Annual Report 2015

Depreciation and amortization
Depreciation of property, plant and equipment and amortization
of intangible assets are categorized on the income statement in
accordance with the function to which the underlying asset is
related. The increase in 2015 primarily relates to the depreciation and
amortization of Westeel assets. Total depreciation and amortization is
summarized below:
Effective tax rate
(thousands of dollars) Year Ended December 31
2015
$
2014
$
Current tax expense 4,722 4,757
Deferred tax expense (1,613) 27,342
17
Depreciation
(thousands of dollars) Year Ended December 31
2015
$
2014
$
Depreciation in cost of sales 8,418 6,167
Depreciation in G&A 640 614
TOTAL DEPRECIATION 9,058 6,781
Amortization
(thousands of dollars) Year Ended December 31
2015
$
2014
$
Amortization in cost of sales 2,545 554
Amortization in G&A 6,065 4,386
TOTAL AMORTIZATION 8,610 4,940
Current income tax expense
For the year ended December 31, 2015 the Company recorded a
current tax expense of $4.8 million (2014 – $4.8 million). Current tax
relates primarily to AGI’s U.S. subsidiaries.
Deferred income tax expense
For the year ended December 31, 2015 the Company recorded
a deferred tax recovery of $1.6 million (2014 – expense of $27.3
million). Deferred tax expense in 2015 relates to the increase
of deferred tax assets plus a decrease in deferred tax liabilities
that related to recognition of temporary differences between the
accounting and tax treatment of accruals, long-term provisions
and convertible debentures.
Upon conversion to a corporation from an income trust in June 2009
(the “Conversion”) the Company received certain tax attributes
that may be used to offset tax otherwise payable in Canada. The
Company’s Canadian taxable income is based on the results of its
divisions domiciled in Canada, including the corporate office, and
realized gains or losses on foreign exchange. For the year ended
December 31, 2015, the Company generated new net Canadian tax
losses of $0.7 million (2014 –utilized $7.8 million of tax attributes).
Through the use of these attributes and since the date of Conversion
a cumulative amount of $36.3 million has been utilized. Utilization
of these tax attributes is recognized in deferred income tax expense
on the Company’s income statement. As at December 31, 2015, the
balance sheet asset related to these unused attributes was
$17.1 million.
AGI Conversion – Agreement with CRA 0 (16,889)
TOTAL TAX EXCLUDING AGREEMENT
WITH CRA 3,109 15,210
Profit before taxes (22,120) 36,199
Total tax % (14%) 42%
The effective tax rate in both periods was significantly impacted by
non-cash income statement items that are not deductible for tax
purposes.
Effective tax rate
(thousands of dollars) Year Ended December 31
2015
$
2014
$
Adjusted profit (1) 30,371 35,331
Total tax 3,109 15,210
ADJUSTED PROFIT BEFORE TAX 33,480 50,541
Tax % 9% 30%
(1)
See “Non-IFRS Measures”. A calculation of adjusted profit may be found under “Diluted profit
per share and Diluted adjusted profit per share” above.
AGI Conversion – Agreement with CRA
On February 25, 2015, AGI announced that it had entered into an
agreement with Canada Revenue Agency (the “CRA”) regarding the
CRA’s objection to the tax consequences of the conversion of AGI
from an income trust structure into a business corporation in June
2009. The agreement did not give rise to any cash outlay by AGI
and subsequent to the settlement AGI had unused tax attributes
remaining of $16.3 million and these are recorded as an asset on
the Company’s balance sheet. As at December 31, 2015, the balance
sheet asset related to these unused attributes was $17.1 million.
MANAGEMENT’S DISCUSSION & ANALYSIS 2015 ANNUAL REPORT