2021
FINNING INTERNATIONAL INC.
Financial report
Finning International Inc.
2021 Annual Results
MANAGEMENT’S DISCUSSION AND ANALYSIS
This MD&A should be read in conjunction with our Annual Financial Statements and the accompanying notes
thereto for the year ended December 31, 2021, which have been prepared in accordance with IFRS. In this MD&A,
unless context otherwise requires, the terms we, us, our, and Finning refer to Finning International Inc. and/or its
subsidiaries. All dollar amounts presented in this MD&A are expressed in CAD, unless otherwise stated. Additional
information relating to Finning, including our AIF and MD&A, can be found under our profile on the SEDAR website
at www.sedar.com and in the investors section of our website at www.finning.com.
February 8, 2022
Finning (TSX:FTT) is the largest dealer of Caterpillar products in the world delivering service to customers for over
85 years. We sell, rent, and provide parts and service for Caterpillar equipment and engines and complementary
equipment on three continents to customers in various industries, including mining, construction, petroleum, forestry,
and a wide range of power systems applications. We aim to consistently deliver solutions that enable customers to
achieve the lowest equipment owning and operating costs while maximizing uptime.
A glossary of defined terms is included on page 54. The first time a defined term is used in this MD&A, it is
shown in bold italics.
Annual Overview
($ millions, except for per share amounts)
Revenue
Net revenue (1)
Gross profit
SG&A
Equity earnings of joint ventures
Other income
Other expenses
EBIT
Net income attributable to shareholders of Finning
Basic EPS
EBITDA (1)
Free cash flow (2)
Adjusted EBIT (2)(3)
Adjusted basic EPS (1)(3)
Adjusted EBITDA (2)(3)
Gross profit as a % of net revenue (1)
SG&A as a % of net revenue (1)
EBIT as a % of net revenue (1)
EBITDA as a % of net revenue (1)
Adjusted EBIT as a % of net revenue (1)(3)
Adjusted EBITDA as a % of net revenue (1)(3)
Adjusted ROIC (1)(3)
2021
2020
% change
fav (unfav)
18%
16%
15%
(2)%
(45)%
n/m
n/m
41%
57%
58%
24%
(66)%
63%
90%
34%
$
$
$
$
$
$
$
$
$
$
$
7,294 $
6,696 $
1,801 $
(1,266)
2
15
—
552 $
364 $
2.26 $
871 $
300 $
537 $
2.18 $
856 $
26.9%
18.9%
8.2%
13.0%
8.0%
12.8%
16.4%
6,196
5,768
1,570
(1,245)
3
115
(51)
392
232
1.43
700
870
328
1.14
636
27.2%
21.6%
6.8%
12.1%
5.7%
11.0%
9.6%
(1) See “Description of Specified Financial Measures and Reconciliations” later in this MD&A.
(2) These are non-GAAP financial measures. See “Description of Specified Financial Measures and Reconciliations” later in this MD&A.
(3) Reported financial measures may be impacted by significant items described on pages 6 and 42 - 45 of this MD&A. Financial measures
that have been adjusted to take into account these items are referred to as “Adjusted measures”. See “Description of Specified Financial
Measures and Reconciliations” later in this MD&A.
1
Finning International Inc.
2021 Annual Results
Annual Highlights
(cid:120) 2021 revenue was $7.3 billion. Net revenue of $6.7 billion was up 16% from 2020, reflecting higher volumes in all
lines of business, primarily new equipment in South America and UK & Ireland and product support and used
equipment in Canada.
(cid:120) 2021 EBIT was $552 million and EBIT as a percentage of net revenue was 8.2%. Excluding significant items not
considered indicative of operational and financial trends, Adjusted EBIT was $537 million and Adjusted EBIT as a
percentage of net revenue was 8.0%, compared to $328 million and 5.7%, respectively, in 2020. 2021 Adjusted
EBIT increased by 63% from 2020 driven by a recovery in market activity and strong execution.
(cid:120) Adjusted EBITDA was $856 million, 34% higher than 2020, driven by revenue growth and improved execution.
2021 Adjusted EBITDA as a percentage of net revenue was 12.8%, improving from 11.0% in 2020. This increase
was primarily due to the reduction in SG&A relative to net revenue as a result of productivity improvements. 2021
SG&A as a percentage of net revenue was 18.9%, down 270 basis points from 2020, which contributed to
improved operating leverage in all of our operations.
(cid:120) Basic EPS was $2.26 per share in 2021 compared to $1.43 per share in 2020. Excluding significant items not
considered indicative of operational and financial trends, Adjusted basic EPS was $2.18 per share in 2021, 90%
higher than $1.14 per share in 2020 reflecting strong earnings across all operations.
(cid:120) 2021 free cash flow was $300 million. We used this strong free cash flow generation to raise our dividend by 10%
and repurchase 4.8 million shares in 2021. Our balance sheet is strong, with a net debt to Adjusted EBITDA (1)(2)
ratio at December 31, 2021 of 1.1 times, an improvement from 1.4 times at December 31, 2020.
(cid:120) Adjusted ROIC at December 31, 2021 was 16.4%, an improvement of 680 basis points from December 31, 2020,
with significant increases in all of our operations, with South America achieving a 20.3% Adjusted ROIC at
December 31, 2021.
(1) See “Description of Specified Financial Measures and Reconciliations” later in this MD&A.
(2) Reported financial measures may be impacted by significant items described on pages 6 and 42 - 45 of this MD&A. Financial measures
that have been adjusted to take into account these items are referred to as “Adjusted measures”. See “Description of Specified Financial
Measures and Reconciliations” later in this MD&A.
2
(cid:3)
Finning International Inc.
2021 Annual Results
Table of Contents
Annual Overview .......................................................................................................................................................... 1
Annual Highlights ......................................................................................................................................................... 2
Strategic Framework .................................................................................................................................................... 4
Impact of COVID-19 .................................................................................................................................................... 5
Adjusted Measures ...................................................................................................................................................... 6
Annual Key Performance Measures ............................................................................................................................ 7
Annual Results ............................................................................................................................................................. 9
Invested Capital ......................................................................................................................................................... 11
Adjusted Return on Invested Capital and Invested Capital Turnover ....................................................................... 12
Annual Results by Reportable Segment.................................................................................................................... 13
Other Developments .................................................................................................................................................. 18
Fourth Quarter Overview ........................................................................................................................................... 19
Fourth Quarter Highlights .......................................................................................................................................... 19
Fourth Quarter Adjusted Measures ........................................................................................................................... 20
Quarterly Key Performance Measures ...................................................................................................................... 21
Fourth Quarter Results ............................................................................................................................................. 23
Market Update and Business Outlook ....................................................................................................................... 27
Liquidity and Capital Resources ................................................................................................................................ 29
Accounting and Estimates ......................................................................................................................................... 32
Risk Factors and Management .................................................................................................................................. 35
Contingencies and Guarantees ................................................................................................................................. 39
Outstanding Share Data ............................................................................................................................................ 39
Controls and Procedures Certification ....................................................................................................................... 40
Description of Specified Financial Measures and Reconciliations ............................................................................ 41
Selected Annual Information ..................................................................................................................................... 50
Selected Quarterly Information .................................................................................................................................. 51
Forward-Looking Information Disclaimer ................................................................................................................... 52
Glossary of Defined Terms ........................................................................................................................................ 54
3
Finning International Inc.
2021 Annual Results
Strategic Framework
Our customer-centric growth strategy is based on three pillars – Develop, Perform, and Innovate – which provide a
strong foundation for our five global strategic priorities:
(cid:120) Customer Centricity – be our customers’ trusted partner by providing consistent and innovative services that
add value to their business;
(cid:120) Lean & Agile Global Finning – maintain relentless focus on productivity, efficiency, and our customers’ total
cost of equipment ownership;
(cid:120) Global Supply Chain – leverage our global supply chain to enhance the omni-channel customer experience
while maximizing working capital efficiencies and generating free cash flow;
(cid:120) Digital Enterprise – advance the use of technology to improve our customers’ experience, enable
data-driven decisions, and reduce cost to serve; and
(cid:120) Growth & Diversification – achieve profitable and capital efficient growth.
Our strategic plan is based on our Purpose, Vision, and Values, which have been articulated with the input of our
employees and comprise our strategic framework:
Simple Execution Plan
At our 2021 Investor Day, we introduced our Simple Execution Plan designed to improve our return on invested
capital performance and ultimately increase our earnings capacity.
(cid:120) First, we are accelerating product support growth. Our strategy is well aligned with Caterpillar in driving
product support growth through strengthening our value proposition to meet the rapidly evolving needs of
our customers. We are leveraging our unified digital platform, CUBIQTM, to help our customers improve their
productivity, costs, safety, and environmental performance.
(cid:120) Second, we are reducing our cost base by becoming more efficient and agile in serving our customers and
driving supply chain improvement across our global organization.
(cid:120) And third, we are reinvesting our free cash flow to compound our earnings. Our strong balance sheet
provides optionality to drive earnings potentially through organic growth, acquisitions, and return of capital to
shareholders.
4
Finning International Inc.
2021 Annual Results
Sustainability
Sustainability is an integral part of our business and is woven through our strategy and operations. We live our
values every day, and they guide our behaviour in every interaction we have. Living our values means that how we
do things is just as important as what we do. We have made significant progress in building a sustainable business
and positioning for growth as the world transitions to cleaner energy sources. Our approach to sustainability is
closely aligned with our purpose and covers the material sustainability topics discussed in our Sustainability Report.
Our Sustainability Report can be found in the sustainability section of our website at www.finning.com.
In 2020, we took decisive measures to protect the interests of all our stakeholders and further strengthen our
financial position as we navigated through the impacts of the COVID-19 pandemic and volatility in commodity prices.
In the second year of the pandemic, we continue to advance our strategic priorities by staying focused on controlling
what we can in a difficult and uncertain environment. We are confident that our resilient business model, strong
execution, financial flexibility, and cost and capital discipline will serve us well as markets recover and position us for
opportunities that lie ahead.
Impact of COVID-19
On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. COVID-19
had an impact on our business beginning in Q1 2020. In 2020, the most significant impacts on our operations from
disruptions related to COVID-19 included delayed equipment deliveries, lower parts sales in the construction sector,
lower rental utilization, reduced productivity at our component repair facilities and lower labour recovery at our
branches due to shift separation and distancing measures, temporary closure of certain facilities in South America,
and additional allowances for doubtful accounts related to an increase in customer credit risk. In response to the
negative economic impact of COVID-19, various government programs were announced to provide financial relief to
affected businesses. The Government of Canada introduced the CEWS program, which subsidized a portion of
employee wages (up to a specified maximum) for Canadian employers whose businesses met eligibility criteria. The
program was intended to help employers rehire previously laid off workers, prevent job losses, and better position
Canadian businesses to resume normal operations. To encourage companies to retain employees, the Government
of the UK introduced the CJRS to pay a portion of salaries for employees (up to a specified maximum) who were
furloughed (on paid leave). We utilized the CEWS program in 2020 and in early 2021. In 2020 we also utilized CJRS
and tax deferral programs that governments in most regions where we operate made available. These government
programs supported us in retaining key technical talent and positioned us well for an economic recovery.
We are monitoring the spread of the Omicron variant in our regions, particularly as it affects the staffing levels of our
and our customers’ operations. We are leveraging the COVID-19 mitigation protocols we developed at the beginning
of the pandemic and expect to successfully manage our day-to-day operations through the Omicron wave.
5
Adjusted Measures
Reported financial measures may be impacted by significant items we do not consider indicative of operational and
financial trends by either nature or amount; these are referred to as “Adjusted measures”. Adjusted measures are
considered non-GAAP financial measures and do not have a standardized meaning under IFRS, and therefore may
not be comparable to similar measures presented by other issuers. For additional information regarding these
financial measures, including definitions and reconciliations from each of these Adjusted measures to their most
directly comparable measure under GAAP, where available, see the heading “Description of Specified Financial
Measures and Reconciliations” on pages 41 - 49 of this MD&A.
Finning International Inc.
2021 Annual Results
2021 significant items:
(cid:120) Finning qualified for and recorded a benefit related to the CEWS program.
(cid:120) Return on our investment in Energyst (described on page 18).
2020 significant items:
(cid:120) Finning qualified for and recorded a benefit related to the CEWS program.
(cid:120) We accelerated existing strategies to further improve employee and facility productivity. As a result, we incurred:
(cid:120) Severance costs related to workforce reductions in all of our operations; and,
(cid:120) Restructuring and impairment losses in our Canadian and South American operations.
The following table shows the magnitude of these significant items and provides reconciliations of the Adjusted
measures to their most directly comparable GAAP financial measures:
For year ended December 31, 2021
($ millions, except for per share amounts)
EBIT and basic EPS
Significant items:
CEWS support
Return on our investment in Energyst
Adjusted EBIT and Adjusted basic EPS
For year ended December 31, 2020
($ millions, except for per share amounts)
EBIT and basic EPS
Significant items:
CEWS support
Severance costs
Facility closure related restructuring costs
and impairment losses
Adjusted EBIT and Adjusted basic EPS
$
EBIT
UK &
Ireland
Other
South
Canada America
$
327 $
209 $
(10)
—
317 $
—
—
209 $
$
53 $
—
—
53 $
EPS
Consol Consol
2.26
552 $
(37) $
—
(5)
(42) $
(10)
(5)
537 $
(0.05)
(0.03)
2.18
EPS
South
Canada America
EBIT
UK &
Ireland
$
288 $
121 $
16 $
(33) $
Other
Consol
Consol
1.43
392 $
(108)
20
—
17
—
4
(7)
1
(115)
42
(0.53)
0.20
5
205 $
4
142 $
—
20 $
—
(39) $
9
328 $
0.04
1.14
6
Annual Key Performance Measures
We utilize the following KPIs to enable consistent measurement of performance across the organization.
For years ended December 31
2021
2020
2019
2018 (1)
2017
(Restated) (1)(2)
Finning International Inc.
2021 Annual Results
ROIC (3)(4) (%)
Consolidated
Canada
South America
UK & Ireland
EBIT (3) ($ millions)
Consolidated
Canada
South America
UK & Ireland
EBIT as a % of net revenue (3)
Consolidated
Canada
South America
UK & Ireland
EBITDA (3) ($ millions)
Consolidated
Canada
South America
UK & Ireland
EBITDA as a % of net revenue (3)
Consolidated
Canada
South America
UK & Ireland
Basic EPS (3)
Invested capital (4) ($ millions)
Consolidated
Canada
South America
UK & Ireland
Invested capital turnover (4) (times)
Consolidated
Canada
South America
UK & Ireland
Inventory ($ millions)
Inventory turns (dealership) (4) (times)
Working capital to net revenue (4)
Free cash flow ($ millions)
16.8%
17.5%
20.3%
14.8%
552
327
209
53
8.2%
9.7%
9.4%
4.7%
871
518
293
94
13.0%
15.3%
13.2%
8.5%
2.26
3,326
1,876
1,026
381
2.04
1.80
2.15
3.11
1,687
3.09
22.9%
300
11.4%
14.6%
11.0%
4.5%
392
288
121
16
6.8%
9.7%
6.3%
1.8%
700
473
204
53
12.1%
16.0%
10.6%
6.0%
1.43
3,067
1,819
931
327
1.68
1.50
1.75
2.49
1,477
2.79
28.3%
870
11.2%
13.7%
9.6%
12.1%
425
296
120
46
5.8%
7.5%
5.4%
4.1%
718
470
201
82
9.9%
12.0%
9.0%
7.2%
1.48
3,591
2,026
1,192
361
1.92
1.81
1.78
2.98
1,990
2.53
27.8%
42
12.8%
16.6%
12.2%
14.2%
423
297
142
51
6.0%
8.1%
6.6%
4.4%
610
393
204
79
8.7%
10.7%
9.4%
6.9%
1.38
3,163
1,675
1,190
336
2.12
2.05
1.86
3.22
2,061
2.68
26.6%
78
13.1%
13.3%
17.8%
12.8%
392
225
184
37
6.3%
7.3%
8.5%
3.6%
576
324
242
63
9.2%
10.6%
11.2%
6.1%
1.28
2,830
1,621
983
250
2.09
1.82
2.09
3.56
1,708
2.82
27.4%
165
(1) Comparative results prior to 2019 have not been restated for our adoption of IFRS 16, Leases effective for the financial year beginning
January 1, 2019.
(2) Comparative results for 2017 have been restated for our adoption of IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial
Instruments effective for the financial year beginning January 1, 2018.
(3) Certain of these reported financial measures have been impacted in some years in this table by significant items management does not
consider indicative of operational and financial trends either by nature or amount. Financial measures that have been adjusted to take into
account these items are referred to as “Adjusted measures” and are summarized on page 8 of this MD&A.
(4) See “Description of Specified Financial Measures and Reconciliations” later in this MD&A.
7
Finning International Inc.
2021 Annual Results
Adjusted KPIs
KPIs may be impacted by significant items described on pages 6 and 42 - 45 of this MD&A. KPIs that have been
adjusted to take these items into account, referred to as Adjusted KPIs, were as follows:
For years ended December 31
2021
2020
2019
2018 (1)
2017
(Restated) (1)(2)
Adjusted ROIC (%)
Consolidated
Canada
South America
UK & Ireland
Adjusted EBIT ($ millions)
Consolidated
Canada
South America
UK & Ireland
Adjusted EBIT as a % of net revenue
Consolidated
Canada
South America
UK & Ireland
Adjusted EBITDA ($ millions)
Consolidated
Canada
South America
UK & Ireland
Adjusted EBITDA as a % of net revenue
Consolidated
Canada
South America
UK & Ireland
Adjusted basic EPS
Net debt to Adjusted EBITDA ratio (times)
16.4%
16.9%
20.3%
14.8%
537
317
209
53
8.0%
9.4%
9.4%
4.7%
856
508
293
94
12.8%
15.1%
13.2%
8.5%
2.18
1.1
9.6%
10.5%
12.9%
5.5%
328
205
142
20
5.7%
7.0%
7.4%
2.2%
636
390
225
57
11.0%
13.2%
11.7%
6.5%
1.14
1.4
12.0%
14.4%
10.5%
12.1%
457
313
131
46
6.3%
8.0%
5.9%
4.1%
750
487
212
82
10.3%
12.4%
9.5%
7.2%
1.65
2.0
13.5%
16.2%
12.2%
14.2%
446
290
142
51
6.4%
7.9%
6.6%
4.4%
633
386
204
79
9.0%
10.5%
9.4%
6.9%
1.65
1.7
13.1%
13.2%
18.1%
12.8%
393
224
186
37
6.3%
7.3%
8.7%
3.6%
577
323
244
63
9.2%
10.5%
11.3%
6.1%
1.33
1.5
(1) Comparative results prior to 2019 have not been restated for our adoption of IFRS 16, Leases effective for the financial year beginning
January 1, 2019.
(2) Comparative results for 2017 have been restated for our adoption of IFRS 15, Revenue from Contracts with Customers and IFRS 9, Financial
Instruments effective for the financial year beginning January 1, 2018.
8
Finning International Inc.
2021 Annual Results
Annual Results
Revenue
Net Revenue by Line of Business and by Operation
For years ended December 31
($ millions)
Net Revenue by Line of Business
2021
2020
8
2
7
3
,
3
7
4
3
,
1
7
6
1
,
9
0
4
8
0
3
5
3
2
6
9
1
5
3
1
0
2
1
3,800
1,900
9
8
1
2
,
0
3,500
1,750
0
Net Revenue by Operation
2021
2020
1
7
3
3
,
9
5
9
2
,
4
1
2
2
,
2
2
9
1
,
1
1
1
1
,
7
8
8
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
Canada
South America
UK & Ireland
Revenue was $7.3 billion in 2021 compared to $6.2 billion during 2020. Net revenue of $6.7 billion increased 16%
from the prior year, largely driven by strong market activity in the construction sector particularly in new equipment
sales and product support revenue. 2020 was impacted by lower customer demand as a result of volatility in
commodity prices and weaker market conditions globally due to COVID-19.
New equipment revenue in 2021 was 31% higher than the prior year, mainly driven by the construction sector in all
operations and the mining sector in South America. 2020 volumes were negatively affected by lower capital
spending by our customers. Equipment backlog (1) of $1.9 billion at December 31, 2021 was up over 140% from
December 31, 2020 due to extremely strong order intake in 2021 that outpaced equipment deliveries in all of our
operations.
Product support revenue in 2021 was 7% higher than 2020, up in all operations with higher demand in all market
sectors, primarily in the construction and mining sectors in our Canadian operations.
Used equipment revenue was up 33% and rental revenue was up 20% in 2021 compared to 2020, fulfilling customer
equipment needs in a tight supply environment.
EBIT and EBITDA
Gross profit in 2021 of $1.8 billion was 15% higher than the comparative prior year, in line with net revenue growth.
Overall gross profit as a percentage of net revenue of 26.9% was comparable to 2020 due to a higher proportion of
equipment revenue in all of our operations which typically generates lower gross margins, partially offset by an
improvement in gross margins in most lines of business.
SG&A in 2021 of $1.3 billion was 2% higher than the prior year primarily due to higher people-related costs,
including LTIP expense, and variable costs to support volumes. This increase was partially offset by cost savings
related to productivity improvements as well as a favourable foreign currency translation impact on SG&A related to
our South American operations, due to the stronger CAD relative to the USD on average in 2021 compared to 2020.
In addition, 2020 included higher provisions to reflect the increased collection risk related to customer trade
receivables due to market conditions at that time. Although SG&A costs were higher in the current year, SG&A as a
percentage of net revenue improved 270 basis points as all of our operations benefited from productivity
improvements.
(1) See “Description of Specified Financial Measures and Reconciliations” later in this MD&A.
9
(cid:3)
Finning International Inc.
2021 Annual Results
Adjusted EBIT and Adjusted EBITDA by Operation (1)
For years ended December 31
($ millions)
Adjusted EBIT
2020
2021
7
1
3
5
0
2
9
0
2
2
4
1
3
5
0
2
330
165
0
8
0
5
0
9
3
520
260
0
Adjusted EBITDA
2021
2020
3
9
2
5
2
2
4
9
7
5
Canada
(1) Excluding Other operations
South America
UK & Ireland
Canada
South America
UK & Ireland
EBIT was $552 million and EBIT as a percentage of net revenue was 8.2% in 2021, compared to $392 million and
6.8%, respectively, in 2020. Excluding significant items not indicative of financial and operational trends described
on page 6, Adjusted EBIT in 2021 was $537 million and Adjusted EBIT as a percentage of net revenue was 8.0%,
higher than $328 million and 5.7%, respectively, in 2020. All of our operations contributed significantly higher
earnings and Adjusted EBIT as a percentage of net revenue.
2021 Adjusted EBITDA was $856 million,
a significant increase from $636 million in
2020. This 34% increase was primarily
due to a 16% increase in net revenue
combined with productivity improvements
that resulted in SG&A being only slightly
higher year over year. Adjusted EBITDA
as a percentage of net revenue of 12.8%
improved 180 basis points from the prior
year. This was driven primarily from an
improvement in SG&A relative to net
revenue.
The net debt to Adjusted EBITDA ratio at December 31, 2021 was 1.1 times, an improvement from 1.4 times at
December 31, 2020, primarily due to an increase in Adjusted EBITDA in 2021 compared with 2020. This ratio
remains below our long-term target of less than three.
Finance Costs
Finance costs for 2021 of $75 million were lower than $85 million in 2020 due to lower average debt levels.
Provision for Income Taxes
The effective income tax rate for 2021 of 23.9% was comparable to 24.4% for 2020.
We expect our effective tax rate generally to be within the 25-30% range on an annual basis. The rate may fluctuate
from period to period as a result of changes in the relative income from the various jurisdictions in which we carry on
business, sources of income, changes in the estimation of tax reserves, outcomes of any tax audits, or tax rates and
tax legislation.
Net Income Attributable to Shareholders of Finning and Basic EPS
Net income attributable to shareholders of Finning was $364 million and basic EPS was $2.26 per share in 2021,
compared to $232 million and $1.43 per share, respectively, in 2020. Excluding the significant items not indicative of
financial and operational trends described on page 6, Adjusted basic EPS of $2.18 per share was 90% higher than
2020 with strong earnings reported in all of our operations in 2021.
10
Invested Capital
($ millions,
unless otherwise stated)
Consolidated
Canada
South America
UK & Ireland
South America (USD)
UK & Ireland (GBP)
Finning International Inc.
2021 Annual Results
Increase from
December 31, December 31, December 31,
2020
$ 3,067
$ 1,819
931
$
327
$
2021
$ 3,326
$ 1,876
$ 1,026
381
$
2020
$
$
$
$
259
57
95
54
$
£
809
222
$
£
731
188
$
£
78
34
Compared to December 31, 2020:
The $259 million increase in consolidated invested capital from December 31, 2020 to December 31, 2021 includes
a foreign exchange impact of $10 million in translating the invested capital balances of our South American and UK
& Ireland operations. The foreign exchange impact was the result of the 1% stronger CAD relative to the GBP and
0.4% stronger CAD relative to the USD at December 31, 2021 compared to December 31, 2020.
Excluding the impact of foreign exchange, consolidated invested capital increased by $269 million from December
31, 2020 to December 31, 2021 reflecting:
(cid:120) higher inventory in all operations,
mainly in Canada and South America,
and equipment deposits paid to
suppliers by our South American
operations (included in other assets),
proactively ordered and sourced to
meet growing customer demand;
(cid:120) an increase in accounts receivables
due to an increase in sales activity in
all operations, primarily in Canada;
(cid:120) partially offset by higher accounts
payable, mainly in Canada and South
America related to higher inventory
purchases.
11
Adjusted ROIC and Invested Capital Turnover
Adjusted ROIC
Consolidated
Canada
South America
UK & Ireland
Invested Capital Turnover (times)
Consolidated
Canada
South America
UK & Ireland
Adjusted ROIC
Finning International Inc.
2021 Annual Results
December 31, December 31,
2021
2020
16.4%
16.9%
20.3%
14.8%
2.04
1.80
2.15
3.11
9.6%
10.5%
12.9%
5.5%
1.68
1.50
1.75
2.49
On a consolidated basis, Adjusted ROIC at December 31, 2021 improved 680 basis points from December 31, 2020
driven by strong Adjusted EBIT for the last twelve-month period combined with a reduction in average invested
capital levels. There was a significant increase in Adjusted ROIC in all of our operations reflecting improved
profitability in a recovering market combined with a strong focus to reduce invested capital levels and improve
invested capital turnover.
Invested Capital Turnover
Consolidated invested capital turnover at December 31, 2021 of 2.04 improved from December 31, 2020. All regions
reported higher net revenue over the last twelve-month period and lower or comparable average invested capital
levels. Higher invested capital turnover in all of our operations at December 31, 2021 reflects our focus on reducing
invested capital levels and improving efficiencies and productivity which is evident in our improving metrics as
markets recover.
12
Annual Results by Reportable Segment
We operate primarily in one principal business: the sale, service, and rental of heavy equipment, engines, and
related products in various markets on three continents as described on pages 14 - 18. Our reportable segments are
Canada, South America, UK & Ireland, and Other.
The table below provides details of net revenue by lines of business for our Canadian, South American, and UK &
Ireland operations.
Finning International Inc.
2021 Annual Results
South
America
$
UK
& Ireland
$
Consol
Net Revenue
%
For year ended December 31, 2021
($ millions)
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Net revenue
Net revenue % by operation
For year ended December 31, 2020
($ millions)
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Net revenue
Net revenue % by operation
Canada
$
774
310
153
1,999
135
3,371
Canada
$
725
169
133
1,812
120
2,959
$
$
$
50%
33%
17%
South
America
$
UK
& Ireland
$
711
48
40
1,415
—
2,214
426
73
37
1,386
—
1,922
704
51
42
314
—
1,111
520
66
26
275
—
887
16%
$
$
$
51%
33%
$
$
2,189
409
235
3,728
135
6,696
100%
33%
6%
3%
56%
2%
100%
Consol
Net Revenue
%
$
$
1,671
308
196
3,473
120
5,768
100%
29%
5%
4%
60%
2%
100%
13
Finning International Inc.
2021 Annual Results
Canada Operations
Our Canadian reporting segment includes Finning (Canada), OEM, 4Refuel, and a 25% interest in PLM. Our
Canadian operations sell, service, and rent mainly Caterpillar equipment and engines in British Columbia, Alberta,
Saskatchewan, the Yukon Territory, the Northwest Territories, and a portion of Nunavut, and also provide mobile on-
site refuelling services in most of the provinces of Canada, as well as in Texas, US. Our Canadian operations’
markets include mining (including the oil sands), construction, conventional oil and gas, forestry, and power
systems.
The table below provides details of the results from our Canadian operations:
For years ended December 31
($ millions)
Net revenue
Operating costs
Equity earnings of joint ventures
Other income
Other expenses
EBITDA
Depreciation and amortization
EBIT
Adjusted EBITDA
Adjusted EBIT
EBITDA as a % of net revenue
EBIT as a % of net revenue
Adjusted EBITDA as a % of net revenue
Adjusted EBIT as a % of net revenue
2021 Annual Overview
2021 net revenue of $3.4 billion was 14% higher than 2020,
up in all lines of business, primarily driven by an increase in
product support and strong used equipment sales. 2020 was
impacted by COVID-19 and low oil prices, which resulted in
customers’ reduced activity, restricted capital spending, and
implementation of cost containment measures.
Product support revenue in 2021 was up 10% from 2020
driven by a market recovery in all sectors, led by growth in
the construction sector with a significant increase in
construction rebuilds and customer value agreements.
2021 used equipment revenue of $310 million increased
84% from 2020 driven by higher demand by customers in
the mining and construction sectors, supported by
favourable construction conditions. We are proactively
sourcing used equipment to meet customer needs in a
constrained supply environment.
2021
2020
$
$
$
$
3,371
(2,865)
2
10
—
518
(191)
327
508
317
15.3%
9.7%
15.1%
9.4%
$
$
$
$
2,959
(2,572)
3
108
(25)
473
(185)
288
390
205
16.0%
9.7%
13.2%
7.0%
Net Revenue by Line of Business
Canadian Operations
For years ended December 31
($ millions)
2021
2020
2,100
1,050
0
9
9
9
,
1
2
1
8
,
1
4
7
7
5
2
7
0
1
3
9
6
1
3
5
1
3
3
1
5
3
1
0
2
1
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
2021 new equipment revenue was 7% higher than 2020 primarily due to a market recovery in the construction
sector partially offset by lower deliveries in the mining and power systems sectors. Equipment backlog at December
31, 2021 was significantly higher than December 31, 2020 as very strong order intake outpaced deliveries, primarily
in the mining and construction sectors.
Overall gross profit as a percentage of net revenue in 2021 was slightly up from 2020, with improved gross margins
in most lines of business, partially offset by the impact of a higher proportion of equipment revenue in the revenue
mix.
14
Finning International Inc.
2021 Annual Results
2021 SG&A was up 3% compared to the prior year, on 14% net revenue growth. 2021 SG&A increased mainly due
to higher costs to support volumes. This was partially offset by higher provisions in 2020 to reflect the increased
collection risk related to customer trade receivables. SG&A as a percentage of net revenue improved over the prior
year, benefiting from an improvement in labour and facility productivity.
Excluding significant items not indicative of financial and operational trends described on page 6, our Canadian
operations contributed Adjusted EBITDA of $508 million in 2021, up 30% from the same period in the prior year on
14% higher net revenues. Adjusted EBITDA as a percentage of net revenue in 2021 was 15.1%, an improvement of
190 basis points from 2020. This increase was driven by an improvement in SG&A as a percentage of net revenue
and higher gross profit as a percentage of net revenue.
South America Operations
Our South American operations sell, service, and rent mainly Caterpillar equipment and engines in Chile, Argentina,
and Bolivia. Our South American operations’ markets include mining, construction, forestry, and power systems.
The table below provides details of the results from our South American operations:
For years ended December 31
($ millions)
Net revenue
Operating costs
Other expenses
EBITDA
Depreciation and amortization
EBIT
Adjusted EBITDA
Adjusted EBIT
EBITDA as a % of net revenue
EBIT as a % of net revenue
Adjusted EBITDA as a % of net revenue
Adjusted EBIT as a % of net revenue
2021
2020
$
$
$
$
$
2,214
(1,921)
—
293
(84)
209
293
209
13.2%
9.4%
13.2%
9.4%
$
$
$
$
$
1,922
(1,697)
(21)
204
(83)
121
225
142
10.6%
6.3%
11.7%
7.4%
15
The stronger CAD relative to the USD on average in 2021 compared to 2020 had an unfavourable foreign currency
translation impact on 2021 net revenue of approximately $150 million and approximately $20 million at the EBITDA
level.
All $ figures in this section are in CAD as this is our reporting currency. All variances and ratios in this section are
based on the functional currency of our South American operations, which is the USD. These variances and ratios
exclude the foreign currency translation impact from the CAD relative to the USD and are therefore, considered to
be specified financial measures. We believe the variances and ratios in functional currency provide meaningful
information about operational performance of the reporting segment.
Finning International Inc.
2021 Annual Results
2021 Annual Overview
2021 net revenue was 23% higher than 2020, largely
driven by stronger market activity in the construction and
mining sectors.
New equipment revenue in 2021 was 78% higher than
the same prior year period, driven by market recovery in
2021 with stronger deliveries to customers in the mining
and construction sectors. Equipment backlog at
December 31, 2021 was up from December 31, 2020,
primarily due to demand in the construction and mining
sectors, as order intake outpaced deliveries.
Product support revenue in 2021 increased 9% from
2020, primarily in Chile as mining customers resumed
major maintenance work and construction markets
recovered.
Net Revenue by Line of Business
South America Operations
For years ended December 31
($ millions)
2021
2020
1,500
750
0
5
1
4
,
1
6
8
3
,
1
1
1
7
6
2
4
8
4
3
7
0
4
7
3
New
equipment
Used
equipment
Equipment
rental
Product
support
Gross profit in 2021 increased from 2020 mainly due to
increased volumes. Gross profit as a percentage of net
revenue in 2021 was lower compared to 2020 mainly due to the significant shift to higher new equipment sales in
the revenue mix (2021: 32% compared with 2020: 22%), which typically generates lower margins.
2021 SG&A costs were comparable to 2020 on 23% higher net revenue. 2021 SG&A increased mainly due to higher
costs to support volumes as well as inflationary increases in Chile. This was offset by higher provisions in 2020
reflecting increased collection risk related to customer trade receivables. 2021 SG&A as a percentage of net
revenue decreased 370 basis points from 2020 driven by the leverage of fixed costs on higher revenues and
productivity improvements.
2021 EBITDA of $293 million was higher than 2020 Adjusted EBITDA of $225 million. 2021 EBITDA as a
percentage of net revenue of 13.2% improved by 150 basis points from 2020 Adjusted EBITDA due to the
improvement in SG&A relative to net revenue more than offsetting the impact of a higher proportion of new
equipment revenue in the revenue mix.
16
UK & Ireland Operations
Our UK & Ireland operations sell, service, and rent mainly Caterpillar equipment and engines in England, Scotland,
Wales, Northern Ireland, and the Republic of Ireland. Our UK & Ireland operations’ markets include construction,
power systems, and quarrying.
The table below provides details of the results from our UK & Ireland operations:
Finning International Inc.
2021 Annual Results
For years ended December 31
($ millions)
Net revenue
Operating costs
Other expenses
EBITDA
Depreciation and amortization
EBIT
Adjusted EBITDA
Adjusted EBIT
EBITDA as a % of net revenue
EBIT as a % of net revenue
Adjusted EBITDA as a % of net revenue
Adjusted EBIT as a % of net revenue
2021
2020
$
$
$
$
$
$
$
$
$
$
1,111
(1,017)
—
94
(41)
53
94
53
8.5%
4.7%
8.5%
4.7%
887
(830)
(4)
53
(37)
16
57
20
6.0%
1.8%
6.5%
2.2%
The CAD relative to the GBP on average in 2021 compared to 2020 did not have a significant impact on 2021 net
revenue or EBITDA.
All $ figures in this section are in CAD as this is our reporting currency. All variances and ratios in this section are
based on the functional currency of our UK & Ireland operations, which is the GBP. These variances and ratios
exclude the foreign currency translation impact from the CAD relative to the GBP and are therefore, considered to
be specified financial measures. We believe the variances and ratios in functional currency provide meaningful
information about operational performance of the reporting segment.
2021 Annual Overview
2021 net revenue was up 25% from 2020, mainly due to
higher new equipment revenue. 2020 was impacted by
COVID-19 restrictions and uncertainty impacting customer
buying behaviours.
New equipment revenue was 35% higher than 2020,
primarily in the construction sector which included
deliveries to the HS2 project. Revenue in the power
systems sector was down slightly from the prior year due
to the timing of project deliveries. Equipment backlog at
December 31, 2021 was significantly higher than
December 31, 2020 as very strong order intake outpaced
deliveries. Order intake reflects the increased equipment
demand for the HS2 project.
2021 product support revenue increased 14% from the
same prior year period, mainly in the construction sector.
Net Revenue by Line of Business
UK & Ireland Operations
For years ended December 31
($ millions)
2021
2020
4
0
7
0
2
5
750
375
0
1
5
6
6
2
4
6
2
4
1
3
5
7
2
New
equipment
Used
equipment
Equipment
rental
Product
support
Gross profit in 2021 was up from the prior year, largely driven by revenue growth. Overall gross profit as a
percentage of net revenue increased from the prior year, largely due to improved gross margins across all lines of
business partially offset by the impact of a higher proportion of new equipment sales in the revenue mix (2021: 63%
compared with 2020: 59%).
17
Finning International Inc.
2021 Annual Results
SG&A was up 14% in 2021 compared to 2020 on 25% net revenue growth. The increase in SG&A reflected higher
costs to support volumes including higher people-related costs from additional headcount, while 2020 included
government support for furloughed employees. SG&A as a percentage of net revenue was lower in 2021 compared
to 2020 primarily due to the leverage of fixed costs on significant revenue growth.
2021 EBITDA of $94 million was higher than 2020 Adjusted EBITDA of $57 million. EBITDA as a percentage of net
revenue of 8.5% in 2021 was 200 basis points higher than Adjusted EBITDA as a percentage of net revenue in the
prior year period primarily due to the improvement in SG&A as a percentage of net revenue combined with the
improvement in gross margins.
Other Operations
Our Other operations includes corporate operating costs.
Excluding significant items not considered by management to be indicative of operational and financial trends as
described on page 6, 2021 Adjusted EBITDA was a loss of $39 million compared to a loss of $36 million in the prior
year. 2021 Adjusted EBITDA included higher LTIP expense partially offset by lower operating costs compared to the
prior year.
Other Developments
ComTech
On September 3, 2021, our Canadian operations acquired a 54.5% controlling ownership interest in ComTech
through our subsidiary, 4Refuel. ComTech is an early-stage developer of alternative energy infrastructure and
provider of proprietary mobile fuelling solutions for low-carbon fuels in North America, including CNG, RNG, and
hydrogen. ComTech provides 4Refuel with the capability to be a leading provider of turn-key, low-carbon energy
solutions. This acquisition expands our fuelling capabilities beyond diesel and allows us to support customers’
energy transition journey, starting with solutions for CNG and RNG. Our investment in ComTech leverages
4Refuel’s leading mobile on-site refuelling platform to enable customers to reduce their emissions and improve
productivity. Cash consideration for this acquisition was $25 million, of which $20 million is to support future growth.
The acquisition was funded with cash on hand. Net assets acquired consist primarily of cash, property, plant, and
equipment, intangible assets, goodwill, and debt. As part of this acquisition, we also recorded a non-controlling
interest in ComTech (45.5% ownership interest) of $21 million. We expect to finalize the purchase price allocation no
later than June 30, 2022.
Enerygst
Energyst was the Caterpillar dealer in Europe for rental power and temperature control solutions. In December
2020, the shareholders of Energyst, which included Finning, decided to restructure the company and convert its
rental activities into four separate regional organizations which were sold in January 2021. A plan is in place to sell
any remaining assets and wind-up Energyst, with the net proceeds from the sale to be distributed to Energyst’s
shareholders. During the year ended December 31, 2021, we received a return on our investment in Energyst.
On January 7, 2021, our UK & Ireland operations acquired the Energyst rental business operations in the UK and
Ireland, one of the four regional organizations, and is now the authorized supplier of rental services for Caterpillar
power generation in these territories. Other Caterpillar dealers acquired the other three regional organizations. We
paid cash consideration of $14 million (€9 million) at the date of acquisition, funded with cash on hand. Net assets
acquired consist of $3 million of net working capital (1), $9 million of rental equipment, $1 million of property, plant,
and equipment, and $1 million of deferred tax assets.
(1) Net working capital comprises cash and cash equivalents, accounts receivable, inventory, other assets, accounts payable and accruals, and
provisions.
18
Fourth Quarter Overview
($ millions, except for per share amounts)
Revenue
Net revenue
Gross profit
SG&A
Equity earnings of joint ventures
Other income
EBIT
Net income attributable to shareholders of Finning
Basic EPS
EBITDA
Free cash flow
Adjusted EBIT
Adjusted basic EPS
Adjusted EBITDA
Gross profit as a % of net revenue
SG&A as a % of net revenue
EBIT as a % of net revenue
EBITDA as a % of net revenue
Adjusted EBIT as a % of net revenue
Adjusted EBITDA as a % of net revenue
Adjusted ROIC
Fourth Quarter Highlights
Finning International Inc.
2021 Annual Results
Q4 2021
Q4 2020
% change
fav (unfav)
17%
14%
16%
(1)%
n/m
n/m
46%
44%
47%
31%
(50)%
67%
71%
41%
$
$
$
$
$
$
$
$
$
$
$
1,949 $
1,774 $
484 $
(328)
1
—
157 $
104 $
0.66 $
241 $
148 $
157 $
0.66 $
241 $
27.3%
18.5%
8.9%
13.6%
8.9%
13.6%
16.4%
1,666
1,551
418
(324)
—
14
108
72
0.45
185
292
94
0.38
171
26.9%
20.9%
6.9%
11.9%
6.1%
11.0%
9.6%
(cid:120) Q4 2021 revenue was $1.9 billion. Q4 2021 net revenue of $1.8 billion was 14% higher than Q4 2020 with higher
revenue in all lines of business driven by strong market activity and solid execution, particularly product support
and used equipment sales in Canada and new equipment volumes in South America.
(cid:120) Q4 2021 EBIT was $157 million and EBIT as a percentage of net revenue was 8.9%. Excluding significant items
not considered indicative of operational and financial trends, Q4 2020 Adjusted EBIT and Adjusted EBIT as a
percentage of net revenue was $94 million and 6.1%, respectively. All regions delivered strong operating
leverage with EBIT as a percentage of net revenue of 10.1% in both Canada and South America.
(cid:120) EBITDA was $241 million and EBITDA as a percentage of net revenue was 13.6% in Q4 2021, compared to
Adjusted EBITDA of $171 million and Adjusted EBITDA as a percentage of net revenue of 11.0% in Q4 2020. Q4
2021 EBITDA as a percentage of net revenue improved 260 basis points from Q4 2020 demonstrating progress
and benefits from our productivity improvements and fixed cost reduction initiatives globally.
(cid:120) Q4 2021 basic EPS was $0.66 per share. Q4 2020 Adjusted basic EPS of $0.38 per share excluded significant
items not considered indicative of operational and financial trends. This 71% increase reflects the successful
execution by each of our operations to deliver on our strategic plan and improve our earnings capacity.
19
Finning International Inc.
2021 Annual Results
Fourth Quarter Adjusted Measures
There were no significant items identified by management that affected our results for the three months ended
December 31, 2021. One significant item that affected our reported results for the three months ended December
31, 2020 which we do not consider to be indicative of operational and financial trends, either by nature or amount, is
detailed below.
Q4 2020 significant item:
(cid:120) CEWS from the Canadian government for eligible entities
3 months ended December 31, 2020
($ millions, except per share amounts)
EBIT and basic EPS
Significant item:
CEWS support
Adjusted EBIT and Adjusted basic EPS
EBIT
UK &
Ireland
Other
South
Canada America
72 $
$
41 $
(13)
59 $
—
41 $
$
11 $
—
11 $
Basic
EPS
Consol Consol
0.45
108 $
(16) $
(1)
(17) $
(14)
94 $
(0.07)
0.38
20
(cid:3)
Quarterly Key Performance Measures
We utilize the following KPIs to enable consistent measurement of performance across the organization.
2021
2020
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2019
Q4
Finning International Inc.
2021 Annual Results
97
72
31
5
5.5%
7.4%
6.0%
1.9%
11.2%
13.7%
9.6%
12.1%
8.9%
9.5%
2.9%
94
60
38
1
52
63
2
(5)
150
84
58
17
137
82
51
17
157
92
59
12
241
142
81
23
108
72
41
11
108
69
41
7
138
93
40
9
7.4%
8.9%
8.6%
3.2%
8.0%
9.3%
9.8%
5.3%
6.6%
7.9%
7.8%
0.5%
8.6%
10.1% 10.4%
9.2%
10.1%
5.6%
4.3%
3.9%
6.9%
9.6%
8.9%
9.3% 12.8%
8.2%
8.3%
0.5%
4.1% (3.2)%
3.7%
11.4% 10.7% 10.0% 11.9%
14.6% 14.3% 13.3% 14.2%
9.3% 11.9%
11.0%
8.4%
3.7%
4.5%
16.8% 15.6% 15.3% 12.5%
17.5% 16.5% 17.0% 15.6%
20.3% 19.0% 17.2% 12.3%
6.5%
14.8% 14.9% 12.9%
ROIC (1) (%)
Consolidated
Canada
South America
UK & Ireland
EBIT (1) ($ millions)
Consolidated
Canada
South America
UK & Ireland
EBIT as a % of net revenue (1)
Consolidated
Canada
South America
UK & Ireland
EBITDA (1) ($ millions)
Consolidated
Canada
South America
UK & Ireland
EBITDA as a % of net revenue (1)
Consolidated
Canada
South America
UK & Ireland
Basic EPS (1)
Invested capital ($ millions)
Consolidated
Canada
South America
UK & Ireland
Invested capital turnover (times)
Consolidated
Canada
South America
UK & Ireland
Inventory ($ millions)
Inventory turns (dealership) (times)
Working capital to net revenue
176
Free cash flow ($ millions)
(1) Certain of these reported financial measures have been impacted in some quarters in this table by significant items management does not
consider indicative of operational and financial trends either by nature or amount. Financial measures that have been adjusted to take into
account these items are referred to as “Adjusted measures” and are summarized on page 22 of this MD&A.
1.78
1.56
1.90
2.66
1,593
2.83
22.9% 23.0% 24.0% 25.9%
(20)
1.83
1.75
1.73
2.60
1,477 1,626 1,893 2,152
2.25
28.3% 29.2% 29.9% 28.9%
(50)
13.6% 13.2% 12.6% 12.6%
15.5% 16.5% 14.7% 14.9%
14.0% 12.5% 13.7% 12.8%
7.9%
0.43
11.9% 14.9%
9.7% 11.8%
15.4% 19.3% 15.6% 13.7%
5.2% 12.4%
12.2% 12.2%
5.2%
2.7%
7.9%
0.33
0.12
0.54
3,067 3,284 3,495 3,883
1,819 1,921 2,037 2,093
931 1,035 1,106 1,330
428
327
2.01
1.74
2.11
3.25
1,627
3.09
2.04
1.80
2.15
3.11
1,687
3.09
1.93
1.70
1.97
3.09
1,643
2.84
3,277
1,861
1,058
358
3,177
1,832
982
350
3,335
1,922
1,057
339
3,326
1,876
1,026
381
1.71
1.63
1.67
2.32
1.68
1.50
1.75
2.49
1.68
1.56
1.67
2.39
170
103
60
11
130
110
24
4
215
141
59
18
185
119
61
20
185
115
61
17
215
129
71
27
230
132
80
27
9.0%
0.61
8.5%
0.56
7.0%
0.45
8.3%
0.66
1.97
2.79
2.30
316
312
292
349
148
323
(4)
3,591
2,026
1,192
361
1.92
1.81
1.78
2.98
1,990
2.53
27.8%
386
9.7%
11.8%
10.0%
5.4%
0.31
170
114
51
15
21
Adjusted KPIs
KPIs may be impacted by significant items described on pages 6, 20, and 42 - 45 of this MD&A. KPIs that have
been adjusted to take these items into account, referred to as Adjusted KPIs, were as follows:
Finning International Inc.
2021 Annual Results
Adjusted ROIC
Consolidated
Canada
South America
UK & Ireland
Adjusted EBIT ($ millions)
Consolidated
Canada
South America
UK & Ireland
Adjusted EBIT as a % of net revenue
Consolidated
Canada
South America
UK & Ireland
Adjusted EBITDA ($ millions)
Consolidated
Canada
South America
UK & Ireland
Adjusted EBITDA as a % of net revenue
Consolidated
Canada
South America
UK & Ireland
Adjusted basic EPS
Net debt to Adjusted EBITDA ratio (times)
2021
2020
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
16.4% 14.7% 13.3% 10.0%
16.9% 15.3% 14.0% 10.8%
20.3% 19.0% 17.2% 14.4%
7.6%
14.8% 14.9% 12.9%
9.3%
9.6%
9.7% 12.0%
10.5% 10.8% 11.6% 14.2%
12.9% 11.3% 11.2% 12.2%
8.4%
3.9%
4.6%
5.5%
2019
Q4
12.0%
14.4%
10.5%
12.1%
157
92
59
12
150
84
58
17
137
82
51
17
93
59
41
7
94
59
41
11
101
58
40
9
39
28
23
(1)
94
60
38
1
8.9%
8.6%
10.1% 10.4%
9.2%
10.1%
5.6%
4.3%
8.0%
9.3%
9.8%
5.3%
6.3%
7.7%
8.6%
3.2%
6.1%
7.7%
8.3%
3.7%
2.9%
7.0%
4.0%
8.1%
8.2%
5.1%
4.1% (1.0)%
6.6%
7.9%
7.8%
0.5%
241
142
81
23
230
132
80
27
215
129
71
27
170
105
61
17
171
106
61
20
178
106
59
18
117
75
45
8
170
103
60
11
13.6% 13.2% 12.6% 11.6%
15.5% 16.5% 14.7% 13.6%
14.0% 12.5% 13.7% 12.8%
7.9%
0.35
9.0%
0.61
1.3
8.5%
0.56
1.4
8.3%
0.66
1.1
1.5
11.0% 12.3%
8.8% 11.8%
13.7% 14.6% 10.6% 13.7%
9.8% 12.4%
12.2% 12.2%
5.2%
4.9%
7.9%
0.06
0.37
0.33
2.1
1.7
7.0%
0.38
1.4
2.2
97
72
31
5
5.5%
7.4%
6.0%
1.9%
170
114
51
15
9.7%
11.8%
10.0%
5.4%
0.31
2.0
22
Finning International Inc.
2021 Annual Results
Fourth Quarter Results
Revenue
Net Revenue by Line of Business and by Operation
3 months ended December 31
($ millions)
Net Revenue by Line of Business
2021 2020
2
8
9
7
7
8
2
6
5
0
0
5
4
2
1
3
9
8
6
9
4
8
3
2
3
1,000
500
0
Net Revenue by Operation
2021
2020
4
1
9
1
7
7
2
8
5
6
9
4
8
7
2
4
8
2
1,000
500
0
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
Canada
South America
UK & Ireland
Q4 2021 revenue was $1.9 billion. Net revenue of $1.8 billion in the fourth quarter of 2021 was up 14% from Q4
2020, with higher revenues in all lines of business driven by strong market activity and solid execution.
Product support revenue was up 12% in Q4 2021 from the same prior year period, up in all market sectors and also
up in all our operations, particularly in Canada. Product support revenue in the construction sector in Q4 2021
increased 31% over the comparable period in the prior year as a result of our strategic focus to capture market
share in this sector.
Q4 2021 new equipment revenue was 13% higher than the same prior year period mainly due to increased volumes
in all market sectors in South America. Equipment backlog of approximately $1.9 billion at December 31, 2021 was
up 17% from September 30, 2021, higher in all regions, particularly in Canada, which included a significant order
from an oil sands operator in Q4 2021.
Q4 2021 used equipment revenue was up 33% from Q4 2020, primarily in the mining sector in Canada. Rental
revenue was up 39% in Q4 2021 compared to Q4 2020, an increase in all regions.
EBIT and EBITDA
Q4 2021 gross profit of $484 million was 16% higher than the same period in the prior year. Overall gross profit as a
percentage of net revenue was 27.3% in Q4 2021, up from 26.9% in Q4 2020, largely due to higher rental utilization
partially offset by the impact of a lower proportion of product support in the revenue mix.
SG&A in Q4 2021 of $328 million was 1% higher than Q4 2020 on 14% net revenue growth. The increase in SG&A
was driven primarily by higher people-related costs and variable costs to support revenue growth. This was partially
offset by lower LTIP expense and the favourable foreign currency translation impact on SG&A from the devaluation
of the CLP relative to the USD in Q4 2021 compared to the prior year period. In addition, Q4 2020 SG&A included
higher provisions reflecting increased collection risk related to customer trade receivables. SG&A as a percentage of
net revenue was 18.5%, a 240 basis point improvement over the same prior year period, demonstrating improved
execution to capture growth opportunities and continued productivity improvements.
23
Finning International Inc.
2021 Annual Results
Adjusted EBIT and Adjusted EBITDA by Operation (1)
3 months ended December 31
($ millions)
Adjusted EBIT
2020
2021
2
9
9
5
9
5
1
4
2
1
1
1
100
50
0
Adjusted EBITDA
2021
2020
1
8
1
6
3
2
0
2
2
4
1
6
0
1
150
75
0
Canada
South America
UK & Ireland
Canada
South America
UK & Ireland
(1) Excluding Other operations
EBIT and EBIT as a percentage of net revenue in Q4 2021 were $157 million and 8.9%, respectively. Excluding the
significant items not indicative of operational and financial trends described on page 20, Q4 2020 Adjusted EBIT
was $94 million and Adjusted EBIT as a percentage of net revenue was 6.1%.
EBITDA in Q4 2021 was $241 million, up
41% from Adjusted EBITDA of $171 million
in Q4 2020. EBITDA was up in all our
operations compared to Adjusted EBITDA in
Q4 2020, primarily from increased gross
profit from a strong market recovery as well
as productivity improvements that
maintained SG&A levels. EBITDA as a
percentage of net revenue of 13.6% in Q4
2021 was 260 basis points higher than
Adjusted EBITDA as a percentage of net
revenue in the same prior year period,
largely driven by the improvement in SG&A as a percentage of net revenue.
Finance Costs
Finance costs in Q4 2021 were $19 million, slightly up from $18 million in Q4 2020.
Provision for Income Taxes
The effective income tax rate in Q4 2021 was 25.0%, higher than 19.8% in Q4 2020. The lower effective income tax
rate in Q4 2020 was due to a lower proportion of earnings from higher tax jurisdictions and a positive revaluation of
current and deferred tax balances resulting from the acceleration of a tax rate reduction in Alberta, which was
substantively enacted in Q4 2020.
Net Income Attributable to Shareholders of Finning and Basic EPS
Q4 2021 net income attributable to shareholders of Finning was $104 million. Q4 2021 basic EPS was $0.66 per
share, a significant increase from Adjusted basic EPS of $0.38 per share in Q4 2020, driven by successful execution
to deliver on our strategic plan and improve our earnings capacity.
24
The table below provides details of net revenue by operation and lines of business and results by operations.
Finning International Inc.
2021 Annual Results
For 3 months ended December 31, 2021
($ millions)
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Net revenue
Operating costs
Equity earnings
EBITDA
Depreciation and amortization
EBIT
Net revenue percentage by operation
$
$
$
South
UK
Canada America
$
197 $
98
45
536
38
914 $
(773)
1
142 $
(50)
92 $
& Ireland Other
177 $
15
11
75
—
278 $
(255)
—
23 $
(11)
12 $
188 $
11
12
371
—
582 $
(501)
—
81 $
(22)
59 $
Consol
562
— $
124
—
68
—
982
—
—
38
— $ 1,774
(1,534)
(5)
1
—
241
(5) $
(84)
(1)
157
(6) $
100%
—
EBITDA as a % of net revenue
EBIT as a % of net revenue
For 3 months ended December 31, 2020
($ millions)
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Net revenue
Operating costs
Other income
EBITDA
Depreciation and amortization
EBIT
Net revenue percentage by operation
Adjusted EBITDA
Adjusted EBIT
EBITDA as a % of net revenue
EBIT as a % of net revenue
Adjusted EBITDA as a % of net revenue
Adjusted EBIT as a % of net revenue
13.6%
8.9%
51%
33%
16%
15.5%
10.1%
14.0%
10.1%
8.3%
4.3%
South
UK
Canada America
$
$
$
$
$
$
191 $
54
36
458
32
771 $
(665)
13
119 $
(47)
72 $
50%
106 $
59 $
& Ireland Other
194 $
16
4
70
—
284 $
(264)
—
20 $
(9)
11 $
115 $
23
9
349
—
496 $
(435)
—
61 $
(20)
41 $
Consol
500
— $
93
—
49
—
877
—
32
—
— $ 1,551
(1,380)
(16)
14
1
185
(15) $
(77)
(1)
108
(16) $
100%
—
32%
18%
61 $
41 $
20 $
11 $
(16) $
(17) $
171
94
15.4%
9.3%
13.7%
7.7%
12.2%
8.3%
12.2%
8.3%
7.0%
3.7%
7.0%
3.7%
11.9%
6.9%
11.0%
6.1%
Net Revenue
%
32%
7%
4%
55%
2%
100%
Net Revenue
%
32%
6%
3%
57%
2%
100%
25
Finning International Inc.
2021 Annual Results
All variances and ratios in this section are based on the functional currency of each operation (Canada: CAD, South
America: USD, UK & Ireland: GBP).
Canada Operations
Q4 2021 net revenue of $914 million was 19% higher than Q4 2020, driven primarily by higher product support
revenue and used equipment sales. Product support revenue in Q4 2021 was up 17% compared to the same prior
year period, largely due to higher customer demand in the construction and mining sectors. The 84% increase in
used equipment sales reflects our strategic focus on rebuilds and resale in response to strong customer demand
and constrained supply of new equipment. Equipment backlog at December 31, 2021 was up significantly from
September 30, 2021 with strong order intake, mainly in the mining sector, which included a significant order from an
oil sands operator. Rental revenue was up 22% from Q4 2020, fulfilling customer equipment needs in a tight supply
environment. In addition, our heavy rental fleet was highly utilized in British Columbia to support flood mitigation and
infrastructure repair work.
Gross profit in Q4 2021 was higher than Q4 2020, mostly driven by higher volumes across all lines of business.
Overall gross profit as a percentage of net revenue increased in Q4 2021 compared to Q4 2020 due to improved
gross margins in most lines of business, primarily as a result of improved rental utilization and equipment margins.
Q4 2021 SG&A was 10% higher than Q4 2020 on 19% net revenue growth. Higher SG&A reflected higher variable
costs to support volumes. SG&A as a percentage of net revenue declined compared to the prior year period driven
by effective cost control measures on higher revenues.
Q4 2021 EBITDA was $142 million. Excluding significant items not indicative of financial and operational trends
described on page 20, Q4 2020 Adjusted EBITDA was $106 million. This 33% improvement was primarily due to net
revenue growth as well as productivity improvements. EBITDA as a percentage of net revenue in Q4 2021 was
15.5%, higher than the Adjusted EBITDA as a percentage of net revenue of 13.7% in Q4 2020. This increase was
driven by lower SG&A as a percentage of net revenue compared to Q4 2020 as well as higher rental utilization and
improved equipment margins.
South America Operations
Q4 2021 net revenue was up 21% from Q4 2020. New equipment revenue in Q4 2021 was 68% higher than the
prior year quarter, driven by deliveries to Chilean mining customers and improved demand for construction
equipment to support mining infrastructure and general construction projects. Product support revenue in Q4 2021
was up 10% from Q4 2020, higher in all market sectors.
Gross profit in Q4 2021 increased from Q4 2020 primarily due to increased volumes. Gross profit as a percentage of
net revenue decreased in the current period reflecting the higher proportion of new equipment sales in the revenue
mix.
Q4 2021 SG&A costs were comparable to Q4 2020 on 21% net revenue growth, reflecting a streamlined cost
structure and continued focus on driving efficiencies. As a result, Q4 2021 SG&A as a percentage of net revenue
was down significantly from Q4 2020.
Q4 2021 EBITDA was $81 million, up from $61 million in Q4 2020 primarily due to revenue growth and productivity
improvements to maintain SG&A levels. Q4 2021 EBITDA as a percentage of net revenue of 14.0% was 180 basis
points higher than Q4 2020, benefiting from improved operating leverage.
UK & Ireland Operations
Fourth quarter 2021 net revenue was 1% lower than the same period in 2020, driven by timing of power system
project deliveries. Revenue from the construction sector was up 26% compared to Q4 2020, driven by equipment
deliveries to HS2 customers and higher product support activity. Equipment backlog at December 31, 2021 was
comparable to record backlog levels at September 30, 2021.
Q4 2021 gross profit was up compared to the same prior year period despite the decline in net revenue driven by a
higher proportion of product support in the revenue mix as well as improved gross margins in the used equipment
and rental lines of business.
SG&A was up 5% in Q4 2021 compared to the prior year period, mainly due to an increase in people-related costs
driven by headcount to support backlog delivery and CUBIQTM service delivery. SG&A as a percentage of net
revenue in Q4 2021 was up from Q4 2020 primarily due to the fixed nature of certain SG&A costs on lower
revenues.
Q4 2021 EBITDA was $23 million and EBITDA as a percentage of net revenue was 8.3%, higher than Q4 2020
primarily driven by higher sales volumes and improved gross profit as a percentage of net revenue.
26
Finning International Inc.
2021 Annual Results
Market Update and Business Outlook
The discussion of our expectations relating to the market and business outlook in this section is forward-looking
information that is based upon the assumptions and subject to the material risks discussed under the heading
“Forward-Looking Information Disclaimer” beginning on page 52 of this MD&A. Actual outcomes and results may
vary significantly.
Canada Operations
Strong commodity prices and broad-based economic growth in Western Canada in 2022 are expected to create
robust demand for equipment and product support across all sectors.
The federal and provincial governments’ infrastructure programs and private sector investments in natural gas,
carbon capture, utilization and storage, and various power projects are expected to drive demand for construction
equipment and product support, heavy equipment rentals, and prime and standby electric power generation. Our
focus remains on executing our strategy to capture product support market share in construction. We are leveraging
our digital platform, CUBIQ™, and further building on our success with construction rebuilds and customer value
agreements.
Healthy commodity markets, including base and precious metals, oil, natural gas, metallurgical coal, lumber,
uranium, and potash provide a positive backdrop for activity in Western Canada. In the oil sands, capital
expenditures have begun to increase in response to recovering demand. We expect the large and aging mining
equipment population in Western Canada to continue driving demand for product support, including rebuilds, and
opportunities for fleet renewals.
South America Operations
We expect a strong copper price to continue driving improved mining activity in Chile in 2022. The projected
increase in copper production (1), large and mature equipment population, and declining ore grades are expected to
support growing demand for mining parts and service, and fleet replacement.
We are closely monitoring the economic and constitutional reform process in Chile, and our current outlook assumes
a moderate increase in mining royalties. While the timing of investment decisions related to greenfield and new
expansion projects remains uncertain, we are constructive about long-term copper mining growth in Chile. We are in
a great position to capture opportunities for new mining equipment and autonomous solutions for brownfield
expansions and greenfield projects in the next mining upcycle.
Our positive outlook for the Chilean construction sector is predicated on strong demand for mining infrastructure and
the government’s infrastructure investment program.
In Argentina, while we expect to benefit from improved activity in construction, oil and gas, and mining, the overall
business environment in the country continues to be challenging. We remain focused on managing fiscal, regulatory,
and currency risks, including high inflation and ARS devaluation expected in 2022.
UK & Ireland Operations
Continued HS2 construction activity coupled with government investments in other infrastructure projects are
expected to drive strong demand for construction equipment in the UK in 2022.
HS2 Phase 1, from London to Birmingham, is projected to require approximately 1,500 units of heavy construction
equipment, representing a total industry opportunity of nearly £500 million from 2021 to 2024. By the end of 2021,
we had captured more than £200 million of equipment orders for this project. Most Caterpillar machines working on
the HS2 project are supported by a range of Finning customer value agreements, and our construction customers
have the option to benefit from our CUBIQ™ platform and our construction apps. We are well-positioned to continue
capturing a large share of opportunities for the remainder of HS2 Phase 1.
Strong demand for our power systems solutions, including in the data centre market, is expected to continue. We
have a solid backlog of power systems projects for deliveries in 2022. Cloud data centre capacity is projected to
continue to grow over the next few years (2), and with our successful track record of project execution, we are well
positioned to capture opportunities related to this trend.
(1) The Chilean Copper Commission (Cochilco) - Proyección de la producción de cobre en Chile 2020 – 2031; DEPP 29/2020; Registro
Propiedad Intelectual © N° 2020-A-10631
(2) UK Data Center Market – Investment Analysis and Growth Opportunities Publication (2020-2025); Ireland Data Center Market – Growth,
Trends and Forecasts Publication (2020-2025)
27
Finning International Inc.
2021 Annual Results
Upcycle and Shift to Growth
Our market outlook is positive in all our regions. We expect upcycle demand conditions from the start of 2022 to be
supported by ongoing economic growth and strength in commodity prices. We expect challenges in the global
supply chain to persist, resulting in longer lead times for equipment and parts in all regions and driving strong
demand for used equipment, rentals, and rebuilds.
We have exceeded our mid-cycle EPS and ROIC targets two quarters ahead of schedule, and we continue to
proactively manage our business with the objective of improving our earnings capacity and compounding our
earnings at each successive mid-cycle point. We continue to target mid-teens and above EPS growth during this
sustained upcycle.
We continue to drive fixed cost reduction initiatives globally, targeting further improvements across people, facilities,
and supply chain productivity, and we expect to make further progress towards reducing our SG&A as a percentage
of net revenue. However, it will take us longer than the previously communicated time frame of Q3 2021 to Q2 2022
to average 17% SG&A as a percentage of net revenue over the four-quarter period. This is primarily due to lower
than projected new equipment deliveries in the second half of 2021 as a result of constrained supply, and higher
than projected product support growth rates in Q4 2021, as well as inflationary headwinds. We remain committed to
delivering fixed cost reduction initiatives, productivity gains, and strong operating leverage going forward.
As we continue to make strategic investments in our facilities network, digital platform, and rental fleet, our 2022 net
capital expenditures and net rental fleet additions are expected to be in the range of $240 million to $280 million. We
continue to advance our M&A strategy and expect to deploy capital with an initial focus on complementary
businesses in the small to medium size range that are aligned with our product support growth strategy, drive
improved outcomes for our customers, and deliver attractive rates of return.
We are monitoring the spread of the Omicron variant in our regions, particularly as it affects the staffing levels of our
and our customers’ operations. We are leveraging the COVID-19 mitigation protocols we developed at the beginning
of the pandemic and expect to successfully manage our day-to-day operations through the Omicron wave.
28
Finning International Inc.
2021 Annual Results
Liquidity and Capital Resources
We assess liquidity in terms of our ability to generate sufficient cash flow, along with other sources of liquidity
including cash and borrowings, to fund operations and growth. Liquidity is affected by operating, investing, and
financing activities.
Cash flows provided by (used in) each of these activities were as follows:
3 months ended
December 31
Years ended
December 31
($ millions)
Operating activities
Investing activities
Financing activities
Free cash flow
(Decrease)
Increase
(Decrease)
Increase
2021
2020
193 $ 317 $
$
$
(32) $
(39) $
$ (167) $ (173) $
148 $ 292 $
$
(124) $
2021
2020
425 $ 962 $
(7) $ (151) $
(99) $
6 $ (300) $ (573) $
300 $ 870 $
(144) $
(537)
(52)
273
(570)
The most significant contributors to the changes in cash flows for 2021 over 2020 were as follows (all events
described were in the current quarter or annual period, unless otherwise stated):
Quarter over Quarter
Year over Year
(cid:120) higher inventory purchases to support
(cid:120) higher inventory purchases to support
Operating
activities
increased demand driven primarily by Canada
and South America;
(cid:120) partially offset by higher collections driven by
increased earnings, mainly in Canada and
South America
increased demand in all of our operations;
(cid:120) partially offset by higher collections driven by
increased earnings in all of our operations
(cid:120) $21 million higher net spend on capital
(cid:120) $33 million higher net spend on capital
expenditures
expenditures
Investing
activities
(cid:120) $17 million net cash consideration paid for
acquisitions in our Canadian operations
(cid:120) partially offset by $30 million proceeds from
long-term and short-term investments
(cid:120) $27 million net cash consideration paid for
acquisitions in our UK & Ireland and Canadian
operations
(cid:120) $75 million lower repayment of short-term
(cid:120) $280 million cash provided by short-term
borrowings;
Financing
activities
(cid:120) partially offset by $67 million use of cash to
repurchase common shares in Q4 2021
compared to no common shares repurchased
in Q4 2020
borrowings in 2021 compared to $129 million
repayment of short-term borrowings in 2020;
(cid:120) $155 million use of cash to repurchase
common shares in 2021 compared to $23
million used to purchase common shares in
2020
(cid:120) free cash flow in Q4 2021 was $148 million,
(cid:120) free cash flow in 2021 was $300 million, lower
Free cash
flow
lower than Q4 2020 due to lower cash
generated from operating activities for the
reasons outlined above
than the prior year due to lower cash
generated from operating activities for the
reasons outlined above
29
Finning International Inc.
2021 Annual Results
Capital resources and management
Our cash and cash equivalents balance at December 31, 2021 was $502 million (December 31, 2020: $539 million).
At December 31, 2021 we had approximately $2.1 billion in unsecured committed and uncommitted credit facilities.
Included in this amount was a committed revolving credit facility totaling $1.3 billion with various Canadian and
global financial institutions, of which approximately $0.9 billion was available at December 31, 2021. We are subject
to certain covenants under our committed revolving credit facilities and were in compliance with these covenants as
at December 31, 2021.
We continuously monitor actual and forecasted cash flows, manage the maturity profiles of our financial liabilities,
and maintain committed and uncommitted credit facilities. In March 2021, we cancelled the $500 million committed
revolving credit facility that we secured in April 2020 because we were comfortable with our liquidity position utilizing
our existing committed credit facility. We believe that, based on cash on hand, available credit facilities and the
discretionary nature of certain cash flows, such as rental and capital expenditures, we have sufficient liquidity to
meet operational needs.
In September 2021, we secured sustainability-linked terms for our $1.3 billion committed revolving credit facility. The
amended credit facility aligns cost of borrowing to our progress towards achieving our absolute greenhouse gas
emissions reduction target set in our Sustainability Report. We also extended the term of the credit facility from a
maturity date of December 2024 to September 2026.
Finning is rated (1) by both DBRS and S&P:
DBRS
S&P
Long-term debt
Short-term debt
Dec 31,
2021
BBB (high)
BBB+
Dec 31,
2020
BBB (high)
BBB+
Dec 31,
2021
R-2 (high)
n/a
Dec 31,
2020
R-2 (high)
n/a
In April 2021, S&P affirmed our BBB+ rating, and revised our outlook from negative to stable, citing strong free cash
flow generation and the resiliency of our business model.
In August 2021, DBRS reconfirmed our BBB (high) long-term rating and R-2 (high) commercial paper rating, both
with stable trends.
During Q2 2021, we resumed our share repurchase program and in 2021 repurchased 4,779,340 common shares
for cancellation for $157 million, at an average cost of $32.81 per share, through an NCIB (2). In 2020, we
repurchased 1,215,617 common shares for cancellation for $23 million, at an average cost of $19.25 per share.
Effective January 2022, the Company implemented an automatic share purchase plan with a designated broker to
enable share repurchases for cancellation during the Company’s regular blackout period.
Net Debt to Adjusted EBITDA
We monitor net debt to Adjusted EBITDA to assess our operating leverage and ability to repay debt. This ratio
approximates the length of time, in years, that it would take us to repay our debt, with net debt and Adjusted EBITDA
held constant.
Net debt to Adjusted EBITDA at December 31, 2021 of 1.1 times was an all-time low.
Net debt to Adjusted EBITDA ratio (times)
Finning
long-term target
< 3.0
2021
1.1
2020
1.4
(1) A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the
rating organization.
(2) A copy of the NCIB notice is available on request directed to the Corporate Secretary, 19100 94 Avenue, Surrey, BC V4N 5C3.
30
Contractual Obligations
Payments on contractual obligations in each of the next five years and thereafter are as follows:
Finning International Inc.
2021 Annual Results
($ millions)
Short-term debt
Long-term debt
Lease liabilities
Total contractual obligations
2022
2023
2024
2025
2026
Thereafter Total
$
$
374 $ — $ — $ — $ — $
232
88
694 $
155
63
218 $
220
47
267 $
25
33
58 $
225
23
248 $
— $
374
533
1,390
519
265
798 $ 2,283
The above table does not include obligations to fund pension benefits. We make regular contributions to our
registered defined benefit pension plans in Canada and the UK in order to fund the pension obligations as required.
Funding levels are monitored regularly and reset with new actuarial funding valuations at least every three years. In
2021, we contributed $12 million towards the defined benefit pension plans. Based on the most recently completed
valuations, we expect to contribute approximately $8 million to the defined benefit pension plans during the year
ended December 31, 2022.
Capital and Rental Expenditures
Our net spend on capital expenditures and rental fleet additions during the year ended December 31, 2022 is
expected to be in the range of $240 million to $280 million depending on the pace of market recovery. These are
planned, but not legally committed expenditures and include strategic capital investments in our Canadian facility
network, our digital capabilities, and rental fleet additions.
Employee Share Purchase Plans
We have employee share purchase plans for our Canadian and South American employees. Under the terms of
these plans, eligible employees may purchase common shares of Finning in the open market at the then current
market price. We pay a portion of the purchase price to a maximum of 2% of employee earnings. At December 31,
2021, approximately 70%, 77% and 3% of eligible employees in our Corporate, Canadian, and South American
operations, respectively, were contributing to these plans.
We also have an All Employee Share Purchase Ownership Plan for our employees in Finning UK & Ireland. Under
the terms of this plan, we provide one common share, purchased in the open market, for every three shares
purchased by Finning (UK) employees and for every one share purchased by Finning (Ireland) employees. Finning
(UK) employees may contribute from £10 to £150 of their salary per month. At December 31, 2021, approximately
32% of eligible employees in Finning (UK) were contributing to this plan. Finning (Ireland) employees may contribute
from €10 to €70 of their salary per month. At December 31, 2021, approximately 18% of eligible employees in
Finning (Ireland) were contributing to this plan.
We may cancel these plans at any time.
31
Finning International Inc.
2021 Annual Results
Accounting and Estimates
We employ professionally qualified accountants throughout our finance group globally and all of our operating unit
financial officers report directly to our CFO. Senior financial representatives are assigned to all significant projects
that impact financial accounting and reporting. Policies are in place to ensure completeness and accuracy of
reported transactions. Key transaction controls are in place, and there is a segregation of duties between transaction
initiation, processing, and cash receipt or disbursement. Accounting, measurement, valuation, and reporting of
accounts, which involve estimates and/or valuations, are reviewed quarterly by the CFO, the SVP, Corporate
Controller, and the Audit Committee. Significant accounting and financial topics and issues are presented to and
discussed with the Audit Committee.
Management’s discussion and analysis of our financial condition and results of operations is based on our Annual
Financial Statements, which have been prepared in accordance with IFRS. Our significant accounting policies are
included in the notes to the Annual Financial Statements for the year ended December 31, 2021. Certain policies
require management to make judgments, estimates, and assumptions in respect of the application of accounting
policies and the reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingent assets and
liabilities. These policies may require particularly subjective and complex judgments to be made as they relate to
matters that are inherently uncertain and because there is a likelihood that materially different amounts could be
reported under different conditions or using different assumptions. We have discussed the development, selection,
and application of our key accounting policies, and the critical accounting estimates and assumptions involved, with
the Audit Committee.
The critical estimates and judgments involved in preparing our Annual Financial Statements for the year ended
December 31, 2021 were:
(cid:120) determination of the functional currency of each Finning entity;
(cid:120)
revenues and costs associated with long-term product support contracts and complex power and energy
systems;
revenues and costs associated with the sale of assets with repurchase commitments;
the fair value of derivative financial instruments;
inputs to the models to determine the fair value of certain share-based payments;
the useful lives and residual values of property, plant, and equipment, rental equipment, and intangible assets;
the determination of lease terms;
identifying the CGU to which assets should be allocated for impairment testing;
recoverable values for goodwill and other indefinite-lived intangible assets;
(cid:120)
(cid:120) allowance for doubtful accounts;
(cid:120)
(cid:120)
(cid:120) provisions for slow-moving and obsolete inventory;
(cid:120) provisions for income tax;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120) provisions for warranty; and,
(cid:120)
the determination of post-employment benefits.
For additional information on the above judgments, estimates, and assumptions made, please refer to the notes to
the Annual Financial Statements for the year ended December 31, 2021.
Revenues and Costs Associated with Long-Term Product Support Contracts and Sales of Complex Power
and Energy Systems
Where the outcome of performance obligations for long-term product support contracts and sales of complex power
and energy systems can be estimated reliably, revenue is recognized. Revenue is measured primarily based on the
proportion of contract costs incurred for work performed to-date relative to the estimated total contract costs.
Variations in contract work, claims, and incentive payments are included to the extent that they have been agreed
with the customer. Where the outcome of performance obligations cannot be reliably measured, contract revenue is
recognized in the current period to the extent that costs have been incurred until such time that the outcome of the
performance obligations can be reasonably measured. Significant assumptions are required to estimate total
contract costs, which are recognized as expenses in the period in which they are incurred. When it is probable that
total contract costs will exceed total contract revenue, the expected loss is immediately recognized in the
consolidated statement of net income.
32
Finning International Inc.
2021 Annual Results
Revenues and Costs Associated with the Sale of Assets with Repurchase Commitments
In certain circumstances, the Company enters into contracts with rights of return (at the customer’s discretion) for
the repurchase of equipment sold to customers for an amount which is generally based on a discount from the
estimated future fair value of that equipment. At the inception of the contract, the Company is required to make
judgments as to whether the customer has a significant economic incentive to exercise its right of return. When no
such incentive is expected, revenue is recognized upon the sale of equipment but when a significant incentive is
expected, revenue is recognized over the term of the repurchase commitment. Significant assumptions are made in
estimating residual values and are assessed based on past experience and taking into account expected future
market conditions and projected disposal values.
Allowance for Doubtful Accounts
The Company records allowance for doubtful accounts that represents management’s best estimate of potential
losses in respect of accounts receivables and unbilled receivables. The main components of these allowances are a
specific loss component that relates to individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that are expected to occur.
The collective loss allowance is estimated based on historical data of payment statistics for similar financial assets,
adjusted for current and forecasted future economic conditions.
Expected credit losses related to the current economic environment have been incorporated in management’s
estimate of its allowance for doubtful accounts. No assurance can be given that this will be sufficient or that the
Company will not suffer material credit losses that will adversely affect its results. The Company allocates each
exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not
limited to external credit ratings and publicly available information about customers) and applying experienced credit
judgment. Exposures within each credit risk grade are segmented by geographic region, industry classification, and
risk categorization. An expected credit loss rate is calculated for each segment.
Provisions for slow-moving and obsolete inventory
The Company makes estimates of the provision required to reflect net realizable value of slow-moving and obsolete
inventory. These estimates are determined on the basis of age, redundancy, and stock levels. For equipment
inventory, estimates are determined on a specific item basis. Management reviewed equipment values with
equipment specialists taking into account industry group, current market demand, market supply of equipment, and
the age and condition of equipment. Management reviewed parts inventory estimates based on market demand,
parts turns, discontinued items, ability to return to the vendor, and surplus/excess items.
Provisions for Income Tax
Estimations of tax assets or liabilities require assessments to be made based on the potential tax treatment of
certain items that will only be resolved once finally agreed with the relevant tax authorities.
Assumptions underlying the composition of deferred tax assets and liabilities include estimates of future results of
operations and the timing of reversal of temporary differences as well as the substantively enacted tax rates and
laws in each jurisdiction at the time of the expected reversal. The composition of deferred tax assets and liabilities
changes from period to period due to the uncertainties surrounding these assumptions and changes in tax rates or
regimes which could have a material effect on expected results.
Judgment is required as income tax laws and regulations can be complex and are potentially subject to a different
interpretation between us and the respective tax authority. Due to the number of variables associated with the
differing tax laws and regulations across the multiple jurisdictions in which we operate, the precision and reliability of
the resulting estimates are subject to uncertainties and may change as additional information becomes known. Net
income in subsequent periods may be impacted by the amount that estimates differ from the final tax return or from
any subsequent re-assessment.
33
Finning International Inc.
2021 Annual Results
Goodwill and intangible assets with indefinite lives
The recoverable value of each CGU or group of CGUSs is estimated using a discounted cash flow model. The
process of determining these recoverable values requires estimates and assumptions including, but not limited to,
future cash flows, growth projections, associated economic risk assumptions and estimates of key operating metrics
and drivers, and WACC rates. Cash flow projections are based on financial budgets approved by our Board.
Projected cash flows are discounted using WACC rates. These estimates are subject to change due to uncertain
competitive and economic market conditions or changes in business strategies.
Judgment is used to identify an appropriate discount rate and growth rate used to estimate the recoverable value,
identifying the CGUs to which intangible assets should be allocated, and the CGU or group of CGUs at which
goodwill is monitored for management purposes.
The recoverable value of CGUs or group of CGUs requires the use of estimates related to the future operating
results and cash-generating ability of the assets.
Related Party Transactions
Related party transactions incurred in the normal course of business between us and our subsidiaries have been
eliminated on consolidation and are not considered material for disclosure. Information on our wholly owned
subsidiaries and the main countries in which they operate is contained in note 2 of the Annual Financial Statements.
Compensation of key management personnel is disclosed in note 25 of the Annual Financial Statements.
New Accounting Pronouncements
The adoption of recent amendments to accounting standards and new IFRS had no impact on our financial position.
Future accounting pronouncements and effective dates are included in note 2 of our Annual Financial Statements.
34
Finning International Inc.
2021 Annual Results
Risk Factors and Management
Finning and its subsidiaries are exposed to market, credit, liquidity, and other risks in the normal course of business
activities. Our ERM process is designed to ensure that these risks are identified, managed, and reported. The ERM
framework assists us in managing risks and business activities in order to mitigate these risks across the
organization and achieve our strategic objectives.
We maintain a strong risk management culture to protect and enhance shareholder value. On a quarterly basis,
Board level committees review our processes for business risk assessment and the management of key business
risks, any changes to key risks and exposures, and the steps taken to monitor and control such exposures, and
report their review to the Board. The Board reviews all material risks in detail on an annual basis. The Board also
reviews the adequacy of disclosures of key risks in our AIF, MD&A, and financial statements on a quarterly and
annual basis. All key financial risks are disclosed in our MD&A and other key business risks are disclosed in our AIF.
For more information on our financial instruments, including accounting policies, description of financial risks, and
relevant financial risk sensitivities, please refer to note 8 of the Annual Financial Statements.
Pandemic Outbreak and Impact on Financial Results
We continue to adapt to the impacts of COVID-19 on our business, with the health and safety of employees,
customers, and communities as the highest priority. Since the World Health Organization’s declaration of the global
pandemic in March 2020, we successfully expedited our business continuity program, however, a risk of this nature
may still have a material adverse impact on our business, results of operations and financial condition.
The outbreak of COVID-19 and its evolution, including new variants, has caused and continues to cause
considerable disruption to the world economy, including financial markets and commodity prices. Although we saw a
recovery in our markets in 2021, global supply chain disruptions and supply constraints extended lead times and
constrained the availability of certain parts and equipment. We continue to work closely with Caterpillar to mitigate
the impact of global supply chain disruptions on our supply of Caterpillar products and there can be no assurance
that Caterpillar will continue to be able to supply its products in the quantities and timeframes required by our
customers.
Similarly, and despite our efforts to minimize impacts, our financial results could continue to be negatively impacted
by the actions taken by governments, customers, and/or suppliers, including business disruptions, customer credit
risk, force majeure, and/or supply chain constraints in response to the ongoing pandemic, and uncertainty remains
as to the severity and duration of any resulting adverse impact on our business, results of operations, and financial
condition. Further, as a result of COVID-19, many governments have made wage subsidy programs available for
eligible entities that meet qualifying criteria and provided other relief programs, such as rent subsidy or tax deferral
programs. There can be no assurance that these programs will be effective in adequately supporting us or our
customers in the intended manner. In particular, to the extent that any of our customers are dependent upon these
programs, the modification or cessation of these programs could increase our risk of customer credit default, with a
resulting negative impact on our results. The extent, duration and availability of government support programs is
highly uncertain and cannot be predicted with confidence at this time.
Our operations and the operations of many of our customers have been deemed essential services during the
pandemic and have remained open. A localized outbreak of a contagious illness such as COVID-19 could impact
operations, risk the health of our employees who continue to work in branches or on customer sites, and result in the
temporary closure of one or more of our major facilities or the facilities of our customers. We are following the
requirements and advice of government and health authorities in each jurisdiction where we operate. We have
continued operating with restrictions on non-critical travel during the pandemic in 2020 and 2021 and are taking a
cautious approach to relaxing travel restrictions, in line with these requirements and advice. We have applied a risk-
based approach to assessing each facility in our global operations. A series of preventative measures have been
developed and executed at each facility that include, at a minimum, communication on the COVID-19 response
protocol, awareness training, personal and facility specific hygiene practices, physical distancing, preventive testing
and work-from home arrangements where possible. We have also promoted vaccination of our employees and
implemented a vaccination disclosure policy with regular COVID-19 testing as an alternative. Rules in all
jurisdictions continue to evolve and further government intervention or quarantine restrictions could impede our
ability to continue to manage the business.
In light of these ongoing uncertainties, we continue to evaluate and adapt our business plans as the situation
evolves. This has included implementing numerous new tools, technologies, training and security monitoring and
detection services to mitigate the heightened risk of experiencing a cybersecurity incident due to the increase in
employees working remotely. We are also continuing to manage costs in line with expected changes in business
activity levels in each region.
35
Finning International Inc.
2021 Annual Results
The extent to which COVID-19 continues to affect our business will depend on future events which are highly
uncertain and cannot be predicted, including the geographic spread, new variants, vaccine evolution, actions taken
by governmental authorities in response to the pandemic, including the imposition of new or reintroduction of
emergency measures, and the impacts on global and regional markets, our customers, suppliers and contracts. As a
result, no assurance can be given as of the date of this MD&A as to the potential impact that COVID-19 may have
on our business, results of operations, cash flows and financial condition. To the extent the COVID-19 pandemic
adversely affects our business and financial results, it may also have the effect of heightening many of the other
risks described in our MD&A and in the Key Business Risks section of our AIF, which may also have an adverse
material impact on our future operating and financial results.
Commodity Prices
We are affected by fluctuations in the prices of commodities, such as copper, gold, and other metals, metallurgical
coal, natural gas, oil, and lumber. We provide equipment and parts and service to customers in resource and
construction industries. In the resource sector, fluctuations in commodity prices and changes in long-term outlook for
commodities impact customer decisions regarding capital expenditures and production levels, which determine
demand for equipment, parts and service. In the construction sector, publicly funded infrastructure spending is
indirectly impacted by fluctuations in commodity prices, particularly in regions with resource-based economies. In
Canada, our customers, mostly in the oil sands in Northern Alberta, are exposed to the price of oil. In South
America, our customers are primarily exposed to the price of copper and, to a much lesser extent, the prices of gold,
other metals, and natural gas. In the UK & Ireland, our resource sector customers operate in off-shore oil & gas.
Significant fluctuations in these commodity prices could have a material impact on our financial results.
In periods of significantly lower commodity prices, demand is reduced as development of new projects is slowed or
stopped and production from existing projects can be curtailed, leading to less demand for equipment. However,
product support growth has been, and is expected to continue to be, important in mitigating the effects of downturns
in the business cycle. Alternatively, if commodity prices rapidly increase, customer demand for our products and
services could increase and apply pressure on our ability to supply the products or skilled technicians on a timely
and cost-efficient basis. To assist in mitigating the impacts of fluctuations in demand for our products and services,
we work closely with Caterpillar to achieve an adequate and timely supply of product and have implemented human
resources recruiting strategies to achieve adequate staffing levels.
Financial Instruments Risk
We are exposed to risks through our operations that arise from the use of financial instruments, which include credit
risk and liquidity risk. Under the normal course of operations, we have mitigation strategies to minimize these risks.
In the current economic climate, we have heightened exposure to these risks.
Credit Risk
Credit risk is the risk of financial loss to us if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally in respect of our cash and cash equivalents, receivables from
customers, receivables from suppliers, and derivative assets.
Credit risk associated with cash and cash equivalents is managed by ensuring that these financial assets are held
with major financial institutions with strong investment grade ratings and by monitoring the exposures with any single
institution. An ongoing review is performed to evaluate the changes in the credit rating of counterparties.
Credit risk associated with accounts receivable, unbilled receivables, and instalment notes receivable from
customers is minimized because of the diversification of our operations as well as our large customer base and
geographical dispersion. Also, we have policies in place to manage credit risk, including maintaining credit limits for
customers taking into account factors such as projected purchase values, credit worthiness of the customer, and
payment performance.
We are exposed to risk on supplier claims receivable, primarily from Caterpillar with whom we have had an ongoing
relationship since 1933.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. Our approach to
managing liquidity is to ensure, as far as possible, that we will have sufficient liquid financial resources to fund
operations and meet commitments and obligations. We maintain bilateral and syndicated credit facilities,
continuously monitor actual and forecast cash flows, and manage maturity profiles of financial liabilities. Based on
the availability of credit facilities, our business operating plans, and the discretionary nature of some cash outflows,
such as rental and capital expenditures, we believe we continue to have sufficient liquidity to meet operational
needs.
36
Finning International Inc.
2021 Annual Results
We will require capital to finance future growth and to refinance outstanding debt obligations as they come due for
repayment. If the cash generated from our operations is not sufficient to fund future capital and debt repayment
requirements, we will require additional debt or equity financing in the capital markets. Our ability to access capital
markets on terms that are acceptable will be dependent upon prevailing market conditions, as well as our financial
condition. Further, our ability to increase the level of debt financing may be limited by financial covenants or credit
rating objectives. The outbreak of COVID-19 globally has caused and continues to cause considerable disruptions in
the world economy, including financial markets and commodity prices and could adversely impact our ability to carry
out our plans and raise capital. The ability to raise additional financing for future activities may be impaired, or such
financing may not be available on favourable terms, due to conditions beyond our control, such as uncertainty in the
capital markets, depressed commodity prices or country risk factors.
Market Risk and Hedging
Market risk is the risk that changes in the market, such as foreign exchange rates and interest rates, will affect our
net income or the fair value of our financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters.
We utilize derivative financial instruments and foreign currency debt in order to manage our foreign currency and
interest rate exposures. We use derivative financial instruments only in connection with managing related risk
positions and do not use them for trading or speculative purposes. All such transactions are carried out within the
guidelines set by us and approved by the Audit Committee. For more information on our accounting policy on
financial instruments, please refer to note 8 of the Annual Financial Statements.
Foreign Exchange Risk
We are geographically diversified, with significant investments in several different countries. We transact business in
multiple currencies, the most significant of which are the CAD, USD, GBP, CLP, and ARS. The functional currency
of our South American operations is USD and the functional currency of our UK & Ireland operations is primarily
GBP (Finning Ireland’s functional currency is the Euro). As a result, we have foreign currency exposure with respect
to items denominated in foreign currencies. Our main types of foreign exchange risk can be categorized as follows:
Translation Exposure
The most significant foreign exchange impact on our net income and other comprehensive income is the translation
of foreign currency-based earnings and net assets or liabilities into CAD, which is our presentation currency. Our
South American and UK & Ireland operations have functional currencies other than CAD and, as a result, exchange
rate movements between the USD/CAD and GBP/CAD will impact the consolidated results of the South American
and UK & Ireland operations in CAD terms. We do not hedge our exposure to foreign exchange risk with regard to
foreign currency earnings.
Assets and liabilities of our South American and UK & Ireland operations are translated into CAD using the
exchange rates in effect at the consolidated statement of financial position dates. Any translation gains and losses
are recorded as foreign currency translation adjustments in other comprehensive income. To the extent practical, it
is our objective to manage this exposure. We hedged a portion of our foreign investments with foreign currency
denominated loans. The currency translation loss of $14 million recorded in 2021 resulted primarily from the 0.4%
stronger CAD relative to the USD and the 1% stronger CAD relative to the GBP at December 31, 2021 compared to
December 31, 2020. This was partially offset by a $4 million unrealized foreign exchange gain on net investment
hedges.
Transaction Exposure
Many of our operations purchase, sell, rent, and lease assets as well as incur costs in currencies other than their
functional currency. This mismatch of currencies creates transactional exposure, which may affect our profitability as
exchange rates fluctuate. For example, our Canadian operating results are exposed to volatility in USD/CAD rates
between the timing of equipment and parts purchases that are made in USD and the ultimate sale to customers
made in CAD. A portion of this exposure is hedged through the use of forward exchange contracts as well as
managed through pricing practices. We apply hedge accounting to hedges of certain inventory purchases and sales
of complex power and energy systems in our Canadian and UK & Ireland operations, respectively.
The results of our operations are impacted by the translation of foreign-denominated transactions; the results of our
Canadian operations are impacted by USD based revenue and costs, and the results of our South American
operations are impacted by CLP and ARS based revenues and costs.
37
Finning International Inc.
2021 Annual Results
We are also exposed to foreign currency risks related to the future cash flows on our foreign-denominated financial
assets and financial liabilities and foreign-denominated net asset or net liability positions on our consolidated
statement of financial position. We enter into forward exchange contracts to manage some mismatches in foreign
currency cash flows but do not fully hedge balance sheet exposure, so this may result in unrealized foreign
exchange gains or losses until the financial assets and financial liabilities are settled.
The CAD has historically been positively correlated to certain commodity prices. In a scenario of declining
commodity prices, our resource industry customers may curtail capital expenditures and decrease production which
can result in reduced demand for equipment, parts, and services. At the same time, the weaker CAD to USD
positively impacts our financial results when USD based revenues and earnings are translated into CAD reported
revenues and earnings, although lags may occur.
The results of our South American operations are affected by changes in the USD/CLP and USD/ARS relationships.
Historically, the CLP has been positively correlated to the price of copper. As the price of copper declines, the value
of the CLP versus the USD declines as well. In such an environment, our revenue may be impacted as mining
customers curtail their equipment and product support spend. Our SG&A in South America, which is largely
denominated in local currency, is reduced when translated into USD, partly offsetting the impact on revenue. The
reverse holds true in an environment where the copper price strengthens, although generally there is a lag between
the increase in SG&A and the improvement in revenue. These impacts are partially offset by our hedging programs.
Our competitive position may also be impacted as relative currency movements affect the business practices and/or
pricing strategies of our competitors.
Key exchange rates that impacted our results were as follows:
3 months ended
12 months ended
Exchange
rate
USD/CAD
GBP/CAD
USD/CLP
USD/ARS
December 31
2020 Change 2021
2020 Change 2021
December 31 – average December 31 – average
2020 Change
7%
(0)%
4%
(36)%
3% 1.2535 1.3415
1% 1.7246 1.7199
(8)% 756.68 791.84
69.82
94.89
0.4% 1.2603 1.3030
1% 1.6990 1.7206
(20)% 824.93 761.70
79.96
(22)% 100.49
(26)%
2021
1.2678 1.2732
1.7132 1.7381
850.25 711.24
84.15
102.72
The impact of foreign exchange due to fluctuations in the value of CAD relative to USD, GBP, CLP, and ARS is
expected to continue to affect our results.
Interest Rate Risk
Changes in market interest rates can cause fluctuations in the fair value or future cash flows of financial instruments.
We are exposed to changes in interest rates on our interest-bearing financial assets. Our floating-rate financial
assets comprise cash and cash equivalents. Due to the short-term nature of cash and cash equivalents, the impact
of fluctuations in fair value is limited but interest income earned can be impacted. Instalment and other notes
receivable bear interest at a fixed rate thus their fair value will fluctuate prior to maturity but, absent monetization,
future cash flows do not change.
We are exposed to changes in interest rates on our interest-bearing financial liabilities, primarily from short-term
and long-term debt and lease liabilities. Our debt portfolio comprises both fixed and floating rate debt instruments,
with terms to maturity ranging up to 2042. Our floating rate debt is short term in nature and as a result, we are
exposed to limited fluctuations in changes to fair value, but finance expense and cash flows will increase or
decrease as interest rates change.
The fair value of our fixed rate debt obligations fluctuates with changes in interest rates, but absent early settlement,
related cash flows do not change. We are exposed to changes in future interest rates upon refinancing of any debt
prior to or at maturity.
We manage our interest rate risk by balancing our portfolio of fixed and floating rate debt, as well as managing the
term to maturity of our debt portfolio.
Share-Based Payment Risk
Share-based payment plans are an integral part of our employee compensation program and can be in the form of
our common shares or cash payments that reflect the value of our shares and the extent we are able to achieve or
exceed specified performance levels. Share-based payment plans are accounted for at fair value, and the expense
associated with these plans can therefore vary as our share price, share price volatility, performance, and employee
exercise behaviour change. For further details on our share-based payment plans, please refer to note 11 of the
Annual Financial Statements.
38
Finning International Inc.
2021 Annual Results
Contingencies and Guarantees
Due to the size, complexity, and nature of our operations, various legal, customs, and tax matters are pending. It is
not currently possible to predict the outcome of such matters due to various factors, including: the preliminary nature
of some claims, an incomplete factual record, and uncertainty concerning procedures and their resolution by the
courts, customs, or tax authorities. However, subject to these limitations, we are of the opinion, based on legal
assessments and information presently available, that, except as stated below, it is not likely that any liability would
have a material effect on our financial position or results of operations.
We began to export an agricultural animal feed product from Argentina in the third quarter of 2012 in response to the
Argentine government’s efforts to balance imports and exports and to manage access to foreign currency. These
exports enabled us to import goods into Argentina to satisfy customer demand, while meeting the government’s
requirements. We have not exported agricultural animal feed product since the third quarter of 2013. The Argentina
Customs Authority has made a number of claims against us associated with the export of this agricultural animal
feed product over this period and has also issued an order that could result in up to a one-year suspension of
imports into Argentina by a portion of the business. The essence of these claims is related to the tariff classification
of this product and therefore the export duty payable. We are appealing these claims and the order, believe they are
without merit, and are confident in our position. Mitigation measures are also available to us in the unlikely event our
appeal of the order suspending imports into Argentina by a portion of the business is not successful. These pending
matters may take a number of years to resolve. No progress was made on the appeals in 2021, largely due to the
shut down of the Argentina Tax Courts during the pandemic. However, in April 2021, in response to an application
by the Canadian government, the World Customs Organization voted by a significant margin in favour of the tariff
classification used by our South American operations and this result has been filed in the appeals. Argentina has
filed an appeal with the World Customs Organization, however, we are confident the decision will be upheld. Should
the ultimate resolution of these matters differ from our assessment and, in the case of the potential suspension of
imports into Argentina by a portion of the business the mitigation measures not be effective, this could have a
material negative impact on our financial position.
In certain circumstances, we enter into contracts with rights of return (at the customer’s discretion) for the
repurchase or trade-in of equipment sold to customers for an amount which is generally based on a discount from
the estimated future fair value of that equipment. At December 31, 2021, the total estimated value of these contracts
outstanding was $146 million (2020: $139 million) coming due at periods ranging from 2022 to 2026. Our experience
to date has been that the estimated fair value of the equipment at the exercise date of the contract is generally
greater than the repurchase price or trade-in amount, however, there can be no assurance that this experience will
continue in the future. The total amount recognized as a provision against these contracts at December 31, 2021
was $2 million (2020: $1 million).
For further information on our contingencies, commitments, guarantees, and indemnifications, refer to notes 26 and
27 of the notes to the Annual Financial Statements.
Outstanding Share Data
As at February 4, 2022
Common shares outstanding
Options outstanding
157,727,172
1,769,207
39
Finning International Inc.
2021 Annual Results
Controls and Procedures Certification
Disclosure Controls and Procedures
We are responsible for establishing and maintaining a system of controls and procedures over the public disclosure
of our financial and non-financial information. Such controls and procedures are designed to provide reasonable
assurance that all relevant information is gathered and reported to senior management, including the CEO and
CFO, on a timely basis so that appropriate decisions can be made regarding public disclosure.
The CEO and the CFO, together with other members of management, have designed our disclosure controls and
procedures in order to provide reasonable assurance that material information relating to Finning and its
consolidated subsidiaries is made known to them in a timely manner.
We have a Corporate Disclosure Policy and a Disclosure Committee in place to mitigate risks associated with the
disclosure of inaccurate or incomplete information, or failure to disclose required information.
(cid:120) The Corporate Disclosure Policy sets out accountabilities, authorized spokespersons, and our approach to the
determination, preparation, and dissemination of material information. The policy also defines restrictions on
insider trading and the handling of confidential information.
(cid:120) The Disclosure Committee, consisting of senior management, including legal counsel, reviews all financial
information prepared for communication to the public to ensure it meets all regulatory requirements. The
Disclosure Committee is responsible for raising any outstanding issues it believes require the attention or
approval of the Audit Committee prior to recommending disclosure, subject to legal requirements applicable to
disclosure of material information.
Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. We have
designed internal control over financial reporting to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with IFRS. There has been no change in the
design of our internal controls over financial reporting during the year ended December 31, 2021 that would
materially affect, or is reasonably likely to materially affect, our internal control over financial reporting. We have
taken additional steps to ensure key financial internal controls remained in place during the financial reporting period
and these controls were completed electronically.
Regular involvement of our internal audit function and quarterly reporting to the Audit Committee assist in providing
reasonable assurance that the objectives of the control system are met. While our officers have designed our
disclosure controls and procedures and internal control over financial reporting to provide reasonable assurance that
the objectives of the control systems are met, they are aware that these controls and procedures may not prevent all
errors and fraud. A control system, no matter how well conceived or operated, can only provide reasonable, not
absolute, assurance that the objectives of the control system are met.
Evaluation of Effectiveness
As required by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings issued
by the Canadian securities regulatory authorities, an evaluation of the design and testing of the effectiveness of the
operation of the Company’s disclosure controls and procedures and internal control over financial reporting was
conducted as of December 31, 2021, by and under the supervision of management. In making the assessment of
the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting,
we used the criteria set forth by the COSO in Internal Control – Integrated Framework (2013 edition). The evaluation
included documentation review, enquiries, testing, and other procedures considered by us to be appropriate in the
circumstances.
Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and
procedures and internal control over financial reporting were effective as of December 31, 2021.
40
Finning International Inc.
2021 Annual Results
Description of Specified Financial Measures and Reconciliations
Specified Financial Measures
We believe that certain specified financial measures, including non-GAAP financial measures, provide users of our
MD&A and consolidated financial statements with important information regarding the operational performance and
related trends of our business. The specified financial measures we use do not have any standardized meaning
prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers.
Accordingly, specified financial measures should not be considered as a substitute or alternative for financial
measures determined in accordance with GAAP (GAAP financial measures). By considering these specified
financial measures in combination with the comparable GAAP financial measures (where available) we believe that
users are provided a better overall understanding of our business and financial performance during the relevant
period than if they simply considered the GAAP financial measures alone.
We use KPIs to consistently measure performance against our priorities across the organization. Some of our KPIs
are specified financial measures.
There may be significant items that we do not consider indicative of our operational and financial trends, either by
nature or amount. We exclude these items when evaluating our operating financial performance. These items may
not be non-recurring, but we believe that excluding these significant items from GAAP financial measures provides a
better understanding of our financial performance when considered in conjunction with the GAAP financial
measures. Financial measures that have been adjusted to take into account these significant items are referred to
as “Adjusted measures”. Adjusted measures are specified financial measures and are intended to provide additional
information to readers of the MD&A.
Descriptions and components of the specified financial measures we use in this MD&A are set out below. Where
applicable, quantitative reconciliations from certain specified financial measures to their most directly comparable
GAAP financial measures (specified, defined, or determined under GAAP and used in our consolidated financial
statements) are also set out below.
Adjusted basic EPS
Adjusted basic EPS excludes the after-tax per share impact of significant items that we do not consider to be
indicative of operational and financial trends either by nature or amount to provide a better overall understanding of
our underlying business performance. The tax impact of each significant item is calculated by applying the relevant
applicable tax rate for the jurisdiction in which the significant item occurred. The after-tax per share impact of
significant items is calculated by dividing the after-tax amount of significant items by the weighted average number
of common shares outstanding during the period.
A reconciliation between basic EPS (the most directly comparable GAAP financial measure) and Adjusted basic
EPS can be found on page 43 of this MD&A.
EBITDA, Adjusted EBITDA, and Adjusted EBIT
EBITDA is defined as earnings before finance costs, income taxes, depreciation, and amortization. We use EBITDA
to assess and evaluate the financial performance of our reportable segments. We believe that EBITDA improves
comparability between periods by eliminating the impact of finance costs, income taxes, depreciation, and
amortization.
Adjusted EBIT and Adjusted EBITDA exclude items that we do not consider to be indicative of operational and
financial trends, either by nature or amount, to provide a better overall understanding of our underlying business
performance.
EBITDA is calculated by adding depreciation and amortization to EBIT. Adjusted EBITDA is calculated by adding
depreciation and amortization to Adjusted EBIT.
The most directly comparable GAAP financial measure to EBITDA, Adjusted EBITDA, and Adjusted EBIT is EBIT.
41
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
i
e
n
n
t
s
a
l
e
h
t
r
o
f
s
n
o
i
t
a
r
e
p
o
d
e
t
a
d
i
l
o
s
n
o
c
r
u
o
r
o
f
I
A
D
T
B
E
d
e
t
s
u
d
A
d
n
a
j
,
I
T
B
E
d
e
t
s
u
d
A
j
,
I
A
D
T
B
E
o
t
I
T
B
E
m
o
r
f
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
:
s
w
o
l
l
o
f
s
a
s
i
7
1
0
2
d
n
a
,
8
1
0
2
,
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
2
9
3
4
8
1
6
7
5
2
9
3
—
—
5
—
—
—
)
4
(
3
9
3
4
8
1
7
7
5
3
2
4
7
8
1
0
1
6
3
2
4
—
—
—
—
—
0
3
)
7
(
6
4
4
7
8
1
3
3
6
5
2
4
3
9
2
8
1
7
5
2
4
—
—
0
2
8
4
—
—
7
5
4
3
9
2
0
5
7
7
9
3
7
0
7
1
4
9
6
7
0
7
1
7
9
—
—
—
—
—
—
—
7
9
3
7
(cid:3)
(cid:3)
4
9
—
—
—
—
—
—
—
4
9
6
7
(cid:3)
(cid:3)
2
5
8
7
0
3
1
2
5
8
3
1
7
7
5
1
2
8
3
1
8
0
1
7
7
5
8
1
8
0
1
)
4
6
(
)
7
3
(
)
4
1
(
—
2
4
9
—
—
—
9
3
8
7
—
—
—
—
—
—
7
7
1
0
1
8
7
1
—
—
—
—
—
—
4
9
7
7
8
0
1
7
7
5
8
1
8
0
1
)
5
(
—
)
0
1
(
(cid:3)
(cid:3)
—
—
—
—
3
9
7
7
7
3
1
8
7
5
1
2
7
3
1
—
—
—
—
—
—
—
8
7
7
3
1
5
1
2
0
5
1
0
8
0
3
2
0
5
1
—
—
—
—
—
—
—
0
8
0
5
1
0
3
2
7
5
1
4
8
1
4
2
7
5
1
—
—
—
—
—
—
—
4
8
7
5
1
1
4
2
0
7
1
0
7
1
7
1
1
1
7
1
0
7
1
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
—
)
1
(
—
—
1
)
2
(
)
2
(
—
—
—
0
2
2
—
2
2
—
)
6
(
)
3
(
4
—
—
)
5
(
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
1
)
0
1
(
)
2
(
—
—
—
4
0
1
—
—
—
—
—
0
1
4
—
—
—
—
—
4
2
—
—
—
—
—
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
s
e
r
i
f
d
l
i
w
a
t
r
e
b
A
m
o
r
f
l
s
d
e
e
c
o
r
p
e
c
n
a
r
u
s
n
I
t
s
y
g
r
e
n
E
o
t
d
e
t
a
e
r
l
s
s
o
l
d
n
a
f
f
o
-
e
t
i
r
W
l
e
u
f
e
R
4
o
t
d
e
t
a
e
r
l
s
t
s
o
c
n
o
i
t
i
s
u
q
c
A
i
t
s
y
g
r
e
n
E
n
i
t
n
e
m
t
s
e
v
n
i
r
u
o
n
o
n
r
u
t
e
R
,
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
r
,
s
e
r
u
s
o
c
l
y
t
i
l
i
c
a
F
s
t
s
o
c
e
c
n
a
r
e
v
e
S
s
e
s
s
o
l
t
n
e
m
r
i
a
p
m
i
d
n
a
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
i
)
2
(
)
1
(
I
A
D
T
B
E
d
e
t
s
u
d
A
j
)
2
(
)
1
(
I
T
B
E
d
e
t
s
u
d
A
j
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
i
)
2
(
)
1
(
I
T
B
E
t
r
o
p
p
u
s
S
W
E
C
:
s
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
I
T
B
E
)
2
(
)
1
(
A
D
T
B
E
I
)
s
n
o
i
l
l
i
m
$
(
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
s
e
r
i
f
d
l
i
w
a
t
r
e
b
A
m
o
r
f
l
s
d
e
e
c
o
r
p
e
c
n
a
r
u
s
n
I
S
R
A
l
f
o
n
o
i
t
a
u
a
v
e
d
f
o
t
c
a
p
m
i
x
a
T
y
l
r
a
e
n
o
s
t
s
o
c
n
o
i
t
p
m
e
d
e
r
f
o
t
c
a
p
m
i
x
a
T
t
b
e
d
m
r
e
t
-
g
n
o
l
f
o
t
n
e
m
y
a
p
e
r
s
e
x
a
t
e
m
o
c
n
i
)
f
o
y
r
e
v
o
c
e
r
(
r
o
f
i
n
o
s
v
o
r
i
s
m
e
t
i
t
n
a
c
i
f
i
n
g
s
n
o
i
,
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
r
,
s
e
r
u
s
o
c
l
y
t
i
l
i
c
a
F
s
t
s
o
c
e
c
n
a
r
e
v
e
S
t
r
o
p
p
u
s
S
W
E
C
:
s
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
d
e
d
n
e
s
h
t
n
o
m
3
)
s
n
o
i
l
l
i
m
$
(
s
e
s
s
o
l
t
n
e
m
r
i
a
p
m
i
d
n
a
:
s
w
o
l
l
o
f
s
a
P
)
1
(
)
2
(
s
a
w
7
1
0
2
d
n
a
,
8
1
0
2
,
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
e
n
n
i
t
s
a
l
e
h
t
r
o
f
s
m
e
t
i
t
n
a
c
i
f
i
n
g
s
i
f
o
s
e
x
a
t
e
m
o
c
n
i
)
f
o
y
r
e
v
o
c
e
r
(
r
o
f
i
i
n
o
s
v
o
r
p
n
o
t
c
a
p
m
i
e
h
T
2
4
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
8
2
.
1
7
1
0
2
8
3
.
1
8
1
0
2
8
4
.
1
9
1
0
2
1
3
.
0
3
3
.
0
2
1
0
.
4
5
0
.
5
4
0
.
3
4
0
.
6
5
0
.
1
6
0
.
6
6
0
.
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
,
8
1
0
2
,
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
e
n
n
i
t
s
a
l
e
h
t
r
o
f
s
n
o
i
t
a
r
e
p
o
d
e
a
d
t
i
l
o
s
n
o
c
r
u
o
r
o
f
i
S
P
E
c
s
a
b
d
e
t
s
u
d
A
o
t
j
i
S
P
E
c
s
a
b
m
o
r
f
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
:
s
w
o
l
l
o
f
s
a
s
i
7
1
0
2
d
n
a
—
—
3
0
.
0
—
—
—
—
—
—
—
—
—
2
1
.
0
8
1
.
0
4
0
.
0
3
3
.
1
—
5
6
.
1
)
2
0
.
0
(
)
3
0
.
0
(
(cid:3)
(cid:3)
—
—
9
0
.
0
3
0
.
0
3
0
.
0
2
0
.
0
—
—
—
5
6
.
1
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
—
—
—
—
—
—
—
—
—
1
3
.
0
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
—
—
—
—
—
—
—
—
—
0
2
.
0
4
0
.
0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
0
3
0
(
.
)
7
1
0
(
.
)
7
0
0
(
.
—
3
3
.
0
—
6
0
.
0
—
7
3
0
.
—
8
3
0
.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
—
—
—
—
—
—
)
5
0
0
(
.
)
3
0
0
(
.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
3
0
.
—
6
5
0
.
—
1
6
0
.
—
6
6
0
.
(cid:3)
t
n
e
m
y
a
p
y
l
r
a
e
e
h
t
n
o
t
s
o
c
n
o
i
t
p
m
e
d
e
R
t
b
e
d
m
r
e
t
-
g
n
o
l
f
o
s
e
r
i
f
d
l
i
w
a
t
r
e
b
A
m
o
r
f
l
s
d
e
e
c
o
r
p
e
c
n
a
r
u
s
n
I
l
e
u
f
e
R
4
o
t
d
e
t
a
e
r
l
s
t
s
o
c
n
o
i
t
i
s
u
q
c
A
i
S
R
A
l
f
o
n
o
i
t
a
u
a
v
e
d
f
o
t
c
a
p
m
i
x
a
T
t
s
y
g
r
e
n
E
o
t
d
e
t
a
e
r
l
s
s
o
l
d
n
a
f
f
o
-
e
t
i
r
W
t
s
y
g
r
e
n
E
n
i
t
n
e
m
t
s
e
v
n
i
r
u
o
n
o
n
r
u
t
e
R
,
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
r
,
s
e
r
u
s
o
c
l
y
t
i
l
i
c
a
F
s
t
s
o
c
e
c
n
a
r
e
v
e
S
s
e
s
s
o
l
t
n
e
m
r
i
a
p
m
i
d
n
a
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
)
3
(
)
2
(
)
1
(
i
S
P
E
c
s
a
b
d
e
t
s
u
d
A
j
3
4
y
a
m
s
t
n
u
o
m
a
y
l
r
e
t
r
a
u
q
,
e
r
o
f
e
r
e
h
t
;
s
r
e
t
r
a
u
q
e
v
i
t
c
e
p
s
e
r
e
h
t
g
n
i
r
u
d
i
g
n
d
n
a
t
s
t
u
o
s
e
r
a
h
s
n
o
m
m
o
c
f
o
r
e
b
m
u
n
e
g
a
r
e
v
a
i
d
e
t
h
g
e
w
e
h
t
g
n
s
u
i
d
e
t
l
a
u
c
a
c
l
n
e
e
b
s
a
h
r
e
t
r
a
u
q
h
c
a
e
r
o
f
t
c
a
p
m
i
e
r
a
h
s
r
e
p
e
h
T
.
l
a
t
o
t
e
t
a
d
-
o
t
-
r
a
e
y
r
o
l
a
u
n
n
a
e
h
t
o
t
d
d
a
t
o
n
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
)
2
(
)
3
(
d
e
d
n
e
s
h
t
n
o
m
3
t
r
o
p
p
u
s
S
W
E
C
:
s
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
)
2
(
)
1
(
S
P
E
c
s
a
B
i
)
$
(
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
,
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
e
n
n
t
s
a
i
l
e
h
t
r
o
f
s
n
o
i
t
a
r
e
p
o
n
a
d
a
n
a
C
i
r
u
o
r
o
f
j
I
A
D
T
B
E
d
e
t
s
u
d
A
d
n
a
T
B
E
d
e
t
s
u
d
A
o
t
I
j
I
T
B
E
m
o
r
f
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
:
s
w
o
l
l
o
f
s
a
s
i
7
1
0
2
d
n
a
,
8
1
0
2
d
e
d
n
e
s
h
t
n
o
m
3
)
s
n
o
i
l
l
i
m
$
(
5
2
2
7
9
2
6
9
2
3
—
—
)
4
(
9
9
4
2
2
3
2
3
—
—
—
)
7
(
6
9
0
9
2
6
8
3
—
0
1
7
—
3
1
3
4
7
1
7
8
4
2
7
—
—
—
—
2
7
2
4
(cid:3)
0
6
—
—
—
—
0
6
3
4
(cid:3)
4
1
1
3
0
1
3
6
3
9
2
7
)
0
6
(
0
2
)
5
3
(
—
)
3
1
(
—
5
—
8
2
7
4
5
7
—
—
8
5
8
4
—
—
9
5
7
4
9
6
)
0
1
(
—
(cid:3)
—
—
9
5
6
4
2
8
—
—
—
—
2
8
7
4
4
8
—
—
—
—
4
8
8
4
2
9
—
—
—
—
2
9
0
5
s
e
r
i
f
d
l
i
w
a
t
r
e
b
A
m
o
r
f
l
s
d
e
e
c
o
r
p
e
c
n
a
r
u
s
n
I
,
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
r
,
s
e
r
u
s
o
c
l
y
t
i
l
i
c
a
F
s
t
s
o
c
e
c
n
a
r
e
v
e
S
t
r
o
p
p
u
s
S
W
E
C
s
e
s
s
o
l
t
n
e
m
r
i
a
p
m
i
d
n
a
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
i
)
2
(
)
1
(
I
T
B
E
d
e
t
s
u
d
A
j
:
s
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
)
2
(
)
1
(
I
T
B
E
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
6
0
1
6
0
1
5
0
1
9
2
1
2
3
1
2
4
1
)
2
(
)
1
(
I
A
D
T
B
E
d
e
t
s
u
d
A
j
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
e
n
n
t
s
a
i
l
e
h
t
r
o
f
s
n
o
i
t
a
r
e
p
o
n
a
c
i
r
e
m
A
h
u
o
S
t
r
u
o
r
o
f
j
I
A
D
T
B
E
d
e
t
s
u
d
A
d
n
a
T
B
E
d
e
t
s
u
d
A
o
t
I
j
I
T
B
E
m
o
r
f
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
4
8
1
2
4
1
0
2
1
2
—
0
1
—
6
8
1
8
5
4
4
2
—
2
4
1
2
6
4
0
2
1
1
3
1
1
8
2
1
2
1
3
—
—
1
3
0
2
1
5
8
3
—
—
8
3
2
2
0
6
2
7
1
4
3
2
2
2
5
4
0
4
—
—
0
4
9
1
9
5
1
4
—
—
1
4
0
2
1
6
1
4
—
—
1
4
0
2
1
6
1
5
—
—
1
5
0
2
1
7
8
5
—
—
8
5
2
2
0
8
9
5
—
—
9
5
2
2
1
8
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
,
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
r
,
s
e
r
u
s
o
c
l
y
t
i
l
i
c
a
F
s
t
s
o
c
e
c
n
a
r
e
v
e
S
s
e
s
s
o
l
t
n
e
m
r
i
a
p
m
i
d
n
a
(cid:3)
(cid:3)
(cid:3)
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
i
)
2
(
)
1
(
I
A
D
T
B
E
d
e
t
s
u
d
A
j
)
2
(
)
1
(
I
T
B
E
d
e
t
s
u
d
A
j
:
s
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
)
2
(
)
1
(
I
T
B
E
)
s
n
o
i
l
l
i
m
$
(
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
:
s
w
o
l
l
o
f
s
a
s
i
7
1
0
2
d
n
a
,
8
1
0
2
,
9
1
0
2
d
e
d
n
e
s
h
t
n
o
m
3
4
4
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
)
2
(
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
e
n
n
t
s
a
i
l
e
h
t
r
o
f
0
2
0
2
s
n
o
i
t
a
r
e
p
o
d
n
a
e
r
I
l
&
K
U
r
u
o
r
o
f
j
I
A
D
T
B
E
d
e
t
s
u
d
A
d
n
a
T
B
E
d
e
t
s
u
d
A
o
t
I
j
I
T
B
E
m
o
r
f
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
1
2
0
2
:
s
w
o
l
l
o
f
s
a
s
i
7
1
0
2
d
n
a
,
8
1
0
2
,
9
1
0
2
d
e
d
n
e
s
h
t
n
o
m
3
7
3
—
7
3
6
2
3
6
1
5
—
1
5
8
2
9
7
6
4
—
6
4
6
3
2
8
5
5
—
0
1
5
1
1
1
—
0
1
1
1
)
5
(
4
)
1
(
9
8
9
9
9
—
8
1
1
1
—
1
1
9
0
2
7
7
—
0
1
7
1
7
1
—
7
1
0
1
7
2
7
1
—
7
1
0
1
7
2
2
1
—
2
1
1
1
3
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
i
)
2
(
)
1
(
I
A
D
T
B
E
d
e
t
s
u
d
A
j
s
t
s
o
c
e
c
n
a
r
e
v
e
S
(cid:3)
:
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
)
2
(
)
1
(
I
T
B
E
)
2
(
)
1
(
I
T
B
E
d
e
t
s
u
d
A
j
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
)
s
n
o
i
l
l
i
m
$
(
)
4
5
(
)
7
6
(
)
7
3
(
)
1
1
(
—
—
—
—
—
)
4
5
(
1
)
3
5
(
—
—
—
—
0
3
)
7
3
(
1
)
6
3
(
—
—
—
4
—
)
3
3
(
2
)
1
3
(
(cid:3)
(cid:3)
—
—
—
—
—
)
1
1
(
1
)
0
1
(
(cid:3)
(cid:3)
)
5
(
—
—
—
—
—
)
5
(
1
)
4
(
)
8
(
)
4
(
—
1
—
—
)
1
1
(
—
)
1
1
(
)
4
(
)
2
(
—
—
—
—
)
6
(
1
)
5
(
)
6
1
(
)
9
(
)
3
1
(
)
9
(
)
1
(
—
—
—
—
)
7
1
(
1
)
6
1
(
(cid:3)
(cid:3)
—
)
5
(
—
—
—
)
4
1
(
1
)
3
1
(
—
—
—
—
—
)
3
1
(
1
)
2
1
(
—
—
—
—
—
)
9
(
—
)
9
(
)
6
(
—
—
—
—
—
)
6
(
1
)
5
(
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
9
1
0
2
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
t
s
y
g
r
e
n
E
n
i
t
n
e
m
t
s
e
v
n
i
r
u
o
n
o
n
r
u
t
e
R
t
s
y
g
r
e
n
E
o
t
d
e
t
a
e
r
l
s
s
o
l
d
n
a
f
f
o
-
e
t
i
r
W
l
e
u
f
e
R
4
o
t
d
e
t
a
e
r
l
s
t
s
o
c
n
o
i
t
i
s
u
q
c
A
i
s
t
s
o
c
e
c
n
a
r
e
v
e
S
t
r
o
p
p
u
s
S
W
E
C
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
:
s
m
e
t
i
t
n
a
c
i
f
i
n
g
S
i
)
2
(
)
1
(
I
T
B
E
)
1
(
n
o
i
t
a
z
i
t
r
o
m
a
d
n
a
n
o
i
t
a
c
e
r
p
e
D
i
)
2
(
)
1
(
I
A
D
T
B
E
d
e
t
s
u
d
A
j
)
2
(
)
1
(
I
T
B
E
d
e
t
s
u
d
A
j
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
:
s
w
o
l
l
o
f
s
a
s
i
7
1
0
2
d
n
a
,
8
1
0
2
d
e
d
n
e
s
h
t
n
o
m
3
)
s
n
o
i
l
l
i
m
$
(
,
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
s
r
a
e
y
d
n
a
s
r
e
t
r
a
u
q
e
n
n
i
t
s
a
l
e
h
t
r
o
f
s
n
o
i
t
a
r
e
p
o
r
e
h
O
t
r
u
o
r
o
f
j
I
A
D
T
B
E
d
e
t
s
u
d
A
d
n
a
T
B
E
d
e
t
s
u
d
A
o
t
I
j
I
T
B
E
m
o
r
f
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
i
y
c
n
e
c
i
f
f
e
r
u
o
s
s
e
s
s
a
o
t
n
o
s
r
e
v
n
o
c
w
o
l
f
h
s
a
c
e
e
r
f
o
i
t
I
A
D
T
B
E
e
s
u
e
W
.
I
A
D
T
B
E
y
b
d
e
d
v
d
w
o
i
i
l
f
h
s
a
c
e
e
r
f
s
a
d
e
t
a
u
c
a
c
l
l
s
i
i
n
o
s
r
e
v
n
o
c
w
o
l
f
h
s
a
c
e
e
r
f
o
t
A
D
T
B
E
I
.
h
s
a
c
o
n
t
i
I
A
D
T
B
E
g
n
n
r
u
i
t
n
i
n
o
i
s
r
e
v
n
o
C
w
o
F
h
s
a
C
e
e
r
F
o
t
l
A
D
T
B
E
I
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
)
2
(
f
o
e
r
u
s
a
e
m
a
s
a
g
o
k
c
a
b
t
n
e
m
p
u
q
e
l
i
e
s
u
e
W
.
s
e
i
r
e
v
i
l
e
d
e
r
u
u
t
f
r
o
f
s
r
e
m
o
t
s
u
c
y
b
d
e
r
e
d
r
o
s
t
i
n
u
t
i
n
e
m
p
u
q
e
w
e
n
f
o
e
u
a
v
l
l
i
a
t
e
r
e
h
t
s
a
d
e
n
i
f
e
d
s
i
l
g
o
k
c
a
b
t
n
e
m
p
u
q
E
i
g
o
l
k
c
a
B
t
n
e
m
p
u
q
E
i
5
4
l
.
g
o
k
c
a
b
t
n
e
m
p
u
q
e
r
o
i
f
e
r
u
s
a
e
m
l
i
a
c
n
a
n
i
f
l
P
A
A
G
e
b
a
r
a
p
m
o
c
y
l
t
c
e
r
i
d
o
n
s
i
e
r
e
h
T
.
s
e
i
r
e
v
i
l
e
d
i
t
n
e
m
p
u
q
e
w
e
n
e
r
u
t
u
f
g
n
i
t
c
e
o
r
p
j
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
s
a
,
s
t
e
s
s
a
e
b
g
n
a
t
n
i
l
i
i
d
n
a
t
n
e
m
p
u
q
e
d
n
a
,
t
n
a
p
,
y
t
r
e
p
o
r
p
o
l
t
s
n
o
i
t
i
d
d
a
t
e
n
s
s
e
l
s
e
i
t
i
v
i
t
c
a
g
n
i
t
a
r
e
p
o
n
i
d
e
s
u
r
o
i
y
b
d
e
d
v
o
r
p
w
o
l
f
h
s
a
c
s
a
d
e
n
i
f
e
d
s
i
w
o
l
f
h
s
a
c
e
e
r
F
l
w
o
F
h
s
a
C
e
e
r
F
e
e
r
f
e
v
i
t
i
s
o
p
t
n
e
t
s
s
n
o
C
i
.
y
c
n
e
c
i
f
f
e
i
l
i
a
t
i
p
a
c
g
n
k
r
o
w
g
n
d
u
c
n
l
i
i
,
e
c
n
a
m
r
o
f
r
e
p
g
n
i
t
a
r
e
p
o
h
s
a
c
s
s
e
s
s
a
o
t
w
o
l
f
h
s
a
c
e
e
r
f
e
s
u
e
W
.
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
i
f
r
u
o
n
i
d
e
s
o
c
s
d
i
l
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
0
2
0
2
1
2
0
2
7
1
0
2
8
1
0
2
9
1
0
2
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
:
s
w
o
l
l
o
f
s
a
s
i
w
o
l
f
h
s
a
c
e
e
r
f
f
o
n
o
i
t
a
i
l
i
c
n
o
c
e
r
A
l
.
s
r
e
d
o
h
e
r
a
h
s
o
t
l
a
t
i
t
p
a
c
n
r
u
e
r
d
n
a
s
s
e
n
s
u
b
r
u
o
w
o
r
g
o
i
t
l
a
t
i
p
a
c
t
s
e
v
n
i
-
e
r
o
t
l
s
u
s
e
b
a
n
e
n
o
i
t
a
r
e
n
e
g
w
o
l
f
h
s
a
c
d
e
d
n
e
s
h
t
n
o
m
3
)
s
n
o
i
l
l
i
m
$
(
3
8
2
0
6
2
1
9
1
)
4
1
(
9
1
3
0
4
3
7
1
3
2
1
8
2
1
2
3
9
1
)
1
(
s
e
i
t
i
v
i
t
c
a
g
n
i
t
a
r
e
p
o
)
n
i
d
e
s
u
(
i
y
b
d
e
d
v
o
r
p
w
o
l
f
h
s
a
C
l
i
e
b
g
n
a
n
t
i
i
d
n
a
t
n
e
m
p
u
q
e
d
n
a
,
t
n
a
p
,
y
t
r
e
p
o
r
p
o
t
l
s
n
o
i
t
i
d
d
A
3
5
6
1
9
1
8
7
5
2
4
)
1
2
1
(
)
1
0
2
(
)
4
5
1
(
2
)
8
3
(
)
0
5
(
)
7
1
(
0
1
2
1
3
)
6
2
(
2
6
1
3
)
4
3
(
9
2
9
2
1
)
3
3
(
)
0
2
(
5
)
4
(
)
7
1
(
)
8
3
(
2
6
7
1
)
5
4
(
—
8
4
1
t
i
n
e
m
p
u
q
e
d
n
a
,
t
n
a
p
,
y
t
r
e
p
o
r
p
f
o
l
l
i
a
s
o
p
s
d
n
o
s
d
e
e
c
o
r
P
)
1
(
w
o
l
f
h
s
a
c
e
e
r
F
s
t
e
s
s
a
e
r
u
s
a
e
m
o
t
i
)
p
h
s
r
e
a
e
d
(
l
s
n
r
u
t
y
r
o
t
n
e
v
n
i
e
s
u
e
W
.
d
o
i
r
e
p
a
r
e
v
o
l
d
e
c
a
p
e
r
d
n
a
l
d
o
s
s
i
t
y
r
o
n
e
v
n
i
l
i
p
h
s
r
e
a
e
d
r
u
o
s
e
m
i
t
f
o
r
e
b
m
u
n
e
h
t
s
i
i
)
p
h
s
r
e
a
e
d
(
l
s
n
r
u
t
y
r
o
t
n
e
v
n
I
i
)
p
h
s
r
e
l
a
e
D
(
s
n
r
u
T
y
r
o
t
n
e
v
n
I
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
1
3
c
e
D
1
3
c
e
D
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
9
9
2
,
1
9
2
4
,
1
3
8
4
,
1
0
4
1
,
1
5
7
0
,
1
3
6
1
,
1
8
4
2
1
,
9
8
1
1
,
6
9
3
1
,
3
4
4
1
,
5
6
4
1
,
—
—
)
8
6
1
(
9
9
2
,
1
9
2
4
,
1
5
1
3
,
1
)
3
3
1
(
7
0
0
,
1
)
5
9
(
0
8
9
)
4
2
1
(
)
9
2
1
(
)
0
4
1
(
)
3
5
1
(
)
0
7
1
(
)
0
9
1
(
9
3
0
,
1
9
1
1
1
,
9
4
0
1
,
3
4
2
1
,
3
7
2
1
,
5
7
2
1
,
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
1
3
c
e
D
1
3
c
e
D
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
8
0
7
,
1
1
6
0
,
2
0
9
9
,
1
2
5
1
,
2
3
9
8
,
1
6
2
6
,
1
7
7
4
1
,
3
9
5
1
,
3
4
6
1
,
7
2
6
1
,
7
8
6
1
,
—
—
)
3
(
)
3
(
)
2
(
)
2
(
)
3
(
)
3
(
)
3
(
)
6
(
)
9
(
8
0
7
,
1
1
6
0
,
2
7
8
9
,
1
9
4
1
,
2
1
9
8
,
1
4
2
6
,
1
4
7
4
1
,
0
9
5
1
,
0
4
6
1
,
1
2
6
1
,
8
7
6
1
,
:
s
w
o
l
l
o
f
l
i
l
t
s
a
d
e
a
u
c
a
c
e
r
a
p
h
s
r
e
a
e
d
e
h
t
o
t
d
e
t
a
e
r
l
l
y
r
o
t
n
e
v
n
i
d
n
a
d
e
d
n
e
s
h
t
n
o
m
3
)
2
(
)
1
(
l
s
e
a
s
f
o
t
s
o
C
)
s
n
o
i
l
l
i
m
$
(
s
n
o
i
t
a
r
e
p
o
g
n
i
l
l
e
u
f
e
r
e
l
i
b
o
m
o
t
d
e
t
a
e
r
l
)
2
(
)
1
(
l
i
p
h
s
r
e
a
e
d
e
h
t
o
t
d
e
t
a
e
r
l
l
s
e
a
s
f
o
t
s
o
C
s
e
a
s
l
f
o
t
s
o
C
)
s
n
o
i
l
l
i
m
$
(
)
2
(
i
l
p
h
s
r
e
a
e
d
e
h
t
o
t
d
e
t
a
e
r
l
y
r
o
t
n
e
v
n
I
y
r
o
t
n
e
v
n
i
l
e
u
F
)
2
(
y
r
o
t
n
e
v
n
I
i
l
p
h
s
r
e
a
e
d
e
h
t
o
t
d
e
t
a
e
r
l
s
e
a
s
l
f
o
t
s
o
C
.
s
r
e
t
r
a
u
q
o
w
t
t
s
a
l
e
h
t
f
o
e
g
a
r
e
v
a
n
a
n
o
d
e
s
a
b
t
,
)
y
r
o
n
e
v
n
i
l
e
u
f
i
g
n
d
u
c
x
e
(
l
y
r
o
t
n
e
v
n
i
e
g
a
r
e
v
a
y
b
d
e
d
v
d
i
i
s
h
t
n
o
m
x
s
i
t
s
a
l
6
4
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
)
2
(
e
h
t
r
o
f
)
s
n
o
i
t
a
r
e
p
o
g
n
i
l
l
e
u
f
e
r
e
l
i
b
o
m
e
h
t
o
t
d
e
t
a
e
r
l
l
s
e
a
s
f
o
i
t
s
o
c
g
n
d
u
c
x
e
(
l
s
e
a
s
l
f
o
t
s
o
c
d
e
z
i
l
a
u
n
n
a
t
s
a
d
e
a
u
c
a
c
l
l
s
i
i
)
p
h
s
r
e
a
e
d
(
l
s
n
r
u
t
y
r
o
t
n
e
v
n
I
.
n
o
i
t
a
z
i
l
i
t
u
t
e
s
s
a
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
l
a
t
i
p
a
C
d
e
t
s
e
v
n
I
s
i
t
b
e
d
t
e
N
i
.
t
b
e
d
t
e
n
g
n
d
u
c
x
e
,
s
e
i
t
i
l
i
l
b
a
i
l
l
a
t
o
t
s
s
e
l
s
t
e
s
s
a
l
a
o
t
t
l
t
s
a
d
e
a
u
c
a
c
o
s
a
s
l
l
i
l
a
t
i
p
a
c
d
e
t
s
e
v
n
I
.
y
t
i
u
q
e
l
a
t
o
t
l
s
u
p
t
b
e
d
t
e
n
s
a
d
e
t
a
u
c
a
c
l
l
s
i
l
a
t
i
p
a
c
d
e
t
s
e
v
n
I
n
i
o
t
e
d
a
m
t
n
e
m
t
s
e
v
n
i
h
s
a
c
l
a
t
o
t
e
h
t
f
o
e
r
u
s
a
e
m
a
s
a
l
a
t
i
p
a
c
d
e
t
s
e
v
n
i
e
s
u
e
W
l
i
.
s
t
n
e
a
v
u
q
e
h
s
a
c
d
n
a
h
s
a
c
f
o
t
e
n
,
t
b
e
d
m
r
e
t
-
g
n
o
l
d
n
a
m
r
e
t
-
t
r
o
h
s
s
a
d
e
t
a
u
c
a
c
l
l
)
r
e
v
o
n
r
u
t
l
a
t
i
p
a
c
d
e
t
s
e
v
n
i
,
I
C
O
R
d
e
t
s
u
d
A
j
,
I
C
O
R
(
s
t
n
e
m
e
r
u
s
a
e
m
t
n
e
r
e
f
f
i
d
f
o
r
e
b
m
u
n
a
n
i
d
e
s
u
s
i
l
a
t
i
p
a
c
d
e
t
s
e
v
n
I
l
.
t
n
e
m
g
e
s
e
b
a
t
r
o
p
e
r
h
c
a
e
d
n
a
g
n
n
n
F
i
i
:
s
w
o
l
l
o
f
s
a
d
e
t
a
u
c
a
c
l
l
s
i
l
a
t
i
p
a
c
d
e
t
s
e
v
n
I
.
s
t
n
e
m
g
e
s
e
b
a
t
r
o
p
e
r
l
t
n
e
e
w
e
b
d
n
a
s
e
n
a
p
m
o
c
i
i
r
e
h
t
o
t
s
n
a
g
a
e
c
n
a
m
r
o
f
r
e
p
l
i
a
c
n
a
n
i
f
s
s
e
s
s
a
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
)
8
5
4
(
)
4
5
4
(
)
8
6
2
(
)
0
6
2
(
)
8
3
3
(
)
3
5
4
(
)
9
3
5
(
)
9
6
4
(
)
8
7
3
(
)
8
1
5
(
)
2
0
5
(
1
3
c
e
D
1
3
c
e
D
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
8
1
—
6
5
8
6
9
2
,
1
4
7
9
,
1
0
3
8
,
2
—
4
5
1
4
5
3
,
1
4
5
0
,
1
9
0
1
,
2
3
6
1
,
3
6
2
2
0
0
2
8
1
3
,
1
6
7
4
,
1
5
1
1
,
2
1
9
5
,
3
9
2
3
0
0
2
1
8
3
,
1
0
5
6
,
1
3
3
2
,
2
3
8
8
,
3
8
5
1
0
0
2
8
4
3
,
1
8
6
3
,
1
7
2
1
,
2
5
9
4
,
3
7
1
2
0
0
2
6
3
1
,
1
0
0
1
,
1
4
8
1
,
2
4
8
2
,
3
2
9
1
0
2
1
6
8
7
0
1
,
1
6
0
2
2
,
7
6
0
3
,
3
0
1
6
2
3
3
7
9
3
3
9
4
4
2
2
,
7
7
1
3
,
4
1
1
6
8
3
3
0
9
5
2
0
,
1
2
5
2
2
,
7
7
2
3
,
9
1
4
1
9
1
3
2
9
5
1
0
,
1
0
2
3
2
,
5
3
3
3
,
4
7
3
0
9
1
1
2
9
3
8
9
3
4
3
,
2
6
2
3
3
,
t
b
e
d
m
r
e
t
-
g
n
o
l
f
o
n
o
i
t
r
o
p
t
n
e
r
r
u
c
-
n
o
N
t
b
e
d
m
r
e
t
-
g
n
o
l
f
o
n
o
i
t
r
o
p
t
n
e
r
r
u
C
t
b
e
d
m
r
e
t
-
t
r
o
h
S
)
2
(
)
1
(
l
a
t
i
p
a
c
d
e
t
s
e
v
n
I
)
2
(
)
1
(
y
t
i
u
q
e
l
a
t
o
T
t
b
e
d
t
e
N
i
l
s
t
n
e
a
v
u
q
e
h
s
a
c
d
n
a
h
s
a
C
)
s
n
o
i
l
l
i
m
$
(
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
)
2
(
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
e
v
o
n
r
u
T
l
a
t
i
p
a
C
d
e
t
s
e
v
n
I
i
i
y
b
d
e
d
v
d
s
h
t
n
o
m
e
v
e
w
l
t
t
s
a
l
e
h
t
r
o
f
e
u
n
e
v
e
r
t
e
n
s
a
d
e
a
u
c
a
c
t
l
l
s
i
r
e
v
o
n
r
u
t
l
a
t
i
p
a
c
d
e
t
s
e
v
n
I
.
y
c
n
e
c
i
f
f
i
e
l
a
t
i
p
a
c
e
r
u
s
a
e
m
o
t
r
e
v
o
n
r
u
t
l
a
t
i
p
a
c
d
e
t
s
e
v
n
i
.
s
r
e
t
r
a
u
q
r
u
o
f
t
s
a
l
e
h
t
f
o
l
a
t
i
p
a
c
d
e
t
s
e
v
n
i
e
s
u
e
W
e
g
a
r
e
v
a
y
a
p
e
r
o
t
7
4
y
t
i
l
i
b
a
d
n
a
e
g
a
r
e
v
e
l
g
n
i
t
a
r
e
p
o
s
s
e
s
s
a
o
t
o
i
t
a
r
i
s
h
t
e
s
u
e
W
t
.
s
h
n
o
m
e
v
e
w
l
t
t
s
a
l
e
h
t
r
o
f
j
i
I
A
D
T
B
E
d
e
t
s
u
d
A
y
b
d
e
d
v
d
t
b
e
d
t
e
n
s
a
d
e
t
a
u
c
a
c
l
l
i
s
i
o
i
t
a
r
i
s
h
T
I
o
i
t
a
R
A
D
T
B
E
d
e
t
s
u
d
A
o
t
j
t
b
e
D
t
e
N
l
.
t
n
a
t
s
n
o
c
d
e
h
A
D
T
B
E
d
e
t
s
u
d
A
d
n
a
I
j
t
b
e
d
t
e
n
h
t
i
w
,
t
b
e
d
y
a
p
e
r
o
t
s
u
e
k
a
t
l
d
u
o
w
t
i
t
a
h
t
,
s
r
a
e
y
n
i
,
e
m
i
t
f
o
h
t
g
n
e
l
e
h
t
i
s
e
t
a
m
x
o
r
p
p
a
o
i
t
a
r
i
s
h
T
.
t
b
e
d
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
e
u
n
e
v
e
R
t
e
N
I
f
o
%
a
s
a
T
B
E
d
n
a
,
e
u
n
e
v
e
R
t
e
N
f
o
%
a
s
a
A
D
T
B
E
I
,
e
u
n
e
v
e
R
t
e
N
f
o
%
a
s
a
A
&
G
S
,
e
u
n
e
v
e
R
t
e
N
f
o
%
a
s
a
t
i
f
o
r
P
s
s
o
r
G
,
e
u
n
e
v
e
R
t
e
N
-
s
s
a
p
e
r
a
s
t
s
o
c
l
e
u
f
e
s
e
h
t
s
A
.
s
n
o
i
t
a
r
e
p
o
n
a
d
a
n
a
C
i
r
u
o
n
i
s
n
o
i
t
a
r
e
p
o
g
n
i
l
l
f
e
u
e
r
e
l
i
b
o
m
e
h
t
o
t
t
d
e
a
e
r
l
l
e
u
f
f
o
t
s
o
c
e
h
t
s
s
e
l
e
u
n
e
v
e
r
l
a
t
o
t
s
a
d
e
n
i
f
e
d
s
i
e
u
n
e
v
e
r
t
e
N
k
c
a
r
e
h
t
e
s
u
a
c
e
b
s
s
e
n
s
u
b
e
h
t
i
f
o
e
c
n
a
m
r
o
f
r
e
p
e
h
t
i
g
n
s
s
e
s
s
a
n
i
e
u
n
e
v
e
r
n
a
h
t
e
v
i
t
t
a
n
e
s
e
r
p
e
r
e
r
o
m
s
a
e
u
n
e
v
e
r
t
e
n
w
e
v
e
w
i
,
s
s
e
n
s
u
b
i
i
s
h
t
r
o
f
e
r
u
t
a
n
n
i
h
g
u
o
r
h
t
l
a
t
o
t
s
a
e
m
a
s
e
h
t
s
a
w
s
n
o
i
t
a
r
e
p
o
l
l
a
m
o
r
f
e
u
n
e
v
e
r
t
e
n
,
9
1
0
2
o
t
r
o
i
r
P
.
l
o
r
t
n
o
c
r
u
o
n
i
t
o
n
s
i
n
a
c
i
r
e
m
A
h
t
u
o
S
r
u
o
r
o
F
.
e
u
n
e
v
e
r
l
i
l
t
e
n
g
n
s
u
d
e
t
a
u
c
a
c
n
e
e
b
e
v
a
h
s
I
P
K
e
s
e
h
t
,
9
1
0
2
1
Q
n
i
d
n
a
r
e
m
o
t
s
u
c
e
h
t
g
n
i
t
r
a
S
t
.
e
u
n
e
v
e
r
o
t
h
g
u
o
r
h
t
d
e
s
s
a
p
y
l
l
u
f
s
i
l
e
u
f
f
o
t
s
o
c
e
h
t
r
o
f
e
c
i
r
p
l
l
i
a
t
o
t
g
n
s
u
d
e
t
a
u
c
a
c
e
r
e
w
s
I
P
K
l
r
u
o
d
n
a
e
u
n
e
v
e
r
.
e
u
n
e
v
e
r
l
a
o
t
t
s
a
e
m
a
s
e
h
t
s
i
e
u
n
e
v
e
r
t
e
n
,
s
n
o
i
t
a
r
e
p
o
d
n
a
e
r
I
l
&
K
U
d
n
a
l
i
a
c
n
a
n
i
f
d
n
a
l
a
n
o
i
t
a
r
e
p
o
f
o
e
v
i
t
a
c
d
n
i
i
e
b
o
t
i
r
e
d
s
n
o
c
t
o
n
o
d
e
w
s
m
e
t
i
t
n
a
c
i
f
i
i
n
g
s
e
d
u
c
x
e
o
l
t
j
I
I
T
B
E
d
e
t
s
u
d
A
d
n
a
A
D
T
B
E
d
e
t
s
u
d
A
g
n
s
u
s
e
r
u
s
a
e
m
j
i
l
i
a
c
n
a
n
i
f
e
s
e
h
t
.
e
c
n
a
m
r
o
f
r
e
p
i
s
s
e
n
s
u
b
g
n
y
l
r
e
d
n
u
i
r
u
o
f
o
i
g
n
d
n
a
t
s
r
e
d
n
u
l
l
a
r
e
v
o
r
e
t
t
e
b
a
e
d
v
o
r
p
o
t
i
t
n
u
o
m
a
r
o
e
r
u
t
a
n
y
b
r
e
h
t
i
e
s
d
n
e
r
t
i
i
t
e
n
y
b
d
e
d
v
d
t
i
f
o
r
p
s
s
o
r
g
l
s
a
,
y
e
v
i
t
c
e
p
s
e
r
l
l
,
d
e
t
a
u
c
a
c
e
r
a
s
o
i
t
a
r
e
h
T
.
e
u
n
e
v
e
r
l
a
o
t
t
s
i
e
u
n
e
v
e
r
t
e
n
o
t
e
r
u
s
a
e
m
l
i
a
c
n
a
n
i
f
l
P
A
A
G
e
b
a
r
a
p
m
o
c
y
l
t
c
e
r
i
d
t
s
o
m
e
h
T
l
l
e
t
a
u
c
a
c
o
s
a
y
a
m
e
W
l
.
s
t
n
e
m
g
e
s
l
e
b
a
t
r
o
p
e
r
r
u
o
f
o
y
t
i
l
i
b
a
t
i
f
o
r
p
r
o
e
c
n
a
m
r
o
f
r
e
p
l
i
a
c
n
a
n
i
f
e
h
t
e
t
l
a
u
a
v
e
d
n
a
s
s
e
s
s
a
o
t
s
e
r
u
s
a
e
m
l
i
a
c
n
a
n
i
f
d
e
i
f
i
c
e
p
s
e
s
e
h
t
e
s
u
e
W
1
3
c
e
D
d
e
d
n
e
s
r
a
e
Y
—
7
1
0
2
6
5
2
,
6
—
8
1
0
2
6
9
9
,
6
9
1
0
2
7
1
8
,
7
)
7
2
5
(
6
5
2
,
6
6
9
9
,
6
0
9
2
,
7
9
1
0
2
1
3
c
e
D
1
1
9
,
1
)
4
5
1
(
7
5
7
,
1
:
s
w
o
l
l
o
f
s
a
l
d
e
t
a
u
c
a
c
l
s
i
e
u
n
e
v
e
r
t
e
N
.
e
u
n
e
v
e
r
t
i
e
n
y
b
d
e
d
v
d
T
B
E
d
n
a
I
i
,
e
u
n
e
v
e
r
t
i
e
n
y
b
d
e
d
v
d
A
D
T
B
E
I
i
,
e
u
n
e
v
e
r
t
e
n
y
b
d
e
d
v
d
A
&
G
S
i
i
,
e
u
n
e
v
e
r
0
2
0
2
1
2
0
2
d
e
d
n
e
s
h
t
n
o
m
3
)
9
1
1
(
)
4
8
(
)
0
1
1
(
)
5
1
1
(
)
7
2
1
(
)
0
4
1
(
)
6
5
1
(
)
5
7
1
(
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
8
5
5
,
1
9
1
4
,
1
3
5
5
1
,
6
6
6
1
,
6
9
5
1
,
5
4
8
1
,
4
0
9
1
,
9
4
9
1
,
9
3
4
,
1
5
3
3
,
1
3
4
4
1
,
1
5
5
1
,
9
6
4
1
,
5
0
7
1
,
8
4
7
1
,
4
7
7
1
,
)
1
(
e
u
n
e
v
e
r
l
a
t
o
T
)
1
(
e
u
n
e
v
e
r
t
e
N
l
e
u
f
f
o
t
s
o
C
)
s
n
o
i
l
l
i
m
$
(
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
.
e
g
a
t
n
e
c
r
e
p
a
s
a
d
e
s
s
e
r
p
x
e
,
s
r
e
t
r
a
u
q
r
u
o
f
t
s
a
l
e
h
t
f
o
l
a
t
i
p
a
c
d
e
t
s
e
v
n
i
e
g
a
r
e
v
a
i
i
y
b
d
e
d
v
d
s
h
t
n
o
m
e
v
e
w
l
t
t
s
a
l
e
h
t
r
o
f
I
T
B
E
s
a
d
e
n
i
f
e
d
s
i
I
C
O
R
j
I
C
O
R
d
e
t
s
u
d
A
d
n
a
C
O
R
I
8
4
r
o
e
r
u
t
a
n
y
b
r
e
h
t
i
e
s
d
n
e
r
t
l
i
a
c
n
a
n
i
f
d
n
a
l
a
n
o
i
t
a
r
e
p
o
f
o
e
v
i
t
i
a
c
d
n
i
e
b
o
t
i
r
e
d
s
n
o
c
t
o
n
o
d
e
w
t
a
h
t
s
m
e
t
i
t
n
a
c
i
f
i
i
n
g
s
e
d
u
c
x
e
o
t
l
j
i
I
T
B
E
d
e
t
s
u
d
A
g
n
s
u
C
O
R
d
e
t
s
u
d
A
I
j
.
e
c
n
a
m
r
o
f
r
e
p
i
s
s
e
n
s
u
b
g
n
y
l
r
e
d
n
u
r
u
o
i
f
i
o
g
n
d
n
a
t
s
r
e
d
n
u
l
l
a
r
e
v
o
r
e
t
t
e
b
a
e
d
v
o
r
p
o
t
i
t
n
u
o
m
a
l
l
e
t
a
u
c
a
c
o
s
a
e
W
l
l
.
s
r
e
d
o
h
e
r
a
h
s
o
t
s
n
r
u
t
e
r
e
v
i
t
c
a
r
t
t
t
a
d
n
a
h
w
o
r
g
e
b
a
l
t
i
f
o
r
p
e
v
i
r
d
t
a
h
t
i
i
s
n
o
s
c
e
d
n
o
i
t
a
c
o
l
l
a
l
a
t
i
p
a
c
r
o
f
e
r
u
s
a
e
m
l
u
f
e
s
u
a
s
a
C
O
R
w
e
v
e
W
I
i
.
c
n
I
l
a
n
o
i
t
a
n
r
e
t
n
I
i
g
n
n
n
F
i
s
t
l
u
s
e
R
l
a
u
n
n
A
1
2
0
2
o
i
t
a
R
e
u
n
e
v
e
R
t
e
N
o
t
l
a
t
i
p
a
C
g
n
i
k
r
o
W
&
l
a
t
i
p
a
C
g
n
i
k
r
o
W
t
n
e
r
r
u
c
d
n
a
t
b
e
d
m
r
e
t
-
t
r
o
h
s
g
n
d
u
c
x
e
(
i
l
s
e
i
t
i
l
i
b
a
i
l
t
n
e
r
r
u
c
l
a
o
t
t
s
s
e
l
)
s
t
l
i
n
e
a
v
u
q
e
h
s
a
c
d
n
a
h
s
a
c
g
n
d
u
c
x
e
(
i
l
s
t
e
s
s
a
t
n
e
r
r
u
c
l
a
t
o
t
s
a
d
e
n
i
f
e
d
s
i
l
a
t
i
p
a
c
g
n
k
r
o
W
i
.
y
t
i
i
d
u
q
i
l
l
l
i
a
r
e
v
o
g
n
s
s
e
s
s
a
r
o
f
e
r
u
s
a
e
m
a
s
a
l
i
a
t
i
p
a
c
g
n
k
r
o
w
w
e
v
e
W
i
.
)
t
b
e
d
m
r
e
t
-
g
n
o
l
f
o
n
o
i
t
r
o
p
e
W
.
s
h
t
n
o
m
e
v
e
w
l
t
t
s
a
l
e
h
t
r
o
f
e
u
n
e
v
e
r
t
e
n
y
b
d
e
d
v
d
i
i
,
s
r
e
t
r
a
u
q
r
u
o
f
t
s
a
l
e
h
t
f
o
.
e
u
n
e
v
e
r
l
a
t
i
i
p
a
c
g
n
k
r
o
w
e
g
a
r
e
v
a
s
a
d
e
a
u
c
a
c
t
l
l
s
i
o
i
t
a
r
e
u
n
e
v
e
r
t
e
n
o
t
l
i
a
t
i
p
a
c
g
n
k
r
o
w
e
h
T
t
t
e
n
e
a
r
e
n
e
g
o
t
l
a
t
i
p
a
c
g
n
k
r
o
w
i
f
o
e
s
u
r
u
o
n
i
i
y
c
n
e
c
i
f
f
e
e
h
t
s
s
e
s
s
a
o
t
I
i
P
K
s
h
t
e
s
u
:
s
w
o
l
l
o
f
s
a
l
d
e
t
a
u
c
a
c
l
s
i
l
a
t
i
p
a
c
i
g
n
k
r
o
W
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
)
8
5
4
(
)
4
5
4
(
)
8
6
2
(
)
0
6
2
(
)
8
3
3
(
)
3
5
4
(
)
9
3
5
(
)
9
6
4
(
)
8
7
3
(
)
8
1
5
(
)
2
0
5
(
1
3
c
e
D
1
3
c
e
D
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
r
a
M
0
3
n
u
J
0
3
p
e
S
1
3
c
e
D
1
3
5
,
3
4
2
9
,
3
9
5
6
,
3
8
2
8
,
3
6
1
4
,
3
1
6
2
,
3
4
1
2
3
,
9
1
3
3
,
6
1
4
3
,
0
2
6
3
,
9
1
6
3
,
3
7
0
,
3
0
7
4
,
3
1
9
3
,
3
8
6
5
,
3
8
7
0
,
3
8
0
8
,
2
5
7
6
2
,
0
5
8
2
,
8
3
0
3
,
2
0
1
3
,
7
1
1
3
,
)
2
(
)
1
(
l
6
4
5
,
1
2
3
6
,
1
1
9
7
,
1
5
8
9
,
1
1
0
7
,
1
8
0
5
,
1
5
4
3
1
,
2
6
4
1
,
6
9
5
1
,
6
5
5
1
,
6
2
5
1
,
)
8
1
(
—
—
)
4
5
1
(
)
6
2
2
(
)
0
0
2
(
)
9
2
3
(
)
0
0
2
(
)
8
5
1
(
)
0
0
2
(
)
7
1
2
(
)
0
0
2
(
)
2
9
(
)
1
0
2
(
)
3
0
1
(
)
6
2
3
(
)
4
1
1
(
)
6
8
3
(
)
9
1
4
(
)
1
9
1
(
)
4
7
3
(
)
0
9
1
(
5
4
5
,
1
2
9
9
,
1
6
2
0
,
2
2
1
1
,
2
5
3
7
,
1
7
1
7
,
1
3
2
6
1
,
7
1
8
1
,
2
4
9
1
,
6
5
1
2
,
5
5
1
2
,
7
2
5
,
1
8
3
8
,
1
0
0
6
,
1
3
8
5
,
1
7
7
3
,
1
0
0
3
,
1
0
3
3
1
,
8
8
3
1
,
2
4
4
1
,
6
4
5
1
,
1
9
5
1
,
)
2
(
)
1
(
a
t
i
p
a
c
g
n
k
r
o
w
n
i
i
s
t
e
s
s
a
t
n
e
r
r
u
c
l
a
t
o
T
l
i
s
t
n
e
a
v
u
q
e
h
s
a
c
d
n
a
h
s
a
C
)
2
(
)
1
(
s
t
e
s
s
a
t
n
e
r
r
u
c
l
a
t
o
T
t
b
e
d
m
r
e
t
-
g
n
o
l
f
o
n
o
i
t
r
o
p
t
n
e
r
r
u
C
t
b
e
d
m
r
e
t
-
t
r
o
h
S
)
2
(
)
1
(
s
e
i
t
i
l
i
b
a
i
l
t
n
e
r
r
u
c
l
a
t
o
T
)
s
n
o
i
l
l
i
m
$
(
l
a
t
i
p
a
c
g
n
k
r
o
w
n
i
i
s
e
i
t
i
l
i
b
a
i
l
t
n
e
r
r
u
c
l
a
t
o
T
l
a
t
i
p
a
c
g
n
k
r
o
W
i
9
4
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
t
n
e
m
u
r
t
s
n
I
l
i
a
c
n
a
n
F
i
,
9
S
R
F
I
d
n
a
s
r
e
m
o
t
s
u
C
h
t
i
w
s
t
c
a
r
t
n
o
C
m
o
r
f
e
u
n
e
v
e
R
,
5
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
e
v
a
h
7
1
0
2
r
o
f
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
.
8
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
.
9
1
0
2
,
1
y
r
a
u
n
a
J
i
g
n
n
n
g
e
b
i
r
a
e
y
l
i
a
c
n
a
n
i
f
e
h
t
r
o
f
e
v
i
t
c
e
f
f
e
s
e
s
a
e
L
,
6
1
S
R
F
I
f
o
n
o
i
t
p
o
d
a
r
u
o
r
o
f
d
e
t
a
t
s
e
r
n
e
e
b
t
o
n
e
v
a
h
9
1
0
2
o
t
r
o
i
r
p
s
t
l
u
s
e
r
e
v
i
t
a
r
a
p
m
o
C
)
1
(
)
2
(
Selected Annual Information
($ millions, except for share and option data)
Revenue from operations
Canada (1)
South America
UK & Ireland
Total revenue
Net income attributable to shareholders of Finning (2)
EPS (2)
Basic EPS
Diluted EPS
Total assets
Long-term debt
Current
Non-current
Total long-term debt (3)
Cash dividends declared per common share
(1)
Finning International Inc.
2021 Annual Results
2021
2020
2019
$ 3,969 $ 3,387 $ 4,454
2,214 1,922 2,226
887 1,137
1,111
$ 7,294 $ 6,196 $ 7,817
242
$
364 $
232 $
2.26 $
2.25 $
1.48
$
$
1.48
$ 5,971 $ 5,458 $ 5,990
1.43 $
1.43 $
$
201 $
190 $
921
200
1,318
$ 1,111 $ 1,308 $ 1,518
0.82 $ 0.815
$
0.86 $
1,107
In February 2019, Finning acquired 4Refuel in its Canadian reportable segment. The results of operations and financial
position of this acquired business have been included in the figures since the date of acquisition.
(2) Results in 2021, 2020, and 2019 were impacted by the following significant items:
($ millions except per share amounts)
CEWS support
Return on our investment in Energyst
Severance costs
Facility closures, restructuring costs, and impairment losses
Acquisition costs related to 4Refuel
Impact of significant items on EBIT
Significant items impacting EBIT - impact on basic EPS
Significant items impacting net income only - impact on basic EPS:
Tax impact of devaluation of ARS (a)
Impact of significant items on basic EPS:
(a) Tax impact of devaluation of ARS in 2019 ($4 million).
2021
2020
2019
(10) $
(5)
—
—
—
(15) $
(0.08) $
(115) $
—
42
9
—
(64) $
(0.29) $
—
—
20
8
4
32
0.15
— $
(0.08) $
— $
(0.29) $
0.02
0.17
$
$
$
$
$
(3)
In September 2021, we secured sustainability-linked terms for our $1.3 billion committed revolving credit facility. We also
extended the term of the credit facility from a maturity date of December 2024 to September 2026.
In September 2021, we settled our 2.84%, $200 million note which was due on September 29, 2021.
In July 2020, we settled our 3.232%, $200 million note which was due July 3, 2020.
In April 2020, we secured an additional $500 million committed revolving credit facility, which provided further financial
flexibility and liquidity. This facility had a term of two years, could be used for general corporate purposes, and had
substantially the same terms and conditions of the existing $1.3 billion committed revolving credit facility. In March 2021, we
cancelled this facility.
In August 2019, we issued $200 million of 2.626% senior unsecured notes due August 14, 2026.
50
(cid:3)
Finning International Inc.
2021 Annual Results
Q2
Q1
Q4
Q3
Q2
Q1
2020
Selected Quarterly Information
2021
$
Q3
Q4
104 $
($ millions, except for share,
per share, and option
amounts)
Revenue
Canada
South America
UK & Ireland
Total revenue
Net income attributable to
shareholders of Finning (1)
EPS (1)
Basic EPS
Diluted EPS
Total assets
Long-term debt
Current
Non-current
Total long-term debt (2)
Cash dividends paid per
common share
Common shares
outstanding (000’s)
Options outstanding (000’s)
(1) Results were impacted by the following significant items:
0.66 $
0.65 $
190 $
921
22.5¢
1,773
22.5¢
$
99 $
$ 1,089 $
874
478
206
$ 1,949 $ 1,904 $ 1,845 $ 1,596 $ 1,666 $ 1,553 $ 1,419 $ 1,558
961 $ 1,019 $
638
305
900 $
482
214
886 $
496
284
838 $
479
236
789 $
469
161
512
314
582
278
91 $
70 $
72 $
88 $
18 $
54
0.33
$
$
0.33
$ 5,971 $ 5,936 $ 5,615 $ 5,524 $ 5,458 $ 5,535 $ 5,716 $ 6,255
0.43 $
$
0.43
0.45 $
0.44 $
0.12 $
0.12 $
0.54 $
0.54 $
0.61 $
0.61 $
0.56 $
0.56 $
200
1,381
$ 1,111 $ 1,114 $ 1,289 $ 1,299 $ 1,308 $ 1,336 $ 1,548 $ 1,581
326 $
973
191 $
923
386 $
903
200 $
201 $
200 $
1,136
1,107
1,348
20.5¢
20.5¢
20.5¢
20.5¢
20.5¢
20.5¢
157,808 159,659 161,419 162,391
2,116
1,926
2,105
162,107 162,104 162,104 162,104
3,353
3,760
3,683
3,758
($ millions except per share amounts)
CEWS support
Return on our investment in Energyst
Severance costs
Facility closures, restructuring costs, and impairment losses
Impact of significant items on EBIT
Impact of significant items on basic EPS (b)
2021 (a)
Q1
2020 (a)
Q3
Q4
Q2
$
$
(10) $
(5)
—
—
(15) $
(14) $
—
—
—
(14) $
(37) $
—
—
—
(37) $
(64)
—
42
9
(13)
$ (0.08) $ (0.07) $ (0.17) $ (0.06)
(a) There were no significant items impacting EBIT or basic EPS in Q4 2021, Q3 2021, Q2 2021, and Q1 2020.
(b) The per share impact for each quarter has been calculated using the weighted average number of common shares outstanding during
the respective quarters; therefore, quarterly amounts may not add to the annual or year-to-date total.
(2)
In September 2021, we secured sustainability-linked terms for our $1.3 billion committed revolving credit facility. We also
extended the term of the credit facility from a maturity date of December 2024 to September 2026.
In September 2021, we settled our 2.84%, $200 million note which was due on September 29, 2021.
In July 2020, we settled our 3.232%, $200 million note which was due July 3, 2020.
In April 2020, we secured an additional $500 million committed revolving credit facility, which provided further financial
flexibility and liquidity. This facility had a term of two years, could be used for general corporate purposes, and had
substantially the same terms and conditions of the existing $1.3 billion committed revolving credit facility. In March 2021, we
cancelled this facility.
51
Finning International Inc.
2021 Annual Results
Forward-Looking Information Disclaimer
This report contains information about our business outlook, objectives, plans, strategic priorities and other
information that is not historical fact. Information is forward-looking when we use what we know and expect today
to give information about the future. Forward-looking information may include terminology such as aim, anticipate,
assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should,
strategy, strive, target, and will, and variations of such terminology. All forward-looking information in this MD&A is
subject to this disclaimer including the assumptions and material risk factors discussed and referred to below.
Forward-looking information in this report also includes, but is not limited to, the following: expected results from
the execution of our strategic framework, including our global strategic priorities, strategic pillars, and simple
execution plan described on page 4 of this MD&A; our expectation that our resilient business model, strong
execution, financial flexibility, and cost and capital discipline will serve us well as markets recover and position us
for opportunities that lie ahead; our belief that we are positioned well for an economic recovery; our expectation
that we will successfully manage our day-to-day operations through the Omicron wave; our expectation that our
effective tax rate will generally be within the 25-30% range on an annual basis; our expectation of future growth for
ComTech and timing to finalize the ComTech purchase price allocation; the plan to sell remaining assets of
Energyst and wind-up Energyst and the expectation that the sale of remaining assets will result in net proceeds to
be distributed to Energyst’s shareholders; all information in the section entitled “Market Update and Business
Outlook” on pages 27-28 of this MD&A regarding our expectations for our Canada operations (based on
assumptions of strong commodity prices and broad-based economic growth in Western Canada, federal and
provincial government infrastructure programs and private sector investments in natural gas, carbon capture,
utilization and storage and power projects, and our ability to leverage CUBIQ™ and drive continued success with
construction rebuilds and CVAs, and continued capital expenditures in the oil sands), our expectations for our
South America operations (based on assumptions related to Chile of a continued strong copper price, a projected
increase in copper production, a moderate increase in mining royalties, a strong demand for mining infrastructure
and the government’s infrastructure investment program), our expectations for our UK & Ireland operations (based
on assumptions of continued HS2 construction activity, continued government investments in infrastructure
projects, and projections of continued growth in cloud data centre capacity) and our expectations for the upcycle
and shift to growth (based on assumptions of ongoing economic growth and strength in commodity prices and that
we will successfully mitigate the effects of persistent challenges in the global supply chain, drive improved earnings
capacity and fixed cost reduction initiatives and manage our day-to-day operations through the Omicron wave); our
belief that, based on cash on hand, available credit facilities and the discretionary nature of certain cash flows,
such as rental and capital expenditures, we have sufficient liquidity to meet operational needs; our expectation to
contribute approximately $8 million to the defined benefit pension plans during the year ended December 31, 2022;
our expectation that foreign exchange fluctuations will continue to affect our results; our belief that we will prevail in
the claims against us associated with our export of agricultural animal feed products from Argentina and our ability
to implement mitigation measures in the case of the potential suspension of imports into Argentina by a portion of
our business.
All such forward-looking information is provided pursuant to the ‘safe harbour’ provisions of applicable Canadian
securities laws. Unless we indicate otherwise, forward-looking information in this report reflects our expectations at
the date in this MD&A. Except as may be required by Canadian securities laws, we do not undertake any
obligation to update or revise any forward-looking information, whether as a result of new information, future
events, or otherwise.
Forward-looking information, by its very nature, is subject to numerous risks and uncertainties and is based on a
number of assumptions. This gives rise to the possibility that actual results could differ materially from the
expectations expressed in or implied by such forward-looking information and that our business outlook,
objectives, plans, strategic priorities and other information that is not historical fact may not be achieved. As a
result, we cannot guarantee that any forward-looking information will materialize.
Factors that could cause actual results or events to differ materially from those expressed in or implied by this
forward-looking information include: the impact and duration of the COVID-19 pandemic and measures taken by
governments, customers and suppliers in response; general economic and market conditions and economic and
market conditions in the regions where we operate; foreign exchange rates; commodity prices; the level of
customer confidence and spending, and the demand for, and prices of, our products and services; our ability to
maintain our relationship with Caterpillar; our dependence on the continued market acceptance of our products,
including Caterpillar products, and the timely supply of parts and equipment; our ability to continue to sustainably
reduce costs and improve productivity and operational efficiencies while continuing to maintain customer service;
our ability to manage cost pressures as growth in revenue occurs; our ability to negotiate satisfactory purchase or
investment terms and prices, obtain necessary regulatory or other approvals, and secure financing on attractive
terms or at all; our ability to manage our growth strategy effectively; our ability to effectively price and manage
52
Finning International Inc.
2021 Annual Results
long-term product support contracts with our customers; our ability to reduce costs in response to slowing activity
levels; our ability to drive continuous cost efficiency in a recovering market; our ability to attract sufficient skilled
labour resources as market conditions, business strategy or technologies change; our ability to negotiate and
renew collective bargaining agreements with satisfactory terms for our employees and us; the intensity of
competitive activity; our ability to maintain a safe and healthy work environment across all regions; our ability to
raise the capital needed to implement our business plan; regulatory initiatives or proceedings, litigation and
changes in laws or regulations; stock market volatility; changes in political and economic environments in the
regions where we carry on business; our ability to respond to climate change-related risks; the occurrence of
natural disasters, pandemic outbreaks, geo-political events, acts of terrorism, social unrest or similar disruptions;
fluctuations in defined benefit pension plan contributions and related pension expenses; the availability of
insurance at commercially reasonable rates and whether the amount of insurance coverage will be adequate to
cover all liability or loss that we incur; the potential of warranty claims being greater than we anticipate; the
integrity, reliability and availability of, and benefits from, information technology and the data processed by that
technology; our ability to protect our business from cybersecurity threats or incidents; the actual impact of the
COVID-19 pandemic; and, with respect to our normal course issuer bid, our share price from time to time and our
decisions about use of capital. Forward-looking information is provided in this report to give information about our
current expectations and plans and allow investors and others to get a better understanding of our operating
environment. However, readers are cautioned that it may not be appropriate to use such forward-looking
information for any other purpose.
Forward-looking information provided in this report is based on a number of assumptions that we believed were
reasonable on the day the information was given, including but not limited to: the specific assumptions stated
above; that we will be able to successfully manage our business through the current challenging times involving
the effects of the COVID-19 response, stretched supply chains, competitive talent markets, and changing
commodity prices, and successfully implement our COVID-19 risk management plans; an undisrupted market
recovery, for example, undisrupted by COVID-19 impacts, commodity price volatility or social unrest; the
successful execution of our profitability drivers; that increased maintenance work by mining customers following
the lessening of COVID-19 restrictions and protocols will continue; that our cost actions to drive earnings capacity
in a recovery can be sustained; that commodity prices will remain at constructive levels; that our customers will not
curtail their activities; that general economic and market conditions will improve; that the level of customer
confidence and spending, and the demand for, and prices of, our products and services will be maintained; that
present supply chain challenges will not materially impact large project deliveries in our backlog; our ability to
successfully execute our plans and intentions; our ability to attract and retain skilled staff; market competition will
remain at similar levels; the products and technology offered by our competitors will be as expected; that identified
opportunities for growth will result in revenue; that we have sufficient liquidity to meet operational needs; consistent
and stable legislation in the various countries in which we operate; no disruptive changes in the technology
environment and that our current good relationships with Caterpillar, our customers and our suppliers, service
providers and other third parties will be maintained; sustainment of strengthened oil prices and the Alberta
government will not re-impose production curtailments; quoting activity for requests for proposals for equipment
and product support is reflective of opportunities; that there will be a moderate increase in mining royalties in Chile;
and strong recoveries in our regions, particularly in Chile and the UK. Some of the assumptions, risks, and other
factors, which could cause results to differ materially from those expressed in the forward-looking information
contained in this report, are discussed in our current AIF and in our annual and most recent quarterly MD&A for the
financial risks, including for updated risks related to the COVID-19 pandemic.
We caution readers that the risks described in the annual and most recent quarterly MD&A and in the AIF are not
the only ones that could impact us. We cannot accurately predict the full impact that COVID-19 will have on our
business, results of operations, financial condition or the demand for our services, due in part to the uncertainties
relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, the
steps our customers and suppliers may take in current circumstances, including slowing or halting operations, the
duration of travel and quarantine restrictions imposed by governments and other steps that may be taken by
governments to respond to the pandemic. Additional risks and uncertainties not currently known to us or that are
currently deemed to be immaterial may also have a material adverse effect on our business, financial condition, or
results of operation.
Except as otherwise indicated, forward-looking information does not reflect the potential impact of any non-
recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other
transactions that may be announced or that may occur after the date of this report. The financial impact of these
transactions and non-recurring and other unusual items can be complex and depends on the facts particular to
each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we
present known risks affecting our business.
53
Glossary of Defined Terms
Finning International Inc.
2021 Annual Results
4Refuel
AIF
Annual Financial Statements
ARS
Audit Committee
Board
CAD
Caterpillar
CEO
CEWS
CFO
CGU
CJRS
CLP
CNG
ComTech
Consol
COSO
COVID-19
DBRS
EBIT
EBITDA
Energyst
EPS
ERM
fav
Finning
Finning (Canada)
GAAP
GAAP financial measure
GBP
HS2
IFRS
KPI
LTIP
M&A
MD&A
n/a
n/m
NCIB
OEM
PLM
RNG
ROIC
S&P
SEDAR
SG&A
Specified Financial Measures
SVP
TSX
UK
unfav
US
USD
WACC
4Refuel Canada and 4Refuel US
Annual Information Form
Audited annual consolidated financial statements
Argentine Peso
Audit Committee of the Board of Directors of Finning
Board of Directors of Finning
Canadian dollar
Caterpillar Inc.
Chief Executive Officer
Canadian Emergency Wage Subsidy
Chief Financial Officer
Cash-generating unit
Coronavirus Job Retention Scheme
Chilean Peso
Compressed natural gas
Compression Technology Corporation
Consolidated
Commission of Sponsoring Organizations of the Treadway Commission
Novel Coronavirus
Dominion Bond Rating Service
Earnings (loss) before finance costs and income tax
Earnings (loss) before finance costs, income tax, depreciation, and amortization
Energyst B.V.
Earnings per share
Enterprise risk management
Favourable
Finning International Inc.
A division of Finning, with dealer territories in British Columbia, Alberta, Saskatchewan, the
Yukon Territory, the Northwest Territories, and a portion of Nunavut
Generally accepted accounting principles
A financial measure determined in accordance with GAAP
UK pound sterling
High Speed 2, a planned high speed railway in the UK the first phase of which is planned to
connect London to Birmingham
International Financial Reporting Standards
Key performance indicator
Long-term incentive plan
Mergers and acquisitions
Management’s Discussion and Analysis
not applicable
% change not meaningful
Normal course issuer bid
OEM Remanufacturing Company Inc.
PipeLine Machinery International ULC
Renewable natural gas
Return on invested capital
Standard and Poor’s
System for Electronic Document Analysis
Selling, general, and administrative costs
As defined in National Instruments 52-112
Senior Vice President
Toronto Stock Exchange
United Kingdom
Unfavourable
United States of America
US dollar
Weighted average cost of capital
54
Finning International Inc.
2021 Annual Results
MANAGEMENT'S REPORT TO THE SHAREHOLDERS
The accompanying Consolidated Financial Statements and Management’s Discussion and Analysis (MD&A) are the
responsibility of the management of Finning International Inc. (the Company). The Consolidated Financial
Statements have been prepared in accordance with International Financial Reporting Standards which recognize the
necessity of relying on management's best estimates and informed judgments. The financial information presented
in the Company’s MD&A is consistent with that in the Consolidated Financial Statements. The Consolidated
Financial Statements and MD&A have, in management's opinion, been properly prepared within reasonable limits of
materiality.
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, Deloitte LLP, have audited the Consolidated Financial Statements, as
reflected in their report for 2021.
The Board of Directors oversees management’s responsibilities for the Consolidated Financial Statements primarily
through the activities of its Audit Committee. The Audit Committee of the Board of Directors is composed solely of
directors who are neither officers nor employees of the Company. The Audit Committee meets regularly during the
year with management of the Company and the Company’s independent auditors to review the Company’s interim
and annual consolidated financial statements and MD&A. The Audit Committee also reviews internal accounting
controls, risk management, internal and external audit results and accounting principles and practices. The Audit
Committee is responsible for approving the remuneration and terms of engagement of the Company’s independent
auditors. The Audit Committee also meets with the independent auditors, without management present, to discuss
the results of their audit and the quality of financial reporting. On a quarterly basis, the Audit Committee reports its
findings to the Board of Directors, and recommends approval of the interim and annual Consolidated Financial
Statements.
/s/ L. Scott Thomson
/s/ Greg Palaschuk
L. Scott Thomson
President and Chief Executive Officer
Greg Palaschuk
Executive Vice President and Chief Financial Officer
February 8, 2022
19100 94 Avenue, Surrey, BC, V4N 5C3, Canada
1
Finning International Inc.
2021 Annual Results
Independent Auditor’s Report
To the Shareholders and the Board of Directors of
Finning International Inc.:
Opinion(cid:3)
We have audited the consolidated financial statements of Finning International Inc. (the "Company"), which
comprise the consolidated statements of financial position as at December 31, 2021 and 2020, and the consolidated
statements of net income, comprehensive income, changes in equity and cash flow for the years then ended, and
notes to the consolidated financial statements, including a summary of significant accounting policies (collectively
referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of
the Company as at December 31, 2021 and 2020, and its financial performance and its cash flows for the years then
ended in accordance with International Financial Reporting Standards ("IFRS").
Basis for Opinion(cid:3)
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS").
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter(cid:3)
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the
consolidated financial statements for the year ended December 31, 2021. This matter was addressed in the context
of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on this matter.
Revenue from sales of parts and labour when servicing equipment under long-term contracts and revenue
from sales of complex power and energy systems - Refer to Note 4 to the financial statements
Key Audit Matter Description
The Company recognizes long-term contracts revenue in a manner that best reflects the Company’s performance
over-time for revenue from sales of parts and labour when servicing equipment under long-term contracts and
revenue from sales of complex power and energy systems, which are presented as product support and new
equipment revenue, respectively, in the financial statements.
Revenue is recorded primarily based on the proportion of contract costs incurred for work performed to-date relative
to the estimated total contract costs. The accounting for servicing equipment under long-term contracts and for
complex power and energy system contracts that are not complete at the reporting date (collectively the
“uncompleted contracts”) involves significant judgments to estimate total contract costs. This required extensive
audit effort and a high degree of auditor attention in applying the audit procedures to audit management’s estimates
and evaluating the results of those procedures.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimated total contract costs for uncompleted contracts included the
following, among others:
(cid:120) For a selection of uncompleted contracts, we:
o Obtained and inspected the executed contract agreements, amendments and confirmed key terms
with management and contract personnel.
o Conducted inquiries with management and operational personnel to gain an understanding of the
status of contract activities.
o Evaluated costs to complete by testing key components of the estimated total contract costs,
including parts and labour.
2
Finning International Inc.
2021 Annual Results
o Compared management’s estimated total contract costs to those of similar contracts, when
applicable.
o Evaluated management’s ability to achieve the estimated total contract costs by performing
corroborative inquiry with the Company’s operational personnel and by comparing the estimates to
management’s work plans and costs incurred to date.
(cid:120) Evaluated management’s ability to estimate total contract costs accurately by comparing actual costs to
management’s historical estimates for completed contracts.
Other Information(cid:3)
Management is responsible for the other information. The other information comprises:
(cid:120) Management's Discussion and Analysis
(cid:120) The information, other than the financial statements and our auditor’s report thereon, in the Financial Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any
form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to
read the other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work
we have performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.
The Financial Report is expected to be made available to us after the date of the auditor's report. If, based on the
work we will perform on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements(cid:3)
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
IFRS, and for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements(cid:3)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
(cid:120) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
(cid:120) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control.
(cid:120) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
3
Finning International Inc.
2021 Annual Results
(cid:120) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
(cid:120) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
(cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Raj S. Bhogal.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, British Columbia
February 8, 2022
4
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
(Canadian $ millions)
ASSETS
Current assets
Cash and cash equivalents (Note 22)
Accounts receivable (Note 8)
Unbilled receivables (Note 4)
Inventory (Note 12)
Other assets (Note 14)
Total current assets
Property, plant, and equipment (Note 15)
Rental equipment (Note 15)
Intangible assets (Note 17)
Goodwill (Note 18)
Net post-employment assets (Note 21)
Distribution network (Note 18)
Investment in joint ventures and associate
Other assets (Note 14)
Total assets
LIABILITIES
Current liabilities
Short-term debt (Note 7)
Accounts payable and accruals (Note 8)
Deferred revenue (Note 4)
Current portion of long-term debt (Note 7)
Other liabilities (Note 19)
Total current liabilities
Long-term debt (Note 7)
Long-term lease liabilities
Other liabilities (Note 19)
Total liabilities
Commitments and contingencies (Note 26)
EQUITY
Share capital
Contributed surplus
Accumulated other comprehensive income
Retained earnings
Equity attributable to shareholders of Finning International Inc.
Non-controlling interests
Total equity
Total liabilities and equity
Approved by the Directors February 8, 2022
/s/ S.L. Levenick
S.L. Levenick, Director
/s/ H.N. Kvisle
H.N. Kvisle, Director
Finning International Inc.
2021 Annual Results
Consolidated Financial Statements
2021
2020
$
$
$
$
$
$
$
$
$
$
502
839
270
1,687
321
3,619
914
434
306
237
189
100
84
88
5,971
374
908
428
190
255
2,155
921
241
311
3,628
561
—
212
1,550
2,323
20
2,343
5,971
$
$
$
$
$
$
$
$
$
$
539
730
231
1,477
237
3,214
867
430
322
205
132
100
85
103
5,458
92
761
374
201
195
1,623
1,107
216
306
3,252
566
1
218
1,421
2,206
—
2,206
5,458
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements
5
CONSOLIDATED STATEMENTS OF NET INCOME
For years ended December 31
(Canadian $ millions, except share and per share amounts)
Revenue
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Total revenue (Note 4)
Cost of sales
Gross profit
Selling, general, and administrative expenses
Equity earnings of joint ventures
Other income (Note 6)
Other expenses (Note 6)
Earnings before finance costs and income taxes
Finance costs (Note 7)
Income before provision for income taxes
Provision for income taxes (Note 13)
Net income
Net income (loss) attributable to:
Shareholders of Finning International Inc.
Non-controlling interests
Earnings per share (Note 5)
Basic
Diluted
Finning International Inc.
2021 Annual Results
Consolidated Financial Statements
2021
2020
$
$
$
$
$
$
$
$
$
$
2,189
409
235
3,728
733
7,294
(5,493)
1,801
(1,266)
2
15
—
552
(75)
477
(114)
363
364
(1)
2.26
2.25
$
$
$
$
$
$
$
$
$
$
1,671
308
196
3,473
548
6,196
(4,626)
1,570
(1,245)
3
115
(51)
392
(85)
307
(75)
232
232
—
1.43
1.43
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements
6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For years ended December 31
(Canadian $ millions)
Net income
Other comprehensive income, net of income tax
Finning International Inc.
2021 Annual Results
Consolidated Financial Statements
2021
2020
$
363
$
232
Items that may be subsequently reclassified to net income:
Foreign currency translation adjustments
Share of foreign currency translation adjustments of joint ventures
Gain on net investment hedges
Impact of foreign currency translation and net investment hedges, net of income tax $
Gain on cash flow hedges
Loss on cash flow hedges, reclassified to statement of net income
Provision for income taxes on cash flow hedges
Impact of cash flow hedges, net of income tax
Items that will not be subsequently reclassified to net income:
Actuarial gain (Note 21)
Provision for income taxes on actuarial gain
Actuarial gain, net of income tax
Total comprehensive income
Total comprehensive income (loss) attributable to:
Shareholders of Finning International Inc.
Non-controlling interests
$
$
$
$
$
(14)
—
4
(10)
2
—
—
2
82
(29)
53
408
409
(1)
$
$
$
$
$
$
(20)
1
10
(9)
1
1
(1)
1
29
(6)
23
247
247
—
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements
7
Finning International Inc.
2021 Annual Results
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to Shareholders of Finning International Inc.
Accumulated
Other
(Canadian $ millions,
except number of shares)
Balance, January 1, 2020
Net income
Other comprehensive (loss)
Share Contributed Comprehensive Retained
Earnings
Capital
$ 1,315 $ 2,115 $
$ 570
232 $
$
$ —
Surplus
$
$
Income
228
—
232 $
2
—
Total
$
$
Total
— $ 2,115
232
— $
Non-
controlling
Interests
income
—
Total comprehensive (loss)
income
Exercise of share options
Share option expense
Hedging gain transferred to
statement of financial position
Repurchase of common
shares (Note 9)
Dividends on common shares
Balance, December 31, 2020
Net income
Other comprehensive (loss)
income
Total comprehensive (loss)
income
Exercise of share options
Share option expense
Hedging loss transferred to
statement of financial position
Non-controlling interests
on acquisition of
subsidiary (Note 23)
Repurchase of common
shares (Note 9)
Dividends on common shares
Balance, December 31, 2021
$
$ —
1
—
$
$
$
—
(5)
—
$ 566
$ —
—
$ —
12
—
—
—
(17)
—
$ 561
$
—
—
(1)
2
—
(2)
—
1
—
—
—
(3)
2
—
—
—
—
—
$
$
$
$
$
(8)
(8)
—
—
(2)
—
23
15
—
15
$
255 $
—
—
—
(16)
247 $
—
2
(2)
(23)
— $
—
—
—
—
247
—
2
—
(2)
(23)
—
218
—
(133)
(133)
$ 1,421 $ 2,206 $
364 $
$
364 $
—
(133)
— $ 2,206
363
(1) $
(8)
(8)
—
—
2
—
—
—
212
53
45
—
45
$
417 $
(9)
—
—
409 $
—
2
2
(1) $
—
—
408
—
2
—
2
—
—
21
21
(140)
(139)
(157)
(139)
$ 1,550 $ 2,323 $
(157)
—
—
(139)
20 $ 2,343
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements
8
CONSOLIDATED STATEMENTS OF CASH FLOW
For years ended December 31
(Canadian $ millions)
OPERATING ACTIVITIES
Net income
Adjusting for:
Depreciation and amortization
Loss on disposal of property, plant, and equipment
Impairment of long-lived assets (Note 15)
Return on investment in Energyst B.V. (Note 23)
Equity earnings of joint ventures
Share-based payment expense (Note 11)
Provision for income taxes (Note 13)
Finance costs (Note 7)
Net benefit cost of defined benefit pension plans and other post-employment benefit
plans in selling, general, and administrative expenses (Note 21)
Changes in operating assets and liabilities (Note 22)
Additions to rental fleet
Additions to rental equipment with purchase options
Proceeds on disposal of rental fleet
Proceeds on disposal of rental equipment with purchase options
Interest paid
Income tax paid
Cash flow provided by operating activities
INVESTING ACTIVITIES
Additions to property, plant, and equipment and intangible assets
Proceeds on disposal of property, plant, and equipment
Consideration paid for business acquisitions, net of cash acquired (Note 23)
Increase in short-term and long-term investments
Return on investment in Energyst B.V.
Cash flow used in investing activities
FINANCING ACTIVITIES
Increase (decrease) in short-term debt (Note 22)
Decrease in long-term debt (Note 22)
Decrease in lease liabilities (Note 22)
Credit facility fee
Repurchase of common shares
Dividends paid
Cash flow used in financing activities
Effect of currency translation on cash balances
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year (Note 22)
Finning International Inc.
2021 Annual Results
Consolidated Financial Statements
2021
2020
$
363
$
232
319
3
—
(5)
(2)
36
114
75
14
(277)
(137)
(91)
62
66
(74)
(41)
425
$
(133) $
8
(27)
(7)
8
(151) $
280
(201)
(84)
(1)
(155)
(139)
(300) $
(11) $
(37) $
$
539
$
502
$
$
$
$
$
$
$
$
308
4
9
—
(3)
21
75
85
12
422
(96)
(93)
85
30
(92)
(37)
962
(115)
23
—
(7)
—
(99)
(129)
(200)
(87)
(1)
(23)
(133)
(573)
(19)
271
268
539
9
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements
Finning International Inc.
2021 Annual Results
Index to the Notes to the Consolidated Financial Statements
1. GENERAL INFORMATION ............................................................................................................................................. 11
2. SIGNIFICANT ACCOUNTING POLICIES, KEY ASSUMPTIONS, AND SIGNIFICANT JUDGMENTS .............................................. 11
3. SEGMENTED INFORMATION ......................................................................................................................................... 14
4. REVENUE ................................................................................................................................................................... 16
5. EARNINGS PER SHARE ............................................................................................................................................... 19
6. OTHER INCOME AND OTHER EXPENSES ...................................................................................................................... 19
7. SHORT-TERM AND LONG-TERM DEBT AND FINANCE COSTS .......................................................................................... 20
8. FINANCIAL INSTRUMENTS ............................................................................................................................................ 21
9. MANAGEMENT OF CAPITAL ......................................................................................................................................... 31
10. SHARE CAPITAL ....................................................................................................................................................... 32
11. SHARE-BASED PAYMENTS ....................................................................................................................................... 33
12. INVENTORY .............................................................................................................................................................. 38
13. INCOME TAXES ......................................................................................................................................................... 39
14. OTHER ASSETS ........................................................................................................................................................ 42
15. PROPERTY, PLANT, AND EQUIPMENT AND RENTAL EQUIPMENT .................................................................................. 43
16. LEASES ................................................................................................................................................................... 45
17. INTANGIBLE ASSETS ................................................................................................................................................. 47
18. IMPAIRMENT ............................................................................................................................................................. 49
19. OTHER LIABILITIES ................................................................................................................................................... 50
20. PROVISIONS ............................................................................................................................................................. 51
21. POST-EMPLOYMENT BENEFITS ................................................................................................................................. 52
22. SUPPLEMENTAL CASH FLOW INFORMATION ............................................................................................................... 58
23. ACQUISITION AND INVESTMENT ................................................................................................................................. 60
24. ECONOMIC RELATIONSHIPS ...................................................................................................................................... 62
25. RELATED PARTY TRANSACTIONS AND TOTAL STAFF COSTS ....................................................................................... 62
26. COMMITMENTS AND CONTINGENCIES ........................................................................................................................ 62
27. GUARANTEES AND INDEMNIFICATIONS ....................................................................................................................... 63
10
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
1. GENERAL INFORMATION
Finning International Inc. (“Finning”) is a widely held, publicly traded corporation, listed on the Toronto Stock
Exchange (TSX: FTT). The registered and head office of the Company is located at 19100 94 Avenue, Surrey,
British Columbia, Canada. The Company’s principal business is the sale of heavy equipment and power and energy
systems, rental of equipment, and providing product support including sales of parts and servicing of equipment.
2. SIGNIFICANT ACCOUNTING POLICIES, KEY ASSUMPTIONS, AND SIGNIFICANT JUDGMENTS
These consolidated financial statements of Finning and its subsidiaries (together, the “Company”) have been
prepared in accordance with International Financial Reporting Standards (IFRS) issued and effective for the current
year. The consolidated financial statements were authorized for issuance by the Company’s Board of Directors (the
Board) on February 8, 2022. The Company has applied the same accounting policies consistently to all periods
presented unless otherwise noted.
The preparation of financial statements in conformity with IFRS requires management to make judgments,
estimates, and assumptions in respect of the application of accounting policies and the reported amounts of assets,
liabilities, income, and expenses. Actual results may differ from those judgments, estimates, and assumptions.
Certain of the Company’s accounting policies that relate to the financial statements, as well as estimates and
judgments the Company has made and how they affect the amounts reported in the consolidated financial
statements, are incorporated in this section. This note also describes new standards, amendments, or
interpretations that are effective and applied by the Company during 2021 or are not yet effective. Where an
accounting policy, estimate, or judgment is applicable to a specific note to the consolidated financial statements, it is
described within that note.
These consolidated financial statements were prepared under the historical cost basis except as otherwise
described in the notes to these consolidated financial statements.
(a) Principles of Consolidation
Accounting Policy
The consolidated financial statements include the results of the Company, which includes the Finning (Canada)
division, and Finning’s subsidiaries. Subsidiaries are those entities over which Finning has the power over the
investee, is exposed, or has rights, to variable returns from its involvement with the investee, and has the ability
to use its power to affect returns of the investee, generally accompanying a shareholding that confers more than
half of the voting rights. The consolidated financial statements include the operating results of acquired or
disposed subsidiaries from the date the Company obtains control or the date control is lost.
For subsidiaries that the Company controls, but does not own 100%, the portion of net assets and income
attributable to third parties is reported as non-controlling interests and net income attributable to non-controlling
interests in the consolidated statement of financial position and consolidated statement of net income,
respectively.
The Company’s principal subsidiaries, and the main countries in which they operate, are as follows:
Name
OEM Remanufacturing Company Inc.
4Refuel Canada LP
Finning Argentina S.A.
Finning Soluciones Mineras S.A.
Finning Bolivia S.A.
Finning Chile S.A.
Moncouver S.A.
Finning (UK) Ltd.
Finning (Ireland) Limited
(1) Canadian dollar (CAD), US dollar (USD), UK pound sterling (GBP), Euro (EUR)
Principal place
of business
Canada
Canada
Argentina
Argentina
Bolivia
Chile
Uruguay
United Kingdom
Republic of Ireland
% ownership
2021
100%
100%
100%
100%
100%
100%
100%
100%
100%
2020
100%
100%
100%
100%
100%
100%
100%
100%
100%
Functional
currency (1)
CAD
CAD
USD
USD
USD
USD
USD
GBP
EUR
The Company also has a 54.5% ownership interest in Compression Technology Corporation with 45.5% ownership
interest held by non-controlling interests. All shareholdings are of ordinary shares or other equity capital. Other
subsidiaries, while included in the consolidated financial statements, are not considered material.
11
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
(b) Joint Ventures and Associate
Accounting Policy
The Company accounts for its joint ventures and associate in which the Company has an interest using the equity
method. The joint ventures and associate follow accounting policies that are materially consistent with the
Company’s accounting policies. Where the Company transacts with its joint ventures or associate, unrealized profits
or losses are eliminated to the extent of the Company’s interest in the joint venture or associate.
Description of Business and Nature of Relationships
PipeLine Machinery International (PLM) is a strategic partnership that sells and rents both purpose-built pipeline and
traditional Caterpillar products to mainline pipeline construction customers worldwide.
Agriterra, an Alberta based company, is a consolidation of equipment dealers providing customers with agriculture
and consumer products.
Enerygst B.V. (Energyst) was the exclusive Caterpillar dealer in Europe for rental power and temperature control
solutions (refer to Note 23 for further details).
The Company’s proportion of ownership interest in its joint ventures and associate was as follows:
December 31
Name
PLM
Agriterra
Energyst
Nature of
Relationship
Joint Venture
Joint Venture
Associate
Principal place of
Business
United States
Canada
Netherlands
% ownership
2021
25.0%
20.0%
31.4%
2020
25.0%
20.0%
31.4%
Functional
currency
USD
CAD
EUR
The Company’s joint ventures and associate are not considered individually material.
(c) Foreign Currency Translation
Accounting Policy
These consolidated financial statements are presented in CAD, which is the functional currency of the parent
company. Transactions undertaken in foreign currencies are translated into the entity’s functional currency at
exchange rates prevailing at the time the transactions occurred.
Account balances denominated in foreign currencies are translated into the entity’s functional currency as follows:
(cid:120) Monetary items are translated at exchange rates in effect at the consolidated statement of financial position
dates and non-monetary items are translated at historical exchange rates; and
(cid:120) Foreign exchange gains and losses are recorded in the consolidated statement of net income except where the
exchange gain or loss arises from the translation of monetary items designated as hedges. Refer to Note 8c for
the Company’s accounting policy for hedging.
Financial statements of foreign operations are translated from the functional currency of the foreign operation into
CAD as follows:
(cid:120) Assets and liabilities are translated using the exchange rates in effect at the reporting dates;
(cid:120) Revenue and expense items are translated at average exchange rates prevailing during the period that the
transactions occurred; and,
(cid:120) Foreign currency translation adjustments are recorded in other comprehensive income. Cumulative foreign
currency translation adjustments are recognized in net income upon the disposal of a foreign operation (i.e. a
disposal of the Company’s entire interest in a foreign operation, or a disposal that involves loss of control of a
subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a
foreign operation, or loss of significant influence over an associate that includes a foreign operation).
The Company uses foreign currency debt to hedge foreign currency gains and losses on its long-term net
investments in foreign operations. Refer to Note 8c for the Company’s accounting policy for hedging.
Areas of Significant Judgment
Management has made judgments with regard to the determination of the functional currency of each subsidiary of
the Company.
12
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
(d) Amendments to Standards and New Accounting Standard
The Company has adopted the following amendments to IFRS:
(cid:120) Amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement,
IFRS 7, Financial Instruments; Disclosures, IFRS 4, Insurance Contracts, and IFRS 16, Leases, collectively
named ‘Interest Rate Benchmark Reform – Phase 2’ (effective January 1, 2021). The amendments provide relief
for modifications of financial contracts and leases and the discontinuation of hedge accounting required solely
by Interest Rate Benchmark Reform. The amendments include a practical expedient to apply the change in the
basis for determining the contractual cash flows prospectively by revising the effective interest rate. A similar
practical expedient is also provided for modifications of the cash flows of lease liabilities. In relation to hedge
accounting, the amendments introduce an exception to the existing requirements so that changes in the formal
designation of a hedge accounting relationship that are needed to reflect the changes required by Interest Rate
Benchmark Reform do not result in the discontinuation of hedge accounting or the designation of a new hedging
relationship. These amendments did not impact the Company’s consolidated financial statements.
(e) Future Accounting Pronouncements
The Company has not applied the following amendments to standards that have been issued but are not yet
effective:
(cid:120) Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets (effective January 1, 2022)
clarify that the ‘costs of fulfilling a contract’ when assessing whether a contract is onerous comprise both the
incremental costs and an allocation of other costs that relate directly to fulfilling the contract. The amendments
apply to contracts existing at the date when the amendments are first applied. On adoption of this amendment,
there will be no impact to the Company’s consolidated financial statements.
(cid:120) Amendments to IAS 1, Presentation of Financial Statements (effective January 1, 2023):
(cid:120) Clarify the presentation of liabilities in the consolidated statement of financial position. The classification of
liabilities as current or non-current is based on contractual rights that are in existence at the end of the
reporting period and is unaffected by expectations about whether an entity will exercise its right to defer or
accelerate settlement. A liability not due over the next twelve months is classified as non-current even if
management intends or expects to settle the liability within twelve months. The amendments also introduce
a definition of ‘settlement’ to make clear that settlement refers to the transfer of cash, equity instruments,
other assets, or services to the counterparty. Management is currently assessing the impact of these
amendments.
(cid:120) Require entities to disclose their material accounting policy information rather than significant accounting
policy information. The amendments provide guidance on how an entity can identify material accounting
policy information and clarify that information may be material because of its nature, even if the related
amounts are immaterial. Management will review and update the Company’s financial statements to
disclose material accounting policy information as appropriate when the amendments become effective.
(cid:120) Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (effective January 1,
2023) introduce a definition of ‘accounting estimates’ and clarify the difference between changes in accounting
policies and changes in accounting estimates. These amendments will impact changes in accounting policies
and changes in accounting estimates made after these amendments are adopted by the Company.
(cid:120) Amendments to IAS 12, Income Taxes (effective January 1, 2023) clarify how companies should account for
deferred tax related to assets and liabilities arising from a single transaction, such as leases and
decommissioning obligations. The amendments narrow the scope of the initial recognition exemption so that it
does not apply to transactions that give rise to equal and offsetting temporary differences. As a result,
companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences
arising on initial recognition of the related asset and liability. Management is currently assessing the impact of
these amendments.
13
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
3. SEGMENTED INFORMATION
The Company has operated primarily in one principal business during the year, that being the selling, servicing, and
renting of heavy equipment, engines, and related products.
The reportable segments, which are the same as the Company’s operating segments, are as follows:
(cid:120) Canadian operations: dealership territories in British Columbia, Alberta, Saskatchewan, the Yukon territory, the
Northwest Territories, and a portion of Nunavut and mobile on-site refuelling services in most of the provinces of
Canada, as well as in Texas, US.
(cid:120) South American operations: Chile, Argentina, and Bolivia.
(cid:120) UK & Ireland operations: England, Scotland, Wales, Northern Ireland, and the Republic of Ireland.
(cid:120) Other: corporate head office.
Information reported to the chief operating decision maker (CODM) for the purposes of resource allocation and
assessment of segment performance primarily focuses on the territories in which the Company operates. The
CODM considers earnings before finance costs, income taxes, depreciation and amortization (EBITDA) as the
primary measure of segment profit and loss. The Company considers net revenue (calculated as total revenue less
cost of fuel) as more representative than revenue in assessing business performance as the cost of fuel is not in the
Company’s control and is fully passed through to the customer.
The Company’s revenue, results, and other information by reportable segment were as follows:
For year ended December 31, 2021
($ millions)
Revenue
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Total revenue
Cost of fuel
Net revenue
Operating costs (1)
Equity earnings of joint ventures
Other income
EBITDA
Depreciation and amortization
Earnings (loss) before finance costs and income taxes
Finance costs
Provision for income taxes
Net income
Invested capital (2)
Gross capital expenditures (3)(4)
Gross rental equipment spend (4)
South
Canada America
UK &
Ireland
Other
Total
$
774 $
310
153
1,999
733
711 $
48
40
1,415
—
704 $
51
42
314
—
$ 3,969 $ 2,214 $ 1,111 $
(598)
—
—
$ 3,371 $ 2,214 $ 1,111 $
(1,921)
—
—
293 $
(84)
209 $
(2,865)
2
10
518 $
(191)
327 $
(1,017)
—
—
94 $
(41)
53 $
$
$
— $ 2,189
409
—
235
—
3,728
—
—
733
— $ 7,294
—
(598)
— $ 6,696
(5,842)
(39)
2
—
5
15
871
(34) $
(319)
(3)
552
(37) $
(75)
(114)
363
$
$ 1,876 $ 1,026 $
62 $
$
39 $
$
106 $
171 $
381 $
9 $
19 $
43 $ 3,326
202
25 $
229
— $
(1) Operating costs are calculated as cost of sales less cost of fuel plus selling, general, and administrative expenses less
(2)
depreciation and amortization.
Invested capital is calculated as total assets less total liabilities, excluding net debt. Net debt is calculated as short-term debt
and long-term debt, net of cash and cash equivalents.
(3) Capital includes property, plant, and equipment and intangible assets.
(4)
Includes leases and borrowing costs capitalized and excludes additions through business acquisitions.
14
For year ended December 31, 2020
($ millions)
Revenue
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Total revenue
Cost of fuel
Net revenue
Operating costs (1)
Equity earnings of joint ventures
Other income
Other expenses
EBITDA
Depreciation and amortization
Earnings (loss) before finance costs and income taxes
Finance costs
Provision for income taxes
Net income
Invested capital (2)
Gross capital expenditures (3)(4)
Gross rental equipment spend (4)
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
South
Canada America
UK &
Ireland
Other
Total
$
725 $
169
133
1,812
548
426 $
73
37
1,386
—
$ 3,387 $ 1,922 $
(428)
—
$ 2,959 $ 1,922 $
(2,572)
3
108
(25)
473 $
(185)
288 $
(1,697)
—
—
(21)
204 $
(83)
121 $
$
$
520 $
66
26
275
—
887 $
—
887 $
(830)
—
—
(4)
53 $
(37)
16 $
— $ 1,671
308
—
196
—
3,473
—
—
548
— $ 6,196
—
(428)
— $ 5,768
(5,135)
(36)
3
—
115
7
(51)
(1)
700
(30) $
(308)
(3)
392
(33) $
(85)
(75)
232
$
$ 1,819 $
41 $
$
157 $
$
931 $
67 $
21 $
327 $
14 $
12 $
(10) $ 3,067
143
21 $
190
— $
(1) Operating costs are calculated as cost of sales less cost of fuel plus selling, general, and administrative expenses less
(2)
depreciation and amortization.
Invested capital is calculated as total assets less total liabilities, excluding net debt. Net debt is calculated as short-term debt
and long-term debt, net of cash and cash equivalents.
(3) Capital includes property, plant, and equipment and intangible assets.
(4)
Includes leases and borrowing costs capitalized and excludes additions through business acquisitions.
Total revenue and non-current assets (5) by location of operations
($ millions)
Canada
Chile
United Kingdom
Argentina
Other countries
Total Revenue
Year ended December 31
2021
2020
Non-current Assets (5)
at December 31
2021
2020
$
$
$
$
$
3,860
1,873
996
282
283
$
$
$
$
$
3,301
1,642
777
228
248
$
$
$
$
$
1,438
328
183
72
104
$
$
$
$
$
1,430
328
193
72
33
(5) Non-current assets shown above exclude deferred tax assets and net post-employment assets.
15
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
4. REVENUE
Revenue Recognition
Revenue is recognized when or as the Company transfers control of goods or services to a customer at the amount
to which the Company expects to be entitled.
Revenue is recognized when control of the goods is transferred to the customer at a point-in-time for the following
revenue streams:
(cid:120) Revenue from sales of new and used equipment (except for complex power and energy systems) is presented
as new equipment revenue and used equipment revenue, respectively. Revenue is recognized when control
passes to the customer, which is generally at the time of shipment of the equipment to the customer or when
commissioning of equipment is complete. Revenue is recorded at the estimated amount of consideration to
which the Company expects to be entitled, including any non-cash consideration when used equipment is
accepted for trade-in value.
(cid:120) Revenue from sales of parts inventory is presented as product support revenue and recognized when control of
the part is transferred to the customer, which is generally upon shipment to the customer or when the customer
collects their purchase from one of the Company’s locations. Revenue from the sales of parts inventory is
initially recorded at the estimated amount of consideration to which the Company expects to be entitled. If
applicable, management recognizes an obligation for items such as refunds, incentives, and discounts with a
corresponding reduction in product support revenue. The value of the obligation is estimated based on the terms
of the contract, customary business practices, and historical experience.
(cid:120) Revenue from sales of mobile refuelling services is presented as fuel and other revenue and recognized upon
delivery to the customer. Revenue is recorded at the estimated amount of consideration to which the Company
expects to be entitled.
Revenue is recognized in a manner that best reflects the Company’s performance over-time for the following
revenue streams:
(cid:120) Revenue from sales of complex power and energy systems involving the design, installation, and assembly of
power and energy systems is presented as new equipment revenue and estimated as the amount of
consideration to which the Company expects to be entitled. Revenue is recognized on a percentage of
completion basis proportionate to the work that has been completed and is based on associated costs incurred.
(cid:120) Revenue from sales of parts and labour when servicing equipment both under and not under a long-term
contract is presented as product support revenue. For servicing of equipment, revenue is recognized as the
service work is performed based on parts list price and standard billing labour rates. Product support is also
offered to customers in the form of long-term contracts. For these contracts, revenue is recognized on a basis
proportionate to the service work that has been performed based on associated costs incurred. For certain long-
term product support contracts where flat-rate labour or a monthly subscription service is provided, the
Company recognizes revenue for labour on a straight-line basis. Revenue from product support under long-term
contracts is estimated based on the number and types of services expected to be performed using the pricing
terms set out in the contract.
(cid:120) Revenue from equipment rentals and operating leases where the Company acts as lessor is presented as
equipment rental revenue and in accordance with the terms of the relevant agreement with the customer, either
recognized evenly over the term of that agreement or on a usage basis such as the number of hours that the
equipment is used. Equipment rental includes revenue from rental agreements with customers which contain an
option to purchase the equipment at the end of the rental term (referred to as ‘Rental Equipment with Purchase
Options’). When the customer exercises its option to purchase the equipment, the sale is presented as new
equipment revenue or used equipment revenue, as appropriate.
Revenue from customers may be recognized in advance of billing the customer. The Company recognizes unbilled
receivables for sales of new equipment (including complex power and energy systems) and product support revenue
(including sales of parts and labour when servicing equipment both under and not under long-term contracts) when
revenue recognition criteria are met, and the Company has the right to receive amounts from customers but invoices
have not yet been issued. Similarly, the Company recognizes deferred revenue when cash has been collected from
customers but control of the goods or services has not yet been transferred. Deferred revenue is recorded when
cash is received prior to the transfer of control related to servicing equipment, complex power and energy systems,
and extended warranty. Deferred revenue is recorded when deposits are received from customers and in respect of
sales of new equipment where the Company has issued a repurchase guarantee and management has determined
that it has not transferred control of the equipment.
16
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Areas of Estimation Uncertainty
Long-Term Product Support Contracts and Sales of Complex Power and Energy Systems
Where the outcome of performance obligations for long-term product support contracts and sales of complex power
and energy systems can be estimated reliably, revenue is recognized. Revenue is measured primarily based on the
proportion of contract costs incurred for work performed to-date relative to the estimated total contract costs.
Variations in contract work, claims, and incentive payments are included to the extent that they have been agreed
with the customer. Where the outcome of performance obligations cannot be reliably measured, contract revenue is
recognized in the current period to the extent that costs have been incurred until such time that the outcome of the
performance obligations can be reasonably measured. Significant assumptions are required to estimate total
contract costs, which are recognized as expenses in the period in which they are incurred. When it is probable that
total contract costs will exceed total contract revenue, the expected loss is immediately recognized in the
consolidated statement of net income.
Areas of Significant Judgment
Repurchase Commitments
In certain circumstances, the Company enters into contracts with rights of return (at the customer’s discretion) for
the repurchase of equipment sold to customers for an amount which is generally based on a discount from the
estimated future fair value of that equipment. At the inception of the contract, the Company is required to make
judgments as to whether the customer has a significant economic incentive to exercise its right of return. When no
such incentive is expected, revenue is recognized upon the sale of equipment but when a significant incentive is
expected, revenue is recognized over the term of the repurchase commitment. Significant assumptions are made in
estimating residual values and are assessed based on past experience and taking into account expected future
market conditions and projected disposal values.
17
The Company earned revenue from the transfer of goods and services over time and at a point-in-time in the
following lines of business:
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
For year ended December 31
($ millions)
New equipment
Used equipment
Equipment rental
Product support
Fuel and other
Total revenue
2021
2020
Total
Point-in-time Over-time
Total
$
Point-in-time Over-time
$ 2,004
409
—
1,669
731
$ 4,813
185 $ 2,189 $ 1,459
308
409
—
235
1,546
3,728
547
733
$ 2,481 $ 7,294 $ 3,860
—
235
2,059
2
$
212 $ 1,671
308
196
3,473
548
$ 2,336 $ 6,196
—
196
1,927
1
The Company recorded the following unbilled receivables from customers:
December 31
($ millions)
Product support
New equipment
Other
Total unbilled receivables
2021
2020
$
$
241
27
2
270
$
$
194
36
1
231
Invoices for sales of parts and labour when servicing equipment under long-term contracts are issued in accordance
with the billing arrangement over the contract term. Invoices for sales of parts and labour when servicing equipment
not under long-term contracts are issued when the work is complete. Invoices for sales of complex power and
energy systems are issued in accordance with milestone payments agreed within each sales contract with the
customer.
The Company recorded the following contract liabilities:
December 31, 2021
($ millions)
Product support
Deposits from customers for
new equipment
Complex power and energy systems
Extended warranty
Other
Total deferred revenue
2021
Current Non-current Total
$
— $
238
$
238
2020
Current Non-current
Total
$
199
$
— $
199
148
14
22
6
428
$
—
—
30
1
$
31 $
148
14
52
7
459
$
114
30
28
3
374
—
—
31
1
$
32 $
114
30
59
4
406
The majority of the Company’s contract liabilities relate to cash collected for goods or services over which control
will be transferred to the customer within one year. Cash is typically collected up front for sales of extended
warranties and new equipment under repurchase guarantees; the transfer of control over these services and goods
can extend beyond one year.
18
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
5. EARNINGS PER SHARE
For year ended December 31,
($ millions, except share and per share amounts)
Net income attributable to shareholders of Finning
2021
2020
Basic
$
364
Diluted
$
364
Basic
$
232
Diluted
$
232
Weighted average shares outstanding (WASO)
Effect of dilutive share options
WASO with assumed conversions
161,088,129 161,088,129 162,289,564 162,289,564
46,872
162,336,436
554,676
161,642,805
Earnings per share
$
2.26
$
2.25
$
1.43
$
1.43
Share options granted to employees that were anti-dilutive were excluded from the weighted average number of
shares for the purpose of calculating diluted earnings per share. Anti-dilutive share options related to the year ended
December 31, 2021 were 1 million (2020: 2 million).
6. OTHER INCOME AND OTHER EXPENSES
For years ended December 31
($ millions)
Canada Emergency Wage Subsidy (a)
Return on investment in Energyst B.V. (Note 23)
Total other income
For years ended December 31
($ millions)
Severance costs (b)
Impairment of long-lived assets (b)
Facility closures and restructuring costs (b)
Total other expenses
2021
2020
10
5
15
$
$
115
—
115
2021
2020
—
—
—
—
$
$
(42)
(7)
(2)
(51)
$
$
$
$
(a) In response to the negative economic impact of the novel coronavirus (COVID-19), various government
programs were introduced to provide financial relief to affected businesses, including wage-subsidy programs
for eligible entities that meet certain criteria. The Company records government grants and subsidies when it is
reasonably assured that the Company will comply with the relevant conditions and that the amount will be
received.
(b) In 2020, as part of actions taken to focus on operational efficiencies and to adjust to market conditions, the
Company implemented plans to restructure its global workforce and facility footprint. As a result, the Company
recorded provisions related to the reduction of its workforce. The Company also implemented plans to
consolidate certain branches and exit some facilities and therefore recorded impairment losses on leased
properties and any related equipment and leasehold improvements, as well as provisions for the unavoidable
non-lease costs for these properties.
19
7. SHORT-TERM AND LONG-TERM DEBT AND FINANCE COSTS
December 31
($ millions)
Short-term debt
Long-term debt
2.84%, $200 million, due September 29, 2021
2.626%, $200 million, due August 14, 2026
5.077% $150 million, due June 13, 2042
3.98% USD $100 million, due January 19, 2022, Series A
4.08% USD $100 million, due January 19, 2024, Series B
4.18% USD $50 million, due April 3, 2022, Series C
4.28% USD $50 million, due April 3, 2024, Series D
4.53% USD $200 million, due April 3, 2027, Series E
3.40% £70 million, due May 22, 2023, Series F
Other term loans
Total long-term debt
Current portion of long-term debt
Non-current portion of long-term debt
Short-Term Debt
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
2021
2020
$
374 $
92
$
— $
199
149
127
127
63
63
253
120
10
200
199
149
127
127
64
64
254
122
2
$ 1,111 $ 1,308
201
$
190 $
921 $ 1,107
$
At December 31, 2021, short-term debt included $370 million drawn on the Company’s committed revolving credit
facility (2020: short-term debt included $92 million drawn on the Company’s committed revolving credit facility).
Refer to Note 8b for more information on the Company’s committed revolving credit facility.
The effective interest rate on the consolidated short-term debt for 2021 was 1.6% (2020: 3.1%).
Long-Term Debt
The Company's CAD denominated Medium Term Notes, USD denominated Senior Notes, and GBP denominated
Senior Notes included in the table above are unsecured, and interest is payable semi-annually with the principal due
on maturity.
The effective interest rate on the consolidated long-term debt for 2021 was 3.8% (2020: 3.8%).
Finance Costs
Finance costs as shown on the consolidated statements of net income comprised the following:
For years ended December 31
($ millions)
Interest on short-term debt
Interest on long-term debt
Interest on debt
Interest on lease liabilities
Other finance related expenses
Finance costs
2021
2020
$
$
$
3 $
48
51 $
10
14
75 $
12
55
67
11
7
85
20
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
8. FINANCIAL INSTRUMENTS
Finning and its subsidiaries are exposed to market, credit, liquidity, and other risks in the normal course of business
activities. The Company’s Enterprise Risk Management (ERM) process is designed to ensure that these risks are
identified, managed, and reported. The ERM framework assists the Company in managing risks and business
activities to mitigate these risks across the organization in order to achieve the Company’s strategic objectives.
The Company maintains a strong risk management culture to protect and enhance shareholder value. On a
quarterly basis, the Board level committees review the Company’s processes for business risk assessment and the
management of key business risks, any changes to key risks and exposures, and the steps taken to monitor and
control such exposures, and report their review to the Board. The Board reviews all material risks in detail on an
annual basis. The Board also reviews the adequacy of disclosures of key risks in the Company’s Annual Information
Form, Management’s Discussion and Analysis, and consolidated financial statements on a quarterly and annual
basis.
This note presents information about the Company’s exposure to credit, liquidity, and market risks and the
Company’s objectives, policies, and processes for managing these risks.
(a) Financial Assets and Credit Risk
Accounting Policy
Classification and measurement
Cash and cash equivalents, accounts receivable, unbilled receivables, supplier claims receivable, and instalment
and other notes receivable are classified as amortized cost and measured using the effective interest method.
Accounts receivable comprises amounts due from customers for goods or services transferred in the ordinary
course of business and non-trade accounts. Unbilled receivables relate to the Company’s right to consideration
for goods or services transferred to a customer but not yet billed as at the reporting date. Instalment notes
receivable represents amounts due from customers relating to the financing of equipment and parts and services
sold.
Financial assets classified as amortized cost are assessed for impairment at the end of each reporting period and
a loss allowance is measured by estimating the lifetime expected credit losses. Certain categories of financial
assets, such as accounts receivable, that are considered not to be impaired individually are also assessed for
impairment on a collective basis. Estimates of expected credit losses take into account the Company’s past
experience of collecting payments, the amount of delayed payments in the portfolio past the average credit
period, as well as observable changes in and forecasts of future economic conditions that correlate with default
on receivables. The carrying amount of accounts receivable is reduced through the use of an allowance account.
Changes in the carrying amount of the allowance account are recognized in the consolidated statement of net
income. At the point when the Company is satisfied that no recovery of the amount owing is possible, the amount
is considered not recoverable and the financial asset is impaired.
21
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Areas of Estimation Uncertainty
Allowance for Doubtful Accounts
The Company records allowance for doubtful accounts that represents management’s best estimate of potential
losses in respect of accounts receivable and unbilled receivables. The main components of these allowances are
a specific loss component that relates to individually significant exposures, and a collective loss component
established for groups of similar assets in respect of losses that are expected to occur.
The collective loss allowance is estimated based on historical data of payment statistics for similar financial
assets, adjusted for current and forecasted future economic conditions.
Expected credit losses related to the current economic environment have been incorporated in management’s
estimate of its allowance for doubtful accounts. No assurance can be given that this will be sufficient or that the
Company will not suffer material credit losses that will adversely affect its results. The Company allocates each
exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (including but
not limited to external credit ratings and publicly available information about customers) and applying experienced
credit judgment. Exposures within each credit risk grade are segmented by geographic region, industry
classification, and risk categorization. An expected credit loss rate is calculated for each segment.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to
meet its contractual obligations and arises principally in respect of the Company’s cash and cash equivalents,
receivables from customers, receivables from suppliers, and derivative assets.
The Company’s material exposure to credit risk at the reporting date was:
December 31
($ millions)
Cash and cash equivalents
Accounts receivable
Unbilled receivables
Supplier claims receivable
Exposure to credit risk
Cash and Cash Equivalents
2021
2020
$
502 $
839
270
103
539
730
231
104
$ 1,714 $ 1,604
Credit risk associated with cash and cash equivalents is managed by ensuring that these financial assets are held
with major financial institutions with strong investment grade ratings and by monitoring the exposures with any single
institution. An ongoing review is performed to evaluate the changes in the credit rating of counterparties.
Receivables from Customers
The Company has a large, diversified customer base, and is not dependent on any single customer or group of
customers. Credit risk associated with accounts receivable, unbilled receivables, and instalment notes receivable
from customers is minimized because of the diversification of the Company’s operations as well as its large
customer base and its geographical dispersion.
The Company limits its exposure to credit risk from accounts receivable by establishing a maximum payment period
for customers. The Company also has policies in place to manage credit risk, including maintaining credit limits for
customers taking into account factors such as projected purchase values, credit worthiness of the customer, and
payment performance.
Receivables from Suppliers
The Company is exposed to risk on supplier claims receivable, primarily from Caterpillar Inc. (Caterpillar), with
whom Finning has an ongoing relationship since 1933.
22
The maximum exposure to credit risk for accounts receivable at the reporting date by geographic location of
customer was as follows:
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
December 31
($ millions)
Canada
Chile
UK
Argentina
Other
Total
Impairment Losses
The aging of accounts receivable at the reporting date was as follows:
December 31
($ millions)
Not past due
Past due 1 – 30 days
Past due 31 – 90 days
Past due 91 – 120 days
Past due greater than 120 days
Total
2021
2020
$
$
445 $
212
97
41
44
839 $
381
207
79
27
36
730
2021
2020
Allowance Gross
Gross
$
626 $
132
59
7
50
$
874 $
— $
—
1
—
34
35 $
521 $
115
46
17
76
Allowance
1
—
—
1
43
45
775 $
The movement in the allowance for doubtful accounts in respect of accounts receivable during the year was as
follows:
For years ended December 31
($ millions)
Balance, beginning of year
Additional allowance and unused amounts reversed
Receivables written off
Balance, end of year
2021
2020
$
$
45 $
(9)
(1)
35 $
42
13
(10)
45
The carrying amount of cash and cash equivalents, unbilled receivables, supplier claims receivable, and instalment
notes receivable represents the Company’s maximum exposure to credit risk for these balances.
23
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
(b) Financial Liabilities and Liquidity Risk
Accounting Policy
Classification and measurement
Accounts payable and accruals, short-term and long-term debt are classified as amortized cost and are measured
using the effective interest method.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquid financial
resources to fund its operations and meet its commitments and obligations. The Company maintains bilateral and
syndicated credit facilities, continuously monitors actual and forecast cash flows, and manages maturity profiles of
financial liabilities.
The Company will require capital to finance future growth and to refinance outstanding debt obligations as they
come due for repayment. If the cash generated from the Company’s operations is not sufficient to fund future capital
and debt repayment requirements, the Company will require additional debt or equity financing in the capital
markets. The Company’s ability to access capital markets on terms that are acceptable will be dependent upon
prevailing market conditions, as well as the Company’s financial condition. Further, Finning’s ability to increase the
level of debt financing may be limited by financial covenants or credit rating objectives.
At December 31, 2021, the Company had approximately $2.1 billion (2020: $2.6 billion) of unsecured committed and
uncommitted credit facilities. Included in this amount is a committed revolving credit facility totaling $1.3 billion with
various Canadian and global financial institutions. In September 2021, the Company secured sustainability-linked
terms for its $1.3 billion committed revolving credit facility. The amended credit facility aligns cost of borrowing to
progress towards achieving the Company’s absolute greenhouse gas emissions reduction target. In addition, the
term of the credit facility, which was set to fully mature in December 2024, was extended to September 2026. The
facility is available in multiple borrowing jurisdictions and may be drawn by a number of the Company’s principal
wholly owned subsidiaries. Borrowings under this facility are available in multiple currencies and at various floating
rates of interest.
In April 2020, the Company secured a $500 million committed revolving credit facility for general corporate
purposes, which had a term of two years. In March 2021, the Company cancelled this facility and expensed $1
million of capitalized debt issue costs related to this facility in finance costs during the year ended December 31,
2021.
At December 31, 2021, $0.9 billion was available under the $1.3 billion committed revolving credit facility. At
December 31, 2020, $1.7 billion was available collectively under the $1.3 billion and $500 million committed
revolving credit facilities.
The Company’s principal source of short-term funding is the committed revolving credit facility. The Company also
maintains a maximum authorized commercial paper program of $600 million, backstopped by credit available under
the $1.3 billion syndicated committed credit facility. There was no commercial paper outstanding at December 31,
2021 or December 31, 2020. In addition, the Company maintains other bank credit facilities, including overdrafts and
letters of credit, to support its subsidiary operations.
Covenants
The Company is subject to certain covenants within its syndicated committed credit facility. At December 31, 2021
and 2020, the Company was in compliance with these covenants.
24
The following are the contractual maturities of non-derivative and derivative financial liabilities. The amounts
presented represent the future undiscounted principal and interest cash flows, and therefore, do not equate to the
carrying amount on the consolidated statement of financial position.
($ millions)
Carrying amount
December 31, 2021
Contractual cash flows
2022
2023
2024
2025
2026 Thereafter
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Non-derivative financial liabilities
Accounts payable and accruals
Short-term debt
Long-term debt
Lease liabilities
Total non-derivative financial liabilities
$
(908) $
(374)
(1,111)
(328)
(908) $ — $ — $ — $ — $
—
(374)
(220)
(232)
(47)
(88)
—
(155)
(63)
—
(225)
(23)
—
(25)
(33)
(58) $ (248) $
$
(2,721) $ (1,602) $ (218) $ (267) $
Derivative financial
Forward foreign currency contracts and swaps
Sell CAD
$
Buy USD
Sell CAD
Buy USD
Sell ARS (1)
Buy USD
Total derivative financial instruments
$
1 $
—
(3)
—
(2)
—
(4) $
(1) Argentine Peso (ARS)
(116) $ — $ — $ — $ — $
—
117
—
(266)
—
263
—
(21)
19
—
(4) $ — $ — $ — $ — $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(533)
(265)
(798)
—
—
—
—
—
—
—
25
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
(c) Derivative Financial Instruments, Hedging, and Market Risk
Accounting Policy
Derivative Financial Instruments
Derivative financial instruments are classified as fair value through profit or loss and are recorded on the
consolidated statement of financial position at fair value. Refer to Cash Flow Hedges and Net Investment Hedges
sections below for the accounting treatment for derivative financial instruments which are designated as hedging
instruments. Fair value changes of derivative financial instruments not designated as hedging instruments are
recorded in the consolidated statement of net income as selling, general, and administrative expenses or finance
costs, as appropriate.
Hedges
The Company utilizes derivative financial instruments and foreign currency debt in order to manage its foreign
currency and interest rate exposures. The Company uses derivative financial instruments only in connection with
managing related risk positions and does not use them for trading or speculative purposes.
The Company determines whether or not to formally designate, for accounting purposes, eligible hedging
relationships between hedging instruments and hedged items. This process includes linking derivatives to specific
risks from assets or liabilities on the statement of financial position, specific firm commitments, or forecasted
transactions. For hedges designated as such for accounting purposes, at inception, the Company documents the
hedging relationship, its risk management objective and strategy for undertaking the hedge, and how the
Company will assess whether the Company meets the hedge effectiveness requirements. When derivative
instruments have been designated as a hedge and are highly effective in offsetting the identified hedged risk,
hedge accounting is applied to the derivative instruments. The ineffective portion of hedging gains and losses of
these hedges is reported in the consolidated statement of net income.
Cash Flow Hedges
The Company uses foreign exchange forward contracts and, at times, may use options to hedge the currency risk
associated with certain foreign denominated sales, purchase commitments, cash balances, payables, and
receivables. The Company may also use other derivative instruments such as swaps, rate locks, and options to
hedge its interest rate exposure.
The effective portion of hedging gains and losses associated with these cash flow hedges is recorded, net of tax,
in other comprehensive income and recognized in earnings in the same period as the hedged item. For cash flow
hedges of non-financial items, these gains and losses are included in the initial carrying cost of the hedged asset
or hedged liability. The gain or loss relating to any ineffective portion is recognized immediately in the
consolidated statement of net income.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any accumulated gain or loss recorded in other comprehensive income at that time remains in accumulated other
comprehensive income until the originally hedged transaction affects net income. When a forecasted transaction
is no longer expected to occur, the accumulated gain or loss that was reported in other comprehensive income is
immediately recorded in the consolidated statement of net income.
Net Investment Hedges
The Company uses foreign currency debt to hedge foreign currency gains and losses on its long-term net
investments in foreign operations. The effective portion of the gain or loss of such instruments associated with the
hedged risk is recorded in other comprehensive income. These gains or losses are recognized in the
consolidated statement of net income upon the disposal of a foreign operation, a disposal that involves loss of
control of a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that
includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation.
Areas of Estimation Uncertainty
Fair Value
The fair value of derivative financial instruments that are not traded in an active market (e.g. over-the-counter
derivatives) is determined using valuation techniques. The Company uses its judgment to select a valuation
method and makes assumptions that are mainly based on market conditions existing at the end of each reporting
period. The Company did not have any hedging relationships directly affected by the interest rate benchmark
reform (Note 2d).
26
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Market risk is the risk that changes in the market, such as foreign exchange rates and interest rates, will affect the
Company’s net income or the fair value of its financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters.
Foreign Exchange Risk
The Company is geographically diversified, with significant investments in several different countries. The Company
transacts business in multiple currencies, the most significant of which are the CAD, USD, GBP, CLP, and ARS.
As a result, the Company has foreign currency exposure with respect to items denominated in foreign currencies.
The main types of foreign exchange risk of the Company can be categorized as follows:
Translation Exposure
The most significant foreign exchange impact on the Company’s net income and other comprehensive income is the
translation of foreign currency-based earnings and net assets or liabilities into CAD, which is the Company’s
presentation currency. The Company’s South American and UK & Ireland operations have functional currencies
other than CAD and, as a result, exchange rate movements between the USD/CAD and GBP/CAD will impact the
consolidated results of the South American and UK & Ireland operations in CAD terms. The Company does not
hedge its exposure to foreign exchange risk with regard to foreign currency earnings.
Assets and liabilities of the Company’s South American and UK & Ireland operations are translated into CAD using
the exchange rates in effect at the consolidated statement of financial position dates. Any translation gains and
losses are recorded as foreign currency translation adjustments in other comprehensive income. To the extent
practical, it is the Company’s objective to manage this exposure. The Company hedged a portion of its foreign
investments with loans denominated in foreign currencies.
The carrying value of the Company’s long-term debt that was designated as net investment hedging instruments
was $753 million (2020: $757 million).
Transaction Exposure
Many of the Company’s operations purchase, sell, rent, and lease assets as well as incur costs in currencies other
than their functional currency. This mismatch of currencies creates transactional exposure, which may affect the
Company’s profitability as exchange rates fluctuate. For example, the Company’s Canadian operating results are
exposed to volatility in USD/CAD rates between the timing of equipment and parts purchases that are made in USD
and the ultimate sale to customers made in CAD. A portion of this exposure is hedged through the use of forward
exchange contracts as well as managed through pricing practices. The Company applies hedge accounting to
hedges of certain inventory purchases and sales of complex power and energy systems in its Canadian and UK &
Ireland operations, respectively. For the year ended December 31, 2021 the Company entered into forward
exchange contracts for inventory purchases of USD $417 million (2020: USD $104 million).
The results of the Company’s operations are impacted by the translation of foreign-denominated transactions: the
results of the Canadian operations are impacted by USD based revenue and costs, and the results of the South
American operations are impacted by CLP and ARS based revenues and costs.
The Company is also exposed to foreign currency risks related to the future cash flows on its foreign-denominated
financial assets and financial liabilities and foreign-denominated net asset or net liability positions on its consolidated
statement of financial position. The Company enters into forward exchange contracts to manage some mismatches
in foreign currency cash flows but does not fully hedge balance sheet exposure so this may result in unrealized
foreign exchange gains or losses until the financial assets and financial liabilities are settled.
27
Exposure to Foreign Exchange Risk
The currencies of the Company’s significant financial instruments were as follows:
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
December 31, 2021
(millions)
Cash and cash equivalents
Accounts receivable
Short-term and long-term debt
Accounts payable and accruals
Lease liabilities
Net statement of financial position exposure
December 31, 2020
(millions)
Cash and cash equivalents
Accounts receivable
Short-term and long-term debt
Accounts payable and accruals
Lease liabilities
Net statement of financial position exposure
Sensitivity Analysis to Foreign Exchange Risk
CAD
USD
1
423
(655)
(330)
(254)
(815)
318
75
(560)
(242)
(4)
(413)
GBP
CLP
24,976
11
58 136,094
(71)
—
(82,256)
(62)
(19)
(25)
78,795
(89)
CAD
USD
7
336
(602)
(260)
(224)
(743)
198
77
(529)
(184)
(5)
(443)
GBP
CLP
48
85,066
46 105,102
(70)
—
(69,708)
(57)
(34)
—
(67) 120,460
ARS
1,651
35
—
(780)
(8)
898
ARS
2,061
248
—
(625)
(9)
1,675
The translation of financial instruments denominated in foreign currencies are impacted by changes in foreign
exchange rates. A weakening of the CAD against the following currencies would increase (decrease) pre-tax income
and other comprehensive income by the amounts shown below. This analysis uses estimated forecast foreign
exchange rates for the upcoming year and assumes that all other variables, in particular volumes, relative pricing,
interest rates, and hedging activities are unchanged.
December 31, 2021
($ millions)
USD/CAD
GBP/CAD
CLP/CAD
ARS/CAD
Weakening
of CAD
10%
10%
25%
30%
Pre-tax
Income
$
$
$
$
3
—
24
3
Other
Comprehensive
Loss
$
$
$
$
(49)
(12)
—
—
A strengthening of the CAD against the above currencies relative to the December 31, 2021 month end rates would
have an equivalent but opposite effect in the amounts shown on the basis that all other variables are unchanged.
28
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Interest Rate Risk
Changes in market interest rates can cause fluctuations in the fair value or future cash flows of financial instruments.
The Company is exposed to changes in interest rates on its interest-bearing financial assets. The Company’s
floating-rate financial assets comprise cash and cash equivalents. Due to the short-term nature of cash and cash
equivalents, the impact of fluctuations in fair value is limited but interest income earned can be impacted. Instalment
and other notes receivable bear interest at a fixed rate thus their fair value will fluctuate prior to maturity but, absent
monetization, future cash flows do not change.
The Company is exposed to changes in interest rates on its interest-bearing financial liabilities, primarily from short-
term and long-term debt and lease liabilities. The Company’s debt portfolio comprises both fixed and floating rate
debt instruments, with terms to maturity ranging up to 2042. The Company’s floating rate debt is short term in nature
and as a result, the Company is exposed to limited fluctuations in changes to fair value, but finance expense and
cash flows will increase or decrease as interest rates change.
The fair value of the Company’s fixed rate debt obligations fluctuates with changes in interest rates, but absent early
settlement, related cash flows do not change. The Company is exposed to changes in future interest rates upon
refinancing of any debt prior to or at maturity.
The Company manages its interest rate risk by balancing its portfolio with fixed and floating rate debt, as well as
managing the term to maturity of its debt portfolio.
Profile
At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was as follows:
December 31
($ millions)
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
2021
2020
$
$
$
45
(1,439) $
27
(1,606)
$
$
$
502
(374) $
539
(92)
Fair Value Sensitivity Analysis for Fixed Rate Instruments
The Company does not account for any fixed rate financial assets or financial liabilities at fair value through the
consolidated statement of net income, and the Company does not currently have any derivatives designated as
hedging instruments under a fair value hedge accounting model, or any derivative interest rate instruments for which
fair value changes are recognized in other comprehensive income. Therefore, a change in interest rates at the
reporting date would not affect net income or other comprehensive income.
Pre-tax Income Sensitivity Analysis for Variable Rate Instruments
The Company’s variable rate instruments are in a net asset position; therefore, an increase of 1.0% in interest rates
for a full year relative to the interest rates at the reporting date would have increased income by $1 million with a
1.0% decrease having the opposite effect. This analysis assumes that all other variables, in particular foreign
currency exchange rates, remain constant.
29
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
(d) Fair Values
Financial instruments measured at fair value are grouped into three levels based on the degree to which fair value is
observable:
Level 1 – quoted prices in active markets for identical securities
Level 2 – significant observable inputs other than quoted prices included in Level 1
Level 3 – significant unobservable inputs
The Company’s only financial instruments measured at fair value are derivative financial instruments. All of the
derivative financial instruments are measured at fair value using Level 2 inputs. Certain assets held-for-sale are
measured at fair value using level 3 inputs. The Company did not move any instruments between levels of the fair
value hierarchy during the years ended December 31, 2021 and 2020.
Derivative Financial Instruments (Level 2)
The fair value of foreign currency forward contracts is determined by discounting contracted future cash flows using
a discount rate derived from interest rate curves and observed forward prices for comparable assets and liabilities.
Where material, fair values are adjusted for credit risk based on observed credit default spreads or market yield
spreads for counterparties for financial assets and based on the Company’s credit risk for financial liabilities. The
Company’s credit risk is derived from yield spreads on the Company’s market quoted debt.
Long-Term Debt (Level 2)
The carrying value and fair value of the Company’s long-term debt was estimated as follows:
December 31
($ millions)
Long-term debt
2021
2020
Carrying Value
1,111
$
Fair Value
$
1,202
Carrying Value
$
1,308
Fair Value
1,443
$
The fair value of the Company’s long-term debt is based on the present value of future cash flows required to settle
the debt which is derived from the remaining interest payments. The present value of future cash flows is discounted
using the yield to maturity rate as at the measurement date. This technique utilizes a combination of quoted prices
and market observable inputs.
Cash and Cash Equivalents, Accounts Receivable, Unbilled Receivables, Supplier Claims Receivable, Instalment
Notes Receivable, Short-Term Investments, Short-Term Debt, and Accounts Payable
The recorded values of cash and cash equivalents, accounts receivable, unbilled receivables, supplier claims
receivable, instalment notes receivable, short-term investments, short-term debt, and accounts payable approximate
their fair values due to the short-term maturities of these instruments.
30
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
9. MANAGEMENT OF CAPITAL
The Company’s objective when managing capital is to maintain a flexible capital structure which optimizes the cost
of capital at an acceptable risk. The Company includes cash and cash equivalents, short-term debt and long-term
debt, and shareholders’ equity in the definition of capital.
The Company manages its capital structure and makes adjustments to it in light of actual and forecasted cash flows,
actual and anticipated capital expenditures and investments, changes in economic conditions and the risk
characteristics of its underlying assets. In order to maintain or adjust the capital structure, the Company may
purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, issue new debt, repay
debt, issue new debt to replace existing debt with different characteristics, or adjust the amount of dividends paid to
shareholders. In May 2021, the Company renewed its normal course issuer bid which enables the Company to
purchase its common shares for cancellation. In 2021, the Company repurchased 4,779,340 Finning common
shares for cancellation for $157 million, at an average cost of $32.81 per share. In 2020, 1,215,617 Finning common
shares were repurchased for cancellation for $23 million, at an average cost of $19.25 per share.
In January 2022, the Company implemented an automatic share purchase plan with a designated broker to enable
share repurchases for cancellation during the Company’s regular blackout period.
The Company monitors net debt to Adjusted EBITDA to assess operating leverage and ability to repay debt. This
ratio approximates the length of time, in years, that it would take the Company to repay its debt, with net debt and
Adjusted EBITDA held constant.
December 31
Net debt to Adjusted EBITDA Ratio (times)
Company
long-term target
< 3.0
2021
1.1
2020
1.4
Net debt to Adjusted EBITDA is calculated as net debt divided by Adjusted EBITDA for the last twelve months. Net
debt is calculated as short-term and long-term debt, net of cash. Adjusted EBITDA is calculated by adding
depreciation and amortization to earnings before finance costs and income taxes, excluding items that are not
considered to be indicative of operational and financial trends, either by nature or amount, to provide a better overall
understanding of the Company’s underlying business performance.
Net debt was calculated as follows:
December 31
($ millions)
Cash and cash equivalents
Short-term debt
Current portion of long-term debt
Long-term debt
Net debt
Adjusted EBITDA reconciles to EBIT as follows:
2021
2020
$
$
(502)
374
190
921
983
$
$
(539)
92
201
1,107
861
For years ended December 31
($ millions)
EBIT
Depreciation and amortization
EBITDA
Significant items:
Canadian emergency wage subsidy (Note 6a)
Return on investment in Energyst B.V. (Note 6)
Severance costs (Note 6b)
Facility closures, restructuring costs, and impairment of long-lived assets (Note 6b)
Adjusted EBITDA
2021
2020
$
$
$
552
319
871
(10)
(5)
—
—
856
$
$
$
392
308
700
(115)
—
42
9
636
31
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
10. SHARE CAPITAL
Accounting Policy
Common shares repurchased by the Company are recognized as a reduction in share capital and contributed
surplus (and retained earnings once contributed surplus is fully drawn down) on the date of repurchase. A liability
is recognized for any committed repurchases that have not yet settled at a reporting period end. The cash
consideration paid to repurchase shares is presented as a financing activity in the statement of cash flow. The
number of repurchased shares is disclosed below and the amount deducted from equity is disclosed in the
statement of changes in equity.
The Company is authorized to issue an unlimited number of preferred shares without par value, of which 4.4 million
are designated as cumulative redeemable convertible preferred shares. The Company had no preferred shares
outstanding for the years ended December 31, 2021 and 2020.
The Company is authorized to issue an unlimited number of common shares. All issued common shares have no
par value and are fully paid.
Finning has no shareholder rights plan currently in place. The Company's dealership agreements with subsidiaries
of Caterpillar are fundamental to its business and a change in control of Finning may result in Caterpillar exercising
its right to terminate those dealership agreements.
The change in the number of shares in share capital were as follows:
For years ended December 31
(number of shares)
Balance, beginning of year
Exercise of share options
Repurchase of common shares (Note 9)
Balance, end of year
2021
162,107,484
479,958
(4,779,340)
157,808,102
2020
163,319,120
3,981
(1,215,617)
162,107,484
32
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
11. SHARE-BASED PAYMENTS
Accounting Policy
The Company has share option plans and other share-based compensation plans for directors and certain eligible
employees and members of the Board.
Equity settled share-based payments are measured at fair value using the Black-Scholes option pricing model. The
fair value is determined on the grant date of the share option and recorded over the vesting period in selling,
general, and administrative expense, based on the Company’s estimate of options that will vest, with a
corresponding increase to contributed surplus. When share options are exercised, the proceeds received by the
Company, together with any related amount recorded in contributed surplus, are credited to share capital.
Total Shareholder Return Performance Share Units are measured at fair value using the Monte Carlo model and all
other cash-settled share-based awards are measured at fair value using the Company’s share price on the Toronto
Stock Exchange (TSX:FTT). Cash settled share-based compensation plans are recognized as a liability.
Compensation expense which arises from vesting and fluctuations in the fair value of the Company’s cash settled
share-based compensation plans is recognized in selling, general, and administrative expense in the consolidated
statement of income with the corresponding liabilities recorded within accounts payable and accruals (current) and
long-term other liabilities (non-current) on the consolidated statement of financial position.
Areas of Estimation Uncertainty
The Company uses the Black-Scholes option pricing model to determine the fair value of share options. Inputs to the
model are subject to various estimates relating to share price volatility, interest rates, dividend yields and expected
life of the units issued. Inputs are subject to market factors as well as internal estimates. The Company considers
historic trends together with any new information to determine the best estimates of inputs to the model at the date
of grant. Separate from the fair value calculation, the Company is required to estimate the expected forfeiture rate of
equity-settled share-based payments in estimating how many units will vest.
The Company also estimates the projected outcome of performance conditions for Performance Share Units
(PSUs), including the relative ranking of the Company’s total shareholder return compared with a specified peer
group using a Monte Carlo simulation option-pricing model and forecasting the Company’s return on invested
capital.
Share Options
The Company has one share option plan (Stock Option Plan) for certain employees. Options granted under the
Stock Option Plan vest over a three-year period and are exercisable over a seven-year period. The exercise price of
each option is based on the weighted average trading price of the common shares of the Company on the date prior
to the grant. Under the Stock Option Plan, the Company may issue up to 7.5 million common shares pursuant to the
exercise of share options. At December 31, 2021, approximately 3 million (2020: approximately 2 million) common
shares remained eligible to be issued in connection with future grants.
In 2021, the Company granted 370,776 common share options to senior executives and management of the
Company (2020: 724,739 common share options). The Company only grants and prices share options when all
material information has been disclosed to the market.
Under the Stock Option Plan, exercises generally utilize the cashless method, whereby the actual number of
common shares issued on exercise is based on the premium between the fair value of common shares at the time
of exercise and the grant value, and the equivalent value of the number of share options up to the grant value is
withheld. Share options exercised in 2021 comprised both cash and cashless exercises. 2,201,407 share options
were exercised in 2021 resulting in 479,958 common shares being issued; 1,721,449 share options were withheld
and returned to the option pool for future issues/grants (2020: 35,053 share options were exercised resulting in
3,981 common shares being issued; 31,072 share options were withheld and returned).
33
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Details of the share option plans were as follows:
For years ended December 31
Share options outstanding,
beginning of year
Granted
Exercised
Forfeited
Expired
Share options outstanding, end of year
Exercisable, end of year
Share
Options
2021
Weighted Average
Exercise Price
Share
Options
2020
Weighted Average
Exercise Price
3,683,449
370,776
(2,201,407)
(72,111)
(8,160)
1,772,547
794,589
$
$
$
$
$
$
$
24.40
33.11
25.18
26.74
30.83
25.12
3,416,168
724,739
(35,053)
(146,468)
(275,937)
3,683,449
26.41
2,490,563
$
$
$
$
$
$
$
25.66
17.75
23.53
25.51
22.06
24.40
26.21
The fair value of the share options granted during the year was estimated on the date of grant using the following
weighted-average assumptions:
Dividend yield
Expected volatility (1)
Risk-free interest rate
Expected life (years)
Share price
(1) Expected volatility is based on historical share price volatility of TSX:FTT shares
2021
2020
3.2%
31.4%
1.0%
5.18
$
33.11 $
3.2%
32.2%
0.4%
5.34
17.75
The weighted average grant date fair value of share options granted during the year was $6.70 (2020: $3.59).
The following table summarizes information about share options outstanding at December 31, 2021:
Range of
exercise prices
$17.75 - $20.68
$20.69 - $22.38
$22.39 - $25.47
$25.48 - $27.98
$27.99 - $33.68
Total
Share options Outstanding
Share options Exercisable
Number
Weighted
Average
Weighted
Average
Number
Weighted
Average
Outstanding Remaining Life Exercise Price
Outstanding Exercise Price
565,892
371,898
123,386
98,595
612,776
1,772,547
5.13 years
3.80 years
0.62 years
2.33 years
5.09 years
4.37 years
$ 17.84
$ 22.22
$ 25.26
$ 26.76
$ 33.31
$ 25.12
115,502
199,924
117,433
98,595
263,135
794,589
$
$
$
$
$
$
18.20
22.14
25.40
26.76
33.58
26.41
The following table summarizes information about share options outstanding at December 31, 2020:
Range of
exercise prices
$17.75 - $20.68
$20.69 - $22.38
$22.39 - $25.47
$25.48 - $27.98
$27.99 - $33.68
Total
Share options Outstanding
Share options Exercisable
Number
Weighted
Average
Weighted
Average
Number
Weighted
Average
Outstanding Remaining Life Exercise Price
Outstanding Exercise Price
739,459
916,588
854,934
387,084
785,384
3,683,449
6.19 years
4.13 years
1.45 years
3.33 years
2.05 years
3.39 years
$ 17.82
$ 22.11
$ 25.38
$ 26.77
$ 31.02
$ 24.40
29,270
553,023
843,027
387,084
678,159
2,490,563
$
$
$
$
$
$
19.53
21.98
25.42
26.77
30.61
26.21
34
Other Share-Based Payment Plans
The Company has other share-based payment plans in the form of deferred share units, performance share units,
and restricted share units that use notional common share units.
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Details of the plans are as follows:
Directors
Directors’ Deferred Share Unit (DDSU) Plan A
Under the DDSU Plan A, non-employee Directors of the Company may be awarded deferred share units and may
also elect to have all or a portion of their annual compensation issued in the form of 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 for cash or common shares of the Company or a combination of cash and shares (as
requested by the holder) only following cessation of service on the Board and must be redeemed by December 31st
of the year following the year in which the cessation occurred. Each deferred share unit is redeemable for one
common share or if redeemed for cash, the value is determined using the redemption-date market value of the
Company’s common shares.
Non-employee Directors of the Company were granted a total of 50,815 deferred share units in 2021 (2020: 91,136),
which were expensed over the calendar year as the units were issued. An additional 24,418 deferred share units
(2020: 38,365) were issued in lieu of cash compensation payable for service as a Director. A further 15,244 deferred
share units (2020: 22,220) were granted to Directors during 2021 as notional dividends.
Executive
Executive Deferred Share Unit (Exec DSU) Plan
Under the Exec DSU Plan, executives of the Company may elect to have all or a portion of their annual bonus
issued in the form of deferred share units and may be awarded deferred share units as approved by the Board. The
Exec DSU Plan utilizes notional units that become fully vested at the time of issuance or in accordance with terms
set at the time of grant. Vested deferred share units are redeemable for cash before December 15th of the year
following the year in which cessation of employment with the Company occurred. Only vested units accumulate
dividend equivalents in the form of additional deferred share units based on the dividends paid on the Company’s
common shares.
Executives were granted a total of 3,585 deferred share units in 2021 (2020: 22,284) as remuneration of their annual
bonus payment and 1,427 deferred share units (2020: 2,674) were issued as notional dividends under the Exec
DSU Plan.
Deferred Share Unit (DSU-B) Plan B for Executives
Under the DSU-B Plan, executives of the Company may be awarded deferred share units as approved by the
Board. The DSU-B Plan utilizes notional units that become vested in accordance with terms set at the time of grant.
Vested deferred share units are redeemable for cash or for common shares of the Company before December 31st
of the year following the year in which cessation of employment with the Company occurred. Deferred share units
expire if they have not vested within five years from the grant-date. Only vested units accumulate dividend
equivalents in the form of additional deferred share units based on the dividends paid on the Company’s common
shares.
During 2021, 1,017 deferred share units (2020: 3,882) were granted to executives as notional dividends under the
DSU-B Plan.
PSU Plan
Under the PSU Plan, executives of the Company may be awarded performance share units as approved by the
Board. This plan utilizes notional units that vest upon achieving future specified performance levels. All units
accumulate dividend equivalents in the form of additional performance share units based on the dividends paid on
the Company’s common shares. All units, including accumulated dividend equivalents, are redeemed upon vesting.
All PSUs granted in 2021 and 2020 were divided equally into two categories. Half of the awards are based on the
extent to which the Company’s return on invested capital achieves or exceeds the specified performance levels over
a three-year period (ROIC PSUs). The other half of the awards is based on the performance of the Company’s total
shareholder return over the three-year period relative to the performance of the total shareholder return of all
companies in the S&P/TSX Capped Industrials Index (TSR PSUs).
35
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Vested performance share units are redeemable in cash. The per unit payout is based on the volume-weighted
average trading price of the Company’s common shares on the five days prior to the end of the performance period.
During the year ended December 31, 2021, a total of 320,416 performance share units were granted to Executives,
based on 100% vesting (2020: 578,238), and 87,619 notional units (2020: 88,942) were issuable based on 100%
vesting as payment for dividends upon vesting.
Compensation expense for the PSU Plan is recorded over the three-year performance period. The amount of
compensation expense is adjusted over the three-year performance period to reflect the fair value of the PSUs and
the number of PSUs anticipated to vest.
2021 Grant
The specified levels and respective vesting percentages for the 2021 grant were as follows:
TSR PSUs
(cid:120) 1/3 of the grant is based on the Company’s total shareholder return for year 1 of the grant (2021);
(cid:120) 1/3 of the grant is based on the Company’s total shareholder return for year 2 of the grant (2022); and
(cid:120) 1/3 of the grant is based on the Company’s total shareholder return for year 3 of the grant (2023).
Percentile Rank < 25th Percentile 25th Percentile
TSR PSUs Vested
50%
0%
50th Percentile
100%
75th Percentile 100th Percentile
150%
200%
ROIC PSUs
(cid:120) 1/3 of the grant is based on the Company’s ROIC performance for year 1 of the grant (2021);
(cid:120) 1/3 of the grant is based on the Company’s ROIC performance for year 2 of the grant (2022) (1); and
(cid:120) 1/3 of the grant is based on the Company’s ROIC performance for year 3 of the grant (2023) (1).
Proportion of
PSUs Vesting
Nil
50%
100%
200%
Performance Level
2021 ROIC
< 10.1%
10.1%
14.4%
18.7% or more
Below Threshold
Threshold
Target
Maximum
(1) The return on invested capital performance level targets for 2022 and 2023 will be determined at the beginning of each of
these years.
2020 Grant
The specified levels and respective vesting percentages for the 2020 grant were as follows:
TSR PSUs
(cid:120) 1/3 of the grant is based on the Company’s total shareholder return for year 1 of the grant (2020);
(cid:120) 1/3 of the grant is based on the Company’s total shareholder return for year 2 of the grant (2021); and
(cid:120) 1/3 of the grant is based on the Company’s total shareholder return for year 3 of the grant (2022).
Percentile Rank < 25th Percentile 25th Percentile
TSR PSUs Vested
50%
0%
50th Percentile
100%
75th Percentile 100th Percentile
150%
200%
ROIC PSUs
(cid:120) 1/3 of the grant is based on the Company’s ROIC performance for year 1 of the grant (2020);
(cid:120) 1/3 of the grant is based on the Company’s ROIC performance for year 2 of the grant (2021); and
(cid:120) 1/3 of the grant is based on the Company’s ROIC performance for year 3 of the grant (2022) (2).
Performance Level
Below Threshold
Threshold
Target
Maximum
(2) The return on invested capital performance level targets for 2022 will be determined at the beginning of 2022.
2021 ROIC
< 10.1%
10.1%
14.4%
18.7% or more
2020 ROIC
< 5.0%
5.0%
7.1%
9.2% or more
Proportion of
PSUs Vesting
Nil
50%
100%
200%
36
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Restricted Share Unit (RSU) Plan
Under the RSU Plan, executives of the Company may be awarded restricted share units as approved by the Board.
This plan utilizes notional units that vest three years from the grant-date in accordance with terms set at the time of
grant. All units accumulate dividend equivalents in the form of additional units based on the dividends paid on the
Company’s common shares.
Restricted share units that have vested are redeemable in cash and the fair value payout per unit is based on the
five-day volume-weighted average trading price of the Company’s common shares at the end of the three-year
period. During the year ended December 31, 2021, a total of 209,599 restricted share units were granted to
Executives (2020: 371,619) and 21,642 notional units (2020: 29,326) are issuable as payment for dividends upon
vesting.
Details of the DSU, PSU, and RSU plans were as follows:
For year ended December 31, 2021
Units
Outstanding, beginning of year
Additions
Exercised
Forfeited
Outstanding, end of year
Exec
DSU
398,071
5,012
(26,798)
—
376,285
DSU-B DDSU
PSU
RSU
Total
38,326 589,571 1,086,100 756,041 2,868,109
918,587
590,840 231,241
(391,050)
(136,304)
(171,277)
(170,350)
(65,109)
(105,241)
39,343 623,377 1,400,422 785,869 3,225,296
90,477
(56,671)
—
1,017
—
—
Vested, beginning of year
Vested
Exercised
Forfeited
Vested, end of year
Liability
($ millions)
Balance, beginning of year
Expensed
Exercised
Forfeited
Balance, end of year
71,806
5,012
(26,798)
—
50,020
38,326 589,571
90,477
(56,671)
—
39,343 623,377
1,017
—
—
881,293
181,590
—
586,168
353,358 136,304
(391,050)
(136,304)
(171,277)
—
(10,313)
(10,313)
— 1,066,098
353,358
$
$
2 $
1
(1)
—
2 $
1 $
—
—
—
1 $
16 $
6
(2)
—
20 $
16 $
20
(5)
(2)
29 $
9 $
9
(4)
(1)
13 $
44
36
(12)
(3)
65
Exec
DSU
For year ended December 31, 2020
Units
Outstanding, beginning of year
Additions
Exercised
Forfeited
Outstanding, end of year
DSU-B DDSU
380,853 130,372 494,393
3,882 151,721
(56,543)
—
PSU
803,123 592,939 2,401,680
657,018 400,945 1,238,524
(631,481)
(177,100)
(294,170)
(140,614)
(60,743)
(79,871)
38,326 589,571 1,086,100 756,041 2,868,109
24,958
(7,740)
—
398,071
(95,928)
—
RSU
Total
Vested, beginning of year
Vested
Exercised
Vested, end of year
Liability
($ millions)
Balance, beginning of year
Expensed
Exercised
Forfeited
Balance, end of year
54,588 130,372 494,393
3,882 151,721
24,958
(95,928)
(7,740)
(56,543)
38,326 589,571
71,806
—
226,422
249,338 177,100
(177,100)
(294,170)
—
181,590
905,775
606,999
(631,481)
881,293
$
$
1 $
1
—
—
2 $
3 $
—
(2)
—
1 $
13 $
4
(1)
—
16 $
13 $
11
(7)
(1)
16 $
8 $
5
(3)
(1)
9 $
38
21
(13)
(2)
44
The fair value of the DSUs, ROIC PSUs, and RSUs outstanding at December 31, 2021 has been estimated using
the period-end closing TSX: FTT share price of $31.88 (December 31, 2020: $27.03).
37
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
The impact of the share-based payment plans on the Company’s financial statements was as follows:
For years ended December 31
($ millions)
Consolidated Statements of Net Income
Compensation expense arising from equity-settled share option incentive plan
Compensation expense arising from cash-settled share-based payments
Total
Consolidated Statements of Financial Position
Liability for cash-settled share-based payments (current)
Liability for cash-settled share-based payments (non-current) (Note 19)
2021
2020
$
$
$
$
3
33
36
17
48
$
$
$
$
2
19
21
9
35
The total intrinsic value of vested but not settled share-based payments was $34 million (2020: $24 million).
12. INVENTORY
Accounting Policy
Inventory is made up of assets held for sale in the ordinary course of business, in the process of production for
sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of
services. Inventory is stated at the lower of cost and net realizable value. Cost is determined on a specific item
basis for on-hand equipment and internal service work in progress, and on a weighted average cost basis for
parts and supplies. The cost of inventory includes all costs of purchase, conversion costs, other costs incurred in
bringing inventory to their existing location and condition, and an appropriate share of overhead costs based on
normal operating capacity.
Areas of Estimation Uncertainty
The Company makes estimates of the provision required to reflect net realizable value of slow-moving and
obsolete inventory. These estimates are determined on the basis of age, redundancy, and stock levels. For
equipment inventory, estimates are determined on a specific item basis. Management reviewed equipment
values with equipment specialists taking into account industry group, current market demand, market supply of
equipment, and the age and condition of equipment. Management reviewed parts inventory estimates based on
market demand, parts turns, discontinued items, ability to return to the vendor, and surplus/excess items.
December 31
($ millions)
On-hand equipment
Parts and supplies
Internal service work in progress
Total inventory
2021
2020
$
540 $
790
357
540
634
303
$ 1,687 $ 1,477
For the year ended December 31, 2021, on-hand equipment, parts, supplies, and internal service work in progress
recognized as an expense in cost of sales amounted to $4.9 billion (2020: $4.2 billion). For the year ended
December 31, 2021, the write-down of inventory to net realizable value, included in cost of sales, was $28 million
(2020: $99 million).
38
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
13. INCOME TAXES
Accounting Policy
The balance sheet liability method of tax allocation is used in accounting for income taxes. Under this method, the
carry forward of unused tax losses and unused tax credits and the temporary differences arising from the
difference between the tax basis of an asset and a liability and its carrying amount on the consolidated statement
of financial position are used to calculate deferred tax assets or liabilities. Deferred tax liabilities are recognized
for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that
taxable profits will be available against which the carry forward of unused tax losses, unused tax credits, and the
deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the
temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor the
accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future. Deferred tax assets or liabilities are calculated using tax rates anticipated to be in effect in
the periods that the asset is expected to be realized or the liability is expected to be settled based on the laws
that have been enacted or substantively enacted by the reporting date. The effect of a change in income tax rates
on deferred tax assets and liabilities is recognized in income and/or equity in the period that the change becomes
enacted or substantively enacted.
The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or
disallowed using tax rates enacted or substantively enacted by the consolidated statement of financial position
date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its tax assets and liabilities on a net basis.
Current and deferred tax are recognized in net income, except when they relate to items that are recognized in
other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized
in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from
the initial accounting for a business combination, the tax effect is included in the accounting for the business
combination. The Company records the deferred tax impact of foreign exchange gains or losses arising on the
translation of foreign-denominated non-monetary assets and non-monetary liabilities in provision for income tax in
the consolidated statement of net income.
Areas of Estimation Uncertainty
Estimations of tax assets or liabilities require assessments to be made based on the potential tax treatment of
certain items that will only be resolved once finally agreed with the relevant tax authorities.
Assumptions underlying the composition of deferred tax assets and liabilities include estimates of future results of
operations and the timing of reversal of temporary differences as well as the substantively enacted tax rates and
laws in each jurisdiction at the time of the expected reversal. The composition of deferred tax assets and liabilities
changes from period to period due to the uncertainties surrounding these assumptions and changes in tax rates
or regimes which could have a material effect on expected results.
Areas of Significant Judgment
Judgment is required as income tax laws and regulations can be complex and are potentially subject to a different
interpretation between the Company and the respective tax authority. Due to the number of variables associated
with the differing tax laws and regulations across the multiple jurisdictions in which the Company operates, the
precision and reliability of the resulting estimates are subject to uncertainties and may change as additional
information becomes known. Net income in subsequent periods may be impacted by the amount that estimates
differ from the final tax return or from any subsequent re-assessment.
39
For year ended December 31, 2021
($ millions)
Current
Adjustment for prior periods recognized in the current year
Total current tax expense
Deferred
Origination and reversal of timing differences
Decrease due to tax rate changes
Write-down of deferred tax asset
Adjustment for prior periods recognized in the current year
Total deferred tax expense
Provision for income taxes
For year ended December 31, 2020
($ millions)
Current
Adjustment for prior periods recognized in the current year
Total current tax expense
Deferred
Origination and reversal of timing differences
Decrease due to tax rate changes
Adjustment for prior periods recognized in the current year
Total deferred tax expense
Provision for income taxes
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Canada
$
58
(2)
56
1
—
—
2
3
59
$
International
Total
$
48 $
2
50
4
(3)
7
(3)
5
$
55 $
106
—
106
5
(3)
7
(1)
8
114
Canada
$
International
Total
24
(7)
17
$
27 $
(3)
24
19
(1)
7
25
42
$
9
(1)
1
9
$
33 $
51
(10)
41
28
(2)
8
34
75
The provision for income taxes differs from the amount that would have resulted from applying the Canadian
statutory income tax rates to income before income taxes as follows:
For years ended December 31
($ millions)
Combined Canadian federal and provincial income taxes at
2021
2020
the statutory tax rate
$
117
24.4 %
$
77
25.1 %
(Decrease) increase resulting from:
Differences in tax rates in foreign jurisdictions
Changes in statutory tax rates
Non-deductible share-based payment expense
Non-taxable/non-deductible foreign exchange in Argentina
Inflationary adjustment
Write-down of deferred tax asset
Taxable capital gain
Utilization of previously unrecognized tax loss
Other
Provision for income taxes
(16)
(3)
1
7
(3)
7
10
(9)
3
114
(3.3)%
(0.6)%
0.2 %
1.5 %
(0.6)%
1.5 %
2.1 %
(1.9)%
0.6 %
23.9 %
$
(11)
(2)
1
6
(1)
—
—
—
5
75
(3.6)%
(0.7)%
0.3 %
2.0 %
(0.3)%
—
—
—
1.6 %
24.4 %
$
40
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
The Company recognized the impact of the following substantively enacted corporate income tax rate changes in
June 2021:
(cid:120) The Argentine government increased its corporate income tax rate from 25% to 35%, effective January 1, 2021.
(cid:120) The UK government will increase its corporate income tax rate from 19% to 25% effective April 1, 2023.
Deferred Tax Asset and Liability
Temporary differences and tax loss carry-forwards that gave rise to deferred tax assets and liabilities were as
follows:
December 31
($ millions)
Accounting provisions not currently deductible for tax purposes
Share-based payments
Loss carry-forwards
Deferred tax assets
Property, plant and equipment, rental equipment, right-of-use assets,
and intangible assets
Distribution network
Employee benefits
Other
Deferred tax liabilities
Net deferred tax liability
2021
$
2020
$
45
9
16
70
51
12
14
77
(130)
(14)
(33)
(11)
(188)
(111)
(115)
(14)
(2)
(9)
(140)
(70)
$
$
Deferred taxes were not recognized on retained profits of approximately $1.5 billion (2020: $1.7 billion) of foreign
subsidiaries, as it was the Company’s intention to invest these profits to maintain and expand the business of the
relevant companies.
The Company recognized the benefit of the following tax loss carry-forwards available to reduce future taxable
income, of which $18 million does not expire and $26 million expires between 2024 and 2026.
December 31
($ millions)
International
2021
2020
$
44 $
62
At December 31, 2021, the Company had unrecognized capital and non-capital loss carry-forwards of $20 million
(2020: $91 million) to reduce future taxable income, of which $13 million does not expire and $7 million expires
between 2024 and 2026.
The income tax expense relating to components of other comprehensive income was as follows:
For years ended December 31
($ millions)
Deferred tax expense
Provision for income taxes recognized in other comprehensive income
2021
2020
$
$
29
29
$
$
7
7
41
14. OTHER ASSETS
December 31
($ millions)
Supplier claims receivable
Equipment deposits
Finance assets
Prepaid expenses
Income tax recoverable
Canada Emergency Wage Subsidy receivable
Other
Total other assets – current
December 31
($ millions)
Deferred tax assets
Prepaid expenses
Finance assets (a)
Other
Total other assets – non-current
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
2021
2020
$
103 $
82
36
30
15
—
55
$
321 $
104
14
24
26
24
13
32
237
2021
2020
$
$
38 $
16
12
22
88 $
56
17
5
25
103
(a) Finance assets include equipment leased to customers under long-term financing leases. Depreciation expense
for equipment leased to customers of $2 million was recorded in 2021 (2020: $2 million). Depreciation expense
is recognized in equal monthly amounts over the term of the individual leases.
42
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
15. PROPERTY, PLANT, AND EQUIPMENT AND RENTAL EQUIPMENT
Accounting Policy
Property, plant, and equipment and rental equipment are recorded at cost, net of accumulated depreciation and any
impairment losses. Depreciation of property, plant and equipment is recorded in selling, general, and administrative
expenses for all assets except standby equipment, which is recorded in cost of sales in the consolidated statement
of net income. Depreciation of rental equipment is recorded in cost of sales in the consolidated statement of net
income.
Rental equipment comprises rental fleet as well as rental equipment with purchase options (equipment under rental
agreements with customers which include an option to purchase the equipment at the end of the rental term). Rental
equipment includes units transferred from inventory and excludes units transferred to inventory when the rental
equipment becomes available for sale.
Depreciation commences when the asset becomes available for use and ceases when the asset is derecognized or
classified as held for sale. Where significant components of an asset have different useful lives, depreciation is
calculated on each separate component.
All classes of property, plant, and equipment and rental equipment are depreciated over their estimated useful lives
to their estimated residual value on a straight-line basis using the following:
Buildings
Equipment and vehicles
Rental equipment
10 - 50 years
3 - 20 years
2 - 8 years
Property, plant, and equipment and rental equipment are reviewed for indicators of impairment at the end of each
reporting period or whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value-
in-use. Where an impairment loss is recognized for an item of property, plant, and equipment and rental equipment,
the asset is reviewed for possible reversal of the impairment at the end of each subsequent reporting period.
Areas of Significant Judgment
Depreciation expense is sensitive to the estimated useful life determined for each type of asset. Actual lives and
residual values may vary depending on a number of factors including technological innovation, product life cycles,
physical condition, prospective use, and maintenance programs.
43
December 31, 2021
($ millions)
Cost
Balance, beginning of year
Additions of owned assets
Additions of right-of-use assets
Remeasurement of right-of-use assets
Additions through business combinations (Note 23)
Transfers from inventory
Transfers to inventory
Reclassification to other assets (Note 16)
Disposals
Foreign exchange rate changes
Balance, end of year
Accumulated depreciation and impairment losses
Balance, beginning of year
Depreciation of owned assets
Depreciation of right-of-use assets
Reclassification to other assets (Note 16)
Disposals
Foreign exchange rate changes
Balance, end of year
Net book value
Balance, beginning of year
Balance, end of year
December 31, 2020
($ millions)
Cost
Balance, beginning of year
Additions of owned assets
Additions of right-of-use assets
Remeasurement of right-of-use assets
Transfers from inventory
Disposals
Foreign exchange rate changes
Balance, end of year
Accumulated depreciation and impairment losses
Balance, beginning of year
Depreciation of owned assets
Depreciation of right-of-use assets
Disposals
Impairment loss
Foreign exchange rate changes
Balance, end of year
Net book value
Balance, beginning of year
Balance, end of year
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Vehicles and
Land Buildings Equipment
Rental
Total Equipment
$
$
$
$
$
$
78
—
8
—
—
—
—
—
(2)
—
84
$
990
37
25
39
3
—
—
(10)
(22)
(2)
$ 1,060
$
$
617 $ 1,685
87
77
39
18
2
(3)
(10)
(47)
(4)
700 $ 1,844
50
44
—
15
2
(3)
—
(23)
(2)
$
$
(10) $
—
—
—
—
—
(10) $
(427) $
(33)
(31)
2
13
—
(476) $
(381) $
(38)
(47)
—
21
1
(444) $
(818) $
(71)
(78)
2
34
1
(930) $
684
147
1
—
9
81
—
—
(200)
(2)
720
(254)
(95)
(11)
—
72
2
(286)
68
74
$
$
563
584
$
$
236 $
256 $
867
914
$
$
430
434
Land
Vehicles and
Buildings Equipment
Total
Rental
Equipment
$
$
$
$
$
$
76
2
—
—
—
—
—
78
$
$
973
17
6
9
—
(10)
(5)
990
$
$
633 $ 1,682
59
28
9
—
(85)
(8)
617 $ 1,685
40
22
—
—
(75)
(3)
$
$
(10) $
—
—
—
—
—
(10) $
(362) $
(33)
(33)
7
(9)
3
(427) $
(339) $
(39)
(46)
41
—
2
(381) $
(711) $
(72)
(79)
48
(9)
5
(818) $
691
110
1
1
79
(199)
1
684
(234)
(91)
(11)
83
—
(1)
(254)
66
68
$
$
611
563
$
$
294 $
236 $
971
867
$
$
457
430
44
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
16. LEASES
At the inception of a contract, the Company assesses whether the contract is or contains a lease.
The Company as Lessee
At the commencement of the lease, the Company recognizes a right-of-use asset and a corresponding lease
liability, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low
value assets.
The right-of-use asset at inception includes the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement date, and any initial direct costs. The right-of-use asset is
subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation of right-of-use
assets is recorded in selling, general, and administrative expenses for all assets except leases of rental equipment,
where depreciation is recorded in cost of sales in the consolidated statement of net income. Depreciation is
recorded on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the
underlying asset, commencing when the asset becomes available for use.
Right-of-use assets are reviewed for indicators of impairment at the end of each reporting period or whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss
is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. Where an
impairment loss is recognized for a right-of-use asset, the asset is reviewed for possible reversal of the impairment
at the end of each subsequent reporting period.
The lease liability is initially measured at the present value of the remaining lease payments that have not been paid
at the commencement date, discounted by using the Company’s incremental borrowing rate unless the rate implicit
in the lease is readily determinable.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest rate method) and by reducing the carrying amount to reflect the lease payments
made.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use
asset) whenever:
(cid:120) The lease term changes or there is a change in the assessment of the likelihood of the purchase option being
exercised, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate,
(cid:120) The lease payments change due to a change in an index, rate, or expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using
the initial discount rate; or,
(cid:120) The lease contract is modified and the lease modification is not accounted for as a separate lease, in which
case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
The right-of-use asset is presented within property, plant, and equipment and rental equipment and the lease liability
is presented within other liabilities (current) and long-term lease liabilities (non-current) on the consolidated
statement of financial position.
Interest expense on lease liabilities is recognized in finance costs in the consolidated statement of net income.
45
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Short-term leases and leases of low-value assets
The Company has elected not to recognize right-of-use assets and lease liabilities for leases that have a term of 12
months or less and leases of low-value assets. The Company recognizes these lease payments as an expense on a
straight-line basis over the lease term.
Areas of Significant Judgment
The Company is required to make judgments in determining the lease term. Management considers all facts and
circumstances, including economic incentives to exercise an extension option and its asset management strategy.
Extension options are only included in the lease term if the lease is reasonably certain to be extended. Most of the
Company’s extension options relate to leases of properties in the Company’s Canadian operations and are
evaluated based on management’s long-term facility strategy.
The Company as Lessor
Revenue from equipment rentals and operating leases is presented as equipment rental revenue and in accordance
with the terms of the relevant agreement with the customer, either recognized evenly over the term of that
agreement or on a usage basis such as the number of hours that the equipment is used.
Right-of-use asset additions and depreciation have been included in property, plant, and equipment and rental
equipment (Note 15). The net book value of right-of-use assets was as follows:
December 31
($ millions)
2021
2020
Amounts under sublease
Vehicles and
Land Buildings Equipment
160
8
$
137
$ —
$
$
$
$
124 $
118 $
Rental
Total Equipment
28
37
292
255
$
$
In 2021, the Company entered into a sublease of one of its leased office spaces, resulting in the right-of-use asset
being derecognized and reclassified to Other Assets.
46
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
17. INTANGIBLE ASSETS
Accounting Policy
Intangible assets are recorded at cost or acquisition-date fair value (if acquired through a business acquisition), net
of any accumulated amortization and any impairment losses.
Intangible assets with finite lives are amortized on a straight-line basis over the period during which they are
expected to generate benefits. Amortization is recorded in selling, general, and administrative expenses in the
consolidated statement of net income using the following estimated useful lives:
Contracts and Customer relationships
Software and Technology
Tradename
2 – 10 years
2 – 7 years
20 years
Intangible assets with indefinite lives are not amortized. The distribution network, presented separately on the
statement of financial position, is estimated to have an indefinite life because it is expected to generate cash flows
indefinitely. Refer to Note 18 for the Company’s policy on impairment reviews.
Borrowing costs are capitalized during the development of qualifying intangible assets. As the Company manages
the financing of all operations centrally, the development of qualifying assets is financed through general
borrowings and therefore, a weighted average borrowing rate is used in calculating interest to be capitalized.
Intangible assets are reviewed for indicators of impairment at the end of each reporting period or whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs of disposal and value-in-use. Where an impairment loss is
recognized for an intangible asset, the asset is reviewed for possible reversal of the impairment at the end of each
subsequent reporting period.
Areas of Significant Judgment
Amortization expense is sensitive to the estimated useful life determined for each type of asset. Actual lives and
residual values may vary depending on a number of factors including technological innovation, prospective use,
and maintenance programs.
47
December 31, 2021
($ millions)
Cost
Balance, beginning of year
Additions
Additions through business combinations
Disposals
Foreign exchange rate changes
Balance, end of year
Accumulated amortization
Balance, beginning of year
Amortization for the year
Disposals
Foreign exchange rate changes
Balance, end of year
Net book value
Balance, beginning of year
Balance, end of year
December 31, 2020
($ millions)
Cost
Balance, beginning of year
Additions
Disposals
Foreign exchange rate changes
Balance, end of year
Accumulated amortization
Balance, beginning of year
Amortization for the year
Foreign exchange rate changes
Balance, end of year
Net book value
Balance, beginning of year
Balance, end of year
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Contracts and
Customer
relationships
Software
and
Technology Tradename
Total
$
$
$
$
$
$
302
3
5
—
(1)
309
(176)
(23)
—
—
(199)
126
110
$
$
$
$
$
$
330
33
1
(1)
(1)
362
(151)
(38)
1
—
(188)
179
174
$
$
$
$
$
$
19
—
6
—
—
25
$
$
651
36
12
(1)
(2)
696
(2) $
(1)
—
—
(3) $
(329)
(62)
1
—
(390)
17
22
$
$
322
306
Contracts and
Customer
relationships
Software
and
Technology
Tradename
Total
$
$
$
$
$
$
284
22
—
(4)
302
(156)
(23)
3
(176)
128
126
$
$
$
$
$
$
298
35
(1)
(2)
330
(123)
(29)
1
(151)
175
179
$
$
$
$
$
$
19
—
—
—
19
$
$
601
57
(1)
(6)
651
(1) $
(1)
—
(2) $
(280)
(53)
4
(329)
18
17
$
$
321
322
48
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
18. IMPAIRMENT
Accounting Policy
Goodwill and intangible assets with indefinite lives (e.g. distribution network) are subject to an assessment for
impairment at least annually and when events or changes in circumstances indicate that their value may not be fully
recoverable, in which case the assessment is done at that time. Assets which do not have separate identifiable cash
inflows are allocated to cash-generating units (CGUs). CGUs are subject to impairment reviews whenever there is
an indicator that they may be impaired. At least quarterly, CGUs are reviewed for indicators of impairment. For the
purposes of impairment testing, goodwill is allocated to each of the Company’s CGUs or group of CGUs expected to
benefit from the acquisition. The level at which goodwill is allocated represents the lowest level at which goodwill is
monitored for management purposes and is not higher than an operating segment. If the recoverable amount of the
CGU is less than the carrying amount, then the impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount
of each asset in the unit, unless the impairment loss would reduce the carrying amount of an individual asset below
the highest of its fair value less costs of disposal; its value-in-use; or, zero. Any impairment is recognized
immediately in the consolidated statement of net income.
Impairment losses on goodwill are never reversed but impairment losses on intangible assets with indefinite lives
may be reversed. If there is any indication that the circumstances leading to the impairment loss of an intangible
asset with an indefinite life no longer exist or may have decreased, management estimates the recoverable value of
the CGU. Indicators of a recovery may include sustainable improvement of the economic performance of the CGU
and a positive trend in the forecast or budgeted results of the CGU. If the recoverable amount exceeds the carrying
amount, then a previously recognized impairment loss is considered to have been reversed (either fully or in part).
Any reversal of an impairment loss is recognized immediately in the consolidated statement of net income.
Areas of Significant Judgment
Judgment is used to identify an appropriate discount rate and growth rate used to estimate the recoverable value,
identifying the CGUs to which intangible assets should be allocated to, and the CGU or group of CGUs at which
goodwill is monitored for management purposes.
Areas of Estimation Uncertainty
The recoverable value of CGUs or group of CGUs requires the use of estimates related to the future operating
results and cash generating ability of the assets.
Overview of annual impairment tests
The annual impairment tests were completed to support April 1, 2021 net asset values. Management’s methodology
for impairment testing utilizes a single set of cash flows from the financial budgets to estimate recoverable value.
Recoverable value
The recoverable value of each CGU or group of CGUs is estimated based on a value-in-use calculation. The value-
in-use calculation uses cash flow projections based on financial budgets approved by the Board which include the
following key assumptions: future cash flows and growth projections, associated economic risk assumptions, and
estimates of achieving key operating metrics and drivers.
The cash flow projection key assumptions are based upon the Company’s financial budgets which are discounted
using after-tax weighted average cost of capital (WACC) rates. For the purposes of the annual impairment test, the
cash flows subsequent to the projection period are extrapolated using growth rates based on estimated long-term
real gross domestic product and inflation (where appropriate) in the markets in which the Company operates.
49
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Carrying amount, CGU allocation and key assumptions
Goodwill, distribution network, and the significant assumptions used in the Company’s value-in-use calculations for
each CGU or group of CGUs were as follows:
2021
After-tax
2020
After-tax
Distribution WACC Growth
Distribution WACC Growth
($ millions, except rate) Goodwill Network
Canada
Canada Mining
Chile
UK & Ireland
$
199 $
$ — $
5 $
$
33 $
$
—
98
—
2
rate
rate
Goodwill Network
rate
rate
8%
9%
9%
9%
2%
2%
3%
2%
$ 166 $
$ — $
$
5 $
$ 34 $
—
98
—
2
9%
9%
10%
10%
2%
2%
3%
2%
Sensitivities to key assumptions
Sensitivity testing is conducted as part of the annual impairment tests, including stress testing the WACC rate with
all other assumptions being held constant. Management believes that any reasonable change in the key
assumptions used to determine the recoverable amount would not cause the carrying amount of any CGU or group
of CGUs to exceed its recoverable amount. Management believes its assumptions are reasonable. If future events
were to differ significantly from management’s best estimate, key assumptions and associated cash flows could be
materially adversely affected and the Company could potentially experience future material impairment charges in
respect of the intangible assets with indefinite lives and goodwill.
Review for indicators of impairment
The Company’s CGUs, as of December 31, 2021, were reviewed for indicators of impairment. Management
reviewed recent cash flow projections and macro-economic conditions (including key assumptions used in WACC
rates). Based on this review, management concluded there were no indicators of impairment of the Company’s
CGUs.
Conclusion
There were no impairment losses recognized in 2021 or 2020 related to goodwill or distribution network. There were
no impairment reversals in 2021 or 2020 related to the distribution network in the Company’s South American
operations.
19. OTHER LIABILITIES
December 31
($ millions)
Lease liabilities
Provisions (Note 20)
Income tax payable
Commodity taxes payable
Other
Total other liabilities – current
December 31
($ millions)
Deferred tax liabilities
Net post-employment obligation (Note 21)
Share-based payments (Note 11)
Deferred revenue (Note 4)
Other
Total other liabilities – non-current
2021
2020
$
$
87 $
60
64
36
8
255 $
82
49
9
46
9
195
2021
2020
$
149 $
61
48
31
22
$
311 $
126
97
35
32
16
306
50
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
20. PROVISIONS
Accounting Policy
Warranty claims
Provisions are made for estimated warranty claims in respect of certain equipment, spare parts, and service
supplied to customers which are still under standard warranty at the end of the reporting period. These claims are
expected to be settled in the next financial year.
Other
Other provisions are estimated for tax, legal, environmental or rehabilitation costs, expected repurchase
guarantees, and anticipated losses related to long-term product support contracts or power system projects.
Other provisions are recorded, when the likelihood of payment or loss is probable and can be reliably measured,
with a corresponding expense in the consolidated statement of net income.
Areas of Estimation Uncertainty
Management estimates the warranty provision based on claims notified and past experience. Factors that could
impact the estimated claim include the quality of the equipment, spare parts, and labour costs.
For year ended December 31, 2021
($ millions)
Balance, beginning of year
New provisions
Charges against provisions
Foreign exchange rate changes
Balance, end of year
Current portion
Non-current portion
For year ended December 31, 2020
($ millions)
Balance, beginning of year
New provisions
Charges against provisions
Foreign exchange rate changes
Balance, end of year
Current portion
Non-current portion
Warranty
Claims
$
Other
Total
35 $
26
(24)
—
37 $
37 $
— $
44 $
24
(33)
—
35 $
35 $
— $
$
$
$
$
$
$
Warranty
Claims
$
Other
Total
18 $
27
(16)
(1)
28 $
23 $
5 $
53
53
(40)
(1)
65
60
5
15 $
55
(51)
(1)
18 $
14 $
4 $
59
79
(84)
(1)
53
49
4
51
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
21. POST-EMPLOYMENT BENEFITS
The Company offers a number of benefit plans that provide pension and other benefits to many of its employees in
Canada, the UK, the Republic of Ireland, and South America. These plans include defined benefit (DB) and defined
contribution (DC) pension plans in Canada, UK and Ireland, and include other post-employment benefits (Other
PEB) in South America.
Pension Plans
The DB plans include both registered and non-registered pension plans that provide a pension based on the
members’ final average earnings and years of service while participating in the pension plan.
(cid:120) In the Company’s Canadian operations, DB plans exist for eligible employees but are closed to new members.
Final average earnings are based on the highest 3 or 5-year average salary depending on employment category
and there is no standard indexation feature. Pension benefits under the registered DB plan’s formula that exceed
the maximum taxation limits are provided from a non-registered supplemental pension plan. Benefits under this
plan are partially funded by a Retirement Compensation Arrangement.
(cid:120) In the Company’s UK operations, a DB plan exists for eligible employees, but is closed to new members and was
amended to cease future accruals. Final average earnings are based on the highest 3-year period and benefits
are indexed annually with inflation subject to limits.
The DC plans are pension plans under which the Company pays fixed contributions, as a percentage of plan
member earnings, into the plans, where an account exists for each plan member.
(cid:120) In the Company’s Canadian operations, the DC plans are registered pension plans that offer a base Company
contribution rate for all members. The Company will also partially match non-executive employee contributions to
a maximum additional Company contribution of 1% of employee earnings. The registered DC plan for executive
employees is supplemented by an unfunded supplementary accumulation plan. Where contributions under the
registered plan would otherwise exceed the maximum taxation limit, the excess contributions are provided through
this supplemental plan.
(cid:120) In the Company’s UK operations, the DC plans offer a match of employee contributions, within a required range,
plus 1%. The Company’s Irish subsidiary has a DC plan, which offers a match of employee contributions at a level
set by the Company.
Other PEB
The Company’s South American employees do not participate in employer pension plans but are covered by country
specific government pension arrangements.
Employment terms at some of the Company’s South American operations provide for a payment when an
employment contract comes to an end under certain conditions, which can be considered a post-employment
benefit. The benefit is typically at the rate of one month of final salary for each year of service (subject in most cases
to a cap as to the number of qualifying years of service and a cap on the salary rate). The Company’s South
American post-employment benefits are not funded.
52
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Accounting Policy
Pension Plans
DB Plans:
The cost of pensions and other retirement benefits is determined by independent actuaries using the projected unit
credit method.
Current service costs, past service costs, and administration costs (net of employee contributions) are recognized in
selling, general, and administrative expenses and net interest costs are recognized in finance costs in the
consolidated statement of net income. Net interest cost is calculated by applying the discount rate at the beginning
of the period to the net DB liability or asset and contributions to and benefit payments from the plan during the year.
Actuarial gains and losses arising from experience and changes in actuarial assumptions are recognized in other
comprehensive income in the period in which they occur.
The amount recognized in the consolidated statement of financial position represents the present value of the DB
obligation reduced by the fair value of plan assets. The present value of the DB obligation is determined by
discounting the estimated future cash outflows using high-quality corporate bond yields, denominated in the same
currency of the benefits to be paid, that approximate the timing of the related pension obligation.
DC Plans:
The cost of pension benefits includes the current service cost, which comprise the actual contributions made and
accrued by the Company during the year. These contributions are based on a fixed percentage of member earnings
for the year and are expensed in the consolidated statement of net income as they become due.
Other PEB
The Company’s PEB in South America is accounted for as an unfunded DB plan. Current service costs are
recognized in selling, general, and administrative expenses and interest costs are recognized in finance costs in the
consolidated statement of net income. Interest costs are calculated by applying the discount rate at the beginning of
the period to the post-employment benefit liability and contributions to and benefit payments from the plan during the
year.
Actuarial gains and losses arising from experience and changes in actuarial assumptions are recognized in other
comprehensive income in the period in which they occur.
The amount recognized in the consolidated statement of financial position represents the present value of the post-
employment benefit obligation. The obligation recognized is based on valuations performed and regularly updated
through independent actuarial calculations by using the projected unit credit method.
Areas of Significant Judgment
Actuarial valuations of the Company’s DB plans and Other PEB are based on assumptions requiring significant
judgment, such as mortality rates, inflation (which is particularly relevant in the UK), estimates of future salary
increases, employee turnover, and the high-quality corporate bond yield (which is used to discount the estimated
future cash flows). These assumptions impact the measurement of the net DB obligation, net benefit cost, actuarial
gains and losses, and funding levels in Canada and the UK.
The total benefit cost and actuarial gain for the Company’s post-employment benefit plans were as follows:
2021
2020
For years ended December 31
($ millions)
Selling, general, and administrative expenses
Net interest recovery
Total benefit cost recognized in net income
Total actuarial gain recognized in
other comprehensive income
DC
DB and
Other
PEB
Plans Plans
14 $
(2)
12 $
$
$
42 $
—
42 $
DB and
Other
PEB
Plans
Total
DC
Plans
Total
56 $
(2)
54 $
12 $
(1)
11 $
41 $
—
41 $
53
(1)
52
$
(82) $ — $
(82) $
(29) $ — $
(29)
53
Other financial information about the Company’s DB plans in Canada and UK and Other PEB plans in South
America was as follows:
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
For years ended December 31
($ millions)
Accrued benefit obligation
Balance, beginning of year
Settlement due to buy-out
annuity transactions
Current service cost
Interest cost
Benefits paid
Remeasurements:
- Actuarial loss (gain) from
change in demographic
assumptions
- Actuarial (gain) loss from
change in financial
assumptions
Experience loss (gain)
Foreign exchange rate changes
Balance, end of year
Plan assets
Balance, beginning of year
Purchase of buy-out annuities
Return on plan assets:
- Return on plan assets
included in net interest cost
- Actuarial gain on plan assets
Employer contributions
Benefits paid
Administration costs
Foreign exchange rate changes
Balance, end of year
Net post-employment
obligation (asset)
2021
South
2020
South
Canada
UK
America Total
Canada
UK
America Total
$ 205 $ 677 $
79 $
961
$ 269 $ 658 $
55 $
982
—
6
5
(5)
—
—
9
(31)
—
7
—
(4)
—
13
14
(40)
(87)
6
7
(10)
—
—
13
(33)
—
8
—
(7)
(87)
14
20
(50)
1
(6)
—
(5)
—
—
11
11
(11)
—
—
(31)
3
(8)
$ 201 $ 613 $
(16)
(2)
(9)
55 $
$ 187 $ 809 $ — $
—
—
—
5
5
3
(5)
—
—
11
15
9
(31)
(1)
(10)
$ 195 $ 802 $ — $
—
—
4
(4)
—
—
(58)
1
(17)
869
996
—
16
20
16
(40)
(1)
(10)
997
17
3
—
39
(8)
8
$ 205 $ 677 $
4
5
3
79 $
60
—
11
961
$ 248 $ 731 $ — $
(84)
—
—
7
21
5
(10)
—
—
14
79
9
(33)
(1)
10
$ 187 $ 809 $ — $
—
—
7
(7)
—
—
979
(84)
21
100
21
(50)
(1)
10
996
$
6 $ (189) $
55 $
(128)
$
18 $ (132) $
79 $
(35)
Included in the accrued benefit obligation and plan assets were the following amounts in respect of plans that
were not fully funded:
For years ended December 31
($ millions)
Accrued benefit obligation
Plan assets
Funded status - plan deficit
2021
South
Canada
$
UK
60 $ — $
38
22 $ — $
America Total
55 $
—
55 $
115
38
77
—
$
Canada
UK
64 $ — $
37
27 $ — $
—
$
$
2020
South
America
Total
79 $
—
79 $
143
37
106
54
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Key Assumptions and Related Sensitivities
The significant actuarial assumptions used in the valuations of the Company’s DB plans in Canada and UK and
Other PEB plans in South America included:
2021
2020
For years ended December 31
Discount rate – obligation
Discount rate – expense (1)
Retail price inflation – obligation
Retail price inflation – expense (1)
Average staff turnover – obligation
Rate of compensation increase – obligation
Canada
UK
3.0%
2.7%
n/m (2)
n/m (2)
n/m (2)
n/m (2)
2.0%
1.4%
3.0%
2.6%
n/m (2)
n/a (2)
South
America
2.2%
(0.2)%
n/a (2)
n/a (2)
7.8%
3.0%
Canada
UK
2.7%
3.1%
n/m (2)
n/m (2)
n/m (2)
n/m (2)
1.4%
2.0%
2.6%
3.0%
n/m (2)
n/a (2)
South
America
(0.2)%
0.4%
n/a (2)
n/a (2)
7.8%
3.0%
(1) Used to determine the net interest cost and expense for the years ended December 31, 2021 and 2020.
(2) n/m – not a material assumption used in the valuation.
n/a – not applicable.
Assumptions regarding future mortality are required for the DB plans and were set based on management’s best
estimate in accordance with published statistics and experience in each country. These assumptions for 2021 and
2020 translate into an average life expectancy (in years) as follows:
December 31
Life expectancy for male currently aged 65
Life expectancy for female currently aged 65
Life expectancy at 65 for male currently aged 45
Life expectancy at 65 for female currently aged 45
(3) n/a – not applicable.
Canada
22
24
23
25
South
America
n/a (3)
n/a (3)
n/a (3)
n/a (3)
UK
22
24
23
25
The post-employment benefit obligation and expense are sensitive to changes in the significant actuarial
assumptions. At the end of the most recent calendar year, the weighted average duration of the obligation in
Canada is 16 years, UK is 19 years, and South America is 7 years. A 0.25% increase in the significant actuarial
assumptions would impact the accrued benefit obligations by the amounts shown below.
($ millions)
Discount rate
Retail price inflation
Average staff turnover
Rate of compensation increase
Change in
assumption
+0.25%
+0.25%
+0.25%
+0.25%
$
(4) n/m – not a material assumption used in the valuation.
n/a – not applicable.
(Decrease) increase in accrued benefit obligation
UK
Canada
$
$
(8)
n/m (4)
n/m (4)
n/m (4)
(29)
20
n/m (4)
n/a (4)
South America
$
$
$
$
(1)
n/a (4)
(1)
1
A 0.25% decrease in the discount rate, retail price inflation, rate of compensation increase, and average staff
turnover would have an approximately equivalent but opposite effect on the accrued benefit obligation in the
amounts shown above.
The sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, as changes in some of the assumptions may be correlated. When calculating the
sensitivity of the accrued benefit obligation to significant actuarial assumptions, the same method (i.e. present value
of the accrued benefit obligation calculated with the projected unit credit method at the end of the reporting period)
has been applied as when calculating the accrued benefit obligation recognized within the consolidated statement of
financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the
previous period.
55
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Funding and Valuations of DB Plans
In Canada, the Company governs and administers the DB plans. An actuarial valuation of the Canadian registered
DB plan is completed at least every three years to determine minimum annual contributions prescribed by applicable
legislation. The Company may make voluntary contributions to a Retirement Compensation Arrangement to partially
fund benefits for the Canadian non-registered supplemental DB plans. A surplus is recognized on the consolidated
statement of financial position to the extent that an economic benefit can be gained by the Company.
In the UK, a board of trustees governs and administers the DB plans. An actuarial valuation of the UK DB plan is
required every three years. In the last formal valuation, a schedule was set out by the board of trustees for
contributions to be made until mid-2023.
Based on the most recent formal valuations completed, the Company expects to contribute approximately $8 million
to the DB plans during the year ended December 31, 2022. The actuarial valuation dates of the Company’s material
post-employment benefit plans were as follows:
Post-Employment Benefit Obligations
Canada – Regular & Executive DB Plan
Canada – Regular & Executive Supplemental Income Plan
Finning UK DB Scheme
Finning South America Pension Arrangements
Plan Assets
Last Actuarial
Valuation Date
December 31, 2020
December 31, 2020
December 31, 2020
December 31, 2019
The fair values of plan assets are determined using a combination of quoted prices and market observable inputs
except for investments in real estate. The fair values of real estate investment funds are based on the net asset
value reported by the investment funds in their audited financial statements and are determined using inputs that are
not based on observable market data (unobservable inputs). Plan assets at December 31, 2021 were principally
invested in the following securities (segregated by geography):
Fixed-income
Equity (3)
Cash and cash equivalents
Canada
UK
Canada
Global (2)
UK
Global (2)
51%
15%
9%
—
25%
—
74%
—
2%
16%
8%
—
(2) Global investments exclude investments in Canadian and UK securities in Canada and UK, respectively.
(3) Approximately half of the UK scheme's equity investments are hedged to the GBP to manage foreign currency risk.
Plan assets do not include any direct investment in common shares of the Company at December 31, 2021 and
2020.
As part of management’s efforts to manage risks, in July 2020, the Company purchased buy-out annuities in
Canada, which settled a portion of its accrued benefit obligation. This settlement resulted in a reduction of both the
plan assets and the accrued DB in the Canadian registered DB plan by $84 million and a gain of $3 million was
recorded in selling, general, and administrative expenses in 2020.
56
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Key Risks
Through its DB plans, the Company is exposed to a number of risks, the most significant of which are detailed
below:
Investment Risk (i.e. asset volatility)
The accrued benefit obligation is calculated using a discount rate set with reference to high quality corporate bond
yields; if plan assets underperform this yield, this will create a deficit. Both the Canadian and UK plans invest in
various asset categories including equities, fixed income, and real estate. These investments, in aggregate, are
expected to outperform corporate bonds in the long-term but may result in volatility in the short-term.
To help mitigate this risk, in selecting the portfolios and the weightings in each category, the Company considers
and monitors how the duration and the expected yield of the investments match the expected cash outflows arising
from the pension obligations. A framework has been developed and adopted for each of the Canadian and UK DB
plans whereby the investments will be adjusted over time as plan funding positions change. The planned
adjustments are intended to improve the asset-liability match over time.
The plans continue to invest in equity investments as the Company believes that equities offer higher returns over
the long term with an acceptable level of risk considering the proportion of assets held in this category and the long-
term nature of the liabilities. Investments remain well diversified, such that the failure of any single investment would
not have a material impact on the overall level of assets.
Discount Rate Risk (i.e. changes in bond yields)
A decrease in corporate bond yields will increase the value of the accrued benefit obligation. This risk is managed
by selecting certain investments that aim to better match assets and liabilities. For example, an increase in the
accrued benefit obligation resulting from a decrease in corporate bond yields will be partially offset by an increase in
the fair value of the plans’ bond holdings.
Inflation Risk
The majority of the pension obligations in the UK are linked to inflation. Higher inflation will lead to higher liabilities
although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme
inflation. While some of the plan’s assets are either unaffected by (i.e. fixed interest bonds) or loosely correlated with
(i.e. equities) inflation, in recent years, the plan has increased its investments in assets that have a direct correlation
with inflation (e.g. index-linked gilts and liability matching funds) in order to manage this risk.
In the Canadian plans, the pension payments are not linked to inflation, so this is not a direct risk. However, to the
extent that future benefits are based on final average earnings and salaries are generally linked to inflation to some
degree, an increase in inflation beyond expectations may result in higher liabilities. With a relatively small number of
employees still earning benefits in the Canadian DB plan, this risk is limited.
Longevity Risk (i.e. increasing life expectancy)
The plans provide benefits for the life of the member after retirement, so increases in life expectancy will result in an
increase in the plans’ liabilities. This is particularly significant in the UK plan, where inflationary increases result in
higher sensitivity to changes in life expectancy.
Longevity risk in the UK plan is managed through asset management strategies. To mitigate this risk in the
Canadian registered pension plan, the Company may purchase annuity contracts.
57
Maturity Analysis
Expected maturity analysis of undiscounted pension and Other PEB obligations of the Company’s operations in
Canada, UK (1), and South America were as follows:
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
December 31, 2021
($ millions)
DB plans
Other PEB benefits
Total
a year
$
Less than Between
1-2 years
Between
2-5 years
Over
5 years
Total
27 $
5
28 $
3
$
32 $
31 $
95 $ 1,265 $ 1,415
128
109
11
106 $ 1,374 $ 1,543
(1) The December 31, 2020 funding valuation of the Finning UK DB Scheme is in progress as at February 8, 2022. In the table
above, cash flows for this plan have been taken from the December 31, 2017 funding valuation (the date of the last completed
valuation). The Company expects the December 31, 2020 funding valuation will be finalized during 2022.
Accumulated Actuarial Gains and Losses
The accumulated actuarial loss, net of tax, of the post-employment benefit obligations in the Company’s operations
in Canada, UK and Ireland, and South America recognized in retained earnings is $107 million at December 31,
2021 (December 31, 2020: $159 million).
22. SUPPLEMENTAL CASH FLOW INFORMATION
Accounting Policy
Cash and cash equivalents comprise cash on hand together with short-term investments, consisting of highly rated
and liquid money market instruments with original maturities of three months or less, and are classified as and
measured at amortized cost.
The components of cash and cash equivalents were as follows:
December 31
($ millions)
Cash
Cash equivalents
Cash and cash equivalents
The changes in operating assets and liabilities were as follows:
For years ended December 31
($ millions)
Accounts receivable
Unbilled receivables
Inventory
Other assets
Accounts payable and accruals
Other liabilities
Changes in operating assets and liabilities
2021
2020
$
$
140 $
362
502 $
222
317
539
2021
2020
$
$
(105) $
(41)
(210)
(70)
145
4
(277) $
188
15
508
3
(276)
(16)
422
58
The changes in liabilities arising from financing and operating activities were as follows:
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
For year ended December 31, 2021
($ millions)
Balance, beginning of year
Cash flow used in
Financing activities
Operating activities
Total cash movements
Non-cash changes
Additions
Additions through business combination
Remeasurement of liability and disposals
Interest expense
Foreign exchange rate changes
Total non-cash movements
Balance, end of year
For year ended December 31, 2020
($ millions)
Balance, beginning of year
Cash flow used in
Financing activities
Operating activities
Total cash movements
Non-cash changes
Additions
Remeasurement of liability and disposals
Interest expense
Foreign exchange rate changes
Total non-cash movements
Balance, end of year
Short-term Long-term
debt
debt
Lease
liabilities
Total
$
$
$
$
$
$
92 $ 1,308
280 $
—
280 $
(201)
—
(201)
— $
3
—
—
(1)
2 $
—
8
—
—
(4)
4
374 $ 1,111
Short-term Long-term
debt
debt
226 $ 1,518
(129) $
—
(129) $
(200)
—
(200)
—
— $
—
—
—
—
(10)
(5)
(5) $
(10)
92 $ 1,308
$
$
$
$
$
$
$
$
$
$
$
$
298 $ 1,698
(84) $
(10)
(94) $
(5)
(10)
(15)
70 $
15
31
10
(2)
70
26
31
10
(7)
124 $
130
328 $ 1,813
Lease
liabilities
Total
$
$
$
$
$
$
357 $ 2,101
(87) $
(11)
(98) $
(416)
(11)
(427)
29 $
(2)
11
1
29
(2)
11
(14)
24
298 $ 1,698
39 $
Dividends of $0.86 (2020: $0.82) per share were paid during the year. In February 2022, the Board approved a
quarterly dividend of $0.225 per share payable on March 10, 2022 to shareholders of record on February 24, 2022.
This dividend will be considered an eligible dividend for Canadian income tax purposes. At December 31, 2021, the
Company had not recognized a liability for this dividend.
59
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
23. ACQUISITIONS AND INVESTMENT
Accounting Policy
The acquisition method of accounting is used to account for all business combinations, regardless of whether
equity instruments or assets are acquired. The consideration for the acquisition of a subsidiary is:
(cid:120) fair values of the assets transferred, and
(cid:120) fair value of an asset or liability resulting from a contingent consideration arrangement
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at the acquisition-date fair value.
The excess of the consideration transferred over the fair value of the identifiable net assets acquired is recorded
as goodwill. Acquisition-related costs are expensed as incurred.
Compression Technology Corporation
On September 3, 2021, the Company’s Canadian operations acquired a 54.5% controlling ownership interest in
Compression Technology Corporation (ComTech) through Finning’s subsidiary, 4Refuel Holdings Limited (4Refuel).
ComTech is an early-stage developer of alternative energy infrastructure and provider of proprietary mobile fuelling
solutions for low-carbon fuels in North America, including compressed natural gas (CNG), renewable natural gas
(RNG), and hydrogen. ComTech provides 4Refuel with the capability to be a leading provider of turn-key, low-
carbon energy solutions. This acquisition expands the Company’s fuelling capabilities beyond diesel and allows the
Company to support customers’ energy transition journey, starting with solutions for CNG and RNG. This investment
in ComTech leverages 4Refuel’s leading mobile on-site refuelling platform to enable customers to reduce their
emissions and improve productivity.
Cash consideration for this acquisition was $25 million, which included $20 million cash acquired. The acquisition
was funded with cash on hand. Net assets acquired consist primarily of cash, property, plant, and equipment,
intangible assets, goodwill, and debt. As part of this acquisition, Finning also recorded a non-controlling interest in
ComTech (45.5% ownership interest) of $21 million.
The acquisition-date fair values of acquired tangible and intangible assets, and assumed liabilities are estimated to
be:
Preliminary purchase price allocation
($ millions)
Net working capital (1)
Property, plant & equipment
Intangible assets
Goodwill
Debt
Lease liabilities
Net identifiable assets
Non-controlling interests
Net assets acquired
December 31,
2021
$
$
$
21
17
9
25
(11)
(15)
46
(21)
25
(1) Net working capital comprises cash and cash equivalents, accounts receivable, inventory, other assets,
accounts payable and accruals, and provisions.
The Company expects to finalize the purchase price allocation no later than June 30, 2022.
Goodwill relates to the expected synergies from combining complementary capabilities and the expected growth
potential for natural gas in Canada and the US. The goodwill is assigned to the Company’s Canada reportable
segment and is not deductible for tax purposes.
60
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
Energyst B.V.
Energyst B.V. (Energyst) was the Caterpillar dealer in Europe for rental power and temperature control solutions. In
December 2020, the shareholders of Energyst, which included Finning, decided to restructure the company and
convert its rental activities into four separate regional organizations which were sold in January 2021. A plan is in
place to sell any remaining assets and wind-up Energyst, with the net proceeds from the sale to be distributed to
Energyst’s shareholders. During the year ended December 31, 2021, the Company received a return on its
investment in Energyst.
On January 7, 2021, the Company’s UK & Ireland operations acquired a 100% ownership interest in the Energyst
rental business operations in the UK and Ireland, one of the four regional organizations, and is now the authorized
supplier of rental services for Caterpillar power generation in these territories. This purchase has been accounted for
as a business combination using the acquisition method of accounting.
Cash consideration of $14 million (€9 million) was paid at the date of acquisition, which included $1 million cash
acquired. The Company funded the transaction with cash on hand.
The acquisition-date fair values of acquired tangible and intangible assets, and assumed liabilities are estimated to
be:
Final purchase price allocation
($ millions)
Net working capital (1)
Rental equipment
Property, plant & equipment
Deferred tax asset
Net assets acquired
December 31,
2021
$
$
3
9
1
1
14
(1) Net working capital comprises cash and cash equivalents, accounts receivable, inventory, other assets,
accounts payable and accruals, and provisions.
61
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
24. ECONOMIC RELATIONSHIPS
The Company distributes and services heavy equipment, engines, and related products. The Company has
dealership agreements with numerous equipment manufacturers, of which the most significant are with subsidiaries
of Caterpillar. Distribution and servicing of Caterpillar products account for the major portion of the Company's
operations. Finning has had a relationship with Caterpillar that has been ongoing since 1933.
25. RELATED PARTY TRANSACTIONS AND TOTAL STAFF COSTS
Balances and transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
The remuneration of the Board of Directors during the year was as follows:
For years ended December 31
($ millions)
Share-based payments
Total
2021
2020
$
$
6
6 $
5
5
The remuneration of key management personnel (defined as officers of the Company and country presidents)
during the year was as follows:
For years ended December 31
($ millions)
Salaries and benefits
Post-employment benefits
Share-based payments
Total
2021
2020
10 $
1
13
24 $
10
1
6
17
$
$
Total staff costs, including salaries, benefits, pension, share-based payments, termination payments, and
commissions are $1.0 billion (2020: $0.9 billion). This amount includes staff costs associated with key management
personnel noted above.
26. COMMITMENTS AND CONTINGENCIES
Due to the size, complexity, and nature of the Company’s operations, various legal, customs, and tax matters are
pending. It is not currently possible for management to predict the outcome of such matters due to various factors,
including: the preliminary nature of some claims, an incomplete factual record, and uncertainty concerning
procedures and their resolution by the courts, customs, or tax authorities. However, subject to these limitations,
management is of the opinion, based on legal assessments and information presently available, that, except as
stated below, it is not likely that any liability would have a material effect on the Company’s financial position or
results of operations.
The Company has received a number of claims from the Argentina Customs Authority associated with the export of
agricultural animal feed product for five quarters in 2012 and 2013 and an order that could result in up to a one-year
suspension of imports into Argentina by a portion of the business. The Company is appealing these claims and the
order, believes they are without merit, and is confident in its position. Mitigation measures are also available to the
Company in the case of the potential imports suspension order in the unlikely event Finning’s appeal is not
successful. These pending matters may take a number of years to resolve. Should the ultimate resolution of these
matters differ from management’s assessment and the mitigation measures not be effective, this could result in a
material negative impact on the Company’s financial position.
62
Finning International Inc.
2021 Annual Results
Notes to the Consolidated Financial Statements
27. GUARANTEES AND INDEMNIFICATIONS
In certain circumstances, the Company enters into contracts with rights of return (at the customer’s discretion) for
the repurchase or trade-in of equipment sold to customers for an amount which is generally based on a discount
from the estimated future fair value of that equipment. At December 31, 2021, the total estimated value of these
contracts outstanding was $146 million (2020: $139 million) coming due at periods ranging from 2022 to 2026. The
Company’s experience to date has been that the equipment at the exercise date of the contract is generally worth
more than the repurchase price or trade-in amount, however, there can be no assurance that this experience will
continue in the future. The total amount recognized as a provision against these contracts at December 31, 2021
was $2 million (2020: $1 million).
The Company has issued guarantees for certain equipment sold to third parties to guarantee their residual values.
The guarantees would be enforceable in the event that the market value of equipment at the time of its ultimate
disposal is below the residual value guarantee issued by the Company. At December 31, 2021, the maximum
potential amount of future payments that the Company could be required to make under the guarantees was $12
million (2020:12 million), covering various periods up to 2025. At December 31, 2021, the Company has recognized
a liability of $4 million for these guarantees (2020: $5 million).
During the year, the Company entered into various other commercial letters of credit in the normal course of
operations. The total issued and outstanding letters of credit at December 31, 2021 was $193 million (2020: $134
million) principally related to performance and advance payment guarantees on delivery for prepaid equipment and
other operational commitments in Chile.
63
Finning International Inc.
19100 94 Ave, Surrey, BC V4N 5C3
finning.com