AirBoss of America : Q3 2021 Financial Statements

AirBoss of America Corp.

Interim Condensed Consolidated Statement of Financial Position

Unaudited

In thousands of US dollars	Note	September 30, 2021	December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	4, 5	12,413	86,970
Trade and other receivables, including derivatives	7, 11	91,500	68,602
Prepaid expenses		18,337	6,176
Inventories	8	199,881	45,525
Current income taxes receivable	15	7,120	1,452
Total current assets		329,251	208,725
Non-current assets
Property, plant and equipment		91,885	81,254
Intangible assets	4, 5, 6	124,033	71,774
Deferred income tax assets	15	570	3,973
Other assets	9	1,150	1,643
Total non-current assets		217,638	158,644
Total assets		546,889	367,369
LIABILITIES
Current liabilities
Loans and borrowings	10, 16	3,023	27,083
Trade and other payables, including derivatives	11	87,354	74,295
Provisions	12	2,630	573
Current income taxes payable	15	-	747
Total current liabilities		93,007	102,698
Non-current liabilities
Loans and borrowings	10	213,493	63,651
Employee benefits	17	648	664
Provisions	12	15,789	2,058
Deferred income tax liabilities	15	2,112	3,710
Total non-current liabilities		232,042	70,083
Total liabilities		325,049	172,781
EQUITY
Share capital	13	87,998	87,060
Contributed surplus	13	2,195	1,578
Retained earnings		131,647	105,950
Total equity		221,840	194,588
Total liabilities and equity		546,889	367,369

The notes on pages 16 to 28 are an integral part of these interim condensed consolidated financial statements.

On behalf of the Board

P.G. Schoch	Robert L. McLeish
Director	Director

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AirBoss of America Corp.

Interim Condensed Consolidated Statement of Profit and Comprehensive Income

Unaudited

		Three-month	Nine-Month
For the three- and nine-month periods ended
September 30		2021	2020	2021	2020
In thousands of US dollars	Note
Net Sales		112,027	162,745	337,805	369,392
Cost of sales	16	(86,251)	(117,032)	(252,951)	(273,725)
Gross profit		25,776	45,713	84,854	95,667
General and administrative expenses	16	(11,786)	(11,290)	(34,591)	(31,434)
Selling and marketing expenses		(3,782)	(1,954)	(8,890)	(4,863)
Research and development expenses		(974)	(1,304)	(2,576)	(2,342)
Other income (expenses)		(367)	(2,217)	(119)	(3,263)
		(16,909)	(16,765)	(46,176)	(41,902)
Results from operating activities		8,867	28,948	38,678	53,765
Finance costs	10, 11	(1,740)	(723)	(3,421)	(2,694)
Profit before income tax		7,127	28,225	35,257	51,071
Income tax expense	15	(225)	(7,065)	(3,716)	(14,741)
Profit and total comprehensive income for the period		6,902	21,160	31,541	36,330
Profit attributable to:
Owners of the Company		6,902	11,646	31,541	17,801
Non-controlling interest		-	9,514	-	18,529
		6,902	21,160	31,541	36,330
Earnings per share:
Basic	14	0.26	0.50	1.17	0.76
Diluted	14	0.24	0.47	1.11	0.74

The notes on pages 16 to 28 are an integral part of these interim condensed consolidated financial statements.

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2021

Interim Condensed Consolidated Statement of Changes in Equity

Unaudited

Attributable to equity holders of the Company

In thousands of US dollars		Share	Contributed	Retained		Non-	Total
Note	Total	controlling
	Capital	Surplus	Earnings	interest	equity
Balance at January 1, 2020		39,579	1,262	85,138	125,979	-	125,979
Total comprehensive income for the period		-	-	17,801	17,801	18,529	36,330
Contributions by and distributions
Stock options expensed		-	295	-	295	-	295
Stock options exercised		(6)	(44)	-	(50)	-	(50)
Stock options forfeited		-	(270)	-	(270)	-	(270)
Acquisition and partial sale of subsidiaries	6	-	13,655	-	13,655	23,538	37,193
Shares issued for director compensation		68	-	-	68	-	68
Dividends to equity holders		-	-	(3,629)	(3,629)	-	(3,629)
Total contributions by and distributions		62	13,636	(3,629)	10,069	23,538	33,607
Balance at September 30, 2020		39,641	14,898	99,310	153,849	42,067	195,916
Balance at January 1, 2021		87,060	1,578	105,950	194,588	-	194,588
Total comprehensive income for the period		-	-	31,541	31,541	-	31,541
Contributions by and distributions
Stock options expensed		-	832	-	832	-	832
Stock options exercised		938	(215)	-	723	-	723
Dividends to equity holders		-	-	(5,844)	(5,844)	-	(5,844)
Total contributions by and distributions		938	617	(5,844)	(4,289)	-	(4,289)
Balance at September 30, 2021		87,998	2,195	131,647	221,840	-	221,840

The notes on pages 16 to 28 are an integral part of these interim condensed consolidated financial statements.

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AirBoss of America Corp.

Interim Condensed Consolidated Statement of Cash Flows

Unaudited

For the nine-month period ended September 30	Note	2021	2020
In thousands of US dollars
Cash flows from operating activities
Profit for the nine-month period ended September 30		31,541	36,330
Adjustments for:
Depreciation		9,751	9,556
Amortization of intangible assets		4,627	4,252
Impairment of assets		-	2,827
Finance costs	10, 11	3,421	2,694
Government assistance loan forgiveness	16	(6,496)	-
Unrealized foreign exchange losses		1,487	(20)
Share-based payment expense	12, 13	6,151	1,865
SRED tax credits		(715)	(533)
Income tax expense	15	3,716	14,741
Other		(93)	(83)
		53,390	71,629
Change in inventories		(152,110)	(5,462)
Change in trade and other receivables		(21,195)	(25,956)
Change in prepaid expenses		(11,374)	(4,336)
Change in trade and other payables		8,708	28,117
Change in provisions	12	(1,069)	(50)
Net change in non-cash working capital balances		(177,040)	(7,687)
Interest paid		(2,258)	(2,174)
Income tax paid		(10,484)	(13,899)
Net cash provided by (used in) operating activities		(136,392)	47,869
Cash flows from investing activities
Acquisition of property, plant and equipment		(12,302)	(9,174)
Acquisition of intangible assets		(706)	(716)
Proceeds from government grant		-	500
Proceeds from asset disposals		9	1,365
Cash paid to acquire subsidiary	4, 5	(47,944)	-
Cash acquired on acquisition of subsidiary	4, 5, 6	1,946	4,498
Net cash used in investing activities		(58,997)	(3,527)
Cash flows from financing activities
Repayment of borrowings	10	(71,250)	(2,813)
Proceeds from operating line of credit	10	199,500	-
Principal payments for lease liabilities		(1,662)	(1,288)
Proceeds from government loan	16	-	6,432
Payment of debt refinancing fees		(1,505)	(717)
Repayment (issuance) of share purchase loans	9, 19	-	248
Exercise of options (net of withholding taxes)		723	(50)
Interest received on share purchase loans	9, 19	5	13
Dividends paid	13	(5,180)	(3,617)
Net cash provided by (used in) financing activities		120,631	(1,792)
Net change in cash and cash equivalents		(74,758)	42,550
Cash and cash equivalents at January 1		86,970	121
Effect of exchange rate fluctuations on cash held		201	420
Cash and cash equivalents at September 30		12,413	43,091

The notes on pages 16 to 28 are an integral part of these interim condensed consolidated financial statements.

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2021

Notes to Interim Condensed Consolidated Financial Statements ("CFS")

For the nine-month periods ended September 30, 2021 and September 30, 2020

(Amounts in thousands of US dollars ("USD"), except per share amounts, unless otherwise specified)

NOTE 1 REPORTING ENTITY

AirBoss of America Corp. is a public company listed on the Toronto Stock Exchange and cross-traded on the OTCQX® Best Market in the United States, incorporated and domiciled in Ontario. Its registered office is located at 16441 Yonge Street, Newmarket, Ontario, Canada. AirBoss of America Corp. and its subsidiaries are together referred to, in these interim condensed consolidated financial statements, as the "Company" or "AirBoss". The Company has operations in Canada and the US and is involved primarily in the manufacture of high-qualityrubber-based products to resource, military, automotive and industrial markets (see Note 18).

Subsidiaries are consolidated based on control which is assessed on whether the Company has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns.

List of Subsidiaries

Set out below is a list of operating subsidiaries of the Company.

Operating Subsidiaries

AirBoss Rubber Compounding (NC), LLC ("ANC") (formerly AirBoss Rubber Compounding (NC) Inc.)

SunBoss Chemicals Corp.

AirBoss Flexible Products, LLC ("AFP")

(formerly AirBoss Flexible Products Co.)

AirBoss Defense Group Ltd. ("ADG Canada")

AirBoss Defense Group, LLC ("ADG USA")

Critical Solutions International, LLC ("CSI") (formerly Critical Solutions International, Inc.)

Blackbox Biometrics, Inc. ("B3")

Jurisdiction	Ownership % 2021 (2020)
North Carolina	100% (100%)
Ontario	100% (100%)
Michigan	100% (100%)
Quebec	100% (55%*)
Delaware	100% (55%*)
Texas	100% (55%*)
New York	100% (2.5%)

Ace Elastomer, Inc. ("Ace")

South Carolina

100% (nil)

* See Note 6, AirBoss Defense Group Transactions

NOTE 2 BASIS OF PREPARATION

Statement of compliance

The interim condensed consolidated financial statements should be read in conjunction with the Company's 2020 audited annual consolidated financial statements and accompanying notes.

The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements were authorized for issue by the Board of Directors on November 9, 2021.

NOTE 3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies in Note 3 to the annual consolidated financial statements for the year ended December 31, 2020, have been applied consistently to all periods presented in these interim condensed consolidated financial statements.

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