Toromont Industries Ltd. — Interim / Quarterly Report 2021

Nov 4, 2021

Management’s Discussion and Analysis

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 three and nine months ended September 30, 2021, compared to the preceding year. This MD&A should be read in conjunction with the unaudited interim condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2021, the annual MD&A contained in the 2020 Annual Report and the audited annual consolidated financial statements for the year ended December 31, 2020.

The unaudited interim condensed consolidated financial statements reported herein have been prepared in accordance with International Accounting Standard (“IAS”) 34 - Interim Financial Reporting, and are reported in Canadian dollars. The information in this MD&A is current to November 4, 2021.

Additional information is contained in the Company’s filings with Canadian securities regulators, including the Company’s 2020 Annual Report and the 2021 Annual Information Form. These filings are available on SEDAR at www.sedar.com and on the Company’s website at www.toromont.com.

Advisory

Information in this MD&A that is not a historical fact is "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 statements containing forward-looking information. Forward-looking information in this MD&A reflects current estimates, beliefs, and assumptions, which are based on Toromont’s perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. Toromont’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. Toromont can give no assurance that such estimates, beliefs and assumptions will prove to be correct. This MD&A also contains forwardlooking statements about the recently acquired businesses.

Numerous risks and uncertainties could cause the actual results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: business cycles, including general economic conditions in the countries in which Toromont operates; commodity price changes, including changes in the price of precious and base metals; potential risks and uncertainties relating to the novel COVID-19 global pandemic, including an economic downturn, reduction or disruption in supply or demand for our products and services, or adverse impacts on our workforce, capital resources, or share trading price or liquidity; increased regulation of or restrictions placed on our businesses as a result of COVID-19; changes in foreign exchange rates, including the Cdn$/US$ exchange rate; the termination of distribution or original equipment manufacturer agreements; equipment product acceptance and availability of supply; increased competition; credit of third parties; additional costs associated with warranties and maintenance contracts; changes in interest rates; the availability of financing; potential environmental liabilities of the acquired businesses and changes to environmental regulation; information technology failures, including data or cyber security breaches; failure to attract and retain key employees; damage to the reputation of Caterpillar, product quality and product safety risks which could expose Toromont to product liability claims

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and negative publicity; new, or changes to current, federal and provincial laws, rules and regulations including changes in infrastructure spending; any requirement of Toromont to make contributions to the registered funded defined benefit pension plans, postemployment benefits plan or the multi-employer pension plan obligations in which it participates and acquired in excess of those currently contemplated; and increased insurance premiums. Readers are cautioned that the foregoing list of factors is not exhaustive.

Any of the above mentioned risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied in the forward-looking information and statements included in this MD&A. For a further description of certain risks and uncertainties and other factors that could cause or contribute to actual results that are materially different, see the risks and uncertainties set out in the "Risks and Risk Management" and "Outlook" sections of Toromont’s most recent annual Management Discussion and Analysis, as filed with Canadian securities regulators at www.sedar.com or at our website www.toromont.com. 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 statements containing forward-looking information.

Readers are cautioned not to place undue reliance on statements containing forward-looking information, which reflect Toromont’s expectations only as of the date of this MD&A, and not to use such information for anything other than their intended purpose. Toromont disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

CONSOLIDATED OPERATING RESULTS

	Three months ended September 30	Three months ended September 30	Nine months ended September 30	Nine months ended September 30
($ thousands, except per share amounts)	2021	2020 $change % change	2021	2020 $change % change
REVENUES Cost ofgoods sold	997,198 $ 738,764	921,656 $ 75,542 $ 8% 695,043 43,721 6%	2,930,502 $ 2,229,984	2,486,712 $ 443,790 18% 1,895,454 334,530 18%
Gross profit(1) Sellingand administrative expenses	258,434 123,991	226,613 31,821 14% 113,736 10,255 9%	700,518 373,351	591,258 109,260 18% 346,006 27,345 8%
OPERATING INCOME (1) Interest expense Interest and investment income	134,443 7,093 (1,936)	112,877 21,566 19% 7,874 (781) (10%) (1,719) (217) 13%	327,167 21,272 (6,200)	245,252 81,915 33% 22,695 (1,423) (6%) (6,008) (192) 3%
Income before income taxes Income taxes	129,286 35,522	106,722 22,564 21% 29,363 6,159 21%	312,095 84,975	228,565 83,530 37% 62,600 22,375 36%
NET EARNINGS	93,764	77,359 16,405 21%	227,120	165,965 61,155 37%
BASIC EARNINGS PER SHARE	1.13 $	0.94 $ 0.19 $ 20%	2.75 $	2.02 $ 0.73 $ 36%
KEY RATIOS: Gross profit margin(1) Selling and administrative expenses as a % of revenues Operating income margin(1) Income taxes as a % of income before income taxes	25.9% 12.4% 13.5% 27.5%	24.6% 12.3% 12.2% 27.5%	23.9% 12.7% 11.2% 27.2%	23.8% 13.9% 9.9% 27.4%

(1) Described in the sections titled "Additional GAAP Measures and Non-GAAP Measures".

Market activity remained healthy in most areas as COVID-related restrictions continue to ease. The equipment market recorded excellent orders and new machine deliveries. A strong backlog, tempered by tight equipment and parts supply supports future business results, Product support and rental activity increased on improving conditions. CIMCO continued to deliver on its order backlog, however, project schedule changes and deferrals, in part due to equipment delivery delays, impacted revenue. Recreational markets are beginning to improve as sites reopen, although industrial bookings lag. Improving operational efficiency and leveraging learnings from the past year are a focus across all businesses. We continue to operate with caution, monitoring the fluid nature of COVID-19 variants, maintaining disciplined protocols as well as evaluating

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economic factors flowing from the pandemic inclusive of supply chain disruptions and cost pressures.

Revenues increased $75.5 million or 8% for the quarter, Equipment Group revenues increased 10% on higher new equipment deliveries and improving rental and product support activity. CIMCO revenues decreased 5% in the quarter on lower project backlog and delays in project schedules, while product support activity improved.

Revenues increased $443.8 million or 18% year-to-date. Activity in the prior year was dampened by restrictions and closures related to the pandemic. Equipment Group revenues increased 17% year-to-date on higher new equipment deliveries, rental and product support activity. CIMCO revenues increased 25% year-to-date as the build out on industrial segment projects advanced.

Gross profit margin increased 130 basis points (“bps”) to 25.9% in the quarter and 10 bps year-to-date to 23.9%. The Equipment Group reported improved margins in both the quarter and year-to-date. Equipment margins improved on strong demand and tight product supply. Product support margins were higher on the increased activity, while rental fleet margins reflected higher utilization and fleet adjustments (selective dispositions and additions). Sales mix was less favourable, with a lower proportion of product support revenues to total, partially dampening gross margin. CIMCO’s margins were lower in both the quarter and year-to-date, on a less favourable sales mix of product support revenues to total revenues, and lower average margins on projects in process.

Selling and administrative expenses were $10.3 million (9%) higher in the third quarter compared to the prior year. No benefits were recorded under the Canada Emergency Wage Subsidy (“CEWS”) program in the third quarter of 2021 (2020 - $7.3 million). The mark-to-market adjustment on deferred share units (DSUs) was $4.3 million lower than the third quarter of 2020, changes in the share price for the two periods. Compensation increased year over year on increased staffing levels, salary increases and higher profit sharing accruals on the higher earnings. Other expenses increased in support of the higher sales activity.

On a year-to-date basis, selling and administrative expenses increased $27.3 million or 8%. No benefits were recorded under the CEWS program in the first nine months of 2021 ($8.1 million in 2020). The mark-to-market adjustment on DSUs was $2.7 million higher than last year reflective of the higher share price in the current year. Compensation costs and other selling and administrative expenses increased as noted above for the quarter. Bad debt expense decreased $2.4 million on good collections. Selling and administrative expenses were 12.7% of revenues, compared to 13.9% in 2020, reflecting higher revenues in the current period and expense containment on a relative basis.

Operating income increased 19% in the quarter to $134.4 million and 33% to $327.2 million year-to-date and was 130 bps higher as a percentage of revenues (11.2% versus 9.9% last year). Revenue growth exceeded growth in expenses. The easing of COVID-19 restrictions has improved activity levels. Operations remain focused on leveraging learned cost containment strategies.

Interest expense decreased $0.8 million in the quarter and $1.4 million year-to-date, on lower debt levels. Drawings on a term credit facility taken in early 2020 at the onset of the pandemic were repaid in late 2020.

Interest income increased $0.2 million in both the quarter and year-to-date on higher cash balances.

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The effective income tax rate was 27.5% for the quarter and remained flat compared to the same quarter in 2020. On a year-to-date basis it was 27.2%, and was lower than the comparable period last year, reflecting lower rates on capital gains and other items in the current year.

Net earnings were up $16.4 million or 21% to $93.8 million for the quarter and $61.2 million or 37% to $227.1 million year-to-date. Basic earnings per share (“EPS”) increased 20% to $1.13 for the quarter and 36% to $2.75 year-to-date.

Comprehensive income in the quarter was $111.1 million (2020 – $84.4 million) and $289.8 million year-to-date (2020 – $156.3 million). Other comprehensive income included an actuarial gain on post-employment benefit plans of $10.3 million after-tax for the quarter (2020 – actuarial gain of $6.7 million) and year-to-date actuarial gain of $52.3 million (2020 – actuarial loss of $12.5 million). These gains/losses reflect changes in the weighted average discount rates used in the valuation, which are reflective of underlying financial markets, as well as changes in the fair value of pension plan assets. Other comprehensive income also included a favorable net change in the fair value of cash flow hedges of $6.7 million after-tax for the quarter (2020 – favourable net change of $0.6 million) and year-to-date a favorable net change of $10.3 million after-tax (2020 – favourable net change of $2.6 million). These changes reflect mark-to-market differences in the value of foreign exchange derivative contracts designated as cash flow hedges and are largely a function of the underlying USD/CAD exchange rates at period end compared to contract date.

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, operating income relative to revenues and return on capital employed. Corporate expenses are allocated based on each segment’s revenue. Interest expense and interest and investment income are not allocated.

Equipment Group

Equipment Group
	Three months ended September 30		Nine months ended September 30
($ thousands)	2021	2020 $change % change	2021	2020 $change % change
Equipment sales and rentals New Used Rentals	354,144 $ 92,509 111,252	279,418 $ 74,726 $ 27% 104,346 (11,837) (11%) 104,541 6,711 6%	1,053,449 $ 275,823 275,013	752,996 $ 300,453 $ 40% 269,900 5,923 2% 257,818 17,195 7%
Total equipment sales and rentals Product support Powergeneration	557,905 353,642 2,839	488,305 69,600 14% 343,657 9,985 3% 2,754 85 3%	1,604,285 1,045,725 8,304	1,280,714 323,571 25% 980,325 65,400 7% 8,156 148 2%
Total revenues	914,386 $	834,716 $ 79,670 $ 10%	2,658,314 $	2,269,195 $ 389,119 $ 17%
Operating income	129,388 $	103,404 $ 25,984 $ 25%	315,648 $	230,977 $ 84,671 $ 37%
KEY RATIOS: Product support revenues as a % of total revenues Operating income margin Grouptotal revenues as a % of consolidated revenues	38.7% 14.2% 91.7%	41.2% 12.4% 90.6%	39.3% 11.9% 90.7%	43.2% 10.2% 91.3%

The Equipment Group delivered solid results in the third quarter as activity levels continued to improve with easing of pandemic restrictions, improved operating practices and expense discipline. Demand for equipment remained relatively strong, however increasingly tight supply chains have resulted in some delivery deferrals. Product support remains an opportunity for growth consistent with increased hiring of skilled technicians and maintaining parts supply.

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Total equipment sales (new and used) increased $62.9 million or 16% in the quarter and $306.4 million or 30% year-to-date. Sales increased across all markets on a year-to-date basis against the prior year, which was hardest hit by the pandemic. Revenues in the third quarter were higher in most markets, however some were lower than prior year on timing of equipment delivery and customer specific orders. Year-over-year revenue changes for the quarter (and year-to-date) were as follows: construction markets +5% (+25%); power systems -3% (+10%); material handling -4% (+11%); agricultural -1% (+26%); and mining +141% (+118%).

Rental revenues were up $6.7 million (+6%) in the quarter and $17.2 million (+7%) year-to-date. Most markets and segments were higher, reflecting continued improvement in activity against a weak comparable last year. Year-over-year revenue changes in each market for the quarter (and year-to-date) were as follows: Light equipment rentals +9% (+8%), power systems +30% (+13%), heavy equipment rentals -2% (+22%) and material handling +36% (+21%). Revenues from equipment on rent with a purchase option (“RPO”) were down 28% in the quarter and 32% year-to-date on a smaller average fleet reflecting recent customer preference for purchase versus rental (RPO). As at September 30, 2021 the RPO fleet was $37.3 million versus $42.4 million at this time last year, well below historical levels for this period.

Product support revenues grew $10.0 million or 3% in the quarter and $65.4 million or 7% year-to-date, with increases in both parts and service. Activity was up in the majority of the markets and across all regions in both the quarter (and year-to-date): construction markets +1% (+8%), mining +2% (+4%) and material handling +16% (+22%). Agricultural activity was down for the quarter (-22%) and year-to-date (-9%).

Gross profit margins increased 170 bps in the quarter and 60 bps year-to-date compared to last year. Margins increased across all revenue streams, partially offset by unfavourable sales mixes. Equipment margins were up 130 bps in the quarter and 50 bps year-to date reflecting strong demand and tight supply. Product support margins were up 50 bps in the quarter and 20 bps year-to-date reflecting improved efficiency on higher volumes. Rental margins were higher in both periods (80 bps for the quarter and 100 bps year-to-date) reflecting higher utilization as well as fleet adjustments (selective dispositions and additions) over the last year. A shift in sales mix with a lower proportion of product support revenues to total revenues decreased margin by 100 bps in the quarter and 150 bps year-to-date. Product support revenues in both periods were lower as a percentage of total revenues compared to both the third quarter (down 250 bps to 38.7%) and year-to-date (down 390 bps to 39.3%) last year, mainly due to stronger comparative equipment sales in the current year.

Selling and administrative expenses were up $9.6 million or 9% in the quarter, $24.1 million or 8% for the first nine months of 2021. Excluding the benefits recorded under the CEWS program in 2020, expenses were up 3% in the quarter and 5% year-to-date reflecting strong cost control. Compensation costs increased on higher staffing levels, salary adjustments, and higher profit sharing accruals on the higher earnings, partially offset by a lower mark-to-market adjustment on DSUs. Other expenses such as travel and training increased in support of higher activity levels after a reduced spending period in 2020. Allowance for doubtful accounts decreased $1.0 million in the quarter and $0.9 million in the first nine months of the year, on good collection activity. Selling and administrative expenses were 110 basis points lower as a percentage of revenues (12.5% versus 13.6% last year), reflecting stronger sales and the continuation of expenditure controls implemented over the past year.

Operating income increased in both the quarter (up $26.0 million or 25% to $129.4 million) and

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year-to-date (up $84.7 million or 37% to $315.6 million), mainly reflecting the higher revenues coupled with a lower expense ratio to revenues.

Bookings and Backlogs

($ millions)	2021	2020 $change % change
Bookings - three months ended September 30 Bookings - nine months ended September 30 Backlogs - as at September 30	539.9 $ 1,859.8 $ 903.5 $	371.1 $ 168.8 $ 45% 1,006.7 $ 853.1 $ 85% 256.1 $ 647.4 $ 253%

New bookings were up $168.8 million or 45% in the third quarter compared to the prior year on good end user demand. The majority of the sectors reported higher orders: construction (+25%), mining (+268%), power systems (+46%), and agriculture (+24%). Material handling orders were down 46% in the quarter, but up 12% year-to-date; timing of orders can be variable and were impacted by the pandemic in the prior year.

On a year-to-date basis, bookings increased $853.1 million or 85% to $1.9 billion, reflecting increases across all sectors.

Backlogs of $903.5 million were up $647.4 million or 253% across all sectors. At September 30, 2021, the total backlog related to construction markets represented 45%, power systems 19%, and mining 33%. Approximately 40% of order backlog is currently expected to be delivered this year however this is subject to customer schedules and equipment deliveries from vendors. Approximately 8% of the backlog is scheduled for delivery in 2023.

Bookings and backlogs can vary significantly from period to period on large project activities, particularly in mining and power systems, the timing of orders and deliveries and the availability of equipment from either inventory or suppliers.

CIMCO

CIMCO
	Three months ended September 30		Nine months ended September 30
($ thousands)	2021	2020 $change % change 48,490 $ (7,840) $ (16%) 38,450 3,712 10% 86,940 $ (4,128) $ (5%)	2021	2020 $change % change
Package sales Product support	40,650 $ 42,162		160,751 $ 111,437	107,210 $ 53,541 $ 50% 110,307 1,130 1%
Total revenues	82,812 $		272,188 $	217,517 $ 54,671 $ 25%
Operating income	5,055 $	9,473 $ (4,418) $ (47%)	11,519 $	14,275 $ (2,756) $ (19%)
KEY RATIOS: Product support revenues as a % of total revenues Operating income margin Grouptotal revenues as a % of consolidated revenues	50.9% 6.1% 8.3%	44.2% 10.9% 9.4%	40.9% 4.2% 9.3%	50.7% 6.6% 8.7%

CIMCO’s results for the third quarter were lower compared to the similar period in 2020. Customer specific construction schedules and supply chain restrictions affect timing of revenue recognition. Lower margins on large industrial projects in progress, coupled with lower current booking activity, dampened results. Product support activity improved in the recreational market as facilities prepare to reopen for the winter season. On a year-to-date basis revenue increased on progress on several significant larger industrial construction projects. Product support remains an essential service and improved activity levels are predicated on the continued reopening of recreational facilities. Operating income has been dampened by increased operating expenditures inline with increasing demand and in support of future growth.

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Package revenues were down $7.8 million or 16% in the quarter, with a decrease in both the recreational (down 2%) and industrial (down 25%) markets. Package revenues reflect the progress of project construction applying the percentage-of-completion method for revenue recognition. This results in a degree of variability of reported revenues and earnings as the timing of projects and construction schedules are largely under the control of third parties (contractors and end-customers). In Canada, package revenues were down $11.9 million or 29% reflecting lower industrial revenues (principally on the build out of a major industrial project) and project delays resulting in part from supply chain issues. In the US, package revenues increased $4.1 million or 57% on a smaller activity base, with higher revenues in the industrial market and lower revenues in the recreational markets. Year-to-date, package sales in both market segments were $53.5 million or 50% higher than last year with build out of projects (industrial up 70% and recreational up 16%). Package sales increased in Canada (up $46.0 million or 53%) and the US (up $7.5 million or 37%), with increases in both the recreational and industrial markets.

Product support revenues increased in the third quarter (up $3.7 million or 10%) and year-to-date (up $1.1 million or 1%). Revenues in Canada increased 10% in the quarter, but were relatively flat year-to-date, reflecting improved economic activity as site restrictions in most areas ease and demand in the third quarter, particularly in recreational centres, increased in anticipation of re-openings for the winter season. In the US, the higher technician base continued to support activity levels resulting in 10% increase in the quarter and 6% increase year-to-date, albeit on a smaller base.

Gross profit margins decreased 320 bps in the quarter versus last year. The decrease in gross profit margins was due to lower package margins (down 290 bps) mainly on lower margins on certain larger projects and lower product support margins (down 60 bps), partially offset by a higher sales mix of product support revenues to total revenues (up 30 bps). Margins mainly reflect activity levels, nature of projects in process and variable construction schedules. Year-to-date, gross profit margins decreased 460 bps on lower package margin (down 350 bps) combined with unfavourable sales mix of product support revenues to total revenues (down 90 bps), as well as slightly lower product support margins (down 20 bps). Lower package margins were generally reflective of the nature of projects.

Selling and administrative expenses were up $0.6 million or 5% in the quarter reflecting spending to support current and future activity levels. Certain costs such as training were higher after a period of deferred spending. Compensation expenses increased on higher staffing levels while occupancy costs increased on facilities expansion, including a charge of $0.9 million related to the forthcoming move of the head office. On a year-to-date basis, selling and administrative expenses increased $3.2 million or 9% due to similar reasons as the quarter. The allowance for doubtful accounts decreased on good collections. In the third quarter of 2020, $0.8 million benefit under the CEWS program was recorded further affecting comparability of results year over year. As a percentage of revenues, selling and administrative expenses were lower at 14.8% in the first nine months of 2021 versus 17.0% for the similar period last year, reflecting the higher revenues.

Operating income decreased $4.4 million or 47% in the quarter reflecting lower package sales and lower margins, along with slightly higher expenses. Through the first nine months of 2021, operating income decreased $2.8 million or 19%, as higher package revenues, were more than offset by the lower gross margins and increased expenses.

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Bookings and Backlogs

($ millions)	2021	2020 $change % change
Bookings - three months ended September 30 Bookings - nine months ended September 30 Backlogs - as at September 30	48.5 $ 132.5 $ 153.8 $	39.6 $ 8.9 $ 22% 203.7 $ (71.2) $ (35%) 216.0 $ (62.2) $ (29%)

Bookings were up $8.9 million or 22% to $48.5 million in the quarter. Recreational bookings were 200% higher on increased market activity in both Canada (up 284%) and the US (up 135%), after a period of limited activity given pandemic closures and restrictions. Bookings in industrial markets were down 23% with reduced activity in both Canada (down 6%) and the US (down 68%).

On a year-to-date basis, bookings were down $71.2 million or 35% to $132.5 million. Several large industrial orders were received in Canada in the first quarter of 2020, resulting in a decrease in bookings compared to last year. Industrial orders were down 52% with a decrease in both Canada (down 54%) and the US (down 24%). Recreational orders increased 17% to $59.1 million, with increases in both the US (up 19%) and Canada (up 16%).

Backlogs of $153.8 million declined 29% versus September last year as revenues recognized on progress of construction exceeded new project orders. Approximately 52% of the backlog is expected to be realized as revenue this year, however this is subject to construction schedules, component availability and potential changes stemming from the COVID-19 pandemic.

CONSOLIDATED FINANCIAL CONDITION

The Company maintained a strong financial position. At September 30, 2021, the ratio of net debt to total capitalization was -5% (net cash position), compared to 3% at December 31, 2020, and 10% at September 30, 2020. Cash balance was $732.6 million at September 30, 2021.

Non-cash Working Capital

Investment in non-cash working capital was $476.2 million at September 30, 2021. The major components, along with the changes from September 30 and December 31, 2020, are identified in the following table.

($ thousands)	September 30	September 30	December 31 Change Change
	2021	2020	$ % 2020 $ %
Accounts receivable Inventories Other current assets Accounts payable and accrued liabilities Provisions Income taxes (payable) recoverable Derivative financial instruments Dividends payable Deferred revenues and contract liabilities	539,110 $ 685,239 18,087 (533,468) (25,528) (857) 11,456 (28,977) (188,908)	512,472 $ 26,638 $ 5% 541,580 $ (2,470) $ - 849,230 (163,991) (19%) 728,404 (43,165) (6%) 14,321 3,766 26% 10,897 7,190 66% (674,532) 141,064 (21%) (558,443) 24,975 (4%) (25,710) 182 (1%) (26,645) 1,117 (4%) 31,413 (32,270) (103%) (23,281) 22,424 (96%) (6,283) 17,739 (282%) (11,043) 22,499 (204%) (25,510) (3,467) 14% (25,560) (3,417) 13% (141,761) (47,147) 33% (149,109) (39,799) 27%
Total non-cash working capital	476,154 $	533,640 $ (57,486) $ (11%) 486,800 $ (10,646) $ (2%)

Accounts receivable increased 5% compared to September 30, 2020, mainly reflecting the 8% increase in revenues in the quarter, offset by a continued focus on collection activity. Days sales outstanding (“DSO”) remained flat at 46 days on an improvement in the Equipment Group (down 1 day), offset by an increase in CIMCO (up 9 days) off a smaller base.

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In comparison to December 31, 2020, accounts receivable remained relatively unchanged. Trade receivables increased on a 5% increase in trailing revenues and a lag in collections. DSO was 41 days at December 31, 2020. Other miscellaneous receivables were lower (largely receipt of amounts claimed under the Canada Emergency Wage Subsidy program in 2020).

Inventories at September 30, 2021, were 19% lower compared to September 30, 2020:

• Equipment Group inventories were down $156.8 million or 19%, reflecting lower levels of equipment (down $131.3 million or 26%) and parts (down $29.2 million or 11%), offset by an increase in service work-in-process (up $3.7 million or 6%). Equipment inventories have reduced as a result of on-going and increasing supply constraints from manufacturers, coupled with recent high sales activity. Parts inventories were reduced throughout last year in light of lower market activity levels, and continued leveraging of the broader distribution network subsequent to systems conversion and alignment at Toromont Cat, the dealership. Higher work-in-process levels reflects higher activity.

• CIMCO inventories were down $7.2 million or 23%, mainly due to lower work-in-process levels (down 28%) on the advancement of larger industrial projects.

• Inventories at September 30, 2021 were 6% lower compared to December 31, 2020:

• Equipment Group inventories were down $32.2 million or 5% on lower equipment inventory (down 10%) and parts inventory (down 3%), partially offset by higher work-in-progress (up 31%). While inventory levels are typically lowest at the end of a fiscal year due to seasonality, changes in supply chain availability has affected these trends.

• CIMCO inventories were down 31% on lower work-in-process (down 36%) reflecting project construction progress.

Other current assets are comprised mainly of prepaid expenses, and vary from period to period based on timing of receipt of invoice and payment.

Accounts payable and accrued liabilities at September 30, 2021, were 21% lower than at September 30, 2020, principally due to the timing of purchases and payments for inventory. Accounts payable have reverted to normal levels as extended credit terms from suppliers have unwound.

In comparison to December 31, 2020, accounts payable and accrued liabilities were down 4%, mainly reflecting the timing of purchase and payment for inventory and other supplies.

Income taxes (payable)/recoverable reflects the difference between tax installments and current tax expense.

Derivative financial instruments represent the fair value of foreign exchange contracts. Fluctuations in the value of the Canadian dollar (stronger) led to a cumulative net gain of $11.5 million as at September 30, 2021. This is not expected to affect net earnings as the unrealized gains offset future losses on the related hedged items, either current accounts payable or future transactions.

Dividends payable increased compared to September 30 and December 31, 2020, reflecting the higher dividend rate and higher number of shares outstanding. The quarterly dividend rate was increased 12.9% from $0.31 per share to $0.35 per share, effective with the July 5, 2021 payment.

Deferred revenues and contract liabilities represent billings to customers in excess of revenue recognized.

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• In the Equipment Group, these balances arise due to progress billings from the sale of power and energy systems and long-term product support maintenance contracts, sales of equipment with residual value guarantees and customer deposits for machinery to be delivered in the future. At September 30, 2021, these were up 46% versus September 30, 2020 and up 49% versus December 31, 2020, largely related to progress billings and customer deposits for future equipment deliveries.

• At CIMCO, these balances arise on progress billings from the sale of refrigeration packages. As at September 30, 2021, these were down 4% versus September 30, 2020 and down 23% versus December 31, 2020, reflecting the timing of billings compared to customer’s construction schedules.

Employee Future Benefits

Subsequent to the quarter end, in October 2021, an annuity purchase transaction was entered into where in the defined benefit obligations associated with retired plan members were assumed by a third party insurer, in exchange for a lump sum payment of $221 million from plan assets. A settlement charge of $5.0 million in connection with this transaction will be recorded in the fourth quarter of 2021.

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 (“NCIB”)

The Company’s NCIB program was renewed on September 15, 2021. The current issuer bid allows the Company to purchase up to approximately 8.2 million of its common shares in the 12-month period ending September 14, 2022, representing 10% of common shares in the public float, as estimated at the time of renewal. The actual number of shares purchased and the timing of any such purchases will be determined by Toromont, except for purchases designated under the Automatic Share Purchase Plan ("ASPP"). All shares purchased under this Bid will be cancelled.

Under this Bid, the Company purchased and cancelled 230,000 common shares for $24.2 million (average cost of $105.31 per share, including transaction costs) through to September 30, 2021.

The Company purchased and cancelled 67,800 common shares for $4.0 million (average cost of $59.62 per share, including transaction costs) during the nine months ended September 30, 2020, under the NCIB program in place at that time.

The Company entered into an ASPP with a broker that allows the purchase of common shares for cancellation under the NCIB at any time during predetermined trading blackout periods. As at September 30, 2021, an obligation of $25.8 million was recognized for the repurchase of shares under the ASPP.

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Outstanding Share Data

As at the date of this MD&A, the Company had 82,327,174 common shares and 2,283,819 share options outstanding.

Dividends

The Company declared and paid the following dividends to common shareholders during the last eight quarters.

Record Date	Payment Date	Dividend Amount per Share	Dividends Paid in Total ($ millions)
December 9,2019	January3,2020	$0.27	$22.0
March 9,2020	April 2,2020	$0.31	$25.4
June 9,2020	July3,2020	$0.31	$25.4
September 8,2020	October 2,2020	$0.31	$25.5
December 9,2020	January5,2021	$0.31	$25.6
March 9,2021	April 1,2021	$0.31	$25.6
June 9,2021	July5,2021	$0.35	$28.9
September 8,2021	October 4,2021	$0.35	$29.0

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 short-term borrowings and the issuance of common shares. Borrowings are obtained through a variety of senior debentures, notes payable and committed credit facilities.

The Company maintains a $500.0 million committed revolving credit facility that matures in October 2022. Toromont’s debt under this facility is unsecured and ranks pari passu with debt outstanding under Toromont’s existing debentures. Interest is based on a floating rate, primarily bankers’ acceptances and prime, plus applicable margins and fees based on the terms of the credit facility. Subsequent to quarter end, the Company extended this credit facility to November 2026, with no material changes to the terms and conditions.

No amounts were drawn on this facility as at September 30, 2021 (December 31, 2020 – $nil; September 30, 2020 – $nil). Standby letters of credit issued utilized $28.7 million of the facility as at September 30, 2021 (December 31, 2020 – $30.8 million and September 30, 2020 – $35.7 million).

The Company entered into an additional $250.0 million committed revolving credit facility on April 17, 2020, that matured in April 2021. This facility was never drawn, and was not renewed at maturity.

The Company expects that continued cash flows from operations in 2021, together with cash on hand and currently available credit facilities will be more than sufficient to fund requirements for

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investments in working capital and capital assets. The Company also has a certain degree of flexibility in its operating and investing plans to mitigate fluctuations.

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:

	Three months ended September 30	Three months ended September 30	Three months ended September 30	Nine months ended September 30	Nine months ended September 30
($ thousands)	2021	2020		2021	2020
Cash, beginning of period Cash, provided by (used in): Operating activities Operations Change in non-cash working capital and other Net rental fleet additions	660,771 $ 134,438 23,068 (10,509)	537,175 $ 124,757 (61,044) (5,375)		591,128 $ 344,152 8,693 (56,745)	365,589 $ 306,272 (70,010) (35,348)
Investing activities	146,997 (27,048)	58,338 (6,333)		296,100 (58,102)	200,914 (25,877)
Financing activities	(48,248)	(118,072)		(96,577)	(69,716)
Effect of foreign exchange on cash balances	79	(86)		2	112
Increase in cash in theperiod	71,780	(66,153)		141,423	105,433
Cash, end ofperiod	732,551 $	471,022 $		732,551 $	471,022 $

Cash Flows from Operating Activities

Operating activities provided cash in both the third quarter and on a year-to-date basis for 2021.

Cash generated from operations increased for the quarter (up 7.8%) and year-to-date (up 12.4%) from the similar periods last year on the higher net earnings.

Non-cash working capital provided $23.1 million in the third quarter of 2021. Reductions in inventory levels and higher deferred revenues (including customer deposits) more than offset cash requirements for accounts payable and other accrued liabilities. Non-cash working capital used $61.0 million in the third quarter of 2020, largely on a reduction of accounts payable as extended terms from certain suppliers wound down. Income tax instalments were higher in the prior year due in part to governmental deferral programs.

On a year-to-date basis non-cash working capital provided $8.7 million in 2021. Reductions in inventory levels and higher deferred revenues (including customer deposits) more than offset cash requirements for accounts payable, DSU redemptions and income tax instalments. Non-cash working capital used $70.0 million in the nine month period ended September 30, 2020, largely on the reduction of accounts payable as certain vendor terms were unwound.

Net rental fleet additions (purchases less proceeds of dispositions) increased in both the third quarter and first nine months of 2021 compared to the similar periods last year. Additional investment in both the heavy and light equipment rental fleets reflect increased demand and improving market conditions, dampened somewhat by equipment availability. In some cases, fleet dispositions have been deferred, pending improved equipment supply.

The components and changes in non-cash working capital are discussed in more detail in this MD&A under the heading “Consolidated Financial Condition”.

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Cash Flows from Investing Activities

Investments in property, plant and equipment totalled $27.3 million in the third quarter of 2021, related largely to expansion of branch and CIMCO head office facilities ($17.0 million) and normal replacement of service and delivery vehicles ($8.0 million). Capital expenditures in 2020 of $6.6 million largely related to an investment in land for potential branch expansion.

On a year-to-date basis, additions to property, plant and equipment totalled $60.3 million (2020 - $36.0 million), comprised of $34.5 million for facilities, inclusive of the new CIMCO head office and new rental locations and $19.7 million for service and delivery vehicles.

Disposition proceeds in the nine months ended September 30, 2021 were $1.6 million (2020 - $9.4 million), resulting in a capital gain of $1.2 million (2020 - $4.1 million), or $1.0 million after-tax (2020 - $3.5 million).

Cash Flows from Financing Activities

During the third quarter of 2021, the Company used $48.2 million (2020 – used $118.1 million) in cash in financing activities, major uses and sources of cash during the quarter included:

• Dividends paid to common shareholders of $28.9 million or $0.35 per share (2020 – $25.4 million or $0.31 per share);

• Cash received on exercise of share options of $7.3 million (2020 – $9.1 million);

• Repurchase of 230,000 common shares under the NCIB program for $24.2 million (see note 4 to the unaudited condensed interim financial statements for further details);

• Lease liability payments of $2.4 million (2020 - $1.7 million ); and,

• In the third quarter of 2020, the Company repaid $100.0 million on a term credit facility.

For the nine months ended September 30, 2021, financing activities used $96.6 million (2020 – used $69.7 million) in cash, major uses and sources of cash during this period included:

• Dividends paid to common shareholders of $80.1 million or $0.97 per share (2020 – $73.0 million or $0.89 per share);

• Cash received on exercise of share options of $15.2 million (2020 – $15.5 million);

• Repurchase of shares under the NCIB program used $24.2 million (2020 – $4.0 million); and

• Lease liability payments of $7.5 million (2020 – $7.8 million);

OUTLOOK

The breadth, duration, impact and response to the COVID-19 pandemic are unknown and evolving. Staff shortages, reduced customer activity and demand, product availability and other supplier constraints, cost increases and increased government regulations or intervention, are some of the factors that have and may continue to negatively impact the business, consolidated financial results and conditions of the Company. It is not possible to reliably estimate the length and severity of these developments as well as the impact on the consolidated financial results and condition of the Company in future periods.

Vaccination programs are underway and generally restrictions are being eased or phased out across most of our territories. However, there is ongoing concern and uncertainty created by vaccine uptake levels and known and potential new COVID-19 variants. It is possible that

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emergency measures will be needed in the future based on local conditions.

Notwithstanding the pandemic related challenges during the past year and a half, we are very optimistic for prospects in the medium and long term.

The Equipment Group’s parts and service business provides stability along with a large and diversified installed base of equipment, so long as it is working in the field. Prior to the pandemic, the long-term outlook for infrastructure projects and other construction activity was positive across most territories. Mining customers and jurisdictions they operate in continue to evaluate appropriate activity levels on a daily/weekly basis. Longer term, mine expansion will remain dependent on global economic and financial conditions.

The protection and support of our people remains a priority. In particular, our technical workforce provide one of our most valuable service offerings for our customers. Workforce planning initiatives, including hiring, continue in light of current and expected activity levels.

Investment in broader product lines, branch network, rental equipment, and the development of product support technologies supporting remote diagnostics and telematics and digital information models to enhance CRM activity comprise our strategic platform aligned to longer-term growth once economic, financial and social environments return to a more normalized state.

CIMCO’s installed base and product support levels provide a platform for current and future operations and growth trends. CIMCO has a wide product offering using natural refrigerants including innovative CO2 solutions, which remains a differentiator in recreational markets. In industrial markets, CIMCO’s proven track record and strong geographical coverage provides continued growth opportunities. Recreational markets have been slow due to pandemic restrictions, however longer term, opportunity exists. Current backlogs are supportive of future activity, although carry somewhat lower gross margins due to the nature of projects in process.

The diversity of the markets served, expanding product offering and services, strong financial position and disciplined operating culture position the Company well for continued growth in the long term.

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 2020 annual audited consolidated financial statements.

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($ thousands, except per share amounts) Q4 2020 Q1 2021 Q2 2021	Q3 2021
REVENUES Equipment Group $ 896,904 $ 727,383 $ 1,016,545 CIMCO 95,281 78,855 110,521	$ 914,386 82,812
Total revenues $ 992,185 $ 806,238 $ 1,127,066	$ 997,198
NET EARNINGS $88,950$47,956$85,400	$ 93,764
PER SHARE INFORMATION: Basic earnings per share 1.08 $ 0.58 $ 1.03 $ Diluted earnings per share 1.07 $ 0.58 $ 1.02 $ Dividends paid per share $ 0.31 $ 0.31 $ 0.35 Weighted average common shares outstanding- basic(in thousands) 82,373 82,499 82,587	1.13 $ 1.12 $ $ 0.35 82,705
($ thousands, except per share amounts) Q4 2019 Q1 2020 Q2 2020	Q3 2020
REVENUES Equipment Group $ 933,131 $ 657,776 $ 776,703 CIMCO 92,059 57,683 72,894
	$ 834,716 86,940
Total revenues $1,025,190$715,459$849,597	$921,656
NET EARNINGS $90,454$37,396$51,210	$77,359
PER SHARE INFORMATION: Basic earnings per share 1.10 $ 0.46 $ 0.62 $ Diluted earnings per share 1.10 $ 0.45 $ 0.62 $ Dividends paid per share $ 0.27 $ 0.27 $ 0.31 Weighted average common shares outstanding- basic(in thousands) 81,897 82,015 82,024	0.94 $ 0.94 $ $ 0.31 82,195

Interim period revenues and earnings historically reflect variability from quarter to quarter due to seasonality. The pandemic has affected seasonal trends and may result in variations to historically experienced trends.

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 had typically been the strongest 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 pattern is impacted by the timing of significant sales to mining and other customers, resulting from the timing of mine site development and access, and construction project schedules. This trend can also be impacted during periods of equipment supply constraints from suppliers.

CIMCO has also had a distinct seasonal trend in results historically, as the timing of construction activity impacts revenue recognition under percentage-of-completion accounting. Lower revenues are recorded during the first quarter on slower construction schedules due to winter weather. Revenues increase in subsequent quarters as construction schedules ramp up. This trend can be, and has been, impacted somewhat by significant governmental funding initiatives, timing of significant industrial projects and product supply constraints. Quarter-over-quarter comparisons

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are also impacted by a relatively high fixed cost structure.

Historically, inventories have increased through the year to meet the expected demand for higher deliveries in the third and fourth quarters of the fiscal year. This seasonal sales trend also leads accounts receivable to be at their highest level at year-end.

In 2020 and 2021, these patterns were impacted by the governmental and market response and reaction to COVID-19. The second quarter of 2020 experienced the most significant slowdown in market activity. COVID-19 variants, vaccine roll-out and further governmental measures may continue to further alter the typical seasonal trend.

RISKS AND RISK MANAGEMENT

The significant risks and uncertainties affecting the Company and its business are discussed in the Company’s MD&A for the year ended December 31, 2020 under “Risks and Risk Management”. The following is an update to the changes in the risks or uncertainties facing the Company since that date.

- Pandemic Risk (Coronavirus COVID 19)

COVID-19 is an evolving risk, the duration and impact of which remains uncertain at this time, as is the efficacy of the government and central bank interventions. Any estimate of the length and severity of these developments is therefore subject to significant uncertainty, and accordingly estimates of the extent to which the COVID-19 pandemic may, directly or indirectly, materially and adversely affect the Company’s operations, financial results and condition in future periods are also subject to significant uncertainty.

Vaccination rates have increased and many provinces and territories are phasing in reduced restrictions. Variants of concern could still result in higher case counts and the resumption of shutdowns, which could continue to adversely impact the Company for a prolonged period.

The Company continues to focus on ensuring the continued safety of our employees, while continuing to serve our customers’ needs as an essential service, and protecting the business and organization for the long-term. The Critical Incident Executive Response Team remains in effect and focuses on developing plans, assessing developments and responding appropriately. The Company is updating employees on a frequent basis to provide information on the situation and on necessary precautions to take. The Company continues to have an open dialogue with public safety and government officials at all levels, as well as key suppliers, partners and customers.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Accounting Policies

The significant accounting policies used in the preparation of the accompanying unaudited interim condensed consolidated financial statements are consistent with those used in the Company’s 2020 audited annual consolidated financial statements, and described in note 1 therein. Several amendments, apply for the first time in 2021, but do not have an impact on the unaudited interim condensed consolidated financial statements of the Company for the three and nine month periods ending September 30, 2021.

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Estimates

The preparation of financial statements in conformity with IFRS 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. There have been no material changes to the critical accounting estimates as described in note 2 to the Company’s 2020 audited annual consolidated financial statements, contained in the Company’s 2020 Annual Report.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management, under the supervision of the President and Chief Executive Officer (“CEO”) and Executive Vice President and Chief Financial Officer (“CFO”), is responsible for establishing and maintaining disclosure controls and procedures, as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings , and have designed such disclosure controls and procedures, or have caused it to be designed under their supervision, to provide reasonable assurance that material information with respect to Toromont is made known to them.

The CEO and the CFO, together with other members of management, have evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures as designed were effective as at September 30, 2021.

Internal Control over Financial Reporting

Management, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings, and have designed such internal control over financial reporting, or caused it to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with IFRS.

There have been no changes in the design of the Company’s internal control over financial reporting during the three and nine month periods ended September 30, 2021, that would materially affect, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Also, a projection of the evaluation of the effectiveness of internal control over financial reporting to future periods is subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation. Internal controls over financial reporting may not prevent all errors and fraud. A

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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.

ADDITIONAL GAAP MEASURES

IFRS mandates certain minimum line items for financial statements and also requires presentation of additional line items, headings and subtotals when such presentation is relevant to an understanding of the Company’s financial position or performance. IFRS also requires the notes to the financial statements to provide information that is not presented elsewhere in the financial statements, but is relevant to understanding them. Such measures outside of the minimum mandated line items are considered additional GAAP measures. The Company’s consolidated financial statements and notes thereto include certain additional GAAP measures where management considers such information to be useful to the understanding of the Company’s results.

Gross Profit

Gross Profit is defined as total revenues less cost of goods sold.

Operating Income

Operating income is defined as net earnings before interest expense, interest and investment income and income taxes and is used by management to assess and evaluate the financial performance of its operating segments. Financing and related interest charges cannot be attributed to business segments on a meaningful basis that is comparable to other companies. Business segments do not correspond to income tax jurisdictions, and it is believed that the allocation of income taxes distorts the historical comparability of the performance of the business segments.

	Nine months ended September 30 Three months ended September 30	Nine months ended September 30 Three months ended September 30	Nine months ended September 30 Three months ended September 30	Nine months ended September 30 Three months ended September 30
($ thousands)	2021	2020	2021	2020
Net earnings _plus:_Interest expense _less:_Interest and investment income _plus:_Income taxes	93,764 $ 7,093 (1,936) 35,522	77,359 $ 7,874 (1,719) 29,363	227,120 $ 21,272 (6,200) 84,975	165,965 $ 22,695 (6,008) 62,600
Operating income	134,443 $	112,877 $	327,167 $	245,252 $
Total Revenues	997,198	921,656	2,930,502	2,486,712
Operating income margin	13.5%	12.2%	11.2%	9.9%

Net Debt to Total Capitalization/Equity

Net debt to total capitalization/equity are calculated as net debt divided by total capitalization and shareholders’ equity, respectively, as defined below, and are used by management as measures of the Company’s financial leverage.

Net debt is calculated as long-term debt plus current portion of long-term debt less cash. Total capitalization is calculated as shareholders’ equity plus net debt.

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The calculations are as follows:

($ thousands)	September 30 2021	December 31 September 30 2020 2020
Long-term debt _less:_Cash	647,099 $ 732,551	646,299 $ 645,981 $ 591,128 471,022
Net debt Shareholders' equity	(85,452) 1,875,154	55,171 174,959 1,698,652 1,629,508
Total capitalization	1,789,702 $	1,753,823 $ 1,804,467 $
Net debt to total capitalization	-5%	3% 10%
Net debt to equity	-0.05:1	0.03:1 0.11:1

NON-GAAP MEASURES

Management believes that providing certain non-GAAP measures provides users of the Company’s consolidated financial statements with important information regarding the operational performance and related trends of the Company's business. By considering these measures in combination with the comparable IFRS measures set out below, management believes that users are provided a better overall understanding of the Company's business and its financial performance during the relevant period than if they simply considered the IFRS measures alone.

The non-GAAP measures used by management do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Accordingly, these measures should not be considered as a substitute or alternative for net income or cash flow, in each case as determined in accordance with IFRS.

Working Capital

Working capital is defined as total current assets less total current liabilities. Management views working capital as a measure for assessing overall liquidity.

($ thousands)	September 30 2021	December 31 September 30 2020 2020
Total current assets _less:_Totalcurrentliabilities	1,986,443 $ 777,738	1,872,144 $ 1,879,026 $ 794,216 874,364
Working capital	1,208,705 $	1,077,928 $ 1,004,662 $

Non-Cash Working Capital

Non-cash working capital is defined as total current assets (excluding cash) less total current liabilities (excluding current portion of long-term debt).

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($ thousands)	September 30 2021	December 31 September 30 2020 2020
Total current assets _less:_Cash	1,986,443 $ 732,551	1,872,144 $ 1,879,026 $ 591,128 471,022
	1,253,892	1,281,016 1,408,004
Total current liabilities	777,738	794,216 874,364
Non-cash working capital	476,154 $	486,800 $ 533,640 $

Market Capitalization & Total Enterprise Value

Market capitalization represents the total market value of the Company’s equity. It is calculated by multiplying the market price of the Company’s share by the total outstanding shares.

Total enterprise value represents the total value of the Company and is often used as a more comprehensive alternative to market capitalization. It is calculated by adding net debt (defined above) to market capitalization.

The calculations are as follows:

($ thousands, except for shares and shareprice)	September 30 2021	December 31 September 30 2020 2020
Outstanding common shares	82,567,774	82,474,658 82,313,138
_times:_Endingshareprice	105.73 $	89.20 $ 79.68 $
Market capitalization	8,729,891 $	7,356,739 $ 6,558,711 $
Long-term debt _less:_Cash	647,099 $ 732,551	646,299 $ 645,981 $ 591,128 471,022
Net debt	(85,452) $	55,171 $ 174,959 $
Total enterprise value	8,644,439 $	7,411,910 $ 6,733,670 $

KEY PERFORMANCE INDICATORS (“KPIs”)

Management uses key performance indicators to consistently measure performance against the Company’s priorities across the organization. The Company’s KPIs include gross profit margin, operating margin, order bookings and backlogs, return on capital employed and return on equity. Although some of these KPIs are expressed as ratios, they are non-GAAP financial measures that do not have a standardized meaning under IFRS and may not be comparable to similar measures used by other issuers.

Gross Profit Margin

This measure is defined as gross profit (defined above) divided by total revenues.

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Operating Income Margin

This measure is defined as operating income (defined above) divided by total revenues.

Order Bookings and Backlogs

The Company’s order bookings represent equipment unit orders that management believes are firm. Backlogs are defined as the retail value of equipment unit ordered by customers for future deliveries. Management uses order backlog as a measure of projecting future equipment deliveries. There are no directly comparable IFRS measures for order bookings or backlog.

Return on Capital Employed (“ROCE”)

ROCE is utilized to assess both current operating performance and prospective investments. The trailing twelve months adjusted earnings 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 or total capitalization.

	Trailing twelve months ended	Trailing twelve months ended
($ thousands)	September 30 2021	December 31 September 30 2020 2020
Net earnings _plus:_Interest expense _less:_Interest and investment income _plus:_Interest income - rental conversions _plus:_Income taxes	316,070 $ 28,558 (9,275) 3,482 118,996	254,915 $ 256,419 $ 29,981 29,551 (9,083) (9,175) 3,529 3,278 96,621 96,656
Adjusted net earnings	457,831 $	375,963 $ 376,729 $
Average capital employed	1,812,402 $	1,838,533 $ 1,853,246 $
Return on capital employed	25.3%	20.4% 20.3%

Return on Equity (“ROE”)

ROE is monitored to assess the profitability of the consolidated Company and is calculated by dividing trailing twelve months net earnings by opening shareholders’ equity (adjusted for shares issued and redeemed during the period).

	Trailing twelve months ended	Trailing twelve months ended
($ thousands)	September 30 2021	December 31 September 30 2020 2020
Net earnings	316,070 $	254,915 $ 256,419 $
Openingshareholders' equity (net of adjustments)	1,639,080 $	1,538,817 $ 1,459,397 $
Return on equity	19.3%	16.6% 17.6%

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