Toromont Industries Ltd Annual Shareholders Meeting
Apr 27, 2017 AM EDT
TIH.TO - Toromont Industries Ltd
Toromont Industries Ltd Annual Shareholders Meeting
Apr 27, 2017 / 02:00PM GMT
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Corporate Participants
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* Glenn Keenan
* Jennifer J. Cochrane
Toromont Industries Ltd. - VP of Finance
* John S. McCallum
Toromont Industries Ltd. - Lead Director
* Miles Gregg
* Paul R. Jewer
Toromont Industries Ltd. - CFO and EVP
* Rick Van Exan
* Robert M. Ogilvie
Toromont Industries Ltd. - Chairman
* Scott J. Medhurst
Toromont Industries Ltd. - CEO, President and Director
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Presentation
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [1]
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Good morning, ladies and gentlemen. My name is Robert Ogilvie, I'm the Chairman of the board. I welcome to you to our 49th Annual Meeting of Shareholders. At this time, I would like to inform you that this Annual Meeting of Shareholders is being audio webcast via link to our website at www.toromont.com. Joining me on the podium today is our President and CEO, Scott Medhurst; Paul Jewer, Executive Vice President and CFO; and David Wetherald, Vice President, HR and Legal. Before calling the meeting to order, I would like to introduce our directors, and I will ask them to stand until all have been introduced. Starting with Rob Franklin. Robert is Chairman of the Human Resources and Compensation Committee. David Galloway, David is Chairman of the Nominating and Corporate Governance Committee. John McCallum, John is Lead Director and Chairman of the Audit Committee. Wayne Hill; Kathy Rethy; Cathy Cranston; Jeffrey Chisholm; Scott Medhurst; and James Gill. These people and I, constitute your current Board of Directors. We're grateful for the wise counsel provided by all of our directors. Thank you, ladies and gentlemen.
With us today is Ron Gage, Ron? Ron served with distinction as a Director from 2000 until his retirement in 2012. He made many contributions to Toromont as the member of the Audit Committee and as Chairman of the Nominating and Corporate Governance Committee. Thank you for joining us, Ron. Also with us today is Ron Willox. Ron? Ron was actively involved with Toromont as an advisor and Director from 1987 until his retirement in 2003. We're again pleased that you have joined us today, Ron. We also have senior management from our businesses here today. Ladies and gentlemen, if you could please stand as I call your name and remain standing. From Toromont CAT we have Randy Casson, President Construction Industries and Battlefield; Miles Gregg, Vice President of Product Support; Glenn Keenan, Vice President Power Systems; Rick Van Exan, Vice President Marketing and Adam Miller, Vice President Central Region. With CIMCO Refrigeration we have Dave Malinauskas, President and Guy Russell, Director Finance and Administration. From Battlefield, we have Tony Joosse, Vice President of Operations; Ross Miller, Director of Finance and Administration; and Colin Goheen, Vice President General Manager. From AgWest, we have Larry Moffatt, advisor. Turning to the Toromont Corporate team in addition to Scott, Paul and David seated with me, we have Mike Cuddy, Vice President, CIO; Jennifer Cochrane, Vice President, Finance; and Linda Lee, Director of Taxation. To give credit where it's due, please join me in thanking these leaders, those executives who're not here today and their teams, Scott, Paul and David, for a job well done in 2016. Thank you, ladies and gentlemen. Also with us today is Steve McLeod who worked at CIMCO for 43 years from '71 until January 2015. He was President for 29 of those years. Thank you for joining us today Steve. And also today I see is Dale Folkerson; Dale was with Battlefield when we bought the business in 1996 and continued with the company until he retired last year in a senior role. Dale, thank you. Following the business portion of the meeting, Scott will do a business update, and then Paul will provide a financial overview of the company. I encourage you to ask questions upon the completion of our presentations. David will act as secretary of the meeting and representative and Canadian Stock Transfer Trust Company will act as scrutineers. I've received the scrutineers' initial report of attendance, and based on such information, I can confirm that a quorum is present. As due notice of this meeting has been given, I now declare this meeting to be duly convened. I'm advised by the scrutineers that if a ballot was conducted, the total number of votes attached to shares represented at the meeting by proxy required to be voted against, what to my knowledge, will be the decision of the meeting in relation to each of the matters put to shareholders today, except the advisory resolution on executive compensation is less than 5% of all the votes that might be cast by shareholders personally or through proxy at the meeting. Accordingly, the vote related to the appointment of auditors will be held by show of hands, whereas the votes on election of directors and the advisory resolution on executive compensation will be held by way of ballot. We will now proceed with the election of directors. The directors have previously determined that the number of directors to be elected at this meeting is 10. Nominations will now be in order.
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Miles Gregg, [2]
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(inaudible)
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Jennifer J. Cochrane, Toromont Industries Ltd. - VP of Finance [3]
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(inaudible)
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [4]
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Thank you, Mr. Gregg. Thank you, Ms. Cochrane. I now declare the nominations closed. May I have a motion from the floor electing those who had been nominated as directors for the ensuing year?
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Jennifer J. Cochrane, Toromont Industries Ltd. - VP of Finance [5]
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(inaudible)
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Glenn Keenan, [6]
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(inaudible)
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [7]
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Thank you, Ms. Cochrane. Thank you, Mr. Keenan. I directed a vote by way of ballot be taken on this motion. Ballots were provided to registered shareholders and proxy holders when you arrived for the meeting. Shareholders who send in their proxy need not fill out a ballot. Their shares will be voted as they have instructed in their proxy. All registered shareholders and proxy nominees present who wish to complete a ballot and who were not provided one -- with one, please raise your hands. So that the scrutineers can give you a ballot. Does anybody need a ballot? I see none. Each shareholder or proxy nominee should record, so we don't -- we can skip that and I ask the scrutineers, the scrutineers are not going to collect anything. So let's move on. We will now consider the appointment of auditors of the Corporation.
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John S. McCallum, Toromont Industries Ltd. - Lead Director [8]
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(inaudible).
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Miles Gregg, [9]
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(inaudible)
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [10]
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Thank you Mr. McCallum, Thank you Mr. Gregg. For the motion, against? Carried. In-line with recent development in emerging governance trends in respect of executive compensation, commonly known as say on pay, the Board of Directors of Toromont has determined to provide shareholders with a say on pay advisory vote to allow shareholders the opportunity to express their opinions on the resolution. The resolution presented to shareholders is described on Page 4 of the Toromont information circular for today's meeting.
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Rick Van Exan, [11]
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(inaudible)
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Jennifer J. Cochrane, Toromont Industries Ltd. - VP of Finance [12]
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(inaudible)
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [13]
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Thank you, Mr. Van Exan. Thank you, Ms. Cochrane. I direct that a vote by way of ballot be taken on this resolution. Ballots were provided to registered shareholders. Does anybody need a ballot? Okay, we'll move on. Next line. I would now -- this completes the business section. Now I ask Scott to stand and make a presentation. Thank you.
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Scott J. Medhurst, Toromont Industries Ltd. - CEO, President and Director [14]
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Thank you, Robert, and good morning, everyone. Toromont had another successful year in 2016. Despite weak demand for new machines and some core markets, revenue earns increased and we continued to strengthen our financial foundation while reinvesting $123 million to increase our competitiveness and paying more than ever in common share dividends. Paul will provide further details in the financial overview. We are pleased with this performance, which reflected the strength Toromont derives from its business model applied across the diversified markets including rental, used and remanufactured equipment. But as shareholders ourselves, we recognize it's not the past that matters. It's the future. Accordingly, I'm going to devote my remarks today to highlight areas of forward focus for this management team. Areas that we believe will build an even better Toromont for tomorrow. Now given the nature of my remarks, you'll appreciate why every year I need to this and insert this slide and a verbal warning that our presentations will contain forward-looking information that are subject to risks and uncertainties. You are cautioned not to place undue reliance on the forward-looking statements in making investment decisions. The first forward-looking statement that I will make is that Toromont has many growth opportunities, that we will never sacrifice employee safety to grow. And for that reason, our first forward focus is on creating a zero harm environment or safe operations is at the heart of our culture. With everyone at Toromont joining in, progress is being made through training, increased budgets and hiring of additional resource specialists. Total recordable injury frequency rate was cut by 69% and injury severity also declined. But now in going forward, we need to finally realize on our goal of creating an injury free workplace. How? Ongoing investments will play a part. But in the final analysis, we can only achieve our objectives if all Toromont employees put their own safety ahead of other considerations. Until and even when that happens, we will continue to deliver the simple message that when it comes to the safety of our people, we mean business. Now in parallel with building a safer Toromont, we will encourage our people to advance their skills. This forward focus area is important because the workforce that is well trained, well motivated and well tenured is a team that creates value. Today, Toromont has that kind of workforce. A view that is objectively validated by our 2016 stats, such as revenue per employee, low turnover rate and high tenure. But let's not forget the fact that our competitors also recognized the importance of team building. It's imperative to stay ahead. In 2016, Toromont invested 70% more in training for employee than the North American corporate average. Combining that investment with our access to Caterpillar's extensive training resources, sets us up for future success. We are also of the view that aligning the interest of our employees with those of our shareholders is important for future value creation. Which is why the recently enhanced our company match so that for every $3 of stock and employee purchases, Toromont adds $1 to a maximum of 2.5% of base salary. About half of our workforce now owns Toromont stock. And we'd like to see that number increase over time. The Toromont of tomorrow will also do its part for the environment by using resources wisely. Two major focus areas are greenhouse gas emissions, and improve water conservation. Our collection of data to fleet management software allows us to determine focus areas for fuel efficiency such as driving behaviors, including engine idling. As well, investments at Toromont CAT during 2016 included the London branch, now this added to our growing installed base of wastewater treatment and water recycling systems. These moves along with improvement such as the 2015 installation of a generator test cell contributed to our positioning as a responsible business as do initiatives like Toromont Reman's zero waste program. Implemented last year, it cut waste by 19%. The Toromont of tomorrow will look like the Toromont of today and that our growth will be achieved exclusively, through a business model of representing highly specialized equipment requiring product support. Product support is designed as both a sustaining feature, generating revenue long after the initial equipment sale and as an engine of growth. Now we've seen that engine firing in all cylinders in each of the past 7 years. But the Toromont of tomorrow will also evolve. It will have an expanded roster of specialized products that will in turn add more product support opportunities and enable us to penetrate new markets that we deem to be attractive. It will rely more on technology to serve customers and improve their experience. And it will use more data analytics to uncover and pursue market opportunities. We're already getting a taste of tomorrow in some recent business activities. A few examples are in order. Beginning with our refrigeration business. Now, it used to be that CIMCO was dismissed as a mature business, and the fact is CIMCO has been the fastest growing part of Toromont over the past 3 years. Among other factors, we attribute this performance to the following areas. Diligent efforts, to better penetrate the vastly larger U.S. market using a niche strategy that in 2016 saw CIMCO increase its win rate on industrial bids to 43% from under 15% historically. And boost its 5-year average annualized revenue growth rate to 18% on a U.S. dollar comparative. Capturing more business in Canada by identifying underserved regions such as Sudbury and Drummondville, where we opened sales and service depots in 2016 and secured over 50 new customers and some 12,000 hours of new work. Maintaining its valued partnership with the NHL, which has proven to be a gateway to more business such as the 5 NHL facilities recently outfitted with CIMCO Technology. CIMCO's ability to do more for its customers than it did in the past by broadening its portfolio of environmental management technology to include a family of CO2, ammonia heat pump and ECO CHILL systems. ECO CHILL now being employed on 37% of CIMCO's recreational capital projects and adding incremental revenue in each case. And exclusivity agreements with product partners such as Mycom, an Asian market leader in packaged ammonium carbon dioxide system known as NewTon, that we recently added to our portfolio. CIMCO's focus on growing efficiencies along with revenue is an important focus for all Toromont businesses. Here is one way CIMCO is doing both. The images you see on the screen are a Walmart distribution facility in Cornwall and a Costco facility in Vaughan. These were CIMCO's largest 2016 projects. In both cases, CIMCO reduced on site construction time by about 20% by prefabricating components in a controlled environment at its Concord facility. Now that's a new go-to-market strategy, creating significant savings. And this new approach will yield bottom line benefits in future years and speed the completion benefits for our customers. Today, our geographic footprint of 19 CIMCO facilities and a coverage model that includes 510 techs along with more than 100 sales professionals providing us with a national presence from both the construction and product support perspective in the U.S. and Canada. That in a culture of innovation, that produces first-to-market technologies are a major competitive advantage that we believe will position us well with customers and help represent the Toromont of tomorrow. Another Toromont business with a solid future is AgWest, our agriculture equipment dealership. Though it's a small part of Toromont now but we think it has potential to be a growth vehicle serving what we estimate is the $1 billion Manitoba equipment market. Our expanded product portfolio including, CLAAS Lexion, AGCO Challenger, RoGator and Caterpillar compact construction equipment brands has fueled our business model for the future by ensuring we can meet a variety of specialized application needs. Now we continue to train our teams and now have the integrated systems necessary to execute efficient and effective growth. In 2016, despite a very weak market, AgWest grew revenue by connecting more effectively with our customers through its 4 locations. Now one of the areas of focus remain on the AgWest coverage model and getting closer supply to our customers. While this meant opening a 2,500 square foot parts depot in Steinbach last fall, a key farming region in Manitoba. Coverage increases do not always require bricks and mortar. A mobile field service team backed by strong technology infrastructure can accomplish a lot. And we look to prove that thesis in the years ahead. Much work remains but the team is making progress. Product and product support expansions backed by innovative customers facing technologies will also feature prominently in the future of Toromont CAT. As our largest business, some examples are in order. The first is demonstrating how we use technology to maximize the growth in our product support business and improve the customer experience. Every month, Toromont CAT sells millions of dollars of parts and consumables over the phone to customers. It's a good thing. But because we don't control the timing of these calls, the parts call centers in our branches are sometimes overwhelmed and other times they are underutilized. We thought there was a better way. So in late 2016, we piloted a new smartphone system for Toromont CAT central region in Ontario. It takes incoming customer calls and routes them to available parts personnel in any central region branch for instant response. So if a customer in Concord dials our local branch and the parts team is busy, the system will automatically transfer the call to a parts counter person in any of the other central region branches, like Orillia or Ottawa, where it will be answered within 3 rings. Now that level of responsiveness improves the customer experience. And just as important, it allows our people to improve other parts operational efficiency and productivity levels. We believe this will allow us to sell more parts, to improve loyalty, and expansion of the client base. We will continue to install the system in various parts of our enterprise. Now I'm cherry picking examples to demonstrate how technology can reshape how we do business and serve customers. And I'll show you a few more advancements. But to be clear, we don't do technology in an ad hoc manner. It's a purpose-driven and every Toromont business operates with a detailed and involving technology roadmap for the future. Now in the case of Toromont CAT, our strategy is lined with Caterpillar, our largest partner and a key driver of our long-term success. CAT is a leader in many areas and technology is one of them. As a dealer, we serve on CAT technology advisory groups and that gives us a place at the table. Our job is to help our customers organize all the data coming from the machines, interpret it and use it to their advantage. And we do so through CAT equipment monitoring or EM services. A standardized equipment monitoring system now used by over 16,150 of our customers connecting over 8,000 machines. Here is an example of how 1 connected customer realized value from EM in 2016. In this case, proactive repair, that cost $4,000 and kept the machine out of commission for 1 day meant that the customer avoided a $23,000 bill down the road that would have kept their machine on the shelf for a longer period of time. Now that's just a small taste of the power of EM. We also strive to augment CAT's offerings with technologies of our own. Such as that telephone system, but also in areas such as transmission and settlement of the invoices and data analytics. We are determined to put all of the data we collect from on board machines, customer buying behaviors and the competitive landscape to work in areas such as predictive inventory management and targeted marketing. Our vision is to be our customers first choice in the markets we serve. And technology is key. One of the ways we're helping to drive future adoption at the machine level is through our SITECH technology dealership, which sells professional services, software training and support. SITECH is considered one of the top dealers of its kind. Our global SITECH dealership ranking in 2016 was top quartile, based on a multiple of metrics, including revenue, profitability, ability to provide complete solutions. These are a few of the areas that help distinguish our SITECH business, which proves that being future-oriented can still deliver results today. Another Toromont business that continues to use technology to grow and enhance the customer experience is Battlefield. At the beginning of this year, it launched a new smartphone app that enables customers to manage their existing rentals, request maintenance and call equipment off rent without ever calling us. This offering combined with sophisticated data analytics was beneficial in targeting new customers. One new client is Flint Canada, a large national account that predominantly dealt with a competitor in our patch. Through the development stage of the mobile app and input from Flint operational staff, their 2016 transactional volumes grew almost 2.5x prior year revenue. Flint were looking for a partner that provided ease of business and they saw that in our app. This is the kind of technology offering combined with proactive marketing initiatives that we see more of at Toromont in future years. We're not the only company in our industry doing this, but our combination of customer and market data and smart people interpreting that data we believe is an advantage. The Battlefield team partnered with 150 new clients in 2016, Battlefield remains a top 5 ranked CAT rental store business within the Caterpillar North American dealer network and will celebrate 40 years in business during 2017. I said at the outset, that the Toromont of the future will continue to have more products to sell and serve. And that we're getting a taste of that future through some of the recent actions. For reference, the brands you see on this screen have all been added in the past decade to enrich our customer offering and expand our markets. Our strategy is to expand the product lines that are able to complement the core products, expand our customer solutions and maintain alignment with Caterpillar. Our Power Systems team is also strategic in selecting which products and brands they add to our portfolio and how best to represent those products in the marketplace. Take Gorman-Rupp as an example. This is a specialized product with a well-defined market. First available through Battlefield we added Gorman-Rupp to our Power Systems business because of demand from our mining and aggregate customers for larger pumps requiring an engineered system to meet their requirements. Now to get to the market, Power Systems works with consultants and as well as end users where we design turnkey solutions. A smaller over-the-counter product is also sold through Power Systems' online store, which offers doorstep delivery. In 2016, we took the next step by adding it through our Power Systems rental fleet; this helped Toromont expand our scope of supply with new and existing customers like a recent assignment for Banister Pipelines. When Banister was working on a creek bypass in Mississauga, they called Power Systems for a 1-month rental supply of 4 12-inch Gorman-Rupp submersible pumps, powered by 4 200 kilo watt CAT generators and over 2,000 feet of steel pipes. So each of these 12-inch pumps moves over 7,000 gallons of water per minute. So you can imagine how much H2O we put through those devices in 1 month. But the point is not the amount of water we move. It's the full package of Power Systems products that we can deliver along with the expertise to put them all together. That matters. Now building a growing Toromont and covering all the ways in which customers want to acquire equipment from us. Some customers buy new machines, some buy used machines, and some want their equipment remanufactured and a growing number rent from us. It's now estimated that 40% of our new products enter the market through the rental channel before eventually being purchased. We've made bold moves in the past few years to increase the size of our rental fleet and the variety of rental equipment we offer through Toromont heavy rent, Toromont Power Systems and Battlefield. More rental units in turn stoke our ability to meet demand for used equipment. As we sell rental units into the used channel as part of a rolling disposition process. Those used products are sought after because they are maintained by Toromont technicians. In answering customer needs has resulted in up-tempo pace at our Toromont Reman Center, where revenue has doubled over the past 3 years. Toromont remanufactures water pumps, turbo, cylinder heads and behemoths like this CAT C175 diesel engine. Over 4,000 components were restored in 2016, and returned to customers for worry-free extended machine life cycles. Have we not made those moves and instead been more dependent on new equipment sales, Toromont would not have had multiple customer solutions or the same level of financial success that it did in 2016. All of which is to say that Toromont's performance yesterday, today and tomorrow is predicated on the diversification of the opportunity and the ability to respond to the nimble and discipline-mannered customer needs, however those may be expressed. Now in closing, we continue to work hard positioning Toromont as a forward-looking business while not resting on our laurels. We embrace new ideas, new technologies and new opportunities. But in the final analysis, it's our people who build this company by executing the strategy in a sensible risk-managed way on the solid foundations and lessons of the past so that we can be of more value to our customers and shareholders in the future. Let's listen to the pride of our people.
(presentation)
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Scott J. Medhurst, Toromont Industries Ltd. - CEO, President and Director [15]
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(inaudible) as President and CEO, I remained humbled and honored to lead and work beside these great folks. And now I'd like to turn the meeting over to Paul for his report. Thank you.
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Paul R. Jewer, Toromont Industries Ltd. - CFO and EVP [16]
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Thanks, Scott, and good morning, everyone. I'm humbled and honored to have the opportunity to stand in front of you once again for my 12th Toromont AGM. 2016 was another great year with homegrown organic growth once again driving our financial performance. Before jumping into discussion on 2016, I'll touch first on the first quarter of 2017. These results were released late yesterday and discussed on a con call earlier this morning, so I'll keep my comments brief. In total, we saw revenue growth of 6% from a year ago. In our Equipment Group, revenues increased on the strength of equipment sales into mining and power projects together with growth in rental revenues and product support somewhat mitigated by softness in construction markets. At CIMCO, revenues grew 5% mainly on increased product support. Strong bookings activities and backlog levels bode well for performance this year. Net earnings were $27 million in the quarter, up 12% from a year ago due to the increased revenues and improved gross profit margins at CIMCO. Earnings per share of $0.34 followed suit, up 10% from a year ago partially diluted by the 7% increase in the number of shares outstanding. Let's turn our attention back to 2016 for a review of performance. Last year, revenues rose 4.6 -- 4% to a record $1.87 billion fueled by growth in product support across the business. The Equipment Group faced challenging market conditions last year. The weakened Canadian dollar resulted in higher new equipment prices versus recent years and delays in the rollout of the announced federal infrastructure investment resulted in customers being more cautious with their capital expenditures. Additionally, weakness in other geographies resulted in a migration of rental fleets, inventory and contractors into the relatively more active Ontario market. This led to increasing competitive conditions across all segments. In total, equipment sales were down 4%. However, record product support revenues led the way in 2016 increasing 9% on the larger installed base of construction and mining equipment. Due to these forces of uncertainty, customers are very actively seeking alternatives such as used, rebuilds and to a certain extent, rentals with purchase options. Fortunately, given the strength of our balance sheet and investment in these areas, Toromont was well-positioned to address the alternate forms of demand especially with respect to used equipment sales. CIMCO reported record revenues for the year led by the 35% increase in package sales. Product support also increased 5% year-over-year. CIMCO's management team has been refining its strategic focus over the past few years and while still nascent, we are seeing positive results. We're especially pleased to achieve growth in the U.S. where we've seen a revenue CAGR of 18% over the past 5 years. Net earnings for 2016 were $155.7 million or $1.99 EPS, up 7% from a year ago largely due to continued product support growth from both groups and strong package sales growth at CIMCO together with the gain realized on the sale of internally developed software. Our target for return on shareholder's equity is 18%, which we have continued to exceed. However, even with growing net earnings our return has declined over the past few years due to the significant increase in the equity base. We recognize that this, together with a low leverage levels, points to the opportunity to prudently deploy capital for enhanced growth. We court the virtue of patience as we continue to look for the right opportunities to deploy our balance sheet. For each of our business units, we convert this ROE target into a return on capital employed target based on our assessment of the appropriate capital deployment levels and reasonable leverage. These ROCE targets then become the basis for improving at-risk compensation pools in each of these businesses, which are then awarded based on the achievement of other business-specific targets. We saw strong cash flows from our business in 2016. Cash from operations generated $216 million of the record net earnings achieved last year. We had a far more productive year in managing working capital levels in 2016. Reductions contributed $35 million cash as inventories decreased $27 million versus a year ago. These cash flows, together with our substantial financial position, enabled us to reinvest; $23 million of this went into property, plant and equipment broadly invested. While timing can vary spending, I expect that we'll see an increased investment level this year, perhaps $35 million to $40 million depending on the progress of certain building projects. We have ramped up our investment in rental in recent years and this continued into 2016. Our net investment of $62 million include $37 million in support of our Battlefield rental strategy. Our long-term investment in this area has translated into a very efficient and profitable rental model over the long term. At Toromont CAT, we invested $25 million across our Power Systems and heavy rent fleets. We continue to be pleased with increasing process and system efficiencies somewhat tampering the very competitive market conditions seen in this space. We expect that our 2017 investment will be in the range of $55 million to $60 million, depending on the market conditions we see. This brings us back to dividends. In 2016, we returned $55 million to our shareholders, representing 38% of the prior year's earnings. For many years, we have the general practice of setting targets around 30% of trailing earnings. But recognizing the significant cash generation profile of our existing portfolio businesses, we've demonstrated a willingness to notch this up a bit, settling in with the practice of targets around 40% of trailing net earnings. As you can see, we invested heavily in our business. Plants, rental fleets, technology and people. However, we still decreased debt by $123 million and close the year in a net cash position of $32 million. Our substantial balance sheet positions us well to support the business and pursue opportunities. The high-performing operations that is Toromont today is not the result of a swinging strategy or a catch up in investment levels. Rather, it's the result of consistent strategies and disciplines that have been in place for decades. We take a long view and strive to be deliberate and consistent in our approach to managing the deployment of capital. Over the past 10 years, we generated $1.45 billion in net earnings adjusted for noncash items, what I call cash earnings. 59% of that was reinvested in our business to foster growth substantially, organic growth and at least 27% of that was returning to our shareholders. I'd say, at least, as we also return shares through our tax of spin-off in 2011. It is through the application of this steady and balanced approach that we've been fortunate enough to generate reasonably consistent growth over the past 10 years, especially considering the decade that it was. Proven, steady growth. This continued to be demonstrated with a record bottom line posted again last year in relatively challenging markets. Strong earnings supported dividend growth and our share price. 45 years of dividends and our most recent increase of $0.76 per share annualized translates to 28 years of consecutive increases - a track record that I believe puts Toromont on rarefied ground. And those dividends have contributed to our total return to shareholders, $100 invested in a TSX index fund at the end of 2006, would have netted you $159 at the end of 2016 representing average annual growth of 4.7%. Compare that to the same $100 invested in Toromont at the end of 2006, which would have netted you $379 for an average annual return of 14.3%. We can't control the markets, however, we are certainly pleased that this has exceeded our internal target for business growth of 10% per year over the cycle. We've had the good fortune to deliver solid results over the long haul. Last year, I introduced you to a few leaders that made a difference across this organization. The fact that Toromont has had the good fortune of continued performance is due to the contributions of each member of our broader team. These are but a few examples of the depth and scope of our 400 leaders found across our businesses managing our total organization of more than 3,600 employees. As Scott said, our retention rates are quite high and our average tenure for the entire employee population is a robust 10.1 years. These are the steady hands behind proven steady growth. We are extremely proud that our succession opportunities are mostly satisfied from within and this is not by happenstance. We focus intently on bringing the right people on the team. Our talent development programs, especially for management trainees and high potential candidates, contributes further to long-term performance. Our succession planning extends deep into the organization. Also important is our model to empower leaders. And although this empowerment term is often flung around on management consulting slides, it's been a core component of Toromont's operating model for more than 30 years and I believe comes with some depth. I think better term here is distributed leadership. Distributed leadership starts with empowerment but it continues with a lot more. First is the recognition that authority must be married with accountability. Authority without accountability is a runaway train and accountability without authority is a no-win situation for the employee involved. Structural support for this model starts with the promise. Our budgeting and planning processes start from the ground up. We don't assign budgets from corporate. Our leaders are expected to put forth prudent plans that match our expectations for 10% growth over the cycle. Because these are their plans, there is ownership. Then comes performance. We've been largely blessed with good performance, which has aligned with or exceeded plans. But often, conditions arise where this is not the case. We have the controls, IT platform and support mechanisms in place to rapidly identify performance gaps and refocus resources to assist to bring in-line. We've also designed our compensation programs to be both simple and aligned with performance. Individual leaders are rewarded based on the performance of their individual business units. Alignment is further ensured through encouraging ownership. About 15% of our employees are shareholders and those eligible to participate in our conservative stock option program, ownership requirements are meaningful and hardcoded. And all of this is governed within the context of our core values. Starting with a safe and respectable workplace, we want to ensure that everyone returns home safely at the end of the day. This continues with commitment to social responsibility, uncompromising integrity, empowerment at all levels, growth of the individual and the enterprise and returns to all stakeholders. At this point, I ask for your forgiveness on this crude graphic attempting to explain something that doesn't readily fit neatly onto a slide. As much as management consultants would like you to believe this, cultures do not get built from PowerPoint slides. Cultures come from the consistency of business practices, people practices and demonstrations of values. Our predecessors didn't start out to build a culture per se. They focused on building a business and the culture came from the way that they set out to do that and how others continued on with those philosophies. But the byproduct has been the development of a resilient culture that goes deep into the organization. As I said last year, us C level execs, us guys, can come and go. However, in the Toromont case the strength resides in its leaders and development candidates found throughout this organization. If there is a secret sauce it is in these leaders and it gives me great confidence for the long-term prospects of Toromont. That pretty much paints the picture for the way forward. Our past reflects our focus and that focus continues. We're also proud to continue to be somewhat boring in this topsy-turvy world. As we move forward -- move our way through 2017, you should expect that we'll manage our working capital requirements and last year, you might remember that I gave ourselves an X on this front, and I'm pleased to have seen progress on this front in 2016. We'll continue to invest in our core assets ensuring that our branch networks support our growing product support opportunity. We'll expand our rental fleet to pursue growth in that channel, invest in our people and technologies, key fundamental underpinnings to our business and hope to continue our trend of increasing dividends. Thank you for your continued support and attention this morning. I'll now return the podium to our Chairman. Robert?
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [17]
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Thank you, Paul. We'll be pleased to answer your questions at this time. This is the most difficult part of the meeting for us because we never get any questions. So if anybody has a question please do not hesitate to stand and ask. Questions? Questions? Please. Mr. Kennedy.
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Unidentified Participant, [18]
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(inaudible)
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Unidentified Company Representative, [19]
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(inaudible) that is punishable through our focus strategically on broadening our services. We've looked at new locations and that's played out very well particularly last year. The team continues to invest in the technologies and new products that we're gaining traction on. And of course, the U.S., in particular it's a large market where we feel that we have great opportunities. Last year the team focused particularly on the industrial side including your company, we still think we have a lot more room to improve on that front. And improving our brand identity in the U.S. is what we're doing with our product and services. Where's David (inaudible) David, you want to put any more color on that?
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Unidentified Participant, [20]
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(inaudible)
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [21]
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David, could you stand? Thank you.
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Unidentified Participant, [22]
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(inaudible)
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Unidentified Company Representative, [23]
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I didn't hear anything.
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [24]
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Are we done? Any other questions? David?
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Unidentified Participant, [25]
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(inaudible)
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [26]
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Scott?
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Scott J. Medhurst, Toromont Industries Ltd. - CEO, President and Director [27]
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What we're focused on there is, Battlefield - we firmly believe we need to continue to expand the footprint and our data suggest that we do it through Greenfield. Actually we -- that's one of our key strategic areas of focus in allocating capital to expand that footprint within our territory and we think that'll pay off, proven results, we do that. So that is a priority for us. What -- we're very careful now, David, with how we fancy bricks and mortar, because there is some fixed cost associated with that. So we are very focused on technology and how we can improve our global market ability and connectivity with customers through the technology and through mobile services and solutions. We think we can be more proactive on that front providing solutions through data capture, and that might not necessarily mean we need more bricks and mortar. It's just something that Mike Cuddy was quite pleased and extremely focused on with Caterpillar and that extends through all our company. It's really managing that technology and connectivity with our specialized footprint.
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Robert M. Ogilvie, Toromont Industries Ltd. - Chairman [28]
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Thank you. Any other questions? Hearing none. The representative of the scrutineers has presented his/her report on the motion approving the election of directors. The scrutineers report that each director has been elected by at least majority of the votes cast at the meeting. Accordingly, I declare the motion carried. The representative of the scrutineers has also presented his report on resolution regarding say on pay. The scrutineers report that the resolution has been approved by at least a majority of the votes cast at the meeting. Accordingly, I declare the resolution approved. In closing, this takes -- it takes many resources to grow steadily and profitably across diverse markets and geographically dispersed territories, it also demands clear sense of purpose. Your company is fortunate to have both. We sincerely thank all of our customers, shareholders, employees, directors and business partners for your ongoing support and contributions. This concludes our annual meeting. Our directors and managers will be available for a short while before we resume our board meeting. Thank you for joining us today and thank you for your support during the past year. Thank you.
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