2016 Annual Report For Web 7.3MB

TRAMCO
2010
Founded in 1967, TRAMCO
manufactures premier bulk
material handling equipment
primarily for the grain and
oilseed processing industry.
TRAMCO’s European
manufacturing facility
supplies the EU with European
spec equipment.
when assessing dividend levels. An adjustment to dividend levels may
be made at such time as the Board determines an adjustment to be
appropriate. Dividends in a fiscal year are typically funded entirely
through cash from operations, although due to seasonality dividends
may be funded on a short-term basis by the Company’s operating lines,
and through the DRIP. Dividends in 2016 were financed $5.2 million by
the DRIP (2015 – $5.2 million) and the remainder was financed from
cash on hand and cash from operations or bank indebtedness.
FUNDS FROM OPERATIONS AND PAYOUT RATIO
In 2016 management adjusted its calculation of funds from operations
as described below. The change was made to simplify the calculation
and provide readers with a clearer measure of FFO. The comparative
percentages in the table below have been restated to reflect the change
in definition.
Funds from operations (“FFO”), defined under “Non-IFRS Measures”,
is adjusted EBITDA less cash taxes, cash interest expense, realized
losses on foreign exchange and maintenance capital expenditures.
The objective of presenting this measure is to provide a measure of
free cash flow. The definition excludes changes in working capital as
they are necessary to drive organic growth and have historically been
financed by the Company’s operating facility (See “Capital Resources”).
Funds from operations should not be construed as an alternative to
cash flows from operating, investing, and financing activities as a
measure of the Company’s liquidity and cash flows.
[thousands of dollars] Year Ended December 31
2016
$
2015
$
Adjusted EBITDA 100,429 73,337
Interest expense (24,025) (18,490)
Non-cash interest 4,363 3,090
Cash taxes (9,720) (2,613)
Maintenance CAPEX (3,751) (2,252)
Realized loss on FX contracts (14,408) (15,281)
FUNDS FROM OPERATIONS 52,888 37,791
Dividends 35,297 33,593
PAYOUT RATIO 67% 89%
The Company’s payout ratio has been negatively impacted by realized
losses on foreign exchange contracts. Excluding these losses, the
Company’s payout ratio for in 2016 was 52% (2015 – 63%). See “Foreign
exchange contracts”.
FINANCIAL INSTRUMENTS
FOREIGN EXCHANGE CONTRACTS
Risk from foreign exchange arises as a result of variations in exchange
rates between the Canadian and the U.S. dollars and to a lesser extent
to variations in exchange rates between the Euro and the Canadian
dollar. AGI has entered into foreign exchange contracts with three
Canadian chartered banks to partially hedge its foreign currency
exposure and as at December 31, 2016, had outstanding the following
foreign exchange contracts:
SETTLEMENT
DATES
The fair value of the outstanding forward foreign exchange contracts
in place as at December 31, 2016 was a loss of $0.9 million. Consistent
with prior periods, the Company has elected to apply hedge accounting
for these contracts and the unrealized loss has been recognized in other
comprehensive income.
INTEREST RATE SWAPS
FORWARD FOREIGN EXCHANGE CONTRACTS
FACE AMOUNT USD
(000’s)
AVERAGE RATE
CAD
CAD AMOUNT
(000’s)
2017 – Q1 9,000 $1.25 11,216
The Company has entered into interest rate swap contracts to manage
its exposure to fluctuations in interest rates.
CURRENCY MATURITY AMOUNT OF
SWAP (000’S)
FIXED (2)
RATE
Term Loan A CAD 2019 50,000 3.59%
Term Loan B CAD 2022 40,000 4.32%
Revolver (1) USD 2020 51,023 3.73%
(1) USD $38.0 million converted at the rate of exchange at December 31, 2016.
(2) With performance adjustments.
05 FIELD TO CONSUMER
2016 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 44