Toromont Industries Ltd. (TIH) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Robert Ogilvie, and I am the Chair of your Board. I welcome you to the 53rd Annual and Special Meeting of Shareholders of Toromont Industries, which is being audio webcast. As you are aware, today's meeting is being held at virtual-only format for the second time. Although we are disappointed that we cannot see you today, we adopted this approach to mitigate the risk to our shareholders, management, employees and other stakeholders associated with the continuing global COVID-19 health emergency. This format gives registered shareholders and duly appointed proxy holders an equal opportunity to participate, ask questions and vote regardless of your physical location, which would otherwise be impossible in these challenging times. As described in detail in the management information circular for today's meeting, registered shareholders who held shares on March 16, 2021, the record date for this meeting, and validly appointed proxy holders, which includes nonregistered shareholders who have properly appointed themselves or another person as proxy holders, are entitled to participate and to vote at this meeting. Our circular and other proxy materials contain full details on how to register yourself or a proxy holder to participate in today's meeting. If you are not a registered shareholder or a duly appointed proxy holder, you are attending this meeting as a guest. Yes, you'll be able to listen to the meeting but will not be able to ask questions, communicate or vote. As we move through our agenda to consider each formal item of business, I will give registered shareholders and appointed proxy holders and an opportunity to ask questions by specifically inviting discussion on the matter. If you have a question, you may type in your question in the chat box that will be present on your screen throughout the meeting. When entering your questions, we ask that you state your questions as clearly as possible and specify the item of business to which your question relates so that we can ensure it is considered and addressed. We also request that you ask one question at a time to ensure all registered shareholders and appointed proxy holders have an opportunity to have their questions considered. During the formal business of the meeting, your questions should be limited to the specific motion or item of business before the meeting. All proper questions that are relevant to the item of business being discussed, will be read aloud by Lynn Korbak, Toromont's Corporate Secretary and responded to while that item of business is before the meeting. After the formal business of the meeting, there will be an opportunity to ask additional questions about the company. Questions that don't specifically relate to the formal business of the meeting will be held back until that time to allow us to efficiently get through the meeting agenda. Before we begin the formal process of the meeting, I would like to introduce our directors who are joining us by audio webcast. Peter Blake; Ben Cherniavsky. Mr. Cherniavsky is our newest board member. He has had a 25-year plus career in financial services. For 22 years, he is Managing Director, Equity Analyst and lead of Industrials research at Raymond James; Jeff Chisholm; Cathy Cranston; James Gill; Wayne Hill; Sharon Hodgson; Scott Medhurst, who is also our President and CEO; Kathy Rethy; and Richard Roy. These individuals, along with myself, comprise your current Board of Directors. We are grateful for the wise counsel provided by all of our directors, especially during these unprecedented and challenging times. Also joining me by audio conference are Scott Medhurst, our President and Chief Executive Officer; Michael McMillan, our Executive Vice President and Chief Financial Officer; and Lynn Korbak, our General Counsel and Corporate Secretary. The meeting will now come to order. As per our company bylaws, I will act as Chair and ask Lynn Korbak, to act as Secretary of the meeting. With the consent of the meeting, Jennifer Anderson; and Laurie Grinton, of AST Trust Company, Canada, Toromont's registrar and transfer agent will act as scrutineers. Under our governing laws and bylaws, registered shareholders and duly appointed proxy holders who are participating in today's meeting by these electronic means we've made available are deemed to be present at the meeting for all purposes, including for the purposes of establishing quorum. I have received the Scrutineers' initial report of attendance, and based on that information, I can confirm a forum is present. A copy of the scrutineer's final report on attendance will be filed with the records of this meeting. As proper notice of the meeting has been given, I declare this meeting to be duly convened. I will now commence the formal business of the meeting. The Secretary has given me proof that the notice of this meeting and the accompanying management information circular dated February 26, 2021, the form of proxy and the annual report containing our 2020 audited consolidated financial statements.were filed and mailed on March 29, 2021, to registered and beneficial shareholders who requested a copy. Proof of that mailing will be in ex to the minutes of this meeting. As outlined in the notice of meeting and management information circular, today's meeting will cover the following 6 items of formal business: to receive our consolidated financial statements for the fiscal year ended December 31, 2021, and the auditor's report on those financial statements; to elect each of the 11 nominated directors; to reappoint Ernst & Young as the company's auditors; to conduct our annual advisory say on pay vote on our approach to executive compensation; to vote on the replenishment and amendment of our stock option plan; and to vote on the renewal and amendment of our shareholder rights plan. All of these items of business are described in detail in this year's circular. We will conduct votes on all matters before us by ballot. Every registered shareholder and duly appointed proxy holder will have one vote for each common share held as of the record date for the meeting. Shareholders and proxy holders that voted in advance of the meeting do not need to take any further steps to cast their votes unless you wish to change your vote. Your advanced vote has already been recorded. If you do vote at today's meeting, then that will automatically revoke your prior vote or any prior proxy credit. On behalf of the Board, I want to thank those shareholders who submitted their proxies in advance of today's meeting. Each of the matters to come before this meeting will require approval by a simple majority of the votes cast. Based on the proxies that have been filed in attendance at today's meeting, it is clear that all resolutions to be put before the meeting today will be approved. To make the best use of our time, we have asked certain shareholders to move and second the resolutions. To vote at the meeting, please follow the instructions on your screen. The ballot will be kept open for all resolutions during the entire formal portion of the meeting. This will allow you to vote on each resolution at any time during the meeting or wait until the end of any discussion on each resolution before casting your vote. Prior to the formal close of the meeting, we will provide a few moments to ensure that all votes have been cast. As I mentioned earlier, I will be providing an opportunity for registered shareholders and duly appointed proxy holders to ask questions on each resolution in turn. I ask that you input your initial questions at this time so that we can address them at the time of -- that each resolution is brought forward. Once discussion on all items of formal business has concluded, I will give you a few additional moments to finalize your votes and then declare voting closed on all resolutions so that the scrutineers can tabulate the results. I'll announce the outcome of the voting at the end of the meeting based on information provided by our scrutineers. The final voting results will be released after the meeting and in accordance with our usual practices and applicable laws and stock exchange requirements. They will also be available on our website and under our profile on SEDAR. I now declare the polls open on all resolutions. The first item of formal business is the presentation of Toromont's audited consolidated financial statements for the fiscal year ended December 31, 2020, and the auditor's report on these financial statements, both of which have been made available to shareholders on our website and on SEDAR. I confirm that our corporate secretary has placed these documents before the meeting. The next item of formal business is the election of each of the directors to Toromont's Board. As described in our management information circular, the Board of Directors has previously determined that the number of directors to be elected to the Board at this meeting is 11. Nominations have already been proposed by management in the management information circular, together with each director's detailed biography. You will be asked to vote for each director individually in accordance with the company's majority voting policy, which is described on Page 14 of our circular. The meeting is now open for nominations. May I have a motion in this regard?

Mr. Chair, this is Michael McMillan. I am a shareholder. I nominate each of the following 11 persons to be elected as directors of the corporation until the next annual meeting of shareholders or until their respective successors are elected or appointed: Peter Blake, Ben Cherniavsky, Jeffrey Chisholm, Cathryn Cranston, James Gill, Wayne Hill, Sharon Hodgson, Scott Medhurst, Robert Ogilvie, Catherine Rethy and Richard Roy.

Thank you, Michael. Are there any questions on this motion? If you have not already done so, please ask your question now. If you have an inquiry relating to the election of the Board of Directors.

Mr. Chair, we have not received any questions at this time.

Thanks, Lynn. Under the company's majority voting policy. In uncontested director elections, the votes cast in favor of each Director nominee must represent a majority of the total votes cast at the meeting. Additional details about our majority voting policy are contained on Page 14 of our management information circular. Under Toromont's events notice bylaw, shareholders are required to give at least 30 days advanced notice of their intention to nominate any other directors at the meeting. As no notices were received, I now ask for a motion to move that nominations be closed and for the motion to be seconded.

I so move.

Thank you. Is there a seconder?

Mr. Chair, this is Lynn Korbak, and I'm a shareholder and I second the motion.

Thank you. I declare the nominations closed. I now call for a vote on the motion before the meeting. Would all registered shareholders and appointed proxy holders, please enter your votes in Lumi if you have not already done so? Thank you. [Voting]

The third item of formal business to be considered is the reappointment of the company's auditors. On the advice of the Audit Committee, the Board of Directors recommends voting in favor of the reappointment of the firm Ernst & Young LLP as Toromont's auditors for the ensuing financial year commencing January 1 and ending December 31, 2021 to hold office until the next annual meeting of shareholders. I believe we have a motion in this regard.

Mr. Chair, I move that Ernst & Young LLP be appointed as auditors of the corporation for the ensuing year and to hold office until the next annual meeting of shareholders at a remuneration to be fixed by the directors of the corporation.

Thank you. May I have a seconder?

I second the motion.

Thank you. Is there any discussion of this motion? As a reminder, if you have not already done so, please take your question now if you have an inquiry relating to this motion on the reappointment of the auditors.

Mr. Chair, we have not received any questions at this time.

Thank you. I now call for a vote on the motion before the meeting. Would all registered shareholders and appointed proxy holders, please enter your votes in Lumi if you have not already done so? Thank you. [Voting]

The next item of business is our annual advisory say on pay vote. Each year, the Board of Directors of Toromont invites shareholders to have a say on pay by way of an advisory vote on the approach to executive compensation at Toromont. Details of our executive compensation program and policies are outlined in detail in this year's management information circular beginning on Page 35. The resolution presented to shareholders is set out on Page 7 of our circular for today's meeting. This is an advisory vote, so the results will not be binding on the Board. However, the result of our say on pay vote is carefully considered by the Board and the Human Resources and Health and Safety committee as part of our annual review of executive compensation. May I have a motion in this regard?

Mr. Chair, I move to approve the following resolutions: be it resolved that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors of Toromont, the shareholders accept the approach to executive compensation disclosed in Toromont's management information circular delivered in advance of its 2021 annual and special meeting of shareholders.

Thank you. May I have a seconder?

Mr. Chair, I second the motion.

Thank you. Is there any discussion of this motion? If you have not already done so, please type your questions now if you have a question relating to the advisory can resolution.

Mr. Chair, we have not received any questions at this time.

Thank you. I now call for a vote on the motion before the meeting. Would all registered shareholders and appointed proxy holders, please enter your votes in Lumi if you have not already done so? Thank you. [Voting]

The next item of business is the consideration of a resolution to authorize the amendment and restatement of Toromont's stock option plan to replenish 1,008,000 shares that have previously been issued upon the exercise of previously granted options and to effect certain other changes to the plan as described in our management information circular beginning on Page 56. The full text of the resolution authorizing the replenishment and amendment of the stock option plan is set out on Page 58 of our management information circular. In order to be effective, this resolution must be approved by a majority of the votes cast at the meeting in person or by proxy. May I have a motion with respect to this resolution?

Mr. Chair, I move to approve the resolution authorizing the replenishment and amendment of Toromont's stock option plan, the full text of which is set out on Page 58 of Toromont's management information circular delivered in advance of its 2021 annual and special meeting of shareholders.

Thank you. May I have the seconder?

I second the motion.

Thank you. Is there any discussion of this motion? If you have not already done so, please take your questions now if you have a question related to the resolution authorizing the replenishment and amendment of Toromont's stock option plan.

Mr. Chair, we have no questions at this time.

Thank you. I now call for a vote on the motion before the meeting. Would all registered shareholders and appointed proxy holders, please enter your votes in Lumi if you have not already done so? Thank you. [Voting]

The next and final item of business is the consideration of a resolution authorizing the continuation, amendment and restatement of Toromont Shareholder Rights plan in the form of an amended and restated shareholder rights plan agreement. Further details regarding the continuation amendment and restatement of our shareholders' rights plan are provided in our management information circular beginning on Page 58. The full text of the resolution authorizing a continuation, amendment and restatement of Toromont Shareholder Rights plan is set out on Pages 65 to 66 of our management information circular. In order to be effective, this resolution must be approved by a majority of votes cast at the meeting in person or by proxy and the majority of the votes cast at the meeting by independent shareholders within the meaning of the amended and restated Shareholder Rights Plan agreement. To the best of Toromont's knowledge, all shareholders as of the record date of the meeting are independent shareholders. May I have a motion with respect to this present resolution?

Mr. Chair, I move to approve the resolution consenting to ratifying, confirming and approving the continuation, amendment and restatement of Toromont's shareholder rights plan, the full text of which is set out on Pages 65 to 66 of Toromont's management information circular delivered in advance of its 2021 annual and special meeting of shareholders.

Thank you. May I have a seconder?

Mr. Chair, I second the motion.

Thank you. Is there any discussion of this motion? If you have not already done so, please state your questions now relating to the resolution, authorizing the continuation amendment and restatement of Toromont's Shareholder Rights plan.

Mr. Chair, we have not received any questions at this time.

Thank you. I now call for a vote of the motion before the meeting. Would all registered shareholders and appointed proxy nominees, please enter your votes in Lumi, if you've not already done so. >I will also give an additional moment to those casting votes to submit their votes for all other motions that have been brought before the meeting today. If they have not already done so, the polls will then close. After the polls close, I will invite any further business to be brought before the meeting. Please also use this moment to identify any further business. [Voting]

The polls are now closed. The scrutineers have presented their report and advised that all resolutions that have been approved by at least the majority of votes cast at the meeting, in person or by proxy as required. Accordingly, I declare all resolutions carried. The final voting results will be released after the meeting in the usual format will be available on our website and under our profile on SEDAR. Lynn, is there any further business for this meeting?

Mr. Chair, we have not received any requests for further business.

Thank you, Lynn. Since there is no further business, I will now ask for a motion to terminate the meeting and for the motion to be seconded.

Mr. Chair, I move that the meeting be terminated.

Thank you. And a seconder?

I second the motion.

Thank you. I declare the meeting formally closed. We will now continue with some brief words from Scott Medhurst, our President and Chief Executive Officer; and Michael McMillan, our Executive Vice President and Chief Financial Officer. Then we will open the meeting to general questions.

Thank you, Robert. Good morning, fellow shareholders, [Foreign Language]. As this virtual meeting attests, technology has never been more essential to the conduct of business. We look forward to resuming in-person annual meetings with the end of the pandemic. We hope that will be soon. Today, I will discuss our pandemic response and update you on business progress. Mike will then provide his report. When I reflect on Toromont's performance since the pandemic began, what stands out is teamwork. Our people came together, demonstrating collaboration and synergy at its finest. Our critical incident executive response team huddled at 5 p.m. daily to assess evolving health guidelines, develop Toromont-specific strategies and align the enterprise to keep our people safe, deliver for customers, protect and prepare the business for the future. It was the effort and sacrifice of Toromont people at all levels that made the difference. Technicians, along with store parts and remanufacturing personnel served as frontline responders, performing essential services for our customers in a physically distanced manner. Parts counters across Canada moved into a virtual setting, enabling reliable delivery of customer orders. Many employees shared hour to protect jobs and Toromont's ability to respond to opportunity. Those in business support roles work from home, adapting to a new operating environment. Board of Directors, executives and senior leaders voluntarily reduced their compensation. I would also like to acknowledge the performance of our suppliers, in particular, Caterpillar. They continue to ensure factories and supply channels remained open and able to deliver prime products and parts. As I reflect on the past 14 months in the context of my 33 years with Toromont, I have never been prouder of our people and their commitment. All I can say is thank you to all. It's an honor to work beside you. While COVID-19 dominated the agenda last year, Toromont did not lose focus on everyday health and safety matters, where 50% of our locations achieved total recordable injury rate or TRIR of 0 in 2020. With the help 110,000 hours of employee safety training and a tenfold increase in hazard identification, our safety-first culture continues to make progress. As a matter of governance and strategy, Toromont is dedicated to achieving a 0 harm environment, providing personal safety training for all employees and ongoing follow-up for education and compliance as a means of building Safety Starts With Me culture. Turning now to other forms of business progress, starting with a report on the multiyear integration of Québec and Maritime operations or QM. The key integration event of 2020 was the implementation of the Toromont Dealer Management System, TDMS, at Toromont Cat QM and the Québec operations of Toromont Material Handling. TDMS is an indispensable tool for reporting, monitoring and benchmarking branch performance against system-wide KPIs. For a decentralized organization, it is an enabler of alignment, authority and accountability. Because of the pandemic, we use virtual means to integrate this system across all Québec and Maritime operations. From minute 1 on the go-live dates, TDMS supported seamless delivery of customer service, a great accomplishment for all. Operating with a unified ERP system has now cleared a path to consolidate and standardize Toromont cats, construction, mining, heavy rental, and used equipment practices. This allowed full Eastern Canada alignment for our dealership. Much work remains that we unlock the full value of our larger scale enterprise, but the journey is well underway. Key part of building the Toromont of tomorrow is to leverage our strengths through technology. Toromont's capabilities include analytics and insights or AI, applications to remotely monitor equipment, various management sales and marketing tools and what we refer to as our digital front door, including e-commerce sites. At the business level, Toromont cat data scientists create algorithms to synthesize the market and customer and machine level data into actionable intelligence to improve market coverage and inventory management. At the machine level, telematics, coupled with AI, offer the ability to watch for performance patterns across the thousands of units to predict the need for a service call, part replacement or repair before failure. The increased installed base of cat smart machines creates a significant opportunity to improve the value of product support for customers through technology. This opportunity is critically important as we align with Caterpillar's objective to substantially grow parts and services through customer value agreements and value add services. E-commerce is another important capability. Most recently, our equipment group businesses collaborated to develop a series of online auctions where used attachments and parts were sold. Each -- virtual auctions created new customer connections. Overall, we are forming the basis for better insights, more timely and cost-effective customer solutions and measurable growth across the businesses. Progress at Toromont is achieved through a disciplined alignment to our major evergreen strategies: expand markets, strength in product support, broaden product and service offerings, enhance operational excellence performance, invest in resources and maintain a strong financial position. While Mike will talk about our financial position, here some of the ways our businesses lived our strategies and found success in doing so. The alignment of our operating systems across Toromont cat enterprise in the third quarter positions the business well for the future. Expansion with multi-customer value offerings took hold with increased demo class purchased and used equipment sales. This, combined with increased value agreements at point of sale, leverages Toromont aftermarket capability and longer-term client connectivity points. Battlefield augmented its broad Eastern Canada footprint by opening a new store, Pierrefonds, Québec. It also brought attention to improving the efficiency of service and delivery processes to ensure better product availability for customers and investment returns for the regional fleet. Toromont Material Handling, or TMH, expanded its customer base and complemented the MCFA products by broadening its lines to include Toromont container handlers in Manitoba and Saskatchewan as well as Landoll and Bendi for forklifts. Calamar recognized TMH's strong equipment sales at the President's Award. The team also brought greater focus to rental operations and product support operational opportunities. AgWest had good progress in representing new combined machines, ranking in the top 5 for North American sales performance and emphasizing proactive machine inspections that led to additional maintenance work and part sales. CIMCO leveraged its advanced engineering and automation capabilities to win some exciting new projects, including the first cold storage facility in Canada to use 100% CO2 refrigeration and 9 CO2 U.S. ice rink projects, reflecting the growing demand for the natural refrigerants that CIMCO harnesses and supplying environmentally sustainable solutions. By our estimates, customers using CIMCO's ECO CHILL have cumulatively offset 1 million CO2 equivalent tons compared to traditional refrigeration and save 19.7 billion cubic feet of natural gas since we introduced this proprietary product 15 years ago. Throughout Toromont, we have an important role to perform in protecting the environment. I would encourage you to review our 2020 sustainability report for information on all aspects of environmental governance, including the measurement of our carbon footprint, and actions taken to manage it. We are particularly proud of Toromont cat's remanufacturing operations for rebuilding 3 million tons of used equipment parts and components in 2020 as part of our circular economy efforts. Important work is also ongoing, developing our sales and service capabilities for electric underground equipment, hybrid and other alternative energy machines. To succeed, Toromont must continue to retain and attract the best people. We also recognize that diverse capabilities, experiences and perspectives enable greater organizational leadership, strength and performance and create more stimulating and rewarding work experience. Accordingly, we embrace diversity and inclusion at all levels. One of the most visible ways we show our commitment is diversity in our senior ranks. In 2020, Toromont received recognition in the Globe and Mail's feature Women Lead Here for its efforts. Women comprise 22% of our senior management team. During my presentation, you have seen a recurring theme on our slides, Building Tomorrow. This reflects our continuous improvement mindset passion to be more effective, value creative tomorrow than we were yesterday. A strong stewardship of our invested Board and leadership teams, the power of our talented employees who embrace Toromont's performance-based culture, the differentiating equipment and technology of our business partners, allowing us to lead in our markets, our great customers whose loyalty is a constant source of inspiration and our fellow shareholders, whose long-term commitments to Toromont drives us to constantly improve. Looking ahead, I am confident that Toromont will rise to meet the challenges posed by what we hope will be the final months of the pandemic. And once we return to a healthier world, realize all the opportunities that our Building Tomorrow mindset is uncovering. Thanks for listening. Now here is Mike.

Thanks, Scott, and good morning, fellow shareholders. It's a pleasure to participate in this meeting, my second since joining in March of last year, some 2 weeks before the first pandemic lockdown. In reality, I've never worked for Toromont in a "normal" time. Although COVID-19 has restricted my ability to visit many of our branches, which I enthusiastically look forward to and consider part of my standard work as CFO. I have been given the opportunity to observe the team in action under the most unusual and challenging circumstances. This experience has only deepened my appreciation for Toromont in value created, the risks mitigated through our consistent application of business model disciplines, and an empowered and aligned workforce, and highly engaged and invested Board and executive team. We are just coming off our Q1 results for 2021. So my remarks today, I will just briefly touch on our results for 2020 and Q1 and focus on this -- how this positions us going forward. While the world has changed and Toromont is proactively responding, the fundamentals and financial disciplines of how we run the business for the very long term have not only endured but remain effective and relevant. Touching on Q4 2020 briefly. Over this pace of Q2 through Q4 of last year, we experienced gradual improvement as we all adapted our customers' increased activity levels gradually and we all return to work with safety at the forefront. We ended 2020 with healthy order input and backlog. Our equipment group showed significant improvement in Q4, up 37%, where CIMCO was up 51% over the prior year with orders booked throughout 2020. That said, revenues still lagged 2019 overall from Q2 to Q4, and we saw sequential improvement in 2020, but the mix of sales and lower activity levels demonstrated the cautious tone we spoke of regularly. Discretionary spending was well managed. Q1 2021 built on Q4 improvements with our backlog well positioned and revenues up 13% versus the prior year. Recall the pandemic began to take hold in March of 2020 as well. Our Q1 results demonstrated continued operational and spending discipline with operating income and net earnings up 27% and 28%, respectively. Our Board also approved a dividend increase effective for July -- to the July quarterly payment of $0.04 per common share. This is a good segue to touch on a few of our financial disciplines, which have endured and remain effective in protecting the business and positioning the company for the long term. The hallmark of the Toromont approach is to maintain a strong, well-capitalized balance sheet at all times because doing so creates stability, financial flexibility and the means to reinvest opportunistically to drive growth. We deployed our balance sheet in 2017 to acquire the Québec and Maritime's territories for approximately $1 billion. Immediately following that move, leverage represented by net debt to total capitalization was 40%. Right before the pandemic, this ratio was down to 15%, not because we saw COVID-19 coming, but because of our adherence to this managed discipline. By the end of 2020, the ratio was 3%. And at the end of Q1, it was 2%, reflecting a focus on debt repayment, earnings growth and growth in market cap. As noted in our Q1 results, our available liquidity is approximately $1.2 billion, including cash on hand and our undrawn credit facility. Because of this balance sheet discipline, we have the flexibility and liquidity necessary to not only weather the pandemic but to emerge stronger, able to respond to demand changes and consider growth opportunities for the future. Of note, we did not reduce leverage at the expense of reinvestment. Instead, debt repayment created the ability to spend confidently and opportunistically where we saw advantage in doing so. In 2020, we prudently tapered our capital spending and managed working capital tightly, which is a testament to our operating model where our teams are aligned, empowered and accountable to make decisions to address their local business environment and customer needs. As you can see, our cash flow discipline managed our cash requirements within the cash generated from operations, improving our year-end cash balance while navigating the dynamic nature of the pandemic business environment. Our capital allocation priorities remain unchanged and focused on supporting our business for the long term. This brings me to the next business model discipline, which relates to achieving hurdle rate returns on our investments as we grow. And to be clear, Toromont exists to grow profitably in serving our customers. Our corporate target is to earn 18% after-tax return on opening shareholders' equity over a full business cycle. Note the words over a full business cycle. To us, this phrase means for the very long term and just -- not just 1 year. Why 18%? Achieving this level of return consistently requires a strong focus on capital allocation, creating a healthy tension on investment decisions, returns and capital available to distribute to our shareholders. In support of this measure, we set specific performance metrics for our business including return on capital employed. We expect to earn threshold pretax returns on invested capital ranging from 17% to 25% depending on the business unit and its capital intensity. Setting targets is one thing, achieving them as another. This is where our distributed leadership approach where capital decisions are made at the point of customer impact comes into play. Right to the branch level, every Toromont business unit knows how ROCE is calculated, how the decisions lead to desired outcomes and that those desired outcomes are only achieved when customer needs are also met consistently. While the pandemic severely challenged us, the decisions made in 2020 by those closest to our customers allowed Toromont to achieve a return on equity of 16.6% and a ROCE of 20.4%. And thinking about return on equity, it should be noted that we have yet to achieve the full cycle rate returns on the rental fleet investments made in our Québec and Maritime territories. This agent cycle is progressing and a driver of our future performance. Maintaining and growing the dividend is important to us and a discipline that I know our shareholders who have grown with us appreciate. I have found it a privilege to be part of a company that has paid a dividend continuously since 1968, the year we were listed on the TSX, and as a result of the 12.9% increase announced yesterday, has raised the dividend for 32 consecutive years. Toromont's place on the S&P/TSX Dividend Aristocrats Index is a badge of honor and a telltale sign of true financial discipline. There are other important disciplines that fuel our success, not the least of which is the strict adherence to our business model, where we provide specialized capital equipment coupled with lifetime product support. This combination has made a material difference in our results over the years, and it has also proved its worth in Q1. If you haven't already, I would encourage you to review our first quarter MD&A for additional information on our approach on recent results. I'm also pleased to say that we will launch a new Toromont investor website later this month, which will capture our story in a more contemporary manner that is smartphone-friendly and accessible for those with disabilities. In summary, Toromont is changing and progressing as part of our continuous improvement efforts, precisely because we continue to apply the very same core business model disciplines that have guided the company for decades. Discipline in the face of an extraordinarily challenging environment is the key to success. We look forward to the future that our steady and proven approach will deliver. Thanks again for listening.

Thank you, Scott and Mike. We would be pleased to answer your questions at this time.

Mr. Chair, we have not received any questions at this time.

Then thank you for joining us today, and thank you for your support during the past year. We wish you and your families good health and are hereby signing off.