STRONGCO CORPORATION . FIRST QUARTER REPORT · STRONGCO CORPORATION . FIRST QUARTER REPORT THREE MONTHS ENDED MARCH 31, 2012. ... The following management discussion and analysis

STRONGCO CORPORATION . FIRST QUARTER REPORTTHREE MONTHS ENDED MARCH 31, 2012

1 Strongco corPorAtIon 2012 FIRST QUARTER REpoRT

To Our Shareholders Strongco’s results for the first quarter of 2012 reflect continued sales growth and earnings generation as we executed the Company’s growth strategy. We also benefited from higher end-use markets, improved sales execution and one additional month of contributions from Chadwick-BaRoss, which we acquired in February of last year. As a result, we posted gains in all major metrics – revenues, margins, EBITDA, net earnings and EPS. Mild weather conditions and lack of snow in January and February affected equipment usage in much of Canada and the northeastern United States and curtailed oilfield activities in northern Alberta. This delayed the buying decisions of customers across the country and tempered demand for heavy equipment and product support. However, the early onset of warm spring weather brought an advanced start to the summer construction season, which contributed to stronger equipment sales in March. Total revenues in the first quarter were 11% higher than the same quarter of 2011. By category, equipment sales increased by 11%, product support revenues gained 14% and rental revenues declined a modest 5%. Gross margin percentages improved with a higher sales mix of larger equipment. As a result, EBITDA increased to $8.0 million from $6.8 million and earnings before income taxes increased to $1.7 million from $0.7 million last year. Strongco ended the first quarter with net income of $1.2 million or $0.09 per share, up from $0.6 million or $0.05 per share in 2011. During the quarter we moved into our new Volvo branch in Edmonton and converted the existing building to exclusive crane use. We expect to complete the purchase of a property in Fort McMurray where we plan to build a new branch to more directly and efficiently serve the oil sands industry. Looking ahead to the balance of 2012, we are cautiously optimistic that the improving Canadian economy will continue to support Strongco’s growth. There are a number of encouraging signs, beginning with our order book. The Company began 2012 with a backlog of $70 million, up from $50 million at the same time last year. Orders continued to rise during the quarter and at March 31 stood at $90 million. By mid-April 2012 the total had topped $100 million, more than double the level of a year ago and the highest in several years -- a robust indication of rising markets for heavy equipment. Much of the demand growth originates in Alberta, which is expected to be an important revenue contributor. Oil prices have continued to support oil activity and the provincial economy in Alberta. Ontario and Quebec are also showing good demand levels. Economic forecasts also call for growth in the United States this year, which bodes well for Chadwick-Baross in New England.


Strongco’s profitable operations and strategic growth initiatives amid an improving economy point to further expansion during the balance of 2012. We look forward to reporting our progress. Robert H.R. Dryburgh President and Chief Executive Officer

Strongco’s profitable operations and strategic growth initiatives amid an improving economy point to further expansion during the balance of 2012. We look forward to reporting our progress. Robert H.R. Dryburgh President and Chief Executive Officer


Strongco Corporation Management’s 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, formerly Strongco Income Fund (“the Fund”), 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, 2012. This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements as at and for the three months ended March 31, 2012. For additional information and details, readers are referred to the Company’s audited consolidated financial statements and accompanying notes as at and for the year ended December 31, 2011 contained in the Company’s annual report for the year ended December 31, 2011. For additional information and details, readers are referred to the Company’s Notice of Annual Meeting of Shareholders and Management Information Circular (“MIC”) dated March 26, 2012, and the Company’s Annual Information Form (“AIF”) dated March 22, 2012, all of which are published separately and are available on SEDAR at www.sedar.com. 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 9, 2012. FINANCIAL HIGHLIGHTS Income Statement Highlights($ millions, except per share amounts) 2012 2011 $ Change % Change

Revenues 96.8$ 87.5$ 9.3$ 11%Income before income taxes 1.7$ 0.7$ 1.0$ 143%

Basic and diluted earnings per share 0.09$ 0.05$ 0.04$ 80%EBITDA (note 1) 8.0 6.8 1.2 18%

Balance Sheet HighlightsEquipment inventory 216.9$ 174.4$ 42.5$ 24%Total assets 338.5 255.9 82.6 32%Debt (bank debt and other notes payable) 32.9 26.9 6.0 22%Equipment notes payable 179.7 128.8 50.9 40%Total liabilities 280.9 202.8 78.1 39%

Three months ended March 31 2012/2011

Note 1 – “EBITDA” refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. 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 Company’s management believes that EBITDA is an important supplemental measure in evaluating the Company’s 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 Company’s performance or to cash flows from operating, investing and financing activities as measures of the Company’s liquidity and cash flows. COMPANY OVERVIEW Strongco is one of the largest multi-line mobile equipment distributors in Canada. In February 2011, Strongco acquired 100% of the shares of Chadwick-BaRoss, Inc., a multi-line distributor of mobile construction equipment in the New England region of the United States, (see discussion below under the heading “Acquisition of Chadwick-BaRoss, Inc.”). Strongco 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. 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 in Canada and Maine and New Hampshire in the United States;

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, excluding Nova Scotia, New Brunswick and Prince Edward Island. The distribution agreements with Volvo and Case provide 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 secondary or complementary equipment lines and attachments.


FINANCIAL RESULTS – THREE MONTHS ENDED MARCH 31, 2012 AND 2011 Consolidated Results of Operations

($ thousands, except per share amounts) 2012 2011 $ Change % Change

Revenues 96,814$ 87,495$ 9,319$ 11%Cost of sales 77,403 70,511 6,892 10%Gross Margin 19,411 16,984 2,427 14%Admin, distribution and selling expenses 16,744 15,241 1,503 10%Other income (433) (274) -159 58%Operating income 3,100 2,017 1,083 54%Interest expense 1,353 1,356 -3 0%Earnings before income taxes 1,747 661 1,086 164%Provision for income taxes 505 63 442

Net income 1,242$ 598$ 644$ 108%

Basic and diluted earnings per share 0.09 0.05 0.04 80%Weighted average number of shares - Basic 13,128,719 12,736,681 - Diluted 13,178,356 12,767,927

Key financial measures:Gross margin as a percentage of revenues 20.0% 19.4%Admin, distribution and selling expenses as percentage of revenues 17.3% 17.4%Operating income as a percentage of revenues 3.2% 2.3%EBITDA (note1) 8,024$ 6,822$ 1,202$ 18%

Three months ending March 31 2012/2011

Note 1 – “EBITDA” refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. 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 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 Company’s management believes that EBITDA is an important supplemental measure in evaluating the Company’s 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 Company’s performance or to cash flows from operating, investing and financing activities as measures of the Company’s liquidity and cash flows. Acquisition of Chadwick-BaRoss, Inc. On February 17, 2011, the Company completed the acquisition of 100% of the shares of Chadwick-BaRoss, Inc. (“Chadwick-BaRoss”) for net proceeds of US$11.1 million. The transaction value was satisfied with net cash proceeds of US$9.2 million and notes issued to the major shareholders of Chadwick-BaRoss totalling US$1.9 million. Chadwick-BaRoss is a heavy equipment dealer headquartered in Westbrook, Maine, with three branches in Maine and one in each of New Hampshire and Massachusetts. The acquisition was effective as of February 1, 2011 and the results of Chadwick-BaRoss have been included in the consolidated results of Strongco from that date. Market Overview Strongco participates in 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. As construction markets recover following a recession, demand for heavy equipment normally improves as construction activity and confidence in construction markets build. In addition, as the financial resources of customers strengthen, they have historically replenished and upgraded their equipment 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. Recovery 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 stronger following a recession until confidence is restored and financial resources of customers improve. With the economic recovery in Canada following the recession construction markets began to show signs of improvement in the latter half of 2010. Spurred by government stimulus spending for infrastructure projects, construction activity in Canada continued to increase in 2011. Correspondingly, demand for new heavy equipment strengthened throughout 2011. Initially, while construction markets and demand for heavy equipment were improving, many customers remained reluctant or lacked the financial resources following the recession to commit to purchase new construction equipment and instead rented to meet their


equipment needs. Rental activity, especially under contracts with purchase options (“RPO” – see discussion under Equipment Rentals below), remained strong in 2011, and as confidence in the economy grew, customers were more willing to purchase equipment and exercise purchase options under RPO contracts. Strongco’s sales backlogs for all categories of equipment, including cranes, improved steadily throughout the latter half of 2010 and continued to strengthen throughout 2011, a positive indication of the continuing recovery. The improving trend in construction markets continued across Canada in the first quarter of 2012. Ongoing activity in the Alberta oil sands, large hydro-electric projects and continuing spending on infrastructure projects contributed to strong demand for heavy equipment and cranes. In the first quarter, customers delayed the buying decisions and reduced parts consumption as a result of the generally mild winter weather conditions across most of the country. In Northern Alberta, these higher than normal winter temperatures curtailed oilfield activities. This tempered demand for heavy equipment and product support in the early part of the first quarter. However, the early onset of warm spring weather brought an advanced start to the summer construction season which contributed to stronger equipment sales in March. Strongco’s sales backlogs continued to rise during the quarter and by mid-April had topped $100 million, more than double the level of a year ago and the highest level in several years, a positive indication of the increasing demand for heavy equipment. While the economy and demand for equipment have been improving in Canada, there has been little recovery in heavy equipment markets in the United States due to continued weak economic conditions. Residential construction has been a major driver of the US economy and heavy equipment markets in the past. However, current housing activity in most states remains depressed and this situation continues to negatively affect demand for heavy equipment. Certain market segments, however, such as waste management and scrap handling, have experienced continued activity and generated demand for heavy equipment in the northeastern US. In addition, while sales of new equipment have not shown significant growth, parts and service activity in New England has remained fairly strong as customers repaired rather than replaced their fleets. Revenues A breakdown of revenue for the quarter ended March 31, 2012 and 2011 by type within each geographic region is as follows:

($ millions) 2012 2011 $ Change % ChangeEastern Canada (Atlantic and Quebec)Equipment Sales 17.1$ 20.1$ (3.0)$ -15%Equipment Rentals 1.8 1.5 0.3$ 20%Product Support 10.1 9.3 0.8$ 9%Total Eastern Canada 29.0$ 30.9$ (1.9)$ -6%

Central Canada (Ontario)Equipment Sales 16.8$ 18.3$ (1.5)$ -8%Equipment Rentals 1.0 1.3 (0.3)$ -23%Product Support 9.0 8.0 1.0$ 13%Total Central Canada 26.8$ 27.6$ (0.8)$ -3%

Western Canada (Manitoba to BC)Equipment Sales 21.8$ 14.9$ 6.9$ 46%Equipment Rentals 1.5 2.4 (0.9)$ -38%Product Support 6.5 5.7 0.8$ 14%Total Western Canada 29.8$ 23.0$ 6.8$ 30%

North-eastern United StatesEquipment Sales 6.3$ 2.7$ 3.6$ 133%Equipment Rentals 0.9 0.3 0.6$ 200%Product Support 4.0 3.0 1.0$ 33%Total North-eastern United States 11.2$ 6.0$ 5.2$ 87%

Total Equipment DistributionEquipment Sales 62.0$ 56.0$ 6.0$ 11%Equipment Rentals 5.2 5.5 (0.3)$ -5%Product Support 29.6 26.0 3.6$ 14%Total Equipment Distribution 96.8$ 87.5$ 9.3$ 11%

Three Months Ended March 31 2012/2011


Equipment Sales Strongco’s equipment sales in the first quarter of 2012 were $62.0 million which was up 11% from $56.0 million in the first quarter of 2011. Sales were strongest in western Canada and New England. Sales of cranes were particularly strong, especially in Alberta due to the ongoing activity in the oil sands and in Quebec due to hydro-electric and infrastructure projects in the province. The markets for new heavy equipment other than cranes in which Strongco operates in Canada were stronger in all regions of the country, however, demand varied significantly from region to region between product categories. Demand was strongest in general purpose construction equipment (“GPE”), particularly in Western Canada, while demand for compact equipment was up a lesser amount. Average selling prices vary from period to period depending on sales mix between product categories, model mix within product categories and features and attachments included in equipment being sold. Strongco’s average selling prices in the first quarter were up slightly from a year ago due primarily to a higher proportion of sales of larger, more expensive equipment (especially cranes and articulated trucks). After scaling back during the recession, OEM’s have been challenged to ramp up production in response to the increasing demand, which has resulted in longer lead times and reduced availability of certain types of equipment. OEM deliveries have been improving but with the increasing demand, shortages of certain types of equipment still exist. While average selling prices in most product categories remained fairly consistent year over year, the introduction of new tier 4 engine technology resulted in higher costs and selling prices in certain product categories. Price competition was particularly aggressive in the quarter from certain dealers who were able to increase their inventories of equipment with old tier 3 engines in 2011. High inventory levels of equipment with old tier 3 engines at certain dealers will continue to put pressure on selling prices in the near future but with the strong demand for equipment, the tier 3 product is expected to be sold though the market quickly which should ease competition and pricing. On a regional basis, equipment sales in Eastern Canada (Quebec and Atlantic regions) were $17.1 million, which compared to $20.1 million in the first quarter of 2011. Crane sales were higher in the first quarter of 2012 while sales of other heavy equipment were below the prior year. Construction markets in Quebec continued to benefit from the hydro-electric and infrastructure projects in that province, while construction activity in the Atlantic provinces declined. Overall, the markets for GPE in Eastern Canada where Strongco participates were estimated to be up approximately 20% over first quarter of 2011. However, aggressive price competition, as well as a high level of sales of equipment on RPO’s carried over from 2011 at certain competitors resulted in a decline in Strongco GPE sales, particularly in the first two months of the quarter. Sales volumes recovered in March but for the quarter unit volumes were down approximately 20% from a year ago and as a result, Strongco’s market share in GPE declined in the quarter. Strongco’s sales of cranes in Eastern Canada were up significantly over the first quarter of 2011 due to strong demand for hydro-electric and other infrastructure projects in Quebec and as crane rental companies continued to replenish and increase their fleets. Strongco’s equipment sales in Central Canada were $16.8 million, which was down from $18.3 million in the first quarter of 2011. Sales of both GPE and compact equipment were higher in the quarter while sales of cranes were lower. The lack of snow and very wet weather condition early in the quarter caused many customers to delay buying decisions, but with the onset of warm spring weather, equipment sales increased significantly in March. Crane sales in Ontario, while quite strong, fell short of the very strong sales level achieved in the first quarter of 2011 when Strongco’s crane rental customers, started to replenish their fleets following the recession. Price competition in Ontario, for GPE and compact equipment remained aggressive in the first quarter, especially from certain dealers attempting to capture market share in particular product categories and dealers carrying high levels of product with the old tier 3 engine. However, Strongco’s unit volume increases outperformed the market overall in both categories, resulting in increased market share in the quarter. At the same time, sales backlogs increased in the quarter which is an indication of continued strong demand for heavy equipment in the province. Equipment sales in Western Canada during the first quarter were $21.8 million, which was up 46% from $14.9 million in the first quarter of 2011. With the upward trend and sustainability in oil prices, economic conditions in Alberta have improved from the recession. The milder than normal and very wet winter weather conditions curtailed activity in the early part of the first quarter, particularly in Northern Alberta, which caused customers to delay heavy equipment buying decisions. Construction activity and demand for heavy equipment improved significantly in the latter part of the quarter resulting in stronger equipment sales in March. Total units sold in the markets served by Strongco in Alberta, excluding cranes, were estimated to be up approximately 45% relative to the first quarter of 2011. Strongco outperformed the market with total unit volume growth in the first quarter greater than 60% and captured a larger share of the market. The increase was in sales of both GPE and compact equipment. Crane sales were also very strong in the quarter, growing by more than 150% over the first quarter of 2011 as crane rental customers continued to replenish and increase fleets. Equipment sales in the North-eastern United States were $6.3 million, which was up from $2.7 million in the first quarter of 2011. As Strongco acquired Chadwick-BaRoss in February 2011, results for the first quarter of 2011 include the results of Chadwick-BaRoss for February and March only, which accounts for a portion of the year over year increase. The markets for heavy equipment in New England remained soft in the first quarter of 2012 and below pre-recession levels. The traditional heavy equipment markets for residential construction, forestry and infrastructure in the region have remained flat year over year, but other markets for scrap handling and waste management have experienced some increase in activity. Chadwick-BaRoss’ equipment sales for the quarter were ahead of the same period in 2011 due to stronger sales of forestry and scrap handling products, and as a result, Strongco’s market share in this region improved slightly.


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 customers’ 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 RPO’s 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. Initially, as construction markets were recovering following the recession, rental activity was robust as many customers lacked the confidence or financial resources to commit to purchase equipment and preferred instead to rent to meet their equipment needs. As heavy equipment markets continued to recover, sales of equipment increased, but at the same time rental activity, including RPOs, has remained strong. At the same time markets were recovering, Strongco made a commitment to participate to a larger extent in the RPO market. This has resulted in growth in Strongco’s rental activity and revenues. Strongco’s rental revenue was $5.2 million in the quarter which was fairly consistent with the level of rental revenue in the first quarter of 2011 of $5.5 million and significantly higher than in prior years. On a regional basis, Strongco’s rental revenue was strong in Eastern Canada, which historically has not been a major rental market, due to RPO contracts for articulated trucks and loaders in Quebec for hydro-electric and infrastructure projects in the province. Rental activity was also stronger at Chadwick-BaRoss as given the continued weak economy in the Northeastern United States, customers preferred to rent to meet their equipment needs. In addition, Strongco’s crane business, which has traditionally not had a significant rental element, experienced an increase in rental activity since the recession as construction markets and demand for cranes improved. Crane rental revenues were up slightly in the first quarter of 2012 compared to the prior year due to RPO contracts in Ontario. 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 impacted 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 strongest 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. Strongco’s product support revenues were higher in the first quarter of 2012 at $29.6 million compared to $26.0 million in the first quarter of 2011. Product support activities were up across all regions in Canada and in New England. As construction markets and other end use markets for heavy equipment have been improving since the recession, utilization of equipment has increased, which, in turn, has resulted in an increase in product support activity generally. In addition, while the first quarter of 2012 saw lower than normal amounts of snow in most regions in Canada and the North-eastern United States and resulted in lower utilization of equipment for snow removal, the early onset of warm spring weather had many customers using or preparing their equipment for the summer season, which resulted in an increase in product support activity in the quarter. In New England, where weak economic conditions persist, many customers are repairing existing machines rather than buying new, which has also lead to higher product support revenues. Gross Margin

Gross Margin $ millions GM% $ millions GM% $ millions % VarEquipment Sales 6.4$ 10.3% 5.4$ 9.5% 1.0$ 19%Equipment Rentals 0.8 15.5% 1.1 18.5% (0.3) -27%Product Support 12.2 41.3% 10.5 40.8% 1.7 16%Total Gross Margin 19.4$ 20.0% 17.0$ 19.4% 2.4$ 14%

Variance2012 2011 Three Months Ended March 31

As a result of the higher revenues in the first quarter of 2012, Strongco’s gross margin increased to $19.4 million from $17.0 million in the first quarter of 2011. As a percentage of revenue, gross margin improved to 20.0% in the first quarter of 2012 from 19.4% in the first quarter of 2011. This was due primarily to a higher gross margin achieved on equipment sales in 2012. The gross margin on equipment sales was $6.4 million compared to the $5.4 million in the first quarter of 2011 due to higher sales and a higher gross margin percentage in 2012. Sales were particularly strong in Alberta, with a large proportion of articulated trucks and cranes being sold in the quarter. As a percentage of sales, gross margin on equipment sales improved to


10.3%, from 9.5% in 2011 due primarily to the higher sales mix of larger equipment (cranes and articulated trucks), which offer higher gross margins. The gross margin on rentals in the first quarter was $0.8 million, which was down from $1.1 million a year ago. The gross margin percentage on rentals declined to 15.5% from 18.5% in the first quarter of 2011 due to a higher proportion of RPO rentals in 2012. The margin on rental under RPO contracts reflects the anticipated margin on the ultimate sale on conversion at the end of the rental which is typically lower than the margin on rentals with no purchase option. The gross margin on product support activities improved to $12.2 million from $10.5 million in the first quarter of 2011. As a percentage of revenue, the gross margin on product support activities was 41.3%, which was consistent with 40.8% in the first quarter of 2011. Administrative, Distribution and Selling Expense Administrative, distribution and selling expenses in the first quarter of 2012 were $16.7 million, which compared to $15.2 million in the first quarter of 2011. Certain variable distribution and selling expenses were higher in 2012 as a result of the increase in revenues. In addition, expenses of Chadwick-BaRoss, which was acquired in February 2011, were higher in 2012 due to the inclusion of one additional month of expenses plus annual salary and wage increases and higher headcounts. Annual salary and wage increases and higher headcounts at Canadian operations, plus a larger accrual for annual and long-term incentive plans and other employee incentives also contributed to the higher expense levels in 2012. Expenses in the first quarter of 2012 include $0.1 million of relocation and moving costs of the new branch in Edmonton. As a percent of revenue, administration, distribution and selling expenses were 17.3%, down slightly from 17.4% in the first quarter of 2011. Other Income 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 purchase financing Strongco places with such finance companies. Other income in the first quarter of 2012 was $0.4 million compared to $0.3 million in the first quarter of 2011. Interest Expense Strongco’s interest bearing debt comprises bank indebtedness and interest bearing equipment notes. Strongco typically finances equipment inventory under floor plan lines of credit available from various non-bank finance companies. Most equipment financing has interest free periods for up to eight months from the date of financing after which the equipment notes become interest bearing. The rate of interest on the Company’s bank indebtedness and interest bearing equipment notes varies with the bank prime rate (“prime rate”) in Canada and the United States, Canadian Bankers Acceptances Rates (“BA rates”) and LIBOR rates. Strongco’s interest expense in the quarter was $1.4 million, which compared to $1.4 million in the first quarter of 2011. Interest expense in first quarter of 2012 includes a $0.3 million interest gain from the mark to market adjustment on $15 million of interest rate swaps put in place in 2011 to fix the interest rate on a portion of the Company’s variable interest rate debt. Excluding this favorable adjustment interest in the first quarter of 2012 was higher than the prior year due to a higher level of interest bearing debt. During 2011 and into 2012, Strongco’s equipment inventories increased to the support the increasing demand for heavy equipment as construction markets recovered. This resulted in a higher level of interest-bearing equipment notes in the first quarter of 2012 compared to the first quarter of 2011. Financing the acquisition of Chadwick-BaRoss in February 2011 increased Strongco’s interest bearing debt. In addition, the bank indebtedness, equipment notes, and mortgage term loans of Chadwick-BaRoss are now included in the Company’s debt. Interest on the construction loan facility to finance the construction of the Company’s new branch facility in Edmonton, Alberta was capitalized in the cost of the building during construction. With the completion of construction in April of 2012, interest on this loan facility will now be expensed. Earnings before Income Taxes Strongco’s earnings before income taxes in the first quarter of 2012 were $1.7 million, which was improved from $0.7 million in the first quarter of 2011. The increase was due to the strong revenue performance in the quarter. Provision for Income Taxes The provision for income taxes in the first quarter of 2012 was $0.5 million which reflects a combined average effective tax rate on the Company’s income in Canada and the United States of 28.9%. For the first quarter of 2011, the provision for income taxes was $0.1 million which represents a tax provision for the Company’s earnings from Chadwick-BaRoss in the United


States. The recognition of tax loss carry forwards resulted in no provision for income taxes in the first quarter of 2011 for Strongco in Canada. All tax loss carry forwards were utilized in 2011. Net Income Strongco’s net income in the first quarter of 2012 was $1.2 million ($0.09 per share), which was improved from $0.6 million ($0.05 per share) in the first quarter of 2011. EBITDA EBITDA in the first quarter of 2012 was $8.0 million which was up from $6.8 million in the first quarter of 2011. EBITDA was calculated as follows:

VarianceEBITDA ($ millions) 2012 2011 2012/2011Net earnings from continuing operations 1.2$ 0.6$ 0.6$ Add Back:

Interest 1.4 1.3 0.1 Income taxes 0.5 0.1 0.4 Amortization of capital assets 0.8 0.7 0.1 Amortization of equipment inventory on rent 3.6 3.9 (0.3) Amortization of rental fleet 0.5 0.2 0.3

EBITDA (note 1) 8.0$ 6.8$ 1.2$

Three Months Ended March 31

Note 1 - “EBITDA” refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. 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 Company’s management believes that EBITDA is an important supplemental measure in evaluating the Company’s 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 Company’s performance or to cash flows from operating, investing and financing activities as measures of the Company’s liquidity and cash flows. Cash Flow, Financial Resources and Liquidity Cash Flow Provided By (Used In) Operating Activities: During the first quarter of 2012, Strongco provided $8.4 million of cash from operating activities before changes in working capital. This compares to $6.5 million of cash provided from operating activities before changes in working capital in the first quarter of 2011. After working capital changes and payments of interest, income taxes and pension funding cash provided by operating activities amounted to $0.4 million which compared to cash used in operating activities of $0.7 million in the first quarter of 2011. The components of the cash provided by (used in) operating activities can be summarized as follows:

($ millions) 2012 2011Net earnings $ 1.2 $ 0.6Non-cash items:

Depreciation - equipment inventory on rent 3.6 3.9Depreciation - capital assets 0.8 0.7Depreciation - rental fleet 0.5 0.2 (Gain) loss on sale of rental fleet 0.1 (0.5) Interest expense 1.4 1.4 Income tax expense / (recovery) 0.5 0.1 Employee future benefit expense 0.3 0.1

8.4$ 6.5$ Changes in non-cash working capital balances (6.0) (5.6)Employee future benefit funding (0.6) (0.2) Interest paid (1.3) (1.4) Income taxes paid (0.1) - Cash provided by (used in) operating activities $ 0.4 $ (0.7)

Three Months Ended March 31


Non-cash items include amortization of equipment inventory on rent of $3.6 million, which compared to $3.9 million in the first quarter of 2011. A slightly lower volume of equipment rentals in 2012 resulted in lower amortization of equipment inventory on rent. Components of cash flow from the net change in non-cash working capital for the three month period ending March 31, 2012 and 2011 were as follows:

($ millions) (Increase) / Decrease 2012 2011Trade and other receivables $ 2.4 $ (2.2)Inventories (37.5) (8.8)Prepaids (0.3) (0.6)Other assets (0.1) -

$ (35.5) $ (11.6)

Trade and other payables 9.8 2.6Deferred revenue & customer deposits 0.2 0.4Equipment notes payable 19.5 3.0

$ 29.5 $ 6.0Net increase in non-cash working capital $ (6.0) $ (5.6)

Three months ended March 31

During the first quarter of 2012, Strongco made a net investment in working capital of $6.0 million to support its growth. By comparison, the working capital investment in the first quarter of 2011 was $5.6 million. Most of the investment in working capital was for equipment inventory and the related equipment note financing. In the first quarter of 2012, Strongco invested $37.5 million in inventory, including $31.6 million of equipment inventory, in anticipation of the summer selling season. By comparison, in the first quarter of 2011, the Company increased inventory by $8.8 million. To finance the increase in inventory, the Company borrowed more on its equipment notes facilities. Equipment notes payable increased by $19.5 million in the quarter of 2012 and $3.0 million in the first quarter of 2011. Given the seasonality of construction and the buying patterns of customers, the majority of Strongco’s purchases of equipment inventory occur in the first quarter which is then sold through the summer season. That purchasing pattern was impacted by the recession and increase in demand as markets recovered. After scaling back during the recession, OEM’s struggled to ramp up production to meet the increase in demand. As a result, supplier delivery performance deteriorated which led to product shortages and significantly extended delivery lead times. In the fourth quarter of 2011 Strongco received a large quantity of equipment inventory from its major OEM suppliers that had been ordered for delivery earlier in the year which contributed to a higher than normal level of inventory entering 2012. Equipment inventory at March 31, 2012 was $216.9 million compared to $174.4 million a year earlier. With markets for heavy equipment continuing to be robust, management is confident this higher level of inventory will be sold through the summer season in 2012. Cash Used In Investing Activities: In the first quarter of 2012, net cash of $2.2 million was used in financing activities which compared to net cash of $11.4 million used in financing activities in the first quarter of 2011. The components of the cash used in investing activities are summarized as follows:

($ millions) 2012 2011Acquisition of Chadwick-BaRoss -$ (9.2)$ Purchase of rental fleet assets (1.7) (0.5)Proceeds from sale of rental fleet assets 1.4 1.1Purchase of capital assets (1.9) (2.8)Cash used in investing activities (2.2)$ (11.4)$


In the first quarter of 2011, Strongco acquired Chadwick-BaRoss for cash proceeds of $9.2 million. In the first quarter of 2012, Chadwick-BaRoss invested a net $0.3 million in rental fleet assets. By comparison, rental fleet assets were reduced by $0.5 million in the first quarter of 2011 Capital expenditures were $1.9 million in the first quarter of 2012 and $2.8 million in the first quarter of 2011, the majority of which related to construction of the new Edmonton, Alberta branch.


Cash Provided By Financing Activities: In the first quarter of 2012, net cash of $1.8 million was provided by financing activities which compared to net cash of $12.1 million provided from financing activities in the first quarter of 2011. The components of cash provided by financing activities in the first quarter are summarized as follows:

[$ millions] 2012 2011Proceeds from rights offering -$ 7.8$ Repayment of term loan - acquisition of Chadwick-BaRoss Inc. (0.3) - Repayment acquisition promissory notes (0.2) - Construction loan - new Edmonton branch 1.0 - Increase (decrease) in bank indebtedness 1.8 5.5 Repayment of finance lease obligations (0.5) - Repayment of Champion acquisition note (1.2) Cash provided by financing activities 1.8$ 12.1$


The significant sources and uses of cash from financing activities in first quarter of 2012 were as follows: • To help finance the purchase of Chadwick-BaRoss, the Company secured a $5.0 million term loan from its bank in April

2011. In the first quarter of 2012, $0.3 million was repaid on that loan.

• The Company issued promissory notes to the previous shareholders of Chadwick-BaRoss on the acquisition of their company in the first quarter totaling $1.9 million. In the first quarter of 2012, $0.2 million of these notes was repaid.

• To support the construction of its new Edmonton branch, the Company secured a construction loan from its bank (see

discussion under “Bank Credit Facilities” below). Borrowing under this construction loan amounted to $1.0 million in the first quarter of 2012.

• Cash of $1.8 million was provided by increasing the Company’s bank indebtedness in the first quarter of 2012.

• Repayments under finance leases (primarily service vehicles and computer equipment) amounted to $0.5 million in the

quarter.

Bank Credit Facilities The Company has credit facilities with banks in Canada and United States that provide 364-day committed operating lines of credit totaling approximately $22.5 million. Borrowings under the lines of credit are 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 $50 million debenture and 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 on intangible and other assets. The operating lines bear interest at rates that range between bank prime rate plus 0.50% and bank prime rate plus 3.00% and between the one month Canadian BA rates plus 1.50% and BA rates plus 4.00% in Canada and at LIBOR plus 2.60% in the United States. 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 the Company’s availability under its operating lines of credit. For certain customers, Strongco issues letters of credit as a guarantee of Strongco’s performance on the sale of equipment to the customer. As at March 31, 2012, there were outstanding letters of credit of $0.1 million and $10.1 million drawn on the Company’s bank operating lines of credit. In addition to its operating lines of credit, Strongco has a $15 million line 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 $15 million. As at March 31, 2012, the Company had outstanding foreign exchange forward contracts under this facility totaling US$5.2 million at an average exchange rate of $1.0181 Canadian for each US$1.00 with settlement dates between April 1, 2012 and September 30, 2012. The Company’s bank credit facilities also include term loans secured by real estate in the United States. At March 31, 2012 the outstanding balance on these term loans was US$3.6 million. The term loans bear interest at LIBOR plus 3.05% and require monthly principal payments of US$13,300 plus accrued interest. The Company has interest rate swap agreements in place that have converted the variable rate on the term loans to a fixed rate of 5.17%. The term loan and swap agreements expire in September 2012 at which point a balloon payment from the balance of the loans is due. It is management’s intention to renew the term loans and interest rate swap agreement prior to their expiry.


In connection with the acquisition of Chadwick-BaRoss, in April 2011, Strongco secured an additional $5.0 million demand non-revolving term loan from its bank secured against certain real estate assets in Canada (“Term Loan – Canadian Real Estate”). This loan is for a term of 60 months to April 2016 and bears interest at the bank’s prime rate plus 2.0%. The Term loan – Canadian Real Estate is subject to monthly principal payments of $83.3 thousand plus accrued interest. As at March 31, 2012, there was $4.1 million owing on the Term Loan – Canadian Real Estate. In April 2011, Strongco secured an additional construction loan facility with its bank (“Construction Loan #1”) to finance the construction of the Company’s new Edmonton, Alberta branch. Under Construction Loan #1, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $7.1 million. Construction of the new branch commenced in June 2011 and is scheduled to be completed in April 2011. Upon completion, Construction Loan #1 will be converted to a demand, non-revolving term loan (“Mortgage Loan #1”). Mortgage Loan #1 will be for an amount of $7.1 million and a term of 60 months. Construction Loan #1 (and Mortgage Loan #1) bears interest at the bank’s prime lending rate plus 2.0%. As at March 31, 2012, there was $6.2 million drawn on Construction Loan #1. In addition, in September 2011, Strongco secured an additional construction loan facility with its bank (“Construction Loan #2”) to finance the construction of a planned new Fort McMurray, Alberta branch. Under Construction Loan #2, the Company is able to borrow 70% of the cost of the land and building construction costs. The Company anticipates construction of the new Fort McMurray branch will commence in the third quarter of 2012 with completion in the first quarter of 2013. Upon completion, Construction Loan #2 will be converted to a demand, non-revolving term loan (“Mortgage Loan #2”). As at March 31, 2012, Construction Loan #2 was undrawn. Strongco’s bank credit facilities contain financial covenants typical of such credit facilities that require the Company to maintain certain financial ratios and meet certain financial thresholds. In particular, the credit facilities in Canada contain covenants that require the Company to maintain a minimum ratio of total current assets to current liabilities (“Current Ratio covenant”) of 1.1:1, a minimum tangible net worth (“TNW covenant”) of $50 million, a maximum ratio of total debt to tangible net worth (“Debt to TNW Ratio covenant”) of 4.0:1 and a minimum ratio of EBITDA minus cash taxes paid and capital expenditures to total interest (“Debt Service Coverage Ratio covenant”) of 1.3:1. For the purposes of calculating covenants under the credit facility, debt is defined as total liabilities less deferred income taxes, trade and other payables, customer deposits and accrued employee future benefits obligations. The Debt Service Coverage Ratio is measured at the end of each quarter on a trailing 12-month basis. Other covenants are measured as at the end of each quarter. The Company was in compliance with all covenants under its bank credit facilities as at March 31, 2012. Equipment Notes In addition to its bank credit facilities, the Company has lines of credit available totaling approximately $240 million from various non-bank equipment lenders in Canada and the United States that are used to finance equipment inventory and rental fleet. At March 31, 2012, there was approximately $185 million borrowed on these equipment finance lines. Typically, these equipment notes are interest free for periods up to 12 months from the date of financing, after which they bear interest at rates ranging, in Canada, from 4.00% to 5.50% over the one-month BA rate and 3.25% to 4.25% over the prime rate of a Canadian chartered bank, and in the United States, from 2.5% to 5.5% over the one-month LIBOR rate and between the U.S. bank prime rate and prime rate plus 4.00%. At March 31, 2012, approximately $76 million of these equipment notes were interest free and $104 million were interest bearing. As collateral for these equipment notes, the Company has provided liens on the specific inventories financed and any related accounts receivable. For the majority of the equipment notes, monthly principal repayments equal to 3% 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 is normally refinanced with the lender over an additional period of up to 24 months. All of the Company’s equipment note 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. In September 2011, Strongco put interest rate swaps in place that have effectively fixed the floating BA rate component on $15.0 million of its interest bearing equipment notes at 4.615% for five years to September 2016. (See discussion under “Interest Rate Swaps” below). Certain of the Company’s 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 all covenants under its equipment finance credit facilities as at March 31, 2012. Interest Rate Swaps In September of 2011, BA rates were at very low levels. However, there was an expectation that interest rates would rise in the future. In September, Strongco secured a Swap Facility in Canada with its bank that allows the Company to swap the floating interest rate component (BA rate) on up to $25.0 million of its floating interest rate debt to a five-year fixed swap rate of interest. On September 8, 2011, the Company entered into an interest rate swap agreement under this facility to fix the floating BA rate


on $15.0 million of interest bearing debt at a fixed interest rate equal to 1.615% for a period of five years to September 8, 2016. The company has put these swaps in place to effectively fix the interest rate on $15.0 million of its interest-bearing equipment notes. The Company also has interest rate swap agreements in place in the US that have converted the variable rate on its US term loans to a fixed rate of 5.17%. The term loan and swap agreements expire in September 2012 at which point a balloon payment from the balance of the loans is due. It is management’s intention to renew the term loans and interest rate swap agreement prior to their expiry. Summary of Outstanding Debt The balance outstanding under Strongco’s debt facilities at March 31, 2012 and 2011 consisted of the following: Debt Facilities As at March 31($ millions) 2012 2011

Bank indebtedness (including outstanding cheques) $ 12.7 $ 17.9Equipment notes payable - non interest bearing 76.2 44.2Equipment notes payable - interest bearing 108.7 88.0Vendor take back note payable - acquisition of Chadwick-BaRoss 1.1 1.8Construction loan #1 6.2 - Term loan - Canadian real estate 4.1 - Term loans - US real estate 3.6 3.7

$ 212.6 $ 155.6 As at March 31, 2012 there was $12.5 million of unused credit available under the Company’s 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 generally ranges between $5.0 million and $15.0 million. Borrowing under the Company’s bank lines is typically highest in the first quarter when cash flows from operations are at the lowest point of the year, and reduces through to the end of the year as cash flows increase. The Company also had $55 million available under its equipment finance facilities at March 31, 2012. Borrowing on these lines typically increases in the first five months of the year as equipment inventory is purchased for the season and declines to the end of the year as equipment sales increase, particularly in the fourth quarter. With the level of funds available under the Company’s bank credit lines, the current availability under the equipment finance facilities and anticipated improvement in cash flows from operations, management believes the Company will have adequate financial resources to fund its operations and make the necessary investment in equipment inventory and fixed assets to support its operations in the future. SUMMARY OF QUARTERLY DATA In general, business activity in the Equipment Distribution segment 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 begin to prepare for summer activity. The third 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: 2012($ millions, except per share amounts) Q4 Q3 Q2 Q1

Revenue $ 96.8Earnings (loss) from continuing operations before income taxes 1.7Net income (loss) 1.2

Basic and diluted earnings (loss) per share $ 0.09

2011($ millions, except per share amounts) Q4 Q3 Q2 Q1

Revenue $ 113.2 $ 108.4 $ 114.1 $ 87.5Earnings (loss) from continuing operations before income taxes 2.9 3.8 3.8 0.7Net income (loss) 2.1 3.6 3.6 0.6

Basic and diluted earnings (loss) per share $ 0.15 $ 0.28 $ 0.28 $ 0.05

2010($ millions, except per unit/share amounts) Q4 Q3 Q2 Q1

Revenue $ 91.8 $ 79.6 $ 69.6 $ 53.7Earnings (loss) from continuing operations before income taxes 1.8 (0.3) (0.3) (2.1)Net income (loss) 1.8 (0.3) (0.3) (2.1)

Basic and diluted earnings (loss) per unit/share $ 0.17 $ (0.03) $ (0.03) $ (0.19) 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 www.sedar.com. CONTRACTUAL OBLIGATIONS The Company has contractual obligations for operating lease commitments totaling $21.1 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 term from three to 10 years. The Company’s maximum potential losses pursuant to the majority of these buy back contracts are limited, under an agreement with the original equipment manufacturer, 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, 2012, the total buy back contracts outstanding were $14.0 million. A reserve of $1.1 million has been accrued in the Company’s accounts as at March 31, 2012 with respect to these commitments. The Company has provided a guarantee of lease payments under the assignment of a property lease which expires January 31, 2014. Total lease payments from April 1, 2012 to January 31, 2014 are $0.3 million. 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.

Less Than 1 to 3 4 to 5 After 5($ millions) Total 1 Year years years yearsOperating leases $21.1 $10.5 $7.3 $2.4 $0.9

Payment due by period

Less Than 1 to 3 4 to 5 After 5($ millions) Total 1 Year years years yearsBuy back contracts $14.0 $2.0 $5.1 $6.8 $0.1

Contingent obligation by period


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. On January 17, 2011, the Company completed a rights offering, under which 2.6 million additional shares were issued pursuant to the rights issued to existing shareholders for gross proceeds of $7.9 million (refer to the Company’s Rights Offering Circular filed on SEDAR for details). The total shares outstanding following completion of the rights offering was 13,128,719. There were no changes in the issued and outstanding shares during the first quarter of 2012.

Number ofCommon Shares Issued and Outstanding Shares Shares

Common shares outstanding as at December 31, 2011 13,128,719 Common shares issued (redeemed) - Common shares outstanding as at March 31, 2012 13,128,719 OUTLOOK The Canadian economy in general and construction markets across Canada are expected to continue to improve throughout 2012, which should result in strong demand for heavy equipment. Mild weather conditions and lack of snow affected equipment usage in much of Canada and the northeastern United States and significantly curtailed oilfield activities in northern Alberta in the first quarter and delayed the buying decisions of customers across the country. This tempered demand for heavy equipment and product support in the first quarter of 2012. However, the early onset of warm spring weather brought an advanced start to the summer construction season which contributed to stronger equipment sales in March. Strongco’s sales backlogs continued to rise during the quarter and by mid-April 2012 had topped $100 million, more than double the level of a year ago and the highest level in several years. This is a positive indication of the increasing demand for heavy equipment. An important contribution to anticipated growth in 2012 is expected from Alberta. Oil prices have continued to show strength and stability, which has powered an ongoing economic upturn in the province. In particular, the outlook for northern Alberta and the oil sands is for continued significant investment over the next several years, which bodes well for heavy equipment demand in the region. Equipment suppliers are expected to improve product availability and delivery lead times in 2012. Inventory levels at Strongco were allowed to run slightly higher than normal at year end to ensure availability of product as the Company enters the prime selling season. Consequently, product availability is not expected to affect the Company’s sales in 2012. Strongco’s significant position with its equipment suppliers should allow the Company to optimize equipment deliveries. Management remains cautiously optimistic that the improving Canadian economy will continue in 2012, which is expected to increase revenues. In addition, while market conditions in the northeastern United States remain weak, Chadwick-BaRoss realized modest growth in the first quarter of 2012 and contributed positively to Strongco’s overall results. Chadwick-BaRoss services a broad range of market sectors in Maine, New Hampshire and Massachusetts. Demand for equipment in these regions is expected to continue to show a modest increase throughout the balance of the year, which should contribute to improved revenue and profitability in 2012. NON-IFRS MEASURES “EBITDA” refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. 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 Company’s management believes that EBITDA is an important supplemental measure in evaluating the Company’s 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 Company’s performance or to cash flows from operating, investing and financing activities as measures of the Company’s liquidity and cash flows. 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 Company’s new and used equipment is evaluated by management throughout each 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, 2012 with changes from December 31, 2011 is as follows: Provision for Inventory Obsolescence [$ millions]Provision for inventory obsolescence as at December 31, 2011 $ 5.3Provision related to inventory disposed of during the quarter (0.6)Additional provisions made during the quarter 0.4Provision for inventory obsolescence as at March 31, 2012 $ 5.1 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, 2012 with changes from December 31, 2011 is as follows: Allowance for doubtful accounts as at December 31, 2011 $ 1.8Accounts written off during the quarter - Additional provisions made during the quarter 0.2Allowance for doubtful accounts as at March 31, 2012 $ 2.0

Post Retirement 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 Strongco’s 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 we expect will be required to pay employee benefit obligations. Management’s assumptions of the discount rate are based on current interest rates on long-term debt of high quality corporate issuers. The assumed return on pension plan assets of 6.5% per annum is based on expectations of long-term rates of return at the beginning of the fiscal year and reflects a pension asset mix consistent with the Company’s investment policy. 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. Changes in assumptions will affect the accrued benefit obligation of Strongco’s employee future benefits and the future years’ 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 Company’s 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 management’s best estimate of the Company’s future income tax accounts.


FORWARD-LOOKING STATEMENTS This Management’s 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 management’s current expectations and assumptions which are based on information currently available to the Company’s 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 2012. 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 Strongco’s 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 Company’s Annual Information Form, may be found on SEDAR at www.sedar.com.


Strongco Corporation Unaudited Interim Consolidated Financial Statements March 31, 2012 and 2011


Strongco Corporation Unaudited Consolidated Statement of Financial Position (in thousands of Canadian dollars, unless otherwise indicated)

Approved by the Board of Directors _______________________________ Director ______________________________ Director

March 31 December 312012 2011

Assets

Current assetsTrade and other receivables $ 40,227 $ 42,759 Inventories [note 5] 244,038 210,128 Prepaid expenses and other deposits 1,675 1,420

285,940 254,307 Non-current assetsProperty and equipment [note 6] 34,460 31,278 Rental fleet 14,704 15,564 Deferred income tax asset [note 10] 1,357 1,541 Intangible asset 1,800 1,800 Other assets 250 146

52,571 50,329 Total assets $ 338,511 $ 304,636

Liabilities and shareholders' equity

Current liabilitiesBank indebtedness $ 12,724 $ 10,951 Trade and other payables 44,917 34,986 Provision for other liabilities [note 7] 1,238 1,198 Deferred revenue and customer deposits 1,132 971 Equipment notes payable

- non-interest bearing [note 8] 75,757 72,262 - interest bearing [note 8] 103,893 88,151

Current portion of finance lease obligations 2,544 2,110 Current portion of notes payable [note 9] 6,184 6,242

248,389 216,871 Non-current liabilitiesDeferred income tax liability [note 10] 2,520 2,565 Finance lease obligations 4,527 3,291 Notes payable [note 9] 13,979 13,558 Employee future benefit obligations 11,454 11,760

32,480 31,174 Total liabilities 280,869 248,045 Contingencies, commitments and guarantees [note 11]

Shareholders' equityShareholders' capital [note 12] 64,898 64,898 Accumulated other comprehensive income (19) 205 Contributed surplus 531 498 Deficit (7,768) (9,010) Total shareholders' equity 57,642 56,591 Total liabilities and shareholders' equity $ 338,511 $ 304,636

The accompanying notes are an integral part of these consolidated financial statements.


Strongco Corporation Unaudited Consolidated Statement of Income For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated, except share and per share amounts)

2012 2011

Revenue [note 14] $ 96,814 $ 87,495 Cost of sales 77,403 70,511 Gross profit 19,411 16,984

ExpensesAdministration 8,342 7,268 Distribution 5,038 4,542 Selling 3,364 3,431 Other income (433) (274) Operating income 3,100 2,017

Interest expense 1,353 1,356

Income before income taxes 1,747 661

Provision for income taxes [note 10] 505 63

Net income attributable toshareholders for the period $ 1,242 $ 598

Earnings per share [note 13]Basic and diluted $ 0.09 $ 0.05

Weighted average number of shares [note 13]- basic- diluted


13,128,719 12,736,681 13,178,356 12,767,927


Strongco Corporation Unaudited Consolidated Statement of Comprehensive Income For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated)

2012 2011

Net income attributable to shareholders for the year $ 1,242 $ 598

Other comprehensive incomeCurrency translation adjustment 224 (354) Comprehensive income attributable to

shareholders for the year $ 1,466 $ 244

The accompanying notes are an integral part of these consolidated financial statements. Strongco Corporation Unaudited Consolidated Statement of Changes in Shareholders’ Equity For the three month periods ended (in thousands of dollars, unless otherwise indicated)

Number of units Deficit Total

Balance - December 31, 2010 10,508,719 $ 57,089 $ - $ 315 $ (12,427) $ 44,977

Net loss for the period 598 598

Other comprehensive loss:Currency translation adjustment (354) (354)

Issuance of shares 2,620,000 7,809 7,809

Contributed surplus 32 32

Balance - March 31, 2011 13,128,719 $ 64,898 $ (354) $ 347 $ (11,829) $ 53,062

Number of shares Deficit Total

Balance - December 31, 2011 13,128,719 $ 64,898 $ 205 $ 498 $ (9,010) $ 56,591

Net income for the period - - - 1,242 1,242

Other comprehensive income:Currency translation adjustment - (224) - - (224)

Contributed surplus - - 33 - 33

Balance - March 31, 2012 13,128,719 $ 64,898 $ (19) $ 531 $ (7,768) $ 57,642


Shareholders' capital

Contributed Surplus

Accumulated other

comprehensive loss

Accumulated other

comprehensive income

Contributed Surplus


Strongco Corporation Unaudited Consolidated Statement of Comprehensive Income For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated)

2012 2011

Net income attributable to shareholders for the year $ 1,242 $ 598

Other comprehensive incomeCurrency translation adjustment 224 (354) Comprehensive income attributable to

shareholders for the year $ 1,466 $ 244


Strongco Corporation Unaudited Consolidated Statement of Changes in Shareholders’ Equity For the three month periods ended (in thousands of dollars, unless otherwise indicated)

Number of units Deficit Total

Balance - December 31, 2010 10,508,719 $ 57,089 $ - $ 315 $ (12,427) $ 44,977

Net loss for the period 598 598

Other comprehensive loss:Currency translation adjustment (354) (354)

Issuance of shares 2,620,000 7,809 7,809

Contributed surplus 32 32

Balance - March 31, 2011 13,128,719 $ 64,898 $ (354) $ 347 $ (11,829) $ 53,062

Number of shares Deficit Total

Balance - December 31, 2011 13,128,719 $ 64,898 $ 205 $ 498 $ (9,010) $ 56,591

Net income for the period - - - 1,242 1,242

Other comprehensive income:Currency translation adjustment - (224) - - (224)

Contributed surplus - - 33 - 33

Balance - March 31, 2012 13,128,719 $ 64,898 $ (19) $ 531 $ (7,768) $ 57,642



Contributed Surplus

Accumulated other

comprehensive loss

Accumulated other

comprehensive income

Contributed Surplus



Strongco Corporation Unaudited Consolidated Statement of Cash Flows For the three month periods ended March 31 (in thousands of Canadian dollars, unless otherwise indicated)

2012 2011

Cash flows from operating activitiesNet income for the period $ 1,242 $ 598 Adjustments for

Depreciation - property and equipment 838 731 Depreciation - equipment inventory on rent 3,562 3,876 Depreciation - rental fleet 523 202 (Gain) loss on sale of rental fleet 76 (547) Contributed surplus 33 32 Interest expense 1,353 1,356 Income tax expense 505 63 Employee future benefit expense 308 143 Foreign exchange gain (20) -

Changes in working capital [note 15] (6,040) (5,553) Funding of employee future benefit obligations (614) (224) Interest paid (1,311) (1,348) Income taxes paid (83) - Net cash provided by (used in) operating activities $ 372 $ (671) Cash flows from investing activitiesBusiness acquisition net of cash acquired [note 4] - (9,248) Purchases of rental fleet (1,718) (473) Proceeds from sale of rental fleet 1,444 1,124 Purchases of property and equipment (1,915) (2,850) Net cash used in investing activities $ (2,189) $ (11,447) Cash flows from financing activitiesIncrease in bank indebtedness 1,786 5,535 Increase in long-term debt 1,028 383 Repayment of long-term debt (289) (1,233) Repayment of finance lease obligations (513) (367) Issue of share capital - 7,809 Repayment of business acquisition purchase financing (195) - Net cash provided by financing activities $ 1,817 $ 12,127 Foreign exchange on cash balances - (9) Change in cash and cash

equivalents during the period $ - $ - Cash and cash equivalents - Beginning of period - - Cash and cash equivalents - End of period $ - $ -



Strongco Corporation Notes to Unaudited Consolidated Financial Statements For the three month periods ending March 31, 2012 and March 31, 2011 (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 and the United States. The Company is a public entity, 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 interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to interim financial statements, including International Accounting Standards (“IAS”) 34, Interim Financial Reporting. The accounting policies followed in these interim consolidated financial statements are the same as those applied in the Company’s consolidated financial statements for the year ended December 31, 2011. The policies applied in these interim consolidated financial statements are based on IFRS issued as of May 9, 2012, the date the Directors approved the interim consolidated financial statements. These interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2011 Changes in accounting policy and disclosure Unless otherwise noted, the following standards and amendments are effective for accounting periods beginning on or after January 1, 2013, with earlier adoption permitted. The Company has not yet assessed the impact of these standards or determined whether it will adopt these standards early. IAS 1, Presentation of Financial Statements, has been amended to require entities to separate items presented in other comprehensive income (“OCI”) into two groups, based on whether or not items may be recycled in the future. Entities that choose to present OCI items before tax will be required to show the amount of tax related to the two groups separately. The amendment is effective for annual periods beginning on or after July 1, 2012 with earlier application permitted. IAS 19, Employee Benefits, has been amended to make significant changes to the recognition and measurement of defined benefit pension expense and termination benefits and to enhance the disclosure of all employee benefits. The amended standard requires immediate recognition of actuarial gains and losses in other comprehensive income (loss) as they arise, without subsequent recycling to net income. This is consistent with the Company’s current accounting policy. Past-service cost (which will now include curtailment gains and losses) will no longer be recognized over a service period but instead will be recognized immediately in the period of a plan amendment. Pension benefit cost will be split between (i) the cost of benefits accrued in the current period (service cost) and benefit changes (past-service cost, settlements and curtailments); and (ii) finance expense or income. The finance expense or income component will be calculated based on the net defined benefit asset or liability. A number of other amendments have been made to recognition, measurement and classification including redefining short-term and other long-term benefits, guidance on the treatment of taxes related to benefit plans, guidance on risk/cost sharing features, and expanded disclosures.



IFRS 7, Financial Instruments: Disclosures, has been amended to enhance disclosure requirements related to offsetting of financial assets and liabilities. IFRS 9, Financial Instruments, was issued in November 2009 and contains requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39, Financial Instruments - Recognition and Measurement (“IAS 39”), for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments and such instruments are either recognized at fair value through profit or loss, or at fair value through comprehensive income (loss), dividends are recognized in income in the consolidated statement of comprehensive income (loss); however, other gains and losses (including impairments) associated with such instruments remain in accumulated other comprehensive income (loss) indefinitely. Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39 except that fair value changes due to credit risk for liabilities designated at fair value through profit or loss would generally be recorded in the consolidated statement of comprehensive income (loss). IFRS 9 was originally published with an effective date for years beginning on or after January 1, 2013. IFRS 9 was approved for amendment in March 2012 to defer the effective date to years beginning on or after January 1, 2015. IFRS 10, Consolidation requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12 Consolidation-Special Purpose Entities and parts of IAS 27 Consolidated and Separate Financial Statements. IFRS 13, Fair Value Measurement is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. 3 Critical accounting estimates and judgments The preparation of interim consolidated 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 interim consolidated 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 and judgments are as follows: 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 trade receivables and maintains provisions for possible credit losses based upon historical experience and known circumstances. Changes or differences in these estimates or assumptions may result in changes



to the trade and other receivables balance on the consolidated balance sheet and a charge or credit to administration expense in the consolidated statement of income. Inventory valuation The value of the Company's new and used equipment is evaluated by management throughout each period. 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. Changes or differences in these estimates or assumptions may result in changes to the inventory balance on the consolidated balance sheet and a charge or credit to administration expense in the consolidated statement of income. Intangible asset An impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in arm’s length transactions of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget and forecast for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. Deferred income taxes At each period-end, the Company evaluates the value and timing of its temporary differences. Deferred 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 interim consolidated financial statements. Changes or differences in these estimates or assumptions may result in changes to the current or deferred tax balance on the consolidated balance sheet and a charge or credit to income tax expense in the consolidated statement of income (loss), and may result in cash payments or receipts. Where appropriate, the provisions for deferred income taxes and deferred income taxes payable are adjusted to reflect management's best estimate of the Company's income tax accounts. Judgment is also required in determining whether deferred tax assets are recognized on the consolidated balance sheet. Deferred tax assets, including those arising from unutilized tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods, in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.



Employee future benefit obligations The present value of the employee future benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for these obligations include the discount rate. The Company determines the appropriate discount rate at the end of each period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Company considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related employee future benefit liability. Other key assumptions for employee future benefit obligations are based in part on current market conditions. Any changes in these assumptions will impact the carrying amount of the employee future benefit obligations. Share-based payment transactions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. 4 Acquisition of Chadwick-BaRoss, Inc. On February 17, 2011, Strongco, through its wholly owned subsidiary Strongco USA Inc., completed the acquisition of 100% of the issued and outstanding shares of Chadwick-BaRoss, Inc. (“CBR”). CBR is a multiline heavy equipment dealer with 90 employees headquartered in Westbrook, Maine, with three branches in Maine and one in each of New Hampshire and Massachusetts. CBR sells, rents and services heavy equipment used in sectors such as construction, infrastructure, utilities, municipalities, waste management and forestry. The acquisition of all of the issued and outstanding shares of CBR was completed for a purchase price of US$11,091, net of cash acquired. The purchase price was satisfied with cash of US$9,228 and three promissory notes totalling US$1,863. The three promissory notes mature on February 17, 2013 and bear interest at the US Prime rate. Principal payments of US$195 are made quarterly commencing May 17, 2011. Costs of $416 related to the acquisition were expensed as period costs within operating expenses in the consolidated statement of income (loss) for the three month period ended March 31, 2011.



The acquisition date fair value for each major class of asset acquired and liabilities assumed:

[in thousands of Canadian dollars]

Trade and other receivables $ 4,388 Inventories 9,960 Property, plant and equipment 5,058 Rental fleet 11,722 Deferred income tax asset 1,125 Other assets 95 Total assets $ 32,348

Trade and other payables $ 3,077 Deferred income tax liabilities 2,807 Equipment notes payable 11,135 Finance lease obligations 419 Notes payable 3,795 Total liabilities $ 21,233 Net assets acquired $ 11,115

The results of operations of CBR have been consolidated into the Company’s results for the three month period ended March 31, 2011, effective February 17, 2011. Revenues of $6.0 million and net income from operations of $0.2 million for CBR have been included in the Company’s consolidated financial statements for the three month period ended March 31, 2011. Had the results of CBR been incorporated into the Company’s consolidated statement of income as though the acquisition had been completed on January 1, 2011, the revenue and net income of the combined entity for the three month period ended March 31, 2011 would have been $90.6 million and $0.6 million, respectively. 5 Inventories Inventory components, net of write-downs and provisions are as follows: As at March 31, 2012 December 31, 2011Equipment $ 216,914 $ 185,335 Parts 22,627 21,148 Work in process 4,497 3,645

$ 244,038 $ 210,128 At March 31, 2012, provisions against inventory totalled $5,118 (December 31, 2011 - $5,397). During the period, the Company reduced its inventory write downs by $279.



6 Property and equipment During the three months ended March 31, 2012, the Company acquired property and equipment, excluding property under construction, of $688 (2011 - $140). In 2011, the Company began construction on a new Edmonton, Alberta branch. The project is expected to be completed during the second quarter of 2012 and the carrying amount at March 31, 2012 was $9,023. The amount of borrowing costs capitalized during the three months ended March 31, 2012 was $84 (2011 - $nil). The weighted-average interest rate used to determine the amount of borrowing costs eligible for capitalization was 5%, which is the effective rate of the specific borrowing. See note 9 (v) regarding the construction facility. Capital expenditures were $1,914 in the first quarter of 2012 and $2,850 in the first quarter of 2011, the majority of which related to construction of the new Edmonton, Alberta branch. 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 ten years. At March 31, 2012, the total obligation under these contracts was $13,974 (December 31, 2011 - $13,512). 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 reserve of $1,138 (December 31, 2011 - $1,115) has been accrued in the Company's accounts with respect to these commitments. 8 Equipment notes payable In addition to its bank credit facilities, the Company has lines of credit available totalling approximately $240 million from various non-bank equipment lenders in Canada and the United States, which are used to finance equipment inventory. At March 31, 2012, there was approximately $185 million borrowed on these equipment finance lines (December 31, 2011 – approximately $160 million). Typically, these equipment notes are interest free for periods up to 12 months from the date of financing, after which they bear interest at rates ranging from 4.00% to 5.50% over the one month BA rate and 3.25% to 4.25% over the prime rate of a Canadian chartered bank in Canada, and from 2.50% to 5.50% over one month Libor rate and between prime and prime plus 4.00% in the United States. As collateral for these equipment notes, the Company has provided liens on the specific inventories financed and any related accounts receivable. Monthly principal repayments equal to 3% 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 Company’s equipment notes facilities are renewable annually. Certain of the Company’s 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”). As at March 31, 2012, the Company was in compliance with these covenants.



9 Notes payable Notes payable is comprised of the following:

March 31, 2012 December 31, 2011Promissory notes (i) $ 1,083 $ 1,301 Equipment plan notes payable - rental fleet (ii) 5,226 5,455 Term note - United States (iii) 3,597 3,702 Term note - Canada (iv) 4,083 4,333 Construction facility (v) 6,174 4,987 Other - 22

20,163 19,800 Current portion 6,184 6,242 Long-term portion $ 13,979 $ 13,558 (i) As part of the acquisition of CBR, the Company issued, through a wholly owned subsidiary, three

promissory notes totalling US$1,863 (as discussed in note 4). The three promissory notes mature on February 17, 2013 and bear interest at the US Prime rate. Quarterly principal payments of US$195 commenced in May 2011. At March 31, 2012, US$118 (March 31, 2011 - US$203) of the outstanding promissory notes was owed to a former shareholder and current employee of CBR, which is recorded at the exchange amount.

(ii) In addition to equipment notes payable as described in note 7, CBR utilizes floor plan notes payable to finance its rental fleet. Payment is required at the earlier of the sale of items or per contractual schedule ranging from 12 to 24 months. Effective interest rates range from 2.01% to 5.80% with various maturity dates.

(iii) The Company’s bank credit facilities in the United Sates include a term note secured by real estate and cross-collateralized with the Company’s revolving line of credit in the United States. The term note matures in September 2012 and bears interest at a rate of LIBOR plus 3.05%. Monthly payments of principal of US$13 plus accrued interest are required under the terms of the note. The Company has interest rate swap agreements in place related to the term note which have converted the variable rate on the term loans to a fixed rate of 5.17%. The term loans and swap agreements expire in September 2012 at which point a balloon payment for the balance of the loans is due.

(iv) In April 2011, the Company’s bank credit facilities were amended to add a $5,000 demand, non-revolving term loan (“Term note – Canada”). The Term note – Canada is for a term of 60 months and bears interest at the bank’s prime lending rate plus 2.0%. Monthly principal payments of $83 plus accrued interest commenced in May 2011.

(v) In May 2011, the bank credit facilities were further amended to add a construction loan facility (“Construction Loan”) to finance the codanynstruction of the Company’s new Edmonton, Alberta branch. Under the Construction Loan, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $7,100. The Company purchased the property in March 2011 and commenced construction in June 2011. The construction is scheduled to be completed during the second quarter of 2012. As at March 31, 2012, the Company has drawn $6,174 against the construction loan facility. Upon completion, the Construction Loan will be converted to a demand, non-revolving term loan (“Mortgage Loan”). The Mortgage Loan will be



for a term of 60 months. The Construction Loan and Mortgage Loan bear interest at the bank’s prime lending rate plus 2%.

In September 2011, the Company secured an additional construction loan facility with its bank to finance the construction of a new planned Fort McMurray, Alberta branch. Under this facility, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $7,900. As at March 31, 2012, no amount has been drawn against this facility. 10 Income taxes The major components of the income tax expense in the interim consolidated statement of income are: Three month period ended March 31 2012 2011Current income tax expense $ 187 $ 63 Deferred tax expense (recovery) related to origination and reversal of deferred taxes 318 -

$ 505 $ 63 11 Contingencies, commitments and guarantees a) 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.

A statement of claim has been filed naming a former division of the Company as one of several defendants in proceedings under the Superior Court of Quebec. The action claims errors and omissions in the contractual execution of work entrusted to the defendants and names the Company as jointly and severally liable for damages of approximately $5.9 million. Management believes that the Company has a strong defence against this claim and that it is without merit. The Company’s insurer has provided conditional coverage for this claim. A statement of claim has been filed naming a former division of the Company as one of several defendants in proceedings under the Court of Queen’s Bench of Manitoba. The action claims errors and omissions in the contractual execution of work entrusted to the defendants and names the Company as jointly and severally liable for damages of approximately $4.8 million. Management believes that the Company has a strong defence against this claim and that it is without merit. The Company’s insurer has provided conditional coverage for this claim.

b) The Company has provided a guarantee of lease payments under the assignment of a property lease, which expires January 31, 2014. Total lease payments from April 1, 2012 to January 31, 2014 are $274 (December 31, 2011 - $311).



12 Shareholders’ capital On January 17, 2011, the Company completed a rights offering for aggregate proceeds of $7,809, net of transaction costs of $51. The offering was virtually fully subscribed, with a total of 9,941,964 rights being exercised for 2,485,491 common shares and 134,509 common shares being issued pursuant to the additional subscription privilege. Under the offering, each registered holder of the Corporation's Common Shares as of December 17, 2010 received one Right for each Common Share held. Four Rights plus the sum of $3.00 were required to subscribe for one Common Share. Each common share was issued at a price of $3.00.

Authorized: Unlimited number of shares Issued: As at March 31, 2012, a total of 13,128,719 shares (December 31, 2011 – 13,128,719) with a stated valued of $64,898 (December 31, 2011 - $64,898) were issued and outstanding.

13 Earnings per share Three-month period ended March 31, 2012 2011

Weighted average number of shares for basicearnings (loss) per share calculation

Effect of dilutive options outstandingWeighted average number of shares for dilutive

earnings (loss) per share calculation

13,128,719

13,178,356

12,736,681

12,767,927

49,637 31,246

On January 17, 2011, the Company completed a rights offering for a total of 9,941,964 rights being exercised for 2,485,491 common shares and 134,419 common shares being issued pursuant to the additional subscription privilege. The shares issued pursuant to the rights offering were issued at a discount to the market price at the date of issue, resulting in a bonus element related to this discount. The calculation of the weighted average number of shares for basic earnings per share has been adjusted for a factor related to the bonus element, impacting the calculation for the three-month period ended March 31, 2011. The computation of dilutive options outstanding only includes those options having exercise prices below the average market price of the shares during the period.

14 Segment information Management has determined the operating segments based on reports reviewed by the chief operating decision maker. The Company has one reportable segment, Equipment Distribution. 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: For the three-month period ended March 31 2012 2011Equipment sales $ 62,052 $ 55,984 Equipment rentals 5,160 5,470 Product support 29,602 26,041 Total Equipment Distribution $ 96,814 $ 87,495

15 Changes in non-cash working capital The components of the changes in non-cash working capital are detailed below: For the three-month period ended March 31 2012 2011Changes in working capital

Trade and other receivables $ 2,422 $ (2,173) Inventories (37,494) (8,948) Prepaid expense and other deposits (257) (578) Other assets (104) - Trade and other payables 9,711 2,575 Provisions 40 147 Deferred revenue and customer deposits 164 432 Equipment notes payable 19,478 2,992

$ (6,040) $ (5,553) 16 Seasonality The Company’s 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, rents and services heavy 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. The distribution and servicing of Volvo products account for a substantial portion of overall operations. The Company has had an ongoing relationship with Volvo since 1991.

CORPORATE AND SHAREHOLDER INFORMATION

CORPORATE ADDRESS

Strongco Corporation1640 Enterprise RoadMississauga, OntarioCanada L4W 4L4Telephone: 905 670-5100Fax: 905 565-1907Website: www.strongco.com

INVESTOR RELATIONS

J. David Wood, C.A.Vice President and Chief Financial OfficerTelephone: 905 565-3808E-mail: [email protected]

AUDITORS

Ernst & Young LLPToronto, 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 AvenueToronto, Ontario M5J 2Y1Telephone: 1-800-564-6253Fax: 1-800-453-0330E-mail: [email protected]

STOCK EXCHANGE LISTING

Toronto Stock ExchangeStock symbol: SQP

SHARES OUTSTANDING

13,128,719 at March 31, 2012

ANNUAL GENERAL MEETING

10:00 am Eastern TimeMay 1, 2012Fraser Milner Casgrain LLP77 King Street WestSuite 400Toronto, Ontario

DIRECTORS

John K. Bell 1

Chairman, BSM Wireless Incorporated

Robert J. Beutel 1, 2

President, Oakwest Corporation Limited

Ian C.B. Currie, Q.C. 2

Corporate Director

Robert H.R. DryburghPresident and Chief Executive OfficerStrongco Corporation

Colin Osborne, P.Eng. 2

President and Chief Executive OfficerVicwest Inc.

Ian Sutherland 1

Chairman of the BoardMCAN Mortgage Corporation

1. Member of Audit Committee2. Member of Corporate Governance, Nominating, Compensation and Pension Committee

OFFICERS AND SENIOR MANAGEMENT

Robert J. BeutelChairman of the Board

Robert H.R. DryburghPresident and Chief Executive Officer

Christopher D. ForbesVice President, Human Resources

William J. OstranderVice President, Crane

Thomas J. PerksVice President, Corporate Development

Leonard V. Phillips, C.A.Vice President, Administration and Secretary

Anna C. SgroVice President, Multiline

J. David Wood, C.A.Vice President and Chief Financial Officer

Stuart E. WelchPresident, Chadwick-BaRoss, Inc.

Michel G. RhéaumeGeneral Manager, Case

Peter DuperrouzelManager, Information Services

Strong People Strong Brands Strong Commitments

The Unmistakable Power of Strongco

Documents

STRONGCO CORPORATION . FIRST QUARTER REPORT · STRONGCO CORPORATION . FIRST QUARTER REPORT THREE MONTHS ENDED MARCH 31, 2012. ... The following management discussion and analysis