VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 2, 2017) - INTERFOR CORPORATION ("Interfor" or "the Company") (TSX:IFP) recorded net earnings in Q3'17 of $16.8 million, or $0.24 per share, compared to $24.5 million, or $0.35 per share in Q2'17 and $15.1 million, or $0.22 per share in Q3'16. Adjusted net earnings1 (which takes into account the effects of share-based compensation expense and non-recurring items) in Q3'17 were $20.0 million or $0.29 per share, compared to $28.7 million, or $0.41 per share in Q2'17 and $20.7 million, or $0.30 per share in Q3'16.
Adjusted EBITDA1 for Q3'17 was $60.5 million (or $70.0 million excluding the impact from $9.4 million of softwood lumber duties expense), on sales of $489.2 million versus $77.4 million on sales of $511.4 million in Q2'17.
Notable items in the quarter included:
- Mixed Benchmark Lumber Prices and Stronger Canadian Dollar
- Total lumber production was 645 million board feet, or 10 million board feet fewer than the prior quarter. Accordingly, sales of Interfor–produced lumber were 650 million board feet versus 654 million board feet in Q2'17. Production in the U.S. South region decreased to 281 million board feet from 294 million board feet in the preceding quarter, as the Company took precautionary measures and temporarily suspended operations at most of its U.S. South sawmills for several days in advance of and during Hurricane Irma. Fortunately, the Company's sawmills did not sustain any material damage and have since been operating in a normal manner. The B.C. and U.S. Northwest regions, in spite of facing fire-related log harvest constraints, produced at levels comparable to Q2'17. The B.C. and U.S. Northwest regions accounted for 225 million board feet and 139 million board feet, respectively, compared to 215 million board feet and 146 million board feet in Q2'17, respectively.
- Interfor's average lumber selling price decreased $31 from Q2'17 to $611 per mfbm, due to a combination of factors, including a US$31 per mfbm decline in the SYP Composite benchmark price and a strengthening of the Canadian Dollar by 6.8% on average, partially offset by a US$26 per mfbm increase in the Western SPF Composite benchmark price.
- Significant Cash Flow and Lower Leverage
- Interfor generated $57.5 million of cash from operations before changes in working capital, or $0.82 per share, plus a $3.5 million reduction in working capital, for total cash generated from operations of $61.0 million.
- Capital spending was $28.9 million on a mix of high-return discretionary, maintenance and woodlands projects.
- Net debt ended the quarter at $177.8 million, or 17.9% of invested capital.
1 Refer to Adjusted EBITDA and Adjusted net earnings in the Non-GAAP Measures section
Strategic Capital Plan
- Interfor has been working on a multi-year strategic capital plan (the "Plan") that will involve a number of discretionary projects designed to capture the opportunities within its current operating platform and to pursue opportunities for further growth.
- The Company has received Board approval to proceed with the Plan, the key elements of which include:
- An increase in discretionary spending on existing assets over the next five years.
- The Plan includes both large scale projects that involve the rebuilding of a number of machine centres, plus a series of smaller debottlenecking and optimization projects, with attractive paybacks. For 2018, discretionary spending is expected to be in the range of $100 million, representing approximately two-thirds of the Company's total annual capital program.
- As part of the 2018 phase, Interfor is proceeding with projects at two of its sawmills in the U.S. South that involve spending of approximately US$65 million which are designed to increase production by approximately 150 million board feet per year, lower cash conversion costs, improve lumber recovery and enhance grade outturns and product mix. These projects are expected to be completed in Q4'18 and Q1'19, respectively.
- Other large capital projects are continuing to be advanced from an engineering and feasibility standpoint and will be sequenced as appropriate. These projects will be subject to Board approval in the normal course.
- Interfor has completed a detailed feasibility study and business case for a greenfield sawmill capable of producing in excess of 200 million board feet of lumber on an annualized basis. Interfor is now proceeding with the next stage of its process and has identified a potential location in the Central Region of the U.S. South. Interfor has estimated the total capital cost to be approximately US$115 million, including pre-start-up costs and working capital. A decision on the project is expected in early 2018.
- An increase in discretionary spending on existing assets over the next five years.
Softwood Lumber Duties
Interfor recorded $9.4 million of expense in respect of countervailing and anti-dumping duties imposed by the U.S. on its lumber shipments from Canada into the U.S. during Q3'17. Anti-dumping duties were incurred at a preliminary rate of 6.87% throughout the third quarter while countervailing duties, at a preliminary rate of 19.88%, were only applicable on shipments through August 13th. The countervailing duty ceased in August in accordance with U.S. law and is not expected to resume until late December 2017 or early January 2018, pending final rulings by the U.S. International Trade Commission. In Q3'17, Interfor shipped approximately 115 million board feet from its Canadian operations to the U.S. market, which represented approximately 17% of the Company's total lumber sales.
On November 2, 2017, the U.S. Department of Commerce announced its final determinations. As part of its determinations, the final countervailing duty rate was lowered from 19.88% to 14.25%, while the anti-dumping duty rate was lowered from 6.87% to 6.58%. In addition, the U.S. Department of Commerce concluded that critical circumstances did not exist for countervailing duties, but did exist for anti-dumping duties.
Interfor has not yet submitted any deposits in respect of retroactive duties relating to critical circumstances, which could total approximately US$3.0 million in respect of anti-dumping. Interfor does not believe the retroactive application of such duties will stand up under final scrutiny which, in turn, should result in a full return to the Company of any related deposits.
Interfor is of the view that these duties imposed by the U.S. are without merit and are politically driven. Interfor intends to vigorously defend the Company's and the Canadian industry's positions through various appeal processes, in conjunction with the B.C. and Canadian Governments.
Notice of CFO Retirement Plans
John Horning, Interfor's Chief Financial Officer, has notified the Company's Board of his intention to retire on December 31, 2018. Mr. Horning, 62, who has been with Interfor since 1997, has been instrumental in the Company's repositioning and growth initiatives over the last two decades. A successor will be named in due course.
Summary of Quarterly Results (1) | ||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||
Unit | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | ||||||||||||
Financial Performance (Unaudited) | ||||||||||||||||||||
Total sales | $MM | 489.2 | 511.4 | 456.8 | 442.3 | 457.6 | 458.8 | 433.9 | 411.4 | |||||||||||
Lumber | $MM | 410.2 | 433.7 | 389.6 | 363.5 | 374.8 | 371.1 | 348.9 | 325.0 | |||||||||||
Logs, residual products and other | $MM | 79.0 | 77.7 | 67.2 | 78.8 | 82.8 | 87.7 | 85.0 | 86.4 | |||||||||||
Operating earnings (loss) | $MM | 28.3 | 42.7 | 30.4 | 22.3 | 20.1 | 30.0 | 3.5 | (6.3 | ) | ||||||||||
Net earnings (loss) | $MM | 16.8 | 24.5 | 19.7 | 26.6 | 15.1 | 23.2 | 0.8 | (3.5 | ) | ||||||||||
Net earnings (loss) per share, basic | $/share | 0.24 | 0.35 | 0.28 | 0.38 | 0.22 | 0.33 | 0.01 | (0.05 | ) | ||||||||||
Adjusted net earnings (2) | $MM | 20.0 | 28.7 | 22.7 | 17.7 | 20.7 | 17.5 | 2.7 | 4.5 | |||||||||||
Adjusted net earnings per share, basic(2) | $/share | 0.29 | 0.41 | 0.32 | 0.25 | 0.30 | 0.25 | 0.04 | 0.06 | |||||||||||
Adjusted EBITDA(2) | $MM | 60.5 | 77.4 | 60.3 | 51.3 | 58.1 | 56.9 | 33.4 | 35.8 | |||||||||||
Shares outstanding - end of period | million | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | |||||||||||
Shares outstanding - weighted average | million | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | 70.0 | |||||||||||
Operating Performance | ||||||||||||||||||||
Lumber production | million fbm | 645 | 655 | 640 | 607 | 628 | 637 | 618 | 568 | |||||||||||
Total lumber sales | million fbm | 671 | 675 | 645 | 619 | 647 | 658 | 637 | 615 | |||||||||||
Lumber sales - Interfor produced | million fbm | 650 | 654 | 624 | 598 | 627 | 634 | 609 | 586 | |||||||||||
Lumber sales - wholesale and commission | million fbm | 21 | 21 | 21 | 21 | 20 | 24 | 28 | 29 | |||||||||||
Lumber - average selling price (3) | $/thousand fbm | 611 | 642 | 604 | 588 | 580 | 564 | 548 | 529 | |||||||||||
Average USD/CAD exchange rate (4) | 1 USD in CAD | 1.2528 | 1.3449 | 1.3238 | 1.3341 | 1.3050 | 1.2886 | 1.3732 | 1.3354 | |||||||||||
Closing USD/CAD exchange rate (4) | 1 USD in CAD | 1.2480 | 1.2977 | 1.3322 | 1.3427 | 1.3117 | 1.3009 | 1.2971 | 1.3840 |
Notes: | |
(1) | Figures in this table may not add due to rounding. |
(2) | Refer to the Non-GAAP Measures section of this release for a definition and reconciliation of this measure to figures reported in the Company's consolidated financial statements. |
(3) | Gross sales before export taxes. |
(4) | Based on Bank of Canada foreign exchange rates. |
Liquidity
Balance Sheet
Net debt at September 30, 2017 was $177.8 million, or 17.9% of invested capital, representing a decrease of $169.1 million from September 30, 2016 and a decrease of $111.8 million from December 31, 2016. A strengthened Canadian Dollar against the U.S. Dollar reduced debt by $19.0 million over the first nine months of 2017.
For the 3 months ended | For the 9 months ended | |||||||||||||||||||
Sept. 30, | Sept. 30, | Jun. 30, | Sept. 30, | Sept. 30, | ||||||||||||||||
Thousands of dollars | 2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||
Net debt | ||||||||||||||||||||
Net debt, period opening, CAD | $ | 218,252 | $ | 395,959 | $ | 306,676 | $ | 289,551 | $ | 452,303 | ||||||||||
Net drawing (repayment) on credit facilities, CAD | 2 | (44,138 | ) | (59,468 | ) | (40,216 | ) | (77,704 | ) | |||||||||||
Impact on U.S. Dollar denominated debt from (strengthening) weakening CAD | (9,942 | ) | 2,441 | (6,359 | ) | (19,005 | ) | (25,734 | ) | |||||||||||
Increase in cash and cash equivalents, CAD | (30,525 | ) | (7,333 | ) | (22,597 | ) | (52,543 | ) | (1,936 | ) | ||||||||||
Net debt, period ending, CAD | $ | 177,787 | $ | 346,929 | $ | 218,252 | $ | 177,787 | $ | 346,929 | ||||||||||
Net debt components by currency | ||||||||||||||||||||
U.S. Dollar debt, period opening, USD | $ | 200,000 | $ | 297,500 | $ | 235,979 | $ | 230,000 | $ | 338,699 | ||||||||||
Net repayment on credit facilities, USD | - | (22,791 | ) | (35,979 | ) | (30,000 | ) | (63,990 | ) | |||||||||||
U.S. Dollar debt, period ending, USD | 200,000 | 274,709 | 200,000 | 200,000 | 274,709 | |||||||||||||||
Spot rate, period end | 1.2480 | 1.3117 | ||||||||||||||||||
U.S. Dollar debt expressed in CAD | 249,600 | 360,336 | ||||||||||||||||||
Canadian Dollar debt, CAD | - | 4,985 | ||||||||||||||||||
Total debt, CAD | 249,600 | 365,321 | ||||||||||||||||||
Cash and cash equivalents, CAD | (71,813 | ) | (18,392 | ) | ||||||||||||||||
Net debt, period ending, CAD | $ | 177,787 | $ | 346,929 | ||||||||||||||||
Capital Resources
The following table summarizes Interfor's credit facilities and availability as of September 30, 2017:
Thousands of Canadian Dollars |
|
Operating Line |
|
Revolving Term Line |
|
Senior Secured Notes |
|
U.S. Operating Line |
|
Total |
||||||
Available line of credit | $ | 65,000 | $ | 200,000 | $ | 249,600 | $ | 62,400 | $ | 577,000 | ||||||
Maximum borrowing available | $ | 65,000 | $ | 200,000 | $ | 249,600 | $ | 62,400 | $ | 577,000 | ||||||
Less: | ||||||||||||||||
Drawings | - | - | 249,600 | - | 249,600 | |||||||||||
Outstanding letters of credit included in line utilization | 11,246 | - | - | 3,869 | 15,115 | |||||||||||
Unused portion of facility | $ | 53,754 | $ | 200,000 | $ | - | $ | 58,531 | $ | 312,285 | ||||||
Add: Cash and cash equivalents | 71,813 | |||||||||||||||
Available liquidity at September 30, 2017 | $ | 384,098 | ||||||||||||||
As of September 30, 2017, the Company had commitments for capital expenditures totaling $12.6 million, related to both maintenance and discretionary projects.
Interfor continues to maintain its disciplined focus on monitoring discretionary capital expenditures, optimizing inventory levels and matching production with offshore and domestic demand.
As at September 30, 2017, the Company had net working capital of $201.7 million and available capacity on operating and term facilities of $312.3 million. These resources, in addition to cash generated from operations, will be used to support working capital requirements, debt servicing commitments and capital expenditures. We believe that Interfor will have sufficient liquidity to fund operating and capital requirements for the foreseeable future.
Non-GAAP Measures
This release makes reference to the following non-GAAP measures: Adjusted net earnings, Adjusted net earnings per share, EBITDA, Adjusted EBITDA, Pre-tax return on total assets, Net debt to invested capital and Operating cash flow per share (before working capital changes) which are used by the Company and certain investors to evaluate operating performance and financial position. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company's unaudited interim consolidated financial statements prepared in accordance with IFRS:
For the 3 months ended | For the 9 months ended | ||||||||||||||||||||
Sept. 30, | Sept. 30, | Jun. 30, | Sept. 30, | Sept. 30, | |||||||||||||||||
Thousands of Canadian Dollars except number of shares and per share amounts | 2017 | 2016 | 2017 | 2017 | 2016 | ||||||||||||||||
Adjusted Net Earnings(1) | |||||||||||||||||||||
Net earnings | $ | 16,778 | $ | 15,093 | $ | 24,512 | $ | 60,957 | $ | 39,093 | |||||||||||
Add: | |||||||||||||||||||||
Restructuring (recovery) costs and capital asset write-downs | (21 | ) | 1,492 | 1,457 | 1,781 | 4,999 | |||||||||||||||
Other foreign exchange loss (gain) | 1,353 | (792 | ) | 913 | 2,447 | (396 | ) | ||||||||||||||
Long term incentive compensation expense | 3,004 | 8,321 | 3,270 | 9,867 | 4,352 | ||||||||||||||||
Other (income) expense | 347 | (7 | ) | 456 | 992 | 358 | |||||||||||||||
Beaver sawmill post-closure wind-down costs (recoveries) | (39 | ) | 6 | 5 | (27 | ) | 17 | ||||||||||||||
Tacoma sawmill post-acquisition losses and closure costs | - | 94 | - | 1 | 777 | ||||||||||||||||
Income tax effect of above adjustments | (1,456 | ) | (1,408 | ) | (1,883 | ) | (4,588 | ) | (2,887 | ) | |||||||||||
Recognition of previously unrecognized deferred tax assets | - | (2,134 | ) | - | - | (5,402 | ) | ||||||||||||||
Adjusted net earnings | $ | 19,966 | $ | 20,665 | $ | 28,730 | $ | 71,430 | $ | 40,911 | |||||||||||
Weighted average number of shares - basic ('000) | 70,030 | 70,030 | 70,030 | 70,030 | 70,030 | ||||||||||||||||
Adjusted net earnings per share | $ | 0.29 | $ | 0.30 | $ | 0.41 | $ | 1.02 | $ | 0.58 | |||||||||||
Adjusted EBITDA | |||||||||||||||||||||
Net earnings | $ | 16,778 | $ | 15,093 | $ | 24,512 | $ | 60,957 | $ | 39,093 | |||||||||||
Add: | |||||||||||||||||||||
Depreciation of plant and equipment | 18,836 | 18,624 | 19,967 | 58,406 | 57,558 | ||||||||||||||||
Depletion and amortization of timber, roads and other | 10,435 | 9,441 | 10,024 | 26,756 | 27,062 | ||||||||||||||||
Restructuring (recovery) costs and capital asset write-downs | (21 | ) | 1,492 | 1,457 | 1,781 | 4,999 | |||||||||||||||
Finance costs | 3,294 | 4,379 | 3,535 | 10,891 | 14,528 | ||||||||||||||||
Other foreign exchange loss (gain) | 1,353 | (792 | ) | 913 | 2,447 | (396 | ) | ||||||||||||||
Income tax expense (recovery) | 6,559 | 1,445 | 13,289 | 26,168 | (29 | ) | |||||||||||||||
EBITDA | 57,234 | 49,682 | 73,697 | 187,406 | 142,815 | ||||||||||||||||
Add: | |||||||||||||||||||||
Long term incentive compensation expense | 3,004 | 8,321 | 3,270 | 9,867 | 4,352 | ||||||||||||||||
Other (income) expense | 347 | (7 | ) | 456 | 992 | 358 | |||||||||||||||
Beaver sawmill post-closure wind-down costs (recoveries) | (39 | ) | 6 | 5 | (27 | ) | 17 | ||||||||||||||
Tacoma sawmill post-acquisition losses and closure costs | - | 94 | - | 1 | 777 | ||||||||||||||||
Adjusted EBITDA(2) | $ | 60,546 | $ | 58,096 | $ | 77,428 | $ | 198,239 | $ | 148,319 | |||||||||||
Pre-tax return on total assets | |||||||||||||||||||||
Operating earnings before restructuring costs | $ | 28,310 | $ | 21,610 | $ | 44,162 | $ | 103,236 | $ | 58,553 | |||||||||||
Total assets(3) | $ | 1,296,015 | $ | 1,337,569 | $ | 1,318,784 | $ | 1,298,964 | $ | 1,358,294 | |||||||||||
Pre-tax return on total assets(4) | 8.7 | % | 6.5 | % | 13.4 | % | 10.6 | % | 5.7 | % | |||||||||||
Net debt to invested capital | |||||||||||||||||||||
Net debt | |||||||||||||||||||||
Total debt | $ | 249,600 | $ | 365,321 | $ | 259,540 | $ | 249,600 | $ | 365,321 | |||||||||||
Cash and cash equivalents | (71,813 | ) | (18,392 | ) | (41,288 | ) | (71,813 | ) | (18,392 | ) | |||||||||||
Total net debt | $ | 177,787 | $ | 346,929 | $ | 218,252 | $ | 177,787 | $ | 346,929 | |||||||||||
Invested capital | |||||||||||||||||||||
Net debt | $ | 177,787 | $ | 346,929 | $ | 218,252 | $ | 177,787 | $ | 346,929 | |||||||||||
Shareholders' equity | 817,676 | 745,333 | 816,136 | 817,676 | 745,333 | ||||||||||||||||
Total invested capital | $ | 995,463 | $ | 1,092,262 | $ | 1,034,388 | $ | 995,463 | $ | 1,092,262 | |||||||||||
Net debt to invested capital(5) | 17.9 | % | 31.8 | % | 21.1 | % | 17.9 | % | 31.8 | % | |||||||||||
Operating cash flow per share (before working capital changes) | |||||||||||||||||||||
Cash provided by operating activities | $ | 60,977 | $ | 67,689 | $ | 105,816 | $ | 171,475 | $ | 150,291 | |||||||||||
Cash used in (generated from) operating work capital | (3,474 | ) | (12,814 | ) | (32,531 | ) | 19,028 | (8,094 | ) | ||||||||||||
Operating cash flow (before working capital changes) | $ | 57,503 | $ | 54,875 | $ | 73,285 | $ | 190,503 | $ | 142,197 | |||||||||||
Weighted average number of shares - basic ('000) | 70,030 | 70,030 | 70,030 | 70,030 | 70,030 | ||||||||||||||||
Operating cash flow per share (before working capital changes) | $ | 0.82 | $ | 0.78 | $ | 1.05 | $ | 2.72 | $ | 2.03 |
Notes: | |
(1) | Certain historical periods have been recast to exclude the recognition of previously unrecognized deferred tax assets from Adjusted net earnings. |
(2) | If countervailing and anti-dumping duties expense was excluded, Adjusted EBITDA for Q3'17, Q2'17, and YTD'17 would be $70.0 million, $84.7 million, and $215.0 million, respectively. Other periods presented were not impacted by such duties. |
(3) | Total assets at period beginning for three month periods; average of opening and closing total assets for nine month periods. |
(4) | Annualized rate. |
(5) | Net debt to invested capital as of the period end. |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||||||
For the three and nine months ended September 30, 2017 and 2016 (unaudited) | |||||||||||||||||
(thousands of Canadian Dollars except earnings per share) | 3 Months | 3 Months | 9 Months | 9 Months | |||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||||
Sales | $ | 489,169 | $ | 457,647 | $ | 1,457,325 | $ | 1,350,404 | |||||||||
Costs and expenses: | |||||||||||||||||
Production | 407,222 | 388,733 | 1,205,504 | 1,169,356 | |||||||||||||
Selling and administration | 11,936 | 10,918 | 36,817 | 33,523 | |||||||||||||
Long term incentive compensation expense | 3,004 | 8,321 | 9,867 | 4,352 | |||||||||||||
U.S. countervailing and anti-dumping duty deposits | 9,426 | - | 16,739 | - | |||||||||||||
Depreciation of plant and equipment | 18,836 | 18,624 | 58,406 | 57,558 | |||||||||||||
Depletion and amortization of timber, roads and other | 10,435 | 9,441 | 26,756 | 27,062 | |||||||||||||
460,859 | 436,037 | 1,354,089 | 1,291,851 | ||||||||||||||
Operating earnings before restructuring costs | 28,310 | 21,610 | 103,236 | 58,553 | |||||||||||||
Restructuring costs (recovery) | (21 | ) | 1,492 | 1,781 | 4,999 | ||||||||||||
Operating earnings | 28,331 | 20,118 | 101,455 | 53,554 | |||||||||||||
Finance costs | (3,294 | ) | (4,379 | ) | (10,891 | ) | (14,528 | ) | |||||||||
Other foreign exchange gain (loss) | (1,353 | ) | 792 | (2,447 | ) | 396 | |||||||||||
Other income (expense) | (347 | ) | 7 | (992 | ) | (358 | ) | ||||||||||
(4,994 | ) | (3,580 | ) | (14,330 | ) | (14,490 | ) | ||||||||||
Earnings before income taxes | 23,337 | 16,538 | 87,125 | 39,064 | |||||||||||||
Income tax expense (recovery) | |||||||||||||||||
Current | 22 | 288 | 708 | 749 | |||||||||||||
Deferred | 6,537 | 1,157 | 25,460 | (778 | ) | ||||||||||||
6,559 | 1,445 | 26,168 | (29 | ) | |||||||||||||
Net earnings | $ | 16,778 | $ | 15,093 | $ | 60,957 | $ | 39,093 | |||||||||
Net earnings per share, basic and diluted | $ | 0.24 | $ | 0.22 | $ | 0.87 | $ | 0.56 | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||
For the three and nine months ended September 30, 2017 and 2016 (unaudited) | |||||||||||||||||
3 Months | 3 Months | 9 Months | 9 Months | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | ||||||||||||||
Net earnings | $ | 16,778 | $ | 15,093 | $ | 60,957 | $ | 39,093 | |||||||||
Other comprehensive income (loss): | |||||||||||||||||
Items that will not be recycled to Net earnings: | |||||||||||||||||
Defined benefit plan actuarial gains (losses), net of tax | 1,192 | (42 | ) | 794 | (2,988 | ) | |||||||||||
Items that are or may be recycled to Net earnings: | |||||||||||||||||
Foreign currency translation differences for foreign operations, net of tax | (16,589 | ) | 2,622 | (31,151 | ) | (16,210 | ) | ||||||||||
Gain (loss) in fair value of interest rate swaps | - | 93 | (11 | ) | (46 | ) | |||||||||||
Total items that are or may be recycled to Net earnings | (16,589 | ) | 2,715 | (31,162 | ) | (16,256 | ) | ||||||||||
Total other comprehensive income (loss), net of tax | (15,397 | ) | 2,673 | (30,368 | ) | (19,244 | ) | ||||||||||
Comprehensive income | $ | 1,381 | $ | 17,766 | $ | 30,589 | $ | 19,849 | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||
For the three and nine months ended September 30, 2017 and 2016 (unaudited) | ||||||||||||||||||
(thousands of Canadian Dollars) | 3 Months | 3 Months | 9 Months | 9 Months | ||||||||||||||
Sept. 30, 2017 | Sept. 30, 2016 | Sept. 30, 2017 | Sept. 30, 2016 | |||||||||||||||
Cash provided by (used in): | ||||||||||||||||||
Operating activities: | ||||||||||||||||||
Net earnings | $ | 16,778 | $ | 15,093 | $ | 60,957 | $ | 39,093 | ||||||||||
Items not involving cash: | ||||||||||||||||||
Depreciation of plant and equipment | 18,836 | 18,624 | 58,406 | 57,558 | ||||||||||||||
Depletion and amortization of timber, roads and other | 10,435 | 9,441 | 26,756 | 27,062 | ||||||||||||||
Income tax expense (recovery) | 6,559 | 1,445 | 26,168 | (29 | ) | |||||||||||||
Finance costs | 3,294 | 4,379 | 10,891 | 14,528 | ||||||||||||||
Other assets | (252 | ) | (22 | ) | (70 | ) | (306 | ) | ||||||||||
Reforestation liability | (522 | ) | 2,235 | 1,787 | 1,692 | |||||||||||||
Provisions and other liabilities | 2,178 | 4,288 | 4,225 | 993 | ||||||||||||||
Stock options | 159 | 97 | 420 | 230 | ||||||||||||||
Write-down of plant and equipment | - | - | - | 1,018 | ||||||||||||||
Unrealized foreign exchange gain | (2 | ) | (698 | ) | (11 | ) | - | |||||||||||
Other | 40 | (7 | ) | 974 | 358 | |||||||||||||
57,503 | 54,875 | 190,503 | 142,197 | |||||||||||||||
Cash generated from (used in) operating working capital: | ||||||||||||||||||
Trade accounts receivable and other | (8,785 | ) | 2,195 | (21,041 | ) | (9,858 | ) | |||||||||||
Inventories | 10,417 | 5,507 | (5,255 | ) | (261 | ) | ||||||||||||
Prepayments and other | (1,011 | ) | 254 | (1,430 | ) | 517 | ||||||||||||
Trade accounts payable and provisions | 3,576 | 5,123 | 9,841 | 18,427 | ||||||||||||||
Income taxes paid | (723 | ) | (265 | ) | (1,143 | ) | (731 | ) | ||||||||||
60,977 | 67,689 | 171,475 | 150,291 | |||||||||||||||
Investing activities: | ||||||||||||||||||
Additions to property, plant and equipment | (19,805 | ) | (15,223 | ) | (42,957 | ) | (37,220 | ) | ||||||||||
Additions to logging roads and bridges | (8,608 | ) | (7,484 | ) | (25,139 | ) | (18,721 | ) | ||||||||||
Additions to timber licenses and other intangible assets | (461 | ) | (633 | ) | (1,826 | ) | (988 | ) | ||||||||||
Proceeds on disposal of property, plant and equipment | 63 | 2 | 461 | 316 | ||||||||||||||
Proceeds on disposal of investments | 2,136 | 10,342 | 2,136 | 10,342 | ||||||||||||||
Investments and other assets | 669 | (1,347 | ) | 517 | (10,900 | ) | ||||||||||||
(26,006 | ) | (14,343 | ) | (66,808 | ) | (57,171 | ) | |||||||||||
Financing activities: | ||||||||||||||||||
Interest payments | (2,832 | ) | (2,268 | ) | (9,585 | ) | (13,433 | ) | ||||||||||
Debt refinancing costs | (615 | ) | (167 | ) | (785 | ) | (1,009 | ) | ||||||||||
Change in operating line components of long-term debt | 2 | 2,937 | (63 | ) | (8,796 | ) | ||||||||||||
Additions to long term debt | - | - | 76,107 | 28,000 | ||||||||||||||
Repayments of long term debt | - | (47,074 | ) | (116,260 | ) | (96,908 | ) | |||||||||||
(3,445 | ) | (46,572 | ) | (50,586 | ) | (92,146 | ) | |||||||||||
Foreign exchange gain (loss) on cash and cash equivalents held in a foreign currency | (1,001 | ) | 559 | (1,538 | ) | 962 | ||||||||||||
Increase in cash | 30,525 | 7,333 | 52,543 | 1,936 | ||||||||||||||
Cash and cash equivalents, beginning of period | 41,288 | 11,059 | 19,270 | 16,456 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 71,813 | $ | 18,392 | $ | 71,813 | $ | 18,392 | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||||
September 30, 2017 and December 31, 2016 (unaudited) | |||||||
(thousands of Canadian Dollars) | Sept. 30, | Dec. 31, | |||||
2017 | 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 71,813 | $ | 19,270 | |||
Trade accounts receivable and other | 113,332 | 95,059 | |||||
Income taxes receivable | 583 | 222 | |||||
Inventories | 155,624 | 154,535 | |||||
Prepayments and other | 14,807 | 14,016 | |||||
Investments and other assets | 921 | 2,911 | |||||
357,080 | 286,013 | ||||||
Employee future benefits | 3,283 | 2,471 | |||||
Other investments and assets | 2,507 | 2,341 | |||||
Property, plant and equipment | 678,395 | 730,981 | |||||
Logging roads and bridges | 26,440 | 20,739 | |||||
Timber licences | 67,296 | 69,273 | |||||
Other intangible assets | 14,893 | 19,017 | |||||
Goodwill | 146,386 | 156,502 | |||||
Deferred income taxes | - | 14,311 | |||||
$ | 1,296,280 | $ | 1,301,648 | ||||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Trade accounts payable and provisions | $ | 142,499 | $ | 138,029 | |||
Reforestation liability | 12,702 | 11,609 | |||||
Income taxes payable | 223 | 317 | |||||
155,424 | 149,955 | ||||||
Reforestation liability | 28,071 | 25,931 | |||||
Long term debt | 249,600 | 308,821 | |||||
Employee future benefits | 8,409 | 8,136 | |||||
Provisions and other liabilities | 24,980 | 21,290 | |||||
Deferred income taxes | 12,120 | 848 | |||||
Equity: | |||||||
Share capital | 555,388 | 555,388 | |||||
Contributed surplus | 8,419 | 7,999 | |||||
Translation reserve | 38,423 | 69,574 | |||||
Hedge reserve | - | 11 | |||||
Retained earnings | 215,446 | 153,695 | |||||
817,676 | 786,667 | ||||||
$ | 1,296,280 | $ | 1,301,648 | ||||
Approved on behalf of the Board of Directors: | ||
"L. Sauder" | "D.W.G. Whitehead" | |
Director | Director |
FORWARD-LOOKING STATEMENTS
This release contains information and statements that are forward-looking in nature, including, but not limited to, statements containing the words "believes", "will", "should", "expects", "annualized" and similar expressions. Such statements involve known and unknown risks and uncertainties that may cause Interfor's actual results to be materially different from those expressed or implied by those forward-looking statements. Such risks and uncertainties include, among other things: price volatility, competition, availability and cost of log supply, natural or man-made disasters, currency exchange sensitivity, regulatory changes, allowable annual cut reductions, Aboriginal title and rights claims, potential countervailing and anti-dumping duties, stumpage fee variables and changes, environmental impact and performance, labour disruptions, and other factors referenced herein and in Interfor's Annual Report available on www.sedar.com and www.interfor.com. The forward-looking information and statements contained in this release are based on Interfor's current expectations and beliefs. Readers are cautioned not to place undue reliance on forward-looking information or statements. Interfor undertakes no obligation to update such forward-looking information or statements, except where required by law.
ABOUT INTERFOR
Interfor is a growth-oriented lumber company with operations in Canada and the United States. The Company has annual production capacity of approximately 3 billion board feet and offers one of the most diverse lines of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.
The Company's unaudited consolidated financial statements and Management's Discussion and Analysis for Q3'17 are available at www.sedar.com and www.interfor.com.
There will be a conference call on Friday, November 3, 2017 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company's release of its third quarter 2017 financial results.
The dial-in number is 1-833-297-9919. The conference call will also be recorded for those unable to join in for the live discussion, and will be available until December 3, 2017. The number to call is 1-855-859-2056, Passcode 88589331.
Contact Information:
John A. Horning
Executive Vice President and Chief Financial Officer
(604) 689-6829
Interfor Corporation
Martin L. Juravsky
Senior Vice President, Corporate Development and Strategy
(604) 689-6873