FINNING INTERNATIONAL INC.
FINANCIAL REPORT
2024
Finning International Inc.
2024 Annual Results
1
MANAGEMENT’S DISCUSSION AND ANALYSIS
February 4, 2025
This MD&A should be read in conjunction with our Annual Financial Statements and the accompanying notes
thereto for the year ended December 31, 2024, which have been prepared in accordance with Accounting
Standards. 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.sedarplus.ca and in the investors section of our website at www.finning.com.
Finning (TSX: FTT) is the largest dealer of Caterpillar products in the world, serving customers for more than 90
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.
Following a detailed review of our remanufacturing business in Canada, we determined that the correct
classification of certain costs in SG&A should be cost of sales. Effective Q3 2024, the comparative figures for 2023
and Q1 2024 and Q2 2024 include an immaterial adjustment for a change in classification of certain expenses. For
more information on the impact to financial statements, please refer to Note 27 of our Annual Financial Statements.
A glossary of defined terms is included on page 49. The first time a defined term is used in this MD&A, it is
shown in bold italics.
Quarterly and Annual Overview
3 months ended
Years ended
December 31
December 31
% change
% change
2024
2023
fav
2024
2023
fav
($ millions, except per share amounts)
(Restated) (unfav)
(Restated)
(unfav)
Revenue
2,873
2,664
8% 11,206
10,527
6%
Net revenue (1)
2,579
2,403
7% 10,096
9,543
6%
Gross profit
631
622
1%
2,478
2,504
(1)%
SG&A
(412)
(391)
(5)%
(1,645)
(1,571)
(5)%
Equity earnings of joint ventures
4
1
9
9
Other income
—
13
—
54
Other expenses
—
(68)
(19)
(86)
EBIT
223
177
26%
823
910
(10)%
Net income attributable to shareholders of Finning
141
85
63%
509
523
(3)%
EPS
1.02
0.59
72%
3.62
3.55
2%
Free cash flow (2)
399
280
43%
865
66
n/m
Adjusted EBIT (2)(3)
223
232
(4)%
856
942
(9)%
Adjusted EPS (1)(3)
1.02
0.96
7%
3.80
3.91
(3)%
Gross profit as a percentage of net revenue (1)
24.5%
25.9%
24.5%
26.2%
SG&A as a percentage of net revenue (1)
(16.0)%
(16.3)%
(16.3)%
(16.5)%
EBIT as a percentage of net revenue (1)
8.7%
7.4%
8.2%
9.5%
Adjusted EBIT as a percentage of net revenue (1)(3)
8.7%
9.6%
8.5%
9.9%
Adjusted ROIC (1)(3)
17.6%
20.0%
17.6%
20.0%
(1) See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
(2) These are non-GAAP financial measures. See “Description of Specified Financial Measures and Reconciliations” in this
MD&A.
(3) Reported financial measures may be impacted by significant items described on pages 5, 6, 15, and 34-39 of this MD&A.
Financial measures that have been adjusted to take these items into account are referred to as “Adjusted” measures. See
“Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
2
Highlights
2024 revenue was $11.2 billion. Net revenue of $10.1 billion was up 6% from 2023, reflecting higher new and
used equipment sales in all our regions and an increase in product support revenue in South America.
2024 gross profit of $2.5 billion and gross profit as a percentage of net revenue of 24.5% were down from 2023.
2024 SG&A of $1.6 billion was 5% higher than 2023 on 6% net revenue growth.
2024 EBIT was $823 million and EBIT as a percentage of net revenue was 8.2%. Excluding significant items not
considered indicative of operational and financial trends as described on pages 5-6, 2024 Adjusted EBIT was
$856 million and Adjusted EBIT as a percentage of net revenue was 8.5%. EBIT and EBIT as a percentage of
net revenue in 2023 were $910 million and 9.5% respectively. Adjusted EBIT and Adjusted EBIT as a percentage
of net revenue in 2023 were $942 million and 9.9%, respectively. Lower Adjusted EBIT in 2024 was driven by
lower earnings in Canada and South America partially offset by the UK & Ireland.
EPS was $3.62 in 2024. Excluding significant items not considered indicative of operational and financial trends
as described on page 5, Adjusted EPS was $3.80 in 2024 compared to Adjusted EPS of $3.91 in 2023. 2024
Adjusted EPS decreased significantly from 2023 mainly due to lower earnings in Canada and South America
partially offset by lower provision for income tax and the benefit of our share repurchases.
2024 free cash flow generation was $865 million compared to $66 million in 2023, reflecting lower spend on
inventory, higher conversions of RPOs to sales, and strong collections. Net debt to Adjusted EBITDA (1)(2) at
December 31, 2024, was 1.5 times, down from December 31, 2023.
Adjusted ROIC at December 31, 2024, was 17.6%, down 240 basis points from December 31, 2023, driven by
lower Adjusted EBIT in the last twelve months and higher average invested capital levels in our Canadian and
South American operations.
Consolidated equipment backlog (1) was $2.6 billion at December 31, 2024, an increase of 27% compared to
December 31, 2023, driven by order intake outpacing deliveries, mainly in the mining and power systems
sectors.
(1) See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
(2)
Reported financial measures may be impacted by significant items described on pages 5, 6, 15, 34-39 of this MD&A.
Financial measures that have been adjusted to take these items into account are referred to as “Adjusted” measures. See
“Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
3
Table of Contents
Quarterly and Annual Overview ................................................................................................................................... 1
Highlights ..................................................................................................................................................................... 2
Strategic Priorities ........................................................................................................................................................ 4
Annual Adjusted Measures .......................................................................................................................................... 5
Annual Key Performance Measures ............................................................................................................................ 7
Annual Results ............................................................................................................................................................. 8
Selected Key Performance Measures – Balance Sheet ........................................................................................... 10
Results by Reportable Segment ................................................................................................................................ 11
Fourth Quarter Adjusted Measures ........................................................................................................................... 15
Quarterly Key Performance Measures ...................................................................................................................... 16
Fourth Quarter Results ............................................................................................................................................. 17
Market Update and Business Outlook ....................................................................................................................... 21
Liquidity and Capital Resources ................................................................................................................................ 22
Accounting and Estimates ......................................................................................................................................... 25
Risk Factors and Management .................................................................................................................................. 28
Contingencies and Guarantees ................................................................................................................................. 31
Outstanding Share Data ............................................................................................................................................ 31
Controls and Procedures Certification ....................................................................................................................... 32
Description of Specified Financial Measures and Reconciliations ............................................................................ 33
Selected Annual Information ..................................................................................................................................... 44
Selected Quarterly Information .................................................................................................................................. 45
Forward-Looking Information Disclaimer ................................................................................................................... 46
Glossary of Defined Terms ........................................................................................................................................ 49
Finning International Inc.
2024 Annual Results
4
Strategic Priorities
Our strategy builds on our success and focuses on the following priorities: drive product support, full-cycle
resilience, and sustainable growth.
We are committed to providing safe and secure environments, and empowering our people to make decisions that
drive long-term customer loyalty. Our strategy is focused on generating value for our customers, employees, and
shareholders.
Driving product support remains our
primary strategic objective. Product
support is our key value driver and
remains by far our largest
opportunity for resilient, profitable
growth. We are working to capture
a greater share of product support
across the full asset life cycle
through further growth in customer
value agreements, expanding our
rebuild business, and continuing to
strategically grow our equipment
population.
Full cycle resilience will enable us to
deliver more reliable and consistent
earnings through all market
conditions. We are continuing to
optimize and variabilize our cost
structure. We are also implementing
initiatives that increase our invested
capital velocity while concurrently
improving customer service levels.
These initiatives include an
increased focus on inventory
management as well as review and
exit of lower ROIC activities and
investments.
We are building a sustainable
growth platform from our core
business and expanding our
addressable market in used
equipment, rental, and power
systems. These segments are
resilient and strategically important,
and growing them will increase our
equipment population and help us
drive additional product support
growth.
All three elements of our strategy are integrated and designed to drive a fundamentally improved range of ROIC and
earnings capacity through all market conditions.
Sustainability
Sustainability is part of our everyday operations, strategies, and long-term plans. We continue to work towards
achieving our GHG emissions reduction target to reduce our absolute Scope 1 and Scope 2 GHG emissions by 40%
by 2027 (from a 2017 baseline). Finning offers customers a range of CAT® products and technologies that are
designed to help with some of the most complex challenges of the energy transition – emissions and energy
management – while also helping to maintain productivity and keeping operators safe. Examples include:
Caterpillar’s battery electric equipment offerings, machine automation systems, charging technologies, power
solutions, CAT digital solutions, operator training and technical support, Finning digital solutions, remanufacturing,
fuel agnostic delivery and advisory services. For more information, please review our Sustainability Report, which
can be found in the sustainability section of www.finning.com.
Finning International Inc.
2024 Annual Results
5
Annual Adjusted Measures
Reported financial measures may be impacted by significant items we do not consider indicative of operational and
financial trends either by nature or amount. We exclude these significant items when evaluating the operational
performance and related trends of our business. Financial measures that have been adjusted to take into account
these significant items are referred to as “Adjusted” measures. Adjusted measures are considered non-GAAP
financial measures, do not have a standardized meaning under Accounting Standards, 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 “Description of Specified Financial Measures and
Reconciliations” on pages 33-43 of this MD&A.
2024 significant items:
Severance costs related to headcount reductions and consolidation efforts focused on non-revenue generating
positions, including selected technology and supply chain roles as well as some financial support functions, as
we simplify our business activities in each of our operations.
Our Canadian operations recorded an estimated loss for receivables from Victoria Gold, a mining customer that
was placed into receivership following a landslide at its mine.
2023 significant items:
On December 13, 2023, the newly-elected Argentine government devalued the ARS official exchange rate by
118% from 366.5 ARS to 800 ARS for USD 1. As a result of prolonged government currency restrictions,
including no material access to USD starting in late August 2023, our ARS exposure increased and during this
period economic hedges were not available. As a result of the growth in our ARS exposure and the significant
devaluation of the ARS in the quarter, our South American operations incurred a foreign exchange loss of $56
million which exceeds the typical foreign exchange impact in the region.
We executed various transactions to simplify and adjust our organizational structure. We wound up two wholly-
owned subsidiaries, recapitalized and repatriated $170 million of profits from our South American operations, and
incurred severance costs in each region as we reduced corporate overhead costs and simplified our operating
model. As a result of these activities, our financial results were impacted by significant items that we do not
consider indicative of operational and financial trends:
net foreign currency translation gain and income tax expense were reclassified to net income on the wind up
of foreign subsidiaries;
withholding tax payable related to the repatriation of profits; and
severance costs incurred in all of our operations.
We began to implement our invested capital improvement plan as outlined at our 2023 Investor Day, which
targets selling and optimizing real estate and exiting low-ROIC activities. In the three months ended December
31, 2023:
our South American operations sold a property in Chile and recorded a gain of $13 million on the sale; and,
following an evaluation of the business needs of our operations and related intangible assets, several
software and technology assets have been or will be decommissioned, and as a result, we derecognized
previously capitalized costs of $12 million.
Finning International Inc.
2024 Annual Results
6
The significant items are noted below together with a reconciliation of the Adjusted measures to their most directly
comparable GAAP financial measures:
EBIT
EPS
Year ended December 31, 2024
South
UK &
($ millions, except for per share amounts)
Canada America
Ireland
Other
Consol
Consol
EBIT and EPS
415
381
67
(40)
823
3.62
Significant items:
Severance costs
9
3
4
3
19
0.10
Estimated loss for a customer receivable
14
—
—
—
14
0.08
Adjusted EBIT and Adjusted EPS
438
384
71
(37)
856
3.80
EBIT
EPS
Year ended December 31, 2023
South
UK &
($ millions, except for per share amounts)
Canada
America
Ireland
Other
Consol
Consol
EBIT and EPS
516
337
58
(1)
910
3.55
Significant items:
Foreign exchange and tax impact of
devaluation of ARS
—
56
—
—
56
0.36
Gain on wind up of foreign subsidiaries
—
—
—
(41)
(41)
(0.21)
Severance costs
4
7
2
5
18
0.09
Withholding tax on repatriation of profits
—
—
—
—
—
0.12
Gain on sale of property, plant,
and equipment
—
(13)
—
—
(13)
(0.06)
Write-off of intangible assets
5
4
3
—
12
0.06
Adjusted EBIT and Adjusted EPS
525
391
63
(37)
942
3.91
Finning International Inc.
2024 Annual Results
7
Annual Key Performance Measures
We utilize the following KPIs to enable consistent measurement of performance across the organization. KPIs may
be impacted by significant items described on pages 5, 6, and 34-39 of this MD&A. KPIs that have been adjusted to
take these items into account are referred to as “Adjusted” measures.
2024
2023
2022
2021
2020
(Restated) (1)(2)
EBIT ($ millions)
823
910
768
552
392
Adjusted EBIT ($ millions)
856
942
768
537
328
EBIT as a % of net revenue
Consolidated
8.2%
9.5%
9.3%
8.2%
6.8%
Canada
8.0%
10.2%
10.5%
9.7%
9.7%
South America
10.7%
10.5%
11.3%
9.4%
6.3%
UK & Ireland
5.0%
4.5%
5.5%
4.7%
1.8%
Adjusted EBIT as a % of net revenue
Consolidated
8.5%
9.9%
9.3%
8.0%
5.7%
Canada
8.4%
10.4%
10.5%
9.4%
7.0%
South America
10.8%
12.1%
11.3%
9.4%
7.4%
UK & Ireland
5.3%
4.9%
5.5%
4.7%
2.2%
EPS
3.62
3.55
3.25
2.26
1.43
Adjusted EPS
3.80
3.91
3.25
2.18
1.14
Invested capital (3) ($ millions)
4,566
4,765
4,170
3,326
3,067
ROIC (3) (%)
Consolidated
16.9%
19.3%
18.7%
16.8%
11.4%
Canada
14.3%
18.6%
18.7%
17.5%
14.6%
South America
25.7%
23.8%
24.5%
20.3%
11.0%
UK & Ireland
14.0%
11.3%
17.0%
14.8%
4.5%
Adjusted ROIC (%)
Consolidated
17.6%
20.0%
18.7%
16.4%
9.6%
Canada
15.1%
19.0%
18.7%
16.9%
10.5%
South America
25.9%
27.6%
24.5%
20.3%
12.9%
UK & Ireland
15.0%
12.3%
17.0%
14.8%
5.5%
Invested capital turnover (3) (times)
2.08
2.03
2.01
2.04
1.68
Inventory ($ millions)
2,646
2,844
2,461
1,687
1,477
Inventory turns (dealership) (3) (times)
2.78
2.47
2.61
3.09
2.79
Working capital to net revenue (3)
28.1%
28.4%
27.4%
22.9%
28.3%
Free cash flow ($ millions)
865
66
(170)
300
870
Net debt to Adjusted EBITDA (times)
1.5
1.7
1.6
1.1
1.4
(1) Following a detailed review of our remanufacturing business in Canada, we determined that the correct classification of
certain costs in SG&A should be cost of sales. In 2024, the comparative figures for 2023 include an immaterial adjustment for
a change in classification of certain expenses. For more information on the impact to financial statements, please refer to
Note 27 of our Annual Financial Statements.
(2) Comparative results for 2023 have been restated for our adoption of the amendments to IAS 1, Presentation of Financial
Statements effective for the financial year beginning January 1, 2024.
(3) See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
8
Annual Results
Revenue
Revenue was $11.2 billion in 2024 compared to $10.5 billion in 2023. Net revenue of $10.1 billion increased 6%
from the prior year with an increase in new and used equipment sales in all regions and product support revenue in
our South American operations.
New equipment revenue in 2024 was 11% higher than the prior year, mainly in the mining sector in South America
and all sectors in Canada. Equipment backlog at December 31, 2024, of $2.6 billion was up from $2.0 billion at
December 31, 2023, with order intake outpacing deliveries, mainly in the mining sector in South America and power
systems sector in UK & Ireland.
2024 used equipment revenue was up 29% from 2023, led by higher volumes in all market sectors of our Canadian
operations.
Product support revenue in 2024 was 2% higher than 2023, led by South America driven by the successful
execution of our product support strategy. This increase was partially offset by Canada where there was a slowdown
in the construction sector in 2024 following a period of high activity levels in 2023 and deferral of maintenance from
oil sands miners as mine plans changed and contractor activity levels lowered in 2024.
EBIT
2024 gross profit and
gross profit as a
percentage of net
revenue of $2.5 billion
and 24.5%, respectively,
were down from 2023,
primarily due to lower
gross margins in all lines
of business.
SG&A in 2024 of $1.6 billion was 5% higher than the prior year and SG&A as a percentage of net revenue was
16.3%. The higher SG&A was mainly due to costs to access USD in Argentina and higher people-related costs in
Canada partially offset by our focus on cost containment. In addition, 2024 SG&A included an estimated loss for
receivables from a customer in Canada that was placed into receivership. Excluding this item, the increase in SG&A
was 4% on 6% net revenue growth.
Net Revenue by Line of Business and by Operation
Years ended December 31
($ millions)
3,612
507
295
5,480
202
3,262
392
327
5,378
184
0
2,750
5,500
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
Net Revenue by Line of Business
2024
2023
5,193
3,561
1,342
5,045
3,221
1,277
0
2,650
5,300
Canada
South America
UK & Ireland
Net Revenue by Operation
2024
2023
Finning International Inc.
2024 Annual Results
9
EBIT was $823 million and EBIT as a percentage of
net revenue was 8.2% in 2024. Excluding significant
items not considered indicative of financial and
operational trends as described on pages 5-6,
Adjusted EBIT in 2024 was $856 million and Adjusted
EBIT as a percentage of net revenue was 8.5%,
compared to $942 million and 9.9%, respectively, in
2023. Lower Adjusted EBIT was driven by lower
earnings in Canada and South America partially offset
by an increase in UK & Ireland.
Finance Costs
Finance costs for 2024 of $160 million were
comparable to 2023.
Provision for Income Taxes
The effective income tax rate for 2024 and 2023 were
23.6% and 30.4%, respectively, and included the impact of significant items not considered indicative of financial
and operational trends described on pages 5-6. Excluding these significant items, the effective income tax rate for
2024 and 2023 would have been 23.6% and 26.4%, respectively, with the 2024 rate being lower primarily due to
unrecognized losses utilized in Argentina.
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 tax audits, or tax rates and tax
legislation.
Net Income Attributable to Shareholders of Finning and EPS
Net income attributable to shareholders of Finning was $509 million and EPS was $3.62 in 2024, compared to $523
million and $3.55, respectively, in 2023. Excluding the significant items not considered indicative of financial and
operational trends described on pages 5-6, Adjusted EPS was $3.80 in 2024, 3% lower than Adjusted EPS in 2023.
Adjusted EBIT by Operation (1)
Years ended December 31
($ millions)
(1)
Excluding Other operations
438
384
71
525
391
63
0
275
550
Canada
South America
UK & Ireland
Adjusted EBIT
2024
2023
Finning International Inc.
2024 Annual Results
10
Selected Key Performance Measures – Balance Sheet
December 31,
December 31,
($ millions, unless otherwise stated)
2024
2023
Invested capital
Consolidated
4,566
4,765
Canada
2,648
2,852
South America
1,552
1,381
UK & Ireland
367
510
South America (USD)
1,078
1,044
UK & Ireland (GBP)
203
303
Adjusted ROIC
Consolidated
17.6%
20.0%
Canada
15.1%
19.0%
South America
25.9%
27.6%
UK & Ireland
15.0%
12.3%
Invested capital turnover (times)
Consolidated
2.08
2.03
Canada
1.80
1.83
South America
2.40
2.27
UK & Ireland
2.81
2.51
Inventory turns (dealership) (times) (1)
2.78
2.47
Working capital to net revenue (2)
28.1%
28.4%
(1) Following a detailed review of our remanufacturing business in Canada, we determined that the correct classification of
certain costs in SG&A should be cost of sales. Effective Q3 2024, the comparative figures for 2023 and Q1 2024 and Q2
2024 include an immaterial adjustment for a change in classification of certain expenses. For more information on the impact
to financial statements, please refer to Note 27 of our Annual Financial Statements.
(2) Comparative results for 2023 have been restated for our adoption of the amendments to IAS 1, Presentation of Financial
Statements effective for the financial year beginning January 1, 2024.
Compared to December 31, 2023:
The $199 million decrease in consolidated invested capital from December 31, 2023, to December 31, 2024,
includes a foreign exchange impact of $150 million in translating the invested capital balances of our South
American and UK & Ireland operations. The foreign exchange impact was the result of the weaker CAD relative to
the USD and GBP compared to December 31, 2023.
Excluding the impact of foreign exchange, consolidated invested capital decreased by $349 million from December
31, 2023, to December 31, 2024, reflecting:
lower inventory in all regions, driven by lower new equipment inventory in Canada in line with higher sales in
2024;
lower rental equipment in all regions, driven by increased rental rollouts and conversions of RPOs to sales,
mainly in our Canadian operations;
lower pension asset in the UK & Ireland, mainly due to the execution of our pension optimization strategy; and
partially offset by higher accounts receivable in Canada and South America, driven by an increase in sales
activity.
Finning International Inc.
2024 Annual Results
11
On a consolidated basis, Adjusted ROIC of 17.6% at December 31, 2024, was 240 basis points lower than Adjusted
ROIC at December 31, 2023, largely driven by lower Adjusted EBIT in the last twelve months and higher average
invested capital levels in our Canadian and South American operations. This was partially offset by a 270 basis point
improvement in UK & Ireland’s Adjusted ROIC due to higher Adjusted EBIT in the last twelve months and lower
average invested capital levels. Consolidated invested capital turnover of 2.08 at December 31, 2024, was higher
than December 31, 2023, mainly due to strong net revenue growth in all of our regions.
Inventory turns (dealership) at December 31, 2024, were higher than December 31, 2023, partially due to faster
equipment throughput and RPO conversions. Working capital to net revenue of 28.1% at December 31, 2024, was
lower than December 31, 2023.
Results by Reportable Segment
We operate primarily in one principal business: the sale, service, and rental of heavy equipment, engines, and
related products in various markets on three continents. Our reportable segments are Canada, South America, UK &
Ireland, and Other.
The table below provides details of net revenue by lines of business and results by operation.
Year ended December 31, 2024
South
UK
Net Revenue
($ millions)
Canada
America & Ireland
Other
Consol
% (1)
New equipment
1,667
1,186
759
—
3,612
36%
Used equipment
341
69
97
—
507
5%
Equipment rental
184
70
41
—
295
3%
Product support
2,801
2,234
445
—
5,480
54%
Fuel and other
200
2
—
—
202
2%
Net revenue
5,193
3,561
1,342
—
10,096
100%
Operating costs
(4,558)
(3,052)
(1,230)
(31)
(8,871)
Depreciation and amortization
(220)
(125)
(41)
(6)
(392)
Equity earnings of joint ventures
9
—
—
—
9
Other expenses
(9)
(3)
(4)
(3)
(19)
EBIT
415
381
67
(40)
823
Net revenue percentage by operation
52%
35%
13%
—
100%
Adjusted EBIT
438
384
71
(37)
856
EBIT as a % of net revenue
8.0%
10.7%
5.0%
8.2%
Adjusted EBIT as a % of net revenue
8.4%
10.8%
5.3%
8.5%
Year ended December 31, 2023
South
UK
Net Revenue
($ millions)
Canada
America & Ireland
Other
Consol
%
New equipment
1,520
1,021
721
—
3,262
34%
Used equipment
261
53
78
—
392
4%
Equipment rental
206
77
44
—
327
4%
Product support
2,875
2,069
434
—
5,378
56%
Fuel and other
183
1
—
—
184
2%
Net revenue
5,045
3,221
1,277
—
9,543
100%
Operating costs
(4,322)
(2,706)
(1,171)
(32)
(8,231)
Depreciation and amortization
(207)
(124)
(43)
(5)
(379)
Equity earnings of joint ventures
9
—
—
—
9
Other income
—
13
—
41
54
Other expenses
(9)
(67)
(5)
(5)
(86)
EBIT
516
337
58
(1)
910
Net revenue percentage by operation
53%
34%
13%
—
100%
Adjusted EBIT
525
391
63
(37)
942
EBIT as a % of net revenue
10.2%
10.5%
4.5%
9.5%
Adjusted EBIT as a % of net revenue
10.4%
12.1%
4.9%
9.9%
(1)
See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
12
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 weaker CAD relative to the USD on average in 2024 compared to 2023 had a favourable foreign currency
translation impact on 2024 net revenue of approximately $55 million and did not have a significant impact at the
EBIT 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 the operational performance of the reporting segment.
2024 Annual Overview
2024 net revenue was 9% higher than 2023, largely
driven by higher revenue in the mining as well as
power systems sectors.
New equipment revenue in 2024 was 14% higher than
the same prior year period, driven by an increase in
deliveries to mining customers as well as higher
revenues in the power systems sector in oil and gas
and data centre markets. This increase was partially
offset by a decrease in new equipment sales in
Argentina driven by lower public investment.
Equipment backlog at December 31, 2024, was up
from December 31, 2023, with order intake outpacing
deliveries, primarily in the mining sector.
Product support revenue in 2024 increased 6% from
2023, up in all market sectors, primarily in the mining
and power systems sectors in Argentina and the
construction sector in Chile.
Gross profit in 2024 increased from 2023 mainly due to increased volumes. Gross profit as a percentage of net
revenue in 2024 was lower than 2023 mainly due to lower gross margins in all lines of business and a higher
proportion of new equipment in the revenue mix.
2024 SG&A costs were up from 2023, mainly due to approximately $40 million higher costs to access USD in
Argentina during the period of elevated government currency restrictions. Excluding these costs, SG&A would have
been lower in 2024 compared to 2023 due to the favourable foreign currency translation impact on SG&A, primarily
from the devaluation of the CLP relative to the USD in 2024 compared to 2023. This was partially offset by higher
people-related and variable costs to support volumes.
2024 EBIT was $381 million and EBIT as a percentage of net revenue was 10.7%. Excluding significant items not
considered indicative of financial and operational trends as described on pages 5-6, Adjusted EBIT in 2024 was
$384 million and Adjusted EBIT as a percentage of net revenue was 10.8%, lower than $391 million and 12.1%,
respectively, in 2023. 2024 Adjusted EBIT as a percentage of net revenue was lower than 2023 mainly due to lower
gross margins partially offset by operating leverage of fixed costs on strong revenue growth.
Net Revenue by Line of Business
South America Operations
Years ended December 31
($ millions)
1,186
69
70
2,234
2
1,021
53
77
2,069
1
0
1,120
2,240
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
2024
2023
Finning International Inc.
2024 Annual Results
13
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.
2024 Annual Overview
2024 net revenue of $5.2 billion was 3% higher than 2023,
led by higher new and used equipment sales partially offset
by lower product support revenue.
2024 new equipment revenue was 10% higher than 2023,
an increase in all market sectors. Equipment backlog at
December 31, 2024, was lower than December 31, 2023,
as deliveries outpaced order intake in all market sectors.
Used equipment sales in 2024 were up 30% from 2023, up
in all market sectors.
Product support revenue in 2024 was down 3% from 2023
driven by lower activity in the construction and mining
sectors.
Gross profit and gross profit as a percentage of net revenue
in 2024 decreased from 2023. The decrease reflected lower
gross margins in all lines of business and a higher
proportion of new equipment in the revenue mix (2024:
32% compared with 2023: 30%).
In June 2024, Victoria Gold experienced a heap leach pad landslide failure at their Eagle Gold mine site in the
Yukon Territory. In Q3 2024, this customer was placed in receivership on application by the Yukon government. We
recorded an estimated loss for receivables of $14 million from this customer.
2024 SG&A was up compared to the prior year. Excluding the estimated loss for receivables from Victoria Gold,
2024 SG&A was up 2% and SG&A as a percentage of net revenue was down slightly compared to 2023 reflecting a
focus on cost containment.
2024 EBIT from our Canadian operations was $415 million and EBIT as a percentage of net revenue was 8.0%.
Excluding significant items not considered indicative of financial and operational trends as described on pages 5-6,
Adjusted EBIT in 2024 was $438 million and Adjusted EBIT as a percentage of net revenue was 8.4%, compared to
$525 million and 10.4%, respectively, in 2023.
Net Revenue by Line of Business
Canadian Operations
Years ended December 31
($ millions)
1,667
341
184
2,801
200
1,520
261
206
2,875
183
0
1,450
2,900
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
2024
2023
Finning International Inc.
2024 Annual Results
14
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 weaker CAD relative to the GBP on average in 2024 compared to 2023 had a favourable foreign currency
translation impact on 2024 net revenue of approximately $55 million and did not have a significant impact at the
EBIT 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 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 the operational performance of the reporting segment.
2024 Annual Overview
2024 net revenue was up slightly from 2023, primarily
due to higher used and new equipment sales partially
offset by lower product support activity.
2024 used equipment sales were 20% higher than the
prior year, mainly from increased volumes in the
construction sector, reflecting the execution of our
strategy.
New equipment revenue in 2024 was up slightly from
2023 due to strong power systems project activity
partially offset by lower deliveries to industrial customers.
Equipment backlog at December 31, 2024, was double
December 31, 2023, mainly due to strong order intake in
all market sectors outpacing deliveries.
2024 product support revenue was down from 2023,
reflecting lower activity levels in the construction sector.
Excluding the impact of foreign exchange, gross profit and gross profit as a percentage of net revenue in 2024 were
comparable to 2023.
SG&A and SG&A as a percentage of net revenue were lower in 2024 compared to 2023. This decrease reflected
the execution of structural changes and overhead reductions in our cost base.
2024 EBIT was $67 million and EBIT as a percentage of net revenue was 5.0%. Excluding the significant item not
considered indicative of financial and operational trends as described on pages 5-6, Adjusted EBIT in 2024 was $71
million and Adjusted EBIT as a percentage of net revenue was 5.3%, higher than $63 million and 4.9%, respectively,
in 2023.
Other Operations
Our Other operations include corporate operating costs.
2024 EBIT was a loss of $40 million. Excluding the significant item not considered indicative of financial and
operational trends as described on pages 5-6, 2024 Adjusted EBIT loss of $37 million was comparable to Adjusted
EBIT loss in 2023.
Net Revenue by Line of Business
UK & Ireland Operations
Years ended December 31
($ millions)
759
97
41
445
721
78
44
434
0
385
770
New
equipment
Used
equipment
Equipment
rental
Product
support
2024
2023
Finning International Inc.
2024 Annual Results
15
Fourth Quarter Adjusted Measures
There were no significant items identified by management for adjustment in the three months ended December 31,
2024.
Significant items affecting our reported results for the three months ended December 31, 2023, which we do not
consider to be indicative of operational and financial trends, either by nature or amount, are detailed below.
Q4 2023 significant items:
Foreign exchange loss of $56 million due to the significant devaluation of the ARS relative to the USD.
Gain of $13 million on the sale of a property in Chile.
Derecognition of $12 million of previously capitalized costs for software and technology assets.
The significant items are noted below together with a reconciliation of the Adjusted measures to their most directly
comparable GAAP financial measures:
EBIT
EPS
3 months ended December 31, 2023
South
UK &
($ millions, except per share amounts)
Canada
America
Ireland
Other
Consol
Consol
EBIT and EPS
117
55
6
(1)
177
0.59
Significant items:
Foreign exchange and tax impact of
devaluation of ARS
—
56
—
—
56
0.37
Gain on sale of property, plant,
and equipment
—
(13)
—
—
(13)
(0.06)
Write-off of intangible assets
5
4
3
—
12
0.06
Adjusted EBIT and Adjusted EPS
122
102
9
(1)
232
0.96
Finning International Inc.
2024 Annual Results
16
Quarterly Key Performance Measures
KPIs may be impacted by significant items described on pages 15 and 34-39 of this MD&A. KPIs that have been
adjusted to take these items into account are referred to as “Adjusted” measures.
2024 (Restated) (1)
2023 (Restated) (1)(2)
2022
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
EBIT ($ millions)
223
170
228
202
177
252
242
239
214
Adjusted EBIT ($ millions)
223
203
228
202
232
252
242
216
214
EBIT as a % of net revenue
Consolidated
8.7%
6.7%
8.6%
8.7%
7.4% 10.3%
9.4% 11.2%
9.0%
Canada
8.1%
5.6%
9.2%
8.9%
9.3% 10.8%
9.9% 11.0%
11.0%
South America
10.9% 10.6% 10.4% 11.0%
6.7% 12.3% 12.1% 10.5%
11.4%
UK & Ireland
5.8%
4.9%
4.6%
4.5%
1.8%
5.9%
5.5%
5.1%
4.4%
Adjusted EBIT as a % of net revenue
Consolidated
8.7%
8.0%
8.6%
8.7%
9.6% 10.3%
9.4% 10.1%
9.0%
Canada
8.1%
7.5%
9.2%
8.9%
9.7% 10.8%
9.9% 11.3%
11.0%
South America
10.9% 10.9% 10.4% 11.0%
12.6% 12.3% 12.1% 11.5%
11.4%
UK & Ireland
5.8%
6.3%
4.6%
4.5%
2.7%
5.9%
5.5%
5.7%
4.4%
EPS
1.02
0.75
1.02
0.84
0.59
1.07
1.00
0.89
0.89
Adjusted EPS
1.02
0.93
1.02
0.84
0.96
1.07
1.00
0.89
0.89
Invested capital ($ millions)
4,566
4,774
4,969
5,128
4,765
4,897
4,630
4,545
4,170
ROIC (%)
Consolidated
16.9% 15.8% 17.4% 18.0%
19.3% 20.7% 20.8% 20.2%
18.7%
Canada
14.3% 14.6% 16.8% 17.4%
18.6% 19.8% 20.1% 19.4%
18.7%
South America
25.7% 23.1% 23.3% 24.2%
23.8% 27.1% 25.9% 24.0%
24.5%
UK & Ireland
14.0% 10.0% 10.4% 10.9%
11.3% 13.7% 15.5% 17.0%
17.0%
Adjusted ROIC
Consolidated
17.6% 17.6% 18.5% 19.1%
20.0% 20.2% 20.2% 19.7%
18.7%
Canada
15.1% 15.5% 16.9% 17.6%
19.0% 19.9% 20.2% 19.6%
18.7%
South America
25.9% 26.5% 26.5% 27.4%
27.6% 27.6% 26.4% 24.6%
24.5%
UK & Ireland
15.0% 11.5% 11.0% 11.5%
12.3% 14.1% 15.9% 17.4%
17.0%
Invested capital turnover (times)
2.08
2.02
1.99
2.00
2.03
2.08
2.07
2.01
2.01
Inventory ($ millions)
2,646
2,881
2,974
3,073
2,844
2,919
2,764
2,710
2,461
Inventory turns (dealership) (times)
2.78
2.67
2.46
2.36
2.47
2.61
2.52
2.52
2.61
Working capital to net revenue
28.1% 28.9% 29.5% 29.0%
28.4% 27.3% 27.3% 27.8%
27.4%
Free cash flow ($ millions)
399
346
330
(210)
280
—
31
(245)
332
Net debt to Adjusted EBITDA ratio (times)
1.5
1.7
1.8
1.9
1.7
1.8
1.8
1.7
1.6
(1) Following a detailed review of our remanufacturing business in Canada, we determined that the correct classification of
certain costs in SG&A should be cost of sales. Effective Q3 2024, the comparative figures for 2023 and Q1 2024 and Q2
2024 include an immaterial adjustment for a change in classification of certain expenses. For more information on the impact
to financial statements, please refer to Note 27 of our Annual Financial Statements.
(2) Comparative results for 2023 have been restated for our adoption of the amendments to IAS 1, Presentation of Financial
Statements effective for the financial year beginning January 1, 2024.
Finning International Inc.
2024 Annual Results
17
Fourth Quarter Results
Revenue
Q4 2024 revenue was $2.9 billion. Net revenue of $2.6 billion in the fourth quarter of 2024 was up 7% from Q4 2023,
driven by higher new equipment sales and product support revenue. The weaker CAD relative to the USD and GBP
on average in Q4 2024 compared to Q4 2023 had a favourable foreign currency translation impact on Q4 2024 net
revenue of approximately $45 million.
Q4 2024 new equipment revenue was 12% higher than the same prior year period, with higher equipment sales to
mining customers in South America and higher power system project deliveries in the UK & Ireland.
Product support revenue was up 6% in Q4 2024 from the same prior year period, up in all regions, mainly led by
South America reflecting our focus on the product support growth strategy.
EBIT
Q4 2024 gross profit of $631
million was up slightly from the
same period in the prior year
due to the favourable impact of
foreign exchange. Gross profit
as a percentage of net revenue
of 24.5% in Q4 2024 was 140
basis points lower than Q4 2023
mainly due to a high proportion
of lower margin mining
equipment in the mix.
SG&A in Q4 2024 of $412 million was 5% higher than Q4 2023 on 7% net revenue growth. This increase included
higher people-related and variable costs to support revenue growth. SG&A as a percentage of net revenue was
16.0%, a 30 basis point improvement over the same prior year period reflecting operating leverage of fixed costs.
Net Revenue by Line of Business and by Operation
3 months ended December 31
($ millions)
921
136
75
1,394
53
819
135
88
1,313
48
0
700
1,400
New
equipment
Used
equipment
Equipment
rental
Product
support
Fuel and
other
Net Revenue by Line of Business
2024
2023
1,252
948
379
1,254
805
344
0
650
1,300
Canada
South America
UK & Ireland
Net Revenue by Operation
2024
2023
Finning International Inc.
2024 Annual Results
18
Q4 2024 EBIT was $223 million and EBIT as a
percentage of net revenue was 8.7%, higher than $177
million and 7.4%, respectively, in Q4 2023. Excluding
significant items not considered indicative of financial
and operational trends as described on page 15,
Adjusted EBIT in Q4 2023 was $232 million and
Adjusted EBIT as a percentage of net revenue was
9.6%.
Finance Costs
Finance costs in Q4 2024 were $33 million, down from
$44 million in Q4 2023 primarily due to lower interest
rates.
Provision for Income Taxes
The effective income tax rate in Q4 2024 was 25.9%,
compared to 35.8% in Q4 2023 which included the
impact of the significant devaluation of the ARS relative to the USD. Excluding the significant items not considered
indicative of financial and operational trends described on page 15, the effective income tax rate for Q4 2023 would
have been 26.4% which is comparable to 25.9% in Q4 2024.
Net Income Attributable to Shareholders of Finning and EPS
Q4 2024 net income attributable to shareholders of Finning was $141 million and EPS was $1.02. Excluding
significant items not considered indicative of financial and operational trends as described on page 15, Q4 2023
Adjusted EPS was $0.96. Higher EPS in Q4 2024 mainly reflected the benefit of our share repurchases and higher
Adjusted EBIT from our UK & Ireland operations, as well as lower finance costs.
Adjusted EBIT by Operation (1)
3 months ended December 31
($ millions)
(1)
Excluding Other operations
101
103
22
122
102
9
0
65
130
Canada
South America
UK & Ireland
Adjusted EBIT
2024
2023
Finning International Inc.
2024 Annual Results
19
The table below provides details of net revenue by operation and lines of business and results by operations.
3 months ended December 31, 2024
South
UK
Net Revenue
($ millions)
Canada
America & Ireland
Other
Consol
%
New equipment
364
316
241
—
921
36%
Used equipment
97
20
19
—
136
5%
Equipment rental
48
17
10
—
75
3%
Product support
691
594
109
—
1,394
54%
Fuel and other
52
1
—
—
53
2%
Net revenue
1,252
948
379
—
2,579
100%
Operating costs
(1,102)
(813)
(348)
(2)
(2,265)
Depreciation and amortization
(53)
(32)
(9)
(1)
(95)
Equity earnings of joint ventures
4
—
—
—
4
EBIT
101
103
22
(3)
223
Net revenue percentage by operation
48%
37%
15%
—
100%
EBIT as a % of net revenue
8.1%
10.9%
5.8%
8.7%
3 months ended December 31, 2023
South
UK
Net Revenue
($ millions)
Canada
America & Ireland
Other
Consol
%
New equipment
374
239
206
—
819
34%
Used equipment
84
20
31
—
135
5%
Equipment rental
58
20
10
—
88
4%
Product support
691
525
97
—
1,313
55%
Fuel and other
47
1
—
—
48
2%
Net revenue
1,254
805
344
—
2,403
100%
Operating costs
(1,077)
(672)
(324)
—
(2,073)
Depreciation and amortization
(56)
(31)
(11)
(1)
(99)
Equity earnings of joint ventures
1
—
—
—
1
Other income
—
13
—
—
13
Other expenses
(5)
(60)
(3)
—
(68)
EBIT
117
55
6
(1)
177
Net revenue percentage by operation
52%
34%
14%
—
100%
Adjusted EBIT
122
102
9
(1)
232
EBIT as a % of net revenue
9.3%
6.7%
1.8%
7.4%
Adjusted EBIT as a % of net revenue
9.7%
12.6%
2.7%
9.6%
Finning International Inc.
2024 Annual Results
20
All variances and ratios in this section are based on the functional currency of each operation (South America: USD,
Canada: CAD, UK & Ireland: GBP).
South America Operations
The weaker CAD relative to the USD on average in Q4 2024 compared to Q4 2023 had a favourable foreign
currency translation impact on Q4 2024 net revenue of approximately $25 million and did not have a significant
impact at the EBIT level.
Q4 2024 net revenue was up 15% from Q4 2023. New equipment revenue in Q4 2024 was 29% higher than the
prior year quarter, reflecting increased sales in the mining sector. Product support revenue in Q4 2024 was up 10%
from Q4 2023, led by mining and oil and gas customers.
Gross profit in Q4 2024 increased from Q4 2023. Gross profit as a percentage of net revenue in Q4 2024 was lower
than Q4 2023 mainly due to the product mix within new equipment sales to mining customers as well as a higher
proportion of new equipment in the revenue mix (Q4 2024: 33% compared to Q4 2023: 30%).
Q4 2024 SG&A was up from Q4 2023 primarily driven by higher people-related and variable costs to support growth
in product support, as well as foreign exchange which included costs to manage our risk exposure.
Q4 2024 EBIT was $103 million and EBIT as a percentage of net revenue was 10.9%, higher than $55 million and
6.7%, respectively in Q4 2023. Excluding significant items not considered indicative of financial and operational
trends described on page 15, Adjusted EBIT in Q4 2023 was $102 million and Adjusted EBIT as a percentage of net
revenue was 12.6%.
Canada Operations
Q4 2024 net revenue of $1.3 billion was comparable to Q4 2023. Used equipment sales were up 15% from Q4
2023, with strong sales in the mining sector. New equipment sales were down 3%, with lower sales in the
construction and power systems sectors partially offset by higher deliveries to mining customers. Q4 2024 rental
revenue was 15% lower than the same prior year period in all market sectors, reflecting slower market conditions, as
well as a small rental fleet. Product support revenue was comparable to Q4 2023, reflecting strong activity levels in
the power sector related to oil & gas activity and higher spending by mining customers, offset by continued slower
activity levels in construction.
Gross profit and gross profit as a percentage of net revenue in Q4 2024 were lower than Q4 2023. The decrease in
gross profit as a percentage of net revenue was driven by a higher proportion of lower margin mining equipment
deliveries in Q4 2024.
Q4 2024 SG&A was comparable to Q4 2023 driven by higher people-related costs offset by the benefit from our
focus on cost containment.
Q4 2024 EBIT was $101 million and EBIT as a percentage of net revenue was 8.1%, lower than $117 million and
9.3%, respectively, in Q4 2023. Excluding significant items not considered indicative of financial and operational
trends described on page 15, Adjusted EBIT in Q4 2023 was $122 million and Adjusted EBIT as a percentage of net
revenue was 9.7%.
UK & Ireland Operations
The weaker CAD relative to the GBP on average in Q4 2024 compared to Q4 2023 had a favourable foreign
currency translation impact on Q4 2024 net revenue of approximately $20 million and did not have a significant
impact at the EBIT level.
Fourth quarter 2024 net revenue was up 4% from the same period in 2023, largely due to an 11% increase in new
equipment revenue driven by strong power systems project activity. Q4 2024 product support revenue was up 5%
from the same prior year period, primarily driven by increased activity in the power systems sector. This was partially
offset by lower used equipment sales in Q4 2024 compared to Q4 2023 which included a large package delivery.
Q4 2024 gross profit and gross profit as a percentage of net revenue were higher than the same prior year period.
The increase in Q4 2024 gross profit as a percentage of net revenue was mainly due to higher new equipment
margins. SG&A in Q4 2024 was down from Q4 2023 on 4% net revenue growth, reflecting operating leverage and
cost containment.
Q4 2024 EBIT was $22 million and EBIT as a percentage of net revenue was 5.8%, higher than $6 million and 1.8%,
respectively, in Q4 2023. Excluding significant items not considered indicative of financial and operational trends
described on page 15, Adjusted EBIT in Q4 2023 was $9 million and Adjusted EBIT as a percentage of net revenue
was 2.7%.
Finning International Inc.
2024 Annual Results
21
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 46 of this MD&A. Actual outcomes and results may
vary significantly.
South America Operations
In Chile, our outlook is underpinned by growing global demand for copper, strong copper prices, capital deployment
into large-scale brownfield expansions, and customer confidence to invest in brownfield and greenfield projects. We
are seeing a broad-based level of quoting, tender, and award activity for mining equipment, product support, and
technology solutions. While activity levels and outlook remain positive, we also expect a more challenging
environment in attracting and retaining qualified labour.
In the Chilean construction sector, we continue to see demand from large contractors supporting mining operations,
and we expect infrastructure construction activity to remain steady. In the power systems sector, activity remains
strong in the industrial and data centre markets, driving growing demand for electric power solutions.
In Argentina, we continue to take a low-risk approach, while at the same time, we are positioning our business to
capture opportunities, particularly in the oil & gas and mining sectors. The operating environment remains dynamic,
and we continue to closely monitor the government’s new rules and policies, some of which are helping drive large-
scale investment.
Canada Operations
Our outlook for Western Canada is mixed. We expect continued spending discipline from our large customers as
they work to achieve operating cost targets. Going forward, we expect these customers to deploy capital to renew,
maintain, and rebuild aging fleets. Based on customer commitments and discussions, we anticipate stable demand
for product support, including component remanufacturing and rebuilds. The recent government changes and
announcements in Canada and the US, including tariffs, create additional uncertainty for our business and our
customers.
We expect ongoing commitments from federal and provincial governments as well as private sector projects for
infrastructure development to support activity in the construction sector, but we expect these projects will take time
to advance. In addition, growing demand for reliable, efficient, and sustainable electric power solutions across
communities in Western Canada creates opportunities for our power systems business.
With slower growth and a more uncertain market environment in the near-term, we are focused on managing our
cost and working capital levels and continue to see additional opportunities to unlock invested capital. We are also
continuously evaluating opportunities to assess and execute opportunities to optimize low-ROIC activities. We
anticipate leveraging the structural changes and overhead reductions strategy demonstrated in our UK operations.
UK & Ireland Operations
With low GDP growth projected in the UK to continue, we expect demand in the construction sector to remain soft.
We expect a growing contribution from used equipment and power systems as we continue to execute on our
strategy. In power systems, quoting activity remains strong, driven by healthy demand for primary and backup power
generation, particularly in the data centre market. We expect our product support business in the UK & Ireland to
remain resilient.
Strategy Execution, Cost and Capital Focus
We expect our 2025 net capital and net rental fleet expenditures to be above our 2024 spend of $219 million. These
planned expenditures are expected to include regular maintenance capital as well as expenditures to add
capabilities and capacity to serve the growing markets in South America and reposition and build our rental fleet in
Canada as the market recovers.
As we progress through 2025, we remain focused on the steady execution of our strategic plan: maximize product
support, continuously improve our cost and capital position to drive full-cycle resilience and grow prudently in used,
rental and power. Consistent execution, despite macroeconomic and market uncertainties, will enable us to meet
our objective of achieving a sustainably higher Adjusted ROIC.
Finning International Inc.
2024 Annual Results
22
Liquidity and Capital Resources
We assess liquidity in terms of our ability to generate sufficient cash flow, along with other sources of liquidity
including cash and borrowings, to fund operations and growth. Liquidity is affected by operating, investing, and
financing activities.
Cash flows provided by (used in) each of these activities and free cash flow were as follows:
3 months ended
Years ended
December 31
December 31
($ millions)
2024
2023
2024
2023
Operating activities
441
291
1,011
228
Investing activities
(43)
(53)
(128)
(229)
Financing activities
(456)
(207)
(818)
(71)
Operating activities
441
291
1,011
228
Additions to property, plant, and equipment and intangible assets
(44)
(51)
(153)
(220)
Proceeds on disposal of property, plant, and equipment
2
40
7
58
Free cash flow
399
280
865
66
The most significant contributors to the changes in cash flows for 2024 over 2023 were as follows (all events
described were in the current quarter or annual period, unless otherwise stated):
Quarter over Quarter
Year over Year
Free cash
flow
lower payments for inventory and RPOs in
Canada;
lower other supplier payments in Canada;
higher collections in South America and UK &
Ireland; and
partially offset by higher payments for
inventory in South America and lower
collections in Canada
lower payments for inventory in Canada and
UK & Ireland;
higher conversions of RPOs to sales and lower
spend on RPOs, primarily in Canada;
higher collections in South America;
lower other supplier payments in Canada; and
partially offset by higher payments for
inventory in South America
Investing
activities
(excluding
net spend
on
property,
plant, and
equipment)
Q4 2023 included $42 million increase in
short-term investments in South America
$27 million decrease in short-term investments
in 2024 compared with a $54 million increase
in short-term investments in 2023 in South
America
Financing
activities
$213 million higher repayment of short-term
borrowings in Q4 2024; and
$30 million higher repurchases of common
shares
$482 million repayment of short-term
borrowings in 2024 compared with $206 million
cash provided by short-term debt in 2023; and
$39 million higher repurchases of common
shares
Finning International Inc.
2024 Annual Results
23
Capital Resources and Management
Our cash and cash equivalents balance at December 31, 2024, was $316 million (December 31, 2023: $152
million). In April 2024, we settled USD 50 million of 4.28% notes which were due on April 3, 2024. In February 2024,
we issued $425 million of 4.778% senior unsecured notes due February 13, 2029, and in January 2024, we settled
USD 100 million of 4.08% notes which were due on January 19, 2024. At December 31, 2024, to complement
internally generated funds from operating and investing activities, we had approximately $3.1 billion in unsecured
committed and uncommitted credit facilities. Included in this amount is a committed sustainability-linked revolving
credit facility totaling $1.3 billion with various Canadian and global financial institutions, which is set to mature in
June 2029, and an additional $300 million committed revolving credit facility which is set to mature in October 2025.
At December 31, 2024, $853 million was available collectively under these committed revolving credit facilities. We
are subject to certain covenants under our committed revolving credit facilities and were in compliance with these
covenants at December 31, 2024.
We continuously monitor actual and forecasted cash flows, manage the maturity profiles of our financial liabilities,
and maintain committed and uncommitted credit facilities. 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.
Finning is rated (1) by both DBRS and S&P:
Long-term debt
Short-term debt
December 31
2024
2023
2024
2023
DBRS
BBB (high)
BBB (high)
R-2 (high)
R-2 (high)
S&P
BBB+
BBB+
n/a
n/a
In April 2024, DBRS affirmed our BBB (high) long-term rating and R-2 (high) commercial paper rating both with
stable trends. In May 2024, S&P affirmed our BBB+ rating with stable outlook.
During the year ended December 31, 2024, we repurchased 8,127,190 common shares for cancellation for $322
million, at an average cost of $39.68 per share (including a 2% share buyback tax, effective January 1, 2024),
through our NCIB (2). During the year ended December 31, 2023, we repurchased 7,216,763 common shares for
cancellation for $272 million, at an average cost of $37.75 per share.
In connection with our NCIB, we implemented an automatic share purchase plan with a designated broker to enable
share repurchases for cancellation during selected blackout periods. At December 31, 2024, we recorded an
estimated obligation of $23 million for the repurchase of shares from January 1, 2025 to February 5, 2025, under
this automatic share purchase plan.
Net Debt to Adjusted EBITDA
We monitor net debt to Adjusted EBITDA to assess our operating leverage and ability to repay debt. This ratio
approximates the length of time, in years, that it would take us to repay our debt, with net debt and Adjusted EBITDA
held constant.
Finning December 31,
December 31,
long-term target
2024
2023
Net debt to Adjusted EBITDA (times)
< 3.0
1.5
1.7
(1) A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any
time by the rating organization.
(2) A copy of the NCIB notice is available on request directed to the Corporate Secretary, 19100 94 Avenue, Surrey, BC V4N
5C3.
Finning International Inc.
2024 Annual Results
24
Contractual Obligations
Payments on contractual obligations in each of the next five years are shown in the table below. The amounts
presented represent the future undiscounted principal and interest cash flows, and therefore, do not necessarily
equal the carrying amount on the consolidated statement of financial position.
($ millions)
2025
2026
2027
2028
2029 Thereafter
Total
Short-term debt
844
—
—
—
—
—
844
Long-term debt
67
242
338
386
443
245
1,721
Lease liabilities
86
70
58
47
38
76
375
Total contractual obligations
997
312
396
433
481
321
2,940
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
2024, we contributed $5 million towards the defined benefit pension plans. Based on the most recently completed
valuations, we expect to contribute approximately $3 million to the defined benefit pension plans during the year
ended December 31, 2025.
Capital and Rental Expenditures
We expect our 2025 net capital and net rental fleet expenditures to be above our 2024 spend of $219 million. These
planned expenditures are expected to include regular maintenance capital as well as expenditures to add
capabilities and capacity to serve the growing markets in South America and reposition and build our rental fleet in
Canada as the market recovers.
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,
2024, 67%, 70% and 4% 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, 2024, 42% 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, 2024, 14% of eligible employees in Finning (Ireland) were
contributing to this plan.
We may cancel these plans at any time.
Finning International Inc.
2024 Annual Results
25
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 Vice President,
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 Accounting Standards. Our significant
accounting policies are included in the notes to the Annual Financial Statements for the year ended December 31,
2024. 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 areas of estimation uncertainty and significant judgments involved in preparing our Annual Financial Statements
for the year ended December 31, 2024, were:
determination of the functional currency of each Finning subsidiary;
estimation of revenues and costs associated with long-term product support contracts and complex power and
energy systems;
determination of when control transfers to customers for revenue contracts;
determination of whether a significant economic incentive exists for sales of assets with repurchase
commitments;
identification of performance obligations in revenue contracts with customers where long-term contracts are sold
bundled together with the sale of equipment;
estimation of allowance for doubtful accounts;
estimation of fair value of derivative financial instruments;
inputs to the models to measure the fair value of certain share-based payments;
estimation of provisions for slow-moving and obsolete inventory;
estimation of provisions for income tax;
estimation of useful lives and residual values of property, plant, and equipment and rental equipment;
estimation of useful lives of intangible assets;
determination of lease terms;
identification of the CGU to which assets should be allocated for impairment testing;
estimation of recoverable values for goodwill and other indefinite-lived intangible assets;
estimation of provisions for warranty; and
assumptions in the actuarial valuation models to measure 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, 2024.
Revenue Recognition from 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.
Finning International Inc.
2024 Annual Results
26
Determination of When Control Transfers to Customers for Revenue Contracts
The Company is required to make judgments when determining when control is transferred to the customer. For the
sale of new and used equipment and parts inventory, generally, control passes to the customer at the time of
shipment of the equipment or parts to the customer or when commissioning of equipment is complete. In certain
circumstances, management must determine if control transfers before or after the goods are shipped to the
customer (for example, bill-and-hold arrangements). In making this determination, management considers whether
the Company has transferred significant risks and rewards related to the product, legal title has transferred, the
Company has the ability to direct or sell the product to another customer, the product is ready for physical transfer,
or the product is in a condition of being capable of operating in the manner intended.
Revenue Recognition for Sales of Equipment 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 economic
incentive is expected, revenue is recognized over the term of the contract. Significant assumptions are made in
estimating residual values, which are assessed based on experience and taking into account expected future market
conditions and projected disposal values.
Identifying Performance Obligations in Revenue Contracts
The Company is required to make judgments when identifying the performance obligations in contracts with
customers. When the sales of parts and labour for servicing equipment under a long-term contract are sold bundled
together with the sale of equipment to a customer, management typically concludes that these are two separate
performance obligations as each of the promises to transfer equipment and provide services is capable of being
distinct and separately identifiable.
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 aging of receivable balances, external credit ratings, publicly available information about customers,
expectation of customer bankruptcies, and the impact of inflation and interest rate increases on customers ability to
pay) 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 reviews equipment values with
equipment specialists taking into account current market demand, market supply of equipment, market prices, and
the age and condition of equipment. Management reviews parts inventory estimates based on market demand, parts
turns, discontinued items, ability to return to the vendor, and surplus/excess items.
Finning International Inc.
2024 Annual Results
27
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 where we operate 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 where 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.
Goodwill and Intangible Assets with Indefinite Lives
The recoverable value of each CGU or group of CGUs 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 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, cash-generating ability of the assets, discount rates, and growth rates.
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 24 of the Annual Financial Statements.
New Accounting Pronouncements
Effective January 1, 2024, we adopted the amendments to IAS 1, Presentation of Financial Statements which
resulted in the restatement of the 2023 comparative results for current liabilities and non-current liabilities. No other
recent amendments to accounting standards had an impact on our financial statements. For more details on
amendments to Accounting Standards that were effective January 1, 2024, as well as future accounting
pronouncements and effective dates, please refer to Note 2 of our Annual Financial Statements.
Finning International Inc.
2024 Annual Results
28
Risk Factors and Management
We are exposed to market, credit, liquidity, and other risks in the normal course of our business activities. Our ERM
process is designed to ensure that such risks are identified, managed, and reported. This framework assists us in
managing business activities and risks across the organization to 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 business risk assessment and the management of key business risks, any
changes to key risk exposures, and the steps taken to monitor and control such exposures, and report their review
to the Board. The Board reviews all material risks 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.
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 the 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 offshore 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 and workforce management 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. This risk 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 and unbilled receivables from customers is minimized because of
the diversification of our operations as well as the diversified customer base and geographical dispersion. We limit
our exposure to credit risk from accounts receivable by establishing a maximum payment period for customers. We
also 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.
Finning International Inc.
2024 Annual Results
29
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.
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 growth, capital, and debt
repayment requirements, we will require additional debt or equity financing. Our ability to access capital markets for
additional debt or equity 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 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.
In Argentina, we have experienced government currency restrictions in the past that have impacted our ability to
meet our USD financial obligations as they fall due. We have been working, and continue to work, with our key
suppliers to manage payment terms and are evaluating the new rules and policies of the newly-elected government.
While our access to USD in Argentina has improved since Q4 2023, new government rules and policies as well as
economic conditions are subject to change, and may impact our ability to manage our liquidity risk.
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 foreign currency debt, derivative financial instruments, and short-term investments 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’s Ireland operations 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 are translation and
transaction exposure.
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 by hedging a portion of our foreign investments with loans denominated in
foreign currencies. The weaker CAD relative to the USD and the GBP of 9% and 7%, respectively, at December 31,
2024, compared to December 31, 2023, resulted in a foreign currency translation gain of $177 million recorded in
2024. This was partially offset by a $28 million foreign exchange loss on net investment hedges.
Finning International Inc.
2024 Annual Results
30
Transaction Exposure
Many of our operations purchase, sell, rent, and lease assets and 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 in our
Canadian operations.
The results of our operations are impacted by the translation of foreign-denominated transactions; the results of our
Canadian operations are most impacted by USD based revenue and costs, and the results of our South American
operations are most impacted by CLP and ARS based revenues and costs.
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, primarily the USD/CAD in Canada and USD/CLP and USD/ARS in South America.
We enter into forward exchange contracts, short-term investments, and short-term borrowings 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. Government
currency restrictions that remain in place in Argentina may continue to impact our ARS exposure and cost to hedge.
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. In this scenario, a 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 weakens against the USD and our revenue may be impacted as mining customers curtail their
equipment and product support spend. In South America, our SG&A is largely denominated in local currency. A
weaker CLP to USD or ARS to USD positively impacts our financial results when local currency-based costs are
translated into USD reported SG&A, 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
Years ended
Exchange
December 31
December 31 – average
December 31 – average
rate
2024
2023 Change
2024
2023 Change
2024
2023 Change
USD/CAD
1.4389 1.3226
(9)%
1.3982 1.3624
(3)%
1.3698 1.3497
(1)%
GBP/CAD
1.8029 1.6837
(7)%
1.7922 1.6913
(6)%
1.7504 1.6784
(4)%
USD/CLP
996.46 877.12
(14)%
962.94 894.77
(8)%
943.23 837.57
(13)%
USD/ARS
1,032.00 808.45
(28)% 1,000.71 394.06 (154)%
911.61 260.80 (250)%
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 some of our interest-bearing financial assets. Our floating-rate
financial assets comprise cash and cash equivalents and short-term investments. Due to the short-term nature of
these financial assets, the impact of fluctuations in fair value is limited but interest income earned can be impacted.
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 variable interest-bearing financial liabilities, primarily from short-
term debt. 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 costs and cash flows will increase or decrease as interest rates change.
Finning International Inc.
2024 Annual Results
31
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, but no assurance can be given that these efforts will fully offset all risk.
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.
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.
Our subsidiary, FASA, began to export an agricultural animal feed product from Argentina in the third quarter of
2012 in response to the Argentina 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. FASA has not exported agricultural animal feed product since the third
quarter of 2013. The ACA has made a number of claims against FASA 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 relates to the tariff classification of
this product and therefore the export duty payable. FASA has appealed these claims and the order, believes they
are without merit, and is confident in their position. In 2024, the Argentina government abolished the industry-wide
import registration requirement, which is the basis for the license the government has purported to suspend (the
suspension is currently not in force) and FASA has applied to have the suspension cancelled on this ground.
Mitigation measures are available to FASA in the unlikely event the import suspension order is not cancelled and the
appeal of the potential imports suspension order is not successful. These pending matters may take a number of
years to resolve. In response to an application by the Canadian government, in April 2021, in September 2022, and
in September 2023 in a final vote, the member states of the WCO voted by a significant margin in favour of the tariff
classification used by FASA. These results have been filed in FASA’s appeals of the ACA claims. During 2024, by
the end of the year, the Argentina Tax Court had issued a number of decisions in favour of the tariff classification
used by FASA. We expect the ACA will appeal these decisions to the Federal Court of Appeals, and by the end of
2024, the ACA had appealed two decisions. We are confident the Courts in Argentina will follow the decision of the
WCO. 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 order could not be cancelled and 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, 2024, the total estimated value of these contracts outstanding
was $68 million (2023: $91 million) coming due at periods ranging from 2025 to 2033. 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, 2024, was $1 million
(2023: $1 million).
For further information on our commitments, contingencies, guarantees, and indemnifications, refer to Notes 25 and
26 of the Annual Financial Statements.
Outstanding Share Data
January 31, 2025
Common shares outstanding
135,508,823
Options outstanding
1,058,687
Finning International Inc.
2024 Annual Results
32
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.
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.
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 Accounting Standards. There has been no
change in the design of our internal controls over financial reporting during the year ended December 31, 2024, that
would materially affect, or is reasonably likely to materially affect, our internal control over financial reporting.
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, 2024, 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, 2024.
Finning International Inc.
2024 Annual Results
33
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 these significant items into account 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 EPS
Adjusted 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 EPS (the most directly comparable GAAP financial measure) and Adjusted EPS can be
found on page 37 of this MD&A.
Adjusted EBIT and Adjusted EBITDA
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.
Adjusted EBITDA is calculated by adding depreciation and amortization to Adjusted EBIT.
The most directly comparable GAAP financial measure to Adjusted EBITDA and Adjusted EBIT is EBIT.
Finning International Inc.
2024 Annual Results
34
Significant items identified by management that affected our results were as follows:
In Q3 2024, we recorded severance costs related to the headcount reductions and consolidation efforts focused on non-revenue generating positions,
including selected technology and supply chain roles as well as some financial support functions as we simplify our business activities in each of our
operations.
In Q3 2024, our Canadian operations recorded an estimated loss for receivables from Victoria Gold, a mining customer that was placed into receivership
following a landslide at its mine.
On December 13, 2023, the newly-elected Argentine government devalued the ARS official exchange rate by 118% from 366.5 ARS to 800 ARS for USD
1. As a result of prolonged government currency restrictions, including no material access to USD starting in late August 2023, our ARS exposure
increased and during this period economic hedges were not available. As a result of the growth in our ARS exposure and the significant devaluation of
the ARS in the fourth quarter, our South American operations incurred a foreign exchange loss of $56 million which exceeds the typical foreign exchange
impact in the region.
We began to implement our invested capital improvement plan as outlined at our 2023 Investor Day, which targets selling and optimizing real estate and
exiting low-ROIC activities. In Q4 2023:
our South American operations sold a property in Chile and recorded a gain of $13 million on the sale; and
following an evaluation of the business needs of our operations and related intangible assets, several software and technology assets have been or
will be decommissioned, and as a result, we derecognized previously capitalized costs of $12 million.
In Q1 2023, we executed various transactions to simplify and adjust our organizational structure. We wound up two wholly-owned subsidiaries,
recapitalized and repatriated $170 million of profits from our South American operations, and incurred severance costs in each region as we reduced
corporate overhead costs and simplified our operating model. As a result of these activities, our Q1 2023 financial results were impacted by significant
items that we do not consider indicative of operational and financial trends:
net foreign currency translation gain and income tax expense were reclassified to net income on the wind up of foreign subsidiaries;
withholding tax payable related to the repatriation of profits; and
severance costs incurred in all our operations.
Finning qualified for and recorded a benefit from Q2 2020 to Q1 2021 related to CEWS, which was introduced by the Government of Canada in response
to the COVID-19 pandemic for eligible entities that met specific criteria.
In December 2020, the shareholders of Energyst, which included Finning, decided to restructure the company. A plan was put in place to sell any
remaining assets and wind up Energyst, with net proceeds from the sale to be distributed to Energyst’s shareholders. In Q1 2021, we recorded a return
on our investment in Energyst.
Finning International Inc.
2024 Annual Results
35
A reconciliation from EBIT to Adjusted EBIT and Adjusted EBITDA for our consolidated operations is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
EBIT
223
170
228
202
177
252
242
239
214
224
190
140
552
392
Significant items:
Severance costs
—
19
—
—
—
—
—
18
—
—
—
—
—
42
Estimated loss for a
customer receivable
—
14
—
—
—
—
—
—
—
—
—
—
—
—
Foreign exchange and tax
impact of devaluation of ARS
—
—
—
—
56
—
—
—
—
—
—
—
—
—
Gain on sale of property,
plant, and equipment
—
—
—
—
(13)
—
—
—
—
—
—
—
—
—
Write-off of intangible assets
—
—
—
—
12
—
—
—
—
—
—
—
—
—
Gain on wind up of foreign
subsidiaries
—
—
—
—
—
—
—
(41)
—
—
—
—
—
—
CEWS support
—
—
—
—
—
—
—
—
—
—
—
—
(10)
(115)
Return on Energyst investment
—
—
—
—
—
—
—
—
—
—
—
—
(5)
—
Facility closures,
restructuring costs,
and impairment losses
—
—
—
—
—
—
—
—
—
—
—
—
—
9
Adjusted EBIT
223
203
228
202
232
252
242
216
214
224
190
140
537
328
Depreciation and amortization
95
100
98
99
99
94
94
92
87
84
81
81
319
308
Adjusted EBITDA (1)
318
303
326
301
331
346
336
308
301
308
271
221
856
636
(1) These are non-GAAP financial measures. See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
36
The income tax impact of the significant items was as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
Significant items:
Severance costs
—
(4)
—
—
—
—
—
(5)
—
—
—
—
—
(10)
Estimated loss for a
customer receivable
—
(4)
—
—
—
—
—
—
—
—
—
—
—
—
Foreign exchange and tax
impact of devaluation of ARS
—
—
—
—
(3)
—
—
—
—
—
—
—
—
—
Gain on sale of property,
plant, and equipment
—
—
—
—
4
—
—
—
—
—
—
—
—
—
Write-off of intangible assets
—
—
—
—
(3)
—
—
—
—
—
—
—
—
—
Gain on wind up of foreign
subsidiaries
—
—
—
—
—
—
—
9
—
—
—
—
—
—
Withholding tax on repatriation
of profits
—
—
—
—
—
—
—
19
—
—
—
—
—
—
CEWS support
—
—
—
—
—
—
—
—
—
—
—
—
2
30
Facility closures,
restructuring costs,
and impairment losses
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
(Recovery of) provision for
taxes on the significant items
—
(8)
—
—
(2)
—
—
23
—
—
—
—
2
18
Finning International Inc.
2024 Annual Results
37
A reconciliation from EPS to Adjusted EPS for our consolidated operations is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
EPS (1)
1.02
0.75
1.02
0.84
0.59
1.07
1.00
0.89
0.89
0.97
0.80
0.59
2.26
1.43
Significant items:
Severance costs
—
0.10
—
—
—
—
—
0.09
—
—
—
—
—
0.20
Estimated loss for a
customer receivable
—
0.08
—
—
—
—
—
—
—
—
—
—
—
—
Foreign exchange and tax
impact of devaluation of ARS
—
—
—
—
0.37
—
—
—
—
—
—
—
—
—
Gain on sale of property,
plant, and equipment
—
—
—
—
(0.06)
—
—
—
—
—
—
—
—
—
Write-off of intangible assets
—
—
—
—
0.06
—
—
—
—
—
—
—
—
—
Gain on wind up of foreign
subsidiaries
—
—
—
—
—
—
—
(0.21)
—
—
—
—
—
—
Withholding tax on repatriation
of profits
—
—
—
—
—
—
—
0.12
—
—
—
—
—
—
CEWS support
—
—
—
—
—
—
—
—
—
—
—
—
(0.05)
(0.53)
Return on Energyst investment
—
—
—
—
—
—
—
—
—
—
—
—
(0.03)
—
Facility closures,
restructuring costs,
and impairment losses
—
—
—
—
—
—
—
—
—
—
—
—
—
0.04
Adjusted EPS
1.02
0.93
1.02
0.84
0.96
1.07
1.00
0.89
0.89
0.97
0.80
0.59
2.18
1.14
(1) The per share impact for each quarter has been calculated using the weighted average number of common shares outstanding during the respective quarters; therefore,
quarterly amounts may not add to the annual or year-to-date total.
Finning International Inc.
2024 Annual Results
38
A reconciliation from EBIT to Adjusted EBIT for our Canadian operations is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
EBIT
101
71
131
112
117
137
136
126
128
125
102
80
327
288
Significant items:
Estimated loss for a
customer receivable
—
14
—
—
—
—
—
—
—
—
—
—
—
—
Severance costs
—
9
—
—
—
—
—
4
—
—
—
—
—
20
Write-off of intangible assets
—
—
—
—
5
—
—
—
—
—
—
—
—
—
CEWS support
—
—
—
—
—
—
—
—
—
—
—
—
(10)
(108)
Facility closures,
restructuring costs,
and impairment losses
—
—
—
—
—
—
—
—
—
—
—
—
—
5
Adjusted EBIT
101
94
131
112
122
137
136
130
128
125
102
80
317
205
A reconciliation from EBIT to Adjusted EBIT for our South American operations is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
EBIT
103
101
93
84
55
104
104
74
96
85
64
65
209
121
Significant items:
Severance costs
—
3
—
—
—
—
—
7
—
—
—
—
—
17
Foreign exchange and tax
impact of devaluation of ARS
—
—
—
—
56
—
—
—
—
—
—
—
—
—
Gain on sale of property,
plant, and equipment
—
—
—
—
(13)
—
—
—
—
—
—
—
—
—
Write-off of intangible assets
—
—
—
—
4
—
—
—
—
—
—
—
—
—
Facility closures,
restructuring costs,
and impairment losses
—
—
—
—
—
—
—
—
—
—
—
—
—
4
Adjusted EBIT
103
104
93
84
102
104
104
81
96
85
64
65
209
142
Finning International Inc.
2024 Annual Results
39
A reconciliation from EBIT to Adjusted EBIT for our UK & Ireland operations is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
EBIT
22
16
15
14
6
19
18
15
16
21
23
14
53
16
Significant items:
Severance costs
—
4
—
—
—
—
—
2
—
—
—
—
—
4
Write-off of intangible assets
—
—
—
—
3
—
—
—
—
—
—
—
—
—
Adjusted EBIT
22
20
15
14
9
19
18
17
16
21
23
14
53
20
A reconciliation from EBIT to Adjusted EBIT for our Other operations is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
EBIT
(3)
(18)
(11)
(8)
(1)
(8)
(16)
24
(26)
(7)
1
(19)
(37)
(33)
Significant items:
Severance costs
—
3
—
—
—
—
—
5
—
—
—
—
—
1
Gain on wind up of foreign
subsidiaries
—
—
—
—
—
—
—
(41)
—
—
—
—
—
—
Return on Energyst investment
—
—
—
—
—
—
—
—
—
—
—
—
(5)
—
CEWS support
—
—
—
—
—
—
—
—
—
—
—
—
—
(7)
Adjusted EBIT
(3)
(15)
(11)
(8)
(1)
(8)
(16)
(12)
(26)
(7)
1
(19)
(42)
(39)
Equipment Backlog
Equipment backlog is defined as the retail value of new equipment units ordered by customers for future deliveries. We use equipment backlog as a measure
of projecting future new equipment deliveries. There is no directly comparable GAAP financial measure for equipment backlog.
Finning International Inc.
2024 Annual Results
40
Free Cash Flow
Free cash flow is defined as cash flow provided by or used in operating activities less net additions to property, plant, and equipment and intangible assets,
as disclosed in our financial statements. We use free cash flow to assess cash operating performance, including working capital efficiency. Consistent
positive free cash flow generation enables us to re-invest capital to grow our business, repay debt, and return capital to shareholders. A reconciliation from
cash flow used in or provided by operating activities to free cash flow is as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
Cash flow provided by (used in)
operating activities
441
383
364
(177)
291
37
66
(166)
410
(24)
(112)
(273)
425
962
Additions to property, plant, and
equipment and intangible assets
(44)
(38)
(34)
(37)
(51)
(50)
(40)
(79)
(78)
(33)
(30)
(30)
(133)
(115)
Proceeds on disposal of property,
plant, and equipment
2
1
—
4
40
13
5
—
—
—
—
—
8
23
Free cash flow
399
346
330
(210)
280
—
31
(245)
332
(57)
(142)
(303)
300
870
Inventory Turns (Dealership)
Inventory turns (dealership) is the number of times our dealership inventory is sold and replaced over a period. We use inventory turns (dealership) to
measure asset utilization. Inventory turns (dealership) is calculated as annualized cost of sales (excluding cost of sales related to the mobile refuelling
operations) for the last six months divided by average inventory (excluding inventory related to the mobile refuelling operations), based on an average of the
last two quarters. Cost of sales related to the dealership and inventory related to the dealership are calculated as follows:
3 months ended
2024 (Restated) (1)
2023 (Restated) (1)
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Dec 31 Sep 30 Dec 31 Sep 30
Cost of sales
2,242
2,214
2,285
1,987
2,042
2,064
2,142
1,775
2,025
1,807
1,465
1,443
1,248
1,163
Cost of sales (mobile
refuelling operations)
(313)
(308)
(292)
(269)
(278)
(283)
(237)
(253)
(302)
(293)
(190)
(170)
(129)
(124)
Cost of sales (dealership) (2)
1,929
1,906
1,993
1,718
1,764
1,781
1,905
1,522
1,723
1,514
1,275
1,273
1,119
1,039
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Dec 31 Sep 30 Dec 31 Sep 30
Inventory
2,646
2,881
2,974
3,073
2,844
2,919
2,764
2,710
2,461
2,526
1,687
1,627
1,477
1,626
Inventory (mobile
refuelling operations)
(8)
(8)
(11)
(9)
(12)
(17)
(14)
(12)
(12)
(12)
(9)
(6)
(3)
(2)
Inventory (dealership) (2)
2,638
2,873
2,963
3,064
2,832
2,902
2,750
2,698
2,449
2,514
1,678
1,621
1,474
1,624
(1) Following a detailed review of our remanufacturing business in Canada, we determined that the correct classification of certain costs in SG&A should be cost of sales.
Effective Q3 2024, the comparative figures for 2023 and Q1 2024 and Q2 2024 include an immaterial adjustment for a change in classification of certain expenses. For
more information on the impact to financial statements, please refer to Note 27 of our Annual Financial Statements.
(2) These are non-GAAP financial measures. See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
41
Invested Capital
Invested capital is calculated as net debt plus total equity. Invested capital is also calculated as total assets less total liabilities, excluding net debt. Net debt
is calculated as short-term and long-term debt, net of cash and cash equivalents. We use invested capital as a measure of the total cash investment made in
Finning and each reportable segment. Invested capital is used in a number of different measurements (ROIC, Adjusted ROIC, invested capital turnover) to
assess financial performance against other companies and between reportable segments. Invested capital is calculated as follows:
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
Cash and cash equivalents
(316)
(298)
(233)
(215)
(152)
(168)
(74)
(129)
(288)
(120)
(170)
(295)
(502)
(539)
Short-term debt
844
1,103
1,234
1,322
1,239
1,372
1,142
1,266
1,068
1,087
992
804
374
92
Long-term debt
Current
6
—
—
68
199
203
199
253
114
106
110
63
190
201
Non-current
1,390
1,378
1,378
1,379
949
955
949
675
815
836
807
909
921
1,107
Net debt (1)
1,924
2,183
2,379
2,554
2,235
2,362
2,216
2,065
1,709
1,909
1,739
1,481
983
861
Total equity
2,642
2,591
2,590
2,574
2,530
2,535
2,414
2,480
2,461
2,449
2,337
2,296
2,343
2,206
Invested capital
4,566
4,774
4,969
5,128
4,765
4,897
4,630
4,545
4,170
4,358
4,076
3,777
3,326
3,067
(1) These are non-GAAP financial measures. See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
Invested Capital Turnover
We use invested capital turnover to measure capital efficiency. Invested capital turnover is calculated as net revenue for the last twelve months divided by
average invested capital of the last four quarters.
Net Debt to Adjusted EBITDA Ratio
This ratio is calculated as net debt at the reporting date divided by Adjusted EBITDA for the last twelve months. We use this ratio to assess operating
leverage and ability to repay debt. This ratio approximates the length of time, in years, that it would take us to repay debt, with net debt and Adjusted EBITDA
held constant.
Finning International Inc.
2024 Annual Results
42
Net Revenue, Gross Profit as a % of Net Revenue, SG&A as a % of Net Revenue, EBIT as a % of Net Revenue, Net Revenue by Line of Business as
a % of Net Revenue, and Net Revenue by Operation as a % of Net Revenue
Net revenue is defined as total revenue less the cost of fuel related to the mobile refuelling operations in our Canadian operations. As these fuel costs are
pass-through in nature for this business, we view net revenue as more representative than revenue in assessing the performance of the business because
the rack price for the cost of fuel is fully passed through to the customer and is not in our control. For our South American and UK & Ireland operations, net
revenue is the same as total revenue.
We use these specified financial measures to assess and evaluate the financial performance or profitability of our reportable segments. We may also
calculate EBIT as a % of net revenue using Adjusted EBIT to exclude significant items 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 ratios are calculated, respectively, as gross profit divided by net revenue, SG&A divided by net revenue, EBIT divided by net revenue, net revenue by
line of business divided by net revenue, and net revenue by operation divided by net revenue. The most directly comparable GAAP financial measure to net
revenue is total revenue. Net revenue is calculated as follows:
3 months ended
Years ended
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
Total revenue
2,873
2,829
2,920
2,584
2,664
2,704
2,779
2,380
2,653
2,384
2,289
1,953
7,294
6,196
Cost of fuel
(294)
(290)
(274)
(252)
(261)
(267)
(220)
(236)
(285)
(277)
(285)
(217)
(598)
(428)
Net revenue
2,579
2,539
2,646
2,332
2,403
2,437
2,559
2,144
2,368
2,107
2,004
1,736
6,696
5,768
ROIC and Adjusted ROIC
ROIC is defined as EBIT for the last twelve months divided by average invested capital of the last four quarters, expressed as a percentage. We view ROIC
as a useful measure for capital allocation decisions that drive profitable growth and attractive returns to shareholders. We also calculate Adjusted ROIC
using Adjusted EBIT to exclude 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.
Finning International Inc.
2024 Annual Results
43
Working Capital & Working Capital to Net Revenue Ratio
Working capital is defined as total current assets (excluding cash and cash equivalents) less total current liabilities (excluding short-term debt and current
portion of long-term debt). We view working capital as a measure for assessing overall liquidity. The working capital to net revenue ratio is calculated as
average working capital of the last four quarters, divided by net revenue for the last twelve months. We use this KPI to assess the efficiency in our use of
working capital to generate net revenue. Working capital is calculated as follows:
2024
2023
2022
2021
2020
($ millions)
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Dec 31
Total current assets
5,206
5,355
5,431
5,432
4,930
5,217
4,985
4,974
4,781
4,652
4,098
4,030
3,619
3,214
Cash and cash equivalents
(316)
(298)
(233)
(215)
(152)
(168)
(74)
(129)
(288)
(120)
(170)
(295)
(502)
(539)
Total current assets in
working capital
4,890
5,057
5,198
5,217
4,778
5,049
4,911
4,845
4,493
4,532
3,928
3,735
3,117
2,675
Total current liabilities (1)
3,150
3,383
3,503
3,561
3,516
3,722
3,600
3,788
3,401
3,196
2,789
2,647
2,155
1,623
Short-term debt
(844) (1,103) (1,234) (1,322) (1,239) (1,372) (1,142) (1,266) (1,068) (1,087)
(992)
(804)
(374)
(92)
Current portion of long-term debt
(6)
—
—
(68)
(199)
(203)
(199)
(253)
(114)
(106)
(110)
(63)
(190)
(201)
Total current liabilities in
working capital (1)
2,300
2,280
2,269
2,171
2,078
2,147
2,259
2,269
2,219
2,003
1,687
1,780
1,591
1,330
Working capital (1)(2)
2,590
2,777
2,929
3,046
2,700
2,902
2,652
2,576
2,274
2,529
2,241
1,955
1,526
1,345
(1) Comparative results for 2023 have been restated for our adoption of the amendments to IAS 1, Presentation of Financial Statements effective for the financial year
beginning January 1, 2024.
(2) These are non-GAAP financial measures. See “Description of Specified Financial Measures and Reconciliations” in this MD&A.
Finning International Inc.
2024 Annual Results
44
Selected Annual Information
($ millions, except for per share amounts)
2024
2023
2022
Revenue from operations
Canada
6,303
6,029
5,200
South America
3,561
3,221
2,740
UK & Ireland (1)
1,342
1,277
1,339
Total revenue
11,206
10,527
9,279
Net income attributable to shareholders of Finning (1)(2)
509
523
503
Earnings per share (1)(2)
EPS
3.62
3.55
3.25
Diluted earnings per share
3.62
3.54
3.25
Total assets (1)
7,731
7,557
7,269
Long-term debt
Current
6
199
114
Non-current
1,390
949
815
Total long-term debt (3)
1,396
1,148
929
Cash dividends declared per common share
1.075
0.986
0.933
(1)
In March 2022, we acquired Hydraquip in our UK & Ireland 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)
These reported financial measures in 2024 and 2023 have been impacted by significant items management does not
consider indicative of operational and financial trends either by nature of amount. These significant items are described on
pages 34-39 of this MD&A.
(3)
In September 2024, we extended the term of our $300 million committed revolving credit facility (originally secured in
October 2022), which was set to mature in October 2024, to October 2025.
In April 2024, we settled our 4.28% USD 50 million notes which were due April 3, 2024.
In February 2024, we issued $425 million of 4.778% senior unsecured notes due February 13, 2029.
In January 2024, we settled our 4.08% USD 100 million notes which were due January 19, 2024.
In May 2023, we issued $350 million of 4.445% senior unsecured notes due May 16, 2028.
In May 2023, we settled our 3.40% £70 million senior notes which were due May 22, 2023.
In the three months ended December 31, 2022, we settled $15 million notional value of our 2.626% $200 million note due
August 14, 2026, on the secondary market.
In April 2022, we settled our 4.18% USD 50 million note which was due April 3, 2022.
In January 2022, we settled our 3.98% USD 100 million note which was due January 19, 2022.
Finning International Inc.
2024 Annual Results
45
Selected Quarterly Information
($ millions, except for
share, per share, and
2024
2023
option amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenue
Canada
1,546
1,549
1,698
1,510
1,515
1,535
1,593
1,386
South America
948
952
894
767
805
853
856
707
UK & Ireland
379
328
328
307
344
316
330
287
Total revenue
2,873
2,829
2,920
2,584
2,664
2,704
2,779
2,380
Net income attributable to
shareholders of Finning (1)
141
103
144
121
85
156
148
134
Earnings per share (1)
EPS
1.02
0.75
1.02
0.84
0.59
1.07
1.00
0.89
Diluted earnings per share
1.02
0.74
1.01
0.84
0.59
1.06
1.00
0.89
Total assets
7,731
7,925
8,033
8,059
7,557
7,738
7,508
7,512
Long-term debt
Current
6
—
—
68
199
203
199
253
Non-current
1,390
1,378
1,378
1,379
949
955
949
675
Total long-term debt (2)
1,396
1,378
1,378
1,447
1,148
1,158
1,148
928
Cash dividends paid per
common share
27.5¢
27.5¢
27.5¢
25.0¢
25.0¢
25.0¢
25.0¢
23.6¢
Common shares
outstanding (000’s)
135,971
137,961
140,384
142,407
144,007
145,256
146,704
149,584
Options outstanding (000’s)
1,069
1,094
1,132
1,150
1,150
1,191
1,240
1,281
(1) These reported financial measures in Q3 2024, Q4 2023, and Q1 2023 have been impacted by significant items management
does not consider indicative of operational and financial trends either by nature of amount. These significant items are
described on pages 34-39 of this MD&A.
(2)
In September 2024, we extended the term of our $300 million committed revolving credit facility, which was set to mature in
October 2024, to October 2025.
In June 2024, we extended the term of our $1.3 billion committed sustainability-linked revolving credit facility, which was set
to mature in September 2026, to June 2029.
In April 2024, we settled our 4.28% USD 50 million notes which were due April 3, 2024.
In February 2024, we issued $425 million of 4.778% senior unsecured notes due February 13, 2029.
In January 2024, we settled our 4.08% USD 100 million notes which were due January 19, 2024.
In May 2023, we issued $350 million of 4.445% senior unsecured notes due May 16, 2028.
In May 2023, we settled our 3.40% £70 million senior notes which were due May 22, 2023.
Finning International Inc.
2024 Annual Results
46
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: our expectations with
respect to the economy, markets and activities and the associated impact on our financial results; the expected
benefits of our strategic plan on generating long-term value for our customers, employees, and shareholders; our
expectation that driving product support is our largest opportunity for resilient, profitable growth; our expectation that
further growth in customer value agreements, expanding our rebuild business, and continuing to strategically grow
our equipment population will capture a greater share of product support across the full asset life cycle; our belief
that full-cycle resilience will enable us to deliver more reliable and consistent earnings through all market conditions;
our belief that our strategy is designed to drive a fundamentally improved range of ROIC (as defined below) and
earnings capacity through all market conditions; our expectation that we will continue to optimize and variabilize our
cost structure; our expectation that our implemented initiatives will increase our invested capital velocity while
concurrently improving customer service levels; our expectation that growing our addressable market in used
equipment, rental and power systems will increase our equipment population and help us drive additional product
support growth; our expectation that we will continue to work towards meeting our commitment to reduce our
absolute GHG emissions by 40% by 2027 from our 2017 baseline; our expectation that our effective tax rate
generally be within the 25%-30% range on an annual basis; our expectation that the impact of foreign exchange due
to fluctuations in the value of CAD relative to USD, GBP, CLP, and ARS will continue to affect our results; our ability
to execute on our strategic priorities; our expectation to contribute approximately $3 million to the defined benefit
pension plans during the year ended December 31, 2025 (based on assumptions of the most recently completed
valuations); our expectation that product support growth will continue to be important in mitigating the effects of
downturns in the business cycle; our expectation that working closely with Caterpillar to achieve an adequate and
timely supply of product and having implemented human resources recruiting and workforce management strategies
to achieve adequate staffing levels, can assist in mitigating the impacts of fluctuations in demand for our products
and services; all information in the section entitled “Market Update and Business Outlook” starting on page 21 of this
MD&A, including for our South America operations: in Chile, our outlook based on growing global demand for
copper, strong copper prices, capital deployment into large-scale brownfield expansions and customer confidence to
invest in brownfield and greenfield projects; our expectation of a broad-based level of quoting, tender and award
activity for mining equipment, product support and technology solutions; our expectation of a more challenging
environment in attracting and retaining qualified labour; our expectation that infrastructure construction in Chile will
remain steady (based on assumptions of continued demand from large contractors supporting mining operations); in
the power systems sector, our expectation regarding growing demand for electric power solutions from strong
activity in the industrial and data centre markets; in Argentina, our expected continued low-risk approach and our
business positioning to capture opportunities, particularly in the oil & gas and mining sectors; continued monitoring
of new rules and policies; our expectation that there will be near-term pockets of strong activity in the oil & gas
sector, and our expectation that new government programs are helping drive large-scale investment by global
miners; our expectations on the claims and orders made against us by the ACA, including the mitigation measures
available to us in the unlikely event the appeal of the potential imports suspension order is not successful, our
expectation the ACA will appeal the decisions of the Argentina Tax Court decisions to the Federal Court of Appeals
and the Courts of Argentina will follow the decision of the WCO, and the material negative impact on our financial
position if the suspension order is not cancelled or our mitigation measures are not effective; for our Canada
operations: our outlook for Western Canada being mixed; our expectation of continued spending discipline from our
large customers (based on assumptions of achieving operating cost targets); our expectation that our large
customers will deploy capital to renew, maintain and rebuild aging fleets; our expectation for stable demand for
product support (based on assumptions of customer commitments and discussions), including component
remanufacturing and rebuilds; our expectation regarding ongoing commitments from federal and provincial
governments, as well as private sector projects for infrastructure development to support activity in the construction
sector; our expectation that these infrastructure development activities will take time to advance; our expectations of
growing demand for reliable, efficient, and sustainable electric power solutions across communities in Western
Canada creating opportunities for our power systems business; our focus on managing our cost and working capital
levels and continuing to see additional opportunities to unlock invested capital; our expectation that recent
government changes and announcements in Canada and the US, including tariffs, create additional uncertainty for
our business and our customers; our expectation for continuously evaluating opportunities to assess and execute
opportunities to optimize low-ROIC activities; and our expectation for leveraging the structural changes and
overhead reductions strategy demonstrated in our UK operations; for our UK & Ireland operations: our expectation
Finning International Inc.
2024 Annual Results
47
for demand in the construction sector to remain soft; our expectation of a growing contribution from used equipment
and power systems as we continue to execute on our strategy; in power systems, our expectation of continued
strong quoting activity (based on assumptions of healthy demand for primary and backup power generation,
particularly in the data centre market); our expectation of our product support business to remain resilient; and
overall: our expectation that our 2025 net capital and net rental fleet expenditures will be above our 2024 spend of
$219 million, and our expectation that these planned expenditures will include regular maintenance capital as well
as expenditures to add capabilities and capacity to serve the growing markets in South America and carefully
reposition and build our rental fleet in Canada as the market recovers; our continued focus on maximizing product
support growth as a key strategic value driver going forward; our expectation that we are well positioned to continue
to execute on our strategy to maximize product support, continuously improve our cost and capital position to drive
full-cycle resilience and grow prudently in used, rental and power markets, all with the objective of achieving a
sustainably higher adjusted ROIC; and, our expectation that we will have sufficient liquidity to meet operational
needs (based on cash on hand, available credit facilities and the discretionary nature of certain cash flows, such as
rental and capital expenditures).
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 of 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 specific factors stated above; the impact and duration of, and our ability to
respond to and manage, high inflation, geopolitical and trade uncertainty, changing tariffs and interest rates, and
supply chain challenges; general economic and market conditions, including increasing inflationary cost pressure
and economic and market conditions in the regions where we operate; perspectives of investments in the oil and
gas and mining projects in Argentina; capital deployment into large-scale brownfield expansions; support and
commitment by Canadian federal and provincial governments in infrastructure development; foreign exchange rates;
commodity prices; interest rates; the level of customer confidence and spending, and the demand for, and prices of,
our products and services; our dependence on the continued market acceptance of our products, and the timely
supply of parts and equipment; our ability to continue to 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 effectively integrate and realize expected synergies from businesses that we acquire; our ability to deliver
our equipment backlog; our ability to access capital markets for additional debt or equity, to finance future growth
and to refinance outstanding debt obligations, on terms that are acceptable will be dependent upon prevailing
market conditions, as well as our financial condition; 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 long-term product
support contracts with our customers; our ability to drive continuous cost efficiency; 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; business disruption resulting from business process change,
systems change and organizational change; regulatory initiatives or proceedings, litigation and changes in laws,
regulations or policies, including with respect to environmental protection, environmental disclosures, and/or energy
transition; 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 availability of carbon neutral technology or
renewable power; the cost of climate change initiatives; the occurrence of one or more natural disasters, pandemic
outbreaks, geo-political events, acts of terrorism, social unrest or similar disruptions; 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; and, our ability
to protect our business from cybersecurity threats or incidents.
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.
Finning International Inc.
2024 Annual Results
48
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 and
expectations stated above; that we will be able to successfully manage our business through volatile commodity
prices, high inflation, changing tariffs and interest rates, and supply chain challenges, and successfully execute our
strategies to win customers, achieve full-cycle resilience and continue business momentum; that we will be able to
continue to source and hire technicians, build capabilities and capacity and successfully and sustainably improve
workshop efficiencies; that commodity prices will remain at constructive levels; that our customers will not curtail
their activities; that general economic and market conditions will continue to be supportive; that the level of customer
confidence and spending, and the demand for, and prices of, our products and services will be maintained; that
support and demand for renewable energy will continue to grow; that supply chain and inflationary challenges will
not materially impact large project deliveries in our equipment backlog; our ability to successfully execute our plans
and intentions, including our strategic priorities; that we will successfully execute initiatives to reduce our GHG
emissions and to support our customers on their individual GHG reduction pathways; 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; identified opportunities for growth will result in revenue; that we have sufficient liquidity to meet
operational needs, commitments and obligations; consistent and stable legislation in the various countries in which
we operate; no disruptive changes in the technology environment; our current good relationship with Caterpillar, our
customers and our suppliers, service providers and other third parties will be maintained and that such suppliers will
deliver quality, competitive products with supply chain continuity; sustainment of oil prices; that demand for reliable
and sustainable electric power solutions in Western Canada will continue to create opportunities for our power
systems business; that maximizing product support growth will positively affect our strategic priorities going forward;
quoting activity for requests for proposals for equipment and product support is reflective of opportunities; and,
market recoveries in the regions that we operate.
Some of the assumptions, risks, and other factors that 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. 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. 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 manner we present
known risks affecting our business.
Finning International Inc.
2024 Annual Results
49
Glossary of Defined Terms
4Refuel
4Refuel Canada and 4Refuel US
ACA
Argentina Customs Authority
Accounting Standards
IFRS® Accounting Standards as issued by the International Accounting Standards Board
AIF
Annual Information Form
Annual Financial Statements
Annual consolidated financial statements
ARS
Argentine peso
Audit Committee
Audit Committee of the Board of Directors of Finning
Board
Board of Directors of Finning
CAD
Canadian dollar
Caterpillar
Caterpillar Inc.
CEO
Chief Executive Officer
CEWS
Canadian Emergency Wage Subsidy
CFO
Chief Financial Officer
CGU
Cash-generating unit
CLP
Chilean peso
Consol
Consolidated
COSO
Commission of Sponsoring Organizations of the Treadway Commission
COVID-19
Novel Coronavirus
DBRS
Dominion Bond Rating Service
EBIT
Earnings (loss) before finance costs and income tax
EBITDA
Earnings (loss) before finance costs, income tax, depreciation, and amortization
Energyst
Energyst B.V.
EPS
Basic earnings per share
ERM
Enterprise risk management
FASA
Finning Argentina S.A.
fav
Favourable
Finning
Finning International Inc.
Finning (Canada)
A division of Finning, with dealer territories in British Columbia, Alberta, Saskatchewan, the
Yukon Territory, the Northwest Territories, and a portion of Nunavut
GAAP
Generally accepted accounting principles
GAAP financial measures
A financial measure determined in accordance with GAAP
GBP
UK pound sterling
GDP
Gross domestic product
GHG
Greenhouse gas
IAS
IAS® Standards
KPI
Key performance indicator
MD&A
Management’s Discussion and Analysis
n/a
not applicable
n/m
% change not meaningful
NCIB
Normal course issuer bid
OEM
OEM Remanufacturing Company Inc.
PLM
PipeLine Machinery International
ROIC
Return on invested capital
RPO
Rental equipment with purchase options
S&P
Standard and Poor’s
SEDAR+
System for Electronic Document Analysis +
SG&A
Selling, general, and administrative expenses
Specified Financial Measures
As defined in National Instrument 52-112
TSX
Toronto Stock Exchange
UK
United Kingdom
unfav
Unfavourable
US
United States of America
USD
US dollar
WACC
Weighted average cost of capital
WCO
World Customs Organization, an independent intergovernmental body that maintains the
international Harmonized System goods nomenclature used in international trade
Finning International Inc.
2024 Annual Results
1
MANAGEMENT'S REPORT TO THE SHAREHOLDERS
The audited annual consolidated financial statements (Annual Financial Statements) and Management’s Discussion
and Analysis (MD&A) are the responsibility of the management of Finning International Inc. (the Company). The
Annual Financial Statements have been prepared in accordance with IFRS® Accounting Standards as issued by the
International Accounting Standards Board (Accounting 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 Annual Financial Statements. The Annual 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 Annual Financial Statements, as reflected in
their report for 2024.
The Board of Directors oversees management’s responsibilities for the Annual 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
unaudited condensed interim consolidated financial statements (Interim Financial Statements), Annual 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 Financial Statements or Annual Financial Statements, as well as the
MD&A.
/s/ Kevin Parkes
/s/ Greg Palaschuk
Kevin Parkes
Greg Palaschuk
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
February 4, 2025
19100 94 Avenue, Surrey, BC, V4N 5C3, Canada
Finning International Inc.
2024 Annual Results
2
Independent Auditor’s Report
To the Shareholders and the Board of Directors of
Finning International Inc.
Opinion
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, 2024 and 2023 and January 1, 2023,
and the consolidated statements of net income, comprehensive income, changes in equity and cash flows for the
years ended December 31, 2024 and 2023, and notes to the consolidated financial statements, including material
accounting policy information (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, 2024 and 2023 and January 1, 2023, and its financial performance and its cash
flows for the years ended December 31, 2024 and 2023 in accordance with IFRS Accounting Standards as issued
by the International Accounting Standards Board ("IASB").
Basis for Opinion
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
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, 2024. 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 contract 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 measured 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.
Finning International Inc.
2024 Annual Results
3
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:
For a selection of uncompleted contracts, we:
o
Obtained and inspected the executed contract agreements and 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.
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.
Evaluated management’s ability to estimate total contract costs accurately by comparing actual costs to
management’s historical estimates for completed contracts.
Other Information
Management is responsible for the other information. The other information comprises:
Management's Discussion and Analysis
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
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
IFRS Accounting Standards as issued by the IASB, 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.
Finning International Inc.
2024 Annual Results
4
Auditor's Responsibilities for the Audit of the Financial Statements
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:
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.
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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and 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.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Company as a basis for forming an opinion on the
financial statements. We are responsible for the direction, supervision and review of the audit work performed
for purposes 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 David Langlois.
/s/ Deloitte LLP
Chartered Professional Accountants
Vancouver, British Columbia
February 4, 2025
Finning International Inc.
2024 Annual Results
Annual Financial Statements
The accompanying Notes to the Annual Financial Statements are an integral part of these statements.
5
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
December 31,
January 1,
2024
2023
2023
(Canadian $ millions)
(Restated - Note 2d) (Restated - Note 2d)
ASSETS
Current assets
Cash and cash equivalents (Note 22)
316
152
288
Accounts receivable (Note 8)
1,221
1,012
1,129
Unbilled receivables (Note 4)
492
496
422
Inventory (Note 12)
2,646
2,844
2,461
Other assets (Note 14)
531
426
481
Total current assets
5,206
4,930
4,781
Property, plant, and equipment (Note 15)
1,085
976
973
Rental equipment (Note 15)
488
608
469
Goodwill (Note 18)
339
329
325
Intangible assets (Note 17)
245
309
333
Distribution network (Note 18)
100
100
100
Investment in joint ventures
100
87
83
Net post-employment assets (Note 21)
27
109
98
Other assets (Note 14)
141
109
107
Total assets
7,731
7,557
7,269
LIABILITIES
Current liabilities
Short-term debt (Note 7)
844
1,239
1,068
Accounts payable and accruals (Note 8)
1,413
1,299
1,337
Deferred revenue (Note 4)
567
507
544
Current portion of long-term debt (Note 7)
6
199
114
Other liabilities (Note 19)
320
272
362
Total current liabilities
3,150
3,516
3,425
Long-term debt (Note 7)
1,390
949
815
Long-term lease liabilities
262
235
255
Deferred tax liabilities
138
160
153
Other liabilities (Note 19)
149
167
160
Total liabilities
5,089
5,027
4,808
Commitments and contingencies (Note 25)
EQUITY
Share capital
487
516
536
Accumulated other comprehensive income
375
220
273
Retained earnings
1,767
1,778
1,634
Equity attributable to shareholders of Finning International Inc. 2,629
2,514
2,443
Non-controlling interests
13
16
18
Total equity
2,642
2,530
2,461
Total liabilities and equity
7,731
7,557
7,269
Approved by the Board of Directors on February 4, 2025
/s/ Edward R. Seraphim
/s/ James E.C. Carter
Edward R. Seraphim, Director
James E.C. Carter, Director
Finning International Inc.
2024 Annual Results
Annual Financial Statements
The accompanying Notes to the Annual Financial Statements are an integral part of these statements.
6
CONSOLIDATED STATEMENTS OF NET INCOME
2024
2023
Years ended December 31
(Restated
(Canadian $ millions, except share and per share amounts)
- Note 27)
Revenue
New equipment
3,612
3,262
Used equipment
507
392
Equipment rental
295
327
Product support
5,480
5,378
Fuel and other
1,312
1,168
Total revenue (Note 4)
11,206
10,527
Cost of sales
(8,728)
(8,023)
Gross profit
2,478
2,504
Selling, general, and administrative expenses
(1,645)
(1,571)
Equity earnings of joint ventures
9
9
Other income (Note 6)
—
54
Other expenses (Note 6)
(19)
(86)
Earnings before finance costs and income taxes
823
910
Finance costs (Note 7)
(160)
(161)
Income before provision for income taxes
663
749
Provision for income taxes (Note 13)
(157)
(228)
Net income
506
521
Net income (loss) attributable to:
Shareholders of Finning International Inc.
509
523
Non-controlling interests
(3)
(2)
Earnings per share (Note 5)
Basic
3.62
3.55
Diluted
3.62
3.54
Finning International Inc.
2024 Annual Results
Annual Financial Statements
The accompanying Notes to the Annual Financial Statements are an integral part of these statements.
7
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31
(Canadian $ millions)
2024
2023
Net income
506
521
Other comprehensive income (loss), net of income tax
Items that may be subsequently reclassified to net income:
Foreign currency translation adjustments
177
(21)
Share of foreign currency translation adjustments of joint ventures
(1)
—
(Loss) gain on net investment hedges
(28)
8
Foreign currency translation adjustments net of net investment hedges,
reclassified to net income (Note 6)
—
(41)
Provision for income taxes on foreign currency translation adjustments,
reclassified to net income (Note 6)
—
9
Impact of foreign currency translation and net investment hedges, net of income tax
148
(45)
Gain on cash flow hedges
13
—
Provision for income taxes on cash flow hedges
(3)
—
Impact of cash flow hedges, net of income tax
10
—
Items that will not be subsequently reclassified to net income:
Actuarial loss (Note 21)
(74)
(5)
Recovery of income taxes on actuarial loss
19
1
Actuarial loss, net of income tax
(55)
(4)
Total comprehensive income
609
472
Total comprehensive income (loss) attributable to:
Shareholders of Finning International Inc.
612
474
Non-controlling interests
(3)
(2)
Finning International Inc.
2024 Annual Results
Annual Financial Statements
The accompanying Notes to the Annual Financial Statements are an integral part of these statements.
8
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to shareholders of Finning International Inc.
Accumulated
other
Non-
Share Contributed
comprehensive
Retained
controlling
(Canadian $ millions)
capital
surplus
income
earnings
Total
interests
Total
Balance, January 1, 2023
536
—
273
1,634
2,443
18
2,461
Net income (loss)
—
—
—
523
523
(2)
521
Other comprehensive loss
—
—
(45)
(4)
(49)
—
(49)
Total comprehensive
(loss) income
—
—
(45)
519
474
(2)
472
Exercise of share options
3
(2)
—
(1)
—
—
—
Share option expense
—
2
—
—
2
—
2
Hedging gain transferred to
statement of financial position
—
—
(8)
—
(8)
—
(8)
Repurchase of common
shares (Note 10)
(25)
—
—
(247)
(272)
—
(272)
Decrease in automatic
share purchase plan
commitment (Note 10)
2
—
—
19
21
—
21
Dividends on common shares
—
—
—
(146)
(146)
—
(146)
Balance, December 31, 2023
516
—
220
1,778
2,514
16
2,530
Net income (loss)
—
—
—
509
509
(3)
506
Other comprehensive
income (loss)
—
—
158
(55)
103
—
103
Total comprehensive
income (loss)
—
—
158
454
612
(3)
609
Exercise of share options
2
(2)
—
—
—
—
—
Share option expense
—
2
—
—
2
—
2
Hedging gain transferred to
statement of financial position
—
—
(3)
—
(3)
—
(3)
Repurchase of common
shares (Note 10)
(29)
—
—
(293)
(322)
—
(322)
Increase in automatic
share purchase plan
commitment (Note 10)
(2)
—
—
(21)
(23)
—
(23)
Dividends on common shares
—
—
—
(151)
(151)
—
(151)
Balance, December 31, 2024
487
—
375
1,767
2,629
13
2,642
Finning International Inc.
2024 Annual Results
Annual Financial Statements
The accompanying Notes to the Annual Financial Statements are an integral part of these statements.
9
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(Canadian $ millions)
2024
2023
OPERATING ACTIVITIES
Net income
506
521
Adjusting for:
Depreciation and amortization
392
379
Gain on disposal of property, plant, and equipment
(1)
(25)
Derecognition of intangible assets (Note 6e)
—
12
Impairment of long-lived assets (Note 15)
—
2
Equity earnings of joint ventures
(9)
(9)
Share-based payment expense (Note 11)
19
26
Provision for income taxes
157
228
Finance costs
160
161
Net benefit cost of defined benefit pension plans and
other post-employment benefit plans (Note 21)
18
17
Gain on wind up of foreign subsidiaries (Note 6a)
—
(41)
Changes in operating assets and liabilities (Note 22)
117
(349)
Additions to rental fleet
(164)
(182)
Additions to rental equipment with purchase options
(146)
(229)
Proceeds on disposal of rental fleet
91
57
Proceeds on disposal of rental equipment with purchase options
221
89
Interest paid
(167)
(165)
Income tax paid
(183)
(264)
Cash flows provided by operating activities
1,011
228
INVESTING ACTIVITIES
Additions to property, plant, and equipment and intangible assets
(153)
(220)
Proceeds on disposal of property, plant, and equipment
7
58
Consideration paid for business acquisitions, net of cash acquired
(9)
(13)
Decrease (increase) in short-term investments
27
(54)
Cash flows used in investing activities
(128)
(229)
FINANCING ACTIVITIES
(Decrease) increase in short-term debt (Note 22)
(482)
206
Issuance of long-term debt, net of issue costs (Notes 7 and 22)
427
348
Repayment of long-term debt (Note 22)
(207)
(122)
Decrease in lease liabilities (Note 22)
(89)
(82)
Credit facility fee
(2)
—
Repurchase of common shares
(314)
(275)
Dividends paid
(151)
(146)
Cash flows used in financing activities
(818)
(71)
Effect of currency translation on cash balances
99
(64)
Increase (decrease) in cash and cash equivalents
164
(136)
Cash and cash equivalents, beginning of year
152
288
Cash and cash equivalents, end of year (Note 22)
316
152
Finning International Inc.
2024 Annual Results
Index to the Notes to the Annual Financial Statements
10
1. GENERAL INFORMATION ............................................................................................................................................. 11
2. MATERIAL ACCOUNTING POLICY INFORMATION, KEY ASSUMPTIONS, AND SIGNIFICANT JUDGMENTS ............................... 11
3. SEGMENTED INFORMATION ......................................................................................................................................... 15
4. REVENUE ................................................................................................................................................................... 17
5. EARNINGS PER SHARE ............................................................................................................................................... 20
6. OTHER INCOME AND OTHER EXPENSES ...................................................................................................................... 20
7. SHORT-TERM AND LONG-TERM DEBT AND FINANCE COSTS .......................................................................................... 21
8. FINANCIAL INSTRUMENTS ............................................................................................................................................ 22
9. MANAGEMENT OF CAPITAL ......................................................................................................................................... 32
10. SHARE CAPITAL ....................................................................................................................................................... 33
11. SHARE-BASED PAYMENTS ........................................................................................................................................ 34
12. INVENTORY .............................................................................................................................................................. 39
13. INCOME TAXES ......................................................................................................................................................... 40
14. OTHER ASSETS ........................................................................................................................................................ 43
15. PROPERTY, PLANT, AND EQUIPMENT AND RENTAL EQUIPMENT .................................................................................. 44
16. LEASES ................................................................................................................................................................... 46
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. ECONOMIC RELATIONSHIPS ...................................................................................................................................... 60
24. RELATED PARTY TRANSACTIONS AND TOTAL STAFF COSTS ....................................................................................... 60
25. COMMITMENTS AND CONTINGENCIES ........................................................................................................................ 60
26. GUARANTEES AND INDEMNIFICATIONS ....................................................................................................................... 61
27. RESTATEMENT ......................................................................................................................................................... 61
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
11
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. MATERIAL ACCOUNTING POLICY INFORMATION, KEY ASSUMPTIONS, AND SIGNIFICANT JUDGMENTS
These annual consolidated financial statements (Annual Financial Statements) of Finning and its subsidiaries
(together, the “Company”) have been prepared in accordance with IFRS® Accounting Standards as issued by the
International Accounting Standards Board (Accounting Standards) issued and effective for the current year. The
Annual Financial Statements were authorized for issuance by the Company’s Board of Directors (the Board) on
February 4, 2025. The Company has applied the same accounting policies consistently to all periods presented
unless otherwise noted.
The preparation of financial statements in conformity with Accounting Standards 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 Annual 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 2024 or are not yet effective. Where an accounting policy, estimate, or
judgment is applicable to a specific note to the Annual Financial Statements, it is described within that note.
These Annual Financial Statements were prepared under the historical cost basis except as otherwise described in
the notes to these Annual Financial Statements.
(a) Principles of Consolidation
Accounting Policy
The Annual 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 Annual 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:
Principal place
% ownership
Functional
Name
of business
2024
2023
currency (1)
OEM Remanufacturing Company Inc.
Canada
100%
100%
CAD
4Refuel Canada LP
Canada
100%
100%
CAD
Compression Technology Corporation
Canada
54.5%
54.5%
CAD
Finning Argentina S.A.
Argentina
100%
100%
USD
Finning Soluciones Mineras S.A.
Argentina
100%
100%
USD
Finning Bolivia S.A.
Bolivia
100%
100%
USD
Finning Chile S.A.
Chile
100%
100%
USD
Moncouver S.A.
Uruguay
100%
100%
USD
Finning (UK) Ltd.
United Kingdom (UK)
100%
100%
GBP
Finning (Ireland) Limited
Republic of Ireland
100%
100%
EUR
(1)
Canadian dollar (CAD), US dollar (USD), UK pound sterling (GBP), Euro (EUR)
All shareholdings are of ordinary shares or other equity capital. Other subsidiaries, while included in the Annual
Financial Statements, are not considered material.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
12
(b) Joint Ventures
Accounting Policy
The Company accounts for its joint ventures in which the Company has an interest using the equity method. The
joint ventures follow accounting policies that are materially consistent with the Company’s accounting policies.
Where the Company transacts with its joint ventures, unrealized profits or losses are eliminated to the extent of the
Company’s interest in the joint venture.
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 Inc. (Caterpillar) products to mainline pipeline construction customers worldwide.
Agriterra Equipment (Agriterra), an Alberta based company, is a consolidation of equipment dealers providing
customers with agriculture and consumer products.
The Company’s proportion of ownership interest in its joint ventures was as follows:
December 31
Nature of
Principal place of
% ownership
Functional
Name
Relationship
Business
2024
2023
currency
PLM
Joint Venture
United States
25.0%
25.0%
USD
Agriterra
Joint Venture
Canada
20.0%
20.0%
CAD
The Company’s joint ventures are not considered individually material.
(c) Foreign Currency Translation
Accounting Policy
These Annual 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 or at the average rate for the period when it is a reasonable
approximation.
Account balances denominated in foreign currencies are translated into the entity’s functional currency as follows:
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
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:
Assets and liabilities are translated using the exchange rates in effect at the reporting dates;
Revenue and expense items are translated at average exchange rates prevailing during the period that the
transactions occurred; and,
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, a disposal that involves loss of control of a
subsidiary that includes a foreign operation, or loss of joint control over a jointly controlled entity 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
The Company is required to make judgments in determining the functional currency of each subsidiary of the
Company. Management considers the currency that mainly influences sales prices for goods and services, the
currency of the country whose competitive forces and regulations mainly determine the sales price of its goods and
services, and the currency that mainly influences labour, material, and other costs of providing goods or services.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
13
(d) Amendments to Standards
The Company has adopted the following amendments to Accounting Standards:
Amendments to IAS 1, Presentation of Financial Statements (effective January 1, 2024):
Clarify the classification of liabilities as current or non-current 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 determined the amendment impacted the presentation of certain of the Company’s share-
based payment arrangements. Deferred Share Units (DSUs) are cash-settled share-based payment
arrangements. DSUs are issued to certain executives and Board members, vest at the time of issuance, and
are redeemable by December of the year following the year in which cessation of employment or service on
the Board occurs. The Company does not have the ability to defer settlement of its vested DSUs for a period
of twelve months after cessation of employment or service on the Board. As a result, the Company
reclassified its vested DSU liabilities as current liabilities. These amendments were applied retrospectively.
The impact of the amendments to IAS 1 are shown in the table below. In addition, to align with this
presentation, the Company also reclassified the current portion of its share-based payment liability from
accounts payable and accruals to other current liabilities (current).
December 31,
January 1,
($ millions)
2023
2023
Increase in other liabilities (current)
47
60
Decrease in accounts payable and accruals
(16)
(36)
Decrease in other liabilities (non-current)
(31)
(24)
Except as outlined in the table above, the adoption of these amendments did not result in any other changes
to the consolidated statement of financial position.
Clarify that only covenants with which an entity must comply on or before the reporting date will affect the
classification of a liability as current or non-current. In addition, the amendments require a company to
disclose information in the notes to the financial statements when liabilities are classified as non-current
when the right to defer settlement of those liabilities is subject to complying with covenants within twelve
months after the reporting date. No changes were required to the Company’s classification upon adoption of
these amendments.
Amendments to IAS 7, Statement of Cash Flows and IFRS 7, Financial Instruments: Disclosures (effective
January 1, 2024) add disclosure requirements that require companies to provide qualitative and quantitative
information about supplier finance arrangements that will assist users of financial statements to assess the
effects of the company’s supplier finance arrangements on its liabilities and cash flows. Management
incorporated the required disclosures of all trade payable finance arrangements in scope of these amendments
in Note 8b.
Amendments to IFRS 16, Leases (effective January 1, 2024) explain how an entity accounts for a sale and
leaseback after the transaction date. The amendments clarify how a seller-lessee should subsequently measure
lease liabilities and when it is appropriate to record a gain or loss on these transactions. The amendments apply
to all sale and leaseback transactions entered since the effective date of IFRS 16 (January 1, 2019). Adoption of
these amendments did not have a material impact on the Company’s financial statements.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
14
(e) Future Accounting Pronouncements
The Company has not applied the following amendments to Accounting Standards and new standard that have
been issued but are not yet effective:
Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures (effective
January 1, 2026):
clarify the date of recognition and derecognition of some financial assets and liabilities, with a new exception
for some financial liabilities settled through an electronic payment system;
clarify and add further guidance for assessing whether a financial asset meets the solely payments of
principal and interest criterion;
add new disclosures for certain instruments with contractual terms that can change cash flows (such as
instruments with features linked to the achievement of environment, social and governance (ESG) targets);
and,
update the disclosure requirements for equity instruments designated at fair value through other
comprehensive income and add disclosure requirements for financial instruments with contingent features
that are not related directly to basic lending risks and costs, such as loans subject to ESG targets.
Management is currently assessing the impact of these amendments.
Amendments to IFRS 9, Financial Instruments (effective January 1, 2026) clarify that, when a lessee has
determined that a lease liability has been extinguished in accordance with IFRS 9, the lessee is required to
recognize any resulting gain or loss in profit or loss. Management is currently assessing the impact of these
amendments on the Company’s financial statements.
IFRS 18, Presentation and Disclosure in the Financial Statements (effective January 1, 2027) replaces IAS 1,
Presentation of Financial Statements. IFRS 18 carries forward many requirements from IAS 1 but introduces
significant changes to the structure of a company’s income statement, more discipline and transparency in
presentation of management-defined performance measures, and less aggregation of items into large, single
numbers. IFRS 18 promotes a more structured income statement, including a newly defined ‘operating profit’
subtotal and a requirement for all income and expenses to be allocated between three new distinct categories
(operating, investing, and financing) based on the Company’s main business activities. Management is currently
assessing the impacts of the new standard but expects the adoption of IFRS 18 will have a material impact on
the Company’s financial statements.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
15
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:
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.
South American operations: Chile, Argentina, and Bolivia.
UK & Ireland operations: England, Scotland, Wales, Northern Ireland, and the Republic of Ireland.
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 and income taxes 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
total 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:
Year ended December 31, 2024
South
UK &
($ millions)
Canada America
Ireland
Other
Total
Revenue
New equipment
1,667
1,186
759
—
3,612
Used equipment
341
69
97
—
507
Equipment rental
184
70
41
—
295
Product support
2,801
2,234
445
—
5,480
Fuel and other
1,310
2
—
—
1,312
Total revenue
6,303
3,561
1,342
—
11,206
Cost of fuel
(1,110)
—
—
—
(1,110)
Net revenue
5,193
3,561
1,342
—
10,096
Operating costs (1)
(4,558)
(3,052)
(1,230)
(31)
(8,871)
Depreciation and amortization
(220)
(125)
(41)
(6)
(392)
Equity earnings of joint ventures
9
—
—
—
9
Other expenses
(9)
(3)
(4)
(3)
(19)
Earnings (loss) before finance costs and income taxes
415
381
67
(40)
823
Finance costs
(160)
Provision for income taxes
(157)
Net income
506
Invested capital (2)
2,648
1,552
367
(1)
4,566
Gross capital expenditures (3)(4)
118
101
18
15
252
Gross rental equipment spend (4)
259
36
16
—
311
(1)
Operating costs are calculated as cost of sales less cost of fuel plus selling, general, and administrative expenses less
depreciation and amortization.
(2)
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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
16
Year ended December 31, 2023
South
UK &
($ millions)
Canada
America
Ireland
Other
Total
Revenue
New equipment
1,520
1,021
721
—
3,262
Used equipment
261
53
78
—
392
Equipment rental
206
77
44
—
327
Product support
2,875
2,069
434
—
5,378
Fuel and other
1,167
1
—
—
1,168
Total revenue
6,029
3,221
1,277
—
10,527
Cost of fuel
(984)
—
—
—
(984)
Net revenue
5,045
3,221
1,277
—
9,543
Operating costs (1)
(4,322)
(2,706)
(1,171)
(32)
(8,231)
Depreciation and amortization
(207)
(124)
(43)
(5)
(379)
Equity earnings of joint ventures
9
—
—
—
9
Other income
—
13
—
41
54
Other expenses
(9)
(67)
(5)
(5)
(86)
Earnings (loss) before finance costs and income taxes
516
337
58
(1)
910
Finance costs
(161)
Provision for income taxes
(228)
Net income
521
Invested capital (2)
2,852
1,381
510
22
4,765
Gross capital expenditures (3)(4)
132
104
12
22
270
Gross rental equipment spend (4)
314
65
38
—
417
(1)
Operating costs are calculated as cost of sales less cost of fuel plus selling, general, and administrative expenses less
depreciation and amortization.
(2)
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
Total revenue
Non-current assets
Year ended December 31
at December 31
($ millions)
2024
2023
2024
2023
Canada
6,138
5,877
1,506
1,610
Chile
3,053
2,677
385
358
United Kingdom
1,140
1,154
310
295
Argentina
421
449
85
92
Other countries
454
370
128
107
(5)
Non-current assets shown above exclude deferred tax assets and net post-employment assets.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
17
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:
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.
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 sales of parts inventory is initially
recorded at the estimated amount of consideration to which the Company expects to be entitled. The Company
may offer incentives (for example, rebates) on certain parts and discounts for large volume parts purchases. 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.
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:
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.
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.
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 sales of new equipment, 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
18
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
Transfer of Control to the Customer
The Company is required to make judgments when determining when control is transferred to the customer. For the
sale of new and used equipment and parts inventory, generally, control passes to the customer at the time of
shipment of the equipment or parts to the customer or when commissioning of equipment is complete. In certain
circumstances, management must determine if control transfers before or after the goods are shipped to the
customer (for example, bill-and-hold arrangements). In making this determination, management considers whether
the Company has transferred significant risks and rewards related to the product, legal title has transferred, the
Company has the ability to direct or sell the product to another customer, the product is ready for physical transfer,
or the product is in a condition of being capable of operating in the manner intended.
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 economic
incentive is expected, revenue is recognized over the term of the contract. Significant assumptions are made in
estimating residual values, which are assessed based on experience and taking into account expected future market
conditions and projected disposal values.
Identifying Performance Obligations
The Company is required to make judgments when identifying the performance obligations in contracts with
customers. When the sales of parts and labour for servicing equipment under a long-term contract are sold bundled
together with the sale of equipment to a customer, management typically concludes that these are two separate
performance obligations as each of the promises to transfer equipment and provide services is capable of being
distinct and separately identifiable.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
19
The Company recorded revenue from the transfer of goods and services at a point-in-time and over time in the
following lines of business:
Years ended December 31
2024
2023
($ millions)
Point-in-time
Over-time
Total
Point-in-time
Over-time
Total
New equipment
3,289
323
3,612
2,992
270
3,262
Used equipment
507
—
507
392
—
392
Equipment rental
—
295
295
—
327
327
Product support
2,371
3,109
5,480
2,418
2,960
5,378
Fuel and other
1,285
27
1,312
1,157
11
1,168
Total revenue
7,452
3,754
11,206
6,959
3,568
10,527
The Company recorded the following unbilled receivables from customers:
December 31
($ millions)
2024
2023
Product support
437
429
New equipment
48
61
Other
7
6
Total unbilled receivables
492
496
Invoices for sales of parts and labour when servicing equipment under long-term contracts were 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 were issued when the work was complete. Invoices for sales of complex
power and energy systems were issued in accordance with milestone payments as agreed in each sales contract
with the customer.
The Company recorded the following contract liabilities:
December 31
2024
2023
($ millions)
Current Non-current
Total
Current Non-current
Total
Product support
249
—
249
231
—
231
Deposits from customers for
new equipment
189
—
189
156
—
156
Extended warranty
34
42
76
32
36
68
Complex power and energy systems
90
—
90
80
—
80
Other
5
1
6
8
2
10
Total deferred revenue
567
43
610
507
38
545
The majority of the Company’s contract liabilities relate to cash collected for goods or services where 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
20
5. EARNINGS PER SHARE
Years ended December 31
2024
2023
($ millions, except share and per share amounts)
Basic
Diluted
Basic
Diluted
Net income attributable to shareholders of Finning
509
509
523
523
Weighted average shares outstanding (WASO)
140,447,583 140,447,583 147,472,530 147,472,530
Effect of dilutive share options
197,643
254,355
WASO with assumed conversions
140,645,226
147,726,885
Earnings per share
3.62
3.62
3.55
3.54
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 were not significant for
the years ended December 31, 2024 and 2023.
6. OTHER INCOME AND OTHER EXPENSES
Years ended December 31
($ millions)
2024
2023
Gain on wind up of foreign subsidiaries (a)
—
41
Gain on sale of property, plant, and equipment (b)
—
13
Other income
—
54
Years ended December 31
2024
2023
($ millions)
Severance costs (a)(c)
(19)
(18)
Foreign exchange impact of devaluation of ARS (d)
—
(56)
Write-off of intangible assets (e)
—
(12)
Other expenses
(19)
(86)
(a) In the three months ended March 31, 2023, the Company executed various transactions to simplify and adjust
its organizational structure. The Company wound up two wholly-owned subsidiaries and incurred severance
costs in each region as the Company reduced corporate overhead costs and simplified its operating model. As a
result of these activities, the Company recorded the following:
Net foreign currency translation gain of $41 million and income tax expense of $9 million (Note 13) were
reclassified to net income on the wind up of foreign subsidiaries; and
Severance costs.
(b) The South American operations sold a property in Chile and recorded a gain of $13 million on the sale.
(c) In the three months ended September 30, 2024, the Company recorded severance costs related to restructuring
activities as it worked to simplify business activities in each of its operations.
(d) On December 13, 2023, the newly-elected Argentine government devalued the Argentine peso (ARS) official
exchange rate by 118% from 366.5 ARS to 800 ARS for USD 1. As a result of prolonged government currency
restrictions, including no material access to USD starting in late August 2023, the Company’s ARS exposure
increased and during this period economic hedges were not available. As a result of the growth in the
Company’s ARS exposure and the significant devaluation of the ARS in the three months ended December 31,
2023, the South American operations incurred a foreign exchange loss of $56 million.
(e) Following an evaluation of the business needs of the operations and related intangible assets, several software
and technology assets have been or will be decommissioned, and as a result, the Company derecognized
previously capitalized costs of $12 million.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
21
7. SHORT-TERM AND LONG-TERM DEBT AND FINANCE COSTS
December 31
($ millions)
2024
2023
Short-term debt
844
1,239
Long-term debt
4.08%, USD 100 million, due January 19, 2024, Series B
—
132
4.28%, USD 50 million, due April 3, 2024, Series D
—
66
2.626%, $200 million, due August 14, 2026
180
180
4.53%, USD 200 million, due April 3, 2027, Series E
288
264
4.445%, $350 million, due May 16, 2028
349
349
4.778%, $425 million, due February 13, 2029
423
—
5.077%, $150 million, due June 13, 2042
149
150
Other term loans
7
7
Total long-term debt
1,396
1,148
Current portion of long-term debt
6
199
Non-current portion of long-term debt
1,390
949
Short-Term Debt
At December 31, 2024, short-term debt included $0.7 billion drawn on the Company’s committed sustainability-
linked revolving credit facility (2023: $1.1 billion). Refer to Note 8b for more information on the Company’s
committed sustainability-linked revolving credit facility.
The effective interest rate on the consolidated short-term debt for 2024 was 6.4% (2023: 7.0%).
Long-Term Debt
The Company's CAD denominated Medium Term Notes and USD denominated Senior Notes are unsecured and
interest is payable semi-annually with the principal due on maturity.
In April 2024, the Company repaid its 4.28%, USD 50 million note due April 3, 2024.
In February 2024, the Company issued $425 million of 4.778% senior unsecured notes due February 13, 2029.
In January 2024, the Company repaid its 4.08%, USD 100 million note due January 19, 2024.
In May 2023, the Company issued $350 million of 4.445% senior unsecured notes due May 16, 2028 and repaid its
3.40%, £70 million note due May 22, 2023.
The effective interest rate on the consolidated long-term debt for 2024 was 4.4% (2023: 4.3%).
Finance Costs
The components of finance costs were as follows:
Years ended December 31
($ millions)
2024
2023
Interest on short-term debt
79
93
Interest on long-term debt
60
46
Interest on debt
139
139
Interest on lease liabilities
14
12
Other finance related expenses
7
10
Finance costs
160
161
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
22
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, Board level committees review the Company’s 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 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 Annual 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 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. 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 selling, general, and administrative
expenses 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
23
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 aging of receivable balances, external credit ratings, publicly available information about customers,
expectation of customer bankruptcies, and the impact of inflation and interest rate increases on customers ability
to pay) 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. This risk 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)
2024
2023
Cash and cash equivalents
316
152
Accounts receivable
1,221
1,012
Unbilled receivables
492
496
Supplier claims receivable
144
127
Exposure to credit risk
2,173
1,787
Cash and Cash Equivalents
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
Credit risk associated with accounts receivable and unbilled receivables from customers is minimized because of
the diversification of the Company’s operations as well as the diversified customer base and 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, with whom Finning has
had an ongoing relationship since 1933.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
24
The maximum exposure to credit risk for accounts receivable at the reporting date by geographic location of
customer was as follows:
December 31
($ millions)
2024
2023
Canada
663
535
Chile
325
273
UK
103
109
Argentina
63
44
Other
67
51
Total
1,221
1,012
Impairment Losses
The aging of accounts receivable at the reporting date was as follows:
December 31
2024
2023
($ millions)
Gross Allowance
Gross
Allowance
Not past due
955
—
735
—
Past due 1 – 30 days
194
—
222
—
Past due 31 – 90 days
64
13
34
1
Past due 91 – 120 days
17
6
13
—
Past due greater than 120 days
51
41
53
44
Total
1,281
60
1,057
45
The movement in the allowance for doubtful accounts in respect of accounts receivable during the year was as
follows:
Years ended December 31
($ millions)
2024
2023
Balance, beginning of year
45
43
Additional allowance and unused amounts reversed, net
17
4
Receivables written off
(4)
(2)
Foreign exchange rate changes
2
—
Balance, end of year
60
45
The carrying amount of cash and cash equivalents, unbilled receivables, and supplier claims receivable represents
the Company’s maximum exposure to credit risk for these balances.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
25
(b) Financial Liabilities and Liquidity Risk
Accounting Policy
Classification and measurement
Accounts payable and accruals and 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
growth, capital, and debt repayment requirements, the Company will require additional debt or equity financing. The
Company’s ability to access capital markets for additional debt or equity 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. 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 Finning’s control, such as uncertainty in the capital markets, depressed commodity
prices or country risk factors.
At December 31, 2024, the Company had approximately $3.1 billion (2023: $2.7 billion) of unsecured committed and
uncommitted credit facilities. Included in this amount is a committed sustainability-linked revolving credit facility
totaling $1.3 billion with various Canadian and global financial institutions. In June 2024, the Company extended the
maturity of this $1.3 billion credit facility from September 2026 to June 2029. Borrowings under this facility are
available in multiple currencies and at various floating rates of interest. In addition, the Company has a $300 million
committed revolving credit facility. In September 2024, the Company extended the maturity of this $300 million credit
facility from October 2024 to October 2025.
At December 31, 2024, $853 million was available collectively under the $1.3 billion committed sustainability-linked
revolving credit facility and $300 million committed revolving credit facility (2023: $455 million). The Company is
subject to certain covenants under its committed revolving credit facilities. At December 31, 2024 and 2023, the
Company was in compliance with these covenants.
The Company’s principal source of short-term funding is the committed sustainability-linked revolving credit facility.
The Company also maintains a maximum authorized commercial paper program of $600 million, backstopped by
credit available under the $1.3 billion committed sustainability-linked revolving credit facility. There was no
commercial paper outstanding at December 31, 2024 and December 31, 2023. In addition, the Company maintains
other bank credit facilities, including overdrafts, letters of credit, and trade payable financing arrangements to
support its subsidiary operations.
In Argentina, the Company has experienced government currency restrictions in the past that have impacted
Finning’s ability to meet USD financial obligations as they fall due. The Company has been working, and continues
to work, with key suppliers to manage payment terms and is evaluating the new rules and policies of the newly-
elected government. While the Company’s access to USD in Argentina has improved since December 31, 2023,
new government rules and policies as well as economic conditions are subject to change, and may impact Finning’s
ability to manage its liquidity risk.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
26
The following are the contractual maturities of non-derivative and derivative financial liabilities. The amounts
presented represent the future undiscounted principal and interest cash flows, and therefore, do not necessarily
equal the carrying amount on the consolidated statement of financial position.
Carrying amount
Contractual cash flows
($ millions)
December 31, 2024
2025
2026
2027
2028
2029 Thereafter
Non-derivative financial liabilities
Accounts payable and accruals
(1,413)
(1,413)
—
—
—
—
—
Short-term debt (Note 7)
(844)
(844)
—
—
—
—
—
Long-term debt (Note 7)
(1,396)
(67)
(242)
(338)
(386)
(443)
(245)
Lease liabilities
(340)
(86)
(70)
(58)
(47)
(38)
(76)
Total non-derivative financial liabilities
(3,993)
(2,410)
(312)
(396)
(433)
(481)
(321)
Derivative financial instruments
Forward foreign currency contracts and swaps
Sell CAD
—
(929)
—
—
—
—
—
Buy USD
9
939
—
—
—
—
—
Sell ARS
(7)
(59)
—
—
—
—
—
Buy USD
—
49
—
—
—
—
—
Total derivative financial instruments
2
—
—
—
—
—
—
Trade Payable Financing Arrangements
The Company has entered into trade payable financing arrangements which extend the maturities for certain trade
payables in its South American operations. At December 31, 2024, the carrying amount of liabilities in accounts
payable and accruals that were part of trade payable financing arrangements was $193 million (2023: $107 million).
At December 31, 2024 and 2023, suppliers received the full amount of these liabilities from the finance providers.
The Company’s payment terms for comparable trade payables that are not part of these arrangements are 25-55
days. These arrangements extend the payment terms by approximately 20-30 days and these payables are still
considered due within a normal operating cycle. The effective interest rate on these arrangements was comparable
to short-term debt and the interest cost was recorded in finance costs. There were no non-cash transfers relating to
the carrying amount of liabilities subject to supplier financing arrangements at December 31, 2024 and 2023.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
27
(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. 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. 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.
Hedges
The Company utilizes foreign currency debt, derivative financial instruments, and short-term investments 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 and debt 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.
If hedge accounting is applied to the hedges, 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 reclassified to the
consolidated statement of net income upon the disposal of a foreign operation or a disposal that involves loss of
control of a subsidiary 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
28
Market Risk
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, Chilean Peso
(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 are translation and transaction
exposure.
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 by hedging 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 $288 million (2023: $462 million).
Transaction Exposure
Many of the Company’s operations purchase, sell, rent, and lease assets and 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 in its Canadian operations. During the year ended December 31, 2024 the
Company entered into forward exchange contracts for inventory purchases of USD 279 million (2023: USD 561
million).
The results of the Company’s operations are impacted by the translation of foreign-denominated transactions; the
results of the Canadian operations are most impacted by USD based revenue and costs, and the results of the
South American operations are most impacted by CLP and ARS based revenues and costs. The results of the
South American operations are affected by changes in the USD/CLP and USD/ARS relationships. As the CLP
weakens against the USD, the Company’s revenue may be impacted as customers curtail their equipment and
product support spend. In the South American operations, SG&A is largely denominated in local currency. A weaker
CLP to USD or ARS to USD positively impacts Finning’s financial results when local currency-based costs are
translated into USD reported SG&A, partly offsetting the impact on revenue.
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, primarily the USD/CAD in Canada and USD/CLP and USD/ARS in South America.
The Company enters into forward exchange contracts, short-term investments, and short-term borrowings 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. Continued government currency restrictions may impact the foreign currency risk and exposure of the
Company’s South American operations.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
29
Exposure to Foreign Exchange Risk
The currencies of the Company’s significant financial instruments were as follows:
December 31, 2024
(millions)
CAD
USD
GBP
CLP (1)
ARS
Cash and cash equivalents
537
65
27
58,253
5,003
Accounts receivable
557
195
56
168,350
1,601
Short-term and long-term debt
(1,784)
(694)
—
—
—
Accounts payable and accruals
(398)
(450)
(78) (130,954)
(10,429)
Lease liabilities
(257)
(7)
(18)
(28,347)
(82)
Net statement of financial position exposure
(1,345)
(891)
(13)
67,302
(3,907)
December 31, 2023
(millions)
CAD
USD
GBP
CLP (1)
ARS
Cash and cash equivalents
8
43
11
28,356
17,642
Accounts receivable
464
159
64
132,183
2,892
Short-term investments
—
—
—
—
15,325
Short-term and long-term debt
(856)
(1,160)
(12)
—
—
Accounts payable and accruals
(435)
(404)
(86)
(50,441)
(3,936)
Lease liabilities
(245)
(2)
(14)
(24,919)
—
Net statement of financial position exposure
(1,064)
(1,364)
(37)
85,179
31,923
(1)
Included are the CLP equivalents of amounts denominated in the Unidad de Fomento.
Sensitivity Analysis to Foreign Exchange Risk
The translation of financial instruments denominated in foreign currencies is impacted by changes in foreign
exchange rates. A weakening of the CAD against the following currencies would increase (decrease) pre-tax income
and pre-tax 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.
Pre-tax other
December 31, 2024
Weakening
Pre-tax
comprehensive
($ millions)
of CAD
income
income
USD/CAD
10%
11
(12)
GBP/CAD
10%
—
—
CLP/CAD (2)
20%
26
—
ARS/CAD
30%
(19)
—
(2)
Excluded from this sensitivity are CLP denominated liabilities which are exempt from the financial instrument disclosures.
A strengthening of the CAD against the above currencies relative to the December 31, 2024 month end rates would
have an equivalent but opposite effect in the amounts shown on the basis that all other variables are unchanged.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
30
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 some of its interest-bearing financial assets. The
Company’s floating-rate financial assets comprise cash and cash equivalents and short-term investments. Due to
the short-term nature of these financial assets, the impact of fluctuations in fair value is limited but interest income
earned can be impacted. 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 variable interest-bearing financial liabilities, primarily
from short-term debt. 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 costs 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, but no assurance can be given that these efforts will fully offset all
risk.
Profile
At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was as follows:
December 31
2024
2023
($ millions)
Fixed rate instruments
Financial assets
73
71
Financial liabilities
(1,736)
(1,457)
Variable rate instruments
Financial assets
316
177
Financial liabilities
(844)
(1,239)
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 liability position; therefore, an increase of 1.0% in interest
rates for a full year relative to the interest rates at the reporting date would decrease income by $5 million with a
1.0% decrease having the opposite effect. This analysis assumes that all other variables, in particular foreign
currency exchange rates and volumes, remain constant.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
31
(d) Fair Values
Financial instruments measured at fair value are grouped into three levels based on the degree to which fair value is
observable:
Level 1 – quoted prices in active markets for identical securities
Level 2 – significant observable inputs other than quoted prices included in Level 1
Level 3 – significant unobservable inputs
The Company’s only financial instruments measured at fair value are derivative financial instruments. All of the
derivative financial instruments are measured at fair value using Level 2 inputs. The Company did not move any
instruments between levels of the fair value hierarchy during the years ended December 31, 2024 and 2023.
Derivative Financial Instruments (Level 2)
The fair value of foreign currency forward contracts is determined by discounting contracted future cash flows using
a discount rate derived from interest rate curves and observed forward prices for comparable assets and liabilities.
Where material, fair values are adjusted for credit risk based on observed credit default spreads or market yield
spreads for counterparties for financial assets and based on the Company’s credit risk for financial liabilities. The
Company’s credit risk is derived from yield spreads on the Company’s market quoted debt.
Long-Term Debt (Level 2)
The carrying value and fair value of the Company’s long-term debt was as follows:
December 31
2024
2023
($ millions)
Carrying value
Fair value
Carrying value
Fair value
Long-term debt
1,396
1,427
1,148
1,143
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. 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, 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, notes receivable, short-term investments, short-term debt, and accounts payable approximate their fair
values due to the short-term maturities of these instruments.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
32
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 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, rental equipment spend, 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 common shares for cancellation pursuant to normal course issuer bids, issue new common
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 2024, the Company renewed its normal course issuer bid
(NCIB) which enables the Company to purchase its common shares for cancellation.
In connection with the NCIB, the Company may enter into an automatic share purchase plan (ASPP) with a
designated broker to enable share repurchases for cancellation during selected blackout periods. Refer to Note 10
for details of the share repurchases made under the NCIB and ASPP during 2024 and 2023.
The Company monitors net debt to Adjusted earnings before finance costs, income taxes, depreciation and
amortization (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.
Company
December 31
long-term target
2024
2023
Net debt to Adjusted EBITDA (times)
< 3.0
1.5
1.7
Net debt to Adjusted EBITDA is calculated as net debt at the reporting date 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)
2024
2023
Cash and cash equivalents
(316)
(152)
Short-term debt
844
1,239
Long-term debt
Current
6
199
Non-current
1,390
949
Net debt
1,924
2,235
A reconciliation from earnings before finance costs and income tax to Adjusted EBITDA is as follows:
Years ended December 31
($ millions)
2024
2023
Earnings before finance costs and income taxes
823
910
Significant items:
Severance costs (Notes 6a and 6d)
19
18
Estimated loss for a customer receivable (a)
14
—
Gain on wind up of foreign subsidiaries (Note 6a)
—
(41)
Gain on sale of property, plant, and equipment (Note 6b)
—
(13)
Foreign exchange impact of devaluation of ARS (Note 6c)
—
56
Write-off of intangible assets (Note 6e)
—
12
Adjusted earnings before finance costs and income taxes
856
942
Depreciation and amortization
392
379
Adjusted EBITDA
1,248
1,321
(a) The Company’s Canadian operations recorded an estimated loss for receivables from a customer that was
placed into receivership following a landslide at its mine.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
33
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 common shares is presented as a financing activity in the statement of cash
flows. The number of repurchased common 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, 2024 and 2023.
The Company is authorized to issue an unlimited number of common shares. All issued common shares have no
par value and are fully paid.
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 common shares in share capital were as follows:
Years ended December 31
(number of common shares)
2024
2023
Balance, beginning of year
144,007,263
151,041,250
Exercise of share options
90,750
182,776
Repurchase of common shares
(8,127,190)
(7,216,763)
Balance, end of year
135,970,823
144,007,263
During the year ended December 31, 2024, the Company repurchased 8,127,190 common shares for cancellation
for $322 million, at an average cost of $39.68 per share (including a 2% share buyback tax effective January 1,
2024), through the Company’s NCIB. In connection with the ASPP, an estimated obligation of $23 million was
recorded at December 31, 2024, for the repurchase of common shares from January 1, 2025 to February 5, 2025,
under the Company’s ASPP. In 2023, 7,216,763 common shares were repurchased for cancellation for $272 million,
at an average cost of $37.75 per share. At December 31, 2023, the Company did not enter into an ASPP and
therefore, no obligation was recorded for the repurchase of shares. Refer to Note 9 for a description of the
Company’s NCIB and ASPP.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
34
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 comprise share options which 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.
Cash-settled share-based payments comprise DSUs, Performance Share Units (PSUs), and Restricted Share Units
(RSUs). Cash-settled share-based awards are measured at fair value. Except for Total Shareholder Return
Performance Share Units (TSR PSUs), the fair value of all cash-settled share-based awards is estimated using the
Company’s share price on the Toronto Stock Exchange (TSX:FTT). The fair value of vested TSR PSUs is estimated
using a 5-day volume-weighted average price and the fair value of unvested TSR PSUs is estimated using the
Monte Carlo model. 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 other liabilities 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 at the time of
grant. 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 historical 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 are expected to vest.
The Company uses the Monte Carlo pricing model to estimate the fair value of PSUs at each reporting date. Inputs
to the model for TSR PSUs include the historical share prices of a specified peer group (S&P/TSX Composite Index
for 2024 grants and S&P/TSX Capped Industrials Index for the remaining grants) and estimates of the relative
ranking of the Company’s total shareholder return compared with the specified peer group. Inputs to the model for
return on invested capital (ROIC) and product support growth (PSG) PSUs include the Company’s projected ROIC
and compound annual growth rate (CAGR) of the Company’s product support business, respectively.
Share Options
The Company has one share option plan (Stock Option Plan) for senior executives and management of the
Company. 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
7,470,000 common shares pursuant to the exercise of share options. At December 31, 2024, 3,598,807 (2023:
3,609,124) common shares remained eligible to be issued in connection with future grants.
Under the Stock Option Plan, the Company only grants and prices share options when all material information has
been disclosed to the market. The difference between options exercised and common shares issued are withheld
and returned to the option pool for future issues or grants. The 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 2024 comprised both cash and cashless
exercises.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
35
Details of the Stock Option Plan were as follows:
2024
2023
Share
Weighted average
Share
Weighted average
Years ended December 31
options
exercise price
options
exercise price
Share options outstanding,
beginning of year
1,149,866
$
30.06
1,567,168
$
27.63
Granted
226,034
$
42.61
278,878
$
35.63
Exercised
(286,102)
$
29.18
(600,296)
$
26.25
Forfeited
(20,365)
$
37.84
(95,884)
$
30.51
Share options outstanding, end of year
1,069,433
$
32.80
1,149,866
$
30.06
Share options exercisable, end of year
585,892
$
28.13
586,739
$
25.71
The fair value of the share options granted during the year was estimated on the date of grant using the following
weighted-average assumptions:
2024
2023
Dividend yield
3.1%
3.2%
Expected volatility (1)
34.1%
33.9%
Risk-free interest rate
3.6%
3.3%
Expected life (in years)
4.97
5.02
Grant date fair value of share options
$
11.16
$
9.05
Share price
$
42.61
$
35.63
(1) Expected volatility is based on historical share price volatility of TSX:FTT shares.
The following table summarizes information about share options outstanding at December 31, 2024:
Share options outstanding
Share options exercisable
Weighted
Weighted
Weighted
Number
average
average
Number
average
Range of exercise prices
outstanding
remaining life exercise price
outstanding
exercise price
$17.75 - $24.87
233,166
2.03 years
$
19.28
233,166
$
19.28
$24.88 - $33.96
176,469
2.49 years
$
33.21
174,012
$
33.25
$33.97 - $34.83
198,783
4.25 years
$
34.02
105,159
$
34.02
$34.84 - $37.35
242,051
5.23 years
$
35.63
73,555
$
35.63
$37.36 - $42.67
218,964
6.30 years
$
42.61
—
$
—
Total
1,069,433
4.12 years
$
32.80
585,892
$
28.13
The following table summarizes information about share options outstanding at December 31, 2023:
Share options Outstanding
Share options Exercisable
Weighted
Weighted
Weighted
Number
average
average
Number
average
Range of exercise prices
outstanding
remaining life
exercise price
outstanding
exercise price
$17.75 - $20.03
186,070
3.36 years
$
17.75
186,070
$
17.75
$20.04 - $33.10
181,923
1.74 years
$
24.36
178,693
$
24.29
$33.11 - $33.79
263,151
3.63 years
$
33.25
165,105
$
33.34
$33.80 - $34.83
251,942
5.38 years
$
34.02
56,871
$
34.02
$34.84 - $35.63
266,780
6.38 years
$
35.63
—
$
—
Total
1,149,866
4.31 years
$
30.06
586,739
$
25.71
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
36
Other Share-Based Payment Plans
The Company has other share-based payment plans in the form of DSUs, PSUs, and RSUs that use notional
common share units.
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 DSUs and may also elect to
have all or a portion of their cash compensation payable for service as a Director issued in the form of DSUs. These
units are fully vested upon issuance. These units accumulate notional dividends 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 DSU 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 47,407 DSUs in 2024 (2023: 50,329), which were
expensed over the calendar year as the units were issued. An additional 25,321 DSUs (2023: 24,636) were issued
in lieu of cash compensation payable for service as a Director. A further 15,858 DSUs (2023: 17,292) were granted
to Directors during 2024 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 DSUs and may be awarded DSUs 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, if
any. Vested DSUs 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 notional dividends in the form of
additional DSUs based on the dividends paid on the Company’s common shares.
There were no DSUs granted to executives in 2024 (2023: 6,025) as remuneration of their annual bonus payment
and 1,363 DSUs (2023: 1,184) 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 DSUs 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 DSUs 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. DSUs expire if they have not vested within five years
from the grant-date. Only vested units accumulate notional dividends in the form of additional DSUs based on the
dividends paid on the Company’s common shares.
During 2024, 789 DSUs (2023: 900) were granted to executives as notional dividends under the DSU-B Plan.
PSU Plan
Under the PSU Plan, certain employees 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 notional dividends over the life of the grants in the form of additional performance share units based on
the dividends paid on the Company’s common shares. All units, including notional dividends, are redeemed upon
vesting.
PSUs granted in 2024 were divided into three categories. Half of the awards were based on the extent to which the
Company’s ROIC achieves or exceeds the specified performance levels in each year of a three-year performance
period (ROIC PSUs). A quarter of the awards were based on the performance of the Company’s total shareholder
return (TSR) over the three-year period relative to the performance of the total shareholder return of companies that
were in the S&P/TSX Composite Index for the performance period (TSR PSUs). The remaining quarter of the
awards were based on the extent to which the CAGR of the Company’s product support business achieves or
exceeds the specified performance levels in the first year, the first two years, and the full three years of a grant over
a three-year performance period (PSG PSUs).
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
37
PSUs granted in 2023 were divided equally into two categories. Half of the awards were based on the extent to
which the Company’s ROIC achieves or exceeds the specified performance levels in each year of a three-year
performance period (ROIC PSUs). The other half of the awards was 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
companies that were in the S&P/TSX Capped Industrials Index for the performance period.
Vesting levels are subject to performance condition achievement with respect to ROIC (a non-market condition),
PSG (a non-market condition), or relative total shareholder return performance compared to the TSX index (a
market condition), and can range from 0% to 200%.
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, 2024, a total of 240,931 performance share units were granted to certain
employees, based on 100% vesting (2023: 307,822), and 43,212 notional units (2023: 43,922) 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.
Restricted Share Unit (RSU) Plan
Under the RSU Plan, certain employees of the Company may be awarded RSUs as approved by the Board. This
plan utilizes notional units that vest in accordance with terms set at the time of grant (typically three years from grant
date). All units accumulate notional dividends over the life of the grants in the form of additional restricted share
units based on the dividends paid on the Company’s common shares.
RSUs that have vested are redeemable in cash and the fair value payout per unit 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 vesting period.
During the year ended December 31, 2024, a total of 186,163 restricted share units were granted to certain
employees (2023: 193,235) and 27,555 notional units (2023: 26,996) are issuable as payment for dividends upon
vesting.
Details of the DSU, PSU, and RSU plans were as follows:
Year ended December 31, 2024
Exec
Units
DSU
DSU-B
DDSU
PSU
RSU
Total
Outstanding, beginning of year
48,222
35,489
727,814
949,463
595,534
2,356,522
Additions
1,363
789
88,586
118,621
203,612
412,971
Exercised
(15,943)
(30,070)
(287,979)
(287,055) (151,890)
(772,937)
Forfeited
—
—
—
(84,794)
(75,492)
(160,286)
Outstanding, end of year
33,642
6,208
528,421
696,235
571,764
1,836,270
Vested, beginning of year
48,222
35,489
727,814
326,450
—
1,137,975
Vested
1,363
789
88,586
290,591
151,890
533,219
Exercised
(15,943)
(30,070)
(287,979)
(287,055) (151,890)
(772,937)
Forfeited
—
—
—
(39,395)
—
(39,395)
Vested, end of year
33,642
6,208
528,421
290,591
—
858,862
Liability
($ millions)
Balance, beginning of year
2
1
28
21
11
63
Expensed
—
—
4
9
8
21
Exercised
(1)
(1)
(11)
(11)
(7)
(31)
Forfeited
—
—
—
(3)
(1)
(4)
Balance, end of year
1
—
21
16
11
49
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
38
Year ended December 31, 2023
Exec
Units
DSU
DSU-B
DDSU
PSU
RSU
Total
Outstanding, beginning of year
42,157
34,589
683,113 1,525,700
796,037
3,081,596
Additions
7,209
900
92,257
297,283
211,887
609,536
Exercised
(1,144)
—
(47,556)
(747,123) (307,581) (1,103,404)
Forfeited
—
—
—
(126,397) (104,809)
(231,206)
Outstanding, end of year
48,222
35,489
727,814
949,463
595,534
2,356,522
Vested, beginning of year
42,157
34,589
683,113
765,986
—
1,525,845
Vested
7,209
900
92,257
326,450
307,581
734,397
Exercised
(1,144)
—
(47,556)
(747,123) (307,581) (1,103,404)
Forfeited
—
—
—
(18,863)
—
(18,863)
Vested, end of year
48,222
35,489
727,814
326,450
—
1,137,975
Liability
($ millions)
Balance, beginning of year
1
1
23
37
15
77
Expensed
1
—
7
12
9
29
Exercised
—
—
(2)
(25)
(11)
(38)
Forfeited
—
—
—
(3)
(2)
(5)
Balance, end of year
2
1
28
21
11
63
The per unit fair value of the DSUs, ROIC and PSG PSUs, and RSUs outstanding at December 31, 2024, was
$38.09. The per unit fair value of the DSUs, ROIC PSUs, and RSUs outstanding at December 31, 2023, was
$38.32. The per unit fair value of TSR PSUs outstanding at December 31, 2024, was $40.79 (2023: $39.81).
The impact of the share-based payment plans on the Company’s consolidated statement of net income was as
follows:
Years ended December 31
2024
2023
($ millions)
Compensation expense arising from equity-settled share-based payments
2
2
Compensation expense arising from cash-settled share-based payments
17
24
Total share-based payment expense
19
26
The total intrinsic value of vested and outstanding share-based payments was $31 million (2023: $42 million).
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
39
12. INVENTORY
Accounting Policy
Inventory is made up of assets held for sale in the ordinary course of business, in the process of production for
sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of
services. Inventory is stated at the lower of cost and net realizable value. Cost is determined on a specific item
basis for on-hand equipment and internal service work in progress, and on a weighted average cost basis for
parts and supplies. The cost of inventory includes all costs of purchase, conversion costs, other costs incurred in
bringing inventory to their existing location and condition, and an appropriate share of overhead costs based on
normal operating capacity.
Areas of Estimation Uncertainty
The Company makes estimates of the provision required to reflect net realizable value of slow-moving and
obsolete inventory. These estimates are determined on the basis of age, redundancy, and stock levels. For
equipment inventory, estimates are determined on a specific item basis. Management reviews equipment values
with equipment specialists taking into account current market demand, market supply of equipment, market
prices, and the age and condition of equipment. Management reviews parts inventory estimates based on market
demand, parts turns, discontinued items, ability to return to the vendor, and surplus/excess items.
December 31
($ millions)
2024
2023
On-hand equipment
1,000
1,266
Parts and supplies
1,127
1,110
Internal service work in progress
519
468
Total inventory
2,646
2,844
For the year ended December 31, 2024, on-hand equipment, parts, supplies, and internal service work in progress
recognized as an expense in cost of sales amounted to $7.9 billion (2023: $7.3 billion). For the year ended
December 31, 2024, the write-down of inventory to net realizable value, included in cost of sales, was $37 million
(2023: $24 million).
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
40
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. Deferred tax liabilities are recognized for taxable temporary
differences associated with investments in subsidiaries, 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.
Deferred tax assets and liabilities are not recognized if the temporary difference arises from:
initial recognition of goodwill;
initial recognition of assets and liabilities in a transaction (other than in a business combination) that affects
neither taxable profit nor the accounting profit; or,
transactions that give rise to equal and offsetting temporary differences.
The Company has applied the exception from the accounting requirements for deferred taxes in relation to Pillar
Two Global Minimum Tax legislation. Accordingly, the Company neither recognizes nor discloses information
about deferred tax assets and liabilities related to Pillar Two Global Minimum Taxes.
Current tax expense 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 deferred tax impact of foreign exchange gains or losses arising on the translation of foreign-
denominated non-monetary assets and non-monetary liabilities is recorded in provision for income taxes 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 where the Company operates 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.
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 where 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
41
Provision for income taxes
The Company recognized the following provisions for income taxes:
Year ended December 31, 2024
($ millions)
Canada
International
Total
Current
82
117
199
Adjustment for prior periods recognized in the current year
(5)
(6)
(11)
Total current tax expense
77
111
188
Deferred
Origination and reversal of timing differences
(11)
(25)
(36)
Recognition of deferred tax assets
—
(6)
(6)
Adjustment for prior periods recognized in the current year
4
7
11
Total deferred tax expense
(7)
(24)
(31)
Provision for income taxes
70
87
157
Year ended December 31, 2023
($ millions)
Canada
International
Total
Current
93
129
222
Adjustment for prior periods recognized in the current year
(3)
—
(3)
Total current tax expense
90
129
219
Deferred
Origination and reversal of timing differences
2
3
5
Decrease due to tax rate changes
—
(2)
(2)
Derecognition of deferred tax assets
—
5
5
Adjustment for prior periods recognized in the current year
2
(1)
1
Total deferred tax expense
4
5
9
Provision for income taxes
94
134
228
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:
Years ended December 31
($ millions)
2024
2023
Combined Canadian federal and provincial income taxes at
the statutory tax rate
162 24.4 %
183 24.4 %
(Decrease) increase resulting from:
Differences in tax rates in foreign jurisdictions
(11)
(1.7)%
(13)
(1.7)%
Withholding taxes
16
2.4 %
36
4.8 %
Pillar Two Global Minimum Tax
5
0.7 %
—
—
Non-taxable/non-deductible foreign exchange in Argentina
2
0.3 %
25
3.3 %
(Recognition) derecognition of deferred tax assets
(6)
(0.8)%
5
0.7 %
Adjustment on losses utilized in Argentina
(10)
(1.6)%
—
—
Inflationary adjustment
(1)
(0.1)%
(2)
(0.2)%
Utilization of capital loss
—
—
(1)
(0.1)%
Non-taxable capital gain
—
—
(1)
(0.1)%
Other
—
—
(4)
(0.7)%
Provision for income taxes
157 23.6 %
228 30.4 %
As part of the organizational restructuring described in Note 6a, the provision for income taxes in 2023 included a $9
million expense related to the wind up of foreign subsidiaries and a $19 million expense for withholding taxes on the
repatriation of $170 million of profits from the Company’s South American operations.
Dividend withholding taxes of $16 million were recorded in 2024 related to the repatriation of profits from the
Company’s South American operations (2023: $36 million, including the $19 million noted above).
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
42
Pillar Two Global Minimum Tax
The Company is within scope of the Pillar Two Global Minimum Tax rules published by the Organization for
Economic Co-operation and Development, and it has applied the IAS 12, Income Taxes exception to recognizing
and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.
In June 2024, the Global Minimum Tax Act was enacted in Canada, the jurisdiction where Finning’s ultimate parent
resides, effective January 1, 2024. Applying Global Minimum Tax to the Company for the year ended December 31,
2024, resulted in a current tax expense of $5 million. There was no current tax expense for the year ended
December 31, 2023, related to Pillar Two Global Minimum Tax as it was not yet effective in any of the Company’s
jurisdictions.
Deferred Tax Asset and Liability
Temporary differences and tax loss carry-forwards that gave rise to deferred tax assets and liabilities were as
follows:
December 31
($ millions)
2024
2023
Accounting provisions not currently deductible for tax purposes
89
56
Employee benefits
13
—
Share-based payments
9
12
Loss carry-forwards
8
8
Deferred tax assets
119
76
Property, plant and equipment, rental equipment, right-of-use assets,
and intangible assets
(150)
(157)
Distribution network
(16)
(16)
Employee benefits
—
(6)
Other
(7)
(1)
Deferred tax liabilities
(173)
(180)
Net deferred tax liability
(54)
(104)
Deferred taxes were not recognized on retained profits of approximately $1.8 billion (2023: $1.5 billion) of foreign
subsidiaries, as it is 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 $9 million does not expire and $22 million expires between 2036 and 2044.
December 31
($ millions)
2024
2023
Canada
22
18
International
9
10
At December 31, 2024, the Company had unrecognized capital and non-capital loss carry-forwards of $119 million
(2023: $86 million) to reduce future taxable income. This amount does not expire.
The income tax relating to components of other comprehensive income was as follows:
Years ended December 31
($ millions)
2024
2023
Deferred tax recovery
(16)
(1)
Recovery of income taxes recognized in other comprehensive income
(16)
(1)
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
43
14. OTHER ASSETS
December 31
($ millions)
2024
2023
Equipment deposits
152
73
Supplier claims receivable
144
127
Finance assets
68
64
Prepaid expenses
46
45
Income tax recoverable
38
17
Commodity taxes receivable
27
12
Short-term investments
—
25
Other
56
63
Total other assets – current
531
426
December 31
($ millions)
2024
2023
Deferred tax assets
84
56
Prepaid expenses
33
28
Finance assets (a)
10
12
Other
14
13
Total other assets – non-current
141
109
(a) Finance assets include equipment leased to customers under long-term financing leases. Depreciation expense
for equipment leased to customers of $4 million was recorded in 2024 (2023: $2 million). Depreciation expense
is recognized in equal monthly amounts over the term of the individual leases.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
44
15. PROPERTY, PLANT, AND EQUIPMENT AND RENTAL EQUIPMENT
Accounting Policy
Property, plant, and equipment (PP&E) and rental equipment are recorded at cost, net of accumulated
depreciation and any impairment losses. Depreciation of PP&E 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 PP&E and rental equipment are depreciated over their estimated useful lives to their estimated
residual value on a straight-line basis using the following:
Buildings
10 - 50 years
Vehicles and equipment
3 - 20 years
Rental equipment
2 - 8 years
PP&E 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 PP&E and rental equipment, the asset is reviewed for
possible reversal of the impairment at the end of each subsequent reporting period.
Areas of Estimation Uncertainty
Depreciation expense is dependent on the estimated useful life determined for each type of asset. Actual lives and
residual values of assets may vary depending on a number of factors including technological innovation, product
life cycles, physical condition, market/recoverable value, prospective use, and maintenance programs.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
45
December 31, 2024
Vehicles and
Total
Rental
($ millions)
Land Buildings
Equipment
PP&E Equipment
Cost
Balance, beginning of year
83
1,093
901
2,077
925
Additions of owned assets
—
35
78
113
210
Additions of right-of-use assets
—
17
82
99
1
Remeasurement of right-of-use assets
—
17
2
19
(14)
Transfers from inventory
—
—
26
26
100
Transfers to inventory
—
—
(6)
(6)
(451)
Reclassification to other assets
—
(5)
—
(5)
—
Disposals
—
(21)
(114)
(135)
(9)
Foreign exchange rate changes
4
29
36
69
21
Balance, end of year
87
1,165
1,005
2,257
783
Accumulated depreciation and impairment losses
Balance, beginning of year
(7)
(525)
(569)
(1,101)
(317)
Depreciation of owned assets
—
(32)
(57)
(89)
(126)
Depreciation of right-of-use assets
—
(31)
(50)
(81)
(5)
Transfers to inventory
—
—
2
2
153
Reclassification to other assets
—
5
—
5
—
Disposals
—
20
111
131
8
Foreign exchange rate changes
—
(17)
(22)
(39)
(8)
Balance, end of year
(7)
(580)
(585)
(1,172)
(295)
Net book value
Balance, beginning of year
76
568
332
976
608
Balance, end of year
80
585
420
1,085
488
December 31, 2023
Vehicles and
Total
Rental
($ millions)
Land
Buildings
equipment
PP&E equipment
Cost
Balance, beginning of year
86
1,133
817
2,036
798
Additions of owned assets
4
34
100
138
325
Additions of right-of-use assets
—
4
45
49
6
Remeasurement of right-of-use assets
—
6
(1)
5
—
Transfers from inventory
—
—
10
10
90
Transfers to inventory
—
—
(18)
(18)
(252)
Reclassification to other assets
(1)
(21)
—
(22)
—
Disposals
(5)
(58)
(47)
(110)
(43)
Foreign exchange rate changes
(1)
(5)
(5)
(11)
1
Balance, end of year
83
1,093
901
2,077
925
Accumulated depreciation and impairment losses
Balance, beginning of year
(10)
(526)
(527)
(1,063)
(329)
Depreciation of owned assets
—
(33)
(51)
(84)
(121)
Depreciation of right-of-use assets
—
(31)
(46)
(77)
(9)
Transfers to inventory
—
—
7
7
106
Reclassification to other assets
—
14
—
14
—
Disposals
3
50
45
98
36
Impairment loss
—
(2)
—
(2)
—
Foreign exchange rate changes
—
3
3
6
—
Balance, end of year
(7)
(525)
(569)
(1,101)
(317)
Net book value
Balance, beginning of year
76
607
290
973
469
Balance, end of year
76
568
332
976
608
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
46
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 (ROU) asset and a corresponding
lease liability, except for short-term leases (defined as leases with a lease term of twelve months or less) and
leases of low value assets.
The ROU 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 and an estimate of costs to be incurred by
the lessee in dismantling and removing the underlying asset, restoring the site on which it is located, or restoring
the underlying asset to the condition required by the terms and conditions of the lease. The ROU asset is
subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation of ROU
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.
ROU 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 ROU 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 ROU asset)
whenever:
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,
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,
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 ROU asset is presented within PP&E 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
47
Short-term leases and leases of low-value assets
The Company has elected to not recognize ROU assets and lease liabilities for leases that have a term of twelve
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.
ROU asset additions and depreciation have been included in PP&E and rental equipment (Note 15). The net book
value of ROU assets was as follows:
December 31
Vehicles and
Total
Rental
($ millions)
Land Buildings
equipment
PP&E equipment
2024
8
137
164
309
7
2023
8
133
126
267
11
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
2 – 10 years
Software and Technology
2 – 7 years
Tradename
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 Estimation Uncertainty
Amortization expense is dependent on the estimated useful life determined for each type of asset. Actual lives may
vary depending on a number of factors including technological innovation and prospective use.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
48
Contracts and
Software
December 31, 2024
customer
and
($ millions)
relationships
technology
Tradename
Total
Cost
Balance, beginning of year
410
410
33
853
Additions
—
15
—
15
Additions through business combinations
1
—
—
1
Derecognized
—
(14)
—
(14)
Foreign exchange rate changes
23
12
1
36
Balance, end of year
434
423
34
891
Accumulated amortization
Balance, beginning of year
(266)
(272)
(6)
(544)
Amortization for the year
(37)
(48)
(2)
(87)
Derecognized
—
13
—
13
Foreign exchange rate changes
(18)
(10)
—
(28)
Balance, end of year
(321)
(317)
(8)
(646)
Net book value
Balance, beginning of year
144
138
27
309
Balance, end of year
113
106
26
245
Contracts and
Software
December 31, 2023
customer
and
($ millions)
relationships
technology
Tradename
Total
Cost
Balance, beginning of year
367
407
33
807
Additions
46
27
—
73
Additions through business combinations
2
—
—
2
Derecognized
—
(22)
—
(22)
Foreign exchange rate changes
(5)
(2)
—
(7)
Balance, end of year
410
410
33
853
Accumulated amortization
Balance, beginning of year
(234)
(235)
(5)
(474)
Amortization for the year
(37)
(48)
(1)
(86)
Derecognized
—
10
—
10
Foreign exchange rate changes
5
1
—
6
Balance, end of year
(266)
(272)
(6)
(544)
Net book value
Balance, beginning of year
133
172
28
333
Balance, end of year
144
138
27
309
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
49
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. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. 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 changed, 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 the CGUs to which intangible assets should be allocated 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, cash generating ability of the assets, discount rates, and growth rates.
Overview of annual impairment tests
The annual impairment tests were completed to support April 1, 2024 net asset values. Management’s methodology
for impairment testing utilizes cash flows from financial budgets to estimate recoverable value.
Recoverable value
The recoverable value of each CGU or group of CGUs was estimated based on a value-in-use calculation. The
value-in-use calculation used cash flow projections based on financial budgets which included 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 were based on 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 were 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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
50
Carrying amount, CGU allocation and key assumptions
The carrying value of goodwill and distribution network at December 31, and the significant assumptions used in the
Company’s value-in-use calculations in the annual impairment tests for each CGU or group of CGUs, were as
follows:
2024
2023
After-tax
After-tax
Distribution
WACC Growth
Distribution
WACC Growth
($ millions, except rates) Goodwill
network
rate
rate Goodwill
network
rate
rate
Canada
212
—
9%
2%
212
—
10%
2%
Canada Mining
—
98
9%
2%
—
98
10%
2%
Chile
5
—
10%
3%
4
—
10%
4%
UK & Ireland
122
2
10%
2%
113
2
10%
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 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, 2024, 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 2024 or 2023 related to the Company’s goodwill or distribution
network. There were no impairment reversals in 2024 or 2023 related to the distribution network in the Company’s
South American operations.
19. OTHER LIABILITIES
December 31,
December 31,
January 1,
2024
2023
2023
($ millions)
(Restated - Note 2d) (Restated - Note 2d)
Lease liabilities
78
74
76
Provisions (Note 20)
75
65
60
Income tax payable
61
25
80
Commodity taxes payable
58
37
73
Share-based payments
37
47
60
Other
11
24
13
Total other liabilities – current
320
272
362
December 31,
December 31,
January 1,
2024
2023
2023
($ millions)
(Restated - Note 2d) (Restated - Note 2d)
Net post-employment obligation (Note 21)
79
89
75
Deferred revenue (Note 4)
43
38
35
Share-based payments
12
16
17
Other
15
24
33
Total other liabilities – non-current
149
167
160
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
51
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, and expected repurchase
guarantees. 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.
Year ended December 31, 2024
Warranty
($ millions)
claims
Other
Total
Balance, beginning of year
47
22
69
New provisions
43
12
55
Charges against provisions
(39)
(11)
(50)
Foreign exchange rate changes
3
2
5
Balance, end of year
54
25
79
Current
54
21
75
Non-current
—
4
4
Year ended December 31, 2023
Warranty
($ millions)
claims
Other
Total
Balance, beginning of year
47
18
65
New provisions
40
16
56
Charges against provisions
(40)
(11)
(51)
Foreign exchange rate changes
—
(1)
(1)
Balance, end of year
47
22
69
Current
47
18
65
Non-current
—
4
4
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
52
21. POST-EMPLOYMENT BENEFITS
The Company offers a number of benefit plans 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, the 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.
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 non-registered supplemental pension plans. Benefits
under these plans are partially funded by Retirement Compensation Arrangements.
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.
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 (ESAP) 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.
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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
53
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 takes into account changes in the net DB liability or
asset during the period resulting from contributions or benefit payments.
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 estimated by
discounting the estimated future cash outflows using high-quality corporate bond yields denominated in the same
currency of the benefits to be paid.
DC Plans:
The cost of pension benefits includes the current service cost, which comprises 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 as incurred in the consolidated statement of net income.
Other PEB
The Company’s PEB in South America and ESAP in Canada are accounted for as unfunded DB plans. The cost
of the PEB is determined by independent actuaries using the projected unit credit method.
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 takes into account
changes in the other post-employment benefit liability during the period resulting from contributions or benefit
payments.
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 present value of the DB obligation is estimated by discounting the
estimated future cash outflows using high-quality corporate bond yields denominated in the same currency of the
benefits to be paid.
Areas of Estimation Uncertainty
Actuarial valuations of the Company’s DB and Other PEB plans are based on assumptions 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 loss for the Company’s post-employment benefit plans were as follows:
2024
2023
DB and
DB and
Other
Other
Years ended December 31
PEB
DC
PEB
DC
($ millions)
plans
plans
Total
plans
plans
Total
Selling, general, and administrative expenses
18
56
74
17
52
69
Net interest income
(1)
—
(1)
(1)
—
(1)
Total benefit cost recognized in net income
17
56
73
16
52
68
Total actuarial loss recognized in
other comprehensive income
74
—
74
5
—
5
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
54
Other financial information about the Company’s DB plans and Other PEB plans was as follows:
2024
2023
Years ended December 31
South
South
($ millions)
Canada
UK America
Total
Canada
UK America
Total
Accrued benefit obligation
Balance, beginning of year
(171)
(396)
(80)
(647)
(155)
(380)
(75)
(610)
Current service cost
(4)
—
(11)
(15)
(4)
—
(12)
(16)
Interest cost
(8)
(18)
(4)
(30)
(8)
(18)
(4)
(30)
Benefits paid
8
26
3
37
7
19
4
30
Remeasurements:
- Actuarial gain from
change in demographic
assumptions
—
8
—
8
—
14
—
14
- Actuarial gain (loss) from
change in financial
assumptions
1
38
5
44
(11)
(9)
—
(20)
- Experience gain (loss)
2
1
4
7
—
(9)
2
(7)
Foreign exchange rate changes
—
(27)
4
(23)
—
(13)
5
(8)
Balance, end of year
(172)
(368)
(79)
(619)
(171)
(396)
(80)
(647)
Plan assets
Balance, beginning of year
162
505
—
667
155
478
—
633
Return on plan assets:
- Interest income
8
23
—
31
8
23
—
31
- Actuarial gain (loss) on
plan assets (1)
6
(139)
—
(133)
5
3
—
8
Employer contributions
4
1
3
8
1
6
4
11
Benefits paid
(8)
(26)
(3)
(37)
(7)
(19)
(4)
(30)
Administration costs
—
(3)
—
(3)
—
(1)
—
(1)
Foreign exchange rate changes
—
34
—
34
—
15
—
15
Balance, end of year
172
395
—
567
162
505
—
667
Net post-employment
asset (obligation)
—
27
(79)
(52)
(9)
109
(80)
20
(1)
In December 2024, the UK DB plan invested the majority of its assets in an annuity contract (totaling $442 million) in order to
mitigate exposures to longevity, investment, interest rate and inflation risk. The change in investments resulted in an
actuarial loss on plan assets of approximately $80 million that was recorded in other comprehensive income. There is no
change to the Company’s responsibility and commitment to the UK DB pension plan members.
Included in the accrued benefit obligation and plan assets were the following amounts in respect of plans that were
not fully funded:
2024
2023
Years ended December 31
South
South
($ millions)
Canada
UK America
Total
Canada
UK America
Total
Accrued benefit obligation
(49)
—
(79)
(128)
(49)
—
(80)
(129)
Plan assets
32
—
—
32
32
—
—
32
Funded status - plan deficit
(17)
—
(79)
(96)
(17)
—
(80)
(97)
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
55
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:
2024
2023
South
South
Years ended December 31
Canada
UK America
Canada
UK
America
Discount rate – obligation
4.7%
5.5%
6.0%
4.6%
4.5%
5.3%
Discount rate – expense (1)
4.6%
4.5%
5.3%
5.2%
4.8%
5.3%
Retail price inflation – obligation
n/m (2)
3.1%
n/a (2)
n/m (2)
2.8%
n/a (2)
Retail price inflation – expense (1)
n/m (2)
2.8%
n/a (2)
n/m (2)
3.0%
n/a (2)
Average staff turnover – obligation
n/m (2)
n/m (2)
7.9%
n/m (2)
n/m (2)
7.9%
Rate of compensation increase – obligation
n/m (2)
n/a (2)
6.6%
n/m (2)
n/a (2)
6.6%
(1)
Used to determine the net interest cost and expense for the years ended December 31, 2024 and 2023.
(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. Assumptions for future mortality
are not applicable to the Other PEB plans in South America. Assumptions for future mortality for Canada and the UK
translate into an average life expectancy (in years) as follows:
2024
2023
December 31
Canada
UK
Canada
UK
Life expectancy for male currently aged 65
22
21
22
22
Life expectancy for female currently aged 65
25
23
24
24
Life expectancy at 65 for male currently aged 45
23
22
23
23
Life expectancy at 65 for female currently aged 45
25
25
25
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 12 years, UK is 13 years, and South America is 7 years. A change in significant actuarial assumptions
would impact the accrued benefit obligations by the amounts shown below.
Change in
(Decrease) increase in accrued benefit obligation
($ millions)
assumption
Canada
UK
South America
Discount rate
+0.25%
(5)
(12)
(2)
Retail price inflation
+0.25%
n/m (3)
9
n/m (3)
Average staff turnover
+0.25%
n/m (3)
n/m (3)
(2)
Rate of compensation increase
+0.25%
n/m (3)
n/a (3)
1
(3)
n/m – not a material assumption used in the valuation.
n/a – not applicable.
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.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
56
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 plan. An actuarial valuation of the UK DB plan is
required every three years.
Based on the most recent formal valuations completed, the Company expects to contribute approximately $3 million
to the DB plans during the year ended December 31, 2025. The actuarial valuation dates of the Company’s material
post-employment benefit plans were as follows:
Last actuarial
Post-Employment Benefit Obligations
valuation date
Canada – Regular & Executive DB Plan
December 31, 2023
Canada – Regular & Executive Supplemental Income Plan
December 31, 2023
Finning UK DB Scheme
December 31, 2023
Finning South America Pension Arrangements
December 31, 2023
Plan Assets
The fair values of plan assets are determined using a combination of quoted prices and market observable inputs.
Plan assets at December 31, 2024 were principally invested in the following securities (segregated by geography):
Canada
UK
Canada
Global (1)
UK
Global (1)
Fixed-income (2)
64%
—
93%
—
Equity
6%
19%
—
—
Infrastructure
—
2%
—
—
Cash and cash equivalents
9%
—
7%
—
(1)
Global investments exclude investments in Canadian and UK securities in Canada and UK, respectively.
(2)
Fixed-income includes an investment in an annuity contract in the UK.
Plan assets do not include any direct investment in common shares of the Company at December 31, 2024 and
2023.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
57
Key Risks
In the UK, the DB pension plan invested the majority of its assets in an annuity contract which provides cash flows
that match the timing and amount of retiree benefit payments, mitigating exposures to the below risks.
Through its Canadian 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.
The Canadian DB plans invests in various asset categories such as equities, fixed income, and infrastructure. 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 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 Canadian DB plan may 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
Pension payments are not linked to inflation in Canada, 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. Longevity risk in the Canadian plan is managed through asset management
strategies. To mitigate this risk in the Canadian registered pension plan, the Company may purchase annuity
contracts.
Maturity Analysis
Expected maturity analysis of undiscounted pension and Other PEB obligations of the Company’s operations in
Canada, UK, and South America were as follows:
December 31, 2024
($ millions)
2025
2026
2027
2028
2029
Thereafter
DB plans
31
32
33
33
34
1,022
Other PEB benefits
7
4
7
7
7
169
Total
38
36
40
40
41
1,191
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 $228 million at December 31,
2024 (2023: $173 million).
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
58
22. SUPPLEMENTAL CASH FLOW INFORMATION
Accounting Policy
Cash and cash equivalents comprise cash on hand together with short-term investments, consisting of highly
rated and liquid money market instruments with original maturities of three months or less, and are classified as
and measured at amortized cost.
The components of cash and cash equivalents were as follows:
December 31
($ millions)
2024
2023
Cash
316
124
Cash equivalents
—
28
Cash and cash equivalents
316
152
The changes in operating assets and liabilities were as follows:
2024
2023
Years ended December 31
(Restated
($ millions)
- Note 2d)
Accounts receivable
(170)
112
Unbilled receivables
30
(78)
Inventory
308
(408)
Other assets
(84)
70
Accounts payable and accruals
40
34
Other liabilities
(7)
(79)
Changes in operating assets and liabilities
117
(349)
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
59
The changes in liabilities arising from financing and operating activities were as follows:
Year ended December 31, 2024
Short-term
Long-term
Lease
($ millions)
debt
debt
liabilities
Total
Balance, beginning of year
1,239
1,148
309
2,696
Cash flows provided by (used in)
Financing activities
(482)
220
(89)
(351)
Operating activities
—
—
(14)
(14)
Total cash movements
(482)
220
(103)
(365)
Non-cash changes
Additions
—
—
100
100
Remeasurement of liability and disposals
—
—
17
17
Interest expense
—
—
14
14
Foreign exchange rate changes
87
28
3
118
Total non-cash movements
87
28
134
249
Balance, end of year
844
1,396
340
2,580
Year ended December 31, 2023
Short-term
Long-term
Lease
($ millions)
debt
debt
liabilities
Total
Balance, beginning of year
1,068
929
331
2,328
Cash flows provided by (used in)
Financing activities
206
226
(82)
350
Operating activities
—
—
(12)
(12)
Total cash movements
206
226
(94)
338
Non-cash changes
Additions
—
—
57
57
Remeasurement of liability and disposals
—
—
1
1
Interest expense
—
—
12
12
Foreign exchange rate changes
(35)
(7)
2
(40)
Total non-cash movements
(35)
(7)
72
30
Balance, end of year
1,239
1,148
309
2,696
Dividends of $1.075 (2023: $0.986) per share were paid during the year. In February 2025, the Board approved a
quarterly dividend of $0.275 per share payable on March 6, 2025 to shareholders of record on February 20, 2025.
This dividend will be considered an eligible dividend for Canadian income tax purposes. At December 31, 2024, the
Company had not recognized a liability for this dividend.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
60
23. ECONOMIC RELATIONSHIPS
The Company distributes and services heavy equipment, engines, and related products. The Company has
dealership agreements with numerous equipment manufacturers, of which the most significant are with subsidiaries
of Caterpillar. Distribution and servicing of Caterpillar products account for the major portion of the Company's
operations. Finning has had a relationship with Caterpillar since 1933.
24. RELATED PARTY TRANSACTIONS AND TOTAL STAFF COSTS
Balances and transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
The remuneration of the Board of Directors during the year was as follows:
Years ended December 31
($ millions)
2024
2023
Share-based payments
4
7
Total
4
7
The remuneration of key management personnel (defined as officers of the Company and country presidents)
during the year was as follows:
Years ended December 31
($ millions)
2024
2023
Salaries and benefits
10
9
Share-based payments
7
8
Post-employment benefits
1
1
Termination payments
—
1
Total
18
19
Total staff costs, including salaries, benefits, pension, share-based payments, termination payments, and
commissions are $1.6 billion (2023: $1.4 billion). This amount includes staff costs associated with key management
personnel noted above.
25. 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’s subsidiary, Finning Argentina S.A. (FASA) 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.
FASA is appealing these claims and the order, believes they are without merit, and is confident in its position. In
addition, in 2024 the Argentina government abolished the import registration requirement, which is the basis for the
licence the government has purported to suspend (the suspension is currently not in force) and FASA has applied to
have the suspension cancelled on this ground. Mitigation measures are also available to FASA in the unlikely event
the import suspension order is not cancelled and the appeal of the potential import suspension order 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, in the case of the potential suspension of imports into Argentina
by a portion of the business, the order not be cancelled and the mitigation measures not be effective, this could have
a material negative impact on the Company’s financial position.
Finning International Inc.
2024 Annual Results
Notes to the Annual Financial Statements
61
26. 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, 2024, the total estimated value of these contracts
outstanding was $68 million (2023: $91 million) coming due at periods ranging from 2025 to 2033. The Company’s
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, 2024, was $1 million (2023: $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, 2024, the maximum
potential amount of future payments that the Company could be required to make under the guarantees was $31
million (2023: $27 million), covering various periods up to 2029. At December 31, 2024, the Company has
recognized a liability of $1 million for these guarantees (2023: less than $1 million).
The Company has issued certain guarantees to Caterpillar Finance to guarantee certain borrowers’ obligations. The
guarantees would be enforceable in the event that the borrowers defaulted on their obligations to Caterpillar
Finance, to the extent that any net proceeds from the recovery and sale of collateral securing repayment of the
borrowers’ obligations is insufficient to meet those obligations. At December 31, 2024, the maximum potential
amount of future payments that the Company could be required to make under the guarantees, before any amounts
that may possibly be recovered under recourse or collateralization provisions in the guarantees, was $31 million
(2023: $11 million), covering various periods up to 2030. At December 31, 2024, the Company has recognized a
liability of $5 million for these guarantees (2023: $3 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, 2024, was $420 million (2023: $320
million) principally related to performance and advance payment guarantees on delivery for prepaid equipment and
other operational commitments in Chile.
27. RESTATEMENT
Following a detailed review of Finning’s remanufacturing business in Canada, management determined that the
correct classification of certain costs in selling, general, and administrative expenses should be cost of sales.
Effective Q3 2024, the comparative figures for the year ended December 31, 2023, include an immaterial
adjustment for a change in classification of certain expenses. The impact of these reclassifications on each
respective line item for the year ended December 31, 2023, comparative period is as follows:
Year ended December 31, 2023
Previously
($ millions)
reported
Adjustment
Restated
Cost of sales
(7,951)
(72)
(8,023)
Gross profit
2,576
(72)
2,504
Selling, general, and administrative expenses
(1,643)
72
(1,571)
Earnings before finance costs and income taxes
910
—
910
Net income
521
—
521
This change in presentation did not affect the Company’s consolidated statement of financial position, cash flow, or
earnings per share.
Finning International Inc.
19100 94 Ave, Surrey, BC V4N 5C3
finning.com