Toromont Industries, Ltd. History

Address:

Corporate Office
One Crothers Drive
Concord, Ontario L4K 4T1
Canada

Telephone: (416) 667-5511
Fax: (416) 667-5555

Public Company
Incorporated: 1961 as Toromont Industrial Holdings, Ltd.
Employees: 2,100
Sales: C $542 million (1996)
Stock Exchanges: Toronto
SICs: 3585 Refrigeration & Heating Equipment; 3313 Electrometallurgical Products

Company History:

Toromont Industries, Ltd. is one of the fastest growing companies in Canada today. Toromont has two operating divisions, the Refrigeration Group and the Equipment Group. The Refrigeration Group designs, manufactures, installs, and services industrial, commercial, and process refrigeration systems. The firm's industrial refrigeration services include contracts with various companies in the food, beverage, and cold storage industries, as well as recreational facilities such as ice skating rinks. Toromont's commercial refrigeration services provide supermarkets and convenience stores with cold storage facilities. The company's process refrigeration services applies to the oil, gas, and petrochemical industries. In the mid-1990s, Toromont focused on expanding its export sales in the Refrigeration Group, and new destinations for company products and services have included Indonesia, Thailand, Singapore, West Africa, Brazil, South Korea, China, Hungary, Pakistan, Switzerland, and Peru. Toromont's Equipment Group is divided into two parts, including Caterpillar dealerships and Battlefield Equipment Rentals. The company's Caterpillar dealerships, spread across Canada and the United States, provide more than 300 Caterpillar products, such as paving machines, earthmoving and construction equipment, diesel engines for trucks, electrical power generation, and various other industrial and marine equipment applications. Battlefield Equipment Rentals provides a wide range of construction equipment and contractors' supplies for customers primarily located in Canada.

Early History

The company was initially incorporated under the name of Toromont Industrial Holdings, Ltd. in 1961 and was established by a group of Canadian businessmen to act as a holding company for various acquisitions over a wide range of industries. From the very beginning of its operations, however, management at the company had a penchant for acquiring companies in the heavy machine and manufacturing industries, and although its first purchase in 1963 was that of F.B. McFarren, Ltd., a brick manufacturing company, this was followed closely by the acquisition of a controlling interest in Modern Handling Methods Ltd. and its subsidiary El-Mel-Parts Ltd. Both of these latter companies manufactured and sold equipment and parts for the construction and materials handling industries, which at the time were growing fast within the Canadian economy.

Throughout the remainder of the 1960s and the entirety of the 1970s, Toromont Industrial Holdings, Ltd. engaged in a dizzying array of acquisitions and selloffs. In 1965 alone, Toromont acquired Viking Pump Company of Canada, W.E. Dillon Company, Ltd., and Lloyd-Truax Ltd. CIMCO Ltd. was purchased in 1969, which was then used by management to acquire Allen Tank Ltd. and Happy Air Exchangers Ltd. Yet by the beginning the 1970s, many of these same companies had been sold off either piece by piece, depending on the value of their core businesses or operating divisions, or sold in their entirety to the highest corporate bidder or group of investors. Although the name of the company was changed to Toromont Industries, Ltd. in 1974, with the acquisitions and selloffs continuing unabated, it was assumed by financial analysts in Toronto and New York that the name change was just that and not indicative of a substantial change in management strategy.

In this case, however, the analysts were wrong. In 1974, Toromont made what can be regarded as one of the defining acquisitions of its new strategic initiative with the purchase of Lewis Refrigeration Company. Even though the company remained committed to the manufacturing, selling, and leasing of heavy construction equipment, management at Toromont had decided to expand into the low temperature refrigeration and gas compression industries. As a result, management decided to sell off Viking Pump Company and F.B. McFarren Ltd. to concentrate on the development of its new core business. Management at Toromont then initiated a comprehensive reorganization strategy for its entire industrial refrigeration operations in Canada and the United States. The company's new emphasis in industrial refrigeration focused on the petrochemical and energy industries.

Growth and Restructuring from the Mid-1980s through the Mid-1990s

Until the mid-1980s, Toromont continued to engage in operations outside of its main core business of refrigeration and gas compression. But in 1986, management at the company decided to sell off all holdings that were not directly related to the refrigeration and gas compression industries. This strategy involved a decision to generate growth and profitability over the longer term and also to narrow the company's focus of activities to generate better returns for stockholders. By 1992, Toromont was involved in four activities, including industrial refrigeration, process refrigeration, commercial refrigeration, and gas compression.

Toromont provided low refrigeration temperature services and technology to dairies, breweries, poultry, meat and processing plants, food distribution centers, refrigerated warehouses, and ice skating and curling rinks. During this time, the company designed and engineered a multistage ammonia system, which increased the refrigeration capabilities for facilities of H.J. Heinz Company. Toromont assisted in the expansion of a large beef processing plant owned by Cargill Foods, while also engineering a brand new state-of-the-art frozen beef facility for Caravelle Foods, which involved installing 11 compressors operating on a microprocessing control system that optimized refrigeration loading within the plant. In addition, the company completed a speed skating rink for the Pettit Center in Milwaukee, Wisconsin, along with supplying refrigeration equipment for the Chicago Stadium, home of the Chicago Black Hawks professional hockey team.

In the area of commercial refrigeration, during the early 1990s Toromont was providing engineering services and equipment to numerous supermarkets and convenience stores within Canada and across the United States. One of the company's largest contracts was to provide a refrigerated warehouse for processed potatoes in Idaho. The company's process refrigeration business experienced a record year in 1992. Toromont provided a low temperature process refrigeration system for a new petrochemical plant in Nigeria, engineered and installed a 650-horsepower propylene refrigeration unit for a hydrocarbons project located in Alberta, Canada, and increased the capacity of the largest, high-purity, food-grade carbon dioxide plant in the world, also located in Alberta, since the use of liquid carbon dioxide was growing rapidly throughout North America for food freezing and oil production.

Toromont's gas compression operation focused on the engineering and fabrication of modularized, reciprocating gas compressor packages. Projects during this time included the supply of a 1,600-horsepowered electric motor-driven compressor for Total Petroleum Corporation working in Indonesia, a similar motor-driven compressor for AGL working in Meerenie, Australia, and a gas injection compressor for Enerplus Resources for use in their Kakwa field in Northern Alberta. Although sales had slipped from $192 million to $184 million from 1990 to 1992, which was considered part of the long-term effect of its restructuring strategy, management was heartened by the fact that the company's refrigeration group posted an increase in revenues of 15 percent from 1991 to 1992.

In 1993, management at Toromont decided once again to restructure the company's operations. During that year, the company purchased all of the operating assets of Crothers Properties, Ltd., a privately owned and managed firm that was an authorized dealer for Caterpillar equipment and heavy machinery in the province of Ontario. Simultaneously, Toromont reached an agreement with American-based Caterpillar Americas Company of Peoria, Illinois, which granted the company the exclusive dealership for the region previously served by Crothers Properties, Ltd. Thus management had arranged that the company's Caterpillar dealership would be subsumed as an operating division under the Toromont name.

By the end of fiscal 1994, Toromont's Caterpillar dealership was marketing approximately 300 Caterpillar products, including such items as paving machines, earthmoving and construction machinery, forestry and mining equipment (including the innovative Elphinstone underground mining wheel loaders), and engines for industrial, marine, and truck applications. In addition, Toromont also provided sales, service, and repair facilities at 13 locations throughout the province of Ontario.

Toromont's Caterpillar dealership greatly benefited from Canada's national infrastructure rehabilitation and development program that set aside more than $2 billion for projects in Ontario alone. Sewer and water, energy, communications, public buildings, and road construction all required the use of Caterpillar equipment and machinery. One of the largest of the projects in which Toromont secured a major tractor equipment order was for the construction of Highway 407, a 68-kilometer multilane highway going from Oakville to the north of the metropolitan area of Toronto. Other tractor equipment projects included a delivery to Placer Dome for the extension of an open gold mine near Timmins and large orders to paper and lumber companies working in the regions of northern and western Ontario. By the time the first full year of Toromont's Caterpillar dealership had come to an end in fiscal 1994, the company's equipment revenues were reported at $171 million, an undisputed success.

Through its subsidiaries CIMCO Refrigeration in Canada and Lewis Refrigeration in the United States, Toromont had one of its best years ever in generating industrial and recreational refrigeration revenues. Sales by the end of fiscal 1994 had increased 34 percent over the previous year because of several major projects. One of the most important of these projects was for the company to design and supply a new 160,000-foot storage space for a multiple cold storage facility operated by Confederation Freezers in Brampton, Ontario. The new, state-of-the-art facility provided multiple temperature areas and long- and short-term blast freezing. The growth of both the Refrigeration Group and the Caterpillar dealership helped to increase Toromont's stock price by 60 percent from 1993 to 1994, and total revenues reached $416 million.

Into the Future

Toromont Industries had one of its best years in 1995. Sales amounted to a total of $496 million, the highest ever recorded for the company. Toromont's Caterpillar dealership led the way with revenues of $301 million, an increase of 24 percent over the previous year, and the company's Refrigeration Group brought in $195 million, an increase of 13 percent over the previous year's figures. CIMCO, the company's leading refrigeration subsidiary, garnered a number of major contracts, including one for the design and construction of a refrigerated storage and distribution center in Mississauga, Ontario, and another to install one of North America's largest computerized refrigeration systems for Onstead Foods, a division of H.J. Heinz. With a staff of more than 500 refrigeration mechanics, and a North American coast-to-coast network of 16 branch locations, Toromont's Refrigeration Group was growing at an unspectacular but steady pace.

Yet it was Toromont's Caterpillar dealership that pushed the company's revenues to record levels. Toromont's position as a Caterpillar dealership was significantly enhanced by Caterpillar's introduction of new equipment and heavy machinery, especially for the forestry, agriculture, and recycling industries. The Highway 407 project, the largest construction project in Ontario, employed a fleet of more than 60 new Caterpillar machines, all supplied by Toromont's dealership, which was expected to benefit even more in the future since two new phases of the $2 billion project had not yet started. When Elphinstone and Caterpillar announced a joint venture in 1995 to manufacture underground mining equipment, Toromont decided to purchase axles, frames, and power train components from Caterpillar that would complement the product line of the Elphinstone-Caterpillar joint venture. These activities, and many more, enabled Toromont's Caterpillar dealership to employ more than 280 trained technicians and sustain its leadership position in the business.

In 1996, Toromont's revenues increased to $542 million. The company's stock price jumped 81 percent, with its second stock split in two years. Toromont's Refrigeration Group won the largest contract in its history, with a $9 million project to provide services for Malaysia's Petronas Gas Berhad refinery. In spite of this historic contract, revenues for the Refrigeration Group declined slightly. But the company's Caterpillar dealership had no such downturn. In fact, Caterpillar, Inc. awarded Toromont new and exclusive dealership contracts for the Canadian provinces of Newfoundland and Labrador. During this same period of time, Toromont management decided to acquire Battlefield Equipment Rentals to augment its Caterpillar dealership. Battlefield Equipment is one of Canada's leading equipment rental operations, with a wide range of machinery available for all kinds of construction activities.

Toromont is quickly becoming one of the leaders in the field of construction equipment and machinery rentals. Already the company has a leadership position in Ontario, Newfoundland, and Labrador, and continues to search for new opportunities to expand its rental business. The company's Refrigeration Group also has carved out a niche market for itself in both Canada and the United States and will continue to make substantial contributions to Toromont's shareholder earnings.

Principal Subsidiaries: Toromont CAT; Newfoundland Tractor and Equipment Company Ltd.; Battlefield Equipment Rentals; Aero Tech Manufacturing, Inc.; ScottPolar Corporation; Kimmel-Motz Refrigeration Corporation; CIMCO Refrigeration; Lewis Refrigeration Company; Toromont Process Systems, Inc.

Toromont Industries, Ltd. History

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