Wajax Corporation
TSX : WJX

Wajax Corporation

March 06, 2012 08:10 ET

Wajax Announces Fourth Quarter 2011 Earnings and Raises Monthly Dividend 35%

TORONTO, ONTARIO--(Marketwire - March 6, 2012) - Wajax Corporation ("Wajax" or the "Corporation") (TSX:WJX) today announced its 2011 fourth quarter earnings and increased its monthly dividend 35% to $0.27 per share.


                                  ------------------------------------------
(Dollars in millions, except per     Three Months      Year Ended December  
 share data)                      Ended December 31             31          
                                  ------------------------------------------
                                     2011      2010        2011        2010 
                                  ------------------------------------------
CONSOLIDATED RESULTS                                                        
----------------------------------                                          
Revenue                           $ 377.2   $ 316.4   $ 1,377.1   $ 1,110.9 
Earnings before income tax        $  22.5   $  14.9   $    87.5   $    53.9 
Net earnings                      $  16.6   $  15.8   $    63.8   $    56.4 
Basic earnings per share          $  1.00   $  0.95   $    3.84   $    3.39 

SEGMENTS                                                                    
----------------------------------                                          
Revenue - Equipment               $ 192.3   $ 159.7   $   685.8   $   555.8 
    - Industrial Components       $  90.2   $  77.8   $   347.5   $   302.2 
    - Power Systems               $  95.5   $  80.2   $   347.4   $   257.3 

Earnings - Equipment              $  14.3   $  10.8   $    50.2   $    39.0 
      % margin                        7.5%      6.8%        7.3%        7.0%
    - Industrial Components       $   5.9   $   2.6   $    23.1   $    12.0 
      % margin                        6.5%      3.4%        6.6%        4.0%
    - Power Systems               $   7.9   $   6.5   $    32.9   $    19.2 
      % margin                        8.3%      8.1%        9.5%        7.5%
                                  ------------------------------------------

Fourth Quarter Highlights

Consolidated fourth quarter revenue of $377.2 million increased $60.8 million, or 19%, compared to last year. Quarterly revenue included $19.9 million attributable to the May 2, 2011 acquisition of Ontario based Harper Power Products ("Harper"). Gains in the mining, energy, forestry, construction and industrial sectors accounted for the majority of the balance of the increase. The Equipment segment's revenue increased 20% on stronger demand for almost all major product categories. Power Systems revenue increased 19% as a result of the Harper acquisition and Industrial Components sales rose 16% on higher revenue from energy, mining and industrial customers, with particular strength in western Canada.


--  Earnings before tax of $22.5 million increased more than 50% over last
    year's level as a result of the higher volumes, while disciplined
    control over selling and administrative costs was maintained in all
    three segments. Net earnings for the quarter of $16.6 million, or $1.00
    per share, were higher than the $15.8 million, or $0.95 per share,
    recorded in 2010 in spite of Wajax being an income fund at that time and
    not subject to income taxes. 

--  Consolidated backlog of $267.7 million at December 31, 2011 increased
    $3.9 million from $263.8 million at September 30, 2011. 

--  Funded net debt at December 31, 2011 of $63.7 million decreased $33.8
    million compared to September 30, 2011 as net cash flows generated from
    operating activities exceeded dividends paid, investing activities and
    finance lease payments. 

The Corporation announced a 35%, or $0.07 per share increase in its monthly dividend beginning in March 2012. Dividends of $0.27 per share were declared for March and April. Commencing in 2012, the Corporation has established an objective of declaring annual dividends equal to at least 75% of earnings subject to the Corporation's financial position, economic outlook and capital requirements for growth including acquisitions.

Neil Manning retired as President and Chief Executive Officer and a director of Wajax on March 5, 2012. His successor, Mark Foote, assumed the role of President and Chief Executive Officer, and was appointed a director, on March 5, 2012. Mark has extensive experience in distribution, supply chain management and logistics. Most recently, he served as the President and Chief Executive Officer of Zellers, and prior to that, was the President and Chief Merchandising Officer at Loblaws Companies. Mark also had a career of more than 20 years at Canadian Tire Corporation, including five years as President, Canadian Tire Retail. As well, effective December 13, 2011, Richard Plain was appointed to the position of Senior Vice President, Wajax Power Systems subsequent to the departure of Tim Zawislak. Prior to his appointment, Richard held the position of Vice President Sales and Marketing since joining Wajax Power Systems in 2009 and brings 18 years of experience in the power systems and equipment distribution businesses in western Canada.

Outlook

In 2011 Wajax achieved record revenue and earnings before income tax of $1.38 billion and $87.5 million respectively. Year-over-year revenue increased 24% while earnings before income tax increased 62%. The earnings before income tax comparison is appropriate since 2011 was the first year after conversion from an income fund when Wajax was effectively not subject to income tax. This performance was driven by a stronger Canadian economy and the execution of the Corporation's strategic initiatives, including the Harper acquisition. Additionally, all three businesses maintained disciplined control over selling and administrative costs. With its Canada-wide branch infrastructure and diverse product lines, Wajax's business has exposure to virtually all of the goods producing sectors of the Canadian economy. Stronger sectors of the economy aiding the Corporation's revenue growth in 2011 were energy, mining, construction and forestry, primarily in western Canada.

Looking forward to 2012, management expects growth in the Canadian economy to be more modest than that experienced in 2011. This is a result of the continuing high value of the Canadian dollar and the dampening effect of the European debt crisis and the slowing Chinese economy on world economic activity. However, we expect global demand for commodities to remain relatively strong, which should bode well for Canada's mining and energy sectors, particularly in western Canada. The revenue implication from phasing out the LeTourneau mining equipment line at the end of April, is expected to be mitigated by additional Hitachi mining equipment sales as Hitachi's manufacturing operations have recovered from the effects of the March 2011 Japanese earthquake and tsunami. As well, management has outlined growth initiatives that are expected to result in increased market share for key product lines, the addition of new products and expansion into new geographic territories. As a result, management expects continued growth in revenue and earnings in 2012, but at a more modest pace than experienced in 2011.

Wajax Corporation is a leading Canadian distributor and service support provider of mobile equipment, industrial components and power systems. Reflecting a diversified exposure to the Canadian economy, its three distinct core businesses operate through a network of 117 branches across Canada. Its customer base spans natural resources, construction, transportation, manufacturing, industrial processing and utilities.

Wajax will Webcast its Fourth Quarter Financial Results Conference Call. You are invited to listen to the live Webcast on Tuesday, March 6, 2012 at 2:30 p.m. ET. To access the Webcast, enter www.wajax.com and click on the link for the Webcast on the Investor Relations page.

Cautionary Statement Regarding Forward Looking Information

This news release contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively, "forward-looking statements"). These forward-looking statements relate to future events or the Corporation's future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "anticipates", "intends", "predicts", "expects", "is expected", "scheduled", "believes", "estimates", "projects" or "forecasts", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation's ability to predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward looking statements. There can be no assurance that any forward looking statement will materialize. Accordingly, readers should not place undue reliance on forward looking statements. The forward looking statements in this news release are made as of the date of this news release, reflect management's current beliefs and are based on information currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct.

Specifically, this news release includes forward looking statements regarding, among other things, our expectations for the Canadian economy in 2012, the global demand for commodities and the associated impact on the Canadian mining and energy sectors, our revenue and earnings outlook, planned strategic and growth initiatives and their expected outcomes, and our objective with respect to the future payment of dividends. These statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding general business and economic conditions, the supply and demand for, and the level and volatility of prices for, commodities, financial market conditions, including interest rates, the future financial performance of the Corporation, our costs, market competition, our ability to attract and retain skilled staff, our ability to procure quality products and inventory and our ongoing relations with suppliers, employees and customers. The foregoing list of assumptions is not exhaustive. Factors that may cause actual results to vary materially include, but are not limited to, a deterioration in general business and economic conditions, volatility in the supply and demand for, and the level of prices for, commodities, fluctuations in financial market conditions, including interest rates, the level of demand for, and prices of, the products and services we offer, market acceptance of the products we offer, termination of distribution or original equipment manufacturer agreements, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of quality products or inventory, supply disruptions, job action and unanticipated events related to health, safety and environmental matters), our ability to attract and retain skilled staff and our ability to maintain our relationships with suppliers, employees and customers. The foregoing list of factors is not exhaustive. The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. The Corporation does not undertake any obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws. Further information concerning the risks and uncertainties associated with these forward looking statements and the Corporation's business may be found in our Annual Information Form for the year ended December 31, 2011, filed on SEDAR.

Management's Discussion and Analysis - 2011

The following management's discussion and analysis ("MD&A") provides a review of the consolidated financial condition and results of operations of Wajax Corporation ("Wajax" or "Corporation") for the year ended December 31, 2011. On January 1, 2011, Wajax adopted International Financial Reporting Standards ("IFRS"). The term "Canadian GAAP" refers to Canadian generally accepted accounting principles before the adoption of IFRS. The following discussion should be read in conjunction with the Corporation's Consolidated Financial Statements and accompanying notes. Information contained in this MD&A is based on information available to management as of March 6, 2012.

Unless otherwise indicated, all financial information within this MD&A is in millions of dollars, except share and per share data.

Additional information, including Wajax's Annual Report and Annual Information Form, are available on SEDAR at www.sedar.com.

Responsibility of Management and the Board of Directors

Management is responsible for the information disclosed in this MD&A and the Consolidated Financial Statements and accompanying notes, and has in place appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is materially complete and reliable. Wajax's Board of Directors has approved this MD&A and the Consolidated Financial Statements and accompanying notes. In addition, Wajax's Audit Committee, on behalf of the Board of Directors, provides an oversight role with respect to all public financial disclosures made by Wajax, and has reviewed this MD&A and the Consolidated Financial Statements and accompanying notes.

Disclosure Controls and Procedures and Internal Control over Financial Reporting

Wajax's management, under the supervision of its Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), is responsible for establishing and maintaining disclosure controls and procedures ("DC&P") and internal control over financial reporting ("ICFR").

As at December 31, 2011 Wajax's management, under the supervision of its CEO and CFO, had designed DC&P to provide reasonable assurance that information required to be disclosed by Wajax in annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation. DC&P are designed to ensure that information required to be disclosed by Wajax in annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated and communicated to Wajax's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

As at December 31, 2011 Wajax's management, under the supervision of its CEO and CFO, had designed ICFR to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. In completing the design, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. With regard to general controls over information technology, management also used the set of practices of Control Objectives for Information and related Technology ("COBIT") created by the IT Governance Institute.

Wajax has not yet completed the design of DC&P and ICFR related to the May 2, 2011 acquisition of the assets of Harper Power Products Inc. ("Harper"). The Harper operation has had revenues of approximately $49.3 million since the acquisition. Wajax anticipates that the evaluation of the design of DC&P and ICFR related to Harper will be completed prior to June 2012, at which time Harper will be fully integrated with the existing Power Systems segment's control environment.

As at December 31, 2011 Wajax's management, under the supervision of its CEO and CFO, had evaluated the effectiveness and operation of its DC&P and ICFR. This evaluation included a risk evaluation, documentation of key processes and tests of effectiveness conducted on a sample basis throughout the year. Due to the inherent limitations in all control systems, an evaluation of the DC&P and ICFR can only provide reasonable assurance over the effectiveness of the controls. As a result, DC&P and ICFR are not expected to prevent and detect all misstatements due to error or fraud. With the exception of DC&P and ICFR related to the Harper operation discussed above, the CEO and CFO have concluded that Wajax's DC&P and ICFR were effective as at December 31, 2011.

Other than the integration of the Harper acquisition discussed earlier, there was no change in Wajax's ICFR that occurred during the fourth quarter of 2011 that has materially affected, or is reasonably likely to materially affect, Wajax's ICFR.

Wajax Corporation Overview

Effective January 1, 2011, Wajax Income Fund converted into a corporation pursuant to a plan of arrangement under the Canada Business Corporations Act ("CBCA") and the shares of Wajax Corporation began trading on the Toronto Stock Exchange on January 4, 2011 under the symbol WJX.

Wajax's core distribution businesses are engaged in the sale and after-sale parts and service support of mobile equipment, industrial components and power systems through a network of 117 branches across Canada. Wajax is a multi-line distributor and represents a number of leading worldwide manufacturers in its core businesses. Its customer base is diversified, spanning natural resources, construction, transportation, manufacturing, industrial processing and utilities.

Wajax's strategy is to continue to grow earnings in all segments through continuous improvement of operating margins and revenue growth while maintaining a strong balance sheet. Revenue growth will be achieved through market share gains, the addition of new or complementary product lines and aftermarket support services and expansion into new Canadian geographic territories, either organically or through acquisitions.

Commencing in 2012, the Corporation has established an objective of declaring annual dividends equal to at least 75% of earnings subject to the Corporation's financial condition, economic outlook and capital requirements for growth including acquisitions. The Corporation's intention is to continue paying dividends on a monthly basis.

Cautionary Statement Regarding Forward-Looking Information

This MD&A contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively, "forward-looking statements"). These forward-looking statements relate to future events or the Corporation's future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "anticipates", "intends", "predicts", "expects", "is expected", "scheduled", "believes", "estimates", "projects" or "forecasts", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation's ability to predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward looking statements. There can be no assurance that any forward looking statement will materialize. Accordingly, readers should not place undue reliance on forward looking statements. The forward looking statements in this MD&A are made as of the date of this MD&A, reflect management's current beliefs and are based on information currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct. Specifically, this MD&A includes forward looking statements regarding, among other things, our expectations for the Canadian economy in 2012, the global demand for commodities and the associated impact on the Canadian mining and energy sectors, our revenue and earnings outlook, our plans and expectations for revenue and earnings growth, planned marketing, strategic, operational and growth initiatives and their expected outcomes, our current and future plans regarding the expansion of our business, the addition of new product offerings and expansion into new geographic territories, and our objective with respect to the future payment of dividends. These statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding general business and economic conditions, the supply and demand for, and the level and volatility of prices for, commodities, financial market conditions, including interest rates, the future financial performance of the Corporation, our costs, market competition, our ability to attract and retain skilled staff, our ability to procure quality products and inventory and our ongoing relations with suppliers, employees and customers. The foregoing list of assumptions is not exhaustive.

Factors that may cause actual results to vary materially include, but are not limited to, a deterioration in general business and economic conditions, volatility in the supply and demand for, and the level of prices for, commodities, fluctuations in financial market conditions, including interest rates, the level of demand for, and prices of, the products and services we offer, market acceptance of the products we offer, termination of distribution or original equipment manufacturer agreements, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of quality products or inventory, supply disruptions, job action and unanticipated events related to health, safety and environmental matters), our ability to attract and retain skilled staff and our ability to maintain our relationships with suppliers, employees and customers. The foregoing list of factors is not exhaustive. Further information concerning the risks and uncertainties associated with these forward looking statements and the Corporation's business may be found in this MD&A under the heading "Risk Management and Uncertainties" and in our Annual Information Form for the year ended December 31, 2011, filed on SEDAR. The forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement. The Corporation does not undertake any obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws. Readers are further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

International Financial Reporting Standards

In February 2008, The Accounting Standards Board of the Canadian Institute of Chartered Accountants confirmed that the use of IFRS is required in Canada for publicly accountable profit oriented enterprises for fiscal years beginning on or after January 1, 2011. The Corporation's IFRS transition date is January 1, 2010 and has prepared its Consolidated Financial Statements and accompanying notes for the year ending December 31, 2011, with comparatives, in accordance with IFRS as published by the International Accounting Standard Board ("IASB"). Prior to the adoption of IFRS, the financial statements of the Corporation were prepared in accordance with Canadian GAAP.

The most significant impacts on the Corporation's Consolidated Financial Statements resulting from the adoption of IFRS are discussed within the applicable sections of this MD&A and Note 29 of the Consolidated Financial Statements.

All comparative figures have been restated in accordance with IFRS, unless otherwise indicated.

Consolidated Results


Year ended December 31                                     2011        2010 
----------------------------------------------------------------------------
Revenue                                              $  1,377.1  $  1,110.9 
----------------------------------------------------------------------------

Gross profit                                         $    292.4  $    237.9 
Selling and administrative expenses                  $    200.3  $    179.6 
----------------------------------------------------------------------------
Earnings before finance costs and income taxes       $     92.1  $     58.2 
Finance costs                                        $      4.6  $      4.3 
----------------------------------------------------------------------------
Earnings before income taxes                         $     87.5  $     53.9 
Income tax expense (recovery)                        $     23.7  $     (2.5)
----------------------------------------------------------------------------
Net earnings                                         $     63.8  $     56.4 
----------------------------------------------------------------------------

Earnings per share                                                          
    - Basic                                          $     3.84  $     3.39 
    - Diluted                                        $     3.77  $     3.34 
----------------------------------------------------------------------------

Pie Charts - Revenue by Geographic Region                                   
                                                          2011         2010 
                                                    -----------  -----------
Western Canada                                              54%          49%
Eastern Canada (i)                                          29%          34%
Ontario                                                     17%          17%
(i) Includes Quebec and the Atlantic provinces.                             

Pie Charts - Revenue by Segment                                             
                                                          2011         2010 
                                                    -----------  -----------
Equipment                                                   50%          50%
Industrial Components                                       25%          27%
Power Systems                                               25%          23%

Pie Charts - EBIT by Segment                                                
                                                          2011         2010 
                                                    -----------  -----------
Equipment                                                   47%          56%
Industrial Components                                       22%          17%
Power Systems                                               31%          27%

Pie Charts - Revenue by Market                                              
                                                          2011         2010 
                                                    -----------  -----------
Industrial/Commercial                                       16%          16%
Construction                                                14%          10%
Oil and Gas                                                 13%          10%
Oil Sands                                                   11%          12%
Mining                                                      11%          13%
Transportation                                               9%          11%
Forestry                                                     9%          10%
Government & Utilities                                       6%           7%
Metal Processing                                             4%           5%
Other                                                        7%           6%

Revenue

Revenue in 2011 of $1,377.1 million increased 24%, or $266.2 million, from $1,110.9 million in 2010 and included $49.3 million of revenue from the acquisition of the assets of Harper by the Power Systems segment effective May 2, 2011. Equipment segment revenue increased 23%, or $130.0 million, due mainly to stronger market demand for construction, forestry, mining and material handling equipment and related parts and service volumes. Industrial Components segment revenue increased 15%, or $45.3 million, attributable to improved oil and gas drilling activity in western Canada and higher mining and industrial sector volumes in all regions. Power Systems segment revenue increased 35%, or $90.1 million, due to the acquisition of Harper and an increase in equipment and parts and service revenues, mostly to off-highway oil and gas customers in western Canada, that more than exceeded a reduction in eastern Canada (Quebec and the Atlantic provinces) volumes.

Gross profit

Gross profit increased $54.5 million, or 23%, in 2011 due to the positive impact of higher volumes compared to last year. The gross profit margin percentage decreased slightly to 21.2% from 21.4% last year as the negative sales mix variance resulting from a higher proportion of equipment sales was partially offset by increased equipment margins.

Selling and administrative expenses

Selling and administrative expenses increased $20.7 million in the year. This was due primarily to increased personnel costs including a $2.6 million increase in annual and mid-term incentive accruals, $7.5 million of selling and administrative expenses relating to Harper and higher sales related and occupancy costs. These increases were offset partially by lower bad debt expenses in the Equipment segment. Selling and administrative expenses as a percentage of revenue decreased to 14.5% in 2011 from 16.2% in 2010.

Finance costs

Finance costs of $4.6 million increased $0.3 million compared to 2010 due to the impact of higher funded net debt, mainly attributable to the acquisition of Harper on May 2, 2011. Funded net debt includes bank debt and obligations under finance leases, net of cash.

Earnings before income taxes

Earnings before income taxes increased $33.6 million in the year. The positive impact of higher volumes more than offset the slightly lower gross profit margin percentage, increased selling and administrative costs and higher finance costs compared to 2010.

Income tax expense

Effective January 1, 2011, Wajax converted from an income fund to a corporation. As a result, Wajax and its subsidiaries are subject to tax on all of their taxable income from that date forward.

The 2011 effective income tax rate of 27.1% was less than the Corporation's statutory income tax rate of 27.7%. The positive impact of partnership income generated in 2011 which will be subject to tax in 2012 at a lower tax rate, more than offset the negative impact of expenses not deductible for tax purposes.

Net earnings

Net earnings for the year ended December 31, 2011 increased $7.4 million to $63.8 million, or $3.84 per share, from $56.4 million, or $3.39 per share, in 2010. The $33.6 million increase in earnings before income taxes, was partially offset by a $26.2 million increase in income tax expense.

Comprehensive income

Comprehensive income for the year ended December 31, 2011 of $62.9 million increased $6.7 million from $56.2 million the previous year due to higher net earnings of $7.4 million, offset partially by a $0.7 million increase in other comprehensive loss. The increase in other comprehensive loss resulted from increased actuarial losses on pension plans and a decrease in losses on derivative instruments designated as cash flow hedges in prior periods reclassified to cost of inventory or finance costs in the current year, offset partially by gains on derivative instruments designated as cash flow hedges outstanding at the end of the year.

Funded net debt

Funded net debt of $63.7 million at December 31, 2011 increased $18.1 million compared to December 31, 2010. This increase was mainly a result of net cash flows generated from operating activities of $61.2 million being less than the $29.2 million of cash flows used in investing activities including $23.2 million used for the Harper acquisition, distributions and dividends of $44.7 million, finance lease payments of $3.5 million and debt facility renewal costs of $1.1 million. As a result, Wajax's year-end funded net debt-to-equity ratio of 0.28:1 increased from last year's ratio of 0.23:1.

On August 12, 2011, Wajax amended and extended the term of its $175 million bank credit facility to August 12, 2016 from December 31, 2011. The terms of the fully secured facility, comprised of a $30 million non-revolving term portion and a $145 million revolving term portion, are no more restrictive than in the previous facility. See Liquidity and Capital Resources section.

Dividends

For the twelve months ended December 31, 2011 monthly dividends declared totaled $2.14 per share. For the twelve months ended December 31, 2010 monthly cash distributions declared as an income fund were $3.40 per unit.

Tax information relating to 2011 dividends and prior year distributions is available on Wajax's website at www.wajax.com.

Backlog

Consolidated backlog at December 31, 2011 of $267.7 million increased $50.4 million, or 23%, from $217.3 million at December 31, 2010. Increases in the Equipment segment, due mainly to higher mining and construction equipment orders, and increases in the Industrial Components segment more than offset the decreases in the Power Systems segment. Backlog includes the total retail value of customer purchase orders for future delivery or commissioning.

CEO Succession

Neil Manning retired as President and CEO and a director of Wajax on March 5, 2012. His successor, Mark Foote, assumed the role of President and CEO, and was appointed a director on March 5, 2012. Mark has extensive experience in distribution, supply chain management and logistics. Most recently, he served as the President and Chief Executive Officer of Zellers, and prior to that, was the President and Chief Merchandising Officer at Loblaws Companies. Mark also had a career of more than 20 years at Canadian Tire Corporation, including five years as President, Canadian Tire Retail.

Results of Operations

Equipment


For the year ended December 31                           2011          2010 
----------------------------------------------------------------------------
Equipment(i)                                      $     428.0   $     332.4 
Parts and service                                 $     257.8   $     223.4 
----------------------------------------------------------------------------
Segment revenue                                   $     685.8   $     555.8 
----------------------------------------------------------------------------

Segment earnings                                  $      50.2   $      39.0 
Segment earnings margin                                   7.3%          7.0%
----------------------------------------------------------------------------
(i)Includes rental and other revenue.                                       

Revenue by Product Type 2011 versus 2010                                    
Market                                                    2011         2010 
----------------------------------------------------------------------------
Construction                                                33%          30%
Forestry                                                    13%          12%
Mining/Oil sands                                            31%          30%
Material Handling                                           16%          17%
Crane & Utility                                              7%          11%

Revenue increased 23%, or $130.0 million, to $685.8 million in 2011 from $555.8 million in 2010. Segment earnings increased $11.2 million to $50.2 million in 2011 compared to $39.0 million in 2010. The following factors contributed to the improved results:


--  Equipment revenue increased by $95.6 million compared to last year.
    Specific year-over-year variances included the following: 

    --  Construction equipment revenue increased $46.3 million due mostly to
        increased market demand for Hitachi construction excavators in
        western Canada and Ontario and for JCB equipment in all regions. 
    --  Forestry equipment sales increased $23.2 million attributable to
        higher market demand for Tigercat and forestry related Hitachi
        products across Canada. 
    --  Mining equipment revenue increased $22.3 million resulting from an
        increase in Hitachi mining revenues in western Canada offset
        partially by fewer deliveries of LeTourneau mining equipment. 
    --  Material handling equipment revenue increased $14.5 million due to
        higher market demand primarily in western and eastern Canada (Quebec
        and Atlantic provinces). 
    --  Crane and utility equipment revenue decreased $10.7 million due
        primarily to lower sales to utility customers in Ontario. 

--  Parts and service volumes increased $34.4 million compared to last year
    resulting from higher mining, construction and material handling sales,
    mainly in western Canada. 

--  Segment earnings increased $11.2 million compared to last year. The
    positive impact of higher volumes outweighed the negative impact of a
    lower gross profit margin and a $6.7 million increase in selling and
    administrative expenses. The lower gross profit margin resulted from a
    higher proportion of equipment sales compared to last year. Selling and
    administrative expenses increased as a result of higher personnel costs
    including additional annual and mid-term incentive accruals and higher
    sales related and occupancy costs. These increases were somewhat offset
    by lower bad debt expenses compared to last year. 

Backlog of $146.6 million at December 31, 2011 increased $52.6 million compared to December 31, 2010 due mainly to increases in mining equipment orders in all regions and construction equipment orders in western Canada. The backlog includes $25.5 million of LeTourneau equipment orders.

During the second quarter of 2011, the Equipment segment entered into an equipment supply agreement with Shell Canada Energy for a total of seven Hitachi mining shovels and construction excavators, adding to the already existing fleet of Hitachi equipment at Shell Albian Sands, Shell's oil sands operation in the province of Alberta. In support of Shell Albian Sands' fleet of Hitachi equipment, Wajax has also renewed and extended the existing commercial arrangement with Shell Canada Energy for the supply of parts, components and services until the end of April 2014.

On October 17, 2011, Wajax announced it had reached an agreement with LeTourneau Technologies, Inc. ("LeTourneau") providing for the dealer agreement relating to Wajax's distribution of LeTourneau mining equipment and parts products in Canada to be discontinued effective April 27, 2012. Joy Global Inc. initially announced the closing of its acquisition of LeTourneau on June 22, 2011 and indicated its intention to integrate the LeTourneau field facilities and distribution activities with its P&H mining equipment operations. Sales and service of LeTourneau products in 2011 generated approximately $35 million of revenue for Wajax and contributed approximately $11 million to its earnings before finance costs and income tax expense. Exit costs or write downs, if any, are expected to be minimal.

Wajax Equipment's strategy is to continue to focus on building the market share of its key product lines, particularly construction and material handling equipment, and to improve product support capabilities across all lines of business. As well, the segment will work to expand its operations in the growing mining sector by building its organizational and support infrastructure to capitalize on market opportunities, particularly in Ontario and eastern Canada.

During 2011, the segment made significant strides toward improving its aftermarket support capabilities. Parts availability and customer fill rates have been increased, and upgraded processes adopted for inventory forecasting, ordering and stocking. In addition, the sales force compensation plans were revamped to be better aligned with market share targets.

The segment's focus going forward will include the following specific initiatives to continue to build its equipment market share and its aftermarket parts and service business:


--  The segment intends to expand its mining support infrastructure to
    improve sales and after-sales support coverage of both above ground and
    underground mining products in Ontario and eastern Canada. The segment
    expects to continue to develop its product offering through the
    introduction of two new underground mining lines, and the new 240 tonne
    Hitachi mine truck at the end of 2012. The recently formed Rotating
    Products Group in Fort McMurray, which distributes and services slurry
    pumps and services equipment such as compressors and gear boxes, is
    planned to be further developed in the Fort McMurray area prior to
    expanding to other major mining areas in Canada.  

--  Equipment will continue to focus on the quality and effectiveness of
    sales personnel and management and provide them the appropriate sales
    execution tools and training to support their market share improvement
    objectives. 

--  The efficiency and effectiveness of the service operations is planned to
    be enhanced through standardization of procedures and quoting practices
    across the country and implementation of technology to assist in
    customer on-line access, process flow, job tracking and field technician
    support.  

--  The branch coverage in key metropolitan areas will continue to be
    upgraded. The current Montreal Lachine facility operation is being
    replaced by two newer facilities to allow for improved market
    penetration. One facility was recently opened in Chambly and another in
    Laval is scheduled to open in mid-2012. A new Edmonton mining facility
    will be constructed with completion expected in early 2013, and a new
    branch in eastern Toronto is expected to be opened in 2013 to better
    serve that portion of the Greater Toronto Area. 

Industrial Components


For the year ended December 31                           2011          2010 
----------------------------------------------------------------------------
Segment revenue                                   $     347.5   $     302.2 
----------------------------------------------------------------------------

Segment earnings                                  $      23.1   $      12.0 
Segment earnings margin                                   6.6%          4.0%
----------------------------------------------------------------------------

Revenue by Market 2011 versus 2010                                          
Market                                                    2011         2010 
----------------------------------------------------------------------------
Industrial/Manufacturing                                    17%          17%
Mining                                                      14%          14%
Oil & Gas                                                   14%          10%
Forestry                                                    14%          15%
Metal Processing                                            11%          13%
Construction                                                 6%           6%
Food & Beverage                                              5%           5%
Transportation                                               4%           4%
Other                                                       15%          16%

Revenue increased $45.3 million, or 15%, to $347.5 million from $302.2 million in 2010. Segment earnings increased $11.1 million to $23.1 million compared to $12.0 million in the previous year. The year-over-year changes in revenue and earnings were a result of the following factors:


--  Bearings and power transmission parts sales increased $15.2 million due
    mainly to higher mining revenues across all regions and increased
    industrial volumes in eastern Canada and Ontario. Improved sales to food
    and beverage, oil and gas, construction and agriculture customers also
    contributed to the increase. 

--  Fluid power and process equipment product and service revenue increased
    $30.1 million on improved oil and gas drilling activity in western
    Canada and increased sales to industrial, mining, forestry and
    agriculture sector customers. 

--  Segment earnings increased $11.1 million compared to last year. The
    positive impact of higher volumes outweighed the negative impact of
    lower gross profit margins on fluid power and process equipment products
    and a $0.8 million increase in selling and administrative expenses. The
    increase in selling and administrative expenses resulted from higher
    sales related and occupancy costs and computer systems upgrade expenses,
    somewhat offset by a reduction in personnel costs due to lower severance
    costs. 

Backlog of $44.8 million as of December 31, 2011 increased $9.4 million compared to December 31, 2010.

The strategic direction of the Industrial Components segment is to continue to grow revenue and earnings by capitalizing on its technical and engineering capabilities by providing engineered solutions built around its product offering. The segment also plans to continue to take steps to maximize its operational efficiency in order to increase margins and lower its working capital requirements.

Considerable effort has been undertaken over the last number of years to improve Industrial Components revenue and profitability. In 2011, the segment was able to leverage its selling and administrative expense base as revenue grew 15% and segment earnings margins increased from 4.0% in 2010 to 6.6% in 2011. Initiatives to further drive earnings improvements include:


--  The segment will continue to capitalize on its technical and engineering
    expertise including further expansion of design and assembly
    capabilities, shop and field repair and analysis services. This will be
    supported by a national marketing program and dedicated technical sales
    representatives in major markets. 

--  Industrial Components expects to grow major product category sales in
    under-represented territories. This is to include the opening of new
    bearings and power transmission product branches in western Canada, the
    addition of hydraulic product lines in Ontario and Quebec and selective
    acquisitions. 

--  In 2012 the segment plans to upgrade its e-commerce capability in order
    to meet the evolving electronic transaction needs of its customers and
    to improve the efficiency of its transactions with suppliers. 

--  Industrial Components intends to improve its inventory management and
    supply chain processes by further centralizing purchasing controls and
    transitioning to a "hub and spoke" supply model in order to optimize
    branch inventory levels, rationalize suppliers and reduce freight
    expenses. As well it will invest in warehouse management system software
    to better manage the flow of product inventory. 

Power Systems


For the year ended December 31                           2011          2010 
----------------------------------------------------------------------------
Equipment(i)                                      $     160.8   $     116.6 
Parts and service                                 $     186.6   $     140.7 
----------------------------------------------------------------------------
Segment revenue                                   $     347.4   $     257.3 
----------------------------------------------------------------------------
Segment earnings                                  $      32.9   $      19.2 
Segment earnings margin                                   9.5%          7.5%
----------------------------------------------------------------------------
(i)Includes rental and other revenue.                                       

Revenue by Market 2011 versus 2010                                          
Market                                                    2011         2010 
----------------------------------------------------------------------------
Oil & Gas                                                   34%          27%
On-highway Transportation                                   23%          28%
Industrial/Commercial                                       20%          24%
Oil Sands                                                    6%           7%
Mining                                                       3%           3%
Other                                                       14%          11%

Revenue increased $90.1 million, or 35%, to $347.4 million in 2011 from $257.3 million in 2010. Excluding the Harper acquisition effective May 2, 2011, Power Systems revenue increased $40.8 million, or 16%, compared to last year. Segment earnings increased $13.7 million to $32.9 million in 2011 from $19.2 million in 2010. The following factors impacted year-over-year revenue and earnings:


--  Equipment revenue increased $44.2 million compared to last year driven
    by increased sales to off-highway oil and gas customers in western
    Canada, $17.1 million of revenues related to the Harper acquisition and
    increased power generation rentals. These increases more than offset
    lower power generation equipment sales in western Canada and the
    delivery of a large order in eastern Canada for marine power packages
    last year.  

--  Parts and service volumes increased $45.9 million compared to last year
    due mainly to $32.2 million of revenues related to the Harper
    acquisition and higher sales to off-highway customers, primarily those
    in the mining and oil and gas sectors. 

--  Segment earnings increased $13.7 million compared to last year as a
    result of higher volumes and gross profit margins, offset by a $10.7
    million increase in selling and administrative expenses. Gross profit
    margins increased mainly as a result of higher equipment margins.
    Increased selling and administrative expenses were attributable to the
    Harper acquisition and higher personnel expenses including commissions
    and severance costs. 

Backlog of $76.3 million as of December 31, 2011 decreased $11.6 million compared to December 31, 2010 as significant deliveries out of backlog more than offset the increase attributable to the Harper acquisition.

Effective December 13, 2011, Richard Plain was appointed to the position of Senior Vice President, Wajax Power Systems subsequent to the departure of Tim Zawislak. Prior to his appointment, Richard held the position of Vice President Sales and Marketing since joining Wajax Power Systems in 2009 and brings eighteen years of experience in the power systems and equipment distribution businesses in western Canada.

On May 2, 2011, Wajax Power Systems purchased the assets of Harper the authorized Ontario distributor for Detroit Diesel, Mercedes-Benz, MTU and Deutz engines, MTU Onsite Energy generator sets and Allison transmissions with adjusted 2010 annual revenue of approximately $71 million. The cash purchase price paid for the assets was $23.2 million, including post closing adjustments. The segment has assumed the operation of Harper's nine branches in Ontario located in Toronto, Ottawa, Hamilton, London, Sudbury, Timmins, Cornwall, Niagara Falls and Pembroke. With the exception of Deutz engines, Wajax Power Systems is presently the authorized distributor of these lines in the rest of Canada except for portions of British Columbia. The Harper business is well established in the on-highway sector of the market and has been rebranded as Wajax Power Systems.

The Harper acquisition represents a major step towards the segment's strategic objective of expanding its off-highway and power generation business to become a Canada-wide total power systems solution provider. Initiatives going forward will include the following:


--  The segment intends to expand its western Canada electrical power
    generation rental business into Ontario and eastern Canada. It provides
    customers with a "turn-key" rental solution including the power
    generator and related connectivity and support products and services. 

--  Power System plans to continue to expand its product portfolio and
    geographic territory. Through the Harper acquisition, it intends to
    further develop its presence in the off-highway and power generation
    sectors in Ontario and will capitalize on new distribution agreements
    for Doosan generators in Canada and Volvo Penta engines in Ontario.
    Power Systems plans to continue to fill gaps in its power generation
    product offering, as well as expanding to areas of British Columbia
    where it is currently not well represented. The segment also intends to
    better penetrate the western Canada preventative maintenance service
    business for standby and prime power diesel generators.  

--  Wajax Power Systems has recently broken ground on a new facility in
    Drummondville, Quebec, where it will focus on developing the segment's
    off-highway and power generation packaging and integration capabilities
    by leveraging its engineering and project management expertise to all
    major geographic markets. 

--  In 2012 the segment will begin to implement a common computer system
    platform across all three regions of Power Systems to meet current and
    future requirements. 

Selected Quarterly Information

The following table summarizes unaudited quarterly consolidated financial data for the eight most recently completed quarters. This quarterly information is unaudited but has been prepared on the same basis as the 2011 annual audited Consolidated Financial Statements.


                                                        2011               
                                              Q4       Q3       Q2       Q1
---------------------------------------------------------------------------
Revenue                                  $ 377.2  $ 361.9  $ 334.1  $ 303.9
---------------------------------------------------------------------------
Earnings before income taxes             $  22.5  $  24.6  $  22.4  $  18.0

Net earnings                             $  16.6  $  17.9  $  16.5  $  12.8
Net earnings per share                                                     
    - Basic                              $  1.00  $  1.08  $  0.99  $  0.77
    - Diluted                            $  0.98  $  1.06  $  0.98  $  0.76
---------------------------------------------------------------------------

                                                         2010               
                                               Q4       Q3       Q2       Q1
----------------------------------------------------------------------------
Revenue                                   $ 316.4  $ 294.4  $ 272.0  $ 228.1
----------------------------------------------------------------------------
Earnings before income taxes              $  14.9  $  18.7  $  11.9  $   8.5

Net earnings                              $  15.8  $  19.6  $  12.2  $   8.9
Net earnings per share                                                      
    - Basic                               $  0.95  $  1.18  $  0.73  $  0.53
    - Diluted                             $  0.93  $  1.16  $  0.72  $  0.53
----------------------------------------------------------------------------

Trends in quarterly revenue and earnings have not been evident over the last two years due in part to the recent strength of the Canadian economy.

A discussion of Wajax's previous quarterly results can be found in Wajax's quarterly MD&A reports available on SEDAR at www.sedar.com.

Selected Annual Information


                                            2011          2010       2009(1)
----------------------------------------------------------------------------
Revenue                              $   1,377.1   $   1,110.9   $   1,007.2
----------------------------------------------------------------------------
Earnings before income taxes         $      87.5   $      53.9   $      32.2
Net earnings                         $      63.8   $      56.4   $      34.2

Net earnings per share     - Basic   $      3.84   $      3.39   $      2.06
                           - Diluted $      3.77   $      3.34   $      2.04
----------------------------------------------------------------------------
Total assets                         $     589.9   $     522.5   $     448.2
Non-current liabilities              $      99.9   $      18.9   $      87.8
----------------------------------------------------------------------------
Dividends declared per share         $      2.14             -             -
Distributions declared per unit                -   $      3.40   $      2.47
----------------------------------------------------------------------------
 (1) 2009 financials are prepared in accordance with Canadian GAAP and      
     certain 2009 comparative amounts have been reclassified to conform with
     the current period presentation. In particular, amounts recovered from 
     customers or manufacturers have been reclassified out of selling and   
     administrative expenses into revenue. The above reclassifications do   
     not affect net earnings or cashflows.                                  

Revenue in 2011 of $1,377.1 million increased $266.2 million compared to 2010 due to the increased market demand for equipment and parts and service in all segments and the Harper acquisition in May 2011 that accounted for $49.3 million of the increase. Revenue in 2010 of $1,110.9 million increased $103.7 million from $1,007.2 million in 2009 due to the general uplift in the Canadian economy that was experienced in all segments.

Earnings before income taxes increased $55.3 million from 2009 to 2011. The increase was attributable to the increases in revenue noted above and higher gross profit margins, offset somewhat by increased selling and administrative and slightly higher finance costs.

Net earnings increased $29.6 million, or $1.78 per share, from 2009 to 2011. The $55.3 million increase in earnings before income taxes more than offset the $25.7 million increase in income tax expense resulting from the conversion from an income fund to a corporation effective January 1, 2011.

Total assets increased $141.7 million between December 31, 2009 and December 31, 2011. The overall increase in total assets is mainly attributable to higher inventories, accounts receivable and rental equipment resulting from the increased sales activity throughout 2010 and 2011. The increase also includes $32.9 million of total assets resulting from the acquisition of Harper.

Non-current liabilities at December 31, 2011 of $99.9 million increased $81.0 million from December 31, 2010. This was primarily due to the reclassification of bank debt to non-current liabilities as the bank credit facility was extended from December 31, 2011 to August 12, 2016 and an increase in deferred taxes payable as the partnership income generated in 2011 will be subject to tax in 2012. Non-current liabilities at December 31,2010 of $18.9 million was lower compared to $87.8 million at December 31, 2009 as the $79.7 million of bank debt was included in current liabilities at December 31, 2010 due to the December 31, 2011 maturity of the bank credit facility at that time. In addition, non-current liabilities as at December 31, 2009 did not include obligations under finance leases under Canadian GAAP.

Cash Flow, Liquidity and Capital Resources

Net Cash Flows Generated from Operating Activities

For the year ended December 31, 2011, net cash flows generated from operating activities amounted to $61.2 million, compared to $88.7 million the previous year. The $27.5 million decrease was due primarily to an increased use of operating assets and liabilities of $42.7 million, higher rental equipment additions in the Equipment and Power Systems segments of $14.4 million and higher income taxes paid of $1.9 million. This was partially offset by higher cash flows from operating activities before changes in operating assets and liabilities of $32.8 million.

Changes in operating assets and liabilities in 2011 compared to 2010 include the following components:

Changes in operating assets and liabilities


For the year ended December 31                          2011           2010 
----------------------------------------------------------------------------
Trade and other receivables                      $      27.1    $      12.0 
Inventories                                      $      35.0    $      15.8 
Prepaid expenses                                 $       0.6    $      (0.6)
Trade and other payables                         $     (22.9)   $     (51.5)
Accrued liabilities                              $     (19.1)   $       2.0 
Provisions                                       $      (0.4)             - 
----------------------------------------------------------------------------
Total                                            $      20.3    $     (22.4)
----------------------------------------------------------------------------

Significant components of the changes in operating assets and liabilities for the twelve months ended December 31, 2011 are as follows:


--  Trade and other receivables increased $27.1 million due to the impact of
    higher sales activity in all segments. 
--  Inventories increased $35.0 million as a result of a continued growth in
    sales activity in all segments. 
--  Trade and other payables increased $22.9 million reflecting higher
    inventory related payables. 
--  Accrued liabilities increased $19.1 million on higher customer deposits
    in the Equipment and Power Systems segments and higher annual and mid-
    term incentive accruals. 

On the consolidated statement of financial position at December 31, 2011, Wajax had employed $165.0 million in current assets net of current liabilities, exclusive of funded net debt, compared to $118.3 million at December 31, 2010. The $46.7 million increase was due primarily to the cash flow factors listed above, the Harper acquisition and a $9.1 million decrease in dividends payable related to the payment in January 2011 of distributions declared in December 2010 prior to converting from an income fund to a corporation.

While the IFRS adjustments do not impact the Corporation's total cash flows, cash flows generated from operating activities and cash flows used in investing activities have each been adjusted, by equal and offsetting amounts to reflect the reclassification of rental equipment additions as operating activities.

Investing Activities

For the year ended December 31, 2011, Wajax invested $5.3 million in capital asset additions net of disposals and $0.7 million in intangible asset additions, compared to $1.7 million and $3.2 million for the year ended December 31, 2010, respectively. In addition, the Power Systems segment paid a total of $23.2 million for the acquisition of the assets of Harper on May 2, 2011.

Financing Activities

For the year ended December 31, 2011, Wajax used $69.3 million of cash in financing activities compared to $50.0 million in 2010. Financing activities in the year included distributions and dividends paid to shareholders totaling $44.7 million, or $2.69 per share, bank debt and finance lease payments of $23.5 million, and debt facility renewal costs of $1.1 million.

Funded net debt of $63.7 million at December 31, 2011 increased $18.1 million compared to December 31, 2010. This increase was mainly a result of net cash flows generated from operating activities of $61.2 million being less than the $29.2 million of cash flows used in investing activities including $23.2 million used for the Harper acquisition, distributions and dividends of $44.7 million, finance lease payments of $3.5 million and debt facility renewal costs of $1.1 million. As a result, Wajax's year-end funded net debt-to-equity ratio of 0.28:1 increased from last year's ratio of 0.23:1.

Fourth Quarter Consolidated Results


For three months ended December 31                       2011          2010 
----------------------------------------------------------------------------
Revenue                                           $     377.2   $     316.4 
----------------------------------------------------------------------------
Gross profit                                      $      79.3   $      64.3 
Selling and administrative expenses               $      55.7   $      48.4 
----------------------------------------------------------------------------
Earnings before finance costs and income taxes    $      23.6   $      15.9 
Finance costs                                     $       1.2   $       1.0 
----------------------------------------------------------------------------
Earnings before income taxes                      $      22.5   $      14.9 
Income tax expense (recovery)                     $       5.9   $      (0.9)
----------------------------------------------------------------------------
Net earnings                                      $      16.6   $      15.8 
----------------------------------------------------------------------------
Earnings per share                                                          
    - Basic                                       $      1.00   $      0.95 
    - Diluted                                     $      0.98   $      0.93 
----------------------------------------------------------------------------

Revenue

Revenue in the fourth quarter of 2011 increased 19% or $60.8 million to $377.2 million, from $316.4 million in the fourth quarter of 2010 and included $19.9 million of revenue from the acquisition of the assets of Harper by the Power Systems segment effective May 2, 2011. Segment revenue increased 20% in Equipment, 16% in Industrial Components and 19% in Power Systems (a decrease of 6% excluding Harper revenue) compared to the same quarter last year.

Gross profit

Gross profit in the fourth quarter of 2011 increased $15.0 million due to the positive impact of higher volumes and gross profit margins compared to the fourth quarter last year. The gross profit margin percentage for the quarter of 21.0% increased from 20.3% in the fourth quarter of 2010 due mainly to improved gross profit margins in all segments.

Selling and administrative expenses

Selling and administrative expenses increased $7.3 million in the fourth quarter of 2011 compared to the same quarter last year. Of this increase, $3.0 million related to Harper with most of the remainder attributable to higher sales related costs and annual and mid-term incentive accruals. Selling and administrative expenses as a percentage of revenue decreased to 14.8% in the fourth quarter of 2011 from 15.3% in the same quarter of 2010.

Finance costs

Quarterly finance costs of $1.2 million increased $0.2 million compared to the same quarter last year due to higher funded net debt, mainly attributable to the acquisition of Harper on May 2, 2011.

Earnings before income taxes

Quarterly earnings before income taxes increased $7.6 million as the positive impact of the higher volumes and increased gross profit margin percentage, more than offset additional selling and administrative costs and higher finance costs compared to the same quarter last year.

Income tax expense

For the three months ended December 31, 2011, the effective income tax rate of 26.3% was less than the Corporation's statutory income tax rate of 27.7%. The positive impact of partnership income generated in 2011, which will be subject to tax in 2012 at a lower rate, more than offset the negative impact of expenses not deductible for tax purposes.

Net earnings

Quarterly net earnings increased $0.8 million to $16.6 million, or $1.00 per share, from $15.8 million, or $0.95 per share, in the same quarter of 2010. The $7.6 million increase in net earnings before income taxes more than offset the $6.8 million increase in income tax expense resulting from the conversion from an income fund to a corporation effective January 1, 2011.

Comprehensive income

Comprehensive income for the fourth quarter of $13.0 million decreased $2.4 million from $15.4 million compared to the same quarter in the previous year as a $3.2 million increase in other comprehensive loss more than offset the $0.8 million increase in net earnings. The increase in other comprehensive loss resulted from increased actuarial losses on pension plans and gains on derivative instruments designated as cash flow hedges in prior periods reclassified to cost of inventory or finance costs in the current period.

Funded net debt

Funded net debt of $63.7 million at December 31, 2011 decreased $33.8 million compared to September 30, 2011. The decrease resulted mainly from net cash flows generated from operating activities of $48.7 million which were offset partially by dividends paid of $10.0 million, investing activities of $3.0 million and finance lease payments of $1.0 million. Wajax's quarter-end funded net debt-to-equity ratio of 0.28:1 at December 31, 2011 decreased from the September 30, 2011 ratio of 0.43:1.

Dividends

For the fourth quarter ended December 31, 2011 monthly dividends declared totaled $0.60 per share. For the fourth quarter ended December 31, 2010 monthly cash distributions declared as an income fund were $1.65 per unit.

Backlog

Consolidated backlog at December 31, 2011 of $267.7 million increased $3.9 million from $263.8 million at September 30, 2011 and increased $50.4 million from $217.3 million at December 31, 2010. Backlog includes the total retail value of customer purchase orders for future delivery or commissioning.

Fourth Quarter Results of Operations

Equipment


For three months ended December 31                       2011          2010 
----------------------------------------------------------------------------
Equipment(i)                                       $    125.4    $    101.7 
Parts and service                                  $     66.9    $     58.0 
----------------------------------------------------------------------------
Segment revenue                                    $    192.3    $    159.7 
----------------------------------------------------------------------------
Segment earnings                                   $     14.3    $     10.8 
Segment earnings margin                                   7.5%          6.8%
----------------------------------------------------------------------------
(i) Includes rental and other revenue.                                      

Revenue in the fourth quarter of 2011 increased $32.6 million, or 20%, to $192.3 million from $159.7 million in the fourth quarter of 2010. Segment earnings for the quarter increased $3.5 million to $14.3 million compared to the fourth quarter of 2010. The following factors contributed to the Equipment segment's fourth quarter results:


--  Equipment revenue for the fourth quarter increased $23.7 million
    compared to the same quarter last year. Specific quarter-over-quarter
    variances included the following: 

    --  Construction equipment revenue increased $12.0 million on increased
        market demand for Hitachi construction excavators, in western Canada
        and Ontario, and higher JCB and other construction equipment sales
        across Canada. 
    --  Mining equipment sales increased $7.6 million due mainly to the
        delivery of a large Hitachi mining shovel in western Canada offset
        by the delivery of a LeTourneau loader in eastern Canada in 2010. 
    --  Material handling equipment revenue increased $5.9 million on higher
        volumes in eastern and western Canada offset by lower sales stemming
        from reduced market demand in Ontario. 
    --  Crane and utility equipment revenue decreased $0.7 million. 
    --  Forestry equipment sales decreased $1.1 million as lower demand in
        Ontario and eastern Canada for Tigercat and Peterson Pacific
        products was somewhat offset by higher market demand related sales
        in western Canada primarily for Tigercat equipment. 

--  Parts and service volumes for the fourth quarter increased $8.9 million
    compared to the same quarter last year due principally to higher mining
    and construction sector sales, primarily in western Canada. 

--  Segment earnings for the fourth quarter increased $3.5 million to $14.3
    million compared to the same quarter last year. The positive impact of
    higher volumes outweighed a $2.2 million increase in selling and
    administrative expenses resulting from higher sales related expenses and
    annual and mid-term incentive accruals. 

Backlog of $146.6 million at December 31, 2011 increased $0.7 million compared to September 30, 2011 and increased $52.6 million compared to December 31, 2010.

Industrial Components


For three months ended December 31                       2011          2010 
----------------------------------------------------------------------------
Segment revenue                                    $     90.2    $     77.8 
----------------------------------------------------------------------------
Segment earnings                                   $      5.9    $      2.6 
Segment earnings margin                                   6.5%          3.4%
----------------------------------------------------------------------------

Revenue of $90.2 million in the fourth quarter of 2011 increased $12.4 million, or 16%, from $77.8 million in the fourth quarter of 2010. Segment earnings increased $3.3 million to $5.9 million in the fourth quarter compared to the same quarter in the previous year. The following factors contributed to the segment's fourth quarter results:


--  Bearings and power transmission parts sales in the fourth quarter of
    2011 increased $4.6 million compared to the same quarter last year led
    by higher mining and industrial sector volumes across all regions. Sales
    to oil and gas customers in western Canada, metal processing customers
    in Ontario and additional construction and food and beverage sector
    volumes in eastern Canada also contributed to the increased sales. 

--  Fluid power and process equipment products and service revenue in the
    fourth quarter of 2011 increased $7.8 million on improved oil and gas
    drilling activity in western Canada and increased sales to industrial
    and agriculture sector customers in all regions. 

--  Segment earnings in the fourth quarter of 2011 increased $3.3 million
    compared to the same quarter last year. The positive impact of higher
    volumes outweighed a $0.5 million increase in selling and administrative
    expenses. The increase in selling and administrative expenses resulted
    mainly from higher sales related costs and computer system upgrade
    expenses. 

Backlog of $44.8 million as of December 31, 2011 decreased $2.5 million compared to September 30, 2011 and increased $9.4 million compared to December 31, 2010.

Power Systems


For three months ended December 31                       2011          2010 
----------------------------------------------------------------------------
Equipment(i)                                       $     43.9    $     44.5 
Parts and service                                  $     51.6    $     35.7 
----------------------------------------------------------------------------
Segment revenue                                    $     95.5    $     80.2 
----------------------------------------------------------------------------
Segment earnings                                   $      7.9    $      6.5 
Segment earnings margin                                   8.3%          8.1%
----------------------------------------------------------------------------
(i) Includes rental and other revenue.                                      

Revenue in the fourth quarter of 2011 increased $15.3 million, or 19%, to $95.5 million compared to $80.2 million in the same quarter of 2010. Excluding the Harper acquisition, Power Systems revenue in the fourth quarter of 2011 decreased $4.6 million, or 6% compared to the same quarter last year. Segment earnings increased $1.4 million to $7.9 million in the fourth quarter compared to the same quarter in the previous year. The following factors impacted quarterly revenue and earnings:


--  Equipment revenue decreased $0.6 million compared to last year.
    Increased sales to off-highway oil and gas customers in western Canada
    and $7.0 million of revenues related to the Harper acquisition were more
    than offset by lower power generation equipment sales in western Canada
    and the delivery of a large order in eastern Canada for marine power
    packages last year.  

--  Parts and service volumes increased $15.9 million compared to last year
    due mainly to $12.9 million of revenues related to the Harper
    acquisition and higher sales to off-highway customers, primarily in the
    mining and oil and gas sectors. 

--  Segment earnings in the fourth quarter of 2011 increased $1.4 million
    compared to the same quarter last year mainly as a result of the Harper
    acquisition. Selling and administrative expenses increased $4.1 million
    due mostly to $3.0 million of selling and administrative expenses
    related to Harper and higher personnel and sales related costs. 

Backlog of $76.3 million as of December 31, 2011 increased $5.8 million compared to September 30, 2011 and decreased $11.6 million compared to December 31, 2010.

Fourth Quarter Cash Flows

Net Cash Flows Generated from Operating Activities

Net cash flows generated from operating activities amounted to $48.7 million in the fourth quarter of 2011, compared to $41.4 million in the same quarter of the previous year. The $7.3 million increase was due mainly to higher cash flows from operating activities before changes in operating assets and liabilities of $8.7 million and a decreased use of operating assets and liabilities of $1.4 million, partially offset by higher rental equipment additions of $2.0 million in the Equipment and Power Systems segments.

Changes in operating assets and liabilities for the fourth quarter in 2011 compared to the same periods in 2010 include the following components:

Changes in operating assets and liabilities


For three months ended December 31                       2011          2010 
----------------------------------------------------------------------------
Trade and other receivables                        $    (13.8)   $    (11.8)
Inventories                                        $      9.2    $      3.6 
Prepaid expenses                                   $     (1.5)   $      1.5 
Trade and other payables                           $     (5.5)   $    (20.1)
Accrued liabilities                                $    (15.4)   $      3.0 
Provisions                                         $      0.3    $     (1.4)
----------------------------------------------------------------------------
Total                                              $    (26.7)   $    (25.2)
----------------------------------------------------------------------------

Significant components of the changes in operating assets and liabilities for the quarter ended December 31, 2011 are as follows:


--  Trade and other receivables decreased $13.8 million due primarily to
    collection of a large mining equipment receivable in the Equipment
    segment and lower sales activity in the Power Systems segment. 
--  Inventories increased $9.2 million, mostly in the Power Systems and
    Industrial Components segments in anticipation of increased sales
    activity. 
--  Trade and other payables increased $5.5 million reflecting higher
    inventory related trade payables. 
--  Accrued liabilities increased $15.4 million due mainly to higher
    customer deposits in the Equipment and Power Systems segments. 

On the consolidated statement of financial position at December 31, 2011, Wajax had employed $165.0 million in current assets net of current liabilities, exclusive of funded net debt, compared to $191.9 million at September 30, 2011. The $26.9 million decrease was due primarily to the cash flow factors listed above.

Investing Activities

During the fourth quarter of 2011, Wajax invested $2.6 million in capital asset additions net of disposals and $0.4 million in intangible asset additions, compared to $2.1 million and $0.5 million in the fourth quarter of 2010, respectively.

Financing Activities

The Corporation used $37.9 million of cash in financing activities in the fourth quarter of 2011 compared to $21.8 million in the same quarter of 2010. Financing activities in the quarter included bank debt and finance lease payments of $28.0 million and dividends paid to shareholders totaling $10.0 million, or $0.60 per share.

Liquidity and Capital Resources

On August 12, 2011, Wajax amended and extended the term of its $175 million bank credit facility to August 12, 2016 from December 31, 2011. The $1.1 million cost of extending the facility has been capitalized and will be amortized over the five year term. The terms of the $175 million bank credit facility include the following:


--  The facility is fully secured, expiring August 12, 2016, made up of a
    $30 million non-revolving term portion and a $145 million revolving term
    portion. 
--  Borrowing capacity is dependent upon the level of inventories on-hand
    and the outstanding trade accounts receivable.  
--  The facility contains customary restrictive covenants including
    limitations on the payment of cash dividends and the maintenance of
    certain financial ratios all of which were met as at December 31, 2011.
    Wajax is restricted from the declaration of monthly dividends in the
    event the ratio of funded debt to earnings before finance costs, income
    taxes, depreciation and amortization and share-based compensation
    expense (the "Leverage Ratio") exceeds three times.  
--  Borrowings bear floating rates of interest at margins over Canadian
    dollar bankers' acceptance yields, U.S. dollar LIBOR rates or prime.
    Margins on the facility depend on Wajax's Leverage Ratio at the time of
    borrowing and range between 1.5% and 3.0% for Canadian dollar bankers'
    acceptances and US dollar LIBOR borrowings, and 0.5% and 2.0% for prime
    rate borrowings. 

At December 31, 2011, Wajax had borrowed $60.0 million and issued $6.0 million of letters of credit for a total utilization of $66.0 million of its $175 million bank credit facility. At December 31, 2011 borrowing capacity under the bank credit facility was equal to $175.0 million.

Wajax also has a $15 million demand inventory equipment financing facility with a non-bank lender. The equipment notes payable under the facility bear floating rates of interest at margins over Canadian dollar bankers' acceptance yields. Principal repayments commence between 6 and 12 months from the date of financing and the notes are due in full when the equipment is sold. At December 31, 2011 Wajax had no utilization of its $15 million equipment financing facility.

Since conversion to a corporation, Wajax has not made, and will not be required to make, any significant income tax payments until 2013 due to income tax payments being deferred as a result of its partnership structure. In January 2013, Wajax will be required to make an income tax payment of approximately $44 million. This includes approximately $23 million of tax on partnership income generated in 2011 and the balance representing income to be included in 2012 taxable income resulting from the recent change in tax legislation that has effectively removed the partnership income deferral benefit. The Corporation will also commence making monthly income tax installments in January 2013.

Wajax's $175 million bank credit facility along with an additional $15 million of capacity permitted under the credit facility, should be sufficient to meet Wajax's short-term normal course working capital, maintenance capital and growth capital requirements, including the January 2013 income tax payment. However, Wajax may be required to access the equity or debt markets in order to fund significant acquisitions and growth related working capital and capital expenditures.

Wajax sponsors certain defined benefit plans that cover executive employees, a small group of inactive employees and employees on long-term disability benefits. The fair value of the defined benefit plans' assets decreased $1.3 million to $11.3 million at December 31, 2011 due to a $0.7 million loss on plan assets and excess benefits paid over contributions for the year. The accrued benefit obligations of the plans at December 31, 2011 were $18.6 million and included a $4.3 million benefit obligation related to the Wajax Limited Supplemental Executive Retirement Plan (SERP) that is not funded but secured by a $4.6 million letter of credit. The resulting deficit for the plans at December 31, 2011 excluding the SERP was $3.1 million. The defined benefit plans are subject to actuarial valuations in 2012 and 2013. Management does not expect future cash contribution requirements to change materially from the 2011 contribution level of $1.0 million as a result of these valuations or any declines in the fair value of the defined benefit plans' assets.

Financial Instruments

Wajax uses derivative financial instruments in the management of its foreign currency and interest rate exposures. Wajax's policy is not to utilize derivative financial instruments for trading or speculative purposes. Significant derivative financial instruments outstanding at the end of the year were as follows:


--  As at December 31, 2011, Wajax had no interest rate swaps outstanding.
    (As at December 31, 2010, Wajax had entered into interest rate swaps
    that effectively fixed the interest rate on $80 million of debt until
    December 31, 2011). 

--  Wajax enters into short-term currency forward contracts to fix the
    exchange rate on the cost of certain inbound inventory and to hedge
    certain foreign currency-denominated sales to (receivables from)
    customers as part of its normal course of business. As at December 31,
    2011, Wajax had contracts outstanding to buy U.S.$36.0 million and
    EUR0.2 million and to sell U.S.$1.0 million (December 31, 2010 - to buy
    U.S.$34.1 million and to sell U.S.$0.3 million). The U.S. dollar
    contracts expire between January 2012 and December 2012, with a weighted
    average U.S./Canadian dollar rate of 1.0249 and weighted average Euro /
    Canadian dollar rate of 1.3993. 

Wajax measures financial instruments held for trading and not accounted for as hedging items, at fair value with subsequent changes in fair value being charged to earnings. Derivatives designated as effective hedges are measured at fair value with subsequent changes in fair value being charged to other comprehensive income. The fair value of derivative instruments is estimated based upon market conditions using appropriate valuation models. The carrying values reported in the balance sheet for financial instruments are not significantly different from their fair values.

Wajax is exposed to non-performance by counterparties to short-term currency forward contracts. These counterparties are large financial institutions with "Stable" outlook and high short-term and long-term credit ratings from Standard and Poor's. To date, no such counterparty has failed to meet its financial obligations to Wajax. Management does not believe there is a significant risk of non-performance by these counterparties and will continue to monitor the credit risk of these counterparties.

The transition to IFRS did not have a material effect on the Corporation's accounting for financial instruments.

Currency Risk

Wajax's operating results are reported in Canadian dollars. While Wajax's sales are primarily denominated in Canadian dollars, significant portions of its purchases are in U.S. dollars. Changes in the U.S. dollar exchange rate can have a negative or positive impact on Wajax's revenue, margins and working capital balances. Wajax enters into short-term currency forward contracts to fix the cost of certain inbound inventory and to hedge certain foreign currency-denominated sales to (receivables from) customers as part of its normal course of business. See the Financial Instruments section.

A declining U.S. dollar relative to the Canadian dollar can have a negative effect on Wajax's revenue and cash flows as a result of certain products being imported from the U.S. Market conditions generally require Wajax to lower its selling prices as the U.S. dollar declines. As well, many of Wajax's customers export products to the U.S., and a strengthening Canadian dollar can negatively impact their overall competitiveness and demand for their products, which in turn may reduce product purchases from Wajax.

A strengthening U.S. dollar relative to the Canadian dollar can have a positive effect on Wajax's revenue as a result of certain products being imported from the U.S. Wajax will periodically institute price increases to offset the negative impact of foreign exchange rate increases and volatility on imported goods to ensure margins are not eroded.

Wajax maintains a hedging policy whereby significant transactional currency risks are identified and hedged.

Contractual Obligations



                                         Less than        1 - 5        After
Contractual Obligations         Total       1 year        years      5 years
----------------------------------------------------------------------------
Bank debt                  $     60.0   $        -   $     60.0   $        -
Operating leases           $     71.3   $     16.8   $     33.3   $     21.2
Obligations under finance                                                   
 leases                    $     10.3   $      3.6   $      6.7   $        -
----------------------------------------------------------------------------
Total                      $    141.6   $     20.4   $    100.0   $     21.2
----------------------------------------------------------------------------

The $60.0 million bank debt obligation relates to the bank term credit facility. On August 12, 2011, Wajax amended and extended the term of its $175 million bank credit facility to August 12, 2016 from December 31, 2011.

The obligations under finance leases relate to certain vehicles financed under finance lease arrangements. The leases have a minimum one year term and are extended on a monthly basis thereafter until termination. For more information on Wajax's operating lease obligations, see the Off Balance Sheet Financing section.

Wajax also has contingent contractual obligations where Wajax has guaranteed the resale value of equipment sold ("guaranteed residual value contracts") or has guaranteed a portion of customer lease payments ("recourse contracts"). These contracts are subject to certain conditions being met by the customer. As at December 31, 2011, Wajax had guaranteed $5.3 million of contracts (2010 - $5.8 million) with commitments arising between 2012 and 2014. The commitments made by Wajax in these contracts reflect the estimated future value of the equipment, based on the judgment and experience of management. Wajax has recorded a $0.1 million provision in 2011 (2010 - $0.5 million) as an estimate of the financial loss likely to result from such commitments.

Off Balance Sheet Financing

Off balance sheet financing arrangements include operating lease contracts entered into for facilities with various landlords, a portion of the long-term lift truck rental fleet in Equipment with a non-bank lender and office equipment with various non-bank lenders. The total obligations for all operating leases are detailed in the Contractual Obligations section. At December 31, 2011, the non-discounted operating lease commitments for facilities totaled $67.9 million, rental fleet $2.5 million, and office equipment $0.9 million.

Although Wajax's consolidated contractual annual lease commitments decline year-by-year, it is anticipated that existing leases will either be renewed or replaced, resulting in lease commitments being sustained at current levels. In the alternative, Wajax may incur capital expenditures to acquire equivalent capacity.

Under IFRS, vehicle leases that were previously classified as operating leases under Canadian GAAP are assessed as financing leases. Assets under finance lease are capitalized at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. The liability is recorded in the statement of financial position and classified between current and non-current amounts. Lease payments are apportioned between finance costs and a reduction of the obligations under finance leases liability so as to achieve a constant rate of return of interest on the remaining balance of the liability.

In addition, the Equipment segment had $41.5 million (2010 - $39.4 million) of consigned inventory on-hand from a major manufacturer at December 31, 2011. In the normal course of business, Wajax receives inventory on consignment from this manufacturer which is generally sold to customers or purchased by Wajax. This consigned inventory is not included in Wajax's inventory as the manufacturer retains title to the goods.

In the event the inventory consignment program was terminated, Wajax would utilize interest free financing, if any, made available by the manufacturer and/or utilize capacity under its credit facilities. Although management currently believes Wajax has adequate debt capacity, Wajax would have to access the equity or debt markets, or temporarily reduce dividends to accommodate any shortfalls in Wajax's credit facilities. See the Liquidity and Capital Resources section.

Dividends and distributions

Dividends to shareholders for the periods January 1, 2011 to December 31, 2011 and distributions to unitholders as an income fund for the periods January 1, 2010 to December 31, 2010 were declared as follows:


                                2011 Dividends          2010 Distributions  
Month (1)                    Per Share      Amount      Per Unit      Amount
----------------------------------------------------------------------------
January                    $      0.15   $     2.5   $      0.15   $     2.5
February                          0.15         2.5          0.15         2.5
March                             0.15         2.5          0.15         2.5
April                             0.15         2.5          0.15         2.5
May                               0.18         3.0          0.15         2.5
June                              0.18         3.0          0.15         2.5
July                              0.18         3.0          0.15         2.5
August                            0.20         3.3          0.35         5.8
September                         0.20         3.3          0.35         5.8
October                           0.20         3.3          0.35         5.8
November                          0.20         3.3          0.55         9.2
December                          0.20         3.3          0.75        12.5
----------------------------------------------------------------------------
Total dividends /                                                           
 distributions for the                                                      
 years ended December 31   $      2.14   $    35.6   $      3.40   $    56.5
----------------------------------------------------------------------------
(1)  The Corporation's monthly dividends / cash distributions were generally
     payable to shareholders / unitholders of record on the last business   
     day of each calendar month and were paid on or about the 20th day of   
     the following month.                                                   

For the year ending December 31, 2011, Wajax declared dividends to shareholders totaling $2.14 per share. For the year ending December 31, 2010, Wajax declared monthly cash distributions to unitholders totaling $3.40 per unit. Dividends paid in 2011 and distributions paid in 2010 were funded from cash generated from operating activities.

Commencing in 2012, the Corporation has established an objective of declaring annual dividends equal to at least 75% of earnings subject to the Corporation's financial condition, economic outlook and capital requirements for growth including acquisitions. The Corporation's intention is to continue paying dividends on a monthly basis.

Tax information relating to 2011 dividends and prior year distributions is available on Wajax's website at www.wajax.com.

Productive Capacity and Productive Capacity Management

Wajax is a distributor and service support provider. As such, Wajax's productive capacity is determined primarily by its branch infrastructure across Canada, manufacturer relationships and other maintenance and growth capital employed.

Wajax operates from 117 facilities throughout Canada, of which 88 are leased. During the second quarter of 2011, Wajax increased its productive capacity through the acquisition of Harper which increased the Power Systems' Ontario infrastructure by an additional 9 branches. Wajax's principal properties are primarily sales and service branches.

Wajax seeks to distribute leading product lines in each of its regional markets and its success is dependent upon continuing relationships with the manufacturers it represents. Wajax endeavours to align itself in long-term relationships with manufacturers that are committed to achieving a competitive advantage and long-term market leadership in their targeted market segments. In the Equipment and Power Systems segments, and in certain cases in the hydraulics and process pumps portion of the Industrial Components segment, manufacturer relationships are governed through effectively exclusive distribution agreements. Distribution agreements are for the most part open-ended, but are cancellable within a relatively short notification period specified in the agreement.

Maintenance capital employed includes rental fleet in the Equipment and Power Systems segments, which will vary with market demand, and other capital which is employed primarily to support and maintain the branch network operations.

In addition, Wajax enters into off balance sheet financing arrangements including operating lease contracts entered into for a portion of the long-term lift truck rental fleet in Equipment and office equipment. At December 31, 2011, the non-discounted operating lease commitments for rental fleet totaled $2.5 million and office equipment $0.9 million.

Financing Strategies

Wajax's $175 million bank credit facility along with the $15 million demand inventory equipment financing facility should be sufficient to meet Wajax's short-term normal course working capital, maintenance capital and growth capital requirements.

Wajax's short-term normal course requirements for current assets net of current liabilities, exclusive of funded net debt ("working capital") can swing widely quarter-to-quarter due to the timing of large inventory purchases and/or sales and changes in market activity. In general, as Wajax experiences growth, there is a need for additional working capital as was the case in 2011. Conversely, as Wajax experiences economic slowdowns working capital reduces reflecting the lower activity levels as was the case in 2009. Fluctuations in working capital are generally funded by, or used to repay, the bank credit facility.

Wajax may be required to access the equity or debt markets in order to fund significant acquisitions and growth related working capital and capital expenditures.

Borrowing capacity under the bank credit facility is dependent on the level of Wajax's inventories on-hand and outstanding trade accounts receivables. At December 31, 2011, total borrowing capacity under the bank credit facility was equal to $175 million of which $66 million was utilized at December 31, 2011.

The bank credit facility contains covenants that could restrict the ability of Wajax to make dividend payments, if (i) the leverage ratio (Debt to EBITDA) is greater than 3.0 at the time of declaration of the dividend, and (ii) an event of default exists or would exist as a result of a dividend payment.

Share Capital

The shares of Wajax issued are included in shareholders' equity on the balance sheet as follows:


Issued and fully paid Shares as at December 31, 2011     Number       Amount
----------------------------------------------------------------------------
Balance at the beginning of the year                 16,629,444   $    105.9
Rights exercised                                              -            -
----------------------------------------------------------------------------
Balance at the end of the year                       16,629,444   $    105.9
----------------------------------------------------------------------------

Wajax has five share-based compensation plans; the Wajax Share Ownership Plan ("SOP"), the Deferred Share Program ("DSP"), the Directors' Deferred Share Unit Plan ("DDSUP"), the Mid-Term Incentive Plan for Senior Executives ("MTIP") and the Deferred Share Unit Plan ("DSUP"). SOP, DSP and DDSUP rights are issued to the participants and are settled by issuing Wajax Corporation shares. The cash-settled MTIP and DSUP consist of annual grants that vest over three years and are subject to time and performance vesting criteria. A portion of the MTIP and the full amount of the DSUP grants are determined by the price of the Corporation's shares. Compensation expense for the SOP, DSP and DDSUP is determined based upon the fair value of the rights at the date of grant and charged to earnings on a straight line basis over the vesting period, with an offsetting adjustment to contributed surplus. Compensation expense for the DSUP and the share-based portion of the MTIP varies with the price of the Corporation's shares and is recognized over the vesting period. Wajax recorded compensation cost of $7.2 million for the year (2010 - $5.0 million) in respect of these plans.

At December 31, 2011, 109,788 (2010 - 101,999) rights were outstanding under the SOP, 30,216 (2010 - 24,164) rights were outstanding under the DSP and 176,591 (2010 - 147,797) rights were outstanding under the DDSUP.

Effective January 1, 2011 the SOP, DSP, DDSUP and MTIP plans were amended to reflect the conversion to a corporation. See Note 21 of the Consolidated Financial Statements.

Critical Accounting Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Wajax has taken into account current economic conditions when determining the provision for inventory obsolescence, provision for doubtful accounts and any impairment of goodwill and other assets. Note 3 to the annual Consolidated Financial Statements describes the significant accounting policies and methods used in preparation of the annual Consolidated Financial Statements. Wajax bases its estimates on historical experience and various other assumptions that are believed to be reasonable in the circumstances. The more significant estimates include provisions for inventory obsolescence and doubtful accounts, warranty provisions and fair market values for goodwill impairment tests.

Provision for inventory obsolescence

The value of Wajax's new and used equipment is evaluated by management throughout the year. When required, provisions are recorded to ensure that the book value of equipment is valued at the lower of cost or estimated net realizable value. Wajax identifies slow moving or obsolete parts inventories and estimates appropriate obsolescence provisions related thereto. Wajax takes advantage of supplier programs that allow for the return of eligible parts for credit within specified time periods. The inventory obsolescence charged to earnings for 2011 was $3.2 million compared to $4.0 million in 2010.

Provision for doubtful accounts

Wajax is exposed to credit risk with respect to its trade and other receivables. However, this is somewhat minimized by Wajax's large customer base which covers most business sectors across Canada. Wajax follows a program of credit evaluations of customers and limits the amount of credit extended when deemed necessary. Wajax maintains provisions for possible credit losses, and any such losses to date have been within management's expectations. The $3.5 million provision for doubtful accounts at December 31, 2011 decreased $0.4 million from $3.9 million in 2010. As conditions change, actual results could differ from those estimates.

Warranty provisions

Wajax provides for customer warranty claims that may not be covered by the manufacturers' standard warranty, primarily in Equipment where the reserve is determined by applying a claim rate to the value of each machine sold. The rate is developed using management's best estimate of actual warranty expense, generally based on recent claims experience, and adjusted as required.

Goodwill and intangible assets

Goodwill and indefinite life intangible assets are not amortized but are tested at least annually for impairment, or more frequently if certain indicators arise that indicate the assets might be impaired. Goodwill and indefinite life intangibles are allocated to cash-generating units ("CGU") that are expected to benefit from the synergies of the acquisition. To test for impairment, Wajax compares each CGU's carrying value to its recoverable amount. Recoverable amount is the higher of value in use or fair value less costs to sell, if the fair value can be readily determined. The value in use is the present value of future cash flows using a pre-tax discount rate that reflects the time value of money and the risk specific to the assets. Any impairment would be recorded as a charge against earnings. During the year, Wajax performed impairment tests, based on value in use, of its goodwill and intangible assets with an indefinite life and concluded that no impairment existed in either the goodwill associated with any of Wajax's cash-generating units or the intangible assets with an indefinite life.

Customer lists and non-competition agreements are amortized on a straight line basis over their useful lives which range from 2 to 7 years. Computer application software is classified as an intangible asset and is amortized on a straight line basis over the useful life ranging from 1 to 7 years. They are reviewed at the end of each reporting period to determine if any indicators of impairment exist. For any indicators of impairment identified, an estimate is made of the recoverable amount of the asset. Impairment of intangible asset is recognized in an amount equal to the difference between the carrying value and the recoverable amount of the related intangible asset and would be recorded as a charge against earnings. Wajax concluded that no impairment of the carrying value of the finite life intangible assets existed.

While Wajax uses available information to prepare its estimate of fair value, actual results could differ significantly from management's estimates which could result in future impairment and losses related to recorded goodwill and other asset balances.

Financing costs

Transaction costs related to the acquisition or amendment of long-term debt are deferred and amortized to finance costs using an effective yield method. Deferred financing costs are included in the carrying amount of the related debt.

Changes in Accounting Policy

Transition to International Financial Reporting Standards

This is the first year that the Corporation has presented its Consolidated Financial Statements in accordance with IFRS. The Corporation provided information on its transition to IFRS in its MD&A for the quarter ended March 31, 2011. This information has not changed materially from what was provided. The most significant impacts on the Corporation's Consolidated Financial Statements resulting from the adoption of IFRS are discussed within the applicable sections of this MD&A and Note 29 of the Consolidated Financial Statements.

Note 29 of the Consolidated Financial Statements provides an explanation of the transition to IFRS. In addition, Note 29 provides detailed reconciliations between Canadian GAAP and IFRS of the consolidated income statement and consolidated statement of comprehensive income for the year ended December 31, 2010 and of the consolidated statements of financial position as at January 1, 2010 and December 31, 2010. These reconciliations provide explanations of each difference.

New standards and interpretations not yet adopted

As of January 1, 2015, the Corporation will be required to adopt IFRS 9 Financial Instruments, which is the result of the first phase of the IASB's project to replace IAS 39 Financial Instruments: Recognition and Measurement. The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The Corporation is currently assessing the impact of this standard on its consolidated financial statements.

As of January 1, 2013, the Corporation will be required to adopt IFRS 10 Consolidated Financial Statements, which establishes principles for the preparation and presentation of consolidated financial statements when an entity controls one or more other entities. The Corporation does not expect IFRS 10 to have a material impact on its consolidated financial statements.

As of January 1, 2013, the Corporation will be required to adopt IFRS 13 Fair Value Measurement, which defines fair value and sets out a framework for measuring fair value when fair value measurements are required or permitted by other IFRSs. The Corporation is currently assessing the impact of this standard on its consolidated financial statements.

As of January 1, 2013, the Corporation will be required to adopt amendments to IAS 1 Presentation of Financial Statements, which require that an entity present separately the items of other comprehensive income that may be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss. As the amendments only require changes in the presentation of items in other comprehensive income, the Corporation does not expect the amendments to IAS 1 to have a material impact on the financial statements.

As of January 1, 2013, the Corporation will be required to adopt amendments to IAS 19 Employee Benefits, which requires recognition of actuarial gains and losses immediately in other comprehensive income, the full recognition of past service costs immediately in profit or loss, recognition of the expected return on plan assets in profit or loss to be calculated based on the rate used to discount the defined benefit obligation, and certain additional disclosures. The Corporation is currently assessing the impact of this standard on its consolidated financial statements.

Risk Management and Uncertainties

As with most businesses, Wajax is subject to a number of marketplace and industry related risks and uncertainties which could have a material impact on operating results and Wajax's ability to pay cash dividends to shareholders.

Wajax attempts to minimize many of these risks through diversification of core businesses and through the geographic diversity of its operations. In addition, Wajax has adopted an annual enterprise risk management assessment which is prepared by the Corporation's senior management and overseen by the Board of Directors and Committees of the Board. The enterprise risk management framework sets out principles and tools for identifying, evaluating, prioritizing and managing risk effectively and consistently across Wajax.

The following are a number of risks that deserve particular comment.

Manufacturer relationships and product access

Wajax seeks to distribute leading product lines in each of its regional markets and its success is dependent upon continuing relations with the manufacturers it represents. Wajax endeavours to align itself in long-term relationships with manufacturers that are committed to achieving a competitive advantage and long-term market leadership in their targeted market segments. In the Equipment and Power Systems segments, and in certain cases in the hydraulics and process pumps portion of the Industrial Components segment, manufacturer relationships are governed through effectively exclusive distribution agreements. Distribution agreements are for the most part open-ended, but are cancellable within a relatively short notification period specified in each agreement. Although Wajax enjoys good relationships with its major manufacturers and seeks to develop additional strong long-term partnerships, a loss of a major product line without a comparable replacement would have a significantly adverse effect on Wajax's results of operations or cash flow.

There is a continuing consolidation trend among industrial equipment and component manufacturers. Consolidation may impact the products distributed by Wajax, in either a favourable or unfavourable manner. Consolidation of manufacturers may have a negative impact on the results of operations or cash flow if product lines Wajax distributes become unavailable as a result of the consolidation. This was the case in the Equipment segment with the discontinued distribution of the LeTourneau product line effective April 27 2012, due to the purchase by Joy Global Inc. of LeTourneau Technologies Inc.

Suppliers generally have the ability to unilaterally change distribution terms and conditions or limit supply of product in times of intense market demand. Supplier changes in the area of product pricing and availability can have a negative or positive effect on Wajax's revenue and margins. As well, from time to time suppliers make changes to payment terms for distributors. This may affect Wajax's interest-free payment period or consignment terms, which may have a materially negative or positive impact on working capital balances such as cash, inventories, trade and other payables and bank debt.

The ability of Wajax to realize its intention to focus its Industrial Components' business on, among other things, the importation of high quality, lower cost products from China or other Asian countries and eastern Europe is dependent on the continued economic and political stability of these regions. There is no assurance that Wajax will be able to import such components at a low cost and/or on a consistent basis.

Economic conditions/Business cyclicality

Wajax's customer base consists of businesses operating in the natural resources, construction, transportation, manufacturing, industrial processing and utilities industries. These industries can be capital intensive and cyclical in nature, and as a result, customer demand for Wajax's products and services may be affected by economic conditions at both a global or local level. Changes in interest rates, consumer and business confidence, corporate profits, credit conditions, foreign exchange, commodity prices and the level of government infrastructure spending may influence Wajax's customers' operating, maintenance and capital spending, and therefore Wajax's sales and results of operations. Although Wajax has attempted to address its exposure to business and industry cyclicality by diversifying its operations by geography, product offerings and customer base, there can be no assurance that Wajax's results of operations or cash flows will not be adversely affected by changes in economic conditions.

Commodity prices

Many of Wajax's customers are directly and indirectly affected by fluctuations in commodity prices in the forestry, metals and minerals and petroleum and natural gas industries, and as a result Wajax is also indirectly affected by fluctuations in these prices. In particular, each of Wajax's businesses is exposed to fluctuations in the price of oil and natural gas. A downward change in these commodity prices, and particularly in the price of oil and natural gas, could therefore adversely affect Wajax's results of operations or cash flows.

Growth initiatives, integration of acquisitions and project execution

As part of its long-term strategy, Wajax intends to continue growing its business through a combination of organic growth and strategic acquisitions. Wajax's ability to successfully grow its business through acquisitions will be dependent on a number of factors including: identification of accretive new business or acquisition opportunities; negotiation of purchase agreements on satisfactory terms and prices; prior approval of acquisitions by third parties, including regulatory authorities; securing attractive financing arrangements; and integration of newly acquired operations into the existing business. All of these activities may be more difficult to implement or may take longer to execute than management anticipates. Further, any significant expansion of the business may increase the operating complexity of Wajax, and divert management away from regular business activities. Any failure of Wajax to manage its acquisition strategy successfully could have a material adverse impact on Wajax's business, results of operations or financial condition.

Key personnel

The success of Wajax is largely dependent on the abilities and experience of its senior management team and other key personnel. Its future performance will also depend on its ability to attract, develop and retain highly qualified employees in all areas of its business. Competition for skilled management, sales and technical personnel is intense, particularly in certain markets where Wajax competes. Wajax continuously reviews and makes adjustments to its hiring, training and compensation practices in an effort to attract and retain a highly competent workforce. However, there can be no assurance that Wajax will be successful in its efforts and a loss of key employees, or failure to attract and retain new talent as needed, may have an adverse impact on Wajax's current operations or future prospects.

Leverage, credit availability and restrictive covenants

Wajax has a $175 million bank credit facility which expires August 12, 2016 comprised of a $30 million non-revolving term portion and a $145 million revolving term portion. (see Liquidity and Capital Resources section above).

While management believes this facility will be adequate to meet the Corporation's normal course working capital requirements, there can be no assurance that additional credit will become available if required, or that an appropriate amount of credit with comparable terms and conditions will be available when the facility matures. See Financing Strategies section.

The facility contains restrictive covenants which place restrictions on, among other things, the ability of Wajax to encumber or dispose of its assets, the amount of interest cost incurred and dividends made relative to earnings and certain reporting obligations. A failure to comply with the obligations of the facility could result in an event of default which, if not cured or waived, could require an accelerated repayment of the facilities. There can be no assurance that Wajax's assets would be sufficient to repay the facility in full.

Wajax's short-term normal course working capital requirements can swing widely quarter-to-quarter due to timing of large inventory purchases and/or sales and changes in market activity. In general, as Wajax experiences growth, there is a need for additional working capital as was the case in 2011. Conversely, as Wajax experiences economic slowdowns working capital reduces reflecting the lower activity levels as was the case in 2009.

Wajax may be required to access the equity or debt markets or reduce dividends in order to fund significant acquisitions and growth related working capital and capital expenditures.

The amount of debt service obligations under the credit facility will be dependant on the level of borrowings and fluctuations in interest rates to the extent the rate is unhedged. As a result, fluctuations in debt servicing costs may have a detrimental effect on future earnings or cash flow.

Wajax also has credit lines available with other financial institutions for purposes of financing inventory and off balance sheet financing of long-term rental fleet. See Liquidity and Capital Resources section. These facilities are not committed lines and their future availability cannot be assured, which may have a negative impact on cash available for dividends and future growth opportunities.

Quality of products distributed

The ability of Wajax to maintain and expand its customer base is dependent upon the ability of the manufacturers represented by Wajax to improve and sustain the quality of their products. The quality and reputation of such products are not within Wajax's control, and there can be no assurance that manufacturers will be successful in meeting these goals. The failure of these manufacturers to maintain a market presence could adversely affect Wajax's results of operations or cash flow.

Foreign exchange exposure

Wajax's operating results are reported in Canadian dollars. While the majority of Wajax's sales are in Canadian dollars, significant portions of its purchases are in U.S. dollars. Changes in the U.S. dollar exchange rate can have a negative or positive impact on Wajax's revenue, margins and working capital balances. Wajax mitigates certain exchange rate risks by entering into short-term foreign currency forward contracts to fix the cost of certain inbound inventory and to hedge certain foreign-currency denominated sales to customers. In addition, Wajax will periodically institute price increases to offset the negative impact of foreign exchange rate increases on imported goods. The inability of Wajax to mitigate exchange rate risks or increase prices to offset foreign exchange rate increases, including sudden and volatile changes in the U.S. dollar exchange rate, may have a material adverse effect on the results of operations or financial condition of Wajax.

A declining U.S. dollar relative to the Canadian dollar can have a negative effect on Wajax's revenue and cash flows as a result of certain products being imported from the U.S. In some cases market conditions require Wajax to lower its selling prices as the U.S. dollar declines. As well, many of Wajax's customers export products to the U.S., and a strengthening Canadian dollar can negatively impact their overall competitiveness and demand for their products, which in turn may reduce product purchases from Wajax.

A strengthening U.S. dollar relative to the Canadian dollar can have a positive effect on Wajax's revenue as a result of certain products being imported from the U.S. Wajax will periodically institute price increases to offset the negative impact of foreign exchange rate increases and volatility on imported goods to ensure margins are not eroded.

Competition

The equipment, industrial components and power systems distribution industries in which Wajax competes are highly competitive. In the Equipment segment, Wajax primarily competes against regional equipment distributors that tend to handle a dedicated product line, such as those offered by John Deere, Komatsu and Caterpillar. There can be no assurance that Wajax will be able to continue to compete on the basis of product quality and price of product lines, distribution and servicing capabilities as well as proximity of its distribution sites to customers.

In terms of the Industrial Components segment, the hydraulics and process equipment branches compete with other distributors of hydraulics components and process equipment on the basis of quality and price of the product lines, the capacity to provide custom-engineered solutions and high service standards. The bearings and power transmission product branches compete with a number of distributors representing the same or competing product lines and rely primarily on high service standards, price and value added services to gain market advantage.

The Power Systems business competes with other major diesel engine distributors representing such products as Cummins and Caterpillar. Competition is based primarily on product quality, pricing and the ability to service the product after the sale.

There can be no assurance that Wajax will be able to continue to effectively compete. Increased competitive pressures or the inability of Wajax to maintain the factors which have enhanced its competitive position could adversely affect its results of operations or cash flow.

Litigation and product liability claims

In the ordinary course of its business, Wajax may be party to various legal actions, the outcome of which cannot be predicted with certainty. One category of potential legal actions is product liability claims. Wajax carries product liability insurance, and management believes that this insurance is adequate to protect against potential product liability claims. Not all risks, however, are covered by insurance, and no assurance can be given that insurance will be consistently available, or will be consistently available on an economically feasible basis, or that the amounts of insurance will at all times be sufficient to cover each and every loss or claim that may occur involving Wajax's assets or operations.

Inventory obsolescence

Wajax maintains substantial amounts of inventories in all three core businesses. While Wajax believes it has appropriate inventory management systems in place, variations in market demand for the products it sells can result in certain items of inventory becoming obsolete. This could result in a requirement for Wajax to take a material write down of its inventory balance resulting in Wajax not being able to realize expected revenue and cash flows from its inventory, which would negatively affect results from operations or cash flow.

Credit risk

Wajax extends credit to its customers, generally on an unsecured basis. Although Wajax is not substantially dependant on any one customer and it has a system of credit management in place, the loss of a large receivable would have an adverse effect on Wajax's profitability.

Guaranteed residual value, recourse and buy-back contracts

In some circumstances Wajax makes certain guarantees to finance providers on behalf of its customers. These guarantees can take the form of assuring the resale value of equipment, guaranteeing a portion of customer lease payments, or agreeing to buy back the equipment at a specified price. These contracts are subject to certain conditions being met by the customer, such as maintaining the equipment in good working condition. Historically, Wajax has not incurred substantial losses on these types of contracts, however, there can be no assurance that losses will not be incurred in the future. See Contractual Obligations section.

Future warranty claims

Wajax provides manufacturers' and/or dealer warranties for most of the product it sells. In some cases, the product warranty claim risk is shared jointly with the manufacturer. In addition, Wajax provides limited warranties for workmanship on services provided. Accordingly, Wajax has some liability for warranty claims. There is a risk that a possible product quality erosion or a lack of a skilled workforce could increase warranty claims in the future, or may be greater than management anticipates. If Wajax's liability in respect of such claims is greater than anticipated, it may have a material adverse impact on Wajax's business, results of operations or financial condition.

Maintenance and repair contracts

Wajax frequently enters into long-term maintenance and repair contracts with its customers, whereby Wajax is obligated to maintain certain fleets of equipment at various negotiated performance levels. The length of these contracts varies significantly, often ranging up to five or more years. The contracts are generally fixed price, although many contracts have additional provisions for inflationary adjustments. Due to the long-term nature of these contracts, there is a risk that significant cost overruns may be incurred. If Wajax has miscalculated the extent of maintenance work required, or if actual parts and service costs increase beyond the contracted inflationary adjustments, the contract profitability will be adversely affected. In order to mitigate this risk, Wajax closely monitors the contracts for early warning signs of cost overruns. In addition, the manufacturer may, in certain circumstances, share in the cost overruns if profitability falls below a certain threshold. Any failure by Wajax to effectively price and manage these contracts could have a material adverse impact on Wajax's business, results of operations or financial condition.

Insurance

Wajax maintains a program of insurance coverage that is ordinarily maintained by similar businesses, including property insurance and general liability insurance. Although the limits and deductibles of such insurance have been established through risk analysis and the recommendation of professional advisors, there can be no assurance that such insurance will remain available to Wajax at commercially reasonable rates or that the amount of such coverage will be adequate to cover all liability incurred by Wajax. If Wajax is held liable for amounts exceeding the limits of its insurance coverage or for claims outside the scope of that coverage, its business, results of operations or financial condition could be adversely affected.

Information systems and technology

Information systems are an integral part of Wajax's business processes, including marketing of equipment and support services, inventory and logistics, and finance. Some of these systems are integrated with certain suppliers' core processes and systems. Any disruptions to these systems due, for example, to the upgrade or conversion thereof, or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect Wajax's operating results by limiting the ability to effectively monitor and control Wajax's operations.

Labour relations

Wajax has approximately 2,738 employees. Wajax is a party to thirteen collective agreements covering a total of approximately 416 employees. Of these, seven collective agreements covering 113 employees have expired on or before December 31, 2011 and are currently being re-negotiated. Of the remaining six collective agreements, two expire in 2012, three expire in 2013, and one expires in 2014. Overall, Wajax believes its labour relations to be satisfactory and does not anticipate it will be unable to renew the collective agreements. If Wajax is unable to renew or negotiate collective agreements from time to time, it could result in work stoppages and other labour disturbances. The failure to renew collective agreements upon satisfactory terms could have a material adverse impact on Wajax's businesses, results of operations or financial condition.

Government regulation

Wajax's business is subject to evolving laws and government regulations, particularly in the areas of taxation, the environment, and health and safety. Changes to such laws and regulations may impose additional costs on Wajax and may adversely affect its business in other ways, including requiring additional compliance measures by Wajax.

Strategic Direction and Outlook

In 2011 Wajax achieved record revenue and earnings before income tax of $1.38 billion and $87.5 million respectively. Year-over-year revenue increased 24% while earnings before income tax increased 62%. The earnings before income tax comparison is appropriate since 2011 was the first year after conversion from an income fund when Wajax was effectively not subject to income tax. This performance was driven by a stronger Canadian economy and the execution of the Corporation's strategic initiatives, including the Harper acquisition. Additionally, all three businesses maintained disciplined control over selling and administrative costs. With its Canada-wide branch infrastructure and diverse product lines, Wajax's business has exposure to virtually all of the goods producing sectors of the Canadian economy. Stronger sectors of the economy aiding the Corporation's revenue growth in 2011 were energy, mining, construction and forestry, primarily in western Canada.

Looking forward to 2012, management expects growth in the Canadian economy to be more modest than that experienced in 2011. This is a result of the continuing high value of the Canadian dollar and the dampening effect on the world economy from the European debt crisis and the slowing Chinese economy. However, we expect global demand for commodities to remain relatively strong, which should bode well for Canada's mining and energy sectors, particularly in western Canada. The revenue implication from phasing out the LeTourneau mining equipment line at the end of April, is expected to be mitigated by additional Hitachi mining equipment sales as Hitachi's manufacturing operations have recovered from the effects of the Japanese earthquake and tsunami in March 2011. As well, management has outlined growth initiatives that are expected to result in increased market share for key product lines, the addition of new products and expansion into new geographic territories. As a result, management expects continued growth in revenue and earnings in 2012, but at a more modest pace than experienced in 2011.

Additional information, including Wajax's Annual Report and Annual Information Form, are available on SEDAR at www.sedar.com.


                              WAJAX CORPORATION                             

            Unaudited Condensed Consolidated Financial Statements           

           For the three and twelve months ended December 31, 2011          

Notice required under National Instrument 51-102, "Continuous Disclosure Obligations" Part 4.3(3) (a):

The attached condensed consolidated financial statements have been prepared by Management of Wajax Corporation and have not been reviewed by the Corporation's auditors.


                             WAJAX CORPORATION                              
                    CONDENSED CONSOLIDATED STATEMENTS OF                    
                             FINANCIAL POSITION                             

As at                                                                       
(unaudited, in thousands of Canadian                 December      December 
 dollars)                                   Note     31, 2011      31, 2010 
----------------------------------------------------------------------------
ASSETS                                                                      
CURRENT                                                                     
Cash                                               $    5,659    $   42,954 
Trade and other receivables                           174,233       135,517 
Inventories                                           241,524       196,460 
Prepaid expenses                                        8,033         7,244 
----------------------------------------------------------------------------
                                                      429,449       382,175 
----------------------------------------------------------------------------

NON-CURRENT                                                                 
Rental equipment                               4       28,060        15,794 
Property, plant and equipment                  5       47,924        43,268 
Intangible assets                              6       84,493        75,794 
Deferred taxes                                10            -         5,277 
Employee benefits                                           -           240 
----------------------------------------------------------------------------
                                                      160,477       140,373 
----------------------------------------------------------------------------
                                                   $  589,926    $  522,548 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY                                        
CURRENT                                                                     
Trade and other payables                       7   $  163,108    $  134,832 
Accrued liabilities                                    84,050        63,762 
Provisions                                              5,704         5,353 
Dividends payable                                       3,326        12,472 
Income taxes payable                                    2,398         2,072 
Obligations under finance leases                        3,646         3,677 
Derivative instruments                                    208         2,452 
Bank debt                                                   -        79,680 
----------------------------------------------------------------------------
                                                      262,440       304,300 
----------------------------------------------------------------------------

NON-CURRENT                                                                 
Provisions                                              4,010         4,338 
Deferred taxes                                10       17,694             - 
Employee benefits                                       6,843         4,132 
Other liabilities                                       5,644         5,221 
Obligations under finance leases                        6,688         5,227 
Bank debt                                              59,021             - 
----------------------------------------------------------------------------
                                                       99,900        18,918 
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY                                                        
Share capital                                         105,371             - 
Trust units                                                 -       105,371 
Contributed surplus                            9        4,888         3,931 
Retained earnings                                     117,477        91,805 
Accumulated other comprehensive loss                     (150)       (1,777)
----------------------------------------------------------------------------
Total shareholders' equity                            227,586       199,330 
----------------------------------------------------------------------------
                                                   $  589,926    $  522,548 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

These condensed consolidated financial statements were approved by the Board of Directors on March 6, 2012.


                              WAJAX CORPORATION                             
                  CONDENSED CONSOLIDATED INCOME STATEMENTS                  

(unaudited, in                                                              
 thousands of                                                               
 Canadian dollars,                                                          
 except per share            Three months ended         Twelve months ended 
 data)                Note          December 31                 December 31 

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

Revenue                    $ 377,182  $ 316,356   $  1,377,100  $ 1,110,888 
Cost of sales                297,850    252,074      1,084,667      873,032 
----------------------------------------------------------------------------
Gross profit                  79,332     64,282        292,433      237,856 
Selling and                                                                 
 administrative                                                             
 expenses                     55,698     48,393        200,321      179,643 
----------------------------------------------------------------------------
Earnings before                                                             
 finance costs and                                                          
 income taxes                 23,634     15,889         92,112       58,213 
Finance costs                  1,153      1,014          4,630        4,277 
----------------------------------------------------------------------------
Earnings before                                                             
 income taxes                 22,481     14,875         87,482       53,936 
Income tax expense                                                          
 (recovery)             10     5,920       (912)        23,679       (2,454)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings               $  16,561  $  15,787   $     63,803  $    56,390 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Basic earnings per                                                          
 share                  11 $    1.00  $    0.95   $       3.84  $      3.39 
Diluted earnings per                                                        
 share                  11 $    0.98  $    0.93   $       3.77  $      3.34 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                             WAJAX CORPORATION                              
                    CONDENSED CONSOLIDATED STATEMENTS OF                    
                            COMPREHENSIVE INCOME                            

(unaudited, in thousands of      Three months ended     Twelve months ended 
 Canadian dollars)                      December 31             December 31 

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

Net earnings                  $  16,561   $  15,787   $  63,803   $  56,390 
----------------------------------------------------------------------------

Actuarial losses on pension                                                 
 plans, net of tax               (2,544)       (628)     (2,544)       (628)

(Gains) losses on derivative                                                
 instruments designated as                                                  
 cash flow hedges in prior                                                  
 periods reclassified to cost                                               
 of inventory or finance costs                                              
 during the period, net of tax                                              
 of ($224) (2010 - $139) and                                                
 year to date, net of tax of                                                
 $237 (2010 - $109)                (649)        661         565         938 

(Losses) gains on derivative                                                
 instruments designated as                                                  
 cash flow hedges during the                                                
 period, net of tax of ($126)                                               
 (2010 - ($75)) and year to                                                 
 date, net of tax of $381                                                   
 (2010 - ($155))                   (354)       (365)      1,062        (482)

----------------------------------------------------------------------------
Other comprehensive loss, net                                               
 of tax                          (3,547)       (332)       (917)       (172)
----------------------------------------------------------------------------

Total comprehensive income    $  13,014   $  15,455   $  62,886   $  56,218 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                             WAJAX CORPORATION                             
                    CONDENSED CONSOLIDATED STATEMENTS OF                   
                      CHANGES IN SHAREHOLDERS' EQUITY                      



For the twelve months ended                                                
 December 31, 2011                                                         
(in thousands of Canadian                   Share               Contributed
 dollars)                        Note     capital Trust units       surplus
---------------------------------------------------------------------------


January 1, 2011                      $          -     105,371         3,931
---------------------------------------------------------------------------


Conversion to corporation                 105,371    (105,371)            -


Net earnings                                    -           -             -

Other comprehensive loss                                                   

Actuarial losses on pension                                                
 plans, net of tax                              -           -             -

Losses on derivative                                                       
 instruments designated as                                                 
 cash flow hedges in prior                                                 
 years reclassified to cost of                                             
 inventory or finance costs in                                             
 the current year, net of tax                   -           -             -

Gains on effective portion of                                              
 derivative instruments                                                    
 designated as cash flow                                                   
 hedges, net of tax                             -           -             -

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

Total other comprehensive loss                  -           -             -
---------------------------------------------------------------------------
Total comprehensive income for                                             
 the year                                       -           -             -
---------------------------------------------------------------------------

Dividends                           8           -           -             -
---------------------------------------------------------------------------
Share-based compensation                                                   
 expense                            9           -           -           957
---------------------------------------------------------------------------

December 31, 2011                    $    105,371           -         4,888
---------------------------------------------------------------------------


                             WAJAX CORPORATION                              
                    CONDENSED CONSOLIDATED STATEMENTS OF                    
                      CHANGES IN SHAREHOLDERS' EQUITY                       

                                                   Accumulated              
                                                         other              
                                                 comprehensive              
                                                 (loss) income              
                                                      ("AOCL")              
                                                 -------------              
For the twelve months ended                                                 
 December 31, 2011                                                          
(in thousands of Canadian               Retained     Cash flow              
 dollars)                        Note   earnings        hedges        Total 
----------------------------------------------------------------------------

January 1, 2011                           91,805        (1,777) $   199,330 
----------------------------------------------------------------------------

Conversion to corporation                      -             -            - 

Net earnings                              63,803             -       63,803 

Other comprehensive loss                                                    

Actuarial losses on pension                                                 
 plans, net of tax                        (2,544)            -       (2,544)

Losses on derivative                                                        
 instruments designated as                                                  
 cash flow hedges in prior                                                  
 years reclassified to cost of                                              
 inventory or finance costs in                                              
 the current year, net of tax                  -           565          565 

Gains on effective portion of                                               
 derivative instruments                                                     
 designated as cash flow                                                    
 hedges, net of tax                            -         1,062        1,062 

----------------------------------------------------------------------------
Total other comprehensive loss            (2,544)        1,627         (917)
----------------------------------------------------------------------------
Total comprehensive income for                                              
 the year                                 61,259         1,627       62,886 
----------------------------------------------------------------------------
Dividends                           8    (35,587)            -      (35,587)
----------------------------------------------------------------------------
Share-based compensation                                                    
 expense                            9          -             -          957 
----------------------------------------------------------------------------
December 31, 2011                        117,477          (150) $   227,586 
----------------------------------------------------------------------------

                              WAJAX CORPORATION                             
                    CONDENSED CONSOLIDATED STATEMENTS OF                    
                       CHANGES IN SHAREHOLDERS' EQUITY                      




 For the twelve months ended                                                
 December 31, 2010                             Share     Trust  Contributed 
(in thousands of Canadian dollars)   Note    capital     units      surplus 
----------------------------------------------------------------------------

January 1, 2010                            $       -   105,129        3,538 
----------------------------------------------------------------------------

Net earnings                                       -         -            - 

Other comprehensive loss                                                    

Actuarial losses on pension plans,                                          
 net of tax                                        -         -            - 

Losses on derivative instruments                                            
 designated as cash flow hedges in                                          
 prior years reclassified to cost of                                        
 inventory or finance costs in the                                          
 current year, net of tax                          -         -            - 

Losses on effective portion of                                              
 derivative instruments designated                                          
 as cash flow hedges, net of tax                   -         -            - 

----------------------------------------------------------------------------
Total other comprehensive loss                     -         -            - 
----------------------------------------------------------------------------
Total comprehensive income for the                                          
 year                                              -         -            - 
----------------------------------------------------------------------------
Distributions                           8          -         -            - 
----------------------------------------------------------------------------
Unit rights plans exercised             9          -       242         (242)
----------------------------------------------------------------------------
Unit-based compensation expense         9          -         -          635 
----------------------------------------------------------------------------
December 31, 2010                          $       -   105,371        3,931 
----------------------------------------------------------------------------


                             WAJAX CORPORATION                              
                    CONDENSED CONSOLIDATED STATEMENTS OF                    
                      CHANGES IN SHAREHOLDERS' EQUITY                       

                                                          AOCL              
                                                     ---------              

 For the twelve months ended                                                
 December 31, 2010                        Retained   Cash flow              
(in thousands of Canadian dollars)   Note earnings      hedges        Total 
----------------------------------------------------------------------------

January 1, 2010                             92,543      (2,233)  $  198,977 
----------------------------------------------------------------------------

Net earnings                                56,390           -       56,390 

Other comprehensive loss                                                    

Actuarial losses on pension plans,                                          
 net of tax                                   (628)          -         (628)

Losses on derivative instruments                                            
 designated as cash flow hedges in                                          
 prior years reclassified to cost of                                        
 inventory or finance costs in the                                          
 current year, net of tax                        -         938          938 

Losses on effective portion of                                              
 derivative instruments designated                                          
 as cash flow hedges, net of tax                 -        (482)        (482)

----------------------------------------------------------------------------
Total other comprehensive loss                (628)        456         (172)
----------------------------------------------------------------------------
Total comprehensive income for the                                          
 year                                       55,762         456       56,218 
----------------------------------------------------------------------------
Distributions                           8  (56,500)          -      (56,500)
----------------------------------------------------------------------------
Unit rights plans exercised             9        -           -            - 
----------------------------------------------------------------------------
Unit-based compensation expense         9        -           -          635 
----------------------------------------------------------------------------
December 31, 2010                           91,805      (1,777)  $  199,330 
----------------------------------------------------------------------------

                             WAJAX CORPORATION                              
                    CONDENSED CONSOLIDATED STATEMENTS OF                    
                                 CASH FLOWS                                 

                                              Three                  Twelve 
(unaudited, in thousands               months ended            months ended 
 of Canadian dollars)                   December 31             December 31 
                      Note         2011        2010        2011        2010 
----------------------------------------------------------------------------
OPERATING ACTIVITIES                                                        
Net earnings                  $  16,561   $  15,787   $  63,803   $  56,390 
Items not affecting                                                         
 cash flow:                                                                 
 Depreciation and                                                           
  amortization                                                              
  Rental equipment                1,471         957       4,838       3,568 
  Property, plant                                                           
   and equipment                  1,233       1,073       4,410       4,065 
  Assets under                                                              
   finance lease                    802         716       3,031       2,645 
  Intangible assets        6        315         239       1,216         966 
 Share-based                                                                
  compensation                                                              
  expense                  9       (386)       (232)        957         635 
 Other liabilities                1,639       2,221         423       4,380 
 Non-cash rental                                                            
  expense                          (125)         24        (303)        103 
 Employee benefits                                                          
  expense, net of                                                           
  payments                           46        (999)       (478)     (1,139)
 Finance costs                    1,153       1,014       4,630       4,277 
 Income tax expense                                                         
  (recovery)              10      5,920        (912)     23,679      (2,454)
----------------------------------------------------------------------------
Cash flows from                                                             
 operating                                                                  
 activities before                                                          
 changes in                                                                 
 operating assets                                                           
 and liabilities                 28,629      19,888     106,206      73,436 
----------------------------------------------------------------------------
Changes in operating                                                        
 assets and                                                                 
 liabilities:                                                               
 Trade and other                                                            
  receivables                    13,770      11,756     (27,054)    (11,980)
 Inventories                     (9,250)     (3,615)    (34,959)    (15,768)
 Prepaid expenses                 1,535      (1,446)       (571)        556 
 Trade and other                                                            
  payables                        5,549      20,089      22,904      51,537 
 Accrued liabilities             15,359      (3,001)     19,076      (2,430)
 Provisions                        (308)      1,439         351         494 
----------------------------------------------------------------------------
                                 26,655      25,222     (20,253)     22,409 
----------------------------------------------------------------------------
Cash flows generated                                                        
 from operating                                                             
 activities                      55,284      45,110      85,953      95,845 
----------------------------------------------------------------------------
 Rental equipment                                                           
  additions                4     (4,996)     (2,979)    (20,177)     (5,775)
 Provisions, non-                                                           
  current                          (598)        112        (328)        820 
 Finance costs paid              (1,011)       (835)     (4,132)     (3,999)
 Income taxes                                                               
  received (paid)                   (18)          -        (116)      1,778 
----------------------------------------------------------------------------
Net cash flows                                                              
 generated from                                                             
 operating                                                                  
 activities                      48,661      41,408      61,200      88,669 
----------------------------------------------------------------------------

----------------------------------------------------------------------------
INVESTING ACTIVITIES                                                        
Property, plant and                                                         
 equipment additions             (2,682)     (2,105)     (5,499)     (4,132)
Proceeds on disposal                                                        
 of property, plant                                                         
 and equipment                      122          30         193       2,393 
Intangible assets                                                           
 additions                         (413)       (514)       (664)     (3,220)
Acquisition of                                                              
 business                 12         10           -     (23,247)          - 
----------------------------------------------------------------------------
Net cash flows used                                                         
 in investing                                                               
 activities                      (2,963)     (2,589)    (29,217)     (4,959)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
FINANCING ACTIVITIES                                                        
 Decrease in bank                                                           
  debt                          (27,000)          -     (20,000)          - 
 Debt facility                                                              
  renewal costs                      11           -      (1,061)        (93)
 Finance lease                                                              
  payments                         (975)     (1,061)     (3,484)     (3,351)
 Dividends paid            8     (9,978)    (20,774)    (44,733)    (46,519)
----------------------------------------------------------------------------
Net cash flows used                                                         
 in financing                                                               
 activities                     (37,942)    (21,835)    (69,278)    (49,963)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net change in cash                7,756      16,984     (37,295)     33,747 
----------------------------------------------------------------------------
(Bank indebtedness)                                                         
 cash - beginning of                                                        
 period                          (2,097)     25,970      42,954       9,207 
----------------------------------------------------------------------------
Cash - end of period          $   5,659   $  42,954   $   5,659   $  42,954 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


WAJAX CORPORATION                                                           

NOTES TO CONDENSED CONSOLIDATED                                             

FINANCIAL STATEMENTS                                                        

DECEMBER 31, 2011

(unaudited, amounts in thousands of Canadian dollars, except share and per share data)

1. COMPANY PROFILE

Wajax Corporation (the "Corporation") is incorporated in Canada. The address of the Corporation's registered office is 3280 Wharton Way, Mississauga, Ontario, Canada. The Corporation's core distribution businesses are engaged in the sale and after-sale parts and service support of equipment, industrial components and power systems, through a network of 117 branches across Canada. The Corporation is a multi-line distributor and represents a number of leading worldwide manufacturers across its core businesses. Its customer base is diversified, spanning natural resources, construction, transportation, manufacturing, industrial processing and utilities.

In 2010 the Corporation was structured as an unincorporated, open-ended, limited purpose investment trust called Wajax Income Fund (the "Fund"). On January 1, 2011, the Fund converted into a corporation pursuant to a Plan of Arrangement under the Canada Business Corporations Act. Unitholders of the Fund automatically received one common share of the Corporation in exchange for each unit of the Fund. The conversion was accounted for as a continuity of interests. The business continues to be carried on by the same management team that was in place prior to the completion of the conversion.

2. BASIS OF PREPARATION

Statement of compliance

These condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. These are the Corporation's interim International Financial Reporting Standards ("IFRS") condensed consolidated financial statements for part of the period covered by the first IFRS annual financial statements, and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. The condensed consolidated financial statements do not include all of the disclosures required for full annual consolidated financial statements. Accordingly, these condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements of Wajax Income Fund for the year ended December 31, 2010 reported under previous Canadian generally accepted accounting principles ("Canadian GAAP") and the condensed consolidated financial statements of the Corporation for the three months ended March 31, 2011, which were the first financial statements presented under IFRS.

An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Corporation is provided in Note 14. This note includes reconciliations of equity and total comprehensive income for comparative periods and of equity at the date of transition reported under previous Canadian GAAP to those reported for those periods and at the date of transition under IFRS. The Corporation's date of transition to IFRS was January 1, 2010.

Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis except for derivative financial instruments and liabilities for cash-settled share-based payment arrangements that have been measured at fair value. The defined benefit liability is recognized as the net total of the plan assets, plus unrecognized past service cost and unrecognized actuarial losses, less unrecognized actuarial gains and the present value of the defined benefit obligation.

Functional and presentation currency

These condensed consolidated financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand, unless otherwise stated and except share and per share data.

Judgements and estimation uncertainty

The preparation of the condensed consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities and revenues and expenses. Actual results could differ from those estimates. The Corporation bases its estimates on historical experience and various other assumptions that are believed to be reasonable in the circumstances.

In preparing these condensed consolidated financial statements, the significant judgments made by management in applying the Corporation's accounting policies and the key sources of estimation uncertainty are expected to be the same as those to be applied in the first annual IFRS financial statements. The more significant judgements and assumptions that have an effect on the amounts recognized in the condensed consolidated financial statements are provision for doubtful accounts, inventory obsolescence, asset impairment, classification of leases, impairment of intangible assets, warranty reserve and measurement of employee benefit obligations.

3. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

The new standards or amendments to existing standards set out below are not yet effective for the three and twelve months ended December 31, 2011 and have not been applied in preparing these condensed consolidated financial statements.

As of January 1, 2015, the Corporation will be required to adopt IFRS 9 Financial Instruments, which is the result of the first phase of the IASB's project to replace IAS 39 Financial Instruments: Recognition and Measurement. The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The Corporation is currently assessing the impact of this standard on its consolidated financial statements.

As of January 1, 2013, the Corporation will be required to adopt IFRS 10 Consolidated Financial Statements, which establishes principles for the preparation and presentation of consolidated financial statements when an entity controls one or more other entities. The Corporation does not expect IFRS 10 to have a material impact on its consolidated financial statements.

As of January 1, 2013, the Corporation will be required to adopt IFRS 13 Fair Value Measurement, which defines fair value and sets out a framework for measuring fair value when fair value measurements are required or permitted by other standards. The Corporation is currently assessing the impact of this standard on its consolidated financial statements.

As of January 1, 2013, the Corporation will be required to adopt amendments to IAS 1 Presentation of Financial Statements, which require that an entity present separately the items of other comprehensive income that may be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss. As the amendments only require changes in the presentation of items in other comprehensive income, the Corporation does not expect the amendments to IAS 1 to have a material impact on the financial statements.

As of January 1, 2013, the Corporation will be required to adopt IAS 19 Employee Benefits, which requires recognition of actuarial gains and losses immediately in other comprehensive income, the full recognition of past service costs immediately in profit or loss, recognition of the expected return on plan assets in profit or loss to be calculated based on the rate used to discount the defined benefit obligation, and certain additional disclosures. The Corporation is currently assessing the impact of this standard on its consolidated financial statements.

4. RENTAL EQUIPMENT

The Corporation acquired rental equipment with a cost of $4,996 during the quarter (2010 - $2,979) and $20,177 year to date (2010 - $5,775). Rental equipment with a carrying amount of $777 during the quarter (2010 - $689) and $3,073 year to date (2010 - $2,624) ceased to be rented and was classified as held for sale in the normal course of business and transferred to inventory.

5. PROPERTY, PLANT AND EQUIPMENT

The Corporation acquired property, plant and equipment with a cost of $4,642 during the quarter (2010 - $3,143) and $12,777 year to date (2010 - $7,213). Assets with a carrying amount of $220 during the quarter (2010 - $264) and $680 year to date (2010 - $1,013) were disposed of, resulting in losses on disposal of $75 during the quarter (2010 - $10) and $61 year to date (2010 - gains of $111).

Included in property, plant and equipment are vehicles held under finance leases as follows:


                               Three months ended       Twelve months ended 
                                      December 31               December 31 
----------------------------------------------------------------------------
                                2011         2010         2011         2010 
----------------------------------------------------------------------------
Cost, beginning of period  $  22,748    $  21,412    $  22,006    $  22,433 
Additions                      1,968        1,469        5,400        3,081 
Disposals                       (452)        (875)      (2,333)      (3,508)
Purchased at end of lease       (173)           -         (982)           - 
----------------------------------------------------------------------------
Cost, end of period        $  24,091    $  22,006    $  24,091    $  22,006 
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Accumulated depreciation,                                                   
 beginning of period          12,687       12,472       12,542       12,589 
Charge for the period            802          716        3,031        2,645 
Disposals                       (353)        (646)      (1,848)      (2,692)
Purchased at end of lease       (127)           -         (716)           - 
----------------------------------------------------------------------------
Accumulated depreciation,                                                   
 end of period                13,009       12,542       13,009       12,542 
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Net book value             $  11,082    $   9,464    $  11,082    $   9,464 
----------------------------------------------------------------------------

All property, plant and equipment except vehicles held under finance leases have been pledged as security for bank debt.

6. INTANGIBLE ASSETS


                                                Customer                    
                                    Product   lists/Non-                    
                               distribution  competition                    
                      Goodwill       rights   agreements Software     Total 
----------------------------------------------------------------------------
Cost                                                                        

January 1, 2011      $  66,335        4,900        4,302    7,053  $ 82,590 
Acquisition of                                                              
 business (Note 12)      4,309        3,900        1,000       42     9,251 
Additions                                                     664       664 
----------------------------------------------------------------------------
December 31, 2011    $  70,644        8,800        5,302    7,759  $ 92,505 
----------------------------------------------------------------------------

January 1, 2010      $  66,335        4,900        4,302    7,093  $ 82,630 
Additions                                                   3,220     3,220 
Disposals                                                  (3,260)   (3,260)
----------------------------------------------------------------------------
December 31, 2010    $  66,335        4,900        4,302    7,053  $ 82,590 
----------------------------------------------------------------------------

Accumulated                                                                 
 amortization                                                               

January 1, 2011      $       -            -        2,565    4,231  $  6,796 
Amortization for the                                                        
 year                        -            -          530      686     1,216 
----------------------------------------------------------------------------
December 31, 2011    $       -            -        3,095    4,917  $  8,012 
----------------------------------------------------------------------------

January 1, 2010      $       -            -        2,032    7,059  $  9,091 
Amortization for the                                                        
 year                        -            -          533      433       966 
Disposals                                                  (3,261)   (3,261)
----------------------------------------------------------------------------
December 31, 2010    $       -            -        2,565    4,231  $  6,796 
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Carrying amount                                                             

----------------------------------------------------------------------------
December 31, 2011    $  70,644        8,800        2,207    2,842  $ 84,493 
----------------------------------------------------------------------------

----------------------------------------------------------------------------
January 1, 2010      $  66,335        4,900        2,270       34  $ 73,539 
----------------------------------------------------------------------------
December 31, 2010    $  66,335        4,900        1,737    2,822  $ 75,794 
----------------------------------------------------------------------------

7. TRADE AND OTHER PAYABLES


                                      December 31, 2011    December 31, 2010
----------------------------------------------------------------------------
Trade payables                       $          139,828   $          124,852
Other payables                                   12,362                7,103
Deferred income                                  10,918                2,877
----------------------------------------------------------------------------
Total trade and other payables       $          163,108   $          134,832
----------------------------------------------------------------------------

8. DIVIDENDS DECLARED

During the three months ended December 31, 2011 the Corporation declared cash dividends of $0.60 per share, or $9,978 (December 31, 2010, distributions of $1.65 per unit or $27,437).

Year to date, the Corporation declared cash dividends of $2.14 per share, or $35,587 (December 31, 2010, distributions of $3.40 per unit or $56,500).

The Corporation has declared dividends of $3,326 ($0.20 per share) for the month of January 2012.

9. SHARE-BASED COMPENSATION PLANS

The Corporation has five share-based compensation plans: the Wajax Share Ownership Plan ("SOP"), the Deferred Share Program ("DSP"), the Directors' Deferred Share Unit Plan ("DDSUP"), the Mid-Term Incentive Plan for Senior Executives ("MTIP") and the Deferred Share Unit Plan ("DSUP").

a) Share Rights Plans

Under the SOP, DSP and the DDSUP, rights are issued to the participants which, upon satisfaction of certain time and performance vesting conditions, are settled by issuing Wajax Corporation shares for no cash consideration. The rights are settled when the participant is no longer employed by the Corporation or one of its subsidiary entities or no longer sits on its board. The aggregate number of shares issuable to satisfy entitlements under these plans may not exceed 1,050,000 shares. Compensation expense is based upon the fair value of the rights at the date of grant and is charged to earnings on a straight-line basis over the vesting period, with an offsetting adjustment to contributed surplus.

Whenever dividends are paid on the Corporation's shares, participants of these plans are granted a number of additional rights equal to the aggregate dollar value of the dividends that would have been paid to each participant if they had received shares under this plan rather than rights, divided by the value of shares on the date that such dividends are paid ("dividend equivalents"). No compensation cost is recorded for these additional rights.

The Corporation recorded compensation recovery of $386 for the quarter (2010 - recovery of $232) and compensation cost of $957 for the year to date (2010 - cost of $635) in respect of these plans.



Share Ownership Plan            December 31, 2011         December 31, 2010 
----------------------------------------------------------------------------
                                             Fair                      Fair 
                                         value at                  value at 
                           Number of      time of   Number of       time of 
                              Rights        grant      Rights         grant 
----------------------------------------------------------------------------
Outstanding at beginning of                                                 
 year                        101,999   $    1,024     126,125    $    1,346 
Granted in the                                                              
year           - new grants        -            -           -             - 
               - dividend                                                   
                equivalents    7,789            -      11,025             - 
Settled in the year                -            -     (26,021)         (242)
Forfeited in the year              -            -      (9,130)          (80)
----------------------------------------------------------------------------
Outstanding at end of year   109,788   $    1,024     101,999    $    1,024 
----------------------------------------------------------------------------

At December 31, 2011 105,213 SOP rights were vested (December 31, 2010 - 93,593).


Deferred Share Program              December 31, 2011      December 31, 2010
----------------------------------------------------------------------------
                                                 Fair                   Fair
                                             value at               value at
                                Number of     time of  Number of     time of
                                   Rights       grant     Rights       grant
----------------------------------------------------------------------------
Outstanding at beginning of year   24,164  $      600     21,944  $      600
Granted in the year - new grants    3,989         150      2,220           -
                    - dividend                                              
                     equivalents    2,063           -                      -
----------------------------------------------------------------------------
Outstanding at end of year         30,216  $      750     24,164  $      600
----------------------------------------------------------------------------

All DSP rights have vested at December 31, 2011 (no rights had vested at December 31, 2010).


Directors' Deferred Share Unit                                              
 Plan                               December 31, 2011      December 31, 2010
----------------------------------------------------------------------------
                                                 Fair                   Fair
                                             value at               value at
                                Number of     time of  Number of     time of
                                   Rights       grant     Rights       grant
----------------------------------------------------------------------------
Outstanding at beginning of year  147,797  $    2,509    117,518  $    2,008
Granted in the year - new grants   17,148         625     17,562         501
                    - dividend                                              
                     equivalents   11,646           -     12,717           -
----------------------------------------------------------------------------
Outstanding at end of year        176,591  $    3,134    147,797  $    2,509
----------------------------------------------------------------------------

DDSUP rights vest immediately upon grant.

b) Mid-Term Incentive Plan for Senior Executives ("MTIP")

The MTIP, which is settled in cash, consists of an annual grant that vests over three years and is based upon time and performance vesting criteria, a portion of which is determined by the price of the Corporation's shares. Compensation expense varies with the price of the Corporation's shares and is recognized over the vesting period. The Corporation recorded compensation cost of $399 for the quarter (2010 - $1,000) and $4,251 for the year to date (2010 - $3,163) in respect of the share-based portion of the MTIP. At December 31, 2011 the carrying amount of the share-based portion of the MTIP liability was $8,103 (2010 - $3,852).

c) Deferred Share Unit Plan ("DSUP")

The DSUP, which is settled in cash, consists of an annual grant that vests over three years and is based upon time and performance vesting criteria. Compensation expense for DSUP rights varies with the price of the Corporation's shares and is recognized over the vesting period. Vested rights are settled when the participant is no longer employed by the Corporation or one of its subsidiary entities. The Corporation recorded compensation cost of $169 for the year ended December 31, 2011 (year ended December 31, 2010 - nil) in respect of the share-based portion of the DSUP. At December 31, 2011 the carrying amount of the DSUP liability was $169 (2010 - nil).

10. INCOME TAXES

On January 1, 2011, a plan of arrangement was completed and Wajax Income Fund was converted to Wajax Corporation. The arrangement resulted in the reorganization of the Fund into a corporate structure which is subject to income tax on all of its taxable income at combined federal and provincial rates.

Prior to conversion, the Corporation was a "mutual fund trust" as defined under the Income Tax Act (Canada) and was not taxable on its income to the extent that it was distributed to its unitholders. Pursuant to the terms of the Declaration of Trust, all taxable income earned by the Fund was distributed to its unitholders. Accordingly, no provision for income taxes was required on taxable income earned by the Fund that was distributed to its unitholders. For 2010, only the Fund's corporate subsidiaries were subject to tax on their taxable income.


Income tax expense comprises current and deferred tax as follows:           

For the year ended December 31                            2011         2010 
----------------------------------------------------------------------------
Current                                             $      442   $      112 
Deferred  - Origination and reversal of temporary                           
           difference                                   24,401          117 
          - Change in tax law and rate                  (1,164)      (2,683)
----------------------------------------------------------------------------
Income tax expense (recovery)                       $   23,679   $   (2,454)
----------------------------------------------------------------------------

The calculation of current tax is based on a combined federal and provincial statutory income tax rate of 27.7% (2010 - 29.4%). The tax rate for the current year is 1.7% lower than 2010 due to the effect of the reduced statutory tax rates. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax assets and liabilities have been measured using an expected average combined statutory income tax rate of 25.9% based on the tax rates in years when the temporary differences are expected to reverse.


The reconciliation of effective income tax is as follows:                   

For the year ended December 31                            2011         2010 
----------------------------------------------------------------------------
Combined statutory income tax rate                        27.7%        29.4%
Expected income tax expense at statutory rates      $   24,233   $   15,857 
Income of the Fund taxed directly to unitholders             -      (15,961)
Non-deductible expenses                                    621          315 
Deferred tax related to changes in tax law and                              
 rates                                                  (1,164)      (2,683)
Other                                                      (11)          18 
----------------------------------------------------------------------------
Income tax expense (recovery)                       $   23,679   $   (2,454)
----------------------------------------------------------------------------

Recognized deferred tax assets and liabilities

Recognized deferred tax assets and liabilities and the movement in temporary differences during the year are as follows:


                                                   Recognized               
                         December   Recognized       in other      December 
                              31,    in profit  comprehensive           31, 
                             2010      or loss         income          2011 
----------------------------------------------------------------------------
Accrued liabilities  $      4,792          457                 $      5,249 
Provisions                  2,400          104                        2,504 
Employee benefits           1,065         (198)           885         1,752 
Property, plant and                                                         
 equipment                 (1,418)        (355)                      (1,773)
Finance leases               (147)         (48)                        (195)
Intangible assets          (2,052)        (303)                      (2,355)
Deferred financing                                                          
 costs                        (38)           9                          (29)
Partnership income                                                          
 not currently                                                              
 taxable                               (23,236)                     (23,236)
Tax loss                                                                    
 carryforwards                             333                          333 
Derivative                                                                  
 instruments                  675                        (619)           56 
----------------------------------------------------------------------------
Net deferred tax                                                            
 assets                                                                     
 (liabilities)       $      5,277      (23,237)           266  $    (17,694)
----------------------------------------------------------------------------

                                                     Recognized             
                             January  Recognized       in other    December 
                                  1,   in profit  comprehensive         31, 
                                2010     or loss         income        2010 
----------------------------------------------------------------------------
Accrued liabilities       $    1,538       3,254                $     4,792 
Provisions                     2,178         222                      2,400 
Employee benefits                883         (35)          217        1,065 
Property, plant and                                                         
 equipment                    (1,308)       (110)                    (1,418)
Finance leases                    38        (185)                      (147)
Intangible assets             (1,910)       (142)                    (2,052)
Deferred financing costs         (46)          8                        (38)
Partnership income not                                                      
 currently taxable                                                          
Tax loss carryforwards           446        (446)                           
Derivative instruments           410                        265         675 
----------------------------------------------------------------------------
Net deferred tax assets   $    2,229       2,566            482 $     5,277 
----------------------------------------------------------------------------

11. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:


                                Three months ended       Twelve months ended
                                       December 31               December 31
                                 2011         2010         2011         2010
Numerator for basic and                                                     
 diluted earnings per                                                       
 unit:                                                                      
 - net earnings           $    16,561  $    15,787  $    63,803  $    56,390
----------------------------------------------------------------------------
Denominator for basic                                                       
 earnings per unit:                                                         
- weighted average units   16,629,444   16,629,444   16,629,444   16,613,676
----------------------------------------------------------------------------
Denominator for diluted                                                     
 earnings per unit:                                                         
 - weighted average units  16,629,444   16,629,444   16,629,444   16,613,676
 - effect of dilutive unit                                                  
  rights                      307,790      256,635      294,555      260,924
----------------------------------------------------------------------------
Denominator for diluted                                                     
 earnings per unit         16,937,234   16,886,079   16,923,999   16,874,600
----------------------------------------------------------------------------
Basic earnings per unit   $      1.00  $      0.95  $      3.84  $      3.39
----------------------------------------------------------------------------
Diluted earnings per unit $      0.98  $      0.93  $      3.77  $      3.34
----------------------------------------------------------------------------

No share rights were excluded from the above calculations as none were anti-dilutive.

12. ACQUISITION OF BUSINESS

On May 2, 2011, the Corporation's Power Systems segment acquired certain assets of Harper Power Products Inc. ("Harper") for consideration of $23,247. The acquisition price was funded through the Corporation's existing bank credit facility. The acquisition secures the Ontario distribution rights for certain product lines and complements the segment's existing product distribution rights in the rest of Canada, except for portions of British Columbia.

For the eight months since the acquisition, Harper contributed revenue of $49,311 and net earnings of $2,978 to the year to date results. Had the acquisition occurred on January 1, 2011 the Corporation estimates that it would have reported revenue of $1,401,755 and net earnings of $65,013 on its consolidated statement of earnings for the year ended December 31, 2011. In determining these amounts, management has assumed that the level of business activity experienced by Harper after May 2, 2011 is representative of the level of business activity that it would have experienced prior to the acquisition.

Recognized amounts of identifiable assets acquired and liabilities assumed are as follows:


Trade and other receivables           $    11,662 
Inventories                                 7,032 
Prepaid expenses                              218 
Property, plant and equipment               1,878 
Trade and other payables                   (6,794)
--------------------------------------------------
Tangible net assets acquired               13,996 
Intangible assets (note 6)                  9,251 
--------------------------------------------------
Total                                 $    23,247 
--------------------------------------------------

An amount of $21,603 was paid on closing based upon a preliminary estimate of tangible net assets acquired. In the third quarter an additional amount of $1,644 was paid to the vendors based on an updated determination of the value of the tangible net assets acquired.

The goodwill is mainly attributable to the skills and technical talent of Harper's workforce and its existing branch network, synergies expected to be achieved from integrating the business into the existing Power Systems segment and the value expected to be generated from initiatives, such as growing the power generation business in Ontario. Amounts attributed to intangible assets will be 75% deductible for income tax purposes.

The Corporation incurred acquisition-related costs of $385 relating to external legal fees and due diligence costs. These costs have been included in selling and administrative expenses on the consolidated statement of earnings.

13. OPERATING SEGMENTS

The Corporation operates through a network of 117 branches in Canada in three core businesses which reflect the internal organization and management structure according to the nature of the products and services provided. The Corporation's three core businesses are: i) the distribution, modification and servicing of equipment; ii) the distribution, servicing and assembly of industrial components; and iii) the distribution and servicing of power systems.



----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                         Segment            
                                                    Eliminations            
For the three                                                and            
 months ended                  Industrial    Power   Unallocated            
 December 31, 2011  Equipment  Components  Systems       Amounts      Total 
----------------------------------------------------------------------------
Equipment          $  117,581 $           $ 42,341 $              $ 159,922 
Parts                  44,004      85,185   35,273                  164,462 
Service                22,854       5,007   16,329                   44,190 
Rental and other        7,849                1,546          (787)     8,608 
----------------------------------------------------------------------------
Revenue            $  192,288 $    90,192 $ 95,489 $        (787) $ 377,182 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment earnings                                                            
 before finance                                                             
 costs and income                                                           
 taxes             $   14,337 $     5,902 $  7,885 $              $  28,124 
Corporate costs and                                                         
 eliminations                                             (4,490)    (4,490)
----------------------------------------------------------------------------
Earnings before                                                             
 finance costs and                                                          
 income taxes          14,337       5,902    7,885        (4,490)    23,634 
Finance costs                                              1,153      1,153 
Income tax expense                                         5,920      5,920 
----------------------------------------------------------------------------
Net earnings       $   14,337 $     5,902 $  7,885 $     (11,563) $  16,561 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                       Segment              
For the twelve                                    Eliminations              
 months ended                                              and              
December 31,               Industrial      Power   Unallocated              
 2011           Equipment  Components    Systems       Amounts        Total 
----------------------------------------------------------------------------
Equipment      $  397,613 $            $ 155,876 $              $   553,489 
Parts             173,188     328,993    125,509                    627,690 
Service            84,697      18,545     61,134                    164,376 
Rental and                                                                  
 other             30,342                  4,906        (3,703)      31,545 
----------------------------------------------------------------------------
Revenue        $  685,840 $   347,538  $ 347,425 $      (3,703) $ 1,377,100 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment                                                                     
 earnings                                                                   
 before finance                                                             
 costs and                                                                  
 income taxes  $   50,193 $    23,106  $  32,915 $              $   106,214 
Corporate costs                                                             
 and                                                                        
 eliminations                                          (14,102)     (14,102)
----------------------------------------------------------------------------
Earnings before                                                             
 finance costs                                                              
 and income                                                                 
 taxes             50,193      23,106     32,915       (14,102)      92,112 
Finance costs                                            4,630        4,630 
Income tax                                                                  
 expense                                                23,679       23,679 
----------------------------------------------------------------------------
Net earnings   $   50,193 $    23,106  $  32,915 $     (42,411) $    63,803 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment assets                                                              
 excluding                                                                  
 intangible                                                                 
 assets        $  238,161 $   114,714  $ 146,695 $              $   499,570 
Intangible                                                                  
 assets            22,083      47,643     14,760             7       84,493 
Cash                                                     5,659        5,659 
Corporate and                                                               
 other assets                                              204          204 
----------------------------------------------------------------------------
Total assets   $  260,244 $   162,357  $ 161,455 $       5,870  $   589,926 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                         Segment            
                                                    Eliminations            
For the three                                                and            
 months ended                  Industrial    Power   Unallocated            
 December 31, 2010  Equipment  Components  Systems       Amounts      Total 
----------------------------------------------------------------------------
Equipment          $   94,306 $           $ 43,752 $              $ 138,058 
Parts                  39,468      72,880   21,810                  134,158 
Service                18,597       4,900   13,871                   37,368 
Rental and other        7,349                  717        (1,294)     6,772 
----------------------------------------------------------------------------
Revenue            $  159,720 $    77,780 $ 80,150 $      (1,294) $ 316,356 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment earnings                                                            
 before finance                                                             
 costs and income                                                           
 taxes             $   10,834       2,622    6,477 $              $  19,933 
Corporate costs and                                                         
 eliminations                                             (4,044)    (4,044)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings before                                                             
 finance costs and                                                          
 income taxes          10,834       2,622    6,477        (4,044)    15,889 
Finance costs                                              1,014      1,014 
Income tax recovery                                         (912)      (912)
----------------------------------------------------------------------------
Net earnings       $   10,834 $     2,622 $  6,477 $      (4,146) $  15,787 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                       Segment              
For the twelve                                    Eliminations              
 months ended                                              and              
December 31,               Industrial      Power   Unallocated              
 2010           Equipment  Components    Systems       Amounts        Total 
----------------------------------------------------------------------------
Equipment      $  301,605 $            $ 114,230 $              $   415,835 
Parts             153,708     285,270     88,237                    527,215 
Service            69,744      16,928     52,479                    139,151 
Rental and                                                                  
 other             30,754                  2,347        (4,414)      28,687 
----------------------------------------------------------------------------
Revenue        $  555,811 $   302,198  $ 257,293 $      (4,414) $ 1,110,888 
----------------------------------------------------------------------------
Segment                                                                     
 earnings                                                                   
 before                                                                     
 finance costs                                                              
 and income                                                                 
 taxes         $   39,006 $    11,998  $  19,176 $              $    70,180 
Corporate                                                                   
 costs and                                                                  
 eliminations                                          (11,967)     (11,967)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings                                                                    
 before                                                                     
 finance costs                                                              
 and income                                                                 
 taxes             39,006 $    11,998  $  19,176       (11,967)      58,213 
Finance costs                                            4,277        4,277 
Income tax                                                                  
 recovery                                               (2,454)      (2,454)
----------------------------------------------------------------------------
Net earnings   $   39,006 $    11,998  $  19,176 $     (13,790) $    56,390 
----------------------------------------------------------------------------
----------------------------------------------------------------------------



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment assets                                                              
 excluding                                                                  
 intangible                                                                 
 assets        $  208,266 $   101,548  $  88,770 $              $   398,584 
Intangible                                                                  
 assets            21,631      48,414      5,733            16       75,794 
Cash                                                    42,954       42,954 
Corporate and                                                               
 other assets                                            5,216        5,216 
----------------------------------------------------------------------------
Total assets   $  229,897 $   149,962  $  94,503 $      48,186  $   522,548 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Segment assets do not include assets associated with the corporate office, financing or income taxes. Additions to corporate assets, and depreciation of these assets, are included in segment eliminations and unallocated amounts.

14. EXPLANATION OF TRANSITION TO IFRS

This is the first year that the Corporation has presented its condensed consolidated financial statements in accordance with IFRS. In the year ended December 31, 2010, the Corporation reported under previous Canadian GAAP.

The accounting policies set out in Note 3 of the condensed consolidated financial statements of the Corporation for the three months ended March 31, 2011 have been applied in preparing the condensed consolidated financial statements for the three and twelve months ended December 31, 2011.

In preparing its opening IFRS statement of financial position, the Corporation has adjusted amounts reported previously in financial statements prepared in accordance with previous Canadian GAAP. An explanation of how the transition from previous Canadian GAAP to IFRS has affected the Corporation's reported financial position, financial performance and cash flows is set out in the tables below and the notes that accompany the tables.

IFRS 1 First-time Adoption of International Financial Reporting Standards sets forth guidance for the initial adoption of IFRS. Under IFRS 1, the standards are applied retrospectively at the transitional statement of financial position date and, in general, all adjustments to assets and liabilities are taken to retained earnings, unless certain exemptions are elected and certain mandatory exceptions are applied. In preparing its opening IFRS statement of financial position, the Corporation has elected the following exemptions:

Business combinations before January 1, 2010 (IFRS 3 "Business Combinations")

The Corporation has elected not to apply IFRS 3 retrospectively to business combinations that took place before January 1, 2010. In addition, and as a condition under IFRS 1 for applying this exemption, goodwill relating to business combinations that occurred prior to January 1, 2010 was tested for impairment even though no impairment indicators were identified. No impairment existed at the date of transition.

Employee Benefits - actuarial gains and losses (IAS 19 "Employee Benefits")

Under IFRS, the Corporation's accounting policy is to recognize all actuarial gains and losses immediately in other comprehensive income. At the date of transition, the Corporation has elected to recognize all cumulative actuarial gains and losses in retained earnings.

Employee Benefits - pension costs (IAS 19 "Employee Benefits")

The Corporation has elected to disclose the present value of the defined benefit obligation, fair value of the plan assets, surplus or deficit in the plan, and the experience adjustments arising on the plan assets or liabilities, for each accounting period prospectively from the date of transition to IFRS.


Reconciliation of Consolidated Statement of Earnings                        

For the three                                             Share-            
 months ended             Employee                         based            
December 31,    Canadian  Benefits   Leases  Inventory   payment            
 2010               GAAP    IAS 19   IAS 17      IAS 2    IFRS 2       IFRS 
----------------------------------------------------------------------------
(In thousands                                                               
 of Canadian                                                                
 dollars)                                                                   
----------------------------------------------------------------------------

Revenue        $ 316,356                                          $ 316,356 
Cost of sales    251,698                           376              252,074 
----------------------------------------------------------------------------
Gross profit      64,658                          (376)              64,282 
----------------------------------------------------------------------------
Selling and                                                                 
 administrative                                                             
 expenses         49,564       (35)    (399)                (737)    48,393 
----------------------------------------------------------------------------
Earnings before                                                             
 finance costs                                                              
 and income                                                                 
 taxes            15,094        35      399       (376)      737     15,889 
Finance costs        951                 63                           1,014 
----------------------------------------------------------------------------
Earnings before                                                             
 income taxes     14,143        35      336       (376)      737     14,875 
Income tax                                                                  
 expense                                                                    
 (recovery)         (905)        8       89       (104)                (912)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings   $  15,048        27      247       (272)      737  $  15,787 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Reconciliation of Consolidated Statement of Comprehensive Income            

For the three                                              Share-           
 months ended               Employee                        based           
December 31,     Canadian   Benefits   Leases Inventory   payment           
 2010                GAAP     IAS 19   IAS 17     IAS 2    IFRS 2      IFRS 
----------------------------------------------------------------------------
(In thousands                                                               
 of Canadian                                                                
 dollars)                                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net earnings    $  15,048         27      247      (272)      737 $  15,787 
----------------------------------------------------------------------------

Actuarial                                                                   
 losses on                                                                  
 pension plans,                                                             
 net of tax             -       (628)                                  (628)

Losses on                                                                   
 derivative                                                                 
 instruments                                                                
 designated as                                                              
 cash flow                                                                  
 hedges in                                                                  
 prior periods                                                              
 reclassified                                                               
 to cost of                                                                 
 inventory or                                                               
 finance costs                                                              
 during the                                                                 
 period, net of                                                             
 tax                  661                                               661 

Gains on                                                                    
 derivative                                                                 
 instruments                                                                
 designated as                                                              
 cash flow                                                                  
 hedges during                                                              
 the period,                                                                
 net of tax          (365)                                             (365)

----------------------------------------------------------------------------
Other                                                                       
 comprehensive                                                              
 income, net of                                                             
 tax                  296       (628)       -         -                (332)
----------------------------------------------------------------------------

Total                                                                       
 comprehensive                                                              
 income         $  15,344       (601)     247      (272)      737 $  15,455 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Reconciliation of Consolidated Statement of Earnings                        

For the                                                                     
 twelve                                                 Share-              
 months ended              Employee                      based              
December 31,     Canadian  Benefits  Leases Inventory  payment              
 2010                GAAP    IAS 19  IAS 17     IAS 2   IFRS 2         IFRS 
----------------------------------------------------------------------------
(In thousands                                                               
 of Canadian                                                                
 dollars)                                                                   
----------------------------------------------------------------------------

Revenue       $ 1,110,888                                       $ 1,110,888 
Cost of sales     873,061                         (29)              873,032 
----------------------------------------------------------------------------
Gross profit      237,827                          29               237,856 
----------------------------------------------------------------------------
Selling and                                                                 
 adminis-                                                                   
 trative                                                                    
 expenses         181,397      (140)   (877)              (737)     179,643 
----------------------------------------------------------------------------
Earnings                                                                    
 before                                                                     
 finance                                                                    
 costs and                                                                  
 income taxes      56,430       140     877        29      737       58,213 
Finance costs       4,094               183                           4,277 
----------------------------------------------------------------------------
Earnings                                                                    
 before                                                                     
 income taxes      52,336       140     694        29      737       53,936 
Income tax                                                                  
 expense                                                                    
 (recovery)        (2,683)       35     185         9                (2,454)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings  $    55,019       105     509        20      737  $    56,390 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Reconciliation of Consolidated Statement of Comprehensive Income            

For the twelve                                              Share-          
 months ended                 Employee                       based          
December 31,       Canadian   Benefits   Leases Inventory  payment          
 2010                  GAAP     IAS 19   IAS 17     IAS 2   IFRS 2     IFRS 
----------------------------------------------------------------------------
(In thousands of                                                            
 Canadian                                                                   
 dollars)                                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net earnings     $   55,019        105      509        20      737 $ 56,390 
----------------------------------------------------------------------------

Actuarial losses                                                            
 on pension                                                                 
 plans, net of                                                              
 tax                      -       (628)                                (628)

Losses on                                                                   
 derivative                                                                 
 instruments                                                                
 designated as                                                              
 cash flow                                                                  
 hedges in prior                                                            
 periods                                                                    
 reclassified to                                                            
 cost of                                                                    
 inventory or                                                               
 finance costs                                                              
 during the                                                                 
 period, net of                                                             
 tax                    938                                             938 

Gains on                                                                    
 derivative                                                                 
 instruments                                                                
 designated as                                                              
 cash flow                                                                  
 hedges during                                                              
 the period, net                                                            
 of tax                (482)                                           (482)

----------------------------------------------------------------------------
Other                                                                       
 comprehensive                                                              
 income, net of                                                             
 tax                    456       (628)       -         -              (172)
----------------------------------------------------------------------------

Total                                                                       
 comprehensive                                                              
 income          $   55,475       (523)     509        20      737 $ 56,218 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Reconciliation of Consolidated Statement of Financial Position              

                                            Employee                        
                                Canadian    Benefits  Leases IAS   Inventory
As at December 31, 2010             GAAP      IAS 19          17       IAS 2
----------------------------------------------------------------------------
(In thousands of Canadian                                                   
 dollars)                                                                   
----------------------------------------------------------------------------
ASSETS                                                                      
CURRENT                                                                     
Cash                         $    42,954                                    
Trade and other receivables      135,517                                    
Inventories                      194,752                               1,708
Prepaid expenses                   7,244                                    
Deferred taxes                     6,466                                    
----------------------------------------------------------------------------
                                 386,933                               1,708
----------------------------------------------------------------------------

NON-CURRENT                                                                 
Rental equipment                  15,794                                    
Property, plant and                                                         
 equipment                        36,626                   9,464            
Intangible assets                 72,972                                    
Deferred taxes                         -       1,065        (146)           
Employee benefits                  3,013      (2,773)                       
----------------------------------------------------------------------------
                                 128,405      (1,708)      9,318            
----------------------------------------------------------------------------
                             $   515,338      (1,708)      9,318       1,708
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND                                                             
 SHAREHOLDERS' EQUITY                                                       
CURRENT                                                                     
Trade and other payables     $   134,540         292                        
Accrued liabilities               64,229                                    
Provisions                         4,892                                    
Distributions payable             12,472                                    
Income taxes payable               1,599                                 473
Obligations under finance                                                   
 leases                                -                   3,677            
Derivative instruments             2,452                                    
Bank debt                         79,680                                    
----------------------------------------------------------------------------
                                 299,864         292       3,677         473
----------------------------------------------------------------------------

NON-CURRENT                                                                 
Provisions                         4,338                                    
Deferred taxes                     2,108                                    
Employee benefits                  3,118       1,014                        
Other liabilities                  5,221                                    
Obligations under finance                                                   
 leases                                -                   5,227            
----------------------------------------------------------------------------
                                  14,785       1,014       5,227            
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY                                                        
Trust units                      105,892                                    
Contributed surplus                6,426                                    
Retained earnings                 90,148      (3,014)        414       1,235
Accumulated other                                                           
 comprehensive loss               (1,777)                                   
----------------------------------------------------------------------------
Total shareholders' equity       200,689      (3,014)        414       1,235
----------------------------------------------------------------------------
                             $   515,338      (1,708)      9,318       1,708
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Reconciliation of Consolidated Statement of Financial Position              

                                Share-                                      
                                 based                                      
                               payment  Income Tax                          
As at December 31, 2010         IFRS 2      IAS 12     Reclass         IFRS 
----------------------------------------------------------------------------
(In thousands of Canadian                                                   
 dollars)                                                                   
----------------------------------------------------------------------------
ASSETS                                                                      
CURRENT                                                                     
Cash                                                            $    42,954 
Trade and other receivables                                         135,517 
Inventories                                                         196,460 
Prepaid expenses                                                      7,244 
Deferred taxes                              (6,466)                       - 
----------------------------------------------------------------------------
                                            (6,466)                 382,175 
----------------------------------------------------------------------------

NON-CURRENT                                                                 
Rental equipment                                                     15,794 
Property, plant and                                                         
 equipment                                              (2,822)      43,268 
Intangible assets                                        2,822       75,794 
Deferred taxes                               4,358                    5,277 
Employee benefits                                                       240 
----------------------------------------------------------------------------
                                             4,358                  140,373 
----------------------------------------------------------------------------
                                            (2,108)             $   522,548 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND                                                             
 SHAREHOLDERS' EQUITY                                                       
CURRENT                                                                     
Trade and other payables                                        $   134,832 
Accrued liabilities                 (6)                   (461)      63,762 
Provisions                                                 461        5,353 
Distributions payable                                                12,472 
Income taxes payable                                                  2,072 
Obligations under finance                                                   
 leases                                                               3,677 
Derivative instruments                                                2,452 
Bank debt                                                            79,680 
----------------------------------------------------------------------------
                                    (6)                             304,300 
----------------------------------------------------------------------------

NON-CURRENT                                                                 
Provisions                                                            4,338 
Deferred taxes                              (2,108)                       - 
Employee benefits                                                     4,132 
Other liabilities                                                     5,221 
Obligations under finance                                                   
 leases                                                               5,227 
----------------------------------------------------------------------------
                                            (2,108)                  18,918 
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY                                                        
Trust units                       (521)                             105,371 
Contributed surplus             (2,495)                               3,931 
Retained earnings                3,022                               91,805 
Accumulated other                                                           
 comprehensive loss                                                  (1,777)
----------------------------------------------------------------------------
Total shareholders' equity           6                              199,330 
----------------------------------------------------------------------------
                                            (2,108)             $   522,548 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Material adjustments to the statement of cash flows for 2010

Consistent with the Corporation's accounting policy choice under IAS 7 Statement of Cash Flows, interest paid and income taxes paid have moved into the body of the Statement of Cash Flows, whereas they were previously disclosed as supplementary information. Rental equipment additions are classified as operating activities whereas they were previously classified as investing activities. There are no other material differences between the statement of cash flows presented under IFRS and the statement of cash flows presented under previous Canadian GAAP.

Notes to the reconciliations

(a) Employee Benefits (IAS 19)

Under Canadian GAAP, the Corporation accounted for post-employment benefits under CICA Handbook Section 3461, Employee Future Benefits, whereby defined benefit pension plan net actuarial gains or losses over 10% of the greater of the benefit obligation and the fair value of the plan assets were amortized to income over the average remaining service life of active employees. Under IAS 19, Employee Benefits, the Corporation has adopted the policy of recognizing actuarial gains and losses in full in other comprehensive income in the period in which they occur.

(b) Leases (IAS 17)

Under Canadian GAAP, the Corporation assessed vehicle leases under CICA Handbook Section 3065, Leases, as operating leases. Under IAS 17, Leases, the Corporation has assessed the vehicle leases as financing leases. Under finance leases the asset is recorded at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease. The liability is included in the statement of financial position and classified between current and non-current amounts. The interest component of the lease payments is charged to earnings over the period of the lease so as to achieve a constant rate of interest on the remaining balance of the liability.

(c) Inventory (IAS 2)

Under Canadian GAAP, the Corporation did not allocate overhead to work in process inventory relating to customer repair orders. Under IFRS the Corporation allocates overhead to work in process inventory relating to customer repair orders resulting in an adjustment to inventory and opening retained earnings.

(d) Income Taxes (IAS 12)

The effect of applying IAS 12, Income Taxes, is that all deferred tax balances are now classified as non-current. No other changes arise from this section. Applicable income tax rates have been applied to all IFRS adjustments.

(e) Share-based Payment (IFRS 2)

Under Canadian GAAP, the Corporation expensed dividend equivalents granted on share rights plans. Under IFRS the grant date fair value reflects all dividend rights therefore no additional compensation cost is recorded.

(f) Comparative Information

Certain comparative amounts have been reclassified to conform with the current period presentation.

In particular, cash discounts provided to customers in an amount of $261 for the quarter and $978 year to date have been reclassified out of selling and administrative expenses into revenue. In addition, cash discounts received from vendors in an amount of $352 for the quarter and $1,265 year to date have been reclassified out of selling and administrative expenses into cost of sales. Software with a net book value of $2,822 at December 31, 2010 has been reclassified out of property, plant and equipment and into intangible assets.

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