Strongco Corporation
TSX : SQP

Strongco Corporation

May 26, 2011 08:46 ET

Strongco Announces First Quarter Results

MISSISSAUGA, ONTARIO--(Marketwire - May 26, 2011) - Strongco Corporation (TSX:SQP) today reported financial results for the three months ended March 31, 2011.

Summary (i)


--  Total revenues increased by 63% to $87.5 million 
--  Chadwick-BaRoss acquisition added $6 million in revenue 
--  Same-store revenues increased by 52% 
--  EBITDA increased by 214% to $6.8 million 
--  Net income of $598,000 compared to loss of $2.0 million 
--  Earnings per share of $0.05 compared to loss of $0.20 
--  Completed rights offering totalling $7.9 million 

(i) Comparisons are between first quarter 2011 and first quarter 2010 

"The momentum we created in the third and fourth quarters of last year continued into the first quarter of 2011," said Robert Dryburgh, President and Chief Executive Officer of Strongco. "We are seeing growth in all revenue categories in virtually all regions as a result of improving markets and better sales execution. We are also pleased that Chadwick-BaRoss, Inc. has made a positive contribution to earnings since we completed the acquisition on February 1, 2011."

"The market signs in both Canada and the United States are positive and our order book reflects our efforts in the marketplace. Expense levels in the first quarter were higher because of the costs of the acquisition of Chadwick-BaRoss but we anticipate those to normalize through the rest of the year. The combination of these factors gives us optimism for the balance of 2011."

First Quarter 2011 Review

Total revenues in the three months ended March 31, 2011 were $87.5 million, an increase of 63% from the first quarter of 2010.

Equipment sales increased by 87% from last year to $56.0 million. Product support revenues gained 29% to $26.0 million. Rental revenues were $5.5 million, up 49% from the year-earlier period.




Financial Highlights (i)                                                   


Three-Month Periods Ended March 31                                         

($ millions except per share amounts)                        2011      2010

Revenues                                                    $87.5     $53.7

EBITDA                                                       $6.8      $2.2

Net income (loss)                                            $0.6    $(2.0)

Basic and diluted net income (loss)                         $0.05   $(0.20)
per share                                                                  
Equipment in inventory                                     $174.4    $146.2

Equipment notes payable                                    $128.7    $103.0

(i) All financial information conforms to International Financial Reporting 
Standards. Results from 2010 have been restated in conformity with IFRS     
rules.                                                                      

Gross margin increased by 49.1% to $17.0 million during the first quarter. As a percentage of revenue, gross margin declined slightly to 19.4% from 21.3% in the same period of 2010. "The change in gross margin percentage was primarily due to the large increase and resulting higher proportion of equipment sales relative to the higher margin product support and rental revenues," said David Wood, Vice President and Chief Financial Officer.

Administrative, distribution and selling expenses during the first quarter totalled $15.2 million, compared to $12.7 million in 2010. Expenses for the period just ended included $0.4 million in one-time acquisition costs and $1.2 million in operating costs for the newly acquired Chadwick-BaRoss unit.

EBITDA for the first quarter increased to $6.8 million from $2.2 million a year earlier.

As a result of the strong revenue and EBITDA performance, Strongco's net income in the first quarter of 2011 was $0.6 million ($0.05 per share), a significant improvement from a net loss of $2.0 million ($0.20 per share) in the first quarter of 2010.

Financial Position

Strongco improved its balance sheet in the first quarter with the issue of 2.6 million shares under a rights offering for gross proceeds of $7.9 million.

Strongco acquired Chadwick-BaRoss during the period for $11.1 million, comprised of $9.2 million in cash and a note taken back by the vendors of $1.9 million. In connection with the acquisition, the company obtained a $5.0 million term loan from its existing bank, which was funded in April.

Subsequent to the first quarter, the bank credit facility was further amended to add a construction loan facility to finance construction of the Company's previously announced new Edmonton branch. The loan, which provides for a maximum of $7.1 million, will be converted to a mortgage when the new facility is completed.

Outlook

The recovery in construction markets that became evident in the latter half of 2010 continued into 2011. With that, demand for equipment has continued to increase. The economy and construction markets across Canada are expected to continue to improve throughout 2011, which in turn is expected to lead to increased demand for heavy equipment, and increased willingness of customers to purchase equipment. Strongco's equipment sales backlogs increased during the first half of 2010 and remained strong through the balance of the year and into 2011, a positive sign that demand for heavy equipment is improving.

As expected following a recession, recovery has been more evident in the markets for earth moving equipment. The markets for cranes, which are typically utilized in latter stages of construction, have been slower to recover. However demand for cranes started to show improvement toward the end of 2010 and is expected to increase in 2011 as construction activity continues to grow. Strongco's sales backlog for cranes has also risen, which is a sign that demand is improving.

An important contribution to anticipated growth in 2011 is expected from Alberta. Oil prices have shown strength and stability and with that, the economy in Alberta has continued to improve. Activity in the oil sands has accelerated and that has led to increased spending for heavy equipment in northern Alberta. In addition, there has been a general increase in construction activity throughout the province. Strongco's sales backlogs in Alberta have increased and management is optimistic that heavy equipment markets in the province will continue to improve in 2011.

Most original equipment manufacturers ("OEM's") had scaled back production and reduced capacity in response to the weak North American economy in 2009 and 2010. This has resulted in increased delivery times and shortages of certain types of equipment. These suppliers are continuing to struggle to increase production capacity and improve lead time and availability. There have been indications of improvement but the transition to the new low-emission tier 4 engine technology in 2011 is an added complication that may lead to longer lead times and reduced supply. In addition, the seismic disruptions in Japan are beginning to cause global shortages of certain equipment and parts. OEM's are still evaluating the impact of the Japanese disaster on their ability to supply but have notified dealers that there could be delays and shortages.

Management remains cautiously optimistic that the improving trend in Canadian construction markets will continue through 2011. Growing demand for heavy equipment will lead to increased revenues in 2011. In addition, the acquisition of Chadwick-BaRoss in the first quarter will contribute to improved sales levels for Strongco in 2011.

Conference Call Details


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Strongco will hold a conference call on Friday, May 27, 2011 at 10 am ET to 
discuss first quarter results. Analysts and investors can participate by    
dialing 416-644-3418 or toll free 1-877-974-0446. An archived audio         
recording will be available until midnight on June 10, 2011. To access it,  
dial 416-640-1917 and enter passcode 4444460#.                              
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About Strongco

Strongco Corporation is one of Canada's largest multiline mobile equipment dealers and also operates in the northeastern U.S. through Chadwick-BaRoss, Inc. Strongco sells, rents and services equipment used in sectors such as construction, infrastructure, mining, oil and gas, utilities, municipalities, waste management and forestry. Strongco has approximately 600 employees servicing customers from 24 branches in Canada and five in the U.S. Strongco represents leading equipment manufacturers with globally recognized brands, including Volvo Construction Equipment, Case Construction, Manitowoc Crane, Terex Cedarapids, Ponsse, Powerscreen, Skyjack, Fassi, Allied, Taylor, ESCO, Dressta, Sennebogen, Takeuchi, Link-Belt and Kawasaki. Strongco is listed on the Toronto Stock Exchange under the symbol SQP.

Forward-Looking Statements

This news release may contain "forward-looking" statements within the meaning of applicable securities legislation which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Strongco or industry results, to be materially different from any future results, events, expectations, performance or achievements expressed or implied by such forward-looking statements. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. Forward-looking statements typically contain words or phrases such as "may", "outlook", "objective", "intend", "estimate", "anticipate", "should", "could", "would", "will", "expect", "believe", "plan" and other similar terminology suggesting future outcomes or events. Forward-looking statements involve numerous assumptions and should not be read as guarantees of future performance or results. Such statements will not necessarily be accurate indications of whether or not such future performance or results will be achieved. You should not unduly rely on forward-looking statements as a number of factors, many of which are beyond the control of Strongco, could cause actual performance or results to differ materially from the performance or results discussed in the forward-looking statements, including, inability to obtain requisite approvals; general economic conditions; business cyclicality, relationships with manufacturers; access to products; competition with existing business; reliance on key personnel; litigation and product liability claims; inventory obsolescence; sufficiency of credit availability; credit risks of customers; warranty claims; technology interpretations; and labour relations. Although the forward-looking statements contained in this news release are based upon what management of Strongco believes are reasonable assumptions, Strongco cannot assure investors that actual performance or results will be consistent with these forward-looking statements. These statements reflect current expectations regarding future events and operating performance and are based on information currently available to Strongco's management. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. All forward-looking statements in this news release are qualified by these cautionary statements. These forward-looking statements and outlook are made as of the date of this news release and, except as required by applicable law, Strongco assumes no obligation to update or revise them to reflect new events or circumstances.

Strongco Corporation

Management's Discussion and Analysis

The following management discussion and analysis ("MD&A") provides a review of the consolidated financial condition and results of operations of Strongco Corporation, formerly Strongco Income Fund ("the Fund"), Strongco GP Inc. and Strongco Limited Partnership collectively referred to as "Strongco" or "the Company", as at and for the three months ended March 31, 2011. This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements as at and for the three months ended March 31, 2011. For additional information and details, readers are referred to the Company's audited consolidated financial statements and accompanying notes as at and for the year ended December 31, 2010 contained in the Company's annual report for the year ended December 31, 2010. For additional information and details, readers are referred to the Company's Notice of Annual and Special Meeting of Shareholders and Management Information Circular ("MIC") dated April 20, 2011, and the Company's Annual Information Form ("AIF") dated March 30, 2011, all of which are published separately and are available on SEDAR at www.sedar.com.

The quarter ended March 31, 2011 is the first quarter in which Strongco has adopted International Financial Reporting Standards ("IFRS") as the basis for its accounting and financial reporting. Prior year comparative figures for the quarter ended March 31, 2010 have been restated to comply with IFRS (see discussion below under the heading "Conversion to International Financial Reporting Standards"). All financial information within this discussion and analysis, for both 2011 and 2010, is presented on the basis of IFRS.

Unless otherwise indicated, all financial information within this discussion and analysis is in millions of Canadian dollars except per share amounts. The information in this MD&A is current to May 25, 2011.


FINANCIAL HIGHLIGHTS                                                        
                                       Three months                         
                                           ended            Variances       
Income Statement Highlights              March 31,          2011/2010       
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($ millions, except per share                                               
 amounts)                               2011    2010                      % 
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Revenues                            $   87.5 $  53.7   $         33.8    63%
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Net income (loss)                   $    0.6 $  (2.0)  $          2.6   130%
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Basic and diluted earnings (loss)                                           
 per share                          $   0.05 $ (0.20)  $         0.25   125%
EBITDA (note 1)                     $    6.8 $   2.2   $          4.6   209%

Balance Sheet Highlights                                    Variances       
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($ millions, except per unit                                                
 amounts)                               2011    2010        2011/2010      %
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Equipment inventory                 $  174.4 $ 146.2   $         28.2    19%
Total assets                           255.9   190.6             65.3    34%
Debt (bank debt and other notes                                             
 payable)                               26.9    16.2             10.7    66%
Equipment notes payable                128.8   103.0             25.8    25%
Total liabilities                   $  202.8 $ 147.1   $         55.7    38%
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Note 1 - EBITDA is a non-IFRS measure. See explanation                      
 under the heading "Non-IFRS Measures" below.                               

COMPANY OVERVIEW

Strongco is one of the largest multi-line mobile equipment distributors in Canada. In February 2011, Strongco acquired 100% of the shares of Chadwick-BaRoss, Inc., a multi-line distributor of mobile construction equipment in the New England region of the United States, (see discussion below under the heading "Acquisition of Chadwick-BaRoss, Inc."). Strongco sells and rents new and used equipment and provides after-sale product support (parts and service) to customers that operate in infrastructure, construction, mining, oil and gas exploration, forestry and industrial markets. This business distributes numerous equipment lines in various geographic territories. The primary lines distributed include those manufactured by:


i.   Volvo Construction Equipment North America Inc. ("Volvo"), for which
     Strongco has distribution agreements in each of Alberta, Ontario,
     Quebec, New Brunswick, Nova Scotia, Prince Edward Island and
     Newfoundland in Canada and Maine and New Hampshire in the United 
     States;
ii.  Case Corporation ("Case"), for which Strongco has a distribution
     agreement for a substantial portion of Ontario; and 
iii. Manitowoc Crane Group ("Manitowoc"), for which Strongco has 
     distribution agreements for the Manitowoc, Grove and National brands,
     covering much of Canada, excluding Nova Scotia, New Brunswick and
     Prince Edward Island. 

The distribution agreements with Volvo and Case provide exclusive rights to distribute the products manufactured by these manufacturers in specific regions and/or provinces.

In addition to the above noted primary lines, Strongco also distributes several other secondary or ancillary equipment lines and attachments.

CONVERSION TO A CORPORATION

The Fund was an unincorporated, open-ended, limited purpose trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated March 21, 2005 as amended and restated on April 28, 2005 and September 1, 2006.

Pursuant to a plan of arrangement approved by the unitholders at the Fund's Annual General Meeting on May 14, 2010, the Fund was converted to a corporation effective July 1, 2010. The conversion involved the incorporation of Strongco Corporation, which issued shares to the unitholders in exchange for the units of the Fund on a one for one basis so that the unitholders became shareholders in Strongco Corporation, after which the Fund was wound up into Strongco Corporation.

Following the conversion on July 1, 2010, Strongco Corporation has carried on the business of the Fund unchanged except that Strongco Corporation is subject to taxation as a corporation. The results of operations, balance sheet and cash flow figures presented in the following MD&A for comparative periods prior to July 1, 2010 reflect those of the Fund. References in this MD&A to shares and shareholders of the Company are comparable to units and unitholders previously under the Fund.

Details of the conversion are outlined in the Fund's Management Information Circular dated April 6, 2010, which contains the Plan of Arrangement, available on SEDAR at www.sedar.com.


FINANCIAL RESULTS THREE MONTHS ENDED MARCH 31, 2011 AND 2010                

Consolidated Results of Operations                                          

                                 Three months ended March                   
                                                      31,           Variance
                                --------------------------- ----------------
($ thousands, except per                                                    
 share amounts)                        2011          2010           $      %
----------------------------------------------------------- ----------------
Revenues                     $       87,495  $     53,680  $   33,815  63.0%
Cost of sales                        70,511        42,263      28,248  66.8%
----------------------------------------------------------- ----------------
Gross Margin                         16,984        11,417       5,567  48.8%
Administration, distribution                                                
 and selling expenses                15,241        12,658       2,583  20.4%
Other expense (income)                 (274)         (268)         -6   2.1%
----------------------------------------------------------- ----------------
Operating income                      2,017          (973)      2,990 307.4%
Interest expense                      1,356         1,100         256  23.3%
----------------------------------------------------------- ----------------
Earnings (loss) from                                                        
 operations before income 
 taxes                                  661        (2,073)      2,733 131.9%
Provision for income taxes               63             -          63   0.0%
----------------------------------------------------------- ----------------

Net income (loss)            $          598  $     (2,073) $    2,670 128.8%
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Basic and diluted earnings                                             
 (loss) per share            $         0.05  $      (0.20) $     0.24 123.9%
Weighted average number of                                                  
 shares                                                                     
  - Basic                        12,633,757    10,508,719                   
  - Diluted                      12,665,004    10,508,719                   
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Key financial measures:                                                     
Gross margin as a percentage                                                
 of revenues                          19.4%         21.3%       -1.9%       
Administration, distribution                                                
 and selling expenses                                                       
 as percentage of revenues            17.4%         23.6%       -6.2%       
Operating income as a                                                       
 percentage of revenues                2.3%         -1.8%        4.1%       
EBITDA (note 1)              $        6,822  $      2,200  $    4,622       
----------------------------------------------------------- ----------------

Note 1 EBITDA is a non-IFRS measure. See explanation                        
 under the heading "Non-IFRS Measures" below.                               

Acquisition of Chadwick-BaRoss, Inc.

On February 17, 2011, the Company completed the acquisition of 100% of the shares of Chadwick-BaRoss, Inc. ("Chadwick- BaRoss") for net proceeds of US$11.1 million. The transaction value was satisfied with net cash proceeds of US$9.2 million and notes issued to the major shareholders of Chadwick-BaRoss totalling US$1.9 million. Chadwick-BaRoss is a heavy equipment dealer headquartered in Westbrook, Maine, with three branches in Maine and one in each of New Hampshire and Massachusetts. The acquisition was effective as of February 1, 2011 and the results of Chadwick-BaRoss have been included in the consolidated results of Strongco from that date.

Market Overview

Construction markets generally follow the cycles of the broader economy, but typically lag. As construction markets recover following a recession, demand for heavy equipment normally improves as construction activity and confidence in construction markets build. In addition, as the financial resources of customers in that sector strengthen, they have historically replenished and upgraded their equipment fleets after a period of restrained capital expenditures. Recovery in equipment markets is normally first evident in equipment used in earth moving applications and followed by cranes, which are typically utilized in later phases of construction. Rental of heavy equipment is typically stronger following a recession until confidence in construction markets is restored and financial resources of customers improve.

While the economic recession that persisted throughout most of 2009 was officially over in Canada in 2010, construction markets remained weak in the first quarter of 2010. With the onset of warmer spring weather and spurred by government stimulus spending for infrastructure projects, construction activity began to show signs of improvement in the second quarter of 2010. This improvement continued in the third and fourth quarters of 2010 as confidence in the economy increased. Similarly, demand for new heavy equipment was soft in the first quarter of 2010 but started to improve late in the second quarter and continued to strengthen in the third and fourth quarters of 2010. While construction markets and demand for heavy equipment were improving, many customers remained reluctant or lacked the financial resources following the recession to commit to purchase new construction equipment and instead rented to meet their equipment needs in the first half of the year. That trend continued in the second half of 2010, but with confidence in the economy continuing to rise and construction activity increasing, customers were more willing to purchase equipment and exercise purchase options under rental contracts in the fourth quarter of 2010. Recovery was first evident in the markets for compact and lower priced equipment while demand for larger higher priced equipment was slower to recover. In particular, the market for cranes remained weak in the first and second quarters of 2010 but started to show improvement in the latter half of the year. Sales backlogs for all categories of equipment, including cranes, improved steadily throughout the first and second quarters of 2010 and remained strong throughout the balance of the year and into 2011.

The improving trend in construction markets and strong demand for heavy equipment evident in the latter half of 2010, continued into the first quarter of 2011. While customer confidence to purchase equipment strengthened in the first quarter of 2011, rental activity, especially under contracts with purchase options ("RPO"), also remained strong in the quarter. In addition, sales backlogs remained at robust levels, a positive indication of the continuing recovery of construction markets and demand for heavy equipment.

Product support (parts and service) activity is normally strong in the first quarter as equipment used in harsh winter conditions for snow removal and other applications require higher levels of service and repair. Product support activity in the first quarter of 2011 was stronger due to the higher amounts of snow compared to 2010 and customers repairing equipment in anticipation of a more robust construction season in 2011.

Revenues

A breakdown of revenue for the quarter ended March 31, 2011 and 2010 by type within each geographic region is as follows:


Revenue by Region                                                           
                                    Three months ended        2011/2010     
                                         March 31             VARIANCE      
($ millions)                            2011       2010          $         %
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Eastern Canada (Atlantic and                                                
 Quebec)                                                                    
---------------------------------                                           
  Equipment Sales                  $    20.1  $     9.6  $    10.5      109%
  Equipment Rentals                      1.6        1.2        0.4       33%
  Product Support                        9.3        7.8        1.5       19%
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  Total Eastern Canada             $    31.0  $    18.6  $    12.4       67%
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---------------------------------                                           
Central Canada (Ontario)                                                    
---------------------------------                                           
  Equipment Sales                  $    18.3  $    14.0  $     4.3       31%
  Equipment Rentals                      1.3        1.4       (0.1)      -7%
  Product Support                        8.0        7.4        0.6        8%
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  Total Central Canada             $    27.6  $    22.8  $     4.8       21%
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---------------------------------                                           
Western Canada (Manitoba to BC)                                             
---------------------------------                                           
  Equipment Sales                  $    14.9  $     6.3  $     8.6      137%
  Equipment Rentals                      2.3        1.1        1.2      109%
  Product Support                        5.7        4.9        0.8       16%
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  Total Western Canada             $    22.9  $    12.3  $    10.6       86%
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---------------------------------                                           
United States                                                               
---------------------------------                                           
  Equipment Sales                  $     2.7  $          $     2.7          
  Equipment Rentals                      0.3                   0.3          
  Product Support                        3.0                   3.0          
------------------------------------------------------------------          
  Total United States              $     6.0  $       -  $     6.0          
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---------------------------------                                           
Total Strongco Corporation                                                  
---------------------------------                                           
  Equipment Sales                  $    56.0  $    29.9  $    26.1       87%
  Equipment Rentals                      5.5        3.7        1.8       49%
  Product Support                       26.0       20.1        5.9       29%
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  Total Strongco Corporation       $    87.5  $    53.7  $    33.8       63%
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Equipment Sales

Strongco's equipment sales in the first quarter of 2011 were $56.0 million which was up $26.1 million or 87% from $29.9 million in the first quarter of 2010. The recent acquisition of Chadwick-BaRoss in February 2011, contributed $2.7 million of the increase while sales in Canada were up $23.4 million or 78%. Sales were up in all regions of the country, with the largest increases in Alberta and Quebec. The markets for new heavy equipment in Canada in which Strongco operates were stronger in all regions of the country, however, demand varied significantly from region to region between product categories. Demand was strongest in general purpose construction equipment ("GPE"), particularly in Western and Eastern Canada, while demand for compact equipment was up a lesser amount. Markets for cranes were also up from the first quarter of 2010, with the largest increases in Central and Eastern Canada.

Average selling prices vary from period to period depending on sales mix between product categories, model mix within product categories and features and attachments included in equipment being sold. Strongco's average selling prices in the first quarter were up from a year ago due primarily to a higher proportion of sales of larger, more expensive equipment. While below pre- recession levels, average selling prices in most product categories increased slightly compared to the first quarter of 2010. While the ongoing strength of the Canadian dollar and price competition continued to put pressure on selling prices, the increase in demand, combined with supply issues during the quarter, helped support stronger selling prices. After scaling back during the recession, OEM's have been challenged to ramp up production in response to the increasing demand, which has resulted in longer lead times and reduced availability of certain types of equipment. In addition, the scheduled transition from tier 3 to the new lower-emission tier 4 engine technology has affected supply and increased demand for equipment with tier 3 engines.

On a regional basis, equipment sales in Eastern Canada (Quebec and Atlantic regions) were $20.1 million, which was more than double the level of the first quarter of 2010. Construction markets in Quebec continued to benefit from the high level of infrastructure projects in that province. The markets for GPE in which Strongco participates in Eastern Canada were estimated to be up approximately 25% compared to the first quarter of 2010. Strongco significantly outperformed the market and captured a larger market share with total GPE unit volume growth in the quarter of greater than 100%. Most of the sales improvement has been in rock crushing equipment, loaders and articulated trucks. The crane market in Eastern Canada, which generally remained weak in 2010 following the recession, showed an improvement as certain large crane rental customers in Quebec upgraded and increased their fleets.

Strongco's equipment sales in Central Canada were $18.3 million, which was up $4.3 million or 31% from the first quarter of 2010. Most of the increase was due to higher sales of cranes in Ontario as certain crane rental customers, who refrained from purchasing new cranes during the recession, started to replenish their fleets during the quarter. While the economy in Ontario has been recovering following the recession, there has been fewer new large construction projects started in the province compared to other parts of the country and many announced construction and infrastructure projects have been delayed due to the cold, snowy winter weather conditions, followed by a very wet spring. This has resulted in certain customers delaying their buying decisions. Price competition in Ontario in GPE and compact equipment remained aggressive in the first quarter, especially from certain dealers attempting to capture market share in particular product categories and markets. While Strongco's market shares in Ontario were lower in January and February, sales activity and market share increased significantly in March. At the same time, sales backlogs and the level of RPOs in Ontario have improved which should lead to stronger sales in the second and third quarters.

Equipment sales in Western Canada during the first quarter were up $8.6 million or 137% over first quarter of 2010 to $14.9 million. Strongco's product lines in Alberta serve the oil sector, primarily in the site preparation phase, as well as natural gas production, both of which have been significantly impacted by weakness in the energy sector during 2009. In addition, Strongco serves construction and infrastructure segments in the region, which were also severely impacted by the recession. With the upward trend and sustainability in oil prices through 2010 and into 2011, economic conditions in Alberta have improved. Construction activity and demand for heavy equipment began to show signs of recovery in 2010, particularly in Northern Alberta in the latter half of the year and that improvement continued in the first quarter of 2011. Total units sold in the markets served by Strongco in Alberta, excluding cranes, were estimated to be up approximately 95% relative to the first quarter of 2010. Strongco outperformed the market with total unit volume growth in the first quarter in excess of 190% and captured a larger share of the market. Most of the increase was in sales of GPE and larger equipment. While this was a substantial increase over the first quarter of 2010, sales in Northern Alberta were hampered by longer delivery lead times and product availability issues on certain products. Crane sales have been slower to recover in Alberta, but sales backlogs of cranes has improved and RPO activity has increased, positive signs that the crane markets in Western Canada is improving.

Equipment Rentals

It is common industry practice for certain customers to rent to meet their heavy equipment needs rather than commit to a purchase. In some cases this is in response to the seasonal demands of the customer, as in the case of municipal snow removal contracts, or to meet the customers' needs for a specific project. In other cases, certain customers prefer to enter into short-term rental contracts with an option to purchase after a period of time or hours of machine usage. This latter type of contract is referred to as a rental purchase option contract ("RPO"). Under an RPO, a portion of the rental revenue is applied toward the purchase price of the equipment should the customer exercise the purchase option. This provides flexibility to the customer and results in a more affordable purchase price after the rental period. Normally, the significant majority of RPO's are converted to sales within a six month period and this market practice is a method of building sales revenues and the field population of equipment.

Strongco's rental revenue in the first quarter was $5.5 million which was up $1.8 million over the first quarter of 2010. Rental revenue from the acquisition of Chadwick-BaRoss in February 2011 contributed $0.3 million of the increase while rental revenue in Canada was up $1.5 million. Strongco's rental activity in Canada was slow at the beginning of 2010 but grew steadily throughout the year, reflecting the preference of many customers to rent equipment as construction markets recovered following the recession. This was very evident with RPO activity which was particularly strong in the last quarter of 2010. Rental activity, including RPOs, remained strong in the first quarter of 2011. Most of the increase in rental revenue was realized in Alberta, demonstrating further evidence of recovery in that province following the significant decline in rental activity experienced during the recession. Strongco's crane business, which has traditionally not had a significant rental element, also experienced an increase in rental activity in the quarter as customers showed an initial preference to rent while the demand for cranes improved.

Product Support

Sales of new equipment usually carry the warranty from the manufacturer for a defined term. Product support revenues from the sales of parts and service are therefore not impacted until the warranty period expires. Warranty periods vary from manufacturer to manufacturer and depending on customer purchases of extended warranties. Product support activities (sales of parts and service outside of warranty), therefore, tend to increase at a slower rate and lag equipment sales by three to five years. The increasing equipment population in the field leads to increased product support activities over time. Product support activities are normally strongest in Canada in the first quarter due to increased use of equipment for snow removal in the winter and during the third quarter in the height of the construction season.

Product support revenues in the first quarter of 2011 were $26.0 million, which included $3.0 million from Chadwick-BaRoss. This was up from $20.1 million in the first quarter of 2010. Product support activities were up across all regions in Canada. Parts and service revenues, particularly in Western and Eastern Canada, benefited from higher amounts of snow and increased use of snow removal equipment in the first quarter of 2011, while the mild winter and lack of snow in the first quarter of 2010, particularly in Eastern and Central Canada, resulted in reduced parts and service activity in the prior year.


Gross Margin                                                                
                            Three Months Ended                              
                                 March 31,                     2011/2010    
                              2011         2010                Variance     
              --------------------------------------------------------------
              --------------------------------------------------------------
Gross Margin     $ millions    GM%   $ millions      GM%   $ millions      %
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Equipment                                                                   
 Sales        $         5.4   9.5%  $       2.6     8.8%  $       2.8   108%
Equipment                                                                   
 Rentals                1.1  18.5%          0.6    16.2%          0.5    83%
Product                                                                     
 Support               10.5  40.8%          8.2    40.8%          2.3    28%
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Total Gross                                                                 
 Margin       $        17.0  19.4%  $      11.4    21.3%  $       5.6    49%
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As a result of the higher revenues in the first quarter of 2011, Strongco's gross margin increased to $17.0 million from $11.4 million in the first quarter of 2010. The gross margin of the newly acquired Chadwick-BaRoss was $1.5 million in the quarter. As a percentage of revenue, gross margin declined to 19.4% in the first quarter of 2011 from 21.3% in the first quarter of 2010. Equipment sales typically generate a lower gross margin percentage than rental revenues and product support activities. The large increase in equipment sales resulted in equipment sales representing a higher proportion of total revenues in the quarter which contributed to the decline in the overall gross margin percentage. Equipment sales accounted for approximately 64% of total revenues in the first quarter of 2011 compared to 56% in the first quarter of 2010, while product support and rental revenues represented 30% and 6% of total revenues, respectively, in the first three months of 2011 compared to 37% and 7% of total revenue, respectively, in the same period of 2010.

The gross margin percentage on equipment sales was 9.5% in the first quarter of 2011, which was up from 8.8% in the first quarter of 2010. Product sales mix contributed most to the increased gross margin percentage on equipment sales. In addition, while price competition and the strength of the Canadian dollar continued to put pressure on selling prices, the increase in demand combined with longer delivery lead times and reduced availability of certain equipment from the OEMs supported slightly higher selling prices, contributing to further improvement in the gross margin percentage. Gross margin percentage on rentals was 18.5% in the first quarter of 2011, compared to 16.2% in the first quarter of 2010. Gross margin percentage on product support activities was 40.8% in the first quarter of 2011, consistent with the prior year.

Administrative, Distribution and Selling Expense

Administrative, distribution and selling expenses in the first quarter of 2011 were $15.2 million, which compared to $12.7 million in the first quarter of 2010. As a percent of revenue, administration, distribution and selling expenses were 17.4%, down from 23.6% in the first quarter of 2010. Administration, distribution and selling expenses of the newly acquired Chadwick-BaRoss were $1.2 million in the quarter. Expenses in the quarter also include the one-time costs for the acquisition of Chadwick-BaRoss of $0.4 million. Strongco participated in and attended two large trade shows in the quarter that the Company did not attend in the prior year resulting in additional expenses for travel, advertising and promotion of approximately $0.2 million. Beyond these one-time and unusual expenses, the Company incurred additional travel and freight costs of approximately $0.2 million as a result of the recent rise in fuel costs which were not passed on to customers. In addition, the significant increase in sales and service activity in the quarter resulted in larger amounts of overtime labour. While labour utilization and recovery improved in the quarter, the overtime premiums could not be fully passed on resulting in incremental expenses of approximately $0.3 million. The cost of performing warranty work in the quarter was lower compared to the first quarter of 2010. However, as OEMs have become more restrictive in the type and amount of warranty they will cover, the amount of recovery from OEMs was lower, resulting in a net warranty recovery that was approximately $0.2 million lower than the first quarter of 2010.

Other Income

Other income and expense is primarily comprised of gains or losses on disposition of fixed assets, foreign exchange gains or losses, service fees received by Strongco as compensation for sales of new equipment by other third parties into the regions where Strongco has distribution rights for that equipment and commissions received from third party financing companies for customer purchase financing Strongco places with such finance companies. Other income in the first quarter of 2011 was $0.3 million compared to $0.3 million in the first quarter of 2010.

Interest Expense

Strongco's interest bearing debt comprises bank indebtedness and interest bearing equipment notes. Strongco typically finances equipment inventory under floor plan lines of credit available from various non-bank finance companies. Most equipment financing has interest free periods for up to eight months from the date of financing after which the equipment notes become interest bearing. The rate of interest on the Company's bank indebtedness and interest bearing equipment notes varies with Canadian chartered bank prime rate ("prime rate") and Canadian Bankers Acceptances Rates ("BA rates").

Strongco's interest expense in the first quarter of 2011 was $1.4 million, compared to $1.1 million in the first quarter of 2010. The increase was mainly due to slightly higher average balance of interest-bearing debt in the first quarter of 2011 coupled with slightly higher effective interest rates on that debt. In addition, interest expense of the newly acquired Chadwick-BaRoss was $0.1 million.

Prime lending rates and BA rates have increased from the very low levels that existed at the beginning of 2010. With the increase in prime rates and BA rates, the interest charged on the Company's bank indebtedness and equipment finance notes was higher in the first quarter of 2011 compared to the first quarter of 2010. In addition, the average amount of interest-bearing debt was slightly higher in the first quarter of 2011 compared to the prior year. During the recession in 2009, Strongco successfully reduced inventory and the related floor plan financing. As a result, interest-bearing equipment notes were lower in the first quarter of 2010. During 2010 and into 2011, Strongco has been increasing equipment inventories to the support the increasing demand for heavy equipment as construction markets recovered. This resulted in a higher average level of interest- bearing equipment notes in the first quarter of 2011 compared to the first quarter of 2010, (see discussion under "Financial Condition and Liquidity").

Earnings before Income Taxes

Strongco's earnings before income taxes in the first quarter of 2011 were $0.7 million, which was significantly improved from a loss before income taxes of $2.1 million in the first quarter of 2010. The increase was due to the strong revenue performance in the quarter and the incremental pretax earnings from the acquisition of Chadwick-BaRoss in February of $0.2 million.

Net Income (Loss)

Following conversion to a corporation on July 1, 2010, Strongco is now subject to income tax at corporate tax rates, whereas previously, as an income trust, the Fund was not subject to corporate tax. In addition, as a consequence of conversion, Strongco is now able to utilize tax losses, including tax losses previously unrecognized from the Fund. The recognition of tax loss carry forwards resulted in no provision for income tax in the first quarter of 2011 for Strongco in Canada. However, the tax provision from the newly acquired Chadwick-BaRoss was $0.1 million in the first quarter.

Strongco's net income in the first quarter of 2011 was $0.6 million ($0.05 per share), which was significantly improved from a net loss of $2.0 million (loss of $0.20 per unit) in the first quarter of 2010.

EBITDA

EBITDA in the first quarter of 2011 was $6.8 million which compares to $2.2 million in the first quarter of 2010. EBITDA was calculated as follows:


                            Three Months Ended December 31,                 
                                   2011                2010        2011/2010
                            ------------------------------------ -----------
                            ------------------------------------ -----------
                             $ millions          $ millions       $ Variance
---------------------------------------------------------------- -----------
---------------------------------------------------------------- -----------
Net Income                       $      0.6    $       (2.1)    $        2.7
Add Back:                                                                   
  Interest                              1.3             1.1              0.2
  Income taxes                          0.1             0.1                -
  Amortization of capital                                                   
   assets                               0.7             0.2              0.5
  Amortization of equipment                                                 
   inventory on rent                    3.9             2.9              1.0
  Amortization of rental                                                    
   fleet equipment                      0.2               -              0.2
---------------------------------------------------------------- -----------
EBITDA (note 1)                  $      6.8    $        2.2     $        4.6
---------------------------------------------------------------- -----------
---------------------------------------------------------------- -----------

Note 1 - EBITDA is a non-IFRS measure. See explanation under the heading    
"Non-IFRS Measures" below.                                                  

Cash Flow, Financial Resources and Liquidity

Cash Flow Provide By (Used In) Operating Activities:

As a result of the strong revenues and earnings in the first quarter of 2011, Strongco generated $7.3 million of cash before changes in working capital and interest. Cash of $5.4 million was used in building working capital and cash employee future benefits funding of $0.1 and cash interest payments were $1.3 million resulting in zero cash from operating activities in the first quarter. By comparison, in the first quarter of 2010, $2.2 million of cash was provided by operating activities before changes in working capital and interest, which was offset by cash used to increase working capital of $4.9 million and interest payments of $1.1 million, resulting in net use of cash from operations of $3.8 million.

The components of the cash used in and provided by operating activities were as follows:


                                                        Three Months        
                                                           ended            
                                                         March 31,          
($ millions)                                              2011         2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (loss) from continuing operations            $    0.6     $   (2.0)
Non-cash items:                                                             
   Amortization of property, plant and equipment           0.7          0.2 
   Amortization of equipment inventory on rent             3.9          2.9 
   Amortization of rental fleet                            0.2            - 
   Gain on disposal of property and equipment                -            - 
   Gain on sale of rental equipment                        0.5              
   Interest expense                                        1.4          1.1 
   Income tax expense / (recovery)                         0.1            - 
   Deferred income tax liability                          (0.1)           - 
----------------------------------------------------------------------------
                                                           7.3          2.2 
----------------------------------------------------------------------------
Changes in non-cash working capital balances              (5.4)        (4.9)
Employee future benefit funding                           (0.1)           - 
Interest paid                                             (1.3)        (1.1)
----------------------------------------------------------------------------
Net cash provided by (used in) operating                                    
 activities                                           $    0.5     $   (3.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Items not involving the outlay of cash includes amortization of equipment inventory on rent of $3.9 million in the first quarter of 2011 which compares to $2.9 million in the first quarter of 2010. Higher volumes of equipment rentals in the first quarter of 2011 resulted in the higher amortization of equipment inventory on rent.

Components of the net change in non-cash working capital for the three month period ending March 31, 2011 and 2010 were as follows:


Net (Increase)/Decrease in Non-cash Working                                 
 Capital                                                                    
(millions)                                                                  
(increase)/decrease                                        2011        2010
----------------------------------------------------------------------------
Accounts receivable                                 $      (2.2) $      2.5
Inventories                                                (8.7)       (4.6)
Prepaids                                                   (0.6)       (0.6)
----------------------------------------------------------------------------
                                                    $    (11.5)  $     (2.7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
increase/(decrease)                                                         
--------------------------------------------------                          
Accounts payable and accrued liabilities                    2.7        (1.1)
Deferred revenue & customer deposits                        0.4         0.8
Deferred income tax liability                              (0.1)       (0.1)
Equipment notes payable                                     3.0        (1.8)
----------------------------------------------------------------------------
                                                    $       6.1  $     (2.2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net Increase in Non-cash Working Capital            $      (5.4) $     (4.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

With an increase in parts and service revenue, accounts receivable increased in the first quarter of 2011 by $2.2 million. By comparison, product support revenues were lower in the first quarter of 2010 which resulted in a decrease in accounts receivable of $2.5 million in the first quarter of 2010. The average age of receivables outstanding at the end of the year was approximately 35 days, slightly improved from December 2010 at approximately 38 days and 40 days a year ago.

Equipment inventory had been reduced by the strong sales in the fourth quarter of 2010. Inventory levels were increased during the first quarter in anticipation of stronger sales throughout 2011 compared to 2010. By comparison, with weak construction markets in the first quarter of 2010 and an expectation of a slow recovery throughout the year, there was a smaller build of inventories in the first quarter of 2010.

As business activity increased in 2011, accounts payable and accrued liabilities increased, in particular due to an increase in parts purchased during the first quarter. By comparison, accounts payable and accrued liabilities were down on the first quarter of 2010 due primarily to the timing of payments and also due to lower purchases of parts inventory.

With the increase in equipment inventory, equipment notes also increased. By comparison equipment notes were reduced in the first quarter of 2010 as equipment inventory was sold and new inventory purchases were lower.

Cash Provided By (Used In) Investing Activities:

Net cash used in investing activities of continuing operations amounted to $13.4 million in the first quarter of 2011 primarily related to the acquisition of Chadwick-BaRoss for $11.2 million. Capital expenditure in the quarter of $2.9 million includes the purchase of land in Edmonton, Alberta for a new branch for $2.6 million. Chadwick-BaRoss sold older rental fleet for proceeds of $1.1 million and added new equipment to its rental fleet at a cost of $0.5 million. Investing activities in the first quarter of 2010 amounted to $0.1 million related mainly to facilities upgrades and miscellaneous shop equipment.

The components of the cash used in investing activities were as follows:


                                                       Three Months Ended   
                                                            March 31,       
                                                ----------------------------
($ millions)                                             2011          2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acquisiton of Chadwick-BaRoss, Inc.               $     (11.2)  $         - 
Purchase of rental fleet equipment                       (0.5)            - 
Proceeds on the sale of rental fleet equipment            1.1             - 
Purchase of capital assets                               (2.9)         (0.1)
----------------------------------------------------------------------------
Cash used in investing activities                 $     (13.4)  $      (0.1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash Provided By (Used In) Financing Activities:

In the first three months of 2011, Strongco provided $13.9 million of cash from financing activities which compared to cash of $3.9 million provided from financing activities in the first quarter of 2010. Net cash of $7.8 million was provided from the issue or shares under the rights offering completed in the first quarter of 2011 (see discussion under "Shareholder Capital"). Additional cash of $5.5 million was provided from increased borrowing under bank credit lines. In March of 2011, Strongco made the final scheduled repayment of $1.2 million of the note taken back from Volvo Construction Equipment on the acquisition of Champion in 2008.

The components of the cash used in financing activities were as follows:


                                                       Three Months Ended   
                                                            March 31,       
                                                     -----------------------
($ millions)                                             2011          2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Proceeds from rights offering                     $       7.8   $         - 
Increase in bank indebtedness                             5.5           5.0 
Repayment of note from purchase of Champion              (1.2)         (1.1)
Vendor take back not on purchase of Chadwick-                               
 BaRoss                                                   1.8             - 
----------------------------------------------------------------------------
Cash used in financing activities                 $      13.9   $       3.9 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Bank Credit Facilities

The Company has credit facilities with banks in Canada and United States which provide 364-Day committed operating lines of credit totaling approximately $22.4 million which are renewable annually. Borrowings under the lines of credit are limited by standard borrowing base calculations based on accounts receivable and inventory, typical of such lines of credit. As collateral the Company has provided a $50 million debenture and a security interest in accounts receivables, inventories (subordinated to the collateral provided to the equipment inventory lenders), capital assets (subordinated to collateral provided to lessors), real estate and on intangible and other assets. The operating lines bear Interest at rates that range between bank prime rate plus 0.50% and bank prime rate plus 1.50% and between the one month Canadian Bankers' Acceptance Rates ("BA rates") plus 1.75% and BA rates plus 2.75 in Canada and at LIBOR plus 2.60% in the United States. Under its bank credit facilities, the Company is able to issue letters of credit up to a maximum of $5 million. Outstanding letters of credit reduce the Company's availability under its operating lines of credit. For certain customers, Strongco issues letters of credit as a guarantee of Strongco's performance on the sale of equipment to the customer. As at March 31, 2011, there were outstanding letters of credit of $0.1 million.

In addition to its operating lines of credit, the Company has a $15 million line for foreign exchange forward contracts as part of its bank credit facilities ("FX Line") available to hedge foreign currency exposure. Under this FX Line, Strongco can purchase foreign exchange forward contracts up to a maximum of $15 million. As at March 31, 2011, the Company had outstanding foreign exchange forward contracts under this facility totaling US$6.7 million at an average exchange rate of $1.0023 Canadian for each US $1.00 with settlement dates between April 30, 2011 and August 31, 2011.

The Company's bank credit facilities also include a term loan secured by real estate in the United States. At March 31, 2011 the outstanding balance on this term loan was US$3.8 million. The term loan bears interest at LIBOR plus 3.05% and requires monthly principal payments of US$13,334 plus accrued interest. The Company has interest rate swap agreements in place which have converted the variable rate on the term loan to a fixed rate of 5.17%. The term loan and swap agreements expire in September 2012 at which point a balloon payment from the balance of the loan is due.

The Company's bank credit facilities contain financial covenants typical of such credit facilities that require the Company to maintain certain financial ratios and meet certain financial thresholds. In particular, the credit facilities contains covenants that require the Company to maintain a minimum ratio of total current assets to current liabilities ("Current Ratio covenant") of 1.1: 1, a minimum tangible net worth ("TNW covenant") of $54 million, a maximum ratio of total debt to tangible net worth ("Debt to TNW Ratio covenant") of 3.5 : 1 and a minimum ratio of EBITDA minus capital expenditures to total interest ("Debt Service Coverage Ratio covenant") of 1.3 : 1. For the purposes of calculating covenants under the credit facility, debt is defined as total liabilities less future income tax amounts and subordinated debt. The Debt Service Coverage Ratio is measured at the end of each quarter on a trailing twelve month basis. Other covenants are measured as at the end of each quarter. The Company's bank has agreed to amend covenants for the accounting changes under IFRS (see discussion under heading "Conversion to International Financial Reporting Standards" below). The Company was in compliance with all covenants under its bank credit facilities as at March 31, 2011, before accounting adjustments for IFRS.

In connection with the acquisition of Chadwick-BaRoss, in April 2011, the Company's credit facilities were amended to add a $5 million demand non-revolving term loan ("Acquisition Loan"). The Acquisition Loan is for a term of 60 months and bears interest at the bank's prime lending rate plus 200 bps. The Acquisition Loan is subject to monthly principal payments of $83,333 plus accrued interest.

In addition, in April 2011, the bank credit facilities were further amended to add a construction loan facility ("Construction Loan") to finance the construction of the Company's new Edmonton, Alberta branch. Under the Construction Loan, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $7.1 million. Construction of the new branch will commence in June 2011 and is scheduled to be completed before the end of 2011. Upon completion, the Construction Loan will be converted to a demand, non-revolving term loan ("Mortgage Loan"). The Mortgage Loan will be for a term of 60 months. The Construction Loan and Mortgage Loan bear interest at the bank's prime lending rate plus 2.0%.

Equipment Notes

In addition to its bank credit facilities, the Company has lines of credit available totaling approximately $250 million from various non-bank equipment lenders in Canada and the United States, which are used to finance equipment inventory and rental fleet. At March 31, 2011, there was approximately $132.3 million borrowed on these equipment finance lines.

Typically, these equipment notes are interest free for periods up to 12 months from the date of financing, after which they bear interest at rates ranging from 4.25% to 5.85% over the one month BA rate or 3.25% to 4.9% over the prime rate of a Canadian chartered bank in Canada, and between 0.0% and 5.85% in the United States. As collateral for these equipment notes, the Company has provided liens on the specific inventories financed and any related accounts receivable. Monthly principal repayments or "curtailments" equal to 3% of the original principal balance of the note commence 12 months from the date of financing and the remaining balance is due in full at the earlier of 24 months after financing or when the financed equipment is sold. While financed equipment is out on rent, monthly curtailments are required equal to the greater of 70% of the rental revenue and 2.5% of the original value of the note. Any remaining balance after 24 months, which is due in full, is normally refinanced with the lender over an additional period of up to 24 months. All of the Company's equipment notes facilities are renewable annually.

Certain of the Company's equipment finance credit agreements contain restrictive financial covenants, including requiring the Company to remain in compliance with the financial covenants under all of its other lending agreements ("cross default provisions"). The Company's equipment finance lenders have agreed to amend covenants for the accounting changes under IFRS (see discussion under heading "Conversion to International Financial Reporting Standards" below). The Company was in compliance with all covenants under its equipment finance credit facilities as at March 31, 2011, before accounting adjustments for IFRS.

The balance outstanding under the Company's debt facilities at March 31, 2011 and 2010 was as follows:


Debt Facilities                                                           
As at March 31 ($ millions)                            2011           2010
--------------------------------------------------------------------------
Bank indebtedness (including outstanding                                  
 cheques)                                       $      17.9  $        15.0
Equipment notes payable - non interest bearing         43.0           27.4
Equipment notes payable - interest bearing             85.7           75.6
Other notes payable                                     9.0            1.2
--------------------------------------------------------------------------
                                                $     155.6  $       119.2
--------------------------------------------------------------------------
--------------------------------------------------------------------------

As at March 31, 2011 there was $4.6 million of unused credit available under the Company's bank credit lines. While availability under the bank line fluctuates daily depending on the amount of cash received and cheques and other disbursements clearing the bank, availability generally ranges between $5 million and $15 million. Borrowing under the Company's bank lines is typically higher in the first quarter when cash flows from operations is the lowest, and reduces through to the end of the year as cash flows increase.

The Company also had availability under its equipment finance facilities of $117.7 million at March 31, 2011. Borrowing on the Company's equipment finance lines typically increases in the first five months of the year as equipment inventory is purchased for the season and declines through to the end of the year as equipment sales increase, particularly in the fourth quarter.

With the level of funds available under the Company's bank credit lines, the current availability under the equipment finance facilities and anticipated improvement in cash flows from operations, management believes the Company will have adequate financial resources to fund its operations and make the necessary investment in equipment inventory and fixed assets to support its operations in the future.

SUMMARY OF QUARTERLY DATA

In general, business activity in the Equipment Distribution segment follows a weather related pattern of seasonality. Typically, the first quarter is the weakest quarter as construction and infrastructure activity is constrained in the winter months. This is followed by a strong gain in the second quarter as construction and other contracts begin to be tendered and companies begin to prepare for summer activity. The third quarter generally tends to be slightly slower from an equipment sales standpoint, which is partially offset by continued strength in equipment rentals and customer support activities. Fourth quarter activity generally strengthens as customers make year-end capital spending decisions and exercise purchase options on equipment which has previously gone out on RPO's. In addition, purchases of snow removal equipment are typically made in the fourth quarter. However, as a result of weak economic conditions and significantly reduced construction activity in Canada, the markets for heavy equipment in 2009 were extremely weak throughout the year. Construction markets and demand for heavy equipment have improved in 2010 and into the first quarter of 2011 but volumes remained below historic pre-recession levels.

A summary of quarterly results for the current and previous two years is as follows:


                                                                       2011 
($ millions, except per                                                     
 share/unit amounts)                    Q4         Q3         Q2         Q1 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue                                                           $    87.5 
Earnings before income taxes                                            0.7 
Net income                                                              0.6 

Basic and diluted earnings per                                              
 share                                                            $    0.05 

                                                                       2010 
($ millions, except per                                                     
 share/unit amounts)                    Q4         Q3         Q2         Q1 
----------------------------------------------------------------------------

Revenue                          $    91.8  $    79.6  $    69.6  $    53.7 
Earnings (loss) from continuing                                             
 operations before income taxes        1.5        0.7       (0.5)      (2.1)
Net income (loss)                      1.5        0.7       (0.5)      (2.1)

Basic and diluted earnings                                                  
 (loss) per share/unit           $    0.14  $    0.07  $   (0.05) $   (0.20)

                                                                       2009 
                                                                    (note 1)
($ millions, except per unit                                                
 amounts)                               Q4         Q3         Q2         Q1 
----------------------------------------------------------------------------

Revenue                          $    67.5  $    74.6  $    76.7  $    73.0 
Earnings (loss) from continuing                                             
 operations before income taxes       (1.8)       0.1        2.0        1.2 
Net income (loss)                     (2.1)      (0.5)       1.4        1.2 

Basic and diluted earnings                                                  
 (loss) per unit                 $   (0.20) $   (0.05) $    0.14  $    0.11 
(Note 1 - 2009 figure do not reflect changes                                
 accounting necessary to comply with IFRS)                                  

A discussion of the Company's previous quarterly results can be found in the Company's quarterly Management's Discussion and Analysis reports available on SEDAR at www.sedar.com.

CONTRACTUAL OBLIGATIONS

The Company has contractual obligations for operating lease commitments totaling $23.8 million. In addition, the Company has contingent contractual obligations where it has agreed to buy back equipment from customers at the option of the customer for a specified price at future dates ("buy back contracts"). These buy back contracts are subject to certain conditions being met by the customer and range in term from three to 10 years. The Company's maximum potential losses pursuant to the majority of these buy back contracts are limited, under an agreement with the original equipment manufacturer, to 10% of the original sale amounts. In addition, this agreement provides a financing arrangement in order to facilitate the buyback of equipment. As at March 31, 2011, the total buy back contracts outstanding were $12.2 million. A reserve of $1.0 million has been accrued in the Company's accounts as at March 31, 2011 with respect to these commitments.

The Company has provided a guarantee of lease payments under the assignment of a property lease which expires January 31, 2014. Total lease payments from January 1, 2011 to January 31, 2014 are $0.5 million.

Contractual obligations are set out in the following tables. Management believes that the Company will generate sufficient cash flow from operations to meet its contractual obligations.


                                                       Payment due by period
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                              Less Than     1 to 3     4 to 5        After 5
($ millions)           Total     1 Year      years      years          years
----------------------------------------------------------------------------
Operating leases  $     23.8 $      4.8 $     12.4 $      4.5 $          2.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                       Contingent obligation
                                                                   by period
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   Less                                     
                                   Than     1 to 3     4 to 5        After 5
($ millions)           Total     1 Year      years      years          years
----------------------------------------------------------------------------
Buy back                                                                    
 contracts        $     12.2 $      2.2 $      5.5 $      4.5 $            -
----------------------------------------------------------------------------

SHAREHOLDER CAPITAL

The Company is authorized to issue an unlimited number of shares. All shares are of the same class of common shares with equal rights and privileges. Effective July 1, 2010 Strongco converted from a trust to a corporation and all outstanding trust units of the Fund were exchanged for shares of Strongco Corporation on a one for one basis after which the Fund was wound up into Strongco Corporation (see discussion under heading "Conversion to a Corporation").

On January 17, 2011, the Company completed a rights offering, under which 2.62 million additional shares were issued pursuant to the rights issued to existing shareholders for gross proceeds of $7.86 million (refer to the Company's Rights Offering Circular filed on SEDAR for details). The total shares outstanding following completion of the rights offering was 13,128,629.


                                                                   Number of
Common Shares/Trust Units Issued and Outstanding Shares         Shares/Units
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Common shares outstanding as at December 31, 2010                 10,508,719
Common shares issued under rights offering                         2,619,910
----------------------------------------------------------------------------
Common shares outstanding as at March 31, 2011                    13,128,629
----------------------------------------------------------------------------
----------------------------------------------------------------------------

OUTLOOK

The recovery in construction markets evident in the latter half of 2010 is continuing into 2011. With that, demand for equipment has continued to increase. The economy and construction markets across Canada are expected to continue to improve throughout 2011, which in turn, will lead to increased demand for heavy equipment, and increased willingness of customers to purchase equipment. Strongco's equipment sales backlogs, which rose during the first half of 2010 from the very low levels that existed at the end of 2009, remained strong through the balance of the year and into 2011, a positive sign that demand for heavy equipment is improving.

As expected following a recession, recovery has been more evident in the markets for earth moving equipment. The markets for cranes, which are typically utilized in latter stages of construction, have been slower to recover, but demand for cranes started to show improvement towards the end of 2010 and is expected to increase in 2011 as construction activity continues to grow. Strongco's sales backlog for cranes has also risen, which is a sign that demand is improving.

An important contribution to the anticipated growth in 2011 is expected from Alberta. Oil prices have continued to show strength and stability and with that, the economy in Alberta has continued to improve. Activity in the oil sands has accelerated which has led to increase spending for heavy equipment in northern Alberta. That improvement was first evident late in 2010 but has continued into 2011. In addition, there has been an increase in construction activity in general throughout the province. Strongco's sales backlogs in Alberta have increased and management is optimistic that heavy equipment markets in the province will continue to improve in 2011.

Most OEM's have scaled back production and reduced capacity in response to the weak North American economy in 2009 and 2010. This has resulted in increased delivery times and shortages of certain types of equipment. OEM's are continuing to struggle to increase production capacity and improve lead time and availability. There have been indications of improvement but the transition to the new low emission tier 4 engine technology in 2011 is an added complication which may lead to longer lead times and reduced supply. In addition, the earthquakes and tsunami in Japan is beginning to cause global shortages of certain equipment and parts. OEM's are still evaluating the impact of the Japanese disaster on their ability to supply but have notified dealer that there could be delays and shortages.

Management remains cautiously optimistic that the improving trend in construction markets evidenced in Canada in the latter half of 2010 and first quarter of 2011 will continue through the balance of the year and expects demand for heavy equipment will grow which will lead to increased revenues in 2011. In addition, the acquisition of Chadwick-BaRoss, effective February 1, 2011 will contribute to improved sales levels for Strongco in 2011.

CONVERSION to INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")

As further described in the Company's interim unaudited consolidated financial statements and notes for the first quarter of 2011, the Company began reporting its financial results in accordance with IFRS effective January 1, 2011.

The following summarizes the significant financial effects on the Company's consolidated financial statements resulting from the conversion to IFRS and a summary of the significant accounting policies adopted by the Company in preparing its IFRS consolidated financial statements.

First-time adoption of IFRS ("IFRS 1")

The interim unaudited consolidated financial statements and notes for the first quarter of 2011 contain the accounting policies adopted under IFRS as well as reconciliations of the impacts to the consolidated financial statements on transition. IFRS 1 allows first-time adopters certain exemptions from the general requirements contained in IFRS. The Company has elected to apply the following optional exemptions:

Business Combinations

The Company had the option of applying IFRS 3 - Business Combinations either retrospectively for all business combinations from a particular pre-transition date selected by the Company or prospectively from the transition date of January 1, 2010. The Company has elected not to apply IFRS 3 retrospectively to business combinations that occurred before January 1, 2010. Accordingly, this election has the effect of maintaining the accounting for past business combinations as previously reported.

Employee benefits

The Company had the option to retroactively apply the requirements of IAS 19 - Employee Benefits or to recognize all cumulative unamortized actuarial gains and losses at the date of transition to IFRS in retained earnings. The Company has elected to recognize all cumulative unamortized actuarial gains and losses on its pension and other postretirement benefit plans as at January 1, 2010 directly in retained earnings. This election resulted in a reduction to retained earnings of $8.8 million ($4.7 million after tax) as at January 1, 2010. In addition, the Company recognized an additional minimum funding liability on transition to IFRS in the amount of $1.5 million ($0.8 million after tax) in accordance with the provisions contained in IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

Borrowing costs

The Company had the option of adopting IAS 23 - Borrowing Costs as at January 1, 2009 or the date of transition to IFRS, whichever is later. The Company has elected to apply this standard on the date of transition to IFRS. This election had no impact on the Company's financial results.

Mandatory exceptions

IFRS 1 provides for a number of mandatory exceptions from full retrospective application of IFRS, with estimates being the only mandatory exception applicable to the Company. Estimates previously made by the Company under previous Canadian GAAP are consistent with their application under IFRS.

Income Taxes

For the comparative six month period ended June 30, 2010 when the Company operated under an income trust structure, deferred income taxes were measured at the rate applicable to undistributed profits. As a result, deferred income taxes were re- measured at the tax rate of approximately 46.4% applicable to undistributed profits which resulted in an increase of $1.2 million to the Company's deferred tax liability as at January 1, 2010. The deferred taxes were subsequently re-measured at the applicable corporate rates on July 1, 2010, the date the Company converted to a corporation.

In addition, following the adjustments made to the opening balance at January 1, 2010 on the adoption of IFRS the Company assessed the recoverability of its deferred tax asset and determined that it did not meet the recognition criteria under IAS 12. As a result, the Company recorded an adjustment of $2.1 million to reduce retained earnings and deferred income tax assets on January 1, 2010.

Employee Benefits

The Company considered the various alternatives under IFRS with respect to the accounting for actuarial gains and losses and elected to follow the method of recognizing actuarial gains and losses to equity in other comprehensive income (loss) in the period in which they arise.

Property, plant and equipment

The Company has elected to continue to account for property, plant and equipment using the cost model. In addition, a review of the significant components of property, plant and equipment was completed at January 1, 2010 and it was determined that no changes were necessary with respect to componentization and the useful lives of property, plant and equipment.

Impairment of assets

As the market capitalization of the Company was less than the carrying value of equity, the Company has completed an impairment test on its long-lived assets at January 1, 2010 and December 31, 2010 and determined that no impairment exists. In addition, the Company completed an impairment test on the indefinite life intangible asset at January 1, 2010 and December 31, 2010 and determined that no impairment exists. The Company used the value in use methodology for its impairment testing using the following five cash generating units: Ontario region, Quebec region, Atlantic region, Western Canada region and Crane division.

Share-based payments

The Company amended its accounting policies related to the recognition and measurement of share options issued under the Company's equity incentive plan to conform to the requirements under IFRS. As required under IFRS 2, Share-based Payment, the Company recognizes compensation cost associated with employee share options when services have commenced and accrues for the cost over the vesting period using the graded method of amortization. Accordingly, each tranche in an award is considered a separate award with its own vesting period and grant date value. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. The Company assessed the impact of the recognition and measurement criteria under IFRS 2 and recorded a reduction to retained earnings of $0.1 million at January 1, 2010.

Trust units

The Company reviewed their trust indenture and concluded that the Fund units, which were outstanding during the period the Company operated as an income trust, met the requirements of a puttable financial instrument in accordance with IAS 32. Accordingly, the Fund units, which were outstanding for the six-month period ended June 30, 2010, were classified as equity under IFRS.

NON-IFRS MEASURES

"EBITDA" refers to earnings before interest, income taxes, amortization of capital assets, amortization of intangible assets, amortization of equipment inventory on rent, and goodwill impairment. EBITDA is a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not an earnings measure recognized by GAAP, does not have standardized meanings prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. The Company's management believes that EBITDA is an important supplemental measure in evaluating the Company's performance and in determining whether to invest in Shares. Readers of this information are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with GAAP as indicators of the Company's performance or to cash flows from operating, investing and financing activities as measures of the Company's liquidity and cash flows. The Company's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Company's EBITDA may not be comparable to similar measures presented by other issuers.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements. The Company bases its estimates and assumptions on past experience and various other assumptions that are believed to be reasonable in the circumstances. This involves varying degrees of judgment and uncertainty which may result in a difference in actual results from these estimates. The more significant estimates are as follows:

Inventory Valuation

The value of the Company's new and used equipment is evaluated by management throughout each year. Where appropriate, a provision is recorded against the book value of specific pieces of equipment to ensure that inventory values reflect the lower of cost and estimated net realizable value. The Company identifies slow moving or obsolete parts inventory and estimates appropriate obsolescence provisions by aging the inventory. The Company takes advantage of supplier programs that allow for the return of eligible parts for credit within specified time periods. The inventory provision as at March 31, 2011 with changes from December 31, 2010 is as follows:


Provision for Inventory Obsolescence                            ($ millions)
----------------------------------------------------------------------------
Provision for inventory obsolescence as at December 31,                     
 2010                                                        $           3.0
Inventory disposed of during the quarter                                   -
Additional provisions made during the quarter                            0.1
Provision for obsolescence of Chadwick-BaRoss                            1.7
----------------------------------------------------------------------------
Provision for inventory obsolescence as at March 31, 2011    $           4.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Allowance for Doubtful Accounts

The Company performs credit evaluations of customers and limits the amount of credit extended to customers as appropriate. The Company is however exposed to credit risk with respect to accounts receivable and maintains provisions for possible credit losses based upon historical experience and known circumstances. The allowance for doubtful accounts as at March 31, 2011 with changes from December 31, 2010 is as follows:


Allowance for Doubtful Accounts                                  $ millions 
----------------------------------------------------------------------------
Allowance for doubtful accounts as at December 31, 2010     $           1.2 
Accounts written off during the quarter                                (0.1)
Additional provisions made during the quarter                           0.1 
Allowance for doubtful accounts of Chardwick-BaRoss                     0.4 
----------------------------------------------------------------------------
Allowance for doubtful accounts as at March 31, 2011        $           1.6 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Post Retirement Obligations

Strongco performs a valuation at least every three years to determine the actuarial present value of the accrued pension and other non-pension post retirement obligations. Pension costs are accounted for and disclosed in the notes to the financial statements on an accrual basis. Strongco records employee future benefit costs other than pensions on an accrual basis. The accrual costs are determined by independent actuaries using the projected benefit method prorated on service and based on assumptions that reflect management's best estimates. The assumptions were determined by management recognizing the recommendations of Strongco's actuaries. These key assumptions include the rate used to discount obligations, the expected rate of return on plan assets, the rate of compensation increase and the growth rate of per capita health care costs.

The discount rate is used to determine the present value of future cash flows that we expect will be required to pay employee benefit obligations. Management's assumptions of the discount rate are based on current interest rates on long-term debt of high quality corporate issuers.

The assumed return on pension plan assets of 6.5% per annum is based on expectations of long-term rates of return at the beginning of the fiscal year and reflects a pension asset mix consistent with the Company's investment policy. The costs of employee future benefits other than pension are determined at the beginning of the year and are based on assumptions for expected claims experience and future health care cost inflation.

Changes in assumptions will affect the accrued benefit obligation of Strongco's employee future benefits and the future years' amounts that will be charged to results of operations.

Future Income Taxes

At each quarter end the Company evaluates the value and timing of the Company's temporary differences. Future income tax assets and liabilities, measured at substantively enacted tax rates, are recognized for all temporary differences caused when the tax bases of assets and liabilities differ from those reported in the consolidated financial statements.

Changes or differences in these estimates or assumptions may result in changes to the current or future tax balances on the consolidated balance sheet, a charge or credit to income tax expense in the consolidated statements of earnings and may result in cash payments or receipts. Where appropriate, the provision for future income taxes and future income taxes payable are adjusted to reflect management's best estimate of the Company's future income tax accounts.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis contains forward-looking statements that involve assumptions and estimates that may not be realized and other risks and uncertainties. These statements relate to future events or future performance and reflect management's current expectations and assumptions which are based on information currently available to the Company's management. The forward-looking statements include but are not limited to: (i) the ability of the Company to meet contractual obligations through cash flow generated from operations, (ii) the expectation that customer support revenues will grow following the warranty period on new machine sales and (iii) the outlook for 2011. There is significant risk that forward-looking statements will not prove to be accurate. These statements are based on a number of assumptions, including, but not limited to, continued demand for Strongco's products and services. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward looking statements. The inclusion of this information should not be regarded as a representation of the Company or any other person that the anticipated results will be achieved and investors are cautioned not to place undue reliance on such information. These forward-looking statements are made as of the date of this MD&A, or as otherwise stated and the Company does not assume any obligation to update or revise them to reflect new events or circumstances.

Additional information, including the Company's Annual Information Form, may be found on SEDAR at www.sedar.com.

Strongco Corporation

Unaudited Interim Consolidated Financial Statements

March 31, 2011 and 2010

The attached unaudited consolidated interim financial statements for Strongco Corporation as at and for the three month period ended March 31, 2011, together with the accompanying notes, were prepared by management and have not been reviewed by the Company's auditors.


Strongco Corporation                                                        
Unaudited Consolidated Balance Sheet                                        

----------------------------------------------------------------------------
(in thousands of Canadian dollars,                                          
 unless otherwise indicated)                                                
----------------------------------------------------------------------------
                                                       December             
                                         March 31,          31,  January 1,
                                              2011         2010        2010
----------------------------------------------------------------------------
Assets                                                                      
Current assets                                                              
Trade and other receivables (note                                           
 5(v)(a))                              $    42,316  $    35,884  $   27,088
Inventories (note 6)                       174,444      159,988     144,461
Prepaid expenses and other deposits          2,122        1,452       1,255
----------------------------------------------------------------------------
                                           218,882      197,324     172,804
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-current assets                                                          
Property and equipment (note 5(v)(b))       22,869       15,849      15,949
Rental fleet                                11,055            -           -
Deferred income tax asset (note 12)          1,091            -           -
Intangible assets (note 5(v)(c))             1,800        1,800       1,800
Other assets                                   188          188         243
----------------------------------------------------------------------------
                                            37,003       17,837      17,992
----------------------------------------------------------------------------
Total assets                           $   255,885  $   215,161  $  190,796
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and shareholders' equity                                        

Current liabilities                                                         
Bank indebtedness (note 7)             $    17,902  $    12,370  $   10,014
Trade and other payables (note 5(v)(d))     34,273       28,829      19,648
Provisions (note 5(v)(e))                    1,583        1,436       1,366
Deferred revenue and customer deposits       1,753        1,321         515
Equipment notes payable - non-interest                                     
 bearing (note 8)                           43,041       40,097      28,671
Equipment notes payable - interest                                         
 bearing (note 8)                           85,739       78,063      76,172
Current portion of finance lease                                           
 obligations                                 1,197          960         954
Current portion of notes payable (note                                     
 9)                                            912        1,233       1,094
----------------------------------------------------------------------------
                                           186,400      164,309     138,434
----------------------------------------------------------------------------
Non-current liabilities                                                     
Deferred income tax liabilities (note                                       
 12)                                         2,722            -           -
Notes payable (note 9)                       8,105            -       1,218
Finance lease obligations                    1,303        1,502       1,154
Employee future benefit obligations                                        
 (note 5(ii)(a))                             4,293        4,374       4,455
----------------------------------------------------------------------------
                                            16,423        5,876       6,827
----------------------------------------------------------------------------
Total liabilities                          202,823      170,185     145,261
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Shareholders' equity                                                        
Shareholders' capital (note 10)             64,898       57,089      57,089
Accumulated other comprehensive loss          (420)         (67)          -
Deferred compensation                          347          315           -
Deficit                                    (11,763)     (12,361)    (11,554)
----------------------------------------------------------------------------
Total shareholders' equity                  53,062       44,976      45,535
----------------------------------------------------------------------------
Total liabilities and shareholders'                                         
 equity                                $   255,885  $   215,161  $  190,796
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contingencies (note 13)                                                     

The accompanying notes are an integral part of these consolidated financial 
statements.                                                                 

Approved: May 26, 2011                                                      

On behalf of the Board:                                                     

Robert J. Beutel        Ian Sutherland                                     

Strongco Corporation                                                        
Unaudited Consolidated Statement of Income (Loss)                    
For the Three-Month Periods Ended March 31                                 
(in thousands of Canadian dollars, unless otherwise indicated, except per   
 share amounts)

----------------------------------------------------------------------------
                                                          2011         2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue (note 14)                                $      87,495 $     53,680
Cost of sales (note 5 (v)(f))                           70,511       42,263
----------------------------------------------------------------------------
Gross profit                                            16,984       11,417
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Expenses                                                                    
Administration (note 5(v)(f))                            7,268        6,218
Distribution (note 5(v)(f))                              4,542        4,250
Selling (note 5(v)(f))                                   3,431        2,190
Other income                                              (274)        (268)
----------------------------------------------------------------------------
Operating income                                         2,017         (973)
----------------------------------------------------------------------------

Interest expense (note 5(v)(g))                          1,356        1,100
----------------------------------------------------------------------------
Income (loss) before income taxes                          661       (2,073)
----------------------------------------------------------------------------

Provision for income taxes (note 12)                        63            -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) attributable to                                           
  shareholders for the period                    $         598 $     (2,073)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings (loss) per share                                                   
Basic and dilutive                               $        0.05 $      (0.20)
----------------------------------------------------------------------------

Weighted average number of shares (note 11)                                 
  - basic                                           12,633,757   10,508,719
----------------------------------------------------------------------------
  - dilutive                                        12,665,004   10,508,719
----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial 
statements.                                                                 


Strongco Corporation                                                        
Unaudited Consolidated Statement of Comprehensive Income (Loss) 
For the three-month periods ended March 31                                  
(in thousands of Canadian dollars, unless otherwise indicated, except per  
 share amounts)                                                             

----------------------------------------------------------------------------
                                                            2011       2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) attributable to shareholders for                          
 the period                                          $       598 $   (2,073)

Other comprehensive income                                                  
Currency translation adjustment                              353           -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Comprehensive income (loss) attributable to                                 
 shareholders                                                               
  for the period                                     $       245 $   (2,073)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial 
statements.                                         

Strongco Corporation                                                        
Unaudited Consolidated Statement of Changes in Shareholders' Equity 

For the three-month period ended March 31                                  
(in thousands of Canadian dollars, unless otherwise indicated, except per  
 share amounts)                                                            

----------------------------------------------------------------------------
                                                                 Accumulated
                                                                       other
                                          Number        Share-       compre-
                                              of      holders'       hensive
                                          shares       capital          loss
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance - January 1, 2010             10,508,719 $      57,089 $           -

Net loss and comprehensive loss       
 for the period                                              -             -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance - March 31, 2010              10,508,719 $      57,089 $           -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                                                 Accumulated
                                                                       other
                                          Number        Share-       compre-
                                              of      holders'       hensive
                                          shares       capital          loss
----------------------------------------------------------------------------

Balance - December 31, 2010           10,508,719 $      57,089 $        (67)

Net loss for the period                                      -            -

Other comprehensive loss:                                                   
 Currency translation                                 
  adjustment                                                 -         (353)

Issuance of shares (note 11)           2,619,910         7,809            -

Deferred compensation                          -             -            -
----------------------------------------------------------------------------

Balance - March 31, 2011              13,128,629 $      64,898 $       (420)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                                          Deferred                          
                                           compen-                          
                                            sation       Deficit       Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance - January 1, 2010            $           - $     (11,554) $  45,535

Net loss and comprehensive loss                  
 for the period                                  -        (2,073)    (2,073)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance - March 31, 2010             $           - $     (13,627) $  43,462
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                          Deferred                          
                                           compen-                          
                                            sation       Deficit       Total
----------------------------------------------------------------------------

Balance - December 31, 2010          $         315 $     (12,361) $  44,976

Net loss for the period                          -           598        598

Other comprehensive loss:                                                   
 Currency translation                            -             -       (353)
  adjustment                                                                

Issuance of shares (note 11)                     -             -      7,809

Deferred compensation                           32             -         32
----------------------------------------------------------------------------

Balance - March 31, 2011             $         347 $    (11,763) $   53,062
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial 
statements.                                                                 

Strongco Corporation                                                        
Consolidated Statement of Cash Flows 
For the three-month period ended March 31                                   

(in thousands of dollars, unless otherwise indicated)                       

----------------------------------------------------------------------------
                                                            2011       2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash flows from operating activities                                        
Net income (loss) for the year                         $     598  $  (2,073)
Adjustments for                                                             
  Depreciation - property and equipment                      731        228 
  Depreciation - equipment inventory on rent               3,876      2,900 
  Depreciation - rental fleet                                202          - 
  Gain on disposal of property and equipment                   -         (6)
  Gain on sale of rental equipment                          (547)         - 
  Deferred compensation                                       32          - 
  Interest expense                                         1,356      1,100 
  Income tax expense                                          63          - 
  Deferred income tax asset                                   12          - 
  Deferred income tax liability                              (73)         - 
Changes in working capital (note 15)                      (5,353)    (4,878)
Employee future benefit funding                              (81)         4 
Interest paid                                             (1,348)    (1,066)
----------------------------------------------------------------------------
Net cash used in operating activities                  $    (532) $  (3,791)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash flows from investing activities                                        
Business acquisition net of cash acquired (note 4)       (11,198)         - 
Purchase of rental equipment                                (473)         - 
Proceeds from sale of rental equipment                     1,124          - 
Purchase of property, plant and equipment                 (2,850)      (129)
----------------------------------------------------------------------------
Net cash used in investing activities                  $ (13,397) $    (129)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash flows from financing activities                                        
Increase in bank indebtedness                              5,535      4,959 
Increase in long term debt                                   383          - 
Repayment of long term debt                               (1,233)    (1,129)
Repayment of finance lease obligations                      (367)        90 
Issue of shareholders' capital (note 10)                   7,809          - 
Increase in notes payable (note 9)                         1,811          - 
----------------------------------------------------------------------------
Net cash provided by financing activities              $  13,938  $   3,920 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Foreign exchange on cash balances held in a foreign                         
 currency                                                     (9)         - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents       
  during the period                                    $       -  $       - 
----------------------------------------------------------------------------
Cash and cash equivalents - Beginning of period                -          - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents - End of period              $       -  $       - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial 
statements.                                                                 

Strongco Corporation

Notes to Unaudited Consolidated Financial Statements

For the three month periods ended March 31, 2011 and March 31, 2010

(in thousands of dollars, unless otherwise indicated)

1. General Information

Strongco Corporation ("Strongco" or "the Company") is a distributor of machinery and equipment in Canada and the United States.

Prior to July 1, 2010, Strongco was an unincorporated, open-ended, limited purpose trust operating under the name Strongco Income Fund ("the Fund"), domiciled and established under the laws of the Province of Ontario pursuant to a declaration of trust dated March 21, 2005, as amended and restated on April 28, 2005 and September 1, 2006.

On July 1, 2010, the Fund completed the conversion from an income trust to a corporation ("the Conversion") through the incorporation of Strongco. Pursuant to a plan of arrangement under the Business Corporations Act (Ontario), the Company issued shares to the unitholders of the Fund in exchange for units of the Fund on a one-for-one basis. The Company's Board of Directors and management team are the former Board of Trustees and management team of the Fund. Immediately subsequent to the Conversion, the Fund was wound up into the Company. The Company has carried on the business of the Fund unchanged except that the Company is subject to tax as a corporation. References to the Company in these financial statements for periods prior to June 30, 2010, refer to the Fund and for periods on or after July 1, 2010, refer to the Company. Additionally, references to shares and shareholders of the Company are comparable to units and unitholders previously under the Fund.

The Conversion was accounted for as a continuity of interests. Transaction costs of $463 related to the Conversion were expensed on conversion.

The Company is a public entity, listed on the Toronto Share Exchange. The address of its registered office is 1640 Enterprise Road, Mississauga, Ontario L4W 4L4.

2. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been applied consistently to all years presented.

Basis of presentation and adoption of International Financial Reporting Standards

The Company prepares its interim consolidated financial statements in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") as set out in the Handbook of the Canadian Institute of Chartered Accountants ("CICA"). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards ("IFRS"), and require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company has commenced reporting on this basis in these interim consolidated financial statements. In these interim consolidated financial statements, the term Canadian GAAP refers to Canadian GAAP before adoption of IFRS.

These interim consolidated financial statements have been prepared in accordance with IFRS applicable to interim financial statements, including IAS 34, Interim financial reporting, and IFRS 1, First-time adoption of IFRS. Subject to certain transition elections disclosed in note 5, the Company has consistently applied the same accounting policies in its opening IFRS consolidated balance sheet at January 1, 2010 and throughout all periods presented, as if these policies had always been in effect. Note 5 discloses the impact of the transition to IFRS on the Company's shareholders' equity, comprehensive income (loss) and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company's Canadian GAAP consolidated financial statements for the year ended December 31, 2010.

Comparative figures in these interim consolidated financial statements have been restated to give effect to these changes.

The policies applied in these interim consolidated financial statements are based on IFRS issued and outstanding as of May 25, 2011, the date the Directors approved the interim consolidated financial statements. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2011 could result in a restatement of these interim consolidated financial statements, including the transition adjustments recognized on changeover to IFRS.

These interim consolidated financial statements should be read in conjunction with the Company's Canadian GAAP annual consolidated financial statements for the year ended December 31, 2010.

The consolidated financial statements have been prepared on a going concern basis and the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires management to make certain critical estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the interim consolidated financial statements, are disclosed in note 3.

Basis of consolidation

The interim consolidated financial statements include the financial statements of Strongco and its subsidiaries. Subsidiaries are entities that are controlled, either directly or indirectly, by Strongco. All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is the President and Chief Executive Officer and is responsible for allocating resources, assessing performance of the operating segments and making key strategic decisions. The Company has determined it has one operating segment, Equipment Distribution, which is located in Canada and the U.S.

Revenue recognition

Revenue is recognized when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Company's activities as described below.

Revenue from equipment sales is recognized at the time title to the equipment and significant risks of ownership passes to the customer, which is generally at the time of shipment of the product to the customer. From time to time, the Company agrees to buy back equipment from certain customers at the option of the customer for a specified price at future dates. The Company's maximum potential losses pursuant to the majority of these buy-back contracts are limited, under an agreement with a third party, to 10% of the original sale amounts. These transactions are accounted for as finance leases under IAS 17: Leases. In accordance with the standard, selling profit or loss relating to these types of sales is accounted for as an outright sale.

b) Revenue from equipment rentals is recognized in accordance with the terms of the relevant agreement with the customer, either evenly over the term of that agreement or on a usage basis such as the number of hours that the equipment is used. Certain rental contracts contain an option for the customer to purchase the equipment at the end of the rental period. Should the customer exercise this option to purchase, revenue from the sale of the equipment is recognized as in (a) above.

c) Product support services include sales of parts and servicing of equipment. For the sale of parts, revenue is recognized when the part is shipped to the customer. For servicing of equipment, revenue is recognized as the service work is completed and billed.

Foreign currency translation

a) Functional and presentational currency

Items included in the financial statements of each of the Company's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in the Company's presentational currency.

The financial statements of entities that have a functional currency different from that of Strongco (foreign operations) are translated into Canadian dollars as follows: assets and liabilities - at the closing rate at the date of the balance sheet; income and expenses - at the average rate of the period (as this is considered a reasonable approximation to actual rates). All resulting changes are recognized in other comprehensive income in the consolidated statement of comprehensive income as currency translation adjustments.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation's functional currency are recognized as other income in the consolidated statement of income (loss).

Employee future benefit obligations

a) Pension obligations

Employees of the Company have entitlements under Company pension plans, which are either defined contribution or defined benefit plans.

The liability recognized in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Actuarial valuations for defined benefit plans are carried out at each balance sheet date. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

Actuarial gains (losses) arise from the difference between the actual long-term rate of return on plan assets for a period and the expected long-term rate of return on plan assets for that period, and from changes in actuarial assumptions used to determine the accrued benefit obligation. Actuarial gains and losses are charged or credited to equity in other comprehensive income in the period in which they arise.

Past-service costs are recognized immediately within operating expenses in the consolidated statement of income (loss), unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

For defined contribution plans, contributions are recognized as post-employment benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

b) Other employee future obligations

The Company also has other employee future obligations, including an unfunded retiring allowance plan and a non-contributory dental and health-care plan. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. These obligations are valued annually by independent qualified actuaries.

Deferred compensation

The Company operates an equity-settled, share-based compensation plan, under which the Company receives services from employees as consideration for equity instruments (options) of the Company. The options vest over a period of time. The fair value of the services received in exchange for the grant of the options is recognized as an expense. Each tranche in an award is considered a separate award with its own vesting period and grant date value. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Deferred compensation expense is recognized over the tranche's vesting period based on the number of awards expected to vest, by increasing deferred compensation, a component within shareholders' equity. The number of awards expected to vest is reviewed at least annually, with any impact being recognized immediately. For expired and cancelled options, deferred compensation expense is not reversed and the related credit remains in deferred compensation. When options are exercised, the Company issues new shares. The proceeds received are credited to shareholders' capital, together with the related amounts previously added to deferred compensation.

Shareholders' capital

Shareholders' capital is classified as equity. Incremental costs directly attributable to the issue of the new shares or options are shown in equity as a deduction from proceeds.

Cash and cash equivalents

Cash and cash equivalents consist of all bank balances and short-term investments with remaining maturities of less than 90 days at the date of acquisition.

Trade and other receivables

Trade and other receivables are amounts due from customers for service performed in the ordinary course of business. If collection is expected within one year, they are classified as current assets; if not, they are presented as non-current assets.

Trade and other receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method, less provisions for impairment.

Inventories

Inventories are recorded at the lower of cost and net realizable value. The cost of equipment inventories is determined on a specific item basis. The cost of repair and distribution parts is determined on a weighted average cost basis. Net realizable value is the estimated selling price in the ordinary course of business, less applicable selling expenses. Equipment inventory on rent is amortized based on expected usage.

Property, plant and equipment and rental fleet

Property, plant and equipment and rental fleet are stated at cost less accumulated depreciation and any impairment. The rental fleet is carried at cost, less depreciation computed on a percentage of rent basis for financial statement purposes. Cost includes expenditures that are directly attributable to the acquisition of the assets. Asset classes are sub-divided into major components to recognize differences in the life spans of the components identified. When parts of an item of property and equipment and rental fleet have different useful lives, they are accounted for as separate items (major components) of property and equipment and rental fleet and each component is depreciated separately. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to operating expenses in the consolidated statement of income (loss) during the period in which they are incurred. Assets' residual values, useful lives and methods of depreciation are reviewed, and adjusted, if appropriate, at each financial period-end. Land is not depreciated. Depreciation is provided on other assets at rates calculated to write off the cost of property and equipment, and rental fleet less estimated residual value over the estimated useful economic life on a diminishing balance method using the following annual rates:


Buildings                                3% to 5%
Machinery and equipment                10% to 30%
Vehicles                               25% to 30%
Computer equipment                            30%

Rental fleet equipment is amortized at a rate of 60% of rental revenue.

Leasehold improvements are amortized on a straight-line basis over the remaining term of the lease.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated fair value. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognized within operating expenses in the consolidated statement of income (loss).

Borrowing costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognized as interest expense in the consolidated statement of income (loss)in the period in which they are incurred.

Income taxes

The income tax expense for the period comprises current and deferred taxes. Taxes are recognized as tax expense (recovery) in the consolidated statement of income (loss), except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this latter case, the taxes are also recognized in other comprehensive income or directly in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the consolidated balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the interim consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the consolidated balance sheet date and that are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

For the period from January 1, 2010 to June 30, 2010, Strongco operated as an income fund and, under the terms of the Income Tax Act (Canada), was not subject to income taxes to the extent that its taxable income in a period was paid or payable to unitholders. Strongco distributed to its unitholders all or virtually all of its taxable income and taxable capital gains that would otherwise have been taxable in the Company and met the requirements under the Income Tax Act (Canada) applicable to such trusts. Accordingly, no provision for current income taxes for the Company was made during this period.

Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less; if not, they are presented as non-current liabilities.

Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate.

Provisions

Provisions for restructuring costs, legal claims, equipment buybacks and certain other obligations are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation, where the effect is material. The increase in the provision due to passage of time is recognized as interest expense in the consolidated statement of income (loss).

Equipment notes payable

Equipment notes payable are used to finance equipment purchases. Equipment notes payable are accounted for in current liabilities. The equipment notes payable are recognized initially at fair value and are subsequently measured at amortized cost; any difference between the proceeds and redemption value is recognized as interest expense in the consolidated statement of income (loss) over the period of the equipment notes payable using the effective interest rate method.

Debt

Debt comprises the Company's operating line of credit, notes payable and finance lease obligations. Debt is recognized initially at fair value, net of transaction costs incurred. Debt is subsequently measured at amortized cost; any difference between the proceeds and redemption value is recognized as interest expense in the consolidated statement of income (loss) over the period of the borrowings using the effective interest rate method.

Impairment of non-financial assets

Property and equipment and rental fleet are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Long-lived assets that are not amortized, comprising the Company's distribution right intangible asset, are subject to an annual impairment test. For the purpose of measuring recoverable amounts, assets are grouped into the lowest levels for which there is separately identifiable cash inflows (cash-generating units or "CGUs"). The recoverable amount is the higher of an asset's fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.

The Company evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to operating expenses in the consolidated statement of income (loss) on a straight-line basis over the period of the lease.

The Company leases certain property and equipment. Leases of property and equipment, where the Company has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalized at the lease commencement date at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the consolidated statement of income (loss) over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

Financial instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the company has transferred substantially all risks and rewards of ownership.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

At initial recognition, the Company classifies its financial instruments in the following categories depending on the purpose for which the instruments were acquired:

i) Financial assets and liabilities at fair value through profit or loss: A financial asset or liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the short-term. Derivatives are also included in this category unless they are designated as hedges. The only instruments held by the Company classified in this category are foreign currency forward contracts (see (v) below).

Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are recorded as an expense in the consolidated statement of income (loss). Gains and losses arising from changes in fair value are presented in the consolidated statement of income (loss) within other gains and losses in the period in which they arise. Financial assets and liabilities at fair value through profit or loss are classified as current except for the portion expected to be realized or paid beyond 12 months of the balance sheet date, which is classified as non-current.

ii) Available-for-sale investments: Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any of the other categories.

Available-for-sale investments are recognized initially at fair value plus transaction costs and are subsequently carried at fair value. Gains or losses arising from changes in fair value are recognized in other comprehensive income in the consolidated statement of comprehensive income (loss). Available-for-sale investments are classified as non-current, unless the investment matures within 12 months, or management expects to dispose of them within 12 months. The Company does not currently have any available-for-sale assets.

iii) Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company's loans and receivables are comprised of cash and trade and other receivables, and are included in current assets due to their short-term nature. Loans and receivables are initially recognized at the amount expected to be received less, when material, a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment.

iv) Financial liabilities at amortized cost: Financial liabilities at amortized cost include bank indebtedness, trade and other payables, provisions, income taxes payable, interest bearing and non-interest bearing equipment note payable, finance lease obligations and notes payable.

Financial liabilities are classified as current liabilities if payment is due within 12 months. Otherwise, they are presented as non-current liabilities.

v) Derivative financial instruments: The Company uses derivatives in the form of foreign currency forward contracts to reduce the impact of currency fluctuations on the cost of equipment ordered for future delivery to customers. Derivatives have been classified as held-for-trading and are included on the balance within trade and other payables.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. If hedge accounting is used, the effectiveness of the derivative in managing an identified risk is assessed on initial application and on an ongoing basis thereafter. Unrealized gains and losses, net of related income taxes, on the derivative contracts are recorded in other comprehensive income (loss) in the consolidated statement of comprehensive income (loss). If a hedge becomes ineffective, hedge accounting is discontinued and the derivative contracts are adjusted to fair value at each reporting date with changes in fair value recorded in the consolidated statement of income (loss).

Impairment of financial assets

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, a loss event and that loss event, or events, has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred, discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized within operating expenses in the consolidated statement of income (loss).

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, such as an improvement in the customer's credit rating, the reversal of the previously recognized impairment loss is recognized as a reduction in expense in the consolidated statement of income (loss).

Impairment testing of trade and other receivables is described in note 5(v)(a).

Earnings per share

Basic earnings per share (EPS) is calculated by dividing the net income (loss) for the period attributable to shareholders of Strongco by the weighted average number of common shares outstanding during the period.

Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and similar instruments is computed using the treasury stock method. Strongco's potentially dilutive common shares comprise share options granted to employees.

Changes in accounting policy and disclosure

Standards that are not yet effective and have not been early-adopted:

IFRS 9, Financial Instruments (IFRS 9), was issued in November 2009 and contains requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39, Financial Instruments - Recognition and Measurement (IAS 39), for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments and such instruments are either recognized at fair value through profit or loss, or at fair value through comprehensive income, dividends are recognized in income in the consolidated statement of comprehensive income (loss); however, other gains and losses (including impairments) associated with such instruments remain in accumulated other comprehensive income indefinitely.

Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39 except that fair value changes due to credit risk for liabilities designated at fair value through profit or loss would generally be recorded in the consolidated statement of comprehensive income (loss). This standard is required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 10, Consolidation (IFRS 10) requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation-Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 13, Fair Value Measurement (IFRS 13) is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

3. Critical Accounting Estimates and Judgments

The preparation of interim consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the interim consolidated financial statements. The Company bases its estimates and assumptions on past experience and various other assumptions that are believed to be reasonable in the circumstances. This involves varying degrees of judgment and uncertainty, which may result in a difference in actual results from these estimates. The more significant estimates are as follows:

Allowance for doubtful accounts

The Company performs credit evaluations of customers and limits the amount of credit extended to customers as appropriate. The Company is, however, exposed to credit risk with respect to accounts receivable and maintains provisions for possible credit losses based upon historical experience and known circumstances. The allowance for doubtful accounts as at December 31, 2010 with changes from January 1, 2010 is disclosed in note 5 (v)(a).

Inventory valuation

The value of the Company's new and used equipment is evaluated by management throughout each period. Where appropriate, a provision is recorded against the book value of specific pieces of equipment to ensure that inventory values reflect the lower of cost and estimated net realizable value. The Company identifies slow-moving or obsolete parts inventory and estimates appropriate obsolescence provisions by aging the inventory. The Company takes advantage of supplier programs that allow for the return of eligible parts for credit within specified time periods.

Deferred income taxes

At each period-end, the Company evaluates the value and timing of its temporary differences. Deferred income tax assets and liabilities, measured at substantively enacted tax rates, are recognized for all temporary differences caused when the tax bases of assets and liabilities differ from those reported in the interim consolidated financial statements.

Changes or differences in these estimates or assumptions may result in changes to the current or deferred tax balance on the consolidated balance sheet and a charge or credit to income tax expense in the consolidated statement of income (loss), and may result in cash payments or receipts. Where appropriate, the provisions for deferred income taxes and deferred income taxes payable are adjusted to reflect management's best estimate of the Company's income tax accounts.

Judgment is also required in determining whether deferred tax assets are recognized on the balance sheet. Deferred tax assets, including those arising from unutilized tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods, in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.

Employee future benefit obligations

The present value of the employee future benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for these obligations include the discount rate.

The Company determines the appropriate discount rate at the end of each period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Company considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related employee future benefit liability.

Other key assumptions for employee future benefit obligations are based in part on current market conditions. Any changes in these assumptions will impact the carrying amount of the employee future benefit obligations

4. Acquisition of Chadwick-BaRoss, Inc.

On February 17, 2011, Strongco, through its wholly owned subsidiary Strongco USA Inc., completed the acquisition of 100% of the issued and outstanding shares of Chadwick-BaRoss, Inc. ("CBR").

CBR is a multiline heavy equipment dealer with 90 employees headquartered in Westbrook, Maine, with three branches in Maine and one in each of New Hampshire and Massachusetts. CBR sells, rents and services heavy equipment used in sectors such as construction, infrastructure, utilities, municipalities, waste management and forestry. CBR represents such brands as Volvo, Powerscreen and Link-Belt, as well as many others.

The acquisition of all of the issued and outstanding shares of CBR was completed for a purchase price of US$11.1 million, net of cash acquired. The purchase price was satisfied with cash of US$9.2 million and three promissory notes totalling US$1.9 million. The three promissory notes mature on February 17, 2013 and bear interest at the US Prime rate. Principal payments of US$0.2 million will be made quarterly commencing May 17, 2011. Costs of $415 related to the acquisition were expensed as period costs within operating expenses in the consolidated statement of income (loss) for the three month period ended March 31, 2011.

The acquisition date fair value for each major class of asset acquired and liabilities assumed:


----------------------------------------------------------------------------
(in thousands of Canadian dollars)
----------------------------------------------------------------------------

Trade and other receivables                                    $       4,387
Inventories                                                            9,961
Property, plant and equipment                                          5,058
Rental fleet                                                          11,722
Deferred income tax asset                                              1,125
Other assets                                                              94
----------------------------------------------------------------------------
Total assets                                                   $      32,347
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Trade and other payables                                       $       2,993
Deferred income tax liabilities                                        2,807
Equipment notes payable                                                7,853
Finance lease obligations                                                419
Notes payable                                                          7,077
----------------------------------------------------------------------------
Total liabilities                                              $      21,149
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net assets acquired                                            $      11,198
----------------------------------------------------------------------------

The purchase price allocation is not final and is subject to post-closing adjustments.

The results of operations of CBR have been consolidated into the Company's results for the three month period ended March 31, 2011, effective February 1, 2011. Revenues of $6.0 million and net income from operations of $0.2 million for CBR have been included in the Company's consolidated statement of income and comprehensive income for the three month period ended March 31, 2011.

Had the results of CBR been incorporated into the Company's consolidated statement of comprehensive income (loss) as though the acquisition had been completed on January 1, 2011, the revenue and net income of the combined entity would have been $90.6 million and $0.6 million, respectively.

5. Transition to IFRS

The date of transition to IFRS for the Company was January 1, 2010. IFRS 1 sets forth guidance for the initial adoption of IFRS. IFRS 1 requires first-time adopters to retrospectively apply all effective IFRS standards as of the transition date, except that IFRS 1 also provides for certain optional exemptions and certain mandatory exceptions to the general requirements of retrospective application. The effect of the Company's transition to IFRS, described in note 2, is summarized in this note as follows:

(i) Optional exemptions and mandatory exceptions;

(ii) Reconciliation of shareholders' equity and comprehensive income as previously reported under Canadian GAAP to IFRS;

(iii) Adjustments to the statement of cash flows;

(iv) Additional IFRS information for year ended December 31, 2010.

i) Optional exemptions

The Company has applied the following optional exemptions to full retrospective application of IFRS. A description of the exemptions and impact to the Company is further described in (ii) below:


--  Employee future benefits - treatment of actuarial gains and losses; and
--  Business combinations.

Mandatory exceptions

The Company has complied with all mandatory exceptions to full retrospective application of IFRS. The estimates previously made by the Company under Canadian GAAP were not revised for application of IFRS.

ii) Reconciliation of shareholders' equity and comprehensive income as previously reported under Canadian GAAP to IFRS


----------------------------------------------------------------------------
(in thousands of Canadian                                    As at December
 dollars)                                                          31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   Canadian
                                       GAAP   Adjustment Note          IFRS
----------------------------------------------------------------------------
Assets
Current assets
Trade and other receivables       $  35,884  $         -      $      35,884
Inventories                         159,988            -            159,988
Prepaid expenses and other
  deposits                            1,452            -              1,452
----------------------------------------------------------------------------
Non-current assets                  197,324            -            197,324
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property and equipment               13,768        2,081  f)         15,849
Intangible assets                     1,800            -              1,800
Accrued benefit                       6,275       (6,275) a)              -
Other assets                            188            -                188
----------------------------------------------------------------------------
                                     22,031       (4,194)            17,837
----------------------------------------------------------------------------
Total assets                      $ 219,355  $    (4,194)     $     215,161
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and shareholders'
  equity
Current liabilities
Bank indebtedness                 $  12,370  $         -      $      12,370
Trade and other payables             30,265       (1,436) b)         28,829
Provisions                                -        1,436  b)          1,436
Deferred revenue and
  customer deposits                   1,321            -              1,321
Equipment notes payable             118,160            -            118,160
Current portion of finance
 lease obligations                      173          787  f)            960
Current portion of notes
  payable                             1,233            -              1,233
----------------------------------------------------------------------------
                                    163,522          787            164,309
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-current liabilities
Deferred income tax liabilities         389         (389) d)              -
Finance lease obligations               114        1,388  f)          1,502
Post-employment benefit
  obligations                           819        3,555  a)          4,374
----------------------------------------------------------------------------
                                      1,322        4,554              5,876
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total liabilities                   164,844        5,341            170,185
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Shareholders' equity
Shareholders' capital                57,089            -             57,089
Accumulated other
  comprehensive income                    -       (2,101) c)         (2,101)
Deferred compensation                   360          (45) c)            315
Deficit                              (2,938)      (7,389)           (10,327)
----------------------------------------------------------------------------
Total shareholders' equity           54,511       (9,535)            44,976
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total liabilities and
  shareholders' equity            $ 219,355  $    (4,194)     $     215,161
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(in thousands of
 Canadian dollars)                                     As at March 31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                     Canadian GAAP   Adjustment Note                   IFRS
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets
Trade and other
 receivables        $       24,576  $         -       $              24,576
Inventories                146,203            -                     146,203
Prepaid expenses
 and other
 deposits                    1,893            -                       1,893
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-current assets         172,672            -                     172,672
----------------------------------------------------------------------------
Property and
 equipment                  14,008        1,848  f)                  15,856
Intangible assets            1,800            -                       1,800
Accrued benefit              6,512       (6,512) a)                       -
Deferred income tax
 asset                           -            -                           -
Other assets                   242            -                         242
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                            22,562       (4,664)                     17,898
----------------------------------------------------------------------------
Total assets        $      195,234  $    (4,664)      $             190,570
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and
 shareholders'
 equity
Current liabilities
Bank indebtedness   $       14,973  $         -       $              14,973
Trade and other
 payables                   19,726       (1,280) b)                  18,446
Provisions                       -        1,478  b)                   1,478
Deferred revenue
 and
 customer deposits           1,347            -                       1,347
Equipment notes
 payable                   103,024            -                     103,024
Current portion of
 finance
 lease obligations             119          837  f)                     956
Current portion of
 notes
 payable                     1,183            -                       1,183
----------------------------------------------------------------------------
                           140,372        1,035                     141,407
----------------------------------------------------------------------------
Non-current
 liabilities
Deferred income tax
 liabilities                 1,383       (1,383) d)                       -
Finance lease
 obligations                   134        1,108  f)                   1,242
Post-employment
 benefit
 obligations                   782        3,677  a)                   4,459
----------------------------------------------------------------------------
                             2,299        3,402                       5,701
----------------------------------------------------------------------------
Total liabilities          142,671        4,437                     147,108
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Shareholders'
 equity
Shareholders'
 capital                    57,089            -                      57,089
Accumulated other
  comprehensive
   income                        -            -                           -
Deferred
 compensation                  110         (110) c)                       -
Deficit                     (4,636)      (8,991)                    (13,627)
----------------------------------------------------------------------------
Total shareholders'
 equity                     52,563       (9,101)                     43,462
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total liabilities
 and shareholders'
 equity             $      195,234  $    (4,664)      $             190,570
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(in thousands of
 Canadian dollars)                                    As at January 1, 2010
----------------------------------------------------------------------------
                      Canadian GAAP   Adjustment Note                  IFRS
----------------------------------------------------------------------------
Assets
Current assets
Trade and other
 receivables         $       27,088  $         -       $             27,088
Inventories                 144,461            -                    144,461
Prepaid expenses and
 other deposits               1,255            -                      1,255
----------------------------------------------------------------------------
Non-current assets          172,804            -                    172,804
----------------------------------------------------------------------------
Property and
 equipment                   14,133        1,816   f)                15,949
Intangible assets             1,800            -                      1,800
Accrued benefit               6,607       (6,607)  a)                     -
Other assets                    243            -                        243
----------------------------------------------------------------------------
                             22,783       (4,791)                    17,992
----------------------------------------------------------------------------
Total assets         $      195,587  $    (4,791)      $            190,796
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and
 shareholders'
 equity
Current liabilities
Bank indebtedness    $       10,014  $         -       $             10,014
Trade and other
 payables                    20,866       (1,218)  b)                19,648
Provisions                                 1,366   b)                 1,366
Deferred revenue and
  customer deposits             515            -                        515
Equipment notes
 payable                    104,843            -                    104,843
Current portion of
 finance
 lease obligations               92          862   f)                   954
Current portion of
 notes
 payable                      1,094            -                      1,094
----------------------------------------------------------------------------
                            137,424        1,010                    138,434
----------------------------------------------------------------------------
Non-current
 liabilities
Deferred income tax
 liabilities                  1,424       (1,424)  d)                     -
Notes payable                 1,218            -                      1,218
Finance lease
 obligations                    104        1,050   f)                 1,154
Post-employment
 benefit
 obligations                    769        3,686   a)                 4,455
----------------------------------------------------------------------------
                              3,515        3,312                      6,827
----------------------------------------------------------------------------
Total liabilities           140,939        4,322                    145,261
----------------------------------------------------------------------------

Shareholders' equity
Shareholders' capital        57,089            -                     57,089
Accumulated other
 comprehensive income             -            -                          -
Deferred
 compensation                    80          (80)  c)                     -
Deficit                      (2,521)      (9,033)                   (11,554)
----------------------------------------------------------------------------
Total shareholders'
 equity                      54,648       (9,113)                    45,535
----------------------------------------------------------------------------
Total liabilities
 and shareholders' equity $ 195,587  $    (4,791)      $            190,796
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(in thousands of Canadian dollars)         Three-months ended March 31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                Canadian    Adjust-
                                    GAAP       ment         Note       IFRS
----------------------------------------------------------------------------

Revenue                        $  53,680  $       -               $  53,680
Cost of sales                     42,263          -                  42,263
----------------------------------------------------------------------------
Gross Margin                      11,417          -                  11,417
----------------------------------------------------------------------------

Expenses
Administration                     6,301        (83)   a), c), g)     6,218
Distribution                       4,250          -            g)     4,250
Selling                            2,190          -            g)     2,190
Plan of arrangement                    -          -                       -
Other expense                       (268)         -                    (268)
----------------------------------------------------------------------------
Operating income (loss)        $  (1,056) $      83               $    (973)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest expense               $   1,100  $       -               $   1,100
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Income (loss) before taxes        (2,156)        83                  (2,073)

Income tax (recovery) expense        (41)        41                       -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) attributable
 to shareholders                  (2,115)        42                  (2,073)
----------------------------------------------------------------------------

Other comprehensive loss
Actuarial loss on post-
 employment benefit
 obligations                          -          -                       -
Comprehensive income (loss)
 attributable to shareholders  $  (2,115) $      42               $  (2,073)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


------------------------------------------------------------------------
(in thousands of Canadian dollars)          Year ended December 31, 2010
------------------------------------------------------------------------
------------------------------------------------------------------------
                                Canadian   Adjust-
                                    GAAP      ment       Note      IFRS
------------------------------------------------------------------------

Revenue                        $ 294,657  $      -             $294,657
Cost of sales                    237,971         -              237,971
------------------------------------------------------------------------
Gross Margin                      56,686         -               56,686
------------------------------------------------------------------------

Expenses
Administration                    17,410      (527) a), c), g)   16,883
Distribution                      26,307         -          g)   26,307
Selling                            9,887         -          g)    9,887
Plan of arrangement                  463         -                  463
Other expense                       (740)        -                 (740)
------------------------------------------------------------------------
Operating income (loss)        $   3,359  $    527             $  3,886
------------------------------------------------------------------------
------------------------------------------------------------------------

Interest expense               $   4,816  $      -             $  4,816
------------------------------------------------------------------------
------------------------------------------------------------------------

Income (loss) before taxes        (1,457)      527                 (930)

Income tax (recovery) expense     (1,040)   (1,118)     a), d)   (2,158)
------------------------------------------------------------------------
------------------------------------------------------------------------
Net income (loss) attributable
 to shareholders                    (417)    1,645                1,228
------------------------------------------------------------------------

Other comprehensive loss
Actuarial loss on post-                                               -
 employment benefit
 obligations                           -     2,101          a)    2,101
Comprehensive income (loss)
 attributable to shareholders  $    (417) $   (456)            $   (873)
------------------------------------------------------------------------
------------------------------------------------------------------------

Explanatory notes

a) Employee future benefits

In accordance with the IFRS transitional provisions, the Company has chosen to recognize unamortized actuarial gains and losses arising from the re-measurement of employee future benefit obligations as an adjustment to retained earnings as at January 1, 2010. Under Canadian GAAP, the Company applied the corridor method of accounting for such gains and losses. Under this method, gains and losses are recognized only if they exceed specified thresholds and are amortized over the expected average remaining service life of active employees. The carrying value of the net asset for employee future benefit obligations has been decreased by $8,791 ($4,712 after tax) to recognize cumulative net unamortized actuarial losses as at January 1, 2010 with a corresponding charge to retained earnings.

Under IFRS, the Company recognizes actuarial gains and losses arising from the re-measurement of employee future benefit obligations in other comprehensive income as they arise. Under Canadian GAAP, the Company applied the corridor method of accounting for such gains and losses.

The carrying value of the net liability for employee future benefit obligations has been increased by $8,687 and $9,733 at March 31, 2010 and December 31, 2010, respectively.

In addition, the Company completed the calculation with respect to the limitation of the defined benefit asset under IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, and recorded a liability of $1,503 ($805, after tax) and $97 ($72, after tax) at January 1, 2010 and December 31, 2010, respectively.

b) Provisions

The Company reclassified liabilities related to equipment buybacks, legal matters, stock- based compensation and certain other items totalling $1,218, $1,280 and $1,436 at January 1, 2010, March 31, 2010 and December 31, 2010, respectively, from trade and other payables to provisions.

c) Stock-based compensation

Under IFRS, the Company recognizes the cost of employee share options over the vesting period using the graded method of amortization rather than the straight-line method, which was the Company's policy under Canadian GAAP. In addition, under IFRS the recognition of compensation expense can occur prior to the grant date when services have commenced whereas under Canadian GAAP, compensation expense is not recognized prior to the grant date. Further, the Company adjusted for forfeitures under Canadian GAAP as they occurred where IFRS requires an estimate of the forfeitures on initial recognition.

These changes increased provisions and reduced retained earnings at January 1, 2010 by $68. For the three month period ended March 31, 2010, these changes increased share- based compensation expense and provisions by $20 and decreased share-based compensation expense and provisions by $114 for the year ended December 31, 2010.

Pursuant to the guidance under IAS 32, Financial Instruments: Presentation, the Fund units, which were outstanding in the comparative period from January 1, 2010 to June 30, 2010 while the Company operated as an income trust, are only allowed to be classified as equity for the purpose of assessing the classification under this standard. Consequently, the share options issued under the Company's equity incentive plan are not accounted for in accordance with IFRS 2, Share-based Payments and as a result, the Company has reclassified compensation expense of $80 and $110 at January 1, 2010 and March 31, 2010, respectively, from contributed surplus to provisions.

d) Deferred income taxes

Deferred income liabilities have been adjusted as follows:


----------------------------------------------------------------------------
                                     December 31,    March 31,      January
                                             2010         2010     31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Employee future benefits (a)          $    (2,518) $    (4,728) $    (4,776)
Rate change (i)                                 -        1,215        1,247
Recoverability assessment (ii)              2,518        3,513        3,529
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      $         -  $         -  $         -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(i) As at January 1, 2010 and for the six-month period ended June 30, 2010, Strongco operated as an income trust that qualified for special tax treatment permitting a tax deduction by the trust for distributions paid to the trust's unitholders. The change in tax legislation in 2007 effectively imposed an income tax for income trusts for taxation years beginning in 2011. As a result, Strongco has recorded future income taxes under Canadian GAAP during this period using the enacted (or substantively enacted) income tax rates that, at the consolidated balance sheet date, are expected to apply when the temporary differences reverse in years 2011 and beyond.

Although IFRS recognizes that in some jurisdictions income taxes may be payable at a higher or lower rate or be refundable or payable if part, or all, of the net profit or retained earnings is paid out as a dividend to shareholders of the entity, there is a general requirement that income taxes be measured at the tax rate applicable to undistributed profits. As a result, deferred income taxes were re-measured at the tax rate of approximately 46.4% applicable to undistributed profits, which resulted in an increase to the Company's deferred tax liability of $1,247 and $1,215 at January 1, 2010 and March 31, 2010, respectively. The deferred taxes were subsequently re- measured at the applicable corporate rates effectively July 1, 2010, the date Strongco converted to a corporation. This resulted in an income tax recovery of $1,247 for the year-ended December 31, 2010.

(ii) In addition, following the adjustments made to the opening balance at January 1, 2010 on the adoption of IFRS the Company assessed the recoverability of its deferred tax asset and determined that it did not meet the recognition criteria under IAS 12. As a result, the Company recorded an adjustment of $3,529, $3,513 and $2,518 to reduce the deferred income tax assets on January 1, 2010, March 31, 2010 and December 31, 2010, respectively.

The above adjustments decreased income tax recovery recognized in the consolidated statement of income (loss) by $41 for the three months ended March 31, 2010 and increased income tax recovery by $1,118 for the year ended December 31, 2010. The adjustments increased deferred income tax expense recognized in other comprehensive income by $nil for the three-month period ended March 31, 2010 and $2,152 for the year ended December 31, 2010.

e) In accordance with the IFRS transitional provisions, the Company elected not to apply IFRS 3, Business Combinations retrospectively to business combinations that occurred before the date of transition to IFRS. As such, Canadian GAAP balances relating to business combinations entered into before the date of transition have been carried forward without adjustment

f) Pursuant to the guidance under IAS 17, Leases, it was determined that certain vehicle and equipment leases that were accounted for as operating leases under Canadian GAAP met the criteria of a finance lease under IFRS. This resulted in an increase of $1,816, $1,848 and $2,081 to property and equipment and $1,912, $1,945 and $2,175 to finance lease obligations at January 1, 2010, March 31, 2010 and December 31, 2010. This also resulted in a reclassification of lease costs from rent expense to depreciation expense and interest expense. The net impact on the consolidated statement of income (loss) was not significant.

g) Pursuant to the guidance under IAS 1, the Company has presented expenses by function and accordingly has reclassified administration, distribution and selling expenses under Canadian GAAP to its respective function under IFRS.

iv) Adjustments to the consolidated statement of cash flows

The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by the Company, except that cash flows related to interest are classified as financing activities. Under Canadian GAAP, cash flows relating to interest payments were classified as operating activities.

v) Additional IFRS Information for the Year Ended December 31, 2010

a) Trade and other receivables


----------------------------------------------------------------------------
                                                           December 31, 2010
----------------------------------------------------------------------------


Trade receivables                                        $            33,517
Less: Provision for impairment of trade receivables                    1,196
----------------------------------------------------------------------------
Trade receivables - net                                               32,321
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Other receivables                                                      3,563
----------------------------------------------------------------------------
Total trade and other receivables                        $            35,884
----------------------------------------------------------------------------

The fair value of trade and other receivables is not materially different from their carrying value.

As at December 31, 2010, trade receivables of $9,737 were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The aging of these receivables is as follows:


----------------------------------------------------------
                                         December 31, 2010

----------------------------------------------------------

Up to 3 months                     $                 8,695
3 to 6 months                                          623
Over 6 months                                          419
----------------------------------------------------------
                                   $                 9,737
----------------------------------------------------------

As at December 31, 2010, trade receivables of $5,476 were impaired and provided for. The amount of provision against these receivables was $1,196 as at December 31, 2010. The aging of these receivables is as follows:


----------------------------------------------------------
                                         December 31, 2010

----------------------------------------------------------

Up to 3 months                     $                 2,793
3 to 6 months                                        1,111
Over 6 months                                        1,573
----------------------------------------------------------
                                   $                 5,476
----------------------------------------------------------

Movements on the Company's provision for impairment of trade receivables are as follows:


----------------------------------------------------------
                                         December 31, 2010

----------------------------------------------------------

As at January 1                    $                 1,362
Provision for impairment                               402
Amounts written off as
 uncollectible                                       (568)
----------------------------------------------------------
                                   $                 1,196
----------------------------------------------------------

The provision for impaired receivables is recognized in the consolidated statement of income (loss) within operating expenses in the period of provision. When a balance is considered uncollectible, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited to operating expenses in the consolidated statement of income (loss).

The other classes of trade and other receivables do not contain impaired amounts.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Company does not hold any collateral as security.

b) Property and equipment


----------------------------------------------------------------------------
                                                     Computers,
                                                       vehicles
                                                            and
                              Building  Machinery,    equipment
                                   and   equipment        under
                             leasehold         and      finance
                    Land  improvements    vehicles        lease       Total
----------------------------------------------------------------------------

As at January
 1, 2010
Cost           $   2,883 $      13,059  $   14,144  $     2,052  $   32,138
Accumulated
 depreciation          -        (5,479)    (10,669)         (41)    (16,189)
----------------------------------------------------------------------------
Net book value $   2,883 $       7,580  $    3,475  $     2,011  $   15,949
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Year ended
 December 31,
 2010
Opening net
 book value    $   2,883 $       7,580  $    3,475  $     2,276  $   16,214
Additions              -            11         397          223         631
Disposals              -             -        (140)           -        (140)
Depreciation           -          (338)       (382)        (136)       (856)
----------------------------------------------------------------------------
Closing net
 book value    $   2,883 $       7,253  $    3,350  $     2,363  $   15,849
----------------------------------------------------------------------------
----------------------------------------------------------------------------

As at December
 31, 2010
Cost           $   2,883 $      13,071  $   14,401  $     2,540  $   32,895
Accumulated
 depreciation          -        (5,818)    (11,051)        (177)    (17,046)
----------------------------------------------------------------------------
Net book value $   2,883 $       7,253  $    3,350  $     2,363  $   15,849
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Company leases various computers, vehicles and equipment under non-cancellable finance lease agreements. The lease terms are between one and five years.

c) Non-financial asset impairments

Impairment test for indefinite-life intangible assets

As at December 31, 2010, intangible assets comprise a distribution right with an indefinite life that was acquired as part of the acquisition of the Champion Road machinery division of Volvo Group Canada Inc. in 2008.

The distribution right intangible asset was tested for impairment at the Ontario region level. As the distribution right provides a benefit to all of the Company's branches in Ontario, the Company conducted an impairment test of the intangible asset at this level as at January 1, 2010 and December 31, 2010 and determined that no impairment existed.

The recoverable amount of the Ontario region cash generating unit is determined based on the value-in-use methodology. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond five years are extrapolated using an estimated terminal growth rate of 3%. The cash flows were discounted using a pre-tax discount rate of 18% and 17% at January 1, 2010 and December 31, 2010.

Impairment test for property and equipment

As the market capitalization of the Company was less than the carrying value of its shareholders' equity, the Company completed an impairment test on its property and equipment at January 1, 2010 and December 31, 2010 and determined that no impairment exists. For the purposes of the impairment testing, the Company determined the following five cash generating units: Ontario region, Quebec region, Atlantic region, Western Canada region and Crane division.

The recoverable amount of cash generating units was determined based on the value-in-use methodology. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond five years are extrapolated using an estimated terminal growth rate of 3%. The cash flows were discounted using a pre-tax income discount rate of 18% and 17% at January 1, 2010 and December 31, 2010.

d) Trade and other payables


----------------------------------------------------------
                                         December 31, 2010

----------------------------------------------------------

Trade payables                     $                14,837
Accrued expenses                                    13,992
----------------------------------------------------------
                                   $                28,829
----------------------------------------------------------

e) Provisions


---------------------------------------------------------------------------
                        Equipment
                         buy-back        Legal   Share-based
                      obligations      matters  compensation
                              (a)          (b)     costs (c)         Total

---------------------------------------------------------------------------
As at January 1,
 2010              $          699 $        519  $        148  $      1,366

Charged (credited)
 to consolidated
 statement of
 income (loss)                161            -             -           161
Additional
 provision                      -          100           100           200
Unused amounts
 reversed                       -          (43)            -           (43)
Transferred to
 deferred
 compensation                   -            -          (248)         (248)
---------------------------------------------------------------------------
As at December 31,
 2010              $          860 $        576  $          -  $      1,436
---------------------------------------------------------------------------

a) Equipment buy-back obligation

The Company has agreed to buy back equipment from certain customers at the option of the customer for a specified price at future dates (buy-back contracts). These contracts are subject to certain conditions being met by the customer and range in term from three to ten years. As at December 31, 2010, the total obligation under these contracts was $10,234. The Company's maximum potential losses pursuant to the majority of these buy-back contracts are limited, under an agreement with a third party, to 10% of the original sale amounts. A reserve $860 has been accrued in the Company's accounts with respect to these commitments.

a) Legal matters

The Company has set up provisions for certain legal matters based on management assessment and support from external legal counsel. As December 31, 2010, these provisions totalled $576.

b) Stock-based compensation expense

The Company has calculated stock-based compensation expense on stock options granted to certain of the Company's employees. This amount was transferred to deferred compensation on July 1, 2010 as a result of the Company's conversion to a corporation.

f) Expenses by nature


-----------------------------------------------------------------
                                                December 31, 2010

-----------------------------------------------------------------
Changes in inventories of equipment, parts
 and work-in-process                        $             220,126
Raw materials and consumables used                          1,038
Depreciation                                                  925
Utilities                                                   1,093
Operating lease expenses                                    7,038
Transportation expenses                                     2,516
Advertising expenses                                          563
Salaries and commissions (a)                               45,571

Telephone, fax and office supplies                          2,454
Other                                                       9,724

-----------------------------------------------------------------
Total cost of sales, administration,
 distribution and selling expenses          $             291,048
-----------------------------------------------------------------

Salaries and commission expense comprise the following:


-------------------------------------------------------------
                                            December 31, 2010

-------------------------------------------------------------
Wages                                   $              43,973
Commissions                                             1,354
Employee future benefits                                  244
-------------------------------------------------------------
                                        $              45,571
-------------------------------------------------------------

g) Interest expense


----------------------------------------------------------
                                         December 31, 2010

----------------------------------------------------------
Bank indebtedness                  $                   516
Equipment notes payable - interest
 bearing                                             4,202
Notes payable                                           84
Finance lease obligations                               14
----------------------------------------------------------
                                   $                 4,816
----------------------------------------------------------

h) Key management compensation

Key management comprise the Chief Executive Officer, Chief Financial Officer, external directors and vice-presidents of the organization. The compensation paid or payable to key management for employee services is shown below:


----------------------------------------------------------
                                         December 31, 2010

----------------------------------------------------------

Salaries and short-term benefits   $                 1,539
Post-employment benefits                               172
Other long-term benefits                                 -
Stock-based payments                                   315
----------------------------------------------------------
                                   $                 2,026
----------------------------------------------------------

6 Inventories

Inventory components, net of write-downs and provisions are as follows:


----------------------------------------------------------------------------
As at:                                 March 31, 2011      December 31, 2011

----------------------------------------------------------------------------
Equipment                     $               152,056  $             142,080
Parts                                          17,363                 15,401
Work in process                                 5,025                  2,507
----------------------------------------------------------------------------
                              $               174,444  $             159,988
----------------------------------------------------------------------------

7 Bank Indebtedness

The Company has credit facilities with banks in Canada and United States which provide 364-Day committed operating lines of credit totaling approximately $22.4 million which are renewable annually. Borrowings under the lines of credit are limited by standard borrowing base calculations based on accounts receivable and inventory, typical of such lines of credit. As collateral the Company has provided a $50 million debenture and a security interest in accounts receivables, inventories (subordinated to the collateral provided to the equipment inventory lenders), capital assets (subordinated to collateral provided to lessors), real estate and on intangible and other assets.

The operating lines bear Interest at rates that range between bank prime rate plus 0.50% and bank prime rate plus 1.50% and between the one month Canadian Bankers' Acceptance Rates ("BA rates") plus 1.75% and BA rates plus 2.75% in Canada and at LIBOR plus 2.60% in the United States. Under its bank credit facilities, the Company is able to issue letters of credit up to a maximum of $5 million. Outstanding letters of credit reduce the Company's availability under its operating lines of credit. For certain customers, Strongco issues letters of credit as a guarantee of Strongco's performance on the sale of equipment to the customer. As at March 31, 2011, there were outstanding letters of credit of $0.1 million.

In addition to its operating lines of credit, the Company has a $15 million line for foreign exchange forward contracts as part of its bank credit facilities ("FX Line") available to hedge foreign currency exposure. Under this FX Line, the Company can purchase foreign exchange forward contracts up to a maximum of $15 million. As at March 31, 2011, the Company had outstanding foreign exchange forward contracts under this facility totaling US$6.7 million at an average exchange rate of $1.0023 Canadian for each US $1.00 with settlement dates between April 30, 2011 and August 31, 2011.

The Company's bank credit facilities also include a term loan secured by real estate in the United States. At March 31, 2011 the outstanding balance on this term loan was US$3.8 million. The term loan bears interest at LIBOR plus 3.05% and requires monthly principal payments of US$13 thousand plus accrued interest. The Company has interest rate swap agreements in place which have converted the variable rate on the term loan to a fixed rate of 5.17%. The term loan and swap agreements expire in September 2012 at which point a balloon payment for the balance of the loan is due.

The Company's bank has agreed to amend covenants for the accounting changes under IFRS. The Company was in compliance with all covenants under its bank credit facilities as at March 31, 2011, before accounting adjustments for IFRS.

8 Equipment Notes Payable

In addition to its bank credit facilities, the Company has lines of credit available totalling approximately $250 million from various non-bank equipment lenders in Canada and the United States, which are used to finance equipment inventory. At March 31, 2011, there was approximately $128.8 million borrowed on these equipment finance lines.

The equipment notes are interest free for periods up to 12 months from the date of financing, after which they bear interest at rates ranging from 4.25% to 5.85% over the one month BA rate or 3.25% to 4.9% over the prime rate of a Canadian chartered bank in Canada, and between 0.0% and 5.85% over LIBOR in the United States. As collateral for these equipment notes, the Company has provided liens on the specific inventories financed and any related accounts receivable. Monthly principal repayments or "curtailments" equal to 3% of the original principal balance of the note commence 12 months from the date of financing and the remaining balance is due in full at the earlier of 24 months after financing or when the financed equipment is sold. While financed equipment is out on rent, monthly curtailments are required equal to the greater of 70% of the rental revenue and 2.5% of the original value of the note. Any remaining balance after 24 months, which is due in full, is normally refinanced with the lender over an additional period of up to 24 months. All of the Company's equipment notes facilities are renewable annually.

Certain of the Company's equipment finance credit agreements contain restrictive financial covenants, including requiring the Company to remain in compliance with the financial covenants under all of its other lending agreements ("cross default provisions"). The Company's equipment finance lenders have agreed to amend covenants for the accounting changes under IFRS.

The Company had availability under its equipment finance facilities of $80.2 million at March 31, 2011.

The Company was in compliance with all covenants under its equipment finance credit facilities as at March 31, 2011, before accounting adjustments for IFRS.

9 Notes Payable

Notes payable is comprised of the following:


----------------------------------------------------------------------------
                                       March 31, 2011      December 31, 2011

----------------------------------------------------------------------------
Champion acquisition note (i)   $                   -  $               1,233
Promissory notes (ii)                           1,811                      -
Floor plan notes payable (iii)                  3,553                      -
Term note (iv)                                  3,653                      -
----------------------------------------------------------------------------
                                                9,017                  1,233
----------------------------------------------------------------------------
Current portion                                   912                  1,233
----------------------------------------------------------------------------
Long-term portion               $               8,105  $                   -
----------------------------------------------------------------------------

i.   On March 20, 2008, the Company purchased substantially all of the
     assets (excluding real property) of the Champion Road Machinery
     division ("Champion") of Volvo Group Canada Inc. for a total
     consideration of $24,984 including deal-related costs of $190. The
     consideration included a non-interest bearing note payable in favour of
     Volvo Group Canada Inc. of $2,500 with instalment payments of $1,250
     due in March 2010 and March 2011. The note is secured with certain
     assets of Champion. The note has been discounted at 6.0% using the
     effective interest rate method, resulting in a discount of $346 that is
     amortized as interest expense over the three-year period to March 2011.
     During the three month period ended March 31, 2011, the final principal
     payment on non-interest bearing note was made.

ii.  As part of the acquisition of Chadwick-BaRoss, Inc., the Company
     issued, through a wholly-owned subsidiary, three promissory notes
     totalling US$1.9 million. The three promissory notes mature on February
     17, 2013 and bear interest at the US Prime rate. Principal payments of
     US$0.2 million will be made quarterly commencing May 17, 2011.

iii. In addition to equipment notes payable as described in note 8,
     Chadwick-BaRoss, Inc. utilizes floor plan notes payable to finance its
     rental fleet. Payment is required at the earlier of the sale of items
     or per contractual schedule ranging from 12 to 24 months. Effective
     interest rates range from 2.01% to 5.80% with various maturity dates.

iv.  Term note: as part of the acquisition of Chadwick-BaRoss, Inc., the
     Company assumed a term note secured by real estate and cross-
     collateralized with Chadwick-BaRoss' revolving line of credit. The term
     note is interest bearing at a rate of LIBOR plus 3.05% and matures in
     September 2012.

10 Shareholders' Capital

On January 17, 2011, the Company completed a rights offering for aggregate proceeds of $7.8 million, net of transaction costs of $51. The offering was virtually fully subscribed, with a total of 9,941,964 rights being exercised for 2,485,491 common shares and 134,419 common shares being issued pursuant to the additional subscription privilege. Under the offering, each registered holder of the Corporation's Common Shares as of December 17, 2010 received one Right for each Common Share held. Four Rights plus the sum of $3.00 were required to subscribe for one Common Share. Each common share was issued at a price of $3.00. The Company incurred expenses of $51 related to the offering.


Authorized
Unlimited number of shares

Issued
As at March 31, 2011 a total of 13,128,629 shares (December 31, 2010 -
10,508,719), valued at $64,898 (December 31, 2010 - $57,089) were issued and
outstanding.

11 Earnings (Loss) Per Share


-----------------------------------------------------------------------
Three month period ended                  March 31,           March 31,
                                               2011                2010
-----------------------------------------------------------------------
Weighted average number of
 shares for basic earnings per
 share calculation                       12,633,757          10,508,719
Effect of dilutive options
 outstanding                                 31,247                   -
-----------------------------------------------------------------------
Weighted average number of
 shares for diluted earnings
 per share calculation                   12,665,004          10,508,719
-----------------------------------------------------------------------

The computation of dilutive options outstanding only includes those options having exercise prices below the average market price of the shares during the period. As a result, 100,000 options and 475,000 options were excluded due to their anti-dilution effect as at March 31, 2011 and March 31, 2010, respectively.

12 Income Taxes

Significant components of the provision for income taxes are as follows:


----------------------------------------------------------------------------
For the three months ended                 March 31,               March 31,
                                                2011                    2010

----------------------------------------------------------------------------
Current tax                    $                 169   $                   -
----------------------------------------------------------------------------
Deferred tax                                    (106)                      -
----------------------------------------------------------------------------
Total income tax expense       $                  63   $                   -
----------------------------------------------------------------------------

The provision for income taxes differs from that which would be obtained by applying the statutory tax rate as a result of the following:


----------------------------------------------------------------------------
As at March 31,                                 2011                   2010

----------------------------------------------------------------------------
Earnings (loss) before taxes                     661                 (2,156)
Statutory tax rate                             25.57%                 46.40%
----------------------------------------------------------------------------

Provision for income taxes at
 statutory tax rate                  $           169   $             (1,000)
Adjustments thereon for the effect
 of:
Permanent and other differences                   29                     65
Benefit of temporary and other
 differences unrecognized                        (62)
Fund's loss for tax purposes for
 which benefit is not recognized                                        935
Utilization of losses previously
 unrecognized                                    (73)
----------------------------------------------------------------------------
                                     $            63   $                  -
----------------------------------------------------------------------------

                                                2011                   2010

Eligible capital expenditures and
 other reserves                      $         1,144   $                589
Pension                                           34                    170
Loss carryforward                                329
----------------------------------------------------------------------------
Deferred income tax assets                     1,507                    759
----------------------------------------------------------------------------

Capital and other assets                      (3,138)                  (759)
----------------------------------------------------------------------------
Deferred income tax liabilities               (3,138)                  (759)
----------------------------------------------------------------------------
Net deferred income tax liability    $        (1,631)  $                  -
----------------------------------------------------------------------------

Income tax expense is recognized based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated annual rate used for the three-month period ended March 31, 2011 was 27.9% (March 31, 2010 - 46.4%).

13 Contingencies and Guarantees

a) In the ordinary course of business activities, the Company may be contingently liable for litigation. On an ongoing basis, the Company assesses the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable costs or losses. A determination of the provision required, if any, is made after analysis of each individual issue. The required provision may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy dealing with these matters.

A statement of claim has been filed naming a division of the Company as one of several defendants in proceedings under the Superior Court of Quebec. The action claims errors and omissions in the contractual execution of work entrusted to the defendants and names the Company as jointly and severally liable for damages of approximately $5.9 million. Although the Company cannot predict the outcome at this time, based on the opinion of external legal counsel, management believes that the Company has a strong defence against the claim and that it is without merit. The Company's insurer has provided conditional coverage for this claim.

A statement of claim has been filed naming a former division of the Company as one of several defendants in proceedings under the Queens Branch of Manitoba. The action claims errors and omissions in the contractual execution of work entrusted to the defendants and names the Company as jointly and severally liable for damages of approximately $4.8 million. Although the outcome is indeterminable at this early stage of the proceedings, the Company believes that they have a strong defence against this claim and that it is without merit. The Company's insurer has provided conditional coverage for this claim.

b) The Company has provided a guarantee of lease payments under the assignment of a property lease, which expires January 31, 2014. Total lease payments from April 1, 2011 to January 31, 2014 are $424 (December 31, 2010 - $461).

14 Segment Information

Management has determined the operating segments based on reports reviewed by the chief operating decision maker. The Company has one reportable segment, Equipment Distribution. This business sells and rents new and used equipment and provides after-sale product support (parts and service) to customers that operate in infrastructure, construction, mining, oil and gas exploration, forestry and industrial markets.

A breakdown of revenue from the Equipment Distribution segment is as follows:


----------------------------------------------------------------------------
Three months ended                     March 31, 2011         March 31, 2010

----------------------------------------------------------------------------
Equipment Sales                 $              55,984  $              29,868
Equipment Rentals                               5,470                  3,734
Product Support                                26,041                 20,078
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Total Equipment Distribution    $              87,495  $              53,680
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Geographical information:


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                 Three month period ended                       Year ended
                           March 31, 2011                December 31, 2010
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             Canada         US      Total     Canada         US      Total
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Total
 assets   $ 221,963  $  33,922  $ 255,885  $ 215,161  $       -  $ 215,161
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15 Changes in Non-Cash Working Capital

The components of the changes in non-cash working capital are detailed below:


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For the three-month period ended March 31,          2011            2010

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Changes in working capital
 Trade and other receivables               $      (2,173)  $       2,512
 Inventories                                      (8,714)         (4,641)
 Prepaid expense and other deposits                 (578)           (638)
 Trade and other payables                          2,597          (1,236)
 Provisions                                          147             112
 Deferred revenue and customer deposits              432             832
 Income taxes recoverable/payable                    (55)              -
 Equipment notes payable                           2,992          (1,819)
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                                           $      (5,353)  $      (4,878)
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16 Seasonality

The Company's interim period revenues and earnings historically follow a weather related pattern of seasonality. Typically, the first quarter is the weakest quarter as construction and infrastructure activity is constrained in the winter months. This is followed by a strong increase in the second quarter as construction and other contracts begin to be put out for bid and companies begin to prepare for summer activity. The third quarter generally tends to be slower from an equipment sales standpoint, which is partially offset by continued strength in equipment rentals and customer support (parts and service) activities. Fourth quarter activity generally strengthens as companies make year-end capital spending decisions in addition to the exercise of purchase options on equipment that has previously gone out on rental contracts.

17 Economic Relationship

The Company sells, rents and services heavy equipment and related parts. Distribution agreements are maintained with several equipment manufacturers, of which the most significant are with Volvo Construction Equipment North America Inc. The distribution and servicing of Volvo products account for a substantial portion of overall operations. The Company has had an ongoing relationship with Volvo since 1991.

18 Subsequent Events

In April 2011, the Company's credit facilities were amended to add a $5 million demand non-revolving term loan ("Acquisition Loan"). The Acquisition Loan is for a term of 60 months and bears interest at the bank's prime lending rate plus 200 basis points. The Acquisition Loan is subject to monthly principal payments of $83 thousand plus accrued interest.

In May 2011, the bank credit facilities were further amended to add a construction loan facility ("Construction Loan") to finance the construction of the Company's new Edmonton, Alberta branch. Under the Construction Loan, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $7.1 million. Construction of the new branch will commence in June 2011 and is scheduled to be completed before the end of 2011. Upon completion, the Construction Loan will be converted to a demand, non-revolving term loan ("Mortgage Loan"). The Mortgage Loan will be for a term of 60 months. The Construction Loan and Mortgage Loan bear interest at the bank's prime lending rate plus 200 basis points.

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