McCoy Bros. Inc. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted from the requirement to file certain interim financial statements of an acquired business in a business acquisition report -- The business acquisition report will include audited financial statements of the acquired business for a period that includes the period covered by the subject interim financial statements
Rules Cited
National Instrument 51-102 -- Continuous Disclosure Obligations, Part 8
National Instrument 52-107 -- Acceptable Accounting Principles, Auditing Standards and Reporting Currency
DATED this 8th day of December, 2004
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, ONTARIO AND SASKATCHEWAN
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
and
IN THE MATTER OF
McCOY BROS. INC. (the "Filer" or "McCoy")
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") for
(a) an exemption from the requirement to include interim financial statements of Peerless Limited in the business acquisition report required to be filed by December 8, 2004 (the Business Acquisition Report); and
(b) an exemption from the requirement to include a pro forma interim statement using an income statement of Peerless Limited for the interim period of January 1, 2004 to September 30, 2004 provided that McCoy includes in the Business Acquisition Report a pro forma income statement based on McCoy's income statement for the interim period ending September 30, 2004 and the income statement of Peerless Limited included in the 2004 Financial Statements (collectively, the Requested Relief).
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) the Alberta Securities Commission is the principal regulator for this application; and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
1. McCoy is a corporation existing under the laws of the Province of Alberta and is a reporting issuer under the Securities Act (Ontario), the Securities Act (Saskatchewan), the Securities Act (Alberta) and the Securities Act (British Columbia).
2. The authorized share capital of McCoy consists of an unlimited number of common shares and an unlimited number of preferred shares, of which there are currently 17,603,800 common shares and no preferred shares outstanding. The common shares of McCoy are listed on the Toronto Stock Exchange.
3. McCoy's businesses include truck service and sales as well as the manufacture of trailers and oil-field products out of its locations in Edmonton, Grand Prairie and Red Deer, Alberta.
4. McCoy has reached an agreement (the "Agreement") with Peerless Corporation providing for the purchase by McCoy of all of the issued and outstanding shares of Peerless Limited. Peerless Limited and Peerless Corporation are presently wholly-owned indirect subsidiaries of Deere & Company ("Deere"), operating in its Construction and Forestry Division.
5. The closing date (the "Closing Date") of the acquisition of Peerless Limited is September 24, 2004.
6. None of the board of directors and officers of McCoy are related to Deere or its subsidiaries or affiliates.
7. Peerless Limited is a manufacturer of truck trailers for the forestry, oil and gas, mining and construction industries.
8. Peerless Corporation presently owns all of the shares of Peerless Limited and presently does not carry on any active business.
9. The financial year end of Peerless Limited is October 31.
10. As part of a larger transaction, Deere acquired Peerless Limited and Peerless Corporation in 2000. Since its acquisition by Deere, Peerless Limited has operated as part of Deere's Construction and Forestry Division and its operations and financial records have been overseen by Deere during that period.
11. Peerless Limited employs approximately 185 people throughout its operations located in Penticton and Prince George, British Columbia, Edmonton and Grand Prairie, Alberta.
12. The business of Peerless Limited is not seasonal.
13. Deere and its subsidiaries manufacture, distribute and finance a full line of agricultural equipment; a variety of commercial and consumer equipment; a broad range of equipment for construction and forestry; and other technological products and services. Deere also provides credit services and managed health care plans.
14. The shares of Deere are listed on the New York, Chicago and Frankfurt, Germany stock exchanges.
15. The auditors of Deere are Deloitte & Touche LLP in Chicago, Illinois.
16. Separate audited financial statements have not been prepared by Peerless Limited since the time of its acquisition by Deere, if ever. The assets and earnings of Peerless Limited have only been reported in the consolidated financial statements of Deere.
17. McCoy has undertaken, and continues to undertake, rigorous due diligence review of the operations and financial records of Peerless Limited and have retained the services of PricewaterhouseCoopers LLP for assistance in that regard. To date, McCoy is satisfied with its review of the operations and financial records of Peerless Limited.
18. Through its due diligence review of Peerless, McCoy and PricewaterhouseCoopers LLP have determined that Peerless Limited has not historically maintained financial records for a period in excess of seven years.
19. The proposed acquisition by McCoy of Peerless Limited will constitute a "significant acquisition" by McCoy as defined in section 8.3 of NI 51-102, as the significance tests provided in subsection 8.3(2)(a) and (b) are satisfied at a level of greater than 40%.
20. Absent an exemption, the Business Acquisition Report to be prepared and filed by McCoy under Part 8 of NI 51-102 in respect of its acquisition of Peerless Limited, may include the following financial information pursuant to sections 8.4 and 8.7 of NI 51-102:
(a) audited balance sheets, statements of income, retained earnings and cash flows for Peerless Limited for:
(i) the financial year ended October 31, 2003 (the "2003 Financial Statements"); and
(ii) the financial period commencing November 1, 2003 and ending on the Closing Date (the "2004 Financial Statements");
(b) unaudited statements of income, retained earnings and cash flows for Peerless Limited for the most recently completed interim period that ended more than 60 days before the date of the Business Acquisition Report and the comparable period in the preceding financial year;
(c) unaudited balance sheet for Peerless Limited as at the end of the most recently completed interim period that ended more than 60 days before the date of the Business Acquisition Report; and
(d) the following:
(i) a pro forma income statement of McCoy to give effect to the acquisition of Peerless Limited for each of:
A. the most recently completed financial year of McCoy, being the year ended December 31, 2003; and
B. the most recently completed interim period of McCoy, being the period ended September 30, 2004;
in each case, as if the acquisition had taken place at the beginning of such financial period;
(ii) pro forma earnings per share based on the foregoing pro forma financial statements; and
(iii) a compilation report accompanying such pro forma financial statements.
21. As permitted by section 6.2(6) of National Instrument 52-107, the auditor's report accompanying the 2003 Financial Statements will contain qualifications relating to inventory as at November 1, 2002 and October 31, 2003 and the auditor's report accompanying the 2004 Financial Statements will contain a qualification relating to inventory as at November 1, 2003. The auditor's report accompanying the 2004 Financial Statements will not contain a qualification relating to inventory as at the Closing Date.
Decision
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.