SET STRONGCO CORPORATION 2017 FIRST QUARTER REPORT

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1 SET Q1 STRONGCO CORPORATION 2017 FIRST QUARTER REPORT THREE MONTHS ENDED MARCH 31, 2017STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 1

2 WE ARE STRONGCO Strongco Corporation is a major multiline mobile equipment dealer with operations across Canada. Strongco sells, rents and services equipment used in diverse sectors such as construction, infrastructure, mining, oil and gas, utilities, municipalities, waste management and forestry. The Company has approximately 500 employees serving customers from 26 branches in Canada. Strongco represents leading equipment manufacturers with globally recognized brands, including Volvo Construction Equipment, Case Construction, Manitowoc Crane, including National and Grove, Terex Cedarapids, Terex Trucks, Fassi, Sennebogen, Konecranes and SDLG. Strongco is listed on the Toronto Stock Exchange under the symbol SQP. 1 LETTER TO OUR SHAREHOLDERS 3 MANAGEMENT S DISCUSSION AND ANALYSIS 4 Financial and Operating Highlights 5 Summary of Operating Results 6 Outlook 7 Company Overview 8 Financial Results First Quarter 19 Summary of Quarterly Data 20 Contractual Obligations 20 Shareholder Capital 20 Non-IFRS Measures 21 Critical Accounting Estimates 22 Forward-Looking Statements 23 FINANCIAL STATEMENTS 25 Unaudited Interim Consolidated Statement of Financial Position 26 Unaudited Interim Consolidated Statement of Income (Loss) 27 Unaudited Interim Consolidated Statement of Comprehensive Income (Loss) 28 Unaudited Interim Consolidated Statement of Changes in Shareholders Equity 29 Unaudited Interim Consolidated Statement of Cash Flows 30 Notes to Unaudited Interim Condensed Consolidated Financial Statements STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 2

3 To Our Shareholders In the first three months of 2017, the Canadian markets began to show small signs of improvement, following a challenging, transitional 2016 for Strongco, in which Management took actions to restructure, simplify and streamline the business. While the economic headwinds have not entirely subsided, we look forward to the rest of this year with cautious optimism, encouraged by the tangible progress within our organization, which we believe is positioning Strongco for greater stability, enhanced market share, and sustainable profitability. Strongco s revenues in the quarter were lower than a year ago, largely due to a few large and non-recurring sales of cranes in Quebec in the first quarter of Excluding these, we are pleased to report that revenues in the first quarter of 2017 were up 5% year-over-year, led by stronger product support sales. Operating expenses and interest were also lower than in 2016, due to the actions taken last year to reduce personnel and other charges, combined with the decrease in aged equipment inventories and the associated financing. In a further effort to contain costs, an additional 30 positions were eliminated since year-end, and, in January, the decision was made to close our Orillia, Ontario branch. While we are not abandoning this important territory, we feel we can more efficiently service the area with the appropriate levels of technicians, sales and service people from our Mississauga and Sudbury facilities. We have continued to reduce equipment inventories and the associated financing costs in a concerted effort to focus on the core, best-in-class brands for which Strongco is known. In the first three months of 2017 inventories fell by a further $8 million. Equipment inventory at the end of March 2017 was down to $121.2 million, approximately $38 million lower than the same time last year, and equipment notes payable were down to $103.6 million, approximately $32 million below last year. Looking ahead in Strongco s key markets, in Alberta, a sense of optimism is emerging that the worst is over and recovery may be on the horizon. In the quarter, Strongco was able to secure an eight-unit, long-term rental deal with a metals recycling customer for a highprofile project in Red Deer. We also saw increased activity on the repair and refurb side, as customers gear up for the warmer spring weather, including refurbishing a fleet of Volvo artic haulers for a key account in Fort McMurray. At the same time, however, economic activity and demand for heavy construction equipment and cranes in the province are expected to remain low for the balance of While smaller-scale construction remains somewhat active in Ontario, an air of caution remains, influencing purchasing decisions and overall demand for heavy equipment. Our Case business unit was ahead of plan in Q1, completing a 19-unit deal with a key account in Ontario a market share win consisting of 15 backhoes and 4 excavators. Overall, though, expectations for Ontario will continue to be low until significant government infrastructure spending is announced. While demand for heavy equipment and cranes in Quebec is expected to remain soft in the near term, activity increased slightly in 2016, and continued improvement is anticipated over longer term. In Atlantic Canada, heavy equipment markets remain soft overall, due to little government infrastructure spending on the horizon and an expectation of a flat housing market. With the warmer spring weather upon us, we are seeing the usual uptick in construction activity and demand for equipment. At the same time, however, Management anticipates market conditions across the country will remain challenging throughout the balance of this year. We expect real competition on many fronts, particularly from dealers carrying lower-cost Tier-3 product and those offering lower-cost financing options, which places increased pressure on our margins. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 1

4 Despite the ongoing challenges, we are pleased with the significant improvements in our financial stability, progress in managing costs, inventory controls, and a tightened focus on the globally recognized brands and high-quality products that we represent, including Manitowoc, CASE and our largest business partner, Volvo Construction Equipment. While it s fair to say that our focus over the past 12 months has been on simplifying the business, we continue to look for new opportunities that suit Strongco s offering and skillset. For example, Atlantic Canada is the test site of our strategy to selectively expand our rental offering. An initial fleet of new Volvo excavators is currently in the process of being delivered, and we have started to actively promote these machines to new and long-time customers in this region. Overall, our management team is cautiously optimistic about the outlook for the balance of the year. Strongco continues to execute on its strategic vision from both an operational and performance standpoint, to build the financial footings that will ensure a more sustainable future for the business and all stakeholders. While the economic headwinds have not entirely subsided, we look forward to the rest of this year with cautious optimism, encouraged by the tangible progress within our organization, which we believe is positioning Strongco for greater stability, enhanced market share, and sustainable profitability. Although rental revenues during the quarter were slightly lower year-over-year, in April, our Quebec team approached the City of Montreal with a proposal to allow for a pricing module on used Volvo graders, which resulted in a successful long-term rental and product support agreement for the municipality s winter snow removal. Robert J. Beutel Executive Chairman J. David Wood, CPA Vice President and Chief Financial Officer May 10, 2017 STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 2

5 MANAGEMENT S DISCUSSION & ANALYSIS STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 3

6 Strongco Corporation Managementʼs Discussion and Analysis The following management discussion and analysis ( MD&A ) provides a review of the consolidated financial condition and results of operations of Strongco Corporation, Strongco GP Inc. and Strongco Limited Partnership, collectively referred to as Strongco or the Company, as at and for the three months ended March 31, This discussion and analysis should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements as at and for the three months ended March 31, For additional information and details, readers are referred to the Companyʼs audited consolidated financial statements and accompanying MD&A as at and for the year ended December 31, 2016 contained in the Companyʼs annual report for the year ended December 31, 2016, the Companyʼs unaudited interim condensed consolidated financial statements and accompanying MD&A as at and for the periods ended March 31, 2016, June 30, 2016 and September 30, 2016, the Companyʼs Notice of Annual Meeting of Shareholders and Management Information Circular ( MIC ) dated March 23, 2017, and the Companyʼs Annual Information Form ( AIF ) dated March 30, 2017, all of which are published separately and are available on SEDAR at Unless otherwise indicated, all financial information within this discussion and analysis is in millions of Canadian dollars except per share amounts. The information in this MD&A is current to May 10, FINANCIAL AND OPERATING HIGHLIGHTS Market conditions across Canada showed some positive, albeit small, signs of improvement in the first quarter of Following a challenging year of transition in 2016 where, in response to difficult market conditions across the country, management took action to refocus, simplify and streamline the business, Strongcoʼs operating performance in the first quarter also improved. While revenues in the first quarter of 2017 were lower than a year ago, this was primarily due to a few large and non-recurring sales of cranes in Quebec that occurred in the first quarter of Excluding these non-recurring crane sales, revenues in the first quarter of 2017 were up 5% over the prior year led by stronger product support sales. In addition, operating expenses and interest were lower than in the prior yearʼs first quarter as a result of the actions taken in 2016 to reduce headcounts and other cash expenses, and decrease aged equipment inventories. Further headcount reductions were taken in the first quarter of 2017, and a decision was made to close the Companyʼs branch in Orillia, Ontario, which resulted in additional restructuring charges of $0.7 million. These actions and the restructuring initiatives in 2016, have significantly reduced the Companyʼs cost structure, improved the balance sheet and better positioned the Company to generate sustainable performance going forward. Operating Results Revenue of $83.2 million, compared to $91.2 million in the first quarter of Excluding large non-recurring crane sales in Quebec in the first quarter of 2016, revenues in the quarter were higher than the prior year by $4.1 million or 5%. Revenues were higher in Alberta and Ontario and product support revenues overall were up 15% over the prior year. Gross profit of $15.6 million (18.7% of revenue) compared to $17.1 million (18.8% of revenue) in the first quarter of Operating income, before restructuring costs and foreign exchange gains, of $0.8 million compared to $0.9 million in the first quarter of EBITDA of $4.3 million compared to $5.3 million in the first quarter of Interest expense for the quarter of $1.3 million, down from $1.5 million in the first quarter of Pretax loss for the quarter of $1.1 million, essentially unchanged from a year ago Net loss from continuing operations of $1.1 million (loss of $0.08 per share) compared to net loss from continuing operations of $0.9 million (loss of $0.07 per share) in the first quarter of Balance Sheet Improvement Equipment inventory of continuing operations of $121.2 million, down from $129.2 million at December 31, 2016 and $159.3 million at March 31, Equipment notes payable of continuing operations of $103.6 million, compared to $101.2 million at December 31, 2016 and $135.5 million at March 31, STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 4

7 Income Statement Highlights - Continuing Operations Three months ended March 31 ($ millions, except per share amounts) Revenues $ 83.2 $ 91.2 Operating income before restructuring costs Pretax loss (1.1) (1.1) Net loss from continuing operations $ (1.1) $ (0.9) Basic and diluted loss per share from continuing operations $ (0.08) $ (0.07) EBITDA (see "Non-IFRS Measures") Balance Sheet Highlights - Continuing Operations Total equipment inventory Total assets Equipment notes payable $ $ Debt (bank debt and other notes payable) $ 29.6 $ 28.1 Total liabilities $ $ SUMMARY OF OPERATING RESULTS As noted in the Management Discussion and Analysis for the year ended December 31, 2016, on September 30, 2016, the Company completed the sale of its U.S. subsidiary, Chadwick-BaRoss Inc. As a consequence of this divestment, the results of Chadwick-BaRoss are no longer consolidated with Strongco in the comparative year figures for the three months ended March 31, 2016, and are shown on a single line in the Companyʼs income statement, as net earnings from discontinued operations. The comments throughout the following management discussion and analysis reflect the results from Strongco Corporation, excluding Chadwick-BaRoss. Strongcoʼs revenues for the quarter were $83.2 million, compared to $91.2 million in the same quarter of As noted above, the decline was due primarily to a few large non-recurring sales of cranes in Quebec in the first quarter of Excluding these crane sales, revenues were up by $4.1 million or 5% in the first quarter of Revenues were up in Western and Central Canada and were down in Eastern Canada again due primarily to the non-recurring crane sales in Quebec in the first quarter of By revenue category, equipment sales were down in the quarter due entirely to the non-recurring crane sales noted above. Excluding those non-recurring sales, equipment sales were up 2% year over year. At the same time rental revenues were down slightly across the country but product support revenues overall were stronger as a result of a few large jobs to refurbish customersʼ equipment. As a result of the lower revenues, gross profits were down by $1.6 million from a year ago at $15.6 million. As a percent of revenue, gross margin was 18.7%, compared to 18.8% in the first quarter of Operating expenses in the quarter were $14.8 million, down from $16.2 million in the first quarter of 2016 as a direct result of managementʼs actions in 2016 in response to the weak markets across the country, to reduce headcounts and other expenses. As a result, operating income, before restructuring costs and foreign exchange gains, was $0.8 million compared to $0.9 million in the first quarter of During the first quarter, the Company recorded a further restructuring provision of $0.7 million for severance and termination costs for additional employees terminated in the quarter and lease termination costs related to the planned closure of the Companyʼs Orillia, Ontario branch. The Canadian dollar remained weak during the first quarter with little movement, fluctuating around $0.75 USD ($1.33 CDN). As a result, the foreign exchange gain in the quarter was small at $0.1 million compared to $1.1 million in the first quarter of 2016 when the dollar was more volatile. After restructuring costs and foreign exchange gains, operating income was $0.2 million compared to $0.4 million in the first quarter of STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 5

8 Interest expenses in the quarter were down by $0.2 million from last year to $1.3 million as a result of reduced equipment inventory and the associated debt. This resulted in pre-tax loss of $1.1 million, the same as the first quarter of After tax, there was a net loss of $1.1 million compared to a net loss from continuing operations of $0.9 million in the first quarter of During 2016, Strongco achieved a significant reduction in equipment inventories and the associated equipment finance debt. The Company has continued to manage inventory and debt levels closely. At March 31, 2017 equipment inventory in continuing operations was $121.2 million, which was down from $129.2 million at December 31, 2015 and $159.3 million at the same time last year. At the same time equipment notes payable of continuing operations were reduced and at March 31, 2017 were $103.6 million compared to $101.2 million December 31, 2016 and $135.5 million a year ago. OUTLOOK While certain markets experienced modest year over year improvement in the first quarter of the year, market conditions across Canada generally remain challenging. In Alberta in particular, heavy equipment markets remain weak, however, a sense of optimism is emerging in the province that the worst is over and recovery may be on the horizon. With warmer spring weather, construction activity and demand for equipment is starting to pick up, but management anticipates market conditions will remain challenging throughout the balance of 2017 in Canada. In Alberta, with no meaningful new development in the oil sands, activity in the northern region and across the entire province is expected to remain low in As a consequence, demand for heavy equipment and cranes is expected to remain weak throughout In response to the current market conditions and weak outlook, in 2016 management made adjustments to the cost structure with layoffs and other expense reductions, and reduced inventory levels, especially aged machines. While these actions will help improve profitability, continuing weak market conditions and soft demand for heavy equipment will result in another challenging year in Alberta. In Quebec, overall, demand for heavy equipment and cranes is expected to remain soft in the near term. Construction activity in the province experienced a very modest uptick in 2016 and the longer term outlook is for continued improvement. However, with no plans for significant new government infrastructure spending, construction activity in Quebec is expected to remain weak in the near term. Commodity prices are expected to remain at low levels and as a result mining activity and demand for associated heavy equipment is expected to remain low in northern regions. In Ontario, while construction activity remains somewhat buoyant, most activity is of a smaller scale and there remains an overall air of caution which is affecting the purchase decisions for heavy equipment. With no new infrastructure spending announced in the recent Ontario government budget and few large projects underway or planned for the near term, larger scale construction activity is expected to remain low and demand for heavy equipment, especially GPE, is not expected to increase significantly in As the majority of heavy equipment is priced in US dollars, the weaker Canadian dollar has resulted in rising costs for new equipment to Canadian dealers. In the current weak construction markets, it has become more difficult for dealers to pass on these higher costs, which has resulted in lower sales and margins. The Canadian dollar is expected to remain weak in the near term in response to both the low oil prices and a weak economic outlook for Canada relative to the United States, which will continue to impact sales and margins. With this economic backdrop, the overall markets for heavy equipment across Canada are expected to be up modestly overall, and competition is expected to remain strong. While encouraged by the Companyʼs first quarter results, with weak market conditions expected to continue, management remains cautiously optimistic regarding the outlook for STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 6

9 COMPANY OVERVIEW Strongco is one of the largest multiline mobile equipment distributors in Canada. Strongco sells and rents new and used equipment and provides after-sale product support (parts and service) to customers who operate in infrastructure, construction, mining, oil and gas exploration, forestry and industrial markets. This business distributes numerous equipment lines in various geographic territories. The primary lines distributed include those manufactured by: i. Volvo Construction Equipment North America Inc. ( Volvo ), for which Strongco has distribution agreements in each of Alberta, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland; ii. Case Corporation ( Case ), for which Strongco has a distribution agreement for a substantial portion of Ontario; and iii. Manitowoc Crane Group ( Manitowoc ), for which Strongco has distribution agreements for the Manitowoc, Grove and National brands, covering much of Canada. The distribution agreements with Volvo and Case provide Strongco exclusive rights to distribute the products manufactured by these manufacturers in specific regions and/or provinces. In addition to the above noted primary lines, Strongco also distributes several other equipment lines and attachments which are complementary to its primary lines, including Allied Construction, Dressta, ESCO, Fassi, Jekko, Konecranes, Sennebogen, SDLG, Terex Trucks and Terex Cedarapids. Strongco is listed on the Toronto Stock Exchange under the symbol SQP. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 7

10 FINANCIAL RESULTS THREE MONTHS ENDED MARCH 31, 2017 AND 2016 Consolidated Results of Operations Three months ended March 31 ($ thousands, except per share amounts) Revenues $ 83,203 $ 91,249 Cost of sales 67,609 74,100 Gross Profit 15,594 17,149 Selling and administrative expenses 14,766 16,219 Restructuring costs 678 1,700 Other (income) expense (54) (1,148) Operating income Interest expense 1,305 1,490 Loss before income taxes (1,101) (1,112) Recovery of income taxes - (243) Net loss from continuing operations (1,101) (869) Net income from discontinued operations Net loss $ (1,101) $ (714) Basic and diluted loss per share - continuing operations (0.08) (0.07) - net loss (0.08) (0.05) Weighted average number of shares - Basic and diluted 13,221,719 13,221,719 Key financial measures: Gross margin as a percentage of revenues 18.7% 18.8% Selling and administration expenses as a percentage of revenues 17.7% 17.8% Operating income as a percentage of revenues 0.2% 0.4% EBITDA (see "Non-IFRS Measures") $ 4,348 $ 5,293 Market Overview Strongco participates in a number of geographic regions and in a wide range of end-use markets that utilize heavy equipment and which may have differing economic cycles. Construction markets generally follow the cycles of the broader economy, but typically lag by periods ranging up to 12 months. When construction markets are robust, demand for heavy equipment is normally strongest. In addition, as the financial resources of heavy equipment customers strengthen, they have historically replenished and upgraded their fleets after a period of restrained capital expenditures. Demand in oil and gas and mining markets is affected by the economy but also tends to be driven by the global demand and pricing of the relevant commodities. Activity in equipment markets is normally first evident in equipment used in earth moving applications and followed by cranes, which are typically utilized in later phases of construction. Cranes are also extensively utilized in the oil and gas sector. Rental of heavy equipment is typically greater following periods of recession until confidence is restored and financial resources of customers improve. However, over the last several years rental activity has remained strong even when markets were robust as more customers are choosing to rent or rent with an option to purchase to meet their equipment needs. Market conditions in Canada in the first quarter of 2017 continued to be impacted by the same factors that affected the economy throughout ongoing weak oil prices, a sagging Canadian dollar, soft commodity prices and lack of government infrastructure spending all of which continued to negatively impact construction and mining activity across the country and served to dampen demand for heavy equipment. Given the seasonality of construction activity in Canada, demand for equipment is normally lower in the first part of the year while product support is typically strong to support snow removal activity and as customers prepare their equipment for the upcoming construction season. This proved to be the case in the first quarter of With early and more normal levels of snowfall, parts and service activity was stronger in the first quarter of 2017 compared to the prior year, and the onset of warmer spring weather resulted in a pickup in demand for equipment towards the end of the quarter. In this weak environment, competition has intensified, especially from dealers carrying tier 3 product and offering discounted financing. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 8

11 Weak economic conditions continued in Alberta as a result of ongoing impact of low oil prices. However, with sustained oil prices around $50 per barrel, a sense of optimism has emerged in the province which is having a positive effect on demand for heavy equipment and customer willingness to repair and refurbish machines. Demand for equipment experienced an uptick in the quarter and product support activity was stronger. Demand for GPE was higher, driven by excavators and loaders and a few large multi-unit deals. Demand for compact equipment was also higher in the quarter. While it cannot yet be called a recovery, the underpinning confidence being demonstrated in the market is a positive sign. Competition in the region remains very aggressive, especially from other dealers carrying tier 3 product and offering lower cost financing options, and as a result, margins are coming under pressure. In Ontario, while an air of caution remains, demand for heavy equipment improved toward the end of the quarter with the early onset of warmer spring weather. However, the increased demand was mainly from excavators and centered around a few large multi-unit sales. Competition for business remains intense, especially from dealers carrying tier 3 product and offering discounted financing, and margins are coming under pressure. In this uncertain environment, while customers are still somewhat reluctant to commit to purchase equipment, rental and product support activity remained strong as customers rented or repaired equipment. Ongoing weak commodity prices and lack of government spending on infrastructure activity continues to dampen heavy equipment markets in Quebec. However, the market for construction equipment experienced an increase in demand in the first quarter driven largely by excavators and compact equipment. Similar to Alberta and Ontario, competition, especially from dealers carrying tier 3 product, remains aggressive and margins are coming under pressure. Product support activity was stronger in the quarter as customers repaired and refurbished equipment in anticipation of the season. With respect to cranes, while the reconstruction of the Champlain Bridge generated some demand in 2015/2016, demand for cranes in the region overall remains very weak. In Atlantic Canada, heavy equipment markets generally remain soft with little government infrastructure spending on the horizon and an expectation of a flat housing market. The continued low price of oil has also resulted in reduced activity and demand for equipment in Newfoundland. The market for GPE in the Atlantic region was down in the quarter compared to the first quarter of 2016 when two large entities replenished their excavator fleets. Rentals and product support remained active in the quarter to support snow removal activity. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 9

12 Revenues A breakdown of revenue for the three months ended March 31, 2017 and 2016 is as follows: Three months ended March 31 [$ millions] Eastern Canada (Atlantic and Quebec) Equipment Sales $ 9.4 $ 29.3 Equipment Rentals Product Support Total Eastern Canada $ 22.9 $ 41.3 Central Canada (Ontario) Equipment Sales $ 23.5 $ 18.6 Equipment Rentals Product Support Total Central Canada $ 35.7 $ 31.2 Western Canada (Manitoba to BC) Equipment Sales $ 17.0 $ 13.2 Equipment Rentals Product Support Total Western Canada $ 24.6 $ 18.7 Strongco Corporation Equipment Sales $ 49.9 $ 61.1 Equipment Rentals Product Support Total Strongco Corporation $ 83.2 $ 91.2 For the three months ended March 31, 2017, total revenues were $83.2 million compared to $91.2 million in the same three months of 2016, down $8.0 million or 9%. Most of the decline was in Quebec due to a few large nonrecurring sales of cranes in the first quarter of Excluding these non-recurring sales, revenues were up by $4.1 million or 5% from the first quarter of Equipment Sales Total equipment sales in the three months ended March 31, 2017 were $49.9 million down $11.2 million or 18% from $61.1 million in the same quarter of Most of the decline was due to the non-recurring sales of a few large cranes in Quebec in the first quarter of Excluding those non-recurring sales equipment sales were up 2% over the first quarter of On a regional basis, equipment sales in Eastern Canada (Quebec and Atlantic regions) were $9.4 million in the quarter, down $19.9 million from the same quarter of The large decrease was primarily due to the nonrecurring sales of a few large cranes in the first quarter of 2016 as noted above. However, even after excluding these non-recurring crane sales, Strongcoʼs equipment sales were down year over year due to lower sales of excavators and loaders. The market for GPE in Quebec was estimated to be up slightly overall in the quarter, driven largely by stronger demand for excavators while demand for loaders declined. Despite the increased demand, Strongcoʼs sales of excavators were lower compared to the prior year due to aggressive price competition from other dealers carrying less expensive tier 3 product which resulted in a drop in market share. Strongcoʼs sales of loaders in Quebec were down but less than the market overall resulting in a slight increase in market share. In the Atlantic region, continuing lack of government spending on infrastructure and the impact of low oil prices on STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 10

13 activity in Newfoundland resulted in continued weak demand for heavy equipment. The overall market for GPE in Atlantic Canada was down in the first quarter due mainly to a decline in excavators as a result of two large multiunit sales in the first quarter of The market for loaders in the region was also down year over year. Strongcoʼs equipment sales in the quarter in Central Canada were up $4.9 million, or 26%, to $23.5 million due primarily to strong sales of loaders. The market for heavy equipment in Ontario was up overall year over year due to higher demand for excavators and compact equipment, while loader demand was relatively unchanged. As a result of the strong sales of loaders, Strongcoʼs GPE market share improved in the first quarter of the year. Crane sales in Ontario were lower in the first quarter as strong sales to crane rental companies in the first quarter of 2016 were not repeated. Equipment sales in Western Canada during the quarter ended March 31, 2017 were $17.0 million, which was up $3.8 million or 28% over the same quarter of The increase was entirely due to higher sales of cranes in the region which more than offset lower sales of other heavy equipment. Crane sales benefited from the sale of a very large crane in Alberta. Sales of other heavy equipment were down in the quarter due to lower excavator sales offset partially by higher sales of loaders. The market for GPE was higher in the quarter due primarily to increased demand for loaders and excavators. Excavator demand was driven by a large quantity of excavators purchased by two major construction companies in Alberta as well as other dealers increasing rental fleets. Excluding these two large excavator deals and rental fleet purchases, excavator demand in the region was essentially unchanged year over year. Strongcoʼs loader market share increased in the quarter but the Companyʼs share of the excavator and overall GPE market declined as a result of the two large excavator deals and dealer rental fleet purchases. Equipment Rentals It is common industry practice for certain customers to rent to meet their heavy equipment needs rather than commit to a purchase. In some cases, this is in response to the seasonal demands of the customer, as in the case of municipal snow removal contracts, or to meet the customersʼ needs for a specific project. In other cases, certain customers prefer to enter into short-term rental contracts with an option to purchase after a period of time or hours of machine usage. This latter type of contract is referred to as a rental purchase option contract ( RPO ). Under an RPO, a portion of the rental revenue is applied toward the purchase price of the equipment should the customer exercise the purchase option. This provides flexibility to the customer and results in a more affordable purchase price after the rental period. Normally, the significant majority of RPOʼs are converted to sales within a six-month period and this market practice is a method of building sales revenues and the field population of equipment. Rental activity tends to be more robust in periods when the economy and construction markets are soft or recovering from recession, as customers generally lack the confidence or financial resources to commit to purchase equipment and prefer instead to rent to meet their equipment needs. Traditionally, when construction markets and demand for heavy equipment are strong, more customers are willing to purchase equipment and rental activity subsides. Rental activity, including RPOs, increased as anticipated since the last recession. However, rental activity has remained strong even after markets recovered and the number of customers choosing RPOs has continued to increase. Rental activity is expected to remain strong in the future. Strongcoʼs rental revenue in the first quarter of 2017 was $4.3 million, down $0.5 million from a year ago. Rental activity remained slower in Alberta due to continuing weak markets in the province, but was more robust in other regions in Canada. Strongcoʼs rental revenue in Alberta was flat overall with a small increase in rentals of construction equipment offset by lower crane rentals. Strongcoʼs rental revenue was down slightly in Eastern Canada in the first quarter, as construction and infrastructure activity remained at low levels in Quebec. Strongcoʼs rental revenue was down slightly in Central Canada but remained strong as many customers continued to rent given the uncertainty and lack of clarity regarding governmental infrastructure spending. Product Support Sales of new equipment usually carry the warranty from the manufacturer for a defined term. Product support revenues from the sales of parts and service are therefore not realized until the warranty period expires. Warranty periods vary from manufacturer to manufacturer and depending on customer purchases of extended warranties. Product support activities (sales of parts and service outside of warranty), therefore, tend to increase at a slower rate and lag equipment sales by three to five years. The increasing equipment population in the field leads to increased product support activities over time. Product support activities are normally strong in the first quarter due to increased use of equipment for snow removal in the winter and during the third quarter in the height of the construction season as equipment is being utilized in the field. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 11

14 Strongcoʼs product support revenues in the first quarter of 2017 were $29.0 million, up 15% from $25.3 million in the same quarter of Product support revenues were particularly strong in Quebec and Alberta as a result of a few large jobs to refurbish customersʼ equipment. Parts and service revenues in Central Canada were down slightly year over year but remained strong as customers, with the onset of warmer spring weather, prepared their equipment for the upcoming construction season. Gross Profit Three Months Ended March Gross Profit $ millions GM% $ millions GM% Equipment Sales $ % $ % Equipment Rentals % % Product Support % % Total Gross Profit $ % $ % Strongcoʼs overall gross profit was down to $15.6 million from $17.1 million in the first quarter last year due to the lower revenue in 2017 and lower gross margin percentages in each revenue stream. Overall gross margin as a percent of sales was 18.7% of revenue in the first quarter of 2017, essentially unchanged from the same quarter in 2016 due to a higher proportion of revenues from product support. By revenue category, gross profit on equipment sales and rentals were lower due to lower sales volumes and lower margins on sales due to competitive pressures. The gross profit on product support was higher as a result of the higher parts and service revenues, but declined as a percentage of sales as lower margins were accepted on a few large jobs to refurbish customersʼ equipment in Alberta and Quebec. Selling and Administrative Expense Selling and administrative expenses in the quarter were $14.8 million or 17.7% of revenue, down from $16.2 million or 17.8% of revenues in the first quarter of The decrease was primarily the result of the actions taken in 2016 to reduce headcounts and other cash expenses, as well as lower depreciation related to the new SAP computer system, which was fully impaired in the third quarter Headcount at March 31, 2017 stood at 502, which was down a further 30 employees from the beginning of the year and compared to 570 a year ago. Net warranty recovery was lower in the quarter as a result of a lower level of warranty work and reduced recoveries, which partially offset the overall expense reduction. Restructuring Costs As noted above, headcount was reduced by an additional 30 people during the first quarter. In addition, management decided to exit and terminate the lease at the Companyʼs branch in Orillia, Ontario. As a result of these decisions, the Company recorded a restructuring provision of $0.7 million for severance and other termination costs of employees and lease termination costs of the Orillia facility. While the Company is exiting the Orillia branch, it is still servicing customers in the region through sales and service personnel covering the territory as well as providing service and parts from its Mississauga and Sudbury, Ontario locations. Other Income and Expense Other income and expense is primarily comprised of gains or losses on disposition of fixed assets, foreign exchange gains or losses, service fees received by Strongco as compensation for sales of new equipment by other third parties into the regions where Strongco has distribution rights for that equipment and commissions received from third party financing companies for customer retail financing Strongco places with such finance companies. Other income and expense in the first quarter of 2017 was net income of $0.1 million, composed primarily of foreign exchange gains that resulted on the translation of US dollar liabilities from the strengthening Canadian dollar. This compared to other income of $1.1 million in the same quarter of 2016 which was primarily foreign exchange gains. 9 STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 12

15 Operating Income Despite lower selling and administrative expenses, lower revenues and the corresponding lower gross profit resulted in operating income, before restructuring costs and foreign exchange gains, of $0.8 million compared to $0.9 million in the first quarter of After restructuring costs and foreign exchange gains, operating income was $0.2 million in the quarter compared to $0.4 million in the first quarter last year. Interest Expense Strongcoʼs interest-bearing debt comprises interest-bearing equipment notes and an operating line with the Companyʼs bank. Strongco typically finances equipment inventory under lines of credit available from various finance companies, many of which are the captive finance affiliate of the OEM supplier. Most equipment financing has interest-free periods of up to 12 months from the date of financing, after which the equipment notes become interest-bearing. The rate of interest on the Companyʼs bank operating lines and interest-bearing equipment notes payable vary with bank prime rates and Bankersʼ Acceptance rates ( BA rates ). (See discussion under Cash Flow, Financial Resources and Liquidity ). Prime rates and BA rates have remained fairly stable compared to Strongcoʼs continued to show further reduction in interest expense in the first quarter as a result of the marked reduction in equipment inventory and the related equipment notes payable. Interest expense for the first quarter was $1.3 million, which was down from $1.5 million a year ago. Earnings / Loss before Income Taxes Before the restructuring provision, the Company realized a loss before income taxes of $0.4 million in the quarter, compared to an income before income taxes of $0.6 million in After restructuring charges, the pre-tax loss was $1.1 million. Recovery of Income Taxes As there is uncertainty that the tax loss incurred in the first quarter of 2017 would be recovered in the future, no recovery of income taxes has been recorded against the loss in the period. By comparison, an income tax recovery of $0.2 million was recorded in the first quarter of Net Income / Loss from continuing operations Strongcoʼs net loss from continuing operations in the quarter was $1.1 million ($0.08 loss per share), which compared to a net loss from continuing operations of $0.9 million ($0.07 loss per share) in the same quarter of EBITDA EBITDA in the first quarter of 2017 was $4.3 million (5.2% of revenue), down from $5.3 million (5.8% of revenue) in EBITDA was calculated as follows: Three Months Ended March 31 EBITDA ($ millions) Net loss from continuing operations $ (1.1) $ (0.9) Add Back: Interest Income taxes - (0.2) Amortization of capital assets Amortization of equipment inventory on rent Amortization of rental fleet Amortization of computer system EBITDA (see "Non-IFRS Measures") $ 4.3 $ 5.3 STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 13

16 Cash Flow, Financial Resources and Liquidity Cash Flow Provided By (Used In) Operating Activities: During the quarter $3.1 million of cash was provided from operating activities which compared to cash provided from continuing operations of $7.5 million in the first quarter of Most of the reduction resulted from the loss in the quarter and the change in working capital. The components of cash provided by (used in) operating activities were as follows: Three Months Ended March 31 ($ millions) Net loss from continuing operations $ (1.1) $ (0.9) Non-cash items: Depreciation - capital assets Depreciation - equipment inventory on rent Depreciation - rental fleet Amortization of computer system Interest expense Recovery of income taxes - (0.2) Employee future benefit expense $ 4.8 $ 5.6 Changes in non-cash working capital balances Employee future benefit funding (0.5) (0.5) Interest paid (1.3) (1.6) Cash provided by operating activities - continuing operations discontinued operations Cash provided by operating activities $ 3.1 $ 9.5 Non-cash items include amortization of equipment inventory on rent of $3.0 million in the three months ended March 31, 2017, which compares to $3.1 million in the same quarter of During the quarter ended March 2017, non-cash working capital decreased by $0.1 million due primarily to decreases in inventory and trade and other payables, offset by increases in equipment notes payable and trade and other receivables as shown in the table below. By comparison, during the quarter ended March 2016, net working capital decreased by $4.0 million. Components of cash flow from the net change in non-cash working capital for the three month periods ending March 31, 2017 and 2016 were as follows: ($ millions) - Cash Provided By (Used In) (Increase) / Decrease Three months ended March Trade and other receivables $ (2.4) $ 0.2 Inventories (excluding depreciation - equipment inventory on rent) Prepaids and other assets (0.6) (0.3) $ 2.6 $ 15.4 Increase / (Decrease) Trade and other payables (4.4) 15.5 Deferred revenue & customer deposits (0.5) (5.7) Equipment notes payable 2.4 (21.2) $ (2.5) $ (11.4) Net decrease in non-cash working capital $ 0.1 $ 4.0 As noted above, excluding the depreciation of equipment inventory while on rent, inventory decreased by $5.6 million. Equipment inventory of continuing operations at the end of March was $121.1 million, which was down from $129.2 million at the beginning of the year and down from $159.3 million from a year earlier. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 14

17 A breakdown of equipment inventory at March 31, 2017 compared to December 31, 2016 and March 31, 2016 is as follows: ($millions) March 31, 2017 December 31, 2016 March 31, 2016 Equipment in-stock $ 90.6 $ 90.0 $ Equipment on rental contract with a purchase option Equipment on a short-term rental contract Equipment Inventory - continuing operations $ $ $ Equipment Inventory - discontinued operations $ - $ - $ 17.4 Equipment Inventory - total $ $ $ As noted, the Companyʼs equipment notes payable of continuing operations have declined from a year ago year as equipment inventory was reduced. Equipment notes payable in continuing operations at March 31, 2017 was $103.6 million which compared to $101.2 million at the end of 2016 and $135.5 million at the same point in A breakdown of equipment notes payable at March 31, 2017 compared to December 31, 2016 and March 31, 2016 is as follows: ($millions) March 31, 2017 December 31, 2016 March 31, 2016 Non-interest-bearing $ 33.7 $ 26.7 $ 33.3 Interest-bearing Equipment Notes Payable - continuing operations $ $ $ Equipment Notes Payable - discontinued operations $ - $ - $ 18.5 Equipment Notes Payable - total $ $ $ Cash Provided By (Used In) Investing Activities: Net cash used in investing activities amounted to $0.1 million in the first quarter of 2017 related to the purchase of capital assets. By comparison, capital expenditures totalled $0.1 million in the first quarter of The capital expenditures related to branch upgrades and miscellaneous shop equipment purchases. Cash Provided By (Used in) Financing Activities: During the first quarter of 2017, $3.0 million of cash was used in financing activities. Most of the cash was used to reduce borrowing under the Companyʼs operating bank lines and long-term equipment notes as shown in the table below. This compared to cash used in financing activities by continuing operations of $7.5 million during the same quarter in The components of cash used in financing activities were as follows: Three months ended March 31 ($ millions) Increase (decrease) in bank indebtedness $ (2.1) $ (6.1) Decrease in long-term equipment notes (0.3) (0.3) Repayment of finance lease obligations (0.6) (1.1) Cash used in financing activities - continuing operations (3.0) (7.5) - discontinued operations - (1.9) Cash used in financing activities $ (3.0) $ (9.4) STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 15

18 Bank Credit Facilities The Company has a credit facility with a bank in Canada as described below. Operating Lines The Canadian bank credit facility is a revolving demand facility which provides an operating line of $30 million. Borrowings under the operating line of credit is limited by standard borrowing base calculations based on accounts receivable and inventory, which are typical of such bank credit facilities. As collateral, the Company has provided a security interest in accounts receivable, inventories (subordinated to the collateral provided to the equipment inventory lenders), capital assets (subordinated to collateral provided to lessors), real estate and intangible and other assets. The bank operating line bears interest at rates that vary with bank prime rates or Bankers Acceptances Rates ( BA rates ). Interest rates range between bank prime rate plus 2.00% and bank prime rate plus 4.00% or between the one-month Canadian BA rate plus 3.00% and the one-month Canadian BA rate plus 5.00%, depending on the Companyʼs ratio of debt to tangible net worth. Under its bank credit facilities, the Company is able to issue letters of credit up to a maximum of $5 million. Outstanding letters of credit reduce availability under the Companyʼs operating lines of credit. For certain customers, Strongco issues letters of credit as a guarantee of Strongcoʼs performance on the sale of equipment to the customer. At March 31, 2017, there were outstanding letters of credit totaling $0.01 million. In addition to its operating lines of credit, Strongco has a line of approximately US$18.4 million for foreign exchange forward contracts as part of its bank credit facilities ( FX Line ) available to hedge foreign currency exposure. Under this FX Line, the Company can purchase foreign exchange forward contracts up to a maximum of US$18.4 million. As at March 31, 2017, the Company had outstanding foreign exchange forward contracts under this facility totalling US$3.3 million at an average exchange rate of $ Canadian for each US$1.00 and 1.2 million at an average exchange rate of $ Canadian for each 1.00 with settlement dates between April 2017 and September Bank Financial Covenants The bank credit facilities in Canada contain financial covenants typical of such credit facilities that require the Company to maintain certain financial ratios and meet certain financial thresholds. A summary of the financial covenants under the bank credit facilities at March 31, 2017 was as follows: Minimum ratio of total current assets to current liabilities ( Current Ratio covenant ) of 1.0:1, Minimum tangible net worth ( TNW covenant ) of $20 million, Maximum ratio of debt to tangible net worth ( Debt to TNW Ratio covenant ) of 7.25:1, and Minimum ratio of EBITDA to total interest ( Interest Coverage Ratio covenant ) of 1.50:1. In addition to these financial covenants, the Companyʼs bank credit facility requires the Company to remain in compliance with the financial covenants under all of its other lending agreements ( cross default provisions ). The Company was in compliance with all financial covenants under its bank credit facilities at March 31, Equipment Notes In addition to its bank credit facilities, the Company has lines of credit available totalling approximately $180 million from various non-bank equipment lenders in Canada and the United States that are used to finance equipment inventory. At March 31, 2017, there was approximately $105 million borrowed on these equipment finance lines. Typically, these equipment notes are interest-free for periods of up to 12 months from the date of financing, after which they bear interest in Canada at variable rates based upon 30-day and 90-day Bankersʼ Acceptance rates ( BA ), the prime rate of a Canadian chartered bank, and 30-day and 90-day LIBOR rates plus the financing companyʼs margin. As at March 31, 2017, the rates ranged from 4.68% to 6.95% with a weighted average effective rate of 5.82%. As collateral for these equipment notes, the Company has provided liens on the specific inventory financed and any related accounts receivable. In the normal course of business, these liens cover substantially all of the inventories. Monthly principal repayments equal to 3.00% of the original principal balance of the note commence 12 months from the date of financing and the remaining balance is due in full at the earlier of 24 months STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 16

19 after financing or when the financed equipment is sold. While financed equipment is out on rent, monthly curtailments are required equal to the greater of 70% of the rental revenue and 2.5% of the original value of the note. Any remaining balance after 24 months, which is due in full, is normally refinanced with the lender over an additional period of up to 24 months. All of the Companyʼs equipment notes facilities are renewable annually. As indicated above, the interest bearing equipment notes in Canada bear interest at floating BA rates plus a fixed component or premium over BA rates. Strongco put interest rate swaps in place that have effectively fixed the variable rate of interest on $35.0 million of its interest bearing equipment notes at approximately 5.97%. (See discussion under Interest Rate Swaps below). Certain of the Companyʼs equipment finance credit agreements contain restrictive financial covenants, including requiring the Company to remain in compliance with the financial covenants under all of its other lending agreements ( cross default provisions ). The Company was in compliance with financial covenants under its equipment finance facilities at March 31, Equipment Notes Financial Covenants Similar to the bank credit facility, two of the Companyʼs equipment finance credit agreements contain restrictive financial covenants that require the Company to remain in compliance with certain financial covenants, including requiring the Company to remain in compliance with the financial covenants under all of its other lending agreements ( cross default provisions ). Under one of the equipment finance agreements, the covenants are identical to those under the Companyʼs bank agreement and the Company was in compliance with those covenants at March 31, For the other equipment finance agreement, the equipment lender provided a waiver of the covenants at prior to March 31, 2017 curing an impending covenant violation. Interest Rate Swaps Strongco has a swap facility in Canada with its bank that allows the Company to swap the floating interest rate component (BA rate) on up to approximately $100 million of its floating interest rate debt to a five-year fixed swap rate of interest. On June 8, 2012, the Company entered into an interest rate swap agreement under this facility to fix the floating BA rate on $10.0 million of interest-bearing debt at a fixed interest rate equal to 1.58% for a period of five years to June 8, On May 6, 2015, the Company entered into an additional interest rate swap agreement under this facility to fix the floating BA rate on an additional $25.0 million of interest-bearing debt at a fixed interest rate equal to 1.78% for a period of three years to May 6, The Company has put these swaps in place to effectively fix the interest rate on $35.0 million of its interest-bearing equipment notes at approximately 5.97%. Summary of Outstanding Debt The balance outstanding under Strongcoʼs debt facilities at March 31, 2017, December 31, 2016 and March 31, 2016 consisted of the following: Debt Facilities ($ millions) Bank indebtedness (including outstanding cheques) $ March 31, $ December 31, $ March 31, Equipment notes payable - non interest bearing Equipment notes payable - interest bearing Rental fleet equipment notes payable Outstanding debt - continuing operations Outstanding debt - discontinued operations $ $ $ Total borrowing by continuing operations under the Companyʼs debt facilities was $133.2 million at March 31, 2017 compared to $163.7 million a year ago. The decrease of $30.5 million was primarily the reduction of equipment notes by $32.0 million. As at March 31, 2017, there was approximately $3.3 million of unused credit available under the Companyʼs bank credit lines. While availability under the bank lines fluctuates daily depending on the amount of cash received and cheques and other disbursements clearing the bank, availability normally ranges between $1 million and $8 million. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 17

20 The Company also had approximately $75 million available under its equipment finance facilities at March 31, Availability under the bank lines fluctuates daily depending on the amount of cash received and cheques and other disbursements clearing the bank. With reduced revenues and slower collections of receivables in 2016 and the first quarter of 2017, the Company has responded by slowing payments to suppliers and borrowing more on its bank operating lines. At the same time, headcounts and other cash expenses were reduced to provide additional cash. In addition, the significant reduction in equipment inventories in 2016 provided additional cash and reduced the cash carrying cost of inventory. As a result, payments to suppliers are beginning to be brought more current, but the Company is continuing to utilize the majority of its bank lines. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 18

21 SUMMARY OF QUARTERLY DATA In general, business activity follows a weather related pattern of seasonality. Typically, the first quarter is the weakest quarter as construction and infrastructure activity is constrained in the winter months. This is followed by a strong gain in the second quarter as construction and other contracts begin to be tendered and companies prepare for summer activity. The first quarter generally tends to be slightly slower from an equipment sales standpoint, which is partially offset by continued strength in equipment rentals and customer support activities. Fourth quarter activity generally strengthens as customers make year-end capital spending decisions and exercise purchase options on equipment which has previously gone out on RPO s. In addition, purchases of snow removal equipment are typically made in the fourth quarter. A summary of quarterly results for the current and previous two years is as follows: 2017 ($ millions, except per share amounts) Q1 Revenue $ 83.2 Loss before income taxes from continuing operations (1.1) Net loss from continuing operations (1.1) Net loss (1.1) Basic and diluted earnings (loss) per share - loss from continuing operations $ (0.08) - net loss $ (0.08) 2016 ($ millions, except per share amounts) Q4 Q3 Q2 Q1 Revenue $ 81.2 $ 86.7 $ $ 91.2 Loss before income taxes from continuing operations (6.2) (19.1) (7.3) (1.1) Net loss from continuing operations (6.1) (26.1) (5.3) (0.9) Net loss (6.3) (23.1) (4.8) (0.7) Basic and diluted earnings per share - loss from continuing operations $ (0.46) $ (1.97) $ (0.40) $ (0.07) - net loss $ (0.47) $ (1.75) $ (0.37) $ (0.05) 2015 ($ millions, except per share amounts) Q4 Q3 Q2 Q1 Revenue $ $ 87.3 $ $ 94.1 Income (loss) before income taxes from continuing operations (7.4) (3.4) 0.3 (1.7) Net income (loss) from continuing operations (5.5) (2.5) 0.3 (1.3) Net income (loss) (5.3) (2.1) 0.9 (0.8) Basic and diluted earnings per share - income (loss) from continuing operations $ (0.41) $ (0.19) $ 0.02 $ (0.09) - net income (loss) $ (0.40) $ (0.16) $ 0.06 $ (0.06) A discussion of the Company s previous quarterly results can be found in the Company s quarterly Management s Discussion and Analysis reports available on SEDAR at STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 19

22 CONTRACTUAL OBLIGATIONS The Company has contractual obligations for operating lease commitments totalling $66.0 million. In addition, the Company has contingent contractual obligations where it has agreed to buy back equipment from customers at the option of the customer for a specified price at future dates ( buy back contracts ). These buy back contracts are subject to certain conditions being met by the customer and range in terms from three to 10 years. The Companyʼs maximum potential losses pursuant to the majority of these buy-back contracts are limited, under an agreement with the OEM, to 10% of the original sale amounts. In addition, this agreement provides a financing arrangement in order to facilitate the buyback of equipment. As at March 31, 2017, the total buy back contracts outstanding were $5.1 million. A reserve of $0.1 million has been accrued in the Companyʼs accounts as at March 31, 2017 with respect to these commitments. Contractual obligations are set out in the following tables. Management believes that the Company will generate sufficient cash flow from operations to meet its contractual obligations. Payment due by period Less Than 1 to 3 4 to 5 After 5 ($ millions) Total 1 Year years years years Operating leases $66.0 $8.7 $15.6 $13.3 $28.4 Contingent obligation by period Less Than 1 to 3 4 to 5 After 5 ($ millions) Total 1 Year years years years Buy back contracts $5.1 $1.8 $2.1 $1.2 $ - SHAREHOLDER CAPITAL The Company is authorized to issue an unlimited number of shares. All shares are of the same class of common shares with equal rights and privileges. Common Shares Issued and Outstanding Shares Number of Shares Common shares outstanding as at December 31, ,221,719 Common shares issued (redeemed) - Common shares outstanding as at March 31, ,221,719 NON-IFRS MEASURES EBITDA refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, amortization of rental fleet and amortization of intangible assets. EBITDA is presented as a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not a measure of financial performance or earnings recognized under International Financial Reporting Standards ( IFRS ) and therefore has no standardized meaning prescribed by IFRS and may not be comparable to similar terms and measures presented by other similar issuers. The Companyʼs management believes that EBITDA is an important supplemental measure in evaluating the Companyʼs performance and in determining whether to invest in shares. Readers of this information are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as indicators of the Companyʼs performance or to cash flows from operating, investing and financing activities as measures of the Companyʼs liquidity and cash flows. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 20

23 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements. The Company bases its estimates and assumptions on past experience and various other assumptions that are believed to be reasonable in the circumstances. This involves varying degrees of judgment and uncertainty which may result in a difference in actual results from these estimates. The more significant estimates are as follows: Inventory Valuation The value of the Companyʼs new and used equipment is evaluated by management throughout the year. Where appropriate, a provision is recorded against the book value of specific pieces of equipment to ensure that inventory values reflect the lower of cost and estimated net realizable value. The Company identifies slow moving or obsolete parts inventory and estimates appropriate obsolescence provisions by aging the inventory. The Company takes advantage of supplier programs that allow for the return of eligible parts for credit within specified time periods. The inventory provision as at March 31, 2017 with changes from December 31, 2016 is as follows: Provision for Inventory Obsolescence ($ millions) Provision for inventory obsolescence as at December 31, 2016 $ 4.9 Provision related to inventory disposed of during the quarter (1.2) Amounts unused and reversed during the quarter - Additional provisions made during the quarter 0.1 Provision for inventory obsolescence as at March 31, 2017 $ 3.8 Allowance for Doubtful Accounts The Company performs credit evaluations of customers and limits the amount of credit extended to customers as appropriate. The Company is however exposed to credit risk with respect to accounts receivable and maintains provisions for possible credit losses based upon historical experience and known circumstances. The allowance for doubtful accounts as at March 31, 2017 with changes from December 31, 2016 is as follows: Allowance for Doubtful Accounts ($ millions) Allowance for doubtful accounts as at December 31, 2016 $ 0.4 Amounts unused and reversed during the quarter - Accounts written off during the quarter - Additional provisions made during the quarter - Allowance for doubtful accounts as at March 31, 2017 $ 0.4 Employee Future Benefit Obligations Strongco performs a valuation at least every three years to determine the actuarial present value of the accrued pension and other non-pension post-retirement obligations. Pension costs are accounted for and disclosed in the notes to the financial statements on an accrual basis. Strongco records employee future benefit costs other than pensions on an accrual basis. The accrual costs are determined by independent actuaries using the projected benefit method prorated on service and based on assumptions that reflect management's best estimates. The assumptions were determined by management recognizing the recommendations of Strongcoʼs actuaries. These key assumptions include the rate used to discount obligations, the expected rate of return on plan assets, the rate of compensation increase and the growth rate of per capita health care costs. The discount rate is used to determine the present value of future cash flows that management expects will be required to pay employee benefit obligations. Managementʼs assumptions of the discount rate are based on current interest rates on long-term debt of high-quality corporate issuers. In accordance with IAS 19, rev. 2011, the assumed return on pension plan assets is based on the same discount rate used to determine the present value of future cash flows as described above. The costs of employee future benefits other than pension are determined at the beginning of the year and are based on assumptions for expected claims experience and future health care cost inflation. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 21

24 Changes in assumptions will affect the accrued benefit obligation of Strongcoʼs employee future benefits and the future yearsʼ amounts that will be charged to results of operations. Future Income Taxes At each quarter end the Company evaluates the value and timing of the Companyʼs temporary differences. Future income tax assets and liabilities, measured at substantively enacted tax rates, are recognized for all temporary differences caused when the tax bases of assets and liabilities differ from those reported in the consolidated financial statements. Changes or differences in these estimates or assumptions may result in changes to the current or future tax balances on the consolidated balance sheet, a charge or credit to income tax expense in the consolidated statements of earnings and may result in cash payments or receipts. Where appropriate, the provision for future income taxes and future income taxes payable are adjusted to reflect managementʼs best estimate of the Companyʼs future income tax accounts and their corresponding net recovery. Forward-Looking Statements This Managementʼs Discussion and Analysis contains forward-looking statements that involve assumptions and estimates that may not be realized and other risks and uncertainties. These statements relate to future events or future performance and reflect managementʼs current expectations and assumptions which are based on information currently available to the Companyʼs management. The forward-looking statements include but are not limited to: (i) the ability of the Company to meet contractual obligations through cash flow generated from operations, (ii) the expectation that customer support revenues will grow following the warranty period on new machine sales and (iii) the outlook for There is significant risk that forward-looking statements will not prove to be accurate. These statements are based on a number of assumptions, including, but not limited to, continued demand for Strongcoʼs products and services. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward looking statements. The inclusion of this information should not be regarded as a representation of the Company or any other person that the anticipated results will be achieved and investors are cautioned not to place undue reliance on such information. These forward-looking statements are made as of the date of this MD&A, or as otherwise stated, and the Company does not assume any obligation to update or revise them to reflect new events or circumstances. Additional information, including the Companyʼs Annual Information Form, may be found on SEDAR at STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 22

25 UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2017 AND 2016 STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 23

26 Notice required under National Instrument , Continuous Disclosure Obligations, Part 4.3 (3) (a). The accompanying unaudited condensed interim financial statements for Strongco Corporation as at and for the three-month period ended March 31, 2017, together with the accompanying notes have not been reviewed by the Companyʼs auditors STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 24

27 Strongco Corporation Unaudited Interim Consolidated Statement of Financial Position (in thousands of Canadian dollars, unless otherwise indicated) Assets As at March 31, 2017 As at December 31, 2016 As at March 31, 2016 Current assets Cash $ - $ - $ 656 Trade and other receivables 39,466 37,024 52,079 Income taxes receivable [note 9] 1,508 1,508 - Inventories [note 3] 156, , ,989 Prepaid expenses and other deposits 2,176 1,586 2, , , ,479 Non-current assets Property and equipment [note 4] 10,402 11,119 17,153 Rental fleet ,157 Intangible asset ,933 Deferred income tax asset [note 9] - - 5,110 Other assets 3,245 3,321 1,815 13,886 15,070 66,168 Total assets $ 213,243 $ 219,852 $ 343,647 Liabilities and shareholders' equity Current liabilities Bank indebtedness [note 5] $ 28,559 $ 30,701 $ 27,338 Trade and other payables 42,014 46,423 58,852 Deferred revenue and customer deposits Equipment notes payable - non-interest bearing [note 6] 33,699 26,722 36,998 - interest bearing [note 6] 69,922 74, ,039 Current portion of finance lease obligations 3,040 3,494 3,499 Current portion of notes payable [note 8] 438 1, Current portion of provisions for other liabilities [note 7] , , ,932 Non-current liabilities Deferred income tax liability [note 9] - - 4,580 Finance lease obligations 2,586 2,722 3,325 Notes payable and other liabilities [note 8] ,716 Long-term portion of provisions for other liabilities [note 7] Employee future benefit obligations 3,958 4,026 3,407 7,148 6,790 29,112 Total liabilities 185, , ,044 Contingencies, commitments and guarantees [note 10] Shareholders' equity Shareholders' capital [note 11] 65,497 65,497 65,417 Accumulated other comprehensive income 1,147 1,147 4,444 Contributed surplus ,088 Retained earnings (deficit) (39,545) (38,444) (1,346) Total shareholders' equity 28,089 29,183 69,603 Total liabilities and shareholders' equity $ 213,243 $ 219,852 $ 343,647 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 25

28 Strongco Corporation Unaudited Interim Consolidated Statement of Income (Loss) For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated, except share and per share amounts) Three-month period ended March Revenue [note 13] $ 83,203 $ 91,249 Cost of sales 67,609 74,100 Gross profit 15,594 17,149 Selling and administrative expenses 14,766 16,219 Restructuring Costs [note 15] 678 1,700 Other (income) expense (54) (1,148) Operating income Interest expense 1,305 1,490 Loss before income taxes (1,101) (1,112) Recovery of income taxes [note 9] - (243) Net loss from continuing operations (1,101) (869) Net income from discontinued operations Net loss attributable to shareholders $ (1,101) $ (714) Loss per share - basic and diluted Continuing operations $ (0.08) $ (0.07) Net loss attributable to shareholders $ (0.08) $ (0.05) Weighted average number of shares [note 12] - basic and diluted 13,221,719 13,221,719 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 26

29 Strongco Corporation Unaudited Interim Consolidated Statement of Comprehensive Income (Loss) For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated) Three-month period ended March Net loss attributable to shareholders $ (1,101) $ (714) Items that may be reclassified subsequently to net income: Currency translation adjustment - (1,303) Comprehensive income (loss) attributable to shareholders $ (1,101) $ (2,017) The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 27

30 Strongco Corporation Unaudited Interim Consolidated Statement of Changes in Shareholdersʼ Equity For the three month periods ended March 31 (in thousands of dollars, unless otherwise indicated) Number of shares Shareholders' capital Accumulated other comprehensive income Contributed surplus Retained earnings Total Balance - December 31, ,221,719 $ 65,417 $ 5,747 $ 1,073 $ (632) $ 71,605 Net loss (714) (714) Currency translation adjustment - (1,303) - - (1,303) Total comprehensive income 65,417 4,444 1,073 (1,346) 69,588 Share-based compensation expense Balance - March 31, ,221,719 $ 65,417 $ 4,444 $ 1,088 $ (1,346) $ 69,603 Number of shares Shareholders' capital Accumulated other comprehensive income Contributed surplus Retained earnings Total Balance - December 31, ,221,719 $ 65,497 $ 1,147 $ 983 $ (38,444) $ 29,183 Net loss (1,101) (1,101) Total comprehensive income 65,497 1, (39,545) 28,082 Share-based compensation expense Balance - March 31, ,221,719 $ 65,497 $ 1,147 $ 990 $ (39,545) $ 28,089 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 28

31 Strongco Corporation Unaudited Interim Consolidated Statement of Cash Flows For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated) Cash flows from operating activities Net loss for the period $ (1,101) $ (872) Adjustments for Depreciation - property and equipment 797 1,009 Depreciation - equipment inventory on rent 2,956 3,089 Depreciation - rental fleet Amortization - intangible asset Share-based payment expense 7 15 Interest expense 1,305 1,491 Income tax recovery - (243) Employee future benefit expense Changes in non-cash working capital [note 14] 105 4,011 Funding of employee future benefit obligations (489) (494) Interest paid (1,335) (1,584) Cash provided by discontinued oeprations - 1,951 Net cash provided by (used in) operating activities $ 3,057 $ 9,527 Cash flows from investing activities Purchases of property and equipment (56) (56) Cash used in discontinued operations - (20) Net cash used in investing activities $ (56) $ (76) Cash flows from financing activities Increase (decrease) in bank indebtedness (2,142) (6,125) Decrease in long-term debt (255) (252) Repayment of finance lease obligations (604) (1,056) Trade activities with discontinued operations - (87) Cash used in discontinued operations - (1,875) Net cash provided by (used in) financing activities $ (3,001) $ (9,395) Foreign exchange on cash balances - (44) Change in cash and cash equivalents during the period $ - $ 12 Cash and cash equivalents - Beginning of period - - continuing operations discontinued operations Cash and cash equivalents - End of period $ - $ 656 Cash and cash equivalents - End of period - continuing operations $ - $ - - discontinued operations $ - $ 656 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 29

32 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) 1 General information Strongco Corporation ( Strongco or the Company ) sells and rents new and used equipment and provides after-sale product support (parts and service) to customers that operate in infrastructure, construction, mining, oil and gas exploration, forestry and industrial markets in Canada. The Company is a public entity, incorporated and domiciled in Canada and listed on the Toronto Stock Exchange. The address of its registered office is 1640 Enterprise Road, Mississauga, Ontario L4W 4L4. 2 Basis of presentation These unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standards ( IAS ) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ( IASB ). The accounting policies followed in these interim condensed consolidated financial statements are the same as those applied in the Companyʼs consolidated financial statements for the year ended December 31, 2016, except for any new accounting pronouncements which have been adopted, as required, on January 1, These interim condensed consolidated financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the Companyʼs annual financial statements for the year ended December 31, 2016, which are available at and on the Companyʼs website at The timely preparation of the interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies, if any, as at the date of the financial statements and the reported amounts of revenue and expenses during the period. By their nature, estimates are subject to measurement uncertainty and changes in such estimates in future years could require a material change in the interim condensed consolidated financial statements. These interim condensed consolidated financial statements were authorized for issuance by the Board of Directors of the Company on May 10, New accounting standards adopted during the period The following amendments have been adopted by the Company effective January 1, 2017: Disclosure Initiative Amendments to IAS 7 Statement of Cash Flows In 2016, the ISAB issued amendments to IAS 7 Statement of Cash Flows ( IAS 7 ). The amendments are intended to enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendments will require entities to provide disclosures that enable investors to evaluate changes in liabilities arising from financing activities, including changes arising from cash flows and noncash changes. The adoption of this amendment had no impact on the financial performance or disclosures of the Company. Future changes in accounting standards The standards, amendments, and interpretations issued before 2017 but not yet adopted by the Company have been disclosed in note 2 of the Companyʼs December 31, 2016 annual consolidated financial STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 30

33 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) statements. There are no new standards, amendments, or interpretations issued in the first quarter of 2017 that are applicable to the Company. Comparative amounts Certain comparative amounts have been reclassified to conform to current periodʼs unaudited interim condensed consolidated financial statements presentation. 3 Inventories Inventory components, net of write-downs and provisions are as follows: As at March 31, 2017 December 31, 2016 March 31, 2016 Equipment in-stock $ 90,546 $ 89,977 $ 122,814 Equipment on rental contract with a purchase option 15,934 14,779 21,678 Equipment on a short-term rental contract 14,738 24,423 14,877 Equipment in-stock - discontinued operations ,337 Equipment 121, , ,706 Parts 29,001 29,109 31,457 Work-in-process 5,987 6,376 7,791 Parts - discontinued operations - - 6,035 Total inventory $ 156,206 $ 164,664 $ 221,989 As at March 31, 2017, provisions against inventory totalled $3,768 (December 31, $4,582; March 31, $8,635). During the three months ended March 31, 2017, the Company recorded inventory write-downs of $nil ( $nil) and reversed inventory provisions of $nil ( $767). 4 Property and equipment During the three months ended March 31, 2017, the Company acquired property and equipment of $366 (three months ended March 31, $448). 5 Bank indebtedness The Company has credit facilities with a bank in Canada that provides an operating line of credit totalling $30.0 million. The bank credit facility is a one-year revolving demand facility expiring in September The bank facilities contain financial covenants that require the Company to maintain certain financial ratios and meet certain financial thresholds. As at March 31, 2017, the Company was in compliance with these covenants. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 31

34 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) 6 Equipment notes payable In addition to its bank credit facilities, the Company has lines of credit available totalling approximately $182 million from various non-bank equipment lenders in Canada and the United States, which are used to finance equipment inventory. As at March 31, 2017, there was approximately $104 million borrowed on these equipment finance lines (December 31, 2016 approximately $101 million; March 31, 2016 approximately $168 million). The equipment notes are payable on demand and therefore have been classified as current liabilities. The carrying amount of equipment notes payable is as follows: As at December 31 March 31, 2017 December 31, 2016 March 31, 2016 Equipment notes payable non-interest-bearing $ 33,699 $ 26,722 $ 33,262 Equipment notes payable interest-bearing 69,922 74, ,277 Discontinued operations non-interest-bearing - - 3,736 Discontinued operations interest-bearing ,762 $ 103,621 $ 101,209 $ 154,037 Typically, these equipment notes are interest-free for periods up to 12 months from the date of financing, after which they bear interest at variable rates based upon 30-day and 90-day Bankersʼ Acceptance rates ( BA ), the prime rate of a Canadian chartered bank, and 30-day and 90-day LIBOR rates plus the financing companyʼs margin. As at March 31, 2017, the rates ranged from 4.68% to 6.95% with an effective weighted average rate of 5.82% (December 31, %; March 31, %). As collateral for these equipment notes, the Company has provided liens on the specific inventory financed and any related accounts receivable. In the normal course of business, these liens cover substantially all of the inventories. Monthly principal repayments equal to 3.00% of the original principal balance of the note commence 12 months from the date of financing and the remaining balance is due in full at the earlier of 24 months after financing or when the financed equipment is sold. While financed equipment is out on rent, monthly curtailments are required equal to the greater of 70% of the rental revenue and 2.5% of the original value of the note. Any remaining balance after 24 months, which is due in full, is normally refinanced with the lender over an additional period of up to 24 months. All of the Companyʼs equipment notes facilities are renewable annually. As at March 31, 2017, the Company has total outstanding swaps in place to fix the interest rate on $35 million of interest bearing debt at approximately 5.97%. Certain of the Companyʼs equipment finance credit agreements contain restrictive financial covenants, including requiring the Company to remain in compliance with the financial covenants under all of its other lending agreements ( cross default provisions ). Two of the Companyʼs equipment finance agreements contain financial covenants that require the Company to maintain certain financial ratios and meet certain financial thresholds. As at March 31, 2017, the Company was in compliance with all of the covenants under one of the agreements and received a waiver from the lender for an impending violation of the covenants under the other agreement. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 32

35 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) 7 Provisions for other liabilities The Company has agreed to buy back equipment from certain customers at the option of the customer for a specified price at future dates ("buy back contracts"). These contracts are subject to certain conditions being met by the customer and range in term from three to 10 years. As at March 31, 2017, the total obligation under these contracts was $5,123 (December 31, $5,588; March 31, $7,863). The Company's maximum potential losses pursuant to the majority of these buy back contracts are limited, under an agreement with a third party, to 10% of the original sale amounts. A provision of $66 (December 31, $69; March 31, $130) has been accrued in the Company's accounts with respect to these potential losses. The long-term portion of the provision of $40 (December 31, $42; March 31, $84) is classified as long-term liabilities. 8 Notes payable and other liabilities Notes payable and other liabilities comprise of the following: March 31, 2017 December 31, 2016 March 31, 2016 Equipment plan notes payable - rental fleet $ 1,087 $ 1,254 $ 1,426 Rental fleet notes - discontinued operations ,185 Term note - discontinued operations - - 4,872 1,087 1,254 18,483 Current portion Long-term portion $ 649 $ 1,254 $ 17,716 In addition to equipment notes payable as described in note 6, the Company utilizes floor plan notes payable to finance its rental fleet. Payment is required at the earlier of the sale of the item and per contractual schedule ranging from 12 to 24 months. Effective interest rates range from 4.68% to 5.78% with various maturity dates. 9 Income taxes The major components of the income tax expense in the interim consolidated statement of income are: Three months ended March 31, Current income tax expense (recovery) $ - $ 88 Deferred tax expense (recovery) related to origination and reversal of deferred taxes - (318) $ - $ (230) STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 33

36 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) 10 Contingencies, commitments and guarantees In the ordinary course of business activities, the Company may be contingently liable for litigation. On an ongoing basis, the Company assesses the likelihood of any adverse judgments or outcomes, as well as potential ranges of probable costs or losses. A determination of the provision required, if any, is made after analysis of each individual matter. The required provision may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy dealing with these matters. As at March 31, 2017, management has determined that there is no pending or actual litigation requiring a provision. 11 Shareholdersʼ capital Authorized: Unlimited number of shares Issued: As at March 31, 2017, a total of 13,221,719 shares (December 31, ,221,719; March 31, ,221,719) with a stated valued of $65,497 (December 31, $65,497; March 31, $65,417) were issued and outstanding. As at March 31, 2017, stock options totalling 150,240 (December 31, ,141; March 31, ,141) had been granted and were outstanding with a weighted average remaining contractual life of 39.4 months (December 31, ; March 31, ) and the weighted average exercise price was $4.64 (December 31, $5.56; March 31, $4.69). A total of 58,901 stock options were cancelled during the period. Stock-based compensation expense resulting from the stock options for the period ended March 31, 2017 is $7 ( $15). 12 Earnings per share Three month periods ended March 31, Weighted average number of shares for basic and diluted earnings per share 13,221,719 13,221,719 The computation of dilutive options outstanding only includes those options having exercise prices below the average market price of the shares during the period. There were no dilutive options as at March 31, 2017 and STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 34

37 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) 13 Segment information Management has determined that the Company has one reportable segment, Equipment Distribution, based on reports reviewed by the Executive Chariman. This business sells and rents new and used equipment and provides after-sale product support (parts and service) to customers that operate in infrastructure, construction, mining, oil and gas exploration, forestry and industrial markets. A breakdown of revenue from the Equipment Distribution segment is as follows: Three month periods ended March 31, Equipment sales $ 49,891 $ 61,140 Equipment rentals 4,331 4,785 Product support 28,981 25,324 Total Equipment Distribution $ 83,203 $ 91, Changes in non-cash working capital The components of the changes in non-cash working capital are detailed below: Three month periods ended March 31, Trade and other receivables $ (2,442) $ 222 Inventories 5,501 15,466 Prepaid expenses and other deposits (590) (404) Other assets Trade and other payables (4,388) 15,501 Provision for other liabilities (1) (17) Deferred revenue and customer deposits (463) (5,659) Equipment notes payable 2,412 (21,150) $ 105 $ 4, Restructuring Costs During the three months ended March 31, 2017, the Company recorded a restructuring provision of $0.7 million (period ended March 31, $1.7 million) for severance and other termination costs of employees and branch closure costs, in response to ongoing weak economic conditions. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 35

38 Strongco Corporation Notes to Unaudited Interim Condensed Consolidated Financial Statements For the three month periods ended March 31, 2017 and March 31, 2016 (in thousands of dollars, unless otherwise indicated) 16 Seasonality The Companyʼs interim period revenues and earnings historically follow a weather-related pattern of seasonality. Typically, the first quarter is the weakest quarter as construction and infrastructure activity is constrained in the winter months. This is followed by a strong increase in the second quarter as construction and other contracts begin to be put out for bid and companies begin to prepare for summer activity. The third quarter generally tends to be slower from an equipment sales standpoint, which is partially offset by continued strength in equipment rentals and customer support (parts and service) activities. Fourth quarter activity generally strengthens as companies make year-end capital spending decisions in addition to the exercise of purchase options on equipment that has previously gone out on rental contracts. 17 Economic relationship The Company sells and services equipment and related parts. Distribution agreements are maintained with several equipment manufacturers, of which the most significant are with Volvo Construction Equipment North America Inc. and The Manitowoc Company Inc. The distribution and servicing of Volvo and Manitowoc products account for a substantial portion of the Companyʼs operations. The Company has had an ongoing relationship with Volvo since 1991 and with the Manitowoc group of companies since 1965 representing approximately 70% of revenues. STRONGCO CORPORATION 2017 FIRST QUARTER REPORT 36

39 CORPORATE AND SHAREHOLDER INFORMATION CORPORATE ADDRESS Strongco Corporation 1640 Enterprise Road Mississauga, Ontario Canada L4W 4L4 Telephone: Fax: Website: strongco.com INVESTOR RELATIONS J. David Wood, CPA Vice President and Chief Financial Officer Telephone: DIRECTORS John A. Anhang 1 Corporate Director John K. Bell 1 Corporate Director Robert J. Beutel Executive Chairman Anne Brace 1, 2 Corporate Director Ian C.B. Currie, Q.C. 2 Corporate Director Yedidia S. Koschitzky 2 Corporate Director 1. Member of Audit Committee 2. Member of Corporate Governance, Nominating, Compensation and Pension Committee AUDITORS Ernst & Young LLP Toronto, Ontario TRANSFER AGENT AND REGISTRAR Inquiries regarding change of address, registered shareholdings, share transfers, lost certificates and duplicate mailings should be directed to the transfer agent: Computershare Investor Services Inc. 100 University Avenue Toronto, Ontario M5J 2Y1 Telephone: Fax: service@computershare.com STOCK EXCHANGE LISTING Toronto Stock Exchange Stock symbol: SQP OFFICERS AND SENIOR MANAGEMENT Robert J. Beutel Executive Chairman J. David Wood, CPA Vice President and Chief Financial Officer Christopher D. Forbes Vice President, Chief Human Resources Officer and Secretary Jack Bradley Vice President, Supply Chain, Inventory Control and Logistics Peter Rayner, CPA Director, Finance OPERATIONS Construction Equipment Oliver Nachevski Vice President, Construction Equipment Steve Di Loreto Regional Vice President, Alberta Yannick Montagano Regional Vice President, Quebec Stephen George Regional Vice President, Atlantic Canada Cranes and Material Handling William J. Ostrander Vice President, Crane Rick Ziegler Regional Vice President, Alberta

40 Strongco Corporation 1640 Enterprise Road Mississauga, Ontario Canada L4W 4L4 Telephone: Fax: strongco.com