NON-IFRS 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 IFRS. 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 IFRS.
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 and Return on Capital Employed
Return on equity ("ROE") is monitored to assess the profitability of the consolidated Company. ROE is calculated by dividing net earnings by opening shareholders' equity (adjusted for shares issued and redeemed during the year). Opening shareholders' equity in 2011 was also adjusted to remove both net earnings and equity associated with discontinued operations.
Return on capital employed ("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.
Net Debt to Total Capitalization
Net debt is defined as total long-term debt less cash and cash equivalents. Total capitalization is defined as net debt plus shareholders' equity. The ratio of net debt to total capitalization is determined by dividing net debt by total capitalization.
TOROMONT INDUSTRIES LTD.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Unaudited) December 31 December 31($ thousands) Note 2012 2011----------------------------------------------------------------------------AssetsCurrent assets Cash $ 2,383 $ 75,319 Accounts receivable 3 231,518 209,243 Inventories 4 327,785 301,937 Derivative financial instruments 43 12 Other current assets 4,086 4,718----------------------------------------------------------------------------Total current assets 565,815 591,229Property, plant and equipment 5 157,993 151,928Rental equipment 5 158,932 135,362Derivative financial instruments - 418Other assets 6 12,614 8,195Deferred tax assets 15 13,697 12,749Goodwill and intangible assets 7 27,119 13,450----------------------------------------------------------------------------Total assets $ 936,170 $ 913,331--------------------------------------------------------------------------------------------------------------------------------------------------------LiabilitiesCurrent liabilities Accounts payable, accrued liabilities and provisions 8 $ 203,468 $ 280,735 Deferred revenues 54,664 49,100 Current portion of long-term debt 9 1,372 1,280 Derivative financial instruments 262 640 Income taxes payable 3,130 8,352----------------------------------------------------------------------------Total current liabilities 262,896 340,107Deferred revenues 11,337 10,387Long-term debt 9 158,395 132,815Accrued pension liability 19 26,840 26,161Derivative financial instruments 127 -Shareholders' equityShare capital 10 270,900 265,436Contributed surplus 11 5,957 5,890Retained earnings 199,486 131,643Accumulated other comprehensive income 232 892----------------------------------------------------------------------------Shareholders' equity 476,575 403,861----------------------------------------------------------------------------Total liabilities and shareholders' equity $ 936,170 $ 913,331--------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notesTOROMONT INDUSTRIES LTD.CONSOLIDATED INCOME STATEMENTS(Unaudited)Years ended December 31 ($ thousands, except share amounts) Note 2012 2011----------------------------------------------------------------------------Revenues $ 1,507,173 $ 1,381,974Cost of goods sold 1,122,765 1,032,599----------------------------------------------------------------------------Gross profit 384,408 349,375Selling and administrative expenses 214,130 201,190----------------------------------------------------------------------------Operating income 170,278 148,185Interest expense 14 9,714 9,012Interest and investment income 14 (3,974) (3,214)----------------------------------------------------------------------------Income before income taxes 164,538 142,387Income taxes 15 43,985 39,709----------------------------------------------------------------------------Net earnings from continuing operations 120,553 102,678Net gain on spinoff of Enerflex 25 - 133,164Earnings from discontinued operations 25 - 10,617----------------------------------------------------------------------------Net earnings $ 120,553 $ 246,459--------------------------------------------------------------------------------------------------------------------------------------------------------Earnings (losses) attributable to :Common shareholders $ 120,553 $ 247,082Non-controlling interests $ - $ (623)Basic earnings per share Continuing operations 16 $ 1.57 $ 1.33 Discontinued operations 16 - 1.87---------------------------------------------------------------------------- $ 1.57 $ 3.20--------------------------------------------------------------------------------------------------------------------------------------------------------Diluted earnings per share Continuing operations 16 $ 1.56 $ 1.32 Discontinued operations 16 - 1.86---------------------------------------------------------------------------- $ 1.56 $ 3.18--------------------------------------------------------------------------------------------------------------------------------------------------------Weighted average number of shares outstanding Basic 76,549,792 77,013,509 Diluted 77,086,929 77,393,253See accompanying notesTOROMONT INDUSTRIES LTD.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited)Years ended December 31 ($ thousands) 2012 2011----------------------------------------------------------------------------Net earnings $120,553 $246,459Other comprehensive income (loss): Unrealized loss on translation of financial statements of foreign operations (121) (6,250) Change in fair value of derivatives designated as cash flow hedges, net of income tax (recovery) (2012 - ($650); 2011 - $2,245) (1,619) 4,552 Loss (gain) on derivatives designated as cash flow hedges transferred to net earnings, net of income tax (recovery) (2012 - $435; 2011 - ($719)) 1,080 (1,662) Loss on translation of financial statements of foreign operations transferred to net earnings on spinoff of Enerflex - 18,015 Actuarial losses on pension plans, net of income tax recovery (2012 - $1,505; 2011 - $2,411) (4,176) (7,234)----------------------------------------------------------------------------Other comprehensive (loss) income (4,836) 7,421----------------------------------------------------------------------------Comprehensive income $115,717 $253,880--------------------------------------------------------------------------------------------------------------------------------------------------------Comprehensive loss attributable to non-controlling interests $ - $ (623)--------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notesTOROMONT INDUSTRIES LTD.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)Years ended December 31 ($ thousands) Note 2012 2011----------------------------------------------------------------------------Operating activities Net earnings from continuing operations $ 120,553 $ 102,678 Items not requiring cash and cash equivalents Depreciation and amortization 52,818 45,863 Stock-based compensation 11 1,659 1,001 Accrued pension liability (5,002) (3,335) Deferred income taxes 769 (1,450) Gain on sale of rental equipment and property, plant and equipment (8,967) (8,211) Cash flow from discontinued operations - 26,028---------------------------------------------------------------------------- 161,830 162,574 Net change in non-cash working capital and other from continuing operations 21 (124,475) (39,731) Net change in non-cash working capital and other from discontinued operations 25 - 31,405----------------------------------------------------------------------------Cash provided by operating activities 37,355 154,248----------------------------------------------------------------------------Investing activities Additions to: Rental equipment (77,611) (57,860) Property, plant and equipment (23,700) (25,017) Proceeds on disposal of: Rental equipment 22,562 23,040 Property, plant and equipment 1,504 4,080 Increase in other assets (291) (184) Increase in intangible assets (13,669) - Discontinued operations 25 - 140,115----------------------------------------------------------------------------Cash (used in) provided by investing activities (91,205) 84,174----------------------------------------------------------------------------Financing activities Increase in term credit facility debt 26,547 - Repayment of long-term debt (1,280) (286,888) Financing costs (369) (575) Dividends 10 (35,996) (40,877) Shares purchased for cancellation (14,137) (12,213) Cash received on exercise of stock options 6,202 3,242----------------------------------------------------------------------------Cash used in financing activities (19,033) (337,311)----------------------------------------------------------------------------Effect of exchange rate changes on cash denominated in foreign currency (53) 119---------------------------------------------------------------------------- Decrease in cash and cash equivalents (72,936) (98,770) Cash and cash equivalents at beginning of year 75,319 174,089---------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 2,383 $ 75,319--------------------------------------------------------------------------------------------------------------------------------------------------------Supplemental cash flow information (note 21)See accompanying notesTOROMONT INDUSTRIES LTD.CONSOLIDATED STATEMENT OF CHANGES IN EQUITY(Unaudited)
