DRIVING
FORWARD
TOGETHER
Toromont Industries Ltd.
Annual Report 2022
Toromont Industries Ltd. employs 6,800 empowered people
across seven business units and 160+ locations. We are driving
forward together as one Toromont aligned by our corporate
values, core strategies and our business model of providing
specialized equipment and lifecycle product support that our
customers count on every day. Our company listed on the Toronto
Stock Exchange (symbol TIH) in 1968 and is a member of the S&P/
TSX Canadian Dividend Aristocrats®.
Please visit www.toromont.com for more information.
Our business units
Toromont is one of the largest Caterpillar dealers
in the world with Toromont Cat branches and
field-service operations across seven provinces
and one territory. We serve the specialized heavy
equipment, power generation, heavy rent, used
equipment, product support and component
remanufacturing needs of thousands of public
infrastructure, construction, demolition, paving,
mining, aggregate, waste management, agriculture,
forestry, trucking, shipping, transit and data
centre customers.
Toromont serves ports and terminals, paper
producers, automotive parts manufacturers,
beverage companies, hardware retailers and
government agencies through Toromont Material
Handling, which sells, rents and supports brand
name lift trucks, container handlers, industrial
batteries, chargers and racking systems.
Toromont rents brand-name machines, tools,
supplies and provides product support to
contractors, specialty trades and do-it-yourself
customers through Battlefield Equipment Rentals –
The Cat Rental Store locations.
Toromont meets the specialized tool crib and rental
equipment needs of contractors working in refinery
industries, healthcare, automotive, steel and
pulp and paper through Jobsite Industrial Rental
Services in eastern and western Canada.
Toromont specializes in providing machine control,
site positioning software and asset management
technologies as well as professional support
services through SITECH Eastern Canada Ltd.,
a Trimble and Cat AccuGrade® dealer.
Tormont serves North American food, dairy, cold
storage, beverage, pharmaceutical, automotive,
chemical, petrochemical, mining and recreational
ice rink markets through CIMCO Refrigeration,
a leading supplier of refrigeration equipment,
Net Zero Naturally technologies and product
support services.
Toromont serves the year-round equipment and
product support needs of Manitoba’s agriculture
industry through AgWest, an official dealer of
AGCO and CLAAS, two trusted brands for crop and
livestock applications.
Corporate Directory
Toromont Cat
3131 Highway 7 West
P.O. Box 5511
Concord, Ontario L4K 1B7
T: 416.667.5511 F: 416.667.5555
5001 Trans-Canada Highway
Pointe-Claire, Québec H9R 1B8
T: 514.630.3100 F: 514.630.9020
www.toromontcat.com
Battlefield Equipment Rentals
880 South Service Road
Stoney Creek, Ontario L8E 5M7
T: 905.643.9410 F: 905.643.6008
www.battlefieldequipment.ca
Toromont Material Handling
425 Millway Avenue
Concord, Ontario L4K 3V8
T: 905.669.6590 F: 416.661.1513
www.toromontmaterialhandling.com
AgWest Ltd.
Highway #1 West
P.O. Box 432
Elie, Manitoba R0H 0H0
T: 204.353.3850 F: 877.353.2486
www.agwest.com
CIMCO Refrigeration
1551 Corporate Drive
Burlington, Ontario L7L 6E9
T: 416.465.7581
www.cimcorefrigeration.com
Annual meeting
The Annual Meeting of the Shareholders
of Toromont Industries Ltd. will be held at
10:00 am (EDT) on Friday, April 28, 2023.
Visit www.toromont.com for more details.
How to get in touch with us
T: 416.667.5511 F: 416.667.5555
E-mail: investorrelations@toromont.com
How to reach our transfer Agent and Registrar
Investors are encouraged to contact TSX Trust
Company (Canada) for information regarding their
security holdings.
TSX Trust Company (Canada)
P.O. Box 700, Station B
Montréal, Québec H3B 3K3
Toll-Free North America: 1.800.387.0825
Local: 416.682.3860
E-mail: shareholderinquiries@tmx.com
www.tsxtrust.com
Common shares
Listed on the Toronto Stock Exchange
Stock Symbol – TIH
Toromont’s 2022 Sustainability Report
is available at:
www.toromont.com/sustainability
Fellow shareholders:
As 2022 began, economic activity
exceeded the ability of global supply
chains to respond. Equipment shortages
persisted and a rapid rise in inflation
followed. With the help of customers,
partners and predictive analytics, the
disciplined deployment of the balance
sheet and creative sourcing of machines
and skilled labour, Toromont adjusted
accordingly. By driving forward together,
our team produced good results and
prepared for the next chapter.
Toromont earned $5.52 per share basic ($5.47 per share
diluted), a 37% improvement over 2021 on revenue of
$4.2 billion, 9% higher than the prior year. This was a
favourable outcome, supported by backlog of $1.3 billion
entering the year. Below those headline numbers, supply chain
constraints, inflationary pressures, escalating interest rates,
volatile foreign exchange rates and labour shortages made
for a uniquely complex operating environment.
To secure new machines, we worked collaboratively with
customers to identify their future resource needs and placed
purchase orders with OEMs months earlier than normal. This
effort helped, although with demand and extended deliveries,
backlog remained relatively unchanged at $1.3 billion at
December 31, 2022. Within that number, CIMCO’s backlog
increased by 23% over the prior year to $198.4 million, in
part reflecting the deferral or delay in construction schedules
resulting from supply chain constraints and as many customers
returned to operations after prolonged pandemic closures.
Used equipment played a role in satisfying demand. Dollar
sales of used machines increased 2% from the prior year
as we sourced, consigned, rebuilt and moved more units. To
enhance customer convenience, we created Toromont Equip,
our ecommerce platform. Here, customers can purchase
used equipment from us or market their own machines. We
bring value to online transactions by giving buyers various
options, including equipment inspections, warranties, purchase
financing and maintenance agreements.
Recognizing that customers rely on rental equipment, we
invested in our heavy and light rental fleets. We were rewarded
with improved machine utilization, 17% year-over-year growth
in rental revenues and modernized fleets for the future. That
Scott J. Medhurst
President and Chief Executive Officer
Richard G. Roy
Chair of the Board
Annual Report 2022
1
$171 million
investment (net) in the rental fleet
$1.3 billion
order backlog
34 years
of consecutive dividend increases
23.5%
5-year average return on opening shareholders’ equity
said, our plan called for us to upload more new equipment
earlier than supply constraints ultimately allowed. To fill
the gap and ensure product availability for customers, we
deferred the planned sale of older units at some cost to our
long-term financial model.
Product support revenues increased 16% year over year
with strong contributions from the Equipment Group and
CIMCO due to active machine utilization by customers,
and the success of various long-term strategies to provide
comprehensive after-sales parts and services. Aided
by machine-level connectivity and data analysis, these
strategies helped us to forecast component replacement
timing and proactively build inventory of needed parts.
This helped to offset scarcity of supply, as did increased
throughput from our component remanufacturing
operations. During the year, we announced a $70 million
investment to build an additional remanufacturing facility,
slated for occupancy in 2024. This new 137,000 square foot,
purpose-built plant in Bradford, Ontario, will increase our
ability to contribute to the circular economy by enabling
Toromont to preserve, through remanufacturing, more used
machine components for customers.
2022 Revenues
Cumulative value
of $100 invested
(assuming reinvestment of dividends)
$191.46
$139.25
43% Product support
42% New & used equipment
11% Rentals
4% Refrigeration equipment
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TIH
TSX
2
Toromont Industries Ltd.
New and proven faces
In the face of strong demand and demographic changes in
Canada, labour shortages were acute. In response, Toromont
stepped up the pace of recruiting, including from farther
afield. We added 271 technicians and apprentices to employ
the largest technical workforce in our history.
The year also featured leadership appointments and
promotions. We welcomed Isabelle Leclerc to our corporate
team in the newly created role of Vice President, Human
Resources. Stationed in Montréal, Isabelle is equipped
with over 30 years of strategic talent development and
transformation management experience. To lead and
implement Toromont’s real estate initiatives and optimize
management of Toromont’s properties, we recruited Garnet
Peirson to the newly created role of Vice President, Real
Estate Asset Management and Development. Garnet brings
over 20 years of experience, most recently in a Canadian
leadership role at a global real estate investment firm.
Recognizing the scope, scale and diversification of our
largest business, we named Joel Couture to the newly
created position of Chief Operating Officer of Toromont
Cat. Joel was previously Vice President, Product Support
for Toromont Cat. He joined in 2007 as a management
trainee. In December, Adam Miller became Vice President
of our Power Systems business. Adam is a 26-year Toromont
veteran who previously served as Vice President of
Toromont Cat’s Central Region. These appointments are
the result of a leadership succession plan. These Toromont
Cat internal promotions, including the 2021 appointments
of Miles Gregg and William Harvey to President, Construction
and President, Mining, respectively, bode well for the
future, bringing invaluable operational knowledge and
strengthening customer relationships.
Well-executed management succession over the past
few years means Toromont has proven, energized, next-
generation leadership in place across our business units.
Investing in the future while protecting
our balance sheet
While equipment availability somewhat constrained capital
deployment, Toromont’s net reinvestment in rental fleets,
branches, plants and other capital assets amounted to
Dividends per share
5 year CAGR = 15.5%
$1.56
$1.36
$1.24
$1.08
$0.92
Return on opening
shareholders’ equity
%
22.3
21.4
23.5
19.6
16.6
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’20
’21
’22
’18
’19
’20
’21
’22
Annual Report 2022
3
$215 million, $79 million or 37% higher than in 2021.
Capital deployment was disciplined, measured and
efficient. Return on opening shareholders’ equity was
23.5% compared to Toromont’s goal of 18% after-tax over a
business cycle and 19.6% in 2021. Pre-tax return on capital
employed was 32.3% compared to 26.6% in 2021.
Even with higher investment levels, Toromont ended 2022
with $928 million of cash on hand and $500 million of
available credit on existing lines. Leverage, represented by
net debt to total capitalization decreased to minus 14%,
compared to minus 16% at December 2021. In other words,
cash and equivalents exceeded debt.
Celebrating 55 years of continuous
dividend payments
Toromont’s Board declared a quarterly dividend of $0.43
at its meeting in February 2023. With it, Toromont has now
paid dividends every year since becoming a publicly traded
company in 1968. Notably, the most recent announcement
came with an increase of 10.3%. As such, 2023 marks our
34th consecutive year of higher dividend payouts. In 2022,
dividends declared per share amounted to $1.56 compared
to $1.36 a year earlier.
The Board also renewed the Normal Course Issuer Bid
in September 2022. During 2022, we purchased 473,100
shares at a total cost of $48.5 million (average per-share
cost of $102.52), helping to offset shares issued under the
Executive Stock Option Plan.
QM at the five-year mark
It has now been five years since we acquired the authorized
Caterpillar dealer for Québec, Western Labrador and the
Maritimes, along with the Caterpillar lift truck dealership
for most of Ontario. QM, as we called it internally, has more
than lived up to our expectations. With QM, Toromont has
room to grow in key geographic and end markets including
mining, construction, power and material handling, and
access to great customers and employee talent. Since
acquisition, enterprise-wide performance has improved,
supported by branch-level benchmarking of KPIs using
Toromont’s Dealer Management System (TDMS). As
pleased as we are to now operate together as one energized
team with a consistent value proposition, we know there
are additional advantages to be gained through scale and
ongoing efforts to entrench best-practice disciplines.
Toromont’s belief in, and adherence to, the principles of
continuous improvement mean we always have more to
do and accomplish.
› Team Toromont assembled this Cat 994K at Côté Gold north of Sudbury, Ontario in 2022. One of three on site, it will load Cat 793F fully
autonomous haul trucks, the first in our territories. When machine deliveries are complete, the Cat fleet will include two of the world’s first
Cat 6060 front shovels with twin electric motors. Toromont will maintain the equipment in the years to come.
4
Toromont Industries Ltd.
Driving forward together within an ESG mindset
The members of Toromont’s Board, leadership team and workforce have always sought to be good
stewards of our resources. A more formal focus on Environmental, Social and Governance (ESG) practices
is therefore a natural and positive extension of our culture. Today, through its ESG Committee, our Board
leads a structured, progressive effort with a continuous improvement mindset.
ENVIRONMENT
SOCIAL
GOVERNANCE
› Operational footprint
› Sustainable products
and services
› Circular economy
› Health and safety
› Building capacity
› Recruitment
› Learning and enablement
› Retention
› Diversity, equity and
inclusion
› Accountability and
executive compensation
› Code of conduct
› Cybersecurity and
data privacy
› Paying our fair share
of taxes
Our Sustainability Report (available on our website)
discusses key risk and opportunity areas of focus.
For readers of this report, we highlight the following:
Safety: At Toromont, safety is both a recognized
corporate value and a responsibility shared by all. Our
Board-reviewed safety program is designed to mitigate
risk and create management, team and personal
accountability for outcomes. With consistent focus and
effort, 80% of our facilities achieved a Total Recordable
Injury Rate (TRIR) of zero in 2022. Company-wide, TRIR
was down 31% from 2021, a solid improvement. More
progress is possible.
Customer sustainability: Products that enable
customers to monitor and reduce their carbon
footprints while maintaining high levels of productivity
and safety are in demand and making their way into our
territories. Toromont participates in the advancement
of these products, and we are beginning to see green
solutions become more significant contributors to
revenue. In 2022, we were pleased to be part of the
delivery of the first Caterpillar autonomous mining
trucks in our territories. Now in use at the Côté
Gold Project in northern Ontario, these innovative
machines reduce carbon emissions by saving fuel.
Elsewhere, through placements of Caterpillar battery
electric vehicle (BEV) field-follow units, we are gaining
valuable experience in BEV machine operation and
maintenance. In all cases, our partnership with
Caterpillar is a strategic advantage compounded
by the significance of Cat’s R&D investments. As a
remanufacturer, Toromont renewed a record dollar
volume of components for customers in 2022. As
outlined earlier in this letter, we committed to building
another remanufacturing facility to enhance our
capacity and contribution to the circular economy
and it will incorporate state-of-the-art tooling and
contamination controls. As a manufacturer of
refrigeration equipment, Toromont is at the leading
edge of bringing net-zero solutions to customers
throughout North America.
Environmental footprint: We continued to take action
to manage our footprint including investments in fuel
efficient company vehicles, our largest source
of emissions. We monitor our GHG emissions annually.
Please see our Sustainability Report for further detail.
Diversity, equity and inclusion: We make a concerted,
intentional effort to diversify our workforce, including
outreach to those who may not have considered
a career in our industry. Progress is being made at
the highest levels and we are pleased that women
make up 33% of our Board of Directors. In 2022,
we made headway by recruiting more members of
underrepresented groups to Toromont, including
women, visible minorities, Indigenous peoples and
persons with disabilities. Diversifying our workforce is
an important work in progress.
Annual Report 2022
5
› The Green Leaf initiative at Battlefield Equipment Rentals – The Cat Rental Store and Jobsite Industrial Rental Services
promotes the use and availability of alternative energy products, from light towers powered by solar panels to electric drive
and hybrid lift equipment such as this battery-operated scissor lift.
Decentralization with alignment
Market diversification is a Toromont strength, and a
risk management advantage in challenging times. Each
of our business units is dialed in to the unique needs of
their end markets and addresses those needs under the
capable direction of empowered leaders who are granted
authority with accountability. However, Toromont’s central
organizing principles – offering specialized equipment
and follow-on product support services – and our core
strategies, are identical across all Toromont companies.
All are aligned in the application of Toromont’s financial
disciplines. Decentralization with alignment proved its
worth again in 2022.
Progress reports from the field
Toromont Cat experienced strong demand as customers
invested to expand fleets to serve infrastructure needs
across public works projects, site preparation and mine
development. Large Caterpillar trucks and loading tools were
delivered to several mining customers with more to come in
2023. The supply of large gensets to a remote Arctic mine
site was another highlight. Just one sea shipment leaves for
this mine each year, and Toromont ensured it carried all six
units – a testament to teamwork and logistical execution.
Utilization of our heavy equipment machine fleet grew and
yet maintenance costs were contained through good fleet
management. Used equipment availability was bolstered by
an increase in machine sourcing outside our borders. This
expansion should continue to provide benefits once supply
constraints ease.
Customer Value Agreements or CVAs, the bedrock of our
aftermarket strategies, reached a record level and provided
the basis for us to proactively assist in the maintenance of
customer equipment, reduce the total lifetime cost of their
ownership and better plan resources. In particular, customer
coverage and machine data inputs from connected assets
enhanced our insights and allowed us to de-risk customers
from parts availability challenges.
In-person training of our team of service technicians
resumed after a pandemic pause. This training prepared
the business to better meet the growing need for product
support across our larger installed base in future years and
gave technicians new skills to advance their careers. As
customers experience skilled labour shortages, our technical
capabilities and capacity have never been more essential.
6
Toromont Industries Ltd.
Battlefield Equipment Rentals – The Cat Rental Store
began to realize on the value of recent expansion and
improvement strategies. Widespread customer demand
for rental units across multiple applications, including
road, transit, site preparation and landscaping contributed
to higher utilization. Fleet uploads were targeted with
emphasis on small compaction equipment and reflected
a partial catch up from 2021. An aptly named Green Leaf
initiative was introduced to promote the use and availability
of products such as hybrid and electric drive lifts, as well
as light towers powered by solar panels. Additions to our
seasonal product lineup in Québec were well received and
served to improve financial performance in winter months.
Saint-Jérôme, Québec, became the site of our newest store.
We also continued to execute our QM integration footprint
strategy focused on customer deliverables and operating
efficiencies with the sale of a property in Saint-Laurent,
Québec. This also liberated capital for more productive
pursuits. Recruitment of technicians and vehicle operators
was aggressive.
Jobsite Industrial Rental Services gained momentum.
New work was secured with petrochemical customers in
its traditional eastern Canadian territories, and we will be able
to serve these same customers in western Canada in future
where a new hub location will be opened in Edmonton as
well as two satellite locations in Fort McMurray, Alberta and
Port Coquitlam, British Columbia in early 2023. In 2022,
locations were added in Halifax and Montréal within Battlefield
stores to bring services closer to regional industries, including
shipbuilding and mining. Specialized tool cribs and electronic
tracking of tools on assignment continue to be differentiators
for this growing business.
SITECH Eastern Canada Ltd. implemented Battlefield’s
Systematics Rental Management system to enhance
business performance and developed a new go-to-market
strategy with Toromont Cat. Demand for 3D construction
technology is expected to grow in future years and SITECH
is ready.
Toromont Material Handling gained experience with the
use of TDMS in managing its eight dedicated branches,
work in process and the financial utilization of its rental
fleet. The scope of that fleet widened with investments
targeted to high-demand markets as well as emerging user
groups. The arrival of more rental units in 2022 created
future opportunity for more timely retirement of older units.
Product support revenues and used machine sales improved
over 2021. Standalone branches were opened in Lévis and
Limoges, Québec and hubs were created to accelerate
turnaround times in preparing used equipment for resale
in Ontario and Québec. TMH expanded its footprint west as
Mitsubishi Logisnext granted Toromont the opportunity to
represent it in Saskatchewan. That gives us dual distribution
for Unicarrier and Mitsubishi Cat lift solutions in both
Saskatchewan and Manitoba. We responded with boots on
the ground in sales and service. For demonstrating best-in-
class expertise and superior customer service, Toromont
Material Handling was honoured with a Mitsubishi Logisnext
Dealer of Excellence Award. Kalmar, a world leader in cargo
handling solutions for ports, terminals and heavy industry,
named TMH a prime dealer in North American territories,
another important 2022 highlight.
AgWest benefitted from a recovery in commodity prices
and strong execution leading to higher market penetration
and growth in combine and tractor market shares. Improved
operational execution and added customer deliverables
contributed to much improved overall performance.
CIMCO Refrigeration began a new era as it relocated
from its original manufacturing plant, opened in 1917, to a
modern headquarters in Burlington, Ontario. Floorspace
is configured for efficient production. A packaging and
assembly facility also opened in Edmonton, Alberta. A
company-wide shared services model was adopted to
enhance efficiency and the consistency of CIMCO’s value
proposition across North America. New project management
technology provided the means to improve control over
material and labour costs and enhance scalability for the
future. Backlog finished the year at record levels. Bookings
were diversified and included breakthrough assignments.
The Columbus Blue Jackets became the first National
Hockey League team to choose the natural refrigerant
CO2 (R744) for its arena and CIMCO to provide it. CIMCO
secured a first order for its Net Zero Naturally heat pump
system, which is four times more efficient than gas boilers.
CIMCO was commissioned to conduct numerous feasibility
studies to provide participating municipalities with a
roadmap to guide their facility operations to dramatically
reduce their carbon emissions. Similarly, a large food retailer
engaged CIMCO for a net zero audit with a view to replacing
synthetic refrigerants and natural gas in its operations. This
is only the beginning. CIMCO is increasingly well positioned
for the future with its growing intellectual property portfolio
including Eco Chill heat recovery systems and new Thermal
Force 1 products.
Annual Report 2022
7
› One of the many specialized recreational equipment packages is readied for delivery to a CIMCO customer where it will support
the customer’s pathway to net zero.
Driving forward together
We thank our customers, employees, business partners and
shareholders for taking an active interest in Toromont and
contributing to the company’s success.
At the time of writing, macroeconomic factors that created
a complex operating environment in 2022 remain. We will
vigorously address and manage through these challenges
to the very best of our ability using our strengths: our
empowered workforce, innovative business partners, proven
strategies and an effective business model fuelled by the
power of scope, scale and financial flexibility.
Toromont is driving forward together – as one company with
6,800 energized employees – to deliver value. We invite you
to drive along with us.
Yours sincerely,
Richard G. Roy
Chair of the Board
February 14, 2023
Scott J. Medhurst
President and Chief
Executive Officer
Driving forward together with technology
to serve customers
Information technology plays a pivotal role in the
management of Toromont’s operations, fleets, inventories,
warehouses and product support activity. It is also
increasingly important in improving the product ownership
experience for customers. Through telematics, we track
machine location, hours of use and fuel burn, diagnose faults
remotely and dispatch field service efficiently. Reducing
time and fuel in making service calls benefits all parties and
the environment. We believe technology and the market
intelligence it enables can be put to even greater use in
the years ahead to help us understand customers and
identify and anticipate opportunity rather than react to it.
To that end, we continue to enrich the data sets we collect
across our installed base and use the insights to equip our
customers and ourselves to be better operators. Together
with low and no-carbon emission equipment, technology
will energize our future.
Governance and leadership
Through a special committee, our Board is actively engaged
in selecting Toromont’s next President and Chief Executive
Officer. This committee was struck following the June 2,
2022 announcement that Scott Medhurst would retire
from his post over the ensuing 12 to 18 months. This period
provides our Board with the ability to conduct a thorough
search for a successor and ensures leadership continuity
for Toromont in between. Certainly, the breadth, depth and
strength of our senior management team ensures we are
ready for this important change.
8
Toromont Industries Ltd.
FINANCIAL
REPORT
10 Management’s Discussion and Analysis
51 Management’s Report to the Shareholders
52
56
61
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
100 Ten-year financial review
102 Corporate information
Management Discussion and Analysis – 2022
MANA(cid:30)EMENT(cid:6)S DISCUSSION AND ANAL(cid:48)SIS
This Management's (cid:29)iscussion and Analysis ((cid:2)M(cid:29)(cid:5)A(cid:2)) of the financial position and results of operations of
Toromont Industries Ltd. ((cid:2)Toromont(cid:2) or the (cid:2)Company(cid:2)) as at and for the year ended (cid:29)ecember 31, 2022 is
prepared as at February 14, 2023, and should be read in conjunction with the audited consolidated financial
statements and related notes for the year ended (cid:29)ecember 31, 2022.
The consolidated financial statements reported herein have been prepared in accordance with International
Financial Reporting Standards ((cid:2)IFRS(cid:2)). The M(cid:29)(cid:5)A is presented in thousands of Canadian dollars unless
otherwise noted.
Additional information about Toromont is available online at www.sedar.com and Toromont's website
www.toromont.com.
Use o(cid:54) Non(cid:10)I(cid:29)RS (cid:29)inancial Measures
The M(cid:29)(cid:5)A presents certain financial and operating performance measures that management believes provide
meaningful information in assessing Toromont's underlying performance. Readers are cautioned that these
measures may not have a standardized meaning prescribed by IFRS and therefore may not be comparable to
similar measures presented by other issuers. Accordingly, non(cid:11)IFRS or non(cid:11)(cid:32)enerally Accepted Accounting
(cid:41)rinciples ((cid:2)(cid:32)AA(cid:41)(cid:2)) measures should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. (cid:29)efinitions and a reconciliations of the Company's non(cid:11)IFRS
or non(cid:11)(cid:32)AA(cid:41) measures are included in the (cid:2)Additional (cid:32)AA(cid:41) Measures(cid:2), (cid:2)Non(cid:11)(cid:32)AA(cid:41) Measures(cid:2) and (cid:2)(cid:36)ey
(cid:41)erformance Indicators(cid:2) sections of this report.
(cid:29)or(cid:70)ard(cid:10)Looking In(cid:54)ormation
Information in this M(cid:29)(cid:5)A that is not a historical fact is (cid:2)forward(cid:11)looking information(cid:2). (cid:48)ords such as (cid:2)plans(cid:2),
(cid:2)intends(cid:2), (cid:2)outlook(cid:2), (cid:2)expects(cid:2), (cid:2)anticipates(cid:2), (cid:2)estimates(cid:2), (cid:2)believes(cid:2), (cid:2)likely(cid:2), (cid:2)should(cid:2), (cid:2)could(cid:2), (cid:2)will(cid:2), (cid:2)may(cid:2) and
similar expressions are intended to identify statements containing forward(cid:11)looking information. Forward(cid:11)looking
information in this M(cid:29)(cid:5)A reflects current estimates, beliefs, and assumptions, which are based on Toromont(cid:80)s
perception of historical trends, current conditions and expected future developments, as well as other factors
management believes are appropriate in the circumstances. Toromont(cid:80)s estimates, beliefs and assumptions
are inherently subject to significant business, economic, competitive and other uncertainties and contingencies
regarding future events and as such, are subject to change. Toromont can give no assurance that such
estimates, beliefs and assumptions will prove to be correct. This M(cid:29)(cid:5)A also contains forward(cid:11)looking
statements about the recently acquired businesses.
Numerous risks and uncertainties could cause the actual results to differ materially from the estimates, beliefs
and assumptions expressed or implied in the forward(cid:11)looking statements, including, but not limited to(cid:24) business
cycles, including general economic conditions in the countries in which Toromont operates(cid:25) commodity price
changes, including changes in the price of precious and base metals(cid:25) inflationary pressures(cid:25) potential risks and
uncertainties relating to the novel CO(cid:47)I(cid:29)(cid:11)19 global pandemic, including an economic downturn, reduction or
disruption in supply or demand for our products and services, or adverse impacts on our workforce, capital
resources, or share trading price or liquidity(cid:25) increased regulation of or restrictions placed on our businesses as
a result of CO(cid:47)I(cid:29)(cid:11)19(cid:25) changes in foreign exchange rates, including the Cdn$/(cid:46)S$ exchange rate(cid:25) the
termination of distribution or original equipment manufacturer agreements(cid:25) equipment product acceptance and
availability of supply(cid:25) increased competition(cid:25) credit of third parties(cid:25) additional costs associated with warranties
and maintenance contracts(cid:25) changes in interest rates(cid:25) the availability of financing(cid:25) potential environmental
liabilities and changes to environmental regulation(cid:25) information technology failures, including data or cyber
10
Toromont Industries Ltd.
of
is
financial
International
unless
website
provide
these
comparable to
Accounting
of
RS
(cid:2)(cid:36)ey
(cid:2)plans(cid:2),
and
orward(cid:11)looking
oromont(cid:80)s
factors
assumptions
contingencies
such
forward(cid:11)looking
beliefs
business
price
and
or
capital
as
the
and
warranties
environmental
cyber
security breaches(cid:25) failure to attract and retain key employees(cid:25) damage to the reputation of Caterpillar, product
quality and product safety risks which could expose Toromont to product liability claims and negative publicity(cid:25)
new, or changes to current, federal and provincial laws, rules and regulations including changes in
infrastructure spending(cid:25) any requirement to make contributions or other payments in respect of registered
defined benefit pension plans or postemployment benefit plans in excess of those currently contemplated(cid:25) and
increased insurance premiums. Readers are cautioned that the foregoing list of factors is not exhaustive.
Any of the above mentioned risks and uncertainties could cause or contribute to actual results that are
materially different from those expressed or implied in the forward(cid:11)looking information and statements included
in this M(cid:29)(cid:5)A. For a further description of certain risks and uncertainties and other factors that could cause or
contribute to actual results that are materially different, see the risks and uncertainties set out in the (cid:2)Risks and
Risk Management(cid:2) and (cid:2)Outlook(cid:2) sections of Toromont(cid:80)s most recent annual Management (cid:29)iscussion and
Analysis, as filed with Canadian securities regulators at www.sedar.com or at our website www.toromont.com
Other factors, risks and uncertainties not presently known to Toromont or that Toromont currently believes are
not material could also cause actual results or events to differ materially from those expressed or implied by
statements containing forward(cid:11)looking information.
Readers are cautioned not to place undue reliance on statements containing forward(cid:11)looking information,
which reflect Toromont(cid:80)s expectations only as of the date of this M(cid:29)(cid:5)A, and not to use such information for
anything other than their intended purpose. Toromont disclaims any obligation to update or revise any
forward-looking information, whether as a result of new information, future events or otherwise, except as
required by law.
COR(cid:39)ORATE (cid:39)RO(cid:29)ILE AND BUSINESS SE(cid:30)MENTATION
As at (cid:29)ecember 31, 2022, Toromont employed over 6,800 people in more than 160 locations across Canada
and the (cid:46)nited States. Toromont is listed on the Toronto Stock Exchange under the symbol TI(cid:33).
Toromont has two reportable operating segments(cid:24) the Equipment (cid:32)roup and CIMCO.
The Equipment (cid:32)roup includes Toromont Cat, one of the world(cid:80)s larger Caterpillar dealerships, Battlefield (cid:78)
The Cat Rental Store, an industry(cid:11)leading rental operation, SITEC(cid:33), providing Trimble technology products
and services, Toromont Material (cid:33)andling, representing MCFA, (cid:36)almar and other manufacturers' products, and
Ag(cid:48)est, an agricultural equipment and solutions dealer representing A(cid:32)CO, CLAAS and other manufacturers'
products. The Company is the exclusive Caterpillar dealer for a contiguous geographical territory in Canada
that covers Manitoba, Ontario, (cid:42)u(cid:77)bec, Newfoundland, New Brunswick, Nova Scotia, (cid:41)rince Edward Island
and most of Nunavut. Additionally, the Company is the Ma(cid:36) engine dealer for the Eastern Seaboard of the
(cid:46)nited States, from Maine to (cid:47)irginia. (cid:41)erformance in the Equipment (cid:32)roup is driven by activity in several
industries(cid:24) road building and other infrastructure(cid:11)related activities(cid:25) mining(cid:25) residential and commercial
construction(cid:25) power generation(cid:25) aggregates(cid:25) waste management(cid:25) steel(cid:25) forestry(cid:25) and agriculture. Significant
activities include the sale, rental and service of mobile equipment for Caterpillar and other manufacturers(cid:25) sale,
rental and service of engines used in a variety of applications including industrial, commercial, marine,
on-highway trucks and power generation(cid:25) and sale of complementary and related products, parts and service.
CIMCO is a market leader in the design, engineering, fabrication, installation and after(cid:11)sale support of
refrigeration systems in industrial and recreational markets. Results of CIMCO are influenced by conditions in
the primary market segments served(cid:24) beverage and food processing(cid:25) cold storage(cid:25) food distribution(cid:25) mining(cid:25)
and recreational ice rinks. CIMCO offers systems designed to optimize energy usage through proprietary
Management’s Discussion and Analysis
11
Management Discussion and Analysis – 2022
products such as ECO C(cid:33)ILL(cid:76). CIMCO has manufacturing facilities in Canada and the (cid:46)nited States and sells
its products and services globally.
(cid:39)RIMAR(cid:48) OB(cid:33)ECTI(cid:45)E AND MA(cid:33)OR STRATE(cid:30)IES
The primary objective of the Company is to build shareholder value through sustainable and profitable growth,
supported by a strong financial foundation. To guide its activities in pursuit of this objective, Toromont works
toward specific, long(cid:11)term financial goals (see section heading (cid:2)(cid:36)ey (cid:41)erformance Measures(cid:2) in this M(cid:29)(cid:5)A)
and each of its operating groups consistently employs the following broad strategies(cid:24)
E(cid:71)pand Markets
Toromont serves diverse markets that offer long(cid:11)term potential for profitable expansion. Each operating group
strives to achieve or maintain leading positions in markets served. Incremental revenue is derived from
improved coverage, market share gains and geographic expansion. Expansion of the installed base of
equipment provides the foundation for product support growth and leverages the fixed costs associated with
the Company(cid:80)s infrastructure.
Strengt(cid:56)en (cid:39)roduct Support
Toromont's parts and service business is a significant contributor to overall profitability and serves to stabilize
results through economic downturns. (cid:41)roduct support activities also represent opportunities to develop closer
relationships with customers and differentiate our product and service offering. The ability to consistently meet
or exceed customers' expectations for service efficiency and quality is critical, as after(cid:11)market support is an
integral part of the customer(cid:80)s decision(cid:11)making process when purchasing equipment.
Broaden (cid:39)roduct O(cid:54)(cid:54)erings
Toromont delivers specialized capital equipment to a diverse range of customers and industries. Collectively,
hundreds of thousands of different parts are offered through the Company's distribution channels. The
Company expands its customer base through selectively extending product lines and capabilities. In support of
this strategy, Toromont represents product lines that are considered leading and generally best(cid:11)in(cid:11)class from
suppliers and business partners who continually expand and develop their offerings. Strong relationships with
suppliers and business partners are critical in achieving growth objectives.
In(cid:69)est in Resources
The combined knowledge and experience of Toromont's people is a key competitive advantage. (cid:32)rowth is
dependent on attracting, retaining and developing employees with values that are consistent with Toromont's. A
highly principled culture, share ownership and profitability(cid:11)based incentive programs result in a close alignment
of employee and shareholder interests. By investing in employee training and development, the capabilities
and productivity of employees continually improve to better serve shareholders, customers and business
partners.
Toromont's information technology represents another competitive differentiator in the marketplace. The
Company's selective investments in technology, inclusive of e(cid:11)commerce and other digital initiatives,
strengthen customer service capabilities, generate new opportunities for growth, drive efficiency and increase
returns to shareholders.
12
Toromont Industries Ltd.
Management Discussion and Analysis – 2022
sells
Maintain a Strong (cid:29)inancial (cid:39)osition
growth,
works
M(cid:29)(cid:5)A)
group
from
of
with
stabilize
closer
meet
an
Collectively,
support of
he
from
with
(cid:32)rowth is
oromont's. A
alignment
capabilities
business
he
initiatives,
increase
A strong, well(cid:11)capitalized balance sheet creates stability and financial flexibility, and has contributed to the
Company(cid:80)s long(cid:11)term track record of profitable growth. It is also fundamental to the Company(cid:80)s future success.
CONSOLIDATED ANNUAL O(cid:39)ERATIN(cid:30) RESULTS
($ thousands(cid:6) e(cid:37)(cid:20)ept pe(cid:32) sha(cid:32)e a(cid:28)ounts)
RE(cid:45)ENUE
Cost of goods sold
(cid:32)ross profit (1)
Selling and administrative expenses
O(cid:39)ERATIN(cid:30) INCOME (1)
Interest expense
Interest and investment income
Income before income taxes
Income taxes
NET EARNIN(cid:30)S
BASIC EARNIN(cid:30)S (cid:39)ER S(cid:31)ARE
(cid:34)E(cid:48) RATIOS(cid:23)
(cid:32)ross profit margin (1)
Selling and administrative expenses as a % of revenue
Operating income margin (1)
Income taxes as a % of income before income taxes
Return on capital employed (1)
Return on equity (1)
$
$
$
2022
4,230,736 $
3,097,150
1,133,586
509,417
624,169
27,338
(22,232)
619,063
164,865
454,198 $
5.52 $
26.8 %
12.0 %
14.8 %
26.6 %
32.3 %
23.5 %
2021
3,886,537 $
2,916,769
969,768
493,831
475,937
28,161
(9,027)
456,803
124,093
332,710 $
4.03 $
$ change
344,199
180,381
163,818
15,586
148,232
(823)
(13,205)
162,260
40,772
121,488
1.49
% change
9 %
6 %
17 %
3 %
31 %
(3) %
nm
36 %
33 %
37 %
37 %
25.0 %
12.7 %
12.2 %
27.2 %
26.6 %
19.6 %
(1) (cid:29)escribed in the sections titled (cid:2)Additional (cid:32)AA(cid:41) Measures(cid:2), (cid:2)Non(cid:11)(cid:32)AA(cid:41) Measures(cid:2) and (cid:2)(cid:36)ey (cid:41)erformance Measures(cid:2).
The Company delivered strong bottom line results in 2022, reflecting a favourable sales mix (higher rentals and
product support revenue to total revenue), improved gross margins and higher interest income on cash
balances. Rental and product support revenue increased on good market activity. Equipment revenue
increased after a slow start to the year caused by delays in product delivery. Supply chain constraints and
general macro-economic factors such as inflation, higher interest rates, and lingering pandemic concerns have
challenged the business in 2022, as well as disrupted historical trends and seasonality patterns, and are
expected to continue to do so for the near to mid(cid:11)term as we progress into 2023.
Revenue for the year increased 9% from prior year to $4.2 billion. Equipment (cid:32)roup revenue increased 10%
compared to last year on higher product support, rental activity and equipment sales. CIMCO revenue
decreased 3% versus last year, on lower package revenue partially offset by higher product support activity
levels. Supply chain challenges continued to dampen revenue in 2022 in both operating groups and have
delayed some deliveries and project completion into 2023.
(cid:32)ross profit margin increased 180 basis points ((cid:2)bps(cid:2)) to 26.8% versus 25.0% last year. The Equipment (cid:32)roup
reported higher margins mainly on tight equipment supply, improved rental fleet utilization, higher product
support activity levels and operating leverage. CIMCO margins increased on higher package margins,
reflecting good execution and mix of projects in process. Sales mix was also favourable in both (cid:32)roups,
contributing 80 bps to margin, with a higher proportion of product support revenue to total revenue.
Management’s Discussion and Analysis
13
Management Discussion and Analysis – 2022
Selling and administrative expenses for the year increased $15.6 million or 3% compared to the prior year.
Three items affect the comparability of expenses year over year. First, property dispositions resulted in pre(cid:11)tax
gains in both periods, $17.7 million in 2022 and $3.8 million in 2021. Secondly, a lower share price gave rise to
a mark-to-market pickup on (cid:29)S(cid:46)s in the current year of $2.9 million, compared to an expense of $7.0 million in
2021 (which saw a higher share price year over year), a swing of $9.9 million. Finally, 2021 included a
$5.0 million charge related to the settlement of certain defined pension benefit obligations for certain retirees,
completed through an annuity purchase. Excluding these three items, selling and administrative expenses
increased $44.4 million or 9%. Compensation costs increased approximately $24.0 million, reflecting higher
staffing levels, regular salary increases, and increased profit sharing accruals on the higher income. Other
expenses such as training, travel and occupancy costs have increased as a result of higher activity levels and
inflationary pressures. Allowance for doubtful accounts increased $4.5 million compared to last year on higher
aged receivables and heightened concern over the current economic environment. Selling and administrative
expenses were 70 basis points lower as a percentage of revenue (12.0% versus 12.7% last year).
Operating income increased $148.2 million or 31% in the year. Operating income margin increased 260 bps to
14.8%, reflecting the higher revenue, higher gross margins, favourable sales mix and lower relative expense
levels.
Interest expense decreased $0.8 million on lower cost borrowings, inclusive of fees on stand(cid:11)by credit facilities.
Interest and investment income increased $13.2 million or 146% in the year on higher average cash balances,
higher interest rates, as well as, higher interest income earned on conversion of equipment on rent with a
purchase option ((cid:2)R(cid:41)O(cid:2)).
The effective income tax rate for the year was 26.6% compared to 27.2% last year, reflecting the lower capital
gains rate on the property disposition in the current year.
Net earnings for the year increased $121.5 million or 37% to $454.2 million from 2021. Basic earnings per
share ((cid:2)E(cid:41)S(cid:2)) increased $1.49 or 37% to $5.52 in line with growth in earnings.
Other comprehensive income of $67.4 million in the year (2021 (cid:78) comprehensive income of $56.1 million)
included an actuarial gain on defined benefit pension and other post(cid:11)employment benefit plans of $58.8 million
(2021 (cid:78) actuarial gain of $49.9 million). These gains reflect changes in the weighted average discount rates
used in the valuation, which are reflective of underlying financial markets, as well as changes in the fair value
of pension plan assets. Other comprehensive income also included a favourable net change in the fair value of
cash flow hedges of $7.5 million (2021 (cid:78) favourable net change of $6.2 million). These changes reflect mark to
market differences in the value of foreign exchange derivative contracts designated as cash flow hedges and
are largely a function of the underlying (cid:46)S(cid:29)/CA(cid:29) exchange rates at period end compared to the contract date.
BUSINESS SE(cid:30)MENT ANNUAL O(cid:39)ERATIN(cid:30) RESULTS
The accounting policies of the segments are the same as those of the consolidated entity. Management
evaluates overall business segment performance based on revenue growth, operating income relative to
revenue and return on capital employed. Corporate expenses are allocated based on each segment(cid:80)s revenue.
Interest expense and interest and investment income are not allocated.
14
Toromont Industries Ltd.
year.
pre(cid:11)tax
rise to
in
included a
retirees,
expenses
higher
Other
and
higher
administrative
bps to
expense
facilities.
balances,
with a
capital
per
million)
million
rates
value
value of
mark to
and
Management
to
revenue.
Management Discussion and Analysis – 2022
Equipment (cid:30)roup
($ thousands)
Equipment sales and rentals
New
(cid:46)sed
Rentals
Total equipment sales and rentals
(cid:41)roduct support
(cid:41)ower generation
Total re(cid:69)enue
Operating income
(cid:34)E(cid:48) RATIOS(cid:23)
(cid:41)roduct support revenue as a % of total revenue
Operating income margin
(cid:32)roup total revenue as a % of consolidated revenue
Return on capital employed
2022
2021
$ change
% change
$
$
$
1,433,779 $
361,476
452,140
2,247,395
1,621,948
10,410
3,879,753 $
597,677 $
41.8 %
15.4 %
91.7 %
29.7 %
1,366,681 $
354,701
387,755
2,109,137
1,405,128
11,019
3,525,284 $
450,950 $
67,098
6,775
64,385
138,258
216,820
(609)
354,469
146,727
5 %
2 %
17 %
7 %
15 %
(6) %
10 %
33 %
39.9 %
12.8 %
90.7 %
23.8 %
The Equipment (cid:32)roup delivered solid results in the year with strong market activity driving higher rentals and
product support services. New equipment and parts supply chains remained challenging through most of the
year, affecting product availability, delaying deliveries and slowing work(cid:11)in(cid:11)process. (cid:32)ross margin improvement
and favourable sales mix (higher rental and product support revenue to total revenue), coupled with lower
expense levels on two one(cid:11)time items, drove improvements in operating income.
Total equipment revenue (new and used) increased $73.9 million or 4% compared to 2021, a tough
comparable. New equipment sales increased 5% in the year, as inventory supply constraints continue to delay
deliveries to customers. (cid:46)sed equipment sales increased 2% year over year, dampened on lower rental fleet
dispositions. (cid:46)sed equipment sales vary based on availability, either from rental fleet, trades or purchases.
Overall, revenue by market segments was as follows for the year(cid:24) construction markets lower (cid:11)5%, mining up
(cid:9)53%, power systems up (cid:9)9%, material handling lower (cid:11)12%, and agriculture up 15%.
Rental revenue increased $64.4 million or 17% versus last year. All markets and most segments were up,
reflecting continued improvement utilization on higher market activity, as well as continued investment in the
heavy and light equipment fleet. (cid:49)ear(cid:11)over(cid:11)year revenue changes in each market were as follows(cid:24) Light
equipment rentals (cid:9)17%, power systems (cid:9)15%, heavy equipment rentals (cid:9)20% and material handling (cid:9)10%.
As at (cid:29)ecember 31, 2022, the R(cid:41)O fleet (rent with a purchase option) was $44.7 million versus $46.1 million a
year ago, which continues to trend below pre(cid:11)pandemic levels.
(cid:41)roduct support revenue increased $216.8 million or 15%, with increases in both parts (up 16%) and service
(up 14%). Activity was higher across all markets and in most regions as follows(cid:24) construction markets (cid:9)16%(cid:25)
mining (cid:9)17%(cid:25) power systems (cid:9)8%(cid:25) material handling (cid:9)9%(cid:25) and agriculture (cid:9)12%.
(cid:32)ross profit margin increased 180 bps to 27.1% from 25.3% in 2021. Margins increased across all revenue
streams coupled with a favourable sales mix (higher product support and rental revenue to total revenue).
Equipment margins were up 40 bps reflecting strong demand, sales mix and tight supply. Rental margins were
up 60 bps on higher fleet utilization, as well as fleet optimization over the last year. (cid:41)roduct support margins
increased 20 bps on continued focus on efficiency as well as higher activity levels. Sales mix increased margin
by 60 bps.
Management’s Discussion and Analysis
15
s at period end compared to the contract date.
Management Discussion and Analysis – 2022
Selling and administrative expenses increased $12.9 million or 3% in 2022. In 2022, a property disposition
reduced expenses by $17.7 million (2021 (cid:78) property related gains of $3.8 million). Expenses in 2021 included a
$5.0 million charge for the settlement of defined benefit pension obligations for certain retirees. Excluding these
two items, expenses increased $31.8 million or 7% year over year, reflecting the higher activity levels.
Compensation costs increased on higher headcount, annual salary increases and higher profit sharing on the
increased earnings, partially offset by the mark(cid:11)to(cid:11)market adjustment on (cid:29)S(cid:46)s. Certain expenses such as
travel and training have increased compared to the prior year which experienced tighter restrictions. Allowance
for doubtful accounts increased $5.6 million on a larger balance of aged receivables. As a percentage of
revenue, selling and administrative expenses were lower at 11.7% in 2022 versus 12.5% last year, reflecting
the higher revenue and the two noted items in the current period.
Operating income increased $146.7 million or 33% and was 260 bps higher as a percentage of revenue
(15.4% versus 12.8% last year) reflecting the higher revenue and gross margins, gain on property disposal,
and lower relative expense levels.
Capital e(cid:71)penditures
($ (cid:28)(cid:26)ll(cid:26)ons)
Rental equipment
Capital expenditures
(cid:41)roceeds on disposals
Net e(cid:71)penditure
(cid:39)roperty, plant and equipment
Capital expenditures
2022
2021
$ change
% change
214,693 $
34,206
180,487 $
117,759 $
50,840
66,919 $
96,934
(16,634)
113,568
82 %
(33) %
nm
61,869 $
50,201 $
11,668
23 %
$
$
$
Rental fleet additions increased in 2022, in both the heavy and light equipment rental fleets across Eastern
Canada after two years of deliberate reduced investment, reflective of market conditions. Fleet dispositions, as
measured by proceeds, have been curtailed in light of tight equipment supply.
(cid:41)roperty, plant and equipment additions increased in 2022, as business activity improved. Capital expenditures
in 2022 included(cid:24)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
$19.6 million for land and buildings associated with facilities and new rental locations(cid:25)
$32.0 million for new and replacement service and delivery vehicles(cid:25)
$2.7 million for information technology infrastructure improvements and developments(cid:25) and
$7.6 million for other machinery and equipment for general operations.
Bookings and Backlog
($ (cid:28)(cid:26)ll(cid:26)ons)
Bookings (cid:78) years ended (cid:29)ecember 31
Backlog (cid:78) as at (cid:29)ecember 31
$
$
2022
1,752.2 $
1,087.3 $
2021
2,478.8 $
1,130.4 $
$ change
(726.6)
(43.1)
% change
(29) %
(4) %
Bookings and backlog can vary significantly from period to period on large project activities, especially in
mining and power systems, the timing of orders and deliveries with customers, which are in turn reflective of
economic factors and general activity levels, and the availability of equipment from either inventory or
suppliers.
New bookings decreased in 2022 by $726.6 million or 29%, reflecting the tough comparable, as several large
mining and construction orders were received in the prior year, which was also elevated by higher orders
16
Toromont Industries Ltd.
s of $3.8 million). Expenses in 2021 included a
on obligations for certain retirees. Excluding these
disposition
levels.
the
as
of
Allowance
reflecting
revenue
disposal,
% change
%
(33) %
nm
%
Eastern
as
expenditures
% change
(29) %
(4) %
reflective of
in
or
large
orders
Management Discussion and Analysis – 2022
following the downturn in 2020 during the height of the pandemic. Bookings in the following sectors were lower(cid:24)
construction ((cid:11)34%), power systems ((cid:11)11%), and mining ((cid:11)41%), partially offset by higher orders in material
handling ((cid:9)28%) and agriculture ((cid:9)10%). Bookings have increased 6% on a cumulative average annual growth
rate since 2019, the pre(cid:11)pandemic comparator.
Backlog of $1.1 billion was down by $43.1 million or 4%, reflecting slightly improved equipment delivery from
manufacturers later in the year. At (cid:29)ecember 31, 2022, the breakdown of backlog by market was as follows(cid:24)
construction 39%(cid:25) mining 30%(cid:25) power systems 22%(cid:25) agriculture 5%(cid:25) and material handling 4%. Approximately
90% of the backlog is expected to be delivered in 2023, however this is subject to timing of vendor supply and
customer delivery schedules.
CIMCO
($ thousands)
(cid:41)ackage sales
(cid:41)roduct support
Total re(cid:69)enue
Operating income
(cid:34)E(cid:48) RATIOS(cid:23)
(cid:41)roduct support revenue as a % of total revenue
Operating income margin
(cid:32)roup total revenue as a % of consolidated revenue
Return on capital employed
$
$
$
2022
173,273 $
177,710
350,983 $
26,492 $
50.6 %
7.5 %
8.3 %
41.9 %
2021
208,854 $
152,399
361,253 $
24,987 $
$ change
(35,581)
25,311
(10,270)
1,505
% change
(17) %
17 %
(3) %
6 %
42.2 %
6.9 %
9.3 %
61.7 %
CIMCO had a slow start to the year with delays in construction schedules dampening package sales, and
against a tough comparable, which included several large projects in the prior year. (cid:41)roduct support activity
continued to increase with a larger technician workforce, and improving activity particularly in the recreational
market. Operating income increased on higher gross margins and favourable sales mix of total product support
revenue to total revenue, partially offset by higher expenses.
(cid:41)ackage sales decreased $35.6 million or 17% versus 2021. Industrial market revenue was down 25% against
a tough comparable that included several large projects in Canada in the prior year. Recreational market
revenue remained relatively flat (up 3%) as an increase in the (cid:46)S (up 27%) was largely offset by a decrease in
Canada (down 12%). (cid:41)ackage revenue reflects the progress of project construction applying the
percentage-of-completion method of accounting. This introduces a degree of variability as the timing of projects
and construction schedules are largely under the control of third parties (contractors and end(cid:11)customers).
(cid:41)roduct support revenue increased $25.3 million or 17% versus 2021 on higher activity levels in both Canada
(up 19%) and the (cid:46)S (up 9%). Activity levels increased with the continued easing of pandemic restrictions, and
a reopening of recreational centres after prolonged pandemic closure. Increased labour capacity including the
increased technician base continues to support activity levels.
(cid:32)ross profit margin increased 180 basis points versus last year to 23.8%. (cid:41)ackage margins were up 120 bps,
on improved execution and the nature of projects in process. (cid:41)roduct support margins decreased 50 bps on
execution and supply chain constraints. A favourable sales mix, with a higher proportion of product support
revenue to total revenue, accounted for 110 bps of the increase.
Selling and administrative expenses increased $2.7 million or 5% versus last year. Allowance for doubtful
accounts decreased $1.1 million reflecting focused collection activity. Travel and training expenses increased
Management’s Discussion and Analysis
17
Management Discussion and Analysis – 2022
to support activity and staffing levels. Expenditure control measures on discretionary spend remained in effect.
Occupancy costs increased during the year as a result of the relocation of the Canadian head office to
Burlington along with other related branch changes. As a percentage of revenue, selling and administrative
expenses were unchanged at 15.9% in 2022 and 2021.
Operating income increased by $1.5 million or 6% in 2022, reflecting improved gross margins, in part due to
sales mix, partially offset by lower package revenue. Operating income as percentage of revenue increased
60 bps to 7.5% compared to last year.
Capital e(cid:71)penditures
($ (cid:28)(cid:26)ll(cid:26)ons)
2022
2021
$ change
% change
(cid:39)roperty, plant and equipment
$
9,206 $
21,729 $
(12,523)
(58) %
Capital expenditures in 2022 included final renovations of property for the new head office facility in
Canada ($3.4 million). Other expenditures included new and replacement service vehicles ($3.8 million), other
machinery and equipment for general operations ($0.8 million) and information technology enhancements and
upgrades ($1.2 million). Investment in 2021 included $16.8 million for acquisition of the head office facility.
Bookings and Backlog
($ (cid:28)(cid:26)ll(cid:26)ons)
Bookings (cid:78) years ended (cid:29)ecember 31
Backlog (cid:78) as at (cid:29)ecember 31
$
$
2022
206.9 $
198.4 $
2021
188.4 $
161.1 $
$ change
18.5
37.3
% change
10 %
23 %
Bookings increased $18.5 million or 10% to $206.9 million in 2022. Industrial bookings were up 10% with
increases in both Canada ((cid:9)9%) and the (cid:46)S ((cid:9)18%), as overall activity continued to improve, following a
slower start to the year, and with the ongoing easing of pandemic restrictions and stronger capital investment
levels in some markets. Recreational bookings were up 9%, mainly on stronger bookings in the (cid:46)S, up 37%,
which offset weaker bookings in Canada, down 9%, where investment is focused on return to operations after
a period of prolonged closures.
Backlog of $198.4 million increased $37.3 million or 23% compared to 2021. Both the recreational and
industrial backlog increased, in part reflecting the deferral or delay in construction schedules resulting from
supply chain constraints. Recreational backlog increased in both Canada (up 30%) and the (cid:46)S (up 58%).
Industrial backlog also increased in both Canada (up 5%) and the (cid:46)S (up 39%). Substantially all of the backlog
is expected to be realized as revenue in 2023, however this is subject to construction schedules and potential
changes stemming from supply chain constraints.
CONSOLIDATED (cid:29)INANCIAL CONDITION
The Company's strong financial position continued. At (cid:29)ecember 31, 2022, the ratio of net debt to total
capitalization decreased to (cid:11)14% (cash and cash equivalents exceeded debt) compared to (cid:11)16% at
(cid:29)ecember 31, 2021.
18
Toromont Industries Ltd.
fect.
to
administrative
due to
increased
% change
(58) %
in
other
and
% change
%
%
with
following a
investment
37%,
after
and
from
58%).
backlog
potential
total
at
Management Discussion and Analysis – 2022
Non(cid:10)cas(cid:56) (cid:46)orking Capital
The Company's investment in non(cid:11)cash working capital was $584.7 million at (cid:29)ecember 31, 2022. The major
components, along with the changes from prior year, are identified in the following table.
($ thousands)
Accounts receivable
Inventories
Other current assets
Accounts payable and accrued liabilities
(cid:41)rovisions
Income tax payable
(cid:29)erivative financial instruments
(cid:29)ividends payable
(cid:29)eferred revenue and contract liabilities
Total non(cid:10)cas(cid:56) (cid:70)orking capital
2022
579,682 $
1,025,759
17,444
(658,980)
(27,653)
(28,653)
18,530
(32,104)
(309,349)
584,676 $
$
$
2021
451,944 $
720,421
13,994
(544,512)
(25,404)
(15,239)
5,252
(28,851)
(199,696)
377,909 $
C(cid:56)ange
$
127,738
305,338
3,450
(114,468)
(2,249)
(13,414)
13,278
(3,253)
(109,653)
206,767
%
28 %
42 %
25 %
21 %
9 %
88 %
nm
11 %
55 %
55 %
Accounts receivable increased 28% from (cid:29)ecember 31, 2021, largely reflecting the higher trailing revenue
((cid:42)4 2022 was 20% higher than (cid:42)4 2021 revenue) and slightly slower collection activity. (cid:29)ays sales
outstanding ((cid:2)(cid:29)SOs(cid:2)) increased 6 days to 42 days, with an increase in both the Equipment (cid:32)roup (up 7 days)
and CIMCO (up 5 days). Collection activity and credit metrics are closely monitored, with added focus
considering the current economic environment.
Inventories at (cid:29)ecember 31, 2022 were 42% higher compared to (cid:29)ecember 31, 2021, with increases in both
(cid:32)roups(cid:24)
(cid:81) Equipment (cid:32)roup inventories were up $290.6 million or 42% higher with increases in equipment
(up $162.0 million or 40%), service work-in-progress (up $18.9 million or 27%), and parts inventories
(up $109.8 million or 49%). Inventory levels are typically lowest at the end of a fiscal year due to
seasonality, with inventories building during the year in advance of the typically busy selling period,
however pandemic and economic factors have influenced customer buying patterns and overridden
normal seasonality. Additionally, supply chain constraints have impacted the normal sales timeline as
delays of equipment, parts and components delay final delivery to end customers. Increased orders in
light of demand signals, as well as recent input price increases also serve to increase inventories.
(cid:81) CIMCO inventories were up $14.7 million or 70% predominantly driven by higher work(cid:11)in(cid:11)process levels
(up $12.8 million or 75%), along with parts inventories (up $1.9 million or 48%) reflecting higher service
and project activity levels as well as delays in construction schedules.
Other current assets are comprised mainly of prepaid expenses, and vary over time based on timing of receipt
of invoice and payment.
Accounts payable and accrued liabilities at (cid:29)ecember 31, 2022, were 21% higher than at (cid:29)ecember 31, 2021,
reflecting higher activity levels and higher profit sharing accruals on higher earnings, partially offset by the
lower (cid:29)S(cid:46) liability (lower number of units and lower share price).
Income tax payable reflects the difference between tax installments and current income tax expense.
(cid:29)erivative financial instruments represent the fair value of foreign exchange contracts. Fluctuations in the value
of the Canadian dollar have led to a cumulative net gain of $18.5 million as at (cid:29)ecember 31, 2022. This is not
Management’s Discussion and Analysis
19
Management Discussion and Analysis – 2022
expected to affect net earnings as the unrealized gains will offset future losses on the related hedged items,
either current accounts payable or future transactions.
(cid:29)ividends payable increased year over year reflecting the increased dividend rate. Effective with the
April 4, 2022 payment, the quarterly dividend rate was increased 11.4% from $0.35 per share to $0.39 per
share.
(cid:29)eferred revenue and contract liabilities represent billings to customers in excess of revenue recognized.
(cid:81)
In the Equipment (cid:32)roup, these balances arise due to(cid:24) progress billings from the sale of power and
energy systems and long(cid:11)term product support maintenance contracts(cid:25) sales of equipment with residual
value guarantees(cid:25) and, customer deposits for equipment to be delivered in the future. These balances
increased $98.2 million or 55.3%, in 2022, generally on timing of progress billings under long(cid:11)term
contracts, as well as customer deposits for future equipment deliveries.
(cid:81) At CIMCO, these balances arise on progress billings from the sale of refrigeration packages and vary
depending on timing of billings compared to customer(cid:80)s construction schedules. These balances
increased $11.4 million or 51.7%, reflecting the timing of billings compared to revenue recognized under
the percentage(cid:11)of(cid:11)completion method.
(cid:30)ood(cid:70)ill and Intangi(cid:50)les
The Company performs impairment tests on its goodwill and intangibles with indefinite lives on an annual basis
or as warranted by events or circumstances. The assessment entails estimating the fair value of operations to
which the goodwill and intangibles relate using the fair value less cost to sell valuation method. This
assessment affirmed goodwill and intangibles values as at (cid:29)ecember 31, 2022, as outlined in note 8 of the
notes to the annual consolidated financial statements.
Employee S(cid:56)are O(cid:70)ners(cid:56)ip
The Company employs a variety of share(cid:11)based compensation plans to align employees' interests with
corporate objectives. Certain programs are offered to to all employees, while other programs are offered
selectively to executives, senior managers and directors.
Executive Stock Option (cid:41)lan
Stock options have a 10(cid:11)year life, vest 20% per year on each anniversary date of the grant and are exercisable
at the designated common share price, which is fixed at prevailing market prices at the date the option is
granted. As at (cid:29)ecember 31, 2022, 2.0 million options to purchase common shares were outstanding, of which
0.9 million were exercisable. (cid:29)irectors do not participate in the option program.
Long(cid:11)Term Incentive (cid:41)rogram
On April 28, 2022, shareholders approved the adoption of certain changes to the Company's LTI(cid:41). There was
no change to the Company's existing share option and cash-settled (cid:29)S(cid:46) plans, both of which remain in place.
(cid:46)nder the LTI(cid:41), the Company introduced performance share units ((cid:2)(cid:41)S(cid:46)s(cid:2)), restricted share units ((cid:2)RS(cid:46)s(cid:2)),
executive deferred share units ((cid:2)E(cid:29)S(cid:46)s(cid:2)) and equity(cid:11)settled (cid:29)S(cid:46)s. The Company has the ability to grant
options and awards under all of these respective plans. The Company intends that total incentive award grants
will be based on historical share option grant levels at approximately a 50/50 split between share options and
grants under the LTI(cid:41).
20
Toromont Industries Ltd.
Management Discussion and Analysis – 2022
(cid:29)etails of each grant will be determined at the date of grant, including performance requirements, vesting and
settlement method. (cid:41)S(cid:46)s and RS(cid:46)s will settle upon vesting, while E(cid:29)S(cid:46)s and equity(cid:11)settled (cid:29)S(cid:46)s will settle
upon cessation of service to the Company. (cid:41)S(cid:46) vesting will be based upon the achievement of performance
objectives established at the time of grant by the Board of (cid:29)irectors. The maximum number of common shares
reserved for issuance, in aggregate, under the LTI(cid:41), will be 750,000, representing 0.9% of the issued and
outstanding shares at February 26, 2022.
(cid:29)uring the year, 7,134 RS(cid:46)s and 28,024 (cid:41)S(cid:46)s were granted under the LTI(cid:41). Expense of $557 thousand is
included in selling and administrative expenses with a credit to contributed surplus.
Employee Share (cid:41)urchase (cid:41)lan
Employees may purchase shares by way of payroll deductions. The Company matches employee contributions
at a rate of $1 for every $3 contributed, to a maximum of 2.5% of an employee's base salary per annum.
Company contributions prior to 2019 vested to the employee immediately, while contributions in 2019 onwards
vest five years from date of contribution. Company contributions amounting to $3.8 million in 2022 (2021 (cid:78)
$3.3 million) were charged to selling and administrative expense when paid. Approximately 49% of employees
participate in the plan (2021 (cid:78) 41%), which is administered by an independent third party.
(cid:29)eferred Share (cid:46)nits ((cid:2)(cid:29)S(cid:46)(cid:2))
A (cid:29)S(cid:46) is a notional unit that reflects the market value of a single Toromont common share and generally vests
immediately. (cid:29)S(cid:46)s may be redeemed only on cessation of employment or directorship. (cid:29)S(cid:46)s have dividend
equivalent rights, which are expensed as earned. Executives and senior managers may elect, on an annual
basis, to receive all or a portion of their performance incentive bonus in (cid:29)S(cid:46)s. Non(cid:11)employee directors
received 55% of their annual compensation in the form of (cid:29)S(cid:46)s and may also elect to receive some or all of
their remainder compensation in (cid:29)S(cid:46)s. The Company records the cost of the (cid:29)S(cid:46) plan as compensation
expense in selling and administrative expenses. (cid:46)nits credited prior to September 2022 will be cash-settled
while units elected or granted after that date will be share(cid:11)settled. As at (cid:29)ecember 31, 2022, 190,128
cash-settled (cid:29)S(cid:46)s were outstanding with a total value of $18.5 million (2021 (cid:78) 202,969 units at a value of
$23.1 million). The liability for cash(cid:11)settled (cid:29)S(cid:46)s is included in accounts payable and accrued liabilities on the
consolidated statements of financial position. As at (cid:29)ecember 31, 2022, 7,534 share(cid:11)settled (cid:29)S(cid:46)s were
outstanding. Share(cid:11)settled (cid:29)S(cid:46)s are credited to contributed surplus at time of grant.
Employee (cid:29)uture Bene(cid:54)its
The Company sponsors pension arrangements for substantially all of its employees. These include(cid:24)
(cid:81) (cid:29)efined contribution plans, including 401(k) matched savings plans for employees in the (cid:46)S, covering
the largest segment of employees, including all new hires(cid:25)
(cid:81) (cid:29)efined benefit pension plans(cid:25) and,
(cid:81) Other post(cid:11)employment benefit plans for certain grandfathered employees.
Certain unionized employees do not participate in Company(cid:11)sponsored plans, and contributions are made to
their retirement programs in accordance with the respective collective bargaining agreements.
he Company intends that total incentive award grants
(cid:29)efined Contribution (cid:41)lans
In the case of defined contribution plans, regular contributions are made to the individual employee accounts,
which are administered by a plan trustee in accordance with the plan documents. As at (cid:29)ecember 31, 2022,
approximately 4,425 employees participated in Company(cid:11)sponsored defined contribution plans.
Management’s Discussion and Analysis
21
items,
the
per
and
residual
balances
long(cid:11)term
vary
balances
under
basis
operations to
his
the
with
fered
exercisable
option is
which
was
e.
((cid:2)RS(cid:46)s(cid:2)),
grant
and
(cid:29)efined Benefit (cid:41)ension (cid:41)lans
The Company sponsors defined benefit plans, which provide pension benefits for approximately 1,300 active
employees. All (cid:41)lans are administered by a separate Fund that is legally separate from the Company, with the
exception of the Executive (cid:41)lan described below.
The funded status of these plans improved by $73.3 million during 2022 (a reduction in post employment
obligations). Actuarial gains, largely related to a higher discount rate reduced the defined benefit obligation by
$111.7 million. (cid:29)eclines in capital markets resulted in a negative return on plan assets, reducing the funded
position by $42.8 million, net of the interest expense on the obligation.
The Executive (cid:41)lan is a supplemental plan and is solely the obligation of the Company. All members of the plan
are retired. The Company is not obligated to fund the plan but is obligated to pay benefits under the terms of
the plan as they come due. At (cid:29)ecember 31, 2022, the Company has posted letters of credit in the amount of
$13.6 million to secure the obligations under this plan.
A key assumption in pension accounting is the discount rate. This rate is set with regard to the yield on
high-quality corporate bonds of similar average duration to the cash flow liabilities of the (cid:41)lans. (cid:49)ields are
volatile and can deviate significantly from period to period.
(cid:41)ost(cid:11)employment Benefit (cid:41)lans
The Company sponsors defined benefit plans, which provide supplementary post-employment health and life
insurance coverage to certain employees. The Company is not obligated to fund the plans but is obligated to
pay benefits as they come due. The plan is closed to new entrants.
See notes 2, 3 and 20 to the audited consolidated financial statements for further information
Legal and Ot(cid:56)er Contingencies
(cid:29)ue to the size, complexity and nature of the Company's operations, various legal matters are pending.
Exposure to these claims is mitigated through levels of insurance coverage considered appropriate by
management and by active management of these matters. In the opinion of management, none of these
matters will have a material effect on the Company's financial position or results of operations.
Normal Course Issuer Bid ("NCIB")
The Company's NCIB program was renewed on September 19, 2022. The current issuer bid allows the
Company to purchase up to approximately 8.2 million of its common shares in the 12-month period ending
September 18, 2023, representing 10% of common shares in the public float, as estimated at the time of
renewal. All shares purchased under the bid will be cancelled.
The Company entered into an Automatic Share (cid:41)urchase (cid:41)lan ((cid:2)AS(cid:41)(cid:41)(cid:2)) with a broker to enable the purchase
of common shares under the NCIB, during regular trading blackout periods. The volume of the purchases is
determined by the broker based on share price and maximum volume parameters established by the Company
under the AS(cid:41)(cid:41) prior to the commencement of each blackout period. As at (cid:29)ecember 31, 2022 and 2021,
there was no obligation for the repurchase of shares under the AS(cid:41)(cid:41).
13
Toromont Industries Ltd.
22
Toromont Industries Ltd.
active
the
employment
by
funded
All members of the plan
terms of
amount of
The Company purchased and cancelled 473,100 common shares for $48.5 million (average cost of
$102.52 per share, including transaction costs) under the previous NCIB program during the year ended
(cid:29)ecember 31, 2022.
The Company purchased and cancelled 470,600 common shares for $50.0 million (average cost of
$106.25 per share, including transaction costs) under the previous NCIB program during the year ended
(cid:29)ecember 31, 2021.
S(cid:56)are(cid:56)older Rig(cid:56)ts (cid:39)lan ("SR(cid:39)")
The SR(cid:41) is a 'new generation' shareholder rights plan, designed to encourage the fair treatment of
shareholders in connection with any takeover offer for the Company. The SR(cid:41) was renewed at the annual
meeting of shareholders in 2021 and expires at the end of the annual meeting of shareholders in 2024.
Outstanding S(cid:56)are Data
on
re
As at the date of this M(cid:29)(cid:5)A, the Company had 82,318,159 common shares and 1,967,892 share options
outstanding.
ife
obligated to
pending.
by
these
the
ng
of
purchase
purchases is
Company
2021,
Di(cid:69)idends
Toromont pays a quarterly dividend on its outstanding common shares and has historically targeted a dividend
rate of approximately 30 (cid:11) 40% of trailing earnings from continuing operations.
In February 2022, the quarterly dividend was increased by 11.4% or 4 cents per share, to 39 cents per
common share, effective with the April payment. In 2022, the Company declared dividends of $1.56 per
common share (2021 (cid:78) $1.36 per common share).
Considering the Company's strong financial position and positive long(cid:11)term outlook, the Board of (cid:29)irectors
increased the quarterly dividend by 10.3% to 43 cents per share effective with the dividend payable on April 4,
2023, to shareholders on record on March 9, 2023. Toromont has paid dividends every year since 1968 and
this is the 34rd consecutive year of dividend increases.
LI(cid:40)UIDIT(cid:48) AND CA(cid:39)ITAL RESOURCES
Sources o(cid:54) Liquidity
Toromont's liquidity requirements can be met through a variety of sources, including cash on hand, cash
generated from operations, long and short(cid:11)term borrowings and the issuance of common shares. Borrowings
are obtained through a variety of senior debentures, notes payable and committed credit facilities.
Toromont's debt portfolio is unsecured, unsubordinated and ranks pari passu.
The Company has a $500.0 million committed revolving credit facility, maturing in November 2026, with a
syndicate of financial institutions. (cid:29)ebt under this facility is unsecured and ranks pari passu with debt
outstanding under Toromont(cid:80)s existing debentures. Interest is based on a floating rate, primarily bankers'
acceptances and prime, plus applicable margins and fees based on the terms of the credit facility.
oromont Industries Ltd.
14
Toromont Industries Ltd.
Management’s Discussion and Analysis
23
Management Discussion and Analysis – 2022
No amounts were drawn on this revolving credit facility as at (cid:29)ecember 31, 2022 or 2021. Standby letters of
credit issued utilized $28.9 million of the facility as at (cid:29)ecember 31, 2022 (2021 (cid:78) $28.8 million).
The Company's credit arrangements include covenants, restrictions and events of default usually present in
arrangements of this nature, including requirements to meet certain financial tests periodically and restrictions
on additional indebtedness and encumbrances. The Company was in compliance with all covenants at
(cid:29)ecember 31, 2022 and 2021.
The Company expects that continued cash flows from operations in 2023, together with cash and cash
equivalents on hand (2022 (cid:78) $927.8 million) and currently available credit facilities will be more than sufficient
to fund requirements for investments in working capital, capital assets and dividend payments through the next
12 months. The Company's credit ratings will also continue to provide access to capital markets to facilitate
future debt issuance. The Company also has a certain degree of flexibility in its operating and investing plans
to mitigate fluctuations.
(cid:39)rincipal Components o(cid:54) Cas(cid:56) (cid:29)lo(cid:70)
Cash from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash
Flows, are summarized in the following table(cid:24)
($ thousands)
Cas(cid:56) and cas(cid:56) equi(cid:69)alents, (cid:50)eginning o(cid:54) year
Cash, provided by (used in)(cid:24)
Operating acti(cid:69)ities
Operations
Change in non(cid:11)cash working capital and other
Net rental fleet additions
In(cid:69)esting acti(cid:69)ities
(cid:29)inancing acti(cid:69)ities
2022
916,830 $
2021
591,128
$
601,927
(213,760)
(171,214)
216,953
480,745
129,322
(67,343)
542,724
(44,333)
(68,869)
(162,159)
(148,143)
Effect of foreign exchange on cash and cash equivalents balances
489
(10)
Increase in cas(cid:56) and cas(cid:56) equi(cid:69)alents during t(cid:56)e year
Cas(cid:56) and cas(cid:56) equi(cid:69)alents, end o(cid:54) year
10,950
927,780 $
325,702
916,830
$
Cash Flows from Operating Activities
Operating activities provided cash in both 2022 and 2021.
Cash generated from operations increased 25% from 2021 primarily on the higher net earnings.
Non(cid:11)cash working capital and other used cash in 2022, as higher inventory and account receivables, were only
partially offset by higher account payables and customer deposits. The remaining working capital accounts had
a more modest overall impact, with lower income tax installments and higher derivative contracts. Inventory
levels have increased on market activity, customer demand signals and supply chain constraints, while higher
account receivables reflect the higher sales volume and slower collections experienced.
24
Toromont Industries Ltd.
letters of
present in
restrictions
at
cash
ficient
next
facilitate
plans
Cash
2021
591,128
480,745
129,322
(67,343)
542,724
(68,869)
(148,143)
(10)
325,702
916,830
only
had
Inventory
higher
Management Discussion and Analysis – 2022
Non(cid:11)cash working capital provided cash in 2021, largely on a reduction of inventory levels due to supply chain
constraint limitations, lower account receivables on lower trailing sales coupled with good collection activity and
higher deferred revenue including customer deposits.
Net rental fleet additions (purchases less proceeds of dispositions) increased by $103.9 million in 2022
compared to 2021. The Company increased investment in both the heavy and light equipment rental fleets
across Eastern Canada after two years of deliberate reduced investment, reflective of market and supply
conditions.
The components and changes in non(cid:11)cash working capital are discussed in more detail in this M(cid:29)(cid:5)A under the
heading (cid:2)Consolidated Financial Condition(cid:2).
Cash Flows from Investing Activities
Investing activities used $44.3 million in 2022 compared to $68.9 million in 2021.
Toromont invested $69.3 million in 2022 in property, plant and equipment (2021 (cid:78) $71.2 million), as follows(cid:24)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
$22.8 million additions for land, buildings and construction in process for new and upgraded facilities
across the business (2021 (cid:78) $37.4 million)(cid:25)
$34.8 million for normal replacement of service and delivery vehicles (2021 (cid:78) $24.7 million)(cid:25)
$3.6 million for upgrades and enhancements to information technology infrastructure and office furniture
(2021 (cid:78) $4.0 million)(cid:25) and
$8.1 million for machinery and equipment replacements and upgrades (2021 (cid:78) $5.1 million).
In 2022, the Company sold a property for proceeds of $24.0 million resulting in a capital gain of $17.7 million
or $15.4 million after(cid:11)tax. Total disposition proceeds for 2022 were $25.2 million. (cid:29)ispositions in 2021
generated $2.5 million in proceeds.
Cash Flows from Financing Activities
For the year ended (cid:29)ecember 31, 2022, financing activities used $162.2 million (2021 (cid:78) used $148.1 million) in
cash, major uses and sources of cash during the year included(cid:24)
(cid:81) (cid:29)ividends paid to common shareholders of $125.2 million or $1.52 per share (2021 (cid:78) $109.1 million or
$1.32 per share)(cid:25)
(cid:81) Cash received on exercise of share options of $20.6 million (2021 (cid:78) $21.8 million)(cid:25)
(cid:81) (cid:41)urchase of shares under the NCIB program used $48.5 million (2021 (cid:78) $50.0 million)(cid:25) and
(cid:81)
Lease liability payments of $9.1 million (2021 (cid:78) $9.9 million).
OUTLOO(cid:34)
The health and safety of our employees and customers continues to be our top priority. (cid:48)e continue to monitor
closely the developments and potential impacts related to the pandemic and follow closely public health
authority recommendations.
Management’s Discussion and Analysis
25
(cid:48)e are also closely monitoring global economic factors, in particular, inflationary pressures from price and
wage increases, including increases from our key suppliers. (cid:48)e strive to continuously improve our operations
efficiency and learn from our experience over the last several years by leveraging the use of technology and
innovative ways to engage with customers, employees and other partners with reduced discretionary spending.
The challenges in the global supply chain resulted in delivery date delays for equipment, components and
parts. There has been improvement in specific model deliveries. and this is expected to continue. (cid:48)e continue
to actively manage supply chain constraints by taking appropriate mitigation steps in collaboration with our key
suppliers and our customers, such as actively sourcing used equipment, optimizing preparation time on
equipment, and offering rebuilds and rental options. (cid:48)e expect a tight supply environment on certain models
to persist for the near to mid term.
The Equipment (cid:32)roup's parts and service business provides stability supported by a large and diversified
installed base of equipment. The long(cid:11)term outlook for infrastructure projects and other construction activity is
positive across most territories although tied somewhat to the general economic climate which is increasingly
uncertain. Mining customers and our operations that support them continue to evaluate appropriate activity
levels on a daily/weekly basis. Longer term, mine expansion will remain dependent on global economic and
financial conditions.
Investment continues in broadening product lines and service offerings, expanding and enhancing the branch
network, optimizing rental fleets, and using technologies to create efficiency and effectiveness across the
organization. Integration and alignment of operating processes and systems, best practices and culture,
continues across our territory. (cid:41)roduct support technologies, such as remote diagnostics, telematics and digital
information models support and expand our strategic platform.
CIMCO's installed base supports current and future operations and growth trends. CIMCO has a wide product
offering using natural refrigerants including innovative CO2 solutions, which remains a differentiator in
recreational markets. In industrial markets, CIMCO's proven track record and strong geographical coverage
provides growth opportunities. Current backlog is supportive of future activity. Inflationary costs and competitive
market conditions continue to challenge package revenue growth opportunities.
The diversity of the markets served, expanding product offering and services, strong financial position and
disciplined operating culture position the Company well for continued positive results in the long term.
CONTRACTUAL OBLI(cid:30)ATIONS
Contractual obligations are set out in the following table. Management believes that these obligations will be
met comfortably through cash and cash equivalents on hand, cash generated from operations and existing
long(cid:11)term financing facilities.
(cid:39)ayments due (cid:50)y year
($ thousands)
Long(cid:11)term debt
(cid:41)rincipal
Interest
Accounts payable and accrued liabilities
Lease liabilities
2023
2024
2025
2026
2027 T(cid:56)erea(cid:54)ter
Total
$
(cid:79) $
(cid:79) $ 150,000 $
(cid:79) $ 500,000 $
24,765
691,084
7,721
24,765
(cid:79)
5,949
23,374
(cid:79)
3,161
19,200
(cid:79)
2,192
16,000
(cid:79)
1,374
$ 723,570 $
30,714 $ 176,535 $
21,392 $ 517,374 $
(cid:79) $ 650,000
(cid:79)
108,104
(cid:79)
691,084
3,484
23,881
3,484 $ 1,473,069
17
Toromont Industries Ltd.
26
Toromont Industries Ltd.
artners with reduced discretionary spending.
operations
and
and
and
continue
key
on
models
diversified
activity is
increasingly
activity
and
branch
the
culture,
digital
product
in
coverage
competitive
and
be
existing
Total
650,000
108,104
691,084
23,881
1,473,069
The above table does not include obligations related to defined benefit pension plans. Regular contributions
are made to registered defined benefit pension plans in order to fund the pension obligations as required.
Funding levels are monitored regularly and reset with new actuarial funding valuations at least every three
years. Contributions in 2022 totaled $10.8 million, including certain defined benefit pension payments, which
are made directly by the Company. Based on the most recent valuations completed, funding contributions and
pension payments are expected to be approximately $12.3 million in 2023.
(cid:34)E(cid:48) (cid:39)ER(cid:29)ORMANCE MEASURES
Management reviews and monitors its activities and the performance indicators it believes are critical to
measuring success. Some of the key financial performance measures are summarized in the following table.
Others include, but are not limited to, measures such as market share, fleet utilization, customer and employee
satisfaction, and employee health and safety.
(cid:49)ears ended (cid:29)ecember 31
2022
2021
2020
2019
2018
E(cid:47)(cid:39)ANDIN(cid:30) MAR(cid:34)ETS AND BROADENIN(cid:30) (cid:39)RODUCT
O(cid:29)(cid:29)ERIN(cid:30)S
Revenue growth
Revenue per employee (thousands)
STREN(cid:30)T(cid:31)ENIN(cid:30) (cid:39)RODUCT SU(cid:39)(cid:39)ORT
(cid:41)roduct support revenue growth
IN(cid:45)ESTIN(cid:30) IN OUR RESOURCES
Investment in information technology (millions)
Return on capital employed (1)
STRON(cid:30) (cid:29)INANCIAL (cid:39)OSITION
Non(cid:11)cash working capital (millions) (1)
Net debt to total capitalization (1)
Book value (shareholders' equity) per share
BUILD S(cid:31)ARE(cid:31)OLDER (cid:45)ALUE
Basic earnings per share growth
(cid:32)rowth in dividends declared per share
Return on equity (1)
$
$
$
$
8.9 %
637
$
11.7 %
625
$
(5.4) %
554
$
5.0 %
575
$
49.1 %
573
15.5 %
5.3 %
(4.4) %
10.1 %
60.4 %
$
36.0
32.3 %
$
35.2
26.6 %
$
37.7
20.4 %
$
34.8
22.9 %
27.4
21.7 %
584.7
(14) %
28.25
$
$
377.9
$
486.8
$
463.7
$
309.5
(16) %
3 %
15 %
18 %
23.69
$
20.60
$
18.70
$
16.35
37.0 %
14.7 %
23.5 %
30.0 %
9.7 %
19.6 %
(11.9) %
14.8 %
16.6 %
13.5 %
17.4 %
21.4 %
39.4 %
21.1 %
22.3 %
(1)
(cid:29)efined in the sections title (cid:2)Additional (cid:32)AA(cid:41) Measures and Non(cid:11)(cid:32)AA(cid:41) Measures.(cid:2)
Measuring Toromont's results against these strategies over the past five years illustrates that the Company has
delivered steady growth. Activity and results in 2022 and 2021 have seen a gradual improvement from the
height of the pandemic. The Company delivered good operating performance, financial results, cash
generation and financial position through a challenging and changing business environment. Results in 2020
reflect the pandemic which resulted in lower economic activity levels in our markets, negatively impacting many
of the key performance measures. Through the pandemic, Toromont remained focused on three priorities,
namely, safeguarding our employees, servicing our customers' needs and protecting our business for the
future.
oromont Industries Ltd.
18
Toromont Industries Ltd.
Management’s Discussion and Analysis
27
Management Discussion and Analysis – 2022
The addition of the (cid:42)u(cid:77)bec and Maritimes territories in October 2017, provided a larger platform for continued
growth. The 2018 amounts shown above include one full year of operations in the acquired territories, and are
fully comparable from 2018 to 2022.
Since 2018, revenue increased at an average annual rate of 13.9%, with product support growing at 17.4%
annually. Over this period, growth in revenue has resulted from(cid:24)
(cid:81) Optimizing acquired territories operations and go(cid:11)to(cid:11)market strategies to increase market share(cid:25)
(cid:81)
Increased customer demand in certain market segments, most notably construction and mining(cid:25)
(cid:81) Organic growth through increased rental fleet size and additional branches(cid:25)
(cid:81)
(cid:81) Additional product offerings over the years from Caterpillar and other suppliers(cid:25) and
(cid:81) (cid:32)overnmental funding programs that provide support for infrastructure spending.
Increased customer demand for formal product support agreements(cid:25)
Over the same five(cid:11)year period, revenue growth has been constrained at times by a number of factors
including(cid:24)
(cid:81)
The CO(cid:47)I(cid:29)(cid:11)19 pandemic, declared in March 2020, which resulted in a significant downturn in economic
activity and disruption of normal operations. Site restrictions and closures impacted the timing of
construction and delivery schedules, as well as product supply and demand,
Inability to source equipment and parts from suppliers to meet customer demand or delivery schedules,
as a result of specific supplier issues or more recently due to global supply chain disruption caused by
the pandemic(cid:25)
(cid:81)
(cid:81) Economic weakness and uncertainty, both generally and in specific markets or sectors(cid:25)
(cid:81) (cid:47)olatility in commodity prices(cid:25)
(cid:81) Competitive conditions(cid:25)
(cid:81)
(cid:81)
Inflationary pressures and rising interest rates(cid:25) and
Inability to hire necessary skilled technicians to service market demand.
Changes in the Canadian/(cid:46)S exchange rate also affect reported revenue as the exchange rate impacts the
purchase price of equipment that, in turn, is reflected in selling prices. Since 2018, the average annual
exchange rate of the Canadian dollar against the (cid:46)S dollar has varied from $0.75 to $0.80, however, there
have been periods of higher volatility, with the dollar ranging from a low of $0.69 to a high of $0.83.
Toromont continues to invest in its resources, including investment in information technology, in part to
increase productivity levels, as well as to maintain our systems to be relevant and secure in the ever(cid:11)changing
technological environment in which we operate.
Toromont continues to maintain a strong balance sheet. Leverage, as represented by the ratio of net debt to
total capitalization, was (cid:11)14% at the end of 2022 compared to (cid:11)16% at the end of 2021. Since 2018, strong
cash generation has allowed the Company to invest in the business while reducing debt levels.
Toromont has paid dividends consistently since 1968 and has increased the dividend in each of the last 34
years. The Company declared dividends of $1.56 per common share in 2022, or $0.39 per quarter (2021 (cid:78)
$1.36 per common share (increase of 14.7%).
28
Toromont Industries Ltd.
continued
are
17.4%
factors
economic
schedules,
of
by
the
annual
there
debt to
strong
34
(cid:78)
Management Discussion and Analysis – 2022
CONSOLIDATED (cid:29)OURT(cid:31) (cid:40)UARTER O(cid:39)ERATIN(cid:30) RESULTS
($ thousands(cid:6) e(cid:37)(cid:20)ept pe(cid:32) sha(cid:32)e a(cid:28)ounts)
RE(cid:45)ENUE
Cost of goods sold
(cid:32)ross profit
Selling and administrative expenses
O(cid:39)ERATIN(cid:30) INCOME
Interest expense
Interest and investment income
Income before income taxes
Income taxes
NET EARNIN(cid:30)S
BASIC EARNIN(cid:30)S (cid:39)ER S(cid:31)ARE
$
T(cid:56)ree mont(cid:56)s ended Decem(cid:50)er 31
2021
956,035 $
686,785
269,250
120,480
148,770
6,889
(2,827)
144,708
39,118
105,590 $
1.28 $
2022
1,150,097 $
826,025
324,072
111,590
212,482
6,786
(8,799)
214,495
54,633
159,862 $
1.94 $
$
$
$ change
194,062
139,240
54,822
(8,890)
63,712
(103)
(5,972)
69,787
15,515
54,272
0.66
% change
20 %
20 %
20 %
(7) %
43 %
(1) %
nm
48 %
40 %
51 %
52 %
(cid:34)E(cid:48) RATIOS(cid:23)
(cid:32)ross profit margin
Selling and administrative expenses as a % of revenue
Operating income margin
Income taxes as a % of income before income taxes
28.2 %
9.7 %
18.5 %
25.5 %
28.2 %
12.6 %
15.6 %
27.0 %
The Company ended the year with solid fourth quarter results on strong execution from our teams. Net
earnings in the fourth quarter of 2022 included a $15.4 million gain related to a property disposition. (cid:33)igher
revenue and good expense control drove positive results in the Equipment (cid:32)roup. Results at CIMCO were
unchanged from the similar period last year as higher revenue was largely offset by higher expenses.
Revenue increased 20% to $1.2 billion, with the Equipment (cid:32)roup up 22% and CIMCO up 7%. Rental and
product support revenue continued to increase on good market activity. Equipment sales delivery improved
slightly as equipment and parts were received from suppliers, however supply constraints remain in effect.
(cid:41)ackage sales increased in the fourth quarter as project schedules progressed.
to
ever(cid:11)changing
(cid:32)ross profit margin was unchanged at 28.2% in the quarter, with higher gross margins in the Equipment (cid:32)roup
being offset by lower gross margins at CIMCO. Overall sales mix was unfavourable down 30 bps with lower
product support and rental revenue to total.
Selling and administrative expenses decreased $8.9 million or 7% in the fourth quarter compared to the prior
year. In 2022, a property disposition reduced expenses by $17.7 million. Expenses in 2021 include a
$5.0 million charge for the settlement of defined benefit pension obligations for certain retirees. Excluding these
items, expenses were up $13.9 million or 12% in the quarter. Compensation costs were higher reflecting
increased staffing levels and increased profit sharing accruals on the higher income. Other expenses such as
training, travel and occupancy costs have increased in light of activity levels and inflationary pressures.
Allowance for doubtful accounts increased $0.5 million in the quarter, reflecting a larger balance of aged
receivables. Selling and administrative expenses were 290 basis points lower as a percentage of revenue
(9.7% versus 12.6% last year) largely due to the impact of the two aforementioned items.
Operating income increased $63.7 million or 43% reflecting the higher revenue and property disposition gain.
Operating income margin increased 290 bps to 18.5%.
Interest expense decreased $0.1 million in the quarter due to lower financing costs related to credit facilities.
Management’s Discussion and Analysis
29
Management Discussion and Analysis – 2022
Interest income increased $6.0 million resulting from higher interest earned on average cash and cash
equivalents balances, reflective of market interest rates and on higher interest from conversions of R(cid:41)Os.
The effective income tax rate for the fourth quarter was 25.5% compared to 27.0% in 2021, mainly as a result
of the lower capital gains rate on the property disposition.
Net earnings in the quarter increased $54.3 million or 51% to $159.9 million. Basic E(cid:41)S increased $0.66 or
52% to $1.94 versus $1.28 in 2021.
BUSINESS SE(cid:30)MENT (cid:29)OURT(cid:31) (cid:40)UARTER O(cid:39)ERATIN(cid:30) RESULTS
Equipment (cid:30)roup
($ thousands(cid:6) e(cid:37)(cid:20)ept as noted)
Equipment sales and rentals
New
(cid:46)sed
Rentals
Total equipment sales and rentals
(cid:41)roduct support
(cid:41)ower generation
Total re(cid:69)enue
Operating income
Bookings ($ millions)
T(cid:56)ree mont(cid:56)s ended Decem(cid:50)er 31
2021
2022
$ change
% change
$
$
$
$
413,731 $
85,497
124,538
623,766
428,164
2,489
1,054,419 $
198,563 $
313,232 $
78,878
112,742
504,852
359,403
2,715
866,970 $
135,302 $
100,499
6,619
11,796
118,914
68,761
(226)
187,449
63,261
32 %
8 %
10 %
24 %
19 %
(8) %
22 %
47 %
405.5 $
618.9 $
(213.4)
(34) %
(cid:34)E(cid:48) RATIOS(cid:23)
(cid:41)roduct support revenue as a % of total revenue
Operating income margin
(cid:32)roup total revenue as a % of consolidated revenue
40.6 %
18.8 %
91.7 %
41.5 %
15.6 %
90.7 %
The Equipment (cid:32)roup delivered solid results in the quarter, as equipment deliveries from suppliers allowed for
the delivery against backlog orders. Rental and product support activity also increased. (cid:33)igher revenue
coupled with lower expense ratios drove improvements in operating income.
Total equipment sales (new and used) increased $107.1 million or 27%. New equipment sales increased 32%
on good deliveries in the mining, power systems, material handling and agriculture markets, while on(cid:11)going
inventory supply constraints continued to dampen deliveries in the construction market. (cid:46)sed equipment sales
were up 8%, dampened slightly by lower rental fleet dispositions. Overall, revenue change by market segment
was as follows for the quarter(cid:24) mining (cid:9)275%, power systems (cid:9)27%, material handling (cid:9)38%, agricultural
(cid:9)24%, and construction (cid:11)2%.
Rental revenue increased $11.8 million or 10%. Most markets and segments were higher reflecting improved
utilization on higher market activity. The following markets resulted in revenue growth in the quarter(cid:24) Light
equipment rentals (cid:9)13%, heavy rental in the construction market (cid:9)41%, and material handling (cid:9)6%. (cid:41)ower
rentals were down 11% while rental revenue from R(cid:41)O equipment was down 31%, both against a tough
comparable last year.
30
Toromont Industries Ltd.
cash
result
or
% change
%
%
%
%
%
%
%
(8) %
(34) %
for
revenue
32%
on(cid:11)going
sales
segment
agricultural
improved
Light
(cid:41)ower
tough
Management Discussion and Analysis – 2022
(cid:41)roduct support revenue increased $68.8 million or 19% on higher parts and service both up 19%. Activity
levels were good across most market segments and regions. Activity was higher across all markets and in
most regions as follows(cid:24) construction markets (cid:9)14%(cid:25) mining (cid:9)24%(cid:25) power systems (cid:9)28%(cid:25) material handling
(cid:9)11%(cid:25) and agriculture (cid:9)44%.
(cid:32)ross margins increased 10 bps in the quarter versus last year, across all revenue streams, largely offset by
sales mix. Equipment margins were up 30 bps, mainly reflecting mix of equipment product lines sold. (cid:41)roduct
support margins increased 20 bps, reflecting improved efficiency on higher volumes. Rental gross margins
were up 10 bps, reflecting improved activity and fleet utilization. Sales mix was unfavourable (down 50 bps)
with a higher proportion of equipment sales to total revenue.
Selling and administrative expenses decreased $9.9 million or 9%. (cid:29)uring the quarter a property was disposed
leading to a gain of $17.7 million. Expenses in 2021 included a $5.0 million charge for the settlement of defined
benefit pension obligations for certain retirees. Excluding these two items, expenses increased $16.6 million or
15% in the quarter, reflecting the higher activity levels. Compensation costs were higher reflecting increased
staffing levels and increased profit sharing accruals on the higher income. Other expenses such as training,
travel and occupancy costs have increased in light of activity levels and inflationary pressures. Allowance for
doubtful accounts increased $2.5 million in the quarter, reflecting a larger balance of aged receivables.
Operating income increased $63.3 million or 47% in the quarter. Operating income was 18.8% as a percentage
of revenue, an increase of 320 bps versus the comparable period last year, mainly reflecting the lower related
expenses inclusive of the property gain.
Bookings decreased $213.4 million or 34% to $405.5 million reflecting a strong prior year comparable that
included several large mining and construction orders. Bookings in the prior year also reflected a general
customer order preference given the supply constraints and economic environment expected at that time.
Bookings for the fourth quarter were down in the construction ((cid:11)60%) and power systems ((cid:11)25%) sectors,
partially offset by higher orders in mining ((cid:9)45%), agriculture ((cid:9)17%) and material handling ((cid:9)6%).
CIMCO
($ thousands(cid:6) e(cid:37)(cid:20)ept as noted)
(cid:41)ackage sales
(cid:41)roduct support
Total re(cid:69)enue
Operating income
T(cid:56)ree mont(cid:56)s ended Decem(cid:50)er 31
2021
48,103 $
40,962
89,065 $
13,468 $
2022
48,889 $
46,789
95,678 $
13,919 $
$
$
$
$ change
786
5,827
6,613
451
% change
2 %
14 %
7 %
3 %
Bookings ($ millions)
$
45.5 $
55.9 $
(10.4)
(19) %
(cid:34)E(cid:48) RATIOS(cid:23)
(cid:41)roduct support revenue as a % of total revenue
Operating income margin
(cid:32)roup total revenue as a % of consolidated revenue
48.9 %
14.5 %
8.3 %
46.0 %
15.1 %
9.3 %
Revenue in the fourth quarter increased on the continued stronger product support activity levels. (cid:41)ackage
sales picked up slightly as project schedules progressed with good execution. Operating income increased due
to the higher revenue, which was dampened by weaker gross margins and higher expenses.
Management’s Discussion and Analysis
31
Management Discussion and Analysis – 2022
(cid:41)ackage revenue increased $0.8 million or 2% in the quarter compared to last year, on the progression of
construction schedules. In Canada revenue was down 10%, in both the industrial ((cid:11)9%) and recreational
markets ((cid:11)14%). Equipment supply issues and customer delays have deferred some projects to 2023. In the
(cid:46)S, package sales were up 53% on strong market activity, in both the recreational ((cid:9)45%) and industrial
markets ((cid:9)67%).
(cid:41)roduct support revenue increased $5.8 million or 14% from last year in both Canada ((cid:9)15%) and the (cid:46)S
((cid:9)12%). Activity levels continued to improve with the easing of pandemic restrictions, and a reopening of
recreational centres resuming winter activities after prolonged pandemic closure. The increased technician
base continues to support activity levels.
(cid:32)ross margins decreased 70 bps in the quarter, on inflationary factors and supply chain constraints. (cid:41)roduct
support margins were 50 bps lower while package margins were 40 bps lower, slightly offset by a favourable
sales mix of a higher proportion of product support revenue to total revenue (up 20 bps).
Selling and administrative expenses increased $1.0 million or 7%. Allowance for doubtful accounts decreased
$2.0 million from the similar period last year reflecting focused efforts on collections. All other expenses,
including compensation, travel and training, on higher staffing levels and normal annual salary increases.
Expenses in the fourth quarter of 2021 were lower reflecting accrual adjustments following the implementation
of the new payroll and (cid:33)RIS system last year, not repeated in the current year.
Operating income increased $0.5 million in the quarter versus a year ago, as higher revenue was dampened
by lower gross margins and higher selling and administrative expenses. As a percentage of revenue, operating
income decreased to 14.5% in 2022, from 15.1% in 2021.
Bookings decreased $10.4 million or 19% to $45.5 million on lower orders in both Canada and the (cid:46)S. Timing
of decisions by customers and receipt of orders can vary from period to period. Bookings were down 12% in
Canada and 31% in the (cid:46)S, however were up in both markets on a full year basis.
(cid:40)UARTERL(cid:48) RESULTS
The following table summarizes quarterly consolidated financial data for the eight most recently completed
quarters. This quarterly information is unaudited but has been prepared on the same basis as the 2022 annual
audited consolidated financial statements.
32
Toromont Industries Ltd.
recreational
industrial
of
the
(cid:46)S
of
technician
(cid:41)roduct
favourable
decreased
expenses,
increases.
implementation
dampened
operating
iming
12% in
completed
annual
Management Discussion and Analysis – 2022
($ thousands(cid:6) e(cid:37)(cid:20)ept pe(cid:32) sha(cid:32)e a(cid:28)ounts)
RE(cid:45)ENUE
Equipment (cid:32)roup
CIMCO
Total revenue
(cid:40)4 2022
(cid:42)3 2022
(cid:42)2 2022
(cid:42)1 2022
(cid:42)4 2021
(cid:42)3 2021
(cid:42)2 2021
(cid:42)1 2021
$ 1,054,419 $ 1,045,493 $ 993,214 $ 786,627 $ 866,970 $ 914,386 $ 1,016,545 $ 727,383
78,855
$ 1,150,097 $ 1,139,599 $ 1,080,897 $ 860,143 $ 956,035 $ 997,198 $ 1,127,066 $ 806,238
82,812 110,521
95,678
87,683
94,106
73,516
89,065
NET EARNIN(cid:30)S
$ 159,862 $ 123,123 $ 111,681 $ 59,532 $ 105,590 $ 93,764 $ 85,400 $ 47,956
(cid:39)ER S(cid:31)ARE IN(cid:29)ORMATION(cid:23)
Basic earnings per share
(cid:29)iluted earnings per share
(cid:29)ividends paid per share
(cid:48)eighted average common
shares outstanding (cid:78) basic
(in thousands)
$
$
$
1.94 $
1.93 $
0.39 $
1.50 $
1.49 $
0.39 $
1.35 $
1.34 $
0.39 $
0.72 $
0.72 $
0.35 $
1.28 $
1.27 $
0.35 $
1.13 $
1.12 $
0.35 $
1.03 $
1.02 $
0.31 $
0.58
0.58
0.31
82,279
82,183
82,433
82,467
82,401
82,705
82,587
82,499
Interim period revenue and earnings historically reflect variability from quarter to quarter due to seasonality.
The pandemic and resulting impact on the economy, including global supply chains, has affected seasonal
trends in recent periods shown and may result in continued variations to historically experienced trends.
The Equipment (cid:32)roup has historically had a distinct seasonal trend in activity levels. Lower revenue is
recorded during the first quarter due to winter shutdowns in the construction industry. The fourth quarter had
typically been the strongest due in part to the timing of customers' capital investment decisions, delivery of
equipment from suppliers for customer(cid:11)specific orders and conversions of equipment on rent with a purchase
option. This pattern is impacted by the timing of significant sales to mining and other customers, resulting from
the timing of mine site development and access, and construction project schedules. This trend can also be
impacted during periods of equipment supply constraints from suppliers.
CIMCO has also had a distinct seasonal trend in results historically, as the timing of construction activity
impacts revenue recognition under percentage(cid:11)of(cid:11)completion accounting. Revenue is typically lower during the
first quarter as winter weather slows down construction schedules. Revenue increases in subsequent quarters
as construction schedules ramp up. This trend can be impacted by governmental funding initiatives, supply
constraints and the customer's timing of significant industrial projects. Sequential comparisons are also
impacted by CIMCO's relatively high fixed cost structure.
(cid:33)istorically, inventories have increased through the year to meet the expected demand for higher deliveries in
the third and fourth quarter. This trend can be impacted by equipment and parts availability. These seasonal
sales trends also typically lead to accounts receivable to be at their highest level at year-end.
In 2020 and 2021, these patterns were disrupted by the governmental and market response and reaction to
CO(cid:47)I(cid:29)(cid:11)19. In 2021, demand for equipment was stronger through the first nine months of the year, reflecting
both delayed purchasing from 2020, as well as stronger order flow in light of global supply chain disruptions,
thus impacting revenue in the fourth quarter. In 2022, patterns have been disrupted by supply chain pressures
impacting the timing of receipt and delivery of products and services to final customers.
Net earnings have generally followed the trend in revenue. Cost reduction and containment strategies continue
to be a focus, however, have a delayed effect on net earnings.
Management’s Discussion and Analysis
33
Management Discussion and Analysis – 2022
Market and economic factors including the CO(cid:47)I(cid:29)(cid:11)19 pandemic, local and global economic factors, and supply
chain issues have affected and may continue to impact these trends. There can be no certainty that this
historical seasonal pattern will recur in the future.
SELECTED ANNUAL IN(cid:29)ORMATION
($ thousands(cid:6) e(cid:37)(cid:20)ept pe(cid:32) sha(cid:32)e a(cid:28)ounts)
Revenue
Net earnings
Earnings per share ((cid:2)E(cid:41)S(cid:2))
Basic
(cid:29)iluted
(cid:29)ividends declared per share
Total assets
Total long(cid:11)term debt
(cid:48)eighted average common shares outstanding (cid:11) basic (in millions)
$
$
$
$
$
$
$
2022
4,230,736 $
454,198 $
2021
3,886,537 $
332,710 $
5.52 $
5.47 $
1.56 $
4,182,125 $
647,060 $
82.3
4.03 $
4.00 $
1.36 $
3,583,796 $
646,337 $
82.5
2020
3,478,897
254,915
3.10
3.09
1.24
3,346,792
646,299
82.2
Revenue increased 9% in 2022 versus the prior year. Equipment (cid:32)roup revenue increased 10% on growth in
equipment sales, rental revenue and product support activity, reflecting the increase in demand as pandemic
restrictions eased compared to 2021. CIMCO revenue decreased 3% versus a tough comparable, which
included several large industrial construction projects, while product support activity increased year over year
with the higher technician workforce. Supply chain challenges continued to constrain revenue in 2022 in both
operating groups.
Revenue increased 12% in 2021 compared to 2020. Equipment (cid:32)roup revenue increased 11% on strong
equipment sales, higher rental revenue and product support reflecting the improvement in demand as
pandemic restrictions eased compared to 2020. CIMCO revenue increased 15% on execution of several large
industrial construction projects while product support activity was unchanged year over year.
Net earnings increased 37% in 2022, mainly reflecting the 9% increase in revenue and improved gross
margins in both the Equipment (cid:32)roup and CIMCO, partially offset by higher selling and administrative
expenses. Net financing costs were lower on higher interest earned on cash balances year over year.
Net earnings increased 31% in 2021 compared to 2020, largely reflecting the 12% increase in revenue,
improved gross margins in the Equipment (cid:32)roup, and a lower relative level of selling and administrative
expenses to sales reflecting cost reductions implemented as a result of the pandemic. Financing costs were
lower on a lower total value of committed credit facilities year over year.
(cid:29)ividends have generally increased in proportion to trailing earnings growth. The quarterly dividend rate
increased(cid:24) in 2020 by 14.8% to $0.31 per share(cid:25) in 2021 by 12.9% to $0.35(cid:25) and in 2022 by 11.4% to $0.39 per
share. The Company has paid dividends every year since 1968.
Total assets increased 17% in 2022, reflecting higher working capital and other investment levels in support of
elevated activity levels. Inventory levels increased due to demand signals, a tight supply environment, as well
as recent input price increases. Accounts receivable increased on the higher trailing revenue, and an increase
in (cid:29)SO. Investments in capital assets have been made to support growth initiatives and expand the rental
fleets. In 2021, total assets increased 7% compared to 2020, largely on higher cash balances coupled with
investments in capital assets to support growth, while focused collections on account receivables reduced (cid:29)SO
and inventory levels were constrained due to strong demand and supply chain delays.
34
Toromont Industries Ltd.
supply
this
2020
3,478,897
254,915
3.10
3.09
1.24
3,346,792
646,299
82.2
growth in
pandemic
which
year
both
strong
as
large
gross
administrative
revenue,
administrative
were
rate
per
support of
well
increase
rental
with
Management Discussion and Analysis – 2022
Long(cid:11)term debt was largely unchanged over the three year period noted. (cid:29)uring 2021, the Company renewed
and extended the $500 million revolving credit facility to mature in November 2026. A $250 million credit facility
taken out in early 2020 at the start of the pandemic, was not renewed.
RIS(cid:34)S AND RIS(cid:34) MANA(cid:30)EMENT
In the normal course of business, Toromont is exposed to risks that may potentially impact its business, results
of operations and financial condition. The Company and each operating segment employ risk management
strategies with a view to identifying, mitigating, and reporting on these risks.
(cid:48)e maintain a strong risk management culture to protect and enhance shareholder value. The Board reviews
all material risks in detail on an annual basis. The Audit Committee and Board also reviews the adequacy of
disclosures of key risks on a quarterly and annual basis.
Business Cycle
Expenditures on capital goods have historically been cyclical, reflecting a variety of factors including interest
rates, foreign exchange rates, consumer and business confidence, commodity prices, corporate profits,
inflation, geo(cid:11)political factors impacting the economy, credit conditions and the availability of capital to finance
purchases, and the level of government infrastructure spending. Toromont's customers are typically affected, to
varying degrees, by these factors and trends in the general business cycle as well as within their respective
markets on both a global and local level. As a result, Toromont's financial performance is affected by the impact
of such business cycles on the Company(cid:80)s customer base.
Commodity prices, and, in particular, changes in the view on long(cid:11)term trends, affect demand for the
Company's products and services in the Equipment (cid:32)roup. Commodity price movements in base and precious
metals sectors in particular can have an impact on customers' demands for equipment and services. Lower
commodity prices reduces short term demand as development of new and existing projects, along with
production levels, may be curtailed or deferred, leading to less demand for heavy equipment, parts and
service.
(cid:48)e rely on Caterpillar to supply financing to our customers. In periods of global credit market disruption,
Caterpillar may tighten sources or terms of financing for our customers. In the current economic climate, our
customers may have limited access to financing from Caterpillar or alternate sources such as financial
institutions. (cid:29)isruption in Caterpillar's or our customers' access to liquidity, due to the effects of the pandemic
or otherwise, could have a material adverse impact on our business, results of operations and financial
condition.
The business of the Company is diversified across a wide range of industry market segments, serving to
temper the effects of business cycles on consolidated results. Continued diversification strategies such as
expanding the Company's customer base, broadening product offerings and geographic diversification are
designed to moderate business cycle impacts. (cid:41)roduct support activity has been, and will continue to be,
fundamental to the mitigation of downturns in the business cycle as it is typically subject to less volatility than
equipment supply activities. (cid:48)e mitigate the economic risks associated with lower business volumes at a
regional level through cost reduction initiatives and through constant evaluation of efficiency and process
improvements. No assurances can be given that our mitigating steps will offset the impact of these economic
risks.
Management’s Discussion and Analysis
35
collections on account receivables reduced (cid:29)SO
Management Discussion and Analysis – 2022
(cid:39)roduct and Supply
The Equipment (cid:32)roup purchases most of its equipment inventories and parts from Caterpillar Inc.
((cid:2)Caterpillar(cid:2)) under a dealership agreement that dates back to 1993. As is customary in distribution
arrangements of this type, the agreement with Caterpillar can be terminated by either party upon 90 days'
notice. In the event Caterpillar terminates, it must repurchase substantially all inventories of new equipment
and parts at cost. Toromont has maintained an excellent relationship with Caterpillar since inception and
management expects this will continue going forward.
Toromont is dependent on the continued market acceptance of Caterpillar's products. It is believed that
Caterpillar has a solid reputation as a quality manufacturer, with excellent brand recognition and customer
support as well as strong market shares in many of the markets it serves. (cid:33)owever, there can be no assurance
that Caterpillar will be able to maintain its reputation and market position in the future. If Caterpillar is
unsuccessful in developing and enhancing its product lines to meet evolving customer needs, including no/low
carbon alternatives to support customer energy transition and net zero goals, is unable to maintain the quality
of its products, or is unable to provide its products at competitive prices, market acceptance for Caterpillar
products may deteriorate over time. Any resulting decrease in the demand for Caterpillar products could have a
material adverse impact on the Company's business, results of operations and future prospects.
Toromont is also dependent on Caterpillar for timely supply of equipment and parts to meet our customers'
demand for equipment deliveries and product support services. From time to time during periods of intense
demand and/or supply chain disruptions, Caterpillar may find it necessary to allocate its supply of particular
products among its dealers. Such allocations of supply have not in the past proven to be a significant
impediment in the conduct of business. (cid:48)hen supply constraints have occurred in the past, we have been able
to lessen the impact by utilizing our rental assets, used equipment, remanufacturing capabilities, and other
sources (such as the dealer network) to meet demand, but there can be no assurance of continued success in
this area. (cid:48)e continue to monitor these issues as they could adversely affect our business, results of
operations, and financial condition.
The general supply chain is also affected by other factors, including global demand and economic factors,
more recently resulting in key component and parts shortages and longer order and shipment times for
equipment and parts. (cid:48)e continue to monitor these issues as they could adversely affect our business, results
of operations, and financial condition.
In addition, new digital and other technologies and advancements to equipment in the market, such as
equipment electrification, can become disruptive to our operations, market share and business model. (cid:48)e scan
continuously for emerging digital and other technologies and equipment advancements and their potential
impacts. In order to face this disruption risk, our digital and technology solutions initiatives are focused on
investigating emerging digital technologies to determine how they can impact customers and our core business
opportunities, improving the customer experience, and identifying and pursuing new opportunities for revenue
generation in the digitally enabled value(cid:11)added services area. (cid:48)hile execution performance to date has been
strong, our failure to meet these objectives could have an adverse impact on our business.
Competition
The Company competes with a large number of international, national, regional and local suppliers in each of
its markets. Although price competition can be strong, there are a number of factors that have enhanced the
Company's ability to compete throughout its market areas including the range and quality of products and
services including digital performance solutions, ability to meet sophisticated customer requirements,
36
Toromont Industries Ltd.
Inc.
distribution
days'
equipment
and
that
customer
assurance
is
no/low
quality
Caterpillar
have a
customers'
intense
particular
significant
able
other
success in
of
factors,
for
results
as
scan
potential
on
business
revenue
been
each of
the
and
requirements,
Management Discussion and Analysis – 2022
distribution capabilities including number and proximity of locations, financing offered by Caterpillar Finance,
e-commerce solutions, reputation and financial strength.
(cid:48)e may encounter increased competition in the future through new entrants in the market and the expansion
of suppliers' e-commerce channels for parts and equipment sales, which may also put pressure on prices. (cid:48)e
may also encounter competition through the introduction of digitally enabled or digitally enhanced value-added
services from third parties, including potential new non(cid:11)traditional entrants into the market. In addition, pressure
on prices may occur as a result of increased data in the marketplace, increasing price transparency and
customers' pursuit of value-added services, which would put commoditization pressure on equipment, core
physical parts and service sales.
Increased competitive pressures or the inability of the Company to maintain the factors that have enhanced its
competitive position to date could adversely affect the Company(cid:80)s business, results of operations or financial
condition.
(cid:31)ealt(cid:56) and Sa(cid:54)ety
Certain hazards and risks are inherent in the Company's operations, with the potential for serious injury, loss of
life and damage to property, which could result in negative financial and/or reputational impacts.
To mitigate these risks, a comprehensive and standardized health and safety program is in place, which
includes leadership walkthroughs, training, inspections, supervisory observations, safety standards for critical
operations, safe work procedures, job hazard assessments, incident investigations, emergency preparedness,
industrial hygiene assessments and other measures focused on maintaining a safe and healthy work
environment. To make the application of the different safety processes easier for employees and enable data
analysis, some of the key processes are supported by digital tools such as electronic job hazard assessments
and vehicle monitoring systems. No assurance can be given that these mitigating steps will eliminate these
risks and the potential for negative financial and/or reputational impacts.
Further information on the Company's health and safety practices and programs can be found in the
Sustainability Report on our website at www.toromont.com.
(cid:34)ey (cid:39)ersonnel
Our success in achieving our goals is largely dependent on the abilities and experience of our senior
management team and other key personnel. Our future performance will also depend on our ability to attract,
develop, motivate and retain highly qualified diverse and inclusive talent in all areas of our business and, as
applicable, to successfully integrate employees transitioning to us from acquisitions. Competition for highly
skilled management, sales and technical personnel is intense, particularly in certain geographic areas where
we operate. (cid:29)emographic trends are reducing the number of individuals entering the trades, making access to
skilled individuals more difficult. The Company has several remote locations, which make attracting and
retaining skilled individuals more difficult. To help mitigate this risk, we have implemented a number of human
resources initiatives, including training and career development programs, succession plans, employee
experience surveys, performance management systems, compensation programs and recruiting strategies.
Although we actively manage our human resources risks, there can be no assurance we will be successful in
our efforts. The loss of certain key employees, or failure to attract, retain and engage talent as needed, may
have an adverse impact on our business, results of operations and future prospects.
Management’s Discussion and Analysis
37
Management Discussion and Analysis – 2022
Certain of our employees are represented by unions and we are party to a number of collective bargaining
agreements, covering approximately 1,200 employees. Of the 23 agreements in place, 3 are scheduled for
negotiation during 2023.
(cid:48)hile we are committed to the collective bargaining process and to concluding a fair contract for us and for our
employees, the renegotiation process could result in future work stoppages or higher wages and benefits paid
to union members. (cid:32)enerally, Toromont believes its labour relations are satisfactory and does not anticipate
any difficulties in respect of upcoming negotiations. The failure to renew collective agreements with satisfactory
terms and in a timely manner could have an adverse impact on our business, results of operations, and
financial condition.
Credit Risk
Credit risk is the risk of financial loss to us if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arise principally in respect of cash and cash equivalents, accounts receivable
and derivative financial instruments. The carrying amounts on the statement of financial position represent the
maximum expected credit exposure.
(cid:48)hen the Company has cash on hand it may be invested in short(cid:11)term instruments, such as money-market
deposits. The Company has deposited cash with reputable financial institutions, from which management
believes the risk of loss to be remote.
The Company has accounts receivable from a large diversified customer base, and is not dependent on any
single customer or industry. The Company's customers are engaged in various industries including
construction, mining, food and beverage, and governmental agencies, predominately based in Canada.
Toromont also maintains policies to manage credit risk, including establishing and reviewing credit limits for
customers taking into account factors such as projected purchase values, credit worthiness of the customer,
and payment performance.
The credit risk associated with derivative financial instruments arises from the possibility that the counterparties
may default on their obligations. In order to minimize this risk, the Company enters into derivative transactions
only with highly rated financial institutions.
Contract E(cid:71)ecution, Including (cid:39)roduct (cid:46)arranty
(cid:48)e enter into refrigeration and power systems contracts, which are engineered solutions involving the design,
assembly and installation of large, complex systems. The length of these contracts varies but typically
construction is completed in under two years. The contracts are generally at a fixed price over the term and
provide for penalties payable by us if contractual milestones are not met.
(cid:48)e have developed processes and have controls in place to ensure contracts are bid appropriately, but due to
the nature and complexity of these contracts, there is a risk that significant cost overruns may be incurred. If
we miscalculate the extent of work required, or if costs increase beyond those anticipated, contract profitability
may be adversely affected. (cid:48)e closely monitor these contracts for early warning signs of cost overruns,
however, there can be no assurance that cost overruns will be avoided.
The Company also enters into long(cid:11)term maintenance and repair contracts, whereby it is obligated to maintain
equipment for its customers. The length of these contracts varies generally from two to five years. The
contracts are typically fixed price on machine hours, with provisions for inflationary and foreign exchange
adjustments. (cid:29)ue to the long(cid:11)term nature of these contracts, there is a risk that maintenance costs may exceed
38
Toromont Industries Ltd.
bargaining
for
our
paid
anticipate
satisfactory
and
meet
receivable
the
et
management
any
including
Canada.
for
customer,
counterparties
transactions
design,
typically
and
due to
incurred. If
profitability
overruns,
maintain
he
exchange
exceed
Management Discussion and Analysis – 2022
the estimate, thereby resulting in a loss on the contract. (cid:41)reventative measures such as condition monitoring
and scheduled fluid sampling help identify problems in equipment early on and help reduce the risk of costly
repair work. These contracts are closely monitored for early warning signs of cost overruns. In addition, the
manufacturer may, in certain circumstances, share in the cost overruns if profitability falls below a certain
threshold. There is no assurance that such measures will always address such risks. Our failure to effectively
price and manage these contracts could have a material adverse impact on our business, results of operations
and financial position.
Standard and extended warranties are provided for most of the equipment, parts and services sold. The
warranty claim risk is generally shared jointly with the equipment manufacturer. Accordingly, liability is generally
limited to the service component of the warranty claim, while the manufacturer is responsible for providing the
required parts. There is a risk that product quality erosion or lack of skilled labor could increase warranty claims
in the future, or that future warranty claims may be greater than we anticipate. If our liability in respect of such
claims is greater than anticipated, it may have a material adverse impact on our business, results of operations
and financial condition. To mitigate this risk, we regularly review our warranty offering to assess the experience
with the product and endeavour to adequately manage the costs to service the product over its warranty
period. Additionally, we work closely with Caterpillar on all product quality issues and have extensive product
improvement, product support and pre(cid:11)delivery inspection programs in place. No assurance can be given that
these steps will fully mitigate these risks.
(cid:29)oreign E(cid:71)c(cid:56)ange
Toromont's operating results are reported in Canadian dollars. (cid:48)hile the majority of Toromont's sales are
transacted in Canadian dollars, significant portions of its purchases are made in (cid:46).S. dollars. Changes in the
(cid:46).S. dollar exchange rate can have a negative or positive impact on revenue, margins and working capital
balances.
Foreign exchange contracts reduce volatility by fixing landed costs related to specific customer orders and
establishing a level of price stability for high-volume goods such as spare parts. The Company does not enter
into foreign exchange forward contracts for speculative purposes. The gains and losses on the foreign
exchange forward contracts designated as cash flow hedges are intended to offset the translation losses and
gains on the hedged foreign currency transactions when they occur. As a result, the foreign exchange impact
on earnings with respect to transactional activity is not significant.
The rate of exchange between the Canadian and (cid:46)S dollar can have an impact on revenue trends.
Substantially all of the equipment and parts sold in the Equipment (cid:32)roup are sourced in (cid:46)S dollars, and
Canadian dollar. Sales prices generally reflect changes in the rate of exchange. As a result, a stronger
Canadian dollar can adversely affect revenue, while a weaker Canadian dollar can increase reported revenue.
The impact is not readily estimable as it is largely dependent on when customers order the equipment versus
when it was sold. Bookings in a given period would more closely follow period-over-period changes in
exchange rates. Sales of parts come from inventories maintained to service customer requirements. As a
result, constant parts replenishment means that there is a lagging impact of changes in exchange rates. In
CIMCO, sales are largely affected by the same factors. In addition, revenue from CIMCO's (cid:46)S subsidiary
reflect changes in exchange rates on the translation of results, although this is not significant. The Canadian
dollar averaged (cid:46)S$0.77 in 2022 and (cid:46)S$0.80 in 2021.
As well, many of Toromont's customers export products to the (cid:46).S., or sell products based on the (cid:46)S dollar. A
strengthening Canadian dollar can negatively impact their overall competitiveness and demand for their
products, which in turn may reduce product purchases from Toromont.
Management’s Discussion and Analysis
39
Management Discussion and Analysis – 2022
Interest Rate
Changes in market interest rates can cause fluctuations in the fair value or future cash flows of financial
instruments.
The Company has exposure to changes in interest rates on interest(cid:11)bearing financial liabilities, primarily from
long-term debt. The Company has fixed(cid:11)rate debt obligations outstanding with maturities in 2025 and 2027.
Fixed-rate debt exposes the Company to future interest rate movements upon refinancing the debt at maturity.
The fair value of fixed(cid:11)rate debt obligations fluctuates with changes in interest rates, exposing the Company to
potential losses on early settlements or refinancing. The Company does not intend to settle or refinance any
existing fixed-rate debt before maturity.
The Company's revolving credit
fluctuations in short-term interest rates by causing related interest payments and finance expense to vary.
floating-rates and exposes the Company to
facilities bear interest at
The Company minimizes its interest rate risk by managing its portfolio of floating(cid:11)and fixed(cid:11)rate debt, as well as
managing the term to maturity.
The Company is exposed to changes in interest rates on interest bearing financial assets, primarily cash and
cash equivalents. (cid:29)ue to the short(cid:11)term nature of cash and cash equivalents, the impact of fluctuations in fair
value is limited but interest income earned can be impacted.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations as they become due. The
Company follows an active cash management program including continuous monitoring of actual and forecast
cash flows. The Company also maintains syndicated credit facilities, and holds cash balances to provide added
liquidity. Based on cash balances on hand, the availability of credit facilities, expected cash flow generation of
operations, and the discretionary nature of some cash outflows, such as rental and capital expenditures, the
Company expects to continue to have sufficient liquidity to meet operational needs.
The Company will also require capital to finance future growth and to refinance outstanding debt obligations as
they come due for repayment. If the cash generated from the Company's business, together with the credit
available under existing bank facilities, are not sufficient to fund future capital requirements, the Company will
require additional debt or equity financing in the capital markets. The Company's ability to access capital
markets, on terms that are acceptable, will be dependent upon prevailing financial market conditions, as well
as the Company's current and expected future financial condition. Further, the Company's ability to increase its
debt financing may be limited by existing financial covenants or credit rating objectives. The Company
maintains a conservative leverage structure and although it does not anticipate difficulties, there can be no
assurance that capital will be available on suitable terms and conditions, or that borrowing costs and credit
ratings will not be adversely affected.
(cid:30)ro(cid:70)t(cid:56) Initiati(cid:69)es
The Company's Strategic (cid:41)lan establishes priorities for growth, including organic growth and strategic
acquisitions.
(cid:48)e have strategic initiatives underway, designed to improve our market competitiveness, and our operational
and financial performance. These initiatives include enhancing our customers' experience including expanding
our product offering(cid:25) operational excellence and sharing of best practices across our decentralized
40
Toromont Industries Ltd.
financial
Company to
from
7.
ty.
any
to
as
and
fair
he
forecast
added
generation of
the
as
credit
will
capital
well
its
Company
no
credit
strategic
operational
expanding
decentralized
Management Discussion and Analysis – 2022
organization(cid:25) continuous investment and improvement in systems and processes to reduce cost-to-serve and
provide value(cid:11)added information(cid:25) and, improving employee relations and engagement. Failure to effectively
execute on these initiatives may result in the inability to obtain desired business results and could adversely
affect our business, results of operations and financial condition.
Climate C(cid:56)ange
Toromont is committed to monitoring, reporting and reducing greenhouse gas ((cid:2)(cid:32)(cid:33)(cid:32)(cid:2)) emissions of our
operations. Further, we see ourselves as valuable partners to our customers to help them reduce their carbon
emissions and build resilience into their own operations.
Our service facilities and fleets of vehicles, generate direct (cid:32)(cid:33)(cid:32) emissions (Scope 1) from fuel combustion in
our fleet, natural gas use for heating facilities, and diesel use for engine and transmission diagnostics. (cid:48)e also
generate indirect (cid:32)(cid:33)(cid:32) emissions (Scope 2) from purchased electricity. Our strategy to address the climate
change challenge is to focus on monitoring and reducing our emissions and to offer and develop products and
services that help our customers further decarbonize their operations. Focus in this area is viewed as a shared
responsibility among our employees and is an important part of our corporate culture.
Our principal climate-related risks are categorized into risks related to the transition to a lower carbon economy
(transition risks) and physical risks resulting from climate change (physical risks) which may impact our
operations and facilities.
(cid:30)o(cid:69)ernment and Ot(cid:56)er Regulation
Our business and customers are subject to evolving law, regulation, and intervention by governments at the
federal, provincial, state, and municipal levels in the countries where we and they conduct operations. The
nature and magnitude of regulatory risks has the potential to change over time, and have the potential to
impact our existing and planned projects as well as impose costs of compliance and increase capital
expenditures and operating expenses. In addition, changes to laws and regulations may impact our customers
in ways that affect their demand for our products. Amendments to, or more stringent implementation of current
laws and regulations governing our operations, or the operations of our customers could have a material
adverse effect on our business, operating results or financial position. In addition, noncompliance with laws and
regulations could significantly damage, and require us to spend substantial amounts of money to rebuild, our
reputation and negatively impact our business.
Our operations expose Toromont to liability for environmental contamination, which may render the Company
liable for remediation costs, natural resource damages and other damages as a result of conduct that was
lawful at the time it occurred or the conduct of, or conditions caused by, prior owners, operators or other third
parties. In addition, where contamination may be present, it is not uncommon for neighbouring land owners
and other third parties to file claims for personal injury, property damage and recovery of response costs.
Toromont maintains an environmental management program that includes robust policies and procedures,
training and audit and compliance processes. (cid:48)e retain environmental engineering consultants to conduct the
following activities(cid:24) environmental site assessments prior to the acquisition or occupation(cid:25) ongoing monitoring
of soil and groundwater contamination(cid:25) and remediation of contaminated sites. There can be no assurance that
any future incidents, emissions or spills will not result in a material adverse effect on Toromont(cid:80)s results of
operations or cash flows. Management is not aware of any material environmental concerns for which a
provision has not been recorded.
(cid:48)e have in place, in each of our business units, programs for monitoring and compliance to ensure that we
meet or exceed applicable laws and regulatory requirements. In addition, our Board has established and
Management’s Discussion and Analysis
41
Management Discussion and Analysis – 2022
maintains the (cid:33)uman Resources and (cid:33)ealth and Safety Committee, the Environment, Social and (cid:32)overnance
Committee, and the Audit Committee to oversee, monitor, and report to the Board on compliance matters. More
information about the mandates of these committees may be found in our most recent Management (cid:41)roxy
Circular, which can be found on our website www.toromont.com or under our profile on SE(cid:29)AR at
www.sedar.com. No assurance can be given that these steps will be successful in completely mitigating these
risks and ensuring we meet all applicable laws and regulatory requirements.
In(cid:54)ormation Tec(cid:56)nology
The Company depends on information technology infrastructure and systems, hosted internally or outsourced,
to conduct day(cid:11)to(cid:11)day operations and for the effective operation of our business. Our business also requires
the appropriate and secure utilization of sensitive and confidential information belonging to third parties such as
our customers and suppliers. (cid:48)hile we strive to leverage technology to meet the growing needs of our
customers and enhance the efficiency of our operations, it nevertheless comes with information risks.
The integrity, reliability and availability of technology and the data processed by that technology is an integral
part of our business processes, including marketing of equipment and support services, inventory and logistics
optimization, business intelligence and finance. Some of these systems are integrated with our suppliers and
other partners(cid:80) core processes and systems.
Toromont continues to invest in information systems to improve business performance through our internal
transactional systems and install or upgrade various business process enablement and decision support
systems as appropriate on a continuous basis. These system implementations often drive business process
changes as well as technology changes.
Information systems, technology and business process changes, and related organizational change, often
carry a risk of business disruption, failure to achieve expected business benefits, cost overruns and ineffective
design and operation of systems of internal control over financial reporting and disclosure controls and
procedures. Benefits assessment, change management, risk and impact assessments, solution validation,
strong project governance, communication and training have been identified as critical success factors in the
successful implementation of new systems. Any disruptions to these systems or the failure of these systems to
operate as expected, or any failure to appropriately adapt to business process changes, could adversely
impact our operating results by limiting our ability to effectively monitor and control our operations.
In addition, new digital and other technologies and advancements to equipment in the market, such as
equipment electrification, can become disruptive to our operations, market share and business model. (cid:48)e scan
continuously for emerging digital and other technologies and equipment advancements and their potential
impacts. In order to face this disruption risk, our digital and technology solutions initiatives are focused on
investigating emerging digital technologies to determine how they can impact customers and our core business
opportunities, improving the customer experience, and identifying and pursuing new opportunities for revenue
generation in the digitally enabled value(cid:11)added services area. (cid:48)hile execution performance to date has been
strong, our failure to meet these objectives could have an adverse impact on our business.
A rigorous management process is followed to manage these risks and a great deal of the business processes
and systems transformation program focus is on developing capabilities to reduce and mitigate these risks,
however, there is no certainty that these risks can be sufficiently reduced or mitigated.
42
Toromont Industries Ltd.
, and report to the Board on compliance matters. More
(cid:32)overnance
Cy(cid:50)ersecurity
Management Discussion and Analysis – 2022
ntial information belonging to third parties such as
(cid:41)roxy
at
these
outsourced,
requires
our
integral
logistics
and
internal
support
process
often
fective
and
validation,
the
systems to
adversely
as
scan
potential
on
business
revenue
been
processes
risks,
Cybersecurity incidents related to our information technology systems are a threat to the integrity, reliability,
and availability of technology and data. Cybersecurity incidents may take the form of malware, computer
viruses, cyber threats, cyber extortion, employee error, malfeasance, system errors and other types of security
and data breaches and may arise from inside and outside of our organization. Cybersecurity incidents could
also target customer data or the security, integrity and/or reliability of the hardware and software installed in
products we sell or service. (cid:48)e rely heavily on information technology systems, some of which are managed
by third parties, to process, transmit and store electronic information, including personally identifiable
information, credit card payment data and other sensitive customer and employee information, and to manage
or support a variety of critical business processes and activities.
The Company continues to monitor and enhance its defenses and procedures to prevent, detect, respond to
and manage these threats, which are constantly evolving, however there can be no assurance these efforts
and measures will be able to prevent all cybersecurity incidents. (cid:29)isruption to information systems or breaches
of security could result in a negative impact on the Company's financial results or result in reputational
damage, including the following(cid:24) disruption of our business operations and lost revenue(cid:25) unauthorized access
to, or destruction, loss, theft, misappropriation or release of, our proprietary, confidential, sensitive or otherwise
valuable information or that of our customers, suppliers or employees, which could be used for disruptive or
otherwise harmful purposes(cid:25) disruptions in the functioning or operation of equipment, which could lead to
property loss or damage or personal injury or death(cid:25) damage to our reputation with our customers, partners,
suppliers, investors and the general public(cid:25) a disruption to the proper functioning of our information technology
systems(cid:25) potential significant expenditures related to remediation(cid:25) investigations by regulatory agencies or
litigation, claims and liability for breach of contract, damages or other penalties(cid:25) inability to process customer
transactions or service customers(cid:25) and/or disruptions to inventory management.
To mitigate information security risks, the Company, through a dedicated, full(cid:11)time team of cybersecurity
professionals, undertakes preventative measures, including controlling access to its network and applications
using secure firewalls and limiting access to an (cid:2)as-needed(cid:2) basis. To identify information security risks, the
company uses various detection methods, including monitoring event logs for firewalls, server, mail systems,
and applications. Third(cid:11)party experts are utilized to perform testing and assessments. The Company provides
regular and mandatory information security training to employees as applicable and appropriate. The Company
maintains an insurance policy with coverage for information security risk.
The security of the Company's data and other information is one of the operational risks overseen by the
Board. Three members of the Board have knowledge and experience in technology, including cyber risk.
Management reports to the Board regularly on information technology and security matters.
Risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving
nature of these threats. As a result, cybersecurity and the continued development and enhancement of
controls, processes, practices and training designed to protect systems, computers, software, data and
networks from attack, damage or unauthorized access remain a priority. To date, the Company has not
experienced any material losses relating to cyber(cid:11)attacks or other information security breaches(cid:25) however,
there can be no assurance that we will not incur such losses in the future.
Business Continuity Risks
The occurrence of one or more natural or man(cid:11)made disasters, such as earthquakes, floods, hurricanes,
unusually adverse weather, health pandemic outbreaks, boycotts, security breach, power
loss,
telecommunications failure, and geo(cid:11)political events in countries in which we supply or sell goods, could
Management’s Discussion and Analysis
43
Management Discussion and Analysis – 2022
materially adversely affect our business, people, customers and financial results. (cid:48)e maintain and continue to
enhance our business continuity program to address and mitigate, to the extent possible, the impact of these
risks. Our decentralized operations provides certain coverage in the case of localized issues. (cid:33)owever, no
such plan can eliminate the risks associated with events of this nature, which could still have a material
adverse impact on our business, results of operations and financial condition.
(cid:39)andemic Risk (Corona(cid:69)irus CO(cid:45)ID(cid:10)19)
A pandemic, including the CO(cid:47)I(cid:29)(cid:11)19 pandemic, can create significant volatility and uncertainty and economic
disruption.
CO(cid:47)I(cid:29)(cid:11)19 is a persisting risk, the duration and impact of which remains uncertain at this time. Any estimate of
the extent to which the CO(cid:47)I(cid:29)(cid:11)19 pandemic may, directly or indirectly, materially and adversely affect the
Company(cid:80)s operations, financial results and condition in future periods are also subject to significant
uncertainty.
A pandemic has and could exacerbate or amplify other risks and uncertainties facing the Company. Such risks
include, but are not limited to(cid:24)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
(cid:81)
uncertainty associated with the costs and ability of resources, including technicians, required to provide
the appropriate/required levels of service to our customers on site(cid:25)
a material reduction in demand for, or profitability of, our products or services(cid:25)
an increase in accounts receivable delinquencies from financial hardship for our customers(cid:25)
issues delivering the Company(cid:80)s products and services due to illness, Company or government
imposed isolation programs, restrictions on the movement of personnel and other supply chain
disruptions(cid:25)
increase in exposure to and reliance on networked systems and the internet increasing risk and
frequency of cybersecurity incidents(cid:25)
the impact of additional legislation, regulation and other government interventions in response to the
CO(cid:47)I(cid:29)(cid:11)19 pandemic(cid:25)
the negative impact on global debt and equity capital markets, including the trading price of the
Company(cid:80)s securities(cid:25) and
the ability to access capital markets at a reasonable cost.
Any of these risks, and others, could have a material adverse effect on our business, operations, capital
resources and/or financial results of operations.
The Company continues to focus on ensuring the continued safety of our employees, while continuing to serve
our customers' needs as an essential service, and protecting the business and organization for the long(cid:11)term.
The Critical Incident Executive Response Team remains in effect and focuses on monitoring and assessing
developments in our markets and operations, and developing appropriate plans in response. (cid:46)pdates are
provided to employees on a frequent basis, including general information as well as specific safety protocols in
place. The Company continues to have an open dialogue with public safety and government officials at all
levels, as well as customers, key suppliers and other partners.
SI(cid:30)NI(cid:29)ICANT ACCOUNTIN(cid:30) (cid:39)OLICIES AND ESTIMATES
The preparation of the Company's consolidated financial statements in conformity with IFRS requires
management to make judgments, estimates and assumptions that affect the reported amounts of revenue,
44
Toromont Industries Ltd.
continue to
these
no
material
economic
estimate of
the
significant
risks
provide
government
chain
and
the
the
capital
serve
long(cid:11)term.
assessing
protocols in
are
all
requires
revenue,
Management Discussion and Analysis – 2022
expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period.
(cid:33)owever, uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability affected in future periods.
In making judgments, estimates and assumptions, management relies on external information and observable
conditions where possible, supplemented by internal analysis as required. Management reviews its estimates
and judgments on an ongoing basis. The Company has discussed the development, selection, and application
of its key accounting policies, and the critical accounting estimates and assumptions they involve, with the
Audit Committee.
Toromont's significant accounting policies and significant accounting estimates, assumptions and judgments
are described in the consolidated financial statements. Refer to notes 2 and 3 of the audited consolidated
financial statements.
C(cid:56)anges in Accounting (cid:39)olicies
The Company has not early(cid:11)adopted any standard, interpretation or amendment that has been issued but is
not yet effective. The following standard amendment has been adopted by the Company on (cid:35)anuary 1, 2022(cid:24)
IAS 37, (cid:15)(cid:32)o(cid:36)(cid:26)s(cid:26)ons(cid:6) (cid:9)ont(cid:26)n(cid:24)ent (cid:14)(cid:26)a(cid:19)(cid:26)l(cid:26)t(cid:26)es and (cid:9)ont(cid:26)n(cid:24)ent (cid:8)ssets (cid:78) The IASB issued amendments to IAS 37 to
clarify costs to be included when determining if a contract is onerous. Costs that relate directly to a contract
can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to
fulfilling contracts.
The implementation of this standard amendment did not have a significant impact on the Company's
consolidated financial statements.
Amendments Issued (cid:50)ut Not E(cid:54)(cid:54)ecti(cid:69)e
A number of amendments to standards have been issued but are not yet effective for the financial year ended
(cid:29)ecember 31, 2022, and accordingly, have not been applied in preparing these consolidated financial
statements. Information on new standards, amendments and interpretations that are expected to be relevant
to the Company's consolidated financial statements is provided below. Certain other new standards,
amendments and interpretations to existing standards may have been issued but are not expected to have a
material impact to the Company's consolidated financial statements. The Company is in the process of
reviewing these amendments to determine the impact on the consolidated financial statements. Based upon
our current facts and circumstances, we do not expect our financial performance or disclosure to be materially
affected by the application of the amended standards.
IFRS 1, (cid:15)(cid:32)esentat(cid:26)on o(cid:23) (cid:12)(cid:26)nan(cid:20)(cid:26)al (cid:16)tate(cid:28)ents (cid:78) Effective for annual periods beginning on or after
(cid:35)anuary 1, 2023, the IASB issued amendments to IFRS 1 to allow a more general approach in classification of
liabilities as current and non(cid:11)current.
IAS 8, (cid:8)(cid:20)(cid:20)ount(cid:26)n(cid:24) (cid:15)ol(cid:26)(cid:20)(cid:26)es(cid:6) (cid:9)han(cid:24)es (cid:26)n (cid:8)(cid:20)(cid:20)ount(cid:26)n(cid:24) (cid:11)st(cid:26)(cid:28)ates and (cid:11)(cid:32)(cid:32)o(cid:32)s (cid:78) Effective for annual periods
beginning on or after (cid:35)anuary 1, 2023, these amendments introduce a definition of 'accounting estimates' and
clarify the difference between changes in accounting policies and changes in accounting estimates. These
amendments will impact changes in accounting policies and changes in accounting estimates made after these
amendments are adopted by the Company.
Management’s Discussion and Analysis
45
Management Discussion and Analysis – 2022
IAS 12, (cid:13)n(cid:20)o(cid:28)e (cid:17)a(cid:37)es (cid:78) Effective for annual periods beginning on or after (cid:35)anuary 1, 2023, these amendments
clarify how companies should account for deferred tax related to assets and liabilities arising from a single
transaction, such as leases and decommissioning obligations. The amendments narrow the scope of the initial
recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary
differences. As a result, companies will need to recognize a deferred tax asset and a deferred tax liability for
temporary differences arising on initial recognition of the related asset and liability.
CONTROLS AND (cid:39)ROCEDURES
Disclosure Controls and (cid:39)rocedures
Management, under the supervision of the (cid:41)resident and Chief Executive Officer ((cid:2)CEO(cid:2)) and Executive (cid:47)ice
(cid:41)resident and Chief Financial Officer ((cid:2)CFO(cid:2)), is responsible for establishing and maintaining disclosure
controls and procedures, as defined in National Instrument 52(cid:11)109 (cid:78) (cid:9)e(cid:32)t(cid:26)(cid:23)(cid:26)(cid:20)at(cid:26)on o(cid:23) (cid:10)(cid:26)s(cid:20)losu(cid:32)e (cid:26)n (cid:13)ssue(cid:32)s(cid:3)
(cid:8)nnual and (cid:13)nte(cid:32)(cid:26)(cid:28) (cid:12)(cid:26)l(cid:26)n(cid:24)s, and have designed such disclosure controls and procedures, or have caused it to
be designed under their supervision, to provide reasonable assurance that material information with respect to
Toromont is made known to them.
The CEO and the CFO, together with other members of management, have evaluated the effectiveness of the
Company(cid:80)s disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that
the Company's disclosure controls and procedures were effective as at (cid:29)ecember 31, 2022.
Internal Control o(cid:69)er (cid:29)inancial Reporting
Management, under the supervision of the CEO and CFO, is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined by National Instrument 52(cid:11)109 (cid:78) (cid:9)e(cid:32)t(cid:26)(cid:23)(cid:26)(cid:20)at(cid:26)on o(cid:23)
(cid:10)(cid:26)s(cid:20)losu(cid:32)e (cid:26)n (cid:13)ssue(cid:32)s(cid:3) (cid:8)nnual and (cid:13)nte(cid:32)(cid:26)(cid:28) (cid:12)(cid:26)l(cid:26)n(cid:24)s(cid:6) and have designed such internal control over financial
reporting, or caused it to be designed under their supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements in accordance with IFRS.
The CEO and the CFO, together with other members of management, have evaluated the effectiveness of the
Company's internal control over financial reporting as at (cid:29)ecember 31, 2022, using the criteria set forth in
Internal Control (cid:78) Integrated Framework (2013 edition) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on that evaluation, the CEO and CFO concluded that the Company's
internal control over financial reporting was effective as at (cid:29)ecember 31, 2022.
There have been no changes in the design of the Company's internal control over financial reporting during
2022 that would materially affect, or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
(cid:29)ue to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements
on a timely basis. Also, a projection of the evaluation of the effectiveness of internal control over financial
reporting to future periods is subject to the risk that the controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to the financial
statement preparation and presentation. Internal controls over financial reporting may not prevent all errors and
fraud. A control system, no matter how well conceived or operated, can only provide reasonable, not absolute,
assurance that the objectives of the control system are met.
46
Toromont Industries Ltd.
amendments
single
initial
temporary
for
ice
disclosure
(cid:13)ssue(cid:32)s(cid:3)
it to
respect to
the
that
maintaining
financial
o(cid:23)
the
the
in
Organizations
Company's
during
control
misstatements
financial
changes
even
financial
and
absolute,
Management Discussion and Analysis – 2022
ADDITIONAL (cid:30)AA(cid:39) MEASURES
IFRS mandates certain minimum line items for financial statements and also requires presentation of additional
line items, headings and subtotals when such presentation is relevant to an understanding of the Company's
financial position or performance. IFRS also requires the notes to the financial statements to provide
information that is not presented elsewhere in the financial statements, but is relevant to understanding them.
Such measures outside of the minimum mandated line items are considered additional (cid:32)AA(cid:41) measures. The
Company's consolidated financial statements and notes thereto include certain additional (cid:32)AA(cid:41) measures
where management considers such information to be useful to the understanding of the Company's results.
(cid:30)ross (cid:39)ro(cid:54)it
(cid:32)ross (cid:41)rofit is defined as total revenue less cost of goods sold.
Operating Income
Operating income is defined as net earnings before interest expense, interest and investment income and
income taxes and is used by management to assess and evaluate the financial performance of its operating
segments. Financing and related interest charges cannot be attributed to business segments on a meaningful
basis that is comparable to other companies. Business segments do not correspond to income tax jurisdictions
and it is believed that the allocation of income taxes distorts the historical comparability of the performance of
the business segments.
($ thousands)
Net earnings
plus: Interest expense
less: Interest and investment income
plus: Income taxes
Operating income
Total revenue
Operating income margin
Net De(cid:50)t to Total Capitali(cid:73)ation(cid:12)Equity
T(cid:56)ree mont(cid:56)s ended
Decem(cid:50)er 31
2021
2022
$
$
159,862
6,786
(8,799)
54,633
212,482
$ 1,150,097
$
$
$
105,590
6,889
(2,827)
39,118
148,770
$
$
(cid:48)ears ended
Decem(cid:50)er 31
2021
332,710
28,161
(9,027)
124,093
475,937
2022
454,198
27,338
(22,232)
164,865
624,169
$
$
956,035
$ 4,230,736
$ 3,886,537
18.5 %
15.6 %
14.8 %
12.2 %
Net debt to total capitalization/equity are calculated as net debt divided by total capitalization and shareholders'
equity, respectively, as defined below, and are used by management as measures of the Company(cid:80)s financial
leverage.
Net debt is calculated as long(cid:11)term debt plus current portion of long(cid:11)term debt less cash and cash equivalents.
Total capitalization is calculated as shareholders' equity plus net debt.
Management’s Discussion and Analysis
47
Management Discussion and Analysis – 2022
The calculations are as follows(cid:24)
($ thousands)
Long(cid:11)term debt
less: Cash and cash equivalents
Net debt
Shareholders' equity
Total capitali(cid:73)ation
Net de(cid:50)t to total capitali(cid:73)ation
Net de(cid:50)t to equity
NON(cid:10)(cid:30)AA(cid:39) MEASURES
$
2022
647,060
927,780
(280,720)
$
2021
646,337
916,830
(270,493)
2,325,359
2,044,639
$
1,953,329
1,682,836
(14) %
(0.12) (cid:23)1
(16) %
(0.14) (cid:24)1
Management believes that providing certain non(cid:11)(cid:32)AA(cid:41) measures provides users of the Company's audited
consolidated financial statements with important information regarding the operational performance and related
trends of the Company's business. By considering these measures in combination with the comparable IFRS
measures set out below, management believes that users are provided a better overall understanding of the
Company's business and its financial performance during the relevant period than if they simply considered the
IFRS measures alone.
The non(cid:11)(cid:32)AA(cid:41) measures used by management do not have any standardized meaning prescribed by IFRS
and are therefore unlikely to be comparable to similar measures presented by other issuers. Accordingly, these
measures should not be considered as a substitute or alternative for net income or cash flow, in each case as
determined in accordance with IFRS.
(cid:46)orking Capital
(cid:48)orking capital is defined as total current assets less total current liabilities. Management views working
capital as a measure for assessing overall liquidity.
($ thousands)
Total current assets
less: Total current liabilities
(cid:46)orking capital
2022
2,569,195 $
1,056,739
1,512,456 $
2021
2,108,441
813,702
1,294,739
$
$
48
Toromont Industries Ltd.
2021
(270,493)
(16) %
(0.14) (cid:24)1
audited
related
RS
the
the
RS
these
as
2021
2,108,441
813,702
1,294,739
Management Discussion and Analysis – 2022
Non(cid:10)Cas(cid:56) (cid:46)orking Capital
Non(cid:11)cash working capital is defined as total current assets, excluding cash and cash equivalents, less total
current liabilities, excluding current portion of long(cid:11)term debt, if applicable.
($ thousands)
Total current assets
less: Cash and cash equivalents
Total current liabilities
Non(cid:10)cas(cid:56) (cid:70)orking capital
$
2022
2,569,195 $
927,780
1,641,415
2021
2,108,441
916,830
1,191,611
1,056,739
813,702
$
584,676 $
377,909
Market Capitali(cid:73)ation (cid:5) Total Enterprise (cid:45)alue
Market capitalization represents the total market value of the Company's equity. It is calculated by multiplying
the closing share price of the Company's common shares by the total number of common shares outstanding.
Total enterprise value represents the total value of the Company and is often used as a more comprehensive
alternative to market capitalization. It is calculated by adding debt/net debt (defined above) to market
capitalization.
The calculations are as follows(cid:24)
($ thousands(cid:6) e(cid:37)(cid:20)ept (cid:23)o(cid:32) sha(cid:32)es and sha(cid:32)e p(cid:32)(cid:26)(cid:20)e)
Outstanding common shares
t(cid:26)(cid:28)es: Ending share price
Market capitali(cid:73)ation
working
Long(cid:11)term debt
less: Cash and cash equivalents
Net de(cid:50)t
Total enterprise (cid:69)alue
2022
82,318,159
97.71 $
8,043,307 $
2021
82,443,968
114.36
9,428,292
647,060 $
927,780
(280,720) $
646,337
916,830
(270,493)
7,762,587 $
9,157,799
$
$
$
$
$
(cid:34)E(cid:48) (cid:39)ER(cid:29)ORMANCE INDICATORS ("(cid:34)(cid:39)Is")
Management uses key performance indicators to enable consistent measurement of performance across the
organization. These (cid:36)(cid:41)Is are non(cid:11)(cid:32)AA(cid:41) financial measures, do not have a standardized meaning under IFRS
and may not be comparable to similar measures presented by other issuers.
(cid:30)ross (cid:39)ro(cid:54)it Margin
This measure is defined as gross profit (defined above) divided by total revenue.
Operating Income Margin
This measure is defined as operating income (defined above) divided by total revenue.
Management’s Discussion and Analysis
49
Order Bookings and Backlog
Order bookings represent the retail value of firm equipment or project orders received during a period. Backlog
is defined as the retail value of equipment units ordered by customers with future delivery, and the remaining
retail value of package/project orders remaining to be recognized in revenue under the percentage of
completion method. Management uses order backlog as a measure of projecting future equipment and project
deliveries. There are no directly comparable IFRS measures for order bookings or backlog.
Return on Capital Employed ("ROCE")
ROCE is utilized to assess both current operating performance and prospective investments. The adjusted
earnings numerator used for the calculation is income before income taxes, interest expense and interest
income (excluding interest on rental conversions). The denominator in the calculation is the monthly average
capital employed, which is defined as net debt plus shareholders' equity, also referred to as total capitalization.
($ thousands)
Net earnings
plus: Interest expense
less: Interest and investment income
plus: Interest income – rental conversions
plus: Income taxes
Adjusted net earnings
Average capital employed
Return on capital employed
Return on Equity ("ROE")
2022
2021
$
$
454,198
27,338
(22,232)
4,760
164,865
628,929
$
$
332,710
28,161
(9,027)
2,635
124,093
478,572
$
1,944,501
$
1,796,703
32.3 %
26.6 %
ROE is monitored to assess profitability and is calculated by dividing net earnings by opening shareholders'
equity (adjusted for shares issued and shares repurchased and cancelled during the year).
($ thousands)
Net earnings
2022
2021
$
454,198
$
332,710
Opening shareholder's equity (net of adjustments)
$
1,935,365
$
1,695,008
Return on equity
23.5 %
19.6 %
41
Toromont Industries Ltd.
50
Toromont Industries Ltd.
, also referred to as total capitalization.
Backlog
remaining
of
project
adjusted
interest
average
2021
(9,027)
shareholders'
%
%
2021
MANA(cid:29)EMENT(cid:6)S REPORT TO THE SHAREHOLDERS
The accompanying consolidated financial statements and (cid:37)anagement(cid:6)s Discussion and (cid:25)nalysis ((cid:2)(cid:37)D(cid:5)(cid:25)(cid:2))
are the responsibility of the management of Toromont Industries Ltd. (the (cid:2)Company(cid:2)). The consolidated
financial statements have been prepared in accordance with International (cid:30)inancial (cid:42)eporting (cid:43)tandards as
issued by the International (cid:25)ccounting (cid:43)tandards (cid:26)oard. The financial Information presented in the Company(cid:6)s
(cid:37)D(cid:5)(cid:25) is consistent, where applicable, with that contained in the consolidated financial statements.
The consolidated financial statements reflect certain amounts which are, necessarily, based on estimates and
judgments. (cid:37)anagement has determined such amounts on a reasonable basis in order to provide reasonable
assurance that the consolidated financial statements are presented fairly in all material respects.
(cid:37)anagement is also responsible for establishing and maintaining appropriate systems of internal control and
procedures over the financial reporting process. (cid:40)olicies and procedures are designed to give reasonable
assurance that transactions are appropriately authori(cid:75)ed, assets are safeguarded from loss or unauthori(cid:75)ed
use and financial records are properly maintained to provide reliable information for preparation of the
consolidated financial statements.
Ernst (cid:5) (cid:49)oung LL(cid:40), an independent firm of chartered professional accountants, were appointed by the
shareholders as external auditor to examine the consolidated financial statements in accordance with generally
accepted auditing standards in Canada and provide an independent professional opinion. Their report is
presented with the consolidated financial statements.
The (cid:26)oard of Directors (the (cid:2)(cid:26)oard(cid:2)) is responsible for ensuring that management fulfills its responsibilities for
financial reporting and internal controls. The (cid:26)oard carries out its responsibilities principally through its (cid:25)udit
Committee, which is composed solely of independent directors. The (cid:25)udit Committee recommends the
independent auditor for appointment by the shareholders. It meets regularly with management and the internal
and external auditors to review internal accounting controls, internal and external audit matters and accounting
principles and practices. Internal and external auditors have full and unrestricted access to the (cid:25)udit
Committee. The consolidated financial statements and (cid:37)D(cid:5)(cid:25) have been approved by the (cid:26)oard of Directors,
based on the review and recommendation of the (cid:25)udit Committee.
(cid:4)signe(cid:32)(cid:5) S(cid:8)(cid:17)(cid:8) (cid:19)e(cid:32)(cid:36)(cid:48)rst
(cid:4)signe(cid:32)(cid:5) (cid:19)(cid:8)S(cid:8) (cid:19)(cid:31)(cid:19)i(cid:39)(cid:39)an
Scott (cid:32). Medh(cid:68)rst
(cid:40)resident and
Chief Executive (cid:39)fficer
M(cid:56)chae(cid:59) S. McM(cid:56)(cid:59)(cid:59)an
Executive (cid:46)ice (cid:40)resident and
Chief Executive (cid:39)fficer
Chief (cid:30)inancial (cid:39)ffice
Chief (cid:30)inancial (cid:39)ffice
(cid:30)ebruary 14, (cid:15)(cid:13)(cid:15)3
Toronto, Canada
oromont Industries Ltd.
Consolidated Financial Statements
51
INDEPENDENT A(cid:43)DITOR(cid:6)S REPORT
To the (cid:43)hareholders of Toromont Industries Ltd.,
O(cid:63)(cid:56)n(cid:56)on
(cid:47)e have audited the consolidated financial statements of Toromont Industries Ltd. and its subsidiaries (the
Group), which comprise the consolidated statements of financial position as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1,
and the consolidated statements of income, consolidated statements of comprehensive income, consolidated
statements of changes in shareholders(cid:6) 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.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International
(cid:30)inancial (cid:42)eporting (cid:43)tandards (I(cid:30)(cid:42)(cid:43)).
(cid:24)as(cid:56)s for O(cid:63)(cid:56)n(cid:56)on
(cid:47)e conducted our audit in accordance with Canadian generally accepted auditing standards. (cid:39)ur
responsibilities under those standards are further described in the (cid:10)(cid:48)(cid:32)it(cid:42)r(cid:3)s (cid:22)esp(cid:42)nsi(cid:30)i(cid:39)ities (cid:34)(cid:42)r t(cid:36)e (cid:10)(cid:48)(cid:32)it (cid:42)(cid:34) t(cid:36)e
(cid:11)(cid:42)ns(cid:42)(cid:39)i(cid:32)ate(cid:32) (cid:14)inan(cid:31)ia(cid:39) Statements section of our report. (cid:47)e are independent of the Group in accordance with
the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. (cid:47)e believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
(cid:33)ey A(cid:68)d(cid:56)t Matter
(cid:35)ey audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our auditor(cid:6)s opinion thereon, and we
do not provide a separate opinion on these matters. (cid:30)or the matter below, our description of how our audit
addressed the matter is provided in that context.
(cid:47)e have fulfilled the responsibilities described in the (cid:10)(cid:48)(cid:32)it(cid:42)r(cid:3)s (cid:22)esp(cid:42)nsi(cid:30)i(cid:39)ities (cid:34)(cid:42)r t(cid:36)e (cid:10)(cid:48)(cid:32)it (cid:42)(cid:34) t(cid:36)e (cid:11)(cid:42)ns(cid:42)(cid:39)i(cid:32)ate(cid:32)
(cid:14)inan(cid:31)ia(cid:39) Statements section of our report, including in relation to this matter. (cid:25)ccordingly, our audit included
the performance of procedures designed to respond to our assessment of the ris(cid:60)s of material misstatement of
the consolidated financial statements. The results of our audit procedures, including the procedures performed
to address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial
statements.
52
Toromont Industries Ltd. Annual Report 2022
Revenue recognition for long-term refrigeration packages
sells
(cid:33)ey a(cid:68)d(cid:56)t matter
The Group
recreational
refrigeration pac(cid:60)ages, which involve the design,
manufacture,
installation and commissioning of
longer(cid:10)term projects under the customer(cid:6)s control and
typically construction is completed in under two years.
industrial and
(cid:42)evenue is recogni(cid:75)ed progressively based on the
percentage(cid:10)of(cid:10)completion method. This method is
measured by reference to costs incurred to date as a
percentage of the total estimated costs. The Group(cid:6)s
policy for revenue recognition together with the related
significant accounting estimates and assumptions is
described in notes (cid:15) and 3 of the consolidated
financial statements.
The Group recogni(cid:75)ed $1(cid:20)3.3 million of revenues for
the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) related to these
contracts. The determination of the estimated costs to
complete projects that are open at period end is a
significant judgement that can have a material impact
on the amount of revenue and profit recogni(cid:75)ed in the
period. These significant judgements include those
related to estimated future labour, materials and
overhead costs for contracts. Given the variation in
the types of refrigeration projects, these judgements
related to the estimation of future costs are subjective
in nature and dependent on the complexity and status
of the related contract as of the period end date.
(the
(cid:15)(cid:13)(cid:15)1,
consolidated
then
accounting
the
financial
International
(cid:39)ur
t(cid:36)e
with
and
the
audit of
our
we
audit
(cid:11)(cid:42)ns(cid:42)(cid:39)i(cid:32)ate(cid:32)
included
misstatement of
performed
consolidated financial
Ho(cid:70) o(cid:68)r a(cid:68)d(cid:56)t addressed the (cid:58)ey a(cid:68)d(cid:56)t matter
(cid:30)or long(cid:10)term refrigeration pac(cid:60)age contracts that
were open as of December 31, (cid:15)(cid:13)(cid:15)(cid:15), our audit
procedures included the following, among others(cid:23)
(cid:47)e obtained an understanding, evaluated the design,
and tested the operating effectiveness of controls
related to the Group(cid:6)s estimation processes (including
the approval of the initial budget, and the monitoring
and assessment of contract activities and estimated
costs to complete), and the recording of revenue in
the consolidated financial statements(cid:24)
(cid:47)e reviewed contractual arrangements, including
pricing and billing terms, change orders and terms
and conditions impacting revenue recognition, if any,
and had discussions with operational personnel and
assessed whether appropriate approvals were
obtained in accordance with the Group(cid:6)s authori(cid:75)ation
matrix for a sample of projects. (cid:39)nce a project
commenced, we also obtained and reviewed a sample
of meeting minutes and observed a sample of project
update calls where management and project
managers discussed the status of each project(cid:24)
(cid:47)e compared prior period cost estimates to actual
contract costs incurred in the current period to assess
management(cid:6)s ability
to
complete a contract(cid:24)
to estimate
the costs
(cid:47)e obtained management(cid:6)s initial cost estimates and
tested a sample of actual material and labour costs
incurred to assess the measurement of the estimated
costs to complete at period end(cid:24) and
the adequacy of disclosures
(cid:47)e assessed
in
describing the areas of judgement and estimation
for
revenue
uncertainties
projects that are open at period end.
recognition
involving
Other Informat(cid:56)on
(cid:37)anagement is responsible for the other information. The other information comprises(cid:23)
(cid:80) (cid:37)anagement(cid:6)s Discussion and (cid:25)nalysis
(cid:80)
The information, other than the consolidated financial statements and our auditor’s report thereon, in
the (cid:25)nnual (cid:42)eport
Consolidated Financial Statements
53
(cid:39)ur opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our (cid:60)nowledge obtained in the audit or otherwise appears to be materially
misstated.
(cid:47)e obtained (cid:37)anagement(cid:6)s Discussion and (cid:25)nalysis prior to the date of this auditor(cid:6)s report. If, based on the
wor(cid:60) we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor’s report. (cid:47)e have nothing to report in this regard.
The (cid:25)nnual (cid:42)eport is expected to be made available to us after the date of the auditor(cid:6)s report. If based on the
wor(cid:60) we will perform on this other information, we conclude there is a material misstatement of other
information, we are required to report that fact to those charged with governance.
Res(cid:63)ons(cid:56)b(cid:56)(cid:59)(cid:56)t(cid:56)es of Mana(cid:54)ement and Those Char(cid:54)ed (cid:70)(cid:56)th (cid:29)o(cid:69)ernance for the Conso(cid:59)(cid:56)dated F(cid:56)nanc(cid:56)a(cid:59)
Statements
(cid:37)anagement is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with I(cid:30)(cid:42)(cid:43), and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group(cid:6)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 Group or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group(cid:6)s financial reporting process.
A(cid:68)d(cid:56)tor(cid:6)s Res(cid:63)ons(cid:56)b(cid:56)(cid:59)(cid:56)t(cid:56)es for the A(cid:68)d(cid:56)t of the Conso(cid:59)(cid:56)dated F(cid:56)nanc(cid:56)a(cid:59) Statements
(cid:39)ur objectives are to obtain reasonable assurance about whether the consolidated 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. (cid:42)easonable assurance is a high level of assurance but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. (cid:37)isstatements 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 ta(cid:60)en on the basis of these consolidated financial statements.
(cid:25)s part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional s(cid:60)epticism throughout the audit. (cid:47)e also(cid:23)
(cid:80)
Identify and assess the ris(cid:60)s of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those ris(cid:60)s, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The ris(cid:60) 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.
54
Toromont Industries Ltd. Annual Report 2022
not
other
the
materially
the
are
the
other
c(cid:56)a(cid:59)
statements in
the
fraud
Group(cid:6)s
the
cease
as a
that
audit
material
if,
of
exercise
whether
audit
detecting a
may
internal control.
(cid:80) (cid:39)btain 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 Group(cid:6)s internal control.
(cid:80) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
(cid:80) Conclude on the appropriateness of management(cid:6)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 Group(cid:6)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(cid:6)s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. (cid:39)ur conclusions are based on the audit evidence obtained up to the date of our
auditor(cid:6)s report. (cid:32)owever, future events or conditions may cause the Group to cease to continue as a
going concern.
(cid:80) Evaluate the overall presentation, structure, and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
(cid:80) (cid:39)btain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements. (cid:47)e
are responsible for the direction, supervision and performance of the group audit. (cid:47)e remain solely
responsible for our audit opinion.
(cid:47)e 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.
(cid:47)e 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.
(cid:30)rom the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore
the (cid:60)ey audit matters. (cid:47)e describe these matters in our auditor(cid:6)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(cid:6)s report is (cid:40)aula (cid:34). (cid:43)mith.
(cid:4)signe(cid:32)(cid:5) (cid:13)rnst (cid:2) (cid:28)(cid:42)(cid:48)ng (cid:18)(cid:18)(cid:21)
Ernst (cid:5) (cid:47)o(cid:68)n(cid:54) LLP
Chartered (cid:40)rofessional (cid:25)ccountants
Licensed (cid:40)ublic (cid:25)ccountants
(cid:30)ebruary 14, (cid:15)(cid:13)(cid:15)3
Toronto, Canada
Consolidated Financial Statements
55
TOROMONT IND(cid:43)STRIES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ thousands)
(cid:25)s at December 31
Assets
Current assets
Cash and cash equivalents
(cid:25)ccounts receivable
Inventories
Derivative financial instruments
(cid:39)ther current assets
Total current assets
(cid:40)roperty, plant and equipment
(cid:42)ental equipment
(cid:39)ther assets
Deferred tax assets
Goodwill and intangible assets
Tota(cid:59) assets
L(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
Current liabilities
(cid:25)ccounts payable and accrued liabilities
(cid:40)rovisions
Deferred revenue and contract liabilities
Income taxes payable
Total current liabilities
Deferred revenue and contract liabilities
Long(cid:10)term lease liabilities
Long(cid:10)term debt
(cid:40)ost(cid:10)employment obligations
Deferred tax liabilities
Tota(cid:59) (cid:59)(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
Shareho(cid:59)ders(cid:6) e(cid:64)(cid:68)(cid:56)ty
(cid:43)hare capital
Contributed surplus
(cid:42)etained earnings
(cid:25)ccumulated other comprehensive income
Tota(cid:59) shareho(cid:59)ders(cid:6) e(cid:64)(cid:68)(cid:56)ty
Tota(cid:59) (cid:59)(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es and shareho(cid:59)ders(cid:6) e(cid:64)(cid:68)(cid:56)ty
Comm(cid:56)tments (cid:7)note 23(cid:8)
See accom(cid:63)any(cid:56)n(cid:54) notes
A(cid:63)(cid:63)ro(cid:69)ed by the (cid:24)oard(cid:22)
(cid:4)signe(cid:32)(cid:5) (cid:22)(cid:8) (cid:15)(cid:8) (cid:22)(cid:42)(cid:52)
(cid:42)ichard G. (cid:42)oy
Director
56
Toromont Industries Ltd. Annual Report 2022
Note
2022
(cid:15)(cid:13)(cid:15)1
4
(cid:18)
13
(cid:19)
(cid:19)
(cid:20), (cid:15)(cid:13)
1(cid:19)
(cid:21)
(cid:20), 19
9
1(cid:13)
1(cid:13)
(cid:20)
11, 13
(cid:15)(cid:13)
1(cid:19)
1(cid:15)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:21)2(cid:19),(cid:19)(cid:20)0 $
(cid:17)(cid:19)(cid:21),6(cid:20)2
1,02(cid:17),(cid:19)(cid:17)(cid:21)
1(cid:20),(cid:17)30
1(cid:19),(cid:16)(cid:16)(cid:16)
2,(cid:17)6(cid:21),1(cid:21)(cid:17)
(cid:16)(cid:19)0,62(cid:16)
616,2(cid:20)(cid:21)
(cid:17)2,(cid:17)2(cid:19)
(cid:21)2(cid:17)
(cid:16)(cid:19)2,(cid:17)6(cid:17)
(cid:16),1(cid:20)2,12(cid:17) $
6(cid:21)1,0(cid:20)(cid:16) $
2(cid:19),6(cid:17)3
30(cid:21),3(cid:16)(cid:21)
2(cid:20),6(cid:17)3
1,0(cid:17)6,(cid:19)3(cid:21)
23,2(cid:19)6
16,160
6(cid:16)(cid:19),060
30,(cid:17)(cid:21)2
(cid:20)2,(cid:21)3(cid:21)
1,(cid:20)(cid:17)6,(cid:19)66
(cid:17)61,0(cid:19)(cid:20)
1(cid:21),262
1,(cid:19)31,661
13,3(cid:17)(cid:20)
2,32(cid:17),3(cid:17)(cid:21)
(cid:16),1(cid:20)2,12(cid:17) $
91(cid:19),(cid:21)3(cid:13)
4(cid:18)1,944
(cid:20)(cid:15)(cid:13),4(cid:15)1
(cid:18),(cid:15)(cid:18)(cid:15)
13,994
(cid:15),1(cid:13)(cid:21),441
4(cid:18)(cid:13),(cid:21)(cid:15)(cid:18)
(cid:18)(cid:15)(cid:18),(cid:18)(cid:15)1
(cid:15)3,(cid:20)3(cid:18)
(cid:15)31
4(cid:20)(cid:18),(cid:13)43
3,(cid:18)(cid:21)3,(cid:20)9(cid:19)
(cid:18)(cid:20)3,3(cid:19)3
(cid:15)(cid:18),4(cid:13)4
199,(cid:19)9(cid:19)
1(cid:18),(cid:15)39
(cid:21)13,(cid:20)(cid:13)(cid:15)
(cid:15)(cid:20),(cid:15)(cid:18)4
11,(cid:20)(cid:21)(cid:13)
(cid:19)4(cid:19),33(cid:20)
(cid:21)(cid:15),(cid:20)1(cid:15)
4(cid:21),(cid:19)(cid:21)(cid:15)
1,(cid:19)3(cid:13),4(cid:19)(cid:20)
(cid:18)39,(cid:19)(cid:20)(cid:20)
1(cid:19),3(cid:18)(cid:15)
1,39(cid:15),(cid:18)(cid:18)1
4,(cid:20)49
1,9(cid:18)3,3(cid:15)9
3,(cid:18)(cid:21)3,(cid:20)9(cid:19)
(cid:4)signe(cid:32)(cid:5) (cid:11)(cid:8) (cid:13)(cid:8) (cid:11)ranst(cid:42)n
Cathy E. Cranston
Director
TOROMONT IND(cid:43)STRIES LTD.
CONSOLIDATED STATEMENTS OF INCOME
($ thousands, except share amounts)
(cid:49)ears ended December 31
Re(cid:69)en(cid:68)e
Cost of goods sold
Gross profit
(cid:43)elling and administrative expenses
O(cid:63)erat(cid:56)n(cid:54) (cid:56)ncome
Interest expense
Interest and investment income
Income before income taxes
Income taxes
Net earn(cid:56)n(cid:54)s
Earn(cid:56)n(cid:54)s (cid:63)er share
(cid:26)asic
Diluted
(cid:45)e(cid:56)(cid:54)hted a(cid:69)era(cid:54)e n(cid:68)mber of shares o(cid:68)tstand(cid:56)n(cid:54)
(cid:26)asic
Diluted
See accom(cid:63)any(cid:56)n(cid:54) notes
Note
(cid:15)4
(cid:18), (cid:19)
(cid:3)
1(cid:18)
1(cid:18)
1(cid:19)
1(cid:20)
1(cid:20)
1(cid:20)
1(cid:20)
(cid:3)
(cid:3)
(cid:3)
2022
(cid:16),230,(cid:19)36 $
3,0(cid:21)(cid:19),1(cid:17)0
1,133,(cid:17)(cid:20)6
(cid:17)0(cid:21),(cid:16)1(cid:19)
62(cid:16),16(cid:21)
2(cid:19),33(cid:20)
(cid:7)22,232(cid:8)
61(cid:21),063
16(cid:16),(cid:20)6(cid:17)
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20) $
(cid:15)(cid:13)(cid:15)1
3,(cid:21)(cid:21)(cid:19),(cid:18)3(cid:20)
(cid:15),91(cid:19),(cid:20)(cid:19)9
9(cid:19)9,(cid:20)(cid:19)(cid:21)
493,(cid:21)31
4(cid:20)(cid:18),93(cid:20)
(cid:15)(cid:21),1(cid:19)1
(9,(cid:13)(cid:15)(cid:20))
4(cid:18)(cid:19),(cid:21)(cid:13)3
1(cid:15)4,(cid:13)93
33(cid:15),(cid:20)1(cid:13)
(cid:17).(cid:17)2 $
(cid:17).(cid:16)(cid:19) $
4.(cid:13)3
4.(cid:13)(cid:13)
(cid:20)2,33(cid:21),(cid:16)(cid:20)0
(cid:20)2,(cid:21)(cid:19)(cid:20),32(cid:16)
(cid:21)(cid:15),(cid:18)4(cid:20),9(cid:19)1
(cid:21)3,(cid:15)(cid:19)9,4(cid:18)1
(cid:15)(cid:13)(cid:15)1
91(cid:19),(cid:21)3(cid:13)
4(cid:18)1,944
(cid:20)(cid:15)(cid:13),4(cid:15)1
(cid:18),(cid:15)(cid:18)(cid:15)
13,994
(cid:15),1(cid:13)(cid:21),441
4(cid:18)(cid:13),(cid:21)(cid:15)(cid:18)
(cid:18)(cid:15)(cid:18),(cid:18)(cid:15)1
(cid:15)3,(cid:20)3(cid:18)
(cid:15)31
4(cid:20)(cid:18),(cid:13)43
3,(cid:18)(cid:21)3,(cid:20)9(cid:19)
(cid:18)(cid:20)3,3(cid:19)3
(cid:15)(cid:18),4(cid:13)4
199,(cid:19)9(cid:19)
1(cid:18),(cid:15)39
(cid:21)13,(cid:20)(cid:13)(cid:15)
(cid:15)(cid:20),(cid:15)(cid:18)4
11,(cid:20)(cid:21)(cid:13)
(cid:19)4(cid:19),33(cid:20)
(cid:21)(cid:15),(cid:20)1(cid:15)
4(cid:21),(cid:19)(cid:21)(cid:15)
1,(cid:19)3(cid:13),4(cid:19)(cid:20)
(cid:18)39,(cid:19)(cid:20)(cid:20)
1(cid:19),3(cid:18)(cid:15)
1,39(cid:15),(cid:18)(cid:18)1
4,(cid:20)49
1,9(cid:18)3,3(cid:15)9
3,(cid:18)(cid:21)3,(cid:20)9(cid:19)
Consolidated Financial Statements
57
TOROMONT IND(cid:43)STRIES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSI(cid:44)E INCOME
($ thousands)
(cid:49)ears ended December 31
Net earn(cid:56)n(cid:54)s
2022
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20) $
(cid:15)(cid:13)(cid:15)1
33(cid:15),(cid:20)1(cid:13)
(cid:3)
Other com(cid:63)rehens(cid:56)(cid:69)e (cid:56)ncome, net of (cid:56)ncome ta(cid:71)es(cid:22)
(cid:16)tems t(cid:36)at ma(cid:52) (cid:30)e re(cid:31)(cid:39)assi(cid:34)ie(cid:32) s(cid:48)(cid:30)se(cid:44)(cid:48)ent(cid:39)(cid:52) t(cid:42) net earnings(cid:9)
(cid:30)oreign currency translation adjustments
(cid:45)nreali(cid:75)ed gains (losses) on derivatives designated as cash flow hedges
Income tax (expense) recovery
(cid:45)nreali(cid:75)ed gains (losses) on cash flow hedges, net of income taxes
(cid:42)eali(cid:75)ed (gains) losses on derivatives designated as cash flow hedges
Income tax expense (recovery)
(cid:42)eali(cid:75)ed (gains) losses on cash flow hedges, net of income taxes
(cid:16)tems t(cid:36)at (cid:50)i(cid:39)(cid:39) n(cid:42)t (cid:30)e re(cid:31)(cid:39)assi(cid:34)ie(cid:32) s(cid:48)(cid:30)se(cid:44)(cid:48)ent(cid:39)(cid:52) t(cid:42) net earnings(cid:9)
(cid:42)emeasurement gain on defined benefit plans
Income tax expense
(cid:42)emeasurement gain on defined benefit plans, net of income taxes
Other com(cid:63)rehens(cid:56)(cid:69)e (cid:56)ncome
Tota(cid:59) com(cid:63)rehens(cid:56)(cid:69)e (cid:56)ncome
See accom(cid:63)any(cid:56)n(cid:54) notes
1,12(cid:16)
(1(cid:15))
(cid:16)6,623
(cid:7)12,122(cid:8)
3(cid:16),(cid:17)01
(cid:7)36,(cid:17)0(cid:21)(cid:8)
(cid:21),(cid:16)(cid:21)3
(cid:7)2(cid:19),016(cid:8)
(cid:19)(cid:21),(cid:21)(cid:16)1
(cid:7)21,1(cid:20)(cid:16)(cid:8)
(cid:17)(cid:20),(cid:19)(cid:17)(cid:19)
(1,1(cid:15)4)
3(cid:13)(cid:13)
((cid:21)(cid:15)4)
9,4(cid:20)(cid:21)
((cid:15),4(cid:20)(cid:15))
(cid:20),(cid:13)(cid:13)(cid:19)
(cid:19)(cid:20),914
(1(cid:20),99(cid:19))
49,91(cid:21)
6(cid:19),366
(cid:18)(cid:19),(cid:13)(cid:21)(cid:21)
(cid:3)
(cid:17)21,(cid:17)6(cid:16) $
3(cid:21)(cid:21),(cid:20)9(cid:21)
58
Toromont Industries Ltd. Annual Report 2022
TOROMONT IND(cid:43)STRIES LTD.
CONSOLIDATED STATEMENTS OF CHAN(cid:29)ES IN SHAREHOLDERS(cid:6) E(cid:39)(cid:43)IT(cid:47)
($ thousands, except share amounts)
Share ca(cid:63)(cid:56)ta(cid:59)
Acc(cid:68)m(cid:68)(cid:59)ated other com(cid:63)rehens(cid:56)(cid:69)e (cid:56)ncome (cid:7)(cid:59)oss(cid:8)
N(cid:68)mber
(cid:21)(cid:15),4(cid:20)4,(cid:19)(cid:18)(cid:21) $
Amo(cid:68)nt
(cid:18)1(cid:19),(cid:18)91 $
Contr(cid:56)b(cid:68)ted
s(cid:68)r(cid:63)(cid:59)(cid:68)s
14,(cid:15)43 $
(cid:78)
(cid:78)
(cid:78)
439,91(cid:13)
(cid:78)
439,91(cid:13)
(4(cid:20)(cid:13),(cid:19)(cid:13)(cid:13))
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:15)(cid:19),11(cid:20)
(cid:78)
(cid:15)(cid:19),11(cid:20)
(3,(cid:13)31)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(4,3(cid:19)3)
(cid:19),4(cid:20)(cid:15)
(cid:15),1(cid:13)9
(cid:78)
(cid:78)
(cid:21)(cid:15),443,9(cid:19)(cid:21) $
(cid:18)39,(cid:19)(cid:20)(cid:20) $
1(cid:19),3(cid:18)(cid:15) $
(cid:75)
(cid:75)
(cid:75)
3(cid:16)(cid:19),2(cid:21)1
(cid:75)
3(cid:16)(cid:19),2(cid:21)1
(cid:7)(cid:16)(cid:19)3,100(cid:8)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
2(cid:16),(cid:17)21
(cid:75)
2(cid:16),(cid:17)21
(cid:7)3,120(cid:8)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
(cid:7)3,(cid:20)(cid:20)(cid:21)(cid:8)
6,(cid:19)(cid:21)(cid:21)
2,(cid:21)10
(cid:75)
(cid:75)
(cid:20)2,31(cid:20),1(cid:17)(cid:21) (cid:3)
(cid:17)61,0(cid:19)(cid:20) (cid:3)
1(cid:21),262 (cid:3)
Reta(cid:56)ned
earn(cid:56)n(cid:54)s
1,1(cid:19)9,(cid:15)39 $
33(cid:15),(cid:20)1(cid:13)
49,91(cid:21)
3(cid:21)(cid:15),(cid:19)(cid:15)(cid:21)
(cid:78)
(cid:78)
(cid:78)
(4(cid:19),9(cid:20)(cid:15))
(11(cid:15),344)
1,39(cid:15),(cid:18)(cid:18)1 $
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20)
(cid:17)(cid:20),(cid:19)(cid:17)(cid:19)
(cid:17)12,(cid:21)(cid:17)(cid:17)
(cid:75)
(cid:75)
(cid:75)
(cid:7)(cid:16)(cid:17),3(cid:20)2(cid:8)
(cid:7)12(cid:20),(cid:16)63(cid:8)
1,(cid:19)31,661 (cid:3)
Fore(cid:56)(cid:54)n
c(cid:68)rrency
trans(cid:59)at(cid:56)on
ad(cid:57)(cid:68)stments
Cash f(cid:59)o(cid:70)
hed(cid:54)es
1,(cid:21)(cid:21)(cid:13) $
(cid:78)
(1(cid:15))
(1(cid:15))
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
1,(cid:21)(cid:19)(cid:21) $
(cid:75)
1,12(cid:16)
1,12(cid:16)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
2,(cid:21)(cid:21)2 (cid:3)
(3,3(cid:13)1) $
(cid:78)
(cid:19),1(cid:21)(cid:15)
(cid:19),1(cid:21)(cid:15)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:15),(cid:21)(cid:21)1 $
(cid:75)
(cid:19),(cid:16)(cid:20)(cid:17)
(cid:19),(cid:16)(cid:20)(cid:17)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
10,366 (cid:3)
As at (cid:32)an(cid:68)ary 1, 2021
(cid:38)et earnings
(cid:39)ther comprehensive income
Total comprehensive income
Exercise of share options
(cid:43)hare(cid:10)based compensation expense
Effect of share compensation plans
(cid:43)hares purchased for cancellation
Dividends declared
As at December 31, 2021
(cid:38)et earnings
(cid:39)ther comprehensive income
Total comprehensive income
Exercise of share options
(cid:43)hare(cid:10)based compensation expense
Effect of share compensation plans
(cid:43)hares purchased for cancellation
Dividends declared
As at December 31, 2022
See accom(cid:63)any(cid:56)n(cid:54) notes
Tota(cid:59)
shareho(cid:59)ders(cid:6)
e(cid:64)(cid:68)(cid:56)ty
1,(cid:19)9(cid:21),(cid:19)(cid:18)(cid:15)
33(cid:15),(cid:20)1(cid:13)
(cid:18)(cid:19),(cid:13)(cid:21)(cid:21)
3(cid:21)(cid:21),(cid:20)9(cid:21)
(cid:15)1,(cid:20)(cid:18)4
(cid:19),4(cid:20)(cid:15)
(cid:15)(cid:21),(cid:15)(cid:15)(cid:19)
((cid:18)(cid:13),(cid:13)(cid:13)3)
(11(cid:15),344)
1,9(cid:18)3,3(cid:15)9
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20)
6(cid:19),366
(cid:17)21,(cid:17)6(cid:16)
20,632
6,(cid:19)(cid:21)(cid:21)
2(cid:19),(cid:16)31
(cid:7)(cid:16)(cid:20),(cid:17)02(cid:8)
(cid:7)12(cid:20),(cid:16)63(cid:8)
2,32(cid:17),3(cid:17)(cid:21)
Tota(cid:59)
(1,4(cid:15)1) $
(cid:78)
(cid:19),1(cid:20)(cid:13)
(cid:19),1(cid:20)(cid:13)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
4,(cid:20)49 $
(cid:75)
(cid:20),60(cid:21)
(cid:20),60(cid:21)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
13,3(cid:17)(cid:20) (cid:3)
(cid:15)(cid:13)(cid:15)1
33(cid:15),(cid:20)1(cid:13)
(1(cid:15))
(1,1(cid:15)4)
3(cid:13)(cid:13)
((cid:21)(cid:15)4)
9,4(cid:20)(cid:21)
((cid:15),4(cid:20)(cid:15))
(cid:20),(cid:13)(cid:13)(cid:19)
(cid:19)(cid:20),914
(1(cid:20),99(cid:19))
49,91(cid:21)
(cid:18)(cid:19),(cid:13)(cid:21)(cid:21)
3(cid:21)(cid:21),(cid:20)9(cid:21)
Consolidated Financial Statements
59
TOROMONT IND(cid:43)STRIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLO(cid:45)S
($ thousands)
(cid:49)ears ended December 31
O(cid:63)erat(cid:56)n(cid:54) act(cid:56)(cid:69)(cid:56)t(cid:56)es
(cid:38)et earnings
Items not requiring cash(cid:23)
Note
2022
(cid:15)(cid:13)(cid:15)1
(cid:3)
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20) $
33(cid:15),(cid:20)1(cid:13)
162,(cid:20)10
6,(cid:19)(cid:21)(cid:21)
2,(cid:19)33
(cid:21),(cid:19)(cid:17)0
(cid:7)3(cid:16),363(cid:8)
601,(cid:21)2(cid:19)
(cid:7)213,(cid:19)60(cid:8)
(cid:7)20(cid:17),(cid:16)20(cid:8)
3(cid:16),206
216,(cid:21)(cid:17)3
(cid:7)6(cid:21),33(cid:16)(cid:8)
2(cid:17),16(cid:20)
(cid:7)16(cid:19)(cid:8)
(cid:7)(cid:16)(cid:16),333(cid:8)
(cid:75)
(cid:7)12(cid:17),210(cid:8)
20,632
(cid:7)(cid:16)(cid:20),(cid:17)02(cid:8)
(cid:7)(cid:21),0(cid:19)(cid:21)(cid:8)
(cid:7)162,1(cid:17)(cid:21)(cid:8)
(cid:16)(cid:20)(cid:21)
10,(cid:21)(cid:17)0
(cid:21)16,(cid:20)30
(cid:21)2(cid:19),(cid:19)(cid:20)0 $
1(cid:18)(cid:21),3(cid:19)(cid:13)
(cid:19),4(cid:20)(cid:15)
1,1(cid:20)(cid:19)
3,(cid:18)(cid:19)(cid:13)
((cid:15)1,(cid:18)33)
4(cid:21)(cid:13),(cid:20)4(cid:18)
1(cid:15)9,3(cid:15)(cid:15)
(11(cid:21),1(cid:21)3)
(cid:18)(cid:13),(cid:21)4(cid:13)
(cid:18)4(cid:15),(cid:20)(cid:15)4
((cid:20)1,(cid:15)(cid:13)3)
(cid:15),4(cid:19)(cid:20)
(133)
((cid:19)(cid:21),(cid:21)(cid:19)9)
(9(cid:19)1)
(1(cid:13)9,(cid:13)(cid:18)3)
(cid:15)1,(cid:20)(cid:18)4
((cid:18)(cid:13),(cid:13)(cid:13)3)
(9,(cid:21)(cid:21)(cid:13))
(14(cid:21),143)
(1(cid:13))
3(cid:15)(cid:18),(cid:20)(cid:13)(cid:15)
(cid:18)91,1(cid:15)(cid:21)
91(cid:19),(cid:21)3(cid:13)
Depreciation and amorti(cid:75)ation
(cid:43)hare(cid:10)based compensation
(cid:40)ost(cid:10)employment obligations
Deferred income taxes
Gain on sale of rental equipment and property, plant and equipment
(cid:19), (cid:20), (cid:21), 11
(cid:15)(cid:15)
(cid:19)
(cid:19)
1(cid:15)
1(cid:15)
(cid:20)
(cid:3)
(cid:38)et change in non(cid:10)cash wor(cid:60)ing capital and other
(cid:25)dditions to rental equipment
(cid:40)roceeds on disposal of rental equipment
Cash (cid:63)ro(cid:69)(cid:56)ded by o(cid:63)erat(cid:56)n(cid:54) act(cid:56)(cid:69)(cid:56)t(cid:56)es
In(cid:69)est(cid:56)n(cid:54) act(cid:56)(cid:69)(cid:56)t(cid:56)es
(cid:25)dditions to property, plant and equipment
(cid:40)roceeds on disposal of property, plant and equipment
Increase in other assets
Cash (cid:68)sed (cid:56)n (cid:56)n(cid:69)est(cid:56)n(cid:54) act(cid:56)(cid:69)(cid:56)t(cid:56)es
F(cid:56)nanc(cid:56)n(cid:54) act(cid:56)(cid:69)(cid:56)t(cid:56)es
(cid:30)inancing fees
Dividends paid
Cash received on exercise of share options
(cid:43)hares purchased for cancellation
(cid:40)ayment of lease liabilities
Cash (cid:68)sed (cid:56)n f(cid:56)nanc(cid:56)n(cid:54) act(cid:56)(cid:69)(cid:56)t(cid:56)es
Effect of currency translation on cash balances
Increase in cash and cash equivalents during the year
Cash and cash equivalents, at beginning of the year
Cash and cash e(cid:64)(cid:68)(cid:56)(cid:69)a(cid:59)ents, at end of the year
S(cid:68)(cid:63)(cid:63)(cid:59)ementa(cid:59) cash f(cid:59)o(cid:70) (cid:56)nformat(cid:56)on (cid:7)note 22(cid:8)
See accom(cid:63)any(cid:56)n(cid:54) notes
60
Toromont Industries Ltd. Annual Report 2022
(cid:15)(cid:13)(cid:15)1
33(cid:15),(cid:20)1(cid:13)
1(cid:18)(cid:21),3(cid:19)(cid:13)
(cid:19),4(cid:20)(cid:15)
1,1(cid:20)(cid:19)
3,(cid:18)(cid:19)(cid:13)
((cid:15)1,(cid:18)33)
4(cid:21)(cid:13),(cid:20)4(cid:18)
1(cid:15)9,3(cid:15)(cid:15)
(11(cid:21),1(cid:21)3)
(cid:18)(cid:13),(cid:21)4(cid:13)
(cid:18)4(cid:15),(cid:20)(cid:15)4
((cid:20)1,(cid:15)(cid:13)3)
(cid:15),4(cid:19)(cid:20)
(133)
((cid:19)(cid:21),(cid:21)(cid:19)9)
(9(cid:19)1)
(1(cid:13)9,(cid:13)(cid:18)3)
(cid:15)1,(cid:20)(cid:18)4
((cid:18)(cid:13),(cid:13)(cid:13)3)
(9,(cid:21)(cid:21)(cid:13))
(14(cid:21),143)
(1(cid:13))
3(cid:15)(cid:18),(cid:20)(cid:13)(cid:15)
(cid:18)91,1(cid:15)(cid:21)
91(cid:19),(cid:21)3(cid:13)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
1. DESCRIPTION OF (cid:24)(cid:43)SINESS
Cor(cid:63)orate Informat(cid:56)on
Toromont Industries Ltd. (the (cid:2)Company(cid:2) or (cid:2)Toromont(cid:2)) is a limited company incorporated and domiciled in
Canada whose shares are publicly traded on the Toronto (cid:43)toc(cid:60) Exchange ((cid:2)T(cid:43)(cid:48)(cid:2)) under the symbol TI(cid:32). The
registered office is located at 3131 (cid:32)ighway (cid:20) (cid:47)est, Concord, (cid:39)ntario, Canada.
The Company operates through two business segments(cid:23) the Equipment Group and CI(cid:37)C(cid:39). The Equipment
Group includes one of the larger Caterpillar dealerships by revenue and geographic territory, spanning the
Canadian provinces of (cid:38)ewfoundland and Labrador, (cid:38)ova (cid:43)cotia, (cid:38)ew (cid:26)runswic(cid:60), (cid:40)rince Edward Island,
(cid:41)u(cid:76)bec, (cid:39)ntario and (cid:37)anitoba, in addition to most of the territory of (cid:38)unavut. The Equipment Group includes
industry(cid:10)leading rental operations, a complementary material handling business and an agricultural equipment
business. CI(cid:37)C(cid:39) is a mar(cid:60)et leader in the design, engineering, fabrication and installation of industrial and
recreational refrigeration systems. (cid:26)oth segments offer comprehensive product support capabilities. Toromont
employs over (cid:19),(cid:21)(cid:13)(cid:13) people in more than 1(cid:19)(cid:13) locations.
2. SI(cid:29)NIFICANT ACCO(cid:43)NTIN(cid:29) POLICIES
These consolidated financial statements are prepared in accordance with International (cid:30)inancial (cid:42)eporting
(cid:43)tandards ((cid:2)I(cid:30)(cid:42)(cid:43)(cid:2)), as issued by the International (cid:25)ccounting (cid:43)tandards (cid:26)oard ((cid:2)I(cid:25)(cid:43)(cid:26)(cid:2)).
These consolidated financial statements were authori(cid:75)ed for issue by the (cid:26)oard of Directors on (cid:30)ebruary 14,
(cid:15)(cid:13)(cid:15)3 on the recommendation of the (cid:25)udit Committee.
(cid:24)as(cid:56)s of Meas(cid:68)rement
These consolidated financial statements were prepared on a historical cost basis, except for certain items
recorded at fair value as detailed in the accounting policies disclosed below.
Presentat(cid:56)on and F(cid:68)nct(cid:56)ona(cid:59) C(cid:68)rrency
The consolidated financial statements are presented in Canadian dollars, which is Toromont(cid:6)s functional
currency. (cid:25)ll values are rounded to the nearest thousand, except where otherwise indicated.
(cid:24)as(cid:56)s of Conso(cid:59)(cid:56)dat(cid:56)on
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
(cid:43)ubsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains
control, and continue to be consolidated until the date that such control ceases. The financial statements of the
subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting
intra-group balances, income and expenses and unreali(cid:75)ed gains and losses resulting from
policies. (cid:25)ll
intra-group transactions are eliminated in full upon consolidation.
(cid:24)(cid:68)s(cid:56)ness Comb(cid:56)nat(cid:56)ons and (cid:29)ood(cid:70)(cid:56)(cid:59)(cid:59)
(cid:47)hen determining the nature of an acquisition, as either a business combination or an asset acquisition,
management defines a business as (cid:2)an integrated set of activities and assets that is capable of being
Consolidated Financial Statements
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other
economic benefits directly to investors or other owners, members or participants.(cid:2) (cid:25)n integrated set of activities
and assets requires inputs and processes applied to those inputs, which together are or will be used to create
outputs. (cid:32)owever, a business need not include all of the inputs or processes that the seller used in operating
that business if the Company is capable of acquiring the business and continuing to produce outputs, for
example, by integrating the business with their own inputs and processes. If the transaction does not meet the
criteria of a business, it is accounted for as an asset acquisition.
(cid:26)usiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of consideration transferred, measured at acquisition date fair value. (cid:25)cquisition costs are
expensed as incurred.
Goodwill is initially measured at cost, being the excess of the cost of the business combination over the
Company(cid:6)s share in the net fair value of the acquiree(cid:6)s identifiable assets, liabilities and contingent liabilities. If
the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is
recogni(cid:75)ed directly in the consolidated statements of income.
(cid:25)fter initial recognition, goodwill is measured at cost less any accumulated impairment losses. (cid:30)or the purpose
of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Company(cid:6)s cash(cid:10)generating units ((cid:2)CG(cid:45)s(cid:2)) that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
(cid:47)here goodwill forms part of a CG(cid:45) and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on
the relative fair values of the operation disposed of and the portion of the CG(cid:45) retained.
Cash and Cash E(cid:64)(cid:68)(cid:56)(cid:69)a(cid:59)ents
Cash and cash equivalents include cash on hand, cash in ban(cid:60), and short(cid:10)term deposits with an original
maturity of three months or less, readily convertible to (cid:60)nown amounts of cash, and which are subject to
insignificant ris(cid:60) of changes in value.
Acco(cid:68)nts Rece(cid:56)(cid:69)ab(cid:59)e
Trade accounts receivable are amounts due from customers for products sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the
business, if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade accounts receivable are recogni(cid:75)ed initially at amounts due, net of impairment for estimated expected
credit loss (allowance for doubtful accounts). The expense relating to expected credit loss is included within
selling and administrative expenses in the consolidated statements of income.
(cid:45)nbilled receivables represent contract assets related to the Company’s rights to consideration for wor(cid:60)
completed but not billed as at the reporting date on the sale of power and energy systems and refrigeration
pac(cid:60)ages. These are transferred to receivables when the entitlement to payment becomes unconditional.
In(cid:69)entor(cid:56)es
Inventories are valued at the lower of cost and net reali(cid:75)able value.
62
Toromont Industries Ltd. Annual Report 2022
other
activities
create
operating
for
the
measured
are
the
liabilities. If
ference is
purpose
allocated to
the
goodwill
determining
on
the
the
ts.
expected
within
wor(cid:60)
refrigeration
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Cost of equipment, repair and distribution parts and direct materials include purchase cost and costs incurred
in bringing each product to its present location and condition. (cid:43)eriali(cid:75)ed inventory is determined on a
specific-item basis. (cid:38)on(cid:10)seriali(cid:75)ed inventory is determined based on a weighted average actual cost.
Cost of wor(cid:60)(cid:10)in(cid:10)process includes cost of direct materials, direct labour and an allocation of overhead costs,
based on normal operating capacity.
Cost of wor(cid:60)(cid:10)in(cid:10)process (contracts) are costs specifically chargeable to customers that are deferred in
inventories and are probable of recovery.
Cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recogni(cid:75)ed in
other comprehensive income (loss) ((cid:2)(cid:39)CI(cid:2)), in respect of the purchase of inventory.
(cid:38)et reali(cid:75)able value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to ma(cid:60)e the sale.
Pro(cid:63)erty, P(cid:59)ant and E(cid:64)(cid:68)(cid:56)(cid:63)ment
(cid:40)roperty, plant and equipment are recorded at cost, net of accumulated depreciation and accumulated
impairment losses, if any.
Depreciation is recogni(cid:75)ed principally on a straight(cid:10)line basis over the estimated useful lives of the assets.
Estimated useful lives range from (cid:15)(cid:13) to 3(cid:13) years for buildings, 3 to 1(cid:13) years for equipment and (cid:15)(cid:13) years for
power generation assets. Leasehold improvements are amorti(cid:75)ed on a straight(cid:10)line basis over the term of the
lease. Land is not depreciated.
The assets(cid:6) residual values, useful lives and methods of depreciation are reviewed at each financial year(cid:10)end
and adjusted prospectively, if appropriate.
original
to
Renta(cid:59) E(cid:64)(cid:68)(cid:56)(cid:63)ment
(cid:42)ental equipment is recorded at cost, net of accumulated depreciation and any impairment losses. Cost is
determined on a specific(cid:10)item basis. (cid:42)ental equipment is depreciated to its estimated residual value over its
estimated useful life on a straight(cid:10)line basis, which ranges from 1 to 1(cid:13) years.
The assets(cid:6) residual values, useful lives and methods of depreciation are reviewed at each financial year-end
and adjusted prospectively, if appropriate.
Intan(cid:54)(cid:56)b(cid:59)e Assets
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired as
part of a business acquisition are initially recorded at the acquisition date fair value. (cid:30)ollowing initial
recognition, intangible assets are carried at cost less any accumulated amorti(cid:75)ation and accumulated
impairment losses, as applicable.
Intangible assets with a finite useful life are amorti(cid:75)ed over their estimated useful lives and are assessed for
impairment whenever there is an indication that the intangible assets may be impaired. The amorti(cid:75)ation period
and the amorti(cid:75)ation method for intangible assets with finite useful lives are reviewed at least at the end of
each reporting period.
Consolidated Financial Statements
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:25)morti(cid:75)ation is recorded as follows(cid:23)
(cid:80) Customer relationships (cid:77) (cid:21) years, straight(cid:10)line
(cid:80) E(cid:42)(cid:40) system (cid:77) (cid:18) years, straight(cid:10)line
(cid:80) Customer order bac(cid:60)log (cid:77) specific basis
(cid:80) (cid:40)atents and licenses (cid:77) remaining life, straight(cid:10)line
Intangible assets with indefinite useful lives are not amorti(cid:75)ed, but are tested for impairment annually or when
indicators of impairment are present. Distribution networ(cid:60)s are considered to have an indefinite life based on
the terms of the distribution rights contracts. The assessment of indefinite life is reviewed annually to determine
whether the indefinite life continues to be supportable.
Pro(cid:69)(cid:56)s(cid:56)ons
(cid:40)rovisions are recogni(cid:75)ed when the Company has a present obligation, legal or constructive, as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
(cid:40)rovisions for warranty costs are recogni(cid:75)ed when the product is sold or service provided. Initial recognition is
based on historical experience.
(cid:29)o(cid:69)ernment (cid:29)rants
Government grants are recogni(cid:75)ed when there is reasonable assurance that the grant will be received and all
conditions associated with the grant are met. Claims under income(cid:10)related government grants are reported in
the consolidated statements of income as other income included in selling and administrative expenses.
Government grants receivable are recorded in accounts receivable on the consolidated statements of financial
position.
F(cid:56)nanc(cid:56)a(cid:59) Instr(cid:68)ments
(cid:30)inancial assets and liabilities are recogni(cid:75)ed when the entity becomes a party to the contractual provisions of
the instrument. The Company determines the classification of its financial assets and liabilities at initial
recognition or when reclassified on the consolidated statements of financial position. (cid:30)inancial assets and
liabilities are classified in the following measurement categories(cid:23) (i) amorti(cid:75)ed cost(cid:24) (ii) fair value through other
comprehensive income (loss)(cid:24) or (iii) fair value through profit or loss ((cid:2)(cid:30)(cid:46)T(cid:40)L(cid:2)). Initially, all financial assets and
liabilities are recogni(cid:75)ed at fair value, net of transaction costs, except for financial instruments classified as
(cid:30)(cid:46)T(cid:40)L, where transaction costs are recogni(cid:75)ed immediately in profit or loss. (cid:42)egular-way trades of financial
assets and liabilities are recogni(cid:75)ed on the trade date.
(cid:30)inancial (cid:25)ssets
(cid:43)ubsequent measurement of financial assets depends on the classification. The Company has made the
following classifications(cid:23)
(cid:80) Cash and cash equivalents, accounts receivable, unbilled receivables, supplier claims receivable, and
installment and other notes receivable are classified as amorti(cid:75)ed cost and measured using the
effective interest rate method less any impairment losses.
(cid:80) (cid:25)ccounts receivable comprises amounts due from customers for goods or services transferred in the
ordinary course of business and non(cid:10)trade accounts. (cid:45)nbilled receivables relate to the Company(cid:6)s right
to consideration for goods or services transferred to a customer but not yet billed as at the reporting
64
Toromont Industries Ltd. Annual Report 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
date. Installment notes receivable represents amounts due from customers relating to the financing of
equipment and parts and services sold.
The Company assesses, as at each consolidated statement of financial position date, whether there is any
objective evidence that a financial asset or a group of financial assets is impaired. The carrying amount of
accounts receivable is reduced through the use of provisions for doubtful accounts.
(cid:30)inancial Liabilities
(cid:25)ll financial liabilities are subsequently measured at amorti(cid:75)ed cost using the effective interest rate method or
at (cid:30)(cid:46)T(cid:40)L. (cid:30)inancial liabilities are classified as (cid:30)(cid:46)T(cid:40)L when the financial liability is(cid:23) (i) contingent consideration
of an acquirer in a business combination(cid:24) (ii) held for trading(cid:24) or (iii) it is designated as (cid:30)(cid:46)T(cid:40)L.
(cid:30)or financial liabilities that are designated as (cid:30)(cid:46)T(cid:40)L, the amount of change in the fair value of the financial
liability that is attributable to changes in the credit ris(cid:60) of that liability is recogni(cid:75)ed in (cid:39)CI, unless the
recognition of the effects of changes in the liability(cid:6)s credit ris(cid:60) in (cid:39)CI would create or enlarge an accounting
mismatch in the consolidated statements of income. The remaining amount of change in the fair value of the
liability is recogni(cid:75)ed in the consolidated statements of income. Changes in fair value attributable to a financial
liability(cid:6)s credit ris(cid:60) that are recogni(cid:75)ed in (cid:39)CI are not subsequently reclassified to the consolidated statements
of income(cid:24) instead, they are transferred to retained earnings upon derecognition of the financial liability.
(cid:30)inancial liabilities that are not(cid:23) (i) contingent consideration of an acquirer in a business combination(cid:24) (ii) held
for trading(cid:24) or (iii) are designated as (cid:30)(cid:46)T(cid:40)L, are subsequently measured at amorti(cid:75)ed cost using the effective
interest rate method.
Derivatives
Derivative assets and liabilities are measured at fair value with changes in fair value being included in profit or
loss, unless they are designated as hedging instruments, in which case changes in fair value are included in
(cid:39)CI.
(cid:30)air (cid:46)alue of (cid:30)inancial Instruments
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments
by valuation technique(cid:23)
(cid:80)
(cid:80)
(cid:80)
Level 1 (cid:77) unadjusted quoted prices in active mar(cid:60)ets for identical assets or liabilities.
Level (cid:15) (cid:77) other techniques for which all inputs that have a significant effect on the recorded fair value
are observable, either directly or indirectly.
Level 3 (cid:77) techniques that use inputs that have a significant effect on the recorded fair value that are not
based on observable mar(cid:60)et data.
Impairment of (cid:30)inancial (cid:25)ssets
(cid:30)inancial assets classified as amorti(cid:75)ed cost are assessed for impairment at the end of each reporting period
and a loss allowance is measured by estimating the lifetime expected credit losses. Certain categories of
financial assets, such as trade receivables, that are considered not to be impaired individually are also
assessed for impairment on a collective basis.
Consolidated Financial Statements
65
when
on
determine
of a
settle
recognition is
all
reported in
expenses.
financial
provisions of
initial
and
other
and
as
ial
the
and
the
the
right
reporting
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:25) financial asset is considered in default when contractual payments are 9(cid:13) days past due. (cid:25) financial asset
may also be considered to be in default if internal or external information indicates that the Company is unli(cid:60)ely
to receive the outstanding contractual amounts in full before ta(cid:60)ing into account any credit enhancements held.
(cid:25) financial asset is written off when there is no reasonable expectation of recovering the contractual cash
flows.
Der(cid:56)(cid:69)at(cid:56)(cid:69)e F(cid:56)nanc(cid:56)a(cid:59) Instr(cid:68)ments and Hed(cid:54)e Acco(cid:68)nt(cid:56)n(cid:54)
Derivative financial arrangements are used to hedge exposure to fluctuations in exchange rates. (cid:43)uch
derivative financial instruments are initially recogni(cid:75)ed at fair value on the date on which a derivative contract is
entered into and are subsequently measured at fair value. Derivatives are carried as financial assets when the
fair value is positive and as financial liabilities when the fair value is negative.
(cid:25)t inception, the Company designates and documents the hedge relationship, including identification of the
transaction and the ris(cid:60) management objectives and strategy for underta(cid:60)ing the hedge. The Company also
documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.
The Company has designated certain derivatives as cash flow hedges. These are hedges of firm commitments
and highly probable forecast transactions. The effective portion of changes in the fair value of derivatives that
are designated as a cash flow hedge is recogni(cid:75)ed in (cid:39)CI. The gain or loss relating to the ineffective portion is
recogni(cid:75)ed immediately in the consolidated statements of income. (cid:25)dditionally(cid:23)
(cid:80)
(cid:80)
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, the
associated gains or losses that were recogni(cid:75)ed in (cid:39)CI are included in the initial cost or other carrying
amount of the asset(cid:24)
(cid:30)or cash flow hedges other than those identified above, amounts accumulated in (cid:39)CI are recycled to
the consolidated statements of income in the period when the hedged item will affect earnings (for
instance, when the forecast sale that is hedged ta(cid:60)es place)(cid:24)
(cid:80) (cid:47)hen a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss in (cid:39)CI remains in (cid:39)CI and is recogni(cid:75)ed when the forecast
transaction is ultimately recogni(cid:75)ed in the consolidated statements of income(cid:24) and
(cid:80) (cid:47)hen a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in (cid:39)CI is immediately recogni(cid:75)ed in the consolidated statements of income.
Im(cid:63)a(cid:56)rment of Non(cid:10)f(cid:56)nanc(cid:56)a(cid:59) Assets
The Company assesses whether goodwill or intangible assets with indefinite lives may be impaired annually
during the fourth quarter, or when indicators of impairment are present. (cid:30)or the purpose of impairment testing,
goodwill arising from acquisitions is allocated to each of the Company(cid:6)s CG(cid:45)s or group of CG(cid:45)s expected to
benefit from the acquisition. The level at which goodwill is allocated represents the lowest level at which
goodwill is monitored for internal management purposes, and is not higher than an operating segment.
Intangible assets with indefinite lives that do not have separate identifiable cash flows are also allocated to
CG(cid:45)s or a group of CG(cid:45)s. (cid:25)ny potential impairment of goodwill or intangible assets is identified by comparing
the recoverable amount of a CG(cid:45) or a group of CG(cid:45)s to its carrying value. The recoverable amount is the
higher of its fair value less costs to sell and its value(cid:10)in(cid:10)use. If the recoverable amount is less than the carrying
amount, then the impairment loss is allocated first to reduce the carrying amount of any goodwill and then to
the other assets pro(cid:10)rata on the basis of the carrying amount of each asset. In determining fair value less costs
to sell, recent mar(cid:60)et transactions are ta(cid:60)en into account, if available. In assessing value(cid:10)in(cid:10)use, the estimated
future cash flows are discounted to their present value using a pre(cid:10)tax discount rate that reflects current mar(cid:60)et
Toromont Industries Ltd. Annual Report 2022
66
1(cid:19)
Toromont Industries Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
assessments of the time value of money and the ris(cid:60)s specific to the asset. Impairment losses are recogni(cid:75)ed
in the consolidated statements of income.
(cid:30)or non(cid:10)financial assets other than goodwill and intangible assets with indefinite lives, an assessment is made
at each reporting date whether there is any indication of impairment, or that previously recogni(cid:75)ed impairment
losses may no longer exist or may have decreased. If such indication exists, the Company estimates the
asset’s recoverable amount. (cid:25)n impairment loss is recogni(cid:75)ed for the amount by which the asset(cid:6)s carrying
amount exceeds its recoverable amount. (cid:25) previously recogni(cid:75)ed impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment
loss was recogni(cid:75)ed. The reversal is limited so that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recogni(cid:75)ed for the asset in prior years. (cid:43)uch reversal is recogni(cid:75)ed in the
consolidated statements of income.
Re(cid:69)en(cid:68)e from Contracts (cid:70)(cid:56)th C(cid:68)stomers
(cid:42)evenue from contracts with customers is recogni(cid:75)ed when control of the goods or services are transferred to
the customer at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for those goods or services.
(cid:80) Sa(cid:39)e (cid:42)(cid:34) (cid:13)(cid:44)(cid:48)ipment (cid:77) (cid:42)evenue is recogni(cid:75)ed when control of the equipment has been transferred to the
customer. This usually occurs when the equipment is delivered or pic(cid:60)ed up by the customer. The
transaction price is documented on the sales invoice and agreed to by the customer. (cid:40)ayment is
generally due at the time of delivery(cid:24) as such, a receivable is recogni(cid:75)ed as the consideration is
unconditional and only the passage of time is required before payment is due. In certain situations,
control transfers to the customer through a bill and hold arrangement when the following criteria are
met(cid:23) (i) there is a substantive reason for the arrangement(cid:24) (ii) the equipment is separately identified as
belonging to the customer(cid:24) (iii) Toromont is no longer able to use the equipment or direct it to another
customer(cid:24) and (iv) the equipment is currently ready for physical transfer to the customer.
(cid:80) Sa(cid:39)e (cid:42)(cid:34) (cid:13)(cid:44)(cid:48)ipment (cid:50)it(cid:36) a (cid:15)(cid:48)arantee(cid:32) (cid:22)esi(cid:32)(cid:48)a(cid:39) (cid:26)a(cid:39)(cid:48)e (cid:42)r (cid:22)ep(cid:48)r(cid:31)(cid:36)ase (cid:11)(cid:42)mmitment (cid:77) The sale of
equipment for which the Company has provided a guarantee to repurchase the equipment at a
predetermined residual value and date is accounted for as an operating lease in accordance with
I(cid:30)(cid:42)(cid:43) 1(cid:19), (cid:18)eases ((cid:2)I(cid:30)(cid:42)(cid:43) 1(cid:19)(cid:2)). (cid:42)evenue is therefore recogni(cid:75)ed over the period extending to the date of
the residual guarantee.
in under
two years. (cid:42)evenue
the design, manufacture,
refrigeration systems, which
(cid:80) Sa(cid:39)e (cid:42)(cid:34) S(cid:52)stems (cid:77) The Company sells systems, including power and energy facilities and industrial and
recreational
installation and
involve
commissioning of longer(cid:10)term projects under the customer(cid:6)s control and typically construction is
completed
the
percentage-of-completion method. This method is normally measured by reference to costs incurred to
date as a percentage of the total estimated costs. (cid:40)ayment terms are usually based on set milestones
outlined in the contract. (cid:40)eriodically(cid:23) (i) amounts are received in advance of the associated contract
wor(cid:60) being performed (cid:77) these amounts are recorded as deferred revenue and contract liabilities(cid:24) and
(ii) revenue is recogni(cid:75)ed without issuing an invoice (cid:77) this entitlement to consideration is recogni(cid:75)ed as
unbilled receivables. (cid:25)ny foreseeable losses on such projects are recogni(cid:75)ed immediately in profit or
loss as identified.
recogni(cid:75)ed progressively based on
is
(cid:80) (cid:13)(cid:44)(cid:48)ipment (cid:22)enta(cid:39)s (cid:77) (cid:42)evenue is accounted for in accordance with I(cid:30)(cid:42)(cid:43) 1(cid:19). (cid:42)evenue is recogni(cid:75)ed on
a straight(cid:10)line basis over the term of the agreement. (cid:40)ayment terms are generally 3(cid:13) days from
invoicing.
(cid:80) (cid:21)r(cid:42)(cid:32)(cid:48)(cid:31)t S(cid:48)pp(cid:42)rt Ser(cid:49)i(cid:31)es (cid:77) (cid:42)evenue from product support services includes the sale of parts and
performance of service wor(cid:60) on equipment. (cid:30)or the sale of parts, revenue is recogni(cid:75)ed when the part
oromont Industries Ltd.
1(cid:20)
Consolidated Financial Statements
67
Toromont Industries Ltd.
asset
unli(cid:60)ely
held.
cash
(cid:43)uch
contract is
the
the
also
that
commitments
that
portion is
he
carrying
to
(for
hedge
forecast
was
annually
testing,
expected to
which
segment.
comparing
to
the
carrying
then to
costs
estimated
mar(cid:60)et
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:80)
is shipped or pic(cid:60)ed up by the customer. (cid:30)or the servicing of equipment, revenue on both the labour
and parts used in performing the wor(cid:60) is recogni(cid:75)ed when the job is completed. (cid:40)ayment terms are
generally 3(cid:13) days from invoicing.
(cid:18)(cid:42)ng(cid:7)term (cid:19)aintenan(cid:31)e (cid:11)(cid:42)ntra(cid:31)ts (cid:77) Long(cid:10)term maintenance contracts generally range from one to five
years and are customer specific. These contracts are sold either separately or bundled together with
the sale of equipment to a customer. These arrangements cover a range of services from regular
maintenance to major repairs. The Company has concluded that these are two separate performance
obligations as each of the promises to transfer equipment and provide services is capable of being
distinct and separately identifiable. If the sales are bundled, the Company allocates a portion of the
transaction price based on the relative stand(cid:10)alone selling price to each performance obligation.
Customers are invoiced on a periodic basis reflecting the terms of the agreement, generally based on
machine hours, with payment terms of 3(cid:13) days from invoicing. These amounts are recogni(cid:75)ed as
deferred revenue and contract liabilities. (cid:42)evenue is recogni(cid:75)ed as wor(cid:60) is performed under the
contract based on standard or contract rates. (cid:42)evenue from maintenance services is recogni(cid:75)ed over
time, using an input method to measure progress towards complete satisfaction of the service.
(cid:80) (cid:13)(cid:51)ten(cid:32)e(cid:32) (cid:27)arrant(cid:52) (cid:77) Extended warranty may be purchased by a customer at time of purchase of a
machine to provide additional warranty coverage beyond the initial one(cid:10)year standard warranty covered
by the supplier. Extended warranty generally covers specified components for a term from three to five
years. Extended warranty is normally invoiced at time of purchase and payment is expected at time of
invoicing. These billings are included in deferred revenue and contract liabilities. The Company
recogni(cid:75)es revenue for extended warranty as wor(cid:60) is performed under the extended warranty contract
using standard rates.
(cid:80) (cid:21)(cid:42)(cid:50)er (cid:15)enerati(cid:42)n (cid:77) The Company owns and operates power generation plants that sell electricity and
thermal power. (cid:42)evenue is recogni(cid:75)ed monthly based on set rates as power is consumed. (cid:40)ayment is
due within 3(cid:13) days of invoicing.
Consideration is given whether there are other promises in a contract with a customer that are separate
performance obligations to which a portion of the transaction price needs to be allocated. In determining the
transaction price for the sale of equipment, variable consideration, the existence of significant financing
components, non(cid:10)cash consideration, and consideration payable to the customer (if any) are considered.
Leases
The Company assesses at contract inception whether a contract is, or contains, a lease, that is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Toromont as Lessee
(cid:25) single recognition and measurement approach is applied for all leases, except for short(cid:10)term leases and
leases of low(cid:10)value assets. (cid:42)ight(cid:10)of(cid:10)use assets representing the right to use the underlying assets and lease
liabilities representing lease payments are recogni(cid:75)ed.
(cid:22)ig(cid:36)t(cid:7)(cid:42)(cid:34)(cid:7)(cid:48)se assets
(cid:42)ight(cid:10)of(cid:10)use assets are recogni(cid:75)ed at the commencement date of the lease (i.e., the date the underlying asset
is available for use) and are measured at cost, less any accumulated depreciation and impairment losses. The
cost of right(cid:10)of(cid:10)use assets includes the amount of lease liabilities recogni(cid:75)ed, initial direct costs incurred, and
lease payments made at or before the commencement date, less any lease incentives received. (cid:45)nless the
Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the
recogni(cid:75)ed right(cid:10)of(cid:10)use assets are depreciated on a straight(cid:10)line basis over the shorter of their estimated useful
Toromont Industries Ltd. Annual Report 2022
68
1(cid:21)
Toromont Industries Ltd.
labour
are
five
with
regular
performance
being
the
obligation.
on
as
the
over
of a
covered
five
time of
Company
contract
and
(cid:40)ayment is
separate
the
financing
contract
and
lease
asset
he
and
the
the
useful
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
life and the lease term, which ranges from 3 to (cid:18) years for vehicles and 1 to 1(cid:18) years for properties.
(cid:42)ight-of-use assets are subject to impairment.
(cid:18)ease (cid:39)ia(cid:30)i(cid:39)ities
(cid:25)t the commencement date of the lease, lease liabilities are recogni(cid:75)ed and measured at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be
paid under residual value guarantees.
The interest rate implicit in the lease is used, if readily determinable, to calculate the present value of lease
payments. If not readily determinable, the Company(cid:6)s incremental borrowing rate at the lease commencement
date is used in the present value calculation. (cid:25)fter the commencement date, the amount of lease liabilities is
reduced by the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the in(cid:10)substance fixed lease payments or a change in
the assessment to purchase the underlying asset.
S(cid:36)(cid:42)rt(cid:7)term (cid:39)eases an(cid:32) (cid:39)eases (cid:42)(cid:34) (cid:39)(cid:42)(cid:50)(cid:7)(cid:49)a(cid:39)(cid:48)e assets
The short(cid:10)term lease recognition exemption is applied to leases that have a lease term of 1(cid:15) months or less
from the commencement date and do not contain a purchase option. The Company also applies the
recognition exemption for leases that are considered low value. Lease payments on short(cid:10)term leases and
leases of low(cid:10)value assets are recogni(cid:75)ed as an expense on a straight(cid:10)line basis over the lease term.
Toromont as Lessor
Leases in which the Company does not transfer substantially all the ris(cid:60)s and rewards incidental to ownership
of an asset are classified as operating leases. (cid:42)ental income arising is recogni(cid:75)ed on a straight(cid:10)line basis over
the lease terms and is included in the consolidated statements of income. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recogni(cid:75)ed over the lease term on the same basis as rental income.
Fore(cid:56)(cid:54)n C(cid:68)rrency Trans(cid:59)at(cid:56)on
The functional and presentation currency of the Company is the Canadian dollar. Each of the Company(cid:6)s
subsidiaries determines its functional currency.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing as at the date
of the transaction or at the average rate for the period when this is a reasonable approximation. (cid:37)onetary
assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of
exchange as at the reporting date. (cid:25)ll differences are ta(cid:60)en directly to profit or loss. (cid:38)on(cid:10)monetary items that
are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the
dates of the initial transactions.
The assets and liabilities of foreign operations (having a functional currency other than the Canadian dollar) are
translated into Canadian dollars at the rate of exchange prevailing at the consolidated statement of financial
position dates and the consolidated statements of income are translated at the average exchange rate for the
period. The exchange differences arising on translation are recogni(cid:75)ed in accumulated other comprehensive
income (loss) in shareholders(cid:6) equity. (cid:39)n disposal of a foreign operation, the deferred cumulative amount
recogni(cid:75)ed in equity is recogni(cid:75)ed in the consolidated statements of income.
oromont Industries Ltd.
19
Consolidated Financial Statements
69
Toromont Industries Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Share(cid:10)based Payment Transact(cid:56)ons
The Company has a stoc(cid:60) option plan, a cash settled Deferred (cid:43)hare (cid:45)nit ((cid:2)D(cid:43)(cid:45)(cid:2)) plan, and a Long Term
Incentive (cid:40)lan with equity settled (cid:40)erformance (cid:43)hare (cid:45)nits ((cid:2)(cid:40)(cid:43)(cid:45)(cid:2)), (cid:42)estricted (cid:43)hare (cid:45)nits ((cid:2)(cid:42)(cid:43)(cid:45)(cid:2)) and(cid:12)or
equity settled D(cid:43)(cid:45)s. The cash settled D(cid:43)(cid:45) plan was closed to new grants(cid:12)elections in (cid:15)(cid:13)(cid:15)(cid:15). (cid:45)nits under such
plans may be awarded to certain employees and directors as part of their compensation pac(cid:60)age for services
performed (excluding options in the case of directors).
St(cid:42)(cid:31)(cid:38) (cid:42)pti(cid:42)ns (cid:77) Expense is based on the fair value of the awards granted determined using the (cid:26)lac(cid:60)-(cid:43)choles
option pricing model and the best estimate of the number of equity instruments that will ultimately vest. (cid:30)or
awards with graded vesting, each tranche is considered to be a separate grant based on its respective vesting
period. The fair value of each tranche is determined separately at the time of grant and is recogni(cid:75)ed as
share-compensation expense, net of estimated forfeitures, over its respective vesting period with a credit to
contributed surplus. (cid:47)hen options are exercised, the proceeds, together with the amount recorded in
contributed surplus, are transferred to share capital.
(cid:21)er(cid:34)(cid:42)rman(cid:31)e S(cid:36)are (cid:25)nits (cid:77) (cid:40)(cid:43)(cid:45)s are awarded at no cost to the recipient and cliff vest over a three(cid:10)year
performance period. (cid:46)esting level is subject to performance condition achievement with respect to relative total
shareholder return performance compared to the T(cid:43)(cid:48) index (a mar(cid:60)et condition) or return on capital employed
(a non(cid:10)mar(cid:60)et condition), and can range from (cid:13)(cid:4) to (cid:15)(cid:13)(cid:13)(cid:4). (cid:40)(cid:43)(cid:45)s are paid out in common shares, or if elected
by the individual at time of grant are transferred to an equity settled D(cid:43)(cid:45) account (see description below).
(cid:25)dditional (cid:40)(cid:43)(cid:45)s are credited to the holder upon each dividend payment made by Toromont.
The fair mar(cid:60)et value of the award is determined at date of grant. The fair value of grants with a mar(cid:60)et
condition are based on the expected payout as of the grant date. The fair value of grants with a non(cid:10)mar(cid:60)et
condition are initially based on the volume(cid:10)weighted average trading price of Toromont(cid:6)s common shares for
five days preceding the date of the grant and the probability of achieving performance conditions at date of
grant. The fair value of awards with non(cid:10)mar(cid:60)et conditions are adjusted over time based on actual performance
and expected payout, while fair value of awards with mar(cid:60)et conditions are not adjusted. (cid:43)hare(cid:10)based
compensation expense is recogni(cid:75)ed over the vesting period with a related credit to contributed surplus.
(cid:22)estri(cid:31)te(cid:32) S(cid:36)are (cid:25)nits (cid:77) (cid:42)(cid:43)(cid:45)s are awarded at no cost to the recipient and cliff vest over a three(cid:10)year
performance period. (cid:42)(cid:43)(cid:45)s are paid out in common shares, or if elected by the individual at time of grant are
transferred to an equity settled D(cid:43)(cid:45) account (see description below). (cid:25)dditional (cid:42)(cid:43)(cid:45)s are credited to the
holder upon each dividend payment made by Toromont.
The fair mar(cid:60)et value of the award is based on the volume(cid:10)weighted average trading price of Toromont(cid:6)s
common shares for five days preceding the date of the grant and expected performance condition payout.
(cid:43)hare(cid:10)based compensation expense is recogni(cid:75)ed over the vesting period with a related credit to contributed
surplus.
(cid:12)e(cid:34)erre(cid:32) S(cid:36)are (cid:25)nits (cid:4)e(cid:44)(cid:48)it(cid:52) sett(cid:39)e(cid:32)(cid:5) (cid:77) Expense is determined based on the fair value of the liability incurred at
each award date. The fair value of the liability is measured by applying quoted mar(cid:60)et prices.
(cid:12)e(cid:34)erre(cid:32) S(cid:36)are (cid:25)nits (cid:4)(cid:31)as(cid:36) sett(cid:39)e(cid:32)(cid:5) (cid:77) Expense is determined based on the fair value of the liability incurred at
each award date. The fair value of the liability is measured by applying quoted mar(cid:60)et prices. Changes in fair
value are recogni(cid:75)ed in the consolidated statements of income in selling and administrative expenses.
70
Toromont Industries Ltd. Annual Report 2022
erm
and(cid:12)or
such
services
vesting
es
or
as
to
in
three(cid:10)year
total
employed
elected
below).
mar(cid:60)et
non(cid:10)mar(cid:60)et
for
of
performance
(cid:43)hare(cid:10)based
three(cid:10)year
are
the
oromont(cid:6)s
payout.
contributed
incurred at
incurred at
fair
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Em(cid:63)(cid:59)oyee F(cid:68)t(cid:68)re (cid:24)enef(cid:56)ts
(cid:30)or defined contribution plans, the pension expense recorded in the consolidated statements of income is the
amount of the contributions the Company is required to pay in accordance with the terms of the plans.
(cid:30)or defined benefit pension plans and other post(cid:10)employment benefit plans, the expense is determined
separately for each plan using the following policies(cid:23)
(cid:80)
The cost of future benefits earned by employees is actuarially determined using the projected unit credit
method prorated on length of service and management(cid:6)s best estimate assumptions using a
measurement date of December 31(cid:24)
(cid:80) (cid:38)et interest is calculated by applying the discount rate to the net defined benefit liability or asset(cid:24)
(cid:80) (cid:40)ast service costs from plan amendments are recogni(cid:75)ed immediately in net earnings to the extent that
the benefits have vested(cid:24) otherwise, they are amorti(cid:75)ed on a straight(cid:10)line basis over the vesting period(cid:24)
and
(cid:80) (cid:25)ctuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and
changes in the effect of the asset ceiling are recogni(cid:75)ed in retained earnings and included in the
consolidated statements of comprehensive income in the period in which they occur.
Defined benefit plan assets or liabilities recogni(cid:75)ed in the consolidated statements of financial position
correspond to the difference between the present value of defined benefit obligations and the fair value of plan
assets. In the case of a surplus funded plan, these assets are limited at the lesser of the actuarial
value determined for accounting purposes or the value of the future economic benefit by way of
surplus refunds or contribution holidays.
Income Ta(cid:71)es
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to
taxation authorities.
Deferred income taxes are provided for using the liability method on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets and liabilities are measured using enacted or substantively enacted income tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is
recogni(cid:75)ed in the consolidated statements of income in the period that includes the date of substantive
enactment. The Company assesses recoverability of deferred tax assets based on the Company’s estimates
and assumptions. Deferred tax assets are recorded at an amount that the Company considers probable to be
reali(cid:75)ed.
Current and deferred income taxes, relating to items recogni(cid:75)ed directly in shareholders(cid:6) equity, are also
recogni(cid:75)ed directly in shareholders(cid:6) equity.
(cid:24)orro(cid:70)(cid:56)n(cid:54) Costs
(cid:26)orrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
ta(cid:60)es a substantial period of time to get ready for its intended use or sale are capitali(cid:75)ed as part of the cost of
the respective asset. (cid:25)ll other borrowing costs are expensed in the period they occur.
Consolidated Financial Statements
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Standards Ado(cid:63)ted (cid:56)n 2022
The Company has not early(cid:10)adopted any standard, interpretation or amendment that has been issued but is
not yet effective. The following standard amendment has been adopted by the Company on (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)(cid:15)(cid:23)
I(cid:25)(cid:43) 3(cid:20), (cid:21)r(cid:42)(cid:49)isi(cid:42)ns(cid:6) (cid:11)(cid:42)ntingent (cid:18)ia(cid:30)i(cid:39)ities an(cid:32) (cid:11)(cid:42)ntingent (cid:10)ssets (cid:77) The I(cid:25)(cid:43)(cid:26) issued amendments to I(cid:25)(cid:43) 3(cid:20) to
clarify costs to be included when determining if a contract is onerous. Costs that relate directly to a contract
can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to
fulfilling contracts.
The implementation of this standard amendment did not have a significant impact on the Company(cid:6)s
consolidated financial statements.
Amendments Iss(cid:68)ed b(cid:68)t Not Effect(cid:56)(cid:69)e
(cid:25) number of amendments to standards have been issued but are not yet effective for the financial year ended
December 31, (cid:15)(cid:13)(cid:15)(cid:15), and accordingly, have not been applied in preparing these consolidated financial
statements. Information on new standards, amendments and interpretations that are expected to be relevant
to the Company(cid:6)s consolidated financial statements is provided below. Certain other new standards,
amendments and interpretations to existing standards may have been issued but are not expected to have a
material impact to the Company(cid:6)s consolidated financial statements. The Company is in the process of
reviewing these amendments to determine the impact on the consolidated financial statements. (cid:26)ased upon
our current facts and circumstances, we do not expect our financial performance or disclosure to be materially
affected by the application of the amended standards.
I(cid:30)(cid:42)(cid:43) 1, (cid:21)resentati(cid:42)n (cid:42)(cid:34) (cid:14)inan(cid:31)ia(cid:39) Statements (cid:77) Effective for annual periods beginning on or after
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)3, the I(cid:25)(cid:43)(cid:26) issued amendments to I(cid:30)(cid:42)(cid:43) 1 to allow a more general approach in classification of
liabilities as current and non(cid:10)current.
I(cid:25)(cid:43) (cid:21), (cid:10)(cid:31)(cid:31)(cid:42)(cid:48)nting (cid:21)(cid:42)(cid:39)i(cid:31)ies(cid:6) (cid:11)(cid:36)anges in (cid:10)(cid:31)(cid:31)(cid:42)(cid:48)nting (cid:13)stimates an(cid:32) (cid:13)rr(cid:42)rs (cid:77) Effective for annual periods
beginning on or after (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)3, these amendments introduce a definition of (cid:6)accounting estimates(cid:6) and
clarify the difference between changes in accounting policies and changes in accounting estimates. These
amendments will impact changes in accounting policies and changes in accounting estimates made after these
amendments are adopted by the Company.
I(cid:25)(cid:43) 1(cid:15), (cid:16)n(cid:31)(cid:42)me (cid:24)a(cid:51)es (cid:77) Effective for annual periods beginning on or after (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)3, these amendments
clarify how companies should account for deferred tax related to assets and liabilities arising from a single
transaction, such as leases and decommissioning obligations. The amendments narrow the scope of the initial
recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary
differences. (cid:25)s a result, companies will need to recogni(cid:75)e a deferred tax asset and a deferred tax liability for
temporary differences arising on initial recognition of the related asset and liability.
3. SI(cid:29)NIFICANT ACCO(cid:43)NTIN(cid:29) ESTIMATES AND ASS(cid:43)MPTIONS
The preparation of financial statements in conformity with I(cid:30)(cid:42)(cid:43) requires management to ma(cid:60)e judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities as at the end of the reporting period,
and the reported amounts of revenue and expenses during the reporting periods. (cid:45)ncertainty about these
72
Toromont Industries Ltd. Annual Report 2022
but is
3(cid:20) to
contract
directly to
Company(cid:6)s
ended
financial
relevant
standards,
have a
of
upon
materially
after
classification of
periods
and
hese
these
amendments
single
initial
temporary
for
judgments,
of
period,
these
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount
of the asset or liability affected in future periods.
(cid:37)anagement reviews its estimates and judgments on an ongoing basis, considering historical experience,
external information and observable conditions where possible, supplemented by internal analysis as required.
(cid:42)evisions to estimates are recogni(cid:75)ed prospectively.
The effects of the C(cid:39)(cid:46)ID(cid:10)19 pandemic have been considered in management’s estimates and judgments
described below. The Company will continue to monitor the impact of the development of the pandemic in
future reporting periods.
The financial statement areas that require significant estimates and judgments are as follows(cid:23)
Sa(cid:59)e of Po(cid:70)er and Ener(cid:54)y Systems and Refr(cid:56)(cid:54)erat(cid:56)on Pac(cid:58)a(cid:54)es
(cid:42)evenue is recogni(cid:75)ed over time for the sale of power and energy systems and refrigeration pac(cid:60)ages.
(cid:26)ecause of the control transferring over time, revenue is recogni(cid:75)ed based on the extent of progress towards
completion of the performance obligation. The selection of the method to measure progress towards
completion requires judgment and is based on the nature of the products and services to be provided.
The percentage(cid:10)of(cid:10)completion method is used as the measure of progress for these contracts as it best depicts
the transfer of assets to the customer, which occurs as costs are incurred on the contracts. (cid:45)nder the
percentage(cid:10)of(cid:10)completion method, the extent of progress towards completion is measured based on the ratio
of costs incurred to date to the total estimated costs of completion of the performance obligation. (cid:42)evenue is
recorded proportionally as costs are incurred. Costs to fulfill include labour, materials and subcontractors(cid:6)
costs, other direct costs, and an allocation of indirect costs.
This method requires management to ma(cid:60)e a number of estimates and assumptions about the expected
profitability of the contract. These factors are routinely reviewed as part of the project management process.
Lon(cid:54)(cid:10)term Ma(cid:56)ntenance Contracts
These contracts typically have fixed prices based on machine hours, with provisions for inflationary and
exchange adjustments. (cid:42)evenue is recogni(cid:75)ed as wor(cid:60) is performed under the contract based on standard or
contract rates. (cid:42)evenue from maintenance services is recogni(cid:75)ed over time, using an input method to measure
progress towards complete satisfaction of the service.
(cid:37)anagement ma(cid:60)es a number of estimates and assumptions surrounding machine usage, machine
performance, future parts and labour pricing, manufacturers(cid:6) warranty coverage and other detailed factors.
These factors are routinely reviewed as part of the project management process.
Pro(cid:63)erty, P(cid:59)ant and E(cid:64)(cid:68)(cid:56)(cid:63)ment and Renta(cid:59) E(cid:64)(cid:68)(cid:56)(cid:63)ment
Depreciation is calculated based on the estimated useful lives of the assets and estimated residual values.
Depreciation expense is sensitive to the estimated service lives and residual values determined for each type
of asset. (cid:25)ctual lives and residual values may vary depending on a number of factors including technological
innovation, product life cycles and physical condition of the asset, prospective use, and maintenance
programs.
Consolidated Financial Statements
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Im(cid:63)a(cid:56)rment of Non(cid:10)f(cid:56)nanc(cid:56)a(cid:59) Assets
(cid:34)udgment is used in identifying an appropriate discount rate and growth rate for the calculations required in
assessing potential impairment of non(cid:10)financial assets. (cid:34)udgment is also used in identifying the CG(cid:45)s to which
the intangible assets should be allocated, and the CG(cid:45) or group of CG(cid:45)s at which goodwill is monitored for
internal management purposes. The impairment calculations require the use of estimates related to the future
operating results and cash(cid:10)generating ability of the assets.
Income Ta(cid:71)es
Estimates and judgments are made for uncertainties that exist with respect to the interpretation of complex tax
regulations, changes in tax laws, and the amount and timing of future taxable income.
In(cid:69)entor(cid:56)es
(cid:37)anagement is required to ma(cid:60)e an assessment of the net reali(cid:75)able value of inventory at each reporting
period. These estimates are determined on the basis of age, stoc(cid:60) levels, current mar(cid:60)et prices, current
economic trends and past experience in the measurement of net reali(cid:75)able value.
A(cid:59)(cid:59)o(cid:70)ance for Do(cid:68)btf(cid:68)(cid:59) Acco(cid:68)nts
The Company ma(cid:60)es estimates for allowances that represent its estimate of potential losses in respect of trade
receivables. The main components of this allowance are a specific loss component that relates to individually
significant exposures, and a collective loss component established for groups of similar assets in respect of
losses that may have been incurred but not yet specifically identified. The Company(cid:6)s allowance is determined
by historical experiences, and considers factors including the aging of the balances, the customer(cid:6)s
creditworthiness, current economic conditions, expectation of ban(cid:60)ruptcies and the economic volatility in the
mar(cid:60)ets(cid:12)locations of customers. The current economic environment has increased the measurement
uncertainty with respect to the determination of the allowance for doubtful accounts.
Share(cid:10)based Com(cid:63)ensat(cid:56)on
The models used to determine the fair value of share(cid:10)based payments requires various estimates relating to
volatility, interest rates, dividend yields, expected life of the options granted and, in the case of (cid:40)(cid:43)(cid:45)s, expected
performance. (cid:30)air value inputs are subject to mar(cid:60)et factors as well as internal estimates. The Company
considers historic trends together with any new information to determine the best estimate of fair value at the
date of grant. (cid:43)eparate from the fair value calculation, the Company is required to estimate the expected
forfeiture rate of equity(cid:10)settled share-based payments.
Post(cid:10)em(cid:63)(cid:59)oyment (cid:24)enef(cid:56)t P(cid:59)ans
The Company has defined benefit pension plans and other post(cid:10)employment benefit plans that provide certain
benefits to its employees. (cid:25)ctuarial valuations of these plans are based on assumptions, which include
discount rates, retail price inflation, mortality rates, employee turnover and salary escalation rates. (cid:34)udgment is
exercised in setting these assumptions. These assumptions impact the measurement of the net employee
benefit obligation, funding levels, the net benefit cost and the actuarial gains and losses recogni(cid:75)ed in (cid:39)CI.
74
Toromont Industries Ltd. Annual Report 2022
required in
which
for
future
tax
reporting
current
trade
individually
of
determined
customer(cid:6)s
the
measurement
relating to
expected
Company
the
expected
certain
include
(cid:34)udgment is
employee
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Leases
The lease term is determined as the non(cid:10)cancellable term of the lease, together with any periods covered by
an option to extend the lease if it is reasonably certain to be exercised.
The Company applies judgment in evaluating whether it is reasonably certain to exercise the option to renew.
(cid:25)ll relevant factors that create an economic incentive for it to exercise the renewal are considered. (cid:25)fter the
commencement date, the lease term is reassessed if there is a significant event or change in circumstances
that is within the Company(cid:6)s control and affects its ability to exercise (or not to exercise) the option to renew.
If the Company cannot readily determine the interest rate implicit in the lease, the incremental borrowing rate
((cid:2)I(cid:26)(cid:42)(cid:2)) is used to measure lease liabilities. The I(cid:26)(cid:42) is a rate of interest that the Company would have to pay to
borrow funds, over a similar term and with similar security, in order to obtain an asset of similar value to the
right(cid:10)of(cid:10)use asset in a similar economic environment. The Company estimates the I(cid:26)(cid:42) using observable
mar(cid:60)et interest rates and adjusts for entity(cid:10)specific estimates, such as credit rating.
(cid:16). ACCO(cid:43)NTS RECEI(cid:44)A(cid:24)LE
Trade receivables
(cid:18)ess(cid:9) (cid:10)(cid:39)(cid:39)(cid:42)(cid:50)an(cid:31)e (cid:34)(cid:42)r (cid:32)(cid:42)(cid:48)(cid:30)t(cid:34)(cid:48)(cid:39) a(cid:31)(cid:31)(cid:42)(cid:48)nts
Trade receivables, net
(cid:45)nbilled receivables
(cid:39)ther receivables
The aging of gross trade receivables was as follows(cid:23)
Current to 9(cid:13) days
(cid:39)ver 9(cid:13) days
Trade receivables
2022
(cid:17)(cid:17)6,2(cid:20)1 $
(cid:7)2(cid:17),(cid:17)(cid:16)0(cid:8)
(cid:17)30,(cid:19)(cid:16)1
30,(cid:19)3(cid:20)
1(cid:20),203
(cid:17)(cid:19)(cid:21),6(cid:20)2 $
(cid:15)(cid:13)(cid:15)1
4(cid:13)9,(cid:15)(cid:15)(cid:15)
((cid:15)(cid:13),31(cid:18))
3(cid:21)(cid:21),9(cid:13)(cid:20)
49,(cid:18)1(cid:19)
13,(cid:18)(cid:15)1
4(cid:18)1,944
2022
(cid:17)22,(cid:19)(cid:20)(cid:16) $
33,(cid:16)(cid:21)(cid:19)
(cid:17)(cid:17)6,2(cid:20)1 $
(cid:15)(cid:13)(cid:15)1
3(cid:21)3,(cid:21)99
(cid:15)(cid:18),3(cid:15)3
4(cid:13)9,(cid:15)(cid:15)(cid:15)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
The movement in the Company(cid:6)s allowance for doubtful accounts was as follows(cid:23)
(cid:26)alance, (cid:34)anuary 1
(cid:40)rovisions and revisions, net
(cid:26)alance, December 31
The movement in the Company(cid:6)s unbilled receivables was as follows(cid:23)
(cid:26)alance, (cid:34)anuary 1
(cid:25)mounts received or recognised in revenue
(cid:25)dditions
(cid:26)alance, December 31
2022
20,31(cid:17) $
(cid:17),22(cid:17)
2(cid:17),(cid:17)(cid:16)0 $
2022
(cid:16)(cid:21),(cid:17)16 $
(cid:7)3(cid:20),162(cid:8)
1(cid:21),3(cid:20)(cid:16)
30,(cid:19)3(cid:20) $
(cid:15)(cid:13)(cid:15)1
(cid:15)(cid:13),(cid:19)(cid:19)1
(34(cid:19))
(cid:15)(cid:13),31(cid:18)
(cid:15)(cid:13)(cid:15)1
(cid:18)3,(cid:19)(cid:20)1
((cid:15)(cid:15),99(cid:20))
1(cid:21),(cid:21)4(cid:15)
49,(cid:18)1(cid:19)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Consolidated Financial Statements
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:17). IN(cid:44)ENTORIES
Equipment
(cid:42)epair and distribution parts
Direct materials
(cid:47)or(cid:60)(cid:10)in(cid:10)process
(cid:47)or(cid:60)(cid:10)in(cid:10)process (contracts)
2022
(cid:17)6(cid:17),0(cid:19)3 $
333,(cid:21)1(cid:16)
6,(cid:20)(cid:20)(cid:19)
(cid:20)6,(cid:17)(cid:17)6
33,32(cid:21)
1,02(cid:17),(cid:19)(cid:17)(cid:21) $
(cid:3)
(cid:3)
(cid:15)(cid:13)(cid:15)1
4(cid:13)3,1(cid:13)(cid:18)
(cid:15)(cid:15)3,(cid:13)(cid:18)9
(cid:19),(cid:13)3(cid:18)
(cid:19)(cid:21),943
19,(cid:15)(cid:20)9
(cid:20)(cid:15)(cid:13),4(cid:15)1
The amount of inventory recogni(cid:75)ed as an expense in cost of goods sold (accounted for other than by the
percentage(cid:10)of(cid:10)completion method) during (cid:15)(cid:13)(cid:15)(cid:15) was $(cid:15).(cid:19) billion ((cid:15)(cid:13)(cid:15)1 (cid:77) $(cid:15).4 billion). In (cid:15)(cid:13)(cid:15)(cid:15), cost of goods
sold included inventory write(cid:10)downs pertaining to obsolescence and aging, net of reversal of write(cid:10)downs, of
$1(cid:18).(cid:19) million ((cid:15)(cid:13)(cid:15)1 (cid:77) $4.(cid:19) million).
6. PROPERT(cid:47), PLANT AND E(cid:39)(cid:43)IPMENT AND RENTAL E(cid:39)(cid:43)IPMENT
Pro(cid:63)erty, P(cid:59)ant and E(cid:64)(cid:68)(cid:56)(cid:63)ment
Land
(cid:24)(cid:68)(cid:56)(cid:59)d(cid:56)n(cid:54)s
E(cid:64)(cid:68)(cid:56)(cid:63)ment
Po(cid:70)er
(cid:29)enerat(cid:56)on
Tota(cid:59)
Renta(cid:59)
E(cid:64)(cid:68)(cid:56)(cid:63)ment
Cost
(cid:32)an(cid:68)ary 1, 2022
(cid:25)dditions
Disposals
(cid:30)oreign currency translation adjustments
December 31, 2022
(cid:3)
1(cid:19)3,0(cid:20)3 (cid:3)
(cid:21),319
(4,313)
1(cid:13)
31(cid:17),0(cid:17)(cid:17) (cid:3)
14,1(cid:19)(cid:13)
((cid:15),33(cid:15))
1(cid:21)4
2(cid:19)2,(cid:20)3(cid:21) (cid:3)
4(cid:21),44(cid:20)
((cid:20),(cid:18)49)
4(cid:20)(cid:20)
3(cid:21),(cid:21)(cid:16)(cid:16) (cid:3)
1(cid:18)(cid:13)
(cid:78)
(cid:78)
(cid:3)
1(cid:19)(cid:19),0(cid:21)(cid:21) (cid:3)
32(cid:19),06(cid:19) (cid:3)
31(cid:16),21(cid:16) (cid:3)
(cid:16)0,0(cid:21)(cid:16) (cid:3)
(cid:20)00,(cid:21)21 (cid:3)
(cid:20)1,(cid:13)(cid:20)(cid:19)
(14,194)
(cid:19)(cid:20)1
(cid:21)6(cid:21),(cid:20)(cid:16)1
(cid:15)14,(cid:19)93
((cid:18)1,4(cid:18)4)
(cid:78)
(cid:20)(cid:17)(cid:20),(cid:16)(cid:19)(cid:16) (cid:3) 1,133,0(cid:20)0
Acc(cid:68)m(cid:68)(cid:59)ated de(cid:63)rec(cid:56)at(cid:56)on
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)(cid:15)
Depreciation expense
Depreciation of disposals
(cid:30)oreign currency translation adjustments
December 31, 2022
Net boo(cid:58) (cid:69)a(cid:59)(cid:68)e (cid:77) December 31, 2022
(cid:3)
(cid:3)
(cid:3)
(cid:75) (cid:3)
(cid:78)
(cid:78)
(cid:78)
(cid:75) (cid:3)
12(cid:17),321 (cid:3)
13,43(cid:18)
(4(cid:20)(cid:18))
41
1(cid:20)(cid:20),(cid:19)(cid:17)2 (cid:3)
3(cid:13),4(cid:20)(cid:15)
((cid:20),(cid:15)4(cid:20))
3(cid:19)(cid:21)
36,023 (cid:3)
1,1(cid:19)(cid:13)
(cid:78)
(cid:78)
3(cid:17)0,0(cid:21)6 (cid:3)
4(cid:18),(cid:13)(cid:19)(cid:20)
((cid:20),(cid:20)(cid:15)(cid:15))
4(cid:13)9
13(cid:20),322 (cid:3)
212,3(cid:16)(cid:17) (cid:3)
3(cid:19),1(cid:20)3 (cid:3)
3(cid:20)(cid:19),(cid:20)(cid:17)0 (cid:3)
(cid:16)(cid:16)(cid:16),320
1(cid:13)(cid:18),3(cid:21)(cid:18)
(3(cid:15),914)
(cid:78)
(cid:17)16,(cid:19)(cid:21)1
1(cid:19)(cid:19),0(cid:21)(cid:21) (cid:3)
1(cid:20)(cid:20),(cid:19)(cid:16)(cid:17) (cid:3)
101,(cid:20)6(cid:21) (cid:3)
2,(cid:21)11 (cid:3)
(cid:16)(cid:19)0,62(cid:16) (cid:3)
616,2(cid:20)(cid:21)
76
Toromont Industries Ltd. Annual Report 2022
(cid:15)(cid:13)(cid:15)1
4(cid:13)3,1(cid:13)(cid:18)
(cid:15)(cid:15)3,(cid:13)(cid:18)9
(cid:19),(cid:13)3(cid:18)
(cid:19)(cid:21),943
19,(cid:15)(cid:20)9
(cid:20)(cid:15)(cid:13),4(cid:15)1
the
goods
write(cid:10)downs, of
(cid:21)6(cid:21),(cid:20)(cid:16)1
(cid:15)14,(cid:19)93
((cid:18)1,4(cid:18)4)
(cid:78)
1,133,0(cid:20)0
(cid:16)(cid:16)(cid:16),320
1(cid:13)(cid:18),3(cid:21)(cid:18)
(3(cid:15),914)
(cid:78)
(cid:17)16,(cid:19)(cid:21)1
616,2(cid:20)(cid:21)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Pro(cid:63)erty, P(cid:59)ant and E(cid:64)(cid:68)(cid:56)(cid:63)ment
Land
(cid:24)(cid:68)(cid:56)(cid:59)d(cid:56)n(cid:54)s
E(cid:64)(cid:68)(cid:56)(cid:63)ment
Po(cid:70)er
(cid:29)enerat(cid:56)on
Tota(cid:59)
Renta(cid:59)
E(cid:64)(cid:68)(cid:56)(cid:63)ment
Cost
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
(cid:25)dditions
Disposals
(cid:30)oreign currency translation adjustments
December 31, (cid:15)(cid:13)(cid:15)1
$
1(cid:18)(cid:18),33(cid:15) $
1(cid:21),(cid:13)99
(34(cid:21))
(cid:78)
(cid:15)9(cid:20),(cid:15)(cid:19)(cid:19) $
19,(cid:21)49
((cid:15),(cid:13)4(cid:21))
(1(cid:15))
(cid:15)4(cid:18),(cid:13)(cid:15)(cid:18) $
33,(cid:20)(cid:15)(cid:13)
((cid:18),(cid:21)(cid:20)1)
(3(cid:18))
39,(cid:19)(cid:21)(cid:15) $
(cid:15)(cid:19)(cid:15)
(cid:78)
(cid:78)
(cid:20)3(cid:20),3(cid:13)(cid:18) $
(cid:20)1,93(cid:13)
((cid:21),(cid:15)(cid:19)(cid:20))
(4(cid:20))
$
1(cid:20)3,(cid:13)(cid:21)3 $
31(cid:18),(cid:13)(cid:18)(cid:18) $
(cid:15)(cid:20)(cid:15),(cid:21)39 $
39,944 $
(cid:21)(cid:13)(cid:13),9(cid:15)1 $
93(cid:15),9(cid:20)9
11(cid:20),(cid:20)(cid:18)9
((cid:21)(cid:13),(cid:21)9(cid:20))
(cid:78)
9(cid:19)9,(cid:21)41
(cid:25)ccumulated depreciation
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
Depreciation
Disposals
(cid:30)oreign currency translation adjustments
December 31, (cid:15)(cid:13)(cid:15)1
(cid:38)et boo(cid:60) value (cid:77) December 31, (cid:15)(cid:13)(cid:15)1
$
$
$
(cid:78) $
(cid:78)
(cid:78)
(cid:78)
(cid:78) $
114,(cid:15)(cid:15)(cid:19) $
13,(cid:13)(cid:18)4
(1,9(cid:18)(cid:18))
(4)
1(cid:19)(cid:18),4(cid:13)4 $
(cid:15)(cid:21),91(cid:20)
((cid:18),(cid:18)41)
((cid:15)(cid:21))
34,393 $
1,(cid:19)3(cid:13)
(cid:78)
(cid:78)
314,(cid:13)(cid:15)3 $
43,(cid:19)(cid:13)1
((cid:20),49(cid:19))
(3(cid:15))
1(cid:15)(cid:18),3(cid:15)1 $
1(cid:21)(cid:21),(cid:20)(cid:18)(cid:15) $
3(cid:19),(cid:13)(cid:15)3 $
3(cid:18)(cid:13),(cid:13)9(cid:19) $
393,(cid:18)(cid:19)(cid:20)
1(cid:13)(cid:13),(cid:19)4(cid:20)
(49,(cid:21)94)
(cid:78)
444,3(cid:15)(cid:13)
1(cid:20)3,(cid:13)(cid:21)3 $
1(cid:21)9,(cid:20)34 $
(cid:21)4,(cid:13)(cid:21)(cid:20) $
3,9(cid:15)1 $
4(cid:18)(cid:13),(cid:21)(cid:15)(cid:18) $
(cid:18)(cid:15)(cid:18),(cid:18)(cid:15)1
During (cid:15)(cid:13)(cid:15)(cid:15), depreciation expense of $13(cid:15).(cid:18) million was charged to cost of goods sold ((cid:15)(cid:13)(cid:15)1 (cid:77) $1(cid:15)(cid:19).4 million)
and $1(cid:21).(cid:13) million was charged to selling and administrative expenses ((cid:15)(cid:13)(cid:15)1 (cid:77) $1(cid:20).(cid:21) million).
(cid:19). OTHER ASSETS AND LEASE LIA(cid:24)ILITIES
(cid:42)ight(cid:10)of(cid:10)use assets
(cid:40)ost(cid:10)employment obligations surplus (note (cid:15)(cid:13))
Equipment sold with guaranteed residual values
(cid:39)ther
Other assets
R(cid:56)(cid:54)ht(cid:10)of(cid:10)(cid:68)se Assets and Lease L(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
(cid:3)
(cid:3)
2022
22,(cid:21)10 $
2(cid:17),0(cid:20)(cid:20)
1,23(cid:19)
3,2(cid:21)2
(cid:17)2,(cid:17)2(cid:19) $
(cid:15)(cid:13)(cid:15)1
1(cid:21),(cid:20)(cid:18)(cid:15)
(cid:78)
1,(cid:21)(cid:18)(cid:20)
3,1(cid:15)(cid:19)
(cid:15)3,(cid:20)3(cid:18)
(cid:25)ctivity within right(cid:10)of(cid:10)use assets and lease liabilities during the year was as follows(cid:23)
(cid:32)an(cid:68)ary 1, 2022
(cid:25)dditions and remeasurements
Depreciation
Disposals and retirements
(cid:30)oreign currency translation adjustments
(cid:40)ayments
December 31, 2022
Pro(cid:63)ert(cid:56)es
R(cid:56)(cid:54)ht(cid:10)of(cid:10)(cid:43)se Assets
(cid:44)eh(cid:56)c(cid:59)es
Tota(cid:59)
Lease
L(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
(cid:3)
(cid:3)
13,(cid:17)6(cid:17) (cid:3)
13,(cid:17)2(cid:20)
(cid:7)6,(cid:16)(cid:19)(cid:20)(cid:8)
(cid:7)(cid:20)(cid:16)(cid:8)
2(cid:20)
(cid:75)
20,(cid:17)(cid:17)(cid:21) (cid:3)
(cid:17),1(cid:20)(cid:19) (cid:3)
(cid:7)63(cid:8)
(cid:7)2,(cid:19)2(cid:17)(cid:8)
(cid:7)(cid:16)(cid:20)(cid:8)
(cid:75)
(cid:75)
2,3(cid:17)1 (cid:3)
1(cid:20),(cid:19)(cid:17)2 (cid:3)
13,(cid:16)6(cid:17)
(cid:7)(cid:21),203(cid:8)
(cid:7)132(cid:8)
2(cid:20)
(cid:75)
22,(cid:21)10 (cid:3)
1(cid:21),613
13,(cid:16)6(cid:17)
(cid:75)
(cid:7)1(cid:16)6(cid:8)
2(cid:20)
(cid:7)(cid:21),0(cid:19)(cid:21)(cid:8)
23,(cid:20)(cid:20)1
Consolidated Financial Statements
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
(cid:25)dditions and remeasurements
Depreciation
Disposals and retirements
(cid:30)oreign currency translation adjustments
(cid:40)ayments
December 31, (cid:15)(cid:13)(cid:15)1
Pro(cid:63)ert(cid:56)es
R(cid:56)(cid:54)ht(cid:10)of(cid:10)(cid:43)se Assets
(cid:44)eh(cid:56)c(cid:59)es
Tota(cid:59)
Lease
L(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
$
$
1(cid:18),(cid:15)(cid:20)(cid:21) $
4,3(cid:20)(cid:21)
((cid:18),(cid:21)(cid:13)3)
((cid:15)(cid:21)(cid:18))
(3)
(cid:78)
13,(cid:18)(cid:19)(cid:18) $
9,(cid:19)(cid:21)9 $
((cid:15)(cid:20)(cid:19))
(4,1(cid:21)9)
(3(cid:20))
(cid:78)
(cid:78)
(cid:18),1(cid:21)(cid:20) $
(cid:15)4,9(cid:19)(cid:20) $
4,1(cid:13)(cid:15)
(9,99(cid:15))
(3(cid:15)(cid:15))
(3)
(cid:78)
1(cid:21),(cid:20)(cid:18)(cid:15) $
(cid:15)(cid:18),(cid:20)1(cid:19)
4,1(cid:13)(cid:15)
(cid:78)
(3(cid:15)(cid:15))
(3)
(9,(cid:21)(cid:21)(cid:13))
19,(cid:19)13
The current portion of lease liabilities as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) of $(cid:20).(cid:20) million ((cid:15)(cid:13)(cid:15)1 (cid:77) $(cid:20).(cid:21) million) is included
in accounts payable and accrued liabilities on the consolidated statements of financial position.
The following amounts were recogni(cid:75)ed in the consolidated statements of income during the year(cid:23)
Depreciation expense of right(cid:10)of(cid:10)use assets
Interest expense on lease liabilities
Expense relating to short(cid:10)term leases and leases of low(cid:10)value assets
Cash outflows for leases in (cid:15)(cid:13)(cid:15)(cid:15) were $9.1 million ((cid:15)(cid:13)(cid:15)1 (cid:77) $9.9 million).
The future cash outflows relating to leases are disclosed in note (cid:15)3.
(cid:20). (cid:29)OOD(cid:45)ILL AND INTAN(cid:29)I(cid:24)LE ASSETS
(cid:3)
(cid:3)
2022
(cid:21),203 $
6(cid:17)1
2(cid:17)2
10,106 $
(cid:15)(cid:13)(cid:15)1
9,99(cid:15)
(cid:19)(cid:19)(cid:15)
194
1(cid:13),(cid:21)4(cid:21)
Patents
and
L(cid:56)censes
C(cid:68)stomer
Order
(cid:24)ac(cid:58)(cid:59)o(cid:54)
ERP
System
C(cid:68)stomer
Re(cid:59)at(cid:56)onsh(cid:56)(cid:63)s
D(cid:56)str(cid:56)b(cid:68)t(cid:56)on
Net(cid:70)or(cid:58)s
(cid:29)ood(cid:70)(cid:56)(cid:59)(cid:59)
Tota(cid:59)
Cost
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
December 31, (cid:15)(cid:13)(cid:15)1
Disposal
December 31, 2022
Acc(cid:68)m(cid:68)(cid:59)ated amort(cid:56)(cid:73)at(cid:56)on
(cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
(cid:25)morti(cid:75)ation
December 31, (cid:15)(cid:13)(cid:15)1
(cid:25)morti(cid:75)ation
(cid:25)morti(cid:75)ation of disposal
December 31, 2022
Net boo(cid:58) (cid:69)a(cid:59)(cid:68)e
December 31, (cid:15)(cid:13)(cid:15)1
December 31, 2022
$
$
(cid:3)
$
$
(cid:3)
$
(cid:3)
(cid:18)(cid:13)(cid:13) $
(cid:18)(cid:13)(cid:13) $
(cid:78)
(cid:17)00 (cid:3)
(cid:21),(cid:19)91 $
(cid:21),(cid:19)91 $
(cid:78)
(cid:20),6(cid:21)1 (cid:3)
(cid:18),(cid:13)(cid:13)(cid:13) $
(cid:18),(cid:13)(cid:13)(cid:13) $
((cid:18),(cid:13)(cid:13)(cid:13))
1(cid:18),13(cid:20) $
1(cid:18),13(cid:20) $
3(cid:20)1,(cid:18)(cid:18)1 $
3(cid:20)1,(cid:18)(cid:18)1 $
(cid:78)
(cid:78)
(cid:75) (cid:3)
1(cid:17),13(cid:19) (cid:3)
3(cid:19)1,(cid:17)(cid:17)1 (cid:3)
93,(cid:20)(cid:21)(cid:13) $ 494,(cid:19)(cid:18)9
93,(cid:20)(cid:21)(cid:13) $ 494,(cid:19)(cid:18)9
((cid:18),(cid:13)(cid:13)(cid:13))
(cid:21)3,(cid:19)(cid:20)0 (cid:3) (cid:16)(cid:20)(cid:21),6(cid:17)(cid:21)
(cid:78)
(cid:15)3(cid:19) $
3(cid:13)
(cid:15)(cid:19)(cid:19) $
3(cid:13)
(cid:78)
2(cid:21)6 (cid:3)
(cid:18),9(cid:15)(cid:13) $
(cid:18)(cid:18)(cid:18)
(cid:19),4(cid:20)(cid:18) $
(cid:18)(cid:18)(cid:19)
(cid:78)
(cid:19),031 (cid:3)
4,333 $
(cid:19)(cid:19)(cid:20)
(cid:18),(cid:13)(cid:13)(cid:13) $
(cid:78)
((cid:18),(cid:13)(cid:13)(cid:13))
(cid:75) (cid:3)
(cid:18),9(cid:21)3 $
1,(cid:21)9(cid:15)
(cid:20),(cid:21)(cid:20)(cid:18) $
1,(cid:21)9(cid:15)
(cid:78)
(cid:21),(cid:19)6(cid:19) (cid:3)
(cid:78) $
(cid:78)
(cid:78) $
(cid:78)
(cid:78)
(cid:75) (cid:3)
(cid:78) $
(cid:78)
(cid:78) $
(cid:78)
(cid:78)
(cid:75) (cid:3)
1(cid:19),4(cid:20)(cid:15)
3,144
19,(cid:19)1(cid:19)
(cid:15),4(cid:20)(cid:21)
((cid:18),(cid:13)(cid:13)(cid:13))
1(cid:19),0(cid:21)(cid:16)
(cid:15)34 $
20(cid:16) (cid:3)
(cid:15),(cid:15)1(cid:19) $
1,660 (cid:3)
(cid:78) $
(cid:75) (cid:3)
(cid:20),(cid:15)(cid:19)(cid:15) $
(cid:17),3(cid:19)0 (cid:3)
3(cid:20)1,(cid:18)(cid:18)1 $
3(cid:19)1,(cid:17)(cid:17)1 (cid:3)
93,(cid:20)(cid:21)(cid:13) $ 4(cid:20)(cid:18),(cid:13)43
(cid:21)3,(cid:19)(cid:20)0 (cid:3) (cid:16)(cid:19)2,(cid:17)6(cid:17)
78
Toromont Industries Ltd. Annual Report 2022
(cid:15)(cid:18),(cid:20)1(cid:19)
4,1(cid:13)(cid:15)
(cid:78)
(3(cid:15)(cid:15))
(3)
(9,(cid:21)(cid:21)(cid:13))
19,(cid:19)13
included
(cid:15)(cid:13)(cid:15)1
9,99(cid:15)
(cid:19)(cid:19)(cid:15)
194
1(cid:13),(cid:21)4(cid:21)
494,(cid:19)(cid:18)9
494,(cid:19)(cid:18)9
((cid:18),(cid:13)(cid:13)(cid:13))
(cid:16)(cid:20)(cid:21),6(cid:17)(cid:21)
1(cid:19),4(cid:20)(cid:15)
3,144
19,(cid:19)1(cid:19)
(cid:15),4(cid:20)(cid:21)
((cid:18),(cid:13)(cid:13)(cid:13))
1(cid:19),0(cid:21)(cid:16)
4(cid:20)(cid:18),(cid:13)43
(cid:16)(cid:19)2,(cid:17)6(cid:17)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:29)ood(cid:70)(cid:56)(cid:59)(cid:59)
The carrying amount of goodwill has been allocated as follows(cid:23)
E(cid:64)(cid:68)(cid:56)(cid:63)ment (cid:29)ro(cid:68)(cid:63)
Toromont Cat
(cid:26)attlefield Equipment (cid:42)entals
CIMCO
2022
(cid:15)(cid:13)(cid:15)1
(cid:3)
(cid:3)
(cid:20)(cid:21),2(cid:19)0 $
(cid:16),060
(cid:16)(cid:17)0
(cid:21)3,(cid:19)(cid:20)0 $
(cid:21)9,(cid:15)(cid:20)(cid:13)
4,(cid:13)(cid:19)(cid:13)
4(cid:18)(cid:13)
93,(cid:20)(cid:21)(cid:13)
The Company performed the annual impairment test as at December 31, (cid:15)(cid:13)(cid:15)(cid:15). The recoverable amounts have
been determined based on the fair value less costs to sell ((cid:2)(cid:30)(cid:46)LC(cid:43)(cid:2)) based on a range of relevant historical
company and current mar(cid:60)et multiples of earnings, applied to current earnings, adjusted for current economic
conditions. (cid:25)s a result of the analysis, management determined there was no impairment of goodwill.
Intan(cid:54)(cid:56)b(cid:59)e Assets (cid:70)(cid:56)th Indef(cid:56)n(cid:56)te L(cid:56)(cid:69)es (cid:74) D(cid:56)str(cid:56)b(cid:68)t(cid:56)on Net(cid:70)or(cid:58)s
The carrying amount of distribution networ(cid:60)s has been allocated to the following CG(cid:45)s and(cid:12)or group of CG(cid:45)s(cid:23)
E(cid:64)(cid:68)(cid:56)(cid:63)ment (cid:29)ro(cid:68)(cid:63)
Toromont Cat (cid:77) (cid:41)uebec(cid:12)(cid:37)aritimes
Toromont Cat (cid:77) all other locations
(cid:26)attlefield Equipment (cid:42)entals (cid:77) (cid:41)uebec(cid:12)(cid:37)aritimes
2022
(cid:15)(cid:13)(cid:15)1
(cid:3)
(cid:3)
3(cid:17)2,(cid:16)3(cid:16) $
13,66(cid:21)
(cid:17),(cid:16)(cid:16)(cid:20)
3(cid:19)1,(cid:17)(cid:17)1 $
3(cid:18)(cid:15),434
13,(cid:19)(cid:19)9
(cid:18),44(cid:21)
3(cid:20)1,(cid:18)(cid:18)1
The Company performed the annual impairment test of intangible assets as at December 31, (cid:15)(cid:13)(cid:15)(cid:15). The
recoverable amounts have been determined based on (cid:30)(cid:46)LC(cid:43) based on a range of relevant historical company
and current mar(cid:60)et multiples of earnings, applied to current earnings, adjusted for current economic conditions.
(cid:26)ased on the analysis, management determined there was no impairment of indefinite(cid:10)lived intangible assets.
These valuations are determined using Level (cid:15) inputs, which are observable inputs or inputs that can be
corroborated by observable mar(cid:60)et data. The calculation of (cid:30)(cid:46)LC(cid:43) for impairment testing is most sensitive to
the earnings multiplier. (cid:37)anagement believes that any reasonable change in the (cid:60)ey assumptions used to
determine the recoverable amount would not cause the carrying amount of any CG(cid:45) or group of CG(cid:45)s to
exceed its recoverable amount.
Consolidated Financial Statements
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:21). PRO(cid:44)ISIONS
(cid:25)ctivities related to provisions were as follows(cid:23)
(cid:26)alance, (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
(cid:38)ew provisions
(cid:45)tili(cid:75)ed or released
(cid:26)alance, December 31, (cid:15)(cid:13)(cid:15)1
(cid:38)ew provisions
(cid:45)tili(cid:75)ed or released
(cid:24)a(cid:59)ance, December 31, 2022
(cid:45)arranty
(cid:45)arranty
13,(cid:21)(cid:21)(cid:13) $
3(cid:13),(cid:18)93
(3(cid:13),(cid:18)(cid:13)9)
13,9(cid:19)4 $
2(cid:21),01(cid:16)
(cid:7)2(cid:17),(cid:16)1(cid:16)(cid:8)
1(cid:19),(cid:17)6(cid:16) (cid:3)
$
$
(cid:3)
Other
1(cid:15),(cid:20)(cid:19)(cid:18) $
1,3(cid:19)(cid:15)
((cid:15),(cid:19)(cid:21)(cid:20))
11,44(cid:13) $
1,(cid:20)6(cid:16)
(cid:7)3,21(cid:17)(cid:8)
10,0(cid:20)(cid:21) (cid:3)
Tota(cid:59)
(cid:15)(cid:19),(cid:19)4(cid:18)
31,9(cid:18)(cid:18)
(33,19(cid:19))
(cid:15)(cid:18),4(cid:13)4
30,(cid:20)(cid:19)(cid:20)
(cid:7)2(cid:20),62(cid:21)(cid:8)
2(cid:19),6(cid:17)3
(cid:25)t the time of sale, a provision is recogni(cid:75)ed for expected warranty claims on products and services, based on
past experience and (cid:60)nown issues. It is expected that most of these costs will be incurred in the next financial
year.
Other
(cid:39)ther provisions relate largely to open legal, insurance and potential environmental claims, and potential
onerous contracts. (cid:38)o one claim is significant.
10. DEFERRED RE(cid:44)EN(cid:43)E AND CONTRACT LIA(cid:24)ILITIES
Deferred revenue and contract liabilities represent billings to customers in excess of revenue recogni(cid:75)ed and
arise on the sale of equipment with residual value guarantees, extended warranty contracts, long(cid:10)term
maintenance agreements, and the sale of power and energy systems and refrigeration pac(cid:60)ages recorded
using the percentage(cid:10)of(cid:10)completion method.
The components of deferred revenue and contract liabilities were as follows(cid:23)
Deposits from customers
(cid:40)roduct support service agreements
(cid:43)ale of systems (cid:10) contract liabilities
Extended warranty
C(cid:68)rrent
2022
Non(cid:10)c(cid:68)rrent
(cid:3)
(cid:3)
1(cid:16)6,(cid:20)(cid:20)(cid:21) (cid:3)
(cid:20)(cid:20),36(cid:19)
6(cid:16),(cid:20)(cid:21)2
(cid:21),201
30(cid:21),3(cid:16)(cid:21) (cid:3)
(cid:16),(cid:20)(cid:16)(cid:16) (cid:3)
(cid:75)
(cid:75)
1(cid:20),(cid:16)32
23,2(cid:19)6 (cid:3)
Tota(cid:59)
1(cid:17)1,(cid:19)33 $
(cid:20)(cid:20),36(cid:19)
6(cid:16),(cid:20)(cid:21)2
2(cid:19),633
332,62(cid:17) $
Current
(cid:15)(cid:13)(cid:15)1
(cid:38)on(cid:10)current
4(cid:20),319 $
(cid:20)(cid:21),4(cid:15)1
(cid:19)(cid:19),(cid:15)(cid:19)(cid:20)
(cid:20),(cid:19)(cid:21)9
199,(cid:19)9(cid:19) $
11,(cid:21)4(cid:18) $
(cid:78)
(cid:78)
1(cid:18),4(cid:13)9
(cid:15)(cid:20),(cid:15)(cid:18)4 $
Total
(cid:18)9,1(cid:19)4
(cid:20)(cid:21),4(cid:15)1
(cid:19)(cid:19),(cid:15)(cid:19)(cid:20)
(cid:15)3,(cid:13)9(cid:21)
(cid:15)(cid:15)(cid:19),9(cid:18)(cid:13)
During the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15), the Company recogni(cid:75)ed as revenue $1(cid:19)1.4 million
((cid:15)(cid:13)(cid:15)1 (cid:77)$14(cid:13).(cid:19) million) of the deferred revenue and contract liabilities balance as at (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)(cid:15).
(cid:37)anagement expects that 93(cid:4) of the transaction price allocated to unsatisfied performance obligations as at
December 31, (cid:15)(cid:13)(cid:15)(cid:15) will be recogni(cid:75)ed as revenue during the year ended December 31, (cid:15)(cid:13)(cid:15)3 and the
remaining (cid:20)(cid:4) between the years ended December 31, (cid:15)(cid:13)(cid:15)4 and (cid:15)(cid:13)(cid:15)9.
80
Toromont Industries Ltd. Annual Report 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
11. LON(cid:29)(cid:10)TERM DE(cid:24)T
(cid:43)enior Debentures
3.(cid:20)1(cid:4), $1(cid:18)(cid:13).(cid:13) million, due (cid:43)eptember 3(cid:13), (cid:15)(cid:13)(cid:15)(cid:18) (1)
3.(cid:21)4(cid:4), $(cid:18)(cid:13)(cid:13).(cid:13) million, due (cid:39)ctober (cid:15)(cid:20), (cid:15)(cid:13)(cid:15)(cid:20) (1)
Debt issuance costs, net of amorti(cid:75)ation
Tota(cid:59) (cid:59)on(cid:54)(cid:10)term debt
(1) Interest payable semi(cid:10)annually, principal due on maturity.
2022
(cid:15)(cid:13)(cid:15)1
(cid:3)
(cid:3)
1(cid:17)0,000 $
(cid:17)00,000
6(cid:17)0,000
(cid:7)2,(cid:21)(cid:16)0(cid:8)
6(cid:16)(cid:19),060 $
1(cid:18)(cid:13),(cid:13)(cid:13)(cid:13)
(cid:18)(cid:13)(cid:13),(cid:13)(cid:13)(cid:13)
(cid:19)(cid:18)(cid:13),(cid:13)(cid:13)(cid:13)
(3,(cid:19)(cid:19)3)
(cid:19)4(cid:19),33(cid:20)
The Company has a $(cid:18)(cid:13)(cid:13).(cid:13) million committed revolving credit facility, maturing in (cid:38)ovember (cid:15)(cid:13)(cid:15)(cid:19), with a
syndicate of financial institutions. Debt under this facility is unsecured and ran(cid:60)s pari passu with debt
outstanding under Toromont’s existing debentures. Interest is based on a floating rate, primarily ban(cid:60)ers(cid:6)
acceptances and prime, plus applicable margins and fees based on the terms of the credit facility.
(cid:38)o amounts were drawn on this revolving credit facility as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) or (cid:15)(cid:13)(cid:15)1. (cid:43)tandby letters of
credit issued utili(cid:75)ed $(cid:15)(cid:21).9 million of the facility as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) ((cid:15)(cid:13)(cid:15)1 (cid:77) $(cid:15)(cid:21).(cid:21) million).
These credit arrangements include covenants, restrictions and events of default usually present in credit
facilities of this nature, including requirements to meet certain financial tests periodically and restrictions on
additional indebtedness and encumbrances. The Company was in compliance with all covenants as at
December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1.
(cid:43)cheduled principal repayments and interest payments on long(cid:10)term debt are as follows(cid:23)
(cid:15)(cid:13)(cid:15)3
(cid:15)(cid:13)(cid:15)4
(cid:15)(cid:13)(cid:15)(cid:18)
(cid:15)(cid:13)(cid:15)(cid:19)
(cid:15)(cid:13)(cid:15)(cid:20)
Pr(cid:56)nc(cid:56)(cid:63)a(cid:59)
(cid:78) $
(cid:78)
1(cid:18)(cid:13),(cid:13)(cid:13)(cid:13)
(cid:78)
(cid:18)(cid:13)(cid:13),(cid:13)(cid:13)(cid:13)
(cid:19)(cid:18)(cid:13),(cid:13)(cid:13)(cid:13) $
$
$
Interest
(cid:15)4,(cid:20)(cid:19)(cid:18)
(cid:15)4,(cid:20)(cid:19)(cid:18)
(cid:15)3,3(cid:20)4
19,(cid:15)(cid:13)(cid:13)
1(cid:19),(cid:13)(cid:13)(cid:13)
1(cid:13)(cid:21),1(cid:13)4
Interest expense includes interest on debt initially incurred for a term of one year or greater and was
$(cid:15)(cid:19).(cid:20) million in (cid:15)(cid:13)(cid:15)(cid:15) ((cid:15)(cid:13)(cid:15)1 (cid:77) $(cid:15)(cid:20).(cid:18) million).
12. SHARE CAPITAL
A(cid:68)thor(cid:56)(cid:73)ed
million
The Company is authori(cid:75)ed to issue an unlimited number of common shares (no par value) and preferred
shares. (cid:38)o preferred shares were issued or outstanding for the years ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1.
(cid:25) continuity of the shares issued and outstanding for the years ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1 is
presented in the consolidated statements of changes in shareholders’ equity.
Consolidated Financial Statements
81
Tota(cid:59)
(cid:15)(cid:19),(cid:19)4(cid:18)
31,9(cid:18)(cid:18)
(33,19(cid:19))
(cid:15)(cid:18),4(cid:13)4
30,(cid:20)(cid:19)(cid:20)
(cid:7)2(cid:20),62(cid:21)(cid:8)
2(cid:19),6(cid:17)3
on
financial
potential
and
long(cid:10)term
recorded
(cid:18)9,1(cid:19)4
(cid:20)(cid:21),4(cid:15)1
(cid:19)(cid:19),(cid:15)(cid:19)(cid:20)
(cid:15)3,(cid:13)9(cid:21)
(cid:15)(cid:15)(cid:19),9(cid:18)(cid:13)
as at
the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Shareho(cid:59)der R(cid:56)(cid:54)hts P(cid:59)an (cid:7)(cid:2)SRP(cid:2)(cid:8)
The (cid:43)(cid:42)(cid:40) is a (cid:2)new generation(cid:2) shareholder rights plan, designed to encourage the fair treatment of
shareholders in connection with any ta(cid:60)eover offer for the Company. (cid:42)ights issued under the plan become
exercisable when a person, and any related parties, acquires or commences a ta(cid:60)eover bid to acquire (cid:15)(cid:13)(cid:4) or
more of the Company’s outstanding common shares without complying with certain provisions set out in the
plan or without approval of the Company(cid:6)s (cid:26)oard of Directors. (cid:43)hould such an acquisition occur, each rights
holder, other than the acquiring person and related parties, will have the right to purchase common shares of
the Company at a (cid:18)(cid:13)(cid:4) discount to the mar(cid:60)et price at that time. The (cid:43)(cid:42)(cid:40) was renewed in (cid:25)pril (cid:15)(cid:13)(cid:15)(cid:15), and
expires at the end of the annual meeting of shareholders in (cid:15)(cid:13)(cid:15)4.
Norma(cid:59) Co(cid:68)rse Iss(cid:68)er (cid:24)(cid:56)d (cid:7)(cid:2)NCI(cid:24)(cid:2)(cid:8)
The Company(cid:6)s (cid:38)CI(cid:26) program was renewed on (cid:43)eptember 19, (cid:15)(cid:13)(cid:15)(cid:15). The current issuer bid allows the
Company to purchase up to approximately (cid:21).(cid:15) million of its common shares in the 1(cid:15)-month period ending
(cid:43)eptember 1(cid:21), (cid:15)(cid:13)(cid:15)3, representing 1(cid:13)(cid:4) of common shares in the public float, as estimated at the time of
renewal. (cid:25)ll shares purchased under the bid will be cancelled.
The Company entered into an (cid:25)utomatic (cid:43)hare (cid:40)urchase (cid:40)lan ((cid:2)(cid:25)(cid:43)(cid:40)(cid:40)(cid:2)) with a bro(cid:60)er to enable the purchase
of common shares under the (cid:38)CI(cid:26), during regular trading blac(cid:60)out periods. The volume of the purchases is
determined by the bro(cid:60)er based on share price and maximum volume parameters established by the Company
under the (cid:25)(cid:43)(cid:40)(cid:40) prior to the commencement of each blac(cid:60)out period. (cid:25)s at December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1,
there was no obligation for the repurchase of shares under the (cid:25)(cid:43)(cid:40)(cid:40).
The Company purchased and cancelled 4(cid:20)3,1(cid:13)(cid:13) common shares for $4(cid:21).(cid:18) million (average cost of
$1(cid:13)(cid:15).(cid:18)(cid:15) per share, including transaction costs) under the previous (cid:38)CI(cid:26) program during the year ended
December 31, (cid:15)(cid:13)(cid:15)(cid:15).
The Company purchased and cancelled 4(cid:20)(cid:13),(cid:19)(cid:13)(cid:13) common shares for $(cid:18)(cid:13).(cid:13) million (average cost of
$1(cid:13)(cid:19).(cid:15)(cid:18) per share, including transaction costs) under the previous (cid:38)CI(cid:26) program during the year ended
December 31, (cid:15)(cid:13)(cid:15)1.
D(cid:56)(cid:69)(cid:56)dends Pa(cid:56)d
The Company paid dividends of $1(cid:15)(cid:18).(cid:15) million ($1.(cid:18)(cid:15) per share) for the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15), and
$1(cid:13)9.1 million ($1.3(cid:15) per share) for the year ended December 31, (cid:15)(cid:13)(cid:15)1.
D(cid:56)(cid:69)(cid:56)dends Dec(cid:59)ared
2022
(cid:15)(cid:13)(cid:15)1
D(cid:56)(cid:69)(cid:56)dend
(cid:41)uarter 1
(cid:41)uarter (cid:15)
(cid:41)uarter 3
(cid:41)uarter 4
Record
Date
D(cid:56)(cid:69)(cid:56)dend
Amo(cid:68)nt
Per Share
Payment
Date
Tota(cid:59)
D(cid:56)(cid:69)(cid:56)dends
Dec(cid:59)ared
(cid:7)(cid:3) m(cid:56)(cid:59)(cid:59)(cid:56)ons(cid:8)
(cid:42)ecord
Date
Mar. (cid:21), 2022 (cid:3)
(cid:32)(cid:68)n. (cid:21), 2022
Se(cid:63). (cid:20), 2022
Dec. (cid:20), 2022
(cid:3)
0.3(cid:21) A(cid:63)r. (cid:16), 2022 (cid:3)
0.3(cid:21)
(cid:32)(cid:68)(cid:59). (cid:17), 2022
0.3(cid:21) Oct. (cid:16), 2022
(cid:32)an. (cid:17), 2023
0.3(cid:21)
1.(cid:17)6
(cid:3)
32.2 (cid:37)ar. 9, (cid:15)(cid:13)(cid:15)1 $
32.1
32.1
32.1
12(cid:20).(cid:17)
(cid:34)un. 9, (cid:15)(cid:13)(cid:15)1
(cid:43)ep. (cid:21), (cid:15)(cid:13)(cid:15)1
Dec. (cid:21), (cid:15)(cid:13)(cid:15)1
$
Dividend
(cid:25)mount
(cid:40)er (cid:43)hare
(cid:13).31
(cid:13).3(cid:18)
(cid:13).3(cid:18)
(cid:13).3(cid:18)
1.3(cid:19)
Total
Dividends
Declared
($ millions)
(cid:40)ayment
Date
(cid:25)pr. 1, (cid:15)(cid:13)(cid:15)1 $
(cid:34)ul. (cid:18), (cid:15)(cid:13)(cid:15)1
(cid:39)ct. 4, (cid:15)(cid:13)(cid:15)1
(cid:34)an. (cid:18), (cid:15)(cid:13)(cid:15)(cid:15)
$
(cid:15)(cid:18).(cid:19)
(cid:15)(cid:21).9
(cid:15)9.(cid:13)
(cid:15)(cid:21).9
11(cid:15).4
82
Toromont Industries Ltd. Annual Report 2022
of
become
(cid:15)(cid:13)(cid:4) or
the
rights
shares of
and
the
ng
of
purchase
purchases is
Company
(cid:15)(cid:13)(cid:15)1,
of
ended
of
ended
and
(cid:15)(cid:18).(cid:19)
(cid:15)(cid:21).9
(cid:15)9.(cid:13)
(cid:15)(cid:21).9
11(cid:15).4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:39)n (cid:30)ebruary 14, (cid:15)(cid:13)(cid:15)3, the (cid:26)oard of Directors declared a quarterly dividend of $(cid:13).43 per common share,
payable on (cid:25)pril 4, (cid:15)(cid:13)(cid:15)3, to shareholders on record on (cid:37)arch 9, (cid:15)(cid:13)(cid:15)3.
13. FINANCIAL INSTR(cid:43)MENTS
F(cid:56)nanc(cid:56)a(cid:59) Assets and L(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es (cid:74) C(cid:59)ass(cid:56)f(cid:56)cat(cid:56)on and Meas(cid:68)rement
The following table highlights the carrying amounts and classifications of certain financial assets and liabilities(cid:23)
Other f(cid:56)nanc(cid:56)a(cid:59) (cid:59)(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es(cid:22)
Long(cid:10)term debt
Der(cid:56)(cid:69)at(cid:56)(cid:69)e f(cid:56)nanc(cid:56)a(cid:59) (cid:56)nstr(cid:68)ments assets, net(cid:22)
(cid:30)oreign exchange forward contracts
Fa(cid:56)r (cid:44)a(cid:59)(cid:68)e of F(cid:56)nanc(cid:56)a(cid:59) Instr(cid:68)ments
2022
(cid:15)(cid:13)(cid:15)1
6(cid:16)(cid:19),060 $
(cid:19)4(cid:19),33(cid:20)
1(cid:20),(cid:17)30 $
(cid:18),(cid:15)(cid:18)(cid:15)
(cid:3)
(cid:3)
The fair value of derivative financial instruments is measured using the discounted value of the difference
between the contract’s value at maturity based on the contracted foreign exchange rate and the contract(cid:6)s
value at maturity based on the comparable foreign exchange rate as at period-end under the same conditions.
The financial institution(cid:6)s credit ris(cid:60) is also ta(cid:60)en into consideration in determining fair value. The valuation is
determined using Level (cid:15) inputs, which are observable inputs or inputs that can be corroborated by observable
mar(cid:60)et data for substantially the full term of the asset or liability, most significantly foreign exchange spot and
forward rates.
The fair value and carrying value of long(cid:10)term debt are as follows(cid:23)
Lon(cid:54)(cid:10)term debt(cid:22)
(cid:30)air value
Carrying value
2022
(cid:15)(cid:13)(cid:15)1
(cid:3)
(cid:3)
626,(cid:17)(cid:20)(cid:17) $
6(cid:17)0,000 $
(cid:19)9(cid:18),(cid:15)(cid:21)(cid:18)
(cid:19)(cid:18)(cid:13),(cid:13)(cid:13)(cid:13)
The fair value was determined using the discounted cash flow method, a generally accepted valuation
technique. The discounted factor is based on mar(cid:60)et rates for debt with similar terms and remaining maturities
and based on Toromont’s credit ris(cid:60). The Company has no plans to prepay these instruments prior to maturity.
During the years ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1, there were no transfers between Level 1 and Level (cid:15)
fair value measurements.
Der(cid:56)(cid:69)at(cid:56)(cid:69)e F(cid:56)nanc(cid:56)a(cid:59) Instr(cid:68)ments and Hed(cid:54)e Acco(cid:68)nt(cid:56)n(cid:54)
(cid:30)oreign exchange contracts and options are transacted with financial institutions to hedge foreign
currency-denominated obligations related to purchases of
inventory and sales of products. (cid:25)s at
December 31, (cid:15)(cid:13)(cid:15)(cid:15), the Company was committed to(cid:23) (i) (cid:45)(cid:43) dollar purchase contracts with a notional amount
of $(cid:19)(cid:19)4.(cid:13) million at an average exchange rate of $1.3(cid:15)4(cid:20), maturing between (cid:34)anuary (cid:15)(cid:13)(cid:15)3 and
December (cid:15)(cid:13)(cid:15)4(cid:24) and (ii) (cid:45)(cid:43) dollar sale contracts with a notional amount of $(cid:21)(cid:20).(cid:18) million at an average
exchange rate of $1.3(cid:18)(cid:19)(cid:18), maturing between (cid:34)anuary (cid:15)(cid:13)(cid:15)3 and (cid:39)ctober (cid:15)(cid:13)(cid:15)3.
Consolidated Financial Statements
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:37)anagement estimates that a gain of $1(cid:21).(cid:18) million ((cid:15)(cid:13)(cid:15)1 (cid:77) gain of $(cid:18).3 million) would be reali(cid:75)ed if the
contracts were terminated on December 31, (cid:15)(cid:13)(cid:15)(cid:15). Certain of these forward contracts are designated as cash
flow hedges and, accordingly, an unreali(cid:75)ed gain of $13.3 million ((cid:15)(cid:13)(cid:15)1 (cid:77) unreali(cid:75)ed gain of $3.9 million) has
been included in (cid:39)CI. These gains will be reclassified to net earnings within the next 1(cid:15) months and will offset
losses recorded on the underlying hedged items, namely foreign(cid:10)denominated accounts payable and accrued
liabilities. Certain of these forward contracts are not designated as cash flow hedges but are entered into for
periods consistent with foreign currency exposure of the underlying transactions. (cid:25) gain of $(cid:18).(cid:15) million
((cid:15)(cid:13)(cid:15)1 (cid:77) gain of $1.4 million) on forward contracts not designated as hedges is included in net earnings, which
offsets losses recorded on the associated foreign(cid:10)denominated items, namely accounts payable and accrued
liabilities.
(cid:25)ll hedging relationships are formally documented, including the ris(cid:60) management objective and strategy. (cid:39)n
an ongoing basis, an assessment is made as to whether the designated derivative financial instruments
continue to be effective in offsetting changes in cash flows of the hedged transactions.
1(cid:16). FINANCIAL INSTR(cid:43)MENTS (cid:74) RIS(cid:33) MANA(cid:29)EMENT
In the normal course of business, Toromont is exposed to financial ris(cid:60)s that may potentially impact its
operating results in one or all of its reportable segments. The Company employs ris(cid:60) management strategies
with a view to mitigating these ris(cid:60)s on a cost(cid:10)effective basis. Derivative financial agreements are used to
manage exposure to fluctuations in exchange rates. The Company does not enter into derivative financial
agreements for speculative purposes.
C(cid:68)rrency R(cid:56)s(cid:58)
The Canadian operations of the Company source the majority of its products and major components from the
(cid:45)nited (cid:43)tates. Consequently, reported costs of inventory and the transaction prices charged to customers for
equipment and parts are affected by the relative strength of the Canadian dollar. The Company mitigates
exchange rate ris(cid:60) by entering into foreign currency contracts to fix the cost of imported inventory where
appropriate. In addition, pricing to customers is customarily adjusted to reflect changes in the Canadian dollar
landed cost of imported goods.
The Company also sells its products to certain customers in (cid:45)(cid:43) currency. The Company mitigates exchange
rate ris(cid:60) by entering into foreign currency contracts to fix the cash inflows where appropriate.
The Company maintains a hedging policy whereby all significant transactional currency ris(cid:60)s are identified and
hedged.
(cid:43)ensitivity (cid:25)nalysis
The following sensitivity analysis is intended to illustrate the sensitivity to changes in foreign exchange rates on
the Company(cid:6)s financial instruments and show the impact on net earnings and comprehensive income. It is
provided as a reasonably possible change in currency in a volatile environment. (cid:30)inancial instruments affected
by currency ris(cid:60) include cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities and derivative financial instruments.
(cid:25)s at December 31, (cid:15)(cid:13)(cid:15)(cid:15), a (cid:18)(cid:4) wea(cid:60)ening (strengthening) of the Canadian dollar against the (cid:45)(cid:43) dollar would
result in a $1.(cid:13) million (decrease) increase in (cid:39)CI for financial instruments held in foreign operations, and a
84
Toromont Industries Ltd. Annual Report 2022
the
cash
has
fset
accrued
for
million
hich
accrued
(cid:39)n
instruments
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
$4.(cid:13) million (decrease) increase in net earnings and $19.(cid:21) million (decrease) increase in (cid:39)CI for financial
instruments held in Canadian operations.
Cred(cid:56)t R(cid:56)s(cid:58)
(cid:30)inancial instruments that potentially subject the Company to credit ris(cid:60) consist of cash and cash equivalents,
accounts receivable and derivative financial instruments. The carrying amount of assets included on the
consolidated statements of financial position represents the maximum credit exposure.
The Company has deposited cash and cash equivalents with reputable financial institutions, from which
management believes the ris(cid:60) of loss to be remote.
The Company has accounts receivable from customers engaged in various industries including mining,
construction, food and beverage, and governmental agencies. These specific customers may be affected by
economic factors that may impact accounts receivable. Credit ris(cid:60) concentration with respect to trade
receivables is mitigated by the Company’s large customer base.
The credit ris(cid:60) associated with derivative financial instruments arises from the possibility that the counterparties
may default on their obligations. In order to minimi(cid:75)e this ris(cid:60), the Company enters into derivative transactions
only with highly rated financial institutions.
Interest Rate R(cid:56)s(cid:58)
The Company minimi(cid:75)es its interest rate ris(cid:60) by managing its portfolio of floating(cid:10) and fixed(cid:10)rate debt, as well
as managing the term to maturity. The Company may use derivative instruments such as interest rate swap
agreements to manage its current and anticipated exposure to interest rates. There were no interest rate swap
agreements outstanding as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) or (cid:15)(cid:13)(cid:15)1.
The Company had no floating(cid:10)rate debt outstanding as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) or (cid:15)(cid:13)(cid:15)1.
L(cid:56)(cid:64)(cid:68)(cid:56)d(cid:56)ty R(cid:56)s(cid:58)
Liquidity ris(cid:60) is the ris(cid:60) that the Company may encounter difficulties in meeting obligations associated with
financial liabilities. (cid:25)s at December 31, (cid:15)(cid:13)(cid:15)(cid:15), the Company had unutili(cid:75)ed lines of credit of $4(cid:20)1.1 million
((cid:15)(cid:13)(cid:15)1 (cid:77) $4(cid:20)1.(cid:15) million).
and
(cid:25)ccounts payable are primarily due within 9(cid:13) days and will be satisfied from current wor(cid:60)ing capital.
The Company expects that continued cash flows from operations in (cid:15)(cid:13)(cid:15)3, together with currently available
cash and cash equivalents on hand and credit facilities, will be more than sufficient to fund its requirements for
investments in wor(cid:60)ing capital, capital assets and dividend payments through the next 1(cid:15) months, and that the
Company(cid:6)s credit ratings provide reasonable access to capital mar(cid:60)ets to facilitate future debt issuance.
strategies
its
to
financial
the
for
mitigates
where
dollar
exchange
on
It is
fected
accrued
would
and a
Consolidated Financial Statements
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
1(cid:17). INTEREST INCOME AND E(cid:46)PENSE
The components of interest expense were as follows(cid:23)
Credit facilities
(cid:43)enior debentures
Interest on lease liabilities
The components of interest and investment income were as follows(cid:23)
Interest on conversion of rental equipment
Interest income
16. INCOME TA(cid:46)ES
(cid:43)ignificant components of the provision for income tax expense were as follows(cid:23)
Current income tax expense
Deferred income tax expense
Tota(cid:59) (cid:56)ncome ta(cid:71) e(cid:71)(cid:63)ense
2022
1,(cid:17)21 $
2(cid:17),166
6(cid:17)1
2(cid:19),33(cid:20) $
2022
(cid:16),(cid:19)60 $
1(cid:19),(cid:16)(cid:19)2
22,232 $
(cid:15)(cid:13)(cid:15)1
(cid:15),(cid:15)(cid:18)3
(cid:15)(cid:18),(cid:15)4(cid:19)
(cid:19)(cid:19)(cid:15)
(cid:15)(cid:21),1(cid:19)1
(cid:15)(cid:13)(cid:15)1
(cid:15),(cid:19)3(cid:18)
(cid:19),39(cid:15)
9,(cid:13)(cid:15)(cid:20)
2022
1(cid:17)(cid:17),01(cid:19) $
(cid:21),(cid:20)(cid:16)(cid:20)
16(cid:16),(cid:20)6(cid:17) $
(cid:15)(cid:13)(cid:15)1
1(cid:15)(cid:13),(cid:18)(cid:13)(cid:19)
3,(cid:18)(cid:21)(cid:20)
1(cid:15)4,(cid:13)93
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:25) reconciliation of income taxes at Canadian statutory rates with the reported income taxes was as follows(cid:23)
(cid:43)tatutory Canadian federal and provincial income tax rates
Expected taxes on income
Increase (decrease) in income taxes resulting from(cid:23)
(cid:32)igher effective tax rates in other jurisdictions
(cid:37)anufacturing and processing rate reduction
Expenses not deductible for tax purposes
(cid:38)on(cid:10)taxable gains
Effect of change in future income tax rate
(cid:39)ther
Pro(cid:69)(cid:56)s(cid:56)ons for (cid:56)ncome ta(cid:71)es
Effect(cid:56)(cid:69)e (cid:56)ncome ta(cid:71) rate
2022
26.(cid:17) (cid:4)
(cid:15)(cid:13)(cid:15)1
(cid:15)(cid:19).(cid:18) (cid:4)
(cid:3)
16(cid:16),0(cid:17)2
$
1(cid:15)1,(cid:13)(cid:18)3
1,323
(cid:7)(cid:16)2(cid:8)
2,(cid:16)33
(cid:7)3,0(cid:21)6(cid:8)
(cid:7)223(cid:8)
(cid:16)1(cid:20)
16(cid:16),(cid:20)6(cid:17)
$
1,139
((cid:18)4)
(cid:15),1(cid:19)(cid:18)
((cid:21)(cid:21)1)
(cid:19)1
(cid:19)1(cid:13)
1(cid:15)4,(cid:13)93
26.6 (cid:4)
(cid:15)(cid:20).(cid:15) (cid:4)
(cid:3)
The statutory income tax rate represents the combined Canadian federal and (cid:39)ntario provincial income tax
rates, which are the relevant tax jurisdictions for the Company.
86
Toromont Industries Ltd. Annual Report 2022
(cid:15)(cid:13)(cid:15)1
(cid:15),(cid:15)(cid:18)3
(cid:15)(cid:18),(cid:15)4(cid:19)
(cid:19)(cid:19)(cid:15)
(cid:15)(cid:21),1(cid:19)1
(cid:15)(cid:13)(cid:15)1
(cid:15),(cid:19)3(cid:18)
(cid:19),39(cid:15)
9,(cid:13)(cid:15)(cid:20)
(cid:15)(cid:13)(cid:15)1
1(cid:15)(cid:13),(cid:18)(cid:13)(cid:19)
3,(cid:18)(cid:21)(cid:20)
1(cid:15)4,(cid:13)93
(cid:15)(cid:13)(cid:15)1
(cid:4)
((cid:18)4)
((cid:21)(cid:21)1)
(cid:4)
tax
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
The sources of deferred income taxes were as follows(cid:23)
(cid:25)ccrued liabilities
Deferred revenue and contract liabilities
(cid:25)ccounts receivable
Inventories
Deferred tax assets on current assets and current liabilities
Capital assets
Goodwill and intangible assets
(cid:39)ther
Cash flow hedges on (cid:39)CI
(cid:40)ost(cid:10)employment obligations
Deferred tax (liabilities) on non(cid:10)current assets and non(cid:10)current liabilities
Net deferred ta(cid:71) (cid:59)(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
The movement in net deferred income taxes was as follows(cid:23)
(cid:26)alance, (cid:34)anuary 1
Tax (expense) recovery recogni(cid:75)ed in income
(cid:30)oreign exchange and other
Tax (expense) recovery recogni(cid:75)ed in (cid:39)CI
(cid:24)a(cid:59)ance, December 31
2022
32,(cid:20)26 $
(cid:17),(cid:20)22
6,336
(cid:21),(cid:16)(cid:19)(cid:21)
(cid:17)(cid:16),(cid:16)63 $
(cid:7)(cid:21)(cid:17),0(cid:21)1(cid:8) $
(cid:7)(cid:16)1,(cid:16)(cid:20)6(cid:8)
1,3(cid:21)6
(cid:7)3,6(cid:16)1(cid:8)
2,3(cid:16)(cid:17)
(cid:7)136,(cid:16)(cid:19)(cid:19)(cid:8) $
(cid:7)(cid:20)2,01(cid:16)(cid:8) $
2022
(cid:7)(cid:16)(cid:20),(cid:16)(cid:17)1(cid:8) $
(cid:7)(cid:21),(cid:20)(cid:16)(cid:20)(cid:8)
(cid:21)(cid:20)
(cid:7)23,(cid:20)13(cid:8)
(cid:7)(cid:20)2,01(cid:16)(cid:8) $
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:15)(cid:13)(cid:15)1
(cid:15)9,1(cid:18)(cid:20)
9,(cid:19)(cid:15)(cid:20)
(cid:18),139
(cid:19),(cid:20)41
(cid:18)(cid:13),(cid:19)(cid:19)4
((cid:21)(cid:15),9(cid:21)3)
(3(cid:21),3(cid:19)9)
94(cid:19)
(1,(cid:13)11)
(cid:15)(cid:15),3(cid:13)(cid:15)
(99,11(cid:18))
(4(cid:21),4(cid:18)1)
(cid:15)(cid:13)(cid:15)1
((cid:15)4,(cid:20)(cid:15)(cid:15))
(3,(cid:18)(cid:21)(cid:20))
(cid:15)(cid:19)
((cid:15)(cid:13),1(cid:19)(cid:21))
(4(cid:21),4(cid:18)1)
The aggregate amount of unremitted earnings
((cid:15)(cid:13)(cid:15)1 (cid:77) $3(cid:18).9 million). These earnings can be remitted with no tax consequences.
in
the Company(cid:6)s subsidiaries was $44.(cid:20) million
1(cid:19). EARNIN(cid:29)S PER SHARE
(cid:38)et earnings available to common shareholders
(cid:3)
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20) $
33(cid:15),(cid:20)1(cid:13)
2022
(cid:15)(cid:13)(cid:15)1
(cid:47)eighted average common shares outstanding
Effect of dilutive securities
(cid:47)eighted average common shares outstanding (cid:77) diluted
Earnings per share(cid:23)
(cid:26)asic
Diluted
(cid:20)2,33(cid:21),(cid:16)(cid:20)0
63(cid:20),(cid:20)(cid:16)(cid:16)
(cid:21)(cid:15),(cid:18)4(cid:20),9(cid:19)1
(cid:20)(cid:15)1,49(cid:13)
(cid:20)2,(cid:21)(cid:19)(cid:20),32(cid:16)
(cid:21)3,(cid:15)(cid:19)9,4(cid:18)1
(cid:3)
(cid:3)
(cid:17).(cid:17)2 $
(cid:17).(cid:16)(cid:19) $
4.(cid:13)3
4.(cid:13)(cid:13)
(cid:30)or the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15), 1(cid:19)(cid:19),(cid:18)(cid:13)(cid:13) outstanding share options with a weighted average exercise
price of $1(cid:13)(cid:20).3(cid:19) were considered anti(cid:10)dilutive (exercise price in excess of average mar(cid:60)et price during the
year) and, as such, were excluded from the calculation of diluted earnings per share. (cid:30)or the comparative
period in (cid:15)(cid:13)(cid:15)1, 3(cid:19)(cid:20),9(cid:18)(cid:20) outstanding share options with a weighted average exercise price of $1(cid:13)4.91 that were
considered anti(cid:10)dilutive.
Consolidated Financial Statements
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
1(cid:20). EMPLO(cid:47)EE (cid:24)ENEFITS E(cid:46)PENSE
(cid:47)ages and salaries
(cid:39)ther employment benefit expenses
(cid:43)hare(cid:10)based compensation expense
(cid:40)ension costs
1(cid:21). SHARE(cid:10)(cid:24)ASED COMPENSATION
Share O(cid:63)t(cid:56)on P(cid:59)an
2022
6(cid:17)3,3(cid:20)(cid:16) $
(cid:20)(cid:16),(cid:17)(cid:17)(cid:20)
6,(cid:20)00
32,(cid:17)(cid:19)(cid:19)
(cid:19)(cid:19)(cid:19),31(cid:21) $
(cid:15)(cid:13)(cid:15)1
(cid:19)(cid:13)(cid:21),9(cid:21)9
(cid:21)(cid:19),4(cid:21)(cid:21)
(cid:19),4(cid:20)1
4(cid:13),(cid:15)1(cid:19)
(cid:20)4(cid:15),1(cid:19)4
(cid:3)
(cid:3)
The Company maintains a share option program for certain employees. (cid:45)nder the plan, up to (cid:20),(cid:13)(cid:13)(cid:13),(cid:13)(cid:13)(cid:13)
options may be granted for subsequent exercise in exchange for common shares. It is the Company(cid:6)s policy
that the aggregate number of options that may be granted in any one calendar year shall not exceed 1(cid:4) of the
outstanding shares as of the beginning of the year in which a grant is made ((cid:15)(cid:13)(cid:15)(cid:15) (cid:77) (cid:21)(cid:15)4,439(cid:24) (cid:15)(cid:13)(cid:15)1 (cid:77) (cid:21)(cid:15)4,(cid:20)4(cid:19)).
(cid:43)hare options have a 1(cid:13)(cid:10)year life, vest (cid:15)(cid:13)(cid:4) per year on each anniversary date of the grant, and are
exercisable at the designated common share price, which is fixed at prevailing mar(cid:60)et prices of the common
shares at the date the option is granted. Toromont accrues compensation cost over the vesting period based
on the grant date fair value.
(cid:25) reconciliation of the outstanding options for the years ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1, was as follows(cid:23)
(cid:39)ptions outstanding, (cid:34)anuary 1
Granted
Exercised (1)
(cid:30)orfeited
O(cid:63)t(cid:56)ons o(cid:68)tstand(cid:56)n(cid:54), December 31
O(cid:63)t(cid:56)ons e(cid:71)erc(cid:56)sab(cid:59)e, December 31
2022
(cid:45)e(cid:56)(cid:54)hted
a(cid:69)era(cid:54)e
e(cid:71)erc(cid:56)se (cid:63)r(cid:56)ce
6(cid:20).(cid:16)(cid:16)
10(cid:19).36
(cid:17)(cid:21).(cid:16)1
(cid:20)0.(cid:19)(cid:17)
(cid:19)3.21
(cid:17)(cid:21).3(cid:20)
N(cid:68)mber of
o(cid:63)t(cid:56)ons
2,16(cid:19),02(cid:17) (cid:3)
166,(cid:17)00
(cid:7)3(cid:16)(cid:19),2(cid:21)1(cid:8)
(cid:7)1(cid:20),3(cid:16)2(cid:8)
1,(cid:21)6(cid:19),(cid:20)(cid:21)2 (cid:3)
(cid:21)22,6(cid:20)1 (cid:3)
(cid:15)(cid:13)(cid:15)1
(cid:47)eighted
average
exercise price
(cid:18)(cid:21).(cid:19)(cid:20)
1(cid:13)4.91
49.4(cid:18)
(cid:18)(cid:20).(cid:18)9
(cid:19)(cid:21).44
(cid:18)(cid:15).(cid:20)(cid:19)
(cid:38)umber of
options
(cid:15),3(cid:15)(cid:21),(cid:13)3(cid:21) $
3(cid:19)(cid:20),9(cid:18)(cid:20)
(439,91(cid:13))
((cid:21)9,(cid:13)(cid:19)(cid:13))
(cid:15),1(cid:19)(cid:20),(cid:13)(cid:15)(cid:18) $
(cid:21)3(cid:20),(cid:19)(cid:21)(cid:20) $
(1) The weighted average share price at the date of exercise for the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) was $1(cid:13)(cid:20).31 ((cid:15)(cid:13)(cid:15)1 (cid:77) $1(cid:13)(cid:18).(cid:19)(cid:15)).
The following table summari(cid:75)es share options outstanding and exercisable as at December 31, (cid:15)(cid:13)(cid:15)(cid:15)(cid:23)
Ran(cid:54)e of e(cid:71)erc(cid:56)se (cid:63)r(cid:56)ces
(cid:3)23.(cid:16)0 (cid:74) (cid:3)36.6(cid:17)
(cid:3)36.66 (cid:74) (cid:3)(cid:17)3.(cid:20)(cid:20)
(cid:3)(cid:17)3.(cid:20)(cid:21) (cid:74) (cid:3)(cid:19)2.(cid:21)(cid:17)
(cid:3)(cid:19)2.(cid:21)6 (cid:74) (cid:3)10(cid:19).36
O(cid:63)t(cid:56)ons o(cid:68)tstand(cid:56)n(cid:54)
O(cid:63)t(cid:56)ons e(cid:71)erc(cid:56)sab(cid:59)e
(cid:45)e(cid:56)(cid:54)hted
a(cid:69)era(cid:54)e
rema(cid:56)n(cid:56)n(cid:54)
(cid:59)(cid:56)fe (cid:7)years(cid:8)
2.1 (cid:3)
(cid:16).2
6.(cid:20)
(cid:20).(cid:20)
6.6 (cid:3)
(cid:45)e(cid:56)(cid:54)hted
a(cid:69)era(cid:54)e
e(cid:71)erc(cid:56)se
(cid:63)r(cid:56)ce
32.(cid:16)0
(cid:16)(cid:20).02
6(cid:21).02
10(cid:17).6(cid:20)
(cid:19)3.21
(cid:45)e(cid:56)(cid:54)hted
a(cid:69)era(cid:54)e
e(cid:71)erc(cid:56)se
(cid:63)r(cid:56)ce
32.(cid:16)0
(cid:16)(cid:20).02
6(cid:20).1(cid:19)
10(cid:16).(cid:21)1
(cid:17)(cid:21).3(cid:20)
N(cid:68)mber
161,2(cid:21)0 (cid:3)
2(cid:16)(cid:19),(cid:21)(cid:17)0
(cid:16)(cid:16)1,123
(cid:19)2,31(cid:20)
(cid:21)22,6(cid:20)1 (cid:3)
N(cid:68)mber
161,2(cid:21)0
2(cid:16)(cid:19),(cid:21)(cid:17)0
1,030,(cid:17)(cid:16)(cid:16)
(cid:17)2(cid:20),10(cid:20)
1,(cid:21)6(cid:19),(cid:20)(cid:21)2
Toromont Industries Ltd. Annual Report 2022
88
3(cid:21)
Toromont Industries Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
The fair values of the share options granted during (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1 were determined at the time of grant using
the (cid:26)lac(cid:60)(cid:10)(cid:43)choles option pricing model with the following weighted average assumptions(cid:23)
(cid:30)air value price per option
(cid:43)hare price
Expected life of options (years)
Expected share price volatility
Expected dividend yield
(cid:42)is(cid:60)(cid:10)free interest rate
Deferred Share (cid:43)n(cid:56)t (cid:7)(cid:2)DS(cid:43)(cid:2)(cid:8) P(cid:59)ans
(cid:3)
(cid:3)
$
$
2022
22.2(cid:19)
10(cid:19).36
(cid:17).30
21.(cid:17) (cid:4)
1.(cid:16)(cid:17) (cid:4)
2.(cid:19)(cid:19) (cid:4)
(cid:15)(cid:13)(cid:15)1
1(cid:21).(cid:15)3
1(cid:13)4.91
(cid:18).3(cid:13)
(cid:15)1.(cid:18) (cid:4)
1.33 (cid:4)
(cid:13).9(cid:13) (cid:4)
The Company offers D(cid:43)(cid:45) plans for executives and non(cid:10)employee directors, whereby they may elect, on an
annual basis, to receive all or a portion of their performance incentive bonus or fees, respectively, in D(cid:43)(cid:45)s. In
addition, the (cid:26)oard of Directors may grant discretionary D(cid:43)(cid:45)s. (cid:38)on(cid:10)employee directors also receive a portion
of their compensation in D(cid:43)(cid:45)s.
(cid:25) reconciliation of the cash(cid:10)settled D(cid:43)(cid:45) plan was as follows(cid:23)
(cid:39)utstanding, (cid:34)anuary 1
(cid:45)nits ta(cid:60)en or ta(cid:60)en in lieu and dividends
(cid:42)edemptions
(cid:30)air mar(cid:60)et value adjustments
(cid:39)utstanding, December 31
N(cid:68)mber of
DS(cid:43)s
202,(cid:21)6(cid:21) (cid:3)
20,30(cid:19)
(cid:7)33,1(cid:16)(cid:20)(cid:8)
(cid:75)
1(cid:21)0,12(cid:20) (cid:3)
2022
(cid:44)a(cid:59)(cid:68)e
23,0(cid:19)(cid:16)
2,231
(cid:7)3,(cid:17)3(cid:17)(cid:8)
(cid:7)3,2(cid:16)2(cid:8)
1(cid:20),(cid:17)2(cid:20)
(cid:38)umber of
D(cid:43)(cid:45)s
394,1(cid:18)4 $
(cid:15)(cid:19),(cid:20)4(cid:21)
((cid:15)1(cid:20),933)
(cid:78)
(cid:15)(cid:13)(cid:15),9(cid:19)9 $
(cid:15)(cid:13)(cid:15)1
(cid:46)alue
3(cid:18),(cid:18)(cid:18)(cid:18)
(cid:15),(cid:19)(cid:18)3
((cid:15)1,(cid:20)(cid:18)1)
(cid:19),(cid:19)1(cid:20)
(cid:15)3,(cid:13)(cid:20)4
The liability for cash(cid:10)settled D(cid:43)(cid:45)s is recorded in accounts payable and accrued liabilities.
The Company introduced an equity(cid:10)settled D(cid:43)(cid:45) plan during the year as part of the long(cid:10)term incentive plan
described below. (cid:25) total of (cid:20),(cid:18)34 units were ta(cid:60)en in lieu, valued at $(cid:20)(cid:20)(cid:21) thousand, which is included in selling
and administrative expenses with a credit to contributed surplus.
Lon(cid:54)(cid:10)term Incent(cid:56)(cid:69)e P(cid:59)an (cid:7)(cid:2)LTIP(cid:2)(cid:8)
(cid:39)n (cid:25)pril (cid:15)(cid:21), (cid:15)(cid:13)(cid:15)(cid:15), shareholders approved the adoption of certain changes to the Company(cid:6)s LTI(cid:40). There was
no change to the Company(cid:6)s existing share option and cash-settled D(cid:43)(cid:45) plans, both of which remain in place.
(cid:45)nder the LTI(cid:40), the Company introduced performance share units ((cid:2)(cid:40)(cid:43)(cid:45)s(cid:2)), restricted share units ((cid:2)(cid:42)(cid:43)(cid:45)s(cid:2)),
executive deferred share units ((cid:2)ED(cid:43)(cid:45)s(cid:2)) and equity(cid:10)settled D(cid:43)(cid:45)s. The Company has the ability to grant
options and awards under all of these respective plans. The Company intends that total incentive award grants
will be based on historical share option grant levels at approximately a (cid:18)(cid:13)(cid:12)(cid:18)(cid:13) split between share options and
grants under the LTI(cid:40).
Details of each grant will be determined at the date of grant, including performance requirements, vesting and
settlement method. (cid:40)(cid:43)(cid:45)s and (cid:42)(cid:43)(cid:45)s will settle upon vesting, while ED(cid:43)(cid:45)s and equity(cid:10)settled D(cid:43)(cid:45)s will settle
upon cessation of service to the Company. (cid:40)(cid:43)(cid:45) vesting will be based upon the achievement of performance
objectives established at the time of grant by the (cid:26)oard of Directors. The maximum number of common shares
(cid:15)(cid:13)(cid:15)1
(cid:19)(cid:13)(cid:21),9(cid:21)9
(cid:21)(cid:19),4(cid:21)(cid:21)
(cid:19),4(cid:20)1
4(cid:13),(cid:15)1(cid:19)
(cid:20)4(cid:15),1(cid:19)4
(cid:20),(cid:13)(cid:13)(cid:13),(cid:13)(cid:13)(cid:13)
policy
the
).
are
common
based
exercise price
(cid:15)(cid:13)(cid:15)1
eighted
average
(cid:18)(cid:21).(cid:19)(cid:20)
1(cid:13)4.91
49.4(cid:18)
(cid:18)(cid:20).(cid:18)9
(cid:19)(cid:21).44
(cid:18)(cid:15).(cid:20)(cid:19)
(cid:45)e(cid:56)(cid:54)hted
a(cid:69)era(cid:54)e
e(cid:71)erc(cid:56)se
(cid:63)r(cid:56)ce
32.(cid:16)0
(cid:16)(cid:20).02
6(cid:20).1(cid:19)
10(cid:16).(cid:21)1
(cid:17)(cid:21).3(cid:20)
oromont Industries Ltd.
39
Consolidated Financial Statements
89
Toromont Industries Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
reserved for issuance, in aggregate, under the LTI(cid:40), will be (cid:20)(cid:18)(cid:13),(cid:13)(cid:13)(cid:13), representing (cid:13).9(cid:4) of the issued and
outstanding shares at (cid:30)ebruary (cid:15)(cid:19), (cid:15)(cid:13)(cid:15)(cid:15).
During the year, (cid:20),134 (cid:42)(cid:43)(cid:45)s and (cid:15)(cid:21),(cid:13)(cid:15)4 (cid:40)(cid:43)(cid:45)s were granted under the LTI(cid:40). Expense of $(cid:18)(cid:18)(cid:20) thousand is
included in selling and administrative expenses with a credit to contributed surplus.
Em(cid:63)(cid:59)oyee Share O(cid:70)nersh(cid:56)(cid:63) P(cid:59)an (cid:7)(cid:2)ESOP(cid:2)(cid:8)
The Company offers an E(cid:43)(cid:39)(cid:40) whereby employees who meet the eligibility criteria can purchase shares by
way of payroll deductions. There is a Company match at the rate of $1 for every $3 contributed, to a maximum
of (cid:15).(cid:18)(cid:4) of an employee’s base salary per annum. Company contributions prior to (cid:15)(cid:13)19 vested to the employee
immediately, while contributions in (cid:15)(cid:13)19 onwards will vest in five years from date of contribution. Company
contributions amounting to $3.(cid:21) million in (cid:15)(cid:13)(cid:15)(cid:15) ((cid:15)(cid:13)(cid:15)1 (cid:77) $3.3 million) were charged to selling and administrative
expenses when paid. The E(cid:43)(cid:39)(cid:40) is administered by a third party.
20. POST(cid:10)EMPLO(cid:47)MENT O(cid:24)LI(cid:29)ATIONS
Def(cid:56)ned Contr(cid:56)b(cid:68)t(cid:56)on P(cid:59)ans
The Company sponsors pension arrangements for more than 4,4(cid:15)(cid:18) of its employees, primarily through defined
contribution plans in Canada and a 4(cid:13)1((cid:60)) matched savings plan in the (cid:45)nited (cid:43)tates. Certain unioni(cid:75)ed
employees do not participate in Company(cid:10)sponsored plans, and contributions are made to these retirement
programs in accordance with the respective collective bargaining agreements. In the case of defined
contribution plans, regular contributions are made to the individual employee accounts, which are administered
by a plan trustee in accordance with the plan documents.
(cid:40)re(cid:10)tax pension expenses recogni(cid:75)ed in net earnings were as follows(cid:23)
Defined contribution plans
4(cid:13)1((cid:60)) matched savings plans
Def(cid:56)ned (cid:24)enef(cid:56)t P(cid:59)ans
(cid:3)
(cid:3)
2022
1(cid:19),(cid:16)(cid:16)3 $
3(cid:19)(cid:21)
1(cid:19),(cid:20)22 $
(cid:15)(cid:13)(cid:15)1
1(cid:19),193
3(cid:15)(cid:20)
1(cid:19),(cid:18)(cid:15)(cid:13)
The Company sponsors funded and unfunded defined benefit pension plans and post(cid:10)employment benefit
plans as described below with approximately 1,3(cid:13)(cid:13) active employees. In late (cid:15)(cid:13)(cid:15)(cid:13), a plan merger of all seven
funded defined benefit pension plans was announced effective December 31, (cid:15)(cid:13)(cid:15)(cid:13). (cid:42)egulatory approval was
received at various dates in (cid:15)(cid:13)(cid:15)1 and (cid:15)(cid:13)(cid:15)(cid:15), and as at December 31 (cid:15)(cid:13)(cid:15)(cid:15), the transfer of assets and defined
benefit obligations has been completed.
In (cid:39)ctober (cid:15)(cid:13)(cid:15)1, an annuity purchase transaction was entered into in which the defined benefit obligations
associated with retired plan members were assumed by a third(cid:10)party insurer.
a) Defined (cid:26)enefit (cid:40)ension (cid:40)lans (cid:77) The Company sponsors seven former plans. (cid:43)ix of these plans provide
pension benefits based on length of service and career average earnings and five plans are contributory. The
merged funded plan is registered with the (cid:39)ntario provincial regulators and is subject to provincial pension
legislation as well as the (cid:16)n(cid:31)(cid:42)me (cid:24)a(cid:51) (cid:10)(cid:31)t (Canada). The plans is administered by the Toromont (cid:40)ension
(cid:37)anagement Committee with assets held in a pension fund that is legally separate from the Company and
Toromont Industries Ltd. Annual Report 2022
90
4(cid:13)
Toromont Industries Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
cannot be used for any purpose other than payment of pension benefits and related administrative fees. the
actuarial valuation for the merged plan was completed as of December 31, (cid:15)(cid:13)(cid:15)(cid:13), with the next valuation
scheduled as at December 31, (cid:15)(cid:13)(cid:15)3.
b) Executive (cid:40)ension (cid:40)lan (cid:77) The plan is a supplemental pension plan and is solely the obligation of the
Company. (cid:25)ll members of the plan are retired. The Company is not obligated to fund the plan but is obligated
to pay benefits under the terms of the plan as they come due. (cid:25)s at December 31, (cid:15)(cid:13)(cid:15)(cid:15), the Company has
posted letters of credit in the amount of $13.(cid:19) million to secure the obligations under this plan. The most recent
actuarial valuation was completed as at December 31, (cid:15)(cid:13)(cid:15)(cid:15). The next valuation is scheduled as at
December 31, (cid:15)(cid:13)(cid:15)3.
c) (cid:40)ost(cid:10)employment (cid:26)enefit (cid:40)lans (cid:77) These plans provide supplementary post(cid:10)employment health and life
insurance coverage to certain employees as well as disability coverage for active employees. The
post-employment health and life insurance coverage covers a closed group of approximately 4(cid:18)(cid:13) retirees and
no active employees will receive post(cid:10)employment benefits. The Company is not obligated to fund the plans
but is obligated to pay benefits under the terms of the plan as they come due. The most recent actuarial
valuation was completed as at (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)(cid:13), with the next valuation scheduled as at (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)3.
R(cid:56)s(cid:58)s
Defined benefit pension plans and other post(cid:10)employment benefit plans expose the Company to ris(cid:60)s as
described below(cid:23)
(cid:80)
(cid:80)
(cid:80)
Investment ris(cid:60) (cid:77) The present value of the defined benefit plan liability is calculated using a discount
rate determined by reference to high(cid:10)quality corporate bond yields(cid:24) if the return on plan assets is below
this rate, it will create a plan deficit. Currently, the plans have a relatively balanced investment in equity
securities, debt instruments and real estate assets. The Toromont (cid:40)ension (cid:37)anagement Committee
reviews the asset mix and performance of the plan assets on a quarterly basis with the balanced
investment strategy intention.
Interest rate ris(cid:60) (cid:77) (cid:25) decrease in the bond yields will increase the plan liability(cid:24) however, this will be
partially offset by higher mar(cid:60)et values of the plan’s holdings in debt instruments.
Longevity ris(cid:60) (cid:77) (cid:25)n increase in the life expectancy of the plan participants will increase the plan(cid:6)s
liability by lengthening the period in which benefits are paid.
(cid:80) (cid:43)alary ris(cid:60) (cid:77) The present value of the defined benefit plan liability is calculated by reference to the
future salaries of plan participants. (cid:25)s such, an increase in the salary of the plan participants will
increase the plan’s liability.
and
thousand is
by
maximum
employee
Company
administrative
defined
unioni(cid:75)ed
retirement
defined
administered
(cid:15)(cid:13)(cid:15)1
1(cid:19),193
3(cid:15)(cid:20)
1(cid:19),(cid:18)(cid:15)(cid:13)
benefit
seven
was
defined
obligations
provide
he
pension
(cid:40)ension
and
oromont Industries Ltd.
Consolidated Financial Statements
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
Information about the Company(cid:6)s defined benefit plans as at December 31, in aggregate, is as follows(cid:23)
Def(cid:56)ned benef(cid:56)t ob(cid:59)(cid:56)(cid:54)at(cid:56)ons(cid:22)
(cid:26)alance, (cid:34)anuary 1
(cid:43)ettle due to buy(cid:10)out annuity transactions
Current service cost
Interest cost
(cid:25)ctuarial remeasurement (gains) losses arising from(cid:23)
Experience adjustments
Changes in financial assumptions
(cid:26)enefits paid
Contributions by plan participants
(cid:24)a(cid:59)ance, December 31
P(cid:59)an Assets
(cid:30)ar value, (cid:34)anuary 1
(cid:40)urchase of buy(cid:10)out annuities
Interest income on plan assets
(cid:42)eturn on plan assets (excluding amounts include in net
interest)
Contributions by the Company
Contributions by plan participants
(cid:26)enefits paid
(cid:30)air value, December 31
Effect of asset ce(cid:56)(cid:59)(cid:56)n(cid:54) (cid:59)(cid:56)m(cid:56)t
Fa(cid:56)r (cid:69)a(cid:59)(cid:68)e, December 31, net of asset ce(cid:56)(cid:59)(cid:56)n(cid:54) (cid:59)(cid:56)m(cid:56)t
Pens(cid:56)on
(cid:24)enef(cid:56)t P(cid:59)ans
Other Post(cid:10)em(cid:63)(cid:59)oyment
(cid:24)enef(cid:56)t P(cid:59)ans
2022
(cid:15)(cid:13)(cid:15)1
2022
(cid:15)(cid:13)(cid:15)1
(cid:3)
3(cid:16)2,(cid:20)60 $
1,(cid:17)(cid:16)(cid:20)
12,(cid:16)2(cid:19)
10,3(cid:16)3
(cid:19)14,1(cid:21)3 (cid:3)
((cid:15)1(cid:18),(cid:21)(cid:21)1)
14,(cid:19)(cid:19)(cid:15)
14,(cid:15)(cid:18)(cid:21)
(cid:7)1,(cid:17)(cid:20)2(cid:8)
(cid:7)110,130(cid:8)
(cid:7)1(cid:17),(cid:21)(cid:19)1(cid:8)
3,3(cid:21)(cid:19)
2(cid:16)2,(cid:20)(cid:21)2
2(cid:20)6,622
1,(cid:17)(cid:16)(cid:20)
(cid:20),(cid:19)13
(cid:7)(cid:16)1,1(cid:16)0(cid:8)
10,(cid:20)1(cid:20)
3,3(cid:21)(cid:19)
(cid:7)1(cid:17),(cid:21)(cid:19)1(cid:8)
2(cid:17)3,(cid:21)(cid:20)(cid:19)
(cid:75)
2(cid:17)3,(cid:21)(cid:20)(cid:19)
((cid:19),(cid:20)(cid:15)(cid:19))
((cid:18)1,(cid:18)14)
((cid:15)9,(cid:21)(cid:13)(cid:15))
3,(cid:19)(cid:21)(cid:13)
34(cid:15),(cid:21)(cid:19)(cid:13)
4(cid:21)(cid:19),3(cid:19)1
((cid:15)(cid:15)(cid:13),913)
11,(cid:19)(cid:15)1
14,3(cid:20)9
(cid:15)1,(cid:15)9(cid:19)
3,(cid:19)(cid:21)(cid:13)
((cid:15)9,(cid:21)(cid:13)(cid:15))
(cid:15)(cid:21)(cid:19),(cid:19)(cid:15)(cid:15)
((cid:18),999)
(cid:15)(cid:21)(cid:13),(cid:19)(cid:15)3
20,(cid:16)(cid:19)(cid:17) $
(cid:75)
1,0(cid:21)(cid:20)
(cid:17)(cid:17)0
(cid:7)(cid:16)6(cid:17)(cid:8)
(cid:7)3,(cid:20)(cid:17)6(cid:8)
(cid:7)1,203(cid:8)
(cid:75)
16,(cid:17)(cid:21)(cid:21)
(cid:75)
(cid:75)
(cid:75)
(cid:75)
1,203
(cid:75)
(cid:7)1,203(cid:8)
(cid:75)
(cid:75)
(cid:75)
(cid:15)1,(cid:19)(cid:15)9
(cid:78)
1,111
4(cid:21)3
(3(cid:19)(cid:18))
(1,1(cid:18)(cid:21))
(1,(cid:15)(cid:15)(cid:18))
(cid:78)
(cid:15)(cid:13),4(cid:20)(cid:18)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
1,(cid:15)(cid:15)1
(cid:78)
(1,(cid:15)(cid:15)1)
(cid:78)
(cid:78)
(cid:78)
Net (cid:63)ost(cid:10)em(cid:63)(cid:59)oyment ob(cid:59)(cid:56)(cid:54)at(cid:56)ons
(cid:3)
(cid:7)11,0(cid:21)(cid:17)(cid:8) $
(cid:19)(cid:15),(cid:15)3(cid:20) (cid:3)
16,(cid:17)(cid:21)(cid:21) $
(cid:15)(cid:13),4(cid:20)(cid:18)
The funded status of the Company(cid:6)s defined benefit plans as at December 31 was as follows(cid:23)
Defined (cid:26)enefit (cid:40)ension (cid:40)lans
Executive (cid:40)ension (cid:40)lan
(cid:40)ost(cid:10)employment (cid:26)enefit (cid:40)lans
Post(cid:10)em(cid:63)(cid:59)oyment ob(cid:59)(cid:56)(cid:54)at(cid:56)ons, net
Def(cid:56)ned
(cid:24)enef(cid:56)t
Ob(cid:59)(cid:56)(cid:54)at(cid:56)ons
(cid:3)
22(cid:20),(cid:20)(cid:21)(cid:21) (cid:3)
13,(cid:21)(cid:21)3
16,(cid:17)(cid:21)(cid:21)
2(cid:17)(cid:21),(cid:16)(cid:21)1 (cid:3)
(cid:3)
2022
P(cid:59)an
Assets
Net Post(cid:10)
Em(cid:63)(cid:59)oyment
Ob(cid:59)(cid:56)(cid:54)at(cid:56)ons
Defined
(cid:26)enefit
(cid:39)bligations
(cid:15)(cid:13)(cid:15)1
(cid:40)lan
(cid:25)ssets
(cid:38)et (cid:40)ost(cid:10)
Employment
(cid:39)bligations
2(cid:17)3,(cid:21)(cid:20)(cid:19) (cid:3)
(cid:75)
(cid:75)
2(cid:17)3,(cid:21)(cid:20)(cid:19) (cid:3)
2(cid:17),0(cid:20)(cid:20) $
(cid:7)13,(cid:21)(cid:21)3(cid:8)
(cid:7)16,(cid:17)(cid:21)(cid:21)(cid:8)
(cid:7)(cid:17),(cid:17)0(cid:16)(cid:8) $
3(cid:15)(cid:18),(cid:18)(cid:15)9 $
1(cid:20),331
(cid:15)(cid:13),4(cid:20)(cid:18)
3(cid:19)3,33(cid:18) $
(cid:15)(cid:21)(cid:13),(cid:19)(cid:15)3 $
(cid:78)
(cid:78)
(cid:15)(cid:21)(cid:13),(cid:19)(cid:15)3 $
(44,9(cid:13)(cid:19))
(1(cid:20),331)
((cid:15)(cid:13),4(cid:20)(cid:18))
((cid:21)(cid:15),(cid:20)1(cid:15))
The plans with a net retirement surplus have been classified as non(cid:10)current assets on the statement of
financial position (note (cid:20)).
92
Toromont Industries Ltd. Annual Report 2022
(cid:15)(cid:13)(cid:15)1
(cid:15)1,(cid:19)(cid:15)9
(cid:78)
1,111
4(cid:21)3
(3(cid:19)(cid:18))
(1,1(cid:18)(cid:21))
(1,(cid:15)(cid:15)(cid:18))
(cid:78)
(cid:15)(cid:13),4(cid:20)(cid:18)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
(cid:78)
1,(cid:15)(cid:15)1
(1,(cid:15)(cid:15)1)
(cid:15)(cid:13),4(cid:20)(cid:18)
Employment
(44,9(cid:13)(cid:19))
(1(cid:20),331)
((cid:15)(cid:13),4(cid:20)(cid:18))
((cid:21)(cid:15),(cid:20)1(cid:15))
of
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
The significant weighted average actuarial assumptions adopted in measuring the Company(cid:6)s defined benefit
obligations are noted below. The mortality assumption is based upon the (cid:15)(cid:13)14 (cid:40)rivate (cid:43)ector Canadian
(cid:40)ensioners(cid:6) (cid:37)ortality Table, developed by the Canadian Institute of (cid:25)ctuaries, projected generationally using
scale (cid:37)I(cid:10)(cid:15)(cid:13)1(cid:20), and adjusted to reflect differences in each (cid:40)lan.
Discount rate
Expected rate of salary increase
2022
(cid:17).0(cid:21) (cid:4)
3.00 (cid:4)
(cid:15)(cid:13)(cid:15)1
3.(cid:13)(cid:18) (cid:4)
3.(cid:13)(cid:13) (cid:4)
(cid:40)re(cid:10)tax pension and other post(cid:10)retirement benefit expenses recogni(cid:75)ed in net earnings were as follows(cid:23)
(cid:43)ervice cost
(cid:38)et interest expense
(cid:42)emeasurements
(cid:43)ettlement charges
(cid:3)
(cid:3)
2022
13,(cid:17)2(cid:17) $
2,1(cid:20)0
(cid:7)(cid:21)(cid:17)0(cid:8)
(cid:75)
1(cid:16),(cid:19)(cid:17)(cid:17) $
(cid:15)(cid:13)(cid:15)1
1(cid:18),(cid:20)(cid:20)3
3,1(cid:15)(cid:13)
((cid:15)(cid:15)9)
(cid:18),(cid:13)3(cid:15)
(cid:15)3,(cid:19)9(cid:19)
In (cid:39)ctober (cid:15)(cid:13)(cid:15)1, an annuity purchase transaction was entered into in which the defined benefit obligations
associated with retired plan members were assumed by a third(cid:10)party insurer, in exchange for a lump(cid:10)sum
payment of $(cid:15)(cid:15)1 million from plan assets. (cid:25) settlement charge of $(cid:18).(cid:13) million in connection with this
transaction was recorded in selling, general and administrative expenses. Toromont considers, for accounting
purposes, that this buy(cid:10)out transaction essentially eliminates any further legal or constructive obligations for
benefits, and that a settlement has occurred. In (cid:38)ovember (cid:15)(cid:13)(cid:15)(cid:15), there were premium adjustments with
insurers to reflect data adjustments. (cid:30)ollowing the transaction, benefits for plan participants are protected
under (cid:25)ssuris, the life insurance compensation association designated under the (cid:16)ns(cid:48)ran(cid:31)e (cid:11)(cid:42)mpanies (cid:10)(cid:31)t of
Canada. Toromont considers the combined ris(cid:60) of a) the insurer going ban(cid:60)rupt and b) that Toromont would be
responsible for paying the portion of pensions not covered by (cid:25)ssuris should the insurer go ban(cid:60)rupt, remote.
(cid:40)re(cid:10)tax amounts recogni(cid:75)ed in (cid:39)CI were as follows(cid:23)
(cid:25)ctuarial (gains) losses arising from experience adjustments
(cid:25)ctuarial (gains) losses arising from changes in financial assumptions
(cid:42)eturn on plan assets less (greater) than net interest recogni(cid:75)ed
Effect of asset ceiling limit
2022
(cid:7)2,0(cid:16)(cid:19)(cid:8) $
(cid:7)113,03(cid:17)(cid:8)
(cid:16)1,1(cid:16)0
(cid:7)(cid:17),(cid:21)(cid:21)(cid:21)(cid:8)
(cid:7)(cid:19)(cid:21),(cid:21)(cid:16)1(cid:8) $
(cid:3)
(cid:3)
(cid:15)(cid:13)(cid:15)1
((cid:20),(cid:13)91)
((cid:18)(cid:15),443)
(14,3(cid:20)9)
(cid:18),999
((cid:19)(cid:20),914)
The Company(cid:6)s pension plans(cid:6) actual weighted average asset allocations by asset category were as follows(cid:23)
Debt securities
Equity securities
(cid:42)eal estate assets
Cash and cash equivalents
2022
3(cid:16).0 (cid:4)
(cid:16)3.(cid:19) (cid:4)
1(cid:21).6 (cid:4)
2.(cid:19) (cid:4)
(cid:15)(cid:13)(cid:15)1
3(cid:21).(cid:18) (cid:4)
4(cid:15).(cid:21) (cid:4)
1(cid:18).(cid:18) (cid:4)
3.(cid:15) (cid:4)
Consolidated Financial Statements
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
The fair values of the plan assets were determined based on the following methods(cid:23)
(cid:80) Equity securities (cid:77) generally quoted mar(cid:60)et prices in active mar(cid:60)ets.
(cid:80) Debt securities (cid:77) generally quoted mar(cid:60)et prices in active mar(cid:60)ets.
(cid:80) (cid:42)eal estate assets (cid:77) infrastructure assets valued based on appraisals performed by a qualified external
appraiser.
(cid:80) Cash and cash equivalents (cid:77) generally recorded at cost, which approximates fair value.
The actual return on plan assets for the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) was a loss of $3(cid:15).4 million
((cid:15)(cid:13)(cid:15)1 (cid:77) gain of $(cid:15)(cid:19).(cid:13) million).
The Company expects to contribute $(cid:15)9.(cid:13) million to pension and other benefit plans in (cid:15)(cid:13)(cid:15)3, inclusive of
defined contribution plans.
The weighted average duration of the defined benefit plan obligations as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) was 1(cid:18).9 years
((cid:15)(cid:13)(cid:15)1 (cid:77) 19.(cid:21) years).
Sens(cid:56)t(cid:56)(cid:69)(cid:56)ty Ana(cid:59)ys(cid:56)s
(cid:43)ignificant actuarial assumptions for the determination of the defined benefit obligations ((cid:2)D(cid:26)(cid:39)(cid:2)) are discount
rate and life expectancy. The sensitivity analyses have been determined based on reasonably possible
changes of the respective assumptions occurring at the end of the reporting period, while holding all other
assumptions constant.
(cid:25)s at December 31, (cid:15)(cid:13)(cid:15)(cid:15), the following quantitative analysis shows changes to the significant actuarial
assumptions and the corresponding impact to the D(cid:26)(cid:39)(cid:23)
Act(cid:68)ar(cid:56)a(cid:59) Ass(cid:68)m(cid:63)t(cid:56)on
Sens(cid:56)t(cid:56)(cid:69)(cid:56)ty
(cid:40)eriod(cid:10)end discount rate
1(cid:4) increase
1(cid:4) decrease
(cid:37)ortality
Trend rate
Increase of 1 year in expected
lifetime of plan participants
Increase (cid:7)Decrease(cid:8) (cid:56)n D(cid:24)O
Pens(cid:56)on
(cid:24)enef(cid:56)t P(cid:59)ans
Other Post(cid:10)
em(cid:63)(cid:59)oyment
(cid:24)enef(cid:56)t P(cid:59)ans
Tota(cid:59)
$
$
$
(3(cid:18),(cid:13)(cid:21)1) $
44,(cid:21)3(cid:18) $
(1,31(cid:15)) $
1,(cid:18)3(cid:19) $
(3(cid:19),393)
4(cid:19),3(cid:20)1
4,(cid:21)49 $
((cid:15)4(cid:21)) $
4,(cid:19)(cid:13)1
1(cid:4) increase
(cid:38)(cid:25) $
1,1(cid:18)(cid:15) $
1,1(cid:18)(cid:15)
The sensitivity analysis presented above may not be representative of the actual change in the D(cid:26)(cid:39) as it is
unli(cid:60)ely that the change in assumptions would occur in isolation of one another as some of the assumptions
may be correlated.
21. CAPITAL MANA(cid:29)EMENT
The Company defines capital as the aggregate of shareholders(cid:6) equity and long(cid:10)term debt, less cash and cash
equivalents.
Toromont Industries Ltd. Annual Report 2022
94
44
Toromont Industries Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
The Company(cid:6)s capital management framewor(cid:60) is designed to maintain a flexible capital structure that allows
for optimi(cid:75)ation of the cost of capital at acceptable ris(cid:60) while balancing the interests of both equity and debt
holders.
external
The Company generally targets a net debt to total capitali(cid:75)ation ratio of 33(cid:4), although there is a degree of
variability associated with the timing of cash flows. (cid:25)lso, if appropriate opportunities are identified, the
Company is prepared to significantly increase this ratio depending upon the opportunity.
million
The Company(cid:6)s capital management criteria can be illustrated as follows(cid:23)
of
Long(cid:10)term debt
(cid:18)ess(cid:9) Cash and cash equivalents
(cid:38)et debt
(cid:43)hareholders(cid:6) equity
Tota(cid:59) ca(cid:63)(cid:56)ta(cid:59)(cid:56)(cid:73)at(cid:56)on
Net debt as a (cid:4) of tota(cid:59) ca(cid:63)(cid:56)ta(cid:59)(cid:56)(cid:73)at(cid:56)on
Net debt to e(cid:64)(cid:68)(cid:56)ty
(cid:3)
2022
6(cid:16)(cid:19),060
(cid:21)2(cid:19),(cid:19)(cid:20)0
(cid:7)2(cid:20)0,(cid:19)20(cid:8)
$
(cid:15)(cid:13)(cid:15)1
(cid:19)4(cid:19),33(cid:20)
91(cid:19),(cid:21)3(cid:13)
((cid:15)(cid:20)(cid:13),493)
2,32(cid:17),3(cid:17)(cid:21)
2,0(cid:16)(cid:16),63(cid:21)
$
1,9(cid:18)3,3(cid:15)9
1,(cid:19)(cid:21)(cid:15),(cid:21)3(cid:19)
(cid:3)
(cid:7)1(cid:16)(cid:8) (cid:4)
(cid:7)0.12(cid:8) (cid:22)1
(1(cid:19)) (cid:4)
((cid:13).14) (cid:23)1
The Company is subject to minimum capital requirements relating to ban(cid:60) credit facilities and senior
debentures. The Company has met these minimum requirements during the years ended December 31, (cid:15)(cid:13)(cid:15)(cid:15)
and (cid:15)(cid:13)(cid:15)1.
There were no changes in the Company(cid:6)s approach to capital management during the years ended
December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1.
22. S(cid:43)PPLEMENTAL CASH FLO(cid:45) INFORMATION
(cid:38)et change in non(cid:10)cash wor(cid:60)ing capital and other
(cid:25)ccounts receivable
Inventories
(cid:25)ccounts payable and accrued liabilities
(cid:40)rovisions
Deferred revenue and contract liabilities
Income taxes
Derivative financial instruments
(cid:39)ther
Cash paid during the year for(cid:23)
Interest
Income taxes
Cash received during the year for(cid:23)
Interest
Income taxes
oromont Industries Ltd.
4(cid:18)
2022
(cid:15)(cid:13)(cid:15)1
(cid:7)12(cid:19),(cid:19)3(cid:20)(cid:8) $
(cid:7)30(cid:17),33(cid:20)(cid:8)
103,(cid:17)66
2,2(cid:16)(cid:21)
10(cid:17),6(cid:19)(cid:17)
13,(cid:16)1(cid:16)
(cid:7)3,16(cid:17)(cid:8)
(cid:7)2,(cid:16)23(cid:8)
(cid:7)213,(cid:19)60(cid:8) $
(cid:21)9,(cid:19)3(cid:19)
(cid:20),9(cid:21)3
(1(cid:15),91(cid:18))
(1,(cid:15)41)
(cid:19)1,4(cid:18)(cid:21)
((cid:21),(cid:13)4(cid:15))
((cid:20),941)
3(cid:21)4
1(cid:15)9,3(cid:15)(cid:15)
2(cid:16),(cid:19)(cid:19)(cid:17) $
1(cid:16)(cid:16),(cid:16)(cid:16)6 $
(cid:15)(cid:19),1(cid:19)(cid:15)
13(cid:15),1(cid:13)9
1(cid:20),(cid:20)0(cid:16) $
2,(cid:19)0(cid:20) $
(cid:21),(cid:19)9(cid:15)
3,(cid:20)1(cid:15)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Consolidated Financial Statements
95
Toromont Industries Ltd.
years
discount
possible
other
actuarial
(3(cid:19),393)
4(cid:19),3(cid:20)1
4,(cid:19)(cid:13)1
1,1(cid:18)(cid:15)
it is
assumptions
cash
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:25) reconciliation of liabilities arising from financing activities was as follows(cid:23)
(cid:26)alance, (cid:34)anuary 1, (cid:15)(cid:13)(cid:15)1
(cid:30)inancing costs paid
Deferred financing costs
(cid:26)alance, December 31, (cid:15)(cid:13)(cid:15)1
Deferred f(cid:56)nanc(cid:56)n(cid:54) costs
(cid:24)a(cid:59)ance, December 31, 2022
23. COMMITMENTS
Lon(cid:54)(cid:10)term Debt
$
(cid:19)4(cid:19),(cid:15)99 $
(9(cid:19)1)
999
(cid:19)4(cid:19),33(cid:20) $
(cid:19)23
6(cid:16)(cid:19),060 (cid:3)
$
(cid:3)
Tota(cid:59)
(cid:19)4(cid:19),(cid:15)99
(9(cid:19)1)
999
(cid:19)4(cid:19),33(cid:20)
(cid:19)23
6(cid:16)(cid:19),060
(cid:30)uture minimum lease payments under non(cid:10)cancellable leases as at December 31, (cid:15)(cid:13)(cid:15)(cid:15) were $(cid:20).(cid:20) million
within one year, $1(cid:15).(cid:20) million within two and five years and $3.(cid:18) million thereafter.
2(cid:16). SE(cid:29)MENTED INFORMATION
The Company has two reportable segments(cid:23) the Equipment Group and CI(cid:37)C(cid:39), each supported by the
corporate office. These segments are strategic business units that offer different products and services, and
each is managed separately. The corporate office provides finance, treasury, legal, human resources and other
administrative support to the segments. The accounting policies of each of the reportable segments are the
same as the significant accounting policies described in note (cid:15).
The operating segments are being reported based on the financial information provided to the Chief Executive
(cid:39)fficer and Chief (cid:30)inancial (cid:39)fficer, who have been identified as the Chief (cid:39)perating Decision (cid:37)a(cid:60)ers
((cid:2)C(cid:39)D(cid:37)s(cid:2)) in monitoring segment performance and allocating resources between segments. The C(cid:39)D(cid:37)s
assess segment performance based on segment operating income, which is measured differently than income
from operations in the consolidated financial statements. Corporate overheads are allocated to the segments
based on revenue. Income taxes, interest expense, interest and investment income are managed at a
consolidated level and are not allocated to the reportable operating segments. Current income taxes, deferred
income taxes and certain financial assets and liabilities are not allocated to the segments as they are also
managed on a consolidated level.
The aggregation of the operating segments is based on the economic characteristics of the business units.
These business units are considered to have similar economic characteristics including nature of products and
services, class of customers and mar(cid:60)ets served and similar distribution models.
(cid:38)o reportable segment is reliant on any single external customer.
96
Toromont Industries Ltd. Annual Report 2022
Tota(cid:59)
(cid:19)4(cid:19),(cid:15)99
(9(cid:19)1)
999
(cid:19)4(cid:19),33(cid:20)
(cid:19)23
6(cid:16)(cid:19),060
million
the
and
other
the
Executive
(cid:37)a(cid:60)ers
C(cid:39)D(cid:37)s
income
segments
at a
deferred
also
units.
and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
E(cid:64)(cid:68)(cid:56)(cid:63)ment (cid:29)ro(cid:68)(cid:63)
The Equipment Group comprises the following(cid:23)
(cid:80)
Toromont Cat (cid:77) supplies, rents and provides product support services for speciali(cid:75)ed mobile equipment
and industrial engines.
(cid:80) (cid:26)attlefield Equipment (cid:42)entals (cid:77) The Cat (cid:42)ental (cid:43)tore (cid:77) supplies and rents speciali(cid:75)ed mobile
(cid:80)
equipment as well as specialty supplies and tools.
Toromont (cid:37)aterial (cid:32)andling (cid:77) supplies, rents and provides product support services for material
handling lift truc(cid:60)s.
(cid:80) (cid:25)g(cid:47)est (cid:77) supplies and provides product support services for speciali(cid:75)ed mobile equipment to the
agriculture industry.
(cid:80) (cid:43)ITEC(cid:32) (cid:77) supplies control systems for speciali(cid:75)ed mobile equipment.
(cid:80)
Toromont Energy (cid:77) develops distributed generators and combined heat and power projects using
Caterpillar engines.
CIMCO
(cid:40)rovides design, engineering, fabrication, installation, and product support services for industrial and
recreational refrigeration systems.
Cor(cid:63)orate Off(cid:56)ce (cid:10) The corporate office does not meet the definition of a reportable operating segment as
defined in I(cid:30)(cid:42)(cid:43) (cid:21), Operating Segments, as it does not earn revenue
The following table sets forth information by segment for the years ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) and (cid:15)(cid:13)(cid:15)1(cid:23)
(cid:47)ears ended December 31
Equipment(cid:12)pac(cid:60)age sales
(cid:42)entals
(cid:40)roduct support
(cid:40)ower generation
Tota(cid:59) re(cid:69)en(cid:68)e
CIMCO
Conso(cid:59)(cid:56)dated
E(cid:64)(cid:68)(cid:56)(cid:63)ment (cid:29)ro(cid:68)(cid:63)
(cid:15)(cid:13)(cid:15)1
2022
(cid:3) 1,(cid:19)(cid:21)(cid:17),2(cid:17)(cid:17) $ 1,(cid:20)(cid:15)1,3(cid:21)(cid:15) (cid:3)
(cid:16)(cid:17)2,1(cid:16)0
1,621,(cid:21)(cid:16)(cid:20)
10,(cid:16)10
3(cid:21)(cid:20),(cid:20)(cid:18)(cid:18)
1,4(cid:13)(cid:18),1(cid:15)(cid:21)
11,(cid:13)19
2022
1(cid:19)3,2(cid:19)3 $
(cid:75)
1(cid:19)(cid:19),(cid:19)10
(cid:75)
(cid:3) 3,(cid:20)(cid:19)(cid:21),(cid:19)(cid:17)3 $ 3,(cid:18)(cid:15)(cid:18),(cid:15)(cid:21)4 (cid:3)
3(cid:17)0,(cid:21)(cid:20)3 $
2022
(cid:15)(cid:13)(cid:15)1
(cid:15)(cid:13)(cid:15)1
(cid:15)(cid:13)(cid:21),(cid:21)(cid:18)4 (cid:3) 1,(cid:21)6(cid:20),(cid:17)2(cid:20) $ 1,93(cid:13),(cid:15)3(cid:19)
3(cid:21)(cid:20),(cid:20)(cid:18)(cid:18)
(cid:16)(cid:17)2,1(cid:16)0
1,(cid:18)(cid:18)(cid:20),(cid:18)(cid:15)(cid:20)
1,(cid:19)(cid:21)(cid:21),6(cid:17)(cid:20)
11,(cid:13)19
10,(cid:16)10
3(cid:19)1,(cid:15)(cid:18)3 (cid:3) (cid:16),230,(cid:19)36 $ 3,(cid:21)(cid:21)(cid:19),(cid:18)3(cid:20)
(cid:78)
1(cid:18)(cid:15),399
(cid:78)
O(cid:63)erat(cid:56)n(cid:54) (cid:56)ncome
(cid:3)
(cid:17)(cid:21)(cid:19),6(cid:19)(cid:19) $
4(cid:18)(cid:13),9(cid:18)(cid:13) (cid:3)
26,(cid:16)(cid:21)2 $
(cid:15)4,9(cid:21)(cid:20) (cid:3)
62(cid:16),16(cid:21) $
4(cid:20)(cid:18),93(cid:20)
Interest expense
Interest and investment income
Income taxes
Net earn(cid:56)n(cid:54)s
2(cid:19),33(cid:20)
(cid:7)22,232(cid:8)
16(cid:16),(cid:20)6(cid:17)
(cid:16)(cid:17)(cid:16),1(cid:21)(cid:20) $
(cid:15)(cid:21),1(cid:19)1
(9,(cid:13)(cid:15)(cid:20))
1(cid:15)4,(cid:13)93
33(cid:15),(cid:20)1(cid:13)
(cid:3)
(cid:39)perating income from rental operations for the year ended December 31, (cid:15)(cid:13)(cid:15)(cid:15) was $9(cid:13).(cid:13) million
((cid:15)(cid:13)(cid:15)1 (cid:77) $(cid:18)(cid:20).9 million).
Consolidated Financial Statements
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
(cid:43)elected consolidated statements of financial position information(cid:23)
As at December 31
Identifiable assets
Corporate assets
Tota(cid:59) assets
Identifiable liabilities
Corporate liabilities
Tota(cid:59) (cid:59)(cid:56)ab(cid:56)(cid:59)(cid:56)t(cid:56)es
E(cid:64)(cid:68)(cid:56)(cid:63)ment (cid:29)ro(cid:68)(cid:63)
(cid:15)(cid:13)(cid:15)1
2022
(cid:3) 3,00(cid:20),(cid:20)1(cid:20) $ (cid:15),4(cid:21)9,(cid:21)(cid:15)1 (cid:3)
CIMCO
2022
1(cid:17)(cid:17),3(cid:19)1 $
(cid:3)
(cid:21)16,632 $
(cid:20)(cid:21)(cid:13),(cid:13)(cid:20)(cid:15) (cid:3)
(cid:20)3,3(cid:16)(cid:19) $
Conso(cid:59)(cid:56)dated
2022
(cid:15)(cid:13)(cid:15)1
(cid:15)(cid:13)(cid:15)1
1(cid:15)(cid:15),(cid:20)(cid:20)1 (cid:3) 3,16(cid:16),1(cid:20)(cid:21) $ (cid:15),(cid:19)1(cid:15),(cid:18)9(cid:15)
1,01(cid:19),(cid:21)36
9(cid:20)1,(cid:15)(cid:13)4
(cid:3) (cid:16),1(cid:20)2,12(cid:17) $ 3,(cid:18)(cid:21)3,(cid:20)9(cid:19)
(cid:20)(cid:13),(cid:13)39 (cid:3)
(cid:21)(cid:21)(cid:21),(cid:21)(cid:19)(cid:21) $
(cid:20)(cid:17)6,(cid:19)(cid:20)(cid:19)
(cid:21)(cid:18)(cid:13),111
(cid:20)(cid:21)(cid:13),3(cid:18)(cid:19)
(cid:3) 1,(cid:20)(cid:17)6,(cid:19)66 $ 1,(cid:19)3(cid:13),4(cid:19)(cid:20)
Ca(cid:63)(cid:56)ta(cid:59) e(cid:71)(cid:63)end(cid:56)t(cid:68)res, net
(cid:3)
21(cid:19),262 $
114,(cid:19)(cid:18)3 (cid:3)
(cid:21),131 $
(cid:15)1,(cid:20)(cid:15)9 (cid:3)
226,3(cid:21)3 $
13(cid:19),3(cid:21)(cid:15)
De(cid:63)rec(cid:56)at(cid:56)on e(cid:71)(cid:63)ense
(cid:3)
1(cid:17)2,(cid:20)(cid:20)(cid:16) $
14(cid:20),4(cid:21)(cid:15) (cid:3)
6,(cid:19)2(cid:17) $
(cid:19),(cid:20)3(cid:19) (cid:3)
1(cid:17)(cid:21),60(cid:21) $
1(cid:18)4,(cid:15)1(cid:21)
(cid:39)perations are based in Canada and the (cid:45)nited (cid:43)tates. The following tables summari(cid:75)e the final destination of
revenue to customers and the capital assets and goodwill held in each geographic segment(cid:23)
(cid:47)ears ended December 31
Canada
(cid:45)nited (cid:43)tates
International
Re(cid:69)en(cid:68)e
As at December 31
Canada
(cid:45)nited (cid:43)tates
Ca(cid:63)(cid:56)ta(cid:59) assets and (cid:54)ood(cid:70)(cid:56)(cid:59)(cid:59)
2022
(cid:16),120,00(cid:19) $
10(cid:21),(cid:19)06
1,023
(cid:16),230,(cid:19)36 $
2022
1,1(cid:19)(cid:17),20(cid:19) $
(cid:17),(cid:16)(cid:20)6
1,1(cid:20)0,6(cid:21)3 $
(cid:15)(cid:13)(cid:15)1
3,(cid:20)9(cid:18),(cid:19)34
(cid:21)(cid:20),(cid:20)4(cid:18)
3,1(cid:18)(cid:21)
3,(cid:21)(cid:21)(cid:19),(cid:18)3(cid:20)
(cid:15)(cid:13)(cid:15)1
1,(cid:13)(cid:19)(cid:18),(cid:20)9(cid:21)
4,3(cid:15)(cid:21)
1,(cid:13)(cid:20)(cid:13),1(cid:15)(cid:19)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
2(cid:17). RELATED PART(cid:47) DISCLOS(cid:43)RES
(cid:33)ey Mana(cid:54)ement Personne(cid:59) Com(cid:63)ensat(cid:56)on
(cid:35)ey management includes the Company(cid:6)s directors and named executive officers. The remuneration of (cid:60)ey
management is determined by the (cid:32)uman (cid:42)esources and (cid:32)ealth and (cid:43)afety Committee, having regard to the
performance of the individual and Company and mar(cid:60)et trends. The compensation paid or payable to (cid:60)ey
management for employee and director services is shown below(cid:23)
(cid:43)alaries
(cid:43)hare options and D(cid:43)(cid:45) awards
(cid:25)nnual non(cid:10)equity incentive based plan compensation
(cid:40)ension costs
(cid:25)ll other compensation
98
Toromont Industries Ltd. Annual Report 2022
(cid:3)
(cid:3)
2022
3,311 $
3,0(cid:20)2
3,(cid:16)(cid:21)(cid:17)
(cid:19)(cid:17)(cid:16)
131
10,(cid:19)(cid:19)3 $
(cid:15)(cid:13)(cid:15)1
3,3(cid:20)(cid:21)
(cid:15),(cid:18)1(cid:19)
3,(cid:15)(cid:13)(cid:13)
(cid:19)4(cid:13)
1(cid:18)(cid:13)
9,(cid:21)(cid:21)4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2022
($ thousands, except where otherwise indicated)
26. ECONOMIC RELATIONSHIP
The Company, through its Equipment Group, sells and services heavy equipment and related parts.
Distribution agreements are maintained with several equipment manufacturers, of which the most significant
are with subsidiaries of Caterpillar Inc. The distribution and servicing of these products account for the major
portion of the Equipment Group’s operations. Toromont has had a strong relationship with Caterpillar Inc. since
inception in 1993.
Consolidated Financial Statements
99
destination of
(cid:15),(cid:19)1(cid:15),(cid:18)9(cid:15)
9(cid:20)1,(cid:15)(cid:13)4
3,(cid:18)(cid:21)3,(cid:20)9(cid:19)
(cid:21)(cid:18)(cid:13),111
(cid:20)(cid:21)(cid:13),3(cid:18)(cid:19)
1,(cid:19)3(cid:13),4(cid:19)(cid:20)
13(cid:19),3(cid:21)(cid:15)
1(cid:18)4,(cid:15)1(cid:21)
(cid:15)(cid:13)(cid:15)1
3,(cid:20)9(cid:18),(cid:19)34
(cid:21)(cid:20),(cid:20)4(cid:18)
3,1(cid:18)(cid:21)
3,(cid:21)(cid:21)(cid:19),(cid:18)3(cid:20)
(cid:15)(cid:13)(cid:15)1
1,(cid:13)(cid:19)(cid:18),(cid:20)9(cid:21)
4,3(cid:15)(cid:21)
1,(cid:13)(cid:20)(cid:13),1(cid:15)(cid:19)
(cid:60)ey
the
(cid:60)ey
(cid:15)(cid:13)(cid:15)1
3,3(cid:20)(cid:21)
(cid:15),(cid:18)1(cid:19)
3,(cid:15)(cid:13)(cid:13)
(cid:19)4(cid:13)
1(cid:18)(cid:13)
9,(cid:21)(cid:21)4
Ten-Year Financial Review
For the years ended December 31
2019
275
930
337
471
891
705
800
955
855
192
($ thousands, except ratios and share data)
OPERATING RESULTS
Revenues
Net earnings
Net interest expense
Capital expenditures, net
Dividends declared
FINANCIAL POSITION
Working capital
Capital assets
Total assets
Non-current portion of long-term debt
Shareholders' equity
FINANCIAL RATIOS
:1
Working capital
21.4
Return on opening shareholders' equity (%)
:1
Total debt, net of cash, to shareholders' equity
PER SHARE DATA ($)
Basic earnings per share
Diluted earnings per share
Dividends declared
Book value (shareholders' equity)
Shares outstanding at year end
Price range
High
Low
Close
52
49
08
70
448
15
71
59
2019
2022
2021
2020
705
4,230,736
800
454,198
955
5,106
855
226,393
192
128,463
275
1,512,456
930
1,086,913
337
4,182,125
471
647,060
891
2,325,359
:1
2.4:1
21.4
23.5
:1
(.12):1
3,886,537
332,710
19,134
136,382
112,344
1,294,739
976,346
3,583,796
646,337
1,953,329
2.6:1
19.6
(.14):1
3,478,897
254,915
20,898
69,253
101,953
1,077,928
962,694
3,346,792
646,299
1,698,652
2.4:1
16.6
.03:1
y
52
5.52
49
5.47
08
1.56
70
28.25
448
82,318,159
4.03
4.00
1.36
23.69
82,443,968
3.10
3.09
1.24
20.60
82,474,658
82,
15
124.25
71
93.25
59
97.71
115.23
84.61
114.36
94.86
52.36
89.20
Notes
(1) In 2015, debentures totalling $125.0 million matured and as such were shown as "Current portion of long-term debt" in working capital in 2014.
(32 The Company completed the acquisition of the businesses and net operating assets of the Hewitt Group of Companies on October 27, 2017 for $1.02 billion. Long-
(32 T
(32 The Company completed the acquisition of the businesses and net operating assets of the Hewitt Group of Companies on October 27, 2017 for $1.02 billion. Long-
(1) In
statem
statements for more information.
statements for more information.
lion. Long-term debt and common shares were issued on October 27, 2017, to partially fund the aforementioned acquisition. Refer to note 25 of the 2018 audited financ
audited financial
statements for more information.
100
Toromont Industries Ltd. Annual Report 2022
2020
2020
2019
2018
2017(2)
2016
2015(1)
2014
2013
897
915
898
253
953
928
694
792
299
652
16.6
:1
:1
10
09
24
60
86
36
20
658
82,
897
915
898
253
953
928
694
792
299
652
:1
6
:1
10
09
24
60
658
86
36
20
3,678,705
286,800
17,955
209,855
88,192
829,275
1,020,930
3,371,337
645,471
1,533,891
1.8:1
21.4
.18:1
3,504,236
251,984
21,725
165,146
74,516
653,906
954,306
3,234,531
644,540
1,327,679
1.6:1
22.3
.23:1
2,350,162
175,970
7,618
100,954
60,402
767,374
881,877
2,866,945
893,806
1,124,727
2.1:1
19.3
.65:1
1,912,040
155,748
3,236
85,031
56,280
575,382
454,104
1,394,212
150,717
885,432
2.8:1
20.0
(.04):1
1,846,723
145,666
5,246
113,911
52,882
486,293
429,824
1,276,077
152,079
775,281
2.6:1
21.6
.11:1
1,660,390
133,196
4,034
76,893
46,267
294,753
371,661
1,107,802
4,942
668,075
1.7:1
23
.07:1
1,593,431
123,031
4,900
71,267
39,854
356,347
341,152
1,030,555
130,948
576,557
2.2:1
25.7
.11:1
3.52
3.49
1.08
18.70
82,012,448
3.10
3.07
0.92
16.35
81,226,383
2.22
2.20
0.76
13.89
80,949,819
1.99
1.98
0.72
11.29
78,398,456
1.88
1.86
0.68
9.95
77,905,821
1.73
1.71
0.60
8.65
77,259,396
1.61
1.59
0.52
7.50
76,844,897
71.15
52.71
70.59
68.11
46.24
54.26
58.44
41.10
55.10
44.44
27.25
42.35
37.61
26.70
31.55
28.97
24.48
28.51
26.94
21.12
26.65
Ten-Year Financial Review
101
Board of Directors
Richard G. Roy
Chair of the Board (Director since 2018)
Peter J. Blake‡*
Corporate Director (since 2019),
Chair of Environmental, Social and
Governance Committee
Benjamin D. Cherniavsky*
Corporate Director (since 2021)
Jeffrey S. Chisholm‡
Corporate Director (since 2011),
Lead Director, Chair of Human Resources
and Health and Safety Committee
Cathryn E. Cranston*‡
Corporate Director (since 2013),
Chair of Audit Committee
Sharon L. Hodgson*
Corporate Director (since 2019)
Scott J. Medhurst
President and Chief Executive Officer
(since 2012)
Fredrick J. Mifflin*
Corporate Director (since 2022)
Katherine A. Rethy‡
Corporate Director (since 2013)
* Member of Audit Committee
Member of Human Resources and Health and Safety Committee
‡ Member of Environmental, Social and Governance Committee
Executive Team
Corporate Executive
Business Unit Leaders
Scott J. Medhurst
President and Chief Executive Officer
Joel Couture
Chief Operating Officer, Toromont Cat
Michael McMillan
Executive Vice President and Chief Financial Officer
Colin Goheen
President, Battlefield Equipment Rentals
Michael P. Cuddy
Vice President and Chief Information Officer
David A. Malinauskas
President, CIMCO Refrigeration
Jennifer J. Cochrane
Vice President, Finance
Lynn M. Korbak
General Counsel and Corporate Secretary
Isabelle Leclerc
Vice President, Human Resources
102
Toromont Industries Ltd. Annual Report 2022
Toromont Industries Ltd. employs 6,800 empowered people
across seven business units and 160+ locations. We are driving
forward together as one Toromont aligned by our corporate
values, core strategies and our business model of providing
specialized equipment and lifecycle product support that our
customers count on every day. Our company listed on the Toronto
Stock Exchange (symbol TIH) in 1968 and is a member of the S&P/
TSX Canadian Dividend Aristocrats®.
Please visit www.toromont.com for more information.
Our business units
Toromont is one of the largest Caterpillar dealers
in the world with Toromont Cat branches and
field-service operations across seven provinces
and one territory. We serve the specialized heavy
equipment, power generation, heavy rent, used
equipment, product support and component
remanufacturing needs of thousands of public
infrastructure, construction, demolition, paving,
mining, aggregate, waste management, agriculture,
forestry, trucking, shipping, transit and data
centre customers.
Toromont serves ports and terminals, paper
producers, automotive parts manufacturers,
beverage companies, hardware retailers and
government agencies through Toromont Material
Handling, which sells, rents and supports brand
name lift trucks, container handlers, industrial
batteries, chargers and racking systems.
Toromont rents brand-name machines, tools,
supplies and provides product support to
contractors, specialty trades and do-it-yourself
customers through Battlefield Equipment Rentals –
The Cat Rental Store locations.
Toromont meets the specialized tool crib and rental
equipment needs of contractors working in refinery
industries, healthcare, automotive, steel and
pulp and paper through Jobsite Industrial Rental
Services in eastern and western Canada.
Toromont specializes in providing machine control,
site positioning software and asset management
technologies as well as professional support
services through SITECH Eastern Canada Ltd.,
a Trimble and Cat AccuGrade® dealer.
Tormont serves North American food, dairy, cold
storage, beverage, pharmaceutical, automotive,
chemical, petrochemical, mining and recreational
ice rink markets through CIMCO Refrigeration,
a leading supplier of refrigeration equipment,
Net Zero Naturally technologies and product
support services.
Toromont serves the year-round equipment and
product support needs of Manitoba’s agriculture
industry through AgWest, an official dealer of
AGCO and CLAAS, two trusted brands for crop and
livestock applications.
Corporate Directory
Toromont Cat
3131 Highway 7 West
P.O. Box 5511
Concord, Ontario L4K 1B7
T: 416.667.5511 F: 416.667.5555
5001 Trans-Canada Highway
Pointe-Claire, Québec H9R 1B8
T: 514.630.3100 F: 514.630.9020
www.toromontcat.com
Battlefield Equipment Rentals
880 South Service Road
Stoney Creek, Ontario L8E 5M7
T: 905.643.9410 F: 905.643.6008
www.battlefieldequipment.ca
Toromont Material Handling
425 Millway Avenue
Concord, Ontario L4K 3V8
T: 905.669.6590 F: 416.661.1513
www.toromontmaterialhandling.com
AgWest Ltd.
Highway #1 West
P.O. Box 432
Elie, Manitoba R0H 0H0
T: 204.353.3850 F: 877.353.2486
www.agwest.com
CIMCO Refrigeration
1551 Corporate Drive
Burlington, Ontario L7L 6E9
T: 416.465.7581
www.cimcorefrigeration.com
Annual meeting
The Annual Meeting of the Shareholders
of Toromont Industries Ltd. will be held at
10:00 am (EDT) on Friday, April 28, 2023.
Visit www.toromont.com for more details.
How to get in touch with us
T: 416.667.5511 F: 416.667.5555
E-mail: investorrelations@toromont.com
How to reach our transfer Agent and Registrar
Investors are encouraged to contact TSX Trust
Company (Canada) for information regarding their
security holdings.
TSX Trust Company (Canada)
P.O. Box 700, Station B
Montréal, Québec H3B 3K3
Toll-Free North America: 1.800.387.0825
Local: 416.682.3860
E-mail: shareholderinquiries@tmx.com
www.tsxtrust.com
Common shares
Listed on the Toronto Stock Exchange
Stock Symbol – TIH
Toromont’s 2022 Sustainability Report
is available at:
www.toromont.com/sustainability
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Toromont Industries Ltd.
Corporate Office
3131 Highway 7 West
P.O. Box 5511
Concord, Ontario L4K 1B7
www.toromont.com
Toromont Industries Ltd.
Annual Report 2022