Toromont Industries Ltd.

Welcome to the Tormont second quarter 2021 results conference call. Please be advised that this call is being recorded. Your host for today will be Mr. Michael McMillan. Please go ahead, Mr. McMillan.

Great. Thank you, Elena. Good morning, everyone. Thank you for joining us today to discuss the results of Tormont Industries Limited for the second quarter and the first half of 2021. Also on the call with me this morning is Scott Medhurst, President and Chief Executive Officer. As noted in the press release issued yesterday, we will be referring to a package posted on our website, and we encourage listeners to download it and follow along. At this time, and as noted on slide two of our presentation, I would like to advise listeners that the presentation may contain forward-looking statements and information that are subject to certain risks, uncertainties, and assumptions that may lead to actual results or events differing materially from those expected. For a complete discussion of these factors, refer to our press release from yesterday which is available on our website. As is our practice, we'll focus on key highlights for the current quarter. Scott will begin with a few general remarks followed by comments on our overall results, after which I'll provide some highlights on our divisional results and financial position. After our prepared remarks, we'll be more than happy to answer questions. Over to you, Scott.

Thank you, Mike, and good morning, everyone. Before I begin, I would ask that you move to slide three of the package. On July 15th, our Board of Directors announced the retirement of its Chair, Mr. Robert Ogilvie. Mr. Ogilvie's responsibilities extended beyond the original scheduled retirement date of April 2021, as the COVID crisis presented unprecedented uncertainties beginning March 2020. Mr. Ogilvie and the Board remain committed to an orderly transition while closely monitoring the economic realities during the pandemic. The company has navigated relatively well over the last 16 months, building on a strong foundation through operational excellence and strategic execution. Given the company's position and Mr. Ogilvie's belief that Torremont is well-placed for the future, he advised the board it was an appropriate time to retire. Mr. Ogilvie's iconic 36-year career included, 34 years as chairman and 20 years as chief executive officer. As at Q2 2021, during Mr. Ogilvie's tenure, Torremont has increased its dividend consistently each year since 1989. This record of performance built significant value for Torremont shareholders while creating opportunities for our employees. Positive outcomes are from disciplines that were embedded in a culture of decentralization empowerment, and accountability. These principles remain core to the Torremont Foundation today and a platform to build our future. During his time as chair and chief executive officer, the company's transformational growth was substantial. Mr. Ogilvie's outstanding financial and operational acumen were instrumental in leading strategic events, including the 1993 acquisition of the Ontario Caterpillar dealership, Through strong operating performance, the company accelerated further expansion with the acquisition of the Newfoundland and Labrador dealership, followed by Manitoba and most of the new territories. There were many other milestone events, including the acquisition of the battlefield rental business that originally consisted of one store and has since grown to over 70 outlets from Manitoba to Newfoundland. In 2011, under Mr. Ogilvie's leadership, there was further transformation with a bifurcation of the Enerflex Systems Limited. This decision positioned the business well to focus on growing the dealership, rental and refrigeration businesses. As chair, his council was instrumental in the acquisition of the Quebec and Maritime dealerships, our largest transaction to date. Robert has been a mentor to many of today's Torremont leadership team and directors. The entire organization wishes Robert well in his retirement and thanks him for his significant contributions to Tormont's success and his steadfast commitment to our employees, customers, and shareholders. Mr. Richard Waugh joined Tormont board in 2018 and has been appointed chair. Mr. Waugh is currently chair of Tormont's Environmental Social Governance Committee and is a member of the Audit Committee. During his more than 35 years of business experience, he spent 16 years at Uniselect where he advanced through several senior executive roles, including Vice President, Administration and Chief Financial Officer, Vice President and Chief Operating Officer, and President and Chief Executive Officer. We congratulate Mr. Waugh on his appointment. Turning to Q2 and the first half of the year on slide four, we are pleased with the overall activity levels in our end markets and are proud of our team's dedication and ability to adjust. to ongoing changes in the environment and customer requirements. The equipment group reported strong prime product deliveries reflecting robust activity levels. Rental and product support activity increased as equipment usage improved. During the quarter, we also secured three new battlefield locations in the Ontario market which are in the process of opening. With respect to Simcoe, revenues increased reflecting the build out of our industrial orders booked in 2020. However, product support activity remains somewhat impacted by COVID-19 restrictions, particularly within the recreational segment. Turning now to our financial results highlighted on slide five. Important to note, the second quarter of 2020 was hardest hit by the impact of pandemic site restrictions and shutdowns, which resulted in lower revenues and profit margins and impacts comparability of results in the current year. The company delivered solid results in the second quarter of 2021. Market activity increased in the equipment group and Simcoe continued to deliver on the strong order backlog. Focus on operational efficiency and leveraging learnings from the past year are a focus. Continue to operate with caution given the rapidly changing situation driven by COVID-19 variants. Backlogs were $957.8 million at quarter end, up 93% versus Q2 2020. In the equipment group, mining and construction represent approximately 33% and 43% of backlog respectively. Typical backlogs were 35% lower at the quarter end versus last year, which had exceptionally strong bookings in the first half of last year. Typical results in Q2 reflect good progress delivering packages related to this backlog position. On a consolidated basis, revenues increased 33% reflecting increased activity in both the equipment group and Simcoe in most markets and across all regions as well as solid execution from our teams. Product support and rental revenues increased 14% and 27% respectively compared to the similar quarter last year and we're both up 7% on a year-to-date basis. Operating income was up 59% in the quarter and 46% year-to-date on the higher revenues. Revenue growth exceeded expense growth as COVID-19 restrictions and cost containment focus continued. Net earnings increased 67% in the quarter and 51% year-to-date versus 2020, while basic earnings per share increased 41 cents to $1.03 per share in the quarter and increased 54 cents to $1.62 per share on a year-to-date basis. We continue to provide essential services and solutions to our customers while remaining diligently focused on safeguarding our employees and protecting our business for the future. We appreciate and value our entire team's incredible effort and ongoing commitment to adapt to changes in the business environment. In the quarter, market activity was very strong and in some cases putting pressure on supply chain availability and delivery date extensions. Although vaccination rates in the main markets we serve are improving, caution is warranted given the changing status of the pandemic and the response required. Technician hiring remains a priority to meet demand. The diversity of our geographic landscape and market serve, extensive product and service offerings, and financial strength together with our disciplined operating culture continue to position us well to respond to the near-term business dynamics and, most importantly, built for the future. Mike, I'll turn it over to you for some more detailed comments on the group results.