PIVOTING TO
GROWTH
2021 ANNUAL REPORT
CONTENTS
FINANCIAL HIGHLIGHTS
PRESIDENT’S MESSAGE
CHAIR’S MESSAGE
2021 HIGHLIGHTS
ESG RECOGNITION
LEADERSHIP TEAM
2021 FINANCIAL REPORT
1
SNC-LAVALIN 2021 ANNUAL REPORT FINANCIAL
HIGHLIGHTS
REVENUES AND BACKLOG
2021 REVENUES BY
GEOGRAPHIC AREA
SNCL Engineering Services and Capital
AMERICAS
2021 REVENUES
BY SEGMENT
SNCL ENGINEERING SERVICES
52% Engineering, Design &
Project Management (EDPM)
19% Infrastructure Services
12% Nuclear (1)
SNCL PROJECTS
12% Infrastructure EPC projects
3% Resources
CAPITAL 2%
REVENUES ($B)
BACKLOG ($B)
2021
6.3
2020
6.1
2019
6.3
11.1
11.0
11.3
SNCL Projects
REVENUES ($B)
BACKLOG ($B)
1.5
2.2
2.8
2021
1.1
2020
0.9
2019
1.3
Consolidated
REVENUES ($B)
BACKLOG ($B)
2021
7.4
2020
7.0
2019
7.6
12.6
13.2
14.1
EUROPE
MIDDLE EAST
& AFRICA
ASIA PACIFIC
51%
35%
9%
5%
(1) ~37% of the Nuclear revenues are from decommissioning and waste management
2
SNC-LAVALIN 2021 ANNUAL REPORT PRESIDENT’S
MESSAGE
This has been a pivotal year for
SNC‑Lavalin. For a company
that has undergone a significant
transformation in a short period
of time, 2021 demonstrated our
resilience and our determination to
deliver on our ambition of being a
leading global professional services
and project management firm.
Our “Pivoting to Growth Strategy,” launched last
fall, lays out a clear and accountable roadmap
for accelerating growth and achieving our
financial targets. It leverages SNC‑Lavalin’s
unique competitive advantages, placing us at the
forefront of engineering solutions that will shape
the future of our industry, and meet the needs of
a fast‑changing world, from data‑driven digital
solutions to an end‑to‑end full‑service offering.
Our Strategy is built into our purpose as a
Company — engineering a better future for
the planet and its people. Helping customers
reach their Net Zero carbon targets is a
fundamental part of that, as companies and
countries around the world look to meet
their climate goals. This is the kind of impact
that drives our world‑class talent, and
makes us a partner of choice, and I am very
excited to be building that future together.
PIVOTING TO GROWTH
Our focus during the past two years has been
on simplifying the business and concentrating
on the geographies and end markets where
we have a competitive advantage, and
where we see opportunities for growth.
Our Strategy crystalizes this thinking with
a well‑defined go‑to market framework,
financial targets and an operating structure
that is designed to execute on our plan.
The go‑to‑market framework includes:
› A focus on three core geographies:
Canada, the UK and the US – which
represent approximately 78 per cent of
revenues, along with targeted operations in
key geographies within Europe, the Middle
East, Asia Pacific and Latin America.
› Seven in demand end markets: where we
are recognized global leaders, including
transportation, buildings & places,
defence, industrial & mining, water,
power & renewables and nuclear.
› An integrated offering that
covers the life cycle of an asset:
beginning with concept and design, to
procurement and project management,
maintenance and decommissioning.
Our realigned operational structure is now
anchored in the newly formed SNCL Services
line of business, which comprises four
segments: Engineering Services, Nuclear,
Operations & Maintenance and Linxon.
LSTK Projects and Capital will continue
to be separate reportable segments.
Engineering Services, SNC‑Lavalin’s largest
segment, representing 59% of revenue, now
includes EDPM, Mining & Metallurgy, and Power
& Industrial services. It is being co‑led by Philip
Hoare and Steve Morriss, enhancing our ability
to expand our footprint in the US, where we see
significant growth potential. This is in addition
to new leadership at O&M and Nuclear.
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SNC-LAVALIN 2021 ANNUAL REPORT SNC‑LAVALIN
2021 ANNUAL REPORT
Importantly, for the first time in a long time,
we have, as part of the Strategy, provided
the market with three-year financial
targets, which include SNCL Services
organic revenue growth, SNCL Services
Segment Adjusted EBIT to Segment
Revenue Ratio and free cash flow (1)
over consolidated adjusted net income
conversion (2). This underpins our objectives,
first articulated in 2019, of delivering
consistent earnings and cash flow.
Based on our 2021 financial results, we
are well‑positioned to achieve our targets,
with SNCL Engineering Services realizing a
22% (3) year‑over‑year increase in Segment
Adjusted EBIT, which translated into a
margin of 10.7%, above our 2021 target (4).
Backlog remained strong, at $10.9 billion,
with EDPM backlog growing by nearly 10%.
Above all, people are the foundation of our
Strategy. We have worked hard to make
SNC‑Lavalin a centre of excellence that
attracts and inspires world‑class talent and
encourages collaboration and diversity. We
do this by investing in our people around
the world. We have also committed to hard
targets for increasing the representation of
women across the Company and in senior
leadership, and in October launched a new
global Equity, Diversity and Inclusion program.
That is not to say there have not been
challenges. Pandemic‑related productivity and
supply chain disruptions impacted work on our
three remaining LSTK projects, affecting the
Company’s overall profitability. Nevertheless,
the fact that we were still able to reduce
our LSTK construction contracts backlog in
SNCL Projects by $671 million in 2021 to $1.2
billion is a testament to our people and our
resolve to de‑risk the business. We anticipate
the majority of this backlog to be concluded
by the end of the first quarter of 2023.
As we leave the LSTK projects permanently
behind us, we are focused on new opportunities
that drive value. In particular, we are investing
in data‑driven digital innovation that we
believe can unlock significant value for our
customers by providing greater certainty over
project timing and costs, increased operational
efficiencies and a reduced carbon footprint.
(1) A non‑IFRS measure. Free cash flow to Adjusted net income (loss)
(2) https://www.snclavalin.com/en/media/press‑releases/2021/28‑09‑2021
attributable to SNC‑Lavalin shareholders is a non‑IFRS ratio based on free
cash flow and Adjusted net income (loss), both non‑IFRS financial measures,
and does not have a standardized definition within IFRS and therefore may
not be comparable to similar measures presented by other issuers. Further
details, including an explanation of the composition and usefulness of
this ratio, as well as a calculation of this ratio, and a reconciliation to the
most comparable IFRS measure are provided at Sections 4, 8 and 13 of
the Company's 2021 MD&A, available on SEDAR at www.sedar.com.
(3) Growth calculated based on the SNCL Engineering Services
Segment Adjusted EBIT of $660.4M in 2021 and of $539.5M in 2020
(4) This margin is the percentage of the Segment Adjusted EBIT to
the segment revenue ratio for SNCL Enginneering Services.
4
In the fall, we opened three‑state‑of‑the art
client technology hubs in Montreal, London
and Bangalore that are focused on advancing
the use of digital twins and data to virtually
design, build and operate large, complex
projects, before ground is even broken. We
also launched the “first of its kind” fully
operational digital twin at Europe’s largest
wastewater facility, just outside London, and
we see significant opportunities to expand
our digital expertise to Nuclear and O&M.
All these efforts enhance our ability to
deliver on what I see as a transformational
opportunity to be a key partner, facilitator
and enabler of a Net Zero carbon future.
As a pioneer in sustainable infrastructure,
with a diverse track record that ranges from
electrified light rail transport and nuclear
energy, to the designing, building, financing
and maintaining Canada’s hydropower
projects, SNC‑Lavalin is actively engaged in
advancing the Net Zero agenda in three ways:
› Committing to reaching Net Zero
as a Company by 2030
› Helping our customers adopt clean
power and renewable energy, which
is expected to require $125 trillion in
investment over the next 30 years
› Helping to engineer a better future
by meeting the global demand for
clean energy, decarbonizing the built
environment, minimizing the impact
of new infrastructure and building
resiliency to climate change impacts
In July, we won a six‑year contract to
decarbonize four million square feet of
public sector office space owned by the UK
government’s Property Agency. We see this
as a bellwether of the change that is coming
and the opportunity for SNC‑Lavalin to be a
leader in the space. In January of 2022, we
launched our new Decarbonomics™ platform,
which leverages carbon databases to deliver
cost‑effective retrofitting solutions.
We are committed to being Net Zero leaders
and innovators, and have a clear path
forward, focused on delivering profitable
growth that will allow us to remain resilient
and agile, invest in accretive opportunities,
and return value to shareholders.
I want to thank everyone who has supported
us through this pivotal year: our employees,
who have demonstrated incredible leadership,
our Board, which has provided invaluable
guidance, our customers, who have remained
steadfast partners, and our shareholders, who
have believed in our vision for this business.
Sincerely,
IAN L. EDWARDS
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
5
SNC-LAVALIN 2021 ANNUAL REPORT CHAIR’S
MESSAGE
2021 marked the first full year of
my tenure as Chair of the Board
of Directors of SNC‑Lavalin.
During the past 18‑months I have had the
privilege of leading this highly engaged Board
with the support of an executive leadership
that managed, against the backdrop of a
global pandemic, with clarity and fortitude.
SNC‑Lavalin stayed true to its purpose – to
engineer a better future for our planet and
its people – and delivered for its clients
and the communities it serves, despite
another unprecedented year of challenges
and uncertainty caused by the pandemic.
SUSTAINED AND MEASURABLE
PROGRESS ON STRATEGIC DIRECTION
In 2021, SNC‑Lavalin continued to make
sustained and measurable progress on
its strategy, launched almost three years
ago, which marked the beginning of its
transition away from LSTK contracts and
the Oil & Gas business to one focused
squarely on growing the high‑potential
Engineering Services business.
It is this future‑facing business that will
support the Company’s growth and long‑
term sustainability as a leading professional
services and project management company.
The design & engineering services,
project & program management, advisory
and infrastructure services, as well the
global nuclear business — which form the
cornerstone of the organization — had a
strong performance last year. Although
the remaining LSTK projects continued
to be impacted by inflation and COVID‑
driven operational challenges, the run‑
off of these projects progresses, and
it is expected that they will be mostly
concluded by the end of first quarter 2023.
NEW ADDITIONS TO THE BOARD
2021 was a pivotal year in SNC‑Lavalin’s
transformation journey and saw the Company
unveil its three‑year strategic growth plan.
The Board will continue to ensure that it
is aligned to support SNC‑Lavalin in the
next phase of its growth journey. In this
regard, I am pleased to introduce two (2)
director nominees for election at the Annual
Meeting of Shareholders: Baroness Ruby
McGregor‑Smith CBE and Quebec‑based
Mr. Robert Paré. These individuals have
relevant skills in corporate governance and
leadership; their backgrounds complement
the Board, and will enable them to effectively
oversee and advise a global organization with
SNC‑Lavalin’s ambitious vision and purpose.
These nominations increase the percentage
of women that would be Board directors from
30% to 36%, demonstrating our unwavering
commitment to prioritize and focus on
diversity in all its forms at the Board level.
On behalf of the Board of Directors and
SNC‑Lavalin management, I would also
like to take this opportunity to thank
outgoing Director Mr. Zin Smati, who will
not stand for re‑election for his tireless
commitment and invaluable contributions
and years of service to the Board.
STRENGTHENING OUR
ESG COMMITMENT
The Board recognizes and applauds the
important work undertaken in 2021 to
advance SNC‑Lavalin’s broad ESG agenda.
An ambitious program that includes a
commitment to ED&I, a clearly defined set
of integrity and carbon targets, as well as
the Engineering Net Zero work undertaken in
partnership with clients, where SNC‑Lavalin
is positioned to make the most significant
impact in tackling climate change.
6
SNC-LAVALIN 2021 ANNUAL REPORT SNC-LAVALIN
2021 ANNUAL REPORT
For its part, the Board approved and adopted
the “Commitment to Equality, Diversity &
Inclusion’’, a statement that codifies the
organization’s pledge to maintaining and
creating a more representative and inclusive
culture for all its employees. This commitment
serves as a foundation for the targets set by
SNC‑Lavalin to have at least 33% representation
by women across the Company and at least
25% in its senior leadership team by 2025.
Moving forward, executive compensation, which
has traditionally been tied to integrity and HSE
performance, will now also be connected to
sustainability and ED&I performance metrics.
The GES Committee continued to assist in
developing the Company’s approach to corporate
governance, integrity issues, and in 2021
added oversight of ESG and the sustainability
framework, governance, and strategy to its
duties and responsibilities, including monitoring
progress and ensuring accountability against
publicly disclosed ESG targets. The Committee
will also review the results of a comprehensive
materiality assessment that will be undertaken
in early 2022 to realign the Company’s ESG
priorities with its new vision and purpose.
Expanded oversight was also given to the Audit
and Risk Committee as it adopted a broader
mandate to oversee the Company’s ERM
framework, strategy, policies and governance.
The Board commends the Committees’
additional responsibilities, and it remains
committed to overseeing the evolution of the
Company’s best‑in‑class integrity program.
Unremitting vigilance is critical to ensuring that
the legacy issues of the past, a result of actions
of a select group of bad actors, are not repeated.
I want to close by thanking our talented global
workforce for their continued dedication and
commitment to SNC‑Lavalin and for their
tremendous efforts in the face of another
unprecedented year. I would also like to extend
my appreciation to the shareholders for their
ongoing support and confidence in SNC‑Lavalin’s
future as a world leading professional
services and project management firm.
Yours truly,
WILLIAM L. YOUNG P.ENG
CHAIR OF THE BOARD
7
SNC-LAVALIN
2021 ANNUAL REPORT
2021
HIGHLIGHTS
PROJECT WINS
Canada
Engaged by Tlingit Homeland
Energy, owned by the Taku River
Tlingit First Nation, to support
additional power capacity for the
local hydro facility in Atlin, BC.
Assisted Becton Dickinson with rapid
expansion projects to accommodate
production increases at their COVID‑19
diagnostic test kit research and
manufacturing facility in Quebec.
United States
Awarded the Company’s first hydroelectric
engineering services contract in the
United States by Rye Development, LLC.
Selected by the US Department of
Defense for outfitting and transition
support services for the construction and
renovation of military healthcare, dental
and medical research laboratories.
Extended existing involvement as part
of a joint venture to continue operating
the depleted uranium hexafluoride
conversion facilities at two United States
Department of Energy facilities.
Chosen by the Texas Department of
Transportation to provide engineering
consulting services for its Interstate
45 Corridor Project to provide safety
improvements, increase freight mobility,
enhance hurricane evacuation capability
and ease daily and seasonal congestion.
Helping prevent channel degradation
and improving water quality
through construction of new grade
control structures for the Southern
Nevada Water Authority.
Providing maintenance management
consulting services to the North
Texas Tollway Authority to establish
efficient asset maintenance operations
involving roadways, roadway
structures, buildings and facilities.
Continued our support of Medicom’s first
mask manufacturing facility in Canada,
providing automation and validation
services for production. Also assisted
Medicom with the rapid deployment of a
mask manufacturing facility in the UK.
Provided engineering design services
to a Canadian vaccine manufacturer,
expanding its domestic manufacturing
facilities with fill‑finish capacity for
mRNA vaccines and other biologics.
8
2021
HIGHLIGHTS
United Kingdom
Led the design of a compact nuclear
power station for the UK’s first small
modular reactor (SMR), as part of the
UK SMR consortium. Subsequently
appointed to provide Rolls‑Royce
SMR with engineering services.
Chosen by Whitetail Clean Energy as
engineering solutions provider for the
Teesside Net Zero emissions plant – the
UK’s first Net Zero emissions power
station utilizing NET Power technology.
Selected by the UK Government
Property Agency to bring over 4 million
square feet of public sector office
space up to Net Zero standard.
Appointed by the UK Atomic Energy
Authority to help design the world’s first
fusion energy research centre, and to
provide specialist engineering services
to its STEP program. The program
aims to design and build a prototype
fusion power plant in the UK by 2040.
Began a collaboration with the UK’s
Electric Aviation Group to accelerate
the development of a zero emission,
regional aircraft fueled by hybrid
hydrogen‑electric technology.
Contracted by the UK Government’s
Geospatial Commission to deliver a UK‑
wide digital map of underground utilities.
Secured, as part of the East West Rail
Alliance, a contract for the second phase
of the East West Rail Project in the UK.
Appointed to lead South East Water’s
engineering, environmental and asset
management program in the UK.
Developing fully autonomous ‘sort
and segregate’ system for radioactive
waste for the UK Government’s Nuclear
Decommissioning Authority.
Australia
Selected as the Integration and Delivery
Partner for the Sydney Metro – Western
Sydney Airport project, the largest
public transport project in Australia.
Middle East
Won a contract from The Royal
Commission for Riyadh City to provide
program management office (PMO)
consultancy services for architectural,
landscape and urban planning projects
that will help position Riyadh as one
of the top 100 cities in the world.
9
SNC-LAVALIN 2021 ANNUAL REPORT Appointed Joe St. Julian
as President of Nuclear.
Mr. St. Julian brings senior
leadership experience in the
nuclear sector with a diverse
background in construction,
project controls, project
management, strategic planning
and commercial management.
Equipped Boston Dynamics'
Spot robot with instruments to
conduct routine monitoring and
surveys, and advanced its use for
the US Department of Energy in
environments that are hazardous
and challenging to humans.
2021
HIGHLIGHTS
PROJECT AWARDS
Inaugural recipient of the
Ambassador of the Year award
from the Centre for Canadian
Nuclear Sustainability.
Diriyah Gate in Saudi Arabia
awarded silver accolade
for Future Projects – Urban
Design Category at The World
Architecture News Awards.
The scope of work for the
Diriyah Gate included developing
project detailed master plan,
urban design guidelines and
plot regulations, concept
landscape design, transport
and infrastructure strategy.
Three projects received Best
in Construction Awards from
the Florida Transportation
Builders' Association.
Ranked in the platinum (top)
tier by ReNew Canada’s
Top 100 Projects list, for
involvement in 24 of the
100 largest infrastructure
projects in Canada.
Won the grand prize in the
transport infrastructure
category from the Association
of Consulting Engineering
Companies – Quebec, for work
on the Samuel De Champlain
Bridge in Montreal.
SNC‑Lavalin's architecture
team in Hong Kong won four
Best Mixed Use Architecture
accolades at the International
Property Awards 2021.
KEY MILESTONES
Launched DecarbonomicsTM,
a data‑driven solution
to decarbonize the built
environment, which
contributes around 40% of
global carbon emissions.
Achieved the world’s first
combined removal of calandria
and pressure tubes at the
Darlington Nuclear Generating
Station, as part of a joint venture
and broader collaboration with
Ontario Power Generation on
Darlington’s refurbishment
and life extension.
Joined, as a founding member,
The Group of Vienna, an initiative
including the International
Atomic Energy Agency and
over a dozen leading companies
in the nuclear industry. The
Group of Vienna will work
together to foster the role
of nuclear technology in
addressing environmental,
social and economic goals.
IMAGE CREDIT: WIRESTOCK - STOCK.ADOBE.COM
10
SNC-LAVALIN 2021 ANNUAL REPORT ESG
ENVIRONMENTAL
SOCIAL
Set a target of Net Zero Carbon
emissions from corporate
activities by 2030 and published
a Routemap to achieving it. This
includes interim targets with
updates published annually.
Joined the United Nations’
Race to Zero global campaign
and The Climate Pledge.
Committed to the Science Based
Targets Initiative (SBTi). The SBTi
brings together 2,000 companies
to set science‑based emissions
reduction targets in support of
limiting global warming to 1.5°C.
Published a report highlighting the
impact of ‘career deflection’ on the
earnings potential and progress
of women, ethnic minorities and
disabled employees within the wider
engineering sector. Concurrent
with its publication, the Company
called for greater industry action
to ensure talent from these groups
remains within the industry.
Contributed $10,000 to the SickKids
Foundation to support their continued
delivery of world‑class care and
ground‑breaking research.
Supported the Canadian Red Cross’
disaster relief efforts in Canada
and around the world. This included
$50,000 to its Ukraine Humanitarian
Crisis Appeal and $25,000 to support
flood relief in British Columbia, with
an additional matching of employee
donations on both campaigns.
Continued the SNC‑Lavalin tradition
of supporting The Montreal Children’s
Hospital’s Caring for Kids Radiothon
fundraiser. Together, the community
raised $1,321,603 in 2021.
For a 6th year, sponsored Ryerson
University’s Virtual Ethical Leadership
Case Competition for students from
seven universities. SNC‑Lavalin
integrity professionals volunteered
their time as competition judges.
Awarded more than $100,000
in scholarships to 26 students
across the US pursuing STEM‑
related curricula, as part
of SNC‑Lavalin's efforts to
encourage and support a healthy
ecosystem for STEM education.
Supporting the success of the next
generation of Indigenous youth with
ongoing annual funding of multiple
academic bursaries and scholarships.
Became an Aboriginal Procurement
Champion by joining the Canadian
Council for Aboriginal Business’
Supply Change Program. This is
part of SNC‑Lavalin's broader
commitment to establishing and
maintaining mutually respectful
and meaningful relationships
between Indigenous communities,
its clients and the Company.
Volunteered our expertise and
assistance in Ground Penetrating
Radar technology — an effective
tool to identify possible locations
of burial sites — to Indigenous
communities to help bring a degree
of closure and peace for families
impacted by the legacy of the
residential school system in Canada.
Launched SNC‑Lavalin's annual
months‑long Wellbeing Initiative for
employees, with themes covering
physical and mental health. This
was part of a reinforced focus
on supporting staff amidst the
enormous stresses placed on
their personal and professional
lives by the ongoing pandemic.
11
SNC-LAVALIN 2021 ANNUAL REPORT ESG
GOVERNANCE
Established targets to increase
the representation of women
in leadership and across the
organization, along with a
commitment to maintain or exceed
30% representation of women
on the Board of Directors.
Appointment of a Chief ESG and
Integrity Officer (filled by Hentie
Dirker), and Vice‑President, Equality,
Diversity and Inclusion (filled by
Victoria Jones). These new roles
will be instrumental moving
SNC‑Lavalin forward in its ESG,
Integrity and ED&I journeys.
Transformed the Global Health,
Safety & Environment (HSE)
function with a new, simplified
structure that is both regionally
agile and client oriented.
Receipt of the independent monitor’s
third report on our Integrity Program,
testing and assessing its robustness.
The independent monitor reports on
our Integrity Program throughout
the duration of the 3‑year probation
order arising from legacy activities
between 2001 and 2011. Their
final report will be received in
December 2022, coinciding with
the end of the probation period.
Published a new Counterparty
Code of Conduct, strengthening our
robust governance architecture for
suppliers. Our partners, suppliers,
subcontractors and representatives
must enforce obligations as
strict as those set out in this
Counterparty Code of Conduct
upon anyone in their supply chain.
SNC‑Lavalin's Singapore team
received the Special Recognition
for Diversity, Equity & Inclusion
award from Kincentric, a leading
human capital advisory firm.
Partnered with the United Way
of Bangalore and the Happy
World Foundation to facilitate
the donation of advanced life
support ambulances to leading
government and charitable hospitals
in India to help ease the impact of
COVID‑19 in local communities.
Achieved a score of 84% when
assessing the strength of our
integrity culture in a survey of our
workforce. Conducted independently,
the survey’s results position us
four points better than the external
benchmark for our industry.
ESG RECOGNITION
Atkins and Faithful+Gould – members
of the SNC‑Lavalin Group – were
awarded the UK’s Gold Standard
in Equality Diversity & Inclusion by
Clear Assured. These are the first
companies from the engineering
sector to receive this accreditation.
SNC‑Lavalin was designated a
Certified Building Commissioning
Firm by the Association of Energy
Engineers, demonstrating a high‑
level of experience and ethical
fitness for the practice of building
commissioning and delivering
sustainable, energy‑efficient projects.
Hentie Dirker, Chief ESG and
Integrity Officer, was recognized
by the Global Investigation Review
with the Outstanding In‑House
Counsel Award. This award
celebrates leaders of exemplary
compliance programs, in a resounding
endorsement of SNC‑Lavalin's
integrity journey’s progress.
12
SNC-LAVALIN 2021 ANNUAL REPORT SNC-LAVALIN
2021 ANNUAL REPORT
LEADERSHIP TEAM
IAN L. EDWARDS
ROBERT E. ALGER
JEFF BELL
DALE CLARKE
JAMES CULLENS
PHILLIP HOARE
STEVE MORRISS
President and
Chief Executive Officer
President,
Major Projects
Executive
Vice‑President and
Chief Financial Officer
Chief Executive Officer,
Engineering
Services, Canada
Executive
Vice‑President,
Human Resources
President, Engineering
Services, United Kingdom,
Europe, Middle East,
India and Canada
President, Engineering
Services, United States,
Asia Pacific, and
Mining & Metallurgy
CHARLENE RIPLEY
ERIK J. RYAN
JOE ST. JULIAN
STÉPHANIE VAILLANCOURT
LOUIS G. VÉRONNEAU
NIGEL W.M. WHITE
Executive
Vice‑President and
General Counsel
Executive
Vice‑President,
Strategy, Marketing and
External Relations
President,
Nuclear
President, Capital
and Operations &
Maintenance (O&M)
Executive
Vice‑President and Chief
Transformation Officer
Executive
Vice‑President, Project
Performance and
Risk Oversight
13
2021
FINANCIAL REPORT
Table of contents
Management’s Responsability for Financial Reporting 1
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
2021 Management’s Discussion and Analysis
Glossary
Information for shareholders
2
5
10
98
193
196
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, 2021, 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, 2021, 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 2, 2022
MONTREAL, CANADA
JEFF BELL (signed)
EXECUTIVE VICE-PRESIDENT AND
CHIEF FINANCIAL OFFICER
1
1
SNC-Lavalin 2021 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, 2021 and 2020, 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, 2021 and 2020, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the financial
statements for the year ended December 31, 2021. This matter was 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 this matter.
Revenue – Lump-sum turnkey construction (“LSTK”) contracts – Refer to Notes 2F, 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
(“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 include 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 duration of LSTK contracts, these
assumptions change over time, as the contract is completed.
Given the significant judgements 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 costs 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 contracts, amendments, pending change orders or claims confirming key
terms with project management.
2
2
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 of 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.
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.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, 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.
3
3
SNC-Lavalin 2021 Financial Report INDEPENDENT AUDITOR’S REPORT (CONTINUED)
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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.
The engagement partner on the audit resulting in this independent auditor’s report is Christian Jacques.
/s/ Deloitte LLP (1)
MARCH 2, 2022
MONTREAL, QUEBEC
___________________________________
(1) CPA auditor, CA, public accountancy permit No. A124341
4
4
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
Short-term debt and current portion of long-term debt:
Liabilities of disposal groups classified as held for sale
6D, 39
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
Recourse
Non-recourse
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
Note
DECEMBER 31
DECEMBER 31
2021
2020
$
608,446 $
3,632,300
4,051,556
3,382,943
3,429,478
$
9,875,964 $
10,340,278
$
1,652,514 $
1,730,398
13,398
1,145,932
1,119,045
17,037
138,371
246,158
343,913
333,493
355,637
380,736
41,327
445,716
658,061
304,189
25,409
316,153
838,209
205,770
328,119
425,613
91,317
96,853
14,021
298,888
3,951,304
997,249
400,000
156,048
137,519
470,410
405,741
37
364,197
6,882,505
1,805,080
1,501,556
(333,269)
—
2,973,367
20,092
2,993,459
932,902
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
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
8A, 9B
8B, 9B
6D, 39
29A
7
7
10
11
12
13
34
5
5
14
15
16
17
9B
18
19
22
34
20
20
20
20
20
21
22
34
29A
23
24
6D
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:
IAN L. EDWARDS (signed)
DIRECTOR
$
9,875,964 $
10,340,278
BENITA M. WARMBOLD (signed)
DIRECTOR
2021 CONSOLIDATED FINANCIAL STATEMENTS
5
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
6D, 39
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:
IAN L. EDWARDS (signed)
DIRECTOR
Note
DECEMBER 31
2021
DECEMBER 31
2020
$
608,446 $
7
7
8A, 9B
8B, 9B
10
11
12
6D, 39
13
34
5
5
14
15
29A
16
17
9B
18
19
22
34
20
20
20
20
20
21
22
34
29A
23
24
6D
$
9,875,964 $
10,340,278
$
1,652,514 $
13,398
1,145,932
1,119,045
17,037
138,371
246,158
343,913
3,632,300
333,493
355,637
380,736
41,327
3,382,943
445,716
658,061
304,189
25,409
316,153
838,209
205,770
328,119
425,613
91,317
96,853
14,021
298,888
3,951,304
997,249
400,000
156,048
137,519
470,410
405,741
37
364,197
6,882,505
932,902
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
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
1,501,556
(333,269)
—
2,973,367
20,092
2,993,459
9,875,964 $
1,805,080
478,351
(320,067)
594,141
2,557,505
11,188
2,568,693
10,340,278
$
BENITA M. WARMBOLD (signed)
DIRECTOR
2021 CONSOLIDATED FINANCIAL STATEMENTS
5
5
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SNC-LAVALIN GROUP INC.
CONSOLIDATED INCOME STATEMENTS
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT
NUMBER OF COMMON SHARES)
Balance at beginning of year
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
Dividends declared (Note 23E)
Dividends declared by subsidiaries
to non-controlling interests
Other transaction with
non-controlling interests
Balance at end of year
YEAR ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT
NUMBER OF COMMON SHARES)
EQUITY ATTRIBUTABLE TO SNC-LAVALIN SHAREHOLDERS
2021
SHARE CAPITAL
COMMON
SHARES
(IN THOUSANDS)
AMOUNT
RETAINED
EARNINGS
OTHER
COMPONENTS
OF
EQUITY
(NOTE 24)
NON-
CONTROLLING
INTERESTS
TOTAL
TOTAL EQUITY
Capital investments accounted for by the consolidation method or at fair value through other
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AND NUMBER
Note
2021
2020
YEARS ENDED DECEMBER 31
OF SHARES)
Continuing operations
Revenues from:
PS&PM
175,554 $ 1,805,080 $ 478,351 $ 274,074 $ 2,557,505 $
11,188 $ 2,568,693
comprehensive income
—
—
—
—
—
—
—
—
666,563
—
666,563
5,493
672,056
376,676
(607,343)
(230,667)
91
(230,576)
Capital investments accounted for by the equity method
—
1,043,239
(607,343)
435,896
5,584
441,480
Direct costs of activities
—
(14,044)
—
(14,044)
—
(14,044)
—
—
—
—
(2,670)
(2,670)
Loss (gain) arising on financial instruments at fair value through profit or loss
—
(5,990)
—
(5,990)
5,990
—
175,554 $ 1,805,080 $ 1,501,556 $ (333,269) $ 2,973,367 $
20,092 $ 2,993,459
2020
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
Impairment loss (reversal of impairment loss) on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell
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
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
Balance at end of year
175,554 $ 1,805,080 $ 478,351 $ 274,074 $ 2,557,505 $
11,188 $ 2,568,693
See accompanying notes to consolidated financial statements
Corporate selling, general and administrative expenses
Impairment loss from expected credit losses
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
Loss on disposals of PS&PM businesses
EBIT (1)
Financial expenses
Financial income and net foreign exchange losses (gains)
Earnings (loss) before income taxes from continuing operations
Income tax recovery
Net income (loss) from continuing operations
Net income (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
Basic
Diluted
(1)
Earnings before interest and taxes (“EBIT”)
See accompanying notes to consolidated financial statements
Weighted average number of outstanding shares (in thousands)
23D
6B, 6F
25
26
5A
6B
27
27
29B
6A
$ 7,237,134 $ 6,878,142
49,116
85,002
42,010
87,349
7,371,252
7,007,501
6,881,947
6,882,152
145,073
175,933
—
(3,725)
70,117
89,477
(5,000)
613
(1,348)
194,098
113,856
(3,406)
83,648
(22,031)
105,679
566,377
874
61,859
63,324
126,770
(25,000)
7,467
6,094
(291,972)
124,703
(10,707)
(405,968)
(59,039)
(346,929)
(609,344)
$
672,056 $
(956,273)
$
100,186 $
(356,103)
5,493
9,174
$
105,679 $
(346,929)
$
666,563 $
(965,447)
5,493
9,174
$
672,056 $
(956,273)
$
$
0.57 $
0.57 $
(2.03)
(2.03)
175,554
175,554
175,554
175,554
6
6
2021 CONSOLIDATED FINANCIAL STATEMENTS
2021 CONSOLIDATED FINANCIAL STATEMENTS
7
SNC-LAVALIN GROUP INC.
CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS AND NUMBER
OF SHARES)
Note
2021
2020
Continuing operations
Revenues from:
PS&PM
Capital investments accounted for by the consolidation method or at fair value through other
$ 7,237,134 $ 6,878,142
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 (gain) arising on financial instruments at fair value through profit or loss
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
25
26
5A
Loss on disposals of PS&PM businesses
Impairment loss (reversal of impairment loss) on remeasurement of assets of disposal group
6B, 6F
6B
27
27
29B
6A
classified as held for sale to fair value less cost to sell
EBIT (1)
Financial expenses
Financial income and net foreign exchange losses (gains)
Earnings (loss) before income taxes from continuing operations
Income tax recovery
Net income (loss) from continuing operations
Net income (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
Weighted average number of outstanding shares (in thousands)
23D
Basic
Diluted
(1)
Earnings before interest and taxes (“EBIT”)
See accompanying notes to consolidated financial statements
49,116
85,002
42,010
87,349
7,371,252
7,007,501
6,881,947
6,882,152
145,073
175,933
—
(3,725)
70,117
89,477
(5,000)
613
(1,348)
194,098
113,856
(3,406)
83,648
(22,031)
105,679
566,377
874
61,859
63,324
126,770
(25,000)
7,467
6,094
(291,972)
124,703
(10,707)
(405,968)
(59,039)
(346,929)
(609,344)
$
672,056 $
(956,273)
$
100,186 $
(356,103)
5,493
9,174
$
105,679 $
(346,929)
$
666,563 $
(965,447)
5,493
9,174
$
672,056 $
(956,273)
$
$
0.57 $
0.57 $
(2.03)
(2.03)
175,554
175,554
175,554
175,554
2021 CONSOLIDATED FINANCIAL STATEMENTS
7
7
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN GROUP INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SNC-LAVALIN GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
2021
ATTRIBUTABLE TO
SNC-LAVALIN
SHAREHOLDERS
NON-CONTROLLING
INTERESTS
TOTAL
$
100,186 $
5,493 $
105,679
Note
2021
2020
$
672,056 $
(956,273)
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)
Cash flow hedges (Note 24)
Share of other comprehensive income 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)
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 income from discontinued operations
Other comprehensive loss from discontinued operations
Total other comprehensive income from discontinued operations
(595,569)
14,339
1,419
(1,412)
(581,223)
5,749
464,878
(94,662)
375,965
(205,258)
566,377
(25,409)
540,968
(11)
102
—
—
91
—
—
—
—
91
—
—
—
(595,580)
14,441
1,419
(1,412)
(581,132)
5,749
464,878
(94,662)
375,965
(205,167)
566,377
(25,409)
540,968
441,480
Total comprehensive income
$
435,896 $
5,584 $
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)
See accompanying notes to consolidated financial statements
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)
See accompanying notes to consolidated financial statements
8
8
2021 CONSOLIDATED FINANCIAL STATEMENTS
2021 CONSOLIDATED FINANCIAL STATEMENTS
9
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Operating activities
Net income (loss)
Income taxes paid
Interest paid (2)
Other reconciling items
Net change in non-cash working capital items
Net cash generated from operating activities
Investing activities
Acquisition of property and equipment
Payments for Capital investments
Refunds for Capital investments
Change in restricted cash position
Increase in receivables under service concession arrangements
Recovery of receivables under service concession arrangements
Cash outflow on disposals of PS&PM businesses
Cash inflow on disposal of a Capital investment accounted for by the equity method
Other (3)
Net cash 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 decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Presented on the statement of financial position as follows:
Cash and cash equivalents
Assets of disposal group classified as held for sale
28A
28B
5C
6C, 6G
5A
28C
28C
28C
28C
23E, 28C
(71,390)
(97,011)
(272,238)
231,417
(97,219)
134,198
(106,291)
(29,731)
2,529
(6,551)
(386,157)
255,622
(21,076)
5,000
22,948
121,039
(201,466)
(99,775)
(14,044)
1,711
(192,535)
(248)
(322,292)
932,902
(22,536)
(105,005)
976,051
(107,763)
229,248
121,485
(75,821)
(55,834)
—
4,818
(239,584)
173,934
(15,043)
—
22,407
1,329,225
(1,387,901)
(118,651)
(14,044)
941
(190,430)
(1,666)
(255,734)
1,188,636
(263,707)
(185,123)
$
610,610 $
932,902
$
608,446 $
932,902
39
2,164
—
$
610,610 $
932,902
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 6A.
Effective January 1, 2021, the Company combined “Interest paid from PS&PM” and “Interest paid from Capital investments”, both presented in operating
activities, into “Interest paid”, also in operating activities, in the consolidated statements of cash flows. The Company has re-presented the comparative
Effective as of the fourth quarter of 2020, the Company combined “Proceeds from disposal of property and equipment” and “Other”, both presented in
investing activities, into “Other”, also in investing activities, in the consolidated statements of cash flows. The Company has re-presented the comparative
(1)
(2)
(3)
figures accordingly.
figures accordingly.
SNC-LAVALIN GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF CANADIAN DOLLARS)
Operating activities
Net income (loss)
Income taxes paid
Interest paid (2)
Other reconciling items
Net change in non-cash working capital items
Net cash generated from operating activities
Investing activities
Acquisition of property and equipment
Payments for Capital investments
Refunds for Capital investments
Change in restricted cash position
Increase in receivables under service concession arrangements
Recovery of receivables under service concession arrangements
Cash outflow on disposals of PS&PM businesses
Cash inflow on disposal of a Capital investment accounted for by the equity method
Other (3)
Net cash 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 decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Presented on the statement of financial position as follows:
Cash and cash equivalents
Assets of disposal group classified as held for sale
Note
2021
2020
$
672,056 $
(956,273)
28A
28B
5C
6C, 6G
5A
28C
28C
28C
23E, 28C
28C
(71,390)
(97,011)
(272,238)
231,417
(97,219)
134,198
(106,291)
(29,731)
2,529
(6,551)
(386,157)
255,622
(21,076)
5,000
22,948
(22,536)
(105,005)
976,051
(107,763)
229,248
121,485
(75,821)
(55,834)
—
4,818
(239,584)
173,934
(15,043)
—
22,407
(263,707)
(185,123)
121,039
(201,466)
(99,775)
(14,044)
1,711
(192,535)
(248)
(322,292)
932,902
1,329,225
(1,387,901)
(118,651)
(14,044)
941
(190,430)
(1,666)
(255,734)
1,188,636
$
610,610 $
932,902
$
608,446 $
932,902
39
2,164
—
$
610,610 $
932,902
(1)
(2)
(3)
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 6A.
Effective January 1, 2021, the Company combined “Interest paid from PS&PM” and “Interest paid from Capital investments”, both presented in operating
activities, into “Interest paid”, also in operating activities, in the consolidated statements of cash flows. The Company has re-presented the comparative
figures accordingly.
Effective as of the fourth quarter of 2020, the Company combined “Proceeds from disposal of property and equipment” and “Other”, both presented in
investing activities, into “Other”, also in investing activities, in the consolidated statements of cash flows. The Company has re-presented the comparative
figures accordingly.
See accompanying notes to consolidated financial statements
2021 CONSOLIDATED FINANCIAL STATEMENTS
9
9
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
40.
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 AND TRANSFORMATION 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 .....................................................................................................................................
DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE ...................................................................................
EVENT AFTER THE REPORTING PERIOD .......................................................................................................
11
11
24
29
32
38
43
43
44
46
47
47
47
48
49
50
51
52
53
53
56
56
57
60
62
62
63
63
68
71
78
79
86
92
93
94
95
97
97
97
10
10 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
Notes to Consolidated Financial Statements
(ALL TABULAR FIGURES IN THOUSANDS OF CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED)
1. DESCRIPTION OF BUSINESS
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, H2Z 1Z3, Canada. 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”) 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 Professional Services & Project
Management (“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, 2021, 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.
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) 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; 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; and iv) certain assets held for sale, which are measured at fair value less cost to sell. 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.
The Company’s financial statements were authorized for issue by the Board of Directors of the Company on March 2, 2022.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
11
11
SNC-Lavalin 2021 Financial Report
2.
B)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW AMENDMENTS ADOPTED IN THE YEAR ENDED DECEMBER 31, 2021
The following amendments to existing standards were adopted by the Company on January 1, 2021:
•
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.
The adoption by the Company of the amendments listed above did not have a significant impact on the Company's financial
statements.
Progress in and risks arising from the transition to alternative benchmark interest rates
The transition from interbank offered rates (“IBORs”) to alternative benchmark interest rates impacts financial instruments
referencing IBOR rates for terms that extend beyond December 31, 2021. Transition activities are focused on two broad streams
of work: i) identifying existing LIBOR based contracts; and ii) determining how to convert such contracts to alternative risk-free
rates.
SNC-Lavalin’s timeline to identify and eventually convert its existing LIBOR (USD) based contracts with terms other than
1-week and 2-months is currently estimated to be at the latest by June 30, 2023, based on the recommended target dates for
cessation of LIBOR-based products provided by the regulators. With regard to existing GBP LIBOR, EUR LIBOR and USD
LIBOR (with terms of 1-week and 2-months) based contracts, SNC-Lavalin determined that as at December 31, 2021 its only
material contract based on these reference rates is the Company’s unsecured revolving credit facility (see Note 20C (i)), which
was not converted or amended to reflect the fallback rates, namely the Sterling Overnight Index Average (“SONIA”) rate for
GBP LIBOR and the Euro Short Term Rate (“€STR”) for EUR LIBOR and for the cessation of USD LIBOR with terms of
1-week and 2-months, effective from January 1st, 2022, since the Company does not expect to obtain borrowings based on these
reference rates. SNC-Lavalin also monitors its exposures to benchmark rates that have no announced plans for cessation or
further reform, including the Canadian Dollar Offered Rate (“CDOR”) and the Euro Interbank Offered Rate (“EURIBOR”).
C)
AMENDMENTS ISSUED TO BE ADOPTED AT A LATER DATE
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.
• Amendments to IAS 37 specify that the “cost of fulfilling” a contract comprises the “costs that relate directly to the
contract” in assessing whether a contract is onerous. 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).
12
12 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
• 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 amendments to existing standards have been issued and are 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, Accounting Policies, Changes in Accounting Estimates and Errors, 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”.
• Amendments to IAS 12, Income Taxes, specify how entities should account for deferred income taxes on transactions
such as leases and decommissioning obligations. In specified circumstances, entities are exempt from recognizing
deferred income taxes when they recognize assets or liabilities for the first time. The amendments clarify that the
exemption does not apply to transactions such as leases and decommissioning obligations and that entities are required to
recognize deferred income taxes on such transactions.
The Company is currently evaluating the impacts of adopting these amendments on its financial statements.
D)
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS 13
13
SNC-Lavalin 2021 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
E)
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
The individual financial statements of each entity within the Company are prepared in its functional currency, being the
currency of the primary economic environment in which the entity operates. 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.
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 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.
14
14 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
2.
F)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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
under a given contract.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS 15
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SNC-Lavalin 2021 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
G)
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.
HEDGING (APPLYING IAS 39)
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.
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16 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
H)
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).
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS 17
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SNC-Lavalin 2021 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenues from service concession arrangements accounted for under IFRIC 12 are recognized as follows:
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 2F).
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
(when financial asset model or bifurcated model is
applied)
Financial asset model
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.
I)
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.
J)
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.
K)
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
18 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
2.
L)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
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
Leasehold improvements
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
Straight-line
1 to 15 years
Over the shorter of: i) the term of the lease;
and ii) the useful life of the asset
M)
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.
N)
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS 19
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SNC-Lavalin 2021 Financial Report
2.
O)
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.
P)
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.
Q)
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.
R)
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 2021 CONSOLIDATED FINANCIAL STATEMENTS
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.
S)
EARNINGS PER SHARE
Basic and diluted earnings per share are determined by dividing 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.
T)
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.
U)
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS 21
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SNC-Lavalin 2021 Financial Report
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 when 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.
V)
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 a 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 a 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 and 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 2021 CONSOLIDATED FINANCIAL STATEMENTS
2.
W)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS 23
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SNC-Lavalin 2021 Financial Report
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.
X)
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
24 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(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 which the Company expects to be entitled to receive 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, since 2020, the Company reviews 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 potential increased costs and
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 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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
25
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SNC-Lavalin 2021 Financial Report 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 any tangible and intangible assets other than goodwill have suffered an impairment loss, the
determination of the recoverable amount of such 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, such as COVID-19 and others, 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 2021 CONSOLIDATED FINANCIAL STATEMENTS
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. As at December 31, 2021, 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. As at December 31, 2021, such amount of $26.7 million remains subject to
uncertainty until the quantification exercise is completed.
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
27
27
SNC-Lavalin 2021 Financial Report
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, 2021 and 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 and remained at $nil since then 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
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.
28
28
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(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 uses 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 whether or not such
modification should 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, defence and security and technology, including some of the world’s most
transformational projects. A significant portion of EDPM 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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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SNC-Lavalin 2021 Financial Report 4.
SEGMENT DISCLOSURES (CONTINUED)
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 model 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 presented as discontinued operations for both 2021 and 2020 and were disposed of in the third quarter of 2021.
Infrastructure EPC Projects includes lump-sum turnkey (“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.
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 revenues less
i) direct cost of activities; ii) directly related selling, general and administrative expenses; and iii) 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 instruments at fair value through profit
or loss, restructuring and transformation 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, gains
(losses) on disposal(s) or adjustment on disposal(s) of Capital investments, impairment of intangible assets related to business
combinations, goodwill impairment, federal charges settlement (PPSC) and impairment loss (reversal of impairment loss) on
remeasurement of assets of disposal group classified as held for sale are not allocated to the Company’s segments.
30
30
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
4.
SEGMENT DISCLOSURES (CONTINUED)
The following table presents revenues and Segment Adjusted EBIT for each of the Company’s segments for the years ended
December 31, 2021 and 2020:
YEARS ENDED DECEMBER 31
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services
Resources (1)
Infrastructure EPC Projects (2)
SNCL Projects
Capital
Segment Adjusted EBIT — Total
Corporate selling, general and administrative expenses not allocated to the
segments — PS&PM
Corporate selling, general and administrative expenses not allocated to the
segments — Capital
Impairment loss arising from expected credit losses
Gain (loss) arising on financial instruments at fair value through profit or
loss
Restructuring and transformation costs (Note 26)
Amortization of intangible assets related to business combinations (Note 15)
Adjustments on gain on disposals of Capital investments (Note 5A)
Loss on disposals of PS&PM businesses (Notes 6B and 6F)
Reversal of impairment loss (impairment loss) on remeasurement of assets
of disposal group classified as held for sale to fair value less cost to sell
(Note 6B)
EBIT
Net financial expenses (Note 27)
Earnings (loss) before income taxes from continuing operations
Income tax recovery (Note 29B)
Net income (loss) from continuing operations
Net income (loss) from discontinued operations (Note 6A)
Net income (loss)
2021
2020
REVENUES
SEGMENT
ADJUSTED EBIT
REVENUES
SEGMENT
ADJUSTED EBIT
$ 3,848,788 $ 431,796 $ 3,721,119 $ 302,269
904,678
135,854
928,606
140,051
1,416,579
92,705
1,325,313
97,212
6,170,045
660,355
5,975,038
539,532
171,757
(39,426)
162,916
(171,118)
895,332
(250,925)
740,188
(359,680)
1,067,089
(290,351)
903,104
(530,798)
134,118
119,301
129,359
116,615
$ 7,371,252
$ 7,007,501
489,305
(116,879)
(28,194)
—
3,725
(70,117)
(89,477)
5,000
(613)
1,348
194,098
110,450
83,648
(22,031)
105,679
566,377
125,349
(147,739)
(28,194)
(874)
(61,859)
(63,324)
(126,770)
25,000
(7,467)
(6,094)
(291,972)
113,996
(405,968)
(59,039)
(346,929)
(609,344)
$ 672,056
$ (956,273)
(1)
(2)
In 2020, the negative Segment Adjusted EBIT of Resources resulted mainly from charges for remaining LSTK contracts and other historical claims and
litigation matters.
In 2021, the negative Segment Adjusted EBIT was mainly due to unfavourable cost reforecasts, primarily driven by COVID-19, supply chain disruptions
and inflation, causing project productivity losses, delays and cost increases on the last remaining LSTK projects. In 2020, 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.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
31
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SNC-Lavalin 2021 Financial Report
4.
SEGMENT DISCLOSURES (CONTINUED)
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.
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 (Notes 6B and 6F)
Net income (loss) from discontinued operations (Note 6A)
Reversal of impairment loss (impairment loss) on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell (Note 6B)
Excluding the items listed above
Net income (loss) attributable to SNC-Lavalin shareholders from PS&PM
Adjustments on net gain on disposals of Capital investments (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
2021
2020
$
(613) $
(7,467)
566,377
(609,344)
1,348
26,284
(6,094)
(388,093)
593,396
(1,010,998)
3,650
25,000
—
(49,627)
40,585
28,932
73,167
38,048
32,130
45,551
$
666,563 $
(965,447)
The following table presents property and equipment, right-of-use assets, goodwill and intangible assets inside and outside
Canada reflected on the Company’s consolidated statements of financial position:
Property and equipment, right-of-use assets, goodwill and intangible assets
Canada
Outside Canada
DECEMBER 31
2021
DECEMBER 31
2020 (1)
$
318,021 $
340,245
4,199,768
4,355,980
$
4,517,789 $
4,696,225
(1)
Effective January 1, 2021, the Company includes its right-of-use assets in the allocation of non-current assets between Canada and Outside Canada. The
Company has re-presented the comparative figures accordingly.
5.
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).
The main concessions and public-private partnerships contracts reported under IFRIC 12 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 AND RELATED TRANSACTIONS
A)
I) IN 2021
INPOWER BC GENERAL PARTNERSHIP
In the fourth quarter of 2021, SNC-Lavalin’s offer to transfer its 100% ownership interest in InPower BC General Partnership
and its related holding companies to SNC-Lavalin Infrastructure Partners LP (the “SNCL IP Partnership”) was accepted by the
external investor in the SNCL IP Partnership, subject to customary approvals and closing conditions. SNC-Lavalin holds a 20%
interest in SNCL IP Partnership, a Capital investment accounted for by the equity method. This transaction was completed in
early February 2022 (see Note 40).
32
32
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
5.
CAPITAL INVESTMENTS (CONTINUED)
As at December 31, 2021, all assets and liabilities of InPower BC General Partnership and its related holding companies were
classified as held for sale (see Note 39).
HIGHWAY CONCESSIONS ONE PRIVATE LIMITED
In the fourth quarter of 2021, SNC-Lavalin completed the sale of its ownership interest in Highway Concessions One Private
Limited, which was measured at fair value through other comprehensive income, for total cash consideration of US$1.0 million
(approximately CA$1.3 million), with no impact in the consolidated income statement.
ADJUSTMENT ON GAIN ON DISPOSAL OF A CAPITAL INVESTMENT ACCOUNTED FOR BY THE EQUITY METHOD
In the fourth quarter of 2021, the Company received a contingent consideration related to the previous disposal of a Capital
investment accounted for by the equity method in the amount of $5.0 million, which is included in “Adjustments on gain on
disposals of Capital investments” in the consolidated income statement for the year ended December 31, 2021. This adjustment
on gain on disposal amounted to $3.7 million after income taxes.
II) 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 “Adjustments on gain on disposals of Capital
investments” in the consolidated income statement for the year ended December 31, 2020.
B)
FINANCIAL INFORMATION AND DESCRIPTION OF CAPITAL INVESTMENTS
Statements of financial position
The Company’s consolidated statements of financial position include 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 from Capital investments accounted for by the consolidation method (1)
Net book value of Capital investments accounted for by the equity method (2)
Net book value of Capital investments at fair value through other comprehensive income
DECEMBER 31
2021
DECEMBER 31
2020
$
197,918 $
380,736
41,327
$
619,981 $
38,296
378,730
9,666
426,692
(1)
(2)
Includes net assets from InPower BC General Partnership classified as held for sale as at December 31, 2021 (see Note 39).
Includes the Company’s investment in Highway 407 ETR, for which the net book value was $nil as at December 31, 2021 and 2020.
Income statements
The Company’s consolidated income statements include the following revenues and expenses from its Capital investments.
YEARS ENDED DECEMBER 31
Revenues from Capital
Direct cost of activities
Corporate selling, general and administrative expenses not allocated to the segments —
Capital
Loss arising on financial instruments at fair value through profit or loss (3)
Adjustments on gain on disposals of Capital investments
EBIT
Net financial expenses
Income before income taxes
Income taxes
Net income
2021
$
134,118 $
14,817
119,301
28,194
—
(5,000)
96,107
16,552
79,555
6,388
$
73,167 $
2020
129,359
12,744
116,615
28,194
57,207
(25,000)
56,214
16,264
39,950
(5,601)
45,551
(3)
Represents a loss of $57.2 million recognized in the year ended December 31, 2020, which arose on contingent consideration receivable from the acquirer
of the 10.01% interest in Highway 407 ETR.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
33
33
SNC-Lavalin 2021 Financial Report
5.
CAPITAL INVESTMENTS (CONTINUED)
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 (1)
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
2021
DECEMBER 31
2020
Yes
Yes
2033
Canada
100.0 %
100.0 %
2049
Canada
100.0 %
100.0 %
II) CAPITAL INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
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.(2)
(“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.(3)
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
2021
DECEMBER 31
2020
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)
(3)
InPower BC General Partnership is classified as held for sale as at December 31, 2021 (see Note 39).
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
34
34 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
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
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, 2021
Statements of comprehensive income
Net income (at 100%)
Other comprehensive income (loss) (at 100%)
Total comprehensive income (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%)
HIGHWAY 407 ETR
OTHER CAPITAL
INVESTMENTS
TOTAL
$
1,023,082 $
1,048,394 $
2,071,476
$
$
$
$
7,928 $
699 $
8,627
470,211 $
90,025 $
560,236
102,163 $
— $
102,163
78,960 $
2 $
78,962
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
$
212,365 $
49,844 $
262,209
(686)
5,656
4,970
$
211,679 $
55,500 $
267,179
HIGHWAY 407 ETR
OTHER CAPITAL
INVESTMENTS
TOTAL
$
147,934 $
57,724 $
205,658
(833)
(6,359)
(7,192)
$
147,101 $
51,365 $
198,466
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
2021
2020
$
31,518 $
30,858
$
58,014 $
59,174
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
35
35
SNC-Lavalin 2021 Financial Report
5.
CAPITAL INVESTMENTS (CONTINUED)
DECEMBER 31, 2021
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
$
306,972 $
121,742 $
428,714
459,646
192,997
652,643
4,574,051
2,911,364
7,485,415
5,340,669
3,226,103
8,566,772
68,988
426,597
18,410
89,206
540,355
70,674
158,194
966,952
89,084
9,354,406
2,021,208
11,375,614
563,815
—
563,815
10,432,216
2,721,443
13,153,659
Net assets (liabilities) (at 100%)
Company’s carrying value of Capital investments included in its statement of
financial position (1)
$
(5,091,547) $
504,660 $
(4,586,887)
$
— $
221,546 $
221,546
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
(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 $40.6 million in 2021
(2020: $38.0 million) and did not recognize its share of Highway 407 ETR’s net income of $14.3 million (2020:
$10.0 million) in the same period, as the carrying amount of its investment in Highway 407 ETR was $nil at
December 31, 2021 and 2020. 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 $345.3 million as at December 31, 2021
(2020: negative carrying value of $319.0 million).
36
36 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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
2021
2020
$
306,791 $
272,550
185,506
121,285
—
162,146
110,404
—
$
$
$
121,285 $
110,404
26,988 $
26,988 $
28,175
28,175
DECEMBER 31
2021
DECEMBER 31
2020
$
355,973 $
336,972
549,052
905,025
125,987
132,419
258,406
592,094
929,066
77,808
186,539
264,347
$
$
646,619 $
664,719
159,190 $
164,407
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
Engaged in the business of bidding for, owning,
acquiring, investing, developing, implementing and
operating infrastructure in the roads sector of India
LOCATION
U.S.A.
India
(1)
Included in the measurement category of “at fair value through other comprehensive income”
OWNERSHIP INTEREST
DECEMBER 31
2021
DECEMBER 31
2020
4.5%
—%
4.5%
10.0%
The investment in Carlyle Global Infrastructure Opportunity Fund, L.P. is designated to be measured at fair value through other
comprehensive income to avoid the variability of the Company’s net income in future periods. Until its disposal in the fourth
quarter of 2021, the investment in Highway Concessions One Private Limited was designated to be measured at fair value
through other comprehensive income to avoid the variability of the Company’s net income.
For the years ended December 31, 2021 and 2020, the Company’s consolidated income includes dividends of $1.4 million and
$nil million, respectively, from investments at fair value through other comprehensive income.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
37
37
SNC-Lavalin 2021 Financial Report
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, 2021 and 2020:
YEARS ENDED DECEMBER 31
Commitments to invest in Capital investments – January 1
Increase in commitments to invest in Capital investments
Payments for Capital investments during the year
2021
$
24,921 $
29,731
(29,731)
Commitments to invest in Capital investments – December 31
$
24,921 $
2020
70,724
10,031
(55,834)
24,921
At December 31, 2021, the commitments to invest in Capital investments were related to contributions for Eglinton Crosstown
(2020: Eglinton Crosstown) 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$60.5 million (approximately CA$77.4 million) as at December 31, 2021 (2020:
US$82.5 million [approximately CA$105.7 million]) and will be recognized as a liability, as a whole or in part, when the
accounting conditions will be met.
6.
DISPOSALS OF PS&PM BUSINESSES
I) IN 2021
A)
DISPOSAL OF DISCONTINUED OPERATIONS — OIL & GAS BUSINESS
On February 9, 2021, the Company announced that it had entered into a binding agreement to sell its Oil & Gas business, which
was previously included in the Resources segment. The associated assets, liabilities and other components of equity of the Oil &
Gas business were consequently classified as held for sale from December 31, 2020 to the date of disposal. 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 $271.6 million before income taxes. A substantial portion of the sale of the Oil & Gas business
was completed on July 29, 2021 and the sale of the remaining Saudi Arabian portion of the business was completed on
August 15, 2021. Financial information relating to the discontinued operations is disclosed below for the year ended
December 31, 2021, along with comparative numbers for the corresponding period of 2020.
38
38 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
6.
DISPOSALS OF PS&PM BUSINESSES (CONTINUED)
Financial performance
The results of the Oil & Gas business for the years ended December 31, 2021 and 2020 were as follows:
YEARS ENDED DECEMBER 31
Revenues
Other expenses
Gain on disposal of South African subsidiaries (Note 6E)
Reversal of impairment loss (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 expenses
Loss before income taxes from discontinued operations and gain on disposal of Oil & Gas
business
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 income (loss) from discontinued operations before gain on disposal of Oil & Gas business
Gain on disposal of Oil & Gas business after income taxes (see below)
Net income (loss) from discontinued operations (1)
(1)
Included in “Net income (loss) from discontinued operations” in the consolidated income statement
Earnings (loss) per share from discontinued operations
2021
2020
$
512,204 $ 1,142,375
(570,748)
(1,423,078)
—
6,205
4,884
(53,660)
(164)
(53,824)
61,633
(271,566)
(546,064)
(261)
(546,325)
(73,064)
(7,335)
10,045
474
(609,344)
565,903
—
$
566,377 $
(609,344)
The earnings (loss) per share from discontinued operations for the years ended December 31, 2021 and 2020 were as follows:
YEARS ENDED DECEMBER 31
Earnings (loss) per share from discontinued operations – Basic (in $)
Earnings (loss) per share from discontinued operations – Diluted (in $)
Cash flows from discontinued operations
$
$
2021
3.23 $
3.23 $
2020
(3.47)
(3.47)
The net cash flows related to the Oil & Gas business for the years ended December 31, 2021 and 2020 were as follows:
YEARS ENDED DECEMBER 31
Operating activities
Investing activities
Financing activities
Net cash generated from (used for) discontinued operations
2021
2020
$
37,776 $
(165,899)
(180)
(6,379)
(15,945)
(12,611)
$
31,217 $
(194,455)
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
39
39
SNC-Lavalin 2021 Financial Report
6.
DISPOSALS OF PS&PM BUSINESSES (CONTINUED)
Details of the sale of the Oil & Gas business
Net gain on disposal of Oil & Gas business
Consideration paid in cash
Consideration receivable (1)
Total consideration
Net assets disposed of (2)
Cumulative exchange gain on translating foreign operations reclassified from equity on disposal
Disposition-related costs and other
Gain on disposal of Oil & Gas business
Income taxes
Net gain on disposal of Oil & Gas business
$
(1,802)
11,920
10,118
(4,388)
573,042
(5,730)
573,042
7,139
$
565,903
(1)
(2)
The consideration receivable in cash from the purchaser is subject to changes for potential purchase price adjustments with the purchaser following
finalization of the closing balance sheet.
The amount of “Net assets disposed of” includes all assets and liabilities that have been disposed of as part of the transaction and incorporates an estimate
for the value related to agreed representations and warranties, and indemnities related to certain projects which were complete or nearing completion at the
time the transaction closed. Any differences in value between the original estimates and revised estimates or actual outcomes will be recognized in the
income statement.
Net assets disposed of
As part of the transaction, the major classes of assets and liabilities of the Oil & Gas business disposed of were as follows:
Cash and cash equivalents
Other current financial assets
Current non-financial assets
Deferred income tax asset
Assets disposed of
Current financial liabilities
Current non-financial liabilities
Deferred income tax liability
Non-current financial liabilities
Other non-current non-financial liabilities
Liabilities disposed of
Net assets disposed of
Cash outflow on disposal of Oil & Gas business
Consideration paid in cash
Less: cash and cash equivalents balances disposed of
Cash outflow on disposal of Oil & Gas business
B)
DISPOSAL OF A SUBSIDIARY IN KENYA
$
17,876
96,196
186,500
12,314
312,886
210,161
61,920
1,861
4,918
29,638
308,498
$
4,388
$
(1,802)
17,876
$
(19,678)
At the beginning of 2021, the Company entered into an agreement to sell its ownership interest in Atkins Consulting Engineers
Limited, which was part of the EDPM segment. The associated assets, liabilities and other components of equity were
consequently classified as held for sale from December 31, 2020 to the date of disposal. 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 an amount
of $6.1 million before and after income taxes. On July 16, 2021, SNC-Lavalin completed the sale of its ownership of 100% in
Atkins Consulting Engineers Limited in Kenya. The loss on disposal of SNC-Lavalin’s ownership interest in this subsidiary
amounted to $0.6 million before and after income taxes and is included in “Loss on disposals of PS&PM businesses” in the
Company’s consolidated income statement.
40
40 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
6.
C)
DISPOSALS OF PS&PM BUSINESSES (CONTINUED)
PRESENTATION OF DISPOSALS OF PS&PM BUSINESSES IN THE STATEMENT OF CASH FLOWS
Statement of cash flows
In 2021, cash outflow on disposals of the Oil & Gas business and a subsidiary in Kenya included in the Company’s consolidated
statement of cash flows was as follows:
Cash outflow on disposal of Oil & Gas business
Consideration paid in cash on disposal of Atkins Consulting Engineers Limited
Cash outflow on disposals of PS&PM businesses
Note 28 — Statements of cash flows
$
(19,678)
(1,398)
$
(21,076)
The following table presents the amount of net gain on disposals of PS&PM businesses before income taxes included in
Note 28A — Statements of cash flows — Other reconciling items for the year ended December 31, 2021:
Gain on disposal of Oil & Gas business before income taxes (Note 6A)
Loss on disposal of Atkins Consulting Engineers Limited before income taxes (Note 6B)
Net gain on disposals of PS&PM businesses before income taxes
$
573,042
(613)
$
572,429
D)
PRESENTATION OF DISPOSAL GROUPS PREVIOUSLY CLASSIFIED AS HELD FOR SALE
The major classes of assets and liabilities of the disposal groups classified as held for sale (see Notes 6A and 6B) as at
December 31, 2020 were as follows:
Cash and cash equivalents
Other current financial assets
Current non-financial assets
Deferred income tax asset
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
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
$
DECEMBER 31
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)
The cumulative amount recognized in other comprehensive income related to the disposal groups classified as held for sale as at
December 31, 2020 was as follows:
Exchange differences on translating foreign operations
Other components of equity of disposal groups classified as held for sale
II) IN 2020
E)
DISPOSAL OF SUBSIDIARIES IN SOUTH AFRICA
DECEMBER 31
2020
$
$
594,141
594,141
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
41
41
SNC-Lavalin 2021 Financial Report
6.
DISPOSALS OF PS&PM BUSINESSES (CONTINUED)
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 gain 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 income (loss) from discontinued operations” in the consolidated income statement
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
F)
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 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.
G)
PRESENTATION OF DISPOSALS OF PS&PM BUSINESSES IN THE STATEMENT OF CASH FLOWS
Statement of cash flows
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
Note 28 — Statements of cash flows
$
2020
13,003
28,046
$
(15,043)
The following table presents the amount of net loss on disposals of PS&PM businesses before income taxes included in
Note 28A — Statements of cash flows — Other reconciling items for the year ended December 31, 2020:
Gain on disposal of South African subsidiaries before income taxes (Note 6E)
Loss on disposal of a subsidiary in Belgium before income taxes (Note 6F)
Net loss on disposals of PS&PM businesses before income taxes
$
$
6,205
(7,467)
(1,262)
42
42 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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
2021
DECEMBER 31
2020
608,446 $
608,446 $
932,902
932,902
DECEMBER 31
2021
DECEMBER 31
2020
13,398 $
13,398 $
29,300
29,300
$
$
$
$
8.
TRADE RECEIVABLES AND CONTRACT ASSETS
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:
Within normal terms of payment
Past due
Total trade receivables
Allowance for expected credit losses
DECEMBER 31
2021
DECEMBER 31
2020
$
830,231 $
482,880
1,313,111
(167,179)
894,248
477,068
1,371,316
(172,150)
Trade receivables, net of allowance for expected credit losses
$
1,145,932 $
1,199,166
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
Balance at end of year
B)
CONTRACT ASSETS
2021
$
172,150 $
25,403
(12,132)
(18,242)
—
$
167,179 $
2020
255,698
43,750
(44,047)
(9,253)
(73,998)
172,150
As at December 31, 2021, the Company has contract assets of $1,119.0 million (2020: $1,090.1 million), which is net of an
allowance for expected credit losses of $25.4 million (2020: $23.3 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
2021
$
23,259 $
2,583
(435)
—
Balance at end of year
$
25,407 $
2020
18,262
16,020
(7,217)
(3,806)
23,259
The significant changes in the balance of contract assets are disclosed in Note 9B, while information about the credit exposures
is disclosed in Note 30B.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
43
43
SNC-Lavalin 2021 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, 2021
and 2020:
YEAR ENDED DECEMBER 31
Americas:
Canada
United States
Latin America
Europe:
United Kingdom
Other
Middle East and Africa:
Middle East (1)
Africa
Asia Pacific (2)
YEAR ENDED DECEMBER 31
Americas:
Canada
United States
Latin America
Europe:
United Kingdom
Other
Middle East and Africa:
Middle East (1)
Africa
Asia Pacific (2)
REVENUE FROM CONTRACTS
WITH CUSTOMERS
OTHER REVENUE
$
2,251,335 $
96,273 $
1,266,222
85,362
2,120,073
462,137
518,080
138,250
362,786
33,101
—
16,740
—
4,347
16,546
—
2021
TOTAL
2,347,608
1,299,323
85,362
2,136,813
462,137
522,427
154,796
362,786
$
7,204,245 $
167,007 $
7,371,252
REVENUE FROM CONTRACTS
WITH CUSTOMERS
OTHER REVENUE
$
2,016,539 $
85,858 $
1,357,825
80,976
1,881,723
409,772
549,459
178,076
380,709
25,819
—
11,866
—
3,590
25,289
—
2020
TOTAL
2,102,397
1,383,644
80,976
1,893,589
409,772
553,049
203,365
380,709
$
6,855,079 $
152,422 $
7,007,501
(1)
(2)
Effective as of the second quarter of 2021, revenues from Saudi Arabia and Other Middle East countries are now included in “Middle East”. The Company
has re-presented the comparative figures accordingly.
Effective as of the fourth quarter of 2021, revenues from Australia and Other countries of Asia-Pacific are now included in “Asia Pacific”. The Company
has re-presented the comparative figures accordingly.
In the years ended December 31, 2021 and 2020, Canada, the United Kingdom and the United States were the only countries
where the Company derived more than 10% of its revenues.
44
44 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
9.
REVENUE (CONTINUED)
Revenues by type of contracts
The types of contracts presented are defined as follow:
Reimbursable and engineering services contracts: Reimbursable and engineering services contracts include all revenue-
generating contracts of the Company, except Standardized EPC contracts and LSTK construction contracts described below.
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 time and material agreements based on hourly rates and fixed-price
lump-sum contracts with limited procurement or construction risks. Reimbursable and engineering services contracts also
include all O&M contracts, some of which are fixed-price agreements, with certain O&M contracts being subject to price-
adjustment clauses such as inflation-driven indexation.
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, 2021 and 2020:
YEAR ENDED DECEMBER 31
REIMBURSABLE AND
ENGINEERING SERVICE
CONTRACTS
STANDARDIZED EPC
CONTRACTS
LUMP-SUM TURNKEY
CONSTRUCTION
CONTRACTS
2021
TOTAL
EDPM
Nuclear
Infrastructure Services
Revenue from contracts with customers –
SNCL Engineering Services
Resources
Infrastructure EPC Projects
Revenue from contracts with customers – SNCL Projects
$
3,831,735 $
844,400
809,289
— $
—
605,089
5,485,424
605,089
151,589
22,566
174,155
—
—
—
— $
3,831,735
25,412
—
25,412
20,101
872,766
892,867
869,812
1,414,378
6,115,925
171,690
895,332
1,067,022
$
5,659,579 $
605,089 $
918,279 $
7,182,947
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
REIMBURSABLE AND
ENGINEERING SERVICE
CONTRACTS
STANDARDIZED EPC
CONTRACTS
LUMP-SUM TURNKEY
CONSTRUCTION
CONTRACTS
54,187
21,298
112,820
$
7,371,252
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
— $
—
— $
3,721,120
11,079
893,549
533,547
—
1,323,435
5,393,478
533,547
134,918
20,704
155,622
—
—
—
11,079
23,657
719,485
743,142
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
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
45
45
SNC-Lavalin 2021 Financial Report
9.
B)
REVENUE (CONTINUED)
CONTRACT BALANCES
Trade receivables (Note 8A)
Contract assets (Note 8B)
Contract liabilities
DECEMBER 31
2021
DECEMBER 31
2020
$
1,145,932 $
1,199,166
1,119,045
1,090,149
$
838,209 $
836,991
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 the passage of time, but also on some other factor, 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)
2021
2020
$
$
493,597 $
534,379
(116,002) $
(353,109)
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. At the end of 2021, the amount of
contract assets and contract liabilities remained at a level comparable to that of the end of 2020.
C)
REMAINING PERFORMANCE OBLIGATIONS
The aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially satisfied) at
December 31, 2021, on all contracts with customers, is expected to be recognized in revenues as follows: 2022 –$4.3 billion,
2023 – $2.0 billion, 2024 – $1.1 billion, and thereafter – $5.2 billion (2020 (for continuing operations): 2021 – $4.4 billion,
2022 – $2.0 billion, 2023 – $1.2 billion, and thereafter – $5.6 billion). The aggregate amount of transaction price allocated to
performance obligations that were unsatisfied (or partially satisfied) at December 31, 2020, on all contracts with customers, is
expected to be recognized in revenues from discontinued operations was $0.8 billion. It should be noted that these amounts
exclude any estimated amounts of variable consideration that are excluded from the transaction price.
10.
INVENTORIES
Work in progress
Finished goods
Inventories
DECEMBER 31
2021
DECEMBER 31
2020
$
2,757 $
14,280
$
17,037 $
130
15,992
16,122
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, 2021 was $12.3 million (2020: $8.7 million).
46
46 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
11. OTHER CURRENT FINANCIAL ASSETS
DECEMBER 31
2021
DECEMBER 31
2020
Advances to suppliers, subcontractors and employees and deposits on contracts
$
46,159 $
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”)
11,524
6,201
—
11,642
2,661
6,237
53,947
$
138,371 $
45,282
41,808
6,200
17,370
23,178
2,627
148
120,819
257,432
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
2021
DECEMBER 31
2020
$
152,044 $
94,114
$
246,158 $
145,341
107,970
253,311
BUILDINGS
COMPUTER
EQUIPMENT
OFFICE
FURNITURE MACHINERY
LEASEHOLD
IMPROVE-
MENTS (1)
OTHER (1) (2)
TOTAL
Gross carrying amount
Balance as at January 1, 2021
Additions
Effect of foreign currency exchange
differences
Disposals / retirements / salvage /
transfers
$ 50,715 $ 490,112 $ 126,799 $ 90,945 $ 188,422 $
9,916 $ 956,909
377
52,448
4,746
10,531
15,528
12,277
95,907
34
(2,780)
(340)
(484)
(528)
37
(4,061)
(27,808)
(33,984)
(13,319)
(21,616)
(18,443)
(535)
(115,705)
Balance as at December 31, 2021
$ 23,318 $ 505,796 $ 117,886 $ 79,376 $ 184,979 $ 21,695 $ 933,050
Accumulated depreciation and
impairment losses
Balance as at January 1, 2021
Depreciation expense
Effect of foreign currency exchange
differences
Impairment loss (3)
Disposals / retirements / salvage
Balance as at December 31, 2021
$ 16,751 $ 350,362 $ 104,809 $ 28,511 $ 80,612 $
— $ 581,045
1,755
47,314
6,740
22,776
15,086
—
93,671
33
—
(2,048)
5,483
(272)
612
(116)
(443)
—
(2,846)
2,204
5,009
3,662
16,970
(13,286)
(32,765)
(13,019)
(12,984)
(17,229)
—
(89,283)
$
5,253 $ 368,346 $ 98,870 $ 40,391 $ 83,035 $
3,662 $ 599,557
(1)
(2)
(3)
Effective January 1, 2021, the Company presents “Leasehold improvements” separately from “Other” and, consequently, the Company has re-presented
the comparative figures accordingly.
“Other” includes assets in the course of their construction and land.
In the year ended December 31, 2021, SNC-Lavalin recognized impairment losses in the amount of $8.3 million in “Restructuring and transformation
costs” and in the amount of $8.7 million in “Net income (loss) from discontinued operations” in the consolidated income statement.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
47
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SNC-Lavalin 2021 Financial Report
13. PROPERTY AND EQUIPMENT (CONTINUED)
BUILDINGS
COMPUTER
EQUIPMENT
OFFICE
FURNITURE MACHINERY
LEASEHOLD
IMPROVE-
MENTS (1)
OTHER (1) (2)
TOTAL
Gross carrying amount
Balance as at January 1, 2020
Additions
Effect of foreign currency exchange
differences
Disposals / retirements / salvage /
transfers
Reclassification to assets of disposal
groups classified as held for sale
$ 97,798 $ 470,761 $ 164,242 $ 156,385 $ 241,343 $ 29,051 $ 1,159,580
3,804
67,566
2,285
7,758
9,073
13,201
103,687
(2,099)
(2,800)
(584)
(6,389)
(635)
(1,955)
(14,462)
(4,276)
(31,732)
(12,856)
(34,723)
(54,396)
(1,417)
(139,400)
(44,512)
(13,683)
(26,288)
(32,086)
(6,963)
(28,964)
(152,496)
Balance as at December 31, 2020
$ 50,715 $ 490,112 $ 126,799 $ 90,945 $ 188,422 $
9,916 $ 956,909
Accumulated depreciation and
impairment losses
Balance as at January 1, 2020
$ 42,103 $ 349,089 $ 128,210 $ 66,132 $ 103,416 $
— $ 688,950
Depreciation expense
22,865
45,763
9,058
27,298
15,221
—
120,205
Effect of foreign currency exchange
differences
Impairment loss (3)
Disposals / retirements / salvage
Reclassification to assets of disposal
groups classified as held for sale
(1,487)
(1,884)
(479)
(4,243)
(511)
—
—
—
5,358
2,894
(2,675)
(30,957)
(11,249)
(34,210)
(27,312)
—
—
—
(8,604)
8,252
(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
Net book value:
As at December 31, 2021
As at December 31, 2020
$ 18,065 $ 137,450 $ 19,016 $ 38,985 $ 101,944 $ 18,033 $ 333,493
$ 33,964 $ 139,750 $ 21,990 $ 62,434 $ 107,810 $
9,916 $ 375,864
Net book value of assets subject to operating leases:
As at December 31, 2021
As at December 31, 2020
$
$
— $
— $
— $ 45,878 $
— $
— $ 45,878
— $
— $
— $ 57,059 $
— $
— $ 57,059
(1)
(2)
(3)
Effective January 1, 2021, the Company presents “Leasehold improvements” separately from “Other” and, consequently, the Company has re-presented
the comparative figures accordingly.
“Other” includes assets in the course of their construction and land.
In the year ended December 31, 2020, SNC-Lavalin recognized impairment losses in the amount of $2.9 million in “Restructuring and transformation
costs” and in the amount of $5.4 million in “Net income (loss) from discontinued operations” in the consolidated income statement.
An amount of $16.9 million as at December 31, 2021 (2020: $6.9 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 $6.0 million in the year
ended December 31, 2021 (2020: $30.9 million).
14. GOODWILL
The following table details a reconciliation of the carrying amount of the Company’s goodwill:
Balance at January 1, 2020
Net foreign currency exchange differences
Balance at December 31, 2020
Net foreign currency exchange differences
Balance at December 31, 2021
48
48 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
$
3,429,094
384
3,429,478
(46,535)
$
3,382,943
14. GOODWILL (CONTINUED)
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.
As at December 31, 2021 and 2020, the Company’s goodwill was allocated to the following CGU and groups of CGU:
CGU OR GROUP OF CGU
EDPM
Infrastructure Services
Nuclear
Linxon
DECEMBER 31
2021
DECEMBER 31
2020
$
2,586,762 $
2,624,526
142,572
634,343
19,266
142,782
642,770
19,400
$
3,382,943 $
3,429,478
As at October 31, 2021 and 2020, goodwill was not considered to be impaired.
In 2021, approximately 76% (2020: 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% (2020:
2.5%) and a discount rate of 9.4% (2020: 9.5%), exceeded its carrying amount by approximately $911 million as at
October 31, 2021 (2020: by approximately $563 million). As at October 31, 2021, assuming all other assumptions remained the
same, a 263-basis point (2020: a 140-basis point) decrease in the terminal growth rate or a 196-basis point (2020: 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, 2021 and 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 2021 (2020: 2.5%) and discount rates ranging from 8.5% to 9.9% have been
used in 2021 (2020: from 9.8% to 12.1%).
15.
INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
The following tables reconcile the carrying amount of intangible assets related to business combinations:
Gross carrying amount
Balance as at January 1, 2021
Effect of foreign currency exchange differences
Balance as at December 31, 2021
Accumulated depreciation and impairment losses
Balance as at January 1, 2021
Amortization expense
Effect of foreign currency exchange differences
Balance as at December 31, 2021
REVENUE
BACKLOG
CUSTOMER
RELATIONSHIPS
TRADEMARKS
TOTAL
$
16,531 $
766,333 $
107,323 $
890,187
(116)
(13,685)
(1,434)
(15,235)
$
16,415 $
752,648 $
105,889 $
874,952
$
11,987 $
266,548 $
67,593 $
346,128
1,843
(59)
75,571
(5,433)
12,063
(877)
89,477
(6,369)
$
13,771 $
336,686 $
78,779 $
429,236
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
49
49
SNC-Lavalin 2021 Financial Report
15.
INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS (CONTINUED)
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
$
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)
Balance as at December 31, 2020
$
16,531 $
766,333 $
107,323 $
890,187
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
$
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)
Balance as at December 31, 2020
$
11,987 $
266,548 $
67,593 $
346,128
Net book value:
As at December 31, 2021
As at December 31, 2020
$
$
2,644 $
415,962 $
27,110 $
445,716
4,544 $
499,785 $
39,730 $
544,059
16. OTHER NON-CURRENT FINANCIAL ASSETS
Derivative financial instruments related to share unit plans – favourable fair value (Note 23C)
$
2,354 $
Derivative financial instruments used for hedges – favourable fair value
Non-current portion of finance lease receivables
Other
Other non-current financial assets
2,276
11,804
8,975
$
25,409 $
908
1,065
13,601
15,824
31,398
The Company’s finance lease receivables relate mainly to the subleases of its unused office space. In 2021, the decrease of
finance lease receivables was mainly due to the passage of time.
DECEMBER 31
2021
DECEMBER 31
2020
50
50 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
17. OTHER NON-CURRENT NON-FINANCIAL ASSETS
DECEMBER 31
2021
DECEMBER 31
2020
Post-employment benefit assets (Note 32A)
PS&PM investments accounted for by the equity method
Other
$
230,763 $
71,577
13,813
Other non-current non-financial assets
$
316,153 $
8,327
54,067
20,557
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.
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
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
$
$
$
$
$
2021
2020
2,465,068 $
1,786,311
81 $
3,665 $
2,627 $
3,250 $
2021
4,743
5,520
317
—
2020
$
142,681 $
100,668
—
—
$
142,681 $
100,668
$
$
2021
54,187 $
54,187 $
2020
41,274
41,274
DECEMBER 31
2021
DECEMBER 31
2020
$
164,410 $
591,537
40,251
796,198
482,315
74,621
7,241
27,731
591,908
204,290 $
211,852
279,008
4,649
495,509
344,412
14,983
4,934
7,504
371,833
123,676
$
$
71,577 $
54,067
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
51
51
SNC-Lavalin 2021 Financial Report
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 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%)
2021
2020
$
26,797 $
31,231
(4,434)
—
33,053
34,112
(1,059)
—
$
(4,434) $
(1,059)
$
$
— $
— $
—
—
DECEMBER 31
2021
DECEMBER 31
2020
$
24,486 $
4,841
29,327
20,732
7,467
28,199
$
1,128 $
21,092
3,716
24,808
17,225
1,953
19,178
5,630
Company’s carrying value of PS&PM investments included in its statement of
financial position
$
— $
—
18. OTHER CURRENT FINANCIAL LIABILITIES
DECEMBER 31
2021
DECEMBER 31
2020
Commitments to invest in Capital investments accounted for by the equity method and at fair value
through other comprehensive income (Note 5C)
$
24,921 $
Retentions on supplier contracts
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
108,301
16,496
—
55,515
537
24,921
90,793
12,981
3,025
55,865
169
$
205,770 $
187,754
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 (PPSC), of which $106.7 million is included in “Other non-current financial liabilities” (see Note 21) as at
December 31, 2021 (2020: $154.3 million).
52
52 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
19. OTHER CURRENT NON-FINANCIAL LIABILITIES
Income taxes and other taxes payable
Share unit plans’ liabilities (Note 23C)
Other current non-financial liabilities
DECEMBER 31
2021
DECEMBER 31
2020
$
267,158 $
434,987
60,961
38,793
$
328,119 $
473,780
20.
SHORT-TERM DEBT AND LONG-TERM DEBT
As at December 31, 2021 and 2020, 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)
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 (iv)
Limited recourse long-term debt
DECEMBER 31
2021
DECEMBER 31
2020
$
96,853 $
—
499,635
—
199,748
297,866
499,360
174,960
199,540
297,105
$
1,094,102 $
1,170,965
96,853
174,960
$
997,249 $
996,005
DECEMBER 31
2021
DECEMBER 31
2020
$
$
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 (v) (1)
Senior Secured Notes from a PS&PM investment (vi)
Unsecured Loan of Linxon (vii)
Credit facility – TransitNEXT General Partnership (viii)
Other
Total non-recourse short-term debt and long-term debt
Less: reclassification to “Liabilities of disposal groups classified as held for sale” (1)
Less: non-recourse short-term debt
Non-recourse long-term debt
DECEMBER 31
2021
DECEMBER 31
2020
$
259,704 $
276,297
27,692
9,906
124,256
8,215
34,631
8,888
102,843
8,886
$
429,773 $
431,545
259,704
14,021
—
31,262
$
156,048 $
400,283
(1)
As at December 31, 2021, the carrying amount of senior bonds of InPower BC General Partnership is included in “Liabilities of disposal groups classified
as held for sale” in the consolidated statement of financial position (see Notes 5A and 39).
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
53
53
SNC-Lavalin 2021 Financial Report
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
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 as
at December 31, 2021: (i) tranche A is for an amount of $2,000 million (2020: $2,000 million); and (ii) tranche B is for an
amount of $600 million (2020: $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 aggregate outstanding amount of uncommitted bilateral letters of credit
allowed under the Credit Agreement is $3,000 million (2020: $3,000 million).
On March 26, 2021, certain lenders under the Company’s Revolving Facility agreed to extend the maturity of such facility
with respect only to such lenders from May 15, 2022 to April 30, 2023 and, as a condition to securing the consent of such
lenders to the maturity extension, the blended pricing applicable to the Revolving Facility was increased commensurately.
As such, the notional amount of Tranche A of the Revolving Facility is $2,000 million until May 15, 2022 and
$1,690.8 million from May 16, 2022 to April 30, 2023 and the notional amount of Tranche B of the Revolving Facility is
$600 million until May 15, 2022 and $507.2 million from May 16, 2022 to April 30, 2023.
As at December 31, 2021 and 2020, the cash draws and letters of credit outstanding under the Company’s Revolving
Facility were as follows:
AT DECEMBER 31, 2021
Revolving Facility
(1) Includes $3.5 million of financial letters of credit
AT DECEMBER 31, 2020
Revolving Facility
(2) Includes $3.5 million of financial letters of credit
COMMITTED
CASH DRAWS
LETTERS OF
CREDIT
OUTSTANDING
UNUSED
$ 2,600,000 $
99,950 $
207,389
(1)
$
2,292,661
COMMITTED
CASH DRAWS
LETTERS OF
CREDIT
OUTSTANDING
UNUSED
$ 2,600,000 $
— $
205,324
(2)
$
2,394,676
In addition, as at December 31, 2021, $1,339.9 million (2020: $1,495.5 million) of uncommitted bilateral letters of credit
were outstanding, of which $94.4 million (2020: $98.2 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 issued as follows: (i) $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”); (ii) $200 million
in 3.235% per annum Series 4 Debentures due in March 2023 (the “Series 4 Debentures”); and (iii) $300 million in 3.80%
per annum Series 6 Debentures due in August 2024 (the “Series 6 Debentures”). The Series 3 Debentures were repaid in
full at their maturity in March 2021.
iv. 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 (2020: $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.
54
54 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
20.
SHORT-TERM DEBT AND LONG-TERM DEBT (CONTINUED)
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. In
2021, the CDPQ Loan Agreement was further amended to disapply a condition under a restrictive covenant in order to
allow dividends received by Highway Holdings from Highway 407 ETR in October 2021 and December 2021 to be
distributed to the Company.
v. 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.
vi. The senior secured notes of a subsidiary of the Company are up to US$40.0 million (approximately CA$51.2 million)
aggregate principal amount (the “Senior Secured Notes”), of which US$38.0 million (approximately CA$48.6 million)
aggregate principal amount was
issued as at December 31, 2021 (2020: US$38.0 million [approximately
CA$48.7 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.
vii. 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) (2020:
approximately CA$11.9 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$43.6 million) (2020: approximately
CA$47.1 million) bears interest at a variable rate and is repayable at the latest on September 30, 2022.
viii. 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 at the latest on February 10, 2024. The credit
facility is secured by all assets of TransitNEXT. In addition, a wholly-owned entity indirectly holding TransitNEXT entered
into a term loan facility agreement. 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.
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, 2021
2022
2023
2024
2025
2026
Total (1)
Net unamortized deferred financing costs and unamortized
discounts
Recourse
Limited
recourse
Non-recourse
Total
$
99,770 $
— $
15,378 $
115,148
700,000
300,000
—
—
—
143,643
400,000
—
—
7,163
7,163
256
843,643
707,163
7,163
256
$
1,099,770 $
400,000 $
173,603 $
1,673,373
(5,668)
—
(3,534)
(9,202)
Net carrying amount of short-term debt and long-term debt
$
1,094,102 $
400,000 $
170,069 $
1,664,171
(1)
Excludes repayment of principal of senior bonds of InPower BC General Partnership, which are included in “Liabilities of disposal groups classified as
held for sale” in the consolidated statement of financial position as at December 31, 2021 (see Notes 5A and 39).
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
55
55
SNC-Lavalin 2021 Financial Report
21. OTHER NON-CURRENT FINANCIAL LIABILITIES
DECEMBER 31
2021
DECEMBER 31
2020
Federal charges settlement (PPSC) payable (Note 18)
$
106,684 $
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
22. PROVISIONS
15,020
940
239
14,636
$
137,519 $
154,332
15,181
3,929
4,627
15,792
193,861
Pension, other long-
term benefits and other
post-employment
benefits
Forecasted
losses on certain
contracts
Restructuring
(1)
Other
Total
Balance at January 1, 2021
$
565,556 $
103,984 $
89,083 $
396,188 $ 1,154,811
Additional provisions recognized in the year
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
Increase in post-employment benefit assets
18,236
(92,554)
—
(464,878)
26,182
(41,843)
(26,458)
—
14,693
196,729
255,840
(44,355)
(46,830)
(225,582)
—
—
(20,485)
(46,943)
—
(464,878)
1,641
222,436
118
—
(879)
—
(541)
339
—
222,436
Balance at December 31, 2021
$
250,437 $
61,983 $
58,542 $
525,061 $ 896,023
Presented on the statement of financial position as follows:
Current portion of provisions
Non-current portion of provisions
$ 425,613
$ 470,410
(1)
Other provisions include mainly provisions recognized for legal proceedings and claims, indemnification from past disposals of PS&PM businesses,
warranty and other project provisions, environmental liabilities and other asset retirement obligations. Due to the nature of these provisions, the Company
does not provide information on each individual component separately.
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.
56
56 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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.
B)
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 the optionee is eligible to retire, both vested and unvested options continue to run their normal course. In
the event of death, vested options of the optionee remain exercisable by his/her legal representatives within a period of
one year following such death and unvested options of the optionee are cancelled as of the date of death.
As at December 31, 2021, 2,787,863 stock options remained available for future grants under the 2013 stock option plan
(2020: 2,787,863 stock options).
There were no stock options outstanding in 2021 and 2020. The stock option compensation cost recorded in the year ended
December 31, 2021 was $nil (2020: $nil).
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
57
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SNC-Lavalin 2021 Financial Report
23.
C)
SHARE CAPITAL (CONTINUED)
SHARE UNIT PLANS
As at December 31, 2021 and 2020, 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 of
units
Payment
Units vest at a rate of 20% per year at the
end of each calendar year following the
grant date
Units are redeemable for cash by the
Company within thirty days following the
first
a participant’s
anniversary of
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
the
following
first
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.
58
58 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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, 2021 and 2020:
2019 PSU plan
2019 RSU plan
DSU plan
2009 DSU plan
NUMBER
OF GRANTED SHARE
UNITS
2021
WEIGHTED AVERAGE
FAIR VALUE PER
SHARE UNIT
(IN DOLLARS)
NUMBER
OF GRANTED SHARE
UNITS
2020
WEIGHTED AVERAGE
FAIR VALUE PER
SHARE UNIT
(IN DOLLARS)
841,434 $
748,350 $
37,931 $
64,144 $
28.69
28.70
28.66
31.44
802,180 $
1,042,570 $
82,030 $
71,204 $
26.09
25.16
26.56
21.62
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 $36.8 million for the year ended December 31, 2021 (2020:
$10.1 million).
The total intrinsic value of the share unit plans’ liabilities for which the participants’ right to cash vested was $13.4 million as at
December 31, 2021 (2020: $7.8 million), while the share unit plans’ liabilities amounted to $61.0 million as at
December 31, 2021 (2020: $38.8 million).
D)
WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES – BASIC AND DILUTED
The weighted average number of outstanding shares in 2021 and 2020 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
2021
175,554
175,554
2020
175,554
175,554
In 2021 and 2020, no dilutive effect of stock options has been calculated as no stock options were outstanding during these
periods.
E)
DIVIDENDS
During the year ended December 31, 2021, the Company recognized as distributions to its equity shareholders dividends of
$14.0 million or $0.08 per share (2020: $14.0 million or $0.08 per share).
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
59
59
SNC-Lavalin 2021 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, 2021 and
2020:
Exchange differences on translating foreign operations
Cash flow hedges
Share of other comprehensive loss of investments accounted for by the equity method
Other components of equity
Presented on the statement of financial position as follows:
DECEMBER 31
2021
DECEMBER 31
2020
$
(329,121) $
292,568
(4,148)
—
(17,450)
(1,044)
$
(333,269) $
274,074
Other components of equity
Other components of equity of disposal groups classified as held for sale (Note 6D)
$
$
(333,269) $
(320,067)
— $
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 other comprehensive income (loss) from its investments accounted for by the equity method.
60
60 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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, 2021 and 2020:
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
Income taxes relating to current year gains
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 6D)
B)
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO NET INCOME
Remeasurement recognized in other comprehensive income
2021
2020
$
292,568 $
365,600
(49,487)
(572,817)
615
(329,121)
(17,450)
11,979
(566)
2,360
(471)
(4,148)
(1,044)
1,419
(375)
—
(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)
$
(333,269) $
274,074
$
$
(333,269) $
(320,067)
— $
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, 2021 and 2020:
YEARS ENDED DECEMBER 31
2021
2020
BEFORE TAX
INCOME TAX (1)
NET OF TAX
BEFORE TAX
INCOME TAX (1)
NET OF TAX
Cumulative amount at January 1
$
(166,186) $
35,253 $
(130,933) $
(49,588) $
6,184 $
(43,404)
Remeasurement recognized during the year:
Defined benefit pension plans
Other post-employment benefits
451,902
(93,898)
358,004
(111,311)
29,180
(82,131)
12,976
(764)
12,212
(5,287)
(111)
(5,398)
464,878
(94,662)
370,216
(116,598)
29,069
(87,529)
Cumulative amount at December 31
$ 298,692 $
(59,409) $ 239,283 $
(166,186) $
35,253 $
(130,933)
(1)
For the year ended December 31, 2021, an amount of deferred income tax liability of $106.3 million (2020: deferred income tax asset of $18.5 million) is
included in deferred income taxes while the remaining balance of income tax recovery of $11.6 million (2020: $10.6 million) is included in current income
taxes.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
61
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SNC-Lavalin 2021 Financial Report
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, 2021 and 2020:
YEARS ENDED DECEMBER 31
2021
2020
Cumulative amount at January 1
$
(9,782) $
105 $
(9,677) $
(2,035) $
65 $
(1,970)
Gains (losses) recognized during the year
5,749
—
5,749
(7,747)
40
(7,707)
Cumulative amount at December 31
$
(4,033) $
105 $
(3,928) $
(9,782) $
105 $
(9,677)
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
2021
$
128 $
144,945
$
145,073 $
2020
97
175,836
175,933
26. RESTRUCTURING AND TRANSFORMATION COSTS
YEARS ENDED DECEMBER 31
Restructuring costs
Transformation costs
Restructuring and transformation costs
I) IN 2021
2021
$
49,222 $
20,895
2020
63,324
—
$
70,117 $
63,324
The restructuring costs of $49.2 million recognized in 2021 were mainly related to actions taken in the EDPM and Nuclear
segments, partly for severances, and also included $25.2 million of non-cash charges, notably $16.9 million of impairment of
right-of-use assets and $8.3 million of impairment of property and equipment.
II) 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.
62
62 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
27.
NET FINANCIAL EXPENSES
YEARS ENDED DECEMBER 31
Interest on debt:
Recourse
Limited recourse
Non-recourse
Interest on lease liabilities
Other
Financial expenses
Financial income
Net foreign exchange losses (gains)
Financial income and net foreign exchange losses (gains)
Net financial expenses
28.
STATEMENTS OF CASH FLOWS
A)
OTHER RECONCILING ITEMS
2021
2020
$
35,298 $
15,827
20,411
18,024
24,296
113,856
(4,809)
1,403
(3,406)
$
110,450 $
45,956
17,160
20,609
21,174
19,804
124,703
(11,257)
550
(10,707)
113,996
The following table presents the items to reconcile net income (loss) to cash flows from operating activities presented in the
statements of cash flows the years ended December 31, 2021 and 2020:
Depreciation of property and equipment and amortization of other non-current non-financial assets
$
183,148 $
246,975
2021
2020
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
Adjustments on gain on disposals of Capital investments (Note 5A)
Restructuring and transformation costs recognized in net income
Restructuring and transformation costs paid
Net loss (gain) on disposals of PS&PM businesses (Notes 6C et 6G )
Loss (gain) arising on financial instruments at fair value through profit or loss
Impairment loss (reversal of 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 (1)
Other
Other reconciling items
88,166
(69,190)
110,614
36,801
(85,002)
76,584
(56,329)
55,965
(42,119)
(5,000)
87,613
(59,133)
(572,429)
(3,725)
(6,232)
68,725
(80,695)
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)
$
(272,238) $
976,051
(1)
Net change in other provisions includes changes in all provisions, except for: i) pension, other long-term benefits and other post-employment benefits,
which change is included in “Other”; ii) forecasted losses on certain contracts, which change is separately presented in the table above; iii) restructuring,
which change is separately presented in the table above; and iv) reversal of a provision related to a disposal of a Capital investment, which change is
separately presented in the table above.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
63
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SNC-Lavalin 2021 Financial Report
28. STATEMENTS OF CASH FLOWS (CONTINUED)
B)
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 the years ended December 31, 2021 and 2020:
Decrease in trade receivables
Decrease (increase) in contract assets
Decrease (increase) in inventories
Decrease (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
2021
2020
$
42,036 $
196,175
(163,760)
(941)
150,207
(41,466)
(63,528)
(14,186)
75,082
(80,663)
361,597
69,500
(29,454)
(32,968)
(330,717)
6,803
(64,893)
53,205
$
(97,219) $
229,248
C)
CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
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, 2021:
Balance at January 1, 2021
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
Reclassification of deferred financing
costs from “Other non-current non-
financial assets”
Net increase of lease liabilities
Reclassification of payable related to
federal charges settlement (PPSC) to
“Other current financial liabilities”
Reclassification to liabilities of disposals
groups classified as held for sale
(Note 20C)
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
$ 1,170,965 $ 400,000 $ 431,545 $ 496,610 $
— $ 193,861 $
219
99,950
(177,214)
(77,264)
—
—
—
21,089
—
—
3,605
(24,252)
(99,775)
(14,044)
(1,679)
(3,163)
(99,775)
(14,044)
1,926
50
(265)
(215)
—
—
—
—
14,044
—
(180)
—
(716)
(2,543)
—
(4,344)
3,690
—
2,107
—
—
7,634
—
—
—
—
—
(7,385)
—
—
—
—
—
(131)
(3,109)
—
—
—
—
—
—
102,766
—
—
—
—
—
—
—
—
—
(54,042)
—
—
(259,704)
—
—
—
—
33
—
—
—
—
—
—
—
37
Balance at December 31, 2021
$ 1,094,102 $ 400,000 $ 170,069 $ 497,058 $
— $ 137,519 $
(1), (2), (3), (4) See Notes 1, 2, 3 and 4 on the following page
64
64 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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
Series 3 Debentures [Note 20C (iii)]
Series 6 Debentures
Total – Recourse debt
Non-recourse debt:
Senior Bonds – InPower BC General Partnership
Credit facility – TransitNEXT General Partnership
Senior Secured Notes of a PS&PM investment
Total – Non-recourse debt
Total
2021
INCREASE
OF DEBT
REPAYMENT
OF DEBT
PAYMENT FOR
DEBT ISSUE COSTS
$
99,950 $
— $
(2,198)
—
—
(175,000)
—
—
(16)
99,950
(175,000)
(2,214)
—
(17,239)
21,089
—
—
(7,013)
21,089
(24,252)
—
—
—
—
$
121,039 $
(199,252) $
(2,214)
(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
2021
$
96,853 $
997,249
JANUARY 1
2021
174,960
996,005
$
1,094,102 $
1,170,965
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
Lease liabilities were presented in the Company’s consolidated statements of financial position as follows:
Current portion of lease liabilities
Non-current portion of lease liabilities
Total
DECEMBER 31
2021
JANUARY 1
2021
$
14,021 $
156,048
$
170,069 $
31,262
400,283
431,545
DECEMBER 31
2021
$
91,317 $
405,741
$
497,058 $
JANUARY 1
2021
97,409
399,201
496,610
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
Total
$
$
2021
1,926
(215)
1,711
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
65
65
SNC-Lavalin 2021 Financial Report
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, 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
Reclassification of payable related to
federal charges settlement (PPSC)
to “Other current financial
liabilities”(Note 18))
Reclassification to liabilities of
disposal groups classified as held
for sale
Net increase of lease liabilities
Disposal of a PS&PM business
Balance at December 31, 2020
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
$ 1,172,663 $ 400,000 $ 485,118 $ 611,750 $
— $ 232,569 $
551
1,297,600
(1,300,729)
—
—
31,625
—
—
7,272
(87,172)
(118,651)
(14,044)
(5,906)
611
(984)
(3,129)
—
(55,547)
(118,651)
(14,044)
1,366
(373)
—
—
—
—
—
—
14,044
—
48
1,392
—
78
1,431
—
1,926
—
—
—
—
—
—
6,950
—
6,211
—
—
—
—
—
1,095
—
—
—
—
—
(54,408)
—
—
—
—
—
—
—
—
—
(20,472)
23,856
(1,265)
—
—
—
—
—
—
—
41
—
—
—
—
—
—
—
$ 1,170,965 $ 400,000 $ 431,545 $ 496,610 $
— $ 193,861 $
219
(1), (2), (3), (4) See Notes 1, 2, 3 and 4 on the following page
66
66 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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
Series 6 Debentures [Note 20C (iii)]
2020 Debentures (Note 28D)
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) $
297,600
—
—
(300,000)
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
Lease liabilities were presented in the Company’s consolidated statements of financial position as follows:
Current portion of lease liabilities
Non-current portion of lease liabilities
Total
DECEMBER 31
2020
$
31,262 $
400,283
$
431,545 $
JANUARY 1
2020
93,664
391,454
485,118
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
D)
2020 DEBENTURES
$
$
2020
1,366
(373)
(52)
941
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
67
67
SNC-Lavalin 2021 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:
Current:
Contract assets
Retentions on supplier contracts
Accrued employee compensation
Current liabilities
Other
Non-current:
Property and equipment, and goodwill
Right-of-use assets
JANUARY 1
2021
Reclassification
to a disposal
groups classified
as held for sale
Recognized in
other
comprehensive
income
Recognized
in
net income
Exchange
differences
and
other charges
DECEMBER 31
2021
$
5,751 $
— $
— $ 14,267 $
637 $ 20,655
4,831
32,477
91,401
(1,633)
(122,706)
(43,516)
—
—
—
—
—
—
—
—
—
—
—
—
—
6,276
4,911
—
(34)
11,107
37,354
28,617
(187)
119,831
(6,753)
—
(8,386)
18,106
3,136
(101,464)
2,953
5,617
84
(15)
(40,479)
19,752
Other non-current financial assets
(19,424)
33,574
Provisions
(33,367)
—
—
(61,110)
182
(94,295)
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
Deferred income tax asset, net
(147,647)
67,337
104,646
44,236
319,104
—
—
—
—
—
(375)
(46,767)
—
(194,789)
—
(5,574)
(20)
61,743
(106,288)
(147)
(2,536)
(4,325)
(1,037)
(30,781)
(517)
11,901
—
141,327
(5,172)
455,259
$ 301,490 $
33,574 $ (107,700) $ 70,942 $ (4,442) $ 293,864
Presented on the statement of financial position as follows:
Deferred income tax asset
Deferred income tax liability
$ 655,838
$ 354,348
$ 658,061
$ 364,197
68
68 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
29.
INCOME TAXES (CONTINUED)
Deferred income taxes for the comparative period of 2020 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
Unused tax losses
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
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
As at December 31, 2021, the Company had $2,958.3 million (2020: $2,495.6 million) of non-capital tax loss carryforwards, of
which $2,526.5 million will expire in varying amounts from 2022 to 2042 (2020: $1,992.2 million expiring from 2021 to 2041).
As at December 31, 2021, a deferred income tax asset of $455.3 million (2020: $319.1 million) has been recognized on
$1,858.0 million (2020: $1,347.3 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, 2021,
the Company had $773.7 million of the unrecognized non-capital tax losses carryforwards that will expire in varying amounts
from 2022 to 2042 (2020: $783.3 million expiring in varying amounts from 2021 to 2041).
As at December 31, 2021, the Company had $299.8 million (2020: $83.6 million) of capital tax loss carryforwards on which no
deferred income tax asset has been recognized of which $139.3 million will expire in 2027 (2020: $nil), while the remaining
capital tax loss carryforwards have no expiry date.
As at December 31, 2021, a deferred income tax liability has not been recognized on taxable temporary differences of
$525.4 million (2020: $620.6 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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
69
69
SNC-Lavalin 2021 Financial Report
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 26.2% (2020:
26.3%) and the reported income taxes in net income can be reconciled as follows:
YEARS ENDED DECEMBER 31
AMOUNT
2021
%
AMOUNT
Earnings (loss) before income taxes from continuing operations
$
83,648
$
(405,968)
Canadian tax rate for SNC-Lavalin
—
26.2
Expected income taxes from continuing operations
$
21,876
$
(106,597)
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
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
2,049
2.4
2,327
(23,539)
318
2,526
(12,815)
(28.1)
0.4
3.0
(15.3)
2,124
(1,948)
(5,737)
6,350
(436)
(0.5)
(9,672)
2.4
—
—
—
—
—
—
7,580
(1.9)
(5,373)
(7,499)
1.3
1.8
16,418
19.6
55,023
(13.6)
(15,029)
(18.0)
(16,742)
4.1
(1,594)
(1,892)
4,112
(14,025)
(1.9)
(2.3)
4.9
(16.7)
1,600
1,870
(413)
18,068
2020
%
26.3
(0.6)
(0.5)
0.5
1.4
(1.6)
(0.4)
(0.5)
0.1
(4.3)
14.5
Income taxes from continuing operations at effective tax rate
$
(22,031)
(26.3) $
(59,039)
SNC-Lavalin’s income taxes from continuing operations were comprised of the following:
YEARS ENDED DECEMBER 31
Current income taxes
Deferred income taxes
Income tax recovery
2021
2020
$
71,577 $
63,674
(93,608)
(122,713)
$
(22,031) $
(59,039)
70
70 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
30. FINANCIAL INSTRUMENTS
A)
CLASSIFICATION AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tables present the carrying value of SNC-Lavalin’s financial assets as at December 31, 2021 and 2020 by
category and classification, with the corresponding fair value, when available. Financial assets classified as held for sale as at
December 31, 2021 and 2020 are not included in the tables below (see Notes 6D and 39).
AT DECEMBER 31
2021
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
AT DECEMBER 31
Cash and cash equivalents
Restricted cash
Trade receivables
Other current financial assets:
Derivative financial instruments
Financial assets at FVTPL
Other (3)
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)
CARRYING VALUE OF FINANCIAL ASSETS BY CATEGORY
FVTPL (1)
FVTOCI (2)
AMORTIZED
COST
DERIVATIVES
USED FOR
HEDGES
TOTAL
FAIR VALUE
$ 608,446 $
— $
— $
— $ 608,446 $ 608,446
13,398
—
—
—
13,398
13,398
—
—
1,145,932
—
1,145,932
1,145,932
—
6,201
—
—
—
—
—
—
114,409
17,761
17,761
17,761
—
—
6,201
6,201
114,409
114,409
—
41,327
—
—
41,327
41,327
—
—
—
—
—
—
—
—
304,189
20,779
—
—
304,189
315,409
4,630
4,630
25,409
25,409
4,630
4,630
20,779
—
20,779
20,779
$ 628,045 $
41,327 $ 1,585,309 $
22,391 $ 2,277,072
2020
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
—
—
1,199,166
—
1,199,166
1,199,166
—
6,200
—
—
—
—
—
—
209,276
41,956
41,956
41,956
—
—
6,200
6,200
209,276
211,877
—
9,666
—
—
9,666
9,666
—
—
433,914
—
433,914
505,332
—
—
—
—
—
1,973
1,973
1,973
29,425
—
29,425
29,425
Total
$ 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 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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
71
71
SNC-Lavalin 2021 Financial Report
30.
FINANCIAL INSTRUMENTS (CONTINUED)
The following tables present the carrying value of SNC-Lavalin’s financial liabilities as at December 31, 2021 and 2020 by
category and classification, with the corresponding fair value, when available. Financial liabilities classified as held for sale as at
December 31, 2021 and 2020 are not included in the tables below (see Notes 6D et 39).
AT DECEMBER 31
CARRYING VALUE OF FINANCIAL LIABILITIES BY CATEGORY
2021
Other non-current financial liabilities
1,179
15,020
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
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
DERIVATIVES USED
FOR HEDGES
FVTPL (1)
AMORTIZED COST
TOTAL
FAIR VALUE
$
— $
— $ 1,652,514 $ 1,652,514 $ 1,652,514
16,496
—
—
—
—
—
—
—
—
—
—
—
—
—
—
189,274
58,542
16,496
189,274
58,542
497,058
497,058
16,496
189,274
58,542
N/A (2)
1,094,102
1,094,102
1,104,859
400,000
170,069
121,320
400,000
170,069
137,519
400,000
170,069
137,519
$
17,675 $
15,020 $ 4,182,879 $ 4,215,574
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
Other non-current financial liabilities
8,556
15,181
Total
$
24,562 $
15,181 $ 4,660,473 $ 4,700,216
(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 similar terms and conditions.
72
72 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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
ASSETS AND LIABILITIES
None
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 based on observable
market data
None
For the years ended December 31, 2021 and 2020, 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, 2021:
Balance as at January 1, 2021
Unrealized net gains (1)
Effect of foreign currency exchange differences
Balance as at December 31, 2021
CONTINGENT CONSIDERATION
RECEIVABLE FROM
THE ACQUIRER OF THE 10.01%
INTEREST IN HIGHWAY 407 ETR
CONTINGENT CONSIDERATION
PAYABLE TO SELLER RELATED TO
LINXON ACQUISITION
$
— $
—
—
$
— $
15,181
(131)
(30)
15,020
(1)
Included in “Loss (gain) arising on financial instruments 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, 2021 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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
73
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SNC-Lavalin 2021 Financial Report
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, 2021:
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)
$
$
$
$
— $
— $
— $
— $
(870)
793
—
—
(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 it 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.
74
74 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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, 2021 and 2020.
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 $138.0 million at December 31, 2021 (2020:
$457.2 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 $319.9 million of financial assets at December 31, 2021 (2020: $492.2 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, 2021 and 2020:
MATURITY
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
DECEMBER 31
2021
DECEMBER 31
2020
$
42,033 $
55,594
247
41,985
59,240
450
$
97,874 $
101,675
II) MATURITY ANALYSIS OF TRADE PAYABLES AND ACCRUED LIABILITIES
As at December 31, 2021, 98% (2020: 98%) of the outstanding balance of “Trade payables and accrued liabilities” of
$1,652.5 million (2020: $1,730.4 million) had a maturity of not later than 1 year.
MARKET RISK
I) CURRENCY RISK
SNC-Lavalin’s foreign currency risk arises from arrangements in currencies other than its reporting currency and from the net
assets (liabilities) of its foreign operations.
The Company manages foreign currency risk by matching, when possible, the cash receipts in a foreign currency and the cash
disbursements in the same foreign currency, for revenue-generating projects in which foreign currencies are involved.
Derivative financial instruments with financial institutions, usually forward foreign exchange contracts, are also used to hedge
the cash flows in foreign currencies.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
75
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SNC-Lavalin 2021 Financial Report
30.
FINANCIAL INSTRUMENTS (CONTINUED)
The following table summarizes the major forward foreign exchange contracts that were outstanding for which SNC-Lavalin
has committed to buy or sell foreign currencies:
AT DECEMBER 31, 2021
AT DECEMBER 31, 2020
SELL
MATURITY
BUY
SELL
MATURITY
BUY
CA$
CA$
US$
552,415
32,112
512,608
€
43,151
CA$
AU$
298,883
13,834
£
300,004
INR
5,830,000
US$
CHF
80,042
22,540
US$
438,174
2022-2024
€
21,342
2022-2023
650,203
2022-2023
CA$
CA$
US$
23,322
361,387
906,041
US$
691,385
2021-2023
64,160
£
174,893
12,761
511,408
CA$
CA$
CA$
CA$
£
£
2022
2022
2022
2022
€
51,472
CA$
AU$
204,887
47,088
£
227,287
54,737
2022-2024
INR 8,314,500
60,294
2022
US$
24,704
2022-2023
US$
CHF
68,022
30,068
€
14,844
2021-2023
CA$
CA$
461,795
2021-2022
80,371
2021-2022
£
120,000
CA$
CA$
£
£
45,444
387,786
78,936
50,847
2021
2021
2021
2021-2023
2021
US$
33,692
2021-2022
As at December 31, 2021, the forward foreign exchange contracts used for hedging purposes by the Company had a net
unfavourable fair value of $3.0 million (2020: net favourable fair value of $28.7 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, 2021 has been calculated from the Company’s net financial
assets (liabilities) denominated in US dollars and British pounds.
Increase (decrease)
Increase (decrease)
10% appreciation in the Canadian dollar (1)
10% depreciation in the Canadian dollar (1)
$
$
(141,152) $
(268,214)
141,152 $
268,214
CA$/US$ (2), (3)
IMPACT ON EQUITY
CA$/£ (2), (4)
(1)
(2)
(3)
(4)
Assuming all other variables remain the same
The Company’s exposure to other currencies is not significant.
Includes mainly $153.6 million of change in exchange differences on translating foreign operations
Includes mainly $229.6 million of change in exchange differences on translating foreign operations
As at December 31, 2021, a 10% appreciation in the Canadian dollar relative to: i) the US dollar would increase the Company’s
net income by $18.1 million (10% depreciation in the Canadian dollar relative to the US dollar would decrease the Company’s
net income by $18.1 million); and ii) the British pound would decrease the Company’s net income by $5.5 million (10%
depreciation in the Canadian dollar relative to the British pound would increase the Company’s net income by $5.5 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.
76
76 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
30.
FINANCIAL INSTRUMENTS (CONTINUED)
In 2021 and 2020, 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 interest
rate risk.
LIMITED RECOURSE DEBT
SNC-Lavalin’s limited recourse debt, being the CDPQ Loan, bears interest at a variable rate which exposes the Company to
interest rate risk.
RECOURSE DEBT
SNC-Lavalin’s Revolving Facility bears interest at a variable rate which exposes the Company to interest rate risk.
SNC-Lavalin’s Series 4 Debentures and Series 6 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 bears interest at a variable rate which exposes the Company to interest rate risk. SNC-Lavalin’s
Series 3 Debentures bore interest at a variable rate which exposed the Company to interest rate risk until the repayment of these
debentures in March 2021.
INTEREST RATE SWAP
TransitNEXT General Partnership 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 SENSITIVITY 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 100 basis points higher/lower than the base rate and all other variables were held constant, the
Company’s net income for the year ended December 31, 2021 would decrease/increase by $8.5 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 decreased in 2021 mainly due to repayment of its floating rate Series 3 Debentures.
III) EQUITY 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.
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, 2021, SNC-Lavalin had outstanding letters of credit of $1,547.3 million (2020: $1,700.8 million).
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
77
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SNC-Lavalin 2021 Financial Report
31. CAPITAL MANAGEMENT
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 rate 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, 2021 and 2020 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
2021
DECEMBER 31
2020
$
2,973,367 $
2,557,505
(333,269)
—
1,094,102
$
4,400,738 $
(320,067)
594,141
1,170,965
3,454,396
The Company has paid quarterly dividends for 32 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
financial measures 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, 2021.
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 2021, 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.
78
78 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
32.
PENSION PLANS, OTHER LONG-TERM BENEFITS AND OTHER POST-
EMPLOYMENT BENEFITS
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 $252.0 million in
2021 (2020: $248.8 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 $171.0 million in 2021 (2020: $170.4 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, 2019 for the Railways Pension
Scheme.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
79
79
SNC-Lavalin 2021 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, 2021
Change in pension benefit obligation:
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
Pension benefit obligation at beginning of year
$ 3,452,866 $
808,555 $
321,123 $ 4,582,544
Current service cost
Interest cost
Past service cost
Benefits paid
Contributions by plan participants
Remeasurement:
172
40,696
—
3,794
9,657
—
1,995
4,180
(290)
5,961
54,533
(290)
(104,326)
(22,762)
(14,010)
(141,098)
—
1,552
429
1,981
Actuarial losses (gains) arising from changes in demographic
assumptions
8,105
(1,380)
(2,554)
4,171
Actuarial gains arising from changes in financial assumptions
(282,284)
(17,416)
(13,117)
(312,817)
Actuarial losses (gains) arising from experience adjustments
41,213
8,105
(3,900)
45,418
Effect of foreign currency exchange differences
Pension benefit obligation at end of year
(60,075)
(14,473)
(10,368)
(84,916)
$ 3,096,367 $
775,632 $
283,488 $ 4,155,487
Change in pension plan assets:
Fair value of pension plan assets at beginning of year
$ 3,235,788 $
559,420 $
291,496 $ 4,086,704
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
Fair value of pension plan assets at end of year
AT DECEMBER 31, 2021
Funded status reflected in the statement of financial position:
Present value of pension benefit obligation
Fair value of pension plan assets
Funded status
Additional liability due to minimum funding requirements
Net accrued pension benefit liability (asset)
Presented on the statement of financial position as follows:
Other non-current non-financial assets (Note 17)
Non-current portion of provisions
38,627
6,898
3,840
49,365
125,709
—
69,493
(1,380)
(5,301)
189,901
(313)
(1,693)
(104,326)
(22,762)
(14,010)
(141,098)
65,355
—
7,243
1,552
8,350
429
80,948
1,981
(59,502)
(10,599)
(9,878)
(79,979)
$ 3,301,651 $
609,865 $
274,613 $ 4,186,129
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$ 3,096,367 $
775,632 $
283,488 $ 4,155,487
3,301,651
609,865
274,613
4,186,129
(205,284)
165,767
—
—
8,875
1,227
(30,642)
1,227
$
(205,284) $
165,767 $
10,102 $
(29,415)
$
230,763
$
201,348
80
80 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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)
(921)
(77,113)
Actuarial losses arising from changes in financial assumptions
485,528
126,241
Actuarial gains arising from experience adjustments
Effect of foreign currency exchange differences
(78,084)
71,019
(12,211)
16,498
32,252
(3,964)
10,141
644,021
(94,259)
97,658
Pension benefit obligation at end of year
$ 3,452,866 $
808,555 $
321,123 $ 4,582,544
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
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
57,273
10,491
5,299
73,063
314,226
—
26,142
(1,376)
20,970
361,338
(329)
(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
Fair value of pension plan assets at end of year
$ 3,235,788 $
559,420 $
291,496 $ 4,086,704
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
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)
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
81
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SNC-Lavalin 2021 Financial Report
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, 2021
Current service cost
Net interest expense
Administration costs
Past service cost
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
$
172 $
3,794 $
1,995 $
2,069
—
—
2,759
1,380
—
340
313
(290)
TOTAL
5,961
5,168
1,693
(290)
Components of benefit pension costs recognized in net income
$
2,241 $
7,933 $
2,358 $
12,532
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)
SNC-Lavalin’s net defined benefit pension costs recognized in other comprehensive income were comprised of:
YEAR ENDED DECEMBER 31, 2021
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding interest income)
Actuarial losses (gains) arising from changes in demographic
assumptions
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
(125,709) $
(69,493) $
5,301 $
(189,901)
8,105
(1,380)
(2,554)
4,171
Actuarial gains arising from changes in financial assumptions
(282,284)
(17,416)
(13,117)
(312,817)
Actuarial losses (gains) arising from experience adjustments
Variation in liability due to minimum funding requirements
Components of reversal of benefit pension costs recognized in
other comprehensive income
YEAR ENDED DECEMBER 31, 2020
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding interest income)
41,213
—
8,105
—
(3,900)
1,227
45,418
1,227
$
(358,675) $
(80,184) $
(13,043) $
(451,902)
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
(314,226) $
(26,142) $
(20,970) $
(361,338)
Actuarial gains arising from changes in demographic assumptions
(54,005)
(22,187)
(921)
(77,113)
Actuarial losses arising from changes in financial assumptions
485,528
126,241
Actuarial gains arising from experience adjustments
(78,084)
(12,211)
32,252
(3,964)
644,021
(94,259)
Components of benefit pension costs recognized in other
comprehensive income
$
39,213 $
65,701 $
6,397 $
111,311
SNC-Lavalin expects to make contributions of $85.7 million in 2022 to its defined benefit pension plans.
82
82 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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:
AT DECEMBER 31, 2021
Asset category
Equity securities
Debt securities
Other (1)
Total
AT DECEMBER 31, 2020
Asset category
Equity securities
Debt securities
Other (1)
Total
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
OTHER
PLANS
TOTAL
$
520,224 $
250,275 $
46,270 $
2,307,734
473,693
248,223
111,367
164,993
63,350
816,769
2,720,950
648,410
$
3,301,651 $
609,865 $
274,613 $
4,186,129
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
(1)
As at December 31, 2021 and 2020, 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, 2021:
AT DECEMBER 31, 2021
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
1.93 %
3.11 %
3.11 %
22.9 years
24.9 years
24.2 years
26.4 years
RAILWAYS
PENSION
SCHEME
1.93 %
3.11 %
3.11 %
OTHER
PLANS
1.85 %
1.96 %
2.23 %
22.2 years
23.3 years
23.0 years
25.0 years
23.5 years
24.7 years
24.7 years
26.6 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 2.75% as at December 31, 2021.
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 2.72% as at December 31, 2021.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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SNC-Lavalin 2021 Financial Report
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, 2020:
AT DECEMBER 31, 2020
Accrued pension benefit obligation
Discount rate
Rate of compensation increase (1)
Inflation (2)
Longevity at age 65 for current pensioners
Men
Women
Longevity at age 65 for future pensioners (current age 45)
Men
Women
ATKINS
PENSION
PLAN
RAILWAYS
PENSION
SCHEME
1.20 %
2.80 %
2.80 %
1.20 %
2.80 %
2.80 %
OTHER
PLANS
1.32 %
1.77 %
1.94 %
22.9 years
22.2 years
23.1 years
24.9 years
23.2 years
25.0 years
24.2 years
23.5 years
24.7 years
26.3 years
24.6 years
26.7 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, 2020.
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 2.1% as at December 31, 2020.
The sensitivity analysis below was determined based on reasonable possible changes of the respective assumptions occurring at
December 31, 2021, while holding all other assumptions constant.
If the discount rate is 100 basis points higher (lower), the defined benefit pension obligation would decrease by an estimated
amount of $759.4 million (increase by an estimated amount of $763.5 million).
If the rate of compensation increase is 100 basis points higher (lower), the defined benefit pension obligation would increase by
an estimated amount of $16.2 million (decrease by an estimated amount of $16.2 million).
If the rate of inflation is 100 basis points higher (lower), the defined benefit pension obligation would increase by an estimated
amount of $571.2 million (decrease by an estimated amount of $571.0 million).
If longevity increases by 1 year, the defined benefit pension obligation would increase by an estimated amount of
$168.5 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, 2021 was 17.0 years for the Atkins Pension
Plan (2020: 18.0 years), 16.2 years for Railways Pension Scheme (2020: 17.4 years) and 17.8 years for the other plans (2020:
18.2 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.
84
84 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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:
YEARS ENDED DECEMBER 31
Change in obligation:
Obligation at beginning of year
Current service cost
Past service cost
Loss (gain) arising from settlement
Interest cost
Remeasurement (1)
Benefits paid
Actuarial losses (gains) (Note 24)
Effect of foreign currency exchange differences
Reclassification to liabilities of disposal groups classified as held for sale
2021
2020
$
61,389 $
11,979
—
(486)
1,974
(621)
(11,606)
(12,976)
(564)
—
98,471
18,799
53
1,252
3,208
(956)
(31,888)
5,287
(1,000)
(31,837)
Obligation at end of year
$
49,089 $
61,389
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 (gain) arising from settlement
Interest cost
Remeasurement (1)
Components of other long-term benefit and other post-employment benefit costs recognized in
net income
2021
2020
$
11,979 $
18,799
—
(486)
1,974
(621)
53
1,252
3,208
(956)
$
12,846 $
22,356
(1)
Remeasurement relates to 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 the 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
2021
DECEMBER 31
2020
4.56 %
4.47 %
3.26 %
4.51 %
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
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SNC-Lavalin 2021 Financial Report
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 former Mining & Metallurgy segment and the former Oil & Gas segment,
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 for April 2022.
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 sought 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 claimed damages and sought 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
contemplated expanding the Drywall Class Period to include SNC-Lavalin’s July 22, 2019 and August 1, 2019 press releases
and increased 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 and on
October 20, 2021, the Drywall Class Action was dismissed.
86
86 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
33.
CONTINGENT LIABILITIES (CONTINUED)
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 referred to as the “Peters
Class Action”).
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. The leave and certification hearing was held between June 1 and June 3, 2021 and, on July 16, 2021, the court ruled
dismissing the Peters Class Action. The Plaintiff has appealed the ruling and the appeal hearing is expected to occur in 2022.
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 was 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 disputed the extent
of the insurance coverage available to the Company and this dispute was 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 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 filed notices seeking leave to appeal to the Supreme Court of Canada.
On May 6, 2021, the Supreme Court of Canada dismissed both the Company’s and its external insurers’ applications seeking
leave to appeal.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
87
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SNC-Lavalin 2021 Financial Report
33.
CONTINGENT LIABILITIES (CONTINUED)
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, which was fully
collected. An additional $33 million in insurance proceeds was also collected by the Company through a reinsurance policy
which was not subject to this court ruling.
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 has appealed 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. Wave 2 claims that relate to damaged
residential buildings have been given priority by the Court and a trial date has been set in May and June 2022, for those claims.
The remaining claims will be dealt with separately. SNC-Lavalin expects some insurance coverage for the Wave 2 claims. In
addition, SNC-Lavalin has filed a separate recourse in warranty claim against Lafarge with respect to the Wave 2 claims. SNC-
Lavalin’s liability exposure on all 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. In a first
instance court ruling in 2021, the claim was dismissed against all defendants including WS Atkins & Partners Overseas. The
claimant has filed an appeal with a ruling anticipated in 2022.
Australian Arbitration
One of the Company’s former subsidiaries, divested as part of the sale of the Company’s Oil & Gas business, 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. Pursuant to the agreement to sell the Oil & Gas business, the Company has retained the divested subsidiary’s
risk associated with, and conduct of, this dispute. Under the relevant project contract, the 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 was challenged by the project owner and a court hearing occurred in June 2021 and on September 28,
2021, the court found in favor of the project owner effectively reversing the September 2020 tribunal ruling. The joint operation
has appealed the September 2021 court ruling. A hearing by the arbitration tribunal on the quantum of damages to be awarded
against the joint operation (if any) has been postponed and may occur in 2023.
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 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 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.
88
88 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
33.
CONTINGENT LIABILITIES (CONTINUED)
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 issue the change orders or other
claims, or fails to 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.
Jacques Cartier Bridge Criminal Charges (Canada)
On September 23, 2021, the Royal Canadian Mounted Police (the “RCMP”) represented by the Province of Quebec’s Directeur
des Poursuites Criminelles et Pénales (“DPCP”) laid charges against the Company’s subsidiary, SNC-Lavalin Inc. and indirect
subsidiary, SNC-Lavalin International Inc. Each entity has been jointly charged (along with a former employee of the Company,
Normand Morin) with the following counts: 1) forgery under Section 366 of the Criminal Code (Canada) (the “Criminal Code”),
2) fraud under Section 380 of the Criminal Code, and 3) fraud against the government under Section 121 of the Criminal Code.
Each entity has also been charged with one count of conspiracy to commit the aforementioned crimes (the “Criminal Charges”).
On the same date, the DPCP gave notice to SNC-Lavalin Inc. and SNC-Lavalin International Inc. of an invitation to negotiate a
remediation agreement in accordance with Part XXII.1. of the Criminal Code with respect to the Criminal Charges and on
October 1, 2021, both entities formally accepted the invitation. These Criminal Charges follow the RCMP’s formal 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 Inc. and which has previously led to a guilty plea on certain criminal charges in 2017
by the former head of the Canada Federal Bridges Corporation. Another former employee of the Company, Kamal Francis was
also charged separately with similar offenses.
Due to the inherent uncertainties of these proceedings, it is not possible to predict whether the parties will be able to
successfully negotiate and enter into a remediation agreement or the final outcome of the Criminal Charges, which could
possibly result in a conviction on one or more of the Criminal Charges. The Company cannot predict what, 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 Criminal Charges, or whether additional charges may be brought in connection with the RCMP investigation of these
matters.
The Criminal Charges and potential outcomes thereof, and any negative publicity associated therewith, could adversely affect
the Company’s business, results of operations and reputation and could subject the Company to sanctions, fines and other
penalties, some of which may be significant. In addition, potential consequences of the Criminal Charges could include, in
respect of the Company or one or more of its subsidiaries, mandatory or discretionary suspension, prohibition or debarment
from participating in projects by certain governments (such as the Government of Canada and/or Canadian provincial
governments) or by certain administrative organizations under applicable procurement laws, regulations, policies or practices.
The Company derives a significant percentage of its annual consolidated revenue and of its revenue in Canada from government
and government-related contracts. As a result, suspension, prohibition or debarment, whether discretionary or mandatory, from
participating in certain government and government-related contracts (in Canada, Canadian provinces or elsewhere) would
likely have a material adverse effect on the Company’s business, financial condition and liquidity and the market prices of the
Company’s publicly traded securities.
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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
89
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SNC-Lavalin 2021 Financial Report
33.
CONTINGENT LIABILITIES (CONTINUED)
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, Brazil, and Angola.
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 the Company or one of its subsidiaries or
investee entities 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.
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”). According to the terms of the World Bank
Settlement, the Company and certain of its other affiliates continued to be eligible to bid on and be awarded World Bank
Group-financed projects as long as they complied 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 required
that the Company cooperate with the World Bank on various compliance matters in the future. The World Bank Settlement led
to certain other multilateral development banks following suit, debarring SNC-Lavalin Inc. and its controlled affiliates on the
same terms. On April 17, 2021, the Company received confirmation that the World Bank Group’s Integrity Officer determined
that the Company and its sanctioned affiliates had satisfied the conditions of the World Bank Settlement and were therefore
removed from the World Bank Group list of sanctioned entities effective April 17, 2021.
90
90 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
33.
CONTINGENT LIABILITIES (CONTINUED)
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 counter-
claimed 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 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 2021 CONSOLIDATED FINANCIAL STATEMENTS
91
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SNC-Lavalin 2021 Financial Report
34.
LEASES
Right-of-use assets
YEAR ENDED DECEMBER 31, 2021
Depreciation expense on right-of-use assets
Additions
YEAR ENDED DECEMBER 31, 2020
Depreciation expense on right-of-use assets
Additions
Net book value:
As at December 31, 2021
As at December 31, 2020
Lease liabilities
OFFICE REAL
ESTATE
EQUIPMENT
TOTAL
$
$
71,828 $
13,763 $
85,591
85,369 $
11,329 $
96,698
OFFICE REAL
ESTATE
EQUIPMENT
TOTAL
$
$
$
$
91,697 $
15,621 $
107,318
33,506 $
6,926 $
40,432
328,654 $
26,983 $
355,637
320,621 $
26,203 $
346,824
The table below presents the future gross lease liabilities payments from continuing operations as at December 31, 2021 and
2020:
MATURITY
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
DECEMBER 31
2021 (1)
DECEMBER 31
2020 (1)
$
118,492 $
124,137
288,529
230,575
281,070
218,794
$
637,596 $
624,001
(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, 2021 and 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
Gain arising from sale and leaseback transactions
Expense relating to variable lease payments not included in the measurement of the lease liabilities
Income from subleasing right-of-use assets
Impairment losses on right-of-use assets (2)
(2)
Included in “Restructuring and transformation costs” in the consolidated income statements
Amounts recognized in the statement of cash flows
2021
85,591 $
18,024 $
481 $
1,671 $
2020
99,475
21,174
1,317
—
33,071 $
28,561
7,368 $
5,594
16,916 $
13,485
$
$
$
$
$
$
$
Total cash outflows for leases amounted to $161.1 million for the year ended December 31, 2021 (2020: $182.4 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, 2021, the lease income on operating leases amounted to $14.3 million (2020: $14.5 million).
92
92 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
35.
REMUNERATION
A)
EMPLOYEE REMUNERATION
Expenses recognized for employee benefits, including expenses recognized for key management remuneration and directors’
fees, are analyzed as follows:
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
2021
2020
$
3,430,676 $
3,704,686
36,801
171,040
25,378
3,663,895 $
$
10,079
170,472
40,648
3,925,885
(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 2021, the number of individuals included as key management was 138 people (2020: 143 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
2021
$
83,565 $
31,099
5,708
3,962
$
124,334 $
2020
80,354
7,505
5,067
1,764
94,690
(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.
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
93
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SNC-Lavalin 2021 Financial Report
36.
RELATED PARTY TRANSACTIONS
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, 2021 and 2020, SNC-Lavalin recognized the following transactions with its related parties:
YEARS ENDED DECEMBER 31
2021
2020
PS&PM revenue from contracts with investments accounted for by the equity method
$
554,173 $
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
Income from PS&PM investments accounted for by the equity method
Dividends and distributions received from PS&PM investments accounted for by the equity
85,002
76,584
56,329
87,349
93,176
47,186
method
$
55,965 $
38,262
As at December 31, 2021 and 2020, 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 (1)
Remaining commitment to invest in Capital investments accounted for by the equity method (2)
(Note 5C)
DECEMBER 31
2021
DECEMBER 31
2020
$
114,435 $
116,190
177,598
110,169
24,921
24,921
Dividends and distributions receivable from Capital investments accounted for by the equity
method (3)
$
290 $
2,400
(1) Included in “Contract assets” or “Contract liabilities” in the statements of financial position
(2) Included in “Other current financial liabilities” in the statements of financial position
(3) Included in “Other current financial assets” in the statements of financial position
All of these related party transactions are measured at fair value.
94
94 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES
The main subsidiaries, joint ventures, joint operations and associates of the Company at December 31, 2021 and 2020, 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
2021
DECEMBER 31
2020
SUBSIDIARIES
Atkins China Limited
Atkins Danmark A/S
Atkins International Holdings Limited
Atkins Limited
Atkins North America, Inc.
Atkins Nuclear Secured Holdings Corporation
Atkins Renewable Resources Corporation (previously, Kentz US
Resources Corporation)
Atkins US Holdings Inc. (previously, AUSHI LLC)
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.
Linxon Gulf LLC (1)
Linxon India Private Limited
Linxon Pvt Ltd
Linxon Sweden AB
Linxon Switzerland Ltd
Linxon UK Ltd.
Protrans BC Operations Ltd.
Saudi Arabian Kentz Co. Ltd.
SNC-Lavalin (GB) Holdings Limited
SNC-Lavalin (GB) Limited
SNC-Lavalin (Guernsey) Holdings Ltd.
SNC-Lavalin Algérie EURL
SNC-Lavalin Arabia Co. Ltd.
SNC-Lavalin ATP Inc.
SNC-Lavalin Australia Pty. Ltd.
SNC-Lavalin Capital Inc.
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 Engineering India Private Limited
SNC-Lavalin Engineers & Constructors, Inc.
SNC-Lavalin Europe B.V.
%
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
—
49.0
99.0
51.0
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
99.0
51.0
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
United States
United States
Canada
United States
United Kingdom
Saudi Arabia
Canada
Canada
Jersey
Australia
100.0
49.0 United Arab Emirates
India
United Kingdom
Sweden
Switzerland
United Kingdom
Canada
Saudi Arabia
United Kingdom
United Kingdom
Guernsey
Algeria
Saudi Arabia
Canada
Australia
Canada
Colombia
Canada
Canada
United States
Canada
Canada
India
United States
Netherlands
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
75.0
(1)
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 2021 CONSOLIDATED FINANCIAL STATEMENTS
95
95
SNC-Lavalin 2021 Financial Report
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES (CONTINUED)
DECEMBER 31
2021
DECEMBER 31
2020
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 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
%
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
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
United Kingdom
Romania
Canada
United Kingdom
United States
United States
Canada
United Kingdom
United Kingdom
DECEMBER 31
2021
DECEMBER 31
2020
%
COUNTRY
%
50.0
6.76
25.0
40.0
50.0
51.0
50.0
22.0
40.0
50.0
6.76
25.0
40.0
50.0
51.0
50.0
22.0
40.0
Canada
Canada
Canada
Canada
Canada
France
Canada
United States
United States
COUNTRY
Canada
Canada
Canada
Canada
Canada
Canada
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.
DECEMBER 31
2021
DECEMBER 31
2020
%
50.0
25.0
24.0
45.0
40.0
40.0
%
50.0
25.0
24.0
45.0
40.0
40.0
(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.
96
96 NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
37.
SUBSIDIARIES, JOINT ARRANGEMENTS AND ASSOCIATES (CONTINUED)
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
2021
DECEMBER 31
2020
%
25.5
26.0
20.0
%
COUNTRY
25.5
26.0
20.0
Algeria
Algeria
Canada
In the year ended December 31, 2021, the Company participated in various government assistance programs related to
COVID-19, mainly in Canada (2020: mainly in Canada and 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, 2021, SNC-Lavalin recognized these government grants as a reduction of “Direct costs of
activities” in the amount of $43.7 million (2020: $75.3 million) and as a reduction of “Corporate selling, general and
administrative expenses” in the amount of $3.4 million (2020: $3.6 million) in the consolidated income statement, as an offset
of costs for which the grants were intended to compensate.
39.
DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
As at December 31, 2021, the disposal group classified as held for sale included all assets and liabilities of InPower BC General
Partnership and its related holding companies (see Note 5A).
The major classes of assets and liabilities of the disposal group classified as held for sale as at December 31, 2021 were as
follows:
Cash and cash equivalents
Restricted cash
Other current assets
Non-current assets
Assets of disposal group classified as held for sale
Current liabilities
Non-current liabilities
Liabilities of disposal group classified as held for sale
Net assets of disposal group classified as held for sale
DECEMBER 31
2021
2,164
22,454
23,240
296,055
343,913
22,952
275,936
298,888
45,025
$
$
40. EVENT AFTER THE REPORTING PERIOD
DISPOSAL OF INPOWER BC GENERAL PARTNERSHIP AND ITS RELATED HOLDING COMPANIES
On February 7, 2022, SNC-Lavalin announced that the Company completed the sale and transfer of its ownership interest in
InPower BC General Partnership and its related holding companies to SNC-Lavalin IP Partnership in which the Company has a
20% ownership interest. The net gain on disposal from this transaction amounted to approximately $4.8 million, while it
generated a cash consideration to the Company of approximately $41 million.
EVENT AFTER THE REPORTING PERIOD
NOTES TO 2021 CONSOLIDATED FINANCIAL STATEMENTS
97
97
SNC-Lavalin 2021 Financial Report
its subsidiaries or
Inc. or one or more of
SNC-LAVALIN
SNC-LAVALIN
2021 Management’s Discussion and Analysis
March 2, 2022
References in this MD&A to the “Company”, “SNC-Lavalin”, “we”, “us” and “our” mean, as the context may
require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements or associates, or SNC-
joint arrangements or associates.
Lavalin Group
Management’s Discussion and Analysis (“MD&A”) is designed to provide the reader with a greater understanding
of SNC-Lavalin Group Inc.’s business, the 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 2021 audited annual
consolidated financial statements (the “2021 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. Unless otherwise specified, references herein to “Sections” means
to Sections of this MD&A.
Non-IFRS Financial Measures and Ratios, Supplementary
Financial Measures and Non-Financial Information
Certain indicators used by the Company to analyze and evaluate its results, which are listed in the table below,
are non-IFRS financial measures or ratios, supplementary financial 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 ratios, and
certain supplementary financial measures and 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 measures, ratios 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.
Performance
NON-IFRS FINANCIAL MEASURES AND RATIOS, SUPPLEMENTARY FINANCIAL MEASURES AND NON-FINANCIAL INFORMATION
Adjusted diluted earnings per share (“Adjusted diluted EPS”)
Adjusted earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization
Earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization (“EBITDA”)
(“Adjusted EBITDA”)
Adjusted EBITDA to revenue ratio
Booking-to-revenue ratio
Adjusted net income (loss) attributable to SNC-Lavalin shareholders
Return on average shareholders’ equity (“ROASE”)
Segment Adjusted EBITDA
Segment Adjusted EBITDA to segment net revenue ratio (%)
Segment net revenue
Liquidity
Days Sales Outstanding (“DSO”) for the EDPM segment
Free cash flow (usage)
Free cash flow (usage) to adjusted net income (loss) attributable to SNC-Lavalin shareholders ratio
Net limited recourse and recourse debt
Net limited recourse and recourse debt to Adjusted EBITDA ratio
◦ Working capital
Current ratio
Other
Organic revenue
Organic revenue growth
Definitions of all non-IFRS financial measures and ratios, supplementary financial 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 quantitative reconciliation from the non-IFRS
financial measures and ratios 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.
◦
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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 growth figures are determined on a constant currency basis using financial results from the prior
year denominated in foreign currencies translated at the foreign exchange rates of the current year.
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%.
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SNC-LAVALIN
Non-IFRS Financial Measures and Ratios, Supplementary
Financial Measures and Non-Financial Information
Certain indicators used by the Company to analyze and evaluate its results, which are listed in the table below,
are non-IFRS financial measures or ratios, supplementary financial 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 ratios, and
certain supplementary financial measures and 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 measures, ratios 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 MEASURES AND RATIOS, SUPPLEMENTARY FINANCIAL MEASURES AND NON-FINANCIAL INFORMATION
Performance
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Adjusted diluted earnings per share (“Adjusted diluted EPS”)
Adjusted earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization
(“Adjusted EBITDA”)
Adjusted EBITDA to revenue ratio
Adjusted net income (loss) attributable to SNC-Lavalin shareholders
Booking-to-revenue ratio
Earnings (loss) before net financial expenses (income), income taxes, depreciation and amortization (“EBITDA”)
Return on average shareholders’ equity (“ROASE”)
Segment Adjusted EBITDA
Segment Adjusted EBITDA to segment net revenue ratio (%)
Segment net revenue
Liquidity
◦
◦
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Days Sales Outstanding (“DSO”) for the EDPM segment
Free cash flow (usage)
Free cash flow (usage) to adjusted net income (loss) attributable to SNC-Lavalin shareholders ratio
Net limited recourse and recourse debt
Net limited recourse and recourse debt to Adjusted EBITDA ratio
◦ Working capital
◦
Current ratio
Other
◦
◦
Organic revenue
Organic revenue growth
Definitions of all non-IFRS financial measures and ratios, supplementary financial 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 quantitative reconciliation from the non-IFRS
financial measures and ratios 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.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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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 2, 2022, 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.
SNC-LAVALIN
SNC-LAVALIN
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”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “likely”, “may”,
“objective”, “outlook”, “plans”, “projects”, “should”, “synergies”, “target”, “vision”, “will”, 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 2, 2022. 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”). 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, matters relating to: (a) ongoing and additional impacts of the COVID-19 pandemic; (b) execution of
the Company’s “Pivoting to Growth Strategy” unveiled in September 2021; (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) supply chain disruptions; (l) joint ventures and partnerships; (m) information
systems and data and compliance with privacy legislation; (n) competition; (o) professional liability or liability for
faulty services; (p) monetary damages and penalties in connection with professional and engineering reports and
opinions; (q) gaps in insurance coverage; (r) health and safety; (s) qualified personnel; (t) work stoppages, union
negotiations and other labour matters; (u) extreme weather conditions and the impact of natural or other disasters
and global health crises; (v) divestitures and the sale of significant assets; (w) intellectual property; (x) liquidity
and financial position; (y) indebtedness; (z) impact of operating results and level of indebtedness on financial
situation; (aa) security under the CDPQ Loan Agreement (as hereinafter defined); (bb) dependence on
subsidiaries to help repay indebtedness; (cc) dividends; (dd) post‑employment benefit obligations, including
pension-related obligations; (ee) working capital requirements; (ff) collection from customers; (gg) impairment of
goodwill and other assets; (hh) the impact on the Company of legal and regulatory proceedings, investigations
and litigation settlements; (ii) further regulatory developments as well as employee, agent or partner misconduct
or failure to comply with anti-corruption and other government laws and regulations; (jj) reputation of the
Company; (kk) inherent limitations to the Company’s control framework; (ll) environmental laws and regulations;
(mm) global economic conditions; (nn) inflation; (oo) fluctuations in commodity prices; and (pp) 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.
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SNC-LAVALIN
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 2, 2022, 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.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
Table of Contents
1
2
3
4
5
6
7
8
9
Our Business
How We Analyze and Report Our Results
2021 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
13
Non-IFRS Financial Measures and Ratios, Supplementary Financial Measures and
Non-Financial Information
14 Risks and Uncertainties
15 Controls and Procedures
16 Quarterly Information
17 Event After the Reporting Period
103
104
110
112
128
131
132
135
144
147
147
147
148
166
190
191
192
SNC-LAVALIN
Our Business
1.1
DESCRIPTION OF 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 design, deliver and operate the
most complex projects. SNC-Lavalin deploys global capabilities locally to its clients and delivers unique end-to-
end services across the whole life cycle of an asset including consulting, advisory & environmental services,
intelligent networks & cybersecurity, design & engineering, procurement, project & construction management,
operations & maintenance (“O&M”), decommissioning and capital.
In certain parts of this MD&A, activities from Professional Services & Project Management are collectively referred
to as “PS&PM” 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 PLAN AND OPERATIONAL REALIGNMENT
On September 28, 2021, the Company released its three-year global “Pivoting to Growth Strategy” outlining how
and where the Company intends to drive profitable growth through 2024. The strategic plan is underpinned mainly
by a focus on core geographic areas of operation – primarily Canada, the United States and the United Kingdom
– and distinct end customer markets. Across the Company’s services, SNC-Lavalin leverages its end-to-end
global capabilities to meet the demands of the future for the Company’s clients in decarbonization and sustainable
solutions by connecting people, data and technology, and expects that the strategy be driven largely by four
growth areas:
Engineering Services in the United States;
Nuclear Decommissioning and Waste Management;
◦ Major Projects with a focus on collaborative contract models; and
Digital Transformation.
As part of its strategic plan, the Company also intends to allocate capital to further strengthen its financial
resilience and to support growth. Future delivery of positive cash flows will be prioritized with a view to further
improving SNC-Lavalin’s leverage and targeting a return to an investment grade credit rating. The Company’s
growth strategy may also be accelerated through organic and inorganic investments. Opportunistically and
depending on the Company’s cash resources, surplus capital may be returned to shareholders through share
buybacks or dividend growth.
To support the next phase of its transformation journey to growth, the Company has undertaken an operational
realignment of the business, effective January 1, 2022. The new global market-facing structure is designed to best
serve the evolving needs of the Company’s clients, as well as support win-work efforts across its three core
geographical markets, and will result in the following segments:
Engineering Services business, bringing together EDPM, Mining and Metallurgy (currently within
Resources), as well as Infrastructure Services (excluding O&M and Linxon);
Linxon, a majority-owned subsidiary which is a global leader in delivering sustainable energy solutions
and an essential component of our Power and Renewables market offering;
Nuclear;
◦ O&M;
Capital.
Infrastructure LSTK Projects; and
◦
◦
◦
◦
◦
◦
◦
◦
The Engineering Services, Nuclear, O&M and Linxon businesses will be separate operating and reportable
segments and be grouped together as the SNCL Services line of business, while Infrastructure LSTK Projects and
Capital will continue to be separate operating and reportable segments. The Company’s financial reporting will be
changed, starting in the first quarter of 2022, with comparative figures restated to reflect these new operating and
reportable segments and lines of business. Please refer to Section 13.5.1 for a presentation of such 2021 restated
comparative figures that will be used in 2022.
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2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
102
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
103
SNC-LAVALIN
Our Business
1.1
DESCRIPTION OF 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 design, deliver and operate the
most complex projects. SNC-Lavalin deploys global capabilities locally to its clients and delivers unique end-to-
end services across the whole life cycle of an asset including consulting, advisory & environmental services,
intelligent networks & cybersecurity, design & engineering, procurement, project & construction management,
operations & maintenance (“O&M”), decommissioning and capital.
In certain parts of this MD&A, activities from Professional Services & Project Management are collectively referred
to as “PS&PM” 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 PLAN AND OPERATIONAL REALIGNMENT
On September 28, 2021, the Company released its three-year global “Pivoting to Growth Strategy” outlining how
and where the Company intends to drive profitable growth through 2024. The strategic plan is underpinned mainly
by a focus on core geographic areas of operation – primarily Canada, the United States and the United Kingdom
– and distinct end customer markets. Across the Company’s services, SNC-Lavalin leverages its end-to-end
global capabilities to meet the demands of the future for the Company’s clients in decarbonization and sustainable
solutions by connecting people, data and technology, and expects that the strategy be driven largely by four
growth areas:
Engineering Services in the United States;
Nuclear Decommissioning and Waste Management;
◦
◦
◦ Major Projects with a focus on collaborative contract models; and
◦
Digital Transformation.
As part of its strategic plan, the Company also intends to allocate capital to further strengthen its financial
resilience and to support growth. Future delivery of positive cash flows will be prioritized with a view to further
improving SNC-Lavalin’s leverage and targeting a return to an investment grade credit rating. The Company’s
growth strategy may also be accelerated through organic and inorganic investments. Opportunistically and
depending on the Company’s cash resources, surplus capital may be returned to shareholders through share
buybacks or dividend growth.
To support the next phase of its transformation journey to growth, the Company has undertaken an operational
realignment of the business, effective January 1, 2022. The new global market-facing structure is designed to best
serve the evolving needs of the Company’s clients, as well as support win-work efforts across its three core
geographical markets, and will result in the following segments:
◦
◦
Engineering Services business, bringing together EDPM, Mining and Metallurgy (currently within
Resources), as well as Infrastructure Services (excluding O&M and Linxon);
Linxon, a majority-owned subsidiary which is a global leader in delivering sustainable energy solutions
and an essential component of our Power and Renewables market offering;
Nuclear;
◦
◦ O&M;
◦
◦
Infrastructure LSTK Projects; and
Capital.
The Engineering Services, Nuclear, O&M and Linxon businesses will be separate operating and reportable
segments and be grouped together as the SNCL Services line of business, while Infrastructure LSTK Projects and
Capital will continue to be separate operating and reportable segments. The Company’s financial reporting will be
changed, starting in the first quarter of 2022, with comparative figures restated to reflect these new operating and
reportable segments and lines of business. Please refer to Section 13.5.1 for a presentation of such 2021 restated
comparative figures that will be used in 2022.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
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 grouping 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, the Company further reports certain results and provides certain financial information separately for
(i) PS&PM activities across its lines of business, which is thus comprised of five of its six segments, namely
EDPM, Nuclear, Infrastructure Services, Resources and Infrastructure EPC Projects, and (ii) Capital.
PS&PM
What is reported in PS&PM includes contracts generating revenues derived mainly from consulting, advisory &
environmental services, 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 bidding 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, defence and security and technology, including some of the world’s most
transformational projects. A significant portion of EDPM revenues are derived from the public sector,
including national, provincial, state and local and municipal authorities. As in 2020, the EDPM segment
derived all of its revenues during 2021 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 (2021: 97%; 2020: 99%), and LSTK construction
contracts (2021: 3%; 2020: 1% from one legacy LSTK construction contract).
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%-owned subsidiary, is reported at 100%. The Infrastructure Services segment
derives its revenues from both reimbursable and engineering services contracts (2021: 57%; 2020: 60%)
and standardized EPC contracts (2021: 43%; 2020: 40%).
Combined, the three segments described above are presented under the SNCL Engineering Services line of
business.
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 model 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 presented as discontinued operations for both 2021 and 2020 and
were disposed of in the third quarter of 2021. The Resources segment derives its revenues from
reimbursable and engineering services contracts (2021: 88%) and LSTK construction contracts (2021:
12%).
Infrastructure EPC Projects includes lump-sum turnkey (“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 (2021: 97%; 2020: 97%) and
reimbursable and engineering services contracts (2021: 3%; 2020: 3%).
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 (2021: 79%;
2020: 81%), standardized EPC contracts (2021: 8%; 2020: 8%) and LSTK construction contracts (2021: 13%;
2020: 11%).
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SNC-LAVALIN
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 model 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 presented as discontinued operations for both 2021 and 2020 and
were disposed of in the third quarter of 2021. The Resources segment derives its revenues from
reimbursable and engineering services contracts (2021: 88%) and LSTK construction contracts (2021:
12%).
Infrastructure EPC Projects includes lump-sum turnkey (“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 (2021: 97%; 2020: 97%) and
reimbursable and engineering services contracts (2021: 3%; 2020: 3%).
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 (2021: 79%;
2020: 81%), standardized EPC contracts (2021: 8%; 2020: 8%) and LSTK construction contracts (2021: 13%;
2020: 11%).
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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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 significantly higher than their
net book value of $620.0 million as at December 31, 2021. 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, 2021 and 2020, the net book value of Capital investments can be summarized as follows:
AT DECEMBER 31
(IN MILLIONS $)
Highway 407 ETR (1)
Others (2)
Total
2021
— $
620.0
620.0 $
2020
—
426.7
426.7
$
$
(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.
(2)
Includes net assets from InPower BC General Partnership classified as held for sale as at December 31, 2021.
PROJECT/MARKET LEVEL
ACCOUNTING METHODOLOGY FOR CAPITAL INVESTMENTS
The Company’s investments are accounted for either at fair value through other comprehensive income, or
through the 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 at fair value through other
comprehensive income and by the equity method, which do not reflect the line by line items of the individual
Capital investment’s financial results.
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
2021 Annual Financial Statements:
Consolidated statement of
The net book value of Capital investments accounted for by the equity method and at fair value through
financial position and related
other comprehensive income, distinctively.
notes
Non-recourse debt from Capital investments controlled by the Company.
Consolidated statement of
For Capital investments controlled by the Company:
cash flows and related notes
Repayment and increase of non-recourse debt from Capital investments.
Other notes to the audited
Net income attributable to SNC-Lavalin shareholders from Capital.
annual consolidated financial
statements
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.
The budget information is prepared by individual projects and/or prospects, or on specific markets, which will form
the primary basis for the Company’s consolidated Annual Budget.
The projects prospects/markets information is then compiled by each sector and approved by the Company’s
SECTOR LEVEL
sector management.
CONSOLIDATED LEVEL
The sector budgets are subsequently reviewed by the Company’s senior executives.
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.
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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
2021 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 method and at fair value through
other comprehensive income, 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.
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.
PROJECT/MARKET LEVEL
The budget information is prepared by individual projects and/or prospects, or on specific markets, which will form
the primary basis for the Company’s consolidated Annual Budget.
SECTOR LEVEL
The projects prospects/markets information is then compiled by each sector and approved by the Company’s
sector management.
CONSOLIDATED LEVEL
The sector budgets are subsequently reviewed by the Company’s senior executives.
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.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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Income taxes
Foreign exchange
SOURCE OF VARIATION
EXPLANATION
Restructuring and transformation
where it conducts business, modifications to its offerings and changes in market
costs, goodwill and other intangible
perspectives might result, among other factors, in restructuring and transformation
assets impairment
costs, goodwill and other intangible assets impairment, having an impact on actual
Changes made to the way the Company operates, closure of certain locations
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.
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.
Despite the continuation 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
projects. Refer to the updated risk factor entitled “Ongoing and 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.
Unforeseen impacts related to
COVID-19 pandemic
ongoing and continued duration of
and planning processes and COVID-19 particularly impacted certain infrastructure
SNC-LAVALIN
SNC-LAVALIN
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 to 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 contracts having revenue
recognized over time using the percentage of completion method results 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 and other factors, such as COVID-19.
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.
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.
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SNC-LAVALIN
SOURCE OF VARIATION
EXPLANATION
Restructuring and transformation
costs, goodwill and other intangible
assets impairment
Income taxes
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 and transformation
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.
Despite the continuation 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 “Ongoing and 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.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
SNC-LAVALIN
2021 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
EBITDA (1)
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
Net income (loss)
Diluted gain (loss) per share from continuing operations (“Diluted EPS”) (in $)
Revenues from PS&PM from continuing operations
Net income (loss) attributable to SNC-Lavalin shareholders from PS&PM
Adjusted net income (loss) attributable to SNC-Lavalin shareholders from PS&PM (1)
Diluted EPS from PS&PM (in $)
Adjusted diluted EPS from PS&PM (in $) (1)
EBIT from PS&PM (% of revenues from PS&PM)
Adjusted EBITDA from PS&PM (% of revenues from PS&PM) (1)
Financial Position & Cash Flows
Cash and cash equivalents (at December 31)
Limited recourse (at December 31)
Recourse debt (at December 31)
Net limited recourse and recourse debt to Adjusted EBITDA ratio (1)
Net cash generated from operating activities
Free cash flow (usage) (1)
Additional Indicator
Revenue backlog (at December 31)
2021
2020
CHANGE (%)
$
7,371.3
194.1
460.6
105.7
566.4
672.1
0.57
7,237.1
593.4
152.1
0.15
0.87
1.4 %
6.0 %
$ 608.4
400.0
1,094.1
1.7
134.2
(15.9)
$ 7,007.5
(292.0)
28.7
(346.9)
(609.3)
(956.3)
(2.03)
6,878.1
(1,011.0)
(188.4)
(2.29)
(1.07)
(5.1) %
1.6 %
$
932.9
400.0
1,171.0
3.2
121.5
(17.0)
5.2 %
N/A
1505.0 %
N/A
N/A
N/A
N/A
5.2 %
N/A
N/A
N/A
N/A
N/A
270.1 %
(34.8) %
— %
(6.6) %
(47.1) %
10.5 %
(6.6) %
$
12,597.0
$ 13,187.8
(4.5) %
(1) Non-IFRS financial measure or ratio or supplementary financial measure. Please refer to Section 13 for further information on these measures and for the reference to the reconciliation
from these measures to the most directly comparable measure specified under IFRS, when applicable.
The Company's financial highlights reflect the following major items:
◦
◦
Revenues in 2021 increased compared to 2020, mainly from Infrastructure EPC Projects, Infrastructure
Services and EDPM.
Net income from continuing operations totaled $105.7 million in 2021, compared to a net loss from continuing
operations of $346.9 million in 2020, mainly reflecting :
◦
◦
◦
a lower loss from Resources and Infrastructure EPC Projects, combined with a higher contribution
mainly from EDPM;
a lower level of unallocated general and administrative expenses in 2021, including the favourable
impact of cost transformation initiatives in 2021, combined with a $58.3 million negative adjustment to
the provision for the Pyrrhotite Case litigation was recognized in 2020;
the recognition, in 2020, of a negative fair value revaluation of $57.2 million of the Highway 407 ETR
contingent consideration receivable. Such contingent consideration, which 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, remained valued at $nil throughout 2021; and
◦
an income tax recovery of $22.0 million in 2021, compared to an income tax recovery of $59.0 million
in 2020.
◦
Net income from discontinued operations totaled $566.4 million in 2021, compared to a net loss from
discontinued operations of $609.3 million in 2020, mainly due to the gain on disposal of the Oil & Gas
business in 2021, while such discontinued operations were negatively impacted in 2020 by a $271.6 million
write down in the value of the disposal group presented as held for sale, combined with unfavourable
reforecasts on certain LSTK construction projects. The gain on disposal in 2021 was mainly due to the
reclassification to net income of the cumulative exchange differences on translating foreign operations upon
disposal of the Oil & Gas business.
Cash and cash equivalents of $608.4 million and revenue backlog of $12.6 billion as at December 31, 2021
as compared to cash and cash equivalents of $932.9 million and revenue backlog of $13.2 billion as at
◦
◦
December 31, 2020;
Net cash generated from operating activities of $134.2 million in 2021, compared to $121.5 million in 2020.
3.2
EXECUTIVE SUMMARY – OTHER ITEMS
COVID-19 PANDEMIC UPDATE
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. To attempt to
mitigate the spread of the pandemic, there have been extraordinary and wide-ranging actions taken by
international, federal, provincial and local public health and governmental authorities to contain and combat the
outbreak of COVID-19 around the world. These actions include quarantines and “stay-at-home” orders, social
distancing measures and travel restrictions, among others. Although from time to time there has been an easing
of restrictions in certain jurisdictions, some of these restrictions have been reinstated in other jurisdictions. In
addition, the reopening of businesses and economies in certain countries is creating a variety of new challenges,
including, for example, higher prices for goods and services, limited availability of products, disruptions to supply
chains and labour shortages.
Such higher prices for goods and services, limited availability of product and disruptions to supply chains had an
unfavourable impact mainly on the Company’s results from LSTK projects, notably in the second half of 2021. The
Company’s results from its other projects remained strong in 2021, notably in the EDPM and Nuclear segments.
Refer to the risk factor entitled “Ongoing and 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.
DISPOSAL – OIL AND GAS BUSINESS
On July 29, 2021, the Company completed the sale of a substantial portion of its Oil & Gas business and the sale
of the remaining Saudi Arabian portion of the business was completed on August 15, 2021. Refer to Note 6A to
the 2021 Annual Financial Statements for financial information relating to the disposal.
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111
SNC-LAVALIN
◦
an income tax recovery of $22.0 million in 2021, compared to an income tax recovery of $59.0 million
in 2020.
◦
◦
◦
Net income from discontinued operations totaled $566.4 million in 2021, compared to a net loss from
discontinued operations of $609.3 million in 2020, mainly due to the gain on disposal of the Oil & Gas
business in 2021, while such discontinued operations were negatively impacted in 2020 by a $271.6 million
write down in the value of the disposal group presented as held for sale, combined with unfavourable
reforecasts on certain LSTK construction projects. The gain on disposal in 2021 was mainly due to the
reclassification to net income of the cumulative exchange differences on translating foreign operations upon
disposal of the Oil & Gas business.
Cash and cash equivalents of $608.4 million and revenue backlog of $12.6 billion as at December 31, 2021
as compared to cash and cash equivalents of $932.9 million and revenue backlog of $13.2 billion as at
December 31, 2020;
Net cash generated from operating activities of $134.2 million in 2021, compared to $121.5 million in 2020.
3.2
EXECUTIVE SUMMARY – OTHER ITEMS
COVID-19 PANDEMIC UPDATE
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. To attempt to
mitigate the spread of the pandemic, there have been extraordinary and wide-ranging actions taken by
international, federal, provincial and local public health and governmental authorities to contain and combat the
outbreak of COVID-19 around the world. These actions include quarantines and “stay-at-home” orders, social
distancing measures and travel restrictions, among others. Although from time to time there has been an easing
of restrictions in certain jurisdictions, some of these restrictions have been reinstated in other jurisdictions. In
addition, the reopening of businesses and economies in certain countries is creating a variety of new challenges,
including, for example, higher prices for goods and services, limited availability of products, disruptions to supply
chains and labour shortages.
Such higher prices for goods and services, limited availability of product and disruptions to supply chains had an
unfavourable impact mainly on the Company’s results from LSTK projects, notably in the second half of 2021. The
Company’s results from its other projects remained strong in 2021, notably in the EDPM and Nuclear segments.
Refer to the risk factor entitled “Ongoing and 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.
DISPOSAL – OIL AND GAS BUSINESS
On July 29, 2021, the Company completed the sale of a substantial portion of its Oil & Gas business and the sale
of the remaining Saudi Arabian portion of the business was completed on August 15, 2021. Refer to Note 6A to
the 2021 Annual Financial Statements for financial information relating to the disposal.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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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 2021 Annual
Financial Statements prepared in accordance with IFRS for each of the three most recently completed financial
years, with the exception of the “Additional selected financial information” section below, which includes certain
non-IFRS financial measures.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
2019
Revenues:
From PS&PM
From Capital
Total Revenues
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
Net income (loss) attributable to SNC-Lavalin shareholders from
continuing operations
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 (1)
Total assets (at December 31)
Non-current financial liabilities (at December 31) (2)
Adjusted diluted EPS from PS&PM (in $) (1)
Dividends per share declared to SNC-Lavalin shareholders (in $)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
7,237.1 $
6,878.1 $
134.1
129.4
7,371.3 $
7,007.5 $
666.6 $
(965.4) $
3.80 $
3.80 $
(5.50) $
(5.50) $
7,367.1
262.7
7,629.8
328.2
1.87
1.87
27.0 $
73.2
(401.7) $
45.6
(332.0)
2,772.8
100.2 $
(356.1) $
2,440.8
0.57 $
(2.03) $
13.90
0.15 $
0.42
0.57 $
(2.29) $
0.26
(2.03) $
12,597.0 $
433.8 $
9,876.0 $
2,096.6 $
0.87 $
0.080 $
13,187.8 $
111.4 $
10,340.3 $
2,389.4 $
(1.07) $
0.080 $
(1.89)
15.79
13.90
14,137.7
485.7
11,644.7
2,378.1
0.86
0.240
While the variances between 2021 and 2020 are further described in the following sections of the MD&A, the main
variances between 2020 and 2019 are explained as follows:
Revenues in 2020 decreased when compared to 2019, mainly resulting from a decrease in Infrastructure EPC
Projects, EDPM and Resources, partially offset by an increase in Infrastructure Services.
◦
The decrease in revenues in Infrastructure EPC Projects reflected higher revenues from certain major
construction projects that 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 decrease in revenues in EDPM 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 lower level of revenues in Resources was mainly due to the run-off of LSTK construction contracts.
The increase in revenues in Infrastructure Services was 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 to 2019 were also higher for Program Management
and Construction Management services.
The net loss attributable to SNC-Lavalin shareholders was $965.4 million in 2020, compared to a net income
attributable to SNC-Lavalin shareholders of $328.2 million in 2019.
◦
The loss attributable to SNC-Lavalin shareholders in 2020 included 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. It also included 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. In addition, the 2020 results included a net loss from discontinued
operations of $609.3 million, of which $271.6 million represented the write down of the Oil & Gas business
value upon its classification as held for sale.
◦
The net income attributable to SNC-Lavalin shareholders in 2019 included a gain of $3.0 billion before
taxes from the disposal by the Company of 10.01% of the shares of Highway 407 ETR and also included
an impairment of goodwill and intangible assets related to Resources of $1.9 billion before taxes.
(1) 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.
(2) Non-current financial liabilities include long-term debt (Recourse, Limited recourse and Non-recourse), Other non-current financial liabilities, and the Non-current portion of lease liabilities.
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While the variances between 2021 and 2020 are further described in the following sections of the MD&A, the main
variances between 2020 and 2019 are explained as follows:
Revenues in 2020 decreased when compared to 2019, mainly resulting from a decrease in Infrastructure EPC
Projects, EDPM and Resources, partially offset by an increase in Infrastructure Services.
◦
◦
◦
◦
The decrease in revenues in Infrastructure EPC Projects reflected higher revenues from certain major
construction projects that 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 decrease in revenues in EDPM 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 lower level of revenues in Resources was mainly due to the run-off of LSTK construction contracts.
The increase in revenues in Infrastructure Services was 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 to 2019 were also higher for Program Management
and Construction Management services.
The net loss attributable to SNC-Lavalin shareholders was $965.4 million in 2020, compared to a net income
attributable to SNC-Lavalin shareholders of $328.2 million in 2019.
◦
◦
The loss attributable to SNC-Lavalin shareholders in 2020 included 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. It also included 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. In addition, the 2020 results included a net loss from discontinued
operations of $609.3 million, of which $271.6 million represented the write down of the Oil & Gas business
value upon its classification as held for sale.
The net income attributable to SNC-Lavalin shareholders in 2019 included a gain of $3.0 billion before
taxes from the disposal by the Company of 10.01% of the shares of Highway 407 ETR and also included
an impairment of goodwill and intangible assets related to Resources of $1.9 billion before taxes.
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4.2
INCOME STATEMENT
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Continuing operations
Revenues
Segment Adjusted EBIT - Total
Corporate selling, general and administrative expenses
Impairment loss from expected credit losses
Loss (gain) arising on financial instruments at fair value through profit or loss
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
Loss on disposals of PS&PM businesses
Impairment loss (reversal of impairment loss) on remeasurement of assets of disposal group classified
as held for sale to fair value less cost to sell
Earnings before interest and taxes (EBIT)
Net financial expenses
Earnings (loss) before income taxes from continuing operations
Income tax recovery
Net income (loss) from continuing operations
Net income (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 income (loss) attributable to SNC-Lavalin shareholders from PS&PM
Diluted EPS from PS&PM (in $)
Adjusted EBITDA from PS&PM (1)
Adjusted diluted EPS from PS&PM (in $) (1)
2021
2020
7,371.3 $
7,007.5
489.3 $
145.1 $
—
(3.7)
70.1
89.5
(5.0)
0.6
(1.3)
125.3
175.9
0.9
61.9
63.3
126.8
(25.0)
7.5
6.1
194.1 $
(292.0)
110.5 $
114.0
83.6 $
(22.0) $
105.7 $
566.4
672.1 $
666.6 $
5.5
672.1 $
(406.0)
(59.0)
(346.9)
(609.3)
(956.3)
(965.4)
9.2
(956.3)
0.57 $
0.57 $
(2.03)
(2.03)
27.0 $
0.15 $
433.8 $
0.87 $
(401.7)
(2.29)
111.4
(1.07)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(1) Non-IFRS financial measure. Please refer to Section 13 for further information on this measure and for the reference to the reconciliation from this measure to the most directly
comparable measure specified under IFRS, when applicable.
4.2.1 ANALYSIS OF REVENUES
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
Total
and EDPM.
2021
2020
CHANGE (%)
$
3,848.8 $
3,721.1
904.7
1,416.6
6,170.0 $
171.8 $
895.3
1,067.1 $
928.6
1,325.3
5,975.0
162.9
740.2
903.1
7,237.1 $
6,878.1
134.1 $
129.4
7,371.3 $
7,007.5
$
$
$
$
$
$
3.4%
(2.6%)
6.9 %
3.3 %
5.4 %
21.0 %
18.2 %
5.2 %
3.7 %
5.2 %
Revenues in 2021 increased compared to 2020, mainly from Infrastructure EPC Projects, Infrastructure Services
Revenues from Infrastructure EPC Projects increased as the work performed in 2021 in the continuing run-off of
LSTK backlog reflects higher progress compared to 2020.
Revenues from Infrastructure Services were higher mainly due to higher engineering services related to hydro
power projects, Program Management services and growth in Linxon and included an unfavourable impact from
the change in foreign exchange rates year-over-year, mainly from the variation of the U.S. dollar compared to the
Canadian dollar.
Revenues from EDPM increased driven primarily by strong volumes in the United Kingdom, offset by reduced
revenues in the Middle East and the United States, partly due to an unfavourable foreign exchange variance.
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4.2.1 ANALYSIS OF REVENUES
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
Total
2021
2020
CHANGE (%)
$
3,848.8 $
3,721.1
904.7
1,416.6
6,170.0 $
171.8 $
895.3
1,067.1 $
7,237.1 $
134.1 $
928.6
1,325.3
5,975.0
162.9
740.2
903.1
6,878.1
129.4
7,371.3 $
7,007.5
$
$
$
$
$
$
3.4%
(2.6%)
6.9 %
3.3 %
5.4 %
21.0 %
18.2 %
5.2 %
3.7 %
5.2 %
Revenues in 2021 increased compared to 2020, mainly from Infrastructure EPC Projects, Infrastructure Services
and EDPM.
Revenues from Infrastructure EPC Projects increased as the work performed in 2021 in the continuing run-off of
LSTK backlog reflects higher progress compared to 2020.
Revenues from Infrastructure Services were higher mainly due to higher engineering services related to hydro
power projects, Program Management services and growth in Linxon and included an unfavourable impact from
the change in foreign exchange rates year-over-year, mainly from the variation of the U.S. dollar compared to the
Canadian dollar.
Revenues from EDPM increased driven primarily by strong volumes in the United Kingdom, offset by reduced
revenues in the Middle East and the United States, partly due to an unfavourable foreign exchange variance.
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4.2.2 ANALYSIS OF CONSOLIDATED NET INCOME, EBIT AND EBITDA
4.2.2.1 NET INCOME (LOSS) FROM CONTINUING OPERATIONS ANALYSIS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Net income (loss) from continuing operations attributable to SNC-Lavalin shareholders:
From PS&PM
From Capital
Net income (loss) from continuing operations attributable to SNC-Lavalin shareholders
Non-controlling interests
Net income (loss) from continuing operations
NET INCOME (LOSS) FROM PS&PM
2021
2020
held for sale as at December 31, 2020 and its related remeasurement.
$
$
$
27.0 $
73.2
100.2 $
5.5
105.7 $
(401.7)
45.6
(356.1)
9.2
(346.9)
Net income attributable to SNC-Lavalin shareholders from continuing operations from PS&PM was
$27.0 million in 2021, compared to a net loss attributable to SNC-Lavalin shareholders from continuing
operations from PS&PM of $401.7 million in 2020. The variance was mainly due to a lower loss from Resources
and Infrastructure EPC Projects, combined with a higher contribution mainly from EDPM, combined with a lower
level of amortization of intangible assets related to business combination, lower corporate general and
administrative expenses, partially offset by a lower income tax recovery in 2021 compared to 2020.
NET INCOME FROM CAPITAL
Net income attributable to SNC-Lavalin shareholders from continuing operations from Capital amounted
to $73.2 million in 2021, compared to a net income attributable to SNC-Lavalin shareholders from continuing
operations from Capital of $45.6 million in 2020. The variance was mainly due to a negative fair value revaluation
in 2020 of $57.2 million of the Highway 407 ETR contingent consideration receivable, partially offset by the
release in full of a $25.0 million provision for contingent indemnification in 2020 (each of which was absent in
2021).
4.2.2.2 NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
The Oil & Gas business was previously presented as part of the Resources segment and is now presented as
discontinued operations.
The table below presents the main components of the net income (loss) from discontinued operations for both
2021 and 2020:
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Contribution from discontinued operations, before items listed below (1)
Restructuring costs
Reversal of impairment loss (impairment loss) on remeasurement of assets of disposal group classified
$
as held for sale to fair value less cost to sell
2021
(41.0) $
(17.5)
4.9
2020
(222.9)
(57.8)
(271.6)
Restructuring costs related to discontinued operations were $17.5 million in 2021, compared to
$57.8 million in 2020, mainly related to the closure of the Valerus operations.
The $271.6 million impairment loss on remeasurement of assets of disposal group classified as held for sale to
fair value less cost to sell in 2020 resulted from the initial presentation of the Company’s Oil & Gas business as
The gain on disposal of the Company’s Oil & Gas business of $573.0 million in 2021 was mainly due to the
reclassification of the cumulative balance of exchange differences on translating foreign operations from equity to
the income statement upon the completion of the disposal in the third quarter of 2021.
The gain on disposal of a PS&PM business relates to the disposal of South African activities in 2020.
Net financial expenses in 2021 were in line with 2020.
The income tax recovery in 2021 mainly resulted from revised estimates on the income tax liabilities related to
the discontinued operations. 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.
4.2.2.3 CONSOLIDATED EBIT, EBITDA AND ADJUSTED EBITDA ANALYSIS
EBITDA is a non-IFRS financial measure. EBITDA is defined and reconciled to net income in Section 13.
In 2021, EBIT was $194.1 million, compared to negative $292.0 million in 2020. The increase in EBIT was
primarily due to a lower loss from Resources and Infrastructure EPC Projects, combined with a higher contribution
mainly from EDPM, combined with a lower level of amortization of intangible assets related to business
combination, lower corporate general and administrative expenses and the impact in 2020 of the negative fair
value revaluation of the Highway 407 ETR contingent consideration receivable related to the partial disposal of
this investment in August 2019.
EBITDA was $460.6 million in 2021, compared to $28.7 million in 2020, mainly due to the factors described
above for EBIT other than the decrease in amortization of intangible assets related to business combinations.
When adjusting for the charges related to restructuring and transformation costs, the adjustments on gain on
disposals of Capital investments, the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the loss (gain) on disposal of PS&PM businesses, the GMP Equalization, the adjustment to the
provision for the Pyrrhotite Case litigation and the impairment loss (reversal of impairment loss) on
remeasurement of assets of disposal group classified as held for sale to fair value less cost to sell, Adjusted
EBITDA, a non-IFRS measure described at Section 13.4.2, amounted to $525.0 million in 2021, compared to
$200.1 million in 2020. When excluding results from Capital, Adjusted EBITDA from PS&PM, also a non-IFRS
measure described at Section 13.4.2 (within the definition of Adjusted EBITDA), amounted to $433.8 million in
2021, compared to $111.4 million in 2020.
Gain on disposal of Oil & Gas business before income taxes
Gain on disposal of a PS&PM business
Net financial expenses (1)
Income taxes
Net income (loss) from discontinued operations
—
6.2
(0.3)
(63.0)
(609.3)
(1) Comparative figures have been re-presented for 2020 to reflect a change made to the Company’s presentation of net financial expenses in 2021, now presented separately from
573.0
—
(0.2)
47.2
566.4 $
$
contribution from discontinued operations, before items listed below.
The $41.0 million loss from the Oil & Gas business in 2021 presented above included the favourable outcome
from a claim on a legacy LSTK construction project, which was more than offset by unfavourable reforecasts on
certain projects. The $222.9 million loss in 2020 presented above was negatively impacted 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 unfavourable ruling on a completed LSTK legacy project.
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Restructuring costs related to discontinued operations were $17.5 million in 2021, compared to
$57.8 million in 2020, mainly related to the closure of the Valerus operations.
The $271.6 million impairment loss on remeasurement of assets of disposal group classified as held for sale to
fair value less cost to sell in 2020 resulted from the initial presentation of the Company’s Oil & Gas business as
held for sale as at December 31, 2020 and its related remeasurement.
The gain on disposal of the Company’s Oil & Gas business of $573.0 million in 2021 was mainly due to the
reclassification of the cumulative balance of exchange differences on translating foreign operations from equity to
the income statement upon the completion of the disposal in the third quarter of 2021.
The gain on disposal of a PS&PM business relates to the disposal of South African activities in 2020.
Net financial expenses in 2021 were in line with 2020.
The income tax recovery in 2021 mainly resulted from revised estimates on the income tax liabilities related to
the discontinued operations. 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.
4.2.2.3 CONSOLIDATED EBIT, EBITDA AND ADJUSTED EBITDA ANALYSIS
EBITDA is a non-IFRS financial measure. EBITDA is defined and reconciled to net income in Section 13.
In 2021, EBIT was $194.1 million, compared to negative $292.0 million in 2020. The increase in EBIT was
primarily due to a lower loss from Resources and Infrastructure EPC Projects, combined with a higher contribution
mainly from EDPM, combined with a lower level of amortization of intangible assets related to business
combination, lower corporate general and administrative expenses and the impact in 2020 of the negative fair
value revaluation of the Highway 407 ETR contingent consideration receivable related to the partial disposal of
this investment in August 2019.
EBITDA was $460.6 million in 2021, compared to $28.7 million in 2020, mainly due to the factors described
above for EBIT other than the decrease in amortization of intangible assets related to business combinations.
When adjusting for the charges related to restructuring and transformation costs, the adjustments on gain on
disposals of Capital investments, the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the loss (gain) on disposal of PS&PM businesses, the GMP Equalization, the adjustment to the
provision for the Pyrrhotite Case litigation and the impairment loss (reversal of impairment loss) on
remeasurement of assets of disposal group classified as held for sale to fair value less cost to sell, Adjusted
EBITDA, a non-IFRS measure described at Section 13.4.2, amounted to $525.0 million in 2021, compared to
$200.1 million in 2020. When excluding results from Capital, Adjusted EBITDA from PS&PM, also a non-IFRS
measure described at Section 13.4.2 (within the definition of Adjusted EBITDA), amounted to $433.8 million in
2021, compared to $111.4 million in 2020.
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4.2.3 ANALYSIS OF OTHER LINE ITEMS IN THE INCOME STATEMENT
4.2.3.4 AMORTIZATION OF INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
4.2.3.1 CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ANALYSIS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Corporate selling, general and
administrative expenses
2021
2020
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$
116.9 $
28.2 $
145.1 $
147.7 $
28.2 $
175.9
Corporate selling, general and administrative expenses totaled $145.1 million in 2021, compared to
$175.9 million in 2020. The decrease was mainly due to a $58.3 million negative adjustment to the provision for
the Pyrrhotite Case litigation in 2020 (such litigation being described in Note 33 to the 2021 Annual Financial
Statements) combined with the favourable impact of cost transformation initiatives in 2021, partially offset by an
increase of certain insurance provisions and digital initiatives.
4.2.3.2 LOSS (GAIN) ARISING ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH
PROFIT OR LOSS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Loss (gain) arising on financial instruments at fair value through profit or loss
$
2021
(3.7) $
2020
61.9
The gain arising on financial instruments at fair value through profit or loss amounted to $3.7 million in
2021, compared to a loss of $61.9 million in 2020, which was mainly due to a $57.2 million negative fair value
revaluation in 2020 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 in 2020 mainly by the
actual and expected performance impacts on traffic volumes as a result of COVID-19, and the resulting impact on
Highway 407 ETR. The underlying contingent consideration payments are conditioned on the attainment of
certain cumulative financial thresholds related to the performance of Highway 407 ETR.
4.2.3.3 RESTRUCTURING AND TRANSFORMATION COSTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Restructuring costs
Transformation costs
Restructuring and transformation costs
$
$
2021
49.2 $
20.9
70.1 $
2020
63.3
—
63.3
The Company incurred $70.1 million of restructuring and transformation costs in 2021 (2020: $63.3
million).
The restructuring costs recognized in 2021 were mainly related to actions taken in the EDPM and Nuclear
segments, partly for severances, and also included $25.2 million of non-cash charges, notably $16.9 million of
impairment of right-of-use assets, mainly related to real estate, and $8.3 million of impairment of property and
equipment.
The restructuring cost recognized in 2020 included mainly actions taken during the year to adjust the cost base of
the Company’s segments, notably in the Middle East and United Kingdom regions of the EDPM segment, as a
result of the impact of COVID-19 on the current and forecasted business activity levels. The Company incurred
$63.3 million of restructuring costs in 2020, which 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 $20.9 million of transformation costs under transformation initiatives that took
place in 2021 (2020: $nil).
Amortization of intangible assets related to business combinations
$
89.5 $
2021
2020
126.8
Amortization of intangible assets related to business combinations amounted to $89.5 million in 2021 and
to $126.8 million in 2020, both mainly attributable to the amortization expense of intangible assets related to
Atkins, which was acquired in 2017. The variance 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.
4.2.3.5 ADJUSTMENTS ON GAIN ON DISPOSALS OF CAPITAL INVESTMENTS AND LOSS ON
DISPOSALS OF PS&PM BUSINESSES
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Adjustments on gain on disposals of Capital investments
Loss on disposals of PS&PM businesses
$
$
2021
(5.0) $
0.6 $
2020
(25.0)
7.5
In the fourth quarter of 2021, the Company received a contingent consideration of $5.0 million related to the
previous disposal of a Capital investment accounted for by the equity method.
At the beginning of 2021, the Company entered into an agreement to sell its ownership interest in Atkins
Consulting Engineers Limited, which was part of the EDPM segment. On July 16, 2021, SNC-Lavalin completed
the sale of its ownership of 100% in Atkins Consulting Engineers Limited in Kenya. The loss on disposal of SNC-
Lavalin’s ownership interest in this subsidiary amounted to $0.6 million.
In the fourth quarter of 2020, the Company released in full a provision of $25.0 million representing a non-cash
reversal for contingent indemnification related to the previous disposal of a Capital investment accounted for
under the consolidation method upon expiry of the indemnification period.
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.
4.2.3.6 NET FINANCIAL EXPENSES
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
2021
2020
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
$
(4.5) $
(0.3) $
(4.8) $
(10.9) $
(0.4) $
35.3
15.8
3.7
1.4
17.9
24.3
—
—
16.7
—
0.1
—
35.3
15.8
20.4
1.4
18.0
24.3
46.0
17.2
4.6
—
21.2
19.7
—
—
16.0
0.6
—
0.1
TOTAL
(11.3)
46.0
17.2
20.6
0.6
21.2
19.8
Net financial expenses
$
93.9 $
16.6 $
110.5 $
97.7 $
16.3 $
114.0
Net financial expenses from PS&PM amounted to $93.9 million in 2021, compared to $97.7 million in 2020,
mainly due to the lower level of interest expense.
Net financial expenses from Capital were $16.6 million in 2021, in line with 2020.
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4.2.3.4 AMORTIZATION OF INTANGIBLE ASSETS RELATED TO BUSINESS COMBINATIONS
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2021
Amortization of intangible assets related to business combinations
$
89.5 $
2020
126.8
Amortization of intangible assets related to business combinations amounted to $89.5 million in 2021 and
to $126.8 million in 2020, both mainly attributable to the amortization expense of intangible assets related to
Atkins, which was acquired in 2017. The variance 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.
4.2.3.5 ADJUSTMENTS ON GAIN ON DISPOSALS OF CAPITAL INVESTMENTS AND LOSS ON
DISPOSALS OF PS&PM BUSINESSES
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Adjustments on gain on disposals of Capital investments
Loss on disposals of PS&PM businesses
$
$
2021
(5.0) $
0.6 $
2020
(25.0)
7.5
In the fourth quarter of 2021, the Company received a contingent consideration of $5.0 million related to the
previous disposal of a Capital investment accounted for by the equity method.
At the beginning of 2021, the Company entered into an agreement to sell its ownership interest in Atkins
Consulting Engineers Limited, which was part of the EDPM segment. On July 16, 2021, SNC-Lavalin completed
the sale of its ownership of 100% in Atkins Consulting Engineers Limited in Kenya. The loss on disposal of SNC-
Lavalin’s ownership interest in this subsidiary amounted to $0.6 million.
In the fourth quarter of 2020, the Company released in full a provision of $25.0 million representing a non-cash
reversal for contingent indemnification related to the previous disposal of a Capital investment accounted for
under the consolidation method upon expiry of the indemnification period.
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.
4.2.3.6 NET FINANCIAL EXPENSES
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
Net financial expenses
$
2021
2020
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
$
(4.5) $
(0.3) $
(4.8) $
(10.9) $
(0.4) $
35.3
15.8
3.7
1.4
17.9
24.3
93.9 $
—
—
16.7
—
0.1
—
35.3
15.8
20.4
1.4
18.0
24.3
16.6 $
110.5 $
46.0
17.2
4.6
—
21.2
19.7
97.7 $
—
—
16.0
0.6
—
0.1
16.3 $
TOTAL
(11.3)
46.0
17.2
20.6
0.6
21.2
19.8
114.0
Net financial expenses from PS&PM amounted to $93.9 million in 2021, compared to $97.7 million in 2020,
mainly due to the lower level of interest expense.
Net financial expenses from Capital were $16.6 million in 2021, in line with 2020.
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4.2.3.7 INCOME TAXES ANALYSIS
4.2.4 ANALYSIS OF SEGMENT RESULTS AND PERFORMANCE
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Earnings (loss) from continuing
operations before income taxes
2021
2020
FROM PS&PM
FROM CAPITAL
TOTAL
FROM PS&PM
FROM CAPITAL
TOTAL
$
4.1
$
79.6
$
83.6
$
(445.9)
$
40.0
$
(406.0)
Income tax expense (recovery)
Effective income tax rate (%)
$
(28.4)
(694.3) %
$
$
6.4
8.0 %
(22.0)
(26.3) %
$
$
(53.4)
12.0 %
$
(5.6)
(14.0) %
(59.0)
14.5 %
In 2021, the Company reported an income tax recovery of $22.0 million, compared to an income tax recovery
of $59.0 million in 2020.
In 2021, the effective income tax rate from PS&PM was lower than the Canadian statutory income tax rate
of 26.2%, mainly due to the geographic mix of earnings, net income not affected by tax and revised estimates on
certain income tax liabilities, partially offset with a $19.0 million reduction of previously recognized deferred
income tax assets resulting from a re-assessment of the future recoverability of loss carryforwards in the United
States and other permanent items.
In 2020, the effective income tax rate from PS&PM was lower than the Canadian statutory income tax rate of
26.3%, mainly due to a $53.3 million reduction of previously recognized deferred income tax assets resulting from
a re-assessment of the future recoverability of 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.
The effective income tax rate from Capital Investments was lower than the Canadian statutory income tax
rate of 26.2% in 2021, mainly due to the non-taxable portion of investment income, partially offset by a tax liability
on the distribution from a Capital investment.
In 2020, the Company reported an income tax recovery from Capital, mainly due to the non-taxable portion of the
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 by the non-deductible portion of the capital loss on the
negative fair value revaluation for the Highway 407 ETR contingent consideration receivable.
4.2.4.1 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 (1)
Backlog at year end
Booking-to-revenue ratio (1)
2021
2020
CHANGE (%)
$ 3,848.8
$ 3,721.1
$
431.8
$
302.3
3.4%
42.9%
$
514.3
$
400.9
$ 3,137.8
$ 2,864.4
1.07
1.06
28.3%
9.5%
Segment Adjusted EBIT to revenues ratio from EDPM (%)
11.2 %
8.1 %
(1) Non-IFRS financial measure or ratio. 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.
EDPM revenues were $3,848.8 million in 2021, compared to $3,721.1 million in 2020, a 3.4% increase. This
growth was driven primarily by strong volumes in the United Kingdom, offset by reduced revenues in the Middle
East and the United States, partly due to an unfavourable foreign exchange variance mainly from the
unfavourable variation of the US dollar compared to the Canadian dollar, as reflected by an organic revenue
growth (a non-IFRS measure described at Section 13) of 6.0% for the EDPM segment in 2021. Work winning
performance was strong throughout the year with the backlog increasing by 9.5% to $3,137.8 million.
The major revenue contributors in 2021 included work in the United Kingdom as a result of a higher volume of
rail, defence and infrastructure projects as the United Kingdom Government maintained spending on critical
infrastructure.
In the United States and Canada, ongoing major projects contributed to steady revenue during 2021, notably the
Purple Line light rail project in Maryland and the Federal Emergency Management Agency (FEMA) hurricane relief
work in the United States and the Réseau Express Métropolitain ("REM") in Canada.
Segment Adjusted EBIT from EDPM increased to $431.8 million (Segment Adjusted EBITDA of
$514.3 million) in 2021, compared to a Segment Adjusted EBIT of $302.3 million (Segment Adjusted EBITDA of
$400.9 million) in 2020. The increase reflected strong year on year performance across the United Kingdom and
the United States, as well as $93.0 million favourable outcome in the fourth quarter of 2021 from a confirmed
arbitration decision related to unpaid additional services performed on a completed contract in the Middle East,
combined with the favourable impact of settling a number of other project final accounts.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
expenses, of which $19.3 million in 2021 (2020: $40.3 million) were incurred in connection with the EDPM
segment.
OTHER KEY PERFORMANCE INDICATOR
AS AT
(IN NUMBER OF DAYS)
DSO for the EDPM segment (1)
(1) 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.
As at December 31, 2021, EDPM segment’s DSO stood at 53 days, compared to 64 days as at
December 31, 2020. The improvement is mainly due to accelerated cash receipts from reduced government
payment terms, largely in the United Kingdom. The DSO is expected to increase in 2022, as the situation
normalizes during that period.
DECEMBER 31, 2021
DECEMBER 31, 2020
53 days
64 days
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4.2.4 ANALYSIS OF SEGMENT RESULTS AND PERFORMANCE
4.2.4.1 EDPM
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from EDPM
Segment Adjusted EBIT from EDPM
2021
2020
CHANGE (%)
$ 3,848.8
431.8
$
$ 3,721.1
302.3
$
3.4%
42.9%
Segment Adjusted EBIT to revenues ratio from EDPM (%)
11.2 %
8.1 %
Additional information
Segment Adjusted EBITDA from EDPM (1)
Backlog at year end
Booking-to-revenue ratio (1)
$
514.3
$ 3,137.8
1.07
$
400.9
$ 2,864.4
1.06
28.3%
9.5%
(1) Non-IFRS financial measure or ratio. 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.
EDPM revenues were $3,848.8 million in 2021, compared to $3,721.1 million in 2020, a 3.4% increase. This
growth was driven primarily by strong volumes in the United Kingdom, offset by reduced revenues in the Middle
East and the United States, partly due to an unfavourable foreign exchange variance mainly from the
unfavourable variation of the US dollar compared to the Canadian dollar, as reflected by an organic revenue
growth (a non-IFRS measure described at Section 13) of 6.0% for the EDPM segment in 2021. Work winning
performance was strong throughout the year with the backlog increasing by 9.5% to $3,137.8 million.
The major revenue contributors in 2021 included work in the United Kingdom as a result of a higher volume of
rail, defence and infrastructure projects as the United Kingdom Government maintained spending on critical
infrastructure.
In the United States and Canada, ongoing major projects contributed to steady revenue during 2021, notably the
Purple Line light rail project in Maryland and the Federal Emergency Management Agency (FEMA) hurricane relief
work in the United States and the Réseau Express Métropolitain ("REM") in Canada.
Segment Adjusted EBIT from EDPM increased to $431.8 million (Segment Adjusted EBITDA of
$514.3 million) in 2021, compared to a Segment Adjusted EBIT of $302.3 million (Segment Adjusted EBITDA of
$400.9 million) in 2020. The increase reflected strong year on year performance across the United Kingdom and
the United States, as well as $93.0 million favourable outcome in the fourth quarter of 2021 from a confirmed
arbitration decision related to unpaid additional services performed on a completed contract in the Middle East,
combined with the favourable impact of settling a number of other project final accounts.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
expenses, of which $19.3 million in 2021 (2020: $40.3 million) were incurred in connection with the EDPM
segment.
OTHER KEY PERFORMANCE INDICATOR
AS AT
(IN NUMBER OF DAYS)
DSO for the EDPM segment (1)
DECEMBER 31, 2021
DECEMBER 31, 2020
53 days
64 days
(1) 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.
As at December 31, 2021, EDPM segment’s DSO stood at 53 days, compared to 64 days as at
December 31, 2020. The improvement is mainly due to accelerated cash receipts from reduced government
payment terms, largely in the United Kingdom. The DSO is expected to increase in 2022, as the situation
normalizes during that period.
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4.2.4.2 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 (1)
Backlog at year end
Booking-to-revenue ratio (1)
2021
2020
CHANGE (%)
YEARS ENDED DECEMBER 31
2021
2020
CHANGE (%)
$
$
904.7
135.9
$
$
15.0%
928.6
140.1
15.1 %
$
$
147.9
834.9
0.94
$
$
153.9
890.6
0.71
(2.6%)
(3.0%)
(3.9%)
(6.3%)
SNC-LAVALIN
4.2.4.3 INFRASTRUCTURE SERVICES
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues from Infrastructure Services
Segment Adjusted EBIT from Infrastructure Services
Segment Adjusted EBIT to revenues ratio from Infrastructure Services (%)
Additional information
Segment Adjusted EBITDA from Infrastructure Services (1)
Backlog at year end
Booking-to-revenue ratio (1)
$ 1,416.6
$ 1,325.3
$
92.7
$
97.2
6.5%
7.3%
$ 103.0
$ 108.3
$ 6,972.5
$ 7,098.5
0.91
0.82
6.9%
(4.6%)
(5.0%)
(1.8%)
(1) Non-IFRS financial measure or ratio. 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.
Nuclear revenues amounted to $904.7 million in 2021, compared to $928.6 million in 2020, a 2.6% decrease.
This was primarily due to higher volume in the United States and Europe, more than offset by a decreased
volume in Canada and Asia and included an unfavourable impact from the change in foreign exchange rates year-
over-year, mainly from the variation of the U.S. dollar compared to the Canadian dollar, with an organic revenue
contraction of 0.7% for the Nuclear segment in 2021.
(1) Non-IFRS financial measure or ratio. 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.
Infrastructure Services revenues were $1,416.6 million in 2021, compared to $1,325.3 million in 2020, a 6.9%
increase. This was mainly due to higher engineering services related to hydro power projects, Program
Management services and growth in Linxon and included an unfavourable impact from the change in foreign
exchange rates year-over-year, mainly from the variation of the U.S. dollar compared to the Canadian dollar, with
an organic revenue growth of 8.6% for the Infrastructure Services segment in 2021.
The major revenue contributors in 2021 are reactor support and life extensions (53%), decommissioning and
waste management (37%) and new builds (10%).
The major revenue contributors in 2021 were O&M contracts, Program Management and Power & Industrial
services, as well as power substation projects from Linxon.
In 2021, Segment Adjusted EBIT from Nuclear decreased to $135.9 million (Segment Adjusted EBITDA of
$147.9 million), compared to $140.1 million (Segment Adjusted EBITDA of $153.9 million) in 2020, mainly due to
a lower contribution from Asia resulting from lower volume, partially offset by a higher contribution from North
America.
It should be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before restructuring
expenses, of which $6.6 million in 2021 (2020: $nil) were incurred in connection with the Nuclear segment.
In 2021, Segment Adjusted EBIT from Infrastructure Services decreased to $92.7 million (Segment
Adjusted EBITDA of $103.0 million), compared to $97.2 million (Segment Adjusted EBITDA of $108.3 million) in
2020, resulting mainly from a lower margin in Linxon.
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4.2.4.3 INFRASTRUCTURE SERVICES
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
CHANGE (%)
Revenues from Infrastructure Services
Segment Adjusted EBIT from Infrastructure Services
Segment Adjusted EBIT to revenues ratio from Infrastructure Services (%)
$ 1,416.6
92.7
$
$ 1,325.3
97.2
$
6.5%
7.3%
Additional information
Segment Adjusted EBITDA from Infrastructure Services (1)
Backlog at year end
Booking-to-revenue ratio (1)
$ 103.0
$ 108.3
$ 6,972.5
$ 7,098.5
0.91
0.82
6.9%
(4.6%)
(5.0%)
(1.8%)
(1) Non-IFRS financial measure or ratio. 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.
Infrastructure Services revenues were $1,416.6 million in 2021, compared to $1,325.3 million in 2020, a 6.9%
increase. This was mainly due to higher engineering services related to hydro power projects, Program
Management services and growth in Linxon and included an unfavourable impact from the change in foreign
exchange rates year-over-year, mainly from the variation of the U.S. dollar compared to the Canadian dollar, with
an organic revenue growth of 8.6% for the Infrastructure Services segment in 2021.
The major revenue contributors in 2021 were O&M contracts, Program Management and Power & Industrial
services, as well as power substation projects from Linxon.
In 2021, Segment Adjusted EBIT from Infrastructure Services decreased to $92.7 million (Segment
Adjusted EBITDA of $103.0 million), compared to $97.2 million (Segment Adjusted EBITDA of $108.3 million) in
2020, resulting mainly from a lower margin in Linxon.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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4.2.4.4 RESOURCES
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
CHANGE (%)
Revenues from Resources
Segment Adjusted EBIT from Resources
Segment Adjusted EBIT to revenues ratio from Resources (%)
Additional information
Segment Adjusted EBITDA from Resources (1)
Backlog at year end
Booking-to-revenue ratio (1)
$
$
$
$
171.8
(39.4)
(23.0%)
162.9
(171.1)
(105.0%)
$
$
(29.2)
139.9
0.87
$
$
(159.1)
161.6
0.41
5.4%
(77.0%)
(81.7%)
(13.4%)
(1) Non-IFRS financial measure or ratio. 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.
Resources revenues were $171.8 million in 2021 compared to $162.9 million in 2020. Excluding an
unfavourable revenue adjustment for an LSTK construction contract in the Middle East in the second quarter of
2020, revenues decreased year-over-year mainly due to the run-off of LSTK construction contracts and the
disposal of the Company's Belgium activities in the third quarter of 2020.
The major revenue contributors in 2021 included the engineering, procurement and overall project
management of mining projects in the United States and Latin America, revenue derived from in-year mining
service contracts in North America, as well as an LSTK project for the construction of an ammonia plant in the
Middle East.
Segment Adjusted EBIT from Resources was negative $39.4 million (negative Segment Adjusted EBITDA
of $29.2 million) in 2021, compared to a negative Segment Adjusted EBIT of $171.1 million (negative Segment
Adjusted EBITDA of $159.1 million) in 2020. Excluding a $70 million charge related to client disputes on a Middle
East LSTK project in the second quarter of 2020, the increase in Segment Adjusted EBIT was driven by a higher
contribution from mining services activities and reduced negative impacts from LSTK projects being run-off. It
should be noted that the results of Resources in 2021 were negatively impacted by the unfavourable effect of
COVID-19 and commissioning challenges on the last remaining LSTK project.
It should also be noted that Segment Adjusted EBIT and Segment Adjusted EBITDA are presented before
restructuring costs, of which $nil in 2021 (2020: $0.3 million) were incurred in connection with the Resources
segment. Please refer to Section 4.2.3.3 for further details of such restructuring costs. The Segment Adjusted
EBIT and Segment Adjusted EBITDA of Resources also exclude a loss on disposal of SNC-Lavalin SA (Belgium)
completed in 2020. Please refer to Section 4.2.3.5 for further details.
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4.2.4.5 INFRASTRUCTURE EPC PROJECTS
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
CHANGE (%)
Revenues from Infrastructure EPC Projects
Segment Adjusted EBIT from Infrastructure EPC Projects
$ 895.3
$ (250.9)
$ 740.2
$ (359.7)
21.0%
(30.2%)
Segment Adjusted EBIT to revenues ratio from Infrastructure EPC Projects (%)
(28.0%)
(48.6%)
Additional information
Segment Adjusted EBITDA from Infrastructure EPC Projects (1)
Backlog at year end
$ (233.7)
$ (342.1)
$ 1,365.3
$ 2,014.0
(31.7%)
(32.2%)
(1) Non-IFRS financial measure or ratio. 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.
Infrastructure EPC Projects revenues were $895.3 million in 2021, compared to $740.2 million in 2020, as the
work performed in 2021 in the continuing run-off of LSTK backlog reflects higher progress compared to 2020.
The major revenue contributors in 2021 included multiple projects for mass transit systems infrastructure
projects in Central and Eastern Canada.
In 2021, Segment Adjusted EBIT from Infrastructure EPC Projects was negative $250.9 million (negative
Segment Adjusted EBITDA of $233.7 million), compared to a negative Segment Adjusted EBIT of
$359.7 million (negative Segment Adjusted EBITDA of $342.1 million) in 2020. The negative Segment Adjusted
EBIT in 2021 was mainly due to unfavourable cost reforecasts, primarily driven by COVID-19, supply chain
disruptions and inflation, causing project productivity losses, delays and cost increases on the last remaining
LSTK projects. Productivity impacts due to COVID-19 increased significantly with the Omicron variant, including
materially higher workforce absenteeism levels on some projects for periods of time. In addition, delays on certain
equipment deliveries and significant increases in inflation impacted direct labour, materials and other costs across
the projects. The impact of these were higher than foreseen by the Company in previous periods, and as a result,
the forecasted costs to complete the LSTK projects had to be increased. 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.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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4.2.4.6 CAPITAL
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
$
$
$
2021
134.1 $
40.6 $
78.7
119.3 $
2020
129.4
38.0
78.6
116.6
(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 2021 amounted to $134.1 million, compared to $129.4 million in 2020. The increase
in revenues for 2021 included a higher level of dividend from Highway 407 ETR, for which $40.6 million of
dividends were received in 2021 compared to $38.0 million of dividends received in 2020.
Segment Adjusted EBIT from Capital increased to $119.3 million in 2021, compared to $116.6 million in 2020.
The increase in Segment Adjusted EBIT was mainly due to the increase in revenues outlined above.
It should be noted that Segment Adjusted EBIT excludes $5.0 million of adjustments in 2021 on gain on disposals
of Capital investment accounted for by the equity method and 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 by
the consolidation method upon expiry of the indemnification period (refer to Section 4.2.3.5). It also excludes the
$57.2 million loss in 2020 arising from the negative fair value revaluation of the consideration receivable from the
sale of 10.01% of the shares of Highway 407 ETR in 2019 (refer to Section 4.2.3.2).
SNC-LAVALIN
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”)
SIGNATURE ON THE SAINT-
LAURENT GROUP GENERAL
PARTNERSHIP (“SSL”)
CROSSLINX TRANSIT
SOLUTIONS GENERAL
PARTNERSHIP (“EGLINTON
CROSSTOWN”)
SNC-LAVALIN
INFRASTRUCTURE
PARTNERS LP
N/A: not applicable
CAPITAL INVESTMENTS PORTFOLIO
The following table presents a list of SNC-Lavalin’s main Capital investments as at December 31, 2021:
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
MYAH TIPAZA S.p.A. (“MYAH
25.5 %
Equity
No
2008
N/A
In operation Myah Tipaza owns, operates and
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.
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.
maintains the New Champlain Bridge
Corridor project.
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.
26 %
Equity
No
2006
N/A
In operation Owns, operates and maintains a
51 %
50 %
Equity
Yes
2008
2043
In operation Operates a 5.3-km electric cog railway in
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
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127
SNC-LAVALIN
CAPITAL INVESTMENTS PORTFOLIO
The following table presents a list of SNC-Lavalin’s main Capital investments as at December 31, 2021:
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
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
is sold
to Sonelgaz S.p.A. under a
20‑year take-or-pay agreement.
France.
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
Limited
Partnership,
Partnership, Okanagan Lake Concession
Limited
and McGill
Healthcare Infrastructure Group.
InTransit BC
Partnership
26 %
Equity
No
2006
N/A
Equity
Yes
2008
2043
In operation Operates a 5.3-km electric cog railway in
51 %
50 %
Equity
Yes
2015
2049
25 %
Equity
Yes
2015
2051
20 %
Equity
No
2017
N/A
SHARIKET KAHRABA
HADJRET EN NOUSS S.p.A.
(“SKH”)
TC DÔME S.A.S. (“TC
DÔME”)
SIGNATURE ON THE SAINT-
LAURENT GROUP GENERAL
PARTNERSHIP (“SSL”)
CROSSLINX TRANSIT
SOLUTIONS GENERAL
PARTNERSHIP (“EGLINTON
CROSSTOWN”)
SNC-LAVALIN
INFRASTRUCTURE
PARTNERS LP
N/A: not applicable
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
127
127
SNC-Lavalin 2021 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
from 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: Reimbursable and engineering services contracts
include all revenue-generating contracts of the Company, except Standardized EPC contracts and LSTK
construction contracts described below. 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 time and material agreements based
on hourly rates and fixed-price lump-sum contracts with limited procurement or construction risks.
Reimbursable and engineering services contracts also include all O&M contracts, some of which are fixed-
price agreements, with certain O&M contracts being subject to price-adjustment clauses such as inflation-
driven indexation.
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.
(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 (1)
Total from continuing operations (2)
From Canada
Outside Canada
Total from continuing operations (2)
DECEMBER 31, 2021
DECEMBER 31, 2020
$
3,137.8 $
834.9
6,972.5
10,945.2 $
139.9 $
1,365.3
1,505.2 $
12,450.4 $
146.6 $
12,597.0 $
7,416.0 $
5,181.0
12,597.0 $
$
$
$
$
$
$
$
$
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
(1) Backlog from Capital represents the amount that will be recognized as revenue from contracts with customers in the Capital segment from a concession.
(2) Revenue backlog excluding backlog related to discontinued operations of $nil as at December 31, 2021 (2020: $0.8 billion)
PS&PM - Total
Capital
$ 10,039.3
$
158.7
77 % $
1,101.1
100 % $
Total from continuing operations
$ 10,198.0
77 % $
1,101.1
8 % $
1,888.7
128
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
128
The Company’s revenue backlog decreased to $12.6 billion as at December 31, 2021 compared to
$13.2 billion as at December 31, 2020, mainly reflecting a decrease in Infrastructure EPC Projects, Infrastructure
Services and Nuclear, partially offset by an increase in EDPM.
BACKLOG RECONCILIATION
In the following table, the Company presents its “booking-to-revenue ratio”, a non-IFRS ratio, 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 (1)
Backlog of business sold during the year
Ending backlog
Booking-to-revenue ratio (2)
(1)
Revenues under the scope of IFRS 15, as disclosed in Note 9 to the 2021 Annual Financial Statements.
(2) Non-IFRS financial ratio. Please refer to Section 13 for further information on this financial measure.
BACKLOG BY TYPES OF CONTRACTS
2021
2020
$
13,187.8 $
14,137.7
6,614.7
7,204.2
1.3
5,906.0
6,855.1
0.8
$
12,597.0 $
13,187.8
0.92
0.86
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
Total from continuing operations
83 % $
968.3
December 31, 2021 and 2020:
AT DECEMBER 31, 2021
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
AT DECEMBER 31, 2020
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
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
$
3,137.8
100 % $
810.5
6,004.2
9,952.5
107.1
231.2
338.3
$
$
$
$ 10,290.7
$
146.6
$ 10,437.3
97 %
86 %
91 % $
77 % $
17 %
22 % $
83 % $
100 % $
968.3
968.3
—
—
—
—
—
—
968.3
— % $
— %
14 %
9 % $
— % $
— %
— % $
—
24.4
—
24.4
32.8
1,134.1
1,166.9
8 % $
1,191.3
— % $
—
8 % $
1,191.3
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 % $
— % $
— %
— % $
8 % $
— % $
—
50.6
—
50.6
72.3
1,765.8
1,838.1
1,888.7
—
— %
3 %
— %
— %
23 %
83 %
78 %
10 %
— %
9 %
— %
6 %
— %
— %
45 %
88 %
84 %
14 %
— %
14 %
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
129
SNC-LAVALIN
The Company’s revenue backlog decreased to $12.6 billion as at December 31, 2021 compared to
$13.2 billion as at December 31, 2020, mainly reflecting a decrease in Infrastructure EPC Projects, Infrastructure
Services and Nuclear, partially offset by an increase in EDPM.
BACKLOG RECONCILIATION
In the following table, the Company presents its “booking-to-revenue ratio”, a non-IFRS ratio, 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 (1)
Backlog of business sold during the year
Ending backlog
Booking-to-revenue ratio (2)
Revenues under the scope of IFRS 15, as disclosed in Note 9 to the 2021 Annual Financial Statements.
(1)
(2) Non-IFRS financial ratio. Please refer to Section 13 for further information on this financial measure.
BACKLOG BY TYPES OF CONTRACTS
2021
2020
$
13,187.8 $
6,614.7
7,204.2
1.3
12,597.0 $
0.92
$
14,137.7
5,906.0
6,855.1
0.8
13,187.8
0.86
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, 2021 and 2020:
AT DECEMBER 31, 2021
(IN MILLIONS $)
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
AT DECEMBER 31, 2020
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
SNCL Engineering Services - Total
Resources
Infrastructure EPC Projects
SNCL Projects - Total
PS&PM - Total
Capital
REIMBURSABLE AND
ENGINEERING SERVICES
CONTRACTS
STANDARDIZED
EPC CONTRACTS
LSTK
CONSTRUCTION
CONTRACTS
$
3,137.8
810.5
6,004.2
$
9,952.5
$
107.1
231.2
$
338.3
$ 10,290.7
$
146.6
$ 10,437.3
100 % $
97 %
86 %
91 % $
77 % $
17 %
22 % $
83 % $
100 % $
83 % $
—
—
968.3
968.3
—
—
—
968.3
—
968.3
— % $
— %
14 %
9 % $
— % $
— %
— % $
8 % $
— % $
8 % $
—
24.4
—
24.4
32.8
1,134.1
1,166.9
1,191.3
—
1,191.3
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
$
100 % $
94 %
84 %
89 % $
55 % $
12 %
16 % $
77 % $
100 % $
—
—
1,101.1
1,101.1
—
—
—
1,101.1
—
— % $
— %
16 %
10 % $
— % $
— %
— % $
8 % $
— % $
—
50.6
—
50.6
72.3
1,765.8
1,838.1
1,888.7
—
Total from continuing operations
$ 10,198.0
77 % $
1,101.1
8 % $
1,888.7
— %
3 %
— %
— %
23 %
83 %
78 %
10 %
— %
9 %
— %
6 %
— %
— %
45 %
88 %
84 %
14 %
— %
14 %
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
129
129
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN
BACKLOG PHASING
Backlog as at December 31, 2021 is expected to be recognized in revenues as follows: 2022 – $4.3 billion, 2023
– $2.0 billion, 2024 – $1.1 billion, and thereafter – $5.2 billion (2020: 2021 – $4.4 billion, 2022 – $2.0 billion, 2023
– $1.2 billion, and thereafter – $5.6 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 2022 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, as well as in discontinued operations, have warranty periods and/or outstanding claims that may result
in costs or legal proceedings extending beyond the actual performance and completion dates of the projects. See
Note 33 - “Contingent Liabilities” to the 2021 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 and 2021. All three projects have been negatively affected, and continue to be negatively affected, due to
COVID-19 related impacts.
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
$—
2022
2023
2024
Infrastructure EPC Projects
Resources
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Americas:
Canada
United States
Latin America
Europe:
Other
United Kingdom
Middle East (1)
Africa
Asia Pacific (2)
Total
Middle East and Africa:
comparative figures for 2020 accordingly.
comparative figures accordingly.
AMERICAS:
Geographic Breakdown of Revenues
2021
TOTAL
2020
%
TOTAL
$
32 % $
2,347.6
1,299.3
85.4
2,136.8
462.1
522.4
154.8
362.8
18 %
1 %
29 %
6 %
7 %
2 %
5 %
2,102.4
1,383.6
81.0
1,893.6
409.8
553.0
203.4
380.7
$
7,371.3
100 % $
7,007.5
%
30 %
20 %
1 %
27 %
6 %
8 %
3 %
5 %
100 %
(1)
(2)
◦
◦
◦
◦
◦
◦
◦
◦
Effective as of the second quarter of 2021, revenues from Saudi Arabia and Other Middle East countries are now included in “Middle East”. The Company has re-presented the
Effective as of the fourth quarter of 2021, revenues from Australia and Other countries of Asia-Pacific are now included in “Asia Pacific”. The Company has re-presented the
Revenues in Canada in 2021 increased compared to 2020, mainly due to an increase in Infrastructure EPC
Projects and Infrastructure Services, partially offset by a decrease in Nuclear.
Revenues in the United States in 2021 decreased compared to 2020, mainly due to a decrease in EDPM,
partially offset by an increase in Infrastructure Services.
Revenues in Latin America in 2021 were in line with 2020.
Revenues in the United Kingdom increased in 2021 compared to the previous year, mainly due to an
Revenues in other countries in Europe increased in 2021 compared to 2020, mainly due to an increase in
Infrastructure Services, notably from a higher level of activities of Linxon.
Revenues in the Middle East decreased in 2021 compared to 2020, mainly due to a decrease of activities
Revenues in Africa decreased in 2021 compared to 2020, primarily due to a decrease in Infrastructure
EUROPE:
increase in EDPM and Nuclear.
MIDDLE EAST AND AFRICA:
in Infrastructure EPC Projects.
Services.
ASIA PACIFIC:
Revenues in Asia Pacific decreased in 2021 compared to the previous year, mainly reflecting a decrease in
Infrastructure Services and EDPM.
130
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
130
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
131
SNC-LAVALIN
Geographic Breakdown of Revenues
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Americas:
Canada
United States
Latin America
Europe:
United Kingdom
Other
Middle East and Africa:
Middle East (1)
Africa
Asia Pacific (2)
Total
2021
TOTAL
2020
%
TOTAL
$
$
2,347.6
1,299.3
85.4
2,136.8
462.1
522.4
154.8
362.8
7,371.3
32 % $
18 %
1 %
29 %
6 %
7 %
2 %
5 %
100 % $
2,102.4
1,383.6
81.0
1,893.6
409.8
553.0
203.4
380.7
7,007.5
%
30 %
20 %
1 %
27 %
6 %
8 %
3 %
5 %
100 %
(1)
(2)
Effective as of the second quarter of 2021, revenues from Saudi Arabia and Other Middle East countries are now included in “Middle East”. The Company has re-presented the
comparative figures for 2020 accordingly.
Effective as of the fourth quarter of 2021, revenues from Australia and Other countries of Asia-Pacific are now included in “Asia Pacific”. The Company has re-presented the
comparative figures accordingly.
AMERICAS:
◦
◦
◦
Revenues in Canada in 2021 increased compared to 2020, mainly due to an increase in Infrastructure EPC
Projects and Infrastructure Services, partially offset by a decrease in Nuclear.
Revenues in the United States in 2021 decreased compared to 2020, mainly due to a decrease in EDPM,
partially offset by an increase in Infrastructure Services.
Revenues in Latin America in 2021 were in line with 2020.
EUROPE:
◦
Revenues in the United Kingdom increased in 2021 compared to the previous year, mainly due to an
increase in EDPM and Nuclear.
◦
Revenues in other countries in Europe increased in 2021 compared to 2020, mainly due to an increase in
Infrastructure Services, notably from a higher level of activities of Linxon.
MIDDLE EAST AND AFRICA:
◦
◦
Revenues in the Middle East decreased in 2021 compared to 2020, mainly due to a decrease of activities
in Infrastructure EPC Projects.
Revenues in Africa decreased in 2021 compared to 2020, primarily due to a decrease in Infrastructure
Services.
ASIA PACIFIC:
◦
Revenues in Asia Pacific decreased in 2021 compared to the previous year, mainly reflecting a decrease in
Infrastructure Services and EDPM.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
131
131
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN
Fourth Quarter Results
.
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
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
Net loss attributable to SNC-Lavalin shareholders from continuing operations
Adjusted net loss attributable to SNC-Lavalin shareholders from PS&PM (1)
Diluted loss per share from continuing operations (“Diluted EPS”) (in $)
Diluted EPS from PS&PM (in $)
Adjusted diluted EPS from PS&PM (in $) (1)
EBIT
EBIT to revenue ratio (in %)
EBITDA (1)
Adjusted EBITDA from PS&PM to PS&PM revenue ratio (in %) (1)
2021
2020
CHANGE (%)
$ 1,944.9
$ 1,697.9
14.5%
$
(105.5)
$
(736.2)
52.6
33.5
$
(52.9)
$
(702.7)
(85.7%)
57.0%
(92.5%)
$
$
$
$
$
$
$
$
$
$
(0.30)
$
(4.00)
(0.30)
$
(4.00)
(92.5%)
(92.5%)
(67.9)
52.6
(15.3)
(25.6)
(0.09)
(0.39)
(0.15)
(35.9)
$
$
$
$
$
$
$
(356.4)
33.5
(322.9)
(268.7)
(1.84)
(2.03)
(1.53)
(372.7)
(80.9%)
57.0%
(95.3%)
(90.5%)
(95.3%)
(80.9%)
(90.5%)
(90.4%)
(1.8) %
32.6
0.3%
(22.0) %
$
(300.7)
(14.8%)
(110.8%)
N/A
(1)
◦
◦
◦
◦
Non-IFRS financial measure or ratio. 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 $1,944.9 million in the fourth quarter of 2021, compared to $1,697.9 million in the
corresponding quarter of 2020, mainly reflecting an increase in EDPM, Infrastructure EPC Projects,
Infrastructure Services, and Capital partially offset by a decrease in Nuclear and Resources.
For the fourth quarter of 2021, net loss attributable to SNC-Lavalin shareholders was $52.9 million
($0.30 per diluted share), compared to a net loss attributable to SNC-Lavalin shareholders of $702.7 million
($4.00 per diluted share) for the fourth quarter of 2020, reflecting mainly a write down of $277.7 million in the
value of disposal groups presented as held for sale, primarily in discontinued operations, in the fourth quarter
of 2020, a higher contribution in the fourth quarter of 2021 from EDPM and Capital combined with a lower loss
from Infrastructure EPC Projects and Resources, a decrease in corporate selling, general and administrative
expenses, which included a $58.3 million negative adjustment to the provision for the Pyrrhotite Case
litigation in the fourth quarter of 2020, and a lower income tax expense from continuing operations.
For the fourth quarter of 2021, Adjusted net loss attributable to SNC-Lavalin shareholders from
PS&PM was $25.6 million ($0.15 per diluted share), compared to an adjusted net loss attributable to SNC-
Lavalin shareholders from PS&PM of $268.7 million ($1.53 per diluted share) for the comparable quarter in
2020, mainly due to a higher contribution from EDPM, combined with a lower loss from Infrastructure EPC
Projects and Resources.
EBIT, EBITDA and Adjusted EBITDA from PS&PM to PS&PM revenues ratio (% of PS&PM revenues)
increased in the fourth quarter of 2021 compared to the fourth quarter of 2020, mainly due to the factors
described above.
SNC-LAVALIN
AS AT
(IN MILLIONS $)
Additional Indicator
Cash and cash equivalents
Revenue backlog
DECEMBER 31, 2021 SEPTEMBER 30, 2021
CHANGE (%)
$
$
608.4 $
12,597.0 $
519.8
12,757.1
17.1%
(1.3%)
◦
◦
At the end of December 31, 2021, the Company’s cash and cash equivalents amounted to
$608.4 million, compared to $519.8 million at the end of September 30, 2021. The increase is mainly
attributable to net cash generated from operating activities of $115.4 million in the fourth quarter of 2021.
Revenue backlog was $12.6 billion as at December 31, 2021, compared to $12.8 billion as at
September 30, 2021, mainly reflecting a decrease in Infrastructure Services and EDPM, partially offset by an
increase in Nuclear.
The following table summarizes the Company’s revenues and Segment Adjusted EBIT and reconciles the
Segment Adjusted EBIT to the Company’s net loss for the fourth quarters ended December 31, 2021 and 2020.
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Total SNCL Engineering Services
Resources
Infrastructure EPC Projects
Total SNCL Projects
Capital
2021
2020
SEGMENT
ADJUSTED
REVENUES
EBIT
REVENUES
$
1,063.5 $
179.3 $
943.3 $
220.4
386.8
34.8
23.3
245.3
334.4
$
1,670.8 $
237.4 $
1,523.0 $
29.4
179.5
208.9 $
65.2
(39.6)
(191.8)
(231.4) $
60.6
53.7
98.6
152.3 $
22.6
$
SEGMENT
ADJUSTED
EBIT
84.9
36.2
32.0
153.1
(93.4)
(319.4)
(412.8)
19.1
Total revenues and Segment Adjusted EBIT
$
1,944.9 $
66.6 $
1,697.9 $
(240.6)
Corporate selling, general and administrative expenses not allocated to the
segments
Loss arising on financial instruments at fair value through profit or loss
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
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
Loss before income taxes from continuing operations
Income tax recovery
Net loss from continuing operations
Net loss from discontinued operations
Net loss
(49.9)
(3.4)
(30.9)
(23.4)
5.0
—
(35.9)
27.0
(62.9)
(47.8)
(15.1)
(37.6)
(52.7)
$
$
$
$
(95.7)
(0.3)
(31.8)
(23.2)
25.0
(6.1)
27.5
(80.5)
$
(372.7)
$
(400.2)
$
(319.7)
(379.8)
(699.5)
$
132
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2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
133
SNC-LAVALIN
AS AT
(IN MILLIONS $)
Additional Indicator
Cash and cash equivalents
Revenue backlog
DECEMBER 31, 2021 SEPTEMBER 30, 2021
CHANGE (%)
$
$
608.4 $
12,597.0 $
519.8
12,757.1
17.1%
(1.3%)
◦
◦
At the end of December 31, 2021, the Company’s cash and cash equivalents amounted to
$608.4 million, compared to $519.8 million at the end of September 30, 2021. The increase is mainly
attributable to net cash generated from operating activities of $115.4 million in the fourth quarter of 2021.
Revenue backlog was $12.6 billion as at December 31, 2021, compared to $12.8 billion as at
September 30, 2021, mainly reflecting a decrease in Infrastructure Services and EDPM, partially offset by an
increase in Nuclear.
The following table summarizes the Company’s revenues and Segment Adjusted EBIT and reconciles the
Segment Adjusted EBIT to the Company’s net loss for the fourth quarters ended December 31, 2021 and 2020.
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $)
BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Total SNCL Engineering Services
Resources
Infrastructure EPC Projects
Total SNCL Projects
Capital
2021
2020
$
$
$
REVENUES
1,063.5 $
220.4
386.8
1,670.8 $
29.4
179.5
208.9 $
65.2
SEGMENT
ADJUSTED
EBIT
179.3 $
34.8
23.3
237.4 $
(39.6)
(191.8)
(231.4) $
60.6
REVENUES
943.3 $
245.3
334.4
1,523.0 $
53.7
98.6
152.3 $
22.6
Total revenues and Segment Adjusted EBIT
$
1,944.9 $
66.6 $
1,697.9 $
Corporate selling, general and administrative expenses not allocated to the
segments
Loss arising on financial instruments at fair value through profit or loss
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
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
Loss before income taxes from continuing operations
Income tax recovery
Net loss from continuing operations
Net loss from discontinued operations
Net loss
(49.9)
(3.4)
(30.9)
(23.4)
5.0
—
(35.9)
27.0
(62.9)
(47.8)
(15.1)
(37.6)
(52.7)
$
$
$
$
SEGMENT
ADJUSTED
EBIT
84.9
36.2
32.0
153.1
(93.4)
(319.4)
(412.8)
19.1
(240.6)
(95.7)
(0.3)
(31.8)
(23.2)
25.0
(6.1)
(372.7)
27.5
(400.2)
(80.5)
$
$
$
(319.7)
(379.8)
(699.5)
$
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
SNC-LAVALIN
Total Segment Adjusted EBIT in the fourth quarter of 2021 was $66.6 million, compared to a total Segment
Adjusted EBIT of negative $240.6 million in the fourth quarter of 2020. The variance is largely attributable to a
higher contribution from EDPM and Capital combined with a lower loss from Infrastructure EPC Projects and
Resources. The increased contribution from EDPM reflected mainly a $93.0 million favourable outcome from a
confirmed arbitration decision related to unpaid additional services performed on a completed contract in the
Middle East, while Capital benefited from a $40.6 million dividend from Highway 407 ETR compared to $nil in the
fourth quarter of 2020. The losses in Infrastructure EPC Projects and Resources in the fourth quarter of 2021
were mainly due to unfavourable cost reforecasts, primarily driven by COVID-19, supply chain disruptions,
inflation and commissioning challenges, causing productivity losses, delays and cost increases on the last
remaining LSTK construction projects. Productivity impacts due to COVID-19 increased significantly with the
Omicron variant, including materially higher workforce absenteeism levels on some projects for periods of time. In
addition, delays on certain equipment deliveries and significant increases in inflation impacted direct labour,
materials and other costs across the projects. The impact of these were higher than foreseen by the Company in
previous periods, and as a result, the forecasted costs to complete the LSTK construction projects had to be
increased and adjusted in the fourth quarter of 2021. The loss in 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 loss in Resources in the fourth
quarter of 2020 was mainly due to charges for one remaining LSTK project and certain other historical legacy
positions.
Corporate selling, general and administrative expenses not allocated to segments amounted to
$49.9 million in the fourth quarter of 2021, compared to $95.7 million in the corresponding period of 2020. The
variance is mainly due to a $48.3 million negative adjustment to the provision for the Pyrrhotite Case litigation and
a $4.0 million revision to the Guaranteed Minimum Pension (“GMP”) equalization provision recognized in the
fourth quarter of 2020.
In the fourth quarter of 2021, the Company recognized a pre-tax gain of $5.0 million from a contingent
consideration receivable related to the previous disposal of a Capital investment accounted for by the equity
method. In the fourth quarter of 2020, the Company released in full a $25.0 million provision for contingent
indemnification related to the previous disposal of a Capital investment accounted for by the consolidation method
upon expiry of the indemnification period. Such gains were included in “Adjustments on gain on disposals of
Capital investments”.
The income tax recovery of $47.8 million in the fourth quarter of 2021 was mainly a result of the loss for
the period. The effective income tax recovery rate was higher than the Canadian statutory income tax rate mainly
due to the geographic mix of earnings, net income not affected by tax and revised estimates on certain income tax
liabilities, partially offset with a $19.0 million reduction of previously recognized deferred income tax assets
resulting from a re-assessment of the future recoverability of loss carryforwards in the United States. The income
tax recovery of $80.5 million in the fourth quarter of 2020,was mainly a result of the loss for the period.
Net loss from discontinued operations was $37.6 million in the fourth quarter of 2021, compared to
$379.8 million in the fourth quarter of 2020. The net loss from discontinued operations in the fourth quarter of
2020 included negative reforecasts on certain major projects and 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 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;
A presentation of the Company’s dividends declared; 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 decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2021
2020
$
134.2 $
(263.7)
(192.5)
(0.2)
932.9
$
(322.3) $
$
610.6 $
121.5
(185.1)
(190.4)
(1.7)
(255.7)
1,188.6
932.9
Less: Cash and cash equivalents included in the assets of disposal group classified as held for sale $
(2.2) $
—
Cash and cash equivalents at end of year as presented on the consolidated statement of financial
$
608.4 $
932.9
position
Cash and cash equivalents decreased by $322.3 million in 2021, compared to a decrease of $255.7 million in
2020, as discussed further below.
134
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
134
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
135
SNC-LAVALIN
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 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;
A presentation of the Company’s dividends declared; 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 decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2021
2020
134.2 $
(263.7)
(192.5)
(0.2)
(322.3) $
932.9
610.6 $
121.5
(185.1)
(190.4)
(1.7)
(255.7)
1,188.6
932.9
$
$
$
Less: Cash and cash equivalents included in the assets of disposal group classified as held for sale $
(2.2) $
—
Cash and cash equivalents at end of year as presented on the consolidated statement of financial
position
$
608.4 $
932.9
Cash and cash equivalents decreased by $322.3 million in 2021, compared to a decrease of $255.7 million in
2020, as discussed further below.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
OPERATING ACTIVITIES
INVESTING ACTIVITIES
Net cash generated from operating activities totaled $134.2 million in 2021, compared to net cash generated
from operating activities of $121.5 million in 2020, a variance reconciled as follows:
Net cash used for investing activities amounted to $263.7 million in 2021, compared to net cash used for
investing activities of $185.1 million in 2020, a variance reconciled as follows:
1,628.3
(48.9)
(73.2)
(63.8)
(19.2)
(16.6)
26.7
(283.9)
(62.8)
20.0
(33.5)
65.3
(65.6)
(573.7)
(162.6)
2.5
339.2
(326.5)
134.2
$
121.5
Net cash used for investing activities for the year ended December 31, 2020
$
(185.1)
(IN MILLIONS $)
Changes in 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, 2021
$
$
(IN MILLIONS $)
Net cash generated from operating activities for the year ended December 31, 2020
Changes between the years ended December 31, 2021 and 2020:
Increase in net income
Increase in income taxes paid
Decrease in income taxes recognized in net income
Lower depreciation of property and equipment and amortization of other non-current non-financial assets
Lower depreciation of right-of-use assets
Decrease in dividends and distributions received from Capital investments accounted for by the equity method
Increase in share-based expense
Lower impairment loss on remeasurement of assets of disposal group classified as held for sale to fair value less cost
to sell
Higher net change in provisions related to forecasted losses on certain contracts
Lower adjustment on gain on disposal of a Capital investment
Decrease in restructuring and transformation costs recognized in net income
Decrease in restructuring and transformation costs paid
Change in loss (gain) arising on financial instruments at fair value through profit or loss
Gain on disposals of PS&PM businesses
Net change in other provisions
Other items
Changes between the years ended December 31, 2021 and 2020:
Increase in acquisition of property and equipment
Decrease in payments for Capital investments
Unfavourable variance in change in restricted cash position
Higher increase in receivables under service concession arrangements, net of recovery
Increase in cash outflow on disposals of PS&PM businesses
Other items
(30.5)
26.1
(11.4)
(64.9)
(6.0)
8.1
Net cash used for investing activities for the year ended December 31, 2021
$
(263.7)
The acquisition of property and equipment related mainly to computer equipment and leasehold
improvements in both 2021 and 2020.
In 2021, payments for Capital investments amounted to $29.7 million, compared to $55.8 million in 2020.
The payments made in 2021 included the contributions made by the Company to Carlyle Global Infrastructure
Opportunity Fund, L.P. The payments made in 2020 included mainly the contributions made by the Company
to Signature on the Saint-Laurent Group General Partnership and Carlyle Global Infrastructure Opportunity
◦
◦
Fund, L.P.
◦
The higher increase in receivables under service concession arrangements, net of recovery, mainly relates to
a higher level of activity on the Trillium Line Extension project in 2021 compared to 2020.
FINANCING ACTIVITIES
Net cash used for financing activities totaled $192.5 million in 2021, compared to net cash used for financing
activities of $190.4 million in 2020, a variance reconciled as follows:
(IN MILLIONS $)
Net cash used for financing activities for the year ended December 31, 2020
Changes between the years ended December 31, 2021 and 2020:
Lower repayment of recourse debt
Lower increase in recourse debt
Lower repayment of non-recourse debt
Lower increase in non-recourse debt
Lower increase in other non-current financial liabilities
Other items
$
(190.4)
1,123.5
(1,197.7)
62.9
(10.5)
(3.7)
19.6
Net cash used for financing activities for the year ended December 31, 2021
$
(192.5)
◦
The changes in cash flows related to financing activities between 2021 and 2020 were primarily explained by
the elements in the table above. Notably, the following transactions on recourse debt took place during 2021
and 2020:
◦
In 2021, the Company drew down $100.0 million under its committed revolving facility (the
“Credit Agreement”). In the first quarter of 2020, the Company drew down $1.0 billion under
its Credit Agreement in order to secure access to liquidity while financial markets were facing
challenges at the onset of the COVID-19 pandemic. The Company subsequently repaid
$500.0 million of this draw-down in the second quarter of 2020 and the remaining balance in
the third quarter of 2020.
◦
In the first quarter of 2021, the Company repaid in full at maturity the Series 3 Debentures for
an aggregate principal amount of $175.0 million.
◦
◦
◦
Net cash generated from operating activities before net change in non-cash working capital items
totaled $231.4 million in 2021, compared to net cash used for operating activities before net change in
working capital items of $107.8 million in 2020.
As detailed in Note 28B to the 2021 Annual Financial Statements, changes in non-cash working capital
items used net cash of $97.2 million in 2021, compared to net cash generated of $229.2 million in 2020.
This difference mainly reflected an unfavourable variance in contract assets, trade receivables, other current
non-financial liabilities and inventories, partially offset by a favourable variance mainly in trade payables and
accrued liabilities, other current financial assets, other current financial liabilities and contract liabilities.
From a business line perspective, SNCL Engineering Services generated $543.6 million of cash from
operating activities in 2021 compared to $800.4 million in 2020, while SNCL Projects used $266.5 million of
cash for operating activities in 2021 compared to $243.1 million used in 2020. Discontinued operations
generated $37.8 million of cash from operating activities in 2021 compared to $165.9 million of cash used for
operating activities in 2020. The remaining balance of cash flows from operating activities relates to Capital,
corporate activities and items not allocated to the Company's segments or to discontinued operations.
136
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
136
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
137
SNC-LAVALIN
INVESTING ACTIVITIES
Net cash used for investing activities amounted to $263.7 million in 2021, compared to net cash used for
investing activities of $185.1 million in 2020, a variance reconciled as follows:
(IN MILLIONS $)
Net cash used for investing activities for the year ended December 31, 2020
$
(185.1)
Changes between the years ended December 31, 2021 and 2020:
Increase in acquisition of property and equipment
Decrease in payments for Capital investments
Unfavourable variance in change in restricted cash position
Higher increase in receivables under service concession arrangements, net of recovery
Increase in cash outflow on disposals of PS&PM businesses
Other items
Net cash used for investing activities for the year ended December 31, 2021
$
(30.5)
26.1
(11.4)
(64.9)
(6.0)
8.1
(263.7)
◦
◦
◦
The acquisition of property and equipment related mainly to computer equipment and leasehold
improvements in both 2021 and 2020.
In 2021, payments for Capital investments amounted to $29.7 million, compared to $55.8 million in 2020.
The payments made in 2021 included the contributions made by the Company to Carlyle Global Infrastructure
Opportunity Fund, L.P. The payments made in 2020 included mainly the contributions made by the Company
to Signature on the Saint-Laurent Group General Partnership and Carlyle Global Infrastructure Opportunity
Fund, L.P.
The higher increase in receivables under service concession arrangements, net of recovery, mainly relates to
a higher level of activity on the Trillium Line Extension project in 2021 compared to 2020.
FINANCING ACTIVITIES
Net cash used for financing activities totaled $192.5 million in 2021, compared to net cash used for financing
activities of $190.4 million in 2020, a variance reconciled as follows:
(IN MILLIONS $)
Net cash used for financing activities for the year ended December 31, 2020
Changes between the years ended December 31, 2021 and 2020:
Lower repayment of recourse debt
Lower increase in recourse debt
Lower repayment of non-recourse debt
Lower increase in non-recourse debt
Lower increase in other non-current financial liabilities
Other items
$
(190.4)
1,123.5
(1,197.7)
62.9
(10.5)
(3.7)
19.6
(192.5)
Net cash used for financing activities for the year ended December 31, 2021
$
◦
The changes in cash flows related to financing activities between 2021 and 2020 were primarily explained by
the elements in the table above. Notably, the following transactions on recourse debt took place during 2021
and 2020:
◦
◦
In 2021, the Company drew down $100.0 million under its committed revolving facility (the
“Credit Agreement”). In the first quarter of 2020, the Company drew down $1.0 billion under
its Credit Agreement in order to secure access to liquidity while financial markets were facing
challenges at the onset of the COVID-19 pandemic. The Company subsequently repaid
$500.0 million of this draw-down in the second quarter of 2020 and the remaining balance in
the third quarter of 2020.
In the first quarter of 2021, the Company repaid in full at maturity the Series 3 Debentures for
an aggregate principal amount of $175.0 million.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-Lavalin 2021 Financial Report
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. A portion of the net
proceeds from this issuance was used to fund the repurchase, through open market
purchases, of $40 million of the outstanding 2020 Debentures, for which the remaining $260
million principal amount was repaid in full at maturity in the fourth quarter of 2020.
In 2020, the credit facility of InPower BC General Partnership was repaid in full, resulting in a
cash outflow of $63.1 million.
◦
◦
◦
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, 2021 and
2020 in Note 28C to the 2021 Annual Financial Statements.
The Company did not issue and did not repurchase any shares during either 2021 or 2020. The number of
common shares outstanding as at February 16, 2022 was 175,554,252.
Dividends paid during 2021 were in line with dividends paid in 2020.
FREE CASH FLOW (USAGE)
Free cash flow (usage), a non-IFRS measure, is calculated as follows:
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
Net cash generated from operating activities
Plus: Payment of federal charges settlement included in operating activities above
Less: Acquisition of property and equipment
Less: Payment of lease liabilities
Free cash flow (usage) (1)
(1) Non-IFRS financial measure. Please refer to Section 13 for further information on this financial measure..
$
$
2021
134.2 $
56.0
(106.3)
(99.8)
(15.9) $
2020
121.5
56.0
(75.8)
(118.7)
(17.0)
The Company’s free cash flow usage was $15.9 million in 2021, compared to free cash flow usage of
$17.0 million in 2020, mainly due to the higher level of acquisition of property and equipment in 2021 compared to
2020, partially offset by the higher level of net cash generated from operating activities and the decrease in
payment of lease liabilities during the same period.
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
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)
2021
$
$
608.4 $
2,292.7 $
2020
932.9
2,394.7
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.
SNC-LAVALIN
$932.9 million).
As at December 31, 2021, the Company had cash and cash equivalents totaling $608.4 million (2020:
Furthermore, as at December 31, 2021, the Company had a committed revolving facility of $2,600 million under
its Credit Agreement (2020: $2,600 million), of which $2,292.7 million was unused (2020: $2,394.7 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 in Section 14 “Risks and Uncertainties” of the 2021 Annual MD&A 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” of the 2021
Annual MD&A, 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 to be unable to repay their long-term debt.
The Company was required to maintain, as at December 31, 2021, 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. (“Highway Holdings”), an indirect wholly-owned
subsidiary of the Company, 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, 2021,
the ratio of the Company’s net recourse debt to EBITDA, as calculated under both the Credit Agreement and the
CDPQ Loan Agreement, was 1.4x and, as such, the Company was in compliance with its financial ratio covenants
under such agreements.
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 similarly labelled financial measures used in this MD&A. Furthermore,
such ratio is calculated using certain financial information not disclosed in the 2021 Annual Financial Statements
or in this MD&A, or not considered recourse debt in these documents. For example, the ratio includes the amount
of down-payments on contracts totaling $145.4 million as at December 31, 2021 (2020: $226.1 million) and the
amount of outstanding financial letters of credit totaling $97.9 million as at December 31, 2021 (2020: $101.7
million) as part of the net recourse debt calculation.
REPAYMENT OF SERIES 3 DEBENTURES AND 2020 DEBENTURES
In the first quarter of 2021, SNC-Lavalin repaid in full at maturity the Series 3 Debentures for an aggregate
principal amount of $175.0 million.
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As at December 31, 2021, the Company had cash and cash equivalents totaling $608.4 million (2020:
$932.9 million).
Furthermore, as at December 31, 2021, the Company had a committed revolving facility of $2,600 million under
its Credit Agreement (2020: $2,600 million), of which $2,292.7 million was unused (2020: $2,394.7 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 in Section 14 “Risks and Uncertainties” of the 2021 Annual MD&A 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” of the 2021
Annual MD&A, 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 to be unable to repay their long-term debt.
The Company was required to maintain, as at December 31, 2021, 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. (“Highway Holdings”), an indirect wholly-owned
subsidiary of the Company, 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, 2021,
the ratio of the Company’s net recourse debt to EBITDA, as calculated under both the Credit Agreement and the
CDPQ Loan Agreement, was 1.4x and, as such, the Company was in compliance with its financial ratio covenants
under such agreements.
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 similarly labelled financial measures used in this MD&A. Furthermore,
such ratio is calculated using certain financial information not disclosed in the 2021 Annual Financial Statements
or in this MD&A, or not considered recourse debt in these documents. For example, the ratio includes the amount
of down-payments on contracts totaling $145.4 million as at December 31, 2021 (2020: $226.1 million) and the
amount of outstanding financial letters of credit totaling $97.9 million as at December 31, 2021 (2020: $101.7
million) as part of the net recourse debt calculation.
REPAYMENT OF SERIES 3 DEBENTURES AND 2020 DEBENTURES
In the first quarter of 2021, SNC-Lavalin repaid in full at maturity the Series 3 Debentures for an aggregate
principal amount of $175.0 million.
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In the third quarter of 2020, a portion of the net proceeds from the issuance of the Series 6 Debentures was used
to fund the repurchase, through open market purchases, of $40 million of the outstanding 2020 Debentures, for
which the remaining $260 million principal amount was repaid in full at maturity in the fourth quarter of 2020.
AMENDMENTS TO THE REVOLVING CREDIT FACILITY
On March 26, 2021, certain lenders under the Company’s Revolving Facility agreed to extend the maturity of such
facility with respect only to such lenders from May 15, 2022 to April 30, 2023 and, as a condition to securing the
consent of such lenders to the maturity extension, the blended pricing applicable to the Revolving Facility was
increased commensurately. As such, the notional amount of Tranche A of the Revolving Facility is $2,000 million
until May 15, 2022 and $1,690.8 million from May 16, 2022 to April 30, 2023 and the notional amount of Tranche
B of the Revolving Facility is $600 million until May 15, 2022 and $507.2 million from May 16, 2022 to April 30,
2023.
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.
Net limited recourse and recourse debt to Adjusted EBITDA ratio (1)
(1) Non-IFRS financial measure or ratio. Please refer to Section 13 for further information on these financial measures.
8.5
CAPITAL MANAGEMENT INDICATORS
The Company periodically monitors capital using certain ratios, which are described further below.
NET LIMITED RECOURSE AND RECOURSE DEBT TO ADJUSTED EBITDA RATIO
The net limited recourse and recourse debt to Adjusted EBITDA is a non-IFRS ratio used to analyze the
Company’s financial leverage. It is calculated by comparing the net limited recourse and recourse debt at the end
of a given period with Adjusted EBITDA of the corresponding trailing twelve-month period, as follows:
AT DECEMBER 31
(IN MILLIONS $, EXCEPT FOR RATIO)
Limited recourse
Recourse debt
Less:
Cash and cash equivalents
Net limited recourse and recourse debt (1)
Adjusted EBITDA (trailing 12 months) (1)
2021
$
400.0 $
1,094.1
$
885.7 $
608.4
525.0
1.7
2020
400.0
1,171.0
932.9
638.1
200.1
3.2
While the level of limited recourse debt remained unchanged as at December 31, 2021 compared to
December 31, 2020, the decrease in recourse debt in 2021 was more than offset by the decrease in cash and
cash equivalents during the same period, resulting in a higher level of net limited recourse and recourse debt as
at December 31, 2021 compared to December 31, 2020. When considering the higher level of Adjusted EBITDA
in 2021 compared to 2020, the net limited recourse and recourse debt to Adjusted EBITDA ratio decreased to 1.7
as at December 31, 2021 compared to 3.2 as at December 31, 2020.
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROASE”)
ROASE is a supplementary financial measure. A definition of this supplementary financial measure is provided
in Section 13. ROASE was 14.3% in 2021, compared to -33.4% for 2020.
8.6
CREDIT RATINGS
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. On April 22, 2021, DBRS confirmed its BB
(high) rating and removed it from Under Review with Negative Implications. DBRS considers that the agreement
to sell the Company’s Oil and Gas business allows for a relatively clean exit from its active contracts and the
ongoing warranty obligations of former contracts. For DBRS, the sale is also an important milestone in achieving
the strategic initiative of focusing on core Engineering Services business. The rating confirmation is supported by
the Company’s comfortable liquidity position and a largely unused revolving credit facility, as well as, the
Company’s portfolio of Capital investments. DBRS integrated its methodology “Rating Companies in the Services
Industry” into the Company’s rating, along with the methodology “Rating Companies in the Construction and
Property Development Industry”, which better aligns the risk profile with the strategic direction to exit LSTK
construction contracts. DBRS notes the modestly improved business risk assessment of the Company with this
incorporation.
On June 14, 2021, S&P Global Ratings revised its outlook on the Company from negative to stable and affirmed
its BB+ issuer credit rating. The stable outlook reflects the expectation that the Company will generate steady
improvement in its earnings and cash flow over the next two years, with reduced financial risk associated with the
Company’s remaining LSTK projects.
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141
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8.5
CAPITAL MANAGEMENT INDICATORS
The Company periodically monitors capital using certain ratios, which are described further below.
NET LIMITED RECOURSE AND RECOURSE DEBT TO ADJUSTED EBITDA RATIO
The net limited recourse and recourse debt to Adjusted EBITDA is a non-IFRS ratio used to analyze the
Company’s financial leverage. It is calculated by comparing the net limited recourse and recourse debt at the end
of a given period with Adjusted EBITDA of the corresponding trailing twelve-month period, as follows:
AT DECEMBER 31
(IN MILLIONS $, EXCEPT FOR RATIO)
Limited recourse
Recourse debt
Less:
Cash and cash equivalents
Net limited recourse and recourse debt (1)
Adjusted EBITDA (trailing 12 months) (1)
Net limited recourse and recourse debt to Adjusted EBITDA ratio (1)
(1) Non-IFRS financial measure or ratio. Please refer to Section 13 for further information on these financial measures.
2021
$
400.0 $
1,094.1
$
608.4
885.7 $
525.0
1.7
2020
400.0
1,171.0
932.9
638.1
200.1
3.2
While the level of limited recourse debt remained unchanged as at December 31, 2021 compared to
December 31, 2020, the decrease in recourse debt in 2021 was more than offset by the decrease in cash and
cash equivalents during the same period, resulting in a higher level of net limited recourse and recourse debt as
at December 31, 2021 compared to December 31, 2020. When considering the higher level of Adjusted EBITDA
in 2021 compared to 2020, the net limited recourse and recourse debt to Adjusted EBITDA ratio decreased to 1.7
as at December 31, 2021 compared to 3.2 as at December 31, 2020.
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROASE”)
ROASE is a supplementary financial measure. A definition of this supplementary financial measure is provided
in Section 13. ROASE was 14.3% in 2021, compared to -33.4% for 2020.
8.6
CREDIT RATINGS
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. On April 22, 2021, DBRS confirmed its BB
(high) rating and removed it from Under Review with Negative Implications. DBRS considers that the agreement
to sell the Company’s Oil and Gas business allows for a relatively clean exit from its active contracts and the
ongoing warranty obligations of former contracts. For DBRS, the sale is also an important milestone in achieving
the strategic initiative of focusing on core Engineering Services business. The rating confirmation is supported by
the Company’s comfortable liquidity position and a largely unused revolving credit facility, as well as, the
Company’s portfolio of Capital investments. DBRS integrated its methodology “Rating Companies in the Services
Industry” into the Company’s rating, along with the methodology “Rating Companies in the Construction and
Property Development Industry”, which better aligns the risk profile with the strategic direction to exit LSTK
construction contracts. DBRS notes the modestly improved business risk assessment of the Company with this
incorporation.
On June 14, 2021, S&P Global Ratings revised its outlook on the Company from negative to stable and affirmed
its BB+ issuer credit rating. The stable outlook reflects the expectation that the Company will generate steady
improvement in its earnings and cash flow over the next two years, with reduced financial risk associated with the
Company’s remaining LSTK projects.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
8.7
DIVIDENDS DECLARED
FINANCIAL INSTRUMENTS
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.
2021
2020
2019
2021 Annual Financial Statements.
$
0.080
$
0.080
$
0.240
—%
(67%)
(79%)
SNC-Lavalin enters or may enter into derivative financial instruments, namely:
Derivative 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
Total cash dividends paid in 2021 were $14.0 million, compared to $14.0 million in 2020. The Company has
paid quarterly dividends for 32 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 $)
2022
2023-2024
2025-2026
THEREAFTER
TOTAL
Short-term debt, long-term debt repayments,
commitments to invest and lease liabilities:
Recourse
Limited recourse
Non-recourse
Commitments to invest in Capital investments
Lease liabilities
Total
$
99.8 $ 1,000.0 $
— $
— $ 1,099.8
—
15.4
24.9
400.0
150.8
—
—
7.4
—
—
—
—
118.5
181.3
107.2
230.6
400.0
173.6
24.9
637.6
$
258.6 $ 1,732.1 $
114.6 $
230.6 $ 2,335.9
Additional details of the future principal repayments of the Company’s recourse, limited recourse and non-
recourse short-term debt and long-term debt are provided in Note 20D to the 2021 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 2021
Annual Financial Statements. At December 31, 2021, the commitments to invest in Capital investments were
related to contributions for Eglinton Crosstown (2020: Eglinton Crosstown) and were presented as “Other current
financial liabilities” (see Note 18 to the 2021 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 is
provided in Note 34 to the 2021 Annual Financial Statements.
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$60.5 million (approximately CA$77.4 million)
as at December 31, 2021 (2020: US$82.5 million [approximately CA$105.7 million]) and will be recognized as a
liability, as a whole or in part, when the accounting conditions will be met.
◦
◦
◦
◦
Forward currency exchange contracts to hedge its exposure to fluctuations in foreign currency exchange rates;
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 2021 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.
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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
2021 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;
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 2021 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.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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in
to
Restricted cash
13.4
29.3
(15.9)
restricted cash
Decrease
the
classification of InPower BC General Partnership and its
related holding companies as a disposal group held for sale
as at December 31, 2021.
is mainly due
SNC-LAVALIN
Financial Position
9.1
ASSETS
CONSOLIDATED FINANCIAL POSITION ANALYSIS
AT DECEMBER 31
(IN MILLIONS $)
Current Assets
Cash and cash equivalents
2021
2020
CHANGE ($)
EXPLANATIONS
$
608.4 $ 932.9 $
(324.5) See discussion in Section 8.1.
SNC-LAVALIN
LIABILITIES
AT DECEMBER 31
(IN MILLIONS $)
Current Liabilities
2021
2020 CHANGE ($) EXPLANATIONS
Trade payables and accrued liabilities $ 1,652.5 $ 1,730.4 $
(77.9)
Decrease is principally attributable to variations in multiple
projects and accrued expenses.
Contract liabilities
838.2
837.0
1.2 Not a significant change compared to prior year.
Other current financial liabilities
205.8
187.8
18.0
Other current non-financial liabilities
328.1
473.8
(145.7)
Increase is mainly due to an increase in retentions on
supplier contracts.
Decrease mainly reflects a decrease in taxes payable,
partially offset by an increase in share unit plans’ liabilities.
Refer to Note 22 to the 2021 Annual Financial Statements
Current portion of provisions
425.6
401.6
24.0
for details.
Current portion of lease liabilities
91.3
97.4
(6.1)
Decrease is mainly due to certain leases which matured or
are close to maturity at the end of 2021.
Recourse
96.9
175.0
(78.1)
Decrease
is mainly due
to repayment of Series 3
Debentures in full at maturity in the first quarter of 2021,
partially offset by the amount of draw down on the revolving
facility.
Decrease is mainly reflecting the classification of InPower
as a disposal group held for sale as at December 31, 2021.
Decrease mainly reflects the classification of InPower BC
General Partnership and its related holding companies as a
offset by the derecognition of liabilities held for sale related
to the Oil & Gas business upon its disposal in 2021.
Non-recourse
14.0
31.3
(17.2)
BC General Partnership and its related holding companies
Liabilities of disposal groups classified
as held for sale
298.9
340.3
(41.4)
disposal group held for sale as at December 31, 2021,
Total current liabilities
$ 3,951.3 $ 4,274.4 $ (323.1)
Long-term debt:
Recourse
Limited recourse
$
997.2 $
996.0 $
1.2 Not a significant change compared to prior year.
400.0
400.0
— No variance compared to prior year.
Non-recourse
156.0
400.3
(244.2)
BC General Partnership and its related holding companies
Decrease is mainly reflecting the classification of InPower
as a disposal group held for sale as at December 31, 2021.
Decrease is mainly due to decrease in the non-current
initially recognized in 2019.
Refer to Note 22 to the 2021 Annual Financial Statements
Other non-current financial liabilities
137.5
193.9
(56.3)
portion of the federal charges settlement (PPSC) liability
Non-current portion of provisions
470.4
753.2
(282.8)
for details.
Non-current portion of lease liabilities
405.7
399.2
6.5 Not a significant change compared to prior year.
Other non-current non-financial
liabilities
—
0.2
(0.2) Not a significant balance.
Deferred income tax liability
364.2
354.3
9.8 Not a significant change compared to prior year.
Total liabilities
$ 6,882.5 $ 7,771.6 $ (889.1)
Trade receivables
Contract assets
Inventories
1,145.9
1,199.2
(53.2) Decrease is mainly due to variation on multiple projects.
1,119.0
1,090.1
28.9 Increase is mainly due to variation on multiple projects.
17.0
16.1
0.9 Not a significant change compared to prior year.
Short-term debt and current portion of
long-term debt:
Other current financial assets
138.4
257.4
(119.1)
financial
Decrease includes a decrease in fair value of favourable
derivative
the classification of
instruments,
InPower BC General Partnership and its related holding
companies as a disposal group held for sale as at
December 31, 2021 and a decrease in the balance of
recovery of
suppliers and
costs expected
subcontractors and in other various current assets.
from
Other current non-financial assets
246.2
253.3
(7.2)
Assets of disposal groups
classified as held for sale
343.9
273.2
70.7
Total current assets
$ 3,632.3 $ 4,051.6 $
(419.3)
Property and equipment
$
333.5 $ 375.9 $
(42.4)
Right-of-use-assets
355.6
346.8
8.8
Decrease is mainly due to a decrease in prepaid expenses
and other, partially offset by an increase in Income taxes
and other taxes receivable.
Increase mainly reflects the classification of InPower BC
General Partnership and its related holding companies as a
disposal group held for sale as at December 31, 2021,
partially offset by the disposal in 2021 of the assets of the
Oil & Gas business that were classified as held for sale as
at December 31, 2020.
Decrease is mainly due to disposals/retirements/salvage as
well as impairment of certain assets in 2021, as the
additions were in line with the amount of deprecation during
the year.
Increase reflects additions during the year, partially offset
by depreciation expense and impairment.
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
380.7
378.7
2.0 Not a significant change compared to prior year.
41.3
9.7
31.7
Increase is mainly due to capital contributions made to
Carlyle Global Infrastructure Opportunity Fund, L.P.
3,382.9
3,429.5
(46.5) Decrease is due to foreign currency translation.
445.7
544.1
(98.3)
Decrease is mainly due to amortization expense recognized
in 2021.
658.1
655.8
2.2 Not a significant change compared to prior year.
304.2
433.9
(129.7)
Decrease is mainly due to classification of InPower BC
General Partnership and its related holding companies as a
disposal group held for sale as at December 31, 2021,
partially offset by an increase from the progress made on
the construction of the TransitNEXT project.
25.4
31.4
(6.0) Not a significant change compared with prior year.
316.2
83.0
233.2
Increase is mainly due to the Atkins Pension Plan being in
surplus as at December 31, 2021.
$ 9,876.0 $ 10,340.3 $
(464.3)
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2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
145
SNC-LAVALIN
LIABILITIES
AT DECEMBER 31
(IN MILLIONS $)
Current Liabilities
2021
2020 CHANGE ($) EXPLANATIONS
Trade payables and accrued liabilities $ 1,652.5 $ 1,730.4 $
(77.9)
Decrease is principally attributable to variations in multiple
projects and accrued expenses.
Contract liabilities
838.2
837.0
1.2 Not a significant change compared to prior year.
Other current financial liabilities
205.8
187.8
18.0
Other current non-financial liabilities
328.1
473.8
(145.7)
Current portion of provisions
425.6
401.6
24.0
Current portion of lease liabilities
91.3
97.4
(6.1)
Increase is mainly due to an increase in retentions on
supplier contracts.
Decrease mainly reflects a decrease in taxes payable,
partially offset by an increase in share unit plans’ liabilities.
Refer to Note 22 to the 2021 Annual Financial Statements
for details.
Decrease is mainly due to certain leases which matured or
are close to maturity at the end of 2021.
Short-term debt and current portion of
long-term debt:
Recourse
96.9
175.0
(78.1)
Non-recourse
14.0
31.3
(17.2)
Liabilities of disposal groups classified
as held for sale
298.9
340.3
(41.4)
Total current liabilities
$ 3,951.3 $ 4,274.4 $ (323.1)
is mainly due
Decrease
to repayment of Series 3
Debentures in full at maturity in the first quarter of 2021,
partially offset by the amount of draw down on the revolving
facility.
Decrease is mainly reflecting the classification of InPower
BC General Partnership and its related holding companies
as a disposal group held for sale as at December 31, 2021.
Decrease mainly reflects the classification of InPower BC
General Partnership and its related holding companies as a
disposal group held for sale as at December 31, 2021,
offset by the derecognition of liabilities held for sale related
to the Oil & Gas business upon its disposal in 2021.
Long-term debt:
Recourse
Limited recourse
$
997.2 $
996.0 $
1.2 Not a significant change compared to prior year.
400.0
400.0
— No variance compared to prior year.
Non-recourse
156.0
400.3
(244.2)
Other non-current financial liabilities
137.5
193.9
(56.3)
Non-current portion of provisions
470.4
753.2
(282.8)
Decrease is mainly reflecting the classification of InPower
BC General Partnership and its related holding companies
as a disposal group held for sale as at December 31, 2021.
Decrease is mainly due to decrease in the non-current
portion of the federal charges settlement (PPSC) liability
initially recognized in 2019.
Refer to Note 22 to the 2021 Annual Financial Statements
for details.
Non-current portion of lease liabilities
405.7
399.2
6.5 Not a significant change compared to prior year.
Other non-current non-financial
liabilities
—
0.2
(0.2) Not a significant balance.
Deferred income tax liability
364.2
354.3
9.8 Not a significant change compared to prior year.
Total liabilities
$ 6,882.5 $ 7,771.6 $ (889.1)
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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to
the
income statement upon
Other components of equity of
disposal groups classified as held
for sale
—
594.1
(594.1)
The 2020 balance primarily related to cumulative balance of
exchange differences on translating foreign operations of
the Oil & Gas business which was classified as a disposal
group held for sale as at December 31, 2020. The balance
the
was reclassified
completion of the disposal in 2021.
SNC-LAVALIN
EQUITY
AT DECEMBER 31
(IN MILLIONS $)
Share capital
SNC-LAVALIN
2021
2020 CHANGE ($) EXPLANATIONS
$ 1,805.1 $ 1,805.1 $
— Not applicable.
Related Party Transactions
Retained earnings
1,501.6
478.4
1,023.2
Other components of equity
(333.3)
(320.1)
(13.2)
Increase is mainly attributable to the 2021 net income,
combined with other comprehensive income mainly related
to the remeasurement of defined benefit plans.
Decrease was largely due to exchange differences on
translating foreign operations, partially offset by cash flow
hedges.
The Company discloses information on its related party transactions, as defined in IAS 24, Related Party
Disclosures, in Note 36 to the 2021 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 2021 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 2021
Annual Financial Statements.
Accounting Policies and Changes
Please refer to Note 2 to the 2021 Annual Financial Statements for more information regarding the Company's
significant accounting policies.
Equity attributable to SNC-Lavalin
shareholders
$ 2,973.4 $ 2,557.5 $ 415.9
Non-controlling interests
20.1
11.2
8.9 Not a significant balance.
Total Equity
$ 2,993.5 $ 2,568.7 $ 424.8
WORKING CAPITAL
AT DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE
NOTED)
2021
2020 CHANGE ($) EXPLANATIONS
Working Capital (1)
$
(319.0) $
(222.9) $
Current Ratio (1)
0.92
0.95
(96.1) Decrease is due to the variance of multiple current assets
and liabilities, notably the decrease of cash and cash
equivalents, other current financial assets and other current
non-financial liabilities.
(0.03)
(1) Supplementary IFRS financial measures. Please refer to Section 13 for further information on these financial measures.
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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 2021 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 2021 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 2021
Annual Financial Statements.
Accounting Policies and Changes
Please refer to Note 2 to the 2021 Annual Financial Statements for more information regarding the Company's
significant accounting policies.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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SNC-LAVALIN
Non-IFRS Financial Measures and
Ratios, Supplementary Financial
Measures and Non-Financial Information
The following section provides information regarding non-IFRS financial measures and ratios, supplementary
financial measures and non-financial information used by the Company to analyze and evaluate its results. These
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 measures 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 measures 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 ratios, supplementary financial measures and other non-financial information are presented
separately for PS&PM, by excluding components related to Capital, as the Company believes that such measures
are useful as these PS&PM 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 ratio 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 13.4.1 for a
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 PS&PM activities and
for Capital, as the Company believes that such measures are useful since these activities are usually analyzed
separately by the Company.
Adjusted EBITDA is a non-IFRS financial measure used by management to facilitate comparisons of operating
performance 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 and transformation
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 Note 33 to
the 2021 Annual Financial Statements), the fair value revaluation of the Highway 407 ETR contingent consideration
receivable, the Guaranteed Minimum Pension (“GMP”) equalization expenses (as described in Note 3 to the 2021
Annual Financial Statements) and the reversal of impairment loss (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 acquisition-related
costs and integration costs and the federal charges settlement (PPSC) expense were removed from the list of
adjustments disclosed in prior periods as there were no adjustments of this nature in the current periods and the
previous year. 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 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 13.4.2 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 PS&PM activities and for Capital (all adjustments listed above apply to
PS&PM activities, except for the fair value revaluation of the Highway 407 ETR contingent consideration receivable
and gains (losses) on disposals of Capital investments (or adjustments to gains or losses on such disposals),
which only apply to Capital), as the Company believes that such measures are useful since these activities are
analyzed separately by the Company.
Adjusted EBITDA to revenue ratio is a non-IFRS ratio used to analyze the profitability of the Company and
facilitate period-to-period comparisons, as well as comparison with peers. This ratio is calculated by dividing the
amount of Adjusted EBITDA for a given period by the amount of revenue for the same period. This ratio is provided
both on a consolidated basis and also separately for PS&PM activities and for Capital (all adjustments listed above
apply to PS&PM activities, except for the fair value revaluation of the Highway 407 ETR contingent consideration
receivable and gains (losses) on disposals of Capital investments (or adjustments to gains or losses on such
disposals), which only apply to Capital, as the Company believes that such ratio is useful since these activities are
analyzed separately by the Company. The table presenting the calculation of this ratio can be found at Section
13.4.3.
Adjusted net income (loss) attributable to SNC-Lavalin shareholders is a non-IFRS financial measure and 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 and transformation 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), the fair value revaluation of the Highway 407
ETR contingent consideration receivable, the adjustment to provision for the Pyrrhotite Case litigation, reversal of
impairment loss (impairment loss) on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell, the GMP equalization expense, as well as income taxes and non-controlling interests on
these adjustments. It should be noted that the following adjustments were removed from the list of adjustments
disclosed in prior periods as there were no adjustments of this nature in the current and comparative periods:
acquisition-related costs and integration costs, financing costs related to the agreement to sell shares of Highway
407 ETR and the federal charges settlement (PPSC) expense. 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 13.4.1 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 PS&PM activities and for Capital (all adjustments listed above apply to PS&PM activities, except for
the fair value revaluation of the Highway 407 ETR contingent consideration receivable and gains (losses) on
disposals of Capital investments (or adjustments to gains or losses on such disposals), which only apply to
Capital), as the Company believes that such measures are useful since these activities are analyzed separately by
the Company.
Booking-to-revenue ratio is a non-IFRS ratio that 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 period. It should be noted that the amount of revenue used to calculate this
ratio includes only revenues that are under the scope of IFRS 15, Revenues from contracts with customers and
disclosed in Note 9 to the 2021 Annual Financial Statements. Refer to Section 5 for the calculation of the booking-
to-revenue ratio on a consolidated basis and to Section 13.4.4 for the calculation of the booking-to-revenue ratio
for selected segments for which the Company believes to be the most meaningful.
EBITDA is a non-IFRS financial measure and 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 13.4.2 for a reconciliation of EBITDA to net
income (loss) from continuing operations as determined under IFRS.
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SNC-LAVALIN
which only apply to Capital), as the Company believes that such measures are useful since these activities are
analyzed separately by the Company.
Adjusted EBITDA to revenue ratio is a non-IFRS ratio used to analyze the profitability of the Company and
facilitate period-to-period comparisons, as well as comparison with peers. This ratio is calculated by dividing the
amount of Adjusted EBITDA for a given period by the amount of revenue for the same period. This ratio is provided
both on a consolidated basis and also separately for PS&PM activities and for Capital (all adjustments listed above
apply to PS&PM activities, except for the fair value revaluation of the Highway 407 ETR contingent consideration
receivable and gains (losses) on disposals of Capital investments (or adjustments to gains or losses on such
disposals), which only apply to Capital, as the Company believes that such ratio is useful since these activities are
analyzed separately by the Company. The table presenting the calculation of this ratio can be found at Section
13.4.3.
Adjusted net income (loss) attributable to SNC-Lavalin shareholders is a non-IFRS financial measure and 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 and transformation 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), the fair value revaluation of the Highway 407
ETR contingent consideration receivable, the adjustment to provision for the Pyrrhotite Case litigation, reversal of
impairment loss (impairment loss) on remeasurement of assets of disposal group classified as held for sale to fair
value less cost to sell, the GMP equalization expense, as well as income taxes and non-controlling interests on
these adjustments. It should be noted that the following adjustments were removed from the list of adjustments
disclosed in prior periods as there were no adjustments of this nature in the current and comparative periods:
acquisition-related costs and integration costs, financing costs related to the agreement to sell shares of Highway
407 ETR and the federal charges settlement (PPSC) expense. 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 13.4.1 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 PS&PM activities and for Capital (all adjustments listed above apply to PS&PM activities, except for
the fair value revaluation of the Highway 407 ETR contingent consideration receivable and gains (losses) on
disposals of Capital investments (or adjustments to gains or losses on such disposals), which only apply to
Capital), as the Company believes that such measures are useful since these activities are analyzed separately by
the Company.
Booking-to-revenue ratio is a non-IFRS ratio that 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 period. It should be noted that the amount of revenue used to calculate this
ratio includes only revenues that are under the scope of IFRS 15, Revenues from contracts with customers and
disclosed in Note 9 to the 2021 Annual Financial Statements. Refer to Section 5 for the calculation of the booking-
to-revenue ratio on a consolidated basis and to Section 13.4.4 for the calculation of the booking-to-revenue ratio
for selected segments for which the Company believes to be the most meaningful.
EBITDA is a non-IFRS financial measure and 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 13.4.2 for a reconciliation of EBITDA to net
income (loss) from continuing operations as determined under IFRS.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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Return on Average Shareholders’ Equity (“ROASE”) is a supplementary financial measure and 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. See
Section 8.4.
Segment Adjusted EBITDA is non-IFRS financial measure derived from Segment Adjusted EBIT (defined in Note
4 to the 2021 Annual Financial Statements) and is 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 peers. See a
reconciliation of Segment Adjusted EBITDA to Segment Adjusted EBIT and consolidated EBIT in Section 13.4.5.
Segment Adjusted EBITDA to segment net revenue ratio is a non-IFRS ratio used to analyze the profitability of
the Company’s segments and management believes that it facilitates period-to-period comparisons, as well as
comparison with peers. This ratio is calculated by dividing the amount of Segment Adjusted EBITDA of a given
period by the amount of segment net revenue for the same period. While this MD&A does not actually disclose this
ratio, the Company is providing, at Section 13.5.3 of this MD&A, the details of the calculation of this ratio as both
the press release issued by the Company announcing the results as well as other documents made publicly
available by the Company for the year ended December 31, 2021 make reference to this ratio when disclosing the
Company’s forward-looking financial targets. In addition, as previously disclosed, beginning in respect of the first
quarter of 2022, the Company will be changing its segment reporting and this non-IFRS ratio will be disclosed for
the new Engineering Services segment in the Company’s future public financial documents, with comparative
figures restated to reflect the new operating and reportable segments and lines of business.
Segment net revenue is a non-IFRS financial measure that consists of segment revenues less direct costs for
sub-contractors and other direct expenses that are recoverable directly from clients. Management believes that this
measure is used by certain securities analysts and investors when comparing the Company’s performance against
competitors and peer companies. While this MD&A does not actually disclose segment net revenue, the Company
is providing, at Section 13.5.3 of this MD&A, a quantitative reconciliation of this measure to segment revenue for
the year ended December 31, 2021 as both the press release issued by the Company announcing the results as
well as other documents made publicly available by the Company for the year ended December 31, 2021 make
reference to this measure when disclosing the Company’s forward-looking financial targets. In addition, as
previously disclosed, beginning in respect of the first quarter of 2022, the Company will be changing its segment
reporting and this non-IFRS measure will be disclosed for the new Engineering Services segment in the
Company’s future public financial documents, with comparative figures restated to reflect the new operating and
reportable segments and lines of business.
SNC-LAVALIN
13.2 LIQUIDITY
Days Sales Outstanding (“DSO”) for the EDPM segment is a supplementary financial measure that
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. See the DSO for the EDPM segment in Section 4.2.4.1.
Free cash flow (usage) is a non-IFRS financial measure and is defined as net cash generated from (used for)
operating activities less acquisition of property and equipment, payment of lease liabilities and the federal charges
settlement included in operating activities. SNC-Lavalin believes that free cash flow (usage) provides a meaningful
measure of discretionary cash generated (used) by and available to the Company to service debt, meet other
payment obligations and make strategic investments, among other things. This non-IFRS measure excludes the
impact of the federal charges settlement (refer to Note 18 to the 2021 Annual Financial Statements and to Section
14) included in operating activities as the Company believes that such element is not representative of its capacity
to generate cash flow from its ongoing operations. Refer to Section 8.1 for a reconciliation of free cash flow
(usage) to net cash generated from (used by) operating activities.
Free cash flow (usage) to adjusted net income (loss) attributable to SNC-Lavalin shareholders ratio is a
non-IFRS ratio calculated by dividing free cash flow (usage) by adjusted net income (loss) attributable to SNC-
Lavalin shareholders, both non-IFRS measures. The Company believes that such ratio is useful when analyzing
the ability of the Company to convert its profitability into cash. While this MD&A does not actually disclose this ratio,
the Company is providing, at Section 13.5.5 of this MD&A, the details of the calculation of this ratio as both the
press release issued by the Company announcing the results as well as other documents made publicly available
by the Company for the year ended December 31, 2021 make reference to this ratio when disclosing the
Company’s forward-looking financial targets.
Net limited recourse and recourse debt is a non-IFRS financial measure corresponding to the total amount of
limited recourse and recourse debt, minus the amount of cash and cash equivalents at the end of a given period.
This measure is used by management to analyze the indebtedness of the Company, excluding lease liabilities as
well as indebtedness related to non-recourse financing. Refer to Section 8.5 for a calculation of this non-IFRS
measure.
Net limited recourse and recourse debt to Adjusted EBITDA ratio is a non-IFRS ratio used to analyze the
Company’s financial leverage. It is calculated by comparing the Net limited recourse and recourse debt at the end
of a given period with Adjusted EBITDA of the corresponding trailing twelve-month period. Management believes
that this measure is useful in evaluating the Company’s ability to service its limited recourse and recourse debt
from its continuing operations. Refer to Section 8.5 for a calculation of this non-IFRS ratio.
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. This
measure and ratio are supplementary financial measures 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. These measures are
presented at Section 9.
13.3 OTHER
Organic revenue is a non-IFRS financial measure corresponding to the amount of revenue of a given period,
excluding the effect of acquisitions, disposals and foreign currency changes of the same period. This non-IFRS
measure is used to analyze the level of activity of the Company excluding the effect of certain transactions and the
impact of foreign exchange fluctuations in order to facilitate period-to-period comparisons, as well as comparison
with peers. As such, organic revenue growth is a non-IFRS ratio calculated by comparing the amount of organic
revenue of a given period with the amount of organic revenue of the comparative period. Both organic revenue and
organic revenue growth do not have a standardized definition within IFRS and other issuers may define these
measures differently and, accordingly, these measures may not be comparable to similar measures used by other
issuers. Refer to Section 13.4.6 for calculations of the organic revenue growth ratio.
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13.2 LIQUIDITY
Days Sales Outstanding (“DSO”) for the EDPM segment is a supplementary financial measure that
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. See the DSO for the EDPM segment in Section 4.2.4.1.
Free cash flow (usage) is a non-IFRS financial measure and is defined as net cash generated from (used for)
operating activities less acquisition of property and equipment, payment of lease liabilities and the federal charges
settlement included in operating activities. SNC-Lavalin believes that free cash flow (usage) provides a meaningful
measure of discretionary cash generated (used) by and available to the Company to service debt, meet other
payment obligations and make strategic investments, among other things. This non-IFRS measure excludes the
impact of the federal charges settlement (refer to Note 18 to the 2021 Annual Financial Statements and to Section
14) included in operating activities as the Company believes that such element is not representative of its capacity
to generate cash flow from its ongoing operations. Refer to Section 8.1 for a reconciliation of free cash flow
(usage) to net cash generated from (used by) operating activities.
Free cash flow (usage) to adjusted net income (loss) attributable to SNC-Lavalin shareholders ratio is a
non-IFRS ratio calculated by dividing free cash flow (usage) by adjusted net income (loss) attributable to SNC-
Lavalin shareholders, both non-IFRS measures. The Company believes that such ratio is useful when analyzing
the ability of the Company to convert its profitability into cash. While this MD&A does not actually disclose this ratio,
the Company is providing, at Section 13.5.5 of this MD&A, the details of the calculation of this ratio as both the
press release issued by the Company announcing the results as well as other documents made publicly available
by the Company for the year ended December 31, 2021 make reference to this ratio when disclosing the
Company’s forward-looking financial targets.
Net limited recourse and recourse debt is a non-IFRS financial measure corresponding to the total amount of
limited recourse and recourse debt, minus the amount of cash and cash equivalents at the end of a given period.
This measure is used by management to analyze the indebtedness of the Company, excluding lease liabilities as
well as indebtedness related to non-recourse financing. Refer to Section 8.5 for a calculation of this non-IFRS
measure.
Net limited recourse and recourse debt to Adjusted EBITDA ratio is a non-IFRS ratio used to analyze the
Company’s financial leverage. It is calculated by comparing the Net limited recourse and recourse debt at the end
of a given period with Adjusted EBITDA of the corresponding trailing twelve-month period. Management believes
that this measure is useful in evaluating the Company’s ability to service its limited recourse and recourse debt
from its continuing operations. Refer to Section 8.5 for a calculation of this non-IFRS ratio.
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. This
measure and ratio are supplementary financial measures 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. These measures are
presented at Section 9.
13.3 OTHER
Organic revenue is a non-IFRS financial measure corresponding to the amount of revenue of a given period,
excluding the effect of acquisitions, disposals and foreign currency changes of the same period. This non-IFRS
measure is used to analyze the level of activity of the Company excluding the effect of certain transactions and the
impact of foreign exchange fluctuations in order to facilitate period-to-period comparisons, as well as comparison
with peers. As such, organic revenue growth is a non-IFRS ratio calculated by comparing the amount of organic
revenue of a given period with the amount of organic revenue of the comparative period. Both organic revenue and
organic revenue growth do not have a standardized definition within IFRS and other issuers may define these
measures differently and, accordingly, these measures may not be comparable to similar measures used by other
issuers. Refer to Section 13.4.6 for calculations of the organic revenue growth ratio.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
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13.4 RECONCILIATIONS
The objective of this section is to provide a quantitative reconciliation between certain non-IFRS measures to the
most comparable measure specified under IFRS and to present the underlying calculation for certain non-IFRS
ratios.
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
Before taxes
Taxes
After taxes Diluted EPS in $ Before taxes
Taxes
After taxes Diluted EPS in $
$ 100.2 $
0.57
$ (356.1) $
(2.03)
13.4.1 ADJUSTED DILUTED EPS AND ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO
Restructuring and transformation costs
$ 70.1 $ (16.5) $ 53.6
$ 63.3 $ (13.9) $ 49.4
SNC-LAVALIN SHAREHOLDERS
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
Before taxes
Taxes
After taxes Diluted EPS in $ Before taxes
Taxes
After taxes Diluted EPS in $
Net loss attributable to SNC-Lavalin
shareholders from continuing
operations
$ (15.3) $
(0.09)
$ (322.9) $
(1.84)
Restructuring and transformation costs
$ 30.9 $ (6.7) $ 24.2
$ 31.8 $ (8.9) $ 23.0
Amortization of intangible assets related to
business combinations
Adjustments on gain on disposals of
Capital investments
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
23.4
(5.2)
18.1
23.2
(4.3)
18.9
(5.0)
1.4
(3.7)
(25.0)
—
(25.0)
—
—
—
—
—
—
4.0
(0.8)
3.2
48.3
(11.7)
36.6
—
—
—
6.1
—
6.1
Total adjustments
$ 49.2 $(10.5) $ 38.7 $
0.22 $ 88.3 $ (25.8) $ 62.7 $
0.36
(5.0)
1.4
(3.7)
(25.0)
—
(25.0)
Adjusted net income (loss) attributable
to SNC-Lavalin shareholders
Net income attributable to SNC-Lavalin
shareholders from Capital
Adjustments on gain on disposals of
Capital investments already considered
above
$ 23.4 $
0.13
$ (260.2) $
(1.48)
$ 52.6 $
0.30
$ 33.5 $
0.19
(5.0)
1.4
(3.7)
(25.0)
—
(25.0)
Total adjustments
$ (5.0) $ 1.4 $
(3.7) $
(0.02) $ (25.0) $ — $ (25.0) $
(0.14)
Adjusted net income attributable to
SNC-Lavalin shareholders from
Capital
Adjusted net income (loss) attributable
to SNC-Lavalin shareholders from
PS&PM
$ 48.9 $
0.28
$
8.5 $
0.05
$ (25.6) $
(0.15)
$ (268.7) $
(1.53)
Net income (loss) attributable to SNC-
Lavalin shareholders from continuing
operations
Amortization of intangible assets related to
business combination
Adjustments on gain on disposals of
Capital investments
Fair value revaluation of Highway 407
ETR contingent consideration
receivable
Loss on disposals of PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite
Case litigation
Impairment loss (reversal of 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
Net income attributable to SNC-Lavalin
shareholders from Capital
Adjustments on gain on disposals of
Capital investments already
considered above
Fair value revaluation of Highway 407
ETR contingent consideration
receivable already considered above
Adjusted net income attributable to
SNC-Lavalin shareholders from
Capital
PS&PM
Adjusted net income (loss) attributable
to SNC-Lavalin shareholders from
89.5
(17.3)
72.1
126.8
(23.3)
103.5
(5.0)
1.4
(3.7)
(25.0)
—
(25.0)
—
—
0.6
—
—
—
—
—
—
0.6
—
—
57.2
(7.6)
49.6
7.5
4.0
—
(0.8)
7.5
3.2
58.3
(14.7)
43.6
(1.3)
—
(1.3)
6.1
—
6.1
Total adjustments
$ 153.9 $ (32.5) $ 121.4 $
0.69 $ 298.1 $ (60.2) $ 237.9 $
1.36
$ 221.6 $
1.26
$ (118.2) $
(0.67)
$ 73.2 $
0.42
$ 45.6 $
0.26
Total adjustments
$ (5.0) $ 1.4 $
(3.7) $
(0.02) $ 32.2 $ (7.6) $ 24.6 $
0.14
—
—
—
57.2
(7.6)
49.6
$ 69.5 $
0.40
$ 70.2 $
0.40
$ 152.1 $
0.87
$ (188.4) $
(1.07)
152
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
152
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
153
SNC-LAVALIN
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
Before taxes
Taxes
After taxes Diluted EPS in $ Before taxes
Taxes
After taxes Diluted EPS in $
Net income (loss) attributable to SNC-
Lavalin shareholders from continuing
operations
$ 100.2 $
0.57
$ (356.1) $
(2.03)
Restructuring and transformation costs
$ 70.1 $ (16.5) $ 53.6
$ 63.3 $ (13.9) $ 49.4
Amortization of intangible assets related to
business combination
Adjustments on gain on disposals of
Capital investments
Fair value revaluation of Highway 407
ETR contingent consideration
receivable
Loss on disposals of PS&PM businesses
GMP Equalization
Adjustment to provision for the Pyrrhotite
Case litigation
Impairment loss (reversal of impairment
loss) on remeasurement of assets of
disposal group classified as held for
sale to fair value less cost to sell
89.5
(17.3)
72.1
126.8
(23.3)
103.5
(5.0)
1.4
(3.7)
(25.0)
—
(25.0)
—
—
0.6
—
—
—
—
—
—
0.6
—
—
57.2
(7.6)
49.6
7.5
4.0
—
(0.8)
7.5
3.2
58.3
(14.7)
43.6
(1.3)
—
(1.3)
6.1
—
6.1
Total adjustments
$ 153.9 $ (32.5) $ 121.4 $
0.69 $ 298.1 $ (60.2) $ 237.9 $
1.36
Adjusted net income (loss) attributable
to SNC-Lavalin shareholders
Net income attributable to SNC-Lavalin
shareholders from Capital
Adjustments on gain on disposals of
Capital investments already
considered above
Fair value revaluation of Highway 407
ETR contingent consideration
receivable already considered above
$ 221.6 $
1.26
$ (118.2) $
(0.67)
$ 73.2 $
0.42
$ 45.6 $
0.26
(5.0)
1.4
(3.7)
(25.0)
—
(25.0)
—
—
—
57.2
(7.6)
49.6
Total adjustments
$ (5.0) $ 1.4 $
(3.7) $
(0.02) $ 32.2 $ (7.6) $ 24.6 $
0.14
Adjusted net income attributable to
SNC-Lavalin shareholders from
Capital
Adjusted net income (loss) attributable
to SNC-Lavalin shareholders from
PS&PM
$ 69.5 $
0.40
$ 70.2 $
0.40
$ 152.1 $
0.87
$ (188.4) $
(1.07)
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
153
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SNC-LAVALIN
13.4.2 CONSOLIDATED EBITDA AND ADJUSTED EBITDA
FOURTH QUARTERS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE
NOTED)
Net income (loss) from continuing
operations
Net financial expenses
Income taxes
EBIT
Depreciation and amortization
Amortization of intangible assets
related to business combinations
EBITDA
Restructuring and transformation costs
Adjustments on gain on disposals of
Capital investments
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
2021
2020
FROM PS&PM FROM CAPITAL
TOTAL
FROM PS&PM FROM CAPITAL
TOTAL
$
(67.7)
$
52.6
$
(15.1)
$
(353.1)
$
33.5
$
(319.7)
$
$
$
$
22.9
(49.7)
4.1
1.9
27.0
(47.8)
23.6
(80.2)
3.9
(0.3)
27.5
(80.5)
(94.5)
$
58.5
$
(35.9)
$
(409.7)
$
37.0
$
(372.7)
45.1
$
—
$
45.2
$
48.8 $
— $
48.8
23.4
—
(25.9)
$
58.5
$
30.9
$
—
$
—
—
—
—
(5.0)
—
—
—
23.4
32.6
30.9
(5.0)
—
—
—
23.2
—
23.2
$
$
(337.8)
$
37.1
$
(300.7)
31.8
$
—
$
31.8
—
4.0
48.3
6.1
(25.0)
(25.0)
—
—
—
4.0
48.3
6.1
Adjusted EBITDA
$
4.9
$
53.5
$
58.5
$
(247.6)
$
12.1
$
(235.5)
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE
NOTED)
Net income (loss) from continuing
operations
Net financial expenses
Income taxes
EBIT
Depreciation and amortization
Amortization of intangible assets
related to business combinations
EBITDA
Restructuring and transformation costs
Adjustments on gain on disposals of
Capital investments
Fair value revaluation of the Highway
407 ETR contingent consideration
receivable
Loss on disposals of PS&PM
businesses
GMP Equalization
Adjustment to provision for the
Pyrrhotite Case litigation
Impairment loss (reversal of impairment
loss) on remeasurement of assets of
disposal group classified as held for
sale to fair value less cost to sell
2021
2020
FROM PS&PM FROM CAPITAL
TOTAL
FROM PS&PM FROM CAPITAL
TOTAL
$
32.5 $
73.2 $
105.7
$
(392.5) $
45.6 $
(346.9)
93.9
(28.4)
16.6
6.4
110.5
(22.0)
98.0 $
96.1 $
194.1
176.9 $
0.1 $
177.0
89.5
—
89.5
364.4 $
96.2 $
460.6
70.1 $
— $
70.1
$
$
$
$
97.7
(53.4)
16.3
(5.6)
114.0
(59.0)
(348.2) $
56.2 $
(292.0)
193.7 $
0.2 $
193.9
126.8
—
126.8
(27.8) $
56.5 $
63.3 $
— $
28.7
63.3
$
$
$
$
—
(5.0)
(5.0)
—
(25.0)
(25.0)
—
0.6
—
—
—
—
—
—
—
0.6
—
—
—
57.2
57.2
7.5
4.0
58.3
—
—
—
7.5
4.0
58.3
(1.3)
—
(1.3)
6.1
—
6.1
Adjusted EBITDA
$
433.8 $
91.2 $
525.0
$
111.4 $
88.7 $
200.1
154
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
154
SNC-LAVALIN
13.4.3 ADJUSTED EBITDA TO REVENUE RATIO
FOURTH QUARTER ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues
EBIT to revenue ratio (in %)
Adjusted EBITDA to revenue ratio (in %)
FOURTH QUARTER ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues
EBIT to revenue ratio (in %)
Adjusted EBITDA to revenue ratio (in %)
YEAR ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues
EBIT to revenue ratio (in %)
Adjusted EBITDA to revenue ratio (in %)
YEAR ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenues
EBIT to revenue ratio (in %)
Adjusted EBITDA to revenue ratio (in %)
2021
FROM PS&PM FROM CAPITAL
TOTAL
$ 1,879.7
$
(5.0) %
0.3 %
65.2
89.7 %
82.1 %
$ 1,944.9
(1.8) %
3.0 %
2020
FROM PS&PM FROM CAPITAL
TOTAL
$ 1,675.3
$
(24.5) %
(14.8) %
22.6
163.7 %
53.4 %
$ 1,697.9
(22.0) %
(13.9) %
2021
FROM PS&PM FROM CAPITAL
TOTAL
$ 7,237.1
$
134.1
$ 7,371.3
1.4 %
6.0 %
71.7 %
68.0 %
2.6 %
7.1 %
2020
FROM PS&PM FROM CAPITAL
TOTAL
$ 6,878.1
$
129.4
$ 7,007.5
(5.1) %
1.6 %
43.5 %
68.5 %
(4.2) %
2.9 %
13.4.4 BOOKING TO REVENUE RATIO
YEAR ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
Opening backlog
Plus: Contract bookings during the year
Less: Revenues from contracts with customers recognized
during the year (1)
Backlog of business sold during the year
Ending backlog
Booking-to-revenue ratio (in %)
YEAR 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 (1)
Ending backlog
Booking-to-revenue ratio (in %)
$
$
$
EDPM
2,864.4
4,106.4
3,831.7
1.3
3,137.8
$
$
Nuclear
890.6
814.1
869.8
—
834.9
Infrastructure
Services
Resources
$ 7,098.5
1,288.4
$
1,414.4
—
$ 6,972.5
$
161.6
150.0
171.7
—
139.9
107.0 %
94.0 %
91.0 %
87.0 %
2020
Nuclear
Infrastructure
Services
$ 1,154.0
630.1
$ 7,337.0
1,084.9
$
893.5
1,323.4
Resources
255.4
64.8
158.6
EDPM
2,630.0
3,955.5
3,721.1
$
2,864.4
$
890.6
$ 7,098.5
$
161.6
106.0 %
71.0 %
82.0 %
41.0 %
(1)
Revenues under the scope of IFRS 15, as disclosed in Note 9 to the 2021 Annual Financial Statements.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
155
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SNC-LAVALIN
13.4.5 SEGMENT ADJUSTED EBITDA
YEAR ENDED DECEMBER 31
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
YEAR ENDED DECEMBER 31
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
2021
$ 431.8 $ 135.9 $
92.7 $
(39.4) $ (250.9) $ 119.3 $ (295.2) $ 194.1
82.5
12.0
10.3
10.3
17.2
0.1
$ 514.3 $ 147.9 $ 103.0 $
(29.2) $ (233.7) $ 119.4
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
2020
$ 302.3 $ 140.1 $
97.2 $ (171.1) $ (359.7) $ 116.6 $ (417.3) $ (292.0)
98.6
13.8
11.1
12.0
17.5
0.2
$ 400.9 $ 153.9 $ 108.3 $ (159.1) $ (342.1) $ 116.9
(1) "Corporate and other" corresponds to items not specifically allocated to segments and, therefore, not included in the Segment Adjusted EBIT of the Company's segments, for which
details are provided below.
The table below presents the details of the "Corporate and other" amount reconciling the Segment Adjusted EBIT
to the Company's consolidated EBIT:
YEARS ENDED DECEMBER 31
(IN MILLIONS $)
2021
Corporate selling, general and administrative expenses not allocated to the segments
$
145.1 $
Impairment loss arising from expected credit losses
Loss (gain) arising on financial instruments at fair value through profit or loss
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
Loss on disposals of PS&PM businesses
Impairment loss (reversal of impairment loss) on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell
—
(3.7)
70.1
89.5
(5.0)
0.6
(1.3)
2020
175.9
0.9
61.9
63.3
126.8
(25.0)
7.5
6.1
Corporate and other - Total
$
295.2 $
417.3
156
156
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
SNC-LAVALIN
13.4.6 ORGANIC REVENUE GROWTH
FOURTH QUARTER ENDED DECEMBER 31
(IN MILLIONS $)
EDPM
Nuclear
Infrastructure Services
Total - SNCL Engineering Services
FOURTH QUARTER ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
EDPM
Nuclear
Infrastructure Services
Total - SNCL Engineering Services
YEAR ENDED DECEMBER 31
(IN MILLIONS $)
EDPM
Nuclear
Infrastructure Services
Total - SNCL Engineering Services
YEAR ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Variance
Foreign
exchange
impact
Divestiture
impact
Organic
revenue growth
(contraction)
2021 Revenue
$ 1,063.5 $
2020 Revenue
220.4
386.8
943.3 $
245.3
334.4
120.2 $
(24.9)
52.5
(19.8) $
(0.6) $
(3.2)
(6.8)
—
—
$ 1,670.8 $ 1,523.0 $
147.8 $
(29.8) $
(0.6) $
140.7
(21.7)
59.2
178.2
2020 Revenue
2021 Revenue
$ 1,063.5 $
943.3
245.3
334.4
$ 1,670.8 $ 1,523.0
220.4
386.8
Foreign
exchange
impact (%)
(2.4) %
(1.2) %
(2.4) %
(2.2) %
Organic
revenue growth
(contraction)
(%)
15.2 %
(9.0) %
18.1 %
11.9 %
Divestiture
impact (%)
(0.1) %
— %
— %
— %
Variance (%)
12.7 %
(10.1) %
15.7 %
9.7 %
2021 Revenue
$ 3,848.8 $ 3,721.1 $
2020 Revenue
904.7
1,416.6
928.6
1,325.3
Variance
Foreign
exchange
impact
Divestiture
impact
Organic
revenue growth
(contraction)
127.7 $
(23.9)
91.3
(94.6) $
(17.2)
(22.3)
(2.7) $
—
—
225.0
(6.7)
113.6
331.8
$ 6,170.0 $ 5,975.0 $
195.0 $
(134.1) $
(2.7) $
EDPM
Nuclear
Infrastructure Services
Total - SNCL Engineering Services
2021 Revenue
2020 Revenue
$ 3,848.8 $ 3,721.1
928.6
1,325.3
$ 6,170.0 $ 5,975.0
904.7
1,416.6
Variance (%)
3.4 %
(2.6) %
6.9 %
3.3 %
Foreign
exchange
impact (%)
(2.5) %
(1.9) %
(1.7) %
(2.2) %
Organic
revenue growth
(contraction)
(%)
6.0 %
(0.7) %
8.6 %
5.5 %
Divestiture
impact (%)
(0.1) %
— %
— %
— %
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
157
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SNC-Lavalin 2021 Financial Report
SNC-LAVALIN
13.5 ADDITIONAL INFORMATION AND RECONCILIATIONS
13.5.1 IFRS MEASURES AND NON-IFRS MEASURES UNDER NEW STRUCTURE EFFECTIVE
JANUARY 1, 2022
As mentioned at Section 1.2, the Company will present its segment results, starting on January 1, 2022, based on
its new operational structure. The Company will also start presenting additional non-IFRS financial measures,
some of which will be provided under the new operating segments structure. As such, the table below provides a
reconciliation of such new segment operating results and related non-IFRS financial measures for 2021, on a
quarterly and annual basis. Please refer to Section 13.4.5 for the quantitative reconciliation of Segment Adjusted
EBITDA for the year end December 31, 2021 and to Section 13.5.2 for the quantitative reconciliations of Segment
Adjusted EBITDA for each quarter of 2021.
YEAR ENDED DECEMBER 31
(IN MILLIONS $)
REVENUES BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
YEAR ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS
OTHERWISE NOTED)
SEGMENT ADJUSTED EBIT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
Segment Adjusted EBIT to
segment revenue ratio
(in %) (1)
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 3,848.8 $
— $
— $
— $ 3,848.8 $
— $
— $ 3,848.8
2021
—
904.7
—
—
904.7
470.4
588.4
1,416.6
—
—
—
904.7
—
1,416.6
357.8
137.3
22.6
—
—
—
—
—
—
—
—
—
137.3
34.4
—
171.8
—
22.6
872.8
—
895.3
—
—
—
134.1
134.1
$ 4,366.4 $ 904.7 $ 470.4 $ 588.4 $ 6,330.0 $ 907.2 $ 134.1 $ 7,371.3
2021
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 431.8
$ —
$ —
$ —
$ 431.8
$ —
$ —
$ 431.8
—
19.9
9.3
3.0
—
135.9
—
—
—
—
—
54.6
—
—
—
—
18.2
—
—
—
135.9
92.7
9.3
3.0
—
—
—
(48.7)
(253.9)
—
—
—
—
135.9
92.7
(39.4)
(250.9)
—
119.3
119.3
$ 464.0
$ 135.9
$ 54.6
$ 18.2
$ 672.7
$ (302.6)
$ 119.3
$ 489.3
10.6 %
15.0 %
11.6 %
3.1 %
10.6 %
(33.4) %
89.0 %
6.6 %
(1) Corresponds to the percentage obtained by dividing the amount of Segment Adjusted EBIT by the amount of segment revenue.
158
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
158
SNC-LAVALIN
YEAR ENDED DECEMBER 31
(IN MILLIONS $)
SEGMENT ADJUSTED EBITDA
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
FIRST QUARTER
(IN MILLIONS $)
REVENUES BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
FIRST QUARTER
(IN MILLIONS $, EXCEPT AS
OTHERWISE NOTED)
SEGMENT ADJUSTED EBIT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
Segment Adjusted EBIT to
segment revenue ratio
(in %) (1)
2021
Engineering
Services
$ 514.3
—
24.2
11.3
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ —
147.9
—
—
$ —
—
56.7
—
$ —
—
22.1
—
$ 514.3
147.9
103.0
11.3
$ —
—
—
(40.5)
$ —
—
—
—
$ 514.3
147.9
103.0
(29.2)
9.2
—
—
—
—
—
—
—
9.2
—
(242.9)
—
(233.7)
—
119.4
119.4
$ 558.9
$ 147.9
$ 56.7
$ 22.1
$ 785.7
$ (283.4)
$ 119.4
$ 621.6
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 933.2 $
— $
—
229.1
— $
—
— $ 933.2 $
—
229.1
— $
—
— $ 933.2
229.1
—
2021
79.3
32.9
4.3
—
—
—
—
—
—
—
—
141.6
131.9
352.8
—
—
32.9
24.1
—
—
352.8
56.9
—
—
4.3
221.7
—
226.0
—
—
21.7
21.7
$ 1,049.6 $ 229.1 $ 141.6 $ 131.9 $ 1,552.3 $ 245.8 $
21.7 $ 1,819.7
2021
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 80.6
$ —
$ —
$ —
$ 80.6
$ —
$ —
$ 80.6
—
1.9
3.2
0.6
—
31.8
—
—
—
—
—
12.4
—
—
—
—
6.1
—
—
—
31.8
20.4
3.2
0.6
—
—
—
(0.8)
(11.1)
—
—
—
—
31.8
20.4
2.3
(10.5)
—
18.7
18.7
$ 86.2
$ 31.8
$ 12.4
$ 6.1
$ 136.6
$ (11.9)
$ 18.7
$ 143.3
8.2 %
13.9 %
8.8 %
4.6 %
8.8 %
(4.8) %
86.2 %
7.9 %
(1) Corresponds to the percentage obtained by dividing the amount of Segment Adjusted EBIT by the amount of segment revenue.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
159
159
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN
FIRST QUARTER
(IN MILLIONS $)
2021
SEGMENT ADJUSTED EBITDA
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
SECOND QUARTER
(IN MILLIONS $)
REVENUES BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
SECOND QUARTER
(IN MILLIONS $, EXCEPT AS
OTHERWISE NOTED)
SEGMENT ADJUSTED EBIT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
Segment Adjusted EBIT to
segment revenue ratio
(in %) (1)
$ 102.8
$ —
$ —
$ —
$ 102.8
$ —
$ —
$ 102.8
—
2.8
3.6
2.3
—
34.6
—
—
—
—
—
12.9
—
—
—
—
7.3
—
—
—
34.6
23.0
3.6
2.3
—
—
—
1.3
(9.4)
—
—
—
—
34.6
22.9
4.9
(7.0)
—
18.7
18.7
$ 111.5
$ 34.6
$ 12.9
$ 7.3
$ 166.3
$
(8.1)
$ 18.7
$ 176.9
2021
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 935.3 $
— $
—
86.6
35.0
4.3
—
234.7
—
—
—
—
— $
—
104.4
—
— $ 935.3 $
—
143.4
—
234.7
334.4
35.0
— $
—
—
5.7
— $ 935.3
234.7
—
334.3
—
40.7
—
—
—
—
—
4.3
228.7
—
233.0
—
—
19.8
19.8
$ 1,061.2 $ 234.7 $ 104.4 $ 143.4 $ 1,543.7 $ 234.4 $
19.8 $ 1,797.8
2021
Engineering
Services
$ 85.4
—
5.8
3.4
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ —
33.2
—
—
$ —
—
13.4
—
$ —
—
7.3
—
$ 85.4
33.2
26.5
3.4
$ —
—
—
(2.4)
$ —
—
—
—
$ 85.4
33.2
26.4
1.0
0.6
—
—
—
—
—
—
—
0.6
—
(22.9)
—
—
16.4
(22.2)
16.4
$ 95.2
$ 33.2
$ 13.4
$ 7.3
$ 149.1
$ (25.3)
$ 16.4
$ 140.3
9.0 %
14.1 %
12.8 %
5.1 %
9.7 %
(10.8) %
82.8 %
7.8 %
(1) Corresponds to the percentage obtained by dividing the amount of Segment Adjusted EBIT by the amount of segment revenue.
160
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
160
SNC-LAVALIN
SECOND QUARTER
(IN MILLIONS $)
SEGMENT ADJUSTED EBITDA
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
THIRD QUARTER
(IN MILLIONS $)
REVENUES BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
THIRD QUARTER
(IN MILLIONS $, EXCEPT AS
OTHERWISE NOTED)
SEGMENT ADJUSTED EBIT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
Segment Adjusted EBIT to
segment revenue ratio
(in %) (1)
2021
Engineering
Services
$ 106.0
—
6.7
3.8
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ —
36.9
—
—
$ —
—
13.9
—
$ —
—
8.4
—
$ 106.0
36.9
29.0
3.8
$ —
—
—
(0.4)
$ —
—
—
—
$ 106.0
36.9
29.0
3.4
2.5
—
—
—
—
—
—
—
2.5
—
(21.8)
—
—
16.4
(19.3)
16.4
$ 119.1
$ 36.9
$ 13.9
$ 8.4
$ 178.2
$ (22.3)
$ 16.4
$ 172.4
2021
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 916.8 $
— $
—
83.9
34.4
4.2
—
220.5
—
—
—
—
— $
—
109.8
—
— $ 916.8 $
—
148.9
—
220.5
342.6
34.4
— $
—
—
10.4
— $ 916.8
220.5
—
342.6
—
44.7
—
—
—
—
—
4.2
252.6
—
256.8
—
—
27.4
27.4
$ 1,039.3 $ 220.5 $ 109.8 $ 148.9 $ 1,518.5 $ 263.0 $
27.4 $ 1,808.8
2021
Engineering
Services
$ 86.5
—
3.6
2.4
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ —
36.0
—
—
$ —
—
17.3
—
$ —
—
1.6
—
$ 86.5
36.0
22.5
2.4
$ —
—
—
(5.5)
$ —
—
—
—
$ 86.5
36.0
22.5
(3.1)
0.6
—
—
—
—
—
—
—
0.6
—
(26.9)
—
—
23.6
(26.4)
23.6
$ 93.0
$ 36.0
$ 17.3
$ 1.6
$ 148.0
$ (32.4)
$ 23.6
$ 139.2
8.9 %
16.3 %
15.8 %
1.1 %
9.7 %
(12.3) %
86.1 %
7.7 %
(1) Corresponds to the percentage obtained by dividing the amount of Segment Adjusted EBIT by the amount of segment revenue.
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
161
161
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN
SNC-LAVALIN
THIRD QUARTER
(IN MILLIONS $)
SEGMENT ADJUSTED EBITDA
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
FOURTH QUARTER
(IN MILLIONS $)
REVENUES BY SEGMENT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
FOURTH QUARTER
(IN MILLIONS $, EXCEPT AS
OTHERWISE NOTED)
SEGMENT ADJUSTED EBIT
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
Segment Adjusted EBIT to
segment revenue ratio
(in %) (1)
Engineering
Services
$ 105.8
—
4.9
2.9
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
SEGMENT ADJUSTED EBITDA
Engineering
Services
Nuclear
O&M
Linxon
Capital
Total
Total SNCL
Infrastructure
Services
LSTK Projects
2021
$ —
38.7
—
—
$ —
—
17.8
—
$ —
—
2.4
—
$ 105.8
38.7
25.1
2.9
$ —
—
—
(3.4)
$ —
—
—
—
$ 105.8
38.7
25.2
(0.5)
1.8
—
—
—
—
—
—
—
1.8
—
(22.6)
—
—
23.6
(20.8)
23.6
$ 115.4
$ 38.7
$ 17.8
$ 2.4
$ 174.3
$ (26.0)
$ 23.6
$ 172.0
$ 212.9
$ 37.7
$ 12.1
$ 4.1
$ 266.8
$ (227.0)
$ 60.6
$ 100.2
$ 199.6
$ —
$ —
$ —
$ 199.6
$ —
$ —
$ 199.6
—
9.8
1.0
2.5
—
37.7
—
—
—
—
—
12.1
—
—
—
—
4.1
—
—
—
37.7
26.0
1.0
2.5
—
—
—
(37.9)
(189.1)
—
—
—
—
37.7
25.9
(37.0)
(186.6)
—
60.6
60.6
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 1,063.5 $
— $
— $
— $ 1,063.5 $
— $
— $ 1,063.5
2021
13.5.2 SEGMENT ADJUSTED EBITDA – 2021 QUARTERLY RESULTS
—
220.4
—
—
220.4
114.6
164.3
386.8
—
35.1
(5.7)
—
—
—
—
—
220.4
386.8
29.4
107.9
35.1
9.8
—
—
—
—
—
—
—
—
—
9.8
169.7
—
179.5
—
—
—
65.2
65.2
$
80.6 $
31.8 $
20.4 $
2.3 $
(10.5) $
18.7 $
(39.9) $ 103.5
$ 1,216.3 $ 220.4 $ 114.6 $ 164.3 $ 1,715.6 $ 164.1 $
65.2 $ 1,944.9
2021
Engineering
Services
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ 179.3
$ —
$ —
$ —
$ 179.3
$ —
$ —
$ 179.3
—
8.6
0.4
1.2
—
34.8
—
—
—
—
—
11.5
—
—
—
—
3.2
—
—
—
34.8
23.3
0.4
1.2
—
—
—
(40.0)
(193.0)
—
—
—
—
34.8
23.3
(39.6)
(191.8)
—
60.6
60.6
$ 189.5
$ 34.8
$ 11.5
$ 3.2
$ 239.0
$ (233.0)
$ 60.6
$ 66.6
$ 106.0 $
36.9 $
29.0 $
3.4 $
(19.3) $
16.4
15.6 %
15.8 %
10.0 %
1.9 %
13.9 %
(142.0) %
92.9 %
3.4 %
FOURTH QUARTER
(IN MILLIONS $)
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
FIRST QUARTER
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
SECOND QUARTER
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
The tables below present a reconciliation of Segment Adjusted EBIT to consolidated EBIT, along with a
reconciliation to Segment Adjusted EBITDA, for each quarter of 2021.
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
22.3
2.7
2.5
2.6
3.5
—
$ 102.8 $
34.6 $
22.9 $
4.9 $
(7.0) $
18.7
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
$
85.4 $
33.2 $
26.4 $
1.0 $
(22.2) $
16.4 $
(59.8) $
80.4
20.6
3.6
2.6
2.5
2.9
—
2021
2021
2021
(1) Corresponds to the percentage obtained by dividing the amount of Segment Adjusted EBIT by the amount of segment revenue.
162
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
162
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
163
SNC-LAVALIN
FOURTH QUARTER
(IN MILLIONS $)
SEGMENT ADJUSTED EBITDA
EDPM
Nuclear
Infrastructure Services
Resources
Infrastructure EPC
Projects
Capital
Total from continuing
operations
2021
Engineering
Services
$ 199.6
—
9.8
1.0
Nuclear
O&M
Linxon
Total SNCL
Services
Infrastructure
LSTK Projects
Capital
Total
$ —
37.7
—
—
$ —
—
12.1
—
$ —
—
4.1
—
$ 199.6
37.7
26.0
1.0
$ —
—
—
(37.9)
$ —
—
—
—
$ 199.6
37.7
25.9
(37.0)
2.5
—
—
—
—
—
—
—
2.5
—
(189.1)
—
(186.6)
—
60.6
60.6
$ 212.9
$ 37.7
$ 12.1
$ 4.1
$ 266.8
$ (227.0)
$ 60.6
$ 100.2
13.5.2 SEGMENT ADJUSTED EBITDA – 2021 QUARTERLY RESULTS
The tables below present a reconciliation of Segment Adjusted EBIT to consolidated EBIT, along with a
reconciliation to Segment Adjusted EBITDA, for each quarter of 2021.
FIRST QUARTER
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
SECOND QUARTER
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
2021
$
80.6 $
31.8 $
20.4 $
2.3 $
(10.5) $
18.7 $
(39.9) $ 103.5
22.3
2.7
2.5
2.6
3.5
—
$ 102.8 $
34.6 $
22.9 $
4.9 $
(7.0) $
18.7
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
2021
$
85.4 $
33.2 $
26.4 $
1.0 $
(22.2) $
16.4 $
(59.8) $
80.4
20.6
3.6
2.6
2.5
2.9
—
$ 106.0 $
36.9 $
29.0 $
3.4 $
(19.3) $
16.4
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
163
163
SNC-Lavalin 2021 Financial Report
SNC-LAVALIN
THIRD QUARTER
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
FOURTH QUARTER
(IN MILLIONS $)
Segment Adjusted EBIT
(EBIT For Consolidated
figure)
Depreciation and
amortization
Segment Adjusted
EBITDA
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
2021
$
86.5 $
36.0 $
22.5 $
(3.1) $
(26.4) $
23.6 $
(93.0) $
46.1
19.3
2.7
2.6
2.6
5.5
—
$ 105.8 $
38.7 $
25.2 $
(0.5) $
(20.8) $
23.6
EDPM
Nuclear
Infrastructure
Services
Resources
Infrastructure
EPC Projects
Less:
Corporate and
other (1)
Capital
Consolidated
2021
$ 179.3 $
34.8 $
23.3 $
(39.6) $ (191.8) $
60.6 $ (102.5) $
(35.9)
20.3
3.0
2.6
2.6
5.2
—
$ 199.6 $
37.7 $
25.9 $
(37.0) $ (186.6) $
60.6
(1) "Corporate and other" corresponds to items not specifically allocated to segments and, therefore, not included in the Segment Adjusted EBIT of the Company's segments, for which details
are provided below.
The table below presents the details of the "Corporate and other" amount reconciling the Segment Adjusted EBIT
to the Company's consolidated EBIT:
(IN MILLIONS $)
Corporate selling, general and administrative expenses not allocated to the
segments
Loss (gain) arising on financial instruments at fair value through profit or loss
Restructuring and transformation costs
Amortization of intangible assets related to business combinations
Adjustments on gain on disposals of Capital investments
Loss on disposals of PS&PM businesses
2021
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
$
16.3 $
26.7 $
52.2 $
(4.2)
4.9
23.3
—
—
(1.6)
15.2
20.5
—
—
49.9
3.4
30.9
23.4
(5.0)
—
—
(1.3)
19.2
22.3
—
0.6
—
Reversal of impairment loss on remeasurement of assets of disposal group
classified as held for sale to fair value less cost to sell
(0.5)
(0.9)
Corporate and other - Total
$
39.9 $
59.8 $
93.0 $
102.5
164
2021 MANAGEMENT’S DISCUSSION AND ANALYSIS
164
SNC-LAVALIN
13.5.3 SEGMENT NET REVENUE AND SEGMENT ADJUSTED EBITDA TO SEGMENT NET
REVENUE RATIO – ENGINEERING SERVICES
The table below presents a reconciliation of Net revenue to Revenue for the Engineering Services segment under
the new organizational structure effective January 1, 2022, as well as the associated Segment Adjusted EBITDA to
segment net revenue ratio for Engineering services.
YEAR ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Revenue - Engineering Services (2)
Direct costs for sub-contractors and other direct expenses that are recoverable directly from clients - Engineering
Services
Segment net revenue - Engineering Services
Segment Adjusted EBITDA - Engineering Services (2)
Segment Adjusted EBITDA to segment net revenue ratio - Engineering Services (in %)
2021 (1)
$
4,366.4
(1,076.0)
$
3,290.4
$
558.9
17.0 %
(1) Based on new organizational structure effective January 1, 2022.
(2) Revenue of Engineering Services and Segment Adjusted EBITDA of Engineering Services under the new organizational structure effective January 1, 2022 are presented at Section 13.5.2.
13.5.4 BOOKING-TO-REVENUE RATIO - ENGINEERING SERVICES
The table below presents the calculation related to the booking-to-revenue ratio of the Engineering Services
segment under the new organizational structure effective January 1, 2022.
YEAR 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 (1)
Backlog of business sold during the year
Ending backlog
Booking-to-revenue ratio (in %)
(1)
Revenues under the scope of IFRS 15.
$
$
2021
3,531.7
4,585.7
4,347.1
1.3
3,769.0
105.0 %
13.5.5 FREE CASH FLOW (USAGE) TO ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO
SNC-LAVALIN SHAREHOLDERS RATIO
YEARS ENDED DECEMBER 31
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
Free cash flow (usage) (1)
Adjusted net income (loss) attributable to SNC-Lavalin shareholders (2)
Free cash flow (usage) to Adjusted net income (loss) attributable to SNC-Lavalin shareholders ratio (in %)
$
$
2021
(15.9)
221.6
(7.2) %
(1) Please refer to Section 8.1 for a quantitative reconciliation of Free cash flow to net cash generated from operating activities.
(2) Please refer to Section 13.4.1 for a quantitative reconciliation of Adjusted net income (loss) attributable to SNC-Lavalin shareholders to net income (loss) attributable to SNC-Lavalin
shareholders.
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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.
ONGOING AND ADDITIONAL IMPACTS OF THE COVID-19 PANDEMIC
From its onset in the first quarter of 2020, 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. Despite differing levels of business and commercial re-openings throughout the world, and the
availability of vaccines and ongoing vaccination programs in some geographies, the ongoing pandemic has had,
and, as the world continues to periodically experience new and emerging variants of the SARS-CoV-2 virus,
continues to have, adverse (and potentially material adverse) repercussions in the jurisdictions where the
Company has offices, delivers services and holds investments, and uncertainties exist as to the efficacy of
vaccines against new variants or mutations of COVID-19. As such, the COVID-19 global pandemic 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.
In particular, the Company’s LSTK projects have seen, in some cases, substantial increases in cost forecasts and
delays to forecast completion dates as a result of the impact of COVID-19 on labour productivity and project
prolongation, in addition to associated inflation and supply chain disruptions.
To attempt to mitigate the spread of the pandemic, there have been extraordinary and wide-ranging actions taken
by international, federal, provincial and local public health and governmental authorities to contain and combat the
outbreak of COVID-19 around the world. These actions include quarantines and “stay-at-home” orders, social
distancing measures, travel restrictions, school closures and similar mandates for many individuals in order to
substantially restrict daily activities and orders for many businesses to curtail or cease normal operations unless
their work is critical, essential or life-sustaining and to require their employees to be vaccinated against COVID-19
as a condition for continued employment. Although from time to time there has been an easing of restrictions in
certain jurisdictions, some of these restrictions have been reinstated in other jurisdictions, or could be reinstated in
the future, to manage a resurgence or new outbreak of COVID-19, including in connection with new variants or
mutations of the virus. In addition, the reopening of businesses and economies in certain countries is creating a
variety of new challenges, including, for example, higher prices for goods and services, limited availability of
products, disruptions to supply chains and labour shortages. As such, the duration, severity of its effects and
ultimate impact to the world’s population and the global economy remain uncertain and difficult to fully evaluate
and quantify.
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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:
◦ Ongoing and future actions taken by governmental and non-governmental bodies to curtail activity in an effort
to help slow the spread of COVID-19 and new and emerging variants thereof, 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.
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If the COVID-19 pandemic persists for all or a substantial portion of 2022, it may continue to impact the health
of the Company’s personnel, partners and contractors, causing labour shortages due to illness making it
difficult to recruit, attract and retain skilled personnel. In addition, we may experience difficulties with
effectively training and integrating new employees, and in the short term, it may be even more difficult to do
so remotely during the COVID-19 pandemic. Increased turnover rates of our employees could increase
operating costs and create challenges for us in maintaining high levels of employee awareness of, and
compliance with, our internal procedures and external regulatory compliance requirements, in addition to
increasing our recruiting, training and supervisory costs.
Resumption of operations by the Company where it 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, including the
emergence of variants and further resurgences of the SARS-CoV-2 virus, has 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.
◦
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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. These impacts
are expected to continue or worsen if “stay-at-home”, “shelter-in-place”, social distancing, travel restrictions
and other similar orders, measures or restrictions remain in place for an extended period of time or are re-
imposed after being lifted or eased. Although we have experienced, and may continue to experience, an
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increase in demand for certain of our services as a result of new projects that have arisen in response to the
COVID-19 pandemic, there can be no assurance that any such increased demand would be sufficient to
offset lost or delayed demand.
◦ Our clients may be unable to meet their payment obligations to us in a timely manner, including as a result of
deteriorating financial condition or bankruptcy resulting from the COVID-19 pandemic and resulting economic
impacts. Further, other third parties, such as suppliers, subcontractors, joint venture partners and other
outside business partners, may experience significant disruptions in their ability to satisfy their obligations with
respect to us, or they may be unable to do so altogether.
Although the Company has made various 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.
The continued global spread of the COVID-19 pandemic and the responses thereto are complex and rapidly
evolving, and the extent to which the pandemic impacts our business, financial condition and results of
operations, including the duration and magnitude of such impacts, will depend on numerous evolving factors that
we may not be able to accurately predict or assess. 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 or increased inflation,
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 Company’s “Pivoting to Growth Strategy” unveiled in September 2021
Since mid-2019, the Company has been implementing a new strategic direction focused on the high-performing
and growth areas of the business as it exits LSTK construction contracting. More recently, the Company unveiled
in September 2021 a three-year global strategic growth plan and a new operational structure and re-affirmed its
strategy comprised of four core elements, namely: (i) focusing on core geographic areas of operation and end
customer markets targeted in the built and natural environment; (ii) leveraging SNC-Lavalin’s unique end-to-end
global capabilities to deliver high value products and services locally; (iii) identifying key growth areas; and (iv)
establishing capital allocation priorities to strengthen business and drive further value creation opportunities. The
strategy also involves SNC-Lavalin SNC-Lavalin focusing its efforts on its three core regions—United Kingdom,
Canada and the United States—where it has a leading presence in each region all the while maintaining more
targeted operations in select markets in Europe, the Middle East, Asia-Pacific, and Latin America. Within these
geographies, SNC-Lavalin intends to focus on seven clearly defined customer end markets, namely
Transportation, Buildings and Places, Defence, Water, Industrial and Mining, Power and Renewables, and
Nuclear.
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.
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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.
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.
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, COVID-19 impacts on productivity, increases in
inflation and supply chain disruptions, all of which could lead to higher costs and delays to project completions,
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 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
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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 and profitability, 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. 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. It should also be noted that 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.
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.
Among other matters, SNC-Lavalin’s estimates of future performance depend on 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 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, regulations and policies 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
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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:
◦
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◦
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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;
tax increases or changes in tax laws, legislation or regulation or in the interpretation, application and/or
enforcement thereof; and
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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 and 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. 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.
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.
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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. Furthermore, irrespective of the
importance or number of project or Company subcontractors or suppliers, general global supply chain disruptions
and issues outside the control of the Company could adversely affect ongoing operations also resulting in the
aforementioned risks to the Company. 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.
Supply chain disruptions
Global disruptions in supply chains continue to affect companies in a variety of industries, triggering widespread
impacts. Shortages and logistical bottlenecks with labour and transportation have in certain instances led to a
shortage of material availability and an increase in shipping costs. Illness, travel restrictions and other workforce
disruptions could adversely affect the Company’s supply chain and its ability to complete its clients’ projects in the
scheduled time frame, while the shortage of material availability and increased shipping costs could also
adversely affect its profitability, notably through inflationary price pressure on material used on certain contracts
and increased prolongation costs.
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Joint ventures and partnerships
SNC-Lavalin enters into 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 governance framework and corresponding 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 reputation and, in the case of government
contracts, could result in fines, penalties, suspension or even debarment being imposed on the Company, which
could in turn 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 can involve malware (including
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, slowed down 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
other causes.
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’s 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 can be anticipated that more countries will establish personal data protection frameworks in 2022
and beyond. The ever-changing landscape presents unique compliance challenges for SNC-Lavalin as its
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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.
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.
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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.
Gaps in insurance coverage
As part of SNC-Lavalin’s business operations, the Company maintains a certain level of 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, or if the Company is found liable on or pays out a significant claim in respect of a project or contract
that is not covered by any insurance, 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 and/or claims not
covered by insurance could materially deplete its assets.
Health and 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 depends heavily on its workforce and its ability to attract, recruit, develop and retain
qualified personnel in a competitive work environment. Engineers, architects, designers, project managers, as
well as functional experts and corporate leadership professionals who possess both experience and skills are
essential to the success of the Company’s business. The ability to retain and motivate qualified personnel, or
attract suitable replacements as needed, is dependent on, among other things, the competitive nature of the
employment market and the career opportunities and compensation that the Company can offer. There is strong
competition for qualified technical and management personnel in the Company’s industry, and if the Company
were to lose some or all of these personnel, they could be difficult to replace in the timeline demanded by the
Company’s clients. For example, some of the Company’s personnel hold government granted clearance that may
be required to obtain government projects. If the Company were to lose some or all of these personnel, they could
be difficult to replace. The inability to attract and retain such qualified personnel would place increased demands
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on the Company’s existing resources, and could result in, among other factors, lost opportunities, cost overruns,
failure to successfully complete existing and compete for new projects, and inability to mitigate risks and
uncertainties.
In addition, in the event that the Company’s corporate leadership professionals and other key personnel were to
retire or otherwise leave the Company, the Company would require appropriate succession plans in place,
including preparation of internal talent and, where relevant, identification of potential external candidates for key
roles, and to successfully implement such plans, which requires devoting time and resources toward identifying
and integrating new personnel into leadership roles and other key positions. If the Company cannot effectively
prepare and implement such succession plans, it could have a material adverse effect on the Company’s ability to
conduct its business effectively and to provide services to its clients until such qualified replacements are found.
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, tornadoes, hurricanes, lightning,
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, subcontractors or suppliers 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 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 “Ongoing and 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 is intended to protect
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
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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, many contracts for the sale of a subsidiary or a business provide for the
delivery of closing financial statements and, depending on the result of such closing financial statements, the
buyer could assert a claim, whether founded or not, that the Company, as seller, is obligated to pay certain sums,
even material sums, as a post-closing adjustment to the buyer after completion of the transaction and, depending
on the amount of any such post-closing adjustment payment that the Company may be required (or decides) to
pay, such payment could have an adverse or even a material adverse impact on the Company’s cash resources,
liquidity and/or its financial results and performance. Conversely, the right to assert a similar claim is generally
also available to the Company against a buyer, depending on the result of the closing financial statements. Also,
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.
SNC-LAVALIN
Indebtedness
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The Company had approximately $1.7 billion of consolidated indebtedness as at December 31, 2021 under
recourse, limited recourse and non-recourse debt presented on its statement of financial position.
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;
environment;
◦ 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, which risk may become more acute in
the near and mid term as world and North American economies appear to be entering a higher inflation rate
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
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.
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.
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Indebtedness
The Company had approximately $1.7 billion of consolidated indebtedness as at December 31, 2021 under
recourse, limited recourse and non-recourse debt presented on its statement of financial position.
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:
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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, which risk may become more acute in
the near and mid term as world and North American economies appear to be entering a higher inflation rate
environment;
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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
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.
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.
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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 2021 and
2020, 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
provided guarantees of the Company’s primary third-party debt instruments and obligations, including the
Company’s Credit Agreement and its outstanding debentures.
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, its subsidiary 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 sit 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. Scheme’s assets are mainly 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, such as the discount rate, the rate of compensation increase or inflation, 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 £37.9 million (or approximately CA$65.4 million) and £4.2 million
(or approximately CA$7.2 million), respectively, for the year ended December 31, 2021, with annual contributions
escalating by 2.5% each year until March 31, 2026 for the Atkins pension plan. 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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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, its subsidiary 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 sit 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. Scheme’s assets are mainly 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, such as the discount rate, the rate of compensation increase or inflation, 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 £37.9 million (or approximately CA$65.4 million) and £4.2 million
(or approximately CA$7.2 million), respectively, for the year ended December 31, 2021, with annual contributions
escalating by 2.5% each year until March 31, 2026 for the Atkins pension plan. 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 potential losses, if any, that may be incurred in connection with any final judgment on
these matters.
uninsured.
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 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
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 issue the change orders or other claims, or fails to 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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RISKS RELATED TO LITIGATION, INVESTIGATIONS, SETTLEMENTS AND REGULATORY MATTERS
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 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 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 issue the change orders or other claims, or fails to 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, Brazil and Angola.
With respect to the investigation by the Royal Canadian Mounted Police (the “RCMP”) concerning the Jacques
Cartier Bridge project, on September 23, 2021, the RCMP represented by the Province of Quebec’s Directeur des
Poursuites Criminelles et Pénales (“DPCP”) laid charges against the Company’s subsidiary, SNC-Lavalin Inc. and
indirect subsidiary, SNC-Lavalin International Inc. Each entity has been jointly charged (along with a former
employee of the Company, Normand Morin) with the following counts: 1) forgery under Section 366 of the
Criminal Code (Canada) (the “Criminal Code”), 2) fraud under Section 380 of the Criminal Code, and 3) fraud
against the government under Section 121 of the Criminal Code. Each entity has also been charged with one
count of conspiracy to commit the aforementioned crimes (the “Criminal Charges”). On the same date, the DPCP
gave notice to SNC-Lavalin Inc. and SNC-Lavalin International Inc. of an invitation to negotiate a remediation
agreement in accordance with Part XXII.1. of the Criminal Code with respect to the Criminal Charges and on
October 1, 2021, both entities formally accepted the invitation. These Criminal Charges follow the RCMP’s formal
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 Inc. and which has previously led to a guilty plea on
certain criminal charges in 2017 by the former head of the Canada Federal Bridges Corporation. Another former
employee of the Company, Kamal Francis was also charged separately with similar offenses.
Except for the Jacques Cartier Bridge investigation, 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 the Company or one of its subsidiaries or investee entities 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 has complied and will comply with the probation order for its remaining
term. 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 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 2021 Annual Financial Statements.
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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 has complied and will comply with the probation order for its remaining
term. 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 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 2021 Annual Financial Statements.
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SNC-LAVALIN
Further regulatory developments as well as employee, agent or partner misconduct or failure to comply
with anti-corruption 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
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 or other environmental, governance or social issues, 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.
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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.
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Commodity prices can also strongly affect the costs of projects. Rising commodity prices and price volatility can
adversely affect the Company’s ability to reasonably forecast or estimate future costs and 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.
SNC-LAVALIN
SNC-LAVALIN
GLOBAL / MACROECONOMIC RISKS
Global economic conditions
Fluctuations in global economic conditions, including the continued general impact of the COVID-19 pandemic on
the global supply chains, public health regulatory mandates and resulting inflationary pressures, 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. Global
economic conditions could also be adversely impacted by more restrictions on certain economic relations
between countries or group of countries, such as the post-Brexit relationship between the U.K and the European
Union or by an increased level of trade protectionism. 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.
Inflation
As indicated above, one of the numerous incidences of the COVID-19 pandemic has been the resulting
inflationary pressures, in part due to issues from the global supply chains that led to the shortage of certain goods
and materials. Inflation could also result from other factors outside of the control of the Company and could have
an impact on the cost of labour, supplies, materials, as well as on various selling, general and administrative
expenses, which may vary from different geographic areas.
While certain contracts include price-indexation clauses aimed at protecting the Company from the increase of
certain costs, the Company generally bears the risk of rising inflation in connection with LSTK, fixed-rate and
other fixed-price contracts. Furthermore, there can be no assurance that price-indexation clauses included in the
Company’s contracts with its customers will result in recovering all cost increases on a given contract, including
but not limited to cost increases resulting from price-indexation clauses in contracts with subcontractors or
suppliers, if any.
The inability of the Company to recover, in whole or in part, the increase in costs from inflationary pressures may
have a material adverse impact on SNC-Lavalin’s business, financial condition and results of operations.
Furthermore, a significant portion of the Company’s financial indebtedness is at variable rates of interest and
expose the Company to the risk of increased interest rates and a resulting increase in financial expenses, which
risk may become more acute in the near and mid-term as world and North American economies appear to be
entering a higher inflation rate environment.
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
Company’s services decreases, which may have a material adverse impact on SNC-Lavalin’s business, financial
condition and results of operations.
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Commodity prices can also strongly affect the costs of projects. Rising commodity prices and price volatility can
adversely affect the Company’s ability to reasonably forecast or estimate future costs and 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.
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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, 2021.
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, 2021.
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, 2021, 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, 2021 that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
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Quarterly Information
(IN MILLIONS $, EXCEPT AS OTHERWISE NOTED)
2021
2020
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
TOTAL
FIRST
QUARTER
SECOND
QUARTER
THIRD
QUARTER
FOURTH
QUARTER
TOTAL
Continuing operations
Revenues:
SNCL Engineering Services
SNCL Projects
Capital
Total Revenues
EBIT
1,515.1 1,504.3 1,479.8 1,670.8 6,170.0 1,534.8 1,469.5 1,447.7 1,523.0 5,975.0
282.9 273.7 301.6 208.9 1,067.1 287.5 168.9 294.5 152.3 903.1
22.6 129.4
1,819.7 1,797.8 1,808.8 1,944.9 7,371.3 1,868.5 1,660.0 1,781.1 1,697.9 7,007.5
(292.0)
103.5
(35.9) 194.1
65.2 134.1
(372.7)
(21.5)
46.1
21.6
80.4
87.4
27.4
46.2
21.7
19.8
14.9
38.9
Net financial expenses
31.2
25.9
26.3
27.0 110.5
31.9
25.9
28.7
27.5 114.0
Earnings (loss) before income
taxes from continuing
operations
Income taxes
Net income (loss)
from continuing operations
Net income (loss) from
discontinued operations
72.3
54.5
19.8
(62.9)
3.6
22.2
—
(47.8)
83.6
(22.0)
(17.0)
(47.5)
58.7
(400.2)
(406.0)
(21.4)
(24.0)
66.9
(80.5)
(59.0)
68.7
32.3
19.8
(15.1) 105.7
4.4
(23.5)
(8.1)
(319.7)
(346.9)
5.3
16.5 582.1
(37.6) 566.4
(66.9)
(86.3)
(76.3)
(379.8)
(609.3)
Net income (loss)
74.0
48.9 601.9
(52.7) 672.1
(62.5)
(109.9)
(84.4)
(699.5)
(956.3)
Net income (loss) attributable to:
SNC-Lavalin shareholders
73.0
45.7 600.7
(52.9) 666.6
(66.0)
(111.6)
(85.1)
(702.7)
(965.4)
Non-controlling interests
0.9
3.1
1.2
0.2
5.5
3.4
1.8
0.7
3.3
9.2
Net income (loss)
74.0
48.9 601.9
(52.7) 672.1
(62.5)
(109.9)
(84.4)
(699.5)
(956.3)
Basic earnings (loss) per share ($)
0.42
0.26
3.42
(0.30)
3.80
(0.38)
(0.64)
(0.48)
(4.00)
(5.50)
Diluted earnings (loss)
per share ($)
Net income (loss) from continuing
operations attributable to:
0.42
0.26
3.42
(0.30)
3.80
(0.38)
(0.64)
(0.48)
(4.00)
(5.50)
SNC-Lavalin shareholders
Non-controlling interests
67.7
29.2
18.6
0.9
3.1
1.2
(15.3) 100.2
5.5
0.2
1.0
3.4
(25.3)
(8.8)
(322.9)
(356.1)
1.8
0.7
3.3
9.2
68.7
32.3
19.8
(15.1) 105.7
4.4
(23.5)
(8.1)
(319.7)
(346.9)
0.39
0.17
0.11
(0.09)
0.57
0.01
(0.14)
(0.05)
(1.84)
(2.03)
Net income (loss)
from continuing operations
Basic earnings (loss) per share
from continuing operations ($)
Diluted earnings (loss) per share
from continuing operations ($)
Dividend declared per share ($)
0.02
0.02
0.02
0.02
0.39
0.17
0.11
(0.09)
0.57
0.08
0.01
(0.14)
(0.05)
(1.84)
(2.03)
0.02
0.02
0.02
0.02
0.08
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Event After the Reporting Period
DISPOSAL OF INPOWER BC GENERAL PARTNERSHIP AND ITS RELATED HOLDING COMPANIES
On February 7, 2022, SNC-Lavalin announced that the Company completed the sale and transfer of its ownership
interest in InPower BC General Partnership and its related holding companies to SNC-Lavalin Infrastructure
Partners LP in which the Company has a 20% ownership interest. The net gain on disposal from this transaction
amounted to approximately $4.8 million, while it generated a cash consideration to the Company of approximately
$41 million.
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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 ratio 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 comparisons of operating performance
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 and
transformation 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 fair value revaluation of the Highway
407 ETR contingent consideration receivable, the Guaranteed
Minimum Pension (“GMP”) equalization expenses and the reversal
of impairment loss (impairment loss) on remeasurement of assets
of disposal group classified as held for sale to fair value less cost
to sell.
Adjusted EBITDA to revenue ratio is a non‑IFRS ratio used to
analyze the profitability of the Company and facilitate period‑to‑
period comparisons, as well as comparison with peers. This ratio
is calculated by dividing the amount of Adjusted EBITDA for a
given period by the amount of revenue for the same period. This
ratio is provided both on a consolidated basis and also separately
for PS&PM activities and for Capital (all adjustments listed above
apply to PS&PM activities, except for the fair value revaluation
of the Highway 407 ETR contingent consideration receivable and
gains (losses) on disposals of Capital investments (or adjustments
to gains or losses on such disposals), which only apply to Capital.
Adjusted net income (loss) attributable to SNC-Lavalin
shareholders is a non‑IFRS financial measure and 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 and transformation 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),
the fair value revaluation of the Highway 407 ETR contingent
consideration receivable, the adjustment to provision for the
Pyrrhotite Case litigation, reversal of impairment loss (impairment
loss) on remeasurement of assets of disposal group classified as
held for sale to fair value less cost to sell, the GMP equalization
expense, as well as income taxes and non‑controlling interests
on these adjustments.
Booking-to-revenue ratio is a non‑IFRS ratio that corresponds
to contract bookings divided by revenues, for a given period.
Backlog (or 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 from certain 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).
Days Sales Outstanding (“DSO”) for the EDPM segment
is a supplementary financial measure that 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.
EBIT is defined as earnings from continuing operations before
net financial expenses (income) and income taxes.
EBITDA is a non‑IFRS financial measure and 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, defence and security and
technology, including some of the world’s most transformational
projects. A significant portion of EDPM 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.
Free cash flow (usage) is a non‑IFRS financial measure
and is defined as net cash generated from (used for) operating
activities less acquisition of property and equipment, payment
of lease liabilities and the federal charges settlement included
in operating activities.
Free cash flow (usage) to adjusted net income (loss)
attributable to SNC-Lavalin shareholders ratio is a non‑IFRS
ratio calculated by dividing free cash flow (usage) by adjusted
net income (loss) attributable to SNC‑Lavalin shareholders, both
non‑IFRS measures.
IFRS International financial reporting standards.
Note : This glossary contains definitions of certain non-IFRS financial measures, non-IFRS financial ratios and supplementary financial measures. Please refer to the Company’s 2021
Management’s Discussion and Analysis for additional information on such measures and ratios, including detailed calculations and reconciliations of non-IFRS measures to the most comparable
IFRS measures.
193
GlossarySNC-Lavalin 2021 Financial Report Glossary (continued)
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 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.
Net limited recourse and recourse debt is a non‑IFRS financial
measure corresponding to the total amount of limited recourse and
recourse debt, minus the amount of cash and cash equivalents at
the end of a given period.
Net limited recourse and recourse debt to Adjusted EBITDA
ratio is a non‑IFRS ratio used to analyze the Company’s financial
leverage. It is calculated by comparing the Net limited recourse and
recourse debt at the end of a given period with Adjusted EBITDA of
the corresponding trailing twelve‑month period.
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.
Organic revenue is a non‑IFRS financial measure corresponding
to the amount of revenue of a given period, excluding the effect of
acquisitions, disposals and foreign currency changes of the same
period. Organic revenue growth is a non‑IFRS ratio calculated by
comparing the amount of organic revenue of a given period with
the amount of organic revenue of the comparative period.
PS&PM (Professional Services & Project Management)
includes contracts generating revenues derived mainly from
consulting, advisory & environmental services, 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 bidding in July 2019,
except for certain repetitive EPC offerings that are lower‑risk,
standardized solutions.
Reimbursable and engineering services contracts:
Reimbursable and engineering services contracts include all
revenue‑generating contracts of the Company, except Standardized
EPC contracts and LSTK construction 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. Reimbursable and engineering services contracts
also include all O&M contracts, some of which are fixed‑price
agreements, with certain O&M contracts being subject to price‑
adjustment clauses such as inflation‑driven indexation.
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 model 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 were presented as discontinued
operations for both 2021 and 2020 and were disposed of in the
third quarter of 2021.
Return on Average Shareholders’ Equity (“ROASE”)
is a supplementary financial measure and 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”.
Segment Adjusted EBIT consists of revenues less i) direct cost
of activities; ii) directly related selling, general and administrative
expenses; and iii) 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
instruments at fair value through profit or loss, restructuring
and transformation 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, gains (losses) on disposal(s)
or adjustment on disposal(s) of Capital investments, impairment
of intangible assets related to business combinations, goodwill
impairment, federal charges settlement (PPSC) and impairment
loss (reversal of impairment loss) on remeasurement of assets of
disposal group classified as held for sale are not allocated to the
Company’s segments.
Note : This glossary contains definitions of certain non-IFRS financial measures, non-IFRS financial ratios and supplementary financial measures. Please refer to the Company’s 2021
Management’s Discussion and Analysis for additional information on such measures and ratios, including detailed calculations and reconciliations of non-IFRS measures to the most comparable
IFRS measures.
194
Glossary (continued)
Segment Adjusted EBITDA is a non‑IFRS financial measure
derived from Segment Adjusted EBIT and is 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 EBITDA to segment net revenue ratio
is a non‑IFRS ratio used to analyze the profitability of the
Company’s segments and is calculated by dividing the amount
of Segment Adjusted EBITDA of a given period by the amount
of segment net revenue for the same period.
Segment net revenue is a non‑IFRS financial measure that
consists of segment revenues less direct costs for sub‑contractors
and other direct expenses that are recoverable directly from clients.
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.
Note : This glossary contains definitions of certain non-IFRS financial measures, non-IFRS financial ratios and supplementary financial measures. Please refer to the Company’s 2021
Management’s Discussion and Analysis for additional information on such measures and ratios, including detailed calculations and reconciliations of non-IFRS measures to the most comparable
IFRS measures.
195
SNC-Lavalin 2021 Financial Report 196
At SNC-Lavalin,
we recognize
the importance
of helping protect
the environment
Our financial 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.
Reference in this presentation, 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 associate.
Statements made in this presentation that describe the Company’s or
management’s 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”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “likely”, “may”,
“objective”, “outlook”, “plans”, “projects”, “should”, “synergies”, “target”,
“vision”, “will”, 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: future revenues, economic performance, business
and management strategies and the expansion and growth of the Company’s
operations and 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 and the forward-looking financial information
made in this presentation are based on a number of assumptions believed
by the Company to be reasonable as at the date hereof. The assumptions are
set out throughout the Company’s 2021 annual Management Discussion and
Analysis (“MD&A”) (particularly in the sections entitled “Critical Accounting
Judgments and Key Sources of Estimation Uncertainty” and “How We
Analyze and Report our Results”). If these assumptions are inaccurate, the
Company’s actual results could differ materially from those expressed or
implied in such forward-looking statements and forward-looking financial
information. 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 and forward-looking financial information. These risk factors are
set out in Section 14 of the Company’s 2021 annual MD&A. The forward-
looking statements herein reflect the Company’s expectations as at the date
of this document and 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.
Head Office
455 René-Lévesque Blvd. West
Montreal, QC, H2Z 1Z3, Canada
Tel. : 514-393-1000 Fax : 514-866-0795
snclavalin.com