CANAM GROUP INC.
ANNUAL INFORMATION FORM
Fiscal year ended December 31, 2016
March 17, 2017
canamgroupinc.com
TABLE OF CONTENTS
Page
ITEM 1
EXPLANATORY NOTES ............................................................................................. 1
ITEM 2
INCORPORATION
2.1
The Corporation .................................................................................................. 1
2.2
Subsidiaries ......................................................................................................... 2
ITEM 3
GENERAL BUSINESS DEVELOPMENT
3.1
General Profile .................................................................................................... 2
3.2
Company History Over the Last Three Fiscal Years .......................................... 3
3.3
Strategy ............................................................................................................... 5
ITEM 4
DESCRIPTION OF OPERATIONS
4.1
General Profile of Operations ............................................................................. 6
4.1.1 Buildings ................................................................................................. 9
4.1.2 Structural Steel ...................................................................................... 11
4.1.3 Bridges .................................................................................................. 12
4.2
Other Operational Activities ............................................................................. 14
4.3
Corporate Investments ...................................................................................... 15
4.4
Environmental Policies and Considerations ..................................................... 15
4.5
Human Resources ............................................................................................. 16
4.6
Risk Factors ...................................................................................................... 17
ITEM 5
CAPITAL STRUCTURE
5.1
General Description of the Capital Structure ................................................... 17
ITEM 6
DIVIDENDS AND DISTRIBUTIONS ....................................................................... 18
ITEM 7
MARKET FOR SECURITIES ..................................................................................... 18
ITEM 8
DIRECTORS AND OFFICERS
8.1
Directors ........................................................................................................... 19
8.2
Executive Officers ............................................................................................ 20
8.3
Security Holdings ............................................................................................. 21
8.4
Cease-Trading Order, Bankruptcies, Penalties or Sanctions ............................ 21
8.5
Ordinary Course of Business Transactions with Management and Others ...... 22
ITEM 9
LEGAL PROCEEDINGS ............................................................................................ 22
ITEM 10
TRANSFER AGENT AND REGISTRAR .................................................................. 22
ITEM 11
INFORMATION ON THE AUDIT COMMITTEE .................................................... 22
ITEM 12
ADDITIONAL INFORMATION ................................................................................ 25
SCHEDULE “A” – AUDIT COMMITTEE CHARTER ................................................................ 27
ITEM 1 - EXPLANATORY NOTES
The information in this annual information form (the Annual Information Form) is stated as at
December 31, 2016 unless otherwise indicated.
Unless the context or wording indicates otherwise, (i) Canam Group Inc. and its subsidiaries are
hereinafter collectively designated as the “Corporation”, and (ii) all dollar amounts referred to in
this document are in Canadian dollars.
Forward-Looking Statements
This Annual Information Form may contain forward-looking statements, which include, but are
not limited to, statements with respect to the Corporation’s growth strategy, costs, financial
position and financial results, economic and business outlook, prospects and trends of the
Corporation’s industry segment; expected growth in demand for products and services; expected
or scheduled orders, deliveries and project execution in general; objectives; projects; targets;
priorities; business strategy; and the expected impact of legislative and regulatory environment
and legal proceedings. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as “may”, “will”, “expect”, “intend”, “anticipate”, “plan”,
“foresee”, “believe”, “continue” or “maintain”, the negative of these terms, variations of them or
similar terminology. By their nature, forward-looking statements require the Corporation to make
assumptions and are subject to important known and unknown risks and uncertainties, which may
cause actual results in future periods to differ materially from forecasted results. While the
Corporation considers its assumptions to be reasonable and appropriate based on information
currently available, there is a risk that they may not be accurate. Readers should not place undue
reliance on forward-looking statements. Factors that could cause actual results to differ materially
from those anticipated in the forward-looking statements include in particular the risks and
uncertainties described in the Management’s Discussion and Analysis of the Corporation for the
most recently completed fiscal year, and in particular the section “Risks and Uncertainties”,
available at www.sedar.com. The forward-looking statements contained herein are made as of the
date hereof and are subject to change thereafter, and the Corporation has no intention and
undertakes no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required by applicable securities
regulations.
ITEM 2 - INCORPORATION
2.1
The Corporation
The Corporation is constituted by virtue of and in accordance with the provisions of the Business
Corporations Act (Quebec). The Corporation’s head office is located at 11535, 1re Avenue,
bureau 500, Saint-Georges, Quebec, G5Y 7H5.
Prior to January 1, 2005, the Corporation was known as The Canam Manac Group Inc.
-22.2
Subsidiaries
The following flowchart describes the Corporation as well as its principal subsidiaries Canam
Steel Corporation and FabSouth LLC, the only subsidiaries whose assets represent 10% or more
of the Corporation’s consolidated assets as at December 31, 2016 or whose operating revenues
account for more than 10% of the Corporation’s consolidated operating revenue. The flowchart
shows the jurisdictions of incorporation of Canam Steel Corporation and FabSouth LLC as well
as the percentages of voting rights held as at December 31, 2016.
CANAM GROUP INC.
100%
Canam Steel
Corporation
(Delaware)
100%
FabSouth LLC
(Florida)
ITEM 3 - GENERAL BUSINESS DEVELOPMENT
3.1
General Profile
Overview
The Corporation is involved in the design, manufacture and sale of construction products and
services for the commercial, industrial, institutional, multi-residential and infrastructure
construction industries. The Corporation operates 23 plants, including seven in Canada and 16 in
the United States, and employed 4,644 people as at December 31, 2016. Its revenues come from a
wide range of customers located primarily in North America. For the purposes of this Annual
Information Form, North America means Canada and the United States.
Brief Description of Operations
The Corporation carries out its business directly or through its subsidiaries. The Corporation’s
sector of activity is divided into three groups of products and services that are allotted to three
business units: (i) buildings, i.e. steel joists and steel deck under Canam-Buildings; (ii) structural
steel, under FabSouth; and (iii) bridges, under Canam-Bridges. Canam Group Inc. and its Canam
Steel Corporation subsidiary also offer fabrication services for structural steel products under the
name Canam-Structures. The activities of the Corporation are carried out in Canada by Canam
Group Inc. (Canam Group), Central Steel Erectors LP, Structure Fusion Inc., St. Lawrence
Erectors Inc. and TecFab International Inc., and in the United States by Canam Steel Corporation
(Canam Steel), Central Erectors, LLC and its subsidiary, Stonebridge, Inc., and FabSouth LLC
and its subsidiaries (FabSouth).
-3Canam-Buildings is the largest manufacturer of steel joists in Canada and is an important steel
joist fabricator in the United States. The Corporation supplies the North American market with an
extensive range of construction products and services, including steel joists under the Canam
name and steel deck under the Canam name in Canada and both the United Steel Deck and
Canam names in the United States. The Corporation’s products and services are used extensively
by structural steel fabricators in industrial, institutional, commercial and multi-residential
construction. Canam-Buildings' product offerings include a prefabricated building envelope
system featuring shop-fabricated wall panels intended for the commercial, industrial and
institutional construction markets and sold under the Murox trademark, and concrete floor
systems used in residential building systems, primarily the multi-story residential market, and
sold under the Hambro trademark.
FabSouth fabricates and installs structural steel products, mainly for the commercial, industrial
and institutional construction markets throughout the United States. Canam Group and
Canam Steel also participate in structural steel projects under the name Canam-Structures in
order to meet the needs of Canam-Buildings and its expanded offer of products and services, as
well as the needs of FabSouth and external customers.
Canam-Bridges manufactures steel girders and other bridge components for the North American
market. Canam-Bridges also designs and manufactures structural bearings and expansion joints
marketed under the Goodco Z-Tech name for highway and airport infrastructures, buildings and
bridges.
3.2
Company History Over the Last Three Fiscal Years
The following events, acquisitions and sales are reported in the present Annual Information Form
although the Corporation's management is of the opinion that they are not significant as pertains
to Regulation 51-102 respecting Continuous Disclosure Obligations. The following conditions or
events have affected the general development of the business over the last three fiscal years and
provide an overview of the Corporation's evolution.
Dessin Cadmax Transaction – Detailing activities
On August 1, 2015, the Corporation purchased all issued and outstanding shares of
137644 Canada Inc., which conducted its activities under the name Dessin Cadmax. Located in
Boisbriand, Quebec, this corporation specialized in detailing steel structures. Over the years,
Dessin Cadmax acted as a subcontractor in numerous projects that the Corporation has taken part
in. The integration of the Dessin Cadmax team into the Canam Group family allows the
Corporation to fortify itself with a group of experienced detailers in addition to its drafting teams
that are already in place.
-4Montacier and Stonebridge Transactions – Installation of steel structures and other steel
component installation activities
In 2014, the Corporation decided to expand its range of services by putting internal teams in
place to offer installation services for structures and other steel products as part of its bridge and
structural steel activities. Hence, the Corporation constituted Central Steel Erectors LP (Central
Steel Erectors), a limited partnership that carries out installation activities in Canada. This step
was followed by the purchase, on August 15, 2015, by St. Lawrence Erectors Inc. (St. Lawrence
Erectors), a wholly-owned subsidiary of the Corporation, of the assets of Montacier International
Inc., a corporation located in Boisbriand, Quebec, that specializes in installing steel structures and
other steel components. The offices of Central Steel Erectors and St. Lawrence Erectors are
respectively located in Cochrane, Alberta, and Laval, Quebec.
On June 1, 2016, Central Erectors, LLC (Central Erectors), a wholly-owned subsidiary of the
Corporation, acquired 51% of the issued and outstanding shares of Stonebridge, Inc.
(Stonebridge), a steel products installation corporation located in South Plainfield, New Jersey,
and a leader in the New York City market. Central Erectors committed to acquire the remaining
49% of Stonebridge shares over a five-year period beginning in 2017. Stonebridge has
specialized in the installation of steel products for commercial, institutional and industrial
projects since 1995, mainly in the New York metropolitan area and the New Jersey market. The
Stonebridge acquisition adds to the activities of Central Erectors, which carries out steel
installation activities on the Corporation’s supply projects in other U.S. markets, and FabSouth’s
in-house teams.
The Corporation continues to employ the services of external companies for the installation of
steel products on its projects.
TecFab Transaction – Fabrication activities
On May 1, 2016, the Corporation acquired 70% of the issued and outstanding shares of TecFab
International Inc. (TecFab), a corporation that operates a steel structure fabrication plant in
Shawinigan, Quebec. While TecFab remains an independent corporation that continues to pursue
its own activities, it regularly executes subcontracts for the Corporation, particularly for CanamBridges. TecFab has an annual production capacity of 7,500 tons.
Revision of the business model for heavy structural steel activities
In early 2017, the Corporation decided to revise its approach for the heavy structural steel market.
It will no longer act in the capacity of a structural contractor for complex or large-scale projects,
such as sports complexes, high-rises and industrial complexes, which require it to oversee the
structural steel fabrication of the entire structure and mobilize its plants and fabrication
subcontractors. However, the Corporation will continue to participate in structural steel projects
as a fabricator, while considering delivery modes that involve the least amount of risk. The
Corporation also intends to meet the needs of Canam-Buildings for its expanded products and
services lineup, as well as those of FabSouth.
-53.3
Strategy
The Corporation’s strategy is to:
(i)
maintain and consolidate its position in the markets it dominates by pursuing a dynamic
policy of customer satisfaction, continuous product development and efficient
manufacturing operations;
(ii)
capitalize on its design, fabrication and marketing expertise in the North American
construction market in order to grow and profitably develop the products and services
known under the trademarks Canam, Goodco Z-Tech, Hambro, Murox, and United Steel
Deck; and
(iii)
innovate by introducing new value-added products and services.
In buildings, Canam-Buildings wants to be recognized as a leader in the creation, design and
fabrication of construction products and solutions for the realization of commercial, industrial,
institutional and multi-residential buildings across North America through its construction
solutions as well as its flexibility, the quality of its products and its exceptional service. The main
products fabricated and sold by Canam-Buildings are steel joists and steel deck. Other steel
components are added to these products, such as the Murox building system and the Hambro
concrete floor system. The Corporation’s coverage of a broad territory, its rapid delivery and its
technical expertise have led to the execution of agreements on a national scale with businesses
operating in the retail sector. Moreover, the BuildMaster approach, which aims to achieve a
structured construction site from the design phase of a project and hence reduce construction
time, is a testimony to the Corporation’s innovative abilities.
Canam-Buildings takes part in projects of various sizes and levels of complexity. Whether it's for
a small-scale project or a large distribution center, a complex project or one with a tight deadline,
Canam-Buildings adapts to customer needs. The pursuit of a better customer experience is the
priority; the Corporation feels that this customer approach allows it to distinguish itself from its
main competitors. The Corporation’s significant steel joists and steel deck production capacity
and the proximity of its plants to large cities allow it to serve markets with a heavy concentration
of commercial and industrial activities.
In structural steel, FabSouth is a major fabricator in the United States primarily serving the
Northwestern, Southeastern and Mideastern regions of the country, in the commercial, industrial
and institutional construction markets. Canam Group and Canam Steel also supply structural steel
components for structural steel projects in North America under the name Canam-Structures.
In bridges, Canam-Bridges is the leading steel bridge fabricator in Canada and a major fabricator
in the United States. In addition to fabricating steel components, Canam-Bridges offers products
and services such as orthotropic steel deck for bridges in order to raise its profile among bridge
designers and contractors.
-6In each of its business units, the Corporation positions itself to be able to meet, with its own
teams, its contractual obligations pertaining to the installation of steel structures by acquiring and
developing skills in the area of installation services. Thus, when opportunities arise, the
Corporation seeks to self-manage the risks associated with installation work. The Corporation
also offers its installation services to third parties under the trade names Central Steel Erectors,
Central Erectors, St. Lawrence Erectors and Stonebridge, thereby expanding its commercial
activities.
ITEM 4 - DESCRIPTION OF OPERATIONS
4.1
General Profile of Operations
Products and Services
The Corporation designs, fabricates and markets a wide range of steel components and steel
construction products. These products include joists, roof trusses, beams, columns, steel deck,
purlins and girts (cold-formed sections), and miscellaneous steel products.
The Corporation also designs and fabricates structural steel products for bridges, major
construction projects and buildings.
The Corporation designs and fabricates specialized construction product systems that
complement its range of steel products. These specialized products are offered under different
trademarks: Murox building systems, Econox fold-away and portable buildings, Hambro concrete
floor systems, United Steel Deck steel deck products, and Goodco Z-Tech structural bearings and
expansion joints, for the bridge and highway infrastructure construction markets. Each of these
specialized products accounts for less than 10% of the Corporation’s total sales.
The Corporation’s products are distributed mainly through its sales and distribution network,
which serves Canada and the United States.
The Corporation offers installation services for steel structures and components, either through its
subsidiaries or subcontractors.
The Corporation also offers virtual design and construction services, building information
modeling (BIM) services, as well as structural steel detailing services.
The Corporation offers design services for wood structures, allowing it to offer its customers
wood solutions or solutions integrating wood and steel. The Corporation also distributes
specialized construction products for wood structures.
The construction products and services market is subject to the same cycles as non-residential
construction. However, Hambro products, which are used in multi-residential construction, are
subject to residential construction cycles.
-7Plants
The Corporation operates 23 plants in North America, which it owns.
The following table lists, for each plant, its location, the products it fabricates and its production
capacities, where applicable. Plant capacity is based on an estimate of the average number of
hours required by type of product for the fabrication of a finished product weighing one imperial
ton based on two work shifts per day. However, the number of hours required to design and
fabricate a finished product varies according to the complexity of the product to be fabricated.
PLANT
LOCATION
PRODUCTS/PURPOSE
CAPACITY
(IMPERIAL
TONS)
Canada
(i) Canam Group
Boucherville, Quebec
Calgary, Alberta
Steel deck and purlins and girts
Joists, girders, steel deck and Hambro joists
70,000
50,000
Laval, Quebec
Structural bearings, expansion joints and related
products for bridges and buildings
Mississauga, Ontario
Joists, girders and steel deck
60,000
Québec City, Quebec
Bridges, structural steel, orthotropic steel deck and
welded beams
25,000
St. Gédéon de Beauce, Quebec
Joists, girders, Hambro joists, Murox panels and
structural steel components
n/a
115,000
(ii) TecFab
Shawinigan, Quebec
Bridges, structural steel and welded beams
7,500
United States
(iii) Canam Steel
Buckeye, Arizona
Joists and girders
30,000
Claremont, New Hampshire
Bridges, orthotropic steel deck and welded beams
25,000
Jacksonville, Florida
Joists, girders, steel deck, and Hambro joists
60,000
Peru, Illinois
Steel deck
50,000
Point of Rocks, Maryland
Joists, girders and bridges
60,000
South Plainfield, New Jersey
Steel deck
65,000
Washington, Missouri
Joists and girders
40,000
-8-
(iv) FabSouth
Daytona Beach, Florida
Structural steel
17,000
Fort Lauderdale, Florida
Structural steel and steel installation
20,000
Kinston, North Carolina
Structural steel
15,000
Orlando, Florida
Miscellaneous metals, including stairs and handrails
Scottdale, (Atlanta) Georgia
Structural steel
25,000
Sunnyside, Washington
(two plants)
Structural steel
25,000
Structural steel
15,000
Winston-Salem, North Carolina
(two plants)
Structural steel
35,000
Miscellaneous metals, including stairs and handrails
1,000
5,000
Raw Materials
Raw materials account for 25% to 55% of the Corporation’s cost of sales depending on the type
of finished product. Steel is the main raw material used and its price is based on supply and
demand in the international market. The significant tonnage of steel utilized by the Corporation
allows it to purchase raw material at competitive rates. The Corporation relies on several
suppliers for its steel requirements and is not dependent on one specific supplier.
When possible, the Corporation protects itself against steel price increases in the course of
fulfilling contracts for the projects it undertakes by including price adjustment clauses in its bids
or contracts. When the situation allows for it, the Corporation also negotiates with its suppliers in
order to purchase raw material at guaranteed prices for a limited duration.
Recent Performance
In 2016, activity in the Canadian non-residential construction sector was in decline compared to
2015, more particularly in Western Canada where the decrease in oil prices had a downward
impact on investments. This decline resulted in a decrease in the Corporation’s steel joist and
structural steel sales. The arrival of new products and services, however, stimulated sales. Bridge
activities increased in 2016, mainly because of fabrication work for the New Champlain Bridge
project. Fabrication for this project began in 2016 and will continue throughout 2017. Structural
steel activities in 2016 were limited to the completion of fabrication work for previously-signed
contracts.
Revenues at Canam-Buildings and FabSouth rose in the United States, where these business units
benefitted from favorable economic conditions despite strong competition. In 2016, the
Corporation continued fabrication work for many large-scale bridge and structural steel projects
previously awarded. As was the case in 2015, over 70% of the Corporation’s 2016 revenues were
generated in the United States.
As at December 31, 2016, the Corporation's order backlog totaled $1,139,000,000, compared to
$1,183,000,000 as at the same date in 2015.
-94.1.1
BUILDINGS
Steel joists and steel deck used in the construction of a building are the two main steel products
sold by Canam-Buildings.
Steel joists are key components that support the roof and floor structures of commercial and
industrial buildings. They are typically used in the construction of one and two-story buildings
such as stores, warehouses, shopping malls, schools and churches. Steel joists are manufactured
in a variety of shapes and sizes and are customized to meet building requirements. Large steel
joist fabricators like Canam-Buildings also supply steel deck, which is corrugated sheet metal
supported by joists and used to support a concrete slab or the insulating membrane of a roof
structure. The three primary types of steel deck are roof standard and acoustic deck, composite
deck, and non-composite (form) deck. Canam-Buildings also markets specialty deck products
such as cellular and long span profiles. Lastly, with its Reveal Series, Canam-Buildings markets
deck with esthetic features that offer architects and structural designers a wider range of options
for roof and floor deck with a composite effect.
The Corporation markets steel joists under the Canam name and steel deck under the Canam
name in Canada and both the United Steel Deck and Canam names in the United States.
Geographic Coverage
Canam-Buildings serves the North American market through a number of plants at locations that
provide good coverage of this market.
Customers
Steel joists and steel deck are mainly sold to structural steel fabricators. After securing a contract
for a project, the general contractor selects a structural steel fabricator who purchases the steel
joists and steel deck required for the project from the Corporation and other suppliers. In certain
markets, steel deck is also sold to installers.
Canam-Buildings has also developed the national accounts market in Canada. Hence, major real
estate developers as well as store and restaurant chain owners can choose to buy directly from
Canam-Buildings rather than from the general contractor. This approach allows Canam-Buildings
to assume the role of steel product integrator (steel contractor) for an entire project, i.e. for the
structural steel, steel joists and steel deck.
Canam-Buildings enters into agreements for the entire steel structure of a building and, in
addition to supplying the steel joist and steel deck products, as it has always done, it entrusts the
fabrication of structural steel and the installation of steel components to subcontractors
(fabricator-partners), unless it chooses to perform the installation itself through its subsidiaries.
By maintaining close ties with its customers, the Corporation is able to promote the benefits of its
other construction products, including Hambro and Murox products. Sales contracts are firm,
fixed-price contracts and are usually awarded following competitive bids for a project. All
projects are custom-built.
- 10 Committed to garnering strong loyalty from its customers and increasing its participation in
projects, Canam-Buildings developed an approach intended to achieve a structured construction
site from the design phase of a project and hence reduce on-site construction time by 15% to 25%
according to testimonials. This fast-track approach is a significant advantage for building owners
and real estate developers. This approach, named BuildMaster, addresses productivity problems
on construction sites which can lead to cost overruns and missed construction deadlines. The
BuildMaster approach aims to simplify the work and the number of handling operations on the
jobsite while improving safety. This collaborative approach impacts the design, engineering,
fabrication and delivery of products to the construction site by improving coordination between
project participants.
For the fiscal year ended December 31, 2016, no single customer accounted for more than 5% of
Canam-Buildings’ sales in the steel joist and steel deck sector.
Competition
The Corporation is a leading steel joist fabricator in North America, with an estimated market
share of 18.3% in 2016. There were about 30 steel joist fabrication plants serving North America
in 2016, seven (7) of which were operated by the Corporation.
The Corporation’s main competitors in the United States are Nucor (Vulcraft), Steel Dynamics
(New Millennium), and EBSCO Industries (Valley Joist). Nucor and Steel Dynamics are
integrated businesses that operate steel mills. When the economy isn't operating at full capacity,
integrated companies may be tempted to lower their selling prices for steel joists and steel deck in
order to maintain their steel mill production levels. This partially explains Canam Steel’s decision
in previous years to focus on complex projects requiring more engineering and more work hours
per ton of fabricated steel joists.
In Canada, Canam Group and Vulcraft Canada are, to the Corporation’s knowledge, the only
companies that serve the country coast to coast. No Canadian fabricator owns a steel mill, with
the exception of Vulcraft Canada, whose parent corporation owns steel mills in the United States.
The Corporation is a leading steel deck fabricator in North America, with an estimated market
share of 17.5% in 2016. The Corporation’s main competitors in Canada are Nucor (Vulcraft),
Steel Dynamics (New Millennium) and Kingspan (Vicwest).
The Corporation believes that the differences between the Canadian and U.S. markets, including
the requirements associated with harsher weather conditions in Canada, the Canadian Building
Code, exchange rate variation risks and the metric system, have had the effect of limiting sales in
Canada of steel components fabricated in the United States.
Murox Products
Murox products complement the Corporation’s range of construction products in terms of the
building envelope and the building’s structural steel frame. Murox is a prefabricated wall panel
system intended for industrial, commercial and institutional applications. These wall panels,
which may be insulated, each measure up to three (3) meters wide and can reach almost 14
- 11 meters in height. They are shop-assembled. Prefabrication ensures faster installation and less time
spent on field management and supervision since fewer trades are needed at the installation stage.
In addition, ventilated thermal panels, which preheat incoming fresh air thus lowering building
heating costs, are available as an option. Econox fold-away portable buildings complete the
product offer.
Hambro Products
Hambro products are used in residential building systems, primarily in the multi-story residential
market. The Hambro concrete floor system is a combination of Hambro steel joists and a concrete
slab in compression. The system is composed of composite girders associated with a continuous
slab. The Hambro system holds multiple fire-resistant ratings listed by Underwriters
Laboratories, Inc. (UL) in the United States and by Underwriters Laboratories of Canada (ULC)
in Canada.
The Corporation can combine the Hambro concrete floor system with other steel components
used in the construction of a residential building structure, that is, Hambro steel joists, steel deck,
structural steel, transfer slabs, Hambro composite girders and beams.
4.1.2
STRUCTURAL STEEL
FabSouth fabricates and installs structural steel products that are mainly intended for the
commercial, industrial and institutional construction markets. Canam Group and its subsidiary
Canam Steel also participate in structural steel projects in the capacity of fabricator for third
parties under the name Canam-Structures or to support FabSouth.
Geographic Coverage
Structural steel products are fabricated at the plants located in St. Gédéon (Quebec), Daytona
Beach and Fort Lauderdale (Florida), Kinston and Winston Salem (North Carolina), Scottdale
(Georgia), and Sunnyside (Washington). The TecFab plant in Shawinigan (Quebec) also
fabricates structural steel products. The St. Gédéon plant has a greater lift capacity than the other
plants, which makes it possible to fabricate heavier and larger components at this facility. As in
the steel joist business, the cost of shipping structural steel products is high and therefore a
determining factor in the price of structural products and in the location of fabrication plants.
Because of the geographical locations of its structural steel product fabrication plants, which
extend from the north to the south of Eastern Canada and the Eastern United States, in addition to
a plant in the Northwestern United States, the Corporation is positioned to be a supplier of choice
on LEED® projects in which the transportation of components is one of the factors taken into
account.
The projects undertaken by the Corporation are generally located within a radius of up to 1,100
kilometers of the steel fabrication plant, even though the products can be shipped over a greater
distance at a lower cost by rail or sea.
- 12 Customers
Canam Group customers are mainly general contractors that retain the Corporation’s services as a
subcontractor. The Corporation, in turn, retains the services of steel installers, i.e. either
subcontractors or installation teams from one of the Corporation’s subsidiaries, if the contracts
stipulate that the Corporation is responsible for installing the steel on the construction sites. On
average, a third of the costs associated with a contract are paid by the structural steel fabricator to
the steel installer.
The Corporation has extensive experience in supplying structural steel components for largescale construction projects such as sports complexes, industrial complexes, airport facilities and
office towers.
In 2016, the Corporation continued the fabrication and/or installation of the structural steel for
several sports venue projects that it obtained in 2014, including one for a new multi-purpose
stadium in Atlanta (Georgia), a project worth over US$300,000,000 with the additions to the
initial contract. In addition to this large-scale contract, the Corporation continued the fabrication
and/or installation of the structural steel for other projects, some of which may also include
design-build, detailing, building information modeling (BIM) and the fabrication and installation
of steel products.
Competition
The structural steel products fabrication market is very fragmented. In North America, it accounts
for over 3,000 active fabricators. A few large-sized companies are the Corporation’s main
competitors, including ADF, Supermétal, Supreme and Walters in Canada, and Banker Steel,
Cives Steel, Schuff Steel and W&W AFCO in the United States. Considering the diverse projects
on which it bids, FabSouth competes with mid-sized companies in its own markets as well as
with many smaller-sized companies.
Concrete and wood also compete with steel.
4.1.3
BRIDGES
The Corporation fabricates and sells girders and other steel products for highway, railway and
forestry bridges made of steel under the Canam-Bridges name. These are specialized, oversized
products that require complex fabrication. Canam-Bridges also fabricates and sells structural
bearings and expansion joints for highway and airport infrastructures, buildings and bridges
under the Goodco Z-Tech name. Structural bearings and expansion joints are used in the
construction of bridges made of steel or concrete. Canam-Bridges also fabricates and sells an
orthotropic steel deck system for bridges. This type of deck is lighter than the conventional
concrete slabs used in the vast majority of bridges. The orthotropic deck system is entirely shopfabricated, including the application of the wearing surface, thus reducing on-site construction
time. Because of its lighter weight, the existing foundations of the structure can be preserved in
many projects while also complying with requirements found in seismic design codes.
- 13 Geographic Coverage
The steel bridge girder fabrication plants are located in Québec City (Quebec), Claremont (New
Hampshire) and Point of Rocks (Maryland), while the structural bearing and expansion joint
fabrication plant is located in Laval (Quebec). The TecFab plant in Shawinigan (Quebec) also
fabricates steel girders for bridges. Canam-Bridges serves the North American market.
Components are transported by truck or by train. All steel girder fabrication plants have direct
access to rail transportation. Since rail transportation is known to be less expensive than highway
transportation, Canam-Bridges is able to offer its products across North America.
Customers
The Corporation believes that a great number of bridges across North America will need to
undergo rehabilitation or replacement in the coming years. Canam-Bridges serves general
contractors, governments, and rail and forestry companies. In 2015, Canam-Bridges was awarded
a contract worth $225,000,000 to supply the steel superstructure for the approaches to the new
Champlain Bridge over the St. Lawrence River which links Montreal, Quebec, and the river's
south shore. The contract also includes the fabrication of steel components for the new Nuns’
Island Bridge but excludes the cable-stayed section of the new Champlain Bridge. The fabrication
and delivery of steel products began in 2016 and are expected to be completed in the first quarter
of 2018.
Competition
The Corporation believes that Canam-Bridges is the largest steel bridge fabricator in Canada.
Competition comes in part from concrete bridge girder fabricators, which pour concrete on site or
supply prefabricated concrete beams. In the Corporation’s view, feasibility and costs tip the
scales in favor of steel as the construction material of choice for longspan and railway bridges,
whereas there are more concrete girders used for shortspan bridges. Growth in the railway bridge
market and the construction of a greater number of longspan bridges have contributed to CanamBridges’ sustained growth. Besides concrete bridge girder fabricators, Canam-Bridges’
competitors in terms of steel bridge girder fabricators in Eastern Canada are ADF, Central
Welding & Iron Works, Cherubini, Constructions Proco and Supermétal. Elsewhere in Canada,
the main bridge fabricators are ADF, Capitol Welding, Rapid-Span Structures and Supreme Steel.
Competition also comes from structural steel fabricators which, during periods of slow activity in
their structural steel operations, take on the fabrication of steel bridge girders with, in the
Corporation’s view, only partial success because of the complexity associated with the
fabrication of these products.
Canam-Bridges’ main competitors in the Eastern United States are Casco Bay Steel, High Steel
Structures and Hirschfeld. The principal steel bridge girder fabricators in the United States are
High Steel Structures, Hirschfeld (Carolina Steel), Veritas Steel, Stupp Bridge and W&W AFCO.
When it comes to non-railway bridge fabrication, competition is essentially at the regional level,
considering the cost of transportation and the size of steel girders. Canam-Bridges competes with
concrete bridge girder fabricators and structural steel fabricators, just as it does in Canada.
- 14 The Corporation believes that Canam-Bridges is also the principal structural bearing and
expansion joint fabricator in Canada. The Corporation’s main competitors for these products are
LCL-Bridge and Watson Bowman Acme.
4.2
Other Operational Activities
Installation of Structures and Other Steel Components
The Corporation provides installation services for structures and other steel components to
Canadian customers through its wholly-owned subsidiaries St. Lawrence Erectors and Central
Steel Erectors, and to customers in the United States through Central Erectors and Stonebridge.
These corporations execute various mandates for customers in the private and public sectors, and
also provide support on projects awarded to the Corporation. These mandates include, among
others, bridges, office and commercial buildings, and sports complexes. For additional
information on installation activities, the reader is invited to refer to section 3.2 of this annual
information form (Montacier and Stonebridge Transactions – Installation of steel structures and
other steel component installation activities). Steel Fabricators, LLC, a subsidiary of FabSouth,
uses its own in-house installation teams for many of its projects.
Building Information Modeling (BIM) and Structural Steel Detailing Services
The Corporation meets most of its structural steel detailing needs and offers services to an
external clientele that is primarily based in North America and composed mainly of steel
fabricators. These services are available on an hourly rate, in the form of a fixed-price contract or
as a fixed-term outsourcing contract with the customer, in which case the latter assumes full
responsibility for the work performed by assigned professionals for the term of the contract.
These services are provided by teams based in Canada, India and Romania.
The Corporation also offers BIM services, thanks to which the main participants involved in the
realization of complex construction projects, that is, architects, consulting engineers and
contractors, can work together on the same multidimensional building information models. This
virtual construction simulation ensures better coordination between the various trades during the
actual construction process, allowing for cost reduction and adherence to schedules.
Design and Engineering of Wood Structures
The Corporation owns 66% of the voting and participating shares of Structure Fusion Inc.
(Structure Fusion), an engineering firm specialized in designing wood structures. This firm
designs non-residential wood buildings featuring structural wood frames or wood elements. This
additional competence allows the Corporation to offer customers solutions that integrate wood
and steel. Structure Fusion can also offer wood components due to procurement agreements with
its suppliers.
- 15 4.3
Corporate Investments
As disclosed in its audited consolidated annual financial statements, the Corporation owns a
portfolio of investments in a number of private and public corporations with a book value of
$47,759,314 as at December 31, 2016.
The Corporation’s largest investment in terms of carrying amount consists of the common shares
in Alta Industriel Ltd. (Alta) worth $21,588,330 as at December 31, 2016, accounting for 50% of
the issued and outstanding voting and participating shares in Alta. Alta owns plots of land in the
city of Coteau-du-Lac, located southwest of Montreal, Quebec, of which 21,128,062 square feet
are to be sold for commercial and industrial use. As at December 31, 2016, third parties held
options to purchase 10,712,000 square feet of this area. As at December 31, 2016, the vast
majority of these properties were located in an agricultural zone within the meaning of the Act to
preserve agricultural land (Quebec). Applications to change the zoning in order to permit the
commercial and industrial development of part of these properties have been filed with
government authorities.
4.4
Environmental Policies and Considerations
The core business of the Corporation is the transformation of steel through cutting, bending and
welding. The finished products are generally covered with a primer coat. Steel, the raw material,
poses little risk to the environment and is easily and entirely recyclable.
Welding operations produce smoke that's emitted in the form of suspended particles. These
particles are captured by dust collectors and evacuated by ventilation systems or personal
protective equipment is worn by the employees in order to prevent the inhalation of this smoke.
Painting operations release volatile organic compounds (VOC) and other air pollutants. Residues
from paint operations, such as solvents and paint residues are collected by corporations that
specialize in hazardous materials and are properly disposed of or recycled in accordance with
applicable government regulations and best practices for materials management. The Corporation
has chosen to gradually integrate water-based paints into its operations, which considerably
reduces VOC emissions and the generation of hazardous waste.
Each of the Corporation’s plants has a pollution prevention/waste reduction program in place.
Certain jurisdictions require that the Corporation hold environmental permits for its plants,
notably with regard to air quality, rainwater runoff and hazardous waste. These permits require
data collection and the production of reports on environmental activities. Pollution prevention
programs are integrated in day-to-day plant activities. No significant additional expenditure is
required to ensure that the Corporation’s immovable property and activities comply with current
environmental standards. The Corporation is monitoring the evolution of existing and proposed
laws and regulations and believes that they will not diminish its competitive edge.
The Corporation's environmental policy is available on the corporate website
(www.canamgroupinc.com). The policy confirms the Corporation’s commitment to comply with
prevailing laws and regulations. To fulfill this commitment, management keeps a close eye on
legislative and regulatory developments affecting the Corporation’s activities. The Corporation
applies new environmental standards as soon as they are adopted or modified by government
- 16 authorities. Periodic audits are conducted by the Corporation's managers in charge of
environmental matters at each plant to make sure that these standards are being applied and
continuously observed.
The Corporation’s Lean manufacturing program generates environmental gains for the
Corporation. Lean methods focus on waste elimination by improving productivity in relation to
resources and operational efficiency. These methods translate into a reduced use of raw materials
and energy as well as a reduction in the amount of waste generated per ton of fabricated steel.
In terms of sustainable development, the Corporation’s actions include the identification of best
practices, the selection of the latest tools, and the management of its energy consumption. With
these initiatives, the Corporation is seeking to reduce its greenhouse gas emissions, respect the
environment and foster sustainable development. Among the actions that have been taken, many
of the Corporation's plants have direct access to a railway and make use of this transportation to
receive raw material shipments and deliver finished products. The use of rail rather than truck
transportation acts to significantly reduce greenhouse gas emissions. At the Boucherville,
Quebec, plant, diesel-powered forklifts were replaced by electric forklifts. This measure is
gradually being tested elsewhere. The Corporation's trucks, which are used to transport its
products, are equipped with engine-off heating systems. The Corporation also encourages the use
of videoconferencing in order to reduce travelling between its business locations, many of which
are equipped with one or several videoconference systems.
At each quarterly meeting of the audit committee, the Corporation’s management files a written
report on the environmental situation of the Corporation’s plants. At least once a year, the
Corporation’s environmental managers report in person to the audit committee on the
Corporation’s environmental situation.
4.5
Human Resources
As at December 31, 2016, the Corporation employed 4,644 people. The following table lists the
number of employees by country.
Total number of employees as at December 31, 2016
Country
Canada
United States
Romania
India
Total
Number of employees
2,161
2,034
356
93
4,644
Just over half of plant employees are unionized. The Corporation is a party to eleven (11)
collective agreements with its employees. Three (3) collective agreements were renewed in 2016.
The Corporation believes that it has good labor relations with its employees.
- 17 4.6
Risk Factors
The section entitled “Risks and Uncertainties”, which is presented in the Management’s
Discussion and Analysis in the 2016 Annual Report, is incorporated herein by reference.
ITEM 5 - CAPITAL STRUCTURE
5.1
General Description of the Capital Structure
The authorized share capital of the Corporation is comprised of an unlimited number of common
shares (common shares), an unlimited number of Class “D” shares without par value, an
unlimited number of Class “E” shares without par value and an unlimited number of Class “F”
shares without par value. Class “D”, Class “E” and Class “F” shares may be issued in one or
more series, and the Board of Directors may determine the conditions attached to said shares at
the time of issuance. If such shares are voting shares, they only confer one (1) vote per share
upon their holder.
As at February 15, 2017, 45,361,766 common shares of the Corporation were issued and
outstanding.
The following is a brief description of the attributes of the common shares. This description does
not purport to be complete and is subject to the Corporation’s articles:
Voting Rights
Subject to the provisions of the Business Corporations Act (Quebec), the holders of common
shares are entitled to receive notices of, and to be present and to vote at, all of the Corporation’s
shareholders’ meetings. Each common share entitles the holder thereof to one (1) vote per share,
which may be exercised in person or by proxy.
Dividends
The holders of common shares are entitled to receive dividends from the funds of the
Corporation, if, as and when declared by the directors.
- 18 ITEM 6 - DIVIDENDS AND DISTRIBUTIONS
The declaration of a dividend and the amount payable per common share is reviewed on a
quarterly basis by the Corporation's Board of Directors. In view of prevailing North American
economic conditions, the Board of Directors suspended the payment of dividends on common
shares in August 2011. Given that economic conditions and the Corporation's results have since
improved progressively, the Board of Directors declared a dividend of $0.04 per common share
in October 2013, payable in January 2014. A dividend of $0.04 per common share has been
declared and paid every quarter since, with the exception of the dividend declared in
October 2014, 2015 and 2016, which were payable in January 2015, 2016 and 2017 respectively.
ITEM 7 - MARKET FOR SECURITIES
The Corporation’s common shares are listed for trading on the Toronto Stock Exchange and are
identified by the symbol “CAM”.
The following tables set forth, for each month of the fiscal year ended December 31, 2016, the
price ranges and volume of the Corporation’s common shares traded on the Toronto Stock
Exchange.
Common Shares
Month
(Year 2016)
High
($)
Low
($)
January
February
March
April
May
June
July
August
September
October
November
December
14.00
13.60
13.75
13.62
13.54
13.39
13.27
10.74
10.75
10.10
9.86
10.22
12.15
11.76
12.51
12.66
12.37
12.51
10.44
9.03
9.77
8.53
8.41
8.60
Total
Volume
1,750,421
1,973,901
1,493,784
1,240,889
2,281,325
1,696,448
3,429,361
4,651,636
2,237,373
3,195,906
2,431,832
1,960,937
28,343,813
Data from TSX Historical Data Access
The closing prices of the Corporation’s common shares as at December 31, 2015 and 2016 were
$13.89 and $9.02 respectively.
- 19 ITEM 8 - DIRECTORS AND OFFICERS
8.1
Directors
The following table lists the name, municipality and province or state of residence of each
director of the Corporation, his or her position and principal occupation and the year in which he
or she became a director.
Name and place of residence
Position and principal occupation
Élaine Beaudoin
Montreal, Quebec(2)(3)
Corporate Director
2000
Anne-Marie Dutil Blatchford
Wellesley, Massachusetts
Corporate Director
1998
Marc Dutil, C.M.
St. Georges, Quebec
President and Chief Executive Officer
Canam Group Inc.
2002
Marcel Dutil, C.M.
St. Georges, Quebec
Chairman of the Board
Canam Group Inc.
1972
Sean Finn
St. Lambert, Quebec(2)
Executive Vice President, Corporate Services,
and Chief Legal Officer
Canadian National Railway Company
(rail carrier)
2010
Guy LeBlanc
Montreal, Quebec(1)
Corporate Director
2016
Pierre Lortie, C.M.
St. Lambert, Quebec(1)(3)(4)(5)
Senior Business Advisor
Dentons Canada LLP
(law firm)
2004
Pierre Marcouiller
Magog, Quebec(2)
Chairman of the Board
and Chief Executive Officer
Camso Inc.
(manufacturer of tires and tracks for off-road vehicles)
2007
Chantal Petitclerc, C.C.
Montreal, Quebec(2)
Senator (Parliament of Canada)
2015
Pierre Thabet
St. Georges, Quebec(1)
President
Boa-Franc, G.P.
(wood flooring manufacturer)
2006
Jean-Marie Toulouse
Town of Mount Royal, Quebec(1)(3)
President
Jean-Marie Toulouse Recherche Action et Gestion Ltd.
(consulting services in business strategy, governance
and business startups)
2006
(1)
(2)
(3)
(4)
(5)
Member of the Audit Committee
Member of the Human Resources Committee
Member of the Corporate Governance Committee
Independent Lead Director
Director of the Corporation from 1990 to 2003
Director
since
- 20 All members of the Board of Directors are Canadian residents, with the exception of
Ms. Anne-Marie Dutil Blatchford, who is a resident of the United States. All of these individuals
will continue in office until the Corporation’s next Annual General Meeting of Shareholders.
During the past five years, they have all served in their current function, or held their current
position or another position within the corporation indicated opposite their name or a predecessor
of that corporation, with the exception of Mr. Guy LeBlanc who, prior to January 2016, was
managing partner of the Montreal, Quebec, office of PricewaterhouseCoopers, and Ms. Chantal
Petitclerc, who, prior to April 2016, was a speaker.
8.2
Executive Officers
The following table lists the name, municipality, province or state of residence, position and
principal occupation of each executive officer of the Corporation.
Name and place of residence
Position within the Corporation
Marcel Dutil, C.M.
St. Georges, Quebec
Chairman of the Board
Marc Dutil, C.M.
St. Georges, Quebec
President and Chief Executive Officer
François Bégin
St. Simon les Mines, Quebec
Vice President, Communications
John Bradley
St. Julie, Quebec
Vice President, Credit
Michael Burnet
Boucherville, Quebec
Vice President, Purchasing
Mihran Cicek
Montreal, Quebec
Vice President, Research and Analysis
Timothy Day
Westfield, New Jersey
Senior Vice President, Manufacturing Operations
Carl Delisle
St. Bruno de Montarville, Quebec
Vice President, Corporate Controller
Serge Dussault
St.Georges, Quebec
Vice President, Canam-Structures
Robert Dutil
Quebec, Quebec
Senior Vice President, Canam-Bridges, Canada
Louis Guertin
Kirkland, Quebec
Vice President, Legal Affairs and Secretary
René Guizzetti
Longueuil, Quebec
Vice President and Chief Financial Officer
Joël Nadeau
St. Georges, Quebec
Senior Vice President, Business Operations
François de Paul Nkombou
Boucherville, Quebec
Vice President, Internal Audit and Risk Management
- 21 Marc O’Connor
St. Mélanie, Quebec
Vice President, Project Management and Construction
Annie Paquet
St. Georges, Quebec
Senior Vice President, Innovation Support
Raymond Pomerleau
Longueuil, Quebec
Treasurer
Claude Provost
St. Georges, Quebec
Senior Vice President, Shared Services and
Organizational Development
Jean Thibodeau
Laval, Quebec
Senior Vice President, Information Technology
All executive officers are Canadian residents, with the exception of Mr. Timothy Day, who is a
resident of the United States. During the past five years, the executive officers have all held their
current position or another position within the Corporation, with the exception of
Mr. Carl Delisle, who prior to August 2013, was Senior Corporate Manager, financial reporting
and financing activities, at Rona Inc., Mr. Robert Dutil, who prior to September 2015,
represented the Beauce-Sud electoral division as a Member of the National Assembly of Québec,
and prior to September 2012, was the Minister of Public Security for the Government of Québec,
and Mr. Marc O’Connor, who held the following positions at the SNC-Lavalin Inc. Global
Mining and Metallurgy Group: from January 2015 to May 2016, Vice President, Aluminum
(Global) and Montreal business unit; from January 2013 to December 2014, Vice President,
Project Management Organization (PMO), North America, and; prior to January 2013,
Vice President and Managing Director, Montreal business unit.
8.3
Security Holdings
As at December 31, 2016, directors and officers collectively owned, directly or indirectly,
6,303,560 common shares in the Corporation, accounting for 13.90% of the total number of
voting shares.
8.4
Cease-Trading Order, Bankruptcies, Penalties or Sanctions
To the knowledge of the Corporation, no director, executive officer of the Corporation, or
shareholder owning a sufficient number of shares in the Corporation to have a material impact on
the control of the Corporation, is, as at the date of this Annual Information Form, or has been,
within ten (10) fiscal years prior to the date of this Annual Information Form, a director or
executive officer of the Corporation or any other corporation which, while that person was acting
in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt,
made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or
instituted any proceedings, arrangement or compromise with creditors, or had a receiver,
receiver-manager or trustee appointed to hold its assets, with the exception of Ms. Élaine
Beaudoin who, until November 2008, was a Director of LMS Medical Systems Inc., which
corporation filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency
Act (Canada) on June 4, 2009, and Mr. Pierre Lortie who, until June 2015, was Chairman of the
Board of Biocean Canada Inc., which corporation filed a Notice of Intention to Make a Proposal
under the Bankruptcy and Insolvency Act (Canada) on October 10, 2014.
- 22 8.5
Ordinary Course of Business Transactions with Management and Others
Placements CMI Inc. (Placements CMI) and Gestion Marcel Dutil Inc., corporations, whose
voting shares are beneficially owned, directly or indirectly, by Mr. Marcel Dutil, and their
subsidiaries concluded operations between related parties with the Corporation. These
corporations and their subsidiaries provide various services. In the view of the Corporation’s
management, these transactions were conducted under market conditions as though negotiated at
arm’s length. For the fiscal year ended December 31, 2016, the Corporation’s invoicing for sales
and purchases of products and services totaled $2,876,012 and $11,811,855 respectively. The
Corporation’s Audit Committee reviews these transactions once a year.
ITEM 9 - LEGAL PROCEEDINGS
There are several legal proceedings and claims currently filed against the Corporation. While it
may be impossible to predict the outcome of such proceedings, management believes that all of
these proceedings as a whole will not result in pecuniary damages likely to interfere materially
with the Corporation’s activities.
ITEM 10 - TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common shares of the Corporation is Computershare
Investor Services Inc., located at 1500 Robert-Bourassa Boulevard, 7th Floor, Montreal, Quebec,
H3A 3S8. Computershare Investor Services Inc. also has offices in Toronto, Ontario.
ITEM 11 - INFORMATION ON THE AUDIT COMMITTEE
Composition
The Audit Committee is composed of Messrs. Guy LeBlanc, Pierre Lortie (Chair), Pierre Thabet
and Jean-Marie Toulouse. Each member of the committee is independent and financially literate
within the meaning of Regulation 52-110 respecting Audit Committees.
Financial Literacy
Each member of the Audit Committee has the ability to understand financial statements that
present a degree of complexity generally comparable to that of the accounting issues which may
reasonably be raised in the Corporation’s financial statements. This section describes at greater
length how these members acquired such financial literacy.
- 23 Guy LeBlanc. Mr. LeBlanc is a corporate director. He holds a Bachelor’s degree in Business
Administration from the École des Hautes Études Commerciales de Montréal (HEC Montréal).
He is a member of the Ordre des comptables professionnels agréés du Québec and received the
title of Fellow (FCPA). He is a graduate of the Directors Education Program at the Institute of
Corporate Directors.
Mr. LeBlanc had a long career at PricewaterhouseCoopers (PwC), a firm that offers certification,
consulting and tax services. When he retired in 2015, he was a managing partner at the Montreal,
Quebec, office, after having held various positions at PwC over the years, including that of
managing partner of the Transactions group at PwC Canada, and partner of the Audit and
Certification groups.
Mr. LeBlanc is a director and chairman of the Credit Committee at ATIS Group Inc. and at
Groupe Meloche Inc.
Pierre Lortie. Mr. Lortie is Senior Business Advisor at the law firm Dentons Canada LLP.
He holds a Master’s degree in Business Administration (MBA) from the University of Chicago.
He graduated from the Directors Education Program at the Institute of Corporate Directors.
During his career of more than 12 years at Bombardier Inc., Mr. Lortie held a variety of
positions, including that of President and Chief Operating Officer of Bombardier Capital and
Bombardier Transport, positions which required a good understanding of accounting principles
and their application in Canada and abroad. At Bombardier Capital, he was responsible, among
other things, for overseeing internal controls and monitoring the accuracy of the financial
reporting and the information and disclosures required by regulatory agencies such as the U.S.
Securities and Exchange Commission, since Bombardier Capital was a reporting issuer both in
Canada and the United States.
He also served as President and Chief Executive Officer of Provigo Inc. and as President of the
Montréal Exchange. In his role at the Montréal Exchange, he was responsible for the financial
audit of several securities brokers and compliance with financial reports and other disclosures
necessary to conform to securities legislation and the requirements for listing on the Montréal
Exchange.
Mr. Lortie is a director and the chairman of the Credit and Investment Committee at ECN Capital
Corp.
Pierre Thabet. Mr. Thabet has been President of Boa-Franc G.P., a Canadian hardwood floor
manufacturer, since 1983. In 1997, he became President of Prolam LP, which manufactures
flooring for truck trailers. He is also involved in the management of the family patrimony, which
invests in various sectors of the economy. Mr. Thabet had to familiarize himself with and master
all aspects of managing and operating a business. As president of a major manufacturing
corporation, Mr. Thabet has acquired a good understanding of accounting standards and their
application. He holds a Bachelor's degree in Administration, Accounting option, from Université
de Moncton.
Mr. Thabet is a corporate director of National Bank of Canada.
- 24 Jean-Marie Toulouse. Mr. Toulouse was a management, strategy and entrepreneurship professor
at École des Hautes Études Commerciales de Montréal (HEC Montréal) from 1973 to 2008. He
has a doctoral degree in social psychology from Université de Montréal and a postdoctoral degree
in management from the University of California, Los Angeles (UCLA).
Mr. Toulouse was Director of the École des Hautes Études Commerciales de Montréal (HEC)
from 1995 to 2006. As part of his duties at the HEC, Mr. Toulouse managed an annual
operational budget of over $100,000,000, a research budget of $5,000,000 and an investment
budget that varied between $5,000,000 and $60,000,000 from year to year. In doing so, Mr.
Toulouse acquired an understanding of accounting standards and their application.
Mr. Toulouse is a director and the chairman of the Audit Committee at the Société des alcools du
Québec. He is also a director and the chairman of the Finance and Audit Committee at the Royal
Society of Canada.
Audit Committee Charter
The Audit Committee Charter sets out the roles and responsibilities of the Corporation’s Audit
Committee. A copy of the charter is attached hereto as Schedule “A”.
Pre-Approval Policies and Procedures for Audit Services
The Audit Committee adopted a policy regarding the range of services provided by external
auditors. This policy prohibits the Corporation from hiring external auditors to provide certain
non-auditing services, such as bookkeeping and other services related to accounting records or
financial statements, financial information systems design and implementation, valuation
services, fairness opinions on prices offered or contribution-in-kind reports, actuarial services,
internal audit outsourcing services, management functions, human resources, brokerage,
investment or investment banking services, as well as legal services or expert services unrelated
to auditing. In certain cases, the policy allows the Corporation to retain the services of external
auditors for the purpose of rendering non-audit services, provided that such services are not
prohibited and that they have received the prior approval of the Audit Committee.
A copy of the policy regarding the range of services offered by external auditors can be
obtained free of charge, upon request, from the Corporation’s Corporate Secretary, at
270, chemin Du Tremblay, Boucherville, Quebec, J4B 5X9.
- 25 External Auditor Service Fees (by Category)
The following table sets forth the fees billed by the external auditors of the Corporation,
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l. (PwC), during the financial years ended
December 31, 2015 and 2016. These figures include the fees billed by PwC for the services
rendered to the Corporation’s subsidiaries.
Fee Category
2015
2016
Audit fees
Fees for audit-related services
Fees for tax-related services
All other fees
$ 709,334
$
13,135
$ 185,730
$
51,521
$
$
$
$
Total
$
$ 1,056,260
959,720
720,136
21,122
205,270
109,732
“Audit fees” include total fees billed by PwC for the audit of the annual consolidated financial
statements.
“Fees for audit-related services” include total fees billed by PwC for audit-related services such
as statutory filings and advice on accounting standards and financial reporting.
“Fees for tax-related services” include total fees billed by PwC for services related to tax
compliance, tax advice, and tax consulting and planning services related to the preparation of the
Corporation’s income tax returns, capital taxes and sales taxes.
“All other fees” include total fees billed by PwC for all services other than those described
above, such as due diligence services as part of acquisitions and various consulting services.
ITEM 12 - ADDITIONAL INFORMATION
Additional information on the Corporation is available on the Internet, on the SEDAR
(System for Electronic Document Analysis and Retrieval) website (www.sedar.com) and on the
Corporation’s website (www.canamgroupinc.com).
The Corporation will provide copies of the following documents to any person or corporation
who makes such a request to the Communications Department or to the Corporation’s
Corporate Secretary at 270, chemin Du Tremblay, Boucherville, Quebec, J4B 5X9:
(a)
when the securities of the Corporation are in the course of a distribution under a short
form prospectus, or a preliminary short form prospectus, (i) a copy of the Annual Information
Form (AIF) of the Corporation and a copy of any document, or the relevant pages of any
document, incorporated by reference in the AIF, (ii) a copy of the comparative financial
statements of the Corporation for its most recently completed financial year and any auditors’
report thereon, as well as a copy of the most recent quarterly financial statements of the
Corporation that have been filed, if any, for any period following the close of its most recently
- 26 completed financial year, (iii) a copy of the management proxy circular of the Corporation in
respect of its most recent annual general meeting of shareholders during which directors were
elected or a copy of any documents prepared in the place and stead of such circular, if any, and
(iv) a copy of any other document incorporated by reference in the preliminary short form
prospectus or the short form prospectus which has not been provided pursuant to (i) to (iii)
hereinabove; or
(b)
at any other time, a copy of any document to which reference is made in (a) (i) to (iii)
above, provided that the Corporation may require the payment of a reasonable charge if the
request is made by a person or corporation who is not a holder of securities of the Corporation.
Additional information, including information on the remuneration of directors and officers as
well as the names of the principal holders of the Corporation’s securities and the securities
authorized for issuance under equity compensation plans, is presented for fiscal 2016 in the
Management Proxy Circular of the Corporation relating to the Annual General Meeting of
Shareholders scheduled for April 28, 2017, which Circular will be filed separately by the
Corporation through SEDAR in March 2017. Additional financial information, in particular the
audited consolidated annual financial statements for the fiscal year ended December 31, 2016 and
the related Management’s Discussion and Analysis, were filed separately by the Corporation
through SEDAR.
- 27 SCHEDULE “A”
CANAM GROUP INC.
Audit Committee Charter
This charter sets out the roles and responsibilities of the Audit Committee of Canam Group Inc.
(the Corporation). The roles and responsibilities described in this Charter must at all times be
exercised in accordance with the requirements of the legislation and regulations governing the
Corporation and its subsidiaries.
COMPOSITION:
The Audit Committee is composed of at least three directors of the Corporation, all of whom are
independent of the Corporation and financially literate. The quorum necessary to constitute a
meeting of the Audit Committee is set at three directors.
“Independent” refers to an individual who has no direct or indirect material relationship with the
Corporation. A material relationship refers to a relationship which could, in the view of the
Corporation’s Board of Directors, reasonably interfere with the exercise of a member’s
independent judgment.
"Financial literacy" means the ability to read and understand a set of financial statements that
present a breadth and level of complexity of accounting issues that are generally comparable to
those that can reasonably be expected to be raised upon reading the Corporation’s financial
statements.
The Audit Committee’s responsibilities extend to the Corporation and its subsidiaries.
OBJECTIVES:
The Audit Committee’s objectives are as follows:

to assist the Board of Directors in performing its duties and in particular to ensure that the
Corporation’s management assumes its responsibilities with respect to:
-
the production of reliable financial information;
-
the identification of the Corporation’s principal risks and the implementation of the
appropriate systems to manage those risks, including environmental risks;
-
the integrity of the Corporation’s internal controls and management information systems;
-
the Corporation’s compliance with the requirements of the stock exchanges, government
agencies, laws and regulations; and
-
a communications policy targeting the shareholders and the general public;

to establish effective lines of communication between the Board of Directors, management
and the external and internal auditors;

to reinforce the independent status of the external and internal auditors and, in cases
involving the financial integrity of the Corporation, that of the chief financial officer;

to ensure the integrity of published financial reports.
- 28 ROLES AND RESPONSIBILITIES:
1.
REPORTS TO THE BOARD OF DIRECTORS
The Audit Committee (the Committee) must periodically report on the results of the review
services rendered and make recommendations to the Board of Directors.
2.
FINANCIAL INFORMATION
2.1
The Committee reviews the Corporation’s annual audited financial statements and annual
Management Discussion and Analysis and recommends their adoption by the Board of
Directors.
2.2
The Committee reviews the Corporation’s interim financial statements and Management
Discussion and Analysis and recommends their adoption by the Board of Directors.
2.3
The Committee reviews the press releases concerning the Corporation’s annual and
interim earnings and recommends their adoption by the Board of Directors.
2.4
In addition to the annual and interim financial statements and management’s interim and
annual Management Discussion and Analysis, the Committee reviews all the documents
containing financial information, audited or not, notably the prospectuses and the Annual
Information Form, and approves them or recommends their approval by the Board of
Directors, as the case may be, before their publication.
2.5
The Committee must be satisfied that adequate procedures are in place to review the
Corporation’s public disclosure of financial information extracted or derived from its
financial statements, other than the financial information referred to in subsections 2.1, 2.2
and 2.3 above, and periodically assesses the adequacy of those procedures.
2.6
The Committee reviews the external auditor’s reports and, when applicable, those of the
internal auditor.
2.7
The Committee reviews, together with the Corporation’s management and the external
auditor, the different accounting policies and the changes proposed to those policies, as
well as the different estimates performed by management that could have a significant
impact on the financial information.
2.8
The Committee reviews, together with the Corporation’s management and the external
auditor, all major decisions regarding the evaluation or presentation of the financial
information.
2.9
The Committee reviews the accounting treatment of material operations outside the
ordinary course of business of the Corporation.
2.10
The Committee ensures coordination between the Corporation and the stock exchanges,
government agencies and external auditor, and that it is kept informed of reports.
- 29 2.11
The Committee ensures with the Corporation’s management that the financial covenants
made by the Corporation to lending institutions are met.
3.
INTERNAL CONTROLS
3.1
The Committee, through communications with the external and internal auditors, ensures
the effectiveness of the internal controls and the reliability of the published financial
information.
3.2
The Committee keeps informed, through the external and internal auditors, of any
weaknesses in the systems that could cause shortcomings, errors or deficiencies in
financial reporting, or to the accounting policies of the Corporation and applicable laws
and regulations.
3.3
The Committee ensures the effectiveness of the coordination between the internal auditor
and the external auditor.
3.4
The Committee periodically reviews financial management’s organization chart, the
circumstances surrounding the departure of the chief financial officer and of any other
senior finance employee involved in procedures for financial reporting, and provides its
comments on the appointment of individuals in these functions.
3.5
The Committee reviews the financial and accounting aspects of transactions between
related parties.
4.
INTERNAL AUDIT
4.1
The Committee reviews and approves the internal auditor’s mandate.
4.2
The Committee assesses the internal auditor’s degree of independence from management
and other employees of the finance section of the Corporation and its subsidiaries. The
internal auditor reports to the Corporation’s Chief Financial Officer. He is independent in
the performance of his functions. The internal auditor may communicate directly with the
Committee Chairman and the Corporation’s President and Executive Officer at all times.
At least once a year, a meeting is held between the Committee and the internal auditor in
the absence of the Corporation’s management.
4.3
The Committee reviews the annual internal audit plan and suggests mandates or studies as
it deems necessary.
4.4
The Committee reviews the internal auditor’s recommendations, including management’s
comments, and reviews the corrective measures taken by the Corporation’s management.
4.5
Provided that the Corporation has decided not to have the interim financial report
reviewed by the external auditor, the Committee receives the internal auditor’s status
report on his work relating to interim financial information.
- 30 5.
EXTERNAL AUDIT
5.1
The external auditor is independent of the Corporation and its directors, management and
employees. He reports directly to the Committee. The Committee may, at any time,
communicate directly with the external auditor. At least once a year, a meeting is held
between the Committee and the external auditor in the absence of the Corporation’s
management.
5.2
The Committee assesses, at least once a year, the work of the acting external auditor. The
Committee considers many factors, in particular: (i) the quality and efficiency of the
services rendered; (ii) the evaluation of the qualifications and competency of the firm and
the partner overseeing the audit; (iii) the knowledge of the Corporation’s activities and
industry; (iv) the quality of ongoing communications with the auditor and of the auditor’s
relationship with the Audit Committee and the Corporation’s management; (v) the
auditor’s independence; (vi) the auditor’s fees; and (vii) public data on the quality of the
auditor’s work and performance.
5.3
The Committee recommends to the Board of Directors which external auditor to appoint
for the purpose of preparing or issuing an auditor’s report or performing other audit,
review or certification services for the Corporation.
5.4
The Committee reviews the external auditor’s mandate and fee budget, and recommends
its approval by the Board of Directors.
5.5
The Committee must give prior approval to any non-audit services that the external
auditor may provide to the Corporation and its subsidiaries, in accordance with the Policy
and procedures for the services of the external auditor.
5.6
The Committee oversees and reviews the work of the external auditor and his audit plans,
service fees and audit results as well as the special mandates entrusted to him.
5.7
The Committee must be informed of cases where the Corporation’s management
requested the opinion of an accounting firm other than the firm appointed as external
auditor on matters that would otherwise fall within the mandate of the external auditor.
5.8
The Committee ensures that the external auditor obtained the cooperation of the
Corporation’s employees and management. In this regard, the Committee resolves
disagreements between the Corporation’s management and the external auditor regarding
financial reporting.
5.9
The Committee reviews the post-audit letter or letter of recommendation issued by the
external auditors as well as management’s reactions to them and the actions taken by
management in response to observed deficiencies.
5.10
The Committee discusses its internal control procedures and the summary results of the
inspection by the Canadian Public Accountability Board (CPAB) with the external
auditor.
- 31 5.11
The Committee discusses the acceptability and quality of the Corporation’s accounting
principles with the external auditor.
5.12
The Committee reviews questions related to the appointment of a new external auditor,
when applicable.
5.13
The Committee ensures that a rotation is made with respect to the lead partner to the
extent prescribed by the independence rules applicable to external auditors.
5.14
The Committee reviews and approves the Corporation’s hiring or retention of services
policies regarding partners, employees and former partners and employees of the present
and former external auditor of the Corporation.
6.
RISK MANAGEMENT
6.1
The Committee ensures with the Corporation’s management that mechanisms are in place
for the purpose of managing risks to which the Corporation may be exposed in the course
of its operations.
6.2
The Committee examines, together with the Corporation’s management, the principal
financial risks to which the Corporation is exposed as well as the measures taken by
management to monitor and control its exposure to such risks.
7.
COMPLAINTS
7.1
The Committee establishes a procedure for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal controls or auditing
matters.
7.2
The Committee establishes a procedure for the confidential, anonymous submission by the
Corporation’s employees of concerns regarding questionable accounting or auditing
matters.
8.
GENERAL
8.1
The Committee may, at the Corporation’s expense, hire independent counsel and any
other advisors it deems necessary to carry out its duties. The Committee may set the
compensation to be paid to these individuals.
(Rev: February 15, 2017)
Administrative Center
270, chemin Du Tremblay
Boucherville (Québec) J4B 5X9
Telephone: 450-641-4000
1-866-506-4000
canamgroupinc.com
© Canam Group Inc., 2017
Printed in Canada-03/2017
Head Office
11535, 1re Avenue, bureau 500
Saint-Georges (Québec) G5Y 7H5
Telephone: 418-228-8031
1-877-499-6049