Growth International Annual Report 2013

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2013 ANNUAL REPORT

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Founded
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201520162017

ceo
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Gary Anderson
President & ceo

$35M

$30M

$25M

$20M

$15M

$10M

$5M

1st Half

2nd Half

$70M

$60M

$50M

$40M

$30M

$20M

$10M

$40M

$30M

$20M

$10M

30%

20%

10%

-10%

2012

2013

2010

2011

2012

2013

trade sales
Compared to prior year

$35M

$30M

$25M

$20M

$15M

$10M

$5M

$400M

$350M

$300M

$250M

$200M

$150M

$100M

$70M

$60M

$50M

$40M

$30M

$20M

$10M

2012

2013

2012

2013

1st Half

2nd Half

adjusted ebitda
Compared to prior year

1st Half

2nd Half

30%

20%

10%

-10%

2012

2013

2010

2011

2012

2013

$40M

1st Half

2nd Half

$30M

$20M

$10M

On behalf of our
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Board of Directors
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and the entire AGI Team,
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we are pleased to present our 2013 Annual Report. While
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we entered the year in the grasp of a “one in fifty year”
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drought in the USA, we were able to enjoy a strong finish
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to the year, with back-to-back record quarters. AGI’s
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leading market share in portable grain handling allowed
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us to take full advantage of a record North American
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harvest. Fourth quarter 2013 sales were a record $88.0m,
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up 47% over Q-4/2012. Fourth quarter Adjusted EBITDA
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was a record $13.9m, up 194% over the same period a year
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earlier. The second half of 2013 not only demonstrated
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a strong recovery from the drought, but it also revealed
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operational improvements, new product development and
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an enhanced presence in international markets, all of which
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were masked by the severity of the drought. In total, H-2
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Sales were a record $202.5m in 2013, while H-2 Adjusted
EBITDA was also a record $37.2m. Overall, AGI’s 2013 sales
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were a record $358.3m, up 14% over 2012, and Adjusted
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EBITDA hit a record $61.2m, up 24% over the prior year.
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It is significant to note that the strength of our results
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was broadly based within our business, capitalizing on
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favourable crop conditions in North America, a prolonged
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U.S. harvest and continued success in international
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markets. Sales of commercial grain handling equipment
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increased substantially compared to 2012 due to robust
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domestic demand and a significant increase in international
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business. Offshore, AGI’s sales increased 29% compared
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to the prior year as we continued to expand our global
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reach. The additions to our Senior Leadership Team since
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early 2012, along with other key hires, have given us much
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needed capacity and depth. We are pleased to highlight
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some of our accomplishments from 2013, which were
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achieved together, as a strong team moving forward.
$400M

$350M

$300M

$250M

$200M

$150M

$100M

2012

2013

2012

2013

1st Half

2nd Half

ANNUAL REPORT 2013CEO MEssagEIn early 2013, we engaged Ipsos Reid to conduct a market survey with
US farmers regarding portable grain handling equipment. Some of
you may have heard me reference the results already…but they bear
repeating. Our market leadership in portable augers and conveyors
was confirmed. Our estimated market share is greater than the next
three portable auger competitors combined, while in the smaller niche,
Batco’s portable conveyor estimated market share exceeded the next
two competitors combined. In both cases, our position is supported by
product line refreshment and innovation. In 2013, Westfield launched
an enormous 16” auger, in lengths up to 125’ and with a capacity
of 20,000 bu./hr. Aside from bragging rights, this new line offers
commercial applications including temporary grain piling and provides
a portable product companion for larger storage bins, previously only
filled with more expensive permanent grain handling equipment. As
well, specialized products like this can provide “one-off” solutions for
customers with unique situations. They can be the differentiator that
wins the day, which in turn allows us to develop long term sustainable

relationships. The market leading breadth of Westfield’s catalogue is
evident in the photo of smallest to largest stock models.

Batco is also renowned for its product innovation. In 2013 Batco
completed its development of a unique paddle conveyor which will
be targeted at seed applications. This is significant directionally as
the seed segment of our market continues to be an area of interest
for future development. Our STORM seed treater prototypes went
through extensive field tests in 2013, with the first production units
rolling off the line in early 2014. By early March we were sold out of our
spring run of 150 units, retailing at approximately $35,000 each. The
seed treatment market is rapidly growing on the need to find better
means to protect seed from insects, parasites, fungus and herbicides.
It enhances germination, vigor (drought and disease) and the quality
of the plant. Traditionally, crop protection has been delivered by
above ground spraying of insecticides and fungicides. Seed treatment
is a relatively new technology without widespread use until midway

ANNUAL REPORT 2013CEO MEssagEOur development of larger diameter storage
bins, up to 105’ in diameter, has proven to be a
valuable catalyst for new market development
globally. We are most advanced in RUK
where AGI sales increased from $27m in 2012
to $57m in 2013, with a significant majority
of those sales coming from Ukraine. Our
strategy has been customer centric, focused
primarily on bundled sales to large corporate
farms, grain handlers and port facilities. We
have been successful finding well capitalized
entities that either qualify for EDC insurance,
direct financing or have the ability to pay
cash in advance of shipment. Since these
customers do most of their business in US
dollars, they are largely insulated from the
volatility of local currencies. We view this
segment of business as both attractive and
sustainable as does a long list of Canadian
short-line manufacturers doing business in
Ukraine. Plans for 2014 include a significant
amount of business in Ukraine and a
substantial amount of this business has been
committed as at the date of writing.

Recent events in Ukraine have given us all
pause. Many Canadians have family and
friends in the region and that is certainly the
case for our workforce at AGI. When we speak
to the business side of the equation, we mean
no disrespect to our employees, customers
and friends who are dealing with the situation
at a personal level. We recognize the fluidity
of events and maintain multiple touch points
in the region on a daily basis. There is no way
of knowing today how events in the region will
play out over the next few months. What we
can say is that we remain committed to our

through the last decade. It is more effective,
lower cost and can incorporate additional
protection and enhancements. Treatment
application is critical, both in amount and
uniformity, if it is to be effective. This is why
we were thrilled to have Bayer CropScience
select us as their partner in developing the
STORM seed treater. The seed treatment
industry is growing at an estimated pace of

5-10% per year and to date the development
of the treatment itself has far surpassed
equipment development. The STORM seed
treater is our entry into this market. We are
being very attentive to its successful launch
and hope to leverage from that success
going forward. Key markets will be North
America, Brazil/Argentina and Russia/
Ukraine/Kazakhstan (RUK).

ANNUAL REPORT 2013CEO MEssagEcustomers and this market with the same resolve
we have demonstrated during other challenges.

Meanwhile, we will continue our geographic
diversification efforts elsewhere. Sales in Asia
Pacific grew to $7m 2013 and in Latin America,
excluding Brazil, we have successfully developed
a network of independent sales agents. This
groundwork is beginning to gain traction. In
recent months we have won significant projects in
Uruguay, Costa Rica, Ecuador and Peru, totalling
approximately $13m. Our quote log outside
RUK continues to grow, currently running in the
$250m range. In addition to this international
activity, we continue to explore a number of
possible strategies to penetrate the Brazilian
market. We are spending a great deal of time
identifying both the opportunities and the risks
associated with participating in this market. Brazil
presents enormous opportunity for our entire
catalogue, but even more specifically for some
of our strongest North American brands. The
opportunities start with the port infrastructure
build and follow the chain all the way back to the
farm gate. Our strategy must take into account,
among other things, the considerable domestic
capabilities of Brazil’s well-established agricultural
equipment footprint, which is protected by
prohibitive tariffs. Challenges aside, current
markets, yet alone growth trajectories, compel us
to serious consideration.

In closing, we would like to take this opportunity
to acknowledge our Board of Directors for their
exceptional guidance throughout the challenges
of this past year, as well as our pursuit of growth
opportunities globally. We would also like to thank
our many long term shareholders who have stuck
with us through some rough times that resulted

ANNUAL REPORT 2013CEO MEssagEEUROPE

27%

RUK*

61%

ASIA PACIFIC

21%

26%

53%

United States

Canada

International

*RUK- Russia, Ukraine, Kazakhstan
*IMEA- India, Middle East, Africa

LATIN AMERICA

IMEA*

from the 2012 drought. We appreciate and
share your long term view of our business.
To our new shareholders, we say welcome
aboard. Our company has been built on a
combination of M&A and organic growth.
With the drought effect completely behind us
we will return to our more historic, acquisitive
nature. In February 2014 we purchased the
Swift Current, Saskatchewan based REM

GrainVac product line and moved it into
Batco’s recently acquired 110,000 square
foot production facility. This product fits
nicely with our existing line of grain handling
products and reminds us of the potential
value creation of clip on acquisitions. Moving
forward we will continue to work diligently
on your behalf to build a strong and globally
diverse market leader of grain handling,

storage and conditioning solutions.

Sincerely,

Gary Anderson

ANNUAL REPORT 2013CEO MEssagE

management’s
discussion & analysis

This Management’s Discussion and Analysis
(“MD&A”) should be read in conjunction with
the audited consolidated financial statements
and accompanying notes of Ag Growth
International Inc. (“AGI”, the “Company”, “we”,
“our” or “us”) for the year ended December
31, 2013. Results are reported in Canadian
dollars unless otherwise stated.

The financial information contained in this
MD&A has been prepared in accordance with
International Financial Reporting Standards
(“IFRS”). All dollar amounts are expressed in
Canadian currency, unless otherwise noted.

Throughout this MD&A references are made
to “trade sales”, “EBITDA”, “adjusted EBITDA”,
“gross margin”, “funds from operations”,
“payout ratio” and “adjusted payout ratio”.
A description of these measures and their
limitations are discussed below under “Non-
IFRS Measures”.

This MD&A contains forward-looking
statements. Please refer to the cautionary
language under the heading “Risks and
Uncertainties” and “Forward-Looking
Statements” in this MD&A and in our most
recently filed Annual Information Form.

summary of results

A brief summary of our operating results can be found below. A more
detailed narrative is included later in this MD&A under “Explanation of
Operating Results”.

(thousands of dollars, other than per share data)

Year ended December 31

2013
$

2012
$

Change

trade sales (1)

358,348

314,616

$43,732

14%

adjusted ebitda (1)

net Profit

diluted Profit
Per share

(1) See “non-IFRS Measures”.

61,186

22,591

49,492

$11,694

24%

17,188

$5,403

31%

1.75

1.37

$0.38

28%

Trade sales and adjusted EBITDA were at record highs in 2013 due
to a very strong second half as AGI capitalized on favourable crop
conditions in North America and experienced continued success in
international markets. AGI’s leading market share in portable grain
handling allowed the Company to take full advantage of record North
American crop production volumes and a prolonged U.S. harvest.
Sales of commercial grain handling equipment increased substantially
compared to 2012 due to robust domestic demand and a significant
increase in international business. Offshore, AGI’s sales increased 29%

ANNUAL REPORT 2013ManageMent’s discussion & analysiscompared to the prior year as the Company continues to expand its
global reach and solidify its position in key international markets.
A strong operating performance across all divisions lead to an increase
in the Company’s gross margin percentage and accordingly, with sales
at record highs, AGI’s adjusted EBITDA exceeded $60 million. Based
on current conditions in North America and strong momentum in its
international business, management retains a positive outlook for fiscal
2014 (see “Outlook”).

the second half of 2013 was offset by a slow start to the year that was
largely the result of Canadian farmers capitalizing on high agricultural
commodity prices and selling their harvested 2012 crop rather than
storing it on the farm, resulting in a reduced need for AGI equipment
at the farm level in early 2013. The opposite is true as we enter 2014
as a record 2013 crop and a significant increase in bushels stored on
the farm has resulted in increased demand and a higher order backlog
compared to the prior year.

Trade Sales (see “Non-IFRS Measures”)

Trade sales of $358.3 million in 2013 represent a record for AGI and
reflect its market leading position in on-farm and commercial grain
handling equipment and its rapidly growing international presence.

(thousands of dollars)

Year ended December 31

Canada

International

total

2013
$

74,818

191,039

92,491

2012
$

Change

76,223

(2%)

166,457

71,936

15%

29%

14%

358,348

314,616

Sales in Canada in the second half of 2013 increased 13% over a very
strong 2012 comparative as AGI leveraged its market leading position
and capitalized on record Canadian crop production. The strength in

In the United States, a record corn harvest and an extended harvest
season contributed to a 15% increase in trade sales compared to the
prior year. Sales in the second half of the current year increased 31%
compared to the drought impacted second half of 2012. The large crop
and late harvest in 2013 generated very strong in-season demand for
on-farm portable equipment and resulted in low levels of inventory
at the dealer level post-harvest. As a result, dealer participation in
the Company’s preseason program increased significantly. Sales
of commercial equipment increased substantially compared to the
prior year due to continued investment in commercial grain handling
infrastructure domestically and significant growth in international
markets. AGI entered 2014 with a record sales order backlog for both
portable and commercial grain handling equipment.

International sales increased 29% to over $92 million in 2013,
representing the fourth consecutive year AGI has posted record
offshore sales. AGI’s established market presence in Eastern Europe
resulted in a significant increase in sales activity in the region with
projects in Russia, Romania and most significantly Ukraine contributing

ANNUAL REPORT 2013ManageMent’s discussion & analysisto strong 2013 results. AGI’s growing global presence was further
evidenced by sales in the Middle East, Southeast Asia, Australia and
Latin America. The Company’s quote book remains at record levels and
entering 2014 AGI’s offshore order book is significantly higher than at
the same time in 2013.

See also, “Outlook”.

ANNUAL REPORT 2013ManageMent’s discussion & analysisGross Profit & Gross Margin

(thousands of dollars)

Trade sales

Cost of inventories(1)

Gross marGin(1)

Gross Margin(1)
(as a % of trade sales)

Gross Margin(2), excluding
goods purchased for resale

Year ended December 31

2013

2012

$358,348

239,348

$119,000

$314,616

213,360

$101,256

33.2%

32.2%

34.3%

33.0%

(1) Excludes depreciation and amortization included in cost of sales.

(2) As per (1) but excluding goods purchased for resale and services provided by third parties.

See explanation below.

The Company’s gross margin percentage for the year ended December
31, 2013 was 33.2%, compared to 32.2% in 2012. As a proportion of total
sales the Company’s highest margin products in portable grain handling
decreased compared to 2012, however the Company’s consolidated
gross margin percentage increased due to efficiencies related to higher
production volumes and operational initiatives.

AGI will often provide complete grain storage and handling systems
when selling internationally and these projects may include equipment
not currently manufactured by the Company or services not provided
by the Company. AGI outsources this equipment and the services
and passes through the cost to the customer at a low gross margin
percentage. Excluding these items, the Company’s gross margin for the
year ended December 31, 2013 was 34.3% (2012 – 33.0%).

General & Administrative Expenses

For the year ended December 31, 2013, selling, general &
administrative expenses were $58.9 million (16.4% of sales) compared
to $51.9 million (16.5% of sales) in 2012. The change from 2012 is
largely due to the following:

• Sales and marketing expenses increased $1.8 million due largely
to an increase in performance based incentives compared to the
drought impacted results of 2012 as well as continued investment
in the Company’s international sales team.

• Salaries and wages increased $0.8 million due largely to higher

performance based incentives compared to the drought impacted
results of 2012.

• Share based compensation expense increased $1.9 million as

expenses related to the implementation of the 2012 Share Award
Incentive Plan were partially offset by lower expenses related to
the expiring LTIP. Based on current participation, which includes
32 employees, the expense going forward will approximate $0.75
million per quarter until awards begin to vest on January 1, 2016.

• Outside commission expense decreased $1.0 million due to a

change in territorial and customer sales mix.

• The remaining variance is the result of a number of offsetting
factors with no individual variance larger than $0.7 million.

EBITDA & Adjusted EBITDA

(thousands of dollars)

Year ended December 31

ebitda(1)

adjusted ebitda(1)

2013
$

61,556

61,186

2012
$

49,971

49,492

(1) See the EBITDA reconciliation table above and “Non-IFRS Measures”.

The increase in EBITDA and adjusted EBITDA in 2013 was due to a
substantial increase in sales, the result of a return to positive market
conditions and overseas growth, and a strong operational performance
across all business lines. See “EBITDA Reconciliation” above for a
reconciliation between these measures.

ANNUAL REPORT 2013ManageMent’s discussion & analysisFinance Costs

Other Operating Expense (Income)

The Company’s bank indebtedness as at December 31, 2013 was nil
(2012 – nil) and its outstanding long-term debt was $26.4 million (2012
- $34.9 million). Long-term debt at December 31, 2013 is primarily
comprised of U.S. $25.0 million aggregate principal amount of non-
amortizing secured notes that bear interest at 6.80% and mature
October 29, 2016. AGI repaid U.S. $10.5 million of non-amortizing term
debt in December 2013. See “Capital Resources” for a description of the
Company’s credit facilities.

Other operating income in the current year is primarily the result of
a $4.7 million gain on the sale of a facility in Saskatoon, SK, made
redundant through reallocation of production to other AGI facilities.
Other income also includes earnings related to AGI acting as agent on
certain goods and services provided by third parties and passed through
to international customers.

Depreciation & Amortization

Finance costs for the year ended December 31, 2013 were $14.9
million (2012 - $13.1 million). In addition to the instruments noted
above, at December 31, 2013 the Company had outstanding (see
“Capital Resources”):

Depreciation of property, plant and equipment and amortization
of intangible assets are categorized on the income statement in
accordance with the function to which the underlying asset is related.
Total depreciation and amortization is summarized below:

• $114.9 million aggregate principal amount of 7.0 % convertible

unsecured subordinated debentures (2012 - $114.9 million) that
converted at the option of the holder or were redeemed in
January 2014.

• $86.2 million aggregate principal amount of 5.25% convertible

unsecured subordinated debentures that were issued in December
2013 (2012 – nil).

Finance costs in the current period include a non-cash expense of $1.3
million resulting from the accelerated amortization of finance fees and
accretion related to the redemption of AGI’s 2009 debentures (see
“Convertible Debentures”) subsequent to year-end. Finance costs
also include non-cash interest related to debenture accretion, the
amortization of deferred finance costs, stand-by fees and other sundry
cash interest.

Finance Expense (Income)

Finance expense (income) relates primarily to the non-cash gain or loss
on the translation of the Company’s U.S. dollar denominated long-term
debt at the rate of exchange in effect at the end of the quarter.

Depreciation

(thousands of dollars)

Year ended December 31

Depreciation in cost of sales

Depreciation in G&A

total dePreciation

Amortization

2013
$

5,470

533

6,003

2012
$

5,596

565

6,161

(thousands of dollars)

Year ended December 31

Amortization in cost of sales

Amortization in G&A

total amortization

2013
$

285

3,754

4,039

2012
$

243

3,606

3,849

ANNUAL REPORT 2013ManageMent’s discussion & analysisCurrent income tax expense

Effective tax rate

For the year ended December 31, 2013 the Company recorded current
tax expense of $7.6 million (2012 – $3.8 million). Current tax expense
relates primarily to AGI U.S. subsidiaries.

Deferred income tax expense

For the year ended December 31, 2013, the Company recorded deferred
tax expense of $6.4 million (2012 - $4.1 million). Deferred tax expense
in 2013 relates to the utilization of deferred tax assets plus a decrease
in deferred tax liabilities that related to the application of corporate tax
rates to reversals of temporary differences between the accounting and
tax treatment of depreciable assets and intangible assets.

Upon conversion to a corporation from an income trust in June 2009
(the “Conversion”) the Company received certain tax attributes that
may be used to offset tax otherwise payable in Canada. The Company’s
Canadian taxable income is based on the results of its divisions
domiciled in Canada, including the corporate office, and realized gains
on foreign exchange. For the year ending December 31, 2013, the
Company offset $4.3 million of Canadian tax otherwise payable (2012
- $1.8 million) through the use of these attributes and since the date
of Conversion a cumulative amount of $27.8 million has been utilized.
Utilization of these tax attributes is recognized in deferred income
tax expense on the Company’s income statement and the unused tax
attributes of $42.7 million are recorded as an asset on the Company’s
balance sheet. See “Risks and Uncertainties – Income Tax Matters”.

(thousands of dollars)

Year ended December 31

Current tax expense

Deferred tax expense

total tax

Profit before taxes

Total tax %

2013

$7,595

6,445

$14,040

$36,631

38.3%

2012

$3,771

4,054

$7,825

$25,013

31.3%

The Company’s effective tax rate for the year ending December 31, 2013
was 38.3% (2012 – 31.3%). In the current year the Company recorded
a non-cash foreign exchange loss of $3.8 million (2012 - gain of $1.5
million) that impacts profit before taxes but is not included in the
calculation of current or deferred tax expense. In addition the current
year includes non-cash share based compensation expenses of $1.5
million (2012 – nil) related to awards granted under AGI’s 2012 share
award incentive plan that are not deductible for tax purposes, as well as
the non-taxable portion of the gain on sale of the Saskatoon property of
$2.3 million. Current tax expense in 2013 as a percentage of profit before
taxes increased compared to 2012 as a higher proportion of pre-tax
income was attributable to the Company’s U.S. subsidiaries.

Profit & profit per share

For the year ended December 31, 2013, the Company reported net
profit of $22.6 million (2012 - $17.2 million), basic net profit per share
of $1.80 (2012 - $1.38), and fully diluted net profit per share of $1.75
(2012 - $1.37). The increase in profit and profit per share is largely due
to higher adjusted EBITDA. Other significant factors to consider when
comparing to the prior year include the sale of a redundant production
facility in 2013 for a gain of $4.7 million, a loss on foreign exchange in
2013 of $4.0 million (2012 – gain of $0.5 million), a non-cash interest
expense of $1.3 million in 2013 related to the redemption of AGI’s 2009
debentures (see “Convertible Debentures”) and a non-cash goodwill
impairment charge at the Mepu division in 2012 of $1.9 million.

ANNUAL REPORT 2013ManageMent’s discussion & analysisSelected Annual Information

(thousands of dollars, other than per share data)

Quarterly financial information

(thousands of dollars other than per share data)

Sales

EBITDA

Adjusted EBITDA

Net profit

Profit per share -
basic

Profit per share -
fully diluted

Year ended December 31

2013

2012

2011

$358,348

$314,616

$301,014

$61,556

$61,186

$22,591

$1.80

$1.75

$49,971

$56,038

$49,492

$17,188

$53,274

$24,523

$1.38

$1.37

$1.97

$1.95

Funds from operations

$52,793

$32,306

$40,319

Payout ratio

57%

93%

75%

Dividends declared
per common share

$2.40

Total assets

$485,636

$370,482

$394,566

Total long-term liabilities

$116,346

$153,515

$151,986

The following factors impact comparability between years in the table above:

• Sales, gain (loss) on foreign exchange, net earnings, and net
earnings per share are significantly impacted by the rate of
exchange between the Canadian and U.S. dollars.

• A widespread drought in the U.S. impacted sales and profit in the third

and fourth quarters of 2012 and the first and second quarters of 2013.

• The inclusion of the assets, liabilities and operating results of

Airlanco, acquired on October 4, 2011, significantly impacts
comparisons in the table above.

Average
USD/CAD
Exchange
Rate
$

1.01

1.02

1.04

Sales
$

59,547

93,320

116,447

87,473

2013

Profit
(loss)
$

3,399

5,956

12,718

518

Basic
Profit
(loss) per
Share
$

Diluted
Profit
(loss) per
Share
$

0.27

0.47

1.01

0.04

0.26

0.46

0.95

0.04

1.03

356,787

22,591

1.80

1.75

Average
USD/CAD
Exchange
Rate
$

1.00

1.01

1.00

2012

Profit
(loss)
$

5,299

8,824

6,501

Basic
Profit
(loss) per
Share
$

Diluted
Profit
(loss) per
Share
$

0.42

0.71

0.52

0.42

0.70

0.52

Sales
$

72,355

98,115

83,855

60,017

(3,436)

(0.28)

(0.27)

1.00

314,342

17,188

1.38

1.37

fiscal
2013

fiscal
2012

Interim period sales and profit historically reflect seasonality. The
third quarter is typically the strongest primarily due to the timing
of construction of commercial projects and high in-season demand
at the farm level. Due to the seasonality of AGI’s working capital

ANNUAL REPORT 2013ManageMent’s discussion & analysis

movements, cash provided by operations will typically be highest in
the fourth quarter. The seasonality of AGI’s business may be impacted
by a number of factors including weather and the timing and quality of
harvest in North America.

The following factors impact the comparison between periods in the
previous table:

• Sales, gain (loss) on foreign exchange, profit, and profit per share

in all periods are impacted by the rate of exchange between the
Canadian and U.S. dollars.

• A widespread drought in the U.S. impacted sales and profit in the

third and fourth quarters of 2012 and the first and second quarters
of 2013.

fourth Quarter
(thousands of dollars other
than per share data)

Three months ended December 31

Trade Sales

Trade sales for the three months ended December 31, 2013 were very
strong due to a large and extended harvest in North America and
continued strength in commercial sales both domestically and overseas.
Sales in the fourth quarter of 2013 of $88.0 million were a record for
AGI and represent a 47% increase over the drought impacted fourth
quarter of 2012. Sales records for the quarter were achieved in the three
geographic segments of Canada, the United States and International.

(thousands of dollars)

Three months ended December 31

Canada

International

total

2013
$

16,541

46,214

25,261

2012
$

12,111

Change

$4,430

30,357

$15,857

17,431

$7,830

88,016

59,899

$28,117

37%

52%

45%

47%

2013
$

2012
$

Change

Gross Margin

Trade sales

88,016

59,899

$28,117

47%

Adjusted
EBITDA

Net Profit

Diluted profit
per share

13,904

4,735

518

(3,436)

$9,169

$3,954

0.04

(0.27)

$0.31

194%

Gross margin as a percentage of sales for the three months ended
December 31, 2013 was 32.8%, (2012 – 29.3%). Gross margin
percentages in the fourth quarter of 2013 increased primarily due to
increased production volumes, operational efficiencies and sales mix.
Historically, gross margin percentages are low in the fourth quarter of a
fiscal year due to lower sales volumes and preseason sales discounts.

AGI will often provide complete grain storage and handling systems
when selling internationally and these projects may include equipment
not currently manufactured by the Company or services not provided
by the Company. AGI outsources this equipment and the services and
resells it to the customer at a low gross margin percentage. Excluding
these goods purchased for resale, the Company’s gross margin in the
fourth quarter of 2013 was 34.1% (2012 – 30.5%).

ANNUAL REPORT 2013ManageMent’s discussion & analysisExpenses

cash floW & liQuidity

(thousands of dollars)

Year ended December 31

For the three months ended December 31, 2013, general and
administrative expenses were $15.9 million or 18% of sales (2012 - $12.7
million and 21%). As a percentage of sales, general and administrative
expenses in the fourth quarter of a fiscal year are generally higher than
the annual percentage due to seasonally lower sales volumes. The
increase from 2012 was largely due to:

• Sales and marketing expenses increased $0.8 million primarily as a
result of higher performance based incentives compared to 2012 as
well as further investment in the Company’s international sales team.

• Salaries and wages increased $0.5 million due largely to higher

performance based incentives compared to 2012.

• Share based compensation expense increased $0.6 million as

expenses related to the implementation of the 2012 Share Award
Incentive Plan were partially offset by lower expenses related to
the expiring LTIP.

Adjusted EBITDA, EBITDA and Net Earnings

Adjusted EBITDA for the three months ended December 31, 2013 was
$13.9 million (2012 - $4.8 million). The increase was the result of record
sales both in North America and overseas and a strong operational
performance across all business lines. The fourth quarter of 2012 was
negatively impacted by the U.S. drought.

EBITDA for the three months ended December 31, 2013 was $12.1
million, compared to $4.5 million in 2012. The increase in EBITDA is the
result of the factors above offset by a loss on foreign exchange in the
current year compared to a gain in 2012.

For the three months ended December 31, 2013, the Company reported
net earnings of $0.5 million (2012 - net loss of $3.4 million), basic net
earnings per share of $0.04 (2012 - net loss per share of $0.28), and a
fully diluted net earnings per share of $0.04 (2012 – net loss per share
of $0.27). Net earnings in the current period include a non-cash interest
expense of $1.3 million resulting from the accelerated amortization of
finance fees and accretion related to the redemption of AGI’s 2009
debentures (see “Convertible Debentures”) subsequent to year-end.

Profit before income taxes

Add charges (deduct credits)
to operations not requiring a
current cash payment:

Depreciation/Amortization

Translation loss (gain) on FX

Non-cash interest expense

Share based compensation

Non-cash impairment
of goodwill

Loss (gain) on sale assets

2013
$

36,631

10,042

7,790

4,071

3,084

(4,633)

56,985

Net change in non-cash working
capital balances related to operations:

Accounts receivable

Inventory

Prepaid expenses & other

Accounts payable

Customer deposits

Provisions

Settlement of SAIP obligation

Income tax paid

cash ProVided
by oPerations

(6,722)

967

(580)

13,521

13,688

980

21,834

(6,181)

2012
$

25,013

10,010

(1,766)

2,543

1,174

1,890

38,896

(2,165)

6,045

1,075

(4,913)

(3,035)

198

(2,795)

(1,495)

(3,012)

72,638

31,594

ANNUAL REPORT 2013ManageMent’s discussion & analysisFor the year ended December 31, 2013, cash provided by operations
was $72.6 million (2012 – $31.6 million). The significant increase
resulted primarily from higher profit before taxes and a substantial
increase in cash generated from working capital. Growth in accounts
receivable compared to 2012 is primarily the result of a significant
increase in fourth quarter sales compared to the prior year. The
increase in accounts payable is largely due to timing of certain
payments and higher performance based bonus accruals. The increase
in customer deposits is indicative of higher levels of committed
commercial business, both in North America and offshore, compared to
the same time in the prior year.

Working Capital Requirements

Interim period working capital requirements typically reflect the
seasonality of the business. AGI’s collections of accounts receivable are
weighted towards the third and fourth quarters. This collection pattern,
combined with historically high sales in the third quarter that result
from seasonality, typically lead to accounts receivable levels increasing
throughout the year and peaking in the third quarter. Inventory levels
typically increase in the first and second quarters and then begin to
decline in the third or fourth quarter as sales levels exceed production.
As a result of these working capital movements, historically, AGI
begins to draw on its operating lines in the first or second quarter. The
operating line balance typically peaks in the second or third quarter
and normally begins to decline later in the third quarter as collections
of accounts receivable increase. AGI has typically fully repaid its
operating line balance by early in the fourth quarter. Going forward,
growth in international business may result in an increase in the
number of days accounts receivable remain outstanding and result in
increased usage of working capital in certain quarters.

Capital Expenditures

Maintenance capital expenditures in the year ended December
31, 2013 were $2.6 million (0.7% of trade sales) compared to $3.5
million (1.1%) in 2012. Maintenance capital expenditures in 2013 relate
primarily to purchases of manufacturing equipment and building
repairs and were funded through cash on hand, cash from operations
and bank indebtedness.

AGI defines maintenance capital expenditures as cash outlays required
to maintain plant and equipment at current operating capacity and
efficiency levels. Non-maintenance capital expenditures encompass
other investments, including cash outlays required to increase
operating capacity or improve operating efficiency. AGI had non-
maintenance capital expenditures $11.7 million in the year ended
December 31, 2013 (2012 - $1.2 million) that related primarily to a $10.2
million investment in facilities and equipment to support growth in
the portable handling equipment market as well as manufacturing
equipment purchases and facility enhancements to support growth in
commercial grain handling. Non-maintenance capital expenditures in
2012 relate primarily to investments in equipment to support growth at
the Company’s commercial divisions. Maintenance capital expenditures
in 2014 are expected to return to a range of 1.0% to 1.5% of sales and
non-maintenance capital expenditures are expected to decrease as
there are no current plans for a project similar to the $10.2 million
facility upgrade undertaken in 2013. Maintenance and non-maintenance
capital expenditures are expected to be financed through bank
indebtedness and cash on hand.

Cash Balance

The Company’s cash balance at December 31, 2013 was $108.7 million
(2012 – $2.2 million) and its outstanding long-term debt was $26.4
million (2012 - $34.9 million). The increase in cash compared to the
prior year is largely due to the receipt of $82.8 million net proceeds
related to the issuance of AGI’s 5.25% convertible debentures in
December 2013. The net proceeds formed a component of the funds
used to redeem AGI’s 7.0% debentures subsequent to year-end (see
“Convertible Debentures”).

ANNUAL REPORT 2013ManageMent’s discussion & analysiscontractual obliGations

(thousands of dollars)

Debentures (2013)

Debentures (2009)

Long-term debt

Operating leases

total
obliGations

Total
$

86,250

114,885

26,595

6,475

2014
$

114,885

1,436

234,205

116,326

2015
$

1,097

2016
$

26,590

848

27,438

2017
$

678

2018+
$

86,250

2,416

88,666

Debentures (2009) relate to the aggregate principal amount of the
7.0% debentures issued by the Company in October 2009. Principal
amount $19.0 million of these debentures were converted to common
shares at the option of the holder in January 2014 and the remainder
were redeemed by AGI on January 17, 2014. Debentures (2013) relate to
the aggregate principal amount of the 5.25% debentures issued by the
Company in December 2013 (see “Convertible Debentures” below).

Long-term debt at December 31, 2013 is comprised of U.S. $25.0 million
aggregate principal amount of secured notes issued through a note
purchase and private shelf agreement. The operating leases relate
primarily to vehicle, equipment, warehousing and facility leases and
were entered into in the normal course of business.

caPital resources
Cash

Cash and cash equivalents at December 31, 2013 were $108.7 million
(2012 - $2.2 million). The increase in cash compared to the prior year is
largely due to the receipt of $82.8 million net proceeds related to the
issuance of AGI’s 5.25% convertible debentures in December 2013. The
net proceeds formed a component of the funds used to redeem AGI’s
7.0% debentures subsequent to year-end (see “Convertible Debentures”).

Due to the seasonality of its business the Company typically draws on
its operating line in the first half of a fiscal year and the operating line
begins to decrease in the third quarter. AGI has typically fully repaid its
operating line balance by early in the fourth quarter and that was the
case in 2013.

ANNUAL REPORT 2013ManageMent’s discussion & analysis
Debt Facilities

On October 29, 2009, the Company issued US $25.0 million aggregate
principal amount of secured notes through a note purchase and private
shelf agreement. The notes are non-amortizing, bear interest at 6.80%
and mature October 29, 2016. Under the note purchase agreement, AGI
is subject to certain financial covenants, including a maximum leverage
ratio and a minimum debt service ratio. The Company is in compliance
with all financial covenants.

On March 9, 2012, the Company renewed its credit facility with its
existing lenders. In the fourth quarter of 2013 the Company exercised the
accordion feature of the credit facility and increased its available credit
by $25 million. The committed lines under the facility are unchanged
under the new facility. The table below summarizes amounts committed
and drawn (USD converted at $1.0636) as at December 31, 2013:

(thousands of dollars)

Committed line at as December 31, 2013

Long term debt drawn under facility

Bank indebtedness drawn under facility

undraWn at december 31, 2013

Debt Facilities

$96,931

Amounts drawn under the facility bear interest at rates of prime plus
0.0% to prime plus 1.0% (superseded facility – prime plus 0.50% to
prime plus 1.50%) based on performance calculations and matures on
March 8, 2016. AGI is subject to certain financial covenants, including
a maximum leverage ratio and a minimum debt service ratio, and is in
compliance with all financial covenants.

Convertible Debentures
Debentures (2009)
In 2009 the Company issued $115 million aggregate principal amount
of convertible unsecured subordinated debentures (the “2009
Debentures”) at a price of $1,000 per 2009 Debenture. The 2009
Debentures bore interest at an annual rate of 7.0% payable semi-
annually on June 30 and December 31. Each 2009 Debenture was
convertible into common shares of the Company at the option of the
holder at a conversion price of $44.98 per common share. The maturity
date of the 2009 Debentures was December 31, 2014.

On and after December 31, 2013, at the option of the Company the 2009
Debentures could be redeemed at a price equal to their principal amount
plus accrued and unpaid interest. In December 2013 the Company
announced its intention to redeem the 2009 Debentures effective
January 20, 2014. In January 2014, holders of $19.0 million principal
amount of the 2009 Debentures exercised the conversion option and
were issued 422,897 common shares. The Company redeemed all
remaining outstanding 2009 Debentures on January 20, 2014.

The 2009 Debentures traded on the TSX under the symbol AFN.DB.

Debentures (2013)
In December 2013 the Company issued $86.2 million aggregate
principal amount of convertible unsecured subordinated debentures
(the “2013 Debentures”) at a price of $1,000 per 2013 Debenture. The
2013 Debentures bear interest at an annual rate of 5.25% payable semi-
annually on June 30 and December 31 with the first payment due on
June 30, 2014. Each 2013 Debenture is convertible into common shares
of the Company at the option of the holder at a conversion price of
$55.00 per common share. The maturity date of the 2013 Debentures is
December 31, 2018.

ANNUAL REPORT 2013ManageMent’s discussion & analysisOn and after December 31, 2016 and prior to
December 31, 2017, the 2013 Debentures may
be redeemed, in whole or in part, at the option
of the Company at a price equal to their
principal amount plus accrued and unpaid
interest, provided that the volume weighted
average trading price of the common shares
during the 20 consecutive trading days
ending on the fifth trading day preceding the
date on which the notice of redemption is
given is not less than 125% of the conversion
price. On and after December 31, 2017, the
2013 Debentures may be redeemed, in whole
or in part, at the option of the Company at
a price equal to their principal amount plus
accrued and unpaid interest.

On redemption or at maturity, the Company
may, at its option, subject to regulatory
approval and provided that no event of
default has occurred, elect to satisfy its
obligation to pay the principal amount of
the 2013 Debentures, in whole or in part,
by issuing and delivering for each $100 due
that number of freely tradeable common
shares obtained by dividing $100 by 95% of
the volume weighted average trading price
of the common shares on the Toronto Stock
Exchange (“TSX”) for the 20 consecutive
trading days ending on the fifth trading day
preceding the date fixed for redemption or
the maturity date, as the case may be. Any
accrued and unpaid interest thereon will be
paid in cash. The Company may also elect,
subject to any required regulatory approval
and provided that no event of default has
occurred, to satisfy all or part of its obligation
to pay interest on the 2013 Debentures by

delivering sufficient freely tradeable common
shares to satisfy its interest obligation.

The 2013 Debentures trade on the TSX under
the symbol AFN.DB.A.

common shares
The following number of common shares were
issued and outstanding at the dates indicated:

December 31, 2012

Share issues under
Dividend Reinvestment Plan

Exercise of grant under
DDCP

December 31, 2013

Shares issued under
Dividend Reinvestment Plan

Conversion of 2009
Debentures

march 12, 2014

# Common
Shares

12,548,103

74,793

5,395

12,628,291

19,181

422,897

13,070,369

On November 17, 2011, AGI commenced a
normal course issuer bid for up to 994,508
common shares, representing 10% of the
Company’s “public float” of common shares
at that time. The normal course issuer bid
terminated on November 20, 2012 and no
common shares were purchased under the
normal course issuer bid.

AGI granted 220,000 share awards under its
2007 share award incentive plan. In fiscal 2010
a total of 140,000 share awards vested and
the equivalent number of common shares was

issued to the participants. The remaining share
awards vested as to 40,000 each on January 1,
2011 and January 1, 2012, however no common
shares were issued on these vesting dates as
the participants were compensated in cash
rather than common shares. No additional
share awards are available under this share
award incentive plan.

The administrator of the LTIP has acquired
317,304 common shares to satisfy its
obligations with respect to awards under the
LTIP for fiscal 2007, 2008, 2009 and 2010.
There was no LTIP award related to fiscal 2011
or fiscal 2012. The common shares purchased
are held by the administrator until such
time as they vest to the LTIP participants.
As at December 31, 2013, a total of 300,307
common shares related to the LTIP had vested
to the participants and 1,766 awards were
forfeited. No further awards are available
under the LTIP subsequent to 2012.

On May 11, 2012 the shareholders of AGI
authorized a new Share Award Incentive Plan
(the “2012 SAIP”) which authorizes the Board
to grant restricted Share Awards (“RSU’s”)
and performance Share Awards (“PSU’s”)
to officers, employees or consultants of
the Company but not to non-management
directors. A total of 465,000 common shares
are available for issuance under the 2012 SAIP.
As at December 31, 2013, a total of 214,000
RSU’s and 110,000 PSU’s have been granted.

A total of 33,206 deferred grants of common
shares are outstanding under the Company’s
Director’s Deferred Compensation Plan.

ANNUAL REPORT 2013ManageMent’s discussion & analysisOn March 5, 2013, the Company announced the adoption of a dividend
reinvestment plan (the “DRIP”). Eligible shareholders who elect to
reinvest dividends under the DRIP will initially receive Common Shares
issued from treasury at a discount of 4% from the market price of the
Common Shares, with the market price being equal to the volume-
weighted average trading price of the Common Shares on the Toronto
Stock Exchange for the five trading days preceding the applicable
dividend payment date.

AGI’s common shares trade on the TSX under the symbol AFN.

diVidends

In the year ended December 31, 2013, AGI declared dividends to
shareholders of $30.2 million (2012 - $30.1 million). AGI’s policy is to
pay monthly dividends. The Company’s Board of Directors reviews
financial performance and other factors when assessing dividend
levels. An adjustment to dividend levels may be made at such time as
the Board determines an adjustment to be appropriate. Dividends in a
fiscal year are typically funded entirely through cash from operations,
although due to seasonality dividends may be funded on a short-term
basis by the Company’s operating lines, and through the Company’s
dividend reinvestment plan. Dividends in the year ended December
31, 2013 were financed $27.5 million [2012 - $30.1 million] from cash on
hand and bank indebtedness and $2.6 million by the DRIP [2012 - nil].

funds from oPerations and Payout ratio

Funds from operations (“FFO”), defined under “Non-IFRS Measures”,
is cash flow from operating activities before the net change in non-
cash working capital balances related to operations and stock-based
compensation, less maintenance capital expenditures and adjusted
for the gain or loss on the sale of property, plant & equipment. The
objective of presenting this measure is to provide a measure of free
cash flow. The definition excludes changes in working capital as they
are necessary to drive organic growth and have historically been
financed by the Company’s operating facility (See “Capital Resources”).
Funds from operations should not be construed as an alternative to
cash flows from operating, investing, and financing activities as a
measure of the Company’s liquidity and cash flows.

(thousands of dollars)

Year ended December 31

EBITDA

Share based compensation

Non-cash interest expense

Translation loss (gain) on FX

Interest expense

Income taxes paid

Maintenance CAPEX

funds from oPerations (1)

(1) See “Non-IRFS Measures”.

2013
$

61,556

3,084

4,071

7,790

(14,883)

(6,181)

(2,644)

52,793

2012
$

49,971

1,174

2,543

(1,766)

(13,058)

(3,012)

(3,546)

32,306

ANNUAL REPORT 2013ManageMent’s discussion & analysisFunds from operations can be reconciled to cash provided by
operating activities as follows:

(thousands of dollars)

Cash provided by
operating activities

Change in non-cash
working capital

Settlement of SAIP option

Maintenance CAPEX

Gain (loss) on sale of assets

Year ended December 31

2013

2012

$72,638

$31,594

(21,834)

(2,644)

4,633

2,795

1,495

(3,546)

(32)

second half of fiscal 2012 and the first half of fiscal 2013, however the
impact on 2012 was more significant resulting in a weaker comparative
number. Funds from operations in 2013 benefited from a $4.7 million
gain on the sale of a redundant production facility in Saskatoon, SK.

financial instruments
Foreign exchange contracts

Risk from foreign exchange arises as a result of variations in exchange
rates between the Canadian and the U.S. dollars and to a lesser extent
to variations in exchange rates between the Euro and the Canadian
dollar. AGI has entered into foreign exchange contracts with three
Canadian chartered banks to partially hedge its foreign currency
exposure and as at December 31, 2013, had outstanding the following
foreign exchange contracts:

funds from oPerations (1)

$52,793

$32,306

Forward Foreign Exchange Contracts

Payout ratio

Dividends to shareholders

Payout ratio (1)

adjusted Payout ratio

Dividends to shareholders

Dividends paid under DRIP

Dividends paid in cash

adjusted Payout ratio(1)

$30,186

57%

$30,186

(2,648)

$27,538

52%

$30,111

93%

$30,111

93%

The fair value of the outstanding forward foreign exchange contracts
in place as at December 31, 2013 was a loss of $4.5 million. Consistent
with prior periods, the Company has elected to apply hedge accounting
for these contracts and the unrealized loss has been recognized in
other comprehensive income for the period ended December 31, 2013.

Settlement
Dates

Face amount
USD (000’s)

Average rate
CAD

CAD Amount
(000’s)

2014

2015

$65,000

$53,000

$1.02

$1.06

$66,300

$56,180

(1) See “Non-IFRS Measures”.

(2) Fully diluted weighted average, excluding the potential dilution of the Debentures as the

calculation includes the interest expense related to the Debentures.

Settlement
Dates

Face amount
Euros (000’s)

Average rate
CAD

CAD Amount
(000’s)

2014

€500

$1.33

$665

The Company’s payout ratio for the year ended December 31, 2013
decreased significantly compared to 2012 due to record adjusted
EBITDA in the current year and a substantial increase in profit before
income taxes. The historic U.S. drought of 2012 impacted both the

ANNUAL REPORT 2013ManageMent’s discussion & analysisSubsequent to December 31, 2013, the Company entered into foreign
exchange forward contracts for settlements in 2015 totalling U.S. $12.0
million at an average rate of $1.09 and for settlements in 2016 totalling
U.S. $5.0 million at an average rate of $1.12. In addition AGI entered into
a foreign exchange forward contract for settlement in 2015 of Euro
$0.5 million at a rate of 1.52.

critical accountinG estimates

The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the period.
By their nature, these estimates are subject to a degree of uncertainty
and are based on historical experience and trends in the industry.
Management reviews these estimates on an ongoing basis. While
management has applied judgment based on assumptions believed to
be reasonable in the circumstances, actual results can vary from these
assumptions. It is possible that materially different results would be
reported using different assumptions.

AGI believes the accounting policies that are critical to its business
relate to the use of estimates regarding the recoverability of accounts
receivable and the valuation of inventory, intangibles, goodwill,
convertible debentures and deferred income taxes. AGI’s accounting
policies are described in the notes to its December 31, 2013 audited
financial statements.

Allowance for Doubtful Accounts

Due to the nature of AGI’s business and the credit terms it provides
to its customers, estimates and judgments are inherent in the on-
going assessment of the recoverability of accounts receivable. AGI
maintains an allowance for doubtful accounts to reflect expected credit
losses. A considerable amount of judgment is required to assess the
ultimate realization of accounts receivable and these judgments must
be continuously evaluated and updated. AGI is not able to predict
changes in the financial conditions of its customers, and the Company’s
judgment related to the recoverability of accounts receivable may
be materially impacted if the financial condition of the Company’s
customers deteriorates.

Valuation of Inventory

Assessments and judgments are inherent in the determination of the
net realizable value of inventories. The cost of inventories may not be
fully recoverable if they are slow moving, damaged, obsolete, or if the
selling price of the inventory is less than its cost. AGI regularly reviews
its inventory quantities and reduces the cost attributed to inventory
no longer deemed to be fully recoverable. Judgment related to the
determination of net realizable value may be impacted by a number of
factors including market conditions.

Goodwill and Intangible Assets

Assessments and judgments are inherent in the determination of the
fair value of goodwill and intangible assets. Goodwill and indefinite
life intangible assets are recorded at cost and finite life intangibles
are recorded at cost less accumulated amortization. Goodwill and
intangible assets are tested for impairment at least annually. Assessing
goodwill and intangible assets for impairment requires considerable
judgment and is based in part on current expectations regarding future
performance. The classification of assets into cash generating units
requires significant judgment and interpretations with respect to the
integration between assets, the nature of products, the way in which
management allocates resources and other relevant factors. Changes in
circumstances including market conditions may materially impact the
assessment of the fair value of goodwill and intangible assets.

ANNUAL REPORT 2013ManageMent’s discussion & analysisDeferred Income Taxes

Deferred income taxes are calculated
based on assumptions related to the future
interpretation of tax legislation, future
income tax rates, and future operating
results, acquisitions and dispositions of
assets and liabilities. AGI periodically reviews
and adjusts its estimates and assumptions
of income tax assets and liabilities as
circumstances warrant. A significant change
in any of the Company’s assumptions could
materially affect AGI’s estimate of deferred
tax assets and liabilities. See “Risks and
Uncertainties – Income Tax Matters”.

Future Benefit of Tax-loss Carryforwards

AGI should only recognize the future benefit
of tax-loss carryforwards where it is probable
that sufficient future taxable income can
be generated in order to fully utilize such
losses and deductions. We are required to
make significant estimates and assumptions
regarding future revenues and profit, and
our ability to implement certain tax planning
strategies, in order to assess the likelihood
of utilizing such losses and deductions.
These estimates and assumptions are subject
to significant uncertainty and if changed
could materially affect our assessment of
the ability to fully realize the benefit of
the deferred income tax assets. Deferred
tax asset balances would be reduced and
additional income tax expense recorded
in the applicable accounting period in the
event that circumstances change and we,
based on revised estimates and assumptions,
determined that it was no longer probable

that those deferred tax assets would be
fully realized. See “Risks and Uncertainties –
Income Tax Matters”.

risKs and uncertainties

The risks and uncertainties described below
are not the only risks and uncertainties
we face. Additional risks and uncertainties
not currently known to us or that we
currently consider immaterial also may
impair operations. If any of the following
risks actually occur, our business, results of
operations and financial condition, and the
amount of cash available for dividends could
be materially adversely affected. See also
“Risks and Uncertainties” in AGI’s most recent
Annual Information Form, which is available
on SEDAR (www.sedar.com).

Industry Cyclicality and
General Economic Conditions

Our success depends substantially on the
health of the agricultural industry. The
performance of the agricultural industry,
including the grain handling, storage and
conditioning business, is cyclical. Sales of
agricultural equipment generally are related
to the health of the agricultural industry,
which is affected by farm income, farm
input costs, debt levels and land values,
all of which reflect levels of agricultural
commodity prices, acreage planted, crop
yields, agricultural product demand,
including crops used as renewable energy
sources such as ethanol, government
policies and government subsidies. Sales
also are influenced by economic conditions,

interest rate and exchange rate levels, and
the availability of distributor and customer
financing. Trends in the agricultural industry,
such as farm consolidations, may affect the
agricultural equipment market. In addition,
weather conditions, such as floods, heat
waves or droughts, can affect farmers’ buying
decisions. Downturns in the agricultural
industry due to these or other factors could
vary by market and are likely to result
in decreases in demand for agricultural
equipment, which would adversely affect
our sales, growth, results of operations and
financial condition.

To the extent that the agricultural industry
declines or experiences a downturn, this is
likely to have a negative impact on the grain
handling, storage and conditioning business,
and the business of AGI. Among other things,
the agricultural sector has in recent years
benefited from an increase in crop production
and investment in agricultural infrastructure
including outside of North America. To the
extent crop production declines or economic
conditions result in a decrease in agricultural
investment including in offshore markets,
this is likely to have a negative impact on the
agricultural industry in those markets and the
business of AGI. In addition, if the ethanol
industry declines or experiences a downturn,
due to changes in governmental policies or
otherwise, this is may have a negative impact
on the demand for and prices of certain
crops which may have a negative impact on
the grain handling, storage and conditioning
industry, and the business of AGI.

ANNUAL REPORT 2013ManageMent’s discussion & analysisFuture developments in the North American
and global economies may negatively impact
the demand for our products. Management
cannot estimate the level of growth or
contraction of the economy as a whole or
of the economy of any particular region or
market that we serve. Adverse changes in our
financial condition and results of operations
may occur as a result of negative economic
conditions, declines in stock markets,
contraction of credit availability, political
instability or other factors affecting economic
conditions generally.

Risk of Decreased Crop Yields

Decreased crop yields due to poor or unusual
weather conditions, natural disasters or
other factors are a significant risk affecting
AGI. Both reduced crop volumes and the
accompanying decline in farm incomes can
negatively affect demand for grain handling,
storage and conditioning equipment.

Potential Volatility of Production Costs

Our products include various materials and
components purchased from others, some
or all of which may be subject to wide price
variation. Consistent with industry practice,
AGI seeks to manage its exposure to material
and component price volatility by planning
and negotiating significant purchases on
an annual basis, and through the alignment
of material input pricing with the terms
of contractual sales commitments. AGI
endeavours to pass through to customers,
most, if not all, material and component price
volatility. There can be no assurance, however,
that industry conditions will allow AGI to

continue to reduce its exposure to volatility
of production costs by passing through price
increases to its customers. A significant
increase in the price of any component or
material, such as steel, could adversely affect
our profitability.

Foreign Exchange Risk

AGI generates the majority of its sales in U.S.
dollars and Euros, but a materially smaller
proportion of its expenses are denominated
in U.S. dollars and Euros. In addition, AGI may
denominate its long term borrowings in U.S.
dollars. Accordingly, fluctuations in the rate
of exchange between the Canadian dollar
and the U.S. dollar and Euro may significantly
impact the Company’s financial results.
Management has implemented a foreign
currency hedging strategy and the Company
regularly enters hedging arrangements to
partially mitigate the potential effect of
fluctuating exchange rates. To the extent that
AGI does not adequately hedge its foreign
exchange risk, changes in the exchange
rate between the Canadian dollar and the
U.S. dollar and Euro may have a material
adverse effect on AGI’s results of operations,
business, prospects and financial condition.
Conversely, to the extent that we enter into
hedging arrangements, we potentially forego
the benefits that might result from favourable
fluctuations in currency exchange rates.

Acquisition and Expansion Risk

AGI may expand its operations by increasing
the scope or changing the nature of
operations at existing facilities or by acquiring
or developing additional businesses,
products or technologies in existing or new
markets. There can be no assurance that the
Company will be able to identify, acquire,
develop or profitably manage additional
businesses, or successfully integrate any
acquired business, products, or technologies
into the business, or increase the scope or
change the nature of operations at existing
facilities without substantial expenses, delays
or other operational or financial difficulties.
The Company’s ability to increase the scope or
change the nature of its operations or acquire or
develop additional businesses may be impacted
by its cost of capital and access to credit.

Acquisitions and expansions, including the
acquisition of businesses or the development
of manufacturing capabilities outside of North
America, may involve a number of special
risks including diversion of management’s
attention, failure to retain key personnel,
unanticipated events or circumstances,
unanticipated market dynamics in new
agricultural markets, added political and
economic risk in other jurisdictions, risks
associated with new market development
outside of North America, and legal liabilities,
some or all of which could have a material
adverse effect on AGI’s performance. In
emerging markets some of these (and
other) risks can be greater than they might
be elsewhere. In addition, there can be no
assurance that an increase in the scope or a

ANNUAL REPORT 2013ManageMent’s discussion & analysischange in the nature of operations at existing
facilities or that acquired or newly developed
businesses, products, or technologies will
achieve anticipated revenues and income.
The failure of the Company to manage its
acquisition or expansion strategy successfully
could have a material adverse effect on AGI’s
results of operations and financial condition.

International Sales and Operations

A portion of AGI’s sales are generated in
overseas markets (approximately $92 million
or 26% in 2013) the majority of which are
in emerging markets such as countries in
Eastern Europe, including most significantly
Ukraine and also Russia and Romania, as well
as countries in Central and South America,
the Middle East and Southeast Asia. An
important component of AGI’s strategy is
to increase its offshore sales and operations
in the future. Sales and operations outside
of North America, particularly in emerging
markets, are subject to various additional
risks, including: currency exchange rate
fluctuations; foreign economic conditions;
trade barriers; competition with North
American and international manufacturers
and suppliers; exchange controls; restrictions
on dividends and the repatriation of funds;
national and regional labour strikes; political
risks; limitations on foreign investment;
sociopolitical instability; fraud; risk of trade
embargoes and sanctions prohibiting sales
to specific persons or countries; risks of
increases in duties; taxes and changes
in tax laws; expropriation of property,
cancellation or modification of contract rights,
unfavourable legal climate for the collection

of unpaid accounts; unfavourable political
or economic climate limiting or eliminating
support from export credit agencies; changes
in laws and policies governing operations of
foreign-based companies; as well as risks of
loss due to civil strife and acts of war.

There is no guarantee that one or more of
these factors will not materially adversely
affect AGI’s offshore sales and operations
in the future, which could have a material
adverse effect on AGI’s results of operations
and financial condition.

There have also been instances of political
turmoil and other instability in some of the
countries in which AGI operates, including
most recently in Ukraine, which has and is
currently experiencing political changes,
civil unrest and military action, which
are contributing to significant economic
uncertainty and volatility. AGI continues to
closely monitor the political, economic and
military situation in Ukraine, and will seek
to take actions to mitigate its exposure
to potential risk events. However, the
situation in Ukraine is rapidly developing
and AGI has no way to predict outcome
of the situation. Continued unrest, military
activities, or broader – based trade sanctions
or embargoes, should they be implemented,
could have a material adverse effect on
our sales in Ukraine and Russia and other
countries in the region, and a material
adverse effect on our sales, growth, results of
operations and financial condition.

Anti-Corruption Laws

The Company’s business practices must
comply with the Corruption of Public
Foreign Officials Act (Canada) and other
applicable similar laws. These anti-corruption
laws generally prohibit companies and
their intermediaries from making improper
payments or providing anything of value to
improperly influence government officials
or private individuals for the purpose of
obtaining or retaining a business advantage
regardless of whether those practices are
legal or culturally expected in a particular
jurisdiction. These risks can be more acute in
emerging markets. Recently, there has been a
substantial increase in the global enforcement
of anti-corruption laws. If violations of these
laws were to occur, they could subject us to
fines and other penalties as well as increased
compliance costs and could have an adverse
effect on AGI’s reputation, business and
results of operations and financial condition.

Agricultural Commodity
Prices, International Trade and
Political Uncertainty

Prices of agricultural commodities are
influenced by a variety of unpredictable
factors that are beyond the control of AGI,
including weather, government (Canadian,
United States and other) farm programs
and policies, and changes in global demand
or other economic factors. A decrease
in agricultural commodity prices could
negatively impact the agricultural sector,
and the business of AGI. New legislation or
amendments to existing legislation, including

ANNUAL REPORT 2013ManageMent’s discussion & analysisthe Energy Independence and Security Act
in the U.S., may ultimately impact demand
for the Company’s products. The world grain
market is subject to numerous risks and
uncertainties, including risks and uncertainties
related to international trade and global
political conditions.

Competition

AGI experiences competition in the markets
in which it operates. Certain of AGI’s
competitors have greater financial and capital
resources than AGI. AGI could face increased
competition from newly formed or emerging
entities, as well as from established entities
that choose to focus (or increase their
existing focus) on AGI’s primary markets. As
the grain handling, storage and conditioning
equipment sector is fragmented, there is also
a risk that a larger, formidable competitor may
be created through a combination of one or
more smaller competitors. AGI may also face
potential competition from the emergence of
new products or technology.

Seasonality of Business

The agricultural equipment business is highly
seasonal, which causes our quarterly results
and our cash flow to fluctuate during the year.
Our sales historically have been higher in the
second and third calendar quarters compared
with the first and fourth quarters and our cash
flow has been lower in the first three quarters
of each calendar year, which may impact the
ability of the Company to make cash dividends
to shareholders, or the quantum of such
dividends, if any. No assurance can be given

that AGI’s credit facility will be sufficient to
offset the seasonal variations in AGI’s cash flow.

Business Interruption

The operation of AGI’s manufacturing
facilities are subject to a number of business
interruption risks, including delays in obtaining
production materials, plant shutdowns, labour
disruptions and weather conditions/natural
disasters. AGI may suffer damages associated
with such events that it cannot insure against
or which it may elect not to insure against
because of high premium costs or other
reasons. For instance, AGI’s Rosenort facility
is located in an area that is often subject to
widespread flooding, and insurance coverage
for this type of business interruption is limited.
AGI is not able to predict the occurrence of
business interruptions.

Litigation

In the ordinary course of its business, AGI
may be party to various legal actions, the
outcome of which cannot be predicted with
certainty. One category of potential legal
actions is product liability claims. Farming is
an inherently dangerous occupation. Grain
handling, storage and conditioning equipment
used on farms or in commercial applications
may result in product liability claims that
require insuring of risk and management of
the legal process.

Dependence on Key Personnel

AGI’s future business, financial condition, and
operating results depend on the continued
contributions of certain of AGI’s executive
officers and other key management and
personnel, certain of whom would be difficult
to replace.

Labour Costs and Shortages and
Labour Relations

The success of AGI’s business depends on
a large number of both hourly and salaried
employees. Changes in the general conditions
of the employment market could affect the
ability of AGI to hire or retain staff at current
wage levels. The occurrence of either of these
events could have an adverse effect on the
Company’s results of operations. There is no
assurance that some or all of the employees
of AGI will not unionize in the future. If
successful, such an occurrence could increase
labour costs and thereby have an adverse
impact on AGI’s results of operations.

Distribution, Sales Representative
and Supply Contracts

AGI typically does not enter into written
agreements with its dealers, distributors
or suppliers in North America. As a result,
such parties may, without notice or penalty,
terminate their relationship with AGI at any
time. In addition, even if such parties should
decide to continue their relationship with
AGI, there can be no guarantee that the
consideration or other terms of such contracts
will continue on the same basis.

ANNUAL REPORT 2013ManageMent’s discussion & analysisAGI often enters into supply agreements with
customers outside of North America. These
contracts may include penalties for non-
performance including in relation to product
quality, late delivery and in some cases project
assembly services. In addition, contractual
commitments negotiated with foreign
customers conducted in languages other than
English may increase the likelihood of disputes
with respect to agreed upon commitments. In
the event AGI fails to perform to the standards
of its contractual commitments it could suffer
a negative financial impact which in some
cases could be material.

Availability of Credit

AGI’s credit facility matures on March 8, 2016
and is renewable at the option of the lenders.
There can be no guarantee the Company will
be able to obtain alternate financing and no
guarantee that future credit facilities will have
the same terms and conditions as the existing
facility. This may have an adverse effect on
the Company, its ability to pay dividends and
the market value of its common shares. In
addition, the business of the Company may
be adversely impacted in the event that the
Company’s customers do not have access
to sufficient financing. Sales related to the
construction of commercial grain handling
facilities, sales to developing markets, and
sales to North American farmers may be
negatively impacted.

Interest Rates

Cash Dividends are not Guaranteed

AGI’s term and operating credit facilities
bear interest at rates that are in part
dependent on performance based financial
ratios. The Company’s cost of borrowing
may be impacted to the extent that the
ratio calculation results in an increase in the
performance based component of the interest
rate. To the extent that the Company has term
and operating loans where the fluctuations
in the cost of borrowing are not mitigated by
interest rate swaps, the Company’s cost of
borrowing may be impacted by fluctuations in
market interest rates.

Uninsured and Underinsured Losses

AGI uses its discretion in determining
amounts, coverage limits and deductibility
provisions of insurance, with a view to
maintaining appropriate insurance coverage
on its assets and operations at a commercially
reasonable cost and on suitable terms. This
may result in insurance coverage that, in
the event of a substantial loss, would not be
sufficient to pay the full current market value
or current replacement cost of its assets or
cover the cost of a particular claim.

AGI obtains insurance for certain of its
accounts receivables outside of North
America while assuming a percentage of the
risk, most often 10% of the insured amount.
In the event that AGI is unable to collect on
its accounts receivables outside of North
America, the Company will incur financial
losses related to the uninsured portion.

Future dividend payments by AGI and the
level thereof is uncertain, as AGI’s dividend
policy and the funds available for the payment
of dividends from time to time are dependent
upon, among other things, operating cash
flow generated by AGI and its subsidiaries,
financial requirements for AGI’s operations
and the execution of its growth strategy,
fluctuations in working capital and the
timing and amount of capital expenditures,
debt service requirements and other factors
beyond AGI’s control.

Income Tax Matters; Canada Revenue
Agency Review Regarding Conversion

Income tax provisions, including current and
deferred income tax assets and liabilities, and
income tax filing positions require estimates
and interpretations of income tax rules and
regulations of the various jurisdictions in
which AGI operates and judgments as to their
interpretation and application to AGI’s specific
situation. The amount and timing of reversals
of temporary differences also depends on
AGI’s future operating results, acquisitions
and dispositions of assets and liabilities. The
business and operations of AGI are complex
and AGI has executed a number of significant
financings, acquisitions, reorganizations
and business combinations over the course
of its history including the Conversion. The
computation of income taxes payable as a
result of these transactions involves many
complex factors as well as AGI’s interpretation
of and compliance with relevant tax legislation
and regulations. While AGI believes that its’

ANNUAL REPORT 2013ManageMent’s discussion & analysisexisting and proposed tax filing positions are
probable to be sustained, there are a number
of existing and proposed tax filing positions
including in respect of the Conversion that are
or may be the subject of review by taxation
authorities. Without limitation, there is a risk
that the tax consequences of the Conversion
may be materially different from the tax
consequences anticipated by the Company in
undertaking the Conversion. In November 2013
the Company received a proposal letter from
the Canada Revenue Agency (the “CRA”) which
advises of the CRA’s intention to challenge
the tax consequences of the Conversion.
While the Company is confident in its tax filing
position, there is a risk that the CRA could
successfully challenge the tax consequences
of the Conversion or prior transactions of
any of the entities involved in the Conversion.
Therefore, it is possible that additional taxes
could be payable by AGI and the ultimate
value of AGI’s income tax assets and liabilities
could change in the future and that changes
to these amounts could have a material
adverse effect on AGI’s consolidated financial
statements and financial position. Further, in
the event of a reassessment of any of AGI’s
tax filings by a taxation authority including the
CRA, AGI would be required to deposit cash
equal to 50% of the tax liability claimed with
the relevant taxation authority in order to file
an objection against such reassessment, the
amount of which deposit could be significant.
See also “Explanation of Operating Results –
Deferred income tax expense”.

AGI May Issue Additional
Common Shares Diluting Existing
Shareholders’ Interests

conditions, prevailing interest rate levels, and
financial, competitive, business and other
factors, many of which are beyond its control.

The Company is authorized to issue an
unlimited number of common shares for such
consideration and on such terms and conditions
as shall be established by the Directors without
the approval of any shareholders, except
as may be required by the TSX. In addition,
the Company may, at its option, satisfy its
obligations with respect to the interest payable
on the Debentures and the repayment of the
face value of the 2013 Debentures through the
issuance of common shares.

Leverage, Restrictive Covenants

The degree to which AGI is leveraged
could have important consequences to
the shareholders, including: (i) the ability
to obtain additional financing for working
capital, capital expenditures or acquisitions
in the future may be limited; (ii) a material
portion of AGI’s cash flow from operations
may need to be dedicated to payment of the
principal of and interest on indebtedness,
thereby reducing funds available for future
operations and to pay dividends; (iii) certain
of the borrowings under the Company’s credit
facility may be at variable rates of interest,
which exposes AGI to the risk of increased
interest rates; and (iv) AGI may be more
vulnerable to economic downturns and be
limited in its ability to withstand competitive
pressures. AGI’s ability to make scheduled
payments of principal and interest on, or to
refinance, its indebtedness will depend on its
future operating performance and cash flow,
which are subject to prevailing economic

The ability of AGI to pay dividends or make
other payments or advances will be subject
to applicable laws and contractual restrictions
contained in the instruments governing its
indebtedness, including the Company’s credit
facility and note purchase agreement. AGI’s
credit facility and note purchase agreement
contain restrictive covenants customary
for agreements of this nature, including
covenants that limit the discretion of
management with respect to certain business
matters. These covenants place restrictions
on, among other things, the ability of AGI
to incur additional indebtedness, to pay
dividends or make certain other payments
and to sell or otherwise dispose of material
assets. In addition, the credit facility and
note purchase agreement contain a number
of financial covenants that will require
AGI to meet certain financial ratios and
financial tests. A failure to comply with these
obligations could result in an event of default
which, if not cured or waived, could permit
acceleration of the relevant indebtedness
and trigger financial penalties including a
make-whole provision in the note purchase
agreement. If the indebtedness under the
credit facility and note purchase agreement
were to be accelerated, there can be no
assurance that the assets of AGI would be
sufficient to repay in full that indebtedness.
There can also be no assurance that the credit
facility or any other credit facility will be able
to be refinanced.

ANNUAL REPORT 2013ManageMent’s discussion & analysisInformation Systems, Privacy and
Data Protection

Security breaches and other disruptions to
AGI’s information technology infrastructure
could interfere with AGI’s operations and
could compromise AGI’s and its customers’
and suppliers’ information, exposing AGI to
liability that would cause AGI’s business and
reputation to suffer.

In the ordinary course of business, AGI relies
upon information technology networks and
systems, some of which are managed by
third parties, to process, transmit and store
electronic information, and to manage or
support a variety of business processes
and activities, including supply chain,
manufacturing, distribution, invoicing and
collection of payments from dealers or
other purchasers of AGI equipment. AGI
uses information technology systems to
record, process and summarize financial
information and results of operations for
internal reporting purposes and to comply
with regulatory financial reporting, legal and
tax requirements.

Additionally, AGI collects and stores sensitive
data, including intellectual property,
proprietary business information and
the proprietary business information of
AGI’s customers and suppliers, as well as
personally identifiable information of AGI’s
customers and employees, in data centers
and on information technology networks.
The secure operation of these information
technology networks and the processing

and maintenance of this information is
critical to AGI’s business operations and
strategy. Despite security measures and
business continuity plans, AGI’s information
technology networks and infrastructure
may be vulnerable to damage, disruptions
or shutdowns due to attacks by hackers
or breaches due to employee error or
malfeasance or other disruptions during the
process of upgrading or replacing computer
software or hardware, power outages,
computer viruses, telecommunication or
utility failures or natural disasters or other
catastrophic events. The occurrence of any
of these events could compromise AGI’s
networks, and the information stored there
could be accessed, publicly disclosed, lost
or stolen. Any such access, disclosure or
other loss of information could result in legal
claims or proceedings, liability or regulatory
penalties under laws protecting the privacy
of personal information, disrupt operations,
and damage AGI’s reputation, which could
adversely affect AGI’s business.

chanGes in accountinG
Policies and future
accountinG chanGes

The Company has adopted the following
new and revised standards along with
any consequential amendments effective
January 1, 2013. These changes were
made in accordance with the applicable
transitional provisions.

IAS 19 Employee Benefits

On June 16, 2011, the IASB revised IAS 19,
Employee Benefits. The revisions include
the elimination of the option to defer the
recognition of gains and losses, enhancing the
guidance around measurement of plan assets
and defined benefit obligations, streamlining
the presentation of changes in assets and
liabilities arising from defined benefit plans
and introduction of enhanced disclosures
for defined benefit plans. The amendments
are effective for annual periods beginning
on or after January 1, 2013 and the Company
has determined that the adoption of these
amendments did not result in any material
impact on its consolidated financial statements.

IAS 32 Financial Instruments: Presentation

In December 2011, the IASB amended IAS 32
to clarify certain requirements for offsetting
financial assets and liabilities. The amendment
addresses the meaning and application of the
concepts of legally enforceable right of set-off
and simultaneous realization and settlement.
The amendment will affect presentation and
disclosures but will not have an impact on
financial results.

IAS 36 Impairment of Assets

ANNUAL REPORT 2013ManageMent’s discussion & analysisimpairment (or reversals) where recoverable
amount (based on fair value less costs of
disposal) is determined using a present value
technique. This amendment may affect
disclosures but is not anticipated to have a
material impact on financial results.

IFRS 9 Financial Instruments

IFRS 9 as issued reflects the first phase of
the IASB’s work on the replacement of the
existing standard for financial instruments
[“IAS 39”] and applies to classification and
measurement of financial assets and liabilities
as defined in IAS 39. The standard is effective
for annual periods beginning on or after
January 1, 2018. The revised version of IFRS
9 introduces a new chapter to IFRS 9 on
hedge accounting, putting in place a new
hedge accounting model that is designed
to be more closely aligned with how entities
undertake risk management activities when
hedging financial and non-financial risk
exposures. The adoption of the first phase of
IFRS 9 will have an effect on the classification
and measurement of AGI’s financial assets.
The Company will quantify the effect in
conjunction with the other phases, when
issued, to present a comprehensive picture.

power over the investee, has exposure to
variable returns from its involvement with
the investee, and has the ability to use its
power over the investee to affect its returns.
Detailed guidance is provided on applying
the definition of control. The accounting
requirements for consolidation have remained
largely consistent with IAS 27.

The Company assessed its consolidation
conclusions on January 1, 2013 and
determined that the adoption of IFRS 10 did
not result in any change in the consolidation
status of any of its subsidiaries.

IFRS 12 Disclosure of Interests in
Other Entities

In May 2011, IFRS 12 was issued. It requires
extensive disclosures relating to an entity’s
interests in subsidiaries, joint arrangements,
associates and unconsolidated structured
entities. IFRS 12 is effective for annual
reporting periods beginning on or after
January 1, 2013. The Company assessed the
impact of IFRS 12 and where applicable,
additional disclosure relating to interests in
subsidiaries will be included in the annual
consolidated financial statements.

IFRS 10 Consolidated Financial Statements

IFRS 13 Fair Value Measurement

IFRS 10, Consolidated Financial Statements,
replaces the guidance on control and
consolidation in IAS 27, Consolidated
and Separate Financial Statements, and
Standing Interpretations Committee
(“SIC”)-12, Consolidation – Special Purpose
Entities. IFRS10 requires consolidation of
an investee only if the investor possesses

IFRS 13, Fair Value Measurement, provides
a single framework for measuring fair value.
The measurement of the fair value of an
asset or liability is based on assumptions that
market participants would use when pricing
the asset or liability under current market
conditions, including assumptions about risk.
The Company adopted IFRS 13 on January 1,

2013 on a prospective basis. The adoption of
IFRS 13 did not require any adjustments to the
valuation techniques used by the Company
to measure fair value and did not result in any
measurement adjustments as at January 1, 2013.

disclosure controls and
Procedures and
internal controls
Disclosure controls and procedures are
designed to provide reasonable assurance
that all relevant information is gathered and
reported to senior management, including
AGI’s Chief Executive Officer and Chief
Financial Officer, on a timely basis so that
appropriate decisions can be made regarding
public disclosure.

Management of AGI is responsible for
designing internal controls over financial
reporting for the Company as defined
under National Instrument 52-109 issued
by the Canadian Securities Administrators.
Management has designed such internal
controls over financial reporting, or caused
them to be designed under their supervision,
to provide reasonable assurance regarding
the reliability of financial reporting and the
preparation of the financial statements for
external purposes in accordance with IFRS.

There have been no material changes in AGI’s
internal controls over financial reporting that
occurred in the three month period ended
December 31, 2013, that have materially
affected, or are reasonably likely to materially
affect, the Company’s internal controls over
financial reporting.

ANNUAL REPORT 2013ManageMent’s discussion & analysisnon-ifrs measures

In analyzing our results, we supplement our use of financial measures
that are calculated and presented in accordance with IFRS, with a
number of non-IFRS financial measures including “EBITDA”, “Adjusted
EBITDA”, “gross margin”, “funds from operations”, “payout ratio”,
“adjusted payout ratio” and “trade sales”. A non-IFRS financial measure
is a numerical measure of a company’s historical performance, financial
position or cash flow that excludes (includes) amounts, or is subject
to adjustments that have the effect of excluding (including) amounts,
that are included (excluded) in the most directly comparable measures
calculated and presented in accordance with IFRS. Non-IFRS financial
measures are not standardized; therefore, it may not be possible to
compare these financial measures with other companies’ non-IFRS
financial measures having the same or similar businesses. We strongly
encourage investors to review our consolidated financial statements
and publicly filed reports in their entirety and not to rely on any single
financial measure.

We use these non-IFRS financial measures in addition to, and in
conjunction with, results presented in accordance with IFRS. These
non-IFRS financial measures reflect an additional way of viewing
aspects of our operations that, when viewed with our IFRS results
and the accompanying reconciliations to corresponding IFRS financial
measures, may provide a more complete understanding of factors and
trends affecting our business.

In this MD&A, we discuss the non-IFRS financial measures, including the
reasons that we believe that these measures provide useful information
regarding our financial condition, results of operations, cash flows
and financial position, as applicable, and, to the extent material,
the additional purposes, if any, for which these measures are used.

Reconciliations of non-IFRS financial measures to the most directly
comparable IFRS financial measures are contained in this MD&A.

Management believes that the Company’s financial results may provide
a more complete understanding of factors and trends affecting our
business and be more meaningful to management, investors, analysts
and other interested parties when certain aspects of our financial results
are adjusted for the gain (loss) on foreign exchange and other operating
expenses and income. This measurement is a non-IFRS measurement.
Management uses the non-IFRS adjusted financial results and non-
IFRS financial measures to measure and evaluate the performance of
the business and when discussing results with the Board of Directors,
analysts, investors, banks and other interested parties.

References to “EBITDA” are to profit before income taxes, finance costs,
amortization, depreciation, and goodwill and intangible impairment.
References to “adjusted EBITDA” are to EBITDA before the gain (loss)
on foreign exchange, gains or losses on the sale of property, plant
& equipment and expenses related to corporate acquisition activity.
Management believes that, in addition to profit or loss, EBITDA and
adjusted EBITDA are useful supplemental measures in evaluating the
Company’s performance. Management cautions investors that EBITDA
and adjusted EBITDA should not replace profit or loss as indicators of
performance, or cash flows from operating, investing, and financing
activities as a measure of the Company’s liquidity and cash flows.

References to “trade sales” are to sales net of the gain or loss on
foreign exchange. Management cautions investors that trade sales
should not replace sales as an indicator of performance. References
to “gross margin” are to trade sales less cost of sales net of the
depreciation and amortization included in cost of sales.

ANNUAL REPORT 2013ManageMent’s discussion & analysisReferences to “funds from operations” are to cash flow from operating
activities before the net change in non-cash working capital balances
related to operations and stock-based compensation, less maintenance
capital expenditures and adjusted for the gain or loss on the sale of
property, plant & equipment. Management believes that, in addition to
cash provided by (used in) operating activities, funds from operations
provide a useful supplemental measure in evaluating its performance.

References to “payout ratio” are to dividends declared as a percentage
of funds from operations. References to “adjusted payout ratio” are to
dividends declared in cash as a percentage of funds from operations.

forWard-looKinG statements

This MD&A contains forward-looking statements that reflect our
expectations regarding the future growth, results of operations,
performance, business prospects, and opportunities of the Company.
Forward-looking statements may contain such words as “anticipate”,
“believe”, “continue”, “could”, “expects”, “intend”, “plans”, “will” or
similar expressions suggesting future conditions or events. In particular,
the forward looking statements in this MD&A include statements
relating to our business and strategy, including our outlook for our
financial and operating performance. Such forward-looking statements
reflect our current beliefs and are based on information currently
available to us, including certain key expectations and assumptions
concerning anticipated grain production in our market areas, financial

performance, business prospects, strategies, product pricing,
regulatory developments, tax laws, the sufficiency of budgeted capital
expenditures in carrying out planned activities, foreign exchange
rates and the cost of materials, labour and services. Forward-looking
statements involve significant risks and uncertainties. A number of
factors could cause actual results to differ materially from results
discussed in the forward-looking statements, including changes in
international, national and local business conditions, weather patterns,
crop yields, crop conditions, the timing of harvest and conditions
during harvest, seasonality, industry cyclicality, volatility of production
costs, agricultural commodity prices, the cost and availability of capital,
foreign exchange rates, and competition. These risks and uncertainties
are described under “Risks and Uncertainties” in this MD&A and in our
most recently filed Annual Information Form. These factors should
be considered carefully, and readers should not place undue reliance
on the Company’s forward-looking statements. We cannot assure
readers that actual results will be consistent with these forward-looking
statements and we undertake no obligation to update such statements
except as expressly required by law.

additional information

Additional information relating to AGI, including AGI’s most recent
Annual Information Form, is available on SEDAR (www.sedar.com).

ANNUAL REPORT 2013ManageMent’s discussion & analysisconsolidated
ﬁnancial statements

december 31, 2013

indePendent auditors’ rePort

To the Shareholders of Ag Growth International Inc.

We have audited the accompanying consolidated financial
statements of Ag Growth International Inc., which
comprise the consolidated statements of financial position
as at December 31, 2013 and 2012, and the consolidated
statements of income, comprehensive income, changes
in shareholders’ equity and cash flows for the years then
ended, and a summary of significant accounting policies
and other explanatory information.

manaGement’s resPonsibility
for the consolidated
financial statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements
in accordance with International Financial Reporting
Standards, and for such internal control as management
determines is necessary to enable the preparation of
consolidated financial statements that are free from
material misstatement, whether due to fraud or error.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsauditors’ resPonsibility

oPinion

In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Ag Growth International Inc.
as at December 31, 2013 and 2012, and its financial performance and its
cash flows for the years then ended in accordance with International
Financial Reporting Standards.

Winnipeg, Canada,
March 11, 2014.

Chartered Accountants

Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material
misstatement. An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’
judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal
control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements 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 entity’s internal control.
An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that the audit evidence
we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.

ANNUAL REPORT 2013Consolidated FinanCial statementsconsolidated statements of financial Position
Assets [note 22]

(in thousands of Canadian dollars)

Year ended December 31

current assets

Cash and cash equivalents [note 15]

Restricted cash [notes 16 and 21]

Accounts receivable [note 17]

Inventory [note 18]

Prepaid expenses and other assets

Income taxes recoverable

Derivative instruments [note 27]

non-current assets

Property, plant and equipment, net [note 9]

Goodwill [note 11]

Intangible assets, net [note 10]

Available-for-sale investment [note 14]

Income taxes recoverable

Derivative instruments [note 27]

Deferred tax asset [note 25]

Assets held for sale [note 13]

total assets

2013
$

108,731

112

58,578

57,546

2,225

—

227,201

88,416

65,322

71,487

2,000

5,487

—

23,327

256,039

2,396

485,636

2012
$

2,171

51,856

58,513

1,645

900

1,377

116,496

80,854

63,399

72,777

2,000

4,880

234

28,741

252,885

1,101

370,482

ANNUAL REPORT 2013ConsolIdated FInanCIal statements
Liabilities and Shareholders’ Equity

(in thousands of Canadian dollars)

Year ended December 31

(in thousands of Canadian dollars)

Year ended December 31

2013
$

2012
$

2013
$

2012
$

current liabilities

Accounts payable and accrued
liabilities [note 24]

Customer deposits

Dividends payable

Income taxes payable

Current portion of long-term debt
[note 22]

Current portion of derivative
instruments [note 27]

Convertible unsecured subordinated
debentures [note 23]

Provisions [note 19]

non-current liabilities

Long-term debt [note 22]

Due to vendor [note 7]

Convertible unsecured subordinated
debentures [note 23]

Derivative instruments [note 27]

Deferred tax liability [notes 25 and 27]

total liabilities

30,872

18,651

2,525

151

3,348

113,360

3,400

172,312

17,351

4,983

2,510

—

2,420

27,271

26,367

34,916

615

—

77,987

109,558

1,144

10,233

—

9,041

116,346

153,515

288,658

180,786

shareholders’ eQuity [note 20]

Common Shares

158,542

153,447

Accumulated other comprehensive
income (loss)

3,365

(2,590)

Equity component of
convertible debentures

Contributed surplus

Retained earnings

Total shareholders’ equity

total liabilities and
shareholders’ eQuity

See accompanying notes

On behalf of the Board of Directors:

8,240

4,984

21,847

196,978

5,105

4,108

29,626

189,696

485,636

370,482

Bill Lambert
Director

David A. White, CA,
ICD.D
Director

ANNUAL REPORT 2013Consolidated FinanCial statements

consolidated statements of income

(in thousands of Canadian dollars,
except per share amounts)

Year ended December 31

sales

Cost of goods sold [note 8[d]]

Gross Profit

exPenses

Selling, general and administrative
[note 8[e]]

Impairment of goodwill [notes 11 and 12]

Other operating income [note 8[a]]

Finance costs [note 8[c]]

Finance expense (income) [note 8[b]]

2013
$

356,787

245,103

111,684

63,509

—

(5,727)

14,883

2,388

75,053

Profit before income taxes

36,631

Income tax expense [note 25]

Current

Deferred

Profit for the year

Profit Per share - basic [note 30]

Profit Per share - diluted
[note 30]

See accompanying notes

7,595

6,445

14,040

22,591

1.80

1.75

2012
$

314,342

219,199

95,143

56,077

1,890

(122)

13,058

(773)

70,130

25,013

3,771

4,054

7,825

17,188

1.38

1.37

consolidated statements of
comPrehensiVe income

(in thousands of Canadian dollars)

Year ended December 31

Profit for the year

2013
$

22,591

2012
$

17,188

other comPrehensiVe income (loss)

Items that may be reclassified
subsequently to profit or loss

Change in fair value of derivatives
designated as cash flow hedges

Losses on derivatives designated as
cash flow hedges recognized in net
earnings in the current period

Income tax effect on cash flow
hedges

Exchange differences on translation
of foreign operations

Loss on available-for-sale financial
assets [note 14]

Income tax effect on
available-for-sale financial assets

(6,341)

2,680

234

749

1,622

(910)

10,440

(2,646)

—

(800)

212

(715)

other comPrehensiVe income
(loss) for the year

5,955

total comPrehensiVe
income for the year

See accompanying notes

28,546

16,473

ANNUAL REPORT 2013ConsolIdated FInanCIal statements

consolidated statements of chanGes in shareholders’ eQuity

(in thousands of Canadian dollars)

Equity
component
of convertible
debentures
$

Common
shares
$

Contributed
surplus
$

Retained
earnings
$

153,447

5,105

4,108

—

2,479

2,648

—

(32)

—

3,135

—

876

—

29,626

22,591

—

(30,186)

—

(184)

—

Cash flow
hedge
reserve
$

1,179

—

Foreign
currency
reserve
$

(3,769)

—

Total
equity
$

189,696

22,591

(4,485)

10,440

5,955

—

3,355

2,648

(30,186)

(32)

(184)

3,135

158,542

8,240

4,984

21,847

(3,306)

6,671

196,978

as at
january 1, 2013

Profit for the year

Other comprehensive
income (loss)

Share-based
payment transactions
[notes 20 and 21]

Dividend reinvestment
plan [note 20[e]]

Dividends to
shareholders [note 20]

Dividend reinvestment
plan costs [note 20]

Dividends on
share-based
compensation awards

Issuance of
convertible unsecured
subordinated
debentures [note 23]

as at
december 31, 2013

See accompanying notes

ANNUAL REPORT 2013Consolidated FinanCial statements
consolidated statements of chanGes in shareholders’ eQuity

(in thousands of Canadian dollars)

Equity
component
of convertible
debentures
$

Common
shares
$

Contributed
surplus
$

Retained
earnings
$

Cash flow
hedge
reserve
$

Foreign
currency
reserve
$

Available-
for-sale
reserve
$

151,039

5,105

5,341

42,549

(1,340)

(1,123)

17,188

—

2,408

—

(1,233)

—

(30,111)

—

153,447

5,105

4,108

29,626

1,179

(3,769)

2,519

(2,646)

(588)

(715)

Total
equity
$

202,159

17,188

588

—

1,175

(30,111)

189,696

as at
january 1, 2012

Profit for the year

Other
comprehensive
income (loss)

Share-based
payment
transactions
[notes 20 and 21]

Dividends to
shareholders
[note 20]

as at
december 31,
2012

See accompanying notes

ANNUAL REPORT 2013ConsolIdated FInanCIal statements
consolidated statements of cash floWs

(in thousands of Canadian dollars)

Year ended December 31

(in thousands of Canadian dollars)

Year ended December 31

2013

2012

2013

2012

inVestinG actiVities

oPeratinG actiVities

Profit before income taxes
for the year

Add (deduct) items not affecting cash

Depreciation of property,
plant and equipment

Amortization of intangible assets

Impairment of goodwill

Translation loss (gain)
on foreign exchange

Non-cash component of
interest expense

Share-based compensation expense

Loss (gain) on sale of property,
plant and equipment

$36,631

$25,013

6,003

4,039

—

6,161

3,849

1,890

7,790

(1,766)

4,071

3,084

2,543

1,174

(4,633)

$56,985

$38,896

Net change in non-cash working
capital balances related to
operations [note 15]

Settlement of SAIP obligation

Income tax paid

cash ProVided by
oPeratinG actiVites

21,834

—

(6,181)

(2,795)

(1,495)

(3,012)

$72,638

$31,594

Acquisition of property,
plant and equipment

Transfer from (to) cash held
in trust and restricted cash

Proceeds from sale of property,
plant and equipment

Development of intangible assets

Transaction and financing costs paid

(14,327)

(4,710)

(78)

2,405

6,089

(1,620)

—

158

(1,615)

(1,938)

cash used in
inVestinG actiVities

financinG actiVities

($9,936)

($5,700)

Repayment of long-term debt

(11,182)

Repayment of obligations under
finance leases

Issuance of convertible unsecured
subordinated debentures

Dividends paid in cash [note 20[e]]

Dividend reinvestment plan
costs incurred

Finance costs incurred

cash ProVided by (used in)
financinG actiVities

net increase (decrease) in
cash and cash eQuiValents
durinG the year

Cash and cash equivalents,
beginning of year

(7)

(131)

—

(30,111)

—

(313)

—

82,610

(27,538)

(32)

—

$43,858

($30,562)

$106,560

($4,668)

2,171

6,839

cash and cash eQuiValents,
end of year

$108,731

$2,171

Supplemental cash flow
information - interest paid

See accompanying notes

$10,751

$10,509

ANNUAL REPORT 2013Consolidated FinanCial statements
notes to consolidated financial statements
(in thousands of Canadian dollars, except where otherwise noted and per share data)
December 31, 2013

1. orGanization

The consolidated financial statements of Ag
Growth International Inc. [“Ag Growth Inc.”]
for the year ended December 31, 2013 were
authorized for issuance in accordance with
a resolution of the directors on March 11,
2014. Ag Growth International Inc. is a listed
company incorporated and domiciled in
Canada, whose shares are publicly traded at
the Toronto Stock Exchange. The registered
office is located at 198 Commerce Drive,
Winnipeg, Manitoba, Canada.

2. oPerations

Ag Growth Inc. conducts business in the grain
handling, storage and conditioning market.

Included in these consolidated financial
statements are the accounts of Ag Growth
Inc. and all of its subsidiary partnerships and
incorporated companies; together, Ag Growth
Inc. and its subsidiaries are referred to as
“AGI” or the “Company”.

3. summary of siGnificant
accountinG Policies
Statement of compliance

These consolidated financial statements
have been prepared in accordance with
International Financial Reporting Standards
[“IFRS”] as issued by the International
Accounting Standards Board [“IASB”].

The Company adopted IFRS 10, 11, 12, and
13, and amendments to IAS 1 and IAS 19 on
January 1, 2013. There was no material impact
other than disclosure to the Company’s
consolidated financial statements as a result
of the adoption of these standards and
amendments. The Company consolidated
its cash-generating units [“CGU”] into two
groups of CGU and revised its operating
segments into two operating segments based
on the CGU groups during the year ended
December 31, 2013.

Basis of preparation

The consolidated financial statements are
presented in Canadian dollars, which is
also the functional currency of the parent
company, Ag Growth International Inc. All
values are rounded to the nearest thousand.
They are prepared on the historical cost basis,
except for derivative financial instruments
and available-for-sale investment, which are
measured at fair value.

The accounting policies set out below have been
applied consistently to all periods presented in
these consolidated financial statements.

Principles of consolidation

The consolidated financial statements include
the accounts of Ag Growth International
Inc. and its wholly owned subsidiaries, Ag
Growth Industries Partnership, AGX Holdings
Inc., Ag Growth Holdings Corp., Westfield

Distributing (North Dakota) Inc., Hansen
Manufacturing Corp. [“Hi Roller”], Union
Iron Inc. [“Union Iron”], Applegate Trucking
Inc., Applegate Livestock Equipment, Inc.
[“Applegate”], Airlanco Inc. [“Airlanco”],
Tramco, Inc. [“Tramco”], Tramco Europe
Ltd., Euro-Tramco B.V., Ag Growth Suomi
Oy and Mepu Oy [“Mepu”] as at December
31, 2013. Subsidiaries are fully consolidated
from the date of acquisition, it being the date
on which AGI obtains control, and continue
to be consolidated until the date that such
control ceases. The financial statements of
the subsidiaries are prepared for the same
reporting period as the Company, using
consistent accounting policies. All intra-
company balances, income and expenses and
unrealized gains and losses resulting from intra-
company transactions are eliminated in full.

Business combinations and goodwill

Business combinations are accounted for
using the acquisition method. The cost of an
acquisition is measured as the fair value of the
assets given, equity instruments and liabilities
incurred or assumed at the date of exchange.
Acquisition costs for business combinations
are expensed and included in selling, general
and administrative expenses. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in a business combination
are measured initially at fair values at the date
of acquisition.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsGoodwill is initially measured at cost, being
the excess of the cost of the business
combination over AGI’s share in the net fair
value of the acquiree’s identifiable assets,
liabilities and contingent liabilities. Any
negative difference is recognized directly
in the consolidated statement of income. If
the fair values of the assets, liabilities and
contingent liabilities can only be calculated on
a provisional basis, the business combination
is recognized using provisional values. Any
adjustments resulting from the completion
of the measurement process are recognized
within 12 months of the date of acquisition
[“measurement period”].

After initial recognition, goodwill is measured
at cost less any accumulated impairment
losses. For the purpose of impairment testing,
goodwill acquired in a business combination
is, from the acquisition date, allocated to each
of AGI’s CGU that are expected to benefit
from the synergies of the combination,
irrespective of whether other assets and
liabilities of the acquiree are assigned to those
CGUs. Where goodwill forms part of a CGU
and part of the operating unit is disposed of,
the goodwill associated with the operation
disposed of is included in the carrying amount
of the operation when determining the gain or
loss on disposal of operation. If the Company
reorganizes its reporting structure in a way
that changes the composition of one or more
CGUs to which goodwill has been allocated,
the goodwill is reallocated to the units
affected. Goodwill disposed of or reallocated
in these cases is measured based on the
relative values of the operation disposed

of and the portion of the CGU retained, or
the relative fair value of the part of a CGU
allocated to a new CGU compared to the part
remaining in the old organizational structure.

Foreign currency translation

Each entity in AGI determines its own
functional currency and items included in
the financial statements of each entity are
measured using that functional currency.

Transactions in foreign currencies are initially
recorded by AGI entities at their respective
functional currency rates prevailing at the
date of the transaction.

Monetary items are translated at the
functional currency spot rate as of the
reporting date. Exchange differences from
monetary items are recognized in the
consolidated statements of income. Non
monetary items that are not carried at fair
value are translated using the exchange rates
as at the dates of the initial transaction. Non
monetary items measured at fair value in
a foreign currency are translated using the
exchange rates at the date when the fair value
is determined.

The assets and liabilities of foreign operations
are translated into Canadian dollars at the
rate of exchange prevailing at the reporting
date and their consolidated statements of
income are translated at the monthly rates
of exchange. The exchange differences
arising on the translation are recognized in
other comprehensive income. On disposal
of a foreign operation, the component of

other comprehensive income relating to that
particular foreign operation is recognized in
the consolidated statements of income.

Any goodwill arising on the acquisition
of a foreign operation and any fair value
adjustments to the carrying amounts of
assets and liabilities arising on the acquisition
are treated as assets and liabilities of the
foreign operation and translated at the rate of
exchange prevailing at the reporting date.

Property, plant and equipment

Property, plant and equipment is stated at
cost, net of any accumulated depreciation
and any impairment losses determined.
Cost includes the purchase price, any costs
directly attributable to bringing the asset
to the location and condition necessary
and, where relevant, the present value of all
dismantling and removal costs. Where major
components of property, plant and equipment
have different useful lives, the components
are recognized and depreciated separately.
AGI recognizes in the carrying amount of an
item of property, plant and equipment the
cost of replacing part of such an item when
the cost is incurred and if it is probable that
the future economic benefits embodied with
the item can be reliably measured. All other
repair and maintenance costs are recognized
in the consolidated statements of income as
an expense when incurred.

ANNUAL REPORT 2013Consolidated FinanCial statementsDepreciation is calculated on a straight-line
basis over the estimated useful lives of the
assets as follows:

Buildings and
building components

Manufacturing
equipment

20 - 60 years

10 - 20 years

Computer hardware

5 years

Leasehold
improvements

Equipment under
finance leases

Over the
lease period

10 years

Furniture and fixtures

5 - 10 years

Vehicles

4 - 16 years

An item of property, plant and equipment
and any significant part initially recognized
is derecognized upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising on
derecognition of the asset is included in the
consolidated statements of income when the
asset is derecognized.

The assets’ useful lives and methods of
depreciation of assets are reviewed at each
financial year-end, and adjusted prospectively,
if appropriate. No depreciation is taken
on construction in progress until the asset
is placed in use. Amounts representing
direct costs incurred for major overhauls
are capitalized and depreciated over
the estimated useful life of the different
components replaced.

Leases

The determination of whether an arrangement
is, or contains, a lease is based on whether
fulfillment of the arrangement is dependent
on the use of a specific asset or assets or the
arrangement conveys a right to use the asset.

Finance leases, which transfer to AGI
substantially all the risks and benefits
incidental to ownership of the leased item,
are capitalized at the commencement of the
lease at the fair value of the leased property
or, if lower, at the present value of the
minimum lease payments. Lease payments
are apportioned between finance charges
and reduction of the lease liability so as to
achieve a constant rate of interest on the
remaining balance of the liability. Finance
charges are recognized in finance costs in the
consolidated statements of income.

Leased assets are depreciated over the
useful life of the asset. However, if there is
no reasonable certainty that AGI will obtain
ownership by the end of the lease term, the
asset is depreciated over the shorter of the
estimated useful life of the asset and the
lease term.

Operating lease payments are recognized as an
expense in the consolidated statements of income
on a straight-line basis over the lease term.

Borrowing costs

months or more, to get ready for its intended
use or sale, are capitalized as part of the cost
of the respective assets. All other borrowing
costs are expensed in the period they occur.

Intangible assets

Intangible assets acquired separately are
measured on initial recognition at cost.
The cost of intangible assets acquired in
a business combination is its fair value at
the date of acquisition. Following initial
recognition, intangible assets are carried at
cost less any accumulated amortization and
any accumulated impairment losses. The
useful lives of intangible assets are assessed
as either finite or indefinite. Intangible assets
with finite useful lives are amortized over
the useful economic life and assessed for
impairment whenever there is an indication
that the intangible asset may be impaired. The
amortization method and amortization period
of an intangible asset with a finite useful life
is reviewed at least annually. Changes in the
expected useful life or the expected pattern
of consumption of future economic benefits
embodied in the asset are accounted for by
changing the amortization period or method,
as appropriate, and are treated as changes
in accounting estimates. The amortization
expense on intangible assets with finite lives
is recognized in the consolidated statements
of income in the expense category consistent
with the function of the intangible assets.

Borrowing costs directly attributable to the
acquisition, construction or production of
an asset that necessarily takes a substantial
period of time, which AGI considers to be 12

Intangible assets with indefinite useful
lives, which include brand names, are not
amortized, but are tested for impairment
annually, either individually or at the CGU

ANNUAL REPORT 2013ConsolIdated FInanCIal statementslevel. The assessment of indefinite life is
reviewed annually to determine whether the
indefinite life continues to be supportable. If
not, the change in useful life from indefinite to
finite is made on a prospective basis.

Internally generated intangible assets are
capitalized when the product or process is
technically and commercially feasible and
AGI has sufficient resources to complete
development. The cost of an internally
generated intangible asset comprises all
directly attributable costs necessary to
create, produce and prepare the asset to be
capable of operating in the manner intended
by management. Expenditures incurred to
develop new demos and prototypes are
recorded at cost as internally generated
intangible assets. Amortization of the
internally generated intangible assets begins
when the development is complete and the
asset is available for use and it is amortized
over the period of expected future benefit.
Amortization is recorded in cost of goods
sold. During the period of development, the
asset is tested for impairment at least annually.

Finite life intangible assets are amortized on
a straight-line basis over the estimated useful
lives of the related assets as follows:

Patents

4 - 10 years

Distribution networks

8 - 25 years

Demos and prototypes

3 - 15 years

Order backlog

3 - 6 months

Software

8 years

Gains or losses arising from derecognition
of an intangible asset are measured as the
difference between the net disposal proceeds
and the carrying amount of the asset and are
recognized in the consolidated statement of
income when the asset is derecognized.

Impairment of non-financial assets

AGI assesses at each reporting date whether
there is an indication that an asset may be
impaired. If such an indication exists, or when
annual testing for an asset is required, AGI
estimates the asset’s recoverable amount. The
recoverable amount of goodwill as well as
intangible assets not yet available for use is
estimated at least annually on December 31.
The recoverable amount is the higher of an
asset’s or CGU group’s fair value less costs to
sell and its value in use.

Value in use is determined by discounting
estimated future cash flows using a pre
tax discount rate that reflects the current
market assessment of the time value of
money and the specific risks of the asset. In
determining fair value less costs to sell, recent
market transactions are taken into account,
if available. If no such transactions can be
identified, an appropriate valuation model is
used. The recoverable amount of assets that
do not generate independent cash flows is
determined based on the CGU group to which
the asset belongs.

AGI bases its impairment calculation on
detailed budgets and forecast calculations
that are prepared separately for each of AGI’s
CGU group to which the individual assets

are allocated. These budgets and forecast
calculations generally cover a period of five
years. For periods after five years, a terminal
value approach is used.

An impairment loss is recognized in the
consolidated statement of income if an asset’s
carrying amount or that of the CGU group
to which it is allocated is higher than its
recoverable amount. Impairment losses of CGU
group are first charged against the carrying
value of the goodwill balance included in the
CGU group and then against the value of the
other assets, in proportion to their carrying
amount. In the consolidated statements of
income, the impairment losses are recognized
in those expense categories consistent with
the function of the impaired asset.

For assets other than goodwill, an assessment
is made at each reporting date as to whether
there is any indication that previously
recognized impairment losses may no longer
exist or may have decreased. If such indication
exists, AGI estimates the asset’s or CGU group’s
recoverable amount. A previously recognized
impairment loss is reversed only if there has
been a change in the assumptions used to
determine the asset’s recoverable amount
since the last impairment loss was recognized.
The reversal is limited so that the carrying
amount of the asset does not exceed its
recoverable amount, nor exceed the carrying
amount that would have been determined,
net of depreciation, had no impairment loss
been recognized for the asset or CGU group in
prior years. Such a reversal is recognized in the
consolidated statements of income.

ANNUAL REPORT 2013Consolidated FinanCial statementsGoodwill is tested for impairment annually
as at December 31 and when circumstances
indicate that the carrying value may be
impaired. Impairment is determined for
goodwill by assessing the recoverable amount
of each CGU group to which the goodwill
relates. Where the recoverable amount of the
CGU group is less than its carrying amount,
an impairment loss is recognized. Impairment
losses relating to goodwill cannot be reversed
in future periods.

Intangible assets with indefinite useful lives
are tested for impairment annually as at
December 31, either individually or at the
CGU group level, as appropriate, and when
circumstances indicate that the carrying value
may be impaired.

Cash and cash equivalents

All highly liquid temporary cash investments
with an original maturity of three months or
less when purchased are considered to be cash
equivalents. For the purpose of the consolidated
statements of cash flows, cash and cash
equivalents consist of cash and money market
funds, net of outstanding bank overdrafts.

Inventory

Inventory is comprised of raw materials
and finished goods. Inventory is valued at
the lower of cost and net realizable value,
using a first-in, first-out basis. For finished
goods, costs include all direct costs incurred
in production, including direct labour and
materials, freight, directly attributable
manufacturing overhead costs based on
normal operating capacity and property, plant
and equipment depreciation.

Inventories are written down to net
realizable value when the cost of inventories
is estimated to be unrecoverable due to
obsolescence, damage or declining selling
prices. Net realizable value is the estimated
selling price in the ordinary course of
business, less estimated costs of completion
and the estimated costs necessary to make
the sale. When the circumstances that
previously caused inventories to be written
down below cost no longer exist, or when
there is clear evidence of an increase in
selling prices, the amount of the write-down
previously recorded is reversed.

Financial instruments

Financial assets and liabilities

AGI classifies its financial assets as [i] financial
assets at fair value through profit or loss,
[ii] loans and receivables or [iii] available-
for-sale, and its financial liabilities as either
[i] financial liabilities at fair value through
profit or loss [“FVTPL”] or [ii] other financial
liabilities. Derivatives are designated as
hedging instruments in an effective hedge,
as appropriate. Appropriate classification of
financial assets and liabilities is determined
at the time of initial recognition or when
reclassified in the consolidated statements of
financial position.

All financial instruments are recognized initially
at fair value plus, in the case of investments
and liabilities not at fair value through profit
or loss, directly attributable transaction costs.
Financial instruments are recognized on the
trade date, which is the date on which AGI
commits to purchase or sell the asset.

Financial assets at fair value through
profit or loss

Financial assets at FVTPL include financial
assets held-for-trading and financial assets
designated upon initial recognition at FVTPL.
Financial assets are classified as held-for-
trading if they are acquired for the purpose of
selling or repurchasing in the near term. This
category includes cash and cash equivalents
and derivative financial instruments entered
into that are not designated as hedging
instruments in hedge relationships as defined
by IAS 39.

Financial assets at FVTPL are carried in the
consolidated statements of financial position
at fair value with changes in the fair value
recognized in finance income or finance costs
in the consolidated statements of income.

AGI has currently not designated any financial
assets upon initial recognition as FVTPL.

Derivatives embedded in host contracts
are accounted for as separate derivatives
and recorded at fair value if their economic
characteristics and risks are not closely
related to those of the host contracts and the
host contracts are not held-for-trading. These
embedded derivatives are measured at fair
value with changes in fair value recognized
in the consolidated statements of income.
Reassessment only occurs if there is a change
in the terms of the contract that significantly
modifies the cash flows that would otherwise
be required.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsLoans and receivables

Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. Assets in this category include
receivables. Loans and receivables are initially
recognized at fair value plus transaction costs.
They are subsequently measured at amortized
cost using the effective interest method
less any impairment. The effective interest
amortization is included in finance income in
the consolidated statements of income. The
losses arising from impairment are recognized
in the consolidated statements of income in
finance costs.

income in finance costs and removed from the
available-for-sale reserve.

For a financial asset reclassified out of the
available-for-sale category, any previous gain
or loss on that asset that has been recognized
in equity is amortized to profit or loss over
the remaining life of the investment using
the effective interest method. Any difference
between the new amortized cost and the
expected cash flows is also amortized over
the remaining life of the asset using the
effective interest method. If the asset is
subsequently determined to be impaired, then
the amount recorded in equity is reclassified
to the consolidated statements of income.

Available-for-sale financial investments

Derecognition

Available-for-sale financial investments
include equity and debt securities. Equity
investments classified as available-for-sale are
those which are neither classified as held-
for-trading nor designated at FVTPL. Debt
securities in this category are those which are
intended to be held for an indefinite period
of time and which may be sold in response to
needs for liquidity or in response to changes
in the market conditions.

After initial measurement, available-for-
sale financial investments are subsequently
measured at fair value with unrealized gains
or losses recognized as other comprehensive
income in the available-for-sale reserve until
the investment is derecognized, at which time
the cumulative gain or loss is recognized in
other operating income, or determined to be
impaired, at which time the cumulative loss is
reclassified to the consolidated statements of

A financial asset is derecognized when the
rights to receive cash flows from the asset
have expired or when AGI has transferred its
rights to receive cash flows from the asset.

Impairment of financial assets

AGI assesses at each reporting date whether
there is any objective evidence that a
financial asset or a group of financial assets
is impaired. A financial asset is deemed to
be impaired if, and only if, there is objective
evidence of impairment as a result of one or
more events that has occurred after the initial
recognition of the asset [an incurred “loss
event”] and that loss event has an impact
on the estimated future cash flows of the
financial asset or the group of financial assets
that can be reliably estimated.

For financial assets carried at amortized cost,
AGI first assesses individually whether objective

evidence of impairment exists individually for
financial assets that are individually significant,
or collectively for financial assets that are not
individually significant. If AGI determines that
no objective evidence of impairment exists
for an individually assessed financial asset,
it includes the asset in a group of financial
assets with similar credit risk characteristics
and collectively assesses them for impairment.
Assets that are individually assessed for
impairment and for which an impairment loss is,
or continues to be, recognized are not included
in a collective assessment of impairment.

If there is objective evidence that an
impairment loss has occurred, the amount
of the loss is measured as the difference
between the asset’s carrying amount and
the present value of estimated future cash
flows. The present value of the estimated
future cash flows is discounted at the financial
asset’s original effective interest rate.

The carrying amount of the asset is reduced
through the use of an allowance account
and the amount of the loss is recognized in
profit or loss. Interest income continues to be
accrued on the reduced carrying amount and
is accrued using the rate of interest used to
discount the future cash flows for the purpose
of measuring the impairment loss. The interest
income is recorded as part of finance income
in the consolidated statements of income.

Loans and receivables, together with the
associated allowance, are written off when
there is no realistic prospect of future
recovery. If, in a subsequent year, the amount
of the estimated impairment loss increases or

ANNUAL REPORT 2013Consolidated FinanCial statementsdecreases because of an event occurring after
the impairment was recognized, the previously
recognized impairment loss is increased or
reduced by adjusting the allowance account.
If a write-off is later recovered, the recovery is
credited to finance costs in the consolidated
statement of income.

For available-for-sale financial investments,
AGI assesses at each reporting date whether
there is objective evidence that an investment
or a group of investments is impaired. In
the case of equity investments classified as
available-for-sale, objective evidence would
include a significant or prolonged decline in
the fair value of the investment below its cost.
“Significant” is evaluated against the original
cost of the investment and “prolonged”
against the period in which the fair value has
been below its original cost. Where there
is evidence of impairment, the cumulative
loss measured as the difference between the
acquisition cost and the current fair value,
less any impairment loss on that investment
previously recognized in the consolidated
statements of income is removed from other
comprehensive income and recognized in
the consolidated statements of income.
Impairment losses on equity investments
are not reversed through the consolidated
statements of income; increases in their fair
value after impairment are recognized directly
in other comprehensive income. In the case
of debt instruments classified as available-
for-sale, impairment is assessed based on
the same criteria as financial assets carried
at amortized cost. However, the amount
recorded for impairment is the cumulative

loss measured as the difference between the
amortized cost and the current fair value,
less any impairment loss on that investment
previously recognized in the consolidated
statements of income. If, in a subsequent year,
the fair value of a debt instrument increases
and the increase can be objectively related
to an event occurring after the impairment
loss was recognized in the consolidated
statements of income, the impairment loss is
reversed through the consolidated statements
of income.

Financial liabilities at FVTPL

Financial liabilities at FVTPL include financial
liabilities held-for-trading and financial
liabilities designated upon initial recognition
at FVTPL. Financial liabilities are classified
as held-for-trading if they are acquired for
the purpose of selling in the near term.
This category includes derivative financial
instruments entered into by the Company that
are not designated as hedging instruments in
hedge relationships as defined by IAS 39.

Gains or losses on liabilities held-for-trading
are recognized in the consolidated statements
of income.

AGI has not designated any financial liabilities
upon initial recognition as FVTPL.

Other financial liabilities

Financial liabilities are measured at amortized
cost using the effective interest rate method.
Financial liabilities include long-term debt
issued, which is initially measured at fair
value, which is the consideration received, net

of transaction costs incurred, net of equity
component. Transaction costs related to the
long-term debt instruments are included in
the value of the instruments and amortized
using the effective interest rate method.
The effective interest expense is included in
finance costs in the consolidated statements
of income.

Derecognition

A financial liability is derecognized when the
obligation under the liability is discharged or
cancelled or expires.

When an existing financial liability is
replaced by another from the same lender on
substantially different terms, or the terms of
an existing liability are substantially modified,
such an exchange or modification is treated
as a derecognition of the original liability
and the recognition of a new liability, and the
difference in the respective carrying amounts
is recognized in the consolidated statements
of income.

Interest income

For all financial instruments measured at
amortized cost, interest income or expense is
recorded using the effective interest method,
which is the rate that exactly discounts the
estimated future cash payments or receipts
through the expected life of the financial
instrument or a shorter period, where
appropriate, to the net carrying amount of the
financial asset or liability. Interest income is
included in finance income in the consolidated
statements of income.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsDerivative instruments and
hedge accounting

AGI uses derivative financial instruments such
as forward currency contracts and interest
rate swaps to hedge its foreign currency
risk and interest rate risk. Such derivative
financial instruments are initially recognized
at fair value on the date on which a derivative
contract is entered into and are subsequently
remeasured at fair value. Derivatives are
carried as financial assets when the fair value
is positive and as financial liabilities when the
fair value is negative.

AGI analyzes all of its contracts, of both a
financial and non-financial nature, to identify
the existence of any “embedded” derivatives.
Embedded derivatives are accounted
for separately from the host contract at
the inception date when their risks and
characteristics are not closely related to those
of the host contracts and the host contracts
are not carried at fair value.

Any gains or losses arising from changes
in the fair value of derivatives are recorded
directly in the consolidated statements of
income, except for the effective portion of
cash flow hedges, which is recognized in
other comprehensive income.

For the purpose of hedge accounting, hedges
are classified as:

• Fair value hedges when hedging the
exposure to changes in the fair value
of a recognized asset or liability or an
unrecognized firm commitment [except
for foreign currency risk].

• Cash flow hedges when hedging exposure
to variability in cash flows that is either
attributable to a particular risk associated
with a recognized asset or liability or
a highly probable forecast transaction
or the foreign currency risk in an
unrecognized firm commitment.

At the inception of a hedge relationship, AGI
formally designates and documents the hedge
relationship to which AGI wishes to apply
hedge accounting and the risk management
objective and strategy for undertaking
the hedge. The documentation includes
identification of the hedging instrument, the
hedged item or transaction, the nature of
the risk being hedged and how the entity
will assess the effectiveness of changes
in the hedging instrument’s fair value in
offsetting the exposure to changes in the cash
flows attributable to the hedged risk. Such
hedges are expected to be highly effective
in achieving offsetting changes in cash flows
and are assessed on an ongoing basis to
determine whether they have been highly
effective throughout the financial reporting
periods for which they were designated.

Hedges that meet the strict criteria for hedge
accounting are accounted for as follows:

Cash flow hedges

income or expenses. Amounts recognized as
other comprehensive income are transferred
to the consolidated statements of income
when the hedged transaction affects profit
or loss, such as when the hedged financial
income or financial expense is recognized
or when a forecast sale occurs. Where the
hedged item is the cost of a non-financial
asset or non-financial liability, the amounts
recognized as other comprehensive income
are transferred to the initial carrying amount
of the non financial asset or liability.

If the forecast transaction or firm commitment
is no longer expected to occur, the cumulative
gain or loss previously recognized in equity
is transferred to the consolidated statements
of income. If the hedging instrument expires
or is sold, terminated or exercised without
replacement or rollover, or if its designation
as a hedge is revoked, any cumulative
gain or loss previously recognized in other
comprehensive income remains in other
comprehensive income until the forecast
transaction or firm commitment affects profit
or loss.

AGI uses primarily forward currency
contracts as hedges of its exposure to
foreign currency risk in forecast transactions
and firm commitments.

The effective portion of the gain or loss on the
hedging instrument is recognized directly as
other comprehensive income in the cash flow
hedge reserve, while any ineffective portion is
recognized immediately in the consolidated
statements of income in other operating

Offsetting of financial instruments

Financial assets and financial liabilities are
offset and the net amount reported in the
consolidated statements of financial position
if, and only if, there is a currently enforceable
legal right to offset the recognized amounts

ANNUAL REPORT 2013Consolidated FinanCial statementsand there is an intention to settle on a net
basis, or to realize the assets and settle the
liabilities simultaneously.

Fair value of financial instruments

Fair value is the estimated amount that AGI
would pay or receive to dispose of these
contracts in an arm’s length transaction
between knowledgeable, willing parties who
are under no compulsion to act. The fair value
of financial instruments that are traded in active
markets at each reporting date is determined
by reference to quoted market prices, without
any deduction for transaction costs.

For financial instruments not traded in an
active market, the fair value is determined
using appropriate valuation techniques that
are recognized by market participants. Such
techniques may include using recent arm’s
length market transactions, reference to the
current fair value of another instrument that is
substantially the same, discounted cash flow
analysis or other valuation models.

Provisions

Provisions are recognized when AGI has a
present obligation, legal or constructive,
as a result of a past event, it is probable
that an outflow of resources embodying
economic benefits will be required to settle
the obligation and a reliable estimate can
be made of the amount of the obligation.
Where AGI expects some or all of a provision
to be reimbursed, for example under an
insurance contract, the reimbursement is
recognized as a separate asset but only when
the reimbursement is virtually certain. The

expense relating to any provision is presented
in the consolidated statements of income,
net of any reimbursement. If the effect of the
time value of money is material, provisions are
discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific
to the liability. Where discounting is used, the
increase in the provision due to the passage
of time is recognized as a finance cost.

Warranty provisions

Provisions for warranty-related costs are
recognized when the product is sold or
service provided. Initial recognition is based
on historical experience.

Profit per share

The computation of profit per share is based
on the weighted average number of shares
outstanding during the period. Diluted
profit per share is computed in a similar
way to basic profit per share except that
the weighted average shares outstanding
are increased to include additional shares
assuming the exercise of share options, share
appreciation rights and convertible debt
options, if dilutive.

Revenue recognition

Revenue is recognized to the extent that it
is probable that the economic benefits will
flow to AGI and the revenue can be reliably
measured, regardless of when the payment
is being made. Revenue is measured at the
fair value of the consideration received or
receivable, taking into account contractually
defined terms of payment and excluding taxes

or duty. AGI assesses its revenue arrangements
against specific criteria in order to determine
if it is acting as principal or agent. With the
exception of third-party services, AGI has
concluded that it is acting as a principal in all
of its revenue arrangements. The following
specific recognition criteria must also be met
before revenue is recognized:

Sale of goods

Revenue from the sale of goods is in general
recognized when significant risks and rewards
of ownership are transferred to the customer.
AGI generally recognizes revenue when
products are shipped, free on board shipping
point; the customer takes ownership and
assumes risk of loss; collection of the related
receivable is probable; persuasive evidence
of an arrangement exists; and, the sales price
is fixed or determinable. Customer deposits
are recorded as a current liability when cash
is received from the customer and recognized
as revenue at the time product is shipped, as
noted above.

In transactions involving the sale of specific
customer products, AGI applies layaway
sales accounting. Under layaway sales, AGI
recognizes revenue prior to the product being
shipped, provided the following criteria are
met as at the reporting date:

• The goods are ready for delivery to the

customer; this implies the goods have
been produced to the specifications
of the customer and AGI has assessed,
through its quality control processes, that
the goods comply with the specifications;

ANNUAL REPORT 2013ConsolIdated FInanCIal statements • A deposit of more than 80% of the total
contract value for the respective goods
has been received;

• The goods are specifically identified for
the customer in AGI’s inventory tracking
system; and

• AGI does not have any other obligation
than to ship the product, or to store the
product until the customer picks it up.

Bill and hold

AGI applies bill and hold sales accounting.
Under bill and hold sales, AGI recognizes
revenue when the buyer takes title, provided
the following criteria are met as of the
reporting date:

• It is probable that delivery will be made;

• The item is on hand, identified and ready

for delivery to the buyer at the time the
sale is recognized;

• The buyer specifically acknowledges the

deferred delivery instructions; and

• The usual payment terms apply.

Third-party services

AGI from time to time enters into
arrangements with third-party providers to
provide services for AGI’s customers. Where
AGI acts as agent the revenue and costs
associated with these services are recorded
on a net basis and disclosed under other
operating income.

Construction contracts

AGI from time to time enters into
arrangements with its customers that are
considered construction contracts. These
contracts [or a combination of contracts] are
specifically negotiated for the construction
of an asset or a combination of assets that
are closely interrelated or interdependent in
terms of their design, technology and function
or their ultimate purpose or use.

AGI principally operates fixed price contracts.
If the outcome of such a contract can be
reliably measured, revenue associated with
the construction contract is recognized
by reference to the stage of completion
of the contract activity at period-end [the
percentage of completion method].

The outcome of a construction contract
can be estimated reliably when: [i] the total
contract revenue can be measured reliably;
[ii] it is probable that the economic benefits
associated with the contract will flow to
the entity; [iii] the costs to complete the
contract and the stage of completion can be
measured reliably; and [iv] the contract costs
attributable to the contract can be clearly
identified and measured reliably so that actual
contract costs incurred can be compared with
prior estimates.

When the outcome of a construction contract
cannot be estimated reliably [principally during
early stages of a contract], contract revenue
is recognized only to the extent of costs
incurred that are expected to be recoverable.
In applying the percentage of completion

method, revenue recognized corresponds to
the total contract revenue [as defined above]
multiplied by the actual completion rate based
on the proportion of total contract costs
[as defined above] incurred to date and the
estimated costs to complete.

Income taxes

AGI and its subsidiaries are generally
taxable under the statutes of their country
of incorporation.

Current income tax assets and liabilities for
the current and prior period are measured at
the amount expected to be recovered from or
paid to the taxation authorities. The tax rates
and tax laws used to compute the amount
are those that are enacted or substantively
enacted at the reporting date in the countries
where AGI operates and generates taxable
income. Current income tax relating to items
recognized directly in equity is recognized in
equity and not in the consolidated statements
of income. Management periodically evaluates
positions taken in the tax returns with
respect to situations in which applicable tax
regulations are subject to interpretation and
establishes provisions where appropriate.

AGI follows the liability method of accounting
for deferred taxes. Under this method, income
tax liabilities and assets are recognized for
the estimated tax consequences attributable
to the temporary differences between the
carrying value of the assets and liabilities on
the consolidated financial statements and
their respective tax bases.

ANNUAL REPORT 2013Consolidated FinanCial statementsDeferred tax liabilities are recognized for all
taxable temporary differences, except:

• Where the deferred tax liability arises

from the initial recognition of goodwill or
of an asset or liability in a transaction that
is not a business combination and, at the
time of the transaction, affects neither
the accounting profit nor the taxable
profit or loss.

• In respect of taxable temporary

differences associated with investments
in subsidiaries, where the timing of the
reversal of the temporary differences can
be controlled and it is probable that the
temporary differences will not reverse in
the foreseeable future.

Deferred tax assets are recognized for
all deductible temporary differences and
carryforward of unused tax losses, to the
extent that it is probable that taxable profit
will be available against which the deductible
temporary differences and the carryforward
of unused tax losses can be utilized.

The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to
allow all or part of the deferred tax asset to
be utilized. Unrecognized deferred tax assets
are reassessed at each reporting date and are
recognized to the extent that it has become
probable that future taxable profits will
allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are
measured at the tax rates that are expected

to apply in the year when the asset is realized
or the liability is settled, based on tax rates
[and tax laws] that have been enacted or
substantively enacted at the reporting date.

The net amount of sales tax recoverable from,
or payable to, the taxation authority is included
as part of receivables or payables in the
consolidated statements of financial position.

Deferred tax items are recognized in
correlation to the underlying transaction
either in the consolidated statements of
income, other comprehensive income or
directly in equity.

Deferred tax assets and deferred tax liabilities
are offset if a legally enforceable right exists
to offset current tax assets against current
income tax liabilities and the deferred taxes
relate to the same taxable entity and the
same taxation authority.

Tax benefits acquired as part of a business
combination, but not satisfying the criteria
for separate recognition at that date, would
be recognized subsequently if information
about facts and circumstances changed.
The adjustment would either be treated as a
reduction to goodwill if it occurred during the
measurement period or in profit or loss, when it
occurs subsequent to the measurement period.

Sales tax

Revenue, expenses and assets are recognized
net of the amount of sales tax, except where
the sales tax incurred on a purchase of
assets or services is not recoverable from the
taxation authority, in which case the sales tax
is recognized as part of the cost of acquisition
of the asset or as part of the expense item
as applicable and where receivables and
payables are stated with the amount of sales
tax included.

Share-based compensation plans

Employees of AGI may receive remuneration
in the form of share-based payment
transactions, whereby employees render
services and receive consideration in the
form of equity instruments [equity-settled
transactions, long-term incentive plan,
share award incentive plan and directors
deferred compensation plan] or cash
[cash-settled transactions and share award
incentive plan]. In situations where equity
instruments are issued and some or all of
the goods or services received by the entity
as consideration cannot be specifically
identified, the unidentified goods or services
received are measured as the difference
between the fair value of the share-based
payment transaction and the fair value of any
identifiable goods or services received at the
grant date and are capitalized or expensed
as appropriate.

Equity-settled transactions

The cost of equity-settled transactions is
recognized, together with a corresponding
increase in other capital reserves, in equity,
over the period in which the performance
and/or service conditions are fulfilled.

The cumulative expense recognized for
equity-settled transactions at each reporting
date until the vesting period reflects the
extent to which the vesting period has expired

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsand AGI’s best estimate of the number of the
shares that will ultimately vest. The expense or
credit recognized for a period represents the
movement in cumulative expense recognized
as at the beginning and end of that period
and is recognized in the consolidated
statements of income in the respective
function line. When options and other share-
based compensation awards are exercised or
exchanged, the amounts previously credited
to contributed surplus are reversed and
credited to shareholders’ equity. The amount
of cash, if any, received from participants is
also credited to shareholders’ equity.

Where the terms of an equity-settled
transaction award are modified, the minimum
expense recognized is the expense as if the
terms had not been modified, if the original
terms of the award are met. An additional
expense is recognized for any modification
that increases the total fair value of the share-
based payment transaction, or is otherwise
beneficial to the employee as measured at the
date of modification.

Where an equity-settled award is cancelled,
it is treated as if it vested on the date
of cancellation and any expense not yet
recognized for the award [being the total
expense as calculated at the grant date]
is recognized immediately. This includes
any award where vesting conditions within
the control of either the Company or the
employee are not met. However, if a new
award is substituted for the cancelled award,
and designated as a replacement award on
the date that it is granted, the cancelled
and new awards are treated as if they were

a modification of the original award. The
dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.

Development costs are charged to operations
in the period of the expenditure unless they
satisfy the condition for recognition as an
internally generated intangible asset.

Cash-settled transactions

Government grants

The cost of cash-settled transactions is
measured initially at fair value at the grant
date using the Black-Scholes model. This
fair value is expensed over the period
until the vesting date, with recognition of
a corresponding liability. The liability is
remeasured to fair value at each reporting
date up to and including the settlement date,
with changes in fair value recognized in the
consolidated statement of income in the line
of the function the respective employee is
engaged in.

Post-retirement benefit plans

AGI contributes to retirement savings plans
subject to maximum limits per employee.
AGI accounts for such defined contributions
as an expense in the period in which the
contributions are required to be made. Certain
of AGI’s plans classify as multi-employer plans
and would ultimately provide the employee a
defined benefit pension. However, based upon
the evaluation of the available information,
AGI is not required to account for the plans
in accordance with the defined benefit
accounting rules, and accounts for such plans
as it does defined contribution plans.

Research and development expenses

Research expenses, net of related tax credits,
are charged to the consolidated statement
of income in the period they are incurred.

Government grants are recognized at fair
value where there is reasonable assurance
that the grant will be received and all
attaching conditions will be complied with.
Where the grants relate to an asset, the fair
value is credited to the cost of the asset and
is released to the consolidated statement
of income over the expected useful life in
a consistent manner with the depreciation
method for the relevant assets.

Investment tax credits

Federal and provincial investment tax credits
are accounted for as a reduction of the cost
of the related assets or expenditures in the
year in which the credits are earned and when
there is reasonable assurance that the credits
can be used to recover taxes.

4. siGnificant accountinG
judGments, estimates and
assumPtions

The preparation of the consolidated financial
statements requires management to make
judgments, estimates and assumptions
that affect the reported amounts of assets,
liabilities, income, expenses and the disclosure
of contingent liabilities. The estimates and
related assumptions are based on previous
experience and other factors considered
reasonable under the circumstances, the

ANNUAL REPORT 2013Consolidated FinanCial statementsresults of which form the basis of making the
assumptions about carrying values of assets
and liabilities that are not readily apparent
from other sources. However, uncertainty
about these assumptions and estimates could
result in outcomes that require a material
adjustment to the carrying amount of the
asset or liability affected in future periods.

The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in
the period in which the estimate is revised if
the revision affects only that period, or in the
period of the revision and future periods if
the revision affects both current and future
periods. The key assumptions concerning the
future and other key sources of estimation
uncertainty at the reporting date that have
a significant risk of causing a material
adjustment to the carrying amounts of assets
and liabilities within the next financial year are
described below.

Impairment of non-financial assets

AGI’s impairment test is based on value in
use or fair value less cost to sell calculations
that use a discounted cash flow model. The
cash flows are derived from the forecast
for the next five years and do not include
restructuring activities to which AGI has
not yet committed or significant future
investments that will enhance the asset’s
performance of the CGU being tested. These
calculations require the use of estimates and
forecasts of future cash flows. Qualitative
factors, including market presence and trends,
strength of customer relationships, strength

of local management, strength of debt and
capital markets, and degree of variability
in cash flows, as well as other factors, are
considered when making assumptions
with regard to future cash flows and the
appropriate discount rate. The recoverable
amount is most sensitive to the discount rate,
as well as the forecasted margins and growth
rate used for extrapolation purposes. A
change in any of the significant assumptions
or estimates used to evaluate goodwill and
other non-financial assets could result in a
material change to the results of operations.
The key assumptions used to determine the
recoverable amount for the different CGUs are
further explained in note 12.

Cash generating units are defined as the
lowest grouping of integrated assets that
generate identifiable cash inflows that are
largely independent of the cash inflows
of other assets or groups of assets. The
classification of assets into cash generating
units requires significant judgment and
interpretations with respect to the integration
between assets, the nature of products, the
way in which management allocates resources
and other relevant factors.

Development costs

Development costs are capitalized in
accordance with the accounting policy
described in note 3. Initial capitalization of
costs is based on management’s judgment
that technical and economical feasibility
is confirmed, usually when a project has
reached a defined milestone according to an
established project management model.

Useful lives of key property, plant and
equipment and intangible assets

The depreciation method and useful lives
reflect the pattern in which management
expects the asset’s future economic benefits
to be consumed by AGI. Refer to note 3 for
the estimated useful lives.

Fair value of financial instruments

Where the fair value of financial assets and
financial liabilities recorded in the consolidated
statements of financial position cannot be
derived from active markets, it is determined
using valuation techniques including the
discounted cash flow models. The inputs
to these models are taken from observable
markets where possible, but where this is not
feasible, a degree of judgment is required in
establishing fair values. The judgments include
considerations of inputs such as liquidity
risk, credit risk and volatility. Changes in
assumptions about these factors could affect
the reported fair value of financial instruments.

Share-based payments

AGI measures the cost of equity-settled
share-based payment transactions with
employees by reference to the fair value of
equity instruments at the grant date, whereas
the fair value of cash-settled share-based
payments is remeasured at every reporting
date. Estimating fair value for share-based
payments requires determining the most
appropriate valuation model for a grant of
these instruments, which is dependent on the
terms and conditions of the grant. This also
requires determining the most appropriate

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsinputs to the valuation model including the
expected life of the option, volatility and
dividend yield.

Income taxes

Uncertainties exist with respect to the
interpretation of complex tax regulations,
changes in tax laws and the amount and timing
of future taxable income. Given the wide
range of international business relationships
and the long-term nature and complexity of
existing contractual agreements, differences
arising between the actual results and the
assumptions made, or future changes to
such assumptions, could necessitate future
adjustments to taxable income and expenses
already recorded. AGI establishes provisions,
based on reasonable estimates, for possible
consequences of audits by the tax authorities
of the respective countries in which it operates.
The amount of such provisions is based on
various factors, such as experience of previous
tax audits and differing interpretations of
tax regulations by the taxable entity and the
responsible tax authority.

Such differences of interpretation may arise
on a wide variety of issues, depending on
the conditions prevailing in the respective
company’s domicile. As AGI assesses the
probability for litigation and subsequent cash
outflow with respect to taxes as remote, no
contingent liability has been recognized.
Deferred tax assets are recognized for all
unused tax losses to the extent that it is
probable that taxable profit will be available
against which the losses can be utilized.
Significant management judgment is required

to determine the amount of deferred tax assets
that can be recognized, based upon the likely
timing and the level of future taxable profits
together with future tax planning strategies.

Acquisition accounting

For acquisition accounting purposes, all
identifiable assets, liabilities and contingent
liabilities acquired in a business combination
are recognized at fair value at the date of
acquisition. Estimates are used to calculate
the fair value of these assets and liabilities
as at the date of acquisition. Contingent
consideration resulting from business
combinations is valued at fair value at the
acquisition date as part of the business
combination. Where the contingent
consideration meets the definition of a
derivative and, thus, a financial liability, it is
subsequently remeasured to fair value at each
reporting date. The determination of the fair
value is based on discounted cash flows. The
key assumptions take into consideration the
probability of meeting each performance
target and the discount factor.

5. standards issued but
not yet effectiVe

Standards issued but not yet effective up
to the date of issuance of the Company’s
consolidated financial statements are listed
below. This listing is of standards and
interpretations issued, which the Company
reasonably expects to be applicable at a
future date. The Company intends to adopt
those standards when they become effective.

Financial instruments: classification and
measurement [“IFRS 9”]

IAS 32 financial instruments:
presentation

ANNUAL REPORT 2013Consolidated FinanCial statementsis to the benefit of the Company, is required to be paid to the vendor of
Tramco once the deduction has become statute barred. The impact of
this deduction from taxable income was to reduce current income tax
expense by $108 and income tax payable by $723. The amount payable
to the vendor upon the deduction becoming statute barred of $615 has
been recorded as a long-term liability on the consolidated statements
of financial position.

IAS 36 impairment of assets

In May 2013, the IASB amended IAS 36 to reduce the circumstances
in which the recoverable amount of assets or cash-generating units
is required to be disclosed, clarify the disclosures required, and to
introduce an explicit requirement to disclose the discount rate used
in determining impairment (or reversals) where recoverable amount
(based on fair value less costs of disposal) is determined using a
present value technique. This amendment may affect disclosures but is
not anticipated to have a material impact on financial results.

6. business combinations 2011
Airlanco Inc. [“Airlanco”]

Effective October 4, 2011, the Company acquired substantially all of the
operating assets of Airlanco, a manufacturer of grain drying systems. The
Company acquired Airlanco to expand its catalogue of aeration and dust
collection products. In the year ended December 31, 2012, the Company
satisfied obligations related to transaction costs of $91 and these have
been included in cash flows from operating activities. Also, in the 2012
period, the conditions related to the cash holdback were met and the
Company transferred restricted cash of $508 to the vendors.

7. business combinations 2010

Tramco, Inc. [“Tramco”]

Effective December 20, 2010, the Company acquired 100% of the
outstanding shares of Tramco, a manufacturer of chain conveyors.
Tramco is an industry leader and provides the Company with an entry
point into the grain processing sector of the food supply chain. In the
year ended December 31, 2012, the Company satisfied obligations
related to transaction costs of $322 and these have been included
in cash flows from operating activities. Also, in the 2012 period, the
conditions related to the cash holdback were met and the Company
transferred restricted cash of $1,017 to the vendors.

In the year ended December 31, 2013, the Company recorded a tax
deduction in regards to the write-off of a receivable outstanding as
at the date of the Tramco acquisition. Per the terms of the purchase
agreement, the tax benefit related to this deduction, net of 15% which

ANNUAL REPORT 2013ConsolIdated FInanCIal statements8. other exPenses (income)

[a] other oPeratinG
exPense (income)

Net loss (gain) on disposal of
property, plant and equipment

Other

[b] finance exPense (income)

Interest expense (income)
from banks

Loss (gain) on foreign exchange

[c] finance costs

Interest on overdrafts and other
finance costs

Interest, including non-cash
interest, on debts and borrowings

Interest, including non-
cash interest, on convertible
debentures [note 23]

2013
$

2012
$

(4,633)

(1,094)

(5,727)

(28)

2,416

2,388

(154)

(122)

(785)

(773)

[d] cost of Goods sold

Depreciation

Amortization of intangible assets

Warranty provision

Cost of inventories recognized
as an expense

[e] sellinG, General and

administratiVe exPenses

Depreciation

Amortization of intangible assets

Minimum lease payments
recognized for operating leases

193

128

Transaction costs

2013
$

2012
$

5,470

5,596

285

922

243

198

238,426

213,162

245,103

219,199

533

3,754

1,722

286

565

3,606

1,048

—

50,858

56,077

2,605

2,533

12,085

14,883

10,397

13,058

Selling, general and administrative

57,214

63,509

[f] emPloyee benefits exPense

Wages and salaries

82,949

81,889

Share-based payment expense
[note 21]

Pension costs

3,084

2,156

88,189

1,174

1,950

85,013

of Which

Included in cost of goods sold

57,736

52,301

Included in general and
administrative expense

30,453

88,189

32,712

85,013

ANNUAL REPORT 2013Consolidated FinanCial statements9. ProPerty, Plant and eQuiPment

Land
$

Grounds
$

Buildings
$

Leasehold
improvements
$

Furniture
and Fixtures
$

Vehicles
$

Computer
hardware
$

Manufacturing
equipment
$

Construction
in progress
$

Total
$

cost

balance,
january 1, 2013

Additions

Classification as
held for sale

Disposals

Exchange
differences

balance,
december 31,
2013

dePreciation

balance,
january 1, 2013

Depreciation
charge for the year

Classification as
held for sale

Disposals

Exchange
differences

balance,
december 31,
2013

net booK Value,
january 1, 2013

4,707

247

649

419

37,590

7,194

2,023

314

1,363

105

(82)

(1,336)

(240)

—

(1,186)

166

1,118

—

(6)

6,155

298

—

(356)

2,649

289

47,978

5,460

—

(17)

—

(294)

1,089

—

103,153

14,327

(1,500)

(2,099)

2,613

4,798 1,006 43,380

2,375

1,490

6,173

2,996

54,233

116,494

—

264

3,540

1,167

(17)

(188)

—

(278)

373

207

—

537

145

—

(5)

2,918

1,741

12,926

596

320

3,497

—

(123)

—

(17)

—

(220)

436

—

22,299

6,003

(205)

(643)

624

—

322

4,326

601

688

3,417

2,085

16,639

— 28,078

4,707

385

34,050

1,650

826

3,237

908

35,052

80,854

net booK Value,
december 31, 2013 4,798

684 39,054

1,774

802

2,756

911

37,594

88,416

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsLand
$

Grounds
$

Buildings
$

Leasehold
improvements
$

Furniture
and Fixtures
$

Vehicles
$

Computer
hardware
$

Manufacturing
equipment
$

Construction
in progress
$

Total
$

4,751

597

37,180

—

673

—

466

1,566

—

(44)

(6)

(263)

(9)

1,148

229

(9)

(5)

6,375

167

(370)

(17)

2,501

205

(41)

(16)

46,800

2,045

(162)

277

100,095

(233)

—

4,710

(582)

(705)

(5)

(1,070)

4,707

649

37,590

2,023

1,363

6,155

2,649

47,978

103,153

—

190

2,446

1,108

—

270

108

—

406

2,502

1,418

9,429

137

(5)

(1)

689

(268)

363

(33)

(5)

(7)

3,682

(86)

(99)

—

16,661

6,161

(392)

(131)

(14)

(5)

—

264

3,540

373

537

2,918

1,741

12,926

—

22,299

4,751

407

34,734

196

742

3,873

1,083

37,371

277

83,434

4,707

385

34,050

1,650

826

3,237

908

35,052

80,854

cost

balance,
january 1, 2012

Additions

Disposals

Exchange
differences

balance,
december 31,
2012

dePreciation

balance,
january 1, 2012

Depreciation
charge for the year

Disposals

Exchange
differences

balance,
december 31,
2012

net booK Value,
january 1, 2012

net booK Value,
december 31, 2012

Construction in progress is comprised primarily of building and equipment.

AGI regularly assesses its long-lived assets for impairment. As at December 31, 2013 and 2012, the recoverable amount of each CGU exceeded the
carrying amounts of the assets allocated to the respective units.

Capitalized borrowing costs

No borrowing costs were capitalized in 2012 or 2013.

ANNUAL REPORT 2013Consolidated FinanCial statements
10. intanGible assets

Distribution
Networks
$

Brand Names
$

Patents
$

Software
$

Development
Projects
$

Total
$

95,195

886

332

2,259

3,397

886

—

101

4,384

98,672

194

231

—

22,418

4,039

728

425

27,185

1,283

—

332

1,711

290

200

510

1,201

3,960

71,487

cost

balance, january 1, 2013

55,269

34,105

Internal development

Acquisition

Exchange differences

—

1,278

—

722

1,141

—

balance, december 31, 2013

56,547

34,827

1,203

amortization

balance, january 1, 2013

Amortization charge for the year

Exchange differences

balance, december 31, 2013

net booK Value,
december 31, 2013

21,190

3,516

671

25,377

—

31,170

34,827

744

873

330

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsDistribution
Networks
$

Brand Names
$

Patents
$

Software
$

Development
Projects
$

cost

balance, january 1, 2012

55,633

34,314

Internal development

Acquisition

Exchange differences

balance, december 31, 2012

amortization

balance, january 1, 2012

Amortization charge for the year

Exchange differences

balance, december 31, 2012

net booK Value,
december 31, 2012

—

(364)

56,269

17,874

3,459

(143)

21,190

—

(209)

34,105

—

34,079

34,105

The Company is continuously working on research and development
projects. Development costs capitalized include the development of
new products and the development of new applications of already
existing products and prototypes. Research costs and development
costs that are not eligible for capitalization have been expensed and
are recognized in selling, general and administrative expenses.

Intangible assets include patents acquired through business
combinations, which have a remaining life of ten years. All brand names
with a carrying amount of $34,827 [2012 - $34,105] have been qualified
as indefinite useful life intangible assets, as the Company expects to
maintain these brand names and currently no end point of the useful
lives of these brand names can be determined. The Company assesses
the assumption of an indefinite useful life at least annually. For definite
life intangibles, the Company assesses whether there are indicators
of impairment at subsequent reporting dates as a triggering event for
performing an impairment test.

Total
$

94,236

1,426

190

(657)

95,195

18,726

3,849

(157)

22,418

2,010

1,426

—

(39)

3,397

147

—

194

1,162

—

(21)

1,141

665

(10)

744

397

1,117

—

190

(24)

1,283

140

154

(4)

290

993

3,203

72,777

Intangible assets and research and development expenses for the year
ended December 31, 2013, are net of combined federal and provincial
scientific research and experimental development [“SR&ED”] tax
credits in the amounts of $402 and $190, respectively. A number
of specific criteria must be met in order to qualify for federal and
provincial SR&ED investment tax credits. As at December 31, 2013, the
Corporation had Federal investment tax credit carryforwards in the
amount of $4,229 [2012 - $4,229], Federal SR&ED investment tax credit
carryforwards in the amount of $703 [2012 - $210], Provincial SR&ED
investment tax credit carryforwards in the amount of $139 [2012 - $56]
and Provincial manufacturing or processing tax credits in the amount
of $416 [2012 - $385]; these begin expiring in 2015.

ANNUAL REPORT 2013Consolidated FinanCial statementsOther significant intangible assets are goodwill [note 11] and the
distribution network of the Company. The distribution network was
acquired in past business combinations and reflects the Company’s
dealer network in North America and the dealer network of the
Mepu operating division. The remaining amortization period for the
distribution network ranges from 2 to 17 years.

With the exception of the acquisition of the Rem GrainVac product
line [note 33], the Company had no contractual commitments for the
acquisition of intangible assets as of the reporting date.

11. GoodWill

The Company’s CGUs and goodwill and indefinite life intangible assets
allocated thereto are as follows:

On-Farm

Goodwill

2013
$

2012
$

37,087

37,983

Intangible assets with indefinite lives

24,181

24,095

Commercial

Goodwill

27,235

25,416

2013
$

2012
$

Intangible assets with indefinite lives

10,647

10,010

total

balance, beGinninG of year

63,399

65,876

GoodWill

Exchange differences

Impairment of goodwill [note 12]

1,923

(587)

—

(1,890)

balance, end of year

65,322

63,399

12. imPairment testinG

The Company performs its annual goodwill impairment test as at
December 31. Prior to 2013, the annual goodwill impairment tests were
performed on all CGUs. With the continuing growth of international
sales, the Company consolidated all its CGUs during 2013 into two
groups of CGU in order to align the units expected to benefit from the
synergies of the business combinations in which the goodwill arises.
The recoverable amount for both of the Company’s CGUs has been
determined based on value in use for the year ended December 31, 2013,
using cash flow projections covering a five-year period. The various
pre-tax discount rates applied to the cash flow projections are between
12.6% and 13.2% [2012 - 12.0% and 16.3%] and cash flows beyond the
five-year period are extrapolated using a 3% growth rate [2012 - 3%],
which is management’s estimate of long-term inflation and productivity
growth in the industry and geographies in which it operates.

intanGible assets With
indefinite liVes

65,322 63,399

34,827

34,105

Key assumptions used in valuation calculations

The calculation of value in use or fair value less cost to sell for all the
CGUs is most sensitive to the following assumptions:

• Gross margins;

• Discount rates;

• Market share during the budget period; and

• Growth rate used to extrapolate cash flows beyond the budget period.

Gross margins

Forecasted gross margins are based on actual gross margins achieved
in the years preceding the forecast period. Margins are kept constant
over the forecast period and the terminal period, unless management
has started an efficiency improvement process.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsDiscount rates

14. aVailable-for-sale inVestment

On December 22, 2009, the Company purchased two million common shares
at $1.00 per share in a private Canadian corporate farming organization
[“Investco”]. The Company’s investment represents approximately 1.8% of the
outstanding shares of Investco. At this point in time, management intends to
hold the investment for an indefinite period of time.

In the year ended December 31, 2013, Investco issued common shares
at $1.00 per common share as partial consideration for an acquisition
of a business. The acquiree was an unrelated third party and the share
issuance was considered to represent a quoted market price and as a
result the Company assessed the fair value of its 2,000,000 common
shares at $1.00 per common share. In the year ended December 31,
2012, the Company decreased the value of its investment by $800 with
the offsetting amount recorded in other comprehensive income.

Discount rates reflect the current market assessment of the risks
specific to each CGU. The discount rate was estimated based on the
weighted average cost of capital for the industry. This rate was further
adjusted to reflect the market assessment of any risk specific to the
CGU for which future estimates of cash flows have not been adjusted.

Market share assumptions

These assumptions are important because, as well as using industry
data for growth rates [as noted below], management assesses how
the CGU’s position, relative to its competitors, might change over the
forecast period.

Growth rate estimates

Rates are based on published research and are primarily derived from
the long-term Consumer Price Index expectations for the markets in
which AGI operates. Management considers Consumer Price Index to
be a conservative indicator of the long-term growth expectations for
the agricultural industry.

13. assets held for sale

In 2010, AGI transferred all production activities from its Lethbridge,
Alberta facility to Nobleford, Alberta. In 2013, AGI transferred all
production activities from its existing Swift Current, Saskatchewan
facility to a new location in Swift Current, Saskatchewan. AGI
concluded that the land and building in Lethbridge, Alberta and the
land, grounds, and building at the existing Swift Current, Saskatchewan
facility met the definition of an asset held for sale. The carrying
amounts of the assets presented in the consolidated statements of
financial position solely consist of the land, grounds, and building. As
at December 31, 2013, the land carrying value is $228 [2012 - $146],
the grounds carrying value is $65 [2012 - nil] and the building carrying
value is $2,103 [2012 - $955].

ANNUAL REPORT 2013Consolidated FinanCial statements15. cash and cash eQuiValents/chanGes in
non cash WorKinG caPital

Cash and cash equivalents as at the date of the consolidated
statements of financial position and for the purpose of the
consolidated statements of cash flows relate to cash at banks and cash
on hand.

Cash at banks earns interest at floating rates based on daily bank
deposit rates.

The change in the non-cash working capital balances related to
operations is calculated as follows:

amounts and the related allowance for doubtful accounts:

2013
$

2012
$

Total accounts receivable

59,389

52,449

Less allowance for doubtful accounts

(811)

(593)

total accounts receiVable, net 58,578

51,856

of Which

Neither impaired nor past due

39,217

33,672

Not impaired and past the due date as follows:

Accounts receivable

Inventory

Prepaid expenses and other assets

Accounts payable and
accrued liabilities

Customer deposits

Provisions

2013
$

2012
$

(6,722)

(2,165)

967

(580)

6,045

1,075

13,521

13,668

980

21,834

(4,913)

(3,035)

198

(2,795)

Within 30 days

31 to 60 days

61 to 90 days

Over 90 days

10,943

2,541

1,616

5,072

9,709

4,095

1,932

3,041

Less allowance for doubtful accounts

(811)

(593)

total accounts receiVable, net 58,578

51,856

Trade receivables assessed to be impaired are included as an allowance
in selling, general and administrative expenses in the period of the
assessment. The movement in the Company’s allowance for doubtful
accounts for the years ended December 31, 2013 and December 31,
2012 was as follows:

16. restricted cash

Restricted cash of $112 [2012 - $34] relates to the long-term incentive
plan [note 21].

17. accounts receiVable

As is typical in the agriculture sector, AGI may offer extended terms on
its accounts receivable to match the cash flow cycle of its customer.
The following table sets forth details of the age of trade accounts
receivable that are not overdue, as well as an analysis of overdue

balance, beGinninG of year

Additional provision recognized

Amounts written off during the period
as uncollectable

Amounts recovered during the period

Unused provision reversed

Exchange differences

balance, end of year

2013
$

593

324

(124)

—

811

2012
$

497

150

(25)

(3)

(22)

(4)

593

ANNUAL REPORT 2013ConsolIdated FInanCIal statements18. inVentory

Raw materials

Finished goods

2013
$

32,324

25,222

57,546

2012
$

33,518

24,995

58,513

Inventory is recorded at the lower of cost and net realizable value.

During the year ended December 31, 2013, no provisions [2012 - nil]
were expensed through cost of goods sold. There were no write-downs
of finished goods and no reversals of write-downs included in cost of
goods sold during the year.

19. ProVisions

Provisions consist of the Company’s warranty provision. A provision
is recognized for expected claims on products sold based on past
experience of the level of repairs and returns. It is expected that most
of these costs will be incurred in the next financial year. Assumptions
used to calculate the provision for warranties were based on current
sales levels and current information available about returns.

balance, beGinninG of year

Costs recogized

Change in reserve

2013
$

2,420

3,351

600

2012
$

2,222

3,419

—

Amounts charged against provision

(2,971)

(3,221)

balance, end of year

3,400

2,420

20. eQuity
[a] Common shares

Authorized

Unlimited number of voting common shares without par value

Issued

12,613,060 common shares

balance, january 1, 2012

12,411,620

Number
#

Amount
$

151,039

Exercise of grants under DDCP
[note 21[c]]

Settlement of LTIP - vested
shares [note 21[e]]

2,107

60,028

balance, december 31, 2012

12,473,755

Settlement of LTIP - vested
shares [note 21[e]]

Forfeiture of LTIP awards

Exercise of grants under DDCP

Dividend reinvestment plan costs

Dividend reinvestment shares
issued from treasury

57,351

1,766

5,395

—

74,793

balance, december 31, 2013 12,613,060

2,355

153,447

2,286

—

193

(32)

2,648

158,542

The 12,613,060 common shares at December 31, 2013 are net of 15,231
common shares with a stated value of $680 that were being held by the
Company under the terms of the LTIP until vesting conditions are met.

The 12,473,755 common shares at December 31, 2012 are net of 74,348
common shares with a stated value of $3,072 that are being held by the
Company under the terms of the LTIP until vesting conditions are met.

ANNUAL REPORT 2013Consolidated FinanCial statements
[b] Normal course issuer bid

Available-for-sale reserve

On November 17, 2011, AGI commenced a normal course issuer bid for
up to 994,508 common shares, representing 10% of the Company’s
public float at the time. The normal course issuer bid terminated on
November 20, 2012. During the year ended December 31, 2012, no
common shares were purchased under the normal course issuer bid.

[c] Contributed surplus

balance, beGinninG of year

Equity-settled director compensation

Obligation under LTIP

Obligation under 2012 SAIP

Exercise of grants under DDCP

Dividends on PSU/RSU

Settlement of LTIP obligation -
vested shares

Forfeiture of LTIP awards

balance, end of year

2013
$

4,108

303

131

2,650

(193)

188

2012
$

5,341

324

850

—

(53)

—

(2,286)

(2,354)

4,984

—

4,108

[d] Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) is comprised
of the following:

Cash flow hedge reserve

The cash flow hedge reserve contains the effective portion of the cash
flow hedge relationships incurred as at the reporting date.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries. It is also used to record the effect of hedging net
investments in foreign operations.

The available-for-sale reserve contains the cumulative change in the fair
value of available-for-sale investment. Gains and losses are reclassified
to the consolidated statements of income when the available-for-sale
investment is impaired or derecognized.

[e] Dividends paid and proposed

In the year ended December 31, 2013, the Company declared dividends of
$30,186 or $2.40 per common share [2012 - $30,111 or $2.40 per common
share] and dividends on share compensation awards of $137 [2012 - nil].
In the year ended December 31, 2013, 74,793 common shares were issued
to shareholders from treasury under the dividend reinvestment plan
[the “DRIP”]. In the year ended December 31, 2013, dividends paid to
shareholders were financed $27,538 [2012 - $30,111] from cash on hand
and bank indebtedness and $2,648 by the DRIP [2012 - nil].

AGI’s dividend policy is to pay cash dividends on or about the 15th of
each month to shareholders of record on the last business day of the
previous month. The Company’s current monthly dividend rate is $0.20
per common share. Subsequent to December 31, 2013, the Company
declared dividends of $0.20 per common share to shareholders of
record on January 31, 2014 and February 28, 2014.

[f] Dividend reinvestment plan

On March 5, 2013, the Company announced the adoption of the DRIP.
Eligible shareholders who elect to reinvest dividends under the DRIP
will initially receive common shares issued from treasury at a discount
of 4% from the market price of the common shares, with the market
price being equal to the volume-weighted average trading price of
the common share on the Toronto Stock Exchange for the five trading
days preceding the applicable dividend payment date. The Company
incurred costs of $32 with respect to implementation of the DRIP.

ANNUAL REPORT 2013ConsolIdated FInanCIal statements[g] Shareholder protection rights plan

On December 20, 2010, the Company’s Board of Directors adopted a
Shareholders’ Protection Rights Plan [the “Rights Plan”]. Specifically,
the Board of Directors has implemented the Rights Plan by authorizing
the issuance of one right [a “Right”] in respect of each common share
[the “Common Shares”] of the Company. If a person or a Company,
acting jointly or in concert, acquires [other than pursuant to an
exemption available under the Rights Plan] beneficial ownership of
20 percent or more of the Common Shares, Rights [other than those
held by such acquiring person which will become void] will separate
from the Common Shares and permit the holder thereof to purchase
that number of Common Shares having an aggregate market price
[as determined in accordance with the Rights Plan] on the date of
consummation or occurrence of such acquisition of Common Shares
equal to four times the exercise price of the Rights for an amount
in cash equal to the exercise price. The exercise price of the Rights
pursuant to the Rights Plan is $150 per Right.

21. share-based comPensation Plans
[a] Long-term incentive plan [“LTIP”]

The LTIP is a compensation plan that awards common shares to key
management based on the Company’s operating performance. Pursuant
to the LTIP, the Company establishes the amount to be allocated to
management based upon the amount by which distributable cash, as
defined in the LTIP, exceeds a predetermined threshold. The service
period commences on January 1 of the year the award is generated and
ends at the end of the fiscal year. The award vests on a graded scale
over an additional three-year period from the end of the respective
performance year. The LTIP provides for immediate vesting in the
event of retirement, death, termination without cause or in the event
the participant becomes disabled. The cash awarded under the plan
formula is used to purchase AGI common shares at market prices.
All vested awards are settled with participants in common shares
purchased by the administrator of the plan and there is no cash
settlement alternative.

The amount owing to participants is recorded as an equity award
in contributed surplus as the award is settled with participants with
treasury shares purchased in the open market. The expense is recorded
in the different consolidated statements of income lines by function
depending on the role of the respective management member. For the
year ended December 31, 2013, AGI expensed $131 [2012 - $850] for
the LTIP. Additionally, there is $112 in restricted cash related to the LTIP
[2012 - $34]. Further awards under the LTIP ceased effective for the
fiscal 2012 year.

[b] Share award incentive plan [“SAIP”]

The 2012 SAlP

On May 11, 2012 the shareholders of AGI approved a Share Award
Incentive Plan [the “2012 SAIP”] which authorizes the Board to grant
restricted Share Awards [“Restricted Awards”] and Performance
Share Awards [“Performance Awards”] to persons who are officers,
employees or consultants of the Company and its affiliates. Share
Awards may not be granted to Non-Management Directors.

A total of 465,000 common shares are available for issuance under the
2012 SAIP. At the discretion of the Board, the 2012 SAIP provides for
cumulative adjustments to the number of common shares to be issued
pursuant to Share Awards on each date that dividends are paid on the
common shares. The Company shall have the option of settling any
amount payable in respect of a Share Award by common shares issued
from the treasury of the Company or, with the consent of the grantee,
cash in an amount equal to the fair market value of such common shares.

Each Restricted Award will entitle the holder to be issued the number
of the common shares designated in the Restricted Award with such
common shares to be issued as to one-third on each of the third, fourth
and fifth anniversary dates of the date of grant, or such earlier or later
dates as determined by the Board of Directors in accordance with
the 2012 SAIP. The Company has an obligation to settle any amount
payable in respect of a Restricted Award by common shares issued
from treasury of the Company.

ANNUAL REPORT 2013Consolidated FinanCial statementsshares he or she has been granted until a period of three years has
passed since the date of grant or until the Director ceases to be
a Director, whichever is earlier. The Directors’ common shares are
fixed based on the fees eligible to him for the respective period and
his decision to elect for cash payments for dividends related to the
common shares; therefore, the Director’s remuneration under the DDCP
vests directly in the respective service period. The three-year period [or
any shorter period until a Director ceases to be a Director] qualifies only
as a waiting period to receive the vested common shares.

For the year ended December 31, 2013, an expense of $303 [2012 -
$324] was recorded for the share grants, and a corresponding amount
has been recorded to contributed surplus. The share grants were
measured with the contractual agreed amount of service fees for the
respective period.

The total number of common shares issuable pursuant to the DDCP
shall not exceed 70,000, subject to adjustment in lieu of dividends, if
applicable. During the year ended December 31, 2013, 8,304 common
shares were granted under the DDCP [2012 - 9,260] and as at
December 31, 2013, a total of 40,708 [2012 - 32,404] common shares
had been granted under the DDCP and 7,502 [2012 - 2,107] common
shares had been issued.

Each Performance Award will entitle the holder to be issued as to one-
third on each of the first, second and third anniversary dates of the date
of grant, or such earlier or later dates, the number of common shares
designated in the Performance Award multiplied by a Payout Multiplier.
The Payout Multiplier is determined based on an assessment of the
achievement of pre-defined measures in respect of the applicable period.
The Payout Multiplier may not be less than 0% or more than 200%. The
Company intends to settle the share award by common shares.

As at December 31, 2013, 214,000 Restricted Awards and 110,000
Performance Awards have been granted. The Company accounted
for the Share Awards as equity-settled plans. The fair values of the
Restricted Awards and the Performance Awards were based on the
share price as at the grant date and the assumption that there will be
no forfeitures. In addition, the expense of the Performance Awards is
based on the probability of achieving 100% of the Payout Multiplier. In
the year ended December 31, 2013, AGI expensed $2,650 for the 2012
SAIP [2012 - nil].

The 2007 SAlP

On May 10, 2007, the shareholders of AGI reserved for issuance 220,000
Share Awards under a Share Award Incentive Plan [the “2007 SAIP”].
All of the 220,000 common shares reserved for issue under the 2007
SAIP were issued and they vested as to one-third on each of January
1, 2010, 2011, and 2012. No further Share Awards may be granted, and
no further common shares may be issued under the 2007 SAIP. For the
year ended December 31, 2013, AGI recorded an expense related to the
2007 SAIP of nil [2012 - nil].

[c] Directors’ Deferred Compensation Plan [“DDCP”]

Under the DDCP, every Director receives a fixed base retainer fee, an
attendance fee for meetings and a committee chair fee, if applicable,
and a minimum of 20% of the total compensation must be taken in
common shares. A Director will not be entitled to receive the common

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsThe exercise price on all 2007 SAIP awards is $0.10 per common share.
There is no exercise price on the 2012 SAIP awards.

A summary of the status of the rights to shares to be issued under the
LTIP is presented below:

2013
Shares
#

2012
Shares
#

outstandinG, beGinninG of year

74,348

134,376

Vested

Forfeited

outstandinG, end of year

(57,351)

(60,028)

(1,766)

—

15,231

74,348

[d] Stock option plan

On June 3, 2009, the shareholders of AGI approved a stock option plan
[the “Option Plan”] under which options may be granted to officers,
employees and other eligible service providers in order to allow these
individuals an opportunity to increase their proprietary interest in AGI’s
long-term success.

On May 11, 2012, the shareholders of AGI approved an amended
management compensation structure which included the termination
of the Option Plan. As at the date of termination, no options had been
granted under the Option Plan.

[e] Summary of expenses recognized under
share-based payment plans

For the year ended December 31, 2013, an expense of $3,084 [2012 -
$1,174] was recognized for employee and Director services rendered.

A summary of the status of the options under the 2007 and 2012 SAIP
is presented below:

2012 saiP

2007
SAIP
#

Restricted
awards
#

Performance
awards
#

40,000

(40,000)

—

214,000

110,000

— 214,000

110,000

outstandinG,
january 1, 2012

Exercised

balance,
december 31, 2012

Granted

balance,
december 31, 2013

ANNUAL REPORT 2013Consolidated FinanCial statements22. lonG-term debt and obliGations under finance leases

current Portion of interest-bearinG loans and borroWinGs

GMAC loans

non-current interest-bearinG loans and borroWinGs

Series A secured notes [U.S. dollar denominated]

Term debt [U.S. dollar denominated]

GMAC loans

total non-current interest-bearinG loans and borroWinGs

Less deferred financing costs

total interest-bearinG loans and borroWinGs

Interest Rate
%

Maturity

0.0

6.8

3.3

0.0

2014

2016

2014

2013
$

26,590

—

26,590

26,595

223

26,372

2012
$

24,872

10,475

35,354

35,361

438

34,923

[a] Bank indebtedness

[b] Long-term debt

AGI has operating facilities of $10.0 million and U.S. $2.0 million and
may also draw on its term loan facility for general operating purposes.
The operating and term loan facilities bear interest at prime to prime
plus 1.0% per annum based on performance calculations. The effective
interest rate during the year ended December 31, 2013 on AGI’s
Canadian dollar operating facility was 3.0% [2012 - 3.1%] and on its U.S.
dollar operating facility was 3.3% [2012 - 3.4%]. As at December 31,
2013, there was nil [2012 - nil] outstanding under these facilities. The
facilities mature March 8, 2016.

Collateral for the operating facilities rank pari passu with the Series
A secured notes and include a general security agreement over all
assets, first position collateral mortgages on land and buildings,
assignments of rents and leases and security agreements for patents
and trademarks.

The Series A secured notes were issued on October 29, 2009. The non-
amortizing notes bear interest at 6.8% payable quarterly and mature
on October 29, 2016. The Series A secured notes are denominated
in U.S. dollars. Collateral for the Series A secured notes and term
loans rank pari passu and include a general security agreement over
all assets, first position collateral mortgages on land and buildings,
assignments of rents and leases and security agreements for patents
and trademarks.

AGI has revolver facilities of $63.0 million and U.S. $20.5 million. The
revolver facilities bear interest at prime to prime plus 1.0% per annum
based on performance calculations. The effective interest rate during the
year ended December 31, 2013 on AGI’s Canadian dollar revolver facility
was 3.0% [2012 - 3.1%] and on its U.S. dollar revolver facility was 3.3%
[2012 - 3.4%]. As at December 31, 2013, there was nil [2012 - $10.5 million]

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsoutstanding under these facilities. The facilities mature March 8, 2016.

GMAC loans bear interest at 0% and mature in 2014. The vehicles
financed are pledged as collateral.

[c] Covenants

AGI is subject to certain financial covenants in its credit facility
agreements which must be maintained to avoid acceleration of the
termination of the agreement. The financial covenants require AGI
to maintain a debt to earnings before interest, taxes, depreciation
and amortization [“EBITDA”] ratio of less than 2.5 and to provide
debt service coverage of a minimum of 1.0. The covenant calculations
exclude the convertible unsecured subordinated debentures from the
definition of debt. As at December 31, 2013 and December 31, 2012, AGI
was in compliance with all financial covenants.

23. conVertible unsecured
subordinated debentures

2013

2012

2013
Debentures
$

2009
Debentures
$

Principal amount

86,250

114,885

Equity component

(4,480)

Accretion

(7,475)

6,538

114,885

(7,475)

4,211

Financing fees,
net of amortization

conVertible
unsecured
subordinated
debentures

(3,812)

(588)

(2,063)

77,987

113,360

109,558

In 2009, the Company issued convertible unsecured subordinated
debentures in the aggregate principal amount of $115 million [the
“2009 Debentures”]. The net proceeds of the offering, after payment
of the underwriters’ fee of $4.6 million and expenses of the offering of
$0.5 million, were approximately $109.9 million. The 2009 Debentures
were issued at a price of $1,000 per Debenture and bear interest at an
annual rate of 7.0% payable semi-annually on June 30 and December
31 in each year commencing June 30, 2010. The maturity date of the
2009 Debentures is December 31, 2014 and accordingly they have been
classified as current liabilities.

Each 2009 Debenture is convertible into common shares of the
Company at the option of the holder at any time on the earlier of the
maturity date and the date of redemption of the 2009 Debenture, at a
conversion price of $44.98 per common share being a conversion rate
of approximately 22.2321 common shares per $1,000 principal amount
of 2009 Debentures. No conversion options were exercised during the
year ended December 31, 2013. During the year ended December 31,
2011, holders of $0.1 million principal amount of the 2009 Debentures
exercised the conversion option and were issued 2,556 common shares.
As at December 31, 2013, AGI has reserved 2,554,136 common shares
for issuance upon conversion of the 2009 Debentures. Subsequent to
December 31, 2013, holders of $19.0 million principal amount of the
2009 Debentures exercised the conversion option and were issued
422,897 common shares. The Company fully redeemed all remaining
outstanding 2009 Debentures on January 17, 2014.

On December 17, 2013, the Company issued convertible unsecured
subordinated debentures in the aggregate principal amount of $75
million, and on December 24, 2013, the underwriters exercised in full their
over-allotment option and the Company issued an additional $11.2 million
of debentures [the “2013 Debentures”]. The net proceeds of the offering,
after payment of the underwriters’ fee of $3.5 million and expenses of
the offering of $0.6 million, were approximately $82.2 million. The 2013
Debentures were issued at a price of $1,000 per debenture and bear
interest at an annual rate of 5.25% payable semi-annually on June 30 and
December 31 in each year commencing June 30, 2014. The maturity date
of the 2013 Debentures is December 31, 2018.

ANNUAL REPORT 2013Consolidated FinanCial statementsEach 2013 Debenture is convertible into common shares of the
Company at the option of the holder at any time on the earlier of the
maturity date and the date of redemption of the 2013 Debenture, at
a conversion price of $55 per common share being a conversion rate
of approximately 18.1818 common shares per $1,000 principal amount
of 2013 Debentures. No conversion options were exercised during
the year ended December 31, 2013. As at December 31, 2013, AGI has
reserved 1,568,182 common shares for issuance upon conversion of the
2013 Debentures.

ended December 31, 2013, the Company recorded accretion of $2,357
[2012 - $1,441], non-cash interest expense related to financing costs of
$1,499 [2012 - $915] and interest expense on the coupon [2009 - 7%,
2013 - 5.25%] of $8,229 [2012 - $8,042]. The estimated fair value of the
holder’s option to convert 2009 Debentures and the 2013 Debentures
to common shares in the total amount of $11,955 has been separated
from the fair value of the liability and is included in shareholders’
equity, net of income tax of $3,175, and its pro rata share of financing
costs of $540.

24. accounts Payable and accrued liabilities

Trade payables

Other payables

Personnel-related accrued liabilities

Accrued outstanding service invoices

2013
$

11,596

9,518

8,894

864

30,872

2012
$

4,613

5,430

6,583

725

17,351

Trade payables and other payables are non-interest bearing and are
normally settled on 30- or 60 day terms. Personnel-related accrued
liabilities include primarily vacation accruals, bonus accruals and
overtime benefits. For explanations on the Company’s credit risk
management processes, refer to note 27.

The 2013 Debentures are not redeemable before December 31, 2016.
On and after December 31, 2016 and prior to December 31, 2017, the
2013 Debentures may be redeemed, in whole or in part, at the option
of the Company at a price equal to their principal amount plus accrued
and unpaid interest, provided that the volume weighted average
trading price of the common shares during the 20 consecutive trading
days ending on the fifth trading day preceding the date on which the
notice of redemption is given is not less than 125% of the conversion
price. On and after December 31, 2017, the 2013 Debentures may be
redeemed, in whole or in part, at the option of the Company at a price
equal to their principal amount plus accrued and unpaid interest.

On redemption or at maturity, the Company may, at its option, elect
to satisfy its obligation to pay the principal amount of the 2013
Debentures by issuing and delivering common shares. The Company
may also elect to satisfy its obligations to pay interest on the 2013
Debentures by delivering common shares. The Company does not
expect to exercise the option to satisfy its obligations to pay interest
by delivering common shares and as a result the potentially dilutive
impact has been excluded from the calculation of fully diluted
earnings per share [note 30]. The number of any shares issued will be
determined based on market prices at the time of issuance.

The Company presents and discloses its financial instruments in
accordance with the substance of its contractual arrangement.
Accordingly, upon issuance of the 2009 Debentures and the 2013
Debentures, the Company recorded in total a liability of $189,180, less
related offering costs of $8,572. The liability component has been
accreted using the effective interest rate method, and during the year

ANNUAL REPORT 2013ConsolIdated FInanCIal statements
25. income taxes

The major components of income tax expense for the years ended
December 31, 2013 and 2012 are as follows:

The reconciliation between tax expense and the product of accounting
profit multiplied by the Company’s domestic tax rate for the years
ended December 31, 2013 and 2012 is as follows:

consolidated statements of income

2013
$

2012
$

accountinG Profit
before income tax

2013
$

2012
$

36,631

25,013

current tax exPense

Current income tax charge

deferred tax exPense

Origination and reversal
of temporary differences

7,595

3,771

At the Company’s statutory income tax
rate of 26.56% [2012 - 26.59%]

9,729

6,651

Tax rate changes

Recognition of deferred tax assets

—

6,445

4,054

Non-taxable portion of capital gains

(600)

(14)

(58)

—

income tax exPense rePorted
in the consolidated statements
of income

14,040

7,825

consolidated statements of
comPrehensiVe income

2013
$

2012
$

deferred tax related to items charGed or
credited directly to other comPrehensiVe
income durinG the Period

Unrealized gain (loss) on derivatives
and available-for-sale investment

Exchange differences on translation of
foreign operations

income tax charGed
(credited) directly to other
comPrehensiVe income

(1,622)

698

649

(200)

(973)

498

Additional deductions allowed in a
foreign jurisdiction

Tax losses not recognized as a deferred
tax asset

Foreign rate differential

Impairment of goodwill

Non-deductible SAIP expense

State income tax, net of federal tax
benefit

Unrealized foreign exchange gain (loss)

Permanent differences and others

(604)

(386)

281

1,729

—

397

522

1,008

1,523

224

1,080

503

—

302

(580)

103

at the effectiVe income tax rate
38.33% [2012 - 31.28%]

14,040

7,825

ANNUAL REPORT 2013Consolidated FinanCial statements

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

consolidated statements
of financial position

consolidated statements
of income

Inventories

Property, plant and equipment and other assets

Intangible assets

Deferred financing costs

Accruals and long-term provisions

Tax loss carryforwards expiring between 2020 to 2029

Investment tax credits

Canadian exploration expenses

Capitalized development expenditures

Convertible debentures

SAIP liability

Equity impact LTIP

Foreign exchange gains

Other comprehensive income (loss)

Exchange difference on translation of foreign operations

deferred tax exPense

net deferred tax assets

reflected in the statement of financial Position as folloWs

Deferred tax assets

Deferred tax liabilities

deferred tax assets, net

2013
$

—

1,181

293

(277)

4,934

1,123

(571)

(307)

—

573

—

(649)

6,445

2012
$

(112)

1,404

189

1,978

(253)

(41)

242

(411)

397

398

—

200

4,054

2013
$

(88)

(12,730)

(13,202)

(168)

1,730

9,897

(1,123)

29,176

(779)

(1,431)

307

312

—

1,193

—

2012
$

(88)

(11,549)

(12,909)

(117)

1,453

14,831

—

29,198

(707)

(868)

—

885

—

(429)

—

13,094

19,700

23,327

(10,233)

13,094

28,741

(9,041)

19,700

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsReconciliation of deferred tax assets, net

2013
$

2012
$

balance, beGinninG of year

19,700

24,252

Deferred tax expense during the period
recognized in profit or loss

Deferred tax expense during the period
recognized in shareholders’ equity

Deferred tax recovery (expense)
during the period recognized in other
comprehensive income (loss)

balance, end of year

(6,445)

(4,054)

(1,134)

—

973

(498)

13,094

19,700

The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which these
temporary differences, and loss carryforwards become deductible.
Based on the analysis of taxable temporary differences and future
taxable income, the management of the Company is of the opinion
that there is convincing evidence available for the probable realization
of all deductible temporary differences of the Company’s tax entities
incurred in its Finnish operations other than losses [1,491 Euros, 2012
- 655 Euros]. Accordingly, the Company has recorded a deferred tax
asset for all other deductible temporary differences as of the reporting
date and as at December 31, 2012.

At December 31, 2013, there was no recognized deferred tax liability
[2012 - nil] for taxes that would be payable on the unremitted earnings
of certain of the Company’s subsidiaries. The Company has determined
that undistributed profits of its subsidiaries will not be distributed in
the foreseeable future. The temporary differences associated with
investments in subsidiaries, for which a deferred tax asset has not been
recognized, aggregate to $622 [2012 - $622].

Income tax provisions, including current and deferred income tax
assets and liabilities, and income tax filing positions require estimates

and interpretations of federal and provincial income tax rules and
regulations, and judgments as to their interpretation and application
to AGI’s specific situation. The amount and timing of reversals of
temporary differences will also depend on AGI’s future operating
results, acquisitions and dispositions of assets and liabilities. The
business and operations of AGI are complex and AGI has executed
a number of significant financings, acquisitions, reorganizations and
business combinations over the course of its history including the
conversion to a corporate entity. The computation of income taxes
payable as a result of these transactions involves many complex
factors, as well as AGI’s interpretation of and compliance with relevant
tax legislation and regulations. While AGI believes that its tax filing
positions are probable to be sustained, there are a number of tax filing
positions including in respect of the conversion to a corporate entity
that may be the subject of review by taxation authorities. Therefore,
it is possible that additional taxes could be payable by AGI and the
ultimate value of AGI’s income tax assets and liabilities could change
in the future and that changes to these amounts could have a material
effect on these consolidated financial statements.

There are no income tax consequences to the Company attached to
the payment of dividends in either 2013 or 2012 by the Company to
its shareholders.

26. Post-retirement benefit Plans

AGI contributes to group retirement savings plans subject to
maximum limits per employee. The expense recorded during the year
ended December 31, 2013 was $2,156 [2012 - $1,950]. AGI expects to
contribute $2,200 for the year ending December 31, 2014.

AGI accounts for one plan covering substantially all of its employees
of the Mepu division as a defined contribution plan, although it does
provide the employees with a defined benefit [average pay] pension.
The plan qualifies as a multi-employer plan and is administered by the
Government of Finland. AGI is not able to obtain sufficient information
to account for the plan as a defined benefit plan.

ANNUAL REPORT 2013Consolidated FinanCial statements27. financial instruments and financial
risK manaGement
[a] Management of risks arising from financial instruments

AGI’s principal financial liabilities, other than derivatives, comprise
loans and borrowings and trade and other payables. The main purpose
of these financial liabilities is to finance the Company’s operations and
to provide guarantees to support its operations. The Company has
deposits, trade and other receivables and cash and short-term deposits
that are derived directly from its operations. The Company also holds
an available-for-sale investment and enters into derivative transactions.

The Company’s activities expose it to a variety of financial risks: market
risk [including foreign exchange and interest rate], credit risk and
liquidity risk. The Company’s overall risk management program focuses
on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the Company’s financial performance.
The Company uses derivative financial instruments to mitigate certain
risk exposures. The Company does not purchase any derivative
financial instruments for speculative purposes. Risk management
is the responsibility of the corporate finance function, which has
the appropriate skills, experience and supervision. The Company’s
domestic and foreign operations along with the corporate finance
function identify, evaluate and, where appropriate, mitigate financial
risks. Material risks are monitored and are regularly discussed with
the Audit Committee of the Board of Directors. The Audit Committee
reviews and monitors the Company’s financial risk-taking activities
and the policies and procedures that were implemented to ensure that
financial risks are identified, measured and managed in accordance
with Company policies.

The risks associated with the Company’s financial instruments
are as follows:

Market risk

Market risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Components of market risk to which AGI is exposed are discussed

below. Financial instruments affected by market risk include trade
accounts receivable and payable, available-for-sale investments and
derivative financial instruments.

The sensitivity analyses in the following sections relate to the position
as at December 31, 2013 and December 31, 2012.

The sensitivity analyses have been prepared on the basis that the
amount of net debt, the ratio of fixed to floating interest rates of the
debt and derivatives and the proportion of financial instruments in
foreign currencies are all constant. The analyses exclude the impact of
movements in market variables on the carrying value of provisions and
on the non financial assets and liabilities of foreign operations.

The following assumptions have been made in calculating the
sensitivity analyses:

• The consolidated statements of financial position sensitivity relates

to derivatives.

• The sensitivity of the relevant consolidated statements of income
item is the effect of the assumed changes in respective market
risks. This is based on the financial assets and financial liabilities
held at December 31, 2013 and December 31, 2012, including the
effect of hedge accounting.

• The sensitivity of equity is calculated by considering the effect

of any associated cash flow hedges at December 31, 2013 for the
effects of the assumed underlying changes.

Foreign currency risk

The objective of the Company’s foreign exchange risk management
activities is to minimize transaction exposures and the resulting
volatility of the Company’s earnings, subject to liquidity restrictions,
by entering into foreign exchange forward contracts. Foreign currency
risk is created by fluctuations in the fair value or cash flows of financial
instruments due to changes in foreign exchange rates and exposure.

A significant part of the Company’s sales are transacted in U.S. dollars
and Euros and as a result fluctuations in the rate of exchange between

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsAGI’s sales denominated in U.S. dollars for the year ended December
31, 2013 were U.S. $249 million, and the total of its cost of goods sold
and its selling, general and administrative expenses denominated
in that currency were U.S. $150 million. Accordingly, a 10% increase
or decrease in the value of the U.S. dollar relative to its Canadian
counterpart would result in a $24.9 million increase or decrease in sales
and a total increase or decrease of $15.0 million in its cost of goods
sold and its selling, general and administrative expenses. In relation to
AGI’s foreign exchange hedging contracts, a 10% increase or decrease
in the value of the U.S. dollar relative to its Canadian counterpart would
result in a $6.3 million increase or decrease in the foreign exchange gain
and a $21.9 million increase or decrease to other comprehensive income.

The counterparties to the contracts are three multinational commercial
banks and therefore credit risk of counterparty non-performance is
remote. Realized gains or losses are included in net earnings and for
the year ended December 31, 2013 the Company realized a gain on its
foreign exchange contracts of $0.5 million [2012 - $0.6 million].

the U.S. dollar, the Euro and Canadian dollar can have a significant
effect on the Company’s cash flows and reported results. To mitigate
exposure to the fluctuating rate of exchange, AGI enters into foreign
exchange forward contracts and denominates a portion of its debt in
U.S. dollars. As at December 31, 2013, AGI’s U.S. dollar denominated
debt totalled U.S. $26.6 million [2012 - U.S. $35.5 million] and the
Company has entered into the following foreign exchange forward
contracts to sell U.S. dollars and Euros in order to hedge its foreign
exchange risk on revenue:

SETTLEMENT DATES

January - December 2014

January - December 2015

Face value
U.S. $

Average rate
Cdn $

65,000

53,000

1.02

1.06

SETTLEMENT DATES

Face value
Euro

Average rate
Cdn $

August - December 2014

500

1.33

The Company enters into foreign exchange forward contracts to
mitigate foreign currency risk relating to certain cash flow exposures.
The hedged transactions are expected to occur within a maximum
24-month period. The Company’s foreign exchange forward contracts
reduce the Company’s risk from exchange movements because gains
and losses on such contracts offset gains and losses on transactions
being hedged. The Company’s exposure to foreign currency changes
for all other currencies is not material.

ANNUAL REPORT 2013Consolidated FinanCial statements

The open foreign exchange forward contracts as at December 31, 2013 are as follows:

U.S. dollar contracts

Euro contracts

Notional amount
of currency sold
$

118,000

500

notional canadian dollar equivalent

Contract
amount
$

1.04

1.33

Cdn $
equivalent
$

Unrealized gain
(loss)
$

122,178

664

(4,418)

(74)

The open foreign exchange forward contracts as at December 31, 2012 are as follows:

U.S. dollar contracts

Euro contracts

Notional amount
of currency sold
$

94,000

1,000

notional canadian dollar equivalent

Contract
amount
$

1.02

1.32

Cdn $
equivalent
$

Unrealized gain
(loss)
$

96,086

1,322

1,625

(14)

The terms of the foreign exchange forward contracts have been negotiated to match the terms of the commitments. There were no highly
probable transactions for which hedge accounting has been claimed that have not occurred and no significant element of hedge ineffectiveness
requiring recognition in the consolidated statements of income.

The cash flow hedges of the expected future sales were assessed to be highly effective and a net unrealized loss of $4,492, with a deferred tax
asset of $1,193 relating to the hedging instruments, is included in accumulated other comprehensive income.

Subsequent to December 31, 2013, the Company entered a number of foreign exchange contracts for the period June 2015 to December 2015
totalling U.S. $12 million at an average rate of $1.0906, and for January 2016 totalling U.S. $5 million at an average rate of $1.12. In addition, AGI
entered into a foreign exchange forward contract for settlement in 2015 of Euro 0.5 million at a rate of $1.52.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsAt December 31, 2013, the Company had three customers [2012 - two
customers] that accounted for approximately 28% [2012 - 17%] of all
receivables owing. The requirement for an impairment is analyzed at
each reporting date on an individual basis for major customers.

Additionally, a large number of minor receivables are grouped into
homogeneous groups and assessed for impairment collectively. The
calculation is based on actual incurred historical data. The Company
does not hold collateral as security.

The Company does not believe that any single customer group
represents a significant concentration of credit risk.

Liquidity risk

Liquidity risk is the risk that AGI will encounter difficulties in meeting
its financial liability obligations. AGI manages its liquidity risk through
cash and debt management. In managing liquidity risk, AGI has access
to committed short- and long-term debt facilities as well as to equity
markets, the availability of which is dependent on market conditions.
AGI believes it has sufficient funding through the use of these facilities
to meet foreseeable borrowing requirements.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of changes in market
interest rates. Furthermore, as AGI regularly reviews the denomination
of its borrowings, the Company is subject to changes in interest rates
that are linked to the currency of denomination of the debt. AGI’s
Series A secured notes and convertible unsecured subordinated
debentures outstanding at December 31, 2013 and December 31, 2012
are at a fixed rate of interest. As at December 31, 2013, the Company
had no U.S. dollar term debt outstanding at a floating rate of interest.

Credit risk

Credit risk is the risk that a customer will fail to perform an obligation
or fail to pay amounts due, causing a financial loss. A substantial
portion of AGI’s accounts receivable are with customers in the
agriculture industry and are subject to normal industry credit risks.
This credit exposure is mitigated through the use of credit practices
that limit transactions according to the customer’s credit quality and
due to the accounts receivable being spread over a large number of
customers. AGI establishes a reasonable allowance for non-collectible
amounts with this allowance netted against the accounts receivable on
the consolidated statement of financial position.

Accounts receivable is subject to credit risk exposure and the
carrying values reflect management’s assessment of the associated
maximum exposure to such credit risk. The Company regularly
monitors customers for changes in credit risk. Trade receivables from
international customers are often insured for events of non-payment
through third-party export insurance. In cases where the credit quality
of a customer does not meet the Company’s requirements, a cash
deposit or letter of credit is received before goods are shipped.

ANNUAL REPORT 2013Consolidated FinanCial statementsThe tables below summarize the undiscounted contractual payments of the Company’s financial liabilities as at December 31, 2013 and 2012:

december 31, 2013

Bank debt [includes interest]

Trade payables and provisions

Dividends payable

Convertible unsecured subordinated
debentures [include interest]

Total
$

30,206

34,272

2,525

0 - 6
months
$

904

34,272

2,525

6 - 12
months
$

904

—

12 - 24
months
$

1,808

—

2 - 4
years
$

26,590

—

After 4
years
$

—

227,796

121,170

2,264

4,528

9,056

90,778

total financial liability Payments

294,799

158,871

3,168

6,336

35,646

90,778

december 31, 2012

Bank debt [includes interest]

Trade payables and provisions

Dividends payable

Convertible unsecured subordinated
debentures [include interest]

Total
$

42,442

19,771

2,510

130,969

0 - 6
months
$

1,016

19,771

2,510

4,021

6 - 12
months
$

1,016

—

12 - 24
months
$

14,128

—

4,021

122,927

2 - 4
years
$

26,282

—

total financial liability Payments

195,692

27,318

5,037

137,055

26,282

After 4
years
$

—

ANNUAL REPORT 2013ConsolIdated FInanCIal statements[b]

Fair value

Set out below is a comparison by class of the carrying amounts and fair value of the Company's financial instruments that are carried in the
consolidated financial statements:

2013

Carrying
amount
$

Fair
value
$

2012

Carrying
amount
$

financial assets

Loans and receivables

Cash and cash equivalents

Restricted cash

Accounts receivable

Available-for-sale investment

Derivative instruments

financial liabilities

Other financial liabilities

Interest-bearing loans and borrowing

Trade payables and provisions

Dividends payable

Derivitive instruments

108,731

112

58,578

2,000

—

26,372

34,272

2,525

4,492

112

58,578

2,000

—

28,602

34,272

2,525

4,492

Fair
value
$

2,171

51,856

2,000

1,611

2,171

51,856

2,000

1,611

34,923

38,082

19,771

2,510

—

19,771

2,510

—

Convertible unsecured subordinated debentures

191,347

197,576

109,558

113,501

ANNUAL REPORT 2013Consolidated FinanCial statementsThe fair value of the financial assets and liabilities are included
at the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale.

[c] Fair value [“FV”] hierarchy

AGI uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:

Level 1

The fair value measurements are classified as Level 1 in the FV hierarchy
if the fair value is determined using quoted, unadjusted market prices
for identical assets or liabilities.

Level 2

Fair value measurements that require inputs other than quoted prices
in Level 1, and for which all inputs that have a significant effect on the
recorded fair value are observable, either directly or indirectly, are
classified as Level 2 in the FV hierarchy.

Level 3

Fair value measurements that require unobservable market data or use
statistical techniques to derive forward curves from observable market
data and unobservable inputs are classified as Level 3 in the FV hierarchy.

The following methods and assumptions were used to estimate the
fair values:

• Cash and cash equivalents, restricted cash, accounts receivable,

dividends payable, finance lease obligations, acquisition price,
transaction and financing costs payable, accounts payable and
accrued liabilities, and provisions approximate their carrying
amounts largely due to the short-term maturities of these
instruments.

• Fair value of quoted notes and bonds is based on price quotations
at the reporting date. The fair value of unquoted instruments,
loans from banks and other financial liabilities, as well as other
non-current financial liabilities is estimated by discounting future
cash flows using rates currently available for debt on similar
terms, credit risk and remaining maturities.

• The Company enters into derivative financial instruments with
financial institutions with investment grade credit ratings.
Derivatives valued using valuation techniques with market
observable inputs are mainly foreign exchange forward contracts
and one option embedded in each convertible debt agreement.
The most frequently applied valuation techniques include forward
pricing, using present value calculations. The models incorporate
various inputs including the credit quality of counterparties and
foreign exchange spot and forward rates.

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsThe FV hierarchy of financial instruments measured at fair value on the consolidated statements of financial position is as follows:

2013

2012

financial assets

Cash and cash equivalents

Accounts receivable

Available-for-sale investment

Derivative instruments

Restricted cash

financial liabilities

Level 1
$

108,731

58,578

—

112

Level 2
$

—

2,000

—

Interest-bearing loans and borrowing

—

26,372

Trade payables and provisions

Dividends payable

Derivative instruments

Convertible unsecured subordinated debentures

34,272

2,525

—

4,492

191,347

Level 3
$

—

Level 1
$

2,171

51,856

—

19,771

2,510

—

Level 2
$

—

2,000

1,611

—

34,923

—

109,558

Level 3
$

—

During the reporting periods ended December 31, 2013 and December 31, 2012, there were no transfers between Level 1 and Level 2 fair value
measurements.

At December 31, 2013, AGI has $112 of restricted cash, which is classified as a current asset [note 16].

Interest from financial instruments is recognized in finance costs and finance income. Foreign currency and impairment reversal impacts for loans
and receivables are reflected in finance expenses (income).

ANNUAL REPORT 2013Consolidated FinanCial statements28. caPital disclosure and manaGement

The Company’s capital structure is comprised of shareholders’ equity
and long-term debt. AGI’s objectives when managing its capital structure
are to maintain and preserve its access to capital markets, continue
its ability to meet its financial obligations, including the payment of
dividends, and finance future organic growth and acquisitions.

different subsidiaries of the Company. Finally, the parent company is
providing management services to the Company entities. Between
the subsidiaries there are limited inter-company sales of inventories
and services. Because all subsidiaries are currently 100% owned by Ag
Growth International Inc., these inter-company transactions are 100%
eliminated on consolidation.

AGI manages its capital structure and makes adjustments to it in light
of changes in economic conditions and the risk characteristics of
the underlying assets. The Company is not subject to any externally
imposed capital requirements other than financial covenants in its
credit facilities and as at December 31, 2013 and December 31, 2012, all
of these covenants were complied with [note 22].

The Board of Directors does not establish quantitative capital structure
targets for management, but rather promotes sustainable and profitable
growth. Quantitative capital structure targets were disclosed in reporting
periods prior to December 31, 2013. Management monitors capital using
non-GAAP financial metrics, primarily total debt to the trailing twelve
months earnings before interest, taxes, depreciation and amortization
[“EBITDA”] and net debt to total shareholders’ equity. There may be
instances where it would be acceptable for total debt to trailing EBITDA
to temporarily fall outside of the normal targets set by management
such as in financing an acquisition to take advantage of growth
opportunities or industry cyclicality. This would be a strategic decision
recommended by management and approved by the Board of Directors
with steps taken in the subsequent period to restore the Company’s
capital structure based on its capital management objectives.

29. related Party disclosures
Relationship between parent and subsidiaries

The main transactions between the corporate entity of the Company
and its subsidiaries is the providing of cash fundings based on the
equity and convertible debt funds of Ag Growth International Inc.
Furthermore, the corporate entity of the Company is responsible
for the billing and supervision of major construction contracts
with external customers and the allocation of sub-projects to the

Other relationships

Burnet, Duckworth & Palmer LLP provides legal services to the
Company and a Director of AGI is a partner of Burnet, Duckworth
& Palmer LLP. The total cost of these legal services related to a
debenture offering and general matters was $0.3 million during the
year ended December 31, 2013 [2012 - nil] and $0.2 million is included
in accounts payable and accrued liabilities as at December 31, 2013.
These transactions are measured at the exchange amount and were
incurred during the normal course of business on similar terms and
conditions to those entered into with unrelated parties.

Compensation of key management personnel of AGI

AGI’s key management consists of 25 individuals including its CEO,
CFO, its Officers and other senior management, divisional general
managers and its Directors.

Short-term employee benefits

Contributions to defined contribution
plans

Salaries

Share-based payments

2013
$

176

4,776

3,084

2012
$

110

168

4,576

1,174

total comPensation Paid
to Key manaGement Personnel

8,129

6,028

ANNUAL REPORT 2013ConsolIdated FInanCIal statementsKey management interests in an employee incentive plan

Key management employees have been granted the following LTIP
awards for the different vesting dates without any exercise price:

ISSUE DATE

2009

2010

Expiry date

2011 - 2013

2012 - 2014

2013
Shares
outstanding
#

2012
Shares
outstanding
#

—

15,231

40,352

33,996

74,348

30. Profit Per share

Profit per share is based on the consolidated profit for the year divided
by the weighted average number of shares outstanding during the year.
Diluted profit per share is computed in accordance with the treasury
stock method and based on the weighted average number of shares
and dilutive share equivalents.

The following reflects the income and share data used in the basic and
diluted profit per share computations:

Profit attributable to
shareholders for basic and
diluted Profit Per share

2013
$

2012
$

22,591

17,188

Basic weighted average number of shares

12,558,435

12,471,757

Dilutive effect of DDCP

Dilutive effect of LTIP

Dilutive effect of PSU

Dilutive effect of RSU

Diluted weighted
average number of shares

basic Profit Per share

diluted Profit Per share

33,543

16,552

110,000

174,373

26,269

74,348

—

12,892,902

12,572,374

1.80

1.75

1.38

1.37

Subsequent to December 31, 2013, holders of $19.0 million principal
amount of the 2009 Debentures exercised the conversion option and
were issued 422,897 common shares, 19,181 shares were issued under
the DRIP and an additional 13,000 shares were issued under the RSU.
Other than the aforementioned, there have been no other transactions
involving ordinary shares or potential ordinary shares between the
reporting date and the date of completion of these consolidated
financial statements.

Both 2009 and 2013 convertible unsecured subordinated debentures
were excluded from the calculation of the above diluted net earnings
per share because their effect is anti-dilutive.

ANNUAL REPORT 2013Consolidated FinanCial statementsIn the year ended December 31, 2013, the Company had one single
customer representing 10% or more of the Company’s revenues. It is an
international customer with sales representing 12% of the Company’s
revenues. In the year ended December 31, 2012, the Company had no
single customer representing 10% or more of the Company’s revenues.

31. rePortable business seGment

The Company is managed as a single business segment that
manufactures and distributes grain handling, storage and conditioning
equipment. The Company determines and presents business segments
based on the information provided internally to the CEO, who is AGI’s
Chief Operating Decision Maker [“CODM”]. When making resource
allocation decisions, the CODM evaluates the operating results of the
consolidated entity.

All segment revenue is derived wholly from external customers and as
the Company has a single reportable segment, inter-segment revenue
is zero.

Property, plant and
equipment, goodwill,
intangible assets and
available-for-sale
investment

2012
$

2013
$

2012
$

revenue

2013
$

Canada

74,818

76,223

144,095

148,781

United States

189,478

166,183

74,010

International

92,491

71,936

9,120

61,954

8,295

356,787

314,342 227,225

219,030

The revenue information above is based on the location of the customer.

ANNUAL REPORT 2013ConsolIdated FInanCIal statements32. commitments and continGencies
[a] Contractual commitment for the purchase of property,
plant and equipment

As of the reporting date, the Company had no commitments to
purchase property, plant and equipment.

[b] Letters of credit

33. subseQuent eVents

Effective February 3, 2014, the Company acquired the operating assets
related to the Rem GrainVac product line for cash consideration of $9.5
million plus working capital of $4.0 million. The acquisition and related
transaction costs were funded from the Company’s cash balance. Due
to the timing of the acquisition, the allocation of the purchase price has
not yet been finalized.

As at December 31, 2013, the Company has outstanding letters
of credit in the amount of $9,201 [2012 - $1,354].

34. comParatiVe fiGures

Certain of comparative figures have been reclassified to conform to the
current year’s presentation.

The key element of the change to the tax balances reported on the
consolidated statements of financial position was to establish a
separate disclosure of investment tax credits by segregating them
from deferred tax assets into an income taxes recoverable. The amount
reclassified in 2012 for comparative purposes was $4,880.

[c] Operating leases

The Company leases office and manufacturing equipment, warehouse
facilities and vehicles under operating leases with minimum aggregate
rent payable in the future as follows:

Within one year

After one year but not more than five years

1,437

5,038

6,475

These leases have a life of between one and five years, with no renewal
options included in the contracts.

During the year ended December 31, 2013, the Company recognized
an expense of $1,722 [2012 - $1,048] for leasing contracts. This amount
relates only to minimum lease payments.

[d] Legal actions

The Company is involved in various legal matters arising in the ordinary
course of business. The resolution of these matters is not expected
to have a material adverse effect on the Company’s financial position,
results of operations or cash flows.

ANNUAL REPORT 2013Consolidated FinanCial statements3
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DIRECTORS

OFFICERS

Gary Anderson, President, Chief Executive Officer & Director

Janet Giesselman, Compensation & Human Resources
Committee Chair

Bill Lambert, Chairman of the Board of Directors

Bill Maslechko, Director

Mac Moore, Governance Committee Chair

David White, CA, ICD.D, Audit Committee Chair

Steve Sommerfeld, CA, Executive Vice President & Chief Financial Officer

Dan Donner, Senior Vice President, Sales & Marketing

Paul Franzmann, CA, Senior Vice President, Operations

Tim Close, Vice President, Strategic Planning & Development

Ron Braun, Vice President, Portable Grain Handling

Paul Brisebois, Vice President, Marketing

Shane Knutson, Vice President, International Sales

Gurcan Kocdag, Vice President, Storage & Conditioning

Craig Nimegeers, Vice President, Engineering

Nicolle Parker, Vice President, Finance & Integration

Tom Zant, Vice President, Commercial Products Group

Eric Lister, Q.C., Counsel

Additional information relating to the Company, including all public filings, is available on SEDAR (www.sedar.com).