Toromont Industries Ltd.
Annual Report 2024
DRIVEN.
DEDICATED.
DISCIPLINED.
Toromont Industries Ltd. is a diversified growth company
that serves its shareholders and customers through several
well-established, market-leading businesses, underpinned
by a strong financial foundation.
Financial highlights
FY ’24
FY ’23
FY ’22
Revenues*
$5.0B
$4.6B
$4.1B
Net Earnings*
$507M
$529M
$450M
Basic EPS*
$6.18
$6.43
$5.47
ROCE
25.7%
30.4%
32.3%
Net Debt/
Total Cap
-9%
-17%
-14%
* Continuing operations basis
Consecutive dividend
increases for 36 years
Toromont has paid dividends every year since 1968
including 2024 when our dividend was $1.92 per share.
In 2025, our Board increased the dividend for the 36th
consecutive year to an annualized rate of $2.08 per share.
At a Glance
For more information, including our Sustainability Report, please visit www.toromont.com.
On the cover: Harry Mott from
Toromont Cat’s Ottawa branch
participated in Caterpillar’s Global
Dealer Technician Challenge, winning
at the North America West and
Canada level and qualifying for the
semi-finals to be held in 2025.
Our company listed on the Toronto Stock Exchange
(symbol TIH) in 1968 and is a member of the S&P/ TSX
Canadian Dividend Aristocrats®.
~7300 employees
~165 locations in Canada and the USA
How we fuel performance
Toromont’s businesses trade on different names and
pursue unique growth and development opportunities
in their markets. However, every business is aligned
to the Toromont business model, values, corporate
management principles and core strategies.
OUR VALUES
›
Safe and respectful workplace
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Social responsibility
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Uncompromising integrity
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Empowerment at all levels
›
Growth of the individual and enterprise
›
Returns to all stakeholders
PROVEN BUSINESS MODEL
AND STRATEGY
SPECIALIZED
EQUIPMENT
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ALIGNMENT
AUTHORITY
ACCOUNTABILITY
Equipment Group
91%
New
39%
Used
6%
Rentals
10%
Product support
36%
CIMCO
9%
Package Sales
5%
Product Support
4%
Rental fleet
(net)
Property, plant
and equipment
Business
acquisition
2024 Revenue
Investments ($ millions)
Our Businesses
EQUIPMENT GROUP
The Equipment Group includes Toromont Cat, one of the largest
Caterpillar dealers in the world, our specialized equipment rental stores
as well as component remanufacturing, material handling and machine
control solutions operations.
CIMCO
As one of North America’s
leading suppliers of thermal
management solutions, CIMCO
enables industrial, recreational
and commercial customers to
reduce energy consumption and
emissions, use natural refrigerants
and control their operating
environments autonomously.
Toromont’s business units serve different markets but each one provides customers with specialized capital
equipment and lifetime product support. Business model continuity across a diversified customer base is a
core attribute but our strength lies in our disciplined, dedicated and driven team culture.
2024
2023
2022
2020
79.6
138.3
250.8
358.7
282.8
2021
After several years characterized by unique market
dynamics, and in the context of opportunities and challenges
in 2024, this was a solid outcome.
While annual results are important, more telling is
performance through market cycles. Delivering value
on this long-term basis is a key objective for our Board
and management team. This mindset drives our capital
allocation decisions, our duty of care for our Toromont team
members and the enduring partnerships we seek to build
with customers and world-leading OEMs. Decades ago,
this mindset inspired our economic model of delivering
specialized capital equipment paired with product support
across diversified vertical markets while maintaining a
strong financial position that further mitigates cyclical risk.
Scrutinizing Toromont on a full-cycle basis demonstrates the
value of this approach. Over the past five years, we invested
over $1.1 billion in our rental fleets and capital infrastructure,
including a business acquisition, giving us a better and broader
platform to serve customers and represent our partners. For
our workforce, we provided more than 142,000 hours of skills
training to empower employees. For shareholders, 5-year
average annual revenue growth of 7.1% translated into 5-year
average annual growth in EPS of 13.4%, an ROE average of
20.3% and five consecutive annual increases in Toromont’s
dividend. (In February 2025, our Board of Directors increased
the dividend for the 36th consecutive year.) While deploying
the balance sheet, strong cashflows allowed Toromont to
reduce net debt to total capitalization to -9% (net cash
position) from 15% at year-end 2019.
We are proud of this performance, delivered as it was
during an economic cycle that began with a global pandemic,
included supply chain constraints, significant increases
in inflation and interest rates, and ended in 2024 with a
transition in those externalities. Supply chains have now
largely normalized and other factors such as interest rates
have trended lower, supporting new product and service
investments by our customers in 2025. At the same time, we
are determined to build on Toromont’s success not just this
year but throughout the next business cycle.
Connect26, Toromont’s three-year plan
To guide our long-term ambitions, Toromont creates three-
year plans. In 2024, we introduced Connect26, our new
growth and improvement roadmap. It is anchored by our
north-star aim of delivering 18% ROE over the business cycle
and is faithful to our core strategies of expanding markets,
broadening product offerings, investing in resources,
strengthening product support and maintaining a strong
financial position.
To support those objectives, Connect26 commits us to
building new and stronger connections with customers,
employees, partners and communities and leveraging the
connections that exist between Toromont businesses for
synergistic advantage. Below we describe actions we are
taking and disciplined investments we are making to win
business today and create value for tomorrow.
Message to Shareholders:
In 2024, Toromont
generated revenue of
just over $5 billion, 9%
higher than in 2023,
earned $506.5 million
or $6.18 basic per share,
a 4% year-over-year
reduction, and delivered
Return on Shareholders’
Equity of 19.2%.
Mike S. H. McMillan
President and Chief
Executive Officer
Richard G. Roy
Chair of the Board
of Directors
Annual Report 2024
1
We also changed how we go to market with Compact
Construction Equipment (CCE) products. Responsibility for
sales of these machines was transferred to Toromont Cat
from Battlefield with two advantages: Battlefield returns
to its roots as a rental company first and foremost; and,
Toromont Cat customers now have the same connection
point to buy all Caterpillar machines we represent, large and
small. We look to build on this shift by selectively introducing
CCE retail showrooms, leveraging the capabilities of the
CCE sales force as part of Toromont Cat, and continuing to
drive the CCE rental opportunity from Battlefield. To open
2025, Battlefield assumed responsibility for the pump
rental business previously managed by Toromont Power
Systems. Construction site dewatering systems are an ideal
complement to Battlefield’s rental product portfolio.
Toromont Material Handling (TMH) used year one of
Connect26 to expand its rental fleet across all equipment
categories to better serve customers – including those
whose business volumes periodically surge and those who
prefer long-term, lease-style arrangements. To improve
financial and time utilization, we will leverage core rental
business disciplines at TMH starting in 2025.
While organic growth remains our priority, Toromont
completed the acquisition of Tri-City Equipment Rentals
in the third quarter. Located in southwestern Ontario, this
business specializes in renting heavy equipment. Although
this acquisition did not make a material difference to
revenues, it connected us to new customers and insights we
will leverage in managing a dealership-wide fleet of ~600
heavy rent machines and attachments.
Connecting customers to the circular economy
with new capacity
Rebuilding engines, transmissions, drive trains, suspension
groups and hydraulic cylinders is one of the ways Toromont
connects customers to the environmental and cost
advantages of the circular economy. To serve the needs
of customers for decades to come, including those whose
machines use hybrid drivetrain and battery electric
technologies, we built – and in May 2024 – occupied a
143,000 square foot Toromont Remanufacturing (TR) Centre
in Bradford, Ontario. That marked the start of a months’
long process to commission and optimize the plant’s
sophisticated equipment including automated soda blasting
(for component cleaning) and engine dynamometers that
arrived before year end.
While 2024 was a staging year, the team in Bradford began
to capitalize on the plant’s footprint and features. Rebuilding
generators for urgent reuse by customers in Iqaluit, including
26-tonne Cat® C280s, demonstrated the value of extra
Message to Shareholders
Connecting to the rental market in new ways
Toromont serves a large rental equipment market through
Toromont Cat, Toromont Power Systems, Battlefield
Equipment Rentals – The Cat Rental Store (Battlefield),
Jobsite Industrial Rental Services (Jobsite), SITECH Eastern
Canada (SITECH) and Toromont Material Handling. To
improve our long-term positions, we made several moves
in year one of Connect26.
Informed by marketplace studies, Battlefield opened two
locations in Ontario (Pembrook and St. Thomas) and
offered customers a better experience by expanding its
Sainte-Madeleine, Québec store and moving into a new
facility in Sherbrooke. While storefront investments are
important and Battlefield now operates in 70 locations
across Eastern Canada, back shops continue to focus on
getting rental equipment in a return-to-ready state quickly
after customer use to drive better utilization. Recognizing
that customers connect with Battlefield for leading brands,
we introduced trench safety products into our Ontario
network with good uptake.
To build long-term connections to Western Canadian
industrial rental markets, Jobsite opened a branch inside
Battlefield’s Winnipeg store. Jobsite now has facilities there as
well as in Edmonton, Fort McMurray, and Burnaby (all opened
in 2023) in addition to 10 locations in Eastern Canada.
While a start-up presence requires patient capital, Jobsite
successfully secured several customer projects in its new
territories, including the provision of tool cribs used during
the maintenance shutdown of a west coast refinery.
$5 billion
Revenue generated in 2024
$506.5 million
Earned in 2024
Toromont Industries Ltd.
2
facility floor and yard space and overhead crane capacity
that makes large-scale work more efficient. This assignment
also underscored the synergistic connections that we
leverage between TR and other parts of our business. In this
case, Toromont Power Systems sourced the used generator
sets, managed a complex set of northern Canadian delivery
logistics and commissioned the rebuilt models in Iqaluit.
To bring the new Centre up to nameplate capacity in 2025,
plant management is making a concerted effort to recruit
additional technicians through open houses with the added
benefit of building community connections and a public
profile for Toromont in the Bradford region.
Through this dedicated facility and four others in Eastern
Canada, Toromont is well connected to customers in power,
mining, transportation and construction for whom our
component exchange program serves as a vital backstop for
business continuity. The exchange program is the subject
of ongoing inventory investments informed by telematics
monitoring of machine hours of use compared to predicted
wear cycles.
In 2025, all of our remanufacturing operations in Eastern
Canada will roll out a made-at-Toromont production planning
system that will support technician training and scheduling,
standardize workflow for greater efficiency and repeatability,
and when linked to the Toromont Hub portal, improve the
customer experience.
In 2026, we plan to start construction of a new TR centre on
owned land adjacent to our existing site in Québec City. This
new 76,000 sq.ft. facility will position Toromont to efficiently
and effectively serve in-region customers, complementing
our other TR locations in Pointe-Claire, Québec, and Thunder
Bay, Bradford and Concord, Ontario. Located on owned land
beside our existing branch, estimated construction costs are
approximately $20 million, subject to site plans and permits.
Connecting with customers by offering them the
right connection points
From tire-kicking to machine disposition, we strive to give
customers easy access to Toromont’s broad portfolio of
products and services. Our connections often begin by
evaluating the customer’s objectives for productivity,
utilization and lifetime cost of ownership. In fleet situations,
this may result in the customer purchasing new Caterpillar
equipment for key high-utilization applications; engaging
SITECH for professional site positioning support services;
acquiring low-hour Cat used equipment for secondary
applications; supplementing fleets through our heavy rent
division and Battlefield; and divesting certain machines and
attachments through our dealerships or the Toromont Equip
online marketplace at a time that optimizes resale value.
Taking a holistic approach to serving customers is a key
objective, which is assisted by continuous investments in
employee training, easy to navigate but comprehensive
e-commerce sites, a variety of digital tools and inter-
company teamwork. We are also investigating how artificial
intelligence can add speed and efficiency to our efforts.
Ensuring the voice of the customer is always heard and
heeded is crucial to our planning efforts. In 2024, Toromont
Cat surveyed a cross-section of customers who own
between one and 15 machines. The findings told us that
for these customers, our parts counter teams are their
most valuable connection point. To address this insight, we
organized soft skills training for the members of our parts
and sales teams who have been with us for less than five
years – a cohort that includes those who missed out on in-
person classroom work during the pandemic.
Connecting all customers to lifecycle
product support
Placing equipment in the field is a key part of our business
model. In 2024, we had some notable successes including
the delivery of over 270 mining machines in our territories
as well as several large construction equipment fleets
in various parts of Eastern Canada. Commissioning new
equipment like Cat® 798 mining trucks with payloads
exceeding 400 tonnes and next-generation hydraulic
mining shovels is a big task, but supporting customers as
they use them is an even bigger job, lasts far longer and for
shareholder value creation, adds some revenue stability
and growth potential during low periods in the capital
equipment purchasing cycles in our various markets.
13.4%
5-year average annual growth in EPS
19.2%
Return on Shareholders’ Equity
Annual Report 2024
3
Message to Shareholders
We have assigned Toromont Cat’s Chief Operating Officer
to oversee our data centre opportunity as well as the
aforementioned expansion of our TR capabilities and
integration of Tri-City Equipment Rentals.
AVL is not the only manufacturing company in the Toromont
portfolio. Through years of innovation, CIMCO has enabled
ice rink and industrial customers to switch to natural CO2
and ammonia refrigerants in place of environmentally harmful
fluorinated gases, optimize energy consumption through heat
recovered during the process of cooling, and harness clean
power. With these capabilities, CIMCO is pursuing several
long-term growth avenues. One is to further penetrate the
U.S. market which accounted for 24% of CIMCO’s revenue in
2024. U.S. customer interest in natural refrigerants is growing
and the 2024 purchase of CIMCO CO2 packages by the NHL’s
Philadelphia Flyers added to our market profile. The NHL also
endorsed CIMCO’s iQ Vision, a new system that captures
precise ice rink temperature data from thermal imaging
and advanced sensors to enable automated quality control
monitoring and in-game reporting. To connect more cost-
effectively to U.S. markets, CIMCO opened a prefabrication
facility in South Carolina in 2023.
In Canada, CIMCO’s recently formed thermal decarbonization
team is building connections with dozens of municipalities
to help them identify ways to achieve 2030 and 2050 GHG
reduction goals. These year-long studies enhance participants’
knowledge of how to achieve net-zero objectives and have
so far resulted in three new capital project wins for CIMCO.
District heating and cooling is another emerging market well
suited to CIMCO’s capabilities. In 2024, CIMCO successfully
completed the initial phase of its first heat pump systems’
installation now in use by the community of Blatchford, Alberta.
The sales cycle for thermal management innovations requires
patience and is assisted by awareness generated by events
such as CIMCO’s 2024 Innovation Summit in Edmonton. It was
attended by ~140 customers and multiple industry influencers.
Connecting with our exceptional people
and a high-performance culture
Toromont is driven to perform by an exceptional workforce
of ~7,300 people across Canada and in the United States.
We do not take their capabilities and contributions for granted.
Under the auspices of Connect26, we will continue to invest
to build a great employee experience, rooted in Toromont’s
corporate values and our belief in the power of engagement.
Our decentralized decision-making structure provides
the right environment for personal growth, professional
development and engagement at all levels. We believe that
investing in our workforce and cultivating a high-performance
culture where safety is paramount ultimately leads to positive
outcomes for our customers and shareholders. We thank the
people of Toromont for their hard work in 2024.
Toromont has long provided product support in various
forms – from comprehensive multi-year Customer Value
Agreements (CVAs) through to simple parts kits for do-
it-myself (DIM) customers. Focused efforts to grow and
renew point-of-sale CVAs for both new and used equipment
are important aspects for our customer value proposition
and this focus adds efficiency to CVA administration and
operations. To address demand now and in the future,
Connect26 saw us expand our parts warehouse in Timmins
and our shop in Sudbury (which supports service for the
first fleet of Cat® Command 793F autonomous haul trucks
operating in our territories) and set up a remote camp to
serve Atlantic Canada’s largest open pit gold mine. More
investments are planned in 2025, including in a general
parts distribution centre near Toronto, to ensure we remain
connected with the product support opportunity and lead our
industry with on-time parts fulfilment. Additionally, we plan to
construct Toromont Cat’s newest branch. This 48,000 sq.ft.
facility in Brooklin, Ontario will support customers in south-
central Ontario when it is operational in the second half of
2026. Land acquisition and construction costs are estimated
at $35 million, subject to final site plans and permits.
Connecting to long-term and emerging opportunities
Like previous Toromont plans, Connect26 focuses on winning
business and delivering results every year, but always with
the long term in mind. It commits us to preparing for trends
that will shape our world five to 10 years (and more) from
now. Electrification, the transition to alternative fuels, the
development of microgrids, battery storage, energy transfer
systems and small modular reactors, machine automation,
as well as data centre scaling to meet the rising demands
of artificial intelligence, are areas to watch. Caterpillar,
our largest OEM partner and a global technology leader,
dedicates significant resources to addressing key trends and
Toromont will benefit from these efforts.
However, our businesses must also contribute by ensuring
we have the right skills, services and resources to assist
customers. With that in mind, in February 2025, we announced
a strategic investment in AVL Manufacturing (AVL), a leader
in designing and fabricating power generation and storage
enclosures. These specialized enclosures are used in the
rapidly growing data centre market in eastern North America
and are often integrated along with standby and prime power
packages produced by Caterpillar dealers, including Toromont
Power Systems. By taking a 60% ownership position in
AVL, we secure our own supply, gain access to a platform
to expand our market to other regions and benefit from the
complementary capabilities of the AVL
team in Hamilton, Ontario led by Vince
DiCristofaro, AVL’s President.
Toromont Industries Ltd.
4
Connecting with wise counsel
Toromont’s Board of Directors plays an active oversight
role in all aspects of the company using a proven
governance framework more fully described in our
Management Information Circular. While the framework
is important, it is the skills, knowledge, experience and
integrity of the people who serve as Directors that are the
most fundamental determinants of effective governance.
For the past 13 years, our Board and our company have
benefitted from the presence of Jeffrey S. Chisholm who
retires in 2025. Mr. Chisholm served as Vice Chairman of
the Board, the Chair of our Human Resources and Health
and Safety Committee, on our ESG Committee and, in
his early years, on the Audit Committee. In every role, he
demonstrated the essential qualities that every shareholder
would want in a corporate director: independence, a
willingness to challenge management, while providing
deep business insights and a passion for continuous
improvement. We thank Jeff for his leadership and
wise counsel.
In preparation for this change, and to ensure our Board
remains well positioned to add value, we welcomed Ave
Lethbridge and Paramita Das as Directors. Ms. Lethbridge
has 30+ years’ experience in the energy industry, most
recently as Executive Vice President and Chief Human
Resources and Safety Officer at Toronto Hydro. Ms. Das
has 20+ years’ experience in the resources, mining and
materials industry, including almost a decade with Rio Tinto,
most recently as Global Head of Marketing, Development
and ESG (Chief Marketing Officer) Metals and Minerals. Ave
and Paramita have skills and industry perspectives that are
highly relevant to our business.
With these changes, the Board of Directors consists of
10 members, nine of whom are independent.
Connecting from a new corporate headquarters
After some 50 years in the same location in Vaughan,
Ontario, Toromont will construct a new headquarters ~10 km
northwest of our existing facility on part of a parcel of land we
acquired several years ago. With occupancy planned for 2027,
this 190,000 sq.ft. facility will be shared with a Toromont
Cat branch. It will be purpose built using mass timber
construction and will leverage the capabilities of Toromont
Power Systems and CIMCO to achieve energy efficiency.
Beyond reducing our relative carbon footprint compared
to our old headquarters, it will provide Toromont with the
capacity to grow and better serve customers for decades to
come. Substantial urban growth in the area surrounding our
existing facility in Vaughan means that the eventual sale of
that property for redevelopment should allow us to realize
funds that will offset the cost of this move.
Connecting as a driven, disciplined and
dedicated team
Disciplined fiscal management is vital for our business,
which regularly encounters cyclicality in our customers’
capital investment cycles and changes in the economic
environment. Ultimately, decision making on where,
when and how much to spend and invest is dependent on
experience, good judgement and sound business cases.
While we act with a long-term mindset, our approach keeps
us grounded in the day-to-day results of every Toromont
branch so that we can understand customer requirements,
what is working and what needs to be course corrected. It
is here that accountability for the short and long term plays
out in real time.
In 2025, our pledge to all stakeholders is to act responsibly
and with balance, so that we can continue to connect
Toromont with the best growth and performance
opportunities now and in the future as a Driven, Disciplined
and Dedicated team.
Yours sincerely,
(signed) R. G. Roy
(signed) M.S. McMillan
Richard G. Roy
Mike S. H. McMillan
Chair of the Board
President and Chief
of Directors
Executive Officer
February 11, 2025
Toromont is driven
by an exceptional
workforce of ~7,300
people across Canada
and the United States.
Annual Report 2024
5
FINANCIAL
REPORT
7
Management’s Discussion and Analysis
40
Management’s Report to the Shareholders
41
Independent Auditor’s Report
44
Consolidated Financial Statements
82
Ten-Year Financial Review
84
Board of Directors/Executive Team
85
Corporate Directory
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") of the financial position and results of operations of Toromont Industries Ltd.
("Toromont" or the "Company") as at and for the year ended December 31, 2024 is prepared as at February 11, 2025, and should be
read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2024.
The consolidated financial statements reported herein have been prepared in accordance with International Financial Reporting
Standards ("IFRS"). The MD&A is presented in thousands of Canadian dollars unless otherwise noted.
Additional information about Toromont is available online at www.sedarplus.ca and Toromont's website www.toromont.com.
Use of Non-IFRS Financial Measures
The MD&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-IFRS or
non-Generally Accepted Accounting Principles ("GAAP") measures should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS. Definitions and reconciliations of the Company's non-IFRS or non-GAAP measures
are included in the "Additional GAAP Measures", "Non-GAAP Measures" and "Key Performance Indicators" sections of this report.
Forward-Looking Information
Information in this MD&A that is not a historical fact is "forward-looking information". Words such as "plans", "intends", "outlook",
"expects", "anticipates", "estimates", "believes", "likely", "should", "could", "would", "will", "may" and similar expressions are intended to
identify statements containing forward-looking information. Forward-looking information in this MD&A reflects current estimates, beliefs,
and assumptions, which are based on Toromont’s perception of historical trends, current conditions and expected future developments,
as well as other factors management believes are appropriate in the circumstances. Toromont'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.
Numerous risks and uncertainties could cause the actual results to differ materially from the estimates, beliefs and assumptions
expressed or implied in the forward-looking statements, including, but not limited to: business cycles, including general economic
conditions in the countries in which Toromont operates; new tariffs and counter-tariffs imposed on cross-border trade, commodity price
changes, including changes in the price of precious and base metals; inflationary pressures; potential risks and uncertainties relating to
a potential new world health issue; increased regulation of or restrictions placed on our businesses; changes in foreign exchange rates,
including the Cdn$/US$ exchange rate; the termination of distribution or original equipment manufacturer agreements; equipment
product acceptance and availability of supply, including reduction or disruption in supply or demand for our products stemming from
external factors; increased competition; credit of third parties; additional costs associated with warranties and maintenance contracts;
changes in interest rates; the availability and cost of financing; level and volatility of price and liquidity of Toromont's common shares;
potential environmental liabilities and changes to environmental regulation; information technology failures, including data or
cybersecurity breaches; failure to attract and retain key employees as well as the general workforce; damage to the reputation of
Caterpillar, product quality and product safety risks which could expose Toromont to product liability claims and negative publicity; new,
or changes to current, federal and provincial laws, rules and regulations including changes in infrastructure spending; 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; increased insurance premiums; and risk related to integration of acquired operations including
cost of integration and ability to achieve the expected benefits. 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-looking information and statements included herein. 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 under the heading "Risks and Risk Management" and "Outlook" sections of Toromont's most recent annual
Management Discussion and Analysis, as filed with Canadian securities regulators at www.sedarplus.ca 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-looking information.
Readers are cautioned not to place undue reliance on statements containing forward-looking information, which reflect Toromont's
expectations only as of the date of this MD&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.
Management’s Discussion and Analysis
7
CORPORATE PROFILE AND BUSINESS SEGMENTATION
As at December 31, 2024, Toromont employed over 7,300 people in more than 165 locations across Canada and the United States.
Toromont is listed on the Toronto Stock Exchange under the symbol TIH.
Toromont has two reportable operating segments: the Equipment Group and CIMCO.
The Equipment Group includes Toromont Cat, one of the world’s larger Caterpillar dealerships, Battlefield – The Cat Rental Store,
industry-leading rental operations, SITECH, providing Trimble technology products and services, Toromont Material Handling,
representing MCFA, Kalmar and other manufacturers' products. The Company is the exclusive Caterpillar dealer for a contiguous
geographical territory in Canada that covers Manitoba, Ontario, Québec, Newfoundland, New Brunswick, Nova Scotia, Prince Edward
Island and most of Nunavut. Additionally, the Company is the MaK engine dealer for the Eastern Seaboard of the United States, from
Maine to Virginia. Performance in the Equipment Group is driven by activity in several industries: road building and other
infrastructure-related activities; mining; residential and commercial construction; power generation; aggregates; waste management;
steel; and forestry. Significant activities include the sale, rental and service of mobile equipment for Caterpillar and other manufacturers;
sale, rental and service of engines used in a variety of applications including industrial, commercial, marine, on-highway trucks and
power generation; and sale of complementary and related products, parts and service.
CIMCO is a market leader in the design, engineering, fabrication, installation and after-sale support of refrigeration systems in industrial
and recreational markets. CIMCO's thermal management solutions enable customers to reduce energy consumption and emissions,
use natural refrigerants and monitor and control their operating environments autonomously. Results of CIMCO are influenced by
conditions in the primary market segments served: beverage and food processing; cold storage; food distribution; mining; and
recreational ice rinks. CIMCO offers proprietary products such as ECO CHILL®. CIMCO has manufacturing facilities in Canada and the
United States and sells its products and services globally.
PRIMARY OBJECTIVE AND MAJOR STRATEGIES
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-term financial goals (see
section heading "Key Performance Measures" in this MD&A) and each of its operating groups consistently employs the following broad
strategies:
Expand Markets
Toromont serves diverse markets that offer long-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’s infrastructure.
Strengthen Product Support
Toromont's parts and service business is a significant contributor to overall profitability and serves to stabilize results through economic
downturns. Product 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-market support is an integral part of the customer’s decision-making process when purchasing equipment.
Broaden Product Offerings
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-in-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.
Invest in Resources
The combined knowledge and experience of Toromont's people is a key competitive advantage. Growth is dependent on attracting,
retaining and developing employees with values that are consistent with Toromont's. A highly principled culture, share ownership and
profitability-based incentive programs result in a close alignment of employee and shareholder interests. By investing in employee
Toromont Industries Ltd.
8
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-commerce and other digital initiatives, strengthen customer service capabilities, generate new
opportunities for growth, drive efficiency and increase returns to shareholders.
Maintain a Strong Financial Position
A strong, well-capitalized balance sheet creates stability and financial flexibility, and has contributed to the Company’s long-term track
record of profitable growth. It is also fundamental to the Company’s future success.
BUSINESS COMBINATION
On September 9, 2024, the Company acquired the rental business and net operating assets of Tri-City Equipment Rentals ("Tri-City"),
an industry leader in heavy equipment rentals with operations in Southwestern Ontario. The acquisition expands Toromont Cat's heavy
rents business to better serve the Company's customer base.
The acquisition was accounted for as a business combination and the results of Tri-City have been included in the Equipment Group
from the date of acquisition. We anticipate that the acquisition will have a positive, accretive impact on future results.
For further information, refer to note 4 "Business Combination" in the notes to the consolidated financial statements.
CONSOLIDATED ANNUAL OPERATING RESULTS
($ thousands, except per share amounts)
2024
2023
$ change
% change
REVENUE
$
5,021,163 $
4,622,301 $
398,862
9 %
Cost of goods sold
3,758,531
3,377,412
381,119
11 %
Gross profit (1)
1,262,632
1,244,889
17,743
1 %
Selling and administrative expenses
592,460
540,661
51,799
10 %
OPERATING INCOME (1)
670,172
704,228
(34,056)
(5) %
Interest expense
28,655
28,098
557
2 %
Interest and investment income
(53,637)
(45,982)
(7,655)
17 %
Income before income taxes
695,154
722,112
(26,958)
(4) %
Income taxes
188,638
193,005
(4,367)
(2) %
Net income from continuing operations
$
506,516 $
529,107 $
(22,591)
(4) %
Net income from discontinued operations
—
5,605
(5,605)
nm
NET EARNINGS
$
506,516 $
534,712 $
(28,196)
(5) %
BASIC EARNINGS PER SHARE
Continuing operations
$
6.18 $
6.43 $
(0.25)
(4) %
Discontinued operations
—
0.07
(0.07)
nm
$
6.18 $
6.50 $
(0.32)
(5) %
KEY RATIOS:
Gross profit margin (1)
25.1%
26.9%
Selling and administrative expenses as a % of revenue
11.8%
11.7%
Operating income margin (1)
13.3%
15.2%
Income taxes as a % of income before income taxes
27.1%
26.7%
Return on capital employed (1)
25.7%
30.4%
Return on equity (1)
19.2%
23.1%
(1) Described in the sections titled "Additional GAAP Measures", "Non-GAAP Measures" and "Key Performance Measures".
Management’s Discussion and Analysis
9
Higher revenue was generated by both the Equipment Group and CIMCO with new equipment deliveries and execution against order
backlog and project schedules. Rental revenue improved during the latter half of the year, however utilization levels remained lower
than prior year particularly in the construction and power systems markets, while used equipment sales declined on lower rental
dispositions. Product support revenue increased in both parts and service, on improving customer activity and focused execution,
supported by our higher technician workforce. Gross profit margins were lower compared to prior year, on sales mix, with a lower
percentage of product support revenue to total, and against a stronger comparator in the Equipment Group last year given market
dynamics in play at that time. Operating income was down 5% compared to the strong results last year, as the higher top-line revenue
was offset by the lower gross margins and higher expense levels.
Revenue for the year increased 9% from prior year to $5.0 billion. Equipment Group revenue increased 8% compared to last year on
higher new equipment sales and strong product support activity. CIMCO revenue increased 16% versus last year, on higher package
revenue and product support activity.
Gross profit margin decreased 180 basis points ("bps") to 25.1% versus 26.9% for last year. The Equipment Group reported lower
margins in all areas, except for product support margins which remained relatively unchanged year-over-year, while CIMCO margins
increased on good execution in all areas. Sales mix was unfavourable, with a higher proportion of equipment and package revenues to
total, dampening margins by 70 bps.
Selling and administrative expenses for the year increased $51.8 million or 10% compared to the prior year. Compensation costs
increased approximately $18.6 million, reflecting higher staffing levels and regular salary increases. Sales related expenses, including
such things as advertising, promotion, travel and training, increased $15.3 million year over year, reflecting the higher activity levels.
Other expenses such as occupancy and information technology costs have increased on continued investment for future growth and
inflationary effects. Bad debt expense increased $5.5 million compared to the similar period last year, reflecting certain exposures.
Mark-to-market adjustments on DSUs resulted in a $3.6 million decrease in expense, as a result of the lower share price. In 2023, a
property disposition reduced expenses by $5.0 million. Overall, selling and administrative expenses were 10 bps higher as a
percentage of revenue (11.8% versus 11.7% last year).
Operating income decreased $34.1 million or 5% in the year, as higher revenue was more than offset by lower gross margins and
higher expenses. Operating income margin decreased 190 bps to 13.3%, reflecting lower gross margins and the higher relative
expense levels.
Interest expense was largely unchanged at $28.7 million, with no change to outstanding fixed-rate term debt and an unused credit
facility.
Interest and investment income increased $7.7 million or 17% in the year on higher average cash balances and higher interest rates.
The effective income tax rate for the year was up slightly to 27.1% compared to 26.7% last year, reflecting the lower capital gains rate
on the property disposition in 2023.
Net earnings (including discontinued operations) for the year decreased $28.2 million or 5% to $506.5 million from 2023. Basic earnings
per share ("EPS") decreased $0.32 or 5% to $6.18.
Other comprehensive income of $39.4 million in the year (2023 – comprehensive loss of $17.4 million) included an actuarial gain on
post-employment benefit plans of $19.8 million (2023 – actuarial gain of $2.1 million). These gains reflect actuarial changes used in the
valuation, 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 $17.0 million (2023 – unfavourable net change of $19.0 million). These changes reflect
mark-to-market differences in the value of foreign exchange derivative contracts designated as cash flow hedges and are largely a
function of the underlying USD/CAD exchange rates at period end compared to the contract date.
BUSINESS SEGMENT ANNUAL OPERATING RESULTS
The accounting policies of the segments are the same as those of the consolidated entity. Management evaluates overall business
segment performance based on revenue growth, operating income relative to revenue and return on capital employed. Corporate
expenses are allocated based on each segment’s revenue. Interest expense and interest and investment income are not allocated.
The operating results below have been restated and reflect continuing operations, unless otherwise noted. The discontinued operation
was previously reported in the Equipment Group results.
Toromont Industries Ltd.
10
Equipment Group
($ thousands)
2024
2023
$ change
% change
Equipment sales and rentals
New
$
1,939,129 $
1,647,757 $
291,372
18 %
Used
296,295
303,551
(7,256)
(2) %
Rentals
491,162
487,178
3,984
1 %
Total equipment sales and rentals
2,726,586
2,438,486
288,100
12 %
Product support
1,823,049
1,775,310
47,739
3 %
Power generation
10,933
11,326
(393)
(3) %
Total revenue
$
4,560,568 $
4,225,122 $
335,446
8 %
Operating income
$
616,718 $
664,688 $
(47,970)
(7) %
KEY RATIOS:
Product support revenue as a % of total revenue
40.0%
42.0%
Operating income margin
13.5%
15.7%
Group total revenue as a % of consolidated revenue
90.8%
91.4%
Return on capital employed
24.1%
28.8 %
The Equipment Group delivered good results for the year. Revenue increased on solid equipment deliveries against order backlog.
Rental revenue improved in the latter half of the year, however utilization remained at low levels, especially in the construction and
power systems markets, while used equipment sales declined on lower rental dispositions. Product support revenue continued to
increase on higher parts and service activity, supported by the higher technician workforce. Operating income declined versus the prior
year, as expected, given a strong comparator which reflected market dynamics in play at that time, and an unfavourable sales mix in the
current year, coupled with lower gross margins and higher expenses, which eroded the good top-line growth.
Total equipment revenue (new and used) increased $284.1 million or 15% across most market segments and regions compared to
2023, reflecting inflow and delivery of equipment against order backlog. New equipment sales increased 18% for the year, across all
market segments and regions, except for material handling, which was marginally down versus 2023. Used equipment sales decreased
2%, predominantly in the construction market. Both rental fleet dispositions and sales of used equipment from trades and purchases
decreased, reflecting shifting supply and demand dynamics. The change in equipment revenue by market segment was as follows:
construction +6%, mining +41%, power systems +16% and material handling -8%.
Rental revenue increased $4.0 million or 1% versus last year. Most market sectors and regions were down compared to prior year,
generally reflecting persisting softer market conditions, principally in residential construction. Revenue changes in each market were as
follows: Light equipment rentals -1%, heavy equipment rentals -5%, power systems -4% and material handling +2%. As at
December 31, 2024, the RPO fleet (rent with a purchase option) was $97.9 million versus $81.1 million at this time last year, and
associated rental revenue was up 36% compared to last year.
Product support revenue increased $47.7 million or 3% compared to last year with increases in both parts (up 1%) and service (up 9%).
Activity was higher across most markets and regions on good end user demand and product support sales mix, coupled with a higher
technician base. Revenue change by market was as follows: construction +1%; mining +4%; power systems +4%; and material
handling -1%.
Gross profit margin decreased 200 bps to 25.0% from 27.0% in 2023. Sales mix was unfavourable with a higher proportion of
equipment revenue to total revenue dampening margin 70 bps. Equipment margins were down 30 bps as expected given market
dynamics in play in the prior year. Rental margins were down 100 bps on lower fleet utilization, higher recent acquisition costs, in part
due to a weaker Canadian dollar, and higher maintenance and repair costs. Product support margins were unchanged year over year.
Selling and administrative expenses increased $47.6 million or 10%. Compensation costs were $16.8 million higher year-over-year
reflecting staffing levels and regular salary increases. Sales-related costs increased $14.3 million, reflective of the 8% increase in
revenue. Other expenses such as occupancy costs and information technology have increased in support of growth and other strategic
initiatives. Allowance for doubtful accounts increased $6.5 million, reflecting certain exposures. In 2023, a gain on a property disposition
reduced expenses by $5.0 million. As a percentage of revenue, selling and administrative expenses were 20 bps higher at 11.5% in the
current period versus 11.3% in the similar period last year.
Operating income decreased $48.0 million or 7% reflecting the higher revenue, more than offset by lower gross margins and higher
expenses. As a percentage of revenue, operating income was 220 bps lower at 13.5% versus 15.7% in 2023.
Management’s Discussion and Analysis
11
Capital expenditures
($ millions)
2024
2023
$ change
% change
Rental equipment
Capital expenditures
$
208,976 $
221,650 $
(12,674)
(6) %
Proceeds on disposals
60,417
60,707
(290)
— %
Net expenditure
$
148,559 $
160,943 $
(12,384)
(8) %
Property, plant and equipment
Capital expenditures
$
125,890 $
115,256 $
10,634
9 %
Investment in both the heavy and light equipment rental fleets across our territory continued to support future long-term growth
strategies, however reduced compared to prior year due to fleet management needs and lower market activity. Fleet dispositions, as
measured by proceeds, were comparable to prior year on regular roll-out of aged units as part of regular fleet management.
Property, plant and equipment additions increased in 2024 and included:
•
$27.6 million related to the new remanufacturing facility in Bradford, Ontario, which opened in Q2 2024;
•
$37.5 million for upgraded facilities and new locations across the business;
•
$44.3 million for new and replacement service and delivery vehicles;
•
$3.0 million for information technology infrastructure improvements and developments; and
•
$13.4 million for other machinery and equipment for general operations.
Bookings and Backlog
($ millions)
2024
2023
$ change
% change
Bookings – years ended December 31
$
1,986.5 $
1,876.6 $
109.9
6 %
Backlog – as at December 31
$
708.4 $
957.3 $
(248.9)
(26) %
New bookings increased $109.9 million or 6% in 2024, compared to 2023. Higher construction and material handling bookings (up 17%
and 18% respectively) were partially offset by lower orders in mining (-8%) and power systems (-15%).
Backlog of $708.4 million at December 31, 2024, was lower $248.9 million or 26%, compared to the same time last year, reflecting
deliveries against customer orders from the opening backlog, partially offset by good new bookings. As at December 31, 2024, the
composition of backlog by market was as follows: construction 27%; mining 26%; power systems 41%; and material handling 6%.
Approximately 90% of the backlog is expected to be delivered over the next twelve months, however this is subject to timing of vendor
supply and customer delivery schedules.
Bookings and backlog can vary significantly from period to period on large project activities (particularly in mining and power systems),
the timing of orders and deliveries with customers (which are in turn reflective of economic factors and general activity levels), and the
availability of equipment from either inventory or suppliers.
CIMCO
($ thousands)
2024
2023
$ change
% change
Package sales
$
239,156 $
187,573 $
51,583
28 %
Product support
221,439
209,606
11,833
6 %
Total revenue
$
460,595 $
397,179 $
63,416
16 %
Operating income
$
53,454 $
39,540 $
13,914
35 %
KEY RATIOS:
Product support revenue as a % of total revenue
48.1%
52.8%
Operating income margin
11.6%
10.0%
Group total revenue as a % of consolidated revenue
9.2%
8.6%
Return on capital employed
87.0%
61.3%
Toromont Industries Ltd.
12
CIMCO delivered solid results for 2024 with good execution in both Canada and the US (against a tough comparator), coupled with
healthy activity levels. Package revenue reflects advancement of construction schedules against a strong order backlog and improved
execution. Product support activity continued to demonstrate strong growth in Canada, supported by the larger technician workforce
and was slightly dampened by the US region. Operating income increased on the higher revenue and improved gross margins, partially
offset by unfavourable sales mix (lower product support revenue to total revenue) and the higher expense levels.
Package sales increased $51.6 million or 28% versus 2023, with increases in both markets. Recreational market revenue increased
43%, as revenue was higher in both Canada (+7%) and in the US (+120%). Industrial market revenue was up 19%, with higher activity
in Canada (+49%), slightly offset by lower activity in the US (-52% against a tough comparative). Package revenue reflects the progress
of construction applying the percentage-of-completion method of accounting. This introduces a degree of variability as the timing of
construction schedules are largely under the control of third parties (contractors and end-customers).
Product support revenue increased $11.8 million or 6% versus 2023 on higher activity levels in Canada (up 12%), partially offset by
lower activity in the US (down 12%). Activity levels continued to improve on good customer demand and the increased technician base.
Gross profit margin increased 40 basis points versus last year to 26.4%. Package margins were up 20 bps, on good execution. Product
support margins increased 60 bps on improved execution and higher volume. An unfavourable sales mix, with a lower proportion of
product support revenue to total revenue, dampened margins by 40 bps.
Selling and administrative expenses increased $4.2 million or 7% versus last year. Allowance for doubtful accounts decreased
$1.0 million reflecting focused efforts on collections and an improvement of aged receivable balances. Compensation costs $1.8 million
reflecting staff levels, annual salary increases and higher profit sharing accruals on the higher earnings. Other expenditures such as
travel and training expenses increased to support activity and staffing levels. As a percentage of revenue, selling and administrative
expenses improved to 14.8% in 2024 versus 16.0% in 2023, reflecting continued focus on expense control and reduction in bad debt
expense.
Operating income increased by $13.9 million or 35% in 2024, reflecting improved gross margins and higher revenue. Operating income
as a percentage of revenue increased 160 bps to 11.6% compared to last year.
Capital expenditures
($ millions)
2024
2023
$ change
% change
Property, plant and equipment
$
10,610 $
6,573 $
4,037
61 %
Capital expenditures in 2024 largely relate to new and replacement service vehicles ($7.9 million) due to shorter lead times for delivery,
as well as delayed shipment of vehicles ordered in 2023. Other expenditures included facility upgrades and maintenance ($0.5 million),
other machinery and equipment for general operations ($1.3 million) and information technology enhancements and upgrades
($0.9 million).
Bookings and Backlog
($ millions)
2024
2023
$ change
% change
Bookings – years ended December 31
$
318.5 $
245.9 $
72.6
30 %
Backlog – as at December 31
$
342.3 $
255.2 $
87.1
34 %
Bookings increased $72.6 million or 30% to $318.5 million in 2024. Recreational bookings increased 146% or $93.8 million, with higher
orders in both Canada (+75%) and in the US (+339%). Industrial bookings were down 12% or $21.2 million lead by a decrease in
Canada (-33% against a strong comparator) which offset an increase in the US (+79%).
Backlog of $342.3 million increased $87.1 million or 34% compared to 2023, with higher backlog in both the recreational and the
industrial market. Recreational backlog was up 78%, reflecting a strong increase in both Canada (+82%) and in the US (+74%).
Industrial backlog increased 10%, with a decrease in Canada (-20%), largely offset by a strong increase in the US (+325%).
Approximately 70% of the backlog is expected to be realized as revenue over the next twelve months, however this is subject to
construction schedules.
Management’s Discussion and Analysis
13
CONSOLIDATED FINANCIAL CONDITION
The Company's strong financial position continued. At December 31, 2024, the ratio of net debt to total capitalization increased to -9%
(cash and cash equivalents exceeded debt) compared to -17% at December 31, 2023.
Non-cash Working Capital
The Company's investment in non-cash working capital was $930.3 million at December 31, 2024. The major components, along with
the changes from prior year, are identified in the following table.
Change
($ thousands)
2024
2023
$
%
Accounts receivable
$
628,671 $
627,243 $
1,428
— %
Inventories
1,321,567
1,119,071
202,496
18 %
Other current assets
22,074
23,733
(1,659)
(7) %
Accounts payable and accrued liabilities
(667,907)
(619,318)
(48,589)
8 %
Provisions
(30,675)
(30,269)
(406)
1 %
Income tax recoverable (payable)
8,267
(7,006)
15,273
nm
Derivative financial instruments
19,352
(13,946)
33,298
nm
Dividends payable
(39,127)
(35,383)
(3,744)
11 %
Deferred revenue and contract liabilities
(331,946)
(360,143)
28,197
(8) %
Total non-cash working capital
$
930,276 $
703,982 $
226,294
32 %
Accounts receivable was relatively unchanged from December 31, 2023, largely reflecting the higher trailing revenue (Q4 2024 revenue
was 7% higher than Q4 2023) offset by good collection activity. Days sales outstanding ("DSOs") decreased to 40 days, with a
decrease in the Equipment Group (down 2 days) partially offset by an increase in CIMCO (up 5 days). Collection activity and credit
metrics are closely monitored, with added focus considering the current economic environment.
Inventories at December 31, 2024 increased 18% compared to December 31, 2023, with increases in both Groups:
•
Equipment Group inventories were up $201.7 million or 19%, with increased equipment (up $121.0 million or 19%),
work-in-progress (up $30.2 million or 28%), and parts (up $50.5 million or 15%). Inventory levels of equipment and parts
increased in light of activity levels, higher availability of new equipment due to improved supply chain and reflect delayed
customer delivery schedules. Price increases and foreign exchange rates on US sourced supplies have also served to
increase inventory. Work-in-process levels reflect higher activity levels.
•
CIMCO inventories were up $0.8 million or 2%, largely lead by higher parts inventory levels up $0.5 million reflecting higher
product support levels. Work-in-process levels increased $0.3 million (up 1%), reflecting timing of project construction and
product support schedules.
Other current assets are comprised of prepaid expenses and vendor deposits. These vary over time based on timing of ordering,
receipt of invoice, vendor terms and payment.
Accounts payable and accrued liabilities at December 31, 2024, were 8% higher than at December 31, 2023, largely reflecting higher
activity levels and timing of purchase and payment for inventory and other suppliers. Accounts payable at December 31, 2024, also
includes $4.0 million deferred payment related to the acquisition of Tri-City.
Income tax recoverable (payable) reflects the difference between tax installments and current income tax expense.
Derivative 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 $19.4 million as at December 31, 2024. This is not 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.
Dividends payable increased year over year reflecting the increased dividend rate. Effective with the April 4, 2024 payment, the
quarterly dividend rate was increased 11.6% from $0.43 per share to $0.48 per share.
Toromont Industries Ltd.
14
Deferred revenue and contract liabilities represent billings to customers in excess of revenue recognized.
•
In the Equipment Group, these balances arise due to: progress billings from the sale of power and energy systems; long-term
product support maintenance contracts; and, customer deposits for equipment to be delivered in the future. These balances
decreased $43.5 million or 14.1%, in 2024, largely on lower customer deposits held on equipment deliveries, with significant
deliveries made in the current year.
•
At CIMCO, these balances arise on progress billings from the sale of refrigeration packages and vary depending on timing of
billings compared to customer’s construction schedules. These balances increased $15.3 million or 30.3%, reflecting the
timing of billings compared to revenue recognized under the percentage-of-completion method.
Goodwill and Intangibles
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
December 31, 2024, as outlined in note 9 of the notes to the annual consolidated financial statements.
Employee Share Ownership
The Company employs a variety of share-based compensation plans to align employees' interests with corporate objectives. Certain
programs are offered to all employees, while other programs are offered selectively to executives, senior managers and directors.
Executive Stock Option Plan
Stock options have a 10-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 December 31, 2024, 1.5 million
options to purchase common shares were outstanding, of which 0.9 million were exercisable. Directors do not participate in the option
program.
Long-Term Incentive Program
In 2022, the Company introduced performance share units ("PSUs"), restricted share units ("RSUs") and executive deferred share units
("EDSUs"). The Company has the ability to grant options and awards under each of these 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 LTIP.
Details of each grant will be determined at the date of grant, including performance requirements, vesting and settlement method. PSUs
and RSUs will settle upon vesting, while EDSUs will settle upon cessation of service to the Company. PSU vesting will be based upon
the achievement of performance objectives established at the time of grant by the Board of Directors. The maximum number of
common shares reserved for issuance under the LTIP is in aggregate 750,000.
A total of 27,544 restricted share units ("RSUs") and 73,420 performance share units ("PSUs") were outstanding under the LTIP as at
December 31, 2024, including reinvested dividends.
LTIP expense of $3.5 million (2023 – $3.6 million) was included in selling and administrative expenses with a credit to contributed
surplus.
Deferred Share Units ("DSU")
A DSU is a notional unit that reflects the market value of a single Toromont common share and generally vests immediately. DSUs may
be redeemed only on cessation of employment or directorship. DSUs have dividend equivalent rights. Executives and senior managers
may elect, on an annual basis, to receive all or a portion of their performance incentive bonus in DSUs. Non-employee directors
received 60% of their annual compensation in the form of DSUs and may also elect to receive some or all of their remainder
compensation in DSUs. The Company records the cost of the DSU plan as compensation expense in selling and administrative
expenses. Units credited prior to September 2022 were issued under a cash-settled plan, while units elected or granted after that date
were issued under a share-settled plan.
As at December 31, 2024, 177,706 cash-settled DSUs were outstanding with a total value of $20.3 million (2023 – 191,320 units at a
value of $22.1 million). The liability for cash-settled DSUs is included in accounts payable and accrued liabilities on the consolidated
statements of financial position.
Management’s Discussion and Analysis
15
As at December 31, 2024, 62,673 share-settled DSUs were outstanding (2023 – 33,360 units). Share-settled DSUs are credited to
contributed surplus at time of grant.
Employee Share Purchase Plan
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 $5.2 million in 2024 (2023 – $4.4 million) were charged to selling and administrative expense when paid. Approximately 3,490
employees participate in the plan (2023 – 3,200) which is administered by an independent third party.
Employee Future Benefits
The Company sponsors pension arrangements for substantially all of its employees. These include:
•
Defined contribution plans, including 401(k) matched savings plans for employees in the US, covering the largest segment of
employees, including all new hires;
•
Defined benefit pension plans; and,
•
Other post-employment benefit plans for certain grandfathered employees.
Certain unionized employees do not participate in Company-sponsored plans, and contributions are made to their retirement programs
in accordance with the respective collective bargaining agreements.
Defined Contribution Plans
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 December 31, 2024, approximately 4,800 employees participated in
Company-sponsored defined contribution plans.
Defined Benefit Pension Plans
The Company sponsors defined benefit plans, which provide pension benefits for approximately 1,100 active employees. All plans are
administered by a separate Fund that is legally separate from the Company, with the exception of the Executive Plan described below.
The funded status of these plans improved by $24.5 million during 2024 (a reduction in post employment obligations). Actuarial gains,
largely related to a higher discount rate reduced the defined benefit obligation by $3.7 million. Stronger capital markets resulted in a
positive return on plan assets, increasing the funded position by $24.0 million, net of the interest expense on the obligation.
The Executive Plan 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
December 31, 2024, the Company has posted letters of credit in the amount of $10.6 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 Plans. Yields are volatile and can deviate significantly from period to period.
Post-employment Benefit Plans
The Company also 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 21 to the audited consolidated financial statements for further information.
Legal and Other Contingencies
Due 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.
Toromont Industries Ltd.
16
Normal Course Issuer Bid ("NCIB")
The Company's NCIB program was renewed in September 2024. The current issuer bid allows the Company to purchase up to
8.2 million common shares during the 12-month period ending September 20, 2025. All shares purchased under the bid will be
cancelled.
The Company purchased and cancelled 1,321,500 common shares for $160.4 million (average cost of $121.39 per share, including
transaction costs) during the year ended December 31, 2024.
The Company maintains an Automatic Share Purchase Plan ("ASPP") with a broker to enable the purchase of common shares under
the NCIB during regular trading blackout periods. The volume of the purchases are determined by the broker based on share price and
maximum volume parameters established by the Company prior to the commencement of each blackout period. As at
December 31, 2024, there was no obligation for the repurchase of shares under the ASPP.
The Company purchased and cancelled 353,000 common shares for $37.5 million (average cost of $106.35 per share, including
transaction costs) during the year ended December 31, 2023. As at December 31, 2023, there was an obligation for the repurchase of
shares of $12.5 million under the ASPP.
Shareholder Rights Plan ("SRP")
The Company has a shareholder rights plan, which is designed to encourage the fair treatment of shareholders in connection with any
takeover offer. Rights issued under the plan become exercisable when a person, and any related parties, acquires or commences a
takeover bid to acquire 20% 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's Board of Directors. Should 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 50% discount to the market
price at that time.
Outstanding Share Data
As at the date of this MD&A, the Company had 81,302,154 common shares and 1,458,651 share options outstanding.
Dividends
Toromont pays a quarterly dividend on its outstanding common shares and has historically targeted a dividend rate of approximately
30 - 40% of trailing earnings from continuing operations over the business cycle.
In February 2024, the quarterly dividend was increased by 11.6% or 5 cents per share, to 48 cents per common share, effective with the
April payment. In 2024, the Company declared dividends of $1.92 per common share (2023 – $1.72 per common share).
Considering the Company's strong financial position and positive long-term outlook, the Board of Directors increased the quarterly
dividend by four cents per share (8.3%) to 52 cents per share effective with the dividend payable on April 4, 2025, to shareholders on
record on March 7, 2025. Toromont has paid dividends every year since 1968 and this is the 36th consecutive year of dividend
increases.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Toromont's liquidity requirements can be met through a variety of sources, including cash on hand, cash generated from operations,
long and short-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. Debt under this facility is unsecured and ranks pari passu with debt outstanding under Toromont'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.
Management’s Discussion and Analysis
17
No amounts were drawn on this revolving credit facility as at December 31, 2024 or 2023. Standby letters of credit issued utilized
$40.8 million of the facility as at December 31, 2024 (2023 – $40.3 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 December 31, 2024 and 2023.
The Company expects that continued cash flows from operations in 2025, together with cash and cash equivalents on hand (2024 –
$890.8 million) and currently available credit facilities will be more than sufficient to fund requirements for investments in working
capital, capital assets, 2025 debenture repayment and dividend payments through the next 12 months. The Company's credit ratings
will also continue to provide access to capital markets to facilitate future debt issuance. The Company also has a certain degree of
flexibility in its operating and investing plans to mitigate fluctuations.
Principal Components of Cash Flow
Cash from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in
the following table:
($ thousands)
2024
2023
Cash and cash equivalents, beginning of year
$
1,040,757 $
927,780
Cash, provided by (used in):
Operating activities
Operations
696,392
701,421
Change in non-cash working capital and other
(188,189)
(177,021)
Net rental fleet additions
(148,976)
(171,192)
359,227
353,208
Investing activities
(206,801)
(104,313)
Financing activities
(303,541)
(164,451)
Effect of foreign exchange on cash and cash equivalents balances
1,173
(210)
(Decrease) increase in cash and cash equivalents during the year from continuing
operations
$
(149,942) $
84,234
Discontinued operations
$
— $
28,743
Cash and cash equivalents, end of year
$
890,815 $
1,040,757
Cash Flows from Operating Activities
Operating activities provided cash in both 2024 and 2023.
Cash generated from operations decreased 1% from 2023 reflecting in part the lower net earnings, which decreased 4%.
Non-cash working capital and other used cash in 2024, as higher inventory levels, held in part for future customer deliveries, and lower
deferred revenue balances were partially offset by higher accounts payable, on the timing of payments to suppliers.
Non-cash working capital and other also used cash in 2023, as working capital levels increased on higher activity levels. Accounts
receivable and inventory both increased reflective of activity, while accounts payable reduced on timing of payment to vendors. This
was partially offset by higher customer deposits received on future order delivery.
Cash used for net rental fleet additions (purchases less proceeds of dispositions) decreased by $22.2 million in 2024 compared to
2023. The Company continued to invest in both the heavy and light equipment rental fleets across Eastern Canada reflective of
long-term growth strategies, although at lower rates than in the comparative period. Dispositions were relatively unchanged year over
year as aged units were rolled out as part of regular fleet management.
Toromont Industries Ltd.
18
The components and changes in non-cash working capital are discussed in more detail in this MD&A under the heading "Consolidated
Financial Condition".
Cash Flows from Investing Activities
Investing activities used $206.8 million in 2024 compared to $104.3 million in 2023.
During the year, the Company used cash of $73.6 million for the acquisition of Tri-City. See note 4 to the consolidated financial
statements for further information on this transaction.
Toromont invested $136.5 million in 2024 in property, plant and equipment (2023 – $114.5 million), as follows:
•
$65.1 million additions for land, buildings and construction in process for new and upgraded facilities across the business
(2023 – $53.2 million);
•
$53.5 million for normal replacement of service and delivery vehicles (2023 – $44.6 million);
•
$3.6 million for upgrades and enhancements to information technology infrastructure and office furniture (2023 – $5.8 million);
and
•
$14.3 million for machinery and equipment replacements and upgrades (2023 – $10.9 million).
In 2023, the Company sold an excess property for gross proceeds of $9.2 million resulting in a capital gain of $5.0 million or $4.5 million
after-tax. Total disposition proceeds for 2024 were $3.4 million (2023 – $10.3 million).
Cash Flows from Financing Activities
For the year ended December 31, 2024, financing activities used $303.5 million (2023 – used $164.5 million) in cash, major uses and
sources of cash during the year included:
•
Dividends paid to common shareholders of $153.6 million or $1.87 per share (2023 – $138.6 million or $1.68 per share);
•
Cash received on exercise of share options of $20.3 million (2023 – $21.0 million);
•
Purchase of shares under the NCIB program of $160.4 million (2023 – $37.5 million); and,
•
Lease liability payments of $9.7 million (2023 – $9.4 million).
Cash Flows from Discontinued Operations
Net cash provided in 2023 from discontinued operations, AgWest Ltd., was $28.7 million, including $26.6 million in proceeds of
disposition. See note 26 to the consolidated financial statements for further information on this transaction.
OUTLOOK
With a long-term focus on growth and returns, we remain dedicated to our operating and financial disciplines to ensure our costs are
well managed, while we invest in capacity and capabilities to provide exceptional service to our customers.
We continue to monitor regional, national and global economic factors, in particular, inflationary pressures from price and wage
increases, interest rate changes, tariffs, and general economic health of the industries we serve. The recent announcements on the
tariffs between the US and Canada has created additional economic turbulence for every company engaged in cross border trade. Our
team is engaged, monitoring and developing an appropriate action plan to navigate the potential impacts over the short and longer term
when details become available. Foreign exchange rate volatility, and a weaker Canadian dollar are also being monitored given the
majority of our supply of equipment and parts is sourced in US dollars. Hedging and pricing policies should limit bottom line exposure to
changing exchange rates, however the impact on the economy as whole could be a factor. The global supply chain has improved
gradually.
The Equipment Group's parts and service business provides stability supported by a large and diversified installed base of equipment.
The long-term outlook for infrastructure projects and other construction activity is positive across most territories although tied
somewhat to the general economic climate. Mine investment and expansion will remain dependent on global economic and financial
conditions. We have had several years of significant deliveries to the mining industry which has impacted sales mix, however should
support product support activity in the future as the machines are utilized. Power systems, particularly prime and stand-by power
generation, continues to be in demand. Our 2025 investment in an enclosure manufacturer should support our position and future
growth in this market.
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
Management’s Discussion and Analysis
19
processes and systems, best practices and culture, continues across our territory. Product 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 the markets they serve. In industrial markets, CIMCO's
proven track record and strong geographical coverage provides growth opportunities. Current backlog is supportive of future activity.
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 OBLIGATIONS
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-term financing facilities.
Payments due by year
($ thousands)
2025
2026
2027
2028
2029
Thereafter
Total
Long-term debt
Principal
$ 150,000 $
— $ 500,000 $
— $
— $
— $ 650,000
Interest
23,374
19,200
16,000
—
—
—
58,574
Accounts payable and accrued liabilities
698,222
—
—
—
—
—
698,222
Lease liabilities
8,812
6,385
5,902
5,485
4,357
10,358
41,299
$ 880,408 $
25,585 $ 521,902 $
5,485 $
4,357 $
10,358 $ 1,448,095
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 are reset
with new actuarial funding valuations at least every three years. Contributions in 2024 totaled $3.8 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 $7.2 million in 2025.
Toromont Industries Ltd.
20
KEY PERFORMANCE 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. Unless otherwise indicated, all
financial information represents the Company’s results from continuing operations.
Years ended December 31
2024
2023
2022
2021
2020
EXPANDING MARKETS AND BROADENING PRODUCT
OFFERINGS
Revenue growth
8.6%
12.3%
8.7%
11.6%
(5.5)%
Revenue per employee (thousands)
$
698 $
668 $
628 $
617 $
548
STRENGTHENING PRODUCT SUPPORT
Product support revenue growth
3.0%
11.1%
15.6%
5.4%
(4.5)%
INVESTING IN OUR RESOURCES
Investment in information technology (millions)
$
39.6 $
36.4 $
35.6 $
34.7 $
37.4
Return on capital employed (1)
25.7%
30.1%
32.5%
27.0%
20.7%
STRONG FINANCIAL POSITION
Non-cash working capital (millions) (1)
$
930.3 $
704.0 $
584.7 $
377.9 $
486.8
Net debt to total capitalization (1)
(9)%
(17)%
(14)%
(16)%
3%
Book value (shareholders' equity) per share
$
36.35 $
32.61 $
28.25 $
23.69 $
20.60
BUILD SHAREHOLDER VALUE
Basic earnings per share growth
(3.9)%
17.6%
36.4%
30.2%
(13.5)%
Growth in dividends declared per share
11.6%
10.3%
14.7%
9.7%
14.8%
Return on equity (1)
19.2%
22.8%
23.3%
19.6%
16.4%
(1) Defined in the sections title "Additional GAAP Measures and Non-GAAP Measures."
Measuring Toromont's results against these strategies over the past five years illustrates that the Company has delivered steady growth
through a challenging period (including the pandemic in 2020), with good operating performance, financial results, cash generation and
financial position.
Since 2020, revenue increased at an average annual rate of 7.1%, with product support growing at 6.1% annually. Over this period,
growth in revenue has resulted from:
•
Optimizing operations and go-to-market strategies to increase market share,
•
Increased customer demand in certain market segments, most notably construction and mining;
•
Organic growth through increased rental fleet size and additional branches;
•
Increased customer demand for formal product support agreements;
•
Additional product offerings from Caterpillar and other suppliers; and
•
Governmental funding programs that provide support for infrastructure spending.
Over the same five-year period, revenue growth has been constrained at times by a number of factors including:
•
The COVID-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 and more generally the global supply chain disruption caused by the pandemic;
•
Economic weakness and uncertainty, both generally and in specific markets or sectors;
•
Geopolitical developments;
•
Volatility in commodity prices;
•
Competitive conditions;
•
Inflationary pressures and rising interest rates; and
•
Inability to hire necessary skilled technicians to service market demand.
Management’s Discussion and Analysis
21
Changes in the Canadian/US 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 2020, the average annual exchange rate of the Canadian dollar against the
US dollar has varied from $0.73 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-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
-9% at the end of 2024 compared to -17% at the end of 2023. Since 2020, strong cash generation has allowed the Company to invest in
the business, while building cash balances.
Toromont has paid dividends consistently since 1968 and has increased the dividend in each of the last 35 years, 36 years including the
recent increase announced in February 2025. The Company declared dividends of $1.92 per common share in 2024, or $0.48 per
quarter (2023 – $1.72 per common share (increase of 11.6%).
CONSOLIDATED FOURTH QUARTER OPERATING RESULTS
Three months ended December 31
($ thousands, except per share amounts)
2024
2023
$ change
% change
REVENUE
$
1,306,953 $
1,226,937 $
80,016
7 %
Cost of goods sold
951,184
897,994
53,190
6 %
Gross profit
355,769
328,943
26,826
8 %
Selling and administrative expenses
144,602
124,388
20,214
16 %
OPERATING INCOME
211,167
204,555
6,612
3 %
Interest expense
7,415
7,122
293
4 %
Interest and investment income
(10,588)
(13,132)
2,544
(19) %
Income before income taxes
214,340
210,565
3,775
2 %
Income taxes
58,044
56,513
1,531
3 %
NET EARNINGS from continuing operations
$
156,296 $
154,052 $
2,244
1 %
BASIC EARNINGS PER SHARE
Continuing operations
$
1.91 $
1.87 $
0.04
2 %
KEY RATIOS:
Gross profit margin
27.2%
26.8%
Selling and administrative expenses as a % of revenue
11.1%
10.1%
Operating income margin
16.2%
16.7%
Income taxes as a % of income before income taxes
27.1%
26.8%
Results for the fourth quarter of 2024 reflected good growth in revenue across all revenue streams, with solid equipment deliveries and
execution against order backlog and project schedules. Gross profit margins were higher compared to prior year, dampened by lower
package sales margins, on timing of project completion impacting cost savings and unfavourable sales mix, with a lower percentage of
product support revenue to total. Operating income was up 3% compared to last year, mainly reflecting the higher revenue levels and
increased gross margins, slightly dampened by higher expense levels and lower property gains.
Revenue increased 7% to $1.3 billion, with the Equipment Group up 5% and CIMCO up 23%. Equipment and package sales delivery
increased 9% on equipment availability, as well as scheduled deliveries against order backlog. Rental activity improved, up 6%. Product
support activity increased across both Groups, also up 4%.
Gross profit margins increased 40 bps to 27.2% in the quarter, with higher gross margins in the Equipment Group, offset by lower
margins at CIMCO. Overall sales mix was unfavourable with a higher proportion of equipment revenue to total revenue, reducing gross
profit margin by 30 bps.
Selling and administrative expenses increased $20.2 million or 16% in the fourth quarter compared to the prior year. Compensation
costs were $7.8 million higher on increased staffing levels, annual salary increases and higher profit sharing accruals on the higher
income. Sales related expenses increased $7.3 million in the quarter, reflecting the higher activity levels. Other expenses such as
Toromont Industries Ltd.
22
occupancy costs and information technology have increased in light of sales levels, planned investment and inflation. Allowance for
doubtful accounts increased $4.4 million in the quarter, reflecting certain exposures. MTM adjustments on cash-settled DSUs reduced
expenses $4.9 million compared to the fourth quarter last year on underlying share price changes. Selling and administrative expenses
were 100 basis points higher as a percentage of revenue (11.1% versus 10.1% last year).
Operating income increased $6.6 million or 3% reflecting the higher revenue and gross margins offset by the higher expense levels
given the higher activity. Operating income margin decreased 50 bps to 16.2%, reflecting the higher expense levels.
Interest expense increased $0.3 million in the quarter largely unchanged from 2023.
Interest income decreased $2.5 million on lower average cash balances compared to similar period in 2023.
The effective income tax rate for the fourth quarter was 27.1% compared to 26.8% in 2023, mainly as a result of the lower capital gains
rate on the property dispositions.
Net earnings in the quarter increased $2.2 million or 1% to $156.3 million. Basic EPS increased $0.04 or 2% to $1.91 versus $1.87 in
2023.
BUSINESS SEGMENT FOURTH QUARTER OPERATING RESULTS
Equipment Group
Three months ended December 31
($ thousands, except as noted)
2024
2023
$ change
% change
Equipment sales and rentals
New
$
514,515 $
480,556 $
33,959
7 %
Used
68,172
70,461
(2,289)
(3) %
Rentals
141,952
133,346
8,606
6 %
Total equipment sales and rentals
724,639
684,363
40,276
6 %
Product support
458,682
441,732
16,950
4 %
Power generation
2,632
2,812
(180)
(6) %
Total revenue
$
1,185,953 $
1,128,907 $
57,046
5 %
Operating income
$
193,192 $
192,368 $
824
— %
Bookings ($ millions)
$
487.4 $
537.2 $
(49.8)
(9) %
KEY RATIOS:
Product support revenue as a % of total revenue
38.7%
39.1%
Operating income margin
16.3%
17.0%
Group total revenue as a % of consolidated revenue
90.7%
92.0%
The Equipment Group delivered good results in the quarter, with continued sales growth up 5%, reflecting the inflow of new equipment
supply and good deliveries against order backlog. Improved availability of new equipment continues to shift the demand from used
equipment sales. Rental revenue increased on a larger fleet and product support activity continued. Higher gross margins were
dampened by lower rental margins (lower fleet utilization) and an unfavourable sales mix of lower product support to total revenue.
Operating income was higher as the higher revenue and gross margins offset the heightened expense levels to support the higher
activity.
Total equipment sales (new and used) increased $31.7 million or 6%. New equipment sales increased 7% on good deliveries in the
construction, mining and material handling, slightly dampened by lower power systems deliveries. Used equipment sales were down
slightly on lower rental fleet dispositions. Overall, total equipment revenue change by market segment was as follows for the quarter:
construction (+6%), mining (+4%), power systems (-1%), and material handling (+44%).
Rental revenue increased $8.6 million or 6% in the quarter, largely due to higher RPO fleet revenue (+62%) reflecting a larger fleet.
Heavy equipment rentals increased 11% in the quarter largely due to the Tri-City acquisition. Material handling rentals increased 37%,
although on a small base. These increases were partially offset by lower light equipment rentals (-1%).
Management’s Discussion and Analysis
23
Product support revenue increased $17.0 million or 4% on higher parts (up 2%) and service (up 8%). Activity levels were good across
most market segments and regions, with changes by market in the quarter as follows: mining (+2%); power systems (+8%);
construction (+5%) and material handling (-1%).
Gross margins increased 60 bps in the quarter versus last year. Equipment margins improved (+100 bps) on sales mix while product
support margins (+50 bps) improved on good execution. Rental margins continue to be challenged by lower utilization, dampening
gross margins 70 bps. An unfavourable sales mix, with a higher proportion of equipment revenue to total revenue, dampened gross
margins by 20 bps.
Selling and administrative expenses increased $21.8 million or 20%. Compensation costs were higher reflecting higher staffing levels
and salary increases. Sales-related and other expenses such as training, travel and occupancy costs have increased in light of higher
activity, planned investment and inflation. Allowance for doubtful accounts increased $4.7 million in the quarter, reflecting certain
exposures, offset by good collections in other areas.
Operating income increased $0.8 million (unchanged as a percent) in the quarter. Operating income was 16.3% as a percentage of
revenue, a decrease of 70 bps versus the comparable period last year, mainly reflecting higher gross margins more than offset by the
higher expenses.
Bookings decreased $49.8 million or 9% to $487.4 million. Improved bookings in construction, power systems and material handling
sectors were more than offset by lower mining orders, against a tough comparator of large customer orders in Q4 2023. Bookings for
the fourth quarter were up in construction (+6%), power systems (+18%), and material handling (+67%), largely offset by lower orders in
mining (-65%).
CIMCO
Three months ended December 31
($ thousands, except as noted)
2024
2023
$ change
% change
Package sales
$
65,852 $
44,924 $
20,928
47 %
Product support
55,148
53,106
2,042
4 %
Total revenue
$
121,000 $
98,030 $
22,970
23 %
Operating income
$
17,975 $
12,187 $
5,788
47 %
Bookings ($ millions)
$
126.0 $
56.2 $
69.8
nm
KEY RATIOS:
Product support revenue as a % of total revenue
45.6%
54.2%
Operating income margin
14.9%
12.4%
Group total revenue as a % of consolidated revenue
9.3%
8.0%
CIMCO continued to deliver strong results in the fourth quarter with good execution in both Canada and the US, coupled with healthy
activity levels. Revenue increased in the fourth quarter driven by strong package sales, on improvements in equipment delivery
schedules and execution of the healthy backlog going into Q4, as well as, on the continued strong growth in product support activity
levels. Operating income increased on the higher revenue, partially offset by lower gross margins and the higher expenses.
Package revenue increased $20.9 million or 47% in the quarter compared to last year, with good equipment delivery schedules and
strong execution on construction schedules. Revenue was up in both markets, with recreational revenue up 10% and industrial revenue
up 77%. In Canada, revenue was up 64%, largely lead by strong industrial revenue (+105%) along with a moderate increase in
recreational activity (+11%). In the US, package sales were down 2% mainly on lower industrial activity (-15% against a tough
comparative), which was only slightly offset by marginally higher recreational activity (+9%).
Product support revenue increased $2.0 million or 4% from last year with an increase in Canada (+9%), partially offset by lower US
revenue (-12%). The increased technician base continues to support activity levels.
Gross margins decreased 210 bps in the quarter versus the comparable period in 2023. Margins were mainly dampened by a decrease
in package margins down 270 bps, resulting from the timing of stage of-completion of construction projects. An unfavourable sales mix
(down 20 bps) also reduced margins on a lower proportion of product support revenue to total revenue. These reductions more than
offset an improvement in product support margins up 80 bps. Improving execution and efficiency continues to be a focus.
Toromont Industries Ltd.
24
Selling and administrative expenses decreased $1.6 million or 10%. Allowance for doubtful accounts increased $0.3 million from the
similar period last year reflecting delayed payments on project billings. Most expenses including travel, training, occupancy and
information technology were lower than last year on good focus on cost containment strategies. Compensation expense in the quarter
was lower reflecting the timing of accruals for profit sharing.
Operating income increased $5.8 million in the quarter versus a year ago, largely reflecting the higher revenue and lower selling and
administrative expenses, which were slightly dampened by lower gross margins. As a percentage of revenue, operating income
increased to 14.9% in 2024, from 12.4% in 2023.
Bookings increased $69.8 million or 124% to $126.0 million with increases in both the recreational (+68%) and the industrial markets
(+174%). In Canada, bookings were up 48%, lead by strong industrial market activity (+82%), slightly offset by lower bookings in the
recreational market (-2%). In the US, bookings were strong in both the recreational (+204%) and the industrial markets (+932%). Timing
of decisions by customers and receipt of orders can vary from period to period.
QUARTERLY RESULTS
The following table summarizes quarterly consolidated financial data for the eight most recently completed quarters. This quarterly
information is unaudited and has been prepared on the same basis as the 2024 annual audited consolidated financial statements. Data
reflects results including discontinued operations, unless otherwise noted.
($ thousands, except per share amounts)
Q4 2024
Q3 2024
Q2 2024
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
REVENUE
Equipment Group
$ 1,185,953 $ 1,210,821 $ 1,235,649 $ 928,145 $ 1,128,907 $ 1,065,615 $ 1,070,194 $ 960,406
CIMCO
121,000
127,171
124,220
88,204
98,030
108,430
104,762
85,957
Revenue - continuing operations
$ 1,306,953 $ 1,337,992 $ 1,359,869 $ 1,016,349 $ 1,226,937 $ 1,174,045 $ 1,174,956 $ 1,046,363
NET EARNINGS
$ 156,296 $ 130,951 $ 135,350 $
83,919 $ 154,052 $ 145,619 $ 139,037 $
96,004
PER SHARE INFORMATION:
Basic earnings per share
$
1.91 $
1.60 $
1.65 $
1.02 $
1.87 $
1.77 $
1.69 $
1.17
Diluted earnings per share
$
1.90 $
1.59 $
1.64 $
1.01 $
1.86 $
1.76 $
1.68 $
1.16
Dividends paid per share
$
0.48 $
0.48 $
0.48 $
0.43 $
0.43 $
0.43 $
0.43 $
0.39
Weighted average common
shares outstanding – basic
(in thousands)
81,721
81,931
82,090
82,309
82,315
82,282
82,294
82,333
Interim period revenue and earnings historically reflect variability from quarter to quarter due to seasonality. This trend has been
impacted in recent years by the pandemic and resulting impact on the economy, including global supply chains. Such factors or others
may result in variations to historically experienced trends.
The Equipment Group 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 has typically been the strongest due in part to the timing of
customers' capital investment decisions, delivery of equipment from suppliers for customer-specific orders and conversions of
equipment on rent with a purchase option. This pattern can be 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-of-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.
Historically, 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.
Management’s Discussion and Analysis
25
In 2023 and 2024, we saw gradual improvements to supply chain availability across most of our product offerings, although constraints
in some areas still exist.
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.
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 INFORMATION
The selected information presented below has been derived from and should be read in conjunction with the annual consolidated
financial statements of the Company dated December 31, 2024, 2023 and 2022. The analysis of the data contained in the table focuses
on the trends and significant events or items affecting the results of operations and financial condition of the Company over the latest
three year period.
Unless otherwise indicated, all financial information represents the Company’s results from continuing operations.
($ thousands, except per share amounts)
2024
2023
2022
Revenue
$
5,021,163 $
4,622,301 $
4,115,347
Net earnings
$
506,516 $
529,107 $
450,100
Earnings per share ("EPS")
Basic
$
6.18 $
6.43 $
5.47
Diluted
$
6.13 $
6.38 $
5.42
Dividends declared per share
$
1.92 $
1.72 $
1.56
Total assets
$
4,868,492 $
4,571,847 $
4,182,125
Total long-term debt
$
648,428 $
647,784 $
647,060
Weighted average common shares outstanding - basic (in millions)
82.0
82.3
82.3
Revenue increased 9% in 2024 versus the prior year. Equipment Group revenue increased 8% on growth in total equipment sales and
product support activity, reflecting the increase in inflow and delivery of equipment, along with end customer demand. Rental revenue
was relatively flat year over year due to lower market activity. CIMCO revenue increased 16% with the advancement on construction
schedules against a strong order backlog and improved execution, while product support activity continued to increase year over year
with the hiring of more technicians and increased customer demand. General macroeconomic factors such as inflation, higher interest
rates for majority of the year, geopolitical developments and Canadian dollar movements continued to challenge the business, as well
as influence buying patterns.
Revenue increased 12% in 2023 compared to 2022. Equipment Group revenue increased 12% on growth in equipment sales, rental
revenue and product support activity, reflecting the improved inflow and deliver of equipment, along with end customer demand. CIMCO
revenue increased 13% versus a tough comparable, with the advancement on construction schedules against a strong order backlog
and improved execution, while product support activity increased year over year with the higher technician workforce. General
macroeconomic factors such as inflation, higher interest rates, geopolitical developments and Canadian dollar movements continued to
challenge the business, as well as influence buying patterns.
Net earnings decreased 4% in 2024, mainly reflecting the 9% increase in revenue, offset by lower gross margins and higher selling and
administrative expenses. Net financing costs were lower, due to the higher interest earned on cash balances year over year.
Net earnings increased 18% in 2023, mainly reflecting the 12% increase in revenue, partially offset by higher selling and administrative
expenses on the increased activity. Net financing costs were significantly lower, on the higher interest earned on cash balances year
over year.
Dividends have generally increased in proportion to trailing earnings growth. The quarterly dividend rate increased: in 2022 by 11.4% to
$0.39 per share; in 2023 by 10.3% to $0.43; and in 2024 by 11.6% to $0.48 per share. The Company has paid dividends every year
since 1968.
Total assets increased 6% in 2024 compared to 2023, and 9% in 2023 compared to 2022. Higher working capital, including inventories
and accounts receivable reflect increasing activity levels. Increased investment in capital assets including rental fleets were also made
each year to support growth, network expansion and other strategic initiatives.
Toromont Industries Ltd.
26
Long-term debt was largely unchanged over the three year period noted. In September 2025, $150 million of the debenture debt is
repayable, thus reflected under current as at December 31, 2024. The $500 million revolving credit facility matures in November 2026.
CORPORATE DEVELOPMENT
On January 31, 2025, the Company acquired 60% of the shares of AVL Manufacturing Inc. ("AVL") for consideration of $67.5 million
cash plus the issuance of 110.4 thousand Toromont shares (nominally $13.5 million based on 5 day average share price as at signing)
for a total consideration of $81.0 million (subject to post-closing adjustments). In addition, the Company has committed to purchase the
remaining 40% at various dates through to 2031. The initial purchase price was funded with cash on hand. AVL is a leader in the design
and fabrication of power generation and storage enclosures. AVL has operations in Hamilton, Ontario and currently serves the data
center market across eastern North America. The Company has not yet finalized its determination of fair value of the assets acquired
and liabilities assumed. The acquisition, while accretive, is not expected to have an overall material impact on Toromont’s combined
revenue, earnings or balance sheet in the near-term.
RISKS AND RISK MANAGEMENT
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 designed to identify, mitigate and
report on these risks.
We maintain a strong risk management culture to protect and enhance shareholder value. The Board reviews all material risks on an
annual basis. The Audit Committee and Board also reviews the adequacy of disclosures of key risks in our AIF, MD&A and financial
statements on a quarterly and annual basis, as applicable.
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-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’s customer base.
Commodity prices, and, in particular, changes in the view on long-term trends, affect demand for the Company's products and services
in the Equipment Group. 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.
We 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. Disruption 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.
As well, many of Toromont's customers export products to the U.S. Any changes to tariffs on export or import to the US can negatively
impact their overall competitiveness and demand for their products, which in turn may reduce product purchases from Toromont.
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. Product 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. We 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
27
Product and Supply
The Equipment Group purchases most of its equipment inventories and parts from Caterpillar Inc. ("Caterpillar") 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. However, 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. When 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. We 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. We continue to monitor these issues as
they could adversely affect our business, results of operations, and financial condition.
The recent announcements on the tariffs between the US and Canada has created additional economic turbulence for every company
engaged in cross border trade. Our team is engaged, monitoring and developing an appropriate action plan to navigate the potential
impacts over the short and longer term when details become available.
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. We 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-added services area. While 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, distribution capabilities including number and proximity of locations, financing offered by
Caterpillar Finance, e-commerce solutions, reputation and financial strength.
We 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. We may also encounter competition through the
introduction of digitally enabled or digitally enhanced value-added services from third parties, including potential new non-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’s business, results of operations or financial condition.
Toromont Industries Ltd.
28
Health and Safety
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.
Key Personnel
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. Demographic 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.
Certain of our employees are represented by unions and we are party to a number of collective bargaining agreements, covering
approximately 1,030 employees. Of the 21 agreements in place, 10 are scheduled for negotiation during 2025.
While 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. Generally, 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.
When the Company has cash on hand it may be invested in short-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.
Management’s Discussion and Analysis
29
Contract Execution, Including Product Warranty
We enter into thermal heating and cooling 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.
We 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. We 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-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. Due to the long-term nature of these contracts, there is a risk
that maintenance costs may exceed the estimate, thereby resulting in a loss on the contract. Preventative 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-delivery inspection programs in place. No assurance
can be given that these steps will fully mitigate these risks.
Foreign Exchange
Toromont's operating results are reported in Canadian dollars. While the majority of Toromont's sales are transacted in Canadian
dollars, significant portions of its purchases are made in U.S. dollars. Changes in the U.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 US dollar can have an impact on revenue trends. Substantially all of the equipment
and parts sold in the Equipment Group are sourced in US 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 US
subsidiary reflect changes in exchange rates on the translation of results, although this is not significant. The Canadian dollar averaged
US$0.73 in 2024 and US$0.74 in 2023.
As well, many of Toromont's customers export products to the U.S., or sell products based on the US 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.
Interest Rate
Changes in market interest rates can cause fluctuations in the fair value or future cash flows of financial instruments.
Toromont Industries Ltd.
30
The Company has exposure to changes in interest rates on interest-bearing financial liabilities, primarily from long-term debt. The
Company has fixed-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-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 facilities bear interest at floating-rates and exposes the Company to fluctuations in short-term interest
rates by causing related interest payments and finance expense to vary.
The Company minimizes its interest rate risk by managing its portfolio of floating-and fixed-rate debt, as well as managing the term to
maturity.
The Company is also exposed to changes in interest rates on interest bearing financial assets, primarily cash and cash equivalents.
Due to the short-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.
Growth Initiatives
The Company's Strategic Plan establishes priorities for growth, including organic growth and strategic acquisitions.
We 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; operational
excellence and sharing of best practices across our decentralized organization; continuous investment and improvement in systems
and processes to reduce cost-to-serve and provide value-added information; 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 Change
Toromont is committed to monitoring, reporting and reducing greenhouse gas ("GHG") 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 GHG emissions (Scope 1) from fuel combustion in our fleet, natural gas use
for heating facilities, and diesel use for engine and transmission diagnostics. We also generate indirect GHG 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.
Management’s Discussion and Analysis
31
Government and Other 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. We retain environmental engineering consultants to conduct the following activities: environmental site
assessments prior to the acquisition or occupation; ongoing monitoring of soil and groundwater contamination; 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’s results of operations or cash flows. Management is not aware of any material environmental concerns for which a
provision has not been recorded.
We 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 maintains the Human Resources and Health and Safety
Committee, the Environment, Social and Governance 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 Proxy
Circular, which can be found on our website www.toromont.com or under our profile on SEDAR at www.sedarplus.ca. 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.
Information Technology
The Company depends on information technology infrastructure and systems, hosted internally or outsourced, to conduct day-to-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. While 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’ 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. We 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-added services area. While execution performance to date has been strong, our failure to meet these
objectives could have an adverse impact on our business.
Toromont Industries Ltd.
32
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.
Cybersecurity
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. We 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. Disruption 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: disruption of our business operations and lost revenue; 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; disruptions in the
functioning or operation of equipment, which could lead to property loss or damage or personal injury or death; damage to our
reputation with our customers, partners, suppliers, investors and the general public; a disruption to the proper functioning of our
information technology systems; potential significant expenditures related to remediation; investigations by regulatory agencies or
litigation, claims and liability for breach of contract, damages or other penalties; inability to process customer transactions or service
customers; and/or disruptions to inventory management.
To mitigate information security risks, the Company, through a dedicated, full-time team of cybersecurity professionals, undertakes
preventative measures, including controlling access to its network and applications using secure firewalls and limiting access to an
"as-needed" basis. To identify information security risks, the company uses various detection methods, including monitoring event logs
for firewalls, server, mail systems, and applications. Third-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-attacks or other information security breaches; 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-made disasters, such as earthquakes, floods, hurricanes, unusually adverse weather,
health pandemic outbreaks, boycotts, security breach, power loss, telecommunications failure, and geo-political events in countries in
which we supply or sell goods, could materially adversely affect our business, people, customers and financial results. We 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. However, 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.
Pandemic Risk
A pandemic can create significant volatility, uncertainty and economic disruption. A pandemic could exacerbate or amplify other risks
and uncertainties facing the Company. Such risks include, but are not limited to:
•
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;
Management’s Discussion and Analysis
33
•
a material reduction in demand for, or profitability of, our products or services;
•
an increase in accounts receivable delinquencies from financial hardship for our customers;
•
issues delivering the Company’s products and services due to illness, Company or government imposed isolation programs,
restrictions on the movement of personnel and other supply chain disruptions;
•
increase in exposure to and reliance on networked systems and the internet increasing risk and frequency of cybersecurity
incidents;
•
the impact of additional legislation, regulation and other government interventions in response to pandemic;
•
the negative impact on global debt and equity capital markets, including the trading price of the Company’s securities; 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.
MATERIAL ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING 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, expenses, assets and liabilities, and the disclosure of
contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
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 material 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.
Changes in Accounting Policies
The following amendments to accounting standards were adopted by the Company on January 1, 2024:
IAS 1 – Presentation of Financial Statements – Disclosure of Accounting Policies:
•
Clarified the classification of liabilities as current or non-current based on contractual rights that are in existence at the end of
the reporting period and are unaffected by expectations about whether an entity will exercise its right to defer or accelerate
settlement. A liability not due over the next 12 months is classified as non-current even if management intends or expects to
settle the liability within 12 months. The amendments also introduced a definition of "settlement" to make clear that settlement
refers to the transfer of cash, equity instruments, other assets, or services to the counterparty.
•
Clarified that only covenants with which an entity is obliged to comply with on or before the reporting date will affect a liability's
classification as current or non-current. Further, disclosure is required for any information that enables users of financial
statements to comprehend the possibility that non-current liabilities with covenants may become payable within 12 months.
IFRS 16 – Lease Liability in a Sale and Leaseback:
•
Specified the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction,
to ensure the seller-lessee does not recognize any amount of the gain or loss that relates to the right of use it retains.
IAS 7 – Statement of Cash Flows and IFRS 7 – Supplier Finance Arrangements:
•
Specified that specific disclosure requirements should be presented to enhance current disclosure requirements, which are
intended to assist users of the financial statements in understanding the effects of supplier finance arrangements on an entity's
liabilities, cash flows and exposure to liquidity risk.
The implementation of these amendments to standards did not have a significant impact on the Company's consolidated financial
statements. The Company has not early-adopted any standard, interpretation or amendment that has been issued but is not yet
effective.
Amendments Issued but Not Effective
A number of amendments to standards and interpretations have been issued but are not yet effective up to the date of authorization of
these consolidated financial statements, for the financial year ended December 31, 2024, and accordingly, have not been applied in
preparing these consolidated financial statements. Information on new standards, amendments and interpretations that are expected to
Toromont Industries Ltd.
34
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.
Annual Improvements to IFRS Accounting Standards – Volume 11 (effective January 1, 2026):
Annual improvements are limited to changes that either clarify the wording in an accounting standard or correct relatively minor
unintended consequences, oversights or conflicts between the requirements in the accounting standards. It contains amendments to
five standards as a result of the IASB's annual improvements project.
Amendments to IFRS 9 and IFRS 7 – Classification and Measurement of Financial Instruments (effective January 1, 2026):
•
Clarify the requirements for the timing of recognition and derecognition of financial assets and liabilities at settlement date,
except for regular-way purchases or sales of financial assets and financial liabilities meeting conditions for new exception. The
new exception permits companies to elect to derecognize certain financial liabilities settled via electronic payment systems
earlier than the settlement date;
•
Clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest
criterion;
•
Add new disclosures guidelines to assess contractual cash flow characteristics of financial assets, which apply to all contingent
cash flows, including those arising from environmental, social and governance linked features; and,
•
Add updates to the disclosures for equity instruments designated at fair value through OCI.
IFRS 18 – Presentation and Disclosure of Financial Statements, which replaces IAS 1 (effective January 1, 2027):
•
Introduces new requirements on presentation and base disclosure requirements for financial statements, mostly within the
statement of income or loss, including the requirement to classify income and expenses into three new categories – operating,
investing and financing – and present specified totals and subtotals for operating profit and loss and profit and loss before
financing and income taxes.
•
Further, operating expenses are presented directly on the face of the income statement – classified either by nature (e.g.,
employee compensation), by function (e.g., cost of sales) or using a mixed presentation. Expenses presented by function
require more detailed disclosures about their nature.
•
Also provides enhanced guidance of information in the financial statements, such as disclosure of management-defined
performance measures, and aggregation and disaggregation of financial information based on identified roles of the primary
financial statements and the notes and eliminates classification options for interest and dividends in the statement of cash
flows.
•
In addition, narrow-scope amendments have been made to IAS 7, which include changing the starting point for determining
cash flows from operations under the indirect method and the removal of the optionality around the classification of cash flows
from dividends and interest.
•
Minor consequential amendments to other standards were also made.
•
Earlier adoption is permitted and the Company intends to adopt these when they become effective.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The President and Chief Executive Officer ("CEO") and Executive Vice President and Chief Financial Officer ("CFO") are responsible for
establishing and maintaining disclosure controls and procedures, as defined in National Instrument 52-109 – Certification of Disclosure
in Issuers' Annual and Interim Filings, 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 by
others and is recorded, processed, summarized and reported within the time periods specified in securities legislation.
The CEO and the CFO, together with other members of management, have evaluated the effectiveness of the Company’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 December 31, 2024.
Internal Control over Financial Reporting
The CEO and CFO, together with management, are responsible for establishing and maintaining adequate internal control over
financial reporting, as defined by National Instrument 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings, 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.
Management’s Discussion and Analysis
35
Three months ended
Year ended
December 31
December 31
($ thousands)
2024
2023
2024
2023
Net income from continuing operations
$
156,296 $
154,052 $
506,516 $
529,107
plus: Interest expense
7,415
7,122
28,655
28,098
less: Interest and investment income
(10,588)
(13,132)
(53,637)
(45,982)
plus: Income taxes
58,044
56,513
188,638
193,005
Operating income
$
211,167 $
204,555 $
670,172 $
704,228
Total revenue
$
1,306,953 $
1,226,937 $
5,021,163 $
4,622,301
Operating income margin
16.2%
16.7%
13.3%
15.2%
Net Debt to Total Capitalization/Equity
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’s financial leverage.
Net debt is calculated as long-term debt plus current portion of long-term debt less cash and cash equivalents. Total capitalization is
calculated as shareholders' equity plus net debt.
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 December 31, 2024, using the criteria set forth in the Internal Control – 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 December 31, 2024.
There have been no changes in the design of the Company's internal control over financial reporting during 2024, that would materially
affect, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Due 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.
ADDITIONAL GAAP 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
GAAP measures. The Company's consolidated financial statements and notes thereto include certain additional GAAP measures
where management considers such information to be useful to the understanding of the Company's results.
Gross Profit
Gross Profit is defined as total revenue less cost of goods sold.
Operating Income
Operating income is defined as net income from continuing operations 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.
Toromont Industries Ltd.
36
The calculations are as follows:
($ thousands)
2024
2023
Long-term debt
$
498,518 $
647,784
Current portion of long-term debt
149,910
—
less: Cash and cash equivalents
890,815
1,040,757
Net debt
(242,387)
(392,973)
Shareholders' equity
2,955,393
2,683,852
Total capitalization
$
2,713,006
2,290,879
Net debt to total capitalization
(9)%
(17)%
Net debt to equity
(0.08):1
(0.15):1
NON-GAAP MEASURES
Management believes that providing certain non-GAAP 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-GAAP 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.
Working Capital
Working capital is defined as total current assets less total current liabilities. Management views working capital as a measure for
assessing overall liquidity.
($ thousands)
2024
2023
Total current assets
$
2,890,746 $
2,810,804
less: Total current liabilities
1,219,565
1,066,065
Working capital
$
1,671,181 $
1,744,739
Non-Cash Working Capital
Non-cash working capital is defined as total current assets, excluding cash and cash equivalents, less total current liabilities, excluding
current portion of long-term debt, if applicable.
($ thousands)
2024
2023
Total current assets
$
2,890,746 $
2,810,804
less: Cash and cash equivalents
890,815
1,040,757
1,999,931
1,770,047
Total current liabilities
1,219,565
1,066,065
less: Current portion of long-term debt
149,910
—
1,069,655
1,066,065
Non-cash working capital
$
930,276 $
703,982
Management’s Discussion and Analysis
37
Market Capitalization & Total Enterprise Value
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:
($ thousands, except for shares and share price)
2024
2023
Outstanding common shares
81,300,574
82,297,341
times: Ending share price
$
113.64 $
116.10
Market capitalization
$
9,238,997 $
9,554,721
Long-term debt
$
498,518 $
647,784
Current portion of long-term debt
149,910
—
less: Cash and cash equivalents
890,815
1,040,757
Net debt
$
(242,387) $
(392,973)
Total enterprise value
$
8,996,610 $
9,161,748
KEY PERFORMANCE INDICATORS ("KPIs")
Management uses key performance indicators to enable consistent measurement of performance across the organization. These KPIs
are non-GAAP financial measures, do not have a standardized meaning under IFRS and may not be comparable to similar measures
presented by other issuers.
Gross Profit 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.
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.
Toromont Industries Ltd.
38
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, adjusted for discontinued operations.
($ thousands)
2024
2023
Net earnings
$
506,516 $
534,712
plus: Interest expense
28,655
28,101
less: Interest and investment income
(53,637)
(46,190)
plus: Interest income – rental conversions
3,635
3,348
plus: Income taxes
188,638
194,849
Adjusted net earnings
$
673,807 $
714,820
Average capital employed
$
2,621,627 $
2,347,864
Return on capital employed
25.7%
30.4%
Return on Equity ("ROE")
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)
2024
2023
Net earnings
$
506,516 $
534,712
Opening shareholder's equity (net of adjustments)
$
2,636,834 $
2,317,906
Return on equity
19.2%
23.1%
Management’s Discussion and Analysis
39
MANAGEMENT'S REPORT TO THE SHAREHOLDERS
The accompanying consolidated financial statements and Management's Discussion and Analysis ("MD&A") are the responsibility of the
management of Toromont Industries Ltd. (the "Company"). The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board. The financial information
presented in the Company's MD&A 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. Management
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.
Management is also responsible for establishing and maintaining appropriate systems of internal control and procedures over the
financial reporting process. Policies and procedures are designed to give reasonable assurance that transactions are appropriately
authorized, assets are safeguarded from loss or unauthorized use and financial records are properly maintained to provide reliable
information for preparation of the consolidated financial statements.
Ernst & Young LLP, 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 Board of Directors (the "Board") is responsible for ensuring that management fulfills its responsibilities for financial reporting and
internal controls. The Board carries out its responsibilities principally through its Audit Committee, which is composed solely of
independent directors. The Audit 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 Audit
Committee. The consolidated financial statements and MD&A have been approved by the Board, based on the review and
recommendation of the Audit Committee.
(signed) M.S. McMillan
(signed) J.M. Doolittle
Michael S. McMillan
John M. Doolittle
February 11, 2025
President and
Chief Executive Officer
Executive Vice President and
Chief Financial Officer
Toronto, Canada
Toromont Industries Ltd.
40
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Toromont Industries Ltd.,
Opinion
We 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, 2024 and 2023, and the consolidated statements of income,
consolidated statements of comprehensive income, consolidated statements of changes in shareholders’ equity and consolidated
statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting
policy information.
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, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for
the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our
report. We 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. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters. For
the matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks 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.
Independent Auditor’s Report
41
Revenue recognition for long-term refrigeration packages
Key audit matter
How our audit addressed the key audit matter
The Group sells industrial and recreational refrigeration packages,
which
involve
the
design,
manufacture,
installation
and
commissioning of longer-term projects under the customer’s
control and typically construction is completed in under two years.
Revenue is recognized progressively based on the percentage-of-
completion method. This method is measured by reference to
costs incurred to date as a percentage of the total estimated
costs. The Group’s policy for revenue recognition together with the
related significant accounting estimates and assumptions is
described in notes 2 and 3 of the consolidated financial
statements.
The Group recognized $239.2 million of revenues for the year
ended December 31, 2024, 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 recognized 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.
For long-term refrigeration package contracts that were open as of
December 31, 2024, our audit procedures included the following,
among others:
We obtained an understanding, evaluated the design, and tested
the operating effectiveness of controls related to the Group’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;
We 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’s authorization matrix for a
sample of projects. Once 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;
We compared prior period cost estimates to actual contract costs
incurred in the current period to assess management’s ability to
estimate the costs to complete a contract;
We obtained management’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;
and
We assessed the adequacy of disclosures in describing the areas
of judgement and estimation uncertainties involving revenue
recognition for projects that are open at period end.
Other Information
Management is responsible for the other information. The other information comprises:
•
Management’s Discussion and Analysis
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report
Our 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 knowledge obtained in
the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed
on this information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this
auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will perform on
this other information, we conclude there is a material misstatement of this other information, we are required to report that fact to those
charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS,
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.
Toromont Industries Ltd.
42
In preparing the consolidated financial statements, management is responsible for assessing the Group’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’s financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our 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. Reasonable 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. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going concern.
•
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.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and review of the work performed for the purposes of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Stephanie Lamont.
(signed) Ernst & Young LLP
Ernst & Young LLP
February 11, 2025
Chartered Professional Accountants
Toronto, Canada
Licensed Public Accountants
Independent Auditor’s Report
43
As at December 31
Note
2024
2023
Assets
Current assets
Cash and cash equivalents
$
890,815 $
1,040,757
Accounts receivable
5
628,671
627,243
Inventories
6
1,321,567
1,119,071
Income taxes recoverable
8,267
—
Derivative financial instruments
14
19,352
—
Other current assets
22,074
23,733
Total current assets
2,890,746
2,810,804
Property, plant and equipment
7
624,552
538,919
Rental equipment
7
783,080
682,369
Other assets
8
99,787
68,297
Deferred tax assets
17
1,203
1,370
Goodwill and intangible assets
4 , 9
469,124
470,088
Total assets
$
4,868,492 $
4,571,847
Liabilities
Current liabilities
Accounts payable and accrued liabilities
8, 20
$
707,034 $
654,701
Provisions
10
30,675
30,269
Deferred revenue and contract liabilities
11
331,946
360,143
Current portion of long-term debt
12, 14
149,910
—
Derivative financial instruments
14
—
13,946
Income taxes payable
—
7,006
Total current liabilities
1,219,565
1,066,065
Deferred revenue and contract liabilities
11
23,585
22,479
Long-term lease liabilities
8
32,487
25,078
Long-term debt
12, 14
498,518
647,784
Post-employment obligations
21
28,774
28,703
Deferred tax liabilities
17
110,170
97,886
Total liabilities
1,913,099
1,887,995
Shareholders' equity
Share capital
13
597,976
582,801
Contributed surplus
34,293
27,346
Retained earnings
2,309,784
2,079,914
Accumulated other comprehensive income (loss)
13,340
(6,209)
Total shareholders' equity
2,955,393
2,683,852
Total liabilities and shareholders' equity
$
4,868,492 $
4,571,847
Commitments (note 24)
See accompanying notes
Approved by the Board:
(signed) R. G. Roy
(signed) C. E. Cranston
Richard G. Roy
Cathy E. Cranston
Director
Director
TOROMONT INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ thousands)
Toromont Industries Ltd.
44
Years ended December 31
Note
2024
2023
Revenue
25
$
5,021,163 $
4,622,301
Cost of goods sold
6, 7
3,758,531
3,377,412
Gross profit
1,262,632
1,244,889
Selling and administrative expenses
592,460
540,661
Operating income
670,172
704,228
Interest expense
16
28,655
28,098
Interest and investment income
16
(53,637)
(45,982)
Income before income taxes
695,154
722,112
Income taxes
17
188,638
193,005
Income from continuing operations
506,516
529,107
Income from discontinued operations
26
—
5,605
Net earnings
$
506,516 $
534,712
Basic earnings per share
Continuing operations
$
6.18 $
6.43
Discontinued operations
$
— $
0.07
18
$
6.18 $
6.50
Diluted earnings per share
Continuing operations
$
6.13 $
6.38
Discontinued operations
$
— $
0.07
18
$
6.13 $
6.45
Weighted average number of shares outstanding
Basic
18
82,011,672
82,305,870
Diluted
18
82,591,896
82,898,696
See accompanying notes
TOROMONT INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF INCOME
($ thousands, except share amounts)
Consolidated Financial Statements
45
Years ended December 31
2024
2023
Net earnings
$
506,516 $
534,712
Other comprehensive income (loss), net of income taxes:
Items that may be reclassified subsequently to net earnings:
Foreign currency translation adjustments
2,579
(583)
Unrealized gains (losses) on derivatives designated as cash flow hedges
35,937
(12,665)
Income tax (expense) recovery
(9,340)
3,293
Unrealized gains (losses) on cash flow hedges, net of income taxes
26,597
(9,372)
Realized gains on derivatives designated as cash flow hedges
(13,004)
(12,989)
Income tax expense
3,377
3,377
Realized gains on cash flow hedges, net of income taxes
(9,627)
(9,612)
Items that will not be reclassified subsequently to net earnings:
Remeasurement gain on defined benefit plans
26,969
2,911
Income tax expense
(7,147)
(772)
Remeasurement gain on defined benefit plans, net of income taxes
19,822
2,139
Other comprehensive income (loss)
39,371
(17,428)
Total comprehensive income
$
545,887 $
517,284
See accompanying notes
TOROMONT INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ thousands)
Toromont Industries Ltd.
46
TOROMONT INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($ thousands, except share amounts)
Share capital
Accumulated other comprehensive income (loss)
Number
Amount
Contributed
surplus
Retained
earnings
Foreign
currency
translation
adjustments
Cash flow
hedges
Total
Total
shareholders'
equity
As at January 1, 2023
82,318,159 $
561,078 $
19,262 $
1,731,661 $
2,992 $
10,366 $
13,358 $
2,325,359
Net earnings
—
—
—
534,712
—
—
—
534,712
Other comprehensive loss
—
—
—
2,139
(583)
(18,984)
(19,567)
(17,428)
Total comprehensive income
—
—
—
536,851
(583)
(18,984)
(19,567)
517,284
Exercise of share options
332,182
24,964
(3,922)
—
—
—
—
21,042
Share-based compensation expense
—
—
12,006
—
—
—
—
12,006
Effect of share compensation plans
332,182
24,964
8,084
—
—
—
—
33,048
Shares purchased for cancellation
(353,000)
(2,441)
—
(35,101)
—
—
—
(37,542)
Shares repurchase commitment
under NCIB
—
(800)
—
(11,652)
—
—
—
(12,452)
Dividends declared
—
—
—
(141,845)
—
—
—
(141,845)
As at December 31, 2023
82,297,341 $
582,801 $
27,346 $
2,079,914 $
2,409 $
(8,618) $
(6,209) $
2,683,852
Net earnings
—
—
—
506,516
—
—
—
506,516
Other comprehensive income
—
—
—
19,822
2,579
16,970
19,549
39,371
Total comprehensive income
—
—
—
526,338
2,579
16,970
19,549
545,887
Exercise of share options
324,733
23,972
(3,708)
—
—
—
—
20,264
Share-based compensation expense
—
—
10,655
—
—
—
—
10,655
Effect of share compensation plans
324,733
23,972
6,947
—
—
—
—
30,919
Shares purchased for cancellation
(1,321,500)
(8,797)
—
(139,165)
—
—
—
(147,962)
Dividends declared
—
—
—
(157,303)
—
—
—
(157,303)
As at December 31, 2024
81,300,574 $
597,976 $
34,293 $
2,309,784 $
4,988 $
8,352 $
13,340 $
2,955,393
See accompanying notes
Consolidated Financial Statements
47
Years ended December 31
Note
2024
2023
Operating activities
Income from continuing operations
$
506,516 $
529,107
Items not requiring cash:
Depreciation and amortization
7, 8, 9, 12
204,975
182,445
Share-based compensation
8,853
10,850
Post-employment obligations
2,803
(4,972)
Deferred income taxes
(658)
18,699
Gain on sale of rental equipment and property, plant and equipment
(26,097)
(34,708)
696,392
701,421
Net change in non-cash working capital and other
23
(188,189)
(177,021)
Additions to rental equipment
7
(209,393)
(231,899)
Proceeds on disposal of rental equipment
60,417
60,707
Continuing operations
359,227
353,208
Discontinued operations
—
2,586
Cash provided by operating activities
359,227
355,794
Investing activities
Additions to property, plant and equipment
7
(136,516)
(114,471)
Proceeds on disposal of property, plant and equipment
3,431
10,297
Business acquisition
4
(73,591)
—
Increase in other assets
(125)
(139)
Continuing operations
(206,801)
(104,313)
Discontinued operations
—
(411)
Proceeds from sale of discontinued operations (net of cash)
26
—
26,606
Cash used in investing activities
(206,801)
(78,118)
Financing activities
Financing fees
(103)
—
Dividends paid
13
(153,560)
(138,565)
Cash received on exercise of share options
20,264
21,042
Shares purchased for cancellation
13
(160,414)
(37,542)
Payment of lease liabilities
8
(9,728)
(9,386)
Continuing operations
(303,541)
(164,451)
Discontinued operations
—
(38)
Cash used in financing activities
(303,541)
(164,489)
Effect of currency translation on cash balances
1,173
(210)
(Decrease) increase in cash and cash equivalents during the year
Continuing operations
(149,942)
84,234
Discontinued operations
—
28,743
Cash and cash equivalents, at beginning of the year
1,040,757
927,780
Cash and cash equivalents, at end of the year
$
890,815 $
1,040,757
Supplemental cash flow information (note 23)
See accompanying notes
TOROMONT INDUSTRIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
Toromont Industries Ltd.
48
1.
DESCRIPTION OF BUSINESS
Corporate Information
Toromont Industries Ltd. (the "Company" or "Toromont") is a limited company incorporated and domiciled in Canada whose shares are
publicly traded on the Toronto Stock Exchange ("TSX") under the symbol TIH. The registered office is located at 3131 Highway 7 West,
Concord, Ontario, Canada.
The Company operates through two business segments: the Equipment Group and CIMCO. The Equipment Group includes one of the
larger Caterpillar dealerships by revenue and geographic territory, spanning the Canadian provinces of Newfoundland and Labrador,
Nova Scotia, New Brunswick, Prince Edward Island, Québec, Ontario and Manitoba, in addition to most of the territory of Nunavut. The
Equipment Group includes industry-leading rental operations and a complementary material handling business. CIMCO is one of North
America’s leading suppliers of thermal management solutions that enable customers to reduce energy consumption and emissions, use
natural refrigerants and monitor and control their operating environments autonomously. Both segments offer comprehensive product
support capabilities. Toromont employs over 7,300 people in more than 165 locations.
2.
MATERIAL ACCOUNTING POLICIES
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"), as
issued by the International Accounting Standards Board ("IASB").
These consolidated financial statements were authorized for issue by the Board of Directors on February 11, 2025 on the
recommendation of the Audit Committee.
Basis of Measurement
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.
Presentation and Functional Currency
The consolidated financial statements are presented in Canadian dollars, which is Toromont's functional currency. All values are
rounded to the nearest thousand, except where otherwise indicated.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
Subsidiaries 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 policies. All intra-group balances, income and expenses and unrealized
gains and losses resulting from intra-group transactions are eliminated in full upon consolidation.
Business Combinations and Goodwill
When determining the nature of an acquisition, as either a business combination or an asset acquisition, management defines a
business as "an integrated set of activities and assets that is capable of being 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."
An integrated set of activities and assets requires inputs and processes applied to those inputs, which together are or will be used to
create outputs. However, 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.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
consideration transferred, measured at the acquisition date fair value. Acquisition costs are expensed as incurred.
Goodwill is initially measured at cost, being the excess of the cost of the business combination over the Company's share in the net fair
value of the acquiree'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 recognized directly in the consolidated statements of income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
49
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company's cash-generating units
("CGUs") 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.
Where goodwill forms part of a CGU 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 CGU
retained.
Discontinued Operations
The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial
impact of disposal transactions from ongoing operations. Discontinued operations reporting occurs when the disposal of a component
or a group of components of the Company represents a strategic shift that will have an impact on the Company's operations and
financial results, and where the operations and cash flows can be clearly distinguished, operationally and for financial reporting
purposes, from the rest of the Company.
The results of discontinued operations are excluded from both continuing operations and business segment information in the
consolidated financial statements and the notes to the consolidated financial statements, unless otherwise noted, and are presented net
of tax in the consolidated statements of income for the current and comparative year. Refer to note 26, "Discontinued Operations" for
further information.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in bank, and short-term deposits with an original maturity of three months or
less, readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value.
Accounts Receivable
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 recognized 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.
Unbilled receivables represent contract assets related to the Company's rights to consideration for work completed but not billed as at
the reporting date on the sale of power and energy systems and refrigeration packages. These are transferred to accounts receivable
when the entitlement to payment becomes unconditional.
Inventories
Inventories are valued at the lower of cost and net realizable value.
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. Serialized inventory is determined on a specific-item basis. Non-serialized inventory is determined
based on a weighted average actual cost.
Cost of work-in-process includes cost of direct materials, direct labour and an allocation of overhead costs, based on normal operating
capacity.
Cost of work-in-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, recognized in other comprehensive (loss)
income ("OCI"), in respect of the purchase of inventory.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
50
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation and accumulated impairment losses, if any.
Depreciation is recognized principally on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives range
from 20 to 30 years for buildings, 3 to 10 years for equipment and 20 years for power generation assets. Leasehold improvements are
amortized on a straight-line basis over the term of the lease. Land is not depreciated.
The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted
prospectively, if appropriate.
Rental Equipment
Rental equipment is recorded at cost, net of accumulated depreciation and any impairment losses. Cost is determined on a specific-
item basis. Rental equipment is depreciated to its estimated residual value over its estimated useful life on a straight-line basis, which
ranges from 1 to 10 years.
The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted
prospectively, if appropriate.
Intangible 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. Following initial recognition, intangible assets are carried at cost less
any accumulated amortization and accumulated impairment losses, as applicable.
Intangible assets with a finite useful life are amortized over their estimated useful lives and are assessed for impairment whenever there
is an indication that the intangible assets may be impaired. The amortization period and the amortization method for intangible assets
with finite useful lives are reviewed at least at the end of each reporting period.
Amortization is recorded as follows:
•
Customer relationships – 8 years, straight-line
•
ERP system – 5 years, straight-line
•
Customer order backlog – specific basis
•
Patents and licenses – remaining life, straight-line
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually or when indicators of impairment
are present. Distribution networks 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.
Financial Instruments
Financial assets and liabilities are recognized 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. Financial assets and liabilities are classified in the following measurement categories: (i) amortized
cost; (ii) fair value through OCI; or (iii) fair value through profit or loss ("FVTPL"). Initially, all financial assets and liabilities are
recognized at fair value, net of transaction costs, except for financial instruments classified as FVTPL, whereby transaction costs are
recognized immediately in profit or loss. Regular-way trades of financial assets and liabilities are recognized on the trade date.
Financial Assets
Subsequent measurement of financial assets depends on the classification. The Company has made the following classifications:
•
Cash and cash equivalents, accounts receivable, unbilled receivables, supplier claims receivable, and installment and other
notes receivable are classified as amortized cost and measured using the effective interest rate method less any impairment
losses.
•
Accounts receivable comprise amounts due from customers for goods or services transferred in the ordinary course of
business and non-trade accounts. Unbilled receivables relate to the Company's right to consideration for goods or services
transferred to a customer but not yet billed as at the reporting date. Installment notes receivable represent amounts due from
customers relating to the financing of equipment and parts and services sold.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
51
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.
Financial Liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest rate method or at FVTPL. Financial
liabilities are classified as FVTPL when the financial liability is: (i) contingent consideration of an acquirer in a business combination; (ii)
held for trading; or (iii) it is designated as FVTPL.
For financial liabilities that are designated as FVTPL, the amount of change in the fair value of the financial liability that is attributable to
changes in the credit risk of that liability is recognized in OCI, unless the recognition of the effects of changes in the liability's credit risk
in OCI 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 recognized in the consolidated statements of income. Changes in fair value attributable to a financial
liability's credit risk that are recognized in OCI are not subsequently reclassified to the consolidated statements of income; instead, they
are transferred to retained earnings upon derecognition of the financial liability.
Financial liabilities that are not: (i) contingent consideration of an acquirer in a business combination; (ii) held for trading; or (iii) are
designated as FVTPL, are subsequently measured at amortized 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 OCI.
Fair Value of Financial Instruments
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
•
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
•
Level 2 – other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either
directly or indirectly.
•
Level 3 – techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable
market data.
Impairment of Financial Assets
Financial assets classified as amortized 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.
A financial asset is considered in default when contractual payments are 90 days past due. A financial asset may also be considered to
be in default if internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held. A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
Derivative Financial Instruments and Hedge Accounting
Derivative financial arrangements are used to hedge exposure to fluctuations in exchange rates. Such derivative financial instruments
are initially recognized 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.
At inception, the Company designates and documents the hedge relationship, including identification of the transaction and the risk
management objectives and strategy for undertaking 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
52
recognized in OCI. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated statements of
income. Additionally:
•
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, the associated gains or
losses that were recognized in OCI are included in the initial cost or other carrying amount of the asset;
•
For cash flow hedges other than those identified above, amounts accumulated in OCI 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 takes place);
•
When 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 OCI remains in OCI and is recognized when the forecast transaction is ultimately recognized in the
consolidated statements of income; and
•
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is
immediately recognized in the consolidated statements of income.
Impairment of Non-financial 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. For the purpose of impairment testing, goodwill arising from acquisitions is allocated to each
of the Company's CGUs or group of CGUs 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 CGUs or a group of CGUs.
Any potential impairment of goodwill or intangible assets is identified by comparing the recoverable amount of a CGU or a group of
CGUs to its carrying value. The recoverable amount is the higher of its fair value less costs to sell and its value-in-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-rata on the basis of the carrying amount of each asset. In determining fair value less costs to
sell, recent market transactions are taken into account, if available. In assessing value-in-use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. Impairment losses are recognized in the consolidated statements of income.
For non-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 recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the Company estimates the asset’s recoverable amount. An impairment loss is recognized for the
amount by which the asset's carrying amount exceeds its recoverable amount. A previously recognized impairment loss is reversed only
if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in the consolidated statements of income.
Revenue from Contracts with Customers
Revenue from contracts with customers is recognized 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.
•
Sale of Equipment – Revenue is recognized when control of the equipment has been transferred to the customer. This usually
occurs when the equipment is delivered or picked up by the customer. The transaction price is documented on the sales
invoice and agreed to by the customer. Payment is generally due at the time of delivery; as such, a receivable is recognized 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: (i) there is a substantive
reason for the arrangement; (ii) the equipment is separately identified as belonging to the customer; (iii) Toromont is no longer
able to use the equipment or direct it to another customer; and (iv) the equipment is currently ready for physical transfer to the
customer.
•
Sale of Equipment with a Guaranteed Residual Value or Repurchase Commitment – 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 IFRS 16, Leases ("IFRS 16"). Revenue is therefore recognized over the period
extending to the date of the residual guarantee.
•
Sale of Systems – The Company sells systems, including power and energy facilities and industrial and recreational
refrigeration systems, which involve the design, manufacture, installation and commissioning of longer-term projects under the
customer's control and typically construction is completed in under two years. Revenue is recognized progressively based on
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. Payment terms are usually based on set milestones outlined in the contract.
Periodically: (i) amounts are received in advance of the associated contract work being performed – these amounts are
recorded as deferred revenue and contract liabilities; and (ii) revenue is recognized without issuing an invoice – this
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
53
entitlement to consideration is recognized as unbilled receivables. Any foreseeable losses on such projects are recognized
immediately in profit or loss as identified.
•
Equipment Rentals – Revenue is accounted for in accordance with IFRS 16. Revenue is recognized on a straight-line basis
over the term of the agreement. Payment terms are generally 30 days from invoicing.
•
Product Support Services – Revenue from product support services includes the sale of parts and performance of service work
on equipment. For the sale of parts, revenue is recognized when the part is shipped or picked up by the customer. For the
servicing of equipment, revenue on both the labour and parts used in performing the work is recognized when the job is
completed. Payment terms are generally 30 days from invoicing.
•
Long-term Maintenance Contracts – Long-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-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 30 days from invoicing.
These amounts are recognized as deferred revenue and contract liabilities. Revenue is recognized as work is performed under
the contract based on standard or contract rates. Revenue from maintenance services is recognized over time, using an input
method to measure progress towards complete satisfaction of the service.
•
Extended Warranty – Extended warranty may be purchased by a customer at time of purchase of a machine to provide
additional warranty coverage beyond the initial one-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 recognizes revenue for extended warranty as work is performed under the extended warranty contract using
standard rates.
•
Power Generation – The Company owns and operates power generation plants that sell electricity and thermal power.
Revenue is recognized monthly based on set rates as power is consumed. Payment is due within 30 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-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
A single recognition and measurement approach is applied for all leases, except for short-term leases and leases of low-value assets.
Right-of-use assets representing the right to use the underlying assets and lease liabilities representing lease payments are recognized.
Right-of-use assets
Right-of-use assets are recognized 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-of-use assets includes the amount of
lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date, less any lease
incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the
recognized right-of-use assets are depreciated on a straight-line basis over the shorter of their estimated useful life and the lease term,
which ranges from 3 to 5 years for vehicles and 1 to 15 years for properties. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, lease liabilities are recognized 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's incremental borrowing rate at the lease commencement date is used in the present value calculation.
After the commencement date, the amount of lease liabilities is reduced by the lease payments made. In addition, the carrying amount
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
54
of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease
payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The short-term lease recognition exemption is applied to leases that have a lease term of 12 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-term leases and leases of low-value assets are recognized as an expense on a straight-line basis over
the lease term.
Toromont as Lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified
as operating leases. Rental income arising is recognized on a straight-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 recognized over the lease term on the same basis as rental income.
Foreign Currency Translation
The functional and presentation currency of the Company is the Canadian dollar. Each of the Company'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. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency spot rate of exchange as at the reporting date. All differences are recorded directly
in profit or loss. Non-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
recognized in accumulated other comprehensive income (loss) in shareholders' equity. On disposal of a foreign operation, the deferred
cumulative amount recognized in equity is recognized in the consolidated statements of income.
Share-based Payment Transactions
The Company has a stock option plan and other share-based compensation plans. Units under such plans may be awarded to certain
employees and directors as part of their compensation package for services performed (excluding options in the case of directors).
Stock options – Expense is based on the fair value of the awards granted determined using the Black-Scholes option pricing model and
the best estimate of the number of equity instruments that will ultimately vest. For 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 recognized as share-based compensation expense, net of estimated forfeitures, over its respective vesting period
with a credit to contributed surplus. When options are exercised, the proceeds, together with the amount recorded in contributed
surplus, are transferred to share capital.
Performance Share Units ("PSUs") – PSUs are awarded at no cost to the recipient and cliff vest over a three-year performance period.
Vesting level is subject to performance condition achievement with respect to relative total shareholder return performance compared to
the TSX index (a market condition) or return on capital employed (a non-market condition), and can range from 0% to 200%. PSUs are
paid out in common shares or, if elected by the individual at time of grant, are transferred to an equity-settled DSU account (see
description below). Additional PSUs are credited to the holder upon each dividend payment made by Toromont.
The fair market value of the award is determined at date of grant. The fair value of grants with a market condition are based on the
expected payout as of the grant date. The fair value of grants with a non-market condition is initially based on the volume-weighted
average trading price of Toromont'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-market conditions is adjusted over time based on actual
performance and expected payout, while the fair value of awards with market conditions is not adjusted. Share-based compensation
expense is recognized over the vesting period with a related credit to contributed surplus.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
55
Restricted Share Units ("RSUs") – RSUs are awarded at no cost to the recipient and cliff vest over a three-year performance period.
RSUs are paid out in common shares or, if elected by the individual at time of grant, are transferred to an equity-settled DSU account
(see description below). Additional RSUs are credited to the holder upon each dividend payment made by Toromont.
The fair market value of the award is based on the volume-weighted average trading price of Toromont's common shares for five days
preceding the date of the grant and expected performance condition payout. Share-based compensation expense is recognized over
the vesting period with a related credit to contributed surplus.
Deferred Share Units ("DSUs") – The Company has two DSU plans:
•
Equity-settled DSUs – 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 market prices.
•
Cash-settled DSUs – 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 market prices. Changes in fair value are recognized in the consolidated
statements of income in selling and administrative expenses. This plan was closed to new grants/elections in 2022.
Employee Future Benefits
For 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.
For defined benefit pension plans and other post-employment benefit plans, the expense is determined separately for each plan using
the following policies:
•
The cost of future benefits earned by employees is actuarially determined using the projected unit credit method prorated on
length of service and management's best estimate assumptions using a measurement date of December 31;
•
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset;
•
Past service costs from plan amendments are recognized immediately in net earnings to the extent that the benefits have
vested; otherwise, they are amortized on a straight-line basis over the vesting period; and
•
Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and changes in the effect of
the asset ceiling are recognized 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 recognized 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 Taxes
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 recognized 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 realized.
Current and deferred income taxes, relating to items recognized directly in shareholders' equity, are also recognized directly in
shareholders' equity.
Standards Adopted in 2024
The following amendments to accounting standards were adopted by the Company on January 1, 2024:
IAS 1 – Presentation of Financial Statements – Disclosure of Accounting Policies:
•
Clarified the classification of liabilities as current or non-current based on contractual rights that are in existence at the end of
the reporting period and are unaffected by expectations about whether an entity will exercise its right to defer or accelerate
settlement. A liability not due over the next 12 months is classified as non-current even if management intends or expects to
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
56
settle the liability within 12 months. The amendments also introduced a definition of "settlement" to make clear that settlement
refers to the transfer of cash, equity instruments, other assets, or services to the counterparty.
•
Clarified that only covenants with which an entity is obliged to comply with on or before the reporting date will affect a liability's
classification as current or non-current. Further, disclosure is required for any information that enables users of financial
statements to comprehend the possibility that non-current liabilities with covenants may become payable within 12 months.
IFRS 16 – Lease Liability in a Sale and Leaseback:
•
Specified the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction,
to ensure the seller-lessee does not recognize any amount of the gain or loss that relates to the right of use it retains.
IAS 7 – Statement of Cash Flows and IFRS 7 – Supplier Finance Arrangements:
•
Specified that specific disclosure requirements should be presented to enhance current disclosure requirements, which are
intended to assist users of the financial statements in understanding the effects of supplier finance arrangements on an entity's
liabilities, cash flows and exposure to liquidity risk.
The implementation of these amendments to standards did not have a significant impact on the Company's consolidated financial
statements. The Company has not early-adopted any standard, interpretation or amendment that has been issued but is not yet
effective.
Amendments Issued but Not Yet Effective
A number of amendments to standards and interpretations have been issued but are not yet effective up to the date of authorization of
these consolidated financial statements, for the financial year ended December 31, 2024, 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.
Annual Improvements to IFRS Accounting Standards – Volume 11 (effective January 1, 2026):
Annual improvements are limited to changes that either clarify the wording in an accounting standard or correct relatively minor
unintended consequences, oversights or conflicts between the requirements in the accounting standards. It contains amendments to
five standards as a result of the IASB's annual improvements project.
Amendments to IFRS 9 and IFRS 7 – Classification and Measurement of Financial Instruments (effective January 1, 2026):
•
Clarify the requirements for the timing of recognition and derecognition of financial assets and liabilities at settlement date,
except for regular-way purchases or sales of financial assets and financial liabilities meeting conditions for new exception. The
new exception permits companies to elect to derecognize certain financial liabilities settled via electronic payment systems
earlier than the settlement date;
•
Clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest
criterion;
•
Add new disclosures guidelines to assess contractual cash flow characteristics of financial assets, which apply to all contingent
cash flows, including those arising from environmental, social and governance linked features; and,
•
Add updates to the disclosures for equity instruments designated at fair value through OCI.
IFRS 18 – Presentation and Disclosure of Financial Statements, which replaces IAS 1 (effective January 1, 2027):
•
Introduces new requirements on presentation and base disclosure requirements for financial statements, mostly within the
statement of income or loss, including the requirement to classify income and expenses into three new categories – operating,
investing and financing – and present specified totals and subtotals for operating profit and loss and profit and loss before
financing and income taxes.
•
Further, operating expenses are presented directly on the face of the income statement – classified either by nature (e.g.,
employee compensation), by function (e.g., cost of sales) or using a mixed presentation. Expenses presented by function
require more detailed disclosures about their nature.
•
Also provides enhanced guidance of information in the financial statements, such as disclosure of management-defined
performance measures, and aggregation and disaggregation of financial information based on identified roles of the primary
financial statements and the notes and eliminates classification options for interest and dividends in the statement of cash
flows.
•
In addition, narrow-scope amendments have been made to IAS 7, which include changing the starting point for determining
cash flows from operations under the indirect method and the removal of the optionality around the classification of cash flows
from dividends and interest.
•
Minor consequential amendments to other standards were also made.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
57
•
Earlier adoption is permitted and the Company intends to adopt these when they become effective.
3.
USE OF SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and accompanying
disclosures as at the end of the reporting period, and the reported amounts of revenue and expenses during the reporting periods.
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.
Management 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. Revisions to estimates are recognized
prospectively.
The consolidated financial statement areas that require significant estimates and judgments are as follows:
Sale of Power and Energy Systems and Refrigeration Packages
Revenue is recognized over time for the sale of power and energy systems and refrigeration packages. Because of the control
transferring over time, revenue is recognized 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-of-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. Under the percentage-of-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. Revenue is recorded proportionally as costs are incurred. Costs to fulfill include labour, materials and
subcontractors' costs, other direct costs, and an allocation of indirect costs.
This method requires management to make a number of estimates and assumptions about the expected profitability of these contracts.
These factors are routinely reviewed as part of the project management process.
Long-term Maintenance Contracts
These contracts typically have fixed prices based on machine hours, with provisions for inflationary and exchange adjustments.
Revenue is recognized as work is performed under the contract based on standard or contract rates. Revenue from maintenance
services is recognized over time, using an input method to measure progress towards complete satisfaction of the service.
Management makes a number of estimates and assumptions surrounding machine usage, machine performance, future parts and
labour pricing, manufacturers' warranty coverage and other detailed factors. These factors are routinely reviewed as part of the project
management process.
Property, Plant and Equipment and Rental Equipment
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. Actual 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.
Impairment of Non-financial Assets
Judgment is used in identifying an appropriate discount rate and growth rate for the calculations required in assessing potential
impairment of non-financial assets. Judgment is also used in identifying the CGUs to which the intangible assets should be allocated,
and the CGU or group of CGUs 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-generating ability of the assets.
Income Taxes
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
58
Inventories
Management is required to make an assessment of the net realizable value of inventory at each reporting period. These estimates are
determined on the basis of age, stock levels, current market prices, current economic trends and past experience in the measurement
of net realizable value.
Allowance for Doubtful Accounts
The Company makes 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's allowance is determined by historical experiences, and considers factors including the aging of the balances, the
customer's creditworthiness, current economic conditions, expectation of bankruptcies and the economic volatility in the markets/
locations of customers. The current economic environment has increased the measurement uncertainty with respect to the
determination of the allowance for doubtful accounts.
Share-based Compensation
The models used to determine the fair value of share-based payments require various estimates relating to volatility, interest rates,
dividend yields, expected life of the options granted and, in the case of PSUs, expected share price performance. Fair value inputs are
subject to market 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. Separate from the fair value calculation, the Company is required to
estimate the expected forfeiture rate of equity-settled share-based payments.
Post-employment Benefit Plans
The Company has defined benefit pension plans and other post-employment benefit plans that provide certain benefits to its
employees. Actuarial valuations of these plans are based on assumptions, which include discount rates, retail price inflation, mortality
rates, employee turnover and salary escalation rates. Judgment 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
recognized in OCI.
Leases
The lease term is determined as the non-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. All relevant factors that
create an economic incentive for the Company to exercise the renewal are considered. After the commencement date, the lease term is
reassessed if there is a significant event or change in circumstances that is within the Company'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 ("IBR") is used to
measure lease liabilities. The IBR 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-of-use asset in a similar economic environment. The Company
estimates the IBR using observable market interest rates and adjusts for entity-specific estimates, such as credit rating.
4. BUSINESS COMBINATION
On September 9, 2024, the Company acquired the rental business and net operating assets of Tri-City Equipment Rentals ("Tri-City"),
an industry leader in heavy equipment rentals with operations in Southwestern Ontario. The acquisition expands Toromont Cat's heavy
rents business to better serve the Company's customer base.
The Company acquired the business and net operating assets of Tri-City in exchange for consideration of $77.6 million, consisting of
cash in the amount of $73.6 million, and a balance of purchase price payable in the amount of $4.0 million, to be paid at various dates
over the next two years. Toromont funded the transaction with cash on hand.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
59
The acquisition was accounted for as a business combination, and the results of Tri-City have been included in the consolidated
statements of income and statements of comprehensive income from the date of acquisition, and are included in the Equipment Group.
The purchase price allocation is final. The Company determined the fair values based on market information, independent valuations
and management’s estimates.
Note
Accounts receivable
$
5,624
Inventories
943
Property, plant and equipment
6,860
Rental equipment
62,650
Net identifiable assets
76,077
Residual purchase price allocated to goodwill
9
1,514
Total
$
77,591
Accounts receivable represent gross contractual amounts receivable and reflect the best estimate at the acquisition date of the
contractual cash flows expected to be collected.
Goodwill is attributed to the existing Tri-City business, the assembled workforce and the combined strategic value to the Company's
growth plan. The amount assigned to goodwill is expected to be deductible for tax purposes.
Acquisition-related costs were expensed and are included in selling and administrative expenses.
5. ACCOUNTS RECEIVABLE
2024
2023
Trade receivables
$
605,521 $
613,976
Less: Allowance for doubtful accounts
(30,014)
(25,082)
Trade receivables, net
575,507
588,894
Unbilled receivables
39,780
21,433
Other receivables
13,384
16,916
$
628,671 $
627,243
The aging of gross trade receivables was as follows:
2024
2023
Current to 90 days
$
554,055 $
583,080
Over 90 days
51,466
30,896
Trade receivables
$
605,521 $
613,976
The movement in the Company's allowance for doubtful accounts was as follows:
2024
2023
Balance, January 1
$
25,082 $
25,540
Provisions and revisions, net
4,932
(458)
Balance, December 31
$
30,014 $
25,082
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
60
The movement in the Company's unbilled receivables was as follows:
2024
2023
Balance, January 1
$
21,433 $
30,738
Amounts received or recognized in revenue
(17,770)
(26,646)
Additions
36,117
17,341
Balance, December 31
$
39,780 $
21,433
6. INVENTORIES
2024
2023
Equipment
$
759,506 $
638,485
Repair and distribution parts
380,451
328,795
Direct materials
5,515
6,143
Work-in-process
79,015
91,365
Work-in-process (contracts)
97,080
54,283
$
1,321,567 $
1,119,071
The amount of inventory recognized as an expense in cost of goods sold (accounted for other than by the percentage-of-completion
method) during 2024 was $3.1 billion (2023 – $2.8 billion). In 2024, cost of goods sold included a net reversal of previous write-downs
of $6.3 million. In 2023, cost of goods sold included inventory write-downs pertaining to obsolescence and aging of $4.0 million.
7. PROPERTY, PLANT AND EQUIPMENT AND RENTAL EQUIPMENT
Property, plant and equipment
Land
Buildings
Equipment
Power
generation
Total
Rental
equipment
Cost
January 1, 2024
$
182,938 $
370,334 $
361,697 $
40,138 $
955,107 $ 1,263,079
Additions
11,294
54,276
70,608
322
136,500
208,976
Business combination
2,888
2,800
1,172
—
6,860
62,650
Disposals
(366)
(1,564)
(13,526)
—
(15,456)
(111,237)
Foreign currency translation adjustments
14
292
786
—
1,092
—
December 31, 2024
$
196,768 $
426,138 $
420,737 $
40,460 $ 1,084,103 $ 1,423,468
Accumulated depreciation
January 1, 2024
$
— $
148,538 $
229,309 $
38,341 $
416,188 $
580,710
Depreciation expense
—
15,940
39,443
1,104
56,487
134,883
Depreciation of disposals
—
(536)
(13,202)
—
(13,738)
(75,205)
Foreign currency translation adjustments
—
68
546
—
614
—
December 31, 2024
$
— $
164,010 $
256,096 $
39,445 $
459,551 $
640,388
Net book value – December 31, 2024
$
196,768 $
262,128 $
164,641 $
1,015 $
624,552 $
783,080
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
61
Property, plant and equipment
Land
Buildings
Equipment
Power
generation
Total
Rental
equipment
Cost
January 1, 2023
$
177,099 $
327,067 $
314,214 $
40,094 $
858,474 $ 1,133,080
Additions
9,671
48,011
64,515
44
122,241
221,650
Disposals
(3,693)
(357)
(11,358)
—
(15,408)
(91,651)
Business disposition
(135)
(4,313)
(5,463)
—
(9,911)
—
Foreign currency translation adjustments
(4)
(74)
(211)
—
(289)
—
December 31, 2023
$
182,938 $
370,334 $
361,697 $
40,138 $
955,107 $ 1,263,079
Accumulated depreciation
January 1, 2023
$
— $
138,322 $
212,345 $
37,183 $
387,850 $
516,791
Depreciation expense
—
13,769
31,481
1,158
46,408
123,194
Depreciation of disposals
—
(357)
(11,132)
—
(11,489)
(59,275)
Business disposition
—
(3,178)
(3,237)
—
(6,415)
—
Foreign currency translation adjustments
—
(18)
(148)
—
(166)
—
December 31, 2023
$
— $
148,538 $
229,309 $
38,341 $
416,188 $
580,710
Net book value – December 31, 2023
$
182,938 $
221,796 $
132,388 $
1,797 $
538,919 $
682,369
During the year ended December 31, 2024, depreciation expense of $171.7 million was charged to cost of goods sold (2023 –
$152.7 million), and $19.7 million was charged to selling and administrative expenses (2023 – $16.9 million).
As at December 31, 2024, the balance of assets under construction and not subject to depreciation was $11.4 million (2023 –
$38.2 million).
8. OTHER ASSETS AND LEASE LIABILITIES
2024
2023
Right-of-use assets
$
39,169 $
32,892
Post-employment obligations net surplus (note 21)
55,317
31,081
Equipment sold with guaranteed residual values
1,707
1,036
Other
3,594
3,288
Other assets
$
99,787 $
68,297
Right-of-use Assets and Lease Liabilities
Activity within right-of-use assets and lease liabilities during the year was as follows:
Right-of-use assets
Lease
liabilities
Properties
Vehicles
Total
January 1, 2024
$
32,337 $
555 $
32,892 $
34,289
Additions and remeasurements
16,436
—
16,436
16,436
Depreciation
(9,912)
(544)
(10,456)
—
Disposals and retirements
—
(11)
(11)
(11)
Foreign currency translation adjustments
308
—
308
313
Payments
—
—
—
(9,728)
December 31, 2024
$
39,169 $
— $
39,169 $
41,299
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
62
Right-of-use assets
Lease
liabilities
Properties
Vehicles
Total
January 1, 2023
$
20,559 $
2,351 $
22,910 $
23,881
Additions and remeasurements
20,156
—
20,156
20,156
Depreciation
(8,178)
(1,644)
(9,822)
—
Disposals and retirements
(1)
(19)
(20)
(23)
Foreign currency translation adjustments
(52)
—
(52)
(52)
Payments
—
—
—
(9,386)
Business disposition
(147)
(133)
(280)
(287)
December 31, 2023
$
32,337 $
555 $
32,892 $
34,289
The current portion of lease liabilities as at December 31, 2024 of $8.8 million (2023 – $9.2 million) is included in accounts payable and
accrued liabilities on the consolidated statements of financial position.
The following amounts were recognized in the consolidated statements of income during the year:
2024
2023
Depreciation expense of right-of-use assets
$
10,456 $
9,822
Interest expense on lease liabilities
1,656
1,139
Expense relating to short-term leases and leases of low-value assets
378
315
$
12,490 $
11,276
Cash outflows for leases in 2024 were $9.7 million (2023 – $9.4 million).
The future cash outflows relating to leases are disclosed in note 24.
9. GOODWILL AND INTANGIBLE ASSETS
Patents
and
licenses
Customer
order
backlog
Customer
relationships
Distribution
networks
Goodwill
Total
Cost
January 1, 2023
$
500 $
8,691 $
15,137 $
371,551 $
93,780 $
489,659
December 31, 2023
$
500 $
8,691 $
15,137 $
371,551 $
93,780 $
489,659
Business acquisition (note 4)
—
—
—
—
1,514
1,514
December 31, 2024
$
500 $
8,691 $
15,137 $
371,551 $
95,294 $
491,173
Accumulated amortization
January 1, 2023
$
296 $
7,031 $
9,767 $
— $
— $
17,094
Amortization
30
555
1,892
—
—
2,477
December 31, 2023
$
326 $
7,586 $
11,659 $
— $
— $
19,571
Amortization
30
556
1,892
—
—
2,478
December 31, 2024
$
356 $
8,142 $
13,551 $
— $
— $
22,049
Net book value
December 31, 2023
$
174 $
1,105 $
3,478 $
371,551 $
93,780 $
470,088
December 31, 2024
$
144 $
549 $
1,586 $
371,551 $
95,294 $
469,124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
63
Goodwill
The carrying amount of goodwill has been allocated as follows:
2024
2023
Equipment Group
Toromont Cat
$
89,270 $
89,270
Tri-City Equipment Rentals (note 4)
1,514
—
Battlefield Equipment Rentals
4,060
4,060
CIMCO
450
450
$
95,294 $
93,780
The Company performed the annual impairment test as at December 31, 2024. The recoverable amounts have been determined based
on the fair value less costs to sell ("FVLCS") based on a range of relevant historical company and current market multiples of earnings,
applied to current earnings, adjusted for current economic conditions. As a result of the analysis, management determined there was no
impairment of goodwill.
Intangible Assets with Indefinite Lives – Distribution Networks
The carrying amount of distribution networks has been allocated to the following CGUs and/or group of CGUs:
2024
2023
Equipment Group
Toromont Cat – Quebec/Maritimes
$
352,434 $
352,434
Toromont Cat – all other locations
13,669
13,669
Battlefield Equipment Rentals – Quebec/Maritimes
5,448
5,448
$
371,551 $
371,551
The Company performed the annual impairment test of intangible assets as at December 31, 2024. The recoverable amounts have
been determined based on FVLCS based on a range of relevant historical company and current market multiples of earnings, applied to
current earnings, adjusted for current economic conditions. Based on the analysis, management determined there was no impairment
of indefinite-lived intangible assets.
These valuations are determined using Level 2 inputs, which are observable inputs or inputs that can be corroborated by observable
market data. The calculation of FVLCS for impairment testing is most sensitive to the earnings multiplier. Management believes that any
reasonable change in the key assumptions used to determine the recoverable amount would not cause the carrying amount of any
CGU or group of CGUs to exceed its recoverable amount.
10. PROVISIONS
Activities related to provisions were as follows:
Warranty
Other
Total
Balance, January 1, 2023
$
17,564 $
10,089 $
27,653
New provisions
38,967
3,804
42,771
Utilized or released
(37,493)
(2,095)
(39,588)
Business disposition
(567)
—
(567)
Balance, December 31, 2023
$
18,471 $
11,798 $
30,269
New provisions
36,684
2,952
39,636
Utilized or released
(34,200)
(5,030)
(39,230)
Balance, December 31, 2024
$
20,955 $
9,720 $
30,675
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
64
Warranty
At the time of sale, a provision is recognized for expected warranty claims on products and services, based on past experience and
known issues. It is expected that most of these costs will be incurred in the next financial year.
Other
Other provisions relate largely to open legal, insurance and potential environmental claims, and potential onerous contracts. No one
claim is significant.
11. DEFERRED REVENUE AND CONTRACT LIABILITIES
Deferred revenue and contract liabilities represent billings to customers in excess of revenue recognized and arise on the sale of
equipment with residual value guarantees, extended warranty contracts, long-term maintenance agreements, and the sale of power and
energy systems and refrigeration packages recorded using the percentage-of-completion method.
The components of deferred revenue and contract liabilities were as follows:
2024
2023
Current
Non-current
Total
Current
Non-current
Total
Deposits from customers
$
115,761 $
1,324 $
117,085 $
157,502 $
1,857 $
159,359
Product support service agreements
104,137
—
104,137
105,432
—
105,432
Sale of systems – contract liabilities
100,918
—
100,918
86,898
—
86,898
Extended warranty
11,130
22,261
33,391
10,311
20,622
30,933
$
331,946 $
23,585 $
355,531 $
360,143 $
22,479 $
382,622
During the year ended December 31, 2024, the Company recognized as revenue $362.9 million (2023 –$285.6 million) of the deferred
revenue and contract liabilities balance as at January 1, 2024.
Management expects that 93% of the transaction price allocated to unsatisfied performance obligations as at December 31, 2024 will
be recognized as revenue during the year ended December 31, 2025 and the remaining 7% between the years ended
December 31, 2026 and 2031.
12. LONG-TERM DEBT
2024
2023
Senior debentures
3.71%, $150.0 million, due September 30, 2025 (1)
$
150,000 $
150,000
3.84%, $500.0 million, due October 27, 2027 (1)
500,000
500,000
650,000
650,000
Debt issuance costs, net of amortization
(1,572)
(2,216)
Total long-term debt
$
648,428 $
647,784
Less: current portion of long-term debt
(149,910)
—
Non-current portion of long-term debt
$
498,518 $
647,784
(1) Interest payable semi-annually, principal due on maturity.
The Company has a $500.0 million committed revolving credit facility, maturing in November 2026, with a syndicate of financial
institutions. Debt under this facility is unsecured and ranks pari passu with debt outstanding under Toromont'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.
No amounts were drawn on this revolving credit facility as at December 31, 2024 or 2023.
Standby letters of credit issued utilized $40.8 million of the facility as at December 31, 2024 (2023 – $40.3 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
65
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, 2024 and 2023.
Scheduled principal repayments and interest payments on long-term debt are as follows:
Principal
Interest
2025
$
150,000 $
23,374
2026
—
19,200
2027
500,000
16,000
$
650,000 $
58,574
Interest expense includes interest on debt initially incurred for a term of one year or greater and was $27.0 million in 2024 (2023 –
$27.0 million).
13. SHARE CAPITAL
Authorized
The Company is authorized to issue an unlimited number of common shares (no par value) and preferred shares. No preferred shares
were issued or outstanding for the years ended December 31, 2024 and 2023.
A continuity of the shares issued and outstanding for the years ended December 31, 2024 and 2023 is presented in the consolidated
statements of changes in shareholders’ equity.
Shareholder Rights Plan
The Company has a shareholder rights plan, which is designed to encourage the fair treatment of shareholders in connection with any
takeover offer. Rights issued under the plan become exercisable when a person, and any related parties, acquires or commences a
takeover bid to acquire 20% 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's Board of Directors. Should 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 50% discount to the market
price at that time.
Normal Course Issuer Bid ("NCIB")
The Company's NCIB program was renewed in September 2024. The current issuer bid allows the Company to purchase up to
8.2 million common shares during the 12-month period ending September 20, 2025. All shares purchased under the bid will be
cancelled.
The Company purchased and cancelled 1,321,500 common shares for $160.4 million (average cost of $121.39 per share, including
transaction costs) during the year ended December 31, 2024.
The Company maintains an Automatic Share Purchase Plan ("ASPP") with a broker to enable the purchase of common shares under
the NCIB during regular trading blackout periods. The volume of the purchases are determined by the broker based on share price and
maximum volume parameters established by the Company prior to the commencement of each blackout period. As at
December 31, 2024, there was no obligation for the repurchase of shares under the ASPP.
The Company purchased and cancelled 353,000 common shares for $37.5 million (average cost of $106.35 per share, including
transaction costs) during the year ended December 31, 2023. As at December 31, 2023, there was an obligation for the repurchase of
shares of $12.5 million under the ASPP.
Dividends Paid
The Company paid dividends of $153.6 million ($1.92 per share) for the year ended December 31, 2024, and $138.6 million ($1.68 per
share) for the year ended December 31, 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
66
Dividends Declared
2024
2023
Dividend
Record
date
Dividend
amount
per share
Payment
date
Total
dividends
declared
($ millions)
Record
date
Dividend
amount
per share
Payment
date
Total
dividends
declared
($ millions)
Quarter 1
Mar. 8, 2024 $
0.48
Apr. 4, 2024 $
39.5
Mar. 9, 2023 $
0.43
Apr. 4, 2023 $
35.4
Quarter 2
Jun. 7, 2024
0.48
Jul. 5, 2024
39.4
Jun. 9, 2023
0.43
Jul. 5, 2023
35.6
Quarter 3
Sep. 6, 2024
0.48
Oct. 4, 2024
39.3
Sep. 8, 2023
0.43
Oct. 4, 2023
35.4
Quarter 4
Dec. 6, 2024
0.48
Jan. 6, 2025
39.1
Dec. 8, 2023
0.43
Jan. 5, 2024
35.4
$
1.92
$
157.3
$
1.72
$
141.8
On February 11, 2025, the Board of Directors declared a quarterly dividend of $0.52 per common share, payable on April 4, 2025, to
shareholders on record on March 7, 2025.
14. FINANCIAL INSTRUMENTS
Financial Assets and Liabilities – Classification and Measurement
The following table highlights the carrying amounts and classifications of certain financial assets and liabilities:
2024
2023
Other financial liabilities:
Current portion of long-term debt
$
149,910 $
—
Long-term debt
498,518
647,784
Derivative financial instruments assets (liabilities), net:
Foreign exchange forward contracts
$
19,352 $
(13,946)
Fair Value of Financial Instruments
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's value at maturity based on the comparable foreign
exchange rate as at year-end under the same conditions. The financial institution's credit risk is also taken into consideration in
determining fair value. The valuation is determined using Level 2 inputs, which are observable inputs or inputs that can be corroborated
by observable market 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 total long-term debt were as follows:
2024
2023
Total long-term debt:
Fair value
$
653,673 $
637,808
Carrying value
$
650,000 $
650,000
The fair value was determined using the discounted cash flow method, a generally accepted valuation technique. The discounted factor
is based on market rates for debt with similar terms and remaining maturities and based on Toromont's credit risk. The Company has no
plans to prepay these instruments prior to maturity.
During the years ended December 31, 2024 and 2023, there were no transfers between Level 1 and Level 2 fair value measurements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
67
Derivative Financial Instruments and Hedge Accounting
Foreign exchange contracts and options are transacted with financial institutions to hedge foreign currency-denominated obligations
related to purchases of inventory and sales of products. As at December 31, 2024, the Company was committed to: (i) US dollar
purchase contracts with a notional amount of $398.5 million at an average exchange rate of $1.3802, maturing between January 2025
and December 2025; and (ii) US dollar sale contracts with a notional amount of $25.2 million at an average exchange rate of $1.3668,
maturing between January 2025 and December 2025.
Management estimates that a gain of $19.4 million (2023 – loss of $13.9 million) would be realized if the contracts were terminated on
December 31, 2024. Certain of these forward contracts are designated as cash flow hedges and, accordingly, an unrealized gain of
$10.9 million (2023 – unrealized loss of $11.6 million) has been included in OCI. These gains will be reclassified to net earnings within
the next 12 months and will offset gains/losses recorded on the underlying hedged items, namely foreign currency-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. A gain of $8.5 million (2023 – loss of $2.3 million)
on forward contracts not designated as hedges is included in net earnings, which offsets losses recorded on the associated foreign
currency-denominated items, namely accounts payable and accrued liabilities.
All hedging relationships are formally documented, including the risk management objective and strategy. On 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.
15. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
In the normal course of business, Toromont is exposed to financial risks that may potentially impact its operating results in one or all of
its reportable segments. The Company employs risk management strategies with a view to mitigating these risks on a cost-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.
Currency Risk
The Canadian operations of the Company source the majority of its products and major components from the United States.
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 risk 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 US currency. The Company mitigates exchange rate risk by entering into
foreign currency contracts to fix the cash inflows where appropriate.
The Company maintains a hedging policy whereby all significant transactional currency risks are identified and hedged.
Sensitivity Analysis
The following sensitivity analysis is intended to illustrate the sensitivity to changes in foreign exchange rates on the Company'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. Financial instruments affected by currency risk include cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities and derivative financial instruments.
As at December 31, 2024, a 5% weakening (strengthening) of the Canadian dollar against the US dollar would result in a $1.7 million
(decrease) increase in OCI for financial instruments held in foreign operations, and a $0.1 million (decrease) increase in net earnings
and $13.5 million (decrease) increase in OCI for financial instruments held in Canadian operations.
Credit Risk
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and
derivative financial instruments. The carrying amount of assets included on the consolidated statements of financial position represents
the maximum credit exposure.
The Company has deposited cash and cash equivalents with reputable financial institutions, from which management believes the risk
of loss to be remote.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
68
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 risk concentration with respect to trade receivables is mitigated by the Company’s large customer base.
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.
Interest Rate Risk
The Company minimizes its interest rate risk by managing its portfolio of floating- and fixed-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, 2024 or 2023.
The Company had no floating-rate debt outstanding as at December 31, 2024 or 2023.
Liquidity Risk
Liquidity risk is the risk that the Company may encounter difficulties in meeting obligations associated with financial liabilities. As at
December 31, 2024, the Company had unutilized lines of credit of $459.2 million (2023 – $459.7 million).
Accounts payable are primarily due within 90 days and will be satisfied from current working capital.
The Company expects that continued cash flows from operations in 2025, 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 working capital, capital assets and
dividend payments through the next 12 months, and that the Company's credit ratings provide reasonable access to capital markets to
facilitate future debt issuance.
16. INTEREST INCOME AND EXPENSE
The components of interest expense were as follows:
2024
2023
Credit facilities
$
1,783 $
1,743
Senior debentures
25,216
25,216
Interest on lease liabilities
1,656
1,139
$
28,655 $
28,098
The components of interest and investment income were as follows:
2024
2023
Interest on conversion of rental equipment
$
3,635 $
3,348
Interest income
50,002
42,634
$
53,637 $
45,982
17. INCOME TAXES
Significant components of the provision for income tax expense were as follows:
2024
2023
Current income tax expense
$
189,253 $
174,446
Deferred income tax (recovery) expense
(615)
18,559
Total income tax expense
$
188,638 $
193,005
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
69
A reconciliation of income taxes at Canadian statutory rates with the reported income taxes was as follows:
2024
2023
Statutory Canadian federal and provincial income tax rates
26.5%
26.5%
Expected taxes on income
$
184,216 $
191,360
Increase (decrease) in income taxes resulting from:
Higher effective tax rates in other jurisdictions
1,607
1,532
Manufacturing and processing rate reduction
(50)
(59)
Expenses not deductible for tax purposes
3,364
3,737
Non-taxable gains
(760)
(1,562)
Effect of change in future income tax rate
46
125
Other
215
(2,128)
Provisions for income taxes
$
188,638 $
193,005
Effective income tax rate
27.1%
26.7%
The statutory income tax rate represents the combined Canadian federal and Ontario provincial income tax rates, which are the
relevant tax jurisdictions for the Company.
The sources of deferred income taxes were as follows:
2024
2023
Accrued liabilities
$
36,746 $
36,568
Deferred revenue and contract liabilities
5,948
3,644
Accounts receivable
7,194
6,459
Inventories
18,661
12,101
Capital assets
(121,793)
(115,277)
Goodwill and intangible assets
(47,678)
(44,657)
Other
1,533
1,766
Cash flow hedges on OCI
(2,934)
3,029
Post-employment obligations
(6,644)
(149)
Net deferred tax liabilities
$
(108,967) $
(96,516)
The movement in net deferred income taxes was as follows:
2024
2023
Balance, January 1
$
(96,516) $
(82,014)
Tax expense recognized in income
615
(18,559)
Foreign exchange and other
44
(138)
Discontinued operations (including business disposition)
—
(1,703)
Tax recovery (expense) recognized in OCI
(13,110)
5,898
Balance, December 31
$
(108,967) $
(96,516)
The aggregate amount of unremitted earnings in the Company's subsidiaries was $67.2 million (2023 – $55.8 million). These earnings
can be remitted with no tax consequences.
Pillar 2 — Global minimum top-up tax
The Base Erosion and Profit Shifting 2.0 initiative is a significant reform of the international tax system led by the Inclusive Framework
and the Organization for Economic Co-operation and Development. This initiative includes a substantial change for large multinational
groups with the "Pillar Two" proposal of a global minimum tax of 15%. Pillar Two legislation has been enacted or substantively enacted
in certain jurisdictions in which the Company operates. The Company has performed an assessment of the potential exposure arising
from Pillar Two income taxes. This assessment is based on the most recent information available regarding the financial performance of
the constituent entities in the Company. Based on the assessment performed, the Pillar Two effective tax rates in all jurisdictions in
which the Company operates are above 15%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
70
18. EARNINGS PER SHARE
2024
2023
Income from continuing operations
$
506,516 $
529,107
Income from discontinued operations
—
5,605
Net earnings available to common shareholders
$
506,516 $
534,712
Weighted average common shares outstanding
82,011,672
82,305,870
Effect of dilutive securities
580,224
592,826
Weighted average common shares outstanding – diluted
82,591,896
82,898,696
Basic earnings per share
Continuing operations
$
6.18 $
6.43
Discontinued operations
—
0.07
$
6.18 $
6.50
Diluted earnings per share
Continuing operations
$
6.13 $
6.38
Discontinued operations
—
0.07
$
6.13 $
6.45
For the year ended December 31, 2024, 157,522 outstanding share options with a weighted average exercise price of $125.11 were
considered anti-dilutive (exercise price in excess of average market price during the year) and, as such, were excluded from the
calculation of diluted earnings per share. For the year ended December 31, 2023, 164,307 outstanding share options with a weighted
average exercise price of $112.48 were considered anti-dilutive.
19. EMPLOYEE BENEFITS EXPENSE
2024
2023
Wages and salaries
$
763,716 $
702,019
Other employment benefit expenses
107,424
100,664
Share-based compensation expense
8,853
10,850
Pension costs
28,082
26,252
$
908,075 $
839,785
20. SHARE-BASED COMPENSATION
Share Option Plan
The Company maintains a share option program for certain employees. Under the plan, up to 7,000,000 options may be granted for
subsequent exercise in exchange for common shares. It is the Company's policy that the aggregate number of options that may be
granted in any one calendar year shall not exceed 1% of the outstanding shares as of the beginning of the year in which a grant is
made (2024 – 822,973; 2023 – 823,181).
Share options have a 10-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 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
71
A reconciliation of the outstanding options for the years ended December 31, 2024 and 2023 was as follows:
2024
2023
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Options outstanding, January 1
1,783,993 $
78.50
1,967,892 $
73.21
Granted
160,960
125.11
168,545
112.48
Exercised (1)
(324,733)
62.40
(332,182)
63.35
Forfeited
(161,569)
93.08
(20,262)
96.14
Options outstanding, December 31
1,458,651 $
85.61
1,783,993 $
78.50
Options exercisable, December 31
918,409 $
72.53
982,044 $
65.64
(1) The weighted average share price at the date of exercise for the year ended December 31, 2024 was $122.77 (2023 – $112.00).
The following table summarizes share options outstanding and exercisable as at December 31, 2024:
Options outstanding
Options exercisable
Range of exercise prices
Number
Weighted
average
remaining
life (years)
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
$36.65 – $39.79
117,100
1.2 $
38.63
117,100 $
38.63
$53.88 – $65.72
247,840
3.9
61.64
247,840
61.64
$66.22 – $72.95
417,530
5.0
70.95
335,794
70.46
$104.91 – $125.11
676,181
7.6
111.58
217,675
106.36
1,458,651
5.7 $
85.61
918,409 $
72.53
The fair values of the share options granted during 2024 and 2023 were determined at the time of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
2024
2023
Fair value price per option
$
27.86 $
24.20
Share price
$
125.11 $
112.48
Expected life of options (years)
5.00
4.94
Expected share price volatility
22.0%
22.0%
Expected dividend yield
1.53%
1.53%
Risk-free interest rate
3.70%
3.40%
Deferred Share Unit Plans
The Company offers DSU plans for executives and non-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 DSUs. In addition, the Board of Directors may grant
discretionary DSUs. Non-employee directors also receive a portion of their compensation in DSUs. The equity-settled DSU plan
commenced in 2022, at which time the cash-settled DSU plan was closed for new grants/elections.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
72
A reconciliation of the cash-settled DSU plan for the years ended December 31, 2024 and 2023 was as follows:
2024
2023
Number of
DSUs
Value
Number of
DSUs
Value
Outstanding, January 1
191,320 $
22,133
190,128 $
18,528
Dividend credits
2,707
336
3,021
319
Redemptions
(16,321)
(2,039)
(1,829)
(193)
Fair market value adjustments
—
(164)
—
3,479
Outstanding, December 31
177,706 $
20,266
191,320 $
22,133
The liability for cash-settled DSUs is recorded in accounts payable and accrued liabilities.
A reconciliation of the outstanding units of the equity-settled DSU plan for the years ended December 31, 2024 and 2023 was as
follows:
2024
2023
Number of
DSUs
Number of
DSUs
Outstanding, January 1
33,360
7,534
Units taken or taken in lieu and dividends
29,313
25,826
Outstanding, December 31
62,673
33,360
The cost of the equity-settled DSU plan is recorded in selling and administrative expenses with a credit to contributed surplus.
Long-term Incentive Plan ("LTIP")
Amendments to the LTIP were effective in early 2022, and the Company introduced PSUs, RSUs and executive deferred share units
("EDSUs"). The Company has the ability to grant options and awards under each of these plans.
Details of each grant will be determined at the date of grant, including performance requirements, vesting and settlement method. PSUs
and RSUs will settle upon vesting, while EDSUs will settle upon cessation of service to the Company. PSU vesting will be based upon
the achievement of performance objectives established at the time of grant by the Board of Directors. The maximum number of
common shares reserved for issuance under the LTIP is in aggregate 750,000.
A reconciliation of the outstanding units of RSUs and PSUs for the years ended December 31, 2024 and 2023 was as follows:
2024
2023
RSUs
PSUs
RSUs
PSUs
Units outstanding, January 1
14,396
56,784
7,163
28,137
Granted
13,575
28,494
7,153
29,714
Reinvested dividends
298
1,041
199
789
Forfeited
(725)
(12,899)
(119)
(1,856)
Units outstanding, December 31
27,544
73,420
14,396
56,784
LTIP expense of $3.5 million (2023 – $3.6 million) was included in selling and administrative expenses with a credit to contributed
surplus.
Employee Share Ownership Plan ("ESOP")
The Company offers an ESOP 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 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 will vest in five years
from date of contribution. Company contributions amounting to $5.2 million in 2024 (2023 – $4.4 million) were charged to selling and
administrative expenses when paid. The plan is administered by a third party.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
73
21. POST-EMPLOYMENT OBLIGATIONS
Defined Contribution Plans
The Company sponsors pension arrangements for approximately 4,800 employees, primarily through defined contribution plans in
Canada and a 401(k) matched savings plan in the United States. Certain unionized employees do not participate in Company-
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.
Pre-tax pension expenses recognized in net earnings were as follows:
2024
2023
Defined contribution plans
$
19,607 $
18,480
401(k) matched savings plans
449
405
$
20,056 $
18,885
Defined Benefit Plans
The Company sponsors funded and unfunded defined benefit pension plans and post-employment benefit plans as described below
with approximately 1,100 active employees.
a) Defined Benefit Pension Plans – The Company sponsors both registered and non-registered pension plans that provide pension
benefits based on length of service and career average earnings. These plans are closed to new members. The one funded plan is
registered with the Ontario provincial regulators and is subject to provincial pension legislation as well as the Income Tax Act (Canada).
Assets are held in a pension fund that is legally separate from the Company and cannot be used for any purpose other than payment of
pension benefits and related administrative fees. All plans are administered by the Toromont Pension Management Committee. An
actuarial valuation was completed as of December 31, 2022, with the next valuation scheduled as at December 31, 2025.
b) Executive Pension Plan – This plan is a supplemental pension 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. As at December 31, 2024, the Company has posted letters of credit in the amount of $10.6 million to secure the obligations under
this plan. The most recent actuarial valuation was completed as at December 31, 2024. The next valuation is scheduled as at
December 31, 2025.
c) Post-employment Benefit Plans – These plans provide supplementary post-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 450 retirees, and no active employees will receive post-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 January 1, 2023, with the next valuation scheduled as at January 1, 2026.
Risks
Defined benefit pension plans and other post-employment benefit plans expose the Company to risks as described below:
•
Investment risk – The present value of the defined benefit plan liability is calculated using a discount rate determined by
reference to high-quality corporate bond yields; 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 Pension Management Committee reviews the asset mix and performance of the plan assets on a quarterly basis
with the balanced investment strategy intention.
•
Interest rate risk – A decrease in the bond yields will increase the plan liability; however, this will be partially offset by higher
market values of the plan’s holdings in debt instruments.
•
Longevity risk – An increase in the life expectancy of the plan participants will increase the plan's liability by lengthening the
period in which benefits are paid.
•
Salary risk – The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan
participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
74
Information about the Company's defined benefit plans as at December 31, in aggregate, is as follows:
Pension
benefit plans
Other post-employment
benefit plans
2024
2023
2024
2023
Defined benefit obligations:
Balance, January 1
$
270,857 $
242,892 $
14,771 $
16,599
Settle due to buy-out annuity transactions
(2,900)
—
—
—
Current service cost
7,141
6,143
1,174
1,081
Interest cost
12,295
11,790
628
647
Actuarial remeasurement losses (gains) arising from:
Experience adjustments
108
(3,816)
(224)
(3,005)
Demographic adjustments
—
(4,252)
—
—
Changes in financial assumptions
(3,843)
20,764
—
575
Benefits paid
(5,402)
(6,142)
(1,246)
(1,126)
Contributions by plan participants
3,141
3,478
—
—
Balance, December 31
281,397
270,857
15,103
14,771
Plan assets:
Fair value, January 1
288,007
253,987
—
—
Purchase of buy-out annuities
(2,792)
—
—
—
Interest income on plan assets
13,333
13,074
—
—
Return on plan assets (excluding amounts included in net
interest)
22,954
12,397
—
—
Contributions by the Company
3,803
11,213
1,246
1,126
Contributions by plan participants
3,141
3,478
—
—
Benefits paid
(5,402)
(6,142)
(1,246)
(1,126)
Fair value, December 31
323,044
288,007
—
—
Fair value, December 31, net of asset ceiling limit
323,044
288,007
—
—
Net post-employment (assets) obligations
$
(41,647) $
(17,150) $
15,103 $
14,771
The funded status of the Company's defined benefit plans as at December 31 was as follows:
2024
2023
Defined
benefit
obligations
Plan
assets
Net post-
employment
obligations
Defined
benefit
obligations
Plan
assets
Net post-
employment
obligations
Defined benefit pension plans
$
267,727 $
323,044 $
55,317 $
256,926 $
288,007 $
31,081
Executive pension plan
13,670
—
(13,670)
13,931
—
(13,931)
Post-employment benefit plans
15,103
—
(15,103)
14,771
—
(14,771)
Post-employment obligations, net
$
296,500 $
323,044 $
26,544 $
285,628 $
288,007 $
2,379
The plans with a net retirement surplus have been classified as non-current assets on the consolidated statements of financial position
(note 8).
The significant weighted average actuarial assumptions adopted in measuring the Company's defined benefit obligations are noted
below. The mortality assumption is based upon the 2014 Private Sector Canadian Pensioners' Mortality Table, developed by the
Canadian Institute of Actuaries, projected generationally using scale MI-2017, and adjusted to reflect differences in each plan.
2024
2023
Discount rate
4.70 %
4.60 %
Expected rate of salary increase
3.00 %
3.00 %
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
75
Pre-tax pension and other post-retirement benefit expenses recognized in net earnings were as follows:
2024
2023
Service cost
$
8,315 $
7,224
Net interest income
(410)
(637)
Remeasurements
56
780
Settlement charges
(108)
—
$
7,853 $
7,367
In October 2021, an annuity purchase transaction was entered into in which the defined benefit obligations associated with retired plan
members were assumed by a third-party insurer, in exchange for a lump-sum payment from plan assets. Toromont considers, for
accounting purposes, that this buy-out transaction essentially eliminates any further legal or constructive obligations for benefits, and
that a settlement has occurred. Following the transaction, benefits for plan participants are protected under Assuris, the life insurance
compensation association designated under the Insurance Companies Act of Canada. Toromont considers the combined risk of a) the
insurer going bankrupt and b) that Toromont would be responsible for paying the portion of pensions not covered by Assuris should the
insurer go bankrupt, remote.
Pre-tax amounts recognized in OCI were as follows:
2024
2023
Actuarial gains arising from experience adjustments
$
(172) $
(7,401)
Actuarial gains arising from demographic assumptions
—
(4,252)
Actuarial (gains) losses arising from changes in financial assumptions
(3,843)
21,139
Return on plan assets greater than net interest recognized
(22,954)
(12,397)
$
(26,969) $
(2,911)
The Company's pension plans' actual weighted average asset allocations by asset category were as follows:
2024
2023
Debt securities
39.3 %
33.5 %
Equity securities
40.4 %
45.8 %
Real estate assets
19.5 %
17.9 %
Cash and cash equivalents
0.8 %
2.8 %
The fair values of the plan assets were determined based on the following methods:
•
Equity securities – generally quoted market prices in active markets.
•
Debt securities – generally quoted market prices in active markets.
•
Real estate assets – infrastructure assets valued based on appraisals performed by a qualified external appraiser.
•
Cash and cash equivalents – generally recorded at cost, which approximates fair value.
The actual return on plan assets for the year ended December 31, 2024 was a gain of $36.3 million (2023 –loss of $25.5 million).
The Company expects to contribute $26.2 million to pension and other benefit plans in 2025, inclusive of defined contribution plans.
The weighted average duration of the defined benefit plan obligations as at December 31, 2024 was 16.1 years (2023 – 16.1 years).
Sensitivity Analysis
Significant actuarial assumptions for the determination of the defined benefit obligations ("DBO") are discount rate and life expectancy.
The sensitivity analyses have been determined based on reasonably possible changes of the respective assumptions occurring at the
end of the reporting period, while holding all other assumptions constant.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
76
As at December 31, 2024, the following quantitative analysis shows changes to the significant actuarial assumptions and the
corresponding impact to the DBO:
Increase (decrease) in DBO
Actuarial Assumption
Sensitivity
Pension
benefit plans
Other post-
employment
benefit plans
Total
Period-end discount rate
1% increase
$
(39,913) $
(1,185) $
(41,098)
1% decrease
$
48,853 $
1,357 $
50,210
Mortality
Increase of 1 year in expected
lifetime of plan participants
$
3,387 $
(139) $
3,248
Trend rate
1% increase
N/A $
878 $
878
The sensitivity analysis presented above may not be representative of the actual change in the DBO as it is unlikely that the change in
assumptions would occur in isolation of one another as some of the assumptions may be correlated.
22. CAPITAL MANAGEMENT
The Company defines capital as the aggregate of shareholders' equity and long-term debt, less cash and cash equivalents.
The Company's capital management framework is designed to maintain a flexible capital structure that allows for optimization of the
cost of capital at acceptable risk while balancing the interests of both equity and debt holders.
The Company generally targets a net debt to total capitalization ratio of 33%, although there is a degree of variability associated with
the timing of cash flows. Also, if appropriate opportunities are identified, the Company is prepared to significantly increase this ratio
depending upon the opportunity.
The Company's capital management criteria can be illustrated as follows:
2024
2023
Long-term debt
$
498,518 $
647,784
Current portion of long-term debt
149,910
—
Less: Cash and cash equivalents
890,815
1,040,757
Net debt
(242,387)
(392,973)
Shareholders' equity
2,955,393
2,683,852
Total capitalization
$
2,713,006 $
2,290,879
Net debt as a % of total capitalization
(9)%
(17)%
Net debt to equity
(0.08):1
(0.15):1
The Company is subject to minimum capital requirements relating to bank credit facilities and senior debentures. The Company has met
these minimum requirements during the years ended December 31, 2024 and 2023.
There were no changes in the Company's approach to capital management during the years ended December 31, 2024 and 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
77
23. SUPPLEMENTAL CASH FLOW INFORMATION
2024
2023
Net change in non-cash working capital and other:
Accounts receivable
$
4,196 $
(49,755)
Inventories
(201,553)
(115,193)
Accounts payable and accrued liabilities
59,675
(47,159)
Provisions
406
3,183
Deferred revenue and contract liabilities
(27,091)
52,532
Income taxes
(15,272)
(20,803)
Derivative financial instruments
(10,365)
6,830
Other
1,815
(6,656)
$
(188,189) $
(177,021)
Cash paid during the year for:
Interest
$
24,775 $
24,775
Income taxes
$
205,635 $
198,283
Cash received during the year for:
Interest
$
50,615 $
33,957
Income taxes
$
1,630 $
1,203
A reconciliation of liabilities arising from financing activities was as follows:
Current portion
of long-term
debt
Long-term debt
Total
Balance, January 1, 2023
$
— $
647,060 $
647,060
Deferred financing costs
—
724
724
Balance, December 31, 2023
$
— $
647,784 $
647,784
Reclassified to current
149,881
(149,881)
—
Deferred financing costs
29
615
644
Balance, December 31, 2024
$
149,910 $
498,518 $
648,428
24. COMMITMENTS
Future minimum lease payments under non-cancellable leases as at December 31, 2024 were $8.8 million within one year, $22.1
million within two and five years and $10.4 million thereafter.
25. SEGMENTED INFORMATION
The Company has two reportable segments: the Equipment Group and CIMCO, each supported by the corporate office. These
segments are strategic business units that offer different products and services, and each is managed separately. The corporate office
provides finance, treasury, legal, human resources and other administrative support to the segments. The accounting policies of each of
the reportable segments are the same as the material accounting policies described in note 2.
The operating segments are being reported based on the financial information provided to the Chief Executive Officer and Chief
Financial Officer, who have been identified as the Chief Operating Decision Makers ("CODMs") in monitoring segment performance and
allocating resources between segments. The CODMs assess segment performance based on segment operating income, which is
measured differently than income from operations in the consolidated financial statements. Corporate overheads are allocated to the
segments based on revenue. Income taxes, interest expense, interest and investment income are managed at a consolidated level and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
78
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 markets served
and similar distribution models.
No reportable segment is reliant on any single external customer.
Equipment Group
The Equipment Group comprises the following:
•
Toromont Cat – supplies, rents and provides product support services for specialized mobile equipment and industrial engines.
•
Tri-City Equipment Rentals – supplies, rents and provides product support services for heavy equipment rentals.
•
Battlefield Equipment Rentals – The Cat Rental Store – supplies and rents specialized mobile equipment as well as specialty
supplies and tools.
•
Toromont Material Handling – supplies, rents and provides product support services for material handling lift trucks.
•
SITECH – supplies control systems for specialized mobile equipment.
•
Toromont Energy – develops distributed generators and combined heat and power projects using Caterpillar engines.
CIMCO
Provides design, engineering, fabrication, installation, and product support services for industrial and recreational refrigeration systems.
Corporate Office
The corporate office does not meet the definition of a reportable operating segment as defined in IFRS 8, Operating Segments, as it
does not earn revenue
Equipment Group
CIMCO
Consolidated
Years ended December 31
2024
2023
2024
2023
2024
2023
Equipment/package sales
$ 2,235,424 $ 1,951,308 $
239,156 $
187,573 $ 2,474,580 $ 2,138,881
Rentals
491,162
487,178
—
—
491,162
487,178
Product support
1,823,049
1,775,310
221,439
209,606
2,044,488
1,984,916
Power generation
10,933
11,326
—
—
10,933
11,326
Total revenue
$ 4,560,568 $ 4,225,122 $
460,595 $
397,179 $ 5,021,163 $ 4,622,301
Operating income
$
616,718 $
664,688 $
53,454 $
39,540 $
670,172 $
704,228
Interest expense
28,655
28,098
Interest and investment income
(53,637)
(45,982)
Income taxes
188,638
193,005
Income from continuing operations
$
506,516 $
529,107
Operating income from rental operations for the year ended December 31, 2024 was $64.9 million (2023 – $97.3 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
79
Selected consolidated statements of financial position information:
Equipment Group
CIMCO
Consolidated
As at December 31
2024
2023
2024
2023
2024
2023
Identifiable assets
$ 3,638,546 $ 3,276,537 $
190,977 $
160,185 $ 3,829,523 $ 3,436,722
Corporate assets
1,038,969
1,135,125
Total assets
$ 4,868,492 $ 4,571,847
Identifiable liabilities
$
921,932 $
939,461 $
145,520 $
103,060 $ 1,067,452 $ 1,042,521
Corporate liabilities
845,647
845,474
Total liabilities
$ 1,913,099 $ 1,887,995
Capital expenditures, net
$
271,211 $
266,229 $
10,418 $
6,245 $
281,629 $
272,474
Depreciation expense
$
193,889 $
172,714 $
7,860 $
6,530 $
201,749 $
179,244
Operations are based in Canada and the United States. The following tables summarize the final destination of revenue to customers
and the capital assets and goodwill held in each geographic segment:
Years ended December 31
2024
2023
Canada
$
4,879,240 $
4,484,205
United States
139,181
137,541
International
2,742
555
Revenue
$
5,021,163 $
4,622,301
As at December 31
2024
2023
Canada
$
1,495,173 $
1,309,322
United States
7,753
5,746
Capital assets and goodwill
$
1,502,926 $
1,315,068
26. DISCONTINUED OPERATIONS
The Company completed the sale of AgWest Ltd., a wholly owned subsidiary, on May 1, 2023. AgWest Ltd. was reported in the
Equipment Group.
The results of AgWest Ltd. were as follows:
2024
2023
Revenue
$
— $
20,866
Net income, net of tax
—
221
Gain on divestiture, net of tax
—
5,384
Income from discontinued operations
$
— $
5,605
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Toromont Industries Ltd.
80
27. SUBSEQUENT EVENTS
On January 31, 2025, the Company acquired 60% of the shares of AVL Manufacturing Inc. ("AVL") for consideration of $67.5 million
cash plus the issuance of 110.4 thousand Toromont shares (nominally $13.5 million based on 5 day average share price as at signing)
for a total consideration of $81.0 million (subject to post-closing adjustments). In addition, the Company has committed to purchase the
remaining 40% at various dates through to 2031. The initial purchase price was funded with cash on hand. AVL has operations in
Hamilton, Ontario and currently serves the data center market across eastern North America. The Company has not yet finalized its
determination of fair value of the assets acquired and liabilities assumed.
28. RELATED PARTY DISCLOSURES
Key Management Personnel Compensation
Key management includes the Company's directors and named executive officers. The remuneration of key management is determined
by the Human Resources and Health and Safety Committee, having regard to the performance of the individual and Company and
market trends. The compensation paid or payable to key management for employee and director services is shown below:
2024
2023
Salaries
$
3,347 $
3,513
Share options and DSU awards
2,134
3,117
Annual non-equity incentive-based plan compensation
2,489
3,916
Pension costs
478
802
All other compensation
154
139
$
8,602 $
11,487
29. 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the year ended December 31, 2024
($ thousands, except where otherwise indicated)
Consolidated Financial Statements
81
For the years ended December 31
($ thousands, except ratios and share data)
2024
2023(1)
2022(1)
2021
OPERATING RESULTS
Revenues
5,021,163
4,622,301
4,115,347
3,886,537
Net earnings
506,516
534,712
454,198
332,710
Net interest (income) expense
(24,982)
(17,884)
5,614
19,134
Capital expenditures, net
281,629
272,474
226,225
136,382
Dividends declared
157,303
141,845
128,463
112,344
FINANCIAL POSITION
Working capital
1,671,181
1,744,739
1,512,456
1,294,739
Capital assets
1,407,632
1,221,288
1,086,913
976,346
Total assets
4,868,492
4,571,847
4,182,125
3,583,796
Non-current portion of long-term debt
498,518
647,784
647,060
646,337
Shareholders' equity
2,955,393
2,683,852
2,325,359
1,953,329
FINANCIAL RATIOS
Working capital
2.4:1
2.6.1
2.4:1
2.6:1
Return on opening shareholders' equity (%)
19.2
23.1
23.5
19.6
Total debt, net of cash, to shareholders' equity
(.08):1
(.15):1
(.12):1
(.14):1
PER SHARE DATA ($)
Basic earnings per share
6.18
6.50
5.52
4.03
Diluted earnings per share
6.13
6.45
5.47
4.00
Dividends declared
1.92
1.72
1.56
1.36
Book value (shareholders' equity)
36.35
32.61
28.25
23.69
Shares outstanding at year end
81,300,574
82,297,341
82,318,159
82,443,968
Price range
High
135.53
117.13
124.25
115.23
Low
109.83
97.06
93.25
84.61
Close
113.64
116.10
97.71
114.36
Ten-Year Financial Review
Notes
(1) The Company completed the sale of AgWest Ltd., a wholly owned subsidiary, on May 1, 2023. Revenues for 2023 and 2022 only are
presented on a continuing operations basis. Earnings, EPS and ROE are reported including discontinued operations for all years. For more
information, please refer to the annual audited consolidated financial statements and Managements’ Discussion and Analysis for the year
ended December 31, 2023.
(2) 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-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 consolidated financial statements for more information.
Toromont Industries Ltd.
82
2017(2)
2020
2019
2018
2016
2015
3,478,897
3,678,705
3,504,236
2,350,162
1,912,040
1,846,723
254,915
286,800
251,984
175,970
155,748
145,666
20,898
17,955
21,725
7,618
3,236
5,246
69,253
209,855
165,146
100,954
85,031
113,911
101,953
88,192
74,516
60,402
56,280
52,882
1,077,928
829,275
653,906
767,374
575,382
486,293
962,694
1,020,930
954,306
881,877
454,104
429,824
3,346,792
3,371,337
3,234,531
2,866,945
1,394,212
1,276,077
646,299
645,471
644,540
893,806
150,717
152,079
1,698,652
1,533,891
1,327,679
1,124,727
885,432
775,281
2.4:1
1.8:1
1.6:1
2.1:1
2.8:1
2.6:1
16.6
21.4
22.3
19.3
20.0
21.6
.03:1
.18:1
.23:1
.65:1
(.04):1
.11:1
3.10
3.52
3.10
2.22
1.99
1.88
3.09
3.49
3.07
2.20
1.98
1.86
1.24
1.08
0.92
0.76
0.72
0.68
20.60
18.70
16.35
13.89
11.29
9.95
82,474,658
82,012,448
81,226,383
80,949,819
78,398,456
77,905,821
94.86
71.15
68.11
58.44
44.44
37.61
52.36
52.71
46.24
41.10
27.25
26.70
89.20
70.59
54.26
55.10
42.35
31.55
Ten-Year Financial Review
83
Board of Directors
Executive Team
Richard G. Roy
Chair of the Board (Director since 2018)
Jeffrey S. Chisholm2,3
Corporate Director (since 2011),
Vice Chair of the Board
Peter J. Blake1,2
Corporate Director (since 2019)
Benjamin D. Cherniavsky1,2
Corporate Director (since 2021)
Cathryn E. Cranston1,3
Corporate Director (since 2013),
Chair of Audit Committee
Paramita Das2,3
Corporate Director (since 2024)
Sharon L. Hodgson1,2
Corporate Director (since 2019),
Chair of Human Resources and
Health & Safety Committee
Ave G. Lethbridge2,3
Corporate Director (since 2024)
Mike S. H. McMillan
President and Chief Executive Officer
(since October 2023)
Frederick J. Mifflin1
Corporate Director (since 2022),
Chair of Environmental, Social,
and Governance Committee
Katherine A. Rethy2,3
Corporate Director (since 2013)
Corporate Executive
Mike S. H. McMillan
President and Chief Executive Officer
John M. Doolittle
Executive Vice President and Chief Financial Officer
Michael P. Cuddy
Vice President, Chief Information Officer
& Corporate Strategy
Jennifer J. Cochrane
Vice President, Finance
Lynn M. Korbak
General Counsel and Corporate Secretary
Stephanie A. Hardman
Vice President, People and Culture
Business Unit Leaders
Joel Couture
Chief Operating Officer, Toromont Cat
Colin Goheen
President, Battlefield Equipment Rentals
David A. Malinauskas
President, CIMCO Refrigeration
Miles Gregg
President, Toromont Cat Construction Industries
William Harvey
President, Toromont Cat Mining Division
1 Member of Audit Committee
2 Member of Human Resources and Health and Safety Committee
3 Member of Environmental, Social and Governance Committee
Toromont Industries Ltd.
84
Toromont Industries Ltd.
Corporate Office
3131 Highway 7 West
P.O. Box 5511
Concord, Ontario L4K 1B7
www.toromont.com
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
CIMCO Refrigeration
1551 Corporate Drive
Burlington, Ontario L7L 6M3
T: 416.465.7581
www.cimcorefrigeration.com
Annual Meeting
In-person meeting:
Novotel Toronto Vaughan
200 Bass Pro Mills Dr,
Vaughan, Ontario L4K 0B9
“Concord” Room
Thursday, May 1, 2025
10:00–11:00 a.m. (EST)
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@aim.toromont.com
How to reach our Transfer Agent and Registrar
Investors are encouraged to contact TSX
Trust Company for information regarding their
security holdings.
TSX Trust Company
301–100 Adelaide Street West
Toronto, Ontario M5H 4H1
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
Corporate
Directory
Shareholder
Information
Toromont’s 2024 Sustainability Report
is available at:
www.toromont.com/sustainability