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

Good morning, everyone, and [Foreign Language]. Sorry for the slight delay. Welcome to the 2022 Toromont Industries Annual and Special Meeting of Shareholders, which I call to order. My name is Richard Roy, Chair of the Board of Directors and a fellow shareholder. Scott Medhurst will step into perform my role in the event of a technical malfunction. I will open today with our safety message. Today is the National Day of Mourning across Canada. Please join us in remembering those who have lost their lives, suffered injury or illness on the job, or experienced a work-related tragedy. At Toromont, we commit to do our utmost to protect workers and prevent further workplace tragedies. We respectfully acknowledge that Toromont's head office in the City of Vaughan is situated in the Territory and Treaty 13 lands of the Mississaugas of the Credit First Nation. We also recognize the traditional territory of the Huron-Wendat and the Haudenosaunee. As representatives of the people of the City of Vaughan, we are grateful to have the opportunity to work and live in this territory. This meeting marks a departure for Toromont. For the first time in 34 years, Robert Ogilvie is not sharing these important proceedings. After a remarkable career, leading Toromont as President from 1985 to 1987, CEO from '87 to 2007, and as Toromont Chairman until last July, Robert took a well-deserved retirement. As you will note from our proxy, Wayne Hill has decided to retire and end his remarkable career. Wayne joined Toromont at the same time as Robert in 1985 and served first as Vice President, Finance and Secretary, then for 20 years as our Chief Financial Officer, and 2 more as Executive Vice President until 2008. Like Robert, Wayne served on our Board for 34 years and together, this tag team established the rock-solid foundations underpinning the Toromont you see today. Knowing Robert and Wayne as I do, they would prefer not to occupy the spotlight but they deserve and receive our company's utmost thanks for their pioneering efforts and speaking personally, for the encouragement and knowledge they shared with me when I joined the Board in 2018 and took on the role of Chair last year. I will also note that today's meeting marks the retirement of Dr. James Gill from our Board. Jim served with distinction for the past 6 years, contributing to our organization in many ways through membership in our Human Resources and Health and Safety, as well as Environmental, Social, and Governance Committees. Jim is an inductee into the Canadian Mining Hall of Fame, but his extensive knowledge and principal business philosophies elevated the quality of all deliberations. Jim, thank you for a job well done. Part of good governance is preparing for successions and we have done that. Today, you will be asked to vote on 8 returning directors, as well as 1 new nominee, Frederick Mifflin. Mr. Mifflin is Vice Chair of Blair Franklin Capital Partners, a private equity firm, and previously was Vice Chair and Global Head of Investment and Corporate Banking at BMO Capital Markets. Earlier in his distinguished 30-year career, he held progressively senior positions at BMO, including Global Head of Mining and Metals. The skills and expertise in finance, accounting, risk management, and governance are of great relevance to us. We look forward to welcoming Fred to our Board. A final note about governance, in late March, we published our 2021 Sustainability Report which is available on our website and includes insight into our ESG framework and practices. We are committed to advancing these in line with emerging standards and always with the best interests of all Toromont stakeholders in mind. I will speak to the format and proceedings for today's virtual meeting momentarily. First, I would like to acknowledge the fact that our company and our customers steered through a most unusual economic and business environment last year. Guided by our values, Toromont met the challenges and delivered. The company's performance enabled us to serve the needs of customers, invest in revenue-generating assets, advance our empowered culture, and pay dividends to shareholders. 2022 marks the 33rd consecutive year of dividend increases and our 54th year of dividend payments, a proud record of results. On behalf of the Board, I thank Scott and our executive operating team for their leadership in these uncertain times, and hats off to Toromont's 6,400 employees who are the daily value creators in our business. I reserve my final thank you to our customers and shareholders for always encouraging us to do better and for trusting us to create value for them. Now to the proceedings. As you are aware, today's meeting is being held in a virtual-only format for the third time. Although, we are disappointed that we can't see each of 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 proxyholders an equal opportunity to participate, ask questions, and vote regardless of your physical location. As described in detail in the Management Information Circular for today's meeting, registered shareholders who held shares on March 14, 2022, the record date for this meeting and validly appointed proxyholders, which includes non-registered shareholders who have properly appointed themselves or another person as proxyholders are entitled to participate and vote at this meeting. Our circular and other proxy materials contain full details about how to register yourself or a proxyholder to participate at today's meeting. If you are not a registered shareholder or a duly appointed proxyholder, you are attending this meeting as guest. Guests will 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 proxyholders 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 1 question at a time to ensure all registered shareholders and appointed proxyholders 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 question 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 business of the meeting, I would like to introduce our directors who are joining us by audio webcast: Peter Blake, Chair of the ESG Committee; Ben Cherniavsky; Jeff Chisholm, Chair of the HR, Health and Safety Committee; Cathy Cranston, Chair, Audit Committee; Sharon Hodgson; Scott Medhurst, who is also our President and CEO; and Kathy Rethy. 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. Your new Director nominee is Frederick Mifflin, who I introduced earlier. 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, Anoosheh Farzanegan and Carol Pineda of TSX Trust Company, Toromont's registrar and transfer agent will act as scrutineers. Under our governing laws and bylaws, registered shareholders and duly appointed proxyholders 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 purpose of establishing forum. I have received the scrutineers' initial report of attendance and based on that information, I can confirm a quorum is present. A copy of the scrutineers' 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, 2022, the form of proxy, and the annual report containing our 2021 audited consolidated financial statements were filed and mailed on March 28, 2022, to registered and beneficial shareholders who requested a copy. Proof of that mailing will be annexed 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 9 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; vote to establish and adapt the long-term incentive plan; and vote on the shareholder proposal. 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 ballots. Every registered shareholder and duly appointed proxyholder will have 1 vote for each common share held as of the record date of the meeting. Shareholders and proxyholders 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 advance 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 granted. 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 and 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 your input your initial questions at this time so that we can address them at the time 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 will 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, 2021, and the auditor's report on these financial statements, both of which have been made available to shareholder 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 the directors to Toromont's Board. As described in our Management Information Circular, the Board of Director has previously determined that the number of directors to be elected to the Board at this meeting is 9. 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, and I'm a shareholder. I nominate each of the following 9 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, Sharon Hodgson, Scott Medhurst, Fred Mifflin, Katherine Rethy, and Richard Roy.

Thank you, Mike. Are there any questions on this motion? If you have not already done so, please ask your question now, if you have any inquiry relating to the Election of the Committee?

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

Thanks, Lynn. Under the company's majority voting policy and uncontested director's election, the votes cast in favor of each director nominee must represent the 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 advance notice bylaw, shareholders are required to give at least 30 days advance 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? 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 proxyholders 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 auditor. Once the advice -- 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 then ending December 31, 2022. And 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 next Annual Meeting of Shareholders at a remuneration to be fixed by the Board -- by the Directors of the Corporation.

Thank you. May I have a seconder?

Motion.

Thank you. Is there any discussion of this motion? As a reminder, if you have not already done so, please type your question now if you have any inquiry relating to this motion on the reappointment of 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 proxyholders 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 invite 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 36. 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 results 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 resolution: we have 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 2022 Annual and Special Meeting of Shareholders.

Thank you. May I have a seconder?

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

The next item of business is to vote to establish and adopt the long-term incentive plan. The plan is described in detail in our Management Information Circular beginning on Page 45. The full text of the resolution to adopt the long-term incentive plan resolution is on Page 63 of the Management Information Circular. Shareholders are asked to vote for the resolution. 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 to adopt a new long-term incentive plan, full text of which is set out on Page 63 on Toromont's Management Information Circular delivered in advance of its 2022 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 resolution to adopt a new long-term incentive plan.

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 proxyholders 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 vote on the shareholder proposal resolution, which is set out at Page 64 of the Management Information Circular. May I have a motion with respect to this resolution?

Mr. Chair, I move to approve the resolution set out on Page 64 of the Management Information Circular.

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 relating to the resolution relating to the shareholder proposal?

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 nominees please enter your votes in Lumi if you have not already done so? [Voting]

I will also give an additional moment for those casting votes to submit their votes on 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. The polls are now closed. The scrutineers have presented their reports and advised that all resolutions have been approved by at least a 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 and 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 request 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. Seconder?

Mr. Chair, 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, Richard, and thank you to our shareholders for joining today. Before we start, I would like to recognize Robert Ogilvie and Wayne Hill on their retirements. Together, these gentlemen formed the business model and established the operating philosophies to propel Toromont from a $98 million industrial company to a diversified multi-billion dollar market leader. More than that, he mentored generations of employees including me, set a tone from the top, inspired everyone around them to strive for excellence in business and interpersonal relationships. I first worked directly with Robert and Wayne when I became a branch manager in the 1990s. Back then, we did not have information technology and yet, they had an uncanny knack of knowing every key detail of branch performance. Working for them was the most formative and empowering experience of my early career and I certainly tried to carry many of these business philosophies in distance. Thank you to Robert and Wayne for their calm and always effective leadership. In April 6, 2022, Ron Willox, an credible contributor to the Toromont story passed away at the age of 89. Ron was a Director and Advisor from 1987 until his retirement in 2003. He was an independently-minded director, heavily involved in many of the key transactions that help build the foundation we enjoy today, including our first Caterpillar dealership acquisition in 1993. On behalf of the Toromont family, I extend our deepest sympathies to Marlene and the entire Willox family. Once again, we meet virtually instead of in-person and I hope for the final time. Typically, I would like to discuss prior year progress and finish with context on the road ahead. Today, the agenda is a little bit different. I will start by addressing new complexities in this fluid business environment, including labor shortages, product availability, and inflation before moving to developments in 2021. I'll begin by saying that many of today's complexities relate to resurge in equipment demand. Demand is always good, but it happened with speed and forced at a time when the pandemic created many challenges. And scarcity happens at a time of great demand, inflation follows, and this is where we are today, and this is what we are doing about it. First, in relation to labor, guided by workforce planning, soon to be aided by our new UltiPro HR system, recruitment is strategic. We broaden the scope of our outreach to technical colleges and universities and look far afield in our own territories and globally for diverse talent. To ensure rewarding careers, we offer dedicated workforce training, 100,000 hours last year alone, to enable the skills people need to progress. Some jobs remained unfilled at year-end. We succeed growing our workforce to over 6,400 and the number of technician and predecessors by 31%. The opportunity to work on sophisticated schemes and technologies that address customers' sustainability goals is an effective calling card for recruiting purposes and the growth of such equipment in our tool kit contributes to the 'E' in the ESG framework, we discussed in this year's Sustainability Report. Toromont always demands commitment to our safety-first approach, accountability for resides of all employees, including those like me, whose variable compensation is tied to safety outcomes. By the numbers, over 80% of our facilities achieved total recordable injury rate of 0 last year. The 5-year trend is positive. But this journey is far from over. More focus and attention are needed and we will apply both. When we talk about being equipped for today and tomorrow, it means perpetuating the Toromont ownership culture of respect, integrity, safety, and empowerment that attracts and keeps talent. To address product availability challenges, Toromont's countermeasures included, one, disciplined demand planning process and communication with our partners at Caterpillar were highly responsive to the needs of our large markets; two, close collaboration with our customers enabled by leveraging fleet data analytics, which led to the earlier replacement of new orders, which is generally termed resource planning; three, applying our product support capabilities, including predictive maintenance informed by real-time machine-level data collection to help customers keep their equipment running at optimal efficiency longer which adds flexibility and replacement cycle time; four, selectively deploying Toromont's balance sheet to acquire high-demand equipment for our rental fleets and used equipment that we reconditioned for reuse. Customers also begin to utilize Toromont's used disposition channel through our consignment offer. These activities keep our customer stocked, their peak shaving needs met and provide an outlet for them to realize resale value; five, investing in Toromont's remanufacturing component rebuilding exchange programs to reduce pressure on new equipment procurement to make a positive circular economy contribution to society. Last year, Toromont rebuilt 90 machines like this CAT 793 mining truck and expertly re-manufactured 4,400 components, including over 400 engines. Turning heavily worn components into as new products for customer reuse is economically and environmentally sound. With respect to inflation, our best defense is cost-effectiveness and efficiencies. We continue to restrain discretionary spending, reinvest in our warehouses and systems to drive operating efficiencies, and use remotely captured machine data to conserve product support resources. Much work remains. Final note on COVID-19, we are not letting down our guard since it's vital that we have all hands on deck to address market complexities. Our hybrid approach to bringing back our workforce began in early April and we will remain sensitive to changes in the path of the virus so we can protect our employees, customers, and communities we serve. Now, business highlights. 2021 was a year of profitable growth with additional gains made in leveraging the strength at scale made possible by the addition of the QM territories. Toromont is at the point of greatest long-term impact in the integration, because every branch in Equipment Group is now equipped with Toromont Dealer Management System or TDMS for performance tracking. Understanding and applying our operating disciplines is a cultural imperative and TDMS gives real-time access to KPIs that inform our branch management approach. Our more work and time is required to maximize value creation, the integration has entered an exciting next stage. Running through individual businesses, Toromont CAT here featured strong unit deliveries, improved product support revenues, and heavy rental fleet utilization. Some 4,000 new customer machine assets were connected for monitoring. Organizational changes made in January 2021 led to better coordination and capabilities across the dealership. Backlogs reflect the customer investments in new and existing mine sites for diverse minerals in many world-building and civil infrastructure projects. Caterpillar recognized this performance as gold level dealer excellence ratings for marketing, sales, and digital activities. Our dealer ratings are important sign of progress. We sincerely thank Caterpillar for their encouragement and support of the growth. We gain advancements through the development of new machine technologies that are autonomous, more efficient, less polluting these renewable energy sources. Several of these technologies are advanced CAT heavy-duty electric mining equipment, Toromont power systems generators that run on hydrogen and landfill gas, as well as solar panels and CAT storage batteries. All are gaining more prominence in our territories. For example, one of our customers recently ordered a fleet of CAT 793 F autonomous trucks with the MineStar CAT command system that utilizes high-precision sensors to safely maneuver around personal and light-vehicles. And as an authorized dealer, now with a broader product offering, we recently delivered 2 Elphinstone Tier 4 machines with AdBlue technology. Battlefield expanded its thermal service footprint by opening 2 new Ontario stores and continue to shift its product mix through investments in Quebec and the Maritimes. Quebec coverage models, focused on small- to medium-sized contractors. Battlefield applied its usual disciplines in uploading high-demand machines combined with returning those machines to ready status quickly. Market data continues to highlight the growing Central and Eastern Canada rental market. Jobsite Industrial Rental Services, our provider of specialized industrial strength tool cribs and rental services had a strong year in the customer plant turnaround market and opened a new facility serving Sarnia's Chemical Valley, and expanded geographic reach, supporting customers in Eastern and Western Canada added to results. We were also pleased with the progress at Toromont Material Handling and Manutention or TMH. We invested heavily in the rental fleet on a strategy that now attuned to demand signals and our efficiencies are improving. In recognition of good performance, Kalmar-designated TMH, a premier partner and presented the team with the President's Award for parts and sales growth. To equip TMH for territory expansion, earlier this year, we signed an agreement to be the Mitsubishi largest next dealer in Manitoba and Saskatchewan for UniCarriers and Mitsubishi forklifts, as well as Cat lift trucks. With a dedicated team and the Q4 introduction of the TMH system, this business is moving forward, but much work remains. We thank Logisnext for their continued support. AgWest, our farm equipment dealer achieved additional market penetration with CLAAS and AGCO brands, putting us in line with future product support opportunities. And finally, CIMCO, our refrigeration business is a case study in responding to customer demand for environmentally sustainable solutions. In the year, we eliminated the manufacture of all recreational ice rink packages that use high global warming potential refrigerants. It also introduced the pathway to net-zero positioning itself as a service that helps customers understand what net-zero is and how to achieve it by eliminating refrigerant emissions, optimizing energy consumption and harvesting green power, including district energy sources. In a related development, CIMCO created its net-zero naturally heat pump that is 4x more efficient than gas boilers and secured a first sale from Markham District Energy. Last year's bookings included CO2 projects for food, seafood, cold storage and distribution facilities. Toromont will continue to equip itself for the future. This year, CIMCO moves into its new headquarters in Burlington, Ontario, departing its decades-old plant in Toromont [indiscernible]. To create new efficiencies, CIMCO's first Western Canadian assembly plant will open in Edmonton, Alberta. Toromont remanufacturing begin site planning for a plant in Bradford on land Toromont acquired years ago. This will give us capacity for more growth in a facility equipped with modern systems for water and energy conservation. Battlefield, Toromont CAT and Toromont Material Handling will grow rental inventories subject to product availability. Toromont will continue to invest in digital strategies, increasing customer service offerings with improved efficiencies through data analytics. Staying well equipped is imperative because we want our employees and customers to have the tools and resources to succeed with a continued focus on creating value for our shareholders. In closing, I thank the 6,400 hard-working employees at Toromont. I know you and your families have been impacted by the coronavirus, and yet, you have come together in new ways, persevered and delivered. I continue to be honored to work beside each of you. Thanks also to our customers and shareholders for giving us the opportunity to deliver for you. Now over to Mike.

Thank you, Scott. Good morning, everyone. It's a pleasure to speak to you today about Toromont and its performance. I'll begin with highlights of 2021 and the first quarter of 2022, periods that included the business complexities that Scott referenced, and then move to recurring priority themes that we believe are vital to driving durable shareholder returns in this environment and in future periods. In 2021, Toromont earned $4.03 per share or $4 on a fully diluted basis, a 30% improvement over 2020 on revenue growth of 12%. Not to diminish this achievement, but I liken it to a leap year, pandemic adjustments and lengthy lockdowns created anomalies in seasonality and customer buying behaviors that skewed prior year comparisons in favor of 2021. Similarly, order flow in the second half of 2021 took on a new complexion as customers sought to order early with our assistance to get ahead of inflation and supply chain disruptions and equip themselves for the future. This change pushed year-end equipment group backlogs up threefold to $1.1 billion, including CIMCO, total order backlog at the end of 2021 was $1.3 billion, well above pre-pandemic levels we would have expected. Moving to the first quarter of 2022, market complexity remained. Global supply chain challenges are persisting and macroeconomic factors are becoming more prominent with interest rates and inflation leading to headlines. Our team executed well, with revenues up 7% compared to last year, driven by improved product support activity and rental utilization. Our Q1 results demonstrate continued operating and spending discipline with net earnings up 24% over Q1 of 2021 and an EPS of $0.72 per share. Backlogs also increased to $1.5 billion overall. In February, our Board approved a dividend increase effective with this month's quarterly payment, moving our annualized dividend to $1.56 per share. Toromont is proud of its status as a member of the TSX Dividend Aristocrats Index, having increased the dividend in each of the past 33 years and paying dividends consistently for 54 years. As managers, we take the long-term view, which is why we target an 18% return on shareholders' equity after tax over a business cycle. Toromont has consistently landed on the right side of this target over the past decade, say, for 2020, which featured an abrupt albeit short-lived, recessionary period, given the unique characteristics that we all are very familiar with. It is perhaps unusual for an industrial company to operate with an ROE as its financial North Star. But as a business that uses tremendous amount of capital, adhering to this target ensures Toromont is discerning in where, when and how much capital is allocated. This is a discipline handed down from Robert and Wayne that works has proven itself over the test of time. To meet our ROE target, each Toromont business operates with its own return on capital employed hurdle rate ranging from the mid-teens to the 20% range, depending on capital intensity. If this objective is achieved and the business case is strong, additional capital is allocated. If we fall short, we adjust by doing root cause analysis, which now becomes much easier because of the TDMS system that Scott mentioned earlier. Because of this approach, Toromont's business leaders, including within our branches, our asset managers, not just operators. The distinction to them is as clear as it is empowering and fundamental to our decentralized operating model, where our team drives sustainable growth while optimizing the assets and capital invested in their markets. To achieve an ROE of 19.6% in 2021, the combined ROCE performance of our business was 26.6%. Admittedly, I'm speaking about principles of our capital allocation approach. Our calculus is sensitive to our predilection for market share leadership as well as market conditions and customer utilization of our offerings, which are part of the business case analysis; the availability of assets, including rental and used equipment that Toromont can [ acquire ]; and the time it takes our rental inventory to properly age so that we can realize the full cycle returns. While Toromont's investment bias is long term, discipline dictates that we adjust to the competitive environment. Last year, we invested heavily compared to 2020, but because of solid demand and supply constraints, the investment was below pre-pandemic levels even when considering our decision to forgo some fleet dispositions. Of the $136 million of CapEx reinvested, roughly half went to rental fleet net of dispositions. The remainder was invested in facilities, service vehicles, machinery and equipment and information technology improvements and development, all with an eye to maintain and support the growth in our business. In 2022, it will be another year of reinvestment guided by the same capital allocation disciplines and influenced by current market realities. Thinking forward, we see many capital investment opportunities in our 3- to 5-year horizon, which is all the more reason for a diligent approach. We also work to constrain costs to deliver positive operating leverage. Inflation is a threat to this objective, but disciplines learned from dealing with COVID, such as using technology to reduce discretionary travel costs will help. While the efficient use of capital is a perpetual Toromont theme and a competitive advantage, there are other important principles at work. One is to always operate with a financial position that creates stability and flexibility. We lean in to deploy our balance sheet for homegrown growth as we did in 2021. Our balance sheet flexibility means we are also prepared for inorganic growth as in 2017 when we acquired the Quebec and Maritimes business. When we do M&A using debt, we move as quickly as possible to deliver back to a position of stability and flexibility, which is where we landed at the end of Q1 with $796 million of cash on hand, approximately $717 million of available credit on existing lines and leverage represented by net debt to total capitalization ratio of minus 8 compared to plus 40 in 2017. Keeping our house in order and using capital efficiently creates room for consistent distribution of dividends paid generally at a rate of between 30% and 40% of trailing earnings. In 2021, confidence in our cash position and financial condition allowed us to reinstate a share buyback program, resulting in the acquisition and cancellation of about $50 million of shares. This buyback approach is an important aspect of our capital management tool kit supporting good capital hygiene and that it helps mitigate dilution from stock option exercises. As you would expect, as CFO, I think our approach -- I think of our approach in capital terms, but I can assure you it is much more than that. Our company must create value and be valued by a full range of stakeholders in order to deliver long-term sustained value for our fellow shareholders. This is why we invest in the safety and development of our people, the management of our environmental footprint, support our communities and engage with charities like the United Way. The modern expression of this approach is ESG, but to us, it has always been good business practice. I encourage you to review Toromont's 2021 Sustainability Report for more information, including information on the increasing number of products and services we provide to help our customers achieve their sustainability and net-zero goals. In this complex environment, it has never been more essential for Toromont to live by our values. Being equipped for today and tomorrow requires capital to be sure, but like yesterday, it means having a coherent strategy and a disciplined culture to apply consistently. To us, this is a glide path to ensure we deliver durable shareholder returns. Thanks for listening. Now back to our Chair, Mr. Roy.

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

We have not received any questions at this time.

Thank you, Lynn. 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 signing off.