Finning International

FINNING INTERNATIONAL INC.
A N N U A L   R E P O R T   2 0 0 2

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TODAY

 
 
 
 
 
 
TOMORROW

CONTENTS

1 Corporate Profile
2 Performance at a Glance
3 Strategic Achievements
4 President’s Report
11 Review of Operations – Finning (Canada)
14 Review of Operations – Finning (UK)
16 Review of Operations – Hewden Stuart
19 Review of Operations – Finning Chile
23 New South American Acquisitions
26 Review of Operations – Power Systems
28 Review of Operations – Customer Support Services
30 Financial Management
33 Management’s Discussion and Analysis
43 Management’s Report to Shareholders
43 Auditors’ Report
44 Consolidated Financial Statements
47 Notes to Consolidated Financial Statements
66 Ten-Year Financial Summary
68 Board of Directors
70 Corporate Officers
71 Corporate Governance
72 Shareholder Information

All figures in this annual report are in Canadian dollars unless otherwise noted.

A Caterpillar 311B excavator in silhouette as it works on a
tunnel for a new subway line in Santiago, Chile.

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

Finning International Inc. sells, rents, finances and provides customer
support services for Caterpillar equipment and engines and complementary
equipment in Western Canada (BC, Alberta, Yukon and the Northwest
Territories), the United Kingdom and South America (Chile, Argentina,
Uruguay and Bolivia*).

In 2002, the Company achieved record net income, despite soft economic
conditions in which revenues decreased slightly. This strong bottom-line
performance was a result of the successful execution of three corporate
objectives: geographic diversification, revenue stream diversification and
financial management measures that increased return on assets. 

The most significant event of 2002 was the announcement in November
of the Company’s agreements to acquire the Caterpillar dealerships
in Argentina, Uruguay and Bolivia. Finning International now operates
throughout the Southern Cone of South America.
TODAY

*The acquisition of Bolivia had not closed as of the date of printing of this annual report.

15%

Revenue growth

20%

Return on equity

30%

Minimum

Market share in all sectors

TOMORROW
The Company will continue to lever the Caterpillar brand name and
provide unrivalled services that earn customer loyalty. Finning’s
market share in such sectors as oil sands mining and pipeline construction
in Canada and copper mining in Chile positions the Company to grow
significantly in the future. The new acquisitions in South America bring
Finning an opportunity to participate in the recovery and expansion of
the construction and resource sectors in those countries. Additional
and ongoing growth will be in all product and core industry segments
and will include acquisitions in core markets. 

Return on equity increases will result from continued improvement
in asset efficiency; adoption of new technologies to manage the business
more effectively; closure of less profitable branches; selective investment
in high-growth and high-profit businesses; cost reduction through
centralization of support services; and lower tax rates as the majority
of revenue growth comes from lower taxed jurisdictions. 

The Company’s Head Office is located in Vancouver, British Columbia, Canada. Finning International Inc. (www.finning.com) is
publicly traded, widely held, and listed on The Toronto Stock Exchange (symbol FTT).

[ 1 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
PERFORMANCE AT A GLANCE

$132

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

$3.2

300

250

200

150

100

50

0

$278

150

120

90

60

30

0

98 99 00 01 02

98 99 00 01 02

98 99 00 01 02

Revenue
$ (BILLIONS)

EBIT 
(Earnings Before Interest and Taxes)
$ (MILLIONS)

Net Income
$ (MILLIONS)

2.0

1.5

1.0

0.5

0.0

$1.72

20

15

10

5

0

15.7%

2.0

1.5

1.0

0.5

0

0.58

98 99 00 01 02

98 99 00 01 02

98 99 00 01 02

Basic EPS 
(Earnings Per Share)  

Return On Equity
(PERCENTAGE)

Debt To Equity

160

140

120

100

80

60

Mar. 31/02

Jun. 30/02

Sept. 30/02

Dec. 31/02

Finning International Inc.

S&P/TSX Composite Index

Relative Price Performance
Finning International Inc. vs. S&P/TSX Composite Index
(JANUARY 1, 2002 TO DECEMBER 31, 2002)

[ 2 ]

TODAY

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
2002 STRATEGIC ACHIEVEMENTS

Finning International Inc.: 

Agreed to acquire the Caterpillar Inc. dealerships in Argentina, Uruguay
and Bolivia for $51 million plus the assumption of $51 million of debt. 
Achieved the largest single transaction in its history with a $283 million
equipment  sale  and  customer  support  service  contract  with  Albian
Sands Energy Inc. in Alberta. 

Sold 19 properties in Western Canada for $79 million and entered

into long-term leases with the purchaser. 

Sold substantially all its Canadian conditional sales contract portfolio
to Caterpillar Financial Services Limited and securitized a portion of
its accounts receivable portfolio. Proceeds were $120 million in 2002,
with an additional $70 million expected in 2003. 

Through  its  U.K.  subsidiary  Hewden  Stuart  Plc  divested  its  Tower
Cranes business as part of the Company’s plan to sell non-core assets.
Concurrently, Hewden acquired the majority of the remaining assets of
Maxxiom Limited for $44 million.

Acquired 36.9% of Maxim Power Corp., a Calgary-based independent
power producer, for $15 million, and Diperk, the Chilean representative
for two Caterpillar product lines, Perkins Engines and FG Wilson. 

Through Finning Chile, completed two transactions with Codelco
Chile valued at $39 million, involving delivery of two new CAT 797B
Series off-highway trucks and renewal of a two-year maintenance and
repair contract covering 29 pieces of equipment. 

Increased its annual common share dividend twice during 2002,
and again in January 2003, the first increases since 1995. The dividend
is now $0.09/quarter.

Received approval from the Toronto Stock Exchange to purchase
up to 10% of its public float during the period December 3, 2002 to
December 2, 2003. 

[ 3 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
PRESIDENT’S REPORT

Finning International achieved record net income in 2002. This excellent
performance was accomplished by employees throughout the Company
successfully implementing our strategic plan. 

The Company’s revenues of $3.21 billion in 2002 compare with $3.25
billion in 2001. Revenues were essentially flat as commodity prices and
general economic activity were fair to poor in our markets — Western
Canada, the United Kingdom and Chile. 

However, our net earnings were $132.3 million ($1.72 per share),
compared with 2001 net earnings of $103.9 million ($1.37 per share).
This dramatic increase reflects the success of a number of initiatives
undertaken before and during 2002. 

GEOGRAPHIC
DIVERSIFICATION

REVENUE STREAM
DIVERSIFICATION

The 2002 achievement likely

The significance of the South

In 2002, we continued our

to have the biggest impact 

America acquisitions

strategy of reducing our

on the Company going

becomes obvious with one

revenue dependence on sales

forward is our agreement 

glance at the map on page 23.

of new and used equipment

to acquire Caterpillar

After successfully increasing

and increasing the proportion

dealerships in Argentina,

revenue and earnings

of revenue from rental, parts

Uruguay and Bolivia. These

performance in Chile since

and service. The result was a

acquisitions add to our

Finning acquired the CAT

gross margin on revenues of

geographic diversification,

dealership there a decade

29.9% compared with 27.9%

which reduces our exposure

ago, we can now apply the

earned in 2001.

to economic cycles that

same strategies to almost 

Our transition toward a

inevitably occur in specific

the entire Southern Cone 

customer service culture

countries and industries. 

of the continent. 

throughout the entire

Company is continuing, and

we believe the major share of

the financial gains from this

strategy is still to be realized.

Our customer support service

initiatives are outlined on

Page 28.

[ 4 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
PRESIDENT’S REPORT

IMPROVED RETURN 
ON ASSETS

We undertook several

initiatives in 2002 to continue

to improve the returns we

generate with our assets. 

In January, the Company

concluded a $79 million sale

The increase in rental

and leaseback transaction 

We welcome our new

revenue has come primarily

in which we sold a number 

colleagues in Argentina,

from our growing Hewden

of our Canadian properties

Uruguay and Bolivia. After

Stuart subsidiary in the U.K.,

and entered into long-term

some tough economic times,

acquired in 2001, and from

leases with the purchaser. 

we believe these countries

the successful expansion of

In October, our Hewden

are now poised for years 

our CAT rental stores in

Stuart subsidiary sold its

of growth and prosperity.

Western Canada and Chile.

Tower Cranes business

Finning appreciates having

Economic conditions have

because it did not fit the

the opportunity to contribute

also prompted some

strategic growth plan.

to this exciting future.

customers to rent heavy

In addition, in December 

The year’s excellent

equipment until their

we sold substantially all 

performance could not 

business improves enough 

our Canadian conditional

have been attained 

to make purchase viable. 

sales contract portfolio to

without the hard work and

Caterpillar Financial Services

talent of our employees 

Limited and securitized a

throughout the Company. 

portion of our trade

I also want to add my personal

receivables for combined

thanks and gratitude to our

proceeds of $120 million.

Board of Directors.

These and other 

initiatives taken during

the year improve our return

on existing assets and

strengthen our balance 

sheet to enable us to pursue

new acquisitions and seize

other growth opportunities 

in core businesses.

[ 5 ]

Everything we do, of course, is based on our relationship with Caterpillar
Inc. Caterpillar is the worldwide leader in designing and manufacturing
high quality, dependable heavy-duty equipment. We are today the world’s
largest Caterpillar equipment dealer. Our corporate vision is to be
Caterpillar’s best global business partner, providing unrivalled services
that earn customer loyalty.

Equipment dwarfs desert vegetation at Caterpillar’s
testing and demonstration site near Tucson, Arizona.

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
PRESIDENT’S REPORT

• A long-term return on
equity rate of 20% a year. 

In 2002, our return on equity

was 15.7%, compared with

14.1% in 2001. We anticipate

increasing ROE 1% each 

year through 2006.
• A market share of 30% 
in all our markets. We 

TOMORROW

We expect to deliver 

another strong bottom-line

exceed this objective now 

performance in 2003, 

in most markets, but we

despite anticipating another

intend to reach this target 

year of challenging 

in all our sectors.

economic conditions. 

We are determined to

Over the longer term,

continue to build value for

additional strategic

our shareholders by

initiatives combined with

enhancing our reputation as

economic growth and 

a Company that sets goals

stable commodity prices 

and achieves them.

will position the Company 

to benefit accordingly. 

We have set a number of

challenging objectives for

2003 and the years that

follow, including:
• A long-term revenue
growth rate of 15% a year. 

Douglas W.G. Whitehead

President and Chief

Executive Officer

We did not meet this goal in

March 26, 2003

2002 and we will be hard-

pressed to meet it in 2003.

However, we did perform 

at this level throughout 

the 1990s, and we are

confident we will return 

to this growth rate when

business cycles improve 

over the medium term.

[ 7 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     M E M O R I A   A N U A L   2 0 0 2
INFORME DEL PRESIDENTE

Finning International alcanzó ingresos netos récord en el año 2002;
excelente  resultado  logrado  por  los  empleados  mediante  la  exitosa
implementación por la compañía de nuestro plan estratégico.

Las  ventas  de  la  compañía  de  $3,21  mil  millones  de  dólares  en
2002 son comparables a los resultados de 2001, de $3,25 mil millones
de dólares. Las ventas se mantuvieron esencialmente planas, mientras
los precios de materias primas y la actividad económica general se
mantuvieron entre regulares y bajos en nuestros mercados (Canadá
occidental, el Reino Unido y Chile).

No obstante, nuestras ganancias netas fueron de $132,3 millones
de dólares ($1,72 por acción), comparado con los resultados de 2001 de
$103,9 millones de dólares ($1,37 por acción). Este aumento dramático
refleja  el  éxito  de  una  cantidad  de  iniciativas  emprendidas  antes  y
durante el año 2002.

DIVERSIFICACIÓN DE LAS
FUENTES DE INGRESOS

estrategia no se ha logrado

aún en su totalidad. La

Durante 2002, continuamos

descripción de nuestras

con la estrategia de reducir

iniciativas de soporte al

La importancia de las

nuestra dependencia de

cliente se encuentra en la

DIVERSIFICACIÓN
GEOGRÁFICA

El logro de 2002 que

adquisiciones de América 

ingresos provenientes de

página 28.

posiblemente tendrá el 

del Sur es aparente con un

ventas de equipos nuevos y

El aumento de ingresos

mayor impacto en el avance

simple vistazo al mapa que 

usados, y aumentar la

derivados del negocio 

de nuestra compañía es el

se encuentra en la página 21.

proporción de ingresos

de arriendo proviene

acuerdo que concretamos

Después de aumentar

mediante el negocio de

principalmente de nuestro

para la adquisición de

exitosamente las ventas 

arriendo, repuestos y servicio

subsidiario Hewden Stuart en

representaciones Caterpillar

y ganancias en Chile tras 

técnico. El resultado fue un

el Reino Unido, adquisición

en Argentina, Uruguay y

la adquisición de la

margen bruto de ventas del

hecha en 2001, como así

Bolivia. Las mismas aumentan

representación de CAT hace

29,9%, comparado con un

también de la exitosa

nuestra diversificación

una década, podemos ahora

27,9% logrado en el año 2001.

expansión de los Cat Rental

geográfica, reduciendo

aplicar la misma estrategia 

Nuestra transición hacia

Stores en el oeste canadiense

nuestra exposición a ciclos

en casi todo el Cono Sur.

una cultura de servicio al

y en Chile. Asimismo, las

cliente en toda la compañía

condiciones económicas han

continúa, y consideramos que

obligado  a algunos clientes a

la porción mayor de los

arrendar maquinaria pesada

beneficios financieros de esta

hasta que sus negocios

mejoren lo suficiente como

para posibilitar una compra.

económicos que ocurren

inevitablemente en países 

e industrias específicas.

[ 8 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     M E M O R I A   A N U A L   2 0 0 2
INFORME DEL PRESIDENTE

mejoran el retorno sobre

activos actuales y 

fortalecen nuestro balance,

permitiéndonos realizar

nuevas adquisiciones 

y aprovechar otras

oportunidades de crecimiento

en los principales negocios.

Les damos la bienvenida 

EL MAÑANA

• Un retorno sobre capital 
de un 20% anual. En 2002,

nuestro retorno sobre 

capital fue de un 15,7%,

MEJORA EN EL RETORNO 
SOBRE ACTIVOS

a nuestros nuevos colegas 

Para 2003, esperamos 

comparado con un 14,1% en

en Argentina, Uruguay y

lograr resultados fuertes 

2001. Anticipamos un

Emprendimos varias

Bolivia. Después de una fase

en nuestra última línea, a

crecimiento de un 1% cada

iniciativas en 2002 para

económica difícil, confiamos

pesar de enfrentar otro 

continuar mejorando los

en que estos países

año de condiciones

retornos generados por

emprenderán un camino de

económicas desafiantes.

año hasta 2006.
• Una participación de
mercado del 30% en todos

nuestros activos. En el mes 

crecimiento y prosperidad

A largo plazo, iniciativas

nuestros mercados. En la

de enero, la compañía

durante los próximos años.

estratégicas adicionales,

actualidad, estamos

completó una transacción de

Finning agradece la

combinadas con 

excediendo esta meta 

venta y retroarrendamiento

oportunidad de contribuir 

crecimiento económico 

en la mayoría de nuestros

de $79 millones de dólares, 

a este futuro emocionante.

y precios de mercado

mercados, y es nuestra

en la que vendimos una parte

El excelente rendimiento 

estables, posicionarán 

intención lograr esta cifra 

de nuestras propiedades

de este año no podría haberse

a la compañía para su

en su totalidad.

canadienses y entramos en

logrado sin el trabajo arduo 

consiguiente beneficio.

Nuestra meta es continuar

arrendamientos a largo plazo

y el talento de nuestros

Hemos establecido un

aumentando el valor para

con el comprador. En octubre,

empleados en toda la

número de objetivos

nuestros accionistas al realzar

nuestra subsidiaria Hewden

empresa. Quisiera también

desafiantes para 2003 y los

nuestra reputación como

compañía que se fija metas y

las logra.

años venideros que incluye:
• Un crecimiento a largo plazo
en ventas de un 15% anual. En

2002, no logramos este

objetivo y nos apremiará

alcanzarlo en 2003. No

obstante, sí logramos este

nivel en la década de los 90, y

Douglas W.G. Whitehead

confiamos que retornaremos

Presidente y C.E.O.

a este porcentaje de

crecimiento en cuanto

mejoren los ciclos de

negocios en el mediano plazo.

26 de marzo de 2003

Stuart vendió su negocio de

agregar mi agradecimiento

Tower Cranes ya que no

personal a nuestro directorio.

calzaba en el plan de

crecimiento estratégico.

Adicionalmente, en

diciembre, vendimos casi 

todo el portafolio canadiense

de contratos de ventas

condicionales a Caterpillar

Financial Services Limited 

y aseguramos  una porción 

de nuestras cuentas por

cobrar por una recaudación

combinada de $120 millones.

Estas y otras iniciativas

tomadas durante el año,

NUESTRA RELACIÓN CON
CATERPILLAR INC.

Naturalmente, todo lo que

hacemos está basado en

nuestra relación con

Caterpillar Inc. Caterpillar es

el líder mundial en el diseño y

la manufactura de maquinaria

pesada de alta calidad y

confiabilidad. Hoy somos el

mayor distribuidor de

maquinaria Caterpillar en el

mundo. Nuestra visión

corporativa es ser el mejor

socio de negocios de

Caterpillar, entregando

servicios incomparables que

nos harán merecedores de la

lealtad de nuestros clientes.

[ 9 ]

Mechanic checks out Caterpillar 797B truck, one of 
23 sold to an Alberta oil sands contractor and part of the
largest transaction ever by Finning (Canada).

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING (CANADA)

Revenue from customer support services hit record levels in 2002. New
equipment sales declined slightly in 2002 principally as a result of lower
activity levels in the oil and gas sectors, and resulted in Finning (Canada)
overall revenue declining after two record years in 2001 and 2000.

The year’s largest transaction, and the largest single transaction in
the  history  of  Finning  (Canada),  was  an  equipment  sale  and  customer
service contract with  Albian  Sands  Energy  Inc.  The  sale  included  23
Caterpillar 797B trucks and 28 pieces of Caterpillar support equipment
valued at over $130 million. The equipment is being delivered over 18 months.
The five-year equipment parts and maintenance contract is valued in
excess of $150 million, more than the value of the equipment delivered,
which is significant proof of the success of our business strategy.

[ 11 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING (CANADA)

of the demand for Caterpillar

excavators, scrapers, 

tractors, wheel loaders and

paving equipment.

Despite numerous

challenges in the Western

Canada forest industry,

Along with the equipment

Finning experienced one of

fleets at Syncrude and

the strongest showings in

Suncor, Finning (Canada) has

decades in forestry for 

placed and now supports the

2002. A combination of a

biggest concentration of

dedicated industry team,

Caterpillar 797s (the industry’s

purpose-built machines 

largest production mining

and a need for the forest

truck) that exists anywhere

companies and contractors 

in the world.

to improve efficiency has

Western Canada oil and gas

resulted in our highest 

The Canadian diamond

drilling activity declined by

market share in many years.

industry continues to

20% during 2002,

The execution of our entry

expand with the opening 

significantly reducing the

into rental services continued

of Diavik, the second major

demand for road-building and

on track. At year-end, we 

mine in the Northwest

site-preparation machines as

had 12 “CAT The Rental Store”

Territories, providing the

well as for engines to power

operations throughout British

market potential for major

rigs and related equipment.

Columbia and Alberta, an

fleets of equipment as 

A strong performance came

increase from seven stores

well as for power generation

from the construction sector.

at year-end 2001. These

equipment. Finning

Privatization of highway

stores vary in size from five 

designed, built and operates

maintenance in Alberta and

to 19 employees and from

the main powerhouse for

British Columbia has provided

annual revenues of $750,000

both of Canada’s major

us with the opportunity to

to $3 million depending on

diamond mines.

supply new fleets of equipment

location. Our target market 

to private contractors. These

is general and industrial

private contractors have

contractors. Equipment

learned from experience 

available for rent at these

that they benefit from buying

stores ranges in size from

quality equipment with

small hand tools to small 

accompanying multi-year

and medium-size Caterpillar

maintenance contracts. We

construction equipment.

have won a large share of 

this market for small wheel

loaders and motor graders,

and we expect this market 

to remain strong. In addition,

the Alberta economy has 

led Canada in growth, which

resulted in strong demand 

for residential construction.

This in turn drives much 

Ian M. Reid
President and Chief
Operating Officer

[ 12 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING (CANADA)

TOMORROW
Oil  sands  customers  are  our  largest  single  source  of  revenue.
Production in the oil sands was approximately 800,000 barrels per
day in 2002 and is forecast to reach one million barrels per day in 2003*.
Finning (Canada) has a 60% market share in heavy equipment in the
oil sands and will benefit from this production increase. The recent
uncertainty  concerning  the  Federal  Government’s  ratification of  the
Kyoto Accord may impact the timing of projects and some new players
entering the industry. It is not expected to significantly affect the
current or future plans of the larger established companies.

Consensus forecasts indicate

a return to record activity

levels for conventional oil

and gas drilling in Western

Canada in 2003. Caterpillar

gas from the Arctic through

equipment is used in the

Western Canada to the

construction of roads to

United States. Pipeline

access drilling locations. In

activity presents opportunity

addition, a large number of

for large fleets of tractors,

drill rigs are powered by

excavators and pipelayers as

Caterpillar engines. The

well as significant opportunity

nature of this business

for large Caterpillar engines

requires frequent equipment

installed in gas compression

movement, and Caterpillar

stations throughout the

engines have won the major

length of the pipeline. 

market share of the large

Once again in 2003,

truck business. 

Edmonton, Vancouver and

Longer term, we are

Calgary are forecast to be

focused on the construction

among the fastest growing

of a pipeline to bring natural

cities in Canada. Continued

economic strength in these

locations and in many of the

industries we serve should

present significant

opportunities for Finning

(Canada) over the next year

and beyond.

* source: Canadian Association of Petroleum Producers

[ 13 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING (UK)

Activity remained strong in all our major markets in 2002, heavily influenced
by the government’s infrastructure spending, despite the overall U.K.
economy experiencing a mild downturn. Revenue was slightly higher at
$828 million. 

Our bottom line was improved by an increase in the proportion of
our business that comes from customer service versus equipment
sales. In 2002, 37% of machines sold included a customer support
contract. In addition 48% of engines sold into the growing landfill gas
industry included a customer support contract.

£180 billion 
Government Infrastructure Investment to 2011
£ billion cash

15

12

9

6

3

0

services to Biffa, the U.K.’s

largest single supplier of

waste management services,

generated revenue of 

$4.4 million in 2002.

Our solid market share 

and customer relationships 

in the quarry industry, 

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0
0
2

0
1
/
9
0
0
2

1
1
/
0
1
0
2

0
0
0
2
/
9
9
9
1

One of our strongest 

which produces aggregate

Since the used equipment

foundations for road 

building and other

market in the U.K. is

traditionally small, we have

construction sectors, are

established relationships

reflected in strong sales for

with large used equipment

our loading and haulage

equipment. The housing

dealers in the Middle East

and the United States, where

markets was the materials

market has also remained

demand was particularly

handling industry, in which

active, driven by government

strong in 2002. 

our market share increased

infrastructure spending, low

We have also taken

for the fourth successive

interest rates and a

measures to improve our

year. This is largely a 

rental business for us, 

recognized lack of housing in

inventory management 

many parts of the U.K. 

of used equipment, which 

with parts and maintenance

Our used equipment

has reduced our capital

service contracts being a 

revenue in the construction

requirements for this activity.

key component. 

industry was 15% higher 

Another strong market is

than in 2001. Used sales

the landfill and waste

are an important component

recycling industry, in which

of our business because 

we have the leading market

we need to take trade-ins

share. In particular, our six-

from customers on new

year agreement to supply

equipment sales, then resell

equipment and maintenance

this equipment profitably.

Stephen Mallett
Managing Director

[ 14 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING (UK)

TOMORROW
In 2003, we expect revenues to be similar to 2002 in all our markets.
The U.K. economy is expected to improve in 2003, leading the major Western
European countries, according to projections of the Organization of
Economic Co-operation and Development (OECD). Public infrastructure
spending is expected to increase by another 6.9% in 2003, after an 11.5%
increase in 2002. 

We expect to continue increasing the customer service contribution
to our revenue in 2003 and beyond. Our goal over the next two years is
to generate 30% of our revenue from customer service contributions.
To achieve this, we will need to increase customer service revenue by 15%
through 2003 and 2004. 

To reach this objective, we are investing in the people and systems
that will bring a stronger customer service culture inside the Company
and a more focused marketing program to our existing and new customers.
The materials handling sector remains one of the most significant

growth areas for future acquisition opportunities.

[ 15 ]

U.K. government infrastructure spending makes work for 
this Caterpillar 320B excavator and other CAT equipment on 
a highway construction project in North Kent.

Hewden  increased  its  market  share  in  2002  to  approximately  22%
through a combination of organic growth and acquisitions in its first full
year since being acquired by Finning International in January 2001.
Revenue in 2002 increased only slightly in the face of a downturn in
the U.K. economy. 

Hewden is the largest equipment rental company in the country, with
353 depots and 3,813 employees, providing everything from wheelbarrows
to wheeled excavators to individuals and companies of all sizes in all
business sectors.

Our inventory exceeds 250,000 pieces of equipment. Caterpillar
equipment was introduced to the product line in 2001. The Caterpillar
inventory has reached 1,296 pieces of equipment and continues to grow.
Maintenance on the Caterpillar equipment is performed under contract
by Finning (UK).

Hewden Stuart’s wide range of rental equipment, including
over 1,200 Caterpillar machines, is offered from 353
locations throughout the United Kingdom.

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
HEWDEN STUART

from the traditional rental

business into that of a sub-

contract supplier business. 

Rental of mobile cranes

TOMORROW

remains a key business

Hewden has a market share

sector for Hewden. The

objective of 30% and 500

Company invested more 

depots, which the Company

than $20 million and added

intends to achieve by

33 new mobile cranes to the

continuing to be the most

fleet in 2002. This outlay is

active consolidator in the

During the year we continued

the largest single equipment

U.K.’s highly fragmented

to focus on growing our core

investment in the history of

equipment rental industry. 

business, both organically

Hewden and the largest of

We have identified

and through acquisitions. 

any crane rental company 

numerous rental companies

In September, Hewden

in the U.K. in 2002. 

as potential acquisitions.

purchased the majority of the

Hewden has also been

Many small rental companies

remaining assets of Maxxiom

successful in growing beyond

are suffering from the slow

Limited for $44 million. This

the traditional scope of the

economy, allowing Hewden 

acquisition not only added to

equipment rental business 

to value prospective

the core rental portfolio, but

by contracting to manage,

acquisitions at favourable

Another priority to

also increased the Company’s

operate and maintain the

purchase prices. Each

accommodate Hewden’s

market share in the areas of

equipment fleets of large 

potential acquisition must

growth is enhanced

passenger and goods hoists,

and medium-sized companies

bring strategic components

information technology 

modular accommodation and

operating in various industrial

that complement Hewden’s

that will help the Company

communications equipment,

and public sectors. 

business plan, such as

manage its assets and

and further extended

Hewden’s geographic

network of depots.

Hewden’s diverse and

technology, location, skilled

locations and also maintain

growing customer base

equipment operators and/

close real-time relationships

includes leading companies

or market sector.

with its customers. 

In October, Hewden

in the construction, oil and

One of the Company’s

During 2002 Hewden 

announced the sale of

gas, power generation, water

challenges is the recruitment

Hire Centres featured a wide

Hewden Tower Cranes, as part

management and chemical

of personnel to accommodate

range of Caterpillar sales

of the Company’s plan to sell

industries, independent

its growth. Hewden’s objective

merchandise at 8 depots, 

assets outside its core

contractors serving a wide

is to become the “employer

and this successful pilot will

markets. The business model

range of industries, and

of choice”.

for this unit had changed

various government agencies.

be influential in on-going 

Hire Centre development.

All Hewden depots now

have access to computer

systems for the generation of

contracts and management

of data. Other internal

procedures implemented

during 2002 to increase

productivity and improve

sales included outsourced

“internal” audits to ensure

that “best operating

practices” are followed 

at all depots. 

Paul J.C. Jarvis
Chief Executive

[ 17 ]

One of two CAT 797B mining trucks makes its debut at the
Codelco mine in Chile, the world’s largest copper producer.

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING CHILE

Finning Chile achieved significant increases in high-margin activities
such as customer support services and equipment rental in 2002, while
year-over-year revenue remained flat in the face of the continuing soft
Chilean economy.

The economy was affected by another year of depressed prices for
copper,  the  country’s  most  important  economic  driver.  Chile  is  the
world’s largest and lowest-cost producer of copper, and production was
down about 5% during 2002. 

This  production  decline  did  not  significantly  curtail  activity  as
many mines took advantage of the opportunity to move overburden
and  other  materials  to  prepare  new  low-cost  sections  of  their  ore
bodies for production. Since Finning Chile has approximately 60% of
the equipment market in the country’s copper mines, CAT trucks and
loaders were involved in much of this activity. 

Finning Chile completed two important transactions with Codelco
Chile, wholly owned by the Chilean State and the largest single copper
producer  in  the  world,  accountable  for  15.9%  of  global  production.
One of the transactions involved delivery of two new CAT 797B Series
off-highway trucks. This delivery represents the introduction of the
797 trucks, the largest of CAT’s product line, to Codelco. These trucks
went to Codelco’s Chuquicamata operation, and are being supported by
a comprehensive maintenance package. 

The second Codelco transaction was an agreement with the Radomiro
Tomic  mine,  part  of  the  new  Codelco  Norte  Division,  for  a  two-year
renewal of its maintenance and repair contract. The contract covers 29
pieces of equipment, including 13 CAT 793B trucks. This is in addition to
other existing contracts with Codelco Radomiro Tomic, which cover a
total of 46 machines.

[ 19 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINNING CHILE

simulator can be delivered 

to mine sites, reducing the

time spent in training as well

as the costs associated with

using real equipment for 

this purpose. In addition, 

the simulator can train an

operator to handle situations

TOMORROW

Chile has one of the most

competitive economies 

in the world, ahead of 

many developed countries

and all of the Latin 

American economies.

After strong growth

through most of the 1990s,

Chile’s economy slowed to

GDP growth of 2.8% in 2001

and approximately 2% in

Nicholas B. Lloyd
President and
Chief Executive Officer

that would be impossible 

Finning Chile saw increased

2002. The government is

or hazardous to simulate in

activity in the equipment

forecasting growth exceeding

the field. 

rental market through its

3% in 2003, even if copper

During the year, Finning

branches and its new CAT

prices remain at current

Chile adopted a more

Rental Store concept. The

levels. Chile has successfully

aggressive position in the

first CAT Rental Store in

negotiated a free trade

construction and forestry

Santiago is steadily increasing

agreement with the 

sectors, resulting in improved

market share. In November, 

European Union and is

revenue performance and a

a second store was opened 

currently negotiating a 

significant increase in market

in Calama, located in northern

similar relationship with 

share. With the combination

Chile in one of the region‘s

the United States. 

of slow economic growth and

most important mining areas.

In 2003, Finning Chile

surplus supply, these markets

Activity near Calama 

expects modestly higher

have become extremely

is increasing dramatically 

revenues, with high-margin

One of the new services

competitive over the last 

with Codelco expanding its

activities continuing to

Finning Chile offers its mining

few years. Two important

Chuquicamata mine, one of

improve bottom line

customers is driver training

deliveries during the year

the largest open-pit mines in

performance. We expect 

using a fully computerized

were made to Empresa

the world, to include the area

to continue to win market

cab simulator. The simulator

Constructora Belfi S.A. and

occupied by the original mine

share in the construction 

allows operators to acquire

the Mexican company Tradeco.

town site. The decision means

and forestry sectors. The

and practice the skills needed

This equipment, consisting 

the town’s residents have to

mining sector revenue will

to safely and efficiently

of a total of 15 units, is

be relocated to the nearby

remain stable.

operate large CAT off-highway

destined primarily for ongoing

city of Calama. Finning Chile’s

Beyond 2003, we are

trucks and wheel loaders,

road and infrastructure

CAT Rental Store and its

positioned to benefit when

including the CAT 797B. The

improvements in central 

nearby Antofagasta branch

copper prices recover and

Chile. This was the first 

will benefit from this activity.

companies open new mines

time that Belfi has chosen

Finning over other suppliers,

which demonstrates our

determination to increase 

our market share in 

the construction and 

forestry sectors. 

and expand existing mines.

Finning Chile will also

benefit from synergies 

with the Company’s

acquisitions in Argentina,

Uruguay and Bolivia.

[ 20 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     M E M O R I A   A N U A L   2 0 0 2
FINNING CHILE

En 2002, Finning Chile logró aumentos importantes en actividades de
alto margen, como en servicios de apoyo al cliente y arriendo de equipos,
mientras que los ingresos de un año a otro se mantuvieron estables
frente a una economía chilena continuamente débil.

La economía se vio afectada por otro año de precios deprimidos del
cobre,  el  conductor  económico  más  importante  del  país.  Chile  es  el
mayor productor de cobre, y al menor costo, del mundo, y su producción
se redujo aproximadamente en un 5% durante 2002.

Esta declinación de la producción no disminuyó la actividad de manera
significativa, ya que muchas minas aprovecharon la oportunidad para
mover estéril y otros materiales en la preparación de nuevas áreas
de bajo costo de su producción mineral. Dado que Finning Chile tiene
aproximadamente  el  60%  del  mercado  de  equipos  en  las  minas  de
cobre del país, se usaron camiones y cargadores CAT para gran parte de
esta actividad.

Finning Chile completó dos transacciones de importancia con Codelco
Chile,  propiedad  del  Estado  chileno  en  su  totalidad  y  productora  de
cobre de mayor importancia del mundo, responsable del 15,9% de la
producción global. Una de las transacciones incluyó la entrega de dos
camiones nuevos Serie CAT 797B, que representa la introducción de
los camiones 797 (el producto más grande de la línea CAT) en Codelco.
Estos  camiones  fueron  destinados  a  la  operación  de  la  empresa  en
Chuquicamata, y reciben un soporte completo de mantención.

La  segunda  transacción  con  Codelco  fue  un  acuerdo  con  la  mina
Radomiro Tomic, parte de la nueva División Codelco Norte, para la
renovación por dos años de su contrato de mantención y reparación.
Este contrato cubre 29 equipos, incluyendo 13 camiones CAT 793B y se
suma a los existentes con Codelco Radomiro Tomic, que cubren un total
de 46 equipos.

[ 21 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     M E M O R I A   A N U A L   2 0 0 2
FINNING CHILE

Durante el año, Finning Chile

adoptó una postura más

agresiva en los sectores 

de construcción y forestal, 

lo que dio como resultado 

una mejora en el rendimiento

2002. Las predicciones del

gobierno son de un

de ingresos y un aumento

segundo local abrió sus

crecimiento superior al 3% 

importante en la participación

puertas en Calama, ubicada

en 2003, aún si el precio del

del mercado. A raíz de la

en el norte de Chile, en una 

cobre se mantiene en los

combinación del lento

de las áreas mineras de mayor

niveles actuales. Chile

Uno de los nuevos servicios

crecimiento económico 

importancia de la región.

negoció exitosamente un

que ofrece Finning Chile 

y el exceso de oferta, estos

La actividad en Calama 

acuerdo de libre comercio 

a sus clientes mineros es la

mercados se han hecho

está aumentando

con la Unión Europea y se

capacitación de operarios,

mediante un simulador de

cabina completamente

extremadamente competitivos

dramáticamente con la

encuentra, actualmente,

durante los últimos años. Se

expansión por Codelco de 

negociando una relación

hicieron dos entregas de

su mina Chuquicamata, una

similar con EE.UU.

computarizada. El simulador

importancia durante el año a

de las minas de tajo abierto

En 2003, Finning Chile

le permite al operario a

adquirir y practicar las

aptitudes necesarias para

operar de manera segura 

y eficiente los grandes

la Empresa Constructora Belfi

más grandes del mundo, 

espera lograr ganancias

S.A. y a la compañía mexicana

que incluye el área ocupada

ligeramente superiores, con

Tradeco. Con un total de 15

originalmente por el

actividades de alto margen

unidades, esta maquinaria se

campamento minero. La

que continúen mejorando la

destinó principalmente a la

decisión implica el traslado 

última línea. Estimamos

camiones fuera de carretera 

mejora continua de carreteras

de los residentes afectados 

continuar elevando nuestra

y cargadores de ruedas,

y de infraestructura en la

a la ciudad cercana de

participación de mercado en

incluyendo el CAT 797B. El

zona central de Chile. Esta fue

Calama. El Cat Rental Store

los sectores de construcción 

simulador puede entregarse

la primera vez que Belfi

de Finning Chile, y su 

y forestal. Los ingresos del

en faena, reduciendo así el

escogió a Finning por sobre

sucursal cercana de

sector de minería se

tiempo utilizado para la

otros proveedores, lo que

Antofagasta, se beneficiarán

mantendrán estables.

capacitación y los costos

demuestra nuestra

de esta actividad.

determinación de aumentar

EL MAÑANA

Más allá de 2003, estamos

en posición de beneficiarnos

asociados con el uso de

maquinaria real para este

propósito. Además, el

nuestra participación de

Chile cuenta con una de las

cuando el precio del cobre se

mercado en los sectores de

economías más competitivas

recupere y las compañías

simulador puede capacitar 

construcción y forestal.

del mundo, adelantándose a

abran nuevas minas y

a un operador para responder

Finning Chile presenció

muchos países desarrollados

expandan las existentes.

a situaciones que serían

mayor actividad en el mercado

y a todas las economías de

Finning Chile se beneficiará

imposibles o peligrosas de

de arriendo de equipos

América Latina.

también de la sinergia con las

simular en terreno.

mediante sus sucursales 

Después de un fuerte

adquisiciones realizadas en

y el nuevo concepto del Cat

crecimiento durante gran

Argentina, Uruguay y Bolivia.

Rental Store. El primer Cat

parte de la década del 90, 

Rental Store en Santiago 

la economía chilena se

está constantemente

desaceleró a un crecimiento

incrementando su

de producto interno bruto  

participación de mercado 

del 2,8% en 2001 y

y se espera abrir otro en

aproximadamente 2% en

2003. En noviembre, un

[ 22 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NEW SOUTH AMERICAN ACQUISITIONS

The Company’s acquisitions of the Caterpillar dealerships in Argentina,
Uruguay  and  Bolivia*,  which  closed  subsequent  to  the  year-end,
significantly  expand  Finning’s  presence  in  South  America.  Finning
operations in South America now span four adjacent countries with 22
branches and 2,289 employees. The operations cover a natural resource
land area of 4.84 million square kilometres, approximately half the size
of the entire continental U.S.A.

Bolivia

Argentina

Uruguay

Chile

Finning Branches / 

Sucursales De Finning

*The acquisition of Bolivia had not closed as of the date of printing of this annual report.

[ 23 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NEW SOUTH AMERICAN ACQUISITIONS

Pro-forma combined annual

As recently as 1998, their

revenue for the three

combined revenue was

acquired dealerships was

approximately $300 million. 

approximately $110 million 

Macrosa has 75 years of

in 2002. Customers typically

experience as the Caterpillar

include large mining and oil

dealer in Argentina, providing

and gas enterprises with

Finning with access to the

contracts denominated in

second largest economy in

United States dollars. Each 

South America, and a

of the dealerships has

resource rich country with

commanding market shares

excellent mining and oil and

in their respective countries.

gas prospects, as well as

Uruguay, gives Finning

construction and agricultural

access to opportunities 

opportunities. Gemcosa, the

in natural resources and

Caterpillar dealer in

manufacturing. Matreq, 

the Caterpillar dealer in

Bolivia, provides Finning

access to natural resources,

including natural gas,

petroleum and minerals. 

Finning’s presence in the

Southern Cone positions

the Company for long-term

growth at a low cost of entry.

In addition, several

synergies will benefit the

Company’s operations in

South America, including:

leveraging Finning Chile’s

expertise and management

systems; centralized sales

and customer service

facilities to serve copper

and gold mining customers

clustered near the Chile,

Bolivia and Argentina

borders; coordinating

inventory and other asset

management strategies; 

the expertise of Finning’s

Power System Group can be

extended to oil and gas and

pipeline customers in Bolivia

and Argentina; and Finning

will benefit from the highway

and other infrastructure

growth in the mineral-rich

Southern Cone region.

[ 23 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     I N F O R M E   A N U A L   2 0 0 2
NUEVAS ADQUISICIONES

Las adquisiciones de los distribuidores Caterpillar en Argentina, Uruguay
y Bolivia*, cuyo cierre se dio después de finalizar el año, expandieron
de manera importante la presencia de Finning en América del Sur. Las
operaciones de Finning en América del Sur abarcan en la actualidad a
cuatro países adyacentes, con 22 sucursales y 2.289 empleados. Estas
operaciones cubren un área de recursos naturales de 4,84 millones de
kilómetros cuadrados, aproximadamente la mitad del tamaño de todo
EE.UU. continental.

NUEVAS ADQUISICIONES 
EN AMERICA DEL SUR

En 2002, el ingreso anual

combinado, pro-forma, de los

tres distribuidores adquiridos

fue aproximadamente de 

cerca de las fronteras entre

Chile, Bolivia y Argentina;

coordinación de estrategias

de inventarios y otras de

$110 millones. Entre los

naturales y manufactura.

manejo de activos; la

clientes típicos se incluyen

Matreq, en Bolivia, nos

experiencia del grupo

grandes empresas mineras 

permite acceso a recursos

Finning Power Systems 

y petroleras con contratos 

naturales, como el gas

podrá extenderse a clientes

en dólares estadounidenses.

natural, el petróleo y

de oleoductos y gasoductos

Cada uno de los distribuidores

minerales. La presencia de

en Bolivia y Argentina; 

cuenta con una participación

Finning en el Cono Sur nos

y finalmente, Finning se

de mercado importante 

posiciona para un

beneficiará del crecimiento

en sus respectivos países 

crecimiento a largo plazo y 

en el desarrollo de rutas

y recientemente sus ingresos

a un costo bajo de entrada.

viales y otra infraestructura

anuales combinados fueron,

Además, varias sinergias

en el Cono Sur, región dotada

en 1998, de $300 millones.

entregarán beneficios a las

con una abundancia de

Macrosa tiene 75 años de

operaciones de la empresa

recursos naturales.

experiencia como distribuidor

en América del Sur,

Caterpillar en Argentina,

incluyendo: aprovechamiento

permitiéndole a Finning el

de la experiencia de Finning 

acceso a la segunda

y sus sistemas de gestión;

economía de América del Sur.

puntos de venta y soporte al

Gemcosa, el distribuidor

cliente centralizados para

Caterpillar en Uruguay, le

atender las necesidades de

entrega a Finning acceso a

clientes de las industrias de

oportunidades en recursos

cobre y oro conglomerados

*La adquisición de la sucursal boliviana ne se había completado hasta la
fecha en que se imprimió este informe.

[ 25 ]

2002 was a year of consolidation for Power Systems. 

Prime product sales decreased with the largest impact coming from
the  reduced  level  of  activity  in  the  Western  Canada  oil  and  gas
industry. Product support revenues, however, increased in all countries.
Power System total revenues declined marginally in 2002 to $362 million.
The  decline  in  Western  Canada  oil  and  gas  activity  was  partially
offset by increased sales to the landfill gas industry and power rentals in
the U.K., as well as a new source of revenue from our acquisition in Chile.

Technician works on a Perkins engine at Diperk plant in Chile.
Finning’s acquisition of Diperk expands its Caterpillar product
line and customer base.

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
POWER SYSTEMS

The marine market has two

broad segments: commercial

and pleasure craft. The

commercial marine market

was somewhat depressed

Early in 2003, Caterpillar Inc.

because of the low demand

and ten European Caterpillar

by the fishing industry. We

dealers, including Finning

did, however, enjoy success

(UK) established a Pan

The Company made two

investments in the Power

Systems business during 

the year. In Canada, Finning

acquired a 36.9% interest 

in Maxim Power Corporation,

In Chile, Finning acquired

with our MaK product in the

European power rental

a Calgary based independent

100% of Diperk S.A., the

U.K., B.C. and Chile.

power producer that owns

country’s representative for

The pleasure craft market

and operates 55 megawatts

two Caterpillar product lines,

was buoyant in both B.C. and

company, Energyst Rental
SolutionsSM, to take advantage
of opportunities in the power

of generation capacity in

Perkins Engines and FG

the U.K., especially for large

rental market in Europe.

Canada, Europe and Asia.

Wilson generator sets. This

powerboats. Caterpillar

The newly acquired

Maxim’s expertise in

acquisition contributes to the

engines are well received by

territories in South America

distributed energy and

Company’s multiple-channel,

discriminating owners of

have significant growth

project development

complements Finning’s

multiple-brand business plan.

large pleasure craft in Europe

opportunities for the oil and

Finning participates in

and in North America.

gas industries and other

engineering, equipment

the truck engines business

TOMORROW

supply, and engine

maintenance skills.

Jack A. Carthy
President 

sectors where our engines

and international expertise

through the after-market

We expect 2003 to be

sales and services of

another challenging year 

have a strong future.

Caterpillar truck engines 

in most markets, with the

Longer term, construction

in Western Canada. Our

largest potential for growth

of a pipeline to bring natural

already high market share —

coming from drilling and gas

gas from the Arctic through

approximately 50% in heavy

compression activity in the

Western Canada to the

duty engines and 40% in

Western Canada oil and 

United States offers a large

mid-range engines — grew

gas industry. 

potential market, both for

during 2002 as customers

Early in 2003, Maxim

construction machines 

increased their purchases 

awarded Finning (Canada) 

and for gas compression

in anticipation of new

a contract to supply the

station engines.

environmental standards

coming into effect in the

powerhouse for a six

megawatt waste gas 

As new engine models and

power systems attachments

United States and Canada. 

recovery project for the 

are added to the Caterpillar

The Company believes 

City of Vancouver. This

engine lines, we anticipate

the introduction during 2003

landfill project is typical 

new opportunities in the

of Caterpillar’s new ACERT™

of the synergies we see

territories and markets we

technology (Advanced

Combustion Emission

between Maxim and Finning

currently serve.

Power Systems. We are

Finning has set aggressive

Reduction Technology) in the

optimistic about the prospects

growth targets for the Power

truck engine field will enable

in the coming years, as more

Systems business units. These

it to continue to grow market

of these types of projects will

growth objectives are tied 

share in Canada and other

be built in our markets.

to the continued expansion

countries as Caterpillar

engines become increasingly

available in on and off

highway truck applications. 

of the Caterpillar engine

families and the growing

demand for clean, green, 

and dependable power.

[ 27 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
CUSTOMER SUPPORT SERVICES

An important factor in Finning International achieving record bottom-
line performance in 2002 was the contribution from customer support
services. Customer support services contributed 31.8% of 2002 revenue,
compared with 29.5% in 2001. Customer support services includes sales
of parts and servicing of equipment, as well as service contracts to
customers in the form of long-term maintenance and repair contracts,
and supply chain logistics. 

We are also working to

increase the proportion of 

our service performed by 

field mechanics. These skilled

and resourceful individuals

In 2002, we continued our

are capable of performing all

emphasis on customer

but the largest repair projects,

service improvement in parts, 

in virtually all latitudes and

service and the Component

elevations and on short

Rebuild Centres. We are

notice. Field maintenance,

continuing to rationalize our

where appropriate, reduces

TOMORROW

We have made significant

progress on our transition 

to a service-oriented 

company but we are still 

only at midpoint and 

we are continually

implementing new service-

oriented initiatives.

We are beginning to

implement a new information

branch networks in all our

customers’ costs by returning

information and satisfaction

technology system that will

countries of operation and

their equipment to productive

they deserve. Toll-free

let us deliver world-class

improving our field service

operation sooner than if the

numbers in Canada and the

service to all our customers

force to meet the objective 

equipment was moved to a

U.K. channel customers with

across all the countries in

of efficiently servicing a

service depot for repair.

questions about any activity

which we operate. The new

higher ratio of the 

Operating from their field

to the specific Finning

Caterpillar Dealer Business

equipment we deliver.

service trucks, our field

employee with the relevant

System, called DBSi, will

mechanics are the front-line

answers. Twenty-four hours 

ultimately enhance our supply

faces of Finning’s growing

a day, our www.finning.com

chain management, finance

customer service culture.

website allows a customer to

and administration and

We have initiated several

view a library of information

customer relationship

measures that make it easier

online, chat online with a

management capabilities.

for customers to get the

service representative, view

We are continuing to add

invoices and the results of

new field service technicians

machine oil samples tested in

in all our countries, while

Finning’s laboratory, or leave

replacing unprofitable or

e-mail messages that will be

poorly located customer

forwarded to the appropriate

service facilities with new

Finning employee.

locations that serve

customers more efficiently. 

Brian C. Bell
Executive 
Vice President 

[ 28 ]

Giant CAT 990 wheel loader is serviced in a quarry operation 
in Leicestershire, U.K. Strong sales of equipment to the
quarry industry boosted market share for Finning (UK).

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINANCIAL MANAGEMENT

Finning International achieved record earnings of $132.3 million, an
increase of 27.3% over 2001 despite marginally lower revenues of $3.21
billion. The improved earnings resulted from a number of performance
achievements — all of which we are determined to sustain or improve. 
Two of the key corporate strategies, geographic diversification of
our operations and diversification of our revenue stream are detailed
in other sections of this Annual Report. 

The third key corporate strategy is the implementation of financial
initiatives that add to the Company’s financial strength and performance.
Essentially, these measures focus on improving our return on assets and
strengthening our balance sheet to enable us to pursue new acquisitions of
high-potential assets and seize other growth opportunities in corebusinesses. 

main branch in British

Columbia and 16 other

properties located throughout

In January 2002, we sold a

Western Canada.

number of our Canadian

In December 2002, we sold

properties for $79 million and

substantially all our Canadian

entered into long-term leases

conditional sales contract

with the purchaser. This

portfolio to Caterpillar

transaction allowed us to take

Financial Services Limited

cash invested in our property

and securitized a portion of

and reinvest it into activities

our accounts receivable

that bring a higher return

portfolio. Proceeds from

than was generated by

these two transactions were

owning the facilities.

$120 million in 2002, with

Properties sold and leased

additional proceeds of up to

back included the Edmonton

$70 million expected in 2003.

head office of Finning

Both transactions were

(Canada), the Calgary main

applied in the short term to

branch in Alberta, the Surrey

reduce debt, but proceeds 

will ultimately be deployed

into new acquisitions, growth

initiatives and other

opportunities to increase

value for our shareholders. 

Richard T. Mahler
Executive Vice President
and Chief Financial Officer

[ 30 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
FINANCIAL MANAGEMENT

centre. Approximately 

40% of the Company’s

current assets are located 

in Canada, so reducing

The Company ended 2002

Canadian receivables has 

with a debt to equity ratio of

an important impact on our

0.58, the fourth consecutive

return on assets. We are

year of improvement. At this

considering adding customer

debt level, we are comfortably

service centres to our 

within our BBB+ credit 

other operations.

rating, indicating that we

An additional improvement

have the financial strength 

in return on assets has

to seize attractive acquisition

resulted from improved

opportunities when they

management of our

arise. Further, we were able

equipment inventory. We now

The downward trend in the

to enhance the ability of the

have a machine in inventory

Company’s tax rate is

acquisitions to immediately

for about three months

another contributor to our

become accretive to earnings

before it is sold, compared

bottom-line and return on

by using debt to finance 

with four months just two

assets performance. Our 

our acquisitions, as is the

years ago, which reduces the

tax rate declined, as a larger

case with the Caterpillar

Company’s new equipment

proportion of our business 

dealerships in Argentina,

inventory investment by

is undertaken offshore, since

Uruguay and Bolivia.

approximately 25%.

the Canadian corporate tax

During the year, we worked

The Company increased its

rate is the highest of the

with Caterpillar on a pilot to

annual dividend twice during

countries in which we

implement new procedures

2002, and again in January

operate. Our effective tax

regarding the payment 

2003, the first increases

rate in 2002 was 26.8%

of equipment and parts 

since 1995, a signal that

compared with 27.3% in

in Finning (Canada). This

management is confident

2001, largely because of 

procedure provided Finning

about the earnings we are

our acquisition in 2001 of

and Caterpillar with more

now generating and will

Hewden Stuart in the U.K.

flexibility, and is now 

sustain for the foreseeable

Our South American

being extended to other

future. The dividend is now

acquisition will contribute 

Caterpillar dealers. 

$0.09/quarter. 

to this trend in 2003.

We also brought significant

Another decision that signals

efficiencies to our collection

the Company’s confidence is

of receivables in Canada by

the decision to renew its

opening a customer service

share repurchase program.

The Company has received

approval from the Toronto

Stock Exchange to purchase

up to 10% of the Company’s

public float, or 7,729,559

common shares during the

period December 3, 2002 to

December 2, 2003. All shares

purchased under the issuer

bid will be cancelled. 

[ 31 ]

Rebar frames Caterpillar 246 skid steer loader moving 
dirt on a river diversion and road construction project in
downtown Santiago.

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS:

Finning International achieved record results in 2002. Consolidated revenues in 2002 declined 1.2% from 2001 to $3,207.5
million, whereas consolidated net income increased 27.3% to $132.3 million. Basic earnings per share for the year 2002
was $1.72 compared with $1.37 in 2001, representing a 25.5% increase. 

Excluding the impact of items included in “Other expenses (income)” (see note 13 to the Consolidated Financial
Statements) and goodwill amortization, normalized earnings before interest and taxes (EBIT) for the year was $272.2
million (higher by 0.9%), normalized net income was $127.6 million (higher by 8.4%) and normalized Basic EPS was $1.66
(higher by 7.8%).

Cash flow after changes in working capital was $472.8 million compared with $445.6 million in 2001. The Company

reinvested $305.7 million (2001: $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.

(C$ million)

Revenue
Gross profit
Selling, general & administrative expenses
Normalized EBIT
Amortization of goodwill
Other expenses (income)
EBIT
Finance costs and interest on other indebtedness
Provision for income taxes
Non-controlling interests
Net income

2002

2001

$ 3,207.5
959.7 
687.5
272.2
—
(5.6)
277.8
79.8
47.7
18.0
132.3

$

$ 3,247.0
904.7
634.9 
269.8 
10.0 
18.2 
241.6 
85.6 
29.0 
23.1 
103.9 

$

(% of Revenue)

2002

2001

29.9%
21.4%
8.5%
0.0%
—0.2%
8.7%
2.5%
1.5%
0.6%
4.1%

27.9%
19.6%
8.3%
0.3%
0.6%
7.4%
2.6%
0.9%
0.7%
3.2%

[ 33 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

REVENUES:

In 2002, although consolidated revenues were lower by $39.5 million when compared with the prior year, UK and Hewden
achieved record revenues. A significant part of their increase was due to the appreciation of approximately 5.5% in the
British pound sterling relative to the Canadian dollar and included a full year contribution from Hewden (In 2001, Hewden
contributed for 11 months). The consolidated revenue shortfall was mainly due to the Canadian operation which was lower
by $129.3 million or 9.2%. 

The table below provides details of revenue by operations and lines of business.

(C$ million)
2002

New mobile equipment
New power & energy systems
Used equipment
Equipment rental
Operating leases
Customer support services
Finance and other

Canada

UK

Chile

Hewden 

Other

Consolidated Revenue %

$ 391.0 

$ 325.0 

$ 98.4 

$

10.9 

$

73.1 

142.9 

102.2 

87.6 

464.5 

8.0 

92.2 

124.8 

61.2 

—

26.7 

13.8 

15.8 

—

225.0 

288.8 

—

1.1 

—

48.2 

565.3 

—

40.9 

—

—

—

—

—

—

—

0.1 

$ 825.3 

192.0 

329.7 

744.5 

87.6 

1,019.2 

9.2 

25.7%

6.0%

10.3%

23.2%

2.7%

31.8%

0.3%

Total

$1,269.3 

$ 828.2 

$ 444.6 

$ 665.3 

$ 0.1 

$ 3,207.5 

100.0%

Revenue percentage by operations 39.6%

25.8%

13.8%

20.8%

0.0%

100.0%

2001
New mobile equipment
New power & energy systems
Used equipment
Equipment rental
Operating leases
Customer support services
Finance and other

Total

Revenue percentage by operations

Canada
$ 404.2 
140.7 
185.7 
107.1 
95.7 
452.6 
12.6 
$ 1,398.6 
43.1%

UK
$ 343.0 
81.5 
116.3 
52.7 
—
210.6 
—
$ 804.1 
24.7%

Chile
$ 140.3 
16.1 
28.0 
13.1 
—
250.1 
0.4 
$ 448.0 
13.8%

$

Hewden 
9.0 
—
24.7 
518.1 
—
35.7 
—
$ 587.5 
18.1%

$

Other
—
—
1.1 
0.1 
—
7.3 
0.3 
$ 8.8 
0.3%

Consolidated Revenue %
27.6%
7.3%
11.0%
21.3%
2.9%
29.5%
0.4%
100.0%

$ 896.5 
238.3 
355.8 
691.1 
95.7 
956.3 
13.3 
$ 3,247.0 
100.0%

[ 34 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

Canada

A softening in the International marketplace and a slow down in the oil and gas sector resulted in lower revenues from
used equipment and power and energy systems in 2002. The lower revenues also reflected the absence of approximately
$34.8 million contribution from the Canadian Materials Handling business which was sold in the 4th quarter of 2001.
Compared with the record revenues of 2001, new mobile equipment revenues experienced only a 3.3% decline. In 2002,
sales of selected operating leases to Caterpillar Financial Services generated $61.0 million equipment revenue with the
reduction of $17.4 million of leasing revenues. The estimated impact on 2003 of these sales is a reduction in leasing
revenue of $8.9 million. The delivery of Caterpillar 797 model trucks and support vehicles into the mining and energy
sectors continued to support 2002 revenues. The energy sector is expected to be a significant factor for the Company in
2003 due to the sizeable contract from Albian Sands Energy Inc. to supply equipment worth over $80 million in 2003.
Revenue from customer support services grew 2.6% with growth opportunities as the Company continues to supply new
equipment with significant maintenance and repair contracts to the Alberta oil sands developers.

Equipment rental revenues were 4.6% lower than 2001 due to the absence of the Materials Handling rental activity but

were positively affected by the addition of five new CAT rental stores. At year-end, a total of 12 CAT rental stores were
operating in British Columbia and Alberta.

UK

For the second consecutive year, higher revenues were achieved in the UK operation. This was due to currency translation
as the British pound sterling appreciated against the Canadian dollar. In Canadian dollars, UK revenue increased by 3.0%.
In local currency terms, revenue declined by 2.1%.

New mobile equipment declined 5.3% (9.1% in local currency terms). In 2001, infrastructure spending resulted in large
construction equipment contracts, most notably on the Birmingham northern relief road, which boosted revenues. While
activity remained strong in this area in 2002, these large sales were not repeated. Partially offsetting, growth was seen in
both the Materials Handling business, which increased the supply of equipment to national accounts, and the Power
Systems business which benefited by increased activity in the EPG gas and petroleum sectors. 

Rental revenue improvement of 16.1% (in British pound sterling, improvement was 9.8%) reflected continued strength in

the Materials Handling rental fleet, power rentals to U.K. utility companies for stand-by power generation, and long-term
agreements for equipment rental and maintenance to the landfill and waste recycling industry.

Increased marketing on customer service contracts and growth through acquisitions, such as the 2001 acquisition of
Finnpave, boosted customer support services revenue by 6.8% (1.2% in local currency terms) over the 2001 level. Customer
support services contributed 27.1% of total revenue in 2002 (2001: 26.3%). Growth opportunities continue into 2003 with
continued focus on marketing customer support programs and the completion of a new Customer Service Centre for existing
and new customers. 

[ 35 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

Chile

In total, revenues continued at the 2001 level. New mobile equipment revenues declined by $41.9 million (29.9%). Another
year of soft copper prices delayed large mining projects. Some customer purchases were deferred and some customers
opted for a rental type agreement compared to direct purchase. However, new large Caterpillar mining equipment
contracts continued to support mining customers in non-production activities (such as moving overburden to prepare new
low-cost sections of their ore bodies for production) , and, in conjunction with comprehensive maintenance packages,
Finning Chile was awarded with several significant contracts in 2002 from such customers as Codelco (wholly-owned by
the Chilean State and the largest single copper producer in the world) and the Escondida Copper Mine.

New power and energy systems revenue increased $10.6 million (65.8%) through the contribution of the April 2002
acquisition of Distribuidora Perkins Chilena S.A. (“Diperk”), the dealer for two Caterpillar manufactured product lines of
Perkins Engines and FG Wilson. Diperk revenue was $14.3 million for 2002.

Rental revenue increased by 20.6% with a larger number of available rental fleet units and increased activity for the

CAT rental store. A second store was opened in November.

Aided by increased maintenance and repair contracts with mining customers and higher direct parts sales, customer

support services revenue increased $38.7 million (15.5%) from 2001. These higher-margined revenues accounted for
65.0% (2001: 55.8%) of the total Chile revenue. Supplying the Chilean copper mine industry with these complete
maintenance packages continues to be a leading growth opportunity for the Company.

Hewden

The first full year for Hewden under Finning ownership achieved revenues of $665.3 million, 13.2% higher than 2001. In
local currency terms, revenues increased by 7.0%. The comparative 2001 numbers include results for eleven months (since
acquisition Jan 26, 2001).

Despite the weak and uncertain economic conditions that prevailed in the U.K. rental sector for 2002, rental revenue
was sustained by organic growth and acquisitions. In line with its strategy of focusing on its core rental business, Hewden
invested $44.0 million in acquiring the majority of the remaining rental and other assets of Maxxiom Limited, invested
approximately $20.0 million in new mobile cranes, and divested its non-core Tower Cranes business.

In order to increase market share and performance, under-performing depots were closed and new depots were opened

in more appropriate locations. There are currently 353 depots throughout the U.K. with future expansion opportunities
being predominately through complementary acquisitions.

Other

During 2001, the Company integrated its international used equipment and parts operations (UMS) into existing 
country operations.

[ 36 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

GROSS PROFITS:

Gross profits increased $55.0 million (6.1%) to $959.7 million in 2002 compared with 2001. As a percentage of revenue,
gross margin was higher at 29.9% compared with 27.9% in 2001. These increases were attributable to:

• inclusion of one extra month results from Hewden.
• revenue mix shift towards higher-margined rental and customer support services. Combined, these revenues produced

a revenue mix of 54.9% compared to 50.8% in 2001.

• favourable performance on customer service maintenance and repair contracts.
• maintenance of pricing strategy despite strong competition in the rental sectors.

Canada, Chile and the UK operations showed improved gross margin as a percentage of revenue while Hewden

maintained its 2001 gross margin percentage. 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:

Selling, general and administrative expenses increased $52.6 million (8.3%) to $687.5 million in 2002 compared with 2001.
As a percentage of revenue, these expenses were higher at 21.4% compared with 19.6% in 2001. Influencing factors were:

• in Hewden and the UK operations, the impact of translation of the British pound sterling which appreciated against the

Canadian dollar contributed approximately $16.8 million higher expenses.

• revenue mix increase in higher cost structure activities of rental and customer support services.
• one additional month of Hewden operations added approximately $12.3 million in 2002.
• Canadian operation’s property sale/leaseback increased occupancy charges by approximately $5.2 million.
• higher operating costs in Canada, UK and Hewden due to increased insurance premiums and higher pension expenses

($6.4 million).

• lower bad debt expenses of $7.5 million in UK, Chile and Hewden.

AMORTIZATION OF GOODWILL:

Amortization of goodwill ceased in 2002 in accordance with the accounting standard of the CICA Handbook Section 3062.
Instead, goodwill is subject to an assessment for impairment by applying a fair-value based test at the reporting unit level.
At December 31, 2002, there was no impairment on any of the operation’s goodwill values.

OTHER EXPENSES (INCOME): 

Other expenses (income) include items shown separately to facilitate comparison with last year. As a result of the
transactions described below, the Company recorded a pre-tax income of $5.6 million, $4.6 million after-tax. These pre-tax
items included:

• the sale of surplus real estate in Canada and the U.K. for a gain of $15.3 million.
• amortization of $1.6 million from the deferred gain on the 2001 sale of the Materials Handling business in Canada.
• equity investment loss of $1.0 million.
• costs incurred on DBSi process reengineering project of $10.3 million. DBSi is the new information technology for the
Caterpillar Dealer Business System. DBSi enhancements encompass customer relationship management, finance and
administration, and supply chain management. 

[ 37 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

EARNINGS BEFORE INTEREST AND TAXES (EBIT):

EBIT increased by 15.0% to $277.8 million compared with $241.6 million in 2001. EBIT as a percentage of revenue was 8.7%
in 2002 (2001: 7.4%) with most of the improvement derived from the UK and Chile operations. 

The table below illustrates EBIT contribution by operations:

(C$ million)
2002

Revenue from external sources
Operating costs
Depreciation
Other expenses (income)
Earnings before interest and tax
EBIT as a percentage of revenue
EBIT percentage by operations

2001
Revenue from external sources
Operating costs
Depreciation
Amortization of goodwill
Other expenses (income)
Earnings before interest and tax
EBIT as a percentage of revenue
EBIT percentage by operations

Canada

UK

Chile

Hewden

Other Consolidated

$1,269.3

$ 828.2

$ 444.6

$ 665.3

$

1,021.2

752.9

388.1

135.1

—

26.1

—

11.7

—

443.6

142.1

—

0.1

14.5

—

(5.6)

$3,207.5

2,620.3

315.0

(5.6)

$ 113.0

$ 49.2

$ 44.8

$ 79.6

$

(8.8)

$ 277.8

8.9%

40.7%

5.9%

17.7%

10.1%

16.1%

12.0%

28.7%

8.7%

—3.2%

100.0%

Canada
$ 1,398.6
1,114.2
151.4
1.1
—
131.9
9.4%
54.6%

$

UK
$ 804.1
748.8
22.1
1.0
—
32.2
4.0%
13.3%

$

Chile
$ 448.0
399.4
10.0
—
—
38.6
8.6%
16.0%

$

Hewden
$ 587.5
380.7
125.0
7.9
—
73.9
12.6%
30.6%

$

$

8.8
25.6
—
—
18.2
$ (35.0)

Other Consolidated
$ 3,247.0
2,668.7
308.5
10.0
18.2
241.6
7.4%
100.0%

– 14.5%

$

FINANCE COSTS AND INTEREST ON OTHER INDEBTEDNESS:

Finance costs and interest on other indebtedness in 2002 was $79.8 million or $5.7 million lower than 2001, mainly as the
overall debt levels decreased due to asset reductions achieved through such initiatives as the Canadian property
sale/leaseback, the Canadian accounts receivable securitization program and the sale of the notes portfolio. The effective
rate of financing costs and interest, which includes interest on debt securities, swap contracts, amortization of deferred
financing costs and other expenses, increased during the year from 7.8% in 2001 to 9.1% reflecting a portfolio shift from
floating to fixed rates.

PROVISION FOR INCOME TAXES:

Income tax expense in 2002 amounted to $47.7 million (2001: $29.0 million), reflecting an effective tax rate of 26.5%
during the year compared with 21.8% in 2001. The 2001 tax rate was unusually low due to the favourable tax treatment on
the Company’s donation of its Great Northern Way Canadian property to a consortium of higher learning institutions.

Normalized for other items (see note 13 to Consolidated Financial Statements), the effective tax rate for the two years

was 26.8% and 27.3% respectively. The decrease in Company’s effective tax rate is mainly due to higher proportion of
income being generated in low tax jurisdictions. 

NON-CONTROLLING INTERESTS:

The Company formed a partnership for the purpose of raising capital to fund the acquisition of Hewden. 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, which is calculated with reference to Canadian
dollar bankers acceptances. The distribution for the year was $18.0 million (2001: $23.1 million), representing a yield of
4.2% (2001: 6.1%).

[ 38 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

NET INCOME: 

Net income improved by 27.3% to $132.3 million in 2002 compared with a year earlier, resulting in an increase in basic
earnings per share from $1.37 to $1.72. This $28.4 million improvement was mainly due to lower finance costs, net gains on
other income/expense, absence of goodwill amortization and lower non-controlling interests distributions. Normalized for
other items discussed earlier and goodwill amortization, net income was $127.6 million compared with $117.7 million last
year and normalized basic earnings per share rose to $1.66 from $1.54.

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 items was $472.8 million compared with $445.6 million in 2001. During the
year, $305.7 million was reinvested (2001: $311.7 million) in revenue-earning assets and as a result, net cash flow from
operating activities was $167.1 million in 2002 compared with $133.9 million in 2001. 

CASH USED FOR INVESTING ACTIVITIES

Net cash generated from investing activities totalled $49.1 million. Cash was generated from divestiture of Hewden’s Tower
Cranes non-core businesses ($44.2 million) and from the net proceeds of the sale/leaseback of the Canadian operation’s
properties ($77.0 million). Cash was utilized for investing for the following items:

• $44.0 million utilized by Hewden for the acquisition of the majority of the remaining assets of Maxxiom Limited in the
U.K.. These assets expanded Hewden’s rental fleet by 7,200 units. In June 2001, Hewden had acquired an initial 640
units from Maxxiom Limited valued at $21.0 million.

• $ 6.3 million investment in Chile to acquire Distribuidora Perkins Chilena SAC (Diperk), an engine and generator set

distribution company for Perkins and FG Wilson products and its complementary service operation.

• $15.0 million equity investment in Maxim Power Corporation (“Maxim”), a Calgary-based independent power producer
providing innovative distributed power solutions in domestic and international energy markets. The Company acquired
36.9% of the common shares of Maxim. As part of this transaction, the Company acquired warrants which entitle the
Company to purchase 50 million common shares at a price of $0.60 each and which, if exercised, would allow the
Company to increase its position in Maxim to approximately 45% on a fully diluted basis. The investment in Maxim is
accounted for using the equity method.

• Operational net capital expenditures of $6.9 million. Total gross spending on operational capital assets was $47.4

million offset by disposals of $40.5 million.

[ 39 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCING ACTIVITIES

To complement the internally generated funds from operating and investing activities, the Company has available
approximately $1,111.1 million in unsecured short-term credit facilities and $38.2 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, the term facilities were fully drawn and approximately $295.8 million was drawn
against the short-term 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
as BBB (high) and its commercial paper as R-2 (high). The respective S&P rating is BBB+ stable.

As at December 31, 2002 overall debt decreased by $266.2 million. Short-term debt decreased by $148.9 million to

$223.5 million during the year while long-term debt decreased by $117.3 million from $673.7 million to $556.4 million.

Late 2002, the Company generated cash of $88.6 million upon the sale of the majority of its instalment notes
receivable portfolio to Caterpillar Financial Services Limited. In addition, the Company entered into a $120.0 million
securitization program for its accounts receivable portfolio in Canada. In December, the Company sold $30.0 million as 
an initial amount under the program. The cash from these activities will be redeployed to fund new acquisitions and other
growth initiatives. Also, in late 2002, cash was used for a voluntary payment of $39.7 million to fund non-registered
pension plans that were previously underfunded.

The Company did not have any equity issues in 2002. Share capital increased from $212.1 million in 2001 to $233.4

million at the end of 2002, reflecting the exercise of stock options for 1.8 million common shares. There was no repurchase
of common shares in 2002 as part of the normal course issuer bids that were in place during the year. Under the current
normal course issuer bid agreement, issued December 3, 2002, the Company is allowed to buy back a maximum of 7.7
million shares (10% of the Company’s public float) up to December 2, 2003. The Company is undertaking this issuer bid, 
as it believes that the current market price of its common shares does not reflect the underlying value of the Company.

As a result of management’s confidence in the future earnings for the Company and commitment to the return of value

to its shareholders, the Company increased its quarterly dividend rate during 2002. In February, the Company increased
the dividend rate by two cents to 7 cents per common share, the first dividend rate increase since 1995. In July, the
dividend rate was increased by an additional one cent. Subsequent to the year-end, in January 2003, the dividend rate
was further increased by one cent to 9 cents per common share as the dividend rate going into 2003.

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. At December 31, 2002, over 63% of Canadian
employees were contributing to this plan compared with 67% at the end of 2001. During 2002, the Company commenced
an All Employee Share Purchase Ownership Plan for its employees in Finning (UK) and Hewden. 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, purchased in the open market, for every three the employee purchases. At December 31, 2002, over
24% and 11% of eligible employees in the UK operations and Hewden, respectively, were contributing to this plan. These
plans may be cancelled by Finning at any time.

[ 40 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

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. The debt to equity
ratios were calculated on a fully consolidated basis including the non-controlling interests of $425.0 million as equity. (For
further information on the non-controlling interests, see Notes to Consolidated Financial Statements, Note 10).

The Company’s overall debt to equity ratio improved from 0.87 at the end of 2001 to 0.58 at the end of 2002 a new ten-

year low. Debt to equity ratio for its operating activities (excluding finance and rental activities and the non-controlling
interests) at negative 0.18 compared to positive 0.21 in 2001. 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
its focus on its core-business activities. The Company achieved an improvement in return on assets, return on equity and
earnings in 2002 as a result of its initiatives.

The tables below compare financial leverage and operating debt to equity ratio for the Company as at the end of 2002 with
the corresponding ratios for 2001. 

(C$ million)
As at Dec 31, 2002

Operations

Rental

Interests

Finance

Consolidated

Non-controlling

$ 1,246.3

Total assets
Payables and accruals
Future income taxes
Liabilities
Net investment
Short & long term debt
Non-controlling interests
Shareholders’ equity
Total debt, NCI and shareholders’ equity $
Debt to equity

$

$ (137.2)

624.0

0.9

624.9 

621.4

—

758.6

621.4

(0.18)

$ 1,148.3

$ 425.0

$ 250.0

$ 3,069.6 

256.5

34.4 

290.9 

$ 857.4

$

714.5

—

142.9

—

—

—

$ 425.0

$

— 

425.0

—

7.8 

10.7 

18.5 

$

231.5

$ 202.6

—

28.9

888.3 

46.0 

934.3

$ 2,135.3 

$

779.9 

425.0 

930.4 

$ 857.4

$ 425.0

$

231.5

$ 2,135.3 

5.00

—

7.00

0.58 

As at Dec 31, 2001

Operations

Rental

Interests

Finance

Consolidated

Non-controlling

Total assets
Payables and accruals
Future income taxes
Liabilities
Net investment
Short & long term debt
Non-controlling interests
Shareholders’ equity
Total debt, NCI and shareholders’ equity $
Debt to equity

$ 1,240.0
523.2
(17.8)
505.4
734.6
125.0
—
609.6
734.6
0.21

$
$

$ 1,000.9
242.5
27.9
270.4
$
730.5
$ 608.8
—
121.7
730.5
5.00

$

$ 425.0
— 
— 
— 
$ 425.0
— 
$
425.0
—
$ 425.0
— 

$

$
$

$

372.9
3.7
12.3
16.0
356.9
312.3
—
44.6
356.9
7.00

$ 3,038.8 
769.4 
22.4 
791.8 
$ 2,247.0 
$ 1,046.1 
425.0 
775.9 
$ 2,247.0 
0.87 

[ 41 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
MANAGEMENT’S DISCUSSION AND ANALYSIS

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. The Company
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.

The Company continually evaluates and manages risks associated with financial derivatives. This includes counterparty 
credit exposure. The Company 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.

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 Canada and Chile source the majority of their products from the United States 
and, as a 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 the British pound sterling in the U.K., and Chilean pesos and U.S. dollars in Chile. Changes in the British pound sterling,
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 British pound sterling 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. There is
a similar risk to the U.K. operations should the British pound sterling strengthen especially against the Euro.

The Company’s sales are also indirectly affected by fluctuations in commodity prices. 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.

Interest rate risk arises from potential changes in interest rates and the impact on the Company’s cost of borrowing.

Floating rate debt exposes the Company to increases in short-term interest rates, while fixed rate debt exposes the
Company to future interest rate movements upon the debt’s maturity. The Company minimizes interest rate risk by
balancing its portfolio of fixed and floating rate debt, as well as managing the term to maturity of its debt portfolio. 
The Company utilizes financial instruments to adjust the balance of fixed and floating rate debt, and to reduce its overall
cost of borrowing.

[ 42 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

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 28, 2003.

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 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.

R. T. Mahler
Executive Vice President and Chief Financial Officer

January 28, 2003
Vancouver, BC Canada

AUDITORS’ REPORT

To the Shareholders of Finning International Inc.:

We have audited the consolidated balance sheet of Finning International Inc. (a Canadian corporation) as at 
December 31, 2002 and the consolidated statements of income and retained earnings and cash flow for the year 
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 audit.

We conducted our audit 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, 2002 and the results of its operations and cash flow for the year then ended in
accordance with Canadian generally accepted accounting principles.

The Consolidated Financial Statements as at December 31, 2001 and for the year then ended were audited by other
auditors, who expressed an opinion without reservation on these statements in their report dated January 30, 2002.

DELOITTE & TOUCHE LLP, Chartered Accountants

January 28, 2003 
Vancouver, BC Canada

[ 43 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31

(C$ thousands)

ASSETS
Current assets

Accounts receivable and other 
Inventories

On-hand equipment
Parts and supplies

Current portion of instalment notes receivable 

Total current assets

Finance assets

Instalment notes receivable 
Equipment leased to customers (Note 3)

Total finance assets

Rental equipment (Note 4)
Land, buildings and equipment (Note 5)
Future income taxes (Note 15)
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 15)

Total liabilities

2002

2001

$

641,847 

$

513,599 

402,316
248,093
13,926
1,306,182

13,410
197,115
210,525

897,891
263,088
12,030
379,866
$ 3,069,582

$

223,514
849,261
39,068
42,324
1,154,167
514,051
46,004
1,714,222 

418,672 
237,557 
67,350 
1,237,178 

70,468 
233,375 
303,843 

776,832 
312,359 
2,825 
405,744 
3,038,781 

372,360
758,009
11,364
132,986
1,274,719
540,756
22,443
1,837,918

$

$

NON-CONTROLLING INTERESTS (Note 10)

425,000

425,000

SHAREHOLDERS’ EQUITY

Share capital (Note 11)
Retained earnings
Cumulative currency translation adjustments (Note 12)

Total shareholders’ equity

Approved by the Directors:

233,450
699,741
(2,831)
930,360
$ 3,069,582

212,122
590,588
(26,847)
775,863
3,038,781

$

D.W.G. Whitehead, Director 

C.A. Pinette, Director

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

[ 44 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31

(C$ thousands except per share amounts)

2002

2001

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 13)
Income before interest, income taxes, non-controlling interests

and amortization of goodwill

Finance cost and interest on other indebtedness (Notes 8 and 9)
Income before provision for income taxes, non-controlling interests

and amortization of goodwill

Provision for income taxes (Note 15)
Non-controlling interests (Note 10)
Amortization of goodwill (Note 7)
Net income

Retained earnings, beginning of year
Net income
Dividends on common shares
Premium on common share repurchase (Note 11)
Retained earnings, end of year

Earnings per share (Note 17)

Basic
Diluted
Basic before amortization of goodwill
Diluted before amortization of goodwill

$ 825,301
192,036
329,661
744,506
87,610
1,019,184
9,188
3,207,486
2,247,760
959,726
687,523
(5,580)

277,783
79,828

197,955
47,730
17,972
—
132,253

$

$ 590,588
132,253
(23,100)
—
699,741

$

$
$
$
$

1.72
1.68
1.72
1.68

$

$

$

$

$
$
$
$

896,466
238,287
355,733
691,202
95,715
956,313
13,327
3,247,043
2,342,308
904,735
634,939
18,226

251,570 
85,550

166,020
29,02 1
2 3, 1 1 3
9,969
103,917

521,569
103,917
(15,155)
(19,743)
590,588

1.37
1.34
1.50
1.47

Weighted average number of shares outstanding

76,954,609

75,854,866

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

[ 45 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31
(C$ thousands)

2002

2001

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 and 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
Divestiture of Hewden Tower Cranes business
Divestiture of Canadian Materials Handling business
Proceeds from Canadian property sale/leaseback
Equity investment
Acquisitions

Aggregate purchase price 
Assumed debt on acquisition of Hewden
Less: Initial investment in Hewden
Cash provided by (used for) investing activities

FINANCING ACTIVITIES

Repayment of long-term debt
Issue of debenture 
Cash funding of pension plans
Securitization of Canadian accounts receivable
Sales of notes portfolio
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 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

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

[ 46 ]

$

132,253 

$

103,917 

314,993
—
11,227
(5,580)
17,972
470,865

(100,944)
29,472
(10,954)
21,664 
41,148
21,553
472,804

(280,116)
(25,625)
167,063

(6,853)
44,219
—
77,049
(15,000)

(50,308)
— 
—
49,107

(120,768)
— 
(39,682)
30,000
88,606
—
(17,972)
21,328
—
(23,100)
(5,736)
(67,324)
148,846
372,360
223,514

80,563
29,420

$

$
$

308,533 
9,969 
(2,943)
(7,634)
23,113 
434,955 

15,785 
(29,665)
(2 9,1 1 6 )
866 
65,009 
( 1 2 , 2 1 1 )
445,623 

(259,385)
(52,318)
133,920 

(22,257)
— 
54,502 
— 
— 

(750,486)
(110,493)
218,050 
(610,684)

(73, 6 1 1 )
200,000 
— 
— 
— 
425,000 
(23,1 1 3)
15,459 
(23,708)
(15,155)
(2,260)
502,612 
25,848 
398,208 
372,360 

86,148 
32,243

$

$
$

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002 and 2001 ($ and £ in thousands, except the number of shares and per share amounts)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These Consolidated Financial Statements have been prepared in accordance with Canadian generally accepted accounting
principles 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. Principal operating subsidiaries include Finning (UK) Ltd, Finning Chile S.A. and Hewden Stuart
Plc (“Hewden”). In addition, Finning consolidates the partnership that was formed to fund the acquisition of Hewden. 

Currency Translation

Transactions undertaken in foreign currencies are translated into Canadian dollars at 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 foreign operations, all considered self-sustaining, 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 some of its investments in foreign subsidiaries by borrowing funds in foreign currency.
Exchange gains or losses arising from the translation of the hedge instruments are accounted for in cumulative currency
translation adjustments.

Securitization of Trade Receivables

The Company has sold a co-ownership interest in certain present and future accounts receivable in Canada to a
securitization trust. These transactions are accounted for as sales to the extent that the Company is considered to have
surrendered control over the interest in the accounts receivables and receives proceeds from the trust, other than a
beneficial interest in the assets sold. Losses on these transactions are recognized as other expenses and are dependent in
part on the previous carrying amount of the receivable interest transferred, which is allocated between the interest sold
and the interest by the Company, based on their relative value at the date of the transfer. The Company determines fair
value based on the present value of future expected cash flows using management’s best estimates of key assumptions
such as discount rates, weighted average life of accounts receivable, dilution rates and credit loss ratios. The receivable
interest is transferred on a fully serviced basis. The Company recognizes a servicing liability on the date of the transfer
and amortizes this liability to income over the expected life of the transferred receivable interest.

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.

[ 47 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

2% — 5%
20% — 30%
25% — 30%

Revenue Recognition

Revenue recognition, with the exception of cash sales, includes obtaining a written arrangement with the customer, which
is in the form of a contract or purchase order, establishing a fixed or determinable sales price with the customer whereby
ultimate collection of the revenue is reasonably assured. Revenue is recognized as performance requirements are achieved
in accordance with the following:

a) Revenue from sales of equipment is recognized at the time of shipment of the product to the customer at which time

title to the equipment and significant risks of ownership passes to the customer;

b) Revenue from power and energy systems includes construction contracts with customers that involve the design,
installation and assembly of power and energy equipment systems. Revenue is recognized on a percentage of
completion basis proportionate to the work that has been completed which is based on associated costs incurred;

c) Revenue from equipment rentals and operating leases is recognized in accordance with the terms of the relevant

agreement with the customer, either evenly over the term of that agreement or on a usage basis such as the number of
hours that the equipment is used;

d) Revenue from customer support services includes sales of parts and servicing of equipment. For sales of parts, revenue
is recognized when the part is shipped to the customer or when the part is installed in the customer’s equipment. For
servicing of equipment, revenue is recognized as the service work is performed. Customer support services are also
offered to customers in the form of long-term maintenance and repair contracts. For these contracts, revenue is
recognized on a percentage of completion basis proportionate to the service work that has been performed based on
the parts and labour service provided. Parts revenue is recognized based on parts list price and service revenue is
recognized based on standard billing labour rates. At the completion of the contract, any remaining profit on the
contract is recognized as revenue. Any losses estimated during the term of the contract are recognized when identified.

Stock-Based Compensation

The Company has 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. 

Defined contribution plans:The cost of pension benefits includes the current service cost based on a fixed percentage of
member earnings for the year. 

Goodwill

Prior to January 1, 2002, goodwill acquired on the acquisition of subsidiaries was amortized to income on a straight line
basis over 40 years. The Company adopted the provisions of CICA Handbook Section 3062, Goodwill and Other Intangible
Assets, beginning on January 1, 2002. Under the new standard, goodwill is no longer amortized. Instead, goodwill is 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 fair value of goodwill.

Financial Instruments

The Company utilizes derivative financial instruments in the management of its foreign currency and interest rate
exposures. The Company uses financial instruments such as interest rate swaps, cross-currency swaps, forward exchange
contracts and options as hedges against actual assets or liabilities. Derivative financial instruments are always associated
with a related risk position. The Company’s policy is to utilize derivative financial instruments for hedging purposes only.

The Company formally documents all relationships between hedging instruments and hedged items, as well 

as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking 
all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted
transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether 
the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or 
cash flows of hedged items.

The Company enters into hedges of its foreign currency exposures on foreign currency denominated long-term

investments by entering into offsetting forward exchange contracts and cross-currency swap contracts, when it is deemed
appropriate. Foreign exchange translation gains and losses on foreign currency denominated derivative financial
instruments used to hedge foreign currency long-term investments are accrued under current liabilities on the balance
sheet and recognized in the cumulative currency translation account, offsetting the respective translation losses and gains
recognized on the underlying foreign currency long-term investments. The forward premium or discount on forward
foreign exchange contracts used to hedge foreign currency long-term debt is amortized as an adjustment of interest
expense over the term of the forward contract. 

The Company also purchases foreign exchange forward contracts to hedge anticipated purchases in foreign currencies

and the related accounts payables. Foreign exchange translation gains and losses on foreign currency denominated
derivative financial instruments used to hedge foreign currency denominated purchases are recognized as an adjustment
of the payable when the purchase is recorded.

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. The Company also enters into interest rate swaps to manage its fixed and floating interest rate exposure. The
Company designates its interest rate hedge agreements as hedges of the underlying debt or asset. Interest expense on the
debt is adjusted to include the payments made or received under the interest rate swaps.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Realized and unrealized gains or losses associated with derivative instruments, which have been terminated or cease 
to be effective prior to maturity, are deferred under current liabilities on the balance sheet and recognized in income 
in the period in which the underlying hedged transaction is recognized. In the event a designated hedged item is sold,
extinguished or matures prior to the termination of the related derivative instrument, any realized or unrealized gain or
loss on such derivative instrument is recognized in income.

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.

2.  ACCOUNTS RECEIVABLE SECURITIZATION

Under an agreement dated November 29, 2002, the Company sold a $30,000 co-ownership interest in a pool of eligible
non-interest bearing trade receivables to a multi-seller securitization trust. Under the terms of this agreement, which
expires on November 29, 2007, the Company can sell co-ownership interests of up to $120,000 on a revolving basis. The
Company retains a subordinated interest in the cashflows arising from the eligible receivables underlying the trust’s co-
ownership interest. The trust and its investors do not have recourse to the Company’s other assets in the event that
obligors fail to pay the underlying receivables when due. Pursuant to the agreement, the Company continues to service the
pool of underlying receivables. 

As at December 31, 2002, the Company is carrying a retained interest in the transferred receivables in the amount of

$8,200. The servicing liability outstanding is approximately $40 as at December 31, 2002. 

For the year ended December 31, 2002, the Company recognized a pre-tax loss of $127 relating to these transfers. The

Company estimates the fair value of its retained interest and computes the loss on sale using a discounted cash flow
model. The key assumptions underlying this model are:

Cost of funds
Weighted average life in days
Average credit loss ratio
Average dilution ratio
Servicing fee liability

3.095%
36
0.125%
5.22%
2%

The impact of an immediate 10 percent and 20 percent adverse change in the average dilution ratio on the current fair
value of the retained interest would be reductions of approximately $311 and $422 respectively. The sensitivity of the
current fair value of the retained interest or residual cash flows to an immediate 10 percent and 20 percent adverse change
in each of the remaining assumptions is not significant.

The table below shows certain cash flows received from and paid to the securitization trust, for the year ended 
December 31, 2002:

Proceeds from new securitization
Proceeds from revolving reinvestment of collections

$30,000
$25,000

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F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  EQUIPMENT LEASED TO CUSTOMERS

Cost
Less accumulated depreciation

2002
$ 309,828
(112,713)
197,115

$

2001
385,198
(151,823)
233,375

$

$

Depreciation of equipment leased to customers for the year ended December 31, 2002 was $61,885 (2001: $67,643).

4.  RENTAL EQUIPMENT

Cost
Less accumulated depreciation

2002
$ 1,661,256
(763,365)
897,891

$

2001
$ 1,486,025
(709,193)
776,832

$

Depreciation of rental equipment for the year ended December 31, 2002 was $223,460 (2001: $213,798). 

5.  LAND, BUILDINGS AND EQUIPMENT

Land
Buildings and equipment
Less accumulated depreciation

Total land, buildings and equipment

$

2002
57,464
416,029
(210,405)
205,624
$ 263,088

2001
77,811 
450,732 
(216,184)
234,548 
312,359

$

$

Depreciation of buildings and equipment for the year ended December 31, 2002 was $29,648 (2001: $27,092).

During the first quarter of 2002, the Company sold its interest in various properties in its Canadian operation across
Alberta and British Columbia and leased them back for a 20-year term. The total proceeds were $77,049, resulting in a 
gain of $10,281. This gain has been deferred and will be amortized to income over the lease term. 

6.  ACQUISITION OF HEWDEN

On January 26, 2001, the Company completed its acquisition of Hewden. 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 was 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 was amortized on a straight-
line basis over its estimated useful life of 40 years in 2001. Following the adoption of the new goodwill accounting
standards, amortization of goodwill ceased.

The net assets acquired at their fair values comprised the following:

Net assets acquired 

Total asset
Total liabilities
Net assets acquired
Goodwill
Total purchase price

2001
704,995
307,968
397,027
332,084
729,111

$

$

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F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  GOODWILL

Goodwill, beginning of year
Goodwill on acquisitions during the year
Reduction in goodwill for purchase price adjustments
Reduction in goodwill on divestitures during the year
Reduction in goodwill in recognition of future income tax asset 
Foreign exchange translation adjustment
Goodwill, end of year

Accumulated amortization, beginning of year
Amortization for the year
Reduction in accumulated amortization of goodwill 
Accumulated amortization, end of year
Net goodwill

Amortization of goodwill — adoption of section 3062
Reported net income
Add back: goodwill amortization
Adjusted net income

2002

2001

$ 429,483
1,483
(53,699)
(8,984)
—
35,322
403,605

(23,739)
—
—
(23,739)
$ 379,866

$

$

132,253 
—
132,253 

$

$

$

$

77,777 
339,069 
— 
(563)
(10,878)
24,078 
429,483 

(13,832)
(9,969)
62 
(23,739)
405,744 

103,917 
9,969 
113,886 

During the year, the Company acquired Distribuidora Perkins Chilena SAC (Diperk), an engine and generator set
distribution company located in Chile and its complementary service operation in Chile for a net total of $6,283 with
resulting goodwill of $1,459. The residual value of goodwill acquired was for smaller rental operations in Canada. 
During 2001, the Company acquired Hewden 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 and 
$6,985 for other acquisitions. 

Upon the acquisition of Hewden, the Company recorded various liabilities and provisions at the date of acquisition based

on the preliminary allocation of the purchase price. In 2002, the Company completed its assessment of the final purchase
price allocation. The resulting purchase price adjustment reduced goodwill by $53,699.

During the fourth quarter of 2002, Hewden sold its Tower Cranes business. Tangible assets associated with the business

were $22,000 and the disposal resulted in a reduction of goodwill of $8,984.

During 2001, 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.

[ 52 ]

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  SHORT-TERM AND LONG-TERM DEBT

Short-term debt:
Bank indebtedness, commercial paper and other loans (a)

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

Bank term facilities (c)

Bank term facilities denominated in pound sterling (d)
Other unsecured loans denominated in U.S. dollars and Chilean pesos, 

maturing between 2002 and 2004

Less current portion of long-term debt
Total long-term debt

2002

2001

$

223,514

$

372,360

75,000
150,000
75,000
200,000

—

38,183

18,192
556,375
42,324
514,051

$

75,000
150,000
75,000 
200,000

72,032

92,640

9,070
673,742
132,986
540,756

$

(a) Bank indebtedness, commercial paper and other loans

The Company has available $1,111,000 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 $6,885 (2001: US $6,000) and £89,584 (2001: £57,429).

(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 had available $75,000 in an unsecured term facility which expired on December 31, 2002. Borrowing
under the term facility was at a floating rate of interest, which averaged 2.88% in 2002 (2001: 5.18%). 

(d) Bank term facilities denominated in pound sterling

The Company has an unsecured £15,000 floating rate loan at an average interest rate of 4.44% (2001: 5.75%),
maturing May 25, 2003. During the year, a £25,000 fixed rate loan at an interest rate of 7.675% matured.

Covenants

The Company is required to meet various covenants with respect to its debt facilities. As at December 31, 2002, the
Company is in compliance with these covenants.

Long-Term Debt Repayments

Principal repayments on long-term debt in each of the next five years and thereafter are as follows:

2003
2004
2005
2006
2007
Thereafter

$

$

42,324
227,834
11,217
75,000
—
200,000
556,375

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F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 contract
Amortization of deferred financing costs and other expenses

2002

37,637
14,267
5,440 
57,344
18,127
4,357
79,828

$

$

2001

30,744 
33,432 
13,175 
77,351 
4,107 
4,092 
85,550

$

$

Interest expense includes interest on debt incurred for a term greater than one year of $43,077 (2001: $41,468).

[ 54 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.  FINANCIAL INSTRUMENTS

The Company is subject to various financial risks including interest rate risk and foreign exchange risk. To manage this risk,
the Company uses interest rate swaps, cross-currency swaps, forward exchange contracts and options as hedges against
actual assets or liabilities. 

The following interest rate contracts and foreign currency contracts were in place at December 31, 2002 and 2001:

2002

Fixed/Floating Interest Rate Swaps:

Notional
Value

Interest Rates

Fixed

Floating

Term to
Maturity

Fair Value
Fav/(Unfav)

a) Canadian $ pay fixed (1)
b) British pound sterling £ pay fixed

$ 39,679
£ 100,000

5.06%
5.50%

2.07%
4.02%

1 to 6 years
10 years

(926)
$
$ (14,028)

Cross-Currency Interest Rate Swap (2):

a) Buy Canadian $ (against £228,000)

$ 498,849 

8.33%

4.57%

n/a

$ (111,965)

Forward Foreign Exchange Contracts:

Notional
Value

Weighted Average
Exchange Rate

Term to
Maturity

a) Buy US $ (against Canadian $)
b) Sell £ (against Canadian $) (3)

US$ 99,088
£ 95,560

1.5783
2.1491

1 to 2 years
n/a

Fair Value
Fav/(Unfav)

$
129 
$ (29,644)

$
$

$

(1,326)
(1,561)

(39,118)

Fair Value
Fav/(Unfav)

$
$
$

991 
(107)
(4,276)

2001

Fixed/Floating Interest Rate Swaps:

a) Canadian $ receive fixed
b) Canadian $ pay fixed

Cross-Currency Interest Rate Swap:

Notional
Value

Interest Rates

Fixed

Floating

Term to
Maturity

Fair Value
Fav/(Unfav)

$ 225,000
74,389
£

7.37%
5.05%

5.24%
2.09%

2 to 5 years
1 to 6 years

a) Buy Canadian $ (against £228,000)

$ 498,849 

8.33%

4.59%

n/a

Forward Foreign Exchange Contracts:

Notional
Value

Weighted Average
Exchange Rate

a) Buy US $ (against Canadian $)
b) Buy EURO (against £)
b) Sell £ (against Canadian $)

US$
EURO
£

71,239
19,517
95,560

1.5787
1.6264
2.1491

Term to
Maturity

1 to 2 years
1 year
n/a

(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
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 3 years and has an open maturity date. The
contract hedges the Company’s investment in Hewden and an amount of British pound sterling cash flows. $62,164 of
the negative fair value, representing the market value of the foreign exchange forward, has been recognized on the
balance sheet in current liabilities and offset to currency translation adjustments.

(3) The forward foreign exchange contract hedges the Company’s investment in Hewden. The negative fair value of the 

contract has been recognized on the balance sheet in current liabilities and offset to currency translation adjustments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

Long-Term Debt

Credit Risk

2002

2001

Book
Value
$556,375

Fair
Value
$590,963

Book
Value
$ 673,742

Fair
Value
$ 692,014

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. NON-CONTROLLING INTERESTS 

In 2001, the Company formed a partnership with third party private investors to raise capital to fund the acquisition of
Hewden. The private investors injected $425,000 into the partnership in return for a non-controlling partnership interest. 
A subsidiary of the Company is the general partner in the partnership. The partnership interest is reported as 
non-controlling interests on the financial statements and distributions on the partnership interest are accounted for as
distributions to non-controlling interests. The financial position, results of operations and cash flows of the partnership 
are consolidated with the Company from its date of inception.

Through their partnership interest, the private investors have a preferred interest in the shares of Hewden ranking in
priority to the debt securities issued by the Company. The return to which the private investors are entitled is limited to 
a quarterly distribution on their partnership interests, which is calculated with reference to Canadian dollar bankers
acceptances. The distributions to the non-controlling interests totaled $17,972 in 2002 (2001: $23,113). At the end of five
years, the yield on the partnership interest will be renegotiated. If no agreement on a new yield is reached, the private
investors have the right to sell their partnership interests. The partnership has a maximum life of 75 years but may be
liquidated earlier if the partnership and the Company fail to agree on a new yield on the partnership interest and the
parties have been unable to arrange a sale of the partnership interest to a new investor. The Company has the option of
purchasing the partnership interest held by the private investors throughout the life of the partnership for an amount
equal to the capital invested in the partnership interest by the private investors. In the event the Company does not
purchase the partnership interest and the partnership is liquidated, the Company will be required to inject funds to a
maximum of approximately $200,000 if the private investors are unable to recover their investment from the sale of the
shares of Hewden. The Company’s obligation to inject these funds would rank equally with the debt securities. 

No return of capital is scheduled during the life of the partnership but a partial return of capital is required in the case 

of certain sales of assets by Hewden out of the ordinary course of business.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.  SHARE CAPITAL

AUTHORIZED

Unlimited

Unlimited

Preferred shares without par of which 4,400,000 are designated 
as Cumulative Redeemable Preferred shares
Common shares

ISSUED AND OUTSTANDING

Common Shares

Balance, beginning of year
Exercise of stock options
Repurchase of common shares

2002

2001

Shares
75,816,263
1,763,691
—
77,579,954

Amount
$ 212,122
21.328
—
$ 233,450

Shares
75,790,463
1,483,100
(1,457,300)
75,816,263

Amount
$ 200,629
15,459
(3,966)
$ 212,122

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 April 2005 unless it is reconfirmed by a majority of the votes cast at the meeting.
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 did not repurchase any common shares during 2002 (1,457,300 shares in 2001) as part of normal course
issuer bids. In 2001, these shares were repurchased at an average price of $16.27 for an aggregate cost of $23,708, which
was allocated to reduce share capital by $3,966 and retained earnings by $19,743.

Stock Options

The Company has several stock option plans for employees and directors, the details of which are as follows:

Options outstanding, beginning of year
Issued
Exercised
Cancelled
Options outstanding, end of year

2002

Options

6,154,442
—
(1,763,691)
(67,533)
4,323,218

Weighted
average
exercise
price
$ 12.87
n/a
$ 12.04
$ 13.22
$ 13.20

2001

Options

6,618,441
1,073,500
(1,483,100)
(54,399)
6,154,442

Weighted
average
exercise
price
$ 12.21
$ 13.37
$ 10.38
$ 11.09
$ 12.87

Exercisable at year-end

3,479,990

$ 13.22

4,125,978

$ 13.05

[ 57 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about the stock options outstanding at December 31, 2002:

Options outstanding
Weighted
average
remaining
contractual
life
(in years)
0.3
4.1
7.5
4.2
5.4

Weighted
average
exercise
price
$ 6.62 
$ 10.42 
$ 12.94 
$ 16.17 
$ 13.20 

Number
outstanding
24,328 
1,277,800 
1,636,219 
1,384,871 
4,323,218 

Options exercisable

Weighted
average

Number
outstanding
24,328 
1,275,134 
795,657 
1,384,871 
3,479,990 

remaining Weighted
average
exercise
price
$ 6.62 
$ 10.42 
$ 12.80 
$ 16.17 
$ 13.22 

contractual
life
(in years)
0.3
4.1
7.4
4.2
4.9

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 in the form of deferred share unit plans and stock appreciation
rights plans that use notional units. These notional units, upon vesting, are valued based on the Company’s common share
price on the Toronto Stock Exchange and are marked to market at the end of each fiscal quarter. Changes in the value of
the units as a result of fluctuations in the Company’s share price and new issues are recognized in selling, general and
administrative expense in the consolidated statement of income with the corresponding liability recorded on the
consolidated balance sheet. Details of these plans are as follows:

Deferred Share Unit Plan A (DSU-A) 

Under the DSU-A Plan, senior executives of the Company may be awarded deferred share units as approved by the
Board of Directors. These units are fully vested upon issuance to the executives. These units accumulate dividend
equivalents in the form of additional units based on the dividends paid on the Company’s common shares. 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, 2002 there were 66,740 (2001: 65,930) units
outstanding for a total liability of $1,705 (2001: $1,318). The total expense charged in the year was $387 (2001: $1,318).

Directors’ Deferred Share Unit Plan A (DDSU)

Under the DDSU Plan, non-employee Directors of the Company may elect to allocate all or a portion of their cash
compensation as deferred share units. These units are fully vested upon issuance. These units accumulate dividend
equivalents in the form of additional units based on the dividends paid on the Company’s common shares. 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, 2002 there were 95,089 
(Dec 2001: 51,320) units outstanding for a total liability of $2,430 (2001: $1,027). The total expense charged 
in the year was $1,403 (2001: $806).

Deferred Share Unit Plan B (DSU-B)

Under the DSU-B Plan, executives of the Company may be awarded performance based deferred share units as
approved by the Board of Directors. This plan utilizes notional units that become vested only at retirement or at
specified percentages if the Company’s common share price exceeds, at specified levels, the common share price at
the date of grant. The specified levels and respective vesting percentages are as follows:

Grant Price
110% improvement
120% improvement
130% improvement
140% improvement

Common Share Price
$ 26.05
$ 28.66
$ 31.26
$ 33.87
$ 36.47

Vesting %
0%
25%
50%
75%
100%

[ 58 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The notional units that have not vested within five years to the date that they were granted expire. Only vested units
accumulate dividend equivalents in the form of additional units based on the dividends paid on the Company’s
common shares. In 2002, the initial year of granting, 275,200 units were granted of which no units were
performance vested and 28,050 units were retirement vested, resulting in a total expense charged in the year of $717.

Share Appreciation Rights (SAR)

In 2002, awards under the SAR plan were granted to senior managers within Canada and the UK. Under the share
appreciation rights plan, awards will be expensed over the vesting periods when the market price of the common
shares exceeds the strike price under the plan. Changes, either increases or decreases, in the quoted market value of
those shares between the date of grant and the measurement date result in a change in the measure of compensation
for the award and will be amortized over the remaining vesting periods. The SAR Plan uses notional units that are
valued based on the Company’s common share price on the Toronto Stock Exchange. The units are exercisable for
cash if incremental common share price thresholds are achieved or other performance measures are met.

Outstanding at the beginning of the year
Granted during the year
Exercised/cancelled during the year
Outstanding at the end of the year
Strike price
Exercisable at the end of year

Units
—
282,500
—
282,500

84,500

22000022

Amount
—
—
—
—
$26.05
—

At the end of 2002, 84,500 units were exercisable, but the common share price was below the grant price of the
SAR, resulting in no charge to expense in 2002.

12.  CUMULATIVE CURRENCY TRANSLATION ADJUSTMENTS

Balance, beginning of year
Gain realized during the year 
Translation adjustments for the year 
Balance, end of year

2002
$ (26,847)
—
24,016
$ (2,831)

2001
$ (23,742)
(746)
(2,359)
$ (26,847)

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,
2002, 2001, and 2000, the Canadian dollar exchange rates against the British pound sterling were 2.5428, 2.3160 and
2.2432 respectively, and the Chilean peso exchange rates against the Canadian dollar were 456, 415 and 382 respectively.
The cumulative currency translation adjustment for 2002 resulted from the weakening of the Chilean peso and the
strengthening of the British pound sterling against the Canadian dollar.

[ 59 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.  OTHER EXPENSES (INCOME)

Other expenses (income) include items shown separately to facilitate comparison with the prior year. The following items
are included in other expenses (income):

a) Gain on sale of surplus properties in Canada and the U.K.
b) 2002 amortization of deferred gain, and gain on 2001 sale of the Canadian  

Materials Handling business. 

c) Costs incurred on DBSi business process reengineering project
d) Loss from equity investment
e) Loss on sale of non-core business
f) Donation of headquarter property located at Vancouver, Canada to post 

secondary educational institutions

g) Gain on donation of property to post secondary educational institutions
h) Restructuring charges
I) Non-operating foreign exchange gain on reduction in the net investment 

in a self-sustaining foreign operation

Tax (provision) recovery on other expenses (income)
Other expenses (income), net of tax

2002

2001

$

(15,216)

$

(8,725)

(1,600)
10,264
972
—

—
—
—

—
(5,580)
(952)
(4,628)

$

$

(3,571)
—
—
2,500

33,787
(29,503)
24,484

(746)
18,226
14,905
3,321

[ 60 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  EMPLOYEE BENEFITS

2002

2001

Canada

UK Hewden

Total

Canada

UK

Hewden

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 
Current service cost, 
net of employee contributions
Interest cost
Expected return on plan assets
Amortization of past service costs
Amortization of net actuarial (gain)/loss
Amortization of transitional
obligation/(asset)
Net benefit plan expense

Defined contribution plan expense
Defined benefit plan expense
Total

$
$

$

$

$

$

5,269 $
5,269 $

— $
— $

249 $
249 $

5,518 $
5,518 $

4,510 $
4,510 $

—
—

$

4,497 $
14,147
(16,461)
165
217

8,297
17,426
(18,245)
—
1,027

3,855 $
8,460
(8,450)
—
(117)

16,649 $
40,033
(43,156)
165
1,127

$

4,171
13,890
(16,654)
165
(368)

1,047
3,612 $

(1,477)
7,028 $

1,889
1,459
5,637 $ 16,277

$

5,269 $
3,612
8,881 $

— $

249 $

7,028
7,028 $

5,637
5,886 $ 21,795 $

5,518 $
16,277

1,144
2,348

$

4,510 $
2,348
6,858

$

10,267
15,540
(19,183)
—
—

(1,295)
5,329

—
5,329
5,329

$
$

$

$

$

$

164 $
164 $

4,674
4,674

3,960 $
7,256
(9,118)
—
(676)

1,577
2,999 $

164 $

2,999
3,163 $

18,398
36,686
(44,955)
165
(1,044)

1,426
10,676

4,674
10,676
15,350

Information about the Company’s defined benefit plans is as follows:

Canada

UK

Hewden

Total

Canada

UK

Hewden

Total

Accrued benefit obligation 
Balance at the beginning of year (1)
Current service cost
Interest cost
Benefits paid
Actuarial gains
Foreign exchange rate changes
Plan amendments
Balance at the end of year

Plan Assets 
Fair value at the beginning of year (1)
Actual return on plan assets
Employer contributions
Employees’ contributions
Benefits paid
Foreign exchange rate changes
Fair value at the end of year

$ 204,063 $ 267,412
12,124
17,426
(8,646)
5,625
26,187
—
$ 212,167 $ 320,128

6,135 
14,147
(16,188)
2,244
—
1,766

$ 128,531 $ 600,006 $

5,404
8,460
(5,645)
10,006
12,586
—

23,663
40,033
(30,479)
17,875
38,773
1,766
$ 159,342 $ 691,637

198,363
5,965
13,890
(11,788)
(2,367)
—
—
$ 204,063

$ 187,314 $ 244,801
(20,815)
12,099
3,827
(8,646)
23,973
$ 220,782 $ 255,239

5,785
42,233
1,638
(16,188)
—

$ 103,155 $ 535,270 $

(4,030)
2,912
1,549
(5,645)
10,100

(19,060)
57,244
7,014
(30,479)
34,073

$ 108,041 $ 584,062 $

196,527
751
—
1,824
(11,788)
—
187,314

(1) The defined benefit plans of Hewden were assumed by the Company on January 26, 2001.

$

$

$

$

287,076
12,106
15,540
(4,348)
(51,198)
8,236
—
267,412

284,591
(49,201)
4,515
1,839
(4,348)
7,405
244,801

$

$

$

$

131,414 $
5,396
7,256
(4,354)
(11,181)
—
—

616,853
23,467
36,686
(20,490)
(64,746)
8,236
—
128,531 $ 600,006

132,709 $
(29,392)
2,756
1,436
(4,354)
—
103,155 $

613,827
(77,842)
7,271
5,099
(20,490)
7,405
535,270

[ 61 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Funded status — plan surplus/(deficit)
Unamortized net actuarial loss
Unamortized past service costs
Adjustment
Unamortized transitional 
obligation/(asset)
Accrued benefit asset/(liability), 
net of valuation allowance

2002

2001

Canada

UK Hewden

Total

Canada

UK

Hewden

Total

$

8,615 $(64,890) $ (51,301) $(107,576) $

26,582
3,555
—

87,391
—
961

28,253
—
—

142,226
3,555
961

(18,581) $
15,712
1,954
—

(22,611) $
39,833
—
1,397

(25,376) $
5,146
—
—

(66,568)
60,691
1,954
1,397

4,068

(16,243)

17,161

4,986

5,116

(16,140)

17,351

6,327

$ 42,820 $

7,219 $ (5,887) $ 44,152 $

4,201

$

2,479

$

(2,879) $

3,801

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

$ 171,473 $ 320,128
255,239
9,877 $ 64,889

524,876
51,301 $ 126,067

122,669 $
96,542
26,127 $

$ 159,342 $ 650,943 $

267,412
244,801
22,611

25,077
6,294
18,783

415,158
347,637
67,521

108,041

161,596

$

$

$

$

$

$

$

The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations are as follows:
7.0%
Discount Rate
Expected long-term rate of return on plan assets 9.3%
3.4%
Rate of compensation increase
10 — 13.3 
Estimated Remaining Service Life (Years)

7.0%
8.5%
3.4%
2 — 13.3 

5.8%
7.3%
3.2%
14

5.8%
7.3%
3.5%
13

6.0%
7.5%
3.8%
13 

5.5%
6.8%
4.5%
14

Plan assets include common shares of the Company having a fair value of $935 at December 31, 2002 (2001: $920).

15.  INCOME TAXES
Provision for Income Taxes 

Current income tax expense
Future income tax expense/(recovery)

2002
36,503
11,227
47,730

$

$

2001
31,964
(2,943)
29,021

$

$

Reconciliation of the Company’s effective income tax rate from statutory Canadian tax rates for the years ended December
31, 2002 and 2001 is as follows:

Combined federal and provincial tax rates

Provision for income taxes based on the combined federal and provincial rates
Increase/(decrease) in provision resulting from:

Lower effective rates on the losses/(earnings) of foreign subsidiaries
Amortization of goodwill and increase in assigned asset value
Large corporation tax
Income not subject to tax
Other items 

Provision for income taxes

2002
38.6%

2001
41.9%

$

69,473

$

55,715

(24,411)
—
2,075
(2,853)
3,446
47,730

$

(23,503)
763  
2,101
(8,598)
2,543
29,021

$

[ 62 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2002 and 2001 are described below. 

Future income tax assets:

Tax loss carry-forwards and other

Future income tax liabilities:

Capital, rental and leased assets, inventories and reserves
Pensions
Other

16.  OPERATING LEASES 

Payments due under various operating lease contracts are as follows:

2002

12,030

(26,084)
(18,043)
(1,877)
(46,004)

$

$

$

2001

2,825 

(19,184)
(2,505)
(754)
(22,443)

$

$

$

2003
2004
2005
2006
2007
2008 & thereafter
Total

$

$

68,376
54,901
46,349
37,078
32,349
222,092
461,145

17.  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. 

2002

Basic earnings per share:

Income
(Numerator)

Shares
(Denominator)

Per Share
Amount

Income available to common shareholders

$

132,253

76,954,609

$

1.72

Effect of dilutive securities:

Stock options

Diluted earnings per share:

Income available to common shareholders

and assumed conversions

2001

Basic earnings per share:

—

1,984,531

—

$

132,253

78,939,140

$

1.68

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 

[ 63 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.  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.

19.  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.
• UK operations: England, Scotland, Wales, Falkland Islands and the Channel Islands.
• Chilean operations: throughout the country.
• Hewden operations: Equipment rental in the U.K.
• Other operations: corporate head office. 2001 included Universal Machinery Services operations. .

The reportable operating segments are:

2002

Canada 

UK

Chile

Hewden

Other

Consolidated

1,021,205 

$ 1,269,275

Revenue from external sources
Operating costs
Depreciation
Other expenses (income)
Earnings before interest and tax
Finance cost and interest on other indebtedness
Non-controlling interests
Provision for income taxes
Net income

135,134 

$

112,936  $

$ 828,246

$ 444,644  $ 665,266

$

55

$ 3,207,486 

752,861 

388,075 

443,665 

14,484

2,620,290

26,073 

11,726 

142,060 

—

(5,580)

314,993

(5,580)

49,312

$ 44,843  $

79,541  $

(8,849) $ 277,783

79,828

17,972

47,730

$

132,253

Identifiable assets
Gross capital expenditures

$ 1,067,196 

$ 492,896  $ 323,105  $ 1,148,219  $

38,166

$ 3,069,582

$

18,197 

$

7,040 

$

7,151  $

15,038  $

—  $

47,426

UK

$ 1,398,623  $ 804,084
748,848
22,113
1,035

1,114,242 
151,438 
1,082 

Chile
$ 448,005 
399,377 
9,950 
—

Hewden

$ 587,482  $
380,677 
125,032 
7,852 

$

32,088

$

38,678 

$

73,921  $

Canada 

2001
Revenue from external sources
Operating costs
Depreciation
Amortization of goodwill
Other expenses (income)
Earnings before interest and tax
131,861
Finance cost and interest on other indebtedness
Non-controlling interests
Provision for income taxes
Net income

$

Other

Consolidated
8,849  $ 3,247,043
2,668,714
25,570
308,533
—
9,969
—
18,226 
18,226 
241,601
85,550
23,113
29,021
103,917

$

(34,947) $

Identifiable assets
Gross capital expenditures

$ 1,301,166  $
$
19,514
$

420,135
6,443

$
$

237,761 
5,071 

$ 1,079,719  $
20,152  $
$

-
-

$ 3,038,781
51,180
$

[ 64 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20.  SUBSEQUENT EVENT

Subsequent to the year-end, the Company closed the acquisitions of Macrosa Del Plata S.A. and General Machinery Co
S.A., the Caterpillar dealerships in Argentina and Uruguay, respectively. The purchase price of $40,765 for the shares of
these companies was funded through debt. The sellers are also entitled to additional future consideration, to a maximum
of $30,000, based on realization of certain performance criteria for these operations. The purchase price allocations for
these acquisitions have not been finalized. These acquisitions are effective January 1, 2003.

[ 65 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
TEN-YEAR FINANCIAL SUMMARY

Years ended December 31 ($ in thousands except per share data)

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 

2002

2001 

2000 

$ 1,269,275
$ 828,246
$ 444,644
$ 665,266
$
55
$ 3,207,486

$ 

$

$
$

$

277,783
8.7%
132,253
4.1%

1.72
1.68

23,100
0.30

$ 472,804
$
6.09
47,426
$

$

$
$

$
$

1.05
0.58:1
1.23:1

(0.18):1
11.99
15.7%

28.85
19.65

77,580
327,462
13,502

2,548
1,578
1,817
3,813
39
9,795

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
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 
15,037 

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 

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.
2. In 2000, the diluted earnings per share calculation was changed to reflect the dilutive effect of exercising outstanding

[ 66 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T
TEN-YEAR FINANCIAL SUMMARY

1999 

1998

1997

1996

1995

1994

1993

1,032,922
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 

1,136,917
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

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 

2,228 
884 
941 
—
34 
4,087 

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 

2,124 
873 
861 
—
29 
3,887 

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

2,025
863 
759
—
27
3,674

stock options by application of the treasury stock method. Diluted earnings per share for the years ended 1999 to
2002 have been stated using this method.

3.  Leverage ratios for the 2000 result did not include the effect of the investment in Hewden Stuart.

[ 67 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

BOARD OF DIRECTORS

Ricardo Bacarreza
(1, 3)
Santiago, Chile

John E. Cleghorn
(5)
Toronto, Ontario

James F. Dinning
1 (chairman), 4
Calgary, Alberta

President, Proinvest S.A., 
a financial services company
based in Santiago, Chile.
Director of several
international companies.
Previously, an economist 
at the World Bank in
Washington, D.C. and a senior
executive of a number of
banks and insurance
companies in Chile. 

Chairman of the Board, 
SNC-Lavalin Group Inc.
Director of Canadian Pacific
Railways and Nortel Networks.
Chancellor of Wilfred Laurier
University. Previously,
executive positions with
several financial institutions,
including Chairman and
Chief Executive Officer of 
the Royal Bank of Canada. 

Executive Vice President,
TransAlta Corporation.
Director of Shaw
Communications Inc. and
Western Financial Group Inc.
Previously, 11 years as a
member of the Legislative
Assembly of Alberta, 
three cabinet portfolios 
1988 to 1997, including
Provincial Treasurer.

Donald S. O’Sullivan
1, 2, 4 (chairman)
Edmonton, Alberta

Conrad A. Pinette
(4)
Vancouver, British Columbia

Andrew H. Simon, OBE
1, 5 (chairman)
Staffordshire, England

President, O’Sullivan
Resources Ltd. Director of
National Life Assurance
Company of Canada Ltd.
Previously, ownership and/or
executive positions with
several companies. 

Elected Chairman of the
Board of the Company in
2000. President and Chief
Operating Officer, Lignum
Limited, one of Canada’s
largest, privately-held 
forest products companies.
Trustee of A&W Revenue
Royalties Income Fund and
Director of TimberWest
Forest Corporation. 

Director of several companies,
including SGL Carbon AG,
Kaffee Partner, and
Associated British Ports Plc.
Previously, Managing
Director and Chairman 
and Chief Executive 
Officer of Evode Group of
Staffordshire, an international
specialty chemicals and
materials company. 

1 Member, Audit Committee

2 Member, Human Resources and Compensation Committee

3 Member, Environmental, Health and Safety Committee

4 Member, Governance Committee

5 Member, Pension Committee

[ 68 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

BOARD OF DIRECTORS

Nicholas B. Lloyd
Vitacura, Chile

President and Chief
Executive Officer, Finning
South America. Previously,
several executive positions 
with Finning, including 
Vice Chairman and
Managing Director of
Finning (UK) Ltd.

Jefferson J. Mooney
(2, 3)
North Vancouver, 
British Columbia

Chairman and Chief Executive
Officer, A&W Food Services of
Canada Inc. Director of
Cadillac Fairview Corporation
Limited. Previously, Chairman
of the Business Council of
British Columbia.

Timothy S. Howden
2 (chairman), 4
Marlow, Buckinghamshire,
England

Director of several companies,
including Hyperion Insurance
Group, Mahindra-British
Telecom SSL Plc, Benchmark
Dental Laboratories Ltd. and
C Zwetsloot & Sons Ltd.
Previously, senior executive
positions with several
international companies
involved in the food and
household products
distribution industries. 

Monica E. Sloan
(3, 5)
Calgary, Alberta

Douglas W.G. Whitehead
(3)
West Vancouver, BritishColumbia

John M. Willson
2, 3 (chairman), 4
Vancouver, British Columbia

Independent Management
and Strategy Consultant.
Director of Intervera Ltd. 
and Entx Capital. Previously,
executive positions with
Kelman Technologies Inc.,
TELUS Advanced
Communications and Novacorp
International Consulting. 

President and Chief Executive
Officer of the Company.
Director of Ballard Power
Systems Inc., BC Gas Ltd.,
Belkorp Industries Inc. and
the Conference Board of
Canada. Previously, senior
executive positions with
Fletcher Challenge Canada,
including President and Chief
Executive Officer.

Director of Nexen Inc. and Pan
American Silver Corporation.
Previously, senior executive
positions with several
companies, including
President and Chief Executive
Officer of Placer Dome Inc., an
international gold mining and
production company, and
President and Chief Executive
Officer of Western Canada
Steel Ltd.

[ 69 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

CORPORATE OFFICERS

Brian C. Bell
Executive Vice President, Customer
Support Services
Finning International Inc.

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 South America

Richard T. Mahler
Executive Vice President and Chief
Financial Officer
Finning International Inc.

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.

[ 70 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

CORPORATE GOVERNANCE

The Board of Directors and management of Finning International Inc. consider good
governance to be an important factor in the effective operation of the Company. The
Board has overall responsibility for conduct of the business and affairs of the Company
and discharges this responsibility both directly and through delegating certain
authority to committees of the Board and to senior management of the Company.

The Corporate Governance Committee enhances corporate performance by assessing

and making recommendations regarding board effectiveness and by establishing a
process for identifying, recruiting, appointing and re-appointing directors and
providing for the on-going development of current board members. The Committee
monitors the flow of information between the board and management and, where
necessary, makes recommendations on improving these lines of communication. 

Douglas W.G. Whitehead 
& Conrad A. Pinette

The Audit Committee assists the Board in fulfilling its oversight responsibility to shareholders, potential shareholders, the
investment community and others with respect to the Company’s financial statements, financial reporting process, systems
of internal accounting and financial controls, internal audit function, external auditors’ reports and risk assessment and
management. The Committee is empowered to investigate any matter, with full access to all books, records, facilities and
personnel of the Company. It is also empowered to instruct and retain outside counsel or other experts as required.
The Human Resources and Compensation Committee plans for the continuity of executive officers and other key

employees. The committee also reviews the Company’s overall executive compensation plan to ensure it is competitive and
motivating in order to attract, retain and inspire excellence in the performance of executive officers and other key
employees. In all its deliberations, the committee takes into account the cost of executive compensation and the interests
of shareholders. 

The Environmental, Health and Safety Committee assists, encourages and counsels management to achieve the Company’s

goal of reducing accidents in the workplace through the adoption, monitoring and enforcement of policies and procedures
designed to meet or exceed the Company’s environmental, health and safety goals. 

The Pension Committee reviews the design and benefits of the Company’s pension funds as well as the selection,

investment objectives and ongoing performance of the fund manager(s).

Ranked 5th of 270 companies in Canada in October 2002 study in the Globe and Mail Report on Business 

on corporate governance.

Ranked 3rd best company by Canadian Business Magazine with regard to corporate governance (“Top 25 Best and Worst

Boards in Canada” — August 2002).

The Company’s compliance with the Toronto Stock Exchange Corporate Governance Guidelines is highlighted below:

Board responsible for overall stewardship of Company
Board constituted with majority of unrelated directors
Relationship of each director disclosed and explained
Corporate Governance committee constituted with non-management directors
Process implemented to assess Board effectiveness
Orientation and education program provided for new directors
Board size reviewed for effective decision-making
Directors compensation reflective of risk and responsibility
Committees generally composed of non-management directors
Committee assigned to supervise corporate governance
Limits to management responsibilities defined
Board functions independently of management
Audit Committee composed only of unrelated directors and has direct communication with the Company’s auditors
System implemented for Board to engage outside advisors

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

[ 71 ]

F I N N I N G   I N T E R N A T I O N A L   I N C .     2 0 0 2   A N N U A L   R E P O R T

SHAREHOLDER INFORMATION

STOCK EXCHANGES

The common shares of Finning International Inc. are listed on the Toronto Stock
Exchange. Symbol: FTT

Auditors
Deloitte & Touche LLP
Vancouver, Canada

Solicitors
Borden Ladner Gervais LLP, Barristers and Solicitors
Vancouver, Canada

Corporate Head Office

Suite 1000 – 666 Burrard Street
Vancouver, Canada V6C 2X8 
Telephone: 604-691-6444

Annual Meeting 

The Annual General Meeting of shareholders will be held at 11:00 a.m., April 24, 2003 at
the Fairmont Waterfront Hotel in Vancouver.

Corporate Information

The Company prepares an Annual Information Form (AIF), which is filed with the securities
commission 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 website at www.finning.com

Registrar and Transfer Agent
Computershare Trust Company of Canada
To contact the stock transfer agent nearest to your location see listing to the right.

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 directed to Anthony R. Guglielmin, Vice President and Corporate
Treasurer, Telephone 604-331-4937, Fax 604-331-4899, email: aguglielmin@finning.ca

Forward-Looking Statements

This report contains forward-looking statements and information, which reflect the
current view of Finning International Inc. with respect to future events and financial
performance. Any such forward-looking statements are subject to risks and uncertainties
and Finning’s actual results of operations could differ materially from historical results or
current expectations.

COMPUTERSHARE 
TRUST COMPANY 
OF CANADA

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 Avenue., 
6th Floor
Montreal, Quebec H3A 3K9
Tel: 1-800-564-6253
Fax: 514-982-7635

Toronto
Computershare 
100 University Avenue, 
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: 1-888-661-5566
Fax: 604-661-9480

Website: 

www.computershare.com
email:

caregistryinfo@computershare.com

[ 72 ]

Helicopter lifts a section of a TK1162 forest harvesting machine
and flies it to a mountainous logging site for reassembly 
near Powell Lake, British Columbia. Finning played a key role
in developing the machine designed and built for Caterpillar. 

Printed in Canada

FINNING INTERNATIONAL INC.
A N N U A L   R E P O R T   2 0 0 2

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