R E S I L I E N T. I N N O V AT I V E .
FUTURE
FOCUSED.
2 0 2 0 A N N U A L R E P O R T
S N C - L A V A L I N | 2 0 2 0 A N N U A L R E P O R T
S N C - L A V A L I N | 2 0 2 0 A N N U A L R E P O R T
“WITH OUR BUSINESS
MATERIALLY SIMPLIFIED
AND FOCUSED ON OUR
CORE MARKETS, WE
ARE NOW POISED TO
ACCELERATE THE
GROWTH POTENTIAL OF
ENGINEERING SERVICES.”
Ian L. Edwards
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
F I N A N C I A L H I G H L I G H T S
P R E S I D E N T ’ S M E S S A G E
L E A D E R S H I P T E A M
2 0 2 0 H I G H L I G H T S
C H A I R M A N ’ S M E S S A G E
2 0 2 0 F I N A N C I A L R E P O R T
I
I I I
V I I
I X
X I I I
I
I I
FINANCIAL
HIGHLIGHTS
2 0 2 0 R E V E N U E S B Y G E O G R A P H I C A R E A
51%
33%
11%
5%
AMERICAS
EUROPE
MIDDLE EAST
& AFRICA
ASIA PACIFIC
2 0 2 0 R E V E N U E S B Y I N D U S T R Y S E G M E N T
S N C L E N G I N E E R I N G S E R V I C E S A N D C A P I TA L
S N C L E N G I N E E R I N G
S E R V I C E S
S N C L P R O J E C T S
C A P I TA L
19%
INFRASTRUCTURE SERVICES
13%
NUCLEAR
11%
INFRASTRUCTURE EPC
PROJECTS
2%
RESOURCES
2%
CAPITAL
53%
ENGINEERING, DESIGN AND
PROJECT MANAGEMENT (EDPM)
REVENUES (B$)
BACKLOG (B$)
2020
2019
2018
6.1
6.3
5.8
2020
2019
2018
11.0
11.3
10.4
S N C L P R O J E C T S
REVENUES (B$)
BACKLOG (B$)
2020
2019
2018
0.9
1.3
2020
2019
2018
1.8
2.2
2.8
3.0
C O N S O L I D AT E D
REVENUES (B$)
BACKLOG (B$)
2020
2019
2018
7.0
2020
7.6
7.6
2019
2018
13.2
14.1
13.4
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT I I I
I V
In a year like no other in recent memory,
SNC-Lavalin has demonstrated that
the foundations of our company, which
go back over a century, are strong and
resilient. We have weathered challenges,
and we have come back stronger.
During the year, through
Engineering Services, we leveraged
our public sector expertise and
the growing adoption of digital
innovation in infrastructure design,
to deepen its penetration into our
core markets of Canada, the U.K.
and the U.S., winning new, and in
some cases, ground breaking work.
This has never been truer than
over the past year. Through the
global pandemic, we took care of
our people and quickly adapted
to the new work environment.
And despite the uncertainty, we
successfully continued to de-risk
the business, maintained a strong
balance sheet and generated
net cash from operations for
the first time since 2017.
We are now ready to accelerate our
growth trajectory at a time when
the world is looking for innovative
and creative engineering solutions
to support economic recovery and
build back better with sustainable
infrastructure. I am extremely
proud of what we have achieved
together and excited about
reaching our goal of becoming a
leading global project service and
project management company.
E X E C U T I N G O N A N E W
S T R AT E G Y I N T H E M I D S T
O F A G L O B A L C R I S I S
SNC-Lavalin was a few months
into a transformative shift in
its business strategy when
the first impacts of COVID-19
began to reverberate around
the world in early 2020.
We quickly mobilized, transitioning
the vast majority of our
office-based staff to remote work,
while collaborating closely with
local governments to institute
health and safety protocols to
protect our essential workers
on job sites around the world.
And we took a hard look at how
we could further protect the
business in the wake of uncertainty,
reducing compensation for all
employees for a quarter as well
as the Board, all but eliminating
discretionary spending, and
freezing capital expenditures.
In the U.K, for example,
SNC-Lavalin was chosen to lead
the digital transformation of the
East Coast Main Line railway and
will participate in an ambitious
£47-billion nation-wide social
housing program, leveraging the
latest in off-site manufacturing
to build low-cost, net zero carbon
housing quickly and at scale.
These quick and decisive
measures in the face of
uncertainty allowed us to
mitigate the worst impacts of
the pandemic on the business
enabling us to continue operations
and maintain client service.
At the same time, we remained
focused on executing on the new
strategy we had laid out in 2019 to
de-risk the business and generate
consistent earnings and cash
flow. This consisted, on the one
hand, of exiting the Lump-Sum-
Turnkey (LSTK) contracting
model, running off our existing
LSTK backlog and restructuring
the Resources business, while
optimizing the performance of the
high-value, future-focus of the
company, Engineering Services.
Engineering Services, which
includes EDPM, Nuclear and
Infrastructure Services, remained
resilient through 2020 across our
core markets, benefitting from
a diversified business model,
long-term client relationships and
a strong public sector focus.
In the U.S., we won new mandates
with the departments of
transportation in several southern
U.S. states and together with our
joint venture partners, secured
a 10-year, $10-billion nuclear
decommissioning contract with
the Department of Energy.
In Canada, our wholly-owned
subsidiary, Candu Energy Inc., was
awarded two additional five-year
vendor of record (VOR) agreements
by Ontario Power Generation (OPG)
to provide niche engineering and
nuclear engineering services.
The Engineering Services
business line ended the year
strongly, with approximately
$11-billion in backlog, including
a 9 per cent increase from
EDPM, compared to the
end of 2019, and a robust
$27-billion prospect pipeline.
We also made significant strides
in continuing to de-risk the
business. We successfully wound
down approximately $1-billion
in LSTK backlog over the course
And despite the uncertainty, we
successfully continued to de-risk
the business, maintained a strong
balance sheet and generated
net cash from operations for
the first time since 2017.
of 2020, which largely consisted
of advancing work on the three
remaining Canadian light rail
projects. We remained keenly
focused on realizing value from
Resources, first closing Valerus in
March, followed by the announced
sale of our South African
Resources business in July, and
the divestment of our European
fertilizer business in September.
This work culminated in the
early part of 2021, with the
announcement of a binding
agreement to sell the Oil & Gas
business to Kentech Corporate
Holdings, who will assume delivery
of all ongoing services as well
as responsibility for recently
completed projects and warranty
obligations. The result is the
almost complete divestiture of
Resources, which is a tremendous
milestone in delivering on our
strategy. Going forward, the
Company is retaining the Mining
& Metallurgy Services business
where it has a long history.
PRESIDENT’S
MESSAGE
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT V
V I
The year was not without its
challenges, however. The ongoing
impacts of the pandemic meant
that productivity on our three
remaining Canadian light rail
transit (LRT) projects continued
to be affected. We made the
decision not to recognize
any revenue associated with
additional COVID-related costs
on a go-forward basis until
there is greater clarity with
respect to reimbursements,
which the Company strongly
believes it is entitled to.
We also undertook a
comprehensive review of all
outstanding litigation matters
and claims receivables in order
to provide the most fulsome
assessment of outstanding risk
to the Company. This was an
intensive but necessary effort
that resulted in provisions that,
while largely non-cash in nature,
affected our financial results.
In 2020, SNC-Lavalin generated
approximately $120-million in net
cash from operations for the year,
a notable improvement compared
to the use of cash from operations
in the three preceding years.
This marks an important milestone
in our operational performance,
however the Company did
report negative net income.
and the new opportunities that
continue to evolve, from mobile
health units to carbon net zero
infrastructure and social housing.
We nonetheless finished 2020
in a strong financial position
with just over $930-million
in cash and cash equivalents
on the balance sheet.
A C C E L E R AT I N G
O U R F U T U R E
At the time of writing, the world
continues to navigate between
uncertainty and new beginnings.
New variants of the coronavirus
have ushered in another wave of
lockdowns while vaccine rollouts
are gaining momentum. The U.S.,
the U.K. and Canada, as well as
other countries around the world,
are looking to new infrastructure
investment to tackle multiple
challenges, from structural
inequality to climate change and
economic recovery. As engineers,
we are purpose-built to help
design, assess, test, procure and
manage the unexpected needs
As a company, SNC-Lavalin has
never been better positioned to
meet the needs of a post-pandemic
world. With our business materially
simplified and focused on our core
markets, we are now poised to
accelerate the growth potential of
Engineering Services by providing
engineering net zero solutions,
leveraging data and modular
manufacturing technologies
to enhance productivity and
lower carbon footprints, and
collaborating with partners
and clients to establish new
liability-capped contracting
models for major projects.
In February 2021, we were awarded
the first such contract for the
second phase of the U.K.’s East
West Rail link, and many other
countries, including Canada,
Australia and parts of the U.S. are
also adopting this collaborative
approach, which caps liabilities
amongst joint venture partners,
allowing both the client and
In closing, I would like to thank
the Board of Directors for its
ongoing support and guidance
during these challenging times. As
well as to our employees around
the world, none of this would be
possible without your ingenuity
and sustained dedication. We have
arrived at this important milestone
thanks to your extraordinary
efforts during an unprecedented
time. I am proud to be moving
forward together with you.
Sincerely,
Ian L. Edwards
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
suppliers like SNC-Lavalin to
focus on successful outcomes.
We see this as an exciting
opportunity that we will replicate.
As we look towards the future,
we do so without hindrance of the
legacy issues of the past. In April
2021, the World Bank granted
an early lifting of all sanctions
previously imposed in 2013 for
a period of 10 years. With this
decision, we have put the past
behind us and will no longer
let yesterday’s events define
who we are today and what we
intend to achieve tomorrow.
Over the course of 2020 we
reflected on our social purpose
as a company and in May 2021
unveiled Environment, Social and
Governance (ESG) targets. To start,
we have committed to achieving
carbon net zero by 2030, based on
the reduction of carbon usage in
energy consumption, transportation
and the consumption of raw
materials. We also committed to
increasing female representation
among our executives, managers,
and senior professionals to 25% by
2025, and to 33% for all regular
staff. Our ESG targets, which
also include commitments to
reduce environmental pollution,
protect and increase biodiversity
and protect human rights, are
dynamic and will continue to
evolve and deepen over time.
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT V I I
LEADERSHIP
TEAM
FROM LEFT TO RIGHT
Dale Clarke
President, Infrastructure
Services
James Cullens
Executive Vice-President,
Human Resources
Stéphanie Vaillancourt
Executive Vice-President,
Capital and Treasurer
Robert (Bob) E. Alger
President, Infrastructure
Projects
V I I I
Philip Hoare
President, Atkins,
Engineering,
Design & Project
Management
Steve Morriss
President, Asia Pacific
and Middle East
Ian L. Edwards
President and Chief
Executive Officer
Charlene Ripley
Executive Vice-President
and General Counsel
Nigel W.M. White
Executive Vice-President,
Project Oversight
Alexander (Sandy) Taylor
President, Nuclear
Erik J. Ryan
Executive Vice-President,
Strategy, Marketing and
External Relations
Jeff Bell
Executive Vice-President
and Chief Financial
Officer
Louis G. Véronneau
Executive Vice-President
and Chief Transformation
Officer
B O A R D A P P O I N T M E N T S
William (Bill) L. Young
Chair of the Board
Mary-Ann Bell
Member of the Audit
Committee; Member
of the Governance and
Ethics Committee
Christie J.B. Clark
Member of the
Audit Committee;
Member of the Human
Resources Committee
Gary C. Baughman
Member of the Safety,
Workplace and Project
Risk Committee;
Member of the Human
Resources Committee
Michael B. Pedersen
Member of the Human
Resources Committee;
Member of the Safety,
Workplace and Project
Risk Committee
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT I X
X
2020
HIGHLIGHTS
P R O J E C T W I N S
Contracted through a joint
venture company to deliver
up to ten, 100-bed Mobile
Health Units to support the
Government of Canada’s
health preparedness efforts
Reselected by the Georgia
Department of Transportation
(GDOT) to continue providing
construction engineering and
inspection (CEI) services for
District 6, which encompasses
17 counties in northwest Georgia
Engaged through a joint
venture to perform nationwide
decontamination and
decommissioning activities of
federal nuclear assets for the U.S.
Department of Energy (DOE)
Closed deal to continue
providing project management
services to Sound Transit’s
Federal Way Link Extension
project in the Seattle-area
Won design consultancy role for
the extension of the Tung Chung
Line in Hong Kong which involves
a 1.3km underground extension
to a new terminus station in Tung
Chung West and an additional
above ground station at Tung
Chung East on Lantau Island
Appointed by Network Rail
to deliver an intercity digital
railway transformation program
in the United Kingdom
Secured nuclear contracts
in Romania for Cernovoda
Unit 1 with the objective of
extending the operating life
of the plant by four years
Selected by Ontario Power
Generation (OPG) to carry
out Phase 2 of the Calabogie
Generating Station Redevelopment
alongside our partner
Signed four contracts with
the Korea Hydro & Nuclear
Power (KHNP) to inspect fuel
channels and perform pressure
tube sampling campaigns
for its Wolsong Units
Entered into contracts with Bruce
Power in support of the Life
Extension program which will see
the continued safe operations
of the site’s CANDU units
Awarded lead design contract
for Six Flags Qiddiya theme
park in Saudi Arabia
K E Y M I L E S T O N E S
Entered into a binding agreement
to sell the Oil & Gas business,
a significant step forward in the
Company’s strategy to reduce
its risk profile and accelerate its
ongoing transition to becoming a
leading provider of professional
engineering services and project
management solutions
Readied the Réseau express
métropolitain (REM) for first
test runs on a stretch of track on
Montreal’s South Shore region
Published the Engineering
Net Zero technical report that
outlines the United Kingdom’s
engineering risks, challenges
and opportunities as it targets
carbon neutrality by 2050
Developed the collaborative
Accelerating Shovel-Ready
Infrastructure framework to
responsibly expedite infrastructure
investments and mitigate risk
Responded to Canada’s mission to
net zero emissions by publishing
the Engineering Net Zero (Canada)
blueprint report that supports jobs,
growth and a modern economy
powered by clean energy
Unveiled EDAROTH’s first
completed social housing
development which provides
families with high quality,
affordable accommodation
in the United Kingdom
Celebrated our inaugural Equality,
Diversity & Inclusion month
with events and activities that
emphasized the importance
of embracing individuals’
uniqueness and engaging in
conversations about inclusivity
Strengthened our corporate social
responsibility (CSR) initiatives
by renewing our commitments
to partners, encouraging
volunteerism, and donating over
$1 million to charities and
non-profits and the equivalent
to over $1 million in KN95
masks to the provinces of
Quebec and Ontario
Launched an industry report
“New alliances: collaborative
contracting in the GCC projects
market” that provides a strategic
framework to enhancing project
delivery and efficiency in the
Gulf Cooperation Council (GCC)
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT X I
X I I
2020
HIGHLIGHTS
I N T E G R I T Y
The World Bank granted an
early lifting of sanctions
previously imposed in 2013
for a period of 10 years
Awarded Compliance Leader
Verification for 2021-2022 from
the Ethisphere Institute for a
second consecutive year
Refreshed our Supplier Code
of Conduct to reflect changes
in standards as well as in best
practices and to maintain
ethical excellence across the
business and our supply chain
Received an assessment from the
independent monitor following
a second report on our global
Integrity Program. The monitor
is tasked with reporting on our
Integrity Program through the
duration of a three-year probation
order and was appointed as
part of the settlement of the
Canadian federal charges arising
from legacy activities in Libya
between 2001 and 2011
H E A LT H , S A F E T Y
& E N V I R O N M E N T
( H S E )
Recorded a total of 186 Perfect
Days without an injury, security
incident or environmental
release – 76 over target and 81
more than the previous year
Launched employee well-being
and work-life-balance initiatives,
focusing on supporting a healthy
workplace and a stigma-free
environment, while helping
to alleviate pressures during
a challenging period
Unveiled tailored Pandemic
Management Plans for offices,
project sites and facilities in
all regions where the Company
operates. The planning and
preparedness continues to
support a well managed response
to the global pandemic
Created a Return to the Workplace
framework that ensures a safe and
orderly return to offices where
permitted by local legislation
R E C O G N I T I O N
Honoured with the prestigious
Schreyer Award and Award of
Excellence at the annual Canadian
Consulting Engineering Awards
for the work on the Samuel De
Champlain Bridge project
Received the HKIE (Hong
Kong Institution of Engineers)
Innovation Award 2020 Grand
Prize (Category II) for the 15-cell
caterpillar cofferdam for large
scale excavation works in difficult
geology for the Tuen Mun-Chek
Lap Kok Link (TM-CLKL) project.
This cofferdam is the world’s first
15-cell cofferdam for large scale
excavation works on reclaimed land
Accredited as a Great Place
to Work by the Great Place to
Work® Institute in India and
recognized with the coveted
‘Employer-of-Choice’ in the
engineering and design sector
Ranked among the top ten of
267 peers in Sustainalytics’
Environmental, Social and
Governance (ESG) rankings
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT X I I I
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CHAIRMAN’S
MESSAGE
My tenure as Chair of the Board of Directors
of SNC-Lavalin began in the Fall of 2020. It is
an honour to lead the Board of such an iconic
Quebec-based Canadian company at a critical
juncture in its journey; and to serve during
an unprecedented and challenging time.
The global community finds
itself amid a pandemic the
likes of which has not been
seen in over a century. While
the staggering human loss,
economic fallout and devastation
caused by COVID-19 will likely
be felt for many years to come,
individuals, business communities,
and all levels of government,
mobilized a response that was
immediate and unparalleled.
The SNC-Lavalin management
team was no exception in
this regard. When faced with
uncharted territory brought on
by unprecedented COVID-19
challenges, its response was
exemplary. The team took
swift action in the early days
of the pandemic, implementing
measures that facilitated the
move from office to home in a
seamless manner, and prioritized
the health and wellbeing of
employees around the world.
To ensure the organization was
well positioned financially to
see through the pandemic, the
Directors and the Executive
Leadership took quick action, ahead
of the second quarter of 2020.
These measures, which included
foregoing compensation by team
members across the organization,
stringent cash controls, and
The Board is committed to
advancing the broader ESG
agenda which includes ED&I,
Integrity and carbon targets
and views it as a strategic
priority for the organization.
SNC-Lavalin’s business plan is
aligned with ESG criteria and a suite
of metrics will be discussed at the
Annual Meeting of Shareholders.
I want to conclude by expressing
my appreciation for the steadfast
counsel provided by the Board
during this unprecedented year
and for the leadership of our
CEO, Ian L. Edwards, and the
entire management team. To
all SNC-Lavalin employees,
particularly to those on the
front-lines on essential projects
around the world, thank you for
your perseverance, resilience and
dedication; and to the employees
and their families who have
experienced the direct impact of
the virus, know that the entire
SNC-Lavalin family stands with you.
Bill Young
CHAIR OF THE BOARD
B O A R D R E N E WA L
2020 continued to be a year of
ongoing renewal for the Board as
we welcomed four new members:
Ms. Mary-Ann Bell, Mr. Gary C.
Baughman, Mr. Christie J.B. Clark,
and Mr. Michael B. Pedersen. These
individuals bring relevant skills
and competencies and a wealth
of experience. Their counsel, and
that of the five other exceptional
individuals who make up our current
Board, is critical in supporting
the Company’s strategic focus
on growing engineering services
and long-term sustainability.
On behalf of the Board of Directors
and SNC-Lavalin management,
I would also like to take this
opportunity to thank outgoing
Director Mr. Jean Raby, who will
not stand for re-election, and my
predecessor, Mr. Kevin Lynch,
for their tireless commitment,
invaluable contributions and
years of service to the Board.
T U R N I N G O U R F O C U S O N
E N V I R O N M E N TA L , S O C I A L ,
A N D G O V E R N A N C E ( E S G)
F O R T H E F U T U R E
As part of this renewal, and to
remain aligned with SNC-Lavalin’s
evolving Equality, Diversity and
Inclusion (ED&I) program, we are
mindful of the diversity of the Board
and strive for greater inclusivity
and representation. We continue
to move the needle in this regard
and are proud that following
this year’s Annual Meeting of
Shareholders, 30% of our corporate
Directors will be women.
reviews of spending, helped to
preserve SNC-Lavalin’s ability
to continue for its clients around
the world during a time of crisis.
P I V O TA L P R O G R E S S O N
S T R AT E G I C D I R E C T I O N
Since announcing the new strategy
in 2019, the Executive Leadership,
with advice and oversight from
the Board, has made significant
strides in advancing SNC-Lavalin’s
strategic direction. Most recently,
the Company executed a critical
element of the strategy with the
divestiture of the Resources Oil
& Gas business, announced in
February 2021. This important
milestone not only reduces the
Company’s risk profile, but also
accelerates its transition to
becoming a leading provider of
professional engineering services
and project management solutions.
The Company is on an unremitting
path to de-risk the business.
I want to commend the work
of management, and external
advisors, in assessing and
reducing the Company’s risk
areas, especially in relation to
the wind-down of the remaining
Lump-Sum-Turnkey contracts. To
this end, the Company announced
in February the conclusion of the
review into all significant litigation
matters, and commercial claims
receivable. The goal of the review
was to give a clear and current
picture of the identifiable risks
and with this work now complete,
and with necessary financial
adjustments made, the Company
can focus squarely on the future
and growing the high potential
Engineering Services business. This
is a core area that we are confident
will unlock and ultimately create
long-term shareholder value.
SNC-LAVALIN | 2020 ANNUAL REPORTSNC-LAVALIN | 2020 ANNUAL REPORT T
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FINANCIAL REPORT
Table of contents
Management’s Responsability for Financial Reporting 1
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
2020 Management’s Discussion and Analysis
Glossary
Ten-year statistical summary
Information for shareholders
2
6
11
103
189
191
193
Management’s Responsibility for Financial Reporting
The accompanying audited consolidated financial statements (“financial statements”) of SNC-Lavalin Group Inc. (the
“Company”) and all the information in this financial report are the responsibility of management and are approved by the Board
of Directors.
The financial statements have been prepared by management in accordance with International Financial Reporting Standards.
When alternative accounting methods exist, management has chosen those it considers most appropriate in the circumstances.
The significant accounting policies used are described in Note 2 to the financial statements. Certain amounts in the financial
statements are based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to
ensure that the financial statements are presented fairly, in all material respects. Management has prepared the financial
information presented elsewhere in the financial report and has ensured that it is consistent with that in the financial statements.
The Company’s Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) are responsible for having
established and maintaining disclosure controls and procedures and internal controls over financial reporting. The CEO and the
CFO have supervised an evaluation of the effectiveness of the Company’s internal control over financial reporting, as at
December 31, 2020, in accordance with the criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, the CEO and the CFO
have concluded that the Company’s internal control over financial reporting, as at December 31, 2020, was effective to provide
reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of its financial
statements for external purposes in accordance with International Financial Reporting Standards.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is
ultimately responsible for reviewing and approving the financial statements. The Board of Directors carries out this
responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of Directors, and all of its members are independent directors. The Audit
Committee meets periodically with management, as well as with the internal and independent auditors, to discuss disclosure
controls and procedures, internal control over financial reporting, management information systems, accounting policies,
auditing and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities, and to review
the financial statements, the Management’s Discussion and Analysis and the independent auditor’s report. The Audit Committee
reports its findings to the Board of Directors for consideration when approving the financial statements for issuance to the
shareholders. The Audit Committee also considers, for review by the Board of Directors and approval by the shareholders, the
engagement or reappointment of the independent auditor, and reviews and approves the terms of its engagement as well as the
fee, scope and timing of its services.
The financial statements have been audited, on behalf of the shareholders, by Deloitte LLP, the independent auditor, in
accordance with Canadian generally accepted auditing standards. The independent auditor has full and free access to the Audit
Committee and may meet with or without the presence of management.
IAN L. EDWARDS (signed)
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
MARCH 8, 2021
MONTREAL, CANADA
JEFF BELL (signed)
EXECUTIVE VICE-PRESIDENT AND
CHIEF FINANCIAL OFFICER
1
1
SNC-Lavalin 2020 Financial Report
Independent Auditor’s Report
To the Shareholders of SNC-Lavalin Group Inc.
Opinion
We have audited the consolidated financial statements of SNC-Lavalin Group Inc. (the “Company”), which comprise the
consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated income statements,
consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of
cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue – Lump-sum turnkey construction (“LSTK”) contracts – Refer to Notes 2G, 3 and 9 to the financial statements
Key Audit Matter Description
The Company recognizes revenue on LSTK contracts over time using an input method, based on costs incurred to date relative
to total anticipated costs at completion. The accounting for LSTK contracts that are not complete at the reporting date (“LSTK
uncompleted contracts”) involves judgment, particularly as it relates to determining the transaction price and estimating total
anticipated costs at completion. The transaction price corresponds to the amount of consideration to which the Company expects
to be entitled in exchange for transferring promised goods or services to a customer. This amount could include an amount of
variable consideration from estimated volume of work, claims and unpriced change orders, and incentives or penalties, to the
extent that it is highly probable that a significant reversal of revenue recognized will not occur when the uncertainty associated
with the variable consideration is subsequently resolved. Total anticipated costs at completion includes both incurred costs to
date as well as anticipated costs to complete which could include contingencies and reserves. These costs are impacted by a
variety of factors such as potential variances in scheduling and cost of materials along with the availability and cost of qualified
labour and subcontractors, productivity, and possible claims from subcontractors. Given the length of LSTK contracts, these
assumptions change over time, as the contract is completed.
Given the significant judgments necessary to account for the Company’s LSTK uncompleted contracts such as the
determination of the variable consideration to be included in the transaction price and the cost to complete each contract,
auditing such estimates required extensive audit effort due to the complexity of these estimates and a high degree of auditor
attention was required when performing audit procedures and evaluating the results of those procedures.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the variable consideration and cost to complete of LSTK uncompleted contracts included the
following, among others:
•
For a sample of LSTK uncompleted contracts we:
◦
Obtained and inspected the executed contract agreements, amendments, pending change orders or claims
confirming key terms with project management.
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Conducted inquiries with management and project personnel to gain an understanding of the status of project
◦
◦
◦
◦
activities.
resolved.
Performed site visits to certain project locations, directly observing project status, and making inquiries to site
personnel regarding the status of project activities.
Examined the documentation from management’s experts, including legal interpretation of relevant
contractual clauses as well as third-party assessments as to the contractual entitlement and value of the
variable consideration.
Based on historical experience with the same customer or other similar contracts, third-party assessments,
legal interpretations, and probabilistic methodologies, evaluated that management’s assessment that the
variable consideration is limited to the amount that it is highly probable that a significant reversal of revenue
recognized will not occur when the uncertainty associated with the variable consideration is subsequently
◦
Evaluated cost to complete by testing key components of the cost to complete estimates, including materials,
labour, and subcontractor costs and evaluating support for estimates of project contingencies.
•
Performed certain retrospective review procedures to assess management’s historical ability to accurately estimate the
transaction price (including variable consideration) and cost to complete as well as to identify any significant or
unusual changes in project revenue and cost forecasts during the period in LSTK contracts.
Goodwill – Engineering, Design and Project Management (“EDPM”) Cash Generating Unit – Notes 2P, 3, and 14 to the
financial statements
Key Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the recoverable amount of each Cash
Generating Unit (“CGU”) to its carrying amount. In the case of the EDPM CGU, the recoverable amount was determined based
on the Value in Use (“VIU”) approach. This required management to make significant estimates and assumptions related to
future cash flows, growth rate, and discount rate, which reflect management’s expectations about future market and economic
conditions. The EDPM goodwill represents 80% ($2.6B) of the Company’s total goodwill. The recoverable amount of the
EDPM CGU exceeded its carrying value as of the measurement date and no impairment was recognized.
While there are several assumptions made by management to determine the recoverable amount of the EDPM CGU, the
assumptions with the highest degree of subjectivity and impact on the recoverable amount are future cash flows, growth rate,
and discount rate (“significant assumptions”). Changes in these significant assumptions could have an impact on the recoverable
amount of the EDPM CGU and result in an impairment charge. Auditing these significant assumptions required a high degree of
auditor attention in applying procedures, and resulted in an increased extent of audit effort, which included the need to involve
fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant assumptions used to estimate the recoverable amount of the EDPM CGU
included the following, among others:
•
•
Evaluated the reasonableness of future cash flows by comparing future cash flows to historical results, project
backlogs, internal communications to management and the Board of Directors, Company press releases and external
information including analysts and industry reports.
Evaluated the reasonableness of the growth rate by developing a range of independent estimates using relevant internal
and external information, including analysts and industry reports and comparing those to the growth rate selected by
• With the assistance of fair value specialists, evaluated the reasonableness of the discount rate derived from the
Weighted Average Cost of Capital (“WACC”) by testing the source information underlying the determination of the
discount rate and developing a range of independent estimates and comparing those to the discount rate selected by
management.
management.
2
2
3
Independent Auditor’s Report
To the Shareholders of SNC-Lavalin Group Inc.
Opinion
We have audited the consolidated financial statements of SNC-Lavalin Group Inc. (the “Company”), which comprise the
consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated income statements,
consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of
cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”).
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Basis for Opinion
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue – Lump-sum turnkey construction (“LSTK”) contracts – Refer to Notes 2G, 3 and 9 to the financial statements
Key Audit Matter Description
The Company recognizes revenue on LSTK contracts over time using an input method, based on costs incurred to date relative
to total anticipated costs at completion. The accounting for LSTK contracts that are not complete at the reporting date (“LSTK
uncompleted contracts”) involves judgment, particularly as it relates to determining the transaction price and estimating total
anticipated costs at completion. The transaction price corresponds to the amount of consideration to which the Company expects
to be entitled in exchange for transferring promised goods or services to a customer. This amount could include an amount of
variable consideration from estimated volume of work, claims and unpriced change orders, and incentives or penalties, to the
extent that it is highly probable that a significant reversal of revenue recognized will not occur when the uncertainty associated
with the variable consideration is subsequently resolved. Total anticipated costs at completion includes both incurred costs to
date as well as anticipated costs to complete which could include contingencies and reserves. These costs are impacted by a
variety of factors such as potential variances in scheduling and cost of materials along with the availability and cost of qualified
labour and subcontractors, productivity, and possible claims from subcontractors. Given the length of LSTK contracts, these
assumptions change over time, as the contract is completed.
Given the significant judgments necessary to account for the Company’s LSTK uncompleted contracts such as the
determination of the variable consideration to be included in the transaction price and the cost to complete each contract,
auditing such estimates required extensive audit effort due to the complexity of these estimates and a high degree of auditor
attention was required when performing audit procedures and evaluating the results of those procedures.
Our audit procedures related to the variable consideration and cost to complete of LSTK uncompleted contracts included the
How the Key Audit Matter Was Addressed in the Audit
following, among others:
•
For a sample of LSTK uncompleted contracts we:
◦
Obtained and inspected the executed contract agreements, amendments, pending change orders or claims
confirming key terms with project management.
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
◦
◦
◦
◦
◦
Conducted inquiries with management and project personnel to gain an understanding of the status of project
activities.
Performed site visits to certain project locations, directly observing project status, and making inquiries to site
personnel regarding the status of project activities.
Examined the documentation from management’s experts, including legal interpretation of relevant
contractual clauses as well as third-party assessments as to the contractual entitlement and value of the
variable consideration.
Based on historical experience with the same customer or other similar contracts, third-party assessments,
legal interpretations, and probabilistic methodologies, evaluated that management’s assessment that the
variable consideration is limited to the amount that it is highly probable that a significant reversal of revenue
recognized will not occur when the uncertainty associated with the variable consideration is subsequently
resolved.
Evaluated cost to complete by testing key components of the cost to complete estimates, including materials,
labour, and subcontractor costs and evaluating support for estimates of project contingencies.
•
Performed certain retrospective review procedures to assess management’s historical ability to accurately estimate the
transaction price (including variable consideration) and cost to complete as well as to identify any significant or
unusual changes in project revenue and cost forecasts during the period in LSTK contracts.
Goodwill – Engineering, Design and Project Management (“EDPM”) Cash Generating Unit – Notes 2P, 3, and 14 to the
financial statements
Key Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the recoverable amount of each Cash
Generating Unit (“CGU”) to its carrying amount. In the case of the EDPM CGU, the recoverable amount was determined based
on the Value in Use (“VIU”) approach. This required management to make significant estimates and assumptions related to
future cash flows, growth rate, and discount rate, which reflect management’s expectations about future market and economic
conditions. The EDPM goodwill represents 80% ($2.6B) of the Company’s total goodwill. The recoverable amount of the
EDPM CGU exceeded its carrying value as of the measurement date and no impairment was recognized.
While there are several assumptions made by management to determine the recoverable amount of the EDPM CGU, the
assumptions with the highest degree of subjectivity and impact on the recoverable amount are future cash flows, growth rate,
and discount rate (“significant assumptions”). Changes in these significant assumptions could have an impact on the recoverable
amount of the EDPM CGU and result in an impairment charge. Auditing these significant assumptions required a high degree of
auditor attention in applying procedures, and resulted in an increased extent of audit effort, which included the need to involve
fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant assumptions used to estimate the recoverable amount of the EDPM CGU
included the following, among others:
•
•
Evaluated the reasonableness of future cash flows by comparing future cash flows to historical results, project
backlogs, internal communications to management and the Board of Directors, Company press releases and external
information including analysts and industry reports.
Evaluated the reasonableness of the growth rate by developing a range of independent estimates using relevant internal
and external information, including analysts and industry reports and comparing those to the growth rate selected by
management.
• With the assistance of fair value specialists, evaluated the reasonableness of the discount rate derived from the
Weighted Average Cost of Capital (“WACC”) by testing the source information underlying the determination of the
discount rate and developing a range of independent estimates and comparing those to the discount rate selected by
management.
2
3
3
SNC-Lavalin 2020 Financial Report INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis;
•
The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact to those charged with governance.
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
•
•
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
The engagement partner on the audit resulting in this independent auditor’s report is Christian Jacques.
/s/ Deloitte LLP (1)
MARCH 8, 2021
MONTREAL, QUEBEC
___________________________________
(1) CPA auditor, CA, public accountancy permit No. A124341
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for
such internal control as management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
•
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to continue as a going concern.
4
4
5
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
•
•
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
The engagement partner on the audit resulting in this independent auditor’s report is Christian Jacques.
/s/ Deloitte LLP (1)
MARCH 8, 2021
MONTREAL, QUEBEC
___________________________________
(1) CPA auditor, CA, public accountancy permit No. A124341
5
5
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis;
•
The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact to those charged with governance.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for
such internal control as management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
skepticism throughout the audit. We also:
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to continue as a going concern.
•
•
•
4
SNC-Lavalin 2020 Financial Report Note
DECEMBER 31
2020
DECEMBER 31
2019
SNC-LAVALIN GROUP INC.
Consolidated Statements of Changes in Equity
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT
NUMBER OF COMMON SHARES)
EQUITY ATTRIBUTABLE TO SNC-LAVALIN SHAREHOLDERS
2020
SNC-LAVALIN GROUP INC.
Consolidated Statements of Financial Position
(IN THOUSANDS OF CANADIAN DOLLARS)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Trade receivables
Contract assets
Inventories
Other current financial assets
Other current non-financial assets
Assets of disposal groups classified as held for sale
Total current assets
Property and equipment
Right-of-use assets
Capital investments accounted for by the equity method
Capital investments at fair value through other comprehensive income
Goodwill
Intangible assets related to business combinations
Deferred income tax asset
Non-current portion of receivables under service concession arrangements
Other non-current financial assets
Other non-current non-financial assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade payables and accrued liabilities
Contract liabilities
Other current financial liabilities
Other current non-financial liabilities
Current portion of provisions
Current portion of lease liabilities
Short-term debt and current portion of long-term debt:
Recourse
Non-recourse
Liabilities of disposal groups classified as held for sale
Total current liabilities
Long-term debt:
Recourse
Limited recourse
Non-recourse
Other non-current financial liabilities
Non-current portion of provisions
Non-current portion of lease liabilities
Other non-current non-financial liabilities
Deferred income tax liability
Total liabilities
Equity
Share capital
Retained earnings
Other components of equity
Other components of equity of disposal groups classified as held for sale
Equity attributable to SNC-Lavalin shareholders
Non-controlling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements
Approved, on behalf of the Board of Directors, by:
7
7
10
11
12
39
13
34
5
5
14
15
29A
16
17
9B
18
19
22
34
20
20
39
20
20
20
21
22
34
29A
23
24
$
932,902 $
8A, 9B
8B, 9B
29,300
1,199,166
1,090,149
16,122
257,432
253,311
273,174
4,051,556
375,864
346,824
378,730
9,666
3,429,478
544,059
655,838
433,914
31,398
82,951
10,340,278 $
$
$
1,730,398 $
836,991
187,754
473,780
401,585
97,409
174,960
31,262
340,303
4,274,442
996,005
400,000
400,283
193,861
753,226
399,201
219
354,348
7,771,585
1,805,080
478,351
(320,067)
594,141
2,557,505
11,188
2,568,693
24, 39
$
10,340,278 $
Balance at beginning of year
Net income (loss)
Other comprehensive income (loss)
Total comprehensive income (loss)
Dividends declared (Note 23E)
Dividends declared by subsidiaries
to non-controlling interests
Capital contributions by
non-controlling interests
Balance at end of year
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT
NUMBER OF COMMON SHARES)
Balance at beginning of year
Transitional adjustments on
adoption of a new accounting
Adjusted balance at beginning of
standard
year
Net income
Other comprehensive loss
Total comprehensive income (loss)
Dividends declared (Note 23E)
Dividends declared by subsidiaries
to non-controlling interests
Additional non-controlling interest
arising on acquisition of Linxon
Capital contributions by
non-controlling interests
SHARE CAPITAL
COMMON
SHARES
(IN THOUSANDS)
AMOUNT
TOTAL
INTERESTS
TOTAL EQUITY
175,554 $ 1,805,080 $ 1,555,853 $ 354,073 $ 3,715,006 $
2,421 $ 3,717,427
OTHER
COMPONENTS
OF
EQUITY
(NOTE 24)
RETAINED
EARNINGS
NON-
CONTROLLING
(965,447)
—
(965,447)
9,174
(956,273)
(98,011)
(79,999)
(178,010)
1,159
(176,851)
—
(1,063,458)
(79,999)
(1,143,457)
10,333
(1,133,124)
—
(14,044)
—
(14,044)
—
(14,044)
—
—
—
—
—
(1,578)
(1,578)
—
12
12
175,554 $ 1,805,080 $ 478,351 $ 274,074 $ 2,557,505 $
11,188 $ 2,568,693
EQUITY ATTRIBUTABLE TO SNC-LAVALIN SHAREHOLDERS
2019
SHARE CAPITAL
COMMON
SHARES
(IN THOUSANDS)
AMOUNT
OTHER
COMPONENTS
OF
EQUITY
(NOTE 24)
RETAINED
EARNINGS
175,554 $ 1,805,080 $ 1,346,624 $ 499,199 $ 3,650,903 $
4,962 $ 3,655,865
TOTAL
TOTAL EQUITY
NON-
CONTROLLING
INTERESTS
—
—
(25,495)
—
(25,495)
—
(25,495)
175,554
1,805,080
1,321,129
499,199
3,625,408
4,962
3,630,370
328,219
—
328,219
2,368
330,587
(51,362)
(145,126)
(196,488)
(1,266)
(197,754)
276,857
(145,126)
131,731
1,102
132,833
(42,133)
—
(42,133)
—
(42,133)
—
—
—
(2)
(2)
—
—
—
(3,671)
(3,671)
—
—
—
30
30
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance at end of year
175,554 $ 1,805,080 $ 1,555,853 $ 354,073 $ 3,715,006 $
2,421 $ 3,717,427
See accompanying notes to consolidated financial statements
1,188,636
34,118
1,533,442
1,755,325
84,888
222,308
331,375
—
5,150,092
470,630
438,787
399,539
8,107
3,429,094
665,598
520,451
352,987
115,941
93,498
11,644,724
2,153,520
889,953
287,716
383,200
289,227
131,075
299,518
93,664
—
4,527,873
873,145
400,000
391,454
232,569
672,096
480,675
551
348,934
7,927,297
1,805,080
1,555,853
354,073
—
3,715,006
2,421
3,717,427
11,644,724
IAN L. EDWARDS (signed)
DIRECTOR
6
6
2020 CONSOLIDATED FINANCIAL STATEMENTS
BENITA M. WARMBOLD (signed)
DIRECTOR
2020 CONSOLIDATED FINANCIAL STATEMENTS
7
SNC-LAVALIN GROUP INC.
Consolidated Statements of Financial Position
SNC-LAVALIN GROUP INC.
Consolidated Statements of Changes in Equity
(IN THOUSANDS OF CANADIAN DOLLARS)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Trade receivables
Contract assets
Inventories
Other current financial assets
Other current non-financial assets
Assets of disposal groups classified as held for sale
Total current assets
Property and equipment
Right-of-use assets
Capital investments accounted for by the equity method
Capital investments at fair value through other comprehensive income
Goodwill
Intangible assets related to business combinations
Deferred income tax asset
Non-current portion of receivables under service concession arrangements
Other non-current financial assets
Other non-current non-financial assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade payables and accrued liabilities
Contract liabilities
Other current financial liabilities
Other current non-financial liabilities
Current portion of provisions
Current portion of lease liabilities
Short-term debt and current portion of long-term debt:
Liabilities of disposal groups classified as held for sale
Total current liabilities
Recourse
Non-recourse
Long-term debt:
Recourse
Limited recourse
Non-recourse
Other non-current financial liabilities
Non-current portion of provisions
Non-current portion of lease liabilities
Other non-current non-financial liabilities
Deferred income tax liability
Total liabilities
Equity
Share capital
Retained earnings
Other components of equity
Non-controlling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements
Approved, on behalf of the Board of Directors, by:
IAN L. EDWARDS (signed)
DIRECTOR
6
2020 CONSOLIDATED FINANCIAL STATEMENTS
29A
7
7
10
11
12
39
13
34
5
5
14
15
16
17
9B
18
19
22
34
20
20
39
20
20
20
21
22
34
23
24
29A
Note
DECEMBER 31
DECEMBER 31
2020
2019
$
932,902 $
1,188,636
8A, 9B
8B, 9B
4,051,556
5,150,092
3,429,478
3,429,094
29,300
1,199,166
1,090,149
16,122
257,432
253,311
273,174
375,864
346,824
378,730
9,666
544,059
655,838
433,914
31,398
82,951
836,991
187,754
473,780
401,585
97,409
174,960
31,262
340,303
996,005
400,000
400,283
193,861
753,226
399,201
219
354,348
7,771,585
1,805,080
478,351
(320,067)
594,141
2,557,505
11,188
2,568,693
34,118
1,533,442
1,755,325
84,888
222,308
331,375
—
470,630
438,787
399,539
8,107
665,598
520,451
352,987
115,941
93,498
889,953
287,716
383,200
289,227
131,075
299,518
93,664
—
873,145
400,000
391,454
232,569
672,096
480,675
551
348,934
7,927,297
1,805,080
1,555,853
354,073
—
3,715,006
2,421
3,717,427
4,274,442
4,527,873
$
10,340,278 $
11,644,724
BENITA M. WARMBOLD (signed)
DIRECTOR
Other components of equity of disposal groups classified as held for sale
24, 39
Equity attributable to SNC-Lavalin shareholders
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT
NUMBER OF COMMON SHARES)
EQUITY ATTRIBUTABLE TO SNC-LAVALIN SHAREHOLDERS
2020
SHARE CAPITAL
COMMON
SHARES
(IN THOUSANDS)
AMOUNT
RETAINED
EARNINGS
OTHER
COMPONENTS
OF
EQUITY
(NOTE 24)
NON-
CONTROLLING
INTERESTS
TOTAL
TOTAL EQUITY
Balance at beginning of year
Net income (loss)
Other comprehensive income (loss)
Total comprehensive income (loss)
Dividends declared (Note 23E)
Dividends declared by subsidiaries
to non-controlling interests
Capital contributions by
non-controlling interests
Balance at end of year
175,554 $ 1,805,080 $ 1,555,853 $ 354,073 $ 3,715,006 $
2,421 $ 3,717,427
—
—
—
—
—
—
—
—
(965,447)
—
(965,447)
9,174
(956,273)
(98,011)
(79,999)
(178,010)
1,159
(176,851)
—
(1,063,458)
(79,999)
(1,143,457)
10,333
(1,133,124)
—
(14,044)
—
(14,044)
—
(14,044)
—
—
—
—
—
—
—
(1,578)
(1,578)
—
12
12
175,554 $ 1,805,080 $ 478,351 $ 274,074 $ 2,557,505 $
11,188 $ 2,568,693
$
10,340,278 $
11,644,724
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT
NUMBER OF COMMON SHARES)
$
1,730,398 $
2,153,520
Balance at beginning of year
Transitional adjustments on
adoption of a new accounting
standard
Adjusted balance at beginning of
year
Net income
Other comprehensive loss
Total comprehensive income (loss)
Dividends declared (Note 23E)
Dividends declared by subsidiaries
to non-controlling interests
Additional non-controlling interest
arising on acquisition of Linxon
Capital contributions by
non-controlling interests
2019
EQUITY ATTRIBUTABLE TO SNC-LAVALIN SHAREHOLDERS
SHARE CAPITAL
COMMON
SHARES
(IN THOUSANDS)
AMOUNT
RETAINED
EARNINGS
OTHER
COMPONENTS
OF
EQUITY
(NOTE 24)
TOTAL
NON-
CONTROLLING
INTERESTS
TOTAL EQUITY
175,554 $ 1,805,080 $ 1,346,624 $ 499,199 $ 3,650,903 $
4,962 $ 3,655,865
—
—
(25,495)
—
(25,495)
—
(25,495)
175,554
1,805,080
1,321,129
499,199
3,625,408
4,962
3,630,370
—
—
—
—
—
—
—
—
—
—
—
—
—
—
328,219
—
328,219
2,368
330,587
(51,362)
(145,126)
(196,488)
(1,266)
(197,754)
276,857
(145,126)
131,731
1,102
132,833
(42,133)
—
(42,133)
—
(42,133)
—
—
—
(2)
(2)
—
—
—
(3,671)
(3,671)
—
—
—
30
30
Balance at end of year
175,554 $ 1,805,080 $ 1,555,853 $ 354,073 $ 3,715,006 $
2,421 $ 3,717,427
See accompanying notes to consolidated financial statements
2020 CONSOLIDATED FINANCIAL STATEMENTS
7
7
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN GROUP INC.
Consolidated Income Statements
SNC-LAVALIN GROUP INC.
Consolidated Statements of Comprehensive Income
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AND
NUMBER OF SHARES)
Note
2020
2019 (1)
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Continuing operations
Revenues from:
PS&PM (2)
Capital investments accounted for by the consolidation method or at fair value through other
comprehensive income
Capital investments accounted for by the equity method
Direct costs of activities
Corporate selling, general and administrative expenses
Impairment loss from expected credit losses
Loss arising on financial assets (liabilities) at fair value through profit or loss
Restructuring costs
Amortization of intangible assets related to business combinations
Acquisition-related costs and integration costs
Gain or adjustment on gain from disposal of a Capital investment
Loss on disposals of PS&PM businesses
Federal charges settlement (PPSC)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell
EBIT (3)
Financial expenses
Financial income and foreign exchange losses (gains)
Earnings (loss) before income taxes from continuing operations
Income taxes
Net income (loss) from continuing operations
Net loss from discontinued operations
Net income (loss)
Net income (loss) from continuing operations attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss) from continuing operations
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
Earnings (loss) per share from continuing operations (in $)
Basic
Diluted
$ 6,878,142 $ 7,367,112
42,010
87,349
52,177
210,543
7,007,501
7,629,832
6,882,152
7,045,393
175,933
874
61,859
63,324
126,770
—
73,944
210
4,743
79,652
162,117
8,315
(25,000)
(2,970,783)
7,467
—
294
257,327
25
26
5A
6
18
39B
6,094
—
27
27
(291,972)
2,968,620
124,703
(10,707)
222,911
(7,802)
(405,968)
2,753,511
29B
(59,039)
310,348
(346,929)
2,443,163
39A
(609,344)
(2,112,576)
$
(956,273) $
330,587
$
(356,103) $ 2,440,795
9,174
2,368
$
(346,929) $ 2,443,163
$
(965,447) $
328,219
9,174
2,368
$
(956,273) $
330,587
$
$
(2.03) $
(2.03) $
13.90
13.90
175,554
175,554
175,554
175,554
Weighted average number of outstanding shares (in thousands)
23D
Basic
Diluted
(1)
(2)
(3)
Comparative figures have been re-presented (see Notes 2C and 39).
Professional Services & Project Management (“PS&PM”) (previously E&C)
Earnings before interest and taxes (“EBIT”)
See accompanying notes to consolidated financial statements
8
8
2020 CONSOLIDATED FINANCIAL STATEMENTS
Net income (loss) from continuing operations
Other comprehensive income (loss):
Exchange differences on translating foreign operations (Note 24)
Share of other comprehensive loss of investments accounted for by the equity
Cash flow hedges (Note 24)
method (Note 24)
Income taxes (Note 24)
Total of items that will be reclassified subsequently to net income
Equity instruments designated at fair value through other comprehensive
income (Note 24)
Income taxes (Note 24)
Income taxes (Note 24)
Remeasurement of defined benefit plans (Note 24)
Total of items that will not be reclassified subsequently to net income
Total other comprehensive income (loss) from continuing operations
Net loss from discontinued operations
Other comprehensive income from discontinued operations
Total other comprehensive loss from discontinued operations
Total comprehensive income (loss)
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Net income from continuing operations
Other comprehensive income (loss):
Exchange differences on translating foreign operations (Note 24)
Share of other comprehensive loss of investments accounted for by the equity
Cash flow hedges (Note 24)
method (Note 24)
Income taxes (Note 24)
Total of items that will be reclassified subsequently to net income
Equity instruments designated at fair value through other comprehensive
income (Note 24)
Income taxes (Note 24)
Income taxes (Note 24)
Remeasurement of defined benefit plans (Note 24)
Net loss from discontinued operations
Other comprehensive loss from discontinued operations
Total other comprehensive loss from discontinued operations
Total comprehensive income
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
See accompanying notes to consolidated financial statements
2020
ATTRIBUTABLE TO
SNC-LAVALIN
SHAREHOLDERS
NON-CONTROLLING
INTERESTS
TOTAL
$
(356,103) $
9,174 $
(346,929)
$
(1,143,457) $
10,333 $
(1,133,124)
2019 (1)
ATTRIBUTABLE TO
SNC-LAVALIN
SHAREHOLDERS
NON-CONTROLLING
INTERESTS
TOTAL
$
2,440,795 $
2,368 $
2,443,163
(70,020)
(6,204)
(1,590)
827
(76,987)
(7,747)
40
(122,601)
28,754
(101,554)
(178,541)
(609,344)
531
(608,813)
(81,539)
(410)
(2,403)
(2,616)
(86,968)
(2,034)
16
(56,805)
8,505
(50,318)
(2,112,576)
(59,202)
(2,171,778)
120
1,039
—
—
1,159
—
—
—
—
—
—
—
—
1,159
(196)
(1,070)
(1,266)
—
—
—
—
—
—
—
—
—
—
(69,900)
(5,165)
(1,590)
827
(75,828)
(7,747)
40
(122,601)
28,754
(101,554)
(177,382)
(609,344)
531
(608,813)
(81,735)
(1,480)
(2,403)
(2,616)
(88,234)
(2,034)
16
(56,805)
8,505
(50,318)
(138,552)
(2,112,576)
(59,202)
(2,171,778)
$
131,731 $
1,102 $
132,833
Total of items that will not be reclassified subsequently to net income
Total other comprehensive loss from continuing operations
(137,286)
(1,266)
2020 CONSOLIDATED FINANCIAL STATEMENTS
9
SNC-LAVALIN GROUP INC.
Consolidated Income Statements
SNC-LAVALIN GROUP INC.
Consolidated Statements of Comprehensive Income
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AND
Note
2020
2019 (1)
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Net income (loss) from continuing operations
Other comprehensive income (loss):
Exchange differences on translating foreign operations (Note 24)
Cash flow hedges (Note 24)
Share of other comprehensive loss of investments accounted for by the equity
method (Note 24)
Income taxes (Note 24)
Total of items that will be reclassified subsequently to net income
Equity instruments designated at fair value through other comprehensive
income (Note 24)
Income taxes (Note 24)
Remeasurement of defined benefit plans (Note 24)
Income taxes (Note 24)
Total of items that will not be reclassified subsequently to net income
Total other comprehensive income (loss) from continuing operations
Net loss from discontinued operations
Other comprehensive income from discontinued operations
Total other comprehensive loss from discontinued operations
Total comprehensive income (loss)
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Net income from continuing operations
Other comprehensive income (loss):
2020
ATTRIBUTABLE TO
SNC-LAVALIN
SHAREHOLDERS
NON-CONTROLLING
INTERESTS
TOTAL
$
(356,103) $
9,174 $
(346,929)
(70,020)
(6,204)
(1,590)
827
(76,987)
(7,747)
40
(122,601)
28,754
(101,554)
(178,541)
(609,344)
531
(608,813)
120
1,039
—
—
1,159
—
—
—
—
—
1,159
—
—
—
(69,900)
(5,165)
(1,590)
827
(75,828)
(7,747)
40
(122,601)
28,754
(101,554)
(177,382)
(609,344)
531
(608,813)
$
(1,143,457) $
10,333 $
(1,133,124)
2019 (1)
ATTRIBUTABLE TO
SNC-LAVALIN
SHAREHOLDERS
NON-CONTROLLING
INTERESTS
TOTAL
$
2,440,795 $
2,368 $
2,443,163
YEARS ENDED DECEMBER 31
NUMBER OF SHARES)
Continuing operations
Revenues from:
PS&PM (2)
Capital investments accounted for by the consolidation method or at fair value through other
comprehensive income
Capital investments accounted for by the equity method
Direct costs of activities
Corporate selling, general and administrative expenses
Impairment loss from expected credit losses
Loss arising on financial assets (liabilities) at fair value through profit or loss
Restructuring costs
Amortization of intangible assets related to business combinations
Acquisition-related costs and integration costs
Gain or adjustment on gain from disposal of a Capital investment
Loss on disposals of PS&PM businesses
Federal charges settlement (PPSC)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell
EBIT (3)
Financial expenses
Financial income and foreign exchange losses (gains)
Earnings (loss) before income taxes from continuing operations
Income taxes
Net income (loss) from continuing operations
Net loss from discontinued operations
Net income (loss)
Net income (loss) from continuing operations attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss) from continuing operations
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
Basic
Diluted
Basic
Diluted
(1)
(2)
(3)
8
Weighted average number of outstanding shares (in thousands)
23D
Comparative figures have been re-presented (see Notes 2C and 39).
Professional Services & Project Management (“PS&PM”) (previously E&C)
Earnings before interest and taxes (“EBIT”)
See accompanying notes to consolidated financial statements
$ 6,878,142 $ 7,367,112
42,010
87,349
52,177
210,543
7,007,501
7,629,832
6,882,152
7,045,393
175,933
874
61,859
63,324
126,770
—
73,944
210
4,743
79,652
162,117
8,315
(25,000)
(2,970,783)
7,467
—
294
257,327
39B
6,094
—
(291,972)
2,968,620
124,703
(10,707)
222,911
(7,802)
(405,968)
2,753,511
29B
(59,039)
310,348
(346,929)
2,443,163
39A
(609,344)
(2,112,576)
$
(956,273) $
330,587
25
26
5A
6
18
27
27
$
(356,103) $ 2,440,795
9,174
2,368
$
(346,929) $ 2,443,163
$
(965,447) $
328,219
9,174
2,368
$
(956,273) $
330,587
$
$
(2.03) $
(2.03) $
13.90
13.90
175,554
175,554
175,554
175,554
Earnings (loss) per share from continuing operations (in $)
Total other comprehensive loss from continuing operations
(137,286)
(1,266)
Exchange differences on translating foreign operations (Note 24)
Cash flow hedges (Note 24)
Share of other comprehensive loss of investments accounted for by the equity
method (Note 24)
Income taxes (Note 24)
Total of items that will be reclassified subsequently to net income
Equity instruments designated at fair value through other comprehensive
income (Note 24)
Income taxes (Note 24)
Remeasurement of defined benefit plans (Note 24)
Income taxes (Note 24)
Total of items that will not be reclassified subsequently to net income
(81,539)
(410)
(2,403)
(2,616)
(86,968)
(2,034)
16
(56,805)
8,505
(50,318)
(196)
(1,070)
—
—
(1,266)
—
—
—
—
—
Net loss from discontinued operations
Other comprehensive loss from discontinued operations
Total other comprehensive loss from discontinued operations
Total comprehensive income
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
See accompanying notes to consolidated financial statements
(2,112,576)
(59,202)
(2,171,778)
—
—
—
$
131,731 $
1,102 $
132,833
(81,735)
(1,480)
(2,403)
(2,616)
(88,234)
(2,034)
16
(56,805)
8,505
(50,318)
(138,552)
(2,112,576)
(59,202)
(2,171,778)
2020 CONSOLIDATED FINANCIAL STATEMENTS
2020 CONSOLIDATED FINANCIAL STATEMENTS
9
9
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN GROUP INC.
Consolidated Statements of Cash Flows (1)
SNC-LAVALIN GROUP INC.
Notes to Consolidated Financial Statements
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Operating activities
Net income (loss)
Income taxes paid
Interest paid from PS&PM
Interest paid from Capital investments
Other reconciling items
Net change in non-cash working capital items
Net cash generated from (used for) operating activities
Investing activities
Acquisition of property and equipment
Payments for Capital investments
Refunds for Capital investments
Net cash inflow on acquisition of businesses
Change in restricted cash position
Increase in receivables under service concession arrangements
Recovery of receivables under service concession arrangements
Cash inflow on disposal of a Capital investment accounted for by the equity method
Payments for disposition-related costs on disposal of a Capital investment
Cash outflow on disposals of PS&PM businesses
Other
Net cash generated from (used for) investing activities
Financing activities
Increase in debt
Repayment of debt and payment for debt issue costs
Payment of lease liabilities
Dividends paid to SNC-Lavalin shareholders
Other
Net cash used for financing activities
Decrease from exchange differences on translating cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2020
2019
NOTE.................................................................................................................................................................................... PAGE
$
(956,273) $
330,587
(22,536)
(89,081)
(15,924)
976,051
(107,763)
229,248
121,485
(75,821)
(55,834)
—
—
4,818
(239,584)
173,934
—
—
(15,043)
22,407
(185,123)
1,329,225
(1,387,901)
(118,651)
(14,044)
941
(9,967)
(199,201)
(18,285)
(123,861)
(20,727)
(334,546)
(355,273)
(122,444)
(39,967)
4,391
14,890
(24,210)
(176,638)
155,645
3,012,256
(94,856)
—
(10,593)
2,718,474
1,926,212
(3,563,049)
(119,106)
(42,133)
(4,071)
28A
28B
5C
28D
5A
5A
6
28C
28C
28C
23E, 28C
28C
(190,430)
(1,802,147)
(1,666)
(255,734)
1,188,636
(6,502)
554,552
634,084
$
932,902 $
1,188,636
(1)
SNC-Lavalin has elected to present a consolidated statement of cash flows that includes an analysis of all cash flows in total – i.e. including both continuing
and discontinued operations; amounts related to discontinued operations by operating, investing and financing activities are disclosed in Note 39.
See accompanying notes to consolidated financial statements
10
10
2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS 11
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
DESCRIPTION OF BUSINESS..............................................................................................................................
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...............................................................................
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY........
SEGMENT DISCLOSURES...................................................................................................................................
CAPITAL INVESTMENTS....................................................................................................................................
DISPOSALS OF PS&PM BUSINESSES...............................................................................................................
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH......................................................................
TRADE RECEIVABLES AND CONTRACT ASSETS.........................................................................................
REVENUE...............................................................................................................................................................
INVENTORIES.......................................................................................................................................................
OTHER CURRENT FINANCIAL ASSETS...........................................................................................................
OTHER CURRENT NON-FINANCIAL ASSETS.................................................................................................
PROPERTY AND EQUIPMENT............................................................................................................................
GOODWILL............................................................................................................................................................
INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS.............................................................
OTHER NON-CURRENT FINANCIAL ASSETS.................................................................................................
OTHER NON-CURRENT NON-FINANCIAL ASSETS.......................................................................................
OTHER CURRENT FINANCIAL LIABILITIES..................................................................................................
OTHER CURRENT NON-FINANCIAL LIABILITIES........................................................................................
SHORT-TERM DEBT AND LONG-TERM DEBT...............................................................................................
OTHER NON-CURRENT FINANCIAL LIABILITIES........................................................................................
PROVISIONS..........................................................................................................................................................
SHARE CAPITAL...................................................................................................................................................
OTHER COMPONENTS OF EQUITY..................................................................................................................
CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..................................................
RESTRUCTURING COSTS...................................................................................................................................
NET FINANCIAL EXPENSES...............................................................................................................................
STATEMENTS OF CASH FLOWS.......................................................................................................................
INCOME TAXES....................................................................................................................................................
FINANCIAL INSTRUMENTS...............................................................................................................................
CAPITAL MANAGEMENT...................................................................................................................................
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT BENEFITS....
CONTINGENT LIABILITIES................................................................................................................................
LEASES...................................................................................................................................................................
REMUNERATION..................................................................................................................................................
RELATED PARTY TRANSACTIONS..................................................................................................................
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES.....................................................................
GOVERNMENT GRANTS.....................................................................................................................................
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE..............
101
101
12
12
25
30
35
41
42
43
44
46
47
47
47
48
50
51
52
53
54
54
57
58
58
62
64
64
65
66
72
75
83
84
91
96
97
98
99
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Operating activities
Net income (loss)
Income taxes paid
Interest paid from PS&PM
Interest paid from Capital investments
Other reconciling items
Net change in non-cash working capital items
Net cash generated from (used for) operating activities
Investing activities
Acquisition of property and equipment
Payments for Capital investments
Refunds for Capital investments
Net cash inflow on acquisition of businesses
Change in restricted cash position
Increase in receivables under service concession arrangements
Recovery of receivables under service concession arrangements
Cash inflow on disposal of a Capital investment accounted for by the equity method
Payments for disposition-related costs on disposal of a Capital investment
Cash outflow on disposals of PS&PM businesses
Net cash generated from (used for) investing activities
Other
Financing activities
Increase in debt
Repayment of debt and payment for debt issue costs
Payment of lease liabilities
Dividends paid to SNC-Lavalin shareholders
Other
Net cash used for financing activities
Decrease from exchange differences on translating cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
28A
28B
5C
28D
5A
5A
6
28C
28C
28C
28C
$
(956,273) $
330,587
(22,536)
(89,081)
(15,924)
976,051
(107,763)
229,248
121,485
(75,821)
(55,834)
—
—
4,818
(239,584)
173,934
—
—
(15,043)
22,407
(185,123)
1,329,225
(1,387,901)
(118,651)
(14,044)
941
(1,666)
(255,734)
1,188,636
(9,967)
(199,201)
(18,285)
(123,861)
(20,727)
(334,546)
(355,273)
(122,444)
(39,967)
4,391
14,890
(24,210)
(176,638)
155,645
3,012,256
(94,856)
—
(10,593)
2,718,474
1,926,212
(3,563,049)
(119,106)
(42,133)
(4,071)
(6,502)
554,552
634,084
23E, 28C
(190,430)
(1,802,147)
(1)
SNC-Lavalin has elected to present a consolidated statement of cash flows that includes an analysis of all cash flows in total – i.e. including both continuing
and discontinued operations; amounts related to discontinued operations by operating, investing and financing activities are disclosed in Note 39.
See accompanying notes to consolidated financial statements
$
932,902 $
1,188,636
SNC-LAVALIN GROUP INC.
Consolidated Statements of Cash Flows (1)
SNC-LAVALIN GROUP INC.
Notes to Consolidated Financial Statements
Note
2020
2019
NOTE.................................................................................................................................................................................... PAGE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
DESCRIPTION OF BUSINESS..............................................................................................................................
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...............................................................................
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY........
SEGMENT DISCLOSURES...................................................................................................................................
CAPITAL INVESTMENTS....................................................................................................................................
DISPOSALS OF PS&PM BUSINESSES...............................................................................................................
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH......................................................................
TRADE RECEIVABLES AND CONTRACT ASSETS.........................................................................................
REVENUE...............................................................................................................................................................
INVENTORIES.......................................................................................................................................................
OTHER CURRENT FINANCIAL ASSETS...........................................................................................................
OTHER CURRENT NON-FINANCIAL ASSETS.................................................................................................
PROPERTY AND EQUIPMENT............................................................................................................................
GOODWILL............................................................................................................................................................
INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS.............................................................
OTHER NON-CURRENT FINANCIAL ASSETS.................................................................................................
OTHER NON-CURRENT NON-FINANCIAL ASSETS.......................................................................................
OTHER CURRENT FINANCIAL LIABILITIES..................................................................................................
OTHER CURRENT NON-FINANCIAL LIABILITIES........................................................................................
SHORT-TERM DEBT AND LONG-TERM DEBT...............................................................................................
OTHER NON-CURRENT FINANCIAL LIABILITIES........................................................................................
PROVISIONS..........................................................................................................................................................
SHARE CAPITAL...................................................................................................................................................
OTHER COMPONENTS OF EQUITY..................................................................................................................
CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..................................................
RESTRUCTURING COSTS...................................................................................................................................
NET FINANCIAL EXPENSES...............................................................................................................................
STATEMENTS OF CASH FLOWS.......................................................................................................................
INCOME TAXES....................................................................................................................................................
FINANCIAL INSTRUMENTS...............................................................................................................................
CAPITAL MANAGEMENT...................................................................................................................................
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT BENEFITS....
CONTINGENT LIABILITIES................................................................................................................................
LEASES...................................................................................................................................................................
REMUNERATION..................................................................................................................................................
RELATED PARTY TRANSACTIONS..................................................................................................................
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES.....................................................................
GOVERNMENT GRANTS.....................................................................................................................................
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE..............
12
12
25
30
35
41
42
43
44
46
47
47
47
48
50
51
52
53
54
54
57
58
58
62
64
64
65
66
72
75
83
84
91
96
97
98
99
101
101
10
2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS 11
11
SNC-Lavalin 2020 Financial Report
Notes to Consolidated Financial Statements
(ALL TABULAR FIGURES IN THOUSANDS OF CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED
DESCRIPTION OF BUSINESS
1.
SNC-Lavalin Group Inc. is incorporated under the Canada Business Corporations Act and has its registered office at
455 René-Lévesque Boulevard West, Montreal, Quebec, Canada H2Z 1Z3. SNC-Lavalin Group Inc. is a public company whose
common shares are listed on the Toronto Stock Exchange in Canada. Reference to the “Company” or to “SNC-Lavalin” means,
as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements or associates, or
SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or associates.
Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around
the world. SNC-Lavalin connects people, technology and data to help shape and deliver world-leading concepts and projects,
while offering comprehensive innovative solutions across the asset lifecycle.
The Company reports its revenues as follows:
•
•
Professional Services & Project Management (“PS&PM”, formerly referred to as E&C, or engineering &
construction) includes contracts generating revenues related mainly to consulting and advisory, intelligent networks and
cybersecurity, design and engineering, procurement, project and construction management, operations and maintenance
(“O&M”), decommissioning and sustaining capital. It also includes revenues from lump-sum turnkey construction
(“LSTK”) contracts, on which the Company ceased bidding in July 2019, except for certain repetitive engineering,
procurement and construction (“EPC”) offerings that are lower-risk, standardized solutions.
Capital investments include SNC-Lavalin’s investments in infrastructure concessions for public services such as
bridges, highways, mass transit systems, power facilities, energy infrastructure, water treatment plants and social
infrastructure (e.g. hospitals).
In these consolidated financial statements (“financial statements”), activities related to PS&PM are collectively referred to as
“from PS&PM” or “excluding Capital investments” to distinguish them from activities related to the Company’s Capital
investments.
2.
A)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) issued and effective for the year ended December 31, 2020, and are presented in Canadian dollars. All values in the
tables included in these notes are rounded to the nearest thousand dollars, except where otherwise indicated.
The accounting policies set out below were consistently applied to all periods presented. In 2020, the Company adopted the new
accounting policy related to government grants, as described in Note 2Y, without any impact on comparative figures. Also, in
2020, the Company adopted the new accounting policy related to discontinued operations, as described in Note 2W, which
resulted in the re-presentation of the consolidated income statement and of the consolidated statement of comprehensive income
for the year ended December 31, 2019 (see Note 2C).
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant, are disclosed in
Note 3.
The Company’s financial statements have been prepared on the historical cost basis, with the exception of i) certain financial
instruments, derivative financial instruments and liabilities for share unit plans, which are measured at fair value; ii) the defined
benefit liabilities, which are measured as the net total of the present value of the defined benefit obligation minus the fair value
of plan assets; and iii) investments measured at fair value, which are held by SNC-Lavalin Infrastructure Partners LP, which is
an investment entity accounted for by the equity method and for which SNC-Lavalin elected to retain the fair value
measurement applied by that investment entity. Historical cost generally represents the fair value of consideration given in
exchange for assets upon initial recognition.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of
the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a
basis, except for share-based payment transactions that are within the scope of IFRS 2, Share-based Payment, and
measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2, Inventories,
or value in use in IAS 36, Impairment of Assets.
12
12
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company’s financial statements were authorized for issue by the Board of Directors of the Company on March 8, 2021.
B)
NEW AMENDMENTS ADOPTED IN THE YEAR ENDED DECEMBER 31, 2020
The following amendments to existing standards were adopted by the Company on January 1, 2020:
• Amendments to IFRS 3, Business Combinations, improve the definition of a business. The amendments help entities
determine whether an acquisition made is of a business or a group of assets. The amended definition emphasizes that the
output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in
the form of dividends, lower costs or other economic benefits to investors and others.
• Definition of Material (Amendments to IAS 1, Presentation of Financial Statements, [“IAS 1”] and to IAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors [“IAS 8”]) is intended to make the definition of material in IAS 1
easier to understand and is not intended to alter the underlying concept of materiality in IFRS Standards. The concept of
“obscuring” material information with immaterial information has been included as part of the new definition. The
threshold for materiality influencing users has been changed from “could influence” to “could reasonably be expected to
influence”. The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1.
• Amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement, and IFRS
7, Financial Instruments: Disclosures, are designed to support the provision of useful financial information by entities
during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as interbank offered rates
(“IBORs”). The amendments modify some specific hedge accounting requirements to provide relief from potential
effects of the uncertainty caused by the IBOR reform. In addition, the amendments require entities to provide additional
information to investors about their hedging relationships which are directly affected by these uncertainties.
The following amendment to an existing standard was adopted by the Company on June 1, 2020:
• COVID-19 Related Rent Concessions (Amendment to IFRS 16, Leases): i) provide lessees with a practical expedient that
relieves a lessee from assessing whether a COVID-19-related rent concession is a lease modification; ii) require lessees
that apply the practical expedient to account for COVID-19-related rent concessions as if they were not lease
The adoption by the Company of the amendments listed above did not have a significant impact on the Company's financial
modifications.
statements.
C)
CHANGES IN PRESENTATION
Segment Disclosures
Effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to (without any change to
this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to clarify that this measure
excludes items other than interest and taxes. Also, effective as of the second quarter of 2020, the Company presents the financial
results of Capital separately from SNCL Engineering Services to further simplify the presentation of financial information
excluding Capital. This change, which only modified the presentation of financial information provided, was made in
accordance with IAS 8 resulting in the restatement of prior year figures (see Note 4).
Discontinued Operations
Certain comparative amounts in the consolidated income statement and in the consolidated statement of comprehensive income
have been re-presented, as a result of the Oil & Gas business, which was previously included in the Resources segment, being
presented as discontinued operations during the current year (see Note 39).
D)
AMENDMENTS ISSUED TO BE ADOPTED AT A LATER DATE
The following amendment to existing standards has been issued and is applicable to the Company for its annual periods
beginning on January 1, 2021 and thereafter, with an earlier application permitted:
•
Interest Rate Benchmark Reform—Phase 2, which amends IFRS 9, Financial Instruments; IAS 39, Financial
Instruments: Recognition and Measurement; IFRS 7, Financial Instruments: Disclosures; IFRS 4, Insurance Contracts,
and IFRS 16, Leases. The amendments relate to: i) changes to contractual cash flows—an entity will not have to
derecognize or adjust the carrying amount of financial instruments for changes required by the reform, but will instead
update the effective interest rate to reflect the change to the alternative benchmark rate; ii) hedge accounting—an entity
will not have to discontinue its hedge accounting solely because it makes changes required by the reform, if the hedge
meets other hedge accounting criteria; and iii) disclosures—an entity will be required to disclose information about new
risks arising from the reform and how it manages the transition to alternative benchmark rates.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
13
Notes to Consolidated Financial Statements
(ALL TABULAR FIGURES IN THOUSANDS OF CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED
1.
DESCRIPTION OF BUSINESS
455 René-Lévesque Boulevard West, Montreal, Quebec, Canada H2Z 1Z3. SNC-Lavalin Group Inc. is a public company whose
common shares are listed on the Toronto Stock Exchange in Canada. Reference to the “Company” or to “SNC-Lavalin” means,
as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements or associates, or
SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or associates.
Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around
the world. SNC-Lavalin connects people, technology and data to help shape and deliver world-leading concepts and projects,
while offering comprehensive innovative solutions across the asset lifecycle.
The Company reports its revenues as follows:
•
Professional Services & Project Management (“PS&PM”, formerly referred to as E&C, or engineering &
construction) includes contracts generating revenues related mainly to consulting and advisory, intelligent networks and
cybersecurity, design and engineering, procurement, project and construction management, operations and maintenance
(“O&M”), decommissioning and sustaining capital. It also includes revenues from lump-sum turnkey construction
(“LSTK”) contracts, on which the Company ceased bidding in July 2019, except for certain repetitive engineering,
procurement and construction (“EPC”) offerings that are lower-risk, standardized solutions.
•
Capital investments include SNC-Lavalin’s investments in infrastructure concessions for public services such as
bridges, highways, mass transit systems, power facilities, energy infrastructure, water treatment plants and social
infrastructure (e.g. hospitals).
In these consolidated financial statements (“financial statements”), activities related to PS&PM are collectively referred to as
“from PS&PM” or “excluding Capital investments” to distinguish them from activities related to the Company’s Capital
investments.
2.
A)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) issued and effective for the year ended December 31, 2020, and are presented in Canadian dollars. All values in the
tables included in these notes are rounded to the nearest thousand dollars, except where otherwise indicated.
The accounting policies set out below were consistently applied to all periods presented. In 2020, the Company adopted the new
accounting policy related to government grants, as described in Note 2Y, without any impact on comparative figures. Also, in
2020, the Company adopted the new accounting policy related to discontinued operations, as described in Note 2W, which
resulted in the re-presentation of the consolidated income statement and of the consolidated statement of comprehensive income
for the year ended December 31, 2019 (see Note 2C).
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant, are disclosed in
Note 3.
The Company’s financial statements have been prepared on the historical cost basis, with the exception of i) certain financial
instruments, derivative financial instruments and liabilities for share unit plans, which are measured at fair value; ii) the defined
benefit liabilities, which are measured as the net total of the present value of the defined benefit obligation minus the fair value
of plan assets; and iii) investments measured at fair value, which are held by SNC-Lavalin Infrastructure Partners LP, which is
an investment entity accounted for by the equity method and for which SNC-Lavalin elected to retain the fair value
measurement applied by that investment entity. Historical cost generally represents the fair value of consideration given in
exchange for assets upon initial recognition.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of
the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a
basis, except for share-based payment transactions that are within the scope of IFRS 2, Share-based Payment, and
measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2, Inventories,
or value in use in IAS 36, Impairment of Assets.
12
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
SNC-Lavalin Group Inc. is incorporated under the Canada Business Corporations Act and has its registered office at
The Company’s financial statements were authorized for issue by the Board of Directors of the Company on March 8, 2021.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B)
NEW AMENDMENTS ADOPTED IN THE YEAR ENDED DECEMBER 31, 2020
The following amendments to existing standards were adopted by the Company on January 1, 2020:
• Amendments to IFRS 3, Business Combinations, improve the definition of a business. The amendments help entities
determine whether an acquisition made is of a business or a group of assets. The amended definition emphasizes that the
output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in
the form of dividends, lower costs or other economic benefits to investors and others.
• Definition of Material (Amendments to IAS 1, Presentation of Financial Statements, [“IAS 1”] and to IAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors [“IAS 8”]) is intended to make the definition of material in IAS 1
easier to understand and is not intended to alter the underlying concept of materiality in IFRS Standards. The concept of
“obscuring” material information with immaterial information has been included as part of the new definition. The
threshold for materiality influencing users has been changed from “could influence” to “could reasonably be expected to
influence”. The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1.
• Amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition and Measurement, and IFRS
7, Financial Instruments: Disclosures, are designed to support the provision of useful financial information by entities
during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as interbank offered rates
(“IBORs”). The amendments modify some specific hedge accounting requirements to provide relief from potential
effects of the uncertainty caused by the IBOR reform. In addition, the amendments require entities to provide additional
information to investors about their hedging relationships which are directly affected by these uncertainties.
The following amendment to an existing standard was adopted by the Company on June 1, 2020:
• COVID-19 Related Rent Concessions (Amendment to IFRS 16, Leases): i) provide lessees with a practical expedient that
relieves a lessee from assessing whether a COVID-19-related rent concession is a lease modification; ii) require lessees
that apply the practical expedient to account for COVID-19-related rent concessions as if they were not lease
modifications.
The adoption by the Company of the amendments listed above did not have a significant impact on the Company's financial
statements.
C)
CHANGES IN PRESENTATION
Segment Disclosures
Effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to (without any change to
this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to clarify that this measure
excludes items other than interest and taxes. Also, effective as of the second quarter of 2020, the Company presents the financial
results of Capital separately from SNCL Engineering Services to further simplify the presentation of financial information
excluding Capital. This change, which only modified the presentation of financial information provided, was made in
accordance with IAS 8 resulting in the restatement of prior year figures (see Note 4).
Discontinued Operations
Certain comparative amounts in the consolidated income statement and in the consolidated statement of comprehensive income
have been re-presented, as a result of the Oil & Gas business, which was previously included in the Resources segment, being
presented as discontinued operations during the current year (see Note 39).
D)
AMENDMENTS ISSUED TO BE ADOPTED AT A LATER DATE
The following amendment to existing standards has been issued and is applicable to the Company for its annual periods
beginning on January 1, 2021 and thereafter, with an earlier application permitted:
•
Interest Rate Benchmark Reform—Phase 2, which amends IFRS 9, Financial Instruments; IAS 39, Financial
Instruments: Recognition and Measurement; IFRS 7, Financial Instruments: Disclosures; IFRS 4, Insurance Contracts,
and IFRS 16, Leases. The amendments relate to: i) changes to contractual cash flows—an entity will not have to
derecognize or adjust the carrying amount of financial instruments for changes required by the reform, but will instead
update the effective interest rate to reflect the change to the alternative benchmark rate; ii) hedge accounting—an entity
will not have to discontinue its hedge accounting solely because it makes changes required by the reform, if the hedge
meets other hedge accounting criteria; and iii) disclosures—an entity will be required to disclose information about new
risks arising from the reform and how it manages the transition to alternative benchmark rates.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
13
13
SNC-Lavalin 2020 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following amendments to existing standards have been issued and are applicable to the Company for its annual periods
beginning on January 1, 2022 and thereafter, with an earlier application permitted:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
E)
BASIS OF CONSOLIDATION
In accordance with IFRS, SNC-Lavalin’s interests in other entities subject to control, joint control or significant influence are
• Amendments to IFRS 3, Business Combinations, are designed to: i) update its reference to the 2018 Conceptual
Framework instead of the 1989 Framework; ii) add a requirement that, for obligations within the scope of IAS 37,
Provisions, Contingent Liabilities and Contingent Assets, (“IAS 37”) an acquirer applies IAS 37 to determine whether at
the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of
IFRIC Interpretation 21, Levies, (“IFRIC 21”) the acquirer applies IFRIC 21 to determine whether the obligating event
that gives rise to a liability to pay the levy has occurred by the acquisition date; and iii) add an explicit statement that an
acquirer does not recognize contingent assets acquired in a business combination.
• Amendments to IAS 16, Property, Plant and Equipment, prohibit deducting from the cost of an item of property, plant
and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while
bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in
profit or loss.
• Amendments to IAS 37 specify that the “cost of fulfilling” a contract comprises the “costs that relate directly to the
contract”. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples
would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example
would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the
contract).
• Amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards, extend the relief, which
allows subsidiaries that become a first-time adopter later than its parent to measure its assets and liabilities at the carrying
amounts that would be included in the parent’s consolidated financial statements, to the cumulative translation
differences for all foreign operations.
• Amendments to IFRS 9, Financial Instruments, clarify which fees an entity includes when it applies the “10 per cent” test
in assessing whether to derecognize a financial liability. An entity includes only fees paid or received between the entity
(the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
• Amendments to IFRS 16, Leases, (“IFRS 16”) remove the illustration of the reimbursement of leasehold improvements
included in the Illustrative Example 13 of IFRS 16 since it does not explain clearly enough the conclusion as to whether
the reimbursement would meet the definition of a lease incentive in IFRS 16.
The following amendment to an existing standard has been issued and is applicable to the Company for its annual periods
beginning on January 1, 2023 and thereafter, with an earlier application permitted:
• Amendments to IAS 1, Presentation of Financial Statements, (“IAS 1”) clarify how to classify debt and other liabilities
as current or non-current. The amendments help to determine whether, in the statement of financial position, debt and
other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled
within one year) or non-current. The amendments also include clarifying the classification requirements for debt an entity
might settle by converting it into equity.
• Amendments to IAS 1 change the requirements in IAS 1 with regard to disclosure of accounting policies. Applying the
amendments, an entity discloses its material accounting policies, instead of its significant accounting policies. Further
amendments to IAS 1 are made to explain how an entity can identify a material accounting policy.
• Amendments to IAS 8 replace the definition of a change in accounting estimates with a definition of accounting
estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject
to measurement uncertainty”.
The Company is currently evaluating the impacts of adopting these amendments on its financial statements.
14
14
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
accounted for as follows:
TYPE OF INTEREST
Subsidiary
Joint venture
Joint operation
Associate
Investment
TYPE OF INFLUENCE
Control
Joint control
Joint control
ACCOUNTING METHOD
Consolidation method
Equity method
SNC-Lavalin’s share of assets, liabilities, revenues and expenses
Significant influence
Equity method
Non-significant influence
Measured at fair value; dividend income is recognized in the
income statement.
A subsidiary that is not wholly-owned by SNC-Lavalin results in non-controlling interests that are presented separately on the
consolidated statement of financial position, while the portions of net income and of other comprehensive income attributable to
such non-controlling interests are also shown separately on the consolidated income statement and on the consolidated statement
of comprehensive income, respectively.
When necessary, adjustments are made to the financial statements of subsidiaries, joint arrangements and associates to bring
their accounting policies in line with those used by the Company.
Business acquisitions
Acquisitions of businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at
the aggregate of the fair values (at the date of acquisition) of assets given, liabilities incurred or assumed, and equity instruments
issued by the Company, if any, in exchange for control of the acquiree. Provisional fair values allocated at a reporting date are
finalized within twelve months of the acquisition date.
At the date of acquisition, the identifiable assets acquired and the liabilities assumed are recognized at fair value, except that:
•
•
•
•
deferred income tax asset or liability, and assets or liabilities related to employee benefit arrangements are recognized
and measured in accordance with IAS 12, Income Taxes, and IAS 19, Employee Benefits, respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Company entered into to replace share-based payment arrangements of the acquiree are measured
in accordance with IFRS 2, Share-based Payment, at the date of acquisition;
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for
Sale and Discontinued Operations, are measured in accordance with this standard; and
right-of-use assets and lease liabilities are recognized in accordance with IFRS 16, Leases, for leases under which the
acquiree is the lessee.
Acquisition-related costs are expensed in the periods in which these costs are incurred and the services are received.
The results of businesses acquired are included in the consolidated financial statements from the date on which control is
obtained.
F)
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
The individual financial statements of each entity within the Company are prepared in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the
results and financial position of each entity within the Company are expressed in Canadian dollars, which is the presentation
currency of the Company for its consolidated financial statements.
Foreign currency transactions and balances
For the purpose of preparing financial statements, Canadian and foreign operations apply the following procedure on
transactions and balances in currencies other than their functional currency: 1) monetary items are translated in their functional
currency using the exchange rate in effect at the period end rate; 2) non-monetary items are translated in their functional
currency using the historical exchange rate if they are measured at cost, or using the exchange rate at the measurement date if
they are measured at fair value; and 3) revenues and expenses are translated in their functional currency using the appropriate
average exchange rate of the period. Any resulting gains or losses are recognized in net income and, if hedge accounting is
applied, offsetting losses or gains from the hedging items are also recognized in net income.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
15
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following amendments to existing standards have been issued and are applicable to the Company for its annual periods
beginning on January 1, 2022 and thereafter, with an earlier application permitted:
• Amendments to IFRS 3, Business Combinations, are designed to: i) update its reference to the 2018 Conceptual
Framework instead of the 1989 Framework; ii) add a requirement that, for obligations within the scope of IAS 37,
Provisions, Contingent Liabilities and Contingent Assets, (“IAS 37”) an acquirer applies IAS 37 to determine whether at
the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of
IFRIC Interpretation 21, Levies, (“IFRIC 21”) the acquirer applies IFRIC 21 to determine whether the obligating event
that gives rise to a liability to pay the levy has occurred by the acquisition date; and iii) add an explicit statement that an
acquirer does not recognize contingent assets acquired in a business combination.
• Amendments to IAS 16, Property, Plant and Equipment, prohibit deducting from the cost of an item of property, plant
and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while
bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in
profit or loss.
contract).
• Amendments to IAS 37 specify that the “cost of fulfilling” a contract comprises the “costs that relate directly to the
contract”. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples
would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example
would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the
• Amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards, extend the relief, which
allows subsidiaries that become a first-time adopter later than its parent to measure its assets and liabilities at the carrying
amounts that would be included in the parent’s consolidated financial statements, to the cumulative translation
differences for all foreign operations.
• Amendments to IFRS 9, Financial Instruments, clarify which fees an entity includes when it applies the “10 per cent” test
in assessing whether to derecognize a financial liability. An entity includes only fees paid or received between the entity
(the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
• Amendments to IFRS 16, Leases, (“IFRS 16”) remove the illustration of the reimbursement of leasehold improvements
included in the Illustrative Example 13 of IFRS 16 since it does not explain clearly enough the conclusion as to whether
the reimbursement would meet the definition of a lease incentive in IFRS 16.
The following amendment to an existing standard has been issued and is applicable to the Company for its annual periods
beginning on January 1, 2023 and thereafter, with an earlier application permitted:
• Amendments to IAS 1, Presentation of Financial Statements, (“IAS 1”) clarify how to classify debt and other liabilities
as current or non-current. The amendments help to determine whether, in the statement of financial position, debt and
other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled
within one year) or non-current. The amendments also include clarifying the classification requirements for debt an entity
might settle by converting it into equity.
• Amendments to IAS 1 change the requirements in IAS 1 with regard to disclosure of accounting policies. Applying the
amendments, an entity discloses its material accounting policies, instead of its significant accounting policies. Further
amendments to IAS 1 are made to explain how an entity can identify a material accounting policy.
• Amendments to IAS 8 replace the definition of a change in accounting estimates with a definition of accounting
estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject
to measurement uncertainty”.
2.
E)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF CONSOLIDATION
In accordance with IFRS, SNC-Lavalin’s interests in other entities subject to control, joint control or significant influence are
accounted for as follows:
TYPE OF INTEREST
Subsidiary
Joint venture
Joint operation
Associate
Investment
TYPE OF INFLUENCE
Control
Joint control
Joint control
ACCOUNTING METHOD
Consolidation method
Equity method
SNC-Lavalin’s share of assets, liabilities, revenues and expenses
Significant influence
Equity method
Non-significant influence
Measured at fair value; dividend income is recognized in the
income statement.
A subsidiary that is not wholly-owned by SNC-Lavalin results in non-controlling interests that are presented separately on the
consolidated statement of financial position, while the portions of net income and of other comprehensive income attributable to
such non-controlling interests are also shown separately on the consolidated income statement and on the consolidated statement
of comprehensive income, respectively.
When necessary, adjustments are made to the financial statements of subsidiaries, joint arrangements and associates to bring
their accounting policies in line with those used by the Company.
Business acquisitions
Acquisitions of businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at
the aggregate of the fair values (at the date of acquisition) of assets given, liabilities incurred or assumed, and equity instruments
issued by the Company, if any, in exchange for control of the acquiree. Provisional fair values allocated at a reporting date are
finalized within twelve months of the acquisition date.
At the date of acquisition, the identifiable assets acquired and the liabilities assumed are recognized at fair value, except that:
•
•
•
•
deferred income tax asset or liability, and assets or liabilities related to employee benefit arrangements are recognized
and measured in accordance with IAS 12, Income Taxes, and IAS 19, Employee Benefits, respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Company entered into to replace share-based payment arrangements of the acquiree are measured
in accordance with IFRS 2, Share-based Payment, at the date of acquisition;
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for
Sale and Discontinued Operations, are measured in accordance with this standard; and
right-of-use assets and lease liabilities are recognized in accordance with IFRS 16, Leases, for leases under which the
acquiree is the lessee.
Acquisition-related costs are expensed in the periods in which these costs are incurred and the services are received.
The results of businesses acquired are included in the consolidated financial statements from the date on which control is
obtained.
F)
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
The individual financial statements of each entity within the Company are prepared in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the
results and financial position of each entity within the Company are expressed in Canadian dollars, which is the presentation
currency of the Company for its consolidated financial statements.
The Company is currently evaluating the impacts of adopting these amendments on its financial statements.
Foreign currency transactions and balances
14
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
For the purpose of preparing financial statements, Canadian and foreign operations apply the following procedure on
transactions and balances in currencies other than their functional currency: 1) monetary items are translated in their functional
currency using the exchange rate in effect at the period end rate; 2) non-monetary items are translated in their functional
currency using the historical exchange rate if they are measured at cost, or using the exchange rate at the measurement date if
they are measured at fair value; and 3) revenues and expenses are translated in their functional currency using the appropriate
average exchange rate of the period. Any resulting gains or losses are recognized in net income and, if hedge accounting is
applied, offsetting losses or gains from the hedging items are also recognized in net income.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
15
15
SNC-Lavalin 2020 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As a result of applying the procedures described above, Canadian and foreign operations produce financial statements presented
in their functional currency.
Translation of financial statements of foreign operations
For the purpose of presenting consolidated financial statements in Canadian dollars, the assets and liabilities of the Company’s
foreign operations that have a functional currency other than Canadian dollars are expressed in Canadian dollars using exchange
rates prevailing at the end of the reporting period, while revenues and expenses items are translated at the appropriate average
exchange rate for the period. Exchange differences arising on consolidation, if any, are recognized initially in other
comprehensive income and reclassified from equity to net income on disposal or partial disposal of foreign operations.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the period end rate.
under a given contract.
G)
REVENUE RECOGNITION
Revenue from contracts with customers is recognized, for each performance obligation, either over a period of time or at a point
in time, depending on which method reflects the transfer of control of the goods or services underlying the particular
performance obligation to the customer.
COMPANY’S CAPITAL INVESTMENTS
Consolidation
Equity method
Revenues from Capital investments include the following:
ACCOUNTING METHODS FOR THE
REVENUES INCLUDED IN THE COMPANY’S CONSOLIDATED INCOME STATEMENT
In most cases, for performance obligations satisfied over time, the Company recognizes revenue over time using an input
method, based on costs incurred to date relative to total estimated costs at completion, to measure progress toward satisfying
such performance obligations. Under this method, costs that do not contribute to the performance of the Company in
transferring control of goods or services to the customer are excluded from the measurement of progress toward satisfying the
performance obligation. For certain contracts, notably certain cost-plus contracts or unit-rate contracts, the Company recognizes
revenue based on its right to consideration when such amount corresponds directly with the value to the customer of the entity’s
performance completed to date. In certain other situations, the Company might recognize revenue at a point in time, when the
criteria to recognize revenue over time are not met. In any event, when the total anticipated costs exceed the total anticipated
revenues on a contract, such loss is recognized in its entirety in the period it becomes known.
The amount of revenue recognized by the Company is based on the transaction price allocated to each performance obligation.
Such transaction price corresponds to the amount of consideration which the Company expects to be entitled to receive in
exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The
transaction price includes, among other things and when applicable, an estimate of variable consideration only to the extent that
it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is subsequently resolved. Variable consideration is usually derived from
incentives, performance bonuses, and penalties, and could include claims and unpriced change orders. When a contract includes
a significant financing component, the value of such component is excluded from the transaction price and is recognized
separately as finance income or expense, as applicable.
SNC-Lavalin may enter into contractual arrangements with a client to deliver services on one project with respect to more than
one performance obligation, such as EPC or Engineering, Procurement, and Construction and Management (“EPCM”), O&M
and/or Capital investments. When entering into such arrangements, the Company allocates the transaction price by reference to
the stand-alone selling price of each performance obligation. Accordingly, when such arrangements exist on the same project,
the value of each performance obligation is based on its stand-alone selling price and recognized according to the respective
revenue recognition methods described above.
The Company accounts for a contract modification, which consists of a change in the scope or price (or both) of a contract, as a
separate contract when the remaining goods or services to be delivered after the modification are distinct from those delivered
prior to the modification and the price of the contract increases by an amount of consideration that reflects the Company’s
stand-alone selling price of the additional promised good or services. When the contract modification is not accounted for as a
separate contract, the Company recognizes an adjustment to revenue on a cumulative catch-up basis at the date of contract
modification.
The Company recognizes assurance-type warranty costs as a provision in accordance with IAS 37, Provisions, Contingent
Liabilities and Contingent Assets, based on the advancement of the projects, and the provision recognized is then either used
when costs are incurred or reversed if it is no longer needed.
In all cases, the value of construction activities, material and equipment purchased by SNC-Lavalin, when acting as purchasing
agent for a client, is not recorded as revenue.
The Company may apply its revenue recognition policy to a portfolio of contracts or performance obligations with similar
characteristics if the effect on its financial statements of applying such policy to the portfolio is not reasonably expected to differ
materially from applying its policy to the individual contracts or performance obligations within that portfolio.
The Company presents its contract balances, on a contract-by-contract basis, in a net contract asset or liability position,
separately from its trade receivables. Contract assets and trade receivables are both rights to receive consideration in exchange
for goods or services that the Company has transferred to a customer, however the classification depends on whether such right
is only conditional on the passage of time (trade receivables) or if it is also conditional on something else (contract assets), such
as the satisfaction of further performance obligations under the contract. A contract liability is the cumulative amount received
and contractually receivable by the Company that exceeds the right to consideration resulting from the Company’s performance
through profit
and financial
liabilities
CATEGORY –
SUBSEQUENTLY
MEASURED AT
or loss
(“FVTPL”)
Fair value
through other
comprehensive
income
(“FVTOCI”)
Revenues that are recognized and reported by the Capital investments
SNC-Lavalin’s share of net results of the Capital investments or dividends from its Capital investments for which the
carrying amount is $nil but would otherwise be negative based on historical financial results and dividends if SNC-
Lavalin had an obligation to fund the investment. Dividends are recognized when the Company’s right to receive payment
has been established
At fair value through other
comprehensive income
Dividends and distributions from the Capital investments
H)
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS AND LIABILITIES
Unless specifically covered by another accounting policy, the measurement of financial assets and financial liabilities is based
on their classification, which is one of the following for SNC-Lavalin:
APPLICABLE TO
INITIAL MEASUREMENT
SUBSEQUENT MEASUREMENT
RECOGNITION OF INCOME/EXPENSE AND GAINS/LOSSES
ON REMEASUREMENT, IF ANY
Fair value
Financial assets
Fair value
Fair value
All recognized in net income
Financial assets
Fair value including
Fair value derived from published bid
Investment income, which includes interest,
transaction costs
price quotations for listed securities.
dividends and distributions, is recognized in net
Where there is no active market, fair
income. For equity instruments, gains (losses)
value is determined using valuation
from
revaluation are
recognized
in other
techniques.
comprehensive income with no reclassification
to net income on disposal of such assets.
Amortized cost
Financial assets
Fair value including
Amortized cost using the effective
All recognized in net income
and financial
liabilities
transaction costs
interest method
Impairment of assets subsequently measured at amortized cost
For “Trade receivables”, “Contract assets” and “Finance lease receivables”, the amount of the loss allowance recognized is the
amount equal to lifetime expected credit losses that result from all possible events of default over the expected life of a financial
For “Non-current portion of receivables under service concession arrangements”, if the credit risk has not increased significantly
since initial recognition, the amount of the loss allowance recognized is the amount equal to 12-month expected credit losses
that result from default events on a financial instrument that are possible within the 12 months after the reporting date.
instrument.
Write-off
The gross carrying amount of a financial asset is reduced when there are no reasonable expectations of recovering a financial
asset in its entirety or a portion thereof.
16
16
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
17
As a result of applying the procedures described above, Canadian and foreign operations produce financial statements presented
in their functional currency.
Translation of financial statements of foreign operations
For the purpose of presenting consolidated financial statements in Canadian dollars, the assets and liabilities of the Company’s
foreign operations that have a functional currency other than Canadian dollars are expressed in Canadian dollars using exchange
rates prevailing at the end of the reporting period, while revenues and expenses items are translated at the appropriate average
exchange rate for the period. Exchange differences arising on consolidation, if any, are recognized initially in other
comprehensive income and reclassified from equity to net income on disposal or partial disposal of foreign operations.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and translated at the period end rate.
G)
REVENUE RECOGNITION
Revenue from contracts with customers is recognized, for each performance obligation, either over a period of time or at a point
in time, depending on which method reflects the transfer of control of the goods or services underlying the particular
performance obligation to the customer.
In most cases, for performance obligations satisfied over time, the Company recognizes revenue over time using an input
method, based on costs incurred to date relative to total estimated costs at completion, to measure progress toward satisfying
such performance obligations. Under this method, costs that do not contribute to the performance of the Company in
transferring control of goods or services to the customer are excluded from the measurement of progress toward satisfying the
performance obligation. For certain contracts, notably certain cost-plus contracts or unit-rate contracts, the Company recognizes
revenue based on its right to consideration when such amount corresponds directly with the value to the customer of the entity’s
performance completed to date. In certain other situations, the Company might recognize revenue at a point in time, when the
criteria to recognize revenue over time are not met. In any event, when the total anticipated costs exceed the total anticipated
revenues on a contract, such loss is recognized in its entirety in the period it becomes known.
The amount of revenue recognized by the Company is based on the transaction price allocated to each performance obligation.
Such transaction price corresponds to the amount of consideration which the Company expects to be entitled to receive in
exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The
transaction price includes, among other things and when applicable, an estimate of variable consideration only to the extent that
it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is subsequently resolved. Variable consideration is usually derived from
incentives, performance bonuses, and penalties, and could include claims and unpriced change orders. When a contract includes
a significant financing component, the value of such component is excluded from the transaction price and is recognized
separately as finance income or expense, as applicable.
SNC-Lavalin may enter into contractual arrangements with a client to deliver services on one project with respect to more than
one performance obligation, such as EPC or Engineering, Procurement, and Construction and Management (“EPCM”), O&M
and/or Capital investments. When entering into such arrangements, the Company allocates the transaction price by reference to
the stand-alone selling price of each performance obligation. Accordingly, when such arrangements exist on the same project,
the value of each performance obligation is based on its stand-alone selling price and recognized according to the respective
revenue recognition methods described above.
The Company accounts for a contract modification, which consists of a change in the scope or price (or both) of a contract, as a
separate contract when the remaining goods or services to be delivered after the modification are distinct from those delivered
prior to the modification and the price of the contract increases by an amount of consideration that reflects the Company’s
stand-alone selling price of the additional promised good or services. When the contract modification is not accounted for as a
separate contract, the Company recognizes an adjustment to revenue on a cumulative catch-up basis at the date of contract
modification.
The Company recognizes assurance-type warranty costs as a provision in accordance with IAS 37, Provisions, Contingent
Liabilities and Contingent Assets, based on the advancement of the projects, and the provision recognized is then either used
when costs are incurred or reversed if it is no longer needed.
In all cases, the value of construction activities, material and equipment purchased by SNC-Lavalin, when acting as purchasing
agent for a client, is not recorded as revenue.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company may apply its revenue recognition policy to a portfolio of contracts or performance obligations with similar
characteristics if the effect on its financial statements of applying such policy to the portfolio is not reasonably expected to differ
materially from applying its policy to the individual contracts or performance obligations within that portfolio.
The Company presents its contract balances, on a contract-by-contract basis, in a net contract asset or liability position,
separately from its trade receivables. Contract assets and trade receivables are both rights to receive consideration in exchange
for goods or services that the Company has transferred to a customer, however the classification depends on whether such right
is only conditional on the passage of time (trade receivables) or if it is also conditional on something else (contract assets), such
as the satisfaction of further performance obligations under the contract. A contract liability is the cumulative amount received
and contractually receivable by the Company that exceeds the right to consideration resulting from the Company’s performance
under a given contract.
Revenues from Capital investments include the following:
ACCOUNTING METHODS FOR THE
COMPANY’S CAPITAL INVESTMENTS
Consolidation
Equity method
REVENUES INCLUDED IN THE COMPANY’S CONSOLIDATED INCOME STATEMENT
Revenues that are recognized and reported by the Capital investments
SNC-Lavalin’s share of net results of the Capital investments or dividends from its Capital investments for which the
carrying amount is $nil but would otherwise be negative based on historical financial results and dividends if SNC-
Lavalin had an obligation to fund the investment. Dividends are recognized when the Company’s right to receive payment
has been established
At fair value through other
comprehensive income
Dividends and distributions from the Capital investments
H)
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS AND LIABILITIES
Unless specifically covered by another accounting policy, the measurement of financial assets and financial liabilities is based
on their classification, which is one of the following for SNC-Lavalin:
CATEGORY –
SUBSEQUENTLY
MEASURED AT
Fair value
through profit
or loss
(“FVTPL”)
Fair value
through other
comprehensive
income
(“FVTOCI”)
Amortized cost
APPLICABLE TO
INITIAL MEASUREMENT
SUBSEQUENT MEASUREMENT
RECOGNITION OF INCOME/EXPENSE AND GAINS/LOSSES
ON REMEASUREMENT, IF ANY
Financial assets
and financial
liabilities
Financial assets
Financial assets
and financial
liabilities
Fair value
Fair value
All recognized in net income
Fair value including
transaction costs
Fair value derived from published bid
price quotations for listed securities.
Where there is no active market, fair
value is determined using valuation
techniques.
Investment income, which includes interest,
dividends and distributions, is recognized in net
income. For equity instruments, gains (losses)
in other
from
comprehensive income with no reclassification
to net income on disposal of such assets.
revaluation are
recognized
Fair value including
transaction costs
Amortized cost using the effective
interest method
All recognized in net income
Impairment of assets subsequently measured at amortized cost
For “Trade receivables”, “Contract assets” and “Finance lease receivables”, the amount of the loss allowance recognized is the
amount equal to lifetime expected credit losses that result from all possible events of default over the expected life of a financial
instrument.
For “Non-current portion of receivables under service concession arrangements”, if the credit risk has not increased significantly
since initial recognition, the amount of the loss allowance recognized is the amount equal to 12-month expected credit losses
that result from default events on a financial instrument that are possible within the 12 months after the reporting date.
Write-off
The gross carrying amount of a financial asset is reduced when there are no reasonable expectations of recovering a financial
asset in its entirety or a portion thereof.
16
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
17
17
SNC-Lavalin 2020 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
HEDGING (APPLYING IAS 39)
Revenues from service concession arrangements accounted for under IFRIC 12 are recognized as follows:
In the normal course of its business, SNC-Lavalin enters into derivative financial instruments, mainly i) forward exchange
contracts to hedge its exposure to fluctuations in foreign currency exchange rates on projects; and ii) interest-rate swaps to
hedge the variability of interest rates relating to financing arrangements. SNC-Lavalin may also enter into other derivative
financial instruments to hedge its exposure to market risk. When applying hedge accounting, SNC-Lavalin formally documents
its accounting choice, the relationship between hedging instruments and hedged items, as well as its risk management objective
and strategy for undertaking these hedge transactions, and regularly assesses the effectiveness of these hedges.
CASH FLOW HEDGES
Derivative financial instruments designated as cash flow hedges are measured at fair value established by using valuation
techniques based on observable market data and taking into account the credit quality of the instruments. The effective portion
of the change in fair value of the derivative financial instruments is recorded in other components of equity, while the
ineffective portion, if any, of such change is recognized in net income. Gains or losses from cash flow hedges included in other
components of equity are reclassified to net income as an offset to the losses or gains recognized on the underlying hedged
items.
FAIR VALUE HEDGES
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in net income
immediately, together with any changes in the fair value of the hedged item that are attributable to the hedged risk. The change
in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognized in
net income in the same line item.
Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or
is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting.
HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the
hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated
under “Exchange differences on translating foreign operations” in the “Other components of equity”. The gain or loss relating to
the ineffective portion is recognized immediately in net income, and is included in the “Financial expenses” line item.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the “Exchange
differences on translating foreign operations” are reclassified to net income on the disposal of the foreign operation.
I)
SERVICE CONCESSION ARRANGEMENTS UNDER IFRIC INTERPRETATION 12
IFRIC Interpretation 12, Service Concession Arrangements, (“IFRIC 12”) provides guidance on the accounting for certain
qualifying public-private partnership arrangements, whereby the grantor (i.e., usually a government):
▪
▪
controls or regulates what services the operator (i.e. “the concessionaire”) must provide with the infrastructure, to
whom it must provide them, and at what price; and
controls any significant residual interest in the infrastructure at the end of the term of the arrangement.
Under such concession arrangements, the concessionaire accounts for the infrastructure asset by applying one of the following
accounting models depending on the allocation of the demand risk through the usage of the infrastructure between the grantor
and the concessionaire:
ACCOUNTING MODEL
DEMAND RISK
Financial asset model
The concessionaire does not bear demand risk through the usage of the infrastructure (i.e., it has an unconditional right to
receive cash irrespective of the usage of the infrastructure, e.g. availability payments).
Intangible asset model
The concessionaire bears demand risk (i.e., it has a right to charge fees for usage of the infrastructure).
Bifurcated model
The concessionaire shares demand risk with the grantor (i.e., the grantor pays the concessionaire for its services partly by a
financial asset and partly by granting a right to charge users of the infrastructure).
ACTIVITIES PROVIDED BY THE CONCESSIONAIRE
REVENUE RECOGNITION
Construction or upgrade
(when a service concession arrangement involves
the construction or upgrade of the public service
infrastructure)
Revenues relating to such activities under a
service concession arrangement are recognized
based on the Company’s accounting policy on
recognizing revenue (see Note 2G).
CLASSIFICATION OF REVENUES IN THE COMPANY’S
CONSOLIDATED INCOME STATEMENT
The Company classifies these revenues as “from
PS&PM” when SNC-Lavalin acts as an EPC
contractor. When SNC-Lavalin does not act as
an EPC contractor, revenues are recognized by
the concession as part of “Capital investments”
activities.
The Company classifies these revenues as “from
PS&PM” when SNC-Lavalin acts as an O&M
contractor. When SNC-Lavalin does not act as
an O&M contractor, revenues are recognized by
the concession as part of “Capital investments”
activities.
The Company classifies these revenues as “from
PS&PM” activities when SNC-Lavalin acts as a
rehabilitation contractor. When SNC-Lavalin
does not act as a rehabilitation contractor,
revenues are recognized by the concession as
part of “Capital investments” activities.
Operations and maintenance
(these activities may include maintenance of the
infrastructure and other activities provided
directly to the grantor or the users)
Rehabilitation
(when a service concession arrangement
requires the concessionaire to rehabilitate the
infrastructure such that the infrastructure can
deliver a specified standard of service at all
times)
Financing
applied)
Financial asset model
(when financial asset model or bifurcated model is
Finance income generated on financial assets is
recognized using the effective interest method.
The Company classifies this finance income as
“Capital investments” activities.
When the Company delivers more than one category of activity in a service concession arrangement, the consideration received
or receivable is allocated by reference to the stand-alone selling price of the activity delivered.
Revenues recognized by the Company under the financial asset model are accumulated in “Receivables under service
concession arrangements”, a financial asset that is recovered through payments received from the grantor.
Intangible asset model
The Company recognizes an intangible asset arising from a service concession arrangement when it has a right to charge for
usage of the concession infrastructure. The intangible asset received as consideration for providing construction or upgrade
services in a service concession arrangement is measured at fair value upon initial recognition. Borrowing costs, if any, are
capitalized until the infrastructure is ready for its intended use as part of the carrying amount of the intangible asset.
The intangible asset is then amortized over its expected useful life, which is the concession period in a service concession
arrangement. Amortization period begins when the infrastructure is available for use.
Fees collected by the concessionaire upon the usage of the infrastructure are classified as revenues from “Capital investments”
activities.
J)
CASH EQUIVALENTS
K)
RESTRICTED CASH
L)
INVENTORIES
Cash equivalents include short-term liquid investments that are readily convertible into a known amount of cash and which are
subject to an insignificant risk of changes in value. Cash equivalents are designated as at FVTPL and accounted for at fair value.
Restricted cash includes cash and cash equivalents for which the use is restricted for specific purposes under certain
arrangements. Restricted cash that is not expected to become unrestricted within the next twelve months is included in “Other
non-current financial assets”. Restricted cash is designated as at FVTPL and accounted for at fair value.
Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined: i) by using specific
identification of the individual costs; or ii) on a weighted average cost basis. Net realizable value represents the estimated
selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
18
18
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
19
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
HEDGING (APPLYING IAS 39)
Revenues from service concession arrangements accounted for under IFRIC 12 are recognized as follows:
Finance income generated on financial assets is
recognized using the effective interest method.
The Company classifies this finance income as
“Capital investments” activities.
ACTIVITIES PROVIDED BY THE CONCESSIONAIRE
REVENUE RECOGNITION
Construction or upgrade
(when a service concession arrangement involves
the construction or upgrade of the public service
infrastructure)
Revenues relating to such activities under a
service concession arrangement are recognized
based on the Company’s accounting policy on
recognizing revenue (see Note 2G).
Operations and maintenance
(these activities may include maintenance of the
infrastructure and other activities provided
directly to the grantor or the users)
Rehabilitation
(when a service concession arrangement
requires the concessionaire to rehabilitate the
infrastructure such that the infrastructure can
deliver a specified standard of service at all
times)
Financing
(when financial asset model or bifurcated model is
applied)
Financial asset model
CLASSIFICATION OF REVENUES IN THE COMPANY’S
CONSOLIDATED INCOME STATEMENT
The Company classifies these revenues as “from
PS&PM” when SNC-Lavalin acts as an EPC
contractor. When SNC-Lavalin does not act as
an EPC contractor, revenues are recognized by
the concession as part of “Capital investments”
activities.
The Company classifies these revenues as “from
PS&PM” when SNC-Lavalin acts as an O&M
contractor. When SNC-Lavalin does not act as
an O&M contractor, revenues are recognized by
the concession as part of “Capital investments”
activities.
The Company classifies these revenues as “from
PS&PM” activities when SNC-Lavalin acts as a
rehabilitation contractor. When SNC-Lavalin
does not act as a rehabilitation contractor,
revenues are recognized by the concession as
part of “Capital investments” activities.
In the normal course of its business, SNC-Lavalin enters into derivative financial instruments, mainly i) forward exchange
contracts to hedge its exposure to fluctuations in foreign currency exchange rates on projects; and ii) interest-rate swaps to
hedge the variability of interest rates relating to financing arrangements. SNC-Lavalin may also enter into other derivative
financial instruments to hedge its exposure to market risk. When applying hedge accounting, SNC-Lavalin formally documents
its accounting choice, the relationship between hedging instruments and hedged items, as well as its risk management objective
and strategy for undertaking these hedge transactions, and regularly assesses the effectiveness of these hedges.
Derivative financial instruments designated as cash flow hedges are measured at fair value established by using valuation
techniques based on observable market data and taking into account the credit quality of the instruments. The effective portion
of the change in fair value of the derivative financial instruments is recorded in other components of equity, while the
ineffective portion, if any, of such change is recognized in net income. Gains or losses from cash flow hedges included in other
components of equity are reclassified to net income as an offset to the losses or gains recognized on the underlying hedged
CASH FLOW HEDGES
items.
FAIR VALUE HEDGES
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in net income
immediately, together with any changes in the fair value of the hedged item that are attributable to the hedged risk. The change
in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognized in
net income in the same line item.
Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or
is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting.
HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the
hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income and accumulated
under “Exchange differences on translating foreign operations” in the “Other components of equity”. The gain or loss relating to
the ineffective portion is recognized immediately in net income, and is included in the “Financial expenses” line item.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the “Exchange
differences on translating foreign operations” are reclassified to net income on the disposal of the foreign operation.
I)
SERVICE CONCESSION ARRANGEMENTS UNDER IFRIC INTERPRETATION 12
IFRIC Interpretation 12, Service Concession Arrangements, (“IFRIC 12”) provides guidance on the accounting for certain
qualifying public-private partnership arrangements, whereby the grantor (i.e., usually a government):
▪
▪
controls or regulates what services the operator (i.e. “the concessionaire”) must provide with the infrastructure, to
whom it must provide them, and at what price; and
controls any significant residual interest in the infrastructure at the end of the term of the arrangement.
Under such concession arrangements, the concessionaire accounts for the infrastructure asset by applying one of the following
accounting models depending on the allocation of the demand risk through the usage of the infrastructure between the grantor
and the concessionaire:
ACCOUNTING MODEL
DEMAND RISK
Financial asset model
The concessionaire does not bear demand risk through the usage of the infrastructure (i.e., it has an unconditional right to
receive cash irrespective of the usage of the infrastructure, e.g. availability payments).
Intangible asset model
The concessionaire bears demand risk (i.e., it has a right to charge fees for usage of the infrastructure).
Bifurcated model
The concessionaire shares demand risk with the grantor (i.e., the grantor pays the concessionaire for its services partly by a
financial asset and partly by granting a right to charge users of the infrastructure).
When the Company delivers more than one category of activity in a service concession arrangement, the consideration received
or receivable is allocated by reference to the stand-alone selling price of the activity delivered.
Revenues recognized by the Company under the financial asset model are accumulated in “Receivables under service
concession arrangements”, a financial asset that is recovered through payments received from the grantor.
Intangible asset model
The Company recognizes an intangible asset arising from a service concession arrangement when it has a right to charge for
usage of the concession infrastructure. The intangible asset received as consideration for providing construction or upgrade
services in a service concession arrangement is measured at fair value upon initial recognition. Borrowing costs, if any, are
capitalized until the infrastructure is ready for its intended use as part of the carrying amount of the intangible asset.
The intangible asset is then amortized over its expected useful life, which is the concession period in a service concession
arrangement. Amortization period begins when the infrastructure is available for use.
Fees collected by the concessionaire upon the usage of the infrastructure are classified as revenues from “Capital investments”
activities.
J)
CASH EQUIVALENTS
Cash equivalents include short-term liquid investments that are readily convertible into a known amount of cash and which are
subject to an insignificant risk of changes in value. Cash equivalents are designated as at FVTPL and accounted for at fair value.
K)
RESTRICTED CASH
Restricted cash includes cash and cash equivalents for which the use is restricted for specific purposes under certain
arrangements. Restricted cash that is not expected to become unrestricted within the next twelve months is included in “Other
non-current financial assets”. Restricted cash is designated as at FVTPL and accounted for at fair value.
L)
INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Costs of inventories are determined: i) by using specific
identification of the individual costs; or ii) on a weighted average cost basis. Net realizable value represents the estimated
selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
18
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
19
19
SNC-Lavalin 2020 Financial Report
2.
M)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
2.
P)
GOODWILL
Property and equipment are recorded at cost. Depreciation is recorded at rates set to charge operations with the cost of
depreciable assets less their residual values (if any) over their estimated useful lives.
Property and equipment are primarily:
CATEGORY
Buildings
Computer equipment
Office furniture
Machinery
DEPRECIATION METHOD
Straight-line, by component
Straight-line
DEPRECIATION PERIOD
10 to 50 years
2 to 5 years
Diminishing balance or straight-line
20% or from 2 to 10 years
Straight-line
1 to 15 years
N)
INTANGIBLE ASSETS OTHER THAN GOODWILL
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their
fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Intangible assets with definite useful life related to business combinations are primarily:
CATEGORY
Revenue backlog
Customer relationships
Trademarks
AMORTIZATION METHOD
Straight-line
Straight-line
Straight-line
AMORTIZATION PERIOD
0.5 to 3.5 years
7 and 10 years
4 to 8 years
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains
and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognized in net income when the asset is derecognized.
O)
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS OTHER THAN GOODWILL
At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets, which mainly include
property and equipment, and its intangible assets other than goodwill 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 asset is estimated 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 cash-generating unit (“CGU”) to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to an individual CGU, or
otherwise they are allocated to the smallest group of CGU for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of: i) fair value less costs to sell; and ii) value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of
the time value of money and risks. 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 income.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset (or CGU) in prior periods. A reversal of an impairment loss is
recognized immediately in net income.
Goodwill represents the excess of the purchase price of an acquired business over the fair value assigned to assets acquired and
liabilities assumed. Goodwill on acquisition of subsidiaries is separately disclosed and goodwill on acquisitions of associates
and joint ventures is included within investments accounted for by the equity method. For the purpose of impairment testing,
goodwill is allocated to each of the Company’s CGU or group of CGU expected to benefit from the synergies of the
combination. A CGU or group of CGU to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the CGU or group of CGU may be impaired. If the recoverable amount of the CGU
or group of CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU or group of CGU and then to the other assets of the CGU or group of CGU pro-rata on the basis
of the carrying amount of each asset in the CGU or group of CGU. An impairment loss recognized for goodwill is not reversed
in a subsequent period.
The Company has designated October 31 as the date for its annual impairment test.
Q)
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred, except if the costs are related to the development and setup of new
products, processes and systems and satisfy generally accepted conditions for capitalization, including reasonable assurance that
they will be recovered. All capitalized development costs are amortized when commercial production begins, using the straight-
line method over a period not exceeding five years.
R)
INCOME TAXES
comprehensive income or directly in equity.
Income taxes recognized in net income comprise the sum of deferred income tax and current income tax not recognized in other
Current income tax assets and/or liabilities comprise amounts receivable from or payable to tax authorities relating to the current
or prior reporting periods, which are uncollected or unpaid at the reporting date. Current tax is payable on taxable income,
which differs from net income in the financial statements. Calculation of current tax is based on tax rates and tax laws that have
been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of
assets and liabilities and their tax bases. Deferred income tax on temporary differences associated with shares in subsidiaries,
joint arrangements and associates is not provided for if reversal of these temporary differences can be controlled by the
Company and it is probable that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets are recognized for unused tax losses, tax credits and deductible temporary differences, to the extent
that it is probable that future taxable income will be available against which they can be utilized. For management’s assessment
of the probability of future taxable income to utilize against deferred income tax assets, see Note 3.
Deferred income tax assets and liabilities are offset only when the Company has a right and intention to offset current tax assets
and liabilities from the same taxation authority.
Changes in deferred income tax assets or liabilities are recognized as a component of income taxes in net income, except where
they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred
income tax is recognized in other comprehensive income or equity, respectively.
S)
DEFINED BENEFIT PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit pension plans, other long-term benefits and other post-employment benefits obligations are included in
“Provisions” in the consolidated statement of financial position and have been determined using the projected unit credit
method, which sees each period of service as giving rise to an additional unit of benefit entitlement to the eligible employees
and measures each unit separately to build up the final obligation. In valuing the defined benefit cost as well as other post-
employment benefits, assumptions are based on management’s best estimates, except for the discount rate where the Company
uses the market interest rate at the measurement date based on high quality corporate bonds with cash flows that match the
timing and amount of expected benefit payments.
20
20
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
21
Property and equipment are recorded at cost. Depreciation is recorded at rates set to charge operations with the cost of
depreciable assets less their residual values (if any) over their estimated useful lives.
Property and equipment are primarily:
CATEGORY
Buildings
Computer equipment
Office furniture
Machinery
DEPRECIATION METHOD
Straight-line, by component
Straight-line
Straight-line
N)
INTANGIBLE ASSETS OTHER THAN GOODWILL
Intangible assets acquired in a business combination
Diminishing balance or straight-line
20% or from 2 to 10 years
DEPRECIATION PERIOD
10 to 50 years
2 to 5 years
1 to 15 years
Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their
fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
CATEGORY
Revenue backlog
Customer relationships
Trademarks
Straight-line
Straight-line
Straight-line
0.5 to 3.5 years
7 and 10 years
4 to 8 years
AMORTIZATION METHOD
AMORTIZATION PERIOD
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains
and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognized in net income when the asset is derecognized.
O)
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS OTHER THAN GOODWILL
At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets, which mainly include
property and equipment, and its intangible assets other than goodwill 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 asset is estimated 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 cash-generating unit (“CGU”) to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to an individual CGU, or
otherwise they are allocated to the smallest group of CGU for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of: i) fair value less costs to sell; and ii) value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of
the time value of money and risks. 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 income.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset (or CGU) in prior periods. A reversal of an impairment loss is
recognized immediately in net income.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
M)
PROPERTY AND EQUIPMENT
2.
P)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill represents the excess of the purchase price of an acquired business over the fair value assigned to assets acquired and
liabilities assumed. Goodwill on acquisition of subsidiaries is separately disclosed and goodwill on acquisitions of associates
and joint ventures is included within investments accounted for by the equity method. For the purpose of impairment testing,
goodwill is allocated to each of the Company’s CGU or group of CGU expected to benefit from the synergies of the
combination. A CGU or group of CGU to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the CGU or group of CGU may be impaired. If the recoverable amount of the CGU
or group of CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU or group of CGU and then to the other assets of the CGU or group of CGU pro-rata on the basis
of the carrying amount of each asset in the CGU or group of CGU. An impairment loss recognized for goodwill is not reversed
in a subsequent period.
The Company has designated October 31 as the date for its annual impairment test.
Q)
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred, except if the costs are related to the development and setup of new
products, processes and systems and satisfy generally accepted conditions for capitalization, including reasonable assurance that
they will be recovered. All capitalized development costs are amortized when commercial production begins, using the straight-
line method over a period not exceeding five years.
Intangible assets with definite useful life related to business combinations are primarily:
R)
INCOME TAXES
Income taxes recognized in net income comprise the sum of deferred income tax and current income tax not recognized in other
comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise amounts receivable from or payable to tax authorities relating to the current
or prior reporting periods, which are uncollected or unpaid at the reporting date. Current tax is payable on taxable income,
which differs from net income in the financial statements. Calculation of current tax is based on tax rates and tax laws that have
been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of
assets and liabilities and their tax bases. Deferred income tax on temporary differences associated with shares in subsidiaries,
joint arrangements and associates is not provided for if reversal of these temporary differences can be controlled by the
Company and it is probable that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets are recognized for unused tax losses, tax credits and deductible temporary differences, to the extent
that it is probable that future taxable income will be available against which they can be utilized. For management’s assessment
of the probability of future taxable income to utilize against deferred income tax assets, see Note 3.
Deferred income tax assets and liabilities are offset only when the Company has a right and intention to offset current tax assets
and liabilities from the same taxation authority.
Changes in deferred income tax assets or liabilities are recognized as a component of income taxes in net income, except where
they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred
income tax is recognized in other comprehensive income or equity, respectively.
S)
DEFINED BENEFIT PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT BENEFITS
Defined benefit pension plans, other long-term benefits and other post-employment benefits obligations are included in
“Provisions” in the consolidated statement of financial position and have been determined using the projected unit credit
method, which sees each period of service as giving rise to an additional unit of benefit entitlement to the eligible employees
and measures each unit separately to build up the final obligation. In valuing the defined benefit cost as well as other post-
employment benefits, assumptions are based on management’s best estimates, except for the discount rate where the Company
uses the market interest rate at the measurement date based on high quality corporate bonds with cash flows that match the
timing and amount of expected benefit payments.
20
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
21
21
SNC-Lavalin 2020 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Remeasurement, comprising: i) actuarial gains and losses; ii) the effect of the changes to the asset ceiling (if applicable); and iii)
the return on plans’ assets (excluding interest), is credited or charged to equity in other comprehensive income in the period in
which it arises. Remeasurement recognized in other comprehensive income is not reclassified to net income in subsequent
periods. The cumulative amount of remeasurement is included in retained earnings.
Defined benefit costs comprise: i) service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements); ii) net interest expense or income; and iii) remeasurement. Service cost and net interest income or
expense are recognized in net income while the remeasurement is recognized in other comprehensive income in the period. Net
interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
T)
EARNINGS PER SHARE
Basic and diluted earnings per share have been determined by dividing the consolidated net income attributable to SNC-Lavalin
shareholders for the period by the basic and diluted weighted average number of shares, respectively.
The diluted weighted average number of shares outstanding is calculated as if all dilutive options had been exercised at the later
of the beginning of the reporting period or date of grant with deemed proceeds from the exercise of such dilutive options used to
repurchase common shares at the average market price for the period.
U)
SHARE-BASED PAYMENTS
Stock options
Stock options granted to employees are measured at their fair value at the grant date. The estimated fair value of the stock
options is determined using the Black-Scholes option pricing model.
The fair value determined at the grant date of the stock options is expensed on a straight-line basis over the shorter of the vesting
period or the term over which an employee becomes eligible to retire, based on the Company’s estimate of stock options that
will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of stock options
expected to vest and the impact of such revision, if any, is recognized in net income.
Share units
The 2019 Performance Share Unit plan (“2019 PSU plan”), 2017 Performance Share Unit plan (“2017 PSU plan”), 2019
Restricted Share Unit plan (“2019 RSU plan”), Restricted Share Unit plan (“RSU plan”), 2009 Deferred Share Unit plan (“2009
DSU plan”), and Deferred Share Unit plan (“DSU plan”) are collectively referred as “share unit plans”. For share units granted
to employees under the share unit plans, a liability is recognized and measured at the fair value of the liability, which is based on
the Company’s share price. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair
value of the liability is remeasured, with any changes in fair value recognized in net income for the period. The fair value of the
grants of share units is expensed in the income statement on a straight-line basis over the vesting period, based on the
Company’s estimate of share units that will eventually vest.
V)
PROVISIONS
A provision is a liability of uncertain timing or amount that is recognized in the consolidated statement of financial position.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash
flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a
receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Restructuring
A restructuring provision is recognized when the Company has developed a detailed formal plan for the restructuring and has
raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or
announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct
expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and
not associated with the ongoing activities of the entity.
Onerous contracts
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is
considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the
contract exceed the economic benefits expected to be received from the contract.
W)
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than continuing use. This condition is regarded as met only when the asset (or disposal group)
is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset
(or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year from the date of classification.
When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will
retain non-controlling interest in its former subsidiary after the sale.
When the Company is committed to a sale plan involving disposal of an investment, or a portion of an investment, in an
associate or a joint venture, the investment or the portion of the investment that will be disposed of is classified as held for sale
when the criteria described above are met, and the Company discontinues the use of the equity method in relation to the portion
that is classified as held for sale. Any retained portion of an investment in an associate or a joint venture that has not been
classified as held for sale continues to be accounted for using the equity method. The Company discontinues the use of the
equity method at the time of disposal when the disposal results in the Company losing significant influence over the associate or
joint control over the joint venture.
After the disposal takes place, the Company accounts for any retained interest in the associate or joint venture in accordance
with IFRS 9, Financial Instruments, unless the retained interest continues to be an associate or a joint venture, in which case the
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount
Company uses the equity method.
and fair value less costs to sell.
Discontinued operations
•
•
•
A disposal group qualifies as discontinued operation if it is a component of an entity for which operations and cash flows can be
clearly distinguished from the rest of the Company, that either has been disposed of, or is classified as held for sale, and:
represents a separate major line of business or geographical area of operations;
is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be
classified as held for sale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount in “Net
income (loss) from discontinued operations” in the consolidated income statement.
When an operation is classified as a discontinued operation, the comparative consolidated income statement and consolidated
statement of other comprehensive income are re-presented as if the operation had been discontinued from the beginning of the
comparative year.
22
22
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
23
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Remeasurement, comprising: i) actuarial gains and losses; ii) the effect of the changes to the asset ceiling (if applicable); and iii)
Restructuring
the return on plans’ assets (excluding interest), is credited or charged to equity in other comprehensive income in the period in
which it arises. Remeasurement recognized in other comprehensive income is not reclassified to net income in subsequent
periods. The cumulative amount of remeasurement is included in retained earnings.
Defined benefit costs comprise: i) service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements); ii) net interest expense or income; and iii) remeasurement. Service cost and net interest income or
expense are recognized in net income while the remeasurement is recognized in other comprehensive income in the period. Net
interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
T)
EARNINGS PER SHARE
Basic and diluted earnings per share have been determined by dividing the consolidated net income attributable to SNC-Lavalin
shareholders for the period by the basic and diluted weighted average number of shares, respectively.
The diluted weighted average number of shares outstanding is calculated as if all dilutive options had been exercised at the later
of the beginning of the reporting period or date of grant with deemed proceeds from the exercise of such dilutive options used to
repurchase common shares at the average market price for the period.
U)
SHARE-BASED PAYMENTS
Stock options
Stock options granted to employees are measured at their fair value at the grant date. The estimated fair value of the stock
options is determined using the Black-Scholes option pricing model.
The fair value determined at the grant date of the stock options is expensed on a straight-line basis over the shorter of the vesting
period or the term over which an employee becomes eligible to retire, based on the Company’s estimate of stock options that
will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of stock options
expected to vest and the impact of such revision, if any, is recognized in net income.
Share units
obligation.
flows.
The 2019 Performance Share Unit plan (“2019 PSU plan”), 2017 Performance Share Unit plan (“2017 PSU plan”), 2019
Restricted Share Unit plan (“2019 RSU plan”), Restricted Share Unit plan (“RSU plan”), 2009 Deferred Share Unit plan (“2009
DSU plan”), and Deferred Share Unit plan (“DSU plan”) are collectively referred as “share unit plans”. For share units granted
to employees under the share unit plans, a liability is recognized and measured at the fair value of the liability, which is based on
the Company’s share price. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair
value of the liability is remeasured, with any changes in fair value recognized in net income for the period. The fair value of the
grants of share units is expensed in the income statement on a straight-line basis over the vesting period, based on the
Company’s estimate of share units that will eventually vest.
V)
PROVISIONS
A provision is a liability of uncertain timing or amount that is recognized in the consolidated statement of financial position.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a
receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
A restructuring provision is recognized when the Company has developed a detailed formal plan for the restructuring and has
raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or
announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct
expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and
not associated with the ongoing activities of the entity.
Onerous contracts
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is
considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the
contract exceed the economic benefits expected to be received from the contract.
W)
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than continuing use. This condition is regarded as met only when the asset (or disposal group)
is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset
(or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year from the date of classification.
When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will
retain non-controlling interest in its former subsidiary after the sale.
When the Company is committed to a sale plan involving disposal of an investment, or a portion of an investment, in an
associate or a joint venture, the investment or the portion of the investment that will be disposed of is classified as held for sale
when the criteria described above are met, and the Company discontinues the use of the equity method in relation to the portion
that is classified as held for sale. Any retained portion of an investment in an associate or a joint venture that has not been
classified as held for sale continues to be accounted for using the equity method. The Company discontinues the use of the
equity method at the time of disposal when the disposal results in the Company losing significant influence over the associate or
joint control over the joint venture.
After the disposal takes place, the Company accounts for any retained interest in the associate or joint venture in accordance
with IFRS 9, Financial Instruments, unless the retained interest continues to be an associate or a joint venture, in which case the
Company uses the equity method.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
Discontinued operations
A disposal group qualifies as discontinued operation if it is a component of an entity for which operations and cash flows can be
clearly distinguished from the rest of the Company, that either has been disposed of, or is classified as held for sale, and:
•
•
•
represents a separate major line of business or geographical area of operations;
is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be
classified as held for sale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount in “Net
income (loss) from discontinued operations” in the consolidated income statement.
When an operation is classified as a discontinued operation, the comparative consolidated income statement and consolidated
statement of other comprehensive income are re-presented as if the operation had been discontinued from the beginning of the
comparative year.
22
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
23
23
SNC-Lavalin 2020 Financial Report
2.
X)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LEASING
Accounting for sale and lease back transactions
Accounting for leases as a lessee
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-
of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease term, and represents a period ranging from 1 to 30 years for office
real estate leases and 1 to 8 years for other leased assets. In addition, the right-of-use asset is reduced by impairment losses
resulting from impairment tests conducted in accordance with IAS 36, Impairment of Assets, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee's incremental
borrowing rate. Lease payments used for the calculations comprise mainly fixed payments, including in-substance fixed
payments, variable lease payments that depend on an index or a rate, the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and payments of penalties for terminating the lease, if the lease term reflects the
lessee exercising an option to terminate the lease. The lease liability is subsequently measured at amortized cost using the
effective interest method and is remeasured to reflect changes in the lease payments, such as upon a lease modification that is
not accounted for as a separate lease.
A lease modification is considered a separate lease if the modification increases the scope of the lease by adding the right to use
one or more underlying assets and the consideration for the lease increases by an amount commensurate with the stand-alone
price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the
particular contract. Any other modification is not accounted for as a separate lease.
For a lease modification that is not accounted for as a separate lease, the Company accounts for the modification, at its effective
date, as follows:
UNCERTAINTY
a.
for a lease modification resulting in a decrease in the scope of the lease, such as a reduction in the term of a lease or in
the space being leased, the lease liability is remeasured to reflect the revised lease payments and the carrying amount of
the right-of-use asset is reduced to reflect the partial or full termination of the lease. If the carrying amount of the right-
of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, a lessee shall
recognize any remaining amount of the remeasurement in profit or loss. Furthermore, the difference between the
reduction in the lease liability and the reduction in the corresponding right-of-use asset’s carrying value is recognized
in profit or loss.
b.
for all other lease modifications, the lease liability is remeasured to reflect the revised lease payments, with a
corresponding adjustment to the right-of-use asset.
The remeasurement of a lease liability upon a lease modification, or upon any change to the lease payments resulting from a
change in the lease term or in the assessment of an option to purchase the underlying asset, is based on a revised discount rate
reflecting the remainder of the lease term. The remeasurement of a lease liability to reflect revised lease payments due to a
change in the amounts expected to be payable to the lessor under a residual value guarantee or to a change in an index or a rate
used to determine those payments, other than a change in floating interest rates, is based on an unchanged discount rate.
Accounting for leases as a lessor
When acting as a lessor, the Company determines at lease commencement whether each lease is a finance lease or an operating
lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially
all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a
finance lease; if not, then it is an operating lease.
As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the
economic life of the asset. When the Company subleases one of its leases and concludes that it is a finance lease, it derecognizes
the right-of-use asset relating to the head lease being sublet, recognizes a receivable equal to the net investment in the sublease
and retains the previously recognized lease liability in its capacity as lessee. The Company then recognizes interest expense on
its lease liability and interest income on the receivable in its capacity as finance lessor.
In a sale and lease back transaction, the transfer of an asset is recognized as a sale when the customer has obtained control of
such asset based on the Company’s revenue recognition policy, otherwise the Company continues to recognize the transferred
asset on its statement of financial position and recognizes a financial liability equal to the proceeds transferred. When the
transfer of an asset satisfies the Company’s revenue recognition policy to be accounted for as a sale, a partial recognition of the
gain on disposal is recognized immediately after the sale, based on the proportion of the asset not retained by the Company
through the lease. The proportion of the asset retained by the Company through the lease is recognized as a right-of-use asset
and the lease liability is measured as the present value of future lease payments.
Y)
GOVERNMENT GRANTS
SNC-Lavalin recognizes grants from the government where there is a reasonable assurance that the grant will be received and
SNC-Lavalin will comply with all attached conditions.
Government grants are recognized in the income statement on a systematic basis over the periods in which SNC-Lavalin
recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose
primary condition is that the Company should purchase, construct or otherwise acquire non-current assets (including property
and equipment) are recognized by deducting the grants from the carrying amount of the related assets in the statement of
financial position and transferred to the income statement on a systematic and rational basis over the useful lives of the related
assets.
which they become receivable.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Company with no future related costs are recognized in the income statement in the period in
3.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
In the application of the Company’s accounting policies, which are described in Note 2, management is required to make
judgments, estimates, and assumptions about the carrying amounts of assets and liabilities recognized that are not readily
apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the critical accounting judgments and key estimates concerning the future, and other key sources of
estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
COVID-19 related matters
The COVID-19 pandemic has significantly disrupted and, although vaccination campaigns are currently underway in certain
countries/regions, it continues to significantly disrupt global health, economic and market conditions and has triggered and
continues to induce an indeterminate period of volatility and slowdown in the global economy and recessions. The full impact of
the COVID-19 pandemic, including the impact of the preventative and mitigation measures that the Company, other businesses
and governments worldwide are taking to combat the spread of the disease and subsequent waves and variants thereof, continues
to evolve and the pandemic continues to have material adverse repercussions in the jurisdictions where the Company has
offices, delivers services and holds investments, and it continues creating significant volatility and negative pressure on virtually
all national economies as well as financial markets, in each case, notwithstanding the fact that vaccination campaigns are
The impacts of the COVID-19 pandemic on the main areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant, for the preparation of the Company’s financial statements are: revenue recognition,
values used in impairment tests, assessment of deferred income tax assets and measurement of financial instruments at fair
currently underway.
value.
24
24
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
25
2.
X)
LEASING
Accounting for leases as a lessee
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-
of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease term, and represents a period ranging from 1 to 30 years for office
real estate leases and 1 to 8 years for other leased assets. In addition, the right-of-use asset is reduced by impairment losses
resulting from impairment tests conducted in accordance with IAS 36, Impairment of Assets, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee's incremental
borrowing rate. Lease payments used for the calculations comprise mainly fixed payments, including in-substance fixed
payments, variable lease payments that depend on an index or a rate, the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and payments of penalties for terminating the lease, if the lease term reflects the
lessee exercising an option to terminate the lease. The lease liability is subsequently measured at amortized cost using the
effective interest method and is remeasured to reflect changes in the lease payments, such as upon a lease modification that is
not accounted for as a separate lease.
A lease modification is considered a separate lease if the modification increases the scope of the lease by adding the right to use
one or more underlying assets and the consideration for the lease increases by an amount commensurate with the stand-alone
price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the
particular contract. Any other modification is not accounted for as a separate lease.
For a lease modification that is not accounted for as a separate lease, the Company accounts for the modification, at its effective
date, as follows:
a.
for a lease modification resulting in a decrease in the scope of the lease, such as a reduction in the term of a lease or in
the space being leased, the lease liability is remeasured to reflect the revised lease payments and the carrying amount of
the right-of-use asset is reduced to reflect the partial or full termination of the lease. If the carrying amount of the right-
of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, a lessee shall
recognize any remaining amount of the remeasurement in profit or loss. Furthermore, the difference between the
reduction in the lease liability and the reduction in the corresponding right-of-use asset’s carrying value is recognized
in profit or loss.
b.
for all other lease modifications, the lease liability is remeasured to reflect the revised lease payments, with a
corresponding adjustment to the right-of-use asset.
The remeasurement of a lease liability upon a lease modification, or upon any change to the lease payments resulting from a
change in the lease term or in the assessment of an option to purchase the underlying asset, is based on a revised discount rate
reflecting the remainder of the lease term. The remeasurement of a lease liability to reflect revised lease payments due to a
change in the amounts expected to be payable to the lessor under a residual value guarantee or to a change in an index or a rate
used to determine those payments, other than a change in floating interest rates, is based on an unchanged discount rate.
Accounting for leases as a lessor
When acting as a lessor, the Company determines at lease commencement whether each lease is a finance lease or an operating
lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially
all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a
finance lease; if not, then it is an operating lease.
As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the
economic life of the asset. When the Company subleases one of its leases and concludes that it is a finance lease, it derecognizes
the right-of-use asset relating to the head lease being sublet, recognizes a receivable equal to the net investment in the sublease
and retains the previously recognized lease liability in its capacity as lessee. The Company then recognizes interest expense on
its lease liability and interest income on the receivable in its capacity as finance lessor.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting for sale and lease back transactions
In a sale and lease back transaction, the transfer of an asset is recognized as a sale when the customer has obtained control of
such asset based on the Company’s revenue recognition policy, otherwise the Company continues to recognize the transferred
asset on its statement of financial position and recognizes a financial liability equal to the proceeds transferred. When the
transfer of an asset satisfies the Company’s revenue recognition policy to be accounted for as a sale, a partial recognition of the
gain on disposal is recognized immediately after the sale, based on the proportion of the asset not retained by the Company
through the lease. The proportion of the asset retained by the Company through the lease is recognized as a right-of-use asset
and the lease liability is measured as the present value of future lease payments.
Y)
GOVERNMENT GRANTS
SNC-Lavalin recognizes grants from the government where there is a reasonable assurance that the grant will be received and
SNC-Lavalin will comply with all attached conditions.
Government grants are recognized in the income statement on a systematic basis over the periods in which SNC-Lavalin
recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose
primary condition is that the Company should purchase, construct or otherwise acquire non-current assets (including property
and equipment) are recognized by deducting the grants from the carrying amount of the related assets in the statement of
financial position and transferred to the income statement on a systematic and rational basis over the useful lives of the related
assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Company with no future related costs are recognized in the income statement in the period in
which they become receivable.
3.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Company’s accounting policies, which are described in Note 2, management is required to make
judgments, estimates, and assumptions about the carrying amounts of assets and liabilities recognized that are not readily
apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the critical accounting judgments and key estimates concerning the future, and other key sources of
estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
COVID-19 related matters
The COVID-19 pandemic has significantly disrupted and, although vaccination campaigns are currently underway in certain
countries/regions, it continues to significantly disrupt global health, economic and market conditions and has triggered and
continues to induce an indeterminate period of volatility and slowdown in the global economy and recessions. The full impact of
the COVID-19 pandemic, including the impact of the preventative and mitigation measures that the Company, other businesses
and governments worldwide are taking to combat the spread of the disease and subsequent waves and variants thereof, continues
to evolve and the pandemic continues to have material adverse repercussions in the jurisdictions where the Company has
offices, delivers services and holds investments, and it continues creating significant volatility and negative pressure on virtually
all national economies as well as financial markets, in each case, notwithstanding the fact that vaccination campaigns are
currently underway.
The impacts of the COVID-19 pandemic on the main areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant, for the preparation of the Company’s financial statements are: revenue recognition,
values used in impairment tests, assessment of deferred income tax assets and measurement of financial instruments at fair
value.
24
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENT S
25
25
SNC-Lavalin 2020 Financial Report
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Revenue recognition
The identification of revenue-generating contracts with customers, the identification of performance obligations, the
determination of the transaction price and its allocation between identified performance obligations, the use of the appropriate
revenue recognition method (over time or at a point in time) for each performance obligation and the measure of progress for
each performance obligation satisfied over time are the main aspects of the revenue recognition process, all of which require the
exercise of judgment and the use of assumptions.
The transaction price corresponds to the amount of consideration to which the Company expects to be entitled in exchange for
transferring promised goods or services to a customer. Such amount may require the Company to estimate an amount of variable
consideration, notably from estimated volume of work, claims and unpriced change orders, incentives or penalties, among
others. Furthermore, the Company needs to constrain the transaction price by including only the amount for which it is highly
probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. The amount of variable consideration to be included in the
transaction price of a given contract is determined by using various estimates and assumptions, which could be based on
historical experience with the same customer or other similar contracts, third-party assessments, legal interpretation of relevant
contractual clauses, and probabilistic methodologies, among others. Due to the uncertain nature of the estimations, the amount
of variable consideration may vary significantly over time. Such estimated amount of variable consideration then needs to be
updated at the end of each reporting period.
The determination of anticipated costs for completing a contract is based on estimates that can be affected by a variety of factors
such as potential variances in scheduling and cost of materials along with the availability and cost of qualified labour and
subcontractors, productivity, and possible claims from subcontractors.
More specifically, in 2020, the Company reviewed numerous variables having an impact on revenue recognition that are, or
could be, affected by the COVID-19 pandemic, such as limitations or suspensions of certain business operations throughout the
world, significant travel, particularly air travel, restrictions and associated quarantine and self-isolation requirements, the
inability to execute work on certain sites for, in certain cases, indeterminate periods of time and the delays resulting therefrom,
unavailability of labour and supply chain disruptions. Where available, force majeure relief (or similar) clauses contained in the
contracts that underpin certain of the Company’s major revenue generating projects were invoked and relied upon by the
Company in response to the impacts of the COVID-19 pandemic and, consequently, the Company continues to monitor these
contracts in light of the evolving situation and address all the claims that have arisen in connection with this process. The
amount of anticipated incremental revenues (and decline thereof) and costs have been included in the forecast of performance
obligations satisfied over time using the input method where such figures could be estimated with reasonable assurance based
on facts and circumstances that existed at the time of such estimate. Where such figures could not be estimated with reasonable
assurance, they were excluded from the forecast of performance obligations satisfied over time using the input method.
Service concession arrangements
The accounting for certain Capital investment activities requires the application of judgment in determining if they fall within
the scope of IFRIC Interpretation 12, Service Concession Arrangements, (“IFRIC 12”). Additional judgments need to be
exercised when determining, among other things, the accounting model to be applied under IFRIC 12, the allocation of the
consideration receivable between revenue-generating activities, the classification of costs incurred on such activities, the
accounting treatment of rehabilitation costs and associated estimates, as well as the effective interest rate to be applied to the
financial asset. As the accounting for Capital investments under IFRIC 12 requires the use of estimates over the term of the
arrangement, any changes to these long-term estimates could result in a significant variation in the accounting for the Capital
investments.
Basis of consolidation
Under certain circumstances, the determination of the Company’s level of power over an investee requires the exercise of
judgment. As such, the classification of the entity as a subsidiary, a joint arrangement, an associate or an investment might
require the application of judgment through the analysis of various indicators, such as the percentage of ownership interest held
in the entity, the representation on the entity’s board of directors, and various other factors.
(CONTINUED)
Values used in impairment tests
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the CGU or group of CGU. Such
recoverable amount corresponds, for the purpose of impairment assessment, to the higher of the value in use or the fair value
less costs of disposal of the CGU or group of CGU to which goodwill has been allocated.
The value in use calculation requires management to estimate future cash flows expected to arise from the CGU or group of
CGU and a suitable discount rate in order to calculate present value. The key assumptions required for the value in use
estimation are the future cash flows growth rate and the discount rate.
When using the value in use approach, cash flows for each CGU or group of CGU are derived from the budget for the upcoming
year, which is approved on an annual basis by members of the Company’s Board of Directors, and a long-term forecast prepared
by management, which covers an additional period from 3 to 5 years. Cash flows beyond the long-term forecast are extrapolated
using a growth rate estimated by management. The discount rate is derived from the Company’s post-tax weighted average cost
of capital and is adjusted, where applicable, to take into account any specific risks.
When the fair value less costs of disposal approach is used, the fair value is derived from a market multiple approach. Under this
approach, transaction multiples are applied to such CGU’s future results, mainly EBIT and earnings before interest, income
taxes, depreciation and amortization. The key assumptions required for the fair value less costs of disposal are the future results
of the CGU or group of CGU, the multiples being used and the costs of disposal.
Future results for each CGU or group of CGU are derived from the budget for the upcoming year. Transaction multiples are
derived from observable market value of comparable publicly traded companies or fair value observed from recent acquisitions
or disposals of businesses that are comparable to the CGU or group of CGU. Costs of disposal, which usually corresponds to a
percentage of the fair value of the CGU or group of CGU, are estimated based on historical transactions of the Company or on
input from recent transactions.
For both the value in use and the fair value less costs of disposal approaches, the values assigned to key assumptions reflect past
experience and external sources of information that are deemed accurate and reliable. The value in use and the fair value are
categorized as Level 3 in the fair value hierarchy described under IFRS 13, Fair Value Measurement, as one or more key
assumption used is based on unobservable data requiring the use of judgement.
When there is any indication that the tangible and intangible assets other than goodwill have suffered an impairment loss, the
determination of the recoverable amount of tangible and intangible assets other than goodwill requires management to estimate
cash flows expected to arise from these assets and a suitable discount rate in order to calculate the present value in a manner
described above for goodwill.
The identification of events that could have an impact on the estimated cash flows of the assets and the determination of these
estimated cash flows require the exercise of judgment, which might result in significant variances in the carrying amount of
these assets if found to be impaired.
The main assumptions used for the goodwill impairment testing are disclosed in Note 14.
Measurement of retirement benefit obligations, other long-term benefit and other post-employment benefit obligations
SNC-Lavalin’s obligations and expenses relating to defined benefit pension plans, other long-term benefits and other post-
employment benefits are determined using actuarial valuations, and are dependent on assumptions such as the rate of
compensation increase, as determined by management. While management believes these assumptions represent its best
estimate, differences in actual results or changes in assumptions could have an impact on the obligations, expenses and amounts
of actuarial gains (losses) recognized in the consolidated statement of comprehensive income.
October 26, 2018 and November 20, 2020 U.K. High Court rulings
SNC-Lavalin has certain defined benefit pension plans in the United Kingdom (the “U.K.”) that are subject to guaranteed
minimum pension (“GMP”) accruals. An October 26, 2018 U.K. High Court ruling resulted in a higher pension obligation for
SNC-Lavalin since the ruling: (i) requires plans to amend their pension formula to equalize benefits for men and women to
adjust for the unequal results produced by the GMP between May 1990 and April 1997; (ii) provides permissible equalization
methods under the law and allows the plan sponsors to use the lowest cost method; and (iii) requires plans to make back
payments subject to plan rule limitations, with interest applied at one percentage point over the Bank of England base rate. On
November 20, 2020, the U.K. High Court ruled that defined benefit plans need to revisit individual transfer payments made
since May 17, 1990 to determine if any additional value is due as a result of GMP equalization.
26
26
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
27
(CONTINUED)
Revenue recognition
The identification of revenue-generating contracts with customers, the identification of performance obligations, the
determination of the transaction price and its allocation between identified performance obligations, the use of the appropriate
revenue recognition method (over time or at a point in time) for each performance obligation and the measure of progress for
each performance obligation satisfied over time are the main aspects of the revenue recognition process, all of which require the
exercise of judgment and the use of assumptions.
The transaction price corresponds to the amount of consideration to which the Company expects to be entitled in exchange for
transferring promised goods or services to a customer. Such amount may require the Company to estimate an amount of variable
consideration, notably from estimated volume of work, claims and unpriced change orders, incentives or penalties, among
others. Furthermore, the Company needs to constrain the transaction price by including only the amount for which it is highly
probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. The amount of variable consideration to be included in the
transaction price of a given contract is determined by using various estimates and assumptions, which could be based on
historical experience with the same customer or other similar contracts, third-party assessments, legal interpretation of relevant
contractual clauses, and probabilistic methodologies, among others. Due to the uncertain nature of the estimations, the amount
of variable consideration may vary significantly over time. Such estimated amount of variable consideration then needs to be
updated at the end of each reporting period.
The determination of anticipated costs for completing a contract is based on estimates that can be affected by a variety of factors
such as potential variances in scheduling and cost of materials along with the availability and cost of qualified labour and
subcontractors, productivity, and possible claims from subcontractors.
More specifically, in 2020, the Company reviewed numerous variables having an impact on revenue recognition that are, or
could be, affected by the COVID-19 pandemic, such as limitations or suspensions of certain business operations throughout the
world, significant travel, particularly air travel, restrictions and associated quarantine and self-isolation requirements, the
inability to execute work on certain sites for, in certain cases, indeterminate periods of time and the delays resulting therefrom,
unavailability of labour and supply chain disruptions. Where available, force majeure relief (or similar) clauses contained in the
contracts that underpin certain of the Company’s major revenue generating projects were invoked and relied upon by the
Company in response to the impacts of the COVID-19 pandemic and, consequently, the Company continues to monitor these
contracts in light of the evolving situation and address all the claims that have arisen in connection with this process. The
amount of anticipated incremental revenues (and decline thereof) and costs have been included in the forecast of performance
obligations satisfied over time using the input method where such figures could be estimated with reasonable assurance based
on facts and circumstances that existed at the time of such estimate. Where such figures could not be estimated with reasonable
assurance, they were excluded from the forecast of performance obligations satisfied over time using the input method.
Service concession arrangements
the scope of IFRIC Interpretation 12, Service Concession Arrangements, (“IFRIC 12”). Additional judgments need to be
exercised when determining, among other things, the accounting model to be applied under IFRIC 12, the allocation of the
consideration receivable between revenue-generating activities, the classification of costs incurred on such activities, the
accounting treatment of rehabilitation costs and associated estimates, as well as the effective interest rate to be applied to the
financial asset. As the accounting for Capital investments under IFRIC 12 requires the use of estimates over the term of the
arrangement, any changes to these long-term estimates could result in a significant variation in the accounting for the Capital
investments.
Basis of consolidation
Under certain circumstances, the determination of the Company’s level of power over an investee requires the exercise of
judgment. As such, the classification of the entity as a subsidiary, a joint arrangement, an associate or an investment might
require the application of judgment through the analysis of various indicators, such as the percentage of ownership interest held
in the entity, the representation on the entity’s board of directors, and various other factors.
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
Values used in impairment tests
Determining whether goodwill is impaired requires an estimation of the recoverable amount of the CGU or group of CGU. Such
recoverable amount corresponds, for the purpose of impairment assessment, to the higher of the value in use or the fair value
less costs of disposal of the CGU or group of CGU to which goodwill has been allocated.
The value in use calculation requires management to estimate future cash flows expected to arise from the CGU or group of
CGU and a suitable discount rate in order to calculate present value. The key assumptions required for the value in use
estimation are the future cash flows growth rate and the discount rate.
When using the value in use approach, cash flows for each CGU or group of CGU are derived from the budget for the upcoming
year, which is approved on an annual basis by members of the Company’s Board of Directors, and a long-term forecast prepared
by management, which covers an additional period from 3 to 5 years. Cash flows beyond the long-term forecast are extrapolated
using a growth rate estimated by management. The discount rate is derived from the Company’s post-tax weighted average cost
of capital and is adjusted, where applicable, to take into account any specific risks.
When the fair value less costs of disposal approach is used, the fair value is derived from a market multiple approach. Under this
approach, transaction multiples are applied to such CGU’s future results, mainly EBIT and earnings before interest, income
taxes, depreciation and amortization. The key assumptions required for the fair value less costs of disposal are the future results
of the CGU or group of CGU, the multiples being used and the costs of disposal.
Future results for each CGU or group of CGU are derived from the budget for the upcoming year. Transaction multiples are
derived from observable market value of comparable publicly traded companies or fair value observed from recent acquisitions
or disposals of businesses that are comparable to the CGU or group of CGU. Costs of disposal, which usually corresponds to a
percentage of the fair value of the CGU or group of CGU, are estimated based on historical transactions of the Company or on
input from recent transactions.
For both the value in use and the fair value less costs of disposal approaches, the values assigned to key assumptions reflect past
experience and external sources of information that are deemed accurate and reliable. The value in use and the fair value are
categorized as Level 3 in the fair value hierarchy described under IFRS 13, Fair Value Measurement, as one or more key
assumption used is based on unobservable data requiring the use of judgement.
When there is any indication that the tangible and intangible assets other than goodwill have suffered an impairment loss, the
determination of the recoverable amount of tangible and intangible assets other than goodwill requires management to estimate
cash flows expected to arise from these assets and a suitable discount rate in order to calculate the present value in a manner
described above for goodwill.
The identification of events that could have an impact on the estimated cash flows of the assets and the determination of these
estimated cash flows require the exercise of judgment, which might result in significant variances in the carrying amount of
these assets if found to be impaired.
The accounting for certain Capital investment activities requires the application of judgment in determining if they fall within
The main assumptions used for the goodwill impairment testing are disclosed in Note 14.
Measurement of retirement benefit obligations, other long-term benefit and other post-employment benefit obligations
SNC-Lavalin’s obligations and expenses relating to defined benefit pension plans, other long-term benefits and other post-
employment benefits are determined using actuarial valuations, and are dependent on assumptions such as the rate of
compensation increase, as determined by management. While management believes these assumptions represent its best
estimate, differences in actual results or changes in assumptions could have an impact on the obligations, expenses and amounts
of actuarial gains (losses) recognized in the consolidated statement of comprehensive income.
October 26, 2018 and November 20, 2020 U.K. High Court rulings
SNC-Lavalin has certain defined benefit pension plans in the United Kingdom (the “U.K.”) that are subject to guaranteed
minimum pension (“GMP”) accruals. An October 26, 2018 U.K. High Court ruling resulted in a higher pension obligation for
SNC-Lavalin since the ruling: (i) requires plans to amend their pension formula to equalize benefits for men and women to
adjust for the unequal results produced by the GMP between May 1990 and April 1997; (ii) provides permissible equalization
methods under the law and allows the plan sponsors to use the lowest cost method; and (iii) requires plans to make back
payments subject to plan rule limitations, with interest applied at one percentage point over the Bank of England base rate. On
November 20, 2020, the U.K. High Court ruled that defined benefit plans need to revisit individual transfer payments made
since May 17, 1990 to determine if any additional value is due as a result of GMP equalization.
26
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
27
27
SNC-Lavalin 2020 Financial Report 3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
(CONTINUED)
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
While the ruling has put forward a range of possible approaches that could be adopted to equalize GMPs, it left it up to
individual pension plan trustees and employers to determine their preferred approach. SNC-Lavalin expects that it will take time
for trustees and employers to decide on the approach for GMP equalization, gather data for plan participants, calculate the new
benefit and cost, and ultimately make payments to members.
Based on its preliminary assessment, SNC-Lavalin recognized $25.1 million as past service cost in “Corporate selling, general
and administrative expenses” in its consolidated income statement for the year ended December 31, 2018. In the year ended
December 31, 2020, SNC-Lavalin recognized an additional amount of $4.0 million as past service cost in “Corporate selling,
general and administrative expenses” in its consolidated income statement (2019: $nil). The cumulative amount of $29.1 million
remains subject to uncertainty until the quantification exercise is completed.
October 15, 2020 U.K. Pensions Ombudsman ruling
An October 15, 2020 U.K. Pensions Ombudsman ruling resulted in a tranche of deferred and pensioner members who for a
period of their pensionable service should receive their first annual increase post retirement in full rather than a pro-rata
increase to reflect the number of complete months they have been in retirement in the first year. This requirement for a full
increase has not been applied historically. Instead a proportionate first increase has been applied for all members and for all
service. Based on its preliminary assessment, SNC-Lavalin recognized $26.7 million as actuarial losses arising from experience
adjustments, which are included in “Remeasurement of defined benefit plans” in the consolidated statement of comprehensive
income for the year ended December 31, 2020.
Measurement of provisions shown in the consolidated statement of financial position
In measuring a provision, the Company takes risks and uncertainties into account. The uncertainties mainly relate to the timing
and amount of a provision. Also, risks and uncertainties arise from discounting a provision, where the effect of the time value of
money is significant, using a pre-tax discount rate that reflects current market assessments of the time value of money.
Additionally, the Company takes future events, such as changes in the law, into account where there is sufficient objective
evidence that they will occur when measuring a provision.
Contingent liabilities
As described in more detail in Note 33, the Company is subject to certain ongoing investigations, and various class action and
other lawsuits and proceedings have been filed against the Company. The outcome of these investigations, actions, lawsuits and
proceedings, while not determinable, could have a material adverse impact on the Company’s liquidity and financial results.
Measurement of share-based payment expenses
The Company offers PSU plans to selected individuals within the organization. Depending on the attainment of performance
criteria and conditions, the number of units granted is adjusted depending on specific indicators to determine the number of
units to which all participants receiving the award will be entitled at the end of the vesting period. At each measurement date,
management is required to estimate the number of performance share units that will vest, which impacts the amount of
associated liabilities and expenses.
Assessment of deferred income tax assets and liabilities
Deferred income tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and
their carrying amounts reported in the financial statements. Deferred income tax assets also reflect the benefit of unutilized tax
losses that can be carried forward to reduce income taxes in future years. This method requires the exercise of significant
judgment in determining whether or not it is probable that the Company’s deferred income tax assets would be recovered from
future taxable income and, therefore, can be recognized in the Company’s consolidated financial statements. Also, estimates are
required to determine the expected timing upon which tax assets will be realized and upon which tax liabilities will be settled,
and the enacted or substantively enacted tax rates that will apply at such time.
Measurement of financial instruments at fair value
The Company measures some of its financial instruments at fair value. The determination of such fair value is based on the most
readily available market data. When data is not readily available, management is required to estimate the fair value of the
instrument using various inputs that are either directly or indirectly observable, or that are not based on observable market data.
Most of the Company’s financial instruments measured at fair value, such as cash and cash equivalents, restricted cash,
derivatives, certain investments in equity instruments and pension plan assets, are based on the most readily available market
data; therefore, the Company determined that there is no additional impact from the COVID-19 pandemic, other than what is
already included in the market data, to be considered for the measurement of such financial instruments as at December 31,
2020.
The Company also accounts for financial instruments classified in the category “Level 3” of the hierarchy of fair value,
including the contingent consideration receivable from the acquirer of the 10.01% interest in 407 International Inc. (“Highway
407 ETR”). The value of this receivable was reduced to $nil in 2020 due to the lower actual and expected traffic and lower
associated revenues as a result of COVID-19 impacts, as the underlying payments by the acquirer are conditioned on the
attainment of certain cumulative financial thresholds related to the performance of Highway 407 ETR.
Refer to Note 30 for additional disclosures on the Company’s Level 3 financial instruments.
Assets and liabilities acquired in a business combination
Intangible assets and goodwill arising out of business combinations are accounted for by applying the acquisition method of
accounting to these transactions. In measuring the fair value of the assets acquired and the liabilities assumed and estimating
their useful lives, the Company uses significant estimates and assumptions regarding cash flow projections, economic risk, and
These estimates and assumptions determine the amount allocated to intangible assets and goodwill, as well as the amortization
period for intangible assets with finite lives. If results differ from estimates, the Company may increase amortization or
weighted average cost of capital.
recognize impairment charges.
Identification of functional currency
The functional currency for each subsidiary, joint operation, joint venture and associate is the currency of the primary economic
environment in which it operates. Determination of functional currency involves significant judgment and other entities may
make different judgments based on similar facts. SNC-Lavalin reconsiders the functional currency of its businesses if there is a
change in the underlying transactions, events or conditions which determine their primary economic environment.
The determination of functional currency affects the carrying value of non-current assets included in the statement of financial
position and, as a consequence, the amortization of those assets included in the income statement. It also impacts exchange
gains and losses included in the income statement and in equity.
Leases
Estimate of the lease term
When the Company recognizes a lease as a lessee, it assesses the lease term based on the conditions of the lease and determines
whether it is reasonably certain that it will exercise its extension or termination option, if any. It then uses the expected modified
term under such option if it is reasonably certain that it will be exercised. As such, a change in the assumption used could result
in a significant impact in the amount recognized as right-of-use asset and lease liability, as well as in the amount of depreciation
of right-of-use asset and interest expense on lease liability.
Assessment of whether a right-of-use asset is impaired
The Company assesses whether a right-of-use asset is impaired in accordance with IAS 36, Impairment of assets, when
indications that an impairment loss may have occurred are present. For example, such assessment occurs when it vacates an
office space and it must determine the recoverability of the asset, to the extent that the Company can sublease the assets or
surrender the lease and recover its costs. The Company examines its lease conditions as well as local market conditions and
estimates its recoverability potential for each vacated premise. The determination of the lease cost recovery rate involves
significant management estimates based on market availability of similar office space and local market conditions. This
significant estimate could affect its future results if the Company succeeds in subleasing their vacated offices at a higher or
lower rate or at different dates than initially anticipated.
28
28
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
29
period of their pensionable service should receive their first annual increase post retirement in full rather than a pro-rata
Assets and liabilities acquired in a business combination
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
Most of the Company’s financial instruments measured at fair value, such as cash and cash equivalents, restricted cash,
derivatives, certain investments in equity instruments and pension plan assets, are based on the most readily available market
data; therefore, the Company determined that there is no additional impact from the COVID-19 pandemic, other than what is
already included in the market data, to be considered for the measurement of such financial instruments as at December 31,
2020.
The Company also accounts for financial instruments classified in the category “Level 3” of the hierarchy of fair value,
including the contingent consideration receivable from the acquirer of the 10.01% interest in 407 International Inc. (“Highway
407 ETR”). The value of this receivable was reduced to $nil in 2020 due to the lower actual and expected traffic and lower
associated revenues as a result of COVID-19 impacts, as the underlying payments by the acquirer are conditioned on the
attainment of certain cumulative financial thresholds related to the performance of Highway 407 ETR.
Refer to Note 30 for additional disclosures on the Company’s Level 3 financial instruments.
Intangible assets and goodwill arising out of business combinations are accounted for by applying the acquisition method of
accounting to these transactions. In measuring the fair value of the assets acquired and the liabilities assumed and estimating
their useful lives, the Company uses significant estimates and assumptions regarding cash flow projections, economic risk, and
weighted average cost of capital.
These estimates and assumptions determine the amount allocated to intangible assets and goodwill, as well as the amortization
period for intangible assets with finite lives. If results differ from estimates, the Company may increase amortization or
recognize impairment charges.
Identification of functional currency
The functional currency for each subsidiary, joint operation, joint venture and associate is the currency of the primary economic
environment in which it operates. Determination of functional currency involves significant judgment and other entities may
make different judgments based on similar facts. SNC-Lavalin reconsiders the functional currency of its businesses if there is a
change in the underlying transactions, events or conditions which determine their primary economic environment.
The determination of functional currency affects the carrying value of non-current assets included in the statement of financial
position and, as a consequence, the amortization of those assets included in the income statement. It also impacts exchange
gains and losses included in the income statement and in equity.
Leases
Estimate of the lease term
When the Company recognizes a lease as a lessee, it assesses the lease term based on the conditions of the lease and determines
whether it is reasonably certain that it will exercise its extension or termination option, if any. It then uses the expected modified
term under such option if it is reasonably certain that it will be exercised. As such, a change in the assumption used could result
in a significant impact in the amount recognized as right-of-use asset and lease liability, as well as in the amount of depreciation
of right-of-use asset and interest expense on lease liability.
Assessment of whether a right-of-use asset is impaired
The Company assesses whether a right-of-use asset is impaired in accordance with IAS 36, Impairment of assets, when
indications that an impairment loss may have occurred are present. For example, such assessment occurs when it vacates an
office space and it must determine the recoverability of the asset, to the extent that the Company can sublease the assets or
surrender the lease and recover its costs. The Company examines its lease conditions as well as local market conditions and
estimates its recoverability potential for each vacated premise. The determination of the lease cost recovery rate involves
significant management estimates based on market availability of similar office space and local market conditions. This
significant estimate could affect its future results if the Company succeeds in subleasing their vacated offices at a higher or
lower rate or at different dates than initially anticipated.
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
While the ruling has put forward a range of possible approaches that could be adopted to equalize GMPs, it left it up to
individual pension plan trustees and employers to determine their preferred approach. SNC-Lavalin expects that it will take time
for trustees and employers to decide on the approach for GMP equalization, gather data for plan participants, calculate the new
benefit and cost, and ultimately make payments to members.
Based on its preliminary assessment, SNC-Lavalin recognized $25.1 million as past service cost in “Corporate selling, general
and administrative expenses” in its consolidated income statement for the year ended December 31, 2018. In the year ended
December 31, 2020, SNC-Lavalin recognized an additional amount of $4.0 million as past service cost in “Corporate selling,
general and administrative expenses” in its consolidated income statement (2019: $nil). The cumulative amount of $29.1 million
remains subject to uncertainty until the quantification exercise is completed.
October 15, 2020 U.K. Pensions Ombudsman ruling
An October 15, 2020 U.K. Pensions Ombudsman ruling resulted in a tranche of deferred and pensioner members who for a
increase to reflect the number of complete months they have been in retirement in the first year. This requirement for a full
increase has not been applied historically. Instead a proportionate first increase has been applied for all members and for all
service. Based on its preliminary assessment, SNC-Lavalin recognized $26.7 million as actuarial losses arising from experience
adjustments, which are included in “Remeasurement of defined benefit plans” in the consolidated statement of comprehensive
income for the year ended December 31, 2020.
Measurement of provisions shown in the consolidated statement of financial position
In measuring a provision, the Company takes risks and uncertainties into account. The uncertainties mainly relate to the timing
and amount of a provision. Also, risks and uncertainties arise from discounting a provision, where the effect of the time value of
money is significant, using a pre-tax discount rate that reflects current market assessments of the time value of money.
Additionally, the Company takes future events, such as changes in the law, into account where there is sufficient objective
evidence that they will occur when measuring a provision.
Contingent liabilities
As described in more detail in Note 33, the Company is subject to certain ongoing investigations, and various class action and
other lawsuits and proceedings have been filed against the Company. The outcome of these investigations, actions, lawsuits and
proceedings, while not determinable, could have a material adverse impact on the Company’s liquidity and financial results.
Measurement of share-based payment expenses
The Company offers PSU plans to selected individuals within the organization. Depending on the attainment of performance
criteria and conditions, the number of units granted is adjusted depending on specific indicators to determine the number of
units to which all participants receiving the award will be entitled at the end of the vesting period. At each measurement date,
management is required to estimate the number of performance share units that will vest, which impacts the amount of
associated liabilities and expenses.
Assessment of deferred income tax assets and liabilities
Deferred income tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and
their carrying amounts reported in the financial statements. Deferred income tax assets also reflect the benefit of unutilized tax
losses that can be carried forward to reduce income taxes in future years. This method requires the exercise of significant
judgment in determining whether or not it is probable that the Company’s deferred income tax assets would be recovered from
future taxable income and, therefore, can be recognized in the Company’s consolidated financial statements. Also, estimates are
required to determine the expected timing upon which tax assets will be realized and upon which tax liabilities will be settled,
and the enacted or substantively enacted tax rates that will apply at such time.
Measurement of financial instruments at fair value
The Company measures some of its financial instruments at fair value. The determination of such fair value is based on the most
readily available market data. When data is not readily available, management is required to estimate the fair value of the
instrument using various inputs that are either directly or indirectly observable, or that are not based on observable market data.
28
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
29
29
SNC-Lavalin 2020 Financial Report
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(CONTINUED)
4.
SEGMENT DISCLOSURES (CONTINUED)
Determining the discount rate for leases
IFRS 16 requires the Company to discount the lease payments using the rate implicit in the lease if that rate is readily available.
If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate (“IBR”). The Company
generally used its IBR when recording leases initially, since the implicit rates are not readily available due to information not
being available from the lessor regarding the fair value of underlying assets and directs costs incurred by the lessor related to the
leased assets. The determination of the IBR requires the use of various assumptions which, if different than those being used,
could result in a significant impact in the amount recognized as right-of-use asset and lease liability, as well as in the amount of
depreciation of right-of-use asset and interest expense on lease liability.
Determining if a contract modification increasing the scope of a lease is a separate lease or not
When a lease modification increasing the scope of a lease occurs, the Company needs to determine if such modification is to be
accounted for as a separate lease or not. Such determination requires the use of judgment on the stand-alone selling price and
any appropriate adjustments to the stand-alone selling price reflecting the circumstance of the particular contract.
Classification and measurement of non-current assets or disposal groups classified as held for sale
The classification of non-current assets or disposal groups as held for sale is based on certain criteria, including the fact that the
sale of such assets or disposal groups is highly probable. Such probability of a sale transaction to be completed within one year
from the date of classification at a reasonable price in relation to the fair value of the assets or disposal groups is, by nature,
subject to uncertainties.
Furthermore, the measurement of non-current assets or disposal groups classified as held for sale at the lower of their carrying
amount and fair value less costs to sell requires the exercise of judgment. While fair value of certain assets or disposal groups
can be determined based on valuation techniques using various inputs, themselves requiring the use of estimates, it might also
require the valuation (and associated estimates) of anticipated contractual clauses related to the transfer, or not, of certain risks
and uncertainties associated to these assets or disposal groups. In addition, events occurring subsequently to the classification of
non-current assets or disposal groups as held for sale, or additional information received on past events unknown at the time of
such classification, could change the estimate of fair value less costs to sell related to such assets or disposal groups.
4.
SEGMENT DISCLOSURES
SNC-Lavalin’s reportable segments are i) Engineering, Design and Project Management (“EDPM”); ii) Nuclear;
iii) Infrastructure Services; iv) Resources; v) Infrastructure EPC Projects; and vi) Capital.
allocated to the Company’s segments.
The description of each of the segments is as follows:
EDPM incorporates all consultancy, engineering, design and project management services around the world. It also leads our
efforts to transform the global infrastructure sector by leveraging data and technology to improve the delivery of our clients’
projects from conception through to eventual operation. EDPM projects are mainly in transportation (including rail, mass transit,
roads and airports), civil infrastructure, aerospace, defense and security and technology, including some of the world’s most
transformational projects. A significant portion of EDPM’s revenues are derived from the public sector, including national,
provincial, state and local and municipal authorities.
Nuclear supports clients across the entire nuclear lifecycle with the full spectrum of services from consultancy, EPCM services,
field services, technology services, spare parts, reactor support and decommissioning and waste management. As stewards of
the CANDU technology, it also provides new-build and full refurbishment services of CANDU reactors.
Infrastructure Services includes O&M projects, as well as the Company’s repetitive EPC offerings that are lower-risk,
standardized solutions for: i) district cooling plants; and ii) power substations executed through its Linxon subsidiary. The
segment also includes engineering solutions in hydro, transmission and distribution, renewables, energy storage, and intelligent
networks and cybersecurity.
Resources provides a full suite of delivery services primarily to the mining & metallurgy sector, covering the project lifecycle
from project development through project delivery and support services. Resources ceased bidding for new EPC projects under
the LSTK construction contracting modeling in July 2019. Resources is now focused on providing engineering, EPCM, project
management consultancy (“PMC”), commissioning and technical support services through a lower risk contracting model and
operational delivery is focused on key regions and global clients. Resources also includes the operating phase of a Build-Own-
Operate (BOO) contract in the United States. In the past, Resources included services and LSTK projects in Oil & Gas, which
are now presented as discontinued operations.
Infrastructure EPC Projects includes LSTK construction contracts related to mass transit, heavy rail, roads, bridges, airports,
ports and harbours and water infrastructure. In addition, Infrastructure EPC Projects includes the LSTK construction contracts
related to the former Clean Power segment, as well as from thermal power activities which the Company exited in 2018. In July
2019, the Company decided to cease bidding on new LSTK construction contracts.
Capital is SNC-Lavalin’s investment, financing and asset management arm, responsible for developing projects, arranging
financing, investing equity, undertaking complex financial modeling and managing its infrastructure investments for optimal
returns. Its activities are principally concentrated in infrastructure such as bridges, highways, mass transit systems, power
facilities, energy infrastructure, water treatment plants and social infrastructure (e.g. hospitals). The Capital segment includes
SNC-Lavalin's 20% ownership interest in and management of SNC-Lavalin Infrastructure Partners LP.
As disclosed in Note 2C, effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to
(without any change to this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to clarify
that this measure excludes items other than interest and taxes. Also, as disclosed in Note 2C, effective as of the second quarter
of 2020, the Company presents the financial results of Capital separately from the SNCL Engineering Services line of business
to further simplify the presentation of financial information excluding Capital.
The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies
(Note 2). The Company evaluates segment performance using Segment Adjusted EBIT, which consists of, except for the
Capital segment, Total Segment Adjusted EBIT less i) directly related selling, general and administrative expenses; and ii)
corporate selling, general and administrative expenses that are directly and indirectly related to projects or segments. Corporate
selling, general and administrative expenses that are not directly or indirectly related to projects or segments, impairment losses
(reversal of impairment losses) arising from expected credit losses, gains (losses) arising on financial assets (liabilities) at fair
value through profit or loss, restructuring costs, amortization of intangible assets related to business combinations, acquisition-
related costs and integration costs, gains (losses) on disposal(s) or adjustment on disposal(s) of PS&PM businesses, impairment
of intangible assets related to business combinations, goodwill impairment and federal charges settlement (PPSC) are not
The Company evaluates the performance of its Capital segment based on: i) dividends or distributions received from
investments, which are not subject to significant influence by SNC-Lavalin; ii) SNC-Lavalin’s share of the net results of its
investments, or dividends from its Capital investments for which the carrying amount is $nil, but would otherwise be negative
based on historical financial results and dividends, for investments accounted for by the equity method; and iii) the net result
from investments accounted for by the consolidation method.
The Capital Segment Adjusted EBIT also reflects selling, general and administrative expenses, including corporate selling,
general and administrative expenses that are directly and indirectly related to the segment. Accordingly, the Segment Adjusted
EBIT from Capital is reported net of selling, general and administrative expenses.
30
30
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
31
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
4.
SEGMENT DISCLOSURES (CONTINUED)
(CONTINUED)
Determining the discount rate for leases
IFRS 16 requires the Company to discount the lease payments using the rate implicit in the lease if that rate is readily available.
If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate (“IBR”). The Company
generally used its IBR when recording leases initially, since the implicit rates are not readily available due to information not
being available from the lessor regarding the fair value of underlying assets and directs costs incurred by the lessor related to the
leased assets. The determination of the IBR requires the use of various assumptions which, if different than those being used,
could result in a significant impact in the amount recognized as right-of-use asset and lease liability, as well as in the amount of
depreciation of right-of-use asset and interest expense on lease liability.
Determining if a contract modification increasing the scope of a lease is a separate lease or not
When a lease modification increasing the scope of a lease occurs, the Company needs to determine if such modification is to be
accounted for as a separate lease or not. Such determination requires the use of judgment on the stand-alone selling price and
any appropriate adjustments to the stand-alone selling price reflecting the circumstance of the particular contract.
Classification and measurement of non-current assets or disposal groups classified as held for sale
The classification of non-current assets or disposal groups as held for sale is based on certain criteria, including the fact that the
sale of such assets or disposal groups is highly probable. Such probability of a sale transaction to be completed within one year
from the date of classification at a reasonable price in relation to the fair value of the assets or disposal groups is, by nature,
subject to uncertainties.
Furthermore, the measurement of non-current assets or disposal groups classified as held for sale at the lower of their carrying
amount and fair value less costs to sell requires the exercise of judgment. While fair value of certain assets or disposal groups
can be determined based on valuation techniques using various inputs, themselves requiring the use of estimates, it might also
require the valuation (and associated estimates) of anticipated contractual clauses related to the transfer, or not, of certain risks
and uncertainties associated to these assets or disposal groups. In addition, events occurring subsequently to the classification of
non-current assets or disposal groups as held for sale, or additional information received on past events unknown at the time of
such classification, could change the estimate of fair value less costs to sell related to such assets or disposal groups.
4.
SEGMENT DISCLOSURES
SNC-Lavalin’s reportable segments are i) Engineering, Design and Project Management (“EDPM”); ii) Nuclear;
iii) Infrastructure Services; iv) Resources; v) Infrastructure EPC Projects; and vi) Capital.
The description of each of the segments is as follows:
EDPM incorporates all consultancy, engineering, design and project management services around the world. It also leads our
efforts to transform the global infrastructure sector by leveraging data and technology to improve the delivery of our clients’
projects from conception through to eventual operation. EDPM projects are mainly in transportation (including rail, mass transit,
roads and airports), civil infrastructure, aerospace, defense and security and technology, including some of the world’s most
transformational projects. A significant portion of EDPM’s revenues are derived from the public sector, including national,
provincial, state and local and municipal authorities.
Nuclear supports clients across the entire nuclear lifecycle with the full spectrum of services from consultancy, EPCM services,
field services, technology services, spare parts, reactor support and decommissioning and waste management. As stewards of
the CANDU technology, it also provides new-build and full refurbishment services of CANDU reactors.
Infrastructure Services includes O&M projects, as well as the Company’s repetitive EPC offerings that are lower-risk,
standardized solutions for: i) district cooling plants; and ii) power substations executed through its Linxon subsidiary. The
segment also includes engineering solutions in hydro, transmission and distribution, renewables, energy storage, and intelligent
networks and cybersecurity.
Resources provides a full suite of delivery services primarily to the mining & metallurgy sector, covering the project lifecycle
from project development through project delivery and support services. Resources ceased bidding for new EPC projects under
the LSTK construction contracting modeling in July 2019. Resources is now focused on providing engineering, EPCM, project
management consultancy (“PMC”), commissioning and technical support services through a lower risk contracting model and
operational delivery is focused on key regions and global clients. Resources also includes the operating phase of a Build-Own-
Operate (BOO) contract in the United States. In the past, Resources included services and LSTK projects in Oil & Gas, which
are now presented as discontinued operations.
Infrastructure EPC Projects includes LSTK construction contracts related to mass transit, heavy rail, roads, bridges, airports,
ports and harbours and water infrastructure. In addition, Infrastructure EPC Projects includes the LSTK construction contracts
related to the former Clean Power segment, as well as from thermal power activities which the Company exited in 2018. In July
2019, the Company decided to cease bidding on new LSTK construction contracts.
Capital is SNC-Lavalin’s investment, financing and asset management arm, responsible for developing projects, arranging
financing, investing equity, undertaking complex financial modeling and managing its infrastructure investments for optimal
returns. Its activities are principally concentrated in infrastructure such as bridges, highways, mass transit systems, power
facilities, energy infrastructure, water treatment plants and social infrastructure (e.g. hospitals). The Capital segment includes
SNC-Lavalin's 20% ownership interest in and management of SNC-Lavalin Infrastructure Partners LP.
As disclosed in Note 2C, effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to
(without any change to this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to clarify
that this measure excludes items other than interest and taxes. Also, as disclosed in Note 2C, effective as of the second quarter
of 2020, the Company presents the financial results of Capital separately from the SNCL Engineering Services line of business
to further simplify the presentation of financial information excluding Capital.
The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies
(Note 2). The Company evaluates segment performance using Segment Adjusted EBIT, which consists of, except for the
Capital segment, Total Segment Adjusted EBIT less i) directly related selling, general and administrative expenses; and ii)
corporate selling, general and administrative expenses that are directly and indirectly related to projects or segments. Corporate
selling, general and administrative expenses that are not directly or indirectly related to projects or segments, impairment losses
(reversal of impairment losses) arising from expected credit losses, gains (losses) arising on financial assets (liabilities) at fair
value through profit or loss, restructuring costs, amortization of intangible assets related to business combinations, acquisition-
related costs and integration costs, gains (losses) on disposal(s) or adjustment on disposal(s) of PS&PM businesses, impairment
of intangible assets related to business combinations, goodwill impairment and federal charges settlement (PPSC) are not
allocated to the Company’s segments.
The Company evaluates the performance of its Capital segment based on: i) dividends or distributions received from
investments, which are not subject to significant influence by SNC-Lavalin; ii) SNC-Lavalin’s share of the net results of its
investments, or dividends from its Capital investments for which the carrying amount is $nil, but would otherwise be negative
based on historical financial results and dividends, for investments accounted for by the equity method; and iii) the net result
from investments accounted for by the consolidation method.
The Capital Segment Adjusted EBIT also reflects selling, general and administrative expenses, including corporate selling,
general and administrative expenses that are directly and indirectly related to the segment. Accordingly, the Segment Adjusted
EBIT from Capital is reported net of selling, general and administrative expenses.
30
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
31
31
SNC-Lavalin 2020 Financial Report 4.
SEGMENT DISCLOSURES (CONTINUED)
4.
SEGMENT DISCLOSURES (CONTINUED)
The following table presents revenues and Segment Adjusted EBIT for each of the Company’s segments for the year ended
December 31, 2020:
The following table presents revenues and Segment Adjusted EBIT for each of the Company’s segments for the year ended
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services
Resources (1)
Infrastructure EPC Projects (2)
SNCL Projects
Capital
Total Segment Adjusted EBIT
Corporate selling, general and administrative expenses not allocated
to the segments (Note 25)
Impairment loss arising from expected credit losses
Gain (loss) arising on financial assets (liabilities) at fair value through
profit or loss
Restructuring costs (Note 26)
Amortization of intangible assets related to business combinations
(Note 15)
Adjustment on gain from disposal of a Capital investment (Note 5A)
Loss on disposals of PS&PM businesses (Note 6)
Impairment loss on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell (Note 39B)
EBIT
Net financial expenses (Note 27)
Earnings (loss) before income taxes from continuing operations
Income taxes (Note 29B)
Net income (loss) from continuing operations
Net loss from discontinued operations (Note 39A)
Net income (loss)
Net income (loss) from continuing operations attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss) from continuing operations
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
2020
SEGMENT ADJUSTED EBIT
REVENUES
PS&PM
CAPITAL
TOTAL
$ 3,721,119 $
302,269 $
— $
302,269
928,606
140,051
1,325,313
97,212
5,975,038
539,532
162,916
(171,118)
740,188
(359,680)
903,104
(530,798)
—
—
—
—
—
—
140,051
97,212
539,532
(171,118)
(359,680)
(530,798)
129,359
—
116,615
116,615
$ 7,007,501
8,734
116,615
125,349
(147,739)
(28,194)
(175,933)
(874)
—
(874)
(4,652)
(57,207)
(63,324)
—
(61,859)
(63,324)
(126,770)
—
(126,770)
—
25,000
(7,467)
(6,094)
—
—
25,000
(7,467)
(6,094)
(348,186)
56,214
(291,972)
97,732
16,264
113,996
(445,918)
39,950
(405,968)
(53,438)
(5,601)
(59,039)
(392,480)
45,551
(346,929)
(609,344)
—
(609,344)
$ (1,001,824) $
45,551 $
(956,273)
Net income (loss) from continuing operations attributable to:
$
(401,654) $
45,551 $
(356,103)
9,174
—
9,174
$
(392,480) $
45,551 $
(346,929)
$ (1,010,998) $
45,551 $
(965,447)
9,174
—
9,174
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
$ (1,001,824) $
45,551 $
(956,273)
from SNCL Engineering Services (see Note 2C).
Net income (loss) from continuing operations
$
(329,639) $ 2,772,802 $ 2,443,163
(1)
(2)
The negative Segment Adjusted EBIT of Resources resulted mainly from charges for remaining LSTK contracts and other historical claims and litigation
matters.
The negative Segment Adjusted EBIT of Infrastructure EPC Projects was mainly due to unfavorable reforecasts, commercial claims receivable reductions,
additional provisions related to legacy litigation matters and the effect of lower productivity caused by COVID-19.
32
32
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
33
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019:
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services
Resources (3)
Infrastructure EPC Projects (4)
SNCL Projects
Capital
Total Segment Adjusted EBIT
Corporate selling, general and administrative expenses not allocated
to the segments
(Note 25)
Impairment loss arising from expected credit losses
Gain (loss) arising on financial assets (liabilities) at fair value through
profit or loss
Restructuring costs (Note 26)
(Note 15)
Amortization of intangible assets related to business combinations
Acquisition-related costs and integration costs (Note )
Gain on disposal of a Capital investment (Note 5A)
Loss from adjustment on disposals of PS&PM businesses
Federal charges settlement (PPSC) (Note 18)
EBIT
Net financial expenses (Note 27)
Earnings (loss) before income taxes from continuing operations
Income taxes (Note 29B)
Net income (loss) from continuing operations
Net loss from discontinued operations (Note 39A)
Net income (loss)
2019 (1), (2)
SEGMENT ADJUSTED EBIT
REVENUES
PS&PM
CAPITAL
TOTAL
$ 3,908,900 $
357,766 $
— $
357,766
929,809
127,601
1,178,582
73,511
6,017,291
558,878
273,077
(111,199)
1,076,744
(106,480)
1,349,821
(217,679)
—
—
—
—
—
—
127,601
73,511
558,878
(111,199)
(106,480)
(217,679)
262,720
—
243,240
243,240
$ 7,629,832
341,199
243,240
584,439
(45,750)
(28,194)
(73,944)
(210)
—
(210)
(5,807)
(76,058)
(162,117)
(8,315)
(294)
(257,327)
1,064
(3,594)
—
—
—
—
(4,743)
(79,652)
(162,117)
(8,315)
(294)
(257,327)
—
2,970,783
2,970,783
(214,679)
3,183,299
2,968,620
197,267
17,842
215,109
(411,946)
3,165,457
2,753,511
(82,307)
392,655
310,348
(329,639)
2,772,802
2,443,163
(2,112,576)
—
(2,112,576)
$ (2,442,215) $ 2,772,802 $
330,587
(332,007)
2,772,802
2,440,795
2,368
—
2,368
$ (2,444,583) $ 2,772,802 $
328,219
2,368
—
2,368
$ (2,442,215) $ 2,772,802 $
330,587
(1)
(2)
(3)
(4)
Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately
Comparative figures have been re-presented (see Notes 2C and 39).
The negative Segment Adjusted EBIT of Resources was mainly due to net unfavorable reforecasts totaling $89.3 million on certain major LSTK contracts.
The negative Segment Adjusted EBIT of Infrastructure EPC Projects was mainly attributable to the net unfavorable reforecasts totaling approximately
$130 million on certain major projects resulting from higher forecasted costs or increased warranty costs, primarily on two LSTK contracts nearing
completion and on smaller clean power projects.
4.
SEGMENT DISCLOSURES (CONTINUED)
4.
SEGMENT DISCLOSURES (CONTINUED)
The following table presents revenues and Segment Adjusted EBIT for each of the Company’s segments for the year ended
The following table presents revenues and Segment Adjusted EBIT for each of the Company’s segments for the year ended
December 31, 2019:
Total Segment Adjusted EBIT
Corporate selling, general and administrative expenses not allocated
2020
SEGMENT ADJUSTED EBIT
REVENUES
PS&PM
CAPITAL
TOTAL
$ 3,721,119 $
302,269 $
— $
302,269
928,606
140,051
1,325,313
97,212
5,975,038
539,532
162,916
(171,118)
740,188
(359,680)
903,104
(530,798)
—
—
—
—
—
—
140,051
97,212
539,532
(171,118)
(359,680)
(530,798)
129,359
—
116,615
116,615
$ 7,007,501
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services
Resources (3)
Infrastructure EPC Projects (4)
SNCL Projects
Capital
December 31, 2020:
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services
Resources (1)
Infrastructure EPC Projects (2)
SNCL Projects
Capital
Total Segment Adjusted EBIT
Corporate selling, general and administrative expenses not allocated
to the segments (Note 25)
Impairment loss arising from expected credit losses
Gain (loss) arising on financial assets (liabilities) at fair value through
profit or loss
Restructuring costs (Note 26)
Amortization of intangible assets related to business combinations
(Note 15)
Loss on disposals of PS&PM businesses (Note 6)
Impairment loss on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell (Note 39B)
EBIT
Net financial expenses (Note 27)
Earnings (loss) before income taxes from continuing operations
Income taxes (Note 29B)
Net income (loss) from continuing operations
Net loss from discontinued operations (Note 39A)
Net income (loss)
Net income (loss) from continuing operations attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss) from continuing operations
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
(1)
(2)
matters.
8,734
116,615
125,349
(147,739)
(28,194)
(175,933)
(874)
—
(874)
(4,652)
(57,207)
(63,324)
—
(61,859)
(63,324)
(126,770)
—
(126,770)
(7,467)
(6,094)
—
—
25,000
(7,467)
(6,094)
(348,186)
56,214
(291,972)
97,732
16,264
113,996
(445,918)
39,950
(405,968)
(53,438)
(5,601)
(59,039)
(392,480)
45,551
(346,929)
(609,344)
—
(609,344)
$
(401,654) $
45,551 $
(356,103)
9,174
—
9,174
$
(392,480) $
45,551 $
(346,929)
$ (1,010,998) $
45,551 $
(965,447)
9,174
—
9,174
$ (1,001,824) $
45,551 $
(956,273)
Adjustment on gain from disposal of a Capital investment (Note 5A)
—
25,000
Impairment loss arising from expected credit losses
Gain (loss) arising on financial assets (liabilities) at fair value through
profit or loss
Restructuring costs (Note 26)
Amortization of intangible assets related to business combinations
(Note 15)
Acquisition-related costs and integration costs (Note )
Gain on disposal of a Capital investment (Note 5A)
Loss from adjustment on disposals of PS&PM businesses
Federal charges settlement (PPSC) (Note 18)
EBIT
Net financial expenses (Note 27)
Earnings (loss) before income taxes from continuing operations
Income taxes (Note 29B)
Net income (loss) from continuing operations
Net loss from discontinued operations (Note 39A)
Net income (loss)
$ (1,001,824) $
45,551 $
(956,273)
Net income (loss) from continuing operations attributable to:
SNC-Lavalin shareholders
Non-controlling interests
to the segments
(Note 25)
The negative Segment Adjusted EBIT of Resources resulted mainly from charges for remaining LSTK contracts and other historical claims and litigation
The negative Segment Adjusted EBIT of Infrastructure EPC Projects was mainly due to unfavorable reforecasts, commercial claims receivable reductions,
additional provisions related to legacy litigation matters and the effect of lower productivity caused by COVID-19.
Net income (loss) from continuing operations
$
(329,639) $ 2,772,802 $ 2,443,163
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
$ (2,444,583) $ 2,772,802 $
328,219
2,368
—
2,368
$ (2,442,215) $ 2,772,802 $
330,587
(1)
(2)
(3)
(4)
Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately
from SNCL Engineering Services (see Note 2C).
Comparative figures have been re-presented (see Notes 2C and 39).
The negative Segment Adjusted EBIT of Resources was mainly due to net unfavorable reforecasts totaling $89.3 million on certain major LSTK contracts.
The negative Segment Adjusted EBIT of Infrastructure EPC Projects was mainly attributable to the net unfavorable reforecasts totaling approximately
$130 million on certain major projects resulting from higher forecasted costs or increased warranty costs, primarily on two LSTK contracts nearing
completion and on smaller clean power projects.
32
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
33
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
33
2019 (1), (2)
SEGMENT ADJUSTED EBIT
REVENUES
PS&PM
CAPITAL
TOTAL
$ 3,908,900 $
357,766 $
— $
357,766
929,809
127,601
1,178,582
73,511
6,017,291
558,878
273,077
(111,199)
1,076,744
(106,480)
1,349,821
(217,679)
—
—
—
—
—
—
127,601
73,511
558,878
(111,199)
(106,480)
(217,679)
262,720
—
243,240
243,240
$ 7,629,832
341,199
243,240
584,439
(45,750)
(28,194)
(73,944)
(210)
—
(210)
(5,807)
(76,058)
(162,117)
(8,315)
1,064
(3,594)
(4,743)
(79,652)
—
—
(162,117)
(8,315)
—
2,970,783
2,970,783
(294)
(257,327)
—
—
(294)
(257,327)
(214,679)
3,183,299
2,968,620
197,267
17,842
215,109
(411,946)
3,165,457
2,753,511
(82,307)
392,655
310,348
(329,639)
2,772,802
2,443,163
(2,112,576)
—
(2,112,576)
$ (2,442,215) $ 2,772,802 $
330,587
(332,007)
2,772,802
2,440,795
2,368
—
2,368
SNC-Lavalin 2020 Financial Report
4.
SEGMENT DISCLOSURES (CONTINUED)
5.
CAPITAL INVESTMENTS
The Company also discloses in the table below supplementary information such as its net income (loss) from PS&PM, its
dividends from Highway 407 ETR, and its net income (loss) from other Capital investments.
SNC-Lavalin makes investments in infrastructure concessions for public services such as bridges, highways, mass transit
systems, power facilities, energy infrastructure, water treatment plants and social infrastructure (e.g. hospitals).
It should be noted that the supplementary information provided in the following table does not reflect information related to the
Company’s segments, but is rather an allocation of net income (loss) attributable to SNC-Lavalin shareholders between various
components.
YEARS ENDED DECEMBER 31
Supplementary information:
Net loss on disposals of PS&PM businesses (Note 6)
Federal charges settlement (PPSC) (Note 18)
Net loss from discontinued operations (Note 39A)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less
cost to sell (Note 39B)
Excluding the items listed above
Net loss attributable to SNC-Lavalin shareholders from PS&PM
Net gain or adjustment on net gain from disposal of a Capital investment (Note 5A)
Net loss arising on contingent consideration receivable from the acquirer of the 10.01% interest in
Highway 407 ETR
Highway 407 ETR dividends
Excluding the items listed above
Net income attributable to SNC-Lavalin shareholders from Capital
Net income (loss) attributable to SNC-Lavalin shareholders
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
2020
2019 (1)
$
(7,467) $
(294)
—
(257,327)
(609,344)
(2,112,576)
(6,094)
—
(388,093)
(74,386)
(1,010,998)
(2,444,583)
25,000
2,585,998
(49,627)
38,048
32,130
—
146,099
40,705
45,551
2,772,802
$ (965,447) $
328,219
The following table presents property, equipment, goodwill and intangible assets inside and outside Canada reflected on the
Company’s consolidated statements of financial position:
Property, equipment, goodwill and intangible assets (2)
Canada
Outside Canada
(2)
All related to PS&PM activities
DECEMBER 31
2020
DECEMBER 31
2019
$
224,424 $
250,826
4,124,977
4,314,496
$
4,349,401 $
4,565,322
The main concessions and public-private partnerships contracts reported under IFRIC Interpretation 12, Service Concession
Arrangements, are all accounted for under the financial asset model.
In order to provide the reader of the financial statements with a better understanding of the financial position and results of
operations of its Capital investments, the Company presents certain distinct financial information related specifically to its
Capital investments throughout its financial statements, as well as additional information below.
VARIATIONS IN OWNERSHIP INTERESTS IN INVESTMENTS
A)
I) IN 2020
In the fourth quarter of 2020, the Company released in full a provision for contingent indemnification related to the previous
disposal of a Capital investment accounted for under the consolidation method upon expiry of the indemnification period. Such
non-cash reversal of the provision in the amount of $25.0 million is included in “Gain or adjustment on gain from disposal of a
Capital investment” in the consolidated income statement for the year ended December 31, 2020.
II) IN 2019
TRANSITNEXT GENERAL PARTNERSHIP
On March 29, 2019, SNC-Lavalin announced that its wholly-owned subsidiary, TransitNEXT General Partnership
(“TransitNEXT”), signed an agreement with the City of Ottawa to design, build, finance and maintain the new Trillium Line
extension, and to also assume responsibility for the long-term maintenance of the existing Trillium Line, under a 30-year
contract.
Also, TransitNEXT entered into a credit facility agreement, which is non-recourse to SNC-Lavalin. The aggregate maximum
principal amount of the credit facility is $149.0 million. The credit facility bears interest at a rate of CDOR plus an applicable
margin and is repayable at the latest on February 10, 2024. The credit facility is secured by all assets of TransitNEXT.
Furthermore, in relation to the credit facility above, TransitNEXT entered into an interest rate swap agreement with financial
institutions under which TransitNEXT pays interest at a fixed rate and receives interest at a rate of CDOR.
In addition, a wholly-owned entity indirectly holding TransitNEXT entered into a term loan facility agreement, which is non-
recourse to SNC-Lavalin. The aggregate principal amount of the term loan facility is $99.7 million and cannot be drawn until
substantial completion of the Trillium project is achieved. The term loan facility bears interest at a rate of: i) 4.82% prior to
August 10, 2026; and ii) CDOR plus an applicable margin from and after August 10, 2026. The maturity of the term loan
facility is the earlier of: i) the date that is 4 years after the substantial completion date of the Trillium project; and
ii) March 29, 2028. The term loan facility is secured by all assets of such entity indirectly holding TransitNEXT and the
interests and securities issued by the entity indirectly holding TransitNEXT have also been pledged to the project lenders as is
customary in projects of this nature.
HIGHWAY 407 ETR
SNC-Lavalin’s investment in TransitNEXT is accounted for by the consolidation method.
On April 5, 2019, SNC-Lavalin announced that the Company entered into an agreement with Ontario Municipal Employees
Retirement System (“OMERS”) to sell 10.01% of the shares of Highway 407 ETR (the “Subject Shares”), subject to
shareholders’ rights, including rights of first refusal in favor of certain other shareholders of Highway 407 ETR.
On May 17, 2019, SNC-Lavalin announced, prior to the expiry of the relevant notice and acceptance period, that another
shareholder of Highway 407 ETR had exercised its right of first refusal to purchase all of the Subject Shares on the same terms
and conditions as those set out in the transaction documents with OMERS. On the basis that the shareholder exercised such a
right of first refusal and in accordance with the terms of the sale contract, SNC-Lavalin terminated the transaction with OMERS,
which was subject to a payment of a break fee of 2.5% of the purchase price once the sale completed.
On August 15, 2019, SNC-Lavalin announced that it completed the sale of the Subject Shares to a company controlled by
Canada Pension Plan Investment Board. Based on the terms of the agreement, SNC-Lavalin received on closing the base
purchase price proceeds of $3.0 billion, with up to an additional $250 million contingently payable over a period of 10 years,
conditional on the attainment of certain financial thresholds related to the ongoing performance of Highway 407 ETR. The
Company was also entitled to receive additional consideration based on the dividend to be declared in October 2019, for which
the fair value was determined to be $12.3 million.
34
34
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
35
4.
SEGMENT DISCLOSURES (CONTINUED)
5.
CAPITAL INVESTMENTS
The Company also discloses in the table below supplementary information such as its net income (loss) from PS&PM, its
dividends from Highway 407 ETR, and its net income (loss) from other Capital investments.
SNC-Lavalin makes investments in infrastructure concessions for public services such as bridges, highways, mass transit
systems, power facilities, energy infrastructure, water treatment plants and social infrastructure (e.g. hospitals).
It should be noted that the supplementary information provided in the following table does not reflect information related to the
Company’s segments, but is rather an allocation of net income (loss) attributable to SNC-Lavalin shareholders between various
The main concessions and public-private partnerships contracts reported under IFRIC Interpretation 12, Service Concession
Arrangements, are all accounted for under the financial asset model.
components.
YEARS ENDED DECEMBER 31
Supplementary information:
Net loss on disposals of PS&PM businesses (Note 6)
Federal charges settlement (PPSC) (Note 18)
Net loss from discontinued operations (Note 39A)
cost to sell (Note 39B)
Excluding the items listed above
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less
Net loss attributable to SNC-Lavalin shareholders from PS&PM
Net gain or adjustment on net gain from disposal of a Capital investment (Note 5A)
Net loss arising on contingent consideration receivable from the acquirer of the 10.01% interest in
Highway 407 ETR
Highway 407 ETR dividends
Excluding the items listed above
Net income attributable to SNC-Lavalin shareholders from Capital
Net income (loss) attributable to SNC-Lavalin shareholders
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
The following table presents property, equipment, goodwill and intangible assets inside and outside Canada reflected on the
Company’s consolidated statements of financial position:
Property, equipment, goodwill and intangible assets (2)
Canada
Outside Canada
(2)
All related to PS&PM activities
2020
2019 (1)
$
(7,467) $
(294)
—
(257,327)
(609,344)
(2,112,576)
(6,094)
—
(388,093)
(74,386)
(1,010,998)
(2,444,583)
25,000
2,585,998
(49,627)
38,048
32,130
—
146,099
40,705
45,551
2,772,802
$ (965,447) $
328,219
DECEMBER 31
DECEMBER 31
2020
2019
$
224,424 $
250,826
4,124,977
4,314,496
$
4,349,401 $
4,565,322
In order to provide the reader of the financial statements with a better understanding of the financial position and results of
operations of its Capital investments, the Company presents certain distinct financial information related specifically to its
Capital investments throughout its financial statements, as well as additional information below.
VARIATIONS IN OWNERSHIP INTERESTS IN INVESTMENTS
A)
I) IN 2020
In the fourth quarter of 2020, the Company released in full a provision for contingent indemnification related to the previous
disposal of a Capital investment accounted for under the consolidation method upon expiry of the indemnification period. Such
non-cash reversal of the provision in the amount of $25.0 million is included in “Gain or adjustment on gain from disposal of a
Capital investment” in the consolidated income statement for the year ended December 31, 2020.
II) IN 2019
TRANSITNEXT GENERAL PARTNERSHIP
On March 29, 2019, SNC-Lavalin announced that its wholly-owned subsidiary, TransitNEXT General Partnership
(“TransitNEXT”), signed an agreement with the City of Ottawa to design, build, finance and maintain the new Trillium Line
extension, and to also assume responsibility for the long-term maintenance of the existing Trillium Line, under a 30-year
contract.
Also, TransitNEXT entered into a credit facility agreement, which is non-recourse to SNC-Lavalin. The aggregate maximum
principal amount of the credit facility is $149.0 million. The credit facility bears interest at a rate of CDOR plus an applicable
margin and is repayable at the latest on February 10, 2024. The credit facility is secured by all assets of TransitNEXT.
Furthermore, in relation to the credit facility above, TransitNEXT entered into an interest rate swap agreement with financial
institutions under which TransitNEXT pays interest at a fixed rate and receives interest at a rate of CDOR.
In addition, a wholly-owned entity indirectly holding TransitNEXT entered into a term loan facility agreement, which is non-
recourse to SNC-Lavalin. The aggregate principal amount of the term loan facility is $99.7 million and cannot be drawn until
substantial completion of the Trillium project is achieved. The term loan facility bears interest at a rate of: i) 4.82% prior to
August 10, 2026; and ii) CDOR plus an applicable margin from and after August 10, 2026. The maturity of the term loan
facility is the earlier of: i) the date that is 4 years after the substantial completion date of the Trillium project; and
ii) March 29, 2028. The term loan facility is secured by all assets of such entity indirectly holding TransitNEXT and the
interests and securities issued by the entity indirectly holding TransitNEXT have also been pledged to the project lenders as is
customary in projects of this nature.
SNC-Lavalin’s investment in TransitNEXT is accounted for by the consolidation method.
HIGHWAY 407 ETR
On April 5, 2019, SNC-Lavalin announced that the Company entered into an agreement with Ontario Municipal Employees
Retirement System (“OMERS”) to sell 10.01% of the shares of Highway 407 ETR (the “Subject Shares”), subject to
shareholders’ rights, including rights of first refusal in favor of certain other shareholders of Highway 407 ETR.
On May 17, 2019, SNC-Lavalin announced, prior to the expiry of the relevant notice and acceptance period, that another
shareholder of Highway 407 ETR had exercised its right of first refusal to purchase all of the Subject Shares on the same terms
and conditions as those set out in the transaction documents with OMERS. On the basis that the shareholder exercised such a
right of first refusal and in accordance with the terms of the sale contract, SNC-Lavalin terminated the transaction with OMERS,
which was subject to a payment of a break fee of 2.5% of the purchase price once the sale completed.
On August 15, 2019, SNC-Lavalin announced that it completed the sale of the Subject Shares to a company controlled by
Canada Pension Plan Investment Board. Based on the terms of the agreement, SNC-Lavalin received on closing the base
purchase price proceeds of $3.0 billion, with up to an additional $250 million contingently payable over a period of 10 years,
conditional on the attainment of certain financial thresholds related to the ongoing performance of Highway 407 ETR. The
Company was also entitled to receive additional consideration based on the dividend to be declared in October 2019, for which
the fair value was determined to be $12.3 million.
34
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
35
35
SNC-Lavalin 2020 Financial Report
5.
CAPITAL INVESTMENTS (CONTINUED)
5.
CAPITAL INVESTMENTS (CONTINUED)
After the completion of the sale, SNC-Lavalin paid the break fee to OMERS in an amount of $81.3 million.
II) CAPITAL INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
SNC-Lavalin’s remaining 6.76% ownership interest in Highway 407 ETR continues to be accounted for under the equity
method of accounting, following the completion of the sale of the Subject Shares in August 2019.
SNC-Lavalin’s main Capital investments accounted for by the equity method are listed below:
Net gain on partial disposal of Highway 407 ETR
YEAR ENDED DECEMBER 31
Consideration received in cash
Additional consideration received
Contingent consideration receivable (1)
Total consideration
Carrying amount of the investment sold
Disposition-related costs (2)
Gain on partial disposal of Highway 407 ETR
Income taxes
Net gain on partial disposal of Highway 407 ETR
2019
$
3,000,000
12,256
56,143
3,068,399
–
(97,616)
2,970,783
(384,785)
$
2,585,998
(1)
(2)
B)
Under the sale agreement, SNC-Lavalin is entitled to receive up to $250 million over a period of 10 years, conditional on the attainment of certain
financial thresholds related to the ongoing performance of Highway 407 ETR. The amount of $56.1 million represented the preliminary estimated fair
value of this receivable at the date of sale.
Disposition-related costs included a break fee of $81.3 million related to the termination of the transaction with OMERS.
FINANCIAL INFORMATION AND DESCRIPTION OF CAPITAL INVESTMENTS
The Company’s consolidated statement of financial position includes the following net assets (liabilities) from its consolidated
Capital investments and net book value from its Capital investments accounted for by the equity method and at fair value
through other comprehensive income.
Net assets (liabilities) from Capital investments accounted for by the consolidation method
Net book value of Capital investments accounted for by the equity method (3)
Net book value of Capital investments at fair value through other comprehensive income
DECEMBER 31
2020
DECEMBER 31
2019
$
38,296 $
378,730
9,666
$
426,692 $
(51,620)
399,539
8,107
356,026
(3)
Includes the Company’s investment in Highway 407 ETR, for which the net book value was $nil as at December 31, 2020 and 2019.
I) CAPITAL INVESTMENTS ACCOUNTED FOR BY THE CONSOLIDATION METHOD
SNC-Lavalin’s main Capital investments accounted for by the consolidation method are detailed below:
NAME OF CAPITAL
INVESTMENT
PRINCIPAL ACTIVITY
InPower BC General
Partnership
TransitNEXT
General
Partnership
John Hart Generating Replacement Facility
New Trillium Line extension (under
construction)
OWNERSHIP INTEREST
SUBJECT TO
IFRIC 12
MATURITY OF
CONCESSION
AGREEMENT
LOCATION
DECEMBER 31
2020
DECEMBER 31
2019
Yes
Yes
2033
Canada
100.0 %
100.0 %
2049
Canada
100.0 %
100.0 %
SUBJECT TO
IFRIC 12
MATURITY OF
CONCESSION
AGREEMENT
LOCATION
DECEMBER 31
DECEMBER 31
2020
2019
OWNERSHIP INTEREST
NAME OF CAPITAL INVESTMENT
PRINCIPAL ACTIVITY
Joint ventures:
General Partnership
(“407 EDGGP”)
407 East Development Group
32-km toll Highway 407 East
2045 Canada
50.0 %
50.0 %
407 International Inc.(1)
(“Highway 407 ETR”)
108-km toll highway under a 99-year
concession agreement
2098 Canada
6.76 %
6.76 %
Crosslinx Transit Solutions
Eglinton Crosstown Light Rail Transit
2051 Canada
25.0 %
25.0 %
project (under construction)
The Confederation Line, City of
Ottawa’s light rail transit system
New Champlain Bridge Corridor
2043 Canada
40.0 %
40.0 %
2049 Canada
50.0 %
50.0 %
TC Dôme S.A.S.(2)
5.3-km electric cog railway
2043
France
51.0 %
51.0 %
General Partnership
(“Eglinton Crosstown”)
Rideau Transit Group
Partnership (“Rideau”)
Signature on the Saint-
Laurent Group General
Partnership (“SSL”)
(“TC Dôme”)
Associates:
Myah Tipaza S.p.A.
Seawater desalination plant to supply
treated water under a 25-year take-or-pay
agreement
N/A
Algeria
25.5 %
25.5 %
Shariket Kahraba Hadjret En
1,227 MW gas-fired thermal power plant
N/A
Algeria
26.0 %
26.0 %
Nouss S.p.A.
supplying electricity under a 20-year
take-or-pay agreement
SNC-Lavalin Infrastructure
Holding interests in mature Capital
Partners LP
investments
N/A
Canada
20.0 %
20.0 %
Although the Company holds less than 20% of the equity shares of Highway 407 ETR, the Company exercises joint control over this entity based on its
Although the Company’s ownership interest in TC Dôme is more than 50%, the Company does not exercise control over this entity based on its
(1)
(2)
contractual agreements.
contractual agreements.
N/A: not applicable
Yes
No
Yes
Yes
Yes
Yes
No
No
No
36
36
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
37
5.
CAPITAL INVESTMENTS (CONTINUED)
5.
CAPITAL INVESTMENTS (CONTINUED)
After the completion of the sale, SNC-Lavalin paid the break fee to OMERS in an amount of $81.3 million.
II) CAPITAL INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
SNC-Lavalin’s remaining 6.76% ownership interest in Highway 407 ETR continues to be accounted for under the equity
method of accounting, following the completion of the sale of the Subject Shares in August 2019.
Net gain on partial disposal of Highway 407 ETR
YEAR ENDED DECEMBER 31
Consideration received in cash
Additional consideration received
Contingent consideration receivable (1)
Total consideration
Carrying amount of the investment sold
Disposition-related costs (2)
Gain on partial disposal of Highway 407 ETR
Income taxes
Net gain on partial disposal of Highway 407 ETR
2019
$
3,000,000
12,256
56,143
3,068,399
–
(97,616)
2,970,783
(384,785)
$
2,585,998
(1)
(2)
B)
Under the sale agreement, SNC-Lavalin is entitled to receive up to $250 million over a period of 10 years, conditional on the attainment of certain
financial thresholds related to the ongoing performance of Highway 407 ETR. The amount of $56.1 million represented the preliminary estimated fair
value of this receivable at the date of sale.
Disposition-related costs included a break fee of $81.3 million related to the termination of the transaction with OMERS.
FINANCIAL INFORMATION AND DESCRIPTION OF CAPITAL INVESTMENTS
The Company’s consolidated statement of financial position includes the following net assets (liabilities) from its consolidated
Capital investments and net book value from its Capital investments accounted for by the equity method and at fair value
through other comprehensive income.
Net assets (liabilities) from Capital investments accounted for by the consolidation method
$
38,296 $
Net book value of Capital investments accounted for by the equity method (3)
Net book value of Capital investments at fair value through other comprehensive income
DECEMBER 31
2020
DECEMBER 31
2019
378,730
9,666
$
426,692 $
(51,620)
399,539
8,107
356,026
(3)
Includes the Company’s investment in Highway 407 ETR, for which the net book value was $nil as at December 31, 2020 and 2019.
I) CAPITAL INVESTMENTS ACCOUNTED FOR BY THE CONSOLIDATION METHOD
SNC-Lavalin’s main Capital investments accounted for by the consolidation method are detailed below:
NAME OF CAPITAL
INVESTMENT
PRINCIPAL ACTIVITY
InPower BC General
John Hart Generating Replacement Facility
SUBJECT TO
IFRIC 12
MATURITY OF
CONCESSION
AGREEMENT
LOCATION
2033
Canada
DECEMBER 31
DECEMBER 31
2020
100.0 %
2019
100.0 %
OWNERSHIP INTEREST
New Trillium Line extension (under
construction)
2049
Canada
100.0 %
100.0 %
Yes
Yes
Partnership
TransitNEXT
General
Partnership
SNC-Lavalin’s main Capital investments accounted for by the equity method are listed below:
NAME OF CAPITAL INVESTMENT
Joint ventures:
407 East Development Group
General Partnership
(“407 EDGGP”)
407 International Inc.(1)
(“Highway 407 ETR”)
Crosslinx Transit Solutions
General Partnership
(“Eglinton Crosstown”)
Rideau Transit Group
Partnership (“Rideau”)
Signature on the Saint-
Laurent Group General
Partnership (“SSL”)
PRINCIPAL ACTIVITY
32-km toll Highway 407 East
108-km toll highway under a 99-year
concession agreement
Eglinton Crosstown Light Rail Transit
project (under construction)
The Confederation Line, City of
Ottawa’s light rail transit system
New Champlain Bridge Corridor
TC Dôme S.A.S.(2)
5.3-km electric cog railway
(“TC Dôme”)
Associates:
Myah Tipaza S.p.A.
Shariket Kahraba Hadjret En
Nouss S.p.A.
Seawater desalination plant to supply
treated water under a 25-year take-or-pay
agreement
1,227 MW gas-fired thermal power plant
supplying electricity under a 20-year
take-or-pay agreement
SNC-Lavalin Infrastructure
Partners LP
Holding interests in mature Capital
investments
SUBJECT TO
IFRIC 12
MATURITY OF
CONCESSION
AGREEMENT
LOCATION
DECEMBER 31
2020
DECEMBER 31
2019
OWNERSHIP INTEREST
Yes
No
Yes
Yes
Yes
Yes
No
No
No
2045 Canada
50.0 %
50.0 %
2098 Canada
6.76 %
6.76 %
2051 Canada
25.0 %
25.0 %
2043 Canada
40.0 %
40.0 %
2049 Canada
50.0 %
50.0 %
2043
France
51.0 %
51.0 %
N/A
Algeria
25.5 %
25.5 %
N/A
Algeria
26.0 %
26.0 %
N/A
Canada
20.0 %
20.0 %
(1)
(2)
Although the Company holds less than 20% of the equity shares of Highway 407 ETR, the Company exercises joint control over this entity based on its
contractual agreements.
Although the Company’s ownership interest in TC Dôme is more than 50%, the Company does not exercise control over this entity based on its
contractual agreements.
N/A: not applicable
36
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
37
37
SNC-Lavalin 2020 Financial Report
5.
CAPITAL INVESTMENTS (CONTINUED)
Capital investments accounted for by the equity method – joint ventures
SNC-Lavalin carries out part of its Capital investment activity through joint ventures which are accounted for by the equity
method. The aggregate amounts of current assets, non-current assets, current liabilities, non-current liabilities, revenues and
expenses related to such joint ventures are summarized below:
YEAR ENDED DECEMBER 31, 2020
Income statements
Revenues (at 100%)
Interest income (at 100%)
Interest expense (at 100%)
Depreciation and amortization (at 100%)
Income tax expense (at 100%)
YEAR ENDED DECEMBER 31, 2019
Income statements
Revenues (at 100%)
Interest income (at 100%)
Interest expense (at 100%)
Depreciation and amortization (at 100%)
Income tax expense (at 100%)
YEAR ENDED DECEMBER 31, 2020
Statements of comprehensive income
Net income (at 100%)
Other comprehensive loss (at 100%)
Total comprehensive income (at 100%)
YEAR ENDED DECEMBER 31, 2019
Statements of comprehensive income
Net income (at 100%)
Other comprehensive loss (at 100%)
Total comprehensive income (at 100%)
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
$
$
$
$
$
908,566 $
1,028,104 $
1,936,670
15,734 $
4,760 $
20,494
456,902 $
94,251 $
551,153
97,434 $
53,379 $
— $
2 $
97,434
53,381
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
Company’s carrying value of Capital investments included in its statement of
$
1,505,301 $
1,271,169 $
2,776,470
$
$
$
$
24,512 $
20,584 $
45,096
444,615 $
116,317 $
560,932
105,512 $
207,489 $
— $
105,512
4 $
207,493
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
$
147,934 $
57,724 $
205,658
(833)
(6,359)
(7,192)
$
147,101 $
51,365 $
198,466
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
Company’s carrying value of Capital investments included in its statement of
$
575,748 $
93,281 $
669,029
(778)
(3,006)
(3,784)
$
574,970 $
90,275 $
665,245
YEARS ENDED DECEMBER 31
Company’s share of net income of Capital investments based on its
ownership interest (1)
Company’s net income from Capital investments included in its income
statement (1)
(1)
See Note 1 on the following page
2020
2019
$
$
30,858 $
109,565
59,174 $
185,266
5.
CAPITAL INVESTMENTS (CONTINUED)
DECEMBER 31, 2020
Statements of financial position
Cash and cash equivalents (at 100%)
Other current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Trade payables (at 100%)
Other current financial liabilities (at 100%)
Other current non-financial liabilities (at 100%)
Other non-current financial liabilities (at 100%)
Other non-current non-financial liabilities (at 100%)
Total liabilities (at 100%)
Net assets (liabilities) (at 100%)
financial position (1)
DECEMBER 31, 2019
Statements of financial position
Cash and cash equivalents (at 100%)
Other current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Trade payables (at 100%)
Other current financial liabilities (at 100%)
Other current non-financial liabilities (at 100%)
Other non-current financial liabilities (at 100%)
Other non-current non-financial liabilities (at 100%)
Total liabilities (at 100%)
Net assets (liabilities) (at 100%)
financial position (1)
HIGHWAY 407 ETR
OTHER CAPITAL
INVESTMENTS
TOTAL
$
614,532 $
66,329 $
680,861
439,922
223,125
663,047
4,597,899
2,811,978
7,409,877
5,652,353
3,101,432
8,753,785
58,390
124,418
18,359
78,525
131,804
55,783
136,915
256,222
74,142
9,602,978
2,360,444
11,963,422
551,433
534
551,967
10,355,578
2,627,090
12,982,668
$
(4,703,225) $
474,342 $
(4,228,883)
$
— $
214,323 $
214,323
HIGHWAY 407 ETR
OTHER CAPITAL
INVESTMENTS
TOTAL
$
557,316 $
122,903 $
680,219
254,470
663,691
918,161
4,539,752
2,669,759
7,209,511
5,351,538
3,456,353
8,807,891
81,248
142,614
18,008
102,259
568,539
56,908
183,507
711,153
74,916
8,868,430
2,321,948
11,190,378
529,066
428
529,494
9,639,366
3,050,082
12,689,448
$
(4,287,828) $
406,271 $
(3,881,557)
$
— $
227,943 $
227,943
(1) Under the equity method of accounting, distributions from a joint venture reduce the carrying amount of the investment.
The equity method of accounting requires the Company to stop recognizing its share of the losses of a joint venture when
the recognition of such losses results in a negative balance for its investment, or where dividends declared by the joint
venture are in excess of the carrying amount of the investment. In these events, the carrying value of the investment is
reduced to $nil, but does not become negative, unless the Company has incurred legal or constructive obligations or made
payments on behalf of the joint venture. In these situations, the Company no longer recognizes its share of net income of a
Capital investment based on its ownership, but rather recognizes the excess amount of dividends declared by a joint venture
in its net income.
As a result, the Company recognized in its income statement dividends from Highway 407 ETR of $38.0 million in 2020
(2019: $146.1 million) and did not recognize its share of Highway 407 ETR’s net income of $10.0 million (2019: $72.0
million) in the same period, as the carrying amount of its investment in Highway 407 ETR was $nil at December 31, 2020
and 2019. The negative carrying value of the Company’s investment in Highway 407 ETR, which is not recognized on the
Company’s statement of financial position, amounted to $319.0 million as at December 31, 2020 (2019: negative carrying
value of $291.0 million).
38
38
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
39
5.
CAPITAL INVESTMENTS (CONTINUED)
Capital investments accounted for by the equity method – joint ventures
SNC-Lavalin carries out part of its Capital investment activity through joint ventures which are accounted for by the equity
method. The aggregate amounts of current assets, non-current assets, current liabilities, non-current liabilities, revenues and
expenses related to such joint ventures are summarized below:
YEAR ENDED DECEMBER 31, 2020
Income statements
Revenues (at 100%)
Interest income (at 100%)
Interest expense (at 100%)
Depreciation and amortization (at 100%)
Income tax expense (at 100%)
YEAR ENDED DECEMBER 31, 2019
Income statements
Revenues (at 100%)
Interest income (at 100%)
Interest expense (at 100%)
Depreciation and amortization (at 100%)
Income tax expense (at 100%)
YEAR ENDED DECEMBER 31, 2020
Statements of comprehensive income
Net income (at 100%)
Other comprehensive loss (at 100%)
Total comprehensive income (at 100%)
YEAR ENDED DECEMBER 31, 2019
Statements of comprehensive income
Net income (at 100%)
Other comprehensive loss (at 100%)
Total comprehensive income (at 100%)
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
908,566 $
1,028,104 $
1,936,670
15,734 $
4,760 $
20,494
456,902 $
94,251 $
551,153
97,434 $
53,379 $
— $
2 $
97,434
53,381
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
$
1,505,301 $
1,271,169 $
2,776,470
24,512 $
20,584 $
45,096
444,615 $
116,317 $
560,932
105,512 $
207,489 $
— $
105,512
4 $
207,493
$
$
$
$
$
$
$
$
$
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
$
147,934 $
57,724 $
205,658
(833)
(6,359)
(7,192)
$
147,101 $
51,365 $
198,466
HIGHWAY 407 ETR OTHER CAPITAL INVESTMENTS
TOTAL
$
575,748 $
93,281 $
669,029
(778)
(3,006)
(3,784)
$
574,970 $
90,275 $
665,245
Company’s share of net income of Capital investments based on its
Company’s net income from Capital investments included in its income
YEARS ENDED DECEMBER 31
ownership interest (1)
statement (1)
(1)
See Note 1 on the following page
2020
2019
$
$
30,858 $
109,565
59,174 $
185,266
5.
CAPITAL INVESTMENTS (CONTINUED)
DECEMBER 31, 2020
Statements of financial position
Cash and cash equivalents (at 100%)
Other current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Trade payables (at 100%)
Other current financial liabilities (at 100%)
Other current non-financial liabilities (at 100%)
Other non-current financial liabilities (at 100%)
Other non-current non-financial liabilities (at 100%)
Total liabilities (at 100%)
HIGHWAY 407 ETR
OTHER CAPITAL
INVESTMENTS
TOTAL
$
614,532 $
66,329 $
680,861
439,922
223,125
663,047
4,597,899
2,811,978
7,409,877
5,652,353
3,101,432
8,753,785
58,390
124,418
18,359
78,525
131,804
55,783
136,915
256,222
74,142
9,602,978
2,360,444
11,963,422
551,433
534
551,967
10,355,578
2,627,090
12,982,668
Net assets (liabilities) (at 100%)
Company’s carrying value of Capital investments included in its statement of
financial position (1)
$
(4,703,225) $
474,342 $
(4,228,883)
$
— $
214,323 $
214,323
DECEMBER 31, 2019
Statements of financial position
Cash and cash equivalents (at 100%)
Other current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Trade payables (at 100%)
Other current financial liabilities (at 100%)
Other current non-financial liabilities (at 100%)
Other non-current financial liabilities (at 100%)
Other non-current non-financial liabilities (at 100%)
Total liabilities (at 100%)
HIGHWAY 407 ETR
OTHER CAPITAL
INVESTMENTS
TOTAL
$
557,316 $
122,903 $
680,219
254,470
663,691
918,161
4,539,752
2,669,759
7,209,511
5,351,538
3,456,353
8,807,891
81,248
142,614
18,008
102,259
568,539
56,908
183,507
711,153
74,916
8,868,430
2,321,948
11,190,378
529,066
428
529,494
9,639,366
3,050,082
12,689,448
Net assets (liabilities) (at 100%)
Company’s carrying value of Capital investments included in its statement of
financial position (1)
$
(4,287,828) $
406,271 $
(3,881,557)
$
— $
227,943 $
227,943
(1) Under the equity method of accounting, distributions from a joint venture reduce the carrying amount of the investment.
The equity method of accounting requires the Company to stop recognizing its share of the losses of a joint venture when
the recognition of such losses results in a negative balance for its investment, or where dividends declared by the joint
venture are in excess of the carrying amount of the investment. In these events, the carrying value of the investment is
reduced to $nil, but does not become negative, unless the Company has incurred legal or constructive obligations or made
payments on behalf of the joint venture. In these situations, the Company no longer recognizes its share of net income of a
Capital investment based on its ownership, but rather recognizes the excess amount of dividends declared by a joint venture
in its net income.
As a result, the Company recognized in its income statement dividends from Highway 407 ETR of $38.0 million in 2020
(2019: $146.1 million) and did not recognize its share of Highway 407 ETR’s net income of $10.0 million (2019: $72.0
million) in the same period, as the carrying amount of its investment in Highway 407 ETR was $nil at December 31, 2020
and 2019. The negative carrying value of the Company’s investment in Highway 407 ETR, which is not recognized on the
Company’s statement of financial position, amounted to $319.0 million as at December 31, 2020 (2019: negative carrying
value of $291.0 million).
38
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
39
39
SNC-Lavalin 2020 Financial Report
5.
CAPITAL INVESTMENTS (CONTINUED)
Capital investments accounted for by the equity method - associates
CAPITAL INVESTMENTS (CONTINUED)
5.
C)
PAYMENTS AND REMAINING COMMITMENTS IN CAPITAL INVESTMENTS
The summary tables below provide supplementary information in respect of Capital investments classified as associates:
When making investments in infrastructure concessions, SNC-Lavalin may not be required to make its contribution immediately
YEARS ENDED DECEMBER 31
Statements of comprehensive income
Revenues (at 100%)
Expenses (at 100%)
Net income (at 100%)
Other comprehensive income (loss) (at 100%)
Total comprehensive income (at 100%)
Company’s share of net income of Capital investments based on its ownership interest
Company’s share of net income from Capital investments included in its income statement
2020
2019
$
272,550 $
308,023
162,146
110,404
—
196,102
111,921
—
$
$
$
110,404 $
111,921
28,175 $
28,175 $
25,277
25,277
Statements of financial position
Current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Current liabilities (at 100%)
Non-current liabilities (at 100%)
Total liabilities (at 100%)
Net assets (at 100%)
Company’s carrying value of Capital investments included in its statement of financial position
DECEMBER 31
2020
DECEMBER 31
2019
demand.
$
336,972 $
358,457
592,094
929,066
77,808
186,539
264,347
685,714
1,044,171
146,578
261,971
408,549
$
$
664,719 $
635,622
164,407 $
171,596
III) CAPITAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The main Capital investments at fair value through other comprehensive income are listed below:
NAME OF CAPITAL INVESTMENT
PRINCIPAL ACTIVITY
Carlyle Global Infrastructure
Opportunity Fund, L.P. (1)
Highway Concessions One
Private Limited (1)
Holding investments in infrastructure projects related to
energy, power and other natural resources
Engages in the business of bidding for, owning,
acquiring, investing, developing, implementing and
operating infrastructure in the roads sector of India
(1)
Included in the measurement category of “at fair value through other comprehensive income”
LOCATION
U.S.A.
India
OWNERSHIP INTEREST
DECEMBER 31
2020
DECEMBER 31
2019
4.5%
4.5%
10.0%
10.0%
The investments in Carlyle Global Infrastructure Opportunity Fund, L.P. and in Highway Concession One Private Limited are
designated to be measured at fair value through other comprehensive income to avoid the variability of the Company’s net
income in the future periods.
For the years ended December 31, 2020 and 2019, the Company’s consolidated income includes dividends of $nil and $1.9
million, respectively, from investments at fair value through other comprehensive income.
but instead may commit to make its contribution over time.
The following table summarizes SNC-Lavalin’s payments and outstanding commitments to invest in Capital investments
accounted for by the equity method and at fair value through other comprehensive income as at December 31, 2020 and 2019:
$
70,724 $
2020
10,031
(55,834)
2019
108,312
2,379
(39,967)
70,724
Commitments to invest in Capital investments – January 1
Increase in commitments to invest in Capital investments
Payments for Capital investments during the year
Commitments to invest in Capital investments – December 31
$
24,921 $
At December 31, 2020, the commitments to invest in Capital investments were related to contributions for Eglinton Crosstown
(2019: SSL, Eglinton Crosstown and Carlyle Global Infrastructure Opportunity Fund, L.P.) and were presented as “Other
current financial liabilities” (see Note 18) since they are either expected to be paid in the following year or are callable on
In 2016, SNC-Lavalin signed an agreement to support a commitment of US$100 million to a fund focused on global
infrastructure investments sponsored by The Carlyle Group (“Carlyle”), subject to certain conditions. The intent of this
agreement is for SNC-Lavalin and Carlyle to cooperate with respect to investments in, and work on, infrastructure projects.
Such commitment to invest amounted to US$82.5 million (approximately CA$105.7 million) as at December 31, 2020 (2019:
US$89.3 million [approximately CA$117.2 million]) and will be recognized as a liability, as a whole or in part, when the
accounting conditions will be met.
6.
A)
DISPOSALS OF PS&PM BUSINESSES
DISPOSAL OF SUBSIDIARIES IN SOUTH AFRICA
In 2020, SNC-Lavalin completed the sale of its ownership interests in three of its subsidiaries in South Africa, which were part
of the Oil & Gas business, classified as a discontinued operation, previously included in the Resources segment, in exchange for
a total consideration of $14.9 million.
Net gain on disposal of South African subsidiaries
Additional deferred consideration receivable
YEAR ENDED DECEMBER 31
Consideration received
Total consideration
Net assets disposed of
Disposition-related costs
Gain on disposal of South African subsidiaries
Income taxes
Net gain on disposal of South African subsidiaries (1)
Cumulative exchange loss on translating foreign operations reclassified from equity
(1)
Included in “Net loss from discontinued operations” in the consolidated income statement (see Note 39)
Upon disposal, the major classes of assets and liabilities of subsidiaries disposed of in South Africa were as follows:
$
$
$
$
2020
13,003
1,908
14,911
(38,006)
29,516
(216)
6,205
—
6,205
20,462
31,437
6,546
58,445
18,376
2,063
20,439
38,006
Cash and cash equivalents
Other current assets
Other non-current assets
Assets disposed of
Current liabilities
Non-current liabilities
Liabilities disposed of
Net assets disposed of
40
40
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
41
5.
CAPITAL INVESTMENTS (CONTINUED)
Capital investments accounted for by the equity method - associates
The summary tables below provide supplementary information in respect of Capital investments classified as associates:
YEARS ENDED DECEMBER 31
Statements of comprehensive income
Revenues (at 100%)
Expenses (at 100%)
Net income (at 100%)
Other comprehensive income (loss) (at 100%)
Total comprehensive income (at 100%)
Company’s share of net income of Capital investments based on its ownership interest
Company’s share of net income from Capital investments included in its income statement
Statements of financial position
Current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Current liabilities (at 100%)
Non-current liabilities (at 100%)
Total liabilities (at 100%)
Net assets (at 100%)
Company’s carrying value of Capital investments included in its statement of financial position
III) CAPITAL INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The main Capital investments at fair value through other comprehensive income are listed below:
NAME OF CAPITAL INVESTMENT
PRINCIPAL ACTIVITY
LOCATION
Carlyle Global Infrastructure
Holding investments in infrastructure projects related to
U.S.A.
Opportunity Fund, L.P. (1)
energy, power and other natural resources
Private Limited (1)
acquiring, investing, developing, implementing and
operating infrastructure in the roads sector of India
(1)
Included in the measurement category of “at fair value through other comprehensive income”
Highway Concessions One
Engages in the business of bidding for, owning,
India
10.0%
10.0%
The investments in Carlyle Global Infrastructure Opportunity Fund, L.P. and in Highway Concession One Private Limited are
designated to be measured at fair value through other comprehensive income to avoid the variability of the Company’s net
income in the future periods.
For the years ended December 31, 2020 and 2019, the Company’s consolidated income includes dividends of $nil and $1.9
million, respectively, from investments at fair value through other comprehensive income.
2020
2019
$
272,550 $
308,023
162,146
110,404
—
196,102
111,921
—
$
$
$
110,404 $
111,921
28,175 $
28,175 $
25,277
25,277
DECEMBER 31
DECEMBER 31
2020
2019
$
336,972 $
358,457
592,094
929,066
77,808
186,539
264,347
685,714
1,044,171
146,578
261,971
408,549
$
$
664,719 $
635,622
164,407 $
171,596
OWNERSHIP INTEREST
DECEMBER 31
DECEMBER 31
2020
4.5%
2019
4.5%
5.
C)
CAPITAL INVESTMENTS (CONTINUED)
PAYMENTS AND REMAINING COMMITMENTS IN CAPITAL INVESTMENTS
When making investments in infrastructure concessions, SNC-Lavalin may not be required to make its contribution immediately
but instead may commit to make its contribution over time.
The following table summarizes SNC-Lavalin’s payments and outstanding commitments to invest in Capital investments
accounted for by the equity method and at fair value through other comprehensive income as at December 31, 2020 and 2019:
Commitments to invest in Capital investments – January 1
Increase in commitments to invest in Capital investments
Payments for Capital investments during the year
Commitments to invest in Capital investments – December 31
2020
$
70,724 $
10,031
(55,834)
$
24,921 $
2019
108,312
2,379
(39,967)
70,724
At December 31, 2020, the commitments to invest in Capital investments were related to contributions for Eglinton Crosstown
(2019: SSL, Eglinton Crosstown and Carlyle Global Infrastructure Opportunity Fund, L.P.) and were presented as “Other
current financial liabilities” (see Note 18) since they are either expected to be paid in the following year or are callable on
demand.
In 2016, SNC-Lavalin signed an agreement to support a commitment of US$100 million to a fund focused on global
infrastructure investments sponsored by The Carlyle Group (“Carlyle”), subject to certain conditions. The intent of this
agreement is for SNC-Lavalin and Carlyle to cooperate with respect to investments in, and work on, infrastructure projects.
Such commitment to invest amounted to US$82.5 million (approximately CA$105.7 million) as at December 31, 2020 (2019:
US$89.3 million [approximately CA$117.2 million]) and will be recognized as a liability, as a whole or in part, when the
accounting conditions will be met.
6.
A)
DISPOSALS OF PS&PM BUSINESSES
DISPOSAL OF SUBSIDIARIES IN SOUTH AFRICA
In 2020, SNC-Lavalin completed the sale of its ownership interests in three of its subsidiaries in South Africa, which were part
of the Oil & Gas business, classified as a discontinued operation, previously included in the Resources segment, in exchange for
a total consideration of $14.9 million.
Net gain on disposal of South African subsidiaries
YEAR ENDED DECEMBER 31
Consideration received
Additional deferred consideration receivable
Total consideration
Net assets disposed of
Cumulative exchange loss on translating foreign operations reclassified from equity
Disposition-related costs
Gain on disposal of South African subsidiaries
Income taxes
Net gain on disposal of South African subsidiaries (1)
$
$
(1)
Included in “Net loss from discontinued operations” in the consolidated income statement (see Note 39)
Upon disposal, the major classes of assets and liabilities of subsidiaries disposed of in South Africa were as follows:
Cash and cash equivalents
Other current assets
Other non-current assets
Assets disposed of
Current liabilities
Non-current liabilities
Liabilities disposed of
Net assets disposed of
$
$
2020
13,003
1,908
14,911
(38,006)
29,516
(216)
6,205
—
6,205
20,462
31,437
6,546
58,445
18,376
2,063
20,439
38,006
40
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
41
41
SNC-Lavalin 2020 Financial Report
6.
B)
DISPOSALS OF PS&PM BUSINESSES (CONTINUED)
DISPOSAL OF A SUBSIDIARY IN BELGIUM
In 2020, SNC-Lavalin completed the sale of its ownership interest of 100% in SNC-Lavalin SA (Belgium) in exchange for a
total consideration of $nil. On the date of disposal, SNC-Lavalin SA held $7.5 million in cash and cash equivalents, which
amount was effectively transferred to the acquirer on closing as per of the terms of the sale agreement. The loss on disposal of
SNC-Lavalin’s ownership interest in SNC-Lavalin SA amounted to $7.5 million before and after income taxes and is included
in “Loss on disposals of PS&PM businesses” in the Company’s consolidated income statement.
C)
CASH OUTFLOW ON DISPOSALS OF PS&PM BUSINESSES
In 2020, cash outflow on disposals of subsidiaries in South Africa and in Belgium included in the Company’s consolidated
statement of cash flows was as follows:
YEAR ENDED DECEMBER 31
Consideration received in cash
Less: cash and cash equivalents balances disposed of
Cash outflow on disposals of PS&PM businesses
$
2020
13,003
28,046
$
(15,043)
7.
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
A) CASH AND CASH EQUIVALENTS
Bank balances, bank term deposits and bankers’ acceptances
Cash and cash equivalents
B) RESTRICTED CASH
Bank balances, bank term deposits and bankers’ acceptances
Restricted cash
DECEMBER 31
2020
DECEMBER 31
2019
932,902 $
932,902 $
1,188,636
1,188,636
DECEMBER 31
2020
DECEMBER 31
2019
29,300 $
29,300 $
34,118
34,118
$
$
$
$
TRADE RECEIVABLES AND CONTRACT ASSETS
8.
A)
TRADE RECEIVABLES
The following table presents the Company’s trade receivables that are within normal terms of payment separately from those
that are past due, with a reconciliation to the net carrying amount:
Trade receivables, net of allowance for expected credit losses
$
1,199,166 $
1,533,442
The change in the allowance for expected credit losses is detailed below:
Trade receivables:
Within normal terms of payment
Past due
Total trade receivables
Allowance for expected credit losses
Change in allowance, other than write-offs and recoveries
YEARS ENDED DECEMBER 31
Balance at beginning of year
Write-offs of trade receivables
Recoveries
Balance at end of year
B)
CONTRACT ASSETS
Reclassification to assets of disposal groups classified as held for sale (Note 39)
losses is detailed below:
YEARS ENDED DECEMBER 31
Balance at beginning of year
Change in allowance, other than write-offs
Write-offs of contract assets
DECEMBER 31
2020
DECEMBER 31
2019
$
894,248 $
477,068
1,371,316
(172,150)
$
255,698 $
$
172,150 $
2020
43,750
(44,047)
(9,253)
(73,998)
2020
16,020
(7,217)
(3,806)
$
18,262 $
1,161,005
628,135
1,789,140
(255,698)
2019
240,264
43,102
(9,133)
(18,535)
—
255,698
2019
11,193
10,523
(3,454)
—
18,262
As at December 31, 2020, the Company has contract assets of $1,090.1 million (2019: $1,755.3 million), which is net of an
allowance for expected credit losses of $23.3 million (2019: $18.3 million). The change in the allowance for expected credit
Reclassification to assets of disposal groups classified as held for sale (Note 39)
Balance at end of year
$
23,259 $
The significant changes in the balance of contract assets are disclosed in Note 9B, while the information about the credit
exposures is disclosed in Note 30B.
42
42
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
43
6.
B)
DISPOSALS OF PS&PM BUSINESSES (CONTINUED)
DISPOSAL OF A SUBSIDIARY IN BELGIUM
In 2020, SNC-Lavalin completed the sale of its ownership interest of 100% in SNC-Lavalin SA (Belgium) in exchange for a
total consideration of $nil. On the date of disposal, SNC-Lavalin SA held $7.5 million in cash and cash equivalents, which
amount was effectively transferred to the acquirer on closing as per of the terms of the sale agreement. The loss on disposal of
SNC-Lavalin’s ownership interest in SNC-Lavalin SA amounted to $7.5 million before and after income taxes and is included
in “Loss on disposals of PS&PM businesses” in the Company’s consolidated income statement.
C)
CASH OUTFLOW ON DISPOSALS OF PS&PM BUSINESSES
In 2020, cash outflow on disposals of subsidiaries in South Africa and in Belgium included in the Company’s consolidated
statement of cash flows was as follows:
YEAR ENDED DECEMBER 31
Consideration received in cash
Less: cash and cash equivalents balances disposed of
Cash outflow on disposals of PS&PM businesses
$
2020
13,003
28,046
$
(15,043)
7.
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
A) CASH AND CASH EQUIVALENTS
Bank balances, bank term deposits and bankers’ acceptances
Cash and cash equivalents
B) RESTRICTED CASH
Bank balances, bank term deposits and bankers’ acceptances
Restricted cash
DECEMBER 31
2020
DECEMBER 31
2019
932,902 $
932,902 $
1,188,636
1,188,636
DECEMBER 31
2020
DECEMBER 31
2019
29,300 $
29,300 $
34,118
34,118
$
$
$
$
8.
A)
TRADE RECEIVABLES AND CONTRACT ASSETS
TRADE RECEIVABLES
The following table presents the Company’s trade receivables that are within normal terms of payment separately from those
that are past due, with a reconciliation to the net carrying amount:
Trade receivables:
Within normal terms of payment
Past due
Total trade receivables
Allowance for expected credit losses
DECEMBER 31
2020
DECEMBER 31
2019
$
894,248 $
477,068
1,371,316
(172,150)
1,161,005
628,135
1,789,140
(255,698)
Trade receivables, net of allowance for expected credit losses
$
1,199,166 $
1,533,442
The change in the allowance for expected credit losses is detailed below:
YEARS ENDED DECEMBER 31
Balance at beginning of year
Change in allowance, other than write-offs and recoveries
Write-offs of trade receivables
Recoveries
Reclassification to assets of disposal groups classified as held for sale (Note 39)
Balance at end of year
B)
CONTRACT ASSETS
2020
$
255,698 $
43,750
(44,047)
(9,253)
(73,998)
$
172,150 $
2019
240,264
43,102
(9,133)
(18,535)
—
255,698
As at December 31, 2020, the Company has contract assets of $1,090.1 million (2019: $1,755.3 million), which is net of an
allowance for expected credit losses of $23.3 million (2019: $18.3 million). The change in the allowance for expected credit
losses is detailed below:
YEARS ENDED DECEMBER 31
Balance at beginning of year
Change in allowance, other than write-offs
Write-offs of contract assets
Reclassification to assets of disposal groups classified as held for sale (Note 39)
Balance at end of year
2020
$
18,262 $
16,020
(7,217)
(3,806)
$
23,259 $
2019
11,193
10,523
(3,454)
—
18,262
The significant changes in the balance of contract assets are disclosed in Note 9B, while the information about the credit
exposures is disclosed in Note 30B.
42
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
43
43
SNC-Lavalin 2020 Financial Report
9.
A)
REVENUE
DISAGGREGATION OF REVENUE
Revenues by geographic area
The following tables present revenues by geographic area according to project location for the years ended December 31, 2020
and 2019:
YEAR ENDED DECEMBER 31
Americas:
Canada
United States
Latin America
Middle East and Africa:
Saudi Arabia
Other Middle East countries
Africa
Asia Pacific:
Australia
Other
Europe:
United Kingdom
Other
YEAR ENDED DECEMBER 31
Americas:
Canada
United States
Latin America
Middle East and Africa:
Saudi Arabia
Other Middle East countries
Africa
Asia Pacific:
Australia
Other
Europe:
United Kingdom
Other
REVENUE FROM CONTRACTS
WITH CUSTOMERS
OTHER REVENUE
$
2,016,539 $
1,357,825
80,976
167,388
382,071
178,076
38,531
342,178
1,881,723
409,772
85,858 $
25,819
—
—
3,590
25,289
—
—
11,866
—
$
6,855,079 $
152,422 $
REVENUE FROM CONTRACTS
WITH CUSTOMERS
OTHER REVENUE
$
2,399,914 $
1,363,446
146,212
275,967
583,983
134,263
96,306
319,576
1,756,061
290,337
218,757 $
18,599
—
—
1,924
19,636
—
—
2,933
1,918
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
$
7,366,065 $
263,767 $
2020
TOTAL
2,102,397
1,383,644
80,976
167,388
385,661
203,365
38,531
342,178
1,893,589
409,772
7,007,501
2019 (1)
TOTAL
2,618,671
1,382,045
146,212
275,967
585,907
153,899
96,306
319,576
1,758,994
292,255
7,629,832
In the years ended December 31, 2020 and 2019, Canada, the United States and the United Kingdom were the only countries
where the Company derived more than 10% of its revenues.
44
44
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
9.
REVENUE (CONTINUED)
Revenues by type of contracts
The types of contracts presented are defined as follow:
ii) O&M contracts.
subsidiary.
the initial estimated costs.
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
◦
Reimbursable and engineering services contracts: Under reimbursable contracts, the Company charges the customer for the
actual cost incurred plus a mark-up that could take various forms such as a fixed-fee per unit, a percentage of costs incurred or
an incentive fee based on achieving certain targets, performance factors or contractual milestones. Reimbursable contracts also
include unit-rate contracts for which a fixed amount per quantity is charged to the customer, and reimbursable contracts with a
cap or a target price accompanied by incentives and/or disincentives. Engineering services contracts include i) time and material
agreements based on hourly rates and fixed-price lump-sum contracts with limited procurement or construction risks, and
◦
Standardized EPC contracts: Under standardized EPC contracts, the Company provides repetitive EPC offerings that are
lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations executed through its Linxon
LSTK construction contracts: Under LSTK construction contracts, the Company completes the work required for the project
at a lump-sum price. Before entering into such contracts, the Company estimates the total cost of the project, plus a profit
margin. The Company’s actual profit margin may vary based on its ability to achieve the project requirements at above or below
The following tables present revenues by type of contracts for the years ended December 31, 2020 and 2019:
REIMBURSABLE AND
ENGINEERING SERVICE
CONTRACTS
STANDARDIZED EPC
CONTRACTS
LUMP-SUM TURNKEY
CONSTRUCTION
CONTRACTS
$
3,721,120 $
— $
3,721,120
882,470
789,888
134,918
20,704
155,622
— $
—
533,547
—
—
—
11,079
—
11,079
23,657
719,485
743,142
5,393,478
533,547
$
5,549,100 $
533,547 $
754,221 $
6,836,868
Revenue from contracts with customers –
SNCL Engineering Services
Resources
Infrastructure EPC Projects
Revenue from contracts with customers – SNCL Projects
Revenue from PS&PM investments accounted for by the equity method (Note 17)
Revenue from contracts with customers – Capital segment
Other revenue – Capital segment
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
Revenue from contracts with customers –
SNCL Engineering Services
Resources
Infrastructure EPC Projects
Revenue from contracts with customers – SNCL Projects
REIMBURSABLE AND
ENGINEERING SERVICE
CONTRACTS
STANDARDIZED EPC
CONTRACTS
LUMP-SUM TURNKEY
CONSTRUCTION
CONTRACTS
$
3,908,772 $
— $
—
— $
3,908,772
11,018
906,675
480,809
—
1,178,582
895,657
697,773
5,502,202
128,150
—
128,150
480,809
—
—
—
11,018
144,734
1,076,744
1,221,478
$
5,630,352 $
480,809 $
1,232,496 $
7,343,657
Revenue from PS&PM investments accounted for by the equity method (Note 17)
Revenue from contracts with customers – Capital segment
Other revenue – Capital segment
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
$
7,629,832
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
45
$
7,007,501
2020
TOTAL
893,549
1,323,435
5,938,104
158,575
740,189
898,764
41,274
18,211
111,148
2019 (1)
TOTAL
5,994,029
272,884
1,076,744
1,349,628
23,455
22,408
240,312
REVENUE
9.
A)
DISAGGREGATION OF REVENUE
Revenues by geographic area
The following tables present revenues by geographic area according to project location for the years ended December 31, 2020
REVENUE FROM CONTRACTS
WITH CUSTOMERS
OTHER REVENUE
$
2,016,539 $
and 2019:
YEAR ENDED DECEMBER 31
Americas:
Canada
United States
Latin America
Middle East and Africa:
Saudi Arabia
Other Middle East countries
Africa
Asia Pacific:
Australia
Other
Europe:
Other
United Kingdom
YEAR ENDED DECEMBER 31
Americas:
Canada
United States
Latin America
Middle East and Africa:
Saudi Arabia
Other Middle East countries
Africa
Asia Pacific:
Australia
Other
Europe:
Other
United Kingdom
1,357,825
80,976
167,388
382,071
178,076
38,531
342,178
1,881,723
409,772
1,363,446
146,212
275,967
583,983
134,263
96,306
319,576
1,756,061
290,337
85,858 $
25,819
3,590
25,289
—
—
—
—
11,866
—
1,924
19,636
—
—
—
—
2,933
1,918
2020
TOTAL
2,102,397
1,383,644
80,976
167,388
385,661
203,365
38,531
342,178
1,893,589
409,772
7,007,501
2019 (1)
TOTAL
2,618,671
1,382,045
146,212
275,967
585,907
153,899
96,306
319,576
1,758,994
292,255
7,629,832
$
6,855,079 $
152,422 $
REVENUE FROM CONTRACTS
WITH CUSTOMERS
OTHER REVENUE
$
2,399,914 $
218,757 $
18,599
9.
REVENUE (CONTINUED)
Revenues by type of contracts
The types of contracts presented are defined as follow:
◦
◦
Reimbursable and engineering services contracts: Under reimbursable contracts, the Company charges the customer for the
actual cost incurred plus a mark-up that could take various forms such as a fixed-fee per unit, a percentage of costs incurred or
an incentive fee based on achieving certain targets, performance factors or contractual milestones. Reimbursable contracts also
include unit-rate contracts for which a fixed amount per quantity is charged to the customer, and reimbursable contracts with a
cap or a target price accompanied by incentives and/or disincentives. Engineering services contracts include i) time and material
agreements based on hourly rates and fixed-price lump-sum contracts with limited procurement or construction risks, and
ii) O&M contracts.
Standardized EPC contracts: Under standardized EPC contracts, the Company provides repetitive EPC offerings that are
lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations executed through its Linxon
subsidiary.
LSTK construction contracts: Under LSTK construction contracts, the Company completes the work required for the project
at a lump-sum price. Before entering into such contracts, the Company estimates the total cost of the project, plus a profit
margin. The Company’s actual profit margin may vary based on its ability to achieve the project requirements at above or below
the initial estimated costs.
The following tables present revenues by type of contracts for the years ended December 31, 2020 and 2019:
YEAR ENDED DECEMBER 31
REIMBURSABLE AND
ENGINEERING SERVICE
CONTRACTS
STANDARDIZED EPC
CONTRACTS
LUMP-SUM TURNKEY
CONSTRUCTION
CONTRACTS
2020
TOTAL
EDPM
Nuclear
Infrastructure Services
Revenue from contracts with customers –
SNCL Engineering Services
Resources
Infrastructure EPC Projects
Revenue from contracts with customers – SNCL Projects
$
3,721,120 $
882,470
789,888
— $
—
533,547
5,393,478
533,547
134,918
20,704
155,622
—
—
—
— $
3,721,120
11,079
—
11,079
23,657
719,485
743,142
893,549
1,323,435
5,938,104
158,575
740,189
898,764
$
5,549,100 $
533,547 $
754,221 $
6,836,868
Revenue from PS&PM investments accounted for by the equity method (Note 17)
Revenue from contracts with customers – Capital segment
Other revenue – Capital segment
41,274
18,211
111,148
$
7,007,501
2019 (1)
TOTAL
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
$
7,366,065 $
263,767 $
In the years ended December 31, 2020 and 2019, Canada, the United States and the United Kingdom were the only countries
where the Company derived more than 10% of its revenues.
Revenue from contracts with customers –
SNCL Engineering Services
Resources
Infrastructure EPC Projects
Revenue from contracts with customers – SNCL Projects
YEAR ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
REIMBURSABLE AND
ENGINEERING SERVICE
CONTRACTS
STANDARDIZED EPC
CONTRACTS
LUMP-SUM TURNKEY
CONSTRUCTION
CONTRACTS
$
3,908,772 $
895,657
697,773
5,502,202
128,150
—
128,150
— $
—
— $
3,908,772
11,018
906,675
480,809
—
1,178,582
480,809
—
—
—
11,018
144,734
1,076,744
1,221,478
5,994,029
272,884
1,076,744
1,349,628
$
5,630,352 $
480,809 $
1,232,496 $
7,343,657
44
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
45
45
Revenue from PS&PM investments accounted for by the equity method (Note 17)
Revenue from contracts with customers – Capital segment
Other revenue – Capital segment
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
23,455
22,408
240,312
$
7,629,832
SNC-Lavalin 2020 Financial Report
9.
B)
REVENUE (CONTINUED)
CONTRACT BALANCES
Trade receivables (Note 8A)
Contract assets (Note 8B)
Contract liabilities
DECEMBER 31
2020
DECEMBER 31
2019
$
1,199,166 $
1,090,149
$
836,991 $
1,533,442
1,755,325
889,953
Trade receivables are rights to consideration in exchange for goods or services that the Company has transferred to a customer
when such rights are only conditional on the passage of time. Trade receivables are non-interest bearing and are generally on
terms of 30 to 90 days.
Contract assets are rights to consideration in exchange for goods or services that the Company has transferred to a customer
when such rights are not only conditional on passage of time, but also on something else, such as the satisfaction of further
performance obligations under the contract. Contract assets are initially recognized for revenue earned from PS&PM activities
and are usually derecognized when they become trade receivables.
Contract liabilities arise from PS&PM activities and represent the cumulative amounts received and contractually receivable
from customers by the Company that exceed the right to consideration resulting from the Company’s performance under a given
contract.
The following table presents the amount of revenue recognized from:
YEARS ENDED DECEMBER 31
Amounts included in contract liabilities at the beginning of the year
Performance obligations satisfied or partially satisfied in previous years (reversal)
$
$
2020
534,379 $
(353,109) $
2019
486,775
(254,787)
As a significant portion of the Company’s revenues are recognized over time, the contractual terms which determine when
consideration becomes receivable from the customer, such as upon the achievement of certain milestones, the attainment by the
Company of such milestones earlier or later than anticipated and the ability to obtain deposits on contracts will influence, among
other factors, the balance of trade receivables, contract assets and contract liabilities on a given contract. Due to i) the large
number of contracts entered into by the Company; ii) the variety of contractual terms of such contracts; and iii) the different
level of progress of the underlying projects, the variance of the contract assets and contract liabilities balances is not usually
attributable to a single factor, except for significant business combinations or divestitures. In 2020 and 2019, there were no
business combinations. The amount of contract assets and contract liabilities decreased at the end of 2020, reflecting mainly: i) a
reclassification of contract balances related to the Oil & Gas business as part of the disposal group classified as held for sale (see
Note 39); ii) the reduction of variable consideration expected from certain commercial claims combined with some unfavorable
reforecasts on certain major projects; and iii) the disposals of PS&PM businesses in Belgium and in South Africa (see Note 6).
C)
REMAINING PERFORMANCE OBLIGATIONS
The aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially satisfied) at
December 31, 2020, on all contracts with customers, is expected to be recognized in revenues from continuing operations as
follows: 2021 –$4.4 billion, 2022 – $2.0 billion, 2023 – $1.2 billion, and thereafter – $5.6 billion (2019: 2020 – $4.8 billion,
2021 – $2.2 billion, 2022 – $1.1 billion, and thereafter – $6.0 billion). The aggregate amount of transaction price allocated to
performance obligations that are unsatisfied (or partially satisfied) at December 31, 2020, on all contracts with customers, is
expected to be recognized in revenues from discontinued operations is $0.8 billion (2019: $1.1 billion). It should be noted that
these amounts exclude any estimated amounts of variable consideration that are excluded from the transaction price.
10.
INVENTORIES
Raw materials
Work in progress
Finished goods
Inventories
DECEMBER 31
2020
DECEMBER 31
2019
$
— $
130
15,992
$
16,122 $
38,042
29,563
17,283
84,888
The cost of inventories recognized by the Company as an expense in continuing operations in its consolidated income statement
during the year ended December 31, 2020 was $8.7 million (2019: $6.3 million).
Advances to suppliers, subcontractors and employees and deposits on contracts
$
45,282 $
11. OTHER CURRENT FINANCIAL ASSETS
Derivative financial instruments used for hedges – favourable fair value
Life insurance policies measured at FVTPL (1)
Current portion of receivables under service concession arrangements
Recovery of costs expected from suppliers and subcontractors
Current portion of finance lease receivables
Derivative financial instruments related to share unit plans – favourable fair value (Note 23C)
Other
Other current financial assets
(1)
Fair value through profit or loss (“FVTPL”)
12. OTHER CURRENT NON-FINANCIAL ASSETS
Income taxes and other taxes receivable
Prepaid expenses and other
Other current non-financial assets
13.
PROPERTY AND EQUIPMENT
DECEMBER 31
2020
DECEMBER 31
41,808
6,200
17,370
23,178
2,627
148
120,819
$
257,432 $
2019
54,895
19,246
6,047
17,556
49,687
3,277
1,900
69,700
222,308
DECEMBER 31
2020
DECEMBER 31
2019
$
145,341 $
107,970
$
253,311 $
220,629
110,746
331,375
BUILDINGS
COMPUTER
EQUIPMENT
OFFICE
FURNITURE
MACHINERY
OTHER
TOTAL
$
97,798 $
470,761 $
164,242 $
156,385 $
270,394 $ 1,159,580
3,804
67,566
2,285
7,758
22,274
103,687
(2,099)
(4,276)
(2,800)
(31,732)
(584)
(12,856)
(6,389)
(34,723)
(2,590)
(14,462)
(55,813)
(139,400)
Gross carrying amount
Balance as at January 1, 2020
Additions
differences
Effect of foreign currency exchange
Disposals / retirements / salvage
Reclassification to assets of disposal
groups classified as held for sale
(Note 39)
Accumulated depreciation and
impairment losses
Balance as at January 1, 2020
Depreciation expense
Effect of foreign currency exchange
differences
Impairment loss
Disposals / retirements / salvage
Reclassification to assets of disposal
groups classified as held for sale
(Note 39)
Balance as at December 31, 2020
$
50,715 $
490,112 $
126,799 $
90,945 $
198,338 $
956,909
(44,512)
(13,683)
(26,288)
(32,086)
(35,927)
(152,496)
$
42,103 $
349,089 $
128,210 $
66,132 $
103,416 $
688,950
22,865
45,763
9,058
27,298
15,221
120,205
(1,487)
(1,884)
—
—
(479)
—
(4,243)
5,358
(511)
2,894
(8,604)
8,252
(2,675)
(30,957)
(11,249)
(34,210)
(27,312)
(106,403)
Balance as at December 31, 2020
$
16,751 $
350,362 $
104,809 $
28,511 $
80,612 $
581,045
(44,055)
(11,649)
(20,731)
(31,824)
(13,096)
(121,355)
46
46
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
47
9.
B)
REVENUE (CONTINUED)
CONTRACT BALANCES
Trade receivables (Note 8A)
Contract assets (Note 8B)
Contract liabilities
terms of 30 to 90 days.
DECEMBER 31
2020
DECEMBER 31
2019
$
1,199,166 $
1,090,149
$
836,991 $
1,533,442
1,755,325
889,953
Trade receivables are rights to consideration in exchange for goods or services that the Company has transferred to a customer
when such rights are only conditional on the passage of time. Trade receivables are non-interest bearing and are generally on
Contract assets are rights to consideration in exchange for goods or services that the Company has transferred to a customer
when such rights are not only conditional on passage of time, but also on something else, such as the satisfaction of further
performance obligations under the contract. Contract assets are initially recognized for revenue earned from PS&PM activities
and are usually derecognized when they become trade receivables.
Contract liabilities arise from PS&PM activities and represent the cumulative amounts received and contractually receivable
from customers by the Company that exceed the right to consideration resulting from the Company’s performance under a given
contract.
The following table presents the amount of revenue recognized from:
YEARS ENDED DECEMBER 31
Amounts included in contract liabilities at the beginning of the year
Performance obligations satisfied or partially satisfied in previous years (reversal)
$
$
2020
534,379 $
(353,109) $
2019
486,775
(254,787)
As a significant portion of the Company’s revenues are recognized over time, the contractual terms which determine when
consideration becomes receivable from the customer, such as upon the achievement of certain milestones, the attainment by the
Company of such milestones earlier or later than anticipated and the ability to obtain deposits on contracts will influence, among
other factors, the balance of trade receivables, contract assets and contract liabilities on a given contract. Due to i) the large
number of contracts entered into by the Company; ii) the variety of contractual terms of such contracts; and iii) the different
level of progress of the underlying projects, the variance of the contract assets and contract liabilities balances is not usually
attributable to a single factor, except for significant business combinations or divestitures. In 2020 and 2019, there were no
business combinations. The amount of contract assets and contract liabilities decreased at the end of 2020, reflecting mainly: i) a
reclassification of contract balances related to the Oil & Gas business as part of the disposal group classified as held for sale (see
Note 39); ii) the reduction of variable consideration expected from certain commercial claims combined with some unfavorable
reforecasts on certain major projects; and iii) the disposals of PS&PM businesses in Belgium and in South Africa (see Note 6).
C)
REMAINING PERFORMANCE OBLIGATIONS
The aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially satisfied) at
December 31, 2020, on all contracts with customers, is expected to be recognized in revenues from continuing operations as
follows: 2021 –$4.4 billion, 2022 – $2.0 billion, 2023 – $1.2 billion, and thereafter – $5.6 billion (2019: 2020 – $4.8 billion,
2021 – $2.2 billion, 2022 – $1.1 billion, and thereafter – $6.0 billion). The aggregate amount of transaction price allocated to
performance obligations that are unsatisfied (or partially satisfied) at December 31, 2020, on all contracts with customers, is
expected to be recognized in revenues from discontinued operations is $0.8 billion (2019: $1.1 billion). It should be noted that
these amounts exclude any estimated amounts of variable consideration that are excluded from the transaction price.
10.
INVENTORIES
Raw materials
Work in progress
Finished goods
Inventories
DECEMBER 31
2020
DECEMBER 31
$
— $
130
15,992
$
16,122 $
2019
38,042
29,563
17,283
84,888
The cost of inventories recognized by the Company as an expense in continuing operations in its consolidated income statement
during the year ended December 31, 2020 was $8.7 million (2019: $6.3 million).
11. OTHER CURRENT FINANCIAL ASSETS
Advances to suppliers, subcontractors and employees and deposits on contracts
Derivative financial instruments used for hedges – favourable fair value
Life insurance policies measured at FVTPL (1)
Current portion of receivables under service concession arrangements
Recovery of costs expected from suppliers and subcontractors
Current portion of finance lease receivables
Derivative financial instruments related to share unit plans – favourable fair value (Note 23C)
Other
Other current financial assets
(1)
Fair value through profit or loss (“FVTPL”)
12. OTHER CURRENT NON-FINANCIAL ASSETS
Income taxes and other taxes receivable
Prepaid expenses and other
Other current non-financial assets
DECEMBER 31
2020
DECEMBER 31
2019
$
45,282 $
41,808
6,200
17,370
23,178
2,627
148
120,819
$
257,432 $
54,895
19,246
6,047
17,556
49,687
3,277
1,900
69,700
222,308
DECEMBER 31
2020
DECEMBER 31
2019
$
145,341 $
107,970
$
253,311 $
220,629
110,746
331,375
13.
PROPERTY AND EQUIPMENT
BUILDINGS
COMPUTER
EQUIPMENT
OFFICE
FURNITURE
MACHINERY
OTHER
TOTAL
Gross carrying amount
Balance as at January 1, 2020
Additions
Effect of foreign currency exchange
differences
Disposals / retirements / salvage
Reclassification to assets of disposal
groups classified as held for sale
(Note 39)
$
97,798 $
470,761 $
164,242 $
156,385 $
270,394 $ 1,159,580
3,804
67,566
2,285
7,758
22,274
103,687
(2,099)
(4,276)
(2,800)
(31,732)
(584)
(12,856)
(6,389)
(34,723)
(2,590)
(14,462)
(55,813)
(139,400)
(44,512)
(13,683)
(26,288)
(32,086)
(35,927)
(152,496)
Balance as at December 31, 2020
$
50,715 $
490,112 $
126,799 $
90,945 $
198,338 $
956,909
Accumulated depreciation and
impairment losses
Balance as at January 1, 2020
Depreciation expense
Effect of foreign currency exchange
differences
Impairment loss
Disposals / retirements / salvage
Reclassification to assets of disposal
groups classified as held for sale
(Note 39)
$
42,103 $
349,089 $
128,210 $
66,132 $
103,416 $
688,950
22,865
45,763
9,058
27,298
15,221
120,205
(1,487)
(1,884)
—
—
(479)
—
(4,243)
5,358
(511)
2,894
(8,604)
8,252
(2,675)
(30,957)
(11,249)
(34,210)
(27,312)
(106,403)
(44,055)
(11,649)
(20,731)
(31,824)
(13,096)
(121,355)
Balance as at December 31, 2020
$
16,751 $
350,362 $
104,809 $
28,511 $
80,612 $
581,045
46
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
47
47
SNC-Lavalin 2020 Financial Report
13.
PROPERTY AND EQUIPMENT (CONTINUED)
14.
GOODWILL (CONTINUED)
BUILDINGS
COMPUTER
EQUIPMENT
OFFICE
FURNITURE
MACHINERY
OTHER
TOTAL
As at December 31, 2020 and 2019, the Company’s goodwill was allocated to the following CGU and groups of CGU:
Gross carrying amount
Balance as at January 1, 2019
Additions
Effect of foreign currency exchange
differences
Disposals / retirements / salvage
Balance as at December 31, 2019
Accumulated depreciation and
impairment losses
Balance as at January 1, 2019
Depreciation expense
Effect of foreign currency exchange
differences
Impairment loss
Disposals / retirements / salvage
Balance as at December 31, 2019
Net book value:
As at December 31, 2020
As at December 31, 2019
$ 102,748 $ 433,670 $ 158,762 $ 147,060 $ 234,794 $ 1,077,034
366
51,291
8,377
17,235
48,243
125,512
Infrastructure Services
(2,832)
(2,484)
(7,620)
(6,580)
(2,650)
(6,279)
(11,924)
(31,305)
(247)
(1,631)
(719)
(11,661)
$
97,798 $ 470,761 $ 164,242 $ 156,385 $ 270,394 $ 1,159,580
$
40,141 $ 311,800 $ 120,981 $
28,400 $
93,093 $ 594,415
4,509
43,704
8,960
31,584
19,483
108,240
(1,355)
(6,309)
(2,065)
33
(1,225)
92
(198)
446
(112)
(1,591)
9,429
(1,690)
(8,894)
(20,214)
—
10,000
(266)
(3,491)
$
42,103 $ 349,089 $ 128,210 $
66,132 $ 103,416 $ 688,950
$
33,964 $ 139,750 $
21,990 $
62,434 $ 117,726 $ 375,864
$
55,695 $ 121,672 $
36,032 $
90,253 $ 166,978 $ 470,630
Net book value of assets subject to operating leases:
As at December 31, 2020
As at December 31, 2019
$
$
— $
— $
— $
— $
— $
57,059 $
— $
57,059
— $
66,570 $
— $
66,570
An amount of $6.9 million as at December 31, 2020 (2019: $23.9 million) of property and equipment was not being depreciated
as the assets were under construction. The non-cash additions of property and equipment amounted to $30.9 million in the year
ended December 31, 2020 (2019: $3.1 million).
14. GOODWILL
The following table details a reconciliation of the carrying amount of the Company’s goodwill:
Balance at January 1, 2019
Net foreign currency exchange differences
Additional amount recognized from the adjustments to the final allocation of purchase price of Linxon
Impairment of goodwill
Balance at December 31, 2019
Net foreign currency exchange differences
Balance at December 31, 2020
$ 5,369,723
(143,435)
3,821
(1,801,015)
3,429,094
384
$ 3,429,478
For the purpose of annual impairment testing, goodwill is allocated to CGU or groups of CGU, which are the units expected to
benefit from the synergies of the business combinations in which the goodwill arises.
CGU OR GROUP OF CGU
EDPM
Nuclear
Linxon
I) IN 2020
DECEMBER 31
2020
DECEMBER 31
2019
$
2,624,526 $
2,625,033
142,782
642,770
19,400
141,741
642,516
19,804
$
3,429,478 $
3,429,094
As at October 31, 2020, goodwill was not considered to be impaired.
In 2020, approximately 77% of the Company’s goodwill balance is allocated to the EDPM CGU. The recoverable amount of
this CGU, determined in accordance with the value in use approach, based on a terminal growth rate of 2.5% and a discount rate
of 9.5%, exceeded its carrying amount by approximately $563 million as at October 31, 2020. Assuming all other assumptions
remained the same, a 140-basis point decrease in the terminal growth rate or a 107-basis point increase in the discount rate
would have caused the EDPM CGU’s carrying amount to be comparable to its recoverable amount as at that date.
No reasonable change in the key assumptions used for the other CGU or group of CGU would have resulted in an impairment
loss as at October 31, 2020. The recoverable amount of other CGU or group of CGU was determined based on the value in use
approach. Under this approach, the following assumptions were used: cash flows beyond the long-term forecast were
extrapolated using a growth rate of 2.5% in 2020 and discount rates ranging from 9.8% to 12.1% have been used in 2020.
II) IN 2019
As at June 30, 2019, goodwill was impaired by $1.8 billion ($1.7 billion after income taxes) in the Resources CGU. Such CGU
corresponded to a reportable segment. The impairment was largely attributable to the Company’s decision to cease bidding on
lump-sum turnkey construction projects, as well as lower than expected performance in Resources in the first half of the year
and challenges in replenishing the backlog. The recoverable amount of this CGU was determined using the value in use
approach as at June 30, 2019, based on a terminal growth rate of 2.5% and a discount rate of 11.3%.
In 2019, approximately 77% of the Company’s goodwill balance was allocated to the EDPM CGU. The recoverable amount of
this CGU, based on a terminal growth rate of 2.5% and a discount rate of 9.4%, exceeded its carrying amount by approximately
$829 million as at October 31, 2019. Assuming all other assumptions remained the same, a 220-basis point decrease in the
terminal growth rate or a 165-basis point increase in the discount rate would have caused the EDPM CGU’s carrying amount to
be comparable to its recoverable amount as at that date.
No reasonable change in the key assumptions used for the other CGU or group of CGU would have resulted in an impairment
loss as at October 31, 2019. The recoverable amount of other CGU or group of CGU was determined based on the value in use
approach. Under this approach, the following assumptions were used: cash flows beyond the long-term forecast were
extrapolated using a growth rate of 2.5% in 2019 and discount rates ranging from 9.5% to 11.0% have been used in 2019.
48
48
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
49
13.
PROPERTY AND EQUIPMENT (CONTINUED)
14.
GOODWILL (CONTINUED)
As at December 31, 2020 and 2019, the Company’s goodwill was allocated to the following CGU and groups of CGU:
$
97,798 $ 470,761 $ 164,242 $ 156,385 $ 270,394 $ 1,159,580
I) IN 2020
CGU OR GROUP OF CGU
EDPM
Infrastructure Services
Nuclear
Linxon
DECEMBER 31
2020
DECEMBER 31
2019
$
2,624,526 $
2,625,033
142,782
642,770
19,400
141,741
642,516
19,804
$
3,429,478 $
3,429,094
As at October 31, 2020, goodwill was not considered to be impaired.
In 2020, approximately 77% of the Company’s goodwill balance is allocated to the EDPM CGU. The recoverable amount of
this CGU, determined in accordance with the value in use approach, based on a terminal growth rate of 2.5% and a discount rate
of 9.5%, exceeded its carrying amount by approximately $563 million as at October 31, 2020. Assuming all other assumptions
remained the same, a 140-basis point decrease in the terminal growth rate or a 107-basis point increase in the discount rate
would have caused the EDPM CGU’s carrying amount to be comparable to its recoverable amount as at that date.
No reasonable change in the key assumptions used for the other CGU or group of CGU would have resulted in an impairment
loss as at October 31, 2020. The recoverable amount of other CGU or group of CGU was determined based on the value in use
approach. Under this approach, the following assumptions were used: cash flows beyond the long-term forecast were
extrapolated using a growth rate of 2.5% in 2020 and discount rates ranging from 9.8% to 12.1% have been used in 2020.
II) IN 2019
As at June 30, 2019, goodwill was impaired by $1.8 billion ($1.7 billion after income taxes) in the Resources CGU. Such CGU
corresponded to a reportable segment. The impairment was largely attributable to the Company’s decision to cease bidding on
lump-sum turnkey construction projects, as well as lower than expected performance in Resources in the first half of the year
and challenges in replenishing the backlog. The recoverable amount of this CGU was determined using the value in use
approach as at June 30, 2019, based on a terminal growth rate of 2.5% and a discount rate of 11.3%.
In 2019, approximately 77% of the Company’s goodwill balance was allocated to the EDPM CGU. The recoverable amount of
this CGU, based on a terminal growth rate of 2.5% and a discount rate of 9.4%, exceeded its carrying amount by approximately
$829 million as at October 31, 2019. Assuming all other assumptions remained the same, a 220-basis point decrease in the
terminal growth rate or a 165-basis point increase in the discount rate would have caused the EDPM CGU’s carrying amount to
be comparable to its recoverable amount as at that date.
No reasonable change in the key assumptions used for the other CGU or group of CGU would have resulted in an impairment
loss as at October 31, 2019. The recoverable amount of other CGU or group of CGU was determined based on the value in use
approach. Under this approach, the following assumptions were used: cash flows beyond the long-term forecast were
extrapolated using a growth rate of 2.5% in 2019 and discount rates ranging from 9.5% to 11.0% have been used in 2019.
BUILDINGS
COMPUTER
EQUIPMENT
OFFICE
FURNITURE
MACHINERY
OTHER
TOTAL
$ 102,748 $ 433,670 $ 158,762 $ 147,060 $ 234,794 $ 1,077,034
366
51,291
8,377
17,235
48,243
125,512
(2,832)
(2,484)
(7,620)
(6,580)
(2,650)
(6,279)
(11,924)
(31,305)
(247)
(1,631)
(719)
(11,661)
$
40,141 $ 311,800 $ 120,981 $
28,400 $
93,093 $ 594,415
4,509
43,704
8,960
31,584
19,483
108,240
(1,355)
(6,309)
(2,065)
33
(1,225)
92
(198)
446
(112)
(1,591)
9,429
(1,690)
(8,894)
(20,214)
—
10,000
(266)
(3,491)
$
42,103 $ 349,089 $ 128,210 $
66,132 $ 103,416 $ 688,950
Gross carrying amount
Balance as at January 1, 2019
Additions
Effect of foreign currency exchange
differences
Disposals / retirements / salvage
Balance as at December 31, 2019
Accumulated depreciation and
impairment losses
Balance as at January 1, 2019
Depreciation expense
Effect of foreign currency exchange
differences
Impairment loss
Disposals / retirements / salvage
Balance as at December 31, 2019
Net book value:
As at December 31, 2020
As at December 31, 2019
$
33,964 $ 139,750 $
21,990 $
62,434 $ 117,726 $ 375,864
$
55,695 $ 121,672 $
36,032 $
90,253 $ 166,978 $ 470,630
Net book value of assets subject to operating leases:
As at December 31, 2020
As at December 31, 2019
$
$
— $
— $
— $
— $
— $
57,059 $
— $
57,059
— $
66,570 $
— $
66,570
An amount of $6.9 million as at December 31, 2020 (2019: $23.9 million) of property and equipment was not being depreciated
as the assets were under construction. The non-cash additions of property and equipment amounted to $30.9 million in the year
ended December 31, 2020 (2019: $3.1 million).
14. GOODWILL
The following table details a reconciliation of the carrying amount of the Company’s goodwill:
Additional amount recognized from the adjustments to the final allocation of purchase price of Linxon
Balance at January 1, 2019
Net foreign currency exchange differences
Impairment of goodwill
Balance at December 31, 2019
Net foreign currency exchange differences
Balance at December 31, 2020
$ 5,369,723
(143,435)
3,821
(1,801,015)
3,429,094
384
$ 3,429,478
For the purpose of annual impairment testing, goodwill is allocated to CGU or groups of CGU, which are the units expected to
benefit from the synergies of the business combinations in which the goodwill arises.
48
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
49
49
SNC-Lavalin 2020 Financial Report
15.
INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
16. OTHER NON-CURRENT FINANCIAL ASSETS
The following tables detail a reconciliation of the carrying amount of intangible assets related to business combinations:
Gross carrying amount
Balance as at January 1, 2020
Derecognition of intangible assets
Effect of foreign currency exchange differences
Reclassification to assets of disposal groups classified as
held for sale (Note 39)
Balance as at December 31, 2020
Accumulated depreciation and impairment losses
Balance as at January 1, 2020
Amortization expense
Derecognition of intangible assets
Effect of foreign currency exchange differences
Reclassification to assets of disposal groups classified as
held for sale (Note 39)
Balance as at December 31, 2020
REVENUE
BACKLOG
CUSTOMER
RELATIONSHIPS
TRADEMARKS
TOTAL
Derivative financial instruments related to share unit plans – favourable fair value (Note 23C)
$
908 $
Derivative financial instruments used for hedges – favourable fair value
Non-current portion of finance lease receivables
$
214,630 $
999,907 $
137,981 $
1,352,518
Contingent consideration receivable related to disposal of the 10.01% interest in Highway 407 ETR (Note 5A)
(200,005)
1,906
(54,600)
8,131
(4,642)
(256)
(259,247)
9,781
Other
Other non-current financial assets
—
(187,105)
(25,760)
(212,865)
$
16,531 $
766,333 $
107,323 $
890,187
$
173,205 $
430,238 $
83,477 $
686,920
36,367
(200,005)
2,420
75,489
(54,600)
2,526
14,914
(4,642)
(396)
126,770
(259,247)
4,550
—
(187,105)
(25,760)
(212,865)
$
11,987 $
266,548 $
67,593 $
346,128
DECEMBER 31
DECEMBER 31
2020
2019
6,561
2,436
24,666
57,207
25,071
1,065
13,601
—
15,824
$ 31,398 $ 115,941
The Company’s finance lease receivables relate mainly to the subleases of its unused office space. In 2020, the decrease of
finance lease receivables was mainly due to the passage of time and to a reclassification of leases included in the Oil & Gas
business to assets of disposal group classified as held for sale (see Note 39).
Gross carrying amount
Balance as at January 1, 2019
Additions through a business combination
Derecognition of intangible assets
Effect of foreign currency exchange differences
REVENUE
BACKLOG
CUSTOMER
RELATIONSHIPS
TRADEMARKS
TOTAL
$
206,220 $
1,008,313 $
140,929 $
1,355,462
14,138
(3,815)
(1,913)
—
—
—
—
(8,406)
(2,948)
14,138
(3,815)
(13,267)
Balance as at December 31, 2019
$
214,630 $
999,907 $
137,981 $
1,352,518
Accumulated depreciation and impairment losses
Balance as at January 1, 2019
Amortization expense
Impairment loss
Derecognition of intangible assets
Effect of foreign currency exchange differences
$
106,414 $
264,830 $
63,632 $
434,876
70,663
—
(3,815)
(57)
91,657
71,756
—
1,995
19,663
1,075
—
(893)
181,983
72,831
(3,815)
1,045
Balance as at December 31, 2019
$
173,205 $
430,238 $
83,477 $
686,920
Net book value:
As at December 31, 2020
As at December 31, 2019
$
$
4,544 $
499,785 $
39,730 $
544,059
41,425 $
569,669 $
54,504 $
665,598
50
50
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
51
15.
INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
16. OTHER NON-CURRENT FINANCIAL ASSETS
Derivative financial instruments related to share unit plans – favourable fair value (Note 23C)
Derivative financial instruments used for hedges – favourable fair value
Non-current portion of finance lease receivables
Contingent consideration receivable related to disposal of the 10.01% interest in Highway 407 ETR (Note 5A)
Other
Other non-current financial assets
DECEMBER 31
2020
DECEMBER 31
2019
$
908 $
1,065
13,601
—
15,824
6,561
2,436
24,666
57,207
25,071
$ 31,398 $ 115,941
The Company’s finance lease receivables relate mainly to the subleases of its unused office space. In 2020, the decrease of
finance lease receivables was mainly due to the passage of time and to a reclassification of leases included in the Oil & Gas
business to assets of disposal group classified as held for sale (see Note 39).
The following tables detail a reconciliation of the carrying amount of intangible assets related to business combinations:
REVENUE
BACKLOG
CUSTOMER
RELATIONSHIPS
TRADEMARKS
TOTAL
Gross carrying amount
Balance as at January 1, 2020
Derecognition of intangible assets
Effect of foreign currency exchange differences
Reclassification to assets of disposal groups classified as
held for sale (Note 39)
Balance as at December 31, 2020
Accumulated depreciation and impairment losses
Balance as at January 1, 2020
Amortization expense
Derecognition of intangible assets
Effect of foreign currency exchange differences
Reclassification to assets of disposal groups classified as
held for sale (Note 39)
Balance as at December 31, 2020
$
214,630 $
999,907 $
137,981 $
1,352,518
(200,005)
1,906
(54,600)
8,131
(4,642)
(256)
(259,247)
9,781
—
(187,105)
(25,760)
(212,865)
$
16,531 $
766,333 $
107,323 $
890,187
$
173,205 $
430,238 $
83,477 $
686,920
36,367
(200,005)
2,420
75,489
(54,600)
2,526
14,914
(4,642)
(396)
126,770
(259,247)
4,550
—
(187,105)
(25,760)
(212,865)
$
11,987 $
266,548 $
67,593 $
346,128
Balance as at December 31, 2019
$
214,630 $
999,907 $
137,981 $
1,352,518
Gross carrying amount
Balance as at January 1, 2019
Additions through a business combination
Derecognition of intangible assets
Effect of foreign currency exchange differences
Accumulated depreciation and impairment losses
Balance as at January 1, 2019
Amortization expense
Impairment loss
Derecognition of intangible assets
Effect of foreign currency exchange differences
Net book value:
As at December 31, 2020
As at December 31, 2019
REVENUE
BACKLOG
CUSTOMER
RELATIONSHIPS
TRADEMARKS
TOTAL
$
206,220 $
1,008,313 $
140,929 $
1,355,462
—
—
—
—
(8,406)
(2,948)
14,138
(3,815)
(13,267)
$
106,414 $
264,830 $
63,632 $
434,876
91,657
71,756
—
1,995
19,663
1,075
—
(893)
181,983
72,831
(3,815)
1,045
14,138
(3,815)
(1,913)
70,663
—
(3,815)
(57)
$
$
4,544 $
499,785 $
39,730 $
544,059
41,425 $
569,669 $
54,504 $
665,598
Balance as at December 31, 2019
$
173,205 $
430,238 $
83,477 $
686,920
50
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
51
51
SNC-Lavalin 2020 Financial Report
17. OTHER NON-CURRENT NON-FINANCIAL ASSETS
DECEMBER 31
2020
DECEMBER 31
2019
Post-employment benefit assets (Note 32A)
PS&PM investments accounted for by the equity method
Other
$
8,327 $
54,067
20,557
Other non-current non-financial assets
$
82,951 $
10,979
27,145
55,374
93,498
PS&PM investments accounted for by the equity method – joint ventures
SNC-Lavalin carries out part of its PS&PM investment activity through joint ventures which are accounted for by the equity
method. The aggregate amounts of current assets, non-current assets, current liabilities, non-current liabilities, revenues and
expenses related to such joint ventures are summarized below. Joint ventures included in assets of disposal groups classified as
held for sale as at December 31, 2020 are not included in the tables below for the current year (see Note 39).
YEARS ENDED DECEMBER 31
Income statements
Revenues (at 100%)
Interest income (at 100%)
Interest expense (at 100%)
Depreciation and amortization (at 100%)
Income tax expense (at 100%)
YEARS ENDED DECEMBER 31
Statements of comprehensive income
Net income (at 100%)
Other comprehensive loss (at 100%)
Total comprehensive income (at 100%)
YEARS ENDED DECEMBER 31
Company’s share of net income of PS&PM investments based on its ownership interest
Company’s net income from PS&PM investments included in its income statement
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
Statements of financial position
Cash and cash equivalents (at 100%)
Other current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Trade payables (at 100%)
Other current financial liabilities (at 100%)
Other current non-financial liabilities (at 100%)
Other non-current financial liabilities (at 100%)
Total liabilities (at 100%)
Net assets (at 100%)
Company’s carrying value of PS&PM investments included in its statement of financial
position
2020
2019
1,786,311 $
1,629,284
$
$
$
$
$
4,743 $
5,520 $
317 $
— $
2020
$
100,668 $
—
$
100,668 $
$
$
2020
41,274 $
41,274 $
Statements of financial position
Current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Current liabilities (at 100%)
Non-current liabilities (at 100%)
Total liabilities (at 100%)
Net assets (at 100%)
4,162
5,253
3,361
209
2019
102,862
(2,025)
100,837
2019 (1)
23,455
23,455
DECEMBER 31
2020
DECEMBER 31
2019
other comprehensive income (Note 5C)
Retentions on supplier contracts
Commitments to invest in Capital investments accounted for by the equity method and at fair value through
$
211,852 $
279,008
4,649
495,509
344,412
14,983
4,934
7,504
371,833
123,676 $
232,152
215,780
85,320
533,252
110,785
198,978
7,506
26,490
343,759
189,493
$
$
54,067 $
27,145
17.
OTHER NON-CURRENT NON-FINANCIAL ASSETS (CONTINUED)
PS&PM investments accounted for by the equity method - associates
The summary tables below provide supplementary information in respect of PS&PM investments classified as associates.
YEARS ENDED DECEMBER 31
Statements of comprehensive income
Revenues (at 100%)
Expenses (at 100%)
Net income (loss) (at 100%)
Other comprehensive income (at 100%)
Total comprehensive income (loss) (at 100%)
Company’s share of net income of PS&PM investments based on its ownership
Company’s share of net income from PS&PM investments included in its income
interest
statement
2020
2019
$
33,053 $
34,112
(1,059)
—
$
(1,059) $
$
$
— $
— $
DECEMBER 31
DECEMBER 31
2020
2019
$
21,092 $
3,716
24,808
17,225
1,953
19,178
181,922
180,505
1,417
—
1,417
—
—
62,649
4,527
67,176
54,320
3,168
57,488
9,688
DECEMBER 31
DECEMBER 31
2020
2019
$
24,921 $
70,724
90,793
112,470
—
12,981
3,025
55,865
169
1,736
17,086
—
55,625
30,075
$ 187,754 $ 287,716
Company’s carrying value of PS&PM investments included in its statement of
financial position
$
5,630 $
$
— $
—
18. OTHER CURRENT FINANCIAL LIABILITIES
Balance of purchase price payable relating to acquisition of businesses
Derivative financial instruments used for hedges – unfavourable fair value
Derivative financial instruments related to share unit plans – unfavourable fair value (Note 23C)
Federal charges settlement (PPSC) payable
Other
Other current financial liabilities
On February 19, 2015, the Royal Canadian Mounted Police and the Public Prosecution Service of Canada (“PPSC”) laid
charges (the “Charges”) against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin
Construction Inc. On December 18, 2019, the Company announced it had reached a settlement with the PPSC regarding the
Charges (the “Federal charges settlement (PPSC)”). As part of the Federal charges settlement (PPSC), SNC-Lavalin
Construction Inc. is required to pay a fine in the amount of $280 million, payable over 5 years, and is subject to a three-year
probation order. The Company estimated the net present value of these installments at $257.3 million at October 18, 2019, the
date of the Federal Charges settlement, of which $154.3 million is included in “Other non-current financial liabilities” (see Note
21) as at December 31, 2020 (2019: $201.8 million).
52
52
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
53
17. OTHER NON-CURRENT NON-FINANCIAL ASSETS
Post-employment benefit assets (Note 32A)
PS&PM investments accounted for by the equity method
Other
Other non-current non-financial assets
$
82,951 $
PS&PM investments accounted for by the equity method – joint ventures
SNC-Lavalin carries out part of its PS&PM investment activity through joint ventures which are accounted for by the equity
method. The aggregate amounts of current assets, non-current assets, current liabilities, non-current liabilities, revenues and
expenses related to such joint ventures are summarized below. Joint ventures included in assets of disposal groups classified as
held for sale as at December 31, 2020 are not included in the tables below for the current year (see Note 39).
DECEMBER 31
2020
DECEMBER 31
2019
$
8,327 $
54,067
20,557
10,979
27,145
55,374
93,498
2020
2019
1,786,311 $
1,629,284
$
$
$
$
$
4,743 $
5,520 $
317 $
— $
2020
—
$
100,668 $
$
100,668 $
$
$
2020
41,274 $
41,274 $
$
211,852 $
279,008
4,649
495,509
344,412
14,983
4,934
7,504
371,833
123,676 $
4,162
5,253
3,361
209
2019
102,862
(2,025)
100,837
2019 (1)
23,455
23,455
232,152
215,780
85,320
533,252
110,785
198,978
7,506
26,490
343,759
189,493
YEARS ENDED DECEMBER 31
Company’s share of net income of PS&PM investments based on its ownership interest
Company’s net income from PS&PM investments included in its income statement
(1)
Comparative figures have been re-presented (see Notes 2C and 39).
YEARS ENDED DECEMBER 31
Income statements
Revenues (at 100%)
Interest income (at 100%)
Interest expense (at 100%)
Depreciation and amortization (at 100%)
Income tax expense (at 100%)
YEARS ENDED DECEMBER 31
Statements of comprehensive income
Net income (at 100%)
Other comprehensive loss (at 100%)
Total comprehensive income (at 100%)
Statements of financial position
Cash and cash equivalents (at 100%)
Other current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Trade payables (at 100%)
Other current financial liabilities (at 100%)
Other current non-financial liabilities (at 100%)
Other non-current financial liabilities (at 100%)
Total liabilities (at 100%)
Net assets (at 100%)
position
Company’s carrying value of PS&PM investments included in its statement of financial
$
$
54,067 $
27,145
17.
OTHER NON-CURRENT NON-FINANCIAL ASSETS (CONTINUED)
PS&PM investments accounted for by the equity method - associates
The summary tables below provide supplementary information in respect of PS&PM investments classified as associates.
YEARS ENDED DECEMBER 31
Statements of comprehensive income
Revenues (at 100%)
Expenses (at 100%)
Net income (loss) (at 100%)
Other comprehensive income (at 100%)
Total comprehensive income (loss) (at 100%)
Company’s share of net income of PS&PM investments based on its ownership
interest
Company’s share of net income from PS&PM investments included in its income
statement
Statements of financial position
Current assets (at 100%)
Non-current assets (at 100%)
Total assets (at 100%)
Current liabilities (at 100%)
Non-current liabilities (at 100%)
Total liabilities (at 100%)
Net assets (at 100%)
2020
2019
$
33,053 $
34,112
(1,059)
—
$
(1,059) $
$
$
— $
— $
181,922
180,505
1,417
—
1,417
—
—
DECEMBER 31
2020
DECEMBER 31
2019
$
21,092 $
3,716
24,808
17,225
1,953
19,178
$
5,630 $
62,649
4,527
67,176
54,320
3,168
57,488
9,688
Company’s carrying value of PS&PM investments included in its statement of
financial position
$
— $
—
18. OTHER CURRENT FINANCIAL LIABILITIES
DECEMBER 31
2020
DECEMBER 31
2019
other comprehensive income (Note 5C)
Retentions on supplier contracts
Commitments to invest in Capital investments accounted for by the equity method and at fair value through
Balance of purchase price payable relating to acquisition of businesses
Derivative financial instruments used for hedges – unfavourable fair value
Derivative financial instruments related to share unit plans – unfavourable fair value (Note 23C)
Federal charges settlement (PPSC) payable
Other
Other current financial liabilities
DECEMBER 31
2020
DECEMBER 31
2019
$
24,921 $
70,724
90,793
112,470
—
12,981
3,025
55,865
169
1,736
17,086
—
55,625
30,075
$ 187,754 $ 287,716
On February 19, 2015, the Royal Canadian Mounted Police and the Public Prosecution Service of Canada (“PPSC”) laid
charges (the “Charges”) against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin
Construction Inc. On December 18, 2019, the Company announced it had reached a settlement with the PPSC regarding the
Charges (the “Federal charges settlement (PPSC)”). As part of the Federal charges settlement (PPSC), SNC-Lavalin
Construction Inc. is required to pay a fine in the amount of $280 million, payable over 5 years, and is subject to a three-year
probation order. The Company estimated the net present value of these installments at $257.3 million at October 18, 2019, the
date of the Federal Charges settlement, of which $154.3 million is included in “Other non-current financial liabilities” (see Note
21) as at December 31, 2020 (2019: $201.8 million).
52
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
53
53
SNC-Lavalin 2020 Financial Report
19. OTHER CURRENT NON-FINANCIAL LIABILITIES
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
Income taxes and other taxes payable
Share unit plans’ liabilities (Note 23C)
Other
Other current non-financial liabilities
DECEMBER 31
2020
DECEMBER 31
2019
$ 434,987 $ 324,662
38,793
—
56,122
2,416
$ 473,780 $ 383,200
20.
SHORT-TERM DEBT AND LONG-TERM DEBT
As at December 31, 2020 and 2019, the Company’s short-term debt and long-term debt included in its consolidated statement of
financial position were as follows:
A)
RECOURSE DEBT
Recourse debt:
Revolving Facility (i)
Term Loan (ii)
Series 3 Debentures (iii)
Series 4 Debentures (iii)
Series 6 Debentures (iii)
2020 Debentures (iv)
Total recourse short-term debt and long-term debt
Less: recourse short-term debt
Recourse long-term debt
B)
LIMITED RECOURSE DEBT
Limited recourse debt:
CDPQ Loan (v)
Limited recourse long-term debt
DECEMBER 31
2020
DECEMBER 31
2019
$
— $
—
As at December 31, 2020 and 2019, the cash draws and letters of credit outstanding under the Company’s Revolving
499,360
174,960
199,540
297,105
499,085
174,722
199,338
—
—
299,518
(1) Includes $3.5 million of financial letters of credit
$
1,170,965 $
1,172,663
174,960
299,518
$
996,005 $
873,145
DECEMBER 31
2020
DECEMBER 31
2019
$
$
400,000 $
400,000
400,000 $
400,000
C)
NON-RECOURSE DEBT (UNSECURED OR SECURED ONLY BY CAPITAL OR PS&PM INVESTMENT’S SPECIFIC
ASSETS)
Non-recourse debt:
Senior bonds – InPower BC General Partnership (vi)
Credit facility – InPower BC General Partnership (vi)
Senior Secured Notes from a PS&PM investment (vii)
Unsecured Loan of Linxon (viii)
Credit facility – TransitNEXT General Partnership (ix)
Other
Total non-recourse short-term debt and long-term debt
Less: non-recourse short-term debt
Non-recourse long-term debt
DECEMBER 31
2020
DECEMBER 31
2019
$
276,297 $
292,125
—
34,631
8,888
102,843
8,886
63,130
42,495
8,147
70,983
8,238
$
431,545 $
485,118
31,262
93,664
$
400,283 $
391,454
i.
The Company’s unsecured revolving credit facility (the “Revolving Facility”), which is part of the Company’s second
amended and restated credit agreement, dated April 30, 2018, between, among others, the Company, as borrower, and the
syndicate of lenders party thereto (as amended, from time to time, the “Credit Agreement”), is comprised of two tranches:
(i) tranche A is for an amount of $2,000 million (2019: $2,000 million); and (ii) tranche B is for an amount of $600 million
(2019: $600 million). Borrowings under tranche A may be obtained in the form of: (i) prime rate loans; (ii) acceptances;
(iii) US base rate loans; (iv) Libor loans in US dollars, Euros and British pounds; and (v) non-financial, financial or
documentary letters of credit. Borrowings under tranche B may be obtained only in the form of non-financial or
documentary letters of credit. The Revolving Facility maturity date is May 15, 2022 (2019: May 15, 2022) or such other
date as may be agreed pursuant to extension provisions of the Credit Agreement. The aggregate outstanding amount of
uncommitted bilateral letters of credit allowed under the Credit Agreement is $3,000 million (2019: $3,000 million).
In 2019, the Credit Agreement was amended to modify the calculation of a financial ratio (net recourse debt to earnings
before interest, taxes, depreciation and amortization (“EBITDA”)) and to provide that such ratio be temporarily increased.
Furthermore, the Company amended its Credit Agreement to modify the calculation of the ratio of net recourse debt to
earnings before interest, taxes, depreciation and amortization to a pro-forma basis so as to include the sale of 10.01% of the
shares of Highway 407 ETR for the second quarter of 2019. The same amendments were made to the CDPQ Loan
agreement (see below) in 2019.
Facility were as follows:
AT DECEMBER 31, 2020
Revolving Facility
COMMITTED
CASH DRAWS
UNUSED
$ 2,600,000 $
— $
205,324
$
2,394,676
AT DECEMBER 31, 2019
Revolving Facility
(2) Includes $3.3 million of financial letters of credit
COMMITTED
CASH DRAWS
UNUSED
$ 2,600,000 $
— $
188,062
$
2,411,938
In addition, as at December 31, 2020, $1,495.5 million (2019: $1,878.9 million) of uncommitted bilateral letters of credit
were outstanding, of which $98.2 million (2019: $256.3 million) related to financial letters of credit.
ii. The Company’s non-revolving term loan, which is part of the Company’s Credit Agreement, is in the principal amount of
$500 million (the “Term Loan”). Borrowings under the Term Loan were available by way of prime rate loans or
acceptances. The Term Loan maturity date is April 30, 2023.
iii. These unsecured debentures were in the aggregate principal amount of $675 million and were issued in four series
consisting of: (i) $150 million in floating rate Series 2 Debentures due in March 2019 (the “Series 2 Debentures”);
(ii) $175 million in floating rate Series 3 Debentures due in March 2021 bearing interest at a rate equal to the 3-month
CDOR plus applicable margin (the “Series 3 Debentures”); (iii) $200 million in 3.235% Series 4 Debentures due in March
2023 (the “Series 4 Debentures”); and (iv) $150 million in floating rate Series 5 Debentures due in June 2019 (the “Series 5
Debentures”). The Series 2 Debentures and the Series 5 Debentures bore interest at a rate equal to the 3-month CDOR plus
an applicable margin. The Series 2 Debentures and the Series 5 Debentures were repaid in full at maturity in 2019. In 2020,
the Company issued, on a private placement basis, new unsecured Series 6 Debentures in the principal amount of
$300 million, which bear interest at the rate of 3.80% per annum and mature on August 19, 2024 (the “Series 6
Debentures”).
iv. The unsecured Series 1 Debentures in the principal amount of $300 million bore interest at a rate of 2.689% per annum and
matured on November 24, 2020 (the “2020 Debentures”). $40 million in principal amount of the 2020 Debentures was
repurchased in August 2020 using a portion of the proceeds of the issuance of the Series 6 Debentures and the remaining
$260 million in principal of the outstanding 2020 Debentures was repaid in full at maturity in November 2020.
LETTERS OF
CREDIT
OUTSTANDING
LETTERS OF
CREDIT
OUTSTANDING
(1)
(2)
54
54
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
55
19. OTHER CURRENT NON-FINANCIAL LIABILITIES
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
20.
SHORT-TERM DEBT AND LONG-TERM DEBT
As at December 31, 2020 and 2019, the Company’s short-term debt and long-term debt included in its consolidated statement of
Income taxes and other taxes payable
Share unit plans’ liabilities (Note 23C)
Other
Other current non-financial liabilities
financial position were as follows:
A)
RECOURSE DEBT
Recourse debt:
Revolving Facility (i)
Term Loan (ii)
Series 3 Debentures (iii)
Series 4 Debentures (iii)
Series 6 Debentures (iii)
2020 Debentures (iv)
Total recourse short-term debt and long-term debt
Less: recourse short-term debt
Recourse long-term debt
B)
LIMITED RECOURSE DEBT
Limited recourse debt:
CDPQ Loan (v)
Limited recourse long-term debt
ASSETS)
Non-recourse debt:
Senior bonds – InPower BC General Partnership (vi)
Credit facility – InPower BC General Partnership (vi)
Senior Secured Notes from a PS&PM investment (vii)
Unsecured Loan of Linxon (viii)
Credit facility – TransitNEXT General Partnership (ix)
Other
Total non-recourse short-term debt and long-term debt
Less: non-recourse short-term debt
Non-recourse long-term debt
DECEMBER 31
DECEMBER 31
2020
2019
$ 434,987 $ 324,662
38,793
—
56,122
2,416
$ 473,780 $ 383,200
DECEMBER 31
DECEMBER 31
2020
2019
$
— $
—
499,360
174,960
199,540
297,105
499,085
174,722
199,338
—
$
1,170,965 $
1,172,663
174,960
299,518
$
996,005 $
873,145
DECEMBER 31
DECEMBER 31
2020
2019
$
$
400,000 $
400,000
400,000 $
400,000
DECEMBER 31
DECEMBER 31
2020
2019
$
276,297 $
292,125
—
34,631
8,888
102,843
8,886
63,130
42,495
8,147
70,983
8,238
$
431,545 $
485,118
31,262
93,664
$
400,283 $
391,454
i.
The Company’s unsecured revolving credit facility (the “Revolving Facility”), which is part of the Company’s second
amended and restated credit agreement, dated April 30, 2018, between, among others, the Company, as borrower, and the
syndicate of lenders party thereto (as amended, from time to time, the “Credit Agreement”), is comprised of two tranches:
(i) tranche A is for an amount of $2,000 million (2019: $2,000 million); and (ii) tranche B is for an amount of $600 million
(2019: $600 million). Borrowings under tranche A may be obtained in the form of: (i) prime rate loans; (ii) acceptances;
(iii) US base rate loans; (iv) Libor loans in US dollars, Euros and British pounds; and (v) non-financial, financial or
documentary letters of credit. Borrowings under tranche B may be obtained only in the form of non-financial or
documentary letters of credit. The Revolving Facility maturity date is May 15, 2022 (2019: May 15, 2022) or such other
date as may be agreed pursuant to extension provisions of the Credit Agreement. The aggregate outstanding amount of
uncommitted bilateral letters of credit allowed under the Credit Agreement is $3,000 million (2019: $3,000 million).
In 2019, the Credit Agreement was amended to modify the calculation of a financial ratio (net recourse debt to earnings
before interest, taxes, depreciation and amortization (“EBITDA”)) and to provide that such ratio be temporarily increased.
Furthermore, the Company amended its Credit Agreement to modify the calculation of the ratio of net recourse debt to
earnings before interest, taxes, depreciation and amortization to a pro-forma basis so as to include the sale of 10.01% of the
shares of Highway 407 ETR for the second quarter of 2019. The same amendments were made to the CDPQ Loan
agreement (see below) in 2019.
As at December 31, 2020 and 2019, the cash draws and letters of credit outstanding under the Company’s Revolving
Facility were as follows:
AT DECEMBER 31, 2020
Revolving Facility
COMMITTED
CASH DRAWS
LETTERS OF
CREDIT
OUTSTANDING
UNUSED
$ 2,600,000 $
— $
205,324
(1)
$
2,394,676
—
299,518
(1) Includes $3.5 million of financial letters of credit
AT DECEMBER 31, 2019
Revolving Facility
(2) Includes $3.3 million of financial letters of credit
COMMITTED
CASH DRAWS
LETTERS OF
CREDIT
OUTSTANDING
UNUSED
$ 2,600,000 $
— $
188,062
(2)
$
2,411,938
In addition, as at December 31, 2020, $1,495.5 million (2019: $1,878.9 million) of uncommitted bilateral letters of credit
were outstanding, of which $98.2 million (2019: $256.3 million) related to financial letters of credit.
ii. The Company’s non-revolving term loan, which is part of the Company’s Credit Agreement, is in the principal amount of
$500 million (the “Term Loan”). Borrowings under the Term Loan were available by way of prime rate loans or
acceptances. The Term Loan maturity date is April 30, 2023.
iii. These unsecured debentures were in the aggregate principal amount of $675 million and were issued in four series
consisting of: (i) $150 million in floating rate Series 2 Debentures due in March 2019 (the “Series 2 Debentures”);
(ii) $175 million in floating rate Series 3 Debentures due in March 2021 bearing interest at a rate equal to the 3-month
CDOR plus applicable margin (the “Series 3 Debentures”); (iii) $200 million in 3.235% Series 4 Debentures due in March
2023 (the “Series 4 Debentures”); and (iv) $150 million in floating rate Series 5 Debentures due in June 2019 (the “Series 5
Debentures”). The Series 2 Debentures and the Series 5 Debentures bore interest at a rate equal to the 3-month CDOR plus
an applicable margin. The Series 2 Debentures and the Series 5 Debentures were repaid in full at maturity in 2019. In 2020,
the Company issued, on a private placement basis, new unsecured Series 6 Debentures in the principal amount of
$300 million, which bear interest at the rate of 3.80% per annum and mature on August 19, 2024 (the “Series 6
Debentures”).
iv. The unsecured Series 1 Debentures in the principal amount of $300 million bore interest at a rate of 2.689% per annum and
matured on November 24, 2020 (the “2020 Debentures”). $40 million in principal amount of the 2020 Debentures was
repurchased in August 2020 using a portion of the proceeds of the issuance of the Series 6 Debentures and the remaining
$260 million in principal of the outstanding 2020 Debentures was repaid in full at maturity in November 2020.
C)
NON-RECOURSE DEBT (UNSECURED OR SECURED ONLY BY CAPITAL OR PS&PM INVESTMENT’S SPECIFIC
54
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
55
55
SNC-Lavalin 2020 Financial Report
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
v. The loan (“CDPQ Loan”) made under the loan agreement (as amended, from time to time, the “CDPQ Loan Agreement”),
dated April 20, 2017, between SNC-Lavalin Highway Holdings Inc. (“Highway Holdings”), an indirect wholly-owned
subsidiary of the Company holding the shares of Highway 407 ETR, as borrower, and CDPQ Revenu Fixe Inc., as lender, is
a limited recourse debt comprised of two tranches: (i) tranche A which is a non-revolving term loan in an aggregate amount
of $400 million (2019: $400 million); and (ii) tranche B which was a non-revolving term loan in an aggregate amount of
$500 million. Recourse is limited to specific circumstances of enforcement on or against the shares of Highway Holdings.
Each of tranche A and tranche B was available by way of a single drawdown by Highway Holdings. Borrowings under
tranche A and tranche B bear interest at a base rate, which is the greater of: (i) the CDOR rate; and (ii) 0.9%, plus an
applicable margin. In 2018, the Company repaid borrowings under tranche B of its CDPQ Loan in full. Tranche A of the
CDPQ Loan matures in 2024.
In 2019, the CDPQ Loan Agreement was amended to align it with the amendments made to the Credit Agreement (see
above). The amendments to the CDPQ Loan Agreement, which also included: i) the Company’s commitment to repay an
amount of $600 million out of $1,000 million outstanding under the tranche A of the CDPQ Loan; and ii) the decrease of
the margin applicable to the base rate and payment by the Company of fees of $15 million, were accounted for as an
extinguishment of financial liability with the issuance of a new financial liability, giving rise to a loss of $33.8 million
recognized in “Net financial expenses” (see Note 27). Such loss included the $15 million cash outflow corresponding to the
fees disclosed above and the amount of $18.8 million representing the unamortized balance of deferred financing costs of
the CDPQ Loan on the date of its amendment.
In 2020, the CDPQ Loan Agreement was amended to: (i) temporarily increase the financial ratio covenant in order to align
it with that under the Credit Agreement; and (ii) disapply a condition under a restrictive covenant in order to allow a
dividend received by Highway Holdings from Highway 407 ETR in September 2020 to be distributed to the Company.
vi. The senior bonds of InPower BC General Partnership in the principal amount of $300 million bear interest at a rate of
4.471% and are due in 2033. The credit facility of InPower BC General Partnership in the principal amount of $63.2 million
bore interest at a variable rate equal to CDOR plus an applicable margin and was due in 2020. The senior bonds are and the
credit facility was secured by all assets of InPower BC General Partnership. The credit facility of InPower BC General
Partnership was repaid in full in 2020.
vii. The senior secured notes of a subsidiary of
the Company are up
to US$40.0 million (approximately
CA$51.3 million) aggregate principal amount (the “Senior Secured Notes”), of which US$38.0 million (approximately
CA$48.7 million) aggregate principal amount was issued as at December 31, 2020 (2019: US$38.0 million [approximately
CA$49.9 million]). The Senior Secured Notes are due in 2026 and bear interest at a variable rate. The net proceeds from the
issuance of the senior secured notes are used by the subsidiary of the Company to finance certain long-term assets
associated to a BOO (Build-Own-Operate) contract.
viii. In relation to the acquisition of Linxon by SNC-Lavalin in 2018, the holder of the non-controlling interest of 49% in Linxon
granted an unsecured loan (the “Unsecured Loan”) and provided an unsecured working capital revolving credit facility to
Linxon. The Unsecured Loan in the principal amount of US$9.3 million (approximately CA$11.9 million) [2019:
approximately CA$12.2 million] is an interest-free loan and is repayable in full on September 1, 2023. The working capital
credit facility in a maximum aggregate amount of €30.0 million (approximately CA$47.1 million) [2019: approximately
CA$43.7 million] bears interest at a variable rate and is repayable at the latest on September 30, 2022.
ix. The credit facility of TransitNEXT General Partnership in the aggregate maximum principal amount of $149.0 million
bears interest at a rate of CDOR plus an applicable margin and is repayable the latest on February 10, 2024. The credit
facility is secured by all assets of TransitNEXT.
In July 2019, SNC-Lavalin and a group of financial institutions entered into a new credit agreement, which made available to
SNC‑Lavalin an unsecured non-revolving bridge term facility (the “Bridge Facility”) in the principal amount of $300 million
and having a maturity of 1 year. The Bridge Facility was repayable in full upon receipt by SNC-Lavalin of the proceeds from
the sale of its 10.01% interest in Highway 407 ETR. Borrowings under the Bridge Facility were available by way of prime rate
loans or acceptances. In 2019, SNC-Lavalin borrowed and repaid $300 million under the Bridge Facility.
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
D)
REPAYMENT OF PRINCIPAL OF SHORT-TERM DEBT AND LONG-TERM DEBT
The future principal payments of SNC-Lavalin’s recourse, limited recourse and non-recourse short-term and long-term debt are
summarized below and reconciled to their net carrying amount:
AT DECEMBER 31, 2020
Recourse
Non-recourse
Total
$
175,000 $
— $
33,302 $
208,302
Limited
recourse
400,000
—
—
—
—
—
700,000
300,000
—
—
128,699
37,926
26,865
27,747
187,248
128,699
737,926
726,865
27,747
187,248
Net unamortized deferred financing costs and unamortized
Net carrying amount of short-term debt and long-term
$
1,175,000 $
400,000 $
441,787 $
2,016,787
(4,035)
—
(10,242)
(14,277)
$
1,170,965 $
400,000 $
431,545 $
2,002,510
2021
2022
2023
2024
2025
Thereafter
Total
discounts
debt
21. OTHER NON-CURRENT FINANCIAL LIABILITIES
Federal charges settlement (PPSC) payable (Note 18)
$
154,332 $
Contingent consideration payable to seller related to Linxon acquisition
Derivative financial instrument used for hedges - unfavourable fair value
Derivative financial instrument related to share unit plans - unfavourable fair value (Note 23C)
Other
Other non-current financial liabilities
DECEMBER 31
2020
DECEMBER 31
2019
15,181
3,929
4,627
15,792
$
193,861 $
201,764
14,405
2,345
—
14,055
232,569
56
56
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
57
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
v. The loan (“CDPQ Loan”) made under the loan agreement (as amended, from time to time, the “CDPQ Loan Agreement”),
D)
REPAYMENT OF PRINCIPAL OF SHORT-TERM DEBT AND LONG-TERM DEBT
dated April 20, 2017, between SNC-Lavalin Highway Holdings Inc. (“Highway Holdings”), an indirect wholly-owned
subsidiary of the Company holding the shares of Highway 407 ETR, as borrower, and CDPQ Revenu Fixe Inc., as lender, is
a limited recourse debt comprised of two tranches: (i) tranche A which is a non-revolving term loan in an aggregate amount
of $400 million (2019: $400 million); and (ii) tranche B which was a non-revolving term loan in an aggregate amount of
$500 million. Recourse is limited to specific circumstances of enforcement on or against the shares of Highway Holdings.
Each of tranche A and tranche B was available by way of a single drawdown by Highway Holdings. Borrowings under
tranche A and tranche B bear interest at a base rate, which is the greater of: (i) the CDOR rate; and (ii) 0.9%, plus an
applicable margin. In 2018, the Company repaid borrowings under tranche B of its CDPQ Loan in full. Tranche A of the
CDPQ Loan matures in 2024.
In 2019, the CDPQ Loan Agreement was amended to align it with the amendments made to the Credit Agreement (see
above). The amendments to the CDPQ Loan Agreement, which also included: i) the Company’s commitment to repay an
amount of $600 million out of $1,000 million outstanding under the tranche A of the CDPQ Loan; and ii) the decrease of
the margin applicable to the base rate and payment by the Company of fees of $15 million, were accounted for as an
extinguishment of financial liability with the issuance of a new financial liability, giving rise to a loss of $33.8 million
recognized in “Net financial expenses” (see Note 27). Such loss included the $15 million cash outflow corresponding to the
fees disclosed above and the amount of $18.8 million representing the unamortized balance of deferred financing costs of
the CDPQ Loan on the date of its amendment.
In 2020, the CDPQ Loan Agreement was amended to: (i) temporarily increase the financial ratio covenant in order to align
it with that under the Credit Agreement; and (ii) disapply a condition under a restrictive covenant in order to allow a
dividend received by Highway Holdings from Highway 407 ETR in September 2020 to be distributed to the Company.
vi. The senior bonds of InPower BC General Partnership in the principal amount of $300 million bear interest at a rate of
4.471% and are due in 2033. The credit facility of InPower BC General Partnership in the principal amount of $63.2 million
bore interest at a variable rate equal to CDOR plus an applicable margin and was due in 2020. The senior bonds are and the
credit facility was secured by all assets of InPower BC General Partnership. The credit facility of InPower BC General
Partnership was repaid in full in 2020.
vii. The senior secured notes of a subsidiary of
the Company are up
to US$40.0 million (approximately
CA$51.3 million) aggregate principal amount (the “Senior Secured Notes”), of which US$38.0 million (approximately
CA$48.7 million) aggregate principal amount was issued as at December 31, 2020 (2019: US$38.0 million [approximately
CA$49.9 million]). The Senior Secured Notes are due in 2026 and bear interest at a variable rate. The net proceeds from the
issuance of the senior secured notes are used by the subsidiary of the Company to finance certain long-term assets
associated to a BOO (Build-Own-Operate) contract.
viii. In relation to the acquisition of Linxon by SNC-Lavalin in 2018, the holder of the non-controlling interest of 49% in Linxon
granted an unsecured loan (the “Unsecured Loan”) and provided an unsecured working capital revolving credit facility to
Linxon. The Unsecured Loan in the principal amount of US$9.3 million (approximately CA$11.9 million) [2019:
approximately CA$12.2 million] is an interest-free loan and is repayable in full on September 1, 2023. The working capital
credit facility in a maximum aggregate amount of €30.0 million (approximately CA$47.1 million) [2019: approximately
CA$43.7 million] bears interest at a variable rate and is repayable at the latest on September 30, 2022.
ix. The credit facility of TransitNEXT General Partnership in the aggregate maximum principal amount of $149.0 million
bears interest at a rate of CDOR plus an applicable margin and is repayable the latest on February 10, 2024. The credit
facility is secured by all assets of TransitNEXT.
In July 2019, SNC-Lavalin and a group of financial institutions entered into a new credit agreement, which made available to
SNC‑Lavalin an unsecured non-revolving bridge term facility (the “Bridge Facility”) in the principal amount of $300 million
and having a maturity of 1 year. The Bridge Facility was repayable in full upon receipt by SNC-Lavalin of the proceeds from
the sale of its 10.01% interest in Highway 407 ETR. Borrowings under the Bridge Facility were available by way of prime rate
loans or acceptances. In 2019, SNC-Lavalin borrowed and repaid $300 million under the Bridge Facility.
The future principal payments of SNC-Lavalin’s recourse, limited recourse and non-recourse short-term and long-term debt are
summarized below and reconciled to their net carrying amount:
AT DECEMBER 31, 2020
2021
2022
2023
2024
2025
Thereafter
Total
Recourse
Limited
recourse
Non-recourse
Total
$
175,000 $
— $
33,302 $
208,302
—
700,000
300,000
—
—
—
—
400,000
—
—
128,699
37,926
26,865
27,747
187,248
128,699
737,926
726,865
27,747
187,248
$
1,175,000 $
400,000 $
441,787 $
2,016,787
Net unamortized deferred financing costs and unamortized
discounts
Net carrying amount of short-term debt and long-term
debt
(4,035)
—
(10,242)
(14,277)
$
1,170,965 $
400,000 $
431,545 $
2,002,510
21. OTHER NON-CURRENT FINANCIAL LIABILITIES
Federal charges settlement (PPSC) payable (Note 18)
$
154,332 $
Contingent consideration payable to seller related to Linxon acquisition
Derivative financial instrument used for hedges - unfavourable fair value
Derivative financial instrument related to share unit plans - unfavourable fair value (Note 23C)
Other
Other non-current financial liabilities
15,181
3,929
4,627
15,792
$
193,861 $
201,764
14,405
2,345
—
14,055
232,569
DECEMBER 31
2020
DECEMBER 31
2019
56
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
57
57
SNC-Lavalin 2020 Financial Report
22.
PROVISIONS
Balance at January 1, 2020
$
543,560 $
91,994 $
121,376 $
204,393 $ 961,323
Additional provisions recognized in the year
29,300
58,556
91,671
275,576
455,103
Pension, other long-
term benefits and other
post-employment
benefits
Forecasted
losses on certain
contracts
Restructuring
(1)
Other
Total
23.
B)
SHARE CAPITAL (CONTINUED)
STOCK OPTION PLAN
The main features of the stock option plan are summarized below:
2013 STOCK OPTION PLAN
Amounts used during the year
Unused amounts reversed during the year
Remeasurement recognized in equity
Increase from the passage of time, effect of
changes in discount rates and effect of foreign
currency exchange differences
Reclassification to liabilities of disposal groups
classified as held for sale (Note 39)
Decrease in post-employment benefit assets
(110,251)
(31,697)
(124,450)
(22,098)
(288,496)
—
(6,206)
116,598
—
—
—
(46,599)
(52,805)
—
116,598
20,838
(433)
486
(3,712)
17,179
normal course.
(31,837)
(2,652)
(8,230)
—
—
—
(11,372)
(51,439)
—
(2,652)
The table below presents the changes in the number of options outstanding in 2020 and 2019:
Balance at December 31, 2020
$
565,556 $
103,984 $
89,083 $
396,188 $ 1,154,811
Presented on the statement of financial position as follows:
Current portion of provisions
Non-current portion of provisions
$ 401,585
$ 753,226
(1)
Other provisions include mainly provisions recognized for legal proceedings and claims, warranty provisions, environmental liabilities and other asset
retirement obligations.
The expected timing of outflows of economic benefits relating to the Company’s provisions are as follows: i) most of the
provisions for legal proceedings and claims relate to matters that are subject to significant uncertainties, including uncertainties
over the timing of resolution, which could extend to several years; ii) forecasted losses on certain contracts are expected to be
incurred over the period of a contract duration, usually up to 3 years; iii) most of the accrued restructuring costs are expected to
be disbursed within the next 12 months; iv) warranty expenditures are expected to take place within the next 5 years; and
v) most of the other provisions are expected to be resolved over the next 10 years. The main assumptions used to determine the
provision for pension, other long-term benefits and other post-employment benefits and other information, including the
expected level of future funding payments in respect of those arrangements, are given in Note 32.
23.
SHARE CAPITAL
A)
AUTHORIZED
The Company is authorized to issue an unlimited number of common shares, an unlimited number of first preferred shares and
an unlimited number of second preferred shares.
The Board of Directors is authorized to issue such preferred shares in one or more series and to establish the number of shares in
each series and the conditions attaching thereto, prior to their issue.
The issued and outstanding share capital of the Company consists only of fully paid common shares without nominal value. All
common shares are equally eligible to receive dividends, subject to the prior rights of the holders of preferred shares. Each
common share carries one vote at the shareholders’ meeting of the Company.
Subject to the prior rights of the holders of preferred shares, upon the liquidation or dissolution of the Company or any other
distribution of its assets among its shareholders for the purpose of winding-up its affairs, all the Company’s assets available for
payment or distribution to the holders of the common shares shall be paid or distributed equally, share for share, to the holders
of such common shares.
Grant date
Sixth trading day following the approval by the Company’s Board of Directors
Exercise price of stock options
The greater of: i) the average closing price for the five trading days preceding the grant date and ii) the closing price
on the first trading day immediately preceding the grant date
Graded vesting in three equal tranches: two years, three years and four years, respectively, after the grant date
Vesting of stock options
Expiry of stock options
Other provisions
Six years after the grant date
In the event of cessation of employment, except in the event of death or if the optionee is eligible to retire, unvested
options are cancelled immediately and vested options remain exercisable for a specified period not exceeding 30 days.
In the event of death or if the optionee is eligible to retire, both vested and unvested options continue to run their
Options outstanding at beginning of year
Expired
Options outstanding at end of year
(2019: 2,787,863 stock options).
As at December 31, 2020, 2,787,863 stock options remained available for future grants under the 2013 stock option plan
The stock option compensation cost recorded in the year ended December 31, 2020 was $nil (2019: $nil).
2020
WEIGHTED
AVERAGE
EXERCISE PRICE
(IN DOLLARS)
NUMBER OF
OPTIONS
— $
— $
— $
—
—
—
2019
WEIGHTED
AVERAGE
NUMBER OF
OPTIONS
EXERCISE PRICE
(IN DOLLARS)
260,866 $
40.98
(260,866) $
40.98
— $
—
58
58
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
59
23.
B)
SHARE CAPITAL (CONTINUED)
STOCK OPTION PLAN
The main features of the stock option plan are summarized below:
Grant date
Exercise price of stock options
Vesting of stock options
Expiry of stock options
Other provisions
2013 STOCK OPTION PLAN
Sixth trading day following the approval by the Company’s Board of Directors
The greater of: i) the average closing price for the five trading days preceding the grant date and ii) the closing price
on the first trading day immediately preceding the grant date
Graded vesting in three equal tranches: two years, three years and four years, respectively, after the grant date
Six years after the grant date
In the event of cessation of employment, except in the event of death or if the optionee is eligible to retire, unvested
options are cancelled immediately and vested options remain exercisable for a specified period not exceeding 30 days.
In the event of death or if the optionee is eligible to retire, both vested and unvested options continue to run their
normal course.
The table below presents the changes in the number of options outstanding in 2020 and 2019:
$ 401,585
$ 753,226
Options outstanding at beginning of year
Expired
Options outstanding at end of year
2020
WEIGHTED
AVERAGE
EXERCISE PRICE
(IN DOLLARS)
NUMBER OF
OPTIONS
— $
— $
— $
—
—
—
2019
WEIGHTED
AVERAGE
EXERCISE PRICE
(IN DOLLARS)
NUMBER OF
OPTIONS
260,866 $
40.98
(260,866) $
40.98
— $
—
As at December 31, 2020, 2,787,863 stock options remained available for future grants under the 2013 stock option plan
(2019: 2,787,863 stock options).
The stock option compensation cost recorded in the year ended December 31, 2020 was $nil (2019: $nil).
22.
PROVISIONS
Pension, other long-
term benefits and other
post-employment
losses on certain
Forecasted
benefits
contracts
Restructuring
(1)
Other
Total
Balance at January 1, 2020
$
543,560 $
91,994 $
121,376 $
204,393 $ 961,323
Additional provisions recognized in the year
29,300
58,556
91,671
275,576
455,103
Amounts used during the year
Unused amounts reversed during the year
Remeasurement recognized in equity
Increase from the passage of time, effect of
changes in discount rates and effect of foreign
currency exchange differences
Reclassification to liabilities of disposal groups
classified as held for sale (Note 39)
Decrease in post-employment benefit assets
(110,251)
(31,697)
(124,450)
(22,098)
(288,496)
—
(6,206)
(46,599)
(52,805)
116,598
—
—
116,598
20,838
(433)
486
(3,712)
17,179
(31,837)
(2,652)
(8,230)
—
(11,372)
(51,439)
—
(2,652)
—
—
—
—
Balance at December 31, 2020
$
565,556 $
103,984 $
89,083 $
396,188 $ 1,154,811
Presented on the statement of financial position as follows:
Current portion of provisions
Non-current portion of provisions
retirement obligations.
(1)
Other provisions include mainly provisions recognized for legal proceedings and claims, warranty provisions, environmental liabilities and other asset
The expected timing of outflows of economic benefits relating to the Company’s provisions are as follows: i) most of the
provisions for legal proceedings and claims relate to matters that are subject to significant uncertainties, including uncertainties
over the timing of resolution, which could extend to several years; ii) forecasted losses on certain contracts are expected to be
incurred over the period of a contract duration, usually up to 3 years; iii) most of the accrued restructuring costs are expected to
be disbursed within the next 12 months; iv) warranty expenditures are expected to take place within the next 5 years; and
v) most of the other provisions are expected to be resolved over the next 10 years. The main assumptions used to determine the
provision for pension, other long-term benefits and other post-employment benefits and other information, including the
expected level of future funding payments in respect of those arrangements, are given in Note 32.
23.
SHARE CAPITAL
A)
AUTHORIZED
The Company is authorized to issue an unlimited number of common shares, an unlimited number of first preferred shares and
an unlimited number of second preferred shares.
The Board of Directors is authorized to issue such preferred shares in one or more series and to establish the number of shares in
each series and the conditions attaching thereto, prior to their issue.
The issued and outstanding share capital of the Company consists only of fully paid common shares without nominal value. All
common shares are equally eligible to receive dividends, subject to the prior rights of the holders of preferred shares. Each
common share carries one vote at the shareholders’ meeting of the Company.
Subject to the prior rights of the holders of preferred shares, upon the liquidation or dissolution of the Company or any other
distribution of its assets among its shareholders for the purpose of winding-up its affairs, all the Company’s assets available for
payment or distribution to the holders of the common shares shall be paid or distributed equally, share for share, to the holders
of such common shares.
58
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
59
59
SNC-Lavalin 2020 Financial Report
23.
C)
SHARE CAPITAL (CONTINUED)
SHARE UNIT PLANS
As at December 31, 2020 and 2019, the Company had five share unit compensation plans for executives, namely the 2019 PSU
plan, the 2019 RSU plan, the 2017 PSU plan, the 2009 DSU plan, and the RSU plan, and a share unit compensation plan, the
DSU plan, for members of the Board of Directors of SNC-Lavalin Group Inc.
The terms and conditions of the executive plans are summarized below:
2009 DSU PLAN
2019 RSU PLAN / RSU PLAN
2019 PSU PLAN / 2017 PSU PLAN
Grant date
Date of approval by the Company’s Board
of Directors
Date of approval by the Company’s Board
of Directors
Date of approval by the Company’s Board
of Directors
Number of
units
Determined at grant date, without any
further changes
Determined at grant date, without any
further changes
to performance conditions,
Subject
the
number of units granted shall be adjusted
depending on the total shareholder return
compared to peers, as defined in the plan
Vesting
units
of
Units vest at a rate of 20% per year at the
end of each calendar year following the
grant date
Payment
Units are redeemable for cash by the
Company within thirty days following the
a participant’s
anniversary of
first
cessation of employment
Redemption
price
Forfeiture
Average closing price per share on the
Toronto Stock Exchange on the first
anniversary of cessation of employment
and the last trading day on the Toronto
Stock Exchange of each of the 12 weeks
preceding that date
If a participant terminates his employment
voluntarily for reasons other than death or
retirement or if a participant is terminated
for cause before the end of the vesting
period, the units expire immediately on the
date of termination with no payment being
made
Units vest in full three years following their
grant date
Units vest in full at the end of the third
calendar year following the grant date
Units are redeemable for cash by the
Company no later than March 15th of the
year following the end of the vesting period
Units are redeemable for cash by the
Company no later than two and a half
months after the end of the performance
period of such award. Performance period
means the period starting on January 1st of
the calendar year during which the grant of
such award was made and ending on the
vesting date
Average closing price per share on the
Toronto Stock Exchange on the five trading
days preceding the vesting date
Average closing price per share on the
Toronto Stock Exchange on the five trading
days preceding the vesting date
If a participant terminates his employment
voluntarily for reasons other than death or
retirement or if a participant is terminated
for cause before the end of the vesting
period, the units expire immediately on the
date of termination with no payment being
made
If a participant terminates his employment
voluntarily for reasons other than death or
retirement or if a participant is terminated
for cause before the end of the vesting
period, the units expire immediately on the
date of termination with no payment being
made
Other
provisions
The units vest immediately in the event of
death or if a participant is retiring, with
payment being made on the date of the
first
the
following
participant’s last day of employment
anniversary
In the event of death or retirement of a
participant before the end of the vesting
period, the units vest on a pro rata basis,
with payment being made no later than
March 15th of the year following the event
In the event of death or retirement of a
participant before the end of the vesting
period, the units vest on a pro rata basis,
with payment being made no later than two
and a half months following the event
The terms and conditions of the DSU plan are as follows: each member of the Board of Directors of SNC-Lavalin Group Inc.
(the “member”) receives an annual retainer consisting of: (a) a lump sum credited in DSU plan units, and (b) a cash award
payment. Each member may elect to receive 100% of the cash award payment, as well as 100% of their committee chair
retainer, meeting fees and travel fees, if applicable, in either cash or DSU plan units. DSU plan units track the price of SNC-
Lavalin’s common shares on the Toronto Stock Exchange. They accumulate during a member’s term in office and are redeemed
in cash when the member leaves the Board of Directors. For the purposes of redeeming DSU plan units, the value of a unit on
any given date is equivalent to the average of the closing price for a common share on the Toronto Stock Exchange for the five
trading days immediately prior to such date. DSU plan units are credited on a quarterly basis and do not carry voting rights.
Furthermore, additional DSU plan units accumulate as dividend equivalents whenever cash dividends are paid on common
shares.
23.
SHARE CAPITAL (CONTINUED)
years ended December 31, 2020 and 2019:
The table below presents the number of granted share units and the weighted average fair value per granted share unit for the
2019 PSU plan
2019 RSU plan
DSU plan
2009 DSU plan
OF GRANTED SHARE
NUMBER
UNITS
2020
WEIGHTED AVERAGE
FAIR VALUE PER
SHARE UNIT
(IN DOLLARS)
OF GRANTED SHARE
NUMBER
UNITS
2019
WEIGHTED AVERAGE
FAIR VALUE PER
SHARE UNIT
(IN DOLLARS)
802,180 $
26.09
1,042,570 $
25.16
82,030 $
26.56
71,204 $
21.62
595,778 $
870,946 $
14,781 $
79,652 $
35.87
35.73
36.22
26.15
The Company has entered into derivative financial instruments with investment grade financial institutions to limit the
Company’s exposure to the variability of the units caused by fluctuations in its share price. The derivative financial instruments,
the fair value of which fluctuates in accordance with the movement in the Company’s share price, are required to be classified
as at FVTPL. As such, they are measured at fair value on the consolidated statement of financial position under “Other current
financial assets” (see Note 11) and “Other non-current financial assets” (see Note 16) if the fair value of a derivative financial
instrument is favourable or under “Other current financial liabilities” (see Note 18) and “Other non-current financial
liabilities” (see Note 21) if the fair value of a derivative financial instrument is unfavourable.
The compensation expense related to the share unit plans was $10.1 million for the year ended December 31, 2020 (2019:
$16.1 million).
The total intrinsic value of the share unit plans’ liabilities for which the participants’ right to cash vested was $7.8 million as at
December 31, 2020 (2019: $12.4 million), while the share unit plans’ liabilities amounted to $38.8 million as at
December 31, 2020 (2019: $56.1 million).
D)
WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES – BASIC AND DILUTED
The weighted average number of outstanding shares in 2020 and 2019 used to calculate the basic and diluted earnings per share
were as follows:
YEARS ENDED DECEMBER 31 (IN THOUSANDS)
Weighted average number of outstanding shares – basic
Weighted average number of outstanding shares – diluted
dilutive.
E)
DIVIDENDS
In 2020, no dilutive effect of stock options has been calculated as no stock options were outstanding during this period. In 2019,
260,866 outstanding stock options were not included in the computation of diluted loss per share because they were anti-
During the year ended December 31, 2020, the Company recognized as distributions to its equity shareholders dividends of
$14.0 million or $0.08 per share (2019: $42.1 million or $0.24 per share).
2020
175,554
175,554
2019
175,554
175,554
60
60
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
61
23.
C)
SHARE CAPITAL (CONTINUED)
SHARE UNIT PLANS
As at December 31, 2020 and 2019, the Company had five share unit compensation plans for executives, namely the 2019 PSU
plan, the 2019 RSU plan, the 2017 PSU plan, the 2009 DSU plan, and the RSU plan, and a share unit compensation plan, the
DSU plan, for members of the Board of Directors of SNC-Lavalin Group Inc.
The terms and conditions of the executive plans are summarized below:
2009 DSU PLAN
2019 RSU PLAN / RSU PLAN
2019 PSU PLAN / 2017 PSU PLAN
Grant date
Date of approval by the Company’s Board
Date of approval by the Company’s Board
Date of approval by the Company’s Board
of Directors
of Directors
of Directors
Number of
Determined at grant date, without any
Determined at grant date, without any
Subject
to performance conditions,
the
units
further changes
further changes
number of units granted shall be adjusted
depending on the total shareholder return
compared to peers, as defined in the plan
Vesting
of
Units vest at a rate of 20% per year at the
Units vest in full three years following their
Units vest in full at the end of the third
units
end of each calendar year following the
grant date
calendar year following the grant date
Payment
Units are redeemable for cash by the
Company within thirty days following the
Units are redeemable for cash by the
Company no later than March 15th of the
Units are redeemable for cash by the
Company no later than two and a half
first
anniversary of
a participant’s
year following the end of the vesting period
months after the end of the performance
grant date
cessation of employment
period of such award. Performance period
means the period starting on January 1st of
the calendar year during which the grant of
such award was made and ending on the
vesting date
Redemption
Average closing price per share on the
Average closing price per share on the
Average closing price per share on the
price
Toronto Stock Exchange on the first
Toronto Stock Exchange on the five trading
Toronto Stock Exchange on the five trading
anniversary of cessation of employment
days preceding the vesting date
days preceding the vesting date
and the last trading day on the Toronto
Stock Exchange of each of the 12 weeks
preceding that date
Forfeiture
If a participant terminates his employment
If a participant terminates his employment
If a participant terminates his employment
voluntarily for reasons other than death or
voluntarily for reasons other than death or
voluntarily for reasons other than death or
retirement or if a participant is terminated
retirement or if a participant is terminated
retirement or if a participant is terminated
for cause before the end of the vesting
for cause before the end of the vesting
for cause before the end of the vesting
period, the units expire immediately on the
period, the units expire immediately on the
period, the units expire immediately on the
date of termination with no payment being
date of termination with no payment being
date of termination with no payment being
made
made
made
Other
provisions
The units vest immediately in the event of
In the event of death or retirement of a
In the event of death or retirement of a
death or if a participant is retiring, with
participant before the end of the vesting
participant before the end of the vesting
payment being made on the date of the
period, the units vest on a pro rata basis,
period, the units vest on a pro rata basis,
first
anniversary
following
the
participant’s last day of employment
with payment being made no later than
March 15th of the year following the event
with payment being made no later than two
and a half months following the event
The terms and conditions of the DSU plan are as follows: each member of the Board of Directors of SNC-Lavalin Group Inc.
(the “member”) receives an annual retainer consisting of: (a) a lump sum credited in DSU plan units, and (b) a cash award
payment. Each member may elect to receive 100% of the cash award payment, as well as 100% of their committee chair
retainer, meeting fees and travel fees, if applicable, in either cash or DSU plan units. DSU plan units track the price of SNC-
Lavalin’s common shares on the Toronto Stock Exchange. They accumulate during a member’s term in office and are redeemed
in cash when the member leaves the Board of Directors. For the purposes of redeeming DSU plan units, the value of a unit on
any given date is equivalent to the average of the closing price for a common share on the Toronto Stock Exchange for the five
trading days immediately prior to such date. DSU plan units are credited on a quarterly basis and do not carry voting rights.
Furthermore, additional DSU plan units accumulate as dividend equivalents whenever cash dividends are paid on common
shares.
23.
SHARE CAPITAL (CONTINUED)
The table below presents the number of granted share units and the weighted average fair value per granted share unit for the
years ended December 31, 2020 and 2019:
2019 PSU plan
2019 RSU plan
DSU plan
2009 DSU plan
NUMBER
OF GRANTED SHARE
UNITS
2020
WEIGHTED AVERAGE
FAIR VALUE PER
SHARE UNIT
(IN DOLLARS)
NUMBER
OF GRANTED SHARE
UNITS
2019
WEIGHTED AVERAGE
FAIR VALUE PER
SHARE UNIT
(IN DOLLARS)
802,180 $
26.09
1,042,570 $
25.16
82,030 $
26.56
71,204 $
21.62
595,778 $
870,946 $
14,781 $
79,652 $
35.87
35.73
36.22
26.15
The Company has entered into derivative financial instruments with investment grade financial institutions to limit the
Company’s exposure to the variability of the units caused by fluctuations in its share price. The derivative financial instruments,
the fair value of which fluctuates in accordance with the movement in the Company’s share price, are required to be classified
as at FVTPL. As such, they are measured at fair value on the consolidated statement of financial position under “Other current
financial assets” (see Note 11) and “Other non-current financial assets” (see Note 16) if the fair value of a derivative financial
instrument is favourable or under “Other current financial liabilities” (see Note 18) and “Other non-current financial
liabilities” (see Note 21) if the fair value of a derivative financial instrument is unfavourable.
The compensation expense related to the share unit plans was $10.1 million for the year ended December 31, 2020 (2019:
$16.1 million).
The total intrinsic value of the share unit plans’ liabilities for which the participants’ right to cash vested was $7.8 million as at
December 31, 2020 (2019: $12.4 million), while the share unit plans’ liabilities amounted to $38.8 million as at
December 31, 2020 (2019: $56.1 million).
D)
WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES – BASIC AND DILUTED
The weighted average number of outstanding shares in 2020 and 2019 used to calculate the basic and diluted earnings per share
were as follows:
YEARS ENDED DECEMBER 31 (IN THOUSANDS)
Weighted average number of outstanding shares – basic
Weighted average number of outstanding shares – diluted
2020
175,554
175,554
2019
175,554
175,554
In 2020, no dilutive effect of stock options has been calculated as no stock options were outstanding during this period. In 2019,
260,866 outstanding stock options were not included in the computation of diluted loss per share because they were anti-
dilutive.
E)
DIVIDENDS
During the year ended December 31, 2020, the Company recognized as distributions to its equity shareholders dividends of
$14.0 million or $0.08 per share (2019: $42.1 million or $0.24 per share).
60
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
61
61
SNC-Lavalin 2020 Financial Report
24. OTHER COMPONENTS OF EQUITY
The Company has the following elements, net of income taxes, within its other components of equity at December 31, 2020 and
2019:
24.
OTHER COMPONENTS OF EQUITY (CONTINUED)
A)
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO NET INCOME
The following table provides a reconciliation of each element of other components of equity for the years ended
Exchange differences on translating foreign operations
Cash flow hedges
Share of other comprehensive income (loss) of investments accounted for by the equity method
Other components of equity
Presented on the statement of financial position as follows:
DECEMBER 31
2020
DECEMBER 31
2019
$
292,568 $
365,600
(17,450)
(1,044)
(11,652)
125
$
274,074 $
354,073
Other components of equity
Other components of equity of disposal groups classified as held for sale (Note 39)
$
$
(320,067) $
354,073
594,141 $
—
•
•
▪
Exchange differences on translating foreign operations component represents exchange differences relating to the
translation from the functional currencies of the Company’s foreign operations into Canadian dollars. On disposal of a
foreign operation, the cumulative translation differences are reclassified to net income as part of the gain or loss on
disposal. Exchange differences also include gains and losses on hedging instruments, if any, relating to the effective portion
of hedges of net investments of foreign operations, which are reclassified to net income on the disposal of the foreign
operation.
Cash flow hedges component represents hedging gains and losses recognized on the effective portion of cash flow hedges.
The cumulative deferred gain or loss on the hedge is recognized in net income when the hedged transaction impacts net
income, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting
policy.
Share of other comprehensive income (loss) of investments accounted for by the equity method component represents the
Company’s share of the other comprehensive income (loss) from its investments accounted for by the equity method.
December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
Exchange differences on translating foreign operations:
Net investment hedge – current year gains (losses)
Balance at beginning of year
Current year losses
Reclassification to net income
Balance at end of year
Cash flow hedges:
Balance at beginning of year
Current year gains (losses)
Income taxes relating to current year gains (losses)
Reclassification to net income
Income taxes relating to amounts reclassified to net income
Balance at end of year
method:
Balance at beginning of year
Current year share
Income taxes relating to current year share
Balance at end of year
Other components of equity
Share of other comprehensive income (loss) of investments accounted for by the equity
2020
2019
$
365,600 $
(41,466)
(28,305)
(3,261)
292,568
(11,652)
6,256
(1,638)
(12,460)
2,044
(17,450)
125
(1,590)
421
(1,044)
505,297
(140,686)
—
989
365,600
(7,989)
(7,595)
2,615
7,185
(5,868)
(11,652)
1,891
(2,403)
637
125
Presented on the statement of financial position as follows:
Other components of equity
Other components of equity of disposal groups classified as held for sale (Note 39)
B)
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO NET INCOME
Remeasurement recognized in other comprehensive income
$
274,074 $
354,073
$
$
(320,067) $
354,073
594,141 $
—
The following table presents changes in the cumulative amount of remeasurement gains (losses) recognized in other
comprehensive income relating to defined benefit pension plans and other post-employment benefits for the years ended
December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
2020
2019
BEFORE TAX
INCOME TAX (1)
NET OF TAX
BEFORE TAX
INCOME TAX
NET OF TAX
Cumulative amount at January 1
$
(49,588) $
6,184 $
(43,404) $
5,756 $
(2,050) $
3,706
Remeasurement recognized during the year:
Defined benefit pension plans
Other post-employment benefits
(111,311)
29,180
(82,131)
(41,081)
6,067
(35,014)
(5,287)
(111)
(5,398)
(14,263)
2,167
(12,096)
(116,598)
29,069
(87,529)
(55,344)
8,234
(47,110)
Cumulative amount at December 31
$
(166,186) $
35,253 $
(130,933) $
(49,588) $
6,184 $
(43,404)
(1)
For the year ended December 31, 2020, an amount of $18.5 million of income taxes is included in deferred income taxes while the remaining balance of
$10.6 million is included in current income taxes.
62
62
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
63
24. OTHER COMPONENTS OF EQUITY
The Company has the following elements, net of income taxes, within its other components of equity at December 31, 2020 and
2019:
Share of other comprehensive income (loss) of investments accounted for by the equity method
Exchange differences on translating foreign operations
Cash flow hedges
Other components of equity
Presented on the statement of financial position as follows:
Other components of equity
Other components of equity of disposal groups classified as held for sale (Note 39)
DECEMBER 31
DECEMBER 31
2020
2019
$
292,568 $
365,600
(17,450)
(1,044)
(11,652)
125
$
274,074 $
354,073
$
$
(320,067) $
354,073
594,141 $
—
•
Exchange differences on translating foreign operations component represents exchange differences relating to the
translation from the functional currencies of the Company’s foreign operations into Canadian dollars. On disposal of a
foreign operation, the cumulative translation differences are reclassified to net income as part of the gain or loss on
disposal. Exchange differences also include gains and losses on hedging instruments, if any, relating to the effective portion
of hedges of net investments of foreign operations, which are reclassified to net income on the disposal of the foreign
operation.
policy.
•
Cash flow hedges component represents hedging gains and losses recognized on the effective portion of cash flow hedges.
The cumulative deferred gain or loss on the hedge is recognized in net income when the hedged transaction impacts net
income, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting
▪
Share of other comprehensive income (loss) of investments accounted for by the equity method component represents the
Company’s share of the other comprehensive income (loss) from its investments accounted for by the equity method.
24.
OTHER COMPONENTS OF EQUITY (CONTINUED)
A)
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO NET INCOME
The following table provides a reconciliation of each element of other components of equity for the years ended
December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
Exchange differences on translating foreign operations:
Balance at beginning of year
Current year losses
Reclassification to net income
Net investment hedge – current year gains (losses)
Balance at end of year
Cash flow hedges:
Balance at beginning of year
Current year gains (losses)
Income taxes relating to current year gains (losses)
Reclassification to net income
Income taxes relating to amounts reclassified to net income
Balance at end of year
Share of other comprehensive income (loss) of investments accounted for by the equity
method:
Balance at beginning of year
Current year share
Income taxes relating to current year share
Balance at end of year
Other components of equity
Presented on the statement of financial position as follows:
Other components of equity
Other components of equity of disposal groups classified as held for sale (Note 39)
2020
2019
$
365,600 $
(41,466)
(28,305)
(3,261)
292,568
(11,652)
6,256
(1,638)
(12,460)
2,044
(17,450)
125
(1,590)
421
(1,044)
505,297
(140,686)
—
989
365,600
(7,989)
(7,595)
2,615
7,185
(5,868)
(11,652)
1,891
(2,403)
637
125
$
274,074 $
354,073
$
$
(320,067) $
354,073
594,141 $
—
B)
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO NET INCOME
Remeasurement recognized in other comprehensive income
The following table presents changes in the cumulative amount of remeasurement gains (losses) recognized in other
comprehensive income relating to defined benefit pension plans and other post-employment benefits for the years ended
December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
2020
2019
BEFORE TAX
INCOME TAX (1)
NET OF TAX
BEFORE TAX
INCOME TAX
NET OF TAX
Cumulative amount at January 1
$
(49,588) $
6,184 $
(43,404) $
5,756 $
(2,050) $
3,706
Remeasurement recognized during the year:
Defined benefit pension plans
Other post-employment benefits
(111,311)
29,180
(82,131)
(41,081)
6,067
(35,014)
(5,287)
(111)
(5,398)
(14,263)
2,167
(12,096)
(116,598)
29,069
(87,529)
(55,344)
8,234
(47,110)
Cumulative amount at December 31
$
(166,186) $
35,253 $
(130,933) $
(49,588) $
6,184 $
(43,404)
(1)
For the year ended December 31, 2020, an amount of $18.5 million of income taxes is included in deferred income taxes while the remaining balance of
$10.6 million is included in current income taxes.
62
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
63
63
SNC-Lavalin 2020 Financial Report
2020
FROM CAPITAL
INVESTMENTS
2019 (1)
FROM CAPITAL
INVESTMENTS
FROM PS&PM
TOTAL
FROM PS&PM
TOTAL
17,160
4,612
21,167
19,706
108,601
(10,867)
(2)
—
15,997
7
98
17,160
20,609
21,174
19,804
(390)
552
(11,257)
550
45,128
5,733
20,872
47,894
(7,640)
232
—
18,085
151
—
45,128
23,818
21,023
47,894
(167)
(227)
(7,807)
5
16,102
124,703
204,675
18,236
222,911
YEARS ENDED DECEMBER 31
Interest on debt:
Recourse
Limited recourse
Non-recourse
Interest on lease liabilities
Other (2)
Financial expenses
Financial income
Net foreign exchange losses (gains)
Financial income and net foreign
exchange losses (gains)
(1)
(2)
Net financial expenses
$
97,732 $
16,264 $
113,996 $
197,267 $
17,842 $
215,109
(10,869)
162
(10,707)
(7,408)
(394)
(7,802)
In 2019, “Other” included $33.8 million of loss related to amendments to the CDPQ Loan (see Note 20C) and $3.7 million related to other PS&PM
financing arrangements in connection with the sale of 10.01% of the shares of Highway 407 ETR.
24.
OTHER COMPONENTS OF EQUITY (CONTINUED)
Equity instruments designated at fair value through other comprehensive income
The following table presents changes in fair value of the equity instruments designated at fair value through other
comprehensive income for the years ended December 31, 2020 and 2019:
27.
NET FINANCIAL EXPENSES
YEARS ENDED DECEMBER 31
2020
2019
$
45,956 $
— $
45,956 $
85,048 $
— $
85,048
Cumulative amount at January 1
$
(2,035) $
65 $
(1,970) $
(1) $
49 $
48
Gains (losses) recognized during the year
(7,747)
40
(7,707)
(2,034)
16
(2,018)
Cumulative amount at December 31
$
(9,782) $
105 $
(9,677) $
(2,035) $
65 $
(1,970)
BEFORE TAX
INCOME TAX
NET OF TAX
BEFORE TAX
INCOME TAX
NET OF TAX
Share of other comprehensive income (loss) of investments accounted for by the equity method
The following tables provide the Company’s share of changes in the cumulative amount of remeasurement gains (losses)
recognized in other comprehensive income by the Company’s investments accounted for by the equity method relating to their
defined benefit plans for the years ended December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
2020
2019
BEFORE TAX
INCOME TAX
NET OF TAX
BEFORE TAX
INCOME TAX
NET OF TAX
Comparative figures have been re-presented (see Notes 2C and 39).
Cumulative amount at January 1
$
(2,234) $
— $
(2,234) $
— $
— $
—
Gains (losses) recognized during the year
(2,775)
—
(2,775)
(2,234)
—
(2,234)
Cumulative amount at December 31
$
(5,009) $
— $
(5,009) $
(2,234) $
— $
(2,234)
25.
CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
YEARS ENDED DECEMBER 31
Selling expenses
General and administrative expenses
Corporate selling, general and administrative expenses
2020
$
97 $
175,836
$
175,933 $
2019
2,662
71,282
73,944
26.
RESTRUCTURING COSTS
I) IN 2020
The Company incurred $63.3 million of restructuring costs in 2020. Restructuring actions were taken during the year to adjust
the cost base of the Company’s segments, notably in the Middle East and the U.K. regions of the EDPM segment, for which an
amount of $40.3 million of restructuring costs was recognized in 2020. The restructuring costs of $63.3 million were mainly for
severance obligations, but also included $16.4 million of non-cash charges, notably $13.5 million related to impairment of right-
of-use assets and $2.9 million of impairment of property and equipment.
II) IN 2019
Over the past years, the Company has been engaged in restructuring its activities. In 2019, the Company announced a new
strategy under which the Company is no longer bidding on LSTK contracts.
SNC-Lavalin was also reducing its geographic footprint to reduce risk and complexity by focusing on its core growth regions:
Canada, the U.S., and the U.K., along with regional markets such as the Middle East and Asia Pacific, which involves exiting
unprofitable operations in certain countries.
The Company incurred $79.7 million of restructuring costs in 2019, which were mainly for severance obligations.
64
64
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
65
27.
NET FINANCIAL EXPENSES
YEARS ENDED DECEMBER 31
Interest on debt:
Recourse
Limited recourse
Non-recourse
Interest on lease liabilities
Other (2)
Financial expenses
Financial income
Net foreign exchange losses (gains)
Financial income and net foreign
exchange losses (gains)
FROM PS&PM
2020
FROM CAPITAL
INVESTMENTS
TOTAL
FROM PS&PM
2019 (1)
FROM CAPITAL
INVESTMENTS
TOTAL
$
45,956 $
— $
45,956 $
85,048 $
— $
85,048
17,160
4,612
21,167
19,706
108,601
(10,867)
(2)
—
15,997
7
98
17,160
20,609
21,174
19,804
45,128
5,733
20,872
47,894
—
18,085
151
—
45,128
23,818
21,023
47,894
16,102
124,703
204,675
18,236
222,911
(390)
552
(11,257)
550
(7,640)
232
(167)
(227)
(7,807)
5
(10,869)
162
(10,707)
(7,408)
(394)
(7,802)
Net financial expenses
$
97,732 $
16,264 $
113,996 $
197,267 $
17,842 $
215,109
(1)
(2)
Comparative figures have been re-presented (see Notes 2C and 39).
In 2019, “Other” included $33.8 million of loss related to amendments to the CDPQ Loan (see Note 20C) and $3.7 million related to other PS&PM
financing arrangements in connection with the sale of 10.01% of the shares of Highway 407 ETR.
24.
OTHER COMPONENTS OF EQUITY (CONTINUED)
Equity instruments designated at fair value through other comprehensive income
The following table presents changes in fair value of the equity instruments designated at fair value through other
comprehensive income for the years ended December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
2020
2019
Cumulative amount at January 1
$
(2,035) $
65 $
(1,970) $
(1) $
49 $
48
Gains (losses) recognized during the year
(7,747)
40
(7,707)
(2,034)
16
(2,018)
Cumulative amount at December 31
$
(9,782) $
105 $
(9,677) $
(2,035) $
65 $
(1,970)
BEFORE TAX
INCOME TAX
NET OF TAX
BEFORE TAX
INCOME TAX
NET OF TAX
Share of other comprehensive income (loss) of investments accounted for by the equity method
The following tables provide the Company’s share of changes in the cumulative amount of remeasurement gains (losses)
recognized in other comprehensive income by the Company’s investments accounted for by the equity method relating to their
defined benefit plans for the years ended December 31, 2020 and 2019:
YEARS ENDED DECEMBER 31
2020
2019
Cumulative amount at January 1
$
(2,234) $
— $
(2,234) $
— $
— $
—
Gains (losses) recognized during the year
(2,775)
—
(2,775)
(2,234)
—
(2,234)
Cumulative amount at December 31
$
(5,009) $
— $
(5,009) $
(2,234) $
— $
(2,234)
BEFORE TAX
INCOME TAX
NET OF TAX
BEFORE TAX
INCOME TAX
NET OF TAX
25.
CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
YEARS ENDED DECEMBER 31
Selling expenses
General and administrative expenses
Corporate selling, general and administrative expenses
$
97 $
2020
175,836
$
175,933 $
2019
2,662
71,282
73,944
26.
RESTRUCTURING COSTS
I) IN 2020
II) IN 2019
The Company incurred $63.3 million of restructuring costs in 2020. Restructuring actions were taken during the year to adjust
the cost base of the Company’s segments, notably in the Middle East and the U.K. regions of the EDPM segment, for which an
amount of $40.3 million of restructuring costs was recognized in 2020. The restructuring costs of $63.3 million were mainly for
severance obligations, but also included $16.4 million of non-cash charges, notably $13.5 million related to impairment of right-
of-use assets and $2.9 million of impairment of property and equipment.
Over the past years, the Company has been engaged in restructuring its activities. In 2019, the Company announced a new
strategy under which the Company is no longer bidding on LSTK contracts.
SNC-Lavalin was also reducing its geographic footprint to reduce risk and complexity by focusing on its core growth regions:
Canada, the U.S., and the U.K., along with regional markets such as the Middle East and Asia Pacific, which involves exiting
unprofitable operations in certain countries.
The Company incurred $79.7 million of restructuring costs in 2019, which were mainly for severance obligations.
64
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
65
65
SNC-Lavalin 2020 Financial Report
28.
STATEMENTS OF CASH FLOWS
A)
OTHER RECONCILING ITEMS
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
C)
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
The following table presents the items to reconcile net income (loss) to cash flows from operating activities presented in the
statements of cash flows, for the years ended December 31:
The following table provides a reconciliation between the opening and closing balances in the statement of financial position for
liabilities arising from financing activities for the year ended December 31, 2020:
Depreciation of property and equipment and amortization of other non-current non-financial
2020
2019
assets
Depreciation of right-of-use assets
Income taxes recognized in net income
Net financial expenses recognized in net income
Share-based expense (Note 23C)
Income from Capital investments accounted for by the equity method
Dividends and distributions received from Capital investments accounted for by the equity
method
Income from PS&PM investments accounted for by the equity method
Dividends and distributions received from PS&PM investments accounted for by the equity
method
Net change in provisions related to forecasted losses on certain contracts
Gain or adjustment on gain from disposal of a Capital investment (Note 5A)
Restructuring costs recognized in net income
Restructuring costs paid
Loss on disposals of PS&PM businesses (Note 6)
Impairment of intangible assets related to business combinations (Note 15)
Impairment of goodwill (Note 14)
Federal charges settlement (PPSC) (Note 18)
Loss arising on financial assets (liabilities) at fair value through profit or loss (1)
Impairment loss on remeasurement of assets of disposal groups classified as held for sale to
fair value less cost to sell
Net change in other provisions (2)
Other (1), (2)
Other reconciling items
$
246,975 $
107,318
3,980
114,257
10,079
(87,349)
93,176
(47,186)
38,262
20,653
(25,000)
121,128
(124,450)
1,262
—
—
—
61,859
277,660
231,355
(67,928)
$
976,051 $
290,223
112,037
198,738
212,083
16,061
(210,543)
160,063
(29,702)
38,043
(84,861)
(2,970,783)
182,801
(92,872)
294
72,831
1,801,015
257,327
4,743
—
7,951
(89,310)
(123,861)
(1)
(2)
B)
In 2019, a loss arising on financial assets (liabilities) at fair value through profit or loss of $4.7 million was included in “Other”.
In 2019, “Net change in other provisions” of $8.0 million was included in “Other”. Net change in other provisions includes changes in all provisions,
except for: i) pension, other long-term benefits and other post-employment benefits; ii) forecasted losses on certain contracts; iii) restructuring; and
iv) reversal of a provision related to a disposal of a Capital investment.
NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS
The following table presents the items included in the net change in non-cash working capital related to operating activities
presented in the statements of cash flows, for the years ended December 31:
Decrease (increase) in trade receivables
Decrease (increase) in contract assets
Decrease in inventories
Increase in other current financial assets
Increase in other current non-financial assets
Decrease in trade payables and accrued liabilities
Increase (decrease) in contract liabilities
Increase (decrease) in other current financial liabilities
Increase (decrease) in other current non-financial liabilities
Net change in non-cash working capital items
66
66
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
2020
$
196,175 $
361,597
69,500
(29,454)
(32,968)
(330,717)
6,803
(64,893)
53,205
2019
(15,214)
(34,506)
15,193
(2,970)
(12,926)
(193,288)
(91,888)
16,720
(15,667)
$
229,248 $
(334,546)
Balance at January 1, 2020
Changes arising from cash flows:
Increase
Repayment
Total – changes arising from cash flows
Non-cash changes:
Declaration of dividends to SNC-Lavalin
shareholders
differences
Effect of foreign currency exchange
Amortization of deferred financing costs
and discounts and increase from the
passage of time
Change in fair value of derivatives used
Change in fair value of contingent
consideration related to the Linxon
for hedges
transaction
Net increase on lease liabilities
Disposal of PS&PM businesses
Reclassification of payable related to
Federal charges settlement (PPSC) to
“Other current financial liabilities”
Reclassification to liabilities of disposal
groups classified as held for sale (Note 39)
Recourse (1)
Limited
debt
recourse debt
Non-(2)
recourse
debt
Dividends
declared to
SNC-Lavalin
shareholders
Other non-(4)
current
financial
liabilities
Other non-(4)
current non-
financial
liabilities
Lease (3)
liabilities
$ 1,172,663 $ 400,000 $ 485,118 $ 611,750 $
— $ 232,569 $
551
1,297,600
(1,300,729)
(3,129)
—
—
—
31,625
—
—
7,272
(87,172)
(118,651)
(14,044)
(5,906)
(55,547)
(118,651)
(14,044)
1,366
611
(984)
(373)
—
—
—
—
14,044
—
—
—
48
1,392
—
78
1,431
—
1,926
—
—
6,950
—
—
—
—
—
6,211
—
—
—
—
—
—
—
—
—
—
—
—
—
—
23,856
(1,265)
—
—
—
1,095
—
—
—
—
—
(54,408)
—
—
(20,472)
—
—
—
41
—
—
—
—
—
—
219
Balance at December 31, 2020
$ 1,170,965 $ 400,000 $ 431,545 $ 496,610 $
— $ 193,861 $
(1), (2), (3), (4) See Notes 1, 2, 3 and 4 on the following page
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
67
28.
STATEMENTS OF CASH FLOWS
A)
OTHER RECONCILING ITEMS
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
C)
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
The following table presents the items to reconcile net income (loss) to cash flows from operating activities presented in the
statements of cash flows, for the years ended December 31:
The following table provides a reconciliation between the opening and closing balances in the statement of financial position for
liabilities arising from financing activities for the year ended December 31, 2020:
Balance at January 1, 2020
Changes arising from cash flows:
Increase
Repayment
Total – changes arising from cash flows
Non-cash changes:
Declaration of dividends to SNC-Lavalin
shareholders
Effect of foreign currency exchange
differences
Amortization of deferred financing costs
and discounts and increase from the
passage of time
Change in fair value of derivatives used
for hedges
Change in fair value of contingent
consideration related to the Linxon
transaction
Net increase on lease liabilities
Disposal of PS&PM businesses
Reclassification of payable related to
Federal charges settlement (PPSC) to
“Other current financial liabilities”
Reclassification to liabilities of disposal
groups classified as held for sale (Note 39)
Recourse (1)
debt
Limited
recourse debt
Non-(2)
recourse
debt
Dividends
declared to
SNC-Lavalin
shareholders
Other non-(4)
current
financial
liabilities
Other non-(4)
current non-
financial
liabilities
Lease (3)
liabilities
$ 1,172,663 $ 400,000 $ 485,118 $ 611,750 $
— $ 232,569 $
551
1,297,600
(1,300,729)
(3,129)
—
—
—
31,625
—
—
7,272
(87,172)
(118,651)
(14,044)
(5,906)
(55,547)
(118,651)
(14,044)
1,366
611
(984)
(373)
—
—
—
—
14,044
—
—
—
48
1,392
—
78
1,431
—
1,926
—
—
6,950
—
—
—
—
—
6,211
—
—
—
—
—
—
—
—
—
—
—
—
—
—
23,856
(1,265)
—
—
—
1,095
—
—
—
—
—
(54,408)
—
—
(20,472)
—
—
—
41
—
—
—
—
—
—
219
$
976,051 $
(1), (2), (3), (4) See Notes 1, 2, 3 and 4 on the following page
Balance at December 31, 2020
$ 1,170,965 $ 400,000 $ 431,545 $ 496,610 $
— $ 193,861 $
$
229,248 $
(334,546)
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
67
67
Depreciation of property and equipment and amortization of other non-current non-financial
2020
2019
$
246,975 $
assets
Depreciation of right-of-use assets
Income taxes recognized in net income
Net financial expenses recognized in net income
Share-based expense (Note 23C)
Income from Capital investments accounted for by the equity method
Dividends and distributions received from Capital investments accounted for by the equity
Income from PS&PM investments accounted for by the equity method
Dividends and distributions received from PS&PM investments accounted for by the equity
method
method
Net change in provisions related to forecasted losses on certain contracts
Gain or adjustment on gain from disposal of a Capital investment (Note 5A)
Restructuring costs recognized in net income
Restructuring costs paid
Loss on disposals of PS&PM businesses (Note 6)
Impairment of goodwill (Note 14)
Federal charges settlement (PPSC) (Note 18)
Impairment of intangible assets related to business combinations (Note 15)
Loss arising on financial assets (liabilities) at fair value through profit or loss (1)
Impairment loss on remeasurement of assets of disposal groups classified as held for sale to
fair value less cost to sell
Net change in other provisions (2)
Other (1), (2)
Other reconciling items
(1)
(2)
B)
In 2019, a loss arising on financial assets (liabilities) at fair value through profit or loss of $4.7 million was included in “Other”.
In 2019, “Net change in other provisions” of $8.0 million was included in “Other”. Net change in other provisions includes changes in all provisions,
except for: i) pension, other long-term benefits and other post-employment benefits; ii) forecasted losses on certain contracts; iii) restructuring; and
iv) reversal of a provision related to a disposal of a Capital investment.
NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS
The following table presents the items included in the net change in non-cash working capital related to operating activities
presented in the statements of cash flows, for the years ended December 31:
$
196,175 $
Decrease (increase) in trade receivables
Decrease (increase) in contract assets
Decrease in inventories
Increase in other current financial assets
Increase in other current non-financial assets
Decrease in trade payables and accrued liabilities
Increase (decrease) in contract liabilities
Increase (decrease) in other current financial liabilities
Increase (decrease) in other current non-financial liabilities
Net change in non-cash working capital items
66
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
107,318
3,980
114,257
10,079
(87,349)
93,176
(47,186)
38,262
20,653
(25,000)
121,128
(124,450)
1,262
—
—
—
61,859
277,660
231,355
(67,928)
2020
361,597
69,500
(29,454)
(32,968)
(330,717)
6,803
(64,893)
53,205
290,223
112,037
198,738
212,083
16,061
(210,543)
160,063
(29,702)
38,043
(84,861)
(2,970,783)
182,801
(92,872)
294
72,831
1,801,015
257,327
4,743
—
7,951
(89,310)
(123,861)
2019
(15,214)
(34,506)
15,193
(2,970)
(12,926)
(193,288)
(91,888)
16,720
(15,667)
SNC-Lavalin 2020 Financial Report
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
CHANGES ARISING FROM CASH FLOWS – RECOURSE DEBT AND NON-RECOURSE DEBT
YEAR ENDED DECEMBER 31
Recourse debt:
Revolving Facility
2020 Debentures
Series 6 Debentures (Note 20)
Total – Recourse debt
Non-recourse debt:
Credit facility – InPower BC General Partnership
Senior Bonds – InPower BC General Partnership
Credit facility – TransitNEXT General Partnership
Senior Secured Notes of a PS&PM investment
Total – Non-recourse debt
Total
2020
INCREASE
OF DEBT
REPAYMENT
OF DEBT
PAYMENT FOR
DEBT ISSUE COSTS
$
1,000,000 $
(1,000,000) $
—
(300,000)
297,600
—
1,297,600
(1,300,000)
—
—
31,625
(63,130)
(16,495)
—
—
(7,547)
31,625
(87,172)
—
—
(729)
(729)
—
—
—
—
—
$
1,329,225 $
(1,387,172) $
(729)
(1)
(2)
(3)
(4)
Recourse short-term debt and recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Recourse short-term debt
Recourse long-term debt
Total
DECEMBER 31
2020
$
174,960 $
996,005
JANUARY 1
2020
299,518
873,145
$
1,170,965 $
1,172,663
Non-recourse short-term debt and non-recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Non-recourse short-term debt
Non-recourse long-term debt
Total
DECEMBER 31
2020
JANUARY 1
2020
$
31,262 $
400,283
$
431,545 $
93,664
391,454
485,118
Lease liabilities were presented in the Company’s consolidated financial statements of financial position as follows:
Current portion of lease liabilities
Non-current portion of lease liabilities
Total
DECEMBER 31
2020
$
97,409 $
399,201
$
496,610 $
JANUARY 1
2020
131,075
480,675
611,750
Change arising from cash flows of other non-current financial liabilities and other non-current non-financial liabilities was presented in the financing
activities in the Company’s consolidated statement of cash flows as follows:
YEAR ENDED DECEMBER 31
Other non-current financial liabilities
Other non-current non-financial liabilities
Other
Total
$
$
2020
1,366
(373)
(52)
941
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
The following table provides a reconciliation between the opening and closing balances in the statement of financial position for
liabilities arising from financing activities for the year ended December 31, 2019:
Recourse (1)
Limited
debt
recourse debt
Non-(2)
recourse
debt
Lease (3)
liabilities
Dividends
declared to
SNC-Lavalin
shareholders
Other non-(4)
current
financial
liabilities
Other non-(4)
current non-
financial
liabilities
$ 2,288,020 $ 980,303 $ 399,705 $
— $
— $
53,505 $
61,508
Adjusted balance at January 1, 2019
2,288,020
980,303
399,705
614,152
—
—
—
614,152
—
—
(2,929)
(60,044)
50,576
1,464
Balance at January 1, 2019
Transitional adjustment on adoption of
a new accounting standard
Changes arising from cash flows:
Increase
Repayment
flows
Non-cash changes:
Total – changes arising from cash
Declaration of dividends to
SNC-Lavalin shareholders
Effect of foreign currency exchange
differences
Amortization of deferred financing
costs and discounts
Change in fair value of derivatives
used for hedges
Change in fair value of contingent
consideration related to the Linxon
transaction
Reclassification of deferred financing
costs to “Other current non-
financial assets” and “Other non-
current non-financial assets” upon
repayment of Revolving Facility
Net increase on lease liabilities
Federal charges settlement (PPSC)
(Note 18)
1,829,988
—
96,224
—
—
608
5,543
(2,952,302)
(600,000)
(10,747)
(119,106)
(42,133)
(3,368)
(6,556)
(1,122,314)
(600,000)
85,477
(119,106)
(42,133)
(2,760)
(1,013)
—
—
—
—
42,133
—
—
(3,316)
—
(2,501)
(6,108)
—
(522)
100
4,321
19,697
2,437
—
—
—
—
—
—
(13,578)
—
—
—
—
—
—
—
(2,911)
—
—
—
—
—
—
5,952
—
—
—
—
—
—
—
—
—
122,812
—
—
—
—
—
—
201,764
Balance at December 31, 2019
$ 1,172,663 $ 400,000 $ 485,118 $ 611,750 $
— $ 232,569 $
551
(1), (2), (3), (4) See Notes 1, 2, 3 and 4 on the following page
68
68
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
69
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
CHANGES ARISING FROM CASH FLOWS – RECOURSE DEBT AND NON-RECOURSE DEBT
YEAR ENDED DECEMBER 31
Recourse debt:
Revolving Facility
2020 Debentures
Series 6 Debentures (Note 20)
Total – Recourse debt
Non-recourse debt:
Credit facility – InPower BC General Partnership
Senior Bonds – InPower BC General Partnership
Credit facility – TransitNEXT General Partnership
Senior Secured Notes of a PS&PM investment
Total – Non-recourse debt
Total
(1)
(2)
(3)
(4)
Recourse short-term debt
Recourse long-term debt
Total
Non-recourse short-term debt
Non-recourse long-term debt
Total
Current portion of lease liabilities
Non-current portion of lease liabilities
YEAR ENDED DECEMBER 31
Other non-current financial liabilities
Other non-current non-financial liabilities
Total
Other
Total
2020
INCREASE
OF DEBT
REPAYMENT
PAYMENT FOR
OF DEBT
DEBT ISSUE COSTS
$
1,000,000 $
(1,000,000) $
—
(300,000)
297,600
—
1,297,600
(1,300,000)
—
—
31,625
(63,130)
(16,495)
—
—
(7,547)
31,625
(87,172)
—
—
(729)
(729)
—
—
—
—
—
$
1,329,225 $
(1,387,172) $
(729)
DECEMBER 31
2020
$
174,960 $
996,005
JANUARY 1
2020
299,518
873,145
$
1,170,965 $
1,172,663
DECEMBER 31
2020
JANUARY 1
2020
$
31,262 $
400,283
$
431,545 $
93,664
391,454
485,118
DECEMBER 31
2020
$
97,409 $
399,201
$
496,610 $
JANUARY 1
2020
131,075
480,675
611,750
$
$
2020
1,366
(373)
(52)
941
Recourse short-term debt and recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Non-recourse short-term debt and non-recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Lease liabilities were presented in the Company’s consolidated financial statements of financial position as follows:
Change arising from cash flows of other non-current financial liabilities and other non-current non-financial liabilities was presented in the financing
activities in the Company’s consolidated statement of cash flows as follows:
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
The following table provides a reconciliation between the opening and closing balances in the statement of financial position for
liabilities arising from financing activities for the year ended December 31, 2019:
Balance at January 1, 2019
Transitional adjustment on adoption of
a new accounting standard
Adjusted balance at January 1, 2019
Changes arising from cash flows:
Increase
Repayment
Total – changes arising from cash
flows
Non-cash changes:
Declaration of dividends to
SNC-Lavalin shareholders
Effect of foreign currency exchange
differences
Amortization of deferred financing
costs and discounts
Change in fair value of derivatives
used for hedges
Change in fair value of contingent
consideration related to the Linxon
transaction
Reclassification of deferred financing
costs to “Other current non-
financial assets” and “Other non-
current non-financial assets” upon
repayment of Revolving Facility
Net increase on lease liabilities
Federal charges settlement (PPSC)
(Note 18)
Recourse (1)
debt
Limited
recourse debt
Non-(2)
recourse
debt
Lease (3)
liabilities
Dividends
declared to
SNC-Lavalin
shareholders
Other non-(4)
current
financial
liabilities
Other non-(4)
current non-
financial
liabilities
$ 2,288,020 $ 980,303 $ 399,705 $
— $
— $
53,505 $
61,508
—
—
—
614,152
2,288,020
980,303
399,705
614,152
—
—
(2,929)
(60,044)
50,576
1,464
1,829,988
—
96,224
—
—
608
5,543
(2,952,302)
(600,000)
(10,747)
(119,106)
(42,133)
(3,368)
(6,556)
(1,122,314)
(600,000)
85,477
(119,106)
(42,133)
(2,760)
(1,013)
—
—
—
—
42,133
—
—
(3,316)
—
(2,501)
(6,108)
—
(522)
100
4,321
19,697
2,437
—
—
—
—
—
—
—
—
(13,578)
—
—
—
—
—
(2,911)
5,952
—
—
—
—
—
—
—
—
—
122,812
—
—
—
—
—
—
201,764
—
—
—
—
—
—
Balance at December 31, 2019
$ 1,172,663 $ 400,000 $ 485,118 $ 611,750 $
— $ 232,569 $
551
(1), (2), (3), (4) See Notes 1, 2, 3 and 4 on the following page
68
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
69
69
SNC-Lavalin 2020 Financial Report
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
CHANGES ARISING FROM CASH FLOWS – RECOURSE DEBT, LIMITED RECOURSE DEBT AND NON-RECOURSE DEBT
D)
LINXON PVT LTD
YEAR ENDED DECEMBER 31
Recourse debt:
Revolving Facility
Bridge Facility (Note 20)
Series 2 Debentures
Series 5 Debentures
2019 Debentures
Bank overdraft
Total – Recourse debt
Limited recourse debt:
CDPQ Loan
Total – Limited recourse debt
Non-recourse debt:
Credit facility – InPower BC General Partnership
Senior Bonds – InPower BC General Partnership
Credit facility – TransitNEXT General Partnership
Senior Secured Notes of a PS&PM investment
Total – Non-recourse debt
Total
2019
INCREASE
OF DEBT
REPAYMENT
OF DEBT
PAYMENT FOR
DEBT ISSUE COSTS
$
1,529,988 $
(1,942,052) $
—
300,000
(300,000)
(1,060)
—
—
—
—
(150,000)
(150,000)
(350,000)
(59,190)
—
—
—
—
1,829,988
(2,951,242)
(1,060)
Less: Return of contingent consideration to be transferred to seller received in cash (1)
—
—
(600,000)
(600,000)
14,895
—
74,717
6,612
96,224
—
(1,350)
(2,859)
(5,540)
(9,749)
—
—
—
—
(998)
—
(998)
$
1,926,212 $
(3,560,991) $
(2,058)
On September 1, 2018, SNC-Lavalin acquired from a subsidiary of ABB Ltd (“ABB”) a 51% ownership interest in Linxon Pvt
Ltd (“Linxon”), incorporated under the laws of England and Wales, for the execution of turnkey electrical substation projects.
Turnkey solutions include project design, engineering, procurement, construction, management, commissioning and after-sales
support. The primary reason for this business combination was to combine ABB’s technology leadership with SNC-Lavalin’s
expertise in managing projects to deliver enhanced customer value.
The acquisition of Linxon by SNC-Lavalin has been accounted for using the acquisition method and Linxon has been
consolidated from the effective date of acquisition, which is September 1, 2018, with a non-controlling interest of 49%.
NET CASH INFLOW ON ACQUISITION OF LINXON
YEAR ENDED DECEMBER 31
Consideration paid in cash
Less: Cash received by Linxon for working capital adjustment
Net cash inflow on acquisition of Linxon
$
2019
—
5,539
9,351
$
(14,890)
(1)
Under the business combination arrangement, ABB was required to compensate Linxon in cash an amount based on the date of transfer of certain
additional assets and liabilities, up to June 30, 2019. The range of outcomes of such right to a return of contingent consideration to be transferred to the
seller was between US$nil and US$8.3 million (approximately between CA$nil and CA$10.8 million).
(1)
(2)
(3)
(4)
Recourse short-term debt and recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Recourse short-term debt
Recourse long-term debt
Total
DECEMBER 31
2019
JANUARY 1
2019
$
299,518 $
1,116,587
873,145
1,171,433
$
1,172,663 $
2,288,020
Non-recourse short-term debt and non-recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Non-recourse short-term debt
Non-recourse long-term debt
Total
DECEMBER 31
2019
$
93,664 $
391,454
$
485,118 $
JANUARY 1
2019
60,168
339,537
399,705
Lease liabilities were presented in the Company’s consolidated financial statements of financial position as follows:
Current portion of lease liabilities
Non-current portion of lease liabilities
Total
DECEMBER 31
2019
JANUARY 1
2019
$
131,075 $
480,675
$
611,750 $
—
—
—
Change arising from cash flows of other non-current financial liabilities and other non-current non-financial liabilities was presented in the financing
activities in the Company’s consolidated statement of cash flows as follows:
YEAR ENDED DECEMBER 31
Other non-current financial liabilities
Other non-current non-financial liabilities
Other
Total
$
$
2019
(2,760)
(1,013)
(298)
(4,071)
70
70
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
71
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
28.
STATEMENTS OF CASH FLOWS (CONTINUED)
CHANGES ARISING FROM CASH FLOWS – RECOURSE DEBT, LIMITED RECOURSE DEBT AND NON-RECOURSE DEBT
D)
LINXON PVT LTD
On September 1, 2018, SNC-Lavalin acquired from a subsidiary of ABB Ltd (“ABB”) a 51% ownership interest in Linxon Pvt
Ltd (“Linxon”), incorporated under the laws of England and Wales, for the execution of turnkey electrical substation projects.
Turnkey solutions include project design, engineering, procurement, construction, management, commissioning and after-sales
support. The primary reason for this business combination was to combine ABB’s technology leadership with SNC-Lavalin’s
expertise in managing projects to deliver enhanced customer value.
The acquisition of Linxon by SNC-Lavalin has been accounted for using the acquisition method and Linxon has been
consolidated from the effective date of acquisition, which is September 1, 2018, with a non-controlling interest of 49%.
NET CASH INFLOW ON ACQUISITION OF LINXON
YEAR ENDED DECEMBER 31
Consideration paid in cash
Less: Return of contingent consideration to be transferred to seller received in cash (1)
Less: Cash received by Linxon for working capital adjustment
$
2019
—
5,539
9,351
Net cash inflow on acquisition of Linxon
$
(14,890)
(1)
Under the business combination arrangement, ABB was required to compensate Linxon in cash an amount based on the date of transfer of certain
additional assets and liabilities, up to June 30, 2019. The range of outcomes of such right to a return of contingent consideration to be transferred to the
seller was between US$nil and US$8.3 million (approximately between CA$nil and CA$10.8 million).
YEAR ENDED DECEMBER 31
Recourse debt:
Revolving Facility
Bridge Facility (Note 20)
Series 2 Debentures
Series 5 Debentures
2019 Debentures
Bank overdraft
Total – Recourse debt
Limited recourse debt:
CDPQ Loan
Total – Limited recourse debt
Non-recourse debt:
Credit facility – InPower BC General Partnership
Senior Bonds – InPower BC General Partnership
Credit facility – TransitNEXT General Partnership
Senior Secured Notes of a PS&PM investment
Total – Non-recourse debt
Total
(1)
(2)
(3)
(4)
Total
Other
Total
Recourse short-term debt
Recourse long-term debt
Total
Non-recourse short-term debt
Non-recourse long-term debt
Total
Current portion of lease liabilities
Non-current portion of lease liabilities
YEAR ENDED DECEMBER 31
Other non-current financial liabilities
Other non-current non-financial liabilities
2019
INCREASE
OF DEBT
REPAYMENT
PAYMENT FOR
OF DEBT
DEBT ISSUE COSTS
$
1,529,988 $
(1,942,052) $
300,000
(300,000)
(1,060)
1,829,988
(2,951,242)
(1,060)
—
—
—
—
—
—
14,895
—
74,717
6,612
96,224
(150,000)
(150,000)
(350,000)
(59,190)
(600,000)
(600,000)
—
(1,350)
(2,859)
(5,540)
(9,749)
—
—
—
—
—
—
—
—
—
—
(998)
(998)
DECEMBER 31
2019
JANUARY 1
2019
$
299,518 $
1,116,587
873,145
1,171,433
$
1,172,663 $
2,288,020
DECEMBER 31
2019
$
93,664 $
391,454
$
485,118 $
JANUARY 1
2019
60,168
339,537
399,705
DECEMBER 31
2019
JANUARY 1
2019
$
131,075 $
480,675
$
611,750 $
—
—
—
2019
(2,760)
(1,013)
(298)
(4,071)
$
$
Recourse short-term debt and recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
$
1,926,212 $
(3,560,991) $
(2,058)
Non-recourse short-term debt and non-recourse long-term debt were presented in the Company’s consolidated statements of financial position as follows:
Lease liabilities were presented in the Company’s consolidated financial statements of financial position as follows:
Change arising from cash flows of other non-current financial liabilities and other non-current non-financial liabilities was presented in the financing
activities in the Company’s consolidated statement of cash flows as follows:
70
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
71
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
71
SNC-Lavalin 2020 Financial Report
29.
INCOME TAXES
A)
DEFERRED INCOME TAX ASSET AND DEFERRED INCOME TAX LIABILITY
Deferred income tax asset (liability) arising from temporary differences and unused tax losses can be summarized as follows:
29.
INCOME TAXES (CONTINUED)
Deferred income taxes for the comparative period of 2019 can be summarized as follows:
Current:
Contract assets
Retentions on supplier contracts
Accrued employee compensation
Current liabilities
Other
Non-current:
Property and equipment, and goodwill
Right-of-use assets
Other non-current financial assets
Provisions
Capital investments accounted for by the equity
method and at fair value through other
comprehensive income
Lease liabilities
Pension plans and other post-employment benefits
Other
Reclassification
to disposal
groups
classified as held
for sale
JANUARY 1
2020
Recognized in
other
comprehensive
income
Recognized
in
net income
Exchange
differences
and
other charges
DECEMBER 31
2020
$ (30,462) $
426 $
— $ 36,406 $
(619) $
5,751
7,509
33,113
67,291
5,808
(111,805)
(77,192)
(41,808)
(21,620)
(116,316)
100,842
82,337
40,592
—
(525)
(731)
—
(358)
(918)
—
—
—
955
—
—
—
—
(2,678)
574
25,040
(7,415)
—
(685)
(199)
(26)
4,831
32,477
91,401
(1,633)
—
(13,346)
2,803
(122,706)
—
40
34,342
22,608
252
(43,516)
(264)
(19,424)
—
(10,703)
(1,044)
(33,367)
421
(31,752)
—
(147,647)
—
(33,962)
(498)
67,337
—
18,458
(344)
4,195
104,646
238
406
2,333
667
44,236
Unused tax losses
Deferred income tax asset, net
233,228
(3,851)
—
94,778
(5,051)
319,104
$ 171,517 $
(4,764) $ 19,325 $ 115,881 $
(469) $ 301,490
Presented on the statement of financial position as follows:
Deferred income tax asset
Deferred income tax liability
$ 520,451
$ 348,934
$ 655,838
$ 354,348
72
72
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
73
Current:
Contract assets
Retentions on supplier
contracts
Accrued employee
compensation
Current liabilities
Other
Non-current:
Property and equipment,
and goodwill
Right-of-use assets
Other non-current
financial assets
Provisions
Capital investments
accounted for by the
equity method and at
fair value through other
comprehensive income
Lease liabilities
Pension plans and other
post-employment
benefits
Other
JANUARY 1
2019
Impact of
adoption of a
new standard
comprehensive
Recognized
income
directly in equity
Recognized in
net income
Exchange
differences and
other charges
DECEMBER 31
2019
Recognized in
other
(46,298)
16,609
34,320
74,587
22,138
—
—
—
—
(2,954)
(189,830)
—
—
(100,679)
(36,437)
(2,018)
(8,776)
(3,513)
—
—
—
—
—
—
—
16
—
—
15,438
398
(30,462)
—
(9,100)
—
7,509
(519)
(6,924)
(12,883)
74,439
22,292
3,389
(15,394)
(688)
(372)
(493)
33,113
67,291
5,808
3,586
(111,805)
1,195
(77,192)
—
(41,808)
(695)
(21,620)
—
—
—
—
—
—
—
—
—
(127,494)
—
637
10,541
—
(116,316)
—
140,463
(38,332)
(1,289)
100,842
87,943
66,318
(16,995)
—
—
8,234
(3,253)
—
—
(10,678)
(8,347)
4,332
(3,162)
(1,463)
82,337
40,592
—
(149,123)
(6,879)
233,228
$ 289,068 $
7,546 $
5,634 $
(8,347) $ (112,522) $
(9,862) $ 171,517
Unused tax losses
389,230
Deferred income tax asset,
net
Presented on the statement of financial position as follows:
Deferred income tax asset
$ 652,155
Deferred income tax
liability
$ 363,087
$ 520,451
$ 348,934
As at December 31, 2020, the Company had $2,495.6 million (2019: $2,255.6 million) of non-capital tax loss carryforwards, of
which $1,992.2 million will expire in varying amounts from 2021 to 2041 (2019: $1,288.7 million expiring from 2020 to 2040).
As at December 31, 2020, a deferred income tax asset of $319.1 million (2019: $233.2 million) has been recognized on
$1,347.3 million (2019: $1,049.6 million) of these losses. The deferred income tax assets are recognized only to the extent that it
is probable that taxable income will be available against which the unused tax losses can be utilized. As at December 31, 2020,
the Company had $783.3 million of the unrecognized non-capital tax losses that will expire in varying amounts from 2021 to
2041 (2019: $512.6 million expiring in varying amounts from 2020 to 2040).
As at December 31, 2020, the Company had $83.6 million (2019: $82.1 million) of non-expiring capital tax loss carryforwards
on which no deferred income tax asset has been recognized.
As at December 31, 2020, a deferred income tax liability has not been recognized on taxable temporary differences of
$620.6 million (2019: $757.3 million) associated with investments in subsidiaries, associates and interests in joint arrangements,
as the Company controls the timing of the reversal and it is probable that the temporary differences will not reverse in the
foreseeable future.
29.
INCOME TAXES
A)
DEFERRED INCOME TAX ASSET AND DEFERRED INCOME TAX LIABILITY
Deferred income tax asset (liability) arising from temporary differences and unused tax losses can be summarized as follows:
Reclassification
to disposal
Recognized in
other
Recognized
Exchange
differences
JANUARY 1
classified as held
comprehensive
in
and
DECEMBER 31
2020
income
net income
other charges
2020
groups
for sale
$ (30,462) $
426 $
— $ 36,406 $
(619) $
5,751
Current:
Contract assets
Retentions on supplier contracts
Accrued employee compensation
Current liabilities
Other
Non-current:
Property and equipment, and goodwill
Right-of-use assets
Other non-current financial assets
Provisions
Capital investments accounted for by the equity
method and at fair value through other
comprehensive income
Lease liabilities
7,509
33,113
67,291
5,808
(111,805)
(77,192)
(41,808)
(21,620)
(116,316)
100,842
82,337
40,592
—
(525)
(731)
—
(358)
(918)
—
—
—
955
—
—
—
—
(2,678)
574
25,040
(7,415)
—
(685)
(199)
(26)
4,831
32,477
91,401
(1,633)
—
(13,346)
2,803
(122,706)
—
40
34,342
22,608
252
(43,516)
(264)
(19,424)
—
(10,703)
(1,044)
(33,367)
421
(31,752)
—
(147,647)
—
(33,962)
(498)
67,337
Pension plans and other post-employment benefits
—
18,458
(344)
4,195
104,646
Other
Unused tax losses
238
406
2,333
667
44,236
233,228
(3,851)
—
94,778
(5,051)
319,104
Deferred income tax asset, net
$ 171,517 $
(4,764) $ 19,325 $ 115,881 $
(469) $ 301,490
Presented on the statement of financial position as follows:
Deferred income tax asset
Deferred income tax liability
$ 520,451
$ 348,934
$ 655,838
$ 354,348
29.
INCOME TAXES (CONTINUED)
Deferred income taxes for the comparative period of 2019 can be summarized as follows:
JANUARY 1
2019
Impact of
adoption of a
new standard
Recognized in
other
comprehensive
income
Recognized
directly in equity
Recognized in
net income
Exchange
differences and
other charges
DECEMBER 31
2019
(46,298)
16,609
34,320
74,587
22,138
—
—
—
—
(2,954)
(189,830)
—
—
(100,679)
(36,437)
(2,018)
(8,776)
(3,513)
—
—
—
—
—
—
—
16
—
(127,494)
—
637
—
140,463
—
15,438
398
(30,462)
—
(9,100)
—
7,509
—
—
—
—
—
—
—
—
—
(519)
(6,924)
(12,883)
74,439
22,292
3,389
(15,394)
(688)
(372)
(493)
33,113
67,291
5,808
3,586
(111,805)
1,195
(77,192)
—
(41,808)
(695)
(21,620)
10,541
—
(116,316)
(38,332)
(1,289)
100,842
Current:
Contract assets
Retentions on supplier
contracts
Accrued employee
compensation
Current liabilities
Other
Non-current:
Property and equipment,
and goodwill
Right-of-use assets
Other non-current
financial assets
Provisions
Capital investments
accounted for by the
equity method and at
fair value through other
comprehensive income
Lease liabilities
Pension plans and other
post-employment
benefits
Other
Unused tax losses
389,230
—
87,943
—
66,318
(16,995)
8,234
(3,253)
—
—
(10,678)
(8,347)
4,332
(3,162)
(1,463)
82,337
40,592
—
(149,123)
(6,879)
233,228
Deferred income tax asset,
net
$ 289,068 $
7,546 $
5,634 $
(8,347) $ (112,522) $
(9,862) $ 171,517
Presented on the statement of financial position as follows:
Deferred income tax asset
$ 652,155
Deferred income tax
liability
$ 363,087
$ 520,451
$ 348,934
As at December 31, 2020, the Company had $2,495.6 million (2019: $2,255.6 million) of non-capital tax loss carryforwards, of
which $1,992.2 million will expire in varying amounts from 2021 to 2041 (2019: $1,288.7 million expiring from 2020 to 2040).
As at December 31, 2020, a deferred income tax asset of $319.1 million (2019: $233.2 million) has been recognized on
$1,347.3 million (2019: $1,049.6 million) of these losses. The deferred income tax assets are recognized only to the extent that it
is probable that taxable income will be available against which the unused tax losses can be utilized. As at December 31, 2020,
the Company had $783.3 million of the unrecognized non-capital tax losses that will expire in varying amounts from 2021 to
2041 (2019: $512.6 million expiring in varying amounts from 2020 to 2040).
As at December 31, 2020, the Company had $83.6 million (2019: $82.1 million) of non-expiring capital tax loss carryforwards
on which no deferred income tax asset has been recognized.
As at December 31, 2020, a deferred income tax liability has not been recognized on taxable temporary differences of
$620.6 million (2019: $757.3 million) associated with investments in subsidiaries, associates and interests in joint arrangements,
as the Company controls the timing of the reversal and it is probable that the temporary differences will not reverse in the
foreseeable future.
72
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
73
73
SNC-Lavalin 2020 Financial Report
29.
INCOME TAXES (CONTINUED)
B)
INCOME TAXES
30.
FINANCIAL INSTRUMENTS
A)
CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The relationship between the expected income taxes based on the Canadian effective tax rate of SNC-Lavalin at 26.3% (2019:
26.5%) and the reported income taxes in net income can be reconciled as follows:
The following table presents the carrying value of SNC-Lavalin’s financial assets as at December 31, 2020 by category and
classification, with the corresponding fair value, when available. Financial assets classified as held for sale as at December 31,
YEARS ENDED DECEMBER 31
Earnings (loss) before income taxes from continuing operations
$
(405,968)
Canadian tax rate for SNC-Lavalin
AMOUNT
2020
%
26.3
AMOUNT
$
2,753,511
2019
%
26.5
Expected income taxes from continuing operations
$
(106,597)
$
729,741
Increase (decrease) resulting from:
Effect of Federal charges settlement (PPSC)
Effect of differences of foreign tax rates compared to Canadian
rates
Effect of Canadian provincial tax rate differences
Effect of adjustments to deferred tax attributable to tax rate
changes
Net income and losses not affected by tax
Effect of benefit from a previously unrecognized tax loss used to
reduce current tax expense
Effect of differences between accounting gain and taxable gain
realized on disposals of Capital investments
Non-deductible loss on revaluation of contingent consideration
receivable from the acquirer of the 10.01% interest in
Highway 407 ETR
Effect of benefit for losses carried back to prior years at higher
tax rate
Effect of reversal of a previous write-down of deferred income
tax asset
Effect of write-down of previously recognized deferred income
tax asset (liability)
Non-taxable income from certain Capital investments accounted
for by the equity method and at fair value through other
comprehensive income
Non-deductible impairment loss on remeasurement of assets of
disposal group classified as held for sale to fair value less cost
to sell
Non-deductible loss on disposal of a PS&PM business
Other permanent differences for tax purposes
Other
68,545
2.5
2,327
2,124
(1,948)
(5,737)
6,350
(0.6)
(0.5)
0.5
1.4
(1.6)
(14,435)
2,384
—
(43,850)
(9,672)
2.4
(47,773)
—
—
(405,443)
(14.7)
7,580
(1.9)
(5,373)
(7,499)
1.3
1.8
—
—
—
—
—
—
55,023
(13.6)
64,656
2.3
(16,742)
4.1
(44,075)
(1.6)
1,600
1,870
(413)
18,068
(0.4)
(0.5)
0.1
(4.3)
—
—
7,777
(7,179)
(0.5)
0.1
—
(1.6)
(1.7)
—
—
0.3
(0.3)
11.3
Income taxes from continuing operations at effective tax rate
$
(59,039)
14.5 $
310,348
SNC-Lavalin’s income taxes from continuing operations were comprised of the following:
2020 are not included in the table below (see Note 39).
AT DECEMBER 31
CARRYING VALUE OF FINANCIAL ASSETS BY CATEGORY
2020
FVTPL (1)
FVTOCI (2)
TOTAL
FAIR VALUE
AMORTIZED
COST
DERIVATIVES
USED FOR
HEDGES
$ 932,902 $
— $
— $
— $ 932,902 $ 932,902
29,300
—
—
—
29,300
29,300
—
1,199,166
—
1,199,166
1,199,166
—
9,666
—
—
9,666
9,666
209,276
41,956
257,432
260,033
—
—
41,956
41,956
41,956
6,200
6,200
209,276
209,276
211,877
—
—
433,914
29,425
—
—
433,914
505,332
1,973
1,973
31,398
31,398
1,973
1,973
29,425
—
29,425
29,425
Cash and cash equivalents
Restricted cash
Trade receivables
Other current financial assets:
Derivative financial instruments
Financial assets at FVTPL
Other
Capital investments at fair value through other
comprehensive income
Non-current portion of receivables under service
concession arrangements (3)
Other non-current financial assets:
Derivative financial instruments
Other (3)
Total
(1)
(2)
(3)
Fair value through profit or loss (“FVTPL”)
Fair value through other comprehensive income (“FVTOCI”)
—
6,200
—
6,200
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 968,402 $
9,666 $ 1,871,781 $
43,929 $ 2,893,778
For non-current portion of receivables under service concession arrangements and most of the other non-current financial assets other than at fair value,
the Company uses the present value technique to determine the fair value.
YEARS ENDED DECEMBER 31
Current income taxes
Deferred income taxes
Income taxes
2020
2019
$
63,674 $
92,194
(122,713)
218,154
$
(59,039) $
310,348
74
74
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
75
30.
FINANCIAL INSTRUMENTS
A)
CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying value of SNC-Lavalin’s financial assets as at December 31, 2020 by category and
classification, with the corresponding fair value, when available. Financial assets classified as held for sale as at December 31,
2020 are not included in the table below (see Note 39).
AT DECEMBER 31
2020
Cash and cash equivalents
Restricted cash
Trade receivables
Other current financial assets:
Derivative financial instruments
Financial assets at FVTPL
Other
CARRYING VALUE OF FINANCIAL ASSETS BY CATEGORY
FVTPL (1)
FVTOCI (2)
AMORTIZED
COST
DERIVATIVES
USED FOR
HEDGES
TOTAL
FAIR VALUE
$ 932,902 $
— $
— $
— $ 932,902 $ 932,902
29,300
—
—
—
29,300
29,300
—
6,200
—
6,200
—
—
1,199,166
—
1,199,166
1,199,166
—
—
—
—
209,276
41,956
257,432
260,033
—
—
209,276
41,956
41,956
41,956
—
—
6,200
6,200
209,276
211,877
Capital investments at fair value through other
comprehensive income
Non-current portion of receivables under service
concession arrangements (3)
Other non-current financial assets:
Derivative financial instruments
Other (3)
Total
—
9,666
—
—
9,666
9,666
—
—
—
—
—
—
—
—
433,914
29,425
—
—
433,914
505,332
1,973
1,973
31,398
31,398
1,973
1,973
29,425
—
29,425
29,425
$ 968,402 $
9,666 $ 1,871,781 $
43,929 $ 2,893,778
(1)
(2)
(3)
Fair value through profit or loss (“FVTPL”)
Fair value through other comprehensive income (“FVTOCI”)
For non-current portion of receivables under service concession arrangements and most of the other non-current financial assets other than at fair value,
the Company uses the present value technique to determine the fair value.
29.
INCOME TAXES (CONTINUED)
B)
INCOME TAXES
The relationship between the expected income taxes based on the Canadian effective tax rate of SNC-Lavalin at 26.3% (2019:
26.5%) and the reported income taxes in net income can be reconciled as follows:
Earnings (loss) before income taxes from continuing operations
$
(405,968)
$
2,753,511
AMOUNT
AMOUNT
YEARS ENDED DECEMBER 31
Canadian tax rate for SNC-Lavalin
Expected income taxes from continuing operations
$
(106,597)
$
729,741
Increase (decrease) resulting from:
Effect of Federal charges settlement (PPSC)
Effect of differences of foreign tax rates compared to Canadian
rates
changes
Effect of Canadian provincial tax rate differences
Effect of adjustments to deferred tax attributable to tax rate
Net income and losses not affected by tax
Effect of benefit from a previously unrecognized tax loss used to
reduce current tax expense
Effect of differences between accounting gain and taxable gain
realized on disposals of Capital investments
Non-deductible loss on revaluation of contingent consideration
receivable from the acquirer of the 10.01% interest in
Highway 407 ETR
Effect of benefit for losses carried back to prior years at higher
tax rate
tax asset
Effect of reversal of a previous write-down of deferred income
Effect of write-down of previously recognized deferred income
tax asset (liability)
Non-taxable income from certain Capital investments accounted
for by the equity method and at fair value through other
comprehensive income
Non-deductible impairment loss on remeasurement of assets of
disposal group classified as held for sale to fair value less cost
Non-deductible loss on disposal of a PS&PM business
Other permanent differences for tax purposes
to sell
Other
YEARS ENDED DECEMBER 31
Current income taxes
Deferred income taxes
Income taxes
2020
%
26.3
(0.6)
(0.5)
0.5
1.4
(1.6)
2,327
2,124
(1,948)
(5,737)
6,350
68,545
2.5
(14,435)
2,384
—
(43,850)
(9,672)
2.4
(47,773)
—
—
(405,443)
(14.7)
7,580
(1.9)
(5,373)
(7,499)
1.3
1.8
—
—
—
55,023
(13.6)
64,656
2.3
(16,742)
4.1
(44,075)
(1.6)
1,600
1,870
(413)
18,068
(0.4)
(0.5)
0.1
(4.3)
—
—
7,777
(7,179)
2019
%
26.5
(0.5)
0.1
—
(1.6)
(1.7)
—
—
—
—
—
0.3
(0.3)
11.3
2020
2019
$
63,674 $
92,194
(122,713)
218,154
$
(59,039) $
310,348
Income taxes from continuing operations at effective tax rate
$
(59,039)
14.5 $
310,348
SNC-Lavalin’s income taxes from continuing operations were comprised of the following:
74
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
75
75
SNC-Lavalin 2020 Financial Report
30.
FINANCIAL INSTRUMENTS (CONTINUED)
30.
FINANCIAL INSTRUMENTS (CONTINUED)
The following table presents the carrying value of SNC-Lavalin’s financial assets as at December 31, 2019 by category and
classification, with the corresponding fair value, when available.
The following tables present the carrying value of SNC-Lavalin’s financial liabilities as at December 31, 2020 and 2019 by
category and classification, with the corresponding fair value, when available. Financial liabilities classified as held for sale as at
AT DECEMBER 31
2019
Cash and cash equivalents
Restricted cash
Trade receivables
Other current financial assets:
Derivative financial instruments
Financial assets at FVTPL
Other
Capital investments at fair value through other
comprehensive income
Non-current portion of receivables under service
concession arrangements (3)
Other non-current financial assets:
Derivative financial instruments
Financial asset at FVTOCI
Financial asset at FVTPL
Other (3)
CARRYING VALUE OF FINANCIAL ASSETS BY CATEGORY
FVTPL (1)
FVTOCI (2)
AMORTIZED
COST
DERIVATIVES
USED FOR
HEDGES
TOTAL
FAIR VALUE
$ 1,188,636 $
— $
— $
— $ 1,188,636 $ 1,188,636
34,118
—
—
—
34,118
34,118
—
6,047
—
6,047
—
—
1,533,442
—
1,533,442
1,533,442
—
—
—
—
195,115
21,146
222,308
223,676
—
—
195,115
21,146
21,146
21,146
—
—
6,047
6,047
195,115
196,483
—
8,107
—
—
8,107
8,107
—
—
352,987
—
352,987
387,060
57,207
303
49,434
8,997
115,941
115,941
—
—
57,207
—
—
303
—
—
—
—
49,434
8,997
8,997
—
—
—
303
57,207
49,434
8,997
303
57,207
49,434
Total
$ 1,286,008 $
8,410 $ 2,130,978 $
30,143 $ 3,455,539
(1)
(2)
(3)
Fair value through profit or loss (“FVTPL”)
Fair value through other comprehensive income (“FVTOCI”)
For non-current portion of receivables under service concession arrangements and most of the other non-current financial assets other than at fair value,
the Company uses the present value technique to determine the fair value.
December 31, 2020 are not included in the table below (see Note 39).
AT DECEMBER 31
CARRYING VALUE OF FINANCIAL LIABILITIES BY CATEGORY
2020
DERIVATIVES USED
FOR HEDGES
FVTPL (1)
AMORTIZED COST
TOTAL
FAIR VALUE
$
— $
— $ 1,730,398 $ 1,730,398 $ 1,730,398
Other non-current financial liabilities
8,556
15,181
$
24,562 $
15,181 $ 4,660,473 $ 4,700,216
Trade payables and accrued liabilities
Other current financial liabilities:
Derivative financial instruments
Short-term debt and long-term debt (3):
Other
Provisions
Lease liabilities
Recourse
Limited recourse
Non-recourse
Total
AT DECEMBER 31
Other
Provisions
Lease liabilities
Recourse
Limited recourse
Non-recourse
Trade payables and accrued liabilities
Other current financial liabilities:
Derivative financial instruments
Short-term debt and long-term debt (3):
16,006
—
—
—
—
—
—
17,086
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,006
171,748
171,748
89,083
89,083
496,610
496,610
16,006
171,748
89,083
N/A (2)
1,170,965
1,170,965
1,185,977
400,000
431,545
170,124
400,000
431,545
193,861
400,000
476,918
193,861
—
270,630
121,376
611,750
17,086
270,630
121,376
611,750
17,086
270,630
121,376
N/A (2)
1,172,663
1,172,663
1,172,458
400,000
485,118
215,819
400,000
485,118
232,569
400,000
511,838
232,569
CARRYING VALUE OF FINANCIAL LIABILITIES BY CATEGORY
2019
DERIVATIVES USED
FOR HEDGES
FVTPL (1)
AMORTIZED COST
TOTAL
FAIR VALUE
$
— $
— $ 2,153,520 $ 2,153,520 $ 2,153,520
Other non-current financial liabilities
2,345
14,405
$
19,431 $
14,405 $ 5,430,876 $ 5,464,712
Total
(1)
(2)
(3)
Fair value through profit or loss (“FVTPL”)
N/A: not applicable
The fair value of short-term debt and long-term debt was determined using public quotations or the discounted cash flows method in accordance with
current financing arrangements. The discount rates used correspond to prevailing market rates offered to SNC-Lavalin or to the Capital investments,
depending on which entity has issued the debt instrument, for debt with the similar terms and conditions.
76
76
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
77
30.
FINANCIAL INSTRUMENTS (CONTINUED)
30.
FINANCIAL INSTRUMENTS (CONTINUED)
The following table presents the carrying value of SNC-Lavalin’s financial assets as at December 31, 2019 by category and
classification, with the corresponding fair value, when available.
The following tables present the carrying value of SNC-Lavalin’s financial liabilities as at December 31, 2020 and 2019 by
category and classification, with the corresponding fair value, when available. Financial liabilities classified as held for sale as at
December 31, 2020 are not included in the table below (see Note 39).
AT DECEMBER 31
2019
CARRYING VALUE OF FINANCIAL ASSETS BY CATEGORY
AT DECEMBER 31
Trade payables and accrued liabilities
Other current financial liabilities:
Derivative financial instruments
Other
Provisions
Lease liabilities
Short-term debt and long-term debt (3):
Recourse
Limited recourse
Non-recourse
Cash and cash equivalents
Restricted cash
Trade receivables
Other current financial assets:
Derivative financial instruments
Financial assets at FVTPL
Other
Capital investments at fair value through other
comprehensive income
Non-current portion of receivables under service
concession arrangements (3)
Other non-current financial assets:
Derivative financial instruments
Financial asset at FVTOCI
Financial asset at FVTPL
Other (3)
Total
(1)
(2)
(3)
Fair value through profit or loss (“FVTPL”)
Fair value through other comprehensive income (“FVTOCI”)
FVTPL (1)
FVTOCI (2)
TOTAL
FAIR VALUE
AMORTIZED
COST
DERIVATIVES
USED FOR
HEDGES
$ 1,188,636 $
— $
— $
— $ 1,188,636 $ 1,188,636
34,118
—
—
—
34,118
34,118
—
6,047
—
6,047
—
—
1,533,442
—
1,533,442
1,533,442
—
—
—
—
195,115
21,146
222,308
223,676
—
—
21,146
21,146
21,146
6,047
6,047
195,115
195,115
196,483
—
—
—
8,107
—
—
8,107
8,107
—
—
352,987
—
352,987
387,060
57,207
303
49,434
8,997
115,941
115,941
—
—
—
57,207
—
303
—
—
—
—
49,434
8,997
8,997
—
—
—
303
57,207
49,434
8,997
303
57,207
49,434
$ 1,286,008 $
8,410 $ 2,130,978 $
30,143 $ 3,455,539
For non-current portion of receivables under service concession arrangements and most of the other non-current financial assets other than at fair value,
the Company uses the present value technique to determine the fair value.
CARRYING VALUE OF FINANCIAL LIABILITIES BY CATEGORY
2020
DERIVATIVES USED
FOR HEDGES
FVTPL (1)
AMORTIZED COST
TOTAL
FAIR VALUE
$
— $
— $ 1,730,398 $ 1,730,398 $ 1,730,398
16,006
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,006
171,748
171,748
89,083
89,083
496,610
496,610
16,006
171,748
89,083
N/A (2)
1,170,965
1,170,965
1,185,977
400,000
431,545
170,124
400,000
431,545
193,861
400,000
476,918
193,861
$
24,562 $
15,181 $ 4,660,473 $ 4,700,216
CARRYING VALUE OF FINANCIAL LIABILITIES BY CATEGORY
2019
DERIVATIVES USED
FOR HEDGES
FVTPL (1)
AMORTIZED COST
TOTAL
FAIR VALUE
$
— $
— $ 2,153,520 $ 2,153,520 $ 2,153,520
17,086
—
—
—
—
—
—
—
—
—
—
—
—
—
—
270,630
121,376
611,750
17,086
270,630
121,376
611,750
17,086
270,630
121,376
N/A (2)
1,172,663
1,172,663
1,172,458
400,000
485,118
215,819
400,000
485,118
232,569
400,000
511,838
232,569
Other non-current financial liabilities
8,556
15,181
Total
AT DECEMBER 31
Trade payables and accrued liabilities
Other current financial liabilities:
Derivative financial instruments
Other
Provisions
Lease liabilities
Short-term debt and long-term debt (3):
Recourse
Limited recourse
Non-recourse
Other non-current financial liabilities
2,345
14,405
Total
$
19,431 $
14,405 $ 5,430,876 $ 5,464,712
(1)
(2)
(3)
Fair value through profit or loss (“FVTPL”)
N/A: not applicable
The fair value of short-term debt and long-term debt was determined using public quotations or the discounted cash flows method in accordance with
current financing arrangements. The discount rates used correspond to prevailing market rates offered to SNC-Lavalin or to the Capital investments,
depending on which entity has issued the debt instrument, for debt with the similar terms and conditions.
76
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
77
77
SNC-Lavalin 2020 Financial Report
30.
FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The methodology used to measure the Company’s financial instruments accounted for at fair value is determined based on the
following hierarchy:
LEVEL
Level 1
Level 2
Level 3
BASIS FOR DETERMINATION OF FAIR VALUE
Quoted prices in active markets for identical assets or liabilities
FINANCIAL INSTRUMENTS
None
Inputs other than quoted prices included in Level 1 that are
directly or indirectly observable for the asset or liability
Inputs for the asset or liability that are not based on observable
market data
Cash and cash equivalents, restricted cash, derivatives, life
insurance policies, which are included in “Other current financial
assets” and equity investments measured at FVTOCI
Contingent consideration receivable from the acquirer of the
10.01% interest in Highway 407 ETR included in “Other non-
current financial assets” and contingent consideration payable to
seller related to Linxon acquisition included in “Other non-current
financial liabilities”
ASSETS AND LIABILITIES NOT MEASURED AT FAIR VALUE AND FOR WHICH THE FAIR VALUE IS DISCLOSED
The methodology used to determine the fair value of the following Company’s assets and liabilities not measured at fair value is
based on the following hierarchy:
LEVEL
Level 1
Level 2
BASIS FOR DETERMINATION OF FAIR VALUE
Quoted prices in active markets for identical
assets or liabilities
Inputs other than quoted prices included in
Level 1 that are directly or indirectly
observable for the asset or liability
ASSETS AND LIABILITIES
None
Trade receivables, receivables under service concession arrangements, trade payables
and accrued liabilities, short-term debt and long-term debt, as well as the following
assets and liabilities not measured at fair value: other current financial assets, other non-
current financial assets, other current financial liabilities, provisions and other non-
current financial liabilities
Level 3
Inputs for the asset or liability that are not
based on observable market data
None
For the years ended December 31, 2020 and 2019, there were no changes in valuation techniques and in inputs used in the fair
value measurements and there were no transfers between the levels of the fair value hierarchy.
LEVEL 3 FINANCIAL INSTRUMENTS
The following table presents changes in fair value of Level 3 financial instruments for the year ended December 31, 2020:
Balance as at January 1, 2020
Unrealized net losses (1)
Effect of foreign currency exchange differences
Balance as at December 31, 2020
CONTINGENT CONSIDERATION
RECEIVABLE FROM
THE ACQUIRER OF THE 10.01%
INTEREST IN HIGHWAY 407 ETR
CONTINGENT CONSIDERATION
PAYABLE TO SELLER RELATED TO
LINXON ACQUISITION
$
57,207 $
(57,207)
—
— $
$
14,405
1,095
(319)
15,181
(1)
Included in “Loss (gain) arising on financial assets (liabilities) at fair value through profit or loss” in the consolidated income statement
Assumptions
When measuring Level 3 financial instruments at fair value using the present value technique, some assumptions are not derived
from an observable market. The main assumptions developed internally relate to discount rate and to future expected cash flows,
based on the projected future performance. The projected future performance is an important input for the determination of fair
value and is prepared by the management of SNC-Lavalin based on the budget and the strategic plan.
The principal assumptions used in measuring fair value of Level 3 financial instruments as at December 31, 2020 were as
follows: i) the discount rate, which was 7.80% for contingent consideration receivable from the acquirer of the 10.01% interest
in Highway 407 ETR and 11.42% for contingent consideration payable to the seller related to the Linxon acquisition; and ii) the
expected future cash flows of Highway 407 ETR and Linxon.
30.
FINANCIAL INSTRUMENTS (CONTINUED)
Sensitivity analysis
These assumptions, not derived from an observable market, are established by the management of SNC-Lavalin using estimates
and judgments that can have a significant effect on net income.
The following impact on net income has been calculated changing one of these assumptions to another reasonably possible
alternative assumption for the year ended December 31, 2020:
CONTINGENT CONSIDERATION
CONTINGENT CONSIDERATION
RECEIVABLE FROM
THE ACQUIRER OF THE 10.01%
INTEREST IN HIGHWAY 407 ETR
PAYABLE TO THE SELLER
RELATED TO THE
LINXON ACQUISITION
IMPACT ON NET INCOME
If the discount rate is 100 basis points lower (1)
If the discount rate is 100 basis points higher (1)
If the expected future cash flows are 1% lower (1)
If the expected future cash flows are 1% higher (1)
$
$
$
$
— $
— $
— $
5,220 $
(936)
859
—
—
NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT
Credit risk
Risk that SNC-Lavalin will incur a financial loss if the other party to a financial instrument fails to discharge an obligation. The
maximum exposure to credit risk for SNC-Lavalin at the end of a given period usually corresponds to the carrying amount of its
financial assets exposed to such risk, as presented in Note 30A.
Liquidity risk
Possibility that SNC-Lavalin will encounter difficulties in meeting the obligations associated with its financial liabilities
Market risk
Variability in the fair value or future cash flows of a financial instrument caused by a change in market prices in items such as currency
Increase (decrease)
Increase (decrease)
Increase (decrease)
Increase (decrease)
(1)
B)
NATURE OF RISK
DESCRIPTION
Assuming all other variables remain the same
rates, interest rates and equity prices
CREDIT RISK
For SNC-Lavalin, credit risk arises from:
on SNC-Lavalin’s investment policy.
i) Cash and cash equivalents, and restricted cash, which are invested in liquid and high-grade financial instruments, based
ii) Derivative financial instruments with a favourable fair value, which contain an inherent credit risk relating to default
on obligations by the counterparty. This credit risk is reduced by entering into such contracts with high-grade financial
institutions, which are expected to satisfy their obligations under the contracts.
iii) Trade receivables, as detailed in Note 8A, and contract assets, as detailed in Note 8B. A given client may represent a
material portion of SNC-Lavalin’s consolidated revenues in any given year due to the size of a particular project and
the progress accomplished on such project.
The Company’s objective is to reduce credit risk by ensuring collection of its trade receivables on a timely basis. The
amounts of trade receivables presented in the consolidated statements of financial position are net of an allowance for
expected credit losses, estimated by the Company and based, in part, on the age of specific and aggregated receivable
balances, on the financial situation of specific customers and the current and expected collection trends. When
assessing the credit risk associated with its trade receivables, the Company also considers the other financial and non-
financial assets and liabilities recognized with the same customer or within the same project to provide additional
indications on the Company’s exposure to credit risk. As such, in addition to the age of its trade receivables, the
Company also considers the age of its contract assets, as well as the existence of any contract liabilities on the same
project or with the same customer.
In addition to providing for individual balances of trade receivables and other financial assets upon certain events, the
Company has an internal policy in place which requires to record, by default, an allowance on any trade receivable or
contract asset that has been outstanding longer than a specific threshold period, unless it can be demonstrated that the
recovery of such trade receivable is not at risk or only partially at risk, in which case the allowance is adjusted
accordingly. Moreover, the Company records an amount of additional expected credit losses on trade receivables and
contract assets for balances that are not provided for and for which no impairment indicator exist as at period end, but
for which it can be reasonably expected that credit losses might occur in the future. Such analysis incorporates the
Company’s past experience, adjusted as needed to better reflect anticipated conditions.
78
78
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
79
30.
FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
LEVEL
Level 1
Level 2
LEVEL
Level 1
Level 2
The methodology used to measure the Company’s financial instruments accounted for at fair value is determined based on the
following hierarchy:
BASIS FOR DETERMINATION OF FAIR VALUE
FINANCIAL INSTRUMENTS
Quoted prices in active markets for identical assets or liabilities
None
Inputs other than quoted prices included in Level 1 that are
directly or indirectly observable for the asset or liability
Level 3
Inputs for the asset or liability that are not based on observable
market data
Cash and cash equivalents, restricted cash, derivatives, life
insurance policies, which are included in “Other current financial
assets” and equity investments measured at FVTOCI
Contingent consideration receivable from the acquirer of the
10.01% interest in Highway 407 ETR included in “Other non-
current financial assets” and contingent consideration payable to
seller related to Linxon acquisition included in “Other non-current
financial liabilities”
ASSETS AND LIABILITIES NOT MEASURED AT FAIR VALUE AND FOR WHICH THE FAIR VALUE IS DISCLOSED
The methodology used to determine the fair value of the following Company’s assets and liabilities not measured at fair value is
based on the following hierarchy:
BASIS FOR DETERMINATION OF FAIR VALUE
ASSETS AND LIABILITIES
Quoted prices in active markets for identical
None
assets or liabilities
Inputs other than quoted prices included in
Level 1 that are directly or indirectly
observable for the asset or liability
Trade receivables, receivables under service concession arrangements, trade payables
and accrued liabilities, short-term debt and long-term debt, as well as the following
assets and liabilities not measured at fair value: other current financial assets, other non-
current financial assets, other current financial liabilities, provisions and other non-
current financial liabilities
Level 3
Inputs for the asset or liability that are not
None
based on observable market data
For the years ended December 31, 2020 and 2019, there were no changes in valuation techniques and in inputs used in the fair
value measurements and there were no transfers between the levels of the fair value hierarchy.
LEVEL 3 FINANCIAL INSTRUMENTS
The following table presents changes in fair value of Level 3 financial instruments for the year ended December 31, 2020:
CONTINGENT CONSIDERATION
RECEIVABLE FROM
THE ACQUIRER OF THE 10.01%
INTEREST IN HIGHWAY 407 ETR
CONTINGENT CONSIDERATION
PAYABLE TO SELLER RELATED TO
LINXON ACQUISITION
$
57,207 $
(57,207)
—
— $
$
14,405
1,095
(319)
15,181
Balance as at January 1, 2020
Unrealized net losses (1)
Effect of foreign currency exchange differences
Balance as at December 31, 2020
Assumptions
(1)
Included in “Loss (gain) arising on financial assets (liabilities) at fair value through profit or loss” in the consolidated income statement
When measuring Level 3 financial instruments at fair value using the present value technique, some assumptions are not derived
from an observable market. The main assumptions developed internally relate to discount rate and to future expected cash flows,
based on the projected future performance. The projected future performance is an important input for the determination of fair
value and is prepared by the management of SNC-Lavalin based on the budget and the strategic plan.
The principal assumptions used in measuring fair value of Level 3 financial instruments as at December 31, 2020 were as
follows: i) the discount rate, which was 7.80% for contingent consideration receivable from the acquirer of the 10.01% interest
in Highway 407 ETR and 11.42% for contingent consideration payable to the seller related to the Linxon acquisition; and ii) the
expected future cash flows of Highway 407 ETR and Linxon.
30.
FINANCIAL INSTRUMENTS (CONTINUED)
Sensitivity analysis
These assumptions, not derived from an observable market, are established by the management of SNC-Lavalin using estimates
and judgments that can have a significant effect on net income.
The following impact on net income has been calculated changing one of these assumptions to another reasonably possible
alternative assumption for the year ended December 31, 2020:
CONTINGENT CONSIDERATION
RECEIVABLE FROM
THE ACQUIRER OF THE 10.01%
INTEREST IN HIGHWAY 407 ETR
CONTINGENT CONSIDERATION
PAYABLE TO THE SELLER
RELATED TO THE
LINXON ACQUISITION
IMPACT ON NET INCOME
Increase (decrease)
Increase (decrease)
Increase (decrease)
Increase (decrease)
If the discount rate is 100 basis points lower (1)
If the discount rate is 100 basis points higher (1)
If the expected future cash flows are 1% lower (1)
If the expected future cash flows are 1% higher (1)
$
$
$
$
— $
— $
— $
5,220 $
(936)
859
—
—
(1)
B)
Assuming all other variables remain the same
NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT
NATURE OF RISK
Credit risk
DESCRIPTION
Risk that SNC-Lavalin will incur a financial loss if the other party to a financial instrument fails to discharge an obligation. The
maximum exposure to credit risk for SNC-Lavalin at the end of a given period usually corresponds to the carrying amount of its
financial assets exposed to such risk, as presented in Note 30A.
Liquidity risk
Possibility that SNC-Lavalin will encounter difficulties in meeting the obligations associated with its financial liabilities
Market risk
Variability in the fair value or future cash flows of a financial instrument caused by a change in market prices in items such as currency
rates, interest rates and equity prices
CREDIT RISK
For SNC-Lavalin, credit risk arises from:
i) Cash and cash equivalents, and restricted cash, which are invested in liquid and high-grade financial instruments, based
on SNC-Lavalin’s investment policy.
ii) Derivative financial instruments with a favourable fair value, which contain an inherent credit risk relating to default
on obligations by the counterparty. This credit risk is reduced by entering into such contracts with high-grade financial
institutions, which are expected to satisfy their obligations under the contracts.
iii) Trade receivables, as detailed in Note 8A, and contract assets, as detailed in Note 8B. A given client may represent a
material portion of SNC-Lavalin’s consolidated revenues in any given year due to the size of a particular project and
the progress accomplished on such project.
The Company’s objective is to reduce credit risk by ensuring collection of its trade receivables on a timely basis. The
amounts of trade receivables presented in the consolidated statements of financial position are net of an allowance for
expected credit losses, estimated by the Company and based, in part, on the age of specific and aggregated receivable
balances, on the financial situation of specific customers and the current and expected collection trends. When
assessing the credit risk associated with its trade receivables, the Company also considers the other financial and non-
financial assets and liabilities recognized with the same customer or within the same project to provide additional
indications on the Company’s exposure to credit risk. As such, in addition to the age of its trade receivables, the
Company also considers the age of its contract assets, as well as the existence of any contract liabilities on the same
project or with the same customer.
In addition to providing for individual balances of trade receivables and other financial assets upon certain events, the
Company has an internal policy in place which requires to record, by default, an allowance on any trade receivable or
contract asset that has been outstanding longer than a specific threshold period, unless it can be demonstrated that the
recovery of such trade receivable is not at risk or only partially at risk, in which case the allowance is adjusted
accordingly. Moreover, the Company records an amount of additional expected credit losses on trade receivables and
contract assets for balances that are not provided for and for which no impairment indicator exist as at period end, but
for which it can be reasonably expected that credit losses might occur in the future. Such analysis incorporates the
Company’s past experience, adjusted as needed to better reflect anticipated conditions.
78
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
79
79
SNC-Lavalin 2020 Financial Report
30.
FINANCIAL INSTRUMENTS (CONTINUED)
30.
FINANCIAL INSTRUMENTS (CONTINUED)
Generally, trade receivables and contract assets are written off if they are no longer subject to enforcement activity. As
such, the amount of trade receivables and contract assets that have been written off but are still being pursued is
minimal.
The Company does not generally hold collateral as security.
iv) Other current financial assets, as detailed in Note 11, and other non-current financial assets, as detailed in Note 16. The
current portion of receivables under service concession arrangements is within normal terms of payment and there were
no significant amounts that were past due as at December 31, 2020 and 2019.
LIQUIDITY RISK
SNC-Lavalin monitors its liquidity risk arising from financial instruments on an ongoing basis by ensuring that it has access to
sufficient resources to meet its obligations.
The Company’s liquidity is generally provided by available cash and cash equivalents, cash generated from operations, credit
facilities and access to capital markets, as needed. Due to the nature of the Company’s activities, the fact that its operations are
conducted through multiple entities and joint operations and that it operates in many countries, the Company’s cash and cash
equivalents are distributed across numerous locations. In order to manage its cash needs and reserves, the Company is part of
various cash pooling agreements with financial institutions, may transfer cash balances between subsidiaries, joint arrangements
or investees and use credit facilities to meet the capital requirements of certain projects or other cash disbursements.
SNC-Lavalin’s consolidated statement of financial position included $457.2 million at December 31, 2020 (2019:
$482.4 million) of liabilities from Capital investments that are accounted for by the consolidation method. These liabilities,
which are non-recourse to the Company, are to be repaid by the Capital investments and are secured by the respective
concession’s assets, including $492.2 million of financial assets at December 31, 2020 (2019: $422.0 million), and by SNC-
Lavalin’s shares or units in such concession investments. As such, the actual book value at risk for SNC-Lavalin, assuming its
Capital investments accounted for by the consolidation method were unable to meet their obligations, corresponds to the
carrying amount invested in these entities.
SNC-Lavalin’s future principal payments on its short-term debt and long-term debt are presented in Note 20.
I) MATURITY ANALYSIS OF FINANCIAL LETTERS OF CREDIT
A draw on letters of credit or bank guarantees (Note 30C) by one or more third parties could, among other things, significantly
reduce the Company’s cash position and have a material adverse effect on its business and results of operations. The following
table presents a maturity analysis for the financial letters of credit outstanding as at December 31, 2020 and 2019:
MATURITY
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
DECEMBER 31
2020
DECEMBER 31
2019
$
41,985 $
201,802
59,240
450
57,269
521
$
101,675 $
259,592
II) MATURITY ANALYSIS OF TRADE PAYABLES AND ACCRUED LIABILITIES
As at December 31, 2020, 98% (2019: 99%) of the outstanding balance of “Trade payables and accrued liabilities” of $1,730.4
million (2019: $2,153.5 million) had a maturity of not later than 1 year.
MARKET RISK
I) CURRENCY RISK
SNC-Lavalin’s foreign currency risk arises from arrangements in currencies other than its reporting currency and from the net
assets (liabilities) of its foreign operations.
Foreign currency risk is managed by the Company by matching, when possible, the cash receipts in a foreign currency and the
cash disbursements in the same foreign currency, for revenue-generating projects in which foreign currencies are involved.
Derivative financial instruments with financial institutions, usually forward foreign exchange contracts, are also used to hedge
the cash flows in foreign currencies.
€
51,472
80,371
2021-2022
€
53,512
79,623
2020-2022
The following table summarizes the major forward foreign exchange contracts that were outstanding for which SNC-Lavalin
has committed to buy or sell foreign currencies:
AT DECEMBER 31, 2020
AT DECEMBER 31, 2019
BUY
SELL
MATURITY
BUY
SELL
MATURITY
US$
691,385
2021-2023
943,877
US$
721,956
2020-2023
CA$
CA$
US$
CA$
AU$
£
€
US$
CHF
906,041
23,322
361,387
204,887
47,088
227,287
10,827
68,022
30,068
€
14,844
2021-2023
461,795
2021-2022
£
120,000
45,444
387,786
13,206
2021
2021
2021
2021
CA$
CA$
CA$
CA$
US$
£
£
CA$
CA$
US$
CA$
AU$
£
€
13,205
248,518
213,508
58,787
131,344
57,765
€
8,593
2020-2022
327,226
2020-2022
CA$
CA$
CA$
CA$
US$
£
£
£
124,000
52,926
226,473
67,098
52,054
75,561
2020
2020
2020
2020
2020
INR
8,314,500
78,936
2021-2023
INR 5,305,000
2020-2021
50,847
2021
US$
CHF
97,621
46,503
US$
33,692
2021-2022
US$
48,208
2020-2021
As at December 31, 2020, the forward foreign exchange contracts used for hedging purposes by the Company had a net
favourable fair value of $28.7 million (2019: $1.7 million). The majority of the forward foreign exchange contracts that were
outstanding at that date were to either buy or sell foreign currencies against the Canadian dollar.
CURRENCY SENSITIVITY ANALYSIS
The following impact on equity for the year ended December 31, 2020 has been calculated from the Company’s net assets
(liabilities) denominated in US dollars, Saudi Arabian riyals and British pounds, from derivative financial instruments used to
hedge the exposure to US dollars, Saudi Arabian riyals and British pounds and from investments made in foreign operations.
Increase (decrease)
Increase (decrease)
10% appreciation in the Canadian dollar (1)
10% depreciation in the Canadian dollar (1)
$
$
(110,238) $
(9,689) $
(235,929)
110,238 $
9,689 $
235,929
CA$/US$ (2), (3)
CA$/SAR (2), (4)
IMPACT ON EQUITY
CA$/£ (2), (5)
(1)
(2)
(3)
(4)
(5)
Assuming all other variables remain the same
The Company’s exposure to other currencies is not significant.
Includes mainly $150.9 million of change in exchange differences on translating foreign operations
Includes mainly $10.1 million of change in exchange differences on translating foreign operations
Includes mainly $198.2 million of change in exchange differences on translating foreign operations
As at December 31, 2020, a 10% appreciation in the Canadian dollar relative to: i) the US dollar would increase the Company’s
net income by $9.0 million (10% depreciation in the Canadian dollar relative to the US dollar would decrease the Company’s
net income by $9.0 million); ii) the Saudi Arabian riyal would increase the Company’s net income by $0.4 million (10%
depreciation in the Canadian dollar relative to the Saudi Arabian riyal would decrease the Company’s net income by
$0.4 million); and iii) the British pound would decrease the Company’s net income by $2.8 million (10% depreciation in the
Canadian dollar relative to the British pound would increase the Company’s net income by $2.8 million).
Cash and cash equivalents, and restricted cash, usually involve limited interest rate risk due to their short-term nature.
II) INTEREST RATE RISK
NON-RECOURSE DEBT
Unlike PS&PM activities, Capital investments are often capital intensive due to the ownership of assets that are financed mainly
with project-specific debt, which is usually non-recourse to the general credit of the Company. These investments usually
reduce their exposure to interest rate risk by entering into fixed-rate financing arrangements or by hedging the variability of
interest rates through derivative financial instruments. Fixing interest rates provides a measure of stability and predictability to
the financing cash outflows of the Company’s Capital investments, which are usually structured to match the expected timing of
their cash inflows.
80
80
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
81
CA$
CA$
£
120,000
CA$
CA$
US$
13,205
248,518
461,795
2021-2022
45,444
387,786
13,206
CA$
CA$
US$
£
£
943,877
US$
721,956
2020-2023
80,371
2021-2022
€
53,512
78,936
2021-2023
INR 5,305,000
SELL
MATURITY
BUY
SELL
MATURITY
US$
691,385
2021-2023
€
14,844
2021-2023
2021
2021
2021
2021
CA$
AU$
£
€
213,508
58,787
131,344
57,765
BUY
CA$
CA$
US$
906,041
23,322
361,387
€
51,472
CA$
AU$
£
€
204,887
47,088
227,287
10,827
INR
8,314,500
US$
CHF
68,022
30,068
30.
FINANCIAL INSTRUMENTS (CONTINUED)
30.
FINANCIAL INSTRUMENTS (CONTINUED)
Generally, trade receivables and contract assets are written off if they are no longer subject to enforcement activity. As
such, the amount of trade receivables and contract assets that have been written off but are still being pursued is
The following table summarizes the major forward foreign exchange contracts that were outstanding for which SNC-Lavalin
has committed to buy or sell foreign currencies:
AT DECEMBER 31, 2020
AT DECEMBER 31, 2019
€
8,593
2020-2022
CA$
CA$
327,226
2020-2022
79,623
2020-2022
£
124,000
CA$
CA$
US$
£
£
52,926
226,473
67,098
52,054
75,561
2020
2020
2020
2020
2020-2021
2020
US$
48,208
2020-2021
minimal.
The Company does not generally hold collateral as security.
iv) Other current financial assets, as detailed in Note 11, and other non-current financial assets, as detailed in Note 16. The
current portion of receivables under service concession arrangements is within normal terms of payment and there were
no significant amounts that were past due as at December 31, 2020 and 2019.
LIQUIDITY RISK
sufficient resources to meet its obligations.
SNC-Lavalin monitors its liquidity risk arising from financial instruments on an ongoing basis by ensuring that it has access to
The Company’s liquidity is generally provided by available cash and cash equivalents, cash generated from operations, credit
facilities and access to capital markets, as needed. Due to the nature of the Company’s activities, the fact that its operations are
conducted through multiple entities and joint operations and that it operates in many countries, the Company’s cash and cash
equivalents are distributed across numerous locations. In order to manage its cash needs and reserves, the Company is part of
various cash pooling agreements with financial institutions, may transfer cash balances between subsidiaries, joint arrangements
or investees and use credit facilities to meet the capital requirements of certain projects or other cash disbursements.
SNC-Lavalin’s consolidated statement of financial position included $457.2 million at December 31, 2020 (2019:
$482.4 million) of liabilities from Capital investments that are accounted for by the consolidation method. These liabilities,
which are non-recourse to the Company, are to be repaid by the Capital investments and are secured by the respective
concession’s assets, including $492.2 million of financial assets at December 31, 2020 (2019: $422.0 million), and by SNC-
Lavalin’s shares or units in such concession investments. As such, the actual book value at risk for SNC-Lavalin, assuming its
Capital investments accounted for by the consolidation method were unable to meet their obligations, corresponds to the
carrying amount invested in these entities.
SNC-Lavalin’s future principal payments on its short-term debt and long-term debt are presented in Note 20.
I) MATURITY ANALYSIS OF FINANCIAL LETTERS OF CREDIT
A draw on letters of credit or bank guarantees (Note 30C) by one or more third parties could, among other things, significantly
reduce the Company’s cash position and have a material adverse effect on its business and results of operations. The following
table presents a maturity analysis for the financial letters of credit outstanding as at December 31, 2020 and 2019:
DECEMBER 31
DECEMBER 31
2020
2019
$
41,985 $
201,802
59,240
450
57,269
521
$
101,675 $
259,592
MATURITY
Not later than 1 year
Later than 5 years
Later than 1 year and not later than 5 years
MARKET RISK
I) CURRENCY RISK
II) MATURITY ANALYSIS OF TRADE PAYABLES AND ACCRUED LIABILITIES
As at December 31, 2020, 98% (2019: 99%) of the outstanding balance of “Trade payables and accrued liabilities” of $1,730.4
million (2019: $2,153.5 million) had a maturity of not later than 1 year.
SNC-Lavalin’s foreign currency risk arises from arrangements in currencies other than its reporting currency and from the net
assets (liabilities) of its foreign operations.
Foreign currency risk is managed by the Company by matching, when possible, the cash receipts in a foreign currency and the
cash disbursements in the same foreign currency, for revenue-generating projects in which foreign currencies are involved.
Derivative financial instruments with financial institutions, usually forward foreign exchange contracts, are also used to hedge
the cash flows in foreign currencies.
As at December 31, 2020, the forward foreign exchange contracts used for hedging purposes by the Company had a net
favourable fair value of $28.7 million (2019: $1.7 million). The majority of the forward foreign exchange contracts that were
outstanding at that date were to either buy or sell foreign currencies against the Canadian dollar.
CURRENCY SENSITIVITY ANALYSIS
The following impact on equity for the year ended December 31, 2020 has been calculated from the Company’s net assets
(liabilities) denominated in US dollars, Saudi Arabian riyals and British pounds, from derivative financial instruments used to
hedge the exposure to US dollars, Saudi Arabian riyals and British pounds and from investments made in foreign operations.
Increase (decrease)
Increase (decrease)
10% appreciation in the Canadian dollar (1)
10% depreciation in the Canadian dollar (1)
$
$
(110,238) $
(9,689) $
(235,929)
110,238 $
9,689 $
235,929
CA$/US$ (2), (3)
CA$/SAR (2), (4)
IMPACT ON EQUITY
CA$/£ (2), (5)
(1)
(2)
(3)
(4)
(5)
Assuming all other variables remain the same
The Company’s exposure to other currencies is not significant.
Includes mainly $150.9 million of change in exchange differences on translating foreign operations
Includes mainly $10.1 million of change in exchange differences on translating foreign operations
Includes mainly $198.2 million of change in exchange differences on translating foreign operations
As at December 31, 2020, a 10% appreciation in the Canadian dollar relative to: i) the US dollar would increase the Company’s
net income by $9.0 million (10% depreciation in the Canadian dollar relative to the US dollar would decrease the Company’s
net income by $9.0 million); ii) the Saudi Arabian riyal would increase the Company’s net income by $0.4 million (10%
depreciation in the Canadian dollar relative to the Saudi Arabian riyal would decrease the Company’s net income by
$0.4 million); and iii) the British pound would decrease the Company’s net income by $2.8 million (10% depreciation in the
Canadian dollar relative to the British pound would increase the Company’s net income by $2.8 million).
II) INTEREST RATE RISK
Cash and cash equivalents, and restricted cash, usually involve limited interest rate risk due to their short-term nature.
NON-RECOURSE DEBT
Unlike PS&PM activities, Capital investments are often capital intensive due to the ownership of assets that are financed mainly
with project-specific debt, which is usually non-recourse to the general credit of the Company. These investments usually
reduce their exposure to interest rate risk by entering into fixed-rate financing arrangements or by hedging the variability of
interest rates through derivative financial instruments. Fixing interest rates provides a measure of stability and predictability to
the financing cash outflows of the Company’s Capital investments, which are usually structured to match the expected timing of
their cash inflows.
80
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
81
81
US$
CHF
97,621
46,503
US$
33,692
2021-2022
50,847
2021
SNC-Lavalin 2020 Financial Report
30.
FINANCIAL INSTRUMENTS (CONTINUED)
31.
CAPITAL MANAGEMENT
In 2020 and 2019, a subsidiary of the Company from PS&PM activities issued senior secured notes to finance certain long-term
assets associated to a BOO (Build-Own-Operate) contract. The senior secured notes bear interest at a variable rate which
exposes the Company to interest rate risk. Also, in relation to the acquisition of Linxon by SNC-Lavalin in 2018, the holder of
non-controlling interest of 49% in Linxon granted an interest-free loan and provided a working capital revolving credit facility
to Linxon. The working capital revolving credit facility bears interest at a variable rate which exposes the Company to the
interest rate risk.
LIMITED RECOURSE DEBT
SNC-Lavalin’s limited recourse debt bears interest at a variable rate which exposes the Company to the interest rate risk.
RECOURSE DEBT
SNC-Lavalin’s recourse short-term debt bears interest at a variable rate which exposes the Company to interest rate risk.
Certain of SNC-Lavalin’s debentures bear interest at a fixed rate and are measured at amortized cost; therefore, the Company’s
net income is not exposed to a change in interest rates on these financial liabilities.
SNC-Lavalin’s Term Loan and the Series 3 Debentures bear interest at a variable rate which exposes the Company to interest
rate risk.
INTEREST RATE SWAP
TransitNEXT General Partnership (see Note 5A) entered into an interest rate swap agreement with financial institutions related
to its credit facility in the aggregate maximum principal amount of $149.0 million, which bears interest at a rate of CDOR plus
an applicable margin, to hedge the variability of the interest rate. Under the interest rate swap agreement, TransitNEXT pays
interest at a fixed rate and receives interest at a rate of CDOR. The interest rate swap agreement expires in August 2022. This
hedge is classified as a cash flow hedge.
INTEREST RATE SENSITIVTY ANALYSIS
For floating rate debt, the analysis is prepared assuming the amount of the debt outstanding at the end of the reporting period
was outstanding for the whole year. A 1% (100 basis points) increase or decrease is used when reporting interest rate risk
internally to key management personnel and represents management’s assessment of the reasonably possible change in interest
rates.
If interest rates had been 1% higher/lower than the base rate and all other variables were held constant, the Company’s net
income for the year ended December 31, 2020 would decrease/increase by $8.9 million. This is mainly attributable to the
Company’s exposure to interest rates on its variable rate borrowings.
The Company’s sensitivity to interest rates has decreased in 2020 mainly due to repayment of certain variable rate debt
instruments.
The Company’s Revolving Facility and Term Loan are committed and subject to affirmative, negative and financial covenants,
including a requirement to maintain at all times, on a rolling 12-month basis, a net recourse debt to EBITDA ratio, as defined in
III) EQUITY PRICE RISK
the Credit Agreement, not exceeding a certain limit.
SNC-Lavalin limits its exposure arising from the share unit plans caused by fluctuations in its share price, through financial
arrangements with investment high-grade financial institutions described in Note 23C.
The terms “net recourse debt” and “EBITDA” are defined in the Credit Agreement and do not correspond to the Company’s
metrics as presented above and/or to the specific terms used in the Company’s Management’s Discussion and Analysis for the
IV) COMMODITY PRICE RISK
In 2019, the Company entered into a copper commodity swap agreement with a financial institution related to its standardized
EPC contracts for power substations executed through its Linxon subsidiary to hedge the variability of the copper price. The
copper commodity agreement was for 1,308 metric tons at an average price of US$5,805 (approximately CA$7,617) per metric
ton with gradual settlement dates until September 2020. This hedge was classified as a cash flow hedge.
C)
LETTERS OF CREDIT
Under certain circumstances, SNC-Lavalin provides bank letters of credit as collateral for the fulfillment of contractual
obligations, including guarantees for performance, advance payments, contractual retentions and bid bonds. The amount
outstanding under certain letters of credit decreases in relation to the percentage of completion of projects. As at
December 31, 2020, SNC-Lavalin had outstanding letters of credit of $1,700.8 million (2019: $2,067.0 million).
82
82
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
83
SNC-Lavalin’s main objective when managing its capital is to maintain an adequate balance between: i) having sufficient
capital for financing net asset positions, maintaining satisfactory bank lines of credit and capacity to absorb project net retained
risks, while at the same time, ii) maximizing return on equity.
The Company defines its capital as its equity attributable to SNC-Lavalin shareholders excluding other components of equity
plus its recourse debt. The Company excludes other components of equity from its definition of capital because this element of
equity results in part from the translation into Canadian dollars of its foreign operations having a different functional currency,
and from the accounting treatment of cash flow hedges, including its accumulated share of other comprehensive income of
investments accounted for by the equity method. These amounts are not representative of the way the Company evaluates the
management of its foreign currency risk and interest risk. Accordingly, the other components of equity are not representative of
the Company’s financial position.
The Company does not consider non-recourse and limited recourse debt when monitoring its capital because such debt results
from the consolidation of certain PS&PM investments and Capital investments or holding entities held by the Company. As
such, the lenders of such debt do not have recourse to the general credit of the Company, but rather to the specific assets of the
PS&PM investments and Capital investments or investment in Capital investments they finance. The Company’s investments
and underlying assets in its PS&PM investments and Capital investments accounted for by the consolidation or equity methods
may be at risk, if such investments or holding entities were to be unable to repay their long-term debt.
The Company’s capital for the years ended December 31, 2020 and 2019 was as follows:
Equity attributable to SNC-Lavalin shareholders
Less: Other components of equity
Less: Other components of equity of disposal groups classified as held for sale
Plus: Recourse debt
Total amount of capital
the Company.
indentures related thereto.
The Company has paid quarterly dividends for 31 consecutive years. Dividend policy is determined by the Board of Directors of
COVENANTS ON RECOURSE AND LIMITED RECOURSE DEBT
The Company’s unsecured recourse debentures are subject to affirmative and negative covenants, as defined in the underlying
DECEMBER 31
2020
DECEMBER 31
2019
$
2,557,505 $
(320,067)
594,141
1,170,965
$
3,454,396 $
3,715,006
354,073
—
1,172,663
4,533,596
year ended December 31, 2020.
Agreement.
The CDPQ Loan is subject to affirmative and negative covenants, as well as financial covenants, notably not to exceed, on a
rolling 12-month and consolidated basis, a maximum net recourse debt to EBITDA ratio, as defined under the CDPQ Loan
In case of an event of default, the Company’s debentures, the Revolving Facility, the Term Loan and the CDPQ Loan are
subject to customary accelerated repayment terms.
In 2020, the Company complied with all of the covenants, as amended from time to time, related to its debentures, Revolving
Facility, Term Loan and CDPQ Loan.
30.
FINANCIAL INSTRUMENTS (CONTINUED)
31.
CAPITAL MANAGEMENT
In 2020 and 2019, a subsidiary of the Company from PS&PM activities issued senior secured notes to finance certain long-term
assets associated to a BOO (Build-Own-Operate) contract. The senior secured notes bear interest at a variable rate which
exposes the Company to interest rate risk. Also, in relation to the acquisition of Linxon by SNC-Lavalin in 2018, the holder of
non-controlling interest of 49% in Linxon granted an interest-free loan and provided a working capital revolving credit facility
to Linxon. The working capital revolving credit facility bears interest at a variable rate which exposes the Company to the
interest rate risk.
LIMITED RECOURSE DEBT
RECOURSE DEBT
rate risk.
INTEREST RATE SWAP
SNC-Lavalin’s limited recourse debt bears interest at a variable rate which exposes the Company to the interest rate risk.
SNC-Lavalin’s recourse short-term debt bears interest at a variable rate which exposes the Company to interest rate risk.
Certain of SNC-Lavalin’s debentures bear interest at a fixed rate and are measured at amortized cost; therefore, the Company’s
net income is not exposed to a change in interest rates on these financial liabilities.
SNC-Lavalin’s Term Loan and the Series 3 Debentures bear interest at a variable rate which exposes the Company to interest
TransitNEXT General Partnership (see Note 5A) entered into an interest rate swap agreement with financial institutions related
to its credit facility in the aggregate maximum principal amount of $149.0 million, which bears interest at a rate of CDOR plus
an applicable margin, to hedge the variability of the interest rate. Under the interest rate swap agreement, TransitNEXT pays
interest at a fixed rate and receives interest at a rate of CDOR. The interest rate swap agreement expires in August 2022. This
hedge is classified as a cash flow hedge.
INTEREST RATE SENSITIVTY ANALYSIS
For floating rate debt, the analysis is prepared assuming the amount of the debt outstanding at the end of the reporting period
was outstanding for the whole year. A 1% (100 basis points) increase or decrease is used when reporting interest rate risk
internally to key management personnel and represents management’s assessment of the reasonably possible change in interest
rates.
If interest rates had been 1% higher/lower than the base rate and all other variables were held constant, the Company’s net
income for the year ended December 31, 2020 would decrease/increase by $8.9 million. This is mainly attributable to the
Company’s exposure to interest rates on its variable rate borrowings.
The Company’s sensitivity to interest rates has decreased in 2020 mainly due to repayment of certain variable rate debt
instruments.
III) EQUITY PRICE RISK
IV) COMMODITY PRICE RISK
SNC-Lavalin limits its exposure arising from the share unit plans caused by fluctuations in its share price, through financial
arrangements with investment high-grade financial institutions described in Note 23C.
In 2019, the Company entered into a copper commodity swap agreement with a financial institution related to its standardized
EPC contracts for power substations executed through its Linxon subsidiary to hedge the variability of the copper price. The
copper commodity agreement was for 1,308 metric tons at an average price of US$5,805 (approximately CA$7,617) per metric
ton with gradual settlement dates until September 2020. This hedge was classified as a cash flow hedge.
C)
LETTERS OF CREDIT
Under certain circumstances, SNC-Lavalin provides bank letters of credit as collateral for the fulfillment of contractual
obligations, including guarantees for performance, advance payments, contractual retentions and bid bonds. The amount
outstanding under certain letters of credit decreases in relation to the percentage of completion of projects. As at
December 31, 2020, SNC-Lavalin had outstanding letters of credit of $1,700.8 million (2019: $2,067.0 million).
SNC-Lavalin’s main objective when managing its capital is to maintain an adequate balance between: i) having sufficient
capital for financing net asset positions, maintaining satisfactory bank lines of credit and capacity to absorb project net retained
risks, while at the same time, ii) maximizing return on equity.
The Company defines its capital as its equity attributable to SNC-Lavalin shareholders excluding other components of equity
plus its recourse debt. The Company excludes other components of equity from its definition of capital because this element of
equity results in part from the translation into Canadian dollars of its foreign operations having a different functional currency,
and from the accounting treatment of cash flow hedges, including its accumulated share of other comprehensive income of
investments accounted for by the equity method. These amounts are not representative of the way the Company evaluates the
management of its foreign currency risk and interest risk. Accordingly, the other components of equity are not representative of
the Company’s financial position.
The Company does not consider non-recourse and limited recourse debt when monitoring its capital because such debt results
from the consolidation of certain PS&PM investments and Capital investments or holding entities held by the Company. As
such, the lenders of such debt do not have recourse to the general credit of the Company, but rather to the specific assets of the
PS&PM investments and Capital investments or investment in Capital investments they finance. The Company’s investments
and underlying assets in its PS&PM investments and Capital investments accounted for by the consolidation or equity methods
may be at risk, if such investments or holding entities were to be unable to repay their long-term debt.
The Company’s capital for the years ended December 31, 2020 and 2019 was as follows:
Equity attributable to SNC-Lavalin shareholders
Less: Other components of equity
Less: Other components of equity of disposal groups classified as held for sale
Plus: Recourse debt
Total amount of capital
DECEMBER 31
2020
DECEMBER 31
2019
$
2,557,505 $
(320,067)
594,141
1,170,965
$
3,454,396 $
3,715,006
354,073
—
1,172,663
4,533,596
The Company has paid quarterly dividends for 31 consecutive years. Dividend policy is determined by the Board of Directors of
the Company.
COVENANTS ON RECOURSE AND LIMITED RECOURSE DEBT
The Company’s unsecured recourse debentures are subject to affirmative and negative covenants, as defined in the underlying
indentures related thereto.
The Company’s Revolving Facility and Term Loan are committed and subject to affirmative, negative and financial covenants,
including a requirement to maintain at all times, on a rolling 12-month basis, a net recourse debt to EBITDA ratio, as defined in
the Credit Agreement, not exceeding a certain limit.
The terms “net recourse debt” and “EBITDA” are defined in the Credit Agreement and do not correspond to the Company’s
metrics as presented above and/or to the specific terms used in the Company’s Management’s Discussion and Analysis for the
year ended December 31, 2020.
The CDPQ Loan is subject to affirmative and negative covenants, as well as financial covenants, notably not to exceed, on a
rolling 12-month and consolidated basis, a maximum net recourse debt to EBITDA ratio, as defined under the CDPQ Loan
Agreement.
In case of an event of default, the Company’s debentures, the Revolving Facility, the Term Loan and the CDPQ Loan are
subject to customary accelerated repayment terms.
In 2020, the Company complied with all of the covenants, as amended from time to time, related to its debentures, Revolving
Facility, Term Loan and CDPQ Loan.
82
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
83
83
SNC-Lavalin 2020 Financial Report
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-
EMPLOYMENT BENEFITS
BENEFITS (CONTINUED)
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
A)
PENSION PLANS
SNC-Lavalin has defined contribution and defined benefit pension plans. The total cash amount paid by SNC-Lavalin for its
pension plans, consisting of contributions to its defined contribution and defined benefit pension plans, was $248.8 million in
2020 (2019: $228.4 million).
DEFINED CONTRIBUTION PENSION PLANS
SNC-Lavalin’s contributions to its defined contribution plans are recorded as expenses in the year in which they are incurred
and totaled $170.4 million in 2020 (2019: $153.3 million).
DEFINED BENEFIT PENSION PLANS
SNC-Lavalin has a number of defined benefit pension plans, which are mostly closed to new entrants, and that provide pension
benefits based on length of service and final pensionable earnings. An individual actuarial valuation is performed at least every
three years for all the plans. The measurement date used for the benefit obligation and plan assets is December 31 of each year.
All of SNC-Lavalin’s defined benefit pension plans are partly funded, except for two plans, of which one plan is unfunded and
one plan is secured by a letter of credit.
The defined benefit plans are administered by committees composed of a number of representatives from employer’s
representatives, active employees, inactive employees and independent members. Members of the committees are required by
law and by their articles of association to act in the best interest of the pension plans and all their relevant stakeholders, i.e.
active employees, inactive employees, retirees and employers. The pension plan committees are responsible for the investment
policy with regard to the assets of the pension plans, which are held by a trustee legally separated from SNC-Lavalin.
SNC-Lavalin’s defined benefit pension plans typically expose the Company to actuarial risks such as: investment risk, interest
rate risk, compensation risk and longevity risk.
NATURE OF RISK
Investment risk
Interest risk
Compensation risk
Longevity risk
DESCRIPTION
The present value of the defined benefit pension plan obligation is calculated using a discount rate determined by reference to
high quality corporate bond yields; if the return on the plans’ assets is below this rate, it will create a plan deficit.
A decrease in the bond interest rate will increase the plans’ liabilities; however, this will be partially offset by an increase in the
return on the plans’ debt securities.
The present value of the defined benefit pension plan obligation is calculated by reference to the final pensionable earnings of
the plans’ participants.
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of the plans’
participants both during and after their employment. An increase in the life expectancy of the plans’ participants will increase
the plans’ liability.
The two main defined benefit pension plans of the Company are the Atkins Pension Plan and the U.K. Railways Pension
Scheme (the “Railways Pension Scheme”), both of which are funded final salary schemes in the U.K. The latest actuarial
valuations were performed on March 31, 2019 for the Atkins Pension Plan and on December 31, 2016 for the Railways Pension
Scheme.
The following tables set forth the change in pension benefit obligation and pension plan assets, as well as the funded status of
SNC-Lavalin’s defined benefit pension plans:
Actuarial losses arising from changes in financial assumptions
485,528
126,241
Pension benefit obligation at beginning of year
$ 3,073,604 $
703,654 $
306,073 $
4,083,331
Fair value of pension plan assets at beginning of year
$ 2,845,134 $
527,527 $
276,560 $
3,649,221
57,273
10,491
5,299
73,063
YEAR ENDED DECEMBER 31, 2020
Change in pension benefit obligation:
Current service cost
Interest cost
Past service cost (1)
Benefits paid
Remeasurement:
assumptions
Contributions by plan participants
Actuarial gains arising from changes in demographic
Actuarial gains arising from experience adjustments
Effect of foreign currency exchange differences
Pension benefit obligation at end of year
Change in pension plan assets:
Interest income
Remeasurement:
Administration costs
Benefits paid
Contributions by the employer
Contributions by plan participants
Return on plan assets (excluding interest income)
Effect of foreign currency exchange differences
Fair value of pension plan assets at end of year
AT DECEMBER 31, 2020
position:
Funded status reflected in the statement of financial
Present value of pension benefit obligation
Fair value of pension plan assets
Net accrued pension benefit liability
Presented on the statement of financial position as follows:
Other non-current non-financial assets (Note 17)
Non-current portion of provisions
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
172
61,228
3,994
3,784
14,103
—
2,074
5,872
(1,577)
6,030
81,203
2,417
(110,590)
(23,047)
(29,379)
(163,016)
—
1,720
552
2,272
(54,005)
(22,187)
(78,084)
(12,211)
71,019
16,498
(921)
32,252
(3,964)
10,141
(77,113)
644,021
(94,259)
97,658
$ 3,452,866 $
808,555 $
321,123 $
4,582,544
314,226
—
26,142
(1,376)
20,970
(329)
361,338
(1,705)
(110,590)
(23,047)
(29,379)
(163,016)
63,464
—
6,192
1,720
66,281
11,771
8,707
552
9,116
78,363
2,272
87,168
$ 3,235,788 $
559,420 $
291,496 $
4,086,704
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$ 3,452,866 $
808,555 $
321,123 $
4,582,544
3,235,788
559,420
291,496
4,086,704
$
217,078 $
249,135 $
29,627 $
495,840
$
$
8,327
504,167
(1) Relates to November 20, 2020 U.K. High Court ruling for the Atkins Pension Plan (see Note 3)
84
84
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
85
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-
EMPLOYMENT BENEFITS
A)
PENSION PLANS
2020 (2019: $228.4 million).
DEFINED CONTRIBUTION PENSION PLANS
and totaled $170.4 million in 2020 (2019: $153.3 million).
DEFINED BENEFIT PENSION PLANS
SNC-Lavalin has defined contribution and defined benefit pension plans. The total cash amount paid by SNC-Lavalin for its
pension plans, consisting of contributions to its defined contribution and defined benefit pension plans, was $248.8 million in
SNC-Lavalin’s contributions to its defined contribution plans are recorded as expenses in the year in which they are incurred
SNC-Lavalin has a number of defined benefit pension plans, which are mostly closed to new entrants, and that provide pension
benefits based on length of service and final pensionable earnings. An individual actuarial valuation is performed at least every
three years for all the plans. The measurement date used for the benefit obligation and plan assets is December 31 of each year.
All of SNC-Lavalin’s defined benefit pension plans are partly funded, except for two plans, of which one plan is unfunded and
one plan is secured by a letter of credit.
The defined benefit plans are administered by committees composed of a number of representatives from employer’s
representatives, active employees, inactive employees and independent members. Members of the committees are required by
law and by their articles of association to act in the best interest of the pension plans and all their relevant stakeholders, i.e.
active employees, inactive employees, retirees and employers. The pension plan committees are responsible for the investment
policy with regard to the assets of the pension plans, which are held by a trustee legally separated from SNC-Lavalin.
SNC-Lavalin’s defined benefit pension plans typically expose the Company to actuarial risks such as: investment risk, interest
rate risk, compensation risk and longevity risk.
NATURE OF RISK
Investment risk
DESCRIPTION
Compensation risk
The present value of the defined benefit pension plan obligation is calculated by reference to the final pensionable earnings of
Longevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of the plans’
participants both during and after their employment. An increase in the life expectancy of the plans’ participants will increase
return on the plans’ debt securities.
the plans’ participants.
the plans’ liability.
The two main defined benefit pension plans of the Company are the Atkins Pension Plan and the U.K. Railways Pension
Scheme (the “Railways Pension Scheme”), both of which are funded final salary schemes in the U.K. The latest actuarial
valuations were performed on March 31, 2019 for the Atkins Pension Plan and on December 31, 2016 for the Railways Pension
Scheme.
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
The following tables set forth the change in pension benefit obligation and pension plan assets, as well as the funded status of
SNC-Lavalin’s defined benefit pension plans:
YEAR ENDED DECEMBER 31, 2020
Change in pension benefit obligation:
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
Pension benefit obligation at beginning of year
$ 3,073,604 $
703,654 $
306,073 $
4,083,331
Current service cost
Interest cost
Past service cost (1)
Benefits paid
Contributions by plan participants
Remeasurement:
172
61,228
3,994
3,784
14,103
—
2,074
5,872
(1,577)
6,030
81,203
2,417
(110,590)
(23,047)
(29,379)
(163,016)
—
1,720
552
2,272
Actuarial gains arising from changes in demographic
assumptions
(54,005)
(22,187)
Actuarial losses arising from changes in financial assumptions
485,528
126,241
(78,084)
(12,211)
71,019
16,498
(921)
32,252
(3,964)
10,141
(77,113)
644,021
(94,259)
97,658
$ 3,452,866 $
808,555 $
321,123 $
4,582,544
Actuarial gains arising from experience adjustments
Effect of foreign currency exchange differences
Pension benefit obligation at end of year
Change in pension plan assets:
Fair value of pension plan assets at beginning of year
$ 2,845,134 $
527,527 $
276,560 $
3,649,221
The present value of the defined benefit pension plan obligation is calculated using a discount rate determined by reference to
high quality corporate bond yields; if the return on the plans’ assets is below this rate, it will create a plan deficit.
Interest income
Remeasurement:
Interest risk
A decrease in the bond interest rate will increase the plans’ liabilities; however, this will be partially offset by an increase in the
Return on plan assets (excluding interest income)
Administration costs
Benefits paid
Contributions by the employer
Contributions by plan participants
Effect of foreign currency exchange differences
Fair value of pension plan assets at end of year
AT DECEMBER 31, 2020
Funded status reflected in the statement of financial
position:
Present value of pension benefit obligation
Fair value of pension plan assets
Net accrued pension benefit liability
Presented on the statement of financial position as follows:
Other non-current non-financial assets (Note 17)
Non-current portion of provisions
57,273
10,491
5,299
73,063
314,226
—
26,142
(1,376)
20,970
(329)
361,338
(1,705)
(110,590)
(23,047)
(29,379)
(163,016)
63,464
—
6,192
1,720
66,281
11,771
8,707
552
9,116
78,363
2,272
87,168
$ 3,235,788 $
559,420 $
291,496 $
4,086,704
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$ 3,452,866 $
808,555 $
321,123 $
4,582,544
3,235,788
559,420
291,496
4,086,704
$
217,078 $
249,135 $
29,627 $
495,840
$
$
8,327
504,167
84
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
85
85
(1) Relates to November 20, 2020 U.K. High Court ruling for the Atkins Pension Plan (see Note 3)
SNC-Lavalin 2020 Financial Report
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
The following tables set forth the change in pension benefit obligation and pension plan assets, as well as the funded status of
SNC-Lavalin’s defined benefit pension plans:
YEAR ENDED DECEMBER 31, 2019
Change in pension benefit obligation:
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
Pension benefit obligation at beginning of year
$ 2,810,839 $
646,364 $
288,948 $
3,746,151
Current service cost
Interest cost
Past service cost
Benefits paid
Contributions by plan participants
Remeasurement:
169
75,882
—
4,065
17,446
—
1,027
7,431
(478)
5,261
100,759
(478)
(112,468)
(24,221)
(13,198)
(149,887)
—
2,710
425
3,135
YEAR ENDED DECEMBER 31, 2019
Components of benefit pension costs recognized in net income
$
8,121 $
8,772 $
1,399 $
18,292
(1) Relates to November 20, 2020 U.K. High Court ruling for the Atkins pension plan (see Note 3)
Actuarial gains arising from changes in demographic
assumptions
Actuarial losses arising from changes in financial assumptions
Actuarial losses arising from experience adjustments
Effect of foreign currency exchange differences
(11,179)
267,790
68,091
(25,520)
(678)
62,163
1,694
(5,889)
(847)
28,818
1,710
(7,763)
(12,704)
358,771
71,495
(39,172)
Pension benefit obligation at end of year
$ 3,073,604 $
703,654 $
306,073 $
4,083,331
Change in pension plan assets:
Fair value of pension plan assets at beginning of year
$ 2,520,543 $
489,508 $
283,036 $
3,293,087
Interest income
Remeasurement:
Return on plan assets (excluding interest income)
Administration costs
Benefits paid
Contributions by the employer
Contributions by plan participants
Effect of foreign currency exchange differences
68,768
13,211
7,493
89,472
329,464
45,908
—
(847)
(1,744)
(278)
373,628
(1,125)
(112,468)
(24,221)
(13,198)
(149,887)
61,146
—
(22,319)
5,759
2,710
(4,501)
8,195
425
(7,369)
75,100
3,135
(34,189)
Fair value of pension plan assets at end of year
$ 2,845,134 $
527,527 $
276,560 $
3,649,221
AT DECEMBER 31, 2019
Funded status reflected in the statement of financial position:
Present value of pension benefit obligation
Fair value of pension plan assets
Net accrued pension benefit liability
Presented on the statement of financial position as follows:
Other non-current non-financial assets (Note 17)
Non-current portion of provisions
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$ 3,073,604 $
703,654 $
306,073 $
4,083,331
2,845,134
527,527
276,560
3,649,221
$
228,470 $
176,127 $
29,513 $
434,110
$
$
10,979
445,089
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
SNC-Lavalin’s net defined benefit pension costs recognized in net income were comprised of:
YEAR ENDED DECEMBER 31, 2020
Current service cost
Net interest expense
Administration costs
Past service cost (1)
Current service cost
Net interest expense
Administration costs
Past service cost
$
172 $
3,784 $
2,074 $
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
3,955
—
3,994
3,612
1,376
—
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
7,114
—
—
4,235
847
—
OTHER
PLANS
573
329
(1,577)
OTHER
PLANS
33
278
(478)
TOTAL
6,030
8,140
1,705
2,417
TOTAL
5,261
11,382
1,125
(478)
$
169 $
4,065 $
1,027 $
Components of benefit pension costs recognized in net income
$
7,283 $
9,147 $
860 $
17,290
SNC-Lavalin’s net defined benefit pension costs recognized in other comprehensive income were comprised of:
YEAR ENDED DECEMBER 31, 2020
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding interest income)
Actuarial losses arising from changes in financial assumptions
Actuarial gains arising from experience adjustments
Components of benefit pension costs recognized in other
comprehensive income
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
(314,226) $
(26,142) $
(20,970) $
(361,338)
485,528
126,241
(78,084)
(12,211)
(921)
32,252
(3,964)
(77,113)
644,021
(94,259)
$
39,213 $
65,701 $
6,397 $
111,311
Actuarial gains arising from changes in demographic assumptions
(54,005)
(22,187)
YEAR ENDED DECEMBER 31, 2019
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding interest income)
Actuarial gains arising from changes in demographic assumptions
Actuarial losses arising from changes in financial assumptions
Actuarial losses arising from experience adjustments
Variation in liability due to minimum funding requirements
Components of (reversal of) benefit pension costs recognized in
other comprehensive income
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
(329,464) $
(45,908) $
1,744 $
(373,628)
(11,179)
267,790
68,091
—
(678)
62,163
1,694
—
(847)
28,818
1,710
(2,853)
(12,704)
358,771
71,495
(2,853)
$
(4,762) $
17,271 $
28,572 $
41,081
SNC-Lavalin expects to make contributions of $82.1 million in 2021 to its defined benefit pension plans.
86
86
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
87
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
The following tables set forth the change in pension benefit obligation and pension plan assets, as well as the funded status of
SNC-Lavalin’s net defined benefit pension costs recognized in net income were comprised of:
YEAR ENDED DECEMBER 31, 2020
Current service cost
Net interest expense
Administration costs
Past service cost (1)
Components of benefit pension costs recognized in net income
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
$
172 $
3,784 $
2,074 $
3,955
—
3,994
3,612
1,376
—
573
329
(1,577)
TOTAL
6,030
8,140
1,705
2,417
$
8,121 $
8,772 $
1,399 $
18,292
(1) Relates to November 20, 2020 U.K. High Court ruling for the Atkins pension plan (see Note 3)
YEAR ENDED DECEMBER 31, 2019
Current service cost
Net interest expense
Administration costs
Past service cost
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
$
169 $
4,065 $
1,027 $
7,114
—
—
4,235
847
—
33
278
(478)
TOTAL
5,261
11,382
1,125
(478)
Components of benefit pension costs recognized in net income
$
7,283 $
9,147 $
860 $
17,290
SNC-Lavalin’s net defined benefit pension costs recognized in other comprehensive income were comprised of:
YEAR ENDED DECEMBER 31, 2020
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding interest income)
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
(314,226) $
(26,142) $
(20,970) $
(361,338)
Pension benefit obligation at beginning of year
$ 2,810,839 $
646,364 $
288,948 $
3,746,151
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
169
75,882
—
4,065
17,446
—
1,027
7,431
(478)
5,261
100,759
(478)
(112,468)
(24,221)
(13,198)
(149,887)
—
2,710
425
3,135
Actuarial gains arising from changes in demographic
Actuarial losses arising from changes in financial assumptions
Actuarial losses arising from experience adjustments
Effect of foreign currency exchange differences
(11,179)
267,790
68,091
(25,520)
(678)
62,163
1,694
(5,889)
(847)
28,818
1,710
(7,763)
(12,704)
358,771
71,495
(39,172)
Pension benefit obligation at end of year
$ 3,073,604 $
703,654 $
306,073 $
4,083,331
Fair value of pension plan assets at beginning of year
$ 2,520,543 $
489,508 $
283,036 $
3,293,087
BENEFITS (CONTINUED)
SNC-Lavalin’s defined benefit pension plans:
YEAR ENDED DECEMBER 31, 2019
Change in pension benefit obligation:
Current service cost
Interest cost
Past service cost
Benefits paid
Remeasurement:
assumptions
Contributions by plan participants
Change in pension plan assets:
Interest income
Remeasurement:
Return on plan assets (excluding interest income)
Administration costs
Benefits paid
Contributions by the employer
Contributions by plan participants
Effect of foreign currency exchange differences
68,768
13,211
7,493
89,472
(112,468)
(24,221)
(13,198)
(149,887)
329,464
45,908
—
(847)
61,146
—
(22,319)
5,759
2,710
(4,501)
(1,744)
(278)
8,195
425
(7,369)
373,628
(1,125)
75,100
3,135
(34,189)
Fair value of pension plan assets at end of year
$ 2,845,134 $
527,527 $
276,560 $
3,649,221
AT DECEMBER 31, 2019
Funded status reflected in the statement of financial position:
Present value of pension benefit obligation
Fair value of pension plan assets
Net accrued pension benefit liability
Presented on the statement of financial position as follows:
Other non-current non-financial assets (Note 17)
Non-current portion of provisions
$ 3,073,604 $
703,654 $
306,073 $
4,083,331
2,845,134
527,527
276,560
3,649,221
$
228,470 $
176,127 $
29,513 $
434,110
$
$
10,979
445,089
SNC-Lavalin expects to make contributions of $82.1 million in 2021 to its defined benefit pension plans.
86
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
87
87
YEAR ENDED DECEMBER 31, 2019
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding interest income)
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
(329,464) $
(45,908) $
1,744 $
(373,628)
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
Actuarial gains arising from changes in demographic assumptions
Actuarial losses arising from changes in financial assumptions
(11,179)
267,790
68,091
—
(678)
62,163
1,694
—
(847)
28,818
1,710
(2,853)
(12,704)
358,771
71,495
(2,853)
Actuarial losses arising from experience adjustments
Variation in liability due to minimum funding requirements
Components of (reversal of) benefit pension costs recognized in
other comprehensive income
(54,005)
(22,187)
485,528
126,241
(78,084)
(12,211)
(921)
32,252
(3,964)
(77,113)
644,021
(94,259)
Actuarial gains arising from experience adjustments
Components of benefit pension costs recognized in other
comprehensive income
Actuarial gains arising from changes in demographic assumptions
Actuarial losses arising from changes in financial assumptions
$
39,213 $
65,701 $
6,397 $
111,311
$
(4,762) $
17,271 $
28,572 $
41,081
SNC-Lavalin 2020 Financial Report
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
The following tables present the fair value of the major categories of assets of SNC-Lavalin’s defined benefit pension plans:
The following is a summary of significant weighted average assumptions used in measuring SNC-Lavalin’s accrued pension
AT DECEMBER 31, 2020
Asset category
Equity securities
Debt securities
Other (1)
Total
AT DECEMBER 31, 2019
Asset category
Equity securities
Debt securities
Other (1)
Total
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
739,564 $
229,448 $
44,284 $
2,012,764
483,460
226,834
103,138
175,067
72,145
1,013,296
2,414,665
658,743
$
3,235,788 $
559,420 $
291,496 $
4,086,704
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
676,885 $
224,208 $
32,841 $
1,757,514
410,735
200,679
102,640
178,879
64,840
933,934
2,137,072
578,215
$
2,845,134 $
527,527 $
276,560 $
3,649,221
The weighted average rate of compensation increase for other plans, excluding pension plans for which benefits are not linked to future salary levels,
(1)
As at December 31, 2020 and 2019, the asset category “Other” includes mainly property and cash.
represented 2.51% as at December 31, 2019.
The inflation assumption shown for Atkins Pension Plan and the Railways Pension Scheme is for the Retail Price Index. The assumption for the Consumer
The fair values of the above equity and debt instruments are mainly determined based on quoted prices in active markets.
Price Index was 1.80% as at December 31, 2019.
The following is a summary of significant weighted average assumptions used in measuring SNC-Lavalin’s accrued pension
benefit obligation as at December 31, 2020:
The sensitivity analysis below was determined based on reasonable possible changes of the respective assumptions occurring at
December 31, 2020, while holding all other assumptions constant.
AT DECEMBER 31, 2020
Accrued pension benefit obligation
Discount rate
Rate of compensation increase (2)
Inflation (3)
Longevity at age 65 for current pensioners
Men
Women
Longevity at age 65 for future pensioners (current age 45)
Men
Women
ATKINS
PENSION
PLAN
1.20 %
2.80 %
2.80 %
22.9 years
24.9 years
24.2 years
26.3 years
RAILWAYS
PENSION
SCHEME
1.20 %
2.80 %
2.80 %
OTHER
PLANS
1.32 %
1.77 %
1.94 %
22.2 years
23.2 years
23.1 years
25.0 years
23.5 years
24.6 years
24.7 years
26.7 years
(2)
(3)
The weighted average rate of compensation increase for other plans, excluding pension plans for which benefits are not linked to future salary levels,
represented 2.51% as at December 31, 2020.
The inflation assumption shown for the Atkins Pension Plan and the Railways Pension Scheme is for the Retail Price Index. The assumption for the
Consumer Price Index was 2.1% as at December 31, 2020.
BENEFITS (CONTINUED)
benefit obligation as at December 31, 2019:
AT DECEMBER 31, 2019
Accrued pension benefit obligation
Rate of compensation increase (1)
Discount rate
Inflation (2)
Longevity at age 65 for current pensioners
Longevity at age 65 for future pensioners (current age 45)
Men
Women
Men
Women
(1)
(2)
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
2.00 %
2.70 %
2.70 %
2.00 %
2.70 %
2.70 %
OTHER
PLANS
1.96 %
1.72 %
1.87 %
23.0 years
22.6 years
23.2 years
24.9 years
23.7 years
25.1 years
24.4 years
23.9 years
24.6 years
26.3 years
25.2 years
26.5 years
If the discount rate is 1% higher (lower), the defined benefit pension obligation would decrease by an estimated amount of
$824.6 million (increase by an estimated amount of $830.0 million).
If the rate of compensation increase is 1% higher (lower), the defined benefit pension obligation would increase by an estimated
amount of $18.6 million (decrease by an estimated amount of $18.5 million).
If the rate of inflation is 1% higher (lower), the defined benefit pension obligation would increase by an estimated amount of
$616.1 million (decrease by an estimated amount of $615.9 million).
If longevity increases by 1 year, the defined benefit pension obligation would increase by an estimated amount of
$161.2 million.
The sensitivity analyses presented above may not be representative of the actual change in the defined benefit pension
obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions
may be correlated. Furthermore, in presenting the above sensitivity analyses, the present value of the defined benefit pension
obligation was calculated using the projected unit credit method at the end of the reporting period, which is the same method
applied in calculating the defined benefit obligation liability recognized in the statement of financial position.
The weighted average duration of the pension benefit obligation as at December 31, 2020 was 18.0 years for the Atkins Pension
Plan (2019: 18.0 years), 17.4 years for Railways Pension Scheme (2019: 17.1 years) and 18.2 years for the other plans (2019:
16.5 years).
B)
OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT BENEFITS
SNC-Lavalin has a number of other long-term benefit and other post-employment benefit plans, which are all defined benefit
plans and include mainly termination indemnities, medical and dental care benefits, and life insurance benefits. SNC-Lavalin’s
other long-term benefit and other post-employment benefit plans are unfunded plans.
88
88
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
89
AT DECEMBER 31, 2020
Asset category
Equity securities
Debt securities
Other (1)
Total
AT DECEMBER 31, 2019
Asset category
Equity securities
Debt securities
Other (1)
Total
(1)
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
739,564 $
229,448 $
44,284 $
2,012,764
483,460
226,834
103,138
175,067
72,145
1,013,296
2,414,665
658,743
$
3,235,788 $
559,420 $
291,496 $
4,086,704
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
1,757,514
410,735
200,679
102,640
178,879
64,840
933,934
2,137,072
578,215
$
2,845,134 $
527,527 $
276,560 $
3,649,221
As at December 31, 2020 and 2019, the asset category “Other” includes mainly property and cash.
The fair values of the above equity and debt instruments are mainly determined based on quoted prices in active markets.
The following is a summary of significant weighted average assumptions used in measuring SNC-Lavalin’s accrued pension
benefit obligation as at December 31, 2020:
AT DECEMBER 31, 2020
Accrued pension benefit obligation
Rate of compensation increase (2)
Discount rate
Inflation (3)
Longevity at age 65 for current pensioners
Longevity at age 65 for future pensioners (current age 45)
Men
Women
Men
Women
(2)
(3)
ATKINS
PENSION
PLAN
1.20 %
2.80 %
2.80 %
22.9 years
24.9 years
24.2 years
26.3 years
RAILWAYS
PENSION
SCHEME
1.20 %
2.80 %
2.80 %
OTHER
PLANS
1.32 %
1.77 %
1.94 %
22.2 years
23.2 years
23.1 years
25.0 years
23.5 years
24.6 years
24.7 years
26.7 years
The weighted average rate of compensation increase for other plans, excluding pension plans for which benefits are not linked to future salary levels,
represented 2.51% as at December 31, 2020.
Consumer Price Index was 2.1% as at December 31, 2020.
The inflation assumption shown for the Atkins Pension Plan and the Railways Pension Scheme is for the Retail Price Index. The assumption for the
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
The following tables present the fair value of the major categories of assets of SNC-Lavalin’s defined benefit pension plans:
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
The following is a summary of significant weighted average assumptions used in measuring SNC-Lavalin’s accrued pension
benefit obligation as at December 31, 2019:
AT DECEMBER 31, 2019
Accrued pension benefit obligation
Discount rate
Rate of compensation increase (1)
Inflation (2)
Longevity at age 65 for current pensioners
Men
Women
$
676,885 $
224,208 $
32,841 $
Longevity at age 65 for future pensioners (current age 45)
Men
Women
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
2.00 %
2.70 %
2.70 %
2.00 %
2.70 %
2.70 %
OTHER
PLANS
1.96 %
1.72 %
1.87 %
23.0 years
22.6 years
23.2 years
24.9 years
23.7 years
25.1 years
24.4 years
23.9 years
24.6 years
26.3 years
25.2 years
26.5 years
(1)
(2)
The weighted average rate of compensation increase for other plans, excluding pension plans for which benefits are not linked to future salary levels,
represented 2.51% as at December 31, 2019.
The inflation assumption shown for Atkins Pension Plan and the Railways Pension Scheme is for the Retail Price Index. The assumption for the Consumer
Price Index was 1.80% as at December 31, 2019.
The sensitivity analysis below was determined based on reasonable possible changes of the respective assumptions occurring at
December 31, 2020, while holding all other assumptions constant.
If the discount rate is 1% higher (lower), the defined benefit pension obligation would decrease by an estimated amount of
$824.6 million (increase by an estimated amount of $830.0 million).
If the rate of compensation increase is 1% higher (lower), the defined benefit pension obligation would increase by an estimated
amount of $18.6 million (decrease by an estimated amount of $18.5 million).
If the rate of inflation is 1% higher (lower), the defined benefit pension obligation would increase by an estimated amount of
$616.1 million (decrease by an estimated amount of $615.9 million).
If longevity increases by 1 year, the defined benefit pension obligation would increase by an estimated amount of
$161.2 million.
The sensitivity analyses presented above may not be representative of the actual change in the defined benefit pension
obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions
may be correlated. Furthermore, in presenting the above sensitivity analyses, the present value of the defined benefit pension
obligation was calculated using the projected unit credit method at the end of the reporting period, which is the same method
applied in calculating the defined benefit obligation liability recognized in the statement of financial position.
The weighted average duration of the pension benefit obligation as at December 31, 2020 was 18.0 years for the Atkins Pension
Plan (2019: 18.0 years), 17.4 years for Railways Pension Scheme (2019: 17.1 years) and 18.2 years for the other plans (2019:
16.5 years).
B)
OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT BENEFITS
SNC-Lavalin has a number of other long-term benefit and other post-employment benefit plans, which are all defined benefit
plans and include mainly termination indemnities, medical and dental care benefits, and life insurance benefits. SNC-Lavalin’s
other long-term benefit and other post-employment benefit plans are unfunded plans.
88
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
89
89
SNC-Lavalin 2020 Financial Report
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
BENEFITS (CONTINUED)
The following table sets forth the change in obligation of SNC-Lavalin’s other long-term benefit and other post-employment
benefit plans:
33.
CONTINGENT LIABILITIES
Class actions
Ruediger Class Action
YEARS ENDED DECEMBER 31
Change in obligation:
Obligation at beginning of year
Current service cost
Past service cost
Loss arising from settlement
Interest cost
Remeasurement (1)
Benefits paid
Actuarial losses (Note 24)
Effect of foreign currency exchange differences
Reclassification to liabilities of disposal groups classified as held for sale (Note 39)
Obligation at end of year
2020
2019
$
98,471 $
18,799
53
1,252
3,208
(956)
(31,888)
5,287
(1,000)
(31,837)
85,004
16,819
—
—
4,216
393
(18,841)
14,263
(3,383)
—
$
61,389 $
98,471
distribution.
SNC-Lavalin’s net defined other long-term benefit and other post-employment benefit costs recognized in net income were
comprised of:
YEARS ENDED DECEMBER 31
Current service cost
Past service cost
Loss arising from settlement
Interest cost
Remeasurement (1)
Components of other long-term benefit and other post-employment benefit costs recognized in
net income
2020
$
18,799 $
53
1,252
3,208
(956)
2019
16,819
—
—
4,216
393
contracts.
Drywall Class Action
$
22,356 $
21,428
“Drywall Defendants”) with the Ontario Superior Court of Justice (the “Drywall Class Action”), on behalf of persons who
(1)
Remeasurement relates to two other long-term employee benefit plans of SNC-Lavalin for which remeasurement is not recognized in other comprehensive
income, but rather in the income statement.
The following is a summary of significant weighted average assumptions used in measuring SNC-Lavalin’s accrued other long-
term benefit and other post-employment benefit obligation:
Accrued other long-term benefit and other post-employment benefit obligation
Discount rate
Rate of compensation increase (2)
(2)
Rate of compensation increase applies only to termination indemnities.
DECEMBER 31
2020
DECEMBER 31
2019
3.26 %
4.51 %
4.45 %
4.55 %
90
90
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
On February 6, 2019, a Motion for authorization of a class action and for authorization to bring an action against SNC-Lavalin
and certain of its directors and officers (collectively, the “Ruediger Defendants”) pursuant to section 225.4 of the Securities Act
(Québec) (the “Ruediger Class Action Motion”) was filed with the Superior Court of Québec (the “Ruediger Class Action”), on
behalf of persons who acquired SNC-Lavalin securities from February 22, 2018 through January 27, 2019 (the “Ruediger Class
Period”) and held some or all of such securities as of the commencement of trading on January 28, 2019.
The Ruediger Class Action Motion alleges that certain documents filed by SNC-Lavalin and oral statements made by its then
Chief Executive Officer during the Ruediger Class Period contained misrepresentations related to SNC-Lavalin’s revenue
forecasts and to the financial performance of the Mining & Metallurgy and Oil & Gas segments, which misrepresentations
would have been corrected by way of SNC-Lavalin’s January 28, 2019 press release.
The Ruediger Class Action Motion seeks leave from the Quebec Superior Court to bring a statutory misrepresentation claim
under the Securities Act (Québec). The plaintiff in the proposed action claims damages and seeks the condemnation of the
Ruediger Defendants to pay the class members an unspecified amount for compensatory damages with interest and additional
indemnity as well as full costs and expenses, including expert fees, notice fees and fees relating to administering the plan of
On October 15, 2019, the plaintiffs in the Ruediger Class Action Motion delivered an amended “Motion for authorization of a
class action and for authorization to bring an action pursuant to section 225.4 of Quebec’s Securities Act”. The amendments
extend the class period for the Ruediger Class Action Motion to July 22, 2019 and broaden the scope of the claim to include,
among other things, disclosure alleged to have been made regarding the Company’s ability to execute certain fixed price
The authorization hearing on the amended Ruediger Class Action Motion is scheduled between May 18 and May 21, 2021.
On June 5, 2019, a Statement of Claim was filed against SNC-Lavalin and certain of its directors and officers (collectively, the
acquired SNC-Lavalin securities from February 22, 2018 through May 2, 2019 (the “Drywall Class Period”).
The Drywall Class Action claim alleges that disclosures by SNC-Lavalin during the Drywall Class Period contained
misrepresentations related to: (i) its IFRS 15 reporting systems and controls compliance; (ii) its revenue recognition in respect of
the Mining & Metallurgy segment being non-compliant with IFRS 15; (iii) revenue from the Company’s Codelco project in
Chile having been overstated in 2018 due to non-compliance with IFRS 15; (iv) the failure of the Company’s disclosure controls
and procedures and its internal control over financial reporting which led to a $350 million write-down on the Codelco project;
(v) when IFRS 15 was applied to the Mining & Metallurgy segment results in 2019, this led to the Company disbanding its
Mining & Metallurgy segment; and (vi) the Company’s financial statements during the Drywall Class Period being materially
non-compliant with IFRS.
The Drywall Class Action seeks leave from the Ontario Superior Court of Justice to bring a statutory misrepresentation claim
under the Securities Act (Ontario). The plaintiffs in the proposed action claim damages and seek the condemnation of the
Drywall Defendants to pay the class members $1.2 billion or such other compensatory damages as the court may award, with
interest and additional indemnity as well as full costs and expenses, including expert fees, notice fees and fees relating to
administering the plan of distribution.
On October 15, 2019, the plaintiffs in the Drywall Class Action delivered a proposed Amended Statement of Claim that
contemplates expanding the Drywall Class Period to include SNC-Lavalin’s July 22, 2019 and August 1, 2019 press releases
and increasing the claim for damages from $1.2 billion to $1.8 billion. On November 5, 2019, the plaintiffs delivered a motion
record for leave under the Securities Act (Ontario) and certification under the Class Proceedings Act (Ontario). The leave and
certification hearing was scheduled for October 19 to 23, 2020 and prior to the hearing, the plaintiffs agreed to dismiss the
Drywall Class Action on the basis that the claims asserted therein can be brought in the Ruediger Class Action.
Peters Class Action
On February 25, 2019, a Notice of action was issued with the Ontario Superior Court of Justice by a proposed representative
plaintiff, Mr. John Peters, on behalf of persons who acquired SNC-Lavalin securities from September 4, 2018 through October
10, 2018. On March 25, 2019, a Statement of Claim was filed with the Ontario Superior Court of Justice with respect to the
claims set out in the Notice of Action (together, the Notice of Action and the Statement of Claim are the “Peters Class Action”).
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
91
BENEFITS (CONTINUED)
The following table sets forth the change in obligation of SNC-Lavalin’s other long-term benefit and other post-employment
benefit plans:
YEARS ENDED DECEMBER 31
Change in obligation:
Obligation at beginning of year
Current service cost
Past service cost
Loss arising from settlement
Interest cost
Remeasurement (1)
Benefits paid
Actuarial losses (Note 24)
Obligation at end of year
comprised of:
YEARS ENDED DECEMBER 31
Current service cost
Past service cost
Loss arising from settlement
Interest cost
Remeasurement (1)
net income
(1)
2020
2019
$
98,471 $
18,799
53
1,252
3,208
(956)
(31,888)
5,287
(1,000)
(31,837)
2020
53
1,252
3,208
(956)
85,004
16,819
—
—
4,216
393
(18,841)
14,263
(3,383)
—
2019
16,819
—
—
4,216
393
$
18,799 $
Effect of foreign currency exchange differences
Reclassification to liabilities of disposal groups classified as held for sale (Note 39)
SNC-Lavalin’s net defined other long-term benefit and other post-employment benefit costs recognized in net income were
$
61,389 $
98,471
Components of other long-term benefit and other post-employment benefit costs recognized in
$
22,356 $
21,428
Remeasurement relates to two other long-term employee benefit plans of SNC-Lavalin for which remeasurement is not recognized in other comprehensive
income, but rather in the income statement.
The following is a summary of significant weighted average assumptions used in measuring SNC-Lavalin’s accrued other long-
term benefit and other post-employment benefit obligation:
Accrued other long-term benefit and other post-employment benefit obligation
Discount rate
Rate of compensation increase (2)
(2)
Rate of compensation increase applies only to termination indemnities.
DECEMBER 31
DECEMBER 31
2020
2019
3.26 %
4.51 %
4.45 %
4.55 %
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-EMPLOYMENT
33.
CONTINGENT LIABILITIES
Class actions
Ruediger Class Action
On February 6, 2019, a Motion for authorization of a class action and for authorization to bring an action against SNC-Lavalin
and certain of its directors and officers (collectively, the “Ruediger Defendants”) pursuant to section 225.4 of the Securities Act
(Québec) (the “Ruediger Class Action Motion”) was filed with the Superior Court of Québec (the “Ruediger Class Action”), on
behalf of persons who acquired SNC-Lavalin securities from February 22, 2018 through January 27, 2019 (the “Ruediger Class
Period”) and held some or all of such securities as of the commencement of trading on January 28, 2019.
The Ruediger Class Action Motion alleges that certain documents filed by SNC-Lavalin and oral statements made by its then
Chief Executive Officer during the Ruediger Class Period contained misrepresentations related to SNC-Lavalin’s revenue
forecasts and to the financial performance of the Mining & Metallurgy and Oil & Gas segments, which misrepresentations
would have been corrected by way of SNC-Lavalin’s January 28, 2019 press release.
The Ruediger Class Action Motion seeks leave from the Quebec Superior Court to bring a statutory misrepresentation claim
under the Securities Act (Québec). The plaintiff in the proposed action claims damages and seeks the condemnation of the
Ruediger Defendants to pay the class members an unspecified amount for compensatory damages with interest and additional
indemnity as well as full costs and expenses, including expert fees, notice fees and fees relating to administering the plan of
distribution.
On October 15, 2019, the plaintiffs in the Ruediger Class Action Motion delivered an amended “Motion for authorization of a
class action and for authorization to bring an action pursuant to section 225.4 of Quebec’s Securities Act”. The amendments
extend the class period for the Ruediger Class Action Motion to July 22, 2019 and broaden the scope of the claim to include,
among other things, disclosure alleged to have been made regarding the Company’s ability to execute certain fixed price
contracts.
The authorization hearing on the amended Ruediger Class Action Motion is scheduled between May 18 and May 21, 2021.
Drywall Class Action
On June 5, 2019, a Statement of Claim was filed against SNC-Lavalin and certain of its directors and officers (collectively, the
“Drywall Defendants”) with the Ontario Superior Court of Justice (the “Drywall Class Action”), on behalf of persons who
acquired SNC-Lavalin securities from February 22, 2018 through May 2, 2019 (the “Drywall Class Period”).
The Drywall Class Action claim alleges that disclosures by SNC-Lavalin during the Drywall Class Period contained
misrepresentations related to: (i) its IFRS 15 reporting systems and controls compliance; (ii) its revenue recognition in respect of
the Mining & Metallurgy segment being non-compliant with IFRS 15; (iii) revenue from the Company’s Codelco project in
Chile having been overstated in 2018 due to non-compliance with IFRS 15; (iv) the failure of the Company’s disclosure controls
and procedures and its internal control over financial reporting which led to a $350 million write-down on the Codelco project;
(v) when IFRS 15 was applied to the Mining & Metallurgy segment results in 2019, this led to the Company disbanding its
Mining & Metallurgy segment; and (vi) the Company’s financial statements during the Drywall Class Period being materially
non-compliant with IFRS.
The Drywall Class Action seeks leave from the Ontario Superior Court of Justice to bring a statutory misrepresentation claim
under the Securities Act (Ontario). The plaintiffs in the proposed action claim damages and seek the condemnation of the
Drywall Defendants to pay the class members $1.2 billion or such other compensatory damages as the court may award, with
interest and additional indemnity as well as full costs and expenses, including expert fees, notice fees and fees relating to
administering the plan of distribution.
On October 15, 2019, the plaintiffs in the Drywall Class Action delivered a proposed Amended Statement of Claim that
contemplates expanding the Drywall Class Period to include SNC-Lavalin’s July 22, 2019 and August 1, 2019 press releases
and increasing the claim for damages from $1.2 billion to $1.8 billion. On November 5, 2019, the plaintiffs delivered a motion
record for leave under the Securities Act (Ontario) and certification under the Class Proceedings Act (Ontario). The leave and
certification hearing was scheduled for October 19 to 23, 2020 and prior to the hearing, the plaintiffs agreed to dismiss the
Drywall Class Action on the basis that the claims asserted therein can be brought in the Ruediger Class Action.
Peters Class Action
On February 25, 2019, a Notice of action was issued with the Ontario Superior Court of Justice by a proposed representative
plaintiff, Mr. John Peters, on behalf of persons who acquired SNC-Lavalin securities from September 4, 2018 through October
10, 2018. On March 25, 2019, a Statement of Claim was filed with the Ontario Superior Court of Justice with respect to the
claims set out in the Notice of Action (together, the Notice of Action and the Statement of Claim are the “Peters Class Action”).
90
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
91
91
SNC-Lavalin 2020 Financial Report
33.
CONTINGENT LIABILITIES (CONTINUED
33.
CONTINGENT LIABILITIES (CONTINUED)
The Peters Class Action alleges that the defendants, including the Company, its Chairman and certain of its then officers, failed
to make timely disclosure of a material change in the business, operations or capital of SNC-Lavalin, by failing to disclose that
on September 4, 2018, the Director of the Public Prosecution Service of Canada (“PPSC”) communicated her decision to
SNC-Lavalin not to award an opportunity to negotiate a remediation agreement.
The Peters Class Action seeks leave from the Ontario Superior Court of Justice to bring a statutory misrepresentation claim
under the Securities Act (Ontario) and the comparable securities legislation in other provinces and also asserts a claim for
common law negligent misrepresentation. The Peters Class Action claims damages in the sum of $75 million or such other
amount as the Superior Court may determine plus interest and costs.
On March 5, 2020, the plaintiff in the Peters Class Action brought a motion for leave and certification of the Peters Class
Action. On December 15, 2020, counsel to the defendants delivered their responding motion for the leave and certification
hearing which is scheduled to be held between June 1 and June 3, 2021.
SNC-Lavalin believes that the claims outlined in the Ruediger Class Action Motion and the Peters Class Action are, in each
case, entirely without merit and is vigorously defending these claims. Due to the inherent uncertainties of litigation, it is not
possible to predict the final outcomes of the Ruediger Class Action or the Peters Class Action, or determine the amount of any
potential losses resulting therefrom, if any, and SNC-Lavalin may, in the future, be subject to further class action lawsuits or
other litigation. SNC-Lavalin has directors’ and officers’ liability insurance insuring individuals against liability for acts or
omissions in their capacity as directors and officers, and the Company itself has coverage for such claims. The amount of
coverage under the directors’ and officers’ policy is limited and such coverage may be less than any amounts the Company is
required or determines to pay in connection with these proceedings. If the Company is required or determines to pay an amount
in connection with any or all of the Ruediger Class Action and/or the Peters Class Action, such amount could have a material
adverse effect on SNC-Lavalin’s liquidity and financial results.
Pyrrhotite case
On June 12, 2014, the Quebec Superior Court rendered a decision in “Wave 1” of the matter commonly referred to as the
“Pyrrhotite Case” in Trois-Rivières, Quebec and in which SNC-Lavalin is one of numerous defendants. The Quebec Superior
Court ruled in favour of the plaintiffs, awarding an aggregate amount of approximately $168 million in damages apportioned
amongst the then-known defendants, on a solidary (in solidum) basis (the “Wave 1 claims”). The Quebec Superior Court ruled
that SNC-Lavalin’s share of the damages award was approximately 70%. The Company’s external insurers dispute the extent of
the insurance coverage available to the Company and this dispute is included in the Pyrrhotite Case. The Company, among other
parties, appealed the Quebec Superior Court’s ruling and, on April 6, 2020, the Quebec Court of Appeal rendered its decision
dismissing most of the appeals filed by all parties and upheld: (i) the Quebec Superior Court’s ruling regarding SNC-Lavalin’s
approximate 70% share of liability; and (ii) the solidary nature of the defendants’ liability. In a further ruling, on June 12, 2020,
the Quebec Court of Appeal confirmed SNC-Lavalin’s allocated share of the damages, inclusive of interest and costs at
approximately $200 million, and the Company paid this amount of damages awarded to the plaintiffs on August 3, 2020. The
Company has filed a notice seeking leave to appeal to the Supreme Court of Canada.
The Quebec Court of Appeal also dismissed an appeal from SNC-Lavalin’s external insurers and confirmed that multiple
insurance policy towers were triggered by the Wave 1 claims, resulting in multiple years of coverage. The Company’s external
insurers have filed notices seeking leave to appeal to the Supreme Court of Canada.
Given that SNC-Lavalin’s external insurers initially refused to comply with terms contained in the relevant policies of insurance
and the orders of the Quebec Superior Court and the Quebec Court of Appeal requiring them to pay a substantial portion of the
$200 million damages award, SNC-Lavalin filed an application with the Quebec Superior Court seeking an order requiring the
Company’s external insurers to comply with the Quebec Court of Appeal’s order and facilitate execution of the $200 million
damages award by way of the multiple towers of insurance. On October 16, 2020, the Quebec Superior Court ruled in favour of
SNC-Lavalin ordering SNC-Lavalin’s external insurers to pay the Company approximately $141 million. The Quebec Superior
Court also ruled that the order is enforceable notwithstanding any appeal and most of the amount receivable was received in the
fourth quarter of 2020. An additional $33 million in insurance proceeds was received by the Company in December 2020
through a reinsurance policy which was not subject to this court ruling. As at December 31, 2020, the remaining amount
receivable of insurance proceeds totaled approximately $38 million and was included in “Other current financial assets” on the
Company’s consolidated statement of financial position as at December 31, 2020.
SNC-Lavalin filed a recourse in warranty claim against Lafarge Canada Inc. (“Lafarge”) seeking its contribution to the damages
awarded against SNC-Lavalin in the Wave 1 judgement. The trial commenced in March 2019 and concluded in 2020. On
February 4, 2021, the Quebec Superior Court dismissed SNC-Lavalin’s claim and SNC-Lavalin will appeal the Quebec Superior
Court’s ruling to the Quebec Court of Appeal.
In parallel to the Wave 1 claims, notices of additional potential claims have been made and continue to be made against
numerous defendants, including SNC-Lavalin, in “Wave 2” of the Pyrrhotite Case. SNC-Lavalin expects some insurance
coverage for the Wave 2 claims. In addition, SNC-Lavalin has filed recourse in warranty claims against Lafarge with respect to
the Wave 2 claims. Wave 2 claims are in a preliminary stage and SNC-Lavalin’s liability exposure in respect of the Wave 2
claims remains subject to several uncertainties.
Dubai civil case
In November, 2018, WS Atkins & Partners Overseas, a subsidiary of the Company, was named as respondent together with
other parties by the subrogated insurers of a property developer in a civil case initiated before the courts of Dubai. The claimant
is seeking damages jointly from the respondents on account of the alleged refurbishment costs and loss of income arising from a
fire at the property developer’s building. WS Atkins & Partners Overseas was a subcontractor in the hotel’s design and
construction supervision and the claim revolves around alleged negligence in the specification, testing and installation of the
building cladding which is claimed to have exacerbated the fire, thereby increasing the damage to the building. The claim is in
preliminary stages and, as such, the Company is not currently in a position to estimate potential liability or amount of loss, if
One of the Company’s subsidiaries has a 35% interest in a joint operation for a project that has been completed. The
construction joint operation is in a dispute with the project owner over labour rates. Under the relevant project contract, the
Company’s subsidiary is jointly and severally liable with the other joint operator vis-à-vis the project owner for performance
and other liabilities. In December 2018, the joint operation received a split award of liability from an arbitration tribunal
resulting in an adverse decision on certain aspects of the dispute. In August 2020, a hearing on residual legal issues occurred
and, in September 2020, the tribunal ruled in favour of the joint operation. The ruling has been challenged by the project owner.
A hearing on the quantum of damages to be awarded against the joint operation (if any) has been postponed and is likely to
any.
Australian Arbitration
occur in 2022.
General litigation risk
Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of these and other related
proceedings generally, (b) determine if the amount included in the Company’s provisions is sufficient or (c) determine the
amount of any potential losses, if any, that may be incurred in connection with any final judgment on these matters.
SNC-Lavalin maintains insurance coverage for various aspects of its business and operations. The Company’s insurance
programs have varying coverage limits and maximums, and insurance companies may seek to deny claims the Company might
make. In addition, SNC-Lavalin has elected to retain a portion of losses that may occur through the use of various deductibles,
limits and retentions under these programs. As a result, the Company may be subject to future liability in respect of lawsuits or
investigations for which it is only partially insured, or completely uninsured.
In addition, the nature of the Company’s business sometimes results in clients, subcontractors, and vendors presenting claims
for, among other things, recovery of costs related to certain projects. Similarly, SNC-Lavalin occasionally presents change
orders and other claims to clients, subcontractors, and vendors. If the Company fails to properly document the nature of claims
and change orders or is otherwise unsuccessful in negotiating reasonable settlements with clients, subcontractors and vendors,
the Company could incur cost overruns, reduced profits or, in some cases, a loss for a project. A failure to recover promptly on
these types of claims could have a material adverse impact on SNC-Lavalin’s liquidity and financial results. Additionally,
irrespective of how well the Company documents the nature of its claims and change orders, the cost to prosecute and defend
claims and change orders can be significant.
In addition, a number of project contracts have warranty periods and/or outstanding claims that may result in legal proceedings
that extend beyond the actual performance and completion of the projects.
Litigation and regulatory proceedings are subject to inherent uncertainties and unfavourable rulings can and do occur. Pending
or future claims against SNC-Lavalin could result in professional liability, product liability, criminal liability, warranty
obligations, and other liabilities which, to the extent the Company is not insured against a loss or its insurer fails to provide
coverage, could have a material adverse impact on the Company’s business, financial condition and results of operations.
92
92
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
93
33.
CONTINGENT LIABILITIES (CONTINUED
33.
CONTINGENT LIABILITIES (CONTINUED)
The Peters Class Action alleges that the defendants, including the Company, its Chairman and certain of its then officers, failed
to make timely disclosure of a material change in the business, operations or capital of SNC-Lavalin, by failing to disclose that
on September 4, 2018, the Director of the Public Prosecution Service of Canada (“PPSC”) communicated her decision to
SNC-Lavalin not to award an opportunity to negotiate a remediation agreement.
The Peters Class Action seeks leave from the Ontario Superior Court of Justice to bring a statutory misrepresentation claim
under the Securities Act (Ontario) and the comparable securities legislation in other provinces and also asserts a claim for
common law negligent misrepresentation. The Peters Class Action claims damages in the sum of $75 million or such other
amount as the Superior Court may determine plus interest and costs.
On March 5, 2020, the plaintiff in the Peters Class Action brought a motion for leave and certification of the Peters Class
Action. On December 15, 2020, counsel to the defendants delivered their responding motion for the leave and certification
hearing which is scheduled to be held between June 1 and June 3, 2021.
SNC-Lavalin believes that the claims outlined in the Ruediger Class Action Motion and the Peters Class Action are, in each
case, entirely without merit and is vigorously defending these claims. Due to the inherent uncertainties of litigation, it is not
possible to predict the final outcomes of the Ruediger Class Action or the Peters Class Action, or determine the amount of any
potential losses resulting therefrom, if any, and SNC-Lavalin may, in the future, be subject to further class action lawsuits or
other litigation. SNC-Lavalin has directors’ and officers’ liability insurance insuring individuals against liability for acts or
omissions in their capacity as directors and officers, and the Company itself has coverage for such claims. The amount of
coverage under the directors’ and officers’ policy is limited and such coverage may be less than any amounts the Company is
required or determines to pay in connection with these proceedings. If the Company is required or determines to pay an amount
in connection with any or all of the Ruediger Class Action and/or the Peters Class Action, such amount could have a material
adverse effect on SNC-Lavalin’s liquidity and financial results.
Pyrrhotite case
On June 12, 2014, the Quebec Superior Court rendered a decision in “Wave 1” of the matter commonly referred to as the
“Pyrrhotite Case” in Trois-Rivières, Quebec and in which SNC-Lavalin is one of numerous defendants. The Quebec Superior
Court ruled in favour of the plaintiffs, awarding an aggregate amount of approximately $168 million in damages apportioned
amongst the then-known defendants, on a solidary (in solidum) basis (the “Wave 1 claims”). The Quebec Superior Court ruled
that SNC-Lavalin’s share of the damages award was approximately 70%. The Company’s external insurers dispute the extent of
the insurance coverage available to the Company and this dispute is included in the Pyrrhotite Case. The Company, among other
parties, appealed the Quebec Superior Court’s ruling and, on April 6, 2020, the Quebec Court of Appeal rendered its decision
dismissing most of the appeals filed by all parties and upheld: (i) the Quebec Superior Court’s ruling regarding SNC-Lavalin’s
approximate 70% share of liability; and (ii) the solidary nature of the defendants’ liability. In a further ruling, on June 12, 2020,
the Quebec Court of Appeal confirmed SNC-Lavalin’s allocated share of the damages, inclusive of interest and costs at
approximately $200 million, and the Company paid this amount of damages awarded to the plaintiffs on August 3, 2020. The
Company has filed a notice seeking leave to appeal to the Supreme Court of Canada.
The Quebec Court of Appeal also dismissed an appeal from SNC-Lavalin’s external insurers and confirmed that multiple
insurance policy towers were triggered by the Wave 1 claims, resulting in multiple years of coverage. The Company’s external
insurers have filed notices seeking leave to appeal to the Supreme Court of Canada.
Given that SNC-Lavalin’s external insurers initially refused to comply with terms contained in the relevant policies of insurance
and the orders of the Quebec Superior Court and the Quebec Court of Appeal requiring them to pay a substantial portion of the
$200 million damages award, SNC-Lavalin filed an application with the Quebec Superior Court seeking an order requiring the
Company’s external insurers to comply with the Quebec Court of Appeal’s order and facilitate execution of the $200 million
damages award by way of the multiple towers of insurance. On October 16, 2020, the Quebec Superior Court ruled in favour of
SNC-Lavalin ordering SNC-Lavalin’s external insurers to pay the Company approximately $141 million. The Quebec Superior
Court also ruled that the order is enforceable notwithstanding any appeal and most of the amount receivable was received in the
fourth quarter of 2020. An additional $33 million in insurance proceeds was received by the Company in December 2020
through a reinsurance policy which was not subject to this court ruling. As at December 31, 2020, the remaining amount
receivable of insurance proceeds totaled approximately $38 million and was included in “Other current financial assets” on the
Company’s consolidated statement of financial position as at December 31, 2020.
SNC-Lavalin filed a recourse in warranty claim against Lafarge Canada Inc. (“Lafarge”) seeking its contribution to the damages
awarded against SNC-Lavalin in the Wave 1 judgement. The trial commenced in March 2019 and concluded in 2020. On
February 4, 2021, the Quebec Superior Court dismissed SNC-Lavalin’s claim and SNC-Lavalin will appeal the Quebec Superior
Court’s ruling to the Quebec Court of Appeal.
In parallel to the Wave 1 claims, notices of additional potential claims have been made and continue to be made against
numerous defendants, including SNC-Lavalin, in “Wave 2” of the Pyrrhotite Case. SNC-Lavalin expects some insurance
coverage for the Wave 2 claims. In addition, SNC-Lavalin has filed recourse in warranty claims against Lafarge with respect to
the Wave 2 claims. Wave 2 claims are in a preliminary stage and SNC-Lavalin’s liability exposure in respect of the Wave 2
claims remains subject to several uncertainties.
Dubai civil case
In November, 2018, WS Atkins & Partners Overseas, a subsidiary of the Company, was named as respondent together with
other parties by the subrogated insurers of a property developer in a civil case initiated before the courts of Dubai. The claimant
is seeking damages jointly from the respondents on account of the alleged refurbishment costs and loss of income arising from a
fire at the property developer’s building. WS Atkins & Partners Overseas was a subcontractor in the hotel’s design and
construction supervision and the claim revolves around alleged negligence in the specification, testing and installation of the
building cladding which is claimed to have exacerbated the fire, thereby increasing the damage to the building. The claim is in
preliminary stages and, as such, the Company is not currently in a position to estimate potential liability or amount of loss, if
any.
Australian Arbitration
One of the Company’s subsidiaries has a 35% interest in a joint operation for a project that has been completed. The
construction joint operation is in a dispute with the project owner over labour rates. Under the relevant project contract, the
Company’s subsidiary is jointly and severally liable with the other joint operator vis-à-vis the project owner for performance
and other liabilities. In December 2018, the joint operation received a split award of liability from an arbitration tribunal
resulting in an adverse decision on certain aspects of the dispute. In August 2020, a hearing on residual legal issues occurred
and, in September 2020, the tribunal ruled in favour of the joint operation. The ruling has been challenged by the project owner.
A hearing on the quantum of damages to be awarded against the joint operation (if any) has been postponed and is likely to
occur in 2022.
General litigation risk
Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of these and other related
proceedings generally, (b) determine if the amount included in the Company’s provisions is sufficient or (c) determine the
amount of any potential losses, if any, that may be incurred in connection with any final judgment on these matters.
SNC-Lavalin maintains insurance coverage for various aspects of its business and operations. The Company’s insurance
programs have varying coverage limits and maximums, and insurance companies may seek to deny claims the Company might
make. In addition, SNC-Lavalin has elected to retain a portion of losses that may occur through the use of various deductibles,
limits and retentions under these programs. As a result, the Company may be subject to future liability in respect of lawsuits or
investigations for which it is only partially insured, or completely uninsured.
In addition, the nature of the Company’s business sometimes results in clients, subcontractors, and vendors presenting claims
for, among other things, recovery of costs related to certain projects. Similarly, SNC-Lavalin occasionally presents change
orders and other claims to clients, subcontractors, and vendors. If the Company fails to properly document the nature of claims
and change orders or is otherwise unsuccessful in negotiating reasonable settlements with clients, subcontractors and vendors,
the Company could incur cost overruns, reduced profits or, in some cases, a loss for a project. A failure to recover promptly on
these types of claims could have a material adverse impact on SNC-Lavalin’s liquidity and financial results. Additionally,
irrespective of how well the Company documents the nature of its claims and change orders, the cost to prosecute and defend
claims and change orders can be significant.
In addition, a number of project contracts have warranty periods and/or outstanding claims that may result in legal proceedings
that extend beyond the actual performance and completion of the projects.
Litigation and regulatory proceedings are subject to inherent uncertainties and unfavourable rulings can and do occur. Pending
or future claims against SNC-Lavalin could result in professional liability, product liability, criminal liability, warranty
obligations, and other liabilities which, to the extent the Company is not insured against a loss or its insurer fails to provide
coverage, could have a material adverse impact on the Company’s business, financial condition and results of operations.
92
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
93
93
SNC-Lavalin 2020 Financial Report
33.
CONTINGENT LIABILITIES (CONTINUED)
Ongoing and potential investigations
The Company is subject to ongoing investigations that could subject the Company to criminal and administrative enforcement
actions, civil actions and sanctions, fines and other penalties, some of which may be significant. These investigations, and
potential results thereof, could harm the Company’s reputation, result in suspension, prohibition or debarment of the Company
from participating in certain projects, reduce its revenues and net income and adversely affect its business.
The Company understands that there are investigations by various authorities which may remain ongoing in connection with
certain legacy matters in various jurisdictions, including, without limitation, Algeria.
The Company also understands that a Royal Canadian Mounted Police (the “RCMP”) investigation relating to alleged payments
in connection with a 2002 contract for the refurbishment of the Jacques Cartier Bridge by a consortium which included
SNC-Lavalin and which led to a guilty plea by the former head of the Canada Federal Bridges Corporation in 2017, continues
and its scope may include the Company.
The Company is currently unable to determine when any of these investigations will be completed or whether other
investigations of the Company by these or other authorities will be initiated or the scope of current investigations broadened.
The Company continues to cooperate and communicate with authorities in connection with all ongoing investigations.
If regulatory, enforcement or administrative authorities or third parties determine to take action against the Company or to
sanction the Company in connection with possible violations of law, contracts or otherwise as a result of ongoing or future
investigations, the consequences of any such sanctions or other actions, whether actual or alleged, could require the Company to
pay material fines or damages, consent to injunctions on future conduct or lead to other penalties, including temporary or
permanent, mandatory or discretionary suspension, prohibition or debarment from participating in projects, or the revocation of
authorizations or certifications, by certain administrative organizations or by governments (such as the Government of Canada
and/or the Government of Quebec) under applicable procurement laws, regulations, policies or practices. The Company derives
a significant percentage of its annual global revenue from government and government-related contracts. Further, public and
private sector bid processes in some instances assess whether the bidder, or an affiliate thereof, has ever been the object of any
investigations, or sanctions or other actions resulting therefrom. In such instances, if a member of the Company’s group must
answer affirmatively to a query as to past or current investigations, or sanctions or other actions resulting therefrom, such
answer may affect that entity’s ability to be considered for the applicable project. In addition, the Company may not win
contracts that it has bid upon due to a client’s perception of the Company’s reputation and/or perceived reputational advantages
held by competitors as a result of such investigations, sanctions or other actions. Loss of bidding opportunities resulting from
such investigations, sanctions or other actions, whether discretionary (including as a result of reputational factors) or mandatory,
from participating in certain government, government-related and private contracts (in Canada, Canadian provinces or
elsewhere) could materially adversely affect the Company’s business, financial condition and liquidity and the market price of
the Company’s issued and traded securities.
The outcomes of ongoing or future investigations could also result in, among other things, (i) covenant defaults under various
project contracts, (ii) third party claims, which may include claims for special, indirect, derivative or consequential damages, or
(iii) adverse consequences on the Company’s ability to secure or continue its own financing, or to continue or secure financing
for current or future projects, any of which could materially adversely affect the Company’s business, financial condition and
liquidity and the market price of the Company’s issued and traded securities. In addition, these investigations and outcomes of
these investigations and any negative publicity associated therewith, could damage SNC-Lavalin’s reputation and ability to do
business.
Due to the uncertainties related to the outcome of ongoing or future investigations, the Company is currently unable to reliably
estimate an amount of potential liabilities or a range of potential liabilities, if any, in connection with any of these investigations.
The Company’s senior management and Board of Directors have been required to devote significant time and resources to the
investigations described above and ongoing related matters, as well as the investigations leading to the settlements described
below, which have distracted and may continue to distract from the conduct of the Company’s daily business, and significant
expenses have been and may continue to be incurred in connection with such investigations including substantial fees of lawyers
and other advisors. In addition, the Company and/or other employees or additional former employees of the Company could
become the subject of these or other investigations by law enforcement and/or regulatory authorities in respect of the matters
described above or below, or other matters, which, in turn, could require the devotion of additional time of senior management
and the diversion or utilization of other resources.
94
94
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
33.
CONTINGENT LIABILITIES (CONTINUED)
World Bank Settlement
On April 17, 2013, the Company announced a settlement in connection with the previously announced investigations by the
World Bank Group relating to a project in Bangladesh and a project in Cambodia, which includes a suspension of the right to
bid on and to be awarded World Bank Group-financed projects by SNC-Lavalin Inc., a subsidiary of the Company, and its
controlled affiliates for a period of 10 years (the “World Bank Settlement”). The suspension could be lifted after eight years, if
the terms and conditions of the settlement agreement are complied with fully. According to the terms of the World Bank
Settlement, the Company and certain of its other affiliates continue to be eligible to bid on and be awarded World Bank
Group-financed projects as long as they comply with all of the terms and conditions imposed upon them under the terms of the
World Bank Settlement, including an obligation not to evade the sanction imposed. The World Bank Settlement also requires
that the Company cooperate with the World Bank on various compliance matters in the future. The World Bank Settlement has
led to certain other multilateral development banks following suit, debarring SNC-Lavalin Inc. and its controlled affiliates on
the same terms.
Canada’s Integrity Regime
The Canadian government announced the Integrity Regime for procurement and real property transactions on July 3, 2015. The
scope of offences which may cause a supplier to be deemed ineligible to carry on business with the federal government is broad
and encompasses offences under the Criminal Code, (Canada) (the “Criminal Code”), the Competition Act, and the Corruption
of Foreign Public Officials Act (Canada) (the “CFPOA,”), among others. Some of the offences qualifying for ineligibility
include: bribery, fraud against Canada, money laundering, falsification of books and documents, extortion, and offences related
to drug trafficking. A determination of ineligibility to participate in federal government procurement projects may apply for
10 years for listed offences. However, the Integrity Regime permits the ineligibility period to be reduced by up to five years if a
supplier can establish that it has cooperated with law enforcement authorities or addressed the causes of misconduct. The
Canadian government is considering further revisions to the Integrity Regime.
If a supplier is charged with or pleads guilty to a listed offence (which does not currently include the plea of guilty to a single
charge of fraud by SNC-Lavalin Construction Inc. (the “Plea”) made as part of the settlement the Company announced it had
reached with the PPSC on December 18, 2019 regarding the charges of one count of fraud under Section 380 of the Criminal
Code and one count of corruption under Section 3(1)(b) of the CFPOA laid by the PPSC against each of the Company and its
indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. (the “Charges”)), it and its affiliates
may under the Integrity Regime be ineligible to do business with the Canadian government.
If a supplier applies for a reduced ineligibility period, or if a supplier charged with a listed offence is notified that it could be
ineligible to do business with the Canadian government, as a condition to granting the reduced ineligibility period or not
suspending the supplier, an administrative agreement may be imposed to monitor the supplier. Administrative agreements
include conditions and compliance measures that the supplier must meet to remain eligible to contract with the federal
government. In December 2015, the Company entered into an administrative agreement with the Canadian government under
the Integrity Regime in connection with the Charges and on December 18, 2020, the agreement terminated.
Other legal proceedings
described below.
SNC-Lavalin becomes involved in various legal proceedings as a part of its ordinary course of business and this section
describes an important ordinary course of business legal proceeding, including the general cautionary language relating to the
risks inherent to all litigation and proceedings against SNC-Lavalin, which is equally applicable to the legal proceedings
SNC-Lavalin Inc. has initiated court proceedings against a Canadian client stemming from engineering, procurement, and
construction management services that SNC-Lavalin Inc. provided in relation to the client’s expansion of an ore-processing
facility. SNC-Lavalin Inc. claimed from the client certain amounts due under the project contract. The client has counterclaimed
alleging that SNC-Lavalin Inc. defaulted under the project contracts and is seeking damages.
Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of this and other legal
proceedings generally, (b) determine if the amount included in the Company’s provisions is sufficient or (c) determine the
amount of any potential losses, if any, that may be incurred in connection with any final judgment on these matters.
The Company is a party to other claims and litigation arising in the normal course of operations, including by clients,
subcontractors, and vendors presenting claims for, amongst other things, recovery of costs related to certain projects. Due to the
inherent uncertainties of litigation and-or the early stage of certain proceedings, it is not possible to predict the final outcome of
all ongoing claims and litigation at any given time or to determine the amount of any potential losses, if any. With respect to
claims or litigation arising in the normal course of operations which are at a more advanced stage and which permit a better
assessment of potential outcome, the Company does not expect the resolution of these matters to have a materially adverse
effect on its financial position or results of operations.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
95
33.
CONTINGENT LIABILITIES (CONTINUED)
Ongoing and potential investigations
The Company is subject to ongoing investigations that could subject the Company to criminal and administrative enforcement
actions, civil actions and sanctions, fines and other penalties, some of which may be significant. These investigations, and
potential results thereof, could harm the Company’s reputation, result in suspension, prohibition or debarment of the Company
from participating in certain projects, reduce its revenues and net income and adversely affect its business.
The Company understands that there are investigations by various authorities which may remain ongoing in connection with
certain legacy matters in various jurisdictions, including, without limitation, Algeria.
The Company also understands that a Royal Canadian Mounted Police (the “RCMP”) investigation relating to alleged payments
in connection with a 2002 contract for the refurbishment of the Jacques Cartier Bridge by a consortium which included
SNC-Lavalin and which led to a guilty plea by the former head of the Canada Federal Bridges Corporation in 2017, continues
and its scope may include the Company.
The Company is currently unable to determine when any of these investigations will be completed or whether other
investigations of the Company by these or other authorities will be initiated or the scope of current investigations broadened.
The Company continues to cooperate and communicate with authorities in connection with all ongoing investigations.
If regulatory, enforcement or administrative authorities or third parties determine to take action against the Company or to
sanction the Company in connection with possible violations of law, contracts or otherwise as a result of ongoing or future
investigations, the consequences of any such sanctions or other actions, whether actual or alleged, could require the Company to
pay material fines or damages, consent to injunctions on future conduct or lead to other penalties, including temporary or
permanent, mandatory or discretionary suspension, prohibition or debarment from participating in projects, or the revocation of
authorizations or certifications, by certain administrative organizations or by governments (such as the Government of Canada
and/or the Government of Quebec) under applicable procurement laws, regulations, policies or practices. The Company derives
a significant percentage of its annual global revenue from government and government-related contracts. Further, public and
private sector bid processes in some instances assess whether the bidder, or an affiliate thereof, has ever been the object of any
investigations, or sanctions or other actions resulting therefrom. In such instances, if a member of the Company’s group must
answer affirmatively to a query as to past or current investigations, or sanctions or other actions resulting therefrom, such
answer may affect that entity’s ability to be considered for the applicable project. In addition, the Company may not win
contracts that it has bid upon due to a client’s perception of the Company’s reputation and/or perceived reputational advantages
held by competitors as a result of such investigations, sanctions or other actions. Loss of bidding opportunities resulting from
such investigations, sanctions or other actions, whether discretionary (including as a result of reputational factors) or mandatory,
from participating in certain government, government-related and private contracts (in Canada, Canadian provinces or
elsewhere) could materially adversely affect the Company’s business, financial condition and liquidity and the market price of
the Company’s issued and traded securities.
The outcomes of ongoing or future investigations could also result in, among other things, (i) covenant defaults under various
project contracts, (ii) third party claims, which may include claims for special, indirect, derivative or consequential damages, or
(iii) adverse consequences on the Company’s ability to secure or continue its own financing, or to continue or secure financing
for current or future projects, any of which could materially adversely affect the Company’s business, financial condition and
liquidity and the market price of the Company’s issued and traded securities. In addition, these investigations and outcomes of
these investigations and any negative publicity associated therewith, could damage SNC-Lavalin’s reputation and ability to do
business.
Due to the uncertainties related to the outcome of ongoing or future investigations, the Company is currently unable to reliably
estimate an amount of potential liabilities or a range of potential liabilities, if any, in connection with any of these investigations.
The Company’s senior management and Board of Directors have been required to devote significant time and resources to the
investigations described above and ongoing related matters, as well as the investigations leading to the settlements described
below, which have distracted and may continue to distract from the conduct of the Company’s daily business, and significant
expenses have been and may continue to be incurred in connection with such investigations including substantial fees of lawyers
and other advisors. In addition, the Company and/or other employees or additional former employees of the Company could
become the subject of these or other investigations by law enforcement and/or regulatory authorities in respect of the matters
described above or below, or other matters, which, in turn, could require the devotion of additional time of senior management
and the diversion or utilization of other resources.
33.
CONTINGENT LIABILITIES (CONTINUED)
World Bank Settlement
On April 17, 2013, the Company announced a settlement in connection with the previously announced investigations by the
World Bank Group relating to a project in Bangladesh and a project in Cambodia, which includes a suspension of the right to
bid on and to be awarded World Bank Group-financed projects by SNC-Lavalin Inc., a subsidiary of the Company, and its
controlled affiliates for a period of 10 years (the “World Bank Settlement”). The suspension could be lifted after eight years, if
the terms and conditions of the settlement agreement are complied with fully. According to the terms of the World Bank
Settlement, the Company and certain of its other affiliates continue to be eligible to bid on and be awarded World Bank
Group-financed projects as long as they comply with all of the terms and conditions imposed upon them under the terms of the
World Bank Settlement, including an obligation not to evade the sanction imposed. The World Bank Settlement also requires
that the Company cooperate with the World Bank on various compliance matters in the future. The World Bank Settlement has
led to certain other multilateral development banks following suit, debarring SNC-Lavalin Inc. and its controlled affiliates on
the same terms.
Canada’s Integrity Regime
The Canadian government announced the Integrity Regime for procurement and real property transactions on July 3, 2015. The
scope of offences which may cause a supplier to be deemed ineligible to carry on business with the federal government is broad
and encompasses offences under the Criminal Code, (Canada) (the “Criminal Code”), the Competition Act, and the Corruption
of Foreign Public Officials Act (Canada) (the “CFPOA,”), among others. Some of the offences qualifying for ineligibility
include: bribery, fraud against Canada, money laundering, falsification of books and documents, extortion, and offences related
to drug trafficking. A determination of ineligibility to participate in federal government procurement projects may apply for
10 years for listed offences. However, the Integrity Regime permits the ineligibility period to be reduced by up to five years if a
supplier can establish that it has cooperated with law enforcement authorities or addressed the causes of misconduct. The
Canadian government is considering further revisions to the Integrity Regime.
If a supplier is charged with or pleads guilty to a listed offence (which does not currently include the plea of guilty to a single
charge of fraud by SNC-Lavalin Construction Inc. (the “Plea”) made as part of the settlement the Company announced it had
reached with the PPSC on December 18, 2019 regarding the charges of one count of fraud under Section 380 of the Criminal
Code and one count of corruption under Section 3(1)(b) of the CFPOA laid by the PPSC against each of the Company and its
indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. (the “Charges”)), it and its affiliates
may under the Integrity Regime be ineligible to do business with the Canadian government.
If a supplier applies for a reduced ineligibility period, or if a supplier charged with a listed offence is notified that it could be
ineligible to do business with the Canadian government, as a condition to granting the reduced ineligibility period or not
suspending the supplier, an administrative agreement may be imposed to monitor the supplier. Administrative agreements
include conditions and compliance measures that the supplier must meet to remain eligible to contract with the federal
government. In December 2015, the Company entered into an administrative agreement with the Canadian government under
the Integrity Regime in connection with the Charges and on December 18, 2020, the agreement terminated.
Other legal proceedings
SNC-Lavalin becomes involved in various legal proceedings as a part of its ordinary course of business and this section
describes an important ordinary course of business legal proceeding, including the general cautionary language relating to the
risks inherent to all litigation and proceedings against SNC-Lavalin, which is equally applicable to the legal proceedings
described below.
SNC-Lavalin Inc. has initiated court proceedings against a Canadian client stemming from engineering, procurement, and
construction management services that SNC-Lavalin Inc. provided in relation to the client’s expansion of an ore-processing
facility. SNC-Lavalin Inc. claimed from the client certain amounts due under the project contract. The client has counterclaimed
alleging that SNC-Lavalin Inc. defaulted under the project contracts and is seeking damages.
Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of this and other legal
proceedings generally, (b) determine if the amount included in the Company’s provisions is sufficient or (c) determine the
amount of any potential losses, if any, that may be incurred in connection with any final judgment on these matters.
The Company is a party to other claims and litigation arising in the normal course of operations, including by clients,
subcontractors, and vendors presenting claims for, amongst other things, recovery of costs related to certain projects. Due to the
inherent uncertainties of litigation and-or the early stage of certain proceedings, it is not possible to predict the final outcome of
all ongoing claims and litigation at any given time or to determine the amount of any potential losses, if any. With respect to
claims or litigation arising in the normal course of operations which are at a more advanced stage and which permit a better
assessment of potential outcome, the Company does not expect the resolution of these matters to have a materially adverse
effect on its financial position or results of operations.
94
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
95
95
SNC-Lavalin 2020 Financial Report
34.
LEASES
Right-of-use assets
YEAR ENDED DECEMBER 31, 2020
Depreciation expense on right-of-use assets
Additions
YEAR ENDED DECEMBER 31, 2019
Depreciation expense on right-of-use assets
Additions
Net book value:
As at December 31, 2020
As at December 31, 2019
Lease liabilities
OFFICE REAL
ESTATE
EQUIPMENT
TOTAL
Expenses recognized for employee benefits, including expenses recognized for key management remuneration and directors’
$
$
91,697 $
15,621 $
107,318
33,506 $
6,926 $
40,432
OFFICE REAL
ESTATE
EQUIPMENT
TOTAL
$
$
$
$
99,266 $
12,771 $
112,037
136,727 $
22,207 $
158,934
320,621 $
26,203 $
346,824
406,990 $
31,797 $
438,787
The table below presents the future gross lease liabilities payments from continuing operations as at December 31, 2020 and
2019:
MATURITY
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
DECEMBER 31
2020 (1)
DECEMBER 31
2019
$
124,137 $
154,432
281,070
218,794
346,427
255,566
$
624,001 $
756,425
Defined benefit and defined contribution pension plans, other long-term benefits and other
(1)
Excludes future gross lease liabilities payments related to lease liabilities reclassified to “Liabilities of disposal groups classified as held for sale” in the
consolidated statement of financial position as at December 31, 2020.
Amounts recognized in the income statement from continuing operations
YEARS ENDED DECEMBER 31
Depreciation expense on right-of-use assets
Interest expense on lease liabilities (Note 27)
Expense relating to short-term leases
Expense relating to variable lease payments not included in the measurement of the lease liabilities
Income from subleasing right-of-use assets
(2)
Comparative figures have been re-presented (see Notes 2C and 39)
Amounts recognized in the statement of cash flows
2020
2019 (2)
99,475 $
100,896
21,174 $
21,023
1,337 $
28,561 $
5,594 $
1,317
33,926
11,735
$
$
$
$
$
Total cash outflows for leases amounted to $182.4 million for the year ended December 31, 2020 (2019: $186.7 million).
Operating leases
Operating leases, in which the Company is the lessor, relate mainly to equipment owned by the Company. For the year ended
December 31, 2020, the lease income on operating leases amounted to $14.5 million (2019: $13.4 million).
35.
REMUNERATION
A)
EMPLOYEE REMUNERATION
fees, are analyzed as follows:
YEARS ENDED DECEMBER 31
Short-term benefits (1)
Share-based payments
Defined contribution pension plans
2020
2019
$
3,704,686 $
4,098,596
10,079
170,472
40,648
16,061
153,327
38,718
$
3,925,885 $
4,306,702
Defined benefit pension plans, other long-term benefits and other post-employment benefits
(1)
B)
Short-term benefits include mainly wages, salaries, social security contributions, sick leaves, profit-sharing and bonuses, non-monetary benefits and
termination benefits that are expected to be settled within twelve months after the end of the annual reporting period.
KEY MANAGEMENT REMUNERATION AND DIRECTORS’ FEES
The Company’s key management include all employees that are classified at the executive levels, corresponding mainly to the
vice-presidents and above, and all members of the Company’s Board of Directors.
In 2020, the number of individuals included as key management was 143 people (2019: 177 people).
Expenses recognized for key management remuneration and directors’ fees, even if the services were provided only for a
portion of the year, are detailed as follows:
YEARS ENDED DECEMBER 31
Short-term benefits (2)
Share-based payments
Termination benefits
post-employment benefits
2020
2019
$
80,354 $
103,222
7,505
5,067
1,764
2,219
8,419
2,131
$
94,690 $
115,991
(2)
Short-term benefits include mainly wages, salaries, social security contributions, sick leaves, profit-sharing and bonuses and non-monetary benefits that
are expected to be settled within twelve months after the end of the annual reporting period.
96
96
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
97
OFFICE REAL
ESTATE
EQUIPMENT
TOTAL
Expenses recognized for employee benefits, including expenses recognized for key management remuneration and directors’
fees, are analyzed as follows:
35.
REMUNERATION
A)
EMPLOYEE REMUNERATION
YEARS ENDED DECEMBER 31
Short-term benefits (1)
Share-based payments
Defined contribution pension plans
Defined benefit pension plans, other long-term benefits and other post-employment benefits
2020
2019
$
3,704,686 $
4,098,596
10,079
170,472
40,648
3,925,885 $
$
16,061
153,327
38,718
4,306,702
(1)
B)
Short-term benefits include mainly wages, salaries, social security contributions, sick leaves, profit-sharing and bonuses, non-monetary benefits and
termination benefits that are expected to be settled within twelve months after the end of the annual reporting period.
KEY MANAGEMENT REMUNERATION AND DIRECTORS’ FEES
The Company’s key management include all employees that are classified at the executive levels, corresponding mainly to the
vice-presidents and above, and all members of the Company’s Board of Directors.
In 2020, the number of individuals included as key management was 143 people (2019: 177 people).
Expenses recognized for key management remuneration and directors’ fees, even if the services were provided only for a
portion of the year, are detailed as follows:
YEARS ENDED DECEMBER 31
Short-term benefits (2)
Share-based payments
Termination benefits
Defined benefit and defined contribution pension plans, other long-term benefits and other
post-employment benefits
2020
2019
$
80,354 $
103,222
7,505
5,067
1,764
2,219
8,419
2,131
$
94,690 $
115,991
(2)
Short-term benefits include mainly wages, salaries, social security contributions, sick leaves, profit-sharing and bonuses and non-monetary benefits that
are expected to be settled within twelve months after the end of the annual reporting period.
34.
LEASES
Right-of-use assets
YEAR ENDED DECEMBER 31, 2020
Depreciation expense on right-of-use assets
Additions
YEAR ENDED DECEMBER 31, 2019
Depreciation expense on right-of-use assets
Additions
Net book value:
As at December 31, 2020
As at December 31, 2019
Lease liabilities
2019:
MATURITY
Not later than 1 year
Later than 5 years
Later than 1 year and not later than 5 years
YEARS ENDED DECEMBER 31
Depreciation expense on right-of-use assets
Interest expense on lease liabilities (Note 27)
Expense relating to short-term leases
$
$
$
$
$
$
91,697 $
15,621 $
107,318
33,506 $
6,926 $
40,432
OFFICE REAL
ESTATE
EQUIPMENT
TOTAL
99,266 $
12,771 $
112,037
136,727 $
22,207 $
158,934
320,621 $
26,203 $
346,824
406,990 $
31,797 $
438,787
DECEMBER 31
2020 (1)
DECEMBER 31
2019
$
124,137 $
154,432
281,070
218,794
346,427
255,566
$
624,001 $
756,425
2020
2019 (2)
99,475 $
100,896
21,174 $
21,023
1,337 $
28,561 $
5,594 $
1,317
33,926
11,735
$
$
$
$
$
The table below presents the future gross lease liabilities payments from continuing operations as at December 31, 2020 and
(1)
Excludes future gross lease liabilities payments related to lease liabilities reclassified to “Liabilities of disposal groups classified as held for sale” in the
consolidated statement of financial position as at December 31, 2020.
Amounts recognized in the income statement from continuing operations
Expense relating to variable lease payments not included in the measurement of the lease liabilities
Income from subleasing right-of-use assets
(2)
Comparative figures have been re-presented (see Notes 2C and 39)
Amounts recognized in the statement of cash flows
Total cash outflows for leases amounted to $182.4 million for the year ended December 31, 2020 (2019: $186.7 million).
Operating leases
Operating leases, in which the Company is the lessor, relate mainly to equipment owned by the Company. For the year ended
December 31, 2020, the lease income on operating leases amounted to $14.5 million (2019: $13.4 million).
96
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
97
97
SNC-Lavalin 2020 Financial Report
36.
RELATED PARTY TRANSACTIONS
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES
In the normal course of its operations, SNC-Lavalin enters into transactions with certain of its associates and joint ventures,
mainly its Capital investments. Investments in which SNC-Lavalin has significant influence or joint control, which are
accounted for by the equity method, are considered related parties.
The main subsidiaries, joint ventures, joint operations and associates of the Company at December 31, 2020 and 2019, except
where otherwise indicated, in addition to their jurisdiction of incorporation and the percentage of voting shares beneficially
owned, or controlled, or directed, directly or indirectly by the Company or the percentage of joint arrangement interest are set
For the years ended December 31, 2020 and 2019, SNC-Lavalin recognized the following transactions with its related parties:
out below:
DECEMBER 31
DECEMBER 31
(3)
87,349
93,176
47,186
2019
717,471
210,543
160,063
29,702
method and at fair value through other comprehensive income (Note 5C)
YEARS ENDED DECEMBER 31
2020
PS&PM revenue from contracts with investments accounted for by the equity method
$
556,541 $
$
38,262 $
38,043
Atkins Nuclear Secured Holdings Corporation
AUSHI LLC (previously, Atkins US Holdings Inc.) (1)
DECEMBER 31
2020
DECEMBER 31
2019
$
177,598 $
110,169
165,371
108,330
$
24,921 $
70,724
Trade receivables from investments accounted for by the equity method
Retentions on client contracts from investments accounted for by the equity method (2)
Remaining commitment to invest in Capital investments accounted for by the equity
(1)
In addition, an amount of $2.4 million of distribution receivable from a Capital investment accounted for by the equity method was included in “Other
current financial assets” in the consolidated statement of financial position as at December 31, 2020 (2019: $nil).
As at December 31, 2020 and 2019, SNC-Lavalin has the following balances with its related parties:
Income from Capital investments accounted for by the equity method
Dividends and distributions received from Capital investments accounted for by the equity
method (1)
Income from PS&PM investments accounted for by the equity method
Dividends and distributions received from PS&PM investments accounted for by the equity
method
SUBSIDIARIES
Atkins China Limited
Atkins Danmark A/S
Atkins International Holdings Limited
Atkins Limited
Atkins North America, Inc.
Candu Energy Inc.
Faithful+Gould, Inc.
Faithful+Gould Limited
Faithful+Gould Saudi Arabia Limited
InPower BC General Partnership
Kentz Canada Holdings Limited
Kentz Corporation Limited
Kentz Pty Ltd.
Kentz US Resources Corporation
Linxon Gulf LLC (2)
Linxon Pvt Ltd
Linxon Switzerland Ltd
Protrans BC Operations Ltd.
P.T. SNC-Lavalin TPS
Saudi Arabian Kentz Co. Ltd.
SNC-Lavalin SA
SNC-Lavalin (GB) Holdings Limited
SNC-Lavalin (GB) Limited
SNC-Lavalin (Guernsey) Holdings Ltd.
SNC-Lavalin (Malaysia) Sdn. Bhd.
SNC-Lavalin (Proprietary) Limited
SNC-Lavalin Algérie EURL
SNC-Lavalin Arabia Co. Ltd.
SNC-Lavalin ATP Inc.
SNC-Lavalin Australia Pty. Ltd.
SNC-Lavalin Capital Inc.
SNC-Lavalin Chile SpA
SNC-Lavalin Colombia S.A.S.
SNC-Lavalin Construction Inc.
SNC-Lavalin Construction (Ontario) Inc.
SNC-Lavalin Constructors Inc.
SNC-Lavalin Constructors International Inc.
SNC-Lavalin Constructors (Pacific) Inc.
SNC-Lavalin Defence Programs Inc.
SNC-Lavalin Engineering India Private Limited
SNC-Lavalin Engineers & Constructors, Inc.
SNC-Lavalin Europe B.V.
SNC-Lavalin Europe S.A.S.
(1)
(2)
AUSHI LLC.
contractual agreements.
2020
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
49.0
51.0
100.0
100.0
95.0
75.0
—
100.0
100.0
100.0
100.0
—
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0 United Arab Emirates
United Kingdom
2019
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
95.0
75.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
COUNTRY
China
Denmark
United Kingdom
United Kingdom
United States
United States
United States
Canada
United States
United Kingdom
Saudi Arabia
Canada
Canada
Jersey
Australia
United States
Switzerland
Canada
Indonesia
Saudi Arabia
Belgium
United Kingdom
United Kingdom
Guernsey
Malaysia
South Africa
Algeria
Saudi Arabia
Canada
Australia
Canada
Chile
Colombia
Canada
Canada
Canada
Canada
Canada
India
United States
United States
Netherlands
France
(2) Included in “Contract assets” or “Contract liabilities” in the statement of financial position
(3) Included in “Other current financial liabilities” in the statement of financial position
All of these related party transactions are measured at fair value.
98
98
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
99
On December 31, 2020, Atkins US Holdings Inc. was converted from a Delaware corporation into a Delaware limited liability company bearing the name
Although the Company holds less than 50% of the equity shares of Linxon Gulf LLC, the Company exercises control over this entity based on its
In the normal course of its operations, SNC-Lavalin enters into transactions with certain of its associates and joint ventures,
mainly its Capital investments. Investments in which SNC-Lavalin has significant influence or joint control, which are
accounted for by the equity method, are considered related parties.
For the years ended December 31, 2020 and 2019, SNC-Lavalin recognized the following transactions with its related parties:
YEARS ENDED DECEMBER 31
PS&PM revenue from contracts with investments accounted for by the equity method
$
556,541 $
Income from Capital investments accounted for by the equity method
Dividends and distributions received from Capital investments accounted for by the equity
method (1)
method
(1)
Income from PS&PM investments accounted for by the equity method
Dividends and distributions received from PS&PM investments accounted for by the equity
In addition, an amount of $2.4 million of distribution receivable from a Capital investment accounted for by the equity method was included in “Other
current financial assets” in the consolidated statement of financial position as at December 31, 2020 (2019: $nil).
$
38,262 $
38,043
2020
87,349
93,176
47,186
2019
717,471
210,543
160,063
29,702
As at December 31, 2020 and 2019, SNC-Lavalin has the following balances with its related parties:
Trade receivables from investments accounted for by the equity method
Retentions on client contracts from investments accounted for by the equity method (2)
Remaining commitment to invest in Capital investments accounted for by the equity
method and at fair value through other comprehensive income (Note 5C)
(3)
(2) Included in “Contract assets” or “Contract liabilities” in the statement of financial position
(3) Included in “Other current financial liabilities” in the statement of financial position
All of these related party transactions are measured at fair value.
DECEMBER 31
2020
DECEMBER 31
2019
$
177,598 $
110,169
165,371
108,330
$
24,921 $
70,724
36.
RELATED PARTY TRANSACTIONS
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES
The main subsidiaries, joint ventures, joint operations and associates of the Company at December 31, 2020 and 2019, except
where otherwise indicated, in addition to their jurisdiction of incorporation and the percentage of voting shares beneficially
owned, or controlled, or directed, directly or indirectly by the Company or the percentage of joint arrangement interest are set
out below:
DECEMBER 31
2020
DECEMBER 31
2019
SUBSIDIARIES
Atkins China Limited
Atkins Danmark A/S
Atkins International Holdings Limited
Atkins Limited
Atkins North America, Inc.
Atkins Nuclear Secured Holdings Corporation
AUSHI LLC (previously, Atkins US Holdings Inc.) (1)
Candu Energy Inc.
Faithful+Gould, Inc.
Faithful+Gould Limited
Faithful+Gould Saudi Arabia Limited
InPower BC General Partnership
Kentz Canada Holdings Limited
Kentz Corporation Limited
Kentz Pty Ltd.
Kentz US Resources Corporation
Linxon Gulf LLC (2)
Linxon Pvt Ltd
Linxon Switzerland Ltd
Protrans BC Operations Ltd.
P.T. SNC-Lavalin TPS
Saudi Arabian Kentz Co. Ltd.
SNC-Lavalin SA
SNC-Lavalin (GB) Holdings Limited
SNC-Lavalin (GB) Limited
SNC-Lavalin (Guernsey) Holdings Ltd.
SNC-Lavalin (Malaysia) Sdn. Bhd.
SNC-Lavalin (Proprietary) Limited
SNC-Lavalin Algérie EURL
SNC-Lavalin Arabia Co. Ltd.
SNC-Lavalin ATP Inc.
SNC-Lavalin Australia Pty. Ltd.
SNC-Lavalin Capital Inc.
SNC-Lavalin Chile SpA
SNC-Lavalin Colombia S.A.S.
SNC-Lavalin Construction Inc.
SNC-Lavalin Construction (Ontario) Inc.
SNC-Lavalin Constructors Inc.
SNC-Lavalin Constructors International Inc.
SNC-Lavalin Constructors (Pacific) Inc.
SNC-Lavalin Defence Programs Inc.
SNC-Lavalin Engineering India Private Limited
SNC-Lavalin Engineers & Constructors, Inc.
SNC-Lavalin Europe B.V.
SNC-Lavalin Europe S.A.S.
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
49.0
51.0
100.0
100.0
95.0
75.0
—
100.0
100.0
100.0
100.0
—
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
%
51.0
95.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
COUNTRY
China
Denmark
United Kingdom
United Kingdom
United States
United States
United States
Canada
United States
United Kingdom
Saudi Arabia
Canada
Canada
Jersey
Australia
United States
100.0
49.0 United Arab Emirates
United Kingdom
51.0
Switzerland
Canada
Indonesia
Saudi Arabia
Belgium
United Kingdom
United Kingdom
Guernsey
Malaysia
South Africa
Algeria
Saudi Arabia
Canada
Australia
Canada
Chile
Colombia
Canada
Canada
United States
Canada
Canada
Canada
India
United States
Netherlands
France
100.0
100.0
75.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
(1)
(2)
On December 31, 2020, Atkins US Holdings Inc. was converted from a Delaware corporation into a Delaware limited liability company bearing the name
AUSHI LLC.
Although the Company holds less than 50% of the equity shares of Linxon Gulf LLC, the Company exercises control over this entity based on its
contractual agreements.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
99
99
SNC-Lavalin 2020 Financial Report
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES (CONTINUED)
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES (CONTINUED)
DECEMBER 31
2020
DECEMBER 31
2019
SUBSIDIARIES
SNC-Lavalin GEM Ontario Inc.
SNC-Lavalin GEM Québec Inc.
SNC-Lavalin Highway Holdings Inc.
SNC-Lavalin Inc.
SNC-Lavalin International Inc.
SNC-Lavalin International S.A.S.
SNC-Lavalin Investments Inc.
SNC-Lavalin Major Projects Inc.
SNC-Lavalin Nuclear Inc.
SNC-Lavalin Operations & Maintenance Inc.
SNC-Lavalin Peru S.A.
SNC-Lavalin Polska Sp. Z o.o.
SNC-Lavalin Projetos Industriais Ltda.
SNC-Lavalin Rail & Transit Limited
SNC-Lavalin Romania S.A.
SNC-Lavalin SA (PTY) LTD
SNC-Lavalin Stavibel Inc.
SNC-Lavalin UK Limited
The Atkins North America Holdings Corporation
The SNC-Lavalin Corporation
TransitNEXT General Partnership
WS Atkins International Limited
WS Atkins Limited (previously, WS Atkins plc)
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
—
100.0
100.0
100.0
100.0
100.0
100.0
100.0
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
COUNTRY
Canada
Canada
Canada
Canada
Canada
France
Canada
Canada
Canada
Canada
Peru
Poland
Brazil
100.0
100.0 United Kingdom
Romania
South Africa
Canada
100.0
100.0 United Kingdom
United States
United States
Canada
100.0
100.0 United Kingdom
100.0 United Kingdom
100.0
100.0
100.0
100.0
70.0
DECEMBER 31
2020
DECEMBER 31
2019
%
COUNTRY
JOINT VENTURES
Capital investments
407 East Development Group General Partnership
407 International Inc. (1)
Crosslinx Transit Solutions General Partnership
Rideau Transit Group General Partnership
Signature on the Saint-Laurent Group General Partnership
TC Dôme S.A.S. (2)
Other
Canadian National Energy Alliance Ltd.
Central Plateau Cleanup Company LLC
Comprehensive Decommissioning International, LLC
SNC-Lavalin International Inc. and Zuhair Fayez Engineering Consultancies Company
%
50.0
6.76
25.0
40.0
50.0
51.0
50.0
22.0
40.0
50.0
50.0
6.76
25.0
40.0
50.0
51.0
50.0
22.0
40.0
50.0
JOINT OPERATIONS
407 East Construction General Partnership
Crosslinx Transit Solutions Constructors G.P.
NouvLR General Partnership
Signature on the Saint Lawrence Construction General Partnership
SLN-Aecon JV
SNC-Dragados-Pennecon G.P.
UGL Kentz Joint Venture
DECEMBER 31
2020
DECEMBER 31
2019
%
50.0
25.0
24.0
45.0
40.0
40.0
50.0
%
50.0
25.0
24.0
45.0
40.0
40.0
50.0
Canada
Canada
Canada
Canada
Canada
France
Canada
United States
United States
Saudi Arabia
COUNTRY
Canada
Canada
Canada
Canada
Canada
Canada
Australia
(1)
(2)
Although the Company holds less than 20% of the equity shares of 407 International Inc., the Company exercises joint control over this entity based on its
contractual agreements.
Although the Company’s ownership interest in TC Dôme S.A.S. is more than 50%, the Company does not exercise control over this entity based on its
contractual agreements.
100
100
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
ASSOCIATES
Capital investments
Myah Tipaza S.p.A.
Shariket Kahraba Hadjret En Nouss S.p.A.
SNC-Lavalin Infrastructure Partners LP
38. GOVERNMENT GRANTS
DECEMBER 31
DECEMBER 31
2020
%
25.5
26.0
20.0
2019
%
25.5
26.0
20.0
COUNTRY
Algeria
Algeria
Canada
In the year ended December 31, 2020, the Company participated in various government assistance programs related to
COVID-19, mainly in Canada and in the United Kingdom. The main programs resulted in governments subsidizing a portion of
salaries paid by qualifying employers who experienced a decrease in activities exceeding a certain threshold or subsidizing
salaries of employees that were no longer providing services to their employers but continued to receive compensation.
In the year ended December 31, 2020, SNC-Lavalin recognized government grants in reduction of “Direct costs of activities”
for $75.3 million and in reduction of “Corporate selling, general and administrative expenses” for $3.6 million in the
consolidated income statement, as an offset of costs for which the grants were intended to compensate.
39.
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS CLASSIFIED AS HELD
FOR SALE
A)
DISCONTINUED OPERATIONS - OIL & GAS BUSINESS
On February 9, 2021, the Company announced that it entered into a binding agreement to sell its Oil & Gas business, which was
previously included in the Resources segment, to Kentech Corporate Holdings Limited. The transaction, subject to regulatory
approvals and satisfaction of customary closing conditions, is expected to be completed in 2021. As at December 31, 2020, the
Oil & Gas business was classified as a disposal group held for sale and as a discontinued operation.
The results of the Oil & Gas business for the years ended December 31, 2020 and 2019 were as follows:
YEARS ENDED DECEMBER 31
Revenues from PS&PM
Impairment of goodwill
Other expenses
Impairment of intangible assets related to business combinations
Gain on disposal of South African subsidiaries (Note 6)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell
EBIT from discontinued operations
Net financial income (expenses)
Loss before income taxes from discontinued operations
Income taxes related to pre-tax loss from the ordinary activities of discontinued operations
Income taxes related to remeasurement of assets of disposal group classified as held for sale to
fair value less cost to sell
Net loss from discontinued operations
2020
2019
$
1,142,375 $
1,885,778
—
—
(1,801,015)
(72,831)
(1,423,078)
(2,239,144)
6,205
(271,566)
(546,064)
(261)
(546,325)
(73,064)
—
—
(2,227,212)
3,026
(2,224,186)
111,610
10,045
—
$
(609,344) $
(2,112,576)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost to sell
Following the classification of the Oil & Gas business as held for sale, a write-down of $271.6 million ($261.5 million after
income taxes) was recognized as at December 31, 2020 to reduce the carrying amount of the assets in the disposal group
classified as held for sale to their estimated fair value less cost to sell. The expected proceeds to be received by the Company as
contemplated in the agreement with Kentech Corporate Holdings Limited is substantially aligned with the Company’s estimated
fair value of the disposal group classified as held for sale.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
101
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES (CONTINUED)
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES (CONTINUED)
SUBSIDIARIES
SNC-Lavalin GEM Ontario Inc.
SNC-Lavalin GEM Québec Inc.
SNC-Lavalin Highway Holdings Inc.
SNC-Lavalin Inc.
SNC-Lavalin International Inc.
SNC-Lavalin International S.A.S.
SNC-Lavalin Investments Inc.
SNC-Lavalin Major Projects Inc.
SNC-Lavalin Nuclear Inc.
SNC-Lavalin Operations & Maintenance Inc.
SNC-Lavalin Peru S.A.
SNC-Lavalin Polska Sp. Z o.o.
SNC-Lavalin Projetos Industriais Ltda.
SNC-Lavalin Rail & Transit Limited
SNC-Lavalin Romania S.A.
SNC-Lavalin SA (PTY) LTD
SNC-Lavalin Stavibel Inc.
SNC-Lavalin UK Limited
The Atkins North America Holdings Corporation
The SNC-Lavalin Corporation
TransitNEXT General Partnership
WS Atkins International Limited
WS Atkins Limited (previously, WS Atkins plc)
JOINT VENTURES
Capital investments
407 East Development Group General Partnership
407 International Inc. (1)
Crosslinx Transit Solutions General Partnership
Rideau Transit Group General Partnership
Signature on the Saint-Laurent Group General Partnership
TC Dôme S.A.S. (2)
Other
Canadian National Energy Alliance Ltd.
Central Plateau Cleanup Company LLC
Comprehensive Decommissioning International, LLC
JOINT OPERATIONS
407 East Construction General Partnership
Crosslinx Transit Solutions Constructors G.P.
NouvLR General Partnership
Signature on the Saint Lawrence Construction General Partnership
SLN-Aecon JV
SNC-Dragados-Pennecon G.P.
UGL Kentz Joint Venture
(1)
(2)
contractual agreements.
contractual agreements.
100
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31
DECEMBER 31
100.0 United Kingdom
100.0 United Kingdom
100.0 United Kingdom
100.0 United Kingdom
DECEMBER 31
DECEMBER 31
2020
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
—
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2020
%
50.0
6.76
25.0
40.0
50.0
51.0
50.0
22.0
40.0
50.0
2020
%
50.0
25.0
24.0
45.0
40.0
40.0
50.0
2019
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
70.0
100.0
100.0
100.0
100.0
2019
%
50.0
6.76
25.0
40.0
50.0
51.0
50.0
22.0
40.0
50.0
2019
%
50.0
25.0
24.0
45.0
40.0
40.0
50.0
COUNTRY
Canada
Canada
Canada
Canada
Canada
France
Canada
Canada
Canada
Canada
Peru
Poland
Brazil
Romania
South Africa
Canada
United States
United States
Canada
COUNTRY
Canada
Canada
Canada
Canada
Canada
France
Canada
United States
United States
Saudi Arabia
COUNTRY
Canada
Canada
Canada
Canada
Canada
Canada
Australia
SNC-Lavalin International Inc. and Zuhair Fayez Engineering Consultancies Company
DECEMBER 31
DECEMBER 31
Although the Company holds less than 20% of the equity shares of 407 International Inc., the Company exercises joint control over this entity based on its
Although the Company’s ownership interest in TC Dôme S.A.S. is more than 50%, the Company does not exercise control over this entity based on its
ASSOCIATES
Capital investments
Myah Tipaza S.p.A.
Shariket Kahraba Hadjret En Nouss S.p.A.
SNC-Lavalin Infrastructure Partners LP
38. GOVERNMENT GRANTS
DECEMBER 31
2020
DECEMBER 31
2019
%
25.5
26.0
20.0
%
COUNTRY
25.5
26.0
20.0
Algeria
Algeria
Canada
In the year ended December 31, 2020, the Company participated in various government assistance programs related to
COVID-19, mainly in Canada and in the United Kingdom. The main programs resulted in governments subsidizing a portion of
salaries paid by qualifying employers who experienced a decrease in activities exceeding a certain threshold or subsidizing
salaries of employees that were no longer providing services to their employers but continued to receive compensation.
In the year ended December 31, 2020, SNC-Lavalin recognized government grants in reduction of “Direct costs of activities”
for $75.3 million and in reduction of “Corporate selling, general and administrative expenses” for $3.6 million in the
consolidated income statement, as an offset of costs for which the grants were intended to compensate.
39.
A)
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS CLASSIFIED AS HELD
FOR SALE
DISCONTINUED OPERATIONS - OIL & GAS BUSINESS
On February 9, 2021, the Company announced that it entered into a binding agreement to sell its Oil & Gas business, which was
previously included in the Resources segment, to Kentech Corporate Holdings Limited. The transaction, subject to regulatory
approvals and satisfaction of customary closing conditions, is expected to be completed in 2021. As at December 31, 2020, the
Oil & Gas business was classified as a disposal group held for sale and as a discontinued operation.
The results of the Oil & Gas business for the years ended December 31, 2020 and 2019 were as follows:
YEARS ENDED DECEMBER 31
Revenues from PS&PM
Impairment of goodwill
Impairment of intangible assets related to business combinations
Other expenses
Gain on disposal of South African subsidiaries (Note 6)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell
EBIT from discontinued operations
Net financial income (expenses)
Loss before income taxes from discontinued operations
Income taxes related to pre-tax loss from the ordinary activities of discontinued operations
Income taxes related to remeasurement of assets of disposal group classified as held for sale to
fair value less cost to sell
Net loss from discontinued operations
2020
2019
$
1,142,375 $
1,885,778
—
—
(1,801,015)
(72,831)
(1,423,078)
(2,239,144)
6,205
(271,566)
(546,064)
(261)
(546,325)
(73,064)
—
—
(2,227,212)
3,026
(2,224,186)
111,610
10,045
—
$
(609,344) $
(2,112,576)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost to sell
Following the classification of the Oil & Gas business as held for sale, a write-down of $271.6 million ($261.5 million after
income taxes) was recognized as at December 31, 2020 to reduce the carrying amount of the assets in the disposal group
classified as held for sale to their estimated fair value less cost to sell. The expected proceeds to be received by the Company as
contemplated in the agreement with Kentech Corporate Holdings Limited is substantially aligned with the Company’s estimated
fair value of the disposal group classified as held for sale.
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
101
101
SNC-Lavalin 2020 Financial Report
39.
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
(CONTINUED)
2020 Management’s Discussion and Analysis
Loss per share from discontinued operations
The loss per share from discontinued operations for the years ended December 31, 2020 and 2019 was as follows:
YEARS ENDED DECEMBER 31
Loss per share from discontinued operations – Basic
Loss per share from discontinued operations – Diluted
Cash flows from discontinued operations
$
$
2020
(3.47) $
(3.47) $
2019
(12.03)
(12.03)
The net cash flows incurred by the Oil & Gas business for the years ended December 31, 2020 and 2019 were as follows:
YEARS ENDED DECEMBER 31
Operating activities
Investing activities
Financing activities
Net cash outflow from discontinued operations
B)
OTHER DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
2020
2019
$
(165,899) $
(187,426)
(15,945)
(12,611)
(2,534)
(9,740)
$
(194,455) $
(199,700)
As at December 31, 2020, the Company classified Atkins Consulting Engineers Limited (Kenya), which is part of the EDPM
segment, as a disposal group classified as held for sale. Upon such classification, SNC-Lavalin recognized an impairment loss
on remeasurement of assets of the disposal group to their fair value less cost to sell in the amount of $6.1 million before and
after income taxes. At the beginning of 2021, the Company has entered into an agreement to sell its ownership interest in this
disposal group classified as held for sale. The transaction, subject to regulatory approvals and satisfaction of customary closing
conditions, is expected to be completed in 2021.
C)
PRESENTATION OF DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
The major classes of assets and liabilities of the disposal groups classified as held for sale (see Notes 39A and 39B) as at
December 31, 2020 were as follows:
AT DECEMBER 31
Cash and cash equivalents
Other current financial assets
Current non-financial assets
Deferred income tax asset (Note 29A)
Non-current financial assets
Other non-current non-financial assets
Assets of disposal groups classified as held for sale
Current financial liabilities
Current non-financial liabilities
Deferred income tax liability (Note 29A)
Non-current financial liabilities
Other non-current non-financial liabilities
Liabilities of disposal groups classified as held for sale
Net liabilities of disposal groups classified as held for sale
$
2020
—
134,689
96,647
6,259
2,202
33,377
273,174
198,231
95,073
1,495
12,279
33,225
340,303
$
(67,129)
Cumulative amounts recognized in the other comprehensive income related to the disposal groups classified as held for sale as
at December 31, 2020 were as follows:
AT DECEMBER 31
Exchange differences on translating foreign operations
Other components of equity of disposal groups classified as held for sale
$
$
2020
594,141
594,141
102
102
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
SNC-LAVALIN
March 8, 2021
Management’s Discussion and Analysis (“MD&A”) is designed to provide the reader with a greater understanding
of the Company’s business, the Company’s business strategy and performance, as well as how it manages risk
and capital resources. It is intended to enhance the understanding of the Company’s 2020 audited annual
consolidated financial statements (the “2020 Annual Financial Statements”) and accompanying notes, and
should therefore be read in conjunction with these documents, and should also be read together with the
text below on forward-looking statements. Reference in this MD&A to the “Company” or to “SNC-Lavalin”
means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint
arrangements or associates, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or
associates. Unless otherwise specified, references herein to “Sections” means to Sections of this MD&A.
The Company’s quarterly and annual financial information, its Annual Information Form, its Management Proxy
Circular, other financial documents and additional information relating to the Company are available on both the
Company’s website at www.snclavalin.com and through SEDAR at www.sedar.com. SEDAR is the electronic
system for the official filing of documents by public companies with the Canadian securities regulatory authorities.
None of the information contained on, or connected to the SNC-Lavalin website is incorporated by reference or
otherwise part of this MD&A.
Unless otherwise indicated, all financial information presented in this MD&A, including tabular amounts, is in
Canadian dollars and is prepared in accordance with International Financial Reporting Standards (“IFRS”).
Certain totals, subtotals and percentages may not reconcile due to rounding. Not applicable (“N/A”) is
used to indicate that the percentage change between the current and prior year figures is not meaningful,
or if the percentage change exceeds 1,000%.
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
103
39.
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
2020 Management’s Discussion and Analysis
The loss per share from discontinued operations for the years ended December 31, 2020 and 2019 was as follows:
March 8, 2021
SNC-LAVALIN
Management’s Discussion and Analysis (“MD&A”) is designed to provide the reader with a greater understanding
of the Company’s business, the Company’s business strategy and performance, as well as how it manages risk
and capital resources. It is intended to enhance the understanding of the Company’s 2020 audited annual
consolidated financial statements (the “2020 Annual Financial Statements”) and accompanying notes, and
should therefore be read in conjunction with these documents, and should also be read together with the
text below on forward-looking statements. Reference in this MD&A to the “Company” or to “SNC-Lavalin”
means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint
arrangements or associates, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or
associates. Unless otherwise specified, references herein to “Sections” means to Sections of this MD&A.
The Company’s quarterly and annual financial information, its Annual Information Form, its Management Proxy
Circular, other financial documents and additional information relating to the Company are available on both the
Company’s website at www.snclavalin.com and through SEDAR at www.sedar.com. SEDAR is the electronic
system for the official filing of documents by public companies with the Canadian securities regulatory authorities.
None of the information contained on, or connected to the SNC-Lavalin website is incorporated by reference or
otherwise part of this MD&A.
Unless otherwise indicated, all financial information presented in this MD&A, including tabular amounts, is in
Canadian dollars and is prepared in accordance with International Financial Reporting Standards (“IFRS”).
Certain totals, subtotals and percentages may not reconcile due to rounding. Not applicable (“N/A”) is
used to indicate that the percentage change between the current and prior year figures is not meaningful,
or if the percentage change exceeds 1,000%.
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
103
103
(CONTINUED)
Loss per share from discontinued operations
YEARS ENDED DECEMBER 31
Loss per share from discontinued operations – Basic
Loss per share from discontinued operations – Diluted
Cash flows from discontinued operations
YEARS ENDED DECEMBER 31
Operating activities
Investing activities
Financing activities
$
$
2020
(3.47) $
(3.47) $
2019
(12.03)
(12.03)
2020
2019
$
(165,899) $
(187,426)
(15,945)
(12,611)
(2,534)
(9,740)
$
(194,455) $
(199,700)
The net cash flows incurred by the Oil & Gas business for the years ended December 31, 2020 and 2019 were as follows:
Net cash outflow from discontinued operations
B)
OTHER DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
As at December 31, 2020, the Company classified Atkins Consulting Engineers Limited (Kenya), which is part of the EDPM
segment, as a disposal group classified as held for sale. Upon such classification, SNC-Lavalin recognized an impairment loss
on remeasurement of assets of the disposal group to their fair value less cost to sell in the amount of $6.1 million before and
after income taxes. At the beginning of 2021, the Company has entered into an agreement to sell its ownership interest in this
disposal group classified as held for sale. The transaction, subject to regulatory approvals and satisfaction of customary closing
conditions, is expected to be completed in 2021.
C)
PRESENTATION OF DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
The major classes of assets and liabilities of the disposal groups classified as held for sale (see Notes 39A and 39B) as at
December 31, 2020 were as follows:
AT DECEMBER 31
Cash and cash equivalents
Other current financial assets
Current non-financial assets
Deferred income tax asset (Note 29A)
Non-current financial assets
Other non-current non-financial assets
Assets of disposal groups classified as held for sale
Current financial liabilities
Current non-financial liabilities
Deferred income tax liability (Note 29A)
Non-current financial liabilities
Other non-current non-financial liabilities
Liabilities of disposal groups classified as held for sale
Net liabilities of disposal groups classified as held for sale
Cumulative amounts recognized in the other comprehensive income related to the disposal groups classified as held for sale as
at December 31, 2020 were as follows:
$
(67,129)
AT DECEMBER 31
Exchange differences on translating foreign operations
Other components of equity of disposal groups classified as held for sale
$
$
102
NOTES TO 2020 CONSOLIDATED FINANCIAL STATEMENTS
$
2020
—
134,689
96,647
6,259
2,202
33,377
273,174
198,231
95,073
1,495
12,279
33,225
340,303
2020
594,141
594,141
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
Non-IFRS Financial Measures, Additional IFRS Measures and
Non-Financial Information
Comparative figures
Segment Disclosures
Certain indicators used by the Company to analyze and evaluate its results, which are listed in the table below,
are non-IFRS financial measures, additional IFRS measures or non-financial information. Consequently, they do
not have a standardized meaning as prescribed by IFRS and therefore may not be comparable to similar
measures presented by other issuers. Management believes that, in addition to conventional measures prepared
in accordance with IFRS, these non-IFRS financial measures and certain non-financial information provide
additional insight into the Company’s financial results and certain investors may use this information to evaluate
the Company’s performance from period to period. However, these non-IFRS financial measures and non-
financial information have limitations and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
NON-IFRS FINANCIAL MEASURE OR ADDITIONAL IFRS MEASURE
Performance
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
Adjusted diluted earnings per share (“Adjusted diluted EPS”)
Adjusted earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization
(“Adjusted EBITDA”)
Adjusted net income (loss) attributable to SNC-Lavalin shareholders
Booking-to-revenue ratio
Earnings (loss) before net financial expenses (income) and income taxes (“EBIT”)
Earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization (“EBITDA”)
Return on average shareholders’ equity (“ROASE”)
Segment Adjusted EBIT
Segment Adjusted EBITDA
Segment Adjusted EBIT to revenues ratio (%)
Segment Adjusted EBITDA to revenues ratio (%)
Liquidity
◦
◦
◦
Current ratio
Net recourse debt (or Cash net of recourse debt)
Days Sales Outstanding (“DSO”) (1)
◦ Working capital
(1) DSO is non-financial information that is being presented by the Company for the first time in this MD&A and only for the EDPM segment. The Company believes that DSO can be
additional meaningful non-financial information in evaluating the performance of this segment and is one that is used by certain peer companies operating a substantially similar business.
Definitions of all non-IFRS financial measures, additional IFRS measures and non-financial information are
provided in Section 13 to give the reader a better understanding of the indicators used by management. In
addition, when applicable, the Company provides a clear quantitative reconciliation from the non-IFRS financial
measures to the most directly comparable measure calculated in accordance with IFRS, refer to Section 13 for
references to the sections of this MD&A where these reconciliations are provided.
104
104
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
Effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to (without
any change to this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to
clarify that this measure excludes items other than interest and taxes. Also, effective as of the second quarter of
2020, the Company presents the financial results of Capital separately from SNCL Engineering Services to further
simplify the presentation of financial information excluding Capital. This change, which only modified the
presentation of financial information provided, was made in accordance with IAS 8, Accounting Policies, Changes
in Accounting Estimates and Errors (“IAS 8”) resulting in the restatement of prior year figures.
Discontinued Operations
Certain comparative amounts in the consolidated income statement and in the consolidated statement of
comprehensive income have been re-presented, as a result of the Oil & Gas business, which was previously
included in the Resources segment, being presented as discontinued operations during the current year (refer to
Section 3.2 to this MD&A). Unless otherwise indicated, all financial information represents the Company’s results from
continuing operations.
Forward-Looking Statements
Statements made in this MD&A that describe the Company’s or management’s budgets, estimates, expectations,
forecasts, objectives, predictions, projections of the future or strategies may be “forward-looking statements”, which can
be identified by the use of the conditional or forward-looking terminology such as “aims”, “anticipates”, “assumes”,
“believes”, “cost savings”, “outlooks”, “estimates”, “expects”, “goal”, “intends”, “may”, “plans”, “projects”, “forecasts”,
“should”, “synergies”, “target”, “vision”, “will”, “likely”, or the negative thereof or other variations thereon. Forward-looking
statements also include any other statements that do not refer to historical facts. Forward-looking statements also
include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic
performance, indebtedness, financial condition, losses and future prospects; ii) business and management strategies
and the expansion and growth of the Company’s operations; and iii) the expected additional impacts of the ongoing
COVID-19 pandemic on the business and its operating and reportable segments as well as elements of uncertainty
related thereto. All such forward-looking statements are made pursuant to the “safe-harbour” provisions of applicable
Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and
uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such
forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking
statements are presented for the purpose of assisting investors and others in understanding certain key elements of the
Company’s current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the
Company’s business and anticipated operating environment. Readers are cautioned that such information may not be
appropriate for other purposes.
Forward-looking statements made in this MD&A are based on a number of assumptions believed by the Company to be
reasonable on March 8, 2021. The assumptions are set out throughout this MD&A (particularly in the sections entitled
“Critical Accounting Judgments and Key Sources of Estimation Uncertainty” and “How We Analyze and Report our
Results” in this MD&A). If these assumptions are inaccurate, the Company’s actual results could differ materially from
those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the
Company’s assumptions and estimates to be inaccurate and actual results or events to differ materially from those
expressed in or implied by these forward-looking statements. These risks include, but are not limited to:
(a) additional impacts of the COVID-19 pandemic; (b) execution of the strategic direction announced in 2019;
(c) fixed‑price contracts or the Company’s failure to meet contractual schedule, performance requirements or to execute
projects efficiently; (d) remaining performance obligations; (e) contract awards and timing; (f) being a provider of
services to government agencies; (g) international operations; (h) Nuclear liability; (i) ownership interests in
investments; (j) dependence on third parties; (k) joint ventures and partnerships; (l) information systems and data and
compliance with privacy legislation; (m) competition; (n) professional liability or liability for faulty services; (o) monetary
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
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Non-IFRS Financial Measures, Additional IFRS Measures and
Comparative figures
Non-Financial Information
Segment Disclosures
Certain indicators used by the Company to analyze and evaluate its results, which are listed in the table below,
are non-IFRS financial measures, additional IFRS measures or non-financial information. Consequently, they do
not have a standardized meaning as prescribed by IFRS and therefore may not be comparable to similar
measures presented by other issuers. Management believes that, in addition to conventional measures prepared
in accordance with IFRS, these non-IFRS financial measures and certain non-financial information provide
additional insight into the Company’s financial results and certain investors may use this information to evaluate
the Company’s performance from period to period. However, these non-IFRS financial measures and non-
financial information have limitations and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
NON-IFRS FINANCIAL MEASURE OR ADDITIONAL IFRS MEASURE
Performance
Adjusted diluted earnings per share (“Adjusted diluted EPS”)
Adjusted earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization
Adjusted net income (loss) attributable to SNC-Lavalin shareholders
(“Adjusted EBITDA”)
Booking-to-revenue ratio
Earnings (loss) before net financial expenses (income) and income taxes (“EBIT”)
Earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization (“EBITDA”)
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
Return on average shareholders’ equity (“ROASE”)
Segment Adjusted EBIT
Segment Adjusted EBITDA
Segment Adjusted EBIT to revenues ratio (%)
Segment Adjusted EBITDA to revenues ratio (%)
Liquidity
Current ratio
Net recourse debt (or Cash net of recourse debt)
Days Sales Outstanding (“DSO”) (1)
◦ Working capital
(1) DSO is non-financial information that is being presented by the Company for the first time in this MD&A and only for the EDPM segment. The Company believes that DSO can be
additional meaningful non-financial information in evaluating the performance of this segment and is one that is used by certain peer companies operating a substantially similar business.
Definitions of all non-IFRS financial measures, additional IFRS measures and non-financial information are
provided in Section 13 to give the reader a better understanding of the indicators used by management. In
addition, when applicable, the Company provides a clear quantitative reconciliation from the non-IFRS financial
measures to the most directly comparable measure calculated in accordance with IFRS, refer to Section 13 for
references to the sections of this MD&A where these reconciliations are provided.
Effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to (without
any change to this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to
clarify that this measure excludes items other than interest and taxes. Also, effective as of the second quarter of
2020, the Company presents the financial results of Capital separately from SNCL Engineering Services to further
simplify the presentation of financial information excluding Capital. This change, which only modified the
presentation of financial information provided, was made in accordance with IAS 8, Accounting Policies, Changes
in Accounting Estimates and Errors (“IAS 8”) resulting in the restatement of prior year figures.
Discontinued Operations
Certain comparative amounts in the consolidated income statement and in the consolidated statement of
comprehensive income have been re-presented, as a result of the Oil & Gas business, which was previously
included in the Resources segment, being presented as discontinued operations during the current year (refer to
Section 3.2 to this MD&A). Unless otherwise indicated, all financial information represents the Company’s results from
continuing operations.
Forward-Looking Statements
Statements made in this MD&A that describe the Company’s or management’s budgets, estimates, expectations,
forecasts, objectives, predictions, projections of the future or strategies may be “forward-looking statements”, which can
be identified by the use of the conditional or forward-looking terminology such as “aims”, “anticipates”, “assumes”,
“believes”, “cost savings”, “outlooks”, “estimates”, “expects”, “goal”, “intends”, “may”, “plans”, “projects”, “forecasts”,
“should”, “synergies”, “target”, “vision”, “will”, “likely”, or the negative thereof or other variations thereon. Forward-looking
statements also include any other statements that do not refer to historical facts. Forward-looking statements also
include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic
performance, indebtedness, financial condition, losses and future prospects; ii) business and management strategies
and the expansion and growth of the Company’s operations; and iii) the expected additional impacts of the ongoing
COVID-19 pandemic on the business and its operating and reportable segments as well as elements of uncertainty
related thereto. All such forward-looking statements are made pursuant to the “safe-harbour” provisions of applicable
Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and
uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such
forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking
statements are presented for the purpose of assisting investors and others in understanding certain key elements of the
Company’s current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the
Company’s business and anticipated operating environment. Readers are cautioned that such information may not be
appropriate for other purposes.
Forward-looking statements made in this MD&A are based on a number of assumptions believed by the Company to be
reasonable on March 8, 2021. The assumptions are set out throughout this MD&A (particularly in the sections entitled
“Critical Accounting Judgments and Key Sources of Estimation Uncertainty” and “How We Analyze and Report our
Results” in this MD&A). If these assumptions are inaccurate, the Company’s actual results could differ materially from
those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the
Company’s assumptions and estimates to be inaccurate and actual results or events to differ materially from those
expressed in or implied by these forward-looking statements. These risks include, but are not limited to:
(a) additional impacts of the COVID-19 pandemic; (b) execution of the strategic direction announced in 2019;
(c) fixed‑price contracts or the Company’s failure to meet contractual schedule, performance requirements or to execute
projects efficiently; (d) remaining performance obligations; (e) contract awards and timing; (f) being a provider of
services to government agencies; (g) international operations; (h) Nuclear liability; (i) ownership interests in
investments; (j) dependence on third parties; (k) joint ventures and partnerships; (l) information systems and data and
compliance with privacy legislation; (m) competition; (n) professional liability or liability for faulty services; (o) monetary
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damages and penalties in connection with professional and engineering reports and opinions; (p) insurance coverage;
(q) health and safety; (r) qualified personnel; (s) work stoppages, union negotiations and other labour matters;
(t) extreme weather conditions and the impact of natural or other disasters and global health crises; (u) divestitures and
the sale of significant assets; (v) intellectual property; (w) liquidity and financial position; (x) indebtedness; (y) impact of
operating results and level of indebtedness on financial situation; (z) security under the CDPQ Loan Agreement;
(aa) dependence on subsidiaries to help repay indebtedness; (bb) dividends; (cc) post-employment benefit obligations,
including pension-related obligations; (dd) working capital requirements; (ee) collection from customers; (ff) impairment
of goodwill and other assets; (gg) the impact on the Company of legal and regulatory proceedings, investigations and
litigation settlements; (hh) further regulatory developments as well as employee, agent or partner misconduct or failure
to comply with anti-bribery and other government laws and regulations; (ii) reputation of the Company; (jj) inherent
limitations to the Company’s control framework; (kk) environmental laws and regulations; (ll) Brexit; (mm) global
economic conditions; (nn) fluctuations in commodity prices; and (oo) income taxes.
The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and
uncertainties, and assumptions that could cause the Company’s actual results to differ from current expectations, please
refer to the sections “Risks and Uncertainties”, “How We Analyze and Report Our Results” and “Critical Accounting
Judgments and Key Sources of Estimation Uncertainty” in this MD&A.
The Company may, from time to time, make oral forward-looking statements. The Company advises that the
above paragraphs and the risk factors described in this MD&A should be read for a description of certain factors
that could cause the actual results of the Company to differ materially from those in the oral forward-looking
statements. The forward-looking statements herein reflect the Company’s expectations as at March 8, 2021, when
the Company’s Board of Directors approved this document, and they are subject to change after this date. The
Company does not undertake to update publicly or to revise any written or oral forward-looking information or
statements whether as a result of new information, future events or otherwise, unless required by applicable
legislation or regulation. The forward-looking information and statements contained herein are expressly qualified
in their entirety by this cautionary statement.
Management’s Discussion and Analysis – Table of Contents
1
2
3
4
5
6
7
8
9
Our Business
How We Analyze and Report Our Results
2020 Executive Summary
Financial Performance Analysis
Backlog (Remaining Performance Obligations)
Geographic Breakdown of Revenues
Fourth Quarter Results
Liquidity and Capital Resources
Financial Position
10 Related Party Transactions
11 Critical Accounting Judgments and Key Sources of Estimation Uncertainty
12 Accounting Policies and Changes
Non-IFRS Financial Measures, Additional IFRS Measures and Other Non-Financial
13
Information
14 Risks and Uncertainties
15 Controls and Procedures
16 Quarterly Information
108
110
116
120
136
140
141
145
153
156
156
156
157
166
187
188
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damages and penalties in connection with professional and engineering reports and opinions; (p) insurance coverage;
(q) health and safety; (r) qualified personnel; (s) work stoppages, union negotiations and other labour matters;
(t) extreme weather conditions and the impact of natural or other disasters and global health crises; (u) divestitures and
the sale of significant assets; (v) intellectual property; (w) liquidity and financial position; (x) indebtedness; (y) impact of
operating results and level of indebtedness on financial situation; (z) security under the CDPQ Loan Agreement;
(aa) dependence on subsidiaries to help repay indebtedness; (bb) dividends; (cc) post-employment benefit obligations,
including pension-related obligations; (dd) working capital requirements; (ee) collection from customers; (ff) impairment
of goodwill and other assets; (gg) the impact on the Company of legal and regulatory proceedings, investigations and
litigation settlements; (hh) further regulatory developments as well as employee, agent or partner misconduct or failure
to comply with anti-bribery and other government laws and regulations; (ii) reputation of the Company; (jj) inherent
limitations to the Company’s control framework; (kk) environmental laws and regulations; (ll) Brexit; (mm) global
economic conditions; (nn) fluctuations in commodity prices; and (oo) income taxes.
The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and
uncertainties, and assumptions that could cause the Company’s actual results to differ from current expectations, please
refer to the sections “Risks and Uncertainties”, “How We Analyze and Report Our Results” and “Critical Accounting
Judgments and Key Sources of Estimation Uncertainty” in this MD&A.
The Company may, from time to time, make oral forward-looking statements. The Company advises that the
above paragraphs and the risk factors described in this MD&A should be read for a description of certain factors
that could cause the actual results of the Company to differ materially from those in the oral forward-looking
statements. The forward-looking statements herein reflect the Company’s expectations as at March 8, 2021, when
the Company’s Board of Directors approved this document, and they are subject to change after this date. The
Company does not undertake to update publicly or to revise any written or oral forward-looking information or
statements whether as a result of new information, future events or otherwise, unless required by applicable
legislation or regulation. The forward-looking information and statements contained herein are expressly qualified
in their entirety by this cautionary statement.
Management’s Discussion and Analysis – Table of Contents
1
2
3
4
5
6
7
8
9
Our Business
How We Analyze and Report Our Results
2020 Executive Summary
Financial Performance Analysis
Backlog (Remaining Performance Obligations)
Geographic Breakdown of Revenues
Fourth Quarter Results
Liquidity and Capital Resources
Financial Position
10 Related Party Transactions
11 Critical Accounting Judgments and Key Sources of Estimation Uncertainty
12 Accounting Policies and Changes
Non-IFRS Financial Measures, Additional IFRS Measures and Other Non-Financial
Information
13
14 Risks and Uncertainties
15 Controls and Procedures
16 Quarterly Information
108
110
116
120
136
140
141
145
153
156
156
156
157
166
187
188
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Addressing disruptive trends
The Company’s strategic priorities are the focus for the years ahead. Running concurrently, management see two
significant disruptive trends, which, over the next decade, will greatly influence the built environment, hence the
industry as a whole. The first one is about what gets built and its impact on carbon emissions. As governments
around the world are making carbon neutral commitments, there is a great opportunity for SNC-Lavalin to work
with its customers to help them achieve their net zero aspirations by engineering both the current built
environment and the future.
The Company already provides a strong range of services in relation to the generation of lower-carbon energy,
including nuclear power, renewables, and power distribution solutions. There are many further opportunities as
design influences heavily the demand side of carbon use, and the Company is working with customers already to
design cleaner and more efficient transport, infrastructure, and urban landscapes. Additionally, the Company sees
a strong market in solutions to address resiliency to climate change; for example, flood protection and water
management. Management believes that the Company has a very significant opportunity to position itself ahead
of the market so that it can differentiate the services that it provides to its customers and accelerate the journey to
The second disruptive trend is about how things get built. While many industries have adopted digital technology,
the infrastructure sector has yet to fully adopt the technology available to become more efficient.
The design and engineering of the built environment will be driven by digital advances, and the Company will
have an increased use of these solutions, with the aim of leading the transformation of the infrastructure sector by
connecting people, technology and the power of data in making complex design decisions. The Company made
good progress in laying the foundations for this in 2020 and intends to accelerate its digital focus in 2021 and
net zero.
beyond.
SNC-LAVALIN
Our Business
1.1
OUR BUSINESS
Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with
offices around the world. SNC-Lavalin connects people, technology and data to help shape and deliver
world‑leading concepts and projects, while offering comprehensive innovative solutions across the asset lifecycle.
Our expertise is wide-ranging - consulting & advisory, intelligent networks & cybersecurity, design & engineering,
procurement, project & construction management, operations & maintenance (“O&M”), decommissioning and
sustaining capital.
SNC-Lavalin maintains exceptionally high standards for health and safety, ethics and compliance, and
environmental protection. The Company is committed to delivering quality projects on budget and on schedule to
the complete satisfaction of its clients.
In certain parts of this MD&A, activities from Professional Services & Project Management are collectively referred
to as “PS&PM” (formerly referred to as E&C, or engineering and construction) to distinguish them from “Capital”
activities. PS&PM groups together five of the Company’s segments, namely EDPM, Nuclear, Infrastructure
Services, Resources and Infrastructure EPC Projects, while Capital is its own reportable segment and separate
from PS&PM.
1.2 STRATEGIC DIRECTION FOR SNC-LAVALIN
On July 22, 2019, SNC-Lavalin announced a new strategic direction to position the Company for long-term
sustainable success and become a leading provider of professional engineering services and project
management solutions. The Company’s strategic direction is centered around:
◦
◦
Creating a simplified and more predictable business;
Lowering the Company’s risk profile; and
◦ Generating more consistent earnings, increased cash flow and profitability.
Strategic Priorities
In 2020, the Company continued to refine its strategic direction and reiterated its focus on creating long-term
shareholder value. Despite pressures from the pandemic, SNC-Lavalin has been largely successful in doing this.
Looking forward over the next several years the Company intends to maintain and enhance this focus, as
described below.
SNC-Lavalin’s Strategic Priorities:
◦
◦
◦
◦
Running off LSTK projects successfully;
Driving consistent performance in Engineering Services, unlocking significant value;
Positioning for a sustainable future, driving organic growth by leveraging our current capabilities and
technology; and
Building a connected collaborative organization.
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Addressing disruptive trends
The Company’s strategic priorities are the focus for the years ahead. Running concurrently, management see two
significant disruptive trends, which, over the next decade, will greatly influence the built environment, hence the
industry as a whole. The first one is about what gets built and its impact on carbon emissions. As governments
around the world are making carbon neutral commitments, there is a great opportunity for SNC-Lavalin to work
with its customers to help them achieve their net zero aspirations by engineering both the current built
environment and the future.
The Company already provides a strong range of services in relation to the generation of lower-carbon energy,
including nuclear power, renewables, and power distribution solutions. There are many further opportunities as
design influences heavily the demand side of carbon use, and the Company is working with customers already to
design cleaner and more efficient transport, infrastructure, and urban landscapes. Additionally, the Company sees
a strong market in solutions to address resiliency to climate change; for example, flood protection and water
management. Management believes that the Company has a very significant opportunity to position itself ahead
of the market so that it can differentiate the services that it provides to its customers and accelerate the journey to
net zero.
The second disruptive trend is about how things get built. While many industries have adopted digital technology,
the infrastructure sector has yet to fully adopt the technology available to become more efficient.
The design and engineering of the built environment will be driven by digital advances, and the Company will
have an increased use of these solutions, with the aim of leading the transformation of the infrastructure sector by
connecting people, technology and the power of data in making complex design decisions. The Company made
good progress in laying the foundations for this in 2020 and intends to accelerate its digital focus in 2021 and
beyond.
SNC-LAVALIN
Our Business
1.1
OUR BUSINESS
Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with
offices around the world. SNC-Lavalin connects people, technology and data to help shape and deliver
world‑leading concepts and projects, while offering comprehensive innovative solutions across the asset lifecycle.
Our expertise is wide-ranging - consulting & advisory, intelligent networks & cybersecurity, design & engineering,
procurement, project & construction management, operations & maintenance (“O&M”), decommissioning and
sustaining capital.
SNC-Lavalin maintains exceptionally high standards for health and safety, ethics and compliance, and
environmental protection. The Company is committed to delivering quality projects on budget and on schedule to
the complete satisfaction of its clients.
In certain parts of this MD&A, activities from Professional Services & Project Management are collectively referred
to as “PS&PM” (formerly referred to as E&C, or engineering and construction) to distinguish them from “Capital”
activities. PS&PM groups together five of the Company’s segments, namely EDPM, Nuclear, Infrastructure
Services, Resources and Infrastructure EPC Projects, while Capital is its own reportable segment and separate
from PS&PM.
1.2 STRATEGIC DIRECTION FOR SNC-LAVALIN
On July 22, 2019, SNC-Lavalin announced a new strategic direction to position the Company for long-term
sustainable success and become a leading provider of professional engineering services and project
management solutions. The Company’s strategic direction is centered around:
Creating a simplified and more predictable business;
Lowering the Company’s risk profile; and
◦ Generating more consistent earnings, increased cash flow and profitability.
Strategic Priorities
In 2020, the Company continued to refine its strategic direction and reiterated its focus on creating long-term
shareholder value. Despite pressures from the pandemic, SNC-Lavalin has been largely successful in doing this.
Looking forward over the next several years the Company intends to maintain and enhance this focus, as
described below.
SNC-Lavalin’s Strategic Priorities:
Running off LSTK projects successfully;
Driving consistent performance in Engineering Services, unlocking significant value;
Positioning for a sustainable future, driving organic growth by leveraging our current capabilities and
technology; and
Building a connected collaborative organization.
◦
◦
◦
◦
◦
◦
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How We Analyze and Report Our
Results
2.1
HOW WE REPORT OUR RESULTS
The Company presents its financial information consistent with the manner in which management evaluates
performance by regrouping its activities in six reportable segments, namely: (i) EDPM; (ii) Nuclear;
(iii) Infrastructure Services; (iv) Resources; (v) Infrastructure EPC Projects; and (vi) Capital.
In addition, we further report certain results and provide certain financial information separately for (i) PS&PM
activities across our lines of business, which is thus comprised of five of our six segments, namely EDPM,
Nuclear, Infrastructure Services, Resources and Infrastructure EPC Projects, and (ii) Capital.
PS&PM
What we report in PS&PM includes contracts generating revenues derived mainly from consulting & advisory,
intelligent networks & cybersecurity, design & engineering, procurement, project & construction management,
O&M, decommissioning and sustaining capital. It also includes revenues from lump-sum turnkey (“LSTK”)
construction contracts, for which the Company ceased to bid in July 2019, except for certain repetitive EPC
offerings that are lower-risk, standardized solutions.
EDPM incorporates all consultancy, engineering, design and project management services around the
world. It also leads our efforts to transform the global infrastructure sector by leveraging data and
technology to improve the delivery of our clients’ projects from conception through to eventual operation.
EDPM projects are mainly in transportation (including rail, mass transit, roads and airports), civil
infrastructure, aerospace, defense and security and technology, including some of the world’s most
transformational projects. A significant portion of EDPM’s revenues are derived from the public sector,
including national, provincial, state and local and municipal authorities. Similar to 2019, the EDPM
segment derived all of its revenues during 2020 from reimbursable and engineering services contracts.
Nuclear supports clients across the entire nuclear lifecycle with the full spectrum of services from
consultancy, EPCM services, field services, technology services, spare parts, reactor support and
decommissioning and waste management. As stewards of the CANDU technology, it also provides new-
build and full refurbishment services of CANDU reactors. The Nuclear segment derives its revenues from
reimbursable and engineering services contracts (2020: 99%; 2019: 99%), and LSTK construction
contracts (2020: 1% from one legacy LSTK construction contract; 2019: 1% from two legacy LSTK
construction contracts).
Infrastructure Services includes O&M projects, as well as the Company’s repetitive EPC offerings that
are lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations executed
through its Linxon subsidiary. The segment also includes engineering solutions in hydro, transmission and
distribution, renewables, energy storage, and intelligent networks and cybersecurity. Segment Adjusted
EBIT includes the contribution attributable to non-controlling interests. As such, the Segment Adjusted
EBIT of Linxon, a 51% subsidiary, is reported at 100% both in 2020 and in 2019. The Infrastructure
Services segment derives its revenues from both reimbursable and engineering services contracts (2020:
60%; 2019: 59%) and standardized EPC contracts (2020: 40%; 2019: 41%).
Combined, the three segments described above are presented under the SNCL Engineering Services line of
business, while in previous periods, SNCL Engineering Services also included Capital.
Resources provides a full suite of delivery services primarily to the mining & metallurgy sector, covering
the project lifecycle from project development through project delivery and support services. Resources
ceased bidding for new EPC projects under the LSTK construction contracting modeling in July 2019.
Resources is now focused on providing engineering, EPCM, project management consultancy (“PMC”),
commissioning and technical support services through a lower risk contracting model and operational
delivery is focused on key regions and global clients. Resources also includes the operating phase of a
Build-Own-Operate (BOO) contract in the United States. In the past, Resources included services and
LSTK projects in Oil & Gas, which are now presented as discontinued operations. The Resources
segment derives its revenues from reimbursable and engineering services contracts (2020: 85%;
2019: 47%) and LSTK construction contracts (2020: 15%; 2019: 53%).
Infrastructure EPC Projects includes LSTK construction contracts related to mass transit, heavy rail,
roads, bridges, airports, ports and harbours and water infrastructure. In addition, Infrastructure EPC
Projects includes the LSTK construction contracts related to the former Clean Power segment, as well as
from thermal power activities which the Company exited in 2018. In July 2019, the Company decided to
cease bidding on new LSTK construction contracts. The Infrastructure EPC Projects segment derives its
revenues from LSTK construction contracts (2020: 97%; 2019: 100%) and reimbursable and engineering
services contracts (2020: 3%; 2019: —%).
Combined, the two segments described above are presented under the SNCL Projects line of business.
Contracts that provide for engineering, procurement and construction management services are often referred to
as “EPCM” contracts. Contracts that include engineering services, providing materials and providing or fabricating
equipment, and construction activities are often referred to as “EPC” contracts.
While our contracts are negotiated using a variety of contracting options, PS&PM revenues are derived primarily
from three major types of contracts: reimbursable and engineering services contracts, LSTK construction
contracts, and standardized EPC contracts. PS&PM contracts can be found in the following segments and lines of
business :
PS&PM Breakdown
SNCL Engineering Services
Line of Business
SNCL Projects
Line of Business
EDPM
Segment
Nuclear
Segment
Services
Segment
EPC Projects
Segment
Resources
Segment
Infrastructure
Infrastructure
ü
N/A
N/A
ü
N/A (1)
N/A
ü
N/A
ü
ü
ü
N/A
ü
ü
N/A
Reimbursable and engineering services
contracts
LSTK construction contracts
Standardized EPC contracts
(1) Nuclear includes certain legacy LSTK construction contracts.
The Company derives its PS&PM revenues from reimbursable and engineering services contracts (2020: 81%;
2019: 77%), standardized EPC contracts (2020: 8%; 2019: 7%) and LSTK construction contracts (2020: 11%;
2019: 17%).
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SNC-LAVALIN
How We Analyze and Report Our
Results
2.1
HOW WE REPORT OUR RESULTS
The Company presents its financial information consistent with the manner in which management evaluates
performance by regrouping its activities in six reportable segments, namely: (i) EDPM; (ii) Nuclear;
(iii) Infrastructure Services; (iv) Resources; (v) Infrastructure EPC Projects; and (vi) Capital.
In addition, we further report certain results and provide certain financial information separately for (i) PS&PM
activities across our lines of business, which is thus comprised of five of our six segments, namely EDPM,
Nuclear, Infrastructure Services, Resources and Infrastructure EPC Projects, and (ii) Capital.
PS&PM
What we report in PS&PM includes contracts generating revenues derived mainly from consulting & advisory,
intelligent networks & cybersecurity, design & engineering, procurement, project & construction management,
O&M, decommissioning and sustaining capital. It also includes revenues from lump-sum turnkey (“LSTK”)
construction contracts, for which the Company ceased to bid in July 2019, except for certain repetitive EPC
offerings that are lower-risk, standardized solutions.
EDPM incorporates all consultancy, engineering, design and project management services around the
world. It also leads our efforts to transform the global infrastructure sector by leveraging data and
technology to improve the delivery of our clients’ projects from conception through to eventual operation.
EDPM projects are mainly in transportation (including rail, mass transit, roads and airports), civil
infrastructure, aerospace, defense and security and technology, including some of the world’s most
transformational projects. A significant portion of EDPM’s revenues are derived from the public sector,
including national, provincial, state and local and municipal authorities. Similar to 2019, the EDPM
segment derived all of its revenues during 2020 from reimbursable and engineering services contracts.
Nuclear supports clients across the entire nuclear lifecycle with the full spectrum of services from
consultancy, EPCM services, field services, technology services, spare parts, reactor support and
decommissioning and waste management. As stewards of the CANDU technology, it also provides new-
build and full refurbishment services of CANDU reactors. The Nuclear segment derives its revenues from
reimbursable and engineering services contracts (2020: 99%; 2019: 99%), and LSTK construction
contracts (2020: 1% from one legacy LSTK construction contract; 2019: 1% from two legacy LSTK
construction contracts).
Infrastructure Services includes O&M projects, as well as the Company’s repetitive EPC offerings that
are lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations executed
through its Linxon subsidiary. The segment also includes engineering solutions in hydro, transmission and
distribution, renewables, energy storage, and intelligent networks and cybersecurity. Segment Adjusted
EBIT includes the contribution attributable to non-controlling interests. As such, the Segment Adjusted
EBIT of Linxon, a 51% subsidiary, is reported at 100% both in 2020 and in 2019. The Infrastructure
Services segment derives its revenues from both reimbursable and engineering services contracts (2020:
60%; 2019: 59%) and standardized EPC contracts (2020: 40%; 2019: 41%).
Combined, the three segments described above are presented under the SNCL Engineering Services line of
business, while in previous periods, SNCL Engineering Services also included Capital.
Resources provides a full suite of delivery services primarily to the mining & metallurgy sector, covering
the project lifecycle from project development through project delivery and support services. Resources
ceased bidding for new EPC projects under the LSTK construction contracting modeling in July 2019.
Resources is now focused on providing engineering, EPCM, project management consultancy (“PMC”),
commissioning and technical support services through a lower risk contracting model and operational
delivery is focused on key regions and global clients. Resources also includes the operating phase of a
Build-Own-Operate (BOO) contract in the United States. In the past, Resources included services and
LSTK projects in Oil & Gas, which are now presented as discontinued operations. The Resources
segment derives its revenues from reimbursable and engineering services contracts (2020: 85%;
2019: 47%) and LSTK construction contracts (2020: 15%; 2019: 53%).
Infrastructure EPC Projects includes LSTK construction contracts related to mass transit, heavy rail,
roads, bridges, airports, ports and harbours and water infrastructure. In addition, Infrastructure EPC
Projects includes the LSTK construction contracts related to the former Clean Power segment, as well as
from thermal power activities which the Company exited in 2018. In July 2019, the Company decided to
cease bidding on new LSTK construction contracts. The Infrastructure EPC Projects segment derives its
revenues from LSTK construction contracts (2020: 97%; 2019: 100%) and reimbursable and engineering
services contracts (2020: 3%; 2019: —%).
Combined, the two segments described above are presented under the SNCL Projects line of business.
Contracts that provide for engineering, procurement and construction management services are often referred to
as “EPCM” contracts. Contracts that include engineering services, providing materials and providing or fabricating
equipment, and construction activities are often referred to as “EPC” contracts.
While our contracts are negotiated using a variety of contracting options, PS&PM revenues are derived primarily
from three major types of contracts: reimbursable and engineering services contracts, LSTK construction
contracts, and standardized EPC contracts. PS&PM contracts can be found in the following segments and lines of
business :
PS&PM Breakdown
SNCL Engineering Services
Line of Business
SNCL Projects
Line of Business
EDPM
Segment
Nuclear
Segment
Infrastructure
Services
Segment
Infrastructure
EPC Projects
Segment
Resources
Segment
ü
N/A
N/A
ü
N/A (1)
N/A
ü
N/A
ü
ü
ü
N/A
ü
ü
N/A
Reimbursable and engineering services
contracts
LSTK construction contracts
Standardized EPC contracts
(1) Nuclear includes certain legacy LSTK construction contracts.
The Company derives its PS&PM revenues from reimbursable and engineering services contracts (2020: 81%;
2019: 77%), standardized EPC contracts (2020: 8%; 2019: 7%) and LSTK construction contracts (2020: 11%;
2019: 17%).
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SNC-Lavalin 2020 Financial Report SNC-LAVALIN
CAPITAL
Capital is SNC-Lavalin’s investment, financing and asset management arm, responsible for developing projects,
arranging financing, investing equity, undertaking complex financial modeling and managing its infrastructure
investments for optimal returns. Its activities are principally concentrated in infrastructure such as bridges,
highways, mass transit systems, power facilities, energy infrastructure, water treatment plants and social
infrastructure (e.g. hospitals). The Capital segment includes SNC-Lavalin's 20% ownership interest in and
management of SNC-Lavalin Infrastructure Partners LP.
Capital is involved in public-private partnerships. These arrangements allow for the transfer to the private sector of
many of the risks associated with designing, building, operating, maintaining and financing such assets. In return,
the client will either: i) commit to making regular payments, usually in the form of availability payments, upon the
start of operations of the infrastructure for a defined period of time (typically 20 to 40 years); or ii) authorize the
infrastructure concession entity to charge users of the infrastructure for a defined period of time; or iii) a
combination of both.
All investments are structured to earn a return on capital adequate for the risk profile of each individual project.
Capital investment revenues are generated mainly from dividends or distributions received by SNC-Lavalin from
the investment concession entities or from all or a portion of an investment concession entity’s revenues or net
results, depending on the accounting method required by IFRS.
It is the Company’s view that the aggregate fair value of its Capital investments is much higher than their net book
value of $426.7 million as at December 31, 2020. The Company’s remaining stake of 6.76% in 407 International
Inc. (“Highway 407 ETR”) represents the most significant portion of the total fair value of the Company’s Capital
investments portfolio.
As at December 31, 2020 and 2019, the net book value of Capital investments can be summarized as follows:
SNC-LAVALIN
Under the equity method of accounting, distributions from a joint venture or associate reduce the carrying amount
of the investment. The equity method of accounting requires the Company to stop recognizing its share of the
losses of a joint venture or associate when the recognition of such losses results in a negative balance for its
investment, or where dividends declared by the joint venture or associate are in excess of the carrying amount of
the investment. In these events, the carrying value of the investment is reduced to $nil, but does not become
negative, unless the Company has incurred legal or constructive obligations or made payments on behalf of the
joint venture or associate. In these situations, the Company no longer recognizes its share of net income of a
Capital investment based on its ownership, but rather recognizes the excess amount of dividends declared by a
joint venture or associate in its net income.
ADDITIONAL FINANCIAL INFORMATION ON CAPITAL INVESTMENTS
The Company provides additional financial information on its Capital investments to allow the reader to have a
better understanding of the financial position, results of operations and cash flows for PS&PM activities and
Capital investments. As such, the following information on the Company’s Capital investments is included in the
2020 Annual Financial Statements:
Consolidated statement of
The net book value of Capital investments accounted for by the equity and cost methods, distinctively.
Non-recourse debt from Capital investments controlled by the Company.
Consolidated statement of
For Capital investments controlled by the Company:
Other notes to the audited
Net income attributable to SNC-Lavalin shareholders from Capital.
Repayment and increase of non-recourse debt from Capital investments.
financial position and related
notes
cash flows and related notes
annual consolidated financial
statements
Certain other notes provide information regarding Capital investments separately from PS&PM.
AT DECEMBER 31
(IN MILLIONS $)
Highway 407 ETR (1)
Others
Total
2020
— $
426.7
426.7 $
2019
—
356.0
356.0
$
$
2.2
HOW WE BUDGET AND FORECAST OUR RESULTS
The Company prepares a formal annual budget (“Annual Budget”) in the fourth quarter of each year.
(1) The net book value is $nil as the Company had previously stopped recognizing its share of the losses of Highway 407 ETR when the cumulative losses and dividends resulted in a
negative balance for the Company’s investment in Highway 407 ETR.
ACCOUNTING METHODOLOGY FOR CAPITAL INVESTMENTS
The Company’s investments are accounted for by either the cost, equity or consolidation methods depending on
whether SNC-Lavalin exercises, or not, significant influence, joint control or control. The revenues included in the
Company’s consolidated income statement are influenced by the consolidation method applied to a Capital
investment, as described below:
ACCOUNTING METHODS FOR THE
COMPANY’S INVESTMENTS IN CAPITAL
INVESTMENTS
REVENUES INCLUDED IN THE COMPANY’S CONSOLIDATED INCOME STATEMENT
Consolidation
Revenues that are recognized and reported by the Capital investments
Equity method
At fair value through other
comprehensive income
SNC-Lavalin’s share of net results of the Capital investment or dividends from its Capital
investments for which the carrying amount is $nil, which are recognized when the Company’s right
to receive payment has been established
Dividends and distributions from the Capital investments
In evaluating the performance of the segment, the relationship between revenues and Segment Adjusted EBIT is
not meaningful, as a significant portion of the investments are accounted for by the cost and equity methods,
which do not reflect the line by line items of the individual Capital investment’s financial results.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
Under the equity method of accounting, distributions from a joint venture or associate reduce the carrying amount
of the investment. The equity method of accounting requires the Company to stop recognizing its share of the
losses of a joint venture or associate when the recognition of such losses results in a negative balance for its
investment, or where dividends declared by the joint venture or associate are in excess of the carrying amount of
the investment. In these events, the carrying value of the investment is reduced to $nil, but does not become
negative, unless the Company has incurred legal or constructive obligations or made payments on behalf of the
joint venture or associate. In these situations, the Company no longer recognizes its share of net income of a
Capital investment based on its ownership, but rather recognizes the excess amount of dividends declared by a
joint venture or associate in its net income.
ADDITIONAL FINANCIAL INFORMATION ON CAPITAL INVESTMENTS
The Company provides additional financial information on its Capital investments to allow the reader to have a
better understanding of the financial position, results of operations and cash flows for PS&PM activities and
Capital investments. As such, the following information on the Company’s Capital investments is included in the
2020 Annual Financial Statements:
Consolidated statement of
financial position and related
notes
Consolidated statement of
cash flows and related notes
Other notes to the audited
annual consolidated financial
statements
The net book value of Capital investments accounted for by the equity and cost methods, distinctively.
Non-recourse debt from Capital investments controlled by the Company.
For Capital investments controlled by the Company:
Repayment and increase of non-recourse debt from Capital investments.
Net income attributable to SNC-Lavalin shareholders from Capital.
Certain other notes provide information regarding Capital investments separately from PS&PM.
$
— $
2020
426.7
$
426.7 $
2019
—
356.0
356.0
2.2
HOW WE BUDGET AND FORECAST OUR RESULTS
The Company prepares a formal annual budget (“Annual Budget”) in the fourth quarter of each year.
SNC-LAVALIN
CAPITAL
Capital is SNC-Lavalin’s investment, financing and asset management arm, responsible for developing projects,
arranging financing, investing equity, undertaking complex financial modeling and managing its infrastructure
investments for optimal returns. Its activities are principally concentrated in infrastructure such as bridges,
highways, mass transit systems, power facilities, energy infrastructure, water treatment plants and social
infrastructure (e.g. hospitals). The Capital segment includes SNC-Lavalin's 20% ownership interest in and
management of SNC-Lavalin Infrastructure Partners LP.
Capital is involved in public-private partnerships. These arrangements allow for the transfer to the private sector of
many of the risks associated with designing, building, operating, maintaining and financing such assets. In return,
the client will either: i) commit to making regular payments, usually in the form of availability payments, upon the
start of operations of the infrastructure for a defined period of time (typically 20 to 40 years); or ii) authorize the
infrastructure concession entity to charge users of the infrastructure for a defined period of time; or iii) a
combination of both.
All investments are structured to earn a return on capital adequate for the risk profile of each individual project.
Capital investment revenues are generated mainly from dividends or distributions received by SNC-Lavalin from
the investment concession entities or from all or a portion of an investment concession entity’s revenues or net
results, depending on the accounting method required by IFRS.
It is the Company’s view that the aggregate fair value of its Capital investments is much higher than their net book
value of $426.7 million as at December 31, 2020. The Company’s remaining stake of 6.76% in 407 International
Inc. (“Highway 407 ETR”) represents the most significant portion of the total fair value of the Company’s Capital
As at December 31, 2020 and 2019, the net book value of Capital investments can be summarized as follows:
investments portfolio.
AT DECEMBER 31
(IN MILLIONS $)
Highway 407 ETR (1)
Others
Total
(1) The net book value is $nil as the Company had previously stopped recognizing its share of the losses of Highway 407 ETR when the cumulative losses and dividends resulted in a
negative balance for the Company’s investment in Highway 407 ETR.
ACCOUNTING METHODOLOGY FOR CAPITAL INVESTMENTS
The Company’s investments are accounted for by either the cost, equity or consolidation methods depending on
whether SNC-Lavalin exercises, or not, significant influence, joint control or control. The revenues included in the
Company’s consolidated income statement are influenced by the consolidation method applied to a Capital
investment, as described below:
ACCOUNTING METHODS FOR THE
INVESTMENTS
Consolidation
COMPANY’S INVESTMENTS IN CAPITAL
REVENUES INCLUDED IN THE COMPANY’S CONSOLIDATED INCOME STATEMENT
Equity method
investments for which the carrying amount is $nil, which are recognized when the Company’s right
Revenues that are recognized and reported by the Capital investments
SNC-Lavalin’s share of net results of the Capital investment or dividends from its Capital
At fair value through other
comprehensive income
to receive payment has been established
Dividends and distributions from the Capital investments
In evaluating the performance of the segment, the relationship between revenues and Segment Adjusted EBIT is
not meaningful, as a significant portion of the investments are accounted for by the cost and equity methods,
which do not reflect the line by line items of the individual Capital investment’s financial results.
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113
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SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
The Annual Budget is a key tool used by management to monitor the Company’s performance and progress
against key financial objectives in accordance with the Company’s strategic plan. The Company updates its
annual expected results in the first, second and third quarters (“Quarterly Forecasts”), which are also presented to
the Board of Directors. In addition, the performance of each project (i.e., its estimated revenues and costs to
complete) is reviewed by the relevant project manager and, depending on the size and risk profile of the project,
by, among others, key management personnel, including the divisional manager, the business unit executive
vice‑president, the sector president, the Chief Financial Officer and the Chief Executive Officer.
The key elements taken into account when estimating revenues and gross margin for budget and forecast
purposes from PS&PM activities are the following:
KEY ELEMENTS
IMPACT ON THE ANNUAL BUDGET
Backlog
Firm contracts used to estimate a portion of future revenues taking into account the execution and
expected performance of each individual project.
Prospects list
Execution and
expected performance
Unsigned contracts that the Company is currently bidding on and/or future projects on which it
intends to bid. Management selects specific prospects, which are deemed representative of its
upcoming activities, to include in the budget together with other sources of revenues such as
recurring business from known clients and expected service orders under master service
agreements.
Revenues and costs (or execution) of projects are determined on an individual project basis for
major projects or by groups of projects and take into consideration assumptions on risks and
uncertainties that can have an impact on the progress and/or profitability of that project. This
includes, but is not limited to, performance of the Company’s employees and subcontractors or
equipment suppliers, as well as price and availability of labour, equipment and materials.
Regarding its Capital budget and forecast, the Company establishes the expected results based on assumptions
specific to each investment.
One of the key management tools for monitoring the Company’s performance is the monthly and quarterly
evaluation and analysis of actual results compared with the Annual Budget or the Quarterly Forecasts, for
revenues and profitability. This enables management to analyze its performance and, if necessary, take remedial
actions.
Variations from plan may arise mainly from the following:
SOURCE OF VARIATION
EXPLANATION
Level of activity
Changes in the estimated costs to
complete each individual project
(“cost reforecasts”)
Variation depends on the number of newly awarded, ongoing, completed or near-
completed projects, and on the progress made on each of these projects in the
period.
Variation of the estimated costs to complete projects for fixed-price contracts result
in either a positive or negative impact to a project’s results. Increases or decreases
in profitability for any given fixed-price project are largely dependent on project
execution.
Changes in the estimated revenues
and in the recovery of such revenues
Variation of the estimated revenues of projects, including the impact from change
orders and claims, as well as the change in estimates on the recovery of trade
receivables and contract assets may impact the financial results of the Company.
Changes in the results of its Capital
investments
Variation in the financial results of each Capital investment accounted for under the
consolidation or equity methods will impact the financial results of the Company.
Additions to the Company’s Capital investments portfolio, or divestitures from it,
can also impact the Company’s results.
SOURCE OF VARIATION
EXPLANATION
Level of selling, general and
administrative expenses
Acquisition-related costs and
integration costs
results.
Variation in selling, general and administrative expenses has a direct impact on the
profitability of the Company. The level of selling, general and administrative
expenses is influenced by the level of activity, and can depend on several other
factors not related to project execution or performance that can be recurring or not.
Business acquisitions might require the Company to incur significant acquisition-
related costs and integration costs, which have an impact on actual and future
Restructuring costs, goodwill and
where it conducts business, modifications to its offerings and changes in market
other intangible assets impairment
perspectives might result, among other factors, in restructuring costs, goodwill and
Changes made to the way the Company operates, closure of certain locations
other intangible assets impairment, having an impact on actual and future results.
Financial expense
Variation in interest rates could have an impact on the Company’s results, as some
of its financing bears interest at a variable rate.
Income taxes
Foreign exchange
Unforeseen impacts related to
ongoing and continued duration of
COVID-19 pandemic
Variation in income taxes impact the profitability of the Company, and depends on
various factors, such as the geographic areas in which the Company is present,
the statutory tax rates enacted, the nature of the revenues earned by the
Company, the recoverability of deferred tax assets as well as tax assessments
made by authorities.
As the Company operates in many countries, foreign currency exchange rates can
cause variances to estimates as the budgets and forecasts are prepared at
specific rates. It should be noted that the Company has a foreign exchange
hedging policy that limits the volatility in results caused by foreign exchange
fluctuations.
Although the Company’s financial and operational results commencing during the
latter part of the first quarter of 2020 demonstrated a measure of resilience to the
COVID-19 pandemic as described elsewhere
in
this MD&A, despite
the
commencement of vaccination campaigns in various regions and countries, the
duration, scope, severity and full impacts of COVID-19 (including subsequent
waves and variants thereof) continue to remain inherently uncertain and difficult to
quantify and account for and plan for in the Company’s budgeting and planning
processes and COVID-19 particularly impacted certain infrastructure projects.
Refer to the updated risk factor entitled “Additional impacts of the COVID-19
Pandemic” in Section 14 of this MD&A for a description of the various risks and
uncertainties posed by COVID-19 to the Company and its business and financial
affairs.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
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115
SNC-LAVALIN
SNC-LAVALIN
SOURCE OF VARIATION
EXPLANATION
Level of selling, general and
administrative expenses
Variation in selling, general and administrative expenses has a direct impact on the
profitability of the Company. The level of selling, general and administrative
expenses is influenced by the level of activity, and can depend on several other
factors not related to project execution or performance that can be recurring or not.
Acquisition-related costs and
integration costs
Business acquisitions might require the Company to incur significant acquisition-
related costs and integration costs, which have an impact on actual and future
results.
Prospects list
upcoming activities, to include in the budget together with other sources of revenues such as
Income taxes
recurring business from known clients and expected service orders under master service
Restructuring costs, goodwill and
other intangible assets impairment
Changes made to the way the Company operates, closure of certain locations
where it conducts business, modifications to its offerings and changes in market
perspectives might result, among other factors, in restructuring costs, goodwill and
other intangible assets impairment, having an impact on actual and future results.
Variation in income taxes impact the profitability of the Company, and depends on
various factors, such as the geographic areas in which the Company is present,
the statutory tax rates enacted, the nature of the revenues earned by the
Company, the recoverability of deferred tax assets as well as tax assessments
made by authorities.
Financial expense
Variation in interest rates could have an impact on the Company’s results, as some
of its financing bears interest at a variable rate.
Foreign exchange
Unforeseen impacts related to
ongoing and continued duration of
COVID-19 pandemic
As the Company operates in many countries, foreign currency exchange rates can
cause variances to estimates as the budgets and forecasts are prepared at
specific rates. It should be noted that the Company has a foreign exchange
hedging policy that limits the volatility in results caused by foreign exchange
fluctuations.
Although the Company’s financial and operational results commencing during the
latter part of the first quarter of 2020 demonstrated a measure of resilience to the
COVID-19 pandemic as described elsewhere
the
commencement of vaccination campaigns in various regions and countries, the
duration, scope, severity and full impacts of COVID-19 (including subsequent
waves and variants thereof) continue to remain inherently uncertain and difficult to
quantify and account for and plan for in the Company’s budgeting and planning
processes and COVID-19 particularly impacted certain infrastructure projects.
Refer to the updated risk factor entitled “Additional impacts of the COVID-19
Pandemic” in Section 14 of this MD&A for a description of the various risks and
uncertainties posed by COVID-19 to the Company and its business and financial
affairs.
this MD&A, despite
in
The Annual Budget is a key tool used by management to monitor the Company’s performance and progress
against key financial objectives in accordance with the Company’s strategic plan. The Company updates its
annual expected results in the first, second and third quarters (“Quarterly Forecasts”), which are also presented to
the Board of Directors. In addition, the performance of each project (i.e., its estimated revenues and costs to
complete) is reviewed by the relevant project manager and, depending on the size and risk profile of the project,
by, among others, key management personnel, including the divisional manager, the business unit executive
vice‑president, the sector president, the Chief Financial Officer and the Chief Executive Officer.
The key elements taken into account when estimating revenues and gross margin for budget and forecast
purposes from PS&PM activities are the following:
KEY ELEMENTS
IMPACT ON THE ANNUAL BUDGET
Backlog
expected performance of each individual project.
Firm contracts used to estimate a portion of future revenues taking into account the execution and
Unsigned contracts that the Company is currently bidding on and/or future projects on which it
intends to bid. Management selects specific prospects, which are deemed representative of its
agreements.
Execution and
expected performance
Revenues and costs (or execution) of projects are determined on an individual project basis for
major projects or by groups of projects and take into consideration assumptions on risks and
uncertainties that can have an impact on the progress and/or profitability of that project. This
includes, but is not limited to, performance of the Company’s employees and subcontractors or
equipment suppliers, as well as price and availability of labour, equipment and materials.
Regarding its Capital budget and forecast, the Company establishes the expected results based on assumptions
specific to each investment.
One of the key management tools for monitoring the Company’s performance is the monthly and quarterly
evaluation and analysis of actual results compared with the Annual Budget or the Quarterly Forecasts, for
revenues and profitability. This enables management to analyze its performance and, if necessary, take remedial
actions.
Variations from plan may arise mainly from the following:
SOURCE OF VARIATION
EXPLANATION
Level of activity
Variation depends on the number of newly awarded, ongoing, completed or near-
completed projects, and on the progress made on each of these projects in the
Changes in the estimated costs to
complete each individual project
(“cost reforecasts”)
Variation of the estimated costs to complete projects for fixed-price contracts result
in either a positive or negative impact to a project’s results. Increases or decreases
in profitability for any given fixed-price project are largely dependent on project
period.
execution.
Changes in the estimated revenues
and in the recovery of such revenues
Variation of the estimated revenues of projects, including the impact from change
orders and claims, as well as the change in estimates on the recovery of trade
receivables and contract assets may impact the financial results of the Company.
Changes in the results of its Capital
consolidation or equity methods will impact the financial results of the Company.
investments
Additions to the Company’s Capital investments portfolio, or divestitures from it,
Variation in the financial results of each Capital investment accounted for under the
can also impact the Company’s results.
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SNC-LAVALIN
2020 Executive Summary
3.1
EXECUTIVE SUMMARY – KEY FINANCIAL INDICATORS
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Income Statements
Revenues
EBIT (2)
EBITDA (2)
Net income (loss) from continuing operations
Net loss from discontinued operations
Net income (loss)
Earnings (loss) per share diluted from continuing operations (“Diluted EPS”) (in $)
Revenues from PS&PM from continuing operations
Adjusted net income (loss) attributable to SNC-Lavalin shareholders
from PS&PM (2)
Adjusted diluted EPS from PS&PM (in $) (2)
Adjusted PS&PM EBITDA (% of revenues from PS&PM) (2)
Financial Position & Cash Flows
Cash and cash equivalents (at December 31)
Cash net of recourse debt (Net recourse debt) (at December 31) (2)
Net cash generated from (used for) operating activities
Additional Indicator
Revenue backlog (at December 31)
2020
2019 (1) CHANGE (%)
The repayment of some recourse and limited recourse debt.
$ 7,007.5
(292.0)
28.7
(346.9)
(609.3)
(956.3)
(2.03)
6,878.1
(188.4)
(1.07)
1.6 %
$ 7,629.8
2,968.6
3,327.2
2,443.2
(2,112.6)
330.6
13.90
7,367.1
150.2
0.86
6.6 %
(8.2) %
N/A
(99.1) %
N/A
(71.2) %
N/A
N/A
(6.6) %
N/A
N/A
(75.4) %
$ 932.9
$
1,188.6
(21.5) %
(240.0)
121.5
7.7
(355.3)
N/A
N/A
$ 13,187.8
$ 14,137.7
(6.7) %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measures or additional IFRS measures. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from
these financial measures to the most directly comparable measure specified under IFRS, when applicable.
The Company's financial highlights reflect the following major items:
2020
◦
The presentation of the Company’s Oil & Gas business as held for sale and as discontinued operations. The
net loss from discontinued operations in 2020 also includes:
◦
◦
a write down of $271.6 million in the value of this disposal group presented as held for sale;
activities of subsidiaries in South Africa that were part of the Oil & Gas business until their disposal in
the fourth quarter of 2020, along with the associated $6.2 million gain on disposal.
◦
A net loss from continuing operations of $346.9 million, resulting mainly from:
◦
◦
◦
a $359.7 million negative Segment Adjusted EBIT from Infrastructure EPC Projects, mainly due to
unfavourable reforecasts, commercial claims receivable reductions, additional provisions related to
legacy litigation matters and the effect of lower productivity caused by COVID-19;
a $171.1 million negative Segment Adjusted EBIT from Resources mainly resulting from charges for
remaining LSTK projects and other historical claims and litigation matters; and
a higher level of unallocated general and administrative expenses, which includes a $58.3 million
negative adjustment to the provision for the Pyrrhotite Case litigation.
◦
◦
Restructuring costs of $63.3 million.
A $7.5 million loss on disposal of a subsidiary in Belgium and a $6.1 million write down of the value of a
disposal group presented as held for sale for an entity in Kenya.
Income tax recognized in net income of $59.0 million.
Loss arising on financial assets (liabilities) at fair value through profit or loss in an amount of $61.9 million,
resulting mainly from the negative fair value revaluation of $57.2 million of the 407 International Inc.
(“Highway 407 ETR”) contingent consideration receivable.
◦
The disposal by the Company of 10.01% of the shares of Highway 407 ETR resulting in:
$3.0 billion of cash proceeds collected at closing in August 2019 and up to $250 million contingently
payable over a period of 10 years;
A gain before taxes of $3.0 billion; and
The settlement of the federal charges (PPSC), resulting in an expense of $257.3 million.
An impairment of goodwill and intangible assets related to Resources, now presented in discontinued
operations, totaling $1.9 billion and largely attributable to the Company's decision to cease bidding on LSTK
construction projects, as well as lower than expected performance in Resources in the first half of 2019 and
challenges in replenishing the backlog has been recorded under discontinued operations;
A Segment Adjusted EBIT of $558.9 million from SNCL Engineering Services and a negative Segment
2019
◦
◦
◦
◦
◦
◦
◦
◦
◦
Adjusted EBIT of $217.7 million from SNCL Projects;
Restructuring costs of $79.7 million.
3.2
EXECUTIVE SUMMARY – OTHER ITEMS
COVID-19 PANDEMIC
The COVID-19 pandemic has had and continues to have a significant impact on the global economy, clients’
businesses and on the Company’s operations, financial and operating results and planning ability. Revenue has
been pressured by lower client volumes, delays in new business ramp-ups, travel restrictions and facility
lockdowns, all of which impacts service delivery. SNC-Lavalin is actively working to manage its clients’ changing
requirements, adapt its service delivery models, ensure data security and manage costs. Going forward, impacts
to the Company’s financial performance will be a function of how long the COVID-19 pandemic lasts on a global
basis, and how long it takes clients’ businesses to stabilize and recover.
Early on in the pandemic, the Company announced actions taken in response to the economic disruptions
resulting from the COVID-19 pandemic while continuing to closely monitor and adjust its plans for its different
business segments and customers in response to the then rapidly evolving situation. Most of the Company’s
SNCL Engineering Services personnel continued servicing clients from non-office-based locations throughout
large parts of 2020 and the Company transitioned work among different jurisdictions as required. The Company
also announced that management had undertaken actions and measures focused on reducing costs and
managing cash flow across the Company to provide flexibility in addressing varying levels of revenue and
customer business, including significantly reducing discretionary expenditure where not required to directly
support client delivery and carefully managing capital expenditure. Where it was not possible for employees to
carry on productive client work, either due to temporary or extended shutdowns or the nature of the client service,
remedial actions were taken. Across the broader employee population, this included reductions in base pay and
hours, temporary leaves of absence and furloughs. All of SNC-Lavalin’s executive leadership took a 20%
reduction in base salary and members of the Company’s Board of Directors took a 20% reduction in cash
compensation for the second quarter of 2020. .
Given the nature of the Company’s activities, including in the important infrastructure space, the Company
continued, in compliance with international, federal, provincial, state, municipal and local requirements, to
materially operate in 2020 despite the pandemic. However, notwithstanding the continued operations of the
Company, COVID-19 has actually negatively impacted the Company’s business and it will likely continue to have
further adverse impacts on its operations and financial results.
116
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117
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2020 Executive Summary
3.1
EXECUTIVE SUMMARY – KEY FINANCIAL INDICATORS
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Income Statements
Revenues
EBIT (2)
EBITDA (2)
Net income (loss) from continuing operations
Net loss from discontinued operations
Net income (loss)
Earnings (loss) per share diluted from continuing operations (“Diluted EPS”) (in $)
Revenues from PS&PM from continuing operations
Adjusted net income (loss) attributable to SNC-Lavalin shareholders
from PS&PM (2)
Adjusted diluted EPS from PS&PM (in $) (2)
Adjusted PS&PM EBITDA (% of revenues from PS&PM) (2)
Financial Position & Cash Flows
Cash and cash equivalents (at December 31)
Cash net of recourse debt (Net recourse debt) (at December 31) (2)
Net cash generated from (used for) operating activities
Additional Indicator
Revenue backlog (at December 31)
2020
2019 (1) CHANGE (%)
$ 7,007.5
$ 7,629.8
(2,112.6)
(71.2) %
(292.0)
28.7
(346.9)
(609.3)
(956.3)
(2.03)
6,878.1
(188.4)
(1.07)
1.6 %
2,968.6
3,327.2
2,443.2
330.6
13.90
7,367.1
150.2
0.86
6.6 %
(8.2) %
N/A
(99.1) %
(6.6) %
(75.4) %
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$ 932.9
$
1,188.6
(21.5) %
(240.0)
121.5
7.7
(355.3)
$ 13,187.8
$ 14,137.7
(6.7) %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measures or additional IFRS measures. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from
these financial measures to the most directly comparable measure specified under IFRS, when applicable.
The Company's financial highlights reflect the following major items:
2020
◦
◦
◦
◦
◦
◦
The presentation of the Company’s Oil & Gas business as held for sale and as discontinued operations. The
net loss from discontinued operations in 2020 also includes:
a write down of $271.6 million in the value of this disposal group presented as held for sale;
activities of subsidiaries in South Africa that were part of the Oil & Gas business until their disposal in
the fourth quarter of 2020, along with the associated $6.2 million gain on disposal.
◦
A net loss from continuing operations of $346.9 million, resulting mainly from:
a $359.7 million negative Segment Adjusted EBIT from Infrastructure EPC Projects, mainly due to
unfavourable reforecasts, commercial claims receivable reductions, additional provisions related to
legacy litigation matters and the effect of lower productivity caused by COVID-19;
a $171.1 million negative Segment Adjusted EBIT from Resources mainly resulting from charges for
remaining LSTK projects and other historical claims and litigation matters; and
a higher level of unallocated general and administrative expenses, which includes a $58.3 million
negative adjustment to the provision for the Pyrrhotite Case litigation.
Restructuring costs of $63.3 million.
◦
◦
A $7.5 million loss on disposal of a subsidiary in Belgium and a $6.1 million write down of the value of a
disposal group presented as held for sale for an entity in Kenya.
◦
◦
Income tax recognized in net income of $59.0 million.
Loss arising on financial assets (liabilities) at fair value through profit or loss in an amount of $61.9 million,
resulting mainly from the negative fair value revaluation of $57.2 million of the 407 International Inc.
(“Highway 407 ETR”) contingent consideration receivable.
2019
◦
The disposal by the Company of 10.01% of the shares of Highway 407 ETR resulting in:
◦
◦
◦
$3.0 billion of cash proceeds collected at closing in August 2019 and up to $250 million contingently
payable over a period of 10 years;
A gain before taxes of $3.0 billion; and
The repayment of some recourse and limited recourse debt.
◦
◦
◦
◦
The settlement of the federal charges (PPSC), resulting in an expense of $257.3 million.
An impairment of goodwill and intangible assets related to Resources, now presented in discontinued
operations, totaling $1.9 billion and largely attributable to the Company's decision to cease bidding on LSTK
construction projects, as well as lower than expected performance in Resources in the first half of 2019 and
challenges in replenishing the backlog has been recorded under discontinued operations;
A Segment Adjusted EBIT of $558.9 million from SNCL Engineering Services and a negative Segment
Adjusted EBIT of $217.7 million from SNCL Projects;
Restructuring costs of $79.7 million.
3.2
EXECUTIVE SUMMARY – OTHER ITEMS
COVID-19 PANDEMIC
The COVID-19 pandemic has had and continues to have a significant impact on the global economy, clients’
businesses and on the Company’s operations, financial and operating results and planning ability. Revenue has
been pressured by lower client volumes, delays in new business ramp-ups, travel restrictions and facility
lockdowns, all of which impacts service delivery. SNC-Lavalin is actively working to manage its clients’ changing
requirements, adapt its service delivery models, ensure data security and manage costs. Going forward, impacts
to the Company’s financial performance will be a function of how long the COVID-19 pandemic lasts on a global
basis, and how long it takes clients’ businesses to stabilize and recover.
Early on in the pandemic, the Company announced actions taken in response to the economic disruptions
resulting from the COVID-19 pandemic while continuing to closely monitor and adjust its plans for its different
business segments and customers in response to the then rapidly evolving situation. Most of the Company’s
SNCL Engineering Services personnel continued servicing clients from non-office-based locations throughout
large parts of 2020 and the Company transitioned work among different jurisdictions as required. The Company
also announced that management had undertaken actions and measures focused on reducing costs and
managing cash flow across the Company to provide flexibility in addressing varying levels of revenue and
customer business, including significantly reducing discretionary expenditure where not required to directly
support client delivery and carefully managing capital expenditure. Where it was not possible for employees to
carry on productive client work, either due to temporary or extended shutdowns or the nature of the client service,
remedial actions were taken. Across the broader employee population, this included reductions in base pay and
hours, temporary leaves of absence and furloughs. All of SNC-Lavalin’s executive leadership took a 20%
reduction in base salary and members of the Company’s Board of Directors took a 20% reduction in cash
compensation for the second quarter of 2020. .
Given the nature of the Company’s activities, including in the important infrastructure space, the Company
continued, in compliance with international, federal, provincial, state, municipal and local requirements, to
materially operate in 2020 despite the pandemic. However, notwithstanding the continued operations of the
Company, COVID-19 has actually negatively impacted the Company’s business and it will likely continue to have
further adverse impacts on its operations and financial results.
116
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
117
117
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
On February 9, 2021, the Company announced that, due to unprecedented COVID-19 related challenges
involving lower productivity attributable to revised working conditions caused by the pandemic and supply chain
disruptions, it was taking a $90 million charge on its remaining three Canadian LSTK infrastructure projects. In
light of the ongoing uncertainty on the timing and scope of reimbursement of certain COVID-19 incremental costs,
no revenue associated with the additional COVID-19 costs was recognized by the Company for these projects in
the fourth quarter of 2020 and, until greater clarity is forthcoming, it will continue to only recognize COVID-19
expenses on the ongoing LSTK infrastructure projects. The Company believes that, in 2021, these types of
infrastructure projects may continue to represent the areas of the Company’s business that would likely be most
adversely impacted by the ongoing COVID-19 pandemic
From among its lines of business, the Company’s SNCL Engineering Services business remained resilient in 2020
in the face of COVID-19, with only modest revenue decreases in 2020, compared to the prior year, and achieved
a solid financial performance given the challenging circumstances, as the decisive and early actions that
management took to align costs, as described above, proved to be effective and allowed the Company to
continue delivering for its customers. In some geographies, the Company benefited from government support in
2020 that was primarily aimed at preventing job losses, re-hiring workers previously laid off as a result of
COVID-19, and better positioning the Company to resume normal operations following the crisis. While such
government support largely offset the costs incurred by the Company in 2020 to maintain capacities in excess of
demand-driven employment requirements in certain regions, the Company stands ready to take additional cost
action in the future should the situation demand, while looking to preserve its world class capability to be ready
and available to deliver for its customers when the economic recovery begins.
COVID-19 also negatively impacted our Capital investment in Highway 407 ETR and no dividend revenues were
received from this Capital investment in the second and fourth quarters of 2020.
Looking ahead, the Company has developed contingency plans to reduce costs even further if the situation further
deteriorates or lasts longer than current expectations. The Company will continue to actively monitor the situation
and may take further actions as may be necessary or appropriate for the health and safety of employees,
contractors, customers, suppliers or others or as required by international, federal, provincial, state, municipal or
local authorities.
Significant uncertainty continues to exist concerning the magnitude, duration and impacts of the COVID-19
pandemic, including with regard to the effects on clients and demand for the Company’s services. Accordingly,
actual results for future financial periods could differ materially versus current expectations and current results and
financial condition discussed herein may not be indicative of future operating results and trends.
Refer to the risk factor entitled “Additional impacts of the COVID-19 Pandemic” in Section 14 of this MD&A for a
more fulsome description of the various risks and uncertainties posed by COVID-19 to the Company and its
business and financial affairs.
TRANSFORMATION OF RESOURCES AND AGREEMENT TO SELL OIL & GAS BUSINESS (PRESENTED
AS DISCONTINUED OPERATIONS)
2021.
In July 2019, the Company announced that it would be exploring all options with regard to its Resources
Business, as part of its decision to exit LSTK contracting and focus on its high potential Engineering Services
business. The Company subsequently decided and announced, in July 2020 that it would be transforming its
Resources Business to focus on a Services offering in a limited number of existing primary markets, which
complement the Company’s broader engineering services capabilities and strategy.
The resulting Resources Services business was to be focused on the primary markets of the Americas and the
Middle East, exiting all non-primary markets through either sale or closure, such as the disposals of the South
African Resources business and the European fertilizer business based in Belgium in 2020.
On February 9, 2021, the Company announced it entered into a binding agreement to sell its Resources Oil &
Gas business, including services and LSTK projects. The transaction is subject to regulatory approvals and
satisfaction of customary closing conditions and is expected to close in the second quarter of 2021. Upon closing,
the transaction is expected to generate a gain on disposal due to the reclassification of the foreign exchange
cumulative translation adjustments balance from equity to the income statement at that time.
In line with the Company’s strategy, the sale of this business, which includes all ongoing and recently completed
Oil & Gas LSTK projects, is expected to significantly reduce operational and execution risks and will simplify the
Company’s corporate structure and enable management to dedicate more time, effort and resources to growing
the higher margin and more stable Engineering Services business.
The Oil & Gas business is presented as a disposal group held for sale as at December 31, 2020 and is presented
as discontinued operations. As such, the Resources segment now excludes the Oil & Gas business and presents
activities from a full suite of delivery services to primarily the mining & metallurgy sector, in addition to the
operating phase of a Build-Own-Operate (BOO) contract in the United States.
CHANGE TO THE COMPANY’S BOARD OF DIRECTORS
On May 7, 2020, Gary C. Baughman, Chris Clark, Mike Pedersen and Mary-Ann Bell were elected to the
Company’s Board of Directors as part of the ongoing renewal process focusing on meeting the evolving needs of
the Company and supporting its strategic objectives and long-term sustainability.
On September 10, 2020, the Company announced the appointment of William (Bill) L. Young as Chairman of the
Board of Directors, effective September 9, 2020 replacing Kevin Lynch.
APPOINTMENT OF CHIEF TRANSFORMATION OFFICER
On January 22, 2020, the Company announced the appointment of Louis G. Véronneau to the newly created role
of Chief Transformation Officer (CTO), charged with rapidly simplifying the Company’s structure and processes,
while supporting the new strategic direction with a focus on Information Technology (IT) and divestitures.
APPOINTMENT OF CHIEF FINANCIAL OFFICER
On February 10, 2020, the Company announced the appointment of Jeffrey Allan Bell as Executive Vice-
President and Chief Financial Officer (CFO), effective April 14, 2020.
OTHER CHANGES TO THE MANAGEMENT TEAM
On August 25, 2020, the Company appointed Robert E. Alger, as President, Infrastructure Projects, effective
immediately and replacing Jonathan Wilkinson.
On November 2, 2020 the Company announced the appointment of Dale Clarke as President, Infrastructure
Services, effective immediately and joining the Executive Committee.
On February 10, 2021, the Company announced that Steve Morriss, who has recently joined the Company as
President, Middle East and Asia Pacific, will assume the executive leadership of the Latin America region as well
as the Mining & Metallurgy business globally. In addition, following the announcement of the strategic divestiture
of the Oil & Gas business, Craig Muir, President, Resources, will be leaving the Company at the end of March
118
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
118
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
119
SNC-LAVALIN
SNC-LAVALIN
On February 9, 2021, the Company announced that, due to unprecedented COVID-19 related challenges
involving lower productivity attributable to revised working conditions caused by the pandemic and supply chain
disruptions, it was taking a $90 million charge on its remaining three Canadian LSTK infrastructure projects. In
light of the ongoing uncertainty on the timing and scope of reimbursement of certain COVID-19 incremental costs,
no revenue associated with the additional COVID-19 costs was recognized by the Company for these projects in
the fourth quarter of 2020 and, until greater clarity is forthcoming, it will continue to only recognize COVID-19
expenses on the ongoing LSTK infrastructure projects. The Company believes that, in 2021, these types of
infrastructure projects may continue to represent the areas of the Company’s business that would likely be most
adversely impacted by the ongoing COVID-19 pandemic
From among its lines of business, the Company’s SNCL Engineering Services business remained resilient in 2020
in the face of COVID-19, with only modest revenue decreases in 2020, compared to the prior year, and achieved
a solid financial performance given the challenging circumstances, as the decisive and early actions that
management took to align costs, as described above, proved to be effective and allowed the Company to
continue delivering for its customers. In some geographies, the Company benefited from government support in
2020 that was primarily aimed at preventing job losses, re-hiring workers previously laid off as a result of
COVID-19, and better positioning the Company to resume normal operations following the crisis. While such
government support largely offset the costs incurred by the Company in 2020 to maintain capacities in excess of
demand-driven employment requirements in certain regions, the Company stands ready to take additional cost
action in the future should the situation demand, while looking to preserve its world class capability to be ready
and available to deliver for its customers when the economic recovery begins.
COVID-19 also negatively impacted our Capital investment in Highway 407 ETR and no dividend revenues were
received from this Capital investment in the second and fourth quarters of 2020.
Looking ahead, the Company has developed contingency plans to reduce costs even further if the situation further
deteriorates or lasts longer than current expectations. The Company will continue to actively monitor the situation
and may take further actions as may be necessary or appropriate for the health and safety of employees,
contractors, customers, suppliers or others or as required by international, federal, provincial, state, municipal or
local authorities.
Significant uncertainty continues to exist concerning the magnitude, duration and impacts of the COVID-19
pandemic, including with regard to the effects on clients and demand for the Company’s services. Accordingly,
actual results for future financial periods could differ materially versus current expectations and current results and
financial condition discussed herein may not be indicative of future operating results and trends.
Refer to the risk factor entitled “Additional impacts of the COVID-19 Pandemic” in Section 14 of this MD&A for a
more fulsome description of the various risks and uncertainties posed by COVID-19 to the Company and its
business and financial affairs.
TRANSFORMATION OF RESOURCES AND AGREEMENT TO SELL OIL & GAS BUSINESS (PRESENTED
AS DISCONTINUED OPERATIONS)
In July 2019, the Company announced that it would be exploring all options with regard to its Resources
Business, as part of its decision to exit LSTK contracting and focus on its high potential Engineering Services
business. The Company subsequently decided and announced, in July 2020 that it would be transforming its
Resources Business to focus on a Services offering in a limited number of existing primary markets, which
complement the Company’s broader engineering services capabilities and strategy.
The resulting Resources Services business was to be focused on the primary markets of the Americas and the
Middle East, exiting all non-primary markets through either sale or closure, such as the disposals of the South
African Resources business and the European fertilizer business based in Belgium in 2020.
On February 9, 2021, the Company announced it entered into a binding agreement to sell its Resources Oil &
Gas business, including services and LSTK projects. The transaction is subject to regulatory approvals and
satisfaction of customary closing conditions and is expected to close in the second quarter of 2021. Upon closing,
the transaction is expected to generate a gain on disposal due to the reclassification of the foreign exchange
cumulative translation adjustments balance from equity to the income statement at that time.
In line with the Company’s strategy, the sale of this business, which includes all ongoing and recently completed
Oil & Gas LSTK projects, is expected to significantly reduce operational and execution risks and will simplify the
Company’s corporate structure and enable management to dedicate more time, effort and resources to growing
the higher margin and more stable Engineering Services business.
The Oil & Gas business is presented as a disposal group held for sale as at December 31, 2020 and is presented
as discontinued operations. As such, the Resources segment now excludes the Oil & Gas business and presents
activities from a full suite of delivery services to primarily the mining & metallurgy sector, in addition to the
operating phase of a Build-Own-Operate (BOO) contract in the United States.
CHANGE TO THE COMPANY’S BOARD OF DIRECTORS
On May 7, 2020, Gary C. Baughman, Chris Clark, Mike Pedersen and Mary-Ann Bell were elected to the
Company’s Board of Directors as part of the ongoing renewal process focusing on meeting the evolving needs of
the Company and supporting its strategic objectives and long-term sustainability.
On September 10, 2020, the Company announced the appointment of William (Bill) L. Young as Chairman of the
Board of Directors, effective September 9, 2020 replacing Kevin Lynch.
APPOINTMENT OF CHIEF TRANSFORMATION OFFICER
On January 22, 2020, the Company announced the appointment of Louis G. Véronneau to the newly created role
of Chief Transformation Officer (CTO), charged with rapidly simplifying the Company’s structure and processes,
while supporting the new strategic direction with a focus on Information Technology (IT) and divestitures.
APPOINTMENT OF CHIEF FINANCIAL OFFICER
On February 10, 2020, the Company announced the appointment of Jeffrey Allan Bell as Executive Vice-
President and Chief Financial Officer (CFO), effective April 14, 2020.
OTHER CHANGES TO THE MANAGEMENT TEAM
On August 25, 2020, the Company appointed Robert E. Alger, as President, Infrastructure Projects, effective
immediately and replacing Jonathan Wilkinson.
On November 2, 2020 the Company announced the appointment of Dale Clarke as President, Infrastructure
Services, effective immediately and joining the Executive Committee.
On February 10, 2021, the Company announced that Steve Morriss, who has recently joined the Company as
President, Middle East and Asia Pacific, will assume the executive leadership of the Latin America region as well
as the Mining & Metallurgy business globally. In addition, following the announcement of the strategic divestiture
of the Oil & Gas business, Craig Muir, President, Resources, will be leaving the Company at the end of March
2021.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
119
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SNC-Lavalin 2020 Financial Report SNC-LAVALIN
SNC-LAVALIN
Financial Performance Analysis
4.1
SELECTED ANNUAL FINANCIAL INFORMATION
The selected annual financial information presented in the table below has been derived from the 2020 Annual
Financial Statements prepared in accordance with IFRS for each of the three most recently completed financial
years, with the exception of the non-IFRS financial measures specifically identified in the “Additional selected
financial information” section below.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues:
From PS&PM
From Capital
Total Revenue
Net income (loss) attributable to SNC-Lavalin shareholders
Earnings (loss) per share (in $)
Basic
Diluted
Net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations:
From PS&PM
From Capital
2020
2019 (1)
2018 (1)
$
6,878.1 $
7,367.1 $
129.4
262.7
7,007.5 $
7,629.8 $
7,308.3
264.7
7,573.0
(965.4) $
328.2 $
(1,316.9)
(5.50) $
(5.50) $
1.87 $
1.87 $
(7.50)
(7.50)
$
$
$
$
$
(401.7) $
(332.0) $
45.6
2,772.8
(350.2)
246.1
While the variances between 2020 and 2019 are further described in the following sections of the MD&A, the main
variances between 2019 and 2018 are explained as follows:
Revenues in 2019 were in line with revenues in 2018, reflecting stable revenues in both PS&PM and Capital.
While revenues from PS&PM in 2019 were in line with revenues in 2018, lower revenues in SNCL Projects in
2019, in Infrastructure EPC Projects, were in fact offset by an increase in revenues in SNCL Engineering Services
from PS&PM in 2019, mainly in Infrastructure Services and EDPM. The decrease in revenues from SNCL Projects
in 2019 reflects the completion or near completion of certain major projects, combined with the Company's
decision in July 2019 to cease bidding on LSTK construction contracts. The increase in revenues from SNCL
Engineering Services in 2019 reflects mainly the first full year of operations of Linxon, acquired in September
2018, and an overall growth in activities in EDPM.
Net income attributable to SNC-Lavalin shareholders was $328.2 million in 2019, compared to a net loss
attributable to SNC-Lavalin shareholders of $1,316.9 million in 2018. While there was a goodwill impairment
related to Resources in both 2019 and 2018, for $1.8 billion and $1.2 billion before taxes, respectively, there was
a gain of $3.0 billion before taxes in 2019 on the disposal by the Company of 10.01% of the shares of Highway
407 ETR. The remaining variance between the two years is due to a lower contribution from the segments in
2018, the increase in amortization of intangible assets related to business combinations, the gain on disposal of
the head office building in 2017 and the net expense in 2018 for the 2012 class action lawsuits settlement,
partially offset by lower acquisition-related costs and integration costs in 2018.
Net income (loss) attributable to SNC-Lavalin shareholders from
continuing operations
$
(356.1) $
2,440.8 $
(104.1)
Earnings (loss) per share from continuing operations (in $):
Basic
Diluted from continuing operations:
From PS&PM
From Capital
Diluted earnings (loss) per share from continuing operations
Additional selected financial information:
Backlog (at December 31)
Adjusted EBITDA from PS&PM (2)
Total assets (at December 31)
Non-current financial liabilities (at December 31) (3)
Adjusted diluted EPS from PS&PM (in $) (2)
Dividends per share declared to SNC-Lavalin shareholders (in $)
$
(2.03) $
13.90 $
(0.59)
$
$
$
$
$
$
$
$
(2.29) $
0.26
(2.03) $
(1.89) $
15.79
13.90 $
13,187.8 $
111.4 $
10,340.3 $
2,389.4 $
(1.07) $
0.080 $
14,137.7 $
485.7 $
11,644.7 $
2,378.1 $
0.86 $
0.240 $
(1.99)
1.40
(0.59)
13,381.2
141.8
12,939.7
2,551.9
(0.18)
1.148
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measure. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from these financial measures to the
most directly comparable measure specified under IFRS, when applicable.
(3) Non-current financial liabilities include long-term debt (Recourse, Limited recourse and Non-recourse), the financial portion of the Non-current portion of provisions, Other non-current
financial liabilities, and the Non-current portion of lease liabilities.
120
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While the variances between 2020 and 2019 are further described in the following sections of the MD&A, the main
variances between 2019 and 2018 are explained as follows:
Revenues in 2019 were in line with revenues in 2018, reflecting stable revenues in both PS&PM and Capital.
While revenues from PS&PM in 2019 were in line with revenues in 2018, lower revenues in SNCL Projects in
2019, in Infrastructure EPC Projects, were in fact offset by an increase in revenues in SNCL Engineering Services
from PS&PM in 2019, mainly in Infrastructure Services and EDPM. The decrease in revenues from SNCL Projects
in 2019 reflects the completion or near completion of certain major projects, combined with the Company's
decision in July 2019 to cease bidding on LSTK construction contracts. The increase in revenues from SNCL
Engineering Services in 2019 reflects mainly the first full year of operations of Linxon, acquired in September
2018, and an overall growth in activities in EDPM.
Net income attributable to SNC-Lavalin shareholders was $328.2 million in 2019, compared to a net loss
attributable to SNC-Lavalin shareholders of $1,316.9 million in 2018. While there was a goodwill impairment
related to Resources in both 2019 and 2018, for $1.8 billion and $1.2 billion before taxes, respectively, there was
a gain of $3.0 billion before taxes in 2019 on the disposal by the Company of 10.01% of the shares of Highway
407 ETR. The remaining variance between the two years is due to a lower contribution from the segments in
2018, the increase in amortization of intangible assets related to business combinations, the gain on disposal of
the head office building in 2017 and the net expense in 2018 for the 2012 class action lawsuits settlement,
partially offset by lower acquisition-related costs and integration costs in 2018.
Financial Performance Analysis
4.1
SELECTED ANNUAL FINANCIAL INFORMATION
The selected annual financial information presented in the table below has been derived from the 2020 Annual
Financial Statements prepared in accordance with IFRS for each of the three most recently completed financial
years, with the exception of the non-IFRS financial measures specifically identified in the “Additional selected
financial information” section below.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Net income (loss) attributable to SNC-Lavalin shareholders
(965.4) $
328.2 $
(1,316.9)
Earnings (loss) per share (in $)
Revenues:
From PS&PM
From Capital
Total Revenue
Basic
Diluted
From PS&PM
From Capital
Net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations:
Diluted from continuing operations:
Basic
From PS&PM
From Capital
Additional selected financial information:
Backlog (at December 31)
Adjusted EBITDA from PS&PM (2)
Total assets (at December 31)
Non-current financial liabilities (at December 31) (3)
Adjusted diluted EPS from PS&PM (in $) (2)
2020
2019 (1)
2018 (1)
$
6,878.1 $
7,367.1 $
129.4
262.7
7,007.5 $
7,629.8 $
7,308.3
264.7
7,573.0
(5.50) $
(5.50) $
1.87 $
1.87 $
(7.50)
(7.50)
$
(401.7) $
(332.0) $
45.6
2,772.8
(350.2)
246.1
$
$
$
$
$
(2.03) $
13.90 $
(0.59)
$
(2.29) $
0.26
(1.89) $
15.79
13.90 $
(1.99)
1.40
(0.59)
$
$
$
$
$
$
13,187.8 $
14,137.7 $
13,381.2
111.4 $
10,340.3 $
2,389.4 $
(1.07) $
0.080 $
485.7 $
11,644.7 $
2,378.1 $
0.86 $
0.240 $
141.8
12,939.7
2,551.9
(0.18)
1.148
Net income (loss) attributable to SNC-Lavalin shareholders from
continuing operations
$
(356.1) $
2,440.8 $
(104.1)
Earnings (loss) per share from continuing operations (in $):
Dividends per share declared to SNC-Lavalin shareholders (in $)
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measure. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from these financial measures to the
most directly comparable measure specified under IFRS, when applicable.
(3) Non-current financial liabilities include long-term debt (Recourse, Limited recourse and Non-recourse), the financial portion of the Non-current portion of provisions, Other non-current
financial liabilities, and the Non-current portion of lease liabilities.
Diluted earnings (loss) per share from continuing operations
$
(2.03) $
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4.2
STATEMENT OF INCOME
4.2.1 REVENUES AND SEGMENT ADJUSTED EBIT ANALYSIS
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019(1)
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Continuing operations
Revenues
Segment Adjusted EBIT - Total
Corporate selling, general and administrative expenses
Impairment loss arising from expected credit losses
Loss arising on financial assets (liabilities) at fair value through profit or loss
Restructuring costs
Amortization of intangible assets related to business combinations
Acquisition-related costs and integration costs
Gain or adjustment on gain from disposal of a Capital investment
Loss on disposals of PS&PM businesses
Federal charges settlement (PPSC)
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value
less cost to sell
Earnings (loss) before interest and income taxes
Net financial expenses
Earnings (loss) before income taxes from continuing operations
Income taxes
Net income (loss) from continuing operations
Net loss from discontinued operations
Net income (loss)
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
Earnings (loss) per share from continuing operations (in $):
Basic
Diluted
Additional financial indicators from continuing operations:
$
$
$
$
$
$
$
$
$
$
$
7,007.5 $
7,629.8
125.3 $
175.9 $
0.9
61.9
63.3
126.8
—
(25.0)
7.5
—
6.1
(292.0) $
114.0 $
(406.0) $
(59.0) $
(346.9) $
(609.3)
(956.3) $
584.4
73.9
0.2
4.7
79.7
162.1
8.3
(2,970.8)
0.3
257.3
—
2,968.6
215.1
2,753.5
310.3
2,443.2
(2,112.6)
330.6
(965.4) $
9.2
(956.3) $
328.2
2.4
330.6
$
$
(2.03) $
(2.03) $
13.90
13.90
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
Total
2020
2019 (1)
REVENUES
ADJUSTED EBIT
REVENUES
ADJUSTED EBIT
SEGMENT
SEGMENT
$
3,721.1 $
302.3 $
3,908.9 $
928.6
1,325.3
140.1
97.2
929.8
1,178.6
5,975.0 $
539.5 $
6,017.3 $
162.9 $
(171.1) $
273.1 $
(111.2)
740.2
(359.7)
1,076.7
903.1 $
(530.8) $
1,349.8 $
6,878.1 $
8.7 $
7,367.1 $
129.4 $
116.6 $
262.7 $
$
7,007.5 $
125.3 $
7,629.8 $
357.8
127.6
73.5
558.9
(106.5)
(217.7)
341.2
243.2
584.4
$
$
$
$
$
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Net loss attributable to SNC-Lavalin shareholders from PS&PM
Diluted EPS from PS&PM (in $)
Adjusted diluted EPS from PS&PM (in $) (2)
Adjusted EBITDA from PS&PM (2)
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
(401.7) $
(2.29) $
(1.07) $
111.4 $
(332.0)
(1.89)
0.86
485.7
$
$
$
$
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measure or additional IFRS measure. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from
these financial measures to the most directly comparable measure specified under IFRS, when applicable.
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4.2
STATEMENT OF INCOME
4.2.1 REVENUES AND SEGMENT ADJUSTED EBIT ANALYSIS
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019(1)
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
Total
2020
2019 (1)
REVENUES
SEGMENT
ADJUSTED EBIT
REVENUES
SEGMENT
ADJUSTED EBIT
$
3,721.1 $
928.6
1,325.3
5,975.0 $
162.9 $
740.2
903.1 $
6,878.1 $
129.4 $
$
$
$
$
$
302.3 $
140.1
97.2
539.5 $
(171.1) $
(359.7)
(530.8) $
8.7 $
116.6 $
3,908.9 $
929.8
1,178.6
6,017.3 $
273.1 $
1,076.7
1,349.8 $
7,367.1 $
262.7 $
$
7,007.5 $
125.3 $
7,629.8 $
357.8
127.6
73.5
558.9
(111.2)
(106.5)
(217.7)
341.2
243.2
584.4
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Continuing operations
Revenues
Segment Adjusted EBIT - Total
Corporate selling, general and administrative expenses
Impairment loss arising from expected credit losses
Loss arising on financial assets (liabilities) at fair value through profit or loss
Restructuring costs
Amortization of intangible assets related to business combinations
Acquisition-related costs and integration costs
Gain or adjustment on gain from disposal of a Capital investment
Loss on disposals of PS&PM businesses
Federal charges settlement (PPSC)
less cost to sell
Earnings (loss) before interest and income taxes
Net financial expenses
Earnings (loss) before income taxes from continuing operations
Income taxes
Net income (loss) from continuing operations
Net loss from discontinued operations
Net income (loss)
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
Earnings (loss) per share from continuing operations (in $):
Basic
Diluted
Additional financial indicators from continuing operations:
Net loss attributable to SNC-Lavalin shareholders from PS&PM
Diluted EPS from PS&PM (in $)
Adjusted diluted EPS from PS&PM (in $) (2)
Adjusted EBITDA from PS&PM (2)
7,007.5 $
7,629.8
$
$
$
125.3 $
175.9 $
584.4
73.9
0.2
4.7
79.7
162.1
8.3
0.3
257.3
—
(2,970.8)
0.9
61.9
63.3
126.8
—
(25.0)
7.5
—
6.1
$
$
$
$
$
(292.0) $
2,968.6
114.0 $
215.1
(406.0) $
2,753.5
(59.0) $
310.3
(346.9) $
2,443.2
(609.3)
(2,112.6)
$
(956.3) $
330.6
$
(965.4) $
9.2
$
(956.3) $
328.2
2.4
330.6
$
$
$
$
$
$
(2.03) $
(2.03) $
13.90
13.90
(401.7) $
(2.29) $
(1.07) $
111.4 $
(332.0)
(1.89)
0.86
485.7
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measure or additional IFRS measure. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from
these financial measures to the most directly comparable measure specified under IFRS, when applicable.
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4.2.1.1 EDPM
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from EDPM
Segment Adjusted EBIT from EDPM
SNC-LAVALIN
4.2.1.2 NUCLEAR
2020
2019
CHANGE (%)
$ 3,721.1
302.3
$
$ 3,908.9
357.8
$
(4.8%)
(15.5%)
Segment Adjusted EBIT to revenues ratio from EDPM (%)
8.1 %
9.2 %
Additional information
Segment Adjusted EBITDA from EDPM
Segment Adjusted EBITDA to revenues ratio from EDPM (%)
Backlog at year end
$
400.9
$
470.3
(14.7%)
10.8 %
12.0 %
$ 2,864.4
$ 2,630.0
8.9%
EDPM revenues were $3,721.1 million in 2020, compared with $3,908.9 million in 2019. The decrease was
mainly attributable to the combined impact of the COVID-19 pandemic, as clients deferred or cancelled projects in
sectors such as aviation, education and commercial property, together with the impact of reduced investment in
the Middle East associated with the fall in oil prices, partially offset by a continued strong demand in the road and
rail sectors.
The major revenue contributors in 2020 included work in the United Kingdom as a result of a higher volume of
rail and infrastructure projects as the U.K. Government maintained spending on critical infrastructure despite the
impact of COVID-19. In addition, an increased volume of work in the defense and security sector was also
secured.
In North America, ongoing major projects contributed to steady revenue during 2020, notably the Purple Line light
rail project in Maryland, United States, the Réseau Express Métropolitain ("REM") and Eglinton LRT, in Canada.
mentioned above.
Segment Adjusted EBIT from EDPM was $302.3 million (Segment Adjusted EBITDA of $400.9 million) in
2020 compared with a Segment Adjusted EBIT of $357.8 million (Segment Adjusted EBITDA of $470.3 million) in
2019, reflecting the volume impact of COVID-19 across some markets and the associated suppressed oil prices,
partially offset by government support measures and Company restructuring actions to improve the cost base of
the segment.
Changes in foreign exchange rates did not have a significant impact on revenues or on Segment Adjusted EBIT
when comparing both periods.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
costs, of which $40.3 million in 2020 (2019: $15.2 million) were incurred in connection with the EDPM Segment.
Please refer to Section 4.2.4 for further details of such restructuring costs.
Other Key Performance Indicator
AS AT
(IN NUMBER OF DAYS)
DSO from EDPM
DECEMBER 31, 2020 DECEMBER 31, 2019
64 days
73 days
As at December 31, 2020, EDPM segment’s DSO stood at 64 days, compared to 73 days as at December 31,
2019. The improvement is mainly due to accelerated cash receipts from reduced government payment terms. The
DSO is expected to increase in 2021, as the situation normalizes during that period.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Nuclear
Segment Adjusted EBIT from Nuclear
Segment Adjusted EBIT to revenues ratio from Nuclear (%)
Additional information
Segment Adjusted EBITDA from Nuclear
Segment Adjusted EBITDA to revenues ratio from Nuclear (%)
Backlog at year end
2020
2019
CHANGE (%)
$
$
928.6
140.1
$
$
15.1 %
929.8
127.6
13.7 %
(0.1%)
9.8%
$
153.9
$
140.7
9.3%
16.6%
15.1%
$
890.6
$ 1,154.0
(22.8%)
Nuclear revenues amounted to $928.6 million in 2020, in line with $929.8 million in 2019, as the higher volume
mainly in the United States and in Europe was offset by the lower volume in Canada, resulting mainly from a
decreased level of activity on certain major projects, some of which achieved major delivery milestones in 2020.
The major revenue contributors in 2020 are services for decommissioning, waste management and
environmental clean-up projects (40%), services for life extension projects (30%), services for operating plants
and new build plants (30%).
In 2020, Segment Adjusted EBIT from Nuclear increased to $140.1 million (Segment Adjusted EBITDA of
$153.9 million), compared with $127.6 million (Segment Adjusted EBITDA of $140.7 million) in 2019, mainly due
to a higher contribution from the United States and from Europe due to a more favourable business mix,
combined with lower overhead across all markets in 2020, partially offset by a lower volume in Canada as
4.2.1.3 INFRASTRUCTURE SERVICES
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Infrastructure Services
Segment Adjusted EBIT from Infrastructure Services
2020
2019
CHANGE (%)
$ 1,325.3
$ 1,178.6
$
97.2
$
73.5
12.4%
32.2%
Segment Adjusted EBIT to revenues ratio from Infrastructure Services (%)
7.3%
6.2%
Additional information
Backlog at year end
Segment Adjusted EBITDA from Infrastructure Services
$
108.3
$
89.5
21.0%
Segment Adjusted EBITDA to revenues ratio from Infrastructure Services (%)
8.2%
7.6%
$ 7,098.5
$ 7,337.0
(3.3%)
Infrastructure Services revenues were $1,325.3 million in 2020, compared with $1,178.6 million in 2019,
mainly attributable to the growth of Linxon, which expanded its geographic activity after the second quarter of
2019, as well as additional revenues on certain O&M contracts in operations phase and increased scope of work
on certain contracts. Infrastructure Services revenues in 2020 compared with 2019 were also higher for Program
Management and Construction Management services
The major revenue contributors in 2020 were O&M contracts, Power & Industrial services, Program
Management, as well as power substation projects from Linxon.
In 2020, Segment Adjusted EBIT from Infrastructure Services increased to $97.2 million (Segment
Adjusted EBITDA of $108.3 million), compared with $73.5 million (Segment Adjusted EBITDA of $89.5 million)
in 2019 resulting mainly from a higher level of revenues, as described above, with a higher contribution from O&M
contracts as well as Program Management & Construction Management services and Linxon.
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4.2.1.1 EDPM
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from EDPM
Segment Adjusted EBIT from EDPM
Additional information
Segment Adjusted EBITDA from EDPM
2020
2019
CHANGE (%)
$ 3,721.1
$ 3,908.9
$
302.3
$
357.8
(4.8%)
(15.5%)
Segment Adjusted EBIT to revenues ratio from EDPM (%)
8.1 %
9.2 %
Segment Adjusted EBITDA to revenues ratio from EDPM (%)
10.8 %
12.0 %
Backlog at year end
$ 2,864.4
$ 2,630.0
8.9%
$
400.9
$
470.3
(14.7%)
EDPM revenues were $3,721.1 million in 2020, compared with $3,908.9 million in 2019. The decrease was
mainly attributable to the combined impact of the COVID-19 pandemic, as clients deferred or cancelled projects in
sectors such as aviation, education and commercial property, together with the impact of reduced investment in
the Middle East associated with the fall in oil prices, partially offset by a continued strong demand in the road and
rail sectors.
secured.
The major revenue contributors in 2020 included work in the United Kingdom as a result of a higher volume of
rail and infrastructure projects as the U.K. Government maintained spending on critical infrastructure despite the
impact of COVID-19. In addition, an increased volume of work in the defense and security sector was also
In North America, ongoing major projects contributed to steady revenue during 2020, notably the Purple Line light
rail project in Maryland, United States, the Réseau Express Métropolitain ("REM") and Eglinton LRT, in Canada.
Segment Adjusted EBIT from EDPM was $302.3 million (Segment Adjusted EBITDA of $400.9 million) in
2020 compared with a Segment Adjusted EBIT of $357.8 million (Segment Adjusted EBITDA of $470.3 million) in
2019, reflecting the volume impact of COVID-19 across some markets and the associated suppressed oil prices,
partially offset by government support measures and Company restructuring actions to improve the cost base of
Changes in foreign exchange rates did not have a significant impact on revenues or on Segment Adjusted EBIT
the segment.
when comparing both periods.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
costs, of which $40.3 million in 2020 (2019: $15.2 million) were incurred in connection with the EDPM Segment.
Please refer to Section 4.2.4 for further details of such restructuring costs.
Other Key Performance Indicator
AS AT
(IN NUMBER OF DAYS)
DSO from EDPM
DECEMBER 31, 2020 DECEMBER 31, 2019
64 days
73 days
As at December 31, 2020, EDPM segment’s DSO stood at 64 days, compared to 73 days as at December 31,
2019. The improvement is mainly due to accelerated cash receipts from reduced government payment terms. The
DSO is expected to increase in 2021, as the situation normalizes during that period.
SNC-LAVALIN
4.2.1.2 NUCLEAR
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Nuclear
Segment Adjusted EBIT from Nuclear
Segment Adjusted EBIT to revenues ratio from Nuclear (%)
Additional information
Segment Adjusted EBITDA from Nuclear
Segment Adjusted EBITDA to revenues ratio from Nuclear (%)
Backlog at year end
2020
2019
CHANGE (%)
$
$
928.6
140.1
$
$
15.1 %
929.8
127.6
13.7 %
(0.1%)
9.8%
$
153.9
$
140.7
9.3%
16.6%
15.1%
$
890.6
$ 1,154.0
(22.8%)
Nuclear revenues amounted to $928.6 million in 2020, in line with $929.8 million in 2019, as the higher volume
mainly in the United States and in Europe was offset by the lower volume in Canada, resulting mainly from a
decreased level of activity on certain major projects, some of which achieved major delivery milestones in 2020.
The major revenue contributors in 2020 are services for decommissioning, waste management and
environmental clean-up projects (40%), services for life extension projects (30%), services for operating plants
and new build plants (30%).
In 2020, Segment Adjusted EBIT from Nuclear increased to $140.1 million (Segment Adjusted EBITDA of
$153.9 million), compared with $127.6 million (Segment Adjusted EBITDA of $140.7 million) in 2019, mainly due
to a higher contribution from the United States and from Europe due to a more favourable business mix,
combined with lower overhead across all markets in 2020, partially offset by a lower volume in Canada as
mentioned above.
4.2.1.3 INFRASTRUCTURE SERVICES
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Infrastructure Services
Segment Adjusted EBIT from Infrastructure Services
2020
2019
CHANGE (%)
$ 1,325.3
97.2
$
$ 1,178.6
73.5
$
12.4%
32.2%
Segment Adjusted EBIT to revenues ratio from Infrastructure Services (%)
7.3%
6.2%
Additional information
Segment Adjusted EBITDA from Infrastructure Services
Segment Adjusted EBITDA to revenues ratio from Infrastructure Services (%)
Backlog at year end
$
108.3
$
89.5
21.0%
8.2%
7.6%
$ 7,098.5
$ 7,337.0
(3.3%)
Infrastructure Services revenues were $1,325.3 million in 2020, compared with $1,178.6 million in 2019,
mainly attributable to the growth of Linxon, which expanded its geographic activity after the second quarter of
2019, as well as additional revenues on certain O&M contracts in operations phase and increased scope of work
on certain contracts. Infrastructure Services revenues in 2020 compared with 2019 were also higher for Program
Management and Construction Management services
The major revenue contributors in 2020 were O&M contracts, Power & Industrial services, Program
Management, as well as power substation projects from Linxon.
In 2020, Segment Adjusted EBIT from Infrastructure Services increased to $97.2 million (Segment
Adjusted EBITDA of $108.3 million), compared with $73.5 million (Segment Adjusted EBITDA of $89.5 million)
in 2019 resulting mainly from a higher level of revenues, as described above, with a higher contribution from O&M
contracts as well as Program Management & Construction Management services and Linxon.
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4.2.1.4 RESOURCES
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
CHANGE (%)
YEARS ENDED DECEMBER 31
Revenues from Resources
Segment Adjusted EBIT from Resources
Segment Adjusted EBIT to revenues ratio from Resources (%)
Additional information
Segment Adjusted EBITDA from Resources
Segment Adjusted EBITDA to revenues ratio from Resources (%)
Backlog at year end
$
$
162.9
(171.1)
(105.0%)
$
$
273.1
(111.2)
(40.7%)
(40.3%)
53.9%
$
(159.1)
$
(100.7)
58.0%
(97.7%)
161.6
$
(36.9%)
255.4
$
(36.7%)
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Resources revenues were $162.9 million in 2020, compared with $273.1 million in 2019, mainly due to the
run‑off of LSTK construction contracts.
The major revenue contributors in 2020 included an LSTK project for the construction of an ammonia plant in
the Middle East, the engineering, procurement and overall project management of mining projects in the United
States and Latin America, as well as revenue derived from in-year service contracts in North America.
Segment Adjusted EBIT from Resources was negative $171.1 million (Segment Adjusted EBITDA of
negative $159.1 million) in 2020, compared with negative $111.2 million (Segment Adjusted EBITDA of negative
$100.7 million) in 2019. The negative Segment Adjusted EBIT in 2020 mainly resulted from charges for remaining
LSTK projects and other historical claims and litigation matters. The negative Segment Adjusted EBIT in 2019 was
mainly due to net unfavourable reforecasts totaling $89.3 million on certain major LSTK projects.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
costs, of which $0.3 million in 2020 (2019: $6.0 million) and $0.5 million in 2020 (2019 : $16.4 million) were
incurred in connection with the Resources Segment. Please refer to Section 4.2.4 for further details of such
restructuring costs. The Segment Adjusted EBIT and Segment Adjusted EBITDA of Resources also excludes a
loss on disposal of SNC-Lavalin SA (Belgium) completed in 2020. Please refer to Section 4.2.6 for further details.
SNC-LAVALIN
4.2.1.5 INFRASTRUCTURE EPC PROJECTS
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Infrastructure EPC Projects
Segment Adjusted EBIT from Infrastructure EPC Projects
2020
2019
CHANGE (%)
$
740.2
$ 1,076.7
$
(359.7)
$
(106.5)
(31.3%)
237.8%
Segment Adjusted EBIT to revenues ratio from Infrastructure EPC Projects (%)
(48.6%)
(9.9%)
Additional information
Backlog at year end
Segment Adjusted EBITDA from Infrastructure EPC Projects
$
(342.1)
$
(85.0)
302.6%
Segment Adjusted EBITDA to revenues ratio from Infrastructure EPC Projects (%)
(46.2%)
(7.9%)
$ 2,014.0
$ 2,584.5
(22.1%)
Infrastructure EPC Projects revenues were $740.2 million in 2020, compared with $1,076.7 million in 2019, as
the higher revenues from certain major construction projects were more than offset by the lower level of activities
as a result of the completion or near completion of certain major construction and clean power projects, coupled
with the negative impact of COVID-19.
The major revenue contributors in 2020 included multiple projects for mass transit systems and general
infrastructure projects in Central and Eastern Canada.
In 2020, Infrastructure EPC Projects Segment Adjusted EBIT amounted to negative $359.7 million
(Segment Adjusted EBITDA of negative $342.1 million), compared with negative $106.5 million (Segment
Adjusted EBITDA of negative $85.0 million) in 2019. The negative Segment Adjusted EBIT in 2020 was mainly
due to unfavourable reforecasts, commercial claims receivable reductions, additional provisions related to legacy
litigation matters and the effect of lower productivity caused by COVID-19.
The corresponding period of 2019 was impacted by net unfavourable reforecasts totaling approximately
$130 million on certain major projects resulting from higher forecasted costs or increased warranty costs, primarily
on two LSTK construction projects nearing completion and on smaller clean power projects.
126
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
127
SNC-LAVALIN
4.2.1.4 RESOURCES
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Resources
Segment Adjusted EBIT from Resources
Segment Adjusted EBIT to revenues ratio from Resources (%)
Additional information
Segment Adjusted EBITDA from Resources
Segment Adjusted EBITDA to revenues ratio from Resources (%)
Backlog at year end
2020
2019 (1)
CHANGE (%)
$
162.9
$
273.1
$
(171.1)
$
(111.2)
(40.3%)
53.9%
(105.0%)
(40.7%)
$
(159.1)
$
(100.7)
58.0%
(97.7%)
(36.9%)
$
161.6
$
255.4
(36.7%)
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Resources revenues were $162.9 million in 2020, compared with $273.1 million in 2019, mainly due to the
run‑off of LSTK construction contracts.
The major revenue contributors in 2020 included an LSTK project for the construction of an ammonia plant in
the Middle East, the engineering, procurement and overall project management of mining projects in the United
States and Latin America, as well as revenue derived from in-year service contracts in North America.
Segment Adjusted EBIT from Resources was negative $171.1 million (Segment Adjusted EBITDA of
negative $159.1 million) in 2020, compared with negative $111.2 million (Segment Adjusted EBITDA of negative
$100.7 million) in 2019. The negative Segment Adjusted EBIT in 2020 mainly resulted from charges for remaining
LSTK projects and other historical claims and litigation matters. The negative Segment Adjusted EBIT in 2019 was
mainly due to net unfavourable reforecasts totaling $89.3 million on certain major LSTK projects.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
costs, of which $0.3 million in 2020 (2019: $6.0 million) and $0.5 million in 2020 (2019 : $16.4 million) were
incurred in connection with the Resources Segment. Please refer to Section 4.2.4 for further details of such
restructuring costs. The Segment Adjusted EBIT and Segment Adjusted EBITDA of Resources also excludes a
loss on disposal of SNC-Lavalin SA (Belgium) completed in 2020. Please refer to Section 4.2.6 for further details.
SNC-LAVALIN
4.2.1.5 INFRASTRUCTURE EPC PROJECTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019
CHANGE (%)
Revenues from Infrastructure EPC Projects
Segment Adjusted EBIT from Infrastructure EPC Projects
$
$
740.2
(359.7)
$ 1,076.7
(106.5)
$
(31.3%)
237.8%
Segment Adjusted EBIT to revenues ratio from Infrastructure EPC Projects (%)
(48.6%)
(9.9%)
Additional information
Segment Adjusted EBITDA from Infrastructure EPC Projects
$
(342.1)
$
(85.0)
302.6%
Segment Adjusted EBITDA to revenues ratio from Infrastructure EPC Projects (%)
(46.2%)
(7.9%)
Backlog at year end
$ 2,014.0
$ 2,584.5
(22.1%)
Infrastructure EPC Projects revenues were $740.2 million in 2020, compared with $1,076.7 million in 2019, as
the higher revenues from certain major construction projects were more than offset by the lower level of activities
as a result of the completion or near completion of certain major construction and clean power projects, coupled
with the negative impact of COVID-19.
The major revenue contributors in 2020 included multiple projects for mass transit systems and general
infrastructure projects in Central and Eastern Canada.
In 2020, Infrastructure EPC Projects Segment Adjusted EBIT amounted to negative $359.7 million
(Segment Adjusted EBITDA of negative $342.1 million), compared with negative $106.5 million (Segment
Adjusted EBITDA of negative $85.0 million) in 2019. The negative Segment Adjusted EBIT in 2020 was mainly
due to unfavourable reforecasts, commercial claims receivable reductions, additional provisions related to legacy
litigation matters and the effect of lower productivity caused by COVID-19.
The corresponding period of 2019 was impacted by net unfavourable reforecasts totaling approximately
$130 million on certain major projects resulting from higher forecasted costs or increased warranty costs, primarily
on two LSTK construction projects nearing completion and on smaller clean power projects.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
127
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SNC-Lavalin 2020 Financial Report SNC-LAVALIN
SNC-LAVALIN
4.2.1.6 REVENUES AND SEGMENT ADJUSTED EBIT FROM CAPITAL
CAPITAL INVESTMENTS PORTFOLIO
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Revenues from Capital
Segment Adjusted EBIT from Capital investments:
From Highway 407 ETR
From other Capital investments (1)
Segment Adjusted EBIT from Capital
$
$
$
2020
129.4 $
38.0 $
78.6
116.6 $
2019
262.7
146.1
97.1
243.2
(1) Segment Adjusted EBIT from other Capital investments is net of divisional and allocated corporate selling, general and administrative expenses, as well as selling, general and
administrative expenses from all other capital investments accounted for by the consolidation method.
Revenues from Capital in 2020 amounted to $129.4 million, compared with $262.7 million in 2019. The
decrease in revenues for 2020 was mainly due to the decrease in contribution from Highway 407 ETR following
the disposal of a portion of this investment by the Company in August 2019 combined with the absence of
dividends received from this investment in the second and fourth quarters of 2020.
Segment Adjusted EBIT from Capital decreased to $116.6 million in 2020, compared with $243.2 million in
2019. The decrease in Segment Adjusted EBIT was due to the reduction in revenues outlined above.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA exclude the release in full of a
provision for contingent indemnification of $25.0 million in 2020 related to the previous disposal of a Capital
investment accounted for under the consolidation method upon expiry of the indemnification period (refer to
Section 4.2.6). It also excludes the gain of $3.0 billion from the sale of 10.01% of the shares of Highway 407 ETR
in 2019 (refer to Section 4.2.6), as well as the $57.2 million loss in 2020 arising from the negative fair value
revaluation of the associated consideration receivable (refer to Section 4.2.3).
The following table presents a list of SNC-Lavalin’s main Capital investments as at December 31, 2020:
NAME
OWNERSHIP
INTEREST
ACCOUNTING
SUBJECT TO
METHOD
IFRIC 12
STATUS
DESCRIPTION OF ACTIVITIES
407 EAST DEVELOPMENT
50 %
Equity
Yes
2045
In operation Operates, maintains and rehabilitates
MATURITY OF
CONCESSION
AGREEMENT
HELD
SINCE
2012
100 %
Consolidation
Yes
2014
2033
In operation Designs,
builds,
partially
finances,
40 %
Equity
Yes
2013
2043
In operation Designs, builds, finances and maintains
N/A
2018
N/A
N/A Holding
investments
in
infrastructure
CARLYLE GLOBAL
INFRASTRUCTURE
OPPORTUNITY FUND L.P.
4.5 %
At fair value
through other
comprehensive
income
Equity
HIGHWAY 407 ETR
6.76 %
No
1999
2098
In operation Operates, maintains and manages
TRANSITNEXT GENERAL
100 %
Consolidation
Yes
2019
2049
Under
Designs, builds, finances and maintains
construction
the new Trillium Line extension, and also
assumes responsibility for the long-term
maintenance of the existing Trillium Line,
under a 30-year contract.
MYAH TIPAZA S.p.A. (“MYAH
25.5 %
Equity
No
2008
N/A
In operation Myah Tipaza owns, operates and
Phase 1 of the new highway 407, east of
Brock Road.
maintains and rehabilitates the John Hart
Generating Replacement Facility
in
Canada.
the Confederation Line, City of Ottawa’s
light rail transit system.
projects related to energy, power and
natural resources.
highway 407, a 108-km all-electronic toll
highway in the Greater Toronto Area,
under a 99-year concession agreement.
maintains a 120,000 m3/day seawater
desalination plant in Algeria and sells the
total capacity of
treated water
to
Sonatrach and l’Algérienne des Eaux
(“ADE”) under a 25-year
take-or-pay
agreement.
1,227 ‑ MW gas-fired thermal power plant
in Algeria; the total capacity of electricity
is sold
to Sonelgaz S.p.A. under a
20‑year take-or-pay agreement.
France.
owning, acquiring, investing, developing,
implementing and operating infrastructure
in the roads sector of India.
maintains the New Champlain Bridge
Corridor project.
26 %
Equity
No
2006
N/A
In operation Owns, operates and maintains a
Equity
Yes
2008
2043
In operation Operates a 5.3-km electric cog railway in
N/A
2012
N/A
N/A Engages in the business of bidding for,
51 %
10 %
50 %
At fair value
through other
comprehensive
income
Equity
Yes
2015
2049
In operation Designs, builds, finances, operates and
25 %
Equity
Yes
2015
2051
Under
Designs, builds,
finances and, once
20 %
Equity
No
2017
N/A
N/A Holds
the participations
in Rainbow
construction
construction is completed, will operate
and maintain
the Eglinton Crosstown
19‑km light rail line.
Hospital Partnership, Chinook Roads
Partnership,
InTransit BC
Limited
Partnership, Okanagan Lake Concession
Limited
Partnership
and McGill
Healthcare Infrastructure Group.
GROUP GENERAL
PARTNERSHIP (“407
EDGGP”)
INPOWER BC GENERAL
PARTNERSHIP (“INPOWER
BC”)
RIDEAU TRANSIT GROUP
PARTNERSHIP (“RIDEAU”)
PARTNERSHIP
(“TransitNEXT”)
TIPAZA”)
SHARIKET KAHRABA
HADJRET EN NOUSS S.p.A.
(“SKH”)
TC DÔME S.A.S. (“TC
DÔME”)
HIGHWAY CONCESSIONS
ONE PRIVATE LIMITED
SIGNATURE ON THE SAINT-
LAURENT GROUP GENERAL
PARTNERSHIP (“SSL”)
CROSSLINX TRANSIT
SOLUTIONS GENERAL
PARTNERSHIP (“EGLINTON
CROSSTOWN”)
SNC-LAVALIN
INFRASTRUCTURE
PARTNERS LP
(“PARTNERSHIP”)
N/A: not applicable
128
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
128
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
129
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Revenues from Capital
Segment Adjusted EBIT from Capital investments:
From Highway 407 ETR
From other Capital investments (1)
Segment Adjusted EBIT from Capital
$
$
$
2020
129.4 $
38.0 $
78.6
116.6 $
2019
262.7
146.1
97.1
243.2
(1) Segment Adjusted EBIT from other Capital investments is net of divisional and allocated corporate selling, general and administrative expenses, as well as selling, general and
administrative expenses from all other capital investments accounted for by the consolidation method.
Revenues from Capital in 2020 amounted to $129.4 million, compared with $262.7 million in 2019. The
decrease in revenues for 2020 was mainly due to the decrease in contribution from Highway 407 ETR following
the disposal of a portion of this investment by the Company in August 2019 combined with the absence of
dividends received from this investment in the second and fourth quarters of 2020.
Segment Adjusted EBIT from Capital decreased to $116.6 million in 2020, compared with $243.2 million in
2019. The decrease in Segment Adjusted EBIT was due to the reduction in revenues outlined above.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA exclude the release in full of a
provision for contingent indemnification of $25.0 million in 2020 related to the previous disposal of a Capital
investment accounted for under the consolidation method upon expiry of the indemnification period (refer to
Section 4.2.6). It also excludes the gain of $3.0 billion from the sale of 10.01% of the shares of Highway 407 ETR
in 2019 (refer to Section 4.2.6), as well as the $57.2 million loss in 2020 arising from the negative fair value
revaluation of the associated consideration receivable (refer to Section 4.2.3).
SNC-LAVALIN
SNC-LAVALIN
4.2.1.6 REVENUES AND SEGMENT ADJUSTED EBIT FROM CAPITAL
CAPITAL INVESTMENTS PORTFOLIO
The following table presents a list of SNC-Lavalin’s main Capital investments as at December 31, 2020:
NAME
407 EAST DEVELOPMENT
GROUP GENERAL
PARTNERSHIP (“407
EDGGP”)
INPOWER BC GENERAL
PARTNERSHIP (“INPOWER
BC”)
RIDEAU TRANSIT GROUP
PARTNERSHIP (“RIDEAU”)
CARLYLE GLOBAL
INFRASTRUCTURE
OPPORTUNITY FUND L.P.
OWNERSHIP
INTEREST
ACCOUNTING
METHOD
SUBJECT TO
IFRIC 12
50 %
Equity
Yes
HELD
SINCE
2012
MATURITY OF
CONCESSION
AGREEMENT
2045
100 %
Consolidation
Yes
2014
2033
STATUS
DESCRIPTION OF ACTIVITIES
In operation Operates, maintains and rehabilitates
Phase 1 of the new highway 407, east of
Brock Road.
In operation Designs,
builds,
partially
finances,
maintains and rehabilitates the John Hart
Generating Replacement Facility
in
Canada.
40 %
Equity
Yes
2013
2043
In operation Designs, builds, finances and maintains
the Confederation Line, City of Ottawa’s
light rail transit system.
4.5 %
At fair value
through other
comprehensive
income
N/A
2018
N/A
N/A Holding
investments
infrastructure
projects related to energy, power and
natural resources.
in
HIGHWAY 407 ETR
6.76 %
Equity
No
1999
2098
TRANSITNEXT GENERAL
PARTNERSHIP
(“TransitNEXT”)
100 %
Consolidation
Yes
2019
2049
MYAH TIPAZA S.p.A. (“MYAH
TIPAZA”)
25.5 %
Equity
No
2008
N/A
SHARIKET KAHRABA
HADJRET EN NOUSS S.p.A.
(“SKH”)
26 %
Equity
No
2006
N/A
In operation Operates, maintains and manages
highway 407, a 108-km all-electronic toll
highway in the Greater Toronto Area,
under a 99-year concession agreement.
Under
construction
Designs, builds, finances and maintains
the new Trillium Line extension, and also
assumes responsibility for the long-term
maintenance of the existing Trillium Line,
under a 30-year contract.
In operation Myah Tipaza owns, operates and
maintains a 120,000 m3/day seawater
desalination plant in Algeria and sells the
total capacity of
to
Sonatrach and l’Algérienne des Eaux
(“ADE”) under a 25-year
take-or-pay
agreement.
treated water
In operation Owns, operates and maintains a
1,227 ‑ MW gas-fired thermal power plant
in Algeria; the total capacity of electricity
to Sonelgaz S.p.A. under a
is sold
20‑year take-or-pay agreement.
Equity
Yes
2008
2043
In operation Operates a 5.3-km electric cog railway in
TC DÔME S.A.S. (“TC
DÔME”)
HIGHWAY CONCESSIONS
ONE PRIVATE LIMITED
51 %
10 %
At fair value
through other
comprehensive
income
N/A
2012
N/A
50 %
Equity
Yes
2015
2049
25 %
Equity
Yes
2015
2051
20 %
Equity
No
2017
N/A
SIGNATURE ON THE SAINT-
LAURENT GROUP GENERAL
PARTNERSHIP (“SSL”)
CROSSLINX TRANSIT
SOLUTIONS GENERAL
PARTNERSHIP (“EGLINTON
CROSSTOWN”)
SNC-LAVALIN
INFRASTRUCTURE
PARTNERS LP
(“PARTNERSHIP”)
N/A: not applicable
France.
N/A Engages in the business of bidding for,
owning, acquiring, investing, developing,
implementing and operating infrastructure
in the roads sector of India.
In operation Designs, builds, finances, operates and
maintains the New Champlain Bridge
Corridor project.
Under
construction
Designs, builds,
finances and, once
construction is completed, will operate
and maintain
the Eglinton Crosstown
19‑km light rail line.
N/A Holds
the participations
in Rainbow
Hospital Partnership, Chinook Roads
Partnership,
Limited
Partnership, Okanagan Lake Concession
Limited
and McGill
Healthcare Infrastructure Group.
InTransit BC
Partnership
128
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
129
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SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
4.2.2 CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ANALYSIS
4.2.5 ACQUISITION-RELATED COSTS AND INTEGRATION COSTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Corporate selling, general and
administrative expenses
2020
2019 (1)
(IN MILLIONS $)
YEARS ENDED DECEMBER 31
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
Acquisition-related costs and integration costs
$
— $
2020
2019
8.3
$
147.7 $
28.2 $
175.9 $
45.8 $
28.2 $
73.9
In 2020, the amount of acquisition-related costs and integration costs was $nil, compared with $8.3 million
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Corporate selling, general and administrative expenses totaled $175.9 million in 2020, compared with
$73.9 million in 2019, mainly reflecting the higher reversal of some corporate incentives and revision of certain
estimates in the first quarter of 2019 combined with a $58.3 million negative adjustment to the provision for the
Pyrrhotite Case litigation (as described in Section 14 of this MD&A and in Note 33 to the 2020 Annual Financial
Statements), the cost related to a new digital transformation project representing approximately $10.0 million in
2020 and a $4.0 million revision to the GMP equalization provision recognized in 2020.
4.2.3 LOSS ARISING ON FINANCIAL ASSETS (LIABILITIES) AT FAIR VALUE THROUGH
PROFIT OR LOSS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Loss arising on financial assets (liabilities) at fair value through profit or loss
$
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
2020
61.9 $
2019 (1)
4.7
The loss arising on financial assets (liabilities) at fair value through profit or loss of $61.9 million in 2020
(2019: $4.7 million) is mainly due to a $57.2 million negative fair value revaluation for the Highway 407 ETR
contingent consideration receivable. Such contingent consideration is payable over a period of 10 years by the
acquirer of the 10.01% ownership interest in Highway 407 ETR sold by the Company in August 2019. The fair
value of this financial asset was negatively impacted mainly by the actual and expected performance of Highway
407 ETR in 2020 due to lower traffic as a result of COVID-19 impacts, as the underlying payments are
conditioned on the attainment of certain cumulative financial thresholds related to the performance of Highway
407 ETR.
4.2.4 RESTRUCTURING COSTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
Restructuring costs
$
63.3 $
2019 (1)
79.7
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
The Company incurred $63.3 million of restructuring costs in 2020 (2019: $79.7 million). Restructuring
actions were taken during the year to adjust the cost base of the Company’s segments, notably in the Middle East
and the U.K. regions of the EDPM segment, for which an amount of $40.3 million of restructuring costs was
recognized in 2020. The restructuring costs of $63.3 million were mainly for severance obligations, but also
included $16.4 million of non-cash charges, notably $13.5 million related to impairment of right-of-use assets and
$2.9 million of impairment of property and equipment.
The Company incurred $79.7 million of restructuring costs in 2019, which were mainly for severance obligations.
in 2019, related to Atkins and Linxon.
4.2.6 LOSS ON DISPOSALS OF PS&PM BUSINESSES AND GAIN OR ADJUSTMENT ON GAIN
FROM DISPOSAL OF A CAPITAL INVESTMENT
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Gain or adjustment on gain from disposal of a Capital investment
Loss on disposals of PS&PM businesses
$
$
2020
(25.0) $
7.5 $
2019
(2,970.8)
0.3
In the fourth quarter of 2020, the Company released in full a provision for contingent indemnification related to the
previous disposal of a Capital investment accounted for under the consolidation method upon expiry of the
indemnification period. Such non-cash reversal of the provision in the amount of $25.0 million is included in “Gain
or adjustment on gain from disposal of a Capital investment” in the consolidated income statement for the year
ended December 31, 2020.
In the third quarter of 2020, SNC-Lavalin completed the sale of its 100% ownership interest in SNC-Lavalin SA
(Belgium) in exchange for total consideration of $nil. The loss on disposal of SNC-Lavalin’s ownership interest in
SNC-Lavalin SA amounted to $7.5 million before and after income taxes.
In 2019, the Company completed the sale of 10.01% of the shares of Highway 407 ETR to a company controlled
by Canada Pension Plan Investment Board. At closing and in accordance with the terms and conditions of the
agreement, SNC-Lavalin received the base purchase price proceeds of $3.0 billion, with up to an additional
$250 million contingently payable over a period of 10 years, conditional on the attainment of certain financial
thresholds related to the ongoing performance of Highway 407 ETR and recognized a gain before taxes of
$3.0 billion on this transaction.
4.2.7 AMORTIZATION OF INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Amortization of intangible assets related to business combinations
$
126.8 $
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
2020
2019 (1)
162.1
Amortization of intangible assets related to business combinations amounted to $126.8 million in 2020,
and to $162.1 million in 2019, both mainly attributable to the amortization expense of intangible assets related to
Atkins. The variance from the prior year was mainly due to the end of the amortization period in the third quarter
of 2020 of intangible assets related to the revenue backlog of the Atkins acquisition.
130
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
131
SNC-LAVALIN
SNC-LAVALIN
4.2.2 CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ANALYSIS
4.2.5 ACQUISITION-RELATED COSTS AND INTEGRATION COSTS
2020
2019 (1)
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
Acquisition-related costs and integration costs
$
— $
2019
8.3
In 2020, the amount of acquisition-related costs and integration costs was $nil, compared with $8.3 million
in 2019, related to Atkins and Linxon.
4.2.6 LOSS ON DISPOSALS OF PS&PM BUSINESSES AND GAIN OR ADJUSTMENT ON GAIN
FROM DISPOSAL OF A CAPITAL INVESTMENT
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Gain or adjustment on gain from disposal of a Capital investment
Loss on disposals of PS&PM businesses
$
$
2020
(25.0) $
7.5 $
2019
(2,970.8)
0.3
In the fourth quarter of 2020, the Company released in full a provision for contingent indemnification related to the
previous disposal of a Capital investment accounted for under the consolidation method upon expiry of the
indemnification period. Such non-cash reversal of the provision in the amount of $25.0 million is included in “Gain
or adjustment on gain from disposal of a Capital investment” in the consolidated income statement for the year
ended December 31, 2020.
In the third quarter of 2020, SNC-Lavalin completed the sale of its 100% ownership interest in SNC-Lavalin SA
(Belgium) in exchange for total consideration of $nil. The loss on disposal of SNC-Lavalin’s ownership interest in
SNC-Lavalin SA amounted to $7.5 million before and after income taxes.
In 2019, the Company completed the sale of 10.01% of the shares of Highway 407 ETR to a company controlled
by Canada Pension Plan Investment Board. At closing and in accordance with the terms and conditions of the
agreement, SNC-Lavalin received the base purchase price proceeds of $3.0 billion, with up to an additional
$250 million contingently payable over a period of 10 years, conditional on the attainment of certain financial
thresholds related to the ongoing performance of Highway 407 ETR and recognized a gain before taxes of
$3.0 billion on this transaction.
4.2.7 AMORTIZATION OF INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
Amortization of intangible assets related to business combinations
$
126.8 $
2019 (1)
162.1
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Amortization of intangible assets related to business combinations amounted to $126.8 million in 2020,
and to $162.1 million in 2019, both mainly attributable to the amortization expense of intangible assets related to
Atkins. The variance from the prior year was mainly due to the end of the amortization period in the third quarter
of 2020 of intangible assets related to the revenue backlog of the Atkins acquisition.
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Corporate selling, general and
administrative expenses
$
147.7 $
28.2 $
175.9 $
45.8 $
28.2 $
73.9
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Corporate selling, general and administrative expenses totaled $175.9 million in 2020, compared with
$73.9 million in 2019, mainly reflecting the higher reversal of some corporate incentives and revision of certain
estimates in the first quarter of 2019 combined with a $58.3 million negative adjustment to the provision for the
Pyrrhotite Case litigation (as described in Section 14 of this MD&A and in Note 33 to the 2020 Annual Financial
Statements), the cost related to a new digital transformation project representing approximately $10.0 million in
2020 and a $4.0 million revision to the GMP equalization provision recognized in 2020.
4.2.3 LOSS ARISING ON FINANCIAL ASSETS (LIABILITIES) AT FAIR VALUE THROUGH
PROFIT OR LOSS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Loss arising on financial assets (liabilities) at fair value through profit or loss
$
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
2020
61.9 $
2019 (1)
4.7
The loss arising on financial assets (liabilities) at fair value through profit or loss of $61.9 million in 2020
(2019: $4.7 million) is mainly due to a $57.2 million negative fair value revaluation for the Highway 407 ETR
contingent consideration receivable. Such contingent consideration is payable over a period of 10 years by the
acquirer of the 10.01% ownership interest in Highway 407 ETR sold by the Company in August 2019. The fair
value of this financial asset was negatively impacted mainly by the actual and expected performance of Highway
407 ETR in 2020 due to lower traffic as a result of COVID-19 impacts, as the underlying payments are
conditioned on the attainment of certain cumulative financial thresholds related to the performance of Highway
407 ETR.
4.2.4 RESTRUCTURING COSTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Restructuring costs
2020
$
63.3 $
2019 (1)
79.7
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
The Company incurred $63.3 million of restructuring costs in 2020 (2019: $79.7 million). Restructuring
actions were taken during the year to adjust the cost base of the Company’s segments, notably in the Middle East
and the U.K. regions of the EDPM segment, for which an amount of $40.3 million of restructuring costs was
recognized in 2020. The restructuring costs of $63.3 million were mainly for severance obligations, but also
included $16.4 million of non-cash charges, notably $13.5 million related to impairment of right-of-use assets and
$2.9 million of impairment of property and equipment.
The Company incurred $79.7 million of restructuring costs in 2019, which were mainly for severance obligations.
130
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
131
131
SNC-Lavalin 2020 Financial Report SNC-LAVALIN
SNC-LAVALIN
4.2.8
IMPAIRMENT LOSS ON REMEASUREMENT OF ASSETS OF DISPOSAL GROUP
CLASSIFIED AS HELD FOR SALE TO FAIR VALUE LESS COST TO SALE
4.2.11 NET FINANCIAL EXPENSES
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
2019 (1)
Impairment loss on remeasurement of assets of disposal group classified
as held for sale to fair value less cost to sell
$
6.1 $
—
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
In 2020, the amount of impairment loss on remeasurement of assets of disposal group classified as held
for sale to fair value less cost to sell was $6.1 million compared with $nil in 2019, due to the remeasurement
of assets related to Atkins Consulting Engineers Limited, in Kenya, a subsidiary part of the EDPM segment and
presented as a disposal group classified as held for sale as at December 31, 2020 .
4.2.9 FEDERAL CHARGES SETTLEMENT (PPSC)
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Federal charges settlement (PPSC)
2020
2019
$ —
$ 257.3
As part of a settlement reached on December 18, 2019, with the Public Prosecution Service of Canada (“PPSC”)
on federal charges arising from legacy activities in Libya between 2001 and 2011, a subsidiary of the Company
agreed to pay a fine in the amount of $280 million, payable in installments over 5 years starting in 2020. The
$257.3 million expense recognized in 2019 represents the net present value of these installments at the time of
the agreement.
4.2.10 EBIT AND EBITDA ANALYSIS
EBIT and EBITDA are non-IFRS financial measures. Definitions and reconciliations of these financial measures
to net income are presented in Section 13.
In 2020, EBIT from PS&PM was negative $348.2 million, compared with negative $214.7 million in 2019, a
variance mainly due to a decrease in the Segment Adjusted EBIT of the Infrastructure EPC Projects of
$253.2 million in 2020 compared with 2019, as well as higher corporate selling, general and administrative
expenses. This was partially offset by lower amortization of intangible assets related to business combinations
and by $257.3 million of Federal charges settlement (PPSC) recorded in 2019.
EBITDA from PS&PM was negative $27.8 million in 2020, compared with $143.7 million in 2019, mainly due to
the factors described above for the EBIT from PS&PM other than the decrease in amortization of intangible assets
related to business combinations. When adjusting for the charges related to restructuring, the acquisition-related
costs and integration costs, the loss on disposals of PS&PM businesses, the adjustment to the provision for the
Pyrrhotite Case litigation, the GMP equalization and the federal charges settlement (PPSC) (as described in
Section 14 of this MD&A and in Note 33 to the 2020 Annual Financial Statements), Adjusted EBITDA from
PS&PM amounted to $111.4 million in 2020, compared with $485.7 million in 2019.
In 2020, EBIT from Capital decreased to $56.2 million, compared with $3,183.3 million in 2019, as the latter
included a gain on the disposal of a 10.01% stake of Highway 407 ETR of $2,970.8 million. EBIT and EBITDA
from Capital were negatively impacted in 2020 by a negative fair value revaluation of $57.2 million of the
Highway 407 ETR contingent consideration receivable, as well as a lower contribution from Highway 407 ETR
following the disposal of a portion of this investment by the Company in August 2019, combined with the absence
of dividends received from this investment in the second and fourth quarters of 2020, partially offset by the
release in full of a provision for contingent indemnification of $25.0 million in 2020.
132
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
132
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Interest revenues
Interest on debt:
Recourse
Limited recourse
Non-recourse
Net foreign exchange losses (gains)
Interest on lease liabilities
Other
2020
2019 (1)
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
$
(10.9) $
(0.4) $
(11.3) $
(7.6) $
(0.2) $
46.0
17.2
4.6
—
21.2
19.7
—
—
16.0
0.6
—
0.1
46.0
17.2
20.6
0.6
21.2
19.8
85.0
45.1
5.7
0.2
20.9
47.9
—
—
18.1
(0.2)
0.2
—
TOTAL
(7.8)
85.0
45.1
23.8
—
21.0
47.9
Net financial expenses
$
97.7 $
16.3 $
114.0 $
197.3 $
17.8 $
215.1
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Net financial expenses from PS&PM decreased to $97.7 million in 2020 compared with $197.3 million in
2019, a variance mainly due to a decrease in debt, combined with $33.8 million of loss related to the amendments
to the CDPQ Loan Agreement and $3.7 million related to other PS&PM financing arrangements in connection with
the sale by the Company of 10.01% of the shares of Highway 407 ETR, both included in “Other” for the year 2019
in the table above.
Net financial expenses from Capital were $16.3 million in 2020, compared with $17.8 million in 2019, mainly
due to lower interest expense on non-recourse debt.
4.2.12 INCOME TAXES ANALYSIS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Earnings (loss) from continuing
operations before income taxes
2020
2019 (1)
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$
(445.9)
$
40.0
$
(406.0)
$
(411.9)
$ 3,165.5
$ 2,753.5
Income tax expense (recovery)
$
(53.4)
$
(5.6)
$
(59.0)
$
(82.3)
$
392.7
$
310.3
Effective income tax rate (%)
12.0 %
(14.0) %
14.5 %
20.0 %
12.4 %
11.3 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
In 2020, the Company reported an income tax recovery of $59.0 million, compared to an income tax expense
of $310.3 million in 2019.
In 2020, the effective income tax recovery rate from PS&PM was lower than the Canadian statutory
income tax rate of 26.3%, mainly due to $53.3 million reduction of previously recognized deferred income tax
assets resulting from a re-assessment of the future recoverability of tax loss carryforwards in the United States,
net losses not affected by tax and other permanent items. These impacts were partially offset by an income tax
recovery on the carry back of net operating losses to a prior year at a higher tax rate and adjustments to deferred
income tax balances attributable to changes in tax rates and laws.
In 2019, the effective income tax recovery rate from PS&PM was lower than the Canadian statutory income tax
rate of 26.5%, mainly due to the non-tax deductible Federal Charges Settlement and $64.7 million of write-down
of previously recognized deferred income tax assets partially offset by the recognition of income tax recoveries on
capital losses and earnings not affected by tax.
The effective income tax rate from Capital Investments was lower than the Canadian statutory income tax
rate of 26.3% in 2020, mainly due to the non-taxable portion of investment income, including dividends from
Highway 407 ETR and the adjustment on the gain from a disposal of a Capital investment. These impacts were
partially offset with the non-deductible portion of the capital loss on the negative fair value revaluation for the
Highway 407 ETR contingent consideration receivable.
The effective income tax rate from Capital investments was higher in 2019 but was lower than the Canadian
statutory income tax rate of 26.5%, mainly due to the non-taxable portion of the gain on the disposal of a 10.01%
stake in Highway 407 ETR.
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
133
SNC-LAVALIN
SNC-LAVALIN
4.2.8
IMPAIRMENT LOSS ON REMEASUREMENT OF ASSETS OF DISPOSAL GROUP
4.2.11 NET FINANCIAL EXPENSES
CLASSIFIED AS HELD FOR SALE TO FAIR VALUE LESS COST TO SALE
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
2019 (1)
FROM CAPITAL
FROM PS&PM
TOTAL
(11.3) $
16.3 $
114.0 $
197.3 $
17.8 $
FROM PS&PM
FROM CAPITAL
$
(10.9) $
(0.4) $
TOTAL
(7.8)
85.0
45.1
23.8
—
21.0
47.9
215.1
46.0
17.2
4.6
—
21.2
19.7
97.7 $
Interest revenues
Interest on debt:
Recourse
Limited recourse
Non-recourse
—
—
16.0
0.6
—
0.1
46.0
17.2
20.6
0.6
21.2
19.8
Net foreign exchange losses (gains)
Interest on lease liabilities
Other
Net financial expenses
$
(7.6) $
(0.2) $
85.0
45.1
5.7
0.2
20.9
47.9
—
—
18.1
(0.2)
0.2
—
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
2019 (1)
Impairment loss on remeasurement of assets of disposal group classified
as held for sale to fair value less cost to sell
$
6.1 $
—
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
In 2020, the amount of impairment loss on remeasurement of assets of disposal group classified as held
for sale to fair value less cost to sell was $6.1 million compared with $nil in 2019, due to the remeasurement
of assets related to Atkins Consulting Engineers Limited, in Kenya, a subsidiary part of the EDPM segment and
presented as a disposal group classified as held for sale as at December 31, 2020 .
4.2.9 FEDERAL CHARGES SETTLEMENT (PPSC)
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Federal charges settlement (PPSC)
2020
2019
$ —
$ 257.3
As part of a settlement reached on December 18, 2019, with the Public Prosecution Service of Canada (“PPSC”)
on federal charges arising from legacy activities in Libya between 2001 and 2011, a subsidiary of the Company
agreed to pay a fine in the amount of $280 million, payable in installments over 5 years starting in 2020. The
$257.3 million expense recognized in 2019 represents the net present value of these installments at the time of
the agreement.
4.2.10 EBIT AND EBITDA ANALYSIS
EBIT and EBITDA are non-IFRS financial measures. Definitions and reconciliations of these financial measures
to net income are presented in Section 13.
In 2020, EBIT from PS&PM was negative $348.2 million, compared with negative $214.7 million in 2019, a
variance mainly due to a decrease in the Segment Adjusted EBIT of the Infrastructure EPC Projects of
$253.2 million in 2020 compared with 2019, as well as higher corporate selling, general and administrative
expenses. This was partially offset by lower amortization of intangible assets related to business combinations
and by $257.3 million of Federal charges settlement (PPSC) recorded in 2019.
EBITDA from PS&PM was negative $27.8 million in 2020, compared with $143.7 million in 2019, mainly due to
the factors described above for the EBIT from PS&PM other than the decrease in amortization of intangible assets
related to business combinations. When adjusting for the charges related to restructuring, the acquisition-related
costs and integration costs, the loss on disposals of PS&PM businesses, the adjustment to the provision for the
Pyrrhotite Case litigation, the GMP equalization and the federal charges settlement (PPSC) (as described in
Section 14 of this MD&A and in Note 33 to the 2020 Annual Financial Statements), Adjusted EBITDA from
PS&PM amounted to $111.4 million in 2020, compared with $485.7 million in 2019.
In 2020, EBIT from Capital decreased to $56.2 million, compared with $3,183.3 million in 2019, as the latter
included a gain on the disposal of a 10.01% stake of Highway 407 ETR of $2,970.8 million. EBIT and EBITDA
from Capital were negatively impacted in 2020 by a negative fair value revaluation of $57.2 million of the
Highway 407 ETR contingent consideration receivable, as well as a lower contribution from Highway 407 ETR
following the disposal of a portion of this investment by the Company in August 2019, combined with the absence
of dividends received from this investment in the second and fourth quarters of 2020, partially offset by the
release in full of a provision for contingent indemnification of $25.0 million in 2020.
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Net financial expenses from PS&PM decreased to $97.7 million in 2020 compared with $197.3 million in
2019, a variance mainly due to a decrease in debt, combined with $33.8 million of loss related to the amendments
to the CDPQ Loan Agreement and $3.7 million related to other PS&PM financing arrangements in connection with
the sale by the Company of 10.01% of the shares of Highway 407 ETR, both included in “Other” for the year 2019
in the table above.
Net financial expenses from Capital were $16.3 million in 2020, compared with $17.8 million in 2019, mainly
due to lower interest expense on non-recourse debt.
4.2.12 INCOME TAXES ANALYSIS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Earnings (loss) from continuing
operations before income taxes
2020
2019 (1)
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$
(445.9)
$
40.0
$
(406.0)
$
(411.9)
$ 3,165.5
$ 2,753.5
Income tax expense (recovery)
Effective income tax rate (%)
$
$
(53.4)
12.0 %
$
(5.6)
(14.0) %
(59.0)
14.5 %
$
(82.3)
20.0 %
$
392.7
$
310.3
12.4 %
11.3 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
In 2020, the Company reported an income tax recovery of $59.0 million, compared to an income tax expense
of $310.3 million in 2019.
In 2020, the effective income tax recovery rate from PS&PM was lower than the Canadian statutory
income tax rate of 26.3%, mainly due to $53.3 million reduction of previously recognized deferred income tax
assets resulting from a re-assessment of the future recoverability of tax loss carryforwards in the United States,
net losses not affected by tax and other permanent items. These impacts were partially offset by an income tax
recovery on the carry back of net operating losses to a prior year at a higher tax rate and adjustments to deferred
income tax balances attributable to changes in tax rates and laws.
In 2019, the effective income tax recovery rate from PS&PM was lower than the Canadian statutory income tax
rate of 26.5%, mainly due to the non-tax deductible Federal Charges Settlement and $64.7 million of write-down
of previously recognized deferred income tax assets partially offset by the recognition of income tax recoveries on
capital losses and earnings not affected by tax.
The effective income tax rate from Capital Investments was lower than the Canadian statutory income tax
rate of 26.3% in 2020, mainly due to the non-taxable portion of investment income, including dividends from
Highway 407 ETR and the adjustment on the gain from a disposal of a Capital investment. These impacts were
partially offset with the non-deductible portion of the capital loss on the negative fair value revaluation for the
Highway 407 ETR contingent consideration receivable.
The effective income tax rate from Capital investments was higher in 2019 but was lower than the Canadian
statutory income tax rate of 26.5%, mainly due to the non-taxable portion of the gain on the disposal of a 10.01%
stake in Highway 407 ETR.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
133
133
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
4.2.13 NET INCOME (LOSS) ANALYSIS FROM CONTINUING OPERATIONS
4.2.14 NET LOSS FROM DISCONTINUED OPERATIONS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
2019 (1)
Net income (loss) attributable to SNC-Lavalin shareholders from continuing operations:
From PS&PM
From Capital
Net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations
Non-controlling interests
Net income (loss) from continuing operations
$
(401.7) $
45.6
$
(356.1) $
$
9.2
(346.9) $
(332.0)
2,772.8
2,440.8
2.4
2,443.2
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
NET LOSS FROM PS&PM
Net loss attributable to SNC-Lavalin shareholders from continuing operations from PS&PM was
$401.7 million in 2020, compared with a net loss attributable to SNC-Lavalin shareholders from continuing
operations from PS&PM of $332.0 million in 2019. The net loss attributable to SNC-Lavalin shareholders from
continuing operations from PS&PM in 2020 includes a negative Segment Adjusted EBIT of $359.7 million in the
Infrastructure EPC Projects segment and of $171.1 million in the Resources segment. In addition, restructuring
costs of $63.3 million before taxes ($49.4 million after taxes) mainly related to the EDPM segment were incurred
in 2020 and $58.3 million negative adjustment to the provision for the Pyrrhotite Case litigation, as well as a
$53.3 million reduction of previously recognized deferred income tax assets resulting from a re-assessment of the
future recoverability of tax loss carryforwards in the United States. The net loss attributable to SNC-Lavalin
shareholders from continuing operations from PS&PM in 2019 included a negative Segment Adjusted EBIT of
$111.2 million in the Resources segment and of $106.5 million in the Infrastructure EPC Projects segment, as well
as a $257.3 million charge related to the Federal Charges Settlement and $76.1 million ($59.8 million after taxes)
of restructuring costs.
NET INCOME FROM CAPITAL
Net income attributable to SNC-Lavalin shareholders from continuing operations from Capital amounted
to $45.6 million in 2020, compared with a net income attributable to SNC-Lavalin shareholders from continuing
operations from Capital of $2,772.8 million in 2019, as the latter included a gain on the disposal of a 10.01% stake
of Highway 407 ETR of $2,586.0 million. The remaining variance was mainly due to a negative fair value
revaluation in 2020 of $57.2 million of the Highway 407 ETR contingent consideration receivable, as well as the
decrease in contribution from Highway 407 ETR following the disposal of a portion of this investment by the
Company in August 2019 combined with the absence of dividends received from this investment in the second
and fourth quarters of 2020, partially offset by the release in full of a $25.0 million provision for contingent
indemnification in 2020.
Net loss from discontinued operations was $609.3 million in 2020, compared to a net loss from discontinued
operations of $2,112.6 million in 2019.
The table below presents the main components of the net loss from discontinued operations for both 2020 and
2019:
(IN MILLIONS $)
Restructuring costs
YEARS ENDED DECEMBER 31
Amortization of intangible assets related to business combinations
Gain on disposal of a PS&PM business
Impairment of goodwill
Impairment of intangible assets related to business combinations
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value
less cost to sell
Income taxes
Other contribution from discontinued operations
Net loss from discontinued operations
$
(57.8) $
2020
—
6.2
—
—
(271.6)
(63.0)
(223.2)
2019
(103.1)
(19.9)
—
(1,801.0)
(72.8)
—
111.6
(227.3)
$
(609.3) $
(2,112.6)
Restructuring costs related to discontinued operations were $57.8 million in 2020, compared to
$103.1 million in 2019. The restructuring costs recognized in 2020 were mainly related to the closure of the
Valerus operations. The restructuring costs recognized in 2019 included approximately $72 million related to
Valerus, of which $52.5 million related to non-cash charges, notably $31.2 million of inventory write-down,
$11.3 million of impairment of right-of-use assets and $10.0 million of impairment of property and equipment.
The gain on disposal of a PS&PM business relates to the disposal of South African activities in 2020.
The impairment of goodwill and of intangible assets related to business combinations in 2019 was largely
attributable to the Company’s decision to cease bidding on LSTK construction projects, as well as lower than
expected performance in Resources in the first half of 2019 and challenges in replenishing the backlog.
The impairment loss on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell results from the presentation of the Company’s Oil & Gas business as held for sale as at
December 31, 2020 and its related remeasurement. Upon closing, the transaction is expected to generate a gain
on disposal due to the reclassification of the foreign exchange cumulative translation adjustments balance from
equity to the income statement at that time. As at December 31, 2020, such cumulative balance of the disposal
groups classified as held for sale amounted to $594.1 million and primarily related to the Oil & Gas business (see
Note 39 to the 2020 Annual Financial Statements).
The income tax expense of $63.0 million in 2020 was mainly a result of net losses not affected by tax,
combined with the anticipated tax impact related to the expected disposition of the Oil & Gas business. The
income tax benefit of $111.6 million in 2019 was mainly due to the reversal of a deferred tax liability previously
recognized on the Oil & Gas business prior to its impairment, combined with the recognition of a deferred tax
benefit on certain operating losses.
The overall contribution of the Oil & Gas business, which was previously presented as part of the Resources
segment, was negatively impacted in both 2020 and 2019 by unfavourable reforecasts on certain LSTK
construction projects. Furthermore, in the third quarter of 2020, the Company recognized a $57.9 million loss from
an unfavorable ruling on a completed LSTK legacy project.
134
134
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
135
SNC-LAVALIN
(IN MILLIONS $)
From PS&PM
From Capital
YEARS ENDED DECEMBER 31
2020
2019 (1)
Net income (loss) attributable to SNC-Lavalin shareholders from continuing operations:
Net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations
Non-controlling interests
Net income (loss) from continuing operations
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
NET LOSS FROM PS&PM
$
(401.7) $
45.6
$
(356.1) $
$
(346.9) $
9.2
(332.0)
2,772.8
2,440.8
2.4
2,443.2
Net loss attributable to SNC-Lavalin shareholders from continuing operations from PS&PM was
$401.7 million in 2020, compared with a net loss attributable to SNC-Lavalin shareholders from continuing
operations from PS&PM of $332.0 million in 2019. The net loss attributable to SNC-Lavalin shareholders from
continuing operations from PS&PM in 2020 includes a negative Segment Adjusted EBIT of $359.7 million in the
Infrastructure EPC Projects segment and of $171.1 million in the Resources segment. In addition, restructuring
costs of $63.3 million before taxes ($49.4 million after taxes) mainly related to the EDPM segment were incurred
in 2020 and $58.3 million negative adjustment to the provision for the Pyrrhotite Case litigation, as well as a
$53.3 million reduction of previously recognized deferred income tax assets resulting from a re-assessment of the
future recoverability of tax loss carryforwards in the United States. The net loss attributable to SNC-Lavalin
shareholders from continuing operations from PS&PM in 2019 included a negative Segment Adjusted EBIT of
$111.2 million in the Resources segment and of $106.5 million in the Infrastructure EPC Projects segment, as well
as a $257.3 million charge related to the Federal Charges Settlement and $76.1 million ($59.8 million after taxes)
of restructuring costs.
NET INCOME FROM CAPITAL
Net income attributable to SNC-Lavalin shareholders from continuing operations from Capital amounted
to $45.6 million in 2020, compared with a net income attributable to SNC-Lavalin shareholders from continuing
operations from Capital of $2,772.8 million in 2019, as the latter included a gain on the disposal of a 10.01% stake
of Highway 407 ETR of $2,586.0 million. The remaining variance was mainly due to a negative fair value
revaluation in 2020 of $57.2 million of the Highway 407 ETR contingent consideration receivable, as well as the
decrease in contribution from Highway 407 ETR following the disposal of a portion of this investment by the
Company in August 2019 combined with the absence of dividends received from this investment in the second
and fourth quarters of 2020, partially offset by the release in full of a $25.0 million provision for contingent
indemnification in 2020.
4.2.13 NET INCOME (LOSS) ANALYSIS FROM CONTINUING OPERATIONS
4.2.14 NET LOSS FROM DISCONTINUED OPERATIONS
SNC-LAVALIN
Net loss from discontinued operations was $609.3 million in 2020, compared to a net loss from discontinued
operations of $2,112.6 million in 2019.
The table below presents the main components of the net loss from discontinued operations for both 2020 and
2019:
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2020
Restructuring costs
Amortization of intangible assets related to business combinations
Gain on disposal of a PS&PM business
Impairment of goodwill
Impairment of intangible assets related to business combinations
Impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value
less cost to sell
Income taxes
Other contribution from discontinued operations
Net loss from discontinued operations
$
(57.8) $
—
6.2
—
—
(271.6)
(63.0)
(223.2)
(609.3) $
$
2019
(103.1)
(19.9)
—
(1,801.0)
(72.8)
—
111.6
(227.3)
(2,112.6)
Restructuring costs related to discontinued operations were $57.8 million in 2020, compared to
$103.1 million in 2019. The restructuring costs recognized in 2020 were mainly related to the closure of the
Valerus operations. The restructuring costs recognized in 2019 included approximately $72 million related to
Valerus, of which $52.5 million related to non-cash charges, notably $31.2 million of inventory write-down,
$11.3 million of impairment of right-of-use assets and $10.0 million of impairment of property and equipment.
The gain on disposal of a PS&PM business relates to the disposal of South African activities in 2020.
The impairment of goodwill and of intangible assets related to business combinations in 2019 was largely
attributable to the Company’s decision to cease bidding on LSTK construction projects, as well as lower than
expected performance in Resources in the first half of 2019 and challenges in replenishing the backlog.
The impairment loss on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell results from the presentation of the Company’s Oil & Gas business as held for sale as at
December 31, 2020 and its related remeasurement. Upon closing, the transaction is expected to generate a gain
on disposal due to the reclassification of the foreign exchange cumulative translation adjustments balance from
equity to the income statement at that time. As at December 31, 2020, such cumulative balance of the disposal
groups classified as held for sale amounted to $594.1 million and primarily related to the Oil & Gas business (see
Note 39 to the 2020 Annual Financial Statements).
The income tax expense of $63.0 million in 2020 was mainly a result of net losses not affected by tax,
combined with the anticipated tax impact related to the expected disposition of the Oil & Gas business. The
income tax benefit of $111.6 million in 2019 was mainly due to the reversal of a deferred tax liability previously
recognized on the Oil & Gas business prior to its impairment, combined with the recognition of a deferred tax
benefit on certain operating losses.
The overall contribution of the Oil & Gas business, which was previously presented as part of the Resources
segment, was negatively impacted in both 2020 and 2019 by unfavourable reforecasts on certain LSTK
construction projects. Furthermore, in the third quarter of 2020, the Company recognized a $57.9 million loss from
an unfavorable ruling on a completed LSTK legacy project.
134
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
135
135
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
Backlog (Remaining Performance
Obligations)
Backlog is defined as a forward-looking indicator of anticipated revenues to be recognized by the Company,
determined based on contract awards that are firm and amounting to the transaction price allocated to remaining
performance obligations. Management may be required to make estimates regarding the revenue to be generated
for certain contracts.
Revenue backlog is derived primarily from three major types of contracts: Reimbursable and engineering
services contracts, standardized EPC contracts and LSTK construction contracts.
◦
◦
◦
Reimbursable and engineering services contracts: Under reimbursable contracts, the Company charges
the customer for the actual cost incurred plus a mark-up that could take various forms such as a fixed-fee per
unit, a percentage of costs incurred or an incentive fee based on achieving certain targets, performance
factors or contractual milestones. Reimbursable contracts also include unit-rate contracts for which a fixed
amount per quantity is charged to the customer, and reimbursable contracts with a cap or a target price
accompanied by incentives and/or disincentives. Engineering services contracts include i) time and material
agreements based on hourly rates and fixed-price lump-sum contracts with limited procurement or
construction risks, and ii) O&M contracts.
Standardized EPC contracts: Under standardized EPC contracts, the Company provides repetitive EPC
offerings that are lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations
executed through its Linxon subsidiary.
LSTK construction contracts: Under LSTK construction contracts, the Company completes the work
required for the project at a lump-sum price. Before entering into such contracts, the Company estimates the
total cost of the project, plus a profit margin. The Company’s actual profit margin may vary based on its ability
to achieve the project requirements at above or below the initial estimated costs.
REVENUE BACKLOG BY SEGMENT AND GEOGRAPHIC AREA
The following table provides a breakdown of revenue backlog by segment and geographic area.
AT DECEMBER 31
(IN MILLIONS $)
BY SEGMENT AND GEOGRAPHIC AREA
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital (2)
From Canada
Outside Canada
Total from continuing operations
Total from continuing operations (3)
$
2,864.4 $
2020
890.6
7,098.5
10,853.5 $
161.6 $
2,014.0
2,175.6 $
13,029.1 $
158.7 $
13,187.8 $
8,155.7 $
5,032.1
13,187.8 $
2019 (1)
2,630.0
1,154.0
7,337.0
11,121.0
255.4
2,584.5
2,839.9
13,960.8
176.9
14,137.7
9,032.9
5,104.8
14,137.7
$
$
$
$
$
$
$
$
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Backlog from Capital represents the amount that will be recognized as revenue from contracts with customers in the Capital segment from a concession agreement.
(3) Revenue backlog excluding backlog related to discontinued operations of $0.8 billion as at December 31, 2020 (December 31, 2019: $1.1 billion).
The Company’s revenue backlog decreased to $13.2 billion as at December 31, 2020 compared with
$14.1 billion as at December 31, 2019, mainly reflecting a decrease in Infrastructure EPC Projects, Nuclear and
Infrastructure Services, partially offset by an increase in EDPM.
BACKLOG RECONCILIATION
In the following section, the Company presents its “booking-to-revenue ratio”, a non-IFRS measure, which
corresponds to contract bookings divided by revenues for a given period. This measure provides a basis for
assessing the renewal of business. However, the revenue backlog measure does not include prospects, one of
the key elements taken into account when estimating revenues and gross margin for budget and forecast
purposes described in Section 2.2, which can be a significant portion of the budgeted and/or forecasted revenues.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Opening backlog
Plus: Contract bookings during the year
Less: Revenues from contracts with customers recognized during the year
Backlog of business sold during the year
Ending backlog
Booking-to-revenue ratio (2)
2020
2019 (1)
$
14,137.7 $
13,381.2
5,906.0
6,855.1
0.8
8,122.6
7,366.1
—
$
13,187.8 $
14,137.7
0.86
1.10
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measures. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from these financial measures to the
most directly comparable measure specified under IFRS, when applicable.
136
136
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
137
SNC-LAVALIN
SNC-LAVALIN
Backlog (Remaining Performance
Obligations)
Backlog is defined as a forward-looking indicator of anticipated revenues to be recognized by the Company,
determined based on contract awards that are firm and amounting to the transaction price allocated to remaining
performance obligations. Management may be required to make estimates regarding the revenue to be generated
for certain contracts.
Revenue backlog is derived primarily from three major types of contracts: Reimbursable and engineering
services contracts, standardized EPC contracts and LSTK construction contracts.
◦
Reimbursable and engineering services contracts: Under reimbursable contracts, the Company charges
the customer for the actual cost incurred plus a mark-up that could take various forms such as a fixed-fee per
unit, a percentage of costs incurred or an incentive fee based on achieving certain targets, performance
factors or contractual milestones. Reimbursable contracts also include unit-rate contracts for which a fixed
amount per quantity is charged to the customer, and reimbursable contracts with a cap or a target price
accompanied by incentives and/or disincentives. Engineering services contracts include i) time and material
agreements based on hourly rates and fixed-price lump-sum contracts with limited procurement or
construction risks, and ii) O&M contracts.
◦
◦
Standardized EPC contracts: Under standardized EPC contracts, the Company provides repetitive EPC
offerings that are lower-risk, standardized solutions for: i) district cooling plants; and ii) power substations
executed through its Linxon subsidiary.
LSTK construction contracts: Under LSTK construction contracts, the Company completes the work
required for the project at a lump-sum price. Before entering into such contracts, the Company estimates the
total cost of the project, plus a profit margin. The Company’s actual profit margin may vary based on its ability
to achieve the project requirements at above or below the initial estimated costs.
REVENUE BACKLOG BY SEGMENT AND GEOGRAPHIC AREA
The following table provides a breakdown of revenue backlog by segment and geographic area.
AT DECEMBER 31
(IN MILLIONS $)
BY SEGMENT AND GEOGRAPHIC AREA
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital (2)
Total from continuing operations
From Canada
Outside Canada
Total from continuing operations (3)
2020
$
2,864.4 $
890.6
7,098.5
10,853.5 $
161.6 $
2,014.0
2,175.6 $
13,029.1 $
158.7 $
13,187.8 $
8,155.7 $
5,032.1
13,187.8 $
$
$
$
$
$
$
$
$
2019 (1)
2,630.0
1,154.0
7,337.0
11,121.0
255.4
2,584.5
2,839.9
13,960.8
176.9
14,137.7
9,032.9
5,104.8
14,137.7
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Backlog from Capital represents the amount that will be recognized as revenue from contracts with customers in the Capital segment from a concession agreement.
(3) Revenue backlog excluding backlog related to discontinued operations of $0.8 billion as at December 31, 2020 (December 31, 2019: $1.1 billion).
The Company’s revenue backlog decreased to $13.2 billion as at December 31, 2020 compared with
$14.1 billion as at December 31, 2019, mainly reflecting a decrease in Infrastructure EPC Projects, Nuclear and
Infrastructure Services, partially offset by an increase in EDPM.
BACKLOG RECONCILIATION
In the following section, the Company presents its “booking-to-revenue ratio”, a non-IFRS measure, which
corresponds to contract bookings divided by revenues for a given period. This measure provides a basis for
assessing the renewal of business. However, the revenue backlog measure does not include prospects, one of
the key elements taken into account when estimating revenues and gross margin for budget and forecast
purposes described in Section 2.2, which can be a significant portion of the budgeted and/or forecasted revenues.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Opening backlog
Plus: Contract bookings during the year
Less: Revenues from contracts with customers recognized during the year
Backlog of business sold during the year
Ending backlog
Booking-to-revenue ratio (2)
2020
$
14,137.7 $
5,906.0
6,855.1
0.8
13,187.8 $
0.86
$
2019 (1)
13,381.2
8,122.6
7,366.1
—
14,137.7
1.10
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
(2) Non-IFRS financial measures. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from these financial measures to the
most directly comparable measure specified under IFRS, when applicable.
136
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
137
137
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
BACKLOG BY TYPES OF CONTRACTS
SNC-LAVALIN
BACKLOG PHASING
The following tables show the amounts and proportions of reimbursable and engineering services contracts,
standardized EPC contracts and LSTK construction contracts included in each segment’s backlog as at
December 31, 2020 and 2019:
AT DECEMBER 31, 2020
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects (1)
SNCL Projects - Total
PS&PM - Total
Capital
Total from continuing operations
REIMBURSABLE AND
ENGINEERING SERVICES
CONTRACTS
STANDARDIZED
EPC CONTRACTS
LSTK
CONSTRUCTION
CONTRACTS
$
2,864.4
840.0
5,997.4
$
9,701.8
$
89.3
248.2
337.5
$
$ 10,039.3
$
158.7
$ 10,198.0
100 % $
94 %
84 %
89 % $
55 % $
12 %
16 % $
77 % $
100 % $
77 % $
—
—
1,101.1
1,101.1
—
—
—
1,101.1
—
1,101.1
— % $
— %
16 %
10 % $
— % $
— %
— % $
8 % $
— % $
8 % $
—
50.6
—
50.6
72.3
1,765.8
1,838.1
1,888.7
—
1,888.7
— %
6 %
— %
— %
45 %
88 %
84 %
14 %
— %
14 %
(1)
In 2020, the Husky White Rose project was reclassified from the LSTK construction contracts to the reimbursable and engineering services contracts to reflect changes made to the
contractual terms of this project.
REIMBURSABLE AND
ENGINEERING SERVICES
CONTRACTS
STANDARDIZED
EPC CONTRACTS
LSTK
CONSTRUCTION
CONTRACTS
AT DECEMBER 31, 2019 (1)
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
$
2,630.0
1,079.0
6,444.5
$ 10,153.5
$
82.7
—
$
82.7
$ 10,236.2
176.9
$
Total from continuing operations
$ 10,413.1
100 % $
94 %
88 %
91 % $
32 % $
— %
3 % $
74 % $
100 % $
74 % $
—
—
892.5
892.5
—
—
—
892.5
—
892.5
— % $
— %
12 %
8 % $
— % $
— %
— % $
6 % $
— % $
—
75.0
—
75.0
172.7
2,584.5
2,757.2
2,832.2
—
6 % $
2,832.2
— %
6 %
— %
1 %
68 %
100 %
97 %
20 %
— %
20 %
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
138
138
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
139
Backlog as at December 31, 2020, is expected to be recognized in revenues as follows: 2021 – $4.4 billion, 2022
– $2.0 billion, 2023 – $1.2 billion, and thereafter – $5.6 billion (2019: 2020 – $4.8 billion, 2021 – $2.2 billion, 2022
– $1.1 billion, and thereafter – $6.0 billion). It should be noted that these amounts exclude any estimated
amounts of variable consideration that are excluded from the transaction price.
The LSTK construction contracts included in the backlog of the Resources and Infrastructure EPC Projects
segments have expected completions varying between 2021 and 2024. The Company will fulfill the contractual
obligations of its current LSTK construction projects. It may be necessary for the Company to accept change
orders under existing LSTK construction contracts, which may temporarily extend the performance timeframe of
such contracts.
In addition, a number of project contracts, particularly in the Resources and Infrastructure EPC Projects
segments, have warranty periods and/or outstanding claims, that may result in legal proceedings that extend
beyond the actual performance and completion of the projects. See Note 33 - “Contingent Liabilities” to the
2020 Annual Financial Statements.
Most of the backlog from LSTK construction contracts in these segments is derived from the following projects:
Réseau Express Métropolitain (REM), Trillium Line Extension (Trillium), and Eglinton LRT. The REM project was
temporarily suspended towards the end of the first quarter of 2020 due to the COVID-19 pandemic, but was
authorized to resume in the second quarter of 2020. The Eglinton and Trillium projects remained open throughout
2020. All three projects have been negatively affected, and continue to be negatively affected, by revised working
conditions due to COVID-19.
As such, while the backlog phasing presented below incorporates the Company’s best estimates, the timing of
projects is subject to uncertainties. See Section 14, “Risks and Uncertainties”, for a more specific overview of the
risks and uncertainties relating to the Company caused by the COVID-19 pandemic.
BACKLOG PHASING – LSTK construction contracts
$1,000.00
)
S
N
O
I
L
L
I
M
N
I
(
$500.00
$—
2021
2022
2023
2024
Infrastructure EPC Projects
Resources
SNC-LAVALIN
BACKLOG BY TYPES OF CONTRACTS
SNC-LAVALIN
BACKLOG PHASING
The following tables show the amounts and proportions of reimbursable and engineering services contracts,
standardized EPC contracts and LSTK construction contracts included in each segment’s backlog as at
December 31, 2020 and 2019:
AT DECEMBER 31, 2020
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects (1)
SNCL Projects - Total
840.0
5,997.4
9,701.8
89.3
248.2
337.5
$
$
$
REIMBURSABLE AND
ENGINEERING SERVICES
CONTRACTS
STANDARDIZED
EPC CONTRACTS
LSTK
CONSTRUCTION
CONTRACTS
$
2,864.4
100 % $
94 %
84 %
1,101.1
89 % $
1,101.1
55 % $
12 %
16 % $
—
—
—
—
—
—
— % $
— %
16 %
10 % $
— % $
— %
— % $
—
50.6
—
50.6
72.3
1,765.8
1,838.1
8 % $
1,888.7
— % $
—
8 % $
1,888.7
PS&PM - Total
Capital
Total from continuing operations
$ 10,039.3
$
158.7
$ 10,198.0
77 % $
1,101.1
100 % $
77 % $
1,101.1
(1)
In 2020, the Husky White Rose project was reclassified from the LSTK construction contracts to the reimbursable and engineering services contracts to reflect changes made to the
contractual terms of this project.
AT DECEMBER 31, 2019 (1)
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
REIMBURSABLE AND
ENGINEERING SERVICES
CONTRACTS
STANDARDIZED
EPC CONTRACTS
LSTK
CONSTRUCTION
CONTRACTS
$
2,630.0
100 % $
1,079.0
6,444.5
$
$
82.7
—
82.7
94 %
88 %
91 % $
32 % $
— %
3 % $
$ 10,236.2
$
176.9
74 % $
892.5
100 % $
892.5
892.5
—
—
—
—
—
—
— % $
— %
12 %
8 % $
— % $
— %
— % $
6 % $
— % $
—
75.0
—
75.0
172.7
2,584.5
2,757.2
2,832.2
—
SNCL Engineering Services - Total
$ 10,153.5
Total from continuing operations
$ 10,413.1
74 % $
892.5
6 % $
2,832.2
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
— %
6 %
— %
— %
45 %
88 %
84 %
14 %
— %
14 %
— %
6 %
— %
1 %
68 %
100 %
97 %
20 %
— %
20 %
Backlog as at December 31, 2020, is expected to be recognized in revenues as follows: 2021 – $4.4 billion, 2022
– $2.0 billion, 2023 – $1.2 billion, and thereafter – $5.6 billion (2019: 2020 – $4.8 billion, 2021 – $2.2 billion, 2022
– $1.1 billion, and thereafter – $6.0 billion). It should be noted that these amounts exclude any estimated
amounts of variable consideration that are excluded from the transaction price.
The LSTK construction contracts included in the backlog of the Resources and Infrastructure EPC Projects
segments have expected completions varying between 2021 and 2024. The Company will fulfill the contractual
obligations of its current LSTK construction projects. It may be necessary for the Company to accept change
orders under existing LSTK construction contracts, which may temporarily extend the performance timeframe of
such contracts.
In addition, a number of project contracts, particularly in the Resources and Infrastructure EPC Projects
segments, have warranty periods and/or outstanding claims, that may result in legal proceedings that extend
beyond the actual performance and completion of the projects. See Note 33 - “Contingent Liabilities” to the
2020 Annual Financial Statements.
Most of the backlog from LSTK construction contracts in these segments is derived from the following projects:
Réseau Express Métropolitain (REM), Trillium Line Extension (Trillium), and Eglinton LRT. The REM project was
temporarily suspended towards the end of the first quarter of 2020 due to the COVID-19 pandemic, but was
authorized to resume in the second quarter of 2020. The Eglinton and Trillium projects remained open throughout
2020. All three projects have been negatively affected, and continue to be negatively affected, by revised working
conditions due to COVID-19.
As such, while the backlog phasing presented below incorporates the Company’s best estimates, the timing of
projects is subject to uncertainties. See Section 14, “Risks and Uncertainties”, for a more specific overview of the
risks and uncertainties relating to the Company caused by the COVID-19 pandemic.
BACKLOG PHASING – LSTK construction contracts
$1,000.00
)
S
N
O
I
L
L
I
M
N
I
(
$500.00
$—
2021
2022
2023
2024
Infrastructure EPC Projects
Resources
138
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
139
139
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
Geographic Breakdown of Revenues
Fourth Quarter Results
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Americas:
Canada
United States
Latin America
Middle East and Africa:
Saudi Arabia
Other Middle East countries
Africa
Asia Pacific:
Australia
Other
Europe:
United Kingdom
Other
Total
2020
TOTAL
2019 (1)
%
TOTAL
$
$
2,102.4
1,383.6
81.0
167.4
385.7
203.4
38.5
342.2
1,893.6
409.8
7,007.5
30 % $
20 %
1 %
2,618.7
1,382.0
146.2
2 %
6 %
3 %
1 %
5 %
276.0
585.9
153.9
96.3
319.6
27 %
6 %
100 % $
1,759.0
292.3
7,629.8
%
34 %
18 %
2 %
4 %
8 %
2 %
1 %
4 %
23 %
4 %
100 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
AMERICAS:
◦
◦
◦
Revenues in Canada in 2020 decreased compared with 2019, mainly due to a decrease in Infrastructure
EPC Projects and Infrastructure Services.
Revenues in the United States in 2020 are in line with 2019, reflecting an increase in Resources, EDPM
and Nuclear, mostly offset by a decrease in Infrastructure EPC Projects, due to the completion or near
completion of certain major projects.
Revenues in Latin America decreased in 2020 compared with the previous year, principally reflecting a
decrease in Resources.
MIDDLE EAST AND AFRICA:
◦
◦
◦
Revenues in Saudi Arabia decreased in 2020 compared with 2019, primarily due to Resources.
Revenues in other Middle East countries decreased in 2020 compared with 2019, mainly due to
Resources, partially offset by activities from the Linxon business in Infrastructure Services.
Revenues in Africa in 2020 increased compared with 2019, primarily due to an increase in Resources.
ASIA PACIFIC:
◦
◦
Revenues in Australia decreased in 2020 compared with the previous year, mainly attributable to a
decrease in Resources due to completion or near completion of certain major projects in 2019, partially offset
by an increase in Infrastructure EPC Projects.
Revenues in other countries in Asia Pacific, increased in 2020 compared with the previous year, mainly
reflecting incremental activities of the Linxon business in Infrastructure Services as well as those in EDPM.
EUROPE:
◦
◦
Revenues in the United Kingdom, increased in 2020 compared with the previous year, mainly due to
EDPM and Infrastructure Services.
Revenues in other countries in Europe increased in 2020 compared with 2019, mainly due to incremental
activities of the Linxon business in Infrastructure Services.
.
(1)
(2)
◦
◦
From PS&PM
From Capital
Basic
Diluted
From PS&PM
From Capital
PS&PM (2)
EBIT (2)
EBITDA (2)
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
Income Statements
Revenues
Net income (loss) attributable to SNC-Lavalin shareholders:
Net loss attributable to SNC-Lavalin shareholders
Earnings (loss) per share attributable to SNC-Lavalin shareholders (in $) :
Net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations:
2020
2019 (1)
CHANGE (%)
$ 1,697.9
$ 1,967.6
(13.7%)
$
(736.2)
$
(310.4)
33.5
17.5
$
(702.7)
$
(292.9)
$
$
(4.00)
$
(1.67)
(4.00)
$
(1.67)
$
(356.4)
$
(197.7)
33.5
17.5
$
$
$
$
$
(268.7)
(1.84)
(1.53)
(372.7)
(300.7)
$
$
$
$
$
109.6
(1.03)
0.62
(132.9)
(40.1)
(14.8%)
10.6%
137.2%
91.4%
139.9%
139.9%
139.9%
80.3%
91.4%
79.2%
N/A
79.3%
N/A
180.4%
650.0%
N/A
Net loss attributable to SNC-Lavalin shareholders from continuing operations
$
(322.9)
$
(180.2)
Adjusted net income (loss) attributable to SNC-Lavalin shareholders from
Diluted loss per share from continuing operations (“Diluted EPS”) (in $)
Adjusted diluted EPS from PS&PM (in $) (2)
Adjusted PS&PM EBITDA (% of PS&PM revenues) (2)
Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Non-IFRS financial measure. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from these financial measures to
the most directly comparable measure specified under IFRS, when applicable.
Revenues totaled $1,697.9 million in the fourth quarter of 2020, compared with $1,967.6 million in the
corresponding quarter of 2019, mainly reflecting lower revenues in Infrastructure EPC Projects, principally
due to the completion or near completion of certain major projects, as well as the impact of the commercial
claims receivable reduction in the fourth quarter of 2020, as described below.
For the fourth quarter of 2020, the net loss attributable to SNC-Lavalin shareholders was
$702.7 million ($4.00 per diluted share), compared with a net loss attributable to SNC-Lavalin shareholders
of $292.9 million ($1.67 per diluted share) for the fourth quarter of 2019. The loss in the fourth quarter of 2020
was mainly attributable to the following factors :
◦
◦
◦
◦
◦
approximately $140 million of provisions recognized on certain legacy litigation matters;
commercial claims receivable reduction of approximately $155 million on certain LSTK projects;
approximately $90 million of charges recognized on remaining Canadian LSTK infrastructure projects
affected by unprecedented COVID-19 challenges;
approximately $95 million of charges related to historical legacy positions and one remaining LSTK
mining project in Resources, of which approximately $78 million relate to continuing operations and
$17 million relate to discontinued operations;and
a write down of $277.7 million in the value of disposal groups presented as held for sale, of which
$6.1 million relate to continuing operations and $271.6 million relate to discontinued operations.
140
140
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
141
Geographic Breakdown of Revenues
Fourth Quarter Results
SNC-LAVALIN
.
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
Income Statements
Revenues
Net income (loss) attributable to SNC-Lavalin shareholders:
From PS&PM
From Capital
Net loss attributable to SNC-Lavalin shareholders
Earnings (loss) per share attributable to SNC-Lavalin shareholders (in $) :
Basic
Diluted
Net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations:
From PS&PM
From Capital
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Americas:
Canada
United States
Latin America
Middle East and Africa:
Saudi Arabia
Other Middle East countries
Africa
Asia Pacific:
Australia
Other
Europe:
Other
Total
United Kingdom
AMERICAS:
2020
TOTAL
2019 (1)
%
TOTAL
$
2,102.4
1,383.6
81.0
167.4
385.7
203.4
38.5
342.2
1,893.6
409.8
30 % $
20 %
1 %
2,618.7
1,382.0
146.2
2 %
6 %
3 %
1 %
5 %
27 %
6 %
276.0
585.9
153.9
96.3
319.6
1,759.0
292.3
%
34 %
18 %
2 %
4 %
8 %
2 %
1 %
4 %
23 %
4 %
100 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
$
7,007.5
100 % $
7,629.8
◦
◦
◦
◦
◦
◦
◦
◦
◦
◦
Revenues in Canada in 2020 decreased compared with 2019, mainly due to a decrease in Infrastructure
EPC Projects and Infrastructure Services.
Revenues in the United States in 2020 are in line with 2019, reflecting an increase in Resources, EDPM
and Nuclear, mostly offset by a decrease in Infrastructure EPC Projects, due to the completion or near
completion of certain major projects.
Revenues in Latin America decreased in 2020 compared with the previous year, principally reflecting a
decrease in Resources.
MIDDLE EAST AND AFRICA:
Revenues in Saudi Arabia decreased in 2020 compared with 2019, primarily due to Resources.
Revenues in other Middle East countries decreased in 2020 compared with 2019, mainly due to
Resources, partially offset by activities from the Linxon business in Infrastructure Services.
Revenues in Africa in 2020 increased compared with 2019, primarily due to an increase in Resources.
ASIA PACIFIC:
EUROPE:
Revenues in Australia decreased in 2020 compared with the previous year, mainly attributable to a
decrease in Resources due to completion or near completion of certain major projects in 2019, partially offset
by an increase in Infrastructure EPC Projects.
Revenues in other countries in Asia Pacific, increased in 2020 compared with the previous year, mainly
reflecting incremental activities of the Linxon business in Infrastructure Services as well as those in EDPM.
Revenues in the United Kingdom, increased in 2020 compared with the previous year, mainly due to
EDPM and Infrastructure Services.
Revenues in other countries in Europe increased in 2020 compared with 2019, mainly due to incremental
activities of the Linxon business in Infrastructure Services.
140
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
Net loss attributable to SNC-Lavalin shareholders from continuing operations
$
Adjusted net income (loss) attributable to SNC-Lavalin shareholders from
PS&PM (2)
Diluted loss per share from continuing operations (“Diluted EPS”) (in $)
Adjusted diluted EPS from PS&PM (in $) (2)
EBIT (2)
EBITDA (2)
Adjusted PS&PM EBITDA (% of PS&PM revenues) (2)
$
$
$
$
$
(268.7)
(1.84)
(1.53)
(372.7)
(300.7)
$
$
$
$
$
(14.8%)
109.6
(1.03)
0.62
(132.9)
(40.1)
10.6%
(1)
(2)
◦
◦
Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Non-IFRS financial measure. Please refer to Section 13 for further information on these financial measures and for the reference to the reconciliation from these financial measures to
the most directly comparable measure specified under IFRS, when applicable.
Revenues totaled $1,697.9 million in the fourth quarter of 2020, compared with $1,967.6 million in the
corresponding quarter of 2019, mainly reflecting lower revenues in Infrastructure EPC Projects, principally
due to the completion or near completion of certain major projects, as well as the impact of the commercial
claims receivable reduction in the fourth quarter of 2020, as described below.
For the fourth quarter of 2020, the net loss attributable to SNC-Lavalin shareholders was
$702.7 million ($4.00 per diluted share), compared with a net loss attributable to SNC-Lavalin shareholders
of $292.9 million ($1.67 per diluted share) for the fourth quarter of 2019. The loss in the fourth quarter of 2020
was mainly attributable to the following factors :
◦
◦
◦
◦
◦
approximately $140 million of provisions recognized on certain legacy litigation matters;
commercial claims receivable reduction of approximately $155 million on certain LSTK projects;
approximately $90 million of charges recognized on remaining Canadian LSTK infrastructure projects
affected by unprecedented COVID-19 challenges;
approximately $95 million of charges related to historical legacy positions and one remaining LSTK
mining project in Resources, of which approximately $78 million relate to continuing operations and
$17 million relate to discontinued operations;and
a write down of $277.7 million in the value of disposal groups presented as held for sale, of which
$6.1 million relate to continuing operations and $271.6 million relate to discontinued operations.
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
141
141
2020
2019 (1)
CHANGE (%)
$ 1,697.9
$ 1,967.6
(13.7%)
$
(736.2)
$
(310.4)
33.5
17.5
$
(702.7)
$
(292.9)
$
$
$
(4.00)
$
(1.67)
(4.00)
$
(1.67)
(356.4)
33.5
(322.9)
$
$
(197.7)
17.5
(180.2)
137.2%
91.4%
139.9%
139.9%
139.9%
80.3%
91.4%
79.2%
N/A
79.3%
N/A
180.4%
650.0%
N/A
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
◦
◦
◦
In the fourth quarter of 2019, the Company recognized a $257.3 million expense related to the federal
charges settlement (PPSC).
The following table summarizes the Company’s revenues and Segment Adjusted EBIT and reconciles the
Segment Adjusted EBIT to the Company’s net income (loss) for the fourth quarters ended December 31, 2020
For the fourth quarter of 2020, Adjusted net loss attributable to SNC-Lavalin shareholders from
PS&PM was $268.7 million ($1.53 per diluted share), compared with an adjusted net income attributable to
SNC-Lavalin shareholders from PS&PM of $109.6 million ($0.62 per diluted share) for the comparable quarter
in 2019, mainly due to the negative Segment Adjusted EBIT from Infrastructure EPC Projects and Resources
in the fourth quarter of 2020.
EBIT, EBITDA and Adjusted PS&PM EBITDA (% of PS&PM revenues) decreased in the fourth quarter
of 2020 compared to the fourth quarter of 2019, mainly due to the factors described above.
AS AT
(IN MILLIONS $)
Additional Indicator
Cash and cash equivalents
Revenue backlog
DECEMBER 31, 2020
SEPTEMBER 30, 2020
CHANGE (%)
Total SNCL Engineering Services
$ 1,523.0 $
153.1 $
— $ 153.1 $ 1,573.6 $
159.0 $ — $ 159.0
$
$
932.9 $
13,187.8 $
1,150.5
13,209.0
(18.9%)
(0.2%)
◦
◦
At the end of December 31, 2020, the Company’s cash and cash equivalents amounted to $0.9 billion,
compared with $1.2 billion at the end of September 30, 2020. The decrease is mainly attributable to cash
used for financing activities, mainly for a $260 million repayment of debentures maturing in November 2020.
Revenue backlog was $13.2 billion as at December 31, 2020, in line with $13.2 billion as at September 30,
2020, mainly reflecting a decrease in Infrastructure EPC Projects and Nuclear, offset by an increase in EDPM
and in Infrastructure Services.
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
2020
SEGMENT
ADJUSTED
EBIT FROM
PS&PM
SEGMENT
ADJUSTED
EBIT
FROM
CAPITAL
TOTAL
SEGMENT
ADJUSTED
REVENUES
EBIT
REVENUES
2019 (1) (2)
SEGMENT
SEGMENT
ADJUSTED
ADJUSTED
EBIT
FROM
PS&PM
EBIT
FROM
CAPITAL
TOTAL
SEGMENT
ADJUSTED
$ 943.3 $
84.9 $
— $
84.9 $ 984.0 $
93.4 $ — $
245.3
334.4
36.2
32.0
—
—
36.2
32.0
250.8
338.7
45.4
20.3
—
—
53.7
(93.4)
—
(93.4)
64.0
98.6
(319.4)
—
(319.4)
293.8
(5.9)
23.4
—
—
$ 152.3 $
(412.8) $
— $
(412.8) $ 357.8 $
17.4 $ — $
22.6
—
19.1
19.1
36.2
—
31.5
$ 1,697.9 $
(259.7) $
19.1 $
(240.6) $ 1,967.6 $
176.4 $ 31.5 $ 208.0
EBIT
93.4
45.4
20.3
(5.9)
23.4
17.4
31.5
SNC-LAVALIN
and 2019.
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC Projects
Total SNCL Projects
Capital
Total revenues and Segment
Adjusted EBIT
Corporate selling, general and
administrative expenses not allocated
to the segments
Reversal of impairment loss
(Impairment loss) arising from
expected credit losses
Gain (loss) arising on financial assets
(liabilities) at fair value through profit
or loss
Restructuring costs
Acquisition-related costs and integration
costs
Amortization of intangible assets related
to business combinations
Adjustment on gain from disposal of a
Capital investments
Loss from disposals of PS&PM
businesses
Federal charges settlement (PPSC)
Impairment loss on remeasurement of
assets of disposal group classified as
held for sale to fair value less cost to
sell
EBIT
Net financial expenses
Earnings (loss) before income taxes
from continuing operations
Income taxes
Net income (loss)
from continuing operations
Net loss
from discontinued operations
Net income (loss)
(88.7)
(7.1)
(95.7)
(21.4)
(6.7)
(28.0)
—
—
—
0.5
—
0.5
(0.3)
(31.8)
—
—
—
—
(0.3)
(31.8)
—
6.0
1.1
7.1
(23.0)
—
(23.0)
(0.1)
—
(0.1)
(23.2)
—
(23.2)
(40.0)
—
(40.0)
—
25.0
25.0
—
—
—
—
—
—
—
—
—
(0.1)
—
(0.1)
(257.3)
—
(257.3)
(6.1)
—
(6.1)
—
—
—
$
(409.7) $
37.0 $
(372.7)
$
(158.8) $ 25.9 $ (132.9)
23.6
3.9
27.5
24.0
4.4
28.4
$
(433.3) $
33.2 $
(400.2)
$
(182.8) $ 21.5 $ (161.3)
(80.2)
(0.3)
(80.5)
11.0
4.0
15.0
$
(353.1) $
33.5 $
(319.7)
$
(193.8) $ 17.5 $ (176.3)
(379.8)
—
(379.8)
(112.7)
—
(112.7)
$
(732.9) $
33.5 $
(699.5)
$
(306.5) $ 17.5 $ (289.0)
(1) Comparative figures have been revised to reflect a change made to the measure of profit or loss for the Company’s reportable segments and a change made to the Company’s reporting
structure. Please refer to Section 12 for further details.
(2) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
142
142
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
143
◦
◦
◦
◦
◦
In the fourth quarter of 2019, the Company recognized a $257.3 million expense related to the federal
charges settlement (PPSC).
For the fourth quarter of 2020, Adjusted net loss attributable to SNC-Lavalin shareholders from
PS&PM was $268.7 million ($1.53 per diluted share), compared with an adjusted net income attributable to
SNC-Lavalin shareholders from PS&PM of $109.6 million ($0.62 per diluted share) for the comparable quarter
in 2019, mainly due to the negative Segment Adjusted EBIT from Infrastructure EPC Projects and Resources
in the fourth quarter of 2020.
EBIT, EBITDA and Adjusted PS&PM EBITDA (% of PS&PM revenues) decreased in the fourth quarter
of 2020 compared to the fourth quarter of 2019, mainly due to the factors described above.
AS AT
(IN MILLIONS $)
Additional Indicator
Cash and cash equivalents
Revenue backlog
DECEMBER 31, 2020
SEPTEMBER 30, 2020
CHANGE (%)
$
$
932.9 $
13,187.8 $
1,150.5
13,209.0
(18.9%)
(0.2%)
At the end of December 31, 2020, the Company’s cash and cash equivalents amounted to $0.9 billion,
compared with $1.2 billion at the end of September 30, 2020. The decrease is mainly attributable to cash
used for financing activities, mainly for a $260 million repayment of debentures maturing in November 2020.
Revenue backlog was $13.2 billion as at December 31, 2020, in line with $13.2 billion as at September 30,
2020, mainly reflecting a decrease in Infrastructure EPC Projects and Nuclear, offset by an increase in EDPM
and in Infrastructure Services.
SNC-LAVALIN
SNC-LAVALIN
The following table summarizes the Company’s revenues and Segment Adjusted EBIT and reconciles the
Segment Adjusted EBIT to the Company’s net income (loss) for the fourth quarters ended December 31, 2020
and 2019.
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
2020
2019 (1) (2)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Total SNCL Engineering Services
Resources
Infrastructure EPC Projects
Total SNCL Projects
Capital
Total revenues and Segment
Adjusted EBIT
Corporate selling, general and
administrative expenses not allocated
to the segments
Reversal of impairment loss
(Impairment loss) arising from
expected credit losses
Gain (loss) arising on financial assets
(liabilities) at fair value through profit
or loss
Restructuring costs
Acquisition-related costs and integration
costs
Amortization of intangible assets related
to business combinations
Adjustment on gain from disposal of a
Capital investments
Loss from disposals of PS&PM
businesses
Federal charges settlement (PPSC)
Impairment loss on remeasurement of
assets of disposal group classified as
held for sale to fair value less cost to
sell
EBIT
Net financial expenses
Earnings (loss) before income taxes
from continuing operations
Income taxes
Net income (loss)
from continuing operations
Net loss
from discontinued operations
Net income (loss)
SEGMENT
ADJUSTED
EBIT FROM
PS&PM
SEGMENT
ADJUSTED
EBIT
FROM
CAPITAL
TOTAL
SEGMENT
ADJUSTED
EBIT
REVENUES
SEGMENT
ADJUSTED
EBIT
FROM
PS&PM
SEGMENT
ADJUSTED
EBIT
FROM
CAPITAL
TOTAL
SEGMENT
ADJUSTED
EBIT
REVENUES
$ 943.3 $
245.3
334.4
$ 1,523.0 $
53.7
98.6
$ 152.3 $
22.6
84.9 $
36.2
32.0
153.1 $
(93.4)
(319.4)
(412.8) $
—
250.8
338.7
84.9 $ 984.0 $
36.2
32.0
— $
—
—
— $ 153.1 $ 1,573.6 $
—
—
— $
(93.4)
(319.4)
(412.8) $ 357.8 $
64.0
293.8
19.1
19.1
36.2
—
—
93.4 $ — $
45.4
20.3
93.4
45.4
20.3
159.0 $ — $ 159.0
(5.9)
23.4
17.4
31.5
(5.9)
23.4
17.4 $ — $
—
—
31.5
—
$ 1,697.9 $
(259.7) $
19.1 $
(240.6) $ 1,967.6 $
176.4 $ 31.5 $ 208.0
(88.7)
(7.1)
(95.7)
(21.4)
(6.7)
(28.0)
—
—
—
0.5
—
0.5
(0.3)
(31.8)
—
—
—
—
(0.3)
(31.8)
—
6.0
1.1
7.1
(23.0)
—
(23.0)
(0.1)
—
(0.1)
(23.2)
—
(23.2)
(40.0)
—
(40.0)
—
25.0
25.0
—
—
—
—
—
—
—
—
—
(0.1)
—
(0.1)
(257.3)
—
(257.3)
(6.1)
—
(6.1)
—
—
—
$
(409.7) $
23.6
37.0 $
3.9
(372.7)
27.5
$
(158.8) $ 25.9 $ (132.9)
28.4
24.0
4.4
$
(433.3) $
33.2 $
(400.2)
$
(182.8) $ 21.5 $ (161.3)
(80.2)
(0.3)
(80.5)
11.0
4.0
15.0
$
(353.1) $
33.5 $
(319.7)
$
(193.8) $ 17.5 $ (176.3)
(379.8)
—
(379.8)
(112.7)
—
(112.7)
$
(732.9) $
33.5 $
(699.5)
$
(306.5) $ 17.5 $ (289.0)
(1) Comparative figures have been revised to reflect a change made to the measure of profit or loss for the Company’s reportable segments and a change made to the Company’s reporting
structure. Please refer to Section 12 for further details.
(2) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
142
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
143
143
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
PS&PM total Segment Adjusted EBIT in the fourth quarter of 2020 was negative $259.7 million, compared
with a total Segment Adjusted EBIT from PS&PM of $176.4 million in the fourth quarter of 2019. The variance is
largely attributable to the negative Segment Adjusted EBIT from Infrastructure EPC Projects segment and
Resources segment, while the contribution of segments included in SNCL Engineering Services in the fourth
quarter of 2020 was in line with the contribution in the corresponding quarter of 2019.
The negative Segment Adjusted EBIT of Infrastructure EPC Projects in the fourth quarter of 2020 was mainly
attributable to commercial claims receivable reductions, additional provisions related to legacy litigation matters
and the effect of lower productivity caused by COVID-19.
The negative Segment Adjusted EBIT of Resources in the fourth quarter of 2020 was mainly due to charges for
one remaining LSTK project and certain other historical legacy positions.
Segment Adjusted EBIT from Capital decreased to $19.1 million in the fourth quarter of 2020, compared
with $31.5 million in the corresponding period of 2019, mainly due to lower contributions from certain Capital
investments, notably from Highway 407 ETR following the disposal of a portion of this investment by the Company
in August 2019 and the absence of dividend from this investment in the fourth quarter of 2020.
Corporate selling, general and administrative expenses not allocated to segments amounted to
$95.7 million in the fourth quarter of 2020, compared to $28.0 million in the corresponding period of 2019. The
increase is mainly due to a $48.3 million negative adjustment to the provision for the Pyrrhotite Case litigation, as
well as a $4.0 million revision to the Guaranteed Minimum Pension (“GMP”) equalization provision and
$5.6 million from the digital transformation project, all recognized in the fourth quarter of 2020.
In the fourth quarter of 2020, the Company released in full a provision for contingent indemnification related to the
previous disposal of a Capital investment accounted for under the consolidation method upon expiry of the
indemnification period. Such non-cash reversal of the provision in the amount of $25.0 million is included in
“Adjustment on gain from disposal of a Capital investment”.
The $257.3 million expense recognized in the fourth quarter of 2019 for Federal charges settlement represents
the net present value of the agreement with Public Prosecution Service of Canada (“PPSC”) on federal charges
arising from legacy activities in Libya between 2001 and 2011 (see Section 4.2.9).
The income tax benefit of $80.5 million in the fourth quarter of 2020 was mainly a result of the loss for the
period. The effective income tax recovery rate was lower than the Canadian statutory income tax rate mainly due
to non-deductible expenses and other permanent items and the write-down of previously recognized deferred
income tax assets The income tax expense of $15.0 million in the fourth quarter of 2019, despite a net loss for the
period, was mainly a result of the non-deductible expense related to the Federal Charges Settlement.
The net loss from discontinued operations was $379.8 million in the fourth quarter of 2020, compared to
$112.7 million in the fourth quarter of 2019. While both periods included negative reforecasts on certain major
projects, the net loss from discontinued operations in the fourth quarter of 2020 also included a write down of
$271.6 million in the value of this disposal group presented as held for sale.
Liquidity and Capital Resources
This section has been prepared to provide the reader with a better understanding of the major components of the
Company’s liquidity and capital resources and has been structured as follows:
A cash flow analysis, providing details on how the Company generated and used its cash and cash
equivalents;
A discussion of the Company’s capital structure management and its capital resources;
A description of the Company’s debt and financing agreements and its capital management indicators;
An update on the Company’s credit ratings;
The presentation of the Company’s dividends declared over the past three years; and
A review of the Company’s contractual obligations and financial instruments, which provides additional
information for a better understanding of the Company’s financial situation.
◦
◦
◦
◦
◦
◦
8.1
CASH FLOWS ANALYSIS
SUMMARY OF CASH FLOWS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Cash flows generated from (used for):
Operating activities
Investing activities
Financing activities
Decrease from exchange differences on translating cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
2019
$
121.5 $
(185.1)
(190.4)
(1.7)
1,188.6
$
(255.7) $
(355.3)
2,718.5
(1,802.1)
(6.5)
554.6
634.1
$
932.9 $
1,188.6
Cash and cash equivalents decreased by $255.7 million in 2020, compared with an increase of $554.6 million
in 2019, as discussed further below.
144
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
145
SNC-LAVALIN
SNC-LAVALIN
PS&PM total Segment Adjusted EBIT in the fourth quarter of 2020 was negative $259.7 million, compared
with a total Segment Adjusted EBIT from PS&PM of $176.4 million in the fourth quarter of 2019. The variance is
largely attributable to the negative Segment Adjusted EBIT from Infrastructure EPC Projects segment and
Resources segment, while the contribution of segments included in SNCL Engineering Services in the fourth
quarter of 2020 was in line with the contribution in the corresponding quarter of 2019.
The negative Segment Adjusted EBIT of Infrastructure EPC Projects in the fourth quarter of 2020 was mainly
attributable to commercial claims receivable reductions, additional provisions related to legacy litigation matters
and the effect of lower productivity caused by COVID-19.
The negative Segment Adjusted EBIT of Resources in the fourth quarter of 2020 was mainly due to charges for
one remaining LSTK project and certain other historical legacy positions.
Segment Adjusted EBIT from Capital decreased to $19.1 million in the fourth quarter of 2020, compared
with $31.5 million in the corresponding period of 2019, mainly due to lower contributions from certain Capital
investments, notably from Highway 407 ETR following the disposal of a portion of this investment by the Company
in August 2019 and the absence of dividend from this investment in the fourth quarter of 2020.
Corporate selling, general and administrative expenses not allocated to segments amounted to
$95.7 million in the fourth quarter of 2020, compared to $28.0 million in the corresponding period of 2019. The
increase is mainly due to a $48.3 million negative adjustment to the provision for the Pyrrhotite Case litigation, as
well as a $4.0 million revision to the Guaranteed Minimum Pension (“GMP”) equalization provision and
$5.6 million from the digital transformation project, all recognized in the fourth quarter of 2020.
In the fourth quarter of 2020, the Company released in full a provision for contingent indemnification related to the
previous disposal of a Capital investment accounted for under the consolidation method upon expiry of the
indemnification period. Such non-cash reversal of the provision in the amount of $25.0 million is included in
“Adjustment on gain from disposal of a Capital investment”.
The $257.3 million expense recognized in the fourth quarter of 2019 for Federal charges settlement represents
the net present value of the agreement with Public Prosecution Service of Canada (“PPSC”) on federal charges
arising from legacy activities in Libya between 2001 and 2011 (see Section 4.2.9).
The income tax benefit of $80.5 million in the fourth quarter of 2020 was mainly a result of the loss for the
period. The effective income tax recovery rate was lower than the Canadian statutory income tax rate mainly due
to non-deductible expenses and other permanent items and the write-down of previously recognized deferred
income tax assets The income tax expense of $15.0 million in the fourth quarter of 2019, despite a net loss for the
period, was mainly a result of the non-deductible expense related to the Federal Charges Settlement.
The net loss from discontinued operations was $379.8 million in the fourth quarter of 2020, compared to
$112.7 million in the fourth quarter of 2019. While both periods included negative reforecasts on certain major
projects, the net loss from discontinued operations in the fourth quarter of 2020 also included a write down of
$271.6 million in the value of this disposal group presented as held for sale.
Liquidity and Capital Resources
This section has been prepared to provide the reader with a better understanding of the major components of the
Company’s liquidity and capital resources and has been structured as follows:
◦
◦
◦
◦
◦
◦
A cash flow analysis, providing details on how the Company generated and used its cash and cash
equivalents;
A discussion of the Company’s capital structure management and its capital resources;
A description of the Company’s debt and financing agreements and its capital management indicators;
An update on the Company’s credit ratings;
The presentation of the Company’s dividends declared over the past three years; and
A review of the Company’s contractual obligations and financial instruments, which provides additional
information for a better understanding of the Company’s financial situation.
8.1
CASH FLOWS ANALYSIS
SUMMARY OF CASH FLOWS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Cash flows generated from (used for):
Operating activities
Investing activities
Financing activities
Decrease from exchange differences on translating cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
2019
121.5 $
(185.1)
(190.4)
(1.7)
(255.7) $
1,188.6
932.9 $
(355.3)
2,718.5
(1,802.1)
(6.5)
554.6
634.1
1,188.6
$
$
$
Cash and cash equivalents decreased by $255.7 million in 2020, compared with an increase of $554.6 million
in 2019, as discussed further below.
144
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
145
145
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
OPERATING ACTIVITIES
Net cash generated from operating activities totaled $121.5 million in 2020, compared with net cash used for
operating activities of $355.3 million in 2019, a variance reconciled as follows:
Net cash used for investing activities amounted to $185.1 million in 2020, compared with net cash generated
from investing activities of $2,718.5 million in 2019, a variance reconciled as follows:
(IN MILLIONS $)
Net cash used for operating activities for the year ended December 31, 2019
Changes between the years ended December 31, 2020 and 2019:
Decrease in net income
Increase in income taxes paid
Decrease in income taxes recognized in net income
Decrease in net financial expenses recognized in net income
Lower depreciation of property and equipment and amortization of other non-current non-financial assets
Decrease in interest paid
Decrease in income from Capital investments accounted for by the equity method
Decrease in dividends and distributions received from Capital investments accounted for by the equity method
Impairment loss on remeasurement of assets held for sale to fair value less cost to sell
Lower net change in provisions related to forecasted losses on certain contracts
2019 gain on disposal of a 10.01% stake of Highway 407 ETR
Increase in restructuring costs paid
2019 impairment of intangible assets related to business combinations
2019 impairment of goodwill
2019 Federal Charges settlement (PPSC)
Change in loss (gain) arising on financial asset (liabilities) at fair value through profit or loss
Other items
Changes in the net cash used for operating activities before net change in non-cash working capital items
Variance from net change in non-cash working capital items
Net cash generated from operating activities for the year ended December 31, 2020
$
(355.3)
Net cash generated from investing activities for the year ended December 31, 2019
$
2,718.5
(1,286.9)
(12.6)
(194.8)
(97.8)
(43.2)
112.5
123.2
(66.9)
277.7
105.5
2,945.8
(31.6)
(72.8)
(1,801.0)
(257.3)
57.1
156.1
(87.0)
563.8
121.5
$
$
◦
◦
◦
Net cash used for operating activities before net change in non-cash working capital items totaled
$107.8 million in 2020, compared with net cash used for operating activities before net change in working
capital items of $20.7 million in 2019.
As detailed in Note 28B to the 2020 Annual Financial Statements, changes in non-cash working capital
items generated net cash of $229.2 million in 2020, compared with net cash used of $334.5 million in
2019. This difference reflected mainly a favourable variance in contract assets, trade receivables, contract
liabilities, other current non-financial liabilities and inventories, partially offset by an unfavourable variance
mainly in trade payables and accrued liabilities and in other current financial liabilities.
◦
The favourable variance in other current non-financial liabilities is due in part to the deferral of
payments of certain taxes, such as sales taxes and income taxes, in some jurisdictions. Such
deferrals resulted from temporary measures implemented as part of certain governmental initiatives
related to the COVID-19 pandemic.
From a business line perspective, SNCL Engineering Services generated $800.4 million of cash from
operating activities in 2020 compared to $732.6 million in 2019, while SNCL Projects and the Oil & Gas
business presented as discontinued operations used $347.5 million of cash from operating activities in 2020
compared with $731.7 million in 2019. The remaining amount relates to Capital, corporate activities and items
not allocated to the Company's segments.
SNC-LAVALIN
INVESTING ACTIVITIES
(IN MILLIONS $)
Changes between the years ended December 31, 2020 and 2019:
Decrease in acquisition of property and equipment
Increase in payments for Capital investments
Favourable change in restricted cash position
Lower increase in receivables under service concession arrangements, net of recovery
2019 net cash inflow on disposal of a 10.01% stake of Highway 407 ETR
2019 net cash inflow on acquisition of Linxon
2019 payment for disposition-related costs on disposals of Capital investments
Other items
Net cash used for investing activities for the year ended December 31, 2020
$
◦
In 2020, payments for Capital investments amounted to $55.8 million, compared with $40.0 million in
2019. The payments made in 2020 included mainly the contribution made by the Company to the Signature
on the Saint-Laurent Group General Partnership and Carlyle Global Infrastructure Opportunity Fund, L.P. The
payments made in 2019 included mainly the contribution made by the Company to the Rideau Transit Group
General Partnership.
◦
In 2019, there was a cash inflow of $3.0 billion on disposal by the Company of 10.01% of the shares of
Highway 407 ETR. This transaction is described in Note 5A to the 2020 Annual Financial Statements.
FINANCING ACTIVITIES
Net cash used for financing activities totaled $190.4 million in 2020, compared with net cash used for
financing activities of $1,802.1 million in 2019, a variance reconciled as follows:
(IN MILLIONS $)
Net cash used for financing activities for the year ended December 31, 2019
Changes between the years ended December 31, 2020 and 2019:
Lower repayment of recourse debt
Lower repayment in limited recourse debt
Lower increase in recourse debt
Higher repayment of non-recourse debt
Lower increase in non-recourse debt
Decrease in payment of dividends to SNC-Lavalin shareholders
Higher increase in other non-current financial liabilities
Other items
Net cash used for financing activities for the year ended December 31, 2020
$
(190.4)
◦
The changes in cash flows related to financing activities between 2020 and 2019 were primarily explained by
the elements in the table above. Notably, the following transactions on recourse debt and non-recourse debt
took place during 2020:
◦
The increase in recourse debt of $1.3 billion in 2020, compared with $1.8 billion in 2019.
◦
In the first quarter of 2020, the Company drew down $1.0 billion under the second amended
and restated credit agreement, dated as of April 30, 2018, among the Company, as borrower,
Bank of Montreal, as agent, and the financial institutions from time to time party thereto (as
amended, restated or otherwise modified, from time to time, the “Credit Agreement”) in order
to secure access to liquidity while financial markets were facing challenges. The Company
subsequently repaid this draw-down in full.
46.6
(15.9)
29.0
(44.7)
(3,012.3)
(14.9)
94.9
13.6
(185.1)
$
(1,802.1)
1,651.6
600.0
(532.4)
(76.4)
(64.6)
28.1
6.7
(1.2)
146
146
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
147
SNC-LAVALIN
OPERATING ACTIVITIES
SNC-LAVALIN
INVESTING ACTIVITIES
Net cash generated from operating activities totaled $121.5 million in 2020, compared with net cash used for
operating activities of $355.3 million in 2019, a variance reconciled as follows:
Net cash used for investing activities amounted to $185.1 million in 2020, compared with net cash generated
from investing activities of $2,718.5 million in 2019, a variance reconciled as follows:
$
(355.3)
Net cash generated from investing activities for the year ended December 31, 2019
$
2,718.5
(IN MILLIONS $)
Changes between the years ended December 31, 2020 and 2019:
Decrease in acquisition of property and equipment
Increase in payments for Capital investments
Favourable change in restricted cash position
Lower increase in receivables under service concession arrangements, net of recovery
2019 net cash inflow on disposal of a 10.01% stake of Highway 407 ETR
2019 net cash inflow on acquisition of Linxon
2019 payment for disposition-related costs on disposals of Capital investments
Other items
Net cash used for investing activities for the year ended December 31, 2020
$
46.6
(15.9)
29.0
(44.7)
(3,012.3)
(14.9)
94.9
13.6
(185.1)
◦
◦
In 2020, payments for Capital investments amounted to $55.8 million, compared with $40.0 million in
2019. The payments made in 2020 included mainly the contribution made by the Company to the Signature
on the Saint-Laurent Group General Partnership and Carlyle Global Infrastructure Opportunity Fund, L.P. The
payments made in 2019 included mainly the contribution made by the Company to the Rideau Transit Group
General Partnership.
In 2019, there was a cash inflow of $3.0 billion on disposal by the Company of 10.01% of the shares of
Highway 407 ETR. This transaction is described in Note 5A to the 2020 Annual Financial Statements.
FINANCING ACTIVITIES
Net cash used for financing activities totaled $190.4 million in 2020, compared with net cash used for
financing activities of $1,802.1 million in 2019, a variance reconciled as follows:
(1,286.9)
(12.6)
(194.8)
(97.8)
(43.2)
112.5
123.2
(66.9)
277.7
105.5
2,945.8
(31.6)
(72.8)
(1,801.0)
(257.3)
57.1
156.1
(87.0)
563.8
121.5
(IN MILLIONS $)
Net cash used for operating activities for the year ended December 31, 2019
Changes between the years ended December 31, 2020 and 2019:
Decrease in net income
Increase in income taxes paid
Decrease in income taxes recognized in net income
Decrease in net financial expenses recognized in net income
Lower depreciation of property and equipment and amortization of other non-current non-financial assets
Decrease in interest paid
Decrease in income from Capital investments accounted for by the equity method
Decrease in dividends and distributions received from Capital investments accounted for by the equity method
Impairment loss on remeasurement of assets held for sale to fair value less cost to sell
Lower net change in provisions related to forecasted losses on certain contracts
2019 gain on disposal of a 10.01% stake of Highway 407 ETR
Increase in restructuring costs paid
2019 impairment of intangible assets related to business combinations
2019 impairment of goodwill
2019 Federal Charges settlement (PPSC)
Other items
Change in loss (gain) arising on financial asset (liabilities) at fair value through profit or loss
Changes in the net cash used for operating activities before net change in non-cash working capital items
Variance from net change in non-cash working capital items
Net cash generated from operating activities for the year ended December 31, 2020
$
$
◦
◦
Net cash used for operating activities before net change in non-cash working capital items totaled
$107.8 million in 2020, compared with net cash used for operating activities before net change in working
capital items of $20.7 million in 2019.
As detailed in Note 28B to the 2020 Annual Financial Statements, changes in non-cash working capital
items generated net cash of $229.2 million in 2020, compared with net cash used of $334.5 million in
2019. This difference reflected mainly a favourable variance in contract assets, trade receivables, contract
liabilities, other current non-financial liabilities and inventories, partially offset by an unfavourable variance
mainly in trade payables and accrued liabilities and in other current financial liabilities.
◦
The favourable variance in other current non-financial liabilities is due in part to the deferral of
payments of certain taxes, such as sales taxes and income taxes, in some jurisdictions. Such
deferrals resulted from temporary measures implemented as part of certain governmental initiatives
related to the COVID-19 pandemic.
◦
From a business line perspective, SNCL Engineering Services generated $800.4 million of cash from
operating activities in 2020 compared to $732.6 million in 2019, while SNCL Projects and the Oil & Gas
business presented as discontinued operations used $347.5 million of cash from operating activities in 2020
compared with $731.7 million in 2019. The remaining amount relates to Capital, corporate activities and items
not allocated to the Company's segments.
(IN MILLIONS $)
Net cash used for financing activities for the year ended December 31, 2019
Changes between the years ended December 31, 2020 and 2019:
Lower repayment of recourse debt
Lower repayment in limited recourse debt
Lower increase in recourse debt
Higher repayment of non-recourse debt
Lower increase in non-recourse debt
Decrease in payment of dividends to SNC-Lavalin shareholders
Higher increase in other non-current financial liabilities
Other items
◦
The changes in cash flows related to financing activities between 2020 and 2019 were primarily explained by
the elements in the table above. Notably, the following transactions on recourse debt and non-recourse debt
took place during 2020:
◦
The increase in recourse debt of $1.3 billion in 2020, compared with $1.8 billion in 2019.
◦
In the first quarter of 2020, the Company drew down $1.0 billion under the second amended
and restated credit agreement, dated as of April 30, 2018, among the Company, as borrower,
Bank of Montreal, as agent, and the financial institutions from time to time party thereto (as
amended, restated or otherwise modified, from time to time, the “Credit Agreement”) in order
to secure access to liquidity while financial markets were facing challenges. The Company
subsequently repaid this draw-down in full.
146
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
147
147
Net cash used for financing activities for the year ended December 31, 2020
$
1,651.6
600.0
(532.4)
(76.4)
(64.6)
28.1
6.7
(1.2)
(190.4)
$
(1,802.1)
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
◦
◦
In the third quarter of 2020, the Company issued, on a private placement basis, new
unsecured Series 6 Debentures in the principal amount of $300 million, as further described
in Section 8.4.
The following transactions on recourse debt, limited recourse and non-recourse debt took
place during 2019:
◦
◦
◦
◦
The repayment of the balance then outstanding on the revolving facility under the
Credit Agreement;
The repayment of $600 million of limited recourse debt;
The repayment in full of certain debentures maturing in 2019; and
The borrowing and repayment in full of $300 million on a bridge credit facility.
◦
◦
◦
The Company also provides a reconciliation between the opening and closing balances in its statement of
financial position for liabilities arising from financing activities for the years ended December 31, 2020 and
2019 in Note 28C to the 2020 Annual Financial Statements.
The Company did not issue and did not repurchase any shares either in 2020 or in 2019. The number of
common shares outstanding as at March 5, 2021 was 175,554,252.
The dividend paid decreased to $14.0 million in 2020, from $42.1 million in 2019, as the Company further
reduced, starting with the dividend declared on August 1, 2019, the amount of dividends per share in order to
deleverage and strengthen its balance sheet.
8.2
CAPITAL STRUCTURE MANAGEMENT
The Company’s sources of funds stem primarily from its operating cash flows from PS&PM projects and Capital
investments, the divestiture of matured Capital investments and non-core assets, the issuance of debt and the
additional financial capacity available under the Credit Agreement. The Company’s funds are mainly used to meet
working capital requirements and sustain capital expenditures on projects, make equity investments, pay
dividends to shareholders and for mergers and acquisitions activities.
SNC-Lavalin’s key objectives for its capital allocation framework are:
To drive organic and inorganic PS&PM growth;
◦
◦ Optimize its balance sheet; and
Return capital to shareholders.
◦
8.3
CAPITAL RESOURCES
AT DECEMBER 31
(IN MILLIONS $)
Cash and cash equivalents
Unused portion of committed revolving credit facilities (1), (2)
Available short-term capital resources
2020
$
932.9 $
2,394.7
3,327.6 $
$
2019
1,188.6
2,411.9
3,600.5
Including cash draws and letters of credit issued on a committed basis, but excluding bilateral letters of credit that can be issued on a non-committed basis.
(1)
(2) Before considering potential limitations resulting from contractual covenants.
Credit Agreement was 2.1x.
As at December 31, 2020, the Company has a committed revolving facility of $2,600 million under its Credit
Agreement (December 31, 2019: $2,600 million), of which $2,394.7 million was unused (December 31, 2019:
$2,411.9 million), and uncommitted credit facilities by way of bilateral letters of credit.
While liquidity remains subject to numerous risks, uncertainties and limitations, including but not limited to the
risks described under Section 14 “Risks and Uncertainties” and in this Section, the Company believes that its
current liquidity position, including its cash position, unused credit capacity and cash generated from its
operations, should be sufficient to fund its operations over the foreseeable future. However, the ongoing
COVID-19 pandemic has created and continues to create an environment and circumstances in which it is difficult
to anticipate future economic and financial conditions and access to capital, credit and financial markets and, as
such, statements regarding the Company’s future liquidity are uncertain and subject to the risks and uncertainties
relating to the COVID-19 pandemic. See also Section 14, “Risks and Uncertainties”, for a more specific overview
of the risks and uncertainties relating to the Company caused by the COVID-19 pandemic.
148
148
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
In addition, due to the nature of the Company’s activities and the fact that its operations are conducted through
multiple entities and joint arrangements on an international level, the Company’s cash and cash equivalents are
distributed across numerous locations. In order to manage its cash needs and reserves, the Company is part of
various cash pooling agreements with financial institutions and may transfer cash balances between subsidiaries,
joint arrangements or investees or use credit facilities to meet the capital requirements of certain projects or other
cash disbursements.
8.4
DEBT AND FINANCING AGREEMENTS
NON-RECOURSE DEBT, LIMITED RECOURSE DEBT AND RECOURSE DEBT
The Company does not consider non-recourse and limited recourse debt when monitoring its capital because
such debt results from the consolidation of certain Capital investments or holding entities held by the Company.
As such, the lenders of such debt do not have recourse to the general credit of the Company, but rather to the
specific assets of the Capital investments or investment in Capital investments they finance. The Company’s
investments and underlying assets in its Capital investments accounted for by the consolidation or equity methods
may be at risk, if such investments or holding entities were unable to repay their long-term debt.
The Company was required to maintain, as at December 31, 2020, a ratio of net recourse debt to EBITDA not to
exceed: (a) 3.75x under the Company’s Credit Agreement; and (b) 3.50x under the loan agreement, dated as of
April 20, 2017, between SNC-Lavalin Highway Holdings Inc., an indirect wholly-owned subsidiary of the Company
(“Highway Holdings”), and CDPQ Revenu Fixe Inc. (“CDPQ RF”), a wholly-owned subsidiary of Caisse de dépôt
et placement du Québec (as amended, restated or otherwise modified, from time to time, the “CDPQ Loan
Agreement” and the limited recourse loan established thereunder, the “CDPQ Loan”). As at December 31, 2020,
the ratio of the Company’s net recourse debt to EBITDA, as calculated under both the Credit Agreement and the
CDPQ Loan Agreement, was 2.1x and, as such, the Company was in compliance with its financial ratio covenants
under such agreements.
In the second quarter of 2019, the Company and CDPQ RF renegotiated certain terms of the CDPQ Loan
Agreement, which included, among others, the following material amendments:
◦ modification to the net recourse debt to EBITDA ratio covenant to align it with the Credit Agreement and
extend the application of such covenant from March 31, 2019 to June 30, 2019;
following the then expected disposal by the Company of 10.01% of the shares of Highway 407 ETR, the
Company committed to repay an amount of $600 million out of $1 billion outstanding under tranche A of the
decrease of the margin applicable to the base rate and payment by the Company of fees of $15 million.
On October 15, 2019, the CDPQ Loan Agreement was, like the Credit Agreement, amended to extend the
temporary increase in the net recourse debt to EBITDA ratio to 4x from June 30, 2019 to December 31, 2019.
As at December 31, 2019, the net recourse debt to EBITDA ratio in accordance with the terms of the Company’s
◦
◦
CDPQ Loan; and
The terms “net recourse debt” and “EBITDA” are defined in the Credit Agreement and in the CDPQ Loan
Agreement and do not correspond to the specific terms used in this MD&A. Furthermore, such ratio is calculated
using certain financial information not disclosed in the 2020 Annual Financial Statements or in this MD&A. For
example, the ratio includes the amount of down-payments on contracts totaling $226.1 million as at
December 31, 2020 (December 31, 2019: $322.4 million) and the amount of outstanding financial letters of credit
totaling $101.6 million as at December 31, 2020 (December 31, 2019: $259.6 million) as part of the net recourse
debt calculation.
ISSUANCE OF SERIES 6 DEBENTURES
In the third quarter of 2020, SNC-Lavalin issued, on a private placement basis, new unsecured Series 6
Debentures in the principal amount of $300 million, which bear interest at the rate of 3.80% per annum and
mature on August 19, 2024.
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
149
SNC-LAVALIN
SNC-LAVALIN
◦
◦
◦
◦
◦
(1)
In the third quarter of 2020, the Company issued, on a private placement basis, new
unsecured Series 6 Debentures in the principal amount of $300 million, as further described
The following transactions on recourse debt, limited recourse and non-recourse debt took
◦
◦
in Section 8.4.
place during 2019:
◦
◦
◦
◦
The repayment of the balance then outstanding on the revolving facility under the
Credit Agreement;
The repayment of $600 million of limited recourse debt;
The repayment in full of certain debentures maturing in 2019; and
The borrowing and repayment in full of $300 million on a bridge credit facility.
The Company also provides a reconciliation between the opening and closing balances in its statement of
financial position for liabilities arising from financing activities for the years ended December 31, 2020 and
2019 in Note 28C to the 2020 Annual Financial Statements.
The Company did not issue and did not repurchase any shares either in 2020 or in 2019. The number of
common shares outstanding as at March 5, 2021 was 175,554,252.
The dividend paid decreased to $14.0 million in 2020, from $42.1 million in 2019, as the Company further
reduced, starting with the dividend declared on August 1, 2019, the amount of dividends per share in order to
deleverage and strengthen its balance sheet.
8.2
CAPITAL STRUCTURE MANAGEMENT
The Company’s sources of funds stem primarily from its operating cash flows from PS&PM projects and Capital
investments, the divestiture of matured Capital investments and non-core assets, the issuance of debt and the
additional financial capacity available under the Credit Agreement. The Company’s funds are mainly used to meet
working capital requirements and sustain capital expenditures on projects, make equity investments, pay
dividends to shareholders and for mergers and acquisitions activities.
SNC-Lavalin’s key objectives for its capital allocation framework are:
To drive organic and inorganic PS&PM growth;
◦ Optimize its balance sheet; and
Return capital to shareholders.
8.3
CAPITAL RESOURCES
AT DECEMBER 31
(IN MILLIONS $)
Cash and cash equivalents
Unused portion of committed revolving credit facilities (1), (2)
Available short-term capital resources
2020
$
932.9 $
2,394.7
$
3,327.6 $
2019
1,188.6
2,411.9
3,600.5
Including cash draws and letters of credit issued on a committed basis, but excluding bilateral letters of credit that can be issued on a non-committed basis.
(2) Before considering potential limitations resulting from contractual covenants.
As at December 31, 2020, the Company has a committed revolving facility of $2,600 million under its Credit
Agreement (December 31, 2019: $2,600 million), of which $2,394.7 million was unused (December 31, 2019:
$2,411.9 million), and uncommitted credit facilities by way of bilateral letters of credit.
While liquidity remains subject to numerous risks, uncertainties and limitations, including but not limited to the
risks described under Section 14 “Risks and Uncertainties” and in this Section, the Company believes that its
current liquidity position, including its cash position, unused credit capacity and cash generated from its
operations, should be sufficient to fund its operations over the foreseeable future. However, the ongoing
COVID-19 pandemic has created and continues to create an environment and circumstances in which it is difficult
to anticipate future economic and financial conditions and access to capital, credit and financial markets and, as
such, statements regarding the Company’s future liquidity are uncertain and subject to the risks and uncertainties
relating to the COVID-19 pandemic. See also Section 14, “Risks and Uncertainties”, for a more specific overview
of the risks and uncertainties relating to the Company caused by the COVID-19 pandemic.
In addition, due to the nature of the Company’s activities and the fact that its operations are conducted through
multiple entities and joint arrangements on an international level, the Company’s cash and cash equivalents are
distributed across numerous locations. In order to manage its cash needs and reserves, the Company is part of
various cash pooling agreements with financial institutions and may transfer cash balances between subsidiaries,
joint arrangements or investees or use credit facilities to meet the capital requirements of certain projects or other
cash disbursements.
8.4
DEBT AND FINANCING AGREEMENTS
NON-RECOURSE DEBT, LIMITED RECOURSE DEBT AND RECOURSE DEBT
The Company does not consider non-recourse and limited recourse debt when monitoring its capital because
such debt results from the consolidation of certain Capital investments or holding entities held by the Company.
As such, the lenders of such debt do not have recourse to the general credit of the Company, but rather to the
specific assets of the Capital investments or investment in Capital investments they finance. The Company’s
investments and underlying assets in its Capital investments accounted for by the consolidation or equity methods
may be at risk, if such investments or holding entities were unable to repay their long-term debt.
The Company was required to maintain, as at December 31, 2020, a ratio of net recourse debt to EBITDA not to
exceed: (a) 3.75x under the Company’s Credit Agreement; and (b) 3.50x under the loan agreement, dated as of
April 20, 2017, between SNC-Lavalin Highway Holdings Inc., an indirect wholly-owned subsidiary of the Company
(“Highway Holdings”), and CDPQ Revenu Fixe Inc. (“CDPQ RF”), a wholly-owned subsidiary of Caisse de dépôt
et placement du Québec (as amended, restated or otherwise modified, from time to time, the “CDPQ Loan
Agreement” and the limited recourse loan established thereunder, the “CDPQ Loan”). As at December 31, 2020,
the ratio of the Company’s net recourse debt to EBITDA, as calculated under both the Credit Agreement and the
CDPQ Loan Agreement, was 2.1x and, as such, the Company was in compliance with its financial ratio covenants
under such agreements.
In the second quarter of 2019, the Company and CDPQ RF renegotiated certain terms of the CDPQ Loan
Agreement, which included, among others, the following material amendments:
◦ modification to the net recourse debt to EBITDA ratio covenant to align it with the Credit Agreement and
extend the application of such covenant from March 31, 2019 to June 30, 2019;
◦
◦
following the then expected disposal by the Company of 10.01% of the shares of Highway 407 ETR, the
Company committed to repay an amount of $600 million out of $1 billion outstanding under tranche A of the
CDPQ Loan; and
decrease of the margin applicable to the base rate and payment by the Company of fees of $15 million.
On October 15, 2019, the CDPQ Loan Agreement was, like the Credit Agreement, amended to extend the
temporary increase in the net recourse debt to EBITDA ratio to 4x from June 30, 2019 to December 31, 2019.
As at December 31, 2019, the net recourse debt to EBITDA ratio in accordance with the terms of the Company’s
Credit Agreement was 2.1x.
The terms “net recourse debt” and “EBITDA” are defined in the Credit Agreement and in the CDPQ Loan
Agreement and do not correspond to the specific terms used in this MD&A. Furthermore, such ratio is calculated
using certain financial information not disclosed in the 2020 Annual Financial Statements or in this MD&A. For
example, the ratio includes the amount of down-payments on contracts totaling $226.1 million as at
December 31, 2020 (December 31, 2019: $322.4 million) and the amount of outstanding financial letters of credit
totaling $101.6 million as at December 31, 2020 (December 31, 2019: $259.6 million) as part of the net recourse
debt calculation.
ISSUANCE OF SERIES 6 DEBENTURES
In the third quarter of 2020, SNC-Lavalin issued, on a private placement basis, new unsecured Series 6
Debentures in the principal amount of $300 million, which bear interest at the rate of 3.80% per annum and
mature on August 19, 2024.
148
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
149
149
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
8.5
CAPITAL MANAGEMENT INDICATORS
Review with Negative Implications status once the Company releases its 2020 financial results and upon further
discussions with management about risk control processes and restructuring strategies as the Company
The Company periodically monitors capital using certain ratios, which are described further below.
continues to navigate the challenges surrounding its legacy business.
CASH NET OF RECOURSE DEBT (NET RECOURSE DEBT)
Cash net of recourse debt (Net recourse debt) is a non-IFRS financial measure. A definition of this financial
measure is provided in Section 13.
On May 15, 2020, S&P affirmed its BB+ rating and maintained its negative outlook. The negative outlook primarily
reflects uncertainty in the Company’s ability to improve earnings and cash flow so that the adjusted debt-to-
EBITDA ratio, as per S&P’s methodology, returns below 3x by 2020. On August 17, 2020, S&P assigned a BB+
issued-level rating on the Company’s unsecured Series 6 Debentures in the principal amount of $300 million due
AT DECEMBER 31
(IN MILLIONS $)
Cash and cash equivalents
Less:
2020
2019
2018
$
932.9 $
1,188.6 $
634.1
on August 19, 2024.
8.7
DIVIDENDS DECLARED
Cash and cash equivalents of Capital investments accounted for by the consolidation
The table below summarizes the dividends declared for each of the past three years:
method
Recourse debt(1):
Revolving facility
Term Loan
Series 2 Debentures
Series 3 Debentures
Series 4 Debentures
Series 5 Debentures
Series 6 Debentures
2019 Debentures
2020 Debentures
Cash net of recourse debt (Net recourse debt)
$
(1) Refer to Note 20 to the 2020 Annual Financial Statements for a description of each debt instrument.
1.9
8.3
3.3
—
499.4
—
175.0
199.5
—
297.1
—
—
(240.0) $
—
499.1
—
174.7
199.3
—
—
—
299.5
466.9
498.8
149.9
174.5
199.1
149.9
—
349.9
299.0
7.7 $ (1,657.2)
◦ Net recourse debt as at December 31, 2020 was $240.0 million, compared with Cash net of recourse debt
of $7.7 million as at December 31, 2019, mainly resulting from a decrease in cash and cash equivalents as
explained in Section 8.1.
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROASE”)
ROASE is a non-IFRS financial measure. A definition of this financial measure is provided in Section 13.
ROASE was -33.4% in 2020, compared with 9.9% for 2019 and -28.2% for 2018.
Short-term debt, long-term debt repayments,
commitments to invest and lease liabilities:
8.6
CREDIT RATING
On April 7, 2020, DBRS issued a rating report confirming the Company’s rating of BBB (low) and maintaining the
trend to negative. This rating confirmation is supported by a relatively better performance, comfortable liquidity
position with cash balances of $1.2 billion as at December 31, 2019, and the Company's ongoing efforts to
execute the new strategy focusing on engineering service offerings and exiting LSTK contracting. On August 14,
2020, DBRS assigned a BBB (low) negative trend rating on the Company’s unsecured Series 6 Debentures in the
principal amount of $300 million due on August 19, 2024. On November 2, 2020, DBRS announced that it was
downgrading the Company’s rating to BB (high) from BBB (low). This downgrade was driven by recurrent losses
in the “Projects” business and continued underperformance in the Company’s earnings and credit metrics during
2020 when compared to other investment grade peers.
On February 10, 2021, DBRS placed the Company’s Issuer Rating and Unsecured Debentures rating, both
currently rated BB (high), Under Review with Negative Implications. The rating actions were taken following the
Company’s announcement of approximately $295 million in additional provisions taken for legacy LSTK litigation
matters and commercial claims. The Company is also taking approximately $90 million in charges on its
remaining LSTK projects that continue to be affected by the COVID-19 pandemic. As a result of this
announcement, key credit metrics continue to face short-term deterioration, below that of the current rating. DBRS
anticipates gradual improvement in the Company’s business profile in the medium term; however, earnings
recovery and stability remain key issues in the near term. DBRS stated that it expects to resolve the Under
YEARS ENDED DECEMBER 31
(IN $)
Dividend decrease (%)
Dividends per share declared to SNC-Lavalin shareholders (1)
(1) The dividends declared are classified in the period based on the declaration date.
2020
2019
2018
$
0.080
$
0.240
$
1.148
(67%)
(79%)
(13%)
Total cash dividends paid in 2020 were $14.0 million, compared with $42.1 million in 2019. The Company has
paid quarterly dividends for 31 consecutive years. The Board of Directors of the Company determines the
dividend policy.
8.8
CONTRACTUAL OBLIGATIONS AND FINANCIAL INSTRUMENTS
CONTRACTUAL OBLIGATIONS
In the normal course of business, SNC-Lavalin has various contractual obligations. The following table provides a
summary of SNC-Lavalin’s future contractual commitments specifically related to short-term debt and long-term
debt repayments, commitments to invest in Capital investments and lease liabilities:
(IN MILLIONS $)
2021
2022-2023
2024-2025
THEREAFTER
TOTAL
Recourse
Limited recourse
Non-recourse
Lease liabilities
Total
Commitments to invest in Capital investments
$
175.0 $
700.0 $
300.0 $
— $ 1,175.0
—
33.3
24.9
—
400.0
166.6
—
54.6
—
124.1
176.9
104.2
—
187.2
—
218.8
400.0
441.8
24.9
624.0
$
357.3 $ 1,043.5 $
858.8 $
406.0 $ 2,665.7
Additional details of the future principal repayments of the Company’s recourse and non-recourse short-term debt
and long-term debt are provided in Note 20D to the 2020 Annual Financial Statements. The commitments to
invest in Capital investments result from SNC-Lavalin not being required to make its contribution immediately
when investing, but instead contributing over time, as detailed in Note 5C to the 2020 Annual Financial
Statements. At December 31, 2020, the commitments to invest in Capital investments were related to
contributions for Eglinton Crosstown (2019: SSL, Eglinton Crosstown and Carlyle Global Infrastructure
Opportunity Fund, L.P.) and were presented as “Other current financial liabilities” (see Note 18 to the 2020 Annual
Financial Statements) since they are either expected to be paid in the following year or are callable on demand.
Information regarding the Company's lease liabilities can be obtained in Note 34 to the 2020 Annual Financial
Statements.
150
150
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
151
AT DECEMBER 31
(IN MILLIONS $)
Cash and cash equivalents
Less:
method
Recourse debt(1):
Revolving facility
Term Loan
Series 2 Debentures
Series 3 Debentures
Series 4 Debentures
Series 5 Debentures
Series 6 Debentures
2019 Debentures
2020 Debentures
1.9
8.3
3.3
—
499.4
—
175.0
199.5
—
297.1
—
—
—
499.1
—
174.7
199.3
—
—
—
299.5
466.9
498.8
149.9
174.5
199.1
149.9
—
349.9
299.0
SNC-LAVALIN
SNC-LAVALIN
8.5
CAPITAL MANAGEMENT INDICATORS
The Company periodically monitors capital using certain ratios, which are described further below.
CASH NET OF RECOURSE DEBT (NET RECOURSE DEBT)
Cash net of recourse debt (Net recourse debt) is a non-IFRS financial measure. A definition of this financial
measure is provided in Section 13.
Review with Negative Implications status once the Company releases its 2020 financial results and upon further
discussions with management about risk control processes and restructuring strategies as the Company
continues to navigate the challenges surrounding its legacy business.
On May 15, 2020, S&P affirmed its BB+ rating and maintained its negative outlook. The negative outlook primarily
reflects uncertainty in the Company’s ability to improve earnings and cash flow so that the adjusted debt-to-
EBITDA ratio, as per S&P’s methodology, returns below 3x by 2020. On August 17, 2020, S&P assigned a BB+
issued-level rating on the Company’s unsecured Series 6 Debentures in the principal amount of $300 million due
on August 19, 2024.
2020
2019
2018
$
932.9 $
1,188.6 $
634.1
8.7
DIVIDENDS DECLARED
Cash and cash equivalents of Capital investments accounted for by the consolidation
The table below summarizes the dividends declared for each of the past three years:
YEARS ENDED DECEMBER 31
(IN $)
Dividends per share declared to SNC-Lavalin shareholders (1)
Dividend decrease (%)
(1) The dividends declared are classified in the period based on the declaration date.
2020
2019
2018
$
0.080
$
0.240
$
1.148
(67%)
(79%)
(13%)
Total cash dividends paid in 2020 were $14.0 million, compared with $42.1 million in 2019. The Company has
paid quarterly dividends for 31 consecutive years. The Board of Directors of the Company determines the
dividend policy.
Cash net of recourse debt (Net recourse debt)
$
(240.0) $
7.7 $ (1,657.2)
8.8
CONTRACTUAL OBLIGATIONS AND FINANCIAL INSTRUMENTS
(1) Refer to Note 20 to the 2020 Annual Financial Statements for a description of each debt instrument.
◦ Net recourse debt as at December 31, 2020 was $240.0 million, compared with Cash net of recourse debt
of $7.7 million as at December 31, 2019, mainly resulting from a decrease in cash and cash equivalents as
explained in Section 8.1.
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROASE”)
CONTRACTUAL OBLIGATIONS
In the normal course of business, SNC-Lavalin has various contractual obligations. The following table provides a
summary of SNC-Lavalin’s future contractual commitments specifically related to short-term debt and long-term
debt repayments, commitments to invest in Capital investments and lease liabilities:
(IN MILLIONS $)
2021
2022-2023
2024-2025
THEREAFTER
TOTAL
ROASE is a non-IFRS financial measure. A definition of this financial measure is provided in Section 13.
ROASE was -33.4% in 2020, compared with 9.9% for 2019 and -28.2% for 2018.
Short-term debt, long-term debt repayments,
commitments to invest and lease liabilities:
8.6
CREDIT RATING
On April 7, 2020, DBRS issued a rating report confirming the Company’s rating of BBB (low) and maintaining the
trend to negative. This rating confirmation is supported by a relatively better performance, comfortable liquidity
position with cash balances of $1.2 billion as at December 31, 2019, and the Company's ongoing efforts to
execute the new strategy focusing on engineering service offerings and exiting LSTK contracting. On August 14,
2020, DBRS assigned a BBB (low) negative trend rating on the Company’s unsecured Series 6 Debentures in the
principal amount of $300 million due on August 19, 2024. On November 2, 2020, DBRS announced that it was
downgrading the Company’s rating to BB (high) from BBB (low). This downgrade was driven by recurrent losses
in the “Projects” business and continued underperformance in the Company’s earnings and credit metrics during
2020 when compared to other investment grade peers.
On February 10, 2021, DBRS placed the Company’s Issuer Rating and Unsecured Debentures rating, both
currently rated BB (high), Under Review with Negative Implications. The rating actions were taken following the
Company’s announcement of approximately $295 million in additional provisions taken for legacy LSTK litigation
matters and commercial claims. The Company is also taking approximately $90 million in charges on its
remaining LSTK projects that continue to be affected by the COVID-19 pandemic. As a result of this
announcement, key credit metrics continue to face short-term deterioration, below that of the current rating. DBRS
anticipates gradual improvement in the Company’s business profile in the medium term; however, earnings
recovery and stability remain key issues in the near term. DBRS stated that it expects to resolve the Under
Recourse
Limited recourse
Non-recourse
Commitments to invest in Capital investments
Lease liabilities
Total
$
175.0 $
700.0 $
300.0 $
— $ 1,175.0
—
33.3
24.9
—
400.0
166.6
—
54.6
—
124.1
176.9
104.2
—
187.2
—
218.8
400.0
441.8
24.9
624.0
$
357.3 $ 1,043.5 $
858.8 $
406.0 $ 2,665.7
Additional details of the future principal repayments of the Company’s recourse and non-recourse short-term debt
and long-term debt are provided in Note 20D to the 2020 Annual Financial Statements. The commitments to
invest in Capital investments result from SNC-Lavalin not being required to make its contribution immediately
when investing, but instead contributing over time, as detailed in Note 5C to the 2020 Annual Financial
Statements. At December 31, 2020, the commitments to invest in Capital investments were related to
contributions for Eglinton Crosstown (2019: SSL, Eglinton Crosstown and Carlyle Global Infrastructure
Opportunity Fund, L.P.) and were presented as “Other current financial liabilities” (see Note 18 to the 2020 Annual
Financial Statements) since they are either expected to be paid in the following year or are callable on demand.
Information regarding the Company's lease liabilities can be obtained in Note 34 to the 2020 Annual Financial
Statements.
150
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
151
151
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
In 2016, SNC-Lavalin signed an agreement to support a commitment of US$100 million to a fund focused on
global infrastructure investments sponsored by The Carlyle Group (“Carlyle”), subject to certain conditions. The
intent of this agreement is for SNC-Lavalin and Carlyle to cooperate with respect to investments in, and work on,
infrastructure projects. Such commitment to invest amounted to US$82.5 million (approximately CA$105.7 million)
as at December 31, 2020 (2019: US$89.3 million [approximately CA$117.2 million]) and will be recognized as a
liability, as a whole or in part, when the accounting conditions will be met.
FINANCIAL INSTRUMENTS
The Company discloses information on the classification and fair value of its financial instruments, as well as on
the nature and extent of risks arising from financial instruments, and related risk management in Note 30 to the
2020 Annual Financial Statements.
SNC-Lavalin enters or may enter into derivative financial instruments, namely:
Derivative financial instruments
◦
◦
◦
◦
Forward currency exchange contracts to hedge its exposure to fluctuations in foreign currency exchange rates;
Trade receivables
1,199.2
1,533.4
(334.3)
well as trade receivables included in the disposal group
Interest-rate swaps to hedge the variability of interest rates relating to financing arrangements;
Derivative financial instruments to limit its exposure to the variability of the fair value of the share units awarded as
part of share unit plans, which fluctuates according to the Company’s share price; and
Commodity swap agreements for certain contracts to hedge the variability of commodity prices.
Contract assets
1,090.1
1,755.3
(665.2)
well as contract assets included in the disposal group
Inventories
16.1
84.9
(68.8)
quarter of 2020.
Refer to Note 30 to the 2020 Annual Financial Statements for further details.
All financial instruments are entered into with sound financial institutions, which SNC-Lavalin anticipates will satisfy their
obligations under the contracts.
The derivative financial instruments are subject to normal credit terms and conditions, financial controls and
management and risk monitoring procedures.
Financial Position
9.1
CONSOLIDATED FINANCIAL POSITION ANALYSIS
ASSETS
AT DECEMBER 31
(IN MILLIONS $)
Current Assets
Restricted cash
2020
2019
CHANGE ($)
EXPLANATIONS
Cash and cash equivalents
$
932.9 $ 1,188.6 $
(255.7) See discussion in Section 8.1.
29.3
34.1
(4.8)
investment.
Decrease in restricted cash is mainly from a certain Capital
Decrease is mainly due to variation on multiple projects, as
classified as held for sale as at December 31, 2020.
Decrease is mainly due to variation on multiple projects, as
classified as held for sale as at December 31, 2020.
Decrease is mainly due to the closure of Valerus in the first
Increase is mainly due to an increase in fair value of
favourable derivative financial instruments, partly offset by
a decrease in recovery of costs expected from suppliers
and subcontractors and an increase in advances to
suppliers, subcontractors and employees and deposits on
Other current financial assets
257.4
222.3
35.1
contracts.
31, 2020.
Other current non-financial assets
253.3
331.4
(78.1) Decrease is mainly due to a decrease in taxes receivable.
Assets of disposal group classified
as held for sale
273.2
—
273.2
business as a disposal group held for sale as at December
Increase mainly reflects the classification of the Oil & Gas
Total current assets
$ 4,051.6 $ 5,150.1 $ (1,098.5)
Property and equipment
$
375.9 $ 470.6 $
(94.8)
Right-of-use-assets
346.8
438.8
(92.0)
Decrease is mainly due to disposals/retirements/salvage as
well as a reclassification of property and equipment to
assets of disposal group classified as held for sale as at
December 31, 2020..
Decrease mainly reflecting depreciation expense, partially
offset by additions in the year.
Decrease is due to foreign exchange currency translation
Capital investments accounted for
by the equity method
Capital investments at fair value
through other comprehensive
income
Goodwill
Intangible assets related to
business combinations
Deferred income tax asset
Non-current portion of receivables
under service concession
arrangements
378.7
399.5
(20.8)
and dividends received in 2020 exceeding the Company’s
share of income.
9.7
8.1
1.6 Not a significant change compared with prior year.
3,429.5
3,429.1
0.4 Not a significant change compared with prior year.
544.1
665.6
(121.5)
2020.
Decrease is mainly due to the amortization expense of
655.8
520.5
135.4 Increase is mainly due to an increase in unused tax losses.
433.9
353.0
80.9
Increase is mainly due to progress of the construction
phase of a service concession arrangement.
Other non-current financial assets
31.4
115.9
(84.5)
of the contingent consideration receivable related to the
Decrease is mainly due to the fair value revaluation in 2020
sale of 10.01% of the shares of Highway 407 ETR.
Other non-current non-financial
assets
Total assets
$ 10,340.3 $ 11,644.7 $
(1,304.4)
83.0
93.5
(10.5) Not a significant change compared with prior year
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
153
152
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
152
SNC-LAVALIN
SNC-LAVALIN
In 2016, SNC-Lavalin signed an agreement to support a commitment of US$100 million to a fund focused on
global infrastructure investments sponsored by The Carlyle Group (“Carlyle”), subject to certain conditions. The
intent of this agreement is for SNC-Lavalin and Carlyle to cooperate with respect to investments in, and work on,
infrastructure projects. Such commitment to invest amounted to US$82.5 million (approximately CA$105.7 million)
as at December 31, 2020 (2019: US$89.3 million [approximately CA$117.2 million]) and will be recognized as a
liability, as a whole or in part, when the accounting conditions will be met.
FINANCIAL INSTRUMENTS
The Company discloses information on the classification and fair value of its financial instruments, as well as on
the nature and extent of risks arising from financial instruments, and related risk management in Note 30 to the
2020 Annual Financial Statements.
SNC-Lavalin enters or may enter into derivative financial instruments, namely:
◦
◦
◦
◦
Interest-rate swaps to hedge the variability of interest rates relating to financing arrangements;
Derivative financial instruments to limit its exposure to the variability of the fair value of the share units awarded as
part of share unit plans, which fluctuates according to the Company’s share price; and
Commodity swap agreements for certain contracts to hedge the variability of commodity prices.
Refer to Note 30 to the 2020 Annual Financial Statements for further details.
All financial instruments are entered into with sound financial institutions, which SNC-Lavalin anticipates will satisfy their
obligations under the contracts.
The derivative financial instruments are subject to normal credit terms and conditions, financial controls and
management and risk monitoring procedures.
Financial Position
9.1
CONSOLIDATED FINANCIAL POSITION ANALYSIS
ASSETS
AT DECEMBER 31
(IN MILLIONS $)
Current Assets
2020
2019
CHANGE ($)
EXPLANATIONS
Derivative financial instruments
Restricted cash
29.3
34.1
(4.8)
Decrease in restricted cash is mainly from a certain Capital
investment.
Cash and cash equivalents
$
932.9 $ 1,188.6 $
(255.7) See discussion in Section 8.1.
Forward currency exchange contracts to hedge its exposure to fluctuations in foreign currency exchange rates;
Trade receivables
1,199.2
1,533.4
(334.3)
Contract assets
1,090.1
1,755.3
(665.2)
Inventories
16.1
84.9
(68.8)
Other current financial assets
257.4
222.3
35.1
Decrease is mainly due to variation on multiple projects, as
well as trade receivables included in the disposal group
classified as held for sale as at December 31, 2020.
Decrease is mainly due to variation on multiple projects, as
well as contract assets included in the disposal group
classified as held for sale as at December 31, 2020.
Decrease is mainly due to the closure of Valerus in the first
quarter of 2020.
Increase is mainly due to an increase in fair value of
favourable derivative financial instruments, partly offset by
a decrease in recovery of costs expected from suppliers
and subcontractors and an increase in advances to
suppliers, subcontractors and employees and deposits on
contracts.
Other current non-financial assets
253.3
331.4
(78.1) Decrease is mainly due to a decrease in taxes receivable.
Assets of disposal group classified
as held for sale
273.2
—
273.2
Total current assets
$ 4,051.6 $ 5,150.1 $ (1,098.5)
Property and equipment
$
375.9 $ 470.6 $
(94.8)
Right-of-use-assets
346.8
438.8
(92.0)
378.7
399.5
(20.8)
Increase mainly reflects the classification of the Oil & Gas
business as a disposal group held for sale as at December
31, 2020.
Decrease is mainly due to disposals/retirements/salvage as
well as a reclassification of property and equipment to
assets of disposal group classified as held for sale as at
December 31, 2020..
Decrease mainly reflecting depreciation expense, partially
offset by additions in the year.
Decrease is due to foreign exchange currency translation
and dividends received in 2020 exceeding the Company’s
share of income.
9.7
8.1
1.6 Not a significant change compared with prior year.
3,429.5
3,429.1
0.4 Not a significant change compared with prior year.
544.1
665.6
(121.5)
Decrease is mainly due to the amortization expense of
2020.
Capital investments accounted for
by the equity method
Capital investments at fair value
through other comprehensive
income
Goodwill
Intangible assets related to
business combinations
Deferred income tax asset
655.8
520.5
135.4 Increase is mainly due to an increase in unused tax losses.
Non-current portion of receivables
under service concession
arrangements
433.9
353.0
80.9
Increase is mainly due to progress of the construction
phase of a service concession arrangement.
Other non-current financial assets
31.4
115.9
(84.5)
Decrease is mainly due to the fair value revaluation in 2020
of the contingent consideration receivable related to the
sale of 10.01% of the shares of Highway 407 ETR.
Other non-current non-financial
assets
Total assets
83.0
93.5
(10.5) Not a significant change compared with prior year
$ 10,340.3 $ 11,644.7 $
(1,304.4)
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SNC-LAVALIN
EQUITY
AT DECEMBER 31
(IN MILLIONS $)
Share capital
2020
2019 CHANGE ($) EXPLANATIONS
$ 1,805.1 $ 1,805.1 $
— Share capital in line with prior year.
Retained earnings
478.4
1,555.9
(1,077.5) The decrease was mainly attributable to the 2020 results.
Other components of equity
(320.1)
354.1
(674.1)
equity included in the disposal group classified as held for
The decrease was largely due to other components of
sale as at December 31, 2020.
Other components of equity of
Increase mainly reflects the classification of the Oil & Gas
disposal group classified as held
594.1
—
594.1
business as a disposal group held for sale as at December
for sale
31, 2020.
Equity attributable to SNC-Lavalin
shareholders
$ 2,557.5 $ 3,715.0 $ (1,157.5)
Non-controlling interests
11.2
2.4
8.8 Not a significant balance.
Total Equity
$ 2,568.7 $ 3,717.4 $ (1,148.7)
WORKING CAPITAL
AT DECEMBER 31
NOTED)
Working Capital (1)
Current Ratio (1)
(IN MILLIONS $, EXCEPT AS OTHERWISE
2020
2019 CHANGE ($) EXPLANATIONS
$
(222.9) $
622.2 $ (845.1)
remeasurement of assets of disposal group classified as
Decrease
is mainly due
to
the
impairment
loss on
0.95
1.14
(0.19)
additional provision on
legacy
litigation matters and
commercial claims receivable reductions in 2020.
held for sale, as well as the impact on current assets and
current
liabilities of certain unfavorable
reforecasts,
(1) Additional IFRS financial measures. Please refer to Section 13 for further information on these financial measures.
SNC-LAVALIN
LIABILITIES
AT DECEMBER 31
(IN MILLIONS $)
Current Liabilities
2020
2019 CHANGE ($) EXPLANATIONS
Trade payables
$ 1,730.4 $ 2,153.5 $ (423.1)
Contract liabilities
837.0
890.0
(53.0)
Other current financial liabilities
187.8
287.7
(100.0)
Variation is principally attributable to multiple projects, as
well as trade payables included in the disposal group
classified as held for sale as at December 31, 2020.
Variation is mainly due to contract liabilities included in the
disposal group classified as held
for sale as at
December 31, 2020.
Variation is due to a decrease in commitments to invest in
certain Capital investments, as well as other current
financial liabilities included in the disposal group classified
as held for sale as at December 31, 2020.
Other current non-financial liabilities
473.8
383.2
90.6 Increase mainly reflects an increase in taxes payable.
Current portion of provisions
401.6
289.2
112.4
Current portion of lease liabilities
97.4
131.1
(33.7)
Refer to Note 22 to the 2020 Annual Financial Statements
for details.
Decrease is mainly due to certain leases which matured or
are close to maturity at the end of 2020, as well as lease
liabilities included in the disposal group classified as held for
sale as at December 31, 2020.
Short-term debt and current portion of
long-term debt:
Recourse
Non-recourse
175.0
299.5
(124.6)
Decrease is mainly due to the 2020 Debentures that were
repaid in full at maturity in 2020, partly offset by certain
debentures maturing in 2021.
31.3
93.7
(62.4) Decrease is mainly due to the credit facility of InPower BC.
Liabilities of disposal group classified
as held for sale
340.3
—
340.3
Increase mainly reflects the classification of the Oil & Gas
business as a disposal group held for sale as at December
31, 2020.
Total current liabilities
$ 4,274.4 $ 4,527.9 $ (253.4)
Long-term debt:
Recourse
$
996.0 $
873.1 $ 122.9
Increase is mainly due to the issuance of the Series 6
Debentures in 2020, partly offset by the maturity of certain
debentures in 2021 now presented in the current portion of
recourse debt.
Limited recourse
Non-recourse
400.0
400.0
— No variance compared to prior year.
400.3
391.5
8.8 Not a significant variance compared to prior year.
Other non-current financial liabilities
193.9
232.6
(38.7)
Non-current portion of provisions
753.2
672.1
81.1
Non-current portion of lease liabilities
399.2
480.7
(81.5)
Decrease is mainly due to the non-current portion of the
Federal Charges Settlement (PPSC) liability recognized in
2019.
Refer to Note 22 to the 2020 Annual Financial Statements
for details.
Decrease is mainly due to passage of time as well as
certain lease liabilities included in the disposal group
classified as held for sale as at December 31, 2020.
Other non-current non-financial
liabilities
0.2
0.6
(0.3) Not a significant balance.
Deferred income tax liability
354.3
348.9
5.4 Deferred income tax liabilities in line with prior year.
Total liabilities
$ 7,771.6 $ 7,927.3 $ (155.7)
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LIABILITIES
AT DECEMBER 31
(IN MILLIONS $)
Current Liabilities
2020
2019 CHANGE ($) EXPLANATIONS
Trade payables
$ 1,730.4 $ 2,153.5 $ (423.1)
well as trade payables included in the disposal group
Contract liabilities
837.0
890.0
(53.0)
disposal group classified as held
for sale as at
Variation is principally attributable to multiple projects, as
classified as held for sale as at December 31, 2020.
Variation is mainly due to contract liabilities included in the
December 31, 2020.
Variation is due to a decrease in commitments to invest in
certain Capital investments, as well as other current
financial liabilities included in the disposal group classified
as held for sale as at December 31, 2020.
Other current financial liabilities
187.8
287.7
(100.0)
Other current non-financial liabilities
473.8
383.2
90.6 Increase mainly reflects an increase in taxes payable.
Current portion of provisions
401.6
289.2
112.4
for details.
Refer to Note 22 to the 2020 Annual Financial Statements
Current portion of lease liabilities
97.4
131.1
(33.7)
Decrease is mainly due to certain leases which matured or
are close to maturity at the end of 2020, as well as lease
liabilities included in the disposal group classified as held for
sale as at December 31, 2020.
Short-term debt and current portion of
long-term debt:
Recourse
Non-recourse
Long-term debt:
Liabilities of disposal group classified
as held for sale
175.0
299.5
(124.6)
repaid in full at maturity in 2020, partly offset by certain
Decrease is mainly due to the 2020 Debentures that were
debentures maturing in 2021.
31.3
93.7
(62.4) Decrease is mainly due to the credit facility of InPower BC.
340.3
—
340.3
business as a disposal group held for sale as at December
Increase mainly reflects the classification of the Oil & Gas
31, 2020.
Total current liabilities
$ 4,274.4 $ 4,527.9 $ (253.4)
Recourse
$
996.0 $
873.1 $ 122.9
Increase is mainly due to the issuance of the Series 6
Debentures in 2020, partly offset by the maturity of certain
debentures in 2021 now presented in the current portion of
recourse debt.
Limited recourse
Non-recourse
400.0
400.0
— No variance compared to prior year.
400.3
391.5
8.8 Not a significant variance compared to prior year.
Other non-current financial liabilities
193.9
232.6
(38.7)
Federal Charges Settlement (PPSC) liability recognized in
Decrease is mainly due to the non-current portion of the
Non-current portion of provisions
753.2
672.1
81.1
Refer to Note 22 to the 2020 Annual Financial Statements
Non-current portion of lease liabilities
399.2
480.7
(81.5)
certain lease liabilities included in the disposal group
Decrease is mainly due to passage of time as well as
classified as held for sale as at December 31, 2020.
Other non-current non-financial
liabilities
0.2
0.6
(0.3) Not a significant balance.
Deferred income tax liability
354.3
348.9
5.4 Deferred income tax liabilities in line with prior year.
Total liabilities
$ 7,771.6 $ 7,927.3 $ (155.7)
2019.
for details.
SNC-LAVALIN
EQUITY
AT DECEMBER 31
(IN MILLIONS $)
Share capital
2020
2019 CHANGE ($) EXPLANATIONS
$ 1,805.1 $ 1,805.1 $
— Share capital in line with prior year.
Retained earnings
478.4
1,555.9
(1,077.5) The decrease was mainly attributable to the 2020 results.
Other components of equity
(320.1)
354.1
(674.1)
Other components of equity of
disposal group classified as held
for sale
Equity attributable to SNC-Lavalin
shareholders
594.1
—
594.1
$ 2,557.5 $ 3,715.0 $ (1,157.5)
The decrease was largely due to other components of
equity included in the disposal group classified as held for
sale as at December 31, 2020.
Increase mainly reflects the classification of the Oil & Gas
business as a disposal group held for sale as at December
31, 2020.
Non-controlling interests
11.2
2.4
8.8 Not a significant balance.
Total Equity
$ 2,568.7 $ 3,717.4 $ (1,148.7)
WORKING CAPITAL
AT DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE
NOTED)
2020
2019 CHANGE ($) EXPLANATIONS
Working Capital (1)
$
(222.9) $
622.2 $ (845.1)
Current Ratio (1)
0.95
1.14
(0.19)
the
impairment
is mainly due
Decrease
loss on
to
remeasurement of assets of disposal group classified as
held for sale, as well as the impact on current assets and
reforecasts,
current
additional provision on
litigation matters and
commercial claims receivable reductions in 2020.
liabilities of certain unfavorable
legacy
(1) Additional IFRS financial measures. Please refer to Section 13 for further information on these financial measures.
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SNC-LAVALIN
Related Party Transactions
The Company discloses information on its related party transactions, as defined in IAS 24, Related Party
Disclosures, in Note 36 to the 2020 Annual Financial Statements.
Non-Financial Information
Critical Accounting Judgments and Key
Sources of Estimation Uncertainty
In the application of the Company’s accounting policies, which are described in Note 2 to the 2020 Annual
Financial Statements, management is required to make judgments, estimates, and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
underlying assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and future periods.
Critical accounting judgments and key estimates concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are described in detail in Note 3 to the 2020
Annual Financial Statements.
Accounting Policies and Changes
Please refer to Note 2 to the 2020 Annual Financial Statements for more information regarding the Company's
significant accounting policies and changes, including the changes made to comparative figures as described
below.
Effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to (without
any change to this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to
clarify that this measure excludes items other than interest and taxes. Also, effective as of the second quarter of
2020, the Company presents the financial results of Capital separately from SNCL Engineering Services to further
simplify the presentation of financial information excluding Capital. This change, which only modified the
presentation of financial information provided, was made in accordance with IAS 8 resulting in the restatement of
prior year figures.
Certain comparative amounts in the consolidated income statement and in the consolidated statement of
comprehensive income have been re-presented, as a result of the Oil & Gas business, which was previously
included in the Resources segment, being presented as discontinued operations during the current year.
Non-IFRS Financial Measures,
Additional IFRS Measures and Other
The following section provides information regarding non-IFRS financial measures, additional IFRS measures and
other non-financial information used by the Company to analyze and evaluate its results. Non-IFRS financial
measures do not have any standardized meaning under IFRS and therefore may not be comparable to similar
measures presented by other issuers. Management believes that, in addition to conventional measures prepared
in accordance with IFRS, these non-IFRS measures and other non-financial information provide additional insight
into the Company’s operating performance and financial position and certain investors may use this information to
evaluate the Company’s performance from period to period. However, these non-IFRS financial measures and
non-financial information have limitations and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. Furthermore, certain non-IFRS financial measures
and additional IFRS measures are presented separately for each of PS&PM and Capital, as the Company
believes that such measures are useful as these activities are usually analyzed separately by the Company.
13.1 Performance
Adjusted diluted earnings per share (“Adjusted diluted EPS”) is defined as adjusted net income (loss)
attributable to SNC-Lavalin shareholders from continuing operations, divided by the diluted weighted average
number of outstanding shares for the period. Adjusted diluted EPS is a non-IFRS financial measure that is an
indicator of the financial performance of the Company’s activities and allows the Company to present the adjusted
net income (loss) attributable to SNC-Lavalin shareholders on a diluted share basis. Refer to Section 13.3 for the
reconciliation of Adjusted diluted EPS to diluted EPS (namely, net income (loss) per diluted share) as determined
under IFRS. Such reconciliation is provided on a consolidated basis and also separately for each of PS&PM and
Capital, as the Company believes that such measures are useful since these activities are also analyzed
separately by the Company.
Adjusted EBITDA is a non-IFRS financial measure used by management to facilitate operating performance
comparison from period to period and to prepare annual operating budgets and forecasts. Adjusted EBITDA is
based on EBITDA from continuing operations and excludes charges related to restructuring costs, acquisition-
related costs and integration costs, gains (losses) on disposals of PS&PM businesses and Capital investments (or
adjustments to gains or losses on such disposals), the adjustment to provision for the Pyrrhotite Case litigation (as
described in Section 14 this MD&A and in Note 33 to the 2020 Annual Financial Statements), the Federal charges
settlement (PPSC) expense, the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the GMP equalization expenses and the impairment loss on remeasurement of assets of disposal
group classified as held for sale to fair value less cost to sell. It should be noted that, in 2020, management has
added as components to Adjusted EBITDA the amounts of the fair value revaluation of the Highway 407 ETR
contingent consideration receivable, the adjustment to provision for the Pyrrhotite Case litigation and the
impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost to
sell as it believes that such items are not reflective of the Company’s underlying operations. Such additions did
not result in any change to comparative figures as there were no significant adjustments of this nature in the
comparative periods being presented. Also, it should be noted that the following adjustment was removed from
the list of adjustments disclosed in prior periods as there was no adjustment of this nature in the current periods
and the previous year: the net expense for the 2012 class action lawsuit settlement and related legal costs. The
Company believes that Adjusted EBITDA is useful for providing securities analysts, investors and others with
additional information to assist them in understanding components of its financial results, including a more
complete understanding of factors and trends affecting the Company’s operating performance. Adjusted EBITDA
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Related Party Transactions
The Company discloses information on its related party transactions, as defined in IAS 24, Related Party
Disclosures, in Note 36 to the 2020 Annual Financial Statements.
Critical Accounting Judgments and Key
Sources of Estimation Uncertainty
In the application of the Company’s accounting policies, which are described in Note 2 to the 2020 Annual
Financial Statements, management is required to make judgments, estimates, and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
underlying assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and future periods.
Critical accounting judgments and key estimates concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are described in detail in Note 3 to the 2020
Annual Financial Statements.
Accounting Policies and Changes
Please refer to Note 2 to the 2020 Annual Financial Statements for more information regarding the Company's
significant accounting policies and changes, including the changes made to comparative figures as described
below.
Effective as of the second quarter of 2020, the measure of profit or loss of each segment is referred to (without
any change to this financial measure’s composition) as Segment Adjusted EBIT (formerly “Segment EBIT”) to
clarify that this measure excludes items other than interest and taxes. Also, effective as of the second quarter of
2020, the Company presents the financial results of Capital separately from SNCL Engineering Services to further
simplify the presentation of financial information excluding Capital. This change, which only modified the
presentation of financial information provided, was made in accordance with IAS 8 resulting in the restatement of
prior year figures.
Certain comparative amounts in the consolidated income statement and in the consolidated statement of
comprehensive income have been re-presented, as a result of the Oil & Gas business, which was previously
included in the Resources segment, being presented as discontinued operations during the current year.
Non-IFRS Financial Measures,
Additional IFRS Measures and Other
Non-Financial Information
The following section provides information regarding non-IFRS financial measures, additional IFRS measures and
other non-financial information used by the Company to analyze and evaluate its results. Non-IFRS financial
measures do not have any standardized meaning under IFRS and therefore may not be comparable to similar
measures presented by other issuers. Management believes that, in addition to conventional measures prepared
in accordance with IFRS, these non-IFRS measures and other non-financial information provide additional insight
into the Company’s operating performance and financial position and certain investors may use this information to
evaluate the Company’s performance from period to period. However, these non-IFRS financial measures and
non-financial information have limitations and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. Furthermore, certain non-IFRS financial measures
and additional IFRS measures are presented separately for each of PS&PM and Capital, as the Company
believes that such measures are useful as these activities are usually analyzed separately by the Company.
13.1 Performance
Adjusted diluted earnings per share (“Adjusted diluted EPS”) is defined as adjusted net income (loss)
attributable to SNC-Lavalin shareholders from continuing operations, divided by the diluted weighted average
number of outstanding shares for the period. Adjusted diluted EPS is a non-IFRS financial measure that is an
indicator of the financial performance of the Company’s activities and allows the Company to present the adjusted
net income (loss) attributable to SNC-Lavalin shareholders on a diluted share basis. Refer to Section 13.3 for the
reconciliation of Adjusted diluted EPS to diluted EPS (namely, net income (loss) per diluted share) as determined
under IFRS. Such reconciliation is provided on a consolidated basis and also separately for each of PS&PM and
Capital, as the Company believes that such measures are useful since these activities are also analyzed
separately by the Company.
Adjusted EBITDA is a non-IFRS financial measure used by management to facilitate operating performance
comparison from period to period and to prepare annual operating budgets and forecasts. Adjusted EBITDA is
based on EBITDA from continuing operations and excludes charges related to restructuring costs, acquisition-
related costs and integration costs, gains (losses) on disposals of PS&PM businesses and Capital investments (or
adjustments to gains or losses on such disposals), the adjustment to provision for the Pyrrhotite Case litigation (as
described in Section 14 this MD&A and in Note 33 to the 2020 Annual Financial Statements), the Federal charges
settlement (PPSC) expense, the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the GMP equalization expenses and the impairment loss on remeasurement of assets of disposal
group classified as held for sale to fair value less cost to sell. It should be noted that, in 2020, management has
added as components to Adjusted EBITDA the amounts of the fair value revaluation of the Highway 407 ETR
contingent consideration receivable, the adjustment to provision for the Pyrrhotite Case litigation and the
impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost to
sell as it believes that such items are not reflective of the Company’s underlying operations. Such additions did
not result in any change to comparative figures as there were no significant adjustments of this nature in the
comparative periods being presented. Also, it should be noted that the following adjustment was removed from
the list of adjustments disclosed in prior periods as there was no adjustment of this nature in the current periods
and the previous year: the net expense for the 2012 class action lawsuit settlement and related legal costs. The
Company believes that Adjusted EBITDA is useful for providing securities analysts, investors and others with
additional information to assist them in understanding components of its financial results, including a more
complete understanding of factors and trends affecting the Company’s operating performance. Adjusted EBITDA
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SNC-LAVALIN
is believed to supplement information provided, as it highlights trends that may not otherwise be apparent when
relying solely on IFRS financial measures. Refer to Section 13.3 for a reconciliation of Adjusted EBITDA to net
income (loss) from continuing operations as determined under IFRS. Such reconciliation is provided on a
consolidated basis and also separately for each of PS&PM and Capital, as the Company believes that such
measures are useful since these activities are analyzed separately by the Company.
Adjusted net income (loss) attributable to SNC-Lavalin shareholders is defined as net income (loss)
attributable to SNC-Lavalin shareholders from continuing operations, adjusted for certain specific items that are
significant but are not, based on management’s judgement, reflective of the Company’s underlying operations.
These adjustments are restructuring costs, acquisition-related costs and integration costs, amortization of
intangible assets related to business combinations, gains (losses) on disposals of PS&PM businesses and Capital
investments (or adjustments to gains or losses on such disposals), financing costs related to the agreement to sell
shares of Highway 407 ETR, the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the federal charges settlement (PPSC) expense, the adjustment to provision for the Pyrrhotite Case
litigation, impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value
less cost to sell and the GMP equalization expense. It should be noted that, in 2020, management has added as
components of Adjusted net income (loss) attributable to SNC-Lavalin shareholders the amounts of the fair value
revaluation of Highway 407 ETR contingent consideration receivable, the adjustment to provision for the
Pyrrhotite Case litigation and impairment loss on remeasurement of assets of disposal group classified as held for
sale to fair value less cost to sell as it believes that such items are not reflective of the Company’s underlying
operations. Such additions did not result in any change to comparative figures as there were no significant
adjustments of this nature in the comparative periods being presented. Also, it should be noted that the following
adjustments were removed from the list of adjustments disclosed in prior periods as there was no adjustment of
this nature in the current periods and the previous year: the net expense for the 2012 class action lawsuit
settlement and related legal costs, and the impact of U.S. corporate tax reform. Furthermore, impairment of
goodwill and impairment of intangible assets related to business combinations were removed in 2020 from the list
of adjustments disclosed in prior periods as the impact of these elements for 2019 were related to discontinued
operations. The Company believes that Adjusted net income (loss) attributable to SNC-Lavalin shareholders is
useful for providing securities analysts, investors and others with additional information to assist them in
understanding components of its financial results, including a more complete understanding of factors and trends
affecting the Company’s operating performance. Adjusted net income (loss) attributable to SNC-Lavalin
shareholders is believed to supplement information provided, as it highlights trends that may not otherwise be
apparent when relying solely on IFRS financial measures. It is also used by management to evaluate the
performance of the activities of the Company from period to period. Refer to Section 13.3 for a reconciliation of
Adjusted net income (loss) attributable to SNC-Lavalin shareholders to net income (loss) as determined under
IFRS. Such reconciliation is provided on a consolidated basis and also separately for each of PS&PM and Capital,
as the Company believes that such measures are useful since these activities are analyzed separately by the
Company.
Booking-to-revenue ratio corresponds to contract bookings divided by revenues for a given period. This measure
provides a useful basis for assessing the renewal of business, as it compares the value of performance
obligations added in a given period to the amount of revenue recognized upon satisfying performance obligations
in the same given period.
EBIT is an indicator of the entity’s capacity to generate earnings from continuing operations before income taxes
and before taking into account management’s financing decisions. Accordingly, EBIT is defined as earnings from
continuing operations before net financial expenses (income) and income taxes. Refer to Section 13.3 for a
reconciliation of EBIT to net income (loss) from continuing operations as determined under IFRS.
EBITDA is defined as earnings from continuing operations before net financial expenses (income), income taxes,
depreciation and amortization. As such, this financial measure allows comparability of operating results from one
period to another by excluding the effects of items that are usually associated with investing and financing
activities. Refer to Section 13.3 for a reconciliation of EBITDA to net income (loss) from continuing operations as
determined under IFRS.
Return on Average Shareholders’ Equity (“ROASE”) corresponds to the trailing 12-month net income (loss)
attributable to SNC-Lavalin shareholders, divided by a trailing 13-month average equity attributable to
SNC‑Lavalin shareholders, excluding “other components of equity”. The Company excludes “other components of
equity” because this element of equity results in part from the translation into Canadian dollars of its foreign
operations having a different functional currency, and from the accounting treatment of cash flow hedges,
including its accumulated share of other comprehensive income (loss) of investments accounted for by the equity
method. These amounts are not representative of the way the Company evaluates the management of its foreign
currency risk and interest risk. The Company believes that this financial measure is useful to compare its
profitability to a measure of equity that excludes certain elements prone to volatility.
Segment Adjusted EBIT consists of revenues allocated to the applicable segment less i) direct costs of activities,
ii) directly related selling, general and administrative expenses, and iii) corporate selling, general and
administrative expenses that are allocated to segments. Segment Adjusted EBIT is the measure used by
management to evaluate the performance of the Company’s segments, and gives investors an indication of the
profitability of each segment, as it excludes certain items that the Company believes are not reflective of the
segment’s underlying operations. Such financial measure also facilitates period-to-period comparisons of the
underlying segment’s performance. Expenses that are not allocated to the Company’s segments are: certain
corporate selling, general and administrative expenses that are not directly related to projects or segments,
impairment loss arising from expected credit losses, gain (loss) arising on financial assets (liabilities) at fair value
through profit or loss, restructuring costs, acquisition-related costs and integration costs, amortization of intangible
assets related to business combinations, the federal charges settlement (PPSC) expense and gains (losses) on
disposals of PS&PM businesses and Capital investments (or adjustments to gains or losses on such disposals),
impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost to
sell, net financial expenses and income taxes. Also, it should be noted that the following adjustment was removed
from the list of adjustments disclosed in prior periods as there was no adjustment of this nature in the current
periods and the previous year: the net expense for the 2012 class action lawsuit settlement and related legal
costs. Furthermore, impairment of goodwill and impairment of intangible assets related to business combinations
were removed in 2020 from the list of adjustments disclosed in prior periods as the impact of these elements for
2019 were related to discontinued operations. See the reconciliation of total Segment Adjusted EBIT to net
income (loss) in Section 4. A reconciliation of Segment Adjusted EBIT from PS&PM and from Capital to net
income (loss) as determined under IFRS is also presented in Note 4 to the 2020 Annual Financial Statements.
Segment Adjusted EBITDA is a supplemental measure derived from Segment Adjusted EBIT and used by
management to evaluate the performance of the Company’s segments but excluding certain items related to
investing activities, through the exclusion of depreciation and amortization from direct costs of activities.
Management believes that this measure is used by certain securities analysts and investors when comparing the
Company’s performance against competitors. See the reconciliation of Segment Adjusted EBITDA to Segment
Adjusted EBIT in Section 13.3, whereas the Segment Adjusted EBIT is reconciled to net income (loss) in
Section 4.
Segment Adjusted EBIT to revenue ratio and Segment Adjusted EBITDA to revenue ratio are two measures
used to analyze the profitability of the Company’s segments and facilitate period-to-period comparisons, as well
as comparison with peers. These financial measures are calculated by dividing the amount of Segment Adjusted
EBIT (Segment Adjusted EBITDA) of a given period to the amount of revenue for the same period.
158
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159
SNC-LAVALIN
SNC-LAVALIN
is believed to supplement information provided, as it highlights trends that may not otherwise be apparent when
relying solely on IFRS financial measures. Refer to Section 13.3 for a reconciliation of Adjusted EBITDA to net
income (loss) from continuing operations as determined under IFRS. Such reconciliation is provided on a
consolidated basis and also separately for each of PS&PM and Capital, as the Company believes that such
measures are useful since these activities are analyzed separately by the Company.
Adjusted net income (loss) attributable to SNC-Lavalin shareholders is defined as net income (loss)
attributable to SNC-Lavalin shareholders from continuing operations, adjusted for certain specific items that are
significant but are not, based on management’s judgement, reflective of the Company’s underlying operations.
These adjustments are restructuring costs, acquisition-related costs and integration costs, amortization of
intangible assets related to business combinations, gains (losses) on disposals of PS&PM businesses and Capital
investments (or adjustments to gains or losses on such disposals), financing costs related to the agreement to sell
shares of Highway 407 ETR, the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the federal charges settlement (PPSC) expense, the adjustment to provision for the Pyrrhotite Case
litigation, impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value
less cost to sell and the GMP equalization expense. It should be noted that, in 2020, management has added as
components of Adjusted net income (loss) attributable to SNC-Lavalin shareholders the amounts of the fair value
revaluation of Highway 407 ETR contingent consideration receivable, the adjustment to provision for the
Pyrrhotite Case litigation and impairment loss on remeasurement of assets of disposal group classified as held for
sale to fair value less cost to sell as it believes that such items are not reflective of the Company’s underlying
operations. Such additions did not result in any change to comparative figures as there were no significant
adjustments of this nature in the comparative periods being presented. Also, it should be noted that the following
adjustments were removed from the list of adjustments disclosed in prior periods as there was no adjustment of
this nature in the current periods and the previous year: the net expense for the 2012 class action lawsuit
settlement and related legal costs, and the impact of U.S. corporate tax reform. Furthermore, impairment of
goodwill and impairment of intangible assets related to business combinations were removed in 2020 from the list
of adjustments disclosed in prior periods as the impact of these elements for 2019 were related to discontinued
operations. The Company believes that Adjusted net income (loss) attributable to SNC-Lavalin shareholders is
useful for providing securities analysts, investors and others with additional information to assist them in
understanding components of its financial results, including a more complete understanding of factors and trends
affecting the Company’s operating performance. Adjusted net income (loss) attributable to SNC-Lavalin
shareholders is believed to supplement information provided, as it highlights trends that may not otherwise be
apparent when relying solely on IFRS financial measures. It is also used by management to evaluate the
performance of the activities of the Company from period to period. Refer to Section 13.3 for a reconciliation of
Adjusted net income (loss) attributable to SNC-Lavalin shareholders to net income (loss) as determined under
IFRS. Such reconciliation is provided on a consolidated basis and also separately for each of PS&PM and Capital,
as the Company believes that such measures are useful since these activities are analyzed separately by the
Company.
Booking-to-revenue ratio corresponds to contract bookings divided by revenues for a given period. This measure
provides a useful basis for assessing the renewal of business, as it compares the value of performance
obligations added in a given period to the amount of revenue recognized upon satisfying performance obligations
in the same given period.
EBIT is an indicator of the entity’s capacity to generate earnings from continuing operations before income taxes
and before taking into account management’s financing decisions. Accordingly, EBIT is defined as earnings from
continuing operations before net financial expenses (income) and income taxes. Refer to Section 13.3 for a
reconciliation of EBIT to net income (loss) from continuing operations as determined under IFRS.
EBITDA is defined as earnings from continuing operations before net financial expenses (income), income taxes,
depreciation and amortization. As such, this financial measure allows comparability of operating results from one
period to another by excluding the effects of items that are usually associated with investing and financing
activities. Refer to Section 13.3 for a reconciliation of EBITDA to net income (loss) from continuing operations as
determined under IFRS.
Return on Average Shareholders’ Equity (“ROASE”) corresponds to the trailing 12-month net income (loss)
attributable to SNC-Lavalin shareholders, divided by a trailing 13-month average equity attributable to
SNC‑Lavalin shareholders, excluding “other components of equity”. The Company excludes “other components of
equity” because this element of equity results in part from the translation into Canadian dollars of its foreign
operations having a different functional currency, and from the accounting treatment of cash flow hedges,
including its accumulated share of other comprehensive income (loss) of investments accounted for by the equity
method. These amounts are not representative of the way the Company evaluates the management of its foreign
currency risk and interest risk. The Company believes that this financial measure is useful to compare its
profitability to a measure of equity that excludes certain elements prone to volatility.
Segment Adjusted EBIT consists of revenues allocated to the applicable segment less i) direct costs of activities,
ii) directly related selling, general and administrative expenses, and iii) corporate selling, general and
administrative expenses that are allocated to segments. Segment Adjusted EBIT is the measure used by
management to evaluate the performance of the Company’s segments, and gives investors an indication of the
profitability of each segment, as it excludes certain items that the Company believes are not reflective of the
segment’s underlying operations. Such financial measure also facilitates period-to-period comparisons of the
underlying segment’s performance. Expenses that are not allocated to the Company’s segments are: certain
corporate selling, general and administrative expenses that are not directly related to projects or segments,
impairment loss arising from expected credit losses, gain (loss) arising on financial assets (liabilities) at fair value
through profit or loss, restructuring costs, acquisition-related costs and integration costs, amortization of intangible
assets related to business combinations, the federal charges settlement (PPSC) expense and gains (losses) on
disposals of PS&PM businesses and Capital investments (or adjustments to gains or losses on such disposals),
impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost to
sell, net financial expenses and income taxes. Also, it should be noted that the following adjustment was removed
from the list of adjustments disclosed in prior periods as there was no adjustment of this nature in the current
periods and the previous year: the net expense for the 2012 class action lawsuit settlement and related legal
costs. Furthermore, impairment of goodwill and impairment of intangible assets related to business combinations
were removed in 2020 from the list of adjustments disclosed in prior periods as the impact of these elements for
2019 were related to discontinued operations. See the reconciliation of total Segment Adjusted EBIT to net
income (loss) in Section 4. A reconciliation of Segment Adjusted EBIT from PS&PM and from Capital to net
income (loss) as determined under IFRS is also presented in Note 4 to the 2020 Annual Financial Statements.
Segment Adjusted EBITDA is a supplemental measure derived from Segment Adjusted EBIT and used by
management to evaluate the performance of the Company’s segments but excluding certain items related to
investing activities, through the exclusion of depreciation and amortization from direct costs of activities.
Management believes that this measure is used by certain securities analysts and investors when comparing the
Company’s performance against competitors. See the reconciliation of Segment Adjusted EBITDA to Segment
Adjusted EBIT in Section 13.3, whereas the Segment Adjusted EBIT is reconciled to net income (loss) in
Section 4.
Segment Adjusted EBIT to revenue ratio and Segment Adjusted EBITDA to revenue ratio are two measures
used to analyze the profitability of the Company’s segments and facilitate period-to-period comparisons, as well
as comparison with peers. These financial measures are calculated by dividing the amount of Segment Adjusted
EBIT (Segment Adjusted EBITDA) of a given period to the amount of revenue for the same period.
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SNC-Lavalin 2020 Financial Report SNC-LAVALIN
13.2 Liquidity
Days Sales Outstanding (“DSO”) for the EDPM segment corresponds to the average number of days needed
to convert the trade receivables and contract assets of the EDPM segment, all using a 12 month average balance;
the result is then divided by the 12 month average revenue of the segment and multiplied by 365 days, in order to
calculate a number of days. The Company tracks this metric closely to ensure timely collection and healthy
liquidity from the EDPM segment. The Company believes this measure is useful to investors as it demonstrates
this segment’s ability to timely convert its earned revenue into cash.
Net recourse debt (or Cash net of recourse debt) corresponds to cash and cash equivalents, less cash and
cash equivalents from Capital investments accounted for by the consolidation method and the Company’s
recourse debt. It provides a view of the Company’s liquidity compared to its indebtedness, excluding the liquidity
and debt of non-recourse financing. As such, it is believed to be helpful when analyzing the Company’s liquidity.
Refer to Section 8.5 for a reconciliation of Cash net of recourse debt (or Net recourse debt) to cash and cash
equivalents as determined under IFRS.
Working capital corresponds to the amount of the Company’s total current assets minus its total current liabilities
and the Current ratio corresponds to the Company’s total current assets divided by its total current liabilities.
Both measures are used to compare the Company’s current assets with its current liabilities and are believed to
be useful metrics in analyzing the Company’s liquidity.
SNC-LAVALIN
13.3 Reconciliations
The tables below provide a quantitative reconciliation between certain non-IFRS measures to the most
comparable measure specified under IFRS:
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
Restructuring costs
$
23.0 $
— $
23.0 $
17.4 $
— $
17.4
Net income (loss)
Less:
Discontinued operations
Non-controlling interests
Net income (loss) attributable to
SNC-Lavalin shareholders
from continuing operations
Adjustments (net of income taxes):
Amortization of intangible assets related to
business combination
Adjustment on gain from disposal of a Capital
investment
Federal charges settlement (PPSC)
GMP Equalization
Loss from adjustment on disposals of PS&PM
Adjustment to provision for the Pyrrhotite Case
businesses
litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
Adjusted net income (loss) attributable to
SNC-Lavalin shareholders
Diluted EPS
from continuing operations (in $)
Adjustments (net of income taxes):
Amortization of intangible assets related to
business combinations
Adjustment on gain from disposal of a Capital
investment
Federal charges settlement (PPSC)
GMP Equalization
Loss from adjustment on disposals of PS&PM
Adjustment to provision for the Pyrrhotite Case
businesses
litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$
(732.9) $
33.5 $
(699.5) $
(306.5) $
17.5 $
(289.0)
(379.8)
3.3
—
—
(379.8)
3.3
(112.7)
3.9
—
—
(112.7)
3.9
$
(356.4) $
33.5 $
(322.9) $
(197.7) $
17.5 $
(180.2)
18.9
—
18.9
32.4
—
32.4
(25.0)
(25.0)
—
—
3.2
—
36.6
257.3
—
0.1
—
—
—
3.2
—
36.6
6.1
—
—
—
—
—
1.8
—
—
—
—
1.8
257.3
—
0.1
—
—
6.1
—
—
$
(268.7) $
8.5 $
(260.2) $
109.6 $
19.3 $
128.9
$
(2.03) $
0.19 $
(1.84) $
(1.13) $
0.10 $
(1.03)
0.11
—
0.11
0.18
—
0.18
—
(0.14)
(0.14)
—
0.01
—
0.02
—
0.21
—
—
—
—
—
0.02
—
0.21
0.03
—
0.03
1.47
—
—
—
—
—
—
—
—
—
0.01
1.47
—
—
—
—
Restructuring costs
$
0.13 $
— $
0.13 $
0.10 $
— $
0.10
Adjusted diluted EPS
$
(1.53) $
0.05 $
(1.48) $
0.62 $
0.11 $
0.73
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
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161
SNC-LAVALIN
13.2 Liquidity
Days Sales Outstanding (“DSO”) for the EDPM segment corresponds to the average number of days needed
to convert the trade receivables and contract assets of the EDPM segment, all using a 12 month average balance;
the result is then divided by the 12 month average revenue of the segment and multiplied by 365 days, in order to
calculate a number of days. The Company tracks this metric closely to ensure timely collection and healthy
liquidity from the EDPM segment. The Company believes this measure is useful to investors as it demonstrates
this segment’s ability to timely convert its earned revenue into cash.
Net recourse debt (or Cash net of recourse debt) corresponds to cash and cash equivalents, less cash and
cash equivalents from Capital investments accounted for by the consolidation method and the Company’s
recourse debt. It provides a view of the Company’s liquidity compared to its indebtedness, excluding the liquidity
and debt of non-recourse financing. As such, it is believed to be helpful when analyzing the Company’s liquidity.
Refer to Section 8.5 for a reconciliation of Cash net of recourse debt (or Net recourse debt) to cash and cash
equivalents as determined under IFRS.
Working capital corresponds to the amount of the Company’s total current assets minus its total current liabilities
and the Current ratio corresponds to the Company’s total current assets divided by its total current liabilities.
Both measures are used to compare the Company’s current assets with its current liabilities and are believed to
be useful metrics in analyzing the Company’s liquidity.
SNC-LAVALIN
13.3 Reconciliations
The tables below provide a quantitative reconciliation between certain non-IFRS measures to the most
comparable measure specified under IFRS:
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
Net income (loss)
Less:
Discontinued operations
Non-controlling interests
Net income (loss) attributable to
SNC-Lavalin shareholders
from continuing operations
Adjustments (net of income taxes):
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$
(732.9) $
33.5 $
(699.5) $
(306.5) $
17.5 $
(289.0)
(379.8)
3.3
—
—
(379.8)
3.3
(112.7)
3.9
—
—
(112.7)
3.9
$
(356.4) $
33.5 $
(322.9) $
(197.7) $
17.5 $
(180.2)
Restructuring costs
$
23.0 $
— $
23.0 $
17.4 $
— $
17.4
Amortization of intangible assets related to
business combination
Adjustment on gain from disposal of a Capital
investment
Federal charges settlement (PPSC)
GMP Equalization
Loss from adjustment on disposals of PS&PM
businesses
Adjustment to provision for the Pyrrhotite Case
litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
Adjusted net income (loss) attributable to
SNC-Lavalin shareholders
Diluted EPS
from continuing operations (in $)
Adjustments (net of income taxes):
Restructuring costs
Amortization of intangible assets related to
business combinations
Adjustment on gain from disposal of a Capital
investment
Federal charges settlement (PPSC)
GMP Equalization
Loss from adjustment on disposals of PS&PM
businesses
Adjustment to provision for the Pyrrhotite Case
litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
18.9
—
18.9
32.4
—
32.4
(25.0)
(25.0)
—
—
3.2
—
36.6
257.3
—
0.1
—
—
—
3.2
—
36.6
6.1
—
—
—
—
—
1.8
—
—
—
—
1.8
257.3
—
0.1
—
—
6.1
—
—
$
(268.7) $
8.5 $
(260.2) $
109.6 $
19.3 $
128.9
$
(2.03) $
0.19 $
(1.84) $
(1.13) $
0.10 $
(1.03)
$
0.13 $
— $
0.13 $
0.10 $
— $
0.10
0.11
—
0.11
0.18
—
0.18
—
(0.14)
(0.14)
—
0.01
—
0.02
—
0.21
—
—
—
—
—
0.02
—
0.21
0.03
—
0.03
1.47
—
—
—
—
—
—
—
—
—
0.01
1.47
—
—
—
—
Adjusted diluted EPS
$
(1.53) $
0.05 $
(1.48) $
0.62 $
0.11 $
0.73
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
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SNC-Lavalin 2020 Financial Report
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
Net income (loss) from continuing operations $
(353.1)
$
33.5 $
(319.7)
$
(193.8)
$
17.5 $
(176.3)
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
Net financial expenses
Income taxes
EBIT
Depreciation and amortization
Amortization of intangible assets
related to business combinations
EBITDA
(as % of Revenues)
Restructuring costs
Acquisition-related costs and
integration costs
3.9
(0.3)
27.5
(80.5)
24.0
11.0
4.4
4.0
28.4
15.0
$
$
$
$
37.0 $
(372.7)
— $
48.8
$
$
(158.8)
43.6
$
$
25.9 $
(132.9)
0.1 $
43.7
—
23.2
40.0
—
40.0
$
(337.8)
$
37.1 $
(300.7)
$
(75.2)
$
25.9 $
(49.2)
(20.2) %
N/A
(17.7) %
(3.9) %
$
31.8
$
— $
31.8
$
23.0
$
N/A
(2.5) %
— $
23.0
—
—
0.1
—
0.1
Adjustment on gain from disposal of a Capital
investment
Federal charges settlement (PPSC)
Loss from adjustment on disposals of
PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite
Case litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for
sale to fair value less cost to sell
(25.0)
(25.0)
—
—
—
—
—
—
4.0
48.3
—
257.3
0.1
—
—
—
—
—
—
—
—
—
257.3
0.1
—
—
Adjusted EBITDA
(as % of Revenues)
$
(247.6)
$
12.1 $
(235.5)
$
205.3
$
25.9 $
231.2
(14.8) %
N/A
(13.9) %
10.6 %
N/A
11.8 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
6.1
—
6.1
—
—
23.6
(80.2)
(409.7)
48.8
23.2
—
—
—
—
4.0
48.3
SNC-LAVALIN
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
Net income (loss)
Less:
Discontinued operations
Non-controlling interests
Net income (loss) attributable to
SNC-Lavalin shareholders
from continuing operations
Adjustments (net of income taxes):
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$ (1,001.8) $
45.6 $
(956.3) $ (2,442.2) $ 2,772.8 $
330.6
(609.3)
9.2
—
—
(609.3)
9.2
(2,112.6)
2.4
—
—
(2,112.6)
2.4
$
(401.7) $
45.6 $
(356.1) $
(332.0) $ 2,772.8 $ 2,440.8
Restructuring costs
$
49.4 $
— $
59.8 $
2.5 $
—
103.5
—
—
49.4 $
—
5.9
103.5
131.6
—
—
62.4
5.9
131.6
Acquisition-related costs and integration costs
Amortization of intangible assets related to
business combination
Gain or adjustment on gain from disposal of a
Capital investment
Financing costs related to the agreement to
sell shares of Highway 407 ETR
Fair value revaluation of Highway 407 ETR
contingent consideration receivable
Federal charges settlement (PPSC)
Loss on disposals of PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite Case
litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
Adjusted net income (loss) attributable to
SNC-Lavalin shareholders
Diluted EPS
from continuing operations (in $)
Adjustments (net of income taxes):
Acquisition-related costs and integration costs
Amortization of intangible assets related to
business combinations
Gain or adjustment on gain from disposal of a
Capital investment
Financing costs related to the agreement to
sell shares of Highway 407 ETR
Fair value revaluation of Highway 407 ETR
contingent consideration receivable
Federal charges settlement (PPSC)
Loss on disposals of PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite Case
litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
—
(25.0)
(25.0)
—
(2,586.0)
(2,586.0)
—
—
—
27.4
—
27.4
—
—
7.5
3.2
43.6
49.6
49.6
—
—
—
—
—
—
7.5
3.2
43.6
257.3
0.3
—
—
—
—
—
—
—
6.1
—
6.1
—
—
—
257.3
0.3
—
—
—
$
(188.4) $
70.2 $
(118.2) $
150.2 $
189.4 $
339.7
$
(2.29) $
0.26 $
(2.03) $
(1.89) $
15.79 $
13.90
—
0.59
—
—
0.28 $
—
0.59
0.34 $
0.01 $
0.03
0.75
—
—
0.36
0.03
0.75
—
(0.14)
(0.14)
—
(14.73)
(14.73)
—
—
—
0.16
—
0.16
—
0.28
—
0.04
0.02
0.25
—
—
—
—
0.28
—
0.04
0.02
0.25
—
1.47
—
—
—
—
—
—
—
—
0.03
—
0.03
—
—
—
1.47
—
—
—
—
Restructuring costs
$
0.28 $
— $
Adjusted diluted EPS
$
(1.07) $
0.40 $
(0.67) $
0.86 $
1.08 $
1.93
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
162
162
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
163
SNC-LAVALIN
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
Restructuring costs
$
49.4 $
— $
49.4 $
59.8 $
2.5 $
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$ (1,001.8) $
45.6 $
(956.3) $ (2,442.2) $ 2,772.8 $
330.6
(609.3)
9.2
—
—
(609.3)
(2,112.6)
9.2
2.4
—
—
(2,112.6)
2.4
$
(401.7) $
45.6 $
(356.1) $
(332.0) $ 2,772.8 $ 2,440.8
—
103.5
—
—
—
5.9
103.5
131.6
—
—
—
(25.0)
(25.0)
—
(2,586.0)
(2,586.0)
—
—
—
27.4
—
27.4
—
—
7.5
3.2
43.6
49.6
49.6
—
—
—
—
—
—
7.5
3.2
43.6
257.3
0.3
—
—
—
—
—
—
—
6.1
—
6.1
—
—
$
(188.4) $
70.2 $
(118.2) $
150.2 $
189.4 $
339.7
$
(2.29) $
0.26 $
(2.03) $
(1.89) $
15.79 $
13.90
—
0.59
—
—
—
0.59
0.03
0.75
—
—
—
(0.14)
(0.14)
—
(14.73)
(14.73)
—
—
—
0.16
—
0.16
—
0.28
—
0.04
0.02
0.25
—
—
—
—
0.28
—
0.04
0.02
0.25
—
1.47
—
—
—
—
—
—
—
—
0.03
—
0.03
—
—
62.4
5.9
131.6
—
257.3
0.3
—
—
—
0.36
0.03
0.75
1.47
—
—
—
—
—
Net income (loss)
Less:
Discontinued operations
Non-controlling interests
Net income (loss) attributable to
SNC-Lavalin shareholders
from continuing operations
Adjustments (net of income taxes):
Acquisition-related costs and integration costs
Amortization of intangible assets related to
business combination
Gain or adjustment on gain from disposal of a
Capital investment
Financing costs related to the agreement to
sell shares of Highway 407 ETR
Fair value revaluation of Highway 407 ETR
contingent consideration receivable
Federal charges settlement (PPSC)
Loss on disposals of PS&PM businesses
GMP Equalization
litigation
Adjustment to provision for the Pyrrhotite Case
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
Adjusted net income (loss) attributable to
SNC-Lavalin shareholders
Diluted EPS
from continuing operations (in $)
Adjustments (net of income taxes):
Acquisition-related costs and integration costs
Amortization of intangible assets related to
business combinations
Gain or adjustment on gain from disposal of a
Capital investment
Financing costs related to the agreement to
sell shares of Highway 407 ETR
Fair value revaluation of Highway 407 ETR
contingent consideration receivable
Federal charges settlement (PPSC)
Loss on disposals of PS&PM businesses
GMP Equalization
litigation
Adjustment to provision for the Pyrrhotite Case
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
162
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
Adjusted diluted EPS
$
(1.07) $
0.40 $
(0.67) $
0.86 $
1.08 $
1.93
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
Restructuring costs
$
0.28 $
— $
0.28 $
0.34 $
0.01 $
Net income (loss) from continuing operations $
Net financial expenses
Income taxes
EBIT
Depreciation and amortization
Amortization of intangible assets
related to business combinations
EBITDA
(as % of Revenues)
Restructuring costs
Acquisition-related costs and
$
$
$
$
integration costs
Adjustment on gain from disposal of a Capital
investment
Federal charges settlement (PPSC)
Loss from adjustment on disposals of
PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite
Case litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for
sale to fair value less cost to sell
$
$
$
(353.1)
23.6
(80.2)
(409.7)
48.8
23.2
33.5 $
3.9
(0.3)
37.0 $
(319.7)
27.5
(80.5)
(372.7)
— $
48.8
$
$
$
(193.8)
24.0
11.0
(158.8)
43.6
$
$
$
17.5 $
4.4
4.0
25.9 $
(176.3)
28.4
15.0
(132.9)
0.1 $
43.7
—
23.2
40.0
—
40.0
(337.8)
$
37.1 $
(300.7)
$
(75.2)
$
25.9 $
(49.2)
(20.2) %
31.8
$
N/A
— $
(17.7) %
31.8
$
(3.9) %
23.0
$
N/A
— $
(2.5) %
23.0
—
—
0.1
—
0.1
—
—
—
—
4.0
48.3
(25.0)
(25.0)
—
—
—
—
—
—
4.0
48.3
—
257.3
0.1
—
—
—
—
—
—
—
—
—
257.3
0.1
—
—
—
—
6.1
—
6.1
Adjusted EBITDA
(as % of Revenues)
$
(247.6)
$
12.1 $
(235.5)
$
205.3
$
25.9 $
231.2
(14.8) %
N/A
(13.9) %
10.6 %
N/A
11.8 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
163
163
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
SNCL Engineering Services - Total
153.1 $
30.1 $
183.2 $
159.0 $
36.2 $
195.2
Total from continuing operations
(240.6) $
38.4 $
(202.2) $
208.0 $
36.0 $
244.0
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering
Services and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
SEGMENT
DEPRECIATION
AND
SEGMENT
ADJUSTED
SEGMENT
DEPRECIATION
AND
ADJUSTED EBIT
AMORTIZATION
EBITDA
ADJUSTED EBIT
AMORTIZATION
SEGMENT
ADJUSTED
EBITDA
$
84.9 $
23.0 $
107.9 $
93.4 $
28.3 $
121.7
36.2
32.0
3.6
3.5
39.8
35.5
45.4
20.3
3.1
4.8
(93.4) $
2.9 $
(90.6) $
(5.9) $
(5.8) $
(11.8)
(319.4)
5.4
(314.0)
23.4
5.6
$
(412.8) $
8.3 $
(404.6) $
17.4 $
(0.3) $
$
(259.7) $
38.3 $
(221.4) $
176.4 $
36.0 $
212.4
19.1 $
— $
19.2 $
31.5 $
0.1 $
31.6
48.4
25.1
28.9
17.2
2020
2019 (1)
SEGMENT
DEPRECIATION
AND
SEGMENT
ADJUSTED
SEGMENT
DEPRECIATION
AND
ADJUSTED EBIT
AMORTIZATION
EBITDA
ADJUSTED EBIT
AMORTIZATION
SEGMENT
ADJUSTED
EBITDA
$
302.3 $
98.6 $
400.9 $
357.8 $
112.5 $
470.3
140.1
97.2
13.8
11.1
153.9
108.3
127.6
73.5
13.1
16.0
140.7
89.5
(171.1) $
12.0 $
(159.1)
(111.2) $
10.5 $
(100.7)
(359.7)
17.5
(342.1)
(106.5)
21.5
(85.0)
(530.8) $
29.5 $
(501.3) $
(217.7) $
32.0 $
(185.7)
8.7 $
153.1 $
161.8 $
341.2 $
173.6 $
514.8
116.6 $
0.2 $
116.9 $
243.2 $
0.2 $
243.5
758.3
$
$
$
$
$
$
$
$
$
$
SNCL Engineering Services - Total
539.5 $
123.6 $
663.1 $
558.9 $
141.6 $
700.5
Total from continuing operations
125.3 $
153.3 $
278.7 $
584.4 $
173.8 $
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering
Services and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
FOURTH QUARTERS ENDED DECEMBER 31
2020
2019 (1)
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
Net income (loss) from continuing operations $
Net financial expenses
Income taxes
EBIT
Depreciation and amortization
Amortization of intangible assets
related to business combinations
EBITDA
(as % of Revenues)
Restructuring costs
Acquisition-related costs and
$
$
$
$
integration costs
Gain or adjustment on gain from disposal of a
Capital investment
Fair value revaluation of the Highway 407
ETR contingent consideration receivable
Federal charges settlement (PPSC)
Loss on disposals of PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite
Case litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
$
$
$
(392.5)
97.7
(53.4)
(348.2)
193.7
126.8
45.6 $
16.3
(5.6)
56.2 $
(346.9)
114.0
(59.0)
(292.0)
0.2 $
193.9
$
$
$
(329.6)
197.3
(82.3)
(214.7)
196.3
$
$
$
2,772.8 $ 2,443.2
215.1
310.3
3,183.3 $ 2,968.6
17.8
392.7
0.2 $
196.5
—
126.8
162.1
—
162.1
(27.8)
$
56.5 $
28.7
$
143.7
$
3,183.5 $ 3,327.2
(0.4) %
63.3
$
N/A
— $
0.4 %
2.0 %
63.3
$
76.1
$
N/A
3.6 $
43.6 %
79.7
—
—
—
—
7.5
4.0
—
—
(25.0)
(25.0)
57.2
57.2
—
—
—
—
7.5
4.0
58.3
—
58.3
6.1
—
6.1
8.3
—
—
257.3
0.3
—
—
—
—
8.3
(2,970.8)
(2,970.8)
—
—
—
—
—
—
—
257.3
0.3
—
—
—
Adjusted EBITDA
(as % of Revenues)
$
111.4
$
88.7 $
200.1
$
485.7
$
216.3 $
702.0
1.6 %
N/A
2.9 %
6.6 %
N/A
9.2 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
164
164
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
165
Net income (loss) from continuing operations $
(392.5)
$
45.6 $
(346.9)
$
(329.6)
$
2,772.8 $ 2,443.2
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
Net financial expenses
Income taxes
EBIT
Depreciation and amortization
Amortization of intangible assets
related to business combinations
EBITDA
(as % of Revenues)
Restructuring costs
Acquisition-related costs and
integration costs
Gain or adjustment on gain from disposal of a
Capital investment
Fair value revaluation of the Highway 407
ETR contingent consideration receivable
Federal charges settlement (PPSC)
Loss on disposals of PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite
Case litigation
Impairment loss on remeasurement of assets
of disposal group classified as held for sale
to fair value less cost to sell
97.7
(53.4)
(348.2)
193.7
126.8
—
—
—
—
7.5
4.0
16.3
(5.6)
114.0
(59.0)
$
$
$
$
56.2 $
(292.0)
0.2 $
193.9
$
$
197.3
(82.3)
(214.7)
196.3
$
$
17.8
392.7
215.1
310.3
3,183.3 $ 2,968.6
0.2 $
196.5
—
126.8
162.1
—
162.1
$
(27.8)
$
56.5 $
28.7
$
143.7
$
3,183.5 $ 3,327.2
(0.4) %
N/A
0.4 %
2.0 %
N/A
43.6 %
$
63.3
$
— $
63.3
$
76.1
$
3.6 $
79.7
—
—
—
8.3
(25.0)
(25.0)
(2,970.8)
(2,970.8)
57.2
57.2
—
—
—
—
7.5
4.0
58.3
—
58.3
—
—
—
—
—
—
257.3
0.3
—
—
257.3
8.3
—
—
0.3
—
—
—
Adjusted EBITDA
(as % of Revenues)
$
111.4
$
88.7 $
200.1
$
485.7
$
216.3 $
702.0
1.6 %
N/A
2.9 %
6.6 %
N/A
9.2 %
(1) Comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
6.1
—
6.1
—
—
SNC-LAVALIN
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
2020
2019 (1)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
Total from continuing operations
SEGMENT
ADJUSTED EBIT
DEPRECIATION
AND
AMORTIZATION
SEGMENT
ADJUSTED
EBITDA
SEGMENT
ADJUSTED EBIT
DEPRECIATION
AND
AMORTIZATION
SEGMENT
ADJUSTED
EBITDA
$
$
$
$
84.9 $
36.2
32.0
23.0 $
107.9 $
3.6
3.5
39.8
35.5
153.1 $
30.1 $
(93.4) $
(319.4)
(412.8) $
2.9 $
5.4
8.3 $
$
(259.7) $
38.3 $
$
$
19.1 $
(240.6) $
— $
38.4 $
183.2 $
(90.6) $
(314.0)
(404.6) $
(221.4) $
19.2 $
(202.2) $
93.4 $
45.4
20.3
28.3 $
121.7
3.1
4.8
48.4
25.1
159.0 $
36.2 $
195.2
(5.9) $
23.4
17.4 $
(5.8) $
5.6
(11.8)
28.9
(0.3) $
17.2
176.4 $
36.0 $
212.4
31.5 $
208.0 $
0.1 $
36.0 $
31.6
244.0
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering
Services and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
2020
2019 (1)
SEGMENT
ADJUSTED EBIT
DEPRECIATION
AND
AMORTIZATION
SEGMENT
ADJUSTED
EBITDA
SEGMENT
ADJUSTED EBIT
DEPRECIATION
AND
AMORTIZATION
SEGMENT
ADJUSTED
EBITDA
$
302.3 $
140.1
97.2
98.6 $
13.8
11.1
$
$
539.5 $
(171.1) $
123.6 $
12.0 $
400.9 $
153.9
108.3
663.1 $
(159.1)
357.8 $
127.6
73.5
$
$
(359.7)
(530.8) $
8.7 $
116.6 $
125.3 $
17.5
29.5 $
153.1 $
0.2 $
153.3 $
(342.1)
(501.3) $
161.8 $
116.9 $
278.7 $
(106.5)
(217.7) $
341.2 $
243.2 $
584.4 $
112.5 $
470.3
13.1
16.0
21.5
140.7
89.5
700.5
(100.7)
(85.0)
32.0 $
(185.7)
173.6 $
514.8
558.9 $
(111.2) $
141.6 $
10.5 $
243.5
Capital
758.3
Total from continuing operations
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering
0.2 $
173.8 $
$
$
Services and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
164
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
165
165
SNC-Lavalin 2020 Financial Report
SNC-LAVALIN
SNC-LAVALIN
Risks and Uncertainties
14.1 PRINCIPAL RISKS AND UNCERTAINTIES
The Company is subject to a number of risks and uncertainties in carrying out its activities. SNC-Lavalin has
measures in place to identify, monitor and, to a certain extent, mitigate such risks and uncertainties. Such
measures include, among others, the enterprise risk management program, the work performed by various
committees at the Board and management levels, as well as the enforcement of numerous policies and
procedures. Investors should carefully consider the risks and uncertainties set out below before investing in the
Company’s securities. Additional risks and/or uncertainties not currently known or that the Company currently
believes are immaterial may also impair its business, results of operations, financial condition and liquidity.
ADDITIONAL IMPACTS OF THE COVID-19 PANDEMIC
The COVID-19 global pandemic, has significantly disrupted global health, economic, market and labour conditions
and has created varying degrees of slowdowns in the global economy and recessions. The ongoing pandemic
has had and continues to have material adverse repercussions in the jurisdictions where the Company has
offices, delivers services and holds investments, and has created and continues to create significant volatility and
negative pressure on virtually all national economies as well as financial markets. At the present time the duration
or scope of the pandemic cannot be predicted and, although some impacts have materialized, it remains
challenging for the Company to accurately estimate or quantify the full scope and magnitude of the pandemic’s
impact on the Company, its business, financial condition and prospects.
On February 9, 2021, the Company announced that, due to unprecedented COVID-19 related challenges
involving lower productivity attributable to revised working conditions caused by the pandemic and supply chain
disruptions, it was taking a $90 million charge on its remaining three Canadian LSTK infrastructure projects. In
light of the ongoing uncertainty on the timing and scope of reimbursement of certain COVID-19 incremental costs,
no revenue associated with the additional COVID-19 costs was recognized by the Company for these projects in
the fourth quarter of 2020 and, until greater clarity is forthcoming, it will continue to only recognize COVID-19
expenses on the ongoing LSTK infrastructure projects. The Company believes that, in 2021, these types of
infrastructure projects may continue to represent the areas of the Company’s business that would likely be most
adversely impacted by the ongoing COVID-19 pandemic.
The COVID-19 pandemic has adversely affected, and will likely continue to adversely affect the Company’s
financial condition, liquidity, future results of operations and outlook due to, among other factors:
◦
◦
Action taken by governmental and non-governmental bodies to curtail activity in an effort to help slow the
spread of COVID-19, including the implementation of mandatory quarantines, restrictions on travel, “stay-at-
home” orders and restrictions on the types of businesses that may continue to operate and on the types of
construction projects that may continue to progress. The Company’s worldwide operations have been and will
likely continue in the near and medium terms (and possibly longer) to be disrupted to varying degrees,
including from (i) disruptions in the Company’s supply chains, (ii) project delays resulting from temporary or
partial project shutdowns, and (iii) the Company’s inability to continue or resume projects as a result of
extended or complete project shutdowns, which may, in each case, expose the Company to penalties or
sanctions under contracts, business interruption claims or even the cancellation or termination of contracts
altogether.
If the COVID-19 pandemic persists for a significant portion of 2021, it may continue to impact the health of the
Company’s personnel, partners and contractors, making it difficult to recruit, attract and retain skilled
personnel.
◦
Resumption of operations by the Company operates after previously implemented restrictive measures have
been loosened or eliminated has been and may continue to be delayed or constrained as a result of the
lingering effects of the impacts of COVID-19 on the Company’s employees, contractors, suppliers, third-party
service providers and customers. Resumption may also continue to impose an additional financial burden on
the Company as it seeks to resume projects with adequate safety measures in place, which safety measures
may not be sufficient to mitigate the risk of infection and could result in increased illness among the
Company’s employees and contractors and associated business interruption, as well as lower productivity
due to revised working conditions. The continued spread of the pandemic and further resurgences have
caused and may continue to cause the reintroduction of previously loosened or eliminated restrictions or the
imposition of new restrictions that could potentially be more onerous.
◦ Work-from-home measures implemented by the Company have impacted and may continue to impact the
productivity of certain employees. In addition, the measures implemented by the Company present
operational challenges as technology in employees’ homes may not be as robust as in the Company’s offices
and, as such, could cause the networks, information systems, applications, and other tools available to
employees to be more limited or less reliable than the Company’s in-office technology. Moreover, having a
significant portion of the Company’s workforce working remotely from non-office-based locations has led to an
increase in the number of potential points of attack and greater cybersecurity risks, including increased
phishing attacks, introduction of malware, strain on the local technology networks for remote operations, and
may cause impairment of the ability to perform critical functions. The Company could also face legal,
reputational and financial risks if it fails to protect data from security breaches or cyberattacks.
◦
Having to systemically deal with, manage and implement a coherent response to the COVID-19 pandemic
could divert management’s attention from the Company’s key strategic priorities, increase costs as the
Company prioritizes health and safety matters and complies with mitigation measures imposed upon it for the
benefit of its personnel and the continuation of ongoing projects, and cause the Company to reduce, delay,
alter or abandon initiatives that may otherwise increase its long-term value.
◦
Public perception of the risks associated with the COVID-19 pandemic have caused, and may continue to
cause, a decrease in demand for the Company’s services and worsening economic conditions.
While the Company (i) has entered into a strategic alliance with key technology partners to provide a digital
collaboration platform, which the Company’s workforce may access from home or other remote locations to
ensure that high levels of project delivery are maintained, (ii) has been awarded work as a result of the COVID-19
situation, and (iii) continues to bid and be awarded work on similar projects and has made efforts to manage and
mitigate the aforementioned risk factors, such efforts may not sufficiently mitigate the negative impacts of
COVID-19 on the business and the effectiveness of these efforts and the extent to which the COVID-19 pandemic
affects the Company’s business will depend on factors beyond its control, including all of the factors listed above,
as well as other elements of uncertainty. Even after the COVID-19 pandemic begins to wane, the Company may
continue to experience material adverse effects to its business, financial condition and prospects as a result of the
continued disruption in the global economy and any resulting recession, the effects of which may persist beyond
that time and which may not be fully reflected in our results of operations until future periods.
The COVID-19 pandemic may also have the effect of heightening other risks and uncertainties disclosed and
described below in the “Risks and Uncertainties” section of this MD&A.
RISKS RELATING TO THE COMPANY’S OPERATIONS
Execution of the strategic direction announced in 2019
On July 22, 2019, the Company announced that it would be focusing on the high-performing and growth areas of
the business and that it was exiting LSTK construction contracting.
There can be no assurance that this strategy will succeed, in whole or in part. Implementation of this plan
presents various managerial, organizational, administrative, operational and other challenges, and the Company’s
organizational, administrative and operational systems may require adjustments in order to appropriately
implement this strategic direction.
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Risks and Uncertainties
14.1 PRINCIPAL RISKS AND UNCERTAINTIES
The Company is subject to a number of risks and uncertainties in carrying out its activities. SNC-Lavalin has
measures in place to identify, monitor and, to a certain extent, mitigate such risks and uncertainties. Such
measures include, among others, the enterprise risk management program, the work performed by various
committees at the Board and management levels, as well as the enforcement of numerous policies and
procedures. Investors should carefully consider the risks and uncertainties set out below before investing in the
Company’s securities. Additional risks and/or uncertainties not currently known or that the Company currently
believes are immaterial may also impair its business, results of operations, financial condition and liquidity.
ADDITIONAL IMPACTS OF THE COVID-19 PANDEMIC
The COVID-19 global pandemic, has significantly disrupted global health, economic, market and labour conditions
and has created varying degrees of slowdowns in the global economy and recessions. The ongoing pandemic
has had and continues to have material adverse repercussions in the jurisdictions where the Company has
offices, delivers services and holds investments, and has created and continues to create significant volatility and
negative pressure on virtually all national economies as well as financial markets. At the present time the duration
or scope of the pandemic cannot be predicted and, although some impacts have materialized, it remains
challenging for the Company to accurately estimate or quantify the full scope and magnitude of the pandemic’s
impact on the Company, its business, financial condition and prospects.
On February 9, 2021, the Company announced that, due to unprecedented COVID-19 related challenges
involving lower productivity attributable to revised working conditions caused by the pandemic and supply chain
disruptions, it was taking a $90 million charge on its remaining three Canadian LSTK infrastructure projects. In
light of the ongoing uncertainty on the timing and scope of reimbursement of certain COVID-19 incremental costs,
no revenue associated with the additional COVID-19 costs was recognized by the Company for these projects in
the fourth quarter of 2020 and, until greater clarity is forthcoming, it will continue to only recognize COVID-19
expenses on the ongoing LSTK infrastructure projects. The Company believes that, in 2021, these types of
infrastructure projects may continue to represent the areas of the Company’s business that would likely be most
adversely impacted by the ongoing COVID-19 pandemic.
The COVID-19 pandemic has adversely affected, and will likely continue to adversely affect the Company’s
financial condition, liquidity, future results of operations and outlook due to, among other factors:
◦
Action taken by governmental and non-governmental bodies to curtail activity in an effort to help slow the
spread of COVID-19, including the implementation of mandatory quarantines, restrictions on travel, “stay-at-
home” orders and restrictions on the types of businesses that may continue to operate and on the types of
construction projects that may continue to progress. The Company’s worldwide operations have been and will
likely continue in the near and medium terms (and possibly longer) to be disrupted to varying degrees,
including from (i) disruptions in the Company’s supply chains, (ii) project delays resulting from temporary or
partial project shutdowns, and (iii) the Company’s inability to continue or resume projects as a result of
extended or complete project shutdowns, which may, in each case, expose the Company to penalties or
sanctions under contracts, business interruption claims or even the cancellation or termination of contracts
◦
If the COVID-19 pandemic persists for a significant portion of 2021, it may continue to impact the health of the
Company’s personnel, partners and contractors, making it difficult to recruit, attract and retain skilled
altogether.
personnel.
◦
Resumption of operations by the Company operates after previously implemented restrictive measures have
been loosened or eliminated has been and may continue to be delayed or constrained as a result of the
lingering effects of the impacts of COVID-19 on the Company’s employees, contractors, suppliers, third-party
service providers and customers. Resumption may also continue to impose an additional financial burden on
the Company as it seeks to resume projects with adequate safety measures in place, which safety measures
may not be sufficient to mitigate the risk of infection and could result in increased illness among the
Company’s employees and contractors and associated business interruption, as well as lower productivity
due to revised working conditions. The continued spread of the pandemic and further resurgences have
caused and may continue to cause the reintroduction of previously loosened or eliminated restrictions or the
imposition of new restrictions that could potentially be more onerous.
◦ Work-from-home measures implemented by the Company have impacted and may continue to impact the
productivity of certain employees. In addition, the measures implemented by the Company present
operational challenges as technology in employees’ homes may not be as robust as in the Company’s offices
and, as such, could cause the networks, information systems, applications, and other tools available to
employees to be more limited or less reliable than the Company’s in-office technology. Moreover, having a
significant portion of the Company’s workforce working remotely from non-office-based locations has led to an
increase in the number of potential points of attack and greater cybersecurity risks, including increased
phishing attacks, introduction of malware, strain on the local technology networks for remote operations, and
may cause impairment of the ability to perform critical functions. The Company could also face legal,
reputational and financial risks if it fails to protect data from security breaches or cyberattacks.
◦
◦
Having to systemically deal with, manage and implement a coherent response to the COVID-19 pandemic
could divert management’s attention from the Company’s key strategic priorities, increase costs as the
Company prioritizes health and safety matters and complies with mitigation measures imposed upon it for the
benefit of its personnel and the continuation of ongoing projects, and cause the Company to reduce, delay,
alter or abandon initiatives that may otherwise increase its long-term value.
Public perception of the risks associated with the COVID-19 pandemic have caused, and may continue to
cause, a decrease in demand for the Company’s services and worsening economic conditions.
While the Company (i) has entered into a strategic alliance with key technology partners to provide a digital
collaboration platform, which the Company’s workforce may access from home or other remote locations to
ensure that high levels of project delivery are maintained, (ii) has been awarded work as a result of the COVID-19
situation, and (iii) continues to bid and be awarded work on similar projects and has made efforts to manage and
mitigate the aforementioned risk factors, such efforts may not sufficiently mitigate the negative impacts of
COVID-19 on the business and the effectiveness of these efforts and the extent to which the COVID-19 pandemic
affects the Company’s business will depend on factors beyond its control, including all of the factors listed above,
as well as other elements of uncertainty. Even after the COVID-19 pandemic begins to wane, the Company may
continue to experience material adverse effects to its business, financial condition and prospects as a result of the
continued disruption in the global economy and any resulting recession, the effects of which may persist beyond
that time and which may not be fully reflected in our results of operations until future periods.
The COVID-19 pandemic may also have the effect of heightening other risks and uncertainties disclosed and
described below in the “Risks and Uncertainties” section of this MD&A.
RISKS RELATING TO THE COMPANY’S OPERATIONS
Execution of the strategic direction announced in 2019
On July 22, 2019, the Company announced that it would be focusing on the high-performing and growth areas of
the business and that it was exiting LSTK construction contracting.
There can be no assurance that this strategy will succeed, in whole or in part. Implementation of this plan
presents various managerial, organizational, administrative, operational and other challenges, and the Company’s
organizational, administrative and operational systems may require adjustments in order to appropriately
implement this strategic direction.
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The strategic direction may also be affected by various factors, notably that it will take several years for the exit
from LSTK construction projects to be fully reflected in the Company’s backlog. Until that exit is completed by the
run-off or transfer of existing LSTK construction projects, the Company may experience losses resulting from the
risks inherent in such projects. In addition, it may be necessary for the Company to accept change orders under
existing LSTK construction contracts, which may temporarily extend the performance timeframe of such contracts
and increase or prolong the Company’s financial and legal exposure under the relevant projects as a result
thereof.
If the Company is unable to successfully execute on any or all of the initiatives contemplated under its strategic
direction, the Company's revenues, operating results and profitability may be adversely affected. Even if the
Company successfully implements this strategic direction, there can be no guarantee that it will achieve its
intended objectives of improved revenues, operating results and/or profitability. Modifications to this strategic
direction may also be required to achieve such objectives, which could delay or temporarily pause its
implementation.
In July 2020 and in furtherance of the strategic direction announced in July 2019, the Company announced that it
would be transforming its Resources Business to focus on a Services offering in a limited number of existing
primary markets, which complement the Company’s broader engineering services capabilities and strategy. The
new Resources Services business provides a targeted service offering to customers focused on engineering
consulting, project management services, and advising on construction management in the energy, mining and
metallurgy sectors. On February 9, 2021, the Company announced that it entered into a binding agreement to sell
its Resources Oil & Gas business with a targeted closing in the second quarter of 2021.
Significant decreases in the demand for oil and natural gas have had, and may well continue to have, an adverse
impact on the demand for the Company’s services in its Oil and Gas business, as customers in the oil and gas
sector continue to revise their capital budgets downwards and adjust their operations in response to uncertain
market conditions and unstable commodity prices. In addition, the volatility in the oil and natural gas markets may
pose liquidity challenges for the Company’s Oil and Gas business as its customers in the oil and gas sector may
seek to delay, defer, restructure or stop payments in connection with their own liquidity issues, restructuring or
creditor protection actions.
Fixed-price contracts or the Company’s failure to meet contractual schedule, performance requirements
or to execute projects efficiently
While the Company is in the process of exiting LSTK construction contracting, a significant portion of the
Company’s backlog and revenues remains dependent on fixed-price contracts. The Company bears the risk for
cost overruns from fixed-price contracts. Contract revenues and costs are established, in part, based on estimates
which are subject to a number of assumptions, such as those regarding future economic conditions, productivity,
performance of the Company’s employees and of subcontractors or equipment suppliers, price, inflation,
availability of labour, equipment and materials and other requirements that may affect project costs or schedule,
such as obtaining the required environmental permits and approvals on a timely basis. Cost overruns may also
occur when unforeseen circumstances arise. In addition, reimbursable contracts such as unit-rate contracts for
which a fixed amount per quantity is charged to the customer and reimbursable contracts with a cap bear some
risks that are similar to those related to fixed-price contracts, as the estimates used to establish the contract
unit‑rate and/or the contractual cap are also subject to the assumptions listed above.
Furthermore, should the Company experience difficulties in the execution of projects due to various factors, such
as a lack of efficiency in the implementation of its processes, failure to accurately estimate project costs and/or
conclude strategic transactions pertaining to project resources, such difficulties could have an adverse impact on
the Company’s financial results from these projects.
If cost overruns occur, the Company could experience reduced profits or, in some cases, a loss for that project. A
significant cost overrun can occur on both large and smaller contracts or projects. If a large cost overrun occurs,
or if cost overruns occur on multiple projects, such cost overruns could increase the unpredictability and volatility
of the Company’s profitability as well as have a material adverse impact on its business.
In addition, in certain instances, SNC-Lavalin may guarantee a client that it will complete a project by a scheduled
date or that a facility will achieve certain performance standards. As such, SNC-Lavalin may incur additional costs
should the project or facility subsequently fail to meet the scheduled completion date or performance standards. A
project’s revenues could also be reduced in the event the Company is required to pay liquidated damages or in
connection with contractual penalty provisions, which can be substantial and can accrue on a daily basis.
Remaining performance obligations
The Company’s remaining performance obligations are derived from contract awards that are considered firm or
management’s estimates of revenues to be generated from firm contract awards for reimbursable contracts, thus
an indication of expected future revenues. Project delays, suspensions, terminations, cancellations or reductions
in scope do occur from time to time in the Company’s industry due to considerations beyond the control of
SNC‑Lavalin and may have a material impact on the amount of reported remaining performance obligations with a
corresponding adverse impact on future revenues and profitability. In addition, a number of project contracts,
particularly in the Resources and Infrastructure EPC segments, have warranty periods and/or outstanding claims,
that may result in legal proceedings extending for considerable periods of time beyond the actual performance
and completion of the projects. Furthermore, many of the Company’s contracts contain “termination for
convenience” provisions, which permit the client to terminate or cancel the contract at its convenience upon
providing the Company with notice a specified period of time before the termination date and/or paying the
Company equitable compensation, depending on the specific contract terms. In the event a significant number of
the Company’s clients were to avail themselves of such “termination for convenience” provisions, or if one or more
significant contracts were terminated for convenience, the Company’s reported remaining performance obligations
would be adversely affected with a corresponding adverse impact on expected future revenues and profitability.
Contract awards and timing
Obtaining new contract awards, which is a key component for the sustainability of revenues, EBITDA and net
income, is increasingly difficult in a competitive environment. The timing of when project awards will be made is
unpredictable and outside of the Company’s control. SNC-Lavalin operates in highly competitive markets where it
is difficult to predict whether and when it will receive awards since these awards and projects often involve
complex and lengthy negotiations and bidding processes. These processes can be impacted by a wide variety of
factors including governmental approvals, financing contingencies, commodity prices, environmental conditions
and overall market and economic conditions. In addition, the Company may not win contracts that it has bid upon
due to price, a client's perception of the Company’s reputation, ability to perform and/or perceived technology or
other advantages held by competitors. SNC-Lavalin’s competitors may be more inclined to take greater or
unusual risks or accept terms and conditions in a contract that the Company might not otherwise deem market or
acceptable. Because a significant portion of the Company’s revenue is generated from large projects, the
Company’s results of operations can fluctuate from quarter to quarter and year to year depending on whether and
when project awards occur and the commencement and progress of work under awarded contracts. As a result,
SNC-Lavalin is subject to the risk of losing new awards to competitors or the risk that revenue may not be derived
from awarded projects as quickly as anticipated. Furthermore, the Company may incur significant costs in order to
bid on projects that may not be awarded to the Company, thus resulting in expenses that did not generate any
profit for the Company.
In addition, fluctuating demand cycles are common in the engineering and construction industries and can have a
significant impact on the degree of competition for available projects and the awarding of new contracts. As such,
fluctuations in the demand for engineering and construction services or the ability of the private and/or public
sector to fund projects in a depressed economic climate could adversely affect the awarding of new contracts and
margin and thus SNC-Lavalin’s results. Given the cyclical nature of the engineering and construction industries,
the financial results of SNC-Lavalin, like others in such industries, may be impacted in any given period by a wide
variety of factors beyond its control, and as a result there may, from time to time, be significant and unpredictable
variations in the Company’s quarterly and annual financial results.
SNC-Lavalin’s estimates of future performance depend on, among other matters, whether and when the
Company will receive certain new contract awards, including the extent to which the Company utilizes its
workforce. The rate at which SNC-Lavalin utilizes its workforce is impacted by a variety of factors including: the
Company’s ability to manage attrition; the Company’s ability to forecast its need for services which in turn allows
the Company to maintain an appropriately sized workforce; the Company’s ability to transition employees from
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The strategic direction may also be affected by various factors, notably that it will take several years for the exit
from LSTK construction projects to be fully reflected in the Company’s backlog. Until that exit is completed by the
run-off or transfer of existing LSTK construction projects, the Company may experience losses resulting from the
risks inherent in such projects. In addition, it may be necessary for the Company to accept change orders under
existing LSTK construction contracts, which may temporarily extend the performance timeframe of such contracts
and increase or prolong the Company’s financial and legal exposure under the relevant projects as a result
thereof.
If the Company is unable to successfully execute on any or all of the initiatives contemplated under its strategic
direction, the Company's revenues, operating results and profitability may be adversely affected. Even if the
Company successfully implements this strategic direction, there can be no guarantee that it will achieve its
intended objectives of improved revenues, operating results and/or profitability. Modifications to this strategic
direction may also be required to achieve such objectives, which could delay or temporarily pause its
implementation.
In July 2020 and in furtherance of the strategic direction announced in July 2019, the Company announced that it
would be transforming its Resources Business to focus on a Services offering in a limited number of existing
primary markets, which complement the Company’s broader engineering services capabilities and strategy. The
new Resources Services business provides a targeted service offering to customers focused on engineering
consulting, project management services, and advising on construction management in the energy, mining and
metallurgy sectors. On February 9, 2021, the Company announced that it entered into a binding agreement to sell
its Resources Oil & Gas business with a targeted closing in the second quarter of 2021.
Significant decreases in the demand for oil and natural gas have had, and may well continue to have, an adverse
impact on the demand for the Company’s services in its Oil and Gas business, as customers in the oil and gas
sector continue to revise their capital budgets downwards and adjust their operations in response to uncertain
market conditions and unstable commodity prices. In addition, the volatility in the oil and natural gas markets may
pose liquidity challenges for the Company’s Oil and Gas business as its customers in the oil and gas sector may
seek to delay, defer, restructure or stop payments in connection with their own liquidity issues, restructuring or
creditor protection actions.
or to execute projects efficiently
Fixed-price contracts or the Company’s failure to meet contractual schedule, performance requirements
While the Company is in the process of exiting LSTK construction contracting, a significant portion of the
Company’s backlog and revenues remains dependent on fixed-price contracts. The Company bears the risk for
cost overruns from fixed-price contracts. Contract revenues and costs are established, in part, based on estimates
which are subject to a number of assumptions, such as those regarding future economic conditions, productivity,
performance of the Company’s employees and of subcontractors or equipment suppliers, price, inflation,
availability of labour, equipment and materials and other requirements that may affect project costs or schedule,
such as obtaining the required environmental permits and approvals on a timely basis. Cost overruns may also
occur when unforeseen circumstances arise. In addition, reimbursable contracts such as unit-rate contracts for
which a fixed amount per quantity is charged to the customer and reimbursable contracts with a cap bear some
risks that are similar to those related to fixed-price contracts, as the estimates used to establish the contract
unit‑rate and/or the contractual cap are also subject to the assumptions listed above.
Furthermore, should the Company experience difficulties in the execution of projects due to various factors, such
as a lack of efficiency in the implementation of its processes, failure to accurately estimate project costs and/or
conclude strategic transactions pertaining to project resources, such difficulties could have an adverse impact on
the Company’s financial results from these projects.
If cost overruns occur, the Company could experience reduced profits or, in some cases, a loss for that project. A
significant cost overrun can occur on both large and smaller contracts or projects. If a large cost overrun occurs,
or if cost overruns occur on multiple projects, such cost overruns could increase the unpredictability and volatility
of the Company’s profitability as well as have a material adverse impact on its business.
In addition, in certain instances, SNC-Lavalin may guarantee a client that it will complete a project by a scheduled
date or that a facility will achieve certain performance standards. As such, SNC-Lavalin may incur additional costs
should the project or facility subsequently fail to meet the scheduled completion date or performance standards. A
project’s revenues could also be reduced in the event the Company is required to pay liquidated damages or in
connection with contractual penalty provisions, which can be substantial and can accrue on a daily basis.
Remaining performance obligations
The Company’s remaining performance obligations are derived from contract awards that are considered firm or
management’s estimates of revenues to be generated from firm contract awards for reimbursable contracts, thus
an indication of expected future revenues. Project delays, suspensions, terminations, cancellations or reductions
in scope do occur from time to time in the Company’s industry due to considerations beyond the control of
SNC‑Lavalin and may have a material impact on the amount of reported remaining performance obligations with a
corresponding adverse impact on future revenues and profitability. In addition, a number of project contracts,
particularly in the Resources and Infrastructure EPC segments, have warranty periods and/or outstanding claims,
that may result in legal proceedings extending for considerable periods of time beyond the actual performance
and completion of the projects. Furthermore, many of the Company’s contracts contain “termination for
convenience” provisions, which permit the client to terminate or cancel the contract at its convenience upon
providing the Company with notice a specified period of time before the termination date and/or paying the
Company equitable compensation, depending on the specific contract terms. In the event a significant number of
the Company’s clients were to avail themselves of such “termination for convenience” provisions, or if one or more
significant contracts were terminated for convenience, the Company’s reported remaining performance obligations
would be adversely affected with a corresponding adverse impact on expected future revenues and profitability.
Contract awards and timing
Obtaining new contract awards, which is a key component for the sustainability of revenues, EBITDA and net
income, is increasingly difficult in a competitive environment. The timing of when project awards will be made is
unpredictable and outside of the Company’s control. SNC-Lavalin operates in highly competitive markets where it
is difficult to predict whether and when it will receive awards since these awards and projects often involve
complex and lengthy negotiations and bidding processes. These processes can be impacted by a wide variety of
factors including governmental approvals, financing contingencies, commodity prices, environmental conditions
and overall market and economic conditions. In addition, the Company may not win contracts that it has bid upon
due to price, a client's perception of the Company’s reputation, ability to perform and/or perceived technology or
other advantages held by competitors. SNC-Lavalin’s competitors may be more inclined to take greater or
unusual risks or accept terms and conditions in a contract that the Company might not otherwise deem market or
acceptable. Because a significant portion of the Company’s revenue is generated from large projects, the
Company’s results of operations can fluctuate from quarter to quarter and year to year depending on whether and
when project awards occur and the commencement and progress of work under awarded contracts. As a result,
SNC-Lavalin is subject to the risk of losing new awards to competitors or the risk that revenue may not be derived
from awarded projects as quickly as anticipated. Furthermore, the Company may incur significant costs in order to
bid on projects that may not be awarded to the Company, thus resulting in expenses that did not generate any
profit for the Company.
In addition, fluctuating demand cycles are common in the engineering and construction industries and can have a
significant impact on the degree of competition for available projects and the awarding of new contracts. As such,
fluctuations in the demand for engineering and construction services or the ability of the private and/or public
sector to fund projects in a depressed economic climate could adversely affect the awarding of new contracts and
margin and thus SNC-Lavalin’s results. Given the cyclical nature of the engineering and construction industries,
the financial results of SNC-Lavalin, like others in such industries, may be impacted in any given period by a wide
variety of factors beyond its control, and as a result there may, from time to time, be significant and unpredictable
variations in the Company’s quarterly and annual financial results.
SNC-Lavalin’s estimates of future performance depend on, among other matters, whether and when the
Company will receive certain new contract awards, including the extent to which the Company utilizes its
workforce. The rate at which SNC-Lavalin utilizes its workforce is impacted by a variety of factors including: the
Company’s ability to manage attrition; the Company’s ability to forecast its need for services which in turn allows
the Company to maintain an appropriately sized workforce; the Company’s ability to transition employees from
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completed projects to new projects or between internal business groups; and the Company’s need to devote
resources to non-chargeable activities such as training or business development. While SNC-Lavalin’s estimates
are based upon its professional judgment, these estimates can be unreliable and may frequently change based
on newly available information. In the case of large-scale domestic and international projects where timing is often
uncertain, it is particularly difficult to predict whether and when the Company will receive a contract award. The
uncertainty of contract award timing can present difficulties in matching the Company’s workforce size with its
contract needs. If an expected contract award is delayed or not received, or if an ongoing contract is cancelled,
the Company could incur costs resulting from reductions in staff or redundancy of facilities that would have the
effect of reducing the Company’s operational efficiency, margins and profits.
Being a provider of services to government agencies
SNC-Lavalin is a provider of services to government agencies and is exposed to risks associated with
government contracting. SNC-Lavalin’s failure to comply with the terms of one or more government contracts or
government statutes and regulations could result in the Company’s contracts with government agencies being
terminated or the Company being suspended or debarred from future government projects for a significant period
of time, possible civil or criminal fines and penalties and the risk of public scrutiny of the Company’s performance,
and potential harm to its reputation, each of which could have a material adverse effect on SNC-Lavalin’s
business. Other remedies that the Company’s government clients may seek for improper activities or performance
issues include sanctions such as forfeiture of profits and suspension of payments. In addition, virtually all of the
Company’s contracts with governments contain “termination for convenience” provisions, as described in the risk
factor above entitled “Remaining performance obligations”.
Government contracts present SNC-Lavalin with other risks as well. Legislatures typically appropriate funds on a
year-by-year basis, while contract performance may take more than one year. As a result, the Company’s
contracts with government agencies may be only partially funded or may be terminated, and the Company may
not realize all of its expected potential revenues and profits from those contracts. Appropriations and the timing of
payment may be influenced by, among other things, the state of the economy, competing political priorities,
curtailments in the use of government contracting firms, budget constraints, the timing and amount of tax receipts
and the overall level of government expenditures.
International operations
Nuclear liability
A significant portion of SNC-Lavalin’s revenues are attributable to projects in international markets outside of
Canada. SNC-Lavalin’s business is dependent on the continued success of its international operations, and the
Company expects its international operations to continue to account for a significant portion of total revenues. The
Company’s international operations are subject to a variety of risks, many of which also apply to its Canadian
operations, including:
◦
◦
◦
◦
◦
◦
◦
◦
recessions and other economic crises in other regions, or specific foreign economies and the impact on the
Company’s costs of doing business in those countries;
difficulties in staffing and managing foreign operations, including logistical, security and communication
challenges;
changes in foreign government policies, laws, regulations and regulatory requirements, or the interpretation,
application and/or enforcement thereof;
difficulty or expense in enforcing contractual rights due to a lack of a developed legal system or otherwise;
renegotiation or nullification of existing contracts;
the adoption of new, and the expansion of existing, trade or other tariffs and restrictions, including those of a
retaliatory or political nature as geopolitical events unfold;
difficulties, delays and expense that may be experienced or incurred in connection with the movement and
clearance of personnel and goods through the customs and immigration authorities of multiple jurisdictions;
embargoes;
◦
◦
◦
◦
◦
◦
◦
acts of war, civil unrest, force majeure and terrorism;
social, political and economic instability;
expropriation of property;
the risk that inter-governmental relationships may deteriorate such that the Company’s operations in a given
country may be negatively impacted because the Company is head-quartered in Canada or because we carry
on business in another country;
difficulties, delays and expense that may be experienced in obtaining critical licenses, permits or the like to
carry on the Company’s business as a result of administrative processes in certain jurisdictions that differ from
those in North America;
enforcement thereof; and
Canada.
tax increases or changes in tax laws, legislation or regulation or in the interpretation, application and/or
limitations on the Company’s ability to repatriate cash, funds or capital invested or held in jurisdictions outside
To the extent SNC-Lavalin’s international or Canadian operations are affected by unexpected or adverse
economic, political and other conditions, the Company’s business, financial condition and results of operations
may be adversely affected.
In addition, the Company’s activities outside Canada expose SNC-Lavalin to foreign currency exchange risks,
which could adversely impact its operating results. The Company is particularly vulnerable to fluctuations in British
pounds, U.S. dollars and currencies pegged to U.S. dollars. While SNC-Lavalin has a hedging strategy in place to
mitigate some of the effects of certain foreign currency exposures, there can be no assurance that such hedging
strategy will be effective. Furthermore, the volatility of the Company’s financial results and cash flows could
increase if certain countries cease to peg their currencies to the U.S. dollar. The Company does not have hedging
strategies in place with respect to all currencies to which it is exposed in the conduct of its business. The
Company’s hedging strategy includes the use of forward foreign exchange contracts, which also contain an
inherent credit risk related to default on obligations by the counterparties to such contracts.
The Company’s Nuclear segment supports clients across the entire Nuclear lifecycle with the full spectrum of
services from consultancy, EPCM services, field services, technology services, spare parts, reactor support &
decommissioning and waste management. As stewards of the CANDU technology, it also provides new-build and
full refurbishment services of CANDU reactors. Such services can subject the Company to risks arising out of a
nuclear, radiological or criticality incident, whether or not within the Company’s control.
Indemnification provisions contained in the domestic legislation of the jurisdictions in which the Company’s
Nuclear segment operates, such as Canada's Nuclear Liability and Compensation Act, the United Kingdom’s
Nuclear Installations Act 1965, the United States’ Price-Anderson Act, or equivalent protections afforded under
international conventions, seek to ensure compensation for the general public, while indemnifying nuclear industry
participants against liability arising from nuclear incidents, subject to possible exclusions.
However, these legislative indemnification provisions may not apply to all liabilities incurred while performing
services as a contractor for the nuclear industry. If an incident or certain damages resulting therefrom are not
covered under applicable legislative indemnification provisions, the Company could be held liable for damages
which could have a material adverse impact on the Company’s financial condition and results of operations. In
addition to legislative indemnification provisions, the Company seeks to protect itself from liability associated with
nuclear incidents and damages resulting therefrom in its contracts, but there can be no assurance that such
contractual limitations on liability will be effective in all cases or that the Company’s or its clients’ insurance will
cover all the liabilities assumed under those contracts. The costs of defending against claims arising out of a
nuclear incident, and any damages that could be awarded as a result of such claims, could have a material
adverse impact on the Company’s financial condition and results of operations.
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completed projects to new projects or between internal business groups; and the Company’s need to devote
resources to non-chargeable activities such as training or business development. While SNC-Lavalin’s estimates
are based upon its professional judgment, these estimates can be unreliable and may frequently change based
on newly available information. In the case of large-scale domestic and international projects where timing is often
uncertain, it is particularly difficult to predict whether and when the Company will receive a contract award. The
uncertainty of contract award timing can present difficulties in matching the Company’s workforce size with its
contract needs. If an expected contract award is delayed or not received, or if an ongoing contract is cancelled,
the Company could incur costs resulting from reductions in staff or redundancy of facilities that would have the
effect of reducing the Company’s operational efficiency, margins and profits.
Being a provider of services to government agencies
SNC-Lavalin is a provider of services to government agencies and is exposed to risks associated with
government contracting. SNC-Lavalin’s failure to comply with the terms of one or more government contracts or
government statutes and regulations could result in the Company’s contracts with government agencies being
terminated or the Company being suspended or debarred from future government projects for a significant period
of time, possible civil or criminal fines and penalties and the risk of public scrutiny of the Company’s performance,
and potential harm to its reputation, each of which could have a material adverse effect on SNC-Lavalin’s
business. Other remedies that the Company’s government clients may seek for improper activities or performance
issues include sanctions such as forfeiture of profits and suspension of payments. In addition, virtually all of the
Company’s contracts with governments contain “termination for convenience” provisions, as described in the risk
factor above entitled “Remaining performance obligations”.
Government contracts present SNC-Lavalin with other risks as well. Legislatures typically appropriate funds on a
year-by-year basis, while contract performance may take more than one year. As a result, the Company’s
contracts with government agencies may be only partially funded or may be terminated, and the Company may
not realize all of its expected potential revenues and profits from those contracts. Appropriations and the timing of
payment may be influenced by, among other things, the state of the economy, competing political priorities,
curtailments in the use of government contracting firms, budget constraints, the timing and amount of tax receipts
and the overall level of government expenditures.
International operations
A significant portion of SNC-Lavalin’s revenues are attributable to projects in international markets outside of
Canada. SNC-Lavalin’s business is dependent on the continued success of its international operations, and the
Company expects its international operations to continue to account for a significant portion of total revenues. The
Company’s international operations are subject to a variety of risks, many of which also apply to its Canadian
operations, including:
recessions and other economic crises in other regions, or specific foreign economies and the impact on the
Company’s costs of doing business in those countries;
difficulties in staffing and managing foreign operations, including logistical, security and communication
challenges;
changes in foreign government policies, laws, regulations and regulatory requirements, or the interpretation,
application and/or enforcement thereof;
difficulty or expense in enforcing contractual rights due to a lack of a developed legal system or otherwise;
renegotiation or nullification of existing contracts;
the adoption of new, and the expansion of existing, trade or other tariffs and restrictions, including those of a
retaliatory or political nature as geopolitical events unfold;
difficulties, delays and expense that may be experienced or incurred in connection with the movement and
clearance of personnel and goods through the customs and immigration authorities of multiple jurisdictions;
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acts of war, civil unrest, force majeure and terrorism;
social, political and economic instability;
expropriation of property;
the risk that inter-governmental relationships may deteriorate such that the Company’s operations in a given
country may be negatively impacted because the Company is head-quartered in Canada or because we carry
on business in another country;
difficulties, delays and expense that may be experienced in obtaining critical licenses, permits or the like to
carry on the Company’s business as a result of administrative processes in certain jurisdictions that differ from
those in North America;
tax increases or changes in tax laws, legislation or regulation or in the interpretation, application and/or
enforcement thereof; and
limitations on the Company’s ability to repatriate cash, funds or capital invested or held in jurisdictions outside
Canada.
To the extent SNC-Lavalin’s international or Canadian operations are affected by unexpected or adverse
economic, political and other conditions, the Company’s business, financial condition and results of operations
may be adversely affected.
In addition, the Company’s activities outside Canada expose SNC-Lavalin to foreign currency exchange risks,
which could adversely impact its operating results. The Company is particularly vulnerable to fluctuations in British
pounds, U.S. dollars and currencies pegged to U.S. dollars. While SNC-Lavalin has a hedging strategy in place to
mitigate some of the effects of certain foreign currency exposures, there can be no assurance that such hedging
strategy will be effective. Furthermore, the volatility of the Company’s financial results and cash flows could
increase if certain countries cease to peg their currencies to the U.S. dollar. The Company does not have hedging
strategies in place with respect to all currencies to which it is exposed in the conduct of its business. The
Company’s hedging strategy includes the use of forward foreign exchange contracts, which also contain an
inherent credit risk related to default on obligations by the counterparties to such contracts.
Nuclear liability
The Company’s Nuclear segment supports clients across the entire Nuclear lifecycle with the full spectrum of
services from consultancy, EPCM services, field services, technology services, spare parts, reactor support &
decommissioning and waste management. As stewards of the CANDU technology, it also provides new-build and
full refurbishment services of CANDU reactors. Such services can subject the Company to risks arising out of a
nuclear, radiological or criticality incident, whether or not within the Company’s control.
Indemnification provisions contained in the domestic legislation of the jurisdictions in which the Company’s
Nuclear segment operates, such as Canada's Nuclear Liability and Compensation Act, the United Kingdom’s
Nuclear Installations Act 1965, the United States’ Price-Anderson Act, or equivalent protections afforded under
international conventions, seek to ensure compensation for the general public, while indemnifying nuclear industry
participants against liability arising from nuclear incidents, subject to possible exclusions.
However, these legislative indemnification provisions may not apply to all liabilities incurred while performing
services as a contractor for the nuclear industry. If an incident or certain damages resulting therefrom are not
covered under applicable legislative indemnification provisions, the Company could be held liable for damages
which could have a material adverse impact on the Company’s financial condition and results of operations. In
addition to legislative indemnification provisions, the Company seeks to protect itself from liability associated with
nuclear incidents and damages resulting therefrom in its contracts, but there can be no assurance that such
contractual limitations on liability will be effective in all cases or that the Company’s or its clients’ insurance will
cover all the liabilities assumed under those contracts. The costs of defending against claims arising out of a
nuclear incident, and any damages that could be awarded as a result of such claims, could have a material
adverse impact on the Company’s financial condition and results of operations.
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Ownership interests in investments
SNC-Lavalin holds investments, mainly through its Capital segment that acts as the Company’s investment and
asset management arm. When SNC-Lavalin holds an ownership interest in an investment, it assumes a degree of
risk associated with the financial performance of such investment. The value of the Company’s investment is
dependent on the ability of the investment to attain its revenue and cost projections as well as the ability to secure
initial and ongoing financing, which can be influenced by numerous factors, some partially beyond the Company’s
control, including, but not limited to, political or legislative changes, lifecycle maintenance, operating revenues,
collection success, cost management and the general state of the capital and/or credit markets.
The Company sometimes makes investments in project entities in which it does not hold a controlling interest.
These investments may not be subject to the same requirements regarding internal controls and internal control
over financial reporting that SNC-Lavalin follows. To the extent the controlling entity makes decisions that
negatively impact such investments or internal controls relating thereto and, consequently, problems arise within
such investments, it could have a material adverse impact on the Company’s business, financial condition and
results of operations.
The Company’s non-recourse debt from its investments can be affected by fluctuations in interest rates. A hedging
strategy is put in place when the management body of the project entity for such investment deems it appropriate.
However, the assumptions and estimates inherent to the hedging strategy could be erroneous, thus rendering the
hedging strategy ineffective or partially ineffective. Furthermore, the financial instruments associated with the
hedging strategy contain an inherent credit risk related to defaults on obligations by the counterparties to such
instruments.
In addition, many of the Company’s investments are governed by shareholder, partnership or similar joint venture
agreements or arrangements, many of which restrict the Company's ability or right to freely sell or otherwise
dispose of its investments and/or that affect the timing of any such sale or other disposition. Consequently, the
Company’s ability to efficiently or timely dispose of or monetize one or more of its investments could be limited by
such contractual arrangements, which could in turn have an adverse impact on SNC-Lavalin's liquidity or capital
resources.
Dependence on third parties
SNC-Lavalin undertakes contracts wherein it subcontracts a portion of the project or the supply of material and
equipment to third parties. If the amount the Company is required to pay for subcontractors or equipment and
supplies exceeds what was estimated, the Company may suffer losses on these contracts. If a supplier or
subcontractor fails to provide supplies, equipment or services as required under a negotiated contract for any
reason, or provides supplies, equipment or services that are not of an acceptable quality or quantity, the Company
may be required to source those supplies, equipment or services on a delayed basis or at a higher price than
anticipated, which could impact contract profitability. In addition, faulty equipment or materials could impact the
overall project, resulting in claims against SNC-Lavalin for failure to meet required project specifications. These
risks may be intensified during an economic downturn if these suppliers or subcontractors experience financial
difficulties or find it difficult to obtain sufficient financing to fund their operations or access to bonding, and are not
able to provide the services or supplies (altogether or on a timely basis) or the requisite quality or grade of
services or supplies necessary for the Company’s business. In addition, in instances where SNC-Lavalin relies on
a single contracted supplier or subcontractor or a small number of subcontractors, there can be no assurance that
the marketplace can provide these products or services on a timely basis, or at the costs the Company had
anticipated. A failure by a third-party subcontractor or supplier to comply with applicable laws, rules or regulations
could negatively impact SNC-Lavalin’s business and/or reputation and, in the case of government contracts, could
also result in fines, penalties, suspension or even debarment being imposed on the Company.
Joint ventures and partnerships
SNC-Lavalin undertakes certain contracts with joint venture partners, as a member of partnerships, and under
other similar arrangements. This situation exposes the Company to a number of risks, including the risk that its
partners may be unable or unwilling to fulfill their contractual obligations to the Company or its clients.
SNC‑Lavalin’s partners may also be unable or unwilling to provide the required levels of financial support to the
partnerships. If these circumstances occur, the Company may be required to pay financial penalties or liquidated
damages, provide additional services, or make additional investments to ensure adequate performance and
delivery of the contracted services. Under agreements with joint and several (or solidary) liabilities, SNC-Lavalin
could be liable for both its obligations and those of its partners. These circumstances could also lead to disputes
and litigation with the Company’s partners or clients, all of which could have a material adverse impact on the
Company’s reputation, business, financial condition and results of operations.
SNC-Lavalin participates in joint ventures and similar arrangements in which it is not the controlling partner. In
these cases, the Company has limited control over the actions or decisions of the joint venture. These joint
ventures may not be subject to the same requirements regarding internal controls and internal control over
financial reporting that SNC-Lavalin follows. To the extent the controlling partner makes decisions that negatively
impact the joint venture or internal control problems arise within the joint venture, it could have a material adverse
impact on the Company’s business, financial condition and results of operations.
The failure by a joint venture partner to comply with applicable laws, rules or regulations, or contract
requirements, could negatively impact SNC-Lavalin’s business and, in the case of government contracts, could
result in fines, penalties, suspension or even debarment being imposed on the Company, which could have a
material adverse impact on the Company’s reputation, business, financial condition and results of operations.
Information systems and data and compliance with privacy legislation
The integrity, reliability and security of information in all forms are critical to the Company’s daily and strategic
operations.
Cyber-attacks have become more frequent and sophisticated and the Company’s information technology and
other defences must be adequate at all times to repel them. Cyber-attacks include insertion of malware or
ransomware, hacking, industrial espionage, unauthorized access to confidential or proprietary information,
phishing or other security breaches and system disruptions. If the Company is unable to protect its information
systems, they could be interrupted, delayed or fail altogether. The Company’s information systems and operations
could also be interrupted or damaged by natural disasters, failures, acts of war or terrorism, among others.
A successful cyber-attack could harm the Company’s reputation and adversely affect its business, financial
condition and results of operations as it may lead to network failures; unauthorized access to confidential or
proprietary information about its business, assets, customers or employees; theft, loss, leakage, destruction or
corruption of data, including information about its customers or employees; physical damage to network assets;
litigation, fines and liability for failure to comply with privacy and information security laws; increased fraud; lost
revenues; the potential for loss of customers or impairment of the Company ability to attract new customers;
higher insurance premiums; and the incurrence by the Company of significant costs payable to specialist
advisors, such as forensic and external communications/public relations experts, to assist the Company in dealing
with such cyber-attacks and the consequences thereof.
In addition, cyber-attacks affecting the Company’s suppliers or other business partners could also adversely affect
the Company’s business, financial condition and results of operations.
As a company that operates globally, SNC-Lavalin is subject to a complex array of legislation designed to protect
personal and confidential information. Privacy and data protection legislation and regulations are in constant
evolution, and it is anticipated that more countries will establish personal data protection frameworks in 2021 and
beyond. The ever-changing landscape presents unique compliance challenges for SNC-Lavalin as its business
undergoes significant transformation. Presently, the European Union’s General Data Protection Regulation and
the Canadian federal Personal Information Protection and Electronic Documents Act (PIPEDA) set the global
compliance-standard for SNC-Lavalin’s personal data compliance framework. In addition, responding to the UK’s
withdrawal from the European Union (“Brexit”) has recently been a key focus for SNC-Lavalin’s data protection
and compliance efforts. The EU is currently undertaking a review of the UK’s data privacy legislative framework
before determining how freely personal data may flow across borders and thus there remains a degree of
uncertainty in relation to data transfers between the UK and EU.
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Ownership interests in investments
SNC-Lavalin holds investments, mainly through its Capital segment that acts as the Company’s investment and
asset management arm. When SNC-Lavalin holds an ownership interest in an investment, it assumes a degree of
risk associated with the financial performance of such investment. The value of the Company’s investment is
dependent on the ability of the investment to attain its revenue and cost projections as well as the ability to secure
initial and ongoing financing, which can be influenced by numerous factors, some partially beyond the Company’s
control, including, but not limited to, political or legislative changes, lifecycle maintenance, operating revenues,
collection success, cost management and the general state of the capital and/or credit markets.
The Company sometimes makes investments in project entities in which it does not hold a controlling interest.
These investments may not be subject to the same requirements regarding internal controls and internal control
over financial reporting that SNC-Lavalin follows. To the extent the controlling entity makes decisions that
negatively impact such investments or internal controls relating thereto and, consequently, problems arise within
such investments, it could have a material adverse impact on the Company’s business, financial condition and
results of operations.
The Company’s non-recourse debt from its investments can be affected by fluctuations in interest rates. A hedging
strategy is put in place when the management body of the project entity for such investment deems it appropriate.
However, the assumptions and estimates inherent to the hedging strategy could be erroneous, thus rendering the
hedging strategy ineffective or partially ineffective. Furthermore, the financial instruments associated with the
hedging strategy contain an inherent credit risk related to defaults on obligations by the counterparties to such
instruments.
In addition, many of the Company’s investments are governed by shareholder, partnership or similar joint venture
agreements or arrangements, many of which restrict the Company's ability or right to freely sell or otherwise
dispose of its investments and/or that affect the timing of any such sale or other disposition. Consequently, the
Company’s ability to efficiently or timely dispose of or monetize one or more of its investments could be limited by
such contractual arrangements, which could in turn have an adverse impact on SNC-Lavalin's liquidity or capital
resources.
Dependence on third parties
SNC-Lavalin undertakes contracts wherein it subcontracts a portion of the project or the supply of material and
equipment to third parties. If the amount the Company is required to pay for subcontractors or equipment and
supplies exceeds what was estimated, the Company may suffer losses on these contracts. If a supplier or
subcontractor fails to provide supplies, equipment or services as required under a negotiated contract for any
reason, or provides supplies, equipment or services that are not of an acceptable quality or quantity, the Company
may be required to source those supplies, equipment or services on a delayed basis or at a higher price than
anticipated, which could impact contract profitability. In addition, faulty equipment or materials could impact the
overall project, resulting in claims against SNC-Lavalin for failure to meet required project specifications. These
risks may be intensified during an economic downturn if these suppliers or subcontractors experience financial
difficulties or find it difficult to obtain sufficient financing to fund their operations or access to bonding, and are not
able to provide the services or supplies (altogether or on a timely basis) or the requisite quality or grade of
services or supplies necessary for the Company’s business. In addition, in instances where SNC-Lavalin relies on
a single contracted supplier or subcontractor or a small number of subcontractors, there can be no assurance that
the marketplace can provide these products or services on a timely basis, or at the costs the Company had
anticipated. A failure by a third-party subcontractor or supplier to comply with applicable laws, rules or regulations
could negatively impact SNC-Lavalin’s business and/or reputation and, in the case of government contracts, could
also result in fines, penalties, suspension or even debarment being imposed on the Company.
Joint ventures and partnerships
SNC-Lavalin undertakes certain contracts with joint venture partners, as a member of partnerships, and under
other similar arrangements. This situation exposes the Company to a number of risks, including the risk that its
partners may be unable or unwilling to fulfill their contractual obligations to the Company or its clients.
SNC‑Lavalin’s partners may also be unable or unwilling to provide the required levels of financial support to the
partnerships. If these circumstances occur, the Company may be required to pay financial penalties or liquidated
damages, provide additional services, or make additional investments to ensure adequate performance and
delivery of the contracted services. Under agreements with joint and several (or solidary) liabilities, SNC-Lavalin
could be liable for both its obligations and those of its partners. These circumstances could also lead to disputes
and litigation with the Company’s partners or clients, all of which could have a material adverse impact on the
Company’s reputation, business, financial condition and results of operations.
SNC-Lavalin participates in joint ventures and similar arrangements in which it is not the controlling partner. In
these cases, the Company has limited control over the actions or decisions of the joint venture. These joint
ventures may not be subject to the same requirements regarding internal controls and internal control over
financial reporting that SNC-Lavalin follows. To the extent the controlling partner makes decisions that negatively
impact the joint venture or internal control problems arise within the joint venture, it could have a material adverse
impact on the Company’s business, financial condition and results of operations.
The failure by a joint venture partner to comply with applicable laws, rules or regulations, or contract
requirements, could negatively impact SNC-Lavalin’s business and, in the case of government contracts, could
result in fines, penalties, suspension or even debarment being imposed on the Company, which could have a
material adverse impact on the Company’s reputation, business, financial condition and results of operations.
Information systems and data and compliance with privacy legislation
The integrity, reliability and security of information in all forms are critical to the Company’s daily and strategic
operations.
Cyber-attacks have become more frequent and sophisticated and the Company’s information technology and
other defences must be adequate at all times to repel them. Cyber-attacks include insertion of malware or
ransomware, hacking, industrial espionage, unauthorized access to confidential or proprietary information,
phishing or other security breaches and system disruptions. If the Company is unable to protect its information
systems, they could be interrupted, delayed or fail altogether. The Company’s information systems and operations
could also be interrupted or damaged by natural disasters, failures, acts of war or terrorism, among others.
A successful cyber-attack could harm the Company’s reputation and adversely affect its business, financial
condition and results of operations as it may lead to network failures; unauthorized access to confidential or
proprietary information about its business, assets, customers or employees; theft, loss, leakage, destruction or
corruption of data, including information about its customers or employees; physical damage to network assets;
litigation, fines and liability for failure to comply with privacy and information security laws; increased fraud; lost
revenues; the potential for loss of customers or impairment of the Company ability to attract new customers;
higher insurance premiums; and the incurrence by the Company of significant costs payable to specialist
advisors, such as forensic and external communications/public relations experts, to assist the Company in dealing
with such cyber-attacks and the consequences thereof.
In addition, cyber-attacks affecting the Company’s suppliers or other business partners could also adversely affect
the Company’s business, financial condition and results of operations.
As a company that operates globally, SNC-Lavalin is subject to a complex array of legislation designed to protect
personal and confidential information. Privacy and data protection legislation and regulations are in constant
evolution, and it is anticipated that more countries will establish personal data protection frameworks in 2021 and
beyond. The ever-changing landscape presents unique compliance challenges for SNC-Lavalin as its business
undergoes significant transformation. Presently, the European Union’s General Data Protection Regulation and
the Canadian federal Personal Information Protection and Electronic Documents Act (PIPEDA) set the global
compliance-standard for SNC-Lavalin’s personal data compliance framework. In addition, responding to the UK’s
withdrawal from the European Union (“Brexit”) has recently been a key focus for SNC-Lavalin’s data protection
and compliance efforts. The EU is currently undertaking a review of the UK’s data privacy legislative framework
before determining how freely personal data may flow across borders and thus there remains a degree of
uncertainty in relation to data transfers between the UK and EU.
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The constantly evolving nature of technology and applicable privacy legislation and regulations pose increasingly
complex compliance challenges and may trigger higher spend by the Company to meet the requirements thereof.
Any failure to comply with these laws and regulations could result in significant penalties, legal liability and
reputational risk for the Company.
The Company relies on industry-accepted security measures and technology to protect the confidential and
proprietary information on its computer and information technology systems. The Company also seeks to adapt its
security policies, procedures and controls to protect its assets. There is no assurance that these measures will
prevent the occurrence of cyber-attacks, or that any insurance the Company may have will cover the costs,
damages, liabilities or losses that could result therefrom.
Competition
SNC-Lavalin operates businesses in highly competitive industry segments and geographic markets both in
Canada and internationally. SNC-Lavalin competes with both large as well as many mid-size and smaller
companies across a range of industry segments. In addition, an increase in international companies entering into
the Canadian marketplace and/or non-traditional competitors and international markets entering any industry
segments where SNC-Lavalin is present has also made such market more competitive. New contract awards and
contract margin are dependent on the level of competition and the general state of the markets in which the
Company operates. Fluctuations in demand in the segments in which the Company operates may impact the
degree of competition for work. Competitive position is based on a multitude of factors, including pricing, ability to
obtain adequate bonding, remaining performance obligations, financial strength, appetite for risk, availability of
partners, suppliers and workforce, and reputation for quality, timeliness and experience. If the Company is unable
to effectively respond to these competitive factors, the Company’s results of operations and financial condition will
be adversely impacted. In addition, a prolonged economic slump or slower than anticipated recovery may also
result in increased competition in certain market segments, price or margin reductions or decreased demand
which may adversely affect results.
Professional liability or liability for faulty services.
The Company’s failure to act or to make judgments and recommendations in accordance with applicable
professional standards could result in large monetary damages awards against the Company. The Company’s
business involves making professional judgments regarding the planning, design, development, construction,
operations and management of industrial facilities and public infrastructure projects. A failure or incident at one of
SNC-Lavalin’s project sites or completed projects resulting from the work it has performed could result in
significant professional or product liability, warranty or other claims against the Company as well as reputational
harm, especially if public safety is impacted. These liabilities could exceed the Company’s insurance limits or the
fees it generates, or could impact the Company’s ability to obtain insurance in the future. See the “Insurance
coverage” risk factor below. In addition, clients or subcontractors who have agreed to indemnify SNC-Lavalin
against any such liabilities or losses might refuse or be unable to pay. An uninsured claim, either in part or in
whole, if successful and of a material magnitude, could have a material adverse impact on the Company’s
financial condition and results of operations.
In some jurisdictions where the Company does business, it may be held jointly and severally (solidarily) liable for
both its obligations and those of other parties working on a particular project, notwithstanding the absence of a
contractual relationship between the Company and such other parties.
Monetary damages and penalties in connection with professional and engineering reports and opinions
SNC-Lavalin issues reports and opinions to clients based on its professional engineering expertise, as well as its
other professional credentials. The Company’s reports and opinions are often required to comply with professional
standards, licensing and technical requirements, securities regulations and other laws, regulations, rules and
standards governing the performance of professional services in the jurisdiction where the services are
performed. In addition, the Company could be liable to third parties who use or rely upon the Company’s reports
or opinions even if it is not contractually bound to those third parties, which may result in monetary damages or
penalties.
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Insurance coverage
As part of SNC-Lavalin’s business operations, the Company maintains insurance coverage. There can be no
assurance that the Company has in place sufficient insurance coverage to satisfy its needs, or that it will be able
to secure all necessary or sufficient insurance coverage in the future. The Company’s insurance is purchased
from a number of third-party insurers, often in layered insurance arrangements. If any of its third-party insurers
fail, refuse to renew or revoke coverage or otherwise cannot satisfy their insurance requirements to SNC-Lavalin,
then the Company’s overall risk exposure and operational expenses could be increased and its business
operations could be interrupted.
SNC-Lavalin has obtained directors’ and officers’ liability insurance insuring directors and officers against liability
for acts or omissions in their capacities as directors and officers of the Company, subject to certain exclusions.
Such insurance also insures SNC-Lavalin against losses which the Company may incur in indemnifying officers
and directors. In addition, SNC-Lavalin may enter into indemnification agreements with key officers and directors
and such persons may also have indemnification rights under applicable laws and the Company’s constating
documents. SNC-Lavalin’s obligations to indemnify directors and officers may pose substantial risks to the
Company’s financial condition as the Company may not be able to maintain its insurance or, even if the Company
is able to maintain its insurance, claims in excess of the Company’s insurance coverage could materially deplete
its assets.
Health & Safety
The nature of SNC-Lavalin’s work places employees and others near large equipment, dangerous processes or
highly regulated materials, and in challenging environments. Many clients require that the Company meet certain
safety standards or criteria to be eligible to bid on contracts, and the payment of a portion of the Company’s
contract fees or profits may be subject to satisfying safety standards or criteria. Unsafe work conditions also have
the potential of increasing employee turnover, increasing project and operating costs and could negatively impact
the awarding of new contracts. If SNC-Lavalin fails to implement appropriate safety procedures and/or if its
procedures fail, employees or others may suffer injuries. Failure to comply with such procedures, client contracts
or applicable regulations could subject SNC-Lavalin to losses and liability and adversely impact the Company’s
business, financial condition and operating results as well as its ability to obtain future projects.
Qualified personnel
and uncertainties.
The success of SNC-Lavalin heavily depends on its workforce and the ability to attract and retain qualified
personnel in a competitive work environment. The inability to attract and retain qualified personnel could result in,
among other factors, lost opportunities, cost overruns, failure to perform on projects and inability to mitigate risks
Work stoppages, union negotiations and other labour matters
A portion of the Company’s workforce and employees working for various subcontractors are unionized. A lengthy
strike or other work stoppages, caused by unionized or non-unionized employees, in connection with any of the
Company’s projects could have a material adverse effect on the Company. There is an inherent risk that on-going
or future negotiations relating to collective bargaining agreements or union representation may not be favourable
to the Company. From time to time, the Company has also experienced attempts to unionize the Company’s non-
unionized employees. Such efforts can often disrupt or delay work and present risk of labour unrest.
Extreme weather conditions and the impact of natural or other disasters and global health crises
The Company’s field activities are generally performed outdoors and include professional surveying, resident
engineering services, field data surveys and collection, archeology, geotechnical investigations and exploratory
drilling, construction oversight and inspection, plant start-up and testing and plant operations. Extreme weather
conditions or natural or other disasters, such as earthquakes, fires, floods, epidemics or pandemics (including the
current COVID-19 pandemic) and similar events, may cause postponements in the initiation and/or completion of
the Company’s field activities and may hinder the ability of its employees to perform their duties, which may result
in delays or loss of revenues that otherwise would be recognized while certain costs continue to be incurred.
Extreme weather conditions or disasters may also delay or eliminate the start and/or completion of various phases
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The constantly evolving nature of technology and applicable privacy legislation and regulations pose increasingly
complex compliance challenges and may trigger higher spend by the Company to meet the requirements thereof.
Any failure to comply with these laws and regulations could result in significant penalties, legal liability and
reputational risk for the Company.
The Company relies on industry-accepted security measures and technology to protect the confidential and
proprietary information on its computer and information technology systems. The Company also seeks to adapt its
security policies, procedures and controls to protect its assets. There is no assurance that these measures will
prevent the occurrence of cyber-attacks, or that any insurance the Company may have will cover the costs,
damages, liabilities or losses that could result therefrom.
Competition
SNC-Lavalin operates businesses in highly competitive industry segments and geographic markets both in
Canada and internationally. SNC-Lavalin competes with both large as well as many mid-size and smaller
companies across a range of industry segments. In addition, an increase in international companies entering into
the Canadian marketplace and/or non-traditional competitors and international markets entering any industry
segments where SNC-Lavalin is present has also made such market more competitive. New contract awards and
contract margin are dependent on the level of competition and the general state of the markets in which the
Company operates. Fluctuations in demand in the segments in which the Company operates may impact the
degree of competition for work. Competitive position is based on a multitude of factors, including pricing, ability to
obtain adequate bonding, remaining performance obligations, financial strength, appetite for risk, availability of
partners, suppliers and workforce, and reputation for quality, timeliness and experience. If the Company is unable
to effectively respond to these competitive factors, the Company’s results of operations and financial condition will
be adversely impacted. In addition, a prolonged economic slump or slower than anticipated recovery may also
result in increased competition in certain market segments, price or margin reductions or decreased demand
which may adversely affect results.
Professional liability or liability for faulty services.
The Company’s failure to act or to make judgments and recommendations in accordance with applicable
professional standards could result in large monetary damages awards against the Company. The Company’s
business involves making professional judgments regarding the planning, design, development, construction,
operations and management of industrial facilities and public infrastructure projects. A failure or incident at one of
SNC-Lavalin’s project sites or completed projects resulting from the work it has performed could result in
significant professional or product liability, warranty or other claims against the Company as well as reputational
harm, especially if public safety is impacted. These liabilities could exceed the Company’s insurance limits or the
fees it generates, or could impact the Company’s ability to obtain insurance in the future. See the “Insurance
coverage” risk factor below. In addition, clients or subcontractors who have agreed to indemnify SNC-Lavalin
against any such liabilities or losses might refuse or be unable to pay. An uninsured claim, either in part or in
whole, if successful and of a material magnitude, could have a material adverse impact on the Company’s
financial condition and results of operations.
In some jurisdictions where the Company does business, it may be held jointly and severally (solidarily) liable for
both its obligations and those of other parties working on a particular project, notwithstanding the absence of a
contractual relationship between the Company and such other parties.
Monetary damages and penalties in connection with professional and engineering reports and opinions
SNC-Lavalin issues reports and opinions to clients based on its professional engineering expertise, as well as its
other professional credentials. The Company’s reports and opinions are often required to comply with professional
standards, licensing and technical requirements, securities regulations and other laws, regulations, rules and
standards governing the performance of professional services in the jurisdiction where the services are
performed. In addition, the Company could be liable to third parties who use or rely upon the Company’s reports
or opinions even if it is not contractually bound to those third parties, which may result in monetary damages or
penalties.
SNC-LAVALIN
Insurance coverage
As part of SNC-Lavalin’s business operations, the Company maintains insurance coverage. There can be no
assurance that the Company has in place sufficient insurance coverage to satisfy its needs, or that it will be able
to secure all necessary or sufficient insurance coverage in the future. The Company’s insurance is purchased
from a number of third-party insurers, often in layered insurance arrangements. If any of its third-party insurers
fail, refuse to renew or revoke coverage or otherwise cannot satisfy their insurance requirements to SNC-Lavalin,
then the Company’s overall risk exposure and operational expenses could be increased and its business
operations could be interrupted.
SNC-Lavalin has obtained directors’ and officers’ liability insurance insuring directors and officers against liability
for acts or omissions in their capacities as directors and officers of the Company, subject to certain exclusions.
Such insurance also insures SNC-Lavalin against losses which the Company may incur in indemnifying officers
and directors. In addition, SNC-Lavalin may enter into indemnification agreements with key officers and directors
and such persons may also have indemnification rights under applicable laws and the Company’s constating
documents. SNC-Lavalin’s obligations to indemnify directors and officers may pose substantial risks to the
Company’s financial condition as the Company may not be able to maintain its insurance or, even if the Company
is able to maintain its insurance, claims in excess of the Company’s insurance coverage could materially deplete
its assets.
Health & Safety
The nature of SNC-Lavalin’s work places employees and others near large equipment, dangerous processes or
highly regulated materials, and in challenging environments. Many clients require that the Company meet certain
safety standards or criteria to be eligible to bid on contracts, and the payment of a portion of the Company’s
contract fees or profits may be subject to satisfying safety standards or criteria. Unsafe work conditions also have
the potential of increasing employee turnover, increasing project and operating costs and could negatively impact
the awarding of new contracts. If SNC-Lavalin fails to implement appropriate safety procedures and/or if its
procedures fail, employees or others may suffer injuries. Failure to comply with such procedures, client contracts
or applicable regulations could subject SNC-Lavalin to losses and liability and adversely impact the Company’s
business, financial condition and operating results as well as its ability to obtain future projects.
Qualified personnel
The success of SNC-Lavalin heavily depends on its workforce and the ability to attract and retain qualified
personnel in a competitive work environment. The inability to attract and retain qualified personnel could result in,
among other factors, lost opportunities, cost overruns, failure to perform on projects and inability to mitigate risks
and uncertainties.
Work stoppages, union negotiations and other labour matters
A portion of the Company’s workforce and employees working for various subcontractors are unionized. A lengthy
strike or other work stoppages, caused by unionized or non-unionized employees, in connection with any of the
Company’s projects could have a material adverse effect on the Company. There is an inherent risk that on-going
or future negotiations relating to collective bargaining agreements or union representation may not be favourable
to the Company. From time to time, the Company has also experienced attempts to unionize the Company’s non-
unionized employees. Such efforts can often disrupt or delay work and present risk of labour unrest.
Extreme weather conditions and the impact of natural or other disasters and global health crises
The Company’s field activities are generally performed outdoors and include professional surveying, resident
engineering services, field data surveys and collection, archeology, geotechnical investigations and exploratory
drilling, construction oversight and inspection, plant start-up and testing and plant operations. Extreme weather
conditions or natural or other disasters, such as earthquakes, fires, floods, epidemics or pandemics (including the
current COVID-19 pandemic) and similar events, may cause postponements in the initiation and/or completion of
the Company’s field activities and may hinder the ability of its employees to perform their duties, which may result
in delays or loss of revenues that otherwise would be recognized while certain costs continue to be incurred.
Extreme weather conditions or disasters may also delay or eliminate the start and/or completion of various phases
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of work relating to other services that commence concurrently with or subsequent to field activities. The
Company’s financial and/or operating performance could also be adversely affected by the outbreak of epidemics
or other public health crises. Refer to the risk factor entitled “Additional impacts of the COVID-19 Pandemic” in
this Section for a description of the various risks and uncertainties posed by COVID-19 to the Company and its
business and financial affairs. Any delay in the completion of the Company’s services may require the Company
to incur additional non-compensable costs, including overtime work, that are necessary to meet clients’
schedules. Due to various factors, a delay in the commencement or completion of a project may also result in
penalties or sanctions under contracts or even the cancellation of contracts.
Divestitures and the sale of significant assets
The sale of a business unit and/or significant assets is a complex process that involves certain risks, such as
failure to properly plan, prepare and execute the transaction and to prepare a contract that protects the Company
from post-closing adjustments, certain liabilities and additional costs. In addition, the Company is exposed to the
risk of the deal falling through, selling at a lower price than the asking price and/or extended deal close times.
Divesting businesses involves risks and uncertainties, such as the difficulty separating assets related to such
businesses from the businesses the Company retains, senior management and employee distraction, the need to
obtain regulatory approvals and other third-party consents, which potentially disrupts customer and supplier
relationships, and the fact that the Company may be subject to additional tax obligations or loss of certain tax
benefits. Such actions also involve significant costs and require time and attention of management, which may
divert attention from other business operations. Because of these challenges, as well as market conditions or
other factors, divestitures may take longer or be costlier or generate fewer benefits than expected and may not be
completed at all. If the Company is unable to complete divestitures or to successfully transition divested
businesses, its business and financial results could be negatively impacted. If the Company disposes of a
business, it may not be able to successfully cause a buyer of a divested business to assume the liabilities of that
business or, even if such liabilities are assumed, the Company may have difficulties enforcing its rights,
contractual or otherwise, against the buyer. The Company may retain exposure on financial or performance
guarantees and other contractual, employment, pension and severance obligations, and potential liabilities that
may arise under law because of the disposition or the subsequent failure of a buyer. As a result, performance by
the divested businesses or other conditions outside of the Company’s control could have a material adverse effect
on its results of operations. In addition, the divestiture of any business could negatively impact the Company’s
profitability because of losses that may result from such a sale, the loss of revenues or a decrease in cash flows.
Following a divestiture, the Company may also have less diversity in its business and in the markets it serves, as
well as in its client base.
Intellectual property
SNC-Lavalin’s success depends, in part, upon its ability to protect its intellectual property. The Company relies on
a combination of intellectual property policies and other contractual arrangements to protect much of its
intellectual property where it does not believe that trademark, patent or copyright protection is appropriate or
obtainable. Trade secrets are generally difficult to protect. Although SNC-Lavalin’s employees are subject to
confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of the
Company’s confidential information and/or the infringement of the Company’s patents and copyrights. Further, the
Company may be unable to detect unauthorized use of its intellectual property or otherwise take appropriate steps
to enforce its rights. Failure to adequately protect, maintain, or enforce the Company’s intellectual property rights
may adversely limit the Company’s competitive position.
RISKS RELATED TO THE COMPANY’S LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
Liquidity and financial position
The Company relies on its cash, its credit facilities and other debt instruments, as well as the capital markets to
provide some of its liquidity and capital requirements and it is, in certain instances, required to obtain bank
guarantees/letters of credit as a means to secure its various contractual obligations for its underlying projects.
Significant instability or disruptions of the capital markets or a deterioration in or weakening of its financial position
due to internal or external factors, could restrict or prohibit the Company’s access to, or significantly increase the
cost of one or more of these financing sources, including credit facilities, the issuance of medium- and long-term
debt (such as the issuance of debentures, bonds or notes), or the availability of bank guarantees/letters of credit
to guarantee its contractual and project obligations. There can be no assurance that the Company will maintain an
adequate cash balance and generate sufficient cash flow from operations in an amount to enable itself to fund its
operations and liquidity needs, service its debt and/or maintain its ability to obtain and secure bank guarantees.
A deterioration in the Company’s financial condition could also result in a reduction or downgrade of its credit
ratings, which could limit the Company’s ability to issue new letters of credit or performance guarantees or
accessing external sources of short-term and long-term debt financing or could significantly increase the costs
associated with utilizing such letters of credit and performance guarantees, bank credit facilities and issuing
medium- and long-term debt, which would in turn have a material adverse effect on the Company’s business,
financial condition and results of operations.
A draw on letters of credit or bank guarantees by one or more third parties could, among other things, significantly
reduce the Company’s cash position and have a material adverse effect on its business and results of operations.
Indebtedness
◦
◦
◦
◦
◦
◦
The Company had approximately $2.0 billion of consolidated indebtedness as at December 31, 2020 under
recourse, limited recourse and non-recourse debt.
The Company will need to refinance or reimburse amounts outstanding under the Company’s consolidated
indebtedness. There can be no assurance that any indebtedness of the Company will be refinanced or that
additional financing on commercially reasonable terms will be obtained, if at all.
The Company’s degree of leverage could have other important consequences, including the following:
it may have a negative effect on the current credit ratings of the Company’s rated long-term debt;
it may limit the Company’s ability to obtain additional financing for working capital, capital expenditures, debt
service requirements, acquisitions and general corporate or other purposes on commercially reasonable
terms, if at all;
◦ most of the Company’s borrowings are at variable rates of interest and expose the Company to the risk of
increased interest rates and a resulting increase in financial expenses;
it may limit the Company’s ability to adjust to changing market conditions and place the Company at a
competitive disadvantage (including if the Company’s credit rating is negatively affected) compared to its
competitors that have less debt or greater financial resources;
it may limit the Company’s ability to declare and pay dividends on its Common Shares;
the Company may be vulnerable in a downturn in general economic conditions; and
the Company may be unable to make capital expenditures that are important to its growth and strategies.
The credit facilities and instruments governing the Company’s consolidated debt contain certain financial
covenants requiring the Company, on a consolidated basis, to satisfy net recourse debt to adjusted earnings
before interest, taxes, depreciation and amortization ratios. Such credit facilities and instruments also contain
covenants restricting the Company’s ability to incur liens on its assets, incur additional debt or effect dispositions
of assets or fundamental changes in its business, pay dividends and make certain other disbursements, or use
the proceeds from the sale of assets and capital stock of subsidiaries. These covenants limit the Company’s
discretion and financial flexibility in the operation of its business. Under the terms of these credit facilities and
instruments, the Company and its subsidiaries are permitted to incur additional debt only in certain circumstances.
However, doing so could increase the risks described above. In addition, if the Company or its subsidiaries incur
additional debt in the future, the Company may be subject to additional covenants, which may be more restrictive
than those that it is subject to now.
A breach of any of these agreements or the Company’s inability to comply with these covenants (as the case may
be) could, if not cured or waived, result in an acceleration of the Company’s consolidated debt or a cross-default
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of work relating to other services that commence concurrently with or subsequent to field activities. The
Company’s financial and/or operating performance could also be adversely affected by the outbreak of epidemics
or other public health crises. Refer to the risk factor entitled “Additional impacts of the COVID-19 Pandemic” in
this Section for a description of the various risks and uncertainties posed by COVID-19 to the Company and its
business and financial affairs. Any delay in the completion of the Company’s services may require the Company
to incur additional non-compensable costs, including overtime work, that are necessary to meet clients’
schedules. Due to various factors, a delay in the commencement or completion of a project may also result in
penalties or sanctions under contracts or even the cancellation of contracts.
Divestitures and the sale of significant assets
The sale of a business unit and/or significant assets is a complex process that involves certain risks, such as
failure to properly plan, prepare and execute the transaction and to prepare a contract that protects the Company
from post-closing adjustments, certain liabilities and additional costs. In addition, the Company is exposed to the
risk of the deal falling through, selling at a lower price than the asking price and/or extended deal close times.
Divesting businesses involves risks and uncertainties, such as the difficulty separating assets related to such
businesses from the businesses the Company retains, senior management and employee distraction, the need to
obtain regulatory approvals and other third-party consents, which potentially disrupts customer and supplier
relationships, and the fact that the Company may be subject to additional tax obligations or loss of certain tax
benefits. Such actions also involve significant costs and require time and attention of management, which may
divert attention from other business operations. Because of these challenges, as well as market conditions or
other factors, divestitures may take longer or be costlier or generate fewer benefits than expected and may not be
completed at all. If the Company is unable to complete divestitures or to successfully transition divested
businesses, its business and financial results could be negatively impacted. If the Company disposes of a
business, it may not be able to successfully cause a buyer of a divested business to assume the liabilities of that
business or, even if such liabilities are assumed, the Company may have difficulties enforcing its rights,
contractual or otherwise, against the buyer. The Company may retain exposure on financial or performance
guarantees and other contractual, employment, pension and severance obligations, and potential liabilities that
may arise under law because of the disposition or the subsequent failure of a buyer. As a result, performance by
the divested businesses or other conditions outside of the Company’s control could have a material adverse effect
on its results of operations. In addition, the divestiture of any business could negatively impact the Company’s
profitability because of losses that may result from such a sale, the loss of revenues or a decrease in cash flows.
Following a divestiture, the Company may also have less diversity in its business and in the markets it serves, as
well as in its client base.
Intellectual property
SNC-Lavalin’s success depends, in part, upon its ability to protect its intellectual property. The Company relies on
a combination of intellectual property policies and other contractual arrangements to protect much of its
intellectual property where it does not believe that trademark, patent or copyright protection is appropriate or
obtainable. Trade secrets are generally difficult to protect. Although SNC-Lavalin’s employees are subject to
confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of the
Company’s confidential information and/or the infringement of the Company’s patents and copyrights. Further, the
Company may be unable to detect unauthorized use of its intellectual property or otherwise take appropriate steps
to enforce its rights. Failure to adequately protect, maintain, or enforce the Company’s intellectual property rights
may adversely limit the Company’s competitive position.
RISKS RELATED TO THE COMPANY’S LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
Liquidity and financial position
The Company relies on its cash, its credit facilities and other debt instruments, as well as the capital markets to
provide some of its liquidity and capital requirements and it is, in certain instances, required to obtain bank
guarantees/letters of credit as a means to secure its various contractual obligations for its underlying projects.
Significant instability or disruptions of the capital markets or a deterioration in or weakening of its financial position
due to internal or external factors, could restrict or prohibit the Company’s access to, or significantly increase the
cost of one or more of these financing sources, including credit facilities, the issuance of medium- and long-term
debt (such as the issuance of debentures, bonds or notes), or the availability of bank guarantees/letters of credit
to guarantee its contractual and project obligations. There can be no assurance that the Company will maintain an
adequate cash balance and generate sufficient cash flow from operations in an amount to enable itself to fund its
operations and liquidity needs, service its debt and/or maintain its ability to obtain and secure bank guarantees.
A deterioration in the Company’s financial condition could also result in a reduction or downgrade of its credit
ratings, which could limit the Company’s ability to issue new letters of credit or performance guarantees or
accessing external sources of short-term and long-term debt financing or could significantly increase the costs
associated with utilizing such letters of credit and performance guarantees, bank credit facilities and issuing
medium- and long-term debt, which would in turn have a material adverse effect on the Company’s business,
financial condition and results of operations.
A draw on letters of credit or bank guarantees by one or more third parties could, among other things, significantly
reduce the Company’s cash position and have a material adverse effect on its business and results of operations.
Indebtedness
The Company had approximately $2.0 billion of consolidated indebtedness as at December 31, 2020 under
recourse, limited recourse and non-recourse debt.
The Company will need to refinance or reimburse amounts outstanding under the Company’s consolidated
indebtedness. There can be no assurance that any indebtedness of the Company will be refinanced or that
additional financing on commercially reasonable terms will be obtained, if at all.
The Company’s degree of leverage could have other important consequences, including the following:
◦
◦
it may have a negative effect on the current credit ratings of the Company’s rated long-term debt;
it may limit the Company’s ability to obtain additional financing for working capital, capital expenditures, debt
service requirements, acquisitions and general corporate or other purposes on commercially reasonable
terms, if at all;
◦ most of the Company’s borrowings are at variable rates of interest and expose the Company to the risk of
increased interest rates and a resulting increase in financial expenses;
◦
◦
◦
◦
it may limit the Company’s ability to adjust to changing market conditions and place the Company at a
competitive disadvantage (including if the Company’s credit rating is negatively affected) compared to its
competitors that have less debt or greater financial resources;
it may limit the Company’s ability to declare and pay dividends on its Common Shares;
the Company may be vulnerable in a downturn in general economic conditions; and
the Company may be unable to make capital expenditures that are important to its growth and strategies.
The credit facilities and instruments governing the Company’s consolidated debt contain certain financial
covenants requiring the Company, on a consolidated basis, to satisfy net recourse debt to adjusted earnings
before interest, taxes, depreciation and amortization ratios. Such credit facilities and instruments also contain
covenants restricting the Company’s ability to incur liens on its assets, incur additional debt or effect dispositions
of assets or fundamental changes in its business, pay dividends and make certain other disbursements, or use
the proceeds from the sale of assets and capital stock of subsidiaries. These covenants limit the Company’s
discretion and financial flexibility in the operation of its business. Under the terms of these credit facilities and
instruments, the Company and its subsidiaries are permitted to incur additional debt only in certain circumstances.
However, doing so could increase the risks described above. In addition, if the Company or its subsidiaries incur
additional debt in the future, the Company may be subject to additional covenants, which may be more restrictive
than those that it is subject to now.
A breach of any of these agreements or the Company’s inability to comply with these covenants (as the case may
be) could, if not cured or waived, result in an acceleration of the Company’s consolidated debt or a cross-default
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under certain of its debt instruments. If the Company’s indebtedness is accelerated, the Company may not be
able to service its indebtedness, or borrow sufficient funds to refinance its indebtedness.
provided guarantees of the Company’s primary third-party debt instruments and obligations, including the
Company’s Credit Agreement and its outstanding debentures.
The Company’s ability to service its consolidated debt will depend upon, among other things, its future financial
and operating performance, which will be affected by prevailing economic conditions, interest rate fluctuations and
financial, business, legal, regulatory and other factors, some of which are beyond the Company’s control. If the
Company’s operating results or liquidity are not sufficient to service its current or future consolidated
indebtedness, the Company may be forced to take actions such as reducing dividends, reducing or delaying
business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing its
debt, or seeking additional equity capital.
Impact of operating results and level of indebtedness on financial situation
As outlined in Section 8.4 of this MD&A, the Company is required to maintain a ratio of net recourse debt to
EBITDA not to exceed a certain threshold. While the Company met its covenant requirements in both 2020 and
2019, an increase of net recourse debt due to items such as cash requirements of operating activities or the
delay/acceleration of certain investing/divestitures or financing transactions, or an inability to generate sufficient
adjusted EBITDA to support the level of indebtedness in the ratio calculation in the future, could have a negative
impact on the Company, as further described in the risk factor entitled “Indebtedness” above.
Security under the CDPQ Loan Agreement
The CDPQ Loan is secured by all of Highway Holdings’ assets, excluding the Highway 407 ETR shares held by
Highway Holdings (until such time as Highway Holdings may elect to grant a pledge thereon), as well as the rights
and loan receivables of Highway Holdings under the intercompany loan agreement, dated July 10, 2017, between
Highway Holdings, as lender, and the Company, as borrower. In addition to this security, SNC-Lavalin Inc. has
provided a guarantee (the “Guarantee”) in favour of CDPQ RF secured by a pledge given by SNC-Lavalin Inc. to
CDPQ RF over 20,900 common shares held by SNC-Lavalin Inc. in the share capital of Highway Holdings
(representing approximately 29.9% of the outstanding common shares of Highway Holdings). CDPQ RF’s sole
recourse against SNC-Lavalin Inc. in connection with the Guarantee and any potential breach or default by
Highway Holdings under the CDPQ Loan Agreement is limited to enforcement on or against the shares of the
capital of Highway Holdings held by SNC-Lavalin Inc. The Company has a 6.76% ownership interest in Highway
407 ETR through Highway Holdings. The terms of the CDPQ Loan Agreement include various covenants that
must be satisfied by Highway Holdings. There can be no assurance that such covenants will be satisfied. Any
event of default under the CDPQ Loan Agreement, including in respect of covenants thereunder, could result in,
among other things, CDPQ RF demanding immediate payment of all amounts outstanding under the CDPQ Loan
Agreement, or forcing the sale of the Highway 407 ETR shares held by Highway Holdings in compliance with the
Highway 407 ETR shareholders’ agreement at a time, price and in circumstances outside of the Company’s
control and/or that may not allow for an optimal sale price of such Highway 407 ETR shares, which could have a
material adverse effect on the Company’s business and financial position.
Dependence on subsidiaries to help repay indebtedness
A significant portion of the Company’s assets are the capital stock of its subsidiaries and the Company conducts
an important portion of its business through its subsidiaries. Consequently, the Company’s cash flow and ability to
service its debt obligations are dependent to a great extent upon the earnings of its subsidiaries and the
distribution of those earnings to the Company, or upon loans, advances or other payments made by these entities
to the Company.
The Company’s subsidiaries are separate and distinct legal entities and may have significant liabilities. The ability
of these entities to pay dividends or make other loans, advances or payments to the Company will depend upon
their operating results and will be subject to applicable laws and contractual restrictions contained in the
instruments governing their debt including, for example, the financial covenants set out in the CDPQ Loan
Agreement pursuant to which the Company’s consolidated net recourse debt to adjusted earnings before interest,
taxes, depreciation and amortization ratio cannot exceed a certain limit. In addition, certain other deeds and
agreements governing certain subsidiaries of the Company contain restrictions on the payment of dividends and
distributions, as well as specified liquidity covenants. Also, a number of the Company’s material subsidiaries have
The ability of the Company’s subsidiaries to generate sufficient cash flow from operations will depend on their
future financial performance, which will be affected by a range of economic, competitive and business factors,
including those discussed in this section, many of which are outside of the control of the Company or its
subsidiaries. The cash flow and earnings of the Company’s operating subsidiaries and the amount that they are
able to distribute to the Company as dividends or otherwise may not generate sufficient cash flow from operations
to satisfy the Company’s debt obligations. Accordingly, the Company may have to undertake alternative financing
plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or
seeking to raise additional capital. The Company cannot assure that any such alternatives would be possible, that
any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those
sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would
be permitted under the terms of the Company’s various debt instruments then in effect. The Company’s inability to
generate sufficient cash flow to satisfy its debt obligations, or to refinance its obligations on commercially
reasonable terms, would have a material adverse effect on its business, financial condition and results of
operations.
Dividends
The declaration and payment of dividends on Common Shares are at the discretion of the board of directors of the
Company. The cash available for dividends is a function of numerous factors, including the Company’s financial
performance, the impact of interest rates, debt covenants and obligations, working capital requirements and future
capital requirements. In addition, the Company’s ability to pay dividends depends upon the payment of dividends
by certain of the Company’s subsidiaries or the repayment of funds to the Company by its subsidiaries. The
Company’s subsidiaries, in turn, may be restricted from paying dividends, making repayments or making other
distributions to the Company for financial, regulatory, legal or other reasons. To the extent the Company’s
subsidiaries are not able to pay dividends or repay funds to the Company, it may adversely affect the Company’s
ability to pay dividends on Common Shares.
Post-Employment Benefit Obligations, Including Pension-Related Obligations
The Company operates certain defined benefits plans and provides other post-employment benefits. More
specifically, Atkins operates two significant defined benefit plans, namely the Atkins Pension Plan and the
Railways Pension Scheme, with combined net significant retirement benefit liabilities. The majority of Atkins’
post‑employment benefits obligations sits within its U.K. business and is comprised of defined benefit pension
obligations. In the U.K., defined benefit pension schemes funding requirements are based on actuarial valuations
of the assets and liabilities of each scheme. A scheme’s assets are determined by the value of investments held
by the scheme and the returns. The valuation of plan liabilities requires significant levels of judgement and
technical expertise in choosing appropriate assumptions. Changes in a number of key assumptions can have a
material impact on the calculation of the liability. There is also some judgement in the measurement of the fair
value of pension assets giving rise to a risk of material misstatement in their valuation.
The nature of the funding regime in the U.K. creates uncertainty around the size and timing of cash that Atkins will
be required to pay to the pension schemes. The scheduled contribution to the Atkins Pension Plan and the
Railways Pension Scheme from Atkins totaled £38.7 million (or approximately CA$66.6 million) for the year
ending December 31, 2020, with annual contributions escalating by 2.5% each year until March 31, 2026. If Atkins
is required to increase cash funding contributions, this will reduce the availability of such funds for other corporate
purposes and limit its ability to invest in growth. Deteriorating economic conditions may result in significant
increases in Atkins’ funding obligations, which could restrict available cash for Atkins’ operations, capital
expenditures and other requirements, and have a material adverse effect on Atkins’ business, financial condition
and results of operations.
The Company’s post-employment benefit obligations, including its pension-related liabilities, and its future
payment obligations thereunder could restrict cash available for the Company’s operations, capital expenditures
and other requirements and may materially adversely affect its financial condition and liquidity.
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under certain of its debt instruments. If the Company’s indebtedness is accelerated, the Company may not be
able to service its indebtedness, or borrow sufficient funds to refinance its indebtedness.
provided guarantees of the Company’s primary third-party debt instruments and obligations, including the
Company’s Credit Agreement and its outstanding debentures.
The Company’s ability to service its consolidated debt will depend upon, among other things, its future financial
and operating performance, which will be affected by prevailing economic conditions, interest rate fluctuations and
financial, business, legal, regulatory and other factors, some of which are beyond the Company’s control. If the
Company’s operating results or liquidity are not sufficient to service its current or future consolidated
indebtedness, the Company may be forced to take actions such as reducing dividends, reducing or delaying
business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing its
debt, or seeking additional equity capital.
Impact of operating results and level of indebtedness on financial situation
As outlined in Section 8.4 of this MD&A, the Company is required to maintain a ratio of net recourse debt to
EBITDA not to exceed a certain threshold. While the Company met its covenant requirements in both 2020 and
2019, an increase of net recourse debt due to items such as cash requirements of operating activities or the
delay/acceleration of certain investing/divestitures or financing transactions, or an inability to generate sufficient
adjusted EBITDA to support the level of indebtedness in the ratio calculation in the future, could have a negative
impact on the Company, as further described in the risk factor entitled “Indebtedness” above.
Security under the CDPQ Loan Agreement
The CDPQ Loan is secured by all of Highway Holdings’ assets, excluding the Highway 407 ETR shares held by
Highway Holdings (until such time as Highway Holdings may elect to grant a pledge thereon), as well as the rights
and loan receivables of Highway Holdings under the intercompany loan agreement, dated July 10, 2017, between
Highway Holdings, as lender, and the Company, as borrower. In addition to this security, SNC-Lavalin Inc. has
provided a guarantee (the “Guarantee”) in favour of CDPQ RF secured by a pledge given by SNC-Lavalin Inc. to
CDPQ RF over 20,900 common shares held by SNC-Lavalin Inc. in the share capital of Highway Holdings
(representing approximately 29.9% of the outstanding common shares of Highway Holdings). CDPQ RF’s sole
recourse against SNC-Lavalin Inc. in connection with the Guarantee and any potential breach or default by
Highway Holdings under the CDPQ Loan Agreement is limited to enforcement on or against the shares of the
capital of Highway Holdings held by SNC-Lavalin Inc. The Company has a 6.76% ownership interest in Highway
407 ETR through Highway Holdings. The terms of the CDPQ Loan Agreement include various covenants that
must be satisfied by Highway Holdings. There can be no assurance that such covenants will be satisfied. Any
event of default under the CDPQ Loan Agreement, including in respect of covenants thereunder, could result in,
among other things, CDPQ RF demanding immediate payment of all amounts outstanding under the CDPQ Loan
Agreement, or forcing the sale of the Highway 407 ETR shares held by Highway Holdings in compliance with the
Highway 407 ETR shareholders’ agreement at a time, price and in circumstances outside of the Company’s
control and/or that may not allow for an optimal sale price of such Highway 407 ETR shares, which could have a
material adverse effect on the Company’s business and financial position.
Dependence on subsidiaries to help repay indebtedness
A significant portion of the Company’s assets are the capital stock of its subsidiaries and the Company conducts
an important portion of its business through its subsidiaries. Consequently, the Company’s cash flow and ability to
service its debt obligations are dependent to a great extent upon the earnings of its subsidiaries and the
distribution of those earnings to the Company, or upon loans, advances or other payments made by these entities
to the Company.
The Company’s subsidiaries are separate and distinct legal entities and may have significant liabilities. The ability
of these entities to pay dividends or make other loans, advances or payments to the Company will depend upon
their operating results and will be subject to applicable laws and contractual restrictions contained in the
instruments governing their debt including, for example, the financial covenants set out in the CDPQ Loan
Agreement pursuant to which the Company’s consolidated net recourse debt to adjusted earnings before interest,
taxes, depreciation and amortization ratio cannot exceed a certain limit. In addition, certain other deeds and
agreements governing certain subsidiaries of the Company contain restrictions on the payment of dividends and
distributions, as well as specified liquidity covenants. Also, a number of the Company’s material subsidiaries have
The ability of the Company’s subsidiaries to generate sufficient cash flow from operations will depend on their
future financial performance, which will be affected by a range of economic, competitive and business factors,
including those discussed in this section, many of which are outside of the control of the Company or its
subsidiaries. The cash flow and earnings of the Company’s operating subsidiaries and the amount that they are
able to distribute to the Company as dividends or otherwise may not generate sufficient cash flow from operations
to satisfy the Company’s debt obligations. Accordingly, the Company may have to undertake alternative financing
plans, such as refinancing or restructuring its debt, selling assets, reducing or delaying capital investments or
seeking to raise additional capital. The Company cannot assure that any such alternatives would be possible, that
any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those
sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would
be permitted under the terms of the Company’s various debt instruments then in effect. The Company’s inability to
generate sufficient cash flow to satisfy its debt obligations, or to refinance its obligations on commercially
reasonable terms, would have a material adverse effect on its business, financial condition and results of
operations.
Dividends
The declaration and payment of dividends on Common Shares are at the discretion of the board of directors of the
Company. The cash available for dividends is a function of numerous factors, including the Company’s financial
performance, the impact of interest rates, debt covenants and obligations, working capital requirements and future
capital requirements. In addition, the Company’s ability to pay dividends depends upon the payment of dividends
by certain of the Company’s subsidiaries or the repayment of funds to the Company by its subsidiaries. The
Company’s subsidiaries, in turn, may be restricted from paying dividends, making repayments or making other
distributions to the Company for financial, regulatory, legal or other reasons. To the extent the Company’s
subsidiaries are not able to pay dividends or repay funds to the Company, it may adversely affect the Company’s
ability to pay dividends on Common Shares.
Post-Employment Benefit Obligations, Including Pension-Related Obligations
The Company operates certain defined benefits plans and provides other post-employment benefits. More
specifically, Atkins operates two significant defined benefit plans, namely the Atkins Pension Plan and the
Railways Pension Scheme, with combined net significant retirement benefit liabilities. The majority of Atkins’
post‑employment benefits obligations sits within its U.K. business and is comprised of defined benefit pension
obligations. In the U.K., defined benefit pension schemes funding requirements are based on actuarial valuations
of the assets and liabilities of each scheme. A scheme’s assets are determined by the value of investments held
by the scheme and the returns. The valuation of plan liabilities requires significant levels of judgement and
technical expertise in choosing appropriate assumptions. Changes in a number of key assumptions can have a
material impact on the calculation of the liability. There is also some judgement in the measurement of the fair
value of pension assets giving rise to a risk of material misstatement in their valuation.
The nature of the funding regime in the U.K. creates uncertainty around the size and timing of cash that Atkins will
be required to pay to the pension schemes. The scheduled contribution to the Atkins Pension Plan and the
Railways Pension Scheme from Atkins totaled £38.7 million (or approximately CA$66.6 million) for the year
ending December 31, 2020, with annual contributions escalating by 2.5% each year until March 31, 2026. If Atkins
is required to increase cash funding contributions, this will reduce the availability of such funds for other corporate
purposes and limit its ability to invest in growth. Deteriorating economic conditions may result in significant
increases in Atkins’ funding obligations, which could restrict available cash for Atkins’ operations, capital
expenditures and other requirements, and have a material adverse effect on Atkins’ business, financial condition
and results of operations.
The Company’s post-employment benefit obligations, including its pension-related liabilities, and its future
payment obligations thereunder could restrict cash available for the Company’s operations, capital expenditures
and other requirements and may materially adversely affect its financial condition and liquidity.
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Working capital requirements
RISKS RELATED TO LITIGATION, INVESTIGATIONS, SETTLEMENTS AND REGULATORY MATTERS
SNC-Lavalin may require significant amounts of working capital to finance the purchase of materials and/or the
performance of engineering, construction and other work on certain projects before it receives payment from
clients. In some cases, the Company is contractually obligated to its clients to fund working capital on projects.
Increases in working capital requirements could negatively impact SNC-Lavalin’s business, financial condition and
cash flows.
Additionally, the Company could temporarily experience a liquidity shortfall if it is unable to access its cash
balances, short- term investments or draw on facilities under its Credit Agreement to meet the Company’s working
capital requirements. SNC-Lavalin’s cash balances and short-term investments are in accounts held by banks and
financial institutions, and some of the Company’s deposits exceed available insurance. There is a risk that such
banks and financial institutions may, in the future, go into bankruptcy or forced receivership, or that their assets
may be seized by their governments, which may cause the Company to experience a temporary liquidity shortfall
or fail to recover its deposits in excess of available insurance, if any.
A significant deterioration of the current global economic and credit market environment could challenge
SNC-Lavalin’s efforts to maintain a diversified asset allocation with creditworthy financial institutions.
refuse or be unable to pay.
In addition, SNC-Lavalin may invest some of its cash in longer-term investment opportunities, including the
acquisition of other entities or operations, the reduction of certain liabilities such as unfunded pension liabilities
and/or repurchases of the Company’s outstanding shares. To the extent the Company uses cash for such other
purposes, the amount of cash available for the working capital needs described above would be reduced.
Collection from customers
SNC-Lavalin is subject to the risk of loss due to clients’ inability to fulfill their obligations with respect to trade
receivables, contracts in progress and other financial assets. A client’s inability to fulfill its obligations could have
an adverse impact on the Company’s financial condition and profitability.
In addition, the Company typically bills clients for engineering services in arrears and is, therefore, subject to its
clients delaying or failing to pay invoices after the Company has already committed resources to their projects. If
one or more clients delays in paying or fails to pay a significant amount of the Company’s outstanding
receivables, it could have a material adverse impact on the Company’s liquidity, financial condition and results of
operations.
Impairment of goodwill and other assets
In accordance with IFRS, goodwill is assessed for impairment no less frequently than on an annual basis by
determining whether the recoverable amount of a cash-generating unit (“CGU”) or group of CGUs exceeds its
carrying amount. Determining whether goodwill is impaired requires an estimation of the value in use of the CGU
or group of CGU to which goodwill has been allocated, requiring management’s estimates and judgments that are
inherently subjective and uncertain, and thus may change over time. The key assumptions required for the value
in use estimation are the future cash flows growth rate and the discount rate. The determination of these
estimated cash flows requires the exercise of judgment, which might result in significant variances in the carrying
amount of these assets.
The Company cannot guarantee that new events or unfavourable circumstances will not take place that would
lead it to reassess the value of goodwill and record a significant goodwill impairment loss, which could have a
material adverse effect on the Company’s results of operations and financial position.
Financial assets, including the Company’s investments, other than those accounted for at fair value, are assessed
for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired
when there is objective evidence that, as a result of one or more events that occurred after the initial recognition
of the financial asset, the estimated future cash flows of the investment have been affected. In such instance, the
Company may be required to reduce carrying values to their estimated fair value. The inherent subjectivity of the
Company’s estimates of future cash flows could have a significant impact on its analysis. Any future write-offs or
write-downs of assets or in the carrying value of the Company’s investments could also have a material adverse
effect on its financial condition or results of operations.
The impact on the Company of legal and regulatory proceedings, investigations and litigation settlements
SNC-Lavalin itself, its subsidiaries or the entities through which Capital makes its investments, are or can be party
to litigation in the normal course of business. Since the Company engages in engineering and construction, and
O&M activities for facilities and projects where design, construction or systems failures can result in substantial
injury or damage to employees or others, the Company is exposed to substantial claims and litigation if there is a
failure at any such project. Such claims could relate to, among other things, personal injury, loss of life, business
interruption, property damage, pollution, and environmental damage and be brought by clients or third parties,
such as those who use or reside near clients’ projects. SNC-Lavalin can also be exposed to claims if it agreed that
a project will achieve certain performance standards or satisfy certain technical requirements and those standards
or requirements are not met. In many contracts with clients, subcontractors, and vendors, the Company agrees to
retain or assume potential liabilities for damages, penalties, losses and other exposures relating to projects that
could result in claims that greatly exceed the anticipated profits relating to those contracts. In addition, while
clients and subcontractors may agree to indemnify the Company against certain liabilities, such third parties may
In addition, in the past, following periods of volatility in the market price of a particular company’s securities,
securities class action litigation has often been brought against that company. SNC-Lavalin has been in the past
and it is currently a defendant in two shareholder-instituted class action proceedings based on alleged disclosure
failures under applicable securities legislation. The Company cannot provide any assurance that similar litigation
will not occur in the future with respect to it. Such litigation could result in substantial costs and a diversion of
management’s attention and resources, which could have a material adverse effect upon the Company’s
business, operating results, and financial condition.
Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of these and other
related proceedings generally, (b) determine if the amount included in the Company’s provisions is sufficient or
(c) determine the amount of any potential losses, if any, that may be incurred in connection with any final
judgment on these matters.
SNC-Lavalin maintains insurance coverage for various aspects of its business and operations. The Company’s
insurance programs have varying coverage limits and maximums, and insurance companies may seek to deny
claims the Company might make. In addition, SNC-Lavalin has elected to retain a portion of losses that may occur
through the use of various deductibles, limits and retentions under these programs. As a result, the Company may
be subject to future liability in respect of lawsuits or investigations for which it is only partially insured, or
completely uninsured.
In addition, the nature of the Company’s business sometimes results in clients, subcontractors, and vendors
presenting claims for, among other things, recovery of costs related to certain projects. Similarly, SNC-Lavalin
occasionally presents change orders and other claims to clients, subcontractors, and vendors. If the Company
fails to properly document the nature of claims and change orders or is otherwise unsuccessful in negotiating
reasonable settlements with clients, subcontractors and vendors, the Company could incur cost overruns,
reduced profits or, in some cases, a loss for a project. A failure to recover promptly on these types of claims could
have a material adverse impact on SNC-Lavalin’s liquidity and financial results. Additionally, irrespective of how
well the Company documents the nature of its claims and change orders, the cost to prosecute and defend claims
and change orders can be significant.
In addition, a number of project contracts have warranty periods and/or outstanding claims that may result in legal
proceedings that extend beyond the actual performance and completion of the projects.
Litigation and regulatory proceedings are subject to inherent uncertainties and unfavourable rulings can and do
occur. Pending or future claims against SNC-Lavalin could result in professional liability, product liability, criminal
liability, warranty obligations, and other liabilities which, to the extent the Company is not insured against a loss or
its insurer fails to provide coverage, could have a material adverse impact on the Company’s business, financial
condition and results of operations.
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Working capital requirements
RISKS RELATED TO LITIGATION, INVESTIGATIONS, SETTLEMENTS AND REGULATORY MATTERS
SNC-Lavalin may require significant amounts of working capital to finance the purchase of materials and/or the
performance of engineering, construction and other work on certain projects before it receives payment from
clients. In some cases, the Company is contractually obligated to its clients to fund working capital on projects.
Increases in working capital requirements could negatively impact SNC-Lavalin’s business, financial condition and
cash flows.
Additionally, the Company could temporarily experience a liquidity shortfall if it is unable to access its cash
balances, short- term investments or draw on facilities under its Credit Agreement to meet the Company’s working
capital requirements. SNC-Lavalin’s cash balances and short-term investments are in accounts held by banks and
financial institutions, and some of the Company’s deposits exceed available insurance. There is a risk that such
banks and financial institutions may, in the future, go into bankruptcy or forced receivership, or that their assets
may be seized by their governments, which may cause the Company to experience a temporary liquidity shortfall
or fail to recover its deposits in excess of available insurance, if any.
A significant deterioration of the current global economic and credit market environment could challenge
SNC-Lavalin’s efforts to maintain a diversified asset allocation with creditworthy financial institutions.
In addition, SNC-Lavalin may invest some of its cash in longer-term investment opportunities, including the
acquisition of other entities or operations, the reduction of certain liabilities such as unfunded pension liabilities
and/or repurchases of the Company’s outstanding shares. To the extent the Company uses cash for such other
purposes, the amount of cash available for the working capital needs described above would be reduced.
Collection from customers
SNC-Lavalin is subject to the risk of loss due to clients’ inability to fulfill their obligations with respect to trade
receivables, contracts in progress and other financial assets. A client’s inability to fulfill its obligations could have
an adverse impact on the Company’s financial condition and profitability.
In addition, the Company typically bills clients for engineering services in arrears and is, therefore, subject to its
clients delaying or failing to pay invoices after the Company has already committed resources to their projects. If
one or more clients delays in paying or fails to pay a significant amount of the Company’s outstanding
receivables, it could have a material adverse impact on the Company’s liquidity, financial condition and results of
operations.
Impairment of goodwill and other assets
In accordance with IFRS, goodwill is assessed for impairment no less frequently than on an annual basis by
determining whether the recoverable amount of a cash-generating unit (“CGU”) or group of CGUs exceeds its
carrying amount. Determining whether goodwill is impaired requires an estimation of the value in use of the CGU
or group of CGU to which goodwill has been allocated, requiring management’s estimates and judgments that are
inherently subjective and uncertain, and thus may change over time. The key assumptions required for the value
in use estimation are the future cash flows growth rate and the discount rate. The determination of these
estimated cash flows requires the exercise of judgment, which might result in significant variances in the carrying
amount of these assets.
The Company cannot guarantee that new events or unfavourable circumstances will not take place that would
lead it to reassess the value of goodwill and record a significant goodwill impairment loss, which could have a
material adverse effect on the Company’s results of operations and financial position.
Financial assets, including the Company’s investments, other than those accounted for at fair value, are assessed
for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired
when there is objective evidence that, as a result of one or more events that occurred after the initial recognition
of the financial asset, the estimated future cash flows of the investment have been affected. In such instance, the
Company may be required to reduce carrying values to their estimated fair value. The inherent subjectivity of the
Company’s estimates of future cash flows could have a significant impact on its analysis. Any future write-offs or
write-downs of assets or in the carrying value of the Company’s investments could also have a material adverse
effect on its financial condition or results of operations.
The impact on the Company of legal and regulatory proceedings, investigations and litigation settlements
SNC-Lavalin itself, its subsidiaries or the entities through which Capital makes its investments, are or can be party
to litigation in the normal course of business. Since the Company engages in engineering and construction, and
O&M activities for facilities and projects where design, construction or systems failures can result in substantial
injury or damage to employees or others, the Company is exposed to substantial claims and litigation if there is a
failure at any such project. Such claims could relate to, among other things, personal injury, loss of life, business
interruption, property damage, pollution, and environmental damage and be brought by clients or third parties,
such as those who use or reside near clients’ projects. SNC-Lavalin can also be exposed to claims if it agreed that
a project will achieve certain performance standards or satisfy certain technical requirements and those standards
or requirements are not met. In many contracts with clients, subcontractors, and vendors, the Company agrees to
retain or assume potential liabilities for damages, penalties, losses and other exposures relating to projects that
could result in claims that greatly exceed the anticipated profits relating to those contracts. In addition, while
clients and subcontractors may agree to indemnify the Company against certain liabilities, such third parties may
refuse or be unable to pay.
In addition, in the past, following periods of volatility in the market price of a particular company’s securities,
securities class action litigation has often been brought against that company. SNC-Lavalin has been in the past
and it is currently a defendant in two shareholder-instituted class action proceedings based on alleged disclosure
failures under applicable securities legislation. The Company cannot provide any assurance that similar litigation
will not occur in the future with respect to it. Such litigation could result in substantial costs and a diversion of
management’s attention and resources, which could have a material adverse effect upon the Company’s
business, operating results, and financial condition.
Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of these and other
related proceedings generally, (b) determine if the amount included in the Company’s provisions is sufficient or
(c) determine the amount of any potential losses, if any, that may be incurred in connection with any final
judgment on these matters.
SNC-Lavalin maintains insurance coverage for various aspects of its business and operations. The Company’s
insurance programs have varying coverage limits and maximums, and insurance companies may seek to deny
claims the Company might make. In addition, SNC-Lavalin has elected to retain a portion of losses that may occur
through the use of various deductibles, limits and retentions under these programs. As a result, the Company may
be subject to future liability in respect of lawsuits or investigations for which it is only partially insured, or
completely uninsured.
In addition, the nature of the Company’s business sometimes results in clients, subcontractors, and vendors
presenting claims for, among other things, recovery of costs related to certain projects. Similarly, SNC-Lavalin
occasionally presents change orders and other claims to clients, subcontractors, and vendors. If the Company
fails to properly document the nature of claims and change orders or is otherwise unsuccessful in negotiating
reasonable settlements with clients, subcontractors and vendors, the Company could incur cost overruns,
reduced profits or, in some cases, a loss for a project. A failure to recover promptly on these types of claims could
have a material adverse impact on SNC-Lavalin’s liquidity and financial results. Additionally, irrespective of how
well the Company documents the nature of its claims and change orders, the cost to prosecute and defend claims
and change orders can be significant.
In addition, a number of project contracts have warranty periods and/or outstanding claims that may result in legal
proceedings that extend beyond the actual performance and completion of the projects.
Litigation and regulatory proceedings are subject to inherent uncertainties and unfavourable rulings can and do
occur. Pending or future claims against SNC-Lavalin could result in professional liability, product liability, criminal
liability, warranty obligations, and other liabilities which, to the extent the Company is not insured against a loss or
its insurer fails to provide coverage, could have a material adverse impact on the Company’s business, financial
condition and results of operations.
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The Company is subject to ongoing investigations that could subject the Company to criminal and administrative
enforcement actions, civil actions and sanctions, fines and other penalties, some of which may be significant.
These investigations, and potential results thereof, could harm the Company’s reputation, result in suspension,
prohibition or debarment of the Company from participating in certain projects, reduce its revenues and net
income and adversely affect its business. The Company understands that there are investigations by various
authorities which may remain ongoing in connection with certain legacy matters (unrelated to the settlements
described below) in various jurisdictions, including, without limitation, Algeria. The Company also understands that
a Royal Canadian Mounted Police (the “RCMP”) investigation relating to alleged payments in connection with a
2002 contract for the refurbishment of the Jacques Cartier Bridge by a consortium which included SNC-Lavalin
and which led to a guilty plea by the former head of the Canada Federal Bridges Corporation in 2017, continues
and its scope may include the Company. The Company is currently unable to determine when any of these
investigations will be completed or whether other investigations of the Company by these or other authorities will
be initiated or the scope of current investigations broadened. The Company continues to cooperate and
communicate with authorities in connection with all ongoing investigations.
If regulatory, enforcement or administrative authorities or third parties determine to take action against the
Company or to sanction the Company in connection with possible violations of law, contracts or otherwise as a
result of ongoing or future investigations, the consequences of any such sanctions or other actions, whether
actual or alleged, could require the Company to pay material fines or damages, consent to injunctions on future
conduct or lead to other penalties, including temporary or permanent, mandatory or discretionary suspension,
prohibition or debarment from participating in projects, or the revocation of authorizations or certifications, by
certain administrative organizations or by governments (such as the Government of Canada and/or the
Government of Quebec) under applicable procurement laws, regulations, policies or practices. The Company
derives a significant percentage of its annual global revenue from government and government-related contracts.
Further, public and private sector bid processes in some instances assess whether the bidder, or an affiliate
thereof, has ever been the object of any investigations, or sanctions or other actions resulting therefrom. In such
instances, if a member of the Company’s group must answer affirmatively to a query as to past or current
investigations, or sanctions or other actions resulting therefrom, such answer may affect that entity’s ability to be
considered for the applicable project. In addition, the Company may not win contracts that it has bid upon due to a
client’s perception of the Company’s reputation and/or perceived reputational advantages held by competitors as
a result of such investigations, sanctions or other actions. Loss of bidding opportunities resulting from such
investigations, sanctions or other actions, whether discretionary (including as a result of reputational factors) or
mandatory, from participating in certain government, government-related and private contracts (in Canada,
Canadian provinces or elsewhere) could materially adversely affect the Company’s business, financial condition
and liquidity and the market price of the Company’s issued and traded securities.
The outcomes of ongoing or future investigations could also result in, among other things, (i) covenant defaults
under various project contracts, (ii) third party claims, which may include claims for special, indirect, derivative or
consequential damages, or (iii) adverse consequences on the Company’s ability to secure or continue its own
financing, or to continue or secure financing for current or future projects, any of which could materially adversely
affect the Company’s business, financial condition and liquidity and the market price of the Company’s issued and
traded securities. In addition, these investigations and outcomes of these investigations and any negative publicity
associated therewith, could damage SNC-Lavalin’s reputation and ability to do business.
Due to the uncertainties related to the outcome of ongoing or future investigations, the Company is currently
unable to reliably estimate an amount of potential liabilities or a range of potential liabilities, if any, in connection
with any of these investigations.
The Company’s senior management and Board of Directors have been required to devote significant time and
resources to the investigations described above and ongoing related matters, as well as the investigations leading
to the settlements described below, which have distracted and may continue to distract from the conduct of the
Company’s daily business, and significant expenses have been and may continue to be incurred in connection
with such investigations including substantial fees of lawyers and other advisors. In addition, the Company and/or
other employees or additional former employees of the Company could become the subject of these or other
investigations by law enforcement and/or regulatory authorities in respect of the matters described above or
below, or other matters, which, in turn, could require the devotion of additional time of senior management and the
diversion or utilization of other resources.
In addition, SNC-Lavalin has entered in a number of settlement agreements, including in December 2019 with the
Public Prosecution Service of Canada (the “PPSC”) in connection with charges against the Company and its
indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. under Section 380 of the
Criminal Code (Canada) (the “Criminal Code”) and Section 3(1)(b) of the Corruption of Foreign Public Officials Act
(Canada) (the “Charges”). As part of the PPSC Settlement, SNC-Lavalin Construction Inc. accepted a plea of
guilty to a single charge of fraud (the “Plea”), the Charges were withdrawn and SNC-Lavalin Construction Inc.
agreed to pay a fine in the amount of $280 million, payable in equal installments over 5 years, and to be subject to
a three-year probation order. The Company estimated the net present cost of these installments at $257.3 million
at the date of settlement. The Company will comply with the probation order for the three-year period. The Plea
may result in, among other things, (i) breaches and/or events of default under various project agreements giving
rise to discretionary termination rights in favour of the counterparties thereto, (ii) third party claims, which may
include claims for special, indirect, derivative or consequential damages, or (iii) adverse consequences on the
Company’s ability to secure financing, or to continue to secure financing for current or future projects, any of
which could materially adversely affect the Company’s business, financial condition and liquidity and the market
prices of the Company’s publicly traded securities.
In addition, potential consequences of the Plea could include, in respect of the Company or one or more of its
subsidiaries, suspension, prohibition or debarment from participating in public or private sector projects or bids, or
the revocation of authorizations or certifications, by certain governments or by certain administrative
organizations. While the Company does not anticipate that the Plea will affect the eligibility of the Company to bid
on future projects that are aligned with its newly announced strategic direction, possible suspension, prohibition,
debarment or loss of bidding opportunities or the revocation of authorizations or certifications in the short term, as
a result of the Plea, could have a short term material adverse effect on the Company’s business, financial
condition and liquidity and the market prices of the Company’s publicly traded securities.
The Company cannot predict if any other actions may be taken by any other applicable government or authority or
the Company’s customers or other third parties as a result of the Plea.
As previously disclosed, the Company also entered into an administrative agreement with the Canadian
government under the Integrity Regime for procurement and real property transactions in connection with the
Charges, which terminated on December 18, 2020. The Company has also entered into a settlement agreement
with the World Bank Group in connection with the previously announced investigations by the World Bank Group
relating to a project in Bangladesh and a project in Cambodia.
Failure by the Company to abide by the terms of any of the above-described settlement agreements could result
in serious consequences for the Company, including new sanctions, legal actions and/or suspension from
eligibility to carry on business with the government or agency involved or to work on projects funded by them. The
Company is taking steps that are expected to mitigate these risks.
A description of the most material legal and regulatory proceedings, investigations and settlements involving
SNC‑Lavalin and its subsidiaries is set forth in Note 33 to the 2020 Annual Financial Statements.
Further regulatory developments as well as employee, agent or partner misconduct or failure to comply
with anti-bribery and other government laws and regulations
The Company is subject to various rules, regulations, laws, and other legal requirements, enforced by
governments or other authorities. Further regulatory developments, namely abrupt changes in foreign government
policies and regulations, could have a significant adverse impact on the Company’s results.
In addition, misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities
by one of the Company’s employees, agents or partners could have a significant negative impact on
SNC-Lavalin’s business and reputation. Such misconduct could include the failure to comply with government
procurement regulations, regulations regarding the protection of classified information, regulations prohibiting
bribery and other foreign corrupt practices, regulations regarding the pricing of labour and other costs in
government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal control
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The Company is subject to ongoing investigations that could subject the Company to criminal and administrative
enforcement actions, civil actions and sanctions, fines and other penalties, some of which may be significant.
These investigations, and potential results thereof, could harm the Company’s reputation, result in suspension,
prohibition or debarment of the Company from participating in certain projects, reduce its revenues and net
income and adversely affect its business. The Company understands that there are investigations by various
authorities which may remain ongoing in connection with certain legacy matters (unrelated to the settlements
described below) in various jurisdictions, including, without limitation, Algeria. The Company also understands that
a Royal Canadian Mounted Police (the “RCMP”) investigation relating to alleged payments in connection with a
2002 contract for the refurbishment of the Jacques Cartier Bridge by a consortium which included SNC-Lavalin
and which led to a guilty plea by the former head of the Canada Federal Bridges Corporation in 2017, continues
and its scope may include the Company. The Company is currently unable to determine when any of these
investigations will be completed or whether other investigations of the Company by these or other authorities will
be initiated or the scope of current investigations broadened. The Company continues to cooperate and
communicate with authorities in connection with all ongoing investigations.
If regulatory, enforcement or administrative authorities or third parties determine to take action against the
Company or to sanction the Company in connection with possible violations of law, contracts or otherwise as a
result of ongoing or future investigations, the consequences of any such sanctions or other actions, whether
actual or alleged, could require the Company to pay material fines or damages, consent to injunctions on future
conduct or lead to other penalties, including temporary or permanent, mandatory or discretionary suspension,
prohibition or debarment from participating in projects, or the revocation of authorizations or certifications, by
certain administrative organizations or by governments (such as the Government of Canada and/or the
Government of Quebec) under applicable procurement laws, regulations, policies or practices. The Company
derives a significant percentage of its annual global revenue from government and government-related contracts.
Further, public and private sector bid processes in some instances assess whether the bidder, or an affiliate
thereof, has ever been the object of any investigations, or sanctions or other actions resulting therefrom. In such
instances, if a member of the Company’s group must answer affirmatively to a query as to past or current
investigations, or sanctions or other actions resulting therefrom, such answer may affect that entity’s ability to be
considered for the applicable project. In addition, the Company may not win contracts that it has bid upon due to a
client’s perception of the Company’s reputation and/or perceived reputational advantages held by competitors as
a result of such investigations, sanctions or other actions. Loss of bidding opportunities resulting from such
investigations, sanctions or other actions, whether discretionary (including as a result of reputational factors) or
mandatory, from participating in certain government, government-related and private contracts (in Canada,
Canadian provinces or elsewhere) could materially adversely affect the Company’s business, financial condition
and liquidity and the market price of the Company’s issued and traded securities.
The outcomes of ongoing or future investigations could also result in, among other things, (i) covenant defaults
under various project contracts, (ii) third party claims, which may include claims for special, indirect, derivative or
consequential damages, or (iii) adverse consequences on the Company’s ability to secure or continue its own
financing, or to continue or secure financing for current or future projects, any of which could materially adversely
affect the Company’s business, financial condition and liquidity and the market price of the Company’s issued and
traded securities. In addition, these investigations and outcomes of these investigations and any negative publicity
associated therewith, could damage SNC-Lavalin’s reputation and ability to do business.
Due to the uncertainties related to the outcome of ongoing or future investigations, the Company is currently
unable to reliably estimate an amount of potential liabilities or a range of potential liabilities, if any, in connection
with any of these investigations.
The Company’s senior management and Board of Directors have been required to devote significant time and
resources to the investigations described above and ongoing related matters, as well as the investigations leading
to the settlements described below, which have distracted and may continue to distract from the conduct of the
Company’s daily business, and significant expenses have been and may continue to be incurred in connection
with such investigations including substantial fees of lawyers and other advisors. In addition, the Company and/or
other employees or additional former employees of the Company could become the subject of these or other
investigations by law enforcement and/or regulatory authorities in respect of the matters described above or
below, or other matters, which, in turn, could require the devotion of additional time of senior management and the
diversion or utilization of other resources.
In addition, SNC-Lavalin has entered in a number of settlement agreements, including in December 2019 with the
Public Prosecution Service of Canada (the “PPSC”) in connection with charges against the Company and its
indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. under Section 380 of the
Criminal Code (Canada) (the “Criminal Code”) and Section 3(1)(b) of the Corruption of Foreign Public Officials Act
(Canada) (the “Charges”). As part of the PPSC Settlement, SNC-Lavalin Construction Inc. accepted a plea of
guilty to a single charge of fraud (the “Plea”), the Charges were withdrawn and SNC-Lavalin Construction Inc.
agreed to pay a fine in the amount of $280 million, payable in equal installments over 5 years, and to be subject to
a three-year probation order. The Company estimated the net present cost of these installments at $257.3 million
at the date of settlement. The Company will comply with the probation order for the three-year period. The Plea
may result in, among other things, (i) breaches and/or events of default under various project agreements giving
rise to discretionary termination rights in favour of the counterparties thereto, (ii) third party claims, which may
include claims for special, indirect, derivative or consequential damages, or (iii) adverse consequences on the
Company’s ability to secure financing, or to continue to secure financing for current or future projects, any of
which could materially adversely affect the Company’s business, financial condition and liquidity and the market
prices of the Company’s publicly traded securities.
In addition, potential consequences of the Plea could include, in respect of the Company or one or more of its
subsidiaries, suspension, prohibition or debarment from participating in public or private sector projects or bids, or
the revocation of authorizations or certifications, by certain governments or by certain administrative
organizations. While the Company does not anticipate that the Plea will affect the eligibility of the Company to bid
on future projects that are aligned with its newly announced strategic direction, possible suspension, prohibition,
debarment or loss of bidding opportunities or the revocation of authorizations or certifications in the short term, as
a result of the Plea, could have a short term material adverse effect on the Company’s business, financial
condition and liquidity and the market prices of the Company’s publicly traded securities.
The Company cannot predict if any other actions may be taken by any other applicable government or authority or
the Company’s customers or other third parties as a result of the Plea.
As previously disclosed, the Company also entered into an administrative agreement with the Canadian
government under the Integrity Regime for procurement and real property transactions in connection with the
Charges, which terminated on December 18, 2020. The Company has also entered into a settlement agreement
with the World Bank Group in connection with the previously announced investigations by the World Bank Group
relating to a project in Bangladesh and a project in Cambodia.
Failure by the Company to abide by the terms of any of the above-described settlement agreements could result
in serious consequences for the Company, including new sanctions, legal actions and/or suspension from
eligibility to carry on business with the government or agency involved or to work on projects funded by them. The
Company is taking steps that are expected to mitigate these risks.
A description of the most material legal and regulatory proceedings, investigations and settlements involving
SNC‑Lavalin and its subsidiaries is set forth in Note 33 to the 2020 Annual Financial Statements.
Further regulatory developments as well as employee, agent or partner misconduct or failure to comply
with anti-bribery and other government laws and regulations
The Company is subject to various rules, regulations, laws, and other legal requirements, enforced by
governments or other authorities. Further regulatory developments, namely abrupt changes in foreign government
policies and regulations, could have a significant adverse impact on the Company’s results.
In addition, misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities
by one of the Company’s employees, agents or partners could have a significant negative impact on
SNC-Lavalin’s business and reputation. Such misconduct could include the failure to comply with government
procurement regulations, regulations regarding the protection of classified information, regulations prohibiting
bribery and other foreign corrupt practices, regulations regarding the pricing of labour and other costs in
government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal control
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over financial reporting, environmental laws and any other applicable laws or regulations. For example, the
CFPOA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries
from making improper payments to foreign officials for the purpose of obtaining or retaining business. In addition,
SNC-Lavalin provides services that may be highly sensitive or that could relate to critical national security matters;
if a security breach were to occur, the Company’s ability to procure future government contracts could be severely
limited.
SNC-Lavalin’s policies mandate compliance with these regulations and laws, and the Company takes precautions
intended to prevent and detect misconduct. However, since internal controls are subject to inherent limitations,
including human error, it is possible that these controls could be intentionally circumvented or become inadequate
because of changed conditions. As a result, SNC-Lavalin cannot assure that its controls will protect the Company
from reckless or criminal acts committed by employees, agents or partners. Failure to comply with applicable laws
or regulations or acts of misconduct could subject SNC-Lavalin to fines and penalties, loss of security clearances,
and suspension, prohibition or debarment from contracting, any or all of which could harm the Company’s
reputation, subject the Company to criminal and administrative enforcement actions and civil actions and have a
negative impact on SNC-Lavalin’s business.
Reputation of the Company
The consequence of reputational risk is a negative impact on the Company’s public image, which may cause the
cancellation of current projects and influence the Company’s ability to obtain future projects. Reputational risk
may arise under many situations including, among others, quality or performance issues on the Company’s
projects, a poor health and safety record, alleged or proven non-compliance with laws or regulations by the
Company’s employees, agents, subcontractors, suppliers and/or partners, and creation of pollution and
contamination.
RISKS RELATING TO COMPLIANCE AND FINANCIAL REPORTING
Inherent limitations to the Company’s control framework
SNC-Lavalin maintains accounting systems and internal controls over its financial reporting and disclosure
controls and procedures. There are inherent limitations to any control framework, as controls can be circumvented
by acts of individuals, intentional or not, by collusion of two or more individuals, by management override of
controls, by lapses in judgment and breakdowns resulting from human error. There are no systems or controls
that can provide absolute assurance that all fraud, errors, circumvention of controls or omission of disclosure can
and will be prevented or detected. Such fraud, errors, circumvention of controls or omission of disclosure could
result in a material misstatement of financial information. Also, projections of any evaluation of the effectiveness of
controls to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or procedures may deteriorate.
Environmental laws and regulations
SNC-Lavalin is exposed to various environmental risks and is required to comply with environmental laws and
regulations which vary from country to country and are subject to change. Any non-compliance by the Company
with environmental laws and regulations could result in penalties, lawsuits and potential harm to its reputation.
The Company manages several legacy sites for which the Company has potential exposure to the costs of
environmental remediation and possible harm to neighboring properties and communities. While the Company is
taking steps to manage this risk and has taken provisions in its financial statements for the related risk and
expense, there can be no assurance that it will not be subject to claims for damages, remediation and other
related matters, and its provisions may not fully cover any such future claim or expense.
Growing concerns about climate change may also result in the imposition of additional environmental regulations.
Legislation, international protocols, regulation or other restrictions on emissions could result in increased
compliance costs for the Company and its clients, including those who are involved in the exploration, production
or refining of fossil fuels, emit greenhouse gases through the combustion of fossil fuels or emit greenhouse gases
through the mining, manufacture, utilization or production of materials or goods. Such policy changes could
increase the costs of projects for clients or, in some cases, prevent a project from going forward, thereby
potentially reducing the need for the Company’s services, which would in turn have a material adverse impact on
the Company’s business, financial condition and results of operations. However, these changes could also
increase the pace of projects, such as carbon capture or storage projects, that could have a positive impact on the
Company’s business. SNC-Lavalin cannot predict when or whether any of these various proposals may be
enacted or what their effect will be on the Company or on its customers.
GLOBAL / MACROECONOMIC RISKS
Brexit
On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the
European Union (E.U.), commonly referred to as “Brexit”. Although the U.K. officially left the E.U. trading bloc on
January 31, 2020, the U.K. and the E.U. agreed to maintain their then existing relationship broadly unchanged
until December 31, 2020 in order to attempt to agree the definitive terms of their future relationship. At the end of
2020, the U.K. and the E.U. agreed to a deal that sets out the new rules for how the U.K. and the E.U. countries
will, among other things, coexist, work and trade together.
Brexit could result in increased geopolitical and economic risks, currency exchange fluctuations, border
disturbances, and could cause disruptions to and create uncertainty surrounding the Company’s businesses,
including affecting the Company’s relationships with existing and future customers, suppliers and, given the
inability for individuals to continue to freely work and live between the U.K. and the E.U., employees, which could
in turn have a material adverse effect on the Company’s financial results and operations. There could also be
greater restrictions on imports and exports between the U.K. and E.U. countries and could also result in increased
regulatory and taxation complexities. These changes may adversely affect the Company’s operations and
financial results.
Global economic conditions
Fluctuations in global economic conditions, including the continued impact of the COVID-19 pandemic, may have
an impact on clients’ willingness and ability to fund their projects. These conditions could make it difficult for the
Company’s clients to accurately forecast and plan future business trends and activities, thereby causing clients to
slow or even curb spending on the Company’s services, or seek contract terms more favourable to them.
SNC‑Lavalin’s government clients may face budget deficits that prohibit them from funding proposed and existing
projects or that cause them to exercise their right to terminate contracts with little or no prior notice. Furthermore,
any financial difficulties suffered by the Company’s partners, subcontractors or suppliers could increase cost or
adversely impact project schedules. These economic conditions continue to reduce the availability of liquidity and
credit to fund or support the continuation and expansion of industrial business operations worldwide. Volatile
financial market conditions and adverse credit market conditions could adversely affect clients’, partners’ or the
Company’s own borrowing capacity, which support the continuation and expansion of projects worldwide, and
could result in contract cancellations or suspensions, project delays, payment delays or defaults by the
Company’s clients. SNC-Lavalin’s ability to operate or expand its business would be limited if, in the future, the
Company is unable to access sufficient credit capacity, including capital market funding, bank credit, such as
letters of credit, and surety bonding on favourable terms or at all. These disruptions could materially impact the
Company’s remaining performance obligations, revenues and net income.
Fluctuations in commodity prices
Commodity prices can affect SNC-Lavalin’s clients in a number of ways. For example, for those clients that
produce commodity products, fluctuations in price can have a direct effect on their profitability and cash flow and,
therefore, their willingness to continue to invest or make new capital investments. To the extent commodity prices
decline and the Company’s clients defer new investments or cancel or delay existing projects, the demand for the
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over financial reporting, environmental laws and any other applicable laws or regulations. For example, the
CFPOA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries
from making improper payments to foreign officials for the purpose of obtaining or retaining business. In addition,
SNC-Lavalin provides services that may be highly sensitive or that could relate to critical national security matters;
if a security breach were to occur, the Company’s ability to procure future government contracts could be severely
limited.
SNC-Lavalin’s policies mandate compliance with these regulations and laws, and the Company takes precautions
intended to prevent and detect misconduct. However, since internal controls are subject to inherent limitations,
including human error, it is possible that these controls could be intentionally circumvented or become inadequate
because of changed conditions. As a result, SNC-Lavalin cannot assure that its controls will protect the Company
from reckless or criminal acts committed by employees, agents or partners. Failure to comply with applicable laws
or regulations or acts of misconduct could subject SNC-Lavalin to fines and penalties, loss of security clearances,
and suspension, prohibition or debarment from contracting, any or all of which could harm the Company’s
reputation, subject the Company to criminal and administrative enforcement actions and civil actions and have a
negative impact on SNC-Lavalin’s business.
Reputation of the Company
The consequence of reputational risk is a negative impact on the Company’s public image, which may cause the
cancellation of current projects and influence the Company’s ability to obtain future projects. Reputational risk
may arise under many situations including, among others, quality or performance issues on the Company’s
projects, a poor health and safety record, alleged or proven non-compliance with laws or regulations by the
Company’s employees, agents, subcontractors, suppliers and/or partners, and creation of pollution and
contamination.
RISKS RELATING TO COMPLIANCE AND FINANCIAL REPORTING
Inherent limitations to the Company’s control framework
SNC-Lavalin maintains accounting systems and internal controls over its financial reporting and disclosure
controls and procedures. There are inherent limitations to any control framework, as controls can be circumvented
by acts of individuals, intentional or not, by collusion of two or more individuals, by management override of
controls, by lapses in judgment and breakdowns resulting from human error. There are no systems or controls
that can provide absolute assurance that all fraud, errors, circumvention of controls or omission of disclosure can
and will be prevented or detected. Such fraud, errors, circumvention of controls or omission of disclosure could
result in a material misstatement of financial information. Also, projections of any evaluation of the effectiveness of
controls to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or procedures may deteriorate.
Environmental laws and regulations
SNC-Lavalin is exposed to various environmental risks and is required to comply with environmental laws and
regulations which vary from country to country and are subject to change. Any non-compliance by the Company
with environmental laws and regulations could result in penalties, lawsuits and potential harm to its reputation.
The Company manages several legacy sites for which the Company has potential exposure to the costs of
environmental remediation and possible harm to neighboring properties and communities. While the Company is
taking steps to manage this risk and has taken provisions in its financial statements for the related risk and
expense, there can be no assurance that it will not be subject to claims for damages, remediation and other
related matters, and its provisions may not fully cover any such future claim or expense.
Growing concerns about climate change may also result in the imposition of additional environmental regulations.
Legislation, international protocols, regulation or other restrictions on emissions could result in increased
compliance costs for the Company and its clients, including those who are involved in the exploration, production
or refining of fossil fuels, emit greenhouse gases through the combustion of fossil fuels or emit greenhouse gases
through the mining, manufacture, utilization or production of materials or goods. Such policy changes could
increase the costs of projects for clients or, in some cases, prevent a project from going forward, thereby
potentially reducing the need for the Company’s services, which would in turn have a material adverse impact on
the Company’s business, financial condition and results of operations. However, these changes could also
increase the pace of projects, such as carbon capture or storage projects, that could have a positive impact on the
Company’s business. SNC-Lavalin cannot predict when or whether any of these various proposals may be
enacted or what their effect will be on the Company or on its customers.
GLOBAL / MACROECONOMIC RISKS
Brexit
On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the
European Union (E.U.), commonly referred to as “Brexit”. Although the U.K. officially left the E.U. trading bloc on
January 31, 2020, the U.K. and the E.U. agreed to maintain their then existing relationship broadly unchanged
until December 31, 2020 in order to attempt to agree the definitive terms of their future relationship. At the end of
2020, the U.K. and the E.U. agreed to a deal that sets out the new rules for how the U.K. and the E.U. countries
will, among other things, coexist, work and trade together.
Brexit could result in increased geopolitical and economic risks, currency exchange fluctuations, border
disturbances, and could cause disruptions to and create uncertainty surrounding the Company’s businesses,
including affecting the Company’s relationships with existing and future customers, suppliers and, given the
inability for individuals to continue to freely work and live between the U.K. and the E.U., employees, which could
in turn have a material adverse effect on the Company’s financial results and operations. There could also be
greater restrictions on imports and exports between the U.K. and E.U. countries and could also result in increased
regulatory and taxation complexities. These changes may adversely affect the Company’s operations and
financial results.
Global economic conditions
Fluctuations in global economic conditions, including the continued impact of the COVID-19 pandemic, may have
an impact on clients’ willingness and ability to fund their projects. These conditions could make it difficult for the
Company’s clients to accurately forecast and plan future business trends and activities, thereby causing clients to
slow or even curb spending on the Company’s services, or seek contract terms more favourable to them.
SNC‑Lavalin’s government clients may face budget deficits that prohibit them from funding proposed and existing
projects or that cause them to exercise their right to terminate contracts with little or no prior notice. Furthermore,
any financial difficulties suffered by the Company’s partners, subcontractors or suppliers could increase cost or
adversely impact project schedules. These economic conditions continue to reduce the availability of liquidity and
credit to fund or support the continuation and expansion of industrial business operations worldwide. Volatile
financial market conditions and adverse credit market conditions could adversely affect clients’, partners’ or the
Company’s own borrowing capacity, which support the continuation and expansion of projects worldwide, and
could result in contract cancellations or suspensions, project delays, payment delays or defaults by the
Company’s clients. SNC-Lavalin’s ability to operate or expand its business would be limited if, in the future, the
Company is unable to access sufficient credit capacity, including capital market funding, bank credit, such as
letters of credit, and surety bonding on favourable terms or at all. These disruptions could materially impact the
Company’s remaining performance obligations, revenues and net income.
Fluctuations in commodity prices
Commodity prices can affect SNC-Lavalin’s clients in a number of ways. For example, for those clients that
produce commodity products, fluctuations in price can have a direct effect on their profitability and cash flow and,
therefore, their willingness to continue to invest or make new capital investments. To the extent commodity prices
decline and the Company’s clients defer new investments or cancel or delay existing projects, the demand for the
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Company’s services decreases, which may have a material adverse impact on SNC-Lavalin’s business, financial
condition and results of operations.
Commodity prices can also strongly affect the costs of projects. Rising commodity prices can negatively impact
the cost of completing future projects as well as those in progress, and could have a material adverse impact on
SNC-Lavalin’s business, financial condition and results of operations.
Income taxes
The Company is subject to income taxes in various jurisdictions throughout the world. The tax legislation,
regulations and interpretation that apply to its operations are continually changing. Moreover, future tax benefits
and liabilities are dependent on factors that are inherently uncertain and subject to change, including future
earnings, future tax rates, and anticipated business mix in the various jurisdictions in which the Company
operates and holds assets. Careful judgment is necessary in determining the required provision for income taxes
and management uses accounting and fiscal principles to determine income tax positions that it believes are likely
to be sustained. However, there is no assurance that the Company's tax benefits or tax liabilities will not materially
differ from its estimates or expectations. In the ordinary course of business, there are many transactions and
calculations where the ultimate tax determination is uncertain. Although management believes that its tax
estimates and tax positions are reasonable, they could nonetheless be materially affected by many factors,
including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards,
legislation, regulations, and related interpretations, the Company’s global mix of earnings and the realizability of
deferred income tax assets. Any of the above factors could have a material adverse effect on the Company's net
income or cash flows by affecting its operations and profitability, the availability of tax credits, the cost of the
services it provides, and the availability of deductions for operating losses as the Company grows its business. An
increase or decrease in the Company’s effective income tax rate could have a material adverse impact on its
financial condition and results of operations.
Controls and Procedures
The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for
establishing and maintaining the Company’s disclosure controls and procedures as well as its internal control over
financial reporting, as those terms are defined in National Instrument 52-109 – Certification of Disclosure in
Issuers’ Annual and Interim Filings (“NI 52-109”) of the Canadian securities regulatory authorities.
15.1 DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER
FINANCIAL REPORTING
The CEO and the CFO have designed disclosure controls and procedures, or caused them to be designed under
their supervision, to provide reasonable assurance that:
i.
ii.
Material information relating to the Company is made known to them by others, particularly during
the period in which the annual filings are being prepared; and
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.
Based on their evaluation carried out to assess the effectiveness of the Company’s disclosure controls and
procedures, the CEO and the CFO have concluded that the disclosure controls and procedures were designed
and operated effectively as at December 31, 2020.
The CEO and the CFO have also evaluated, or caused to be evaluated under their supervision, the effectiveness
of the Company’s disclosure controls and procedures, and its internal control over financial reporting, in each
case as at December 31, 2020.
Based on their evaluation carried out to assess the effectiveness of the Company’s internal control over financial
reporting, the CEO and the CFO have concluded that the internal control over financial reporting was designed
and operated effectively as at December 31, 2020, using the Internal Control – Integrated Framework (2013
Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
15.2 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company’s internal control over financial reporting that occurred during the
most recent interim period and year ended December 31, 2020 that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
SNC-LAVALIN
Company’s services decreases, which may have a material adverse impact on SNC-Lavalin’s business, financial
condition and results of operations.
Commodity prices can also strongly affect the costs of projects. Rising commodity prices can negatively impact
the cost of completing future projects as well as those in progress, and could have a material adverse impact on
SNC-Lavalin’s business, financial condition and results of operations.
Income taxes
The Company is subject to income taxes in various jurisdictions throughout the world. The tax legislation,
regulations and interpretation that apply to its operations are continually changing. Moreover, future tax benefits
and liabilities are dependent on factors that are inherently uncertain and subject to change, including future
earnings, future tax rates, and anticipated business mix in the various jurisdictions in which the Company
operates and holds assets. Careful judgment is necessary in determining the required provision for income taxes
and management uses accounting and fiscal principles to determine income tax positions that it believes are likely
to be sustained. However, there is no assurance that the Company's tax benefits or tax liabilities will not materially
differ from its estimates or expectations. In the ordinary course of business, there are many transactions and
calculations where the ultimate tax determination is uncertain. Although management believes that its tax
estimates and tax positions are reasonable, they could nonetheless be materially affected by many factors,
including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards,
legislation, regulations, and related interpretations, the Company’s global mix of earnings and the realizability of
deferred income tax assets. Any of the above factors could have a material adverse effect on the Company's net
income or cash flows by affecting its operations and profitability, the availability of tax credits, the cost of the
services it provides, and the availability of deductions for operating losses as the Company grows its business. An
increase or decrease in the Company’s effective income tax rate could have a material adverse impact on its
financial condition and results of operations.
Controls and Procedures
The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for
establishing and maintaining the Company’s disclosure controls and procedures as well as its internal control over
financial reporting, as those terms are defined in National Instrument 52-109 – Certification of Disclosure in
Issuers’ Annual and Interim Filings (“NI 52-109”) of the Canadian securities regulatory authorities.
15.1 DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER
FINANCIAL REPORTING
The CEO and the CFO have designed disclosure controls and procedures, or caused them to be designed under
their supervision, to provide reasonable assurance that:
i.
ii.
Material information relating to the Company is made known to them by others, particularly during
the period in which the annual filings are being prepared; and
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.
Based on their evaluation carried out to assess the effectiveness of the Company’s disclosure controls and
procedures, the CEO and the CFO have concluded that the disclosure controls and procedures were designed
and operated effectively as at December 31, 2020.
The CEO and the CFO have also evaluated, or caused to be evaluated under their supervision, the effectiveness
of the Company’s disclosure controls and procedures, and its internal control over financial reporting, in each
case as at December 31, 2020.
Based on their evaluation carried out to assess the effectiveness of the Company’s internal control over financial
reporting, the CEO and the CFO have concluded that the internal control over financial reporting was designed
and operated effectively as at December 31, 2020, using the Internal Control – Integrated Framework (2013
Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
15.2 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company’s internal control over financial reporting that occurred during the
most recent interim period and year ended December 31, 2020 that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
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187
SNC-Lavalin 2020 Financial Report SNC-LAVALIN
Quarterly Information
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
TOTAL
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
TOTAL
Continuing operations
Revenues:
SNCL Engineering Services (1)
SNCL Projects
Capital (1)
Total Revenues
EBIT
1,534.8 1,469.5 1,447.7 1,523.0 5,975.0 1,442.0 1,499.8 1,501.9 1,573.6 6,017.3
287.5 168.9 294.5 152.3 903.1 383.6 262.3 346.1 357.8 1,349.8
36.2 262.7
1,868.5 1,660.0 1,781.1 1,697.9 7,007.5 1,897.8 1,836.8 1,927.6 1,967.6 7,629.8
(132.9) 2,968.6
(122.5) 3,156.5
22.6 129.4
79.6
38.9
72.2
21.6
74.7
46.2
67.5
(292.0)
(372.7)
(21.5)
14.9
87.4
Net financial expenses
31.9
25.9
28.7
27.5 114.0
52.4
92.7
41.7
28.4 215.1
Earnings (loss) before income
taxes from continuing
operations
Income taxes
Net income (loss)
from continuing operations
Net loss
from discontinued operations
(17.0)
(47.5)
58.7
(400.2)
(21.4)
(24.0)
66.9
(80.5)
(406.0)
(59.0)
15.2
(215.2) 3,114.9
(161.3) 2,753.5
(4.4)
(24.4) 324.2
15.0 310.3
4.4
(23.5)
(8.1)
(319.7)
(346.9)
19.6
(190.8) 2,790.6
(176.3) 2,443.2
(66.9)
(86.3)
(76.3)
(379.8)
(609.3)
(37.9) (1,927.9)
(34.0)
(112.7) (2,112.6)
Net income (loss)
(62.5)
(109.9)
(84.4)
(699.5)
(956.3)
(18.3) (2,118.7) 2,756.6
(289.0) 330.6
Net income (loss) attributable to:
SNC-Lavalin shareholders
(66.0)
(111.6)
(85.1)
(702.7)
(965.4)
(17.3) (2,118.3) 2,756.7
(292.9) 328.2
Non-controlling interests
3.4
1.8
0.7
3.3
9.2
(1.0)
(0.4)
(0.1)
3.9
2.4
Net income (loss)
(62.5)
(109.9)
(84.4)
(699.5)
(956.3)
(18.3) (2,118.7) 2,756.6
(289.0) 330.6
Basic earnings (loss) per share ($)
(0.38)
(0.64)
(0.48)
(4.00)
(5.50)
(0.10)
(12.07) 15.70
(1.67)
1.87
Diluted earnings (loss)
per share($)
Net income (loss) from continuing
operations attributable to:
(0.38)
(0.64)
(0.48)
(4.00)
(5.50)
(0.10)
(12.07) 15.70
(1.67)
1.87
SNC-Lavalin shareholders
Non-controlling interests
1.0
3.4
(25.3)
(8.8)
(322.9)
1.8
0.7
3.3
(356.1)
9.2
20.6
(190.4) 2,790.7
(180.2) 2,440.8
(1.0)
(0.4)
(0.1)
3.9
2.4
Net income (loss)
from continuing operations
Basic earnings (loss) per share
from continuing operations ($)
Diluted earnings (loss) per share
from continuing operations ($):
4.4
(23.5)
(8.1)
(319.7)
(346.9)
19.6
(190.8) 2,790.6
(176.3) 2,443.2
0.01
(0.14)
(0.05)
(1.84)
(2.03)
0.12
(1.08) 15.90
(1.03) 13.90
From PS&PM
From Capital
0.12
(0.18)
(0.20)
(2.03)
(0.11)
0.04
0.15
0.19
(2.29)
0.27
(0.17)
(1.46)
0.86
(1.13)
(1.90)
0.29
0.40 15.00
0.10 15.79
Diluted earnings (loss) per share
from continuing operations ($)
0.01
(0.14)
(0.05)
(1.84)
(2.03)
0.12
(1.08) 15.90
(1.03) 13.90
Dividend declared per share ($)
0.02
0.02
0.02
0.02
0.08
0.10
0.10
0.02
0.02
0.24
Net income (loss) attributable to
SNC-Lavalin shareholders from
PS&PM from continuing
operations
Net income (loss) attributable to
SNC-Lavalin shareholders from
Capital investments from
continuing operations:
From Highway 407 ETR
From other Capital investments
Net income (loss) attributable to
SNC-Lavalin shareholders
from continuing operations
21.0
(31.9)
(34.4)
(356.4)
(401.7)
(29.4)
(255.8) 150.9
(197.7)
(332.0)
21.1
(41.2)
—
6.6
16.9
8.6
—
33.5
38.0
7.5
41.9
41.9
41.9
20.3 146.1
8.1
23.5 2,597.9
(2.8) 2,626.7
1.0
(25.3)
(8.8)
(322.9)
(356.1)
20.6
(190.4) 2,790.7
(180.2) 2,440.8
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
188
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
SNC-LAVALIN
Quarterly Information
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2020
2019 (1)
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
TOTAL
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
TOTAL
SNCL Engineering Services (1)
1,534.8 1,469.5 1,447.7 1,523.0 5,975.0 1,442.0 1,499.8 1,501.9 1,573.6 6,017.3
287.5 168.9 294.5 152.3 903.1 383.6 262.3 346.1 357.8 1,349.8
46.2
21.6
38.9
22.6 129.4
72.2
74.7
79.6
36.2 262.7
1,868.5 1,660.0 1,781.1 1,697.9 7,007.5 1,897.8 1,836.8 1,927.6 1,967.6 7,629.8
14.9
(21.5)
87.4
(372.7)
(292.0)
67.5
(122.5) 3,156.5
(132.9) 2,968.6
Net financial expenses
31.9
25.9
28.7
27.5 114.0
52.4
92.7
41.7
28.4 215.1
(17.0)
(47.5)
58.7
(400.2)
(406.0)
15.2
(215.2) 3,114.9
(161.3) 2,753.5
(21.4)
(24.0)
66.9
(80.5)
(59.0)
(4.4)
(24.4) 324.2
15.0 310.3
4.4
(23.5)
(8.1)
(319.7)
(346.9)
19.6
(190.8) 2,790.6
(176.3) 2,443.2
(66.9)
(86.3)
(76.3)
(379.8)
(609.3)
(37.9) (1,927.9)
(34.0)
(112.7) (2,112.6)
Net income (loss)
(62.5)
(109.9)
(84.4)
(699.5)
(956.3)
(18.3) (2,118.7) 2,756.6
(289.0) 330.6
SNC-Lavalin shareholders
(66.0)
(111.6)
(85.1)
(702.7)
(965.4)
(17.3) (2,118.3) 2,756.7
(292.9) 328.2
Non-controlling interests
3.4
1.8
0.7
3.3
9.2
(1.0)
(0.4)
(0.1)
3.9
2.4
Net income (loss)
(62.5)
(109.9)
(84.4)
(699.5)
(956.3)
(18.3) (2,118.7) 2,756.6
(289.0) 330.6
Basic earnings (loss) per share ($)
(0.38)
(0.64)
(0.48)
(4.00)
(5.50)
(0.10)
(12.07) 15.70
(1.67)
1.87
(0.38)
(0.64)
(0.48)
(4.00)
(5.50)
(0.10)
(12.07) 15.70
(1.67)
1.87
SNC-Lavalin shareholders
Non-controlling interests
1.0
3.4
(25.3)
(8.8)
(322.9)
(356.1)
20.6
(190.4) 2,790.7
(180.2) 2,440.8
1.8
0.7
3.3
9.2
(1.0)
(0.4)
(0.1)
3.9
2.4
4.4
(23.5)
(8.1)
(319.7)
(346.9)
19.6
(190.8) 2,790.6
(176.3) 2,443.2
0.01
(0.14)
(0.05)
(1.84)
(2.03)
0.12
(1.08) 15.90
(1.03) 13.90
From PS&PM
From Capital
0.12
(0.18)
(0.20)
(2.03)
(0.17)
(1.46)
0.86
(1.13)
(1.90)
(0.11)
0.04
0.15
0.19
0.29
0.40 15.00
0.10 15.79
(2.29)
0.27
Dividend declared per share ($)
0.02
0.02
0.02
0.02
0.08
0.10
0.10
0.02
0.02
0.24
0.01
(0.14)
(0.05)
(1.84)
(2.03)
0.12
(1.08) 15.90
(1.03) 13.90
Continuing operations
Revenues:
SNCL Projects
Capital (1)
Total Revenues
EBIT
Earnings (loss) before income
taxes from continuing
operations
Income taxes
Net income (loss)
from continuing operations
Net loss
from discontinued operations
Net income (loss) attributable to:
Diluted earnings (loss)
per share($)
Net income (loss) from continuing
operations attributable to:
Net income (loss)
from continuing operations
Basic earnings (loss) per share
from continuing operations ($)
Diluted earnings (loss) per share
from continuing operations ($):
Diluted earnings (loss) per share
from continuing operations ($)
Net income (loss) attributable to
SNC-Lavalin shareholders from
PS&PM from continuing
operations
Net income (loss) attributable to
SNC-Lavalin shareholders from
Capital investments from
continuing operations:
From Highway 407 ETR
From other Capital investments
Net income (loss) attributable to
SNC-Lavalin shareholders
from continuing operations
21.1
(41.2)
—
6.6
16.9
—
38.0
41.9
41.9
41.9
20.3 146.1
8.6
33.5
7.5
8.1
23.5 2,597.9
(2.8) 2,626.7
(1) Comparative figures have been revised to reflect a change made to the Company’s presentation of financial results of Capital, now presented separately from SNCL Engineering Services
and, furthermore, comparative figures have been re-presented as a result of an operation discontinued during the current year (see Section 12).
1.0
(25.3)
(8.8)
(322.9)
(356.1)
20.6
(190.4) 2,790.7
(180.2) 2,440.8
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2020 MANAGEMENT’S DISCUSSION AND ANALYSIS
21.0
(31.9)
(34.4)
(356.4)
(401.7)
(29.4)
(255.8) 150.9
(197.7)
(332.0)
Adjusted diluted earnings per share (“Adjusted diluted
EPS”) is defined as adjusted net income (loss) attributable to
SNC-Lavalin shareholders from continuing operations, divided
by the diluted weighted average number of outstanding shares
for the period. Adjusted diluted EPS is a non-IFRS financial
measure that is an indicator of the financial performance of
the Company’s activities and allows the Company to present
the adjusted net income (loss) attributable to SNC-Lavalin
shareholders on a diluted share basis.
Adjusted EBITDA is a non-IFRS financial measure used by
management to facilitate operating performance comparison
from period to period and to prepare annual operating
budgets and forecasts. Adjusted EBITDA is based on EBITDA
from continuing operations, and excludes charges related to
restructuring costs, acquisition-related costs and integration
costs, gains (losses) on disposals of PS&PM businesses and
Capital investments (or adjustments to gains or losses on such
disposals), the adjustment to provision for the Pyrrhotite Case
litigation, the Federal charges settlement (PPSC) expense,
the fair value revaluation of the Highway 407 ETR contingent
consideration receivable, the GMP equalization expenses and the
impairment loss on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell.
Adjusted net income (loss) attributable to SNC-Lavalin
Shareholders is a non-IFRS financial measure defined as
net income (loss) attributable to SNC-Lavalin shareholders
from continuing operations, excluding charges related to
restructuring costs, acquisition-related costs and integration
costs, amortization of intangible assets related to business
combinations, gains (losses) on disposals of PS&PM businesses
and Capital investments (or adjustments to gains or losses on
such disposals), financing costs related to the agreement to
sell shares of Highway 407 ETR, the fair value revaluation of
the Highway 407 ETR contingent consideration receivable, the
federal charges settlement (PPSC) expense, the adjustment
to provision for the Pyrrhotite Case litigation, impairment
loss on remeasurement of assets of disposal group classified
as held for sale to fair value less cost to sell and the GMP
equalization expense.
Booking-to-revenue ratio corresponds to contract bookings
divided by revenues, for a given period.
Capital is SNC-Lavalin’s investment, financing and asset
management arm, responsible for developing projects, arranging
financing, investing equity, undertaking complex financial
modeling and managing its infrastructure investments for
optimal returns. Its activities are principally concentrated in
infrastructure such as bridges, highways, mass transit systems,
power facilities, energy infrastructure, water treatment plants
and social infrastructure (e.g. hospitals).
Days Sales Outstanding (“DSO”) for the EDPM
segment corresponds to the average number of days needed to
convert the trade receivables and contract assets of the EDPM
segment, all using a 12 month average balance; the result is then
divided by the 12 month average revenue of the segment and
multiplied by 365 days, in order to calculate a number of days.
Diluted earnings per share from PS&PM and Diluted
earnings per share from Capital correspond to diluted earnings
per share as determined under IFRS, reported separately for
PS&PM and for Capital.
EBIT is defined as earnings from continuing operations before
net financial expenses (income) and income taxes.
EBITDA is defined as earnings from continuing operations before
net financial expenses (income), income taxes, depreciation
and amortization.
EDPM incorporates all consultancy, engineering, design and
project management services around the world. It also leads
our efforts to transform the global infrastructure sector by
leveraging data and technology to improve the delivery of our
clients’ projects from conception through to eventual operation.
EDPM projects are mainly in transportation (including rail, mass
transit, roads and airports), civil infrastructure, aerospace,
defense and security and technology, including some of the
world’s most transformational projects. A significant portion of
EDPM’s revenues are derived from the public sector, including
national, provincial, state and local and municipal authorities.
EPC Type of agreement whereby the Company provides
Engineering, Procurement and Construction.
EPCM Type of agreement whereby the Company provides
services related to Engineering, Procurement, and Construction
Management activities.
IFRS International financial reporting standards.
Infrastructure EPC Projects includes LSTK construction
contracts related to mass transit, heavy rail, roads, bridges,
airports, ports and harbours and water infrastructure. In addition,
Infrastructure EPC Projects includes the LSTK construction
contracts related to the former Clean Power segment, as well as
from thermal power activities which the Company exited in 2018.
In July 2019, the Company decided to cease bidding on new
LSTK construction contracts.
Infrastructure Services includes O&M projects, as well as
the Company’s repetitive EPC offerings that are lower-risk,
standardized solutions for: i) district cooling plants; and ii) power
substations executed through its Linxon subsidiary. The segment
also includes engineering solutions in hydro, transmission
and distribution, renewables, energy storage, and intelligent
networks and cybersecurity.
LSTK stands for lump-sum turnkey.
LSTK construction contracts: Under LSTK construction
contracts, the Company completes the work required for the
project at a lump-sum price. Before entering into such contracts,
the Company estimates the total cost of the project, plus a profit
189
GlossarySNC-Lavalin 2020 Financial Report
margin. The Company’s actual profit margin may vary based on
its ability to achieve the project requirements at above or below
the initial estimated costs.
(loss) attributable to SNC-Lavalin shareholders, divided by a
trailing 13-month average equity attributable to SNC-Lavalin
shareholders, excluding “other components of equity”.
Net recourse debt (or Cash net of recourse debt) corresponds
to cash and cash equivalents, less cash and cash equivalents
from Capital investments accounted for by the consolidation
method and the Company’s recourse debt.
Nuclear supports clients across the entire nuclear lifecycle with
the full spectrum of services from consultancy, EPCM services,
field services, technology services, spare parts, reactor support
and decommissioning and waste management. As stewards
of the CANDU technology, it also provides new build and full
refurbishment services of CANDU reactors.
PS&PM (Professional Services & Project Management)
(formerly referred to as E&C, or engineering and
construction) includes contracts generating revenues derived
mainly from consulting & advisory, intelligent networks &
cybersecurity, design & engineering, procurement, project
& construction management, O&M, decommissioning and
sustaining capital. It also includes revenues from LSTK
construction contracts, for which the Company ceased to bid in
July 2019, except for certain repetitive EPC offerings that are
lower-risk, standardized solutions.
Reimbursable and engineering services contracts: Under
reimbursable contracts, the Company charges the customer
for the actual cost incurred plus a mark-up that could take
various forms such as a fixed-fee per unit, a percentage of costs
incurred or an incentive fee based on achieving certain targets,
performance factors or contractual milestones. Reimbursable
contracts also include unit-rate contracts for which a
fixed amount per quantity is charged to the customer, and
reimbursable contracts with a cap, or a target price accompanied
by incentives and/or disincentives. Engineering services contracts
include i) time and material agreements based on hourly rates
and fixed-price lump-sum contracts with limited procurement or
construction risks, and ii) O&M contracts.
Resources provides a full suite of delivery services primarily to
the mining & metallurgy sector, covering the project lifecycle
from project development through project delivery and support
services. Resources ceased bidding for new EPC projects under
the LSTK construction contracting modeling in July 2019.
Resources is now focused on providing engineering, EPCM,
project management consultancy (“PMC”), commissioning and
technical support services through a lower risk contracting
model and operational delivery is focused on key regions and
global clients. Resources also includes the operating phase of a
Build-Own-Operate (BOO) contract in the United States. In the
past, Resources included services and LSTK projects in Oil &
Gas, which are now presented as discontinued operations.
Return on Average Shareholders’ Equity
(“ROASE”) corresponds to the trailing 12-month net income
Revenue backlog is defined as a forward-looking indicator
of anticipated revenues to be recognized by the Company,
determined based on contract awards that are firm and
amounting to the transaction price allocated to remaining
performance obligations. Management may be required to
make estimates regarding the revenue to be generated for
certain contracts.
Segment Adjusted EBIT consists of revenues allocated to the
applicable segment less i) direct costs of activities, ii) directly
related selling, general and administrative expenses, and iii)
corporate selling, general and administrative expenses that are
allocated to segments. Expenses that are not allocated to the
Company’s segments are: certain corporate selling, general
and administrative expenses that are not directly related to
projects or segments, impairment loss arising from expected
credit losses, gain (loss) arising on financial assets (liabilities) at
fair value through profit or loss, restructuring costs, acquisition-
related costs and integration costs, amortization of intangible
assets related to business combinations, the federal charges
settlement (PPSC) expense and gains (losses) on disposals of
PS&PM businesses and Capital investments (or adjustments
to gains or losses on such disposals), impairment loss on
remeasurement of assets of disposal group classified as held
for sale to fair value less cost to sell, net financial expenses and
income taxes.
Segment Adjusted EBITDA is a supplemental measure derived
from Segment Adjusted EBIT and used by management to
evaluate the performance of the Company’s segments but
excluding certain items related to investing activities, through
the exclusion of depreciation and amortization from direct costs
of activities.
Segment Adjusted EBIT to revenue ratio and Segment
Adjusted EBITDA to revenue ratio are two measures used
to analyze the profitability of the Company’s segments and
facilitate period-to-period comparisons, as well as comparison
with peers. These financial measures are calculated by dividing
the amount of Segment Adjusted EBIT (Segment Adjusted
EBITDA) of a given period to the amount of revenue for the
same period.
Standardized EPC contracts: Under standardized EPC
contracts, the Company provides repetitive EPC offerings
that are lower-risk, standardized solutions for: i) district
cooling plants; and ii) power substations executed through its
Linxon subsidiary.
Working capital corresponds to the amount of the Company’s
total current assets minus its total current liabilities and the
Current ratio corresponds to the Company’s total current assets
divided by its total current liabilities.
190
Glossary (continued) TEN-YEAR STATISTICAL SUMMARY
YEARS ENDED DECEMBER 31
(IN MILLIONS $, UNLESS OTHERWISE INDICATED)
Revenues(1):
From PS&PM
From Capital
Restructuring costs and Impairment of
goodwill and of intangible assets related
to business combinations(1)
Acquisition-related costs and
integration costs
EBIT(1)(2)
Net income (loss) from
continuing operations(1)
Net loss from discontinued operations(1)
Net income (loss)
Net income (loss) attributable to:
SNC-Lavalin shareholders
Non-controlling interests
Net income (loss)
Acquisition of property and equipment:
From PS&PM
From Capital
Depreciation and amortization(1)(2):
From PS&PM
From Capital
Net financial expenses(1)(2):
From PS&PM
From Capital
EBITDA(1)(2):
From PS&PM
From Capital
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
6,878.1
129.4
7,007.5
7,367.1
262.7
7,629.8
9,819.3
264.7
10,084.0
9,096.7
238.0
9,334.7
8,223.1
247.7
8,470.8
9,363.5
223.4
9,587.0
7,334.7
904.1
8,238.8
7,149.3
763.8
7,913.2
7,525.9
565.1
8,091.0
6,708.5
501.4
7,209.9
63.3
79.7
1,309.0
26.4
115.4
116.4
109.9
123.5
-
8.3
54.9
(292.0)
2,968.6
(1,160.4)
124.3
603.4
4.4
19.6
62.5
-
312.1
521.6
1,877.4
228.8
499.5
595.6
-
-
-
-
(1,316.3)
383.2
256.6
437.5
1,334.6
36.4
306.3
385.9
(346.9)
(609.3)
(956.3)
(965.4)
9.2
(956.3)
75.8
-
75.8
320.5
0.2
320.7
97.7
16.3
114.0
(27.8)
56.5
28.7
2,443.2
(2,112.6)
330.6
328.2
2.4
330.6
122.4
-
122.4
358.4
0.2
358.6
197.3
17.8
215.1
143.7
3,183.5
3,327.2
(1,316.9)
0.6
(1,316.3)
152.9
-
152.9
324.6
-
324.6
156.0
11.5
167.5
140.5
264.1
404.6
382.0
1.1
383.2
124.8
-
124.8
215.6
-
215.6
107.8
10.0
117.8
589.4
229.6
818.9
9.5%
255.5
1.0
256.6
151.4
-
151.4
140.6
2.5
143.1
27.9
14.2
42.1
219.1
236.1
455.2
404.3
33.2
437.5
116.0
-
116.0
162.4
-
162.4
(7.7)
8.0
0.3
333.7
350.3
684.0
1,333.3
1.2
1,334.6
70.2
1,522.4
1,592.5
113.7
53.5
167.2
38.9
180.9
219.8
35.8
0.6
36.4
55.5
1,545.9
1,601.5
67.9
133.1
201.0
19.5
131.2
150.7
(160.0)
2,233.1
2,073.1
(131.6)
617.8
486.2
305.9
0.4
306.3
96.2
849.2
945.4
61.6
99.2
160.8
13.7
112.5
126.2
273.1
387.2
660.3
377.4
8.5
385.9
67.2
545.8
613.0
45.4
93.1
138.5
15.5
99.7
115.2
389.9
344.1
734.0
7.1%
12.0%
58.7%
1.6%
14.6%
19.1%
Return on average shareholders’ equity(3)
(33.4)%
9.9%
(28.2)%
Certain totals, subtotals and percentages may not be reconciled due to rounding.
Certain indicators used by the Company to analyze and evaluate its results, which are listed in the ten-year statistical summary table, are non-IFRS financial measures or additional IFRS measures.
Consequently, they do not have a standardized meaning as prescribed by IFRS, and therefore may not be comparable to similar measures presented by other issuers. Management believes that,
in addition to conventional measures prepared in accordance with IFRS, these non-IFRS financial measures provide additional insight into the Company’s financial results and certain investors
may use this information to evaluate the Company’s performance from period to period. However, these non-IFRS financial measures have limitations and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with IFRS. Definitions of all non-IFRS financial measures and additional IFRS measures are provided in the Company’s 2020
Management’s Discussion and Analysis (“MD&A”) to give the reader a better understanding of the indicators used by management. In addition, when applicable, the Company provides a clear
quantitative reconciliation from the non-IFRS financial measures to the most directly comparable measure calculated in accordance with IFRS in its MD&A.
(1)
(2)
2019 comparative figures have been re-presented as a result of an operation discontinued during 2020. Please refer to Note 2C “Changes in presentation” in the Company’s 2020 audited
annual consolidated financial statements for more information. 2018 and prior comparative figures were not re-presented.
Effective January 1, 2019, the company adopted IFRS 16, Leases, using the modified retrospective approach. Under IFRS 16, depreciation of right-of-use asset and interest expense on
the lease liability replace the operating lease expenses which were recognized under the previous standard. As permitted under the modified retrospective approach, the prior periods were
not restated.
(3)
Excluding other components of equity.
191
SNC-Lavalin 2020 Financial Report TEN-YEAR STATISTICAL SUMMARY (CONTINUED)
YEARS ENDED DECEMBER 31
(IN MILLIONS $, UNLESS OTHERWISE INDICATED)
Supplementary information:
Net income (loss) attributable to
SNC-Lavalin shareholders
From PS&PM
From Capital investments:
From Highway 407 ETR
From AltaLink
From other Capital investments
Net income (loss) attributable to
SNC-Lavalin shareholders
Earnings (loss) per share ($):
Basic
Diluted
Weighted average number of outstanding
shares (in thousands):
Basic
Diluted
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
(1,011.0)
(2,444.6)
(1,563.0)
176.0
46.3
95.8
(300.5)
(245.8)
149.0
246.2
38.0
-
7.5
146.1
-
2,626.7
154.3
-
91.8
141.7
-
64.3
132.5
-
76.7
125.8
-
182.7
122.5
175.6
1,335.9
114.1
91.8
75.7
100.6
54.5
1.8
77.2
33.8
20.2
(965.4)
328.2
(1,316.9)
382.0
255.5
404.3
1,333.3
35.8
305.9
377.4
(5.50)
(5.50)
1.87
1.87
(7.50)
(7.50)
2.35
2.34
1.70
1.70
2.68
2.68
8.76
8.74
0.24
0.24
2.03
2.02
2.50
2.48
175,554
175,554
175,554
175,554
175,541
175,541
162,910
163,029
150,077
150,279
150,918
150,988
152,218
152,605
151,497
151,814
151,058
151,304
150,897
151,940
Annual dividends declared per share ($)(4)
0.08
0.24
1.148
1.092
1.04
1.00
0.96
0.92
0.88
0.84
AT DECEMBER 31
(IN MILLIONS $, UNLESS OTHERWISE INDICATED)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Number of employees
37,584
46,490
52,435
52,448
34,952
36,754
42,003
29,714
33,909
28,100
Revenue backlog(1)(5)
13,187.8
14,137.7
14,885.0
10,406.4
10,677.4
11,991.9
12,325.5
8,287.8
10,133.4
10,088.0
Cash and cash equivalents
932.9
1,188.6
634.1
706.5
1,055.5
1,581.8
1,702.2
1,108.7
1,174.9
1,231.0
Working capital
(222.9)
622.2
(950.1)
111.9
227.9
108.1
(365.4)
(527.0)
(267.9)
32.0
Property and equipment:
From PS&PM
From Capital
Recourse long-term debt
Limited recourse long-term debt
Non-recourse long-term debt
Equity attributable to
SNC-Lavalin shareholders
375.9
-
375.9
996.0
400.0
400.3
470.6
-
470.6
873.1
400.0
391.5
482.6
-
482.6
414.1
-
414.1
1,171.4
1,026.8
1,475.2
980.3
339.5
298.3
-
298.3
349.4
-
265.1
-
265.1
349.1
-
246.1
-
246.1
348.9
-
180.4
5,132.0
5,312.4
193.1
3,470.0
3,663.1
159.9
2,637.7
2,797.6
348.7
348.5
348.4
-
-
-
297.4
472.6
525.8
530.7
3,536.9
2,000.7
1,561.4
2,557.5
3,715.0
3,650.9
5,225.1
3,873.2
3,868.2
3,313.8
2,036.7
2,075.4
1,883.1
Book value per share ($)
14.57
21.16
20.80
29.77
25.76
25.83
21.73
13.42
13.74
12.47
Number of outstanding common shares
(in thousands)
175,554
175,554
175,554
175,488
150,357
149,772
152,465
151,807
151,069
151,034
Closing market price per share ($)
21.73
29.95
45.92
57.05
57.79
41.12
44.31
47.79
40.32
51.08
Market capitalization
3,814.8
5,257.8
8,061.5
10,011.6
8,689.1
6,158.6
6,755.7
7,254.8
6,091.1
7,714.8
Certain totals, subtotals and percentages may not be reconciled due to rounding.
(4)
Dividends declared are classified in the period based on the declaration date.
(5)
Effective January 1, 2018, the Company’s definition of backlog has been changed and now corresponds to the concept of remaining performance obligations, which is based on IFRS 15,
Revenue from Contracts with Customers, without restatement of the prior periods.
192
Table of contents
2019 Management’s Discussion and Analysis
Management’s Responsibility for Financial Reporting 85
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Glossary
Ten-year statistical summary
Information for shareholders
1
86
88
93
185
187
189
Information for shareholders
Common Share Information
Code of Conduct
LISTED: Toronto Stock Exchange
SYMBOL: SNC
SHARES OUTSTANDING: 175.6 million (December 31, 2020)
MARKET CAPITALIZATION: $3.815 million (December 31, 2020)
Our Code of Conduct seeks to promote integrity and transparency
in the conduct of our business and in our relations with our
colleagues, directors, shareholders and business partners, including
customers, associates and suppliers. To learn more on our
Code of Conduct, go to www.snclavalin.com/en/about/integrity.
Registrar and Transfer Agent
If you would like to modify your address, eliminate multiple
mailings, transfer SNC-Lavalin shares, or for other information
on your shareholder account such as dividends and registration,
please contact:
Computershare Investor Services Inc.
100 University Ave., 8th Floor, North Tower, Toronto ON, M5J 2Y1
Telephone: 1-800-564-6253
Website: www.investorcentre.com
Investor Relations
Denis Jasmin, Vice-President, Investor Relations
denis.jasmin@snclavalin.com
514-393-1000
Proxy Circular
The proxy circular contains information about our directors,
Board committee reports and further details of our corporate
governance practices. This document is available online at
www.snclavalin.com.
Have Your Say
If you would like to ask a question, you can submit it at
investors@snclavalin.com or at chairoftheboard@snclavalin.com.
You can also send your question in by writing to the Associate
General Counsel and Corporate Secretary at:
Associate General Counsel and Corporate Secretary
455 René-Lévesque Blvd. West, Montreal QC, H2Z 1Z3, Canada
Annual Meeting
Head Office
The Annual Shareholders’ Meeting will be held on Friday,
May 14, 2021. To learn more, go to www.snclavalin.com/en/
investors/shareholder-information/general-information.
SNC-Lavalin Group Inc.
455 René-Lévesque Blvd West, Montreal QC, H2Z 1Z3, Canada
www.snclavalin.com
We invite you to visit our website at www.snclavalin.com to learn
more about SNC-Lavalin, our governance practices, our continuous
disclosure materials and to obtain electronic copies of this and
other reports.
Exemplaires en français
Pour télécharger la version française de ce rapport ou
en demander un exemplaire, veuillez consulter la section
Investisseurs au www.snclavalin.com.
Corporate Governance
Our website provides information on our corporate governance
practices, including our Code of Conduct, and the mandates for
the Board of Directors and the Board committees as well as various
position descriptions. To learn more, go to www.snclavalin.com
and click on About Us.
Sustainability
SNC-Lavalin puts sustainability at the heart of its business
strategy and undertakes business activities in a way that is
beneficial to the environment, society and global and local
economies. Our sustainable business strategy is aligned with the
UN Sustainable Development Goals and recognizes the importance
of advancing the triple bottom line of environmental, social and
economic sustainability. To learn more on our Sustainability, go
to www.snclavalin.com/en/sustainability.
SNC-Lavalin 2019 Financial Report
189
SNC-Lavalin 2020 Financial Report193 AT SNC-LAVALIN,
WE RECOGNIZE THE
IMPORTANCE OF HELPING
PROTECT THE ENVIRONMENT.
Our annual report is available online.
We invite you to visit our website at
www.snclavalin.com for a list of our
offices and to learn more about
SNC-Lavalin.
Head Office
455 René-Lévesque Blvd. West
Montreal, QC, H2Z 1Z3, Canada
Tel.: 514-393-1000 Fax: 514-866-0795