2016 Annual Report For Web 7.3MB

EBITDA AND ADJUSTED EBITDA
[thousands of dollars] Year Ended December 31
Adjusted EBITDA increased significantly compared to 2015 due largely
to strategic acquisitions in the grain and fertilizer equipment sectors
both in North America and overseas. Adjusted EBITDA benefited from
a strong Canadian Farm market and robust North American demand
for Commercial equipment, offset by continued weakness in the U.S.
Farm market and a decrease in large international project sales. As
a percentage of sales, adjusted EBITDA increased compared to 2015
as strong Commercial margins and results from acquisitions more
than offset the impact of lower sales of high margin Farm handling
equipment. The increase in EBITDA over 2015 was more significant
due to a smaller loss on foreign exchange and a gain on an equity
compensation derivative in 2016.
FINANCE COSTS
2016
$
2015
$
EBITDA (1) 83,663 28,396
Adjusted EBITDA (1) 100,429 73,337
(1) See the EBITDA and adjusted EBITDA reconciliation table above, “Non-IFRS Measures” and
“Basis of Presentation”.
Finance costs in 2016 were $24.0 million (2015 – $18.5 million). The
higher expense in 2016 relates primarily to financing the acquisition of
Westeel in May 2015, partially through a convertible debenture issuance
and through an increase in amounts drawn on the Company’s credit
facility, as well as a debenture issuance in September 2015. Finance
costs in both periods include non-cash interest related to convertible
debenture accretion, the amortization of deferred finance costs related
to the convertible debentures, stand-by fees and other sundry cash
interest.
OTHER OPERATING EXPENSE (INCOME)
Other operating income in 2016 includes a gain on financial instruments
of $9.2 million that was entered in 2016 (see “Equity Compensation
Hedge”) and in 2016 the Company recorded a gain on the sale of
property, plant & equipment and assets held for sale of $0.1 million
(2015 – loss of $3.2 million).
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 2016 primarily relates to acquisitions made in 2015 and
2016. Total depreciation and amortization is summarized below:
Depreciation
[thousands of dollars] Year Ended December 31
Amortization
CURRENT INCOME TAX EXPENSE
2016
$
2015
$
Depreciation in cost of sales 10,019 7,621
Depreciation in G&A 904 567
Total Depreciation 10,923 8,188
[thousands of dollars] Year Ended December 31
2016
$
2015
$
Amortization in cost of sales 3,648 2,545
Amortization in G&A 7,413 5,784
Total Amortization 11,061 8,329
DEFERRED INCOME TAX EXPENSE
For the year ended December 31, 2016, the Company recorded deferred
tax recovery of ($0.3) million (2015 –$1.6 million). Deferred tax recovery
in 2016 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 depreciable
assets, intangible assets 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, 2016,
the Company offset $0.5 million of Canadian tax otherwise payable
(2015 - generated new net Canadian tax losses of ($0.7) million).
Through the use of these attributes and since the date of Conversion
a cumulative amount of $38.2 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, 2016, the balance
sheet asset related to these unused attributes was $16.8 million.
EFFECTIVE TAX RATE
[thousands of dollars] Year Ended December 31
2016
$
2015
$
Current tax expense 11,122 4,722
Deferred tax expense (260) (1,613)
TOTAL TAX 10,862 3,109
Profit (loss) before taxes 30,168 (22,120)
Total tax % 36.0% (14.1%)
PROFIT (LOSS) AND DILUTED PROFIT (LOSS) PER SHARE AND
ADJUSTED DILUTED PROFIT (LOSS) PER SHARE
In 2016 the Company reported profit of $19.3 million (2015 – loss of
$25.2 million), basic profit per share of $1.31 (2015 – loss of $1.81) and
a fully diluted profit per share of $1.29 (2015 – loss of $1.81).
A reconciliation of adjusted profit per share is below:
[thousands of dollars, other than per share data] Year Ended December 31
2016
$
2015
$
Profit as reported 19,306 (25,229)
Diluted profit per share as reported 1.29 (1.81)
Loss on foreign exchange 14,070 31,322
Assets under review (353) 15,509
Asset Impairment 7,839 0
M&A expenses 3,018 5,405
Contingent consideration expense 1,307 0
Gain on financial instruments (9,210) 0
Loss on sale of PP&E (114) 3,203
Allowance for net Receivables 682 2,280
Adjusted profit (1) 36,545 32,490
Diluted adjusted profit per share (1) 2.44 2.33
(1) See “Non-IFRS Measures”.
FINANCE EXPENSE
Finance expense in both periods relates primarily to non-cash gains
and losses on the translation of the Company’s U.S. dollar denominated
long-term debt at the rate of exchange in effect at the end of the
quarter.
For the year ended December 31, 2016 the Company recorded current
tax expense of $11.1 million (2015 – $4.7 million). Current tax expense
relates primarily to Ag Growth U.S. and Italy subsidiaries.
The total tax percentage in 2015 and to a much lesser extent in 2016
was impacted by items that were expensed for accounting purposes but
were not deductible for tax purposes. These include non-cash losses
on foreign exchange. See “Diluted profit per share and Diluted adjusted
profit per share”.
27 MANAGEMENT’S DISCUSSION & ANALYSIS
FIELD TO CONSUMER
2016 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 28