6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of January 2003 Commission File Number 0-30024

CFM CORPORATION
(Name of registrant)

460 Admiral Boulevard, Mississauga, Ontario, Canada L5T 3A3
(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F Form, 40-F √

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the SEC pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes No √

If “Yes” is marked, indicate the file number assigned to the registrant in connection with Rule 12g3-2(b):  N/A

EXHIBIT INDEX

1
2
3
4 Annual Report
Annual Audited Financial Statements
Management Proxy Materials
Management Discussion and Analysis

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CFM CORPORATION
By:	/s/SONYA STARK
Sonya Stark Director, Legal Affairs Investor Relations and Corporate Secretary

Date:  January 30, 2003

#

EX-1

corporate profile During the past 15 years, CFM has grown from a small regional hearth manufacturer into a diversified home products company, with annual sales of $576 million and more than 2,400 employees in North America and the United Kingdom.   This track record has been made possible by an unwavering focus on the high quality, high performance home products that today’s consumers value most. Whether they are spending precious time with family or proudly describing the attributes of our hearth, barbeque and other home products to friends and neighbours, everything we manufacture at CFM is designed to make consumers feel right at home.

CFM at a Glance  inside front cover Financial Performance  2 Letter from the Chairman  3 Management Biographies  12 Management’s Discussion and Analysis 14 Management’s Responsibility for the Financial Statements 20 Auditors’ Report 20 Financial Statements 21 Notes to Consolidated Financial Statements 24 Five Year Highlights 39 Corporate Directory and Investor Information 40 Employee Listing inside back page

PRODUCT		MARKET
gas fireplaces		CFM manufactures an extensive line of gas fireplaces. The economic, environmental and aesthetic benefits of natural gas bode well for CFM, an industry leader that derives more than 50% of its hearth revenues from high-margin, gas-fuelled products.
wood fireplaces		CFM's factory-built wood hearths meet increasingly stringent demands for efficiency, convenience and safety. Loaded with features such as advanced heat circulation and zero-clearance designs, CFM wood fireplaces combine traditional charm with unprecedented versatility.
gas and wood stoves		With a complete range of direct-vent, natural-vent and vent-free gas stoves, and an elegant line of fuel-efficient low emission cast-iron wood-burning models, CFM's high-quality stoves are aimed at the growing retrofit/remodelling markets, where consumers are seeking elegant and efficient space heating.
electric fireplaces and stoves		CFM's electric fireplaces and stoves have extended the Company's presence into condominiums, apartment buildings, offices and retail locations. With patented light filtering technology that creates astounding realism and ambience, these innovative products can be "plugged-in" just about anywhere.
space heating products		CFM's full line of space heaters has helped the Company expand its presence in the fast-growing mass merchant sales channel. The Company's focus on product innovation makes it well positioned to benefit from strong demand and continued consolidation in this sector.
gas log sets		Used in tandem with CFM's patented Insta-Flame burner, the Company's ceramic fibre log sets create an intense, realistic glow. Gas logs make it easy and cost-effective to convert any traditional fireplace to gas.
mantels and accessories		CFM's mantels, cabinets and other hand crafted accessories provide consumers with the choice and quality they need to enhance the value and appearance of their homes.

PRODUCT		MARKET
barbeques		CFM's entry into the mid- to high-end segment of the barbeque market has leveraged the Company's core manufacturing expertise, provided important counter-seasonal benefits and fuelled its penetration of mass merchant sales channels. In just three short years, CFM has become a major player in the growing North American barbeque industry.
patio heaters		CFM's gas infrared patio heaters take the chill off cool evenings and extend the outdoor season, two reasons for their growing popularity in home, restaurant and other commercial applications.
outdoor fireplaces		The rising popularity of outdoor leisure and entertainment activities is taking the conveniences of the home outside. CFM is meeting this trend with specialized outdoor fireplaces that feature realistic masonry design and durable stainless steel construction.
garden products		Supported by strong demographic fundamentals, CFM's garden products business continues to provide counter-seasonal opportunities to enhance capacity utilization and revenue growth.

PRODUCT		MARKET
dispensing, filtration and purification		Focused on value-added appliances for the home market, CFM offers a growing range of innovative water dispensing, filtration and purification products under the Greenway, Polar and Vitapur brand names.
		CFM's unique Vitapur UV water purification system delivers whole-home protection against organic contaminants.

market driven product development	Our products are specifically developed to meet emerging consumer needs. Quality, aesthetics and ease of installation and use consistently drive our product development efforts.
a strong focus on high-value-added products	We are focused on the high-margin retrofit market. Our products have an edge - in quality and performance - that makes them a source of pride in the consumer's home and an attractive opportunity for our retail partners.
expansion/extension within leading distribution channels	We systematically evaluate distribution possibilities and our existing relationships within leading sales channels to selectively place product. During the past few years, we have achieved significant growth in the home renovation and mass merchant sales channels.
continuous improvement	CFM is committed to building its lead as the lowest cost, highest quality supplier. During the past few years we have invested heavily in manufacturing process improvement and enterprise-wide information technology.
flexible manufacturing	Within our core hearth operations, we fabricate most of our own components and products, an approach that results in greater manufacturing flexibility and faster speed to market. Where beneficial, we also source production with quality manufacturers around the world to supplement our domestic capabilities.
management accountability	We promote entrepreneurial behaviours that benefit our customers and shareholders - through performance-based compensation, share ownership and profit sharing programs that reward employees on the basis of outcomes.
industry-leading financial performance	Over the long term, we aim to achieve 20% annual revenue and pre-tax profit growth. We expect to generate strong operating margins and free cash flow and to create returns on capital significantly in excess of the cost of funds invested.

F I N A N C I A L   P E R F O R M A N C E
SUMMARIZED EARNINGS STATEMENT
(thousands of dollars except per share amounts)
		2002		2001	% change
Sales		576,232		416,332	38
Income before taxes		61,800		43,626	42
Net income		42,081		31,398	34
Earnings per share	$	1.06	$	0.82	29
EBITDA*		81,964		69,344	18

* EBITDA is defined as earnings before the taking of any deductions in respect of interest, taxes and amortization. EBITDA is presented before deductions for interest expense, tax expense and amortization to provide financial statement users a measure of CFM's earnings available to provide for these costs. EBITDA has been determined by taking net income for the period from the Consolidated Statement of Operations and adding to it interest expense, amortization and income taxes which are disclosed as individual line items within the Consolidated Statement of Operations. Please refer to the EBITDA section of the Management's Discussion and Analysisin this annual report for a detailed calculation of EBITDA.

EBITDA is not a recognized measure for financial statement presentation under Canadian generally accepted accounting principles ("GAAP"). Non-GAAP measures (such as EBITDA) do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other issuers. Investors are encouraged to consider this financial measure in the context of CFM's GAAP results, as provided in the attached financial statements.

Another great year By almost any measure, fiscal 2002 was a year of significant accomplishment at CFM. It was a year in which we achieved record financial results by extending our presence into more product categories and more sales channels than ever before. At the same time, we continued to make the necessary investments - in both human and capital resources - that will advance our evolution as a leading and diversified home products manufacturer.

Record financial results For the 12 months ended September 28, 2002, sales were up $160 million to a record $576 million, a 38% increase over the year before. Sales of hearth and heating products were up 11%, and within this category, hearth products generated double-digit growth thanks to continuing market share gains in the new home market. Sales of barbeque and outdoor products reached $133 million, an increase of $114 million from fiscal 2001. This exponential rate of growth was the result of our successful introduction of barbeques into the mass merchant channel, the January 2, 2002 acquisition of Keanall Holdings Limited - a manufacturer of barbeque accessories and after market parts - and the subsequent acquisition of The Great Outdoors Grill Company on May 30, 2002.

Gross profit also increased significantly, rising 26% to a record $174 million. As a percentage of sales, however, gross profit declined from 33.0% to 30.1%. This was primarily due to our expansion into barbeque products, which command lower margins than our traditional hearth products, as well as to short-term inefficiencies associated with the commencement of large-scale barbeque operations at our new facility in Mississauga, Ontario.

At $82 million, earnings before interest, taxes and depreciation also reached record levels but as a percentage of sales declined from 16.6% to 14.2%. This was primarily due to lower gross margins. Net income increased 34% to $42.1 million from $31.4 million a year ago and 16% from $36.4 million last year after adjusting for changes to the amortization of goodwill as required by the Canadian Institute of Chartered Accountants. Earnings per share increased 29% to $1.06 from $0.82 last year and 12% from $0.95 last year after giving effect to the same accounting changes.

A proven strategy It's been said that "the more things change, the more they stay the same." Sometimes I think that adage could have been invented to describe the history of CFM. That's because - while evolution has been a way of life at this Company from its very beginning - one thing that's never changed is our basic strategy for growth. Our success has always been based on market-leading quality and innovation, ongoing expansion of our product lines and distribution channels, and continuous improvement in our manufacturing and distribution processes. This philosophy has been the driving force behind CFM's exceptional rate of growth during the past 15 years.

Right at home At the same time, we know the size and shape of CFM will keep right on changing. In fact, the theme of this year's annual report - Right at Home - reflects this guiding principle of our ongoing evolution. CFM began its existence as a small regional hearth manufacturer in 1987. Since then, through a combination of timely acquisitions and strong internal growth, we have developed into a leader in the North American hearth industry, with a hard earned reputation for quality, innovation and manufacturing excellence. Along the way, we've taken advantage of favourable consumer trends, such as a steady increase in home improvement spending and a rising demand for the economic, environmental and aesthetic advantages of gas-fired heating products.

Of potentially even greater significance, our success in the hearth business has provided the foundation for our development as a diversified home products manufacturer. In just three years, CFM's barbeque business has leapt from the drawing board into a $133 million operation with enormous growth potential. Barbeque was a natural fit for CFM because it allowed us to leverage our expertise in metal fabrication and burner technology while providing a complementary product line for our manufacturing facilities and existing customer base. Last year, we successfully expanded our barbeque business into the mass retail channel as a dedicated supplier to North America's two largest home improvement chains. That's quite an accomplishment for a company that built its first barbeque manufacturing plant in September 2001. But we aren't finished yet. In fact, we have set our sight on becoming one of the industry's leading full-line barbeque manufacturers within two years.

We have a few competitive advantages. First, because CFM's barbeque operations are counter-seasonal to its core hearth operations, we are able to maximize the utilization of our facilities on a year-round basis and operate over a much larger manufacturing base than a traditional barbeque manufacturer. That's something we believe our competitors simply aren't able to do. Second, although we are relatively new to the business, our expanding line of barbeques further strengthens our growing presence in all of the retail sales channels we serve.

We know that success in today's retail environment is really a matter of effective real estate management. Our job is about getting the right products to the right stores in a tight time frame and presenting them in a way that helps our customers maximize sales per square foot. It's about genuine partnerships and collaborating with our customers to develop the next generation of home products for our markets. It's about being able to step up and meet unexpected demand.

Of course, the ability to provide our customers with complete lines of high quality products is essential. That's why we purchased Keanall - to give us a strong, complementary position in after-market parts and accessories and valuable merchandizing experience. Four months later, the purchase of The Great Outdoors Grill Company allowed us to extend the barbeque line with thick cast aluminum grills, smokers, and other products aimed at lower price points. Today's leading retailers are looking for complete program management and that is exactly what CFM is striving to deliver.

Growing thirst for water products The same thinking applies to our new water and air purification business. It formally commenced operations in early October 2002, with the purchase of Greenway Home Products Inc. Greenway is a rapidly growing participant in the residential water dispensing and purification and air movement products markets with well developed product lines, a growing list of customers and a thriving business that will be accretive to CFM's earnings in its first year of operation. But that's not the exciting part.

Like our hearth and barbeque businesses, the water and air purification business is buoyed by strong fundamentals as consumers become increasingly concerned about the quality of their home environments. According to the Water Quality Association, nearly two-thirds of Americans already use bottled water, water filtration, or a combination of both in their homes. It's also a business that remains highly fragmented, one in which CFM has an opportunity to leverage its reputation for excellence in home products manufacturing as well as its growing relationships with some of North America's leading retailers.

As always, product innovation is at the heart of our growth strategy.In early fiscal 2003, CFM will introduce the revolutionary Vitapur UV water purification system, following extensive trials in numerous locations throughout North America. One of only three water purification systems in the world to earn the National Sanitation Foundation's highest effectiveness rating, this unique point-of-entry system eliminates organic contaminants from the entire household water supply. That means it offers significantly broader protection than conventional under-the-counter drinking water systems. Designed to kill a wider spectrum of microbes than traditional chlorine treatment, we believe the Vitapur system simply offers the best combination of performance and value in its category.

Diversified growth While we are pleased with the record year behind us, we know that the best is yet to come. CFM is better positioned than ever with growing product lines in expanding distribution channels. In a retail industry that continues to consolidate, CFM has well-established and growing relationships with North America's largest home improvement and mass merchant retailers. We are also well represented across the entire retail spectrum from regional merchants to farm equipment cooperatives to home appliance and specialty dealers. All of these customers are focused on higher margin home products to drive sales growth. As a full line program vendor in a growing number of important categories, CFM is well positioned to help them do that.

Despite the abundant opportunities on the road ahead, we'll also be sure to keep fine-tuning our business along the way. There is significant room to bolster earnings through various margin enhancement initiatives in the coming months, particularly through the optimization of our barbeque manufacturing facilities. Last year, we incurred some extraordinary costs to meet our commitments to quality and on-time fulfillment. It was money well spent as CFM quickly established a major new presence in the mass merchant channel and set the stage for expanded supply agreements this year and into the future. In the meantime, however, we have turned our attention to improving our manufacturing and distribution processes for next year. While gross margins on barbeque products are below those of our traditional hearth business, the incremental earnings generated as volumes increase will contribute significantly to our bottom line.

Throughout our business, we will continue to look for opportunities to realign our factory operations, to streamline our processes, to put all the pieces together in a smarter way. That effort includes our investment in a new information system across our mass merchant operations. More business process oriented than our existing system, it's strong on distribution and logistics, with the flexibility to meet the sophisticated and diverse requirements of our retail customers.

The people of CFM Earlier, I mentioned that change is nothing new to CFM. Today, however, we are better positioned than ever to take advantage of it. During the past year, we've made some important additions to the senior management team. Patrick Keane, Executive Vice President, Operations, has brought a unique combination of manufacturing and marketing skills to his new position. Our new Chief Financial Officer, David Wood, whose senior experience in a global manufacturing environment will continue to benefit CFM in the streamlining of its operations. Wes Ogden and Jamie Harrod joined the CFM family with The Great Outdoors Grill Company acquisition and brought with them a depth of experience in barbeque and the mass merchant retail environment. Doug Greenway, President of CFM's new water products business, has given us immediate expertise in a profitable business with significant growth potential.

I would also like to acknowledge the extraordinary contributions of our veteran executives. Jim Lutes, President and Chief Operating Officer of CFM, has adroitly managed another record year at CFM while helping to extend the Company's track record of timely and profitable acquisitions. Steve Haramaras, President of Mass Merchant Operations, continued to be instrumental in expanding our product placement within key mass merchant retailers. Of course, bringing a brand new barbeque manufacturing facility to large-scale production in record time was equally important, and I'd like to thank Peter Plows and his entire team for making that possible. Dan Downing, as President of Vermont Castings Majestic Products, has solidified our position in the dealer network and Michael Miller, Managing Director of CFM Europe (formerly CFM Kinder), continues to advance our position in the European market. You can read more about all of our senior people on pages 12 and 13 of this report.

Of course, I'd also like to extend my thanks to the rest of CFM's 2,400 employees, most of whom are shareholders in this Company and all of whom are listed on the outside of this report. Their spirit and dedication is the primary reason we have turned in a record performance while establishing a platform for unprecedented growth in the years ahead.

Sincerely,

COLIN ADAMSON

Colin Adamson

(FROM LEFT TO RIGHT) J A M I E H A R R O D , President, The Great Outdoors Grill Company; P E T E R P L O W S , Senior Vice President, Operations; J .. D A V I D W O O D , Vice President and Chief Financial Officer; J I M L U T E S , President and Chief Operating Officer; S U S A N M A R L O W , Vice President, Human Resources and Development; W E S L E Y O G D E N , Vice President, The Great Outdoors Grill Company; PA T R I C K K E A N E , Executive Vice President, Operations; C O L I N A D A M S O N , Chairman and Chief Executive Officer; D O U G G R E E N W AY , President, Greenway Home Products Inc.; D A N D O W N I N G , President, Vermont Castings Majestic Products ; S T E V E H A R A M A R A S , President, Mass Merchant Operations; M I C H A E L M I L L E R , Managing Director, CFM Europe Limited

J A M I E H A R R O D is the former Chairman and co-founder of The Great Outdoors Grill Company and has over 25 years of experience in the outdoor consumer products business. Jamie also co-founded Harrod-Ogden & Team, Ltd. and GO Marketing, LLC, two sales and marketing companies, and prior to that served as Vice President, Managing Director of Sunbeam's Grill Division.

P E T E R P L O W S has been CFM's Senior Vice President, Operations, since November 2000. He was formerly the Vice President, Operations, of Atoma International (part of Magna International Inc.), and prior to that, served as Group Managing Director of Webasto Group, an international group of companies engaged in the design, manufacture and supply of specialized systems for the global automotive industry.

J . D AV I D W O O D is a chartered accountant with broad financial management experience in manufacturing and distribution environments. Former Senior Vice President, Finance, of Atoma International (part of Magna International Inc.), Director of Finance at Dell Computer Corp., Vice President and Controller at Derlan Industries Limited, David possesses significant expertise in reorganizing and streamlining business operations, as well as the acquisition and integration of new businesses.

J I M L U T E S joined CFM as President and Chief Operating Officer in 1997. Since then he has been responsible for all aspects of the Company's operations including manufacturing, sales and marketing, distribution, information systems and finance. A chartered accountant and former Partner at Ernst & Young, Jim has significant experience in both mergers and acquisitions as well as in the assimilation and financing of acquired businesses.

S U S A N M A R L O W is a Certified Human Resources Professional (CHRP) and a veteran executive in human resources, manufacturing and finance. Since 1999, Susan has been responsible for all aspects of the Company's human resources program including labour relations, recruitment, training and development, compensation, occupational health and safety and benefit program design and administration.

W E S L E Y O G D E N is former President of The Great Outdoors Grill Company, a firm he co-founded in 1997. A seasoned marketing executive with more than 15 years in the outdoor consumer products business, Wes co-founded Harrod-Ogden & Team, Ltd., a sales and marketing consulting company and prior to that, served as Vice President, Sales, Outdoor Products Group at Sunbeam Corporation.

PA T R I C K K E A N E founded Keanall Holdings Limited, a manufacturer and distributor of quality aftermarket barbeque parts and accessories, in October 1981. Under Patrick's guidance, Keanall grew into the pre-eminent supplier to many of North America's leading retailers. In January 2002, CFM acquired 100% of the shares of Keanall from Patrick, who now serves as CFM's Executive Vice President, Operations.

C O L I N A D A M S O N is Chairman, Chief Executive Officer and co-founder of CFM Corporation. Under his guidance, CFM has evolved from a regional hearth manufacturer into a diversified, fast-growing leader in the North American home products industry. In recognition of his achievements, Colin received the Ontario Entrepreneur of the Year Award in the Manufacturing - Consumer Products sector, in 1999.

D O U G G R E E N W AY co-founded Greenway Home Products Inc., which quickly achieved a leadership position in the water dispensing and treatment business following its establishment in 2001. Former Vice President of Operations for Danby Products Limited, Doug managed its expansion into the U.S. and helped establish Danby as North America's largest OEM Marketer of Compact Refrigeration and Home Comfort Appliances.

D A N D O W N I N G is a mechanical engineer with more than 15 years of executive experience in the manufacturing sector. President of CFM's Vermont Castings Majestic Products division, Dan is former President of CFM RMC International, former Vice President and General Manager at Majestic Products - Huntington, Indiana facility and former Vice President, Operations and Research & Development, at Vermont Castings. Prior to that, Dan held senior operating positions in Huffy Industries.

S T E V E H A R A M A R A S is President of Mass Merchant Operations at CFM and has played a pivotal role in CFM's expansion into the fastest growing segments of North American retailing. He was formerly the President of CFM Harris Systems, former Vice President, Sales and Marketing at Harris Systems Inc. and co-founder of Uniflame Corporation, a manufacturer and importer of fireplace accessories and barbeque products.

M I C H A E L M I L L E R is a seasoned marketing executive with significant experience in the home products industry. He joined CFM in 2001 as Managing Director of the Company's U.K. operations and has been responsible for CFM's continuing expansion into the European market. Michael is former Sales and Marketing Director of Slumberland UK, and former Managing Director of Bemrose Promotional Products.

INTRODUCTION

The following management’s discussion and analysis (“MD&A”) provides a review of important events, results of operations and the financial position of CFM Corporation (“CFM” or the “Company”) for the year ended September 28, 2002, in comparison with those for the year ended September 29, 2001. This discussion should be read in conjunction with the consolidated financial statements for the year ended September 28, 2002 and the accompanying notes.

CFM operates in one business segment, home products, which includes the development, manufacture and sale of fireplaces, hearth related products and barbeques and related accessories. CFM is subject to a number of the usual risks associated with a durable consumer products industry. Demand for these products is affected by the general state of the economy, demographics, the level of housing starts, consumer spending on home renovations and remodelling, weather, the seasonality of the demand for CFM’s products, the seasonal buying patterns of major customers, industry capacity and competition. A more complete discussion of the risk factors affecting CFM is contained later in this report under the heading “Risks and Uncertainties.”

This MD&A contains forward-looking statements that reflect CFM’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of words such as “believed,” “expect,“ “anticipate,” “intend,” “foresee,” “likely,” “will” or other similar words or phrases. These forward-looking statements involve certain risks and uncertainties, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could affect these statements include, without limitation, general economic conditions, demographics, consumer confidence and the level of housing starts, war and acts of terrorism, CFM’s ability to develop new products, patent protection, weather, the seasonality of the demand for CFM’s products, the seasonal buying patterns of major customers, the availability of CFM’s manufacturing capacity to respond to seasonal demand, industry capacity, product liability, relationships with certain significant customers, suppliers and employees, availability of gas and gas prices, mass merchant consolidation, credit and collections, supply and cost of raw materials, purchased parts and labour, costs of certain employee benefits, the inability to increase selling prices as costs increase, competition, foreign currency fluctuations and government regulation. CFM considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions the reader that these assumptions regarding future events, many of which are beyond the control of CFM, may ultimately prove to be incorrect. In addition, CFM does not have any obligation to publicly update on any previously issued forward-looking statements.

Results of Operations

CFM’s consolidated sales increased 38% to $576.2 million in the year ended September 28, 2002, compared to $416.3 million in the prior year.

Sales by product category were as follows:

FOR THE 12 MONTHS ENDED	September 28	September 29
($ millions)	2002	2001
	$	$
Hearth and heating products	443.2	397.6
Barbeque and outdoor products	133.0	18.7
	576.2	416.3

Sales of hearth and heating products were $443.2 million in the year, an increase of 11% from the prior year. Within this product category, hearth products generated sizeable growth due to significant expansion within the mass merchant retail channel as well as double-digit growth in North American new home construction segment sales. The growth in new home construction was partially offset by a fourth quarter year-over-year decline in retrofit hearth product sales in the specialty retail channel caused by particularly warm weather in the fall buying season. Sales of heating products declined marginally year-over-year.

Sales of barbeque and outdoor products were $133.0 million in the year, an increase of $114.3 million from the prior year. The significant increase was a result of sales of CFM’s new mass merchant barbeque grills and barbeque accessories through CFM Keanall’s operations. CFM Keanall was formed as a barbeque division in January 2002 by combining the newly acquired Keanall Holdings Limited (“Keanall”) with the commencement of commercial production in our new barbeque grill manufacturing plant. Also as previously announced, CFM acquired The Great Outdoors Grill Company (“TGO”) on May 30, 2002. TGO’s post acquisition end of season grill sales also contributed to CFM’s overall sales increase in this category.

Gross Profit

Gross profit increased by $36.3 million or 26% from the prior year to $173.7 million. As a percentage of sales, gross profit declined to 30.1% from 33.0% in the previous year.

Gross margin in the year was impacted by the significant growth in barbeque appliance sales, which are at margins lower than the historical margins realized in hearth products, as well as by the initial season costs of the new barbeque manufacturing facility. Barbeque appliance margins were negatively impacted in this start-up year by costs associated with inefficient raw material usage and component sourcing, subcontracted metal forming and inefficient labour and operating costs following commencement of commercial operation of the new facility in January 2002. Many of the initial year cost inefficiencies have been addressed and future barbeque margins are expected to improve but remain lower than the historical hearth product margins realized by the Company.

Gross margin in the year was also impacted by year-over-year changes in sales mix. The higher sales growth in the lower margin, new home segment in the hearth market and lower fourth quarter sales of higher margin retrofit hearth products due to the unusually warm fall weather were the main contributors to the lower gross margin.

Selling, Administrative, Research and Development Expenses

Operating expenses for the year increased $23.6 million or 35% to $91.7 million. The incremental increase in expenses related primarily to the addition of Keanall and TGO. As a percentage of sales, operating expenses were 15.9%, slightly lower than the prior year of 16.4%.

EBITDA

Earnings before interest, taxes, and amortization (“EBITDA”) were $82.0 million, up $12.7 million or 18% from the prior year. EBITDA margins declined to 14.2% from 16.6% last year due primarily to the impact of lower overall gross margins as discussed above. The following is a reconciliation of EBITDA to net income for the year:

EBITDA for the year has been determined as follows:

FOR THE 12 MONTHS ENDED	September 28	September 29
($ millions)	2002	2001
	$	$
Net income for the period	42.1	31.4
Amortization	13.3	10.4
Interest income	(0.2)	(0.5)
Interest expense	7.1	8.3
Income taxes	19.7	14.7
Amortization of goodwill (net of tax)	—	5.0
EBITDA	82.0	69.3

EBITDA is defined as earnings before the taking of any deductions in respect of interest, taxes and amortization. EBITDA is presented before deductions for interest expense, tax expense and amortization to provide financial statement users a measure of CFM’s earnings available to provide for these costs. EBITDA has been determined by taking net income for the period from the Consolidated Statement of Operations and adding to it interest expense, amortization and income taxes which are disclosed as individual line items within the Consolidated Statement of Operations.  

EBITDA and EBITDA margin are not recognized measures for financial statement presentation under Canadian generally accepted accounting principles (“GAAP”). Non-GAAP measures (such as EBITDA and EBITDA margin) do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other issuers. Investors are encouraged to consider these financial measures in the context of CFM’s GAAP results, as provided in the financial statements for the year ended September 28, 2002.

Net Interest Expense

Net interest expense of $6.8 million was down $1.0 million from the prior year as a result of lower interest rates.

Net Income

Net income for the year ended September 28, 2002 was $42.1 million, up 34% from $31.4 million in the previous year due primarily to the significant growth in sales.

In accordance with the Canadian Institute of Chartered Accountants’ (“CICA”) new accounting recommendation for Business Combinations, Goodwill and Other Intangible Assets, goodwill is no longer amortized. Net income in the prior year was $36.4 million after giving retroactive effect to the accounting change concerning the amortization of goodwill of $5.0 million.

Earnings Per Share

Earnings per share (“EPS”) increased 29% to $1.06 from $0.82 in 2001, due primarily to the 34% increase in net income, partially offset by a 4% increase in the weighted average number of shares outstanding. The weighted average number of common shares of the Company (“Common Shares”) outstanding increased to 39,836,000 primarily as a result of the 2,722,000 Common Shares issued on the acquisitions of Keanall and TGO net of the purchase of 180,000 Common Shares under the Company’s Normal Course Issuer Bid. On a comparative basis, EPS increased by $0.11 or 12% from $0.95 in 2001 after giving retroactive effect to the accounting change concerning goodwill.

Diluted EPS improved to $1.03 from $0.81 in the prior year and from $0.94 after retroactive effect of the accounting change concerning goodwill.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Accounts receivable increased $33.5 million compared to a year ago due primarily to higher hearth sales in the fourth quarter and particularly in the month of September 2002 compared to a year ago, as well as barbeque accounts receivable of Keanall and TGO operations.

Inventory increased by $38.5 million over the prior year due to the addition of Keanall and TGO as well as the initial year, end of season inventories of grills and raw material inventories required for CFM’s new barbeque manufacturing operation. The expanded barbeque grill offering has been successful with consumers, contributing significantly to CFM’s sales growth in the year. Initial year market penetration uncertainty, product mix variability and customer on-time fulfillment demands have led to higher grill inventories to support this sales growth.

Other assets increased by $1.3 million over the prior year to $6.8 million with the deferred barbeque facility start-up costs accounting for the majority of the increase. Pre-commercial production start-up costs for the new barbeque manufacturing facility totalling $3.8 million have been deferred. Of that amount, $2.0 million was incurred and deferred in fiscal 2002 up to the end of the first quarter when commercial production quality and output levels were achieved. For the nine-month period from the beginning of the second quarter through to the end of the fiscal year, $0.6 million of deferred barbeque facility start-up costs were amortized.

Intangible assets increased by $2.0 million over the prior year to $8.3 million. The trademarks acquired by the Company’s British fireplace business accounted for the majority of the increase.

Goodwill increased by $60.7 million to $232.7 million due primarily to the goodwill acquired on the acquisitions of Keanall and TGO of $51.5 million and $12.9 million, respectively. Application of the new fair value impairment test of goodwill recommended by the CICA resulted in a $2.0 million writedown of the goodwill associated with CFM’s United Kingdom subsidiary to zero. Consistent with the CICA accounting recommendation for Business Combinations, Goodwill and Other Intangible Assets, the Company ceased amortizing goodwill in fiscal 2002. In accordance with the new pronouncement, the Company will assess the impairment of goodwill by applying a fair value based test on an annual basis going forward.

Shareholders’ equity increased by $65.8 million or 24% over the prior year to $343.4 million with net book value per share increasing to $8.46, up 16% from $7.30 in 2001. The principal factors contributing to the change in equity were net earnings for the year of $42.1 million and the share consideration issued as part of the Keanall and TGO acquisitions of $33.5 million.

CASH FLOW

During the year, CFM generated $49.7 million in cash from operations, a $15.3 million or 44% increase from the $34.4 million of cash generated in fiscal 2001. An increase of $7.3 million in cash flow from operations before changes in non-cash working capital, along with an $8.0 million lower investment in working capital compared to the prior year, contributed to the improvement in cash generated.

Non-cash working capital was impacted by an incremental investment in inventory primarily attributable to the initial year, end of season finished goods inventory of barbeque grills and raw materials for the new barbeque operation, as well as higher fireplace inventories in line with the demand expectation for the fall/winter fireplace season. This was offset by lower cash installments of income taxes in fiscal 2002 as a result of changes in the timing of quarterly installments in the United States and an increase in accounts payable and accrued liabilities. The increase in payables was lower than the increase in other working capital as the Company continued to take advantage of supplier discounts for early payment when economically justified. Excluding the impact of the additional receivables from the acquired businesses of Keanall and TGO, accounts receivable increased only marginally year-over-year despite high er sales in the fourth quarter and particularly in the month of September 2002 due to a focused effort to improve the aging of receivables.

Cash flow used in investing activities was $50.3 million with Keanall and TGO acquisitions consuming $10.8 million and $15.1 million, respectively. Capital spending in the fiscal year was $20.9 million. Significant capital projects in the year included the completion of the Company’s new barbeque manufacturing facility, tooling costs to accommodate the increase in demand for electric fireplaces, and the ERP system implementation for our mass merchant operations.

The Company’s net debt increased by $50.1 million to $201.3 million, reflecting the residual over operating cash flow required to fund the acquisitions of Keanall and TGO as well as capital expenditures. The Company is capitalized with net debt to total capital of 59%.

Net debt is defined as debt (current and long-term portion) plus bank indebtedness net of cash. This measure is widely accepted by the financial markets as a measure of credit availability. Net debt is not a recognized measure for financial statement presentation under Canadian generally accepted accounting principles (“GAAP”). Non-GAAP measures (such as net debt) do not have any standarized meaning and are, therefore, unlikely to be comparable to similar measures presented by other issuers. Investors are encouraged to consider this financial measure in the context of CFM’s GAAP results, as provided in the financial statements for the year ended September 28, 2002.

With the objective of maximizing return on capital employed, the Company purchased and cancelled under its 2001/2002 Normal Course Issuer Bid 179,500 Common Shares at an average price of $9.48 per share during the fiscal year for $1.7 million. The Company filed a new Normal Course Issuer Bid on October 3, 2002, and under the 2002/2003 Normal Course Issuer Bid, the Company can purchase up to 2,800,000 Common Shares commencing October 9, 2002 until October 8, 2003.

Cash flows from operations in fiscal 2003 should generate adequate cash reserves for capital expenditures and purchases of shares under the 2002/2003 Normal Course Issuer Bid and provide excess cash capacity to repay debt or use for other corporate purposes.

RISKS AND UNCERTAINTIES

The Company is subject to a number of the usual risks associated with operating as a manufacturer in a durable consumer products industry. The Company manufactures a line of hearth, heating and barbeque products and accessories for the North American and U.K. markets. Demand for these products is affected by the general state of the economy, including interest rates, the level of housing starts and consumer spending on home renovations and remodelling, and the weather. The Company seeks to minimize the effect of these short-term variances by geographic, product-line and distribution-channel diversification.

A substantial portion of the Company’s products is based on gas-fuelled products. Major changes in the prices of natural gas, propane or kerosene may affect the markets for the Company’s products.

In the normal course of business, the Company monitors the financial condition of its customers and reviews on a regular basis the credit history of each new customer. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and economic circumstances. The Company does not believe that it is exposed to an unusual level of customer credit risk.

An increasing proportion of the Company’s revenues is generated from mass merchant customers. There is a trend to increased concentration in the mass merchant channel through continued retailer consolidation. For the year ended September 28, 2002, three customers represented 38% of total sales and 52% of the year-end accounts receivable balance. In future, as the Company’s sales to this type of customer grow, the risk increases that loss of revenue from one or more of these customers could adversely affect the Company’s operating results.

As the Company continues to expand the scope of its activities in foreign markets, it becomes exposed to a greater degree of foreign exchange risk. The Company has exposure to exchange rate changes as a result of its net investment in foreign subsidiaries. The U.S. and U.K. operations are considered self-sustaining foreign operations for financial reporting purposes. Gains or losses on translation of the Company’s net investment in foreign subsidiaries are recorded as a separate item of shareholders’ equity.

Any weakening in the value of the U.S. dollar or British pound against the Canadian dollar would result in lower revenue and earnings for the Company when stated in Canadian dollars.

The Company also imports certain products from South Korea. While these purchases are denominated in U.S. dollars, the Company is subject to adjustments in product pricing, either favourable or unfavourable, depending on the relationship of the Korean won and the U.S. dollar. Significant strengthening of the Korean won against the U.S. dollar could result in lower earnings for the Company.

The Company’s Canadian operations utilize raw materials purchased in U.S. dollars. A substantial portion of the foreign exchange exposure on these purchases is offset by a corresponding revenue stream obtained from sales of products manufactured in Canada and sold in the United States in U.S. dollars. U.S. denominated debt allows the Company to mitigate the currency translation effects on these operations. The Company continues to monitor foreign exchange rates and their impact on the balance sheet. While not currently a party to any exchange hedging instruments, if deemed necessary, the Company may enter into such arrangements in the future.

The Company’s interest bearing debt is floating rate, based upon prime rate based loans, Bankers’ Acceptances, LIBOR loans or any combination thereof. Interest bearing debt was $174 million at September 28, 2002.

Due to the nature of the Company’s manufacturing operations, environmental laws and regulations have not had, and are not expected to have, a significant impact on operations.

Quarterly Financial Results

(in thousands of dollars, except per share amounts)

		Q1		Q2			Q3			Q4		Full Year
	2002		2001	2002	2001	2002		2001	2002		2001	2002	2001
Sales	127.7		110.3	113.1	74.8	152.4		87.2	183.0		144.0	576.2	416.3
Net income	13.9		11.9	6.3	3.0	7.3		3.4	14.6		13.1	42.1	31.4
EBITDA*	25.4		23.9	13.2	8.8	15.8		10.4	27.6		26.2	82.0	69.3
Per share
Earnings	0.37		0.31	0.15	0.08	0.18		0.09	0.36		0.34	1.06	0.82
Earnings before
goodwill
amortization	0.37		0.34	0.15	0.11	0.18		0.12	0.36		0.38	1.06	0.95
Diluted earnings	0.36		0.30	0.15	0.08	0.18		0.09	0.35		0.34	1.03	0.81
* Please refer to the EBITDA section of the MD&A included in this report.

O U T L O O K

While fiscal 2002 was a success in terms of record sales and earnings, it was also a success in establishing a strong platform from which to build and grow profitably in the future on three fronts. First, CFM’s core hearth and space heating operations remain well positioned for continued growth through market share gains in the new home sector and significant new opportunities in remodelling markets as consumers focus more of their discretionary spending on the home. In addition, with expanded relationships within the mass merchant channel, the fastest growing segment of the retail market, and one of the broadest distribution networks in the industry, we expect to achieve continued revenue growth in CFM’s core hearth and space heating business next year and beyond.

Second, in fiscal 2002, we successfully launched CFM’s new barbeque manufacturing facility and a new line of barbeque appliances, and established and strengthened relationships with key mass merchant retailers. In combination with the acquisitions of Keanall and TGO, CFM is now a major player in barbeque appliances and accessories. Through new product offerings and expanded presence in retail markets, we expect significant growth in barbeque and outdoor products in fiscal 2003 and following years.

Third, CFM’s recent acquisition of Greenway Home Products Inc. (“Greenway”), in conjunction with the continued development of CFM’s own water purification technology, has solidly placed the Company in the high-growth-potential water purification and dispensing market. As these products are sold through retail and, in particular, mass merchant retail channels, we will be able to lever CFM’s relationships within these channels to drive further sales growth. In fiscal 2003, we expect to achieve only modest growth in this segment, but with the expectation of significant growth beyond.

As barbeque appliances and accessories command a lower gross margin than CFM’s traditional hearth products, with the anticipated growth in the Company’s barbeque business, we expect overall gross margins to be lower in the future. However, from CFM’s results in fiscal 2002, we believe that the Company has significant performance opportunities heading into fiscal 2003. A number of factors should contribute to gross margin improvements in fiscal 2003, including overcoming start-up inefficiencies at the Company’s new barbeque facility, improving overhead absorption profile through better utilization of manufacturing capacity and streamlining the Company’s operations to improve the link between sales forecasts, inventory levels and plant performance. In addition, looking forward we will see leverage in CFM’s net profitability as the Company is able to grow without adding significant overhe ad and administrative support, which should result in improvement in the Company’s net margins.

As we look at trends in the Company’s business overall, we are hopeful that, through a more expansive participation with a broad range of retailers in hearth, barbeque and now our water and air products, CFM can be positioned as the supplier of home appliances that will be commonplace in most North American homes.

We feel that CFM is well positioned in its markets and has the financial capacity to support its aggressive growth plans for fiscal 2003 and beyond.

 

The accompanying consolidated financial statements of CFM Corporation have been prepared by management in accordance with generally accepted accounting principles consistently applied. The significant accounting policies, which management believes are appropriate for the Company, are described in note 2 to the consolidated financial statements. The financial information contained elsewhere in this Annual Report is consistent with that in the consolidated financial statements.

Management is responsible for the integrity and objectivity of the consolidated financial statements. Estimates are necessary in the preparation of these statements and, based on careful judgements, have been properly reflected. The Company’s accounting procedures and related systems of internal control are designed to provide reasonable assurance that its assets are safeguarded and its financial records are reliable.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Audit Committee of the Board is responsible for reviewing the annual consolidated financial statements and reporting to the Board, making recommendations with respect to the appointment and remuneration of the Company’s Auditors and reviewing the scope of the audit. Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards and applicable laws and maintaining proper standards of conduct for its activities.

COLIN ADAMSON	JIM LUTES
Colin Adamson	Jim Lutes
CHAIRMAN AND CEO	PRESIDENT AND COO

To the Shareholders of

CFM Corporation (formerly CFM Majestic Inc.)

We have audited the consolidated statements of financial position of CFM Corporation (formerly CFM Majestic Inc.) as at September 28, 2002 and September 29, 2001 and the consolidated statements of operations and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 28, 2002 and September 29, 2001 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Toronto, Canada	ERNST & YOUNG LLP
November 8, 2002	CHARTERED ACCOUNTANTS

FOR THE YEAR ENDED	September 28		September 29
		2002		2001
		$		$
SALES		576,232		416,332
Cost of sales		402,534		278,892
Gross profit		173,698		137,440
EXPENSES
Selling and administrative, research and development (note 6)		91,734		68,096
Amortization		13,319		10,382
Interest income		(282)		(539)
Interest expense		7,127		8,363
		111,898		86,302
Income before income taxes and amortization of goodwill		61,800		51,138
Income taxes (note 11)		19,719		14,757
Income before amortization of goodwill		42,081		36,381
Amortization of goodwill (2001 – net of taxes of $2,529) (note 7)		—		4,983
Net income for the year		42,081		31,398
Retained earnings, beginning of year		119,942		94,465
Options repurchased (net of taxes of $1,584; 2001 – $331) (note 10)		(2,598)		(539)
Premium on repurchased common shares (note 10)		(1,076)		(5,382)
Goodwill impairment on transition (net of taxes of $166) (note 7)		(1,848)		—
Retained earnings, end of year		156,501		119,942
Earnings per share (note 13)	$	1.06	$	0.82
Earnings per share before goodwill amortization (note 7)	$	1.06	$	0.95
Diluted earnings per share (note 13)	$	1.03	$	0.81
See accompanying notes

AS AT SEPTEMBER 28, 2002 AND AT SEPTEMBER 29, 2001	2002	2001
	$	$
A S S E T S
Current
Cash and cash equivalents	11,720	4,266
Accounts receivable (note 3)	156,064	122,592
Inventory (note 4)	118,232	79,693
Prepaid and other expenses	4,123	1,985
Income taxes recoverable	—	8,421
Future income taxes (note 11)	9,588	6,447
Total current assets	299,727	223,404
Capital assets, net (note 5)	116,376	94,124
Other assets (note 6)	6,780	5,501
Goodwill (note 7)	232,716	172,051
Intangible assets (note 7)	8,298	6,319
Future income taxes (note 11)	888	630
	664,785	502,029
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Bank indebtedness (note 9)	19,279	10,976
Accounts payable and accrued liabilities	79,152	49,900
Current portion of long-term debt (note 9)	16,338	16,009
Current portion of note payable (note 8b)	14,722	—
Income taxes payable	1,370	—
Future income taxes (note 11)	205	231
Total current liabilities	131,066	77,116
Long-term debt (note 9)	157,695	128,513
Note payable (note 8b)	4,978	—
Future income taxes (note 11)	27,662	18,644
Total liabilities	321,401	224,273
Minority interest	8	144
Contingencies and commitments (note 12)
SHAREHOLDERS’ EQUITY
Share capital (note 10)	161,498	128,545
Retained earnings	156,501	119,942
Cumulative translation adjustment (note 14)	25,377	29,125
Total shareholders’ equity	343,376	277,612
	664,785	502,029
See accompanying notes
On behalf of the Board:
WILLIAM S. CULLENS	CARLO DE PELLEGRIN
Director	Director

FOR THE YEAR ENDED	September 28	September 29
	2002	2001
	$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year	42,081	31,398
Add (deduct) items not involving cash
Amortization	13,319	17,894
Future income taxes	6,432	6,015
Non-cash interest on Keanall note payable (note 8b)	357	—
Loss/(gain) on disposal of capital assets	144	(175)
Minority interest	(11)	(93)
	62,322	55,039
Changes in non-cash working capital (note 15)	(12,646)	(20,646)
Cash flows provided by operating activities	49,676	34,393
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (note 8)	(29,421)	(23,363)
Purchase of capital assets	(20,854)	(16,525)
Development costs	(79)	(1,459)
Proceeds on disposal of capital assets	64	328
Cash flows used in investing activities	(50,290)	(41,019)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of non-revolving term facilities	(11,280)	(15,074)
Revolving term facility, net	31,645	17,747
Bank indebtedness	3,445	3,574
Repayment of note payable (note 8b)	(10,000)	—
Repurchase of common shares (note 10)	(1,705)	(10,537)
Options repurchased (note 10)	(4,182)	(870)
Issuance of common shares (note 10)	114	151
Cash flows provided by (used in) financing activities	8,037	(5,009)
Effect of foreign currency translation on cash and cash equivalents	31	(572)
Net increase (decrease) in cash and cash equivalents during the year	7,454	(12,207)
Cash and cash equivalents, beginning of year	4,266	16,473
Cash and cash equivalents, end of year	11,720	4,266
Supplementary cash flow information
Cash taxes paid	1,068	11,552
Cash interest paid	6,424	7,582
See accompanying notes

SEPTEMBER 28, 2002

1. NATURE OF OPERATIONS

CFM Corporation (the “Company” formerly CFM Majestic Inc.) is amalgamated under the laws of the Province of Ontario. The Company is a leading vertically integrated manufacturer of hearth and home products in North America and the United Kingdom. The Company designs, develops, manufactures and distributes hearth and space heating products, barbeque and outdoor products. The Company maintains an ongoing program of research and development aimed at continually improving the quality, design, features and efficiency of its products. The Company began operating in 1987 in Mississauga, Ontario and now has five facilities in Mississauga, nine facilities in the United States and one in Stoke-on-Trent, England.

2. SIGNIFICANT ACCOUNTING POLICIES

The Company’s accounting policies are in accordance with Canadian generally accepted accounting principles.

Consolidation

These consolidated financial statements include the accounts of the Company, its subsidiaries from the dates of their acquisition and the proportionate share of the assets, liabilities and results of operations from its joint venture interest. All significant intercompany amounts and transactions have been eliminated upon consolidation.

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent; however, actual results could differ from these estimates.

Translation of foreign currencies

The accounts of self-sustaining foreign operations are translated into Canadian dollars using the current rate method, under which all assets and liabilities are translated at the exchange rate prevailing at year end, and revenue and expenses at average rates of exchange during the year. Gains or losses on translation of these account balances are not included in the consolidated statements of operations and retained earnings but are deferred and shown as a separate item of shareholders’ equity. Gains or losses on foreign currency loans that are designated as hedges of a net investment in self-sustaining foreign operations are reported in the same manner as translation adjustments.

Foreign currency denominated monetary assets and liabilities of Canadian operations are translated at the exchange rate prevailing at year end, and revenue and expenses at average rates of exchange during the year. Exchange gains and losses arising on the translation of the accounts are included in income. Non-monetary assets, liabilities and depreciation and amortization are translated at historical rates of exchange. Long-term debt payable in foreign currency is translated at the exchange rate prevailing at the year end, with the resulting adjustment included as a separate item in shareholders’ equity if the related debt has been designated as a hedge against the net investment in foreign operations or amortized over the remaining term of the debt.

Cash and cash equivalents

All highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents. Cash equivalents are valued at cost which approximates market value.

Inventory

Inventory is carried at the lower of cost, as determined on a first-in, first-out basis, and market value. Market value is defined as net realizable value for finished goods and work-in-process, and replacement cost for raw materials.

Capital assets

Capital assets are recorded at cost less accumulated amortization. Amortization is provided on the original cost less estimated salvage value of buildings and equipment using the straight-line method based on estimated useful lives as follows:

Buildings	31 years
Leasehold improvements	over lease term
Machinery and equipment	4 to 20 years
Computer hardware and software	4 to 7 years
Automotive equipment	4 to 7 years
Office furniture and equipment	10 years

Amortization commences on capital assets under construction once the construction has been completed.

Other assets

Deferred charges are carried at cost less accumulated amortization.

Research and development costs: Research and development costs are expensed as incurred unless the development costs meet the criteria for deferral. Deferred development costs are amortized over the estimated product life not longer than three years.

Deferred start-up costs: Costs incurred during the start-up period prior to commencement of commercial operations of new facilities or businesses are deferred. Amortization of these deferred costs commences when the pre-operating period ends. Amortization is provided on a straight-line basis over five years.

Deferred financing costs: Deferred financing costs are amortized on a straight-line basis over the remaining term of the corresponding debt.

Goodwill

Goodwill comprises the excess of cost over fair values of the underlying net assets acquired arising from business combinations accounted for using the purchase method. Beginning October 1, 2001, goodwill is not amortized but subject to an assessment of impairment by applying a fair value based test on an annual basis. Prior to October 1, 2001, goodwill was amortized over 25 years.

Intangible assets

Intangible assets with finite useful lives are amortized over their useful lives.

Income taxes

The Company uses the liability method of tax allocation for accounting for income taxes. Under the liability method of tax allocation, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Revenue recognition

Revenue from sales of manufactured products, net of appropriate reserves for returns, is recognized either at the date of shipment or delivery, depending on the shipping terms. Commission revenue is earned when an exclusive manufacturer ships product directly to the customer.

Stock-based compensation plan

No compensation expense is recognized when stock options are issued to employees. Any consideration paid by employees exercising stock options to purchase common shares is charged to share capital. If stock options are repurchased from employees, the excess of the market value of the stock and the exercise price is charged to retained earnings. The Company will comply with the accounting and disclosure requirements under Section 3870 of the Canadian Institute of Chartered Accountants (“CICA”) Handbook commencing in the 2003 fiscal year.

Earnings per share

Basic earnings per share has been determined by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated in accordance with the treasury stock method and is based on the weighted average number of common shares and dilutive common share equivalents outstanding.

Fair value

The following methods and assumptions were used in estimating the fair values of financial instruments:

Current financial assets and liabilities: Terms are such that their carrying amounts approximate fair values.

Variable rate bank facilities: The carrying amounts of variable rate debt approximate fair value because the rates are reflective of the current market.

Committed long-term bank facilities and other long-term debt: Fair values are estimated using discounted cash flow analysis based on current incremental borrowing rates for similar borrowing arrangements.

Credit risk

The Company’s financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents consist of short-term investments, primarily overnight deposits, and are invested with recognized Canadian and U.S. banks.

Foreign currency risk

A significant portion of the Company’s operations relates to subsidiaries located in the United States that are considered self-sustaining.

The parent Company and subsidiaries located in Canada maintain their accounts in Canadian dollars. The foreign currency risk associated with the Company’s foreign currency denominated accounts receivable and payable balances as at September 28, 2002 is not material.

3. ACCOUNTS RECEIVABLE

The combined accounts receivable of three customers represent 52% of the total receivable outstanding at September 28, 2002 (one customer represented 17% of the total receivable outstanding at September 29, 2001).

For the year ended September 28, 2002, three customers (2001 – one customer) accounted for 38% (2001 – 10%) of annual sales.

4. INVENTORY

Inventory consists of the following:

	2002	2001
	$	$
Raw materials	36,140	23,055
Work-in-process	17,983	18,984
Finished goods	64,109	37,654
	118,232	79,693

5. CAPITAL ASSETS

Capital assets consist of the following:

		2002
	Cost	Accumulated	Net book
		amortization	value
	$	$	$
Land	6,987	—	6,987
Buildings	33,788	4,989	28,799
Leasehold improvements	10,356	1,258	9,098
Machinery and equipment	95,783	37,787	57,996
Computer hardware and software	13,719	8,046	5,673
Automotive equipment	1,008	709	299
Office furniture and equipment	7,393	2,322	5,071
Capital assets under construction	2,453	—	2,453
	171,487	55,111	116,376

		2001
	Cost	Accumulated	Net book
		amortization	value
	$	$	$
Land	4,080	—	4,080
Buildings	27,125	3,982	23,143
Leasehold improvements	8,239	837	7,402
Machinery and equipment	73,099	32,529	40,570
Computer hardware and software	10,106	5,997	4,109
Automotive equipment	1,047	658	389
Office furniture and equipment	5,486	1,859	3,627
Capital assets under construction	10,804	—	10,804
	139,986	45,862	94,124

6. OTHER ASSETS

Other assets consist of the following:

	2002	2001
	$	$
Deferred barbeque facility start-up costs	3,195	1,792
Deferred development costs	1,287	1,867
Deferred financing costs	1,442	1,499
Other	856	343
	6,780	5,501

Changes in the carrying amount of deferred barbeque facility start-up costs and deferred development costs for the year ended September 28, 2002 were:

	Deferred	Deferred
	barbeque facility	development
	start-up costs	costs
	$	$
Balance as at September 29, 2001	1,792	1,867
Additions during the year	2,027	79
Amortization for 2002	(624)	(659)
Balance as at September 28, 2002	3,195	1,287

Research and development expenses for the year ended September 28, 2002 are $6,976 (2001 – $4,292).

Amortization of deferred development costs in the year are $659 (2001 – $102). Additions to deferred development costs in the year are $79 (2001 – $1,459).

7. GOODWILL AND INTANGIBLE ASSETS

In 2001, the CICA issued accounting recommendations for Business Combinations, Goodwill and Other Intangible Assets. Under the new rules, goodwill and intangible assets with an indefinite useful life arising from business combinations accounted for using the purchase method are no longer amortized but subject to an assessment of impairment by applying a fair value based test on an annual basis. Intangible assets with finite useful lives will continue to be amortized over their useful lives. The Company has adopted the new recommendations for fiscal year 2002.

Goodwill

During the year, the Company completed its transitional fair value impairment test of goodwill. Using a multiple of historical earnings valuation technique, it was determined that the carrying value of goodwill for the Company’s United Kingdom subsidiary exceeded the fair value. This caused the Company to write down the value for goodwill associated with its United Kingdom operations to zero. This resulted in a write-down of goodwill in the amount of $2,014 and related deferred tax liabilities of $166. In accordance with the transitional rules of implementing this new standard, write-down has been charged to opening retained earnings in the net amount of $1,848.

In implementing the recommendations of the CICA with respect to accounting for business combinations, goodwill and intangibles, future tax liabilities of $2,752, recorded at the time of a prior year acquisition, were reclassified against goodwill.

Changes in the carrying amount of goodwill are as follows:
	$
Balance as at September 30, 2000	149,166
Goodwill acquired on the purchase of RMC (note 8d)	23,363
Goodwill amortization	(7,512)
Adjustment for tax liabilities	858
Foreign currency translation	6,176
Balance as at September 29, 2001	172,051
Goodwill acquired on the purchase of The Great Outdoors (note 8a)	12,859
Goodwill acquired on the purchase of Keanall (note 8b)	51,508
Transitional impairment loss	(2,014)
Adjustment of future tax liabilities	(2,752)
Foreign currency translation	336
Other	728
Balance as at September 28, 2002	232,716

The change in policy with respect to the amortization of goodwill has been applied prospectively. The consolidated financial statements for the year ended September 28, 2002 have been prepared in accordance with the new policy. The consolidated financial statements for the year ended September 29, 2001 have not been adjusted. The pro forma impact on the prior period is as follows:

FOR THE YEAR ENDED	September 28		September 29
		2002		2001
		$		$
Reported net income		42,081		31,398
Add back: goodwill amortization (net of income taxes)		—		4,983
Adjusted net income		42,081		36,381
Basic earnings per share	$	1.06	$	0.82
Goodwill amortization	$	—	$	0.13
Adjusted earnings per share	$	1.06	$	0.95
Diluted earnings per share	$	1.03	$	0.81
Goodwill amortization	$	—	$	0.13
Adjusted diluted earnings per share	$	1.03	$	0.94

Intangible assets

As part of the asset purchase of Harris Systems Inc. on November 1, 1997, the Company purchased a long-term facility operating lease. The market value of the lease exceeded the present value of the future lease commitments. This leasehold right was recognized as an asset at the time of the acquisition and has been amortized over the 22-year lease term.

Trademarks include the British hearth trademarks acquired on April 9, 2002 (note 8c).

	September 28	September 29
	2002	2001
	$	$
Leasehold right
Cost	7,681	7,687
Accumulated amortization	1,717	1,368
Net book value	5,964	6,319
Trademarks, net	1,655	—
Other, net	679	—
	8,298	6,319

Amortization expense of intangible assets for the year was $349 (2001 – $340).

8. ACQUISITIONS

a) The Great Outdoors Grill Company

Effective May 30, 2002, the Company acquired all the issued and outstanding shares of The Great Outdoors Grill Company (“TGO”) of Joplin, Missouri. TGO is a North American manufacturer and distributor of quality cast aluminum barbeques. The Company satisfied the purchase price by a cash payment, including acquisition costs, of $15,423 and the issuance of 195,366 common shares of the Company valued at $3,102. The fair value of the Company’s shares was $15.88 representing the average market price on the announcement date. Additional contingent consideration not to exceed US$12,300 in the form of a non-interest-bearing promissory note will be paid if TGO achieves an earnings target for the 2003 fiscal year. The promissory note will be payable in equal installments over a two-year period commencing on January 2, 2004.

The results of the operations of TGO from the date of acquisition are included in the Company’s consolidated statement of operations for the year ended September 28, 2002. The acquisition was accounted for using the purchase method with the purchase price allocated to net identifiable assets at their fair values.

The following is a summary of the assets purchased:

	$
Current assets acquired	17,092
Long-term assets acquired	2,837
Current liabilities assumed	(14,263)
Goodwill	12,859
	18,525
Consideration:
	$
Cash, including acquisition costs	15,423
Share capital issued	3,102
	18,525

It is estimated that goodwill of $10,285 is tax deductible.

b) Keanall Holdings Limited

Effective January 2, 2002, the Company acquired all the issued and outstanding shares of Keanall Holdings Limited ("Keanall") of Mississauga, Ontario. Keanall is a leading manufacturer and distributor of quality after-market gas grill products to many of North America’s largest retailers that serve the recreational and home improvement market. Under the terms of the transaction, the Company satisfied the purchase price with a combination of a cash payment, including acquisition costs, of $11,206, the issuance of a $30,000 face value non-interest-bearing note repayable monthly over 24 months with a fair value of $29,343, and a further $30,366, paid by the issuance of 2,526,314 common shares of the Company. The fair value of the Company’s common shares was $12.02 representing the average market price on the announcement date.

The results of the operations of Keanall from the date of acquisition are included in the Company’s consolidated statement of operations for the year ended September 28, 2002. The acquisition was accounted for using the purchase method with the purchase price allocated to net identifiable assets at their fair values.

The following is a summary of the assets purchased:

	$
Current assets acquired	24,169
Long-term assets acquired	12,224
Intangible assets acquired	212
Current liabilities assumed	(17,198)
Goodwill	51,508
	70,915
Consideration:
	$
Cash, including acquisition costs	11,206
Unsecured note payable	29,343
Share capital issued	30,366
	70,915

It is estimated that goodwill of $15,000 is tax deductible.

c) Other

Effective April 9, 2002, the Company acquired substantially all of the net assets of a British hearth fireplace business for cash consideration, including acquisition costs of $2,718.

The results of operations from the date of acquisition are included in the Company’s consolidated statement of operations for the year ended September 28, 2002. The acquisition was accounted for using the purchase method with the purchase price allocated to the net identifiable assets at their fair value.

The following is a summary of the assets purchased:

	$
Current assets acquired	685
Long-term assets acquired	114
Intangible assets	1,563
Liabilities assumed	(68)
Goodwill	424
	2,718

d) RMC International Ltd.

Effective July 1, 1999, the Company acquired substantially all of the net assets of RMC International Ltd. (“RMC”) for cash consideration of $37,643 and 564,528 common shares of the Company valued at $7,480. Additional cash consideration of $23,363 (US$15,000) was paid on April 1, 2001 as RMC achieved an earnings target for the calendar year 2000. The additional consideration of $23,363 was added to goodwill in fiscal 2001.

9. BANK INDEBTEDNESS AND LONG-TERM DEBT

Long-term debt consists of the following:

	2002	2001
	$	$
Non-revolving term credit facility currently advanced at fixed rates not exceeding
90 days (2001 – 180 days) with a weighted average rate of 4.47% (2001 – 4.95%)
repayable over quarterly installments beginning September 28, 2002 to be fully paid
by July 26, 2005. The Company may borrow up to $55,000 (2001 – $66,250).
Included in this amount was U.S. dollar debt of US$4,035 (2001 – US$5,044)
and U.K. pound sterling debt of £3,400 (2001 – £2,050).	53,703	61,469
Revolving operating loans currently advanced at fixed rates not exceeding 90 days
(2001 – 180 days) with a weighted average rate of 4.50% (2001 – 5.21%)
under which the Company may borrow up to $130,000 (2001 – $100,000).
Letters of credit totalling $8,549 (2001 – $2,582) have been issued against this facility.
The credit facility expires on July 26, 2005.	54,000	35,500
Revolving term credit facility of up to $80,000 (2001 – $50,000) advanced
at fixed rates and/or floating rates not exceeding 90 days (2001 – 180 days) with
a weighted average rate of 4.31% (2001 – 5.25%). Included in this amount was
U.S. dollar debt of $8,000 (2001– nil). The credit facility expires on July 26, 2005.	60,468	42,100
Other long-term debt bearing interest at 4.94% (2001 – 7.30%).	5,862	5,453
	174,033	144,522
Less current portion	16,338	16,009
	157,695	128,513

The Company’s syndicated credit agreement expires on July 26, 2005 with the revolving facilities extended annually for an additional 364-day period. As at September 28, 2002, the Company’s total available line of credit was $265,000 (2001 – $216,250).

In accordance with the credit agreement, the Company may borrow in Canadian dollars, U.S. dollars and U.K. pounds sterling by way of prime rate based loans, Bankers’ Acceptances, LIBOR loans or any combination thereof. Fair values of the committed long-term facilities and other long-term debt are not materially different from the carrying values.

The credit agreement includes certain restrictive covenants and undertakings. The Company is in compliance with all financial covenants.

The future minimum annual principal repayments of long-term debt over the next five years and thereafter are as follows:

	$
2003	16,338
2004	15,654
2005	138,195
2006	120
2007	120
Thereafter	3,606
	174,033

Interest on long-term debt amounted to $6,845 for the year ended September 28, 2002 (2001 – $7,824).

Bank Indebtedness

As part of the total available credit facility of $265,000, the Company has available operating lines totalling $210,000, which includes bank overdraft facilities in Canada and the U.S.

10. SHARE CAPITAL

The Company’s authorized share capital consists of an unlimited number of common shares without nominal or par value.

a) Issued and outstanding

	Number of
	shares	Amount
	#	$
	(in thousands)
Balance October 2, 2000	39,532	133,549
Options exercised	14	56
Employee share purchase plan (i)	15	95
Shares repurchased and cancelled under Issuer Bid (ii)	(1,525)	(5,155)
Balance September 29, 2001	38,036	128,545
Shares cancelled (iii)	(6,000)	(23,870)
Shares issued (iii)	6,000	23,870
Share consideration for Keanall acquisition	2,526	30,366
Share consideration for The Great Outdoors acquisition	195	3,102
Options exercised	—	3
Employee share purchase plan (i)	10	111
Shares repurchased and cancelled under Issuer Bid (ii)	(179)	(629)
Balance September 28, 2002	40,588	161,498

(i) The Company has established an Employee Share Purchase Plan (“ESPP”) in order to encourage employees to participate in the growth and development of the Company. Annually, all eligible employees may contribute to the ESPP an amount up to 20% of their aggregate base cash compensation received in the previous year. Throughout the year, the administrator, on behalf of each participating employee, purchases shares from the Company at market price less a 15% discount. Employees can sell 85% of these share accounts at any time. The remaining 15% of the employee’s share account vests equally over four quarters after the quarter in which shares were purchased. During fiscal 2002, 9,520 (2001 –15,202) shares were issued under the ESPP for $111 (2001 – $95).

(ii) The Company filed a Normal Course Issuer Bid enabling it to make market purchases of up to 2,800,000 of its common shares commencing October 9, 2001 during the next twelve-month period. As at October 8, 2002, the expiry date of the Normal Course Issuer Bid, a total of 179,500 shares had been repurchased and cancelled at an average price of $9.48.

Details of fiscal 2002 repurchases are as follows:

	Number of
	shares	Price paid
Month of purchase	purchased	per share
	#	$
October 2001	95,000	8.0000
November 2001	44,400	8.0000
July 2002	40,100	14.5145
	179,500

On September 27, 2000, the Company filed a Normal Course Issuer Bid enabling it to make market purchases of up to 2,987,000 of its common shares during the next twelve-month period. As at September 26, 2001, the expiry date of the Normal Course Issuer Bid, a total of 1,525,200  shares had been repurchased and cancelled at an average price of $6.92.

Details of fiscal 2001 repurchases are as follows:

	Number of
	shares	Price paid
Month of purchase	purchased	per share
	#	$
October 2000	211,100	6.8976
November 2000	693,300	6.5870
December 2000	359,300	6.4491
January 2001	100,800	7.2812
February 2001	10,300	8.1403
March 2001	18,200	8.7280
April 2001	2,100	9.0952
July 2001	30,100	8.6997
September 2001	100,000	9.0000
	1,525,200

On October 3, 2002, the Company filed a new Normal Course Issuer Bid enabling it to make market purchases of up to 2,800,000 of its common shares commencing October 9, 2002 during the next twelve-month period.

(iii) During the year, the Company purchased from and issued to an Officer and shareholder of the Company an equivalent number of common shares. This transaction, which was subject to regulatory approval, was reviewed and approved by the Board.

b) Stock options

Under the terms of the Stock Option Plan, all options are granted for a term of seven years commencing on the date of grant. All options granted prior to January 10, 2000 are exercisable six years and three hundred and sixty days from the date upon which such options were granted. For all options granted after January 10, 2000 and before July 24, 2002, one-third of such options will become exercisable as of each of the first, second and third anniversaries, respectively, of the date such options are granted. For all options granted after July 24, 2002, one-fourth of such options will become exercisable as of each of the first, second, third and fourth anniversaries, respectively, of the date such options are granted.

Options granted prior to September 15, 1999, may vest early if certain stock price performance criteria are met, being, one-third of the options granted in each fiscal year will become exercisable as of the first day of each of the three immediately following fiscal years, provided that the cumulative percentage increase in the market value of the common shares of the Company since the first day of the fiscal year in which the options were granted has been at least equal to 110% of the cumulative increase of the Toronto Stock Exchange 300 Index during the same period.

Options granted after September 15, 1999 but prior to January 10, 2000 may vest early if certain stock price performance criteria are met, being, one-third of the options granted in each fiscal year will become exercisable as of the first day of each of the three immediately following fiscal years, provided that the cumulative percentage increase in the market value of the common shares of the Company since the first day of the fiscal year in which the options were granted has been at least equal to the cumulative percentage increase of the Toronto Stock Exchange Industrial Products Index during the same period.

Under the Stock Option Plan, the Company is authorized to issue a maximum of 5,624,500 common shares. As at September 28, 2002, a total of 1,096,130 common shares are available for future grants and options.

A summary of the Stock Option Plan as of September 28, 2002 and September 29, 2001 and changes during the years ended on these dates is presented below:

	Options	Weighted	Number of
	outstanding	average price	vested options
	#	$	#
Outstanding at September 30, 2000	2,702,610	8.20	339,949
Granted	1,162,000	9.62
Exercised	(14,000)	4.00
Repurchased	(306,471)	7.12
Forfeited	(215,468)	9.11
Outstanding at September 29, 2001	3,328,671	8.75	379,700
Granted	1,049,000	13.99
Exercised	(333)	9.50
Repurchased	(625,470)	8.33
Forfeited	(189,832)	9.20
Outstanding at September 28, 2002	3,562,036	10.37	297,582

The following table outlines stock options outstanding at September 28, 2002:

	Exercise	Options
Options outstanding	price	exercisable	Expiry date
#	$	#
12,000	8.375	12,000	November 27, 2003
168,009	12.625	—	October 1, 2004
169,658	7.800	7,673	October 1, 2005
398,323	11.250	13,006	October 4, 2006
727,478	6.250	264,903	July 26, 2007
66,666	6.700	—	November 21, 2007
945,902	9.500	—	July 25, 2008
10,000	9.750	—	September 10, 2008
15,000	9.510	—	September 12, 2008
1,042,500	14.000	—	July 24, 2009
6,500	12.500	—	September 25, 2009

Under the terms of the Stock Option Plan, 625,470 options (2001 – 306,471) were repurchased during fiscal 2002 for $4,182 (2001 –  for $870) and 333 options (2001 – 14,000) were exercised for common shares.

11. INCOME TAXES

a) Rate reconciliation

The Company’s effective income tax rates for the years ended September 28, 2002 and September 29, 2001 are derived as follows:

	2002	2001
	%	%
Combined Canadian federal and provincial tax rate	38.62	43.31
Manufacturing and processing profits deduction	(.16)	(.80)
Income taxes at different rates in foreign jurisdictions	(7.46)	(15.04)
Other	.91	.56
	31.91	28.03

b) Provision for (recovery of) income taxes
The components of income before income taxes by jurisdiction are as follows:
	2002	2001
	$	$
Income before income taxes and amortization of goodwill	61,800	51,138
Amortization of goodwill, net of tax	—	(4,983)
Income tax on amortization of goodwill	—	(2,529)
Income before income taxes	61,800	43,626
Domestic	2,224	3,111
Foreign	59,576	40,515
	61,800	43,626
The provision for (recovery of) income taxes consists of the following:
	2002	2001
	$	$
Income taxes before the undernoted	19,719	14,757
Income taxes on amortization of goodwill	—	(2,529)
Income taxes	19,719	12,228
Current	13,287	2,728
Future	6,432	9,500
	19,719	12,228
The details of the provision for (recovery of) current income taxes are as follows:
	2002	2001
	$	$
Canadian federal taxes	(444)	(117)
Provincial taxes	(437)	(63)
Foreign taxes	14,168	2,908
	13,287	2,728
The details of the provision for future income taxes are as follows:
	2002	2001
	$	$
Canadian federal taxes	1,028	488
Provincial taxes	463	251
Foreign taxes	4,941	8,761
	6,432	9,500
c) Provision for future income taxes
Future income taxes have been provided on temporary differences consisting of the following:
	2002	2001
	$	$
Reserves and allowances	1,100	813
Inventory	(835)	1,368
Capital assets	2,085	1,673
Goodwill	4,137	634
Financing	13	14
Compensation	44	25
Net operating losses	(326)	4,660
Other	214	313
	6,432	9,500

d) Future income tax assets and liabilities
Future income taxes have been provided on temporary differences consisting of the following:
	2002	2001
	$	$
Current future income tax assets
Reserves and allowances	6,115	3,531
Net operating losses	632	1,717
Inventory	2,041	843
Compensation	618	556
Stock options	404	—
Other	(222)	(200)
Total current future income tax assets	9,588	6,447
Current future income tax liabilities	(205)	(231)
Net current future income tax assets	9,383	6,216
Long-term future income tax assets
Net operating losses	595	467
Other	293	163
Total long-term future income tax assets	888	630
Long-term future income tax liabilities
Goodwill	11,099	7,578
Capital assets	10,407	7,584
Financing	4,117	78
Reserves and allowances	1,238	2,674
Other	801	730
Total long-term future income tax liabilities	27,662	18,644
Net long-term future income tax liabilities	26,774	18,014

The Company has recognized the full amount of its future income tax assets with no valuation allowance for each of the years presented.

As at September 28, 2002, one of the Company’s foreign subsidiaries has income tax losses of approximately $3,485 (2001 – $2,989) which can be applied against future years’ taxable income, the benefit of which has been recorded in the consolidated financial statements. These income tax losses do not expire.

12. CONTINGENCIES AND COMMITMENTS

a) Lease commitments

The Company is committed to premises and equipment leases with terms expiring at various dates during the next five years and thereafter. Future minimum annual payments under non-cancelable operating leases consist of the following at September 28, 2002:

	$
2003	3,340
2004	3,093
2005	2,906
2006	2,813
2007	2,739
Thereafter	6,627
	21,518

b) Legal

During the normal course of business, there are various claims and proceedings that have been or may be instituted against the Company. There are claims that are at the early stages of legal proceedings and thus the outcomes of these matters are not determinable. These claims could have a material adverse effect on the consolidated financial position of the Company or its results of operations.

c) Other

Pursuant to certain acquisitions, including a joint venture investment, the minority shareholders and joint venture partner have the option to cause the Company to purchase their interests. The Company has similar options to require the minority shareholders to sell their shares. The purchase price in both cases would be based upon a prescribed valuation formula.

13. EARNINGS PER SHARE

Basic earnings per share has been determined by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed in accordance with the treasury stock method and is based on the weighted average number of common shares and dilutive common share equivalents outstanding.

FOR THE YEAR ENDED	September 28		September 29
(in thousands except for per share amounts)		2002		2001
Earnings for year	$	42,081	$	31,398
Weighted average number of shares outstanding		39,836		38,346
Basic earnings per share	$	1.06	$	0.82
Diluted earnings per share
Weighted average number of shares outstanding		39,836		38,346
Add: Dilutive effect of stock options		1,048		386
Adjusted weighted average number of shares outstanding		40,884		38,732
Diluted earnings per share	$	1.03	$	0.81

In 2002, there are 756,099 stock options (2001 – 188,666) that were anti-dilutive and not included in the diluted earnings per share calculation.

14. CUMULATIVE TRANSLATION ADJUSTMENT

During the year ended September 28, 2002, the cumulative translation adjustment account was reduced by $4,035 to reflect the future tax liability on an unrealized foreign exchange gain resulting from the Canadian dollar investment in a U.S. subsidiary.

15. CONSOLIDATED STATEMENTS OF CASH FLOWS

The net change in non-cash working capital balances consists of the following:

FOR THE YEAR ENDED	September 28	September 29
	2002	2001
	$	$
Accounts receivable	(16,238)	(14,535)
Inventory	(16,929)	(2,769)
Prepaid and other expenses	(2,062)	(1,094)
Other assets	(3,598)	(368)
Accounts payable and accrued liabilities	14,428	3,695
Income taxes recoverable	11,753	(5,575)
	(12,646)	(20,646)

16. EMPLOYEE BENEFIT PLANS

The Company maintains various employee benefit plans which include a defined contribution plan and a multi-employer defined benefit plan. During the year, the Company’s benefit plan expenditures were approximately $1,750 (2001 – $1,457).

17. SEGMENTED INFORMATION

The Company operates in one business segment, home products, which includes the development, manufacture, and sale of hearth and heating products, barbeque and outdoor products. In light of the growth and significance of barbeque and outdoor products to the overall revenue of the Company, the Company’s revenue has been disclosed by product category.

The Chief Executive and Operating Officers of the Company review consolidated operating results to assess the performance of the business. The Company’s business organization structure and performance measurement systems are not based on product categories.

FOR THE YEAR ENDED	September 28	September 29
	2002	2001
	$	$
Net external sales:
Hearth and heating products	443,250	397,586
Barbeque and outdoor products	132,982	18,746
	576,232	416,332

Geographic information:

The Company conducts substantially all of its business activities in North America. External sales are allocated on the basis of sales to external customers.

External sales:

	U.S.	Canada	Other	Total
	$	$	$	$
Year ended September 28, 2002	472,824	81,614	21,794	576,232
Year ended September 29, 2001	345,904	51,552	18,876	416,332
Capital assets, goodwill and intangibles:
	U.S.	Canada	Other	Total
	$	$	$	$
Year ended September 28, 2002	277,841	68,510	11,039	357,390
Year ended September 29, 2001	229,770	32,287	10,437	272,494

18. RELATED PARTY TRANSACTION

During 2001, the Company purchased for $307 an exclusive perpetual licence to manufacture, market and sell products. The licence was purchased from an entity in which officers of the Company had a non-controlling interest.

19. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

The comparative consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the 2002 consolidated financial statements.

20. SUBSEQUENT EVENT

On October 3, 2002, the Company acquired all the issued and outstanding shares of Greenway Home Products Inc. (“Greenway”) of Guelph, Ontario for a cash payment of $1,000. Greenway is a participant in the residential water dispensing, purification and air movement products market, offering a line of innovative water dispensing, water purification and air appliances. The total purchase price consists of the $1,000 cash payment at closing and substantial future payments contingent on Greenway achieving future earnings targets.

F I V E Y E A R H I G H L I G H T S

(in thousands of dollars except for per share amounts and number of employees)

	2002	2001	2000	1999	1998
	$	$	$	$	$
Operating Results
Sales	576,232	416,332	381,900	355,742	272,740
EBITDA before restructuring and other costs*	81,964	69,344	72,012	66,309	51,379
Earnings before restructuring and other costs and income taxes	61,800	43,626	49,039	46,857	35,311
Earnings before restructuring and other costs	42,081	31,398	33,782	32,610	26,216
Restructuring and other costs before tax	—	—	—	23,005	—
Net income	42,081	31,398	33,782	16,487	26,216
Cash flow from operations	49,676	34,393	31,883	34,248	21,088
Capital expenditures	20,854	16,525	13,413	16,786	13,019
Acquisition expenditures	29,421	23,363	22,741	35,031	39,471
Number of employees	2,400	1,880	2,100	2,190	2,049
Per Share
EBITDA*	2.06	1.81	1.74	1.58	1.23
Cash flow from operations*	1.25	0.90	0.77	0.82	0.50
Book value*	8.46	7.30	6.16	5.33	5.06
Earnings before restructuring and other costs*	1.06	0.82	0.82	0.78	0.63
Earnings	1.06	0.82	0.82	0.39	0.63
Diluted earnings before restructuring and other costs*	1.03	0.81	0.81	0.77	0.62
Average number of shares outstanding	39,836	38,346	41,398	41,945	41,885
Financial Position
Working capital*	176,220	152,998	133,433	73,490	105,842
Total assets	664,785	502,029	452,248	418,420	360,469
Total net debt*	201,292	151,232	132,364	109,007	87,259
Shareholders' equity	343,376	277,612	243,453	225,706	212,012
Financial Statistics
Gross Margin	30.1%	33.0%	35.9%	34.6%	34.4%
EBITDA before restructuring and other costs margin	14.2%	16.7%	18.9%	18.6%	18.8%
Current ratio*	2.58	3.31	3.18	1.73	3.09
Total net debt/equity*	0.59	0.54	0.54	0.48	0.41
Total net debt/total capitalization*	0.37	0.35	0.35	0.33	0.29
Return before restructuring and other costs on average equity*	13.6%	12.10%	14.40%	14.90%	13.70%

*

The five year highlights include the following measures which are not recognized for financial statement presentation under Canadian generally accepted accounting principles: EBITDA before restructuring and costs, EBITDA per share, Cash flow from operations per share, Book value per share, Earnings before restructuring and other costs per share, Diluted earnings before restructuring and other costs per share, Working Capital, Total net debt, Current ratio, Total net debt/equity, Total net debt/total capitalization and Return before restructuring and other costs on average equity. Non-GAAP measures (such as the aforementioned measures) do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other issuers. The following are definitions of the non-GAAP measures presented above:

EBITDA before restructuring and other costs is defined as earnings before the taking of any deductions in respect of interest, taxes, amortization and restructuring costs. EBITDA is presented before deductions for interest expense, tax expense and amortizations to provide financial statement users a measure of CFM’s earnings available to provide for these costs. EBITDA has been determined by taking net income for the period from the Consolidated Statement of Operations and adding to it interest expense, amortization and income taxes which are disclosed as individual line items within the Consolidated Statement of Operations.

EBITDA per share is defined as EBITDA divided by the average number of shares outstanding.

Cash flow from operations per share is defined as cash flow from operations divided by the average number of shares outstanding.

Book value per share is defined as total shareholders’ equity divided by the number of shares outstanding as at the balance sheet date.

Earnings before restructuring and other costs per share is defined as earnings before restructuring and other costs divided by the average number of shares outstanding.

Diluted earnings before restructuring and other costs per share is defined as earnings before restructuring and other costs divided by the adjusted weighted average number of shares outstanding. Working capital is defined as current assets less current liabilities less cash plus bank indebtedness. Total net debt is defined as debt (current and long-term) plus bank indebtedness less cash. Current ratio is defined as current assets less cash divided by current liabilities less bank indebtedness. Total net debt/equity is defined as total net debt divided by shareholders’ equity. Total net debt/total capitalization is defined as total net debt divided by the sum of total net debt and shareholders’ equity. Return before restructuring and other costs on average equity is defined as earnings before restructuring and other costs divided by the average of beginning and ending shareholders’ equity.

CORPORATE DIRECTORY AND INVESTOR INFORMATION

Directors	Executive Officers	Wesley Ogden	Operating Facilities
		Vice President, The Great Outdoors
Colin M. Adamson	Colin Adamson	Grill Company	Vermont Castings Majestic Products
Chairman, Chief Executive	Chairman and		410 Admiral Boulevard
Officer and Co-Founder	Chief Executive Officer	Doug Greenway	Mississauga, Ontario
		President, CFM Greenway	Canada L5T 2N6
David W. Colcleugh (3)	Jim Lutes		Telephone: (905) 670-7777
Chairman, President and	President and	Solicitors	Facsimile: (905) 670-4676
Chief Executive Officer,	Chief Operating Officer
Dupont Canada Inc.		Fraser Milner Casgrain LLP	475 Admiral Boulevard
	Patrick Keane	1 First Canadian Place	Mississauga, Ontario
William A. Corbett (1) (2)	Executive Vice President,	100 King Street West	Canada L5T 2N1
Chairman,	Operations	Toronto, Ontario	Telephone: (905) 670-7777
The New Providence		Canada M5X 1B2	Facsimile: (905) 670-4650
Development	Peter Plows
Company Limited	Senior Vice President,	Foley & Lardner	1000 East Market Street
	Operations	Three First National Plaza	Huntington, Indiana, USA 46750
William S. Cullens (1) (2)		70 West Madison	Telephone: (260) 356-8000
Past Chairman and	J. David Wood	Chicago, Illinois	Facsimile: (260) 356-9672
Chief Executive Officer,	Vice President and	USA 60602-4205
Canron Inc.	Chief Financial Officer		Route 107
		Auditors	Bethel, Vermont, USA 05032
Carlo De Pellegrin (1) (2) (3) (4)	Susan Marlow		Telephone: (802) 234-2300
Partner,	Vice President,	Ernst & Young LLP,	Facsimile: (802) 234-2340
Williams & Partners,	Human Resources	Chartered Accountants
Chartered Accountants LLP	and Development	The Ernst & Young Tower	Beanville Road
		TD Centre, Toronto, Ontario	Randolph, Vermont, USA 05060
Paul A. Houston (2)	Sonya Stark	Canada M5K 1J7	Telephone: (802) 728-3151
President and	Director, Legal Affairs,		Facsimile: (802) 728-3171
Chief Executive Officer,	Investor Relations and	Bankers
Alderwoods Group, Inc.	Corporate Secretary		CFM Harris Systems
		Bank of Montreal	3501 West Howard Street
Patrick S. Keane	David Brash	First Canadian Place	Skokie, Illinois, USA 60076-4012
Executive Vice President,	Director, Corporate Finance	11th Floor, Toronto, Ontario	Telephone: (847) 676-3556
Operations		Canada M5X 1A1	Facsimile: (847) 676-3759
	Eileen Foley
Sheila O’Brien (2)	Director, Tax	Transfer Agent	CFM RMC International
Senior Vice President,			3501 West Howard Street
Nova Chemicals	Paul Kroetsch	Computershare	Skokie, Illinois, USA 60076-4012
	Treasurer	Trust Company of Canada	Telephone: (847) 676-3556
Heinz Rieger (3)		100 University Avenue	Facsimile: (847) 676-3759
Past Chairman and Co-Founder	Operating Management	8th Floor, Toronto, Ontario
		Canada M5J 2Y1	CFM Europe Limited
	Dan Downing		Trentham Lakes
(1) Member of the Audit Committee	President, Vermont Castings	Share Listing	Stoke-on-Trent
	Majestic Products		Staffordshire, England ST4 4TJ
(2) Member of the Compensation		Stock Symbol: CFM	Telephone: (178) 233-9000
and Corporate Governance Committee	Steve Haramaras		Facsimile: (178) 233-9009
	President, Mass Merchant	Exchange: Toronto
(3) Member of the Business	Operations	Stock Exchange	CFM Keanall
Development Committee			2695 Meadowvale Boulevard
	Michael Miller	Corporate Head Office	Mississauga, Ontario
(4) Lead Director	Managing Director,		Canada L5T 8A3
	CFM Europe Limited	CFM Corporation	Telephone: (905) 858-8010
			Facsimile: (905) 858-1165
	Jamie Harrod	460 Admiral Boulevard
		Mississauga, Ontario	350 Admiral Boulevard
	President, The Great Outdoors	Canada L5T 3A3	Mississauga, Ontario
	Grill Company	Telephone: (905) 670-7777	Canada L5T 2N6
		Facsimile: (905) 670-7915	Telephone: (905) 670-7777

								Facsimile: (905) 565-4683
Annual Meeting	The Annual and Special Meeting of the shareholders will be held on Wednesday, February 26, 2003 at 4:15 p.m. at the Toronto Stock Exchange, Conference Centre, 130 King Street West, Toronto, Ontario, Canada M5X 1J2. Send inquiries to Investor Relations, CFM Corporation 460 Admiral Boulevard, Mississauga, Ontario, Canada L5T 3A3 Telephone: (905) 670-7777 Facsimile: (905) 670-7915 E-mail: cfm@cfmmajestic.com Website: www.cfmmajestic.com
								25400 Industrial Park Road
								Ardmore, Tennessee, USA 38449
Investor Relations								Telephone: (931) 427-8170
								Facsimile: (931) 427-8168
								The Great Outdoors Grill Company
								7980 East American Drive
								Joplin, Missouri, USA 64804
Share Trading Summary								Telephone: (417) 623-2596
								Facsimile: (417) 623-3946
2002 Fiscal Year		High		Low		Close	Volume
								Greenway Home Products Inc.
First Quarter	$	13.32	$	7.85	$	13.20	3,479,357	33 Kerr Cresent, RR#3
								Guelph, Ontario
Second Quarter	$	16.95	$	13.00	$	16.00	3,274,319	Canada N1H 6N9
								Telephone: (519) 837-9724
Third Quarter	$	17.50	$	15.00	$	15.96	4,394,241	Facsimile: (519) 837-8913
Fourth Quarter	$	16.85	$	12.11	$	12.52	1,640,620
Fiscal 2002	$	17.50	$	7.85	$	12.52	12,788,537

EX-2

The accompanying consolidated financial statements of CFM Corporation have been prepared by management in accordance with generally accepted accounting principles consistently applied. The significant accounting policies, which management believes are appropriate for the Company, are described in note 2 to the consolidated financial statements. The financial information contained elsewhere in this Annual Report is consistent with that in the consolidated financial statements.

Management is responsible for the integrity and objectivity of the consolidated financial statements. Estimates are necessary in the preparation of these statements and, based on careful judgements, have been properly reflected. The Company’s accounting procedures and related systems of internal control are designed to provide reasonable assurance that its assets are safeguarded and its financial records are reliable.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Audit Committee of the Board is responsible for reviewing the annual consolidated financial statements and reporting to the Board, making recommendations with respect to the appointment and remuneration of the Company’s Auditors and reviewing the scope of the audit. Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards and applicable laws and maintaining proper standards of conduct for its activities.

COLIN ADAMSON	JIM LUTES
Colin Adamson	Jim Lutes
CHAIRMAN AND CEO	PRESIDENT AND COO

To the Shareholders of

CFM Corporation (formerly CFM Majestic Inc.)

We have audited the consolidated statements of financial position of CFM Corporation (formerly CFM Majestic Inc.) as at September 28, 2002 and September 29, 2001 and the consolidated statements of operations and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at September 28, 2002 and September 29, 2001 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Toronto, Canada	ERNST & YOUNG LLP
November 8, 2002	CHARTERED ACCOUNTANTS

FOR THE YEAR ENDED	September 28		September 29
		2002		2001
		$		$
SALES		576,232		416,332
Cost of sales		402,534		278,892
Gross profit		173,698		137,440
EXPENSES
Selling and administrative, research and development (note 6)		91,734		68,096
Amortization		13,319		10,382
Interest income		(282)		(539)
Interest expense		7,127		8,363
		111,898		86,302
Income before income taxes and amortization of goodwill		61,800		51,138
Income taxes (note 11)		19,719		14,757
Income before amortization of goodwill		42,081		36,381
Amortization of goodwill (2001 – net of taxes of $2,529) (note 7)		—		4,983
Net income for the year		42,081		31,398
Retained earnings, beginning of year		119,942		94,465
Options repurchased (net of taxes of $1,584; 2001 – $331) (note 10)		(2,598)		(539)
Premium on repurchased common shares (note 10)		(1,076)		(5,382)
Goodwill impairment on transition (net of taxes of $166) (note 7)		(1,848)		—
Retained earnings, end of year		156,501		119,942
Earnings per share (note 13)	$	1.06	$	0.82
Earnings per share before goodwill amortization (note 7)	$	1.06	$	0.95
Diluted earnings per share (note 13)	$	1.03	$	0.81
See accompanying notes

AS AT SEPTEMBER 28, 2002 AND AT SEPTEMBER 29, 2001	2002	2001
	$	$
A S S E T S
Current
Cash and cash equivalents	11,720	4,266
Accounts receivable (note 3)	156,064	122,592
Inventory (note 4)	118,232	79,693
Prepaid and other expenses	4,123	1,985
Income taxes recoverable	—	8,421
Future income taxes (note 11)	9,588	6,447
Total current assets	299,727	223,404
Capital assets, net (note 5)	116,376	94,124
Other assets (note 6)	6,780	5,501
Goodwill (note 7)	232,716	172,051
Intangible assets (note 7)	8,298	6,319
Future income taxes (note 11)	888	630
	664,785	502,029
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Bank indebtedness (note 9)	19,279	10,976
Accounts payable and accrued liabilities	79,152	49,900
Current portion of long-term debt (note 9)	16,338	16,009
Current portion of note payable (note 8b)	14,722	—
Income taxes payable	1,370	—
Future income taxes (note 11)	205	231
Total current liabilities	131,066	77,116
Long-term debt (note 9)	157,695	128,513
Note payable (note 8b)	4,978	—
Future income taxes (note 11)	27,662	18,644
Total liabilities	321,401	224,273
Minority interest	8	144
Contingencies and commitments (note 12)
SHAREHOLDERS’ EQUITY
Share capital (note 10)	161,498	128,545
Retained earnings	156,501	119,942
Cumulative translation adjustment (note 14)	25,377	29,125
Total shareholders’ equity	343,376	277,612
	664,785	502,029
See accompanying notes
On behalf of the Board:
WILLIAM S. CULLENS	CARLO DE PELLEGRIN
Director	Director

FOR THE YEAR ENDED	September 28	September 29
	2002	2001
	$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year	42,081	31,398
Add (deduct) items not involving cash
Amortization	13,319	17,894
Future income taxes	6,432	6,015
Non-cash interest on Keanall note payable (note 8b)	357	—
Loss/(gain) on disposal of capital assets	144	(175)
Minority interest	(11)	(93)
	62,322	55,039
Changes in non-cash working capital (note 15)	(12,646)	(20,646)
Cash flows provided by operating activities	49,676	34,393
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (note 8)	(29,421)	(23,363)
Purchase of capital assets	(20,854)	(16,525)
Development costs	(79)	(1,459)
Proceeds on disposal of capital assets	64	328
Cash flows used in investing activities	(50,290)	(41,019)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of non-revolving term facilities	(11,280)	(15,074)
Revolving term facility, net	31,645	17,747
Bank indebtedness	3,445	3,574
Repayment of note payable (note 8b)	(10,000)	—
Repurchase of common shares (note 10)	(1,705)	(10,537)
Options repurchased (note 10)	(4,182)	(870)
Issuance of common shares (note 10)	114	151
Cash flows provided by (used in) financing activities	8,037	(5,009)
Effect of foreign currency translation on cash and cash equivalents	31	(572)
Net increase (decrease) in cash and cash equivalents during the year	7,454	(12,207)
Cash and cash equivalents, beginning of year	4,266	16,473
Cash and cash equivalents, end of year	11,720	4,266
Supplementary cash flow information
Cash taxes paid	1,068	11,552
Cash interest paid	6,424	7,582
See accompanying notes

SEPTEMBER 28, 2002

1. NATURE OF OPERATIONS

CFM Corporation (the “Company” formerly CFM Majestic Inc.) is amalgamated under the laws of the Province of Ontario. The Company is a leading vertically integrated manufacturer of hearth and home products in North America and the United Kingdom. The Company designs, develops, manufactures and distributes hearth and space heating products, barbeque and outdoor products. The Company maintains an ongoing program of research and development aimed at continually improving the quality, design, features and efficiency of its products. The Company began operating in 1987 in Mississauga, Ontario and now has five facilities in Mississauga, nine facilities in the United States and one in Stoke-on-Trent, England.

2. SIGNIFICANT ACCOUNTING POLICIES

The Company’s accounting policies are in accordance with Canadian generally accepted accounting principles.

Consolidation

These consolidated financial statements include the accounts of the Company, its subsidiaries from the dates of their acquisition and the proportionate share of the assets, liabilities and results of operations from its joint venture interest. All significant intercompany amounts and transactions have been eliminated upon consolidation.

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent; however, actual results could differ from these estimates.

Translation of foreign currencies

The accounts of self-sustaining foreign operations are translated into Canadian dollars using the current rate method, under which all assets and liabilities are translated at the exchange rate prevailing at year end, and revenue and expenses at average rates of exchange during the year. Gains or losses on translation of these account balances are not included in the consolidated statements of operations and retained earnings but are deferred and shown as a separate item of shareholders’ equity. Gains or losses on foreign currency loans that are designated as hedges of a net investment in self-sustaining foreign operations are reported in the same manner as translation adjustments.

Foreign currency denominated monetary assets and liabilities of Canadian operations are translated at the exchange rate prevailing at year end, and revenue and expenses at average rates of exchange during the year. Exchange gains and losses arising on the translation of the accounts are included in income. Non-monetary assets, liabilities and depreciation and amortization are translated at historical rates of exchange. Long-term debt payable in foreign currency is translated at the exchange rate prevailing at the year end, with the resulting adjustment included as a separate item in shareholders’ equity if the related debt has been designated as a hedge against the net investment in foreign operations or amortized over the remaining term of the debt.

Cash and cash equivalents

All highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents. Cash equivalents are valued at cost which approximates market value.

Inventory

Inventory is carried at the lower of cost, as determined on a first-in, first-out basis, and market value. Market value is defined as net realizable value for finished goods and work-in-process, and replacement cost for raw materials.

Capital assets

Capital assets are recorded at cost less accumulated amortization. Amortization is provided on the original cost less estimated salvage value of buildings and equipment using the straight-line method based on estimated useful lives as follows:

Buildings	31 years
Leasehold improvements	over lease term
Machinery and equipment	4 to 20 years
Computer hardware and software	4 to 7 years
Automotive equipment	4 to 7 years
Office furniture and equipment	10 years

Amortization commences on capital assets under construction once the construction has been completed.

Other assets

Deferred charges are carried at cost less accumulated amortization.

Research and development costs: Research and development costs are expensed as incurred unless the development costs meet the criteria for deferral. Deferred development costs are amortized over the estimated product life not longer than three years.

Deferred start-up costs: Costs incurred during the start-up period prior to commencement of commercial operations of new facilities or businesses are deferred. Amortization of these deferred costs commences when the pre-operating period ends. Amortization is provided on a straight-line basis over five years.

Deferred financing costs: Deferred financing costs are amortized on a straight-line basis over the remaining term of the corresponding debt.

Goodwill

Goodwill comprises the excess of cost over fair values of the underlying net assets acquired arising from business combinations accounted for using the purchase method. Beginning October 1, 2001, goodwill is not amortized but subject to an assessment of impairment by applying a fair value based test on an annual basis. Prior to October 1, 2001, goodwill was amortized over 25 years.

Intangible assets

Intangible assets with finite useful lives are amortized over their useful lives.

Income taxes

The Company uses the liability method of tax allocation for accounting for income taxes. Under the liability method of tax allocation, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Revenue recognition

Revenue from sales of manufactured products, net of appropriate reserves for returns, is recognized either at the date of shipment or delivery, depending on the shipping terms. Commission revenue is earned when an exclusive manufacturer ships product directly to the customer.

Stock-based compensation plan

No compensation expense is recognized when stock options are issued to employees. Any consideration paid by employees exercising stock options to purchase common shares is charged to share capital. If stock options are repurchased from employees, the excess of the market value of the stock and the exercise price is charged to retained earnings. The Company will comply with the accounting and disclosure requirements under Section 3870 of the Canadian Institute of Chartered Accountants (“CICA”) Handbook commencing in the 2003 fiscal year.

Earnings per share

Basic earnings per share has been determined by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated in accordance with the treasury stock method and is based on the weighted average number of common shares and dilutive common share equivalents outstanding.

Fair value

The following methods and assumptions were used in estimating the fair values of financial instruments:

Current financial assets and liabilities: Terms are such that their carrying amounts approximate fair values.

Variable rate bank facilities: The carrying amounts of variable rate debt approximate fair value because the rates are reflective of the current market.

Committed long-term bank facilities and other long-term debt: Fair values are estimated using discounted cash flow analysis based on current incremental borrowing rates for similar borrowing arrangements.

Credit risk

The Company’s financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents consist of short-term investments, primarily overnight deposits, and are invested with recognized Canadian and U.S. banks.

Foreign currency risk

A significant portion of the Company’s operations relates to subsidiaries located in the United States that are considered self-sustaining.

The parent Company and subsidiaries located in Canada maintain their accounts in Canadian dollars. The foreign currency risk associated with the Company’s foreign currency denominated accounts receivable and payable balances as at September 28, 2002 is not material.

3. ACCOUNTS RECEIVABLE

The combined accounts receivable of three customers represent 52% of the total receivable outstanding at September 28, 2002 (one customer represented 17% of the total receivable outstanding at September 29, 2001).

For the year ended September 28, 2002, three customers (2001 – one customer) accounted for 38% (2001 – 10%) of annual sales.

4. INVENTORY

Inventory consists of the following:

	2002	2001
	$	$
Raw materials	36,140	23,055
Work-in-process	17,983	18,984
Finished goods	64,109	37,654
	118,232	79,693

5. CAPITAL ASSETS

Capital assets consist of the following:

		2002
	Cost	Accumulated	Net book
		amortization	value
	$	$	$
Land	6,987	—	6,987
Buildings	33,788	4,989	28,799
Leasehold improvements	10,356	1,258	9,098
Machinery and equipment	95,783	37,787	57,996
Computer hardware and software	13,719	8,046	5,673
Automotive equipment	1,008	709	299
Office furniture and equipment	7,393	2,322	5,071
Capital assets under construction	2,453	—	2,453
	171,487	55,111	116,376

		2001
	Cost	Accumulated	Net book
		amortization	value
	$	$	$
Land	4,080	—	4,080
Buildings	27,125	3,982	23,143
Leasehold improvements	8,239	837	7,402
Machinery and equipment	73,099	32,529	40,570
Computer hardware and software	10,106	5,997	4,109
Automotive equipment	1,047	658	389
Office furniture and equipment	5,486	1,859	3,627
Capital assets under construction	10,804	—	10,804
	139,986	45,862	94,124

6. OTHER ASSETS

Other assets consist of the following:

	2002	2001
	$	$
Deferred barbeque facility start-up costs	3,195	1,792
Deferred development costs	1,287	1,867
Deferred financing costs	1,442	1,499
Other	856	343
	6,780	5,501

Changes in the carrying amount of deferred barbeque facility start-up costs and deferred development costs for the year ended September 28, 2002 were:

	Deferred	Deferred
	barbeque facility	development
	start-up costs	costs
	$	$
Balance as at September 29, 2001	1,792	1,867
Additions during the year	2,027	79
Amortization for 2002	(624)	(659)
Balance as at September 28, 2002	3,195	1,287

Research and development expenses for the year ended September 28, 2002 are $6,976 (2001 – $4,292).

Amortization of deferred development costs in the year are $659 (2001 – $102). Additions to deferred development costs in the year are $79 (2001 – $1,459).

7. GOODWILL AND INTANGIBLE ASSETS

In 2001, the CICA issued accounting recommendations for Business Combinations, Goodwill and Other Intangible Assets. Under the new rules, goodwill and intangible assets with an indefinite useful life arising from business combinations accounted for using the purchase method are no longer amortized but subject to an assessment of impairment by applying a fair value based test on an annual basis. Intangible assets with finite useful lives will continue to be amortized over their useful lives. The Company has adopted the new recommendations for fiscal year 2002.

Goodwill

During the year, the Company completed its transitional fair value impairment test of goodwill. Using a multiple of historical earnings valuation technique, it was determined that the carrying value of goodwill for the Company’s United Kingdom subsidiary exceeded the fair value. This caused the Company to write down the value for goodwill associated with its United Kingdom operations to zero. This resulted in a write-down of goodwill in the amount of $2,014 and related deferred tax liabilities of $166. In accordance with the transitional rules of implementing this new standard, write-down has been charged to opening retained earnings in the net amount of $1,848.

In implementing the recommendations of the CICA with respect to accounting for business combinations, goodwill and intangibles, future tax liabilities of $2,752, recorded at the time of a prior year acquisition, were reclassified against goodwill.

Changes in the carrying amount of goodwill are as follows:
	$
Balance as at September 30, 2000	149,166
Goodwill acquired on the purchase of RMC (note 8d)	23,363
Goodwill amortization	(7,512)
Adjustment for tax liabilities	858
Foreign currency translation	6,176
Balance as at September 29, 2001	172,051
Goodwill acquired on the purchase of The Great Outdoors (note 8a)	12,859
Goodwill acquired on the purchase of Keanall (note 8b)	51,508
Transitional impairment loss	(2,014)
Adjustment of future tax liabilities	(2,752)
Foreign currency translation	336
Other	728
Balance as at September 28, 2002	232,716

The change in policy with respect to the amortization of goodwill has been applied prospectively. The consolidated financial statements for the year ended September 28, 2002 have been prepared in accordance with the new policy. The consolidated financial statements for the year ended September 29, 2001 have not been adjusted. The pro forma impact on the prior period is as follows:

FOR THE YEAR ENDED	September 28		September 29
		2002		2001
		$		$
Reported net income		42,081		31,398
Add back: goodwill amortization (net of income taxes)		—		4,983
Adjusted net income		42,081		36,381
Basic earnings per share	$	1.06	$	0.82
Goodwill amortization	$	—	$	0.13
Adjusted earnings per share	$	1.06	$	0.95
Diluted earnings per share	$	1.03	$	0.81
Goodwill amortization	$	—	$	0.13
Adjusted diluted earnings per share	$	1.03	$	0.94

Intangible assets

As part of the asset purchase of Harris Systems Inc. on November 1, 1997, the Company purchased a long-term facility operating lease. The market value of the lease exceeded the present value of the future lease commitments. This leasehold right was recognized as an asset at the time of the acquisition and has been amortized over the 22-year lease term.

Trademarks include the British hearth trademarks acquired on April 9, 2002 (note 8c).

	September 28	September 29
	2002	2001
	$	$
Leasehold right
Cost	7,681	7,687
Accumulated amortization	1,717	1,368
Net book value	5,964	6,319
Trademarks, net	1,655	—
Other, net	679	—
	8,298	6,319

Amortization expense of intangible assets for the year was $349 (2001 – $340).

8. ACQUISITIONS

a) The Great Outdoors Grill Company

Effective May 30, 2002, the Company acquired all the issued and outstanding shares of The Great Outdoors Grill Company (“TGO”) of Joplin, Missouri. TGO is a North American manufacturer and distributor of quality cast aluminum barbeques. The Company satisfied the purchase price by a cash payment, including acquisition costs, of $15,423 and the issuance of 195,366 common shares of the Company valued at $3,102. The fair value of the Company’s shares was $15.88 representing the average market price on the announcement date. Additional contingent consideration not to exceed US$12,300 in the form of a non-interest-bearing promissory note will be paid if TGO achieves an earnings target for the 2003 fiscal year. The promissory note will be payable in equal installments over a two-year period commencing on January 2, 2004.

The results of the operations of TGO from the date of acquisition are included in the Company’s consolidated statement of operations for the year ended September 28, 2002. The acquisition was accounted for using the purchase method with the purchase price allocated to net identifiable assets at their fair values.

The following is a summary of the assets purchased:

	$
Current assets acquired	17,092
Long-term assets acquired	2,837
Current liabilities assumed	(14,263)
Goodwill	12,859
	18,525
Consideration:
	$
Cash, including acquisition costs	15,423
Share capital issued	3,102
	18,525

It is estimated that goodwill of $10,285 is tax deductible.

b) Keanall Holdings Limited

Effective January 2, 2002, the Company acquired all the issued and outstanding shares of Keanall Holdings Limited ("Keanall") of Mississauga, Ontario. Keanall is a leading manufacturer and distributor of quality after-market gas grill products to many of North America’s largest retailers that serve the recreational and home improvement market. Under the terms of the transaction, the Company satisfied the purchase price with a combination of a cash payment, including acquisition costs, of $11,206, the issuance of a $30,000 face value non-interest-bearing note repayable monthly over 24 months with a fair value of $29,343, and a further $30,366, paid by the issuance of 2,526,314 common shares of the Company. The fair value of the Company’s common shares was $12.02 representing the average market price on the announcement date.

The results of the operations of Keanall from the date of acquisition are included in the Company’s consolidated statement of operations for the year ended September 28, 2002. The acquisition was accounted for using the purchase method with the purchase price allocated to net identifiable assets at their fair values.

The following is a summary of the assets purchased:

	$
Current assets acquired	24,169
Long-term assets acquired	12,224
Intangible assets acquired	212
Current liabilities assumed	(17,198)
Goodwill	51,508
	70,915
Consideration:
	$
Cash, including acquisition costs	11,206
Unsecured note payable	29,343
Share capital issued	30,366
	70,915

It is estimated that goodwill of $15,000 is tax deductible.

c) Other

Effective April 9, 2002, the Company acquired substantially all of the net assets of a British hearth fireplace business for cash consideration, including acquisition costs of $2,718.

The results of operations from the date of acquisition are included in the Company’s consolidated statement of operations for the year ended September 28, 2002. The acquisition was accounted for using the purchase method with the purchase price allocated to the net identifiable assets at their fair value.

The following is a summary of the assets purchased:

	$
Current assets acquired	685
Long-term assets acquired	114
Intangible assets	1,563
Liabilities assumed	(68)
Goodwill	424
	2,718

d) RMC International Ltd.

Effective July 1, 1999, the Company acquired substantially all of the net assets of RMC International Ltd. (“RMC”) for cash consideration of $37,643 and 564,528 common shares of the Company valued at $7,480. Additional cash consideration of $23,363 (US$15,000) was paid on April 1, 2001 as RMC achieved an earnings target for the calendar year 2000. The additional consideration of $23,363 was added to goodwill in fiscal 2001.

9. BANK INDEBTEDNESS AND LONG-TERM DEBT

Long-term debt consists of the following:

	2002	2001
	$	$
Non-revolving term credit facility currently advanced at fixed rates not exceeding
90 days (2001 – 180 days) with a weighted average rate of 4.47% (2001 – 4.95%)
repayable over quarterly installments beginning September 28, 2002 to be fully paid
by July 26, 2005. The Company may borrow up to $55,000 (2001 – $66,250).
Included in this amount was U.S. dollar debt of US$4,035 (2001 – US$5,044)
and U.K. pound sterling debt of £3,400 (2001 – £2,050).	53,703	61,469
Revolving operating loans currently advanced at fixed rates not exceeding 90 days
(2001 – 180 days) with a weighted average rate of 4.50% (2001 – 5.21%)
under which the Company may borrow up to $130,000 (2001 – $100,000).
Letters of credit totalling $8,549 (2001 – $2,582) have been issued against this facility.
The credit facility expires on July 26, 2005.	54,000	35,500
Revolving term credit facility of up to $80,000 (2001 – $50,000) advanced
at fixed rates and/or floating rates not exceeding 90 days (2001 – 180 days) with
a weighted average rate of 4.31% (2001 – 5.25%). Included in this amount was
U.S. dollar debt of $8,000 (2001– nil). The credit facility expires on July 26, 2005.	60,468	42,100
Other long-term debt bearing interest at 4.94% (2001 – 7.30%).	5,862	5,453
	174,033	144,522
Less current portion	16,338	16,009
	157,695	128,513

The Company’s syndicated credit agreement expires on July 26, 2005 with the revolving facilities extended annually for an additional 364-day period. As at September 28, 2002, the Company’s total available line of credit was $265,000 (2001 – $216,250).

In accordance with the credit agreement, the Company may borrow in Canadian dollars, U.S. dollars and U.K. pounds sterling by way of prime rate based loans, Bankers’ Acceptances, LIBOR loans or any combination thereof. Fair values of the committed long-term facilities and other long-term debt are not materially different from the carrying values.

The credit agreement includes certain restrictive covenants and undertakings. The Company is in compliance with all financial covenants.

The future minimum annual principal repayments of long-term debt over the next five years and thereafter are as follows:

	$
2003	16,338
2004	15,654
2005	138,195
2006	120
2007	120
Thereafter	3,606
	174,033

Interest on long-term debt amounted to $6,845 for the year ended September 28, 2002 (2001 – $7,824).

Bank Indebtedness

As part of the total available credit facility of $265,000, the Company has available operating lines totalling $210,000, which includes bank overdraft facilities in Canada and the U.S.

10. SHARE CAPITAL

The Company’s authorized share capital consists of an unlimited number of common shares without nominal or par value.

a) Issued and outstanding

	Number of
	shares	Amount
	#	$
	(in thousands)
Balance October 2, 2000	39,532	133,549
Options exercised	14	56
Employee share purchase plan (i)	15	95
Shares repurchased and cancelled under Issuer Bid (ii)	(1,525)	(5,155)
Balance September 29, 2001	38,036	128,545
Shares cancelled (iii)	(6,000)	(23,870)
Shares issued (iii)	6,000	23,870
Share consideration for Keanall acquisition	2,526	30,366
Share consideration for The Great Outdoors acquisition	195	3,102
Options exercised	—	3
Employee share purchase plan (i)	10	111
Shares repurchased and cancelled under Issuer Bid (ii)	(179)	(629)
Balance September 28, 2002	40,588	161,498

(i) The Company has established an Employee Share Purchase Plan (“ESPP”) in order to encourage employees to participate in the growth and development of the Company. Annually, all eligible employees may contribute to the ESPP an amount up to 20% of their aggregate base cash compensation received in the previous year. Throughout the year, the administrator, on behalf of each participating employee, purchases shares from the Company at market price less a 15% discount. Employees can sell 85% of these share accounts at any time. The remaining 15% of the employee’s share account vests equally over four quarters after the quarter in which shares were purchased. During fiscal 2002, 9,520 (2001 –15,202) shares were issued under the ESPP for $111 (2001 – $95).

(ii) The Company filed a Normal Course Issuer Bid enabling it to make market purchases of up to 2,800,000 of its common shares commencing October 9, 2001 during the next twelve-month period. As at October 8, 2002, the expiry date of the Normal Course Issuer Bid, a total of 179,500 shares had been repurchased and cancelled at an average price of $9.48.

Details of fiscal 2002 repurchases are as follows:

	Number of
	shares	Price paid
Month of purchase	purchased	per share
	#	$
October 2001	95,000	8.0000
November 2001	44,400	8.0000
July 2002	40,100	14.5145
	179,500

On September 27, 2000, the Company filed a Normal Course Issuer Bid enabling it to make market purchases of up to 2,987,000 of its common shares during the next twelve-month period. As at September 26, 2001, the expiry date of the Normal Course Issuer Bid, a total of 1,525,200  shares had been repurchased and cancelled at an average price of $6.92.

Details of fiscal 2001 repurchases are as follows:

	Number of
	shares	Price paid
Month of purchase	purchased	per share
	#	$
October 2000	211,100	6.8976
November 2000	693,300	6.5870
December 2000	359,300	6.4491
January 2001	100,800	7.2812
February 2001	10,300	8.1403
March 2001	18,200	8.7280
April 2001	2,100	9.0952
July 2001	30,100	8.6997
September 2001	100,000	9.0000
	1,525,200

On October 3, 2002, the Company filed a new Normal Course Issuer Bid enabling it to make market purchases of up to 2,800,000 of its common shares commencing October 9, 2002 during the next twelve-month period.

(iii) During the year, the Company purchased from and issued to an Officer and shareholder of the Company an equivalent number of common shares. This transaction, which was subject to regulatory approval, was reviewed and approved by the Board.

b) Stock options

Under the terms of the Stock Option Plan, all options are granted for a term of seven years commencing on the date of grant. All options granted prior to January 10, 2000 are exercisable six years and three hundred and sixty days from the date upon which such options were granted. For all options granted after January 10, 2000 and before July 24, 2002, one-third of such options will become exercisable as of each of the first, second and third anniversaries, respectively, of the date such options are granted. For all options granted after July 24, 2002, one-fourth of such options will become exercisable as of each of the first, second, third and fourth anniversaries, respectively, of the date such options are granted.

Options granted prior to September 15, 1999, may vest early if certain stock price performance criteria are met, being, one-third of the options granted in each fiscal year will become exercisable as of the first day of each of the three immediately following fiscal years, provided that the cumulative percentage increase in the market value of the common shares of the Company since the first day of the fiscal year in which the options were granted has been at least equal to 110% of the cumulative increase of the Toronto Stock Exchange 300 Index during the same period.

Options granted after September 15, 1999 but prior to January 10, 2000 may vest early if certain stock price performance criteria are met, being, one-third of the options granted in each fiscal year will become exercisable as of the first day of each of the three immediately following fiscal years, provided that the cumulative percentage increase in the market value of the common shares of the Company since the first day of the fiscal year in which the options were granted has been at least equal to the cumulative percentage increase of the Toronto Stock Exchange Industrial Products Index during the same period.

Under the Stock Option Plan, the Company is authorized to issue a maximum of 5,624,500 common shares. As at September 28, 2002, a total of 1,096,130 common shares are available for future grants and options.

A summary of the Stock Option Plan as of September 28, 2002 and September 29, 2001 and changes during the years ended on these dates is presented below:

	Options	Weighted	Number of
	outstanding	average price	vested options
	#	$	#
Outstanding at September 30, 2000	2,702,610	8.20	339,949
Granted	1,162,000	9.62
Exercised	(14,000)	4.00
Repurchased	(306,471)	7.12
Forfeited	(215,468)	9.11
Outstanding at September 29, 2001	3,328,671	8.75	379,700
Granted	1,049,000	13.99
Exercised	(333)	9.50
Repurchased	(625,470)	8.33
Forfeited	(189,832)	9.20
Outstanding at September 28, 2002	3,562,036	10.37	297,582

The following table outlines stock options outstanding at September 28, 2002:

	Exercise	Options
Options outstanding	price	exercisable	Expiry date
#	$	#
12,000	8.375	12,000	November 27, 2003
168,009	12.625	—	October 1, 2004
169,658	7.800	7,673	October 1, 2005
398,323	11.250	13,006	October 4, 2006
727,478	6.250	264,903	July 26, 2007
66,666	6.700	—	November 21, 2007
945,902	9.500	—	July 25, 2008
10,000	9.750	—	September 10, 2008
15,000	9.510	—	September 12, 2008
1,042,500	14.000	—	July 24, 2009
6,500	12.500	—	September 25, 2009

Under the terms of the Stock Option Plan, 625,470 options (2001 – 306,471) were repurchased during fiscal 2002 for $4,182 (2001 –  for $870) and 333 options (2001 – 14,000) were exercised for common shares.

11. INCOME TAXES

a) Rate reconciliation

The Company’s effective income tax rates for the years ended September 28, 2002 and September 29, 2001 are derived as follows:

	2002	2001
	%	%
Combined Canadian federal and provincial tax rate	38.62	43.31
Manufacturing and processing profits deduction	(.16)	(.80)
Income taxes at different rates in foreign jurisdictions	(7.46)	(15.04)
Other	.91	.56
	31.91	28.03

b) Provision for (recovery of) income taxes
The components of income before income taxes by jurisdiction are as follows:
	2002	2001
	$	$
Income before income taxes and amortization of goodwill	61,800	51,138
Amortization of goodwill, net of tax	—	(4,983)
Income tax on amortization of goodwill	—	(2,529)
Income before income taxes	61,800	43,626
Domestic	2,224	3,111
Foreign	59,576	40,515
	61,800	43,626
The provision for (recovery of) income taxes consists of the following:
	2002	2001
	$	$
Income taxes before the undernoted	19,719	14,757
Income taxes on amortization of goodwill	—	(2,529)
Income taxes	19,719	12,228
Current	13,287	2,728
Future	6,432	9,500
	19,719	12,228
The details of the provision for (recovery of) current income taxes are as follows:
	2002	2001
	$	$
Canadian federal taxes	(444)	(117)
Provincial taxes	(437)	(63)
Foreign taxes	14,168	2,908
	13,287	2,728
The details of the provision for future income taxes are as follows:
	2002	2001
	$	$
Canadian federal taxes	1,028	488
Provincial taxes	463	251
Foreign taxes	4,941	8,761
	6,432	9,500
c) Provision for future income taxes
Future income taxes have been provided on temporary differences consisting of the following:
	2002	2001
	$	$
Reserves and allowances	1,100	813
Inventory	(835)	1,368
Capital assets	2,085	1,673
Goodwill	4,137	634
Financing	13	14
Compensation	44	25
Net operating losses	(326)	4,660
Other	214	313
	6,432	9,500

d) Future income tax assets and liabilities
Future income taxes have been provided on temporary differences consisting of the following:
	2002	2001
	$	$
Current future income tax assets
Reserves and allowances	6,115	3,531
Net operating losses	632	1,717
Inventory	2,041	843
Compensation	618	556
Stock options	404	—
Other	(222)	(200)
Total current future income tax assets	9,588	6,447
Current future income tax liabilities	(205)	(231)
Net current future income tax assets	9,383	6,216
Long-term future income tax assets
Net operating losses	595	467
Other	293	163
Total long-term future income tax assets	888	630
Long-term future income tax liabilities
Goodwill	11,099	7,578
Capital assets	10,407	7,584
Financing	4,117	78
Reserves and allowances	1,238	2,674
Other	801	730
Total long-term future income tax liabilities	27,662	18,644
Net long-term future income tax liabilities	26,774	18,014

The Company has recognized the full amount of its future income tax assets with no valuation allowance for each of the years presented.

As at September 28, 2002, one of the Company’s foreign subsidiaries has income tax losses of approximately $3,485 (2001 – $2,989) which can be applied against future years’ taxable income, the benefit of which has been recorded in the consolidated financial statements. These income tax losses do not expire.

12. CONTINGENCIES AND COMMITMENTS

a) Lease commitments

The Company is committed to premises and equipment leases with terms expiring at various dates during the next five years and thereafter. Future minimum annual payments under non-cancelable operating leases consist of the following at September 28, 2002:

	$
2003	3,340
2004	3,093
2005	2,906
2006	2,813
2007	2,739
Thereafter	6,627
	21,518

b) Legal

During the normal course of business, there are various claims and proceedings that have been or may be instituted against the Company. There are claims that are at the early stages of legal proceedings and thus the outcomes of these matters are not determinable. These claims could have a material adverse effect on the consolidated financial position of the Company or its results of operations.

c) Other

Pursuant to certain acquisitions, including a joint venture investment, the minority shareholders and joint venture partner have the option to cause the Company to purchase their interests. The Company has similar options to require the minority shareholders to sell their shares. The purchase price in both cases would be based upon a prescribed valuation formula.

13. EARNINGS PER SHARE

Basic earnings per share has been determined by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed in accordance with the treasury stock method and is based on the weighted average number of common shares and dilutive common share equivalents outstanding.

FOR THE YEAR ENDED	September 28		September 29
(in thousands except for per share amounts)		2002		2001
Earnings for year	$	42,081	$	31,398
Weighted average number of shares outstanding		39,836		38,346
Basic earnings per share	$	1.06	$	0.82
Diluted earnings per share
Weighted average number of shares outstanding		39,836		38,346
Add: Dilutive effect of stock options		1,048		386
Adjusted weighted average number of shares outstanding		40,884		38,732
Diluted earnings per share	$	1.03	$	0.81

In 2002, there are 756,099 stock options (2001 – 188,666) that were anti-dilutive and not included in the diluted earnings per share calculation.

14. CUMULATIVE TRANSLATION ADJUSTMENT

During the year ended September 28, 2002, the cumulative translation adjustment account was reduced by $4,035 to reflect the future tax liability on an unrealized foreign exchange gain resulting from the Canadian dollar investment in a U.S. subsidiary.

15. CONSOLIDATED STATEMENTS OF CASH FLOWS

The net change in non-cash working capital balances consists of the following:

FOR THE YEAR ENDED	September 28	September 29
	2002	2001
	$	$
Accounts receivable	(16,238)	(14,535)
Inventory	(16,929)	(2,769)
Prepaid and other expenses	(2,062)	(1,094)
Other assets	(3,598)	(368)
Accounts payable and accrued liabilities	14,428	3,695
Income taxes recoverable	11,753	(5,575)
	(12,646)	(20,646)

16. EMPLOYEE BENEFIT PLANS

The Company maintains various employee benefit plans which include a defined contribution plan and a multi-employer defined benefit plan. During the year, the Company’s benefit plan expenditures were approximately $1,750 (2001 – $1,457).

17. SEGMENTED INFORMATION

The Company operates in one business segment, home products, which includes the development, manufacture, and sale of hearth and heating products, barbeque and outdoor products. In light of the growth and significance of barbeque and outdoor products to the overall revenue of the Company, the Company’s revenue has been disclosed by product category.

The Chief Executive and Operating Officers of the Company review consolidated operating results to assess the performance of the business. The Company’s business organization structure and performance measurement systems are not based on product categories.

FOR THE YEAR ENDED	September 28	September 29
	2002	2001
	$	$
Net external sales:
Hearth and heating products	443,250	397,586
Barbeque and outdoor products	132,982	18,746
	576,232	416,332

Geographic information:

The Company conducts substantially all of its business activities in North America. External sales are allocated on the basis of sales to external customers.

External sales:

	U.S.	Canada	Other	Total
	$	$	$	$
Year ended September 28, 2002	472,824	81,614	21,794	576,232
Year ended September 29, 2001	345,904	51,552	18,876	416,332
Capital assets, goodwill and intangibles:
	U.S.	Canada	Other	Total
	$	$	$	$
Year ended September 28, 2002	277,841	68,510	11,039	357,390
Year ended September 29, 2001	229,770	32,287	10,437	272,494

18. RELATED PARTY TRANSACTION

During 2001, the Company purchased for $307 an exclusive perpetual licence to manufacture, market and sell products. The licence was purchased from an entity in which officers of the Company had a non-controlling interest.

19. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

The comparative consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the 2002 consolidated financial statements.

20. SUBSEQUENT EVENT

On October 3, 2002, the Company acquired all the issued and outstanding shares of Greenway Home Products Inc. (“Greenway”) of Guelph, Ontario for a cash payment of $1,000. Greenway is a participant in the residential water dispensing, purification and air movement products market, offering a line of innovative water dispensing, water purification and air appliances. The total purchase price consists of the $1,000 cash payment at closing and substantial future payments contingent on Greenway achieving future earnings targets.

EX-3

Notice is hereby given that an Annual and Special Meeting of the Shareholders (the "Meeting") of CFM Corporation (the "Corporation") will be held in the Auditorium in the Conference Centre at The Toronto Stock Exchange, The Exchange Tower, 2 First Canadian Place, 130 King Street West, Toronto, Ontario, on Wednesday, February 26, 2003 at 4:15 p.m. (Toronto time), for the purposes of:

1. Receiving the directors’ Annual Report and the Corporation’s consolidated financial statements for the fiscal year ended September 28, 2002 together with the auditors’ report thereon;

2. Electing directors for the ensuing year;

3. Appointing auditors for the ensuing year and authorizing the directors to fix the remuneration of the auditors;

4. Considering and, if thought fit, approving a special resolution authorizing an amendment to the Articles of the Corporation to increase the maximum number of directors specified in the Articles of the Corporation to 12. The full text of the special resolution to be submitted to the Meeting with respect to this amendment to the Articles of the Corporation is set forth as Schedule B to the management information circular accompanying this notice; and

5. Transacting such other business, including amendments to the foregoing, as may properly come before the Meeting or any adjournment thereof.

A copy of the Annual Report, Management Information Circular and form of Proxy accompany this Notice.

Shareholders who are unable to attend the Meeting in person are requested to complete and sign the enclosed form of proxy and return it to Computershare Trust Company of Canada in the envelope provided for that purpose or to the Secretary of the Corporation not later than 5:00 p.m. (Toronto time) on February 24, 2003, or deposit it with the Chairman of the Meeting on the day of the Meeting or any adjournment thereof.

Dated this 31st day of December, 2002.

By order of the Board

SONYA STARK

Sonya Stark Secretary

This management information circular (the "Circular") is furnished in connection with the solicitation of proxies by the management of CFM Corporation (the "Corporation") for use at the annual and special meeting of the shareholders (or any postponements or adjournments thereof) of the Corporation (the “Meeting”) to be held on Wednesday, February 26, 2003 at 4:15 p.m. (Toronto time) at the place and for the purposes set forth in the foregoing notice of meeting (the “Notice”).

Solicitation of Proxies

The enclosed proxy is being solicited by or on behalf of the management of the Corporation and the cost of such solicitation will be borne by the Corporation. The solicitation will be primarily by mail, but regular employees of the Corporation may also solicit proxies by telephone or in person.

To be effective, proxies must be received by Computershare Trust Company of Canada at

100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 or the Secretary of the Corporation at 460 Admiral Boulevard, Mississauga, Ontario, L5T 3A3 before 5:00 p.m. (Toronto time) on February 24, 2003 or be deposited with the Chairman of the Meeting on the day of the Meeting, or any adjournment thereof.

Unless otherwise indicated, the information in this Circular is given as at December 31, 2002. Unless otherwise indicated, all dollar references in this Circular are to Canadian dollars.

Appointment of Proxy Holder

A shareholder has the right to appoint as his or her proxy holder a person or company (who need not be a shareholder), other than the persons designated in the form of proxy accompanying this Circular (who are officers of the Corporation), to attend and to act on the shareholder’s behalf at the Meeting. A shareholder may do so by inserting the name of such person in the blank space provided in the proxy and striking out the other names or by completing another proper form of proxy and delivering such proxy within the time limits specified above.

Revocation of Proxy

A shareholder executing the enclosed form of proxy has the right to revoke it under section 110(4) of the Business Corporations Act (Ontario), as amended (the “Act”). A shareholder may revoke a proxy by depositing an instrument in writing, including another proxy bearing a later date, executed by the shareholder or by an attorney authorized in writing, at the registered office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or any postponement or adjournment thereof, at which the proxy is to be used, or with the Chairman of the Meeting on the day of the Meeting, or any postponement or adjournment thereof, prior to being voted at the Meeting or any postponement or adjournment thereof, or in any other manner permitted by law. A shareholder attending the Meeting has the right to vote in person and, if he or she does so, his or her proxy is nullified with respect to the matters he or she votes upon and any subsequent matters thereafter to be voted on at the Meeting.

Exercise of Vote by Proxy

The common shares of the Corporation (the "Common Shares") represented by properly executed proxies will be voted, or withheld from voting, in accordance with the instructions of the shareholder on any ballot that may be called for and, if the shareholder specifies a choice with respect to any matter to be acted upon at the Meeting, shares represented by properly executed proxies will be voted accordingly. If no choice is specified with respect to any such matter, the persons designated in the accompanying form of proxy will vote in favour of the matter to be voted on.

If any amendments or variations to matters identified in the Notice are proposed at the Meeting or if any other matters properly come before the Meeting, the enclosed form of proxy confers authority to vote on such amendments or variations according to the discretion of the person voting the proxy at the Meeting. At the date of this Circular, management of the Corporation knows of no such amendments, variations or other matters to come before the Meeting other than the matters referred to in the Notice.

Voting Shares and Principal Holders Thereof

The Common Shares are the only class of shares entitled to vote at the Meeting. As at December 31, 2002, 40,137,609 Common Shares were issued and outstanding, each carrying the right to one vote per share at the Meeting. The presence, in person or by proxy, of holders of 20% of the total number of issued voting shares is necessary for a quorum at the Meeting.

The Board of Directors of the Corporation (the "Board of Directors" or the "Board") has fixed the close of business on January 15, 2003 as the record date for the purpose of determining shareholders entitled to receive notice of the Meeting, but the failure of any shareholder to receive notice of the Meeting does not deprive the shareholder of the right to vote at the Meeting. If a person has acquired Common Shares after the record date, that person is entitled to vote those shares at the Meeting upon producing properly endorsed share certificates, or otherwise establishing share ownership, and requesting the inclusion of his or her name in the list of shareholders not later than ten days before the date of the Meeting.

To the knowledge of the directors and officers of the Corporation, no person or company beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the outstanding Common Shares except as follows:

	Number of Common Shares
	beneficially owned, directly or indirectly,
	or over which control or direction is	Approximate percentage of
Name of Holder	exercised as of December 31, 2002	outstanding Common Shares
Colin Adamson(1)	6,000,000	15%
Guardian Capital Inc.(2)	5,130,280	13%

(1) 3,682,559 Common Shares are registered to Cricket International Limited; however,Mr.Adamson exercises control over the voting of such shares.The remaining 2,317,441 Common Shares are held or controlled by Adamson House Inc.,a private holding company controlled by Mr.Adamson.Mr.Adamson also holds options to purchase an aggregate of 964,666 Common Shares (see “Statement of Executive Compensation – Option Exercises During the Most Recently Completed Fiscal Year and September 28,2002 Option Values”in this Circular).

(2) The directors and officers of the Corporation understand that Guardian Capital Inc.is an investment manager but are not aware whether any person on whose behalf shares are held by Guardian Capital Inc.beneficially owns,directly or indirectly,or exercises control or direction over,more than 10% of the outstanding Common Shares.

As at December 31, 2002, the Canadian Depository for Securities Limited ("CDS") is the registered owner of 27,083,640 Common Shares which represent approximately 68% of the outstanding Common Shares. The directors and officers of the Corporation understand that CDS holds these Common Shares as a nominee but are not aware whether any person on whose behalf such shares are held beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the outstanding Common Shares.

Annual Report and Financial Statements

The audited consolidated financial statements of the Corporation for the fiscal year ended September 28, 2002 and the report of the auditors thereon will be placed before the Meeting. These audited consolidated financial statements form part of the Annual Report of the Corporation which accompanies the Notice and this Circular. Receipt at the Meeting of the audited consolidated financial statements of the Corporation for the fiscal year ended September 28, 2002 will not constitute approval or disapproval of any matters referred to therein.

Election of Directors

The articles of the Corporation (the "Articles") provide for a minimum of one and a maximum of ten directors. The Board of Directors currently consists of nine directors to be elected annually. Each director will hold office until the next annual meeting or until his/her successor is duly elected unless his/her office is earlier vacated in accordance with the by-laws of the Corporation. In the course of its regular review of the overall effectiveness of the Board, the Board has determined that an increase in the number of directors, beyond the current authorized maximum number of

directors as permitted by the Articles may be desirable in the future to the extent that suitable candidates are identified by the Board. Accordingly, the Board is requesting approval of a special resolution to amend the Articles to increase the authorized maximum number of directors from 10 to 12. The Corporation’s intention is to increase the size of the Board to 11 directors, providing suitable additional directors can be found. Please see “Special Business – Amendment of Articles to Increase the Maximum Number of Directors” on page 18 in this Circular.

The Board of Directors currently has three committees: the Compensation and Corporate Governance Committee (the “CCG Committee”), the Audit Committee and the Business Development Committee (the “BD Committee”). In light of the resignation of the former Chairman of the BD Committee as a director of the Corporation early in the most recently completed fiscal year, the Board of Directors determined that the two remaining directors on the BD Committee were an insufficient number of directors to carry out the BD Committee’s responsibilities and accordingly, the responsibilities of the BD Committee were assumed by the full Board during the most recently completed fiscal year. With the addition of two new directors during fiscal 2002, one of whom has been appointed Chairman of the BD Committee, the BD Committee will resume its work as a functioning committee of the Board during fiscal 2003. As the full Board assumed the BD Committee’s duties during fiscal 2002, this Circular will only provide details on the activities of the Corporation’s other two committees, the CCG Committee and the Audit Committee, during fiscal 2002.

During the fiscal year ended September 28, 2002, the Board of Directors met 12 times; the CCG Committee met five times and the Audit Committee met four times.

It is proposed to nominate the nine persons listed below for election as directors of the Corporation. All such proposed nominees, except Mr. Mitchell, are now directors of the Corporation and have been since the dates indicated. Unless authority to do so is withheld, proxies given pursuant to this solicitation by the management of the Corporation will be voted for the election of the proposed nominees listed below. If any of the proposed nominees should for any reason be unable to serve as a director of the Corporation, the persons named in the enclosed form of proxy reserve the right to nominate and vote for another nominee in their discretion.

A brief statement of the current principal occupation and a brief biography, including at least the past five years, for each person nominated for election as a director of the Corporation is set forth below. There are no contracts, arrangements or understandings between any director, any executive officer or any other person pursuant to which any of the nominees has been nominated.

			Common Shares
			beneficially owned,
			directly or indirectly, or
		Year first	over which control or
	Principal occupation and	became a	direction is exercised
Name and office	short biography	director	at December 31, 2002(1)
Colin M. Adamson	Chairman, Chief Executive	1992	6,000,000(5)
Director, Chairman,	Officer and Co-Founder of
Chief Executive Officer	the Corporation.
and Co-Founder
	Mr. Adamson co-founded the
	Corporation in 1987 and, since
	then, has held various positions
	in the Corporation, including
	Vice President, Secretary and
	Treasurer from 1987 to 1994,
	President from 1994 to 1996,
	Chief Executive Officer since 1994
	and Chairman since 1996. In
	recognition of his achievements,
	Mr. Adamson received the Ontario
	Entrepreneur of the Year Award
	in the Manufacturing – Consumer
	Products sector in 1999.

			Common Shares
			beneficially owned,
			directly or indirectly, or
		Year first	over which control or
	Principal occupation and	became a	direction is exercised
Name and office	short biography	director	at December 31, 2002(1)
David Colcleugh (4)	Chairman of DuPont Canada	2002	0
Director	since October 1997. President
	and Chief Executive Officer of
	DuPont Canada Inc. from October
	1997 to January 1, 2003. DuPont
	Canada is a diversified science
	company, which products include
	nylon industrial yarn, synthetic
	fibers, polymer resins, packaging
	films, automotive finishes, crop
	protection products, and industrial
	chemicals.
	Mr. Colcleugh graduated from the
	University of Toronto where he obtained
	a B.A.Sc. in 1959, M.A.Sc. in 1960 and
	a Ph.D in 1962. He furthered his education
	from 1962 to 1963 at the University of
	Cambridge, doing post-doctoral research.
	Mr. Colcleugh joined DuPont Canada in
	1963 as a Research Engineer in Kingston,
	Ontario, and has held various positions
	with Dupont including Corporate Plans in
	EI DuPont, Wilmington, Delaware, and
	President Asia Pacific Region in Tokyo,
	Japan. In September 1997, Mr. Colcleugh
	returned to Canada where he was
	appointed Chairman, President and CEO
	of DuPont Canada Inc.
William A. Corbett (2)(3)	Chairman of The New Providence	1994	5,000
Director	Development Company Limited
	(a real estate developer).
	Mr. Corbett received a Bachelor
	of Commerce degree from the
	University of Toronto in 1953 and
	an honors law degree from
	Osgoode Hall law school in 1957.
	He practised law with Fraser & Beatty
	from the time of his graduation to his
	retirement in 1995. He was appointed
	Chairman of the Executive Committee
	of the firm in 1984, Vice-Chairman
	in 1986 and Chairman in 1989.
	Mr. Corbett’s practice was primarily
	in the corporate and securities
	law fields. He became Chairman of
	The New Providence Development
	Company Limited in 1992.

			Common Shares
			beneficially owned,
			directly or indirectly, or
		Year first	over which control or
	Principal occupation and	became a	direction is exercised
Name and office	short biography	director	at December 31, 2002(1)
William S. Cullens (2)(3)	Director of the Corporation.	1994	10,000
Director	Past Chairman and Chief
	Executive Officer of Canron Inc.
	(a manufacturer of structural
	steel, plastic pipe and fittings,
	industrial forgings and
	machined products).
	Mr. Cullens graduated from the
	University of Glasgow in 1951 with
	a B.Sc. in Civil Engineering. He held
	various engineering positions during
	1951 to 1960 and in 1960 joined
	Canron Inc. From 1960 to 1980
	Mr. Cullens held various positions
	with Canron. In 1980 Mr. Cullens
	was appointed President and
	Chief Executive Officer of Canron Inc.
	and in 1990 was appointed Chairman
	of Canron Inc. and held such position
	until 1997.
Paul Houston(3)	President and Chief Executive	2002	0
Director	Officer of Alderwoods Group Inc.
	(a funeral services provider)
	since 1999. President and Chief
	Executive Officer of Scott’s
	Restaurants from 1996 to 1999.
	Mr. Houston has held various senior
	management and Board positions
	within large organizations whose
	business interests were held in
	North America, Japan and the U.K.
	The most recent of those
	accomplishments being President and
	Chief Executive Officer of Black Photo
	Corporation from 1992 to 1995, President
	and Chief Operating Officer of Scott’s
	Food Services from 1995 to 1996,
	President and Chief Executive Officer of
	Scott’s Restaurants from 1996 to 1999.
	In 1999 Mr. Houston served on the
	Board of Directors during the restructuring
	of the Loewen Group, and was then
	appointed as President and
	Chief Executive Officer of the
	Loewen Group through to its emergence
	as Alderwood’s Group Inc. in 2002,
	remaining both on the Board of Directors
	and in the position of President and
	Chief Executive Officer of the
	Alderwoods Group Inc.

			Common Shares
			beneficially owned,
			directly or indirectly, or
	Year first		over which control or
	Principal occupation and became a		direction is exercised
Name and office	short biography director		at December 31, 2002(1)
Patrick Keane	Executive Vice President, 2002		2,526,314(8)
Director	Operations of the Corporation
Executive Vice President,
Operations	Mr. Keane founded Keanall Holdings Ltd.,
	a manufacturer and distributor
	of quality aftermarket barbeque
	parts and accessories, in October
	1981 and served as President from
	1981 through to December 2001.
	Mr. Keane sold his interest in
	Keanall Holdings Inc. to the
	Corporation in January 2002 and
	became the Corporation’s
	Executive Vice President, Operations.
Bruce Mitchell	Chairman, Chief Executive Officer and	n/a	0
Nominee	Owner of Permian Industries Limited,
	(a management and holding company),
	and sole shareholder of Ajax Precision
	Manufacturing Limited (a manufacturer
	of metal stamped components and
	assemblies for N/A automotive OEMs),
	Integrated Solutions Group Inc. (a U.S.
	based computer software company) and
	Trophy Foods Inc. (an edible nut and
	confectionery processor and distributor)
	since 1976.
	Mr. Mitchell received a Bachelor of
	Science in Civil Engineering from
	Queen’s University in 1968 and a
	Masters in Business Administration
	from Harvard University in 1970.
	From 1972 to 1976 Mr. Mitchell was a
	Management Consultant and Principal
	of Woods Gordon & Co. From 1994 to
	1997 Mr. Mitchell served as Chairman
	of Corvair Oils Ltd. and from 1991 to
	1998 served as Chairman of Promanad
	Communications Inc. Since 1976,
	Mr. Mitchell has been Chief Executive
	Officer and Owner of Permian
	Industries Limited.

			Common Shares
			beneficially owned,
			directly or indirectly, or
	Year first		over which control or
	Principal occupation and became a		direction is exercised
Name and office	short biography director		at December 31, 2002(1)
Carlo De Pellegrin (2)(3)(4)(7)	Partner of Williams & Partners,	1994	46,000
Director	Chartered Accountants LLP
	Mr. De Pellegrin graduated from the
	University of Toronto with a Bachelor
	of Arts degree in 1969. He has been
	a Partner with public accounting firm
	Williams & Partners LLP of Markham,
	Ontario, since 1997. Mr. De Pellegrin
	received his CA designation in 1972 while
	training with PricewaterhouseCoopers
	where he worked with large public
	companies as well as private,
	entrepreneurial organizations engaged
	in several sectors. From 1972 until 1977,
	Mr. De Pellegrin worked in private industry
	where he gained extensive experience
	within the construction, real estate
	development and manufacturing sectors.
Heinz H. Rieger (4)	Director of the Corporation,	1992	3,467,904(6)
Director	Past Chairman and Co-Founder.
	Mr. Rieger immigrated to Canada in 1957
	and held various construction related
	positions from 1957 to 1960. From 1961
	to 1968, Mr. Rieger worked in the
	sheetmetal industry primarily in
	manufacturing, engineering and design.
	Mr. Rieger received a Bachelor of
	Commerce from Concordia University
	in 1968. From 1969 to 1975, Mr. Rieger
	held various positions in Sears Canada.
	From 1976 to 1987, Mr. Rieger held
	various positions in the fireplace and
	stove industry in various manufacturing,
	production and R&D related capacities.
	Mr. Rieger co-founded the Corporation
	in 1987 and held various positions in the
	Corporation, including Chairman, until
	his retirement in May 1997.

(1) The information with respect to the shares beneficially owned,directly or indirectly,by the above nominees has been furnished by the

     respective nominees individually,such information not being within the knowledge of the Corporation.

(2) Member of the Audit Committee.

(3) Member of the CCG Committee.

(4) Member of the BD Committee.

(5) 3,682,559 Common Shares are registered to Cricket International Limited; however,Mr.Adamson exercises control over the voting of such

     shares.The remaining 2,317,441 Common Shares are held or controlled by Adamson House Inc.,a private holding company controlled by

     Mr.Adamson.Mr.Adamson also holds options to purchase an aggregate of 964,666 Common Shares (see “Statement of Executive

     Compensation – Option Exercises During the Most Recently Completed Fiscal Year and September 28,2002 Option Values”in this Circular).

(6) All of the shares are owned by Koralm Holdings Inc.,a private holding company controlled by Mr.and Mrs.Rieger,save and except for

     222,000 shares which are held by Mr.Rieger personally.

(7) Lead director.

(8) 186,893 Common Shares are registered to the Keanall Holdings Employee Trust,over which Mr.Keane has control.458,386 Common

     Shares are registered to 1504794 Ontario Inc.,a personal holding company over which Mr.Keane exercises control.1,881,035

     Common Shares are registered to 1504795 Ontario Inc.,a personal holding company over which Mr.Keane exercises control.

Attendance at Board and Committee Meetings

The following chart provides information as to the total number of board and committee meetings held by the Corporation during the fiscal year ended September 28, 2002 and the record of attendance of the current directors of the Corporation at those meetings.

		Audit	CCG
	Board	Committee	Committee
Total Number of meetings held during the
fiscal year ended September 28, 2002	12	4	5
Colin Adamson	12	n/a	n/a
David Colcleugh(1)	1	n/a	n/a
William Corbett	11	4	5
William Cullens	12	4	5
Paul Houston(2)	2	n/a	n/a
Patrick Keane(3)	9	n/a	n/a
Sheila O’Brien(4)	10	n/a	5
Carlo De Pellegrin	12	4	5
Heinz Rieger	7	n/a	n/a

(1) Mr.Colcleugh was elected as a director of the Corporation on July 24,2002 and there have been two Board meetings during the period between when he first became a director to September 28,2002.

(2) Mr.Houston was elected as a director of the Corporation on July 24,2002 and there have been two Board meetings during the period between when he first became a director to September 28,2002.Mr.Houston was appointed to the CCG Committee on November 20,2002.

(3) Mr.Keane was elected as a director of the Corporation on January 2,2002 and there have been nine Board meetings during the period when he first became a director to September 28,2002.

(4) Ms.O’Brien tendered her resignation as a director of the Corporation effective the date of the Meeting.

Statement of Executive Compensation

Summary Compensation Table

The following table sets forth compensation information for the fiscal years ended September 30, 2000, September 29, 2001 and September 28, 2002, for the Chairman and Chief Executive Officer of the Corporation and the four other most highly compensated executive officers of the Corporation who served as executive officers of the Corporation during the fiscal year ended September 28, 2002 (collectively the “Named Executive Officers”).

		Annual		Long-term
		compensation		compensation
				Securities under	All other
Name and		Salary	Bonus(1)	options granted	compensation(2)
principal position	Year	$	$	#	$
Colin Adamson	2002	500,000	225,000	200,000	14,250
Chairman and	2001	481,250	0	250,000	20,867
Chief Executive Officer	2000	425,000	199,219	630,000	21,335
Jim Lutes(3)	2002	325,000	134,000	120,000	11,375
President and	2001	318,750	0	130,000	11,337
Chief Operating Officer	2000	300,000	128,906	308,000	15,160
Steve Haramaras	2002	275,520	93,000	80,000	9,634
President,	2001	277,536	0	100,000	9,518
Mass Merchant	2000	229,500	72,605	88,000	11,656
Operations
Peter Plows(4)	2002	275,000	93,000	80,000	121,957
Senior Vice President,	2001	252,083	0	180,000	4,076
Operations
Dan Downing	2002	275,520	83,000	80,000	7,894
President, Vermont	2001	268,868	0	70,000	11,483
Castings, Majestic	2000	258,317	95,535	58,000	10,551
Products Division

(1) The amounts disclosed hereunder were paid in accordance with each individual’s employment agreement and pursuant to the terms of the Corporation’s management incentive plan (see “Statement of Executive Compensation – Employment Contracts”and “Report on Executive Compensation”in this Circular).

(2) The amounts disclosed hereunder were earned under the Corporation’s broad-based employee profit sharing and savings plan under which all eligible employees are entitled to receive a share of the Corporation’s annual pre-tax profit that is proportional to the share that their annual compensation bears to the Corporation’s total payroll in the most recently completed financial year.Amounts disclosed hereunder also include the amount of matching contributions paid to Named Executive Officers under the terms of such profit sharing and savings plan.In the case of Mr.Plows,it includes a one time payment of $112,332 in accordance with the terms of his employment agreement.Mr.Plows’ employment agreement provides that,in the event that during the period beginning on November 21,2000 and ending on the first anniversary of the date of the granting of options to purchase shares of the Corporation in respect of the first year of his employment,being November 21,2001,(the “First Option Vesting Date”),the aggregate of the amounts paid to Mr.Plows and the value of the stock options granted to Mr.Plows which have vested as of the First Option Vesting Date (collectively,the “Aggregate First Year Compensation”) does not equal $450,000,then the Corporation is required to pay to Mr.Plows an amount equal to the difference between $450,000 and the Aggregate First Year Compensation.The Corporation determined that the Aggregate First Year Compensation equalled $337,668,consisting of $275,000 base salary and vested stock options valued at $62,668.Therefore,the payment of $112,332 equals the difference between $450,000 and $337,668.

(3) Pursuant to a certain agreement between Mr.Adamson and Mr.Lutes,Mr.Lutes has the option,exercisable at any time from November 26,1999 until November 26,2006,of obtaining from Mr.Adamson,certain cash benefits determined by reference to the change in the market price of the Common Shares.

(4) Mr.Plows commenced employment on November 21,2000.The compensation amounts disclosed above for fiscal year 2001 are for the period November 21,2000 to September 29,2001 and are in accordance with the terms of his employment agreement (see “Statement of Executive Compensation – Employment Contracts”in this Circular).

Stock Option Plan

The Corporation has in place a stock option plan in which directors, senior officers and employees of the Corporation and subsidiaries of the Corporation are entitled to participate. Under the stock option plan, options may be granted to designated executives and other employees of the Corporation, and its subsidiaries. Currently, the term of each option is a period of seven years commencing on the date such option is granted. All options granted under the stock option plan prior to January 10, 2000 become unconditionally exercisable on the date which is 6 years and 360 days following the date on which such options were granted. The vesting of one third of such options will be accelerated to occur after one year if certain stock performance criteria are met. Vesting of the second and final third of such options will be accelerated to occur after two years and three years, respectively, if the same criteria are met after two years and three years, respectively. All options granted after January 10, 2000 become unconditionally exercisable as to one third on each of the first, second and third anniversaries of the date of the grant of such options. On July 24, 2002, the Board of Directors approved an amendment to the vesting provisions of the stock option plan, whereby one fourth of the options granted will vest unconditionally each year for a period of four years commencing on the first anniversary of the date the options were granted. The options granted under the stock option plan during the fiscal year ended September 28, 2002 are subject to these revised vesting requirements.

Option Grants During the Most Recently Completed Financial Year

The table below sets out information related to options granted to Named Executive Officers during the fiscal year ended September 28, 2002.

		Percentage of		Market value
	Securities	total options		of securities
	under	granted to		underlying
	options	employees in	Exercise or	options on
	granted	financial year(1)	base price	date of grant	Expiration
Name	#	%	($/share)	($/share)	date
Colin Adamson	200,000	19	14.00	14.00	July 24, 2009
Jim Lutes	120,000	11	14.00	14.00	July 24, 2009
Steve Haramaras	80,000	8	14.00	14.00	July 24, 2009
Peter Plows	80,000	8	14.00	14.00	July 24, 2009
Dan Downing	80,000	8	14.00	14.00	July 24, 2009

(1) This percentage is calculated by dividing the number of options granted to each Named Executive Officer during the fiscal year ended September 28,2002 by the total number of options granted to all directors,officers and employees.

The securities underlying all of the above options are Common Shares. All of the above options were granted under the stock option plan.

Option Exercises During the Most Recently Completed Financial Year and September 29, 2002 Option Values

The following chart indicates the number of Common Shares received, and the aggregate dollar value realized, upon the exercise of options by Named Executive Officers during the fiscal year ended September 28, 2002 and the amount by which the market value of the Common Shares underlying unexercised options held by Named Executive Officers at September 28, 2002 exceeds the exercise price of those options.

	Securities	Aggregate			Value of unexercised
	acquired on	value	Unexercised options		in-the-money options
	exercise	realized	at September 28, 2002		at September 28, 2002
Name	#	$		#	$
			Exercisable	Unexercisable	Exercisable	Unexercisable
Colin Adamson	262,001	1,975,618	293,334	571,332	1,252,501	1,409,593
Jim Lutes	36,000	153,360	146,001	365,999	628,171	888,659
Steve Haramaras	41,001	291,750	62,667	199,332	252,335	476,162
Peter Plows	60,001	469,475	0	199,999	0	576,662
Dan Downing	43,800	284,149	42,667	176,666	171,500	309,062

Employment Contracts

The Corporation has entered into the following employment agreements with each of the Named Executive Officers.

Colin Adamson

Mr. Adamson’s employment agreement provides for employment for an indefinite term with the payment of a minimum base salary, which is currently $500,000 per annum and which is reviewed annually by the Board of Directors, and the payment of an annual bonus, that is currently set at 60% of Mr. Adamson’s annual base salary and which amount is determined by the CCG Committee and which amount is not guaranteed but is dependent on the profit of the Corporation and the success of Mr. Adamson as determined by the CCG Committee in its sole discretion. Mr. Adamson is also entitled to participate in the Corporation’s profit sharing and savings plan, employee share purchase plan and stock option plan. Mr. Adamson’s employment agreement includes provisions requiring 36 months’ notice from the Corporation to Mr. Adamson, or the payment of an amount equal to 36 months’ compensation, which compensation includes annual base salary and bonus and an additional 80% of base salary in lieu of stock options and a lump sum equivalent to the amount of Mr. Adamson’s option granted but not exercised at the date of termination (being the difference between the option price and the average price of the shares in the ten business days prior to termination), in connection with any termination of Mr. Adamson’s employment without cause. Mr. Adamson’s employment agreement also contains standard non-competition and non-solicitation provisions.

Jim Lutes

Mr. Lutes’ employment agreement provides for employment for an indefinite term with the payment of a minimum base salary, which is currently $325,000 per annum and which is reviewed annually by the CCG Committee. Mr. Lutes is entitled to participate in the management incentive plan with a target bonus amount that is currently set at 55% of Mr. Lutes’ annual base salary, which amount is determined by the CCG Committee and which amount is not guaranteed but is dependent on the profit of the Corporation and the success of Mr. Lutes as determined by the CCG Committee in its sole discretion. Mr. Lutes is also entitled to participate in the Corporation’s profit sharing and savings plan, employee share purchase plan and stock option plan. Mr. Lutes’ employment agreement includes provisions requiring the payment of an amount equal to 12 months’ compensation, which compensation includes annual base salary and pr ojected bonus, in connection with any termination of Mr. Lutes’ employment without cause. Mr. Lutes’ employment agreement also contains standard non-competition and non-solicitation provisions.

Steve Haramaras

Mr. Haramaras’ employment agreement provides for employment for an indefinite term with the payment of a minimum base salary, which is currently $275,520 per annum and which is reviewed annually by the CCG Committee. Mr. Haramaras is entitled to participate in the management incentive plan with a target bonus amount that is currently 40% of his annual base salary, which amount is determined by the CCG Committee on an annual basis in accordance with the terms of the management incentive plan and which amount is not guaranteed but is dependent on the profit of the Corporation and the success of Mr. Haramaras as determined by the CCG Committee in its sole discretion. Mr. Haramaras is also entitled to participate in the Corporation’s profit sharing and savings plan, employee share purchase plan and stock option plan. Mr. Haramaras’ employment agreement provides that in each year of the term o f his employment agreement, he shall be granted options to purchase shares of the Corporation having a value equal to 30% of his annual base salary using the Black-Scholes valuation method. Mr. Haramaras’ employment includes provisions requiring the payment of an amount equal to 12 months’ compensation, which compensation includes salary and projected bonus, in connection with any termination of Mr. Haramaras’ employment without cause. Mr. Haramaras’ employment agreement also contains standard non-competition and non-solicitation provisions.

Peter Plows

Mr. Plows’ employment agreement provides for employment for an indefinite term with the payment of a minimum base salary, which is currently $275,000 per annum and which is reviewed annually by the CCG Committee. Mr. Plows is entitled to participate in the management incentive plan with a target bonus amount of 45% of his annual base salary, which amount is determined by the CCG Committee on an annual basis in accordance with the terms of the Corporation’s management incentive plan and which amount is not guaranteed but is dependent on the profit of the corporation and the success of Mr. Plows as determined by the CCG Committee in its sole discretion. Mr. Plows is also entitled to participate in the Corporation’s profit sharing and savings plan, employee share purchase plan and stock option plan. Mr. Plows’ employment agreement provides that in each year of the term of his employment agreement, he shall be granted options to purchase shares of the Corporation having a value equal to 45% of his annual base salary using the Black-Scholes valuation method. Mr. Plows’ employment agreement includes provisions requiring the payment of an amount equal to 12 months’ compensation, which compensation includes salary, in connection with any termination of Mr. Plows’ employment without cause. Mr. Plows’ employment agreement also contains standard non-competition and non-solicitation provisions.

Dan Downing

Mr. Downing’s employment agreement provides for employment for an indefinite term with the payment of a minimum base salary, which is currently $275,520 per annum and which is reviewed annually by the CCG Committee. Mr. Downing is entitled to participate in the management incentive plan with a target bonus amount that is currently 40% of his annual base salary, which amount is determined by the CCG Committee on an annual basis in accordance with the terms of the management incentive plan and which amount is not guaranteed but is dependent on the profit of the Corporation and the success of Mr. Downing as determined by the CCG Committee in its sole discretion. Mr. Downing is also entitled to participate in the Corporation’s profit sharing and savings plan, employee share purchase plan and stock option plan. Mr. Downing’s employment agreement provides that in each year of the term of his employment agreement, he sha ll be granted options to purchase shares of the Corporation having a value equal to 30% of his annual base salary using the Black-Scholes valuation method. Mr. Downing’s employment agreement includes provisions requiring the payment of an amount equal to 12 months’ compensation, which compensation includes salary and projected bonus, in connection with any termination of Mr. Downing’s employment without cause. Mr. Downing’s employment agreement also contains standard non-competition and non-solicitation provisions.

The Corporation has entered into agreements with the Named Executive Officers which provide for the payment of certain cash benefits in the event of a change of control of the Corporation and the involuntary termination or constructive dismissal of one of these executive officers within two years of the effective date of such change of control. In the case of Mr. Adamson, such benefits include the lump sum payment of (i) 36 months’ worth of base salary and other compensation, (ii) the amount of Mr. Adamson’s target management incentive award for three years, and (iii) an amount equal to the value of the most recent stock options granted to Mr. Adamson prior to the change in control multiplied by three. In addition to being payable in the event of Mr. Adamson’s involuntary termination or constructive dismissal within two years of a change of control, these benefits are also payable if Mr. A damson resigns his employment during the thirteenth month following a change of control. In the case of the Named Executive Officers, other than Mr. Adamson, the benefits payable include the lump sum payment of (i) 30 months’ worth of base salary and other compensation, (ii) an amount equal to the target management incentive award then in effect for the applicable executive multiplied by 2.5, and (iii) an amount equal to the value of the most recent stock options granted to the applicable executive prior to the change of control multiplied by 2.5. The entitlement of each of the Named Executive Officers under these agreements is consideration for a non-competition covenant in favour of the Corporation for a period of one year following their involuntary termination or constructive dismissal, or resignation in the circumstances described above in the case of Mr. Adamson, following a change of control. In addition, each of these agreements provides that in the event of an involuntary termination or constru ctive dismissal, or resignation in the circumstances described above in the case of Mr. Adamson, within two years following a change of control, all unvested stock options of the Corporation or its successor then held by each executive will become vested and fully exercisable.

Composition of the Compensation and Corporate Governance Committee

The following served as members of the CCG Committee during the fiscal year ended September 28, 2002 and all continue to serve: Mr. William S. Cullens (Chairman), Mr. William A. Corbett, Ms. Sheila O’Brien and Mr. Carlo De Pellegrin. Ms. Sheila O’Brien has tendered her resignation as a director of the Corporation effective the date of the Meeting. Mr. Paul Houston was elected to the CCG Committee on November 20, 2002. All committee members are independent, non-employee directors of the Corporation.

Report on Executive Compensation

The CCG Committee’s specific responsibilities pertaining to compensation include:

• Approving and overseeing the total compensation package for the Corporation’s executives including, among other things, their base salaries, annual incentives, deferred compensation, stock options and other equity-based compensation, incentive compensation, special benefits, perquisites, and incidental benefits. The CCG Committee is responsible for making all determinations and taking any actions that are reasonably appropriate or necessary in the course of establishing the compensation of the Corporation’s executives.

• Reviewing and approving corporate goals and objectives relevant to the compensation of the Corporation’s CEO, evaluating the performance of the level of the Corporation’s CEO based on this evaluation and setting the compensation level of the Corporation’s CEO based on this evaluation. In determining the long-term incentive component of the Corporation’s CEO’s compensation, the CCG Committee considers, among other things, the Corporation’s performance and relative shareholder return, the value of similar incentive awards to CEO’s at comparable companies and the awards given to the Corporation’s CEO in past years.

• Reviewing the results of and procedures for the evaluation of the performance of other executive officers by the Corporation’s CEO.

• Reviewing periodically and making recommendations to the Board regarding any long-term incentive compensation or equity plans, programs or similar arrangements that the Corporation establishes for, or makes available to, its directors and employees, the appropriateness of the allocation of benefits under such plans and the extent to which the plans are meeting their intended objectives and, where appropriate, recommending that the Board modify any such plan that yields payments and benefits that are not reasonably related to employee performance.

• Reviewing and making recommendations to the Board regarding all new employment, consulting, retirement and severance agreements and arrangements proposed for the Corporation’s executives.

The CCG Committee periodically evaluates existing agreements with the Corporation’s executives for continuing appropriateness.

• Adopting and periodically reviewing a comprehensive statement of executive compensation philosophy, strategy and principles that has the support of management and the Board, and administering the Corporation’s compensation program fairly and consistently in accordance with these principles.

• Selecting a peer group of companies that is used for purposes of determining competitive compensation packages.

The CCG Committee believes that the Corporation’s overall compensation should enable the Corporation to attract and retain qualified and experienced senior management, which is motivated to achieve the Corporation’s business plans, strategies and goals. The CCG Committee’s general compensation philosophy is that the compensation of its executive officers (including the Named Executive Officers) should be in the 50th percentile (in respect of base salary), the 75th percentile (in respect of bonus incentives) and the 75th percentile (in respect of the value of annual stock option grants), all in comparison to an appropriate peer group.

Individual executive compensation includes base salary, an annual bonus, subject to the provisions of the management incentive plans and stock option components. Each component has a specific role with respect to supporting the concept of pay for performance and is structured to reinforce specific job and organizational requirements. Compensation guidelines with respect to these three components are established for particular positions based on job responsibilities and a periodic review of compensation practices for comparable positions at comparable companies. The compensation of the Chief Executive Officer and the other Named Executive Officers is provided for in their respective employment agreements, with any increases in base salary determined annually by the CCG Committee.

The base salary component forms approximately 30% to 35% of an executive officer’s total compensation. A Named Executive Officer’s base salary is intended to remunerate the Named Executive Officer for discharging job responsibilities and reflects the executive’s performance over time. Individual salary adjustments take into account performance contributions.

The bonus component forms approximately 15% to 20% of an executives’s total compensation and is calculated according to the specific level of responsibility of the particular executive officer and/or in accordance with the terms of their employment agreements, subject to the provisions of the management incentive plan. Bonus awards recognize and reward accomplishments in a given year measured against specific personal achievements and quantitative goals of the Corporation, including, in particular, earnings per share. Participants in the Corporation’s management incentive plan are required to designate personal measurable objectives for each financial year and to consider carefully the alignment of these objectives with the Corporation’s business plan and strategic intent. The designation of these objectives is

intended to create strong alignment across the management group with the direction of the Corporation. The management incentive plan has two components, personal performance objectives and corporate performance objectives, each carrying a weight of 50% of the total possible bonus entitlement. Under the personal objectives, each participant must achieve a minimum of five personal performance objectives. The objectives must be specific, measurable, agreed-upon by the participant and their immediate supervisor, realistic and indicate a timeframe in which the objective must be reached.

At its meeting on November 19, 2002, the CCG Committee determined that although the

Corporation met its earning per share target of $1.04 for the fiscal year ended September 28, 2002, which would result in a 100% bonus entitlement for fiscal 2002 under the management incentive plan, the Corporation met this target with the inclusion of the results of operations from certain acquisitions completed during the fiscal year and would not have met the 100% target without such acquisitions. Therefore, the CCG Committee approved the payment of 75% of bonus entitlement under the management incentive plan for fiscal 2002.

Annual grants of stock options are targeted to form approximately 50% of the executive officers’ total compensation and are granted according to the specific level of responsibility of the particular executive officer and/or in accordance with the terms of an executive officer’s employment agreement, subject to the terms of the Corporation’s stock option plan. The number of outstanding options is considered by the Corporation when determining the number of new options to be granted in any particular year due to the limited number of options which are currently available for grant under the stock option plan. Grants under the Corporation’s stock option plan are intended to provide long-term rewards linked directly to the market value performance of the Corporation’s Common Shares. The grant of stock options effectively integrates the long-term interests of critical employees of the Corporation with those of its shareholders. The stock option plan reinforces an ownership perspective and encourages the loyalty of key executives. Approximately 1.1 million options were historically granted each year; however, there are currently only approximately 1.1 million shares reserved for issuance in connection with future grants of options. Accordingly, in the future, the Corporation may be forced to grant fewer options to its Named Executive Officers, seek approval from the Corporation’s shareholders to increase the number of Common Shares reserved for issue pursuant to the stock option plan, or find an alternative form of incentive.

The total compensation packages for the Corporation’s executive officers are reviewed annually. In fiscal 2001, the CCG Committee retained an independent compensation consultant to assist in the determination of appropriate compensation for its senior officers. The CCG Committee sought advice on the appropriate level of base salary, options, bonus, retirement vehicles, benefits and other incentive plans. After such review, it was determined that the Corporation’s level of overall compensation for its executive officers was competitive compared to a peer group of companies. The peer group of companies consisted of 24 Canadian public companies with annual sales in the $750 million to $1.2 billion range. This study demonstrated that the base salary component for the Corporation’s senior officers was in the 50th percentile of the selected peer group, the bonus component was in the 90th percentile and the stock option component was in the 90th percentile, of the selected peer group of companies. As it was determined that the base salaries for the Corporation’s Named Executive Officers in fiscal 2001 were competitive, the bonus and option amounts were more than competitive, and given the very low inflation rate in fiscal 2002, base salaries for Named Executive Officers were, therefore, not increased for fiscal 2002. However, at its meeting on November 19, 2002, the CCG Committee determined that, as base salaries were not increased in fiscal 2001 or fiscal 2002, base salaries for the Named Executive Officers should be increased by approximately 3% in fiscal 2003.

The CEO’s total compensation package is reviewed annually. The CEO has a written position description and is also required to meet the corporate objectives and goals in the applicable year’s business plan. The CEO’s compensation is determined in the same manner as the other Named Executive Officers, as described above.

Presented by the Compensation and Corporate Governance Committee:

William S. Cullens (Chairman) William A. Corbett Paul Houston Sheila O’Brien Carlo De Pellegrin

Performance Graph

The following graph compares the Corporation’s cumulative total shareholder return, (assuming an investment of $100, purchased on September 30, 1997 (adjusted to reflect the 2-for-1 subdivision of the Common Shares on February 19, 1998)), on the Common Shares during the period September 30, 1997 to September 28, 2002, with the cumulative return of The Toronto Stock Exchange’s (the “TSX”) S&P/TSX Index, formerly the TSE 300 Index, and the TSX’s Industrials Index, formerly the TSX’s Industrial Products Index.

Compensation of Directors

During the fiscal year ended September 28, 2002, directors’ fees were paid to each of the directors of the Corporation, other than Mr. Adamson and Mr. Keane (who are also executive officers of the Corporation) on the basis of $15,000 per annum payable in quarterly installments and $1,500 per annum payable in quarterly installments to each member of each committee, together with $1,000 for each meeting of the Board of Directors, or a committee thereof, attended. Each outside director acting as a committee chairman received $3,000 per annum payable in quarterly installments in addition to their regular compensation. During this year, a Lead Director, Mr. De Pellegrin, was appointed with an annual retainer of $1,500. In addition, on July 24, 2002, each director was granted options to purchase 2,000 Common Shares at an exercise price of $14.00 under the terms of the stock option plan.

On November 20, 2002, the Board of Directors adopted certain Corporate Governance Policies, one of which requires each director to own shares of the Corporation but which allows each director to determine the number of shares to be held. This policy provides that, notwithstanding such discretion, as a guideline, within five years of a directors’ first election or appointment to the Board, such director should hold a number of shares of the Corporation equal to three times the annual retainer payable to such director as of the date of their first election or appointment divided by the market price of the Corporation’s shares as of such date. In order to enable directors to comply with this guideline, directors have the option of receiving all or a portion of their directors fees in the form of shares of the Corporation, any such issuance of shares to be made annually on a date determined by the CCG Committee in an amount equal to the amount of directors fees in respect of the year which the applicable director has elected to receive by way of shares divided by the weighted average trading price of the Corporation’s shares for the 10 trading day period immediately preceding such date.

Directors’ and Officers’ Insurance

The Corporation has purchased a policy of insurance for the benefit of its directors and officers, and the directors and officers of its subsidiaries, against liability incurred by them in the performance of their duties as directors and officers of the Corporation, or its subsidiaries, as the case may be. The amount of the premium paid with respect to this policy for the financial year ended September 28, 2002 was US$37,189. The policy does not specify that any part of the premium is paid in respect of either directors as a group or officers as a group. The entire premium is paid by the Corporation. The current annual policy limit is US$25 million subject to a deductible of US$50,000 per occurrence or US$100,000 per employment practice liability claim.

Normal Course Issuer Bid

On October 3, 2001, the Corporation filed a Notice of Intention to commence a normal course issuer bid with the TSX so as to permit purchases of Common Shares through the facilities of the TSX during the following 12 months. As of October 8, 2002, the expiry of the normal course issuer bid, the Corporation had purchased a total of 179,500 Common Shares.

On September 25, 2002, the Corporation filed a Notice of Intention to commence a normal course issuer bid (the “Notice of Intention”). The Corporation is permitted, commencing October 9, 2002, to purchase up to 2,800,000 Common Shares under the normal course issuer bid and could effect such purchases from time to time up until October 8, 2003 when it determines that such purchases are advantageous to the Corporation. Any such purchases made under the normal course issuer bid would be effected in accordance with the rules and policies of the TSX. As of the date hereof, 463,700 Common Shares have been purchased under the new normal course issuer bid.

Any shareholder of the Corporation may obtain a copy of the Notice of Intention, without charge, by writing the Corporation at its head office.

Statement of Corporate Governance Practices

Under the rules of the TSX, the Corporation is required to disclose information relating to its system of corporate governance with reference to the TSX’s corporate governance guidelines. The Corporation’s disclosure relating to its corporate governance practices is set out in tabular form in Schedule A to this circular. This disclosure statement has been prepared by the Corporation’s Compensation and Corporate Governance Committee and has been approved by the Corporation’s Board of Directors. The Corporation complies with each one of the TSX’s corporate governance guidelines.

Appointment and Remuneration of Auditors

Management proposes that Ernst & Young LLP, Chartered Accountants, of Toronto, Ontario, be reappointed as auditors of the Corporation to hold office until the next annual meeting of the shareholders and proposes that the directors of the Corporation be authorized to fix the remuneration of such auditors. Ernst & Young LLP have been the auditors of the Corporation since January 31, 1994.

Proxies received in favour of management will be voted in favour of the reappointment of Ernst & Young LLP, as auditors of the corporation to hold office until the next annual meeting of shareholders and the authorization of the directors to fix the auditors’ remuneration, unless the shareholder has specified in the proxy that his or her shares are to be withheld from voting in respect thereof.

Special Business

Amendment of Articles to Increase the Maximum Number of Directors

The Board of Directors, through the CCG Committee, reviews annually the effectiveness of the Board and the committees of the Board. During the most recently completed fiscal year, the Board determined that, in light of recent developments in relation to corporate governance practices in both the U.S. and Canada it is appropriate to increase the number of directors on the Board, as qualified and appropriate candidates become available to the Corporation, during the current fiscal year.

The Board believes that an additional two directors are required in order to ensure a broad spectrum of knowledge and experience on the Board and in order to provide an adequate number of directors to properly staff the three committees with the appropriate specific qualifications for each committee.

The current maximum number of directors specified in the Articles is 10 and the current number of elected directors is nine. The election or appointment of an additional two directors would bring the number of directors to 11, which is above the maximum number of directors specified in the Articles.

The Corporation is, therefore, requesting that the shareholders approve a special resolution authorizing the Corporation to amend its Articles to increase the maximum number of directors specified in the Articles to 12 and empowering the Board to thereafter determine from time to time the number of directors of the Corporation within the minimum and maximum numbers provided for in the Articles.

The full text of the special resolution authorizing the amendment to the Articles with respect to this change is attached hereto as Schedule B.

The special resolution is required to be passed by at least two thirds of the votes cast at the Meeting. Proxies received in favour of management will be voted in favour of the special resolution authorizing an amendment to the Articles to increase the maximum number of directors specified in the Articles, unless the shareholder submitting the proxy has specified that the shares represented by such proxy are to be voted against the foregoing.

The amendment to the Articles will not become effective until Articles of Amendment have been delivered to the Director under the Act and a Certificate of Amendment has been endorsed thereon in accordance with the Act. The text of the special resolution authorizes the Board to revoke the resolution without further approval of the shareholders at any time prior to the endorsement by the Director under the Act of a Certificate of Amendment.

Additional Information

Copies of the Corporation’s Annual Information Form, Annual Report and interim quarterly reports may be obtained, without charge, by writing the Corporation, at its head office. Additional copies of this Circular are also available upon request.

Other Matters Which May Come Before the Meeting

Management of the Corporation knows of no matters to come before the Annual and Special Meeting of Shareholders other than as set forth in the Notice and as described in this Circular.

However, if other matters which are not now known to management on the date hereof should properly come before the meeting, the accompanying proxy will be voted on such matters in accordance with the best judgment of the persons voting all proxies returned.

The undersigned hereby certifies that the contents and the mailing of this Circular have been approved by the Board of Directors.

Dated at Mississauga, Ontario, this day 31st of December, 2002.

By order of the Board

SONYA STARK

Sonya Stark Secretary

SCHEDULE A
	Compliance by CFM Corporation with TSX Corporate Governance Guidelines
		Compliance
	TSX Corporate Governance Guideline	by CFM	Reasons
1.	The board of directors of every	Yes	• The Board of Directors specifically reviews strategic
	corporation should explicitly assume		planning on an annual basis as part of the approval
	responsibility for the stewardship of the		process relating to the Corporation’s annual
	corporation and,as part of the overall		business plan.
	stewardship responsibility,should
	assume responsibility for the
	following matters:
(a)	adoption of a strategic planning process;
(b)	the identification of the principal risks	Yes	• The Board of Directors has specifically identified the
	of the corporation’s business and		principal risks facing the Corporation and receives
	ensuring the implementation of		an integrated briefing on the systems in place to
	appropriate systems to manage		manage these risks on an annual basis.
	these risks;
			• The Board of Directors receives an integrated health,
			safety and environmental report on a quarterly basis.
			• The Charter of the Audit Committee provides that the
			Audit Committee is responsible for reviewing and
			discussing with management the Corporation’s major
			financial risk exposures and the steps management
			has taken to monitor and control such exposures,
			including the Corporation’s policies with respect to
			risk assessment and risk management.
(c)	succession planning,including	Yes	• The Board of Directors is specifically responsible for
	appointing,training and monitoring		recruiting, training, monitoring and succession
	senior management;		planning for senior management.
			• In accordance with its Charter, the CCG Committee is
			responsible for reviewing and making
			recommendations to the Board regarding all new
			employment, consulting, retirement and severance
			agreements and arrangements proposed to the
			Corporation’s executives. The CCG Committee must
			periodically evaluate existing agreements with the
			Corporation’s executives for continuing
			appropriateness.
			• In accordance with its Charter, the CCG Committee is
			responsible for monitoring compliance with the
			Corporation’s Code of Business Conduct and Ethics.
			The CCG Committee is also responsible for reviewing
			and approving corporate goals and objectives

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
1. (c) continued		relevant to the compensation of the Corporation’s
		CEO, evaluating the performance of the Corporation’s
		CEO in light of those goals and objectives and setting
		the compensation level of the Corporation’s CEO
		based on this evaluation. The CCG Committee is also
		responsible for reviewing the results of and
		procedures for evaluating the performance of other
		executive officers by the Corporation’s CEO.
(d) a communications policy for	Yes	• The Board of Directors has implemented systems
the corporation;		governing the communications between the
		Corporation, its shareholders and the public. These
		systems are embodied in formal policies that have
		been approved by the Board.
		• The Board of Directors reviews in advance all press
		releases that disclose financial results. Other
		statutory disclosure documents required to be
		prepared by the Corporation, such as its annual
		management information circular and annual
		information form, are reviewed and, where required,
		approved by the Board.
		• The Corporation’s disclosure and communications
		policies provide for open, accessible, non-selective
		and timely exchange of material information with all
		shareholders with respect to the business, activities
		and financial results of the Corporation, subject to all
		applicable legal requirements. All publicly
		disseminated information is released through news
		wire services of broad circulation and is posted on
		the Corporation’s website. Conference calls and live
		webcasts are held to report on quarterly and annual
		earnings and major corporate developments so that
		the information will be accessible simultaneously to
		all interested parties. Questions or comments from
		shareholders can be made at any time by calling or
		writing to the Corporation’s head office in
		Mississauga, Ontario.
		• The Corporation’s disclosure and communications
		policies govern the Corporation’s interaction with
		analysts and the public, contain measures designed
		to avoid selective disclosure and are reviewed
		annually.

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
(e) the integrity of the corporation’s	Yes	• The Corporation’s internal controls are monitored on
internal control and management		a regular basis by the Audit Committee. In
information systems;		accordance with its Charter, the Audit Committee is
		specifically responsible for assisting the Board’s
		oversight of (i) the independent auditor’s
		qualifications and independence; (ii) the
		performance of the Corporation’s independent
		auditors; (iii) the quality and integrity of the
		Corporation’s financial statements and related
		disclosure; and (iv) the Corporation’s compliance
		with legal and regulatory requirements.
		• The Board of Directors and the Audit Committee
		review all financial statements prior to their release
		and receive detailed financial information on a
		quarterly basis.
		• The Board of Directors and the Audit Committee
		receive detailed briefings concerning all matters
		relating to management information systems and
		approve all significant expenditures.
		• In accordance with the requirements of the Sarbanes
		Oxley Act of 2002, the Corporation’s CEO and CFO are
		required to certify the annual financial statements
		included with its Form 40F filing with the Securities
		and Exchange Commission in the United States. The
		CEO and CFO are also required to certify that the
		Corporation has in place the necessary internal
		controls to support the certification and that such
		internal controls are effective. The Corporation has in
		place certain processes which enable the CEO and
		CFO to sign such certifications. In accordance with
		its Charter, the Audit Committee is responsible for
		ensuring that such controls are effective, and is
		responsible for conducting an annual assessment
		and quarterly evaluations of the Corporation’s
		disclosure controls and procedures and the
		Corporation’s internal controls in order to determine
		whether or not there are any significant deficiencies
		or weaknesses in the Corporation’s disclosure
		controls and procedures.

		Compliance
	TSX Corporate Governance Guideline	by CFM	Reasons
2.	The board of directors of every	Yes	• Colin Adamson and Patrick Keane are the only
	corporation should be constituted with		directors of the Corporation who, on a strict
	a majority of individuals who qualify		application of the appropriate definition, are related.
	as unrelated directors. An unrelated		Accordingly, seven out of a total of nine directors are
	director is a director who is independent		unrelated to the Corporation.
	of management and is free from any
	interest and any business or other
	relationship which could,or could
	reasonably be perceived to,materially
	interfere with the director’s ability to
	act with a view to the best interests of
	the corporation,other than interests and
	relationships arising from shareholding.
	A related director is a director who is not
	an unrelated director.
3.	The board of directors of a corporation is	Yes	• Colin Adamson is a related director by virtue of his
	required to disclose on an annual basis		position as Chief Executive Officer of the Corporation.
	whether the board has a majority of
	unrelated directors and is required to		• Patrick Keane is a related director by virtue of his
	disclose the analysis of the application of		position as Executive Vice President, Operations.
	the principles supporting its conclusions.
			• With respect to the remaining directors, none of
			them, nor their associates, (i) work in the day-to-day
			operations of the Corporation, (ii) are party to any
			material contracts with the Corporation, or (iii)
			receive, other than in their capacity as directors, any
			consulting, advisory or other compensatory fees from
			the Corporation or any of its subsidiaries, including
			fees paid directly or indirectly for services as a
			consultant, legal or financial advisor. Accordingly, all
			of such remaining directors are unrelated to the
			Corporation, as listed below:
			David Colcleugh	– Unrelated
			William Corbett	– Unrelated
			William Cullens	– Unrelated
			Paul Houston	– Unrelated
			Sheila O’Brien	– Unrelated
			Carlo De Pellegrin	– Unrelated
			Heinz Rieger	– Unrelated

		Compliance
	TSX Corporate Governance Guideline	by CFM	Reasons
4.	The board of directors of every	Yes	• In accordance with its Charter, the CCG Committee
	corporation should appoint a committee		is responsible for identifying and recommending to
	of directors composed exclusively of		the Board individuals qualified to become Board
	outside,i.e. non-management,directors,		members and recommending to the Board the
	a majority of whom are unrelated		director nominees for election at the next annual
	directors,with the responsibility for		meeting of shareholders.
	proposing to the full board new nominees
	to the board and for assessing directors		• Under its Charter, the CCG Committee is
	on an ongoing basis.		responsible for leading the Board of Directors and
			each committee thereof in an annual performance
			evaluation, which performance evaluation must
			focus on the contribution to the Corporation by the
			Board of Directors and each committee.
			• All members of the CCG Committee are not members
			of management and all members are unrelated.
5.	Every board of directors should	Yes	• The Corporation’s Corporate Governance Policies
	implement a process to be carried out		require that the CCG Committee be responsible for
	by the nominating committee or other		conducting an annual evaluation of the Board, of
	appropriate committee for assessing the		each individual director and of each committee to
	effectiveness of the Board as a whole,		determine whether each of them is functioning
	the committees of the Board and for		effectively. Such review is discussed with the full
	assessing directors on an ongoing basis.		Board following the end of each fiscal year. The
			assessment focuses on the contribution to the
			Corporation by the Board, each individual director
			and each committee. The CCG Committee is
			responsible for establishing the criteria to be used
			in such evaluations.
			• The CCG Committee’s Charter requires that the CCG
			Committee be responsible for leading the Board
			and each committee of the Board in an annual
			performance self-evaluation; reviewing with the
			Board, on an annual basis, the current composition
			of the Board in light of the characteristics of
			independence, diversity, age, skills, experience and
			availability of service of its members and of
			anticipated needs; and reviewing with the Board
			the appropriate skills and characteristics required
			of Board members.

		Compliance
	TSX Corporate Governance Guideline	by CFM	Reasons
6.	Every corporation,as an integral element	Yes	• In accordance with the Corporation’s Corporate
	of the process for appointing new		Governance Policies, all new directors must be
	directors,should provide an orientation		provided with the Corporate Governance Policies
	and education program for new recruits		and participate in the Corporation’s orientation
	to the board.		initiatives as soon as practicable after the annual
			or other meeting at which new directors are
			elected or appointed. The initiatives may include
			presentations by senior management and outside
			advisors as appropriate to familiarize new directors
			with the Corporation’s business, its strategic plans,
			its significant financial, accounting and risk
			management issues and its compliance programs,
			as well as their fiduciary duties and responsibilities
			as directors.
			• Each new director is provided with copies of the
			Corporation’s Articles and By-laws,Code of Business
			Conduct and Ethics,Corporate Policies,Board and
			Committee mandates and charters,the current
			Business Plan,and is welcomed by the existing
			directors of the Corporation with an outline of:
			• The nature of the business of the Corporation;
			• Current issues facing the Corporation;
			• The Corporation’s corporate strategy;
			• The Corporation’s expectations concerning input
			from its directors; and
			• The general responsibilities of directors.
			• In addition, a new director is required to visit some
			of the Corporation’s facilities and meet with its
			corporate officers in order to discuss and better
			understand the Corporation’s business.

		Compliance
	TSX Corporate Governance Guideline	by CFM	Reasons
7.	Every board of directors should	Yes	• Under its Charter, the CCG Committee is
	examine its size and,with a view		responsible for reviewing with the Board, on an
	to determining the impact of the		annual basis, the current composition of the Board
	number upon effectiveness,undertake,		in light of the characteristics of independence,
	where appropriate,a program to reduce		diversity, age, skills, experience and availability of
	the number of directors to a number		service of its members and of anticipated needs;
	which facilitates more effective		and reviewing with the Board the appropriate skills
	decision making.		and characteristics required of Board members.
			• As part of this regular process, the Board of
			Directors increased the size of the Board during the
			fiscal year ended September 28, 2002 by two to
			ensure effective and efficient decision making,
			through the presence of a variety of viewpoints,
			both from within management and from without.
			The Board is considering a further increase in the
			Board, should it be able to retain appropriate new
			candidates and is, therefore, requesting
			shareholder approval to increase the maximum
			number of directors specified in the Articles of the
			Corporation to 12 to accommodate an increase in
			the number of directors to 11. See “Special
			Business – Amendment of Articles to Increase
			Maximum Authorized Number of Directors”.
8.	The board of directors should review the	Yes	• Under its Charter, the CCG Committee is
	adequacy and form of the compensation		responsible for evaluating and making
	of directors and ensure the compensation		recommendations to the Board regarding
	realistically reflects the responsibilities		compensation of the Corporation’s directors,
	and risk involved in being an effective		including, among other things, equity and equity-
	director.		based compensation.
			• In determining the directors’ compensation, the
			CCG Committee considers the commitment of time
			required to fulfill the directors’ duties and
			responsibilities, the fees paid to directors at other
			comparable public companies, the risks of being a
			director and the responsibilities.
9.	Committees of the board of directors	Yes	• The committees of the Board of Directors are
	should generally be composed of outside		composed entirely of unrelated, non-management
	directors,a majority of whom are		directors.
	unrelated directors.

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
10.Every board of directors should	Yes	• Under its Charter, the CCG Committee is responsible
expressly assume responsibility for,		for monitoring significant developments in the law
or assign to a committee of directors,		and practice of corporate governance and of the
the general responsibility for developing		duties and responsibilities of directors of public
the corporation’s approach to		companies; overseeing compliance with the
governance issues.		Corporation’s Code of Business Conduct and Ethics;
		and developing and recommending to the Board and
		administering the corporate governance procedures
		and policies of the Corporation.
11.The board of directors,together with	Yes	• The mandate of the Board of Directors is generally
the CEO,should develop position		to oversee the conduct of the Corporation’s
descriptions for the board and CEO,		business and to supervise management of the
involving the limits to management’s		Corporation. In addition to this general mandate,
responsibilities. In addition,the board		the Board has expressly identified a number of its
should approve or develop the corporate		specific responsibilities as being:
objectives which the CEO is responsible
for meeting.		• Developing, reviewing and, where prudent,
		modifying the corporate strategy of the
		Corporation;
		• Identifying and developing a strategy to manage
		the principal risks facing the Corporation;
		• Recruiting, training, monitoring and succession
		planning for senior management;
		• Ensuring timely and effective communication
		between the Corporation and its shareholders;
		• Ensuring the integrity of the internal control
		systems and assessment processes for the
		Corporation, its directors, management and
		employees; and
		• Developing the Corporation’s approach to
		corporate governance issues and establishing
		and implementing the Corporation’s governance
		system.
		• The Board of Directors approves and develops
		the Corporation’s annual business plan, which
		includes the approval of corporate objectives, on
		which all senior management’s incentive
		compensation is based.
		• There are written Corporate Governance Policies
		which set out directors’ responsibilities as well as
		committee members’ responsibilities.

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
11. continued		• There are written Committee Charters which
		further detail the responsibilities of members of
		each Board committee.
		• There is a written position description for the CEO
		which has been approved by the CCG Committee
		and is reviewed annually. The approved annual
		business plan also constitutes part of the CEO’s
		annual objectives.
		• In addition to those matters which must by law or
		pursuant to the Articles of the Corporation be
		approved by the Board of Directors, management is
		required to seek approval in respect of material
		transactions. A material transaction includes any
		transaction which could materially affect the price
		of the Corporation’s shares, including a sale or
		acquisition of assets. Certain other transactions
		which may not be material, such as the granting of
		options to employees, require Board ratification.
12.Every board of directors should have in	Yes	• The Board of Directors meets independently of
place appropriate structures and		management for a portion of each regularly
procedures to ensure that the board can		scheduled meeting.
function independently of management.
		• The Board of Directors is composed of seven out of
		a total of nine outside directors of whom seven are
		unrelated.
		• The Board has also appointed a lead director, Mr.
		De Pellegrin, to preside at all executive sessions of
		the non-management directors.
		• To ensure that the Board of Directors functions
		independently of management, there are three
		committees in place, all of which are comprised of
		unrelated directors.
		• In appropriate circumstances, the outside and
		unrelated directors will meet separately from
		management to discuss certain issues.
		• The Board and each committee have the power to
		hire independent legal,financial or other advisors as
		they may deem necessary,without consulting or
		obtaining the approval of any officer of the
		Corporation in advance,subject to the requirement
		that individual directors obtain the approval of the
		CCG Committee prior to engaging any such advisors.

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
13.The audit committee of every board of	Yes	• The Corporation’s Audit Committee is composed
directors should be composed only of		only of outside, unrelated directors. In accordance
outside directors. The roles and		with the Audit Committee Charter, each member is
responsibilities of the audit committee		financially literate and one member of the Audit
should be specifically defined so as to		Committee, Mr. De Pellegrin, has been determined
provide appropriate guidance to audit		by the Board as having financial expertise.
committee members as to their duties.
The audit committee should have		• The roles and responsibilities of the Audit
direct communication channels with the		Committee are specifically defined in the Audit
internal and external auditors to discuss		Committee’s Charter. The Audit Committee Charter
and review specific issues as appropriate.		specifically defines the purpose, composition,
The audit committee duties should		operations, authority and responsibilities of the
include oversight responsibility for		Audit Committee. The specific responsibilities in
management reporting on internal control.		the Audit Committee Charter with respect to
		oversight responsibility for management reporting
		on internal controls include:
		• Reviewing the quarterly financial statements,
		notes and management’s discussion and
		analysis prior to their submission to the Board
		for approval;
		• Reviewing the annual financial statements, notes
		and management’s discussion and analysis prior
		to their submission to the Board for approval;
		• Reviewing and discussing quarterly reports
		from the independent auditor on (a) all critical
		accounting policies and practices to be used
		by the Corporation in preparing its financial
		statements; (b) all alternative treatments of
		financial information within GAAP that have
		been discussed with management, ramifications
		of the use of these alternative disclosures and
		treatments, and the treatment preferred by the
		independent auditor; and (c) other material
		communications between the independent
		auditor and management, such as any
		management letter or schedule of unadjusted
		differences.
		• Reviewing and discussing with management
		earnings press releases, with particular attention
		to the use of “pro forma” or “adjusted”
		non-GAAP information, before they are issued.

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
13. continued		• Reviewing and discussing generally with
		management the nature of the financial
		information and earnings guidance provided to
		analysts and rating agencies.
		• Reviewing with management and the
		independent auditor disclosures made to the
		Audit Committee by the Corporation’s CEO and
		CFO during their certification process for the
		Corporation’s Form 40F about the quality,
		adequacy and effectiveness of the Corporation’s
		internal controls and any significant deficiencies
		in the design or operation of internal controls or
		material weakness therein and any fraud
		involving management or other employees who
		have a significant role in the Corporation’s
		internal controls.
		• Reviewing and discussing with management and
		the independent auditor the effect of regulatory
		and accounting initiatives as well as off-balance
		sheet structures on the Corporation’s financial
		statements.
		• Reviewing and discussing with management and
		the independent auditor any audit problems or
		difficulties and management’s response.
		• Reviewing and discussing with management and
		the independent auditor the effectiveness of the
		Corporation’s disclosure controls and procedures.
		• Discussing with management and the
		independent auditor financial reporting issues
		and judgements made in connection with the
		preparation of the Corporation’s financial
		statements, including any significant changes in
		the Corporation’s selection or application of
		accounting principles, any major issues as to the
		adequacy of the Corporation’s internal controls
		and any special steps adopted in light of
		material control deficiencies.

	Compliance
TSX Corporate Governance Guideline	by CFM	Reasons
13. continued		• Reviewing with management, and such outside
		professionals as the Audit Committee considers
		appropriate, important trends and developments
		in financial reporting practices and requirements
		and their effect on the Corporation’s financial
		statements.
		• Discussing with management and the
		independent auditor any correspondence with
		regulators or governmental agencies and any
		published reports which raise material issues
		regarding the Corporation.
		• Establishing procedures for the receipt, retention
		and treatment of complaints received by the
		Corporation regarding accounting, internal
		accounting controls, auditing matters or
		potential violations of law; and the confidential,
		anonymous submission by employees of the
		Corporation of concerns regarding questionable
		accounting or auditing matters or potential
		violations of law.
		• In accordance with its Charter, the Audit Committee
		is required to have direct communication channels
		with the external auditors to discuss and review
		specific issues as appropriate. The Audit
		Committee Charter specifically provides that the
		independent auditor shall report directly to the
		Audit Committee and requires that the Audit
		Committee be directly responsible for the oversight
		of the work of the independent auditor, including
		the resolution of disagreements between
		management and the auditor regarding financial
		reporting matters.
14.The board of directors should implement	Yes	• Individual directors may, in appropriate
a system which enables an individual		circumstances and subject to the approval of the
director to engage an outside advisor		CCG Committee, engage independent advisors at
at the expense of the corporation in		the expense of the Corporation.
appropriate circumstances. The
engagement of the outside advisor
should be subject to the approval of an
appropriate committee of the board.

SCHEDULE B

Special Resolution Authorizing Amendment of Articles to Increase the Maximum Number of Directors

Be It Resolved That:

1. the articles of the Corporation be amended to provide that the Corporation shall have a minimum of one (1) and a maximum of twelve (12) directors;

2. the number of directors of the Corporation within the minimum and maximum number of directors provided for in the articles of the Corporation is hereby determined to be nine (9);

3. hereafter, the board of directors of the Corporation is empowered to determine from time to time the number of directors of the Corporation within the minimum and maximum numbers provided for in the articles of the Corporation, as the same may be amended from time to time;

4. any one officer or director of the Corporation is hereby authorized and directed on behalf of the Corporation to deliver Articles of Amendment in duplicate, to the Director under the Business Corporations Act (Ontario) to give effect to the amendment provided for in paragraph 1 and to sign and execute all documents and to do all things necessary or advisable in connection with the foregoing; and

5. the Board of Directors of the Corporation is hereby authorized to revoke the special resolution provided in paragraph 1 without further approval of the shareholders of the Corporation at any time prior to the endorsement by the Director under the Business Corporations Act of a Certificate of Amendment of articles in respect of the amendment referred to therein.

ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

February 26, 2003

The undersigned shareholder of CFM CORPORATION (the "Corporation") hereby appoints Colin Adamson, Chairman and Chief Executive Officer of the Corporation, or failing him, Jim Lutes, President and Chief Operating Officer of the Corporation, or if the undersigned wishes to appoint a proxy holder other than the foregoing persons, the undersigned hereby appoints _______________________________________ as the proxy of the undersigned to attend, act and vote for and on behalf of the undersigned at the Annual and Special Meeting of Shareholders of the Corporation (the "Meeting") to be held in the Auditorium in the Conference Centre at The Toronto Stock Exchange, The Exchange Tower, 2 First Canadian Place, 130 King Street West, Toronto, Ontario, on February 26, 2003 at 4:15 p.m. (Toronto time), and at any adjournment thereof, hereby revoking any proxy previously given.

Election of	The shares represented by this proxy will be voted in the manner indicated below.
Directors	If no choice is specified, this proxy will be voted in favour of the election of
	directors, as set out in the Management Information Circular of the Corporation
	dated December 31, 2002 (the "Management Information Circular").
	For the election as directors of all nominees specified in the accompanying
	Management Information Circular; or
	Withhold from voting for the election of directors.
Appointment	The shares represented by this proxy will be voted in the manner indicated below.
of Auditors	If no choice is specified, this proxy will be voted in favour of the appointment
	of Ernst & Young LLP, Chartered Accountants, as auditors of the Corporation
	and authorizing the Board of Directors of the Corporation to fix the
	remuneration of the auditors.
	For the appointment of Ernst & Young LLP as auditors of the Corporation and
	authorizing the Board of Directors of the Corporation to fix the remuneration
	of the auditors, or
	Withhold from voting for the appointment of auditors.
Increase in	The shares represented by this proxy will be voted in the manner indicated below.
Maximum	If no choice is specified, this proxy will be voted for the approval of the special
Number of	resolution authorizing an amendment to the Articles of the Corporation to
Directors	increase the maximum number of directors specified in the Articles of the
	Corporation to 12, as set out in the Management Information Circular.
	For the approval of the special resolution authorizing an amendment to the
	Articles of the Corporation to increase the maximum number of directors
	specified in the Articles of the Corporation to 12; or
	Against the approval of the special resolution authorizing an amendment to
	the Articles of the Corporation to increase the maximum number of directors
	specified in the Articles of the Corporation to 12.

Other Matters	The shares represented by this proxy will be voted at the discretion of the proxyholder
	named above on amendments to the foregoing matters and on such other matters as may
	properly come before the Meeting.
	Any shareholder has the right to appoint a person (who need not be a shareholder)
	other than the persons designated above to attend and act for him or her and on his or
	her behalf at the Meeting. In order to do so the shareholder may insert the name of
	such person in the blank space provided above, or such shareholder may use another
	appropriate form of proxy.

This proxy is solicited by the management of the Corporation.

Dated this ______________________ day of _______________________, 2003. Name of shareholder (please print) Signature of shareholder or duly authorized person

Notes:

(1) This proxy should be dated and signed by the shareholder, or by his or her attorney authorized in writing or, if the shareholder is a corporation, by a duly authorized person.

The name of the shareholder must appear exactly as it is shown on the affixed label. If shares are held jointly, any one of the owners may sign. Executors, administrators, trustees and other similar holders should set out their full title. If not dated in the space provided, this proxy will be deemed to bear the date on which it was mailed by management.

(2) The shares represented by this proxy will be voted as directed by the shareholder. This proxy confers authority for the above-named to vote in their discretion with respect to any amendments or variations to the matters identified in the notice of meeting accompanying this proxy instrument or other matters which may properly come before the Meeting.

EX-4

INTRODUCTION

The following management’s discussion and analysis (“MD&A”) provides a review of important events, results of operations and the financial position of CFM Corporation (“CFM” or the “Company”) for the year ended September 28, 2002, in comparison with those for the year ended September 29, 2001. This discussion should be read in conjunction with the consolidated financial statements for the year ended September 28, 2002 and the accompanying notes.

CFM operates in one business segment, home products, which includes the development, manufacture and sale of fireplaces, hearth related products and barbeques and related accessories. CFM is subject to a number of the usual risks associated with a durable consumer products industry. Demand for these products is affected by the general state of the economy, demographics, the level of housing starts, consumer spending on home renovations and remodelling, weather, the seasonality of the demand for CFM’s products, the seasonal buying patterns of major customers, industry capacity and competition. A more complete discussion of the risk factors affecting CFM is contained later in this report under the heading “Risks and Uncertainties.”

This MD&A contains forward-looking statements that reflect CFM’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of words such as “believed,” “expect,“ “anticipate,” “intend,” “foresee,” “likely,” “will” or other similar words or phrases. These forward-looking statements involve certain risks and uncertainties, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could affect these statements include, without limitation, general economic conditions, demographics, consumer confidence and the level of housing starts, war and acts of terrorism, CFM’s ability to develop new products, patent protection, weather, the seasonality of the demand for CFM’s products, the seasonal buying patterns of major customers, the availability of CFM’s manufacturing capacity to respond to seasonal demand, industry capacity, product liability, relationships with certain significant customers, suppliers and employees, availability of gas and gas prices, mass merchant consolidation, credit and collections, supply and cost of raw materials, purchased parts and labour, costs of certain employee benefits, the inability to increase selling prices as costs increase, competition, foreign currency fluctuations and government regulation. CFM considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions the reader that these assumptions regarding future events, many of which are beyond the control of CFM, may ultimately prove to be incorrect. In addition, CFM does not have any obligation to publicly update on any previously issued forward-looking statements.

Results of Operations

CFM’s consolidated sales increased 38% to $576.2 million in the year ended September 28, 2002, compared to $416.3 million in the prior year.

Sales by product category were as follows:

FOR THE 12 MONTHS ENDED	September 28	September 29
($ millions)	2002	2001
	$	$
Hearth and heating products	443.2	397.6
Barbeque and outdoor products	133.0	18.7
	576.2	416.3

Sales of hearth and heating products were $443.2 million in the year, an increase of 11% from the prior year. Within this product category, hearth products generated sizeable growth due to significant expansion within the mass merchant retail channel as well as double-digit growth in North American new home construction segment sales. The growth in new home construction was partially offset by a fourth quarter year-over-year decline in retrofit hearth product sales in the specialty retail channel caused by particularly warm weather in the fall buying season. Sales of heating products declined marginally year-over-year.

Sales of barbeque and outdoor products were $133.0 million in the year, an increase of $114.3 million from the prior year. The significant increase was a result of sales of CFM’s new mass merchant barbeque grills and barbeque accessories through CFM Keanall’s operations. CFM Keanall was formed as a barbeque division in January 2002 by combining the newly acquired Keanall Holdings Limited (“Keanall”) with the commencement of commercial production in our new barbeque grill manufacturing plant. Also as previously announced, CFM acquired The Great Outdoors Grill Company (“TGO”) on May 30, 2002. TGO’s post acquisition end of season grill sales also contributed to CFM’s overall sales increase in this category.

Gross Profit

Gross profit increased by $36.3 million or 26% from the prior year to $173.7 million. As a percentage of sales, gross profit declined to 30.1% from 33.0% in the previous year.

Gross margin in the year was impacted by the significant growth in barbeque appliance sales, which are at margins lower than the historical margins realized in hearth products, as well as by the initial season costs of the new barbeque manufacturing facility. Barbeque appliance margins were negatively impacted in this start-up year by costs associated with inefficient raw material usage and component sourcing, subcontracted metal forming and inefficient labour and operating costs following commencement of commercial operation of the new facility in January 2002. Many of the initial year cost inefficiencies have been addressed and future barbeque margins are expected to improve but remain lower than the historical hearth product margins realized by the Company.

Gross margin in the year was also impacted by year-over-year changes in sales mix. The higher sales growth in the lower margin, new home segment in the hearth market and lower fourth quarter sales of higher margin retrofit hearth products due to the unusually warm fall weather were the main contributors to the lower gross margin.

Selling, Administrative, Research and Development Expenses

Operating expenses for the year increased $23.6 million or 35% to $91.7 million. The incremental increase in expenses related primarily to the addition of Keanall and TGO. As a percentage of sales, operating expenses were 15.9%, slightly lower than the prior year of 16.4%.

EBITDA

Earnings before interest, taxes, and amortization (“EBITDA”) were $82.0 million, up $12.7 million or 18% from the prior year. EBITDA margins declined to 14.2% from 16.6% last year due primarily to the impact of lower overall gross margins as discussed above. The following is a reconciliation of EBITDA to net income for the year:

EBITDA for the year has been determined as follows:

FOR THE 12 MONTHS ENDED	September 28	September 29
($ millions)	2002	2001
	$	$
Net income for the period	42.1	31.4
Amortization	13.3	10.4
Interest income	(0.2)	(0.5)
Interest expense	7.1	8.3
Income taxes	19.7	14.7
Amortization of goodwill (net of tax)	—	5.0
EBITDA	82.0	69.3

EBITDA is defined as earnings before the taking of any deductions in respect of interest, taxes and amortization. EBITDA is presented before deductions for interest expense, tax expense and amortization to provide financial statement users a measure of CFM’s earnings available to provide for these costs. EBITDA has been determined by taking net income for the period from the Consolidated Statement of Operations and adding to it interest expense, amortization and income taxes which are disclosed as individual line items within the Consolidated Statement of Operations.  

EBITDA and EBITDA margin are not recognized measures for financial statement presentation under Canadian generally accepted accounting principles (“GAAP”). Non-GAAP measures (such as EBITDA and EBITDA margin) do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other issuers. Investors are encouraged to consider these financial measures in the context of CFM’s GAAP results, as provided in the financial statements for the year ended September 28, 2002.

Net Interest Expense

Net interest expense of $6.8 million was down $1.0 million from the prior year as a result of lower interest rates.

Net Income

Net income for the year ended September 28, 2002 was $42.1 million, up 34% from $31.4 million in the previous year due primarily to the significant growth in sales.

In accordance with the Canadian Institute of Chartered Accountants’ (“CICA”) new accounting recommendation for Business Combinations, Goodwill and Other Intangible Assets, goodwill is no longer amortized. Net income in the prior year was $36.4 million after giving retroactive effect to the accounting change concerning the amortization of goodwill of $5.0 million.

Earnings Per Share

Earnings per share (“EPS”) increased 29% to $1.06 from $0.82 in 2001, due primarily to the 34% increase in net income, partially offset by a 4% increase in the weighted average number of shares outstanding. The weighted average number of common shares of the Company (“Common Shares”) outstanding increased to 39,836,000 primarily as a result of the 2,722,000 Common Shares issued on the acquisitions of Keanall and TGO net of the purchase of 180,000 Common Shares under the Company’s Normal Course Issuer Bid. On a comparative basis, EPS increased by $0.11 or 12% from $0.95 in 2001 after giving retroactive effect to the accounting change concerning goodwill.

Diluted EPS improved to $1.03 from $0.81 in the prior year and from $0.94 after retroactive effect of the accounting change concerning goodwill.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Accounts receivable increased $33.5 million compared to a year ago due primarily to higher hearth sales in the fourth quarter and particularly in the month of September 2002 compared to a year ago, as well as barbeque accounts receivable of Keanall and TGO operations.

Inventory increased by $38.5 million over the prior year due to the addition of Keanall and TGO as well as the initial year, end of season inventories of grills and raw material inventories required for CFM’s new barbeque manufacturing operation. The expanded barbeque grill offering has been successful with consumers, contributing significantly to CFM’s sales growth in the year. Initial year market penetration uncertainty, product mix variability and customer on-time fulfillment demands have led to higher grill inventories to support this sales growth.

Other assets increased by $1.3 million over the prior year to $6.8 million with the deferred barbeque facility start-up costs accounting for the majority of the increase. Pre-commercial production start-up costs for the new barbeque manufacturing facility totalling $3.8 million have been deferred. Of that amount, $2.0 million was incurred and deferred in fiscal 2002 up to the end of the first quarter when commercial production quality and output levels were achieved. For the nine-month period from the beginning of the second quarter through to the end of the fiscal year, $0.6 million of deferred barbeque facility start-up costs were amortized.

Intangible assets increased by $2.0 million over the prior year to $8.3 million. The trademarks acquired by the Company’s British fireplace business accounted for the majority of the increase.

Goodwill increased by $60.7 million to $232.7 million due primarily to the goodwill acquired on the acquisitions of Keanall and TGO of $51.5 million and $12.9 million, respectively. Application of the new fair value impairment test of goodwill recommended by the CICA resulted in a $2.0 million writedown of the goodwill associated with CFM’s United Kingdom subsidiary to zero. Consistent with the CICA accounting recommendation for Business Combinations, Goodwill and Other Intangible Assets, the Company ceased amortizing goodwill in fiscal 2002. In accordance with the new pronouncement, the Company will assess the impairment of goodwill by applying a fair value based test on an annual basis going forward.

Shareholders’ equity increased by $65.8 million or 24% over the prior year to $343.4 million with net book value per share increasing to $8.46, up 16% from $7.30 in 2001. The principal factors contributing to the change in equity were net earnings for the year of $42.1 million and the share consideration issued as part of the Keanall and TGO acquisitions of $33.5 million.

CASH FLOW

During the year, CFM generated $49.7 million in cash from operations, a $15.3 million or 44% increase from the $34.4 million of cash generated in fiscal 2001. An increase of $7.3 million in cash flow from operations before changes in non-cash working capital, along with an $8.0 million lower investment in working capital compared to the prior year, contributed to the improvement in cash generated.

Non-cash working capital was impacted by an incremental investment in inventory primarily attributable to the initial year, end of season finished goods inventory of barbeque grills and raw materials for the new barbeque operation, as well as higher fireplace inventories in line with the demand expectation for the fall/winter fireplace season. This was offset by lower cash installments of income taxes in fiscal 2002 as a result of changes in the timing of quarterly installments in the United States and an increase in accounts payable and accrued liabilities. The increase in payables was lower than the increase in other working capital as the Company continued to take advantage of supplier discounts for early payment when economically justified. Excluding the impact of the additional receivables from the acquired businesses of Keanall and TGO, accounts receivable increased only marginally year-over-year despite high er sales in the fourth quarter and particularly in the month of September 2002 due to a focused effort to improve the aging of receivables.

Cash flow used in investing activities was $50.3 million with Keanall and TGO acquisitions consuming $10.8 million and $15.1 million, respectively. Capital spending in the fiscal year was $20.9 million. Significant capital projects in the year included the completion of the Company’s new barbeque manufacturing facility, tooling costs to accommodate the increase in demand for electric fireplaces, and the ERP system implementation for our mass merchant operations.

The Company’s net debt increased by $50.1 million to $201.3 million, reflecting the residual over operating cash flow required to fund the acquisitions of Keanall and TGO as well as capital expenditures. The Company is capitalized with net debt to total capital of 59%.

Net debt is defined as debt (current and long-term portion) plus bank indebtedness net of cash. This measure is widely accepted by the financial markets as a measure of credit availability. Net debt is not a recognized measure for financial statement presentation under Canadian generally accepted accounting principles (“GAAP”). Non-GAAP measures (such as net debt) do not have any standarized meaning and are, therefore, unlikely to be comparable to similar measures presented by other issuers. Investors are encouraged to consider this financial measure in the context of CFM’s GAAP results, as provided in the financial statements for the year ended September 28, 2002.

With the objective of maximizing return on capital employed, the Company purchased and cancelled under its 2001/2002 Normal Course Issuer Bid 179,500 Common Shares at an average price of $9.48 per share during the fiscal year for $1.7 million. The Company filed a new Normal Course Issuer Bid on October 3, 2002, and under the 2002/2003 Normal Course Issuer Bid, the Company can purchase up to 2,800,000 Common Shares commencing October 9, 2002 until October 8, 2003.

Cash flows from operations in fiscal 2003 should generate adequate cash reserves for capital expenditures and purchases of shares under the 2002/2003 Normal Course Issuer Bid and provide excess cash capacity to repay debt or use for other corporate purposes.

RISKS AND UNCERTAINTIES

The Company is subject to a number of the usual risks associated with operating as a manufacturer in a durable consumer products industry. The Company manufactures a line of hearth, heating and barbeque products and accessories for the North American and U.K. markets. Demand for these products is affected by the general state of the economy, including interest rates, the level of housing starts and consumer spending on home renovations and remodelling, and the weather. The Company seeks to minimize the effect of these short-term variances by geographic, product-line and distribution-channel diversification.

A substantial portion of the Company’s products is based on gas-fuelled products. Major changes in the prices of natural gas, propane or kerosene may affect the markets for the Company’s products.

In the normal course of business, the Company monitors the financial condition of its customers and reviews on a regular basis the credit history of each new customer. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and economic circumstances. The Company does not believe that it is exposed to an unusual level of customer credit risk.

An increasing proportion of the Company’s revenues is generated from mass merchant customers. There is a trend to increased concentration in the mass merchant channel through continued retailer consolidation. For the year ended September 28, 2002, three customers represented 38% of total sales and 52% of the year-end accounts receivable balance. In future, as the Company’s sales to this type of customer grow, the risk increases that loss of revenue from one or more of these customers could adversely affect the Company’s operating results.

As the Company continues to expand the scope of its activities in foreign markets, it becomes exposed to a greater degree of foreign exchange risk. The Company has exposure to exchange rate changes as a result of its net investment in foreign subsidiaries. The U.S. and U.K. operations are considered self-sustaining foreign operations for financial reporting purposes. Gains or losses on translation of the Company’s net investment in foreign subsidiaries are recorded as a separate item of shareholders’ equity.

Any weakening in the value of the U.S. dollar or British pound against the Canadian dollar would result in lower revenue and earnings for the Company when stated in Canadian dollars.

The Company also imports certain products from South Korea. While these purchases are denominated in U.S. dollars, the Company is subject to adjustments in product pricing, either favourable or unfavourable, depending on the relationship of the Korean won and the U.S. dollar. Significant strengthening of the Korean won against the U.S. dollar could result in lower earnings for the Company.

The Company’s Canadian operations utilize raw materials purchased in U.S. dollars. A substantial portion of the foreign exchange exposure on these purchases is offset by a corresponding revenue stream obtained from sales of products manufactured in Canada and sold in the United States in U.S. dollars. U.S. denominated debt allows the Company to mitigate the currency translation effects on these operations. The Company continues to monitor foreign exchange rates and their impact on the balance sheet. While not currently a party to any exchange hedging instruments, if deemed necessary, the Company may enter into such arrangements in the future.

The Company’s interest bearing debt is floating rate, based upon prime rate based loans, Bankers’ Acceptances, LIBOR loans or any combination thereof. Interest bearing debt was $174 million at September 28, 2002.

Due to the nature of the Company’s manufacturing operations, environmental laws and regulations have not had, and are not expected to have, a significant impact on operations.

Quarterly Financial Results

(in thousands of dollars, except per share amounts)

		Q1		Q2			Q3			Q4		Full Year
	2002		2001	2002	2001	2002		2001	2002		2001	2002	2001
Sales	127.7		110.3	113.1	74.8	152.4		87.2	183.0		144.0	576.2	416.3
Net income	13.9		11.9	6.3	3.0	7.3		3.4	14.6		13.1	42.1	31.4
EBITDA*	25.4		23.9	13.2	8.8	15.8		10.4	27.6		26.2	82.0	69.3
Per share
Earnings	0.37		0.31	0.15	0.08	0.18		0.09	0.36		0.34	1.06	0.82
Earnings before
goodwill
amortization	0.37		0.34	0.15	0.11	0.18		0.12	0.36		0.38	1.06	0.95
Diluted earnings	0.36		0.30	0.15	0.08	0.18		0.09	0.35		0.34	1.03	0.81
* Please refer to the EBITDA section of the MD&A included in this report.

O U T L O O K

While fiscal 2002 was a success in terms of record sales and earnings, it was also a success in establishing a strong platform from which to build and grow profitably in the future on three fronts. First, CFM’s core hearth and space heating operations remain well positioned for continued growth through market share gains in the new home sector and significant new opportunities in remodelling markets as consumers focus more of their discretionary spending on the home. In addition, with expanded relationships within the mass merchant channel, the fastest growing segment of the retail market, and one of the broadest distribution networks in the industry, we expect to achieve continued revenue growth in CFM’s core hearth and space heating business next year and beyond.

Second, in fiscal 2002, we successfully launched CFM’s new barbeque manufacturing facility and a new line of barbeque appliances, and established and strengthened relationships with key mass merchant retailers. In combination with the acquisitions of Keanall and TGO, CFM is now a major player in barbeque appliances and accessories. Through new product offerings and expanded presence in retail markets, we expect significant growth in barbeque and outdoor products in fiscal 2003 and following years.

Third, CFM’s recent acquisition of Greenway Home Products Inc. (“Greenway”), in conjunction with the continued development of CFM’s own water purification technology, has solidly placed the Company in the high-growth-potential water purification and dispensing market. As these products are sold through retail and, in particular, mass merchant retail channels, we will be able to lever CFM’s relationships within these channels to drive further sales growth. In fiscal 2003, we expect to achieve only modest growth in this segment, but with the expectation of significant growth beyond.

As barbeque appliances and accessories command a lower gross margin than CFM’s traditional hearth products, with the anticipated growth in the Company’s barbeque business, we expect overall gross margins to be lower in the future. However, from CFM’s results in fiscal 2002, we believe that the Company has significant performance opportunities heading into fiscal 2003. A number of factors should contribute to gross margin improvements in fiscal 2003, including overcoming start-up inefficiencies at the Company’s new barbeque facility, improving overhead absorption profile through better utilization of manufacturing capacity and streamlining the Company’s operations to improve the link between sales forecasts, inventory levels and plant performance. In addition, looking forward we will see leverage in CFM’s net profitability as the Company is able to grow without adding significant overhe ad and administrative support, which should result in improvement in the Company’s net margins.

As we look at trends in the Company’s business overall, we are hopeful that, through a more expansive participation with a broad range of retailers in hearth, barbeque and now our water and air products, CFM can be positioned as the supplier of home appliances that will be commonplace in most North American homes.

We feel that CFM is well positioned in its markets and has the financial capacity to support its aggressive growth plans for fiscal 2003 and beyond.