Corporate Structure - Empire Industries...

Steel Fabrication Services

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49% 45%R&D for the

commercialization of large optical telescopes

Proprietary equipment manufacturing in China

51% (to be incorporated)

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Corporate Structure

01EMPIRE INDUSTRIES | 2014 ANNUAL REPORT

2014 was another successful year for Empire. It is encouraging and satisfying to see that our strategy is working. Our company is well positioned to take advantage of future opportunities in the markets we compete in, and our current profitability demonstrates that we can successfully capitalize on each of these market opportunities.

2014 Highlights

•Revenuesincreasedby20% - up $23.4 million to $141.2 million (from $117.8 million in 2013) •AdjustedEBITDAincreasedby37% - up $2.3 million to $8.6 million (from $6.3 million in 2013) •NetIncomeincreasedby45% - up $2.0 million to $6.4 million (from $4.4 million in 2013) -PerShareNetIncomewas$0.025in2014(from$0.02in2013) •Backlogof$155million,upfrom$93millionatoftheGroup’sthirdquarterreport

Business Unit Update Our engineered product business divisions continue to focus on manufacturing high value added, proprietary products such as media-based attractions, custom design/build observatory telescope enclosures and hydrovac trucks.Manyofthecompany’sproductsaregloballycompetitiveandexportedaroundtheworld.Oursteelfabrication business divisions continue to specialize in becoming more cost competitive by leveraging its China/Western Canadian fabricated steel supply chain strategy in order to enhance its margin.

Media-based AttractionsIn2014,theCompany’smedia-basedattractionssegmentremainedverybusymanufacturingproductsformanyclientsaroundtheworld.Theengineeringanddetailinggroupwasalsoverybusyworkingondesigninganddetailingseveralnewmedia-basedattractionproducts.DynamicAttractionshasestablisheditselfasa leader in the burgeoning business of selling proprietary media-based attractions and generating contract awards,especiallyinAsiaandtheMiddleEast.Thesemarketsareparticularlyimportant,becausehighquality,entertainment infrastructure is in its infancy and domestic demand is growing rapidly due to the increased affluence of their middle classes and their appetite for entertainment.

Hydrovac TrucksOur hydrovac truck manufacturing division had a good year in 2014, improving its manufacturing processes, increasing throughput, improving plant productivity and increasing its profits. However, the dramatic drop in oil andgaspriceshashadadirectandimmediatenegativeimpactontheoutlookfor2015.Ourbackloghasshrunkandourmarketingstrategyisintheprocessofbeingadjustedtoreflectcurrentmarketconditions,andourcoststructureisbeingrealignedtoreflectsuch.TheweakerCanadiandollarhasopeneduptheexportmarkettotheUS and our newly established sales distribution channel to the US should bear more fruit in the second half of 2015.

Report to Shareholders

TelescopesAsmentionedelsewhereinthisreportandapressreleasedatedApril7,2015,theCompanyisactivelyworkingoutthedetailsofthecontracttodesignandmanufacturethethirtymetertelescope’senclosure.Whenthecontractisexecutedlaterthisyear,weexpectthatitwillstarttoimpactourresultsinthesecondhalfof2015,largely in the detailed design area, with procurement and manufacturing really impacting the Company between 2016and2019.

Steel FabricationTheCompanyhasdevelopedastrategytoloweritssteelfabricationcostsanddifferentiateitsservicedelivery.Akeypartofthisplanhasbeentocomplementitsdomesticsteelfabricationcapacitywithavailablecapacityatlowercostsfromits45%owned,steelfabricationjointventureinChina.Oursteelfabricationvaluepropositioniscompellinganduniqueandwewillcontinuetomakecustomersawareofthelowercostadvantageofengaging our services. Oil sands customers absolutely need to reduce the capital cost per barrel of their expansions.Oureffortisaworkinprogress,andgiventhecurrenttractioninthemarketplace,wefeelthatthepotential gains are worth the continued effort and future investment.

OutlookTheCompanyexpectstocontinuetoimproveitsoperatingperformancein2015asaresultofthefollowing: •TheCompanyhasincreaseditsbacklogto$155million,upfromto$116millionattheendof2013, $92millionattheendof2012and$43millionattheendof2011.Thisexcludesanyamountforthe thirty meter telescope because the contract has not been finalized yet. •Themedia-basedattractionsgroupwillcontinuetoexecuteitsrecordbacklogofhighvalueadded products.Asthesegmentcontinuestobuildmultiplenewproductsconcurrently,itisanticipatedthat there will still be some challenges from an earned revenue and profit perspective in the near term whichisalsoexpectedtoimproveassecondgenerationproductsgetproducedthattakeadvantageof the learning curve associated with the first generation products. •AweakCanadiandollarwillpositivelyimpactprofitmarginsbecausethemedia-basedattractionsare allsoldpredominantlyinUSdollars.TothebestofabilitiesandcapacitytheGrouphedgesitsnetUS dollarexposuresoastomanagetoplannedresults. •DynamicStructureswillfinalizethecontracttobuildthethirtymetertelescopeenclosureandafterthe contractiscompleted,moveaggressivelyintothedetaileddesignphasethesecondhalfof2015. DisruptionsinsiteconstructionactivitieswillnothaveanyeffectonouroperationalactivitiesinBritish Columbia. •TheGroup’sChineseassociateinvestmentinGuangdongProvinceisincreasingtheamountofworkit isperformingforEmpire,positivelyimpactingEmpire’smargins.

TheGrouphasbeenchallengedtorespondquicklytothenegativeaffectthatthesignificantreductioninoilandgaspriceshashadonreducingcapitalexpendituresinWesternCanada,especiallyintheoilsandsmarket.Therefore,theCompany’soperatingperformancein2015isexpectedtobeimpactednegativelyin2015comparedto2014asaresultofthefollowing:



•TheGroup’sHydrovactruckmanufacturingoperationhasseenitsbacklogreduceddramatically, its forecasted monthly throughput reduced significantly, sales price per truck reduced and margins reducedcorrespondingly.Thesegmentisexpandingitssalesregionandfocusincludingexpandingin theUnitedStatestooffsetthedeclineindemandexperiencedinWesternCanadaduetothedeclinein oil prices. •TheGroup’ssteelfabricationoperationswillseeincreasedcompetitionintheindustrial,commercial andinstitutionalmarketofAlberta.Thesegmentispursuingopportunitiesthatdeploysomeofour fabricatedsteelfromourChineseassociateinvestmentintoEmpire’ssteelsupplychaininCanada. •OurassociateinvestmentinFortMcMurrayispredominantlyfocusedonmaintenanceexpenditures, notconstructioncapitalexpenditures,soweexpecttoseecontinued,moderateprofitabilityfromthis operation.

Summary TheCompanyhassuccessfullyrepositioneditselfintohighermarginandhighergrowth,media-basedattractions.TheGroupwillcontinuetoshelteritsprofitsfromtaxthroughtheuseofits$5.0millionofitsDeferredTaxAssets.Itexpectsitsbalancesheettostrengthenthroughouttheyearasitsequityincreasesanditsdebtdecreases.

TheGroupcontinuestoassessstrategicgrowthinitiativesinthehydrovacoperationanditsfabricatedsteelsupply chain with the view to generating a much better return on its tangible and intangible assets deployed in these two businesses.

Onbalance,the2015improvementinthemedia-basedattractionsbusinessisexpectedtomorethanoffsetthenegativeoutlookforourmanufacturedproductsandsteelfabricationoperationsin2015.

TheCompanyhasstartedtoimplementaninvestorandpublicrelationsprogramthatwillseektocreateawarenessofanddemandforitscommonsharesfrominstitutionstoaddtoitsfloatoflargelyretailinvestors.Asthese programs gather momentum, we are confident that the announcing of future results will be met with more enthusiasm than the past.

Wewouldliketowelcomeanynewshareholdersthathavedecidedtojoinusonourmissionandthankour“old”shareholders who have stuck with us patiently as the management, directors and employees guided us through the challenges and capitalized on the opportunities of the past few years. We are confident the future will be excitingandunfoldasplanned.

GuyNelson IanMacdonaldExecutiveChairmanandCEO Non-executiveChairmanoftheBoard

Media-Based Attractions

Media-Based Attractions

(in000’s)

Sales

AdjustedEBITDA

AdjustedEBIT

YTD

Dec31,2014

$67,754

$6,437

$5,524


Dynamic Structures: designsandmanufacturescomplexridesystemsforestablishedthemeparkownersaroundtheworld.Isalsooneoftheworld’sleadingdesignersandmanufacturersoflargeground-basedastronomical observatory telescopes.

Dynamic Attractions: turn key integrator of proprietary, premium media-based entertainment attractions, and providerofpartsandserviceforthemeparkattractions.KeyproductsincludeFlyingTheatres,SpecialEffectsRollerCoasters,AutomaticallyGuidedVehicle(AGV)attractions,andDarkRides.

Manufactured Products



(in000’s)

Sales

AdjustedEBITDA

AdjustedEBIT

YTD

Dec31,2014

$35,674

$3,407

$3,165

Petrofield Industries:manufactureshydrovactrucksforexcavationserviceproviders,primarilyintheoilandgasindustry.PetrofielddesignsandmanufacturestheTornadoHydrovacF4–consideredtobethebestindustrialgradehydrovacintheindustry.TornadoHydrovacsarepowerful,ruggedandmostimportant…simple.Industrial hydrovacs must be much more durable than municipal hydrovacs, given the rough terrain they operate in,andthefactthattheyareoftenfarfromthenearestserviceoutlet.Petrofield’sdeepunderstandingoftheseissues keeps them at the forefront of the industrial hydrovac industry.

Equity Interests in Strategic PartnershipsACE Industrial Services:AboriginallycontrolledpartnershipinFortMcMurray,AB.51%ownedbytheAthabascaChipewyanFirstNation,throughACDENbusinessgroupand49%byEmpire.Providesmulti-tradeindustrial maintenance services, steel fabrication and erection, and machining services primarily to the oil sands market.

Dongguan Qiguang Dynamic Steel Structures Ltd.:55%ownedbyourChinesepartnerand45%byEmpire.ThisChinesecompanyfabricatesandinstallscomplexstructuralsteelprojectsinChina.WearedevelopingthecapabilitiesofthiscompanytoallowittoexportfabricatedsteelintoNorthAmericaaspartofourglobalsteelsupply chain.



(in000’s)

Sales

AdjustedEBITDA

AdjustedEBIT

YTD

Dec31,2014

$37,475

$600

$219

Wholly Owned Business UnitsEmpire Iron Works: focuses on structural steel fabrication and installation in the western Canadian industrial market.Thisfocusmeansthattheyarenotsubjecttothesamecompetitivepressuresthatexistinthesimplercommercialmarket,wheretherearealargenumberofsmallershopsthatcancompeteforcontracts.Theindustrialmarketrequiressignificantcapabilitiesandqualitycontrolthatmanycommercialfabricatorsarelessequippedtoprovide.

Parr Metal Fabricators: Speciality carbon and stainless steel fabrication, such as tanks and pressure vessels. Inadditiontosupplyingthegeneralmarketplacewiththeseproducts,ParralsoprovidesthetanksforPetrofield’shydrovactrucks,improvingEmpire’sconsolidatedmarginsbykeepingtheworkin-house.

Management’s Discussion and Analysis

ThefollowingManagement’sDiscussionandAnalysis(“MD&A”)offinancialconditionandresultsofoperationsofEmpireIndustriesLtd.(“EIL”orthe“Group”)issupplementalto,andshouldbereadinconjunctionwiththeauditedconsolidatedfinancialstatementsforthefiscalyearendedDecember31,2014.

TheauditedconsolidatedfinancialstatementsandaccompanyingnotesoftheGroupfortheyearendedDecember31,2014havebeenpreparedinconformitywithInternationalFinancialReportingStandards(“IFRS”)andrequiremanagementtomakeestimatesandassumptionsthataffectamountsreportedanddisclosedin such financial statements and related notes. Unless otherwise indicated, a reference to a year relates to theGroup’sfiscalyearendedDecember31.AllamountsarereportedinCanadiandollarsunlessspecificallystatedtothecontrary.FinancialinformationdisclosedinthisMD&Aispresentedinthousands(000’s)withtheexceptionofpercentagesandpersharedata.

TheBoardofDirectors,ontherecommendationoftheAuditCommittee,approvedthecontentsofthisMD&AonApril22,2015.Disclosurecontainedinthisdocumentiscurrenttothisdate,unlessotherwisestated.

AdditionalinformationonEILisavailablethroughtheSystemforElectronicDocumentAnalysisandRetrieval(“SEDAR”)atwww.sedar.com


Management’s Discussion and AnalysisFor the 3 and 12 month periods ending December 31, 2014

Business DescriptionTheGroup’soperationstakeplaceprimarilythroughthefollowingwhollyownedoperatingsegments:

Operating Segment

Media-basedAttractions


SteelFabricationServices

Corporate

Description

Designandmanufacturecomplexridesystems,telescopesandcustommachineryandequipment.Turnkeysupplierofpremiumentertainmentattractionsandproviderofpartsandserviceofamusementparkattractions.LeasedproductionfacilitiesinPortCoquitlam,BC.LeasedsalesofficesinArlington,TXandToronto,ON.

ManufacturesHydrovactrucksforexcavationserviceproviderstotheoilandgasindustryandthemunicipalmarket.LeasedproductionfacilityisinStettler,ABandasalesofficelocatedinCalgary,AB.

Structuralsteelfabricationandinstallation.Fabricationoftanks,pressurevesselsandother specialty carbon and stainless steel products. One owned production facility west of Edmonton,ABandaleasedsalesofficeinEdmontonABaswellasaleasedproductionfacilityinWinnipeg,MB.

HeadofficelocatedinWinnipeg.Executivemanagement,managerialandfinancialoversight,businessdevelopmentandcompliancerequirementsfortheoverallorganization.


Inadditiontothesewhollyownedoperatingsegments,theGroupholdssignificantequityinterestsintwomajorbusinessenterprisesbothalignedwiththeGroup’sSteelFabricationServicessegment:

Enterprise

AthabascaChipewyanEmpire(ACE)IndustrialServicesLtd.(49%)

DongguanQiguangDynamicSteelStructures,Ltd.(45%)

Business

Steel fabrication and installation, machining, multi-trade industrial construction and maintenanceservices,primarilyservingtheoilsandsmarket.FacilitiesareinFortMcMurray,AB.ThisisastrategicalliancebetweentheACDEN(formerlytheAthabascaChipewyanFirstNationBusinessGroup)andEmpireIndustriesLtd.

FabricationandinstallationofcomplexstructuralsteelprojectsinChinathroughaCompanyowned55%byGuangdongQiguangSteelStructuresCo.Ltd.and45%byEmpireIndustriesLtd.TheCompanyoperatesoutofaleasedfacilityintheGuangdongProvince.

EILmaintainsitsheadofficeinWinnipeg,Manitoba.TheGroup’scommonsharesarelistedontheTSXVentureExchangeunderthetradingsymbolEIL.

Consolidated Financial Results

2014 OverviewTheyearendedDecember31,2014representsastrongyearforEILwithrevenuegrowthof20%comparedtothepreviousyearwhichwasdrivenbyincreasedrevenuesfromtheGroup’sManufacturedProductssegmentandSteelFabricationoperatingsegments.RevenuesfromtheGroup’sMedia-basedAttractionsdeclinedby6.5%.

TheGroup’sAdjustedGrossMarginincreasedto17.52%in2014from16.72%in2013.FactorsimpactingAdjustedGrossMarginwereasfollows:

•Businessmix •StrengtheningUSDollar,and •Recoveryofinvestmenttaxcredits

TheGroup’sAdjustedEBITDAincreasedby26.7%to$8.0millionin2014ascomparedto$6.3millionin2013.Netincomeincreasedby37.2%to$6.1millionin2014from$4.4millionin2013.Netincomewaspositivelyimpactedby$2.3millionfromdeferredtaxrecoveriesrealizedintheyearassociatedwithrecognizingpreviouslyunrecognizeddeferredtaxassets.In2013,netincomewaspositivelyimpactedby$1.4millionasaresultofthesimilarcircumstances.Managementrecordsdeferredtaxassetswhenitconcludesthatthereisaprobableexpectationofutilization.

4Q14 OverviewThequarterendedDecember31,2014wasalsoastrongquarterwithrevenuegrowthof14.7%overthesameperiod in 2013. Consistent with discussion for 2014 as a whole, the drivers behind the revenue increases in 4Q14werefromtheGroup’sManufacturedProductsandSteelFabricationoperatingsegmentsoffsetbyarevenuedeclineintheMedia-basedAttractionssegment.

RevenuegrowthinTheGroup’sSteelFabricationoperatingsegmentwas$8.2million(343%)over2013and$4.0million(75%)inTheGroup’sManufacturedProductsoperatingsegment.Theseincreaseswereoffsetbya$7.6million(32%)declineinrevenuesfromTheGroup’sMedia-basedAttractionsoperatingsegment.

TheGroup’sAdjustedGrossMarginincreasedto19.89%in4Q14comparedto16.25%in2013.Consistentwithdiscussionfor2014asawhole,thefactorsimpactingAdjustedGrossMarginwereasfollows:

•BusinessMix •StrengtheningUSDollar;and •Recoveryofinvestmenttaxcredits

TheGroup’sAdjustedEBITDAincreasedby55%to$1.85millionascomparedto$1.2millioninthesameperiodin2013.Netincomewaspositivelyimpactedby$2.3millionindeferredtaxrecoveriesrealizedintheyear


Courtesy TMT International Conservatory


associated with recognizing previously unrecognized deferredtaxassets.In2013,netincomewaspositively impacted by $1.4 million as a result of the similar circumstances. Management records deferred taxassetswhenitconcludesthatthereisaprobableexpectationofutilization.

Significant Events•OnOctober28,2014,theGroupannounced the successful award of a media-based attraction contractinSouthKoreavaluedatapproximately$8millionUSD.Thecontractwillbeexecutedoverthenext12-24months.

•OnDecember2,2014,theGroupannouncedthe successful award of two media-based attractions in China and the United States valued at $17 million USDinaggregate.Thesecontractswillbeexecutedoverthenext12-36months.

•TheGroup’sMedia-basedAttractionssegmentannouncedtheawardofcontractstotaling$25millionintheUnitedArabEmirates.Thecontractswillbeexecutedoverthenext12-24monthsand include the successful commercialization of a new proprietary product for the segment.

•TheGroup’sSteelFabricationServicessegmentsecuredcontractstotaling$22millionintheAlbertaregion.Thesegmentcompletedmuchofwork associated with these contracts over the course of the 2014 fiscal year.

•TheGroupsuccessfullynegotiatedanincreasetoitsrevolvingcreditfacilitiesto$15millionfrom$10 million.

•OnJuly10,2014,theexercisepriceof27.7millionunexercisedwarrantsincreasedto$0.10from$0.05,

inaccordancewiththeirterms,bringingtheexercisepriceofallunexercisedwarrantsto$0.10.

•OnJuly31,2014,theGroupobtainedafurther increase in its performance security guarantee facilitywithExportDevelopmentCanadato$10 million from $7 million.

Subsequent Significant Events •OnMarch2,2015andMarch4,2015,theGroup announced the award of 3 contracts totaling $66 millionUSD.Twocontractstotaling$42millionhavebeenawardedfortwooftheGroup’sproprietaryMedia-basedAttractionsfromamajorthemeparkinSouthAsia.Thethirdawardtotaling$24millionUSDtosupplyoneofitsproprietaryrobotictrackridestoamajorthemeparkintheUnitedArabEmirates.Thesecontractswillbeexecutedoverthenext36months.

•OnApril6,2015,thePrimeMinisterofCanadaissuedapressreleasethatannounced;“theGovernmentofCanada’sintentiontoprovidesignificantsupporttotheThirtyMeterTelescope(TMT),aninternationalprojectthatwillbuildoneoftheworld’slargestandmostadvancedastronomicalobservatoriesinHawaii.ThemajorityoftheGovernment’ssupportfortheTMTwillbespentinCanada,creatinghighqualityjobstothe construction an assembly of key telescope components, including a precision enclosure by DynamicStructuresbasedinPortCoquitlam,BritishColumbia.”ThedetailedtermsandconditionsofDynamicStructure’sTMTenclosurecontractare in the process of being finalized and the Company expectstoannouncethesedetailsinthenextfew months.

Selected Annual and Quarterly Financial Information


Liquidity and Capital Resources

LiquidityFortheyearendedDecember31,2014,theGroup’scontinuingoperationsgenerated$4.3millionofcash,comparedwith$4.9millionofcashin2013excludingtheimpactofchangesinnon-cashworkingcapitalamounts.TheGroupexpectsthatitsoperationswillgeneratesufficientcashonagoforwardbasistomeettheGroup’sobligations.


TheGrouphasa$15.0millionrevolvingcreditfacilitywithCIBC,ofwhich$9.8wasdrawnasofDecember31,2014.TheGroup’smarginableassetsatDecember31,2014were$21.2million,whichis$11.4millioninexcessoftheGroup’stotaldrawonthe operating line.

TheGroupmade$0.9millionofcashprincipalrepaymentsduringtheyear.Totallong-termdebtof$4.9millionasatDecember31,2014consistedof$2.9millionoftermdebtwithCIBC,$0.3millionunder finance leases, $0.8 million of a limited recourse loanand$0.9millionofsubordinatedconvertibledebentures.

Shareholders’ EquityShareholders’equityof$22.0millionatDecember31,2014is$6.7millionhigherthantheshareholders’equityatDecember31,2013duelargelytothenetincome in the period as well as proceeds received

fromstockoptionsandwarrantsexercisedandstock-basedcompensationexpensefortheyear.Nodividendsweredeclaredorpaidintheyear.TheGroupmaintainsastockoptionplanforthebenefitofofficers, directors, key employees and consultants of theGroup.TheGrouphad21,760,000outstandingoptionsatDecember31,2014.Theaverageexercisepriceoftheoutstandingoptionsis$0.095pershare.Oftheseoptions,21,760,000arecurrentlyexercisableatanaverageexercisepriceof$0.095pershare.

Market CapitalizationThemarketcapitalizationoftheGroup’s258,236,473issuedandoutstandingcommonsharesatApril24,2015was$32.3millionor$0.125pershare,whichisinexcessoftheGroup’sbookvaluepershareof$0.086atDecember31,2014.TheissuedandoutstandingcommonsharesatApril16,2015,together with securities convertible into common shares are summarized in the table below.

Financial RatiosThefollowinginformationisbasedonthedatadisclosedinNote26(CapitalDisclosuresandManagement)fromthe2014FinancialStatements:


TheGroup’sleverageratiodecreasedto15.7%from19.9%atDecember31,2013.

TheGroup’scurrentratioof1.15isreducedfromtheDecember31,2013ratioof1.19duetohigherworkingcapital volumes.


Segment PerformanceTheGroup’soperationsconsistoffourseparatelyidentifiablesegments,Media-basedAttraction,ManufacturedProducts,SteelFabricationServicesandCorporate.Theperformanceofthegroupsoperatingsegmentsarelistedbelow:

Media-based Attractions

2014 OverviewOverthepastthreeyears,TheGrouphasinvestedheavily in creating and designing its own line of proprietary media-based attractions to complement itshistoricalbusinesswhichwasprovidingcomplexengineering, design and manufacturing solutions to sometheworld’slargestamusementparkcustomers.TheGrouphasdemonstratedthesuccessofitsdevelopment of its own proprietary product line through numerous contract awards during this time.In2014,theGroupwasexecutingnumerouscontracts for its own proprietary products as well as traditionalworkfortheworld’slargestamusementpark companies.

Revenuesfortheoperatingsegmentdecreasedby6.5%to$67.8millionin2014.Thedeclineinrevenues was due largely to a transition phase in productionexperiencedin2014ascomparedto2013.Thetimingofcompletionofcertainprojectsandthecommencement of new contracts was staggered such that the segment was not operating at consistent production levels as the prior year, resulting in the decline.

Thesegment’sAdjustedGrossMarginincreasedby2.7%to20.2%in2014asthesegmentsmarginswerepositivelyimpactedbythestrengtheningUSDollarforwhich substantially all of its revenues are negotiated in.Inaddition,theGrouprecognizedinvestmenttaxcredits which offset certain production costs.

Sellingandadministrativeexpensesincreasedby$1.8millionover2013.Thisincreasewasdrivenby$0.5millionincurredfromthedepartureofcertainexecutivesaswellas$0.4millionspentonspecificresearchinitiativesaimedatfuturegrowthandexpansionopportunities.Thebalanceoftheincreaseinthesegment’ssellingandadministrativeexpenseswasincurredasthesegmenthascontinuedtoinvesttoimproveitsexecutioncapacityandcapabilityasthesegmentcontinuestoincreaseitsbacklogofmedia-basedattractions.

AdjustedEBITDAdeclinedby$0.8millionasaresultofthefactorsdiscussedabove.AdjustedEBITdecreased$1.2millionover2013asaresultofincreasedamortizationexpenseresultingfromtherecognitionofintangibleassets by the segment.

4Q14 OverviewTheresultsfor4Q14reflectthefactorsdiscussedabovealthougharesomewhatmorevisibleduetothefactthemanyofthevariablesdiscussedintheannualoverviewwereactuallyrealizedandincurredinthe4Q14.Thosefactorsinclude:

•StrengthoftheUSDollar–inAugustof2014theUSDwastradingatapproximately1.09/CADandat December31,2014itwastradingat1.16/CAD.

•TheGroupconcludedduringthequarterthatitwasappropriatetorecognizeapoolofinvestmenttax creditswhichoffsetcertainproductionexpenses.

•TheGroup’srestructuringofthesegment’smanagementpersonnelwascompletedinQ4.

•In4Q14thesegmentexperiencedreducedproductionlevelsresultingfromtimingbetweencompleting certainprojectsandstartingnewprojects.

Theimpactoffactorsabovearedemonstratedinthesegment’soperatingresultstableforthequarterasthevariances compared to 2013 are much larger than those demonstrated on an annual basis.




2014 OverviewRevenuesforthesegmentincreased45%over2013to$35.7millionin2014.Theincreaseinrevenuewasattributed by the segment continuing to increase its production capacity as it has been doing over the past threeyearswhiledemandofthesegment’ssignatureproduction(HydrovacTrucks)remainedstrongthrough most of 2014.

AdjustedGrossMarginpercentagedeclined1.6%comparedto2013.Thisdecreasewasdrivenby the outsourcing of certain components of the manufacturing process in further efforts to increase production.

Sellingandadministrativeexpensesincreasedby$0.8millioncomparedto2013.Approximately$0.3million of this increase was related certain one-time non-recurringexpensesthesegmentincurredtohelpimproveitsproductioncapabilityandefficiency.Thebalance of the increase was incurred to effectively manage the increased volume of production.

AdjustedEBITDAincreasedby$0.7millionasaresultoffactorsdiscussedabovealthoughtheadjustedEBITDA%decreasedby1.5%asaresultofthosesamefactors.Thesegment’sdepreciationexpensewas consistent with prior year and thus the increase in AdjustedEBIT$0.7millionanddecreaseinAdjustedEBIT%1.2%arealsoexplainedbythefactorsoutlined above.

4Q14 OverviewThefourthquartershowedthebenefitoftheincreasedproductioncapacitywhererevenuesincreasedby76%overthesameperiodof2013.Historically,withthereducednumberofworkingdaysinthefourthquarteritisthesegmentsslowestquarter.Theimprovedproductioncapacityrealizedoverthecourseof2014allowedthesegmenttokeeppacewiththepreviousthreequartersirrespectiveofthereducedworkingdays.

AdjustedGrossMargindeclinedby5%to14.4%in4Q14ascomparedtothesameperiodintheprioryear.Tokeeppacewithdemandthesegmentsub-contractedseveraltruckassembliesthatexpectedlyyieldedlowerprofitswhichhadanegativeimpactonAdjustedGrossMargin.

Sellingandadministrativeexpenseswereconsistentwiththesameperiodin2013at$0.6million.

AdjustedEBITDAandAdjustedEBITincreasedby$0.3millionasaresultofthefactorsdiscussedabove.

Steel Fabrication


2014 OverviewRevenuesfor2014increasedby82%to$37.5millioncomparedto$20.6millionin2013.Thesegmentsecuredandsubstantiallyexecutedtwolargecontractsin2014inexcessof$10millioneachinadditiontoanumberofother smaller contracts.


AdjustedGrossMarginsimprovedby1.2%to12.5%in2014.Theincreaseinmargincomparedto2013was due to the increase in volume in 2014 being sufficienttofurtherabsorbthesegment’sfixedproductioncosts.However,thetwomajorcontractssecuredandsubstantiallyexecutedbythesegmentin2014 were largely for field installation services which carry lower margins than traditional fabrication or combinedfabricationandinstallationprojects.

Sellingandadministrativeexpensesincreasedby$0.9millionin2014whichisapproximatelya29%increaseover2013.Thisincreasewaslargelyanticipatedascertainpersonnelpositionsinsafetyandprojectmanagementwererequiredtobefilledandtoeffectivelyaddresstheabovenoted82%increaseinsales.

AdjustedEBITDAincreasedby$1.4millionfromtheAdjustedEBITDAlossincurredin2013.Despitetheincreased volume of work in 2014 compared to 2013, the profit performance remained unacceptably low., Management continues to work towards improving thesegment’sexecutioncapabilityinanefforttorealizeimprovedAdjustedGrossMarginsinthefuture.

Depreciationexpensewasconsistentwiththeprevious year that accounts for the increase in AdjustedEBITbeingconsistentwithAdjustedEBITDAat $1.4 million compared to 2013.

4Q14 OverviewRevenuesincreasedby343%to$10.6millionin4Q14ascomparedtothesameperiodin2013.Thesegmentwasexperiencingaveryslowperiodinthesame period of 2013 that improved significantly in 2014.

AdjustedGrossMarginsincreasedby13.8%to2.6%in4Q14asaresultoftheincreaseinvolumeasthevolumeexecutedinthepreviousperiodwasnotsufficienttocoverthefixedproductioncostsintheperiod.Despitetheincreasecomparedtothepriorperiod,themarginsrealized4Q14werelowerthanthefirstthreequartersof2014.Thesegmentbegantoexperiencesomechallengesoncertainelementsoftheircontractsrequiringitsmarginprojectionsatcompletion to be reduced.

Sellingandadministrativeexpensesincreasedby$0.15millionin4Q14comparedtothesameperiodofthe2013.Theincreaseinsellingandadministrativeexpensesasdiscussedabovewasexpectedgiventheincrease in volume over 2013.

AdjustedEBITDAandAdjustedEBITimprovedbyapproximately35%and31%respectivelytoalossof$0.8millionin4Q14comparedtothatsameperiodin 2013 as a result of the factors outlined above with depreciationexpenseremainingconsistentwiththeprior period.

Corporate (non-operating)


2014 OverviewRevenuesforthecorporatenon-operatingsegmentarenotmaterialandrepresentmanagementfeesandinterestincomeearnedfromtheGroup’sassociateinvestments.

Sellingandadministrativeexpensesdecreasedby$0.2millionin2014whichisapproximatelya6%decreaseovertheprioryear.SellingandadministrativeexpensesareimpactedlargelybythestrategicdirectionoftheGroupwhichisinfluencedbyanumberofstrategicinitiativesandgrowthopportunitiesitispursuinginagivenperiod.

AdjustedEBITDAandAdjustedEBITincreasedby$0.3millionwhichwaslargelyattributabletothedecreaseinsellingandadministrativeexpensesover2013.

4Q14 OverviewRevenuesandAdjustedGrossMarginimprovedby$0.1millionoverthesameperiodin2013andsellingandadministrativeexpenseswereconsistentwiththatsameperiod.AdjustedEBITDAandAdjustedEBITincreasedby $0.1 million.

Other Matters

Critical Accounting EstimatesThepreparationoffinancialstatementsinaccordancewithIFRSnecessitatestheuseofmanagementestimates,assumptionsandjudgmentthataffectreportedamountsofassets,liabilities,revenuesandexpensesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatements.Althoughmanagementreviews its estimates on an ongoing basis, actual results may differ from these estimates as confirming events


occur.Thefollowingcomponentsofthefinancialstatements depend most heavily on such managementestimates,assumptionsandjudgment,any changes in which may have a material impact ontheGroup’sfinancialconditionorresultsofoperations.Formoreinformationaboutcertainassumptions and risks that may affect these estimates,assumptionsandjudgments,pleaseseethe“ForwardLookingInformation”sectionofthisMD&A.

Revenue Recognition Thepercentageofcompletionmethodandtherevenue to be recognized are determined on the basis ofestimatesforwhichtheGrouphasimplementedan internal financial budgeting and reporting system whichreliesonhistoricalexperience.TheGroupreviews the estimates of contract revenue and contract costs as of each reporting date. Contract losses are recognized as soon as they are identified.

Cash generating units Forthepurposeofassessingimpairment,assetsare grouped at the lowest levels for which there are separately identifiable cash inflows. Management determines which groups of assets are capable of generating cash inflows that are largely independent ofotheroperationswithintheGroup.

Allowance for doubtful accountsGiventhenatureofbusinessandthecredittermsprovidedtocustomers,estimatesandjudgementsare inherent in the on-going assessment of the recoverabilityofsomeaccountsreceivable.TheGroupmaintainsanallowancefordoubtfulaccountstoreflectexpectedcreditlosses.TheGroupisnotable to predict changes in the financial conditions ofitscustomersandtheGroup’sjudgementrelated

to the recoverability of accounts receivable may be materially impacted if the financial condition of the Group’scustomersdeteriorates.

Valuation of inventoryEstimatesandjudgementsareinherentinthedetermination of the net realizable value of inventories. Thecostofinventoriesmaynotbefullyrecoverableif they are damaged or if the selling price of the inventoryislessthanitscost.TheGroupregularlyreviewsitsinventoryquantitiesandreducesthecostattributed to inventory no longer deemed to be fully recoverable. Estimates related to the determination of net realizable value may be impacted by a number of factors including market conditions.

Share-based paymentsTheGroupmeasuresthecostofshare-basedpayments to employees by reference to the fair value oftheequityinstrumentsatthedateonwhichtheyare granted. Estimating fair value for share-based paymenttransactionsrequiresdeterminingthemostappropriate valuation model, which is dependent onthetermsandconditionsofthegrant.Thisestimatealsorequiresthedeterminationofthemostappropriate inputs to the valuation model including theexpectedlifeoftheshareoption,volatilityanddividend yield and making assumptions about them.


Valuation of Long-lived Assets and Asset ImpairmentTheGroupperiodicallyassessestherecoverabilityofvaluesassignedtolong-livedassetsafterconsideringpotential impairment indicated by such factors as business and market trends, future prospects, current market value and other economic factors. In performing its review of recoverability, management estimates the future cashflowsexpectedtoresultfromtheuseoftheassetanditseventualdisposition.Ifthesumoftheexpectedfuture cash flows is less than the carrying value of the asset, an impairment loss would be recognized based on theexcessofthecarryingvalueoftheassetoverthefairmarketvaluecalculatedusingdiscountedfuturecashflows.

Useful lives of key property, plant and equipment investment property and intangible assetsThedepreciationmethodandusefullivesreflectthepatterninwhichmanagementexpectstheasset’sfutureeconomicbenefitstobeconsumedbytheGroup.Usefullives,depreciationmethods,andresidualvaluesarereviewed periodically and, historically, changes to estimates of remaining useful lives have not been material.

Deferred Income TaxesTheGroupaccountsforincometaxesusingtheassetandliabilitymethod.Underthismethod,deferredtaxassetsandliabilitiesarerecognizedbasedondeductibleortaxabletemporarydifferencesbetweenthecarryingamountsandtaxbasesoftheassetsandliabilities.Deferredtaxassetsandliabilitiesaremeasuredusingsubstantiallyenactedtaxratesexpectedtoapplyintheyearsinwhichthetemporarydifferencesareexpectedtoreverse.Iftheestimatesandassumptionsaremodifiedinthefuture,theGroupmayberequiredtoreduceorincreasethevalueofdeferredtaxassetsorliabilitiesresultingin,whereapplicable,anincometaxexpenseorrecovery.TheGroupregularlyevaluatesdeferredtaxassetsandliabilities.

Investment tax creditsFederalandprovincialinvestmenttaxcreditsareaccountedforasareductiontothecorrespondingexpendituresin the period in which the credits are earned and when there is reasonable assurance that the credits can be usedtorecovertaxes.

Risks and Uncertainties

Operating ResultsEIL’smixofbusinessestypicallyrequiresignificantfinancialresources,andthereisnoassurancethatfuturerevenueswillbesufficienttogeneratethefundsrequiredtocontinueEIL’sbusinessdevelopmentandmarketingactivities. In certain markets, the Company competes with local, regional, national and international companies forwork.WiththeexperienceoftheCompany’soperatingsubsidiaries,managementbelievesithasdevelopedsystems, policies, and procedures to mitigate this risk.


Liquidity RequirementsTheGrouprequiressignificantamountsofworkingcapitalinordertobeabletooperate.TheCompany’scontracts are primarily based upon firm prices and billing is generally performed on a monthly basis. ProjectsofteninvolvechangesorrequestsforextraworkandalthoughtheGroupendeavorstobillpromptlyforthisextrawork,anydelayinissuingchange orders can impact cash flows. Construction projectstypicallyallowforthegeneralcontractortowithholdbetweenfiveandtenpercentoftheGroup’stotalbillingsuntilthecompletionoftheproject.Asaconsequence,largerandlonger-termprojectscangreatlyincreasecapitalizationrequirementsforworking capital.

TheGroup’sabilitytoobtainadditionalcapitalis a significant factor in achieving its strategy of expansionintheconstructionindustry.Therecanbeno assurance that the current working capital of EIL will be sufficient to enable it to implement all of its objectives.Furthermore,thecurrentcreditcontractionintheworld’sfinancialmarketsmaylimittheGroup’sability to access credit in the event that it identifies apotentialacquisitionorsomeotherbusinessopportunitythatwouldrequireasignificantinvestmentinresources.TherecanbenoassurancethatifandwhenEILseeksequityordebtfinancing,itwillbeabletoobtaintherequiredfundingonfavourablecommercialterms,oratall.Anysuchfuturefinancingmayalsoresultinadditionaldilutiontoexistingshareholders.

EILrequiressufficientfinancingtofunditsoperations.Failuretoobtainfinancingonatimelybasiscouldcausemissedacquisitionopportunities,delaysinexpansionandmayalsoimpactongoingoperations.

Credit RiskCredit risk arises from the possibility that customers mayexperiencefinancialdifficultyandbeunabletofulfilltheircommitmentstotheGroup.NotwithstandingtheGroup’scurrentcreditpoliciesand practices, there can be no assurance that customers will remain able to fulfill their commitments totheGroupwhichmayhaveanadverseeffectontheGroup’sfinancialperformance.

Interest Rate RiskFluctuationsininterestrateswillaffectthatportionoftheGroup’sdebtthatissubjecttovariableinterestrates, and will also affect the prices for other financial instruments. Such fluctuations could have an adverse effectontheGroup’sfinancialperformance.

Foreign Exchange RiskRapidcurrencyfluctuationscanhaveasignificantimpact on un-hedged non-Canadian dollar denominatedprojects.TheGrouphasexportedsomefabricated steel products over the years to the United StatesandthepurchaseofDSLandPetrofieldhaveincreased the percentage of revenue from the United States,butamajorityofthesecontractshavebeenhedged with forward contracts to sell US dollars.


Bonding CapacitySomecustomersrequireperformancebondsunderwrittenbyinsuranceproviders,orirrevocablelettersofcreditasaconditionofcontractaward.However,therecanbenoassurancethattheGroupwillbeabletoobtainsuchbonds or letters of credit.

Cost of Raw MaterialTheprincipalcostofrawmaterialisstructuralsteelandothersteelproducts.Thesesupplyandpricingarrangements are negotiated directly with steel manufacturers or steel supply companies that buy and warehousesteelproducts.Whereappropriate,theGroupwillendeavourtoincludeanescalationclauseformaterialcostsinjobsbeingtenderedintheindustrial,commercialandinstitutionalsectorineachcontract.Intheabsenceofanescalationclause,theGroupmitigatesitsrisk,totheextentpossible,throughcontractedbuyingarrangements or limitations on the length of time that bids can remain outstanding prior to acceptance. In the circumstanceofvolatilityinthecommoditypriceofsteel,unexpectedincreasesinsteelpriceswhicharenothedgedbyescalationclausesorsimilarmeans,maynegativelyimpactmarginsonaparticularjobandthereforethecompany’sfutureresultsofoperationsorfinancialposition.

Project PerformanceMostofEIL’ssalescontractsarefixed-pricecontractsresultingfromcompetitivebids.Whenbiddingonaproject,theGroupestimatesitscosts,includingprojectedincreasesinthecostsoflabour,materialsandservices.

Despitetheseestimates,actualcostscouldvaryfromtheestimatedamounts.ThesevariationscouldadverselyaffecttheGroup’sbusiness.AnyinabilityoftheGroup’ssubsidiariestoexecutecustomerprojectsinaccordancewithrequirements,includingadherencetocompletiontimetables,mayhaveamaterialadverseeffectontheGroup’sbusiness,operationsandprospects.

Percentage of Completion Accounting MethodTheGrouprecognizesrevenuefromitsfabricationanderectioncontractsusingthepercentageofcompletionaccountingmethod,basedoncostsincurredascomparedtoprojectedcosts.Estimatedlossesoncontractsareimmediatelyrecognized.Revenueestimatesarebasedonmanagementassumptionssupportedbyhistoricalexperience.Therecanbenoassurancethattheseestimatesmadeduringthecontractexecutionphasewillnotvary from the actual results measured at the completion of the contract.


Competitive MarketCompetitors tend to be based in Western Canada and are virtually all privately or family owned businesses. TheGroup’sapproachtocompetitiveriskistodevelop strong relationships with clients, increase the breadth of services offered and to broaden our geographic coverage to enhance service and competitiveness.Fromtimetotime,competitorsoutoftheUnitedStates,Asia,OntarioandQuebechave bid on work and been awarded work in Western Canada. Incremental transportation costs, scheduling issuesandqualitystandardshavetendedtomaketheseoptionslessattractivetoownersandowners’engineers.

Duetothecompetitivenatureofthebusiness,theGroupmustcompeteonpriceandqualityofservice.AsignificantportionoftheGroup’sbusinessistoprovide a contracted scope of work to clients on afixedpriceorunitpricebasis.Therecanbenoassurancethatthefixedpricecommitmentadequatelyrecovers the full cost of providing the contracted scopeofwork.Norcantherebeanyassurancethatthe contracted scope of work is so clear as to prevent disagreements over the interpretation of what has been contracted for. Management is of the view that theGroup’sexperienceintheindustryprovidesitwiththenecessaryexpertisetoresolvedisputesthatmayariseinamannerthatissatisfactorytotheGroup’soverallrequirements.

Global Economic EnvironmentThecurrenteconomicdownturnhasdemonstratedthat businesses and industries throughout the world areverytightlyconnectedtoeachother.Thus,eventsseeminglyunrelatedtotheGroup,suchastherecentextraordinarydevelopmentsinglobalfinancialmarkets,mayadverselyaffecttheGroupoverthecourseoftime.Forexample,thecreditcontractionin

financial markets, combined with reduced economic activity, may adversely affect general contractors and other businesses that collectively constitute a significantportionoftheGroup’scustomerbase.Asaresult,thesecustomersmayneedtoreducetheirpurchasesoftheGroup’sproductsorservices,ortheGroupmayexperiencegreaterdifficultyinreceiving payment for the products or services that thesecustomerspurchasefromtheGroup.Anyofthese events, or any other events caused by turmoil in world financial markets, may have a material adverse effectontheGroup’sbusiness,operatingresults,andfinancial condition.

Non-residential Construction Activity in Western CanadaThedemandfortheGroup’sproductsandservicestends to fluctuate directly with non-residential constructionactivity.Adeclineinthedemandforthese products and services can occur if deteriorating economic conditions reduce non-residential capital expenditureswhichwouldhaveanadverseeffectontheEIL’sbusiness,resultsofoperations,andfinancialcondition.

AlargeportionofEIL’srevenuesarederivedfromlargeprojects(includingjointventures)whichdonot occur on a regular basis and could generate fluctuations in corporate revenues.

EIL’sbusinessisprimarilyinfluencedbytheoveralllevel of capital spending in the mining and oil and gas industries in Western Canada. Lower commodity prices results in lower corporate profits which provides less available funds for spending on capital projects.TheGroup’sactivitylevelisthereforedependent on oil and gas prices and commodity prices.


Reliance on Key PersonnelThebusinessactivitiesoftheGroupinvolveacertaindegreeofriskthatevenacombinationofexperience,knowledgeanddiligencemaynotbeabletoovercome.Shareholdersmustrelyontheability,expertise,judgment,directionandintegrityofthemanagementofEIL.Successwillbedependentontheservicesofanumberofkeypersonnel,includingitsexecutiveofficersandotherkeyemployees,thelossofanyoneofwhomcouldhaveanadverseeffectonitsoperationsandbusinessprospects.TheGroupfeelsthatbybeingapubliclytradedcompanyitwillhavemoreflexibilitythanitsprivatecompetitorstoimplementattractiveincentiveplansfor key employees to attract and retain the necessary employees.

Labour RelationsTheemploymentofskilledtradespersonsinthefieldandshopsissubjecttomulti-year,collectiveagreementswithavarietyofunions.Theincreasingshortageofskilledtradespersonsisincreasingthewageexpectationsand concessions of all fabricators and manufacturers, especially those companies that provide their services closesttotheactivemarkets,suchasAlberta.TheGrouphassixnon-unionshops,andsevenunionizedshopsthataresubjecttotheirowncollectiveagreementsandthreedifferentcollectiveagreementsrelatingtothefielderection business. EIL is at risk if there are labour disruptions relating to any of these collective agreements.

Management feels the staggering and independence of each collective agreement mitigates the issue of work stoppagethatmayariseatanyonelocation.TheGroupalsobelievesithasfosteredapositiverelationshipwithits workers as is evidenced by zero work stoppages in over 40 years of operations.

AcquisitionsTheGroupmayseektoexpanditsbusinessthroughacquisitionsandmaydivestunderperformingornon-corebusinesses.Empire’ssuccessdepends,inpart,uponmanagement’sabilitytoidentifysuchacquisitionanddivestitureopportunitiesandtonegotiatefavourablecontractualterms.TheGroup’sabilitytosuccessfullyintegrateacquisitionsintoitsoperationscouldaffectEmpire’sfinancialresults.

EILassessesthe“labour/capital”trade-offthatisassociatedwiththeincreasedusageofsoftwaretoenhanceemployee productivity and increase profitability. Management has historically invested in prudent capital expendituresdesignedtomitigatetheincreasingcostoflabourandthehistoricallytightsupplyofskilledtradespersons.TotheextentthattheGroupisunabletocontinuetoinvestintechnologicaladvancementsdesignedtoenhanceitscompetitivecoststructure,itmayhaveanadverseeffectontheCompany’soperations.


Environment/RegulatoryEnvironmental legislation is evolving in a manner expectedtoresultinstricterstandardsandenforcement, larger fines and liability and potentially increasedcapitalexpendituresandoperatingcosts.Noassurancecanbegiventhatenvironmentallaws will not result in an increase in the costs of the Group’sactivitiesorotherwiseadverselyaffecttheGroup’sfinancialcondition,resultsofoperationsorprospects.

EIL maintains insurance consistent with industry practice to protect against losses due to sudden and accidental environmental contamination, accidental destruction of assets, and other operating accidents ordisruption.TheGroupalsohasoperationalandemergency response procedures, and safety and environmental programs in place to reduce potential lossexposure.EILbelievesthatitisinsubstantialcompliance, in all material respects, with all current environmental legislation and is taking such steps as it believes are prudent to ensure that compliance will be maintained.

Forward Looking InformationThisMD&Acontainscertain“forward-lookingstatements.”Allstatements,otherthanstatementsof historical fact, that address activities, events or developmentsthattheCompanybelieves,expectsoranticipates will or may occur in the future (including, without limitation, statements regarding financial and business prospects and financial outlook) are forwardlookingstatements.Theseforward-lookingstatementsreflectthecurrentexpectationsorbeliefsoftheGroup,basedoninformationcurrentlyavailabletotheGroup.Forward-lookingstatementsaresubjecttoanumberofrisks,uncertaintiesandassumptions that may cause the actual results of

theGrouptodiffermateriallyfromthosediscussedin the forward-looking statements and, even if such actual results are realized or substantially realized, there can be no assurance that they will have the expectedconsequencesto,oreffectsontheGroup.Factorsthatcouldcauseactualresultsoreventstodiffermateriallyfromcurrentexpectationsinclude,among other things, changes in general economic and market conditions, changes to regulations affecting theGroup’sactivities,anduncertaintiesrelatingtothe availability and costs of financing needed in the future.Anyforward-lookingstatementspeaksonlyasatthedateonwhichitismadeand,exceptasmayberequiredbyapplicablesecuritieslaws,theGroupdisclaimsanyintentorobligationtoupdateany forward-looking statement, whether as a result of new information, future events or results or otherwise. AlthoughtheGroupbelievesthattheassumptionsinherent in the forward-looking statements are reasonable, forward looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.


OutlookInadditiontoothersectionsoftheGroup’sreport,thissectioncontainsforward-lookinginformationandactualoutcomesmaydiffermateriallyfromthoseexpressedorimpliedtherein.Formoreinformation,seethesectiontitled“Forward-LookingInformation”inthisMD&A.TheCompanyexpectstocontinuetoimproveitsoperatingperformancein2015asaresultofthefollowing:

•Themediabasedattractionsgroupwillcontinuetoexecuteitsrecordbacklogofhighvalueadded products.Asthesegmentcontinuestobuildmultiplenewproductsconcurrently,itisanticipatedthat there will still be some challenges from an earned revenue and profit perspective in the near term whichisalsoexpectedtoimproveassecondgenerationproductsgetproducedthattakeadvantageof the learning curve associated with the first generation products.

•AweakCanadiandollarwillpositivelyimpactprofitmarginsbecausethemediabasedattractionsare allsoldpredominantlyinUSdollars.TothebestofabilitiesandcapacitytheGrouphedgesitsnetUS dollarexposuresoastomanagetoplannedresults.

•DynamicStructureswillfirstfinalizethecontracttobuildthethirtymetertelescopeenclosureandafter complete, move aggressively into the design and procurement planning phase of manufacturing during 2015.Disruptionsinsiteconstructionactivitieswillnothaveanyeffectonouroperationalactivitiesin BritishColumbia.

•TheGrouphasincreaseditsbacklogto$155million,upfrom$93millionasoftheGroup’sthird quarter2014report.Thisexcludesanyamountforthethirtymetertelescopebecausethecontracthas not been finalized yet.

•TheGroup’sChineseassociateinvestmentinGuangdongProvinceisincreasingtheamountofworkit isperformingforEmpire,positivelyimpactingEmpire’smargins.

TheGrouphasbeenchallengedtorespondquicklytothenegativeaffectthatthesignificantreductioninoilandgaspriceshashadonreducingcapitalexpendituresinWesternCanada,especiallyintheoilsandsmarket.Therefore,theCompany’soperatingperformancein2015isexpectedtobeimpactednegativelyin2015comparedto2014asaresultofthefollowing:

•TheGroup’sHydrovactruckmanufacturingoperationhasseenitsbacklogreduceddramatically, its forecasted monthly throughput reduced significantly, sales price per truck reduced and margins reducedcorrespondingly.Thesegmentisexpandingitssalesregionandfocusincludingexpandingin theUnitedStatestooffsetthedeclineindemandexperiencedinWesternCanadaduetothedeclinein oil prices.


•TheGroup’ssteelfabricationoperations will see increased competition in the industrial, commercial and institutional marketofAlberta.Thesegmentispursuing opportunities that deploy some of our fabricated steel from our Chinese associateinvestmentintoEmpire’ssteel supply chain in Canada.

•OurassociateinvestmentinFort McMurray is predominantly focused on maintenanceexpenditures,notconstruction capitalexpenditures,soweexpecttosee continued, moderate profitability from this operation.

Overall TheCompanyhassuccessfullyrepositioneditselfinto higher margin and higher growth, media based attractions.TheGroupwillcontinuetoshelteritsprofitsfromtaxthroughtheuseofits$5.0millionofDeferredTaxAsset.Itexpectsitsbalancesheettostrengthenthroughouttheyearasitsequityincreasesand its debt decreases.

TheGroupcontinuestoassessstrategicinitiativesinthe hydrovac operation and its fabricated steel supply chain with the view to generating a much better return on its assets deployed in these two businesses.

Onbalance,the2015improvementinthemediabasedattractionsbusinessisexpectedtomorethanoffset the negative outlook for our manufactured productsandsteelfabricationoperationsin2015.

Non-IFRS MethodsInthisMD&A,theGroupusestwofinancialmanagement metrics that are not in accordance with IFRS“Adjustedearnings(loss)beforeinterest,tax,depreciationandamortization(AdjustedEBITDA)”and“AdjustedGrossMargin.”BecausethesetermsarenotdefinedbyIFRStheycannotbeformallypresented in the consolidated financial statements. ThedefinitionofAdjustedEBITDAdoesnottakeintoaccounttheGroup’sshareofprofitofanassociateinvestment, gains and losses on the disposal of assets, fair value changes in foreign currency forward contracts and non-cash components of stock based compensation.AdjustedEBITistheresultoftheGroup’sAdjustedEBITDAlessdepreciationandamortizationexpenses.

TheAdjustedGrossMarginmetricistheresultofrevenueslesscostofsales,excludingdepreciationofproperty,plantandequipment.ItshouldbenotedthattheGroup’sdefinitionofAdjustedEBITDA,AdjustedEBITandAdjustedGrossMarginmaydifferfrom those definitions used by other companies.

WhilenotIFRSmeasures,AdjustedEBITDA,AdjustedEBITandAdjustedGrossMarginareusedby management, creditors, analysts, investors and otherfinancialstakeholderstoassesstheGroup’sperformance and management from a financial and operational perspective.


Reconciliation of Profit (loss) to Adjusted EBITDA

Calculation of Adjusted EBIT


Calculation of Adjusted Gross Margin

Consolidated Financial Statements


Management’s ReportTo the Shareholders of Empire Industries Ltd.:

TheaccompanyingconsolidatedfinancialstatementsofEmpireIndustriesLtd.containedinthisannualreport,includingthenotesthereto,havebeenpreparedbymanagementinaccordancewiththeCompany’saccountingpolicies,whichareincompliancewithInternationalFinancialReportingStandards(IRFS).Inaddition,thefinancialinformationcontainedelsewhereinthisAnnualReportisconsistentwiththefinancialstatements.

TheBoardofDirectorsisresponsibleforthefinancialstatementsincludedinthisannualreport.TheAuditCommittee reviewed the contents of the consolidated financial statements with management and the independentauditorpriortotheirapprovalbytheBoardofDirectors.Theindependentauditordiscussedtheiraudit work with the Committee.

Management has overall responsibility for internal controls and maintains accounting control systems designed to provide reasonable assurance that transactions are properly authorized, assets safeguarded and that the financial records form a reliable base for the preparation of accurate and timely financial information.

GuyNelson,MBA,B.Comm. MichaelMartin,CAChiefExecutiveOfficer ChiefFinancialOfficer

April28,2015


We have audited the consolidated financial statements of Empire Industries Ltd. and its subsidiaries, which comprise the consolidatedstatementsoffinancialpositionasatDecember31,2014andDecember31,2013andtheconsolidatedstatementsofcomprehensiveincome,changesinshareholders’equityandcashflowsfortheyearsthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance withInternationalFinancialReportingStandards,andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOurresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithCanadiangenerallyacceptedauditingstandards.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheauditstoobtainreasonableassuranceaboutwhethertheconsolidatedfinancial statements are free from material misstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheconsolidatedfinancialstatements.Theproceduresselecteddependontheauditors’judgment,includingtheassessmentoftherisksof material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,theauditorconsidersinternalcontrolsrelevanttotheentity’spreparationandfairpresentationoftheconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrols.Anauditalsoincludesevaluatingthe appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Empire IndustriesLtd.anditssubsidiariesasatDecember31,2014andDecember31,2013,andtheirfinancialperformanceandtheircashflowsfortheyearsthenendedinaccordancewithInternationalFinancialReportingStandards.

Winnipeg, ManitobaApril22,2015 CharteredAccountants

2500-201PortageAvenue,Winnipeg,Manitoba,R3B3K6,Phone:(204)775-4531,1(877)500-0795

Independent Auditors’ ReportTo the Shareholders of Empire Industries Ltd.:


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


CONSOLIDATED STATEMENTS OF CASH FLOWS



Notes to the Consolidated Financial StatementsDecember 31, 2014 and 2013Amounts reported in thousands (000’s) except per share amounts

1. Corporate informationEmpireIndustriesLtd.(“Empire”)designs,fabricates,manufactures,erectsandsellsproprietaryengineeredproducts throughout the world. Key customer sectors include the entertainment industry, natural resource infrastructure,manufacturing,andprocessingindustries,excavationindustry,andthegovernmentsector.Empire also provides steel fabrication and installation services to industrial and infrastructure markets, primarily inwesternCanadaaswellasparticipatinginthemarketforoilsandsmaintenanceservicesthroughits49%ownership of its aboriginal partnership.

EmpireIndustriesLtd.islistedontheTorontoStockExchange’sventureexchangetradingunder“EIL”andisincorporatedundertheBusinessCorporationsActofAlberta,Canada.Theheadofficeislocatedat717JarvisAvenue,WinnipegManitoba,R2W3B4.

TheconsolidatedfinancialstatementswererecommendedforapprovalbytheAuditCommitteeonApril21,2015andwereapprovedandauthorizedforissuebytheBoardofDirectorsonApril22,2015.

2. Summary of significant accounting policies

Basis of presentationTheconsolidatedfinancialstatementsarepreparedfortheyearendedDecember31,2014andincludetheresultsforthecomparativeyearendedDecember31,2013.Theconsolidatedfinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforcertainfinancialinstrumentswhicharemeasuredatfairvalueas disclosed. Included in these consolidated financial statements are the accounts for Empire and all of its subsidiaries(the“Group”).TheseconsolidatedfinancialstatementshavebeenpreparedinCanadiandollarswhichisthefunctionalcurrencyoftheGroup.

Statement of complianceTheseconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”).

Basis of consolidationTheconsolidatedfinancialstatementsincludetheaccountsofEmpireIndustriesLtd.anditswhollyownedsubsidiaries:EmpireIronWorksLtd.,DynamicAttractionsLtd.andDynamicAttractionsInc.Theconsolidatedfinancialstatementsfurthermoreincludesubsidiariesofthewholly-ownedsubsidiaries:KWHConstructorsInc.(WS,USA);and1366377TexasInc.(formerlyTornadoTechnologies,Inc.,TX,USA).TheGroupequityaccountsforitsinvestmentsinACEIndustrialServicesanditssubsidiariesLemaxMachineandWeldingInc.(AB,Canada“ACE”–49%)andQiguangDynamicStructuresLtd(Dongguan,GuangdongP.R.China“QDSL”45%).

Subsidiariesarefullyconsolidatedfromthedateofacquisition,beingthedateonwhichtheGroupobtainscontrol,andcontinuetobeconsolidateduntilthedatethatsuchcontrolceases.ThefinancialstatementsofthesubsidiariesarepreparedforthesamereportingperiodasEmpire,usingconsistentaccountingpolicies.Allinter-companybalances,incomeandexpensesandunrealizedgainsandlossesresultingfrominter-companytransactions are eliminated in full.

Changes in accounting policyTheGrouphasadoptedthefollowingnewandrevisedstandards,alongwithanyconsequentialamendments,effectiveJanuary1,2014.Thesechangesweremadeinaccordancewiththeapplicabletransitionalprovisions.

AmendmentstoIAS32OffsettingFinancialAssetsandFinancialLiabilitiesTheamendmentstoIAS32clarifytherequirementsrelatingtotheoffsetoffinancialassetsandfinancialliabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’and‘simultaneousrealizationandsettlement’.TheapplicationoftheseamendmentstoIAS32didnothaveasignificantimpactontheCompany’sconsolidatedfinancialstatementsastheCompanydoesnothaveanyfinancialassetsandfinancialliabilitiesthatqualifytobeoffset.

IFRIC 21, LeviesTheIASBissuedIFRIC21,Levies,ontheaccountingforleviesimposedbygovernments. TheinterpretationconsideredtheguidanceinIAS37,Provisions,ContingentLiabilitiesandContingentAssetsfortherecognitionofalevyliabilityduetoanobligatingeventdescribedinthelegislationthatbringsaboutpaymentofthelevy.Thisnew guidance did not have a significant impact on the consolidated financial statements.

Business combinationsBusinesscombinationsareaccountedforusingtheacquisitionmethod.Thecostofanacquisitionismeasuredasthefairvalueoftheassetsgiven,equityinstrumentsandliabilitiesincurredorassumedatthedateofexchange.Acquisitioncostsforbusinesscombinationsareexpensedandincludedinselling,generalandadministrativeexpenses.Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationaremeasuredinitiallyatfairvalueatthedateofacquisition.

Investment in associatesAnassociateisanentityoverwhichtheGrouphassignificantinfluence(i.e.thepowertoparticipateinthefinancialandoperatingpolicydecisionsoftheassociate)butnothavecontrolorjointcontrol.

Investmentsinassociatesareaccountedforusingtheequitymethod.Theshareofincomeofassociatesisrecognized in the consolidated statement of comprehensive income and its share of other comprehensive income of associates is included in other comprehensive income.

Ifthecumulativelossesexceedthecarryingvalueoftheequityinvestment,theyarefirstappliedtoanyadditionaladvancesthatarereceivablefromtheassociatetotheextentofthetotalamountreceivable.Additionallossesarerecognizedonlytotheextentthatthereexistsalegalorconstructiveobligation.


Notes to the Consolidated Financial Statements

Foreign currency translationThereportingcurrencyfortheconsolidatedfinancialstatementsistheCanadiandollar.ForsubsidiariesintheGroupwhosefunctionalcurrencyisnottheCanadiandollar,theirresultsaretranslatedintoCanadiandollarsasfollows:

•assetsandliabilitiesaretranslatedintoCanadiandollarsattheexchangerateineffectonthe statement of financial position date. •resultsofoperationsaretranslatedintoCanadiandollarsattheaveragemonthlyexchangerate. •foreignexchangedifferencesarisingfromexchangeratefluctuationsareaccountedforin comprehensiveincomeandequity.

ForeigncurrencytransactionsaretranslatedintoCanadiandollarsattheexchangerateineffectatthedateofthetransaction.Gainsorlossesresultingfromthetranslationsarerecognizedincomprehensiveincome.MonetaryitemsaretranslatedattheCanadiandollarspotrateasofthereportingdate.Exchangedifferencesfrommonetaryitemsarerecognizedincomprehensiveincome.Nonmonetaryitemsthatarenotcarriedatfairvaluearetranslatedusingtheexchangeratesasatthedatesoftheinitialtransaction.Nonmonetaryitemsmeasuredatfairvalueinaforeigncurrencyaretranslatedusingtheexchangeratesatthedatewhenthefairvalue is determined.

Revenue recognitionRevenuesarerecordedaccordingtoIAS11,“ConstructionContracts”,whenthecriteriaaresatisfied;otherwise,revenuesarerecordedinaccordancewithIAS18,“Revenue”.Aconstructioncontractisacontractspecifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use.

Revenuefromconstructioncontractsisdeterminedusingthepercentageofcompletionmethod,basedontheratio of costs incurred to date over estimated total costs. Contract costs include all direct material and labour costs. Provisions are recorded for anticipated contract losses as soon as they are evident. In circumstances where significant advance purchases under a contract, such as materials, would result in a materially higher percentage of completion estimate for sales than would be indicated by other measures such as labour hours, managementadjuststhepercentageofcompletiontothelowerlevelindicatedbythealternativemeasure.

Anticipatedrevenuesoncontractsmayincludefuturerevenuesfromclaimsandunapprovedchangeorders, if such additional revenues can be reliably estimated and it is considered probable that they will be recovered. Suchadditionalrevenuesarelimitedtothecostsrelatedtotheclaimsorunapprovedchangeorders.

Revenuesfromthedesign,fabricationandinstallationofequipmentarerecordedwhentheproductsarecompleted and accepted by the customer or the services are rendered and collection is reasonably assured. Anyforeseeablelossesoncontractsarechargedtooperationsatthetimetheybecomeevident.RevenuesfromthesaleofusedequipmentarerecognizedwhentitlepassesfromtheGrouptoitscustomersandcollectionisreasonablyassured.Revenuesfromoperatingleasesarerecognizedovertheleasetermincludingestimatedrenewal periods.

OtherrevenuesarerecognizedwhenearnedinaccordancewithIAS18.



Income taxesTaxexpenseiscomprisedoftwocomponents;currenttaxexpenseanddeferredtaxexpense.

Current tax Recoverabletaxassetsorcurrenttaxliabilitiesrepresentthetaxauthorities’obligationsorclaimsforpriororcurrentperiodswhicharenotreceivedorpaidattheendofthereportingperiod.Currenttaxisbasedontaxableincomewhichdiffersfromaccountingincomebydefinition.Recoverabletaxassetsorcurrenttaxliabilitiesaremeasuredusingthetaxratesthathavebeenenactedorsubstantiallyenactedbytheendofthereportingperiod.

Deferred tax Deferredtaxisdeterminedbasedondifferencesbetweenthecarryingamountsoftheassetsandliabilitiesintheconsolidatedfinancialstatementsandthecorrespondingtaxbasesusedinthecalculationoftaxableincome.Deferredtaxassetsorliabilitiesaremeasuredbasedontaxratesthathavebeenenactedorsubstantiallyenactedbytheendofthereportingperiod,andthatareexpectedtoapplytotheperiodwhentheassetisrealized or the liability is settled.

Deferredtaxassetsorliabilitiesarerecognizedforalldeductibleortaxabletemporarydifferencesarisingifitisprobablethatthetemporarydifferencewillreverseintheforeseeablefutureandthattaxableprofitwillbeavailable against which the temporary difference(s) can be utilized.

Deferredtaxassetsanddeferredtaxliabilitiesareoffsetifalegallyenforceablerightexiststooffsetcurrenttaxassetsagainstcurrentincometaxliabilitiesandthedeferredtaxesrelatetothesametaxableentityandthesametaxationauthority.

Investment tax creditsFederalandprovincialinvestmenttaxcreditsareaccountedforasareductiontothecorrespondingexpendituresin the period in which the credits are earned and when there is reasonable assurance that the credits can be usedtorecovertaxes.

Non-current assets held for sale and discontinued operationsNon-currentassetsanddisposalgroupsclassifiedasheldforsalearemeasuredattheloweroftheircarryingamountandfairvaluelesscoststosell.Non-currentassetsanddisposalgroupsareclassifiedasheldforsaleif their carrying amounts will be recovered principally through a sale transaction rather than through continuing use.Thisconditionisregardedasmetonlywhenthesaleishighlyprobableandtheassetordisposalgroupisavailable for immediate sale in its present condition. Management must be committed to the sale, which should beexpectedtoqualifyforrecognitionasacompletedsalewithinoneyearfromthedateofclassification.

In the consolidated statement of comprehensive income of the reporting period, and of the comparable period, incomeandexpensesfromdiscontinuedoperationsarereportedseparatelyfromincomeandexpensesfromcontinuingoperations,downtothelevelofprofitaftertaxes.Intheconsolidatedstatementoffinancialposition,non-current assets held for sale have been separately identified.

Property,plantandequipmentandintangibleassetsonceclassifiedasheldforsalearenotdepreciatedoramortized.



Property, plant and equipment and investment propertyProperty,plantandequipmentarestatedatcost,netofanyaccumulateddepreciation,impairmentlossesandsubsequentreversals(ifany).Depreciationiscalculatedonastraightlinebasisovertheestimatedusefullivesofthe assets as follows

Buildings(includinginvestmentproperty) 25years Machineryandequipment(“M&E”) 3to15years Vehicles 1to7years Officefurnitureandequipment(“OfficeEquip”) 3to10years Leasehold improvements Over the lease period Parking lots 10 years

Theassets’usefullives,residualvaluesandmethodsofdepreciationofassetsarereviewedannually,andadjustedprospectively,ifappropriate.

Investment property is held to earn rental income and for capital appreciation. It is recognized at cost less accumulateddepreciationandaccumulatedimpairmentlosses.Withtheexceptionofland,whichisnotdepreciated,investmentpropertyisdepreciatedusingthestraight-linemethodoveritsusefullife(25years).Useful lives and residual values are revised annually or when warranted by the circumstances.

LeasesFinanceleases,whichtransfertotheGroupsubstantiallyalltherisksandbenefitsincidentaltoownershipofthe leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance oftheliability.Financechargesarerecognizedinfinancecostsintheconsolidatedstatementofcomprehensiveincome.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that theGroupwillobtainownershipbytheendoftheleaseterm,theassetisdepreciatedovertheshorteroftheestimated useful life of the asset and the lease term.

Operatingleasepaymentsarerecognizedasanexpenseintheconsolidatedstatementofcomprehensiveincome on a straight-line basis over the lease term.

Borrowing costsBorrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofanassetthatnecessarilytakesasubstantialperiodoftime,whichtheGroupconsiderstobe12monthsormore,togetreadyforitsintendeduseorsalearecapitalizedaspartofthecostoftherespectiveassets.Allotherborrowingcostsareexpensedintheperiodtheyoccur.Borrowingcostsconsistofinterestandothercoststhatanentityincursinconnection with the borrowing of funds.



Intangible assetsIntangibleassetsareinitiallyrecognizedwhentherecognitioncriteriaoutlinedinIAS38–IntangibleAssetsaremet.IAS38outlinestherecognitioncriteriaaswellasthenatureoftheamountstoberecognized.

Internallygeneratedintangibleassetsaremeasuredoninitialrecognitionatcost.Followinginitialrecognition,intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Theusefullivesofintangibleassetsareassessedaseitherfiniteorindefinite.Intangibleassetswithfiniteusefullives are amortized over the useful economic life and assessed for impairment whenever there is an indication thattheintangibleassetmaybeimpaired.Theamortizationmethodandamortizationperiodofanintangibleassetwithafiniteusefullifeisreviewedatleastannually.Changeintheexpectedusefullifeortheexpectedpattern of consumption of future economic benefits embodied in the asset are accounted for by changing theamortizationperiodormethod,asappropriate,andaretreatedaschangesinaccountingestimates.Theamortizationexpenseonintangibleassetswithfiniteusefullivesisrecognizedintheconsolidatedstatementofcomprehensive income.

Finitelifeintangibleassetsareamortizedonastraight-linebasisovertheestimatedusefullivesoftherelatedassetsasfollows:

Internally developed product designs 3 - 7 years Internallygeneratedpatents 5-7years

Gainsorlossesarisingfromderecognitionofanintangibleassetaremeasuredasthedifferencebetweenthenet disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statement of comprehensive income when the asset is derecognized.

Impairment of non-financial assetsAttheendofeachreportingperiod,theGroupassesseswhetherthereisanyindicationthatthenon-currentassetshavebeenimpaired.Ifanysuchindicationexists,therecoverableamountoftheassetisdetermined.Animpairmentlossisrecognizedinprofitorlosswhenthecarryingamountoftheassetexceedsitsrecoverableamount.

Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,theGroupdeterminestherecoverableamountofthecash-generatingunittowhichtheassetbelongs.Therecoverableamountofanasset is the higher of its fair value less costs to sell and its value in use. In the measurement of the value in use, estimatesoffuturecashflowsarediscountedattheirpresentvalueusingapre-taxdiscountratethatreflectscurrent market assessments of the time value of money and the risks specific to the asset for which estimates of cashflowshavenotbeenadjusted.

Cash and cash equivalentsAllhighlyliquidtemporarycashinvestmentswithanoriginalmaturityofthreemonthsorlesswhenpurchasedareconsideredtobecashequivalents.



InventoryInventory is comprised of raw materials, work in progress and finished goods. Inventory is valued at the lower of costandnetrealizablevalue,usinganaveragecostbasis.Netrealizablevalueistheestimatedsellingpriceinthe ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. When the circumstances that previously caused inventories to be written down below cost no longer existorwhenthereisclearevidenceofanincreaseinsellingprices,theamountofthewritedownpreviouslyrecorded is reversed.

Financial instrumentsFinancialassetsandliabilitiesareinitiallyrecognizedatfairvalueandsubsequentlyrecognizedaccordingtotheirclassification.Theclassificationdependsontheintentionwithwhichthefinancialinstrumentswereacquiredandtheircharacteristics.UnlessspecificcircumstancespermittedunderIFRSarepresent,theclassificationisnot modified after initial recognition.

Financial assetsFinancialassetsareclassifiedintothefollowingspecifiedcategories:

Financial assets at fair value through profit or loss [“FVTPL”]-Financialassetsclassifiedasassetsheldfortrading are recognized at fair value at each reporting period date, and any change in the fair value is reflected in profit or loss in the period during which these changes take place.

Loans and receivables-Financialassetsclassifiedasloansandreceivablesareaccountedforatamortizedcostusingtheeffectiveinterestratemethod.Interestincomeisincludedinprofitorlossovertheexpectedlifeofthefinancial asset.

Held-to-maturity investments-BondswithfixedordeterminablepaymentsandfixedmaturitydateswheretheGrouphasapositiveintentandabilitytoholdtomaturityareclassifiedasheld-to-maturityinvestments.Held-to-maturity investments are recorded at amortized cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.

Available for sale assets-Financialassetsclassifiedasavailable-for-salearerecordedatfairvalue,andthegains/losses resulting from the revaluation at the end of each period are recognized in other comprehensive income. Upon derecognition, all cumulative gains or losses previously recognized in accumulated other comprehensive income are reflected in comprehensive income.

Impairment of Financial AssetsFinancialassets,otherthanFVTPL,areassessedforindicatorsofimpairmentattheendofeachreportingdate.Financialassetsareimpairedwherethereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.



Forfinancialassetscarriedatamortizedcost,theamountoftheimpairmentisthedifferencebetweentheasset’scarrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

Thecarryingamountsofallfinancialassetsarereducedbytheimpairmentlossdirectlywiththeexceptionoftrade receivables where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Withtheexceptionofavailable-for-saleequityinstruments,if,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to theextentthecarryingamountoftheinvestmentatthedatetheimpairmentisreverseddoesnotexceedwhatthe amortized cost would have been had the impairment not been recognised.

Inrespectofavailable-for-saleequityinstruments,anysubsequentincreaseinfairvalueafteranimpairmentlossisrecogniseddirectlyinequity.

Derecognition of financial assets TheGroupderecognisesafinancialassetonlywhenthecontractualrightstothecashflowsfromtheassetexpire,orittransfersthefinancialassetandsubstantiallyalltherisksandrewardsofownershipoftheassettoanotherentity.IftheGroupneithertransfersnorretainssubstantiallyalltherisksandrewardsofownershipofthefinancialassetandcontinuestocontrolthetransferredasset,theGrouprecognisesitsretainedinterestintheassetandanassociatedliabilityforamountsitmayhavetopay.IftheGroupretainssubstantiallyalltherisksandrewardsofownershipofatransferredfinancialasset,theGroupcontinuestorecognisethefinancialassetand also recognises a collateralised borrowing for the proceeds receivables.

Financial liabilities and equity instruments FinancialliabilitiesandequityinstrumentsissuedbytheGroupareclassifiedaccordingtothesubstanceofthecontractualarrangementsenteredintoandthedefinitionsofafinancialliabilityandanequityinstrument.

Financial liabilities Financialliabilitiesareclassifiedaseitherfinancialliabilitiesatfairvaluethroughprofitorlossorotherfinancialliabilities.Financialliabilitiesareclassifiedasatfairvaluethroughprofitorlossifthefinancialliabilityiseitherheld for trading or it is designated as such upon initial recognition.

Other financial liabilitiesAccountspayableandaccruedliabilitiesareinitiallymeasuredatfairvalue,netoftransactioncosts,andaresubsequentlymeasuredatamortizedcost,whereapplicable,usingtheeffectiveinterestmethod,withinterestexpenserecognisedonaneffectiveyieldbasis.

Interest-bearingbankloansandoverdraftsareinitiallymeasuredatfairvalue,andaresubsequentlymeasuredatamortizedcost,usingtheeffectiveinterestmethod.Anydifferencebetweentheproceeds(netoftransactioncosts) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordancewiththeGroup’saccountingpolicyforborrowingcosts.



Derecognition of financial liabilitiesTheGroupderecognisesfinancialliabilitieswhen,andonlywhen,theGroup’sobligationsaredischarged,cancelledortheyexpire.

Equity instrumentsAnequityinstrumentisanycontractthatevidencesaresidualinterestintheassetsoftheGroupafterdeductingallofitsliabilities.Equityinstrumentsarerecordedatfairvaluedeterminedusingtheperspectiveofamarketparticipantatthemeasurementdatewhichistypicallytheproceedsreceived.Directissuecostsaredeductedfrom this value.

Convertible debenturesTheproceedsfromtheofferingsofconvertibledebenturesarerecognizedasaliabilitycomponentandanequitycomponent,whichrepresentsthefairvalueofequityandthefairvalueofthefinancialliabilityfromthefairvalueoftheconvertibledebenturesissued.Thefairvalueofthefinancialliabilityisestimatedbycomparingthestatedinterest rate on the debentures to the prevailing market rates for non-convertible debt with all other terms and conditions consistent to the underlying debenture.

WarrantsWarrants granted in connection with issuing common shares and convertible debentures are recorded at fair valueonthedateofgrantusingtheBlack-Scholesoption-pricingmodelorotherappropriatemeasure.Thecomponent of the capital raised attributable to the fair value of the warrants is recorded in the corresponding periodtocontributedsurplus.Anyconsiderationpaidbythewarrantholderonexerciseofthewarrantiscreditedto share capital and contributed surplus is decreased.

Derivative financial instrumentsTheGroupentersintoderivativefinancialinstrumentstomanageitsexposuretoforeignexchangeraterisk,comprisingforeignexchangeforwardcontractsandoptions.Derivativesareinitiallyrecognisedattheirfairvaluesatthedatethederivativecontractisenteredintoandaresubsequentlyre-measuredtotheirfairvaluesattheendofeachreportingperiod.TheGroup’sderivativesarenotdesignatedordonotqualifyforhedgeaccounting,anysubsequentchangeinfairvalueisrecognizedinincome.

Transaction costsTransactioncostsrelatedtofinancialinstrumentsthatarenotclassifiedasassetsandliabilitiesatfairvaluethroughprofitandloss,arerecognizedontheconsolidatedstatementoffinancialpositionasanadjustmentto the cost of the financial instrument upon initial recognition and amortized using the effective interest rate method.Deferredfinancingexpensesrelatedtorevolvingloansandrecognizedundernon-currentassetsareamortized over the financing period.

Earnings per shareThecomputationofearningspershareisbasedontheweightedaveragenumberofsharesoutstandingduringtheperiod.Dilutedearningspersharearecomputedinasimilarwaytobasicearningspershareexceptthattheweightedaveragesharesoutstandingareincreasedtoincludeadditionalsharesassumingtheexerciseofshareoptions, share appreciation rights and convertible debt options, if dilutive.



Share-based compensation plansEmployeesoftheGroupmayreceiveremunerationintheformofstockoptions.AwardsgrantedundertheGroup’sstockoptionplanarerecognizedincomprehensiveincomeusingthefairvaluemethodusingtheBlackScholes method for option valuation.

Equity settled transactionsThecostofequitysettledtransactionsisrecognized,togetherwithacorrespondingincreaseinothercapitalreserves,inequity,overtheperiodinwhichtheperformanceand/orserviceconditionsarefulfilled.

Whenoptions,warrantsandothershare-basedcompensationawardsareexercisedorexchanged,theamountspreviouslycreditedtocontributedsurplusarereversedandcreditedtoshareholder’sequity.Theamountofcash,ifany,receivedfromparticipantsisalsocreditedtoshareholder’sequity.

Thedilutiveeffectofoutstandingoptionsisreflectedasadditionalsharedilutioninthecomputationofdilutedearnings per share.

Reportable segmentsAreportablebusinesssegmentisacomponentoftheGroupthatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpensesincludingrevenuesandexpensesthatrelatetotransactionswithanyoftheGroup’sothersegments.Allinter-segmenttransactionsareaccountedforatfairvalue.Alloperatingsegments’operatingresultsarereviewedregularlybytheGroup’sChiefExecutiveOfficertomakedecisionsabout resources to be allocated to the segment and assess its performance, and for which discrete financial informationisavailable.TheGrouphasfourmainreportablesegments;Media-BasedAttractions,SteelFabricationServices,ManufacturedProductsandCorporatesegment.Theoperatingsegmentsaredescribedbelow.


Operating Segment

Media-basedAttractions


SteelFabricationServices

Corporate

Description

Designandmanufacturecomplexridesystems,telescopesandcustommachineryandequipment.Turnkeysupplierofpremiumentertainmentattractionsandproviderofpartsandserviceofamusementparkattractions.LeasedproductionfacilitiesinPortCoquitlam,BC.LeasedsalesofficesinVictoria,BC,Arlington,TXandToronto,ON.

Manufacturehydrovactrucksforexcavationserviceproviderstotheoilandgasindustryandthemunicipalmarket.LeasedproductionfacilityisinStettler,ABandasalesofficelocatedinCalgary,AB.

Structuralsteelfabricationandinstallation.Fabricationoftanks,pressurevesselsandother specialty carbon and stainless steel products. One owned production facility west of Edmonton,ABandaleasedsalesofficeinEdmonton,ABaswellasaleasedproductionfacilityinWinnipeg,MB.

HeadofficelocatedinWinnipeg.Executivemanagement,managerialandfinancialoversight,businessdevelopmentandcompliancerequirementsfortheoverallorganization.


Post-retirement benefit plansTheGroupcontributestoretirementsavingsplanssubjecttomaximumlimitsperemployee.TheGroupaccountsforsuchdefinedcontributionsasanexpenseintheperiodinwhichthecontributionsarerequiredtobemade.TheGroupdoesnothaveanydefinedbenefitplans.

3. Significant accounting judgements, estimates and assumptionsThepreparationoftheconsolidatedfinancialstatementsrequiresmanagementtomakejudgments,estimatesandassumptionsthataffectthereportedamountsofassets,liabilities,income,expensesandthedisclosureofcontingentliabilities.Actualresultscoulddifferfromthosejudgements,estimatesandassumptions.Theitemswhoseactualresultscoulddiffersignificantlyfromthosejudgements,estimatesandassumptionsaredescribedbelow.

Critical judgements made in applying the Group’s accounting policies

Cash generating unitsForthepurposeofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiable cash inflows. Management determines which groups of assets are capable of generating cash inflowsthatarelargelyindependentofotheroperationswithintheGroup.

Key sources of estimation uncertainty

Revenue recognitionThepercentageofcompletionmethodandtherevenuetoberecognizedaredeterminedonthebasisofestimatesforwhichtheGrouphasimplementedaninternalfinancialbudgetingandreportingsystemwhichreliesonhistoricalexperience.TheGroupreviewstheestimatesofcontractrevenueandcontractcostsasofeachreporting date. Contract losses are recognized as soon as they are identified.

Thedeterminationofanticipatedcostsforcompletingacontractisbasedonestimatesthatcanbeaffectedbya variety of factors such as potential variances in scheduling and cost of materials along with the availability and costofqualifiedlabourandsubcontractors,productivity,andpossibleclaimsfromsubcontractors.

Thedeterminationofanticipatedrevenuesincludesthecontractuallyagreedrevenueandmayalsoinvolveestimates of future revenues from claims and unapproved change orders if such additional revenues can bereliablyestimatedanditisconsideredprobablethattheywillberecovered.Achangeorderresultsfromachangetothescopeoftheworktobeperformedcomparedtotheoriginalcontractthatwassigned.Anexampleofsuchcontractvariationcouldbeachangeinthespecificationsordesignoftheproject,wherebycostsrelatedtosuchvariationmightbeincurredpriortotheclient’sformalcontractamendmentsignature.Aclaimrepresentsanamountexpectedtobecollectedfromtheclientorathird-partyasreimbursementforcostsincurredthatarenotpartoftheoriginalcontract.Inbothcases,management’sjudgmentsarerequiredindetermining the probability that additional revenue will be recovered from these variations and in determining the measurementoftheamounttoberecovered.AsatDecember31,2014,theGrouphasestimatedthatrevenuesof$nil(2013–$795)willberecoveredonspecificcontractvariationsandclaims.TheGrouphasrecognizedconstructioncostsintheamountof$nil(2013-$525)intheconsolidatedstatementofcomprehensiveincomeforwhichnoassociatedrevenuehasbeenrecognized.Revenuesassociatedwiththeseconstructioncostswill



be recognized if management believes the receipt of such revenues is probable and the amount to be received can be measured reliably.

Allowance for doubtful accountsGiventhenatureofbusinessandthecredittermsprovidedtocustomers,estimatesandjudgementsareinherentintheon-goingassessmentoftherecoverabilityofsomeaccountsreceivable.TheGroupmaintainsanallowancefordoubtfulaccountstoreflectexpectedcreditlosses.TheGroupisnotabletopredictchangesinthefinancialconditionsofitscustomersandtheGroup’sjudgementrelatedtotherecoverabilityofaccountsreceivablemaybemateriallyimpactedifthefinancialconditionoftheGroup’scustomersdeteriorates.

Valuation of inventoryEstimatesandjudgementsareinherentinthedeterminationofthenetrealizablevalueofinventories.Thecostofinventories may not be fully recoverable if they are damaged or if the selling price of the inventory is less than its cost.TheGroupregularlyreviewsitsinventoryquantitiesandreducesthecostattributedtoinventorynolongerdeemed to be fully recoverable. Estimates related to the determination of net realizable value may be impacted by a number of factors including market conditions.

Share-based paymentsTheGroupmeasuresthecostofshare-basedpaymentstoemployeesbyreferencetothefairvalueoftheequityinstruments at the date on which they are granted. Estimating fair value for share-based payment transactions requiresdeterminingthemostappropriatevaluationmodel,whichisdependentonthetermsandconditionsofthegrant.Thisestimatealsorequiresthedeterminationofthemostappropriateinputstothevaluationmodelincludingtheexpectedlifeoftheshareoption,volatilityanddividendyieldandmakingassumptionsaboutthem.Theassumptionsandmodelsusedforestimatingfairvalueofshare-basedpaymenttransactionsaredisclosedin note 17.

Impairment of non-financial assetsTheGroup’simpairmenttestisbasedonvalueinusecalculationsthatuseadiscountedcashflowmodel.ThecashflowsarederivedfromtheforecastanddonotincluderestructuringactivitiesthattheGroupisnotyet committed to or significant future investments that may enhance the performance of the cash generating unitbeingtested.Thecalculationissensitivetothediscountrateappliedaswellastheexpectedfuturecashinflows.

Useful lives of key property, plant and equipment, investment property and intangible assetsEstimatedusefullivesofproperty,plantandequipment,investmentpropertyandintangibleassetsarebasedonmanagement’sjudgmentandexperience.Whenmanagementidentifiesthattheactualusefullivesfortheseassets differ materially from the estimates used to calculate depreciation and amortization, that change is adjustedprospectively.Assetlives,depreciationandamortizationmethods,andresidualvaluesarereviewedperiodically.

TheGroupperiodicallyassessestherecoverabilityofvaluesassignedtolong-livedassetsafterconsideringpotential impairment indicated by such factors as significant changes in technological, market, economic or legal environment, business and market trends, future prospects, current market value and other economic factors. In performing its review of recoverability, management estimates either the value in use or fair value less costs to sell.



Deferred TaxesTheGroupaccountsforincometaxesusingtheassetandliabilitymethod.Underthismethod,deferredtaxassetsandliabilitiesarerecognizedbasedondeductibleortaxabletemporarydifferencesbetweenthecarryingamountsandtaxbasesoftheassetsandliabilities.Deferredtaxassetsandliabilitiesaremeasuredusingsubstantiallyenactedtaxratesexpectedtoapplyintheyearsinwhichthetemporarydifferencesareexpectedtoreverse.Iftheestimatesandassumptionsaremodifiedinthefuture,theGroupmayberequiredtoreduceorincreasethevalueofdeferredtaxassetsorliabilitiesresultingin,whereapplicable,anincometaxexpenseorrecovery.TheGroupregularlyevaluatesdeferredtaxassetsandliabilities.AsatDecember31,2014theGrouphasanassetof$4,909pertainingtoprojectedfutureusebasedonmanagement’sbudgetandestimates.

Managementhasrevieweditsfutureoperatingprojection’sandhasconcludedthatthereisreasonableassurancethattheGroupwillutilizethepreviouslyunrecognizedtaxcredits.Accordingly,$1,308wasrecognizedasareductionofcostofsalesinaccordancewiththeGroup’saccountingpolicy.

4. Standards issued but not yet effectiveAsofJanuary1,2015orlaterdates,theCompanywillberequiredtoadoptcertainstandardsandamendmentsissuedbytheIASBasdescribedbelow,forwhichtheCompanyiscurrentlyassessingtheimpact.Standardsand interpretations that have recently been issued or amended but are not yet effective have not been adopted bytheCompanyfortheseconsolidatedfinancialstatements.TheCompanyreasonablyexpectsthefollowingstandardstobeapplicabletoitsconsolidatedfinancialstatementsatafuturedateaslistedbelow:

IFRS 9 Financial instrumentsIFRSintroducesnewrequirementsforclassifyingandmeasuringfinancialassetsandfinancialliabilities.UnderIFRS9financialassetsareclassifiedandmeasuredbasedonthebusinessmodelinwhichtheyareheldandthecharacteristicsoftheircontractualcashflows.IFRS9alsointroducedadditionalchangesrelatedtothefinancialliabilities.ThestandardiseffectiveforannualperiodsbeginningonorafterJanuary1,2018.TheCompanyiscurrently assessing the impact of these amendments on its consolidated financial statements.

IFRS 11 Joint arrangementsInMay2014,theInternationalAccountingStandardsBoard(IASB)amendedIFRS11toclarifythattheacquirerofaninterestinajointoperationinwhichtheactivityconstitutesabusiness,asdefinedinIFRS3Businesscombinations,isrequiredtoapplyalloftheprinciplesonbusinesscombinationsaccountinginIFRS3andotherIFRSswiththeexceptionofthoseprinciplesthatconflictwiththeguidanceinIFRS11.Theamendmentsapplytotheacquisitionofaninterestinajointoperationonitsformation,unlesstheformationofthejointoperationcoincideswiththeformationofthebusiness,andtheacquisitionofadditionalinterestsinthesamejointoperation.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2016.TheCompany is currently assessing the impact of these amendments on its consolidated financial statements.

IFRS 15 Revenue from contracts with customersIFRS15,issuedinMay2014,specifieshowandwhenentitiesrecognizerevenue,aswellasrequiresmoredetailedandrelevantdisclosures.IFRS15supersedesIAS11Constructioncontracts,IAS18Revenue,IFRIC13Customerloyaltyprogrammes,IFRIC15Agreementsfortheconstructionofrealestate,IFRIC18Transfers



ofassetsfromcustomersandSIC31Revenue–bartertransactionsinvolvingadvertisingservices.Thestandardprovides a single, principles based fivestep model to be applied to all contracts with customers, with certain exceptions.Thefivestepsare:

1. Identify the contract(s) with the customer. 2. Identify the performance obligation(s) in the contract. 3.Determinethetransactionprice. 4.Allocatethetransactionpricetoeachperformanceobligationinthecontract. 5.Recognizerevenuewhen(oras)theentitysatisfiesaperformanceobligation.

IFRS15iseffectiveforannualperiodsbeginningonorafterJanuary1,2017.TheCompanyiscurrentlyassessing the impact of this standard on its consolidated financial statements.

IAS 16 Property, plant and equipment and IAS 38 Intangible assetsTheamendmentstoIAS16andIAS38,issuedinDecember2013,clarifyhowanentitycalculatesthegrosscarryingamountandaccumulateddepreciationwhenarevaluationisperformed.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJuly1,2014.TheCompanyiscurrentlyassessingtheimpactoftheseamendments on its financial statements.

TheamendmentstoIAS16andIAS38,issuedinMay2014,clarifythattheuseofrevenuebasedmethodstocalculatethedepreciationofanassetisnotappropriate.AmendmentstoIAS38specifythatanamortizationmethod based on revenue is generally presumed to be an inappropriate basis for measuring the consumption oftheeconomicbenefitsembodiedinanintangibleasset.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2016.TheCompanyiscurrentlyassessingtheimpactoftheseamendmentsonits consolidated financial statements.

5. Accounts receivable



TheGroup’sbreakdownoftheagingoftradeaccountsreceivablesisasfollows:



6. Construction contracts

7. InventoriesInventories are comprised of the following

Duringtheyear,theGrouprecordedinventorywrite-downsof$191(2013-$290).Theamountofinventoriesrecognizedasanexpensewithincostofgoodssoldis$22,116(2013-$13,846).


8. Other non-current assetsOthernon-currentassetsconsistof:

TheGrouphasdesignatedcertainproprietaryproductdesignsandotheritemsunderdevelopmentthatwillbepatentedasinternallygeneratedintangibleassetsintheGroup’sMedia-basedattractionssegment.


Thelong-termnotereceivableisduefromavendorandprincipalpaymentshavebeenre-negotiatedtocommencein2015.Accordingly,$84ofthenotereceivablehasbeenclassifiedascurrentasatDecember31,2014inotherreceivables.Nointeresthasbeenchargedonthenotereceivable,althoughtheGroupisentitledatitsdiscretiontochargeinterestintheamountof2%permonthcompoundedmonthly.

9. Intangible assets



10. Property, plant and equipment and investment property

Duringtheyear,thegrouprecordedrevenueof$68fromtheinvestmentproperty(2013-$15)withrecoverabledirectoperatingexpensesof$52(2013-$25).Includedindepreciationexpensefortheyearisdepreciationof$21relatingtotheinvestmentproperty(2013-$12).TheGroupestimatesthatthenetbookvalueofinvestmentpropertyconsistingoflandof$190(2013-$190)andthenetbookvalueofthebuildingof$436(2013-$457)whichtheGroupestimatesapproximatesthefairvalue.

Fullyamortizeditemsofproperty,plantandequipmentwithahistoricalcostof$2,341(2013-$1,400)arestillinusebytheGroup.


11. Investment in associates

TheGrouphasa49%interestinAthabascaChipewyanEmpireIndustrialServicesLtd.(“ACE”),FortMcMurray,Canada, which is involved in the steel fabrication and installation business and provides multi-trade industrial constructionaswellasmaintenanceservices.TheGroup’sinterestinACEincludesitswhollyownedsubsidiary,LemaxMachineandWeldingInc.ACEisaprivateentitythatisnotlistedonanypublicexchangeandassuchits independent fair value is not readily determinable.

ThetablesbelowdisclosetheassetsandliabilitiesasatDecember31,2014andDecember31,2013andincomeandexpensesofACEfortheyearendedDecember31,2014and2013:

TheGrouphasoutstandinglong-termadvancestoACEIndustrialServicesLtd.of$934(2013-$875).Theunsecuredadvancesaccrueinterestat8%perannumwithnospecifiedrepaymentterms.Duringtheyear,theGroupearned$59(2013-$34)ininterestincomefromACEIndustrialServicesLtdandmanagementfeesof$160 (2013 - $160).




TheGrouphasa45%interestinDongguanQiguangDynamicSteelStructuresLtd(“QDSL”),inDongguan,GuangdongP.R.ChinawhichisinvolvedinthesteelfabricationandinstallationbusinessinChinawhichtheGrouphasassessedasimmaterial.QDSLisaprivateentityandisnotlistedonanypublicexchange.TheGroup’sshareoffutureequityearningswillbeappliedtotheprincipalofthelimitedrecourseloanowingtoQiguangInvestment(HK)Limiteduntilsuchtimeastheprincipalisrepaidinfull(note15).TheGroupassessedthe current fair value of the investment at $nil (2013 - $nil).

TheGroupisnotexposedtoanyadditionallossesbeyonditsinitialinvestmentamount.TheGrouphasnotdisclosedanyfinancialinformationforQDSLasfinancialinformationisnotavailableatthedateofrelease.

12. Accounts payable and accrued liabilities

13. Bank indebtedness and bank operating lines

TheGroup’scashbalanceof$31(2013-$311)representsfundsondeposit.

AtDecember31,2014,theGrouphadtotaldrawsonitsbankoperatinglinesofcreditof$9,785(2013-$7,454).Advancesonthefacilityarepayableondemandandbearinterestatprimeplus1.5%.Theoverdraftfacilityissecuredbyageneralsecurityagreementprovidingafirstsecurityinterestinallpresentandafter-acquiredpropertyoftheGroup.

ThefacilityissubjecttocertainfinancialandmarginingcovenantswhichtheGroupwasincompliancewith.Duringtheyear,thelimitontheGroup’sfacilitywasincreasedto$15,000(2013-$10,000).


14. Long-term debt

TheCIBCtermloanbearsinterestatprimeplus1.5%andmaturesonNovember1,2018.TheGroupmakesequalmonthlyprincipalpaymentsof$58plusaccruedinterest.TheCIBCtermloanispartofthesamefacilitydescribed in note 13 and is secured by general security agreements providing a first security interest in all presentandafter-acquiredpropertyoftheGroup.TheGrouphasrecordedunamortizedfinancingcostsof$56(2013-$62)associatedwithsecuringtheCIBCtermloanasanetreductionoftheoveralllong-termdebtbalance.

Otherfinanceleasesareforshopequipmentthatbearsinterestbetween4-7%withaggregatemonthlypaymentsof$14maturingbetween2016and2018.Theleasesaresecuredbytheassetsbeingleasedwithanetbookvalueof$414comprisedof$278ofmachineryandequipmentand$136ofofficeequipment(2013-$212ofmachineryandequipmentand$148ofofficeequipment).Principalamountsdueonlong-termdebtineachofthenextfiveyearsandthereafterareasfollows:




15. Notes payable and limited recourse loan

ThelimitedrecourseloanwasissuedonNovember14,2011intheamountof$711USD(2014:$825and2013$756)andtheproceedswereusedtofundtheGroup’s45%investmentinDongguanQiguangDynamicSteelStructuresLimited(“QDSL”)inDongguan,Guangdong,P.R.China(note11).Theloanbearsinterestat10%perannumpayablequarterly.SecurityfortheloanforQiGuangInvestment(HK)LimitedisrestrictedtotheGroup’ssharesofQDSL.ThereisnotermontheloanandprincipalrepaymentfortheloanisrestrictedonlytotheGroup’sshareoftheequityearningsofQDSL.Totalinterestexpensein2014of$88(2013-$84)hasbeenpaidor accrued on the limited recourse loan with accrued interest of $31 (2013 - $10) recorded in accounts payable at the date of the consolidated statement of financial position.

16. Convertible debentures

TheGrouphastwotranchesofsubordinateconvertibledebenturesoutstandingwithatotalfacevalueof$1,020(2013-$1,060).ThesedebenturesareunsecuredandsubordinatedandareconvertibleintoEmpireIndustriesLtd.commonsharesataconversionpriceof$0.10.Thetermsandconditionsforeachtrancheofdebenturesissuedareasfollows:

ThefairvalueofthesubordinatedconvertibledebenturesatDecember31,2014is$953(2013-$957)andisrecordedatamortizedcost.Fairvaluewasestimatedbycomparingthefacevalueofthedebenturestotheprevailingmarketratesforsimilarnon-convertibledebtinstruments.Theresidualvalueof$151isseparatelyrecordedinequitywithaccumulatedaccretionof$87whichincludesaccretionexpensein2014of$33(2013-$28).Duringtheyear,convertibledebentureswithafacevalueof$40wereconvertedintocommonsharesmakingthefacevalueatDecember31,2014$1,020.


17. Share capital

Common sharesTheGroupispermittedtoissueanunlimitednumberofcommonshareswithoutnominalorparvalueandanunlimitednumberofpreferredshares.Thepreferredsharesmaybeissuedinoneormoreseries,andtheDirectorsareauthorizedtofixthenumberofsharesineachseriesandtodeterminethedesignation,rights,privileges, restrictions and conditions attached to the shares of each series.

During2014,4,000,000shareswereissuedasaresultofwarrantsexercisedforadditionalcashproceedsof$285and600,000shareswereissuedfromexercisingstockoptionsforadditionalcashproceedsof$54.Anadditional400,000shareswereissueduponconversionofconvertibledebentureswithafacevalueof$40.Alsoduringtheyear3,135shareswerecancelled.

In2013theGroupclosedtheprivateplacementof60,000,000commonsharesatapriceof$0.05pershareforgross proceeds of $3,000. Share issuance costs of $317 were deducted from the gross proceeds and $300 was ascribedtothecommonsharepurchasewarrantsthatwereattachedtothecommonsharesissued.Themarketpriceonthedatetheshareswereissuedwas$0.045.

Reduction in stated capitalOnAugust20,2013,attheGroup’sannualshareholdermeeting,theGroup’sshareholder’svotedtoreducetheGroup’sstatedcapitalandretaineddeficitby$34,653.

WarrantsOnJuly10,2013,30,000,000warrantswereissuedinconnectionwithaprivateplacementofshares.Eachwarrantentitlestheholdertobuyonecommonshareatanexercisepriceof$0.05pershareuntilJuly10,2014andatanexercisepriceof$0.10pershareuntilJuly10,2018.AsummaryoftheGroup’swarrantsasatDecember31,2014andDecember31,2013andchangesduringtheperiodsthenendedasfollows:




Theremaining27,700,000warrantsissuedin2013arerecordedatfairvalueatthetimeofissuance,whichtheGrouphasestimatedat$300byascribingthedifferenceinproceedsreceivedonthecommonsharesissuedat$0.05pershareversusthemarketpriceonthedateofissueof$0.045.SecuritieslegislationrestrictstheminimumexercisepriceofwarrantsirrespectiveofthemarketpriceofthecommonsharesoftheGroupatthetimeofissuance.Thevolatilityassumedforthewarrantsissuedin2013was145.44%.Therisk-freeinterestrateassumedforthewarrantswas1.16%.Thefairvalueofthewarrantsexercisedof$23wasre-classedtosharecapitalinconjunctionwiththeexerciseandthefairvalueoftheoutstandingwarrantsof$277isincludedintheGroup’scontributedsurplusbalance.

Stock OptionsTheGroupmaintainsastockoptionplanforthebenefitofofficers,directors,keyemployeesandconsultantsoftheGroup.AtDecember31,2014theGroupwaspermittedtoissueuptoamaximumof25,823,647stockoptions,being10%oftheoutstandingcommonshares.AsummaryoftheGroup’soptionsasatDecember31,2014andDecember31,2013andchangestotheperiodsthenendedareasfollows:


ThefairvalueassociatedwiththeoptionsgrantedwascalculatedusingtheBlack-Scholesmodelforoptionvaluation.Theoptionsgrantedin2014weregrantedinoneissuancevestingimmediately(2013:twoissuancesvestingimmediately).Thevolatilityassumedfortheoptionsgrantedis141.89%(2013:149.5%).Therisk-freeinterestrateassumedfortheoptionswas1.33%(2013:1.71%).Themarketpriceonthedateofgrantwas$0.095(2013:$0.09)pershare.Thefairvalueoftheoptionsgrantedin2014was$208(2013:$989).

Theoptionsgrantedin2011weregrantedinoneissuancevestingoverthreeyearsfromthedateofgrant.Thevolatilityassumedfortheoptionsgrantedis139%.Therisk-freeinterestrateassumedfortheoptionswas2.06%.Theannualpre-vestforfeitureratewhichiscalculatedbasedonhistoricaldataisestimatedat9.58%.Themarketpriceatthedateofgrantwas$0.06pershare.Thefairvalueoftheseoptionsgrantedin2011is$279.Stock-basedcompensationexpenseonthistranchesofoptionsin2014was$12(2013-$44).

Contributed surplusChangesincontributedsurplusconsistedofthefollowing:




18. Cost of sales

Includedincostofsalesis$1,630(2013-$733)expensedduringtheyearfordefinedcontributionplans.

19. Selling and administrative expenses

Includedinsellingandadministrativeexpensesis$81(2013-$81)expensedduringtheyearfordefinedcontribution pension plans.

20. Finance costs


21. Derivative financial instruments

TheCompanyutilizesforwardcurrencycontractsandoptionstoprovideprotectionagainstforeignexchangeratemovementsonlong-termsalescontracts.TheCompany’spolicyistonotutilizederivativefinancialinstrumentsfortradingorspeculativepurposes.During2014,theGrouprecordedunrealizedmark-tomarketlossesonforeigncurrencyforwardcontractsandoptionsof$1,212(2013-$395).AsatDecember31,2014theGrouprecordedaliabilityassociatedwiththeunrealizedmark-tomarketlossonforeigncurrencyforwardcontractsandoptionsof$1,625(2013-$413).

22. Other income (loss)

23. Income per share

IncomepersharefortheyearendedDecember31




Basicearningspershareisderivedbydividingtheearningsfortheyearbytheweightedaveragenumberofcommonsharesoutstandingfortheperiod.Dilutiveearningspershareisderivedbydividingtheadjustedearnings by the weighted average number of common shares outstanding assuming all dilutive securities are exercisedatthebeginningoftheyear.Inthedilutiveearningspersharecalculation,earningsisadjustedtoreflect finance costs that would not have been incurred as a result of the assumed conversion of subordinate convertible debentures.

24. Income tax expense (recovery)

Themajorcomponentsoftaxexpense(recovery)areasfollows:


Thereconciliationbetweenincometaxexpense(recovery)andtheproductofaccountingprofitmultipliedbythecombinedfederalandprovincialstatutoryincometaxrateisasfollows:




Theamountofdeferredtaxassetsandliabilitiesinrespectofeachtypeoftemporarydifferenceandinrespectofeachtypeofunusedtaxlossesandunusedtaxcreditsisasfollows:

Theamountofdeductibletemporarydifferences,unusedtaxlosses,andunusedtaxcreditsforwhichnodeferredtaxassetisrecognizedareasfollows:


Theunusednon-capitallossespresentedaboveexpireasfollows:

Theunusedinvestmenttaxcreditspresentedaboveexpireasfollows:

25. Operating segments

AdescriptionoftheCompany’sbusinesssegments,Media-basedAttractions,SteelFabricationServices,ManufacturedProductsandCorporateareincludedinnote2.RevenuerecognitionisnotconsistentbetweenthetwosegmentsasallrevenuesarerecognizedintheSteelFabricationservicessegmentandMedia-basedAttractionssegmentsarerecognizedinaccordancewithIAS11–ConstructionContracts.RevenuerecognitionintheManufacturingandCorporatesegmentsisinaccordancewithIAS18.

ThefollowingtablesshowthesegmentedperformancefortheGroupfromitsfouroperatingsegments,Media-basedAttractions,ManufacturedProducts,SteelFabricationServicesandCorporatefortwelvemonthsendedDecember31,2014and2013respectively:




Thefollowingtablebreaksdownthesalesbygeographicalregion:

Allnon-currentassetsoftheGrouparelocatedinCanada.


26. Capital disclosure and management

TheGroup’sobjectivewhenmanagingitslong-termcapitalstructureistostriveforalong-termmanageableleveloflong-termfundeddebttototalcapitalization.TheGroupsetstheamountofcapitalinproportiontorisk.TheGroupmanagesthecapitalstructureandmakesadjustmentstoitinlightofchangesineconomicconditionsandtheriskcharacteristicsoftheunderlyingassets.Inordertomaintainoradjustthecapitalstructure,theGroupmay issue new shares, sell redundant or non-core assets or borrow through the issue of long-term debt.

Fundeddebtisdefinedaslongtermdebtincludingfinanceleases.Tangiblenetworthincludesshareholder’sequity,subordinatedebtsuchassubordinateconvertibledebenturesandlimitedrecourseloanslessintangibleassetsanddeferredtaxassets.TheGroup’sstrategyduringtheperiod,whichwasunchangedfromthepriorperiod,wastomaintainitsabilitytosecureaccesstofinancingatareasonablecost.Thereareexternalrestrictions to capital as lending limits are based on asset availability and financing agreements that are impacted by covenants. Management actively monitors these limits to ensure compliance.




27. Financial instruments and risk management

Fair value of financial instrumentsTheGrouphasestablishedthefollowingclassification:

•Cashandequivalents,bankindebtednessandforeigncurrencyforwardcontractsareclassifiedunder “Assetorliabilitiesatfairvaluethroughprofitorloss” •Accountsreceivableincludingtoanassociaterelatedpartyandotherareclassifiedas“Loansand receivables” •Accountspayableandaccruedliabilities,convertibledebentures,notespayable,subordinatednotes payableandlimitedrecourseloanandlong-termdebtincludingfinanceleasesareclassifiedas“Other FinancialLiabilities”

Hierarchy of fair value measurementsTheGroupclassifiesitsfinancialassetsandliabilitiesmeasuredatfairvalueintothreelevelsaccordingtotheobservability of the inputs used in their measurement.

Level 1 Valuesbasedonunadjustedquotedpricesinactivemarketsthatareaccessibleatthemeasurementdateforidentical assets or liabilities.

Level 2Valuesbasedonquotedpricesinmarketsthatarenotactiveormodelinputsthatareobservableeitherdirectlyor indirectly for substantially the full term of the asset or liability.

Level 3 Valuesbasedonpricesorvaluationtechniquesthatrequireinputsthatarebothunobservableandsignificanttothe overall fair value measurement.

ThefollowingtablepresentsinformationontheGroup’sassetsandliabilitiesmeasuredatfairvalueanddisclosesthefairvaluehierarchyofthevaluationtechniquesusedtodeterminethisfairvalueatDecember31,2014:


Thefairvaluesofaccountsreceivable(includingadvancestoassociate),cashandequivalents,bankindebtednessandaccountspayableandaccruedliabilitiesapproximatetheircarryingvaluesgiventheirshort-term maturities. Management has determined that the fair value of long-term debt including finance leases, subordinate convertible debentures and limited recourse loans do not materially differ from its carrying value as themajorityofsuchdebtissubjecttofloatinginterestratesandcurrentmarketconditions.ThefairvalueoftheforwardforeigncurrencyoptioncontractsisdeterminedbythefinancialinstitutionthattheGrouphasenteredinto the contracts with.

Risk managementInthenormalcourseofitsbusiness,theGroupisexposedtoanumberofrisksthatcanaffectitsoperatingperformance.Management’scloseinvolvementinoperationshelpsidentifyrisksandvariationsfromexpectations.AsapartoftheoveralloperationoftheGroup,managementconsiderstheavoidanceofundueconcentrationsofrisk.TheGroupmanagesitsrisksandriskexposuresthroughacombinationoffinancialinstruments,insurance,asystemofinternalanddisclosurecontrolsandsoundbusinesspractices.Theprimarytypesoffinancialriskwhichariseareliquidity,credit,andmarketrisk.Theserisksandtheactionstakentomanagethemareasfollows:

Liquidity riskLiquidityriskistheriskthattheGroupcannotmeetitsfinancialobligationsassociatedwithfinancialliabilitiesinfull.ArangeofalternativesisavailabletotheGroupincludingcashflowprovidedbyoperations,additionaldebt,theissuanceofequityoracombinationthereof.ThefundsareprimarilyusedtofinanceworkingcapitalandcapitalexpenditurerequirementsandareadequatetomeettheGroup’sforeseeablefinancialobligationsassociated with financial liabilities.




ThefollowingtablesummarizestheGroup’sfinancialliabilitieswithcorrespondingmaturitydatesasatDecember31,2014:

TheGroupexpectstohaveadequateresourcestodischargethesefinancialliabilities.TheGroupperformsacomprehensivebudgetingprocesswhichincludesadetailedanalysisofprojectedfuturecashflowsbaseduponbutnotlimitedtohistoricalexperienceandbacklogreports.Thisprocessissubjecttosensitivityanalysisandisperiodicallyreviewedagainstrecentandpastperformance.Thebankoperatinglinesarerenewableonanannualbasisand,totheextentthatthesearerenewed,thereisnorequirementforthebalancetobepaiddownotherthanintheordinarycourseofoperations.AtDecember31,2014,theCompanyhas$15,645oftradeaccountsreceivableand$24,065ofunbilledconstructioninprogressthatoncecollectedwillallowtheGrouptodischarge the remainder of the financial liabilities in the normal course.

Credit riskCreditriskarisesfromthepossibilitythatcustomersmayexperiencefinancialdifficultyandbeunabletofulfilltheircommitmentstotheGroup.Forafinancialasset,thisistypicallythegrosscarryingamount,netofanyamountsoffsetandanyimpairmentlosses.TheGrouphascreditpoliciestoaddresscreditriskonaccountsreceivable from customers, which may include the analysis of the financial position of customers and review ofcreditlimits.TheGroupalsoreviewsnewcustomercredithistorybeforeestablishingcreditandperiodicallyreviewsexistingcustomercreditperformance.TheGroupmayrequirelettersofcreditorcreditinsurance.Anallowance for doubtful accounts is established based upon factors surrounding credit risk of specific customers, historicaltrendsandotherinformation.AtDecember31,2014,theGrouphadoneindividualcustomeraccountingforapproximately17%oftotalaccountsreceivable(2013–28%)forwhichtheGrouphasinsuredtoeffectively eliminate the credit risk.

AsatDecember31,2014,theGrouphas$2,401oftradeaccountsreceivableover90dayswhichhavenotbeenprovisioned(2013-$1,092).AsatDecember31,2014,tradeaccountsreceivablethatwereprovisionedamountedto$7(2013-$96).Theseaccountswereprovisioneddueprimarilytohardshiprelatedtoeconomicconditionsofspecificcustomers.Thefollowingtablesummarizeschangesintheallowancefordoubtfulaccounts:


Market riskMarket risk is the risk that changes in market prices will have an effect on future cash flows associated with financialinstruments.TherehasbeennochangetotheGroup’sexposuretoMarketrisksinthemannerinwhichtheserisksaremanagedormeasured.Marketriskcomprisesthreetypesofrisk:currencyrisk,interestrateriskand commodity price risk.

Currency riskTheGroupsellsitsproducts,aswellas,purchasesgoodsinbothCanadianandU.S.currencies.Accordingly,theGroupisexposedtocurrencyriskasitrelatestocustomeraccountsreceivablebalancesandtradeaccountspayabledenominatedinU.S.currency.Changesintheapplicableexchangeratemayresultinadecreaseorincreaseinforeignexchangeincomeorexpense.TheGroupmayenterintoforwardexchangecontractsoruseotherhedgingactivitiestomanagepartoftheforeignriskexposuresrelatingtocustomeraccountsreceivablebalances and trade accounts payable denominated in U.S. currency.

AsatDecember31,2014,theGrouphadUSDforeigncurrencyforwardcontractsfor$23,400(2013-$16,100)atforwardratesrangingfrom$1.09to$1.13maturingmonthlythroughDecember31,2015.Theaccountsnoted below include amounts denominated in U. S. currency that have been converted to the Canadian dollar equivalentonthebalancesheetdateatarateof$1.1601perU.S.dollar(2013-$1.0636):




FortheyearendedDecember31,2014,iftheCanadiandollarhadstrengthened10%percentagainsttheUSdollarwithallothervariablesheldconstant,netincomefortheperiodwouldhavebeen$1,097lower(2013-$1,071lower).Conversely,iftheCanadiandollarhadweakened10%percentagainsttheUSdollarwithallothervariablesheldconstant,netincomewouldhavebeen$1,097higher(2013-$1,071higher).

Included in revenue are realized gains on translation of foreign currency monetary assets and liabilities and realizedgainsonforeigncurrencytransactionsof$409fortheyearendedDecember31,2014(2013–gainsof$593).

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchangesinmarketinterestrates.TheGroupisexposedtointerestrateriskprimarilythroughitsvariableratesonbankoperatinglinesandlongtermborrowings.TheGroupmanagesexposuretointerestrateriskbyusingacombinationoffixedandfloatingratedebtinstruments.

FortheyearendedDecember31,2014,ifinterestrateshadbeen50basispointslowerwithallothervariablesheldconstant,after-taxnetincomefortheperiodwouldhavebeen$64(2013-$48)higher,arisingmainlyasaresultoflowerinterestexpensesonvariableborrowings.Ifinterestrateshadbeen50basispointshigher,withallothervariablesheldconstant,after-taxnetincomewouldhavebeen$64(2013-$48)lower,arisingmainlyasaresultofhigherinterestexpensesonvariableborrowings.

Commodity price riskManufacturingcostsfortheGroup’sproductsareaffectedbyfluctuationsinthepriceofrawmaterials,primarilysteel.Inordertomanageitsrisk,theGroupimplementssellingpriceadjustmentsinordertomatchrawmaterialcostchanges.Thismatchingisnotalwayspossibleascustomersreacttosellingpricepressuresrelatedtorawmaterialcostfluctuationsaccordingtoconditionspertainingtotheirmarkets.Forlongtermcontracts,theGroupmaynegotiatetheinclusionofaflowthroughpriceadjustmentclauseintocontractswherebythecustomeragrees to price changes based on the underlying market value of steel. In order to limit the risk associated with steelpriceincreases,theGrouplocksinorderpricestotheextentpossibleassoonascontractsareawarded.

ThesensitivityanalysesinthecurrencyriskandinterestraterisksectionsabovedonottakeintoconsiderationthattheGroup’sliabilitiesareactivelymanaged.Additionally,thefinancialpositionoftheGroupmayvaryatthetimethatanyactualmarketmovementoccursorbemitigatedbymanagement’sactionstoreduceexposureto risks. Other limitations in the above sensitivity analyses includes the use of hypothetical market movements todemonstratepotentialriskthatonlyrepresenttheGroup’sviewofpossiblenear-termmarketchangesthatcannotbepredictedwithanycertainty;andtheassumptionthatallinterestratesmoveinanidenticalfashion.

28. Related parties

Balanceswithrelatedpartiesarepresentedseparatelyinthenotestotheconsolidatedfinancialstatements.During2014,rentwaspaidtocompaniescontrolledbyofficers,directorsandmembersoftheirfamiliesintheamount$nil($122in2013).TheGrouphadsalestoanAssociateintheamount$190($384in2013),$160of


whichweremanagementfees($160in2013)andpurchasesfromanassociateof$4,188($3in2013).Also,theGrouphad$91ofinterestexpenseonconvertibledebenturespaidorpayabletorelatedpartieswhowereindividualdebentureholders($108in2013).Thesetransactionsareinthenormalcourseofoperationsandaremeasuredattheexchangeamount,whichistheamountofconsiderationestablishedandagreedtobytheparties.Compensationawardedtokeymanagementincluded:

29. Subsidiaries

ThesearewhollyownedsubsidiariesoftheGroup.

30. Guarantees and contingencies

Loan guaranteesTheGroupiscontingentlyliableunderoneguaranteegiventoathird-partylenderwhohasprovidedcertainfinancingfacilitiestoassociatedinvestments.AsatDecember31,2014,themaximumamountoffixedguaranteesprovidedtoathird-partylenderonbehalfofanaffiliatedcompanyis$822(2013-$2,353).

Letters of Credit Inthenormalcourseofbusiness,theGroupcontractedlettersofcreditforanamountof$2,989USDasatDecember31,2014(2013-$3,850).TheGrouphasaguaranteefacilitywithExportDevelopmentCanadatoguaranteelettersofcreditforperformancesecurityandadvancepaymentguaranteesissuedbytheGrouponinternationalconstructioncontracts.Thetotalvalueoflettersofcreditdisclosedaboveareguaranteedbythisfacility.AsatDecember31,2014,thelimitonthefacilitywas$10,000USDandissecuredbyageneralsecurityagreementprovidingsecondsecurityinterestsinalloftheGroup’spresentandafter-acquiredproperty.


Director and officer indemnificationTheGroupindemnifiesitsdirectorsandofficersagainstanyandallclaimsorlossesreasonablyincurredintheperformanceoftheirservicetotheGrouptotheextentpermittedbylaw.TheGrouphasacquiredandmaintainsliability insurance for its directors and officers as well as those of its wholly-owned subsidiaries and certain affiliated companies.

Other indemnification provisionsFromtimetotime,theGroupentersintoagreementsinthenormalcourseofoperationsandinconnectionwithbusinessorassetacquisitionsanddispositions.Bytheirnature,theseagreementsmayprovideforindemnificationofcounterparties.ThevaryingnatureoftheseindemnificationagreementspreventstheGroupfrommakingareasonableestimateofthemaximumpotentialamountitcouldincur.Historically,theGrouphasnot made any significant payments in connection with these indemnification provisions.

Other contingenciesTheGroupissubjecttovariousproductliabilityorgeneralclaimsandlegalproceedingscoveringmattersthatariseintheordinarycourseofbusiness.Allsuchmattersareadequatelycoveredbyinsuranceorbyaccruals,or are determined by management to be without merit, or of such kinds or amounts as would not have a material adverseeffectonthefinancialresultsoftheGroup.



Corporate Structure - Empire Industries...

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