2009 Annual Report - Toromont Industries Ltd.

2009 

Annual Report 

The Future 

of Enerflex 

Our natural gas and process compression 

business in profile | Pg 04 

Forging a Precious 

Relationship 

Toromont stakes its claim with 

senior gold producer | Pg 13

180 180 

160 160 

140 140 

120 120 

100 100 

09 

Compression Group 

TOROMONT INDUSTRIES LTD. employed over 3,800 people in 129 

locations, predominantly in Canada and the United States at the end 

of 2009. With the acquisition of Enerflex in January 2010, this scope 

increases significantly (see page 4). Our common shares are listed 

on the Toronto Stock Exchange under the symbol TIH. We serve our 

customers through two business groups: Equipment and Compression. 

Equipment Group 

We sell, rent and service a broad range of mobile equipment 

and industrial engines through our Caterpillar dealership 

and Battlefield – The CAT Rental Store in Ontario, Manitoba, 

Newfoundland, and most of Labrador and Nunavut. 

Financial Highlights 

We design, engineer, fabricate, install and service natural gas 

compression units and hydrocarbon and petrochemical process 

systems through Toromont Energy Systems (renamed Enerflex in 

2010) and industrial and recreational refrigeration systems through 

CIMCO Refrigeration. 

(in thousands except per share amounts and ratios) 2009 2008 2007 

Revenues $ 1,824,592 $ 2,121,209 $ 1,886,761 

Operating income 182,352 207,854 180,123 

Net earnings 120,516 140,524 122,280 

Working capital 539,264 509,276 466,859 

Total assets 1,364,667 1,533,450 1,356,861 

Debt net of cash to equity (0.06:1) 0.05:1 0.19:1 

Shareholders’ equity 854,063 779,103 654,730 

– per share $ 13.17 $ 12.06 $ 10.08 

Earnings per share – basic 1.86 2.16 1.89 

Dividends per share 0.60 0.56 0.48 

Closing share price – TSX 27.79 22.99 28.26 

Return on opening shareholders’ equity 15.5% 21.5% 21.6% 

Total Return on 

a $100 investment 

180 

160 

140 

120 

100 

$146.96 $146.96 $146.96 

$144.65 $144.65 $144.65 

2.5 

2.0 

1.5 

1.0 

0.5 

04 0405 05 0406 06 0507 07 0608 08 0709 09 08 09 05 05 06 05 06 07 06 07 08 07 08 09 08 09 09 05 05 06 05 06 07 06 07 08 07 08 09 08 09 09 

TIH TIH 

TSX TIHTSX 

TSX EPS EPS EPS DPS DPS DPS 

2.5 

2.0 

1.5 

1.0 

0.5 

Earnings Per Share and 

Dividends Per Share 

2.5 

2.0 

1.5 

1.0 

0.5 

$1.86 $1.86 $1.86 

$0.60 $0.60 $0.60 

Return on Opening 

Shareholders’ Equity 

25 

20 

15 

10 

5 

25 

20 

15 

10 

5 

25 

20 

15 

10 

5 

15.5% 15.5% 15.5%

contents 

Empowered to 

power Results 

Delivering profitable growth is a team 

effort. Toromont fuels performance 

through a decentralized approach – 

empowering business unit leaders and 

their teams to produce ever increasing 

value to our customers and shareholders. 

On OUR cOvER 

Rob VanRoon, Battlefield 

Joanne Wilson, Toromont CAT 

Elias Leon, TESI 

Dave Parise, CIMCO 

ABOvE 

From left to right: 

Mike Storring, Toromont CAT 

Tony Joosse, Battlefield 

Mark Szilard, CIMCO 

Michael Smith, TESI 

Jennifer Cochrane, TIL 

Haley Coito, Toromont CAT 

Kevin Rolston, Battlefield 

Kelli Celeste, CIMCO 

Lynn Chang, CIMCO 

Frank Crummey, Toromont CAT 

Jon Brown, Battlefield 

Peter McMurdo, Toromont CAT 

Nigel Watson, Toromont CAT 

FEATURES 

04 ThE FUTURE OF EnERFlEx 

BEginS nOw 

With global market reach and 

substantial capabilities, our natural 

gas compression and process 

business readies for value creation. 

08 A SOUThwESTERn SUccESS STORy 

Southwestern Energy’s pioneering 

efforts in Arkansas’ Fayetteville Shale 

play create opportunity for Toromont. 

10 wASTE nOT, wAnT nOT 

Helping an Ontario municipality realize 

value from landfill gas is a 24/7 job. 

13 FORging A pREciOUS 

RElATiOnShip 

Toromont people and equipment play 

a variety of important supporting roles 

at Goldcorp Inc. mines. 

02 lETTER TO ShAREhOldERS 

15 whEn ThE gOing gETS TOUgh, 

ThERE iS TOROmOnT SERvicE 

16 mOving mOUnTAinS pART OF dAy’S 

wORk AT lOng hARBOUR 

18 On ThE FROnT linES 

OF inFRASTRUcTURE 

20 cOld TEchnOlOgy, hOT EcOnOmicS 

23 EcO chill mAkES indUSTRiAl 

mARkET dEBUT 

24 13,000 cUSTOmERS, 36 STORES, 

OnE REnTAl cOmpAny 

27 A SAFE And SEcURE wORkplAcE 

28 cOmmUniTy SUppORT 

29 EnviROnmEnTAl STEwARdShip 

30 cORpORATE gOvERnAncE 

31 BOARd OF diREcTORS 

32 mAnAgEmEnT’S diScUSSiOn 

And AnAlySiS 

53 mAnAgEmEnT’S And 

AUdiTORS’ REpORTS 

54 FinAnciAlS

2 | TOROMONT 2009 ANNUAL REPORT 

dear Fellow 

Shareholders 

THE MARK OF A GOOD COMPANY IS THE ABILITY TO PERFORM THROUGH ALL PHASES 

OF THE ECONOMIC CYCLE. IN THE WORST ECONOMIC RECESSION IN A GENERATION, 

TOROMONT RAISED ITS DIVIDEND, DELIVERED PROFITABLE RESULTS, STRENGTHENED 

ITS BALANCE SHEET, MAINTAINED ITS STRONG CORE OF PEOPLE AND CAPABILITIES, 

AND ESTABLISHED ITSELF AS A GLOBAL COMPRESSION EQUIPMENT INDUSTRY LEADER 

BY MAKING THE LARGEST ACQUISITION IN ITS HISTORY. 

we are pleased to say that Toromont made the most of 

the recessionary environment. Through the disciplined 

work of our team and aggressive action taken at the 

first signs of the economic correction, we maintained our track 

record of strong performance during this challenging phase of 

the business cycle. 

Net income for 2009 was $120.5 million or $1.86 per share 

as all of our business units continued to operate profitably. 

Return on opening shareholders’ equity was 15.5%. Revenues 

were $1.8 billion, as the impact of the broad-based decline in 

customer spending was somewhat mitigated by product support. 

At year end, our cash exceeded our total debt, a financial 

position that reflects the ongoing strength of our operations, 

our enduring focus on disciplined capital management and a 

conscious effort to build our cash position in order to finance 

the acquisition of Enerflex. 

While the revenue and earnings records of the prior year 

remain unsurpassed – for now – Toromont’s long-term track 

record stands as the most important testament to the quality 

of our Company and its ability to create shareholder value. 

AdjUSTEd TO nEw REAliTiES 

It was not business as usual in 2009. The global credit crisis 

affected our end markets, driving a significant decline in 

economic activity and reducing customer order volume in key 

sectors including construction and natural gas. 

With the support of our employees, Toromont adjusted to 

these conditions beginning in September of 2008. Across our 

Company, discretionary expenses were reduced, certain projects 

were deferred, salaries were frozen and work sharing as well as 

voluntary leaves were tools used to help maintain our strong core 

of people and capabilities while we await the economic upturn. 

Due to these adjustments, and the large backlogs carried over 

from 2008, Toromont’s results in 2009 were even stronger than 

we anticipated. 

What we did not adjust was our approach to business, which 

can be summarized as follows: 

n We supply highly specified capital equipment to broad markets 

and support our customers every step of the way as they use 

that equipment – a business model designed with capital 

spending trends in mind. 

n We strive for market leadership and operate only in those areas 

where we have a reasonable prospect of achieving it – because 

this is the best way to drive shareholder and customer value. 

n We settle for nothing less than the highly productive use 

of capital. Each of our businesses operates with an individually 

calibrated return on capital employed target and is held 

accountable for meeting that target as the price for receiving 

capital. 

n We trust our business leaders to make capital allocations. This 

trust is reflected in our decentralized management system, 

which, along with meaningful employee share ownership, is a 

trademark characteristic of our Company. 

n We pursue opportunities aggressively but never at the expense 

of ethical behaviour or employee safety – both of which are 

priorities for Toromont.

By remaining faithful to this formula and preserving our 

sales, engineering design and service capabilities through this 

downturn, Toromont made good things happen in 2009. 

Among the notable highlights of the year in the Equipment Group: 

n Our installed equipment base in the mining sector surpassed 

the 1,000-unit level across 70 customer locations. Additions 

were made to fleets at Goldcorp, Vale Inco, Apollo Gold and 

Agnico Eagle Mines, Barrick – Hemlo, Sifto Salt – Goderich 

Mine, and Canadian Salt – Ojibway Mine. Reflecting the scope 

of our offering, these additions included underground and 

surface equipment, and prime and standby power systems – all 

provided by Caterpillar, the world leader in mining equipment 

and our partner for the past 16 years. Due to the steady 

increase in our installed base, parts and service sales to the 

mining industry have contributed almost $300 million to total 

revenue over the past five years. 

n Power systems activity was buoyant with strength in commercial 

applications such as telecommunications and banking, as 

well as municipal infrastructure and landfill gas to energy. As 

a result, Toromont CAT Power Systems had an excellent year. 

n While many competitors reduced rental fleets, Battlefield – The 

CAT Rental Store continued to invest to drive increased 

product availability, reliability and customer satisfaction. 

Unprecedented levels of government infrastructure spending 

intentions had limited impact on our Equipment Group 

businesses because of the length of time required for projects to 

become truly “shovel ready.” However, there is reason for 

optimism. Billions of dollars in public works funds must be spent 

by Canadian governments by March 2011 and as this deadline 

approaches, customers expect activity to intensify. 

The Compression Group completed a variety of customer 

projects: 

n In the United States, Toromont Energy Systems made sizeable 

deliveries for both the 1,679-mile Rockies Express Pipeline and 

the 500-mile Midcontinent Express Pipeline. Together, these 

two projects generated $173 million of revenue for Toromont 

over the past two years. 

n Southwestern Energy (see page 8) purchased a number of 

compression packages for its Fayetteville Shale project. 

n Industrial refrigeration orders were received and delivered for 

Roche Canada, Walmart, Overwaitea Food Group, Nova 

Chemicals, ConAgra Foods ® , Loblaw Companies, Millard 

Refrigerated Services and Southern Cold Storage. 

n Spurred on by the $500 million Recreational Infrastructure 

Canada (RinC) program, CIMCO’s bookings were strong, 

including numerous orders for ECO CHILL. This environmentally 

friendly ice rink refrigeration system also made its first 

forays into the far larger industrial refrigeration market (see 

page 23). 

n The Orlando Magic purchased a CIMCO ice rink system for 

their multi-purpose arena scheduled to open in 2010. CIMCO 

has supplied and installed the rinks that sit below the hard 

court on every NBA facility constructed since 1990. 

In early 2010, we also celebrated the successful conclusion 

of the Vancouver Winter Olympics with the knowledge that 

CIMCO supplied refrigeration systems, engineering and service 

to eight Olympic venues. 

TOROMONT 2009 ANNUAL REPORT | 3 

EnERFlEx AcqUiSiTiOn 

In early 2010, Toromont acquired Enerflex Systems Income 

Fund and Enerflex Holdings Limited Partnership. This important 

transaction brings together Enerflex and Toromont Energy 

Systems to create a stronger organization better able to serve 

customers and compete globally. 

Headquartered in Calgary and with pro forma annual 

revenues of $1.5 billion, our new business is called Enerflex Ltd. 

This is a very exciting accomplishment several years in the 

making. We believe the timing is advantageous because it occurs 

near the bottom of the business cycle. These two former rivals 

serve complementary markets (see page 4) and together have 

a solid and growing product support base to help offset future 

energy cycles. Integration is now underway to realize the value 

of the attractive synergies and cost savings available to us. 

Blair Goertzen leads as Chief Executive Officer of Enerflex, 

supported by three divisional Presidents: Jerry Fraelic, President, 

U.S.; Ivan Heidecker, President, Canada; and Bill Moore, 

President, International. Other executives and managers from 

the two predecessor organizations are part of the new 

management team. 

We paid $315.6 million in cash and issued 11.9 million 

Toromont shares to effect the purchase. Even after accounting 

for the acquisition, Toromont has a significant cash position, 

no borrowings on its $250 million operating lines and no change 

in its strong credit rating. 

lOOking FORwARd 

It is too early to say how much of a recovery, if any, our business 

and the economy in general will see in 2010. Within our Equipment 

Group, we expect certain sectors such as road building, mining 

and power systems will improve. We expect that 2010 will be 

a year of transition for our natural gas-related business as we 

focus on integrating the combined operations of Enerflex Ltd. 

In our refrigeration business, we expect that the recreational 

side will continue to show strength while industrial will remain 

challenged. 

My thanks to our customers and business partners, as 

well as all members of the Toromont community – shareholders, 

employees and Directors – for your support in what has been 

a time of sacrifice and uncertainty but also dramatic and 

meaningful progress. 

Yours sincerely, 

Signed 

Robert M. Ogilvie 

Chairman of the Board 

and Chief Executive Officer

1 


The future of 

Enerflex 

begins now 

what’s in a name? 

if the name is Enerflex, 

the answer is over 3,000 

employees, pro forma 

2009 annual revenues 

of $1.5 billion, a 30-year 

track record in serving 

the needs of customers 

in 35 countries – and an 

exciting future. 

Calgary, Alberta, Canada 

1 

Calgary, Alberta, Canada 

2 

1 

3 

2 

4 

Nisku, Alberta, Canada 

3 

Casper, Wyoming, U.S.

4 

5 

Houston, Texas, U.S. 

5 

AUSTRAliA 

Dry Creek 

Eagle Farm 

Kewdale 

Northbridge 

Roma 

Seven Hills 

South Guildford 

Rijsenhout, Netherlands 

cAnAdA 

Athabasca, Alberta 

Barrhead, Alberta 

Bonnyville, Alberta 

Calgary, Alberta 

Drayton Valley, Alberta 

Drumheller, Alberta 

Edson, Alberta 

Edmonton, Alberta 

Fort Nelson, British Columbia 

Fort St. John, British Columbia 

Grande Prairie, Alberta 

Hinton, Alberta 

Kindersley, Saskatchewan 

Lethbridge, Alberta 

Lloydminster, Saskatchewan 

London, Ontario 

6 

Manning, Alberta 

Medicine Hat, Alberta 

Red Deer, Alberta 

Seven Hills, North West Territories 

Slave Lake, Alberta 

Stettler, Alberta 

Swift Current, Saskatchewan 

Westlock, Alberta 

cOlUmBiA 

Bogota 

gERmAny 

Spelle 

indOnESiA 

Jakarta 

Java 

mAlAySiA 

Kuala Lumpur 

nEThERlAndS 

Rijsenhout 

OmAn 

Muscat 

pAkiSTAn 

Lahore 

Perth, Australia 

6 


UniTEd ARAB EmiRATES 

Abu Dhabi 

UniTEd kingdOm 

Caterham 

Inverurie 

Surrey 

UniTEd STATES 

Cypress, Texas 

Denver, Colorado 

Longview, Texas 

Mars, Pennsylvania 

Rifle, Colorada 

Soldotna, Alaska 

Washington, Pennsylvania 

Wheeler, Texas 

Vernal, Utah 

Enerflex 

worldwide 

Sales/Service Locations 

7 

7 

Brisbane, Australia


Enerflex Ltd. is the new name for 

our natural gas and process 

compression business formed 

from the combination of Enerflex Systems 

Income Fund, acquired January 20, 2010 

and Toromont Energy Systems. 

As one company, Enerflex provides 

what we believe are the scope, scale and 

expertise necessary to address market 

challenges and deliver value to our 

customers and shareholders over the long 

term. On that basis, we are proud to 

present the Enerflex company profile. 

lEAding ApplicATiOnS 

From the well-head to the pipeline, 

Enerflex is a market leader in engineering, 

manufacturing and servicing highly 

specified equipment for a diversified 

mix of customers, including many of the 

largest energy exploration and production, 

chemical and petrochemical companies 

in the world. Enerflex also has expertise 

in providing gas compression and 

processing facilities to our customers on 

a turn-key basis and through alternative 

delivery models such as ‘build-ownoperate-maintain’ 

contracts like a recent 

project in Oman. 

Our corporate roots stretch back 30 

years and over this time, we have 

amassed knowledge from manufacturing 

several million horsepower for upstream, 

midstream and downstream applications. 

Midstream markets represent about 

75% of our pro-forma revenues. Once a 

well is drilled and completed and the 

upstream portion of a project is finished, 

Enerflex provides compression packages 

to increase well-head pressure and for 

gas gathering, pipeline and storage 

facilities for both conventional and 

An Enerflex Combined Heat and Power Unit (CHP) produces energy using alternative 

fuel in Rijsenhout, Netherlands. 

unconventional resource plays around 

the world. 

In this market segment, we also provide 

producers with industrial refrigeration 

packages, amine plants (where CO 2 and 

hydrogen sulfide are removed from natural 

gas), dew point plants and cryogenic plants. 

Our downstream markets include 

power generation, petrochemical, natural 

gas distribution and storage facilities. 

lEAding SERvicE 

In all customer segments, our customers 

rely on us not just for equipment designed 

to maximize production and compressor 

throughput, but for ongoing customer 

support. On a pro forma basis, product 

support represents some 25% of our 2009 

pro forma revenue. 

Contributions from our preventative 

maintenance, parts and service business 

are important for our future because they 

help to offset energy cycles that affect 

customer spending on new equipment. 

Of equal importance, customer service 

creates customer satisfaction and the 

potential for new equipment sales. 

Today, we have over 400 service 

technicians across 28 locations and in 

six countries, along with over 300 

field-service trucks – an infrastructure 

that makes Enerflex a reliable 24/7 

supplier to customers around the world. 

lEAding mARkETS 

Another key strength for our future is 

geographic diversification. We operate in 

four major regions. Our largest market, 

Enerflex provided equipment for the phase two expansion of this 

natural gas compression station in Injune, Queensland, Australia.

epresenting 86% of pro forma 2009 

revenue, is the Americas where we work 

from Alaska to the Gulf of Mexico and 

beyond. This includes Canada, where we 

have a well-established presence in the 

Western Canadian Sedimentary Basin, the 

United States, where our packages are 

employed in major gas plays in Wyoming, 

Texas, Arkansas and Colorado as well as 

pipelines and storage facilities connecting 

east to west and north to south, Latin 

America and the Caribbean. 

Australasia is our second largest 

market, accounting for 11% of pro forma 

2009 revenue. Across this vast territory, 

which encompasses nine countries, we 

have completed more than 130 projects, 

delivering turn key natural gas processing 

facilities and gas compression stations 

together with the infrastructure to move 

gas from where it is produced to where it 

is needed. Australia has announced plans 

to significantly expand its existing 

capacity over the next five years in 

Queensland, which adds to existing 

prospects on the northwestern shelf of 

that continent. Major producers in this 

region have been expanding coal seam 

gas production in Queensland for 

domestic use in power generation and as 

feedstock for LNG facilities for export. 

This will create a strong growth opportunity 

for Enerflex because coal seam gas 

requires both compression and processing 

equipment before it reaches the LNG facility. 

Enerflex has a strong service 

business in Europe and has provided gas 

compression equipment into that region 

for 20 years. In 2009 alone, 50,000 

horsepower of compression was packaged 

for that market, with Russia leading 

the way. We are also involved in Europe’s 

Combined Heat and Power (CHP) 

generation market. Our products 

encompass institutional and industrial 

applications using alternative fuels such 

as biogas, landfill gas and vapour gas. 

We expect this market to continue to 

expand as environmentally friendly fuel 

sources receive strong government 

support in Europe. 

In the Middle East/North Africa, our 

customers are located in Oman, Kuwait, 

Egypt, Pakistan, the United Arab Emirates 

and a number of other oil and gas-producing 

countries. We have completed numerous 

turn-key projects in this region over the 

years, most notably the El Wastani project 

(an LPG facility in Egypt) and the MOL 

project, a gas processing facility in 

Pakistan. Recently, Enerflex was awarded 

a contract to build-own-operate-maintain 

an offshore gas compression facility in the 

Sultanate of Oman. Demand for our 

products in this region will be driven by 

domestic demand for gas used for power 

generation and desalination plants, as 

well as an expanding LNG infrastructure 

in the region. 

lEAding pEOplE, 

FAciliTiES, EqUipmEnT 

Enerflex operates fabrication and 

manufacturing facilities in Calgary and 

Nisku, Alberta, Houston, Texas, Casper, 

Wyoming, Rijsenhout, Netherlands and 

Brisbane, Australia. 

In total, we have more than one million 

sq.ft. of production space available to 

produce highly engineered packages 

using a variety of reciprocating and 

rotary screw compression engines and 

components from a broad number of 

leading original equipment manufacturers. 


Our modern facilities, including our 

sales and service operations, are staffed 

by experienced and highly skilled 

people. A common goal for our team 

across our operations is to efficiently 

deliver reliable solutions that maximize 

customer return on investment. 

Like all Toromont employees, 

the Enerflex team is empowered to 

run their business. We look forward to 

what this empowerment will mean as 

we begin to realize the benefits of the 

size, scope and synergies resident in 

this exciting combination. TIH 

An Enerflex service technician inspects 

a compression system in Calgary. 

Product support represents 25% of 

Enerflex’s 2009 pro forma revenue. 

This natural gas compression facility in Charleville, Queensland, Australia 

is one of a growing number of Enerflex installations on the continent.


A southwestern 

success story 

just beyond little Rock, Arkansas is an unassuming stretch of rural 

land that is quickly becoming an important part of the energy production 

landscape in the United States thanks to the pioneering efforts of one 

integrated company. 

A typical compression station in Southwestern Energy’s Fayetteville Shale play.

The land in question encompasses 

the Fayetteville Shale play and the 

company is Southwestern Energy, the 

first to successfully produce unconventional 

natural gas from this large reservoir located 

on the Arkansas side of the Arkoma Basin. 

Today, Southwestern is the largest gas 

producer in the Fayetteville Shale. 

Over the past two years, Toromont 

Energy Systems Inc. (TESI) has played 

an active role in this success story by 

providing dozens of highly specified 

natural gas compression packages 

used by Southwestern’s natural gas 

gathering subsidiary. 

The history of this relationship began 

with a cold call. Impressed with 

Southwestern’s progress in Arkansas, 

Mark Phillips, Account Manager at TESI’s 

Houston operations saw opportunity and 

in March of 2008, an introductory call was 

made to the customer. The timing was 

good. Southwestern was in the market for 

compression systems and not long after 

the initial call and exploratory meetings, 

TESI was given a request for proposal. 

Not content to go on the information 

found in the request alone, TESI made a 

field trip to Fayetteville to better 

understand the customer’s requirements. 

Southwestern also visited TESI’s 

operations to assess everything from the 

“quality of our facility and equipment to 

the quality of our people,” said Marc 

Rossiter, Sales Manager TESI. “This was 

an extensive assessment, conducted in a 

very disciplined manner by a company 

that knows what it’s doing.” 

Although TESI faced strong 

competition, it was awarded a contract to 

build a significant portion of Southwestern’s 

business based on a host of considerations 

that included TESI’s ability to meet three 

unique requirements: low noise, low 

emissions and stability. 

Since many of Southwestern’s natural 

gas gathering stations on the Fayetteville 

Shale operate close to other land owners, 

they insisted on procuring low noise 

compression packages. Reducing 

emissions was also important due to 

environmental policies. In addition, to 

enable Southwestern to nimbly respond 

to the changing output of its wells over 

time, they wanted the compression 

packages to be able to sit on a temporary 

foundation of compacted gravel and to 

operate in this state without loss of 

performance or structural integrity. 

Typically, compression packages of this 

size are bolted to an engineered concrete 

foundation for stability. 

To meet the first requirement, TESI 

designed its packages with low noise fans. 

The second spec was met with the 

addition of special oxidization catalysts 

(which work like an automobile’s catalytic 

converter). These were designed as part of 

a base-mounted silencer system. This 

system is housed outside the gathering 

station to make it easy for Southwestern’s 

operators to change the catalysts. The 

third need was met through a redesign of 

the compression skid to make it even 

heavier and more stable. The end product 

was both sizeable and powerful, featuring 

1,775 horsepower CAT ® 3606 gas engines 

running Ariel JGD/4 compressors. Each 

unit is capable of compressing about 

seven million standard cubic feet of 

gas per day. 

With the design complete, each 

package was then made to identical 

specifications at TESI’s Houston 

fabrication operation. Identical design 

not only improved TESI’s manufacturing 

efficiency, it improved the efficiency and 

speed of maintenance performed by 

Southwestern’s operators on site. Once 

built, the skids were delivered to the 

Fayetteville Shale where TESI’s service 

division assembled and commissioned 

each package. 

“This project was a TESI team effort 

all the way,” said Jerry Fraelic, President, 

U.S. Operations TESI. “It shows what can 

be accomplished with ingenuity, attention 

to detail, hard work and a very 

knowledgeable customer.” 

While compression rental is prevalent 

in the U.S. market, Southwestern chose 

to own these packages due to its integrated 

business model of engaging in oil and 

“ Our relationship with Southwestern 

Energy began with a phone call and was 

solidified when we demonstrated we 

could meet three unique requirements.” 

Marc Rossiter, Sales Manager 

Toromont Energy Systems Inc., Houston 


gas exploration and production, natural 

gas gathering and marketing – as well 

as a financial assessment of rental 

versus ownership. 

TESI’s contribution to Southwestern’s 

infrastructure has been focused on gas 

gathering and the compression technology 

that underpins it – a critical part of the 

process. Compression comes into play 

after the fluids from the well (water, 

hydrocarbons, etc.) have been separated. 

“The equipment Toromont is 

providing to Southwestern Energy is 

critical in their overall business of 

marketing clean-burning natural gas to 

consumers throughout North America,” 

says Mr. Rossiter. “Using our compression 

systems, we pressurize the natural gas to 

1,000 psi – which is the standard for most 

pipelines. Anything less means the gas 

doesn’t move from the gathering station 

into the pipeline and that means no sale.” 

Southwestern expects to produce 

and move natural gas from the Fayetteville 

Shale formation to waiting markets for 

years to come. TESI’s specified packages 

are built for this exciting journey. TIH


waste not, 

want not 

TOROmOnT hElpS mUnicipAliTy 

REAliZE vAlUE FROm lAndFill gAS 

The gas utilization plant at the Glanbrook facility consists of two Caterpillar G3520 generator 

sets housed in custom-designed enclosures supplied by Toromont CAT Power Systems.

like many landfills in North America, 

Glanbrook serves as an important 

repository for municipal solid waste 

that cannot be diverted or composted. 

Operational since 1980 and with an 

expected operating life of another 20-plus 

years, it sits on a 539-acre site between 

the Welland River and Buckhorn Creek. 

In late 2003, forward-thinking 

members of City council and staff 

commissioned a study to determine the 

feasibility of landfill gas recovery at the 

site. The study, conducted by CRA 

Consultants, concluded that the site could 

support a landfill gas-to-energy (LGE) 

plant because it produced more than 500 

cubic feet per minute of gas – a threshold 

that was necessary to make the plant 

economically viable. Under the Ontario 

Power Authority’s (OPA) Renewable 

Energy Standard Offer Program, the City 

was also assured of getting favourable 

rates for the electricity generated. 

Following receipt of the study, the 

City formed Hamilton Renewable Power Inc. 

to finance the project and collect revenue 

from the energy generated from waste. 

The City also decided that construction 

and operation of the site would best be 

handled on a turn-key basis and in 


Each minute, the city of hamilton’s glanbrook 

landfill produces about 1,100 cubic feet of 

methane gas mixed with carbon dioxide. 

Rather than flaring this dangerous mix into 

the atmosphere, hamilton has turned this 

problem into a source of electrical energy 

and $2.8 million in annual revenue with help 

from Toromont cAT power Systems. 

“ The city of hamilton set ambitious objectives for 

the glanbrook landfill. we were eager to accept 

the challenge and to leverage our experience in 

similar landfill gas-to-energy projects.” 

Joe VanSchaick, Toromont CAT Power Systems 

EPG Market Manager, Concord, Ontario 

November 2006, hired Toromont to provide 

a complete solution, including commissioning 

and ongoing operation. 

This was not Toromont’s first LGE 

plant: the Company gained significant 

experience in building and operating 

successful landfill gas-to-energy projects 

in Sarnia, Waterloo and Toronto over the 

past decade. Glanbrook, though, had its 

own unique requirements. 

Continued on next page.


“The City of Hamilton set out to 

achieve several objectives with the 

Glanbrook site beyond the elimination of 

harmful gases and revenue generation,” 

said Joe VanSchaick, EPG Market Manager, 

Toromont CAT Power Systems who 

developed Toromont’s Glanbrook proposal. 

“Because the site is located in an urban 

area, they wanted to reduce odours and 

odour complaints, leachate mounding and 

noise emissions. This is also an operating 

landfill, so there would be zero tolerance for 

any waste disposal disruption during plant 

construction. It was an ambitious effort 

and one we were eager to undertake.” 

To address the City’s objectives, 

Toromont engineers added a dedicated 

blower to provide extra combustion 

capacity for odour control. The gas 

collection system was designed to include 

28 horizontal gas collection trenches placed 

in areas with higher leachate levels, which 

improved collection efficiency. This was in 

addition to gas wells drilled into the top of 

the landfill. A number of adjustments were 

also made to the generators and radiator 

system to reduce noise. Powerful monitoring 

and control systems were also added, 

allowing the operator to remotely perform 

diagnostic tests and calibrations. 

Following design, construction began 

in 2007. Phase one included installation of 

horizontal collection trenches, transmission 

header piping, condensate traps and 

extraction wells. During this phase, 

Toromont CAT equipment was used for 

earthmoving and Battlefield – The CAT 

Rental Store provided a variety of small 

tools and lifts. 

Phase two involved site preparation 

and construction of the power plant and 

its various units in an obscure area of the 

The Caterpillar G3520 efficiently burns the methane produced from the 

landfill to provide a clean, green, reliable source of renewable energy. 

landfill, chosen so that it would integrate 

with a nearby forest. The plant includes a 

motor control centre and a blower 

building, which houses a collection 

system. Inside the blower building, gas 

sucked from the wells is conditioned, 

chilled and condensed before it is 

combusted by two low-emission Caterpillar 

1.6MW G3520C generators packaged 

by Toromont specifically for Glanbrook. 

These systems cope with impure gas, 

which shortens both spark plug and oil life 

and causes regular build ups of siloxanes 

in the combustion chamber. Siloxane is a 

chemical compound that when oxidized, 

forms abrasive deposits on pistons and 

cylinder heads and damages internal 

engine components. 

In all, it was a complex installation 

completed while the landfill remained fully 

operational. The plant was commissioned 

by Toromont in November of 2008 after 

Ontario Power Generation installed five miles 

of electrical line to connect the plant to the 

grid and Glanbrook received operating 

permits from the Ministry of the Environment. 

Bill Batty, a long-time Toromont 

employee, led the commissioning process 

– and now serves as plant supervisor. “My 

job is to keep the plant operating 24/7, 

because any downtime means the loss of 

revenue for the City and the need to flare 

the gas rather than capture and harness 

it,” said Mr. Batty. “I also maintain and 

balance production from the 45 gas wells 

on site. Using gas monitoring equipment, I 

switch production from one well to another 

and that way get a higher average 

methane content in the gas we’re burning. 

If a well is overtaxed, the blowers start to 

draw oxygen rather than methane. So far, 

Glanbrook has been running its engines at 

“ landfills produce greenhouse 

gas 24/7. with the Toromont 

engineered, cAT powered plant, 

we are able to maintain production 

volumes on a continuous basis.” 

Bill Batty, 

Plant Supervisor, Glanbrook Landfill, Hamilton 

about 55 to 57% methane – which is much 

better than average for a landfill.” 

Mr. Batty uses an Internet-enabled 

Scada system to remotely monitor the plant 

on weekends and evenings from his laptop 

and makes a variety of adjustments to 

ensure peak operation. Toromont’s St. 

Catharines branch provides ongoing 

maintenance to the plant. 

While the market for LGE plants is 

decidedly niche, more than 50 landfills in 

Toromont CAT’s territories meet the gas 

production threshold that would make them 

viable energy producers. 

Today, more than a year after completion, 

Glanbrook is meeting its objectives. 

The operation generates net electricity 

output of 26 million kilowatts-hours per 

year, enough to power 2,100 homes. Based 

on a 20-year agreement with OPA, Hamilton 

Renewable Power receives 11 cents per 

kilowatt hour plus 3.52 cents per kilowatt 

hour for on-peak power production from the 

landfill. Considering project costs offset by 

the revenue stream, payback will be 

achieved by the end of 2012. 

Most important, this installation 

eliminates 100,000 tonnes a year of carbon 

dioxide that would otherwise be released 

into the atmosphere. That’s the equivalent 

of planting 9,200 hectares of trees. TIH

A CAT 2900 LHD at work in underground mining. 

Forging a precious 

relationship 

TOROmOnT STAkES iTS clAim wiTh 

SEniOR gOld pROdUcER 

Building a mine takes years of exploration and development, along with 

hundreds of millions of dollars of capital. it’s a high stakes, high reward 

business that requires careful planning, extensive knowledge and effective 

execution, often in some of the harshest environments on earth. 

in the gold mining industry, Goldcorp Inc. has consistently 

found success despite these challenges. Today, it is widely 

recognized as a low-cost and fast-growing senior gold 

producer. In Canada, Goldcorp operates Red Lake, Musselwhite 

and Porcupine gold mines, all based in Ontario. 

Toromont people and equipment play a variety of important 

supporting roles at each of these mines. In so doing, we have 

forged a 15-year relationship with Goldcorp that transcends 

mining techniques, distance and commodity cycles. 

These mines employ dozens of sophisticated Caterpillar 

production machines – the equipment that tears blasted rock 

from the earth and heaves it hour after hour to processing mills to 

be refined. Each piece of equipment is chosen to meet the 

specific requirements of its destination. 

Production at Musselwhite is high volume, meaning a 

substantial amount of rock must be extracted on a daily basis to 

produce each ounce of gold. For this site 480 kilometres north of 

Thunder Bay, the Toromont fleet of machines is comprised of large 

and medium-sized equipment designed to move large, heavy 

loads. It includes CAT AD45B underground trucks, CAT R2900G 

underground Load Haul Dump (LHD), CAT R1700G LHDs, R1300G 

LHDs and a CAT M135H custom motor grader. 

Conversely, Red Lake Gold Mines is one of the world’s 

highest-grade gold mines with comparatively less rock moved 

per day to meet gold production requirements. Although Red 

Lake is the largest gold mine in Canada from the standpoint of 

gold production, its rich mineral deposits require smaller 

machines than Musselwhite such as CAT R1300G LHDs, R1600G 

LHDs and CAT AD30 underground trucks. 


“Goldcorp measures its production costs right down to the 

ounce,” said Jeff McKnight, Branch Manager, Toromont CAT 

Thunder Bay. “So it’s no surprise that they are experts in selecting 

the right production equipment for each mine. While Red Lake’s 

narrow vein, high-grade ore body dictates the use of smaller 

equipment, Musselwhite specifies bigger equipment which is 

capable of extracting larger volumes on a very efficient basis. 

With CAT’s product range, we are able to meet the needs of all of 

Goldcorp’s properties in our territories.” 

At the Porcupine sites near Timmins, Ontario – North 

America’s longest continuously operating gold mine – Toromont 

CAT equipment has operated since 1994. Back then, Caterpillar 

had only recently awarded Toromont the Ontario dealership 

territory when the Dome surface mine announced it was in the 

market for mining equipment. Toromont beat out the competition 

for this important order, setting in motion a long-term relationship. 

As time went on, Dome surface machines moved to the nearby 

Pamour Open Pit and continued to perform at a high rate until 

last year when the Pit scaled back and began to focus on 

transporting roughly six years’ worth of stockpiled materials to 

the Goldcorp Dome mill for processing. Meanwhile, Toromont’s 

relationship with Porcupine continues uninterrupted at 

Porcupine’s Hoyle Pond site 20 kilometres east of Timmins. Here, 

a sizeable and growing fleet of Caterpillar equipment contributes 

to the mine’s strong future. 

Goldcorp’s machines are both rugged and technologically 

advanced. Rugged because they run 24/7 in unforgiving 

conditions and technologically advanced to provide operator 

safety and highly efficient operation. Most of the LHD machines 

Continued on next page.


at Musselwhite mine are equipped with 

remote control interfaces allowing safe 

operation from a distance, away from 

danger zones. To increase durability, 

Toromont designs special guarding 

packages to protect the machines from 

collisions with rock walls, which can lead 

to lost production time and machine 

damage – a costly combination. 

Toromont is one of the only mining 

equipment suppliers capable of machine 

customization to meet a site’s specific 

requirements. Over the past five years, 

specialized braking and emissions systems 

have been added and adjustments made to 

operator workspaces on dozens of mining 

machines at Toromont CAT before delivery. 

pOwERing liFElinES 

Production equipment is only part of 

Toromont’s contribution. Equally important 

is the provision of power systems. Just 

ask a miner who depends on electricity 

for fresh air and light 2,000 metres below 

the surface. 

In 2009, Toromont CAT Power 

Systems added to its existing fleet at 

Musselwhite by commissioning two 3500 

Series CAT power generation systems to 

provide primary power for shaft 

ventilation. These large, 50 by 10 foot 

packages are now providing 2 megawatts 

and 1.7 megawatts of power respectively 

on a primary basis for the next two years 

until the shaft is connected to the hydro 

grid – and thereafter for back-up power. 

“We designed and built these 

systems to be ready to produce power the 

minute they were dropped on site and we 

did it in five weeks,” said Chris Moskal, 

Manager of Toromont CAT Power 

Systems, Western Region. “It normally 

takes 18 to 20 weeks to do what we did in 

five, but when it’s critical to a customer’s 

production, we make it happen.” 

Red Lake is fully connected to the 

hydro grid, but even there, Goldcorp uses 

two CAT standby generator sets. 

pEOplE mAkE ThE diFFEREncE 

Whether the equipment is used for production 

or power generation, it must be maintained 

to deliver flawlessly. Service is the third 

element of Toromont’s relationship with 

Goldcorp’s Ontario mines. 

Due to the high volume nature of 

production at Musselwhite, customer 

support is delivered by a team of 

specialized Toromont technicians who 

keep the machines operating 24 hours a 

day, 365 days a year. 

In recognition of the size of the fleet 

and its high level of utilization, Toromont CAT 

created the position of Project Manager 

for the Musselwhite operation. It is performed 

by Bob Robertson, a 15-year Toromont 

veteran who coordinates Toromont service 

technicians and site supervisors onsite. 

“Our job is to deliver uptime – to 

make sure that the customer’s machines 

are available for production exactly when 

they are needed,” said Mr. Robertson. 

“That takes a high level of coordination 

given the continuous nature of 

Musselwhite’s production. Schedules are 

important and we match our work with the 

activity of the mine and the usage of each 

machine. It’s like a chess match.” 

Machine hours are monitored and 

preventative maintenance is delivered at 

250, 500 and 1,000 hours to exacting 

Caterpillar standards. To eliminate 

downtime, Toromont’s technicians perform 

preventative maintenance during mine 

shift changes – meaning they are flat out 

busy at 6am and again at 6pm. In between 

times, they troubleshoot, manage parts 

inventories and undertake more elaborate 

maintenance on both the underground 

fleet and the CAT surface vehicles that are 

involved in exploration, snow removal, 

material handling and site maintenance. 

Mr. Robertson’s job also includes fleet 

analysis, an important task enabled by the 

advanced nature of the technology 

onboard each machine. “Through 

diagnostic downloads three times each 

month from our on-site technicians, we 

calculate the volume of rock the machine 

has moved, hours of usage, idle time, 

consumable consumption and harness 

this intelligence to advise the customer on 

whether it’s time to do an overhaul or buy 

new. These calculations help Goldcorp 

reduce their cost of ownership and cost of 

production.” 

While the needs of each of Goldcorp’s 

mines in Ontario are unique, as Mr. Robertson 

sees it, the common bond is “consistency 

of delivery. Whether we’re providing 

equipment, service or parts, our job is to 

deliver to the highest standard of performance 

every time. It’s what Goldcorp expects and 

it’s what we expect of ourselves.” TIH 

Goldcorp’s Musselwhite mine 

uses Caterpillar equipment 

including the CAT AD45B 

underground articulated truck.

A Caterpillar AP1055D track 

asphalt paver on the job. 

whEn ThE gOing gETS 

TOUgh, ThERE iS 

TOROmOnT SERvicE 

Road building is tough. In some areas of Canada as 

winter sets in, it’s close to impossible. 

Facing the end of the paving season in central 

Newfoundland and a construction deadline, Bill Farrell of Farrell’s 

Excavating Ltd. was getting set for a final push to complete a job 

he started on the Trans Canada Highway in July. 

The weather was uncooperative and with just four days to 

go before his deadline, the final drive motor on his AP1055D track 

asphalt paver failed. At 4 pm on Saturday, October 24, 2009, Jonas 

Gaulton, Service Supervisor of Toromont CAT St. John’s branch 

received the call. A normally self-sufficient Bill Farrell needed a 

new Final Drive Assembly so paving could resume on Monday 

at 7 am sharp. 

Being late in the season, a new motor was not in inventory 

at the branch – or anywhere else in Newfoundland and Labrador. 

After alerting a local team comprised of Wayne Waterman, 

Toromont CAT Vice President Newfoundland and Labrador, Peter 

Warren, Machine Sales Representative (MSR) and Carl Hamlyn 

Product Support Manager, Jonas sought help from Mark Medeiros 

Paving Sales Specialist and Scott Symon Technical Communicator 

at Toromont’s Concord, Ontario branch. Scott located a new 

AP1055D paver in Windsor – but not a spare final drive motor. 

Not to be deterred, the Windsor branch joined the team early 

Saturday evening. Tom Scott, the on-call MSR in Windsor 

contacted technicians Troy White and Mike Renaud, along with 

Jason Martin, the Parts Counterman and the plan took shape. 

Troy, Mike and Jason would remove the drive assembly and 

Jason would transport it to Toronto’s Pearson Airport where it 


would leave on a commercial flight to St. John’s in the early hours 

of Sunday morning. Five hours after they started, the final drive 

was expertly disassembled and on a truck to Toronto. Jason 

unloaded it and returned home, confident that the motor would 

arrive Sunday morning in Newfoundland. 

Then the unexpected: the motor did not arrive. Without 

notice, the commercial flight was cancelled. More quick thinking 

was needed. The team contacted a charter company. A plane based 

in New Brunswick would travel to Toronto, pick up the 400 pound 

motor and then head to St. John’s. Problem solved. 

At 4 pm Sunday, the motor arrived at the St. John’s branch 

where technicians James Bonia, Edward Farrell and Greg Simms 

were standing by with Farrell’s AP1055D paver to install the 

assembly. Five hours later, a good-as-new paver was readied for 

its trek back to the Trans Canada Highway. 

At 7 am Monday, October 26, paving resumed. On Thursday, 

motorists streamed down the 25 kilometre final stretch of the 

newly paved section of the Trans Canada Highway unaware of 

the gargantuan effort made by the team at Farrell’s and 

Toromont CAT to make it happen. 

“I’ve been a customer of Toromont’s for the past seven 

years and while I knew they offered good service – having 

purchased over 20 machines from them – I never knew they 

would go this far to help,” said Farrell’s founder, Bill. “The 

teamwork between the branches and their persistence made all 

the difference for me. In my view, Toromont CAT really gives new 

meaning to the term customer support.” TIH


moving mountains 

part of day’s work 

at long harbour 

Site development began in 2009 on one of the most anticipated 

mining-related projects in canada, the vale inco’s long harbour 

hydromet processing plant outside St. john’s, newfoundland. 

Pennecon Limited relies on a variety of Toromont CAT 

equipment including the Caterpillar 740 articulated truck.

when completed in February 2013, 

this $2.8 billion plant will use a 

unique water-based process to 

extract nickel from concentrate, produced 

at the Voisey’s Bay Mine 1,200 kilometers 

northwest (in northern Labrador), and 

refine it to a finished nickel product. 

The Long Harbour project has 

attracted 1,000 workers and many local 

companies to the construction site. One 

of them is Pennecon Limited, a leading 

diversified construction company 

headquartered in Newfoundland and 

Labrador. Pennecon, through their Penny 

Heavy Civil Division, was awarded the 

Long Harbour earthworks contract in late 

May 2009. As a long-time Toromont 

customer, Pennecon responded to its 

contract win with an order for a fleet of 

Caterpillar equipment and a requirement 

to deliver the machines in only three weeks. 

Drawing on its resources in 

Newfoundland and Labrador, as well as 

its Concord, Ontario branch, Toromont 

immediately set out first to secure the 

equipment fleet, which included CAT D8T 

bulldozers, 345D and 365C hydraulic 

excavators, 740 ADT off-road trucks, C65 

model rollers and a CAT 988H wheel loader. 

“Normally, when we factor in 

customization and PDI (pre-delivery 

inspection), an order of this size would 

take eight to ten weeks to deliver,” says 

Dave Fowler, Sales Office Manager at 

Toromont CAT St. John’s branch, who 

along with two local Machine Sales 

Representatives, Tom Hill and Peter 

Warren, worked to fill the bill. “Doing it all 

in three weeks was a tall order, requiring 

us to mobilize significant resources.” 

Locating the equipment was made 

easier by the dealership’s online 

inventory management system and once 

located, modifications were made to 

certain machines to meet the special 

requirements of the Long Harbour 

project: the removal of 1.3 million cubic 

meters of soil, rock and bog. 

“As part of site preparation, Penny 

Heavy Civil are literally removing/ 

flattening the top of a mountain at Long 

Harbour, installing underground services 

including a storm-water management and 

diversion system, cables and piping, and 

constructing main and secondary access 

roads,” says Mr. Hill. “Their equipment 

must be able to perform these tasks on 

an efficient and cost-effective basis.” 

Through customer discussions aided 

by Toromont CAT’s Customer Service 

Group, with significant experience in fleet 

production and analysis, a number of 

units were equipped with machine control 

and guidance systems. These systems 

increase productivity by up to 40% by 

using cross slope, sonic, laser and GPS 

technology combined with automatic 

blade controls to allow machine 

operators to maintain consistent grades. 

With over one million cubic metres of 

earth to move at Long Harbour, these 

systems eliminate the considerable back 

and forth that would otherwise 

accompany site preparation. 

Toromont CAT’s Concord branch 

made a number of other modifications, 

notably shortening the stick, which is 

the arm that moves the bucket on an 


“ we mobilized resources from 

several Toromont cAT branches 

to deliver the right machines at 

the right time for pennecon 

limited to use on one of the 

largest earthworks projects in 

this province’s history.” 

Peter Warren, Toromont CAT 

Machine Sales Representative, St. John’s 

excavator, and cutting the track shoes 

to suit the application and the types of 

material that had to be excavated. 

On June 15th, 2009, Penny Heavy 

Civil put the new equipment to work, 

along with a number of other Caterpillar 

machines owned by the partners. Today, 

a substantial amount of blasting, 

excavation and earth moving has already 

taken place, and the one-kilometresquare 

location of the main process 

buildings is taking shape. The port area 

at Long Harbour, which is contiguous to 

the plant site, is being developed as it 

prepares to accept in-bound ships 

carrying concentrate and outbound ships 

carrying nickel. This remediation work is 

part of massive improvements being 

made by Vale Inco. 

This project represents a continuation 

of Toromont’s service to the Voisey’s Bay 

mine itself. Today Vale Inco Voisey’s Bay 

operates a fleet of Caterpillar equipment 

consisting primarily of CAT 777 off-highway 

trucks, CAT wheel loaders ranging from 

a 906 CCE to the large 992 mining wheel 

loader, hydraulic excavators from a 315 

to a 385 and D3 trim and D9 bulldozers. 

Toromont supports the mine through an 

on-site parts department staffed by highly 

qualified parts and service personnel. TIH 

A Caterpillar 345 hydraulic excavator with 

substantial lift capacity loads material into a 

CAT articulated truck.


On ThE FROnT linES 

OF inFRASTRUcTURE 

Across Canada, “shovel-ready” 

infrastructure projects are now 

turning into roads, bridges, water 

mains, universities, hospitals and skating 

facilities, thanks to unprecedented public 

funding by all levels of government. 

According to the federal government’s 

update at the end of 2009, under collective 

infrastructure programs cost-shared with 

provinces, territories and municipalities, 

$25.8 billion has been committed for 

infrastructure spending toward some 

6,700 projects. Much of this activity will 

take place before March 31, 2011, creating 

conditions for a groundswell of construction 

activity over the next 12 months. 

Cruickshank Construction, with 

operations in Kingston, Green Valley and 

Morrisburg, Ontario, is one of hundreds 

of companies on the front lines of 

delivering the benefits of infrastructure 

investing for Canadians. 

This long-time supplier of road and 

bridge construction and maintenance 

services to government and private 

developers, is preparing for a busy 2010. 

This activity will be a boon to Cruickshank, 

which owns aggregate quarries, ready-mix 

concrete and asphalt plants. 

To ensure its future readiness, 

Cruickshank took delivery of a fleet of 22 

heavy machines from Toromont in 2009, 

including CAT 320 and 336 hydraulic 

excavators, four CAT models of asphalt 

rollers, a D6K bulldozer, IT 38 integrated 

tool carrier and CAT models 924, 966, 972 

and 980 wheel loaders. 

This equipment has been deployed 

across Cruickshank’s operations, including 

its aggregate quarries, where it is 

augmenting or replacing older CAT 

models. Toromont CAT will also maintain 

the equipment as part of a long-term 

customer support agreement. As such, the 

order represented a departure for 

Cruickshank owners, who have 

traditionally purchased used equipment 

and serviced it themselves. 

The change of approach was made 

after the customer assessed the total cost 

of ownership, taking into account not only 

initial capital costs, but the expenses and 

complexity associated with maintenance. 

“ cruickshank construction traditionally 

used pre-owned equipment but a 

thorough assessment showed better 

cost of ownership was possible with 

a new fleet from Toromont.” 

Paul Egan, 

Territory Manager, Toromont CAT, Ottawa 

“Cruickshank is a sophisticated buyer 

that is focused on return on employed 

capital,” said Matt De Witt, Vice President 

of Toromont CAT, Central Region. “Their 

own analysis determined that leasing new 

equipment packaged with a Customer 

Support Agreement (“CSA”) would not 

only reduce their initial capital outlay, it 

would lower their total cost of operation 

compared to buying and operating 

pre-owned machines.” 

In other words, while Cruickshank 

expects to be busy for the foreseeable 

future owing to public infrastructure 

spending and a recovering economy, their 

decision was not based on market 

demand alone but on equipment 

economics. 

CSAs fix the cost of maintenance 

over the life of the equipment, giving 

customers like Cruickshank budget 

certainty as well as something equally 

tangible: better equipment performance 

Inside a dome at one of Cruickshank’s 

yards, a Toromont CAT wheel loader 

stockpiles salt for winter.

from regularly scheduled service. In an 

aggregate quarry, where dirt and sand can 

wreak havoc with engines and 

components, regular maintenance is vital 

to productivity. 

To enable Toromont to deliver CSAs 

to Cruickshank and other customers on 

mutually agreeable financial terms, 

Toromont relies on predictive models of 

equipment failure and real world 

experience in servicing machines. 

“We determine the cost of 

maintenance down to the operating hour 

for our customer’s equipment and we do 

that in a systematic way,” said Steve 

Cassidy, Product Support Manager at 

Toromont CAT who along with Dave 

McClure, Ottawa Branch Manager and 

Paul Egan, Machine Sales Representative 

helped Cruickshank place its order. 

“Specifically, we conducted an 

applications survey to assess the work 

each machine will do. For example, 

Cruickshank wheel loaders that perform 

face work (where drilling and blasting 

occur) will require more maintenance than 

loaders engaged in stockpiling aggregate. 

The information gathered from this survey 

is fed into our CAT Builder software 

program, allowing us to calculate the 

exact cost of maintenance for each 

component and consumable on each 

machine based on hours of usage. No 

guessing is required.” 

Guesswork is also removed from the 

delivery of service with Product Link, an 

electronic system that allows Toromont to 

remotely monitor equipment performance, 

utilization and location. 

“Product Link gives us an edge 

because it allows us to intervene 

proactively with oil changes and other 

service protocols right at the aggregate 

quarry, before harm is done to critical parts 

and components,” says Mr. Cassidy. “This 

level of service is standard with CSAs and 

is part of reducing cost of ownership.” 

Financial considerations aside, 

Cruickshank chose Toromont because 

CAT equipment best fit their varied needs. 

As an integrated company, Cruickshank 

regularly shifts their machines to the work 

that needs to be performed. For example 

CAT wheel loaders will work in their quarries 

in the summer and in winter will move 

sand for road maintenance. Same for their 

excavators: they may be used to widen a 

road one day and at a quarry the next. 

While the work is varied, Cruickshank 

had very specific criteria for performance. 

The machines were chosen after 

considering cycle speeds (which 

determine cost per tonne), fuel efficiency, 

power requirements, accuracy of machine 

control and guidance systems and 

operator safety and visibility. CAT’s work 

tools, which are used to extract rock, were 

also assessed, along with CAT’s Quick 


Cruickshank had specific criteria in mind when selecting 

its equipment, including this CAT excavator. 

Coupler system. With it, operators can 

remove and replace tools in a matter of 

seconds – which eliminates costly 

downtime between jobs. 

“Cruickshank performed a very 

thorough buying process,” said Mr. 

McClure. “We were short listed based on a 

number of criteria, including our branch 

network, people and our collective ability 

to perform for them where they do 

business. This level of due diligence 

makes our win even more special.” 

As a general contractor, Cruickshank 

has the management and field expertise, 

equipment, and construction products to 

complete any job and has built roads and 

bridges throughout Ontario in all types of 

terrain. As a result, since 1998, its 

equipment needs have also been served 

by Battlefield – The CAT Rental Store. 

Cruickshank’s motto, “we do our level 

best” expresses the company’s strong 

commitment to customer service and 

satisfaction. Toromont is proud to help 

Cruickshank meet this commitment in 

2010 and beyond. TIH


cold technology, 

hot economics 

cimcO’s EnviROnmEnTAl gAmE chAngER EcO chill 

SURFAcES SAvingS FOR icE Rink OwnER 

CIMCO’S ECO CHILL system provides both 

high performance ice for these hockey players 

and high energy efficiency for Ridley’s new 

ice rink facility.


Ridley college is recognized 

internationally for its high 

academic standards. Beginning 

in 2010, this independent school 

in St. catharines, Ontario will 

also be recognized for its ability 

to heat and air condition its new 

arena using ice. 

Extracting heat to make ice is a well-known engineering 

feat. Less well known is the ability to recover the heat 

extracted during the ice making process and re-use it, 

as Ridley is doing, to heat the dressing rooms, water for the 

showers, snow melting equipment and the floors of an adjacent 

field house at its new sports complex. 

All of this is made possible with ECO CHILL ® technology 

from CIMCO Refrigeration. What makes ECO CHILL special to 

Ridley and the many other private and municipally owned arenas 

that have installed it is that the technology significantly reduces 

heating (and cooling) costs by lowering electricity consumption. 

Greenhouse gas (GHG) emissions are also reduced because 

utilization of the arena’s natural-gas burning furnaces is lower 

and the refrigerants used in ECO CHILL are non-ozone depleting. 

Exactly how does ECO CHILL work? In an old style ice rink, 

heat is extracted from the five-inch thick concrete pad that sits 

below the ice surface and then released outdoors using a heat 

exchanger. Heating and cooling for the seating areas and 

dressing rooms require additional HVAC systems powered by 

natural gas and electricity. In an ECO CHILL rink like Ridley’s, 

100% of the heat and cold extracted from the ice rink are 

recovered, recycled or stored for future consumption. 

“Ice rinks are energy intensive,” says CIMCO’s Dave Sinclair, 

Branch Manager for the group that handled the Ridley project for 

CIMCO. “A traditional rink consumes 1.5 million kWh of electricity 

per year, so reducing this consumption by recycling heat and cold 

creates attractive cost savings. In Ridley’s case, the ECO CHILL 

system makes 80 tons of heat available, some of which is 

recycled for radiant flooring in the adjoining field house (site of its 

old ice rink that now serves as a vantage point for the new 

450-seat area.) The rest is either stored until it’s needed or is used 

to heat dressing rooms, showers and common areas. ECO CHILL 

also provides some cooling for the dressing rooms, lobby and 

field house through CIMCO’s patented Ice Battery. The Ice 

Battery is a thermal storage device that is used to store heat but 

can also provide cooling. Economically and environmentally, it’s 

the way of the future for ice rinks.” Continued on next page.


In traditional arenas, the refrigeration 

and heating systems don’t talk to each 

other. By integrating the control systems 

for both, CIMCO creates an intelligent 

building that is able to store heat, use it 

when it’s necessary to meet the facility’s 

changing temperature requirements and 

reduce peak electricity consumption. The 

integration is managed through a 

sophisticated computer control system 

called ECO SENSE. 

ECO SENSE allows Ridley to monitor 

its athletic complex remotely, and adjust 

temperatures for each room without 

physically touching a thermostat. The 

technology also collects data on energy 

consumption, which will be used to 

achieve LEED (Leadership in Energy and 

Environmental Design) certification. 

To an untrained eye, other than the 

Ice Battery, an ECO CHILL-powered 

facility looks the same as an ordinary 

rink. Most of the equipment, including 

CIMCO-engineered high efficiency 

screw compressor package, steel 

plate and frame heat exchangers, and 

microprocessor controls, is contained 

in a mechanical room. 

Unseen is what goes on in the 

concrete pad below the ice rink. There, 

entombed in layers of concrete and 

insulation, are 52,000 linear feet of pipe. 

Inside, a syrupy solution known as glycol 

A CIMCO Eco-80A ECO CHILL package at Ridley College. 

Complete with screw compressors and plate and frame 

heat exchangers, this package provides up to 1,300 MBH 

of building heat for the new facility. 

circulates in the floor. The cold glycol acts 

as a heat transfer fluid to move the heat 

away from the floor allowing the floor to 

freeze and ice to be made. The rejected 

heat is then transferred to a warm glycol 

solution that is circulated through piping in 

the building to provide heat. A portion of 

these same cold and warm glycol flows 

are also directed to a system called ECO 

DRY, which ventilates, heats and 

dehumidifies the arena while keeping 

humidity at about 40%. This is important 

for Ridley as its arena operates year 

round. If left unchecked, particularly in the 

summer, humidity in an arena creates fog. 

Ammonia is used as the primary 

refrigerant that exchanges heat 

with the chilled glycol. Ridley chose 

ammonia over Freon because ammonia 

has no harmful ozone-depleting 

properties, offers better heat transfer 

characteristics and is ten times less 

expensive than Freon. 

Since inventing ECO CHILL in 2002, 

CIMCO has earned four U.S. and 

Canadian patents – the latest granted in 

2009 for ECO CHILL’s computerized 

control systems – a prestigious federal 

government innovation award, and more 

than 100 customers. 

In its markets, ECO CHILL has 

become the standard for environmentally 

responsible ice rinks and as such has 

removed, across its installed base, some 

50,000 tons of GHG per year – the 

equivalent of 11,000 cars travelling 20,000 

kilometers each. This environmental payback 

is growing each year along with the 

installed base. 

So how is ECO CHILL performing at 

Ridley? Julia Bertollo, Director of Physical 

Plant, recommended ECO CHILL to her 

Board of Directors, based on a cost/ 

benefit analysis, five year ROI and the 

desire to contribute to the College’s 

five-year Sustainable Energy Plan to 

reduce energy consumption by 33.5%. 

“Our goals were clear,” says 

Ms. Bertollo. “Achieve LEED certification, 

create an ice surface of NHL calibre and 

deliver the arena on budget and on time. 

We’ve gotten it all. Although LEED 

certification will take a year, operating 

statistics so far show that we will be able 

to run our new two-building arena 

complex for the same price as our old 

single facility rink, taking into account 

annual hydro and natural gas costs. We’re 

also on budget and CIMCO delivered a 

beautiful facility exactly when they said they 

would – in just 10 months.” 

Aside from the technical details, one 

other important feature stands out 

according to Ms. Bertollo: “The quality of 

the ice. It’s simply outstanding.” TIH

EcO chill mAkES 

indUSTRiAl 

mARkET dEBUT 

industrial refrigeration for food, 

beverage, blast freezing, cold 

storage and process industries is 

historically a larger market for CIMCO 

than recreational refrigeration. 

For this reason, the recent 

introduction of ECO CHILL as well 

as ammonia-based heat pumps and 

other green refrigeration technologies 

for industrial customers is a positive 

development – one that is creating new 

revenue opportunities. 

An early adopter of ECO CHILL’s 

industrial market offering is Viandes 

Paquette. This leading Quebec-based 

food production company specializes in 

meat processing and quick freezing. It 

will use the technology to heat and cool a 

complex that includes a meat processing 

plant with 40 process rooms and a spiral 

freezer, an office space and in the future, 

a grocery store. Even its driveway will be 

served by ECO CHILL, eliminating the 

need to shovel snow in the winter. 

The opportunity for ECO CHILL 

arose after a violent fire destroyed 

Viandes Paquette’s factory. In taking the 

decision to rebuild, company President 

Guy Paquette and his team decided 

to make their new facility a “green” 

one. This installation, now underway in 

Henryville, Quebec will be a showcase for 

environmental management. Outfitted with 

a complete ECO CHILL thermal package, 

the building will recycle 100% of the 

heat it creates and on a projected basis, 

reduce annual electrical consumption 

by 2.5 million kilowatt hours per year – a 

substantial annual savings. 

“Unlike most industrial projects where 

our sole responsibility is refrigeration, for 

Viandes Paquette, we are taking on the 

broader role of managing the energy of the 

entire plant,” said Benoit Rodier, Quebec 

Region Manager for CIMCO. “We’re able 

to do this because ECO CHILL is an 

integrated energy management system 

that works as efficiently and effectively 

for industrial applications as it does for 

recreational facilities.” 

The premise behind ECO CHILL 

for industrial applications is the same 


An ECO CHILL package is hoisted 

to the mechanical room on the roof 

of Viandes Paquette’s factory. 

as it is for recreational ice rinks: remove 

heat to create cold, store the heat rather 

than waste it and use it to reduce peak 

power consumption. However, there is a 

significant difference: size. The Viandes 

Paquette building is a two-storey, 130,000 

square foot plant. 

Size means more equipment. The 

Viandes Paquette facility will be equipped 

with six ECO DRY units (a new glycol-fed 

zero gas, zero electricity air handling 

system developed by CIMCO’s team 

in Montreal), four Ice Batteries, two 

low-temperature screw compressors, 

45 evaporators, a boiler for domestic 

hot water and a complete building 

automation system. 

Two closed loop systems will carry 

food-grade glycol throughout the plant. 

One loop will be used to keep the process 

rooms at +/–34 Fahrenheit, the second will 

be used to condition the office space. This 

is a major project and the first complete 

industrial ECO CHILL thermal plant 

installation in Canada. TIH


13,600 customers, 36 Stores, 

One Rental 

company 

hOw BATTlEFiEld – ThE cAT REnTAl STORE mAkES 

pERFORmAncE hAppEn in TOUgh mARkETS 

Battlefield sells and rents Caterpillar multi terrain loaders, like this one, 

and other compact construction equipment to many customers.

meeting the needs of 13,600 

customers is never easy but 

Battlefield – The CAT Rental 

Store has made it look that way for 

almost 15 years by applying a variety of 

customer-focused strategies. 

For any rental company, the most 

fundamental part of business success is 

the ability to meet customer needs – now. 

In this business, “yes we have it available 

today” means the difference between 

deal and no deal. 

Answering in the affirmative when a 

customer calls takes sophisticated and 

attentive inventory management, 

calibrated to carrying the right quantities 

of the right brand name items. 

“Metrics pertaining to time and 

financial utilization are Key Performance 

Indicator’s for the management of our 

business,” says Dale Folkerson, 

Battlefield’s VP and General Manager. 

“Coupled with industry information on 

construction activities, we continually 

determine fleet requirements and adjust 

our product lists accordingly.” 

The seasonal nature of customer 

activity in Battlefield’s markets presents a 

challenge for inventory management and 

business generally. To meet this challenge, 

Battlefield has strengthened its product 

offerings over the years to include 

groundheaters, bottled and bulk propane, 

tarps, curing blankets and related 

supplies as well as snow removal equipment. 

“Whether we provide winter heat 

solutions to the expansion of St. 

Michael’s Hospital, cement-based grouts 

for a bridge deck project on the QEW, or 

a scissor lift to change light bulbs in a 

shopping plaza, Battlefield emphasizes a 

one-stop experience for contractors,” says 

Tony Joosse, VP Operations and Regional 

Manager for the Greater Toronto Region. 

Beyond equipment rental, Battlefield 

also generates revenue from the sale of 

new and used CAT Compact Construction 

Equipment and replacement parts, as 

well as product sales and service for 

Trimble survey technologies commonly 

used by contractors, such as lasers and 

optical control instruments. 

gETTing TO yES 

Meeting a rental need is not only about 

what’s in inventory – it’s about how quickly 

the product can get out of the warehouse 

and into the customer’s place of business. 

Battlefield’s objective is to deliver in two 

hours or less. 

To address this requirement, 36 

Battlefield – The CAT Rental Stores 

operate in carefully chosen urban and 

suburban markets with quick access to 

major thoroughfares. Not only do these 

brightly lit and distinctive stores attract 

walk-in business, they serve pivotal roles 

in Battlefield’s hub and spoke model of 

distribution. 

“When we are located within a 30 

minute drive time of construction projects 

or customer facilities, we find that 

customer expectations can be met 

consistently,” says Gerry Hamilton, 

Rental Manager, Brampton. “Proximity to 

markets is a lynchpin of our financial 

model as well.” 

Choosing locations for new stores is 

more science than art for Battlefield, 

which has grown its footprint by four 

stores in the past five years with new 

locations added organically and by way 

of acquisition. To underscore the 

short-term “need it now” nature of its 

business, about 85% of all rentals are for 

durations of less than 30 days. 

Sometimes sizeable jobs require a 

different approach to service. In certain 


(Left) A Battlefield delivery truck loaded with a towable Lincoln Electric welder prepares to depart for a customer jobsite. 

(Right) Jay Battrick, Rental Manager at Battlefield’s Barrie location explains the features of a gas-powered Honda generator to a customer. 

cases, Battlefield may establish a 

“storefront” at the customer’s site to 

enable contractors to access equipment in 

minutes rather than hours. Battlefield has 

operated several of these temporary rental 

locations over the past five years at 

locations including a nuclear power facility 

which used numerous pieces of equipment. 

Continued on next page. 

“ Battlefield uses technology, 

experience, our storefronts 

and our delivery fleets in 

combination to put value 

in each rental transaction.” 

Dale Folkerson, 

Battlefield VP and General Manager


(Left) A customer uses a pneumatic breaker to weaken a concrete surface. (Right Top) A Battlefield driver enters customer transaction information 

into an industry leading, state-of-the-art TRAC hand-held device. (Right Bottom) Jim Connolly, Laser Service Technician at the Laser Service & Repair 

Centre at Battlefield’s Brampton location calibrates a laser level to ensure factory specifications are met. 

For these and other jobs where 

equipment may be used for weeks rather 

than days, Battlefield’s TRAC and 

e-commerce technologies represent an 

added bonus for customers. With these 

systems, the customer knows exactly 

when the equipment was rented and 

where that equipment is at any given 

time. The result is a reduction of costs for 

idle or lost equipment and much 

improved record-keeping. 

In 2010, Battlefield will launch the 

second generation of its TRAC system to 

improve its delivery truck dispatch system 

as well as certain administrative efficiencies. 

“TRAC II was designed to improve 

our delivery truck dispatch functionality 

without sacrificing delivery speed to 

customers,” said Ross Miller, Battlefield’s 

Controller. ”Operating a fleet of 250 

delivery trucks is a significant expense, 

so improving fleet efficiency reduces fuel 

costs, greenhouse gas emissions and the 

need to add more trucks to cover 

expansions in our territory. While it’s too 

early to indicate success with TRAC II, our 

objective is to reduce costs by 5–7%.” 

Making performance happen is never 

easy in any business. That Battlefield has 

managed to do so through this recent 

downturn is testament not only to its 

business formula and the empowerment 

of its people, but the loyalty of its 

customers – all 13,600 of them. TIH 

“ we continued to invest in our 

business through the downturn 

to increase our competitiveness 

and financial utilization.” 

Ross Miller, 

Battlefield Controller


A Safe and Secure workplace 

creating a safe workplace for our 

employees is a goal shared by all 

Toromont leaders, including our 

Board of Directors who review health and 

safety statistics on a regular basis and 

oversee compliance with the Company’s 

Code of Business Conduct. While a 

top-down approach is used to ensure all 

safety rules are implemented and 

enforced, real success comes from 

creating a “safety first” culture. 

In all business units, service 

technicians hold “tool box” meetings that 

focus on safety and throughout the day 

all employees are reminded of the 

importance of safety through posters, 

daily emails and monthly newsletters. A 

safety suggestion contest was launched 

across Toromont in search of the best 

safety ideas from our employees. The use 

of cellphone and electronic devices has 

been banned while driving – well ahead 

of provincial and state rule changes. On 

every job, it’s mandatory for our 

employees to identify and document the 

potential risks and review procedures to 

minimize those risks. Some 60,000 

hazard assessments were completed by 

Toromont CAT employees in 2009 alone. 

While these are corporate-wide 

initiatives, each of our business units 

focuses on the special needs of their 

workforce. As part of its work alone 

PUT YOUR BEST FOOT FORWARD! 

WEAR FOOT PROTECTION! 

FOOT PROTECTION REQUIRED 

BEYOND THIS POINT 

CSA APPROVED STEEL TOE, STEEL PLATE REQUIRED. 

MAY ALSO REQUIRE ELECTRIC SHOCK PROTECTION 

IF EXPOSED TO LIVE ELECTRICAL CONDUCTORS. 

FOR MORE INFO CONTACT: 

H&S 416-514-4760 

OR VISIT: http://info.toromont.com/hrcat/healthsafety_program/Safety_Standards.asp 

policy, Toromont CAT uses a satellitebased 

SPOT device to monitor the safety 

of its employees in the field. SPOT 

satellite GPS messenger devices work 

in locations where cellphones do not 

and with the click of a button, enable 

technicians to connect to 911 services. 

At Toromont Energy Systems (TESI), 

a new behavioural-based approach has 

been adopted called AWARE. Its purpose 

is to empower employees to root out 

unsafe behaviours and conditions and 

promote mutual accountability for a safe 

workplace. At Battlefield – The CAT Rental 

Store where employees log over 11 

million kilometers a year, driver training is 

both obligatory and much valued, not 

only by its employees, but customers 

who need on-time delivery every time. In 

2009, CIMCO began to implement new 

software that streamlines the overall 

management of the safety process. 

Recognition programs are also used 

to encourage safe practices. Sometimes 

recognition comes from customers. 

TESI’s Houston service group was 

honoured in May 2009 by Shell with the 

2008 HSE Contractor Award in 

recognition of safety excellence. A 

Number 1 Safety Award was given to 

CIMCO by Giffels Design-Build Inc. in 

recognition of CIMCO’s safety program 

on a major project in B.C. 

DON'T BE AFRAID 

TO LOOK ME IN THE EYES! 

WEAR EYE PROTECTION! 

EYE PROTECTION REQUIRED 


EYE PROTECTION CAN INCLUDE: 

SAFETY GLASSES, GOGGLES, FACE SHIELD, ETC... 


H&S 416-514-4760 


HEARING PROTECTION REQUIRED 



H&S 416-514-4760 

The payback on these efforts? Fewer 

injured employees – lost time injuries 

were reduced year over year by 45%. 

This ongoing effort underscores a 

philosophy best described by David 

Wetherald, Toromont’s Vice President 

Human Resources and Legal: “Toromont 

has made a serious commitment to 

achieving an injury-free, productive and 

engaging workplace. We are making 

headway, but this is a job that never ends 

and a commitment that will not fade.” TIH 

Ownership 

works 

To make it easier for our employees 

to acquire an ownership stake in 

Toromont, we have offered a 

Company-match in our Employee Share 

Ownership Plan (ESOP) since 2008. For 

every $3 contributed to the employee 

share ownership plan, Toromont invests 

$1 to a maximum of $1,000 per year. 

Now, more than 48% of our employees 

are shareholders. This program aligns 

our employees in a common cause: 

creating shareholder value. TIH 

WHAT SOUNDS BETTER? 

A TRACTOR OR 

YOUR KIDS LAUGHTER? 

WEAR YOUR HEARING 

PROTECTION TO HEAR 

WHAT YOU REALLY WANT 

TO HEAR! 

HEARING LOSS CAN OCCUR WHERE dB LEVELS EXCEED 85dB CONSISTENTLY. 

HEARING PROTECTION INCLUDES BOTH EAR PLUGS OR EAR MUFFS. 


Toromont uses a variety 

of tools, including posters 

like these, to encourage 

all employees to embrace 

safe and smart workplace 

practices.


community 

Support 

we are proud that once again in 2009, our employees, 

working together and individually, made a difference 

in our communities. An ongoing example is support 

provided to United Way. To raise funds for this important cause, 

Toromont CAT employees and their families participated in 

seven fundraisers, including the marquee event, the Toromontsponsored 

Dragon Boat Festival of York Region which attracted 

1,800 spectators including 315 people from Toromont. This year 

marked the first time that CIMCO employees also participated 

in the races. These events encouraged teamwork and went a 

long way in helping employees and Toromont contribute over 

$180,000 in 2009, and a total of $657,075 donated to United Way 

since 2003. 

Beyond financial contributions, 22 employees participated 

in United Way “Days of Caring” when they worked at the Sandgate 

Women’s Shelter (a transitional shelter) and the Vitanova 

Foundation, which provides support to people suffering from 

substance abuse. Toromont CAT was honoured with the United 

Way of York Region 2009 Days of Caring Spirit Award for its 

participation. Two Toromont executives also served on or 

chaired United Way of York Region fundraising committees, 

further strengthening the bonds between our organizations. 

Our business units also supported other causes such as 

food banks, homeless shelters and foundations for children. 

CIMCO and Toromont CAT employees at the 2009 Toromont CAT Dragon Boat Festival in King City, Ontario. 

Community support also involves educational initiatives. 

In addition to scholarships at Centennial College, since 2008 

we have offered a scholarship in motive power techniques at 

Sir Sandford Fleming College for Inuit students. This scholarship 

is only one element of our support. We have been active for 

more than a decade with Kitikmeot, Qikiqtaalluk and Sakku Inuit 

organizations. The goal of this partnership is to bring the 

benefits of employment and skills development north. TIH 

Day of Caring volunteer team at work at Sandgate Women’s Shelter 

of York Region in Sutton, Ontario.

Environmental 

Stewardship 

we help customers to improve their environmental 

practices (see Glanbrook Landfill page 10 and ECO 

CHILL page 20) but we also seek to improve our own. 

As part of this ongoing effort, we examined our operations 

in 2009 and began to take inventory of our environmental 

practices to form a baseline for a carbon mitigation strategy. 

It will take time and effort to develop this sustainability strategy 

but we believe it’s imperative to have our own house in order 

which means having verifiable achievements. 

We also continued to encourage our employees to innovate 

with a goal of doing more with less and increasing our efficiency 

and competitiveness while reducing our environmental impacts. 

This led to some big and small changes, a few of which are 

described below. 

To eliminate waste, a pilot project at our Concord, Ontario 

branch proved to be successful in recycling absorbent pads 

used to soak up oil and other lubricants. In the past, these 

pads were either buried in a landfill or incinerated. Dave Tufts, 

Toromont CAT’s Environmental and Facilities Manager, found 

a company that would collect, clean and return these pads, 

thereby eliminating a substantial waste stream. 


“While this initiative is only cost neutral, it works so well in 

diverting waste that we have rolled it out to multiple branches,” 

said Mr. Tufts. “In 2009, we diverted 5,400 kilograms of waste 

from landfill and recycled 3,430 litres of liquids. We will do much 

more in 2010.” 

Toromont CAT’s Reman operations implemented a lights/ 

computers off policy, installed programmable thermostats and 

minimized environmental waste by installing a ZEP shurfill brake 

clean refill system. This system eliminates the use of aerosol 

from parts cleaning and is less expensive. Electricity use was 

also reduced – by 20,000 kilowatt hours per month – with the 

installation of a variable speed air compressor used to power 

hand tools. Similar efforts were undertaken at other branches 

as part of a broader pledge made by Toromont CAT to reduce 

its energy consumption by 10% over three years. 

Battlefield invested in two more equipment washing 

systems, at a capital cost of over $300,000. These systems 

not only conserve up to 1,245 cubic metres of water a year per 

location, they capture particles of oil and fuel residue removed 

from the equipment while it’s cleaned, allowing for safer disposal. 

More of these systems will be installed in the future. TIH


corporate governance Overview 

A strong and effective corporate governance program continues to be a principal priority for Toromont. The Nominating and Corporate 

Governance Committee, on behalf of the Board, establishes and monitors the governance program and its effectiveness. The Company’s 

corporate governance structure and procedures are founded on our Code of Business Conduct that applies to all directors, officers 

and employees. Our governance program includes the activities of the Board of Directors, who are elected by and are accountable to 

the shareholders, and the activities of management who are appointed by the Board and are charged with the day-to-day management 

of the Company. 

Toromont regularly reviews and enhances its governance practices in response to evolving regulatory developments and other 

applicable legislation. 

The Company’s corporate governance program is in compliance with National Policy 58-201 – Corporate Governance Guidelines 

and Multilateral Instrument 52-110 – Audit Committees. 

BOARd OF diREcTORS 

The role of the Board of Directors, its activities and responsibilities are documented and are assessed at least annually, as are the 

terms of reference for each of the committees of the Board, the Chairs of the committees, the Lead Director and the Chairman, 

inclusive of scope and limits of authority of management. The Board acts in a supervisory role and any responsibilities not delegated 

to management remain with the Board. The Board’s supervisory role includes such matters as strategic planning, identification and 

management of risks, succession planning, communication policy, internal controls and governance. 

The Lead Director is an independent director appointed annually by the independent directors of the Board to facilitate the 

Board’s functioning autonomously from management. The Lead Director serves as a non-partisan contact for other directors on matters 

not deemed appropriate to be discussed initially with the Chairman or in situations where the Chairman is not available. The Lead Director 

is available to counsel the Chairman on matters appropriate for review in advance of discussion with the full Board of Directors. The 

Lead Director chairs a session at each Board meeting during which only independent directors are present. 

cOmmiTTEE STRUcTURE And mAndATES 

Committees of the Board are an integral part of the Company’s governance structure. Three committees have been established with a 

view to allocating expertise and resources to particular areas, and to enhance the quality of discussion at Board meetings. The committees 

facilitate Board decision-making by providing recommendations to the Board on matters within their respective responsibilities. 

All committees are comprised solely of directors who are independent of management. A summary of the responsibilities of the 

committees follow. 

The Nominating and Corporate Governance Committee: Principal responsibilities are reviewing and making recommendations as 

to all matters relating to effective corporate governance. The committee is responsible for assessing effectiveness of the Board, its 

size and composition, its committees, director compensation, the Board’s relationship to management and individual performance and 

contribution of its directors. The committee is responsible for identification and recruitment of new directors and new director orientation. 

The Audit Committee: Principal duties include oversight responsibility for financial statements and related disclosures, reports to 

shareholders and other related communications, establishment of appropriate financial policies, the integrity of accounting systems 

and internal controls, legal compliance on ethics programs established by management, the approval of all audit and non-audit services 

provided by the independent auditors and consultation with the auditors independent of management and overseeing the work of the 

auditors and the Internal Audit department. 

The Human Resources and Compensation Committee: Principal responsibilities are compensation of executive officers and other 

senior management, short- and long-term incentive programs, pension and other benefit plans, executive officer appointments, evaluation 

of performance of the Chief Executive Officer, succession planning and executive development. The committee also oversees compliance 

with the Company’s Code of Business Conduct and the health, safety and environment program.

Board of directors 

Robert S. Boswell Director since 2007 

Mr. Boswell is Chairman and Chief Executive Officer 

of Laramie Energy II, LLC., a Denver-based company 

primarily focused on finding and developing natural 

gas reserves from unconventional gas reservoirs 

within the Western Sedimentary Basin of North 

America. He is also a director of Complete 

Production Services, Inc., an oil and gas service 

provider based in Houston, Texas. 

Robert m. Franklin l s Director since 1994 

Chairman, Human Resources and 

Compensation Committee 

Mr. Franklin is President of Signalta Capital 

Corporation, a private investment company. 

He is also a director of Barrick Gold Corporation, 

First Uranium Corporation, and Canadian Tire 

Corporation. 

Ronald g. gage, f c a n l Director since 2000 

Chairman, Nominating and 

Corporate Governance Committee 

Mr. Gage is a Fellow of The Institute of Chartered 

Accountants of Ontario. He is a director of Invesco 

Trimark Canada Fund Inc., Invesco Trimark 

Corporate Class Inc., easyhome Ltd., and the 

Canadian Public Accountability Board. 

david A. galloway n s Director since 2002 

Mr. Galloway is Chairman of the Board of 

Directors of Bank of Montreal. He also serves on 

the Board of Directors of E.W. Scripps Company. 

n Member of Nominating and 

Corporate Governance Committee 

l Member of Audit Committee 

s Member of Human Resources and 

Compensation Committee 

Back row left to right: 

H. Stanley Marshall 

Ronald G. Gage 

Stephen J. Savidant 

David A. Galloway 

Robert M. Franklin 

Front row left to right: 

Robert M. Ogilvie 

Robert S. Boswell 

Wayne S. Hill 

John S. McCallum 

wayne S. hill Director since 1988 

Mr. Hill is a former Executive Vice President of 

the Company. Mr. Hill joined Toromont in 1985 

as Vice President, Finance and Chief Financial 

Officer and became Executive Vice President in 

2002. He retired from the Company in May 2008. 

He is also a director of First Uranium Corporation. 

h. Stanley marshall s Director since 1998 

Mr. Marshall is President and Chief Executive 

Officer and a director of Fortis Inc. and several 

of its subsidiaries (an international electric utility 

holding company). 

john S. mccallum n l Director since 1985 

Lead Director and Chairman, Audit Committee 

Mr. McCallum is a Professor of Finance in the 

I.H. Asper School of Business at the University 

of Manitoba. He is also a director of IGM 

Financial Inc., Wawanesa Mutual Insurance 

Company, Wawanesa General Insurance 

Company, Wawanesa Life Insurance Company 

and Fortis Inc. (including subsidiaries in British 

Columbia and Alberta). 


Robert m. Ogilvie Director since 1986 

Mr. Ogilvie is Chairman of the Board and Chief 

Executive Officer of the Company. Mr. Ogilvie 

joined Toromont in 1985 and has been Chairman 

since 1987. He has also been the Company’s CEO 

since 1987, excluding the period from 2002 to 

2006. Mr. Ogilvie is also on the Board of Regents 

of Mount Allison University. 

Stephen j. Savidant Director since 2007 

Mr. Savidant is an independent businessman 

and Chairman of ProspEx Resources Ltd., a 

Calgary-based oil and gas company focused 

on exploration for natural gas in the Western 

Canadian Sedimentary Basin. He is also a 

director of Empire Company Limited.


Management’s Discussion and Analysis 

of Financial Results for the year ended December 31, 2009 

This Management’s Discussion and Analysis (“MD&A”) comments on the operations, performance and financial condition of Toromont 

Industries Ltd. (“Toromont” or the “Company”) as at and for the year ended December 31, 2009, compared to the preceding year. This 

MD&A should be read in conjunction with the attached audited consolidated financial statements and related notes for the year ended 

December 31, 2009. 

The consolidated financial statements reported herein have been prepared in accordance with Canadian Generally Accepted 

Accounting Principles (“GAAP”) and are reported in Canadian dollars. The information in this MD&A is current to February 5, 2010. 

Additional information is contained in the Company’s filings with Canadian securities regulators, including the Company’s Annual 

Information Form. These filings are available on SEDAR at www.sedar.com and on the Company’s website at www.toromont.com. 

ADVISORY 

Statements and information herein that are not historical facts are “forward-looking information”. Words such as “plans”, “intends”, “outlook”, 

“expects”, “anticipates”, “estimates”, “believes”, “likely”, “should”, “could”, “will”, “may” and similar expressions are intended to identify 

forward-looking information and statements. 

By their nature, forward-looking information and statements are subject to risks and uncertainties which may be beyond Toromont’s 

ability to control or predict. Actual results or events could differ materially from those expressed or implied by forward-looking information 

and statements. Factors that could cause actual results or events to differ from current expectations include, among others: business 

cycle risk, including general economic conditions in the countries in which Toromont operates; risk of commodity price changes including 

precious and base metals and natural gas; risk of changes in foreign exchange rates, including the Cdn$/US$ exchange rate; risk of the 

termination of distribution or original equipment manufacturer agreements; risk of equipment product acceptance and availability of supply; 

risk of increased competition; credit risk related to financial instruments; risk of additional costs associated with warranties and maintenance 

contracts; interest rate risk on financing arrangements; risk of availability of financing; risk of environmental regulation; and risks related to 

the integration of Enerflex’s operations with those of Toromont. Additional information on these factors and other risks and uncertainties 

that could cause actual results or events to differ from current expectations can be found in the “Risks and Risk Management” and 

“Outlook” section of this MD&A. Other factors, risks and uncertainties not presently known to Toromont or that Toromont currently 

believes are not material could also cause actual results or events to differ materially from those expressed or implied by forward-looking 

information and statements. 

Forward-looking information and statements contained herein about prospective results of operations, financial position or cash 

flows that are based on assumptions about future economic conditions and courses of action are presented for the purpose of assisting 

Toromont’s shareholders in understanding management’s current view regarding those future outcomes and may not be appropriate for 

other purposes. Readers are cautioned not to place undue reliance on the forward-looking information and statements contained herein, 

which are given as of the date of this document, and not to use such information and statements for anything other than their intended 

purpose. Toromont disclaims any obligation or intention to update or revise any forward-looking information or statement, whether the 

result of new information, future events or otherwise, except as required by applicable law. 

CORPORATE PROFILE AND BUSINESS SEGMENTATION 

As at December 31, 2009, Toromont employed approximately 3,800 people in more than 129 locations, predominately in Canada and the 

United States. Toromont is listed on the Toronto Stock Exchange under the symbol TIH. The Company serves its customers through two 

business groups. 

The Equipment Group sells, rents and services a broad range of specialized construction equipment and industrial engines. These 

activities generated 48% of the Company’s revenues in 2009 (2008 – 52%). The Equipment Group is comprised of Toromont CAT, one of the 

world’s larger Caterpillar dealerships by revenue and geographic territory, and Battlefield – The CAT Rental Store, an industry-leading 

rental operation. Performance in the Equipment Group is driven by activity in several industries: road building and other infrastructurerelated 

activities; residential and commercial construction; mining; aggregates; waste management; steel; forestry; and agriculture. Other 

significant activities include sales and product support activities for Caterpillar engines used in a variety of applications including industrial, 

commercial, marine, on-highway trucks and power generation. 

The Compression Group is a leading North American business specializing in the design, engineering, fabrication, installation 

and after-sale support of compression, process and refrigeration systems. These activities generated 52% of the Company’s revenues 

in 2009 (2008 – 48%). In 2009, the Compression Group was comprised of Toromont Energy Systems Inc., a leader in supplying and 

servicing compression and process systems used in natural gas, fuel gas and carbon dioxide applications and CIMCO Refrigeration, 

a leader in industrial and recreational markets. Results in the Compression Group are influenced by conditions in the primary market 

segments served: natural gas production and transportation; chemical, petrochemical, food and beverage processing; cold storage; food 

distribution; and ice rink construction.


ACQUISITION OF ENERFLEX 

On January 20, 2010, Toromont completed its take-over bid for Enerflex Systems Income Fund (“Enerflex”), acquiring a total of approximately 

42.2 million trust units and exchangeable limited partnership units. Together with the trust units owned by Toromont prior to commencement 

of the take-over bid, Toromont now owns approximately 96% of the outstanding trust units on a fully-diluted basis. Toromont will acquire 

the balance of the outstanding trust units on February 26, 2010. The total consideration for Enerflex is approximately $670 million, including 

units acquired prior to the take-over bid, units acquired in the take-over bid and the second step transaction. 

Enerflex is a supplier of products and services to the global oil and gas production industry, and has operations in Canada, Australia, 

the Netherlands, the United States, Germany, Pakistan, the United Arab Emirates, Egypt, Indonesia and Malaysia. 

This important transaction brings together Enerflex and Toromont Energy Systems, reported in the Compression Group, to create a 

stronger organization (named “Enerflex Ltd.”), better able to serve customers and compete in both North American and international 

markets. The combined organization has significant presence in key global markets including Canada, the United States, Australia, Europe 

and the Middle East. The new Enerflex benefits from increased financial strength and access to capital and is better positioned to serve 

customers. Toromont also expects to realize attractive synergies and cost savings through the elimination of excess fabrication capacity, 

overlapping service facilities, certain public company costs of Enerflex and duplicative head office and general and administration expenses. 

Toromont acquired the Enerflex units tendered to its take-over bid with cash and shares, and will acquire the remaining trust units 

on the same terms. In the aggregate, Toromont will pay approximately $315.6 million in cash and issue 11.9 million common shares for 

these units. 

The cash consideration of the purchase price along with transaction costs and repayment of $100.6 million in senior secured notes 

payable at Enerflex will be largely financed with additional unsecured bank debt under a new term loan facility that Toromont closed in 

January 2010. Borrowings of up to $450 million are available to Toromont under this facility, with draw downs to occur by July 2010, and 

are due in July 2011 (eighteen month term). Interest on borrowings is charged at floating rates based on Canadian prime rate or Canadian 

Bankers’ Acceptances rate, plus a specified margin. 

This acquisition will be accounted for as a business combination with Toromont as the acquirer of Enerflex. The purchase method of 

accounting will be used. The Company is in the process of finalizing the estimated fair values of assets acquired and liabilities assumed 

at the date of acquisition, including goodwill and identifiable intangible assets. The consolidated results of operations of Enerflex will be 

included in the Consolidated Statement of Earnings after January 20, 2010. 

Except as otherwise disclosed, the information presented herein excludes Enerflex and its businesses as Enerflex was acquired after 

December 31, 2009. 

PRIMARY OBJECTIVE AND MAJOR STRATEGIES 

A primary objective is to build shareholder value through sustainable and profitable growth, founded on a strong financial position. To guide 

its activities in pursuit of this objective, Toromont works toward specific, long-term financial goals (see “Key Performance Measures”) and 

each of its operating groups consistently employs the following broad strategies: 

Expand Markets 

Toromont serves a diverse number of markets that offer significant long-term potential for profitable expansion. Each operating group 

strives to achieve or maintain leading positions in served markets. Incremental revenues are derived from improved coverage, market 

share gains and geographic expansion. Expansion of the installed base of equipment provides the foundation for future product support 

growth and leverages the fixed costs associated with the Company’s infrastructure. 

Strengthen Product Support 

Toromont’s parts and service business is a significant contributor to overall profitability and serves to stabilize results through economic 

downturns. Product support activities also represent opportunities to develop closer relationships with customers and differentiate the 

Company’s product and service offering. The ability to consistently meet or exceed customers’ expectations for service efficiency and 

quality is critical, as after-market support is an integral part of the customer’s decision-making process when purchasing equipment. 

Broaden Product Offerings 

Toromont delivers specialized capital equipment to a diverse range of customers and industries. Collectively, thousands of different parts 

are offered through the Company’s distribution channels. The Company expands its customer base through selectively extending product 

lines and capabilities. In support of this strategy, Toromont represents product lines that are considered leading, and often best-in-class 

from suppliers and business partners who continually expand and develop their offerings. Strong relationships with suppliers and business 

partners are critical in achieving growth objectives. 

Invest in Resources 

The combined knowledge and experience of Toromont’s people is a key competitive advantage. Growth is dependent on attracting, 

retaining and developing employees with values that are consistent with Toromont’s. Incentive programs, a strong share ownership


Revenue 

($ MiLLiONs) 


2008 

2007 

2006 

2005 

and highly principled culture result in a close alignment of employee and shareholder interests. By investing in employee training 

and development, the capabilities and productivity of employees continually improve to better serve shareholders, customers and 

business partners. 

Toromont’s information technology represents another competitive differentiator in the marketplace. The Company’s selective 

investments in technology, inclusive of e-commerce initiatives, strengthen customer service capabilities, generate new opportunities 

for growth, drive efficiency and increase returns to shareholders. 

Maintain a Strong Financial Position 

A strong, well-capitalized balance sheet creates financial flexibility, and has contributed to the Company’s long-term track record of profitable 

growth. It is also fundamental to the Company’s future success. 

CONSOLIDATED RESULTS OF OPERATIONS 

Years ended December 31 ($ thousands, except per share amounts) 2009 2008 % change 

REvENUEs $ 1,824,592 $ 2,121,209 (14%) 

Cost of goods sold 1,415,476 1,660,285 (15%) 

Gross profit 409,116 460,924 (11%) 

Selling and administrative expenses 226,764 253,070 (10%) 

OPERATiNg iNcOME 182,352 207,854 (12%) 

Interest expense 8,815 11,753 (25%) 

Interest and investment income (6,355) (14,999) (58%) 

Income before income taxes 179,892 211,100 (15%) 

Income taxes 59,376 70,247 (15%) 

EARNiNgs fROM cONTiNUiNg OPERATiONs 120,516 140,853 (14%) 

Loss on disposal of discontinued operations – (432) n/m 

Earnings from discontinued operations – 103 n/m 

NET EARNiNgs $ 120,516 $ 140,524 (14%) 

EARNiNgs PER shARE – BAsic $ 1.86 $ 2.16 (14%) 

KEy RATiOs: 

Gross profit as a % of revenues 22.4% 21.7% 

Selling and administrative expenses as a % of revenues 12.4% 11.9% 

Operating income as a % of revenues 10.0% 9.8% 

Income taxes as a % of income before income taxes 33.0% 33.3% 

n/m = not meaningful 

1,584.9 

1,824.6 

1,746.2 

1,886.8 

2,121.2 

Operating income 

($ MiLLiONs) 

2009 182.4 

2008 

2007 

2006 

2005 

Revenues decreased by $296.6 million or 14% in 2009 compared to a year ago on weak economic conditions. Compression revenues were 

down 8% while Equipment revenues were down 20%. 

The Canadian/U.S. dollar exchange rate impacts reported revenues on the translation of the financial statements of the Compression 

Group’s growing U.S. operations. Exchange rates between the Canadian and US dollar have been volatile in 2009, ranging from a low of 

$0.77 to a high of $0.97; on average, the Canadian dollar was 6% weaker in 2009 compared to 2008. The impact in 2009 was an increase 

in revenues of $40 million and net income by $3 million. In addition, the exchange rate impacts revenues in the Canadian operations of 

both the Equipment and Compression Groups, as pricing to customers typically reflects movements in the exchange rate on U.S. sourced 

equipment, components and spare parts, although this will typically lag posted rate changes, given the age of inventory, timing of orders 

and hedging practices. 

Gross profit margin in 2009 was 22.4%, compared to 21.7% in 2008. The change in gross margin reflected the increased proportion 

of revenues coming from the relatively higher margin product support business within the Equipment Group. Compression Group gross 

margins were 40 basis points higher on improved sales mix and project execution. In 2008, the Compression Group reported several large 

pipeline projects which carried lower margins. Equipment Group gross profit margins were 140 basis points higher on a change in sales mix, 

with a higher proportion of product support business in 2009 compared to 2008. 

Selling and administrative expenses decreased $26.3 million or 10% in 2009, tracking the 14% decrease in revenue. Compensation costs 

were $8.4 million lower due to reduced staffing levels and lower profit sharing related to lower earnings. Bad debt expense decreased 

119.6 

165.3 

180.1 

207.9

Equipment group Revenue 

($ MiLLiONs) 


2008 

2007 

2006 

2005 

881.3 

913.9 

987.9 

1,099.2 

1,098.3 


$6.9 million reflecting strong collections experience and an improved aging of accounts receivable. Sales-related expenses such as freight, 

service costs and marketing were down approximately $4.7 million on lower activity levels. Other costs including occupancy, travel and 

training were tightly controlled in light of the economic slowdown resulting in an annual reduction of approximately $8.2 million. Foreign 

exchange on translation of subsidiaries increased expense $2.3 million. Selling and administrative expenses as a percentage of revenues 

were 12.4% for 2009, versus 11.9% in 2008. 

Operating income declined $25.5 million or 12% in 2009 compared to the prior year on lower revenues, partially offset by improved 

gross margins. Operating income as a percentage of revenue improved to 10.0% from 9.8% in 2008. 

Interest expense was $2.9 million or 25% lower in 2009 than in the prior year. Certain long-term debt was repaid during the year as 

scheduled and served to reduce the effective average interest rate. 

Interest and investment income in 2008 included gains realized on the sale of marketable securities of $8.2 million, or $0.10 per share 

after tax. Excluding this item, interest and investment income decreased $0.4 million or 6% from the prior year reflecting lower interest rates 

on investing of excess cash, partially offset by higher dividend income on Enerflex trust units held during 2009. 

The effective income tax rate for 2009 was 33.0% compared to 33.3% for 2008, reflecting lower corporate income tax rates in 2009. 

Net earnings in 2009 were $120.5 million, $1.86 basic earnings per share (“EPS”), down 14% from 2008. Excluding investment gains 

in 2008, net earnings and EPS in 2009 were down 10%. 

Comprehensive income for the year was $109.0 million, comprised of net earnings of $120.5 million and other comprehensive loss of 

$11.5 million. Other comprehensive loss arose primarily from a loss on translation of self-sustaining foreign operations of $23.3 million and 

a decrease in fair value of derivatives designated as cash flow hedges of $4.1 million, partially offset by an unrealized gain on Enerflex trust 

units designated as available for sale assets of $15.6 million. 

BUSINESS SEGMENT OPERATING RESULTS 

The accounting policies of the segments are the same as those of the consolidated entity. Management evaluates overall business segment 

performance based on revenue growth and operating income relative to revenues. Corporate expenses are allocated based on each segment’s 

operating income. Interest expense and interest and investment income are not allocated. 

Results of Operations in the Equipment Group 

Equipment group Operating income 

($ MiLLiONs) 


Years ended December 31 ($ thousands) 2009 2008 % change 

Equipment sales and rentals 

New $ 336,907 $ 503,478 (33%) 

Used 118,273 145,069 (18%) 

Rental 137,536 151,342 (9%) 

Total equipment sales and rentals 592,716 799,889 (26%) 

Power generation 9,692 8,893 9% 

Product support 278,938 290,431 (4%) 

Total revenues $ 881,346 $ 1,099,213 (20%) 

Operating income $ 85,441 $ 108,672 (21%) 

Capital expenditures $ 37,706 $ 65,835 (43%) 

KEy RATiOs: 

Product support revenues as a % of total revenues 31.6% 26.4% 

Group total revenues as a % of consolidated revenues 48.3% 51.8% 


2008 

2007 

2006 

2005 

Results in the Equipment Group were dampened by weak economic conditions in Canada. 

New equipment sales were 33% lower in 2009 compared to 2008 on lower unit sales. Industrial power systems applications, including 

prime and backup power systems, recorded good deliveries in the year. Other market segments, most notably heavy and general 

construction, and mining were lower. 

Used equipment sales were 18% lower year-over-year, reflecting weaker market conditions. Sales of used equipment vary depending 

on customer buying preferences, exchange rate considerations and product availability. 

Rental revenues were down $14 million or 9% from 2008 reflecting lower utilization and lower rental rates in a competitive market. 

Power generation revenues from Toromont-owned plants increased 9% over the prior year, reflecting increased operating hours 

and higher average prices for electricity. 

80.6 

91.5 

108.7 

108.3


compression group Revenue 

($ MiLLiONs) 


2008 

2007 

2006 

2005 

671.0 

788.4 

758.3 

943.2 

1,022.0 

Equipment Group product support revenues were down $11 million or 4% from 2008 on lower parts and service. Product support 

revenues in 2009 benefited from higher parts pricing on the weaker Canadian dollar during the earlier part of the year. On a constant 

dollar basis, parts revenues were down 14%. Lower activity levels and economic uncertainty have led to reduced demand for maintenance 

and repair services. 

Operating income was down $23.2 million or 21% from 2008 on the 20% decrease in revenues. Gross margins were higher in 2009 

on a higher proportion of product support activities. Selling and administrative expenses were 11% lower in 2009 than in the prior year 

on lower compensation costs, bad debt expense and sales-related expenses in light of lower volume levels. Operating income was 9.7% 

of revenues, down slightly from the prior year. 

New equipment bookings for the year were down 29% in 2009 from the prior year due to year-over-year decreases seen in the first 

three quarters of 2009. Bookings were lower across most industries, particularly heavy and general construction and mining. 

Backlogs at December 31, 2009 were down 24% year-over-year on lower bookings. 

Capital expenditures in the Equipment Group totalled $37.7 million in 2009 compared to $65.8 million in 2008. Capital expenditures 

have been reduced in light of the prevailing economic climate. Expenditures related to replacement and expansion of the rental fleet 

accounted for $27.2 million of total expenditures in 2009. 

Results of Operations in the Compression Group 

compression group Operating income 

($ MiLLiONs) 


Years ended December 31 ($ thousands) 2009 2008 % change 

Package sales and rentals 

Package sales $ 746,741 $ 792,856 (6%) 

Rentals 15,238 21,149 (28%) 

Total package sales and rentals 761,979 814,005 (6%) 


Total revenues $ 943,246 $ 1,021,996 (8%) 


Capital expenditures $ 23,335 $ 30,640 (24%) 

KEy RATiOs: 




2008 

2007 

2006 

2005 

The Compression Group delivered terrific revenues and operating income in 2009, considering the economic slowdown, due to a large 

backlog entering the year. 

Package sales revenues were $46.1 million or 6% lower compared to 2008 on the following factors: 

n On average, the Canadian dollar was weaker in 2009, resulting in an increase in package revenues on translation of foreign operations 

of $35 million. 

n U.S. natural gas compression revenues were flat to 2008 on a U.S. dollar basis, despite the fact that 2008 revenues included approximately 

$65 million related to large pipeline projects not repeated in 2009. 

n Canadian natural gas compression revenues were down 40% from 2008 on continued weak market fundamentals. 

n Process systems revenues were up 2% on a constant dollar basis. 

n Package revenues from refrigeration systems were $25 million lower compared to the similar period of 2008, primarily on lower activity 

within industrial and U.S. recreational markets. 

Rental revenues were $5.9 million or 28% lower in 2009 than in the prior year. The decrease was due to lower utilization of the Canadian 

rental fleet on lower demand for compression equipment in light of weak natural gas pricing. 

Product support revenues were down $26.7 million or 13% in the year. Natural gas product support activities were down approximately 

29% in Canada and 14% in the U.S. on a constant dollar basis on lower market activity. Industrial refrigeration product support activities 

were even with levels reported in the prior year. 

Operating income for the Compression Group decreased 2% on the 8% reduction in revenues. Gross margins were up slightly over 

the prior year on better project execution and job mix. General and administrative expenses decreased 10% year-over-year with decreases 

driven by lower compensation and sales-related expenses in keeping with the current economic environment. Operating income increased 

to 10.3% of revenues for the year compared with 9.7% in 2008. 

56.9 

71.8 

73.8 

99.2


Compression bookings in 2009 were down 48% from the record bookings seen in 2008. Natural gas compression bookings were down 

60%, with decreases in both the U.S. and Canada. Lower prices for natural gas have led to reductions in the capital spending by natural gas 

producers. Industrial and recreational bookings were up 10%, as gains in Canada were partially offset by lower activity in the United States. 

End-of-year backlogs were down 46% from December 31, 2008 on reduced bookings. 

Capital expenditures in the Compression Group totalled $23.3 million in 2009 compared to $30.6 million in 2008. Significant capital 

expenditures related to the expansion of manufacturing facilities in Casper, Wyoming. 

CONSOLIDATED FINANCIAL CONDITION 

The Company has maintained a strong financial position for many years. At December 31, 2009, the ratio of total debt net of cash to equity was 

less than 0.01:1 compared to 0.05:1 in the prior year. The Company had significant cash balances at year-end which exceeded total debt. Total 

assets were $1.4 billion at December 31, 2009, compared with $1.5 billion at the end of 2008. 

Working Capital 

The Company’s investment in non-cash working capital decreased to $332.3 million at December 31, 2009. The major components, along 

with the changes from December 31, 2008, are identified in the following table. 

Years ended December 31 ($ thousands) 2009 2008 $ change % change 

Accounts receivable $ 244,759 $ 375,059 $ (130,300) (35%) 

Inventories 373,110 499,360 (126,250) (25%) 

Future income tax assets 34,326 34,934 (608) (2%) 

Derivative financial instruments (874) 11,246 (12,120) n/m 

Other current assets 6,037 11,381 (5,344) (47%) 

Accounts payable and accrued liabilities (228,436) (337,073) 108,637 (32%) 

Dividends payable (9,728) (9,045) (683) 8% 

Deferred revenue (89,810) (194,261) 104,451 (54%) 

Current portion of long-term debt (14,044) (15,363) 1,319 (9%) 

Income taxes receivable, net 16,967 (4,236) 21,203 n/m 

Total non-cash working capital $ 332,307 $ 372,002 $ (39,695) (11%) 

n/m = not meaningful 

Accounts receivable were 35% lower than last year reflecting lower revenues in the fourth quarter of 2009. Focused attention on collections 

has resulted in improvements in days sales outstanding in all businesses. 

Inventories were 25% lower than at December 31, 2008. Inventories in the majority of locations were lower due to focused efforts 

to reduce existing inventories. 

Future income tax assets reflect differences between income tax and accounting. 

Derivative financial instruments represent the fair value of foreign exchange contracts. Given the recent volatility in the Canadian/ 

U.S. dollar exchange rate, the Company’s hedging practices have led to a cumulative net loss of $0.9 million as at December 31, 2009. 

This is not expected to affect net income, as the unrealized loss will offset future gains on the related hedged items. 

Other current assets in 2008 included deposits made for equipment ordered for delivery through 2009. 

Accounts payable and accrued liabilities were down 32% from 2008. Lower activity levels have reduced purchasing. 

Dividends payable were 8% higher than in 2008 reflecting the higher dividend rate of $0.15 per share compared to $0.14 per share 

a year ago. 

Deferred revenues represent receipts from customers in excess of revenue recognized. In the Compression Group, deferred revenues 

arise on progress billings received in advance of revenue recognition. Deferred revenues decreased 56% compared to December 2008 

as a result of lower activity. In the Equipment Group, deferred revenues arise on sales of equipment with residual value guarantees, 

extended warranty and other customer support agreements as well as on progress billings on long-term construction contracts. Equipment 

Group deferred revenues decreased 44% compared to December 2008 on lower sales with residual value guarantees and completion of 

several long-term industrial projects. 

Current portion of long-term debt reflects scheduled principal repayments due in 2010. This amount is lower as a result of the 

maturity of senior debentures in September 2008. 

Income taxes receivable reflects amounts owing for corporate income taxes less installments made to date. The amount in 2009 is 

a receivable as higher tax installments were made compared to income generated in the year.


Goodwill 

The Company performs impairment tests on its goodwill balances on an annual basis or as warranted by events or circumstances. The 

assessment of goodwill entails estimating the fair value of operations to which the goodwill relates using the present value of expected 

discounted future cash flows. This assessment affirmed goodwill values as at December 31, 2009. 

Employee Share Ownership 

The Company employs a variety of stock-based compensation plans to align employees’ interests with corporate objectives. 

The Company maintains an Executive Stock Option Plan for certain employees and directors. Stock options have a seven-year term, vest 

20% cumulatively on each anniversary date of the grant and are exercisable at the designated common share price. At December 31, 2009, 

2.0 million options to purchase common shares were outstanding, of which 0.9 million were exercisable. 

The Company offers an Employee Share Ownership Plan whereby employees can purchase shares by way of payroll deductions. In 

2008, the Company enhanced this plan to provide a Company match on contributions at a rate of $1 for every $3 dollars contributed, to a 

maximum of $1,000 per annum per employee. Company contributions vest to the employee immediately. Company contributions amounting 

to $0.9 million in 2009 (2008 – $0.8 million) were charged to selling and administrative expense when paid. A third party administers the Plan. 

The Company also offers a deferred share unit (DSU) plan for executives and non-employee directors, whereby they may elect, on an 

annual basis, to receive all or a portion of their management incentive award or fees, respectively, in deferred share units. In addition, the 

Board may grant discretionary DSUs to executives. A DSU is a notional unit that reflects the market value of a single Toromont common 

share and generally vests immediately. DSUs will be redeemed on termination of employment or resignation from the Board, as the case 

may be. As at December 31, 2009, 68,723 units were outstanding at a value of $1,882 (2008 – 79,476 units at a value of $1,671). The 

Company records the cost of the DSU Plan as compensation expense. During 2009, 47,086 units were redeemed for $1,098 (2008 – Nil). 

Employee Future Benefits 

The Company sponsors pension arrangements for substantially all of its employees, primarily through defined contribution plans in Canada 

and a 401(k) matched savings plan in the United States. Certain unionized employees do not participate in Company-sponsored plans, 

and contributions are made to these union-sponsored plans in accordance with respective collective bargaining agreements. In the case 

of the defined contribution plans, regular contributions are made to the employees’ individual accounts, which are administered by a plan 

trustee, in accordance with the plan document. Future expense for these plans will vary based on future participation rates. 

Approximately 5% of active employees participate in one of two defined benefit plans: 

n Powell Plan – Consists of personnel of Powell Equipment (acquired by Toromont in 2001); and 

n Other plan assets and obligations – Provides for certain retirees and terminated vested employees of businesses previously acquired 

by the Company as well as for retired participants of the defined contribution plan who, in accordance with the plan provisions, have 

elected to receive a pension directly from the plan. 

Financial markets improved in 2009 after a significant downturn in 2008. This resulted in a gain on opening plan assets of $5.5 million or 13%. 

The funded status of the plans has declined from zero to a deficit of $0.4 million. The unrecognized actuarial loss at December 31, 2009, 

was $12.4 million, unchanged from the prior year. Pension plan accounting requires gains and losses to be effectively smoothed over 

future periods, beginning in the following period. The Company expects pension expense and cash pension contributions to be similar 

to 2009 levels, before consideration of the acquisition of Enerflex. 

The Company also has a pension arrangement for certain senior executives that provides for a supplementary retirement payout 

in excess of amounts provided for under the registered plan. This “Executive Plan” is a non-contributory pension arrangement and is 

solely the obligation of the Company. The Company is not obligated to fund this plan but is obligated to pay benefits under the terms of 

the plan as they come due. The Company has posted letters of credit to secure the obligations under this plan, which were $19.9 million 

as at December 31, 2009. As there are only nominal plan assets, the impact of volatility in financial markets on pension expense and 

contributions for this plan are insignificant. 

The Company estimates a long-term return on plan assets of 7%. While there is no assurance that the plan will be able to generate 

this assumed rate of return each year, management believes that it is a reasonable longer-term estimate. 

A key assumption in pension accounting is the discount rate. The standard requires that this rate is set with regard to the yield 

on high-quality corporate bonds of similar average duration to the cash flow liabilities of the Plans. Yields are volatile and can deviate 

significantly from period to period. 

Off-Balance Sheet Arrangements 

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect 

on its results of operations or financial condition.

capital structure 

($ MiLLiONs) 


2008 

2007 

2006 

2005 

854.1 

779.1 

654.7 

565.6 

481.8 

(48.9) 

36.2 

126.8 

205.6 

203.4 

shareholders’ equity 

debt, net of cash 


Legal and Other Contingencies 

Due to the size, complexity and nature of the Company’s operations, various legal matters are pending. Exposure to these claims is 

mitigated through levels of insurance coverage considered appropriate by management and by active management of these matters. 

In the opinion of management, none of these matters will have a material effect on the Company’s consolidated financial position or 

results of operations. 

Normal Course Issuer Bid 

Toromont believes that, from time to time, the purchase of its common shares at prevailing market prices may be a worthwhile investment 

and in the best interests of both Toromont and its shareholders. As such, the normal course issuer bid with the Toronto Stock Exchange 

was renewed in 2009. This issuer bid allows the Company to purchase up to approximately 4.7 million of its common shares, representing 

10% of common shares in the public float, in the year ending August 30, 2010. The actual number of shares purchased and the timing of 

any such purchases will be determined by Toromont. All shares purchased under the bid will be cancelled. 

The Company purchased and cancelled 43,400 shares for $0.9 million (average cost of $19.77 per share) in 2009. The shares were 

purchased for an amount higher than their weighted average book value per share ($1.97 per share) resulting in a reduction of retained 

earnings of $772. In 2008, the Company purchased and cancelled 595,600 shares for $12.8 million (average cost of $21.50 per share), 

resulting in a reduction of retained earnings of $11.7 million. 

Outstanding Share Data 

On January 22, 2010, Toromont issued 11,362,031 common shares pursuant to purchase of tendered units of Enerflex. As at the date 

of this MD&A, the Company had 76,296,981 common shares and 1,893,389 share options outstanding. 

The Company will issue approximately 515,300 additional common shares as partial consideration for the purchase of the remaining 

units of Enerflex on February 26, 2010. 

Dividends 

Toromont pays a quarterly dividend on its outstanding common shares and has historically targeted a dividend rate that approximates 30% 

of trailing earnings from continuing operations. This practice is reviewed from time-to-time, based upon and subject to the Company’s 

earnings, financial requirements and general economic circumstances. During 2009, the Company declared dividends of $0.60 per common 

share ($0.56 per common share in 2008). 

LIQUIDITY AND CAPITAL RESOURCES 

Sources of Liquidity 

Toromont’s liquidity requirements can be met through a variety of sources, including cash generated from operations, long- and shortterm 

borrowings and the issuance of common shares. Borrowings are obtained through a variety of senior debentures, notes payable 

and committed long-term credit facilities. 

At December 31, 2009, $156.0 million or 99% of long-term debt carried interest at fixed rates. This debt matures at various dates 

through to 2019 with a current weighted average interest rate of 5.3%. The remaining $2.1 million or 1% of long-term debt carried 

interest at a variable rate of 0.14% with maturities in 2010. 

Combined unsecured credit facilities amounted to $246 million at year-end comprised of $225 million in Canada and U.S. $20 million 

in the United States ($21 million Canadian equivalent). Of these combined credit facilities, U.S. $20 million matures in 2010 and the 

balance matures in 2011. At December 31, 2009, there were no drawings against these credit facilities. Letters of credit in the amount 

of $33 million were issued against the credit facilities. 

Toromont secured a term loan facility in January 2010 in connection with the acquisition of Enerflex. Borrowings of up to $450 million 

are available to Toromont under this facility, with draw downs to occur by July 2010. As at February 5, 2010, $313.8 million was drawn under 

this facility. Debt incurred under this facility is unsecured and ranks equally with debt incurred under Toromont’s existing credit facility and 

debentures. This facility is subject to fees at levels customary for credit facilities of this type. Outstanding loans under this facility bear 

interest at a rate equal to the Canadian prime rate plus a specified margin ranging from 175 to 300 basis points. Alternatively, Toromont 

may utilize this facility through the issuance of bankers’ acceptances with acceptance fees ranging from 275 to 400 basis points. The 

applicable margin or acceptance fee will, in each case, be determined based on Toromont’s leverage ratio. This facility matures in July 2011. 

Amounts outstanding from time to time must be repaid on the basis of 15% per annum, payable in equal quarterly installments. Subject 

to certain exceptions, this facility also provides that the net proceeds of any new debt issued by Toromont during the term of the Credit 

Facility must be used to repay any amounts outstanding under this facility. This facility includes covenants, restrictions and events of 

default that are substantially the same as the corresponding provisions in Toromont’s existing credit facility. 

The Company expects that continued cash flows from operations in 2010, cash and cash equivalents on hand and currently available 

credit facilities will be more than sufficient to fund requirements for investments in working capital and capital assets.


capital Expenditures 

($ MiLLiONs) 


2008 

2007 

2006 

2005 

Principal Components of Cash Flow 

Cash from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized 

in the following table: 

Years ended December 31 ($ thousands) 2009 2008 

Cash, beginning of year 

Cash, provided by (used in): 

$ 137,274 $ 103,514 

Operations 176,945 174,862 

Change in non-cash working capital and other 19,308 (10,150) 

Operating activities 196,253 164,712 

Investing activities (73,904) (31,940) 

Financing activities (51,014) (101,255) 

Increase in cash in the year 71,335 31,517 

Effect of foreign exchange on cash balances (1,652) 2,243 

Cash, end of year $ 206,957 $ 137,274 

Cash Flows from Operating Activities 

Operating activities provided $196.3 million in the year compared to $164.7 million in 2008. Net earnings adjusted for items not requiring cash 

were up 1%. Non-cash working capital and other provided $19.3 million in 2009 compared to using $10.1 million in 2008. The components and 

changes in working capital are discussed in more detail in this MD&A under the heading “Consolidated Financial Condition.” 

Cash Flows from Investing Activities 

Investing activities used $73.9 million in the year compared to $31.9 million in 2008. 

During 2009, Toromont purchased 3.9 million trust units of Enerflex at a cost of $37.8 million ($9.69 per unit). 

In 2008, Toromont realized a net cash inflow of $30.1 million from sale of investments. 

Net additions to the rental fleet (additions less proceeds on disposal) in 2009 were $9.6 million compared to $27.4 million in 2008. 

Additions to the rental fleet have been curtailed in light of the current economic environment. 

Gross investment in property, plant and equipment was $21.3 million, $17.2 million lower than in the prior year. Significant 

investments in 2009 included the following: 

n $5.7 million for completion of the expansion of the compression facilities in Northern U.S. Operations, including Casper, Wyoming; 

n $1.6 million to complete expansion of the compression facilities in Houston, Texas; 

n $4.7 million for additions to the service vehicle fleet, primarily for the Equipment Group; 

n $5.8 million for facilities renovations and expansion in the Equipment Group; and 

n $1.9 million for computer technology upgrades. 

Additions in 2008 included significant spending for expansion of the compression facilities in Casper, Wyoming. 

In 2008, Aero Tech Manufacturing, a wholly owned subsidiary, was sold for proceeds of $4.0 million. 

Cash Flows from Financing Activities 

Financing activities used $51.0 million in 2009 compared to $101.3 million in 2008. The significant financing activities and changes from 

the prior year were as follows: 

n Long-term debt decreased $15.4 million in 2009 due to scheduled debt repayments. In 2008, long-term debt decreased $56.8 million. 

n Dividends paid to common shareholders in 2009 totalled $38.2 million, an increase of 9% over 2008 reflecting the higher dividend rate. 

n Purchases under the normal course issuer bid used $0.9 million in 2009 compared to $12.8 million in 2008. 

n Cash received on exercise of share options totalled $3.4 million compared to $3.5 million in 2008. The number of stock options exercised 

was generally consistent with the prior year. 

21.3 

38.6 

26.4 

35.9 

20.5 

39.7 

57.9 

70.7 

66.5 

52.3 

Property, plant and equipment 

Rental fleet additions 

OUTLOOK 

Toromont has a history of performance at a high level for all stakeholders, resulting from consistent application of long-term strategies, 

a proven business model and a focus on asset management and progressive, profitable improvement. Toromont is well positioned in each 

of its diverse markets and both business segments have good growth prospects over the longer term. 

In January 2010, Enerflex was substantially acquired through the take-up of 96% of its units, with the remaining units expected to be 

acquired in late February 2010. The process of merging Enerflex with Toromont Energy Systems is well under way. The newly merged 

business, Enerflex Ltd., is a well capitalized global leader in the compression market, built on the complementary strengths of its predecessor 

organizations. A strong leadership team is in place and the prospects for this business are excellent and will become more evident when 

the demand for compression equipment picks up.


The global economy is in recession, the duration of which is impossible to predict. This will present challenges. Fortunately, 2009 

started with significant backlogs that cushioned the impact through the first half of the year. 

Our Equipment Group is experiencing reduced bookings related to the general economic slowdown. Certain markets continue to 

perform well including road building, power systems and precious metals mining and the announced stimulus spending for Canadian 

infrastructure looks positive. The parts and service business provides a measure of stability, driven by the larger installed base of 

equipment in the field. 

Our Compression Group is also experiencing reduced bookings related to the global economic slowdown and on weak natural 

gas markets. The Company believes that the long term market fundamentals for natural gas in both Canada and the U.S. are positive. 

Process and international markets also provide opportunity. Canadian refrigeration markets have held up well, and the Canadian 

governmental spending stimulus contains monies designated for recreational refrigeration projects. 

Our management teams have been adjusting to these conditions. Areas of focus include headcount adjustments, asset 

management, discretionary spending reductions and limiting capital investment. 

Although we reported improved bookings in the fourth quarter of 2009, it is uncertain whether this improvement is sustainable in 

nature. We do not expect a meaningful recovery in our businesses in 2010. 

CONTRACTUAL OBLIGATIONS 

Contractual obligations are set out in the following table. Management believes that these obligations will be met comfortably through 

cash on hand, cash generated from operations and existing short- and long-term financing facilities. 

Payments due by Period 

Long-term debt 

2010 2011 2012 2013 2014 Thereafter Total 

– principal $ 14,044 $ 6,889 $ 1,280 $ 1,372 $ 1,471 $ 133,039 $ 158,095 

– interest 8,137 7,266 6,986 6,895 6,796 7,635 43,715 

Operating leases 4,188 3,423 2,492 1,942 1,423 3,881 17,349 

Total $ 26,369 $ 17,578 $ 10,758 $ 10,209 $ 9,690 $ 144,555 $ 219,159 

Toromont secured a term loan facility in January 2010 in connection with the acquisition of Enerflex. As at February 5, 2010, $313.8 

million was drawn under this facility. This debt is not included within the above contractual obligations table. For further details as to this 

facility, including its repayment terms, see “Liquidity and Capital Resources – Sources of Liquidity”. 

KEY PERFORMANCE MEASURES 

Management reviews and monitors its activities and the performance indicators it believes are critical to measuring success. Some of 

the key financial performance measures are summarized in the following table. Others include, but are not limited to, measures such as 

market share, fleet utilization, customer and employee satisfaction and employee health and safety. 

Years ended December 31 2009 2008 2007 2006 2005 

ExPANdiNg MARKETs ANd 

BROAdENiNg PROdUcT OffERiNgs 

Revenue growth (14.0%) 12.4% 8.1% 10.2% 12.0% 

Revenue generated outside North America (millions) $ 87.9 $ 69.0 $ 75.6 $ 80.8 $ 70.0 

Revenues, Equipment Group to Compression Group 48:52 52:48 58:42 56:44 57:43 

sTRENgThENiNg PROdUcT sUPPORT 

Product support revenue growth (7.7%) 5.5% 6.3% 9.2% 15.8% 

iNvEsTiNg iN OUR REsOURcEs 

Revenue per employee (thousands) $ 422 $ 463 $ 431 $ 407 $ 392 

Investment in information technology (millions) $ 15.3 $ 14.9 $ 13.6 $ 12.7 $ 13.2 

Return on capital employed 21.1% 26.4% 24.7% 22.7% 17.8% 

sTRONg fiNANciAL POsiTiON 

Working capital (millions) $ 539 $ 509 $ 467 $ 470 $ 411 

Total debt, net of cash to equity ratio n/m .05:1 .19:1 .36:1 .42:1 

Book value (shareholders’ equity) per share $ 13.17 $ 12.06 $ 10.08 $ 8.79 $ 7.57 

BUiLd shAREhOLdER vALUE 

Basic earnings per share growth (13.9%) 14.3% 21.2% 24.8% 12.6% 

Dividends per share growth 7.1% 16.7% 20.0% 25.0% 23.1% 

Return on equity 15.5% 21.5% 21.6% 20.6% 18.9% 

n/m = not meaningful


While the global recession of 2009 has interrupted the steady string of growth across key performance measures, profitability endured and 

the balance sheet continued to strengthen. This has been discussed at length throughout this MD&A. 

Measuring Toromont’s results against these strategies over the past five years illustrates that the Company has made significant progress. 

Since 2005, revenues increased at an average annual rate of 5.7%. Product support revenue growth has averaged 5.8% annually. 

Revenue growth in continuing operations has been a result of: 

n Significant expansion of compression operations in the United States; 

n Additional product offerings over the years from Caterpillar and other suppliers; 

n Organic growth through increased fleet size and additional branches; 

n Increased customer demand for formal product support agreements; and 

n Acquisitions, primarily within the Equipment Group’s rental operations. 

Over the same five-year period, revenue growth has been constrained at times by a number of factors including: 

n General economic weakness, which has negatively impacted revenues since the latter part of 2008; 

n Declines in underlying market conditions such as depressed natural gas prices in Canada; 

n Inability to source equipment from suppliers to meet customer demand or delivery schedules; and 

n Lack of skilled workers such as mechanics and journeymen resulting in service revenue and efficiency impacts. 

Changes in the Canadian/U.S. exchange rate impacts reported revenues in two ways. First the exchange rate impacts on the translation 

of results from foreign subsidiaries. Second the exchange rate impacts on the purchase price of equipment that in turn is reflected in 

selling prices. 

Over the past two years, the Company’s revenue base has been further diversified and in 2009 was fairly evenly split between 

Compression and Equipment Groups. The underlying diversification – by industrial market, by type of product/service provided and 

by customer provides a certain amount of balance in a cyclical environment. 

Revenues generated outside North America have remained relatively consistent from year to year although do vary in terms of 

customer and end market. While an important component of the Company’s diversification strategy, operating internationally poses 

challenges and as such, international revenue will continue to be generated in a prudent and measured manner. 

Toromont has generated significant competitive advantage over the past years by investing in its resources, in part to increase 

productivity levels. Revenue per employee has increased 8% since 2005. 

Toromont continues to maintain a strong balance sheet. In 2009, book value (shareholders’ equity) per share increased 9% over the 

prior year on strong earnings. Leverage, as represented by the ratio of total debt, net of cash, to shareholders’ equity, also improved over 

the prior year. 

Toromont has a history of progressive earnings per share growth. This trend was not continued in 2009 due to the weak economic 

environment, which reduced revenues. 

Toromont has paid dividends consistently since 1968, and has increased the dividend in each of the last 20 years. 

CONSOLIDATED RESULTS OF OPERATIONS FOR THE FOURTH QUARTER 2009 

Three months ended December 31 ($ thousands, except per share amounts) 2009 2008 % change 

REvENUEs $ 452,838 $ 609,704 (26%) 

Cost of goods sold 352,485 468,447 (25%) 

Gross profit 100,353 141,257 (29%) 

Selling and administrative expenses 54,532 66,784 (18%) 

OPERATiNg iNcOME 45,821 74,473 (38%) 

Interest expense 2,450 2,747 (11%) 

Interest and investment income (2,913) (1,881) 55% 

Income before income taxes 46,284 73,607 (37%) 

Income taxes 14,934 24,497 (39%) 

NET EARNiNgs $ 31,350 $ 49,110 (36%) 

BAsic EARNiNgs PER shARE $ 0.48 $ 0.76 (37%) 

KEy RATiOs: 

Gross profit as a % of revenues 22.2% 23.2% 

Selling and administrative expenses as a % of revenues 12.0% 11.0% 


Income taxes as a % of income before income taxes 32.3% 33.3%


The Canadian dollar was 14% stronger on average for the fourth quarter of 2009 compared to the similar period last year. The impact on 

revenues and net income on translation of foreign subsidiaries, all reported in the Compression Group, were decreases of $21 million and 

$2 million respectively. 

Revenues were 26% lower in the fourth quarter of 2009 compared to the same period last year. Decreases were reported in both 

Compression and Equipment. 

Gross profit decreased 29% in the fourth quarter over last year on the lower sales volumes and lower gross margins. Gross profit 

margin was 22.2% in 2009, down from 23.2% in 2008. Lower margins were reported in the Equipment Group on lower volumes, partially 

offset by a sales mix shift to a higher proportion of product support business. The Compression Group reported higher margins on 

improved project execution and sales mix. 

Selling and administrative expenses decreased $12.3 million or 18% versus the comparable period of the prior year. Bad debt 

expense decreased $5.4 million reflecting strong collections activity in the quarter and on improved aging of accounts receivable. 

Compensation was lower in the fourth quarter on reduced staffing levels and lower profit sharing on lower net earnings. Other expenses 

were lower on strong cost control initiatives implemented throughout the year in light of economic conditions. 

Interest expense was lower in the quarter compared to the similar period last year on lower average debt balances. 

Interest income was higher in the fourth quarter of 2009 as distributions received on investment in Enerflex trust units were partially 

offset by lower interest rates on treasury investments. 

The effective income tax rate was 32.3% compared to 33.3% in the fourth quarter of 2008 reflecting lower statutory income tax rates. 

Net earnings in the quarter were $31.4 million, down 36% from 2008. Basic earnings per share were $0.48 compared with $0.76 

in 2008, a decrease of 37%. 

Comprehensive income was $43.1 million, comprised of net earnings of $31.4 million and other comprehensive income of $11.7 million. 

Other comprehensive income arose primarily on unrealized gains on the Company’s investment in Enerflex trust units which were designated 

as available for sale. 

Fourth Quarter Results of Operations in the Equipment Group 

Three months ended December 31 ($ thousands) 2009 2008 % change 

Equipment sales and rentals 

New $ 99,632 $ 133,746 (26%) 

Used 32,492 49,391 (34%) 

Rental 38,065 43,790 (13%) 

Total equipment sales and rentals 170,189 226,927 (25%) 

Power generation 2,482 2,117 17% 


Total revenues $ 239,009 $ 303,904 (21%) 


KEy RATiOs: 




New equipment sales were 26% lower on a decline in new tractor unit deliveries. In the fourth quarter of 2009, the global economic 

uncertainty resulted in fewer year-end purchases and rental conversions. 

Used equipment sales were down 34% versus the comparable period of 2008 due to general economic conditions. Used equipment 

sales are dependent on a variety of factors and will fluctuate from quarter to quarter. 

Rental revenues were down 13% in the quarter compared to the prior year on lower fleet utilization and rental rates in a competitive market. 

Product support revenues were down 11% compared to the prior year on lower activity levels. 

Operating income was down 50% over last year on lower revenues and lower gross margins. Gross margins decreased due to reduced 

price realization on parts and equipment, partially offset by a higher proportion of product support, which carries relatively higher margins 

than equipment sales. Selling and administrative expenses declined 15% largely driven by lower staffing levels and lower bad debt expense. 

Operating income as a percentage of revenues was 8.2% compared to 13.0% in the fourth quarter of 2008. 

Bookings in the fourth quarter were 25% higher than the comparable period last year on improved activity levels in certain sectors 

including commercial, mining and road building. Also, bookings in 2008 were negatively impacted by order cancellations.


Fourth Quarter Results of Operations in the Compression Group 

Three months ended December 31 ($ thousands) 2009 2008 % change 

Package sales and rentals 

Package sales $ 166,200 $ 244,666 (32%) 

Rentals 3,322 4,972 (33%) 

Total package sales and rentals 169,522 249,638 (32%) 


Total revenues $ 213,829 $ 305,800 (30%) 


KEy RATiOs: 




Revenues in the Compression Group for the fourth quarter of 2009 were down $92.0 million or 30% from the similar period last year on 

the following factors: 

n On average, the Canadian dollar was stronger in the fourth quarter of 2009, resulting in a decrease in revenues on translation of foreign 

operations of $21 million. 

n Natural gas package sales were down 27% on a constant dollar basis, on lower activity levels. 

n Process compression systems were down 37% in the quarter, however were up slightly for the full year. Process system sales depend 

on timing of customer orders and requirements. 

n Refrigeration revenues for the quarter were 18% lower on weaker industrial and U.S. recreational activity, resulting largely from the weak 

economy. Canadian recreational revenues were 10% higher with increased activity levels, especially with the ECO CHILL product line. 

n Natural gas product support revenues were 33% lower than the comparable period last year on lower activity in both Canada and the 

United States. 

n Refrigeration product support revenues were consistent with prior year as increased activity in Canada was largely offset by lower 

activity in the United States. 

Operating income was 25% lower in the fourth quarter of 2009 compared to the similar period last year on lower volume, partially offset 

by higher margins. Gross margin was higher in 2009 compared to 2008 on product mix and project execution. Selling and administrative 

expenses were down 23% from the prior year due to lower compensation on reduced headcount and lower bad debt expense. 

Bookings in the fourth quarter were up 46% from the prior year with several good orders received late in 2009. Bookings in 2008 

were depressed and included order cancellations from customers in light of economic conditions. 

QUARTERLY RESULTS 

The following table summarizes unaudited quarterly consolidated financial data for the eight most recently completed quarters. This quarterly 

information is unaudited but has been prepared on the same basis as the 2009 annual audited consolidated financial statements. 

($ thousands, except per share amounts) Q1 Q2 Q3 Q4 


Revenues 

Equipment Group $ 191,693 $ 217,015 $ 233,629 $ 239,009 

Compression Group 265,966 267,158 196,293 213,829 

Total revenues $ 457,659 $ 484,173 $ 429,922 $ 452,838 

Net earnings $ 23,718 $ 33,525 $ 31,923 $ 31,350 

Per share information: 

Basic earnings per share $ 0.37 $ 0.51 $ 0.50 $ 0.48 

Diluted earnings per share $ 0.37 $ 0.51 $ 0.50 $ 0.48 

Dividends per share $ 0.15 $ 0.15 $ 0.15 $ 0.15


($ thousands, except per share amounts) Q1 Q2 Q3 Q4 

2008 

Revenues 

Equipment Group $ 202,023 $ 285,845 $ 307,441 $ 303,904 

Compression Group 195,036 250,632 270,528 305,800 

Total revenues $ 397,059 $ 536,477 $ 577,969 $ 609,704 

Net earnings 

Continuing operations $ 16,417 $ 38,222 $ 37,104 $ 49,110 

Discontinued operations 77 (406) – – 

$ 16,494 $ 37,816 $ 37,104 $ 49,110 

Per share information: 

Basic earnings per share 

Continuing operations $ 0.25 $ 0.59 $ 0.57 $ 0.76 

Discontinued operations – (0.01) – – 

$ 0.25 $ 0.58 $ 0.57 $ 0.76 

Diluted earnings per share 

Continuing operations $ 0.25 $ 0.59 $ 0.56 $ 0.76 

Discontinued operations – (0.01) – – 

$ 0.25 $ 0.58 $ 0.56 $ 0.76 

Dividends per share $ 0.14 $ 0.14 $ 0.14 $ 0.14 

Interim period revenues and earnings historically reflect some seasonality. 

The Equipment Group has historically had a distinct seasonal trend in activity levels. Lower revenues are recorded during the 

first quarter due to winter shutdowns in the construction industry. The fourth quarter has typically been the strongest quarter due in 

part to the timing of customers’ capital investment decisions, delivery of equipment from suppliers for customer-specific orders and 

conversions of equipment on rent with a purchase option. This trend has not been evident in the last two years due to the slowdown 

in the Canadian economy. Management expects the trend to continue as economic conditions improve. 

The Compression Group also has historically had a distinct seasonal trend in activity levels due to well-site access and drilling 

patterns, which reflect weather conditions. Generally, higher revenues are reported in the fourth quarter of each year. This trend has 

not been evident in the last two years due to deteriorating natural gas markets and general economic conditions. Geographic and 

product mix diversification has also served to mitigate this seasonality. Management expects this trend to continue as natural gas 

market fundamentals improve. 

As a result of the historical seasonal sales trends, inventories increase through the year in order to meet the expected demand 

for delivery in the fourth quarter of the fiscal year, while accounts receivable are highest at year end. 

SELECTED ANNUAL INFORMATION 

($ thousands, except per share amounts) 2009 2008 2007 

Revenues $ 1,824,592 $ 2,121,209 $ 1,886,761 

Net earnings – continuing operations $ 120,516 $ 140,853 $ 121,868 

Net earnings $ 120,516 $ 140,524 $ 122,280 

Earnings per share – continuing operations 

Basic $ 1.86 $ 2.17 $ 1.88 

Diluted $ 1.86 $ 2.16 $ 1.87 

Earnings per share 

Basic $ 1.86 $ 2.16 $ 1.89 

Diluted $ 1.86 $ 2.15 $ 1.88 

Dividends declared per share $ 0.60 $ 0.56 $ 0.48 

Total assets $ 1,364,667 $ 1,533,450 $ 1,356,861 

Total long-term debt $ 158,095 $ 173,475 $ 230,299


Revenue growth was strong through 2008 with year-over-year increases of 8% and 12% in 2007 and 2008 respectively. The global 

economic crisis of late 2008 and 2009 has served to reduce revenues in 2009 as activity levels in end markets has slowed. 

Growth in net earnings on a continuing operations basis was strong through 2008, with year-over-year increases of 23% and 16% in 

2007 and 2008 respectively. Net earnings declined 14% in 2009 on lower revenues. Net earnings in 2007 and 2008 also included gains on 

sales of assets. 

Earnings per share have generally varied in line with earnings. The number of common shares outstanding over the last three years 

has remained fairly consistent as new shares issued on exercise of stock options have been largely offset by purchases under the normal 

course issuer bid. 

Dividends have generally increased in proportion to trailing earnings growth. 

Total assets have decreased in 2009 as inventories were reduced in light of lower activity levels. Accounts receivable have also 

decreased due to lower revenues. 

Long-term debt decreased in 2009 and represented 19% of total shareholders’ equity at year end. In 2008, long-term debt represented 

22% of shareholders’ equity. At December 31, 2009, total cash exceeded total long-term debt. 

RISKS AND RISK MANAGEMENT 

In the normal course of business, Toromont is exposed to risks that may potentially impact its financial results in either or both of its 

business segments. The Company and each operating segment employ risk management strategies with a view to mitigating these risks 

on a cost-effective basis. 

Business Cycle 

Expenditures on capital goods have historically been cyclical, reflecting a variety of factors including interest rates, foreign exchange 

rates, consumer and business confidence, commodity prices, corporate profits, credit conditions and the availability of capital to finance 

purchases. Toromont’s customers are typically affected, to varying degrees, by these factors and trends in the general business cycle 

within their respective markets. As a result, Toromont’s financial performance is affected by the impact of such business cycles on the 

Company’s customer base. 

Commodity prices, and, in particular, changes in the view on long-term trends, affect demand for the Company’s products and services 

in both operating segments. Commodity price movements in the natural gas and base metals sectors in particular can have an impact on 

customers’ demands for equipment and customer service. With lower commodity prices, demand is reduced as development of new projects 

is often stopped and existing projects can be curtailed, both leading to less demand for heavy equipment and compression packages. 

Toromont’s business is diversified across a wide range of industry market segments and geographic territories, serving to temper the 

effects of business cycles on consolidated results. Continued diversification strategies such as expanding the Company’s customer base, 

broadening product offerings and geographic diversification are designed to moderate business cycle impacts. Across both operating 

segments, the Company has focused on the sale of specialized equipment and ongoing support through parts distribution and skilled service. 

Product support growth has been, and will continue to be, fundamental to the mitigation of downturns in the business cycle. The product 

support business contributes significantly higher profit margins and is typically subject to less volatility than equipment supply activities. 

Product and Supply 

Equipment Group 

The Equipment Group purchases most of its equipment inventories and parts from Caterpillar under a dealership agreement that dates 

back to 1993. As is customary in distribution arrangements of this type, the agreement with Caterpillar can be terminated by either party 

upon 90 days’ notice. In the event Caterpillar terminates, it must repurchase substantially all inventories of new equipment and parts at cost. 

Toromont has maintained an excellent relationship with Caterpillar for 16 years and management expects this will continue going forward. 

Toromont is dependent on the continued market acceptance of Caterpillar’s products. It is believed that Caterpillar has a solid 

reputation as a high-quality manufacturer, with excellent brand recognition and customer support as well as leading market shares in many 

of the markets it serves. However, there can be no assurance that Caterpillar will be able to maintain its reputation and market position 

in the future. Any resulting decrease in the demand for Caterpillar products could have a material adverse impact on the Company’s 

business, results of operations and future prospects. 

Toromont is also dependent on Caterpillar for timely supply of equipment and parts. From time to time during periods of intense 

demand, Caterpillar may find it necessary to allocate its supply of particular products among its dealers. Such allocations of supply have 

not, in the past, proven to be a significant impediment in the conduct of business. However, there can be no assurance that Caterpillar 

will continue to supply its products in the quantities and timeframes required by customers.


Compression Group 

The Compression Group purchases a broad range of materials and components in connection with its manufacturing and service 

activities. Though it is generally not dependent on any single source of supply, the ability of suppliers to meet performance, quality 

specifications and delivery schedules is important to the maintenance of customer satisfaction. Further, a significant increase in the price 

of one or more of these components could have a negative impact on Toromont’s results of operations. 

Competition 

The Company competes with a large number of international, national, regional and local suppliers in each of its markets. Although price 

competition can be strong, there are a number of factors that have enhanced the Company’s ability to compete throughout its market areas 

including: the range and quality of products and services; ability to meet sophisticated customer requirements; distribution capabilities 

including number and proximity of locations; financing offered by Caterpillar Finance; e-commerce solutions; reputation and financial 

strength. Increased competitive pressures or the inability of the Company to maintain the factors that have enhanced its competitive 

position to date could adversely affect the Company’s business, results of operations or financial condition. 

The Compression Group requires skilled engineering and design professionals in order to maintain customer satisfaction and 

engage in product innovation. Toromont competes for these professionals, not only with other companies in the same industry, but 

also with oil and gas producers and other industries. In periods of high energy activity, demand for the skills and expertise of these 

professionals increases, making the hiring and retention of these individuals more difficult. 

Toromont also relies on the skills and availability of trained and experienced tradesmen and technicians in both the Equipment and 

Compression Groups in order to provide efficient and appropriate services to customers. Hiring and retaining such individuals is critical 

to the success of these businesses. Demographic trends are reducing the number of individuals entering the trades, making access to 

skilled individuals more difficult. The Company has several remote locations which could make attracting and retaining skilled individuals 

more difficult. 

Credit Risk 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash equivalents, accounts 

receivable and derivative financial instruments. The carrying amount of assets included on the balance sheet represents the maximum 

credit exposure. 

Cash equivalents consist mainly of short-term investments, such as money market deposits. No asset-backed commercial paper 

products were held. The Company manages its credit exposure associated with cash equivalents by ensuring there is no significant 

concentration of credit risk with a single counterparty, and by dealing only with highly rated financial institutions as counterparties. 

The Company has accounts receivable from a large diversified customer base, and is not dependent on any single customer, 

industry or geographic area. The Company has accounts receivable from customers engaged in various industries including oil and 

gas production construction, mining, food and beverage, and governmental agencies. These customers are based across North 

America with a smaller percentage of accounts receivable held with international clients. Management does not believe that any 

single industry or geographic region represents significant credit risk. While the acquisition of Enerflex will increase the concentration 

of customers in the natural gas industry, there will be further diversification in terms of geographic representation, as Enerflex has 

significant operations in Europe and Australia. 

The credit risk associated with derivative financial instruments arises from the possibility that the counterparties may default on their 

obligations. In order to minimize this risk, the Company enters into derivative transactions only with highly rated financial institutions. 

Warranties and Maintenance Contracts 

Toromont provides warranties for most of the equipment it sells, typically for a one-year period following sale. The warranty claim risk 

is generally shared jointly with the equipment manufacturer. Accordingly, liability is generally limited to the service component of the 

warranty claim, while the manufacturer is responsible for providing the required parts. 

The Company also enters into long-term maintenance and repair contracts, whereby it is obligated to maintain equipment for its 

customers. The length of these contracts varies generally from two to five years. The contracts are typically fixed price with provisions 

for inflationary adjustments. Due to the long-term nature of these contracts, there is a risk that maintenance costs may exceed the 

estimate, thereby resulting in a loss on the contract. These contracts are closely monitored for early warning signs of cost overruns. In 

addition, the manufacturer may, in certain circumstances, share in the cost overruns if profitability falls below a certain threshold. 

Foreign Exchange 

The Company transacts business in multiple currencies, the most significant of which are the Canadian dollar, the U.S. dollar and the 

Euro. As a result, the Company has foreign currency exposure with respect to items denominated in foreign currencies. The types of 

foreign exchange risk can be categorized as follows:


Transaction Exposure 

The Company sources the majority of its products and major components from the United States. Consequently, reported costs of inventory 

and the transaction prices charged to customers for equipment and parts are affected by the relative strength of the Canadian dollar. The 

Company mitigates exchange rate risk by entering into foreign currency contracts to fix the cost of imported inventory where appropriate. 

In addition, pricing to customers is customarily adjusted to reflect changes in the Canadian dollar landed cost of imported goods. 

The Company also sells compression packages in foreign currencies, primarily the U.S. dollar and the Euro, and enters into foreign 

currency contracts to reduce these exchange rate risks. 

Foreign exchange contracts reduce volatility by fixing landed costs related to specific customer orders and establishing a level 

of price stability for high-volume goods such as spare parts. The Company does not enter into foreign exchange forward contracts for 

speculative purposes. The gains and losses on the foreign exchange forward contracts designated as cash flow hedges are intended to 

offset the translation losses and gains on the hedged foreign currency transactions when they occur. 

As a result, the foreign exchange impact on earnings with respect to transactional activity is not significant. 

Translation Exposure 

At December 31, 2009 all of the Company’s foreign operations are considered self-sustaining. Accordingly, assets and liabilities are 

translated into Canadian dollars using the exchange rates in effect at the balance sheet dates. Unrealized translation gains and losses 

are deferred and included in accumulated other comprehensive income. The cumulative currency translation adjustments are recognized 

in income when there has been a reduction in the net investment in the foreign operations. Analysis of Enerflex’s foreign operations will 

be performed in 2010 to determine whether they are self-sustaining or integrated. 

Foreign currency-based earnings are translated into Canadian dollars each period. As a result, fluctuations in the value of the 

Canadian dollar relative to these other currencies will impact reported net income. Such exchange rate fluctuations have historically 

not been material year-over-year relative to the overall earnings or financial position of the Company. The impact in 2009 was to reduce 

revenues by $40 million and net income by approximately $3 million. 

However, exchange rate fluctuations may be more significant in future periods as a result of Toromont’s acquisition of Enerflex. 

When Enerflex’s results of operations are consolidated with those of Toromont, a larger percentage of revenues and expenses will be 

denominated in currencies other than the Canadian dollar. 

Interest Rate 

The Company minimizes its interest rate risk by managing its portfolio of floating and fixed rate debt, as well as managing the term 

to maturity. 

The Company is exposed to changes in interest rates, which may impact on the Company’s floating rate borrowing costs. At 

December 31, 2009, the Company’s debt portfolio is comprised of 99% fixed rate and 1% floating rate debt. In January 2010, in 

connection with the acquisition of Enerflex, Toromont secured a term loan facility providing for the availability of an additional $450 million 

of floating rate debt, of which $313.8 million had been drawn as at February 5, 2010. Further draw downs of this facility will be made as 

required. Assuming the full amount of the facility is drawn down, Toromont’s debt portfolio would be comprised of approximately 26% 

fixed rate and 74% floating rate debt. 

Fixed rate debt exposes the Company to future interest rate movements upon refinancing the debt at maturity. The Company’s fixed 

rate debt matures between 2011 and 2019, with 80% maturing in 2015. 

Further, the fair value of the Company’s fixed rate debt obligations may be negatively affected by declines in interest rates, thereby 

exposing the Company to potential losses on early settlements or refinancing. The Company does not intend to settle or refinance any 

existing debt before maturity. 

Floating rate debt exposes the Company to fluctuations in short-term interest rates by causing related interest payments and 

finance expense to vary. 

Financing Arrangements 

The Company requires capital to finance its growth and to refinance its outstanding debt obligations as they come due for repayment. If the 

cash generated from the Company’s business, together with the credit available under existing bank facilities, is not sufficient to fund future 

capital requirements, the Company will require additional debt or equity financing in the capital markets. The Company’s ability to access 

capital markets on terms that are acceptable will be dependent upon prevailing market conditions, as well as the Company’s future financial 

condition. Further, the Company’s ability to increase its debt financing may be limited by its financial covenants or its credit rating objectives. 

The Company maintains a conservative leverage structure and although it does not anticipate difficulties, there can be no assurance that 

capital will be available on suitable terms and conditions, or that borrowing costs and credit ratings will not be adversely affected.


Integration Risk 

The anticipated benefits and synergies from acquiring Enerflex will depend in part on whether the operations, systems, management and 

cultures of Enerflex and Toromont can be integrated in an efficient and effective manner and whether the presumed bases or sources of 

synergies produce the benefits anticipated. Most operational and strategic decisions with respect to the combined organization have not 

yet been made and may not have been fully identified. These decisions and the integration of Enerflex with Toromont Energy Systems will 

present significant challenges to management. There can be no assurance that there will be operational or other synergies realized by 

the combined company, or that the integration of the two companies’ operations, systems, management, personnel and cultures will be 

timely or effectively accomplished, or ultimately will be successful in achieving the anticipated benefits. The integration process may lead 

to greater than expected operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining 

relationships with employees, customers or suppliers) for Toromont or the combined organization that may affect the ability of the combined 

organization to realize the anticipated benefits of the combination or may otherwise materially and adversely affect Toromont’s business, 

results of operations or financial condition. 

Environmental Regulation 

Toromont’s customers, particularly in North America and Europe, are subject to significant and ever-increasing environmental legislation 

and regulation. This legislation can impact Toromont in two ways. First, it may increase the technical difficulty in meeting environmental 

requirements in product design, which could increase the cost of these businesses’ products. Second, it may result in a reduction in activity 

by Toromont’s customers in environmentally sensitive areas, in turn reducing the sales opportunities available to Toromont. 

Toromont is also subject to a broad range of environmental laws and regulations. These may, in certain circumstances, impose 

strict liability for environmental contamination, which may render Toromont liable for remediation costs, natural resource damages and 

other damages as a result of conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners, 

operators or other third parties. In addition, where contamination may be present, it is not uncommon for neighbouring land owners 

and other third parties to file claims for personal injury, property damage and recovery of response costs. Remediation costs and other 

damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing 

environmental laws and regulations or the adoption of new environmental laws and regulations could be substantial and could negatively 

impact Toromont’s business, results of operations or financial condition. 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

The Company’s significant accounting policies are described in Note 1 to the audited consolidated financial statements. The preparation 

of financial statements in conformity with Canadian GAAP requires estimates and assumptions that affect the results of operations 

and financial position. By their nature, these judgments are subject to an inherent degree of uncertainty and are based upon historical 

experience, trends in the industry and information available from outside sources. Management reviews its estimates on an ongoing 

basis. Different accounting policies, or changes to estimates or assumptions could potentially have a material impact, positive or 

negative, on Toromont’s financial position and results of operations. The critical accounting policies and estimates described below 

affect both the Equipment Group and Compression Group similarly and therefore are not discussed on a segmented basis. 

Revenue Recognition 

The Company reflects revenues generated from the assembly and manufacture of projects using the percentage-of-completion approach 

of accounting for performance of production-type contracts. This approach to revenue recognition requires management to make a 

number of estimates and assumptions surrounding the expected profitability of the contract, the estimated degree of completion based 

on cost progression and other detailed factors. Although these factors are routinely reviewed as part of the project management process, 

changes in these estimates or assumptions could lead to changes in the revenues recognized in a given period. However, there are many 

of these projects in process at any given point, the majority of which are in actual construction for a period of three months or less. 

Property, Plant and Equipment 

Fixed assets are stated at cost less accumulated depreciation, including asset impairment losses. Depreciation is calculated using the 

straight-line method over the estimated useful lives of the assets. 

The estimated useful lives of fixed assets are reviewed on a regular basis. Assessing the reasonableness of the estimated useful 

lives of fixed assets requires judgment and is based on currently available information. 

Fixed assets are also reviewed for potential impairment on a regular basis or whenever events or changes in circumstances indicate 

that the carrying amount may not be recoverable. In cases where the undiscounted expected future cash flows are less than the carrying 

amount, an impairment loss is recognized. Impairment losses on long-lived assets are measured as the amount by which the carrying 

value of an asset or asset group exceeds its fair value, as determined by the discounted future cash flows of the asset or asset group. In 

estimating future cash flows, the Company uses its best estimates based on internal plans that incorporate management’s judgments as 

to the remaining service potential of the fixed assets.


Changes in circumstances, such as technological advances and changes to business strategy can result in actual useful lives and 

future cash flows differing significantly from estimates. The assumptions used, including rates and methodologies, are reviewed on an 

ongoing basis to ensure they continue to be appropriate. Revisions to the estimated useful lives of fixed assets or future cash flows 

constitute a change in accounting estimate and are applied prospectively. 

Income Taxes 

The liability method of accounting for income taxes is used. Future income tax assets and liabilities, measured at substantively enacted 

tax rates, are recognized for all temporary differences caused when the tax bases of assets and liabilities differ from those reported in 

the audited consolidated financial statements. 

Income tax rules and regulations in the countries in which the Company operates and income tax treaties between these countries 

are subject to interpretation and require estimates and assumptions in determining the Company’s consolidated income tax provision 

that may be challenged by the taxation authorities. 

Changes or differences in these estimates or assumptions may result in changes to the current or future income tax balances on 

the consolidated balance sheet, a charge or credit to income tax expense in the consolidated statement of earnings and may result in 

cash payments or receipts. Additional information on income taxes is provided in Note 17 to the accompanying audited consolidated 

financial statements. 

CHANGES IN ACCOUNTING POLICIES 

Goodwill and Intangible Assets 

Effective January 1, 2009, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 

3064 Goodwill and Intangible Assets, which replaced previous guidance. The standard establishes guidelines for the recognition, 

measurement, presentation and disclosure of goodwill and intangible assets subsequent to initial recognition. The standard had no 

impact on the Company’s consolidated financial statements. 

Credit Risk and the Fair Value of Financial Instruments 

Effective January 1, 2009, the Company adopted CICA EIC 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. 

This guidance clarified that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining 

the fair value of financial assets and financial liabilities including derivative instruments. Adoption of this guidance had no impact on the 

Company’s consolidated financial statements. 

Financial Instruments – Disclosures 

In June 2009, the CICA amended Section 3862 Financial Instruments – Disclosures. The amendments enhance disclosures about 

fair value measurements, including the relative reliability of the inputs used in those measurements, and about the liquidity risk, of 

financial instruments. The amendment establishes a three level hierarchy that reflects the significance of the inputs used in fair value 

measurements on financial instruments. The amendment is effective for annual financial statements relating to fiscal years ending after 

September 30, 2009. The amendments are effective for the Company’s 2009 annual consolidated financial statements and its adoption 

did not have an impact on the financial position, cash flow or earnings of the Company. The required disclosures are provided in Note 14. 

Comparative information is not required in the year of adoption. 

Financial Instruments – Recognition and Measurement 

In 2009, the CICA made several amendments and clarifications to Section 3855 Financial Instruments – Recognition and Measurement. 

The changes were as follows: 

n Clarified the effective interest method which is a method of calculating the amortized cost of financial assets and financial liabilities and 

of allocating the interest income or interest expense over the relevant period 

n Clarified the requirements regarding reclassification of held-for-trading financial instruments containing embedded derivatives 

n Eliminated the distinction between debt securities and other debt instruments and changed the categories to which debt instruments 

are required or are permitted to be classified. 

The adoption of these amendments did not have a material impact on the financial position, cash flow or earnings of the Company. 

FUTURE ACCOUNTING STANDARDS 

In January 2009, the CICA issued Handbook Section 1582 Business Combinations, Section 1601 Consolidated Financial Statements, and 

Section 1602 Non-controlling Interests. These new standards are harmonized with International Financial Reporting Standards (IFRS). 

Section 1582 specifies a number of changes, including: an expanded definition of a business, a requirement to measure all business


acquisitions at fair value, a requirement to measure non-controlling interests at fair value, and a requirement to recognize acquisition-related 

costs as expenses. Section 1601 establishes the standards for preparing consolidated financial statements. Section 1602 specifies that 

non-controlling interests be treated as a separate component of equity, not as a liability or other item outside of equity. The new standards 

will become effective in 2011. Early adoption is permitted. If an entity applies this Section before January 1, 2011, it shall also adopt Section 

1601 and 1602. The Company is currently considering early adoption of Section 1582. 

INTERNATIONAL FINANCIAL REPORTING STANDARDS 

International Financial Reporting Standards (IFRS) will be required in Canada for publicly accountable enterprises for fiscal years 

beginning on or after January 1, 2011. IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences 

on recognition, measurement and disclosures. 

The conversion project consists of four phases: diagnostic, design and planning, solution development and implementation. 

Investments in training and resources will be made throughout the transition period to facilitate a timely conversion. 

Based on diagnostics completed to date, the areas identified with the most potential impact are as follows: property, plant and 

equipment; provisions; certain aspects of revenue recognition; expanded disclosure requirements and IFRS 1 First Time Adoption. 

The Company expects the transition to IFRS to potentially impact financial reporting, business processes, internal controls and 

information systems. 

We are in the solution development phase and have established issue-specific work teams to focus on quantification of impact, 

generating options and making recommendations in the identified risk areas. During this phase, we will establish a staff communications 

plan, develop our staff training programs, and evaluate the impacts of the IFRS transition on other business activities. 

Although our solution development activities are well underway and commencing according to plan, continued progress is 

necessary before the Company can prudently increase the specificity of the disclosure of IFRS changeover accounting policy 

differences. In addition, due to anticipated changes in Canadian GAAP and IFRS prior to the Company’s transition to IFRS, the full impact 

of adopting IFRS on the Company’s future financial position and results of operations cannot be reasonably determined at this time. 

Toromont anticipates a significant increase in disclosure resulting from the adoption of IFRS and is continuing to assess the level of 

disclosure required as well as systems changes that may be necessary to gather and process the required information. 

RESPONSIBILITY OF MANAGEMENT AND THE BOARD OF DIRECTORS 

Management is responsible for the information disclosed in this MD&A and the accompanying consolidated financial statements, 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. In addition, the Company’s Audit Committee, on behalf of the Board of Directors, 

provides an oversight role with respect to all public financial disclosures made by the Company, and has reviewed and approved this MD&A 

and the accompanying consolidated financial statements. The Audit Committee is also responsible for determining that management 

fulfills its responsibilities in the financial control of operations, including disclosure controls and procedures and internal control over 

financial reporting. 

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING 

The Chairman & Chief Executive Officer and the Chief Financial Officer, together with other members of management, have evaluated the 

effectiveness of the Company’s disclosure controls and procedures and internal controls over financial reporting as at December 31, 2009, 

using the internal control integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. 

Based on that evaluation, they have concluded that the design and operation of the Company’s disclosure controls and procedures were 

adequate and effective as at December 31, 2009, to provide reasonable assurance that a) material information relating to the Company 

and its consolidated subsidiaries would have been known to them and by others within those entities, and b) information required to be 

disclosed is recorded, processed, summarized and reported within required time periods. They have also concluded that the design 

and operation of internal controls over financial reporting were adequate and effective as at December 31, 2009, to provide reasonable 

assurance regarding the reliability of financial reporting and the preparation of financial reporting in accordance with GAAP. 

There have been no changes in the design of the Company’s internal controls over financial reporting during the fourth quarter of 

2009 that would materially affect, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting. 

While the Officers of the Company have evaluated the effectiveness of disclosure controls and procedures and internal control over 

financial reporting as at December 31, 2009 and have concluded that these controls and procedures are being maintained as designed, 

they expect that the disclosure controls and procedures and internal controls over financial reporting may not prevent all errors and fraud. 

A control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that the objectives of 

the control system are met.


NON-GAAP FINANCIAL MEASURES 

The success of the Company and business unit strategies is measured using a number of key performance indicators, which are outlined 

below. These measures are also used by management in its assessment of relative investments in operations. These key performance 

indicators are not measurements in accordance with Canadian GAAP. It is possible that these measures will not be comparable to similar 

measures prescribed by other companies. They should not be considered as an alternative to net income or any other measure of 

performance under Canadian GAAP. 

Operating Income and Operating Margin 

Each business segment assumes responsibility for its operating results as measured by, amongst other factors, operating income, which 

is defined as income before income taxes, interest income and interest expense. Financing and related interest charges cannot be attributed 

to business segments on a meaningful basis that is comparable to other companies. Business segments and income tax jurisdictions 

are not synonymous, and it is believed that the allocation of income taxes distorts the historical comparability of the performance of 

the business segments. Consolidated and segmented operating income is reconciled to net earnings in tables where used in this MD&A. 

Operating income margin is calculated by dividing operating income by total revenue. 

Return on Equity (ROE) and Return on Capital Employed (ROCE) 

Return on equity is monitored to assess the profitability of the consolidated Company. ROE is calculated by dividing net earnings by 

opening shareholders’ equity. 

ROCE is a key performance indicator that is utilized to assess both current operating performance and prospective investments. 

The numerator used for the calculation is income before income taxes, interest expense and interest income (excluding interest on 

rental conversions). The denominator in the calculation is the monthly average capital employed, which is defined as net debt plus 

shareholders’ equity. 

Working Capital and Non-Cash Working Capital 

Working capital is defined as current assets less current liabilities. Non-cash working capital is defined as working capital less cash 

and equivalents.

Management’s Report 


The preparation and presentation of the Company’s consolidated financial statements is the responsibility of management. The 

financial statements have been prepared in accordance with Canadian generally accepted accounting principles and necessarily 

include estimates, which are based on management’s best judgments. Information contained elsewhere in the Annual Report is 

consistent, where applicable, with that contained in the financial statements. 

Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable 

assurance that transactions are appropriately authorized, assets are safeguarded from loss or unauthorized use and financial records 

are properly maintained to provide reliable information for preparation of financial statements. 

Ernst & Young LLP, an independent firm of Chartered Accountants, were appointed by the shareholders as external auditors to 

examine the consolidated financial statements in accordance with generally accepted auditing standards in Canada and provide an 

independent professional opinion. Their report is presented with the consolidated financial statements. 

The Board of Directors, acting through an Audit Committee comprised solely of independent directors, is responsible for 

determining that management fulfills its responsibilities in the preparation of the consolidated financial statements and the financial 

control of operations. The Audit Committee recommends the independent auditors for appointment by the shareholders. It meets 

regularly with financial management and the internal and external auditors to discuss internal controls, auditing matters and financial 

reporting issues. The independent auditors have unrestricted access to the Audit Committee. The consolidated financial statements 

and Management’s Discussion and Analysis have been approved by the Board of Directors for inclusion in this Annual Report, based 

on the review and recommendation of the Audit Committee. 

Signed Signed 

Robert M. Ogilvie Paul R. Jewer Toronto, Ontario, Canada 

Chairman and Vice President Finance and February 5, 2010 

Chief Executive Officer Chief Financial Officer 

Auditors’ Report 

To the Shareholders of Toromont Industries Ltd.: 

We have audited the consolidated balance sheets of Toromont Industries Ltd. as at December 31, 2009 and 2008 and the consolidated 

statements of earnings, retained earnings, comprehensive income and cash flows for the years then ended. These financial statements 

are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based 

on our audits. 

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that 

we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An 

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also 

includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 

financial statement presentation. 

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the 

Company as at December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in 

accordance with Canadian generally accepted accounting principles. 

Signed 

Ernst & Young LLP Toronto, Ontario, Canada 

Chartered Accountants February 5, 2010 

Licensed Public Accountants


Consolidated Balance Sheets 

As at December 31 ($ thousands) 2009 2008 

AssETs 

Current assets 

Cash and cash equivalents $ 206,957 $ 137,274 

Accounts receivable 244,759 375,059 

Inventories (note 5) 373,110 499,360 

Income taxes receivables 16,967 2,068 

Future income taxes (note 17) 34,326 34,934 

Derivative financial instruments – 13,212 

Other current assets 6,037 11,381 

Total current assets 882,156 1,073,288 

Property, plant and equipment (note 6) 186,491 199,370 

Rental equipment (note 7) 183,175 203,277 

Derivative financial instruments – 1,403 

Other assets (note 8) 78,045 21,312 

Goodwill 34,800 34,800 

Total assets $ 1,364,667 $ 1,533,450 

LiABiLiTiEs 

Current liabilities 

Accounts payable and accrued liabilities (note 9) $ 238,164 $ 346,118 

Deferred revenues 89,810 194,261 

Current portion of long-term debt (note 10) 14,044 15,363 

Income taxes payable – 6,304 

Derivative financial instruments 874 1,966 

Total current liabilities 342,892 564,012 

Deferred revenues 13,386 25,480 

Long-term debt (note 10) 144,051 158,112 

Accrued pension liability (note 16) 2,351 2,322 

Future income taxes (note 17) 7,924 4,421 

shAREhOLdERs’ EQUiTy 

Share capital (note 11) 132,261 127,704 

Contributed surplus (note 12) 10,012 8,978 

Retained earnings 712,418 631,522 

Accumulated other comprehensive (loss) income (note 13) (628) 10,899 

Total shareholders’ equity 854,063 779,103 

Total liabilities and shareholders’ equity $ 1,364,667 $ 1,533,450 

See accompanying notes 

On behalf of the Board: 

Signed Signed 

Robert M. Ogilvie John S. McCallum 

Director Director

Consolidated Statements 

of Earnings 


Years ended December 31 ($ thousands, except share amounts) 2009 2008 

REvENUEs $ 1,824,592 $ 2,121,209 

Cost of goods sold 1,415,476 1,660,285 

Gross profit 409,116 460,924 

Selling and administrative expenses 226,764 253,070 

OPERATiNg iNcOME 182,352 207,854 

Interest expense 8,815 11,753 

Interest and investment income (6,355) (14,999) 

Income before income taxes 179,892 211,100 

Income taxes 59,376 70,247 

Earnings from continuing operations 120,516 140,853 

Loss on disposal of discontinued operations (note 3) – (432) 

Earnings from discontinued operations, net of tax (note 3) – 103 

NET EARNiNgs $ 120,516 $ 140,524 

BAsic EARNiNgs PER shARE (note 18) 

Continuing operations $ 1.86 $ 2.17 

Discontinued operations – (0.01) 

$ 1.86 $ 2.16 

diLUTEd EARNiNgs PER shARE (note 18) 



$ 1.86 $ 2.15 

WEighTEd AvERAgE NUMBER Of shAREs OUTsTANdiNg – BAsic 64,716,775 65,016,778 

WEighTEd AvERAgE NUMBER Of shAREs OUTsTANdiNg – diLUTEd 64,830,866 65,439,046 

See accompanying notes 


of Retained Earnings 


Retained earnings, beginning of year $ 631,522 $ 539,039 

Net earnings 120,516 140,524 

Dividends (38,848) (36,391) 

Shares purchased for cancellation (note 11) (772) (11,650) 

Retained earnings, end of year $ 712,418 $ 631,522 

See accompanying notes



of Comprehensive Income 


Net earnings 

Other comprehensive income: 

$ 120,516 $ 140,524 

Unrealized (loss) gain on translation of financial statements 

of self-sustaining foreign operations (23,308) 21,072 

Loss on translation of financial statements of self-sustaining foreign 

operations transferred to net income on dispositon of operations 

Change in fair value of derivatives designated as cash flow hedges, 

– 1,090 

net of income tax (recovery) expense (2009 - ($2,181); 2008 - $4,062) 

Loss (gain) on derivatives designated as cash flow hedges 

transferred to net income in the current period, 

(4,063) 7,547 

net of income tax expense (recovery) (2009 - $122; 2008 - ($1,415) 

Unrealized gain on financial assets designated as available-for-sale, 

229 (2,626) 

net of income taxes ($3,090) 15,615 – 

Gain on financial assets designated as available-for-sale transferred 

to net income on realization, net of income taxes of $24 – (44) 

Other comprehensive (loss) income (11,527) 27,039 

Comprehensive income $ 108,989 $ 167,563 



of Cash Flows 



OPERATiNg AcTiviTiEs 

Net earnings $ 120,516 $ 140,524 

Items not requiring cash and cash equivalents 

Depreciation 58,165 56,070 

Stock-based compensation 2,289 2,494 

Accrued pension liability 29 (1,261) 

Future income taxes 

Gain on sale of: 

3,093 (8,972) 

Rental equipment, property, plant and equipment (7,147) (6,191) 

Investments – (8,234) 

Loss on disposal of discontinued operations – 432 

176,945 174,862 

Net change in non-cash working capital and other (note 21) 19,308 (10,150) 

Cash provided by operating activities 196,253 164,712 

iNvEsTiNg AcTiviTiEs 

Additions to: 

Rental equipment (39,712) (57,901) 

Property, plant and equipment (21,329) (38,574) 

Investments 

Proceeds on disposal of: 

(37,797) (13,811) 

Rental equipment 30,078 30,456 

Property, plant and equipment 5,128 1,319 

Investments – 43,948 

Disposal of discontinued operations (note 3) – 4,038 

Increase in other assets (10,272) (786) 

Business acquisitions (note 4) – (629) 

Cash used in investing activities (73,904) (31,940) 

fiNANciNg AcTiviTiEs 

Decrease in term credit facility debt – (30,000) 

Repayment of other long-term debt (15,380) (26,824) 

Dividends (38,165) (35,138) 

Shares purchased for cancellation (858) (12,808) 

Cash received on exercise of options 3,389 3,515 

Cash used in financing activities (51,014) (101,255) 

Effect of exchange rate changes on cash denominated 

in foreign currency (1,652) 2,243 

Increase in cash and cash equivalents 69,683 33,760 

Cash and cash equivalents at beginning of year 137,274 103,514 

Cash and cash equivalents at end of year $ 206,957 $ 137,274 

sUPPLEMENTAL cAsh fLOW iNfORMATiON (note 21) 



Notes to the Consolidated Financial Statements 

December 31, 2009 

($ thousands except where otherwise indicated) 

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES 

Toromont Industries Ltd. and its subsidiaries (the “Company”) operate through two business segments: Equipment Group and Compression 

Group. The Equipment Group includes one of the world’s larger Caterpillar dealerships by revenue and geographic territory in addition 

to industry leading rental operations. The Compression Group is a Global leader specializing in the design, engineering, fabrication, 

and installation of natural gas compression units and hydrocarbon and petrochemical process systems and industrial and recreational 

refrigeration systems. Both Groups offer comprehensive product support capabilities. Toromont is listed on the Toronto Stock Exchange 

under the symbol TIH. 

These consolidated financial statements have been prepared by management in accordance with Canadian Generally Accepted 

Accounting Principles (“GAAP”). 

Basis of Consolidation 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company 

accounts and transactions have been eliminated. 

Use of Estimates 

The preparation of the consolidated financial statements in conformity with Canadian GAAP requires management to make estimates 

and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date 

of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those 

estimates. Estimates are used in accounting for items and matters such as long-term contracts, allowance for uncollectible accounts 

receivable, allowance for inventory obsolescence, product warranty, estimated useful lives of assets for depreciation, asset and goodwill 

impairment assessments, employee benefits and income taxes. 

Revenue Recognition 

Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, performance requirements 

are achieved and ultimate collection is reasonably assured. In addition to this general policy, the following describes the specific revenue 

recognition policies for each major category of revenue. 

(a) Revenues from the sale of equipment are recorded when goods are shipped to the customer, at which time title to the equipment and 

significant risks of ownership have passed. 

(b) Revenues from the supply of equipment systems involving design, manufacture, installation and start-up are determined using the 

percentage-of-completion method, based on total costs incurred as a proportion of expected total costs of the project. Revenues and 

costs begin to be recognized when progress reaches a stage of completion sufficient to reasonably determine the probable results. 

Any foreseeable losses on such projects are charged to operations when determined. 

(c) Revenues from equipment rentals are recognized in accordance with the terms of the relevant agreement with the customer, generally 

on a straight-line basis over the term of the agreement. 

(d) Product support services include sales of parts and servicing of equipment. For the sale of parts, revenues are recognized when the 

part is shipped to the customer. For servicing of equipment, revenues are recognized as the service work is completed and billed. 

(e) Revenues on extended warranty and long-term maintenance contracts are recognized either on a percentage-of-completion basis 

proportionate to the service work that has been performed based on the parts and labour service provided, or on a straight-line basis 

over the life of the warranty. At the completion of the contract, any remaining profit on the contract is recognized as revenue. Any 

losses estimated during the term of the contract are recognized when identified. 

(f) Revenues on equipment sold directly to customers or to third-party lessors for which the Company has provided a guarantee to 

repurchase the equipment at predetermined residual values and dates are accounted for as operating leases wherein revenue is 

recognized over the period extending to the date of the residual guarantee. 

Translation of Foreign Currencies 

Transactions denominated in foreign currencies are translated into Canadian dollars at the rate of exchange in effect at the time of the 

transaction. Monetary assets and liabilities are translated into Canadian dollars at the year-end exchange rate. Non-monetary items are 

translated at historical rates. All exchange gains and losses are included in earnings. 

Foreign subsidiaries are financially and operationally self-sustaining. Accordingly, their assets and liabilities are translated into 

Canadian funds at the year-end exchange rate. Revenue and expense items are translated at the average exchange rate for the year. The 

foreign exchange impact of these translations is included in accumulated other comprehensive income in shareholders’ equity.


Financial Instruments 

Financial instruments are measured at fair value on initial recognition. After initial recognition, financial instruments are measured at 

their fair values, except for loans and receivables and other financial liabilities, which are measured at cost or amortized cost using the 

interest rate method. 

The Company primarily applies the market approach for recurring fair value measurements. Three levels of inputs may be used to 

measure fair value: 

n Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities 

n Level 2 – observable inputs other than Level 1 prices that are observable or can be corroborated by observable market data for 

substantially the full term of asset or liability 

n Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets 

or liabilities 

The Company has made the following classifications: 

n Cash and cash equivalents are classified as assets held for trading and are measured at fair value. Gains and losses resulting from the 

periodic revaluation are recorded in net income. 

n Accounts receivable are classified as loans and receivables and are recorded at amortized cost using the effective interest rate method. 

n Investments are classified as available for sale and are recorded at fair value based on quoted market prices. Gains and losses resulting 

from the periodic revaluation are recorded in other comprehensive income. 

n Accounts payable and accrued liabilities and long-term debt are classified as other financial liabilities. Subsequent measurements are 

recorded at amortized cost using the effective interest rate method. 

Transaction costs are expensed as incurred for financial instruments classified or designated as held for trading. Transaction costs for 

financial assets classified as available for sale are added to the value of the instrument at acquisition. Transaction costs related to other 

financial liabilities are added to the value of the instrument at acquisition and taken into net income using the effective interest rate method. 

Derivative Financial Instruments and Hedge Accounting 

Derivative financial agreements are used to manage exposure to fluctuations in exchange rates. The Company does not enter into 

derivative financial agreements for speculative purposes. 

Derivative financial instruments are measured at their fair value upon initial recognition and on each subsequent reporting date. 

The fair value of quoted derivatives is equal to their positive or negative market value. If a market value is not available, the fair value is 

calculated using standard financial valuation models, such as discounted cash flow or option pricing models. Derivatives are carried as 

assets when the fair value is positive and as liabilities when the fair value is negative. 

The Company elected to apply hedge accounting for foreign exchange forward contracts for firm commitments and anticipated 

transactions. These are also designated as cash flow hedges. For cash flow hedges, fair value changes of the effective portion of the 

hedging instrument are recognized in accumulated other comprehensive income, net of taxes. The ineffective portion of the fair value 

changes is recognized in net income. Amounts charged to accumulated other comprehensive income are reclassified to the income 

statement when the hedged transaction affects the income statement. 

All hedging relationships are formally documented, including the risk management objective and strategy. On an ongoing basis, an 

assessment is made as to whether the designated derivative financial instruments continue to be effective in offsetting changes in cash 

flows of the hedged transactions. 

Income Taxes 

The liability method of accounting for income taxes is used. Future income tax assets and liabilities are recognized for the future income 

tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their 

respective income tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted income tax 

rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The 

effect on future income tax assets and liabilities of a change in income tax rates is recognized in net earnings in the period that includes 

the date of substantive enactment. 

Stock-Based Compensation 

The fair value method of accounting for stock options is used. The fair value of option grants are calculated using the Black-Scholes option 

pricing model and is recognized as compensation expense over the vesting period of those grants with a corresponding adjustment to 

contributed surplus. On the exercise of stock options, the consideration paid by the employee and the related amounts in contributed surplus 

are credited to common share capital.


Employee Future Benefits 

For defined contribution plans, the pension expense recorded in earnings is the amount of the contributions the Company is required to 

pay in accordance with the terms of the plan. 

For defined benefit plans, the Company accrues its obligations and the related costs, net of plan assets. The Company has adopted 

the following policies for its defined benefit plans: 

n The cost of pensions earned by employees is actuarially determined using the projected unit credit method pro-rated on length of service 

and management’s best estimate assumptions to value its pensions using a measurement date of December 31; 

n For the purpose of calculating the expected return on plan assets, those assets are valued at fair value; 

n Past service costs from plan amendments are amortized on a straight-line basis over the average remaining service period of employees 

active at the date of amendments; 

n The excess of the net actuarial gain (loss) over 10% of the greater of the benefit obligation and the fair value of plan assets is amortized 

on a straight-line basis over the average remaining service period of the active employees or on the average remaining lifetime in the 

case of retirees. 

Earnings Per Share (“EPS”) 

Basic EPS is calculated by dividing the net earnings available to common shareholders by the weighted average number of common 

shares outstanding during the year. Diluted EPS is calculated using the treasury stock method, which assumes that all outstanding stock 

option grants are exercised, if dilutive, and the assumed proceeds are used to purchase the Company’s common shares at the average 

market price during the year. 

Cash and Cash Equivalents 

Cash and cash equivalents, including cash on account, demand deposits and short-term investments with original maturities of three 

months or less, are recorded at cost, which approximates market value. 

Inventories 

Inventories are valued at the lower of cost and net realizable value. 

Cost of equipment, repair and distribution parts and direct materials include purchase cost and costs incurred in bringing each 

product to its present location and condition. Serialized inventory is determined on a specific item basis. Non-serialized inventory is 

determined based on a weighted average actual cost. 

Cost of work-in-process includes cost of direct materials, labour and an allocation of manufacturing overheads, excluding borrowing 

costs, based on normal operating capacity. 

Cost of inventories include the transfer from accumulated other comprehensive income (loss) of gains and losses on qualifying cash 

flow hedges in respect of the purchase of inventory. 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the 

estimated costs necessary to make the sale. 

Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, 

damage or declining selling prices. When circumstances that previously caused inventories to be written down below cost no longer exist 

or when there is clear evidence of an increase in selling prices, the amount of the write-down previously recorded is reversed. 

Rental Equipment 

Rental equipment is recorded at cost. Rental equipment is depreciated over its estimated useful life on a straight-line basis. Estimated 

useful lives range from 1 to 15 years. 

Property, Plant and Equipment 

Property, plant and equipment are recorded at cost. Depreciation is recognized principally on a straight-line basis to depreciate the 

cost of these assets over their estimated useful lives. Estimated useful lives range from 20 to 30 years for buildings, 3 to 10 years for 

equipment and 20 years for power generation assets. 

Leasehold improvements and lease inducements are amortized on a straight-line basis over the term of the lease. 

Impairment of Long-lived Assets 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not 

be recoverable. In cases where the undiscounted expected future cash flows are less than the carrying amount, an impairment loss is 

recognized. Impairment losses on long-lived assets are measured as the amount by which the carrying value of an asset group exceeds 

its fair value, as determined by the discounted future cash flows of the asset group.


Goodwill 

Goodwill represents the cost of acquired businesses in excess of the fair value of net identifiable assets acquired. Goodwill is tested for 

impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. In the fourth quarter of 

2008 and 2009, annual goodwill assessments were performed and determined that there was no impairment in either year. 

Discontinued Operations 

The results of discontinued operations are presented net of tax on a one-line basis in the consolidated statements of earnings. Direct 

corporate overheads and income taxes are allocated to discontinued operations. Interest expense (income) and general corporate 

overheads are not allocated to discontinued operations. 

Comparative Amounts 

Certain comparative figures have been restated to conform with the current year’s presentation. 

2. CHANGES IN ACCOUNTING POLICIES 

Goodwill and Intangible Assets 

Effective January 1, 2009, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3064 Goodwill 

and Intangible Assets, which replaced previous guidance. The standard establishes guidelines for the recognition, measurement, presentation 

and disclosure of goodwill and intangible assets subsequent to initial recognition. The standard had no impact on the Company’s consolidated 

financial statements. 

Credit Risk and the Fair Value of Financial Instruments 

Effective January 1, 2009, the Company adopted CICA EIC 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. 

This guidance clarified that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining 

the fair value of financial assets and financial liabilities including derivative instruments. Adoption of this guidance had no impact on the 

Company’s consolidated financial statements. 

Financial Instruments – Disclosures 

In June 2009, the CICA amended Section 3862 Financial Instruments – Disclosures. The amendments enhance disclosures about 

fair value measurements, including the relative reliability of the inputs used in those measurements, and about the liquidity risk, of 

financial instruments. The amendment establishes a three level hierarchy that reflects the significance of the inputs used in fair value 

measurements on financial instruments. The amendment is effective for annual financial statements relating to fiscal years ending after 

September 30, 2009. The amendments are effective for the Company’s 2009 annual consolidated financial statements and its adoption 

did not have an impact on the financial position, cash flow or earnings of the Company. The required disclosures are provided in note 14. 

Comparative information is not required in the year of adoption. 

Financial Instruments – Recognition and Measurement 

In 2009, the CICA made several amendments and clarifications to Section 3855 Financial Instruments – Recognition and Measurement. 

The changes were as follows: 

n Clarified the effective interest method which is a method of calculating the amortized cost of financial assets and financial liabilities and 

of allocating the interest income or interest expense over the relevant period 

n Clarified the requirements regarding reclassification of held-for-trading financial instruments containing embedded derivatives 

n Eliminated the distinction between debt securities and other debt instruments and changed the categories to which debt instruments 

are required or are permitted to be classified. 

The adoption of these amendments did not have a material impact on the financial position, cash flow or earnings of the Company. 

Future Accounting Standards 

Business Combinations 

In January 2009, the CICA issued Handbook Section 1582 Business Combinations, Section 1601 Consolidated Financial Statements, and 

Section 1602 Non-controlling Interests. These new standards are harmonized with International Financial Reporting Standards (IFRS). 

Section 1582 specifies a number of changes, including: an expanded definition of a business, a requirement to measure all business 

acquisitions at fair value, a requirement to measure non-controlling interests at fair value, and a requirement to recognize acquisitionrelated 

costs as expenses. Section 1601 establishes the standards for preparing consolidated financial statements. Section 1602


specifies that non-controlling interests be treated as a separate component of equity, not as a liability or other item outside of equity. 

The new standards will become effective in 2011. Early adoption is permitted. If an entity applies this Section before January 1, 2011, 

it shall also adopt Section 1601 and 1602. The Company is currently considering early adoption of Section 1582. 

International Financial Reporting Standards (IFRS) 

Canadian GAAP will be converged with IFRS effective January 1, 2011. The transition from Canadian GAAP to IFRS will be applicable for the 

Company for the first quarter of 2011 when the Company will prepare both the current and comparative financial information using IFRS. 

3. DISCONTINUED OPERATIONS 

Effective June 30, 2008, the shares of Aero Tech Manufacturing Inc. were sold to its local management. Revenues and income before 

income taxes from discontinued operations in 2008 were $7,621 and $163 respectively. 

4. BUSINESS ACQUISITIONS 

Effective June 25, 2008, certain assets of a privately owned rental operation in Sault Ste. Marie, Ontario, were purchased. The acquisition 

was recorded using the purchase method. The purchase price was $629. The fair value of assets acquired was as follows: non-cash 

working capital – $126; property, plant and equipment – $165; and rental assets – $338. 

5. INVENTORIES 

2009 2008 

Equipment $ 164,744 $ 232,879 

Repair and distribution parts 74,809 80,261 

Direct materials 75,740 72,041 

Work-in-process 57,817 114,179 

$ 373,110 $ 499,360 

The amount of inventory recognized as an expense and included in cost of goods sold accounted for other than by the percentage-ofcompletion 

method during 2009 was $704 million (2008: $902 million). The amount charged to the income statement and included in cost 

of goods sold for the write-down of inventory for valuation issues during 2009 was $13.8 million (2008: $9.6 million). 

6. PROPERTY, PLANT AND EQUIPMENT 


Accumulated Net Book Accumulated Net Book 

cost depreciation value Cost Depreciation Value 

Land $ 41,269 $ – $ 41,269 $ 39,030 $ – $ 39,030 

Buildings 157,830 58,679 99,151 143,333 51,814 91,519 

Equipment 129,987 97,774 32,213 147,554 106,928 40,626 

Power generation 37,714 24,353 13,361 36,061 23,264 12,797 

Assets under construction 497 – 497 15,398 – 15,398 

$ 367,297 $ 180,806 $ 186,491 $ 381,376 $ 182,006 $ 199,370 

Depreciation expense for the year ended December 31, 2009 was $22,668 (2008 – $23,423). 

7. RENTAL EQUIPMENT 


Cost $ 301,489 $ 311,619 

Less: Accumulated depreciation 118,314 108,342 

$ 183,175 $ 203,277 

Depreciation expense for the year ended December 31, 2009 was $35,497 (2008 – $32,647). Operating income from rental operations for 

the year ended December 31, 2009 was $17.2 million (2008 – $31.5 million).

8. OTHER ASSETS 



Equipment sold with guaranteed residual values $ 10,940 $ 20,981 

Investment in marketable securities 56,502 – 

Deferred transaction costs 10,160 – 

Other 443 331 

$ 78,045 $ 21,312 

The investment in marketable securities is comprised of 3.9 million trust units of Enerflex Systems Income Fund. Units were purchased at a 

cost of $37,797 ($9.69 per unit) and were marked to market value of $56,502 ($14.48) as at December 31, 2009. These financial instruments 

are designated as available for sale and as such the unrealized gain of $18,705 has been credited to other comprehensive income. 

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 


Accounts payable and accrued liabilities $ 228,436 $ 337,073 

Dividends payable 9,728 9,045 

Total accounts payable and accrued liabilities $ 238,164 $ 346,118 

10. LONG-TERM DEBT 


Senior debentures (b) $ 155,999 $ 166,659 

Notes payable (c) 2,096 6,816 

Total long-term debt 158,095 173,475 

Less current portion 14,044 15,363 

$ 144,051 $ 158,112 

All debt is unsecured. 

(a) The Company maintains $225 million in bank credit in Canada and U.S. $20 million in bank credit in the United States, provided through 

committed credit facilities. Of this, U.S. $20 million matures in 2010 and $225 million matures in 2011. Bank borrowings bear interest at 

rates ranging from prime to bankers acceptance rates. At December 31, 2009, the Canadian prime rate was 2.25% and the 30-day banker’s 

acceptance rate was 0.3%. Standby letters of credit issued utilized $33,248 of the credit lines at December 31, 2009 (2008 – $62,225). 

(b) Terms of the senior debentures are: 

n $16,527, 6.80% senior debentures due March 29, 2011, interest payable semi-annually through March 29, 2007; thereafter, blended 

principal and interest payments through to maturity; 

n $125,000, 4.92% senior debentures due October 13, 2015, interest payable semi-annually, principal due on maturity; and 

n $14,471, 7.06% senior debentures due March 29, 2019, interest payable semi-annually through September 29, 2009; thereafter, 

blended principal and interest payments through to maturity. 

(c) Notes payable mature in 2010 and bear interest at 0.14%. 

These credit arrangements include covenants, restrictions and events of default usually present in credit facilities of this nature, including 

requirements to meet certain financial tests periodically and restrictions on additional indebtedness and encumbrances. 

Scheduled principal repayments and interest payments on long-term debt are as follows: 

Principal Interest 

2010 $ 14,044 $ 8,137 

2011 6,889 7,266 

2012 1,280 6,986 

2013 1,372 6,895 

2014 1,471 6,796 

2015 to 2019 133,039 7,635 

$ 158,095 $ 43,715 

Interest expense included interest on debt initially incurred for a term greater than one year of $8,636 (2008 – $11,042).


11. SHARE CAPITAL 

Authorized 

The Company is authorized to issue an unlimited number of common shares and preferred shares. No preferred shares have been issued. 

Issued 

The changes in the common shares issued and outstanding during the year were as follows: 


Number of common Number of Common 

common share Common Share 

shares capital Shares Capital 

Balance, beginning of year 64,620,677 $ 127,704 64,943,497 $ 124,124 

Exercise of stock options 290,190 4,643 272,780 4,739 

Purchase of shares for cancellation (43,400) (86) (595,600) (1,159) 

Balance, end of year 64,867,467 $ 132,261 64,620,677 $ 127,704 

Shareholder Rights Plan 

The Shareholder Rights Plan is designed to encourage the fair treatment of shareholders in connection with any takeover offer for the Company. 

Rights issued under the plan become exercisable when a person, and any related parties, acquires or commences a take-over bid to acquire 

20% or more of the Company’s outstanding common shares without complying with certain provisions set out in the plan or without approval of 

the Company’s Board of Directors. Should such an acquisition occur, each rights holder, other than the acquiring person and related parties, will 

have the right to purchase common shares of the Company at a 50% discount to the market price at that time. The Shareholder Rights Plan was 

continued and amended in 2009. Amendments were largely administrative in nature. The plan expires in April 2012. 

Normal Course Issuer Bid (“NCIB”) 

On August 27, 2009, Toromont announced the renewal of its NCIB program. The issuer bid allows the Company to purchase up to 

approximately 4.7 million of its common shares, representing 10% of common shares in the public float, in the year ending August 30, 2010. 

The actual number of shares purchased and the timing of any such purchases will be determined by Toromont. All shares purchased 

under the bid will be cancelled. The Company purchased and cancelled 43,400 shares for $858 (average cost of $19.77 per share) in 2009 

under its NCIB program which expired on August 30, 2009. The shares were purchased for an amount higher than their weighted average 

book value per share ($1.97 per share) resulting in a reduction of retained earnings of $772. The Company purchased and cancelled 

595,600 shares for $12,808 (average cost of $21.50 per share) in 2008. 


Total shares purchased (number of shares) 43,400 595,600 

Average purchase price (per share) $ 19.77 $ 21.50 

Total cash paid (thousands) $ 858 $ 12,808 

Book value of shares cancelled 86 1,158 

Reduction to retained earnings $ 772 $ 11,650 

12. CONTRIBUTED SURPLUS 

Contributed surplus consists of accumulated stock option expense less the fair value of the options at the grant date that have been 

exercised and reclassified to share capital. Changes in contributed surplus were as follows: 


Balance, beginning of year $ 8,978 $ 7,707 

Stock-based compensation expense, net of forfeitures 2,289 2,494 

Value of compensation cost associated with exercised options (1,255) (1,223) 

Balance, end of year $ 10,012 $ 8,978

13. ACCUMULATED OTHER COMPREHENSIVE INCOME 

The changes in accumulated other comprehensive income were as follows: 



Balance, beginning of year $ 10,899 $ (16,140) 

Other comprehensive (loss) income (11,527) 27,039 

Balance, end of year $ (628) $ 10,899 

As at December 31, accumulated other comprehensive income was comprised of the following amounts: 


Unrealized (losses) gains on translation of financial statements of self-sustaining foreign operations 

(Losses) gains on foreign exchange derivatives designated as cash flow hedges, net of income tax 

$ (15,954) $ 7,355 

(recovery) expense (2009 – ($150); 2008 – $1,909) (289) 3,544 

Unrealized gain on financial assets designated as available-for-sale (income taxes – Nil) 15,615 – 

Balance, end of year $ (628) $ 10,899 

The gains and losses on derivative contracts are intended to offset the transaction losses and gains. The losses of $289 will be reclassified 

to net income within the next twelve months. These losses will offset gains recorded on the underlying hedged items, namely foreign 

denominated accounts payable and accounts receivable. Management intends to hold these foreign currency contracts to maturity. 

14. FINANCIAL INSTRUMENTS 

Categories of Financial Assets and Liabilities 

The carrying values of the Company’s financial instruments are classified into the following categories: 


Held for trading (1) $ 206,957 $ 137,274 

Loans and receivables (2) $ 244,759 $ 375,059 

Available for sale assets (3) $ 56,502 $ – 

Other financial liabilities (4) $ 396,259 $ 519,593 

Derivatives designated as effective hedges gain (loss) (5) $ (440) $ 5,453 

Derivatives designated as held for trading gain (loss) (6) $ (434) $ 7,196 

(1) Comprised of cash and cash equivalents. All held for trading assets were designated as such upon initial recognition. 

(2) Comprised of accounts receivable. 

(3) Comprised of investment in marketable securities, reported in other assets. 

(4) Comprised of accounts payable and accrued liabilities and long-term debt. 

(5) Comprised of the Company’s foreign exchange forward contracts designated as hedges. 

(6) Comprised of the Company’s foreign exchange forward contracts that are not designated as hedges for accounting purposes. 

Fair Value Measurements 

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as at 

December 31, 2009 and indicates the fair value hierarchy of the valuation techniques used to determine such fair value. 

Carrying 

fair value 

Value Level 1 Level 2 Level 3 Total 

AssETs 

Marketable securities $ 56,502 $ 56,502 $ – $ – $ 56,502 

LiABiLiTiEs 

Derivative financial instruments $ 874 $ – $ 874 $ – $ 874 

Senior debentures $ 155,999 $ – $ 156,993 $ – $ 156,993 

The estimated fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, borrowings under 

the bank term facility and notes payable approximate their respective carrying values.


The fair value of marketable securities is measured based on quoted market prices. 

The fair value of derivative financial instruments is measured using a generally accepted valuation technique, that is, the discounted 

value of the difference between the contract’s value at maturity based on the foreign exchange rate set out in the contract and the 

contract’s value at maturity based on the foreign exchange rate that the financial institution would use if it were to renegotiate the 

same contract at December 31, 2009 under the same conditions. The financial institution’s credit risk is also taken into consideration in 

determining fair value. 

The fair values of senior debentures is measured using a generally accepted valuation technique, that is, the discounted cash flows 

using current interest rates for debt with similar terms and remaining maturities. The Company has no plans to prepay these instruments 

prior to maturity. 

Derivative Financial Instruments and Hedge Accounting 

Foreign exchange contracts and options are transacted with financial institutions to hedge foreign currency denominated obligations 

related to purchases of inventory and sales of products. The following table summarizes the Company’s commitments to buy and sell 

foreign currencies as at December 31, 2009. 

Average 

Notional Exchange 

Amount Rate Maturity 

Purchase contracts USD 73,639 $ 1.0618 January 2010 to December 2010 

EUR 2,729 $ 1.5529 January 2010 to June 2010 

Sales contracts USD 3,769 $ 1.0609 January 2010 to December 2010 

Management estimates that a loss of $874 would be realized if the contracts were terminated on December 31, 2009. Certain of these 

forward contracts are designated as cash flow hedges, and accordingly, a loss of $440 has been included in other comprehensive income. 

These losses are not expected to affect net income as the losses will be reclassified to net income within the next twelve months and will 

offset gains recorded on the underlying hedged items, namely foreign denominated accounts payable and accounts receivable. A loss of 

$434 on forward contracts not designated as hedges is included in net income which offsets gains recorded on the foreign-denominated 

items, namely accounts payable and accounts receivable. 

All hedging relationships are formally documented, including the risk management objective and strategy. On an ongoing basis, an 

assessment is made as to whether the designated derivative financial instruments continue to be effective in offsetting changes in cash 

flows of the hedged transactions. 

Risks Arising from Financial Instruments and Risk Management 

In the normal course of business, Toromont is exposed to financial risks that may potentially impact its operating results in either or both 

of its business segments. The Company and each operating segment employ risk management strategies with a view to mitigating 

these risks on a cost-effective basis. Derivative financial agreements are used to manage exposure to fluctuations in exchange rates and 

interest rates. The Company does not enter into derivative financial agreements for speculative purposes. 

Currency risk 

The Company transacts business in multiple currencies, the most significant of which are the Canadian dollar and the U.S. dollar. As a 

result, the Company has foreign currency exposure with respect to items denominated in foreign currencies. The types of foreign exchange 

risk can be categorized as follows: 

Transaction exposure 

The Company sources the majority of its products and major components from the United States. Consequently, reported costs of inventory 

and the transaction prices charged to customers for equipment and parts are affected by the relative strength of the Canadian dollar. The 

Company mitigates exchange rate risk by entering into foreign currency contracts to fix the cost of imported inventory where appropriate. In 

addition, pricing to customers is customarily adjusted to reflect changes in the Canadian dollar landed cost of imported goods. 

The Company also sells compression packages in foreign currencies, primarily the U.S. dollar, and enters into foreign currency 

contracts to reduce these exchange rate risks. 

The Company maintains a conservative hedging policy whereby all significant transactional currency risks are identified and hedged. 

Translation exposure 

All of the Company’s foreign operations are considered self-sustaining. Accordingly, assets and liabilities are translated into Canadian 

dollars using the exchange rates in effect at the balance sheet dates. Unrealized translation gains and losses are deferred and included 

in accumulated other comprehensive income. The cumulative currency translation adjustments are recognized in income when there has 

been a reduction in the net investment in the foreign operations.


Foreign currency based earnings are translated into Canadian dollars each period. As a result, fluctuations in the value of the 

Canadian dollar relative to these other currencies will impact reported net income. Such exchange rate fluctuations have historically not 

been material year-over-year relative to the overall earnings or financial position of the Company. A fluctuation of +/- 5%, provided as an 

indicative range in a volatile currency environment, would, everything else being equal, have an annualized effect on net income before 

tax of approximately +/– $4.5 million. 

Sensitivity analysis 

The following sensitivity analysis is intended to illustrate the sensitivity to changes in foreign exchange rates on the Company’s financial 

instruments and show the impact on net earnings and comprehensive income. Financial instruments affected by currency risk include 

cash and cash equivalents, accounts receivable, accounts payable and derivative instruments. This sensitivity analysis relates to the 

position as at December 31, 2009. The following table shows Toromont’s sensitivity to a 5% weakening of the Canadian dollar against the 

U.S. dollar. A 5% strengthening of the Canadian dollar would have an equal and opposite effect. 

Other 

Comprehensive 

Net earnings Income 

Cdn/U.S. dollar exchange rate –5% 

– financial instruments in Canadian operations $ 393 $ 1,371 

– financial instruments held in foreign operations $ – $ 2,356 

The movement in net earnings in Canadian operations is a result of a change in the fair values of financial instruments. The majority of 

these financial instruments are hedged. 

The movement in other comprehensive income in Canadian operations reflects the change in the fair value of derivative financial 

instruments that are designated as cash flow hedges. The gains or losses on these instruments are not expected to affect net income 

as the gains or losses will offset losses or gains on the underlying hedged items. 

The movement in other comprehensive income in foreign operations reflects the change in the fair value of financial instruments. 

Gains or losses on translation of financial instruments held in self-sustaining subsidiaries are deferred in other comprehensive income. 

Credit risk 

Financial instruments that potentially subject the Company to credit risk consist of cash equivalents, accounts receivable, investments and 

derivative financial instruments. The carrying amount of assets included on the balance sheet represents the maximum credit exposure. 

Cash equivalents consist mainly of short-term investments, such as money market deposits. No asset-backed commercial paper 

products were held. The Company has deposited the cash equivalents with reputable financial institutions, from which management 

believes the risk of loss to be remote. 

The Company has accounts receivable from customers engaged in various industries including mining, construction, natural gas 

production and transportation, food and beverage, and governmental agencies that are not concentrated in any specific geographic 

area. These specific industries may be affected by economic factors that may impact accounts receivable. Management does not believe 

that any single industry or particular geographic region represents significant credit risk. Credit risk concentration with respect to trade 

receivables is mitigated by the Company’s large customer base. 

As at December 31, 2009, $14.3 million or 5.7% of accounts receivable were outstanding for more than 90 days (2008 – $21.9 million 

or 5.7%). The movement in the Company’s allowance for doubtful accounts was as follows: 



Change in foreign exchange rates (437) 356 

Provisions and revisions, net (2,241) 2,917 

Balance, end of year $ 7,096 $ 9,774 

The Company minimizes the credit risk of investments by investing excess cash in short-term securities that meet minimum requirements 

for quality and liquidity as allowed under the Company’s treasury policy. Other securities may be purchased or disposed of as specifically 

approved by the Company’s Board of Directors. Marketable securities at December 31, 2009 are comprised of trust units of Enerflex 

Systems Income Fund. The maximum credit risk associated with these financial instruments is represented by their carrying values. 

The credit risk associated with derivative financial instruments arises from the possibility that the counterparties may default on their 

obligations. In order to minimize this risk, the Company enters into derivative transactions only with highly rated financial institutions.


Interest rate risk 

In relation to its debt financing, the Company is exposed to changes in interest rates, which may impact on the Company’s borrowing 

costs. Floating rate debt exposes the Company to fluctuations in short-term interest rates. As at December 31, 2009, $2.1 million or 1% 

of the Company’s total debt portfolio was subject to movements in floating interest rates. A +/– 1.0% change in interest rates, which 

is indicative of the change in the prime lending rate over the preceding twelve-month period, would, all things being equal, have an 

insignificant impact on income before income taxes for the period. 

The Company minimizes its interest rate risk by managing its portfolio of floating and fixed rate debt, as well as managing the term 

to maturity. The Company may use derivative instruments such as interest rate swap agreements to manage its current and anticipated 

exposure to interest rates. There were no interest rate swap agreements outstanding as at December 31, 2009 or 2008. 

Liquidity risk 

Liquidity risk is the risk that the Company may encounter difficulties in meeting obligations associated with financial liabilities. As at 

December 31, 2009, the Company was holding cash and cash equivalents of $207 million and had unutilized lines of credit of $213 million. 

The contractual maturities of the Company’s long-term debt and scheduled interest payments are presented in Note 10. 

Accounts payable are primarily due within 90 days and will be satisfied from current working capital. 

The Company expects that continued cash flows from operations in 2010, together with cash and cash equivalents on hand and 

currently available credit facilities, will be more than sufficient to fund its requirements for investments in working capital, capital assets 

and dividend payments. 

Market risk 

The Company is subject to market risk arising from its investments in marketable securities. Marketable securities are market traded 

equity instruments which are accounted for based on their quoted market value. The investments in marketable securities are in publicly 

traded markets which are susceptible to significant volatility. To the extent that market prices vary from those at the previous reporting 

periods, unrealized gains or losses would be recorded through other comprehensive income/(loss). 

15. STOCK-BASED COMPENSATION 

The Company maintains an Executive Stock Option Plan for certain employees and directors. Under the plan, options may be granted for up 

to 6,096,000 common shares. Stock options have a seven-year term, vest 20% cumulatively on each anniversary date of the grant and are 

exercisable at the designated common share price, which is fixed at prevailing market prices of the common shares at the date the option is 

granted. Each stock option is exercisable into one common share of the Company at the price specified in the terms of the option. 

A reconciliation of the outstanding options is as follows: 

Twelve months ended December 31 2009 2008 

Weighted Weighted 

Average Average 

Number of Exercise Number of Exercise 

Options Price Options Price 

Options outstanding, beginning of year 1,917,599 $ 21.62 1,843,359 $ 18.78 

Granted 508,000 22.05 384,400 28.76 

Exercised (290,190) 11.53 (272,780) 12.15 

Forfeited (173,600) 25.14 (37,380) 24.28 

Options outstanding, end of year 1,961,809 $ 22.91 1,917,599 $ 21.62 

Options exercisable, end of year 900,607 $ 20.85 906,983 $ 17.06 

The following table summarizes stock options outstanding and exercisable at December 31, 2009: 

Options Outstanding Options Exercisable 

Weighted Weighted Weighted 

Range of Average Average Average 

Exercise Number Remaining Exercise Number Exercise 

Prices Outstanding Life (years) Price Outstanding Price 

$10.28 – $10.71 71,420 0.1 $ 10.68 71,420 $ 10.68 

$16.59 – $23.34 1,006,149 3.7 20.51 495,519 18.93 

$24.58 – $28.84 884,240 4.2 26.63 333,668 25.89 

Total 1,961,809 3.8 $ 22.91 900,607 $ 20.85


The fair value of each stock option granted is estimated on the date of grant. The fair value of the stock options was determined using 

the Black-Scholes option pricing model with the following assumptions: 


Weighted average fair value price per option $ 4.55 $ 6.88 

Expected life of options (years) 5.80 5.84 

Expected stock price volatility 25.0% 25.0% 

Expected dividend yield 2.7% 2.0% 

Risk-free interest rate 2.0% 3.3% 

Deferred Share Unit Plan 

The Company offers a deferred share unit (DSU) plan for executives and non-employee directors, whereby they may elect, on an annual 

basis, to receive all or a portion of their management incentive award or fees, respectively in deferred share units. In addition, the 

Board may grant discretionary DSUs to executives. A DSU is a notional unit that reflects the market value of a single common share of 

Toromont and generally vests immediately. The DSUs will be redeemed on termination of employment or resignation from the Board, as 

the case may be. The redemption amount will be based upon the average of the high and low trading prices of the common shares on 

the TSX for the five trading days preceding the redemption date. As at December 31, 2009, 68,723 units were outstanding at a value of 

$1,882 (2008 – 79,476 units at a value of $1,671). The Company records the cost of the DSU Plan as compensation expense. During 2009, 

47,086 units were redeemed for $1,098 (2008 – Nil). 

Employee Share Ownership Plan 

The Company offers an Employee Share Ownership Plan whereby employees who meet the eligibility criteria can purchase shares by 

way of payroll deductions. In 2008, the plan was enhanced to provide a Company match of up to $1,000 per employee per annum based 

on contributions by the Company of $1 for every $3 dollars contributed by the employee. Company contributions vest to the employee 

immediately. Company contributions amounting to $0.9 million in 2009 (2008 – $0.8 million), were charged to selling and administrative 

expense when paid. The Plan is administered by a third party. 

16. EMPLOYEE FUTURE BENEFITS 

The Company sponsors pension arrangements for substantially all of its employees, primarily through defined contribution plans in Canada 

and a 401(k) matched savings plan in the United States. Certain unionized employees do not participate in Company-sponsored plans, 

and contributions are made to these union-sponsored plans in accordance with respective collective bargaining agreements. In the case 

of the defined contribution plans, regular contributions are made to the employees’ individual accounts, which are administered by a plan 

trustee, in accordance with the plan document. 

Approximately 5% of participating employees are included in defined benefit plans. 

(a) Powell Plan – This is a legacy plan whose members were employees of Powell Equipment when it was acquired by Toromont in 2001. 

The plan is a contributory plan that provides pension benefits based on length of service and career average earnings. The last 

actuarial valuation of the plan was completed as at December 31, 2006. The next valuation is scheduled as at December 31, 2009. 

(b) Executive Plan – This is a non-contributory pension arrangement for certain senior executives that provides for a supplementary 

retirement payout in excess of amounts provided for under the registered plan. The most recent actuarial valuation of the plan was 

completed as at December 31, 2009. The next valuation is scheduled as at December 31, 2010. 

(c) Other plan assets and obligations – This provides for certain retirees and terminated vested employees of businesses previously 

acquired by the Company as well as for retired participants of the defined contribution plan that, in accordance with the plan 

provisions, have elected to receive a pension directly from the plan. The most recent actuarial valuation of the plan was completed as 

at January 1, 2009. The next valuation is scheduled as at January 1, 2012.


The changes in the fair value of assets and the pension obligations and the funded status of the defined benefit plans were as follows: 


AccRUEd BENEfiT OBLigATiONs 


Transfers – 153 

Service cost 1,412 1,570 

Interest cost 3,685 3,656 

Actuarial loss (gain) 4,538 (7,330) 

Benefits paid (5,503) (8,061) 

Balance, end of year $ 65,649 $ 61,517 

PLAN AssETs 

Fair value, beginning of year $ 45,364 $ 58,159 

Transfers 15 16 

Actual return on plan assets 5,867 (7,482) 

Company contributions 2,235 2,280 

Participant contributions 422 452 

Benefits paid (5,503) (8,061) 

Fair value, end of year $ 48,400 $ 45,364 

fUNdEd sTATUs Of ThE PLANs $ (17,249) $ (16,153) 

Unrecognized actuarial loss 15,785 15,013 

Unrecognized past service benefit (887) (1,182) 

AccRUEd PENsiON LiABiLiTy $ (2,351) $ (2,322) 

The funded status of the Company’s defined benefit pension plans at year-end are as follows: 


funded Funded 

Accrued status – Accrued status – 

benefit surplus benefit surplus 

obligation Plan assets (deficit) obligation Plan assets (deficit) 

Powell Plan $ 38,392 $ 36,583 $ (1,809) $ 35,937 $ 34,646 $ (1,291) 

Executive Plan 18,923 2,071 (16,852) 17,868 1,724 (16,144) 

Other plan assets and obligations 8,334 9,746 1,412 7,712 8,994 1,282 

Funded status of the plans $ 65,649 $ 48,400 $ (17,249) $ 61,517 $ 45,364 $ (16,153) 

The Executive Plan is a supplemental pension plan and is solely the obligation of the Company. The Company is not obligated to fund 

this plan but is obligated to pay benefits under the terms of the plan as they come due. The Company has posted letters of credit in the 

amount of $19.9 million to secure the obligations under this plan. 

The significant annual actuarial assumptions adopted in measuring the accrued benefit obligations were as follows: 


Discount rate 5.75% 6.25% 

Expected long-term rate of return on plan assets 7.00% 7.00% 

Rate of compensation increase 4.00% 4.00%

The allocations of plan assets are as follows: 



Equity securities 44.2% 40.5% 

Debt securities 43.9% 43.7% 

Real estate 11.9% 12.4% 

Cash and cash equivalents –% 3.4% 

No plan assets are directly invested in the Company’s securities. 

The net pension expense for the years ended December 31 included the following components: 


dEfiNEd BENEfiT PLANs 

Service cost $ 990 $ 1,118 

Interest cost 3,686 3,656 

Actual return on plan assets (5,867) 7,482 

Actuarial loss (gain) 4,538 (7,330) 

Difference between actual and expected return on assets 2,876 (11,406) 

Difference between actual and recognized actuarial loss (3,663) 7,643 

Difference between actual and recognized past service benefits (296) (296) 

2,264 867 

dEfiNEd cONTRiBUTiON PLANs 8,788 9,102 

401(K) MATchEd sAviNgs PLAN 787 818 

Net pension expense $ 11,839 $ 10,787 

The total cash amount paid or payable for employee future benefits in 2009, including defined benefit and defined contribution plans, 

was $12,116 (2008 – $12,343). 

17. INCOME TAXES 

Significant components of the provision for income tax expense were as follows: 


Current income tax expense $ 56,283 $ 79,219 

Future income tax expense (recovery) 3,093 (8,972) 

Total income tax expense $ 59,376 $ 70,247 

A reconciliation of income taxes at Canadian statutory rates with the reported income taxes was as follows: 


Statutory Canadian federal and provincial income tax rates 33.0% 33.5% 

Expected taxes on income $ 59,364 $ 70,719 

Increase (decrease) in income taxes resulting from: 

Lower effective tax rates in other jurisdictions (102) (1,380) 

Manufacturing and processing rate reduction (147) (164) 

Expenses not deductible for tax purposes 1,138 1,485 

Non-taxable gains (93) (794) 

Effect of future income tax rate reductions 814 419 

Other (1,598) (38) 

Provision for income taxes $ 59,376 $ 70,247 

Effective income tax rate 33.0% 33.3%


The income tax effects of temporary differences that gave rise to significant portions of the future income tax assets and future income 

tax liabilities were as follows: 


cURRENT fUTURE iNcOME TAx AssETs 

Accrued liabilities $ 12,761 $ 14,573 

Deferred revenue 2,358 5,772 

Accounts receivable 2,490 3,029 

Inventories 16,554 12,977 

Cash flow hedges in other comprehensive income 163 (1,417) 

$ 34,326 $ 34,934 

NON-cURRENT fUTURE iNcOME TAx LiABiLiTiEs 

Capital assets $ (9,047) $ (9,250) 

Other 4,213 5,321 

Cash flow hedges in other comprehensive income – (492) 

Available for sale financial assets in other comprehensive income (3,090) – 

$ (7,924) $ (4,421) 

18. EARNINGS PER SHARE 

The following table sets forth the computation of basic and diluted earnings per share. 


Net earnings available to common shareholders $ 120,516 $ 140,524 

Weighted average common shares outstanding 64,716,775 65,016,778 

Dilutive effect of stock option conversion 114,091 422,268 

Diluted weighted average common shares outstanding 64,830,866 65,439,046 

BAsic EARNiNgs PER shARE 



$ 1.86 $ 2.16 

diLUTEd EARNiNgs PER shARE 



$ 1.86 $ 2.15 

In 2009, 884,240 outstanding stock options with an exercise price range of $24.58 to $28.84 were excluded from the calculation of diluted 

earnings per share as these options were anti-dilutive. In 2008, 383,400 outstanding stock options were excluded from the calculation. 

19. COMMITMENTS 

Certain land, buildings and equipment are leased under several non-cancellable operating leases that require minimum annual payments 

as follows: 

2010 $ 4,188 

2011 3,423 

2012 2,492 

2013 1,942 

2014 1,423 

2015 and thereafter 3,881 

$ 17,349


20. CAPITAL MANAGEMENT 

The Company defines capital as the aggregate of shareholders’ equity (excluding accumulated other comprehensive income) and longterm 

debt less cash and cash equivalents. 

The Company’s capital management framework is designed to maintain a flexible capital structure that allows for optimization of the 

cost of capital at acceptable risk while balancing the interests of both equity and debt holders. 

The Company generally targets a net debt to equity ratio of 0.5:1, although there is a degree of variability associated with the timing 

of cash flows. Also, if appropriate opportunities are identified, the Company is prepared to significantly increase this ratio depending upon 

the opportunity. 

The above capital management criteria can be illustrated as follows: 

december 31 December 31 


Shareholders’ equity excluding accumulated other comprehensive income $ 854,691 $ 768,204 

Long-term debt 158,095 173,475 

Cash and cash equivalents (206,957) (137,274) 

Capital under management $ 805,829 $ 804,405 

Net debt as a % of capital under management n/m 5% 

Net debt to equity ratio n/m 0.05:1 

n/m – not meaningful, cash exceeds long-term debt at December 31, 2009 

The Company is subject to minimum capital requirements relating to bank credit facilities and senior debentures. The Company has 

comfortably met these minimum requirements during the year. 

There were no changes in the Company’s approach to capital management during the period. 

21. SUPPLEMENTAL CASH FLOW INFORMATION 


Net change in non-cash working capital and other 

Accounts receivable $ 130,300 $ (37,920) 

Inventories 126,250 (97,691) 

Accounts payable and accrued liabilities (101,028) 61,943 

Deferred revenues (104,451) 33,583 

Other (31,763) 29,935 

$ 19,308 $ (10,150) 

Cash paid during the year for: 

Interest $ 9,818 $ 12,306 

Income taxes $ 77,204 $ 78,604 

Non-cash transactions: 

Capital asset additions included in accounts payable and accrued liabilities $ 467 $ 460 

22. SEGMENTED INFORMATION 

The Company has two reportable operating segments, each supported by the corporate office. The business segments are strategic 

business units that offer different products and services, and each is managed separately. The corporate office provides finance, 

treasury, legal, human resources and other administrative support to the business segments. Corporate overheads are allocated to the 

business segments based on operating income. 

The Equipment Group includes one of the world’s larger Caterpillar dealerships by revenue and geographic territory in addition 

to industry leading rental operations. The Compression Group is a global leader specializing in the design, engineering, fabrication, 

and installation of natural gas compression units and hydrocarbon and petrochemical process systems and industrial and recreational 

refrigeration systems. Both groups offer comprehensive product support capabilities. 

The accounting policies of the reportable operating segments are the same as those described in the summary of significant 

accounting policies. Each reportable operating segment’s performance is measured based on operating income. No reportable operating 

segment is reliant on any single external customer.


Equipment Group Compression Group Consolidated 

2009 2008 2009 2008 2009 2008 

Equipment/package sales $ 455,180 $ 648,547 $ 746,741 $ 792,856 $ 1,201,921 $ 1,441,403 

Rentals 137,536 151,342 15,238 21,149 152,774 172,491 

Product support 278,938 290,431 181,267 207,991 460,205 498,422 

Power generation 9,692 8,893 – – 9,692 8,893 

Total revenues $ 881,346 $ 1,099,213 $ 943,246 $ 1,021,996 $ 1,824,592 $ 2,121,209 

Operating income $ 85,441 $ 108,672 $ 96,911 $ 99,182 $ 182,352 $ 207,854 

Interest expense 8,815 11,753 

Interest and investment income (6,355) (14,999) 

Income taxes 59,376 70,247 

Net earnings from continuing operations $ 120,516 $ 140,853 

Selected Balance Sheet Information 

Equipment Group Compression Group Consolidated 

2009 2008 2009 2008 2009 2008 

Identifiable assets $ 599,358 $ 731,553 $ 459,572 $ 633,941 $ 1,058,930 $ 1,365,494 

Corporate assets 305,737 167,956 

Total assets $ 1,364,667 $ 1,533,450 

Capital expenditures $ 37,706 $ 65,835 $ 23,335 $ 30,640 $ 61,041 $ 96,475 

Depreciation $ 43,104 $ 44,002 $ 15,061 $ 12,068 $ 58,165 $ 56,070 

Goodwill $ 13,000 $ 13,000 $ 21,800 $ 21,800 $ 34,800 $ 34,800 

Operations are based primarily in Canada and the United States. The following summarizes the final destination of revenues to customers 

and the assets held in each geographic segment. 


Revenues 

Canada $ 1,127,929 $ 1,445,302 

United States 608,798 606,816 

International 87,865 69,091 

$ 1,824,592 $ 2,121,209 

Capital assets and goodwill 

Canada $ 350,596 $ 379,992 

United States 53,870 57,455 

$ 404,466 $ 437,447 

23. ECONOMIC RELATIONSHIP 

The Company, through its Equipment Group, sells and services heavy equipment and related parts. Distribution agreements are 

maintained with several equipment manufacturers, of which the most significant are with subsidiaries of Caterpillar Inc. The distribution 

and servicing of Caterpillar products account for the major portion of the Equipment Group’s operations. Toromont has had a strong 

relationship with Caterpillar since 1993.


24. SUBSEQUENT EVENT 

On January 20, 2010, Toromont completed its take-over bid for Enerflex Systems Income Fund (“Enerflex”), acquiring a total of 

approximately 42.2 million trust units and exchangeable limited partnership units. Together with the trust units owned by Toromont prior 

to commencement of the take-over bid, Toromont now owns approximately 96% of the outstanding trust units on a fully-diluted basis. 

Toromont will acquire the balance of the outstanding trust units on February 26, 2010. The total consideration for the Enerflex units 

acquired in the take-over bid and the second step transaction is approximately $670 million. 

Toromont acquired the Enerflex units tendered to its take-over bid with cash and shares, and will acquire the remaining trust units 

on the same terms. In the aggregate, Toromont will pay approximately $315.6 million in cash and issue 11.9 million common shares for 

these units. 

The cash consideration of the purchase price along with transaction costs and repayment of $100.6 million in senior secured notes 

payable at Enerflex will be largely financed with additional unsecured bank debt under a new term loan facility that Toromont closed in 

January 2010. Borrowings of up to $450 million are available to Toromont under this facility, with draw downs to occur by July 2010 and 

are due in July 2011 (eighteen month term). Interest on borrowings is charged at floating rates based on Canadian prime rate or Canadian 

Bankers’ Acceptances rate, plus a specified margin. 

This acquisition will be accounted for as a business combination with Toromont as the acquirer of Enerflex. The purchase method 

of accounting will be used and the earnings will be consolidated from the acquisition date. The Company is in the process of finalizing 

the estimated fair values of assets acquired and liabilities assumed at the date of acquisition, including goodwill and identifiable 

intangible assets. The consolidated results of operations of Enerflex will be included in the Consolidated Statement of Earnings from 

January 20, 2010. 

Enerflex is a supplier of products and services to the global oil and gas production industry, and has operations in Canada, Australia, 

the Netherlands, the United States, Germany, Pakistan, the United Arab Emirates, Egypt, Indonesia and Malaysia.


Ten-Year Financial Review 

For the years ended December 31 

($ thousands except where otherwise indicated) 2009 2008 2007 2006 

OPERATiNg REsULTs 

Revenues 1,824,592 2,121,209 1,886,761 1,746,162 

Net earnings 120,516 140,524 122,280 99,421 

Net interest expense (income) 2,460 (3,246) 9,331 11,110 

Capital expenditures 61,041 96,475 97,108 102,444 

Dividends declared 38,848 36,391 31,061 25,594 

fiNANciAL POsiTiON 

Working capital 539,264 509,276 466,859 469,638 

Capital assets 369,666 402,647 341,159 323,504 

Total assets 1,364,667 1,533,450 1,356,861 1,299,992 

Long-term debt 144,051 158,112 203,425 238,468 

Shareholders’ equity 854,063 779,103 654,730 565,556 

fiNANciAL RATiOs 

Working capital 2.6:1 1.9:1 2.0:1 2.1:1 

Return on opening shareholders’ equity (%) 15.5 21.5 21.6 20.6 

Total debt net of cash to shareholders’ equity (.06):1 .05:1 .2:1 .4:1 

PER shARE dATA ($) 

Net earnings – basic 1.86 2.16 1.89 1.56 

Net earnings – diluted 1.86 2.15 1.88 1.54 

Dividends declared 0.60 0.56 0.48 0.40 

Book value (shareholders’ equity) 13.17 12.06 10.08 8.79 

Shares outstanding at year end 64,867,467 64,620,677 64,943,497 64,310,377 

Price range 

High 27.80 32.90 30.00 27.15 

Low 19.26 19.03 22.30 20.08 

Close 27.79 22.99 28.26 24.50 

Notes 

(1) Results in 2004 and prior have not been restated to conform with the current year’s presentation.


2005 2004 (1) 2003 2002 2001 2000 

1,584,911 1,434,756 1,299,389 1,076,930 911,005 800,464 

78,962 70,518 58,693 40,457 43,700 32,345 

10,192 10,202 10,608 7,136 (6,913) 3,797 

72,813 65,608 72,922 53,042 77,394 57,968 

20,280 16,486 13,319 11,541 10,646 9,257 

410,990 263,294 203,577 213,222 218,132 165,098 

283,407 297,645 293,211 258,764 252,104 206,526 

1,143,972 962,437 856,176 771,902 720,702 613,787 

241,265 166,508 159,694 156,479 171,970 157,187 

481,812 415,855 376,837 335,316 314,248 218,213 

2.1:1 1.8:1 1.7:1 1.8:1 2.0:1 1.7:1 

18.9 18.7 17.5 12.9 17.1 15.9 

.4:1 .4:1 .5:1 .4:1 .5:1 .7:1 

1.25 1.11 0.93 0.63 0.71 0.56 

1.23 1.09 0.91 0.62 0.70 0.54 

0.32 0.26 0.21 0.18 0.17 0.16 

7.57 6.59 5.93 5.28 4.90 3.77 

63,624,936 63,082,586 63,563,246 63,455,146 64,194,946 57,951,396 

25.68 20.85 16.73 13.25 13.10 10.38 

20.05 15.88 9.88 9.25 7.63 6.90 

25.40 20.72 16.53 10.33 10.24 8.75


Corporate Information 

Toromont CAT 

3131 Highway 7 West 

P.O. Box 5511 

Concord, Ontario L4K 1B7 

T: 416 667 5511 

F: 416 667 5555 

S.J. Medhurst 

President 

Enerflex Ltd. 

1331 Macleod Trail SE 

Suite 904 

Calgary, Alberta T2G OK3 

T: 403 387 6377 

F: 403 720 4385 

J. B. Goertzen 

President and Chief Executive Officer 

Officers 

Battlefield – The CAT Rental Store 

880 South Service Road 

Stoney Creek, Ontario L8H 7S8 

T: 905 577 7777 

F: 905 643 6008 

R.B. Casson 

President 

CIMCO Refrigeration 

65 Villiers Street 

Toronto, Ontario M5A 3S1 

T: 416 465 7581 

F: 416 465 8815 

S.D. McLeod 

President 

Robert M. Ogilvie, Chairman and Chief Executive Officer 

Paul R. Jewer, Vice President, Finance and Chief Financial Officer 

Michael P. Cuddy, Vice President and Chief Information Officer 

David C. Wetherald, Vice President, Human Resources and Legal 

ANNUAL MEETING 

The Annual Meeting of the Shareholders 

of Toromont Industries Ltd. will be held 

at 10:00 am on Thursday, April 22, 2010 

in the Imperial Room at the Fairmont 

Royal York Hotel, 100 Front Street West, 

Toronto, Ontario.

Design and Coordination: Ove Design & Communications www.ovedesign.com 

Editorial: BarnesMcInerney Inc. 

HOW TO GET IN TOUCH WITH US 

Tel: 416 667 5511 

Fax: 416 667 5555 

E-mail: investorrelations@toromont.com 

www.toromont.com 

HOW TO REACH OUR TRANSFER AGENT 

AND REGISTRAR 

Investors are encouraged to contact 

CIBC Mellon Trust Company for information 

regarding their security holdings. 

CIBC Mellon Trust Company 

P.O. Box 7010 

Adelaide Street Postal Station 

Toronto ON M5C 2W9 

CANADA 

AnswerLine: 416 643 5500 or 

Toll-Free North America: 1 800 387 0825 

Email: inquiries@cibcmellon.com 

www.cibcmellon.com 

COMMON SHARES 

Listed on the Toronto Stock Exchange 

Stock Symbol – TIH 

This annual report was printed in Canada on 

stock manufactured totally chlorine-free with 

10% postconsumer fibre.

2009 Annual Report - Toromont Industries Ltd.

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