Form 20-F ⌧
|
Form 40-F □
|
Yes □
|
No ⌧
|
EXFO INC.
|
|
By: /s/
Philippe Morin
Name: Philippe Morin
Title: Chief Executive Officer
|
|
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of EXFO Inc.
Opinions on the financial statements and internal control over financial reporting
We have audited the accompanying consolidated balance sheets of EXFO Inc. and its subsidiaries (together, the "Company") as at August 31, 2019 and 2018, and the related consolidated statements of earnings, comprehensive income (loss), changes in shareholders' equity and cash flows for each of the three years in the period ended August 31, 2019, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as at August 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at August 31, 2019 and 2018, and its financial performance and its cash flows for each of the three years in the period ended August 31, 2019 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
Basis for opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in "Management's Annual Report on Internal Control over Financial Reporting" included in Item 15(b) of the Annual Report on Form 20-F for the fiscal year ended August 31, 2019. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and limitations of internal control over financial reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Montréal, Canada November 26, 2019 |
We have served as the Company's auditor since 1994.
1 CPA auditor, CA, public accountancy permit No. A111799
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash
|
$
|
16,518
|
$
|
12,758
|
||||
Short-term investments (note 6)
|
2,918
|
2,282
|
||||||
Accounts receivable (note 6)
|
||||||||
Trade
|
51,517
|
47,273
|
||||||
Other
|
3,396
|
4,137
|
||||||
Income taxes and tax credits recoverable (note 20)
|
3,159
|
4,790
|
||||||
Inventories (note 7)
|
38,017
|
38,589
|
||||||
Prepaid expenses
|
6,510
|
5,291
|
||||||
Other assets (note 19)
|
3,083
|
2,279
|
||||||
125,118
|
117,399
|
|||||||
Tax credits recoverable (note 20)
|
46,704
|
47,677
|
||||||
Property, plant and equipment (notes 8 and 22)
|
39,364
|
44,310
|
||||||
Intangible assets (notes 9 and 22)
|
21,654
|
29,866
|
||||||
Goodwill (notes 9 and 22)
|
38,648
|
39,892
|
||||||
Deferred income tax assets (note 20)
|
4,821
|
4,714
|
||||||
Other assets
|
1,293
|
686
|
||||||
$
|
277,602
|
$
|
284,544
|
|||||
Liabilities
|
||||||||
Current liabilities
|
||||||||
Bank loan (note 10)
|
$
|
5,000
|
$
|
10,692
|
||||
Accounts payable and accrued liabilities (note 11)
|
50,790
|
47,898
|
||||||
Provisions (note 11)
|
1,065
|
2,954
|
||||||
Income taxes payable
|
704
|
873
|
||||||
Deferred revenue (note 19)
|
24,422
|
16,556
|
||||||
Other liabilities
|
1,606
|
3,197
|
||||||
Current portion of long-term debt (note 12)
|
2,449
|
2,921
|
||||||
86,036
|
85,091
|
|||||||
Provisions (note 11)
|
2,737
|
2,347
|
||||||
Deferred revenue (note 19)
|
9,056
|
6,947
|
||||||
Long-term debt (note 12)
|
3,293
|
5,907
|
||||||
Deferred income tax liabilities (note 20)
|
3,598
|
5,910
|
||||||
Other liabilities
|
318
|
421
|
||||||
105,038
|
106,623
|
|||||||
Commitments (note 13)
|
||||||||
Shareholders’ equity
|
||||||||
Share capital (note 14)
|
92,706
|
91,937
|
||||||
Contributed surplus
|
19,196
|
18,428
|
||||||
Retained earnings
|
112,173
|
114,906
|
||||||
Accumulated other comprehensive loss (note 15)
|
(51,511
|
)
|
(47,350
|
)
|
||||
172,564
|
177,921
|
|||||||
$
|
277,602
|
$
|
284,544
|
On behalf of the Board | |
/s/ Philippe Morin
PHILIPPE MORIN, Chief Executive Officer
|
/s/ Claude Séguin
CLAUDE SÉGUIN, Chairman, Audit Committee
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Sales (note 22)
|
$
|
286,890
|
$
|
269,546
|
$
|
243,301
|
||||||
Cost of sales (1)
|
118,677
|
105,004
|
94,329
|
|||||||||
Selling and administrative
|
98,646
|
98,794
|
86,256
|
|||||||||
Net research and development
|
50,553
|
57,154
|
47,168
|
|||||||||
Depreciation of property, plant and equipment
|
5,469
|
5,444
|
3,902
|
|||||||||
Amortization of intangible assets
|
9,012
|
10,327
|
3,289
|
|||||||||
Change in fair value of cash contingent consideration
|
–
|
(670
|
)
|
(383
|
)
|
|||||||
Interest and other expense
|
718
|
1,378
|
303
|
|||||||||
Foreign exchange (gain) loss
|
949
|
(1,309
|
)
|
978
|
||||||||
Share in net loss of an associate (note 3)
|
–
|
2,080
|
–
|
|||||||||
Gain on deemed disposal of the investment in an associate (note 3)
|
–
|
(2,080
|
)
|
–
|
||||||||
Earnings (loss) before income taxes
|
2,866
|
(6,576
|
)
|
7,459
|
||||||||
Income taxes (note 20)
|
5,346
|
5,678
|
6,608
|
|||||||||
Net earnings (loss) for the year
|
(2,480
|
)
|
(12,254
|
)
|
851
|
|||||||
Net loss for the year attributable to non-controlling interest
|
–
|
(352
|
)
|
–
|
||||||||
Net earnings (loss) for the year attributable to parent interest
|
$
|
(2,480
|
)
|
$
|
(11,902
|
)
|
$
|
851
|
||||
Basic and diluted net earnings (loss) attributable to parent interest per share
|
$
|
(0.04
|
)
|
$
|
(0.22
|
)
|
$
|
0.02
|
||||
Basic weighted average number of shares outstanding (000’s)
|
55,325
|
54,998
|
54,423
|
|||||||||
Diluted weighted average number of shares outstanding (000’s)
(note 21)
|
55,325
|
54,998
|
55,555
|
(1)
|
The cost of sales is exclusive of depreciation and amortization, shown separately.
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Net earnings (loss) for the year
|
$
|
(2,480
|
)
|
$
|
(12,254
|
)
|
$
|
851
|
||||
Other comprehensive income (loss), net of income taxes
|
||||||||||||
Items that may be reclassified subsequently to net earnings
|
||||||||||||
Foreign currency translation adjustment
|
(4,177
|
)
|
(6,491
|
)
|
8,262
|
|||||||
Unrealized gains/losses on forward exchange contracts
|
(795
|
)
|
(1,476
|
)
|
1,403
|
|||||||
Reclassification of realized gains/losses on forward exchange contracts in net earnings
|
744
|
(972
|
)
|
423
|
||||||||
Deferred income tax effect of gains/losses on forward exchange contracts
|
67
|
554
|
(479
|
)
|
||||||||
Other comprehensive income (loss)
|
(4,161
|
)
|
(8,385
|
)
|
9,609
|
|||||||
Comprehensive income (loss) for the year
|
(6,641
|
)
|
(20,639
|
)
|
10,460
|
|||||||
Comprehensive loss for the year attributable to non-controlling interest
|
–
|
(352
|
)
|
–
|
||||||||
Comprehensive income (loss) for the year attributable to parent interest
|
$
|
(6,641
|
)
|
$
|
(20,287
|
)
|
$
|
10,460
|
Year ended August 31, 2017
|
||||||||||||||||||||
Share
capital |
Contributed
surplus |
Retained
earnings |
Accumulated
other comprehensive loss |
Total
shareholders’ equity |
||||||||||||||||
Balance as at September 1, 2016
|
$
|
85,516
|
$
|
18,150
|
$
|
126,309
|
$
|
(48,574
|
)
|
$
|
181,401
|
|||||||||
Issuance of share capital (note 14)
|
3,490
|
–
|
–
|
–
|
3,490
|
|||||||||||||||
Reclassification of stock-based compensation costs (note 14)
|
1,405
|
(1,405
|
)
|
–
|
–
|
–
|
||||||||||||||
Stock-based compensation costs
|
–
|
1,439
|
–
|
–
|
1,439
|
|||||||||||||||
Net earnings for the year
|
–
|
–
|
851
|
–
|
851
|
|||||||||||||||
Other comprehensive income
|
||||||||||||||||||||
Foreign currency translation adjustment
|
–
|
–
|
–
|
8,262
|
8,262
|
|||||||||||||||
Changes in unrealized gains/losses on forward exchange contracts, net of
deferred income taxes of $479
|
–
|
–
|
–
|
1,347
|
1,347
|
|||||||||||||||
Total comprehensive income for the year
|
10,460
|
|||||||||||||||||||
Balance as at August 31, 2017
|
$
|
90,411
|
$
|
18,184
|
$
|
127,160
|
$
|
(38,965
|
)
|
$
|
196,790
|
Year ended August 31, 2018
|
||||||||||||||||||||||||
Share
capital |
Contributed
surplus |
Retained
earnings |
Accumulated
other comprehensive loss |
Non-controlling
interest |
Total
shareholders’ equity |
|||||||||||||||||||
Balance as at September 1, 2017
|
$
|
90,411
|
$
|
18,184
|
$
|
127,160
|
$
|
(38,965
|
)
|
$
|
–
|
$
|
196,790
|
|||||||||||
Reclassification of stock-based compensation costs (note 14)
|
1,526
|
(1,526
|
)
|
–
|
–
|
–
|
–
|
|||||||||||||||||
Stock-based compensation costs
|
–
|
1,770
|
–
|
–
|
–
|
1,770
|
||||||||||||||||||
Business combination (note 3)
|
–
|
–
|
–
|
–
|
(3,662
|
)
|
(3,662
|
)
|
||||||||||||||||
Acquisition of non-controlling interest on acquisition of subsidiary (note 3)
|
–
|
–
|
(352
|
)
|
–
|
4,014
|
3,662
|
|||||||||||||||||
Net loss for the year
|
–
|
–
|
(11,902
|
)
|
–
|
(352
|
)
|
(12,254
|
)
|
|||||||||||||||
Other comprehensive loss
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
–
|
–
|
–
|
(6,491
|
)
|
–
|
(6,491
|
)
|
||||||||||||||||
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of
$554
|
–
|
–
|
–
|
(1,894
|
)
|
–
|
(1,894
|
)
|
||||||||||||||||
Total comprehensive loss for the year
|
(20,639
|
)
|
||||||||||||||||||||||
Balance as at August 31, 2018
|
$
|
91,937
|
$
|
18,428
|
$
|
114,906
|
$
|
(47,350
|
)
|
$
|
–
|
$
|
177,921
|
Year ended August 31, 2019
|
||||||||||||||||||||
Share
capital |
Contributed
surplus |
Retained
earnings |
Accumulated
other comprehensive loss |
Total
shareholders’ equity |
||||||||||||||||
Balance as at August 31, 2018
|
$
|
91,937
|
$
|
18,428
|
$
|
114,906
|
$
|
(47,350
|
)
|
$
|
177,921
|
|||||||||
Adoption of IFRS 9 (note 2)
|
–
|
–
|
(253
|
)
|
–
|
(253
|
)
|
|||||||||||||
Adjusted balance as at September 1, 2018
|
91,937
|
18,428
|
114,653
|
(47,350
|
)
|
177,668
|
||||||||||||||
Reclassification of stock-based compensation costs (note 14)
|
1,106
|
(1,106
|
)
|
–
|
–
|
–
|
||||||||||||||
Redemption of share capital (note 14)
|
(337
|
)
|
25
|
–
|
–
|
(312
|
)
|
|||||||||||||
Stock-based compensation costs
|
–
|
1,849
|
–
|
–
|
1,849
|
|||||||||||||||
Net loss for the year
|
–
|
–
|
(2,480
|
)
|
–
|
(2,480
|
)
|
|||||||||||||
Other comprehensive income (loss)
|
||||||||||||||||||||
Foreign currency translation adjustment
|
–
|
–
|
–
|
(4,177
|
)
|
(4,177
|
)
|
|||||||||||||
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes of
$67
|
–
|
–
|
–
|
16
|
16
|
|||||||||||||||
Total comprehensive loss for the year
|
(6,641
|
)
|
||||||||||||||||||
Balance as at August 31, 2019
|
$
|
92,706
|
$
|
19,196
|
$
|
112,173
|
$
|
(51,511
|
)
|
$
|
172,564
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cash flows from operating activities
|
||||||||||||
Net earnings (loss) for the year
|
$
|
(2,480
|
)
|
$
|
(12,254
|
)
|
$
|
851
|
||||
Add (deduct) items not affecting cash
|
||||||||||||
Stock-based compensation costs
|
1,831
|
1,748
|
1,477
|
|||||||||
Depreciation and amortization
|
14,481
|
15,771
|
7,191
|
|||||||||
Gain on disposal of capital assets (note 4)
|
(1,732
|
)
|
–
|
–
|
||||||||
Writeoff of capital assets
|
1,386
|
592
|
–
|
|||||||||
Change in fair value of cash contingent consideration
|
–
|
(670
|
)
|
(383
|
)
|
|||||||
Deferred revenue
|
10,477
|
1,998
|
1,723
|
|||||||||
Deferred income taxes
|
(2,103
|
)
|
1,368
|
1,054
|
||||||||
Share in net loss of an associate
|
–
|
2,080
|
–
|
|||||||||
Gain on deemed disposal of the investment in an associate
|
–
|
(2,080
|
)
|
–
|
||||||||
Changes in foreign exchange gain/loss
|
(46
|
)
|
(181
|
)
|
1,096
|
|||||||
21,814
|
8,372
|
13,009
|
||||||||||
Changes in non-cash operating items
|
||||||||||||
Accounts receivable
|
(4,786
|
)
|
7,275
|
3,955
|
||||||||
Income taxes and tax credits
|
1,536
|
86
|
(2,386
|
)
|
||||||||
Inventories
|
(134
|
)
|
(1,020
|
)
|
911
|
|||||||
Prepaid expenses
|
(1,307
|
)
|
57
|
(918
|
)
|
|||||||
Other assets
|
(1,459
|
)
|
(1,311
|
)
|
(121
|
)
|
||||||
Accounts payable and accrued liabilities and provisions
|
3,184
|
1,033
|
(1,745
|
)
|
||||||||
Other liabilities
|
(1,606
|
)
|
(122
|
)
|
165
|
|||||||
17,242
|
14,370
|
12,870
|
||||||||||
Cash flows from investing activities
|
||||||||||||
Additions to short-term investments
|
(1,879
|
)
|
(1,550
|
)
|
(2,910
|
)
|
||||||
Proceeds from disposal and maturity of short-term investments
|
1,168
|
234
|
6,374
|
|||||||||
Purchases of capital assets (notes 8 and 9)
|
(7,498
|
)
|
(10,452
|
)
|
(7,175
|
)
|
||||||
Proceeds from disposal of capital assets (note 4)
|
3,318
|
–
|
–
|
|||||||||
Investment in an associate (note 3)
|
–
|
(12,530
|
)
|
–
|
||||||||
Business combinations, net of cash acquired (note 3)
|
–
|
(19,600
|
)
|
(12,792
|
)
|
|||||||
(4,891
|
)
|
(43,898
|
)
|
(16,503
|
)
|
|||||||
Cash flows from financing activities
|
||||||||||||
Bank loan
|
(5,195
|
)
|
11,061
|
–
|
||||||||
Repayment of long-term debt
|
(2,817
|
)
|
(1,688
|
)
|
(1,480
|
)
|
||||||
Redemption of share capital (note 14)
|
(312
|
)
|
–
|
–
|
||||||||
Other liabilities
|
–
|
(1,449
|
)
|
–
|
||||||||
Acquisition of non-controlling interest (note 3)
|
–
|
(3,657
|
)
|
–
|
||||||||
(8,324
|
)
|
4,267
|
(1,480
|
)
|
||||||||
Effect of foreign exchange rate changes on cash
|
(267
|
)
|
(416
|
)
|
340
|
|||||||
Change in cash
|
3,760
|
(25,677
|
)
|
(4,773
|
)
|
|||||||
Cash – Beginning of year
|
12,758
|
38,435
|
43,208
|
|||||||||
Cash – End of year
|
$
|
16,518
|
$
|
12,758
|
$
|
38,435
|
||||||
Supplementary information
|
||||||||||||
Income taxes paid
|
$
|
2,577
|
$
|
2,376
|
$
|
2,866
|
1
|
Nature of Activities and Incorporation
|
2
|
Basis of Presentation
|
As reported
as at August 31, 2018
|
Adjustments
|
As adjusted
as at September 1, 2018
|
||||||||||
Accounts receivable – Trade (note 6)
|
$
|
47,273
|
$
|
(303
|
)
|
$
|
46,970
|
|||||
Income taxes recoverable
|
$
|
4,790
|
$
|
50
|
$
|
4,840
|
||||||
Total assets
|
$
|
284,544
|
$
|
(253
|
)
|
$
|
284,291
|
|||||
Retained earnings
|
$
|
114,906
|
$
|
(253
|
)
|
$
|
114,653
|
|||||
Shareholders’ equity
|
$
|
177,921
|
$
|
(253
|
)
|
$
|
177,668
|
Financial assets
|
Classification – IAS 39
|
Classification – IFRS 9
|
Cash
|
Loans and receivables
|
Amortized cost
|
Short-term investments
|
Available for sale
|
Fair value through other comprehensive income
|
Accounts receivable
|
Loans and receivables
|
Amortized cost
|
Forward exchange contracts
|
Derivatives used for hedging
|
Fair value through other comprehensive income
|
Financial liabilities
|
||
Bank loan
|
Other financial liabilities
|
Amortized cost
|
Accounts payable and accrued liabilities
|
Other financial liabilities
|
Amortized cost
|
Other liabilities
|
Other financial liabilities
|
Amortized cost
|
Long-term debt
|
Other financial liabilities
|
Amortized cost
|
Forward exchange contracts
|
Derivatives used for hedging
|
Fair value through other comprehensive income
|
(a)
|
Foreign currency transactions
|
(b)
|
Foreign operations
|
Level 1: |
Quoted prices (unadjusted) in an active market for identical assets or liabilities;
|
Level 2: |
Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly or indirectly; and
|
Level 3: |
Unobservable inputs for the asset or liability.
|
Term
|
|
Land improvements
|
15 years
|
Buildings
|
20 to 60 years
|
Equipment
|
3 to 15 years
|
Leasehold improvements
|
The lesser of useful life and remaining lease term
|
(a)
|
Determination of functional currency
|
(b)
|
Determination of cash generating units and allocation of goodwill
|
(a)
|
Inventories
|
(b)
|
Income taxes
|
(c)
|
Tax credits recoverable
|
(d)
|
Impairment of non-financial assets
|
(e)
|
Purchase price allocation in business combinations
|
(f)
|
Identification of performance obligations
|
3
|
Business Combinations
|
Sales (1)
|
$
|
16,377
|
||
Net loss attributable to the parent interest (1, 2)
|
$
|
12,850
|
(1)
|
Includes acquisition-related deferred revenue fair value adjustment of $2,095,000.
|
(2)
|
Includes amortization of acquired intangible assets of $5,077,000.
|
Assets acquired
|
||||
Accounts receivable
|
$
|
16,374
|
||
Income taxes and tax credits recoverable
|
11,259
|
|||
Inventories
|
3,045
|
|||
Prepaid expenses
|
1,229
|
|||
Property, plant and equipment
|
1,944
|
|||
Core technologies
|
12,869
|
|||
Customer relationships
|
8,381
|
|||
Brand name
|
846
|
|||
Other intangible assets
|
498
|
|||
Other assets
|
1,402
|
|||
57,847
|
||||
Liabilities assumed
|
||||
Accounts payable and accrued liabilities
|
11,068
|
|||
Deferred revenue
|
4,748
|
|||
Long-term debt (note 12)
|
8,888
|
|||
Deferred income tax liabilities
|
2,692
|
|||
Other liabilities
|
6,715
|
|||
Net identifiable assets acquired
|
23,736
|
|||
Goodwill
|
2,505
|
|||
Fair value of the total consideration, net of cash acquired
|
$
|
26,241
|
Cash paid net of cash acquired
|
$
|
9,580
|
||
Fair value of shares held
|
12,967
|
|||
Non-controlling interest (purchased in February 2018)
|
3,694
|
|||
$
|
26,241
|
Assets acquired
|
||||
Accounts receivable
|
$
|
1,889
|
||
Inventories
|
2,384
|
|||
Property, plant and equipment
|
1,424
|
|||
Core technologies
|
3,686
|
|||
Customer relationships
|
811
|
|||
In-process research and development
|
305
|
|||
Other intangible assets
|
132
|
|||
Prepaid expenses
|
171
|
|||
10,802
|
||||
Liabilities assumed
|
||||
Accounts payable and accrued liabilities
|
1,035
|
|||
Long-term debt (note 12)
|
2,143
|
|||
Deferred income taxes
|
1,510
|
|||
Net identifiable assets acquired
|
6,114
|
|||
Goodwill
|
3,426
|
|||
Fair value of the total consideration, net of cash acquired
|
$
|
9,540
|
4
|
Restructuring Charges
|
Years ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Balance – Beginning of year
|
$
|
3,167
|
$
|
2,477
|
||||
Addition
|
3,305
|
3,209
|
||||||
Payments
|
(5,339
|
)
|
(2,052
|
)
|
||||
Reversal
|
–
|
(467
|
)
|
|||||
Balance – End of year (note 11)
|
$
|
1,133
|
$
|
3,167
|
5
|
Capital Disclosures
|
•
|
To maintain a flexible capital structure that optimizes the cost of capital at acceptable risk;
|
•
|
To sustain future development of the company, including research and development activities, market development and potential
acquisitions of complementary businesses or products; and
|
•
|
To provide the company’s shareholders with an appropriate return on their investment.
|
6
|
Financial Instruments
|
As at August 31, 2019
|
||||||||||||
Amortized
cost |
Fair value
through other comprehensive income |
Total
|
||||||||||
Financial assets
|
||||||||||||
Cash
|
$
|
16,518
|
$
|
–
|
$
|
16,518
|
||||||
Short-term investments
|
$
|
–
|
$
|
2,918
|
$
|
2,918
|
||||||
Accounts receivable
|
$
|
54,834
|
$
|
–
|
$
|
54,834
|
||||||
Forward exchange contracts
|
$
|
–
|
$
|
79
|
$
|
79
|
||||||
Financial liabilities
|
||||||||||||
Bank loan
|
$
|
5,000
|
$
|
–
|
$
|
5,000
|
||||||
Accounts payable and accrued liabilities
|
$
|
49,945
|
$
|
–
|
$
|
49,945
|
||||||
Other liabilities
|
$
|
1,606
|
$
|
–
|
$
|
1,606
|
||||||
Long-term debt
|
$
|
5,742
|
$
|
–
|
$
|
5,742
|
||||||
Forward exchange contracts
|
$
|
–
|
$
|
1,057
|
$
|
1,057
|
As at August 31, 2018 – IAS 39
|
||||||||||||||||||||
Loans and
receivables |
Available
for sale |
Other
financial liabilities |
Derivatives
used for hedging |
Total
|
||||||||||||||||
Financial assets
|
||||||||||||||||||||
Cash
|
$
|
12,758
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
12,758
|
||||||||||
Short-term investments
|
$
|
–
|
$
|
2,282
|
$
|
–
|
$
|
–
|
$
|
2,282
|
||||||||||
Accounts receivable
|
$
|
46,955
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
46,955
|
||||||||||
Other assets
|
$
|
352
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
352
|
||||||||||
Forward exchange contracts
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
318
|
$
|
318
|
||||||||||
Financial liabilities
|
||||||||||||||||||||
Bank loan
|
$
|
–
|
$
|
–
|
$
|
10,692
|
$
|
–
|
$
|
10,692
|
||||||||||
Accounts payable and accrued liabilities
|
$
|
–
|
$
|
–
|
$
|
47,308
|
$
|
–
|
$
|
47,308
|
||||||||||
Other liabilities
|
$
|
–
|
$
|
–
|
$
|
3,197
|
$
|
–
|
$
|
3,197
|
||||||||||
Long-term debt
|
$
|
–
|
$
|
–
|
$
|
8,828
|
$
|
–
|
$
|
8,828
|
||||||||||
Forward exchange contracts
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
807
|
$
|
807
|
As at August 31, 2019
|
As at August 31, 2018
|
|||||||||||||||
Level 1
|
Level 2
|
Level 1
|
Level 2
|
|||||||||||||
Financial assets
|
||||||||||||||||
Short-term investments
|
$
|
2,918
|
$
|
–
|
$
|
2,282
|
$
|
–
|
||||||||
Forward exchange contracts
|
$
|
–
|
$
|
79
|
$
|
–
|
$
|
318
|
||||||||
Financial liabilities
|
||||||||||||||||
Forward exchange contracts
|
$
|
–
|
$
|
1,057
|
$
|
–
|
$
|
807
|
Expiry dates
|
Contractual
amounts |
Weighted average
contractual forward rates |
|||||||
As at August 31, 2018
|
|||||||||
September 2018 to August 2019
|
$
|
26,400
|
1.3029
|
||||||
September 2019 to August 2020
|
15,700
|
1.2756
|
|||||||
September 2020 to May 2021
|
3,700
|
1.2703
|
|||||||
Total
|
$
|
45,800
|
1.2909
|
||||||
As at August 31, 2019
|
|||||||||
September 2019 to August 2020
|
$
|
35,500
|
1.3013
|
||||||
September 2020 to August 2021
|
19,900
|
1.3107
|
|||||||
September 2021 to July 2022
|
6,000
|
1.3216
|
|||||||
Total
|
$
|
61,400
|
1.3063
|
Expiry dates
|
Contractual
amounts |
Weighted average
contractual forward rates |
|||||||
As at August 31, 2018
|
|||||||||
September 2018 to May 2019
|
$
|
4,600
|
67.68
|
||||||
As at August 31, 2019
|
|||||||||
September 2019 to August 2020
|
$
|
3,500
|
71.48
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Gains (losses) on forward exchange contracts
|
$
|
(591
|
)
|
$
|
875
|
$
|
(468
|
)
|
As at August 31,
|
||||||||||||||||
2019
|
2018
|
|||||||||||||||
Carrying/nominal
amount (in thousands
of US dollars)
|
Carrying/nominal
amount (in thousands
of euros)
|
Carrying/nominal
amount (in thousands
of US dollars)
|
Carrying/nominal
amount (in thousands
of euros)
|
|||||||||||||
Financial assets
|
||||||||||||||||
Cash
|
$
|
5,531
|
€
|
3,129
|
$
|
2,790
|
€
|
3,352
|
||||||||
Accounts receivable
|
30,451
|
6,389
|
30,306
|
3,787
|
||||||||||||
35,982
|
9,518
|
33,096
|
7,139
|
|||||||||||||
Financial liabilities
|
||||||||||||||||
Bank loan
|
5,000
|
–
|
7,197
|
3,000
|
||||||||||||
Accounts payable and accrued liabilities
|
12,563
|
2,218
|
13,017
|
2,107
|
||||||||||||
Forward exchange contracts (nominal value)
|
5,800
|
–
|
5,000
|
–
|
||||||||||||
23,363
|
2,218
|
25,214
|
5,107
|
|||||||||||||
Net exposure
|
$
|
12,619
|
€
|
7,300
|
$
|
7,882
|
€
|
2,032
|
•
|
An increase (decrease) of 10% in the period-end value of the Canadian dollar compared to the US dollar would decrease (increase)
net earnings by $844,000, or $0.02 per diluted share, and $1,166,000, or $0.02 per diluted share, as at August 31, 2018 and 2019 respectively.
|
•
|
An increase (decrease) of 10% in the period-end value of the Canadian dollar compared to the euro would decrease (increase) net
earnings by $335,000, or $0.01 per diluted share, and $769,000 or $0.01 per diluted share, as at August 31, 2018 and 2019 respectively.
|
•
|
An increase (decrease) of 10% in the period-end value of the Canadian dollar compared to the US dollar would increase (decrease)
other comprehensive income by $2,956,000 and $4,072,000 as at August 31, 2018 and 2019 respectively.
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Term deposits denominated in Indian rupees, bearing interest at annual rates of 5.0% to
6.8% in 2018 and 5.1% to 7.0% in 2019, maturing on different dates between October 2018 and August 2019 in 2018 and September 2019 and May 2020 in 2019
|
$
|
2,548
|
$
|
1,909
|
||||
Other
|
370
|
373
|
||||||
$
|
2,918
|
$
|
2,282
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Current
|
$
|
39,054
|
$
|
34,344
|
||||
Past due, 0 to 30 days
|
3,529
|
6,011
|
||||||
Past due, 31 to 60 days
|
2,006
|
2,556
|
||||||
Past due, more than 60 days
|
6,928
|
4,362
|
||||||
$
|
51,517
|
$
|
47,273
|
Years ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Balance – Beginning of year
|
$
|
772
|
$
|
2,960
|
||||
IFRS 9 adoption initial adjustment (note 2)
|
303
|
–
|
||||||
Addition charged to earnings
|
864
|
834
|
||||||
Writeoff of uncollectible accounts and reversal
|
(404
|
)
|
(3,022
|
)
|
||||
Balance – End of year
|
$
|
1,535
|
$
|
772
|
As at August 31, 2019
|
||||||||||||
No later
than one year |
Later than
1 year and no later than 5 years |
Later than
5 years |
||||||||||
Bank loan
|
$
|
5,000
|
$
|
–
|
$
|
–
|
||||||
Accounts payable and accrued liabilities
|
49,945
|
–
|
–
|
|||||||||
Forward exchange contracts
|
||||||||||||
Outflow
|
39,000
|
25,900
|
–
|
|||||||||
Inflow
|
(38,252
|
)
|
(25,585
|
)
|
–
|
|||||||
Long-term debt
|
2,449
|
3,237
|
56
|
|||||||||
Other liabilities
|
1,606
|
–
|
–
|
|||||||||
Total
|
$
|
59,748
|
$
|
3,552
|
$
|
56
|
As at August 31, 2018
|
||||||||||||
No later
than one year |
Later than
1 year and no later than 5 years |
Later than
5 years |
||||||||||
Bank loan
|
$
|
10,692
|
$
|
–
|
$
|
–
|
||||||
Accounts payable and accrued liabilities
|
47,308
|
–
|
–
|
|||||||||
Forward exchange contracts
|
||||||||||||
Outflow
|
31,000
|
19,400
|
–
|
|||||||||
Inflow
|
(30,738
|
)
|
(18,940
|
)
|
–
|
|||||||
Long-term debt
|
2,921
|
5,745
|
162
|
|||||||||
Other liabilities
|
3,197
|
–
|
–
|
|||||||||
Total
|
$
|
64,380
|
$
|
6,205
|
$
|
162
|
7
|
Inventories
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Raw materials
|
$
|
24,115
|
$
|
24,561
|
||||
Work in progress
|
1,009
|
869
|
||||||
Finished goods
|
12,893
|
13,159
|
||||||
$
|
38,017
|
$
|
38,589
|
8
|
Property, Plant and Equipment
|
Land and land
improvements |
Buildings
|
Equipment
|
Leasehold
improvements |
Total
|
||||||||||||||||
Cost as at September 1, 2017
|
$
|
4,522
|
$
|
31,951
|
$
|
35,574
|
$
|
3,048
|
$
|
75,095
|
||||||||||
Additions
|
17
|
3,048
|
5,677
|
46
|
8,788
|
|||||||||||||||
Business combinations (note 3)
|
–
|
–
|
3,105
|
263
|
3,368
|
|||||||||||||||
Disposals
|
–
|
(1,413
|
)
|
(3,651
|
)
|
(175
|
)
|
(5,239
|
)
|
|||||||||||
Foreign currency translation adjustment
|
(180
|
)
|
(1,240
|
)
|
(1,617
|
)
|
(134
|
)
|
(3,171
|
)
|
||||||||||
Cost as at August 31, 2018
|
4,359
|
32,346
|
39,088
|
3,048
|
78,841
|
|||||||||||||||
Additions
|
–
|
1,116
|
3,700
|
164
|
4,980
|
|||||||||||||||
Disposals
|
(192
|
)
|
(3,378
|
)
|
(4,623
|
)
|
(164
|
)
|
(8,357
|
)
|
||||||||||
Foreign currency translation adjustment
|
(76
|
)
|
(592
|
)
|
(1,329
|
)
|
(153
|
)
|
(2,150
|
)
|
||||||||||
Cost as at August 31, 2019
|
$
|
4,091
|
$
|
29,492
|
$
|
36,836
|
$
|
2,895
|
$
|
73,314
|
||||||||||
Accumulated depreciation as at September 1, 2017
|
$
|
1,295
|
$
|
7,333
|
$
|
25,207
|
$
|
1,128
|
$
|
34,963
|
||||||||||
Depreciation for the year
|
48
|
604
|
4,420
|
372
|
5,444
|
|||||||||||||||
Disposals
|
–
|
(994
|
)
|
(3,440
|
)
|
(30
|
)
|
(4,464
|
)
|
|||||||||||
Foreign currency translation adjustment
|
(53
|
)
|
(282
|
)
|
(1,024
|
)
|
(53
|
)
|
(1,412
|
)
|
||||||||||
Accumulated depreciation as at August 31, 2018
|
1,290
|
6,661
|
25,163
|
1,417
|
34,531
|
|||||||||||||||
Depreciation for the year
|
47
|
667
|
4,391
|
364
|
5,469
|
|||||||||||||||
Disposals
|
–
|
(1,452
|
)
|
(3,673
|
)
|
(114
|
)
|
(5,239
|
)
|
|||||||||||
Foreign currency translation adjustment
|
(53
|
)
|
(120
|
)
|
(602
|
)
|
(36
|
)
|
(811
|
)
|
||||||||||
Accumulated depreciation as at August 31, 2019
|
$
|
1,284
|
$
|
5,756
|
$
|
25,279
|
$
|
1,631
|
$
|
33,950
|
||||||||||
Net carrying value as at:
|
||||||||||||||||||||
August 31, 2018
|
$
|
3,069
|
$
|
25,685
|
$
|
13,925
|
$
|
1,631
|
$
|
44,310
|
||||||||||
August 31, 2019
|
$
|
2,807
|
$
|
23,736
|
$
|
11,557
|
$
|
1,264
|
$
|
39,364
|
9
|
Intangible Assets and Goodwill
|
Core
technology |
Customer
relationships |
In-process
research and development |
Brand
name |
Software
|
Total
|
|||||||||||||||||||
Cost as at September 1, 2017
|
$
|
12,893
|
$
|
1,689
|
$
|
–
|
$
|
–
|
$
|
11,901
|
$
|
26,483
|
||||||||||||
Additions
|
89
|
–
|
–
|
–
|
3,049
|
3,138
|
||||||||||||||||||
Business combinations (note 3)
|
16,555
|
9,192
|
305
|
846
|
630
|
27,528
|
||||||||||||||||||
Disposal
|
(60
|
)
|
–
|
–
|
–
|
(2,474
|
)
|
(2,534
|
)
|
|||||||||||||||
Foreign currency translation adjustment
|
(1,419
|
)
|
(590
|
)
|
(13
|
)
|
(50
|
)
|
(446
|
)
|
(2,518
|
)
|
||||||||||||
Cost as at August 31, 2018
|
28,058
|
10,291
|
292
|
796
|
12,660
|
52,097
|
||||||||||||||||||
Additions
|
363
|
–
|
–
|
–
|
1,719
|
2,082
|
||||||||||||||||||
Disposal
|
(27
|
)
|
–
|
(293
|
)
|
–
|
(222
|
)
|
(542
|
)
|
||||||||||||||
Foreign currency translation adjustment
|
(1,955
|
)
|
(618
|
)
|
1
|
(46
|
)
|
(240
|
)
|
(2,858
|
)
|
|||||||||||||
Cost as at August 31, 2019
|
$
|
26,439
|
$
|
9,673
|
$
|
–
|
$
|
750
|
$
|
13,917
|
$
|
50,779
|
||||||||||||
Accumulated amortization as at September 1, 2017
|
$
|
5,130
|
$
|
169
|
$
|
–
|
$
|
–
|
$
|
10,001
|
$
|
15,300
|
||||||||||||
Amortization for the year
|
4,878
|
3,949
|
–
|
519
|
981
|
10,327
|
||||||||||||||||||
Disposal
|
(45
|
)
|
–
|
–
|
–
|
(2,462
|
)
|
(2,507
|
)
|
|||||||||||||||
Foreign currency translation adjustment
|
(353
|
)
|
(185
|
)
|
–
|
(7
|
)
|
(344
|
)
|
(889
|
)
|
|||||||||||||
Accumulated amortization as at August 31, 2018
|
9,610
|
3,933
|
–
|
512
|
8,176
|
22,231
|
||||||||||||||||||
Amortization for the year
|
4,926
|
2,372
|
–
|
284
|
1,430
|
9,012
|
||||||||||||||||||
Disposal
|
(19
|
)
|
–
|
–
|
–
|
(219
|
)
|
(238
|
)
|
|||||||||||||||
Foreign currency translation adjustment
|
(1,080
|
)
|
(424
|
)
|
–
|
(46
|
)
|
(330
|
)
|
(1,880
|
)
|
|||||||||||||
Accumulated amortization as at August 31, 2019
|
$
|
13,437
|
$
|
5,881
|
$
|
–
|
$
|
750
|
$
|
9,057
|
$
|
29,125
|
||||||||||||
Net carrying value as at:
|
||||||||||||||||||||||||
August 31, 2018
|
$
|
18,448
|
$
|
6,358
|
$
|
292
|
$
|
284
|
$
|
4,484
|
$
|
29,866
|
||||||||||||
August 31, 2019
|
$
|
13,002
|
$
|
3,792
|
$
|
–
|
$
|
–
|
$
|
4,860
|
$
|
21,654
|
||||||||||||
Remaining amortization period as at August 31, 2019
|
4 years
|
2 years
|
–
|
–
|
3 years
|
Years ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Balance – Beginning of year
|
$
|
39,892
|
$
|
35,077
|
||||
Business combinations (note 3)
|
–
|
5,931
|
||||||
Foreign currency translation adjustment
|
(1,244
|
)
|
(1,116
|
)
|
||||
Balance – End of year
|
$
|
38,648
|
$
|
39,892
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
EXFO CGU
|
$
|
12,949
|
$
|
13,185
|
||||
EXFO Optics CGU (note 3)
|
3,376
|
3,562
|
||||||
Service assurance, systems and services CGU
|
22,323
|
–
|
||||||
Brix CGU
|
–
|
13,327
|
||||||
Ontology CGU (note 3)
|
–
|
7,471
|
||||||
EXFO Solutions CGU (note 3)
|
–
|
2,347
|
||||||
Total
|
$
|
38,648
|
$
|
39,892
|
10
|
Credit Facilities
|
11
|
Accounts Payable and Accrued Liabilities and Provisions
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Trade
|
$
|
27,996
|
$
|
26,052
|
||||
Salaries and social benefits
|
19,716
|
18,101
|
||||||
Forward exchange contracts (note 6)
|
845
|
590
|
||||||
Other
|
2,233
|
3,155
|
||||||
$
|
50,790
|
$
|
47,898
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Warranty
|
$
|
356
|
$
|
417
|
||||
Restructuring charges (note 4)
|
1,133
|
3,167
|
||||||
Other
|
2,313
|
1,717
|
||||||
$
|
3,802
|
$
|
5,301
|
12
|
Long-Term Debt
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Unsecured, non-interest-bearing loans, denominated in euros, repayable
in quarterly instalments, maturing in March 2024 and March 2025
|
$
|
866
|
$
|
883
|
||||
Unsecured loans, denominated in euros, repayable in monthly, quarterly
or bi‑annual instalments, bearing interest at annual rates of nil to 5.0%, maturing at different dates between December 2018 and September 2023 in 2018 and March 2020 and September 2023 in 2019
|
3,111
|
4,853
|
||||||
Loans, secured by the universality of the assets of a subsidiary,
denominated in euros, repayable in monthly instalments, bearing interest at annual rates of 0.7% to 2.0%, maturing at different dates between December 2018 and August 2022 in 2018 and April 2020 and August 2022 in 2019
|
459
|
828
|
||||||
Loans, secured by the universality of the assets of a subsidiary,
denominated in euros, repayable in monthly or quarterly instalments, bearing interest at annual rates of 1.1% to 2.9%, maturing at different dates between March 2020 and July 2022
|
1,306
|
2,264
|
||||||
5,742
|
8,828
|
|||||||
Current portion of long-term debt
|
2,449
|
2,921
|
||||||
$
|
3,293
|
$
|
5,907
|
No later than one year
|
$
|
2,449
|
||
Later than one year and no later than five years
|
3,237
|
|||
Later than five years
|
56
|
|||
$
|
5,742
|
13
|
Commitments
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
No later than 1 year
|
$
|
2,895
|
$
|
3,365
|
||||
Later than 1 year and no later than 5 years
|
6,323
|
9,519
|
||||||
Later than 5 years
|
23
|
502
|
||||||
$
|
9,241
|
$
|
13,386
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
No later than 1 year
|
$
|
2,289
|
$
|
1,492
|
||||
Later than 1 year and no later than 5 years
|
2,444
|
1,982
|
||||||
$
|
4,733
|
$
|
3,474
|
14
|
Share Capital
|
Authorized – unlimited as to number, without par value
|
|
Subordinate voting and participating, bearing a non-cumulative dividend to be determined by
the Board of Directors, ranking pari passu with multiple voting shares
|
|
Multiple voting and participating, entitling to 10 votes each, bearing a non-cumulative
dividend to be determined by the Board of Directors, convertible at the holder’s option into subordinate voting shares on a one-for-one basis, ranking pari passu with subordinate voting
shares
|
Multiple Voting Shares
|
Subordinate Voting Shares
|
|||||||||||||||||||
Number
|
Amount
|
Number
|
Amount
|
Total
amount
|
||||||||||||||||
Balance as at September 1, 2016
|
31,643,000
|
$
|
1
|
21,917,942
|
$
|
85,515
|
$
|
85,516
|
||||||||||||
Issuance of share capital
|
–
|
–
|
793,070
|
3,490
|
3,490
|
|||||||||||||||
Redemption of restricted share units (note 16)
|
–
|
–
|
327,859
|
–
|
–
|
|||||||||||||||
Redemption of deferred share units (note 16)
|
–
|
–
|
29,906
|
–
|
–
|
|||||||||||||||
Reclassification of stock-based compensation costs to share capital upon exercise of stock awards
|
–
|
–
|
–
|
1,405
|
1,405
|
|||||||||||||||
Balance as at August 31, 2017
|
31,643,000
|
1
|
23,068,777
|
90,410
|
90,411
|
|||||||||||||||
Redemption of restricted share units (note 16)
|
–
|
–
|
345,883
|
–
|
–
|
|||||||||||||||
Redemption of deferred share units (note 16)
|
–
|
–
|
58,335
|
–
|
–
|
|||||||||||||||
Reclassification of stock-based compensation costs to share capital upon exercise of stock awards
|
–
|
–
|
–
|
1,526
|
1,526
|
|||||||||||||||
Balance as at August 31, 2018
|
31,643,000
|
1
|
23,472,995
|
91,936
|
91,937
|
|||||||||||||||
Redemption of restricted share units (note 16)
|
–
|
–
|
317,072
|
–
|
–
|
|||||||||||||||
Redemption of share capital
|
–
|
–
|
(86,392
|
)
|
(337
|
)
|
(337
|
)
|
||||||||||||
Reclassification of stock-based compensation costs to share capital upon exercise of stock awards
|
–
|
–
|
–
|
1,106
|
1,106
|
|||||||||||||||
Balance as at August 31, 2019
|
31,643,000
|
$
|
1
|
23,703,675
|
$
|
92,705
|
$
|
92,706
|
a)
|
On January 8, 2019, the company announced that its Board of Directors had approved a share repurchase program, by way of a normal
course issued bid on the open market of up to 6.3% of the issued and outstanding subordinate voting shares, representing 1,200,000 subordinate voting shares at the prevailing market price. The normal course issuer bid started on
January 14, 2019 and will end on January 13, 2020 or earlier if the company repurchases the maximum number of shares permitted. All shares repurchased under the bid will be cancelled.
|
15
|
Accumulated Other Comprehensive Loss
|
Foreign
currency translation adjustment |
Cash-flow
hedge |
Accumulated
other comprehensive loss |
||||||||||
Balance as at September 1, 2016
|
$
|
(49,136
|
)
|
$
|
562
|
$
|
(48,574
|
)
|
||||
Foreign currency translation adjustment
|
8,262
|
–
|
8,262
|
|||||||||
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes
|
–
|
1,347
|
1,347
|
|||||||||
Balance as at August 31, 2017
|
(40,874
|
)
|
1,909
|
(38,965
|
)
|
|||||||
Foreign currency translation adjustment
|
(6,491
|
)
|
–
|
(6,491
|
)
|
|||||||
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes
|
–
|
(1,894
|
)
|
(1,894
|
)
|
|||||||
Balance as at August 31, 2018
|
(47,365
|
)
|
15
|
(47,350
|
)
|
|||||||
Foreign currency translation adjustment
|
(4,177
|
)
|
–
|
(4,177
|
)
|
|||||||
Changes in unrealized gains/losses on forward exchange contracts, net of deferred income taxes
|
–
|
16
|
16
|
|||||||||
Balance as at August 31, 2019
|
$
|
(51,542
|
)
|
$
|
31
|
$
|
(51,511
|
)
|
16
|
Stock-Based Compensation Plans
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Stock-based compensation costs arising from
equity-settled awards |
$
|
1,849
|
$
|
1,770
|
$
|
1,439
|
||||||
Stock-based compensation costs arising from
cash-settled awards |
(18
|
)
|
(22
|
)
|
38
|
|||||||
$
|
1,831
|
$
|
1,748
|
$
|
1,477
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Outstanding – Beginning of year
|
1,615,152
|
1,611,330
|
1,551,555
|
|||||||||
Granted
|
632,931
|
420,621
|
527,143
|
|||||||||
Redeemed
|
(317,072
|
)
|
(345,883
|
)
|
(327,859
|
)
|
||||||
Forfeited
|
(94,565
|
)
|
(70,916
|
)
|
(139,509
|
)
|
||||||
Outstanding – End of year
|
1,836,446
|
1,615,152
|
1,611,330
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Outstanding – Beginning of year
|
181,689
|
174,279
|
159,127
|
|||||||||
Granted
|
69,818
|
65,745
|
45,058
|
|||||||||
Redeemed
|
–
|
(58,335
|
)
|
(29,906
|
)
|
|||||||
Outstanding – End of year
|
251,507
|
181,689
|
174,279
|
17
|
Related-Party Disclosures
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Salaries and short-term employee benefits
|
$
|
4,029
|
$
|
3,985
|
$
|
3,715
|
||||||
Stock-based compensation costs
|
1,175
|
1,047
|
775
|
|||||||||
$
|
5,204
|
$
|
5,032
|
$
|
4,490
|
18
|
Statements of Earnings
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Test and measurement
|
$
|
204,693
|
$
|
197,423
|
$
|
193,863
|
||||||
Service assurance, systems and services
|
82,788
|
71,248
|
49,906
|
|||||||||
Foreign exchange gains (losses) on forward exchange contracts
|
(591
|
)
|
875
|
(468
|
)
|
|||||||
Total sales for the year
|
$
|
286,890
|
$
|
269,546
|
$
|
243,301
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Gross research and development expenses
|
$
|
57,972
|
$
|
65,243
|
$
|
53,124
|
||||||
Research and development tax credits and grants
|
(7,419
|
)
|
(8,089
|
)
|
(5,956
|
)
|
||||||
Net research and development expenses for the year
|
$
|
50,553
|
$
|
57,154
|
$
|
47,168
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cost of sales
|
||||||||||||
Depreciation of property, plant and equipment
|
$
|
1,862
|
$
|
2,077
|
$
|
1,522
|
||||||
Amortization of intangible assets
|
7,186
|
9,212
|
2,652
|
|||||||||
9,048
|
11,289
|
4,174
|
||||||||||
Selling and administrative expenses
|
||||||||||||
Depreciation of property, plant and equipment
|
1,354
|
902
|
530
|
|||||||||
Amortization of intangible assets
|
1,043
|
592
|
251
|
|||||||||
2,397
|
1,494
|
781
|
||||||||||
Net research and development expenses
|
||||||||||||
Depreciation of property, plant and equipment
|
2,253
|
2,465
|
1,850
|
|||||||||
Amortization of intangible assets
|
783
|
523
|
386
|
|||||||||
3,036
|
2,988
|
2,236
|
||||||||||
$
|
14,481
|
$
|
15,771
|
$
|
7,191
|
|||||||
Depreciation of property, plant and equipment
|
$
|
5,469
|
$
|
5,444
|
$
|
3,902
|
||||||
Amortization of intangible assets
|
9,012
|
10,327
|
3,289
|
|||||||||
Total depreciation and amortization expenses for the year
|
$
|
14,481
|
$
|
15,771
|
$
|
7,191
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Salaries and benefits
|
$
|
136,059
|
$
|
134,453
|
$
|
115,832
|
||||||
Restructuring charges
|
3,305
|
2,072
|
3,509
|
|||||||||
Stock-based compensation costs
|
1,831
|
1,748
|
1,414
|
|||||||||
Total employee compensation for the year
|
$
|
141,195
|
$
|
138,273
|
$
|
120,755
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cost of sales
|
$
|
304
|
$
|
517
|
$
|
1,697
|
||||||
Selling and administrative expenses
|
495
|
673
|
1,150
|
|||||||||
Net research and development costs
|
2,506
|
3,219
|
2,232
|
|||||||||
Interest and other expense
|
–
|
150
|
–
|
|||||||||
Income taxes
|
(63
|
)
|
(1,150
|
)
|
–
|
|||||||
Total restructuring charges for the year
|
$
|
3,242
|
$
|
3,409
|
$
|
5,079
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Cost of sales
|
$
|
136
|
$
|
143
|
$
|
121
|
||||||
Selling and administrative expenses
|
1,375
|
1,217
|
1,052
|
|||||||||
Net research and development expenses
|
320
|
388
|
304
|
|||||||||
Total stock-based compensation costs for the year
|
$
|
1,831
|
$
|
1,748
|
$
|
1,477
|
19
|
Other Disclosures
|
•
|
Canadian defined contribution pension plan
|
•
|
US defined contribution pension plan (401K plan)
|
20
|
Income Taxes
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Income tax provision (recovery) at combined Canadian federal and provincial statutory tax rate (27%)
|
$
|
774
|
$
|
(1,775
|
)
|
$
|
2,014
|
|||||
Increase (decrease) due to:
|
||||||||||||
Foreign income/loss taxed at different rates
|
13
|
452
|
(900
|
)
|
||||||||
Non-deductible loss (non-taxable income)
|
10
|
(69
|
)
|
(245
|
)
|
|||||||
Non-deductible expenses
|
594
|
1,285
|
981
|
|||||||||
Change in tax rates
|
–
|
167
|
(10
|
)
|
||||||||
Effect of the US tax reform (1)
|
–
|
1,528
|
–
|
|||||||||
Foreign exchange effect of translation of foreign subsidiaries in the functional currency
|
63
|
(16
|
)
|
176
|
||||||||
Recognition of previously unrecognized deferred income tax assets (note 4)
|
(2,383
|
)
|
(560
|
)
|
–
|
|||||||
Utilization of previously unrecognized deferred income tax assets
|
(964
|
)
|
(627
|
)
|
(46
|
)
|
||||||
Unrecognized deferred income tax assets on temporary deductible differences and unused tax losses
|
5,761
|
6,100
|
4,659
|
|||||||||
Other
|
1,478
|
(807
|
)
|
(21
|
)
|
|||||||
Income tax provision for the year
|
$
|
5,346
|
$
|
5,678
|
$
|
6,608
|
(1)
|
On December 22, 2017, the US tax reform (“Tax Cuts and Jobs Act”) was substantively enacted and reduces the maximum corporate
income tax rate from 35% to 21%, effective January 1, 2018. Based on management’s estimate of deferred tax assets expected to be used in fiscal 2018 and beyond against taxable income in the United States, the company recorded a
deferred income tax expense of $1,528,000 in the consolidated statement of earnings for the year ended August 31, 2018 to account for the effect of this substantively enacted tax rate.
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
The income tax provision consists of the following:
|
||||||||||||
Current
|
||||||||||||
Current income taxes
|
$
|
7,449
|
$
|
4,310
|
$
|
5,554
|
||||||
Deferred
|
||||||||||||
Deferred income taxes relating to the origination and reversal of temporary differences
|
(4,517
|
)
|
(3,545
|
)
|
(3,559
|
)
|
||||||
Benefit arising from previously unrecognized tax losses and deductible temporary differences
|
(2,383
|
)
|
(560
|
)
|
–
|
|||||||
Utilization of previously unrecognized deferred income tax assets
|
(964
|
)
|
(627
|
)
|
(46
|
)
|
||||||
(7,864
|
)
|
(4,732
|
)
|
(3,605
|
)
|
|||||||
Unrecognized deferred income tax assets on temporary deductible differences and unused tax losses
|
5,761
|
6,100
|
4,659
|
|||||||||
(2,103
|
)
|
1,368
|
1,054
|
|||||||||
Income tax provision for the year
|
$
|
5,346
|
$
|
5,678
|
$
|
6,608
|
Balance
as at September 1, 2017 |
Credited
(charged) to the statement of earnings |
Credited
(charged) to shareholders’ equity |
Business
combinations |
Foreign
currency translation adjustment |
Balance
as at August 31, 2018 |
|||||||||||||||||||
Deferred income tax assets
|
||||||||||||||||||||||||
Long-lived assets
|
$
|
1,802
|
$
|
200
|
$
|
–
|
$
|
–
|
$
|
(77
|
)
|
$
|
1,925
|
|||||||||||
Provisions and accruals
|
3,772
|
(250
|
)
|
554
|
–
|
(113
|
)
|
3,963
|
||||||||||||||||
Deferred revenue
|
2,890
|
(101
|
)
|
–
|
–
|
(73
|
)
|
2,716
|
||||||||||||||||
Research and development expenses
|
2,731
|
(101
|
)
|
–
|
–
|
(106
|
)
|
2,524
|
||||||||||||||||
Losses carried forward
|
4,241
|
(2,633
|
)
|
–
|
3,687
|
(222
|
)
|
5,073
|
||||||||||||||||
Deferred income tax liabilities
|
||||||||||||||||||||||||
Long-lived assets
|
(1,002
|
)
|
1,903
|
–
|
(7,889
|
)
|
527
|
(6,461
|
)
|
|||||||||||||||
Research and development tax credits
|
(10,995
|
)
|
(386
|
)
|
–
|
–
|
445
|
(10,936
|
)
|
|||||||||||||||
Total
|
$
|
3,439
|
$
|
(1,368
|
)
|
$
|
554
|
$
|
(4,202
|
)
|
$
|
381
|
$
|
(1,196
|
)
|
|||||||||
Classified as follows:
|
||||||||||||||||||||||||
Deferred income tax assets
|
$
|
6,555
|
$
|
4,714
|
||||||||||||||||||||
Deferred income tax liabilities
|
(3,116
|
)
|
(5,910
|
)
|
||||||||||||||||||||
$
|
3,439
|
$
|
(1,196
|
)
|
Balance
as at September 1, 2018 |
Credited
(charged) to the statement of earnings |
Credited
(charged) to shareholders’ equity |
Foreign
currency translation adjustment |
Balance
as at August 31, 2019 |
||||||||||||||||
Deferred income tax assets
|
||||||||||||||||||||
Long-lived assets
|
$
|
1,925
|
$
|
2,695
|
$
|
–
|
$
|
(52
|
)
|
$
|
4,568
|
|||||||||
Provisions and accruals
|
3,963
|
446
|
67
|
15
|
4,491
|
|||||||||||||||
Deferred revenue
|
2,716
|
490
|
–
|
(36
|
)
|
3,170
|
||||||||||||||
Research and development expenses
|
2,524
|
(149
|
)
|
–
|
(45
|
)
|
2,330
|
|||||||||||||
Losses carried forward
|
5,073
|
(2,751
|
)
|
–
|
(176
|
)
|
2,146
|
|||||||||||||
|
||||||||||||||||||||
Deferred income tax liabilities
|
||||||||||||||||||||
Long-lived assets
|
(6,461
|
)
|
1,710
|
–
|
345
|
(4,406
|
)
|
|||||||||||||
Research and development tax credits
|
(10,936
|
)
|
(338
|
)
|
–
|
198
|
(11,076
|
)
|
||||||||||||
Total
|
$
|
(1,196
|
)
|
$
|
2,103
|
$
|
67
|
$
|
249
|
$
|
1,223
|
|||||||||
Classified as follows:
|
||||||||||||||||||||
Deferred income tax assets
|
$
|
4,714
|
$
|
4,821
|
||||||||||||||||
Deferred income tax liabilities
|
(5,910
|
)
|
(3,598
|
)
|
||||||||||||||||
$
|
(1,196
|
)
|
$
|
1,223
|
As at August 31,
|
||||||||
2019
|
2018
|
|||||||
Temporary deductible differences
|
$
|
241
|
$
|
1,435
|
||||
Losses carried forward
|
39,721
|
42,361
|
||||||
$
|
39,962
|
$
|
43,796
|
Year of expiry
|
Finland
|
France
|
Spain
|
United States
|
United Kingdom
|
|||||||||||||||
2020
|
$
|
3,397
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
||||||||||
2021
|
6,345
|
–
|
–
|
1,958
|
–
|
|||||||||||||||
2022
|
11,001
|
–
|
–
|
7,435
|
–
|
|||||||||||||||
2023
|
7,127
|
–
|
–
|
1,972
|
–
|
|||||||||||||||
2024
|
5,502
|
–
|
–
|
1,351
|
–
|
|||||||||||||||
2025
|
6,859
|
–
|
–
|
1,351
|
–
|
|||||||||||||||
2026
|
235
|
–
|
–
|
1,351
|
–
|
|||||||||||||||
2027
|
1,425
|
–
|
–
|
1,351
|
–
|
|||||||||||||||
2028
|
–
|
–
|
–
|
2,447
|
–
|
|||||||||||||||
2030
|
–
|
–
|
–
|
2,713
|
–
|
|||||||||||||||
2031
|
–
|
–
|
–
|
109
|
–
|
|||||||||||||||
2033
|
–
|
–
|
–
|
4,681
|
–
|
|||||||||||||||
2034
|
–
|
–
|
–
|
4,851
|
–
|
|||||||||||||||
2035
|
–
|
–
|
–
|
2,616
|
–
|
|||||||||||||||
2036
|
–
|
–
|
–
|
8,501
|
–
|
|||||||||||||||
2037
|
–
|
–
|
–
|
9,660
|
–
|
|||||||||||||||
2038
|
–
|
–
|
–
|
7,997
|
–
|
|||||||||||||||
Indefinite
|
–
|
35,839
|
6,100
|
–
|
4,461
|
|||||||||||||||
$
|
41,891
|
$
|
35,839
|
$
|
6,100
|
$
|
60,344
|
$
|
4,461
|
(1)
|
Undistributed profits of its foreign subsidiaries will not be distributed in the foreseeable future; and
|
(2)
|
Undistributed profits of its domestic subsidiaries will not be taxable when distributed.
|
21
|
Earnings per Share
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Basic weighted average number of shares outstanding (000’s)
|
55,325
|
54,998
|
54,423
|
|||||||||
Plus dilutive effect of (000’s):
|
||||||||||||
Restricted share units
|
–
|
–
|
979
|
|||||||||
Deferred share units
|
–
|
–
|
153
|
|||||||||
Diluted weighted average number of shares outstanding (000’s)
|
55,325
|
54,998
|
55,555
|
|||||||||
Stock awards excluded from the calculation of the diluted weighted average number of shares outstanding
because their exercise price was greater than the average market price of the common shares, or their inclusion would be antidilutive (000’s)
|
1,701
|
1,799
|
–
|
22
|
Segment Information
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
United States
|
$
|
106,607
|
$
|
100,225
|
$
|
97,186
|
||||||
Canada
|
15,913
|
18,425
|
22,586
|
|||||||||
Other
|
21,391
|
16,743
|
14,951
|
|||||||||
Americas
|
143,911
|
135,393
|
134,723
|
|||||||||
United Kingdom
|
16,438
|
17,508
|
11,799
|
|||||||||
Other
|
76,285
|
67,169
|
50,302
|
|||||||||
Europe, Middle East and Africa
|
92,723
|
84,677
|
62,101
|
|||||||||
China
|
27,620
|
20,724
|
22,312
|
|||||||||
Other
|
22,636
|
28,752
|
24,165
|
|||||||||
Asia-Pacific
|
50,256
|
49,476
|
46,477
|
|||||||||
$
|
286,890
|
$
|
269,546
|
$
|
243,301
|
As at August 31, 2019
|
As at August 31, 2018
|
|||||||||||||||||||||||
Property,
plant and equipment |
Intangible
assets |
Goodwill
|
Property,
plant and equipment |
Intangible
assets |
Goodwill
|
|||||||||||||||||||
Canada
|
$
|
29,517
|
$
|
5,675
|
$
|
17,487
|
$
|
32,107
|
$
|
5,668
|
$
|
4,481
|
||||||||||||
United States
|
7
|
–
|
–
|
1,677
|
435
|
13,327
|
||||||||||||||||||
Finland
|
331
|
446
|
8,547
|
473
|
380
|
8,704
|
||||||||||||||||||
France
|
1,896
|
12,788
|
5,600
|
2,401
|
19,330
|
5,909
|
||||||||||||||||||
United Kingdom
|
640
|
2,706
|
7,014
|
755
|
4,005
|
7,471
|
||||||||||||||||||
India
|
4,249
|
23
|
–
|
4,021
|
28
|
–
|
||||||||||||||||||
China
|
2,667
|
16
|
–
|
2,822
|
20
|
–
|
||||||||||||||||||
Other
|
57
|
–
|
–
|
54
|
–
|
–
|
||||||||||||||||||
$
|
39,364
|
$
|
21,654
|
$
|
38,648
|
$
|
44,310
|
$
|
29,866
|
$
|
39,892
|
Consolidated statement of earnings data: (1)
|
2019
|
2018
|
2017
|
2019
|
2018
|
2017
|
||||||||||||||||||
Sales
|
$
|
286,890
|
$
|
269,546
|
$
|
243,301
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||||||||
Cost of sales (2)
|
118,677
|
105,004
|
94,329
|
41.4
|
39.0
|
38.8
|
||||||||||||||||||
Selling and administrative
|
98,646
|
98,794
|
86,256
|
34.4
|
36.7
|
35.5
|
||||||||||||||||||
Net research and development
|
50,553
|
57,154
|
47,168
|
17.6
|
21.2
|
19.4
|
||||||||||||||||||
Depreciation of property, plant and equipment
|
5,469
|
5,444
|
3,902
|
1.9
|
2.0
|
1.6
|
||||||||||||||||||
Amortization of intangible assets
|
9,012
|
10,327
|
3,289
|
3.1
|
3.8
|
1.4
|
||||||||||||||||||
Change in fair value of cash contingent consideration
|
–
|
(670
|
)
|
(383
|
)
|
–
|
(0.3
|
)
|
(0.2
|
)
|
||||||||||||||
Interest and other expense
|
718
|
1,378
|
303
|
0.3
|
0.5
|
0.1
|
||||||||||||||||||
Foreign exchange (gain) loss
|
949
|
(1,309
|
)
|
978
|
0.3
|
(0.5
|
)
|
0.4
|
||||||||||||||||
Share in net loss of an associate
|
–
|
2,080
|
–
|
–
|
0.8
|
–
|
||||||||||||||||||
Gain on deemed disposal of the investment in an associate
|
–
|
(2,080
|
)
|
–
|
–
|
(0.8
|
)
|
–
|
||||||||||||||||
Earnings (loss) before income taxes
|
2,866
|
(6,576
|
)
|
7,459
|
1.0
|
(2.4
|
)
|
3.0
|
||||||||||||||||
Income taxes
|
5,346
|
5,678
|
6,608
|
1.9
|
2.1
|
2.7
|
||||||||||||||||||
Net earnings (loss) for the year
|
(2,480
|
)
|
(12,254
|
)
|
851
|
(0.9
|
)
|
(4.5
|
)
|
0.3
|
||||||||||||||
Net loss for the year attributable to non-controlling interest
|
–
|
(352
|
)
|
–
|
–
|
(0.1
|
)
|
–
|
||||||||||||||||
Net earnings (loss) for the year attributable to the parent interest
|
$
|
(2,480
|
)
|
$
|
(11,902
|
)
|
$
|
851
|
(0.9
|
)%
|
(4.4
|
)%
|
0.3
|
%
|
||||||||||
Basic and diluted net earnings (loss) attributable to the parent interest per share
|
$
|
(0.04
|
)
|
$
|
(0.22
|
)
|
$
|
0.02
|
||||||||||||||||
Other selected information:
|
||||||||||||||||||||||||
Gross margin before depreciation and amortization (3)
|
$
|
168,213
|
$
|
164,542
|
$
|
148,972
|
58.6
|
%
|
61.0
|
%
|
61.2
|
%
|
||||||||||||
Research and development data:
|
||||||||||||||||||||||||
Gross research and development
|
$
|
57,972
|
$
|
65,243
|
$
|
53,124
|
20.2
|
%
|
24.2
|
%
|
21.8
|
%
|
||||||||||||
Restructuring charges included in:
|
||||||||||||||||||||||||
Cost of sales
|
$
|
304
|
$
|
517
|
$
|
1,697
|
0.1
|
%
|
0.2
|
%
|
0.7
|
%
|
||||||||||||
Selling and administrative expenses
|
$
|
495
|
$
|
673
|
$
|
1,150
|
0.2
|
%
|
0.2
|
%
|
0.5
|
%
|
||||||||||||
Net research and development expenses
|
$
|
2,506
|
$
|
3,219
|
$
|
2,232
|
0.9
|
%
|
1.2
|
%
|
0.9
|
%
|
||||||||||||
Adjusted EBITDA (3, 4)
|
$
|
25,585
|
$
|
17,198
|
$
|
22,041
|
8.9
|
%
|
6.4
|
%
|
9.1
|
%
|
||||||||||||
Consolidated balance sheet data: (1)
|
||||||||||||||||||||||||
Total assets
|
$
|
277,602
|
$
|
284,544
|
$
|
259,241
|
(1)
|
Consolidated statement of earnings and balance sheet data has been derived from our consolidated financial statements
prepared according with IFRS, as issued by the IASB, except for non-IFRS measures.
|
(2)
|
The cost of sales is exclusive of depreciation and amortization, shown separately.
|
(3)
|
Refer to page 76 for non-IFRS measures.
|
(4)
|
Includes acquisition-related costs of $2.2 million or 0.8% of sales in fiscal 2018 and $1.1 million or 0.4% of sales in 2017 (nil in 2019).
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Test and measurement
|
$
|
204,693
|
$
|
197,423
|
$
|
193,863
|
||||||
Service assurance, systems and services
|
82,788
|
71,248
|
49,906
|
|||||||||
287,481
|
268,671
|
243,769
|
||||||||||
Foreign exchange gains (losses) on forward exchange contracts
|
(591
|
)
|
875
|
(468
|
)
|
|||||||
Total sales
|
$
|
286,890
|
$
|
269,546
|
$
|
243,301
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Test and measurement
|
$
|
210,055
|
$
|
193,836
|
$
|
198,583
|
||||||
Service assurance, systems and services
|
88,341
|
72,982
|
53,651
|
|||||||||
298,396
|
266,818
|
252,234
|
||||||||||
Foreign exchange gains (losses) on forward exchange contracts
|
(591
|
)
|
875
|
(468
|
)
|
|||||||
Total bookings
|
$
|
297,805
|
$
|
267,693
|
$
|
251,766
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
Americas
|
50
|
%
|
50
|
%
|
55
|
%
|
||||||
Europe, Middle East and Africa (EMEA)
|
32
|
32
|
26
|
|||||||||
Asia-Pacific (APAC)
|
18
|
18
|
19
|
|||||||||
100
|
%
|
100
|
%
|
100
|
%
|
Cash flows provided by operating activities
|
$
|
17,242
|
||
Proceeds from disposal of capital assets
|
3,318
|
|||
Purchases of capital assets
|
(7,498
|
)
|
||
Repayment of bank loan
|
(5,195
|
)
|
||
Repayment of long-term debt and other liabilities
|
(2,817
|
)
|
||
Redemption of share capital
|
(312
|
)
|
||
Unrealized foreign exchange loss on cash and short-term investments
|
(342
|
)
|
||
$
|
4,396
|
Long-term
debt
|
Operating
leases
|
Licensing
agreements
|
Total
|
|||||||||||||
No later than one year
|
$
|
2,449
|
$
|
2,895
|
$
|
2,289
|
$
|
7,633
|
||||||||
Later than one year and no later than five years
|
3,237
|
6,323
|
2,444
|
12,004
|
||||||||||||
Later than five years
|
56
|
23
|
–
|
79
|
||||||||||||
$
|
5,742
|
$
|
9,241
|
$
|
4,733
|
$
|
19,716
|
Expiry dates
|
Contractual
amounts
|
Weighted average
contractual
forward rates
|
||||||
September 2019 to August 2020
|
$
|
35,500,000
|
1.3013
|
|||||
September 2020 to August 2021
|
19,900,000
|
1.3107
|
||||||
September 2021 to July 2022
|
6,000,000
|
1.3216
|
||||||
Total
|
$
|
61,400,000
|
1.3063
|
Expiry dates
|
Contractual
amount
|
Weighted average
contractual
forward rate
|
||||||
September 2019 to August 2020
|
$
|
3,500,000
|
71.48
|
(a)
|
Determination of functional currency
|
(a)
|
Inventories
|
(b)
|
Income taxes
|
(c)
|
Tax credits recoverable
|
(d)
|
Impairment of non-financial assets
|
EXFO CGU
|
$
|
12,949,000
|
|||
EXFO Optics CGU
|
3,376,000
|
||||
Service assurance, systems and services (SASS) CGU
|
22,323,000
|
||||
Total
|
$
|
38,648,000
|
(e)
|
Purchase price allocation in business combinations
|
i)
|
Growth rates
|
ii)
|
Discount rate
|
(f)
|
Identification of performance obligations
|
As reported
as at
August 31, 2018
|
Adjustments
|
As adjusted
as at
September 1, 2018
|
||||||||||
Accounts receivables – Trade
|
$
|
47,273
|
$
|
(303
|
)
|
$
|
46,970
|
|||||
Income taxes and tax credits recoverable
|
$
|
4,790
|
$
|
50
|
$
|
4,840
|
||||||
Total assets
|
$
|
284,544
|
$
|
(253
|
)
|
$
|
284,291
|
|||||
Retained earnings
|
$
|
114,906
|
$
|
(253
|
)
|
$
|
114,653
|
|||||
Shareholders’ equity
|
$
|
177,921
|
$
|
(253
|
)
|
$
|
177,668
|
Financial assets
|
Classification – IAS 39
|
Classification – IFRS 9
|
Cash
|
Loans and receivables
|
Amortized cost
|
Short-term investments
|
Available for sale
|
Fair value through other comprehensive income
|
Accounts receivable
|
Loans and receivables
|
Amortized cost
|
Forward exchange contracts
|
Derivatives used for hedging
|
Fair value through other comprehensive income
|
Financial liabilities
|
Classification – IAS 39
|
Classification – IFRS 9
|
Bank loan
|
Other financial liabilities
|
Amortized cost
|
Accounts payable and accrued liabilities
|
Other financial liabilities
|
Amortized cost
|
Other liabilities
|
Other financial liabilities
|
Amortized cost
|
Long-term debt
|
Other financial liabilities
|
Amortized cost
|
Forward exchange contracts
|
Derivatives used for hedging
|
Fair value through other comprehensive income
|
Years ended August 31,
|
||||||||||||
2019
|
2018
|
2017
|
||||||||||
IFRS net earnings (loss) attributable to the parent interest for the year
|
$
|
(2,480
|
)
|
$
|
(11,902
|
)
|
$
|
851
|
||||
Add (deduct):
|
||||||||||||
Depreciation of property, plant and equipment
|
5,469
|
5,444
|
3,902
|
|||||||||
Amortization of intangible assets
|
9,012
|
10,327
|
3,289
|
|||||||||
Interest and other expense
|
718
|
1,378
|
303
|
|||||||||
Income taxes
|
5,346
|
5,678
|
6,608
|
|||||||||
Stock-based compensation costs
|
1,831
|
1,748
|
1,414
|
|||||||||
Restructuring charges
|
3,305
|
4,409
|
5,079
|
|||||||||
Change in fair value of cash contingent consideration
|
–
|
(670
|
)
|
(383
|
)
|
|||||||
Acquisition-related deferred revenue fair value adjustment
|
1,435
|
2,095
|
–
|
|||||||||
Foreign exchange (gain) loss
|
949
|
(1,309
|
)
|
978
|
||||||||
Adjusted EBITDA for the year (1)
|
$
|
25,585
|
$
|
17,198
|
$
|
22,041
|
||||||
Adjusted EBITDA in percentage of total sales
|
8.9
|
%
|
6.4
|
%
|
9.1
|
%
|
(1)
|
Includes acquisition-related costs of $1.1 million and $2.2 million in fiscal 2017 and 2018 respectively (nil in fiscal 2019).
|
1st quarter
|
2nd quarter
|
3rd quarter
|
4th quarter
|
Year ended
August 31, |
||||||||||||||||
2019
|
||||||||||||||||||||
Sales
|
$
|
69,201
|
$
|
73,927
|
$
|
73,587
|
$
|
70,175
|
$
|
286,890
|
||||||||||
Cost of sales (2)
|
$
|
28,897
|
$
|
29,062
|
$
|
30,458
|
$
|
30,260
|
$
|
118,677
|
||||||||||
Net earnings (loss)
|
$
|
(7,467
|
)
|
$
|
5,193
|
$
|
21
|
$
|
(227
|
)
|
$
|
(2,480
|
)
|
|||||||
Basic and diluted net earnings (loss) (3)
|
$
|
(0.14
|
)
|
$
|
0.09
|
$
|
0.00
|
$
|
(0.00
|
)
|
$
|
(0.04
|
)
|
1st quarter
|
2nd quarter
|
3rd quarter
|
4th quarter
|
Year ended
August 31, |
||||||||||||||||
2018
|
||||||||||||||||||||
Sales
|
$
|
63,391
|
$
|
64,722
|
$
|
72,217
|
$
|
69,216
|
$
|
269,546
|
||||||||||
Cost of sales (2)
|
$
|
23,289
|
$
|
25,326
|
$
|
28,963
|
$
|
27,426
|
$
|
105,004
|
||||||||||
Net earnings (loss) attributable to the parent interest
|
$
|
2,679
|
$
|
(4,660
|
)
|
$
|
(5,970
|
)
|
$
|
(3,951
|
)
|
$
|
(11,902
|
)
|
||||||
Basic and diluted net earnings (loss) attributable to the parent interest per share (3)
|
$
|
0.05
|
$
|
(0.08
|
)
|
$
|
(0.11
|
)
|
$
|
(0.07
|
)
|
$
|
(0.22
|
)
|
(1)
|
Quarterly financial information has been derived from our unaudited condensed interim consolidated financial statements, which are
prepared in accordance with IFRS, as issued by the IASB, applicable to the preparation of interim financial statements, including IAS 34, “Interim Financial Reporting”. The presentation
currency is the US dollar, which differs from the functional currency of the company (Canadian dollar).
|
(2)
|
The cost of sales is exclusive of depreciation and amortization.
|
(3)
|
Per share data is calculated independently for each quarter presented. Therefore, the sum of this quarterly information does not
equal the corresponding annual information.
|
/s/ Germain Lamonde
|
/s/ Philippe Morin
|
Germain Lamonde
|
Philippe Morin
|
Executive Chairman of the Board
|
Chief Executive Officer
|
EXFO Inc. | EXFO Inc. |
1.
|
to receive the consolidated financial statements of the Corporation for the financial year ended
August 31, 2019, and the Auditor’s report thereon;
|
2.
|
to elect Directors of the Corporation;
|
3.
|
to appoint PricewaterhouseCoopers LLP as auditors and to authorize the Audit Committee to fix their
remuneration;
|
4.
|
to transact such further or other business as may properly come before the Meeting or any adjournment
or adjournments thereof.
|
|
|
Under Canadian Securities Law, you are entitled to receive certain investor documents. If you wish to receive such material,
please tick the applicable boxes below. You may also go to AST website https://ca.astfinancial.com/financialstatements and input code 1629a.
☐ I would like to receive quarterly financial statements
☐ I do not want to receive annual financial statements
☐ I would like to receive future mailings by email at _____________________________
I/We authorize you to act in accordance with my/our instructions set out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above, this Proxy will be voted FOR a matter by Management's appointees or, if you appoint another proxyholder, as that other proxyholder sees fit. On any
amendments or variations proposed or any new business properly submitted before the Meeting, I/We authorize you to vote as you see fit.
________________________________________________ __________________
Signature(s)
Date
Please sign exactly as your name(s) appear on this proxy. Please see reverse for instructions. All proxies must be received by January 7th, 2020 at 5:00 p.m.
(Eastern time).
|
|||||
I/We, being holder(s) of subordinate
voting shares of EXFO Inc. (the "Company"), hereby appoint: Germain Lamonde, Executive Chairman, or, failing him, Philippe Morin, Chief Executive Officer OR
__________________________________________________________________________________________
Print the name of the person you are appointing if this person is someone other than the individuals listed above
as proxy of the undersigned, to attend, act and vote on behalf of the undersigned in accordance with the below direction (or if no directions have been given, as the proxy sees fit) on all the
following matters and any other matter that may properly come before the Annual Meeting of Shareholders of the Company to be held at 9:00 a.m. (Eastern Time) on Wednesday,
January 8, 2020, at the Vantage Venues, 150 King Street West, 27th Floor, L2 Room, Toronto, Ontario, Canada (the "Meeting"), and at any and all adjournments or postponements thereof in the same manner, to the same
extent and with the same powers as if the undersigned was/were personally present, with full power of substitution.
|
|||||||
Management recommends voting FOR Resolutions 1 and 2. Please use a dark black pencil or pen.
|
|||||||
1. Election
of Directors
|
FOR
|
WITHHOLD
|
|||||
1. François Côté
|
☐
|
☐
|
|||||
2. Germain Lamonde
|
☐
|
☐
|
|||||
3. Angela Logothetis
|
☐
|
☐
|
|||||
4. Philippe Morin
|
☐
|
☐
|
|||||
5. Claude Séguin
|
☐
|
☐
|
|||||
6. Randy E. Tornes
|
☐
|
☐
|
|||||
2. Appointment
of Auditors
|
FOR
|
WITHHOLD
|
|||||
Appointment of PricewaterhouseCoopers LLP
as Auditors
|
☐
|
☐
|
|||||
|
|
How to Vote
|
||
Proxy Form – Annual Meeting of Shareholders of EXFO Inc. to be held on January 8, 2020 (the "Meeting")
Notes to Proxy
|
INTERNET
● Go to www.astvotemyproxy.com
● Cast your vote online
● View Meeting documents
|
TELEPHONE
Use any touch-tone phone, call toll free in Canada and United States
1-888-489-7352 and follow the voice instructions
|
|
1. This proxy must be signed by a holder or his or her attorney duly authorized in writing. If you are an individual, please sign exactly as your name appears on this proxy. If the holder is a
corporation, a duly authorized officer or attorney of the corporation must sign this proxy, and if the corporation has a corporate seal, its corporate seal should be affixed.
|
To vote using your smartphone,
please scan this QR Code è |
|
|
2. If the securities are registered in the name of an executor, administrator or trustee, please sign exactly as your name appears on this proxy. If the securities are registered in the name of
a deceased or other holder, the proxy must be signed by the legal representative with his or her name printed below his or her signature, and evidence of authority to sign on behalf of the deceased or other holder must be
attached to this proxy.
|
To vote by telephone or Internet you will need your control number. If you
vote by Internet or telephone, do not return this proxy.
MAIL, FAX or EMAIL
|
||
3. Some holders may own securities as both a registered and a beneficial holder; in which case you may receive more than one Circular and will need to vote separately as a registered and
beneficial holder. Beneficial holders may be forwarded either a form of proxy already signed by the intermediary or a voting instruction form to allow them to direct the voting of securities they beneficially own. Beneficial
holders should follow instructions for voting conveyed to them by their intermediaries.
|
● Complete and return your
signed proxy in the envelope provided
or send to:
AST Trust Company (Canada) ("AST")
P.O. Box 721 Agincourt, ON M1S 0A1 |
||
4. If a security is held by two or more individuals, any one of them present or represented by proxy at the Meeting may, in the absence of the other or others, vote at the Meeting. However, if
one or more of them are present or represented by proxy, they must vote together the number of securities indicated on the proxy.
|
● You may alternatively fax your proxy to
416-368-2502 or toll free in Canada
and the United States to 1-866-781-3111 or scan and email to
proxy@astfinancial.com
|
||
All holders should refer to the Proxy Circular for further information regarding completion and use of this proxy and other information pertaining to the Meeting.
This proxy is solicited by and on behalf of Management of the Company.
|
An undated proxy is deemed to bear the date on which it is mailed by management to you.
If you wish to receive investor documents electronically in future, please visit https://ca.astfinancial.com/edelivery to enroll. |
||
All proxies must be received by January 7, 2020 at 5:00 p.m. (Eastern time).
|
Name of Shareholder
|
Number of
Subordinate Voting Shares |
Percentage of Voting
Rights Attached to All Subordinate Voting Shares |
Number of
Multiple Voting Shares (1) |
Percentage of Voting
Rights Attached to All Multiple Voting Shares |
Percentage of Voting
Rights Attached to All Subordinate and Multiple Voting Shares |
|||
Germain Lamonde
|
3,672,474
|
(2)
|
15.38%
|
31,643,000
|
(3)
|
100%
|
94.06%
|
(1)
|
The holder of Multiple Voting Shares is entitled to ten (10) votes for each share.
|
(2)
|
Mr. Lamonde exercises control over 3,191,666 Subordinate Voting Shares through G. Lamonde Investissements Financiers
Inc., a company controlled by Mr. Lamonde. Mr. Lamonde exercises control over 316,247 Subordinate Voting Shares through 9356-8988 Québec Inc., a company controlled by Mr. Lamonde. Mr. Lamonde exercises direct control over 164,561
Subordinate Voting Shares.
|
(3)
|
Mr. Lamonde exercises control over 29,743,000 Multiple Voting Shares through G. Lamonde Investissements Financiers
Inc., a company controlled by Mr. Lamonde. Mr. Lamonde exercises control over 1,900,000 Multiple Voting Shares through 9356-8988 Québec Inc., a company controlled by Mr. Lamonde.
|
GERMAIN LAMONDE
|
||||||||
|
St-Augustin-de-Desmaures,
Quebec, Canada Director since
September 1985 Not Independent
(Management) Principal Occupation:
Executive Chairman of the Board of Directors |
Germain
Lamonde, founder of EXFO, is Executive Chairman of the Board and served as the company’s Chief Executive Officer (CEO) for over 30 years. During his tenure as CEO, Mr. Lamonde grew the company from the ground up, turning
it into a global leader in the communications test, monitoring and analytics market and the world’s #1 fiber/highspeed testing company, with customers in over one hundred countries. Today as Executive Chairman, Mr. Lamonde leads
EXFO’s acquisitions strategy and is actively involved in defining the company’s growth and investment strategies, strategic direction and corporate governance policies. Mr. Lamonde has served on the board of directors of several
public and private organizations, fulfilled numerous speaking engagements, and received several industry awards for his leadership, innovation and global development and was named EY Entrepreneur of the Year 2018 Canada. Mr.
Lamonde is presently Chairman of ENCQOR, the Canada–Quebec-Ontario partnership focused on research and innovation in the field of 5G/IoT innovation and serves on the Board of QG100 – a CEO development forum. Mr. Lamonde holds a
bachelor’s degree in engineering physics from Polytechnique Montréal and a master’s degree in optics from Université Laval in Québec City. He is a graduate of the Ivey Executive Program at Western University in London, Ontario,
and is also a Fellow of the Canadian Academy of Engineering.
|
||||||
Board/Committee Membership
|
Attendance (1)
|
Board Memberships of Another Reporting Issuer
|
||||||
Board of Directors
|
5/6
|
83%
|
–
|
|||||
Securities Held
|
||||||||
As at
|
Subordinate
Voting Shares (#) |
Multiple Voting
Shares (#) |
PSUs (#)
|
RSUs (#)
|
Total Shares (2)
and PSUs, RSUs (#) |
Total Market Value (3)
of Shares (2) and PSUs, RSUs (US$) |
||
August 31, 2019
|
3,672,474 (4)
|
31,643,000 (5)
|
–
|
–
|
35,315,474
|
128,901,480
|
||
(1)
|
From September 1, 2018 until November 1, 2019, Mr. Lamonde attended four (4) board meetings in person and one (1)
board meeting by telephone.
|
(2)
|
Includes both Subordinate Voting Shares and Multiple Voting Shares.
|
(3)
|
The value of unvested PSUs or RSUs at the financial year-end is the market value of the Subordinate Voting Shares
on August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares and Multiple Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the
Toronto Stock Exchange and on the NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the
Toronto Stock Exchange closing price to United States dollars as required. The actual gains on vesting of PSUs or RSUs will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance
that these values will be realized.
|
(4)
|
Mr. Lamonde exercises control over 3,191,666 Subordinate Voting Shares through G. Lamonde Investissements
Financiers Inc., a company controlled by Mr. Lamonde. Mr. Lamonde exercises control over 316,247 Subordinate Voting Shares through 9356-8988 Québec Inc., a company controlled by Mr. Lamonde. Mr. Lamonde exercises direct control
over 164,561 Subordinate Voting Shares.
|
(5)
|
Mr. Lamonde exercises control over 29,743,000 Multiple Voting Shares through G. Lamonde Investissements Financiers
Inc., a company controlled by Mr. Lamonde. Mr. Lamonde exercises control over 1,900,000 Multiple Voting Shares through 9356-8988 Québec Inc., a company controlled by Mr. Lamonde.
|
FRANÇOIS CÔTÉ
|
||
|
Montreal, Quebec, Canada
Director since
January 2015 Lead Director
Independent
Principal Occupation:
Director
|
François
Côté was appointed a member of our Board of Directors in January 2015. Mr. Côté is a director as a full-time occupation, for corporations in the public, private and non-profit sectors, bringing his expertise in strategy,
M&A, governance and passion for growth. Mr. Côté held a variety of executive positions at Bell Canada prior to becoming President and Chief Executive Officer of Emergis. Following the acquisition of Emergis by TELUS in January
2008, he was appointed President of TELUS Quebec, TELUS Health and TELUS Ventures. In this role, Mr. Côté was responsible for broadening TELUS Quebec’s presence and driving the company’s national health strategy through timely
investments in information technology and innovative wireless solutions. Mr. Côté holds a bachelor’s degree in Industrial Relations from Laval University. In 2007, he was named Entrepreneur of the Year by Ernst & Young, in the
Corporate Restructuring category for the province of Quebec. Mr. Côté serves on the boards of Purkinje, a Montreal health IT growth company as Chairman, Aspire Food Group, HZB Pharma Canada also as Chairman and Diagnos Inc. a new
publicly listed company on the TSX Venture Exchange. Mr. Côté also serves on the Advisor Committee of Groupe Morneau.
|
Board/Committee Membership
|
Attendance (1)
|
Board Memberships of Another Reporting Issuer
|
|
Board of Directors
Audit Committee Human Resources Committee Independent Board of Directors |
6/6
5/5 5/5 5/5 |
100%
100% 100% 100% |
Diagnos Inc.
|
Securities Held
|
||||
As at
|
Subordinate
Voting Shares (#) |
DSUs (#)
|
Total Shares (2)
and DSUs (#) |
Total Market Value (3)
of Shares (2) and DSUs (US$) |
August 31, 2019
|
6,500
|
38,582
|
45,082
|
164,549
|
(1)
|
From September 1, 2018 until November 1, 2019, Mr. Côté attended five (5) board meetings in person and one (1)
board meeting by telephone.
|
(2)
|
Refers to Subordinate Voting Shares.
|
(3)
|
The value of unvested DSUs at the financial year-end is the market value of the Subordinate Voting Shares on
August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange and on
the NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing
price to United States dollars as required. The actual gains on vesting of DSUs will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance that these values will be realized.
|
ANGELA LOGOTHETIS
|
||
|
Bath
United Kingdom Director since
January 2017 Independent
Principal Occupation:
Vice President and CTO,
Amdocs Open Network (1)
|
Angela
Logothetis has more than twenty-five (25) years of international experience in the telecommunications industry. She has been strategically engaged in the industry’s major network
transformations. Ms. Logothetis has an outstanding software pedigree having worked for market-leading software companies including Amdocs, Cramer, PricewaterhouseCoopers and Accenture as well as start-up software companies
Clarity and Time Quantum Technology. She has held senior leadership positions in ANZ, APAC and EMEA and has held global responsibility for the past ten (10) years. Ms. Logothetis is the CTO for Amdocs Open Network. Amdocs is the
market leader in customer experience software solutions and services for the world’s largest communications, entertainment and media service providers. Ms. Logothetis has held several senior leadership positions at Amdocs
including Head of OSS Product and Technology, Vice President of OSS Product Management and Executive Site Lead for Amdocs Bath. She has chaired high-caliber software forums in Amdocs including the Divisional Leadership Team, the
Technical Advisory Council, and has served as an executive on the Product Business Management Team and the Product Leadership Forum. Ms. Logothetis holds a Bachelor of Science degree, with first class honors, in Business
Information Technology from the University of New South Wales, Australia. She completed dual majors in accountancy and information technology.
|
Board/Committee Membership
|
Attendance (2)
|
Board Memberships of Another Reporting Issuer
|
|
Board of Directors
Audit Committee Human Resources Committee Independent Board of Directors |
6/6
5/5 5/5 5/5 |
100%
100% 100% 100% |
–
|
Securities Held
|
||||
As at
|
Subordinate
Voting Shares (#) |
DSUs (#)
|
Total Shares (3)
and DSUs (#) |
Total Market Value (4)
of Shares (3) and DSUs (US$) |
August 31, 2019
|
–
|
49,714
|
49,714
|
181,456
|
(1)
|
Amdocs is a market leader in software solutions and services for
communications, media and entertainment service providers.
|
(2)
|
From September 1, 2018 until November 1, 2019, Ms. Logothetis attended five (5) board meetings in person and one
(1) board meeting by telephone.
|
(3)
|
Refers to Subordinate Voting Shares.
|
(4)
|
The value of unvested DSUs at the financial year-end is the market value of the Subordinate Voting Shares on
August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange and on the
NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing price
to United States dollars as required. The actual gains on vesting of DSUs will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance that these values will be realized.
|
PHILIPPE MORIN
|
||||||||||
|
Montreal, Quebec
Canada Director since
January 2018 Not Independent
(Management) Principal Occupation:
CEO of the Corporation |
Philippe
Morin was appointed Chief Executive Officer (CEO) of EXFO in April 2017 and is responsible for the Corporation’s strategy and financial directions, goals and results. He has more than thirty (30) years of experience in
the telecommunications industry and joined EXFO in November 2015 as Chief Operating Officer (COO) leading the company’s global sales leadership, market development, and product strategy. Before joining EXFO, Mr. Morin was Senior
Vice President of Worldwide Sales and Field Operations at Ciena. He previously held senior leadership roles at Nortel Networks, including President of Metro Ethernet Networks and Vice President and General Manager of Optical
Networks. Philippe Morin holds a bachelor’s degree in electrical engineering from Université Laval in Quebec City, Canada, and a master’s degree in business administration (MBA) from McGill University in Montreal, Canada.
|
||||||||
Board/Committee Membership
|
Attendance (1)
|
Board Memberships of Another Reporting Issuer
|
||||||||
Board of Directors
|
6/6
|
100%
|
–
|
|||||||
Securities Held
|
||||||||||
As at
|
Subordinate
Voting Shares (#) |
PSUs (#)
|
RSUs (#)
|
Total Shares (2)
and PSUs, RSUs (#) |
Total Market Value (3)
of Shares (2) and PSUs, RSUs (US$) |
|||||
August 31, 2019
|
658,059
|
–
|
327,039
|
985,098
|
3,595,608
|
|||||
(1)
|
From September 1, 2018 until November 1, 2019, Mr. Morin attended five (5) board meetings in person and one (1)
board meeting by telephone.
|
(2)
|
Refers to Subordinate Voting Shares.
|
(3)
|
The value of unvested PSUs or RSUs at the financial year-end is the market value of the Subordinate Voting Shares
on August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares and Multiple Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the
Toronto Stock Exchange and on the NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the
Toronto Stock Exchange closing price to United States dollars as required. The actual gains on vesting of PSUs or RSUs will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance
that these values will be realized.
|
CLAUDE SÉGUIN
|
||
|
Westmount, Quebec,
Canada Director since
February 2013 Independent
Principal Occupation:
Director |
Claude
Séguin was appointed a member of EXFO’s Board of Directors in February 2013. He brings to EXFO nearly forty (40) years of corporate, financial, executive and provincial government experience gained through senior
management positions in major corporations and government departments. Mr. Séguin was Special advisor to the Founder and Executive Chairman at CGI Group Inc., a global leader in information technology and business process
services, until March 2018. He was, until November 2016, Senior Vice President, Corporate Development and Strategic Investments. In this position, he was responsible for all merger and acquisition activities. Prior to joining CGI
in 2003, he served as President of CDP Capital—Private Equity, and prior to this position, he served as Teleglobe Inc.’s Executive Vice President, Finance and Chief Financial Officer, a position that he held from 1992 to 2000. Mr.
Séguin also has extensive senior-level government experience, having served as Deputy Finance Minister of the Province of Quebec from 1987 to 1992, in addition to Assistant Deputy Finance Minister in prior years. Prior to that, he
held senior positions at the Province of Quebec Treasury Board. Mr. Séguin is a member of the board of HEC-Montréal. He also chairs the Boards of Centraide of Greater Montreal Foundation and of Fonds de solidarité FTQ, a $15B
Labour Sponsored Investment Fund in Québec. Claude Séguin graduated from HEC-Montréal and earned a master’s and a Ph.D. in public administration from Syracuse University in New York State. He also followed the Advanced Management
Program at Harvard Business School.
|
Board/Committee Membership
|
Attendance (1)
|
Board Memberships of Another Reporting Issuer
|
|
Board of Directors
Audit Committee Human Resources Committee Independent Board of Directors |
5/6
5/5 4/5 4/5 |
83%
100% 80% 80% |
Fonds de solidarité FTQ
|
Securities Held
|
||||
As at
|
Subordinate
Voting Shares (#) |
DSUs (#)
|
Total Shares (2)
and DSUs (#) |
Total Market Value (3)
of Shares (2) and DSUs (US$) |
August 31, 2019
|
5,000
|
64,211
|
69,211
|
252,620
|
(1)
|
From September 1, 2018 until November 1, 2019, Mr. Séguin attended four (4) board meetings in person and one (1) board meeting by telephone.
|
(2)
|
Refers to Subordinate Voting Shares.
|
(3)
|
The value of unvested DSUs at the financial year-end is the market value of the Subordinate Voting
Shares on August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange
and on the NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange
closing price to United States dollars as required. The actual gains on vesting of DSUs will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance that these values will be
realized.
|
RANDY E. TORNES
|
||||
|
Frisco, Texas, USA
Director since
February 2013 Independent
Principal Occupation:
Vice President, Client Partner
for AT&T at Aricent (1)
|
Randy E. Tornes was appointed a member of EXFO’s Board of Directors in February 2013. He brings to EXFO over thirty (30) years of telecommunications experience gained through senior management
positions at leading network equipment manufacturers. Mr. Tornes is Vice President, Client Partner for AT&T at Aricent, An Altran Company. Prior to joining Aricent, Mr. Tornes was Vice President Strategic Alliances at Juniper
Networks, a worldwide leader in high-performance networking and telecommunications equipment. Mr. Tornes has also worked as the Operating Area Leader for AT&T and responsible for all sales, service and support of Juniper
products and services. Prior to joining Juniper Networks in May 2012, he spent two (2) years at Ericsson, where he was Vice President Sales (AT&T account). Previous to that position, he worked for Nortel for twenty-six (26)
years, holding various sales management positions, including Vice President Sales, GSM Americas. Mr. Tornes also served as member of the Board of Governors at 3G Americas LLC. Randy E. Tornes holds a Bachelor of Science degree in
business—organizational development and production and operations management, from the University of Colorado in Colorado Springs.
|
||
Board/Committee Membership
|
Attendance (2)
|
Board Memberships of Another Reporting Issuer
|
||
Board of Directors
Audit Committee Human Resources Committee Independent Board of Directors |
6/6
5/5 5/5 5/5 |
100%
100% 100% 100% |
–
|
Securities Held
|
||||
As at
|
Subordinate
Voting Shares (#) |
DSUs (#)
|
Total Shares (3)
and DSUs (#) |
Total Market Value (4)
of Shares (3) and DSUs (US$) |
August 31, 2019
|
–
|
99,000
|
99,000
|
361,350
|
(1)
|
Aricent is a global design and engineering company.
|
(2)
|
From September 1, 2018 until November 1, 2019, Mr. Tornes attended five (5)
board meetings in person and one (1) board meeting by telephone.
|
(3)
|
Refers to Subordinate Voting Shares.
|
(4)
|
The value of unvested DSUs at the financial year-end is the market value of the Subordinate Voting Shares on
August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange and on the
NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing price
to United States dollars as required. The actual gains on vesting of DSUs will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance that these values will be realized.
|
With the exception of Mr. Philippe Morin (as disclosed below), none of the individuals who are proposed to be nominated at the Meeting for election as a director of the Corporation:
a)
|
is, as at the date hereof, or has been, within ten (10) years before the date hereof, a director, chief executive officer or chief financial officer of any company that (i) was subject to an order
that was issued while such individual was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to an order that was issued after such individual ceased to be a director, chief
executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;
|
b)
|
is, as at the date hereof, or has been within ten (10) years before the date hereof, a director or executive officer of any company that, while such individual was acting in that capacity, or within a year of that individual 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; |
c)
|
has, within the ten (10) years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his assets; or |
d)
|
has been subject to (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for such individual. |
Mr. Philippe Morin acted as an executive officer of Nortel Networks Corporation (“Nortel”) and its affiliates from 2006 to 2010 as President Metro Ethernet Networks. Nortel and certain of its affiliates filed for bankruptcy protection in a number of jurisdictions in January 2009.
•
|
Mr. François Côté (Chairman)
|
•
|
Ms. Angela Logothetis
|
•
|
Mr. Claude Séguin
|
•
|
Mr. Randy E. Tornes
|
Meeting
|
Main Activities of the Human Resources Committee
|
|
October 11, 2018
|
●
|
Review of the Business Performance Measures results for the financial year
ended August 31, 2018;
|
●
|
Review of the Business Performance Measures for the financial year started
September 1, 2018;
|
|
●
|
Review of the Short-Term Incentive Plan results for the financial year
ended August 31, 2018;
|
|
●
|
Update on the Short-Term Incentive Plan for the financial year started
September 1, 2018;
|
|
●
|
Review of the proposed salary scales and salary increases for the year
started September 1, 2018;
|
|
●
|
Review of the compensation plans of executive officers for the financial
year started September 1, 2018 being the Base Salary, the Short-Term Incentive Plan and the stock-based compensation delivered through the Long-Term Incentive Plan;
|
|
●
|
Review and approval of the executive compensation section of the
Management proxy circular for the financial year ended August 31, 2018;
|
|
●
|
Review and approval of the CEO and Executive Chairman objectives and
compensation plan;
|
|
●
|
Human Resources Key Accomplishments;
|
|
●
|
Annual Sales Force Achievement;
|
|
●
|
Annual Review of the Human Resources Committee Charter;
|
|
●
|
Review and approval of the stock-based compensation
for executive officers delivered through the Long-Term Incentive Plan for the financial year started September 1, 2018.
|
|
January 9, 2019
|
●
|
Review of the Short-Term Incentive Plan results of some executive officers for the financial year ended August 31, 2018;
|
●
|
Review and approval of the Short-Term Incentive Plan of some executive
officers for the financial year started September 1, 2018, including the CEO and Executive Chairman;
|
|
●
|
Review of the quarterly results under the Short-Term Incentive Plan for
the financial year started September 1, 2018 and being part of the Short-Term Incentive Plan;
|
|
●
|
Review and approval of the stock-based compensation for performing
employees delivered through the Long-Term Incentive Plan for the financial year started September 1, 2018;
|
|
●
|
Leadership program and Talent
Management;
|
|
●
|
Review of the Risk Assessment of Executive
Compensation.
|
|
April 10, 2019
|
●
|
Review of the quarterly results under the Short-Term Incentive Plan for
the financial year started September 1, 2018 and being part of the Short-Term Incentive Plan;
|
●
|
Succession Planning;
|
|
●
|
Review of the Key Human Resources Initiatives;
|
|
●
|
Compensation Review;
|
|
●
|
Review of the stock-based compensation for performing and critical
employees;
|
|
●
|
Review of the Talent Management and Leadership
program.
|
|
July 10, 2019
|
●
|
Review of the quarterly results under the Short-Term Incentive Plan for
the financial year started September 1, 2018 and being part of the Short-Term Incentive Plan;
|
●
|
Global Employment Status;
|
|
●
|
Review and approval of the compensation package of recently hired
executive officer;
|
|
●
|
Review of the Talent Management and Leadership program;
|
|
●
|
Review of the Key Human Resources Initiatives.
|
Meeting
|
Main Activities of the Human Resources Committee
|
October 9, 2019
|
●
|
Review of the Business Performance Measures results for the financial year
ended August 31, 2019;
|
●
|
Review of the Business Performance Measures for the financial year started
September 1, 2019;
|
|
●
|
Review of the Short-Term Incentive Plan results for the financial year
ended August 31, 2019;
|
|
●
|
Review of the Short-Term Incentive Plan for the financial year started
September 1, 2019;
|
|
●
|
Review of the proposed salary scales and salary increases for the year
started September 1, 2019;
|
|
●
|
Review of the compensation plans of executive officers for the financial
year started September 1, 2019 being the Base Salary, the Short-Term Incentive Plan and the stock-based compensation delivered through the Long-Term Incentive Plan;
|
|
●
|
Review and approval of the executive compensation section of the
Management proxy circular for the financial year ended August 31, 2019;
|
|
●
|
Review and approval of the CEO and Executive Chairman objectives and
compensation plan;
|
|
●
|
Review and approval of the stock-based compensation for senior management
and officers delivered through the Long-Term Incentive Plan for the financial year started September 1, 2019;
|
|
●
|
Annual Sales Force Achievement;
|
|
●
|
Annual Review of the Human Resources Committee Charter;
|
|
●
|
Review of the Directors’ Compensation;
|
|
●
|
Review of the Key Human Resources Initiatives;
|
|
●
|
Review of the Risk Assessment of Executive
Compensation.
|
Type of Fee
|
Financial 2018 Fees
|
Percentage of
Financial 2018 Fees |
Financial 2019 Fees
|
Percentage of
Financial 2019 Fees |
||||
Executive Compensation – Related Fees
|
CA$5,736
|
7%
|
CA$807
|
2%
|
||||
All Other Fees
|
CA$76,774
|
93%
|
CA$39,793
|
98%
|
||||
Total
|
CA$82,510
|
100%
|
CA$40,600
|
100%
|
•
|
Canada executives: For the executives based in Canada, the Corporation used the
following comparator group: 5N Plus Inc., ACCEO Solutions, AgJunction Inc, Atos IT Services and Solutions, Inc., Avigilon Corporation, Callian Technologies Ltd., Ciena, COM DEV International Ltd., Constellation Software inc.,
Evertz Technologies Ltd., GTECH, Open Text Corporation, Redline Communications Group Inc., Sandvine Corporation, Sierra Wireless Inc., Smart Technologies Inc., Vecima Networks Inc., Vidéotron Ltée and Wi-Lan Inc.
|
•
|
United States executives: For the executives based in the United States, the
Corporation used the following comparator group: AMETEK, Avangate, BMC Software, CDK Global, Communications Systems, Crown Castle, Intelsat, Itron, Keysight Technologies, Laird Technologies, MTS Systems, Plexus, SAS Institute,
SunGard Data Systems, Teradata, TomTom, Total System Services, Truphone and Verint Systems.
|
•
|
United Kingdom executives: For the executives based in the United Kingdom, the
Corporation used the following comparator group: BAE Systems Applied Intelligence, COLT Telecom, Flextronics, Fujitsu, Irdeto, McCain Foods, PepsiCo, Premier Food Group, QinetiQ, Qualcomm, Rentokil Initial, Talk Talk Group and
Viacom.
|
•
|
Asia executives: For the executives based in Asia, the Corporation used a broader
comparator group, based on general industry data: A.Menarini Asia-Pacific, Abbott Laboratories, AbbVie, Accenture, ACE Asia Pacific Services, ACE Insurance, ACE Life Insurance Company Ltd, ACR Capital Holdings, AIA Company,
Aimia, Alcatel-Lucent, Amazon.com, ANZ Banking Group, ASML, AstraZeneca, Avanade, Aviva Ltd, AXA Insurance Singapore, AXA Life Insurance Singapore, Bank of New York Mellon, Baxter, Beckman Coulter, Becton Dickinson, BHP
Billiton, Bio-Rad Laboratories, Biosensors, BT Global Services, Cerebos Pacific Limited, Chubb Pacific Underwriting, Cigna, CommScope, DHL, DHL Express, DHL GBS, DHL Global Forwarding, DHL Mail, DHL Supply Chain, Discovery
Communications, Experian, Federal Insurance Company, Fujitsu, GE Energy, GE Healthcare, General Electric, Great Eastern Life Insurance, Hap Seng Consolidated, HSBC Holdings, IHS Global, IMI, Ingenico, Intel, Intercontinental
Hotels Group, International Flavors & Fragrances, ITT Corporation, Johnson & Johnson, Lexmark, Liberty Insurance, M1 Limited, Manulife, MasterCard, Merck KgaA, Microsoft, Molex, MSD International GMBH (Singapore Branch),
National Australia Bank, NBC Universal, NCR, Overseas Assurance Corporation, Pfizer, Pramerica Financial Asia HQ, Proximus, Prudential Assurance Company, Prudential Services, QBE Insurance, Qualcomm, Reinsurance Group of
America, RELX Group, Rio Tinto, Roche Pharmaceuticals, Sabre Holdings, Sealed Air, Smiths Group, Spirax Sarco, Standard Chartered Bank, StarHub, Starwood Hotels & Resorts, Straits Developments, Swiss Reinsurance
International, Teva Pharmaceutical Industries, Thermo Fisher Scientific, Trayport, TUI, UBS, Unilever, United Overseas Bank, Verizon, Zurich Insurance Company and Zurich Life Insurance.
|
a)
|
Similar industry: Technology Hardware and Equipment, Telecommunications Equipment and Services or Software and Services; and
|
b)
|
Comparable in size: revenues under CA$1 billion. Only one publicly traded company had revenues above the equivalent of CA$1
billion. The compensation market comparison is done using the regression analysis which is a method to predict the “size-adjusted” competitive level of compensation to reflect the size of the Corporation in relation to that of
the other companies of the reference group. This method mitigates the impact that larger companies may have on the competitive compensation levels for the Corporation.
|
•
|
Performance-based: Executive compensation levels reflect both the results of the
Corporation and individual results based on specific quantitative and qualitative objectives established at the beginning of each financial year in keeping with the Corporation’s long-term strategic objectives.
|
•
|
Aligned with shareholder interests: An important portion of incentive compensation for
executives is composed of equity awards to ensure that executives are aligned with the principles of sustained long-term shareholder value growth.
|
•
|
Market competitive: Compensation of executives is designed to be externally competitive
when compared against executives of comparable peer companies, and in consideration of the Corporation’s results.
|
•
|
Individually equitable: Compensation levels are also designed to reflect individual
factors such as scope of responsibility, experience, and performance against individual measures.
|
Name & Position
|
Annual Incentive Target as % of Base Salary
|
Germain Lamonde, Executive Chairman
|
65.0%
|
Philippe Morin, CEO
|
52.5%
|
Pierre Plamondon, CFO and Vice President, Finance
|
45.0%
|
Willem Jan te Niet, Vice President, Sales — EMEA
|
73.0%
|
Dana Yearian, Vice President, Sales — Americas
|
90.0%
|
Base Salary
|
X
|
Annual Incentive Target (%)
|
X
|
Business Performance Measures (%)
|
X
|
Individual Performance Measures (%)
|
Business Performance Measures (1)
|
Weight
|
Result in % of the Weight
|
Result of the Metrics
|
|||
Consolidated revenues (2)
|
30%
|
20.56%
|
US$286.9 million
|
|||
Profitability (3)
|
45%
|
28.75%
|
US$25.6 million
|
|||
Quality (4)
|
18%
|
22.50%
|
115.0%
|
|||
Net Promoter Score (5)
|
7%
|
7.59%
|
73.00
|
|||
Total
|
100%
|
79.40%
|
||||
(1)
|
The corporate Profitability result for the year must be positive (above 0) for the whole Business Performance
Measure to trigger a payout. The corporate Profitability represents net earnings before interest, income taxes, depreciation and amortization, restructuring charges, stock-based compensation costs, foreign exchange gain and
certain one-time items.
|
(2)
|
For consolidated revenues metric, results will range from 40% to 100% of the weight upon attainment of a minimum
threshold (US$275.0 million) up to the target defined at the beginning of the financial year (US$286.9 million) and from 100% to 125% of the weight from such annual target to the maximum threshold (US$310.0 million).
|
(3)
|
For Profitability metric, results will range from 40% to 100% of the weight upon attainment of a minimum threshold
(US$22.0 million) up to the target defined at the beginning of the financial year (US$31.0 million) and from 100% to 125% of the weight from such annual target to the maximum threshold (US$35.5 million).
|
(4)
|
For quality, results will range from 25% to 100% of the weight upon attainment of a minimum threshold of 50% up to
the annual target defined at the beginning of the financial year (100%) and from 100% to 125% of the weight from such annual target to the maximum threshold of 115%.
|
(5)
|
For Net Promoter Score metrics, results will range from 25% to 100% of the weight upon attainment of a minimum
threshold of 62 up to the annual target defined at the beginning of the financial year (72) and from 100% to 125% of the weight from such annual target to the maximum threshold of 75.
|
Germain Lamonde, Executive Chairman
|
||||
Elements of Individual
Performance Measures (1)
|
Weight
(from 0% to 120%) (2) |
Result
(%) |
||
Financial objectives
|
||||
Corporate EBITDA
|
From 0% to 30%
|
19.76%
|
||
Corporate revenues
|
From 0% to 30%
|
26.32%
|
||
Strategic contribution
|
||||
Positioning and transforming the Corporation’s divisions
as set forth in the Corporation’s strategic plan, Maximizing the value from the Corporation’s Mergers & Acquisitions activities
|
From 0% to 30%
|
19.88%
|
||
Corporate Development & Governance
|
From 0% to 30%
|
25.65%
|
||
Total
|
91.61%
|
|||
Total of Business Performance Measures
(79.40%) X Individual Performance Measures (91.61%)
|
72.74%
|
|||
(1)
|
If the minimum level of the Corporate EBITDA, as determined at the beginning of the financial year, is not
achieved, payment of any variable compensation to the Executive Chairman will be at the discretion of the Human Resources Committee.
|
(2)
|
The weight of each individual objective is not capped but the total is capped at 150%.
|
Philippe Morin, CEO
|
||||
Elements of Individual
Performance Measures (1)
|
Weight
(from 0% to 120%) (2) |
Result
(%) |
||
Financial objectives
|
||||
Corporate EBITDA
|
From 0% to 30%
|
19.76%
|
||
Corporate revenues
|
From 0% to 20%
|
14.76%
|
||
Corporate cash flow from operations (3)
|
From 0% to 10%
|
15.00%
|
||
Strategic contribution
|
||||
Positioning and transforming the Corporation’s divisions
as set forth in the Corporation’s strategic plan, Maximizing the value from the Corporation’s Mergers & Acquisitions activities
|
From 0% to 40%
|
18.57%
|
||
Delivering the strategic transformation imperatives as
set forth in the Corporation’s strategic plan and strengthening the Corporation’s strategic capabilities
|
From 0% to 20%
|
17.39%
|
||
Total
|
85.48%
|
|||
Total of Business Performance Measures
(79.40%) X Individual Performance Measures (85.48%)
|
67.87%
|
|||
(1)
|
If the minimum level of the Corporate EBITDA, as determined at the beginning of the financial year, is not
achieved, payment of any variable compensation to the CEO will be at the discretion of the Human Resources Committee.
|
(2)
|
The weight of each individual objective, with the exception of the corporate cash flow from operations
objective, is not capped but the total is capped at 150%.
|
(3)
|
This objective is capped.
|
Pierre Plamondon, CFO and Vice
President of Finance
|
||||
Elements of Individual
Performance Measures (1)
|
Weight
(from 0% to 120%) (2) |
Result
(%) |
||
Financial objectives
|
||||
Corporate EBITDA
|
From 0% to 30%
|
19.76%
|
||
Corporate revenues
|
From 0% to 20%
|
14.76%
|
||
Corporate cash flow from operations
|
From 0% to 10%
|
17.24%
|
||
Strategic contribution
|
||||
Contribute to the Corporation’s finance function
transformation set forth in the Corporation’s strategic plan
|
From 0% to 30%
|
26.00%
|
||
Contribute to the Corporation’s digital transformation
set forth in the Corporation’s strategic plan
|
From 0% to 20%
|
17.00%
|
||
Leadership performance
|
From 0% to 10%
|
8.00%
|
||
Total
|
102.76%
|
|||
Total of Business Performance Measures
(79.40%) X Individual Performance Measures (102.76%)
|
81.59%
|
|||
(1)
|
If the minimum level of the Corporate EBITDA, as determined at the beginning of the financial year, is not
achieved, payment of any variable compensation to the CFO and Vice President of Finance will be at the discretion of the Human Resources Committee.
|
(2)
|
The weight of each individual objective is not capped but the total is capped at 150%.
|
Willem Jan te Niet, Vice President, Sales —
EMEA
|
||||
Business Performance Measures
|
Incentive Targets (US$)
|
Results (US$)
|
||
Contribution Margin Bonus (1)
|
107,616
|
94,135
|
||
Bonus on Bookings Achievement (2)
|
35,872
|
26,498
|
||
Corporate EBITDA (3)
|
35,872
|
19,687
|
||
Total
|
179,360
|
140,320
|
(1)
|
The amount of bonus for the attainment of the quarterly contribution margin targets for the territory of EMEA is
based on the percentage of achievement up to 100% of the quarterly and annual contribution margin targets defined at the beginning of the financial year. An accelerated amount of bonus based on the percentage of attainment of
the quarterly and annual contribution margin targets above 100% is also payable.
|
(2)
|
The amount of bonus for the attainment of the bookings’ targets for the territory of EMEA is based on the
percentage of achievement up to 100% of the quarterly and annual bookings targets defined at the beginning of the financial year. An accelerated amount of bonus based on the percentage of attainment from above 100%, 150% and
200% of the annual bookings target is also payable.
|
(3)
|
If the minimum level of the Corporate EBITDA, as determined at the beginning of the financial year, is achieved
then 25% up to 100% of achievement is payable and capped at 125% but if it is not achieved, payment of any variable compensation to the NEO will be at the discretion of the Human Resources Committee.
|
Dana Yearian, Vice President, Sales —
Americas
|
||||
Business Performance Measures
|
Incentive Targets (US$)
|
Results (US$)
|
||
Contribution Margin Bonus (1)
|
131,094
|
115,328
|
||
Bonus on Bookings Achievement (2)
|
43,698
|
39,182
|
||
Corporate EBITDA (3)
|
43,698
|
23,974
|
||
Total
|
218,490
|
178,484
|
(1)
|
The amount of bonus for the attainment of the quarterly contribution margin targets for the territory of the
Americas is based on the percentage of achievement up to 100% of the quarterly and annual contribution margin targets defined at the beginning of the financial year. An accelerated amount of bonus based on the percentage of
attainment of the quarterly and annual contribution margin targets above 100% is also payable.
|
(2)
|
The amount of bonus for the attainment of the bookings’ targets for the territory of the Americas is based on the
percentage of achievement up to 100% of the quarterly and annual bookings targets defined at the beginning of the financial year. An accelerated amount of bonus based on the percentage of attainment from above 100%, 150% and
200% of the annual bookings target is also payable.
|
(3)
|
If the minimum level of the Corporate EBITDA, as determined at the beginning of the financial year, is achieved
then 25% up to 100% of achievement is payable and capped at 125% but if it is not achieved, payment of any variable compensation to the NEO will be at the discretion of the Human Resources Committee.
|
•
|
amendments of a general housekeeping or clerical nature that, among others, clarify, correct or rectify any ambiguity, defective
provision, error or omission in the LTIP or the DSU Plan;
|
•
|
amendments necessary to comply with applicable laws or the requirements of any securities regulatory authority or stock exchange;
|
•
|
changing the eligibility for, and limitations on, participation in the LTIP and the DSU Plan;
|
•
|
modifying the terms and conditions of any options, PSUs, RSUs and DSUs, including restrictions, not inconsistent with the terms
of the LTIP and the DSU Plan, which terms and conditions may differ among individual grants and holders of such securities;
|
•
|
modifying the periods referred to in the LTIP during which vested options may be exercised, provided that the option period is
not extended beyond ten years after the date of the granting of the option;
|
•
|
amendments with respect to the vesting period, with respect to circumstances that would accelerate the vesting of options, PSUs
or RSUs, or the redemption of DSUs;
|
•
|
any amendment resulting from or due to the alteration of share capital as more fully set out in the LTIP and the DSU Plan;
|
•
|
amendments to the provisions relating to the administration of the LTIP and the DSU Plan; and
|
•
|
suspending or terminating the LTIP and the DSU Plan.
|
•
|
a reduction in the exercise price of options held by an insider;
|
•
|
an extension of the exercise period of options held by an insider;
|
•
|
any amendment to remove or to exceed the limits on insider participation;
|
•
|
an increase to the maximum number of Subordinate Voting Shares issuable under the LTIP and the DSU Plan; and
|
•
|
any amendment to the amendment provisions of the LTIP and the DSU Plan.
|
Name & Position
|
Grant Levels (1) (% of Previous Year Base
Salary)
|
||
Philippe Morin, CEO
|
55.0%
|
||
Pierre Plamondon, CFO and Vice President, Finance
|
45.0%
|
||
Willem Jan te Niet, Vice President, Sales ─ EMEA
|
35.0%
|
||
Dana Yearian, Vice President, Sales ─ Americas
|
42.5%
|
||
(1)
|
Actual grant value may differ from the grant level guidelines as the stock price may vary between the time of
the grant and its approval.
|
Financial
Year Ended |
Grant Date
|
RSUs
Granted (#) |
Fair Value
at the Time of Grant (US$/RSU) |
Vesting Schedule
|
|
August 31, 2019
|
October 18, 2018
|
166,161
|
3.17
|
100% on the third anniversary date of the grant.
|
|
January 15, 2019
|
238,500
|
3.42
|
|||
July 17, 2019
|
30,571
|
3.85
|
|||
October 18, 2018
|
197,699
|
3.17
|
100% on the third
anniversary date of the grant if performance objectives related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation, are fully attained.
|
||
Total
|
632,931
|
Financial
Year Ended |
Grant Date
|
RSUs
Granted (#) |
Fair Value
at the Time of Grant (US$/RSU) |
Vesting Schedule
|
|
August 31, 2018
|
October 19, 2017
|
15,000
|
4.00
|
50% on each of the third and fourth anniversary dates of the grant.
|
|
January 16, 2018
|
154,833
|
4.45
|
|||
February 2, 2018
|
30,000
|
4.62
|
|||
October 19, 2017
|
211 155
|
4.00
|
100% on the fifth
anniversary date of the grant subject to early vesting of up to 1/3 on the third anniversary date of the grant and up to 50% of the remaining units on the fourth anniversary date of the grant if performance objectives namely
related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation, are fully attained.
|
||
November 13, 2017
|
9,633
|
4.30
|
|||
Total
|
420,621
|
||||
August 31, 2017
|
October 19, 2016
|
38,300
|
4.01
|
50% on each of the third and fourth anniversary dates of the grant.
|
|
January 18, 2017
|
153,700
|
5.10
|
|||
April 5, 2017
|
123,110
|
4.89
|
|||
October 19, 2016
|
207,269
|
4.01
|
100% on the fifth
anniversary date of the grant subject to early vesting of up to 1/3 on the third anniversary date of the grant and up to 50% of the remaining units on the fourth anniversary date of the grant if performance objectives namely
related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation, are fully attained.
|
||
April 5, 2017
|
4,764
|
4.89
|
|||
Total
|
527,143
|
||||
August 31, 2016
|
October 15, 2015
|
36,900
|
3.23
|
50% on each of the third and fourth anniversary dates of the grant.
|
|
November 9, 2015
|
109,890
|
3.43
|
|||
January 13, 2016
|
151,400
|
3.00
|
|||
July 7, 2016
|
2,500
|
3.30
|
|||
August 15, 2016
|
10,000
|
3.33
|
|||
October 15, 2015
|
206,373
|
3.23
|
100% on the fifth
anniversary date of the grant subject to early vesting of up to 1/3 on the third anniversary date of the grant and up to 50% of the remaining units on the fourth anniversary date of the grant if performance objectives namely
related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation, are fully attained.
|
||
November 9, 2015
|
54,945
|
3.43
|
|||
Total
|
572,008
|
||||
August 31, 2015
|
October 16, 2014
|
29,150
|
3.71
|
50% on each of the third and fourth anniversary dates of the grant.
|
|
January 14, 2015
|
163,400
|
3.55
|
|||
March 31, 2015
|
5,000
|
3.78
|
|||
July 2, 2015
|
12,299
|
3.27
|
|||
October 16, 2014
|
197,726
|
3.71
|
100% on the fifth
anniversary date of the grant subject to early vesting of up to 1/3 on the third anniversary date of the grant and up to 50% of the remaining units on the fourth anniversary date of the grant if performance objectives namely
related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation, are fully attained.
|
||
July 2, 2015
|
1,946
|
3.27
|
|||
Total
|
409,521
|
Name
|
RSUs
Granted (#) |
Percentage of Total
RSUs Granted to Employees in Financial Year (%) (1) |
Fair Value
at the Time of Grant (US$/RSU) (2) |
Grant Date
|
Vesting Schedule (3)
|
||
Philippe Morin
|
34,892
|
12.40%
|
3.17
|
October 18, 2018
|
100% on the third
anniversary date of the grant.
|
||
43,615
|
100% on the third
anniversary date of the grant if performance objectives namely related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation are fully attained. (4)
|
||||||
Pierre Plamondon
|
16,842
|
5.99%
|
3.17
|
October 18, 2018
|
100% on the third
anniversary date of the grant.
|
||
21,052
|
100% on the third
anniversary date of the grant if performance objectives namely related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation are fully attained. (4)
|
||||||
Willem Jan te Niet
|
13,117
|
4.66%
|
3.17
|
October 18, 2018
|
100% on the third
anniversary date of the grant.
|
||
16,397
|
100% on the third
anniversary date of the grant if performance objectives namely related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation are fully attained. (4)
|
||||||
Dana Yearian
|
16,282
|
5.79%
|
3.17
|
October 18, 2018
|
100% on the third
anniversary date of the grant.
|
||
20,353
|
100% on the third
anniversary date of the grant if performance objectives namely related to long-term growth of revenue and profitability, as determined by the Board of Directors of the Corporation are fully attained. (4)
|
||||||
(1)
|
Such percentage does not include any cancelled RSUs.
|
(2)
|
The fair value at the time of grant of a RSU is equal to the market value of Subordinate Voting Shares at the
time RSUs are granted. The grant date market value is equal to the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange and the NASDAQ Global Select Market on the last trading day
preceding the grant date, using the daily exchange rate of the Bank of Canada on the last trading day preceding the grant date to convert either the NASDAQ Global Select Market closing price to
Canadian dollars or the Toronto Stock Exchange closing price to United States dollars as required.
|
(3)
|
All RSUs first vesting cannot be earlier than the third anniversary date of their grant.
|
(4)
|
Those RSUs granted in the financial year ended August 31, 2019 vest on the third anniversary date of the grant
but are subject to the attainment of performance objectives, as determined by the Board of Directors of the Corporation. Such performance objectives are based on the attainment of a profitability metric target for the upcoming
three fiscal years. The profitability metric is determined as the upcoming three fiscal year ‘s cumulative Corporation’s IFRS net earnings (loss) before interest and other expense, income taxes, and amortization, stock-based
compensation costs, restructuring charges, acquisition-related deferred revenue fair value adjustment and foreign exchange gain or loss, change in fair value of cash contingent consideration, and extraordinary gain or loss
(“LTIP EBITDA”). Accordingly, the vesting performance objectives will be attained, calculated on a pro-rated basis as follows: i) 0% for a LTIP EBITDA below target for the three-year period ending on August 31, 2021; ii) 50%
to 100% for a LTIP EBITDA at target or above and caped at two times the target for the three-year period ending on August 31, 2021.
|
Number of
RSUs (#) |
% of Issued and
Outstanding RSUs |
Weighted Average Fair Value at
the Time of Grant ($US/RSU) |
||||
Executive Chairman (one (1) individual)
|
–
|
–
|
–
|
|||
CEO (one (1) individual)
|
327,039
|
17.81%
|
3.73
|
|||
Board of Directors (four (4) individuals)
|
–
|
–
|
–
|
|||
Management and Corporate Officers (ten (10) individuals)
|
844,544
|
45.99%
|
3.58
|
DSUs
Granted (#) |
Weighted Average Fair Value
at the Time of Grant (US$/DSU) |
Total of the Fair Value
at the Time of Grant (US$) |
Vesting
|
69,818
|
3.63
|
253,439
|
At the time director ceases to be a member of the Board of Directors of the Corporation
|
DSUs
Granted (#) |
% of Issued and
Outstanding DSUs |
Total of the Fair Value at
the Time of Grant (US$) |
Weighted Average Fair Value
at the Time of Grant (US$/DSU) |
|
Board of Directors (four (4) individuals)
|
251,507
|
100%
|
980,877
|
3.90
|
Long-Term Incentive Plan (LTIP) - RSUs
|
|||
Date of Grant
|
Vesting Date
|
% of Early Vesting Achievement (1)
|
|
October 15, 2015
|
October 15, 2019
|
8%
|
|
October 19, 2016
|
October 21, 2019
|
11%
|
|
(1)
|
The vesting schedules are provided in the table under the heading “Long-Term Incentive Plan”.
|
Compensation Elements
|
2019
|
2018
|
2017 (1)
|
Three-Year Total
|
|||||
Cash
|
|||||||||
Base Salary
|
CA$486,735
|
CA$588,350
|
CA$717,500
|
CA$1,792,585
|
|||||
Short-Term Incentive
|
CA$230,128
|
CA$160,800
|
CA$262,962
|
CA$653,890
|
|||||
Equity
|
|||||||||
Long-Term Incentive
|
–
|
–
|
–
|
–
|
|||||
Total Direct Compensation
|
CA$716,863
|
CA$749,150
|
CA$980,462
|
CA$2,446,475
|
|||||
Contribution to DPSP
|
–
|
–
|
–
|
–
|
|||||
All Other Compensation
|
–
|
–
|
–
|
–
|
|||||
Total Compensation
|
CA$716,863
|
CA$749,150
|
CA$980,462
|
CA$2,446,475
|
|||||
Annual Average
|
–
|
–
|
–
|
CA$815,492
|
|||||
Total Market Capitalization (CA$ millions) as at August 31
|
268.4
|
318.0
|
322.3
|
302.9
|
|||||
Total Cost as a % of Market Capitalization
|
0.27%
|
0.24%
|
0.31%
|
0.27%
|
|||||
(1)
|
On April 1, 2017, Mr. Germain Lamonde stepped down as CEO and became Executive Chairman of the Corporation.
|
Compensation Elements
|
2019
|
2018
|
2017 (1)
|
Three-Year Total
|
|||||
Cash
|
|||||||||
Base Salary
|
CA$531,898
|
CA$522,750
|
CA$512,500
|
CA$1,567,148
|
|||||
Short-Term Incentive
|
CA$189,528
|
CA$115,396
|
CA$118,531
|
CA$423,455
|
|||||
Equity
|
|||||||||
Long-Term Incentive
|
CA$323,449
|
CA$256,251
|
CA$531,256
|
CA$1,110,956
|
|||||
Total Direct Compensation
|
CA$1,044,875
|
CA$894,397
|
CA$1,162,287
|
CA$3,101,559
|
|||||
Contribution to DPSP
|
CA$24,156
|
CA$986
|
CA$14,346
|
CA$39,488
|
|||||
All Other Compensation
|
–
|
–
|
–
|
–
|
|||||
Total Compensation
|
CA$1,069,031
|
CA$895,383
|
CA$1,176,633
|
CA$3,141,047
|
|||||
Annual Average
|
–
|
–
|
–
|
CA$1,047,016
|
|||||
Total Market Capitalization (CA$ millions) as at August 31
|
268.4
|
318.0
|
322.3
|
302.9
|
|||||
Total Cost as a % of Market Capitalization
|
0.40%
|
0.28%
|
0.37%
|
0.35%
|
|||||
(1)
|
Mr. Philippe Morin was nominated CEO on April 1, 2017.
|
Name and
Principal Position |
Financial
Year |
Salary (1) (2)
($) |
Share-Based
Awards (2) (3) ($) |
Option-
Based Awards ($) |
Non-Equity Incentive
Plan Compensation ($) |
Pension
Value ($) |
All Other
Compensation ($) (2) (5) |
Total
Compensation ($) |
||||||
Annual
Incentive Plans (2) (4) |
Long-Term
Incentive Plan |
|||||||||||||
Germain Lamonde,
Executive Chairman (6) |
2019
|
367,430 (US)
486,735 (CA) |
─
─ |
(US)
(CA) |
–
|
173,721
230,128 |
(US)
(CA) |
–
|
–
|
–
|
541,151
716,863 |
(US)
(CA) |
||
2018
|
460,800 (US)
588,350 (CA) |
─
─ |
(US)
(CA) |
–
|
125,940
160,800 |
(US)
(CA) |
–
|
–
|
–
|
586,740
749,150 |
(US)
(CA) |
|||
2017
|
543,067 (US)
717,500 (CA) |
─
─ |
(US)
(CA) |
–
|
199,032
262,962 |
(US)
(CA) |
–
|
–
|
–
|
742,099
980,462 |
(US)
(CA) |
|||
Philippe Morin,
CEO (7) |
2019
|
401,523 (US)
531,898 (CA) |
244,168
323,449 |
(US)
(CA)
|
–
|
143,072
189,528 |
(US)
(CA) |
–
|
–
|
18,235
24,156 |
(US)
(CA) |
806,998
1,069,031 |
(US)
(CA) |
|
2018
|
409,422 (US)
522,750 (CA) |
200,698
256,251
|
(US)
(CA)
|
–
|
90,379
115,396 |
(US)
(CA) |
–
|
–
|
772
986 |
(US)
(CA) |
701,271
895,383 |
(US)
(CA) |
||
2017
|
387,905 (US)
512,500 (CA) |
402,101
531,256 |
(US)
(CA) |
–
|
89,715
118,531 |
(US)
(CA) |
–
|
–
|
10,858
14,346 |
(US)
(CA) |
890,579
1,176,633 |
(US)
(CA) |
||
Pierre Plamondon,
CFO and Vice President, Finance |
2019
|
235,129 (US)
311,476 (CA) |
117,856
156,123 |
(US)
(CA) |
–
|
86,330
114,362 |
(US)
(CA) |
–
|
–
|
10,368
13,734 |
(US)
(CA) |
449,683
595,695 |
(US)
(CA) |
|
2018
|
241,535 (US)
308,392 (CA) |
106,561
136,057 |
(US)
(CA) |
–
|
60,189
76,850 |
(US)
(CA) (8) |
–
|
–
|
7,833
10,002 |
(US)
(CA) |
416,118
531,301 |
(US)
(CA) |
||
2017
|
228,841 (US)
302,345 (CA) |
100,176
132,352 |
(US)
(CA) |
–
|
46,116
60,928 |
(US)
(CA) |
–
|
–
|
11,006
14,541 |
(US)
(CA) |
386,139
510,166 |
(US)
(CA) |
Name and
Principal Position |
Financial
Year |
Salary (1) (2)
($) |
Share-Based
Awards (2) (3) ($) |
Option-
Based Awards ($) |
Non-Equity Incentive
Plan Compensation ($) |
Pension
Value ($) |
All Other
Compensation ($) (2) (5) |
Total
Compensation ($) |
||||||
Annual
Incentive Plans (2) (4) |
Long-Term
Incentive Plan |
|||||||||||||
Willem Jan te Niet,
Vice President, Sales — EMEA |
2019
|
235,956 (US)
312,571 (CA) 208,019 (€) |
93,559
123,938 82,482 |
(US)
(CA) (€) |
–
|
140,320
185,882 123,706 |
(US)
(CA) (€) |
–
|
–
|
18,877
25,006 16,642 |
(US)
(CA) (€) |
488,712
647,397 430,849 |
(US)
(CA) (€) |
|
2018
|
243,191 (US)
310,506 (CA) 203,940 (€) |
80,612
102,925 67,601 |
(US)
(CA) (€) |
–
|
141,296
180,406 118,491 |
(US)
(CA) (€) |
–
|
–
|
19,455
24,841 16,315 |
(US)
(CA) (€) |
484,554
618,678 406,347 |
(US)
(CA) (€) |
||
2017
|
226,587 (US)
299,367 (CA) 206,625 (€) |
66,891
88,376 60,998 |
(US)
(CA) (€) |
–
|
104,094
137,529 94,923 |
(US)
(CA) (€) |
–
|
–
|
7,912
10,454 7,215 |
(US)
(CA) (€) |
405,484
535,726 369,761 |
(US)
(CA) (€) |
||
Dana Yearian,
Vice President, Sales — Americas |
2019
|
242,897 (US)
321,766 (CA) |
116,133
153,841 |
(US)
(CA) |
–
|
178,484
236,438 |
(US)
(CA) |
–
|
–
|
8,400
11,127 |
(US)
(CA) |
545,914
723,172 |
(US)
(CA) |
|
2018
|
242,897 (US)
310,131 (CA) |
101,208
129,222 |
(US)
(CA) |
–
|
152,285
194,438 |
(US)
(CA) |
–
|
–
|
7,667
9,789 |
(US)
(CA) |
504,057
643,580 |
(US)
(CA) |
||
2017
|
238,134 (US)
314,623 (CA) |
99,223
131,094 |
(US)
(CA) |
–
|
156,675
206,999 |
(US)
(CA) |
–
|
–
|
7,049
9,314 |
(US)
(CA) |
501,081
662,030 |
(US)
(CA) |
|
|
(1)
|
Base salary earned in the financial year, regardless when paid.
|
(2)
|
The compensation information for Canadian residents has been converted from Canadian dollars to US dollars based
upon an average foreign exchange rate of CA$ 1.3247 = US$1.00 for the financial year ended August 31, 2019, CA$1.2768 = US$1.00 for the financial year ended August 31, 2018 and CA$1.3212 = US$1.00 for the financial year ended
August 31, 2017. The compensation information for the Netherlands resident has been converted from Euros to US dollars based upon an average foreign exchange rate of €0.8816 = US$1.00 for the financial year ended August 31,
2019, €0.8386 = US$1.00 for the financial year ended August 31, 2018 and €0.9119 = US$1.00 for the financial year ended August 31, 2017 and the conversion from US dollars to Canadian dollars is made as described above.
|
(3)
|
Indicates the dollar amount based on the grant date fair value of the RSUs awarded under the LTIP for the
financial year. The fair value at the time of grant of a RSU is equal to the market value of Subordinate Voting Shares at the time RSUs are granted. The grant date market value is equal to the highest of the closing prices of
the Subordinate Voting Shares on the Toronto Stock Exchange and the NASDAQ Global Select Market on the last trading day preceding the grant date, using the daily exchange rate of the Bank of Canada on the last trading
day preceding the grant date to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing price to United States dollars as
required. Grants of RSUs to NEOs are detailed under section “Compensation Discussion and Analysis – Long-Term Incentive Plan”.
|
(4)
|
Indicates the total bonus earned during the financial year whether paid during the financial
year or payable on a later date:
|
Name
|
Paid during the
Financial Year Ended August 31, 2019 (i) ($) |
Paid in the First Quarter
of the Financial Year Ending on August 31, 2020 (i) ($) |
Total Bonus Earned during
the Financial Year Ended August 31, 2019 (i) ($) |
|||||
Germain Lamonde
|
–
– |
(US)
(CA) |
173,721
230,128 |
(US)
(CA) |
173,721
230,128 |
(US)
(CA) |
||
Philippe Morin
|
–
– |
(US)
(CA) |
143,072
189,528 |
(US)
(CA) |
143,072
189,528 |
(US)
(CA) |
||
Pierre Plamondon
|
–
– |
(US)
(CA) |
86,330
114,362 |
(US)
(CA) |
86,330
114,362 |
(US)
(CA) |
||
Willem Jan te Niet
|
85,619
113,419 75,482 |
(US)
(CA) (€) |
54,701
72,463 48,224 |
(US)
(CA) (€) |
140,320
185,882 123,706 |
(US)
(CA) (€) |
||
Dana Yearian
|
109,973
145,681 |
(US)
(CA) |
68,511
90,757 |
(US)
(CA) |
178,484
236,438 |
(US)
(CA) |
||
(i)
|
Refer to note 2 above.
|
(5)
|
Indicates the amount contributed by the Corporation during the financial year to the DPSP as detailed under
section “Compensation Discussion and Analysis – Deferred Profit-Sharing Plan”, the 401K plan as detailed under section “Compensation Discussion and Analysis – 401K plan”, as applicable, for the benefit of the NEOs. Mr. Lamonde
is not eligible to participate in the DPSP.
|
(6)
|
Mr. Lamonde stepped down as CEO as of April 1, 2017 and was nominated Executive Chairman of the Corporation.
|
(7)
|
Mr. Morin was promoted from Chief Operating Officer of the Corporation to CEO of the Corporation as of April 1,
2017.
|
(8)
|
Including a discretionary bonus of CA$10,000 (US$7,832).
|
Name
|
Outstanding Option-Based Awards (Options)
|
Outstanding Share-Based Awards (PSUs or RSUs)
|
||||||||
Number of
Securities Underlying Unexercised Options (#) |
Option
Exercise Price |
Option
Expiration Date |
Value of
Unexercised “in-the-money” Options |
Number of
Shares or Units of Shares that Have Not Vested (#) |
Market or
Payout Value of Share-Based Awards that Have Not Vested (US$) (1) |
Market or
Payout Value of Vested Share- Based Awards Not Paid Out or Distributed (US$) |
||||
Germain Lamonde
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|||
Philippe Morin
|
–
|
–
|
–
|
–
|
327,039
|
1,193,692
|
–
|
|||
Pierre Plamondon
|
–
|
–
|
–
|
–
|
143,945
|
525,399
|
–
|
|||
Willem Jan te Niet
|
–
|
–
|
–
|
–
|
71,348
|
260,420
|
–
|
|||
Dana Yearian
|
–
|
–
|
–
|
–
|
139,346
|
508,613
|
–
|
|||
(1)
|
The value of unvested PSUs or RSUs at the financial year-end is the market value of the Subordinate Voting Shares
on August 31, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange and on
the NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing
price to United States dollars as required. The actual gains on vesting will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance that these values will be realized.
|
Name
|
Share-Based Awards – Value
Vested during the Year (US$) (1) |
Non-Equity Incentive Plan Compensation –
Value Earned during the Year (US$) (2) |
|||
Germain Lamonde
|
–
|
173,721
|
|||
Philippe Morin
|
171,020
|
143,072
|
|||
Pierre Plamondon
|
66,009
|
86,330
|
|||
Willem Jan te Niet
|
32,775
|
140,320
|
|||
Dana Yearian
|
60,382
|
178,484
|
|||
(1)
|
The aggregate dollar value realized is equivalent to the market value of the Subordinate Voting Shares
underlying the PSUs or RSUs at vesting. This value, as the case may be, has been converted from Canadian dollars to US dollars based upon the daily exchange rate of the Bank of Canada on the day of vesting.
|
(2)
|
Includes total non-equity incentive plan compensation earned by each NEO in respect to the financial year ended
on August 31, 2019 (as indicated under the “Summary Compensation Table”).
|
Named Executive Officer
|
Termination Payment Event
|
||||||
Without Cause ($) (1) (2)
|
Change of Control ($) (2) (3)
|
Voluntary ($)
|
|||||
Germain Lamonde
|
986,740
1,295,070 |
(US) (4)
(CA) |
986,740
1,295,070 |
(US)
(CA) |
0
|
(5)
|
|
Philippe Morin (6)
|
1,094,815
1,453,122 |
(US)
(CA) |
1,595,215
2,118,037 |
(US)
(CA) |
–
|
||
Pierre Plamondon (6)
|
535,834
711,043 |
(US)
(CA) |
968,376
1,280,622 |
(US)
(CA) |
–
|
||
Willem Jan te Niet (6)
|
284,405
377,188 250,731 |
(US)
(CA) (€) |
437,387
580,466 385,600 |
(US)
(CA) (€) |
–
|
||
Dana Yearian (6)
|
534,616
709,393 |
(US)
(CA) |
1,101,386
1,450,134 |
(US)
(CA) |
–
|
||
(1)
|
The aggregate amount disclosed includes an evaluation of the amount that the NEO would have been entitled to
should a termination of employment without cause have occurred on August 31, 2019 and includes, as the case may be for each NEO, the base salary that would have been received and total value of PSUs, RSUs and options that
would have vested (with the exception of Mr. Lamonde’s evaluation which is described in note 6 below and includes: the base salary, STIP compensation, and total value of PSUs, RSUs and options that would have vested). The
amount for base salary compensation is calculated according to those amounts provided under the section entitled “Summary Compensation Table” included in this Circular. The amount for the total value attached to the vesting of
PSUs, RSUs and options determined pursuant to the LTIP as described in the section entitled “Long-Term Incentive Compensation – Long-Term Incentive Plan” for termination without cause.
|
(2)
|
The aggregate amount for Canadian residents has been converted from Canadian dollars to US dollars based upon a
foreign exchange rate of CA$1.3247 = US$1.00 as of August 31, 2019. The aggregate amount for Netherlands resident has been converted from Euros to US dollars based upon a foreign exchange rate of €0.8816 = US$1.00 as of August
31, 2019.
|
(3)
|
The aggregate amount disclosed includes, as the case may be for each NEO, an evaluation of the amount that the NEO
would have been entitled to should a termination of employment for Change of Control have occurred on August 31, 2019 and includes, as the case may be, namely, the base salary, STIP or SIP compensation and total value of PSUs,
RSUs and options that would have vested. The amount for base salary and STIP or SIP compensation are calculated according to those amounts provided under the section entitled “Summary Compensation Table” included in this
Circular, the total value attached to the vesting of PSUs, RSUs and options is calculated according to those amounts provided in the columns named “Value of unexercised “in-the-money” options” and “Market or payout value of
share-based awards that have not vested” of the table included under the heading entitled “Outstanding share-based awards and option-based awards”.
|
(4)
|
The aggregate amount disclosed includes an evaluation of the amount that Mr. Lamonde would have been entitled to
should a termination of employment without cause have occurred on August 31, 2019 and includes: the base salary, STIP compensation, and total value of PSUs, RSUs and options that would have vested. The amount for base salary and
STIP compensation are calculated according to those amounts provided under the section entitled “Summary Compensation Table” included in this Circular; the total value attached to the vesting of PSUs or RSUs and options are
calculated according to those amounts provided in the columns named “Value of unexercised “in-the-money” options” and “Market or payout value of share-based awards that have not vested” of the table included under the heading
entitled – “Outstanding share-based awards and option-based awards”.
|
(5)
|
Mr. Lamonde did not hold any PSUs, RSUs or options on August 31, 2019.
|
(6)
|
None of these NEOs held any PSUs or options on August 31, 2019.
|
From September 1, 2018
to August 31, 2019 |
|||||
Annual Retainer for Directors (1)
|
CA$70,000
|
(2)
|
US$52,842
|
(3)
|
|
Annual Retainer for Lead Director
|
CA$10,000
|
US$7,549
|
(3)
|
||
Annual Retainer for Audit Committee Chairman
|
CA$12,000
|
US$9,059
|
(3)
|
||
Annual Retainer for Audit Committee Members
|
CA$4,500
|
(4)
|
US$3,397
|
(3)
|
|
Annual Retainer for Human Resources Committee Chairman
|
CA$7,000
|
US$5,284
|
(3)
|
||
Annual Retainer for Human Resources Committee Members
|
CA$4,500
|
(4)
|
US$3,397
|
(3)
|
|
(1)
|
All the Directors elected to receive 100% of their Annual Retainer for Directors in form of DSUs except Mr.
François Côté, who elected to receive 75% of his Annual Retainer in form of DSUs.
|
(2)
|
The Annual Retainer for Mr. François Côté and Mr. Claude Séguin is CA$70,000 (US$52,842). The Annual Retainer
for Ms. Angela Logothetis and Mr. Randy E. Tornes is US$70,000 (CA$92,729).
|
(3)
|
The compensation information has been converted from Canadian dollars to US dollars based upon an average
foreign exchange rate of CA$1.3247 = US$1.00 for the financial year ended August 31, 2019.
|
(4)
|
The Annual Retainer for Audit Committee Members and Human Resources Committee Members is CA$4,500 (US$3,397) for
Mr. François Côté and Mr. Claude Séguin and US$4,500 (CA$5,961) for Ms. Angela Logothetis and Mr. Randy Tornes.
|
Name
|
Fees
Earned (1) ($) |
Share-Based
Awards ($) |
Option-
Based Awards ($) |
Non-Equity
Incentive Plan Compensation ($) |
Pension
Value ($) |
All Other
Compensation ($) |
Total
($) |
|||
François Côté
|
69,073
91,500 |
(US)
(CA) |
–
|
–
|
–
|
–
|
–
|
69,073
91,500 |
(US)
(CA) |
|
Angela Logothetis
|
79,000
104,651 |
(US)
(CA) |
–
|
–
|
–
|
–
|
–
|
79,000
104,651 |
(US)
(CA) |
|
Claude Séguin
|
65,298
86,500 |
(US)
(CA) |
–
|
–
|
–
|
–
|
–
|
65,298
86,500 |
(US)
(CA) |
|
Randy E. Tornes
|
79,000
104,651 |
(US)
(CA) |
–
|
–
|
–
|
–
|
–
|
79,000
104,651 |
(US)
(CA) |
|
(1)
|
The compensation information has been converted from Canadian dollars to US dollars based upon an average
foreign exchange rate of CA$1.3247 = US$1.00 for the financial year ended August 31, 2019 except for compensation amounts paid to Ms. Angela Logothetis and Mr. Randy E. Tornes which were paid in US dollars. Subject to our
internal policy, the fees are always payable in cash, but executives are provided the opportunity to elect to exchange all or a portion of their Annual Retainer for Directors into DSUs. The following table identifies the
portion of the fees earned by the directors that were paid in DSUs and the portion that were paid in cash.
|
Name
|
Fees Earned
|
|||||||
DSUs ($) (i)
|
Cash ($)
|
Total ($)
|
||||||
François Côté
|
39,632
52,500 |
(US)
(CA) |
29,441
39,000 |
(US)
(CA) |
69,073
91,500 |
(US)
(CA) |
||
Angela Logothetis
|
79,000
104,651 |
(US)
(CA) |
–
– |
(US)
(CA) |
79,000
104,651 |
(US)
(CA) |
||
Claude Séguin
|
65,298
86,500 |
(US)
(CA) |
–
– |
(US)
(CA) |
65,298
86,500 |
(US)
(CA) |
||
Randy E. Tornes
|
70,000
92,729 |
(US)
(CA) |
9,000
11,922 |
(US)
(CA) |
79,000
104,651 |
(US)
(CA) |
||
(i)
|
The estimated value at the time of grant of a DSU is determined based on the highest of the closing prices of
the Subordinate Voting Shares on the Toronto Stock Exchange and the NASDAQ Global Select Market on the last trading day preceding the grant date, using the daily exchange rate of the Bank of Canada on the last trading day
preceding the grant date to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing price to United States dollars, as required. The value at vesting of a DSU is
equivalent to the market value of a Subordinate Voting Share when a DSU is converted to such Subordinate Voting Share.
|
Name
|
Outstanding Share-Based Awards (DSUs)
|
|||||
Number of Shares or Units of
Shares that Have Not Vested (#) |
Market or Payout Value of
Share-Based Awards that Have Not Vested (US$) (1) |
Market or Payout Value of
Vested Share-Based Awards Not Paid Out or Distributed (US$) |
||||
François Côté
|
38,582
|
140,824
|
–
|
|||
Angela Logothetis
|
49,714
|
181,456
|
–
|
|||
Claude Séguin
|
64,211
|
234,370
|
–
|
|||
Randy E. Tornes
|
99,000
|
361,350
|
–
|
|||
(1)
|
The value of unvested DSUs at the financial year-end is the market value of the Subordinate Voting Shares on
August 30, 2019, which was US$3.65 (CA$4.85). The market value of the Subordinate Voting Shares was calculated by using the highest of the closing prices of the Subordinate Voting Shares on the Toronto Stock Exchange and on
the NASDAQ Global Select Market on August 30, 2019 using the daily exchange rate of the Bank of Canada to convert either the NASDAQ Global Select Market closing price to Canadian dollars or the Toronto Stock Exchange closing
price to United States dollars as required. The actual gains on vesting will depend on the value of the Subordinate Voting Shares on the date of vesting. There can be no assurance that these values will be realized.
|
Plan Category
|
Number of Securities to Be
Issued upon Exercise of Outstanding DSUs, Options, PSU and RSUs (#) (a) |
Weighted-Average Exercise
Price of Outstanding DSUs, Options, PSU and RSUs (US$) (b) |
Number of Securities Remaining
Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (#) (c) |
|||
DSU Plan – DSUs
|
251,507
|
n/a (1)
|
4,898,130
|
|||
LTIP – Options
|
–
|
–
|
||||
LTIP - PSUs
|
–
|
–
|
||||
LTIP – RSUs
|
1,836,446
|
n/a (1)
|
||||
(1)
|
The value of DSUs, PSUs and RSUs will be equal to the market value of the Subordinate Voting Shares of the
Corporation on the date of vesting.
|
Year ended
August 31, 2019 |
Year ended
August 31, 2018 |
Year ended
August 31, 2017 |
||||
Number of DSUs granted
|
69,818
|
65,745
|
45,058
|
|||
Number of Options granted
|
–
|
–
|
–
|
|||
Number of PSUs granted
|
–
|
–
|
–
|
|||
Number of RSUs granted
|
632,931
|
420,621
|
527,143
|
|||
Weighted average number of securities outstanding for the applicable year
|
55,325,000
|
54,998,000
|
54,423,000
|
|||
Annual burn rate of the DSUs
|
0.1%
|
0.1%
|
0.1%
|
|||
Annual burn rate of Options
|
–
|
–
|
–
|
|||
Annual burn rate of PSUs
|
–
|
–
|
–
|
|||
Annual burn rate of RSUs
|
1.1%
|
0.8%
|
1.0%
|
August 31,
|
||||||||||||||||||||||||
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
|||||||||||||||||||
EXFO Subordinate Voting Shares (CA$)
|
$
|
100
|
$
|
84
|
$
|
89
|
$
|
121
|
$
|
120
|
$
|
101
|
||||||||||||
S&P/TSX Composite Index (CA$)
|
$
|
100
|
$
|
89
|
$
|
93
|
$
|
97
|
$
|
104
|
$
|
105
|
||||||||||||
NEOs’ total compensation (in millions of
CA$)
|
$
|
2.6
|
$
|
2.6
|
$
|
4.1
|
$
|
3.9
|
$
|
3.4
|
$
|
3.8
|
•
|
The Corporation’s share price decreased as at August 31, 2015 compared to the previous financial year, while total NEO
compensation as expressed in Canadian dollars remained flat for the same period. It should be noted, however, three out of five NEOs were remunerated in currencies other than the Canadian dollar. On a constant currency basis,
total NEO compensation would have decreased by about CA$100,000 year-over-year. As a result, total compensation received by the NEOs for this period was aligned with share price performance.
|
•
|
The Corporation’s share performance increased from September 1, 2015 to August 31, 2016. Total compensation received by the NEOs
during this period also increased but at a higher rate than the Corporation’s share price. It should be noted that the Corporation hired an executive to the newly created position of Chief Operating Officer in the early part of
the financial year, which contributed to the increase in total compensation received by the NEOs during this period.
|
•
|
The Corporation’s share performance increased from September 1, 2016 to August 31, 2017. Total compensation received by the NEOs
decreased during this period as certain financial targets were not met, which consequently was aligned with shareholders’ interests.
|
•
|
The Corporation’s share price remained relatively flat as at August 31, 2018 compared to the previous financial year, while total
compensation received by the NEOs decreased during that period as certain financial targets were not met. In addition, fewer Restricted Share Units (RSUs) were attributed to the CEO in 2018 than in the previous year, while the
Executive Chairman accepted a reduced compensation plan after transitioning from his former role as CEO.
|
•
|
The Corporation’s share performance decreased from September 1, 2018 to August 31, 2019. Total compensation received by the NEOs
increased during this period since most financial targets were met with revenues, bookings, IFRS net loss, adjusted EBITDA and cash flows from operations improving year-over-year.
|
(a)
|
one (1) copy of the Annual Report on Form 20-F of the Corporation filed with the SEC in the United States pursuant to the Securities Exchange Act of 1934, and with securities commissions or similar authorities;
|
(b)
|
one (1) copy of the consolidated financial statements and the Auditors’ report thereon as well as the Management’s discussion and
analysis of financial condition and results of operations of the Corporation for its most recently completed financial year, included in the Annual Report on Form 20-F of the Corporation and one (1) copy of any interim
consolidated financial statements of the Corporation subsequent to the consolidated financial statements for its most recently completed financial year;
|
(c)
|
one (1) copy of this Management Proxy Circular.
|
CSA Guidelines
|
EXFO’s Corporate Governance Practices
|
||
1.
|
Board of Directors
|
||
(a)
|
Disclose the identity of directors who are
independent.
|
The following directors are independent:
Mr. François Côté
Ms. Angela Logothetis Mr. Claude Séguin Mr. Randy E. Tornes |
|
(b)
|
Disclose the identity of directors who are not
independent and describe the basis for that determination.
|
Mr. Germain Lamonde – non-independent – is Executive
Chairman of the Corporation and the majority shareholder of the Corporation as he has the ability to exercise a majority of the votes for the election of the Board of Directors.
Mr. Philippe Morin – non-independent – is CEO of the
Corporation since April 1, 2017.
|
|
(c)
|
Disclose whether or not a majority of directors are
independent. If a majority of directors are not independent, describe what the board of directors does to facilitate its exercise of independent judgment in carrying out its responsibilities.
|
The majority of directors are independent:
From September 1, 2018 to November 1, 2019, 4 out of
6.
|
|
(d)
|
If a director is presently a director of any other
issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.
|
Mr. François Côté is chairman of the board of directors of Diagnos Inc. Mr. Claude Séguin is chairman of the board of directors of Fonds de solidarité FTQ.
|
|
(e)
|
Disclose whether or not the independent directors
hold regularly scheduled meetings at which non-independent directors and members of management are not in attendance. If the independent directors hold such meetings, disclose the number of meetings held since the beginning of the
issuer’s most recently completed financial year. If the independent directors do not hold such meetings, describe what the board does to facilitate open and candid discussion among its independent directors.
|
The independent Directors hold as many meetings as
needed annually and any Director may request a meeting at any time. From September 1, 2018 and to November 1, 2019 five (5) meetings of independent Directors without Management occurred.
In June 2011, an Independent Members Committee
Charter was adopted.
|
(f)
|
Disclose whether or not the chair of the board is an independent director. If the
board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the board has neither a chair that
is independent nor a lead director that is independent, describe what the board does to provide leadership for its independent directors.
|
The Chair of the Board of Directors (being the majority
shareholder) is not an independent Director. Since 2002, the Corporation has named an independent director to act as “Lead Director”. Mr. François Côté has been acting as the independent “Lead Director” of the Corporation
since January 2016.
The Lead Director is an outside and unrelated Director
appointed by the Board of Directors to ensure that the Board of Directors can perform its duties in an effective and efficient manner independent of Management. The appointment of a Lead Director is part of the
Corporation’s ongoing commitment to good corporate governance. The Lead Director will namely:
|
||
●
|
provide independent leadership to the Board of Directors;
|
|||
●
|
select topics to be included in the Board of Directors meetings;
|
|||
●
|
facilitate the functioning of the Board of Directors independently of the
Corporation’s Management;
|
|||
●
|
maintain and enhance the quality of the Corporation’s corporate governance
practices;
|
|||
●
|
in the absence of the Executive Chair, act as chair of meetings of the Board of
Directors;
|
|||
●
|
recommend, where necessary, the holding of special meetings of the Board of
Directors;
|
|||
●
|
serve as Board of Directors ombudsman, so as to ensure that questions or comments
of individual directors are heard and addressed;
|
|||
●
|
manage and investigate any report received through the Corporation website
pursuant to the Corporation’s Statement on reporting Ethical Violations, Ethics and Business Conduct Policy and Agent Code of Conduct; and
|
|||
●
|
work with the Board of Directors to facilitate the process for
developing, monitoring and evaluating specific annual objectives for the Board of Directors each year.
|
|||
(g)
|
Disclose the attendance record of each
director for all board meetings held since the beginning of the issuer’s most recently completed financial year.
|
The table below indicates the Directors’
record of attendance at meetings of the Board of Directors and its committees during the financial year ended August 31, 2019:
|
Director
|
Board
Meetings Attended |
Audit Committee
Meetings
Attended
|
Human Resources Committee
Meetings Attended
|
Independent
Directors Meetings
Attended
|
Total Board and
Committee Meetings
Attendance Rate
|
|
Lamonde, Germain
|
4 of 5
|
n/a
|
n/a
|
n/a
|
80%
|
|
Côté, François
|
5 of 5
|
4 of 4
|
4 of 4
|
4 of 4
|
100%
|
|
Logothetis, Angela
|
5 of 5
|
4 of 4
|
4 of 4
|
4 of 4
|
100%
|
|
Morin, Philippe
|
5 of 5
|
n/a
|
n/a
|
n/a
|
100%
|
|
Séguin, Claude
|
4 of 5
|
4 of 4
|
3 of 4
|
3 of 4
|
82%
|
|
Tornes, Randy E.
|
5 of 5
|
4 of 4
|
4 of 4
|
4 of 4
|
100%
|
|
Attendance Rate:
|
93%
|
100%
|
94%
|
94%
|
95%
|
2.
|
Board Mandate – Disclose the
text of the board’s written mandate. If the board does not have a written mandate, describe how the board delineates its role and responsibilities.
|
||
(a)
|
Assuring the integrity of the executive officers
and creating a culture of integrity throughout the organization.
|
The Board of Directors is committed to maintaining
the highest standards of integrity throughout the organization. Accordingly, the Board of Directors adopted an Ethics and Business Conduct Policy and a Statement on Reporting Ethical Violations (Whistleblower Policy) which are
available on the Corporation’s website (www.EXFO.com) to all employees and initially distributed to every new employee of the Corporation.
|
|
(b)
|
Adoption of a strategic planning process.
|
The Board of Directors provides guidance for the
development of the strategic planning process and approves the process and the plan developed by Management annually. In addition, the Board of Directors carefully reviews the strategic plan and deals with strategic planning
matters that arise during the year.
|
|
(c)
|
Identification of principal risks and implementing
of risk management systems.
|
The Board of Directors works with Management to
identify the Corporation’s principal risks and manages these risks through regular appraisal of Management’s practices on an ongoing basis.
|
|
(d)
|
Succession planning including appointing, training
and monitoring senior management.
|
The Human Resources Committee is responsible for
the elaboration and implementation of a succession planning process and its updates as required. The Human Resources Committee is responsible to monitor and review the performance of the Executive Chairman and of the Chief
Executive Officer and that of all other senior officers.
|
|
(e)
|
Communications policy.
|
The Chief Financial Officer of the Corporation is
responsible for communications between Management and the Corporation’s current and potential shareholders and financial analysts. The Board of Directors adopted and implemented Disclosure Guidelines to ensure consistency in the
manner that communications with shareholders and the public are managed. The Audit Committee reviews press releases containing the quarterly results of the Corporation prior to release. In addition, all material press releases
of the Corporation are reviewed by the Executive Chairman, Chief Executive Officer, Chief Financial Officer, Investor Relations Manager, Director of Financial Reporting and Accounting and General Counsel. The Disclosure
Guidelines have been established in accordance with the relevant disclosure requirements under applicable Canadian and United States securities laws.
|
|
(f)
|
Integrity of internal control and management
information systems.
|
The Audit Committee has the responsibility to
review the Corporation’s systems of internal controls regarding finance, accounting, legal compliance and ethical behavior. The Audit Committee meets with the Corporation’s external auditors on a quarterly basis. Accordingly,
the Corporation fully complies with Sarbanes-Oxley Act requirements within the required period of time.
|
(g)
|
Approach to corporate governance including developing a set of
corporate governance principles and guidelines that are specifically applicable to the issuer.
|
The Board of Directors assumes direct responsibility for the
monitoring of the Board of Director’s corporate governance practices, the functioning of the Board of Directors and the powers, mandates and performance of the committees. These responsibilities were previously assumed by the
Human Resources Committee. Accordingly, the Board of Directors adopted the following policies to fully comply with these responsibilities, which are updated on a regular basis as required:
|
|||
Policy
|
Adopted
|
Amendments
|
|||
Audit Committee Charter*
|
March 2005
|
November 2011
(French version only)
October 2014
|
|||
Board of Directors Corporate Governance Guidelines*
|
March 2005
|
February 2010
June 2017 |
|||
Code of Ethics for our Principal Executive Officer
and Senior Financial Officers*
|
March 2005
|
February 2010
|
|||
Disclosure Guidelines
|
March 2005
|
May 2005
August 2008 March 2017 |
|||
Ethics and Business Conduct Policy*
|
March 2005
|
June 2013
July 2018 |
|||
Human Resources Committee Charter*
|
March 2005
|
September 2006
October 2012 January 2013 October 2014 October 2017 |
|||
Securities and Trading Policy
|
March 2005
|
February 2010
|
|||
Statement on Reporting Ethical Violations (Whistleblower Policy) *
|
March 2005
|
June 2013
|
|||
Policy Regarding Hiring Employees and Former Employees of Independent
Auditor*
|
October 2006
|
February 2010
|
|||
Best Practice Regarding the Granting Date of Stock Incentive Compensation
|
April 2007
|
February 2010
|
|||
Guidelines Regarding the Filing and Disclosure of Material Contracts
|
October 2008
|
February 2010
|
|||
Independent Members Committee Charter*
|
June 2011
|
||||
Majority Voting Policy*
|
October 2011
|
March 2016
|
|||
Policy Regarding Conflict Minerals*
|
January 2013
|
December 2018
|
|||
Agent Code of Conduct*
|
September 2013
|
July 2018
|
|||
Director Share Ownership Policy*
|
September 2013
|
June 2017
|
|||
* Available on the Corporation’s website (www.EXFO.com).
|
The Board of Directors adopted in October 2011 a Majority Voting
Policy for the election of Directors and updated it in accordance with the TSX Rules in March 2016. In October 2012 in order to expressly reflect the responsibility of the Human Resources Committee to conduct an annual
assessment of the risks associated with the Corporation’s executive compensation policies and procedures, the Board of Directors amended the Human Resources Committee Charter. The Board of Directors amended in January 2013 the
Human Resources Committee Charter to include within the Human Resources Committee’s mandate the responsibility to receive and discuss suggestions from shareholders for potential director’s nominees. Also, in January 2013, the
Board of Directors adopted a Policy Regarding Conflict Minerals. In the course of formalizing its anti-corruption compliance program, the Board of Directors amended the Ethics and Business Conduct Policy and the Statement on
Reporting Ethical Violations (Whistleblower Policy) in June 2013 and also adopted in September 2013 the Agent Code of Conduct. In September 2013, the Board of Directors integrated a governance best practice by adopting a
Director Share Ownership Policy.
The Board of Directors amended in October 2014 the Human Resources
Committee Charter in order to adapt it to the latest NASDAQ Rules on compensation committees along with an update on the nomination of Directors process and the Audit Committee Charter in order to harmonize its terminology with
MI 52-110.
The Board of Directors amended in March 2017 the Disclosure
Guidelines to add the Executive Chairman as a member of the Disclosure Committee. The Board of Directors amended in June 2017 the Director Share Ownership Policy and the Board of Directors Corporate Governance Guidelines in
order to introduce mandatory obligations for the Directors to elect to receive at least seventy-five (75%) of their Annual Retainer in form of DSUs until their cumulative Annual Retainers equal or exceed three (3) times the sum
of: i) the Annual Retainer for Directors; ii) the Annual Retainer for Audit Committee Members; and iii) the Annual Retainer for Human Resources Committee Members. The Board of Directors amended in October 2017 the Human
Resources Committee Charter in order to specifically add the compensation review of the Executive Chairman. The Board of Directors amended in July 2018 the Ethics and Business Conduct Policy and the Agent Code of Conduct to
remove the exception for facilitation payments.
|
|||
(h)
|
Expectations and responsibilities of Directors,
including basic duties and responsibilities with respect to attendance at board meetings and advance review of meeting materials.
|
The Board of Directors is also responsible for the
establishment and functioning of all of the Board of Directors’ committees, their compensation and their good standing. At regularly scheduled meetings of the Board of Directors, the Directors receive, consider and discuss
committee reports. The Directors also receive in advance of any meeting, all documentation required for the upcoming meetings and they are expected to review and consult this documentation.
|
3.
|
Position Descriptions
|
||||
(a)
|
Disclose whether or not the board has developed written position
descriptions for the chair of the board and the chair of each board committee. If the board has not developed written position descriptions for the chair and/or the chair of each board committee, briefly describe how the board
delineates the role and responsibilities of each such position.
|
There is no specific mandate for the Board of Directors, however
the Board of Directors is, by law, responsible for managing the business and affairs of the Corporation. Any responsibility which is not delegated to senior Management or to a committee of the Board of Directors remains the
responsibility of the Board of Directors. Accordingly, the chairs of the Board of Directors, of the Audit Committee and of the Human Resources Committee will namely:
|
|||
●
|
provide leadership to the Board of Directors or Committee;
|
||||
●
|
ensure that the Board of Directors or Committee can perform its duties in an effective
and efficient manner;
|
||||
●
|
facilitate the functionary of the Board of Directors or Committee; and
|
||||
●
|
promote best practices and high standards of corporate governance.
|
||||
(b)
|
Disclose whether or not the board and CEO have
developed a written position description for the CEO. If the board and CEO have not developed such a position description, briefly describe how the board delineates the role and responsibilities of the CEO.
|
No written position description has been
developed for the Executive Chairman nor for the CEO. The Executive Chairman and the Chief Executive Officer, along with the rest of Management placed under their supervision, are responsible for meeting the corporate
objectives as determined by the strategic objectives and budget as they are adopted each year by the Board of Directors.
|
|||
4.
|
Orientation and Continuing Education
|
||||
(a)
|
Briefly describe what measures the board takes to
orient new directors regarding
|
||||
i.
|
the role of the board, its committees and its
directors; and
|
The Human Resources Committee Charter foresees
that the Human Resources Committee maintains an orientation program for new Directors.
|
|||
ii.
|
the nature and operation of the issuer’s
business.
|
Presentations and reports relating to the
Corporation’s business and affairs are provided to new Directors. In addition, new Board of Directors members meet with senior Management of the Corporation to review the business and affairs of the Corporation.
|
(b)
|
Briefly describe what measures, if any, the board takes to provide
continuing education for its directors. If the board does not provide continuing education, describe how the board ensures that its directors maintain the skill and knowledge necessary to meet their obligations as directors.
|
The Human Resources Committee Charter foresees that the Human
Resources Committee maintains a continuing education program for Directors. In March 2013, the independent Directors of the Corporation attended a presentation on the Corruption of Foreign Public Officials Act given by
PricewaterhouseCoopers LLP. In March 2014, the independent Directors of the Corporation attended a presentation on directors’ fiduciary duty by Fasken Martineau DuMoulin LLP. In March 2015, the Directors of the Corporation
attended a presentation on directors’ fiduciary duty in a controlled environment and on Corporate Governance by Norton Rose Fulbright LLP. In October 2015 the Directors of the Corporation attended a presentation on the
Corporation’s Service Assurance products by the Vice President Transport and Service Assurance Division of the Corporation. In 2016, the Directors of the Corporation attended an online training on the Corporation’s business and
orientation. In 2017, the Directors of the Corporation attended a training on the Corporation’s products and solutions and also attended a presentation on Fraud Risk given by
PricewaterhouseCoopers LLP. In 2018, the Directors of the Corporation attended trainings on the Corporation’s products and solutions and attended a presentation on stock valuation by
Canaccord Genuity and by Cowen. In 2019, the Directors of the Corporation attended trainings on the Corporation’s products and solutions and on IFRS.
|
||
5.
|
Ethical Business Conduct
|
|||
(a)
|
Disclose whether or not the board has adopted a
written code for the directors, officers and employees. If the board has adopted a written code:
|
The Corporation is committed to maintaining the
highest standard of business conduct and ethics. Accordingly, the Board of Directors updated and established (i) a Board of Directors Corporate Governance Guidelines, (ii) a Code of Ethics for our Principal Executive Officer and
senior Financial Officers, (iii) an Ethics and Business Conduct Policy and (iv) a Statement on Reporting Ethical Violations (Whistleblower Policy) which are available on the Corporation’s website (www.EXFO.com).
|
||
i.
|
disclose how a person or company may obtain a copy
of the code;
|
|||
ii.
|
describe how the board monitors compliance with its
code, or if the board does not monitor compliance, explain whether and how the board satisfies itself regarding compliance with its code; and
|
The Board of Directors will determine, or designate
appropriate persons to determine, appropriate actions to be taken in the event of a violation of the Code of Ethics for our Principal Executive Officer and senior Financial Officers. Someone who does not comply with this Code of
Ethics will be subject to disciplinary measures, up to and including discharge from the Corporation. Furthermore, a compliance affirmation must be filled in a written form agreeing to abide by the policies of the Code of Ethics.
|
||
iii.
|
provide a cross-reference to any material change report filed since the
beginning of the issuer’s most recently completed financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the code.
|
No material change report has been required or
filed during our financial year ended August 31, 2019 with respect to any conduct constituting a departure from our Code of Ethics.
|
(b)
|
Describe any steps the board takes to ensure directors exercise
independent judgement in considering transactions and agreements in respect of which a director or executive officer has a material interest.
|
Activities that could give rise to conflicts of interest are
prohibited. Members of the Board of Directors should contact the Lead Director or in-house legal counsel regarding any issues relating to possible conflict of interest. If such event occurs, the implicated Board of Directors
member will not participate in the meeting and discussion with respect to such possible conflict of interest and will not be entitled to vote on such matter. Senior executives should also contact the in-house legal counsel
regarding any issues relating to possible conflict of interest.
|
|
(c)
|
Describe any other steps the board takes to
encourage and promote a culture of ethical business conduct.
|
The Corporation has instituted and follows a
“Whistleblower Policy” where each member of the Board of Directors as well as any senior officer, every employee of the Corporation and any person is invited and encouraged to report anything appearing or suspected of being
non-ethical to our Lead Director, in confidence. The Lead Director has the power to hire professional assistance to conduct an internal investigation should he so feel it is required. The Corporation also provides training to
its employees as part of its anti-corruption compliance program.
|
|
6.
|
Nomination of Directors
|
||
(a)
|
Describe the process by which the board identifies
new candidates for board nomination.
|
The Board of Directors adopted and implemented a
Human Resources Committee Charter which integrates the Compensation Committee Charter and the Nominating and Governance Committee Charter. The Human Resources Committee is responsible for nomination, assessment and compensation
of Directors and Officers.
More specifically, the Human Resources Committee,
which is comprised entirely of independent Directors, is responsible for the recruitment and recommendation of new candidates for appointment or election to the Board. When considering a potential candidate, the Human Resources
Committee considers the qualities and skills that the Board, as a whole, should have and assesses the competencies and skills of the current members of the Board. Based on the talent already represented on the Board, the Human
Resources Committee then identifies the specific skills, personal qualities or experiences that a candidate should possess in light of the opportunities and risks facing the Corporation. Potential candidates are screened to
ensure that they possess the requisite qualities, including integrity, business judgment and experience, business or professional expertise, independence from Management, international experience, financial literacy, excellent
communications skills and the ability to work well with the Board and the Corporation. The Human Resources Committee considers the existing commitments of a potential candidate to ensure that such candidate will be able to
fulfill his or her obligations as a Board member.
|
The Human Resources Committee maintains a list of potential director
candidates for its future consideration and may engage outside advisors to assist in identifying potential candidates. The Human Resources Committee also considers recommendations for director nominees submitted by the
Corporation’s shareholders, Officers, Directors and senior Management.
|
|||||
(b)
|
Disclose whether or not the board has a nominating
committee composed entirely of independent directors. If the board does not have a nominating committee composed entirely of independent directors, describe what steps the board takes to encourage an objective nomination
process.
|
The Human Resources Committee consists of four (4)
members all of whom are independent Directors. The Chairman of the Human Resources Committee is Mr. François Côté.
The Human Resources Committee Charter foresees:
|
|||
●
|
recommending a process for assessing the
performance of the Board of Directors as a whole, the Chair of the Board of Directors and the Committee chairs and the contribution of individual Directors, and seeing to its implementation;
|
||||
(c)
|
If the board has a nominating committee, describe
the responsibilities, powers and operation of the nominating committee.
|
●
|
recommending the competencies, skills and personal
qualities required on the Board of Directors in order to create added value, taking into account the opportunities and risks faced by the Corporation and subsequently identifying and recommending to the Board of Directors.
|
||
7.
|
Compensation
|
||||
(a)
|
Describe the process by which the board determines
the compensation for the issuer’s directors and officers.
|
The Human Resources Committee reviews periodically
compensation policies in light of market conditions, industry practice and level of responsibilities. Only independent Directors are compensated for acting as Directors of the Corporation.
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(b)
|
Disclose whether or not the board has a
compensation committee composed entirely of independent directors. If the board does not have a compensation committee composed entirely of independent directors, describe what steps the board takes to ensure an objective
process for determining such compensation.
|
The Human Resources Committee consists of four (4)
members all of whom are independent Directors. The Chairman of the Human Resources Committee is Mr. François Côté.
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(c)
|
If the board has a compensation committee, describe
the responsibilities, powers and operation of the compensation committee.
|
The Human Resources Committee Charter foresees that
such committee shall:
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●
|
review and approve on an annual basis the annual compensation of all
senior officers which namely includes the assessment of risks associated with the compensation of such senior officers;
|
●
|
review and approve, on behalf of the Board of Directors or in
collaboration with the Board of Directors as applicable, on the basis of the attribution authorized by the Board of Directors, to whom options to purchase shares of the Corporation, PSUs, RSUs or DSUs shall be offered as the
case may be and if so, the terms of such options, PSUs, RSUs or DSUs in accordance with the terms of the Corporation’s LTIP or DSU Plan provided that no options, PSUs, RSUs or DSUs shall be granted to members of this committee
without the approval of the Board of Directors;
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●
|
recommend to the Board of Directors from time to time the
remuneration to be paid by the Corporation to Directors;
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●
|
make recommendations to the Board of Directors with respect to the
Corporation’s incentive compensation plans and equity-based plans.
|
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8.
|
Other Board
Committees – If the board has standing committees other than the audit, compensation and nominating committees identify the committees and describe their function.
|
The Board of Directors has no other standing
committee.
|
||
9.
|
Assessments – Disclose
whether or not the board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution. If assessments are regularly conducted, describe the process used for the
assessments. If assessments are not regularly conducted, describe how the board satisfies itself that the board, its committees, and its individual directors are performing effectively.
|
The Board of Directors assumes direct responsibility for the
monitoring of the Board of Directors’ corporate governance practices, the functioning of the Board of Directors and the powers, mandates and performance of the Human Resources Committee. The Human Resources Committee, composed
solely of independent Directors, initiates a self-evaluation of the Board of Directors’ performance on an annual basis. Questionnaires are distributed to each independent director for the purpose of evaluation of the Board of
Directors’ responsibilities and functions and the performance of the Board of Directors’ Committees. The results of the questionnaires are compiled on a confidential basis to encourage full and frank commentary and are discussed
at the next regular meeting of the Human Resources Committee or independent Board of Directors members meeting.
|
||
10.
|
Director Term
Limits and Other Mechanisms of Board Renewal –
Disclose whether or not the issuer has adopted term
limits for the directors on its board or other mechanisms of board renewal and, if so, include a description of those director term limits or other mechanisms of board renewal. If the issuer has not adopted director term limits
or other mechanisms of board renewal, disclose why it has not done so.
|
The Corporation does not have a policy that limits
the term of the directors on its board. The Board has determined that the term limit of the director’s mandate or the mandatory retirement age is not essential in part, because Board renewal has not been a challenge for the
Corporation in recent years. Specifically, the average tenure of the current independent directors is low, at approximately five (5) years and a third (sixty-four (64) months). Historically, including the current independent
directors, the average tenure of the independent directors that served on the Board of Directors since 2000 is approximately seven (7) years and eight (8) months. In addition, the Corporation seeks to avoid losing the services
of a qualified director with experience and in-depth knowledge of the Corporation through the imposition of an arbitrary term limit but is of the opinion however that a balance between long‐term directors and new directors who
bring a different experience and new ideas is essential.
|
The Human Resources Committee initiates a self-evaluation of the
Board of Directors’ performance on an annual basis. This evaluation is an alternative mechanism for renewing the terms of the Directors serving on its Board of Directors. The annual review process of the overall efficiency of
the Board of Directors and committees as a whole and of committee members and Directors on an individual basis, remains the best way of ensuring that the skills required are well represented within the Board of Directors.
|
||||
11.
|
Policies Regarding the
Representation of Women, Indigenous Person, Person with Disabilities or a Member of Visible Minorities on the Board
|
|||
(a)
|
Disclose whether the issuer has adopted a written
policy relating to the identification and nomination of women, indigenous person, person with disabilities or a member of visible minorities directors. If the issuer has not adopted such a policy, disclose why it has not done
so.
|
The Corporation does not have any written policy
regarding the identification and nomination of women, indigenous person, person with disabilities or a member of visible minorities directors as it did not deem it necessary and its focus is
on the recruitment of candidates with the specific skills, personal qualities and experiences to add the highest value to the Board, rather than on the gender or other personal characteristics of particular candidates.
|
||
(b)
|
If an issuer has adopted a policy referred to in (a), disclose the
following in respect of the policy:
|
The Corporation does not have a written policy.
|
||
i.
|
a short summary of its objectives and key provisions,
|
|||
ii.
|
the measures taken to ensure that the policy has been effectively
implemented,
|
|||
iii.
|
annual and cumulative progress by the issuer in achieving the
objectives of the policy, and
|
|||
iv.
|
whether and, if so, how the board or its nominating committee
measures the effectiveness of the policy.
|
12.
|
Consideration of
the Representation of Women, Indigenous Person, Person with Disabilities or a Member of Visible Minorities in the Director Identification and Selection Process – Disclose whether and, if so, how the board or nominating
committee considers the level of representation of women, indigenous person, person with disabilities or a member of visible minorities on the board in identifying and nominating candidates for election or re-election to the
board. If the issuer does not consider the level of representation of women, indigenous person, person with disabilities or a member of visible minorities on the board in identifying and nominating candidates for election or
re-election to the board, disclose the issuer’s reasons for not doing so.
|
The Human Resources Committee does not specifically
consider the level of representation of women, indigenous person, person with disabilities or a member of visible minorities on the Board in identifying and nominating candidates for election or re-election to the Board. In the
context of such process, it considers the then current Board composition and anticipated competencies required so as to add the highest value to the Board. See Heading 6 “Nomination of Directors” on page 138 of this Circular for
a description of the process adhered to by the Corporation to select director candidates.
|
13.
|
Consideration Given to the
Representation of Women, Indigenous Person, Person with Disabilities or a Member of Visible Minorities in Executive Officer Appointments – Disclose whether and, if so, how the issuer considers the level of
representation of women, indigenous person, person with disabilities or a member of visible minorities in executive officer positions when making executive officer appointments. If the issuer does not consider the level of
representation of women, indigenous person, person with disabilities or a member of visible minorities in executive officer positions when making executive officer appointments, disclose
the issuer’s reasons for not doing so.
|
The Corporation is focused on finding executive talent to grow and
expand its business. As such, it focuses on recruiting and retaining executive talent needed to develop and implement the Corporation’s strategy, objectives and goals without regard for the gender or other personal
characteristics of particular candidates for executive officer positions.
|
14.
|
Issuer’s Targets Regarding the Representation
of Women, Indigenous Person, Person with Disabilities or a Member of Visible Minorities on the Board and in Executive Officer Positions
|
|||
(a)
|
For purposes of this Item, a “target” means a
number or percentage, or a range of numbers or percentages, adopted by the issuer of women, indigenous person, person with disabilities or a member of visible minorities on the issuer’s
board or in executive officer positions of the issuer by a specific date.
|
N/A.
|
||
(b)
|
Disclose whether the issuer has adopted a target
regarding women, indigenous person, person with disabilities or a member of visible minorities on the issuer’s board. If the issuer has not adopted a target, disclose why it has not done
so.
|
The Corporation does not have a target of women,
indigenous person, person with disabilities or a member of visible minorities on the Board of Directors because it does not believe that any candidate for membership to the Board of
Directors should be chosen nor excluded solely or largely because of gender or other personal characteristics. In selecting director nominees, the Corporation considers the skills, expertise and background that would
complement the existing Board.
|
||
(c)
|
Disclose whether the issuer has adopted a target
regarding women, indigenous person, person with disabilities or a member of visible minorities in executive officer positions of the issuer. If the issuer has not adopted a target, disclose why it has not done so.
|
The Corporation has not adopted a target
regarding women, indigenous person, person with disabilities or a member of visible minorities in executive officer positions of
the Corporation. The Corporation considers candidates based on their qualifications, personal qualities, business background and experience, and does not feel that targets necessarily result in the identification or selection
of the best candidates.
|
||
(d)
|
If the issuer has adopted a target referred to in
either (b) or (c), disclose:
|
The Corporation has not adopted a target.
|
||
i.
|
the target, and
|
|||
ii.
|
the annual and cumulative progress of the issuer in achieving the
target.
|
15.
|
Number of Women, Indigenous
Person, Person with Disabilities or a Member of Visible Minorities on the Board and in Executive Officer Positions
|
||
(a)
|
Disclose the number and proportion (in percentage
terms) of directors on the issuer’s board who are women, indigenous person, person with disabilities or a member of visible minorities.
|
Currently, one of the Corporation’s Board members
is a woman (17%).
Currently, none of the Corporation’s Board
members is an indigenous person (First Nations, Inuit and Métis), a person with disabilities nor a member of visible minorities.
|
|
(b)
|
Disclose the number and proportion (in percentage
terms) of executive officers of the issuer, including all major subsidiaries of the issuer, who are women, indigenous person, person with disabilities or a member of visible minorities.
|
Currently, one of the Corporation’s executive
officers is a woman (9%).
Currently, none of the Corporation’s executive
officers is an indigenous person (First Nations, Inuit and Métis), a person with disabilities nor a member of visible minorities.
|