FINNING INTERNATIONAL INC.
2001 ANNUAL REPORT
GROWING AND
DIVERSIFYING
ARE
FINNING
Printed in Canada
DIVERSIFICANDO
SOMOS FINNING
CRECIENDO Y
Contents
2 Performance at a Glance
26 Review of Operations – Chile
3 Corporate Profile
32 Our Global Partners
5 President’s Report to the Shareholders
36 Management Discussion and Analysis
11
Financial Highlights
47 Management’s Report to the Shareholders
13 Review of Operations – Customer Support Services
47 Auditors’ Report
15 Review of Operations – Power Systems
48 Consolidated Financial Statements
16 Review of Operations – Canada
68
Ten-Year Financial Summary
20 Review of Operations – United Kingdom
70 Corporate Information
24 Review of Operations – Hewden Stuart
72 Shareholder Information
On the Cover
The scope of Caterpillar’s broad product
line is illustrated by the world’s largest
mining truck, the 797, and a mini excavator
that serves the building construction
markets. Truck sales and compact
equipment rentals were key to Finning
International’s growth in 2001.
Inside Cover
The geographic diversity of the countries
Finning International serves is depicted in
these scenes. From left, Mount Rundle in
the Rockies of Western Canada, the
Yorkshire Moors in Northern England and
Easter Island west of Chile.
GROWING
A strong record of growth and delivery of shareholder value:
Revenue growth of 32 percent to $3.2 billion. Earnings growth of
46.2 percent to $241.6 million EBIT. Reduction in debt: equity ratio.
Profitable for 69 consecutive years. Five major acquisitions over the past
20 years. Outperformed the TSE 300 over the past 20 years.
Diversifying globally to better serve new and existing markets:
Increasing products and services as Caterpillar’s best global business partner.
Dramatic expansion to serve diverse industries in three countries. A leader in
short term rentals for equipment and supplies. Less reliant on equipment sales
to the cyclical resource industries. Over half of revenue and 80 percent of gross
margin generated from more economically predictable sectors – rental services,
The Finning
Commitment
To our Customers
customer support and finance. Diverse, highly skilled workforce of 9,800.
We will be Caterpillar’s best global business partner, providing unrivalled services
DIVERSIFYING
that earn customer loyalty.
To our Shareholders
Industry leadership through:
• Continuous growth in shareholder value.
• The best solutions and value for our customers.
• Competitive advantage through innovation.
• Continuous growth in market share.
To our Employees
WE CARE.
WE EMPOWER.
• We depend on ourselves and each
• We expect the best of each other.
other for our safety and well being.
• We encourage and value learning,
WE COMMUNICATE.
innovation, and personal growth.
• We rely on open, honest, and effective
WE TRUST.
communication to work together.
• We work at building honest,
• All contributions have value.
constructive relationships with
WE TAKE RESPONSIBILITY.
customers, suppliers, and colleagues.
• Responsibility and accountability
WE DO OUR BEST.
are rewarded.
• We continuously strive to make
• Together, we shape the Finning
Finning the best place to work.
of tomorrow.
Employee
Commitment
“My job is to make our customers and our company successful”
$15.75
$12.10
$16.95
$18.30
$20.00
1-Jan-01
31-Mar-01
30-Jun-01
30-Sep-01
31-Dec-01
Finning Int Inc
TSE 300
2001
Finning Share Price Outperforms the TSE 300
HIGHLIGHTS
12 Months Ended - December 31
Revenue
EBIT
Net Income
Cashflow After Working Capital Changes
Basic EPS
Diluted EPS
( $ i n m i l l i o n s, ex c e p t E P S d a t a )
2001
3,247.0
241.6
103.9
445.6
1.37
1.34
2000
2,460.0
165.3
73.4
357.8
0.95
0.94
2001
Performance at a
Glance
$1.32
$1.37
$0.95
$0.75
0.04
1997
1998
1999
2000
2001
Basic EPS
216.6
103.7
103.9
241.6
16.2%
165.3
148.9
82.7
73.4
59.6
14.1%
10.5%
8.7%
1997
1998
1999
2000
2001
1997
1998
1999
2000
2001
1997
1998
1999
2000
2001
Earnings Before Interest and Taxes (EBIT)
( $ i n m i l l i o n s )
Net Income
( $ i n m i l l i o n s )
Return on Equity
3.2
0.5%
438.2
445.6
0.97
0.90
357.8
253.9
200.4
0.47
0.20
0.21
1.66
1.67
1.29
1.04
0.87
1997
1998
1999
2000
2001
1997
1998
1999
2000
2001
1997
1998
1999
2000
2001
Cashflow After Working Capital Changes
( $ i n m i l l i o n s )
Operating Debt to Equity
Total Debt to Equity
2 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
F I N N I N G I N T E R N AT I O N A L I N C .
Corporate
Profile
Finning International Inc. is a widely held public corporation
based in Vancouver, British Columbia. Finning International
is one of the world’s largest Caterpillar equipment dealers,
with extensive operations in Western Canada, the United
Kingdom and Chile.
Finning (Canada)
Finning (UK) Ltd.
Hewden Stuart
Finning (Canada) sells, rents,
leases and finances Caterpillar and
complementary equipment and provides
customer support services throughout
British Columbia, Alberta, the Yukon
Territory and the Northwest Territories.
It carries the complete line of
Finning (UK) Ltd. sells and rents
Hewden Stuart is the U.K. leader in
Caterpillar and complementary equipment
equipment rental and associated services.
and provides customer support services
It specializes in general hire, tool hire and
throughout England, Scotland, Wales and
lifting hire. Hewden supplies a wide range
the Channel Islands, and through an
of make and models of equipment for
agency agreement sells Caterpillar
rental customers, including the Caterpillar
equipment and parts in the Falkland
compact line of equipment.
Caterpillar products. Complementary
Islands.
Based in Glasgow, Scotland, Hewden
equipment includes Svedala Reedrill rock
drills, CompAir LeROI air compressors,
Kaldnes Scandlog log handlers, Risley
Associated product lines include:
operates from 350 locations in the U.K.
materials handling equipment
and has 4,066 employees.
manufactured by Mitsubishi Caterpillar
feller bunchers, Wagner log stackers and
Forklift Europe B.V., Caterpillar branded
Finning Chile
chip dozers, LeeBoy motor graders and
paving products, Barber Greene, Gomaco
and Rosco paving products, Amida light
towers and John Henry rock drills.
Finning (Canada) based in Edmonton,
Alberta is represented by 31 branches,
6 depots and 33 residencies. There are
2,629 employees in Canadian operations.
warehouse equipment manufactured by
Finning Chile sells and rents Caterpillar
Rocla of Finland and the Caterpillar
Olympian power generating systems
and complementary equipment and
provides customer support services
manufactured by F.G. Wilson in Ireland,
throughout Chile. Complementary product
business and distribution rights for Sabre
lines include Ingersoll Rand air
Perkins marine power products and Bitelli
compressors and drills and Denharco
paving machines.
Finning (UK) is headquartered in
Cannock, Staffordshire. There are 15
forestry equipment.
Finning Chile is headquartered in
Santiago and has 1,516 employees. There
branches, and 8 depots serving the United
are 7 branches and 33 depots throughout
Kingdom. Finning (UK) has 1,553
the country.
employees.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 3
L E T T E R T O T H E S H A R E H O L D E R S
President’s
Report
“We achieved our objectives of record
financial returns and growth in equipment
rentals, customer support services and
Doug Whitehead visits the Cat Rental Store in
Santiago, Chile. Finning International Inc.
expanded its rental service operations globally
in 2001.
power systems.”
Douglas W.G. Whitehead
President and Chief Executive Officer
We surpassed expectations in 2001 as
Both Finning (Canada) and Finning
Our pledge to earn our customers’
Finning International set new records for
(UK) set new revenue records while
loyalty by providing the best solutions for
revenue, profits and cash flow. The
Finning Chile improved operating earnings
their equipment needs, was rewarded
successful acquisition of Hewden Stuart in
ensuring the company was profitable for
through the signing of several major
the United Kingdom, which dramatically
the 69th consecutive year.
increased our equipment rental business,
combined with greater productivity in all
operations, powered us to new levels of
Economic Impact on
Customers
customer service agreements. These
contracts for the sales, servicing and
maintenance of Caterpillar fleets were
finalized or underway at all three country
success.
These results were achieved in the
operations. These agreements added
We showed significant financial
face of a global economic decline that
to the strategic alliances Finning
improvement over 2000 with revenue
impacted many of our customers in the
International already enjoyed with
growth of 32 percent to $3.25 billion and
resource industries. Lumber, coal and gold
customers across a broad range of
an earnings increase of 41.6 percent to
prices were relatively weak throughout
industries.
$103.9 million.
2001, while pulp, newsprint and copper
Our commitment to customers could
We delivered on our commitment to be
prices declined in the last half of the year.
not have been achieved without the
Caterpillar’s best global business partner,
Despite these challenges, we
winning partnership between Finning and
by diversifying our sources of earnings,
capitalized on our opportunities,
Caterpillar Inc., manufacturer of the
and by achieving market share growth.
particularly in the United Kingdom where
world’s best heavy equipment.
Our focus on fast growing segments of
government infrastructure spending
our business resulted in a 22.9 percent
generated major demand for heavy
Cat Expands Lines
jump in power systems revenue, a
equipment and in Alberta where oil sands
Caterpillar’s commitment to expanded
13.5 percent improvement in parts and
investment continued at a robust level.
production of innovative mobile and power
service revenue and a four-fold increase in
equipment rental activity.
Versatile and productive in tight spaces,
Caterpillar’s mini rubber track excavator,
owned by McDonald Trucking, works on
residential site in West Vancouver, B.C.
systems equipment enabled Finning to
take advantage of market potential in such
areas as the building construction industry,
rental services, engines and related
products. Our investment in Hewden
Stuart was strengthened by the availability
of Caterpillar compact machines that
increased rental opportunities.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 5
P r e s i d e n t ’s R e p o r t t o t h e S h a r e h o l d e r s
Our strategy to increase our market
Asset Reduction
share of the fast growing power systems
business resulted in the formation of a
separate international power systems
group. Jack Carthy was appointed
President, Power Systems, based in
Vancouver. Jack is responsible for Power
Systems operations in Canada, the U.K.
and Chile, interfacing with Caterpillar and
driving the growth of this business. Jack
was replaced as Managing Director of
Finning (UK) by Steve Mallett, formerly
Vice-President of Customer Support
Services for Canadian operations. With
these appointments, we continued to build
a talented group of internationally trained
managers and executives.
Our ongoing focus on asset
management and core business activity
resulted in the disposition of surplus
properties in Canada and the U.K. and the
sale of our materials handling division in
Western Canada. In the short run, the sale
proceeds were used to reduce debt and
fund our share repurchase program. In the
long term, we have ensured financial
flexibility as we pursue opportunities to
grow our core business both domestically
and internationally.
Late in the year, the company gifted
18.6 acres of its Great Northern Way
property in Vancouver to four British
Columbia post-secondary institutions. The
BC Institute of Technology, Emily Carr
Institute of Art and Design, University of
BC and Simon Fraser University share
equally in the land valued at $33.8 million.
We believe in the need to reinvest in
the community that has supported our
growth over many decades. This gift
assists these world-class institutions to
educate many talented people and provide
us with skilled employees in the future.
Teaming up on the Birmingham Northern
Relief Road project in the U.K., a Caterpillar
excavator loads a Cat articulated truck.
P r e s i d e n t ’s R e p o r t t o t h e S h a r e h o l d e r s
As the year closed, Finning completed
Although the economic outlook for
its move from the Great Northern Way
2002 is far from bright, we do expect to
property to its international offices in
maintain the same level of profitability
downtown Vancouver. The balance of its
reached in 2001. The Finning
Finning (Canada) employees relocated to
management team will be moving ahead
our expanded Surrey facilities, now the
as we accelerate investment in the ever-
largest branch in BC.
growing power systems, rental and
Improved Productivity
customer support businesses. We will shift
resources from slower growth geographic
All employees contributed to our record
locations to high growth areas. We will
financial results and improved safety
pursue acquisitions that will propel the
performance. In fact, lost time accidents
company forward.
dropped by one third over the previous
year. We are especially grateful to the
Hewden Stuart employees who have
embraced the Finning culture and
performance expectations. Once again,
our dedicated employees have shown their
commitment to making Finning and our
customers successful.
Bob Steinkey of Environmental Builders
gets operating tips on a Caterpillar
compact excavator from Florence Blais,
manager of the Cat Rental Store in Grand
Prairie, Alberta. Finning opened seven
rentals facilities and has nine more
planned.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 7
C A R TA A L O S A C C I O N I S TA S
Reporte del
Presidente
financieros y de crecimiento en arriendo de equipos, soporte al
“Logramos un récord de nuestros objetivos de retornos
cliente y sistemas de potencia.”
Douglas W.G. Whitehead
Presidente y Director Ejecutivo
En 2001, excedimos las expectativas
Nuestro enfoque en segmentos de
A pesar de estos desafíos,
en la medida que Finning International
rápido crecimiento de nuestro negocio se
capitalizamos nuestras oportunidades,
logró nuevos récords de ventas,
tradujo en una alza del 22,9 por ciento en
sobre todo en el Reino Unido donde los
rentabilidad y flujo de liquidez. La exitosa
ventas de Sistemas de Potencia, una
gastos en infraestructura del gobierno
adquisición de Hewden Stuart en el Reino
mejora del 13,5 por ciento en ventas de
generaron una demanda importante para
Unido, que aumentó considerablemente
repuestos y servicios, y un incremento
equipos pesados, y en Alberta donde la
nuestro negocio de arriendo de equipo,
cuádruple en la actividad de arriendo
inversión en las arenas petrolíferas
junto a una mayor productividad en todas
de equipos.
continuó a un gran nivel. Nuestro
las operaciones, nos llevó a obtener
Finning (Canadá) y Finning (Reino
compromiso de ganar la lealtad de
nuevos niveles de éxito.
Unido) alcanzaron nuevos récords de
nuestros clientes proporcionando las
Demostramos una significativa mejora
venta en tanto que Finning Chile mejoró
mejores soluciones para sus necesidades
financiera en comparación al año 2000
sus ganancias operacionales y aseguró la
de equipos fue recompensado con la
con un crecimiento de ventas del 32 por
rentabilidad de la empresa por 69° año
firma de varios acuerdos importantes de
ciento a $3,25 mil millones y un aumento
consecutivo.
en las ganancias de un 41,6 por ciento a
$103,9 millones.
Cumplimos con nuestro compromiso
Impacto Económico
sobre Clientes
soporte. Estos contratos, para la venta y
mantenimiento de flotas Caterpillar fueron
concluidos o en curso en las tres
operaciones Finning. Estos acuerdos se
de ser el mejor socio en el negocio global
Estos resultados fueron alcanzados
suman a las alianzas estratégicas que
de Caterpillar, diversificando nuestras
pese a una baja económica global que
Finning sostiene con un amplio rango de
fuentes de ganancias, y logrando un
afectó a muchos de nuestros clientes de
clientes en distintas industrias.
crecimiento en la participación de
la industria primaria. Los precios de la
El compromiso con nuestros clientes
mercado.
madera de construcción, carbón y del oro
no se habría podido alcanzar sin la sólida
fueron relativamente débiles durante el
alianza entre Finning y Caterpillar Inc.,
2001, mientras que los precios de la
fabricante del mejor equipo pesado del
pulpa, papel de prensa y del cobre,
mundo.
bajaron en la última mitad del año.
8 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
R e p o r t e d e l p r e s i d e n t e p a r a l o s a c c i o n i s t a s
Cat Expande su Línea
Reducción de los Activos
Productividad Mejorada
El compromiso de Caterpillar de
Nuestro constante enfoque en el
Todos los empleados contribuyeron al
ampliar su producción de equipos
manejo de activos y la actividad principal
récord de nuestros resultados financieros
innovadores de sistemas de potencia ha
del negocio resultó en la disposición de
y a la mejora en nuestra gestión de
permitido a Finning aprovechar el
propiedades de sobra en Canadá y el
seguridad. De hecho, los accidentes con
potencial de mercado en áreas tales como
Reino Unido, y a la venta de nuestra
tiempo perdido bajaron en un tercio
la industria de la construcción de edificios,
división de manejo de materiales en
comparado con el año anterior. Estamos
servicios de arriendo, motores y productos
Canadá occidental. En el corto plazo, los
especialmente agradecidos de los
relacionados. Nuestra inversión en
ingresos de estas ventas fueron utilizados
empleados de Hewden Stuart, quienes
Hewden Stuart fue afianzada por la
para la reducción de deuda y para
han asumido la cultura Finning y las
disponibilidad de las máquinas compactas
financiar nuestro programa de recompra
expectativas de gestión. Nuevamente,
Caterpillar que aumentaron oportunidades
de acciones. Al largo plazo, hemos
nuestros empleados han demostrado su
de arriendo.
asegurado una flexibilidad financiera
compromiso de asegurar el éxito de
Nuestra estrategia para aumentar
mientras perseguimos oportunidades de
Finning y sus clientes.
nuestra participación en el mercado
hacer crecer nuestro principal negocio
Aunque la perspectiva económica para
creciente de sistemas de potencia dio
nacional e internacionalmente.
2002 está lejos de ser espectacular,
lugar a la formación de un grupo
A fines de año, la empresa obsequió
esperamos mantener el mismo nivel de
independiente, internacional de sistemas
18,6 acres (7.53 hectáreas) de su
rentabilidad alcanzado en el 2001. El
de potencia. Jack Carthy fue designado
propiedad Great Northern Way, en
equipo gerencial de Finning seguirá
como Presidente, Power Systems, basado
Vancouver a cuatro instituciones de
adelante, en tanto aceleramos inversiones
en Vancouver. Jack es responsable de las
enseñanza superior. El British Columbia
en los negocios de sistemas de potencia,
operaciones de Power Systems en
Instituto de Tecnología, Emily Carr
arriendo y soporte al cliente. Trasladamos
Canadá, Reino Unido y Chile,
Instituto de Arte y Diseño, la Universidad
recursos desde regiones geográficas de
conduciendo el crecimiento de este
de British Columbia y la Universidad
lento crecimiento a áreas de mayor
negocio a través del nexo con Caterpillar.
Simon Fraser comparten en partes iguales
crecimiento. Buscaremos adquisiciones
Jack fue reemplazado como Gerente
el terreno valorado en $33,8 millones.
que impulsen a la compañía hacía
Director de Finning (UK) por Steve Mallett,
Creemos en la necesidad de invertir en
adelante.
el anterior Vicepresidente de Servicios de
la comunidad que ha apoyado nuestro
Soporte al Cliente en Canadá. Con estos
crecimiento durante muchas décadas.
nombramientos, continuamos
Este obsequio asiste a estas instituciones
construyendo un grupo talentoso de
de primer nivel en la educación de
gerentes y ejecutivos entrenados
muchos individuos con talento para
internacionalmente.
proveernos de personal capacitado en
el futuro.
Hacia fin de año Finning terminó su
traslado desde las instalaciones en
Great Northern Way a sus oficinas
Internacionales en el centro de Vancouver.
El resto de sus empleados (Finning
Canadá) fueron mudados a las amplias
instalaciones de Surrey, la sucursal de
mayor tamaño en British Columbia.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 9
10 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
F I N N I N G I N T E R N AT I O N A L I N C .
Financial
Highlights
“Our financial performance showed
significant improvements in all
key segments.”
Richard T. Mahler
Executive Vice President and Chief Financial Officer
Rick Mahler with Kelly Cardwell, Human
Resources Manager, at new corporate
headquarters in downtown Vancouver.
Revenues increased by 32 percent to
Hewden Stuart was fully integrated
$3.2 billion, up from $2.5 billion the
into Finning’s financial control and
previous year. Earnings before interest
reporting system.
and tax was a record $241.6 million, a
We commenced implementation of the
jump of 46.2 percent. Net income reached
Khalix system that integrates planning and
a record high of $103.9 million, up 41.6
budgeting, corporate reporting and
percent.
consolidation on a single server for global
We improved our overall debt: equity
operational access.
ratio to 0.87 from 1.04.
Three of four of our operations saw the
Earnings per share were $1.37, up
introduction of new finance directors, all of
44.2 percent compared to $0.95.
whom replaced directors who had moved
Cash flow, after working capital
on to operating roles within the company.
charges, increased 24.5 percent to a
These financial improvements provided
historic high of $445.6 million.
us with the ability to take advantage of
future opportunities to enhance value for
Key Finance Initiatives
our shareholders.
We launched an innovative financing
structure that added $425 million in equity.
We disposed of $100 million of non-
core operating and under utilized real
estate assets. The company completed a
successful $200 million Medium Term
Note issue.
In early 2002, we concluded a $79
million sale/leaseback agreement on our
Canadian real estate properties.
Education leaders were on hand when
Finning International announced it was
gifting 18.6 acres of its Great Northern Way
property in Vancouver to four post
secondary institutions. From left, Martha
Piper, University of BC; Michael Stevenson,
Simon Fraser University; Doug Whitehead,
Mechanic Javier León services a backhoe
Finning International; Tony Knowles, BC
loader at the Cat Rental Store service shop
Institute of Technology; Ron Burnett, Emily
in Santiago.
Carr Institute of Art and Design.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 11
12 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
R E V I E W O F O P E R AT I O N S
Customer Support
Services
“Our programs led to lower operating costs
and increased productivity for customers
as we enhanced sales opportunities for our
Brian Bell with sophisticated testing equipment
at Finning’s scientific oil analysis facility in
Surrey, B.C.
global operations.”
Brian C. Bell
Executive Vice President Customer Support Services
We accomplished our global objectives
movement of the UK dealership to a
Training
to improve safety performance, streamline
regional hub-and-spoke distribution model
Caterpillar’s expanding product line
key customer support functions and asset
is another example of the restructuring
and Finning’s growing service technology
management, expand services through
that we have conducted to improve
technology and upgrade employee training
customer service. Several other business
require constant training to meet our
standards of customer support. We
programs.
process reviews were launched to improve
identified employee skills development
As a result of these achievements, our
our effectiveness in other support areas,
overall customer support business grew
such as warranty and transportation of
13.5 percent.
parts and equipment.
Customer Satisfaction
We enhanced customer services
throughout our operations by reducing
warranty costs, ensuring faster delivery of
parts, and improving turnaround times on
rebuild and repair of equipment.
Customer satisfaction surveys, which
measure overall customer satisfaction with
our parts and service operations, show 95
percent of customers in Canada are either
satisfied or very satisfied with Finning’s
service. In response to the data collected
in these surveys, we restructured our
customer service functions to respond
even faster and more efficiently to the
needs of our customers. The continued
Infra red spectrometer automatically tests
equipment oil samples at Finning’s S.O.S.
Technology
Advances in technology assisted our
customers by providing online reporting
systems and faster and more efficient
communication services. For example, in
Canada, customers can view their invoices
at our Canadian website as well as oil
and education as one of the key areas
for improvement in order to increase
customer satisfaction and loyalty. These
training initiatives include a Caterpillar-
sponsored program that identifies skill
requirements of service technicians for
specific job functions. It outlines
educational programs and career paths to
achieve these requirements. Along with
this and other programs, the result will
improve overall employee performance
sample results from their equipment tested
and establish high standards for our
at our laboratory. A global satellite system,
customer support.
Safety
Overall, lost time accidents decreased
by 33 percent. Diligent adherence to
safety standard and awareness programs
has paid off throughout the company.
which enables Finning to upload
information from customer machines and
our rental fleet, gives access to equipment
location, maintenance status and servicing
needs. In the United Kingdom, a regional
call center centralizes dispatch of field
engineers, parts orders and complete
machine information. The benefits were
lower operating and maintenance costs,
increased productivity, more sales
opportunities and greater customer
laboratory. Customers can now review fluid
satisfaction.
test results online.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 13
R E V I E W O F O P E R AT I O N S
Power
Systems
strategy developed to gain a greater
“New records were set and a unique global
share of the power systems business.”
Jack A. Carthy
President, Power Systems
Jack Carthy (right) chats with customer
Wes Vermeulen, President of West Bay SonShip
Yachts Ltd. on Vancouver waterfront.
A pivotal year for Power Systems was
Major activity in the oil and gas fields
Target Growth
highlighted by record sales, products and
of Western Canada resulted in record
service expansion and formation of an
demand for our core products. Our truck
International organization that integrates
engine market share reached a record
all three country operations.
high of nearly 50 percent for heavy duty
New prime power and energy systems
and 40 percent for mid-range models.
The newly formed Finning International
Power Systems Group met in September
to develop a unique strategy and business
plan aimed at capitalizing on Caterpillar’s
projected growth in engine and related
volumes reached $238 million, an
Rental activities in power generation
markets.
The strategic plan establishes a
market-focused international organization
to leverage our expertise across the
countries in which we operate and to
double or triple Power Systems revenue
in the next five years. As a leading
provider of power and energy systems,
we will also use our technical expertise,
integrated support services, innovation
and global reach to provide the highest
value for our customers, opportunities for
our employees and return for our
shareholders.
increase of 22.8 percent over the previous
grew substantially and our customer
year. Revenue from power generation,
support services for power systems
rentals, customer service and used
markets were up, partially as a result of
equipment contributed an additional
additional revenues from the recently
$130 million.
acquired MaK product line in the United
Sales growth in both direct prime
Kingdom and CIPA Limitada, a former
products and customer support services,
rental market competitor in Chile.
dramatic increases in truck and marine
engine market share, and new acquisitions
Added Value
were the major contributors to our global
We succeeded in selling marine
success.
engines to the tugboat and salmon fishing
industries and provided high value added
products for prime power in Chile.
The strong demand for Caterpillar
power systems products worldwide
created a major increase in our customer
support revenues as Finning technical
expertise was required for service and
maintenance of engines and power
generation installations.
Cutting through West Coast waters, this 58-
foot motor yacht built by West Bay SonShip
Yachts Ltd. of Delta is powered by
Caterpillar 3406E marine engine rated at 800
horsepower.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 15
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 15
R E V I E W O F O P E R AT I O N S
Canada
“Big machine deliveries and compact
equipment sales and rentals were the main
contributors to our revenue and market
Ian Reid (right) and production mechanic Derrick
Bradley inspect wheel from a Cat 793 truck in
Edmonton Service Shop.
share success.”
Ian M. Reid
President and Chief Operating Officer
High demand for Caterpillar’s largest
Some 83 Caterpillar mid sized tractors,
We delivered 333 Caterpillar compact
equipment, increased governmental sales
the D7R and D6M, equipped with
machines, up from 260 the previous year.
and an aggressive penetration into the
environmentally sensitive low ground
Some 190 skid steer loaders, an increase
rental services business helped generate
pressure tracks were supplied to oilpatch
of 50 units, were supplied to the Cat
record revenues and overall market share
contractors.
Rental Stores and subdivision and utility
for Finning (Canada).
contractors.
We achieved $1.4 billion in revenue
Demand for Services
from $1.2 billion the previous year.
The demand for service and
Excavator Sales Grow
Unit deliveries of new equipment grew
maintenance of these new and existing
Construction sales increased by 20
while overall market share exceeded
40 percent. Parts revenue increased
11.9 percent and service revenue by
11.7 percent.
Major investment in the Alberta
oilsands, which continued to thrive in
2001, resulted in strong deliveries of
equipment used in the petroleum
industries.
equipment fleets, which includes over 100
percent, due mainly to the success of the
Cat 789 off-highway trucks, brought 80
Cat 300 series excavators. Finning
additional Finning employees to Fort
delivered 64 model 330B and 53 model
McMurray. The company expanded
320 excavators to construction and oil and
facilities in the oilsands and Edmonton to
gas contractors. Sales of this series are
meet customer support needs.
anticipated to grow with the market entry
In total, 151 machines valued at $190
of Cat’s largest excavator, the 385 model,
million were delivered to the mining
in 2002.
industry, compared to 105 units at $126
The Cat 535 skidder, introduced in
Oilsands customers purchased 19 of
million the previous year.
2000, gained wide acceptance with BC
Caterpillar’s largest trucks, the 380-ton
Governmental sales also show
interior contractors, helping increase our
797, bringing the total number of these off-
dramatic growth with 150 machines valued
forest industry market share to 30 percent
highway vehicles working in northeast
at $41.8 million delivered, compared to
despite lower unit sales. This skidder
Alberta to 39, the heaviest concentration
107 units at $27.6 million.
increases production while working in
anywhere in the world. This number is
expected to reach 60 when trucks on
order are delivered in 2002. The oilsands,
with over $50 million of announced
projects, presents a tremendous
opportunity for us over the next several
years.
16 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
difficult terrain.
Lost time accidents dropped by 26
percent as employees continued their
focus on safety.
Pages 17 & 18 - Canada fold-out
FOLD
A Caterpillar 320C works at a construction
site for DeFord Contracting of Edmonton.
Cat’s 300 Series excavators helped Finning
build construction market share.
Pages 19 & 20 - Canada/Customer Service fold-out
FOLD
R E V I E W O F O P E R AT I O N S
United Kingdom
“Revenues from quarrying, waste
management, plant hire and materials
handling equipment sales boosted our
Steve Mallett joins apprentice mechanic Lance
Armstrong in checking transmission components
at Finning (UK) headquarters in Cannock.
overall performance.”
Stephen Mallett
Managing Director
Increased activity in several leading
Big Fleet Agreement
Plant Hire Up
markets and the government’s
accelerated spending on infrastructure
projects contributed to improved results.
Finning (UK) revenue increased 17.8%
to $804 million compared to $682 million
in 2000.
The construction and materials
handling operations made significant
gains in market share. New equipment
grew 16.2 percent and used equipment
revenue jumped by 34.8 percent. The
rental market saw moderate growth of 6.6
percent. Customer support revenue grew
by 15.8 percent, which included a 12
percent increase in part sales.
Revenue from the MaK and Sabre
Perkins engine lines and the paving
equipment operation Finnpave exceeded
revenue expectations by over 40 percent.
Finning (UK) acquired distribution rights
for the engine operations, both
subsidiaries of Caterpillar, and purchased
the paving business in 2000.
A major long-term fleet supply
Plant hire deliveries were up by 60
agreement between Finning (UK) and
percent, largely due to the Birmingham
"Biffa, the UK’s largest single supplier of
Relief Road infrastructure project in
integrated waste management services"
Northern England. This included a $28
generated $5.7 million in sales and total
million delivery to a major plant hire
customer service support. Another $10
customer. Deliveries to the Finning-owned
million in equipment will be delivered in
Hewden Stuart, which rents equipment to
2002 as part of the six-year agreement
its customers, contributed to the growth in
valued at $32 million. It provides for the
this sector.
supply, repair and maintenance of over 65
The market share of materials
Caterpillar waste handler machines
handling equipment jumped significantly
including 15 landfill compactors.
with a 45 percent increase in deliveries.
Equipment deliveries to the quarrying,
Many of those units were supplied to
plant hire and materials handling
national accounts.
industries showed strong growth.
Our focus on increasing service
Quarrying business grew by 96.8
revenues resulted in customer support
percent as the government initiated its
agreements, which help reduce machine
10-year, $400 billion investment in
downtime and increase productivity, being
improving roads and railways. This growth
sold on 43 percent of all new equipment.
included a $13 million equipment sale to
These agreements contract Finning (UK)
a single aggregate producer.
as the supplier of parts and service.
Lost time accidents declined by 48
percent as employees continued their
emphasis on workplace safety.
Caterpillar 906 loader moves sawdust to
conveyor belt at Edson, Alberta. North
American Shavings Ltd. grades and packages
shavings and sawdust from local mills for use
at horse racing tracks and stables.
20 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
Pages 21 & 22 - UK fold-out
FOLD
Caterpillar’s largest tractor, the D11R, rips and
dozes sand and gravel mix that contains
extremely hard layers of sandstone. The
machine, owned by Stokey Plant Hire Ltd., is
working on contract at Tarmac’s Croxden
quarry at Cheadle, Staffordshire, the largest
sand and gravel operation in Europe.
Pages 23 & 24 - UK/Hewden Stuart fold-out
FOLD
R E V I E W O F O P E R AT I O N S
F I N N I N G I N T E R N AT I O N A L I N C .
Hewden
Stuart
“Our investment in Caterpillar’s compact
equipment and acquisition of a new
product line expanded our sales and
support capabilities.”
Paul J.C. Jarvis
Chief Executive
Paul Jarvis (foreground), and Peter Milo (left), Hewden
Stuart depot manager at Redditch, meet with project
manager Ian Kelly of the Birmingham Northern
Relief Road, one of the UK government’s major
infrastructure initiatives.
Hewden Stuart contributed to
Hewden developed its own strong
Hewden retained strong focus on
Finning’s financial success with revenue
partnership with Caterpillar. The Cat
balance sheet management, generated a
of $587 million. Acquired in early 2001,
products acquired and rented to
positive cash flow and increased
Hewden Stuart adapted to Finning’s
customers by Hewden were well received
productivity while many of its public
strategic direction and business
by the markets it serves. A significant
ownership competitors struggled in the
processes while remaining focused on its
investment in Caterpillar equipment
face of significantly reduced share prices.
key markets and customer base.
during the year included the UK
A review of its 350 locations
As the UK leader in equipment rentals
introduction of some 150 skid steer
throughout the UK resulted in some
and associated services, Hewden
loaders.
continued to expand sales and support
services, mainly to the construction,
petro-chemical engineering and
manufacturing industries.
restructuring of its depot network, with
the closure of 15 depots and the
Key Acquisition
opening of 7.
Capital investments expansion
included acquiring the materials handling
equipment of Maxxiom Limited,
comprising of 640 units.
Hewden took major internal initiatives
through improved employee health and
safety standards, strategies for growth,
investment in new computer technology
and aggressive management
development programs. Synergies with
Finning (UK) aimed at cost savings and
improved customer service were explored
and several productivity initiatives were
launched.
Clay drainage pipes frame a Caterpillar lift
truck with 3,500 kg lifting capacity at Travis
Perkins Trading Co. Ltd. builders merchant
yard in Leicester, UK.
24 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
Hewden Stuart rental equipment, such as
this Caterpillar telehandler that moves and
lifts material, is transported quickly to
meet customer job demands throughout
the UK.
R E V I E W O F O P E R AT I O N S
Chile
Nick Lloyd (right) watches as mechanic Daniel
Bravo checks on newly inserted valve guides on
a Caterpillar engine in Finning Chile’s Santiago
service department.
“The copper mine industry’s ongoing need
for large Caterpillar trucks and our
penetration into rental equipment markets
were among the highlights of the year.”
Nicholas B. Lloyd
President and Chief Executive Officer
Finning Chile improved its market
Minera Los Pelambres ordered
The purchase of "Yrarent", a local
share in all major industries and moved
another six 797s, valued at approximately
company, expands the Cat Rental Store
rapidly to become a leader in the
$32 million, for delivery in 2002.
capabilities and makes it the leader in
equipment rentals business, despite a
An agreement was finalized with
work platform rentals. The acquisition
slight decline in revenue to $448 million
Compañía Minera Cerro Colorado
provides exclusive distribution rights for
from $474 million in the previous year.
(BHP- Billiton) for a $48 million package
Genie brand products in the Chilean
Our focus on major mining customer
consisting of 13 Caterpillar 789C mining
market.
needs resulted in a gain in industry sales
trucks and auxiliary equipment that will
Two important agreements were
and increased market share. Service
work on the mine’s expansion.
formalised during 2001. A new four-year
revenue grew by 13 percent while parts
revenue dropped slightly as some
Unit Sales Up
collective agreement with the company's
two employee unions was signed in
customers made less use of their
Facing weak markets for both
December of 2001. Additionally, Finning
equipment fleets due to lower copper
construction and forestry equipment,
Chile and Caterpillar reached agreement
prices.
Finning Chile successfully increased unit
on the establishment of a two-year,
Caterpillar’s largest mining truck, the
sales while building market share for
degree program being developed initially
380-ton 797, is in growing demand by
specific models, including medium and
for service technicians. The project
mining interests exploring and developing
heavy-wheel loaders, medium-sized
includes a purpose-built facility planned
new sites. The number of these trucks
graders and excavators and small skid-
for 2002, with the first enrolment
now in operation or on order stands
steer loaders.
beginning in March of 2003.
at 27. To date, sales and orders for these
In general construction, market share
Lost time accidents figures showed
trucks and support equipment totals
decreased slightly but strong sales of
modest improvement. Frequency rates
$143 million.
compact machines, primarily skid steer
rose slightly but the severity rate dropped
loaders, raised market share for these
by 21 percent.
Big Fleet Sales
products.
In 2001, eleven 797s were delivered –
six to Minera Escondida, three to Minera
Rental Expansion
excellence.
This achievement brings Finning Chile
to a world class standard of safety
Los Pelambres and two units configured
As the rental of equipment became an
for high-altitude operation to Compañía
integral part of its business, Finning Chile
Minera Dona Ines de Collahuasi SCM.
planned the formation of a rentals
This latter sale, the first to Collahuasi,
equipment division, acquired an industrial
generated revenues of $9 million.
supply company and relocated its flagship
Cat Rental Store to new premises.
26 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
Pages 27 & 28 - Chile fold-out
FOLD
Two Cat 797 trucks pass at the Minera Los Pelambres operation in northern Chile. The Chilean owned
mine, located 3600 meters above sea level, has among the lowest cost production of any copper mine
in the world. Some 80 Finning employees work at the on-site service facility.
Dos camiones Cat 797 se cruzan en Minera Los Pelambres, ubicada a 3.600 metros de altura en el
norte de Chile, y cuyos propietarios son chilenos. La mina de cobre presenta uno de los costos de
producción más bajos del mundo. Alrededor de 80 empleados Finning prestan servicio en esta faena.
Pages 29 & 30 - Chile Spanish fold-out
FOLD
R e s e ñ a d e C h i l e
Chile
camiones Caterpillar y nuestra penetración en los mercados de
“La necesidad por parte de la industria minera por los grandes
arriendo de equipos fueron los hechos destacados del año.”
Nicholas B. Lloyd
President and Chief Executive Officer
Finning Chile mejoró su participación
Ventas de Flotas Mayores
En el 2001 once 797s fueron
Suben las Ventas
por Unidad
de mercado en todas las principales
industrias y avanzó rápidamente para
convertirse en líder del negocio de
arriendos. Observamos una leve baja en
las ventas de $474 millones en el año
anterior a $448 millones.
Nuestro enfoque en las necesidades
de nuestros principales clientes mineros
nos llevó a un aumento en las ventas a
esa industria y a una mayor participación
de mercado. Las ventas por concepto de
servicio técnico crecieron en 13 por
ciento, mientras que las ventas de
repuestos disminuyeron levemente
debido a que algunos clientes utilizaron
menos sus flotas de equipos a causa de
los deprimidos precios de cobre.
La demanda por el camión más
grande de Caterpillar, el 797 con una
capacidad de 380 toneladas, está
creciendo por el interés del sector minero
explorando y desarrollando depósitos
nuevos. Actualmente, existen 27 de estos
camiones solicitados o en operación. A la
fecha, las ventas y encargos por estos
camiones y equipos de apoyo alcanzan
los $143 millones.
entregados – seis a Minera Escondida,
Enfrentando mercados débiles para
tres a Minera Los Pelambres y dos
equipos de construcción y forestal,
unidades configuradas para operación a
Finning Chile exitosamente incrementó
gran altitud a Compañía Minera Doña
las ventas por unidad, y paralelamente,
Inés de Collahuasi SCM. Esta última
generó una mayor participación de
venta, la primera a Collahuasi, generó
mercado para modelos específicos,
ingresos de $9 millones.
incluyendo los cargadores de ruedas
Minera Los Pelambres solicitó otros
medianos y pesados, motoniveladoras y
seis 797, valorados en aproximadamente
excavadoras medianas, y minicargadores
$32 millones, para ser entregados en
pequeños.
el 2002.
En el área de construcción general, la
Se concluyó un acuerdo con la
participación de mercado disminuyó
Compañía Minera Cerro Colorado
levemente, pero fuertes ventas de los
(BHP-Billiton) por un grupo de 13
productos compactos, especialmente
camiones mineros 789C y equipo auxiliar,
minicargadores, aumentando la
valorado en $48 millones, que serán
participación en este segmento.
utilizados en la expansión de la mina.
Expansión en Arriendo
En la medida que el arriendo de
equipos se fue transformando en una
parte integral de su negocio, Finning
Chile planeó la formación de una división
de arriendo de equipos, adquirió una
compañía de suministro industrial y
trasladó su Cat Rental Store a nuevas
instalaciones.
Vehicle tail lights make colorful display as a shovel
loads a Cat 797 truck working at Minera Los
Pelambres copper mine in Chile.
Luces de operación presentan un escenario colorido
mientras que una pala carga un Cat 797 trabajando en
la mina de cobre, Minera Los Pelambres, en Chile.
30 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
La adquisición de "Yrarent", una
Las cifras de accidentes con tiempo
compañía local, amplía las capacidades
perdido mostraron una leve mejora. Los
del Cat Rental Store y lo hace líder en
índices de frecuencia subieron levemente,
arriendo de plataformas de trabajo. La
pero el índice de severidad bajó en un 21
compra otorga los derechos exclusivos de
por ciento. Este logro lleva a Finning
distribución de los productos de la marca
Chile a un estándar mundial de excelencia
Genie en el mercado chileno.
en seguridad.
Dos importantes acuerdos fueron
formalizados durante el 2001. En
diciembre del 2001 se firmó un nuevo
convenio colectivo de cuatro años con los
dos sindicatos de la empresa.
Adicionalmente, Finning Chile y Caterpillar
llegaron a un acuerdo para el
establecimiento de un programa de grado
de dos años, que será desarrollado
inicialmente para técnicos de servicio.
El proyecto incluye una edificación a
medida previsto para el año 2002, con la
primera inscripción comenzando en marzo
del 2003.
R e s e ñ a d e C h i l e
One of three Cat 525 skidders owned by
contractor Leonida Poo Ltda. works in
Monterey pine forests of southern Chile.
This type of pine is 30 to 40 centimeters at
the butt when reaching maturity in about
20 years.
Uno de tres arrastradores de troncos
Cat 525 del contratista Leonida Poo Ltda.,
trabaja en un bosque de pino Monterrey en
el sur de Chile. Esta variedad de pino
alcanza los 30 a 40 centímetros de base,
y alcanza su madurez en 20 años.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 31
Our Global Partners
A SASIPA Ltda. mechanic checks out the
Caterpillar 3516 generator set that supplies
power to the 3500 residents of Easter Island,
located 3700 km west of continental Chile.
This Caterpillar 3612 engine, rated at
3335 horsepower, is one of three such
installations that power a gas compression
plant at Rio Alto’s Galloway operation near
Edson, Alberta.
Ice crystals form over giant Caterpillar 797
truck being loaded at Syncrude operation in
the Alberta oil sands. Finning delivered 19 of
these trucks to oil patch customers in 2001.
Santiago Branch mechanic Raúl Silva loads up
for field service duties. “Purpose unites us;
Passion moves us” is the slogan promoting
Finning Chile’s customer support philosophy.
Skid steer machines, part of Caterpillar’s
compact equipment line, are opening
new sales and rentals opportunities for
Finning in the United Kingdom, Chile and
Western Canada.
Finning focus on customer support sees
Al Lindholm, field service mechanic,
re-tension tracks on Cat machine at customer
worksite in Edmonton, Alberta.
Two new Caterpillar 836G compactors
move and compact garbage at a landfill site
operated by Biffa Waste Services Ltd. at
Risley in Cheshire, U.K. The machines were
part of $32 million agreement with
Finning (UK) to supply and support Biffa’s
waste handling fleet.
P r e s i d e n t ’s R e p o r t t o t h e S h a r e h o l d e r s
Management
Discussion and Analysis
Revenue by Activity
2001
30%
28%
3%
7%
21%
11%
New Mobile Equipment
New Power & Energy Systems
Used Equipment
Equipment Rental
Leasing & Financing
Customer Support
2000
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
Results of operations
Finning International achieved record revenues and net income from operating activities in
2001. Consolidated revenues increased 32.0% to $3,247.0 million, whereas consolidated net
income increased 41.6% to $103.9 million. Earnings per share for the year 2001 were $1.37
compared with $0.95 in 2000, representing a 44.2% increase.
Excluding the impact of non-operating items included in "Other Expenses/(Income)" (see
note 12), EBIT for the year was $259.8 million, net income was $107.2 million and Basic EPS
was $1.41. These results showed improvement over the comparable prior year (higher by
60.9%, 52.2%, and 55.4%, respectively).
Cash flow after changes in working capital was $445.6 million compared with $357.8 million
in 2000. The Company reinvested $311.7 million in revenue-earning rental and lease assets
during the year.
The table below sets forth summary financial data for the years indicated.
Revenue
Gross profit
Selling, general & administrative expenses
Amortization of goodwill
Other expenses/(income)
EBIT
34%
32%
Finance costs and interest on other
indebtedness
Provision for income taxes
Non-controlling interests
Net income
2001
2000
2001
2000
($ million) ($ million)
(% of Revenue)
3,247.0
2,460.0
904.7
634.9
10.0
18.2
624.4
461.0
1.9
(3.8)
241.6
165.3
85.6
29.0
23.1
103.9
58.6
33.3
-
73.4
27.9%
19.6%
0.3%
0.6%
7.4%
2.6%
0.9%
0.7%
3.2%
25.4%
18.7%
0.1%
-0.2%
6.7%
2.4%
1.4%
0.0%
3.0%
5%
8%
During the year, the Company completed the acquisition for Hewden Stuart Plc., a leader in
the equipment rental industry in the U.K. The Company formed a partnership for the purpose of
raising equity capital to fund the acquisition of Hewden. Third party investors injected $425
million of capital into the partnership for a non-controlling partnership interest.
In 2001, the Company also acquired complementary businesses in Canada, the U.K. and
7%
14%
Chile in the equipment rental and distribution business.
The Company also divested its material handling business in Canada. This business
provided sales, rentals and servicing of new and used forklifts and high-reach equipment.
New Mobile Equipment
New Power & Energy Systems
Used Equipment
Equipment Rental
Leasing & Financing
Customer Support
Tons of overburden drops
from a giant Caterpillar
380-ton 797 truck at Minera
Los Pelambres copper mine
in Chile.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 37
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
Revenues
In 2001, consolidated revenues were higher by $787.0 million with Canadian and UK
operations achieving record revenues. A significant part of this increase was due to the
inclusion of Hewden ($587.4 million). Revenues in the Canadian and the UK operations were
higher by $184.1 and $121.9 million respectively. Revenues were lower by $26.1 million in
Chile. Reported revenues were also lower in Universal Machinery Services as the operations of
this division were merged with the existing country operations during the year.
The table below provides details of revenue by operations and lines of business.
2001 (dollars in thousands)
New mobile equipment
New power & energy systems
Used equipment
Equipment rental
Operating leases
Customer support services
Finance and other
Total
Canada
UK
Chile
Hewden
Other
Consolidated
%
Revenue
$ 404,239
$342,991
$140,287
$ 8,959
$
140,705
185,679
107,100
95,715
81,470
116,260
52,716
-
16,112
28,036
13,112
-
-
24,653
518,145
-
452,573
210,647
250,026
35,735
12,612
-
432
-
-
-
1,105
129
-
7,332
283
$ 896,466
238,287
355,733
691,202
95,715
956,313
13,327
27.6%
7.3%
11.0%
21.3%
2.9%
29.5%
0.4%
$1,398,623
$804,084
$448,005
$587,482
$ 8,849
$3,247,043
100.0%
Revenue percentage by operations
43.1%
24.8%
13.8%
18.1%
0.3%
2000 (dollars in thousands)
New mobile equipment
New power & energy systems
Used equipment
Equipment rental
Operating leases
Customer support services
Finance and other
Total
$ 344,290
$287,377
$164,836
$
104,321
148,459
100,202
98,451
78,463
85,171
49,461
-
11,122
31,145
14,882
-
405,782
181,690
245,966
13,011
-
6,194
$1,214,516
$682,162
$474,145
$
Revenue percentage by operations
49.4%
27.7%
19.3%
-
-
-
-
-
-
-
-
-
$
-
-
77,959
2,225
-
8,806
219
$ 796,503
193,906
342,734
166,770
98,451
842,244
19,424
32.4%
7.9%
13.9%
6.8%
4.0%
34.2%
0.8%
$ 89,209
$2,460,032
100.0%
3.6%
Canada
Led by buoyant mining sales from the oil sands, Finning (Canada) achieved record revenues
of $1,398.6 million. Both equipment and customer service revenues increased. Unit deliveries
into the mining sector increased 44% over the prior year. The momentum in the energy sector is
expected to continue as the Company secured a new contract from Albian Sands Energy Inc. to
supply equipment worth over $100 million over 2002 and 2003.
Equipment rental revenues increased as management focused on the development of the
CAT Rental Stores. In addition to the seven rental stores opened in 2001, nine stores are to be
added either by green-fielding or through acquisitions in the near future.
New power & energy systems sales also achieved record levels fo the year. Strong demand
in the gas compression, electric power, drilling and truck markets combined to deliver 34.9%
increase in revenues.
38 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
Revenue by Operations
2001
18%
43%
United Kingdom
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
14%
25%
Canada
UK
Chile
Hewden
2000
4%
19%
49%
28%
Canada
UK
Chile
UMS
Record revenues in the U.K. were achieved primarily as a result of renewed infrastructure
spending in the country, most notably on the Birmingham Northern Relief Road. In addition, the
acquisition of Finnpave, a paving equipment specialist, contributed to the increased construction
equipment revenues. Partially offsetting, was the lower sales activity due to the outbreak of foot
& mouth disease which showed capital purchases. The outlook for the construction sector
remains positive spurred on by a large contract signed in December with a large integrated
waste management services supplier to supply 65 Caterpillar machines in 2002.
Materials handling sales increased due to the supply of machines to national accounts. The
power systems strength in the industrial business was somewhat offset by a weak internet
service provider business.
Used equipment revenues increased by 36.5%, though there was a slowdown in the fourth
quarter due to the softening of the U.S. market which reduced the export of used construction
equipment.
Customer support services revenue increased due to marketing programs and inclusion of
recently acquired MaK (late 2000) and Finnpave (2001) businesses.
Chile
Revenues were lower by $26.1 million, mainly for new equipment as some customers
deferred or reduced their purchases as copper prices languished in 2001. The 797 mining truck
continued to make inroads in the Chilean mining market. This market provides a long-term
source of service and parts business to the Chilean operation. New orders for six trucks were
placed in late December for delivery to the minesites beginning 2002, however, the depressed
copper price may reduce production in Chile and customers may continue to defer purchases
into 2003.
While the construction market remained subdued during the year, the Chilean Chamber of
Commerce expects a slight recovery in 2002. Pulp prices were also lower in 2001 and resulted
in a drop in export activity. Despite this, the Company has been able to increase its market
share in both the construction and forestry markets.
Power and energy system sales were higher as a result of some large projects and
acquisition of CIPA and Yrarent. As a result of these acquisitions, the Company now has a
leadership position in the Chilean power systems market.
Hewden
The first year for Hewden under Finning ownership has met management’s expectations.
Hewden derives rental revenues from its rental services, tool hire and lifting hire divisions
through approximately 350 branches in the U.K. Revenues achieved after eleven months of
operations were $587.5 million. There was a net reduction of eight depots over last year, as
underperforming depots were closed and new openings in more appropriate locations were
created.
The foot and mouth crisis led to a higher utilisation of Hewden rental equipment in mid 2001
as the Company supported the efforts to contain the crisis. During the year, the Company also
expanded its operations by acquiring assets from Maxxiom (640 units valued at approximately
$20 million) which assisted in achieving additional revenues.
Other
During the year, the Company merged its international used equipment and parts operations
(UMS) into the existing country operations.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 39
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
Gross profits
Gross profits increased $280.3 million (44.9%) to $904.7 million in 2001 compared with
2000. This increase was substantially attributable to the inclusion of Hewden during the year.
As a percentage of revenue, gross profit was higher at 27.9% compared with 25.4% in 2000
mainly due to inclusion of high gross profit rental activities at Hewden. Gross profit as a
percentage of revenue was lower in Canada due to adverse exchange rate impact and fleet
sales in the oil-sands sector. It was marginally lower in the U.K. mainly as a result of a shift in
the sales mix and it was higher in Chile due to better performing service contracts.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $173.9 million (37.7%) to $634.9
million in 2001 compared with 2000 due to volume increases and inclusion of Hewden, with its
extensive branch structure supporting the rental market. As a percentage of revenue, these
expenses were higher at 19.6% compared with 18.7% in 2000, due mainly to Hewden’s higher
cost structure.
Selling, general and administrative expenses as a percentage of revenue was lower in
Canada and the UK due to operating leverage and focus on cost control. It was higher in Chile
as a result of the volume shift towards the customer support services which deliver a higher
gross margin but have a higher selling, general and administrative component.
Other expenses were lower as the international used equipment and parts operations were
merged into the existing country operations.
Amortization of goodwill
Amortization of goodwill increased by $8.1 million primarily due to the amortization of
goodwill on the acquisition of Hewden. In 2002, with the change in accounting treatment of
goodwill, amortization of goodwill will not occur but be replaced by an annual assessment for
impairment (for more details see Note 1, Notes to Consolidated Financial Statements).
Other expenses/(income)
Other expenses/(income) include non-operating or occasional items shown separately to
facilitate comparison with last year. As a result of the transactions described below, the
Company recorded a net non-operating expense of $18.2 million for the year. As a result of the
tax recovery of $14.9 million thereon, the net income impact was $3.3 million.
During the year, the Company recorded restructuring charges of $14.2 million related to the
planned closure, consolidation or downsizing of some branches in the U.K. and Canada to
achieve operating efficiencies. Additional restructuring charges of $10.2 million were recorded in
2001 related to the winding up of international Universal Machinery Services and merging it
with the existing country operations.
The Company donated its head office property located in Vancouver to post secondary
institutions. This donation was valued at $33.8 million. The property had a book value of $4.3
million and the donation expense was offset by a deemed gain of $29.5 million, resulting in a
net donation expense of $4.3 million.
The Company also sold surplus real estate in Canada and the U.K. for a gain on $8.7 million
During the year, the Company sold the business previously carried out by its Materials
Handling Division and its subsidiary Interior Lift Truck Services Inc. in Canada for $65.0 million
and recognized a gain of $3.6 million on cash received and deferred a gain of $10.2 million in
40 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
Operating Income (EBIT)
by Operations
(dollars in millions)
Consolidated
241.6
165.3
2001
2000
Canada
131.9
119.2
2001
2000
UK
32.1
27.6
2001
2000
Chile
38.7
29.3
2001
2000
Hewden
73.9
0
2000
2001
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
respect of promissory notes received. This gain on sale was partially offset by $2.5 million loss
on the sale of the attachment services business in Canada.
The Company also reduced its net investment in its UK subsidiary by GBP 21 million. As a
result of this transaction, a foreign exchange gain of $0.7 million was realized.
Earnings before interest and taxes (EBIT):
EBIT increased by 46.2% to $241.6 million due to inclusion of Hewden and significant
increases in all the operations. EBIT as a percentage of revenue was 7.4% in 2001 compared
with 6.7% in 2000. The improvement was even more significant (8.0% vs. 6.6%), when
normalized for non-recurring items.
The table below illustrates EBIT contribution by operations:
Canada
UK
Chile
Hewden
Other
Consolidated
2001 (dollars in thousands)
Revenue from external sources
$1,398,623
$ 804,084
$ 448,005
$ 587,482
$
8,849
$3,247,043
Operating costs
Depreciation
Amortization of goodwill
Other expense/(income)
1,114,242
151,438
1,082
748,848
22,113
1,035
399,377
9,950
-
380,677
125,032
7,852
25,570
2,668,714
-
-
18,226
308,533
9,969
18,226
Earnings before interest and tax
$ 131,861
$ 32,088
$ 38,678
$ 73,921
$ (34,947)
$ 241,601
9.4%
4.0%
8.6%
12.6%
7.4%
2000 (dollars in thousands)
Revenue from external sources
$1,214,516
$ 682,162
$ 474,145
$
Operating costs
Depreciation
Amortization of goodwill
Other expense/(income)
947,015
147,300
1,012
629,309
24,389
843
435,877
8,987
-
Earnings before interest and tax
$ 119,189
$ 27,621
$ 29,281
$
-
-
-
-
-
$ 89,209
$2,460,032
103,826
2,116,027
-
-
(3,789)
180,676
1,855
(3,789)
$ (10,828)
$ 165,263
9.8%
4.0%
6.2%
0.0%
6.7%
Finance costs and interest on other indebtedness
Finance costs and interest on other indebtedness increased by $27.0 million to $85.6 million
in 2001 compared with 2000, mainly as debt increased to finance the Hewden acquisition.
Provision for income taxes
Income tax expense in 2001 amounted to $29.0 million, reflecting an effective tax rate of
21.8% during the year compared with 31.2% in 2000.
Normalized for non-recurring items discussed earlier, the effective tax rate for the two years
was 29.0% and 31.6% respectively. The decrease in the Company’s effective tax rate is mainly
due to higher proportion of income being generated in lower tax jurisdictions and lower
Canadian tax rates.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 41
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
Non-controlling interests
In the first quarter of 2001, Finning formed a partnership for the purpose of raising capital to
fund the acquisition of Hewden. Finning is the general partner in this partnership. Third party
investors injected $425.0 million of capital into the partnership for a non-controlling partnership
interest. The partnership interests are entitled to a quarterly distribution on their capital account.
The distribution for the year was $23.1 million, representing a yield of 6.1%.
Net income
Net income improved by 41.6% to $103.9 million in 2001 compared to a year earlier,
resulting in a 44.2% increase in basic earnings per share to $1.37. Normalized for non-recurring
items discussed earlier, basic earnings per share rose to $1.41 or 55.4%.
Liquidity and Capital Resources
Management of the Company assesses liquidity in terms of its ability to generate sufficient
cash flow to fund its operations. Net cash flow is affected by the following items:
• operating activities, including the level of accounts receivable, inventories, accounts payable,
rental equipment and financing provided to customers;
•
investing activities, including acquisitions of complementary businesses, and capital
expenditure; and
• external financing, including bank credit facilities, commercial paper and other capital market
activities, providing both short and long-term financing.
Cash flow from operating activities
Cash provided after changes in working capital was $445.6 million compared with $357.8
million in 2000. During 2001, $311.7 million was reinvested ($117.1 million in 2000) in revenue
earning assets and as a result, cash flow from operating activities was $133.9 million in 2001
compared with $240.6 million in 2000.
Cash used for investing activities
Cash used in investing activities totalled $610.7 million. This included $642.9 million for
acquisitions (2000 - $218.0 million) and $22.3 million for capital assets (2000 - $11.9 million)
offset by $54.5 million received on the sale of the materials handling business in Canada
(2000 – nil).
Financing activities
To complement the internally generated funds from operating and investing activities, the
Company has available approximately $1,147.4 million in unsecured short-term credit facilities
and $75.0 million in unsecured term facilities. The Company also has a commercial paper
program for $300.0 million, which can be issued against the designated short-term credit
facilities amount. At the year-end, approximately $483.9 million, including commercial paper,
was drawn against the bank facilities.
Longer-term capital resources are provided by direct access to capital markets. The
Company is rated by both Standard & Poor’s (S&P) and Dominion Bond Rating Service
(DBRS). DBRS rates Finning’s senior debentures and medium term notes BBB (high) and its
commercial paper R-2 (high). The respective S&P rating is BBB, with a positive outlook and
A-2.
42 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
During 2001, overall debt increased by $103.5 million. Short-term debt decreased by $25.8
million to $372.4 million during the year while long-term debt increased by $129.3 million from
$544.4 million to $673.7 million. The acquisition of Hewden was financed on February 7, 2001,
with $425.0 million being recorded as a non-controlling interest. The Company refinanced
$200.0 million of short-term bank debt associated with the Hewden acquisition with a debenture
issue under its Medium Term Note program on June 19, 2001.
The Company did not have any equity issues in 2001. Share capital increased from $200.6
million in 2000 to $212.1 million at the end of 2001, reflecting the exercise of stock options into
1.5 million common shares offset by the repurchase of 1.5 million common shares as part of a
normal course issuer bid. Under the current normal course issuer bid agreement, the Company
is allowed to buy back a maximum of 7.6 million shares up to September 24, 2002.
The Company has an employee share purchase plan for its Canadian employees. Under the
terms of this plan, eligible employees may purchase common shares of the Company in the
open market at market value. The Company pays a portion of the purchase price to a maximum
of 2% of employee earnings. The plan may be cancelled by Finning at any time. At December
31, 2001, over 67% of Canadian employees were contributing to this plan compared with 65%
at the end of 2000. During 2001, the Company launched an All Employees Share Purchase
Ownership Plan for its employees in Finning (UK) and Hewden, which will commence in
January, 2002. Under the terms of this plan, employees may contribute up to 10% of their
salary to a maximum of £125.00 per month. The Company will provide one common share for
every three the employee purchases.
Financial Leverage
The Company’s operations consist of three major components, namely its operating (new
and used equipment sales and customer support services), equipment rental activities and
finance (equipment leasing and financing). Each of these major components has a different risk
profile. Accordingly, Finning applies a different capital structure and financial leverage to each
component based on industry norms.
The finance assets and rental assets are supported by a combination of debt and equity.
Finning applies a debt to equity ratio of 7:1 to its finance operation and 5:1 to its rental
operation. Total debt, non-controlling interests and shareholders' equity is allocated to the
operating, finance, rental activities and non-controlling interests. Future income taxes are
allocated based on the assets and liabilities assigned to the operating, finance and rental
activities. In 2000, the debt to equity ratios were calculated excluding the investment in Hewden
($218.1 million removed from assets and short-term debt). In 2001, the debt to equity ratios
were calculated on a fully consolidated basis including the non-controlling interest of $425.0
million as equity.
The Company’s overall debt to equity ratio improved from 1.04 at the end of 2000 to 0.87 at
the end of 2001. Debt to equity ratio for its operating activities (excluding finance and rental
activities and the non-controlling interests) at 0.21 was at a similar level to 2000. This continued
improvement in the overall debt to equity ratio was primarily due to the Company’s focused
asset management program to improve current operating asset efficiency and short-term
borrowings. The Company achieved an improvement in receivables collections, inventory
turnover and earnings in 2001 as a result of the program.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 43
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
The table below compares financial leverage and operating debt to equity ratio for the
Company as at the end of 2001 with the corresponding ratios for 2000.
As at Dec. 31, 2001 (dollars in thousands)
Total assets
Payables and accruals
Future income taxes, net
Liabilities
Net investment
Short & long term debt
Non-controlling interests
Shareholders’ equity
Operations
Rental
Interest
Finance
Consolidated
Non-controlling
$1,237,174
$1,000,915
$ 425,000
$ 372,867
$3,035,956
523,140
(20,535)
502,605
242,531
27,875
270,406
-
-
-
3,702
12,278
15,980
769,373
19,618
788,991
$ 734,569
$ 730,509
$ 425,000
$ 356,887
$2,246,965
$ 125,068
$ 608,758
$
-
$ 312,276
$1,046,102
609,501
121,752
-
44,611
425,000
425,000
775,863
Total debt and shareholders’ equity
$ 734,569
$ 730,510
$ 425,000
$ 356,887
$2,246,965
Debt to equity
0.21
5.00
As at Dec. 31, 2000 (dollars in thousands)
Total assets
Payables and accruals
Future income taxes, net
Liabilities
Net investment
Short & long term debt
Shareholders’ equity
Total debt and shareholders’ equity
Debt to equity
$1,180,287
$ 347,339
$
482,328
(15,722)
466,606
14,466
11,240
25,706
$ 713,681
$ 321,633
$ 117,298
$ 268,028
596,383
53,605
$ 713,681
$ 321,633
0.20
5.00
$
$
$
-
-
-
-
-
-
-
-
-
-
7.00
0.87
$ 404,500
$1,932,126
3,328
13,431
16,759
500,122
8,949
509,071
$ 387,741
$1,423,055
$ 339,273
$ 724,599
48,468
698,456
$ 387,741
$1,423,055
7.00
1.04
Note: In the 2000 ratios, the investment in Hewden and debt associated therewith was not included as the acquisition had not been
completed by year-end.
Financial Derivatives and Risk Management
The Company uses various financial instruments such as interest rate swaps, forward
exchange contracts and options as hedges against actual assets or liabilities. Derivative
financial instruments are always associated with a related risk position. For example, the
Company has a policy of arranging its financing such that the fixed rate financing offered to its
customers is matched by fixed rate borrowings. As well, the portfolio is matched on currency
and term. Finning enters into swap agreements, which fix the effective interest rate and
currency of the borrowing. This is an effective and flexible method of matching fixed rate terms
provided to customers with fixed rate debt obligations.
Finning continually evaluates and manages risks associated with financial derivatives. This
includes counterparty credit exposure. Finning manages its credit exposure by ensuring there is
no substantial concentration of credit risk with a single counterparty, and by dealing only with
highly rated financial institutions as counterparties.
44 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
M a n a g e m e n t D i s c u s s i o n a n d A n a l y s i s
Operating Debt
to Equity Ratio
0.97
0.90
0.47
Financial Risks and Uncertainties
The Company’s financial performance may be influenced either favourably or adversely by
fluctuations in foreign exchange, commodity prices and interest rates.
The Company is subject to four main direct sources of foreign exchange risk: transaction,
translation, economic and competitive. The first source of foreign exchange risk, transaction
risk, relates to fluctuations in the purchase price of inventory. The Company’s operations in
0.20
0.21
Canada and Chile source the majority of their products from the United States and, as a
1997
1998
1999
2000
2001
Total Debt
to Equity Ratio
1.66
1.67
1.29
1.04
0.87
1997
1998
1999
2000
2001
consequence, exchange rate movements affect the transaction price for most equipment and
parts. Finning is generally able to manage this risk through adjustments in the pricing of its
product sales, and through the use of financial derivatives. Finning uses a combination of
forward, option or spot strategies to manage the foreign exchange transaction exposure.
The second source of foreign exchange risk, translation risk, relates to the fact that the
Company’s U.K. and Chilean operations are recorded in its financial statements in Canadian
dollars, while those operations conduct business primarily in British pounds in the U.K., and
Chilean pesos and U.S. dollars in Chile. Changes in the British pound, Chilean peso and U.S.
dollar to the Canadian dollar exchange rate directly affect the financial performance in Canadian
dollars of the Company’s U.K. and Chilean operations. The Company hedges its investments in
some of its foreign subsidiaries by borrowing funds in the foreign currency or with long-term
cross currency swaps and forwards.
The third source of foreign exchange risk, economic risk, is characterized by the risk
associated with cash flows from subsidiary companies. To minimize fluctuations in the amount
received in GBP currency dividends from its Hewden subsidiary, Finning has entered into a
long-term cross currency interest rate swap that fixes the foreign exchange rate on a certain
amount of dividends received.
The fourth foreign exchange risk is competitive risk. This is where the currency of the
competing firms continues to depreciate against the currency that the Company sources its
inventory. For example, if the US dollar appreciates against the Canadian dollar and if the
Company’s competitors source their inventory in Canada, the Company’s price to the customers
will have to increase if margins are to be maintained even as the competitors’ prices remain the
same.
The Company’s sales are also indirectly affected by fluctuations in commodity prices and
exchange rates. In Canada, commodity price movements in the forestry, metals and petroleum
sectors can have an impact on customers’ demands for equipment and customer service. In
Chile, significant fluctuations in the price of copper and gold can have similar effects. In the
U.K., lower prices for thermal coal may reduce equipment demand in that sector. In addition, the
strength of the British pound and/or Canadian dollar relative to other currencies may result in
lower activity levels in the used equipment market and increased competition from competitive
imports.
The Company borrows at both fixed and floating interest rates. The floating rate debt portion
exposes the Company to increases in short-term interest rates. The Company could eliminate
this risk by fixing all of its debt. However, this is not efficient in terms of the interest rate risk and
return efficient frontier. The Company can incur lower interest rate costs while maintaining the
same risk profile by funding a portion of its debt with floating interest rates. The Company uses
interest rate swaps to manage its floating rate exposure.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 45
Finning Power Systems supplied turnkey operation for
Viridor Waste Management’s Pilsworth power plant near
Manchester, U.K. The three-kilowatt power generation
package, enough to supply 3,000 homes, consists of three
Cat 3516 generator sets that are powered by methane
from adjacent garbage site. Geoff Craven, Northern Area
Plant Supervisor, takes reading from engine.
Management’s
Report to the Shareholders
The Consolidated Financial Statements of the Company have been prepared by management in accordance with Canadian generally
accepted accounting principles and necessarily include some amounts that are based on management's best estimates and judgement of
all information available up to January 30, 2002.
The Company maintains an accounting system and related controls to provide management with reasonable assurance that transactions
are executed and recorded in accordance with its authorizations, that assets are properly safeguarded and accounted for, and that
financial records are reliable for preparation of financial statements.
The Company's independent auditors, appointed by the shareholders, express an opinion as to whether management's financial
statements present fairly the Company's financial position, operating results and cash flow in accordance with Canadian generally
accepted accounting principles.
The Audit Committee of the Board of Directors, consisting solely of outside directors, meets regularly during the year with financial officers
of the Company and the external auditors to review internal accounting controls, risk management, audit results, quarterly financial results
and accounting principles and practices. In addition, the Audit Committee reports its findings to the Board of Directors which reviews and
approves the Consolidated Financial Statements contained in this Annual Report.
The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the
framework of the accounting policies summarized in Note 1 of the Notes to Consolidated Financial Statements. Financial information
elsewhere in this Annual Report is consistent with that in the financial statements.
January 30, 2002
Vancouver, BC Canada
R. T. Mahler
Executive Vice President and Chief Financial Officer
Auditor’s
Report
To the Shareholders of Finning International Inc.:
We have audited the consolidated balance sheets of Finning International Inc. (a Canadian corporation) as at December 31, 2001 and
2000 and the consolidated statements of income and retained earnings and cash flow for the years then ended. These Consolidated
Financial Statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
Consolidated Financial Statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the Consolidated Financial Statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Consolidated Financial Statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall Consolidated Financial Statement presentation.
In our opinion, these Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company as at
December 31, 2001 and 2000 and the results of its operations and cash flow for the years then ended in accordance with Canadian
generally accepted accounting principles.
January 30, 2002
Vancouver, BC Canada
ARTHUR ANDERSEN LLP
Chartered Accountants
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 47
A s a t D e c e m b e r 3 1 ( $ i n t h o u s a n d s )
Consolidated
Balance Sheets
Assets
Current assets
2001
2000
Accounts receivable and other
$
513,599
$
375,208
Inventories
On-hand equipment
Parts and supplies
Current portion of instalment notes receivable
418,672
237,557
67,350
395,420
203,579
66,476
Total current assets
1,237,178
1,040,683
Finance assets
Instalment notes receivable
Equipment leased to customers (Note 2)
Total finance assets
Rental equipment (Note 3)
Land, buildings and equipment (Note 4)
Investment (Note 5)
Future income taxes (Note 14)
Goodwill (Note 7)
Liabilities
Current liabilities
Short-term debt (Note 8)
Accounts payable and accruals
Income tax payable
Current portion of long-term debt (Note 8)
Total current liabilities
Long-term debt (Note 8)
Future income taxes (Note 14)
Total liabilities
Non-controlling interests (Note 6)
Shareholders’ equity
Share capital (Note 10)
Retained earnings
Cumulative currency translation adjustments (Note 11)
Total shareholders’ equity
Approved by the Directors:
70,468
233,375
303,843
776,832
312,359
-
2,825
405,744
72,569
253,949
326,518
311,019
189,961
218,050
7,465
63,945
$ 3,038,781
$ 2,157,641
$
372,360
$
398,208
758,009
11,364
132,986
1,274,719
540,756
22,443
1,837,918
495,239
4,883
67,224
965,554
477,217
16,414
1,459,185
425,000
-
212,122
590,588
(26,847)
775,863
200,629
521,569
(23,742)
698,456
$ 3,038,781
$ 2,157,641
D.W.G. Whitehead, Director
C.A. Pinette, Director
48 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
Consolidated Statements
of Income and Retained Earnings
Fo r t h e ye a r s e n d e d D e c e m b e r 3 1 ( $ i n t h o u s a n d s, ex c e p t p e r s h a r e a m o u n t s )
Revenue
New mobile equipment
New power & energy systems
Used equipment
Equipment rental
Operating leases
Customer support services
Finance and other
Total revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Other expenses/(income) (Note 12)
Income before interest, income taxes, non-controlling
2001
2000
$
896,466
$
796,503
238,287
355,733
691,202
95,715
956,313
13,327
3,247,043
2,342,308
904,735
634,939
18,226
193,906
342,734
166,770
98,451
842,244
19,424
2,460,032
1,835,644
624,388
461,059
(3,789)
interests and amortization of goodwill
251,570
167,118
Finance cost and interest on other indebtedness
(Notes 8 and 9)
85,550
58,552
Income before provision for income taxes,
non-controlling interests and amortization of goodwill
Provision for income taxes (Note 14)
Non-controlling interests (Note 6)
Amortization of goodwill (Note 7)
Net income available to shareholders
Retained earnings, beginning of year
Dividends on common shares
Premium on common share repurchase (Note 10)
166,020
29,021
23,113
9,969
103,917
521,569
(15,155)
(19,742)
108,566
33,320
-
1,855
73,391
502,028
(15,452)
(38,398)
Retained earnings, end of year
$
590,589
$
521,569
Earnings per share (Note 16)
Basic
Diluted
Basic before amortization of goodwill
Diluted before amortization of goodwill
$
$
$
$
1.37
1.34
1.50
1.47
$
$
$
$
0.95
0.94
0.97
0.96
Weighted average number of shares outstanding
75,854,866
77,436,109
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 49
Consolidated
Statements of Cash Flow
Fo r t h e ye a r s e n d e d D e c e m b e r 3 1 ( $ i n t h o u s a n d s )
Operating Activities
Net income
Add
Depreciation
Amortization of goodwill
Future income taxes
Other items
Non-controlling interests distribution
Changes in working capital items
Accounts receivable and other
Inventories – On-hand equipment
Inventories – Parts & supplies
Instalment notes receivable
Accounts payable and accruals
Income taxes
Cash provided after changes in working capital items
Rental equipment, net of disposals
Equipment leased to customers, net of disposals
Cash flow from operating activities
Investing Activities
Net cash invested in land, buildings and equipment
Proceeds on sale of Canadian Materials Handling business
Acquisitions
Aggregate purchase price
Assumed debt on acquisition of Hewden
Less: Initial investment in Hewden
Cash used for investing activities
Financing Activities
Repayment of long-term debt
Issue of debenture
Non-controlling interests
Non-controlling interests distribution
Issue of common shares on exercise of stock options
Repurchase of common shares
Dividends paid
Currency translation adjustments
Cash provided by/(used for) financing activities
Decrease/(increase) in short-term debt
Short-term debt at beginning of year
Short-term debt at end of year
Cash flows include the following elements
Interest paid
Income taxes paid
2001
2000
$
103,917
$
73,391
308,533
9,969
(2,943)
(7,634)
23,113
434,955
15,785
(29,665)
(29,116)
866
65,009
(12,211)
445,623
(259,385)
(52,318)
133,920
(22,257)
54,502
(750,486)
(110,493)
218,050
(610,684)
(73,611)
200,000
425,000
(23,113)
15,459
(23,708)
(15,155)
(2,260)
502,612
25,848
398,208
180,676
1,855
1,774
892
-
258,588
(7,840)
4,502
27,678
(20,074)
78,939
15,987
357,780
(68,581)
(48,584)
240,615
(11,893)
-
-
-
(218,050)
(229,943)
(42,746)
-
-
-
1,472
(49,196)
(15,452)
2,681
(103,241)
(92,569)
305,639
$
372,360
$
398,208
$
$
86,148
32,243
$
$
59,610
14,461
50 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
D e c e m b e r 3 1 , 2 0 0 1 a n d 2 0 0 0 ( $ a n d £ i n t h o u s a n d s, ex c e p t t h e n u m b e r o f s h a r e s a n d p e r s h a r e a m o u n t s )
Notes to
Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in
Canada that require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual amounts could differ from those estimates. The significant accounting policies used in
these Consolidated Financial Statements are as follows:
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Finning International Inc. ("Finning" or "Company") and its wholly
owned subsidiaries. In addition, Finning consolidates the partnership that was formed to fund the acquisition of Hewden Stuart.
Principal operating subsidiaries include Finning (UK) Ltd, Finning Chile S.A. and Hewden Stuart Plc.
Currency Translation
Transactions undertaken in foreign currencies are translated into Canadian dollars at approximate exchange rates prevailing at the
time the transactions occurred.
Account balances denominated in foreign currencies are translated into Canadian dollars as follows:
Monetary assets and liabilities are translated at exchange rates in effect at the balance sheet dates and non-monetary items
are translated at historical exchange rates.
Exchange gains and losses are included in income except where the exchange gain or loss arises from the translation of
monetary liabilities considered to be hedges, in which case the gain or loss is deferred and accounted for in conjunction with
the hedged asset.
Financial statements of self-sustaining foreign operations are translated into Canadian dollars as follows:
Assets and liabilities are translated using the exchange rates in effect at the balance sheet dates.
Revenue and expense items are translated at average exchange rates prevailing during the period that the transactions
occurred.
Unrealized translation gains and losses are deferred and included as a separate component of shareholders' equity. These
cumulative currency translation adjustments are recognized in income when there is a reduction in the net investment in the
self-sustaining foreign operation.
The Company has hedged its investments in some of its foreign subsidiaries by borrowing funds in foreign currency. Exchange
gains or losses arising from the translation of the hedge instruments are accounted for in the cumulative currency translation
adjustments.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined on a specific item basis for on-hand
equipment. For approximately two-thirds of parts and supplies, cost is determined on a first-in, first-out basis. An average cost basis
is used for the remainder.
Instalment Notes Receivables
Instalment notes receivables are recorded net of unearned finance charges.
Equipment Leased to Customers
Depreciation of equipment leased to customers is provided in equal monthly amounts over the terms of the individual leases after
recognizing the estimated residual value of each unit at the end of each lease.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 51
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
Rental Equipment
Rental equipment is recorded at cost, net of accumulated depreciation. Cost is determined on a specific item basis. Rental
equipment is depreciated to its estimated residual value over its estimated useful life on a straight line or on an actual usage basis.
Land, Buildings and Equipment
Land, buildings and equipment are recorded at cost, net of accumulated depreciation.
Buildings and equipment are depreciated over their estimated useful lives on either a declining balance or straight line basis using
the following annual rates:
Buildings
General equipment
Automotive equipment
Revenue Recognition
2%- 5%
20%-30%
25%-30%
Revenue from sales of products and services is recognized at the time of shipment of products to, and performance of services for,
customers. Equipment lease and rental revenue is recognized over the term of the lease or rental. Finance income is recognized as
earned.
Stock-Based Compensation
The Company has several stock option plans and other stock-based compensation plans for directors and certain eligible
employees.
The Company follows the intrinsic value method of accounting for stock options. Since the exercise price is set at an amount equal
to the weighted average trading price on the day prior to the grant of the stock options, no compensation expense is recognized on
the day of the grant. When options are exercised, the proceeds received by the Company are credited to common shares in the
consolidated balance sheet.
Changes in the Company’s obligations under other stock-based compensation plans, which arise from fluctuations in the market
price of the Company’s common shares underlying these compensation plans, are recorded in selling, general and administrative
expense in the consolidated statement of income with a corresponding accrual in the consolidated balance sheet.
Employee Benefits
The Company and its subsidiaries have a number of defined benefit and defined contribution plans providing pension and other
benefits to most of its employees in the Canadian, the UK and the Hewden operations. The Company accrues its obligations under
employee benefit plans and the related costs, net of plan assets and has adopted the following policies:
Defined benefit plans:
For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. The cost of pensions
and other retirement benefits is determined by independent actuaries using the projected benefit method prorated on service
and management’s best estimates of expected plan investment performance, salary escalation, retirement ages of
employees and expected health care costs.
Adjustments arising from plan amendments, changes in assumptions and the excess of net actuarial gains or losses over
10% of the greater of the benefit obligation and the fair value of the plan assets are amortized on a straight line basis over
the expected average remaining service life of the employees covered by the plans.
The Company adopted the recommendations of section 3461 of the CICA handbook in 2000 on a prospective basis. The
transitional balance as a result of this change in the accounting policy is being amortized over the expected average
remaining service life of the employees covered by the plans.
Defined contribution plans:
The cost of pension benefits includes the current service cost based on a fixed percentage of member earnings for the year.
52 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
Goodwill
Goodwill acquired on the acquisition of subsidiaries is amortized to income on a straight line basis over 40 years. Goodwill
is evaluated annually, and is written down when the undiscounted future earnings of the related business are less than its
carrying amount.
In July 2001, the CICA issued new accounting standards with CICA Handbook Section 3062, Goodwill and Other Intangible Assets.
Under the new standards, goodwill will no longer be subject to amortization over its estimated useful life. Instead, goodwill will be
subject to, at a minimum, an annual assessment for impairment by applying a fair-value based test at the reporting unit level. An
impairment loss would be recognized to the extent the carrying amount of goodwill exceeds the implied fair value. The Company
will adopt the provisions of this new standard beginning on January 1, 2002. The adoption will have no cash impact on the
Company’s financial statements.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under this method, temporary differences arising from the
difference between the tax basis of an asset and a liability and its carrying amount on the balance sheet are used to calculate
future income tax assets or liabilities. Future income tax assets or liabilities are calculated using tax rates anticipated to be in effect
in the periods that the temporary differences are expected to reverse. The effect of a change in income tax rates on future income
tax assets and liabilities is recognized in income in the period that the change occurs.
Statement of Cash Flow
Short-term debt forms an integral part of the Company’s cash management; accordingly, cash flows are represented by changes
in short-term debt.
Prior Year Comparatives
Certain prior year amounts have been reclassified to conform to the 2001 presentation.
2. EQUIPMENT LEASED TO CUSTOMERS
Cost
Less accumulated depreciation
2001
2000
$
$
385,198
(151,823)
233,375
$
$
393,604
(139,655)
253,949
Depreciation of equipment leased to customers for the year ended December 31, 2001 was $67,643 (2000: $66,709).
3. RENTAL EQUIPMENT
Cost
Less accumulated depreciation
2001
2000
$ 1,486,025
(709,193)
$
776,832
$
$
418,304
(107,285)
311,019
Depreciation of rental equipment for the year ended December 31, 2001 was $213,798 (2000: $96,168).
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 53
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
4.
LAND, BUILDINGS AND EQUIPMENT
2001
2000
Land
$
77,811
$
47,017
Buildings and equipment
Less accumulated depreciation
Total land, buildings and equipment
450,732
(216,184)
$
$
234,548
312,359
302,215
(159,271)
$
$
142,944
189,961
Depreciation of buildings and equipment for the year ended December 31, 2001 was $27,092 (2000: $17,799).
Subsequent to December 31, 2001, the Company arranged to sell its interest in various properties across Alberta and British
Columbia for $78,770 and lease it back for a 20 year term. The estimated gain on the sale is $14,643, which will be deferred and
amortized over the lease term. The Company’s obligation under the lease is estimated as follows:
2002 to 2006
$ 8,064 per annum
2007 and thereafter
$146,810
5. ACQUISITION OF HEWDEN STUART
At December 31, 2000 Finning had an investment in Hewden of $218,050 representing 29.4% of the issued ordinary share capital.
The Consolidated Financial Statements give effect to the acquisition of the remaining 70.6% of Hewden which was completed on
January 26, 2001. Hewden is in the equipment rental and related services business, operating throughout Scotland, England,
Wales and Northern Ireland. The results of Hewden’s operations have been included in the Company’s Consolidated Financial
Statements from January 26, 2001. The purchase of Hewden is accounted for under the purchase method of accounting. The
aggregate purchase price of $729,111 (including acquisition costs of $19,700 ) was paid in cash. Goodwill arising on the acquisition
is amortized on a straight-line basis over its estimated useful life of 40 years.
The net assets acquired at their fair values comprised the following:
Net assets acquired
Total assets
Total liabilities
Net assets acquired
Goodwill
Total purchase price
$
704,995
307,968
397,027
332,084
$
729,111
54 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
6. NON CONTROLLING INTERESTS
In the first quarter of 2001, Finning formed a partnership for the purpose of raising equity capital to fund the acquisition of Hewden
Stuart. Finning is the general partner in this partnership. Third party investors injected $425,000 of capital into the partnership for a
non-controlling partnership interest. The partnership interests are entitled to a quarterly distribution on their capital account and
distributions to the non-controlling interests totaled $23,113 in 2001.
The partnership has a seventy-five year life, but could be liquidated in certain circumstances. No return of capital is scheduled
during the life of the partnership. The partnership interests and the partnership distributions are accounted for as non-controlling
interests on the consolidated balance sheet and on the consolidated statement of income. The financial position, results of
operations and cash flows of the partnership is consolidated with Finning from its date of inception.
7. GOODWILL
2001
2000
Purchased goodwill, beginning of year
$
77,777
$
88,619
Goodwill on acquisitions during the year
339,069
4,195
Reduction in goodwill in recognition of future income
tax asset
Reduction in goodwill on divestitures during the year
Foreign exchange translation adjustment
Purchased goodwill, end of year
Accumulated amortization, beginning of year
Amortization for the year
Reduction in accumulated amortization of goodwill
Accumulated amortization, end of year
(10,878)
(563)
24,078
429,483
(13,832)
(9,969)
62
(23,739)
(15,257)
-
220
77,777
(14,260)
(1,855)
2,283
(13,832)
Net purchased goodwill
$
405,744
$
63,945
Acquisitions are accounted for under the purchase method. The excess of the cost of the acquisitions over the amounts assigned to
the identifiable assets acquired less the liabilities assumed is assigned to goodwill. During the year the Company acquired Hewden
Stuart and several other smaller operations in Canada, the U.K. and Chile for $760,603 (Hewden $729,111; others $31,492).
Goodwill on these acquisitions comprised of $332,084 for Hewden Stuart and $6,985 for other acquisitions. During 2000, the
Company acquired two marine products distribution businesses operating in the U.K. and Ireland, namely MaK parts and service
operations and Sabre Perkins operations for $6,168 with resulting goodwill of $4,195.
During the year, the Company adjusted its goodwill by $10,878 to recognize a previously unrecognized future income tax asset with
respect to tax loss carry-forwards resulting from the purchase of Leverton in 1997. As a result of the Company changing its method
of accounting for income taxes in 2000, the Company adjusted its goodwill in 2000 to recognize a previously unrecognized future
income tax asset with respect to tax loss carry-forwards for $12,974 that was acquired from the purchase of Finning Chile in 1993.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 55
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
8. SHORT-TERM AND LONG-TERM DEBT
Short-term debt:
Bank indebtedness, commercial paper
and other loans (a)
$
372,360
$
398,208
2001
2000
Long-term debt:
Debentures (b)
8.35% due March 22, 2004
7.75% due November 1, 2004
6.60% due December 8, 2006
7.40% due June 19, 2008
75,000
150,000
75,000
200,000
75,000
150,000
75,000
-
Bank term facilities (c)
72,032
134,291
Bank term facilities denominated in pound sterling (d)
92,640
89,728
Other unsecured loans denominated in U.S. dollars and
Chilean pesos, maturing between 2002 and 2004
Less current portion of long-term debt
9,070
673,742
132,986
20,422
544,441
67,224
Total long-term debt
$
540,756
$
477,217
(a) Bank indebtedness, commercial paper and other loans
The Company has available $1,147,400 in unsecured short-term credit facilities. Borrowings under the credit facilities are at
floating rates of interest at a margin over Canadian dollar bankers' acceptance yields, and U.S. and U.K. LIBOR rates. In
addition, the Company has a Canadian commercial paper program for $300,000 which can be issued against the available
credit amount. Other loans include supplier merchandising programs. Included in short-term debt are foreign currency
amounts of US $6,000 (2000: US $26,599) and £57,429 (2000: £22,256).
(b) Debentures
The Company's debentures are unsecured, and interest is payable semi-annually with principal due on maturity.
(c) Bank term facilities
The Company has available $75,000 in an unsecured term facility. Borrowing under the term facility is at a floating rate of
interest which averaged 5.18% in 2001 (2000: 6.24%). This facility expires on December 31, 2002.
(d) Bank term facilities denominated in pound sterling
The pound sterling term facilities are unsecured and are comprised of a £15,000 floating rate loan at an average interest rate
of 5.75% (2000: 6.63%), maturing May 25, 2003; and a £25,000 fixed rate loan at 7.675%, maturing May 8, 2002. These
loans have been used to hedge the Company's investment in Finning (UK) Ltd.
Covenants
The Company is required to meet various covenants with respect to its debt facilities. As at December 31, 2001, the Company is in
compliance with these covenants.
56 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
Long-Term Debt Repayments
Principal repayments on long-term debt in each of the next five years and thereafter are as follows:
2002
2003
2004
2005
2006
Thereafter
$ 132,986
37,748
228,008
-
75,000
200,000
$ 673,742
Finance Cost and Interest
Finance cost and interest on other indebtedness as shown on the consolidated statement of income is comprised of the
following elements:
Interest on debt securities:
Debentures
Bank indebtedness, commercial paper
and other loans
Bank term facilities
Interest on swap contracts
Amortization of deferred financing costs
and other expenses
2001
2000
$
30,744
$
21,708
33,432
13,175
77,351
4,107
4,092
25,127
11,508
58,343
(1,022)
1,231
$
85,550
$
58,552
Interest expense includes interest on debt incurred for a term greater than one year of $41,468 (2000: $36,935).
9.
FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments as part of an overall risk management strategy to manage the underlying
financial and economic risks of the Company and to achieve lower cost financing. The Company uses derivative financial
instruments to manage the mix of fixed and floating interest rate exposure, to manage foreign exchange exposure, and to diversify
sources of financing.
Interest Rate Risk Management
The Company has a policy of arranging its financing so that the fixed rate financing offered to its customers on its lease and notes
portfolio is matched by fixed rate borrowings. As well, the portfolio is matched on currency and term. To meet this objective, the
Company enters into swap agreements, which fix the effective interest rate and currency of the borrowing.
Swaps are contractual agreements between two counterparties to exchange a series of cash flows. For interest rate swaps,
counterparties generally exchange fixed and floating interest payments based on a notional value in a single currency. For cross-
currency interest rate swaps, principal amounts and fixed and floating interest payments are exchanged in different currencies.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 57
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
Additionally, the Company uses interest rate swaps to manage its fixed and floating interest rate exposure. The following interest
rate contracts were in place at December 31, 2001 and 2000.
Interest Rate Swaps
2001
Fixed/Floating Swaps
(a) Canadian $ receive fixed
(b) Canadian $ pay fixed
Cross-Currency Interest Rate Swap (2)
Notional
Value
Interest Rates (1)
Fixed
Floating
Term To
Maturity
Fair Value
Fav/(Unfav)
$ 225,000
$ 74,389
7.37%
5.05%
5.24% 2 to 5 years
2.09% 1 to 6 years
$ (1,326)
$ (1,561)
(a) Buy Canadian $ (against £ 228,000)
$ 498,849
4.59%
8.33%
n/a
$ (39,118)
(1)
For the fixed/floating Canadian $ swaps, the fixed interest rates represent the weighted average interest rates which the
Company is contractually committed to pay/receive until the swap matures. The floating interest rates represent the average
effective interest rates at the balance sheet date and vary over time.
(2)
The interest rate on the cross currency interest rate swap contract is reset in 4 years. The swap has an open maturity date
and hedges the Company’s investment in Hewden Stuart.
2000
At December 31, 2000, interest rate swap agreements having a notional principal of $80,043 at weighted average fixed pay rate of
5.69% were outstanding. These agreements expire on various dates between 2001 and 2005. Additionally, the Company had an
interest rate swap agreement outstanding at a notional principal of $150,000. The Company received a fixed rate of 7.75% and paid
a floating bankers’ acceptances based rate determined quarterly. This rate was 7.00% at December 31, 2000. The fair value
adjustment of these interest rate swap agreements as at December 31, 2000 was $4,597 in favour of the Company, taking into
account interest rates in effect at the time.
Foreign Exchange Risk Management
The Company manages foreign exchange risk by matching assets with related liabilities, through adjustments in the pricing of its
product sales, and through the use of derivative instruments such as forward exchange contracts. Forward exchange contracts are
contractual agreements to either buy or sell a specified currency at a specific price and date in the future. Such contracts are used
to hedge foreign currency denominated investments and foreign currency denominated inventory purchases. The following foreign
currency contracts were in place at December 31, 2001 and 2000.
Forward Foreign Exchange Contracts
2001
Notional Weighted Average
Term to
Fair Value
Value
Exchange Rate
Maturity
Fav/(Unfav)
(a) Buy US $ (against Canadian $)
(b) Buy EURO (against £)
(c) Sell £ (against Canadian $) (1)
US$
EUR
£
71,239
19,517
95,560
1.5787
1.6264
2.1491
1-2 years
1 year
n/a
991
(107)
(4,276)
(1)
The forward foreign exchange contract hedges the Company’s investment in Hewden Stuart.
2000
At December 31, 2000, the Company had forward exchange contracts to sell £ 95,560 and option contracts to purchase £ 227,000
to hedge exchange exposure on its investment in Hewden Stuart. The fair value adjustment of these foreign exchange contracts as
at December 31, 2000 was $3,797 in favour of the Company.
58 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
Fair Values
The fair value of financial instruments is determined by reference to quoted market prices for actual or similar instruments, where
available, or by estimates derived using present value or other valuation techniques. The estimated fair values of interest rate swaps
and foreign exchange contracts are reported above. The fair value of accounts receivable, notes receivable, short-term debt,
accounts payable and accruals approximates their recorded values due to the short-term maturities of these instruments. The fair
value of the Company’s long term debt is as follows:
2001
2000
Book
Value
Fair
Value
Book
Value
Fair
Value
$ 673,742
$ 692,014
$ 544,441
$ 545,903
Long-Term Debt
Credit Risk
The Company operates internationally as a full service provider (selling, servicing, renting and financing) of heavy equipment and
related products. The Company is not dependent on any single customer or group of customers. There is no concentration of credit
risk related to the Company's position in trade accounts or notes receivables. Credit risk is minimized because of the diversification
of the Company's operations, as well as its large customer base and its geographical dispersion.
The credit risk of the foreign currency contracts and interest rate swap agreements arises from the possibility that the
counterparties to the agreements or contracts may default on their obligations; however, the Company does not anticipate such an
event to occur. In order to minimize this risk, the Company enters into such agreements only with highly rated financial institutions.
10. SHARE CAPITAL
AUTHORIZED
Unlimited
Preferred shares without par of which 4,400,000 are
designated as Cumulative Redeemable Preferred shares
Unlimited
Common shares
ISSUED AND OUTSTANDING
Common Shares
Balance, beginning of year
Exercise of stock options
Repurchase of common shares
2001
2000
Shares
Amount
Shares
Amount
75,790,463
1,483,100
(1,457,300)
75,816,263
$ 200,629
79,736,877
$ 209,955
15,459
(3,966)
147,406
(4,093,820)
1,472
(10,798)
$ 212,122
75,790,463
$ 200,629
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 59
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
A shareholders' rights plan is in place which is intended to provide all holders of common shares with the opportunity to receive full
and fair value for all of their shares in the event a third party attempts to acquire a significant interest in the Company. The
Company's dealership agreements with subsidiaries of Caterpillar Inc. are fundamental to its business and any change in control
must be approved by Caterpillar.
The plan provides that one share purchase right has been issued for each common share and will trade with the common shares
until such time as any person or group, other than a permitted bidder, bids to acquire or acquires 20% or more of the Company's
common shares. The rights may also be triggered by a third party proposal for merger, amalgamation or a similar transaction. The
rights plan will expire at the termination of the Annual Meeting of shareholders to be held in 2002.
The plan will not be triggered if a bid meets certain criteria (a permitted bidder). These criteria include that:
•
the offer is made for all outstanding voting shares of the Company;
• more than 50% of the voting shares have been tendered by independent shareholders pursuant to the Takeover Bid (voting
shares tendered may be withdrawn until taken up and paid for); and
•
the Takeover Bid expires not less than 60 days after the date of the bid circular.
Repurchase of Common Shares
The Company repurchased 1,457,300 common shares during 2001 (4,093,820 shares in 2000) as part of normal course issuer
bids. These shares were repurchased at an average price of $16.27 ($12.02 in 2000) for an aggregate cost of $23,708 ($49,196
in 2000) which has been allocated to reduce share capital by $3,966 ($10,798 in 2000) and retained earnings by $19,742
($38,398 in 2000).
Stock Options
The Company has several stock option plans for employees and directors, the details of which are as follows:
2001
2000
Weighted
average
exercise
price
$ 12.21
$ 13.37
$ 10.38
$ 11.09
$ 12.87
Options
5,932,918
1,085,917
(147,406)
(252,988)
6,618,441
Weighted
average
exercise
price
$ 12.07
$ 12.45
$
$
9.98
11.20
$ 12.21
Options
6,618,441
1,073,500
(1,483,100)
(54,399)
6,154,442
Options outstanding, beginning of year
Issued
Exercised
Cancelled
Options outstanding, end of year
Exercisable at year end
4,125,978
$ 13.05
4,494,635
$ 12.25
60 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
The following table summarizes information about the stock options outstanding at December 31, 2001:
Options outstanding
Options exercisable
Weighted
average
Weighted
average
remaining
Weighted
remaining
Weighted
Number
outstanding
126,062
2,170,680
2,012,084
1,845,616
6,154,442
contractual
life (in)
years)
1.0
4.5
8.5
4.9
5.9
average
exercise
price
$ 6.62
$ 10.31
$ 12.94
$ 16.22
$ 12.87
Number
outstanding
126,062
1,841,434
312,866
1,845,616
4,125,978
contractual
life (in)
years)
1.0
4.0
8.0
4.9
4.6
average
exercise
price
$ 6.62
$ 10.42
$ 12.45
$ 16.22
$ 13.05
Range of
exercise
prices
$ 6 - $ 9
$ 9 - $12
$12 - $15
$15 - $17
Other Stock-Based Compensation Plans
The Company has other stock-based compensation plans, deferred share unit plans, that use notional units that are valued based
on the Company’s common share price on the Toronto Stock Exchange. These units accumulate dividend equivalents in the form of
additional units based on the dividends paid on the Company’s common shares. Changes in the value of the units as a result of
fluctuations in the Company’s share price and new issues for the year ended December 31, 2001 totaled $2,125 (2000: $220),
which was recognized in selling, general and administrative expense in the consolidated statement of income. Details of these
plans are as follows:
Deferred Share Unit Plan (DSU) -
Under the DSU Plan, senior executives of the Company may be awarded deferred share units as approved by the Board of
Directors. Units are redeemable only following termination of employment and must be redeemed by December 31st of the
year following the year in which the termination occurred. As at December 31, 2001 there were 65,930 units outstanding.
Directors’ Deferred Share Unit Plan (DDSU) -
Under the DDSU Plan, non-employee Directors of the Company may elect to allocate all or a portion of their compensation,
which includes fees and an annual award of common share options and deferred share units for that fiscal year, as deferred
share units. Units are redeemable only following termination of service on the Board of Directors and must be redeemed by
December 31st of the year following the year in which the termination occurred. As at December 31, 2001 there were 51,320
units outstanding.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 61
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
11. CUMULATIVE CURRENCY TRANSLATION ADJUSTMENTS
2001
2000
Balance, beginning of year
Gain realized during the year
Translation adjustments for the year
$ (23,742)
$ (15,388)
(746)
(2,359)
-
(8,354)
Balance, end of year
$ (26,847)
$ (23,742)
Translation gains or losses on the consolidation of foreign subsidiaries financial statements are accumulated in this account.
Translation adjustments arise as a result of fluctuations in foreign currency exchange rates. At December 31, 2001, 2000, and
1999, the Canadian dollar exchange rates against the British pound sterling were 2.3160, 2.2432 and 2.3314 respectively, and the
Chilean peso exchange rates against the Canadian dollar were 415, 382 and 367 respectively. The cumulative currency translation
adjustment for 2001 resulted from the weakening of the Chilean peso and the strengthening of the pound sterling against the
Canadian dollar.
12. OTHER EXPENSES/(INCOME)
Other expenses/(income) include non-operating and/or occasional items shown separately to facilitate comparison with the prior
year. The following items are included in Other expenses/(income):
2001
2000
Restructuring of branch network in the U.K. and
$ 24,484
$
-
Canada and integration of Universal Machinery
Services operations into the Canadian, Chilean
and UK operations.
Gain on disposal of Vancouver headquarters property
to institutions of higher learning
(29,503)
Donation expense for property donated to
institutions of high learning in Vancouver, Canada
33,787
-
-
Gain on disposal of surplus real estate in
Canada and the U.K.
(8,725)
(3,789)
Gain on sale of the Canadian Materials
Handling business
Loss on sale of non-core attachment services
businesses in Canada
Non-operating foreign exchange gain on reduction
in the net investment in a self-sustaining
foreign operation
(3,571)
2,500
(746)
-
-
-
$ 18,226
$
(3,789)
62 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
13. EMPLOYEE BENEFITS
2001
2000
Canada
UK
Hewden
Total
Total
The expense for the Company’s benefit plans, primarily for pension benefits, is as follows:
Defined contribution plans
Current service cost
Net benefit plan expense
Defined benefit plans
$
$
4,510
4,510
$
$
-
-
Current service cost, net of employee contributions
$
4,170
$ 10,267
Interest cost
Expected return on plan assets
Amortization of past service costs
Amortization of net actuarial (gain)/loss
Amortization of transition obligation/(asset)
Net benefit plan expense
Defined contribution plan expense
Defined benefit plan expense
Total
13,890
(16,654)
165
(368)
1,144
2,348
4,510
2,348
6,858
$
$
$
15,540
(19,183)
-
-
(1,295)
5,329
-
5,329
5,329
$
$
$
$
$
$
$
$
$
164
164
$
$
4,674
4,674
$
$
3,896
3,896
3,960
7,256
(9,118)
-
(676)
1,577
2,999
164
2,999
3,163
$ 18,398
$ 14,589
36,686
(44,955)
165
(1,044)
1,426
$ 10,676
$
4,674
10,676
$
$
28,253
(34,912)
-
-
(163)
7,767
3,896
7,767
$ 15,350
$ 11,663
Information about the Company’s defined benefit plans is as follows:
Accrued benefit obligation
Balance at the beginning of year (1)
$ 191,614
$ 287,076
$ 131,414
$ 610,104
$ 463,727
Canada
UK
Hewden
Total
Total
Current service cost
Interest cost
Benefits paid
Actuarial gains
Foreign exchange rate changes
Plan amendments
Balance at the end of year
Plan Assets
5,965
13,890
(11,788)
4,095
-
2,119
10,267
15,540
(4,348)
(51,198)
8,236
1,839
3,960
7,256
(4,354)
(11,182)
-
1,437
20,192
36,686
(20,490)
(58,285)
8,236
5,395
18,874
28,253
(17,723)
(3,810)
(10,631)
-
$ 205,895
$ 267,412
$ 128,531
$ 601,838
$ 478,690
Fair value at the beginning of year (1)
$ 196,527
$ 284,591
$ 132,709
$ 613,827
$ 485,137
Actual return on plan assets
Employer contributions
Employees’ contributions
Benefits paid
Foreign exchange rate changes
Fair value at the end of year
751
-
1,824
(11,788)
-
(49,201)
(29,392)
(77,842)
4,515
1,839
(4,348)
7,405
2,756
1,436
(4,354)
-
7,271
5,099
(20,490)
7,405
13,927
6,786
4,285
(17,723)
(11,294)
$ 187,314
$ 244,801
$ 103,155
$ 535,270
$ 481,118
(1)
The defined benefit plans of Hewden were assumed by the Company on January 26, 2001.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 63
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
2001
2000
Canada
UK
Hewden
Total
Total
Funded status – plan surplus/(deficit)
$ (18,581)
$ (22,611)
$ (25,376)
$ (66,568)
$
2,428
Unamortized net actuarial loss
Unamortized past service costs
Adjustment
Unamortized transitional obligation/(asset)
Accrued benefit asset/(liability) net of
$
valuation allowance
15,712
1,954
-
5,116
4,201
5,146
60,691
17,118
39,833
-
1,397
(16,140)
-
-
17,351
$
2,479
$
(2,879)
$
1,954
1,397
6,327
3,801
-
-
(10,677)
$
8,869
Included in the above accrued benefit obligation and fair value of plan assets at the year-end
are the following amounts in respect of plans that are not fully funded:
Accrued benefit obligation
Fair value of plan assets
Funded status – plan deficit
$ 25,077
$ 267,412
$ 122,669
$ 415,158
$ 21,283
6,294
244,801
96,542
347,637
8,930
$ 18,783
$
22,611
$ 26,127
$ 67,521
$ 12,353
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations are as follows:
Discount Rate
Expected long-term rate of return on plan assets
Rate of compensation increase
Estimated Remaining Service Life (Years)
7.0%
8.5%
3.4%
2-13.3
5.5%
6.8%
4.5%
14
6.0%
7.5%
3.8%
13
Plan assets include common shares of the Company having a fair value of $920 at December 31, 2001 (2000: $906).
14.
INCOME TAXES
Provision for Income Taxes
Current income tax expense
Future income tax expense/(recovery)
2001
2000
$ 40,763
(11,742)
$ 29,021
$ 30,886
2,434
$ 33,320
64 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
Reconciliation of the Company’s effective income tax rate from statutory Canadian tax rates for the years ended
December 31, 2001 and 2000 is as follows:
2001
2000
Combined federal and provincial tax rates
41.91%
43.79%
Provision for income taxes based on the combined
federal and provincial rates
$ 55,715
$ 46,729
Increase/(decrease) in provision resulting from:
Lower effective rates on the losses/(earnings)
of foreign subsidiaries
(23,503)
(15,823)
Amortization of goodwill and increase in
assigned asset value
Large corporation tax
Income not subject to tax
Other items
763
2,101
(8,598)
2,543
431
1,651
(694)
1,026
Provision for income taxes
$ 29,021
$ 33,320
Future Income Tax Asset and Liability
Temporary differences and tax loss carry-forwards that give rise to future income tax assets and liabilities as at December 31, 2001
and 2000 are described below.
Future income tax assets:
Tax loss carry-forwards and other
$
2,825
$
7,465
2001
2000
Future income tax liabilities:
Capital, rental and leased assets,
inventories and reserves
Pensions
Other
$ (19,184)
$
(8,009)
(2,505)
(754)
(3,349)
(5,056)
$ (22,443)
$ (16,414)
15. OPERATING LEASES
Payments due under various operating lease contracts are as follows:
2002
2003
2004
2005
2006
2007 & thereafter
$
55,549
45,957
33,804
27,601
17,636
65,460
Total
$ 246,007
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 65
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
16. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income available to the shareholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is calculated to reflect the dilutive effect of exercising
outstanding stock options by application of the treasury stock method.
Income
Shares
(Numerator)
(Denominator)
Per Share
Amount
2001
Basic earnings per share:
Income available to common shareholders
$ 103,917
75,854,866
$
1.37
Effect of dilutive securities:
Stock options
Diluted earnings per share:
Income available to common shareholders
-
1,507,044
-
and assumed conversions
$ 103,917
77,361,910
$
1.34
2000
Basic earnings per share:
Income available to common shareholders
$ 73,391
77,436,109
$
0.95
Effect of dilutive securities:
Stock options
Diluted earnings per share:
Income available to common shareholders
-
704,950
-
and assumed conversions
$ 73,391
78,141,059
$
0.94
17. ECONOMIC RELATIONSHIPS
The Company distributes and services heavy equipment and related products. The Company has dealership agreements with
numerous equipment manufacturers, of which the most significant are with subsidiaries of Caterpillar Inc. Distribution and servicing
of Caterpillar products account for the major portion of the Company's operations. Finning has a strong relationship with Caterpillar
that has been ongoing since 1933.
66 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s
18. SEGMENTED INFORMATION
The Company and its subsidiaries have operated primarily in one industry during the year, that being the selling, servicing, renting
and financing of heavy equipment and related products.
Operating units are as follows:
• Canadian operations: British Columbia, Alberta, most of the Northwest Territories and the Yukon.
• U.K. operations: England, Scotland, Wales, Falkland Islands and the Channel Islands.
• Chilean operations: throughout the country.
• Hewden operations: Equipment rental in the U.K.
• Other includes corporate head office operations. Universal Machinery Services operations were also included for 2000
and part of 2001.
The reportable operating segments are:
2001
Canada
UK
Chile
Hewden
Other
Consolidated
Revenue from external sources
$ 1,398,623
$ 804,084
$ 448,005
$
587,482
$
8,849
$ 3,247,043
Operating costs
Depreciation
Amortization of goodwill
Other expenses/(income)
1,114,242
151,438
1,082
748,848
22,113
1,035
399,377
9,950
-
380,677
125,032
7,852
25,570
2,668,714
-
-
18,226
308,533
9,969
18,226
Earnings before interest and tax
$
131,861
$
32,088
$
38,678
$
73,921
$
(34,947)
$
241,601
Finance cost and interest on
other indebtedness
Non-controlling interests
Provision for income taxes
Net income
85,550
23,113
29,021
$
103,917
Identifiable assets
Capital expenditures
$ 1,301,166
$ 420,135
$ 237,761
$ 1,079,719
$
19,514
$
6,443
$
5,071
$
20,152
$
$
-
-
$ 3,038,781
$
51,180
2000
Revenue from external sources
$ 1,214,516
$ 682,162
$ 474,145
$
Operating costs
Depreciation
Amortization of goodwill
Other expenses/(income)
947,015
147,300
1,012
629,309
24,389
843
435,877
8,987
-
Earnings before interest and tax
$ 119,189
$
27,621
$
29,281
$
Finance cost and interest on
other indebtedness
Provision for income taxes
Net income
Identifiable assets
Capital expenditures
$ 1,195,607
$ 433,161
$ 226,422
$
7,851
$
3,862
$
3,324
$
$
-
-
-
-
-
-
-
$
89,209
$ 2,460,032
103,826
2,116,027
-
-
(3,789)
180,676
1,855
(3,789)
$
(10,828)
$
165,263
58,552
33,320
73,391
$
$ 302,451
$ 2,157,641
$
-
$
15,037
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 67
Ten-Year
Financial Summary
Ye a r s e n d e d D e c e m b e r 3 1 ( $ i n t h o u s a n d s. ex c e p t p e r s h a r e d a t a )
Assets
Revenue
Canadian operations
UK operations
Chilean operations
Hewden operations
International operations
Total consolidated
Earnings before interest and taxes
As a percent of revenue
Net income
As a percent of revenue
Earnings Per Common Share
Basic
Diluted (2)
Dividends
Total common share
Per common share
Cash flow after working capital changes
Cash flow per share
Gross capital expenditures
Ratios
Asset turnover ratio
Debt to equity (3)
Liabilities to equity (3)
Operating debt to equity (excluding
finance and rental activities (1) (3)
Book value per common share
Return on average shareholders’ equity
Common Share Price
High
Low
Common shares outstanding (thousands)
Revenue per employee
Net income per employee
Number of Employees
Canada
UK
Chile
Hewden
International
Total
2001
2000
1999
1998
$1,398,623
$ 804,084
$ 448,005
$ 587,482
$
8,849
$3,247,043
$ 241,601
7.4%
$ 103,917
3.2%
$
$
$
$
1.37
1.34
15,155
0.20
$ 445,623
$
$
5.88
51,180
1.25
0.87:1
1.53:1
0.21:1
$
10.23
14.1%
$
$
20.35
12.10
75,816
$ 331,230
$
10,601
2,629
1,553
1,516
4,066
39
9,803
1,214,516
1,032,922
1,136,917
682,162
474,145
-
89,209
2,460,032
165,263
6.7%
73,391
3.0%
0.95
0.94
15,452
0.20
357,780
4.72
15,284
1.18
1.04:1
1.75:1
0.20:1
9.02
10.5%
13.85
9.85
75,790
477,120
14,234
2,326
1,404
1,390
-
36
5,156
712,941
377,777
-
106,221
2,229,861
148,912
6.7%
59,600
2.7%
0.75
0.74
15,919
0.20
438,232
5.50
20,864
1.05
1.29:1
1.90:1
0.47:1
8.74
8.7%
15.40
9.00
79,737
450,113
12,031
2,271
1,364
1,259
-
60
4,954
793,020
503,505
-
151,979
2,585,421
82,729
3.2%
3,185
0.1%
0.04
0.04
15,868
0.20
253,891
3.20
44,176
1.13
1.67:1
2.29:1
0.97:1
8.52
0.5%
18.50
10.25
79,426
492,367
607
2,494
1,348
1,354
-
55
5,251
Financial data has been restated to incorporate common share subdivision occurring during the ten-year period.
1. Assumes a debt to equity ratio of 7:1 in the finance operations and 5:1 in the rental operation.
68 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
Te n - Ye a r F i n a n c i a l S u m m a r y
1997
1996
1995
1994
1993
1992
1,146,406
565,376
514,068
-
101,214
2,327,064
216,625
9.3%
103,695
4.5%
1.32
1.27
15,761
0.20
200,397
2.53
47,148
0.99
1.66:1
2.37:1
0.90:1
8.69
16.2%
20.50
14.43
79,091
423,565
18,874
2,496
1,720
1,228
-
50
5,494
926,653
437,949
408,616
-
101,491
1,874,709
188,404
10.0%
88,184
4.7%
1.13
1.09
15,600
0.20
153,887
1.96
43,132
1.04
1.50:1
1.97:1
0.59:1
7.59
16.0%
14.58
9.75
78,547
441,940
20,788
2,269
925
1,008
-
40
4,242
923,275
416,034
350,650
-
62,032
1,751,991
174,397
10.0%
77,493
4.4%
1.00
0.98
15,451
0.20
16,341
0.21
25,812
1.09
1.55:1
2.11:1
0.61:1
6.55
16.2%
11.63
8.63
77,442
428,674
18,961
838,680
338,499
241,221
-
39,138
1,457,538
136,748
9.4%
61,421
4.2%
0.80
0.78
9,985
0.13
69,735
0.91
16,641
1.06
1.35:1
1.99:1
0.43:1
5.83
14.8%
12.06
9.19
77,026
374,978
15,802
675,490
258,235
74,464
-
34,768
1,042,957
71,305
6.8%
22,271
2.1%
0.30
0.30
6,592
0.09
96,738
1.27
13,752
0.95
1.23:1
1.80:1
0.39:1
5.00
6.5%
10.88
5.88
76,266
283,875
6,062
2,228
2,124
2,025
884
941
-
34
873
861
-
29
863
759
-
27
553,316
251,909
-
-
27,512
832,737
46,981
5.6%
2,878
0.3%
0.03
0.03
5,042
0.08
48,540
0.72
7,025
0.86
1.59:1
2.03:1
0.66:1
4.58
0.9%
7.25
5.25
67,370
281,425
973
2,004
930
-
-
25
4,087
3,887
3,674
2,959
2. In 2000, the diluted earnings per share calculation was changed to reflect the dilutive effect of exercising outstanding stock options by application
of the treasury stock method. Diluted earnings per share for the years ended 1999 to 2001 have been stated using this method.
3. Equity ratios for the 2000 result did not include the effect of the investment in Hewden Stuart.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 69
Corporate
Information
Board of Directors
Ricardo Bacarreza
Presidente
Proinvest S.A.
Santiago, Chile
John E. Cleghorn
Company Director
Toronto, Ontario
James F. (Jim) Dinning
Executive Vice President
Sustainable Development & External Relations
TransAlta Corp.
Calgary, Alberta
Timothy S. Howden
Company Director
Marlow, Buckinghamshire
England
Nicholas B. Lloyd
President and Chief Executive Officer
Finning Chile S.A.
Vitacura, Chile
Jefferson J. Mooney
Chairman, President and Chief Executive Officer
A&W Food Services of Canada, Inc.
North Vancouver, B.C.
Donald S. O’Sullivan
President
O’Sullivan Resources Ltd.
Edmonton, Alberta
Conrad A. Pinette
President and Chief Operating Officer
Lignum Limited
Vancouver, B.C.
Andrew H. Simon
Executive Vice Chairman
Diamant Boart S.A.
Staffordshire, England
Monica E. Sloan
Independent Management and Strategy Consultant and
Associate, Deloitte Consulting
Calgary, Alberta
Douglas W.G. Whitehead
President and Chief Executive Officer
Finning International Inc.
Coquitlam, B.C.
John M. Willson
Company Director
Vancouver, B.C.
70 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT
C o r p o r a t e I n fo r m a t i o n
Officers
Brian C. Bell
Committees
Management Pension Committee
Executive Vice President, Customer Support Services
Finning International Inc.
A.R. Guglielmin
R.T. Mahler
Jack A. Carthy
President, Power Systems
Finning International Inc.
Anthony R. Guglielmin
Vice President and Corporate Treasurer
Finning International Inc.
Paul J.C. Jarvis
Chief Executive
Hewden Stuart Plc.
Nicholas B. Lloyd
President and Chief Executive Officer
Finning Chile S.A.
Richard T. Mahler
Board Pension Committee
A.H. Simon, Chairman
J.E. Cleghorn
Audit Committee
J.F. Dinning, Chairman
R. Bacarreza
J.E. Cleghorn
A.H. Simon
M.E. Sloan
Human Resources & Compensation Committee
T.S. Howden, Chairman
J.J. Mooney
D.S. O’Sullivan
J.M. Willson
Executive Vice President and Chief Financial Officer
Governance Committee
Finning International Inc.
D.S. O’Sullivan, Chairman
J.F. Dinning
T.S. Howden
C.A. Pinette
J.M. Willson
Environmental, Health & Safety Committee
J.M. Willson, Chairman
R. Bacarreza
J.J. Mooney
M.E. Sloan
D.W.G. Whitehead
Stephen Mallett
Managing Director
Finning (UK) Ltd.
Conrad A. Pinette
Chairman of the Board
Finning International Inc.
Ian M. Reid
President and Chief Operating Officer
Finning (Canada)
John T. Struthers
Corporate Secretary
Finning International Inc.
Douglas W.G. Whitehead
President and Chief Executive Officer
Finning International Inc.
2001 ANNUAL REPORT – FINNING INTERNATIONAL INC. 71
Shareholder
Information
Stock Exchanges
The common shares of Finning International Inc. are listed
on the Toronto Stock Exchange. (Symbol: FTT)
Computershare Trust Company
of Canada
Auditors
Arthur Andersen LLP., Chartered Accountants,
Vancouver, Canada
Solicitors
Borden Ladner Gervais LLP., Barristers and Solicitors
Vancouver, Canada
Corporate Head Office
Suite 1000 - 666 Burrard Street
Vancouver, Canada, V6C 2X8 (604) 691-6444
Annual Meeting
The Annual Meeting of the shareholders will be held at
11:00 a.m., April 24, 2002 at the Fairmont Waterfront Hotel,
Vancouver.
Corporate Information
The Company prepares an Annual Information Form (AIF)
which is filed with the securities commissions or similar bodies
in all of the provinces of Canada. Copies of the AIF and Annual
and Quarterly Reports are available to shareholders and other
interested parties on request or can be accessed directly from
Finning’s home page on the Internet at http://www.finning.com.
Registrar and Transfer Agent
Computershare Trust Company of Canada.
To contact the stock transfer office nearest to your location,
see listing.
Investor Inquiries
Inquiries relating to shares or dividends should be directed to
the Company’s Registrar and Transfer Agent. Inquiries relating
to the Company’s operating activities and financial information
should be addressed to Anthony R. Guglielmin, Vice President
and Corporate Treasurer, (604) 331-4937, Fax (604) 331-4852,
e-mail: aguglielmin@finning.ca
Halifax
Computershare
1465 Brenton St., Ste. 501
P.O. Box 36012
Halifax, Nova Scotia B3J 3S9
Tel: 902-420-2211
Fax: 902-420-2764
Montreal
Computershare
1800 McGill College Ave., 6th Floor
Montreal, Quebec H3A 3K9
Tel: 1-800-564-6253
Fax: 514-982-7635
Toronto
Computershare
100 University Ave., 11th Floor
Toronto, Ontario M5J 2Y1
Tel: 1-800-663-9097
Fax: 416-981-9507
Calgary
Computershare
530 - 8th Ave. S.W., Ste. 600
Calgary, Alberta T2P 3S8
Tel: 1-888-267-6555
Fax: 403-267-6592
Vancouver
Computershare
510 Burrard St., 2nd Floor
Vancouver, B.C. V6C 3B9
Tel: 1-888-861-5566
Fax: 604-661-9480
Website: www.computershare.com
email: caregistryinfo@computershare.com
72 FINNING INTERNATIONAL INC. – 2001 ANNUAL REPORT