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

Good morning, everyone, and [Foreign Language]. Welcome to the 2023 Toromont Industries Annual Meeting of Shareholders, which I call to order. I am Richard Roy of the Board of Directors and a fellow shareholder, Scott Medhurst will step in to perform my role in the event of a technical malfunction. We respectfully acknowledge that Toromont's head office in the city of Vaughan is situated in the Territory and Treay 13 lens 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. I will speak to the format and proceedings for today's virtual meeting momentarily. First, today marks the National Day of mourning as they dedicated annually in Canada to remembering those who have lost their lives, suffer an injury or illness on the job or experienced a work-related tragedy. Today, we remember the many workers and their loved ones impacted by a workplace injury. We also confirm our unwavering commitment to continue to elevate workplace safety and prevent future workplace injuries and illnesses. We recognize that even one single injury is one injury too many and that every injury is preventable. Next, I would like to acknowledge the upcoming retirement of Scott Medhurst, as Toromont's President and Chief Executive Officer. Scott began his career at Toromont more than 35 years ago as a management trainee. He was appointed President of Toromont Cap in 2004 and became President and CEO of Toromont Industries in 2012. Under Scott's dedicated and principled leadership, Toromont grew from a company with $1.5 billion in annual revenue, 102 locations and 3,200 employees in 2012 to a 6,800 employee strong company, operating out of 160 locations and generating more than $4.2 billion in annual revenue in 2022. With Scott's unwavering focus on operational excellence, and anticipating customer needs, all the while building for the future. All of our stakeholders have benefited from his service to Toromont. Thank you, Scott. Yesterday, we announced the appointment of Michael McMillan, as Toromont's next President and CEO. Michael joined Toromont in March 2020 as Executive Vice President and Chief Financial Officer; bringing a proven track record for leadership and disciplined execution. It has been a critical partner to Scott and the entire Toromont team, helping to successfully navigate Toromont through these unprecedented recent years. Mike's selection at Toromont's next CEO follows an orderly and comprehensive search process by the Board of Directors of Toromont led by an independent committee. We are confident that Mike is the right person to drive continued success for Toromont's business and stakeholders. Scott will stay on as an adviser to Mike as he transitions from his current role as CFO. A search for Mr. McMillan's successor as CFO, is underway and the effective date of the changes will be announced at a later date. Now to the proceedings of our Annual Meeting of Shareholders. As you are aware, today's meeting is being held in a virtual-only format again this year. This format gives registered shareholders and duly appointed proxy holders and 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 15, 2023, the record date for this meeting and validly appointed proxy holders, which include nonregistered shareholders who may 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 about how to register yourself or a proxy holder to participate at today's meeting. If you are not a registered shareholder or a duly appointed proxy holder, you are attending this meeting as a 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 proxy holders 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 allowed 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 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 HR and HNS Committee; Cathy Cranston, Chair of the Audit Committee; Sharon Hodgson, Scott Medhurst, who is also our President and CEO; Fred Mifflin; 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. 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 TMX Trust Company, 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 quorum 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 inform circular -- Management Information Circular dated February 28, 2023. The form of proxy and the annual report containing our 2022 audited consolidated financial statements were filed and mailed using the notice and access method on March 28, 2023, to registered and beneficial shareholders. Proof of that mailing will be next to the minutes of this meeting. As outlined in the notice of meeting and management information circular, today's meeting will cover the following four items of formal business: One, to receive our consolidated financial statements for the fiscal year ended December 31, 2022 and the auditor's report on those financial statements; two, to elect each of the nine nominated directors; three, to reappoint Ernst & Young as the company's auditors; and four, to conduct our annual advisory say-on-pay vote on our approach to executive compensation. 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 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 vote 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 you 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, 2022, 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 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 practices, which are 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 am a shareholder. I nominate each of the following nine 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; Jeff 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 questions 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 practices 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 practices are contained on Page 14 of our Management Information Circular. Under Toromont advanced notice by law, shareholders are required to give at least for today's 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 motions to be seconded.

Mr. Chair. I so move.

Thank you. Is there a seconder?

Mr. Chair. This is Lynn Korbak. 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 auditor for the ensuing financial year commencing January 1 and ending December 31, 2023, 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 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?

Mr. Chair, I second the motion.

Thank you. Is there any discussion of this motion?

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

Thank you. I now call for a vote on the motion before the meeting. With 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 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. 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 2023 Annual Meeting of Shareholders.

Thank you. May I have a seconder?

Mr. Chair, I second the motion.

Thank you. Is there any discussion on 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.

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]

I will also give an additional moment for 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 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 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 the 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. [Foreign Language], good morning, everyone. Richard noted, this will be my last meeting as Chief Executive Officer, which affords me the opportunity to express my deep appreciation to everyone listening, including our Board, for your guidance, encouragement and support. We are not led by one person, but by over 6,800 committed employees, and it has been my absolute honor to serve within the Toromont team as we strive to produce differentiated value for our customers, shareholders and business partners. I'm a proud product of Toromont, a believer in our business model, the cycle of our philosophy of authority with alignment and accountability and grateful to Robert Ogilvie and Wayne Hill, two exceptional leaders, thank them both for their career opportunities, their trust, incredible support and most important, the many lessons they taught and virtues of strong decentralized operating practices with uncompromising core values they modeled. One important aspect of running a business is to develop and promote next-generation talent. Toromont has always strived to operate effectively using a promote from within approach backstopped by significant annual investments in employee training and development. One outcome is the ability to plan smooth management succession. Over the past few years, Six Toromont veterans were promoted into key roles, ensuring continuity approach as our past leaders retired and/or to address business needs created by our growing scope and scale. Past year, we appointed Joel Couture to the newly created position of Chief Operating Officer of Toromont CAT, our largest business. Like me, Joe began here as a management trainee. Over the past 15 years of a strong product support background, he worked his way up the ladder before taking on these new responsibilities. 2021, Miles Gregg, another management trainee graduate, William Harvey, former Head Executive both took on roles as Toromont CAT presidents, Miles heading construction and William leading Mining. In December, Adam Miller became Vice President of our Power Systems business. Adam is a 26-year Toromont veteran and the former management trainee. Collectively, these gentlemen have decades of industry experience. In 2019, Colin Goheen became President of Battlefield following the retirement of Randy Casson. On joined Battlefield in 1998. And in 2015, we appointed Dave Malinauskas, President of CIMCO, filling the big shoes left behind by Steve McLeod. Dave joined in 1999. These Toromont businesses are well prepared for the future, not only because of these individuals because they, too, are cultivating bench strength within. Our value proposition as an employer enables Toromont to recruit and retain great people, including those who make a direct contribution to the excess of our customers are technicians. Last year, we increased our technician headcount by 8% to a total of 3,145. Total technician team now accounts for 45% of our total workforce. Product support and specified services is a customer expectation and a central plank of Toromont's business model. We simply must be able to tailor service solutions to our customer success and be able to assemble, convention, maintain and repair everything we sell. Includes hybrid and battery electric machines, alternative fuel power systems, net 0 ammonia heat pump and autonomous trucks as well as all of the parts and components that go into the many sophisticated equipment models we represent. To keep pace, Toromont delivered 40,000 hours of training last year. Training at this scale is essential given the technology embedded in today's specialized equipment. Our most recent sustainability report available at toromont.com has a section on the environment, including the sustainable products and services we sell. In it, we'll find information about our ESG framework, key risk and opportunity areas and among a variety of data. Statistic, we paid very close attention to TRIR, or total recordable injury rate. Safety is job one for all of us at Toromont. Accountability and alignment for resides with all employees, including those like me, whose variable compensation is tied to annual safety outcomes. With a dedicated all hands on deck approach we saw improvement in 2022 as 80% of our facilities achieved TRIR of 0 with the overall metric improving by 31% from 2021. Safe operating principles and practices are nonnegotiable as our safety journey continues with further training and investment. As my practice at our annual meeting to update you on our businesses and focus on highlights that impact more than just annual results. I will do that now more in the theme of our sustainability report, driving forward together. Together is the operative word in that phrase as it represents our philosophy of working collectively with our market-leading business partners and customers to continuously improve. Internally, it reflects the singular advantage gain when 6,800 employees serving in diversified business units across vast territories are on the same page. Today's business environment for supply chain challenges, inflation, foreign currency, economic concerns and competition provide a unique combination of challenges driving forward together has never been more important. Toromont cat year featured solid unit deliveries, improved product support revenues through developed use of machine data and higher heavy rental fleet utilization. Clear highlight with the delivery of the first tranche of equipment to IAMGOLD's Côté Gold joint venture project, North of Sudbury, including two cat 994 wheel orders like the one in the foreground, Toromont's very first CAT-793 command for hauling autonomous trucks in our territory. Machine deliveries are complete. Cat fleet will include two next-generation zero-emission 60-60 electric drive front shovels with twin electric motors along with a full complement of Caterpillar dozers, graders and other support equipment. 793 Command for hauling trucks are monsters; two-story houses on wheels. However, we're also incredibly sophisticated. Paired to staff trucks, mines that use them realize improved operations safety, up 30% productivity gains and up to 20% reduction in haulage costs. From the outside, our Blue Command life helps to clearly distinguish these trucks, autonomous units. Toromont Cat, resource planning is made easier because of our close and constructive relationship with Caterpillar and the presence of what we refer to as connected assets. These are customer machines that we monitor remotely while they work in the field. By connecting through onboard software, we can tell how many hours are on each unit identify utilization trends and analyze machine performance metrics. There are several advantages. We can identify problems before they become failures, proactively schedule field service technicians to do maintenance at exactly the right time for the machine and the customer and derisk customers from parts availability challenges. Share life cycle machine data to help customers pinpoint the right time to replace and repair their equipment with prioritized service events. We partnered with our customers to develop complementary resource strategies, such as machine rentals to augment existing fleets. It makes a world of a difference. About 77% of our available units in our installed base are connected to us now, allowing further development of customer solutions. Toromont also continues to gain traction with our rental equipment, expanded used equipment strategies and investments all aligned to meeting customer business needs. The recent introduction of Toromont Equipped, our e-commerce platform is a direct outcome of thinking creatively about how to improve equipment flow across our territories. It enables customers to purchase used equipment from us or market their own machines online. Last year, over 200 customer consigned units were sold. We're early stage on this venture, but allows us to use our capabilities to give buyers peace of mind through options such as equipment inspections, warranties, purchase financing and maintenance agreements. Customers combine machines from our platform, knowing the equipment has been inspected, assessed and described by the authorized Caterpillar dealers. Our deep roots with Caterpillar equipment, combined with our exclusive data and analytics capabilities, ensure online customers have access to the information they need. Customers can even create their own unique searches for specific equipment. Toromont Equipped is an outlet all of our businesses can use. A great example of driving forward together, even augment inventory by sourcing used iron beyond our borders. One of 4 months differentiators is the ability to participate in the circular economy. While iron is not just used once and landfill is remanufactured and reused multiple times in a circular flow. Pharma, Caterpillar and our customers are part of this virtuous cycle. Caterpillar because they make components that are engineered to last customers because they gain economic advantages from the exchange of worn parts and use of our machine certified refill program, and Toromont because remanufacturing highly worn core engines, drive chains, cylinders and suspensions, the differentiating capability in our markets and a growing source of our business. Toromont has dedicated remanufacturing operations in strategic locations throughout Central and Eastern Canada. And the big news is that we broke ground on another last year. When opened in 2024, our purpose-built Bradford remanufacturing facility will increase capacity and allow us to manufacture components using advanced processes and tooling design with maximum efficiency to ensure the highest quality products. Battlefield is also in growth mode, and we are pleased with what's happening across our expanded territories. Since acquiring QM, Battlefield has shifted its rental fleet mix in Quebec and the Maritimes in response to the customer demand and most recently, with emphasis on small compaction equipment and added specialized products that are heavily used in winter months. Improvements in utilization and quicker return to rating status show that Battlefield is on the right track. Uploading, aging and then selling rental equipment at the right pace are the key to delivery of our long-term economic model. We also opened a new Battlefield store in Saint-Jérôme, Quebec and sold a property in Saint-Laurent to realize value from QM footprint optimization. Jobsite had a good year to position itself for the future by expanding its industrial rental services with a new hub in Edmonton, Alberta. Satellite location in Fort McMurray and a short-term arrangement in the Vancouver area. One could call this a follow-your-customer strategy. By that, I mean chemical and petrochemical customers served by job sites in Ontario and Quebec are also active in the West and we're determined to provide them with the same industrial services and solutions from these new locations. Over the last 3 years, Battlefield expands the footprint with eight new locations deliver consistent customer operating platforms and product lines. Toromont Material Handling and [indiscernible], or TMH, as we call it, is also on the move geographically. In our traditional territories, TMH improved its presence by opening stand-alone branches in Laval, Quebec and Limoges, Ontario, You recall, in 2021, we expanded Westward beyond Manitoba as Mitsubishi largest next granted Toromont dual distribution ranks for Union Carrier commenced cat products in Saskatchewan. Last year, the team introduced a new go-to-market strategy with dedicated sales teams to provide in-depth solutions to emerging market clients. 5 years ago, Toromont made a calculated decision to carve out and invest in TMH with particular focus on expanding its rental fleets and product lines, including Calmar, world leader in cargo handling solutions. 2022, TMH received the President's award recognizing total new sales. In addition, steady improvements in KPIs aided by the use of the Toromont dealer management system are encouraging signs. Ag West benefited from a recovery in agricultural commodity prices and strong execution last year and added market share. This is a small Toromont business. We recently announced that we have entered into an agreement for the sale of AgWest Limited, a wholly-owned subsidiary to Mechan International, part of the weekers Group effective May 1, 2023. We wish Mechan and the entire AgWest team continued success. Final report from the field comes from CIMCO. Through 2020 and 2021, the pandemic whipsaw,our refrigeration business as many municipal ice rinks shutdown. CIMCO kept driving forward, bolstered by its presence in industrial refrigeration markets on both sides of the border as a counterbalance to the recreational segment. Our service strategies also took hold, producing a record year supporting our customers with aftermarket solutions. CIMCO opened its new manufacturing headquarters in Burlington. Additive packaging and assembling facility in Edmonton to be near its many Western customers and enhance its market position by expanding its intellectual property portfolio to incorporate a net 0 lineup for refrigeration equipment and solutions for both industrial and recreational markets. Building Equipment CIMCO favors natural refrigerants with ultra low or no global warming potential impact, so do customers. All of our systems orders CIMCO placed in 2022, 91% will use natural refrigerants. One of those orders was placed by the Columbus Blue Jackets, which became the first NHL team to choose CO2 for its arena. Like our Equipment Group, CIMCO is moving forward together in 2023 with a very solid backlog. In summary, 2022 was uniquely challenging, but also rewarding year. digital capabilities that allow us to collect and understand data became an even bigger part of the story in managing assets, engine inventory, directing service and planning for the future. As always, it's impossible to predict exactly what lies ahead, but as a parting gesture, I would say, Toromont is ready to drive forward together. Our team has a great mix of youth and experience. We continue to broaden and diversify our product offerings, customer services and solutions and territories and our balance sheet is strong, which we never take for granted. In closing, let me begin where I began today with a simple thank you to our customers, shareholders, business partners and my 6,800 Toromont colleagues whose hard work and diligence make all the difference. It has been a great honor to be part of this team over the last 35 years. Now over to our soon-to-be President and Chief Executive Officer, Mike McMillan, for his report.

Thanks very much, Scott, and good morning, everyone. As always, it's a pleasure to speak with you today, and we appreciate your interest in our company. Jumping right into 2022 and was another volatile year featuring strong demand, but also supply chain challenges affecting the delivery of equipment a number of macro factors we have not seen for some time, including elevated inflation, rising interest rates and currency shifts. Against this backdrop, the Toromont team demonstrated dependability and resiliency for customers and shareholders. You would expect the CFO to attribute performance to our business model and core strategies, and I will, but mostly it's due to the hard work of our team service, productivity, efficiency, flexibility and focus. The attributes of the Toromont People Power were all evident in this past year. We're going to need to display these same characteristics in 2023 to meet evolving market and economic challenges brought on by now -- brought on now by tighter credit markets. These challenges may or may not lead to a recession, but we must prepare ourselves for any eventuality if we're to continue with a focus on the long term and drive forward together for value creation. Since this is an annual meeting, I'll provide highlights of 2022, followed by a brief report on Q1 of 2023. My remarks will include some broader themes to consider as USSR performance. Toromont earned $5.52 per share basic last year on revenue of $4.2 billion. EPS was up 37% over the prior year, while the top line increased at 9%. Demand for rental equipment and product support were key drivers and together accounted for a greater proportion of our revenues than we recently experienced. The mix change was one driver of higher margin contribution. In part, this shift may have reflected maneuvers used by our customers who have had to make choices to manage through a period of heightened uncertainty and adapt to changing business dynamics. In some cases, customers opted to increase the rental activities and operate their older machines longer to satisfy their business needs, a decision also influenced by new product supply constraints. Market distortions like this came with the pandemic and continued throughout 2022. While rental and product support channels as well as our used equipment business have long runways for growth, our sense is that we are not yet seeing the new norm for revenue mix. One would expect supply chain conditions to improve, but it will take some time to return to a more familiar seasonal pattern. Those seeking a more indicative or comparable year, generally look to 2019 for Insight. That said, Toromont did make some encouraging headway with the delivery of new equipment in 2022, including in mining, where commodity prices were generally supportive of customer investment. Getting that new equipment on the ground was a great example of driving forward together with our customers, Caterpillar and our allied product partners who pulled out all the stops to manufacture very sophisticated machines and work tools within the complex operating environment. Another contributor was better operating leverage. It was encouraging to see the revenue per employee increased for the third year in a row, especially along with strong employment growth, particularly in our technician workforce. On the expense side, selling and administration costs were higher than 2021 by 9% after removing pretax gains on property dispositions in both years and other onetime operating items. This reflected higher compensation on increased headcount, salary increases and increased profit sharing accruals as well as training, travel and occupancy costs. Inflationary pressures had some impact on the expense line as did the end of lockdowns, which allowed for more in-person training and customer engagement. These are important costs of doing business that help Toromont continuously improve and thinking about discretionary expenses, I can assure you that culture at Toromont manages this spending carefully. It's an ongoing theme and part of our DNA across the enterprise. Generation of durable cash from operations is critically important and enables us to reinvest for the future. With a keen focus on returns, we invested approximately $286 million in CapEx, where $226 million net of fleet dispositions. The dispositions were somewhat lower than normal as we optimize the rotation of our fleet in order to maintain customer service in the face of tight supply. 79% of that new capital was used to upload machines to our rental fleets. The balance was earmarked for other assets, including new and replacement service and delivery vehicles and land and buildings. As Scott said, CIMCO was the beneficiary of some of that investment as we relocated our original headquarters and shop from the waterfront in Toronto, to a modern fit-for-purpose facility in Burlington, Ontario. 2022 reinvestments were higher than previous -- than in the previous 2 years when we reduced activity in response to demand signals and like customers experienced supply chain delays. It is reasonable to categorize this most recent spending level as a catch-up for recovery rather than a new norm, but I can assure you with purpose, as we continue our process of improving coverage, in particular, with our Quebec and Maritimes territories. Uploading new rental equipment, the [ seeding ] process, driving utilization and aging it properly by ensuring as well maintained the cultivating process and then selling it the harvesting process is a virtuous cycle and a theme that we repeat over the business cycle. Much effort has been expended in our QM territories to understand and respond to the customer rental needs that entrench our business disciplines. Recent performance trends show we are gaining traction. While reinvesting, we also reallocated some capital and realized considerable value from our Quebec Maritimes integration footprint strategy that continues to be calibrated to ensure both good market coverage and operating efficiencies. A great example was the sale in Saint-Laurent, Quebec last year, which resulted in a pretax gain of $17.7 million. On the topic of ongoing themes, Toromont has a large and valuable real estate portfolio. About 86% of our facilities are owned, tending that to that portfolio, looking after its environmental footprint and planning future property investments require specialist oversight. We're pleased that Gartner has joined the team to expand our capabilities and to lead that important effort. Speaking of our property portfolio, you heard Scott speak about the $70 million Toromont remanufacturing plant now under construction in Bradford. We acquired the land in 2019 and will book a significant portion of building costs this year. Green manufacturing is an important capability and one that is accretive to our customers, our product support business and to the circular economy. We saw that very clearly in 2022, and this new reman center will give us greater efficiency and capacity to better serve our customers well into the future. Financial prudence is an ongoing theme for Toromont, and dry powder gives us the means to act decisively when opportunities arise as it did in 2022 and protect our team and business when the storm clouds of a downturn or recession will end. The pandemic years of 2020 and 2021 illustrated the importance of our disciplined financial and operating culture. I'm pleased to note that even with higher investment levels, Toromont ended 2022 with a strong balance sheet and flexible financial position featuring $928 million of cash on hand and an effectively unutilized line of credit. Since deploying our balance sheet to acquire the QM territories in 2017, Toromont has steadily reduced leverage, such that net debt to total capitalization was minus 14% and at year-end compared to a relatively short-lived peak of 40% 5 years ago. Overall, we believe corporate performance is best assessed over a business cycle through financial indicators such as return on equity and return on capital employed. These metrics reflect capital efficiency and effectiveness. In both cases, Toromont operates with high hurdle rates and our long-term focus. Including 2022, our 5-year return on equity average was 20.7% compared to our hurdle rate of 18% over a business cycle. 5-year average return on capital employed was 24.8%. Each of our businesses operates with its own ROCE hurdle rate calibrated to reflect capital intensity. Strong execution by our team and focus on resource deployment, including capital, produced solid returns throughout '22. Complete this annual review, steady performance supported by our Board's decision to increase Toromont's common share dividend in both February of 2022 and again in February of 2023 making this our 55th year of continuous dividend payments and our 34th consecutive year of dividend increases. That's a theme we think our shareholders appreciate. Assuming those dividends were reinvested in Toromont's stock, total 5-year shareholder returns outpaced the S&P TSX composite consistently. Now shifting to Q1. 2023 began with the same level of backlog as 2022 at approximately $1.3 billion; a good way to start the year. Looking at macro trends. Product availability improved compared to last year, but we still have some way to go. Interest rates and inflation remain front of mind and continue to drive our buying and investment decisions and strategies. Against this backdrop, our team executed well with revenues up 23%, driven by new equipment sales, product support, rental activity, where used sales were slightly lower. Profitability demonstrated ongoing operating and spending discipline within our plan to achieve higher customer engagement levels, or workforce training, provide normal compensation increases in the context of an inflationary environment. Net earnings were up 63% over Q1 of 2022 and basic EPS was $1.17 per share. A property gain on sale of approximately $3.4 million pretax along with interest income on our cash balance contributed approximately $7.8 million or $0.07 per share. Backlogs remained healthy at $1.2 billion, although lower than the exceptionally strong level of $1.5 billion last year. I promised at the outset to refer to ongoing business themes. You should consider as you assess Toromont's performance. To wrap up, here are three more: One, there is a risk and opportunity advantage and diversification, knowing that Toromont built its franchise intentionally to provide a broad range of products and services across a diversified geography and customer base. Selling specialized equipment and supporting customers as they use it with well-developed value-added aftermarket services is itself a critically important form of diversification. However, diversification without focus, synergy and specialization does not work. So as Toromont has grown in scale and added more scope. We've been careful to add products and services to lines of business that are complementary and able to leverage our core capabilities, discipline and business model. Two, we manage for the long term. It's why we intentionally reinvest. It's why we maintain a strong financial position as a matter of principle as much as strategy. And that's why many of our customers and business partner relationships, including with Caterpillar spend decades. We engage our partners as valued allies and collaborators, which is both necessary and appropriate to ensure a quick pro quo relationship that fuels their growth and Toromont's. And three, we exist to grow. But because of our emphasis on long-term sustainability and belief in our special brand of decentralization, we may make decisions differently than some companies. We choose to grow in alignment with our values in markets where our competitive advantages allow us to lead and where our people can excel safely and where our business and financial disciplines create the investment returns that achieve our hurdle rates. In summary, there is a lot going on in the world today. But Toromont's fundamentals, especially our people power, are there to support our business as we continue to drive forward together for long-term value creation. On a personal note, it is an honor and a great privilege to be selected as our next President and CEO. I could not imagine taking on this new challenge without the exceptional Toromont leadership group and the operational excellence of our Toromont teams that drive our business forward every day. I look forward to working closely with Scott during our transition and serving our team members, customers, suppliers, shareholders and communities for many years to come. Thank you for your support and time today. Mr. Chair, over to you to continue with our agenda.

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

Mr. Chair, we have not received any questions.

Thank you for joining us today, and thank you for your support during the past year. We wish you and your loved ones good health and are signing off.