W A J A X
2 0 2 4
A N N U A L
R E P O R T
(1) “Backlog” does not have a standardized meaning prescribed by generally accepted accounting principles (“GAAP”). See Management’s Discussion and Analysis, page 13.
(2) “Leverage ratio”, “Adjusted EBITDA”, “Adjusted basic earnings per share” and “Adjusted net earnings” do not have standardized meanings prescribed by GAAP.
See Management’s Discussion and Analysis, page 13.
Forward-Looking Statements and Information: This Annual Report, including the accompanying Management’s Discussion and Analysis, includes forward-looking statements and information that is
based on Wajax’s current beliefs, expectations, estimates and assumptions in light of information currently available. Actual results, performance and achievements may differ materially from those
anticipated or implied in such forward-looking statements or information. Please see page 33 for a discussion of the risks and uncertainties related to such statements and information.
Revenue (millions)
$2,097.6
Adjusted Basic Earnings Per Share(2)
$2.44
$3.88
Adjusted EBITDA(2) (millions)
$168.0
2024
2023
$2,154.7
$197.4
2020
2023
2024
2021
2018
2019
41.9
2022
39.9
35.1
51.5
69.8
35.9
Net earnings
39.5
31.7
53.2
72.4
83.5
81.0
52.9
42.8
Adjusted net earnings
2020
2023
2024
2021
1,553.0
2022
1,481.6
2019
2018
1,422.6
1,637.3
1,962.8
2,154.7
2,097.6
2020
2019
2018
2023
2024
2021
2.10
2022
2.02
1.75
2.41
3.26
1.82
1.98
1.58
2.50
3.38
3.88
3.77
2.44
1.97
Basic earnings per share
Adjusted basic earnings per share
2.45
2.60
2.28
1.29
1.13
1.98
2.61
2020
2019
2018
2023
2024
2021
2022
Net Earnings and Adjusted Net Earnings(2) ($ millions)
Revenue ($ millions)
Leverage Ratio(2) (%)
Earnings and Adjusted Basic Earnings Per Share(2) ($ millions)
F I N A N C I A L H I G H L I G H T S
In 2024, Wajax’s financial performance declined
following two years of strong performance
supported by robust market conditions.
Increased market pressures and moderating
customer demand in selected markets and
geographic regions contributed to lower margins
and reduced profitability. In the face of economic
uncertainty, and to build increased resilience in
the business, management continues to focus
on managing expenses and inventory. Strong
cash flow generation in 2024 and a robust
backlog position us well for the year ahead.(1)
Wajax 2024 Annual Report 1
2024 Highlights:
Exited the year with backlog of $564 million.(1)
Generated $70 million cash flow from operating activities.
Announced a 6% increase in our quarterly dividend.
Completed 90% of our Enterprise Resource Planning
(“ERP”) system rollout.
Received two Excellence Canada Platinum Awards.
Improved our Total Recordable Incident Frequency
(“TRIF”) rate to 0.94.
I N B U S I N E S S T O G E T H E R
(1) “Backlog” does not have a standardized meaning prescribed by GAAP. See Management’s Discussion and Analysis, page 13.
With 114 locations and over 165 years of experience offering world‑class brands,
unwavering customer support and advanced technical expertise to diverse industries,
Wajax is able to provide solutions that help customers nationwide get more done –
efficiently and effectively.
Contents
Message to Shareholders
2
The Core of Wajax
5
Heavy Equipment
6
Industrial Parts and
Engineered Repair Services
9
People and Sustainability
10
Message from the Chair
12
Management’s Discussion
and Analysis
13
Management’s Responsibility
for Financial Reporting
34
Independent Auditor’s Report
35
Consolidated Financial Statements
37
Notes to Consolidated
Financial Statements
41
Additional Financial Information
60
Corporate Information
61
Locations
62
2 Wajax 2024 Annual Report
Strategic Priorities and Performance
Continuing to Build a People-First Company
The safety, well-being and engagement of our 3,081 teammates is
the foundation of our business and ensures that both our people and
business can thrive together. Investing in our people remains a top priority,
and in 2024 we launched our people-first leadership model and provided
training to leaders across the company, reinforcing our commitment to
fostering a culture of empowerment, accountability and development.
Our Women of Wajax employee resource group continued to grow and
now has over 260 members, fostering an inclusive and supportive
environment. We also continued building a bridge to the next generation
of skilled tradespeople and leaders through our partnerships with
organizations including Jill of All Trades, Indspire and Catalyst.
Safety remains at the core of everything we do and in 2024, our strong
focus on this priority resulted in a TRIF of 0.94, an improvement from
1.01 in 2023. Additionally, we were honoured with two Excellence Canada
Platinum awards recognizing our commitment to Mental Health at Work®
and a Healthy Workplace®.
Each of these initiatives strengthens our ability to attract, develop and
retain top talent. As we move forward, we remain dedicated to investing in
our most important asset – our people.
Growing Our Existing Business with a Focus
on Parts, Service and Margin Improvement
Our commitment to exceptional customer service remained strong
throughout the year, as reflected in our Net Promoter Score of +68,
consistent with prior results. Wajax was recognized by multiple suppliers
and customers for excellence in service, reinforcing our reputation as a
trusted partner.
Whereas the previous two years presented exceptional market conditions,
2024 required us to adapt to a rapidly shifting landscape. Weaker
demand, economic uncertainty, and cautious customer purchasing
behaviours, all contributed to a 120 basis-point decrease in our gross
profit margins, and a decline in our adjusted net earnings per share from
$3.88 in 2023 to $2.44 in 2024.
In the industrial parts market, an increasingly stabilized supply chain
combined with a softer market led to lower demand and margin pressure.
In the heavy equipment market, higher levels of inventory coupled with
higher interest rates through most of the year, resulted in increased
interest costs and leverage.
To address these challenges, we took action to adjust our cost structure,
including a 6% reduction in headcount during the latter part of the year.
We continue to seek additional ways to enhance our efficiency while
maintaining the highest level of service to our customers. Wajax has a
long history of adaptability, and we are confident that we will evolve and
strengthen our business, execute our strategic priorities and continue to
create value for all stakeholders.
For the year
%
ended December 31
2024
2023
change
n Western
Canada
$
944.5 $
975.8
(3)%
n Central Canada
(Ontario)
375.2
387.9
(3)%
n Eastern
Canada*
777.9
791.0
(2)%
$ 2,097.6 $ 2,154.7
(3)%
*Includes Quebec and the Atlantic provinces.
Revenue by
Geographic Region
($ millions)
For the year
%
ended December 31
2024
2023
change
n Equipment
Sales
$
618.6 $ 607.1
2%
n Product
Support
535.0
543.3 (2)%
n Industrial Parts
572.0
605.1
(6)%
n ERS
326.5
354.3 (8)%
n Equipment
Rental
45.5
45.0
1%
$ 2,097.6 $ 2,154.7
(3)%
Revenue Sources
($ millions)
For the year
ended December 31
2024
2023
n Construction
15%
16%
n Mining
14%
15%
n Oil and Gas
11%
10%
n Industrial/
Commercial
10%
13%
n Forestry
10%
11%
n Oil Sands
10%
9%
n Transportation
8%
7%
n Government
and Utilities
7%
6%
n Metal Processing
6%
5%
n Other
9%
8%
Revenue by
End Market
Ignacy (Iggy) Domagalski, President and Chief Executive Officer
During its 166th year in business, Wajax demonstrated resilience in navigating a complex and
changing operating environment. We generated $2.1 billion in revenue, a slight decline from
the prior year, while maintaining strong fundamentals which position us for long-term success.
We generated $70 million in cash flow from operating activities, closed the year with a robust
backlog of $564 million and announced a 6% increase in our quarterly dividend, underscoring
our confidence in the future.(1)
M E S S A G E T O S H A R E H O L D E R S
(1) “Backlog” does not have a standardized meaning prescribed by GAAP. See Management’s Discussion and Analysis, page 13.
Wajax 2024 Annual Report 3
We continued to strengthen our supply chain, maintaining a robust 89%
parts fill rate to ensure customers receive the parts they need, when
they need them. At the same time, we invested in expanding our service
capabilities – enhancing training, adopting new technologies and improving
our repair and maintenance offerings. These advancements allow us to
deliver even greater value and support to our customers, helping them
keep their operations running smoothly.
Parts and service remain the cornerstone of our business, and multiple
margin enhancement initiatives are in place to drive further improvements
in the year ahead. A continued focus on efficiency, reliability and customer
satisfaction positions us well to improve our results over time.
Unlocking the Potential of Our Enhanced
Direct Relationship with Hitachi
Through the year we secured multiple orders for ultra-class Hitachi
EX8000 mining shovels, with seven units in backlog at year-end.(1) At
the same time, we delivered a near-record number of Hitachi excavators,
reinforcing the strength of our direct distribution model.
Looking ahead, Hitachi’s Zaxis financing program will drive further
momentum by making it easier for customers to invest in high-quality
excavators and wheel loaders. Additionally, our close collaboration with
Hitachi throughout the year led to streamlined supply chain processes,
contributing to faster and more reliable equipment and parts delivery.
By continuing to strengthen this partnership, we are well-positioned to
seize new opportunities in the construction and mining sectors while
delivering even greater value to our customers.
Acquiring and Integrating Industrial Parts and
Engineered Repair Services Businesses
Since 2018, we have invested over $200 million in acquisitions to expand
our Industrial Parts (“IP”) and Engineered Repair Services (“ERS”)
businesses. These businesses now represent 43% of our total revenue,
growing significantly from $446 million in 2018 to $898 million in 2024.
In 2025, our focus will be on fully integrating prior acquisitions to
realize additional synergies and maintaining a disciplined approach to
future opportunities.
Improving Cost Structure and Processes
Recognizing the need to drive efficiencies, we re-examined our operating
processes and refocused on core activities. Our efforts are focused on
three critical priorities – reducing our inventory, improving our margins and
lowering our costs. Initiatives related to these priorities will be essential
as we continue to navigate an uncertain economic environment.
As we announced earlier, a key leadership transition has taken place
with Tania Casadinho succeeding Stuart Auld as Chief Financial
Officer following a comprehensive succession planning process.
Tania will continue to build on our strong financial foundation, while
Stuart will remain at Wajax for a period to lead several key operational
efficiency initiatives.
Continuing ERP System Roll-out and Technology Improvements
We made significant progress on our technology initiatives, bringing our
Infor M3 ERP system rollout to 90% completion, up from 50% last year.
This modern cloud-based platform will be a key enabler as we continue
streamlining operations, standardizing processes and enhancing reporting
capabilities across the business.
We further leveraged integrated digital solutions to drive efficiency in
mobile field services and warehouse management. These enhancements
are improving workflow automation, reducing manual processes and
boosting overall productivity.
We also introduced new digital tools that strengthen customer interactions
and support data-driven decision-making across the organization. These
advancements are critical in keeping Wajax agile, efficient and responsive
to the evolving needs of our customers.
Commitment to Sustainability
In 2024, we made meaningful progress in advancing our environmental
and social commitments. Through branch and vehicle fleet energy
efficiency initiatives, we continued to reduce energy consumption
and greenhouse gas emissions, resulting in a GHG Emissions
Intensity reduction of 16% over the last two years. At the same
time, we increased our waste recycling efforts, further minimizing
our environmental impact. To enhance our tracking and reporting
capabilities, we also implemented new carbon accounting software,
streamlining the capture of key environmental metrics.
Our commitment to social responsibility remained strong, with over
$250,000 raised to support our communities through partnerships
with organizations such as Food Banks Canada, the Canadian Cancer
Society and the Kids Cancer Care Foundation of Alberta.
For a closer look at our environmental, social and governance initiatives,
pleased see our annual Sustainability Report for the year-ended
December 31, 2024 (the “2024 Sustainability Report”), which is
available on our website at wajax.com.(2)
Looking Ahead
As we enter 2025, we are focused on strengthening our financial
performance. Our priorities include reducing inventory and leverage,
improving cost efficiency and improving profit margins. Our strong
backlog and strategic initiatives position us well for the future.(1)
Our path forward is guided by our corporate Purpose – Empowering
People to Build a Better Tomorrow – and grounded in our core values:
We commit to safety and well-being;
We develop potential and expertise;
We deliver an exceptional experience together;
We build lasting relationships; and
We strive to continuously improve.
These values shape our decisions, drive us forward and define how we
work together to achieve success.
We extend our gratitude to our team members for their resilience,
dedication and commitment to excellence. Your hard work and
perseverance continue to drive our success, even in challenging times.
To our customers, we deeply appreciate your trust and partnership. Your
confidence in our people motivates us to continually improve and deliver
exceptional value.
We also recognize our manufacturing partners for their ongoing support
and collaboration. Your innovation and expertise enable us to provide
high-quality solutions that meet the needs of our customers.
Additionally, we are grateful for the guidance and oversight of our Board
of Directors, whose leadership helps us navigate these eventful times
with confidence and strategic focus.
Finally, we sincerely appreciate our shareholders for their continued
belief in our vision and long-term success. Your support enables us to
invest in the future and create lasting value for all our stakeholders.
We look forward to sharing our progress in the year ahead.
Ignacy (Iggy) Domagalski
President and Chief Executive Officer
(2) The 2024 Sustainability Report is not incorporated by reference into this Annual Report.
4 Wajax 2024 Annual Report
Tania S. Casadinho
Chief Financial Officer
I’m committed to supporting our established corporate
purpose, values and strategic priorities. In the face
of more challenging market conditions, management
has been, and will continue to be, focused on those
strategic priorities aimed at building efficiency and
resilience into the business. This includes acting
quickly and decisively to reduce costs, ensuring we
continue to prudently manage inventory levels and
driving additional operational efficiency initiatives
to optimize resources. By carefully managing each
of these elements, enhancing capital allocation,
and supporting the progress we made in cash flow
generation this year, we believe we can continue to
strengthen the balance sheet and build upon our
disciplined approach to financial risk management.
Wajax 2024 Annual Report 5
O U R P U R P O S E
Empowering People to Build a Better Tomorrow
O U R VA L U E S
We commit to safety and well-being.
We develop potential and expertise.
We deliver an exceptional experience together.
We build lasting relationships.
We strive to continuously improve.
O U R S T R AT E G I C P R I O R I T I E S
Continue to build a people‑first company.
Grow our existing business with a focus on parts,
service and margin improvement.
Unlock the potential of our enhanced direct
relationship with Hitachi.
Acquire and integrate IP and ERS businesses.
Improve our cost structure and processes.
Continue ERP system roll‑out and technology improvements.
T H E C O R E O F WA J A X
6 Wajax 2024 Annual Report
2020
2023
2024
2021
2022
2019
2018
Mining
Power Systems
Material Handling
Construction, Forestry and Crane/Utility
1,036.9
1,035.3
915.8 957.4
1,151.6
1,195.3
1,199.1
Construction, Forestry, Crane and
Utility Revenue ($ millions)
Mining Revenue ($ millions)
Material Handling Revenue ($ millions)
Power Systems Revenue ($ millions)
2024
2023
2022
2021
2020
2019
2018
420.6 386.1
435.7
516.4 542.7 511.2
435.1
Equipment
Product Support
2024
2023
2022
2021
2020
2019
2018
170.3 176.0
153.2
226.5
196.6 208.7
164.5
Equipment
Product Support
2024
2023
2022
2021
2020
2019
2018
163.9 151.1 149.7
172.1
208.8
233.7
143.7
Equipment
Rental
Product Support
2024
2023
2022
2021
2020
2019
2018
282.1
202.6 218.8 236.6 247.2 245.5
292.0
Equipment
Rental
Product Support
Heavy Equipment Revenue ($ millions)
H E AV Y E Q U I P M E N T
In 2024, Wajax continued to sell and service a broad range of heavy
equipment solutions, helping to meet the needs of customers across
sectors that power the Canadian economy. A key win for the year
included securing multiple orders for large mining shovels, with
deliveries stretching into 2027, that contributed to a robust backlog
moving into the new year.(1)
Working with Leading OEMs Globally
Wajax represents a diverse array of leading OEMs including Hyster-Yale Group, Tigercat, Hitachi Construction
Machinery Americas (“Hitachi”), Bell Equipment, Rolls-Royce Power Systems and Allison Transmission. Each of
these leading OEMs continue to focus on launching innovative new products that meet the increasingly complex
needs of clients across the mining, construction, forestry, power systems and material handling sectors. This
diverse equipment offering is a key differentiator for Wajax and ensures we have multiple opportunities to grow
in key markets nationally.
Our largest supplier Hitachi continues to focus on their reinvigorated approach to the North American market.
In 2024, they launched the industry-competitive Zaxis financing program and began supplying parts directly from
Japan to ensure end customers had improved flexibility in both the acquisition and servicing of equipment.
Empowering Technical Talent to be their Best
Over the last year, we prioritized technical training and certifications for both staff and customers. This helped
to ensure equipment across all our brands operated efficiently and with minimal downtime, reinforcing our
reputation for service across the entire lifecycle of the products we sell.
(1) “Backlog” does not have a standardized meaning prescribed by GAAP. See Management’s Discussion and Analysis, page 13.
Wajax 2024 Annual Report 7
We continue to focus on driving both sales and product support for a diverse
range of heavy equipment. We anticipate continued strong demand for reliable
mining equipment, and a key priority in 2025 is preparing for the next generation
of Hitachi equipment, the innovative and increasingly proprietary Hitachi Zaxis‑7
series excavators and loaders, which will help drive both sales and service over
the mid-term. While our focus remains on growing sales and product support
revenue across the portfolio, we are also focused on providing equipment solutions
and training for increasingly in-demand applications, which will provide additional
opportunities for growth as we work to meet our customers’ evolving needs.
Brian Deacon
Senior Vice President,
Category Management
Wajax 2024 Annual Report 7
8 Wajax 2024 Annual Report
André Dubé
Senior Vice President,
Sales and Operations
8 Wajax 2024 Annual Report
In 2024, we successfully retained key customers, focused on
operational excellence and advanced critical initiatives, like the
continued implementation our of ERP system, which will help to
support enhanced resilience of the business. Looking ahead,
we remain dedicated to continuously improving our processes,
empowering our people and delivering exceptional value to our
customers. These efforts will ensure that Wajax is not only ready
to navigate future challenges but also positioned for sustainable
success and long-term growth.
Wajax 2024 Annual Report 9
Wajax’s extensive product portfolio covers a broad range of industrial components
and equipment including bearings, power transmission products, bulk material
handling systems, filtration solutions, fluid handling equipment, hydraulics,
pneumatics, motors and drives, valves, instrumentation and analytical products.
Our comprehensive suite of solutions allows us to repair and service the products
and brands we sell, helping to ensure that our customers’ critical applications
operate efficiently, and with minimal downtime, helping them to remain
competitive. With 114 branches coast-to-coast, we are well‑positioned to serve
a diverse range of sectors across Canada and act as strategic partners to our
customers, right in the heart of their operations.
Enhancing Efficiency Internally
In 2024, Wajax focused on continuous improvement and driving enhanced efficiency in
its business. Key initiatives for the year included completion of the roll-out of its new
ERP system to its IP facilities and half of its ERS facilities, which accounts for 90%
of the revenue generated by Wajax. The ERP system deployment sets the foundation
for continued refinement in our processes, to enable greater efficiency, improved
decision‑making and enhanced agility across our operations.
Building Even Closer Ties with Customers
The Key Accounts team continued to excel, successfully retaining valued customers
and securing new business in targeted areas. Their commitment to building long‑lasting
partnerships and identifying new opportunities has been key to expanding Wajax’s
presence in new and strategic markets. Wajax continues to support capital and
infrastructure intensive industrial, manufacturing and energy producing businesses
nationwide. Our combination of an extensive solution offering and high technical
proficiency positions Wajax as a strategic partner for customers across industries.
Putting People First in Support of Growth
In 2025, Wajax remains focused on driving operational efficiency and excellence, and
continuing its journey as a people-first company, while deepening its commitment to
customer-centricity and satisfaction. Our team is dedicated to driving long‑term growth
in the IP and ERS business.
I N D U S T R I A L PA R T S A N D
E N G I N E E R E D R E PA I R S E R V I C E S
2020
2019
2018
2023
2024
2021
2022
522.8
449.7
518.4
699.5
835.5
991.3 923.7
Industrial Parts
Engineered Repair Services
2020
2019
2018
2023
2024
2021
2022
366.6
361.7
342.6
438.1
535.8
605.1 572.0
2020
2019
2018
2023
2024
2021
2022
156.3
88.1
175.9
261.3
299.7
386.3
351.7
IP Revenue ($ millions)
Total IP and ERS Revenue(1) ($ millions)
ERS Revenue(1) ($ millions)
(1) Consolidated category revenue may not match total revenue due to
adjustments and eliminations not allocated to the categories.
10 Wajax 2024 Annual Report
P E O P L E A N D
S U S TA I N A B I L I T Y
Wajax continues to build a people-first company. Our corporate
Purpose and Values guide our journey and are critical to the
execution of our strategic priorities. Our approach to sustainability
prioritizes the social elements across stakeholder groups, while
recognizing the importance of effective environmental practices
and the need for ethical business dealings and good governance.
A Foundational Year
Building a people-first company is a commitment from the top. Recognizing the importance that
leadership plays in our people-first ambitions, during the year, we ran 25 in‑person workshops for our
leaders, introducing them to a new people-first leadership model and building an understanding of the
characteristics that define a people-first leader.
Successful leaders and businesses require feedback to succeed. Building on our long-running Voice
of the Employee initiative, we launched a new employee listening strategy to ensure our plans are
fully aligned with the priorities of our people and the business. This included running a series of focus
groups to inform the development of our people-first employee value proposition and launching a new
engagement platform to gather richer, real-time insights from our employees about their experience
working at Wajax. The insights from this engagement survey were complemented by a total rewards
review, which gathered feedback from 74% of our employees on what was important to them from a
comprehensive rewards standpoint. The feedback has been analyzed and is being used to build our
plans and prioritize our investments in 2025 and beyond to ensure that we continuously improve and
put our people first.
Building a Skilled Workforce
In recent years, the industrials industry has been characterized by skilled labour shortages, particularly
in heavy equipment and commercial/industrial technical roles. In 2024, Wajax worked diligently to
ensure staffing levels met our customer needs, while allowing us to carefully manage costs as broader
economic conditions presented challenges and pressured margins. Our core initiatives included an
international hiring program that brought technical talent from several countries, as well as expanded
technical training for both employees and customers across key brands such as Allison Transmission
and Hyster‑Yale. During the year, new training was offered by Hitachi, with a focus on the introduction of
Hitachi’s new Zaxis-7 excavators in 2025. In addition, in support of Wajax’s focus on long-term internal
career growth in technical fields, during the year, we implemented a new training platform to expand the
courses available in sought after topics. Additional training helps us to meet the needs of our many
customers with increasingly complex requirements.
Ongoing Commitment to Sustainability
Wajax’s Sustainability Report for the 2024 fiscal year has been separated from the Annual Report
and published as a standalone document for the first time this year. Our 2024 Sustainability Report
outlines our environmental, social and governance priorities, progress and key metrics. Key highlights
for the year include the: implementation of a carbon accounting system that prepares Wajax to meet
future reporting and third-party auditing requirements; receipt of Excellence Canada Platinum level
certification for both Healthy Workplace® and Mental Health at Work®, recognizing our commitment
to the well-being of our people; and implementation of our first Vendor Code of Conduct, which sets
out the standards by which we expect our vendors to conduct their business. Our 2024 Sustainability
Report is available in digital form on our website.(1)
10 Wajax 2024 Annual Report
(1) The 2024 Sustainability Report is not incorporated by reference into this Annual Report.
Wajax 2024 Annual Report 11
Mark Edgar
Chief People Officer
Our focus remains on fulfilling our people-first ambition
and, in 2024, we took steps to ensure stronger alignment
business‑wide between our operational requirements and the
needs of our people. For the year ahead and beyond, I am
excited that we are prioritizing those investments, including
leadership development and technical training, supported
by a very competitive total rewards program, which will
help drive improved business performance and increased
employee satisfaction.
Wajax 2024 Annual Report 11
12 Wajax 2024 Annual Report
Very notably, in early November 2024, Wajax announced the planned
retirement of Stuart Auld from the CFO role effective March 4, 2025.
Over the last decade, Stu has served with distinction in multiple senior
roles at Wajax – a strong testament to his experience and versatility.
It was subsequently announced that Stu would remain with the
corporation in the near term to support a series of operational efficiency
initiatives – and the board looks forward to his continued contribution in
these areas.
In considering Stu’s successor as CFO, the board participated with
senior management in a comprehensive succession planning process,
and appointed Tania Casadinho, Vice President, Corporate Controller, to
the role effective March 4, 2025. Since joining Wajax in 2018, Tania has
been a strong leader, taking on progressively more responsibility and
challenge. Among other items, she has significantly improved Wajax’s
budgeting and forecasting processes and introduced new analytical
tools; she has also worked closely with senior leaders across the
company and contributed greatly to the corporation’s strategic planning
process. The board is confident Tania is the ideal person to maintain
Wajax’s disciplined approach to financial risk management and we look
forward to continuing to work with her.
Last, but certainly not least, the corporation’s efforts in sustainability
and creating a people-first organization have continued, and I would
invite shareholders to review Wajax’s fifth annual sustainability report,
which now takes the form of a stand-alone report available on the
corporation’s website, for updates. Of course, safety is core to being
people-first, and it is very notable that Wajax’s 2024 safety results were
an improvement on already strong 2023 performance.
In closing, and on behalf of the board, I would like to thank Iggy and
his management team for their dedication and resilience during the
year in the face of many new and complex challenges. To Wajax’s
frontline teams, thank you for your exceptional commitment to serving
our customers. To our customers and suppliers, thank you for your
continued support, and to my fellow directors, for your insightful
guidance. To our shareholders, rest assured we are driving forward to
strengthen Wajax as it pursues its strategic goals.
Edward M. Barrett
Board Chair
As discussed by Iggy in his Message to Shareholders, management
took action during the year to address changing market dynamics,
including a workforce reduction and improvements to operating
processes. The board spent considerable time monitoring these efforts
and will continue to closely monitor the execution of initiatives designed
to meaningfully and sustainably enhance efficiency and operational
leverage. The board believes strongly that these initiatives will better
position Wajax for long-term success by ensuring it remains agile and
competitive in the evolving market landscape.
Acknowledging what was a challenging
year, the board continues to be fully
aligned with the corporation’s strategic
priorities – including unlocking the
potential of Wajax’s enhanced direct
relationship with Hitachi and acquiring
and integrating complementary industrial
parts and ERS businesses – which will
continue to be core contributors to
Wajax’s growth.
The board also spent significant time during the year overseeing
management’s ongoing work in updating and enhancing the
corporation’s enterprise risk management (“ERM”) framework –
helping to ensure the appropriate steps are being taken to identify and
mitigate the major risks facing the corporation. In addition, the board
closely monitored the progress and impact of the corporation’s Infor
M3 ERP system implementation, now 90% complete. The system will
enable further efficiencies as processes and reporting are increasingly
streamlined and standardized across the business, and as new
integrated solutions are added.
Following two years of robust market conditions and record financial results, in 2024, market
pressures increased as customer demand declined across several key markets, resulting in
decreased profitability and increased leverage. Management has responded by adjusting the
corporation’s cost structure and is implementing robust plans to meaningfully and sustainably
enhance efficiency and operational leverage. These measures will further enhance Wajax’s
strength and competitiveness as it pursues the many exciting opportunities ahead.
Edward M. Barrett, Board Chair
M E S S A G E F R O M T H E C H A I R
Wajax 2024 Annual Report 13
Management’s Discussion and Analysis
M A N A G E M E N T ’ S D I S C U S S I O N
A N D A N A LY S I S
The following management’s discussion and analysis (“MD&A”)
discusses the consolidated financial condition and results of operations
of Wajax Corporation (“Wajax” or the “Corporation”) for the year ended
December 31, 2024. This MD&A should be read in conjunction with
the information contained in the consolidated financial statements
and accompanying notes for the year ended December 31, 2024.
Information contained in this MD&A is based on information available to
management as of March 4, 2025.
Management is responsible for the information disclosed in this MD&A
and the consolidated financial statements and accompanying notes,
and has in place appropriate information systems, procedures and
controls to ensure that information used internally by management
and disclosed externally is materially complete and reliable. Wajax’s
Board of Directors has approved this MD&A and the consolidated
financial statements and accompanying notes. In addition, Wajax’s Audit
Committee, on behalf of the Board of Directors, provides an oversight
role with respect to all public financial disclosures made by Wajax and
has reviewed this MD&A and the consolidated financial statements and
accompanying notes.
Wajax reports on certain non‑GAAP measures, non‑GAAP ratios, and
supplementary financial measures that are used by management to
evaluate the performance of the Corporation. In addition, non‑GAAP
measures are used in measuring compliance with debt covenants.
Non‑GAAP measures do not have standardized meaning under GAAP and
may not be comparable to similar measures provided by other issuers.
Wajax includes these measures because management believes that
they assist investors in assessing financial performance. The definition,
calculation and reconciliation of non‑GAAP measures are provided in the
Non‑GAAP and Other Financial Measures section.
Unless otherwise indicated, all financial information within this MD&A is
in millions of Canadian dollars, except ratio calculations, share, share
rights and per share data. Additional information, including Wajax’s
Annual Report and Annual Information Form, is available under the
Corporation’s profile on SEDAR+ at www.sedarplus.ca.
Wajax Corporation Overview
Founded in 1858, Wajax (TSX: WJX) is one of Canada’s longest‑standing
and most diversified industrial products and services providers. The
Corporation operates an integrated distribution system, providing sales,
parts and services to a broad range of customers in diverse sectors
of the Canadian economy, including: construction, forestry, mining,
industrial and commercial, oil sands, transportation, metal processing,
government and utilities, and oil and gas.
Strategic Direction and Outlook
Wajax’s corporate purpose statement is, “Empowering People to Build
a Better Tomorrow”, which we strive to achieve by living our values
and delivering an exceptional experience for our people, customers,
suppliers, shareholders, and the communities we serve. In 2025, we
are focusing on six strategic priorities:
Continuing to Build a People-First Company
The safety, well-being and engagement of our 3,000+ teammates is
the foundation that ensures that both our people and business can
thrive together. We take a comprehensive approach to employee health
and wellness – including physical, mental and financial well-being – in
addition to providing extensive learning and development opportunities
and support for internal career development. A key pillar of building a
people-first company is living our values every day:
We commit to safety and well‑being;
We develop potential and expertise;
We deliver an exceptional experience together;
We build lasting relationships; and
We strive to continuously improve.
We continue to develop our environmental, social and governance
programs as outlined in our annual Sustainability Report for the year
ended December 31, 2024, which will be made available on our website
at www.wajax.com. The Sustainability Report is not incorporated by
reference in this MD&A.
Growing Our Existing Business with a Focus on Parts,
Service and Margin Improvement
Creating a differentiated and exceptional customer experience is an
important driver of success for Wajax. We will continue to improve
our mix and margin profile over time, and invest in tools, training
and support to allow our people to deliver value‑added services to
our customers.
Unlocking the Potential of Our Enhanced
Direct Relationship with Hitachi
Continuing to leverage and expand our enhanced direct distribution
relationship with Hitachi will also be a key driver of our success. Our
ability to source world‑class Hitachi equipment and parts directly
from Japan, coupled with Hitachi’s technological innovation and
dedicated financing programs, will continue to allow us to better serve
our customers.
Acquiring and Integrating Industrial Parts and
Engineered Repair Services Businesses
Our national infrastructure and extensive customer relationships
position us as an aggregator in the highly fragmented engineered repair
services (“ERS”) and related industrial parts market – and adding
sought‑after technical capabilities and expanding the services we offer
will allow us to better serve our customers and drive improved product
mix and margin profile. In 2025, our focus will be on fully integrating
our prior acquisitions to realize additional synergies and maintaining a
disciplined approach to future opportunities.
Improving Cost Structure and Processes
Investing in infrastructure and continuous improvement initiatives to
enhance customer service and to improve operating efficiency and
leverage in our business. Our current programs include the ongoing
optimization of our branch network, reviewing operating processes for
efficiency and effectiveness, and prudently managing our balance sheet.
Continuing ERP System Roll‑out and Technology Improvements
Investing in information technology platforms to improve operating
efficiencies and to improve customer and employee experience. Our
enterprise resource planning (“ERP”) system roll‑out continues to be an
area of focus, with 90% completed at the end of 2024.
Outlook
In 2024, Wajax delivered revenue of $2,097.6 million versus a record of
$2,154.7 million in 2023. Adjusted basic earnings per share was $2.44
versus $3.88 in 2023. The year‑over‑year decrease in revenue was
primarily due to lower product support, industrial parts and ERS revenue
resulting from weaker market conditions in the second half of the year.
This decline was partially offset by higher equipment sales in the mining
14 Wajax 2024 Annual Report
Management’s Discussion and Analysis
and material handling categories. Gross profit margin decreased to
19.7% in 2024, from 20.9% in 2023, as increased competitive and
market pressures resulted in lower margins realized on equipment,
product support, industrial parts and rental revenue, partially offset
by higher margins on ERS sales.(1) In response to market conditions,
management implemented a number of cost‑saving initiatives, including
workforce reductions, which resulted in severance costs of $5.8 million.
The Corporation’s backlog at December 31, 2024 of $564.4 million
decreased $23.7 million, or 4.0%, compared to September 30, 2024
backlog of $588.1 million, due primarily to lower material handling and
mining orders. Included in this backlog are seven large mining shovels,
which are expected to be delivered over the next nine quarters.(1)
As at December 31, 2024, the Corporation’s inventory of $673.1 million
decreased by $48.4 million from September 30, 2024 and
$76.3 million from peak levels at March 31, 2024. Management
continues to be committed to managing and reducing inventory levels.
Wajax generated $70.0 million in cash flow from operations in 2024
compared to cash used of $89.0 million in 2023. The Corporation’s
leverage ratio decreased to 2.61 times at December 31, 2024
compared to 2.78 times at September 30, 2024 due primarily to
lower debt as at December 31, 2024. The sequential decline in both
inventory and leverage reflects management’s focus on optimizing
working capital and managing leverage.(1)
Looking ahead to the first half of 2025, Wajax continues to see strong
customer demand in the mining and energy sectors, with the former
supported by strong backlog.(1) Headwinds are expected, with broader
market conditions remaining soft and uncertainty surrounding potential
tariffs and counter‑tariffs on Canada‑U.S. trade; additional headwinds
are expected should such tariffs materialize. Amid this backdrop,
management remains committed to executing the Corporation’s six
strategic priorities, which will continue to support and position the
business for future success, and which have been refined for 2025. As
additional focus areas, management will execute initiatives to reduce
inventory, improve margins and lower costs.
See the Cautionary Statement Regarding Forward‑Looking
Information section.
Annual and Fourth Quarter Highlights
2024 Full Year Highlights
Revenue decreased $57.1 million, or 2.6%, to $2,097.6 million in
2024 from $2,154.7 million in 2023. From a regional perspective:
Revenue in western Canada of $944.5 million decreased 3.2%
from the prior year due primarily to lower equipment sales in the
construction and forestry category, lower product support sales
in the mining category and lower ERS sales. These decreases
were offset partially by higher industrial parts sales, and higher
equipment sales in the material handling and mining categories.
Revenue in central Canada of $375.2 million decreased 3.3%
from the prior year due primarily to lower equipment sales in the
construction and forestry category, lower industrial parts sales
due to weaker market conditions, and lower product support sales
in the mining category. These decreases were offset partially by
higher equipment sales in the material handling category.
Revenue in eastern Canada of $777.9 million decreased 1.7%
from the prior year due primarily to lower industrial parts and ERS
sales, offset partially by higher equipment sales in the construction
and forestry category.
Gross profit margin of 19.7% in 2024 decreased 120 basis points
(“bps”) compared with gross profit margin of 20.9% in 2023.(1)
This decrease in margin was driven primarily by increased market
pressures, mostly in the second half of the year, which resulted in
lower margins realized on equipment, product support, rental, and
industrial parts revenue.
Selling and administrative expenses as a percentage of revenue
increased to 14.9% in 2024 from 14.6% in 2023.(1) For the year
ended December 31, 2024, selling and administrative expenses
decreased $2.4 million compared to last year. This decrease
was due primarily to lower personnel costs, bonuses, travel and
entertainment costs, and supplies and marketing costs. Excluding
the $2.3 million of contingent consideration revaluation expense
(2023 – $0.3 million), and the $3.4 million of unrealized loss on
total return swaps (2023 – $4.2 million unrealized gain), selling and
administrative expenses decreased $11.9 million compared with the
prior year, and selling and administrative expenses as a percentage
of revenue decreased to 14.6% in 2024, versus 14.7% in 2023.(1)
During the year, the Corporation implemented workforce reductions
in response to market conditions. A restructuring cost of $5.8 million
was recognized in the year relating primarily to severance costs.
EBIT decreased $40.3 million, or 29.4%, to $96.5 million in 2024
from $136.7 million in 2023.(1) The year‑over‑year decrease resulted
primarily from lower sales volume and gross profit margin, and a
$5.8 million restructuring cost for workforce reductions. Adjusted
EBIT decreased $33.1 million, or 23.8%, to $105.8 million in 2024
from $138.9 million in 2023, and adjusted EBIT margin decreased to
5.0% in 2024 from 6.4% in 2023.(1)
Finance costs of $38.2 million in 2024 increased $11.1 million
compared with 2023 due primarily to higher average borrowings
under the Corporation’s bank credit facility, higher lease interest
due to higher lease liabilities, as well as an unrealized loss on
interest rate swaps of $3.6 million in 2024 compared to a loss of
$1.2 million in 2023. Excluding the unrealized loss/gain on interest
rate swaps in both periods, finance costs increased $8.7 million
compared with 2023.
The Corporation generated net earnings of $42.8 million, or
$1.97 per share in 2024, versus $81.0 million, or $3.77 per share
in 2023. The Corporation generated adjusted net earnings of
$52.9 million, or $2.44 per share in 2024, versus $83.5 million,
or $3.88 per share in 2023.(1) Adjusted net earnings for the year
ended December 31, 2024 excludes facility closure, restructuring,
and other related costs of $4.3 million after tax, or $0.20 per share
(2023 – $1.4 million after tax, or $0.07 per share), non‑cash
losses on mark to market of derivative instruments of $3.6 million
after tax, or $0.16 per share (2023 – losses of $0.9 million after
tax, or $0.04 per share), and losses on the change in fair value of
contingent consideration of $2.3 million after tax, or $0.10 per share
(2023 – losses of $0.2 million after tax, or $0.01 per share).(1)
Adjusted net earnings for the prior year also excluded gains
on the sale of properties of $0.1 million after tax, or less than
$0.01 per share.(1)
Adjusted EBITDA margin decreased to 8.0% in 2024 from 9.2%
in 2023.(1)
Cash flows generated from operating activities amounted to
$70.0 million in 2024, compared to cash used of $89.0 million in
2023. The increase in cash generated of $159.0 million was mainly
attributable to an increase in inventory of $38.0 million compared
to an increase of $162.5 million in the prior year, an increase in
accounts payable and accrued liabilities of $4.4 million compared to
a decrease of $29.9 million in the prior year, and income taxes paid
of $25.3 million compared to $49.2 million in the prior year. This
increase in cash generated was offset partially by a decrease in net
earnings excluding items not affecting cash flow of $35.1 million.
(1) “Backlog”, “Leverage ratio”, “Gross profit margin”, and “Adjusted basic earnings per share” do not have standardized meanings prescribed by GAAP. See the Non‑GAAP and Other Financial
Measures section.
Wajax 2024 Annual Report 15
Management’s Discussion and Analysis
The Corporation’s backlog at December 31, 2024 of $564.4 million
increased $10.5 million, or 1.9%, compared to December 31, 2023
backlog of $554.0 million due primarily to higher construction and
forestry orders, and higher mining orders, including seven large
mining shovels, offset partially by lower material handling, ERS and
industrial parts orders.(1)
Working capital of $532.4 million at December 31, 2024 decreased
$27.8 million, from $560.2 million at December 31, 2023 due
primarily to lower contract assets and higher accounts payable and
accrued liabilities, offset partially by higher inventory levels.(1)
Working capital efficiency was 26.0%, an increase of 210 bps from
23.9% in 2023, due to the higher trailing four quarter average
working capital, largely resulting from higher average inventory levels,
and lower trailing 12‑month revenue. Excluding the Corporation’s
senior unsecured debentures, working capital of $589.4 million at
December 31, 2024 increased $29.2 million from $560.2 million at
December 31, 2023, and working capital efficiency was 28.7%, an
increase of 240 bps from 26.3% at December 31, 2023.(1)
The Corporation’s leverage ratio increased to 2.61 times at
December 31, 2024 compared to 1.98 times at December 31, 2023
due primarily to a lower trailing 12‑month pro‑forma adjusted
EBITDA.(1) The Corporation’s senior secured leverage ratio was
2.17 times at December 31, 2024, compared to 1.64 times at
December 31, 2023.(1)
Effective January 2, 2024, Wajax completed adjustments to its senior
management structure following the retirement of Steve Deck, Chief
Operating Officer and Senior Vice President, Heavy Equipment. Brian
Deacon was appointed to the role of Senior Vice President, Category
Management, and André Dubé to the role of Senior Vice President,
Sales and Operations.
On January 11, 2024, Wajax amended its senior secured bank
credit facility to increase the facility limit from $400.0 million
to $500.0 million. The bank credit facility is now composed of
a $50.0 million non‑revolving term facility and a $450.0 million
revolving term facility. There was no change to the maturity date of
the senior secured bank credit facility.
On March 4, 2024, the Corporation announced a 6% increase in its
quarterly dividend.
On November 4, 2024, Wajax announced the planned retirement of
Stuart Auld, Chief Financial Officer, to be effective March 4, 2025.
Following a comprehensive succession planning process, Tania
Casadinho, Vice President, Corporate Controller, was appointed to
succeed Mr. Auld as Chief Financial Officer effective March 4, 2025.
Subsequent to year end, on January 15, 2025, Wajax announced
the repayment in full of the $57.0 million in principal amount owed
under its 6.00% senior unsecured debentures due January 15, 2025,
along with accrued interest up to but excluding the maturity date.
The Corporation’s existing bank credit facility was used to complete
the repayment.
Fourth Quarter Highlights
Revenue in the fourth quarter of 2024 increased $23.3 million, to
$565.9 million, from $542.6 million in the fourth quarter of 2023.
From a regional perspective:
Revenue in western Canada of $274.9 million increased 16.7%
from the same period in the prior year due primarily to higher
industrial parts sales and higher mining equipment sales, including
the delivery of two large mining shovels in the fourth quarter of
2024 with no such deliveries in the fourth quarter of the prior year.
These increases were offset partially by lower ERS sales.
Revenue in central Canada of $99.7 million decreased 5.4% from
the same period in the prior year due primarily to lower equipment
sales in the construction and forestry category, as well as lower
ERS sales. The decrease was offset partially by higher equipment
sales in the material handling category.
Revenue in eastern Canada of $191.4 million decreased 5.1%
from the same period in the prior year due primarily to lower
equipment sales in the construction and forestry category, as well
as lower industrial parts sales. The decrease was partially offset
by higher equipment sales in the material handling category.
Gross profit margin of 17.1% in the fourth quarter of 2024 decreased
420 bps compared with gross profit margin of 21.2% in the same
period of 2023.(1) This decrease in margin was driven primarily
by lower margins realized on equipment, ERS and rental revenue
due to increased market pressures, as well as a lower proportion
of ERS, product support, and industrial parts sales relative to
equipment sales.
Selling and administrative expenses as a percentage of revenue
decreased to 14.1% in the fourth quarter of 2024 from 16.1% in the
same period of 2023.(1) Selling and administrative expenses in the
fourth quarter of 2024 decreased $7.4 million, or 8.5% compared
to the fourth quarter of 2023. This decrease was due primarily to
lower spending in multiple areas, including personnel, bonuses,
travel and entertainment, and supplies and marketing, driven largely
by cost saving initiatives. Excluding the $2.3 million of contingent
consideration revaluation expense (2023 – $0.3 million), and
the $1.8 million of unrealized loss on total return swaps (2023 –
$0.8 million unrealized gain), selling and administrative expenses
decreased $12.0 million compared with the same period in the prior
year, and selling and administrative expenses as a percentage of
revenue decreased to 13.4% in the fourth quarter of 2024, from
16.1% in the same quarter of 2023.(1)
In the fourth quarter of 2024, the Corporation implemented workforce
reductions in response to market conditions. A restructuring cost of
$5.8 million was recognized in the fourth quarter relating primarily to
severance costs.
EBIT decreased $16.9 million, or 60.3%, to $11.1 million in the
fourth quarter of 2024 from $28.1 million in the same period of
2023. The year‑over‑year decrease in EBIT resulted primarily from
lower gross profit margin and a $5.8 million restructuring cost
for workforce reductions, offset partially by reduced selling and
administrative expenses.(1) Adjusted EBIT decreased $12.3 million,
or 39.0%, to $19.3 million in the fourth quarter of 2024 from
$31.7 million in the fourth quarter of 2023, and adjusted EBIT
margin decreased to 3.4% in the fourth quarter of 2024 from 5.8% in
the same quarter of 2023.(1)
Finance costs of $8.4 million in the fourth quarter of 2024 decreased
$4.9 million compared with the same quarter last year due primarily
to an unrealized gain on interest rate swaps of $0.2 million in the
quarter compared to a loss of $5.5 million in the same period of the
prior year. Excluding the unrealized gain/loss on interest rate swaps
in both periods, finance costs increased $0.8 million compared with
the same quarter last year due primarily to higher average borrowings
under the Corporation’s bank credit facility.
The Corporation generated net earnings of $1.0 million,
or $0.05 per share, in the fourth quarter of 2024 versus
$11.1 million, or $0.52 per share, in the same period of 2023. The
Corporation generated adjusted net earnings of $7.5 million, or
$0.35 per share, in the fourth quarter of 2024 versus $17.8 million,
or $0.83 per share, in the fourth quarter of 2023.(1) Adjusted net
earnings for the quarter excludes facility closure, restructuring, and
other related costs of $4.3 million after tax, or $0.20 per share
(2023 – $1.4 million after tax, or $0.07 per share), losses on the
change in fair value of contingent consideration of $2.3 million
after tax, or $0.10 per share (2023 – $0.2 million after tax,
or $0.01 per share), and non‑cash gains on mark to market of
derivative instruments of less than $0.1 million after tax, or less
than $0.01 per share (2023 – losses of $5.0 million after tax, or
$0.23 per share).(1)
Adjusted EBITDA margin decreased to 6.2% in the fourth quarter of
2024 from 8.7% in the fourth quarter of 2023.(1)
16 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Statement of financial position highlights
As at December 31
2024
2023
Trade and other receivables
$
303.5 $
309.1
Inventory
673.1
630.9
Accounts payable and accrued liabilities
(417.8)
(407.1)
Debentures – current(4)
(57.0)
—
Other working capital amounts(1)
30.6
27.3
Working capital(1)
$
532.4 $
560.2
Rental equipment
$
50.0 $
42.5
Property, plant and equipment
$
45.7 $
44.8
Funded net debt(1)
$
332.7 $
325.5
Key ratios:
Leverage ratio(1)
2.61
1.98
Senior secured leverage ratio(1)
2.17
1.64
(1) These measures do not have a standardized meaning prescribed by GAAP. See the Non‑GAAP
and Other Financial Measures section.
(2) Weighted average shares, net of shares held in trust, outstanding for calculation of basic and
diluted earnings per share for the year ended December 31, 2024 were 21,719,568 (2023 –
21,509,250) and 22,188,628 (2023 – 22,271,628), respectively.
(3) Net earnings excluding the following:
a. after‑tax facility closure, restructuring, and other related costs of $4.3 million (2023 –
$1.4 million), or basic and diluted loss per share of $0.20 and $0.19, respectively (2023 –
basic and diluted loss per share of $0.07 and $0.06 respectively) for the year ended
December 31, 2024.
b. after‑tax non‑cash losses on mark to market of derivative instruments of $3.6 million
(2023 – losses of $0.9 million), or basic and diluted loss per share of $0.16 (2023 –
loss per share of $0.04) for the year ended December 31, 2024.
c. after‑tax losses on the change in fair value of contingent consideration of $2.3 million
(2023 – losses of $0.2 million), or basic and diluted loss per share of $0.10 (2023 –
loss per share of $0.01) for the year ended December 31, 2024.
d. after‑tax gains recorded on the sale of properties of nil (2023 – $0.1 million), or basic and
diluted earnings per share of nil (2023 – earnings per share of less than $0.01) for the year
ended December 31, 2024.
(4) The unsecured subordinated debentures due January 15, 2025 were classified as current as
at December 31, 2024. On January 15, 2025, the Corporation repaid in full the $57.0 million
in principal amount owed under its 6.00% senior unsecured debentures, along with accrued
interest up to but excluding the maturity date.
Cash flows generated from operating activities amounted to
$75.9 million in the fourth quarter of 2024, compared with cash
generated of $48.5 million in the same quarter of the previous
year. The increase in cash generated of $27.4 million was mainly
attributable to an increase in accounts payable and accrued liabilities
of $37.6 million compared to a decrease of $20.3 million in the
same quarter of the prior year, and a decrease in inventory of
$48.4 million compared to a decrease of $29.7 million in the same
quarter of the prior year. This increase in cash generated was offset
partially by an increase in accounts receivable of $36.0 million in the
fourth quarter of 2024 compared to a decrease of $3.9 million in the
same quarter of the previous year, and a decrease in net earnings
excluding items not affecting cash flow of $17.2 million.
The Corporation’s backlog at December 31, 2024 of $564.4 million
decreased $23.7 million, or 4.0%, compared to September 30, 2024
backlog of $588.1 million due primarily to lower material handling
and mining orders. Backlog at December 31, 2024 included seven
large mining shovels.(1)
Summary of Annual Operating Results
Statement of earnings highlights
2024
2023
% change
Revenue
$
2,097.6 $
2,154.7
(2.6)%
Gross profit
$
413.8 $
450.6
(8.2)%
Selling and
administrative expenses
311.5
313.9
(0.8)%
Restructuring and
other related costs
5.8
—
—%
Earnings before finance
costs and income taxes $
96.5 $
136.7
(29.4)%
Finance costs
38.2
27.1
40.9%
Earnings before
income taxes
$
58.3 $
109.6
(46.8)%
Income tax expense
15.5
28.7
(45.8)%
Net earnings
$
42.8 $
81.0
(47.2)%
– Basic earnings
per share(2)
$
1.97 $
3.77
(47.7)%
– Diluted earnings
per share(2)
$
1.93 $
3.64
(47.0)%
Adjusted net earnings(1)(3) $
52.9 $
83.5
(36.6)%
– Adjusted basic
earnings per share(1)(2)(3) $
2.44 $
3.88
(37.2)%
– Adjusted diluted
earnings per share(1)(2)(3) $
2.38 $
3.75
(36.4)%
Adjusted EBIT(1)
$
105.8 $
138.9
(23.8)%
Adjusted EBITDA(1)
$
168.0 $
197.4
(14.9)%
Key ratios:
Gross profit margin(1)
19.7%
20.9%
Selling and administrative
expenses as a
percentage of revenue(1)
14.9%
14.6%
EBIT margin(1)
4.6%
6.3%
Adjusted EBIT margin(1)
5.0%
6.4%
Adjusted EBITDA margin(1)
8.0%
9.2%
Effective income tax rate
26.6%
26.1%
(1) “Backlog”, “Working capital”, “Gross profit margin”, “Selling and administrative expenses as a percentage of revenue”, “Working capital efficiency”, “Leverage ratio”, “Senior secured leverage ratio”,
“Adjusted net earnings”, “Adjusted basic and diluted earnings per share”, “Adjusted EBIT”, “Adjusted EBIT margin”, and “Adjusted EBITDA margin” do not have standardized meanings prescribed by
GAAP. See the Non‑GAAP and Other Financial Measures section.
Working capital of $532.4 million at December 31, 2024 decreased
$39.6 million, from $572.0 million at September 30, 2024 due
primarily to lower inventory and higher accounts payable and accrued
liabilities, offset partially by higher trade and other receivables.(1)
Working capital efficiency was 26.0%, a decrease of 60 bps from
26.6% at September 30, 2024 due to the lower trailing four quarter
average working capital and higher trailing 12‑month revenue.(1)
Excluding the Corporation’s senior unsecured debentures, working
capital of $589.4 million at December 31, 2024 decreased
$39.4 million from $628.8 million at September 30, 2024, and
working capital efficiency was 28.7% as at both December 31, 2024
and September 30, 2024.(1)
The Corporation’s leverage ratio decreased to 2.61 times
at December 31, 2024, compared to 2.78 times at
September 30, 2024.(1) The decrease in the leverage ratio was due
to a lower debt level driven largely by cash generated from operating
activities during the quarter. The Corporation’s senior secured
leverage ratio was 2.17 times at December 31, 2024, compared to
2.38 times at September 30, 2024.(1)
Wajax 2024 Annual Report 17
Management’s Discussion and Analysis
Annual Results of Operations
Revenue
For the year ended December 31, 2024, revenue decreased 2.6%, or
$57.1 million, to $2,097.6 million, from $2,154.7 million in the same
period in 2023. The following key factors contributed to the decrease
in revenue:
Industrial parts sales decreased 5.5% and ERS sales decreased
7.9% due to weaker market conditions.
Equipment sales increased 1.9% due primarily to higher mining sales
in western Canada, higher material handling sales in all regions, and
higher construction and forestry sales in eastern Canada. These
increases were offset partially by lower construction and forestry
sales in western and central Canada.
Backlog
The Corporation’s backlog at December 31, 2024 of $564.4 million
increased $10.5 million, or 1.9%, compared to December 31, 2023
backlog of $554.0 million due primarily to higher construction and
forestry orders, and higher mining orders, including seven large mining
shovels, offset partially by lower material handling, ERS and industrial
parts orders.(1)
Gross profit
For the year ended December 31, 2024, gross profit decreased
$36.9 million, or 8.2%, compared with the same period last year,
primarily due to lower sales volume, and lower margins realized on
equipment, product support, rental and industrial parts revenue driven
by increased market pressures.
Revenue by End Market
For the year ended December 31
2024
■ Construction
15%
■ Mining
14%
■ Oil and Gas
11%
■ Industrial/Commercial
10%
■ Forestry
10%
■ Oil Sands
10%
■ Transportation
8%
■ Government and Utilities
7%
■ Metal Processing
6%
■ Other
9%
For the year ended December 31
2023
■ Construction
16%
■ Mining
15%
■ Oil and Gas
10%
■ Industrial/Commercial
13%
■ Forestry
11%
■ Oil Sands
9%
■ Transportation
7%
■ Government and Utilities
6%
■ Metal Processing
5%
■ Other
8%
Revenue by Geographic Region ($ millions)
For the year ended December 31
2024
$ change
% change
■ Western Canada
$
944.5
$
(31.3)
(3.2) %
■ Central Canada
375.2
(12.7)
(3.3) %
■ Eastern Canada(1)
777.9
(13.1)
(1.7) %
Total revenue
$ 2,097.6
$
(57.1)
(2.6) %
(1) Includes Quebec and the Atlantic provinces.
For the year ended December 31
2023
■ Western Canada
$
975.8
■ Central Canada
387.9
■ Eastern Canada(1)
791.0
Total revenue
$ 2,154.7
Revenue Sources ($ millions)
For the year ended December 31
2024
$ change
% change
■ Equipment sales
$
618.6
$
11.5
1.9 %
■ Product support
535.0
(8.2)
(1.5) %
■ Industrial parts
572.0
(33.1)
(5.5) %
■ Engineered repair
services (ERS)
326.5
(27.8)
(7.9) %
■ Equipment rental
45.5
0.6
1.3 %
Total
$ 2,097.6
$
(57.1)
(2.6) %
For the year ended December 31
2023
■ Equipment sales
$
607.1
■ Product support
543.3
■ Industrial parts
605.1
■ Engineered repair
services (ERS)
354.3
■ Equipment rental
45.0
Total
$ 2,154.7
For the year ended December 31, 2024, gross profit margin of 19.7%
decreased 120 bps compared with gross profit margin of 20.9% in
2023.(1) This decrease in margin was driven primarily by increased
market pressures which resulted in lower margins realized on
equipment, product support, rental and industrial parts revenue.
Selling and administrative expenses
For the year ended December 31, 2024, selling and administrative
expenses decreased $2.4 million compared with the same period
last year. This decrease was due primarily to lower personnel costs,
bonuses, travel and entertainment costs, and supplies and marketing
costs. Excluding the $2.3 million of contingent consideration revaluation
expense (2023 – $0.3 million), and the $3.4 million of unrealized loss
on total return swaps (2023 – $4.2 million unrealized gain), selling and
administrative expenses decreased $11.9 million compared with the
prior year.
Selling and administrative expenses as a percentage of revenue
increased to 14.9% in 2024 from 14.6% in 2023. Excluding the
contingent consideration revaluation expense and the unrealized loss/
gain on total return swaps in both years, selling and administrative
expenses as a percentage of revenue decreased to 14.6% in 2024,
versus 14.7% in 2023.(1)
Facility closure, restructuring and other related costs
During the year, the Corporation implemented workforce reductions in
response to market conditions. A restructuring cost of $5.8 million was
recognized in the year relating primarily to severance costs.
18 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Finance costs
For the year ended December 31, 2024, finance costs of $38.2 million
increased $11.1 million compared with the same period in 2023 due
primarily to higher average borrowings under the Corporation’s bank
credit facility, higher lease interest due to higher lease liabilities, as
well as an unrealized loss on interest rate swaps of $3.6 million in
2024 compared to a loss of $1.2 million in the same period in 2023.
Excluding the unrealized loss/gain on interest rate swaps in both
periods, finance costs increased $8.7 million compared with the same
period in 2023. See Liquidity and Capital Resources section.
At December 31, 2024, 62.2% of the Corporation’s funded net debt was
at a fixed interest rate.(1)
Income tax expense
The Corporation’s effective income tax rate of 26.6% for the year ended
December 31, 2024 was higher compared with the statutory rate of
26.0% due to the impact of expenses not deductible for tax purposes.
The Corporation’s effective income tax rate of 26.1% for the same
period in 2023 was higher compared with the statutory rate of 26.0%
due mainly to the impact of expenses not deductible for tax purposes.
Net earnings
For the year ended December 31, 2024, the Corporation generated
net earnings of $42.8 million, or $1.97 per share, compared with
$81.0 million, or $3.77 per share, in 2023. The $38.2 million decrease
in net earnings resulted primarily from lower sales volume and gross
profit margin, higher finance costs and a $5.8 million restructuring cost
for workforce reductions.
Adjusted net earnings
Adjusted net earnings for the year ended December 31, 2024 excludes
facility closure, restructuring, and other related costs of $4.3 million
after tax, or $0.20 per share (2023 – $1.4 million after tax, or
$0.07 per share), non‑cash losses on mark to market of derivative
instruments of $3.6 million after tax, or $0.16 per share (2023 –
losses of $0.9 million after tax, or $0.04 per share), and losses on the
change in fair value of contingent consideration of $2.3 million after
tax, or $0.10 per share (2023 – losses of $0.2 million after tax, or
$0.01 per share). Adjusted net earnings for the prior year also excluded
gains on the sale of properties of $0.1 million after tax, or less than
$0.01 per share.(1)
As a result, adjusted net earnings decreased $30.6 million
to $52.9 million, or $2.44 per share, for the year ended
December 31, 2024 from $83.5 million, or $3.88 per share, in 2023.(1)
Comprehensive income
For the year ended December 31, 2024, the total comprehensive
income of $45.6 million included net earnings of $42.8 million and an
other comprehensive gain of $2.8 million. The other comprehensive
gain of $2.8 million in the current year resulted primarily from
$2.7 million of unrealized after‑tax gains on derivatives designated as
cash flow hedges.
Selected Annual Information
The following selected annual information has been prepared
on the same basis as the 2024 annual audited consolidated
financial statements.
For the year ended December 31
2024
2023
2022
Revenue
$
2,097.6 $
2,154.7 $
1,962.8
Net earnings
$
42.8 $
81.0 $
72.4
Basic earnings per share
$
1.97 $
3.77 $
3.38
Diluted earnings per share $
1.93 $
3.64 $
3.26
Total assets
$
1,547.6 $
1,473.3 $
1,249.9
Non‑current liabilities
$
477.1 $
493.7 $
286.0
Dividends declared
per share
$
1.40 $
1.32 $
1.00
Revenue in 2024 of $2,097.6 million decreased $57.1 million
compared to 2023. The decrease in 2024 was driven by lower
overall sales in all regions, and from a category perspective was
driven primarily by lower industrial parts and ERS sales resulting
from weaker market conditions, and lower construction and forestry
equipment sales. These decreases were offset partially by higher
mining and material handling equipment sales. Revenue in 2023 of
$2,154.7 million increased $191.9 million compared to 2022. The
increase in 2023 was driven primarily by higher industrial parts, ERS,
and product support revenue across all regions, offset partially by a
decrease in mining equipment sales in western Canada.
Net earnings in 2024 of $42.8 million decreased $38.2 million, or
47.2%, from 2023. The decrease in net earnings resulted primarily
from lower sales volume and gross profit margin, higher finance costs
and a $5.8 million restructuring cost for workforce reductions. The
Corporation generated adjusted net earnings of $52.9 million, or
$2.44 per share in 2024, versus $83.5 million, or $3.88 per share in
2023. Net earnings in 2023 of $81.0 million increased $8.6 million,
or 11.9%, from 2022. The increase in net earnings resulted primarily
from higher sales volumes, improved margins, and a higher proportion
of ERS and industrial parts sales, offset partially by increased selling
and administrative expenses and higher finance costs. The Corporation
generated adjusted net earnings of $83.5 million, or $3.88 per share in
2023, versus $69.8 million, or $3.26 per share in 2022.
The $297.7 million increase in total assets from December 31, 2022
to December 31, 2024 was mainly attributable to higher inventory
of $210.9 million, increased right‑of‑use assets of $35.8 million due
to higher lease liabilities, higher goodwill and intangible assets of
$12.8 million, and increased rental equipment of $10.6 million.
Non‑current liabilities at December 31, 2024 of $477.1 million
increased $191.1 million from December 31, 2022, primarily
attributable to an increase in long‑term debt of $199.4 million.
(1) “Funded net debt”, “Backlog”, “Gross profit margin”, “Selling and administrative expenses as a percentage of revenue”, “Adjusted net earnings”, and “Adjusted basic earnings per share” do not have
standardized meanings prescribed by GAAP. See the Non‑GAAP and Other Financial Measures section.
Wajax 2024 Annual Report 19
Management’s Discussion and Analysis
Although quarterly fluctuations in revenue and net earnings are difficult
to predict, during times of weak resource sector activity, the first quarter
will tend to have seasonally lower revenues. However, the project timing
of large mining trucks and shovels and power generation packages can
shift revenue and net earnings throughout the year. In addition, the
sale of large construction units can also impact revenue due to the
seasonality in that industry.
Effective July 4, 2023, the Corporation acquired Polyphase Engineered
Controls (1977) Ltd. (“Polyphase”), and effective September 1, 2023,
the Corporation acquired Beta Fluid Power Ltd. and Beta Industrial Ltd.
(together, “Beta”). The results of operations and financial position of
these acquired businesses have been included in the above figures
since the dates of acquisition.
A discussion of Wajax’s previous quarterly results can be found in
Wajax’s quarterly MD&A available under the Corporation’s profile on
SEDAR+ at www.sedarplus.ca.
Consolidated Financial Condition
Capital Structure and Key Financial Condition Measures
December 31
2024
2023
Shareholders’ equity
$
512.3 $
496.2
Funded net debt(1)
332.7
325.5
Total capital(1)
$
844.9 $
821.7
Funded net debt to total capital(1)
39.4%
39.6%
Leverage ratio(1)
2.61
1.98
Senior secured leverage ratio(1)
2.17
1.64
(1) These measures do not have standardized meanings prescribed by GAAP. See the Non‑GAAP
and Other Financial Measures section.
The Corporation’s objective is to manage its working capital and
normal‑course capital investment programs within a leverage range
of 1.5 to 2.0 times and to fund those programs through operating
cash flow and its bank credit facilities as required. There may be
instances whereby the Corporation is willing to maintain a leverage
ratio outside of this range either to support key growth initiatives or
fluctuations in working capital levels during changes in economic cycles.
The Corporation may also maintain a leverage ratio above the stated
range as a result of investments in acquisitions and may fund those
acquisitions using its bank credit facilities and other debt instruments
in accordance with the Corporation’s expectations of total future cash
flows, financing costs and other factors. The Corporation’s leverage ratio
is currently above the target range primarily due to higher debt from
investment in working capital and acquisitions completed in 2023, and
the lower trailing 12‑month pro‑forma adjusted EBITDA driven by weaker
market conditions.(1) See the Funded Net Debt section.
Shareholders’ Equity
The Corporation’s shareholders’ equity at December 31, 2024 of
$512.3 million increased $16.0 million, from $496.2 million at
December 31, 2023 due primarily to total comprehensive income of
$45.6 million, offset partially by dividends declared of $30.4 million.
The Corporation’s share capital included in shareholders’ equity on the
consolidated statements of financial position, consists of:
Number of
Common
Shares
Amount
Issued and outstanding,
December 31, 2023
21,810,411 $
211.3
Common shares issued to settle
share‑based compensation awards
98,278
1.2
Issued and outstanding,
December 31, 2024
21,908,689 $
212.5
Shares held in trust,
December 31, 2023
(140,865)
(1.3)
Released for settlement of certain
share‑based compensation awards
57,511
0.5
Purchased for future settlement of certain
share‑based compensation awards
(29,419)
(0.3)
Shares held in trust, December 31, 2024
(112,773) $
(1.1)
Issued and outstanding,
net of shares held in trust,
December 31, 2024
21,795,916 $
211.5
At the date of this MD&A, the Corporation had 21,795,916 common
shares issued and outstanding, net of shares held in trust.
At December 31, 2024, Wajax had four share‑based compensation
plans; the Wajax Share Ownership Plan (the “SOP”), the Directors’
Deferred Share Unit Plan (the “DDSUP”), the Mid‑Term Incentive Plan for
Senior Executives (the “MTIP”) (with MTIP awards being composed of
performance share units (“PSUs”) and restricted share units (“RSUs”))
and the Deferred Share Unit Plan (the “DSUP”).
Selected Quarterly Information
The following table summarizes unaudited quarterly consolidated financial data for the eight most recently completed quarters.
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenue
$ 565.9
$ 481.0 $ 568.3
$ 482.3 $ 542.6
$ 509.7 $
586.2 $ 516.1
Net earnings
$
1.0
$
6.4 $
20.6
$
14.7 $
11.1
$
23.4 $
29.0 $
17.5
Earnings per share
– Basic
$
0.05
$
0.29 $
0.95
$
0.68 $
0.52
$
1.09 $
1.35 $
0.81
– Diluted
$
0.05
$
0.29 $
0.93
$
0.66 $
0.50
$
1.05 $
1.31 $
0.79
Adjusted net earnings(1)
$
7.5
$
9.6 $
22.9
$
12.8 $
17.8
$
20.7 $
27.1 $
17.8
Adjusted earnings per share(1)
– Basic
$
0.35
$
0.44 $
1.06
$
0.59 $
0.83
$
0.96 $
1.26 $
0.83
– Diluted
$
0.34
$
0.43 $
1.03
$
0.58 $
0.80
$
0.93 $
1.22 $
0.80
Dividends declared per share
$
0.35
$
0.35 $
0.35
$
0.35 $
0.33
$
0.33 $
0.33 $
0.33
Weighted average common shares
outstanding – basic (in thousands)
21,774
21,724 21,697
21,682 21,570
21,490
21,487 21,489
(1) These measures do not have a standardized meaning prescribed by GAAP. See the Non‑GAAP and Other Financial Measures section.
20 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Each fully vested right under the SOP and DDSUP is settled by the
issuance of a common share from treasury. As of December 31, 2024,
there were a total of 360,761 rights outstanding under the SOP
and DDSUP, of which 347,420 were fully vested. Each fully vested
MTIP PSU and certain fully vested deferred share units issued under
the DSUP (“equity settled DSUs”) are settled by the delivery of a
market‑purchased common share. As of December 31, 2024, a total
of 232,458 MTIP PSUs and equity settled DSUs were outstanding,
of which 20,902 were fully vested. Each fully vested MTIP RSU and
non‑equity settled DSUs (“cash settled DSUs”) are settled in cash. As
of December 31, 2024, a total of 402,430 MTIP RSUs and cash settled
DSUs were outstanding, of which 4,452 were fully vested. Depending on
the actual level of achievement of the performance targets associated
with the outstanding MTIP PSUs, the number of market‑purchased
shares required to satisfy the Corporation’s obligations thereunder
could be higher or lower.
Wajax recorded compensation expense of $6.8 million for the year
ended December 31, 2024 (2023 – expense of $9.4 million) in respect
of these plans.
Funded Net Debt
December 31
2024
2023
(Cash) bank indebtedness
$
(7.4) $
1.4
Debentures
57.0
56.3
Long‑term debt
283.0
267.8
Funded net debt(1)
$
332.7 $
325.5
Funded net debt of $332.7 million at December 31, 2024 increased
$7.2 million compared to $325.5 million at December 31, 2023.(1)
The increase during the year was due primarily to the payment of lease
liabilities of $39.2 million, dividends paid of $30.0 million, and property,
plant and equipment additions of $8.9 million, offset partially by cash
generated from operating activities of $70.0 million.
The Corporation’s ratio of funded net debt to total capital decreased to
39.4% at December 31, 2024 from 39.6% at December 31, 2023 due
to the higher shareholders’ equity level in the year.(1)
The Corporation’s leverage ratio of 2.61 times at December 31, 2024
increased from the December 31, 2023 ratio of 1.98 times due
primarily to a lower trailing 12‑month pro‑forma adjusted EBITDA.(1)
However, the leverage ratio decreased compared to the
September 30, 2024 leverage ratio of 2.78 times, due to the lower
debt level at December 31, 2024 driven largely by cash generated from
operating activities during the quarter.(1)
See the Liquidity and Capital Resources section.
Financial Instruments
Wajax uses derivative financial instruments in the management of
its foreign currency, interest rate and share‑based compensation
exposures. Wajax policy restricts the use of derivative financial
instruments for trading or speculative purposes.
Wajax monitors the proportion of variable rate debt to its total debt
portfolio and may enter into interest rate hedge contracts to mitigate
a portion of the interest rate risk on its variable rate debt. A change
in interest rates, in particular related to the Corporation’s unhedged
variable rate debt, is not expected to have a material impact on the
Corporation’s results of operations or financial condition over the
long term.
Wajax has entered into interest rate swap contracts to minimize
exposure to interest rate fluctuations on its variable rate debt. All
interest rate swap contracts are recorded in the consolidated financial
statements at fair value. As at December 31, 2024, Wajax had the
following interest rate swap contracts outstanding:
$150.0 million, expiring October 2027, with a weighted average
interest rate of 2.57% (December 31, 2023 – $150.0 million,
expiring October 2026 to October 2027, with a weighted average
interest rate of 2.32%)
Wajax enters into foreign exchange forward contracts to hedge the
exchange risk associated with the cost of certain inbound inventory
and foreign currency‑denominated sales to customers along with the
associated receivables as part of its normal course of business. As at
December 31, 2024, Wajax had the following contracts outstanding:
to buy U.S. $164.2 million (December 31, 2023 –
to buy U.S. $195.2 million),
to buy Euro €0.8 million (December 31, 2023 –
to buy Euro €7.3 million),
to buy AUD $7.3 million (December 31, 2023 – nil),
to sell U.S. $87.3 million (December 31, 2023 –
to sell U.S. $77.9 million), and
to sell Euro €1.0 million (December 31, 2023 –
to sell Euro €1.6 million).
The U.S. dollar contracts expire between January 2025 to August 2026,
with an average U.S./Canadian dollar rate of 1.3636.
The Euro contracts expire between January 2025 to November 2025,
with an average Euro/Canadian dollar rate of 1.4873.
The Australian dollar contracts expire between January 2025 to
December 2025, with an average AUD/Canadian dollar rate of 0.9078.
Wajax has entered into total return swap contracts to hedge the
exposure to share price market risk on a class of MTIP units that
are cash‑settled. All total return swap contracts are recorded
in the consolidated financial statements at fair value. As at
December 31, 2024, Wajax had the following total return swap
contracts outstanding:
contracts totaling 366,000 shares at an initial share value of
$9.9 million (December 31, 2023 – contracts totaling 399,000
shares at an initial share value of $9.1 million).
The total return swap contracts expire between March 2025 and
March 2027.
Wajax measures derivatives not designated as hedging instruments
at fair value with subsequent changes in fair value being recorded in
earnings. Derivatives designated as effective hedges are measured at
fair value with subsequent changes in fair value being recorded in other
comprehensive income until the related hedged item is recorded and
affects income or inventory. The fair value of derivative instruments
is estimated based upon market conditions using appropriate
valuation models.
A change in foreign currency value, relative to the Canadian dollar,
on transactions with customers that include unhedged foreign
currency exposures is not expected to have a material impact on the
Corporation’s results of operations or financial condition over the
longer term.
Wajax will periodically institute price increases to offset the negative
impact of foreign exchange rate increases and volatility on imported
goods to ensure margins are not eroded. However, a sudden
strengthening of the U.S. dollar relative to the Canadian dollar can have
a negative impact mainly on parts margins in the short term prior to
price increases taking effect.
(1) “Funded net debt”, “Funded net debt to total capital”, “Total capital”, “Leverage ratio”, and “Pro‑forma adjusted EBITDA” do not have standardized meanings prescribed by GAAP. See the Non‑GAAP and
Other Financial Measures section.
Wajax 2024 Annual Report 21
Management’s Discussion and Analysis
The impact of a change in the Corporation’s share price on
cash‑settled MTIP units is not expected to have a material impact on
the Corporation’s results of operations or financial condition over the
longer term.
Wajax is exposed to the risk of non‑performance by counterparties
to foreign exchange forward contracts, long‑term interest rate swap
contracts and total return swap contracts. These counterparties are
large financial institutions that maintain high short‑term and long‑term
credit ratings. To date, no such counterparty has failed to meet its
financial obligations to Wajax. Management does not believe there is
a significant risk of non‑performance by these counterparties and will
continue to monitor the credit risk of these counterparties.
Contractual Obligations
< 1
1 – 3
3 – 5
After
Contractual Obligations
Total
year
years
years
5 years
Accounts payable and accrued liabilities
$
417.8 $
417.8 $
— $
— $
—
Undiscounted lease obligations
303.9
58.9
97.3
57.4
90.3
Long‑term debt
283.7
—
283.7
—
—
Debentures
57.0
57.0
—
—
—
Total
$
1,062.5 $
533.8 $
381.1 $
57.4 $
90.3
The lease obligations relate to contracts to lease properties for the
Corporation’s branch network, certain vehicles, computer hardware and
equipment. The long‑term debt obligation relates to the bank credit
facility and the debentures obligation relates to the senior unsecured
debentures. See the Liquidity and Capital Resources section.
Related Party Transactions
The Corporation’s related party transactions, consisting of the
compensation of the Board of Directors and key management
personnel, totaled $8.7 million in 2024 (2023 – $9.6 million).
Off‑Balance Sheet Arrangements
The Corporation has no off‑balance sheet arrangements as at
December 31, 2024.
Liquidity and Capital Resources
The Corporation’s liquidity is maintained through various sources,
including bank and other credit facilities, debentures and cash
generated from operations.
Bank and Other Credit Facilities and Debentures
On January 11, 2024, the Corporation amended its senior secured
bank credit facility to increase the facility limit from $400.0 million
to $500.0 million. There was no change to the maturity date of
the facility. As part of the bank credit facility amendment effective
January 11, 2024, the Canadian dollar bankers’ acceptances were
replaced with the term Canadian Overnight Repo Rate Average
loan (“CORRA”).
As at December 31, 2024, Wajax had a $500.0 million credit limit
on its bank credit facility, composed of a $50.0 million non‑revolving
term facility and a $450.0 million revolving term facility, maturing on
October 1, 2027.
At December 31, 2024, Wajax had borrowed $283.7 million and
issued $3.7 million of letters of credit for a total utilization of
$287.4 million of its $500.0 million bank credit facility. Borrowing
capacity under the bank credit facility is dependent on the level of
inventories on‑hand and outstanding trade accounts receivables. At
December 31, 2024, borrowing capacity under the bank credit facility
was equal to $500.0 million, of which $212.6 million was accessible to
the Corporation.
The bank credit facility contains customary restrictive covenants,
including limitations on paying cash dividends and acquiring businesses
in the event the senior secured leverage ratio, as defined in the bank
credit facility agreement, exceeds 4.0 times, and an interest coverage
maintenance ratio, all of which were met as at December 31, 2024.
The Corporation’s senior secured leverage ratio was 2.17 times at
December 31, 2024.
As at December 31, 2024, borrowings under the bank credit facility
were subject to floating rates of interest at margins over Canadian
dollar term CORRA loan yields, U.S. dollar Secured Overnight Financing
Rate (“SOFR”) rates or prime. Margins on the facility depend on
the Corporation’s leverage ratio at the time of borrowing and range
between 1.8% and 3.3% for Canadian dollar term CORRA loans and
U.S. dollar SOFR borrowings, and between 0.8% and 2.3% for prime
rate borrowings.
In addition, Wajax had $57.0 million of senior unsecured debentures
outstanding at December 31, 2024, bearing interest at a rate of 6.00%
per annum, payable semi‑annually and maturing on January 15, 2025.
As at December 31, 2024, the Corporation had not redeemed any of
the debentures.
On January 15, 2025, the Corporation repaid in full the $57.0 million
in principal amount owed under its 6.00% senior unsecured debentures
due January 15, 2025, along with accrued interest up to but excluding
the maturity date. The Corporation used borrowings under its bank
credit facility to complete the repayment.
Under the terms of the bank credit facility, Wajax is permitted to have
additional interest bearing debt of $25.0 million. As such, Wajax has
up to $25.0 million of demand inventory equipment financing capacity
with three third‑party financing companies. At December 31, 2024,
Wajax had utilized $12.5 million of the interest bearing equipment
financing facilities.
In addition, the Corporation has an agreement with a financial institution
to sell 100% of selected trade accounts receivable on a recurring,
non‑recourse basis. Under this facility, up to $20.0 million of accounts
receivable is permitted to be sold to the financial institution and can
remain outstanding at any point in time. After the sale, Wajax does
not retain any interests in the accounts receivable but continues to
service and collect the outstanding accounts receivable on behalf of
the financial institution. As at December 31, 2024, the Corporation
continues to service and collect $8.4 million in accounts receivable on
behalf of the financial institution.
As of March 4, 2025, Wajax continues to maintain its $500.0 million
bank credit facility and an additional $25.0 million in credit facilities
with third‑party financing companies. Wajax maintains sufficient liquidity
to meet short‑term normal course working capital and maintenance
capital requirements and fund certain strategic investments. However,
Wajax may be required to access the equity or debt capital markets to
fund significant acquisitions.
The Corporation’s tolerance to interest rate risk decreases/increases
as the Corporation’s leverage ratio increases/decreases. At
December 31, 2024, 62.2% of the Corporation’s funded net debt was
at a fixed interest rate which is within the Corporation’s interest rate
risk policy.
22 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Cash Flow
The following table highlights the major components of cash flow as
reflected in the Consolidated Statements of Cash Flows for the years
ended December 31, 2024 and December 31, 2023:
2024
2023
$ Change
Net earnings
$
42.8 $
81.0 $
(38.2)
Items not affecting
cash flow
123.5
120.3
3.1
Changes in non‑cash
operating working capital
(12.7)
(197.0)
184.4
Finance costs paid on debts
(23.0)
(16.2)
(6.9)
Finance costs paid
on lease liabilities
(10.6)
(8.9)
(1.7)
Income taxes paid
(25.3)
(49.2)
23.9
Rental equipment additions
(25.4)
(20.9)
(4.5)
Other
0.7
1.8
(1.1)
Cash generated from
(used in) operating
activities
$
70.0 $
(89.0) $
159.0
Cash generated from
(used in) investing
activities
$
0.2 $
(24.5) $
24.7
Cash (used in) generated
from financing activities
$
(61.4) $
117.3 $
(178.7)
Operating Activities
For the year ended December 31, 2024, cash flows generated from
operating activities amounted to $70.0 million, compared to cash flows
used in operating activities of $89.0 million for the prior year. The
increase in cash generated of $159.0 million was mainly attributable
to an increase in inventory of $38.0 million compared to an increase
of $162.5 million in the prior year, an increase in accounts payable
and accrued liabilities of $4.4 million compared to a decrease of
$29.9 million in the prior year, and income taxes paid of $25.3 million
compared to $49.2 million in the prior year. This increase in cash
generated was offset partially by a decrease in net earnings excluding
items not affecting cash flow of $35.1 million.
For the year ended December 31, 2024, rental equipment additions
of $25.4 million (2023 – $20.9 million) related primarily to material
handling lift trucks.
Changes in significant components of non‑cash operating
working capital for the years ended December 31, 2024 and
December 31, 2023 include the following:
Changes in Non-cash
Operating Working Capital (1)
2024
2023
$ Change
Trade and other receivables $
7.5 $
3.7 $
3.8
Contract assets
13.9
(7.4)
21.3
Inventory
(38.0)
(162.5)
124.4
Deposits on inventory
(4.8)
(0.1)
(4.7)
Prepaid expenses
(1.4)
(2.7)
1.3
Accounts payable and
accrued liabilities
4.4
(29.9)
34.3
Provisions
4.4
(0.5)
4.9
Contract liabilities
1.3
2.4
(1.1)
Total Changes in
Non‑cash Operating
Working Capital
$
(12.7) $
(197.0) $
184.4
(1) Increase (decrease) in cash flow
Significant components of the changes in non‑cash operating working
capital for the year ended December 31, 2024 compared to the year
ended December 31, 2023 are as follows:
Inventory increased $38.0 million in 2024 compared with an increase
of $162.5 million in 2023. The increase in 2024 resulted primarily
from higher equipment inventory in the construction and forestry,
mining and material handling categories, due partially to higher
backlog in the construction and forestry, and mining categories.
These increases were partially offset by lower equipment inventory in
the power systems category and lower industrial parts inventory. The
increase in 2023 resulted primarily from higher equipment inventory
in the construction and forestry, mining and material handling
categories, and increased overall parts inventory purchasing due to
strong sales activity in the year.
Accounts payable and accrued liabilities increased $4.4 million
in 2024 compared to a decrease of $29.9 million in 2023. The
decrease in 2023 resulted primarily from lower trade payables driven
largely by timing of inventory payments.
Contract assets decreased $13.9 million compared to an increase
of $7.4 million in 2023. The decrease in 2024 was due primarily
to lower sales activity and timing of billings for customer contracts.
The increase in 2023 resulted primarily from increased sales
activity resulting in more work completed but not yet billed on
customer contracts.
Investing Activities
For the year ended December 31, 2024, the Corporation generated
$0.2 million of cash from investing activities compared with cash used
in investing activities of $24.5 million in 2023. Investing activities in the
year included property, plant and equipment additions of $8.9 million
(2023 – $9.0 million), collection of lease receivables of $7.9 million
(2023 – $5.2 million), and net cash received from sellers relating
to business acquisitions of $0.9 million (2023 – net cash paid of
$21.0 million).
Financing Activities
For the year ended December 31, 2024, the Corporation used
$61.4 million of cash in financing activities compared with cash
generated from financing activities of $117.3 million in 2023. Financing
activities for the year ended December 31, 2024 included the payment
of lease liabilities of $39.2 million (2023 – $35.5 million), dividends
paid to shareholders of $30.0 million (2023 – $26.7 million), and a net
bank credit facility borrowing of $15.2 million (2023 – net borrowing of
$183.6 million).
Dividends
Dividends to shareholders for the 2024 and 2023 years were declared
and payable to shareholders of record as follows:
Record Date
Payment Date
Per Share
Amount
March 15, 2024
April 2, 2024 $
0.35 $
7.6
June 14, 2024
July 3, 2024
0.35
7.6
September 16, 2024
October 2, 2024
0.35
7.6
December 16, 2024
January 7, 2025
0.35
7.6
Year Ended
December 31, 2024
$
1.40 $
30.4
Record Date
Payment Date
Per Share
Amount
March 15, 2023
April 4, 2023 $
0.33 $
7.1
June 15, 2023
July 5, 2023
0.33
7.1
September 15, 2023
October 3, 2023
0.33
7.1
December 15, 2023
January 3, 2024
0.33
7.2
Year Ended
December 31, 2023
$
1.32 $
28.4
Wajax 2024 Annual Report 23
Management’s Discussion and Analysis
On March 4, 2025, the Corporation declared a dividend of
$0.35 per share for the first quarter of 2025, payable on April 2, 2025,
to shareholders of record on March 14, 2025.
Fourth Quarter Consolidated Results
For the three months
ended December 31
2024
2023
% change
Revenue
$
565.9 $
542.6
4.3%
Gross profit
$
96.6 $
115.2
(16.2)%
Selling and
administrative expenses
79.7
87.1
(8.5)%
Restructuring and
other related costs
5.8
—
—%
Earnings before finance
costs and income taxes $
11.1 $
28.1
(60.3)%
Finance costs
8.4
13.3
(36.7)%
Earnings before
income taxes
$
2.7 $
14.8
(81.5)%
Income tax expense
1.7
3.7
(53.9)%
Net earnings
$
1.0 $
11.1
(90.7)%
Basic earnings per share(2) $
0.05 $
0.52
(90.8)%
Diluted earnings
per share(2)
$
0.05 $
0.50
(90.7)%
Adjusted net earnings(1)(3) $
7.5 $
17.8
(57.8)%
Adjusted basic earnings
per share(1)(2)(3)
$
0.35 $
0.83
(58.2)%
Adjusted diluted earnings
per share(1)(2)(3)
$
0.34 $
0.80
(57.6)%
Adjusted EBIT(1)
$
19.3 $
31.7
(39.0)%
Adjusted EBITDA(1)
$
35.1 $
47.2
(25.6)%
Key ratios:
Gross profit margin(1)
17.1%
21.2%
Selling and administrative
expenses as a
percentage of revenue(1)
14.1%
16.1%
EBIT margin(1)
2.0%
5.2%
Adjusted EBIT margin(1)
3.4%
5.8%
Adjusted EBITDA margin(1)
6.2%
8.7%
Effective income tax rate
62.3%
25.0%
(1) These measures do not have a standardized meaning prescribed by GAAP. See the Non‑GAAP
and Other Financial Measures section.
(2) Weighted average shares, net of shares held in trust outstanding for calculation of basic
and diluted earnings per share for the fourth quarter of 2024 were 21,774,451 (2023 –
21,570,005) and 22,210,260 (2023 – 22,319,062), respectively.
(3) Net earnings excluding the following:
a. after‑tax facility closure, restructuring, and other related costs of $4.3 million (2023 –
$1.4 million), or basic and diluted loss per share of $0.20 and $0.19, respectively (2023 –
basic and diluted loss per share of $0.07 and $0.06, respectively) for the fourth quarter
of 2024.
b. after‑tax losses on the change in fair value of contingent consideration of $2.3 million
(2023 – $0.2 million), or basic and diluted loss per share of $0.10 (2023 – loss per share
of $0.01) for the fourth quarter of 2024.
c. after‑tax non‑cash gains on mark to market of derivative instruments of less than
$0.1 million (2023 – losses of $5.0 million), or basic and diluted earnings per share of less
than $0.01 (2023 – loss per share of $0.23) for the fourth quarter of 2024.
Revenue by Geographic Region
For the three months
ended December 31
2024
2023
$ change
% change
Western Canada
$ 274.9 $ 235.6
$
39.3
16.7%
Central Canada
99.7
105.4
(5.7)
(5.4)%
Eastern Canada(1)
191.4
201.7
(10.3)
(5.1)%
Total revenue
$ 565.9 $ 542.6
$
23.3
4.3%
(1) Includes Quebec and the Atlantic provinces.
Revenue Sources
For the three months
ended December 31
2024
2023
$ change
% change
Equipment sales
$ 208.4 $ 158.5
$
49.9
31.5%
Product support
132.8
132.8
(0.1)
(0.1)%
Industrial parts
133.6
136.0
(2.4)
(1.7)%
Engineered repair
services (ERS)
79.1
103.6
(24.6) (23.7)%
Equipment rental
12.1
11.7
0.4
3.2%
Total revenue
$ 565.9 $ 542.6
$
23.3
4.3%
Revenue in the fourth quarter of 2024 increased 4.3%, or $23.3 million,
to $565.9 million from $542.6 million in the fourth quarter of 2023.
The following key factors contributed to the increase in revenue:
Equipment sales increased 31.5% due primarily to higher mining
sales in western Canada including the delivery of two large mining
shovels in the fourth quarter of 2024 with no such deliveries in the
fourth quarter of the prior year, as well as higher material handling
sales in all regions. These increases were offset partially by lower
construction and forestry sales in all regions.
ERS revenue decreased 23.7% due to lower sales in all regions,
particularly in western Canada.
Backlog
The Corporation’s backlog of $564.4 million at December 31, 2024
decreased $23.7 million, or 4.0%, compared to September 30, 2024
backlog of $588.1 million due primarily to lower material handling and
mining orders. Backlog at December 31, 2024 included seven large
mining shovels.(1)
Gross profit
Gross profit decreased $18.6 million, or 16.2%, in the fourth quarter
of 2024 compared to the fourth quarter of 2023, primarily due to
lower margins realized on equipment, ERS and rental revenue driven
by increased market pressures, as well as sales mix. These decreases
were offset partially by higher sales volume.
Gross profit margin of 17.1% in the fourth quarter of 2024 decreased
420 bps compared with gross profit margin of 21.2% in the same period
of 2023. This decrease in margin was driven primarily by lower margins
realized on equipment, ERS and rental revenue due to increased market
pressures, as well as a lower proportion of ERS, product support and
industrial parts sales relative to equipment sales.(1)
Selling and administrative expenses
Selling and administrative expenses in the fourth quarter of 2024
decreased $7.4 million compared with the fourth quarter of 2023.
This decrease was due primarily to lower spending in multiple areas,
including personnel, bonuses, travel and entertainment, and supplies
and marketing, driven largely by cost saving initiatives. Excluding the
$2.3 million of contingent consideration revaluation expense (2023 –
$0.3 million), and the $1.8 million of unrealized loss on total return
swaps (2023 – $0.8 million unrealized gain), selling and administrative
expenses decreased $12.0 million compared with the same period in
the prior year.(1)
Selling and administrative expenses as a percentage of revenue
decreased to 14.1% in the fourth quarter of 2024 from 16.1% in
the same period of 2023. Excluding the contingent consideration
revaluation expense and the unrealized loss/gain on total return swaps
in both periods, selling and administrative expenses as a percentage of
revenue decreased to 13.4% in the fourth quarter of 2024, from 16.1%
in the same quarter of 2023.(1)
24 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Facility closure, restructuring and other related costs
In the fourth quarter of 2024, the Corporation implemented workforce
reductions in response to market conditions. A restructuring cost of
$5.8 million was recognized in the fourth quarter relating primarily to
severance costs.
Finance costs
Finance costs of $8.4 million in the fourth quarter of 2024 decreased
$4.9 million compared with the same quarter last year due primarily to
an unrealized gain on interest rate swaps of $0.2 million in the quarter
compared to a loss of $5.5 million in the same period of the prior
year. Excluding the unrealized gain/loss on interest rate swaps in both
periods, finance costs increased $0.8 million compared with the same
quarter last year due primarily to higher average borrowings under the
bank credit facility. See Liquidity and Capital Resources section.
Income tax expense
The Corporation’s effective income tax rate of 62.3% for the fourth
quarter of 2024 was higher compared with the statutory rate of
26.0% due mainly to the $2.3 million expense for the change in fair
value of contingent consideration that was not deductible for tax
purposes, relative to the smaller net earnings base for the quarter. The
Corporation’s effective income tax rate of 25.0% for the same period in
2023 was lower compared with the statutory rate of 26.0% due mainly
to the impact of changes in estimates related to prior years.
Net earnings
In the fourth quarter of 2024, the Corporation generated net earnings
of $1.0 million, or $0.05 per share, compared with net earnings of
$11.1 million, or $0.52 per share, in the fourth quarter of 2023. The
$10.1 million decrease in net earnings resulted primarily from lower
gross profit margin and a $5.8 million restructuring cost for workforce
reductions, offset partially by reduced selling and administrative
expenses and finance costs.
Adjusted net earnings (See the Non‑GAAP
and Other Financial Measures section)
Adjusted net earnings for the fourth quarter of 2024 excludes facility
closure, restructuring, and other related costs of $4.3 million after tax,
or $0.20 per share (2023 – $1.4 million after tax, or $0.07 per share),
losses on the change in fair value of contingent consideration of
$2.3 million after tax, or $0.10 per share (2023 – $0.2 million after
tax, or $0.01 per share), and non‑cash gains on mark to market of
derivative instruments of less than $0.1 million after tax, or less
than $0.01 per share (2023 – losses of $5.0 million after tax, or
$0.23 per share).(1)
As a result, adjusted net earnings decreased $10.3 million to
$7.5 million, or $0.35 per share, for the fourth quarter of 2024 from
$17.8 million, or $0.83 per share, in the same period of 2023.(1)
Comprehensive income
Total comprehensive income of $3.2 million in the fourth quarter of
2024 included net earnings of $1.0 million and an other comprehensive
gain of $2.2 million. The other comprehensive gain of $2.2 million in
the quarter resulted primarily from $2.1 million of unrealized after‑tax
gains on derivatives designated as cash flow hedges.
Fourth Quarter Cash Flows
Cash Flow
The following table highlights the major components of cash flow for the
quarters ended December 31, 2024 and December 31, 2023:
For the quarter ended December 31
2024
2023
$ Change
Net earnings
$
1.0 $
11.1 $
(10.1)
Items not affecting
cash flow
28.9
36.1
(7.2)
Changes in non‑cash
operating working capital
54.3
23.0
31.4
Finance costs paid on debts
(5.0)
(4.6)
(0.4)
Finance costs paid
on lease liabilities
(2.8)
(2.4)
(0.4)
Income taxes paid
(0.6)
(6.8)
6.2
Rental equipment additions
(0.3)
(7.9)
7.6
Other
0.2
—
0.2
Cash generated from
operating activities
$
75.9 $
48.5 $
27.4
Cash generated from
(used in) investing
activities
$
0.4 $
(0.4) $
0.8
Cash used in
financing activities
$
(59.2) $
(53.4) $
(5.7)
Operating Activities
Cash flows generated from operating activities amounted to
$75.9 million in the fourth quarter of 2024, compared with cash flows
generated from operating activities of $48.5 million in the same quarter
of the previous year. The increase in cash generated of $27.4 million
was mainly attributable to a decrease in inventory of $48.4 million
compared to a decrease of $29.7 million in the same quarter of the
prior year, and an increase in accounts payable and accrued liabilities
of $37.6 million compared to a decrease of $20.3 million in the same
quarter of the prior year. This increase in cash generated was offset
partially by an increase in accounts receivable of $36.0 million in the
fourth quarter of 2024 compared to a decrease of $3.9 million in the
same quarter of the previous year, and a decrease in net earnings
excluding items not affecting cash flow of $17.2 million.
Rental equipment additions in the fourth quarter of 2024 of
$0.3 million (2023 – $7.9 million) related primarily to material handling
lift trucks.
Changes in significant components of non‑cash operating
working capital for the quarters ended December 31, 2024 and
December 31, 2023 included the following:
Changes in Non-cash
Operating Working Capital(1)
2024
2023
$ Change
Trade and other receivables $
(36.0) $
3.9 $
(39.9)
Contract assets
(2.4)
3.4
(5.8)
Inventory
48.4
29.7
18.7
Deposits on inventory
3.6
(0.3)
3.8
Prepaid expenses
3.0
7.3
(4.3)
Accounts payable and
accrued liabilities
37.6
(20.3)
57.9
Provisions
4.4
(0.5)
4.9
Contract liabilities
(4.1)
(0.2)
(3.9)
Total Changes in
Non‑cash Operating
Working Capital
$
54.3 $
23.0 $
31.4
(1) Increase (decrease) in cash flow
(1) “Backlog”, “Gross profit margin”, “Selling and administrative expenses as a percentage of revenue”, “Adjusted net earnings”, and “Adjusted basic earnings per share” do not have standardized
meanings prescribed by GAAP. See the Non‑GAAP and Other Financial Measures section.
Wajax 2024 Annual Report 25
Management’s Discussion and Analysis
Significant components of the changes in non‑cash operating working
capital for the quarter ended December 31, 2024 compared to the
quarter ended December 31, 2023 are as follows:
Inventory decreased $48.4 million in the fourth quarter of 2024
compared to a decrease of $29.7 million in the same period of
2023. The decrease in the fourth quarter of 2024 resulted primarily
from lower equipment inventory in the mining category driven by
the delivery of two large mining shovels in the quarter, and lower
equipment inventory in the power systems category. The decrease in
the fourth quarter of 2023 resulted primarily from lower equipment
inventory in the construction and forestry category due to timing of
inventory purchases.
Accounts payable and accrued liabilities increased $37.6 million in
the fourth quarter of 2024 compared to a decrease of $20.3 million
in the same period of 2023. The increase in the fourth quarter of
2024 resulted primarily from higher trade payables through supplier
finance arrangements and higher payroll accruals. The decrease
in the fourth quarter of 2023 resulted primarily from lower trade
payables driven largely by timing of inventory payments.
Trade and other receivables increased $36.0 million in the fourth
quarter of 2024 compared to a decrease of $3.9 million in the same
period of 2023. The increase in the fourth quarter of 2024 resulted
primarily from higher sales activity in the quarter, including the
delivery of a large mining shovel near the end of the quarter that was
still a receivable at the end of the quarter, with no such deliveries in
the prior quarter.
Investing Activities
The Corporation generated $0.4 million of cash from investing activities
in the fourth quarter of 2024 compared to cash used in investing
activities of $0.4 million in the same quarter of 2023. Investing
activities in the quarter included property, plant and equipment
additions of $2.1 million (2023 – $1.7 million) and the collection of
lease receivables of $2.3 million (2023 – $1.5 million).
Financing Activities
The Corporation used $59.2 million of cash in financing activities in the
fourth quarter of 2024 compared to cash used in financing activities of
$53.4 million in the same quarter of 2023. Financing activities in the
quarter included a net bank credit facility repayment of $40.5 million
(2023 – net repayment of $37.0 million), the payment of lease
liabilities of $10.3 million (2023 – $9.2 million), and dividends paid to
shareholders of $7.6 million (2023 – $7.1 million).
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity
with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, revenue and expenses. Critical
accounting estimates are those that require management to make
assumptions about matters that are highly uncertain at the time the
estimate or assumption is made. Critical accounting estimates are also
those that could potentially have a material impact on the Corporation’s
financial results were a different estimate or assumption used.
Estimates and underlying assumptions are reviewed on an ongoing
basis. These estimates and assumptions are subject to change at any
time based on experience and new information. Revisions to accounting
estimates are recognized in the period in which the estimates are
revised and in any future periods affected.
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of resulting in a
material adjustment to the carrying amount of assets and liabilities within
the next fiscal year are as follows:
Allowance for credit losses
The Corporation is exposed to credit risk with respect to its trade
and other receivables. However, this is partially mitigated by the
Corporation’s diversified customer base who operate in many business
sectors across Canada, with no one customer accounting for more
than 10% of the Corporation’s annual consolidated sales. In addition,
the Corporation’s customer base spans large public companies, small
independent contractors, original equipment manufacturers and various
levels of government. The Corporation follows a program of credit
evaluations of customers and limits the amount of credit extended
when deemed necessary. The Corporation maintains an allowance
for possible credit losses, and any such losses to date have been
within management’s expectations. The allowance for credit losses is
determined by estimating the lifetime expected credit losses, taking
into account the Corporation’s past experience of collecting payments
as well as observable changes in and forecasts of future economic
conditions that correlate with default on receivables. At the point when
the Corporation is satisfied that no recovery of the amount owing is
possible, the amount is deemed not recoverable and the financial
asset is written off. The $2.3 million allowance for credit losses at
December 31, 2024 decreased $1.4 million from $3.6 million at
December 31, 2023. As economic conditions change, there is risk
that the Corporation could experience a greater number of defaults
compared to prior periods which would result in an increased charge
to earnings.
Inventory obsolescence
The value of the Corporation’s new and used equipment and high value
parts are evaluated by management throughout the year on a unit-
by-unit basis considering projected customer demand, future market
conditions, and other considerations evaluated by management.
Specifically, equipment inventory and high value parts aged greater than
one year carry a higher risk of obsolescence with equipment inventory
generally having higher per-unit costs. When required, provisions are
recorded to ensure that equipment and parts are valued at the lower
of cost or estimated net realizable value. The Corporation performs an
aging analysis to identify slow moving or obsolete lower value parts
inventory and estimates appropriate obsolescence provisions related
thereto. The Corporation takes advantage of supplier programs that
allow for the return of eligible parts for credit within specified time
periods. The inventory obsolescence impact on earnings for the three
months ended December 31, 2024 was a charge of $3.0 million
(2023 – charge of $1.3 million) and for the twelve months ended
December 31, 2024 was a charge of $7.6 million (2023 – charge
of $4.5 million). As economic conditions change, there is risk that
the Corporation could have an increase in inventory obsolescence
compared to prior periods which would result in an increased charge
to earnings.
Acquisition accounting, goodwill and intangible assets
For acquisition accounting purposes, all identifiable assets and
liabilities acquired in a business acquisition are recognized at fair
value at the date of acquisition. Estimates and assumptions are used
to calculate the fair value of these assets and liabilities. Changes
to assumptions could significantly impact the fair values of certain
assets, such as intangible assets like customer relationships and
brands. The Corporation’s significant assumptions used in determining
the acquisition date fair value of intangible assets include projected
revenues and cash flows attributable to acquired intangible assets,
customer attrition rates, discount rates, royalty rates and estimations of
useful life.
26 Wajax 2024 Annual Report
Management’s Discussion and Analysis
The value in use of goodwill and intangible assets has been estimated
using the forecasts prepared by management for the next five years.
The key assumptions for the estimate are those regarding revenue
growth, EBITDA margin, tax rates, discount rates and the level of
working capital required to support the business. These estimates are
based on past experience and management’s expectations of future
changes in the market and forecasted growth initiatives.
Unanticipated changes in management’s assumptions or estimates
could materially affect the determination of the fair value of the
Corporation and therefore, could reduce or eliminate the excess of fair
value over the carrying value of the Corporation and could potentially
result in an impairment charge in the future.
The Corporation performs an annual impairment test based on value in
use of its goodwill and intangible assets with an indefinite life unless
there is an indication that the assets may be impaired, in which case
the impairment tests would occur earlier.
Contingent consideration, as part of acquisitions, is valued based on
estimated future performance of the acquired businesses. The valuation
is based on management’s best assessment of the related inputs used
in the valuation models, such as future cash flows, discount rates, and
volatility. Future performance results that differ from management’s
estimates could result in changes to the liabilities, which are recorded
as they arise in net earnings.
Lease term of contracts with renewal options
The lease term is defined as the non‑cancellable term of the lease,
including any periods covered by a renewal option to extend the lease if
it is reasonably certain that the renewal option will be exercised, or any
periods covered by an option to terminate the lease, if it is reasonably
certain that the termination option will not be exercised.
Judgement is used when evaluating whether the Corporation is
reasonably certain that the lease renewal option will be exercised,
including examining any factors that may provide an economic
advantage for renewal.
Changes in Accounting Policies
During the year, the Corporation did not adopt any new accounting
standards or amendments that had an impact on the Corporation’s
consolidated financial statements.
Accounting standards and amendments issued but not yet adopted
In April 2024, the IASB issued IFRS 18, Presentation and Disclosure
in Financial Statements, which will replace IAS 1, Presentation
of Financial Statements. IFRS 18 introduces three sets of new
requirements to improve companies’ reporting of financial
performance and give investors a better basis for analyzing and
comparing companies: improved comparability in the statement
of earnings by introducing three defined categories for income
and expenses (operating, investing and financing) and requiring
companies to provide new defined subtotals, including operating
profit; enhanced transparency of management‑defined performance
measures by requiring companies to disclose explanations of
those company‑specific measures that are related to the statement
of earnings; and enhanced guidance on how companies group
information in the financial statements, including guidance on
whether information is included in the primary financial statements
or is further disaggregated in the notes. IFRS 18 is effective for
annual reporting periods beginning on or after January 1, 2027, with
earlier application permitted. Management is currently assessing the
impact of adopting IFRS 18 on its consolidated financial statements
presentation and disclosure.
Risk Management and Uncertainties
As with most businesses, the Corporation is subject to a number of
marketplace and industry related risks and uncertainties which could
have a material impact on operating results and the Corporation’s ability
to pay cash dividends to shareholders. The Corporation attempts to
minimize many of these risks through diversification of core businesses
and through the geographic diversity of its operations. In addition, the
Corporation has adopted an enterprise risk management framework
which is prepared by senior management and overseen by the Board of
Directors and committees of the Board of Directors. The enterprise risk
management framework sets out principles and tools for identifying,
evaluating, prioritizing and managing risk effectively and consistently
across the Corporation.
The following are a number of risks that deserve particular comment:
Manufacturer relationships and product access
Wajax seeks to distribute leading product lines in each of its regional
markets and its success is dependent upon continuing relations with
the manufacturers it represents. Wajax endeavours to align itself in
long‑term relationships with manufacturers that are committed to
achieving a competitive advantage and long‑term market leadership
in their targeted end markets. In equipment and certain industrial
categories, manufacturer relationships are governed through effectively
exclusive distribution agreements. Distribution agreements are typically
for multi‑year terms and are cancellable by Wajax or the manufacturer
based on a notification period specified in the agreement. Although
Wajax enjoys good relationships with its major manufacturers and seeks
to develop additional strong long‑term partnerships, a loss of a major
product line without a comparable replacement would have a significant
adverse effect on Wajax’s results of operations or cash flow.
There is a continuing consolidation trend among industrial equipment
and component manufacturers. Consolidation may impact the products
distributed by Wajax, in either a favourable or unfavourable manner.
Consolidation of manufacturers may have a negative impact on the
results of operations or cash flow if product lines Wajax distributes
become unavailable as a result of the consolidation.
Suppliers generally have the ability to unilaterally change distribution
terms and conditions, product lines or limit supply of product in times
of intense market demand. Supplier changes in the area of product
pricing and availability can have a negative or positive effect on Wajax’s
revenue and margins. A change in one of a supplier’s product lines can
result in conflicts with another supplier’s product lines that may have
a negative impact on the results of operations or cash flow if one of
the suppliers cancels its distribution with Wajax due to the conflict. In
addition, from time to time suppliers make changes to payment terms
for distributors. This may affect Wajax’s interest‑free payment period
which may have a materially negative or positive impact on working
capital balances such as cash, inventory, deposits on inventory, trade
and other payables and long‑term debt.
Economic conditions/Business cyclicality
Wajax’s customer base consists of businesses operating in the natural
resources, construction, transportation, manufacturing, industrial
processing and utilities industries. These industries can be capital
intensive and cyclical in nature and, as a result, customer demand for
Wajax’s products and services may be affected by economic conditions
at both a global or local level. Changes in interest rates, consumer
and business confidence, corporate profits, credit conditions, foreign
exchange, commodity prices and the level of government infrastructure
spending may influence Wajax’s customers’ operating, maintenance and
capital spending, and therefore Wajax’s sales and results of operations.
Although Wajax has attempted to address its exposure to business and
industry cyclicality by diversifying its operations by geography, product
offering and customer base, there can be no assurance that Wajax’s
results of operations or cash flows will not be adversely affected by
changes in economic conditions.
Wajax 2024 Annual Report 27
Management’s Discussion and Analysis
Many of Wajax’s customers export products to, or import products
from, the U.S. Any changes to tariffs on export to or import from the
U.S. may negatively impact their overall competitiveness and demand
for their products, which in turn may reduce purchases or products
and/or services from Wajax. Wajax also imports products from the
U.S. and changes to tariffs may increase the cost of these products,
requiring Wajax to pass through such costs to its customers, reducing
the competitiveness and demand for same. Recent announcements
regarding tariffs and counter-tariffs between the U.S. and Canada have
created economic uncertainty for all companies engaged in cross‑border
trade. Wajax is developing action plans to navigate the potential
impacts of tariffs over the short and longer term.
Commodity prices
Many of Wajax’s customers are directly and indirectly affected by
fluctuations in commodity prices in the forestry, metals and minerals
and petroleum and natural gas industries and, as a result, Wajax is also
indirectly affected by fluctuations in these prices. In particular, each of
Wajax’s products and services categories are exposed to fluctuations
in the price of oil and natural gas. A downward change in commodity
prices, and particularly in the price of oil and natural gas, could
therefore adversely affect Wajax’s results of operations or cash flows.
Growth initiatives, integration of acquisitions and project execution
The Corporation’s strategic plan establishes priorities for organic
growth, acquisitions and operating infrastructure, including maintaining
a target leverage ratio range of 1.5 – 2.0 times unless a leverage ratio
outside this range is required either to support key growth initiatives or
fluctuations in working capital levels during changes in economic cycles.
The Corporation may also maintain a leverage ratio above the stated
range as a result of investment in significant acquisitions and may
fund those acquisitions using its bank credit facilities and other debt
instruments in accordance with the Corporation’s expectations of total
future cash flows, financing costs and other factors. See the Strategic
Direction and Outlook section and the Non‑GAAP and Other Financial
Measures sections. While end market conditions remain challenging,
the Corporation believes it has a robust strategy and is confident in
its growth prospects. The Corporation’s confidence is strengthened
by the enhanced earnings potential of its consolidated “One Wajax”
business model and by relationships with its customers and vendors.
Wajax’s ability to develop its core capabilities and successfully grow
its business organically will be dependent on achieving the individual
growth initiatives. Wajax’s ability to successfully grow its business
through acquisitions will be dependent on a number of factors including:
identification of accretive new business or acquisition opportunities;
negotiation of purchase agreements on satisfactory terms and prices;
prior approval of acquisitions by third‑parties, including any necessary
regulatory approvals; securing attractive financing arrangements; and
integration of newly acquired operations into the existing business.
All of these activities associated with growing the business, realizing
enhanced earnings potential from the One Wajax structure and
investments made in systems may be more difficult to implement or
may take longer to execute than management anticipates. Further,
any significant expansion of the business may increase the operating
complexity of Wajax, and divert management away from regular
business activities. Any failure of Wajax to successfully manage its
growth strategy, including acquisitions, could have a material adverse
impact on Wajax’s business, results of operations or financial condition.
Key personnel
The success of Wajax is largely dependent on the abilities and
experience of its senior management team and other key personnel.
Its future performance will also depend on its ability to attract, develop
and retain highly qualified employees in all areas of its business.
Competition for skilled management, sales and technical personnel is
intense, particularly in certain markets where Wajax competes. Wajax
continuously reviews and makes adjustments to its hiring, training
and compensation practices in an effort to attract and retain a highly
competent workforce. There can be no assurance, however, that Wajax
will be successful in its efforts and a loss of key employees, or failure
to attract and retain new talent as needed, may have an adverse impact
on Wajax’s current operations or future prospects.
Leverage, credit availability and restrictive covenants
At the date of this MD&A, Wajax has a $500.0 million senior secure
bank credit facility which matures October 1, 2027. The bank credit
facility contains restrictive covenants which place restrictions on,
among other things, the amount of finance costs incurred relative to
earnings, and the ability of Wajax to encumber or dispose of its assets,
acquire businesses and declare dividends. A failure to comply with the
obligations of the facility could result in an event of default which, if not
cured or waived, could require an accelerated repayment of the facility.
There can be no assurance that Wajax’s assets would be sufficient to
repay the facility in full.
Wajax’s short‑term normal course working capital requirements
can swing widely quarter‑to‑quarter due to timing of large inventory
purchases and/or sales and changes in market activity. In general,
as Wajax experiences growth, there is a need for additional working
capital. Conversely, as Wajax experiences economic slowdowns, the
need for working capital is reduced, reflecting the lower activity levels.
While management believes its bank credit facility will be adequate to
meet the Corporation’s normal course working capital requirements,
maintenance capital requirements and certain strategic investments,
there can be no assurance that additional credit will become available if
required, or that an appropriate amount of credit with comparable terms
and conditions will be available when the bank credit facility matures.
Wajax may be required to access the equity or debt markets or reduce
dividends in order to fund significant acquisitions and growth related
working capital and capital expenditures. The amount of debt service
obligations under the bank credit facility will be dependent on the level
of borrowings and fluctuations in interest rates to the extent the rate is
unhedged. As a result, fluctuations in debt servicing costs may have a
detrimental effect on future earnings or cash flow.
Wajax also has credit lines available with other financial institutions
for purposes of financing inventory. These facilities are not committed
lines and their future availability cannot be assured, which may
have a negative impact on cash available for dividends and future
growth opportunities.
Quality of products distributed
The ability of Wajax to maintain and expand its customer base is
dependent upon the ability of the manufacturers represented by Wajax
to sustain or improve the quality of their products. The quality and
reputation of such products are not within Wajax’s control, and there
can be no assurance that manufacturers will be successful in meeting
these goals. The failure of these manufacturers to maintain a market
presence could adversely affect Wajax’s results of operations or
cash flow.
Inventory obsolescence
Wajax maintains substantial amounts of inventory in its business
operations. While Wajax believes it has appropriate inventory
management systems in place, variations in market demand for the
products it sells can result in certain items of inventory becoming
obsolete. This could result in a requirement for Wajax to take a material
write down of its inventory balance resulting in Wajax not being able to
realize expected revenue and cash flows from its inventory, which would
negatively affect results from operations or cash flow.
28 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Government regulation
Wajax’s business is subject to evolving laws and government
regulations, particularly in the areas of taxation, the environment, and
health and safety. Changes to such laws and regulations may impose
additional costs on Wajax and may adversely affect its business in other
ways, including requiring additional compliance measures by Wajax.
Insurance
Wajax maintains a program of insurance coverage that is comparable
to those maintained by similar businesses, including property,
general liability, directors’ and officers’ liability, and cyber security
insurance. Although the limits and self‑insured retentions of such
insurance policies have been established through risk analysis and the
recommendations of professional advisors, there can be no assurance
that such insurance will remain available to Wajax at commercially
reasonable rates or that the amount of such coverage will be adequate
to cover all liability incurred by Wajax. If Wajax is held liable for amounts
exceeding the limits of its insurance coverage or for claims outside the
scope of that coverage, its business, results of operations or financial
condition could be adversely affected.
Information systems and technology
Information systems are an integral part of Wajax’s business processes,
including marketing of equipment and support services, inventory and
logistics, and finance. Some of these systems are integrated with
certain suppliers’ core processes and systems. Any disruptions to
these systems or new systems due to, for example, the upgrade or
conversion thereof, or the failure of these systems or new systems to
operate as expected could, depending on the magnitude of the problem,
adversely affect Wajax’s operating results by limiting the ability to
effectively monitor and control Wajax’s operations.
Cyber security
Wajax’s business relies on information technology platforms, including
third‑party service providers, to process, transmit and store electronic
information – including that related to customers, vendors and
employees. A breach in the security of the Corporation’s information
technology systems, or those of its third‑party service providers, could
expose the business to a risk of loss, misuse of confidential information
and/or business interruption.
The Corporation has security controls in place, including security
tools, and reviews security internally and with the assistance of expert
third‑parties. In addition, the Corporation has policies in place regarding
security over confidential customer, vendor and employee information,
performs employee security training, and has recovery plans in place in
the event of a cyber‑attack.
Despite such security controls, there is no assurance that cyber security
threats can be fully detected, prevented or mitigated. Should such
threats materialize and depending on the magnitude of the problem,
they could have a material impact on Wajax’s business, results of
operations or financial condition.
Credit risk
Wajax extends credit to its customers, generally on an unsecured basis.
Although Wajax is not substantially dependent on any one customer
and it has a system of credit management in place, the loss of a large
receivable would have an adverse effect on Wajax’s profitability.
Labour relations
Wajax had 3,000+ employees as of December 31, 2024. At
the outset of 2024, Wajax was party to 13 collective bargaining
agreements pertaining to approximately 317 employees. During 2024,
three agreements expired. Of these, one agreement pertaining to
approximately 100 employees was re‑ratified, one agreement pertaining
to 8 employees expired at year end and is being renegotiated during
the first quarter of 2025, and the remaining agreement pertaining to
2 employees was terminated due to the elimination of the positions
during the 2024 workforce reductions. Four agreements are set
to expire in 2025, pertaining to approximately 56 employees. One
agreement pertaining to approximately 17 employees will expire in
2026, and five agreements pertaining to approximately 122 employees
will expire in 2027. As of December 31, 2024, Wajax was party
to 12 collective agreements pertaining to a total of approximately
300 employees.
Wajax respects employees’ rights to unionize and strives for
constructive labour relations by adhering to agreements and legislation.
The company promotes people‑first initiatives, a safe and respectful
work culture, and equitable employee treatment. Wajax recognizes
its employees’ rights to join a union and is committed to integrity
in its labour relations. Wajax strives to establish a constructive and
cooperative dialogue that promotes collaborative union/management
relations, a safe and respectful work culture, productive work
environments and the equitable treatment of employees by consistently
adhering to collective agreements, labour relations legislation and
workplace policies. The Corporation believes its labour relations to
be satisfactory and does not anticipate it will be unable to renew
the collective agreements. If Wajax is unable to renew or negotiate
collective agreements from time to time, it could result in work
stoppages and other labour disturbances. The failure to renew collective
agreements upon satisfactory terms could have a material adverse
impact on Wajax’s business, results of operations or financial condition.
Foreign exchange exposure
Wajax’s operating results are reported in Canadian dollars. While the
majority of Wajax’s sales are in Canadian dollars, significant portions of
its purchases are in U.S. dollars. Changes in the U.S. dollar exchange
rate can have a negative or positive impact on Wajax’s revenue, margins
and working capital balances. Wajax mitigates certain exchange rate
risks by entering into foreign exchange forward contracts to fix the
cost of certain inbound inventory and to hedge certain foreign‑currency
denominated sales to customers. In addition, Wajax will periodically
institute price increases to offset the negative impact of foreign
exchange rate increases on imported goods. The inability of Wajax
to mitigate exchange rate risks or increase prices to offset foreign
exchange rate increases, including sudden and volatile changes in the
U.S. dollar exchange rate, may have a material adverse effect on the
results of operations or financial condition of Wajax.
A declining U.S. dollar relative to the Canadian dollar can have a
negative effect on Wajax’s revenue and cash flows as a result of
certain products being imported from the U.S. In some cases market
conditions require Wajax to lower its selling prices as the U.S. dollar
declines. As well, many of Wajax’s customers export products to the
U.S., and a strengthening Canadian dollar can negatively impact their
overall competitiveness and demand for their products, which in turn
may reduce product purchases from Wajax.
A strengthening U.S. dollar relative to the Canadian dollar can have a
positive effect on Wajax’s revenue, as Wajax will periodically institute
price increases on inventory imported from the U.S. to offset the
negative impact of foreign exchange rate increases to ensure margins
are not eroded. However, a sudden strengthening U.S. dollar relative to
the Canadian dollar can have a negative impact mainly on parts margins
in the short‑term prior to price increases taking effect.
Wajax maintains a hedging policy whereby significant transactional
currency risks are identified and hedged.
Wajax 2024 Annual Report 29
Management’s Discussion and Analysis
Interest rate risk
Wajax has exposure to interest rate fluctuations on its interest‑bearing
financial liabilities, in particular from its long‑term debt. Changes in
interest rates can have a negative or positive impact on Wajax’s finance
costs and cash flows. Wajax monitors the proportion of variable rate
debt to its total debt portfolio and may enter into interest rate swap
contracts to mitigate all or a portion of the interest rate risk on its
variable rate debt. The inability of Wajax to mitigate interest rate risks to
offset interest rate increases may have a material adverse effect on the
results of operations or financial condition of Wajax.
Equity price risk
Certain share‑based compensation plans of the Corporation, and the
resulting liabilities, are exposed to fluctuations in the Corporation’s
share price. Changes in the Corporation’s share price can have a
positive or negative impact on Wajax’s net earnings and cash flows.
Wajax monitors the proportion of MTIP units that are cash‑settled
and may enter into total return swap contracts to mitigate a portion
of the equity price risk on these MTIP units. The inability of Wajax to
mitigate equity price risks to offset fluctuations in its share price may
have a material adverse effect on the results of operations or financial
condition of Wajax.
Competition
The categories in which Wajax participates are highly competitive and
include competitors who are national, regional and local. Competitors
can be grouped into four classifications:
Capital Equipment Dealers and Distributors – these competitors
typically represent a major alternative manufacturer and provide sales,
product support, rental, financing and other services in categories
such as construction, forestry, mining and power generation. Examples
include the regional dealer and distributor networks of Caterpillar,
Komatsu, John Deere and Cummins. Competition is based on product
range and quality, aftermarket support and price.
Industrial Parts Distributors – these competitors typically represent
a broad range of industrial parts manufacturers and offer sales and,
in many cases, product support services, including design, assembly
and repair. Competitive product range varies from focused on specific
applications (e.g., hydraulics) to very broad (similar to Wajax).
Competitors can be local, regional and national. Competition is based
on brand access, product quality, customer service levels, price and
ancillary services.
Engineered Repair Services Providers – these competitors typically
have a local or regional presence. They offer services including design,
assembly and repair, are generally focused on specific products, brands
and/or applications (e.g., hydraulics), whereas Wajax typically offers
a broader scope of capabilities. Competition is based on customer
service levels, quality of the work performed and price.
Aftermarket Service Providers – these competitors provide aftermarket
services in areas such as on‑highway transportation. Competitors vary,
from the dealer and distributor networks of manufacturers such as
Freightliner and Western Star, to local service providers. Competition is
based on customer service levels and price.
There can be no assurance that Wajax will be able to continue to
effectively compete. Increased competitive pressures, the growing
influence of online distribution or the inability of Wajax to maintain the
factors which have enhanced its competitive position could adversely
affect its results of operations or cash flow.
Litigation and product liability claims
In the ordinary course of its business, Wajax may be made a party to
various legal actions, the outcome of which cannot be predicted with
certainty. One category of potential legal actions is product liability
claims. Wajax carries product liability insurance, and management
believes that this insurance is adequate to protect against potential
product liability claims. Not all risks, however, are covered by insurance,
and no assurance can be given that insurance will be consistently
available, or will be consistently available on an economically feasible
basis, or that the amounts of insurance will at all times be sufficient
to cover each and every loss or claim that may occur involving Wajax’s
assets or operations.
Guaranteed residual value, recourse and buy‑back contracts
In some circumstances Wajax makes certain guarantees to finance
providers on behalf of its customers. These guarantees can take the
form of assuring the resale value of equipment, guaranteeing a portion
of customer lease payments, or agreeing to buy back the equipment
at a specified price. These contracts are subject to certain conditions
being met by the customer, such as maintaining the equipment in
good working condition. Historically, Wajax has not incurred substantial
losses on these types of contracts, however, there can be no assurance
that losses will not be incurred in the future.
Future warranty claims
Wajax provides manufacturers’ and/or dealer warranties for most of
the product it sells. In some cases, the product warranty claim risk is
shared jointly with the manufacturer. In addition, Wajax provides limited
warranties for workmanship on services provided. Accordingly, Wajax
has some liability for warranty claims. There is a risk that a possible
product quality erosion or a lack of a skilled workforce could increase
warranty claims in the future, or may be greater than management
anticipates. If Wajax’s liability in respect of such claims is greater than
anticipated, it may have a material adverse impact on Wajax’s business,
results of operations or financial condition.
Maintenance and repair contracts
Wajax occasionally enters into long‑term maintenance and repair
contracts with its customers, whereby Wajax is obligated to maintain
certain fleets of equipment at various negotiated performance levels.
The length of these contracts varies significantly, often ranging up to
five or more years. The contracts are generally fixed price, although
many contracts have additional provisions for inflationary adjustments.
Due to the long‑term nature of these contracts, there is a risk that
significant cost overruns may be incurred. If Wajax has miscalculated
the extent of maintenance work required, or if actual parts and service
costs increase beyond the contracted inflationary adjustments, the
contract profitability will be adversely affected. In order to mitigate this
risk, Wajax closely monitors the contracts 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.
Any failure by Wajax to effectively price and manage these contracts
could have a material adverse impact on Wajax’s business, results of
operations or financial condition.
Environmental factors
From time to time, Wajax experiences environmental incidents,
emissions or spills in the course of its normal business activities. Wajax
has established environmental compliance and monitoring programs,
including an internal compliance audit function, which management
believes are appropriate for its operations. In addition, Wajax retains
qualified environmental engineering consultants to conduct the following
activities: environmental site assessments prior to the acquisition
or occupation by Wajax; 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 Wajax’s results of operations or cash flows.
Management is not aware of any material environmental concerns for
which a provision has not been recorded.
30 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Disclosure Controls and Procedures and
Internal Control over Financial Reporting
Wajax’s management, under the supervision of its Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”), is responsible
for establishing and maintaining disclosure controls and procedures
(“DC&P”) and internal control over financial reporting (“ICFR”).
As at December 31, 2024, Wajax’s management, under the supervision
of its CEO and CFO, had designed DC&P to provide reasonable
assurance that information required to be disclosed by Wajax in annual
filings, interim filings or other reports filed or submitted under applicable
securities legislation is recorded, processed, summarized and reported
within the time periods specified in such securities legislation. DC&P
are designed to ensure that information required to be disclosed
by Wajax in annual filings, interim filings or other reports filed or
submitted under applicable securities legislation is accumulated and
communicated to Wajax’s management, including its CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure.
As at December 31, 2024, Wajax’s management, under the supervision
of its CEO and CFO, had designed ICFR to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with IFRS. In
completing the design, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in
its 2013 version of Internal Control – Integrated Framework. With regard
to general controls over information technology, management also used
the set of practices of Control Objectives for Information and related
Technology created by the IT Governance Institute.
During the year, Wajax’s management, under the supervision of its
CEO and CFO, evaluated the effectiveness and operation of its DC&P
and ICFR. This evaluation included a risk evaluation, documentation
of key processes and tests of effectiveness conducted on a sample
basis throughout the year. Due to the inherent limitations in all
control systems, an evaluation of the DC&P and ICFR can only provide
reasonable assurance over the effectiveness of the controls. As a
result, DC&P and ICFR are not expected to prevent and detect all
misstatements due to error or fraud. The CEO and CFO have concluded
that Wajax’s DC&P and ICFR were effective as at December 31, 2024.
Non‑GAAP and Other Financial Measures
The MD&A contains certain non‑GAAP and other financial measures
that do not have a standardized meaning prescribed by GAAP. Therefore,
these financial measures may not be comparable to similar measures
presented by other issuers. Investors are cautioned that these
measures should not be construed as an alternative to net earnings
or to cash flow from operating, investing, and financing activities
determined in accordance with GAAP as indicators of the Corporation’s
performance. The Corporation’s management believes that:
(i)
these measures are commonly reported and widely used by
investors and management;
(ii)
the non‑GAAP measures are commonly used as an indicator of a
company’s cash operating performance, profitability and ability to
raise and service debt;
(iii) “Adjusted net earnings”, “Adjusted basic earnings per share”
and “Adjusted diluted earnings per share” provide indications
of the results by the Corporation’s principal business activities
prior to recognizing non‑recurring costs (recoveries) and non‑cash
losses (gains) on mark to market of derivative instruments.
These adjustments to net earnings and basic and diluted
earnings per share allow the Corporation’s management to
consistently compare periods by removing infrequent charges
incurred outside of the Corporation’s principal business activities
and the impact of unrealized losses (gains) resulting from
fluctuations in interest rates and the Corporation’s share price;
(iv) “Adjusted EBITDA” provides an indication of the results by the
Corporation’s principal business activities prior to recognizing
non‑recurring costs (recoveries) and non‑cash losses (gains) on
mark to market of derivative instruments. These adjustments to
net earnings allow the Corporation’s management to consistently
compare periods by removing infrequent charges incurred outside
of the Corporation’s principal business activities, the impact of
unrealized losses (gains) resulting from fluctuations in interest
rates and the Corporation’s share price, the impact of fluctuations
in finance costs related to the Corporation’s capital structure,
the impact of tax rates, and the impact of depreciation and
amortization of long‑term assets; and
(v)
“Pro‑forma adjusted EBITDA” provides the same utility as
Adjusted EBITDA described above, however pursuant to the terms
of the bank credit facility, is adjusted for the EBITDA of business
acquisitions made during the period as if they were made at the
beginning of the trailing 12‑month period, and for the deduction of
payments of lease liabilities. Pro‑forma adjusted EBITDA is used in
calculating the Leverage ratio and Senior secured leverage ratio.
Non‑GAAP financial measures are identified and defined below:
Funded net debt
Funded net debt includes bank indebtedness,
debentures and total long-term debt, net of cash.
Funded net debt is relevant in calculating the
Corporation’s funded net debt to total capital,
which is a non-GAAP ratio commonly used as
an indicator of a company’s ability to raise and
service debt.
Debt
Debt is funded net debt plus letters of credit.
Debt is relevant in calculating the Corporation’s
leverage ratio, which is a non-GAAP ratio
commonly used as an indicator of a company’s
ability to raise and service debt.
Total capital
Total capital is shareholders’ equity plus funded
net debt.
EBITDA
Net earnings (loss) before finance costs, income
tax expense, depreciation and amortization.
Adjusted net
earnings (loss)
Net earnings (loss) before any facility closure,
restructuring, and other related costs, gains/
losses recorded on sale of properties, non-cash
gains/losses on mark to market of derivative
instruments, and change in fair value of
contingent consideration.
Adjusted basic
earnings (loss) per
share and adjusted
diluted earnings
(loss) per share
Basic and diluted earnings (loss) per share
before any facility closure, restructuring, and
other related costs, gains/losses recorded on
sale of properties, non-cash gains/losses on
mark to market of derivative instruments, and
change in fair value of contingent consideration.
Adjusted EBIT
EBIT before any facility closure, restructuring,
and other related costs, gains/losses recorded
on sale of properties, non-cash gains/losses on
mark to market of derivative instruments, and
change in fair value of contingent consideration.
Wajax 2024 Annual Report 31
Management’s Discussion and Analysis
Adjusted EBITDA
EBITDA before any facility closure, restructuring,
and other related costs, gains/losses recorded
on sale of properties, non-cash gains/losses on
mark to market of derivative instruments, and
change in fair value of contingent consideration.
Pro-forma adjusted
EBITDA
Defined as adjusted EBITDA adjusted for the
EBITDA of business acquisitions made during
the period as if they were made at the beginning
of the trailing 12-month period pursuant to
the terms of the bank credit facility and the
deduction of payments of lease liabilities. Pro-
forma adjusted EBITDA is used in calculating the
Leverage ratio and Senior secured leverage ratio.
Working capital
Defined as current assets less current liabilities,
as presented in the consolidated statements of
financial position.
Other working
capital amounts
Defined as working capital less trade and other
receivables and inventory plus accounts payable
and accrued liabilities and the current portion
of debentures, as presented in the consolidated
statements of financial position.
Non‑GAAP ratios are identified and defined below:
Adjusted EBIT
margin
Defined as adjusted EBIT (defined above) divided
by revenue, as presented in the consolidated
statements of earnings.
EBITDA margin
Defined as EBITDA (defined above) divided
by revenue, as presented in the consolidated
statements of earnings.
Adjusted EBITDA
margin
Defined as adjusted EBITDA (defined above)
divided by revenue, as presented in the
consolidated statements of earnings.
Leverage ratio
The leverage ratio is defined as debt (defined
above) at the end of a particular quarter divided
by trailing 12-month pro-forma adjusted EBITDA
(defined above). The Corporation’s objective is
to maintain this ratio between 1.5 times and
2.0 times.
Senior secured
leverage ratio
The senior secured leverage ratio is defined
as debt (defined above) excluding debentures
at the end of a particular quarter divided by
trailing 12-month pro-forma adjusted EBITDA
(defined above).
Funded net debt to
total capital
Defined as funded net debt (defined above)
divided by total capital (defined above).
Working capital
efficiency
Defined as trailing four-quarter average working
capital (defined above) as a percentage of the
trailing 12-month revenue.
Supplementary financial measures are identified and defined below:
EBIT margin
Defined as EBIT divided by revenue, as presented
in the consolidated statements of earnings.
Backlog
Backlog is a management measure which
includes the total sales value of customer
purchase commitments for future delivery or
commissioning of equipment, parts and related
services, including ERS projects. There is no
directly comparable GAAP financial measure
for Backlog.
Gross profit margin
Defined as gross profit divided by revenue,
as presented in the consolidated statements
of earnings.
Selling and
administrative
expenses as a
percentage of
revenue
Defined as selling and administrative expenses
divided by revenue, as presented in the
consolidated statements of earnings.
Reconciliation of the Corporation’s net earnings to adjusted net
earnings, adjusted basic earnings per share and adjusted diluted
earnings per share is as follows:
Three months ended
Year ended
December 31
December 31
2024
2023
2024
2023
Net earnings
$
1.0 $
11.1
$
42.8 $
81.0
Facility closure,
restructuring, and
other related costs,
after tax
4.3
1.4
4.3
1.4
Gain recorded on the
sale of properties,
after tax
—
—
—
(0.1)
Non‑cash losses on
mark to market
of derivative
instruments,
after tax
—
5.0
3.6
0.9
Change in fair value
of contingent
consideration,
after tax
2.3
0.2
2.3
0.2
Adjusted net earnings $
7.5 $
17.8
$
52.9 $
83.5
Adjusted basic
earnings
per share(1)
$
0.35 $
0.83
$
2.44 $
3.88
Adjusted diluted
earnings
per share(1)
$
0.34 $
0.80
$
2.38 $
3.75
(1) At December 31, 2024, the number of weighted average basic and diluted shares outstanding
were 21,774,451 and 22,210,260, respectively for the three months ended, and 21,719,568
and 22,188,628, respectively for the year ended.
At December 31, 2023, the number of weighted average basic and diluted shares outstanding
were 21,570,005 and 22,319,062, respectively for the three months ended, and 21,509,250
and 22,271,628, respectively for the year ended.
32 Wajax 2024 Annual Report
Management’s Discussion and Analysis
Calculation of the Corporation’s funded net debt, debt, leverage ratio
and senior secured leverage ratio is as follows:
December 31
2024
2023
(Cash) bank indebtedness
$
(7.4) $
1.4
Debentures
57.0
56.3
Long‑term debt
283.0
267.8
Funded net debt
$
332.7 $
325.5
Letters of credit
3.7
4.8
Debt
$
336.3 $
330.3
Pro‑forma adjusted EBITDA(1)
$
128.7 $
166.7
Leverage ratio(2)
2.61
1.98
Senior secured leverage ratio(3)
2.17
1.64
(1) For the year ended December 31, 2024 and December 31, 2023.
(2) Calculation uses debt divided by the trailing four‑quarter Pro‑forma adjusted EBITDA. This
leverage ratio is calculated for purposes of monitoring against the Corporation’s target leverage
ratio of between 1.5 times and 2.0 times, and is different from the leverage ratio calculated
under the Corporation’s bank credit facility agreement.
(3) Calculation uses debt excluding debentures divided by the trailing four‑quarter Pro‑forma
adjusted EBITDA. While the calculation contains some differences from the leverage ratio
calculated under the Corporation’s bank credit facility agreement, the resulting leverage ratio
under the bank credit facility agreement is not significantly different. See the Liquidity and
Capital Resources section.
Calculation of total capital and funded net debt to total capital is
as follows:
December 31
2024
2023
Shareholders’ equity
$
512.3 $
496.2
Funded net debt
332.7
325.5
Total capital
$
844.9 $
821.7
Funded net debt to total capital
39.4%
39.6%
Calculation of the Corporation’s working capital and other working
capital amounts is as follows:
December 31
2024
2023
Total current assets
$
1,090.7 $
1,043.6
Total current liabilities
558.3
483.4
Working capital
$
532.4 $
560.2
Trade and other receivables
(303.5)
(309.1)
Inventory
(673.1)
(630.9)
Debentures – current
57.0
—
Accounts payable and accrued liabilities
417.8
407.1
Other working capital amounts
$
30.6 $
27.3
Reconciliation of the Corporation’s EBIT to EBITDA, Adjusted EBIT,
Adjusted EBITDA and Pro‑forma adjusted EBITDA is as follows:
Three months ended
Year ended
December 31
December 31
2024
2023
2024
2023
EBIT
$
11.1 $
28.1
$
96.5 $ 136.7
Depreciation and
amortization
15.8
15.5
62.2
58.6
EBITDA
$
27.0 $
43.6
$ 158.7 $ 195.3
EBIT
$
11.1 $
28.1
$
96.5 $ 136.7
Facility closure,
restructuring, and
other related costs(1)
5.8
1.9
5.8
1.9
Gain recorded on the
sale of properties
—
—
—
(0.1)
Non‑cash losses on
mark to market
of derivative
instruments,
excluding interest
rate swaps(2)
0.1
1.3
1.3
—
Change in fair value
of contingent
consideration(3)
2.3
0.3
2.3
0.3
Adjusted EBIT
$
19.3 $
31.7
$ 105.8 $ 138.9
Depreciation and
amortization
15.8
15.5
62.2
58.6
Adjusted EBITDA
$
35.1 $
47.2
$ 168.0 $ 197.4
Payment of
lease liabilities(4)
(39.2)
(35.5)
Polyphase acquisition
pro‑forma EBITDA(5)
—
3.2
Beta acquisition
pro‑forma EBITDA(5)
—
1.4
Pro‑forma adjusted
EBITDA
$ 128.7 $ 166.7
(1) For 2024, facility closure, restructuring, and other related costs consists of costs relating
to workforce reductions in response to market conditions, incurred during the fourth quarter
of 2024.
For 2023, facility closure, restructuring, and other related costs consists of costs accrued for a
branch closure during the fourth quarter of 2023, including workforce reduction and remaining
facility costs.
(2) Non‑cash losses (gains) on mark to market of derivative instruments that are not effectively
designated as hedging instruments under IFRS, excluding interest rate swaps as their fair
value fluctuations impact finance costs.
(3) The change in fair value of contingent consideration relates to changes in the estimated fair
value of future performance‑based earnout payments relating to business acquisitions.
(4) Effective with the reporting period beginning on January 1, 2019 and the adoption of IFRS 16,
the Corporation amended the definition of Funded net debt to exclude lease liabilities not
considered part of debt. As a result, the corresponding lease costs must also be deducted
from EBITDA for the purpose of calculating the leverage ratio.
(5) Pro‑forma EBITDA for business acquisitions made during the period as if they were made at the
beginning of the trailing 12‑month period pursuant to the terms of the bank credit facility, for
the purpose of calculating the leverage ratio.
Wajax 2024 Annual Report 33
Management’s Discussion and Analysis
Cautionary Statement Regarding
Forward‑Looking Information
This MD&A and Annual Report contain certain forward-looking
statements and forward-looking information, as defined in applicable
securities laws (collectively, “forward-looking statements”). These
forward-looking statements relate to future events or the Corporation’s
future performance. All statements other than statements of historical
fact are forward-looking statements. Often, but not always, forward
looking statements can be identified by the use of words such as
“plans”, “anticipates”, “intends”, “predicts”, “expects”, “is expected”,
“scheduled”, “believes”, “estimates”, “projects” or “forecasts”, or
variations of, or the negatives of, such words and phrases, or state that
certain actions, events or results “may”, “could”, “would”, “should”,
“might” or “will” be taken, occur or be achieved. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors beyond the Corporation’s ability to predict or control which may
cause actual results, performance and achievements to differ materially
from those anticipated or implied in such forward-looking statements.
To the extent any forward-looking information in this MD&A and Annual
Report constitutes future-oriented financial information or financial
outlook within the meaning of applicable securities law, such
information is being provided to demonstrate the potential of the
Corporation and readers are cautioned that this information may not be
appropriate for any other purpose. There can be no assurance that any
forward-looking statement will materialize. Accordingly, readers should
not place undue reliance on forward-looking statements. The forward-
looking statements in this MD&A and Annual Report are made as of the
date of this MD&A and Annual Report, reflect management’s current
beliefs and are based on information currently available to
management. Although management believes that the expectations
represented in such forward-looking statements are reasonable, there is
no assurance that such expectations will prove to be correct.
Specifically, this MD&A and Annual Report include forward-looking
statements regarding, among other things: our focus on managing
expenses and inventory; our belief that strong cashflow generation in
2024 and our robust backlog position us well for 2025; our belief that
we maintained strong fundamentals in 2024 which position us for
long-term success, and our confidence in the future; our pursuit of
additional ways to enhance our efficiency while maintaining the highest
level of service to our customers; our confidence that we will evolve and
strengthen our business, execute our strategic priorities and continue to
create value for all stakeholders; our commitment to fostering a culture
of empowerment, accountability and continuous development; our belief
that our initiatives around the safety, well-being and engagement of our
teammates strengthen our ability to attract, develop and retain top
talent, and our continuing dedication to investing in our most important
asset – people; our plans to drive further improvements in parts and
service through multiple margin enhancement initiatives, and our belief
that a continued focus on efficiency, reliability and customer satisfaction
positions us well to improve our results over time; our expectation that
the Zaxis financing program will drive further momentum by making it
easier for customers to invest in high-quality Hitachi excavator and
wheel loaders; our belief that by continuing to strengthen our
relationship with Hitachi, we are well-positioned to seize new
opportunities in the construction and mining sectors while delivering
even greater value to our customers; our plans to fully integrate
previously acquired IP and ERS business during 2025, and to maintain
a disciplined approach to future acquisition opportunities; our focus on
reducing our inventory, improving our margins and lowering our costs,
and our belief that initiatives related to these priorities will be essential
as we continue to navigate an uncertain economic environment; our
intention to build on our strong financial foundation; our belief that our
new ERP system will be a key enabler as we continue to streamline our
operations, standardize processes and enhance reporting capabilities
across our business, and that it will support enhanced resilience in our
business, allow for greater efficiency, improved decision-making and
enhanced agility; our focus in 2025 on strengthening our financial
performance, reducing inventory and leverage, improving cost efficiency
and further integrating our acquisitions; the role of our corporate
purpose and core values in shaping our decisions, driving us forward
and defining how we work together to achieve success; our belief that,
by carefully managing costs and inventory, driving additional operational
efficiency initiatives, enhancing capital allocation and supporting the
progress we made in cash flow generation during 2024, we can
continue to strengthen our balance sheet and build upon our disciplined
approach to financial risk management; our anticipation of continued
strong demand for reliable mining equipment; our belief that the
increasingly proprietary Hitachi Zaxis-7 series of excavators and wheel
loaders will help drive sales and service over the mid-term; our belief
that our focus on equipment solutions and training for increasingly
in-demand applications will provide additional opportunities for growth;
our belief that our coast-to-coast branch network positions us well serve
a diverse range of sectors across Canada and act as strategic partners
to our customers; our dedication to driving long-term growth in our IP
and ERS business; our continued focus on fulfilling our people-first
ambition and commitment to sustainability; prioritizing investments to
ensure stronger alignment between our operational requirements and
the needs of our people, including leadership development and
technical training, supported by a very competitive total rewards
programs, and our belief they will help drive improved business
performance and increased employee satisfaction; our implementation
of robust plans to meaningfully and sustainably enhance efficiency and
operational leverage, and our belief that such initiatives further enhance
Wajax’s strength, competitiveness, efficiency, operational leverage and
agility, and will better position the corporation for long-term success; our
focus on six strategic priorities for 2025: continuing to build a people-
first company, growing our existing business with a focus on parts,
service and margin improvement, unlocking the potential of our
enhanced direct relationship with Hitachi, acquiring and integrating
industrial parts and ERS businesses, improving our cost structure and
processes, and continuing our ERP system roll-out and additional
technology improvements, as well as the initiatives and goals
associated with such strategic priorities; our plans to improve our mix
and margin profile over time and to invest in tools, training and support
to allow our people to deliver value-added services to our customers;
our plans in 2025 to fully integrate our prior acquisitions so that we may
realize additional synergies, and to maintain a disciplined approach to
future opportunities; the continued development of our environmental,
social and governance programs; our expectation that we will deliver
seven large mining shovels over the next nine quarters; our outlook for
the first half of 2025, including our expectation of strong customer
demand in the mining and energy sectors, headwinds related to softer
market conditions in the broader market and uncertainty surrounding
potential tariffs and counter-tariffs on Canada-U.S. trade, and additional
headwinds should such tariffs materialize; management’s commitment
to executing our six strategic priorities and our belief that such priorities
will continue to support and position our business for future success;
our additional focus on the execution of initiatives to reduce inventory,
improve margins and lower costs; our objective of managing our working
capital and normal-course capital investment programs within a leverage
range of 1.5 – 2.0 times, and to fund such programs through operating
cash flow and our bank credit facilities as required; instances whereby
we may be willing to maintain a leverage ratio outside our target range
due to changes in economic cycles, and above this range as a result of
investments in acquisitions, and that we may fund those acquisitions
using our bank credit facilities and other debt instruments in
accordance with our expectations of total future cash flows financing
costs and other factors; our expectation that a change in interest rates
(in particular, related to unhedged variable rate debt), would not have a
material impact on our results of operations or financial condition over
the long term; our expectation that a change in foreign currency value
relative to the Canadian dollar, on transactions with customers that
include unhedged foreign currency exposures, would not have a material
impact on our results of operations or financial condition over the longer
term; our expectation that the impact of a change in our share price on
cash-settled MTIP awards would not have a material impact on our
results of operations or financial condition over the longer term; our
belief that there is no significant risk of non-performance by
34 Wajax 2024 Annual Report
Management’s Discussion and Analysis
The consolidated financial statements of Wajax Corporation are
the responsibility of management and have been prepared in
accordance with International Financial Reporting Standards. Where
appropriate, the information reflects management’s judgement and
estimates based on the available information. Management is also
responsible for all other information in the Annual Report and for
ensuring that this information is consistent with the consolidated
financial statements.
Wajax maintains a system of internal control designed to provide
financial information and the safeguarding of its assets. Wajax also
maintains an internal audit function, which reviews the system of
internal control and its application.
The Audit Committee of the Board, consisting solely of outside
directors, meets regularly during the year with management, internal
auditors and the external auditors, to review their respective activities
and the discharge of their responsibilities.
Both the external and internal auditors have free and independent
access to the Audit Committee to discuss the scope of their
audits, the adequacy of the system of internal control and the
adequacy of financial reporting. The Audit Committee reports its
findings to the Board, which reviews and approves the consolidated
financial statements.
Wajax’s external auditors, KPMG LLP, are responsible for auditing the
consolidated financial statements and expressing an opinion thereon.
Ignacy (Iggy) Domagalski
Tania S. Casadinho
President and
Chief Financial Officer
Chief Executive Officer
Mississauga, Canada, March 4, 2025
M A N A G E M E N T ’ S R E S P O N S I B I L I T Y
F O R F I N A N C I A L R E P O R T I N G
counterparties to our foreign exchange forward contracts; our belief that
we maintain sufficient liquidity to meet short-term normal course
working capital and maintenance capital requirements and fund certain
strategic investments, as well as the potential we may be required to
access the equity or debt capital markets or reduce dividends to fund
significant acquisitions and/or growth related working capital and
capital expenditures; our development of action plans to navigate the
potential impacts of trade tariffs over the short and longer term; our
belief that we have a robust strategy and our confidence in our growth
prospects, strengthened by the enhanced earnings potential of our “One
Wajax” business model and our relationships with our customers and
vendors; our belief we have appropriate inventory management systems
in place; and our belief our labour relations are satisfactory and that we
will be able to renew our collective bargaining agreements. These
statements are based on a number of assumptions which may prove to
be incorrect, including, but not limited to, assumptions regarding: the
absence of significant negative changes to general business and
economic conditions; our ability to manage our business through the
imposition of new or changing trade tariffs; limited negative fluctuations
in the supply and demand for, and the level and volatility of prices for,
oil, natural gas and other commodities; the stability of financial market
conditions, including interest rates; the ability of Hitachi and Wajax to
develop and execute successful sales, marketing and other plans
related to the enhanced direct distribution relationship which took effect
on March 1, 2022; our continued ability to execute our strategic
priorities, including our ability to execute on our organic growth
priorities, complete and effectively integrate industrial parts and ERS
acquisitions, and successfully implement new information technology
platforms, systems and software, such as our new ERP system; the
future financial performance of the Corporation; limited fluctuations in
our costs; the level of market competition; our continued ability to
attract and retain skilled staff; our continued ability to procure quality
products and inventory; and our ongoing maintenance of strong
relationships with suppliers, employees and customers. The foregoing
list of assumptions is not exhaustive. Factors that may cause actual
results to vary materially include, but are not limited to: a continued or
prolonged deterioration in general business and economic conditions;
new tariffs and counter-tariffs imposed on cross-border trade,
particularly between Canada and the U.S.; negative fluctuations in the
supply and demand for, and the level of prices for, oil, natural gas and
other commodities; a continued or prolonged decrease in the price of oil
or natural gas; the inability of Hitachi and Wajax to develop and execute
successful sales, marketing and other plans related to the enhanced
direct distribution relationship which took effect on March 1, 2022; a
decrease in levels of customer confidence and spending; supply chain
disruptions and shortages; fluctuations in financial market conditions,
including interest rates; the level of demand for, and prices of, the
products and services we offer; decreased market acceptance of the
products we offer; the termination of distribution or original equipment
manufacturer agreements; unanticipated operational difficulties
(including failure of plant, equipment or processes to operate in
accordance with specifications or expectations, cost escalation, our
inability to reduce costs in response to slow-downs in market activity,
unavailability of quality products or inventory, supply disruptions, job
action and unanticipated events related to health, safety and
environmental matters); our inability to attract and retain skilled staff
and our inability to maintain strong relationships with our suppliers,
employees and customers. The foregoing list of factors is
not exhaustive.
Further information concerning the risks and uncertainties associated
with these forward-looking statements and the Corporation’s business
may be found in this MD&A under the heading “Risk Management
and Uncertainties”. The forward-looking statements contained in this
MD&A and Annual Report are expressly qualified in their entirety by
this cautionary statement. The Corporation does not undertake any
obligation to publicly update such forward-looking statements to reflect
new information, subsequent events or otherwise unless so required by
applicable securities laws.
Readers are cautioned that the risks described in this MD&A are
not the only risks that could impact the Corporation. Risks and
uncertainties not currently known to the Corporation, or currently
deemed to be immaterial, may have a material effect on the
Corporation’s business, financial condition or results of operations.
Wajax 2024 Annual Report 35
Evaluation of equipment inventory obsolescence
Description of the matter
We draw attention to Notes 2 and 8 to the financial statements. As at
December 31, 2024, the Entity had an equipment inventory balance of
$377,205 thousand and a total inventory obsolescence provision of
$30,814 thousand, a portion of which related to equipment inventory.
The value of the Entity’s new and used equipment is evaluated by the
Entity throughout the year, on a unit-by-unit basis considering projected
customer demand, future market conditions, and other considerations
evaluated by management. Specifically, equipment inventory greater
than one year carries a higher risk of obsolescence. When required,
provisions are recorded to adjust the value of equipment to the lower of
cost and estimated net realizable value.
Why the matter is a key audit matter
We identified the evaluation of equipment inventory obsolescence as
a key audit matter. We identified this as a key audit matter because
significant auditor judgment was required in evaluating the results of our
audit procedures regarding the Entity’s determination of net realizable
value for equipment aged greater than one year.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter
included the following:
For a selection of equipment inventory aged greater than one year,
we assessed the estimated net realizable value of the units by
comparing the carrying amounts to the most recent sales invoices of
the same or similar equipment
For a selection of equipment inventory aged greater than one year
without recent sales invoices, we analyzed the Entity’s estimate of
net realizable value by taking into consideration the length of time the
inventory had not been sold, market conditions and other factors
We evaluated the Entity’s estimate of the inventory obsolescence
provision by comparing the prior year provision to actual results in the
current year, both on an aggregate basis and for a selection of the
equipment inventory.
Other Information
Management is responsible for the other information. Other
information comprises:
the information included in Management’s Discussion and Analysis
filed with the relevant Canadian Securities Commissions.
the information, other than the financial statements and the auditor’s
report thereon, included in a document likely to be entitled “Wajax
2024 Annual Report”.
Our opinion on the financial statements does not cover the other
information and we do not and will not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained
in the audit and remain alert for indications that the other information
appears to be materially misstated.
To the Shareholders of Wajax Corporation
Opinion
We have audited the consolidated financial statements of Wajax
Corporation (the “Entity”), which comprise:
the consolidated statements of financial position as at
December 31, 2024 and December 31, 2023
the consolidated statements of earnings for the years then ended
the consolidated statements of comprehensive income for the years
then ended
the consolidated statements of changes in shareholders’ equity for
the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a
summary of material accounting policy information
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in
all material respects, the consolidated financial position of the Entity as
at December 31,2024 and December 31, 2023, and its consolidated
financial performance and its consolidated cash flows for the years then
ended in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board.
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
Financial Statements” section of our auditor’s report.
We are independent of the Entity in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in Canada and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the financial statements for the
year ended December 31, 2024.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit
matters to be communicated in our auditor’s report.
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
36 Wajax 2024 Annual Report
We obtained the information included in Management’s Discussion
and Analysis filed with the relevant Canadian Securities Commissions
as at the date of this auditor’s report. If, based on the work we have
performed on this other information, we conclude that there is a
material misstatement of this other information, we are required to
report that fact in the auditor’s report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s
report thereon, included in a document likely to be entitled “Wajax 2024
Annual Report” is expected to be made available to us after the date of
this auditor’s report. If, based on the work we will perform on this other
information, we conclude that there is a material misstatement of this
other information, we are required to report that fact to those charged
with governance.
Responsibilities of Management and Those Charged
with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation
of the financial statements in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board,
and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for
assessing the Entity’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 Entity or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the
Entity’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian
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 the 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
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 Entity’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 Entity’s ability
to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or,
if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date
of our auditor’s report. However, future events or conditions may
cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
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.
Provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
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 group financial statements. We are responsible for the direction,
supervision and review of the audit work performed for the purposes
of the group audit. We remain solely responsible for our audit opinion.
Determine, from the matters communicated with those charged with
governance, those matters that were of most significance in the audit
of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our auditor’s report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditor’s report is
W. G. Andrew Smith.
Vaughan, Canada
March 4, 2025
Wajax 2024 Annual Report 37
Consolidated Financial Statements
C O N S O L I D AT E D S TAT E M E N T S
O F F I N A N C I A L P O S I T I O N
December 31
As at (in thousands of Canadian dollars)
Note
2024
2023
Assets
Current
Cash
$
7,351
$
—
Trade and other receivables
6
303,537
309,079
Contract assets
7
55,588
69,520
Inventory
8
673,076
630,931
Deposits on inventory
13,411
8,643
Lease receivables – current
14
9,062
5,896
Income taxes receivable
3,563
—
Prepaid expenses
15,321
13,912
Derivative financial assets – current
18
9,773
5,632
Total current assets
1,090,682
1,043,613
Non-Current
Rental equipment
9
50,044
42,490
Property, plant and equipment
9
45,669
44,829
Right-of-use assets
10
158,473
135,832
Lease receivables
14
17,538
10,601
Goodwill and intangible assets
11
183,520
190,276
Derivative financial assets
18
1,698
5,676
Total non-current assets
456,942
429,704
Total assets
$
1,547,624
$
1,473,317
Liabilities And Shareholders’ Equity
Current
Bank indebtedness
$
—
$
1,397
Accounts payable and accrued liabilities
12
417,834
407,090
Provisions – current
13
7,172
2,727
Contract liabilities
7
23,182
21,891
Dividends payable
19
7,629
7,151
Income taxes payable
—
4,631
Lease liabilities – current
14
40,151
34,407
Debentures – current
16
56,973
—
Derivative financial liabilities – current
18
5,313
4,081
Total current liabilities
558,254
483,375
Non-Current
Provisions
13
—
76
Deferred tax liabilities
25
8,999
10,328
Employee benefits
15
6,526
7,024
Derivative financial liabilities
18
3,585
1,521
Lease liabilities
14
168,031
140,967
Debentures
16
—
56,340
Long-term debt
17
283,042
267,755
Other liabilities
6,904
9,694
Total non-current liabilities
477,087
493,705
Total liabilities
1,035,341
977,080
Shareholders’ Equity
Share capital
19
211,453
210,004
Contributed surplus
7,511
7,563
Retained earnings
289,993
278,100
Accumulated other comprehensive income
3,326
570
Total shareholders’ equity
512,283
496,237
Total liabilities and shareholders’ equity
$
1,547,624
$
1,473,317
Subsequent events (Notes 15, 16, 18 and 31)
See accompanying notes to consolidated financial statements.
38 Wajax 2024 Annual Report
Consolidated Financial Statements
C O N S O L I D AT E D S TAT E M E N T S O F
C O M P R E H E N S I V E I N C O M E
C O N S O L I D AT E D S TAT E M E N T S
O F E A R N I N G S
For the years ended December 31 (in thousands of Canadian dollars, except per share data)
Note
2024
2023
Revenue
21
$
2,097,595
$
2,154,678
Cost of sales
1,683,811
1,704,044
Gross profit
413,784
450,634
Selling and administrative expenses
311,523
313,886
Restructuring and other related costs
13, 23
5,766
—
Earnings before finance costs and income taxes
96,495
136,748
Finance costs
24
38,182
27,104
Earnings before income taxes
58,313
109,644
Income tax expense
25
15,520
28,654
Net earnings
$
42,793
$
80,990
Basic earnings per share
19
$
1.97
$
3.77
Diluted earnings per share
19
$
1.93
$
3.64
For the years ended December 31 (in thousands of Canadian dollars)
Note
2024
2023
Net earnings
$
42,793
$
80,990
Items that will not be reclassified to earnings
Actuarial gain (loss) on pension plans, net of tax expense of $8 (2023 – recovery of $115)
15
22
(321)
Items that may be subsequently reclassified to earnings
Unrealized gain (loss) on derivatives designated as cash flow hedges,
net of tax expense of $950 (2023 – recovery of $821)
2,662
(2,301)
Reclassification of realized loss (gain) on derivatives designated as cash flow hedges
to net earnings during period, net of tax recovery of $34 (2023 – expense of $798)
94
(2,236)
Other comprehensive income (loss), net of tax
2,778
(4,858)
Total comprehensive income
$
45,571
$
76,132
See accompanying notes to consolidated financial statements.
Wajax 2024 Annual Report 39
Consolidated Financial Statements
C O N S O L I D AT E D S TAT E M E N T S O F
C H A N G E S I N S H A R E H O L D E R S ’ E Q U I T Y
Accumulated
other
comprehensive
income (loss)
Share
Contributed
Retained
Cash flow
For the year ended December 31, 2024 (in thousands of Canadian dollars)
Note
capital
surplus
earnings
hedges
Total
December 31, 2023
$ 210,004 $
7,563 $ 278,100 $
570 $ 496,237
Net earnings
—
—
42,793
—
42,793
Other comprehensive income
—
—
22
2,756
2,778
Total comprehensive income
—
—
42,815
2,756
45,571
Shares issued to settle share-based compensation awards
19
1,189
(1,189)
—
—
—
Shares released from trust to settle
share-based compensation awards
19, 20
545
(2,160)
(508)
—
(2,123)
Excess tax benefit on share-based compensation
—
—
712
—
712
Purchased for future settlement of certain
share-based compensation awards
19
(285)
—
(695)
—
(980)
Share-based compensation expense
20
—
3,297
—
—
3,297
Dividends declared
19
—
—
(30,431)
—
(30,431)
December 31, 2024
$ 211,453 $
7,511 $ 289,993 $
3,326 $ 512,283
Accumulated
other
comprehensive
income (loss)
Share
Contributed
Retained
Cash flow
For the year ended December 31, 2023 (in thousands of Canadian dollars)
Note
capital
surplus
earnings
hedges
Total
December 31, 2022
$ 207,555 $
8,963 $ 228,145 $
5,107 $ 449,770
Net earnings
—
—
80,990
—
80,990
Other comprehensive loss
—
—
(321)
(4,537)
(4,858)
Total comprehensive income
—
—
80,669
(4,537)
76,132
Shares issued to settle share-based compensation awards
19
2,574
(2,574)
—
—
—
Shares released from trust to settle
share-based compensation awards
19, 20
680
(1,635)
(1,074)
—
(2,029)
Purchased for future settlement of certain
share-based compensation awards
19
(805)
—
(1,195)
—
(2,000)
Share-based compensation expense
20
—
2,809
—
—
2,809
Dividends declared
19
—
—
(28,445)
—
(28,445)
December 31, 2023
$ 210,004 $
7,563 $ 278,100 $
570 $ 496,237
See accompanying notes to consolidated financial statements.
40 Wajax 2024 Annual Report
Consolidated Financial Statements
C O N S O L I D AT E D S TAT E M E N T S
O F C A S H F L O W S
For the years ended December 31 (in thousands of Canadian dollars)
Note
2024
2023
Operating Activities
Net earnings
$
42,793
$
80,990
Items not affecting cash flow:
Depreciation and amortization:
Rental equipment
9
13,721
14,304
Property, plant and equipment
9
8,825
8,271
Right-of-use assets
10
32,592
29,548
Intangible assets
11
7,032
6,448
Loss (gain) on disposal of property, plant & equipment
150
(198)
Gain on disposal of right-of-use assets
(68)
(29)
Share-based compensation expense
20
6,833
9,448
Change in fair value of contingent consideration
18
2,263
330
Non-cash income from finance leases
(2,531)
(600)
Employee benefits expense, net of employer contributions
(468)
(67)
Loss (gain) on foreign exchange forwards and total return swaps
18
1,408
(2,876)
Finance costs
24
38,182
27,104
Income tax expense
25
15,520
28,654
166,252
201,327
Changes in non-cash operating working capital
26
(12,672)
(197,023)
Rental equipment additions
9
(25,402)
(20,936)
Other non-current liabilities
(2,202)
(179)
Cash received on settlement of total return swaps
18
1,896
1,396
Finance costs paid on debts
(23,045)
(16,155)
Finance costs paid on lease liabilities
14, 24
(10,580)
(8,871)
Interest collected on lease receivables
24
1,031
630
Income taxes paid
(25,323)
(49,194)
Cash generated from (used in) operating activities
69,955
(89,005)
Investing Activities
Property, plant and equipment additions
9
(8,874)
(8,970)
Proceeds on disposal of property, plant and equipment
528
1,104
Intangible asset additions
11
(271)
(876)
Collection of lease receivables
7,861
5,242
Business acquisitions, net of cash acquired
912
(21,000)
Cash generated from (used in) investing activities
156
(24,500)
Financing Activities
Net increase in bank debt
17
15,188
183,606
Purchase of shares held in trust
(980)
(2,000)
Transaction costs on debts
17
(472)
—
Payment of lease liabilities
14
(39,230)
(35,450)
Payment of contingent consideration
18
(3,793)
(127)
Payment of tax withholding for share-based compensation
(2,123)
(2,029)
Dividends paid
(29,953)
(26,662)
Cash (used in) generated from financing activities
(61,363)
117,338
Change in cash
8,748
3,833
Bank indebtedness – beginning of period
(1,397)
(5,230)
Cash (bank indebtedness) – end of period
$
7,351
$
(1,397)
See accompanying notes to consolidated financial statements.
Wajax 2024 Annual Report 41
Notes to Consolidated Financial Statements
December 31, 2024 (amounts in thousands of Canadian dollars, except share and per share data)
N O T E S T O C O N S O L I D AT E D
F I N A N C I A L S TAT E M E N T S
1. Company Profile
Wajax Corporation (the “Corporation”) is incorporated in Canada. The
address of the Corporation’s registered head office is 10 Diesel Drive,
Toronto, Ontario, Canada. The Corporation operates an integrated
distribution system, providing sales, parts and services to a broad
range of customers in diversified sectors of the Canadian economy,
including: construction, forestry, mining, industrial and commercial, oil
sands, transportation, metal processing, government and utilities, and
oil and gas.
2. Basis of Preparation
Statement of compliance
These consolidated financial statements have been prepared
in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board (“IASB”).
These consolidated financial statements were authorized for issue by
the Board of Directors on March 4, 2025.
Basis of measurement
These consolidated financial statements have been prepared under
the historical cost basis except for derivative financial instruments,
contingent consideration and share-based payment arrangements
that have been measured at fair value. The defined benefit liability is
recognized as the net total of the fair value of the plan assets and the
present value of the defined benefit obligation.
Functional and presentation currency
These consolidated financial statements are presented in Canadian
dollars, which is the Corporation’s functional currency. All financial
information presented in Canadian dollars has been rounded to the
nearest thousand, unless otherwise stated and except share and per
share data.
Judgements and estimation uncertainty
The preparation of these consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts and disclosures made in these
consolidated financial statements. Actual results could differ from those
judgements, estimates and assumptions. The Corporation bases its
estimates on historical experience and various other assumptions that
are believed to be reasonable in the circumstances.
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of resulting in a
material adjustment to the carrying amount of assets and liabilities
within the next fiscal year are as follows:
Allowance for credit losses
The Corporation is exposed to credit risk with respect to its trade
and other receivables. However, this is partially mitigated by the
Corporation’s diversified customer base who operate in many business
sectors across Canada. In addition, the Corporation’s customer base
spans large public companies, small independent contractors, original
equipment manufacturers and various levels of government. The
Corporation follows a program of credit evaluations of customers and
limits the amount of credit extended when deemed necessary. The
Corporation maintains an allowance for possible credit losses, and any
such losses to date have been within management’s expectations. The
allowance for credit losses is determined by estimating the lifetime
expected credit losses, taking into account the Corporation’s past
experience of collecting payments as well as observable changes in
and forecasts of future economic conditions that correlate with default
on receivables. At the point when the Corporation is satisfied that no
recovery of the amount owing is possible, the amount is considered not
recoverable and the financial asset is written off.
Inventory obsolescence
The value of the Corporation’s new and used equipment and high value
parts is evaluated by management throughout the year, on a unit-by-
unit basis considering projected customer demand, future market
conditions, and other considerations evaluated by management.
Specifically, equipment inventory and high value parts aged greater than
one year carry a higher risk of obsolescence with equipment inventory
generally having higher per-unit costs. When required, provisions are
recorded to ensure that equipment and parts are valued at the lower
of cost and estimated net realizable value. The Corporation performs
an aging analysis to identify slow moving or obsolete lower value
parts inventory and estimates appropriate obsolescence provisions
related thereto. The Corporation takes advantage of supplier programs
that allow for the return of eligible parts for credit within specified
time periods.
Acquisition accounting, goodwill and intangible assets
For acquisition accounting purposes, all identifiable assets and
liabilities acquired in a business acquisition are recognized at fair
value at the date of acquisition. Estimates and assumptions are used
to calculate the fair value of these assets and liabilities. Changes
to assumptions could significantly impact the fair values of certain
assets, such as intangible assets like customer relationships and
brands. The Corporation’s significant assumptions used in determining
the acquisition date fair value of intangible assets include projected
revenues and cash flows attributable to acquired intangible assets,
customer attrition rates, discount rates, royalty rates, and estimations
of useful life.
Contingent consideration, as part of acquisitions, is valued based on
estimated future performance of the acquired businesses. The valuation
is based on management’s best assessment of the related inputs used
in the valuation models, such as future cash flows, discount rates, and
volatility. Future performance results that differ from management’s
estimates could result in changes to the liabilities, which are recorded
as they arise in net earnings.
For impairment testing purposes, the value in use of goodwill and
intangible assets has been estimated using the forecasts prepared
by management for the next five years. The key assumptions for the
estimate are those regarding revenue growth, earnings before interest,
taxes, depreciation and amortization (“EBITDA”) margin, tax rates,
discount rates and the level of working capital required to support
the business. These estimates are based on past experience and
management’s expectations of future changes in the market and
forecasted growth initiatives.
42 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
Lease term of contracts with renewal options
The lease term is defined as the non-cancellable term of the lease,
including any periods covered by a renewal option to extend the lease if
it is reasonably certain that the renewal option will be exercised, or any
periods covered by an option to terminate the lease, if it is reasonably
certain that the termination option will not be exercised.
Judgement is used when evaluating whether the Corporation is
reasonably certain that the lease renewal option will be exercised,
including examining any factors that may provide an economic
advantage for renewal.
3. Material Accounting Policies
Principles of consolidation
These consolidated financial statements include the accounts of
Wajax Corporation and its subsidiary entities, which are all wholly-
owned. Intercompany balances and transactions are eliminated on
consolidation.
Revenue recognition
Revenue from contracts with customers is recognized for each
performance obligation as control is transferred to the customer.
The following is a description of principal activities from which the
Corporation generates its revenue, and the associated timing of
revenue recognition.
Revenue type
Nature and timing of satisfaction
of performance obligations
Equipment sales
Retail sales
Retail sales include the sale of new and used
equipment. The Corporation recognizes revenue
when control of the equipment passes to the
customer based on shipment terms.
Sales of power
and energy
systems
Sales of complex power and energy systems involve
design, installation, and assembly. As a result
of control transferring over time as the asset is
constructed, revenue is recognized on a percentage
of completion basis proportionate to the work that
has been completed and is based on associated
costs incurred.
Industrial parts
The Corporation recognizes revenue when control
of the parts passes to the customer based on
shipment terms.
Product support
Service
Revenue from sales of parts and labour when
servicing equipment is recognized based on the
extent of progress towards completion of the
performance obligation. The customer controls
the asset as it is being serviced, so revenue is
recognized on a basis proportionate to the service
work that has been performed based on associated
costs incurred. The Corporation’s service
arrangements are generally short-term in nature
with predictable pricing and costs.
Parts
The Corporation recognizes revenue when control
of the parts passes to the customer based on
shipment terms or upon customer pickup.
Engineered
repair services
("ERS")
Revenue from engineered repair services is
recognized based on the extent of progress towards
completion of the performance obligation. Revenue
is recognized on a basis proportionate to the
service work that has been performed based on
associated costs incurred, because it best reflects
the transfer of control of the work-in-progress to
the customer as the asset is being constructed,
repaired, or modified.
Equipment rental
Revenue from equipment rentals where the
Corporation acts as lessor is presented as
equipment rental revenue, and is recognized on a
straight-line basis over the term of the lease.
The transaction price is generally the amount stated in the contract.
Certain contracts are subject to discounts which are estimated and
included in the transaction price. Provisions are made for expected
returns and warranty costs based on historical data.
Business combinations
Business combinations are accounted for using the acquisition method
at the acquisition date, which is the date that control is transferred
to the Corporation. In assessing control, the Corporation takes into
consideration potential voting rights that are currently exercisable.
Goodwill is measured as the excess of the sum of the fair value of the
consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of any previously held equity interest
in the acquiree over the net of the acquisition date fair value of the
identifiable assets acquired and the liabilities assumed. If the excess
is negative, a bargain purchase gain is recognized immediately in
earnings. Transaction costs, other than those associated with the
issuance of debt or equity, are recognized in earnings as incurred.
Any contingent consideration payable is measured at fair value at the
acquisition date. If the contingent consideration is classified as equity,
then it is not re-measured, and settlement is accounted for in equity.
Otherwise, subsequent changes in the fair value of the contingent
consideration are recognized in earnings.
When the initial accounting for a business combination has not been
finalized by the end of the reporting period in which the combination
occurs, the Corporation reports provisional amounts for the items for
which the accounting has not been finalized. These provisional amounts
are adjusted during the measurement period, which does not exceed
one year from the acquisition date, to reflect new information obtained
about facts and circumstances that existed at the acquisition date.
Trade and other receivables
Trade accounts receivable are amounts due from customers for
merchandise sold or services performed in the ordinary course of
business. Other accounts receivable are generally from suppliers for
warranty and rebates. 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 losses. The expense relating
to expected credit losses is included within selling and administrative
expenses in the consolidated statements of earnings.
Contract assets and contract liabilities
Contract assets relate to the Corporation’s rights to consideration
for work completed but not billed at the reporting date, primarily on
product support and ERS revenue. The contract assets are transferred
to receivables when billed upon completion of significant milestones.
Contract liabilities relate to the advance billing or advance consideration
received from customers, primarily on equipment sales, industrial parts
sales, and ERS revenue, for which revenue is recognized when control
transfers to the customer.
Inventory
Inventory is valued at the lower of cost and net realizable value. Cost
is determined using the weighted average method except where the
items are not ordinarily interchangeable, in which case the specific
identification method is used. Cost of equipment and parts includes
purchase cost, conversion cost, if applicable, and the cost incurred
in bringing inventory to its present location and condition. Cost of
Wajax 2024 Annual Report 43
Notes to Consolidated Financial Statements
work‑in‑process and cost of conversion includes cost of direct labour,
direct materials and a portion of direct and indirect overheads, allocated
based on normal capacity. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated costs
to sell.
Rental equipment
Rental equipment is recorded at cost less accumulated depreciation.
Cost includes all expenditures directly attributable to the acquisition of
the asset. Rental equipment is depreciated over its estimated useful
life of 5 years to its estimated residual value on a straight-line basis.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated
depreciation. Cost includes all expenditures directly attributable to the
acquisition of the asset. Assets are depreciated over their estimated
useful lives based on the following methods and annual rates:
Asset
Method
Rate
Buildings
declining balance
5% – 10%
Equipment and vehicles
declining balance
20% – 30%
Computer hardware
straight-line
3 – 5 years
Furniture and fixtures
declining balance
10% – 20%
Leasehold improvements
straight-line
over the
remaining
terms of
the leases
Leases
As a lessee
The Corporation leases properties for its branch network, certain
vehicles, machinery and IT equipment. At the commencement of
the lease, the Corporation recognizes a right-of-use asset and a
corresponding lease liability.
Lease liabilities are initially measured at the present value of the
remaining lease payments discounted using the implicit interest rate in
the lease or, if that rate is not readily determinable, the Corporation’s
incremental borrowing rate. Lease payments over the estimated lease
term included in the measurement of the lease liability comprise of:
fixed payments, adjusted for any lease incentives receivable, variable
payments that are based on an index or a rate, amounts expected to
be payable under residual value guarantees, the exercise price of a
purchase option if the lessee is reasonably certain to exercise that
option, and payments of penalties for early termination of a lease
unless the Corporation is reasonably certain not to terminate early.
Not included in the balance of lease liabilities are short-term leases
(defined as leases with a lease term of 12 months or less), leases of
low-value assets and variable lease payments not linked to an index,
which are all expensed as incurred in the consolidated statements of
earnings. Lease liabilities are subsequently measured by increasing
the carrying amount to reflect interest on the lease liability (using the
effective interest rate method) and by reducing the carrying amount to
reflect the lease payments made.
Right-of-use assets at inception include the initial measurement
of the corresponding lease liability, lease payments made at or
before the commencement date and any initial direct costs. Right-
of-use assets are subsequently measured at cost less accumulated
depreciation and impairment losses. Depreciation of right-of-use
assets is recorded in selling and administrative expenses. Depreciation
is recorded on a straight-line basis over the lease term, unless the
lease transfers ownership of the underlying asset to the Corporation
by the end of the lease term, in which case depreciation is recorded
from the commencement date to the end of the useful life of the
underlying asset.
The Corporation remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset) if there is
a change in the future lease payments, a change in the Corporation’s
estimate of the amounts expected to be payable or if the Corporation
changes its assessments of whether it will exercise a purchase,
renewal, or termination option.
As a lessor
When the Corporation acts as lessor, it determines at lease
commencement whether each lease is a finance lease or an operating
lease. To classify each lease, the Corporation makes an overall
assessment of whether the lease transfers to the lessee substantially
all of the risks and rewards of ownership incidental to ownership of the
underlying asset. If this is the case, then the lease is a finance lease;
if not, then it is an operating lease. As part of this assessment, the
Corporation considers certain indicators such as whether the lease is
for the major part of the economic life of the asset.
Operating leases
The Corporation rents equipment to customers under rental
agreements with terms of up to 5 years. The rentals have been
assessed and classified as operating leases. Revenue is presented as
equipment rental revenue and recognized evenly over the term of the
rental agreement.
Finance leases
The Corporation subleases certain equipment to customers. The
Corporation assesses and classifies its subleases as finance leases,
and therefore derecognizes the right-of-use assets relating to the
respective head leases, recognizes lease receivables equal to the net
investment in the subleases, and retains the previously recognized
lease liabilities in its capacity as lessee.
Goodwill and intangible assets
Goodwill arising in a business combination is recognized as an
asset at the date that control is acquired. Goodwill and indefinite life
intangible assets are subsequently measured at cost less accumulated
impairment losses. Goodwill and indefinite life intangible assets are
allocated to cash-generating units (“CGUs”) that are expected to benefit
from the synergies of the acquisition.
Product distribution rights and brands represent the fair value attributed
to these rights and brands at the time of acquisition and are classified
as indefinite life intangible assets because the Corporation is generally
able to renew these rights and brands with minimal cost of renewal.
Customer relationships and vendor relationships are amortized on
a straight-line basis over their useful lives which range from 4 to 12
years. Computer application software is classified as an intangible
asset and is amortized on a straight-line basis over the useful life
ranging from 1 to 15 years.
Impairment
Property, plant and equipment, rental equipment, right-of-use assets and
definite life intangible assets are reviewed at the end of each period
to determine if any indicators of impairment exist. If an indicator of
impairment is identified, an impairment test is performed comparing its
recoverable amounts to its carrying value. An impairment loss would be
recognized as the amount by which the asset’s carrying amount exceeds
its recoverable amount. Where the asset does not generate cash flows
that are independent of other assets, impairment is considered for the
CGU or group of CGUs to which the asset belongs.
Goodwill and indefinite life intangible assets are tested for impairment
at least annually or whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. To test
for impairment, the Corporation compares the carrying values of its
goodwill and indefinite life intangibles to their recoverable amounts.
44 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
Recoverable amount is the higher of value in use or fair value less
costs of disposal. The value in use is the present value of future
cash flows using a pre-tax discount rate that reflects the time value of
money and the risk specific to the assets. The fair value less costs of
disposal is determined either by an adjusted net asset-based approach
or by the present value of future cash flows from a market participant
perspective. Any impairment of goodwill or indefinite life intangible
assets would be recorded as a charge against earnings.
A CGU is the smallest identifiable group of assets that generates cash
inflows that are largely independent of the cash inflows from other
assets or groups of assets. For the purpose of goodwill impairment
testing the CGUs are grouped at the level at which it is monitored,
which is at the consolidated Corporation level. As a result, goodwill
has been tested for impairment using the cash flows generated by the
consolidated operations of the Corporation.
Financial assets measured at 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 (“ECL”).
The Corporation uses the simplified approach to determine ECL on
trade and other receivables, using a provision matrix based on historical
credit loss experiences adjusted to reflect information about current
economic conditions and forecasts of future economic conditions
to estimate lifetime ECL. The ECL models applied to other financial
assets and contract assets also require judgement, assumptions and
estimations on changes in credit risks, forecasts of future economic
conditions and historical information on the credit quality of the financial
asset. Impairment losses are recorded in selling and administrative
expenses with the carrying amount of the financial asset reduced
through the use of impairment allowance accounts.
Cash and bank indebtedness
Cash and bank indebtedness includes cash on hand, demand deposits,
bank overdrafts and outstanding cheques. The Corporation considers
bank indebtedness to be an integral part of the Corporation’s cash
management. Cash and bank indebtedness are offset and the
net amount presented in the consolidated statements of financial
position to the extent that there is a right to set off and a practice of
net settlement.
Borrowing costs
Borrowing costs directly attributable to the acquisition or construction
of a qualifying asset are capitalized, until those assets are substantially
ready for their intended use. Qualifying assets are those that take a
substantial period of time to prepare for their intended use. All other
borrowing costs are recognized in finance costs in the period in which
they are incurred.
Finance costs
Finance costs are comprised of interest on the Corporation’s long-term
debt and debentures, interest on lease liabilities, interest income on
lease receivables, and any unrealized gain or loss on interest rate
swaps. Finance costs are net of any borrowing costs that have been
capitalized. Transaction costs directly attributable to the acquisition
or amendment of long-term debt or debentures are deferred and
amortized to finance costs over the term of the related long-term
debt or debentures using the effective interest rate method. Deferred
financing costs reduce the carrying amount of the related long-term debt
or debentures.
Derivative financial instruments and hedge accounting
The Corporation uses derivative financial instruments in the
management of: a) its foreign currency exposures related to certain
inventory purchases and customer sales commitments, b) its interest
rate risk related to its variable rate debt, and c) its equity price risk
related to certain share-based compensation plans. The Corporation’s
policy is to not utilize derivative financial instruments for trading
or speculative purposes. Where the Corporation intends to apply
hedge accounting it formally documents the relationship between the
derivative and the risk being hedged, as well as the risk management
objective and strategy for undertaking the hedge transaction. The
documentation links the derivative to a specific asset or liability or to
specific firm commitments or forecasted transactions. The Corporation
also assesses, at the hedge’s inception and at least quarterly whether
the hedge is effective in offsetting changes in fair values or cash flows
of the risk being hedged. Should a hedge become ineffective, hedge
accounting will be discontinued prospectively. All derivative instruments
are recorded in the consolidated statements of financial position at
fair value. All changes in fair value are recorded in earnings unless
hedge accounting is applied, in which case the effective portion of
changes in fair value of the hedging instrument are recorded in other
comprehensive income. If the cash flow hedge of a firm commitment
or forecasted transaction results in the recognition of a non-financial
asset or liability, then, at the time the asset or liability is recognized,
the associated gain or loss on the derivative that had previously been
recognized in other comprehensive income are included in the initial
measurement of the asset or liability.
Share-based compensation plans
The fair value of share-based compensation plan rights is based on
the trading price of a Wajax Corporation common share on the Toronto
Stock Exchange (“TSX”) or a Monte Carlo simulation. Compensation
expense for share-settled plans is based upon the fair value of the
rights at the date of grant and is charged to selling and administrative
expenses on a straight-line basis over the vesting period, with an
offsetting adjustment to contributed surplus. Compensation expense for
cash-settled plans varies with the price of the Corporation’s shares and
is charged to selling and administrative expenses, recognized over the
vesting period with an offset to accounts payable and accrued liabilities.
Employee benefits
The Corporation has defined contribution pension plans for most of its
employees. The cost of the defined contribution plans is recognized in
earnings based on the contributions required to be made each year.
The Corporation also has defined benefit plans closed to new members,
covering certain of its former employees, and with only inactive
members remaining. The benefits are based on years of service and
pensionable earnings. Defined benefit plan obligations were accrued
as the members rendered the services necessary to earn the pension
benefits. The Corporation has adopted the following policies:
The cost of pension benefits earned by plan members is actuarially
determined using the projected unit credit method for defined
benefit plans and management’s best estimate of retirement ages of
deferred vested pensioners.
For purposes of calculating expected return on plan assets, those
assets are valued at fair value.
The charge to earnings for the defined benefit plans is split between
an operating cost and a finance charge. The finance charge
represents the net interest cost on the defined benefit obligation net
of the expected return on plan assets and is included in selling and
administrative expenses.
Actuarial gain and loss are recognized in full in other comprehensive
income in the year in which they occur.
Income taxes
Income tax expense comprises current and deferred taxes. Current
and deferred taxes are recognized in earnings except to the extent that
they relate to a business combination or to items recognized directly in
equity or in other comprehensive income.
Current tax is the expected taxes payable or receivable on the taxable
income or loss for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to income taxes
payable in respect of previous years.
Wajax 2024 Annual Report 45
Notes to Consolidated Financial Statements
Deferred tax is recognized in respect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is
measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognized for unused tax losses and deductible
temporary differences to the extent that it is probable that future
taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax
benefit will be realized.
The Corporation has determined that the global minimum top-up tax –
which it is required to pay under Pillar Two legislation – is an income
tax in the scope of IAS 12. The Corporation has applied a temporary
mandatory relief from deferred tax accounting for the impacts of the top-
up tax and accounts for it as a current tax when it is incurred.
4. Change in Accounting Policies
During the year, the Corporation did not adopt any new accounting
standards or amendments that had an impact on the Corporation’s
consolidated financial statements.
Accounting standards and amendments issued but not yet adopted
In April 2024, the IASB issued IFRS 18, Presentation and Disclosure
in Financial Statements, which will replace IAS 1, Presentation
of Financial Statements. IFRS 18 introduces three sets of new
requirements to improve companies’ reporting of financial
performance and give investors a better basis for analyzing and
comparing companies: improved comparability in the statement
of earnings by introducing three defined categories for income
and expenses (operating, investing and financing) and requiring
companies to provide new defined subtotals, including operating
profit; enhanced transparency of management-defined performance
measures by requiring companies to disclose explanations of
those company-specific measures that are related to the statement
of earnings; and enhanced guidance on how companies group
information in the financial statements, including guidance on
whether information is included in the primary financial statements
or is further disaggregated in the notes. IFRS 18 is effective for
annual reporting periods beginning on or after January 1, 2027, with
earlier application permitted. Management is currently assessing the
impact of adopting IFRS 18 on its consolidated financial statements
presentation and disclosure.
5. Business Acquisitions
Beta Fluid Power Ltd. and Beta Industrial Ltd. (“Beta”)
On September 1, 2023, the Corporation acquired all of the issued and
outstanding shares of Sault Ste. Marie, Ontario-based Beta, a supplier
of hydraulic and pneumatic equipment for use in the industrial, mining
and construction sectors, and a provider of related maintenance, repair
and replacement services. After insignificant final working capital
adjustments during the year ended December 31, 2024, the shares of
Beta were acquired for total cash consideration of $8,439, subject to
the result of a three-year performance-based earnout, and tangible net
assets acquired and goodwill recognized upon acquisition were $2,055
and $6,384, respectively.
Polyphase Engineered Controls (1977) Ltd. (“Polyphase”)
On July 4, 2023, the Corporation acquired all of the issued and
outstanding shares of Calgary, Alberta-based Polyphase. Polyphase
specializes in producing custom electrical and instrumentation
equipment. The acquisition of Polyphase expanded the Corporation’s
electrical solutions portfolio. There were no changes to the
purchase price allocation for Polyphase during the year ended
December 31, 2024. The shares of Polyphase were acquired for total
cash consideration of $23,240, subject to the result of a three-year
performance-based earnout. Tangible net assets acquired, intangible
assets acquired, and goodwill recognized upon acquisition were $4,484,
$12,524, and $6,232, respectively.
6. Trade and Other Receivables
The Corporation’s trade and other receivables consist of trade accounts
receivable from customers and other accounts receivable, generally
from suppliers for warranty and rebates. Trade and other receivables are
comprised of the following:
December 31
2024
2023
Trade accounts receivable
$ 277,884 $ 278,394
Less: allowance for credit losses
(2,271)
(3,639)
Net trade accounts receivable
$ 275,613 $ 274,755
Other receivables
27,924
34,324
Total trade and other receivables
$ 303,537 $ 309,079
The Corporation has an agreement with a financial institution to sell
100% of selected trade accounts receivable on a recurring, non-
recourse basis. Under the agreement, up to $20,000 of accounts
receivable may be sold to the financial institution and can remain
outstanding at any point in time. After the sale, the Corporation does
not retain any interests in the accounts receivable and removes
them from its consolidated statement of financial position, however
the Corporation continues to service and collect the outstanding
accounts receivable on behalf of the financial institution. As at
December 31, 2024, the Corporation continues to service and collect
$8,363 in accounts receivable on behalf of this financial institution
(December 31, 2023 – $6,060). Net proceeds from this program are
classified in operating activities in the consolidated statements of
cash flows.
The Corporation’s exposure to credit and currency risks related to trade
and other receivables is disclosed in Note 18.
7. Contract Assets and Liabilities
The following table provides information about contract assets and
contract liabilities from contracts with customers:
December 31
2024
2023
Contract assets
$
55,588 $
69,520
Contract liabilities
$
23,182 $
21,891
The contract assets relate to the Corporation’s rights to consideration
for work completed but not billed at the reporting date, primarily on
product support and engineered repair services (“ERS”) revenue.
The contract assets are transferred to receivables when billed upon
completion of significant milestones. The contract liabilities relate to
the advance billing or advance consideration received from customers,
primarily on equipment sales, industrial parts sales, and ERS revenue,
for which revenue is recognized when control transfers to the customer.
Revenue recognized in 2024 that was included in the contract liability
balance at the beginning of the year was $17,890 (2023 – $16,421).
46 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
9. Property, Plant and Equipment and Rental Equipment
Property,
Land and
Equipment
Computer
Furniture
Leasehold
plant and
Rental
buildings
and vehicles
hardware
and fixtures
improvements
equipment
equipment
Cost
December 31, 2023
$
23,125 $
78,981 $
4,117 $
9,638 $
14,719 $ 130,580 $ 105,476
Additions
105
5,024
93
1,091
2,561
8,874
25,402
Transfer from leased to
owned at end of lease
—
8,703
—
—
—
8,703
—
Transfer to inventory
—
—
—
—
—
—
(28,730)
Other transfers
—
121
—
—
—
121
(121)
Disposals
—
(6,288)
(1,195)
(1,230)
(417)
(9,130)
—
December 31, 2024
$
23,230 $
86,541 $
3,015 $
9,499 $
16,863 $ 139,148 $ 102,027
Accumulated depreciation
December 31, 2023
$
12,526 $
53,230 $
3,670 $
7,319 $
9,006 $
85,751 $
62,986
Charge for the year
274
6,277
198
527
1,549
8,825
13,721
Transfer from leased to
owned at end of lease
—
7,263
—
—
—
7,263
—
Transfer to inventory
—
—
—
—
—
—
(24,632)
Other transfers
—
92
—
—
—
92
(92)
Disposals
—
(5,716)
(1,195)
(1,128)
(413)
(8,452)
—
December 31, 2024
$
12,800 $
61,146 $
2,673 $
6,718 $
10,142 $
93,479 $
51,983
Carrying amount
December 31, 2024
$
10,430 $
25,395 $
342 $
2,781 $
6,721 $
45,669 $
50,044
Cost
December 31, 2022
$
23,329 $
76,687 $
5,311 $
10,705 $
13,794 $ 129,826 $
99,646
Additions
176
6,725
64
314
1,691
8,970
20,936
Transfer from leased to
owned at end of lease
—
3,261
—
—
—
3,261
—
Transfer to inventory
—
—
—
—
—
—
(15,106)
Other transfers
—
(749)
—
—
749
—
—
Disposals
(380)
(7,338)
(1,263)
(1,404)
(1,517)
(11,902)
—
Business acquisitions
—
395
5
23
2
425
—
December 31, 2023
$
23,125 $
78,981 $
4,117 $
9,638 $
14,719 $ 130,580 $ 105,476
Accumulated depreciation
December 31, 2022
$
12,486 $
51,347 $
4,420 $
8,045 $
9,424 $
85,722 $
60,246
Charge for the year
299
5,936
512
539
985
8,271
14,304
Transfer from leased to
owned at end of lease
—
2,754
—
—
—
2,754
—
Transfer to inventory
—
—
—
—
—
—
(11,564)
Other transfers
—
8
—
—
(8)
—
—
Disposals
(259)
(6,815)
(1,262)
(1,265)
(1,395)
(10,996)
—
December 31, 2023
$
12,526 $
53,230 $
3,670 $
7,319 $
9,006 $
85,751 $
62,986
Carrying amount
December 31, 2023
$
10,599 $
25,751 $
447 $
2,319 $
5,713 $
44,829 $
42,490
8. Inventory
The Corporation’s inventory balance consists of the following:
December 31
2024
2023
Equipment
$ 377,205 $ 329,010
Parts
257,623
272,073
Work-in-process
38,248
29,848
Total inventory
$ 673,076 $ 630,931
All amounts shown are net of obsolescence provisions of $30,814
(December 31, 2023 – $28,271).
For the year ended December 31, 2024, $7,625 (2023 – $4,463) was
recorded in cost of sales for the write-down of inventory to estimated
net realizable value.
For the year ended December 31, 2024, the Corporation recognized
$1,337,740 (2023 – $1,395,296) of inventory as an expense which is
included in cost of sales.
As at December 31, 2024, the Corporation has included $28,484
(December 31, 2023 – $51,658) in equipment inventory related to
short-term rental contracts, the majority of which is expected to convert
to equipment sales within a six to twelve month period.
Substantially all of the Corporation’s inventory is pledged as security for
the bank credit facility (Note 17).
Wajax 2024 Annual Report 47
Notes to Consolidated Financial Statements
10. Right-of-Use Assets
Computer
Properties
Vehicles
hardware
Equipment
Total
Cost
December 31, 2023
$ 208,150 $
36,694 $
10,668 $
— $ 255,512
Additions
50,413
6,326
1,840
15,328
73,907
Disposals
(7,423)
(753)
—
—
(8,176)
Disposal to lease receivables upon sublease
—
—
—
(15,328)
(15,328)
Transfer from leased to owned at end of lease
—
(8,703)
—
—
(8,703)
December 31, 2024
$ 251,140 $
33,564 $
12,508 $
— $ 297,212
Accumulated depreciation
December 31, 2023
$
96,217 $
19,719 $
3,744 $
— $ 119,680
Charge for the year
24,564
5,705
2,323
—
32,592
Disposals
(5,764)
(506)
—
—
(6,270)
Transfer from leased to owned at end of lease
—
(7,263)
—
—
(7,263)
December 31, 2024
$ 115,017 $
17,655 $
6,067 $
— $ 138,739
Carrying amount
December 31, 2024
$ 136,123 $
15,909 $
6,441 $
— $ 158,473
Cost
December 31, 2022
$ 179,100 $
32,169 $
5,806 $
33 $ 217,108
Additions
26,317
8,451
4,862
9,012
48,642
Disposals
(1,393)
(665)
—
(33)
(2,091)
Disposal to lease receivables upon sublease
—
—
—
(9,012)
(9,012)
Transfer from leased to owned at end of lease
—
(3,261)
—
—
(3,261)
Business acquisitions
4,126
—
—
—
4,126
December 31, 2023
$ 208,150 $
36,694 $
10,668 $
— $ 255,512
Accumulated depreciation
December 31, 2022
$
74,993 $
17,461 $
1,914 $
20 $
94,388
Charge for the year
22,252
5,453
1,830
13
29,548
Disposals
(1,028)
(441)
—
(33)
(1,502)
Transfer from leased to owned at end of lease
—
(2,754)
—
—
(2,754)
December 31, 2023
$
96,217 $
19,719 $
3,744 $
— $ 119,680
Carrying amount
December 31, 2023
$ 111,933 $
16,975 $
6,924 $
— $ 135,832
11. Goodwill And Intangible Assets
The Corporation performed its annual impairment test of its goodwill
and indefinite life intangibles as at December 31, 2024. Similar key
assumptions were used for both the goodwill impairment test and the
indefinite life intangibles impairment test. The recoverable amount
of the CGU group was estimated based on the present value of the
future cash flows expected to be derived from the CGU group (value in
use). This approach requires assumptions about revenue growth rates,
EBITDA margins, tax rates, discount rates and the level of working
capital required to support the business. The after-tax cash flows from
operations are based on historical results, the Corporation’s projected
2025 operating budget and its long-term strategic plan. To prepare
these calculations, the forecasts were extrapolated beyond the five year
period at the estimated long-term inflation rate of 2% (2023 – 2%). The
cash flow projections were discounted using the Corporation’s after-tax
weighted average cost of capital, which equates to a pre-tax discount
rate of approximately 13.5% (2023 – 13.2%).
The tax rates applied to the cash flow projections were based on
the expected effective tax rate of the Corporation of approximately
26.3% (2023 – 26.5%). Tax assumptions are sensitive to changes
in tax laws as well as assumptions about the jurisdictions in which
profits are earned. It is possible that actual tax rates could differ from
those assumed.
The Corporation concluded as at December 31, 2024 that no
impairment existed in either the goodwill or the intangible assets with
an indefinite life, as the recoverable amount of the CGU group exceeded
its carrying value.
The Corporation did not reverse any impairment losses for definite
life intangible assets for the years ended December 31, 2024 and
December 31, 2023.
For the year ended December 31, 2024, the Corporation transferred
rental equipment to inventory with a net book value of $4,098
(2023 – $3,542).
All property, plant and equipment except land and buildings have been
pledged as security for bank debt (Note 17).
48 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
12. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are comprised of the following:
December 31
2024
2023
Trade payables
$ 333,314 $ 280,336
Deferred rental income
680
918
Contingent consideration liability – current
3,280
2,997
Payroll, bonuses and incentives
35,842
52,657
Accrued liabilities
44,718
70,182
Accounts payable and accrued liabilities $ 417,834 $ 407,090
The Corporation has supplier finance arrangements with three
third‑party financing companies, one of which became effective in the
third quarter of 2024. Under these arrangements, the Corporation
can purchase equipment from suppliers with interest-free payment
terms ranging anywhere from approximately 45 days to 11 months,
depending on the type of equipment and the financing company. After
the interest-free period, the financing becomes interest bearing if the
Corporation does not repay the principal borrowed. If the Corporation
sells the equipment before payment is due, payment must then be
remitted to the financing company. Comparable trade payables that are
not part of a supplier finance arrangement usually have payment terms
of approximately 30 days. As at December 31, 2024, supplier finance
liabilities were $166,887 (December 31, 2023 – $24,877) and are
included in trade payables above. Under the terms of the Corporation’s
bank credit facility, the Corporation is permitted to have additional
interest bearing equipment inventory financing of up to $25,000. The
interest bearing portion of the supplier finance liabilities was $12,522
as at December 31, 2024 (December 31, 2023 – nil).
Customer
Product relationships/
distribution
Vendor
Goodwill rights/Brands
relationships
Software
Total
Cost
December 31, 2023
$ 115,940 $
18,236 $
60,000 $
18,988 $ 213,164
Additions
—
—
—
271
271
Disposals
—
—
—
(656)
(656)
Business acquisitions
5
—
—
—
5
December 31, 2024
$ 115,945 $
18,236 $
60,000 $
18,603 $ 212,784
Accumulated amortization
December 31, 2023
$
— $
— $
18,823 $
4,065 $
22,888
Charge for the year
—
—
5,766
1,266
7,032
Disposals
—
—
—
(656)
(656)
December 31, 2024
$
— $
— $
24,589 $
4,675 $
29,264
Carrying amount
December 31, 2024
$ 115,945 $
18,236 $
35,411 $
13,928 $ 183,520
Cost
December 31, 2022
$ 103,330 $
18,236 $
47,500 $
18,130 $ 187,196
Additions
—
—
—
876
876
Disposals
—
—
—
(42)
(42)
Business acquisitions
12,610
—
12,500
24
25,134
December 31, 2023
$ 115,940 $
18,236 $
60,000 $
18,988 $ 213,164
Accumulated amortization
December 31, 2022
$
— $
— $
13,577 $
2,905 $
16,482
Charge for the year
—
—
5,246
1,202
6,448
Disposals
—
—
—
(42)
(42)
December 31, 2023
$
— $
— $
18,823 $
4,065 $
22,888
Carrying amount
December 31, 2023
$ 115,940 $
18,236 $
41,177 $
14,923 $ 190,276
Amortization of intangible assets is charged to selling and administrative expenses.
Wajax 2024 Annual Report 49
Notes to Consolidated Financial Statements
13. Provisions and Contingencies
Warranties,
Environmental,
Restructuring
and Litigation
Total
Provisions,
December 31, 2023
$
103 $
2,700 $
2,803
New provisions expensed
5,766
479
6,245
Utilized
(1,054)
(822)
(1,876)
Provisions,
December 31, 2024
$
4,815 $
2,357 $
7,172
Current portion
$
4,815 $
2,357 $
7,172
Non-current portion
—
—
—
Total
$
4,815 $
2,357 $
7,172
See Note 23 for details on the restructuring charge recognized in
the year.
Contingencies
In the ordinary course of business, the Corporation is contingently
liable for various amounts that could arise from warranties, litigation,
environmental matters or other sources. The Corporation does not
expect the resolution of these matters to have a materially adverse
effect on its financial position or results of operations. Provisions have
been made in these consolidated financial statements when the liability
is expected to result in an outflow of economic resources, and where
the obligation can be reliably estimated.
14. Lease Liabilities and Lease Receivables
As lessee
The Corporation leases properties for its branch network, certain
vehicles, machinery and IT equipment.
The change in lease liabilities is as follows:
For the year ended December 31
Note
2024
2023
Balance at beginning of year
$ 175,374 $ 158,446
Changes from operating
cash flows
Finance costs paid
on lease liabilities
(10,580)
(8,871)
Changes from financing cash flows
Payment of lease liabilities
(39,230)
(35,450)
Other changes
Business acquisitions
—
4,126
Interest expense
24
10,580
8,871
New leases, net of disposals
72,038
48,252
Balance at end of year
$ 208,182 $ 175,374
Current portion
$
40,151 $
34,407
Non-current portion
$ 168,031 $ 140,967
Not included in the balance of lease liabilities are short-term leases,
leases of low-value assets and variable lease payments not linked to an
index. Variable lease payments, lease payments associated with short-
term leases and leases of low-value assets are expensed as incurred in
the consolidated statements of earnings.
For the year ended December 31
Note
2024
2023
Expense related to
short-term leases
$
298 $
109
Expense related to low value
assets, excluding short-term
leases of low value assets
453
386
Expense related to variable
lease payments not included
in the measurement of
lease liabilities
4,803
3,815
Payment of lease liabilities
39,230
35,450
Interest paid on lease liabilities
24
10,580
8,871
Total outflow for leases
$
55,364 $
48,631
The maturity analysis of contractual undiscounted cash flows of lease
obligations is as follows:
December 31
2024
2023
Within one year
$
58,933 $
49,225
Between one and three years
97,310
80,996
Between three and five years
57,356
51,717
More than five years
90,303
56,570
Total undiscounted lease obligations
$ 303,902 $ 238,508
As lessor
Operating leases
The Corporation rents equipment to customers under rental agreements
with terms of up to 5 years. The rentals have been assessed and
classified as operating leases. Revenue is presented as equipment
rental revenue and recognized evenly over the term of the rental
agreement. The future minimum lease payments receivable under the
agreements are as follows:
December 31
2024
2023
Less than one year
$
6,091 $
9,221
Between one and five years
10,326
13,019
Future minimum lease
payments receivable
$
16,417 $
22,240
Finance leases
The Corporation subleases certain equipment to customers. The
Corporation assesses and classifies its subleases as finances leases,
and therefore derecognizes the right-of-use assets relating to the
respective head leases, recognizes lease receivables equal to the net
investment in the subleases, and retains the previously recognized
lease liabilities in its capacity as lessee. The following table sets out a
maturity analysis of lease receivables, showing the undiscounted lease
payments to be received after the reporting date:
50 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
December 31
2024
2023
Less than one year
$
10,092 $
6,547
Between one and five years
18,645
11,172
Total undiscounted lease
payments receivable
$
28,737 $
17,719
Unearned finance income
(2,137)
(1,222)
Lease receivables
$
26,600 $
16,497
Current portion
$
9,062 $
5,896
Non-current portion
$
17,538 $
10,601
15. Employee Benefits
The Corporation sponsors four pension plans: Wajax Limited Defined
Contribution Pension Plan (the “Employees’ Plan”) which is a defined
contribution plan (“DC”), Simplified Pension Plan (the “SP Plan”)
which is a defined contribution plan for employees in the province of
Quebec, and two defined benefit plans: the Pension Plan for Executive
Employees of Wajax Limited (the “Executive Plan”) and the Wajax
Limited Supplemental Executive Retirement Plan (the “SERP”).
The Corporation also contributes to several union sponsored multi-
employer pension plans for a small number of employees. Two of
these are target benefit plans but they are accounted for as defined
contribution plans since the Corporation has no involvement in the
management of these plans and does not have sufficient information to
account for the plans as defined benefit plans.
The Corporation uses actuarial reports prepared by independent
actuaries for funding and accounting purposes and measures its
defined benefit obligations and the fair value of plan assets for
accounting purposes as at December 31 of each year. These actuarial
assumptions include discount rates, mortality rates, and inflation. While
management believes that the actuarial assumptions are appropriate,
any significant changes to those used would affect the statements of
financial position and statements of earnings.
The previous actuarial valuation for the Executive Plan for funding
purposes was as at January 1, 2024. Subsequent to year end, on
January 30, 2025, the Executive Plan purchased buyout annuities from
a third-party insurance company for a cost of $6,830. As a result of
the annuity purchase, the third-party insurance company will become
responsible for the payment of plan members’ pension benefits and the
Corporation settled its defined benefit obligation in respect of all plan
members. The defined benefit cost of the Executive Plan for the fiscal
year ending December 31, 2025 will include a loss on settlement of
$458 due to the annuity purchase.
The following significant actuarial assumptions were used to
determine the net defined benefit plan cost and the defined benefit
plan obligations:
December 31
2024
2023
Discount rate – at beginning of year
(to determine plan expenses)
4.7%
5.3%
Discount rate – at end of year
(to determine defined benefit obligation)
4.6%
4.7%
Increases in pensionable earnings
—%
—%
Rate of inflation
2.0%
2.0%
Assumptions regarding future mortality rates were based on 87% of the
rates of the 2014 Public Sector Canadian Pensioner’s Mortality Table for
the Executive Plan and SERP.
Plan assets for the defined contribution plans are invested according
to the directions of the plan members. Plan assets for defined benefit
plans are invested in the following major categories of plan assets as a
percentage of total plan assets:
Executive Plan
December 31
2024
2023
Fixed Income
100.0%
39.8%
Foreign Equities
—%
60.2%
100.0%
100.0%
The history of adjustments on the defined benefit plans recognized
in other comprehensive income for the current and prior year are
as follows:
2024
2023
Actuarial (gain) loss on defined
benefit obligation arising from:
Experience adjustments
$
(36) $
—
Financial assumption changes
19
677
$
(17) $
677
Actuarial gain on asset return
(13)
(241)
Total remeasurement (gain) loss
recognized in OCI, pre-tax
$
(30) $
436
Total cash payments
Total cash payments for employee future benefits for 2024, consisting
of cash contributed by the Corporation to its funded pension plans,
cash payments directly to beneficiaries for its unfunded pension plans,
and cash contributed to its defined contribution plans was $12,928
(2023 – $11,596).
Subsequent to year end, in January 2025, the Corporation contributed
$2,902 to the Executive Plan to fully fund the plan before purchasing
buyout annuities from a third-party insurance company to settle
its defined benefit obligation in respect of all plan members. The
Corporation estimates a contribution of $5,457 to the SERP during
the year ended December 31, 2025, which takes into account the
possibility of the Corporation fully funding and settling the SERP benefit
obligation near the end of 2025. The timing of settling the SERP is
subject to change, and the market conditions affecting the level of
required contributions to settle the SERP are also subject to change.
The plan expenses recognized in earnings are as follows:
2024
2023
Defined contribution plans
Current service cost
$
12,092 $
11,178
Defined benefit plans
Administration expenses
50
9
SERP line of credit fees
107
115
Interest cost on defined
benefit obligation
507
556
Interest income on plan assets
(189)
(214)
$
475 $
466
Total plan expense recognized in earnings $
12,567 $
11,644
Wajax 2024 Annual Report 51
Notes to Consolidated Financial Statements
Of the amounts recognized in earnings, $4,819 (2023 – $4,504) is
included in cost of sales and $7,748 (2023 – $7,140) is included in
selling and administrative expenses.
The amounts recognized in other comprehensive income are as follows:
2024
2023
Actuarial (gain) loss
$
(30) $
436
Deferred tax expense (recovery)
8
(115)
Amount recognized in other
comprehensive income
$
(22) $
321
Cumulative actuarial loss, net of tax
$
1,827 $
1,849
Information about the Corporation’s defined benefit pension plans, in
aggregate, is as follows:
Present value of benefit obligation
2024
2023
Present value of benefit
obligation, eginning of year
$
11,325 $
10,935
Interest cost on defined benefit obligation
507
556
Actuarial (gain) loss
(17)
677
Benefits paid
(1,015)
(843)
Present value of benefit
obligation, end of year
$
10,800 $
11,325
Fair value of plan assets
2024
2023
Fair value of plan assets,
beginning of year
$
4,301 $
4,280
Interest income
189
214
Return on plan assets
(excluding interest income)
109
276
Employer contributions
836
418
Benefits paid
(1,015)
(843)
Administration expenses
(146)
(44)
Fair value of plan assets, end of year
$
4,274 $
4,301
Funded Status
2024
2023
Fair value of plan assets, end of year
$
4,274 $
4,301
Present value of benefit
obligation, end of year
(10,800)
(11,325)
Plan deficit
$
(6,526) $
(7,024)
The accrued benefit liability is included in the Corporation’s statement
of financial position as follows:
2024
2023
Employee benefits
$
(6,526) $
(7,024)
The present value of the benefit obligation includes a benefit obligation
of $4,355 (2023 – $4,855) related to the SERP that is not funded. This
obligation is secured by a letter of credit of $2,813 (2023 – $3,574).
Sensitivity analysis
The following sensitivity analysis is hypothetical and should be used
with caution. The sensitivities of the key assumption have been
calculated independently of any changes in other assumptions.
Actual experience may result in changes in a number of assumptions
simultaneously. Changes in one factor may result in changes in another,
which could amplify or reduce the impact of such assumptions.
A 1% increase in discount rate would result in a $942 (2023 – $984)
decrease to the defined benefit obligation as at December 31, 2024. A
1% decrease in discount rate would result in a $1,146 (2023 – $1,178)
increase to the defined benefit obligation.
16. Debentures
Senior Unsecured Debentures – 6%, due January 15, 2025
In December 2019, the Corporation issued $57,000 in
unsecured subordinated debentures with a term of five years due
January 15, 2025. These debentures bear a fixed interest rate of
6.00% per annum, payable semi-annually on January 15 and July 15 of
each year.
Prior to the maturity date of January 15, 2025, the debentures are
redeemable at a price equal to their principal amount plus accrued and
unpaid interest. As at December 31, 2024, the Corporation had not
redeemed any of the debentures.
Subsequent to year end, on January 15, 2025, the Corporation repaid
in full the $57,000 in principal amount owed under its senior unsecured
debentures, along with accrued interest up to the maturity date. The
Corporation used borrowings under its bank credit facility to complete
the repayment.
The debentures are classified as a financial liability and are initially
recorded at fair value net of transaction costs. The debentures are
measured subsequently at amortized cost using the effective interest
method over the life of the debentures.
The following balances were outstanding:
December 31
2024
2023
Debentures issued
$
57,000 $
57,000
Deferred financing costs,
net of accumulated amortization
(27)
(660)
Total debentures
$
56,973 $
56,340
Current portion
$
56,973 $
—
Non-current portion
$
— $
56,340
Movements in the debentures balance were as follows:
For the year ended December 31
2024
2023
Balance at beginning of period
$
56,340 $
55,762
Amortization of deferred financing costs
633
578
Balance at end of period
$
56,973 $
56,340
Finance costs on the debentures for the year ended
December 31, 2024 were $4,048 (2023 – $3,999).
52 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
17. Long-Term Debt
On January 11, 2024, the Corporation amended its senior secured
credit facility. The amendment increased the facility limit from
$400,000 to $500,000. There was no change to the maturity date
of the facility. As part of the bank credit facility amendment effective
January 11, 2024, the Canadian dollar bankers’ acceptances were
replaced with the term Canadian Overnight Repo Rate Average loan (or
“CORRA”). The $472 cost of amending the facility has been capitalized
and will be amortized over the remaining term of the facility.
As at December 31, 2024, Wajax had a $500,000 credit limit on its
bank credit facility, composed of a $50,000 non-revolving term facility
and a $450,000 revolving term facility, maturing on October 1, 2027.
As at December 31, 2024, borrowings under the bank credit facility
bear floating rates of interest at margins over Canadian dollar term
CORRA loan yields, U.S. dollar SOFR rates or prime. Margins on the
facility depend on the Corporation’s leverage ratio at the time of
borrowing and range between 1.8% and 3.3% for Canadian dollar term
CORRA loans and U.S. dollar SOFR borrowings, and between 0.8% and
2.3% for prime rate borrowings.
Borrowing capacity under the bank credit facility is dependent upon the
level of the Corporation’s inventory on hand and the outstanding trade
accounts receivable. As at December 31, 2024, borrowing capacity
under the bank credit facility was $500,000 (December 31, 2023 –
$400,000), of which $212,574 (December 31, 2023 – $126,602)
was accessible to the Corporation. In addition, the bank credit facility
contains customary restrictive covenants, including limitations on
paying cash dividends and acquiring businesses in the event the senior
secured leverage ratio, as defined in the bank credit facility agreement,
exceeds 4.0 times, and an interest coverage maintenance ratio, all of
which were met as at December 31, 2024.
The following balances were outstanding:
December 31
2024
2023
Bank credit facility
Non-revolving term portion
$
50,000 $
50,000
Revolving term portion
233,749
218,561
$ 283,749 $ 268,561
Deferred financing costs, net of
accumulated amortization
(707)
(806)
Total long-term debt
$ 283,042 $ 267,755
The Corporation had $3,677 (December 31, 2023 – $4,837) letters of
credit outstanding at the end of the year. Finance costs on long-term
debt amounted to $21,019 (2023 – $13,627).
Movements in the long-term debt balance were as follows:
For the year ended December 31
2024
2023
Balance at beginning of period
$ 267,755 $
83,602
Changes from financing cash flows
Net proceeds of borrowings
15,188
183,606
Transaction costs related to borrowings
(472)
—
Other changes
Amortization of deferred financing costs
571
547
Balance at end of period
$ 283,042 $ 267,755
18. Financial Instruments and
Financial Risk Management
The Corporation uses the following fair value hierarchy for determining
and disclosing the fair value of financial instruments:
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.
The Corporation categorizes its financial instruments as follows:
December 31
2024
2023
Financial assets measured at amortized cost:
Cash
$
7,351 $
—
Trade and other receivables
303,537
309,079
Contract assets
55,588
69,520
Lease receivables
26,600
16,497
Financial liabilities measured at amortized cost:
Bank indebtedness
—
1,397
Accounts payable and accrued liabilities
(excluding contingent consideration)
414,554
404,093
Provisions
7,172
2,803
Dividends payable
7,629
7,151
Other liabilities (excluding
contingent consideration)
2,285
3,262
Debentures
56,973
56,340
Long-term debt
283,042
267,755
Financial assets measured at fair value:
Derivative financial assets
11,471
11,308
Financial liabilities measured at fair value:
Contingent consideration (in accounts
payable and accrued liabilities)
3,280
2,997
Contingent consideration (in other liabilities)
4,619
6,432
Derivative financial liabilities
8,898
5,602
The Corporation measures financial assets and financial liabilities at
amortized cost, except for derivative financial assets/liabilities and
contingent consideration from acquisitions, which are measured at
fair value. Changes in fair value are recognized in the consolidated
statements of earnings except for changes in fair value related to
derivative financial assets/liabilities that are effectively designated
as hedging instruments which are recognized in other comprehensive
income. The Corporation’s derivative financial assets/liabilities are
held with major Canadian chartered banks and are deemed to be Level
2 financial instruments. The Corporation’s contingent consideration
liabilities are Level 3 financial instruments, and are valued using either
a discounted cash flow model or a Monte Carlo simulation model. The
Monte Carlo simulation uses various assumptions including EBITDA
forecast, discount rate, and volatility factor. The fair value of long-term
debt approximates its recorded value due to its floating interest rate.
Wajax 2024 Annual Report 53
Notes to Consolidated Financial Statements
The fair value of lease receivables approximates its carrying value. The
fair value of the debentures can be estimated based on the trading
price of the debentures, which takes into account the Corporation’s
own credit risk. At December 31, 2024, the Corporation has estimated
the fair value of its debentures to be $57,000 (December 31, 2023 –
$56,516). The fair values of all other financial assets and liabilities
approximate their recorded values due to the short-term maturities of
these instruments.
Movements in the contingent consideration liability were as follows:
December 31, 2024
Contingent consideration liability – Opening
$
9,429
Contingent consideration paid –
QT Valve & Supply Limited (2021)
(113)
Contingent consideration paid – Beta
(641)
Contingent consideration paid – Polyphase
(3,039)
Revaluation of contingent consideration – Polyphase
2,263
Contingent consideration liability – Ending
$
7,899
Current portion (in accounts
payable and accrued liabilities)
$
3,280
Non-current portion (in other liabilities)
4,619
Total
$
7,899
The $2,263 increase on revaluation of the contingent consideration
liability was recorded to selling and administrative expenses.
The Corporation, through its financial assets and liabilities, has
exposure to the following risks from its use of financial instruments:
credit risk, liquidity risk, and market risk (consisting of currency risk,
interest rate risk and equity price risk). The following analysis provides a
measurement of these risks as at December 31, 2024 and 2023:
Credit risk
The Corporation is exposed to credit risk with respect to its trade and
other receivables. This risk is mitigated by the Corporation’s large
customer base which covers many business sectors across Canada.
The Corporation follows a program of credit evaluations of customers
and limits the amount of credit extended when deemed necessary. The
Corporation’s trade and other receivables consist of trade accounts
receivable from customers and other accounts receivable, generally
from suppliers for warranty and rebates.
The aging of the trade accounts receivable is as follows:
December 31
2024
2023
Current
$ 153,700 $ 130,124
Less than 60 days overdue
107,566
120,711
More than 60 days overdue
16,618
27,559
Total trade accounts receivable
$ 277,884 $ 278,394
The carrying amounts of accounts receivable represent the maximum
credit exposure.
The Corporation maintains an allowance for expected credit losses
taking into account past experience of collecting payments as well as
observable changes in and forecasts of future economic conditions
that correlate with default on receivables. Any such losses to date have
been within management’s expectations. Movement of the allowance for
credit losses is as follows:
For the year ended December 31
2024
2023
Opening balance
$
3,639 $
1,182
Charge (reversals), net
(183)
3,413
Utilization
(1,185)
(956)
Closing balance
$
2,271 $
3,639
The Corporation is also exposed to the risk of non-performance by
counterparties to foreign exchange forwards, interest rate swaps and
total return swaps. These counterparties are large financial institutions
that maintain high short-term and long-term credit ratings. To date, no
such counterparty has failed to meet its financial obligations to the
Corporation. Management does not believe there is a significant risk of
non-performance by these counterparties and will continue to monitor
the credit risk of these counterparties.
Liquidity risk
Liquidity risk is the risk that the Corporation will encounter difficulty
in meeting obligations associated with its financial liabilities as they
become due. At December 31, 2024, the Corporation had borrowed
$283,749 (2023 – $268,561) from the bank credit facility that
matures on October 1, 2027. The Corporation issued $3,677 (2023 –
$4,837) of letters of credit for a total utilization of $287,426 (2023 –
$273,398) of its $500,000 (2023 – $400,000) bank credit facility and
utilized $12,522 (2023 – nil) of its $25,000 (2023 – $25,000) interest
bearing equipment financing facilities.
In December 2019, the Corporation issued $57,000 in
unsecured subordinated debentures with a term of five years due
January 15, 2025. These debentures bear a fixed interest rate of
6.00% per annum, payable semi-annually on January 15 and July 15
of each year, commencing July 15, 2020. Subsequent to year
end, on January 15, 2025, the Corporation repaid the unsecured
subordinated debentures in full. See Note 16 Debentures for details of
the repayment.
The Corporation’s $500,000 bank credit facility, of which $212,574
was unutilized at the end of the year, along with the additional $25,000
of equipment financing with third-party financing companies, of which
$12,478 was unutilized at the end of the year, is deemed to be
sufficient to meet the Corporation’s short-term normal course working
capital and maintenance capital requirements and certain strategic
investments. However, the Corporation may be required to access the
equity or debt markets to fund significant acquisitions.
Contractual obligations are as follows:
< 1
1 – 3
3 – 5
After
Total
year
years
years
5 years
Accounts payable and accrued liabilities
$ 417,834 $ 417,834 $
— $
— $
—
Undiscounted lease obligations
303,902
58,933
97,310
57,356
90,303
Long-term debt
283,749
—
283,749
—
—
Debentures
57,000
57,000
—
—
—
Total
$ 1,062,485 $ 533,767 $ 381,059 $
57,356 $
90,303
54 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
Market risk
Market risk is the risk from changes in market prices, such as changes
in foreign exchange rates, interest rates, and the Corporation’s share
price which will affect the Corporation’s earnings as well as the value of
the financial instruments held and cash-settled share-based liabilities
outstanding. The exposure to these risks is managed through the use
of various derivative instruments.
a) Currency risk
Certain of the Corporation’s sales to customers and purchases from
vendors are exposed to fluctuations in the U.S. dollar (“USD”) and the
Euro (“EUR”). When considered appropriate, the Corporation purchases
foreign exchange forwards for USD and EUR as a means of mitigating
this risk. A change in foreign currency relative to the Canadian dollar
would not have a material impact on the Corporation’s unhedged foreign
currency-denominated sales to customers along with the associated
receivables, or on the Corporation’s unhedged foreign currency-
denominated purchases from vendors along with the associated
payables. The Corporation will periodically institute price increases
to offset the negative impact of foreign exchange rate increases and
volatility on imported goods to ensure margins are not eroded. However,
a sudden strengthening of the U.S. dollar relative to the Canadian dollar
can have a negative impact mainly on parts margins in the short term
prior to price increases taking effect.
The Corporation maintains a hedging policy whereby significant
transactional currency risks are typically identified and hedged.
b) Interest rate risk
The Corporation’s borrowing costs are impacted by changes in interest
rates. The Corporation’s tolerance to interest rate risk decreases as
the Corporation’s leverage ratio increases and interest coverage ratio
decreases. To manage this risk prudently, guideline percentages of
floating interest rate debt decrease as the Corporation’s leverage
ratio increases. The Corporation has entered into interest rate swap
contracts primarily to minimize exposure to interest rate fluctuations on
its variable rate debt.
A 1.00 percentage point change in interest rates on the unhedged
average amount outstanding under the bank credit facility for
2024 would result in a change to earnings before income taxes of
approximately $1,833 for the year.
c) Equity price risk
The Corporation’s total return swaps are exposed to fluctuations in its
share price. A $1.00 per share decrease in the share price would result
in a decrease in earnings before income taxes of $366 relating to the
total return swaps. An increase of $1.00 per share would result in an
equal and opposite effect on earnings before income taxes.
Derivative financial instruments and hedges
The Corporation enters into interest rate swaps to hedge the risk
associated with interest rate fluctuations on its variable rate debt.
Interest rate swaps are initially recognized on the date the derivative
contracts are entered into, and are subsequently re-measured at
their fair values. The method of recognizing the resulting gain or
loss depends on whether the derivative is designated as a hedging
instrument. In a cash flow hedging relationship, the effective portion of
the change in the fair value of the hedging derivative, net of taxes, is
recognized in other comprehensive income while the ineffective portion
is recognized within net earnings. Amounts in accumulated other
comprehensive income are reclassified to net earnings in the periods
when the hedged item affects profit or loss.
During the second quarter of 2023, the Corporation discontinued its
application of hedge accounting relating to its interest rate swaps.
The derivatives continue to be carried at fair value in the consolidated
statements of financial position with changes in fair value recognized
in finance costs in the consolidated statements of earnings. Amounts
previously accumulated in accumulated other comprehensive income
prior to discontinuance will be amortized to finance costs over the
remaining term of the underlying forecasted interest payments. During
the second quarter of 2024, the maturity on $100,000 of interest rate
swaps was extended from October 2026 to October 2027 to match the
maturity date of the bank credit facility.
For the year ended December 31, 2024, the Corporation recognized a
loss of $3,566 (2023 – loss of $1,237) in the consolidated statements
of earnings associated with its interest rate swaps and a loss of $708
(2023 – loss of $678), net of tax in other comprehensive income.
The Corporation’s interest rate swaps outstanding are summarized
as follows:
Weighted
Average
Notional Interest
Amount
Rate
Maturity
As at December 31, 2024: $ 150,000
2.57%
October 2027
As at December 31, 2023: $ 150,000
2.32% October 2026 to
October 2027
The Corporation enters into short-term foreign exchange forwards to
hedge the exchange risk associated with the cost of certain inbound
inventory and certain foreign currency-denominated sales to customers
along with the associated receivables as part of its normal course of
business. Foreign exchange forwards are initially recognized on the
date the derivative contract is entered into and are subsequently re-
measured at their fair values. The method of recognizing the resulting
gain or loss depends on whether the derivative is designated as a
hedging instrument. In a cash flow hedging relationship, the effective
portion of the change in the fair value of the hedging derivative, net of
taxes, is recognized in other comprehensive income while the ineffective
portion is recognized within net earnings. Amounts in accumulated
other comprehensive income are reclassified to net earnings in the
periods when the hedged item affects profit or loss. For the year ended
December 31, 2024, the Corporation recognized a gain of $1,983
(2023 – loss of $1,304) associated with its foreign exchange forwards
in the consolidated statements of earnings, and a gain of $3,462
(2023 – loss of $3,312), net of tax in other comprehensive income.
The Corporation’s contracts to buy and sell foreign currencies are
summarized as follows:
Average
Notional
Exchange
December 31, 2024
Amount
Rate
Maturity
Purchase contracts US$ 164,165
1.3705
January 2025 to
August 2026
€ 756
1.5001
January 2025 to
March 2025
AUD 7,269
0.9078
January 2025 to
December 2025
Sales contracts
US$ 87,306
1.3507
January 2025 to
May 2026
€ 973
1.4774
January 2025 to
November 2025
Wajax 2024 Annual Report 55
Notes to Consolidated Financial Statements
Average
Notional
Exchange
December 31, 2023
Amount
Rate
Maturity
Purchase contracts US$ 195,235
1.3499
January 2024 to
November 2025
€ 7,257
1.4642
January 2024 to
October 2024
Sales contracts
US$ 77,866
1.3451
January 2024 to
December 2025
€ 1,648
1.4777
January 2024 to
September 2024
The Corporation has certain total return swaps to hedge the exposure
associated with increases in its share price on its outstanding restricted
share units (“RSUs”). The Corporation does not apply hedge accounting
to these relationships and as such, gain and loss arising from marking
these derivatives to market are recognized in earnings in the period
in which they arise. As at December 31, 2024, the Corporation’s
total return swaps cover 366,000 of the Corporation’s underlying
common shares (December 31, 2023 – 399,000), and expire between
March 2025 and March 2027. During the year, the Corporation settled
a total return swap contract for 147,000 shares (2023 – 143,000
shares), resulting in a cash receipt of $1,896 (2023 – cash receipt
of $1,396). For the year ended December 31, 2024, the Corporation
recognized a loss of $3,391 (2023 – gain of $4,180) associated with
its total return swaps.
Derivative financial assets consist of:
December 31
2024
2023
Interest rate swaps
$
1,676 $
6,203
Foreign exchange forwards
9,795
2,262
Total return swaps
—
2,843
Total derivative financial assets
$
11,471 $
11,308
Current portion
$
9,773 $
5,632
Non-current portion
$
1,698 $
5,676
Derivative financial liabilities consist of:
December 31
2024
2023
Foreign exchange forwards
$
6,453 $
5,602
Total return swaps
2,445
—
Total derivative financial liabilities
$
8,898 $
5,602
Current portion
$
5,313 $
4,081
Non-current portion
$
3,585 $
1,521
Movements in the net derivative financial assets (liabilities) balance are
as follows:
For the year ended December 31
2024
2023
Opening net derivative financial assets $
5,706 $
10,876
(Loss) gain recognized in net earnings
(4,974)
1,639
Gain (loss) recognized in other
comprehensive income – before tax
3,737
(5,413)
Cash received on settlement
of total return swaps
(1,896)
(1,396)
Ending net derivative financial assets
$
2,573 $
5,706
The balance in accumulated other comprehensive income is comprised
of the fair value of the Corporation’s various foreign exchange forwards
where hedge accounting is applied, and the remaining unamortized
fair value of the Corporation’s interest rate swaps where hedge
accounting was applied, prior to discontinuance of hedge accounting.
These accumulated amounts will be continuously released to the
consolidated statements of earnings within gross profit and finance
costs, respectively.
During the periods presented and cumulatively to date, changes in
counterparty credit risk have not significantly contributed to the overall
changes in the fair value of these derivative instruments.
19. Share Capital and Earnings Per Share
The Corporation is authorized to issue an unlimited number of no
par value common shares and an unlimited number of no par value
preferred shares. Each common share entitles the holder of record to
one vote at all meetings of shareholders. All issued common shares
are fully paid. There were no preferred shares outstanding as at
December 31, 2024 (December 31, 2023 – nil). Each common share
represents an equal beneficial interest in any distributions of the
Corporation and in the net assets of the Corporation in the event of its
termination or winding-up.
Number of
Common
Shares
Amount
Issued and outstanding,
December 31, 2023
21,810,411 $ 211,337
Common shares issued to settle
share-based compensation awards
98,278
1,189
Issued and outstanding,
December 31, 2024
21,908,689 $ 212,526
Shares held in trust, December 31, 2023
(140,865) $
(1,333)
Released for settlement of certain
share-based compensation awards
57,511
545
Purchased for future settlement of certain
share-based compensation awards
(29,419)
(285)
Shares held in trust, December 31, 2024
(112,773) $
(1,073)
Issued and outstanding, net of shares
held in trust, December 31, 2024
21,795,916 $ 211,453
Number of
Common
Shares
Amount
Issued and outstanding,
December 31, 2022
21,602,836 $ 208,763
Common shares issued to settle
share-based compensation awards
207,575
2,574
Issued and outstanding,
December 31, 2023
21,810,411 $ 211,337
Shares held in trust, December 31, 2022
(131,734) $
(1,208)
Released for settlement of certain
share-based compensation awards
74,149
680
Purchased for future settlement of certain
share-based compensation awards
(83,280)
(805)
Shares held in trust, December 31, 2023
(140,865) $
(1,333)
Issued and outstanding, net of shares
held in trust, December 31, 2023
21,669,546 $ 210,004
56 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
During the year, the Corporation purchased 29,419 (2023 –
83,280) common shares on the open market through Employee
Benefit Plan Trusts for the future settlement of certain share-based
compensation awards. The cash consideration paid for the purchase
was $980 (2023 – $2,000), the reduction in share capital was $285
(2023 –$805) and the premium charged to retained earnings was
$695 (2023 – $1,195).
Dividends declared
During the year, the Corporation declared cash dividends of $1.40
per share or $30,431 (2023 – dividends of $1.32 per share or
$28,445). As at December 31, 2024, the Corporation had $7,629
(December 31, 2023 – $7,151) dividends outstanding which were paid
on January 7, 2025.
Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share:
For the year ended December 31
2024
2023
Numerator for basic and
diluted earnings per share:
– net earnings
$
42,793 $
80,990
Denominator for basic earnings per share:
– weighted average shares,
net of shares held in trust
21,719,568 21,509,250
Denominator for diluted earnings per share:
– weighted average shares,
net of shares held in trust
21,719,568 21,509,250
– effect of dilutive share rights
469,060
762,378
Denominator for diluted
earnings per share
22,188,628 22,271,628
Basic earnings per share
$
1.97 $
3.77
Diluted earnings per share
$
1.93 $
3.64
For the year, the calculation above excludes 38,667 anti-dilutive share
rights (2023 – nil).
20. Share-Based Compensation Plans
The Corporation has four share-based compensation plans: the Wajax
Share Ownership Plan (the “SOP”), the Directors’ Deferred Share Unit
Plan (the “DDSUP”), the Mid-Term Incentive Plan for Senior Executives
(the “MTIP”) and the Deferred Share Unit Plan (the “DSUP”). The
following table provides the share-based compensation expense for
awards under all plans:
For the year ended December 31
2024
2023
Treasury share rights plans
SOP equity-settled
$
84 $
90
DDSUP equity-settled
1,026
1,037
Total treasury share rights plans expense $
1,110 $
1,127
Market-purchased share rights plans
MTIP equity-settled
$
2,097 $
1,677
DSUP equity-settled
90
5
Total market-purchased
share rights plans expense
$
2,187 $
1,682
Cash-settled rights plans
MTIP cash-settled
$
3,561 $
6,512
DSUP cash-settled
(25)
127
Total cash-settled rights plans expense $
3,536 $
6,639
Total share-based compensation expense $
6,833 $
9,448
a) Treasury share rights plans
Under the SOP and the DDSUP, rights are issued to the participants
which are settled by issuing Wajax Corporation shares for no cash
consideration. Rights under the SOP vest over three years, while rights
under the DDSUP vest immediately. Vested rights are settled when
the participant is no longer employed by the Corporation or one of its
subsidiary entities or no longer sits on its Board. Whenever dividends
are paid on the Corporation’s shares, additional rights (dividend
equivalents) with a value equal to the dividends are credited to the
participants’ accounts.
The following rights under these plans are outstanding:
Fair value
Number
at Time
of Rights
of Grant
Outstanding at December 31, 2023
399,288 $
5,818
Grants – new grants
40,026
1,025
– dividend equivalents
19,725
—
Settlements
(98,278)
(1,189)
Outstanding at December 31, 2024
360,761 $
5,654
At December 31, 2024, 347,420 share rights were vested
(December 31, 2023 – 386,584 share rights were vested).
The outstanding aggregate number of shares issuable to satisfy
entitlements under these plans is as follows:
Number of Shares
Approved by shareholders
1,650,000
Exercised to date
(736,655)
Rights outstanding
(360,761)
Available for future grants at December 31, 2024
552,584
b) Market-purchased share rights plans
The MTIP plan consists of cash-settled restricted share units (“RSUs”)
and equity-settled performance share units (“PSUs”), and the equity-
settled DSUP plan consists of deferred share units (“DSUs”).
Market-purchased share rights plans consist of PSUs under the MTIP
plan and DSUs, which vest over three years and are settled in common
shares of the Corporation on a one-for-one basis. DSUs are only subject
to time-vesting, whereas PSUs are also subject to performance vesting.
PSUs are comprised of two types:
Total shareholder return (“TSR”) PSUs: TSR PSUs vest dependent
upon the attainment of a TSR market condition. Such performance
vesting criteria result in a performance vesting factor that ranges
from 0% to 200% depending on the Corporation’s TSR relative to a
pre-selected group of peers.
Return on net assets (“RONA”) PSUs or Return on invested capital
(“ROIC”) PSUs: RONA PSUs are applicable for grants prior to 2022
and vest dependent upon the attainment of a target level of return
on net assets. ROIC PSUs are applicable from 2022 onward and vest
dependent upon the attainment of a target level of return on invested
capital. Such performance vesting criteria results in a performance
vesting factor that ranges from 0% to 150% depending on the level
of RONA or ROIC attained. During the year, the last remaining RONA
PSUs vested and were settled, leaving only ROIC PSUs outstanding
as at December 31, 2024.
Wajax 2024 Annual Report 57
Notes to Consolidated Financial Statements
These plans are settled through shares purchased on the open market
by the employee benefit plan trust, subject to the attainment of their
vesting conditions. PSUs are settled at the end of the vesting period,
and the number of shares remitted to the participant upon settlement
is equal to the number of PSUs awarded multiplied by the performance
vesting factor less shares withheld to satisfy the participant’s
withholding tax requirement. DSUs are settled when the participant
is no longer employed by the Corporation or one of its subsidiary
entities. Whenever dividends are paid on the Corporation’s shares,
additional rights with a value equal to the dividends are credited to the
participants’ accounts with the same vesting conditions as the original
PSUs and DSUs.
The following rights under these plans are outstanding:
Fair value
Number
at Time
of Rights
of Grant
Outstanding at December 31, 2023
256,622 $
5,809
Grants – new grants
86,745
2,637
– dividend equivalents
15,647
—
Forfeitures
(3,707)
(98)
Settlements
(122,849)
(2,160)
Outstanding at December 31, 2024
232,458 $
6,188
At December 31, 2024, 20,902 outstanding rights were vested
(December 31, 2023 – 33,796 rights were vested). All vested rights
are DSUs.
c) Cash-settled rights plans
Cash-settled rights plans consist of MTIP RSUs and cash-settled DSUs.
Compensation expense varies with the price of the Corporation’s shares
and is recognized over the three year vesting period. RSUs are settled
at the end of the vesting period, whereas DSUs are settled when the
participant is no longer employed by the Corporation or one of its
subsidiary entities. Whenever dividends are paid on the Corporation’s
shares, additional rights with a value equal to the dividends are credited
to the participants’ accounts with the same vesting conditions as
the original rights. The value of the payout is equal to the number of
rights awarded including earned dividend equivalents, multiplied by
the volume weighted average share price at the time of vesting. At
December 31, 2024, the carrying amount of the liabilities for these
plans was $5,235 (December 31, 2023 – $8,077).
The following rights under these plans are outstanding:
Number of Rights
Outstanding at December 31, 2023
479,146
Grants – new grants
109,529
– dividend equivalents
20,716
Forfeitures
(12,038)
Settlements
(194,923)
Outstanding at December 31, 2024
402,430
At December 31, 2024, 4,452 outstanding rights were vested
(December 31, 2023 – 11,816 rights were vested).
21. Revenue
a) Disaggregation of revenue
In the following table, revenue is disaggregated by revenue type:
For the year ended December 31
2024
2023
Equipment sales
$ 618,582 $ 607,089
Product support
535,034
543,278
Industrial parts
572,001
605,072
Engineered repair services (ERS)
326,456
354,286
Revenue from contracts with customers $ 2,052,073 $ 2,109,725
Equipment rental
45,522
44,953
Total
$ 2,097,595 $ 2,154,678
For the year ended December 31, 2024, the Corporation included
$20,437 (2023 – $17,057) in equipment sales related to short-term
rental contracts, the majority of which are expected to convert to
equipment sales within a six to twelve month period.
b) Transaction price allocated to the
remaining performance obligations
The following table includes revenue expected to be recognized in
the future related to performance obligations that are unsatisfied (or
partially unsatisfied) at the reporting date:
2025
2026
2027
Total
Equipment sales
$ 10,006 $
52
$
— $ 10,058
ERS
12,954
920
461 14,335
Total
$ 22,960 $
972
$
461 $ 24,393
The Corporation has applied the practical expedient which permits the
Corporation to not disclose information about remaining performance
obligations that have original expected durations of one year or less.
22. Employee Costs
Employee costs recorded in cost of sales and selling and administrative
expenses for the Corporation during the year amounted to:
Note
2024
2023
Wages and salaries,
including bonuses
$ 324,271 $ 326,735
Other benefits
46,813
45,430
Pension costs – defined
contribution plans
15
12,092
11,178
Pension costs – defined
benefit plans
15
475
466
Share-based compensation expense 20
6,833
9,448
$ 390,484 $ 393,257
23. Restructuring and Other Related Costs
In the fourth quarter of 2024, the Corporation implemented workforce
reductions in response to economic conditions. A restructuring cost
of $5,766 was recognized in the fourth quarter relating primarily to
severance costs.
See Note 13 for the restructuring provision balance and movement.
58 Wajax 2024 Annual Report
Notes to Consolidated Financial Statements
24. Finance Costs
Finance costs are comprised of the following:
For the year ended December 31
Note
2024
2023
Interest on long-term debt
17 $
21,019 $
13,627
Unrealized loss on
interest rate swaps
18
3,566
1,237
Interest on debentures
16
4,048
3,999
Interest on lease liabilities
14
10,580
8,871
Interest income on lease receivables
(1,031)
(630)
Finance costs
$
38,182 $
27,104
25. Income Tax Expense
Income tax expense comprises current and deferred tax as follows:
For the year ended December 31
2024
2023
Current income tax expense
$
17,129 $
28,107
Deferred income tax (recovery) expense
(1,609)
547
Income tax expense
$
15,520 $
28,654
The calculation of current tax is based on a combined federal and
provincial statutory income tax rate of 26.0% (2023 – 26.0%). Deferred
tax assets and liabilities are measured at tax rates that are expected to
apply to the period when the asset is realized or the liability is settled.
Deferred tax assets and liabilities have been measured using an
expected average combined statutory income tax rate of 26.0% based
on the tax rates in years when the temporary differences are expected
to reverse.
On June 20, 2024, legislation to implement the “Pillar Two” global
minimum tax regime in Canada was enacted, effective January 1,
2024. The Corporation is subject to the global minimum tax. The global
minimum top-up tax recognized in current income tax expense for the
year ended December 31, 2024 is nil.
The Corporation has applied a temporary mandatory relief from deferred
tax accounting for the impacts of the top-up tax and accounts for it as a
current tax when it is incurred.
The reconciliation of income taxes at Canadian statutory rates to the
reported income tax expense is as follows:
For the year ended December 31
2024
2023
Combined statutory income tax rate
26.0%
26.0%
Expected income tax
expense at statutory rates
$
15,161 $
28,507
Non-deductible expenses
1,394
896
Changes in estimates
related to prior years
(610)
(559)
Other
(425)
(190)
Income tax expense
$
15,520 $
28,654
Recognized deferred tax assets and liabilities and the movement of
temporary differences during the year are as follows:
Recognized
in other
Recognized
December 31,
Recognized in
comprehensive
in retained
December 31,
2023
profit or loss
income
earnings
2024
Property, plant and equipment
$
(11,508) $
403 $
— $
— $
(11,105)
Finance leases
6,085
23
—
—
6,108
Intangible assets
(13,250)
1,340
—
—
(11,910)
Goodwill
(797)
(144)
—
—
(941)
Accrued liabilities
7,790
(1,676)
—
712
6,826
Provisions
743
(8)
—
—
735
Other Liabilities
63
—
—
—
63
Derivative instruments
(1,644)
1,463
(984)
—
(1,165)
Employee benefits
1,828
(123)
(8)
—
1,697
Deferred financing costs
(227)
226
—
—
(1)
Tax loss carryforwards
589
105
—
—
694
Net deferred tax liabilities
$
(10,328) $
1,609 $
(992) $
712 $
(8,999)
Recognized
in other
Recognized
December 31,
Recognized in
comprehensive
on business
December 31,
2022
profit or loss
income
aquisitions
2023
Property, plant and equipment
$
(10,447) $
(960) $
— $
(101) $
(11,508)
Finance leases
6,265
(180)
—
—
6,085
Intangible assets
(11,582)
1,207
—
(2,875)
(13,250)
Goodwill
(643)
(154)
—
—
(797)
Accrued liabilities
8,436
(646)
—
—
7,790
Provisions
822
(79)
—
—
743
Other Liabilities
—
63
—
—
63
Derivative instruments
(3,197)
(66)
1,619
—
(1,644)
Employee benefits
1,730
(17)
115
—
1,828
Deferred financing costs
(276)
49
—
—
(227)
Tax loss carryforwards
353
236
—
—
589
Net deferred tax liabilities
$
(8,539) $
(547) $
1,734 $
(2,976) $
(10,328)
Deferred tax assets of $1,035 (2023 – $1,035) have not been recognized in respect of deductible temporary differences related to land because it
is not probable that future taxable profit will be available against which the Corporation can use the benefits therefrom.
Wajax 2024 Annual Report 59
Notes to Consolidated Financial Statements
26. Changes in Non-Cash Operating Working Capital
The net change in non-cash operating working capital comprises
the following:
For the year ended December 31
2024
2023
Trade and other receivables
$
7,476 $
3,699
Contract assets
13,932
(7,415)
Inventory
(38,047)
(162,481)
Deposits on inventory
(4,768)
(106)
Prepaid expenses
(1,409)
(2,713)
Accounts payable and accrued liabilities
4,408
(29,936)
Provisions
4,445
(451)
Contract liabilities
1,291
2,380
Total
$
(12,672) $ (197,023)
For the year ended December 31, 2024, the change in inventory
above excludes transfers of rental equipment to inventory of $4,098
(2023 – $3,542).
27. Capital Management
Objective
The Corporation defines its capital as the total of its shareholders’
equity, long-term debt, and debentures (“interest bearing debt”). The
Corporation’s objective when managing capital is to have a capital
structure and capacity to support the Corporation’s operations and
strategic objectives set by the Board of Directors.
Management of capital
As part of the Corporation’s renewed long-term strategy, its capital
structure will continue to be managed such that it maintains a prudent
leverage ratio, defined below, in order to provide funds available
to invest in strategic growth initiatives, provide liquidity in times of
economic uncertainty and to allow for the payment of dividends. In
addition, the Corporation’s tolerance to interest rate risk decreases/
increases as the Corporation’s leverage ratio increases/decreases.
The Corporation’s objective is to manage its working capital and
normal-course capital investment programs within a leverage range of
1.5 to 2.0 times and to fund those programs through operating cash
flow and its bank credit facilities as required. There may be instances
whereby the Corporation is willing to maintain a leverage ratio outside
of this range during changes in economic cycles. The Corporation may
also maintain a leverage ratio above the stated range as a result of
investment in significant acquisitions and may fund those acquisitions
using its bank credit facilities and other debt instruments in accordance
with the Corporation’s expectations of total future cash flows, financing
costs and other factors.
The leverage ratio at the end of a particular quarter is defined as debt
divided by trailing 12-month pro-forma adjusted EBITDA. Debt includes
bank indebtedness, debentures, total long-term debt, and letters of
credit, net of cash. Pro-forma adjusted EBITDA used in calculating
the leverage ratio under the bank credit agreement is calculated as
earnings before any facility closure, restructuring, and other related
costs, gains/losses recorded on the sale of properties, non-cash gains/
losses on mark to market of derivative instruments, change in fair
value of contingent consideration, finance costs, income tax expense
and depreciation and amortization, adjusted for the EBITDA of business
acquisitions made during the period as if they were made at the
beginning of the trailing 12-month period, and adjusted for payment of
lease liabilities pursuant to the terms of the bank credit facility.
Although management currently believes the Corporation has adequate
debt capacity, the Corporation may have to access the equity or
debt markets, or temporarily reduce dividends to accommodate any
shortfalls in the Corporation’s credit facilities or significant growth
capital requirements.
There were no significant changes in the Corporation’s approach to
capital management during the year.
Restrictions on capital
The interest bearing debt includes a $500,000 bank credit facility
which expires on October 1, 2027. The bank credit facility contains the
following key covenants:
Borrowing capacity is dependent upon the level of the Corporation’s
inventory on hand and the outstanding trade accounts receivable
(“borrowing base”).
The Corporation will be restricted from declaring cash dividends or
acquiring businesses in the event the Corporation’s leverage ratio, as
defined under the bank credit facility, exceeds 4.0 times.
An interest coverage maintenance ratio.
At December 31, 2024, the Corporation was in compliance with all
covenants and there were no restrictions on declaring quarterly cash
dividends or acquiring businesses.
Under the terms of the $500,000 bank credit facility, the Corporation
is permitted to have additional interest bearing debt of $25,000. As
a result, the Corporation has up to $25,000 of demand inventory
equipment financing capacity with three third-party financing companies.
At December 31, 2024, the Corporation had utilized $12,522 of its
interest bearing equipment financing facilities.
28. Related Party Transactions
Balances and transactions between the Corporation and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
The Corporation’s related party transactions consist of the
compensation of the Board of Directors and key management personnel
which is set out in the following table:
2024
2023
Salaries, bonus and other
short-term employee benefits
$
5,333 $
5,778
Pension costs – defined contribution plans
315
280
Share-based compensation expense
3,005
3,514
Total compensation
$
8,653 $
9,572
29. Operating Segments
The Corporation’s Chief Executive Officer, who is also the Chief
Operating Decision Maker, regularly assesses the performance of, and
makes resource allocation decisions based on, the Corporation as a
whole. As a result, the Corporation has determined that it comprises a
single operating segment and therefore a single reportable segment.
30. Comparative Information
A change in presentation during the year resulted in the reclassification
of the unrealized gain or loss on interest rate swaps, from selling
and administrative expenses to finance costs within the consolidated
statements of earnings. Accordingly, certain comparative information
has been reclassified to conform to the current year’s presentation.
31. Subsequent Events
On March 4, 2025, the Corporation declared a first quarter 2025
dividend of $0.35 per share.
60 Wajax 2024 Annual Report
Summary of Quarterly Data – Unaudited
2024
2023
(in millions of dollars, except per share data)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Revenue
$
482.3 $
568.3 $
481.0 $
565.9 $
516.1 $
586.2 $
509.7 $
542.6
Net earnings (loss)
$
14.7 $
20.6 $
6.4 $
1.0 $
17.5 $
29.0 $
23.4 $
11.1
Earnings (loss) per share – Basic
$
0.68 $
0.95 $
0.29 $
0.05 $
0.81 $
1.35 $
1.09 $
0.52
Earnings (loss) per share – Diluted
$
0.66 $
0.93 $
0.29 $
0.05 $
0.79 $
1.31 $
1.05 $
0.50
Eleven Year Summary – Unaudited
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
Operating Results
Revenue
$ 2,097.6 $ 2,154.7 $ 1,962.8 $ 1,637.3 $ 1,422.6 $ 1,553.0 $ 1,481.6 $ 1,318.7 $ 1,221.9 $ 1,273.3 $ 1,451.3
Net earnings (loss)
42.8
81.0
72.4
53.2
31.7
39.5
35.9
27.4
11.0
(11.0)
41.2
Finance costs
38.2
25.9
17.3
19.1
21.0
19.7
8.8
15.2
11.2
12.2
13.0
Property, plant
and equipment
expenditures – net
8.2
8.1
8.3
0.6
2.7
2.5
4.2
1.7
6.5
4.1
5.4
Rental equipment
expenditures
25.4
20.9
10.9
10.1
16.5
37.5
43.6
19.3
13.5
23.0
23.1
Depreciation and
amortization
62.2
58.6
55.5
55.4
52.4
52.8
27.0
23.2
24.7
24.5
22.5
Per Share
Net earnings
(loss) – Basic
$
1.97 $
3.77 $
3.38 $
2.50 $
1.58 $
1.98 $
1.82 $
1.40 $
0.55 $
(0.59) $
2.46
Dividends declared
1.40
1.32
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.23
2.40
Equity
23.50
22.90
20.95
18.21
16.26
15.83
14.88
14.08
14.07
14.44
14.82
Financial Position
Working capital
$
532.4 $
560.2 $ 346.0 $
313.5 $
376.2 $
404.1 $
334.7 $
289.7 $
268.8 $
302.7 $
258.2
Rental equipment
50.0
42.5
39.4
45.8
56.9
77.0
73.7
60.4
58.1
64.1
59.4
Property, plant and
equipment
45.7
44.8
44.1
39.6
41.4
42.1
59.0
43.6
45.7
46.2
48.7
Right-of-use assets
158.5
135.8
122.7
134.5
131.7
117.1
—
—
—
—
—
Lease liabilities
excluding current
portion
168.0
141.0
127.1
137.6
129.2
106.4
—
—
—
—
—
Debentures
—
56.3
55.8
55.2
54.6
54.1
—
—
—
—
—
Long-term debt
excluding current
portion
283.0
267.8
83.6
98.2
171.6
225.6
218.1
143.7
122.0
151.6
180.9
Shareholders’ equity
512.3
496.2
449.8
389.9
325.6
316.8
297.0
274.7
278.9
288.5
248.5
Total assets
1,547.6 1,473.3 1,249.9 1,080.8
981.4 1,045.1
831.2
694.4
667.3
677.5
718.2
Other Information
Number of employees
3,081
3,287
3,021
2,824
2,461
2,700
2,800
2,418
2,318
2,609
2,725
Shares
outstanding (000s)
21,796
21,670 21,471
21,409
20,034
20,012
19,957
19,504
19,826
19,986
16,779
Price range of shares
High
$
34.96 $
32.57 $ 24.57 $
29.67 $
19.60 $
19.95 $
28.17 $
25.74 $
25.76 $
30.93 $
39.56
Low
20.32
19.16
17.25
16.24
4.90
13.98
15.43
18.49
13.34
14.81
28.75
Additional Financial Information
Wajax 2024 Annual Report 61
Directors
Edward M. Barrett
Leslie Abi-karam 2, 3
Thomas M. Alford 1, 2
A. Jane Craighead 1, 3
Ignacy P. Domagalski
David G. Smith 1, 3
Elizabeth A. Summers 1, 3
Alexander S. Taylor 2, 3
Susan Uthayakumar 1, 2
1 Member of the Audit Committee
2 Member of the Governance Committee
3 Member of the Human Resources and
Compensation Committee
Officers
Ignacy P. Domagalski
President and Chief Executive Officer
Tania S. Casadinho
Chief Financial Officer
Brian Deacon
Senior Vice President, Category Management
André Dubé
Senior Vice President, Sales and Operations
Mark Edgar
Chief People Officer
Andrew W. H. Tam
General Counsel and Corporate Secretary
Shareholder Information
Transfer Agent and Registrar
For information relating to shareholdings,
dividends, lost certificates, changes of
address or estate transfers, please contact
our transfer agent:
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, ON M5J 2Y1
Telephone: 1-800-564-6253
Fax: 1-888-453-0330
Web: www.investorcentre.com/service
Auditors
KPMG LLP
Home Office
10 Diesel Drive
Toronto, ON M8W 2T8
Telephone: (905) 212-3300
Fax: (905) 212-3350
Exchange Listing
Toronto Stock Exchange
Symbol
WJX
Wajax Corporation
Share Trading Information
(January 1 – December 31, 2024)
Vol. of
Shares
Open
High
Low
Close
Traded
$30.52 $34.96 $20.32 $20.96 9,872,000
Quarterly Earnings Reports
Quarterly earnings for 2025 are anticipated to
be announced after market close on May 5,
August 7 and November 3, 2025 and
March 2, 2026.
2025 Dividend Dates
Quarterly dividends are payable to
shareholders of record on or about the 15th
day of the last month in each quarter and
will generally be paid in the first week of the
following month.
Investor Information
Tania Casadinho, Chief Financial Officer
Telephone: (905) 212-3300
Fax: (905) 212-3350
E-mail: ir@wajax.com
To obtain a delayed share quote, read news
releases, listen to the latest analysts’
conference call, and stay abreast of other
Corporation news, visit our website at
www.wajax.com.
Annual Meeting
Shareholders are invited to attend the Annual
Meeting of Wajax Corporation, to be held
at the Sheraton Gateway Hotel located at
the Toronto International Airport, Ontario in
the Gateway Ballroom Meeting Room, on
Tuesday, May 6, 2025, at 11:00 a.m. EDT.
Vous pouvez obtenir la version française de
ce rapport en écrivant au secrétaire,
Corporation Wajax,
10 Diesel Drive,
Toronto, ON M8W 2T8
C O R P O R AT E I N F O R M AT I O N
62 Wajax 2024 Annual Report
Quebec
Atlantic
British Columbia
Prairies/Fort McMurray
Team Members
3,081
Locations
114
Ontario
Team Members
1,075
Team Members
196
Team Members
232
Team Members
899
Team Members
679
Locations
25
Locations
18
Locations
8
Locations
35
Locations
28
Western Canada
Ontario
Eastern Canada
Fort St. John, BC (2)
Kamloops, BC
Langley, BC
Nanaimo, BC
Prince George, BC (2)
Sparwood, BC
Calgary, AB (5)
Clairmont, AB
Edmonton, AB (6)
Edmonton (Acheson), AB
Fort McMurray, AB (3)
Grande Prairie, AB (3)
Lethbridge, AB
Lloydminster, AB
Medicine Hat, AB
Nisku, AB
Red Deer, AB
Rock View County, AB
Regina, SK (2)
Saskatoon, SK (3)
Flin Flon, MB
Winnipeg, MB (3)
Yellowknife, NT
Belleville, ON (2)
Guelph, ON
Kapuskasing, ON
Kirkland Lake, ON
Kitchener, ON
London, ON
Mississauga, ON (2)
Ottawa, ON
Pembroke (Laurentian Valley), ON
Sarnia, ON
Sault Ste. Marie, ON (2)
Stoney Creek, ON
Sudbury, ON
Sudbury (Lively), ON (2)
Thunder Bay, ON (5)
Timmins, ON (2)
Toronto, ON
Vaughan, ON
Windsor, ON
Chambly, QC
Chicoutimi, QC
Dorval, QC
Fermont, QC
Granby, QC
Lachine, QC
L’Ancienne-Lorette, QC
Lasalle, QC
Laval, QC
Montreal, QC (2)
Noranda, QC
Pointe-aux-Trembles, QC (2)
Québec City, QC
Rimouski, QC
Sept Iles, QC
Sherbrooke, QC
St-Felicien, QC
St-Germain-de-Grantham, QC
Temiscaming, QC
Tracy (Sorel), QC
Trois-Rivières, QC
Val d’Or, QC
Valleyfield, QC
Bathurst, NB
Edmundston, NB
Moncton, NB (2)
Moncton (Dieppe), NB
Charlottetown, PEI
Dartmouth, NS (3)
Port Hawkesbury, NS
Stellarton, NS
Corner Brook, NL
Mount Pearl, NL (3)
Pasadena, NL
St. John’s, NL
Wabush, NL
L O C AT I O N S
10 Diesel Drive
Toronto, ON M8W 2T8
Telephone: (905) 212-3300
Fax: (905) 212-3350