Rocky Mountain Dealerships Inc. Annual Report 2015

FY2015 Annual Report · Rocky Mountain Dealerships Inc.

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ANNUAL REPORT 2015

CONSOLIDATED FINANCIAL STATEMENTSRocky Mountain Dealerships Inc. | Annual Report | 2015 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2015 and 2014Expressed in Thousands of Canadian Dollars Except Per Share and Per Option AmountsROCKY MOUNTAIN
DEALERSHIPS INC.
ANNUAL REPORT
2015

MESSAGE TO SHAREHOLDERS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6

MANAGEMENT'S DISCUSSION & ANALYSIS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 10

MANAGEMENT'S REPORT TO SHAREHOLDERS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 62

CONSOLIDATED FINANCIAL STATEMENTS � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 64

CORPORATE INFORMATION � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 122

Rocky Mountain Dealerships Inc. | Annual Report | 2015 CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATION

cash flow benefits in the future; statements discussing
future demand or financial benefits for our products
and services, including our geomatics, technology and
precision farming services; statements about our ability
to achieve brand acceptance and profitability within
our Industrial segment; statements that achievements
during this past year have set the groundwork for
future growth; and, statements about providing value
to shareholders. Rocky cannot assure investors that
Rocky’s actual performance or results will be consistent
with these forward-looking statements. Rocky’s actual
results could differ materially from those anticipated in
the forward-looking statements contained in this
Annual Report as a result of the risk factors set forth
in Rocky's Annual Information Form dated March 15,
2016, available on SEDAR at www.sedar.com.

All forward-looking statements in this Annual Report
are qualified in their entirety by the cautionary
statements herein, as well as by the cautionary
statements on forward-looking information contained
in the Management’s Discussion and Analysis, which
is found in this Annual Report.

This Annual Report contains certain statements or
disclosures relating to Rocky Mountain Dealerships Inc.
and its subsidiaries (hereinafter collectively “Rocky”)
that are based on the estimates or expectations of its
management as well as assumptions made by and
information currently available to Rocky, which may
constitute forward-looking statements or information
under applicable securities laws. All such statements
and disclosures, other than those of historical fact,
which address activities, events, outcomes, results or
developments that Rocky anticipates or expects may,
or will occur in the future (in whole or in part) should
be considered forward-looking statements. In most
cases, forward-looking statements can be identified
by terms such as “forecast”, “future”, “may”, “will”,
“expect”, “anticipate”, “believe”, “hope”, “potential”,
“enable”, “plan”, “continue”, “contemplate”, “should”,
“intend”, or other comparable terminology suggesting
future outcomes or events. Forward-looking statements
may, among other things, relate to: Comments and
discussion contained in the Message to Shareholders;
comments contained in the individual quotation pages,
including the comment about setting the groundwork
for future growth; comments dealing with or implying
continued inventory reductions and the economic
benefits derived therefrom; discussion about achieving
or maintaining per-store and per-employee revenue
levels; statements about future facility improvement,
expansion or construction; statements that our
installed equipment base will yield balance sheet and

CAUTIONARY STATEMENTSRocky Mountain Dealerships Inc. | Annual Report | 2015 WE HAVE SET THE
GROUNDWORK FOR
FUTURE GROWTH.

MESSAGE TO SHAREHOLDERS

While 2015 offered its fair share of challenges, it was also a year where I saw our people truly rise up to meet those
challenges. We were able to leverage market conditions to further our existing business initiatives and enhance our
presence in the marketplace. As a result, Rocky was able to deliver strong gains in several key areas, and I believe we
ended 2015 a better and stronger organization than we went in.

One of the biggest success stories for Rocky in 2015 was the meaningful inventory reduction we achieved, with
minimal imapct on our margins. During 2015, we were able to reduce our inventory by $69.8 million, excluding the
$43.6 million of inventory we acquired in April, 2015, as part of the Chabot Implements acquisition. While the disparity
between the Canadian and U.S. Dollars created some headwinds for us to sell new equipment, it opened the door
for us to sell a higher volume of used equipment to our customers throughout the year. This increase in our used
equipment customer base also helped drive our parts and service business to another profitable year with record
amounts of revenue. This continued focus on inventory rationalization has yielded year-over-year improvements to
our balance sheet, improved cash generation, and solidified our foundation, on which we can continue to build.

During 2015, Rocky enacted a number of cost containment strategies, which in large measure helped to offset the
costs acquired as part of our acquisitions, as well as ensure that our fixed-cost structure was better aligned with
market conditions. We achieved success in our cost containment strategies in a number of ways, chief of which was
through strategically amalgamating stores in key areas. As we continued to review and analyze our “bricks & mortar
footprint” we saw opportunities that allowed us to maintain the same excellent level of service and dependability
our customers expect, while at the same time ensuring that our fixed cost structure remained in check. We believe
that each location needs to have the opportunity to generate a minimum of $20-25 million in revenue. Operating
our individual locations on this scale allows for reasonable profitability and the ability to support the customers in
each location efficiently and effectively. This initiative helped to ensure that our revenue per store continues to be
industry-leading.

On that point, during 2015 we invested in facility improvements, to better meet the needs of our growing customer
base. We were pleased to open a new facility in Neepawa, Manitoba, during 2015. On April 1, 2016, we were proud to
open the doors of our new facility in Yorkton, Saskatchewan, which we believe will have the size and scale to service
that community for many years to come. We expect this new store to be a flagship store for that region, helping to
solidify our commitment to the marketplace there, while laying the groundwork for the business to come. As we
continue to evaluate and fine-tune our facility strategy, I expect that the coming years will see further investment into
new flagship locations, showing Rocky’s commitment to being a first-class dealer across its entire territory.

Sales process changes, as well as point-of-sale training and development for our staff, helped Rocky to maintain
relatively consistent same-store agriculture equipment sales year-over-year. This is a particularly significant takeaway
from 2015, a year in which our industry saw decreases in overall equipment demand. We also continued to focus on
furthering our higher-margin product support business. Our sales initiatives, combined with our increased equipment
installed-base, helped drive same-store product support sales in 2015. We continue to see product support as an area
of growth for Rocky as the elevated levels of equipment inventory in our market continues to age. These successes
in sales, combined with our drive to keep facility and staffing footprints in line with our overall demand, helped us
maintain revenue-per-employee numbers that are ahead of industry averages.

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MESSAGE TO SHAREHOLDERS

While weather conditions continue to have a major influence on the success of our industry, the simple fact is that the
business, and more specifically the technology, of farming has advanced by leaps and bounds during the past several
years. Advances in precision farming techniques have enabled farmers to minimize their input costs while at the same
time maximize their yields. And to that point, Rocky continues to strive to be at the forefront of the technological
revolution taking place in this industry. In early 2015, we acquired NGF Geomatics, a geomatics company specializing
in geo-spatial imaging using LiDAR technology and unmanned aerial vehicles (or “drones”). This new division of Rocky,
called RME Geomatics, is able to provide vast amounts of vital data to our agriculture customers, to assist them in
assessing and formulating their crop management decisions. Furthermore, we have engaged in strategic partnerships
and alliances with other organizations who see the vast potential that the area of precision farming holds. And while
these services do not currently contribute materially to Rocky’s results, they do show our continued commitment to be
a leader in the industry and both an equipment and technology partner to our customers.

Continuing on the acquisitions front, in 2015 we were able to grow our Case IH distribution footprint in Manitoba
with the acquisition of Chabot Implements. With four stores across Manitoba, this long-standing distributor of Case
IH equipment represented a strategic growth opportunity, allowing us to solidify our position as a major equipment
distributor in the Manitoba region. We look forward to showing to our new customers in that region the advantages
that come from having our powerful dealer network at their disposal.

One area where we saw some setbacks this year was in our Industrial segment. This was due primarily to the
precipitous drop in oil prices, and the resultant effects it had on the Alberta economy in 2015. While our Industrials
segment is not reliant on doing business directly within Alberta’s oil patch, the indirect effects of a slowdown in that
industry does impact us. As infrastructure projects were shelved and housing starts waned, the demand for industrial
products decreased significantly over 2015. We continue to work on initiatives to further our brand and ultimately
achieve profitability in this segment, despite the challenges ahead.

While we acknowledge that 2015 saw a drop in Rocky’s overall profitability, we believe that our achievements during
this past year have set the groundwork for future growth. It is Rocky’s people who truly make us unique in this
industry. We have a passionate group of individuals who are personally invested in ensuring the long-term success of
Rocky. I would like to briefly mention our colleague Paul Walters, who after nearly nine years on our Board of Directors,
has decided to step down to pursue other interests. Paul was one of Rocky’s original directors, having been with us
since our IPO in 2007. His dedication to our company, combined with his insights gained from a lifetime of experience
in the retail industry, made him an invaluable member of our Board of Directors. He will be missed, and I, on behalf of
all of Rocky, would like to thank Paul for his efforts and contributions over the years.

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With a solid team of dedicated individuals in place, I am excited by the value we can provide shareholders as we strive
to be the safe, dependable equipment partner of choice to our customers.

GARRETT GANDEN
President & Chief Executive Officer

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WE ACHIEVED
MEANINGFUL
INVENTORY
REDUCTION.

MANAGEMENT’S DISCUSSION & ANALYSIS

ROCKY MOUNTAIN DEALERSHIPS INC�
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2015

Rocky’s common shares trade on the Toronto Stock
Exchange under the symbol ‘RME’ and on the OTCQX
under the symbol ‘RCKXF’. Additional information
relating to Rocky, including the Company’s Annual
Information Form, dated March 15, 2016 (“AIF”), is
available on the System for Electronic Document
Analysis and Retrieval (“SEDAR”) website at
www.sedar.com.

This MD&A contains forward-looking statements (“FLS”).
Please see the section “Caution Regarding Forward-
Looking Information and Statements” for a discussion
of the risks, uncertainties and assumptions relating to
those statements.

This Management’s Discussion and Analysis (“MD&A”)
was prepared as of March 15, 2016 and is provided
to assist readers in understanding Rocky Mountain
Dealerships Inc.’s financial performance for the
year ended December 31, 2015. It should be read in
conjunction with the audited consolidated financial
statements for the years ended December 31, 2015
and 2014 together with the notes thereto and the
auditor’s report thereon. The results reported herein
have been derived from consolidated financial
statements prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board and are
presented in Canadian dollars.

Unless the context otherwise requires, use in this MD&A
of “Rocky”, “the Company”, “we”, “us”, or “our” means
Rocky Mountain Dealerships Inc. and its wholly-owned
subsidiaries including Rocky Mountain Equipment
Canada Ltd. (“RME Canada”) and Rocky Mountain
Dealer Acquisition Corp. (“RMDAC”).

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MANAGEMENT’S DISCUSSION & ANALYSIS

SUMMARY OF THE YEAR ENDED
DECEMBER 31, 2015

SUMMARY OF THE QUARTER ENDED
DECEMBER 31, 2015

■

Total revenues decreased by 2.9% to $285.6 million.

Used equipment sales increased by 16.1% to $92.7
million.

Gross profit decreased by 4.9% to $37.5 million
(13.1% of sales).

Adjusted Diluted Earnings per Share(1) declined by
21.9% to $0.25.

Adjusted EBITDA(1) declined 16.6% to $9.0 million.

Inventory increased by $10.1 million to $499.8
million.

■

Total revenues increased by 1.0% to $975.5 million.

Same store agriculture sales were held flat despite
softer industry demand.

Used equipment sales increased by 24.4% to $377.5
million.

Gross profit decreased by 2.5% to $142.0 million
(14.6% of sales).

Adjusted Diluted Earnings per Share(1) declined by
26.8% to $0.71.

Adjusted EBITDA(1) declined 18.9% to $28.6 million.

Inventory decreased by $69.8 million to $499.8
million(2).

Expanded our sales territory through the
acquisition of Chabot.

Completed the construction of our new facility in
Neepawa, Manitoba.

(1)See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below.
(2)Excluding $43.6 million of inventory acquired through the Chabot acquisition.

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MANAGEMENT’S DISCUSSION & ANALYSIS

COMPANY OVERVIEW

Headquartered in Calgary, Alberta, Rocky is Canada’s
largest agriculture equipment dealer with a network of
full-service agriculture and industrial equipment stores
across the Canadian Prairie Provinces.

Rocky is Canada’s largest retail dealer of CNH Industrial
N.V. (“CNH”) equipment, which includes Case IH, New
Holland, and Case Construction. We are also a major
independent dealer of equipment from a number of
other manufacturers, including, but not limited to,
Bourgault, Seed Hawk, Dynapac, Leeboy and Metso.

We offer our customers a one-stop solution for their
equipment needs through new and used equipment
sales, parts sales, repairs and maintenance services
and third-party equipment financing and insurance
services. In addition, we provide or arrange other
ancillary services such as GPS signal subscriptions and
geomatics services.

The Company’s operations in Alberta, Saskatchewan
and Manitoba are conducted through RME Canada under
the name Rocky Mountain Equipment.

On January 1, 2015, the Corporation’s wholly-owned
subsidiaries, Hi-Way Service Ltd., Hammer Equipment
Ltd. and Miller Equipment Ltd. were amalgamated
pursuant to the Business Corporations Act (Alberta) to
form RMDAC.

On February 12, 2015, the Company acquired 100%
of the issued and outstanding common shares of
NGF Geomatics Inc. (“NGF”), a geomatics company
specializing in the collection of geospatial survey data
using unmanned aerial vehicles. NGF is a start-up
company with minimal assets and liabilities and is
included in our agriculture segment.

On April 1, 2015, the Company acquired 100% of the
issued and outstanding shares of the entities forming
Chabot Implements (“Chabot”), a Manitoba-based
dealer of Case IH agriculture equipment with locations
in Portage La Prairie, Steinbach and Elie. Chabot also
represented various short-lines including Bourgault,
MacDon and Kubota through its Neepawa, Manitoba
location.

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MANAGEMENT’S DISCUSSION & ANALYSIS

MARKET FUNDAMENTALS AND OUTLOOK

AGRICULTURE MARKET

Our agriculture equipment sales are made primarily
to grain, pulse and oilseed crop farmers in Western
Canada. Demand for our equipment is largely driven
by agricultural commodity prices, input costs and
weather. Changes in these demand drivers can cause
our customers’ buying patterns to shift. Equipment
utilization rates, by contrast, are comparatively less
volatile as agricultural equipment incurs hours in the
field regardless of weather or economic conditions.
Farmers are required to work their fields each year,
however circumstances may exist whereby farmers opt
for used equipment in lieu of new equipment, or they
may elect to maintain rather than replace their fleets.
The breadth of Rocky’s product offering enables us to
meet these shifts in buying patterns and provides a
measure of stability within our agriculture segment’s
financial results.

The 2015 growing season ended on a much more
positive note than was originally forecasted. Late
summer rainfalls provided some much needed moisture
across the Canadian Prairies which had otherwise
experienced a very arid growing season. The improved
moisture levels helped to restore forecasted yields for
2015, with Canadian grain and oilseed production now
expected to exceed their 2014 levels by 3.9% according
to Statistics Canada.

Prices for key Western Canadian crops remain strong
as Rocky’s agriculture customer base primarily plants
cereal grains, pulses and oilseeds, which have not
experienced the same price decline as has been
experienced with corn of late. Depreciation in the
Canadian dollar, relative to the U.S. dollar, is expected
to continue to support higher prices in Canada, while
sustained cost reductions in fuel and fertilizer prices are
providing relief to farmers for their input costs.

Agriculture and Agri-Food Canada is estimating that
2015 will yield 2% increases in both crop and livestock

receipts and expects a similar level of crop receipts in
2016. While Canadian farm operators continue to enjoy
earnings growth, such growth has been outpaced in
recent years by increases in equipment pricing. This
has resulted in a shift in equipment buying patterns
including the deferral of fleet replacement and the
purchase of used rather than new equipment.

The Association of Equipment Manufacturers reported
a 13.9% decrease in the number of new tractors and
self-propelled combines sold in Canada during 2015,
as compared to the same period last year. The lack of
moisture early in the growing season softened demand
for agriculture equipment in general, while the added
costs associated with the depreciating Canadian dollar
further reduced demand for new agriculture equipment.
Notwithstanding these macro factors, Western
Canadian farmers continue to hold strong balance
sheets with ample working capital due to a number of
consecutive years of healthy crop receipts. They also
continue to require equipment to work their fields. As
a result, we have seen our equipment sales mix shift
towards used equipment as many of our customers
reassess the economics of purchasing new equipment.
We have also experienced strong product support
demand as some customers are electing to maintain
rather than replace their fleets. We expect a similar mix
to persist into 2016.

Agriculture, as a whole, exhibits cyclical surges in
demand and profitability driven by the aforementioned
macroeconomic and other factors. At present, we
remain at the low end of the demand cycle as a result
of elevated equipment levels throughout the industry.
However, we reiterate the stability of the fundamentals
underlying the agriculture industry. Furthermore, while
weather continues to have a significant influence on our
overall demand, advances made in farming practices,
seed technology and application techniques, have
helped to mitigate this exposure to an extent.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Within the Canadian agriculture sector, the trend
towards larger farms continues to support farm
equipment sales. These operators typically require
larger, more productive equipment along with
specialized support. Furthermore, these operators
tend to replace their equipment more frequently to
capitalize on the latest technological advances and
equipment efficiencies. These larger operators tend
to value the per-acre cost certainty that comes with
maintaining a newer fleet.

As part of their drive to improve productivity and
reduce cost per acre, farmers are continually investing
in new equipment to drive better results on both the
input cost and output efficiency sides of their business.
New equipment technology enables lower input costs
by reducing the number of field passes, per-hour fuel
consumption and overlapping seed and spray patterns.
New equipment technology on the harvest side of the
business also reduces fuel consumption, increases the
speed per acre harvested and reduces process waste
on the field. The emergence of GPS-enabled precision
farming techniques acts as a multiplier for all of these
advantages as well as a driver of demand and total
spend.

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INDUSTRIAL MARKET

Our industrial equipment sales are balanced through
residential construction, roadwork (including
paving and aggregate production), and commercial,
industrial, and municipal construction in the Alberta
market. Housing starts, oil rig count, vehicle sales, and
GDP growth are all factors that influence industrial
equipment purchases in Alberta.

The success of Rocky’s industrial segment is largely
correlated to investment in residential housing as
well as overall infrastructure spending in Alberta.
The significant decline in the Alberta economy has
tempered spending in all sectors and we continue to
feel the effects on our industrial business.

While we do not have a significant direct presence
in Alberta’s oil industry, we are prone to the indirect
effects that a downturn in that industry may have.
For instance, the weakening economic environment
has curtailed housing starts in Alberta of late. The
Canadian Mortgage and Housing Corporation reported
a 6.9% decline in Alberta housing starts during 2015 as
compared to the same period last year.

As these industry headwinds persist, it is anticipated
that overall infrastructure and residential housing
investment may be further curtailed which, in turn,
is likely to negatively impact our industrial segment
results.

In response, we have implemented a number of
cost rationalization measures to offset the expected
reduction in gross profit and will react further as
required depending on market conditions in the coming
quarters. Given the size of the Company’s industrial
segment relative to the agriculture segment, our
overall exposure to the drop in oil prices is substantially
mitigated.

OVERALL

In response to new emission standards implemented in
recent years, equipment manufacturers incorporated
technologies to improve fuel efficiency and emissions
handling into their product offerings. In some instances,
these technologies brought with them considerable
pricing increases. Additionally, the recent weakening
of the Canadian dollar relative to the U.S. dollar has,
and is expected to continue contributing to, a further
premium on new equipment pricing.

For some customers, these pricing increases have
altered their historical buying patterns as they reassess
the economic viability of purchasing new equipment.
In many cases, these customers are electing instead
to populate their fleets with used equipment due to
its lower relative cost, or alternatively, maintaining
their existing fleets longer. To the extent we are able to
replace new equipment demand with used, we are able
to reduce equipment procurement thereby decreasing
overall equipment inventory and balance sheet risk.

The depreciation in the Canadian dollar relative to the
U.S. dollar is also expected to continue to generate
incremental demand for used equipment from U.S.
customers looking to capitalize on the favourable
exchange rate.

Rocky’s success and growth, while predicated on the
larger economic conditions and factors discussed
above, are also affected by our continued ability to
be a partner of choice for equipment purchasers. To
that end, we continue to invest in our people, through
training and employee engagement programs and in
the communities that we serve.

MANAGEMENT’S DISCUSSION & ANALYSIS

We also continue to consolidate our bricks and mortar
footprint to better scale the associated fixed costs and
rationalize our product offering to focus our efforts
on key product lines. We believe that for a store to be
truly successful, ensuring the business can support the
customers and the communities effectively, an annual
revenue of between $20-25 million is required. With
the changes we made in 2015 and are continuing to
enact in 2016, the majority of our locations will have
the opportunity to achieve these targets as the market
recovers.

The outlook for our end-markets, long-term health in
agricultural commodity prices, the impact of previously
acquired dealerships and trade areas and our strong
original equipment manufacturer (“OEM”) relationships,
position us well to pursue our longer-term revenue and
earnings growth initiatives.

Our underlying business fundamentals remain strong.
We have exclusive distribution rights for some of the
world’s leading equipment brands, with significant
barriers to entry into this market. Our installed base
and customer relationships create an annuity of
equipment sales and product support revenue, which
help drive dependable earnings and cash flow. It is
these strong fundamentals that continue to provide
stability in our results and value to our shareholders.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SELECTED ANNUAL FINANCIAL INFORMATION

$ THOUSANDS, EXCEPT PER
SHARE AMOUNTS

2015

2014

2013

Sales

New equipment
Used equipment
Parts
Service
Other

Cost of sales

Gross profit

Selling, general and administrative
Interest on short-term debt
Interest on long-term debt

Earnings before income taxes
Provision for income taxes

Net earnings

Earnings per share

Basic
Diluted

Dividends per share
Non-IFRS Measures(1)
Adjusted Diluted Earnings per Share
Adjusted EBITDA
Operating SG&A
Floor Plan Neutral
Operating Cash Flow

449,997
377,482
107,509
35,865
4,603

975,456
833,475

46.1%
38.7%
11.0%
3.7%
0.5%

100.0%
85.4%

521,747
303,536
101,622
35,064
3,438

965,407
819,785

54.0%
31.4%
10.5%
3.6%
0.5%

523,522
358,861
92,599
29,421
3,359

51.9%
35.6%
9.2%
2.9%
0.4%

100.0% 1,007,762
867,356
84.9%

100.0%
86.1%

141,981

14.6%

145,622

15.1%

140,406

13.9%

111,776
12,747
2,060

15,398
4,105

11,293

0.58
0.58
0.4600

0.71
28,622
100,612

11.5%
1.3%
0.2%

1.6%
0.4%

1.2%

2.9%
10.3%

105,756
11,483
2,182

26,201
7,276

18,925

0.98
0.98
0.4450

0.97
35,303
98,836

11.0%
1.2%
0.2%

2.7%
0.7%

2.0%

3.7%
10.2%

105,450
11,696
2,233

21,027
5,714

15,313

0.80
0.80
0.3675

0.79
29,563
99,147

10.5%
1.2%
0.1%

2.1%
0.6%

1.5%

2.9%
9.8%

92,193

9.5%

(22,993)

(2.4%)

42,342

4.2%

(1)See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SEGMENTED FINANCIAL REPORTING

The Company’s branches have been aggregated on the basis of the primary industry which they serve, being
agriculture or industrial. Certain of our branches serve both industries. In cases where branches distribute both
agriculture and industrial equipment, the primary industry served is agriculture and, therefore, these facilities have
been categorized as such. As a result, certain industrial related results are included in the agriculture segment for the
purposes of segmented financial reporting.

$ THOUSANDS

Sales

New equipment
Used equipment
Parts
Service
Other

Gross profit

Gross margin

Net income (loss)

2015

2014

AGRICULTURE

INDUSTRIAL

TOTAL

AGRICULTURE

INDUSTRIAL

TOTAL

423,107
372,954
94,558
31,090
4,008

925,717

130,998

14.2%

14,081

26,890
4,528
12,951
4,775
595

49,739

10,983

22.1%

(2,788)

449,997
377,482
107,509
35,865
4,603

473,715
300,277
87,387
29,478
2,731

975,456

893,588

141,981

132,430

14.6%

11,293

14.8%

20,430

48,032
3,259
14,235
5,586
707

71,819

13,192

18.4%

(1,505)

521,747
303,536
101,622
35,064
3,438

965,407

145,622

15.1%

18,925

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MANAGEMENT’S DISCUSSION & ANALYSIS

REVENUE AND GROSS PROFIT

The Company uses the terms “acquired” versus “same store” in assessing its revenue. Each acquired store has an
average historical level of sales prior to being acquired by Rocky. When the Company discusses “acquired” results,
it is referring to these average historical levels. This base level of activity continues to be classified as acquired until
such time as the acquired store has been included in our dealership network for twelve months after which point,
all activity is classified as same store. For the year ended December 31, 2015, all acquired growth pertains to the
agriculture segment of the Company. As a start-up entity, the historical sales for NGF were negligible and have not
been presented as acquired sales.

Agriculture Segment

$ THOUSANDS

2015

2014

CHANGE

TOTAL

ACQUIRED

SAME STORE

Sales

New equipment
Used equipment
Parts
Service
Other

Gross profit

Gross margin

423,107
372,954
94,558
31,090
4,008

925,717

130,998

14.2%

473,715
300,277
87,387
29,478
2,731

893,588

132,430

14.8%

(50,608)
72,677
7,171
1,612
1,277

32,129

(1,432)

(0.6%)

20,295
6,672
4,722
899
-

32,588

(70,903)
66,005
2,449
713
1,277

(459)

For the year ended December 31, 2015, total sales for the agriculture segment increased by $32.1 million or 3.6% over
the same period in 2014. This increase includes $32.6 million of acquired sales for the year.

The mix within equipment sales has shifted towards used equipment during the year. New equipment pricing
increases associated with government-mandated emissions standards were further compounded in 2015 by the
depreciation of the Canadian dollar. These factors altered the economics of purchasing new equipment for many
farmers, who opted instead to invest in lightly-used equipment or defer their fleet replacement altogether.

As a result of the appreciating U.S. dollar relative to the Canadian dollar, demand from U.S.-based customers has
increased, which also supported the strength in our used equipment sales during 2015. We continue to see this as
a driver towards incremental used equipment sales in the near term, provided the current disparity between the
currencies remains or increases.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Same store product support sales for the year ended December 31, 2015 increased by $3.2 million or 2.7% over the
same period in 2014. Fleet replacement deferrals translated into increased product support demand during 2015 as
new equipment price increases caused certain customers to opt to maintain their fleets. Procurement synergies, sales
training and initiatives geared toward technician efficiency as well as market penetration of non-captive product
lines have also contributed to the growth in our product support revenues. Acquired sales contributed an additional
$5.6 million of product support revenue growth during 2015.

Gross profit for 2015 decreased by $1.4 million or 1.1% year-over-year. Gross margin for the year ended December 31,
2015, declined by 0.6% over last year. Efforts undertaken to reduce equipment inventory compressed margins,
most notably early in the year when arid weather conditions created pessimism amongst farmers and heightened
competitive pressures within the agriculture equipment market. The shift in our equipment sales mix towards
lower-margin used equipment contributed to additional margin dilution as did a $2.6 million reduction in
manufacturer incentives recognized year-over-year, due in part to the reduction in new equipment sales.

Industrial Segment

$ THOUSANDS

2015

2014

CHANGE

Sales

New equipment
Used equipment
Parts
Service
Other

Gross profit

Gross margin

26,890
4,528
12,951
4,775
595

49,739

10,983

22.1%

48,032
3,259
14,235
5,586
707

71,819

13,192

18.4%

(21,142)
1,269
(1,284)
(811)
(112)

(22,080)

(2,209)

3.7%

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For the year ended December 31, 2015, total sales for the industrial segment decreased by $22.1 million or 30.7%.

Equipment sales for the year ended December 31, 2015 decreased by $19.9 million or 38.7% over 2014. Persistent
low oil prices have reduced demand for, and use of, industrial equipment during the year. Although our business is
not heavily concentrated in the oil and gas sector, the impact of low oil prices has had a negative impact on Alberta’s
overall GDP and our industrial segment sales.

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MANAGEMENT’S DISCUSSION & ANALYSIS

The decrease in equipment revenues is also attributable to the disposition of the Company’s rock truck inventory
during the first quarter of 2014 for proceeds of $7.0 million, which increased prior year equipment sales.

Product support sales for the year ended December 31, 2015 decreased by $2.1 million or 10.6% compared to last year.
The reduction in product support revenues during the year reflects the slowing of the Alberta economy as many of the
units in our installed base were either idle or, where possible, had repairs deferred or performed in-house.

Gross profit for the year ended December 31, 2015 decreased by $2.2 million or 16.7% year-over-year as a result of the
contraction in top-line revenues.

Gross margin for the year ended December 31, 2015 increased by 3.7%. The increase in gross margin pertains largely
to the disposition of the Company’s rock truck inventory during the first quarter of 2014. These assets were disposed
of for proceeds of $7.0 million at negligible margins, depressing gross margin for the comparative period. Sales of
equipment inventory procured in previous periods at favourable exchange rates and improved efficiencies within our
service departments also contributed to improved margins in the industrial segment.

PRODUCT SUPPORT REVENUES

Certain product support activity is performed for the benefit of other departments within the Company. This activity is
excluded from reported parts and service revenues. Management assesses overall product support activity to ensure
that the resources deployed are adequate in light of total activity. Total parts and service activity is reconciled to our
reported revenues for the respective departments as follows:

$ THOUSANDS

2015

2014

Parts activity
Total activity
Internal activity eliminated

Reported revenues

Service activity
Total activity
Internal activity eliminated

Reported revenues

121,690
(14,181)

107,509

57,451
(21,586)

35,865

116,283
(14,661)

101,622

57,613
(22,549)

35,064

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MANAGEMENT’S DISCUSSION & ANALYSIS

SELLING, GENERAL AND
ADMINISTRATIVE

Selling, general and administrative (“SG&A”)
expenses include sales and marketing expenses,
sales commissions, payroll and related benefit costs,
insurance expenses, professional fees, rent and other
facility costs and administration overhead including
depreciation of property and equipment. Many of these
costs are fixed. When we acquire new stores, these costs
typically increase as we incur additional expenditures
related to the direct selling, general and administrative
functions. Over time, as these acquisitions are
amalgamated into the business, the costs generally
decrease as we incorporate their finance and other
administrative functions into our centralized corporate
resources. Similarly, our costs will increase as we add
direct customer-related resources such as equipment
specialists, but will normalize relative to sales volumes
as those positions drive incremental revenue and
increase our customer base.

Fixed costs are subject to price increases driven
primarily by real estate and labour demand in Western
Canada. Variable costs included within SG&A expenses
consist primarily of sales commissions.

The Company assesses its Operating SG&A relative to
total sales in analyzing its results (see the definition
and reconciliation of Operating SG&A in the “Non-IFRS
Measures” and “Reconciliation of Non-IFRS Measures to
IFRS” sections below). The Company targets a sub-10%
Operating SG&A as a percentage of sales on an annual basis.

For the year ended December 31, 2015, Operating SG&A
increased by $1.8 million or 1.8% over 2014. Operating
SG&A for the year includes $6.3 million associated with
our four new Manitoba locations and our geomatics
division. Excluding Operating SG&A acquired pursuant
to these acquisitions, Operating SG&A decreased by
$4.6 million or 4.6%. As a percentage of sales, Operating
SG&A for the year ended December 31, 2015 remained
relatively flat as compared to 2014 and slightly above
our target range.

In response to market conditions in both the
agriculture and industrial segments of our business, we
implemented a number of cost containment measures
to better align our resources deployed with industry
demand. During the latter half of 2015, these cost
reductions served to partially offset the Operating SG&A
incurred by acquired locations.

We also continue to scale the business by amalgamating
facilities were appropriate. Typically, we expect
to generate a minimum of $20.0 – $25.0 million in
revenue per location in order to meet our customers’
needs and expectations while appropriately scaling
the costs associated with a facility. During the year,
we successfully completed the consolidation of our
facilities in Westlock, Alberta, and Neepawa, Manitoba
and are in the process of amalgamating stores in
Edmonton, and Bow Island, Alberta as well as Yorkton,
Saskatchewan in the first quarter of 2016.

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MANAGEMENT’S DISCUSSION & ANALYSIS

INTEREST

NET EARNINGS

The Company’s short-term interest expense is
attributable to the floor plan financing associated
with its new and used equipment inventory as well as
interest on its Operating Facility. Interest on long-term
debt pertains primarily to the Company’s Term Facility
as well as its former Debenture Repayment, Acquisition,
Real Estate and Fleet Facilities. During 2015, interest on
short-term debt increased by $1.3 million or 11.0% as
a result of a higher average balance of interest-bearing
floor plan payable outstanding as well as draws on our
Operating Facility utilized to extinguish debt assumed
as part of the Chabot acquisition.

The increase in the Company’s hedged position with
respect to its short-term floating-rate debt has also
increased its effective cost of funds, contributing to the
increase in short-term interest expense.

Net earnings for the year ended December 31, 2015
decreased by $7.6 million or $0.40 per share over 2014.
As a result of the decline in the Company’s share price
as at December 31, 2015, the Company recognized
non-cash charges associated with marking its total
return swaps to market of $3.5 million as compared
to $0.1 million during 2014. The Company expects
this charge to reverse over future periods as its stock
price recovers. The Company’s net earnings were also
impacted by weaker gross margins, largely as a result of
reduced manufacturer incentives.

Adjusted Diluted Earnings per Share, which excludes
the loss on the total return swaps, amounted to $0.71
for 2015, down from $0.97 last year. See the definition
and reconciliation of Adjusted Diluted Earnings per
Share in the “Non-IFRS Measures” and “Reconciliation
of Non-IFRS Measures to IFRS” sections below.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SUMMARY OF QUARTERLY RESULTS

$ THOUSANDS,
EXCEPT PER
SHARE AMOUNTS

Sales

New equipment
Used equipment
Parts
Service
Other

Q4
2015

Q3
2015

Q2
2015

Q1
2015

Q4
2014

Q3
2014

Q2
2014

Q1
2014

Q4
2013

162,424
92,676
20,614
8,714
1,159

80,432
125,534
37,918
10,711
1,391

95,393
75,487
31,989
9,387
1,204

111,748
83,785
16,988
7,053
849

182,555
79,810
21,320
9,569
838

81,837
102,354
35,568
10,041
995

133,086
70,621
29,216
8,478
953

124,269
50,751
15,518
6,976
652

179,359
84,925
18,099
7,403
795

285,587

255,986

213,460

220,423

294,092

230,795

242,354

198,166

290,581

Cost of sales

248,049

215,944

180,519

188,963

254,623

191,680

204,548

168,934

257,329

Gross profit

37,538

40,042

32,941

31,460

39,469

39,115

37,806

29,232

33,252

Gross margin

13.1%

15.6%

15.4%

14.3%

13.4%

16.9%

15.6%

14.8%

11.4%

SG&A
Interest and taxes

27,449
5,509

30,334
5,356

26,363
4,549

27,630
3,498

27,548
5,700

27,165
5,746

25,985
5,925

25,058
3,570

Net earnings

4,580

4,352

2,029

EPS – basic

EPS – diluted

0.24

0.23

0.10

332

0.02

6,221

6,204

5,896

0.32

0.31

604

0.03

27,249
3,937

2,066

0.11

Fluctuating seasonal revenue cycles are common in both the agriculture and industrial industries as a result of
weather conditions, the timing of crop receipts and farming cycles and the timing of infrastructure expenditures. As
a result, our financial results typically vary between quarters. The first quarter is generally the weakest due to the
lack of agriculture activity and winter shutdowns, while the fourth quarter is the strongest due to conversions of
equipment on rent with purchase options, and the post-harvest purchases that are typical in the agriculture sector.

Over time, we expect second and third quarter sales activity to increase relative to the fourth quarter as our increased
installed base drives more parts and service activity and our customers decide to trade their equipment earlier in the
year to take advantage of advancements in technology before the harvest season.

Weather conditions, such as a late spring, excess moisture or drought conditions may positively or negatively impact
sales activity for any given period. The early spring in 2015 drove a considerable amount of equipment sales activity
associated with seeding and other spring work into the first quarter, whereas in 2014, much of this activity was
deferred until the second quarter.

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MANAGEMENT’S DISCUSSION & ANALYSIS

BALANCE SHEET SUMMARY

$ THOUSANDS

DECEMBER 31, 2015

DECEMBER 31, 2014

DECEMBER 31, 2013

Assets

Inventory
Other current assets
Total current assets

Property and equipment
Deferred tax asset
Intangible assets
Goodwill

Total assets

Liabilities and equity
Floor plan payable
Other current liabilities
Total current liabilities

Long-term debt
Obligations under finance leases
Deferred tax liability
Derivative financial liabilities

Shareholders’ equity

Total liabilities and equity

499,760
63,824
563,584

39,888
2,367
671
18,802

625,312

356,568
53,893
410,461

40,080
154
-
4,859

455,554
169,758

625,312

526,003
69,049
595,052

32,886
1,186
-
14,692

643,816

382,081
57,261
439,342

32,776
9
-
3,282

475,409
168,407

643,816

479,330
74,520
553,850

30,860
-
-
14,692

599,402

342,364
53,113
395,477

41,681
541
2,576
1,706

441,981
157,421

599,402

Current assets at December 31, 2015, consisted primarily of new and used equipment inventory of approximately
$172.3 million and $287.8 million, respectively (2014 – $213.7 million and $273.3 million, respectively). The Company’s
new and used equipment inventory is comprised predominantly of agriculture equipment. Rocky has a diverse
customer base for its agriculture equipment and strives to carry an appropriate mix of both new and used equipment
to best serve our customers. Typically, our agriculture customers trade in their used equipment when making
equipment purchases. Industrial equipment, by contrast, is generally utilized to the end of its useful life by one
owner. Trades of used industrial equipment are less common and as such, the Company carries less used industrial
equipment relative to new.

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MANAGEMENT’S DISCUSSION & ANALYSIS

Excluding $43.6 million of inventory acquired pursuant to the acquisition of Chabot, total inventories have decreased
by $69.8 million or 13.3% since December 31, 2014, due largely to the shift in our equipment sales mix towards used
equipment. To the extent that customers elect to buy used instead of new equipment, we are able to reduce our
equipment procurement and consequently, our overall inventory and balance sheet risk.

These reductions in inventory come despite recent increases in equipment valuation driven by the incorporation
of more stringent emissions standards and the depreciation of the Canadian dollar. These factors have combined
to increase equipment prices in recent years, and have partially offset progress made on our inventory reduction
initiatives over the same period.

Rightsizing our inventory levels to our sales volume continues to be a top priority for Rocky. The realization of such
rightsizing is not expected to occur in a linear manner. Inventory balances will fluctuate period-over-period based
on several factors including, but not limited to, the timing of new equipment deliveries from OEMs to coincide with
market cycles, trades taken as consideration for new and used equipment sales and overall customer demand.

The Company continues to closely manage its inventory and remains committed to its stated objective of inventory
rightsizing in the coming quarters and years by maintaining an appropriate range of units at competitive values.

Current liabilities consist predominantly of floor plan payable for financed inventory of approximately $356.6 million
as at December 31, 2015 (2014 – $382.1 million). As a percentage of equipment inventory, floor plan payable has
decreased to 77.5% as at December 31, 2015, down 1.0% from a year ago.

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MANAGEMENT’S DISCUSSION & ANALYSIS

LIQUIDITY AND CAPITAL RESOURCES

We assess liquidity in terms of our ability to generate sufficient cash flow, along with other sources of liquidity
including cash and borrowings, to fund our operations and growth in operations. Net cash flow is affected by the
following items:

■

Operating activities, including, the levels of accounts receivable, inventory, accounts payable and floor plan
payable;

Financing activities, including bank credit facilities, long-term debt and other capital market activities providing
both short- and long-term financing; and,

Investing activities, including capital expenditures, dispositions of fixed assets and acquisitions of
complementary businesses.

SUMMARY OF CASH INFLOWS (OUTFLOWS)

$ THOUSANDS

Net earnings
Effect of non-cash items in
net earnings and changes in
working capital

Cash flows from operating activities
Cash flows from financing activities
Cash flows from investing activities

Net increase (decrease) in cash
Cash, beginning of period

Cash, end of period

Floor Plan Neutral Operating
Cash Flow(1)

2015

11,293

24,167

35,460
(12,788)
(28,934)

(6,262)
22,952

16,690

2014

18,925

(2,201)

16,724
(17,589)
(10,905)

(11,770)
34,722

22,952

2013

15,313

14,792

30,105
(8,459)
(21,101)

545
34,177

34,722

92,193

(22,993)

42,342

(1)See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below.

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MANAGEMENT’S DISCUSSION & ANALYSIS

CASH FLOWS FROM OPERATING
ACTIVITIES

CASH FLOWS FROM FINANCING
ACTIVITIES

The Company assesses its Floor Plan Neutral Operating
Cash Flow in analyzing its cash flows from operating
activities. See the definition and reconciliation of Floor
Plan Neutral Operating Cash Flow in the “Non-IFRS
Measures” and “Reconciliation of Non-IFRS Measures to
IFRS” sections below.

Rocky is eligible to finance its equipment inventory
using its various floor plan facilities. Floor plan facilities
are asset-backed lending arrangements whereby each
draw is associated with a specific piece of equipment.
The Company is under no obligation to finance any
of its equipment inventory and, as a general rule,
financed units can be paid out for a period of time
and refinanced at a later date. Adjusting cash flows
from operating activities for changes in the balance of
floor plan payable allows management to isolate and
analyze cash flows from operating activities, prior to
any sources or uses of cash associated with equipment
financing decisions.

For the year ended December 31, 2015, Floor Plan
Neutral Operating Cash Flow increased by $115.2
million as compared to 2014. This increase is primarily
attributable to additional cash generated from reducing
inventory during the year ended December 31, 2015, as
compared to 2014.

For the year ended December 31, 2015, cash flows from
operating activities increased by $18.7 million over the
comparative period, primarily as a result of an increase
in cash generated from inventory net of floor plan
payable.

Cash flows from financing activities pertained primarily
to debt and dividend payments as well as net proceeds
associated with the financing of the acquisition of
Chabot and certain real estate assets.

For the year ended December 31, 2015, cash outflows
from financing activities decreased by $4.8 million.
During 2015, proceeds from long-term debt increased
by $13.4 million over 2014. The incremental draws
pertain primarily to real estate related financing as
well as funding the acquisition of Chabot. These
incremental draws were partially offset by additional
debt repayments including the repayment of certain
loans assumed pursuant to the acquisition of Chabot as
well as debt repaid pursuant to the restructuring of the
Syndicated Facility (as defined herein).

CASH FLOWS FROM INVESTING
ACTIVITIES

Cash utilized for investing activities was the result
of our normal capital expenditures, the acquisition
and construction of real estate and the net cash
consideration paid pursuant to business combinations,
offset by proceeds on the disposition of property and
equipment.

During the year ended December 31, 2015, cash utilized
for investing activities increased by $18.0 million over
2014 primarily as a result of $15.8 million paid on the
acquisition of Chabot, inclusive of $7.1 million of bank
indebtedness assumed.

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MANAGEMENT’S DISCUSSION & ANALYSIS

ADEQUACY OF CAPITAL RESOURCES

We use operating cash flows to finance the purchase of inventory, service our debt requirements, pay dividends, and
fund our operating activities, including working capital, both operating and finance leases and floor plan payable.
Our ability to service our debt and distribute dividends to shareholders will depend upon our ability to generate cash,
which depends on our future operating performance, general economic conditions, availability of adequate credit
facilities, compliance with debt covenants, as well as other factors, some of which are beyond our control. Based on
our current operational performance, we believe that cash flows from operations, along with existing credit facilities,
will provide for our capital needs.

FINANCE FACILITIES

The Company has a credit facility with a syndicate of lenders (the “Syndicated Facility”). The Syndicated Facility is a
revolving facility, secured in favour of the syndicate by a general security agreement. Advances under the Syndicated
Facility may be made based on our lenders’ prime rate or the U.S. base rate plus 1.0% – 2.5% or based on the banker’s
acceptance (“BA”) rate plus 2.0% – 3.5%. The Company pays standby fees of between 0.4% – 0.7% per annum on
any undrawn portion of the Syndicated Facility. The standby fees and premiums on base interest rates within the
respective ranges are determined based on the Company’s covenant compliance.

During 2015, the Syndicated Facility was amended. As part of the amendment, the Company consolidated and
re-termed its former Acquisition, Real Estate and Debenture Repayment Facilities into one term facility (the “Term
Facility”). The $45.0 million balance on the Term Facility has an interest-only period for the first six months, followed
by a seven year repayment period, effectively reducing the Company’s fixed charge commitments.

As part of the amendment, the maturity date was also extended until September 24, 2018.

The Company incurred debt issue costs of $0.8 million, $0.5 million of which was allocated to and offset against
the Flooring Facility with the remainder allocated to and offset against the Term Facility. The costs allocated to the
Flooring and Term Facilities will be amortized into short-and long-term interest, respectively, over the term of the
Syndicated Facility using the effective interest method.

Subsequent to the amendment, the Syndicated Facility consists of:

■

The “Operating Facility” – which may be utilized to advance up to the lesser of the established borrowing base
and $70.0 million. The borrowing base is supported by otherwise unencumbered assets including certain
accounts receivable, inventory and items of property and equipment, less priority payables. This facility may be
used to finance general corporate operating requirements.

The “Flooring Facility” – which may be utilized to finance up to 75% of the value of eligible equipment inventory
to a maximum of $125.0 million. Draws against the Flooring Facility are repayable over a term of 28 months
however; they become due in full upon the sale of the associated equipment.

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MANAGEMENT’S DISCUSSION & ANALYSIS

■

The “Term Facility” – which may be utilized to finance up to 60% of the cost of acquisitions and 75% of the cost of
real estate to a maximum of $75.0 million. Draws are repayable in quarterly installments with acquisition and real
estate related draws amortized over periods of 7 and 15 years, respectively.

Including the syndicated Flooring Facility, we have total floor plan facilities of approximately $592.0 million (inclusive
of seasonal increases) from various lending institutions for the purpose of financing equipment inventory. Our
equipment inventory is financed by way of floor plan financing, which is made available to Rocky by the equipment
manufacturers’ captive finance companies or divisions (such as CNH Industrial Capital Canada Ltd.), as well as by
banks and specialty lenders. The Company also has an additional $75.0 million of floor plan availability with its OEMs,
to be made available to the Company if required as a result of business combinations.

In addition to our available cash balance of $21.7 million as at December 31, 2015, we have approximately $328.4
million available on our various credit facilities.

$ MILLIONS

FACILITY LIMIT

AMOUNT DRAWN

AVAILABLE

Operating Facility
Term Facility
Various floor plan facilities
OEM floor plan facilities
Syndicated Flooring Facility
Other floor plan facilities

70.0
75.0

205.0
125.0
262.0

737.0

5.0
45.0

104.6
72.7
181.3

408.6

65.0
30.0

100.4
52.3
80.7

328.4

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MANAGEMENT’S DISCUSSION & ANALYSIS

FINANCIAL COVENANTS

Pursuant to agreements with lenders, the Company is required to monitor and report certain financial ratios on
a quarterly basis. These measures and the applicable compliance ranges are as follows:

Fixed charge coverage of at least
Debt to tangible net worth less than
Current ratio of at least

2015

2014

1.20-1.50:1
4.00-5.00:1
1.15-1.20:1

1.25-1.50:1
4.00-5.00:1
1.15-1.20:1

Each lender has its own definition of which account balances are to be included in these computations. Failing to
meet these covenants would constitute a default event which may result in, among other restrictions and remedies,
the associated debt becoming due and restrictions on the Company’s ability to draw on its facilities or make
distributions to shareholders.

The amendment to the Syndicated Facility in 2015 has improved the Company’s compliance with its fixed charge
coverage ratio by re-terming the debt and reducing our fixed charge commitments going forward. Furthermore, the
fixed charge coverage ratio under the Syndicated Facility is to be calculated using proforma debt repayments for
the first four quarters following the amendment, to better assess the Company’s ability to meet its reduced fixed
charge commitments. Commencing in the third quarter of 2016, the calculation reverts back to a trailing four-quarter
assessment.

As at December 31, 2015 and 2014, the Company was in compliance with all externally imposed capital requirements.
The Company’s continued compliance with its financial covenants is dependent on various factors which influence
our financial results including, but not limited to, overall demand for our products and services and the timing of
that demand driven by weather and other factors. The Company’s recent financial results reflect the low-end of the
agriculture equipment demand cycle as well as the impact of Alberta’s considerable economic headwinds on our
industrial segment performance. As these conditions persist, there is a risk that the Company’s financial results and/
or position may weaken and that we may not comply with our financial covenants, most notably, our fixed charge
coverage ratios. In response to this risk, the Company has approached its lenders requesting a temporary relaxation of
its fixed charge coverage ratio compliance requirements.

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MANAGEMENT’S DISCUSSION & ANALYSIS

DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes derivative financial instruments to hedge its exposure to changes in interest rates and
fluctuations in the valuation of its common shares. We do not use derivatives to speculate, but rather as a risk
management tool. The Company’s portfolio of derivative financial instruments consists of interest rate and total
return swaps.

Losses realized on derivative financial instruments are as follows:

$ THOUSANDS

Loss recognized in net earnings
Loss recognized in accumulated other comprehensive
loss – net of tax
Loss recognized in deferred tax position

2015

3,548

1,525

544

2014

1,122

386

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MANAGEMENT’S DISCUSSION & ANALYSIS

Interest Rate Swaps

During the year ended December 31, 2015, the Company entered into a new floating-to-fixed interest rate swap on an
additional $50.0 million of its floating-rate floor plan debt. Including this new hedge, the Company has five separate
interest rate swaps related to portions of its Term Facility and various floor plan facilities (collectively, the “Hedged
Facilities”).

The Hedged Facilities each bear interest at a floating rate based on the prevailing BA rate. The interest rate swaps hedge
our exposure to fluctuations in the BA rate. The Company’s hedged and at risk positions are summarized as follows:

$ THOUSANDS

DECEMBER 31, 2015

DECEMBER 31, 2014

HEDGED POSITION

MATURITY

TYPE

EFFECTIVE
RATE

AMOUNT

EFFECTIVE
RATE

AMOUNT

Current debt

Floor plan facility #1
Floor plan facility #2
Floor plan facility #3

August, 2018
September, 2020
September, 2022

Non-amortizing
Non-amortizing
Non-amortizing

Long-term debt
Term Facility #1(1)
Term Facility #2(2)

May, 2016
April, 2017

Amortizing
Amortizing

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Floating-rate debt

Position hedged

(1)Formerly the Acquisition Facility.
(2)Formerly the Debenture Repayment Facility.

4.2%
5.1%
5.4%

5.0%

3.5%
4.1%

4.0%

4.8%

25,000
35,000
50,000

110,000

1,365
22,750

24,115

134,115

299,694

44.8%

4.2%
5.1%
-

4.7%

3.5%
4.1%

4.0%

4.5%

25,000
35,000
-

60,000

4,642
26,250

30,892

90,892

309,219

29.4%

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MANAGEMENT’S DISCUSSION & ANALYSIS

Total Return Swaps

The Company has several total return swap
arrangements to hedge the exposure associated with
increases in its share price on its outstanding Director
Share Units (“DSUs”) and Share Appreciation Rights
(“SARs”). The hedging relationship with the SARs is
ineffective to the extent that the Company’s share price
falls below the strike price of the SARs.

During the vesting period, the accounting treatment of
the SARs creates an inherent discrepancy from the total
return swaps in terms of the timing of the impact on
net earnings. Changes in the Company’s share price are
factored into the Black-Scholes option pricing model to
determine the fair value of the SARs at each reporting
date. This fair value will then be expensed over the
remainder of the vesting period. The derivative financial
instruments, by contrast, are marked-to-market at
each reporting date. Once vested, the SARs will also be
marked-to-market at each reporting period, eliminating
the timing discrepancy.

The Company does not apply hedge accounting to these
relationships and as such, gains and losses arising from
marking these derivatives to market are recognized in
net earnings in the period in which they arise.

The decline in the Company’s share price during the
year resulted in a $3.5 million mark-to-market loss on
the total return swaps (2014 – loss of $0.1 million). The
Company anticipates that the accumulated mark-to-
market loss will be reversed in subsequent periods as
its share price returns to a more typical range.

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At inception, these instruments were designated as
hedges and were accounted for using hedge accounting.
Subsequently, the interest rate swaps on the Term
Facility failed their effectiveness testing and as such,
hedge accounting was discontinued. The $0.1 million
accumulated loss recognized within accumulated other
comprehensive loss will be reversed into net earnings
over the remainder of terms of these derivatives. Future
changes in the fair value of these derivatives will be
recognized within net earnings in the period in which
they arise.

The interest rate swaps on the various floor plan
facilities continue to remain effective and as such, we
continue to account for these cash flow hedges using
hedge accounting. If we sell or terminate a hedged item,
or it matures before the related hedging instrument
is terminated, we recognize in income any realized or
unrealized gain or loss on the derivative instrument. In
accounting for these cash flow hedges, changes in fair
value of the swaps are included in the consolidated
statement of other comprehensive income to the extent
the hedge continues to be effective. The related other
comprehensive amounts are allocated to net earnings
in the same period in which the hedged item affects
net earnings. For all these hedges, to the extent the
change in fair value of the derivative is not completely
offset by the change in the fair value of the hedged item,
the ineffective portion of the hedging relationship is
recorded immediately in net earnings.

During the year ended December 31, 2015, we
recognized in net earnings, a mark-to-market gain of
$0.1 million on our interest rate swaps (2014 – loss of
$39 thousand).

MANAGEMENT’S DISCUSSION & ANALYSIS

The Company’s hedged and at risk positions are summarized as follows:

DECEMBER 31, 2015

DECEMBER 31, 2014

WEIGHTED AVERAGE
PRICE/SHARE $

SHARES/
UNITS

WEIGHTED AVERAGE
PRICE/SHARE $

SHARES/
UNITS

10.54
9.21

9.31

10.54
9.52

9.87

100
1,170

1,270

75
1,146

1,221

104.0%

100
191

291

75
550

625

46.6%

IN THOUSANDS
OF SHARES/UNITS
EXCEPT PER
SHARE AMOUNTS

Hedged position

DSUs
SARs

Position at risk

DSUs
SARs

Position hedged

DIVIDENDS

On February 2, 2016, the Board of Directors of Rocky approved a quarterly dividend of $0.115 per common share on its
outstanding common shares. The common share dividend is payable on March 31, 2016, to shareholders of record at
the close of business on February 29, 2016.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SHARE CAPITAL – OUTSTANDING SHARES

$ THOUSANDS

Opening balance
Shares issued upon exercise of stock options

Closing balance

2015

19,384
-

19,384

2014

19,313
71

19,384

As at March 15, 2016, there were 19,384,086 shares outstanding.

The options outstanding at December 31, 2015 are as follows:

GRANT DATE

March 11, 2011
August 11, 2011
March 28, 2012
March 13, 2013
March 13, 2014

OPTIONS
OUTSTANDING
(THOUSANDS)

OPTIONS
EXERCISABLE
(THOUSANDS)

WEIGHTED AVERAGE
EXERCISE PRICE
($)

WEIGHTED AVERAGE
CONTRACTUAL LIFE
(YEARS)

30
142
237
363
393

1,165

30
142
237
242
131

782

10.39
8.71
11.96
12.89
11.52

11.66

0.2
0.6
1.2
2.2
3.2

2.1

As at March 15, 2016, there were 1,163,333 options outstanding.

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MANAGEMENT’S DISCUSSION & ANALYSIS

CONTRACTUAL OBLIGATIONS

The Company’s contractual obligations consist primarily of its floor plan payable used to finance the purchase of
new, and to a lesser extent, used equipment. The Company has classified its floor plan payable as current as the
corresponding inventory to which it relates has also been classified as current.

Floor plan payable as well as trade payables, accruals and other form the majority of the Company’s contractual
obligations which will be discharged within the next 12 months.

Other significant contractual obligations outstanding as at December 31, 2015 include long-term debt consisting
predominantly of the Term Facility and operating lease commitments which relate primarily to the Company’s
facilities. Lease terms are between one and eleven years and most building leases contain renewal options for periods
ranging from three to five years.

The Company assesses its liquidity based on the period in which cash flows are expected to occur. The following table
summarizes the Company’s expected undiscounted cash flows as at December 31, 2015 assuming the Syndicated
Facility is renewed prior to maturity on September 24, 2018. The analysis is based on foreign exchange rates and
interest rates in effect at the consolidated balance sheet date, and includes both principal and interest cash flows.

$ THOUSANDS

TOTAL

2016

2017-2018

2019-2020

Trade payables, accruals and other
Floor plan payable(1)
Long-term debt
Obligations under finance leases
Operating lease obligations
Derivative financial instruments

33,963
370,861
49,869
237
33,680
9,589

33,963
370,861
6,145
77
8,921
4,051

Total contractual obligations

498,199

424,018

-
-
14,784
146
13,639
4,320

32,889

-
-
14,031
14
7,349
1,218

22,612

THERE-
AFTER

-
-
14,909
-
3,771
-

18,680

(1)Includes floor plan payable classified as liabilities associated with assets held for sale.

In the event that the Syndicated Facility is not renewed prior to its maturity, the cash outflow for long-term debt
outstanding as at December 31, 2015 would be $41.9 million in 2017-2018 and $Nil thereafter.

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MANAGEMENT’S DISCUSSION & ANALYSIS

RELATED PARTY TRANSACTIONS

During the year ended December 31, 2015, the Company entered into the following transactions with related parties:

$ THOUSANDS

Equipment and product support sales
Expenditures

Rental payments on Company facilities
Equipment purchases
Flight costs
Other expenses

2015

1,394

5,589
665
83
92

2014

6,921

5,435
3,846
191
70

All related parties are either directly or indirectly owned by a member of senior management of the Company and/or a
close family member thereof. These transactions were made on terms equivalent to those that prevail in arm’s length
transactions and are made only if such terms can be substantiated.

The remuneration of the directors and officers of the Company is determined by the Compensation, Governance
and Nominating Committee of the Board of Directors of the Company, based on performance and is consistent with
market trends. The remuneration of directors and officers of the Company identified as key management is as follows
for the respective years ended:

$ THOUSANDS

Salary and short-term benefits
Post-retirement benefits
Share-based payments

2015

1,897
25
290

2,212

2014

2,061
33
769

2,863

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MANAGEMENT’S DISCUSSION & ANALYSIS

Amounts due from (to) related parties are included in the consolidated balance sheet under trade receivables and
other (trade payables, accruals and other) and are as follows:

$ THOUSANDS

Due from related parties
Due to related parties

2015

111
(13)

2014

61
(112)

The amounts due from related parties are not secured and are to be settled in cash. As at December 31, 2015 and
2014, the amounts due from related parties are considered collectible and therefore have not been provided for in
the allowance for doubtful accounts. During the year ended December 31, 2015, $Nil has been recognized in bad debt
expenses with regards to related party transactions (2014 – $Nil).

The Company has contractual obligations to related parties in the form of facility leases. As at December 31, 2015,
these contractual obligations and due dates are as follows:

$ THOUSANDS

TOTAL

2016

2017-2018

2019-2020

THERE-
AFTER

Operating lease obligations

24,063

5,751

8,797

5,744

3,771

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MANAGEMENT’S DISCUSSION & ANALYSIS

OFF-BALANCE SHEET ARRANGEMENTS

We use off-balance sheet financing in connection with numerous operating leases. These leases relate to the
Company’s buildings and certain vehicles with lease terms of between one and eleven years. Most building leases
contain renewal options for periods of three to five years. We have paid monthly amounts under these operating
leases of up to $64.2 thousand. In some instances, the counterparty to the Company’s operating lease obligations
is a related party. Refer to the “Related Party Transactions” section of this MD&A for a discussion of the terms and
amounts of such arrangements. The current operating leases expire between January 2016 and July 2023.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SELECTED FOURTH QUARTER FINANCIAL
INFORMATION

$ THOUSANDS, EXCEPT PER
SHARE AMOUNTS

2015

2014

2013

Sales

New equipment
Used equipment
Parts
Service
Other

Cost of sales

Gross profit

Selling, general and administrative
Interest on short-term debt
Interest on long-term debt

Earnings before income taxes
Provision for income taxes

Net earnings

Earnings per share
Basic
Diluted
Dividends per share
Non-IFRS Measures(1)
Adjusted Diluted Earnings per Share
Adjusted EBITDA
Operating SG&A
Floor Plan Neutral Operating Cash
Flow

162,424
92,676
20,614
8,714
1,159

285,587
248,049

56.9%
32.5%
7.2%
3.1%
0.3%

100.0%
86.9%

182,555
79,810
21,320
9,569
838

294,092
254,623

62.1%
27.1%
7.2%
3.3%
0.3%

100.0%
86.6%

179,359
84,925
18,099
7,403
795

290,581
257,329

61.7%
29.2%
6.2%
2.5%
0.4%

100.0%
88.6%

37,538

13.1%

39,469

13.4%

33,252

11.4%

27,449
3,312
501

6,276
1,696

4,580

0.24
0.24
0.1150

0.25
8,966
25,260

9.6%
1.2%
0.1%

2.2%
0.6%

1.6%

3.1%
8.8%

27,548
2,956
524

8,441
2,220

6,221

0.32
0.32
0.1150

0.32
10,746
25,767

9.4%
1.0%
0.1%

2.9%
0.8%

2.1%

3.7%
8.8%

27,249
2,802
572

2,629
563

2,066

0.11
0.11
0.1000

0.11
4,983
25,467

9.4%
1.0%
0.1%

0.9%
0.2%

0.7%

1.7%
8.8%

6,844

2.4%

7,822

2.7%

(19,916)

(6.9%)

(1)See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SEGMENTED FINANCIAL REPORTING

$ THOUSANDS

Sales

New equipment
Used equipment
Parts
Service
Other

Gross profit

Gross margin

Net income (loss)

2015

2014

AGRICULTURE

INDUSTRIAL

TOTAL

AGRICULTURE

INDUSTRIAL

TOTAL

157,490
91,694
18,040
7,769
1,061

276,054

35,119

12.7%

5,231

4,934
982
2,574
945
98

9,533

2,419

25.4%

(651)

162,424
92,676
20,614
8,714
1,159

173,023
78,304
17,659
8,044
617

285,587

277,647

37,538

13.1%

4,580

36,255

13.1%

6,695

9,532
1,506
3,661
1,525
221

16,445

3,214

19.5%

(474)

182,555
79,810
21,320
9,569
838

294,092

39,469

13.4%

6,221

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MANAGEMENT’S DISCUSSION & ANALYSIS

AGRICULTURE SEGMENT REVENUE AND GROSS PROFIT

$ THOUSANDS

2015

2014

CHANGE

TOTAL

ACQUIRED

SAME STORE

Sales

New equipment
Used equipment
Parts
Service
Other

Gross profit

Gross margin

157,490
91,694
18,040
7,769
1,061

276,054

35,119

12.7%

173,023
78,304
17,659
8,044
617

277,647

36,255

13.1%

(15,533)
13,390
381
(275)
444

(1,593)

(1,136)

(0.4%)

7,610
2,502
1,242
281
-

11,635

(23,143)
10,888
(861)
(556)
444

(13,228)

For the quarter ended December 31, 2015, total sales for the agriculture segment were $276.1 million, a decrease of
$1.6 million or 0.6% over the same period in 2014. Acquired stores contributed $11.6 million, which was offset by a
contraction in same store sales.

Same store equipment sales declined by $12.3 million or 4.9% over the same period in 2014 on reduced new
equipment sales. Continuing the year-to-date trend, manufacturer price increases compounded by a weakening
Canadian dollar, have altered the economics of purchasing new equipment for many farmers who have opted instead
to invest in lightly-used equipment or defer their fleet replacement altogether. The reduction in same store equipment
sales was offset by $10.1 million of acquired equipment sales.

Same store parts and service sales for the quarter ended December 31, 2015 decreased by $0.9 million or 4.9% and
$0.6 million or 6.9%, respectively. These reductions in our product support revenues are primarily associated with the
timing and duration of the harvest which pulled more of this activity into the third quarter than was the case during
2014. Acquired product support revenues of $1.5 million offset these reductions.

Gross profit for the quarter ended December 31, 2015 decreased by $1.1 million or 3.1% over the same period in 2014.
Gross margin declined by 0.4% to 12.7% during the fourth quarter. These decreases are primarily attributable to a
$1.2 million reduction in accrued manufacturer incentives.

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MANAGEMENT’S DISCUSSION & ANALYSIS

INDUSTRIAL SEGMENT REVENUE AND GROSS PROFIT

$ THOUSANDS

2015

2014

CHANGE

Sales

New equipment
Used equipment
Parts
Service
Other

Gross profit

Gross margin

4,934
982
2,574
945
98

9,533

2,419

25.4%

9,532
1,506
3,661
1,525
221

16,445

3,214

19.5%

(4,598)
(524)
(1,087)
(580)
(123)

(6,912)

(795)

5.9%

For the quarter ended December 31, 2015, total sales for the industrial segment were $9.5 million representing
a decrease of $6.9 million or 42.0% over the same period in 2014. The continued depression in oil prices, and its
correlative impact on Alberta’s overall infrastructure investment, was felt more profoundly during the latter part
of 2015 as projects were completed and few new projects were available for our customer base. As more of the
installed base of industrial equipment sits idle, demand for equipment and product support declines. As a result, we
experienced revenue contraction across all categories during the fourth quarter of 2015 relative to the same period
last year.

Gross profit for the quarter ended December 31, 2015 decreased by $0.8 million over 2014. Gross margin increased
to 25.4% from 19.5% in the fourth quarter of 2014. The increase in margin is attributable primarily to the following
factors: (i) certain units were procured at advantageous exchange rates and sold with favorable margins; (ii) there was
a reduction in auction activity; and, (iii) initiatives to improve efficiency in our service departments helped produce
better margins.

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MANAGEMENT’S DISCUSSION & ANALYSIS

SELLING, GENERAL
AND ADMINISTRATIVE

NET EARNINGS

For the quarter ended December 31, 2015, we generated
net earnings of $4.6 million, down from $6.2 million in
the same period in 2014. The Company’s Adjusted
Diluted Earnings per Share for the quarter ended
December 31, 2015 was $0.25 compared to $0.32 for
the fourth quarter of 2014.

The Company assesses its Operating SG&A relative to
total sales in analyzing its results. See the definition
and reconciliation of Operating SG&A in the “Non-IFRS
Measures” and “Reconciliation of Non-IFRS Measures to
IFRS” sections below.

For the quarter ended December 31, 2015, Operating
SG&A was $25.3 million (8.8% of sales), down slightly
from $25.8 million (8.8% of sales) in 2014. The reduction
in Operating SG&A comes despite the inclusion of $2.0
million of Operating SG&A associated with locations
added through the acquisitions of Chabot and NGF.
Excluding Operating SG&A acquired pursuant to these
acquisitions, Operating SG&A decreased by $2.5 million
or 9.7%. This reduction is the result of cost containment
measures implemented in response to market
conditions.

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MANAGEMENT’S DISCUSSION & ANALYSIS

CRITICAL ACCOUNTING ESTIMATES

The preparation of the consolidated financial statements requires that certain estimates and judgments be made
with respect to the reported amounts of sales and expenses and the carrying amounts of assets and liabilities. These
estimates are based on historical experience and management’s judgment. Anticipating future events involves
uncertainty and consequently, the estimates used by management in the preparation of the consolidated financial
statements may change as future events unfold, additional information is acquired or the Company’s operating
environment changes. Management considers the following to be the most significant of these estimates.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

NET RECOVERABLE AMOUNT OF GOODWILL

The allowance for doubtful accounts is reviewed by
management on a monthly basis. Accounts receivable
are considered for impairment on a case-by-case basis
when they are past due or when objective evidence is
received that a customer will default. The Company
takes into consideration the customer’s payment
history, their creditworthiness and the current
economic environment in which the customer operates
to assess impairment. The Company’s historical bad
debt expenses have not been significant and are usually
limited to specific customer circumstances.

NET REALIZABLE VALUE OF INVENTORY

Equipment is valued at the lower of cost and net
realizable value, with cost being determined on a
specific item, actual cost basis, and net realizable
value being determined by the recent sales of the same
or similar equipment inventory or market values as
established by industry publications, less the costs to
sell. Parts inventory is recorded at the lower of cost
and net realizable value, with cost being determined
on an average cost basis and net realizable value being
determined by recent sales of the same or similar parts
inventory, less the costs to sell. Work-in-progress is
valued on a specific item, actual cost basis.

For the purposes of impairment testing, goodwill is
allocated to the Company’s cash-generating units
(“CGUs”). The recoverable amount of each CGU is
determined using a value in use calculation. The key
assumptions for the value in use calculations are
those regarding discount and growth rates. These key
assumptions are based on past experience, which has
been adjusted for anticipated changes in future periods.

MANUFACTURER INCENTIVES

Certain manufacturers offer annual performance
incentives which are linked to the Company’s market
share achievement and annual sales and settlement
volumes. The Company uses estimated annual market
share statistics derived from historical results which
have been adjusted for any anticipated changes in the
current year, as well as eligible sales and settlement
volumes to date to accrue the proportion of these
annual manufacturer incentives earned during the
period. The manufacturer incentives received by the
Company are primarily associated with agriculture
equipment and as such, the majority of such incentives
are accrued within the financial results of the
agriculture segment.

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MANAGEMENT’S DISCUSSION & ANALYSIS

DERIVATIVE FINANCIAL INSTRUMENTS

BUSINESS COMBINATIONS

Assets acquired and liabilities assumed pursuant
to business combinations are measured at their
acquisition date fair values. Where appropriate,
management bases its fair value estimates on
observable third party data as reported by sources
deemed both reputable and qualified. In the case of
inventory acquired, management estimates the value in
the manner discussed within the “Net Realizable Value
of Inventory” section above.

Goodwill is measured as the excess of the fair value of
consideration transferred over the acquisition-date fair
value of the net identifiable assets acquired.

The purchase price allocation is subject to change
throughout the duration of the measurement period.
The measurement period is the period from the date of
acquisition, to the date the Company obtains complete
information about facts and circumstances that existed
as of the acquisition date and is subject to a maximum
of one year.

The Company utilizes floating-to-fixed interest rate
swaps to manage its interest rate exposure. These
derivatives are initially recognized on the date
the contract is entered into and are subsequently
re-measured at their fair values. The fair values of the
interest rate swaps are calculated as the net present
value of the estimated future cash flows expected
to arise on the variable and fixed legs, determined
using applicable yield curves at each measurement
date. Swap curves, which incorporate credit spreads
applicable to large commercial banks, are typically
used to calculate expected future cash flows and the
present values thereof. Adjustments are also made to
reflect the Company’s own credit risk and the credit risk
of the counterparty, if different from the spread implicit
in the swap curve.

The Company also has several total return swap
arrangements to hedge the exposure associated with
increases in its share price on its outstanding DSUs and
SARs. These derivatives accrue to the Company, any
gains (losses) associated with changes in the value of its
common shares as well as dividends paid on its hedged
position, net of interest costs incurred by the bank
to build and hold the position. These derivatives are
initially recognized on the date the contract is entered
into and are subsequently re-measured at their fair
values. The fair values are calculated as the net present
value of estimated future cash flows.

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MANAGEMENT’S DISCUSSION & ANALYSIS

KEY FINANCIAL STATEMENT COMPONENTS

EQUIPMENT SALES

COST OF SALES

Equipment revenues are derived from the sale of
new and used agriculture and industrial equipment.
Revenue is recognized when the customer has signed
the sales agreement, has paid or is credit-approved,
and title to and risk of loss for the piece of equipment
have transferred. New equipment sales also include
certain rental revenues.

PARTS SALES

Parts revenue is recognized when title to the product
has transferred to the customer and collection is
reasonably assured. This is evidenced by the goods
being shipped or physically taken by the customer, or in
the case of parts drawn to complete service work, when
the service work order is completed.

SERVICE REVENUE

Revenue from service is recognized by reference to the
stage of completion of the contract when the outcome
can be estimated reliably.

Cost of sales is the accumulation of the costs
attributable to the sources of revenue set forth in the
financial statements. Revenues are matched to cost
of sales attributable to specific revenue sources. The
cost of equipment sales is determined based on the
actual cost of the equipment. The cost of parts sales is
determined based on the average actual cost for those
parts. The cost of service revenues is determined based
on actual costs to complete the service job, which
include, without limitation, wages paid to service
technicians and the actual cost of externally sourced
labour, plus applicable overheads.

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES

SG&A expenses include sales and marketing expenses,
sales commissions, payroll, and related benefit costs,
insurance expenses, professional fees, rent, and other
facility costs and administrative overhead including
depreciation of property and equipment.

INTEREST EXPENSE

Short-term interest includes the aggregate expense for
interest under the current floor plan financing programs
associated with financing equipment inventory through
numerous creditors, and existing credit facilities.
Long-term interest includes the aggregate expense
for interest associated with the Company’s various
long-term credit facilities and obligations under finance
leases. Short- and long-term interest also includes
charges related to credit and financing.

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MANAGEMENT’S DISCUSSION & ANALYSIS

RISKS AND UNCERTAINTIES

Our success largely depends on the abilities and
experience of our senior management team and other
key personnel. These employees carry a significant
amount of the management responsibility of our
business and are important for setting strategic
direction and dealing with certain significant customers.

Our future performance will also depend on our
ability to attract, develop, and retain highly qualified
employees in all areas of our business. We face
significant competition for individuals with the skills
required to develop, market and support our products
and services. If we fail to recruit and retain sufficient
numbers of these highly skilled employees, we may
not be able to achieve our growth objectives and our
business may be adversely affected.

Risk factors faced by Rocky are listed in the Company’s
AIF, which can be found on SEDAR. These risk factors
include industry risks associated with agriculture and
industrial equipment dealerships and others, including
but not limited to: economic conditions; weather and
climate conditions; commodity prices; inventory risk;
industry oversupply; the seasonality and cyclicality of
the industries we service; foreign exchange exposure;
our reliance on key manufacturers; the nature of our
dealership agreements; interest rate changes; changes
in the value of our common shares; government
regulations in the areas we operate; competition within
our industry; credit facilities; consolidation within the
equipment manufacturing industry; the non-exclusive
nature of key geographic markets; customer credit
risks; our information systems; the availability of
floor plan financing and other forms of credit to the
Company; unfavorable conditions (economic, weather
or otherwise) in key geographic markets; our continued
ability to pay our dividend; import restrictions and
foreign trade risks; insurance matters; branch leases;
the retention of key personnel; labour relations;
labour costs and shortages; freight costs; future
warranty claims; product liability risks; restrictions and
impediments on acquisitions; aviation risks; growth
risks; and our ability to successfully integrate our
acquisitions.

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MANAGEMENT’S DISCUSSION & ANALYSIS

RISKS RELATED TO FINANCIAL INSTRUMENTS

Through its financial instruments, the Company has exposure to the following risks: credit risk, market risk (consisting
of foreign currency exchange risk, interest rate risk and equity price risk), and liquidity risk.

CREDIT RISK

MARKET RISK

Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in a
financial loss to the Company. The Company has a
policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral, where appropriate,
as a means of mitigating the risk of financial loss from
defaults. The creditworthiness of counterparties is
determined using information supplied by independent
rating agencies where available and, if not available,
the Company uses other publicly available financial
information and its own trading records to rate its
major customers. The Company’s exposure and the
credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties.
Credit exposure is controlled by counterparty limits that
are reviewed regularly.

The Company’s exposure to credit risk on its cash
balance is mitigated as these financial assets are held
with major financial institutions with strong credit
ratings.

During the year ended December 31, 2015, the Company
recognized $0.5 million in bad debt expense (2014 - $0.9
million). Bad debt expense is recognized in SG&A
expenses.

Market risk is the risk from changes in market prices,
such as changes in foreign currency exchange rates,
interest rates and the market price of the Company’s
common shares, which will affect the Company’s
earnings or the value of the financial instruments held.

Foreign Currency Exchange Risk

The OEMs we do business with are geographically
diversified, requiring us to conduct business in two
currencies: U.S. dollars and Canadian dollars. As a
result, we have foreign currency exposure with respect
to purchases of U.S. dollar denominated products
(inventory) and we experience foreign currency gains
and losses thereon. The nature of exposure to foreign
exchange fluctuations differs between equipment
manufacturers and the various dealer agreements
with them.

A weakening of the U.S. dollar in comparison to the
Canadian dollar will generally have a positive effect
on our performance by lowering our cost of goods
sold. However, as the markets in which we operate
are highly competitive, a declining U.S. dollar also has
the effect of reducing sales prices in Canadian dollars
and, as a consequence, we cannot capture the entire
potential benefit of a declining U.S. dollar environment.
By contrast, a strengthening U.S. dollar will increase
the cost of equipment purchases. If we are unable
to fully offset the increase in cost of goods through
price increases, our financial results will be negatively
affected. We mitigate some of this risk by occasionally
purchasing forward contracts for U.S. dollars on large

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MANAGEMENT’S DISCUSSION & ANALYSIS

transactions to cover the period from the time the
equipment is ordered from the manufacturer to
the payment date.

Included in selling, general and administrative
expenses is a net loss recognized due to foreign
currency translation for transactions and balances
aggregating $0.6 million for the year ended
December 31, 2015 (2014 – gain of $0.2 million).

Interest Rate Risk

We also finance our equipment inventory, certain
capital expenditures, business acquisitions and
occasionally, our other general working capital
requirements, by way of various financing facilities
under which we are charged interest at floating
rates. As a result, rising interest rates have the effect
of increasing our overall costs. To the extent that we
cannot pass on such increased costs to our customers,
our net earnings or cash flow may decrease. In addition,
some of our customers finance the equipment they
purchase from us. A customer’s decision to purchase
may be affected by interest rates available to finance
the purchase.

The Company manages its interest rate risk by using
floating-to-fixed interest rate swaps when appropriate.
Generally, the Company will obtain floor plan
financing and long-term debt at floating rates. When
the Company enters into a floating-to-fixed interest
rate swap, it agrees with a third party to exchange the
difference between the fixed and floating contract rates
based on agreed notional amounts.

Refer to the “Derivative Financial Instruments” section
of this MD&A for additional information and gains
(losses) on derivative financial instruments.

Equity Price Risk

As part of its overall compensation of directors, officers
and employees, the Company has issued cash-settled
share-based payments in the form of DSUs and SARs.
The DSUs are valued on a per DSU basis at an amount
equal to the volume weighted average trading price of
the Company’s common shares over the immediately
preceding 20 day trading period. The SARs are revalued
at each reporting date using the Black-Scholes option
pricing model. Increases in the Company’s share
value result in additional compensation expense
to the Company related to these two programs. As
cash-settled share-based payments, the DSUs and SARs
are not accounted for as financial instruments.

The Company has entered into several total return
swaps to hedge the exposure associated with increases
in its share value on its outstanding DSUs and SARs. The
total return swaps are classified as derivative financial
instruments. The intent of these derivatives is to offset
the incremental cost to the Company associated with
increases in its common share price on its cash-settled
share-based payments.

Refer to the “Derivative Financial Instruments” section
of this MD&A for additional information and gains
(losses) on derivative financial instruments.

LIQUIDITY RISK

The Company’s objective is to have sufficient liquidity
to meet its liabilities when due. The Company monitors
its cash balance and cash flows generated from
operations as well as available credit facilities to meet
its requirements.

Refer to the “Adequacy of Capital Resources” section of
this MD&A for a discussion of the liquidity risks faced by
the Company as well as the Company’s various credit
facilities.

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MANAGEMENT’S DISCUSSION & ANALYSIS

NON-IFRS MEASURES

Throughout this MD&A, we use terms which do not have
standardized meanings under IFRS. As these non-IFRS
financial measures do not have standardized meanings
prescribed by IFRS, they are unlikely to be comparable
to similar measures presented by other issuers. Our
definition for each term is as follows:

“Adjusted Diluted Earnings per Share” is calculated by
eliminating from net earnings, the after-tax impact of
the losses (gains) arising from the Company’s derivative
financial instruments and DSUs, as well as the expense
(recovery) associated with its SARs. These items arise
from changes in the Company’s share price as well as
fluctuations in interest rates and are not reflective of
the Company’s core operations.

The Company also adjusts for any non-recurring
charges (recoveries) recognized in net earnings.
Management deems non-recurring charges (recoveries)
to be unusual or infrequent items that the Company
incurs outside of its common day-to-day operations.
Adjusting for these items allows management to isolate
and analyze diluted earnings per share from core
business operations. For the periods presented, no
non-recurring charges (recoveries) have been identified.

“EBITDA” is a commonly used metric in the dealership
industry. EBITDA is calculated by adding interest on
long-term debt, income taxes and depreciation to
net earnings. Adding back non-operating expenses
allows management to consistently compare periods
by removing changes in tax rates, long-term assets
and financing costs related to the Company’s capital
structure.

“Adjusted EBITDA” is calculated by eliminating from
EBITDA, the impact of the losses (gains) arising from the
Company’s derivative financial instruments and DSUs,
as well as the expense (recovery) associated with its
SARs. These items arise from changes in the Company’s
share price as well as fluctuations in interest rates and
are not reflective of the Company’s core operations.

The Company also adjusts for any non-recurring
charges (recoveries) recognized in EBITDA. Management
deems non-recurring charges (recoveries) to be unusual
or infrequent items that the Company incurs outside
of its common day-to-day operations. Adjusting for
these items allows management to isolate and analyze
EBITDA from core business operations. For the periods
presented, no non-recurring charges (recoveries) have
been identified.

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“Floor Plan Neutral Operating Cash Flow” is
calculated by eliminating the impact of the change
in floor plan payable (excluding floor plan assumed
pursuant to business combinations) from cash flows
from operating activities. Adjusting cash flows from
operating activities for changes in the balance of
floor plan payable allows management to isolate and
analyze operating cash flows during a period, prior to
any sources or uses of cash associated with equipment
financing decisions.

MANAGEMENT’S DISCUSSION & ANALYSIS

“Operating SG&A” is calculated by eliminating from
SG&A, the impact of the losses (gains) arising from the
Company’s derivative financial instruments and DSUs,
as well as the expense (recovery) associated with its
SARs. These items arise from changes in the Company’s
share price as well as fluctuations in interest rates and
are not reflective of the Company’s core operations.

The Company also adjusts for depreciation of property
and equipment and any non-recurring charges
(recoveries) recognized in SG&A. Management deems
non-recurring charges (recoveries) to be unusual or
infrequent items that the Company incurs outside of
its common day-to-day operations. Adjusting for these
items allows management to assess discretionary
expenses from ongoing operations. For the periods
presented, no non-recurring charges (recoveries) have
been identified. We target a sub-10% Operating SG&A
as a percentage of total sales on an annual basis.

During the year, the Company changed this metric such
that the aforementioned charges (recoveries) on its
derivative financial instruments, DSUs and SARs are
also eliminated from SG&A in calculating Operating
SG&A.

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MANAGEMENT’S DISCUSSION & ANALYSIS

RECONCILIATION OF NON-IFRS MEASURES
TO IFRS

ADJUSTED DILUTED EARNINGS PER SHARE

$ THOUSANDS

Earnings used in the
calculation of Diluted
Earnings per Share

Loss (gain) on derivative
financial instruments

Loss (gain) on DSUs

SAR expense

Tax effect of adjustments
(2015 - 27%, 2014 &
2013 – 25%)

Earnings used in the
calculation of
Adjusted Diluted
Earnings per Share

Weighted average
diluted shares used
in the calculation of
Diluted Earnings per
Share (in thousands)

Adjusted Diluted
Earnings per Share

FOR THE QUARTER ENDED
DECEMBER 31,

FOR THE YEAR ENDED
DECEMBER 31,

2015

2014

2013

2015

2014

2013

4,580

6,221

2,066

11,293

18,925

15,313

274

(53)

(127)

3,548

(211)

(223)

(61)

(28)

(907)

(225)

4,746

6,197

2,149

13,747

18,822

15,187

19,272

19,269

19,327

19,309

19,224

0.25

0.32

0.11

0.71

0.97

0.79

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EBITDA

$ THOUSANDS

Net earnings
Interest on long-term
debt
Depreciation expense
Income taxes
EBITDA
Loss (gain) on derivative
financial instruments
Loss (gain) on DSUs
SAR expense

FOR THE QUARTER ENDED
DECEMBER 31,

FOR THE YEAR ENDED
DECEMBER 31,

2015

4,580

501
1,962
1,696
8,739

274
(53)
6

2014

6,221

524
1,813
2,220
10,778

77
(127)
18

2013

2,066

572
1,671
563
4,872

57
54
-

2015

2014

2013

11,293

18,925

15,313

2,060
7,803
4,105
25,261

3,548
(211)
24

2,182
7,057
7,276
35,440

68
(223)
18

2,233
6,471
5,714
29,731

(225)
57
-

Adjusted EBITDA

8,966

10,746

4,983

28,622

35,303

29,563

OPERATING SG&A

$ THOUSANDS

SG&A
Depreciation expense
Gain (loss) on derivative
financial instruments
Gain (loss) on DSUs
SAR expense

FOR THE QUARTER ENDED
DECEMBER 31,

FOR THE YEAR ENDED
DECEMBER 31,

2015

2014

2013

2015

2014

2013

27,449
(1,962)

27,548
(1,813)

27,249
(1,671)

111,776
(7,803)

105,756
(7,057)

105,450
(6,471)

(274)
53
(6)

(77)
127
(18)

(57)
(54)
-

(3,548)
211
(24)

(68)
223
(18)

225
(57)
-

Operating SG&A

25,260

25,767

25,467

100,612

98,836

99,147

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MANAGEMENT’S DISCUSSION & ANALYSIS

FLOOR PLAN NEUTRAL OPERATING CASH FLOW

$ THOUSANDS

Cash flow from
operating activities
Net decrease (increase)
in floor plan payable(1)
Floor plan assumed
pursuant to business
combinations

Floor Plan Neutral
Operating Cash Flow

FOR THE QUARTER ENDED
DECEMBER 31,

FOR THE YEAR ENDED
DECEMBER 31,

2015

2014

2013

2015

2014

2013

12,839

12,898

(221)

35,460

16,724

30,105

(5,995)

(5,076)

(19,695)

23,951

(39,717)

9,448

32,782

2,789

6,844

7,822

(19,916)

92,193

(22,993)

42,342

(1)Includes change in floor plan payable classified as liabilities associated with assets held for sale.

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MANAGEMENT’S DISCUSSION & ANALYSIS

INTERNAL CONTROLS OVER FINANCIAL
REPORTING AND DISCLOSURE CONTROLS
AND PROCEDURES

The Chief Executive Officer (“CEO”) and the Chief
Financial Officer (“CFO”) are responsible for establishing
and maintaining the Company’s disclosure controls
and procedures, (“DC&P”), to provide reasonable
assurance that material information related to the
Company is made known. In addition, internal controls
over financial reporting (“ICFR”) have been designed
by or have been caused to be designed under the
supervision of the CEO and CFO to provide reasonable
assurance regarding the reliability of financial reporting
and preparation of financial statements for external
purposes in accordance with IFRS.

Management has concluded that, as of December 31,
2015, the Company has sufficiently documented and
tested the effectiveness of the ICFR for the Company
and can conclude that these controls are working
effectively. It should be noted that while the Company’s
management believes that the Company’s ICFR and
DC&P provide a reasonable level of assurance that they
are effective, they do not expect these controls will
prevent all errors or fraud. A control system, no matter
how well conceived or operated, can provide only
reasonable, not absolute, assurance that the objectives
of the control system are met.

The CEO and CFO have evaluated the effectiveness of
our DC&P and assessed the design of our ICFR, as of
December 31, 2015, pursuant to the requirements of
National Instrument 52-109, and have concluded that:

(i) The DC&P are effective to provide
reasonable assurance that all material or
potentially material information about
activities of the Company are made known
to them; and

(ii) Information required to be disclosed by
the Company in its annual filings,
interim filings or other reports filed or
submitted by it under securities
legislation is recorded, processed,
summarized and reported within the time
periods specified in securities legislation.

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MANAGEMENT’S DISCUSSION & ANALYSIS

CAUTION REGARDING FORWARD-LOOKING
INFORMATION AND STATEMENTS

This MD&A contains FLS within the meaning of
applicable securities legislation which involve known
and unknown risks, uncertainties and other factors
which may cause the actual results, performance
or achievements of Rocky or industry results, to be
materially different from any future results, events,
expectations, performance or achievements expressed
or implied by such FLS. FLS typically contain words or
phrases such as “may”, “outlook”, “objective”, “intend”,
“estimate”, “anticipate”, “should”, “could”, “would”, “will”,
“expect”, “believe”, “plan”, “predict” and other similar
terminology suggesting future outcomes or events. FLS
involve numerous assumptions and should not be read
as guarantees of future performance or results. Such
statements will not necessarily be accurate indications
of whether or not such future performance or results
will be achieved. Readers of this MD&A should not
unduly rely on FLS as a number of factors, many of
which are beyond the control of Rocky, could cause
actual performance or results to differ materially from
the performance or results discussed in the FLS.

In particular, FLS in this MD&A include, but are not
limited to, the following: (i) disclosure under the
heading “Market Fundamentals and Outlook”, (ii)
continuing demand for Rocky’s products and services,
and the cyclical nature of agriculture equipment
demand and any revenue or inventory statements or
forecasts attributed thereto, (iii) statements pertaining
to the growth of Rocky’s business and operations,

including through acquisitions, (iv) statements
pertaining to arid weather conditions and the
anticipated effect of such conditions on crop quality
and yield, (v) statements that declines in oil prices have
impacted spending, as well as the Alberta residential
housing and industrial markets, which may also
impact the Company’s results, (vi) statements that
recent fluctuations in the Canadian dollar relative to
the U.S. dollar are expected to increase pricing, (vii)
any discussion of the anticipated mix of new and
used equipment sales for the remainder of 2016, (viii)
discussion on the fundamentals of Rocky’s business,
including discussion regarding growth in GDP, farmers’
crop receipts, increases in global food demand, bio-fuel
production, and the future demand for agriculture
equipment and commodities, (ix) statements
pertaining to the impact of declining oil prices on
infrastructure spending and our industrial segment
results, and any statements on the effectiveness of
measures taken by us to offset our overall exposure
to oil prices, (x) statements that technological
enhancements aimed at meeting emissions standards
and the recent weakening of the Canadian dollar are
expected to contribute to premiums on new equipment
pricing, (xi) statements regarding customer buying
patterns, including the extent to which we are able to
convert new equipment customers to used equipment
customers and attract U.S. customers looking to
capitalize on favorable U.S.-Canadian foreign exchange
rates, (xii) any statements or discussions regarding

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MANAGEMENT’S DISCUSSION & ANALYSIS

Rocky’s inventory management and any expected
increases or decreases in Rocky’s inventory levels,
(xiii) statements that any anticipated reduction in
inventories are not expected to occur in a linear manner,
(xiv) discussions regarding initiatives to restore our
industrial results, including statements regarding our
intention to leverage our recent successes to gain
market acceptance and better market presence within
the territories we operate, (xv) discussions that the
impact of previously acquired dealerships and trade
areas, coupled with our OEM relationships, make us
well-positioned to pursue our longer-term revenue and
earnings growth initiatives, (xvi) statements that we
believe cash flow from operations, along with existing
credit facilities, will provide for our capital needs,
(xvii) discussion around SG&A expenses including the
seasonal variances and expectations in operating SG&A,
(xviii) discussion that our first quarter is generally the
weakest financial quarter due to lack of agricultural
activity and winter shutdowns, that the fourth quarter
is generally our strongest quarter financially, and
discussion that we expect our second and third quarter
sales activity to increase as our installed equipment-
and customer-base increases, (xix) statements that
as acquisitions are integrated into the business, the
associated SG&A costs for Rocky will generally decrease,
(xx) statements related to our per-location revenue
expectations and any assessment of the economies of
scale associated with any facility, (xxi) statements that
our installed base and customer relationships create

an annuity of equipment sales and product support
revenue, which help drive dependable earnings and
cash flow, (xxii) statements that weather conditions
may impact sales activity for any given period, (xxiii)
statements that the Company anticipates that the
loses related to the total return swaps will be reversed
in subsequent periods as its share price returns to a
more typical range; (xxiv) statements concerning the
Company’s ongoing compliance with, or potential
breaches of, its covenants under its credit facilities,
including the recently-amended Syndicated Facility;
(xxv) statements concerning the Company’s expected
undiscounted cash flows as at December 31, 2015; and,
(xxvi) statements that may imply that the Company’s
lenders will relax its requirements under their fixed
charge ratio covenants.

With respect to the FLS listed above and contained in
this MD&A, Rocky has made assumptions regarding,
among other things: (i) expectations that commodity
prices will continue to remain above historical levels,
(ii) increasing global food demand over the next 25
years in response to a growing world population and a
decrease in arable land per capita, (iii) rising demand
for agriculture commodities and insufficient investment
in productive capacity and infrastructure, especially
in developing countries, (iv) increasing food demand,
including increasing demand from China and India for
grain and oilseed products, as well as increasing crop
land dedicated to bio-fuel production, will cause

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MANAGEMENT’S DISCUSSION & ANALYSIS

producers to improve their productivity, and as a
result invest in new equipment, (v) expectations
that increases in farmer liquidity would generally
correlate to farmers making capital re-investments
in their business, so as to increase their productivity
and lower their input costs, which investments may
include Rocky’s products and services, (vi) inventory
levels will fluctuate during a year, both positively and
negatively, based on timing of equipment deliveries,
and volume of whole-good sales involving a unit taken
in on trade, (vii) the general GDP growth and/or relative
economic stability in the markets we operate in, (viii)
the trend towards larger farms in the agriculture
sector will continue to benefit further farm equipment
sales as larger farm operations tend to replace their
equipment more frequently, (ix) the Company’s cash
flow will remain sufficient to, in connection with its
credit facilities, adequately finance its capital needs,
(x) as stores are consolidated, certain functions can
be centralized thereby reducing SG&A costs as a result,
(xi) the anticipated improvement in ongoing revenue
and cash-flow, including parts and service revenue, as
our installed base increases, (xii) expectations that no
material change will happen to our OEM relationships
and related contractual agreements, (xiii) expectations
that customers who purchase their equipment from
the Company will, generally, return to the Company
for their product support needs; (xix) the Company
expects that its share price will return to a more typical
range, allowing it to offset losses related to the total

return swap; and, (xx) the renewal of its Syndicated
Facility prior to maturity on September 24, 2018.

Rocky’s actual results could differ materially from those
anticipated in the FLS in this MD&A as a result of the
risk factors set forth herein under the heading “Risks
and Uncertainties” and the risk factors set forth in
Rocky’s AIF. Although the FLS contained in this MD&A
are based upon what management of Rocky believes
are reasonable assumptions, Rocky cannot assure
investors that actual performance or results will be
consistent with these FLS. These statements reflect
current expectations regarding future events and
operating performance and are based on information
currently available to Rocky’s management. There
can be no assurance that the plans, intentions or
expectations upon which these FLS are based will occur.
All FLS in this MD&A are qualified in their entirety by
the cautionary statements herein and those set forth
in Rocky’s AIF available on SEDAR at www.sedar.com.
These FLS and outlook are made as of the date of this
document and, except as required by applicable law,
Rocky assumes no obligation to update or revise them
to reflect new events or circumstances.

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MANAGEMENT’S DISCUSSION & ANALYSISRocky Mountain Dealerships Inc. | Annual Report | 2015 WE ENDED THE
YEAR A BETTER,
STRONGER
ORGANIZATION.

MANAGEMENT’S DISCUSSION & ANALYSISRocky Mountain Dealerships Inc. | Annual Report | 2015 MANAGEMENT’S REPORT TO SHAREHOLDERS

MANAGEMENT'S REPORT TO SHAREHOLDERS

The accompanying Consolidated Financial Statements
(the “Financial Statements”) of Rocky Mountain
Dealerships Inc. (the “Company”) are the responsibility
of management. The Financial Statements have been
prepared by management in Canadian dollars in
accordance with International Financial Reporting
Standards (IFRS) and include certain estimates that
reflect management’s best judgments.

The Board of Directors of the Company (the “Board”)
has approved the information contained in the
Financial Statements. The Board fulfills its responsibility
regarding the Financial Statements mainly through its
Audit Committee which has a written mandate that
complies with the current requirements of Canadian
securities legislation. The Audit Committee meets at
least on a quarterly basis.

Management has overall responsibility for internal
controls and has developed and maintains a system
of internal controls that provides reasonable assurance
that all transactions are accurately recorded, that the
Financial Statements realistically report the Company’s
operating and financial results and that the Company’s
assets are safeguarded. The policy of the Company
is to maintain the highest standard of ethics in all its
activities and it has a written business conduct and
ethics policy.

PricewaterhouseCoopers LLP, an independent
firm of Chartered Professional Accountants, was
appointed by the shareholders to audit the Financial
Statements and provide an independent opinion.

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WE GENERATED
RECORD
PRODUCT SUPPORT
REVENUE.

INDEPENDENT AUDITOR'S REPORT

March 15, 2016

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Rocky Mountain Dealerships Inc�

We have audited the accompanying consolidated financial statements of Rocky Mountain Dealerships Inc. and its
subsidiaries, which comprise the consolidated balance sheets as at December 31, 2015 and December 31, 2014
and the consolidated statements of net earnings, comprehensive income, change in equity and cash flows for the
years then ended, and the related notes, which comprise 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.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require
that we 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 auditor’s 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 auditor considers 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.

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PricewaterhouseCoopers LLP
Suite 3100, 111 5 Avenue SW, Calgary, Alberta, Canada T2P 5L3
T: +1 403 509 7500, F: +1 403 781 1825, www.pwc.com/ca

"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

INDEPENDENT AUDITOR'S REPORT

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Rocky Mountain Dealerships Inc. and its subsidiaries as at December 31, 2015 and December 31, 2014 and their
financial performance and their cash flows for the years then ended in accordance with International Financial
Reporting Standards.

Chartered Professional Accountants

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CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

Expressed in Thousands of Canadian Dollars

Assets
Current
Cash
Restricted cash
Trade receivables and other
Inventory
Income taxes receivable
Prepaid expenses
Assets held for sale

Total current assets

Non-current

Property and equipment
Deferred tax asset
Intangible assets
Goodwill

Total non-current assets

Total assets

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NOTE

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

6
7
8

11
22.2
10
12

21,691
879
25,152
499,760
47
5,513
10,542

563,584

39,888
2,367
671
18,802

61,728

625,312

22,952
4,560
33,807
526,003
-
5,478
2,252

595,052

32,886
1,186
-
14,692

48,764

643,816

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CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS, CONTINUED

Expressed in Thousands of Canadian Dollars

NOTE

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Liabilities
Current

Bank indebtedness
Trade payables, accruals and other
Income taxes payable
Floor plan payable
Deferred revenue
Current portion of long-term debt
Current portion of obligations under finance leases
Current portion of derivative financial instruments
Liabilities associated with assets held for sale

Total current liabilities
Non-current

Long-term debt
Obligations under finance leases
Derivative financial instruments

Total non-current liabilities

Total liabilities

15
13

16
17
27.6
9

16
17
27.6

Commitments, contingencies and guarantees

18, 27.3

Shareholders’ Equity

Common shares
Contributed surplus
Accumulated other comprehensive loss
Retained earnings

Total shareholders’ equity

Total liabilities and shareholders’ equity

5,001
33,963
-
356,568
4,404
4,852
71
4,040
1,562

410,461

40,080
154
4,859

45,093

455,554

87,709
5,929
(3,609)
79,729

169,758

625,312

-
34,409
6,661
382,081
4,925
10,560
453
-
253

439,342

32,776
9
3,282

36,067

475,409

87,709
5,429
(2,084)
77,353

168,407

643,816

APPROVED BY THE BOARD

“Signed” Dennis Hoffman
Dennis Hoffman, Director

“Signed” Matthew Campbell
Matthew Campbell, Director

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The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF NET EARNINGS

Years Ended
Expressed in Thousands of Canadian Dollars Except Per Share Amounts

Sales

New equipment
Used equipment
Parts
Service
Other

Total sales

Cost of sales

Gross profit

Selling, general and administrative
Interest on short-term debt
Interest on long-term debt

Earnings before income taxes
Income taxes

Current
Deferred

Total income taxes

Net earnings

Earnings per share

Basic

Diluted

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NOTE

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

449,997
377,482
107,509
35,865
4,603

975,456

833,475

141,981

111,776
12,747
2,060

15,398

5,334
(1,229)

4,105

11,293

0.58

22.2

22.1

521,747
303,536
101,622
35,064
3,438

965,407

819,785

145,622

105,756
11,483
2,182

26,201

10,652
(3,376)

7,276

18,925

0.98

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The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended
Expressed in Thousands of Canadian Dollars

NOTE

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Net earnings
Other comprehensive loss
Items which will subsequently be reclassified to net
earnings:

Unrealized loss on derivative financial instruments,
net of tax

27.6

Total other comprehensive loss for the year,
net of tax

Comprehensive income

11,293

18,925

(1,525)

9,768

(1,122)

17,803

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The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Expressed in Thousands of Canadian Dollars and Thousands of Common Shares

COMMON SHARES

NOTE

NUMBER OF SHARES

AMOUNT
$

87,709
-
-
-
-

87,709

19,384
-
-
-
-

19,384

COMMON SHARES

NUMBER OF SHARES

19,313
71
-
-
-
-

19,384

AMOUNT
$

86,695
1,014
-
-
-
-

87,709

Balance, January 1, 2015
Equity-settled share-based payment expense
Net earnings
Other comprehensive loss
Dividends paid

Balance, December 31, 2015

Balance, January 1, 2014
Shares issued upon exercise of stock options
Equity-settled share-based payment expense
Net earnings
Other comprehensive loss
Dividends paid

Balance, December 31, 2014

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19.1

NOTE

19.3

19.2

19.1

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The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED FINANCIAL STATEMENTS

CONTRIBUTED
SURPLUS
$

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
$

5,429
500
-
-
-

5,929

(2,084)
-
-
(1,525)
-

(3,609)

CONTRIBUTED
SURPLUS
$

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
$

4,662
(355)
1,122
-
-
-

5,429

(962)
-
-
-
(1,122)
-

(2,084)

RETAINED
EARNINGS
$

77,353
-
11,293
-
(8,917)

79,729

RETAINED
EARNINGS
$

67,026
-
-
18,925
-
(8,598)

77,353

TOTAL
EQUITY
$

168,407
500
11,293
(1,525)
(8,917)

169,758

TOTAL
EQUITY
$

157,421
659
1,122
18,925
(1,122)
(8,598)

168,407

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CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended
Expressed in Thousands of Canadian Dollars

NOTE

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Operating activities
Net earnings
Adjustments for:

Depreciation expense
Deferred tax recovery
Equity-settled share-based payment expense
Gain on disposal of property and equipment
Loss on derivative financial instruments
Changes in non-cash working capital

Total cash generated from operating activities

Financing activities
Repayment of long-term debt
Proceeds from long-term debt
Net change in obligations under finance leases
Dividends paid
Deferred debt issuance costs
Proceeds from issuance of common shares

Total cash used from financing activities

Investing activities
Purchase of property and equipment
Disposal of property and equipment
Purchase of equipment dealerships, net of
cash acquired

Total cash used from investing activities

Net decrease in cash
Cash, beginning of year

Cash, end of year

10,11
22.2
21
11
27.6
24

19.2

11
11

11,293

7,803
(1,229)
500
(302)
3,548
13,847

35,460

(19,008)
15,566
(237)
(8,917)
(192)
-

(12,788)

(13,284)
1,041

(16,691)

(28,934)

(6,262)
22,952

16,690

18,925

7,057
(3,376)
1,122
(995)
68
(6,077)

16,724

(10,958)
2,210
(902)
(8,598)
-
659

(17,589)

(11,906)
2,265

(1,264)

(10,905)

(11,770)
34,722

22,952

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CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

Years Ended
Expressed in Thousands of Canadian Dollars

Taxes paid (received)
Interest paid

Cash, end of period consists of:

Cash

Bank indebtedness

Cash, end of year

NOTE

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

12,042
14,745

21,691
(5,001)

16,690

(896)
13,665

22,952

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The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

1. GENERAL INFORMATION

Rocky Mountain Dealerships Inc. (the “Company”) is
incorporated under the Business Corporations Act
(Alberta). Through its wholly-owned subsidiaries, the
Company sells, leases and provides product and
warranty support for a wide variety of agriculture and
industrial equipment in Western Canada. All of the
Company’s operating subsidiaries are incorporated in
Alberta, Canada and all of the equipment dealership
locations operate under the name “Rocky Mountain
Equipment”.

The head office, principal address and registered and
records office of the Company are located at Suite 301,
3345 8th Street S.E., Calgary, Alberta, T2G 3A4.

2. BASIS OF PREPARATION

2.1. Statement of compliance

The Company prepares its consolidated financial
statements in accordance with International Financial
Reporting Standards. These consolidated financial
statements were authorized for issue by the Board of
Directors on March 15, 2016.

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2.2. Adoption of new and revised standards and

interpretations

No new standards, interpretations or amendments were
adopted for the first time from January 1, 2015, which
had a material impact on the Company’s financial
statements.

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At the date of authorization of these consolidated
financial statements, the IASB and the IFRS
Interpretations Committee (IFRIC) have issued
the following new and revised standards and
interpretations which are not yet effective for the
relevant reporting periods. The Company has

not early adopted these standards, amendments
or interpretations, however the Company is
currently assessing what impact the application of
these standards or amendments will have on the
consolidated financial statements.

Amendment to IAS 1, ‘Presentation of financial
statement’

Amended to clarify guidance on materiality and
aggregation, the presentation of subtotals, the structure
of financial statements and the disclosure of accounting
policies. This amendment is effective for fiscal periods
beginning on or after January 1, 2016.

IFRS 15, ‘Revenue from contracts with customers’

IFRS 15 provides a single, comprehensive revenue
recognition model for all contracts with customers
to improve comparability within industries, across
industries, and across capital markets. The underlying
principle is that an entity will recognise revenue to
depict the transfer of goods or services to customers
at an amount that the entity expects to be entitled to
in exchange for those goods or services. This standard
is effective for fiscal periods beginning on or after
January 1, 2018.

IFRS 9, ‘Financial instruments’

IFRS 9 retains but simplifies the mixed measurement
model and establishes two primary measurement
categories for financial assets: amortized cost and
fair value. The basis of classification depends on the
entity’s business model and the contractual cash flow
characteristics of the financial asset. The guidance in
IAS 39 on impairment of financial assets and hedge
accounting continues to apply. This standard is effective
for fiscal periods beginning on or after January 1, 2018.

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

Amendment to IFRS 7, ‘Financial instruments:
Disclosures on derecognition’

In conjunction with the transition from IAS 39 to IFRS
9 for fiscal years beginning on or after January 1, 2018,
IFRS 7 will also be amended to require additional
disclosure in the year of transition.

IFRS 16, ‘Leases’

IFRS 16 replaces IAS 17 and requires all leases to be
recognized as a lease liability on the balance sheet.
This standard includes an optional exemption for
certain short-term leases and leases of low-value assets
and is effective for fiscal periods beginning on or after
January 1, 2019.

3. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

3.1. Basis of measurement

The fundamental valuation method applied in the
consolidated financial statements is historical cost
except for certain financial instruments and cash-settled
share-based payments which are measured at fair value
as explained below. Historical cost is generally based on
the fair value of the consideration given in exchange for
assets.

These consolidated financial statements are presented
in Canadian dollars, which is the Company’s functional
and presentation currency. All financial information
presented in Canadian dollars has been rounded to
the nearest thousand, except per share and per option
amounts or unless otherwise stated.

by the Company. Control exists when the Company has
the power over the investee; is exposed, or has rights, to
variable returns from its involvement with the investee;
and has the ability to use its power to affect its returns,
to an extent generally accompanying a shareholding
that confers more than half of the voting rights.
Subsidiaries are included in the consolidated financial
statements of the Company from the date control of
the subsidiary commences until the date that control
ceases. Intercompany transactions and balances are
eliminated on consolidation.

3.3. Business combinations

Acquisitions of subsidiaries and businesses are
accounted for using the acquisition method. The
consideration for each acquisition is measured at the
aggregate of the fair values (at the acquisition date)
of assets given, liabilities incurred or assumed, and
equity instruments issued by the Company in exchange
for control of the acquiree. Acquisition-related costs
incurred have been included in selling, general and
administrative expenses in the period in which they are
incurred.

Where applicable, the consideration for the acquisition
may include any asset or liability resulting from a
contingent consideration arrangement, measured at
its acquisition-date fair value. Subsequent changes in
fair values of contingent consideration are adjusted
against the cost of the acquisition where they qualify as
measurement period adjustments. All other subsequent
changes in the fair value of contingent consideration
classified as an asset or liability are accounted for in
accordance with relevant IFRS.

3.2. Basis of consolidation

The consolidated financial statements include the
financial statements of the Company and its wholly-
owned subsidiaries. Subsidiaries are entities controlled

Goodwill is measured as the excess of the consideration
transferred over the net of the acquisition-date fair
value of the identifiable assets acquired and the
liabilities assumed. If the net of the acquisition-date
amounts of the identifiable assets acquired and

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

liabilities assumed exceeds the sum of the consideration
transferred, the excess is recognized immediately in net
earnings as a bargain purchase gain.

The measurement period is the period from the date of
acquisition to the date the Company obtains complete
information about facts and circumstances that existed
as of the acquisition date and is subject to a maximum
of one year.

Each part of an item of property and equipment and
intangible assets with a useful life that is significantly
different from the useful lives of other parts is
depreciated separately.

Items of property and equipment are depreciated
commencing on the date they are ready for use using
the following methods and rates:

3.4. Segment reporting

Land

Not depreciated

The Company has identified two operating segments,
an agriculture segment and a industrial segment.
These segments are managed separately and strategic
decisions are made on the basis of their respective
operating results. All business segments’ operating
results are reviewed regularly by the Company’s CEO
to make decisions about resources to be allocated to
the segment and assess its performance, and for which
discrete financial information is available.

3.5. Cash

Cash consists of cash on hand.

3.6. Restricted cash

Restricted cash consist of a cash equivalents for a
specific purpose and therefore not available for
immediate and general use by the Company.

3.7. Bank indebtedness

Bank indebtedness consists of draws on our operating
line.

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3.8. Property and equipment

All items in property and equipment are recorded
at cost less accumulated depreciation and any
accumulated impairment losses.

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Buildings

Straight-line over 20 years

Computer
equipment

Furniture
and fixtures

Leasehold
improvements

Shop tools
and equipment

Straight-line over 3 – 6 years

Straight-line over 5 – 10 years

Straight-line over the lesser
of the lease term (including
renewals) and useful life

Straight-line over 3 – 10 years

Vehicles

Straight-line over 3 – 5 years

An item of property and equipment is derecognized
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement
of an item of property and equipment is determined
as the difference between the sale proceeds and the
carrying amount of the asset and is recognised in net
earnings. Items of property and equipment are tested
for impairment as discussed in Note 3.11.

3.9. Key estimates and judgements

The preparation of financial statements in accordance
with IFRS requires management to make estimates

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent
assets and liabilities as at the date of the consolidated
financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.

By nature, asset valuations are subjective and do not
necessarily result in precise determinations. Should
underlying assumptions change, estimated net
recoverable values could change by a material amount.

Balances in these consolidated financial statements
that are subject to estimation include the allowance
for doubtful accounts (Note 7), the net realizable value
of inventory (Note 3.14), the depreciation periods and
methods applied to items of property and equipment
(Note 3.8), the net recoverable value of goodwill (Note
12), the fair value of derivative financial instruments
(Note 3.21.10), impairment of goodwill and other assets
(Note 3.10, Note 3.11), shared-based compensation
(Note 3.17), and the fair value of business combinations
(Note 3.3).

Management also makes certain estimates with respect
to manufacturer incentives. Certain manufacturers offer
annual performance incentives which are linked to the
Company’s market share achievement and annual sales
volumes. The Company uses estimated annual market
share statistics derived from current and historical
results which have been adjusted for any anticipated
changes in the current year, as well as annual sales
volume to accrue manufacturer incentives earned
during the year.

3.10. Goodwill and impairment of goodwill

Goodwill represents the excess of the cost of an
acquisition over the fair value of the Company’s share of
the net identifiable assets of the acquiree at the date of
acquisition. Goodwill arising on an acquisition of a

business is carried at cost as established at the date
of acquisition of the business less accumulated
impairment losses, if any. Goodwill generated on initial
recognition is not deductible for tax purposes and has
an indefinite useful life.

For the purposes of impairment testing, goodwill is
allocated to each of the Company’s cash-generating
units (“CGUs”) which are expected to benefit from the
synergies of the combination.

A CGU to which goodwill has been allocated is tested
for impairment annually, or more frequently when
there is indication that the unit may be impaired. If the
recoverable amount of the CGU is less than its carrying
amount, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro-rata
based on the carrying amount of each asset in the
unit. The recoverable amount of a CGU is the greater
of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset. Any impairment loss for goodwill is recognized in
net earnings. Such impairment losses are not reversed
in subsequent periods.

3.11.

Impairment of assets other than goodwill

At the end of each reporting period, the Company
reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those
assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the assets
is estimated in order to determine the extent of the
impairment loss, if any. Where it is not possible to
estimate the recoverable amount of an individual asset,
the Company estimates the recoverable amount of the
CGU to which the asset belongs. Corporate assets are

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

also allocated to individual CGUs on the basis of the
distribution of assets deployed in the CGU.

The recoverable amount is the higher of fair value
less cost to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or CGU) is
estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognized
immediately in net earnings.

Where an impairment loss subsequently reverses, the
carrying amount of the assets (or CGU) is increased to
the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the
original carrying amount. A reversal of impairment loss
is recognized immediately in net earnings.

3.12. Earnings per share

Basic earnings per share is computed by dividing net
earnings by the weighted average number of common
shares outstanding during the period. Diluted earnings
per share amounts reflect the potential dilution that
could occur if options to purchase common shares
were exercised. The treasury stock method is used to
determine the dilutive effect of options, whereby any
proceeds received by the Company from their exercise
are assumed to be used to purchase common shares at
the average market price during the period.

The average market price of the Company’s shares for
the purposes of calculating the dilutive effect of options
is based upon quoted market prices for the periods
during which the options are outstanding.

3.13. Leases

Assets held under finance leases are initially recognized
as assets of the Company at their fair value at the
inception of the lease or, if lower, at the present value
of the minimum lease payments. The corresponding
liability to the lessor is included in the consolidated
balance sheet as an obligation under finance lease.

Lease payments are apportioned between interest
expense and reductions of the lease obligation so as
to achieve a constant rate of interest on the remaining
balance of the liability. Interest expense is recognized
immediately in net earnings.

Operating lease payments are recognised as an expense
on a straight-line basis over the lease term, except
where another systematic basis is more representative
of the time pattern in which economic benefits from the
leased asset are consumed.

3.14.

Inventory

Equipment inventory is valued at the lower of cost and
net realizable value, with cost being determined on a
specific item, actual cost basis. Net realizable value
is estimated using recent sales of the same or similar
equipment inventory or market values as established
by industry publications less the costs to sell. Parts
inventory is recorded at the lower of cost and net
realizable value, with cost being determined on an
average cost basis. Net realizable value is estimated
using recent sales of the same or similar parts inventory
less the costs to sell. Work-in-progress is valued on a
specific item, actual cost basis.

3.15. Revenue recognition

Sales are measured at the fair value of the consideration
received or receivable.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

3.15.1. Sale of goods

3.15.3. Other revenue

Revenue from the sale of goods including new and
used equipment and parts is recognized when all the
following conditions are satisfied:

Other revenue consists of commission revenue from
finance and insurance, recognized when the finance
contract is signed.

■

the Company has transferred to the buyer the
significant risks and rewards of ownership of the
goods;

the Company retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated
with the transaction will flow to the Company; and

the costs incurred or to be incurred in respect of the
transaction can be measured reliably.

3.15.2. Rendering of services

Revenue derived from the rendering of services is
recognized when:

■

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated
with the transaction will flow to the Company;

the stage of completion of the transaction at the
end of the reporting period can be measured
reliably; and

the costs incurred for the transaction and the costs
to complete the transaction can be measured
reliably.

3.16. Deferred revenue

Deferred revenue comprises equipment sales in which
cash has been received but not all terms and conditions
have been fulfilled to meet the requirements of revenue
recognition, and maintenance plans sold to customers
in which all services have not yet been provided.

3.17. Share-based transactions

Equity-settled share-based payments to employees and
others providing similar services are measured at the
fair value of the equity instruments at the grant date.
The Company follows the fair value based method of
accounting, using the Black-Scholes option pricing
model, whereby compensation expense is recognized
over the vesting period and is based on the Company’s
estimate of awards that will ultimately vest, with a
corresponding increase to contributed surplus.
Details regarding the determination of the fair value
of equity-settled share-based transactions are set out
in Note 19.3.

Cash-settled share-based payments are recorded as
liabilities and are measured initially at their fair values.
At the end of each reporting period and at the date of
settlement, the fair value of the liability is remeasured,
with any changes in fair value recognized in net earnings
for the period. Details regarding the determination of
the fair value of cash-settled share-based payments are
set out in Note 19.4 and Note 19.5.

3.18. Employee Share Ownership Plan

The Company has an Employee Share Ownership Plan
(“ESOP”). Under the ESOP, employees can contribute
a percentage of their annual gross salary by way of
payroll deductions. For employees with 3 years or less

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

of service, the Company matches up to 2% of earnings,
to a maximum of $2 per annum. For employees with
more than 3 years of service, the Company matches up
to 5% of earnings, to a maximum of $5 per annum or
an amount modified and approved by the Company’s
Compensation, Governance and Nominating Committee.
The Company’s contributions vest to the employee on
December 31 of the contribution year and are expensed
as incurred.

ESOP shares are purchased on the open market. The
weighted average unvested shares held in the ESOP
during the period are excluded from the earnings
per share calculations as they are not considered to
be outstanding. Dividends paid on the Company’s
common shares held for the ESOP are used to purchase
additional common shares on the open market.

3.19.

Income taxes

Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.

Current tax and deferred tax are recognized in net
earnings except when they relate to items that are
recognized in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income
or directly in equity, respectively. Where current tax
or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the
accounting for the business combination.

3.20. Foreign currency translation

Transactions in currencies other than the Company’s
functional currency are recorded at the rates of
exchange prevailing on the dates of the transactions.

Current tax is the expected tax payable or recoverable
on the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date.

At each balance sheet date, monetary assets and
liabilities denominated in foreign currencies are
retranslated at prevailing rates.

Deferred tax is recognized using the asset and liability
method on temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized if it arises from
goodwill generated on a business combination or an
asset or liability in a transaction other than a business
combination that, at the time of the transaction, affects
neither accounting net earnings nor taxable income.
Deferred tax is determined using tax rates and laws
that have been enacted or substantively enacted at
the reporting date and are expected to apply when the
related deferred tax asset is realized or deferred tax
liability is settled.

A deferred tax asset is recognized to the extent that it is
probable that future taxable income will be available
against which the temporary difference can be utilized.

3.21. Financial instruments

Financial assets and liabilities are recognized when the
Company becomes party to the contractual provisions
of the instrument.

On initial recognition, financial instruments are
measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of
financial instruments, other than financial instruments
at fair value through profit or loss (“FVTPL”), are added
to or deducted from the fair value of the financial
instrument, as appropriate. Transaction costs directly
attributable to the acquisition of financial instruments
at FVTPL are recognized immediately in net earnings.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

3.21.1. Classification of financial instruments

Financial instruments are classified into the following
specified categories: financial assets at FVTPL, held-to-
maturity investments, available-for-sale (“AFS”)
financial assets, loans and receivables, financial
liabilities at FVTPL and other financial liabilities. The
classification depends on the nature and purpose of the
financial instrument and is determined at the time of
initial recognition. The Company has no financial assets
classified as held-to-maturity or AFS.

3.21.2.

Effective interest method

The effective interest method is a method of
calculating the amortized cost of a debt instrument
and of allocating interest over the relevant period.
The effective interest rate is the rate that discounts
estimated future cash receipts (including all fees,
transaction costs and other premiums or discounts)
through the expected life of the debt instrument, or,
where appropriate, a shorter period, to the net carrying
amount on initial recognition.

3.21.3. Financial instruments at FVTPL

Financial instruments are classified as at FVTPL
when the instrument is either held for trading or it is
designated as at FVTPL.

A financial asset (liability) is classified as held for
trading if:

A financial instrument other than one held for trading
may be designated as at FVTPL upon initial recognition if:

■

such designation eliminates or significantly reduces
a measurement or recognition inconsistency that
would otherwise arise;

the financial instrument forms part of a group of
financial assets or financial liabilities or both, which
is managed and its performance is evaluated on a
fair value basis, in accordance with the Company’s
documented risk management or investment
strategy, and information about the grouping is
provided internally on that basis; or

it forms part of a contract containing one or more
embedded derivatives, and IAS 39, ‘Financial
instruments: Recognition and measurement’
permits the entire combined contract (asset or
liability) to be designated as at FVTPL.

Financial assets classified as at FVTPL are stated
at fair value, with any gains or losses arising on
remeasurement recognized in net earnings. The net
gain or loss recognised in net earnings incorporates
any dividends or interest earned on the financial asset
and is included in selling, general and administrative
expenses. The Company has designated its derivative
financial instruments as at FVTPL. Fair value is
determined in the manner described in Notes 3.21.10
and 27.6.

■

it has been acquired principally for the purpose of
selling (repurchasing) it in the near term;

3.21.4. Loans and receivables

on initial recognition, it is part of a portfolio of
identified financial instruments that the Company
manages together and has a recent actual pattern
of short-term profit-taking; or

it is a derivative that is not designated and effective
as a hedging instrument.

Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables are
measured at amortized cost using the effective interest
method, less any impairment.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The Company has classified its cash, restricted
cash, and trade receivables and other as loans and
receivables.

3.21.5. Other financial liabilities

Other financial liabilities are measured at amortized
cost using the effective interest method.

The Company has classified its bank indebtedness,
trade payables, accruals and other (with the exception
of DSUs and SARs), floor plan payable, long-term debt,
and obligations under finance leases as other financial
liabilities.

3.21.6.

Impairment of financial assets

Financial assets, other than those at FVTPL, are
assessed for indicators of impairment at the end of
each reporting period. For financial assets carried
at amortized cost, the amount of the impairment
loss, if any, is the difference between the asset’s
carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s
original effective interest rate. As indicated above, the
Company’s financial assets carried at amortized cost
consist only of cash and trade receivables and other.
Any impairment determined on trade receivables and
other reduces their carrying amount through the use of
an allowance account and is recorded when an account
is considered uncollectible. Subsequent recoveries of
amounts previously provided for are credited against
the allowance. Changes in the carrying amount of
the allowance are recognized in selling, general and
administrative expenses.

3.21.7. Derecognition of financial instruments

The Company derecognizes a financial asset when
the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of
the asset to another entity.

On derecognition of a financial asset, the difference
between the asset’s carrying amount and the sum of the
consideration received and receivable and the
cumulative gain or loss that had been recognized in
other comprehensive income and accumulated equity
is recognized in net earnings.

The Company derecognizes a financial liability when
the Company’s obligations are discharged, cancelled
or they expire. The difference between the carrying
amount of the financial liability derecognized and the
consideration paid and payable is recognized in net
earnings.

3.21.8. Classification as debt or equity

Debt and equity instruments issued by the Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangement and the definitions of a financial liability
and equity instrument.

3.21.9. Equity instruments

An equity instrument is any contract that evidences
a residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments
issued by the Company are recognized at the proceeds
received, net of direct issue costs. Repurchases of the
Company’s own equity instruments are recognized and
deducted directly in equity. No gain or loss is recognized
in net earnings on the purchase, sale, issuance or
cancellation of the Company’s own equity instruments.

3.21.10. Derivative financial instruments and hedging

activities

Derivatives are initially recognized on the date a
derivative contract is entered into and are subsequently
re-measured at their fair values. The fair values of
interest rate swaps are calculated as the net present
value of the estimated future cash flows expected to
arise on the variable and fixed streams, determined

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

using applicable yield curves at each measurement
date. Swap curves, which incorporate credit spreads
applicable to large commercial banks, are typically used
to calculate expected future cash flows and the present
values thereof. Adjustments are also made to reflect
the Company’s own credit risk and the credit risk of the
counter party, if different from the spread implicit in the
swap curve.

The method of recognizing the resulting gain or loss
depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item
being hedged. The Company may designate derivatives
of a particular risk associated with a recognized asset or
liability or highly probable forecast transaction as cash
flow hedges.

The Company documents at the inception of the
transaction, the relationship between hedging
instruments and hedged items, as well as its risk
management objectives and strategy for undertaking
various hedging transactions.

The Company uses the regression method to determine
whether the interest rate swaps that are used in
hedging transactions are highly effective in offsetting
changes in fair values or cash flows of hedged items and
uses the cumulative dollar offset method to measure
the ineffective portion. The documentation identifies
the anticipated cash flows being hedged, the risk that is
being hedged, and the type of hedging instrument used
and how effectiveness will be assessed. The hedging
instrument must be highly effective in accomplishing
the objective of offsetting changes in anticipated
cash flows attributable to the risk being hedged both
at inception and throughout the life of the hedge.
Hedge accounting is discontinued prospectively when
it is determined that the hedging instrument is no
longer effective as a hedge, the hedging instrument is
terminated, or upon early settlement of the hedged item.

Where hedge accounting can be applied, a hedge
relationship is designated and documented at inception
to detail the particular risk management objective and
the strategy for undertaking the hedge transaction.

In a cash flow hedging relationship, the effective portion
of the change in the fair value of the hedging derivative,
net of taxes, is recognized in other comprehensive
income while the ineffective portion is recognized in
the consolidated statement of net earnings. Amounts in
accumulated other comprehensive loss are reclassified
to profit or loss in the periods when the hedged item
affects profit or loss.

Gains or losses on derivatives not designated as hedges
are recognized in the consolidated statement of net
earnings.

When a hedging instrument expires or no longer meets
the criteria for hedge accounting, any cumulative
gain or loss existing in equity remains in equity and is
recognized when the forecast transaction is ultimately
recognized in the consolidated statement of net earnings.

The Company uses interest rate swaps to hedge the
variability in cash flows related to variable rate debt.

The Company has a number of total return swaps
outstanding that are intended to reduce the variability
of cash flows and, to a lesser extent, earnings
associated with stock-based compensation awards that
will settle in cash, namely, the SARs and DSUs. The total
return swaps do not qualify as accounting hedges and,
therefore, the fair value adjustment at the end of each
reporting period is recognized in selling, general and
administrative expenses.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

4. PRIOR YEAR COMPARATIVE

NGF Geomatics Inc.

2014 Acquisitions

York Auto Supply

On June 2, 2014, the Company purchased the net
assets of York Auto Supply (“YAS”), a distributor
of automotive and agricultural parts, body shop
and industrial supplies, with a store in Yorkton,
Saskatchewan. The operating results of the business
acquired are consolidated from June 2, 2014, the
acquisition’s closing date.

DISCLOSURES

Certain prior period comparative information has been
revised to conform to current period presentation.

5. ACQUISITIONS

During the years ended December 31, 2015 and 2014,
the Company completed three business acquisitions.
Over time, the company expects these acquisitions
to offer synergies in the forms of cost reduction, an
expanded market to distribute used inventory and
an expanded territory for sales and product support.
Acquisitions completed during these periods are as
follows:

2015 Acquisitions

Chabot Implements

On April 1, 2015, the Company acquired 100% of the
issued and outstanding common shares of the entities
forming Chabot Implements (“Chabot”), a Manitoba-
based dealer of Case IH agriculture equipment with
stores in Portage La Prairie, Steinbach and Elie.
Chabot also represented various short-lines including
Bourgault, MacDon and Kubota through its Neepawa,
Manitoba location. During Q4 2015, we consolidated the
acquired Neepawa location into our existing Neepawa
location and have the acquired location up for sale
(Note 9). The operating results of the business acquired
are consolidated from April 1, 2015, the date control
was acquired. It is the Company’s intention to settle all
long-term debt assumed pursuant to the acquisition of
Chabot within its normal operating cycle and as such,
all long-term debt assumed has been classified
as current.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

Purchase price allocation

Cash consideration

Paid
Payable

Purchase consideration

Net working capital

Cash
Trade receivables and other
Income tax receivable
Inventory
Bank indebtedness
Trade payables, accruals
and other
Floor plan payable
Current portion of
long-term debt

Property and equipment
Deferred tax liability
Intangible assets
Goodwill

Net assets

NGF
$

902
-

902

7
41
15
-
-

(3)

20
(220)
822
220

902

2015

CHABOT
$

8,656
751

9,407

-
1,132
369
43,587
(7,140)

(2,609)

(32,782)

(4,977)

(2,420)

8,309
(372)
-
3,890

9,407

TOTAL
$

9,558
751

10,309

7
1,173
384
43,587
(7,140)

(2,612)

(32,782)

(4,977)

(2,360)

8,329
(592)
822
4,110

10,309

2014

YAS
$

1,264
-

1,264

-
226
-
339
-

565

699
-
-
-

1,264

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

Cash flows outflows associated with business combinations are presented net of cash acquired and bank
indebtedness assumed as summarized in the following table:

Cash consideration paid
Less: cash acquired
Plus: bank
indebtedness assumed

Cash outflows associated
with business combinations

NGF
$

902
(7)

895

2015

CHABOT
$

8,656
-

7,140

TOTAL
$

9,558
(7)

7,140

15,796

16,691

2014

YAS
$

1,264
-

1,264

The Company incurred $188 of acquisition related costs during the year ended December 31, 2015 (2014 – $18). These
costs are recognized as administrative expenses within selling, general and administrative expenses in the period in
which they are incurred.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The acquisitions effected during the year ended December 31, 2015, generated revenue of $34,483 during the year
of acquisition (2014 – $958) and net loss of $562 (2014 – net loss of $120). Had these business combinations been
effected at January 1 of the acquisition year, the Company estimates that consolidated revenue and net earnings for
the year ended December 31, 2015 would have been $983,700 and $11,294, respectively (2014 – $967,563 and $18,655,
respectively). The pro forma revenues and earnings are not necessarily indicative of the results that actually would
have occurred had these acquisitions taken place on January 1, or of the results which may be obtained in the future.

In determining these amounts, management has assumed that the fair value adjustments, determined provisionally,
that arose on the date of acquisition would have been the same had these acquisitions occurred on January 1 of the
acquisition year.

Goodwill arose on these acquisitions due to the potential future revenue growth and synergies expected to occur.
This amount is not recognized separately as it does not meet the recognition criteria for identifiable intangible assets.
Goodwill generated on acquisition is not deductible for tax purposes.

6. RESTRICTED CASH

Restricted cash as at December 31, 2015 is comprised of $879 related to a hold back on the Chabot acquisition that is
held in trust (2014 – comprised of $4,560 related to the issuance of treasury bills).

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

7. TRADE RECEIVABLES AND OTHER

Trade receivables

Current
Aged between 61 – 120 days
Aged greater than 120 days

Allowance for doubtful accounts

Net trade receivables
Contracts in transit
Warranty receivables

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

11,866
1,415
2,528

15,809

(1,939)

13,870
9,732
1,550

25,152

15,552
2,065
2,024

19,641

(1,745)

17,896
13,683
2,228

33,807

The Company considers its trade receivables and other which are neither past due nor impaired to be of good credit
quality. Contracts in transit and warranty receivables are due from retail finance institutions and original equipment
manufacturers, respectively.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The allowance for doubtful accounts can be reconciled as follows:

As at January 1,

Provided for during the year, net of recoveries

Written-off during the year

As at December 31,

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

1,745

479

(285)

1,939

1,272

1,021

(548)

1,745

The allowance for doubtful accounts is reviewed by management and accounts receivable are considered for
impairment on a case-by-case basis when they are past due or when objective evidence is received that a customer
will default. The Company takes into consideration the customer’s payment history, their creditworthiness and the
current economic environment in which the customer operates to assess impairment. The Company’s historical bad
debt expenses have not been significant and are generally limited to specific customer circumstances.

INVENTORY

New equipment
Used equipment
Parts
Work-in-progress

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

172,335
287,784
37,872
1,769

499,760

213,685
273,306
36,455
2,557

526,003

For the year ended December 31, 2015, inventory recognized as an expense amounted to $819,064 (2014 – $804,693),
which is included in cost of sales in the consolidated statement of net earnings. For the year ended December 31,
2015, there were net write downs of inventory to net realizable value of $6,497 (2014 – $3,177) in cost of sales in
the consolidated statement of net earnings. The Company’s inventory has been pledged as security for its bank
indebtedness, floor plan payable and long-term debt.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

9. ASSETS HELD FOR SALE

As at December 31, 2015, three parcels of land with a
net book value of $8,472 (2014 – one parcel of land with
a net book value of $2,252) are classified as held for sale.
The debt associated with the land amounts to $Nil
(2014 – $253) and have been classified as a current
liability.

In 2015, the Company made the decision to divest itself
of a portion of the inventory and related distribution
territory of an agriculture short-line it represents.
“Short-line” is a term commonly used in the agriculture
equipment manufacturing and distribution industry.

Typically, a “short-line” is a manufacturer or brand
that limits its product offering to specific equipment
segments or categories, as opposed to providing a full
line equipment offerings.

As at December 31, 2015, the whole-goods and parts
associated with this portion of the short-line are
classified as assets held for sale in the amount of
$2,070 (2014 – $Nil). The floor plan associated with this
inventory amounts to $1,562 (2014 – $Nil) and has been
classified as a current liability. This transaction closed
in early 2016.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

10. INTANGIBLE ASSETS

Intangible assets is comprised of technology acquired from the NGF acquisition.

Cost
December 31, 2014
Business combinations (Note 5)

December 31, 2015

Accumulated depreciation
December 31, 2014
Depreciation charge

December 31, 2015

Net book value
December 31, 2014

December 31, 2015

INTANGIBLE
ASSETS
$

-
822

822

-
151

151

671

The amortization expense of $151 has been recorded in selling, general and administrative expense.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

11. PROPERTY AND EQUIPMENT

Cost
January 1, 2014
Additions
Business combinations (Note 5)
Asset held for sale (Note 9)
Disposals

December 31, 2014
Assets reclassified from assets held for sale
Additions
Business combinations (Note 5)
Assets held for sale (Note 9)
Disposals

December 31, 2015

Accumulated depreciation
January 1, 2014
Depreciation charge
Disposals

December 31, 2014
Depreciation charge
Disposals

December 31, 2015

Net book value
January 1, 2014

December 31, 2014

December 31, 2015

LAND
$

10,524
2,492
145
(2,252)
-

10,909
2,252
1,203
2,787
(8,311)
-

8,840

-
-
-

10,524

10,909

8,840

BUILDINGS
$

COMPUTER
EQUIPMENT
$

482
3,138
359
-
-

3,979
-
5,516
4,693
(161)
(67)

13,960

316
50
-

366
386
(15)

737

166

3,613

13,223

7,830
1,169
38
-
(95)

8,942
-
980
-
-
(39)

9,883

4,060
1,524
(26)

5,558
1,676
(38)

7,196

3,770

3,384

2,687

Included in selling, general and administrative expenses for the year ended December 31, 2015 is depreciation
expense of $7,652 (2014 – $7,057) and a gain on the disposal of property and equipment of $302 (2014 – gain of $995).

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

FURNITURE AND
FIXTURES
$

LEASEHOLD
IMPROVEMENTS
$

SHOP TOOLS AND
EQUIPMENT
$

VEHICLES
$

3,132
440
36
-
-

3,608
-
670
179
-
(70)

4,387

1,985
452
-

2,437
460
(70)

2,827

1,147

1,171

1,560

4,685
692
-
-
(22)

5,355
-
525
107
-
(53)

5,934

1,189
661
(9)

1,841
660
(50)

2,451

3,496

3,514

3,483

8,413
1,437
86
-
(90)

9,846
-
1,649
222
-
(452)

11,265

5,725
1,409
(62)

7,072
1,463
(328)

8,207

2,688

2,774

3,058

18,780
2,538
35
-
(3,741)

17,612
-
2,741
341
-
(1,999)

18,695

9,711
2,961
(2,581)

10,091
3,007
(1,440)

11,658

9,069

7,521

7,037

TOTAL
$

53,846
11,906
699
(2,252)
(3,948)

60,251
2,252
13,284
8,329
(8,472)
(2,680)

72,964

22,986
7,057
(2,678)

27,365
7,652
(1,941)

33,076

30,860

32,886

39,888

As at December 31, 2015, assets under finance leases included in computer equipment and vehicles have net carrying
amounts of $186 and $63 (2014 – $440 and $199), respectively. Certain items of property and equipment have been
pledged as security for liabilities as disclosed in Notes 15, 16 and 17.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

12. GOODWILL

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Opening balance
Recognized on business acquisitions (Note 5)

Ending balance

14,692
4,110

18,802

14,692
-

14,692

Goodwill recognized pursuant to a business
combination is allocated, at the time of acquisition,
to the Company’s CGU that is expected to benefit
from that business combination. As at December
31, 2015 and 2014 the Company has identified two
CGU’s, agriculture and industrial. All goodwill has been
allocated to the agriculture CGU.

The recoverable amount of the CGUs was determined
from value in use calculations. The key assumptions
made for the value in use calculations are those
regarding the discount and growth rates. These key
assumptions are based on past experience which
has been adjusted for expected changes in future
conditions.

As at December 31, 2015 and 2014, the Company
prepared cash flow forecasts derived from the most
recent financial plans prepared by management and
extrapolated these cash flows into perpetuity using
growth assumptions relevant to the business sector.
The growth rate used for the purposes of these analyses
was 2.0%.

As at December 31, 2015, the rate used to discount
the forecasted cash flows was 10.9% (2014 – 11.7%),
and represents the Company’s estimate of the pre-tax
discount rate reflecting current market assessments
of the time value of money and the risks specific to the
particular CGU. The recoverable amount of the CGU to
which goodwill has been allocated exceeded its carrying
value at the impairment test dates.

The Company has conducted a sensitivity analysis
based on possible changes in the key assumptions used
for the impairment tests. Had the estimated cost of
capital used in determining the pre-tax discount rates
been 6.4% (2014 – 5.5%) higher than management’s
estimates or the estimated growth rate used in
extrapolating forecasted results been 13.8% (2014 –
12.1%) lower, the recoverable amount of the CGU would
equal its carrying amount for the respective periods.
Any additional change in the assumption would cause
goodwill to be impaired.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

13. TRADE PAYABLES, ACCRUALS AND OTHER

Trade payables and accruals
Directors’ share units (Note 19.4)
Share appreciation rights (Note 19.5)

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

33,466
454
43

33,963

33,711
680
18

34,409

14. FLOOR PLAN PAYABLE

15. BANK INDEBTEDNESS

The Company utilizes floor plan financing arrangements
with various suppliers and creditors to finance
whole-good inventory on hand. The terms of these
arrangements may include up to a twelve month
interest-free period followed by a fixed or variable
interest rate term ranging from 0.0% to the bank’s prime
rate plus 4.3% at December 31, 2015 (2014 – ranging
from 0.0% to the bank’s prime rate plus 4.3%). At
December 31, 2015, the Company had unused floor plan
of approximately $233,372 available (2014 – $154,919).
The amounts due are secured by specific new and used
equipment inventories and the payments are due when
the equipment is sold or transferred, up to a maximum
term of 48 months. At December 31, 2015, the Company
had $6,818 of floor plan outstanding in US currency
(2014 – $2,911) The entire amount of floor plan payable
has been classified as current, as the corresponding
inventory to which it relates has also been classified as
current.

Pursuant to agreements with lenders, the Company
is required to monitor and report certain non-IFRS
measures (Note 28).

The Company’s bank indebtedness is comprised of
an operating facility (the “Operating Facility”) made
available to the Company through a revolving credit
facility with a syndicate of lenders (the ”Syndicated
Facility”) which matures on September 24, 2018. The
Operating Facility is utilized to advance up to the
lesser of the established borrowing base and $70,000.
The borrowing base is supported by otherwise
unencumbered assets including certain accounts
receivable, inventory and items of property and
equipment, less priority payables. Within the Operating
facility is a $7,000 letter of credit pledged as security
for the hedged position on the total return swaps (Note
27.6). The effective interest rate at December 31, 2015
was 3.7%.

16. LONG-TERM DEBT

During the second quarter of 2015, the Company
renewed its Syndicated Facility. As part of the renewal,
the Company’s minimum Fixed Charge Coverage Ratio
was amended to 1.20:1.00 from 1.25:1.00.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

During the third quarter of 2015, the Company amended its Syndicated Facility. As part of the amendment, the
Company consolidated and re-termed its former Acquisition, Real Estate and Debenture Repayment Facilities
(as described below) into one term facility (the “Term Facility”). The former Fleet Facility (as described below) was
consolidated into the Operating Facility, which is classified as bank indebtedness. The $45,000 balance on the Term
Facility has an interest-only period for the first six months, followed by a seven year repayment period. The total debt
issuance costs for the syndicate amendment were $751, where $542 of the cost is attributed to the Operating and
Flooring Facility and the remaining $209 is attributed to the Term Facility. The debt issuance costs are amortized into
short- and long-term interest, respectively, over the term of the Syndicated Facility using the effective interest method.
Included in long-term interest expenses for the year ended December 31, 2015 is debt issuance costs related to the
Term facility of $17 (2014 – $Nil).

The following table summarizes the Company’s long-term debt.

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Debenture Repayment Facility, amortized with quarterly
principal instalments of $875 plus interest with the
remaining principal due on September 30, 2017. The
effective interest rate at December 31, 2014 was 3.3%.

Acquisition Facility, revolving facility payable in monthly
principal instalments over 60 months plus interest. The
effective interest rate at December 31, 2014 was 3.3%.

Fleet Facility, revolving facility payable in monthly
principal instalments over 36 – 60 months plus interest. The
effective interest rate at December 31, 2014 was 3.6%.

Term Facility, revolving facility with interest-only period
to April 1, 2016, then payable in quarterly principal
instalments over 28 quarters plus interest. The effective
interest rate at December 31, 2015 was 2.9%

Various other facilities

Less: current portion

Less: liabilities associated with assets held for sale
Less: deferred debt issuance cost

Long-term portion

45,000

124

45,124

(4,852)
-
(192)

40,080

26,250

11,782

4,957

600

43,589

(10,560)
(253)
-

32,776

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

17. OBLIGATIONS UNDER FINANCE LEASES

Finance leases relate to vehicles and computer equipment with lease terms ranging from three to five years. The
Company has options to purchase many of these assets for a nominal amount at the conclusion of the lease terms.
The lessors’ title to the leased assets provides security for the Company’s obligations under finance leases.

Interest rates underlying all obligations under finance leases are fixed at the respective contract dates ranging from
2.7% to 7.1% at December 31, 2015 (2014 – 3.4% to 7.6%).

The fair values of the obligations under finance leases approximate their carrying amounts as interest rates are
consistent with market rates for similar debt.

Future minimum payments under finance leases along with the balance of the obligations under finance leases are
as follows:

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Due within one year
Due later than one year and not later than five years
Due later than five years

Total future minimum lease payments
Less: future finance charges

Present value of future minimum lease payments
Current portion of obligations under finance leases

Long-term portion of obligations under finance leases

77
160
-

237
(12)

225
(71)

154

492
9
-

501
(39)

462
(453)

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

18. CONTINGENCY AND GUARANTEE

19.2. Dividends paid

The Company is subject to various degrees of recourse,
arising in the ordinary course of business, by assisting
its customers in financing the sale of equipment. The
Company is exposed to potential losses arising from the
difference between the assessed value of the underlying
security and the loan balance, if certain customers
default on their loan. Any resulting losses are recorded
as soon as the amount of the loss can be reasonably
estimated. It is management’s opinion that there is
an insignificant risk of loss from these guarantees, as
the assessed value of the underlying security generally
exceeds the loan balance. Accordingly, management
believes that the exposure on these guarantees is not
significant.

19. SHARE CAPITAL

19.1. Common shares

The Company is authorized to issue an unlimited
amount of common shares with no par value. As at
December 31, 2015, 19,384 thousand shares were
issued and outstanding (2014 – 19,384 thousand).
All issued and outstanding shares were fully paid as
at December 31, 2015 and 2014.

Dividends paid during the year ended December 31,
2015 were $8,917 or $0.46 per share (2014 – $8,598 or
$0.445 per share).

In respect of the fourth quarter of 2015, the Board of
Directors declared a dividend of $0.115 per common
share on the Company’s outstanding common
shares. The dividend is payable on March 31, 2016, to
shareholders of record at the close of business on
February 29, 2016. The payment of this dividend will not
have any tax consequences for the Company.

19.3. Stock options

The Company has a stock option plan under which
the Board of Directors may grant options to directors,
officers, and employees of the Company at an exercise
price equal to the market price of the Company’s
common shares at the time of the grant. The plan is
limited to 10% of the issued and outstanding common
shares. Options granted carry neither voting rights nor
rights to dividends.

The general terms of stock options granted under the
plan include a maximum exercise period of five years
and a vesting period of three years with one-third of the
grant vesting on each anniversary date.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The fair value of the options granted using the Black-Scholes option pricing model and assumptions used in their
determination during the years ended December 31 are as follows:

Risk-free interest rate
Expected option life (years)
Expected volatility(1)
Expected annual dividend per share
Exercise price
Share price on grant date
Fair value

DECEMBER 31, 2015

DECEMBER 31, 2014

-
-
-
-
-
-
-

1.5%
3.8
27.1%
$0.40
$11.52
$11.52
$1.81

(1)Expected volatility has been based on the historical volatility of the Company’s publicly traded shares.

The reconciliation of options outstanding during the years ended December 31 is as follows:

2015

2014

NUMBER OF
OPTIONS
(THOUSANDS)

WEIGHTED AVERAGE
EXERCISE PRICE
$

NUMBER OF
OPTIONS
(THOUSANDS)

WEIGHTED AVERAGE
EXERCISE PRICE
$

January 1,
Granted
Exercised
Forfeited

December 31,

1,236
-
-
(71)

1,165

11.68
-
-
11.97

11.66

945
432
(71)
(70)

1,236

11.61
11.52
9.26
12.15

11.68

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The weighted average share price at the date of exercise for the options exercised during the year ended December 31,
2015 was $Nil (2014 – $10.00).

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

Options outstanding at December 31, 2015 are summarized as follows:

GRANT DATE

March 11, 2011
August 11, 2011
March 28, 2012
March 13, 2013
March 13, 2014

OPTIONS
OUTSTANDING
(THOUSANDS)

OPTIONS
EXERCISABLE
(THOUSANDS)

WEIGHTED AVERAGE
EXERCISE PRICE
($)

WEIGHTED AVERAGE
CONTRACTUAL LIFE
(YEARS)

30
142
237
363
393

1,165

30
142
237
242
131

782

10.39
8.71
11.96
12.89
11.52

11.66

0.2
0.6
1.2
2.2
3.2

2.1

Upon redemption and at each reporting period, the
DSUs are valued on a per DSU basis at an amount equal
to the volume weighted average trading price of the
Company’s shares over the immediately preceding 20
day trading period. At December 31, 2015, $454 was
included in trade payables, accruals and other with
respect to the DSUs (2014 – $680). During the year
ended December 31, 2015, 26 DSU’s were redeemed
(2014 – Nil DSU’s were redeemed).

19.4. Directors’ share unit plan

The Company has instituted a Directors’ share unit
plan (“DSU”). Under this plan, the Board of Directors
may grant DSUs to non-officer Directors of the Company
as they determine to be appropriate for their services
rendered. The DSUs are notional grants of shares and
are to be settled in cash within 30 days of a Director’s
termination date. Additional DSUs are credited to the
Directors’ accounts when cash dividends are paid to the
common shareholders of the Company. Such amount of
additional DSUs is determined by dividing the dividends
which would have been paid on the DSUs had they
been common shares of the Company by the volume
weighted average trading price of the Company’s shares
over the 20 day trading period immediately preceding
the date the dividends are paid.

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100

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

DSUs granted and redeemed and the unrealized losses recognized on the DSUs during the years ended December 31
are as follows:

2015

2014

DSUS
(THOUSANDS)

January 1,
Granted(1)
Redeemed
Loss on mark to market
revaluation(1)

December 31,

75
26
(26)

680
220
(235)

(211)

454

DSUS
(THOUSANDS)

53
22
-

656
247
-

(223)

680

(1)Included in selling general and administrative expenses.

19.5. Share appreciation rights plan

In 2014, the Company introduced a share
appreciation rights (“SAR”) plan as a component of
overall compensation of certain directors, officers and
employees. These SARs vest after a three year period,
are exercisable for two years thereafter and will be
settled in cash. The SARs terminate five years after
their initial date of grant. During the vesting period,
the SARs are revalued at each reporting period using
the Black-Scholes option pricing model. The Company
recognizes a liability to the extent that the fair value
of the SARs has been earned by the holder, with the
coinciding expense being recognized within selling,
general and administrative expense.

In 2015, the company granted 673,000 SARs with an
exercise price of $8.82 (2014 – 550,000 SARs with an
exercise price of $10.93). As at December 31, 2015,
1,145,500 SARs were outstanding (2014 – 550,000). As at
December 31, 2015, the Company recognized a liability
of $43 (2014 - $18) and an expense of $24 (2014 - $18).

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101

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The weighted average fair value of the SARs granted using the Black-Scholes option pricing model and assumptions
used in their determination as at December 31 are as follows:

Risk-free interest rate
Expected option life (years)
Expected volatility(1)
Expected annual dividend per share
Exercise price
Share price
Fair value

2015

0.6%
2.7
27.6%
$0.46
$9.74
$6.24
$0.13

2014

1.4%
3.8
25.6%
$0.46
$10.93
$9.50
$0.83

(1)Expected volatility has been based on the historical volatility of the Company’s publicly traded shares.

As at December 31, 2015 and 2014, the Company has several total return swaps as an economic hedge for our DSUs
and SARs (Note 27.6).

19.6. Employee share ownership plan

During the year ended December 31, 2015, the Company recognized $1,191 in selling, general and administrative
expenses in respect of employee contributions to the ESOP plan which were matched by the Company (2014 – $1,040).

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102

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

20. SALES

The Company’s annual sales consist of the following for the respective years ended:

Agriculture equipment sales
Industrial equipment sales
Parts sales

Sale of goods
Rendering of services

Total sales

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

777,352
50,127
107,509

934,988
40,468

975,456

737,220
88,063
101,622

926,905
38,502

965,407

21. SELLING, GENERAL AND ADMINISTRATIVE

The Company’s selling, general and administration expenses consist of the following for the respective years ended:

Compensation and related expenses
Administrative expenses
Rent and other facility expenses
Depreciation expense
Equity-settled share-based payment expense

Total selling, general and administrative expenses

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

67,273
21,764
14,436
7,803
500

111,776

65,052
18,744
13,781
7,057
1,122

105,756

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Included in compensation and related expenses for the year ended December 31, 2015 are variable sales commissions
of $14,323 (2014 – $14,658). Costs included in administrative expenses are marketing, training, insurance, travel,
professional fees and other miscellaneous expenses. Also included in administrative expenses for the year ended
December 31, 2015 are losses of $3,548 (2014 – losses of $68) related to non-cash mark to market of derivative
financial instruments.

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103

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

22. INCOME TAXES

22.1. Income tax recognized in net earnings

Total taxes recognized in net earnings were different than the amount computed by applying the combined statutory
Canadian and Provincial tax rates to income before taxes. The difference resulted from the following:

Earnings before income taxes

Computed tax at statutory tax rate of 26% (2014 – 25%)
Non-deductible expenses
Change in enacted rates
Adjustment from prior year income tax expenses
Other

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

15,398

4,003
253
(55)
(49)
(47)

4,105

26,201

6,550
411
(6)
246
75

7,276

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104

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

22.2. Deferred tax asset (liability)

SHARE
ISSUE
COSTS
$

CUMULATIVE
ELIGIBLE
CAPITAL
$

PROPERTY
AND
EQUIPMENT
$

INTANGIBLE
ASSET
$

PARTNER-
SHIP
DEFERRAL
$

DSUS
$

INTEREST
RATE
SWAPS
$

TOTAL
$

January 1, 2014
Recognized in
net earnings
Recognized in
equity (Note 27.6)

December 31, 2014
Added in acquisition
(Note 5)
Recognized in
net earnings
Recognized in
equity (Note 27.6)

December 31, 2015

329

(142)

187

171

(32)

139

(98)

(23)

116

(103)

(44)

(147)

(370)

334

(222)

(183)

(181)

(3,572)

164

435

(2,576)

3,572

170

3,376

386

837

386

1,186

(592)

(47)

1,022

1,229

123

544

2,403

2,367

The Company also has unrecognized deferred tax assets related to $3,150 capital losses and deferred tax assets
related to $1,510 non-capital losses. The capital losses do not expire and the non-capital losses expire in 2035.

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105

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

23. EARNINGS PER SHARE

Both basic and diluted earnings per share have been calculated using net earnings for the respective periods. The
weighted average number of ordinary shares used in the calculations of basic and diluted EPS for the respective years
ended, are as follows:

THOUSANDS

DECEMBER 31, 2015

DECEMBER 31, 2014

Weighted average number of ordinary shares used in the
calculation of basic EPS
Dilutive impact of stock options

Weighted average number of ordinary shares used in the
calculation of diluted EPS

19,327

19,280

19,309

For the year ended December 31, 2015, 1,165 stock options were anti-dilutive (2014 – 1,056).

24. CHANGES IN NON-CASH WORKING CAPITAL

The net change in non-cash working capital for the years ended December 31 is comprised of the following sources
(uses) of cash:

Restricted cash
Trade receivables and other
Income taxes receivable
Inventory
Prepaid expenses
Assets held for sale
Trade payables, accruals and other
Income taxes payable
Floor plan payable
Liabilities associated with assets held for sale
Deferred revenue

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

3,681
9,828
337
69,830
(35)
(2,070)
(3,809)
(6,661)
(58,295)
1,562
(521)

13,847

(4,560)
(4,213)
4,887
(46,334)
65
-
(867)
6,661
39,717
-
(1,433)

(6,077)

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106

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

25. OPERATING LEASE ARRANGEMENTS

Operating leases relate primarily to the Company’s facilities with lease terms of between one and eleven years. Most
building leases contain five-year renewal options. During the year ended December 31, 2015, the Company recognized
$9,397 of operating lease payments as expenses (2014 – $8,973).

Non-cancellable operating lease commitments at December 31 are due as follows:

Not later than one year
Later than one year and not later than five years
Later than five years

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

8,921
20,988
3,771

33,680

8,018
19,993
6,297

34,308

26. RELATED PARTY TRANSACTIONS

The Company entered into the following transactions with related parties for the respective years ended:

Equipment and product support sales
Expenditures

Rental payment on Company facilities
Equipment purchases
Flight costs
Other expenses

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

1,394

5,589
665
83
92

6,921

5,435
3,846
191
70

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107

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The remuneration of the directors and officers of the Company is determined by the Compensation, Governance and
Nominating Committee of the Board of Directors based on performance and is consistent with market trends. The
remuneration of directors and senior officers of the Company identified as key management is as follows for the
respective years ended:

Salary and short-term benefits
Post-retirement benefits
Share-based payments

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

1,897
25
290

2,212

2,061
33
769

2,863

Amounts due from (to) related parties are included in the consolidated balance sheets under trade receivables and
other (trade payables, accruals and other) and are as follows:

Due from related parties
Due to related parties

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

111
(13)

61
(112)

The amounts due from related parties are not secured and are to be settled in cash. As at December 31, 2015 and
2014, the amounts due from related parties are considered collectible and therefore have not been provided for in
the allowance for doubtful accounts. During the year ended December 31, 2015, $Nil has been recognized in bad debt
expenses with respect to related party transactions (2014 – $Nil).

Key management personnel are comprised of the Company’s senior officers. As at December 31, 2015, there is a
$1,044 commitment (2014 – $2,640) relating to the termination of employment of the key management personnel.

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108

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The Company has contractual obligations to related parties in the form of facility leases. As at December 31, 2015,
these contractual obligations and due dates are as follows:

$ THOUSANDS

TOTAL

2016

2017-2018

2019-2020

THERE-
AFTER

Operating lease obligations

24,063

5,751

8,797

5,744

3,771

27. FINANCIAL INSTRUMENTS AND
FINANCIAL RISK MANAGEMENT

The Company, through its financial assets and
liabilities, has exposure to the following risks from its
use of financial instruments: credit risk, market risk
(consisting of foreign currency exchange risk, interest
rate risk and equity price risk), and liquidity risk. The
following analysis provides a measurement of risks as
at December 31, 2015 and 2014.

27.1. Credit risk

Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in a
financial loss to the Company. The Company has a
policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral, where appropriate,
as a means of mitigating the risk of financial loss from
defaults. The creditworthiness of counterparties is
determined using information supplied by independent
rating agencies where available and, if not available,
the Company uses other publicly available financial
information and its own trading records to rate its major
customers. The Company’s exposure and the credit
ratings of its counterparties are continuously monitored
and the aggregate value of transactions concluded
is spread amongst approved counterparties. Credit
exposure is controlled by counterparty limits that are
reviewed regularly.

The Company’s exposure to credit risk on its cash
balance is mitigated as these financial assets are held
with major financial institutions with strong credit
ratings.

The aging of the Company’s trade receivables is
disclosed in Note 7. Contracts in transit and warranty
receivables are due from counterparties who maintain
strong credit ratings and the Company has a history of
collecting on these accounts. Trade receivables consist
of amounts due from a large number of customers,
spread across diverse industries and geographic areas.
On-going credit evaluation is performed on the financial
condition of trade receivables.

27.2. Market risk

Market risk is the risk from changes in market prices,
such as changes in foreign currency exchange rates,
interest rates, and the Company’s stock price which
will affect the Company’s earnings or the value of the
financial instruments held.

27.2.1. Foreign currency exchange risk and

sensitivity analysis

Certain of the Company’s financial instruments are
exposed to fluctuations in the U.S. dollar (“USD”). When
considered appropriate, the Company purchases forward
contracts for USD as means of mitigating this risk.

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109

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The following tables detail the Company’s exposure to currency risk at December 31, 2015 and 2014 and a sensitivity
analysis to changes in currency (a 5.0% change in currency was used for obligations that would be retired in 30 days
or less and a 10.0% change in currency for obligations that would be retired within one year). The sensitivity analysis
includes USD denominated monetary items and adjusts their translation at year end for their respective change in the
USD. For the respective weakening of the USD, there would be an equal and opposite impact on the Company’s net
earnings.

CHANGE IN
CURRENCY
RATES
%

DENOMINATED
IN USD
$

EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2015 $

DENOMINATED
IN USD
$

EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2014 $

Cash
Trade payables,
accruals and other
Floor plan payable

5.0

10.0

1,279

(274)

(4,941)

(3,936)

(10)

(361)

(324)

2,284

(481)

(2,911)

(1,108)

(18)

(218)

(150)

Included in selling, general and administrative expenses are losses recognized due to foreign currency translation for
transactions and balances aggregating $650 for the year ended December 31, 2015 (2014 – gains of $169).

27.2.2. Interest rate risk and sensitivity analysis

The Company’s financial liabilities are exposed to fluctuations in interest rates with respect to certain of its long-term
liabilities, line of credit and floor plan payable.

The Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps when appropriate.
Generally, the Company will raise floor plan financing and/or long-term debt at floating rates. When the Company
enters into a floating-to-fixed interest rate swap, it agrees with a third party to exchange the difference between the
fixed and floating contract rates based on agreed notional amounts.

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110

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The following table details the Company’s exposure to interest rate risk as at December 31, 2015 and 2014 and a
sensitivity analysis to an increase of interest rates by 0.5% on net earnings. The sensitivity includes floating rate
financial liabilities and adjusts their effect at period end for a 0.5% increase in interest rates. A decrease of 0.5% would
result in an equal and opposite effect on net earnings. This analysis excludes floating rate financial liabilities for which
the Company has hedged its exposure to interest rate fluctuations though the use of floating-to-fixed interest rate
swaps, as well as interest rate swaps themselves.

CHANGE IN
INTEREST
RATES
%

FLOATING RATE
FINANCIAL
LIABILITIES
$

EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2015 $

FLOATING RATE
FINANCIAL
LIABILITIES
$

EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2014 $

Floor plan payable(1)
Term facility
Acquisition facility
Fleet facility
Other long-term
debt(2)

0.5
0.5
0.5
0.5

0.5

144,618
20,885
-
-

165,579

528
76
-
-

604

205,977
-
7,140
4,957

253

218,327

772
-
27
19

819

(1)2015 includes liabilities associated with assets held for sale.
(2)2014 includes debt associated with assets held for sale.

27.2.3. Equity price risk and sensitivity analysis

The Company’s financial liabilities are exposed to fluctuations in stock price with respect to the total return swaps.
The following table details the Company’s exposure to equity rate risk as at December 31, 2015 and 2014 and a
sensitivity analysis to a decrease of the Company’s stock price by 5% on net earnings. The sensitivity includes the total
return swaps financial liabilities and adjusts the effect at period end for a 5% decrease in the stock price. An increase
of 5% would result in an equal and opposite effect on net earnings.

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111

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

CHANGE IN
STOCK PRICE
%

TOTAL RETURN
SWAP
FINANCIAL
LIABILITY
$

EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2015 $

TOTAL RETURN
SWAP
FINANCIAL
LIABILITY
$

EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2014 $

Total return swaps

(3,606)

(288)

(108)

(103)

27.3. Liquidity risk

The Company’s objective is to have sufficient liquidity to meet its liabilities when due. The Company monitors its cash
balance and cash flows generated from operations as well as available credit facilities to meet its requirements.

The Company has credit facilities with a syndicate of lenders to help finance the general day-to-day cash requirements
of its operations (the “Operating Facility”), to finance its inventory (the “Flooring Facility”), and to finance acquisitions,
and real estate transactions (the “Term Facility”), (collectively the “Syndicated Facility”).

The Syndicated Facility is a revolving facility secured in favour of the syndicate by a general security agreement.
Advances under the Syndicated Facility may be made based on our lender’s prime rate or the US base rate plus
1.0% – 2.5% or based on the banker’s acceptance (“BA”) rate plus 2.0% – 3.5%. The Company pays standby fees of
between 0.4% and 0.7% per annum (2014 – 0.4% and 0.7%) on any undrawn portion of the Syndicated Facility. The
Syndicated Facility matures on September 24, 2018 however, it is the Company’s intention to renew this facility prior
to its maturity date.

The facilities included in the Syndicated Facility have the following limits:

Operating Facility
Term Facility
Flooring Facility
Acquisition Facility
Fleet Facility
Debenture Repayment Facility
Real Estate Facility

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

70,000
75,000
125,000
-
-
-
-

30,000
-
125,000
30,000
10,000
26,250
15,000

In addition to the Flooring Facility, the Company has additional floor plan facilities of approximately $467,000 as at
December 31, 2015 (2014 – $412,000).

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112

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The Company assesses its liquidity based on the expected period in which cash flows will occur. The following tables
summarize the Company’s undiscounted cash flows expected for its financial liabilities as at December 31. The
analysis is based on foreign exchange rates and interest rates in effect at the consolidated balance sheet date, and
includes both principal and interest cash flows.

AS AT
DECEMBER 31, 2015

INTEREST AND
PRINCIPAL
OUTSTANDING
$

2016
$

2017-2018
$

2019-2020
$

Trade payables,
accruals and other(1)
Floor plan payable(2)
Long-term debt
Obligations under
finance leases
Derivative financial
instruments

33,466
370,861
49,869

33,466
370,861
6,145

237

9,589

464,022

4,051

414,600

-
-
14,784

146

4,320

19,250

-
-
14,031

1,218

15,263

AS AT
DECEMBER 31, 2014

INTEREST AND
PRINCIPAL
OUTSTANDING
$

2015
$

2016-2017
$

2018-2019
$

Trade payables,
accruals and other(1)
Floor plan payable
Long-term debt(2)
Obligations under
finance leases
Derivative financial
instruments

33,711
395,375
46,408

33,711
395,375
12,074

501

492

3,592

479,587

1,150

442,802

-
-
32,427

1,453

33,889

-
-
1,893

799

2,692

(1)Trade payables, accruals and other excludes DSUs and SARs which are not financial instruments.
(2)Includes liabilities associated with assets held for sale.

THERE-
AFTER
$

-
-
14,909

14,909

THERE-
AFTER
$

-
-
14

190

204

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113

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The Term Facility included in long-term debt is governed
by a syndicate credit agreement which, if not renewed,
will mature on September 24, 2018. It is management’s
intention to renew this credit agreement before its
maturity date. The tables presented above assumes
the agreement is renewed prior to maturity. In the
event that the Syndicated Facility is not renewed prior
to its maturity, the cash outflow for the long-term debt
outstanding as at December 31, 2015 would be $41,908
in 2017-2018 and $Nil in subsequent periods (2014 –
$34,040 for 2016-2017 and $Nil in subsequent periods).

The Company’s Level 2 financial instruments
consist of derivative financial liabilities in the form
of interest rate swaps and total return swaps, which
had a fair value of $8,899 at December 31, 2015
(2014 – $3,282).

■

Level 3 financial instruments are those derived
from valuation techniques that include inputs for
the financial asset or liability which are not based
on observable market data (unobservable inputs).
The Company has no Level 3 financial instruments.

27.4. Fair value of financial instruments carried

at amortized cost

There were no transfers between Level 1 and 2 during
the year 2015 and 2014.

The carrying amounts of cash, trade receivables and
other, bank indebtedness and trade payables, accruals
and other (excluding DSUs and SARs) approximate
their fair values because of the short-term maturities
of these items. The carrying amounts of floor plan
payable, long-term debt and obligations under finance
leases approximate their fair values as the interest
rates are consistent with market rates for similar debt.
Substantially all short- and long-term interest expense
pertains to financial liabilities that are not at FVTPL.

27.5. Fair value measurements recognized in the

consolidated balance sheet

The financial instruments of the Company are measured
subsequent to initial recognition at fair value and are
grouped into categories accordingly:

■

Level 1 financial instruments are those which can
be derived from quoted market prices (unadjusted)
in active markets for similar financial assets or
liabilities. The Company does not have any Level 1
financial instruments.

Level 2 financial instruments are those whose
fair value can be derived from inputs that are
observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from price.

27.6. Derivative financial instruments and hedges

The Company has long and short-term debt raised at
floating interest rates and hedges a portion of this risk
by using floating-to-fixed interest rate swaps. Under the
interest rate swaps, the Company hedges interest rate
risk by exchanging, at monthly intervals, the difference
between fixed contract rates and floating-rate interest
amounts calculated by reference to the agreed
notional amounts. The Company has five separate
interest rate swaps related to portions of its term and
Flooring Facilities (collectively, the “Hedged Facility”).
Interest rate swaps outstanding at December 31, 2015
mature between May 2016 and September 2020 (2014
– between May 2016 and September 2020). During 2014,
two of the interest rate swaps on the Term Facility were
no longer effective and as such, hedge accounting was
discontinued. The accumulated amounts recognized
within accumulated other comprehensive loss will be
reversed into net earnings over the remainder of the
term of the derivatives. Future charges in fair value will
be recognized within net earnings in the period in which
they arise.

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114

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The combined notional principal amounts of interest rate swaps outstanding at December 31, 2015 was $134,115
(2014 – $90,892). At December 31, 2015, the effective fixed interest rate on the underlying debt was 4.8% (2014 – 4.5%)
and the effective floating rate using the Bankers’ Acceptance rate was 3.5% (2014 – 3.3%).

The Company has several total return swaps to hedge the exposure associated with increases in its share value on its
outstanding Director Share Units (DSUs) and Share Appreciation Rights (SARs). The Company does not apply hedge
accounting to this relationship and as such, gains and losses arising from marking these derivatives to market are
recognized in earnings in the period in which they arise.

As at December 31, 2015, the Company’s total return swaps cover 1,270,000 of the Company’s underlying common
shares (2014 – 290,500), which represents all of its DSUs, and all of its SARs. For the year ended, December 31, 2015,
the Company recognized a loss of $3,498 (2014 – loss of $108) in general and administrative expenses.

Derivative financial instruments recognized as liabilities are as follows:

Derivative financial liabilities

Current portion – total return swap
Current portion – interest rate swap
Long-term portion – total return swap
Long-term portion – interest rate swap

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

2,130
1,910
1,476
3,383

8,899

-
-
108
3,174

3,282

Losses on derivative financial instruments recognized as liabilities are as follows:

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

Opening derivative financial instruments
Loss recognized in net earnings
Loss recognized in accumulated other comprehensive loss –
net of tax
Tax on loss recognized in accumulated other comprehensive loss

Ending derivative financial instruments

3,282
3,548

1,525

544

8,899

1,706
68

1,122

386

3,282

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115

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The Company monitors debt to equity capitalization.
This ratio is a non-IFRS measure which does not have a
standardized meaning prescribed by IFRS and therefore
may not be comparable to similar measures presented
by other issuers.

The Company calculates debt to equity capitalization
including and excluding floor plan payable. Debt to
equity capitalization (excluding floor plan payable) is
calculated as total long-term debt including obligations
under finance leases, (both current and long-term
portions), divided by total equity, (common shares,
contributed surplus, accumulated other comprehensive
loss and retained earnings). Debt to equity
capitalization (including floor plan payable) includes
the balance of floor plan payable in the calculation of
the numerator.

These accumulated losses will be continuously released
to the consolidated statement of net earnings within
interest on short-term and long-term debt until full
repayment of the underlying debt.

During the years presented and cumulatively to
date, changes in counterparty credit risk have not
significantly contributed to the overall changes in the
fair value of these derivative financial instruments.

28. MANAGEMENT OF CAPITAL

The Company’s objectives when managing capital are:

(a) To maintain a flexible capital structure
which optimizes the cost of capital at
acceptable risk; and

(b) To maintain capital in a manner which
balances the interests of equity and
debt holders.

In the management of capital, the Company includes
shareholders’ equity, long-term debt and obligations
under finance leases (including current portions
thereof), and floor plan payable.

The Company manages its capital structure and makes
adjustments due to changes in economic conditions
and the risk characteristics of the underlying assets.
In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to
shareholders, purchase shares for cancellation pursuant
to normal course issuer bids, issue new shares, issue
new debt, and/or issue new debt to replace existing
debt with different characteristics.

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116

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The debt to equity ratio target excluding floor plan payable is between 0.2 and 0.4 to 1. The debt to equity ratio target
for the Company including floor plan payable is debt between 2.0 and 3.0 to 1.0. The Company lowered its range in
2015 as the focus has shifted to paying down the Company’s debt. As at December 31, 2015 and 2014, the Company
was within its target range for these ratios. The components of debt to equity ratios are as follows:

Current portion of long-term debt(1)
Current portion of obligations under finance leases
Long-term debt
Obligations under finance leases

Total debt excluding floor plan payable
Floor plan payable(2)

Total debt including floor plan payable

Shareholders’ equity

Debt equity ratios
- excluding floor plan payable

- including floor plan payable

(1)2014 Includes liabilities associated with assets held for sale.
(2)2015 Includes liabilities associated with assets held for sale.

DECEMBER 31, 2015
$

DECEMBER 31, 2014
$

4,852
71
40,080
154

45,157
358,130

403,287

169,758

0.27

2.38

10,813
453
32,776
9

44,051
382,081

426,132

168,407

0.26

2.53

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117

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

Pursuant to agreements with lenders, the Company is also required to monitor and report certain non-IFRS measures
on a quarterly basis. These measures and the applicable compliance ranges are as follows:

Fixed charge coverage of at least
Debt to tangible net worth less than
Current ratio of at least

DECEMBER 31, 2015

DECEMBER 31, 2014

1.20-1.50:1
4.00-5.00:1
1.15-1.20:1

1.25-1.50:1
4.00-5.00:1
1.15-1.20:1

Each lender has its own definition of which account balances are to be included in these computations. As at
December 31, 2015 and 2014, the Company was in compliance with all externally imposed capital requirements.

29. SEGMENTED REPORTING

The Company has two reportable operating segments, the agriculture segment and the industrial segment, which
are both supported by the corporate office. The business segments are strategic business units that offer different
products and services and are managed separately. The corporate office provides finance, treasury, human resources,
legal and other administrative support to the business segments. Corporate expenditures are allocated and absorbed
in each individual segment on the basis of the distribution of assets deployed in the segment.

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

The agriculture segment primarily includes sales of agricultural equipment, parts and services and the industrial
segment includes sales of industrial equipment, parts and services. The Company’s branches have been aggregated
based on the primary industry which they serve. In the case where certain branches serve both industries, the
primary industry served is agriculture and therefore, these facilities have been categorized as such. As a result, certain
industrial related results are included in the agriculture segment for the purposes of segmented financial reporting
shown below.

The accounting policies of the reportable operating segments are the same as those described in Note 3 – Summary of
significant accounting policies.

Segmented Assets:

2015

2014

AGRICULTURE
$

INDUSTRIAL
$

TOTAL
$

AGRICULTURE
$

INDUSTRIAL
$

TOTAL
$

Inventory
Intangible assets
Goodwill
Other assets

Total assets

451,088
671
18,802
88,732

559,293

48,672
-
-
17,347

66,019

499,760
671
18,802
106,079

480,320
-
14,692
83,525

625,312

578,537

45,683
-
-
19,596

65,279

526,003
-
14,692
103,121

643,816

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CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014
Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts

Segmented Statement of Net Earnings:

2015

2014

AGRICULTURE
$

INDUSTRIAL
$

TOTAL
$

AGRICULTURE
$

INDUSTRIAL
$

TOTAL
$

Sales

New equipment
Used equipment
Parts
Service
Other

Cost of Sales

Gross profit

Selling, general
and administrative
Interest on
short-term debt
Interest on
long-term debt

Earnings (loss)
before income taxes

Income taxes(1)

Net earnings (loss)

423,107
372,954
94,558
31,090
4,008

925,717
794,719

130,998

26,890
4,528
12,951
4,775
595

49,739
38,756

10,983

449,997
377,482
107,509
35,865
4,603

975,456
833,475

141,981

473,715
300,277
87,387
29,478
2,731

893,588
761,158

132,430

48,032
3,259
14,235
5,586
707

71,819
58,627

13,192

521,747
303,536
101,622
35,064
3,438

965,407
819,785

145,622

98,198

13,578

111,776

91,837

13,919

105,756

11,764

1,836

19,200

5,119

14,081

983

224

(3,802)

(1,014)

(2,788)

12,747

10,346

1,137

11,483

2,060

1,963

219

2,182

15,398

4,105

11,293

28,284

7,854

20,430

(2,083)

(578)

(1,505)

26,201

7,276

18,925

(1)For purpose of presentation, income taxes have been allocated to each segment using the consolidated tax rate (2015 – 26.7%, 2014 - 27.8%).

30. ECONOMIC DEPENDENCE

The Company is a retail dealer of CNH Industrial N.V. (“CNH”) equipment, and is therefore party to dealership and
distribution contracts with various affiliates of CNH. These contracts give the Company the right to be an authorized
dealer of the CNH equipment brands of Case IH Agriculture, Case Construction and New Holland. This also entitles the
Company to use certain floor plan facilities as provided by certain CNH-affiliated entities. These dealership contracts,
as well as the associated floor plan facilities, can be cancelled by CNH if the Company does not observe certain
established guidelines and covenants. This is a common practice in the industry in which the Company does business.

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WE STRIVE
TO BE THE SAFE,
DEPENDABLE
EQUIPMENT
PARTNER OF
CHOICE TO OUR
CUSTOMERS.

CORPORATE INFORMATION

CORPORATE INFORMATION(1)

OFFICERS

GARRETT A.W. GANDEN
President and Chief Executive Officer

DAVID J. ASCOTT
Chief Financial Officer

JERALD D. PALMER JR.
General Counsel & Corporate Secretary

Auditor

PricewaterhouseCoopers LLP
Calgary, Alberta

External Legal Counsel

Dentons Canada LLP
Calgary, Alberta

Banker

Canadian Imperial Bank of Commerce
HSBC Bank Canada

Stock Exchange Listing

Toronto Stock Exchange
Symbol: RME (RCKXF on the OTCQX)

Transfer Agent

Computershare Trust Company of Canada
Calgary, Alberta

DIRECTORS

MATTHEW C. CAMPBELL(2)
Calgary, Alberta

DEREK I. STIMSON(3)
Calgary, Alberta

PAUL S. WALTERS(4)
Toronto, Ontario

DENNIS J. HOFFMAN
Calgary, Alberta

ROBERT K. MACKAY
Vancouver, British Columbia

SCOTT A. TANNAS
High River, Alberta

CAMERON W. CRAWFORD
De Winton, Alberta

WILLIAM DeJONG
Calgary, Alberta

GARRETT A.W. GANDEN
Calgary, Alberta

(1)Information provided as at April 1, 2016.
(2)Board Chair.
(3)Board Vice-Chair.
(4)Lead Independent Director.

HEAD OFFICE

#301, 3345 8th Street S.E.
Calgary, Alberta T2G 3A4

Tel: (403) 265-7364
Fax: (403) 214-5644
www.rockymtn.com

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ROCKY MOUNTAIN DEALERSHIPS INC. ANNUAL REPORT 2015Layout and Design | Kristin Knudson, B.Des.; RME MarketingPhotography | Neil Speers