2009 Annual Report - Toromont Industries Ltd.

34 | TOROMONT 2009 ANNUAL REPORT
Revenue
($ MiLLiONs)
2009
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