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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| TSXV:AAC | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
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INTERNATIONAL FOREST PRODUCTS LIMITED ("Interfor" or the "Company") (TSX:IFP.A)
reported a net loss of $5.0 million or $0.11 per share in the fourth quarter of
2009. Excluding one-time items, the loss for the fourth quarter of 2009 was $5.4
million or $0.11 per share compared to a net loss of $7.4 million or $0.16 per
share in the third quarter of 2009. On the same basis, the Company reported a
net loss of $3.7 million or $0.08 per share in the fourth quarter of 2008.
Included in the results for the fourth quarter was a provision of $1.5 million
($1.1 million or $0.02 per share after tax) relating to long-term incentive
compensation. Similar costs expensed in the third quarter amounted to $0.7
million ($0.5 million or $0.01 per share); in the fourth quarter last year the
Company recorded a recovery of $0.9 million ($0.6 million or $0.01 per share
after tax).
EBITDA for the quarter (adjusted to exclude "other income") was positive at $5.7
million compared to $3.6 million in the third quarter and $1.7 million in the
fourth quarter of 2008.
"Higher operating rates and sales activity were the key factors underlying the
improvement in our results," said Duncan Davies, Interfor's President and Chief
Executive Officer.
"Production at the new Adams Lake sawmill continues to ramp up nicely", said
Davies, "and the Grand Forks mill, which resumed operations in October, made a
strong contribution as well. Our U.S. mills also performed well in the quarter,
with production up more than 10% compared to the preceding quarter."
The trends in product pricing were mixed in the fourth quarter. SPF 2X4 gained
US$14 or 7% quarter-over-quarter as low in-market inventories and increased
volumes to China and other offshore markets served to tighten demand/supply
balances.
Cedar - which is an important product line for Interfor - continued to adjust
downward in the quarter, while pricing in Japan was stable.
Adding to the challenge was the rising value and volatility of the C$, which
averaged US$0.946 in the quarter versus US$0.911 in the third quarter, and
traded between US$0.912 and US$0.976.
Lumber production totalled 245 million board feet in the quarter (or the
equivalent of 62% of rated capacity) compared to 180 million board feet in the
third quarter, with Adams Lake and Grand Forks accounting for most of the
increase. In the fourth quarter of 2008, production amounted to 118 million
board feet.
Log production at the Company's Canadian operations was 533,000 m3 in the fourth
quarter compared to 378,000 m3 in the third quarter and 290,000 m3 in the fourth
quarter last year. In the U.S., log procurement was matched against mill
consumption. U.S. log prices continued to firm in the quarter.
Lumber sales, including wholesale volumes, totalled 234 million board feet
compared with 181 million board feet in the third quarter and 133 million board
feet in the fourth quarter of 2008.
In the quarter Interfor used $12.7 million in cash after working capital changes
reflecting primarily the increase in accounts receivable and inventories
associated with the Company's increased activity level. Capital spending
amounted to $4.0 million, primarily for road construction. Net debt ended the
quarter at $140.7 million or 28% of invested capital versus $128.6 million or
26% at the end of the third quarter and $167.8 million or 29% at the end of the
fourth quarter of 2008.
Positive signs are beginning to emerge in the U.S. and offshore, laying a
foundation for better market conditions in 2010. In the U.S., the pace of
housing sales has improved, the inventory of unsold homes has dropped and
housing prices are showing signs of stabilizing. Housing starts have also
improved, but remain at historically depressed levels.
Most significantly, increased demand from China and other offshore markets has
improved demand/supply balances in North America leading to higher prices on
most commodity items.
All things considered, however, the near-term outlook remains uncertain. The
economic recovery is fragile at best and employment has been slow to recover.
More significantly, the number of homes in the foreclosure process represents a
material overhang of potential inventory which needs to be addressed before a
meaningful increase in new house construction or product demand can be achieved.
In the face of this uncertainty, Interfor will continue to balance operating
rates against sales activity, with a clear priority on managing for cash and
realizing on the benefits of recent strategic activities and investments. In
that regard, operating rates will likely be similar to those achieved in the
fourth quarter. Discretionary capital spending will remain curtailed for the
time-being.
At December 31, the Company had unused credit available in excess of $100
million. Subsequent to year-end, the Company announced an extension and
modification to its bank facilities which increased the amount of unused credit
available to more than $115 million which the Company feels is sufficient to
meet its foreseeable requirements.
FORWARD-LOOKING STATEMENTS
This release contains information and statements that are forward-looking in
nature, including, but not limited to, statements containing the words "will"
and "is expected" 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 others: general economic
and business conditions, product selling prices, raw material and operating
costs, changes in foreign-currency exchange rates, and other factors referenced
herein and in Interfor's 2008 Annual Report and management information circular
available on www.sedar.com. The forward-looking information and statements
contained in this report 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 one of the Pacific Northwest's largest producers of quality wood
products. The Company has operations in British Columbia, Washington and Oregon,
including two sawmills in the Coastal region of British Columbia, three in the
B.C. Interior, two in Washington and two in Oregon. For more information about
Interfor, visit our website at www.interfor.com.
There will be a conference call on Friday, February 12, 2010 at 8:00 AM (Pacific
Time) hosted by INTERNATIONAL FOREST PRODUCTS LIMITED for the purpose of
reviewing the Company's release of its Fourth Quarter, 2009 Financial Results.
The dial-in number is 1-866-323-8540. The conference call will also be recorded
for those unable to join in for the live discussion, and will be available until
February 26, 2010. The number to call is 1-866-245-6755 Passcode 934592.
SELECTED QUARTERLY FINANCIAL INFORMATION (1)
Quarterly Earnings Summary
2009 2008
------------------------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
------------------------------------------------------
(millions of dollars except share and per amounts)
Sales - Lumber 93.1 76.8 62.3 56.5 65.6 73.4 82.2 76.2
- Logs 17.3 17.3 13.0 12.8 18.3 28.8 25.7 30.9
- Wood chips
and
other
by-
products 12.2 8.9 5.9 7.4 8.8 8.9 7.4 5.5
- Other 2.9 2.2 0.6 0.6 0.8 0.9 2.1 1.8
------------------------------------------------------
Total Sales 125.5 105.2 81.8 77.3 93.5 112.0 117.4 114.4
------------------------------------------------------
Operating loss
before
restructuring
costs and asset
write-downs (7.8) (7.0) (16.4) (15.2) (8.1) (12.8) (11.7) (1.0)
Operating loss (7.8) (10.4) (16.3) (16.3) (8.9) (14.1) (42.2) (3.2)
Net earnings
(loss) (5.0) 9.7 (15.0) (13.6) (18.7) (8.1) (27.7) (0.9)
Net earnings
(loss)
per share -
basic
and diluted (0.11) 0.21 (0.32) (0.29) (0.40) (0.17) (0.59) (0.02)
EBITDA(5) 6.3 25.3 (7.3) (7.7) 2.0 0.7 2.5 8.5
Cash flow from
operations per
share(2) 0.06 (0.07) (0.23) (0.22) 0.12 0.06 (0.06) 0.22
Shares
outstanding
- end of period
(millions)(3) 47.1 47.1 47.1 47.1 47.1 47.1 47.1 47.1
- weighted
average
(millions) 47.1 47.1 47.1 47.1 47.1 47.1 47.1 47.1
Adjusted
EBITDA(5) 5.7 3.6 (7.3) (8.4) 1.7 0.1 1.9 8.5
Closing foreign
exchange rate,
per $1.00 US(4) 1.051 1.071 1.163 1.261 1.218 1.064 1.011 1.022
1 Tables may not add due to rounding.
2 Cash generated from operations before taking account of changes in
operating working capital.
3 As at February 11, 2010, the numbers of shares outstanding by class are:
Class A Subordinate Voting shares - 46,101,476 Class B Common shares -
1,015,779, Total - 47,117,255.
4 Accounting quarter-end dates may differ slightly from the reporting date.
As such, the foreign exchange rate used to revalue quarter-end balances
may differ from the Bank of Canada closing foreign exchange rate as at the
reporting date.
5 The Company discloses EBITDA as it is a measure used by analysts and
Interfor's management to evaluate the Company's performance. As EBITDA
is a non-GAAP measure, it may not be comparable to EBITDA calculated by
others. In addition, as EBITDA is not a substitute for net earnings,
readers should consider net earnings in evaluating the Company's
performance. Adjusted EBITDA represents EBITDA adjusted for other income.
EBITDA and Adjusted EBITDA can be calculated from the statements of
operations as follows:
2009 2008
------------------------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
------------------------------------------------------
(millions of
dollars)
Net earnings
(loss) (5.0) 9.7 (15.0) (13.6) (18.7) (8.1) (27.7) (0.9)
Add: Income
taxes
(recovery) (3.3) 0.1 (3.6) (3.1) 10.4 (5.2) (13.9) (2.4)
Interest expense 2.0 2.2 2.0 1.6 2.5 1.5 0.8 0.4
Depletion and
amortization 12.5 9.9 9.5 6.3 7.8 11.3 13.0 8.8
Other foreign
exchange (gains)
losses 0.1 - (0.1) - (0.9) - (0.4) 0.4
Restructuring
costs, asset
write-downs
and other 0.1 3.3 (0.1) 1.1 0.8 1.3 30.6 2.2
------------------------------------------------------
EBITDA 6.3 25.3 (7.3) (7.7) 2.0 0.7 2.5 8.5
Deduct:
Other income 0.6 21.7 - 0.6 0.3 0.6 0.6 -
------------------------------------------------------
Adjusted EBITDA 5.7 3.6 (7.3) (8.4) 1.7 0.1 1.9 8.5
------------------------------------------------------
Volume and Price Statistics 2009 2008
---------------------------------------
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
---------------------------------------
Lumber sales (million fbm) 234 181 131 122 133 132 125 113
Lumber production (million fbm) 245 180 115 121 118 148 128 104
Log sales(1) (thousand cubic 261 242 216 200 236 372 312 399
metres)
Log production(1) (thousand cubic 533 378 312 72 290 501 679 411
metres)
Average selling ($/thousand fbm)
price - lumber(2) $398 $424 $477 $462 $494 $555 $658 $672
Average selling ($/cubic metre)
price - logs(1) $62 $69 $56 $54 $69 $70 $79 $75
Average selling ($/thousand fbm)
price - pulp chips $39 $38 $40 $46 $58 $48 $47 $41
1 B.C. operations
2 Gross sales before duties and export taxes
Quarter 4, 2009 Compared to Quarter 4, 2008
Overview
The Company recorded a net loss of $5.0 million, or $0.11 per share, for the
fourth quarter of 2009 as compared to a net loss of $18.7 million, or $0.40 per
share in the fourth quarter of 2008 and which included a non-cash valuation
allowance of $15.2 million relating to future income tax assets.
EBITDA and Adjusted EBITDA for the fourth quarter of 2009 were $6.3 million and
$5.7 million, respectively, compared to $2.0 million and $1.7 million, for the
comparative quarter in 2008.
The operating loss in the fourth quarter of 2009 reflects continued poor U.S.
housing starts resulting in low lumber and log sales volumes and prices.
U.S. housing starts remained at historically low levels with average U.S.
housing starts for the fourth quarter, 2009 at 554,000 units, down from 658,000
units in the comparable period, 2008. Some price stability was generated by
continued industry curtailments with year-to-date highs in lumber prices reached
in December 2009 at an average price of SPF 2x4 #2&Btr at US$218 per mfbm,
significantly higher than the price of US$167 in December 2008. The positive
impact of the rising price, however, was offset by the strengthened Canadian
dollar which, relative to its U.S. counterpart, closed 2009 at CAD$1.051
compared to the December 31, 2008 close at CAD$1.218.
The Company continued to monitor and adjust production levels in all operations
to match product demand and control inventory levels.
The new Adams Lake sawmill continued its impressive ramp-up, averaging in excess
of 110% of pro forma production volume on a per hour basis. The mill's operating
schedule was increased from 64 hours to 80 hours per week in the fourth quarter,
2009.
Sales
Compared to the same quarter of 2008, lumber shipments were up 76.5% or 101
million board feet for the fourth quarter of 2009, reflecting additional volumes
resulting from the commencement of full operations at the new Adams Lake
sawmill, new wholesale programs in 2009, and higher operating rates overall.
Unit lumber sales values over the same period were down $97 per mfbm as the
average sales values for cedar products fell, the sales mix was weighted less
heavily toward higher value cedar, and the Canadian dollar strengthened.
Compared to the average of the fourth quarter of 2008, the Canadian dollar
appreciated 15 cents relative to its U.S. counterpart.
Log sales increased by 25,000 m3 with the average sales value declining $7 per
m3 in the fourth quarter, 2009 vis-a-vis its comparative in 2008. The fourth
quarter of 2008 saw a dramatic decline in demand from lumber and pulp producers
in response to the decline in the global economy. External demand for logs
continued to be relatively weak in the fourth quarter, 2009.
Fourth quarter, 2009, pulp chip and other by-product revenues increased by $3.3
million, or 37.4%, compared to the same quarter of 2008 with chip sales volumes
slightly more than double the volumes in the same period of 2008. The increase
corresponds almost directly with the increase in sawmill operating rates for the
fourth quarter, 2009, as compared to the same period, 2008. Average chip prices
were down by 32.8% reflecting reduced global demand for pulp.
Operating Costs
Production costs for the fourth quarter of 2009 increased $23.3 million, or
25.6% compared to the same period in 2008. Production costs in the fourth
quarter, 2008, were low as a result of significant market related curtailments
in manufacturing and logging, and the curtailment of the Adams Lake sawmill. In
the fourth quarter, 2009, slightly improved demand and North American structural
lumber prices, and a significantly lower cost structure at the new Adams Lake
sawmill resulted in an increase in operating rates and production costs as
compared to 2008. Lumber production rose by 127 million board feet, or 108.1%,
as compared to the fourth quarter, 2008 and logging increased by 243,000 m3 or
83.9%. Unit cash conversion costs declined by 38.9%, primarily as a result of
increased operating efficiencies, lower log costs and production increases,
particularly at the new Adams Lake sawmill.
The Canada/U.S. lumber export tax remained at 15% through the fourth quarter of
2009. Export taxes increased by $1.2 million over the fourth quarter, 2008, due
to increased shipments from Canada to the U.S. markets. In addition, the fourth
quarter, 2008, included $0.5 million for a refund of export taxes received
pursuant to provisions under the Export Charge Act.
The Company recorded a LTIC expense of $1.5 million for the fourth quarter of
2009 (2008 - LTIC recovery of $0.9 million), reflecting the rise in the
Company's share price over the period.
Amortization and depletion expense for the fourth quarter of 2009 increased by
$4.7 million compared to the fourth quarter of 2008 due to the impact of higher
operating rates.
Interest, Other Foreign Exchange Gain (loss), Other Income
Fourth quarter, 2009, interest expense decreased by $0.5 million compared to the
fourth quarter, 2008. The additional interest expense from the rise in the
Company's average debt level in 2009 was offset by a stronger Canadian dollar
and lower overall lending rates in the fourth quarter, 2009, compared to the
same period in 2008.
The Company recorded a foreign exchange loss of $0.1 million for the three
months ended December 31, 2009, in contrast to a gain of $0.9 million for the
fourth quarter of 2008. Reduced shipment volumes and the volatility of the
Canadian dollar resulted in a decline in equity income of $1.0 million in the
fourth quarter, 2009, as compared to the fourth quarter, 2008.
Income Taxes
In the fourth quarter of 2008, the Company recorded income tax expense of $10.4
million, comprised of a tax recovery of $4.8 million offset by the non-cash
valuation allowance of $15.2 million taken against future income tax assets. The
Company continued to take a valuation allowance against certain future income
tax assets through 2009, which decreased its income tax recovery by $1.0 million
in the fourth quarter of 2009.
Cash Flow
Cash used by the Company in operations, after changes in working capital, was
$12.7 million for the fourth quarter of 2009, compared to cash used of $2.6
million for the fourth quarter of 2008. The increase in cash used for inventory
build-up and increased accounts receivable partially offset by a rise in
accounts payable was the result of the higher operating rates in the fourth
quarter of 2009.
In light of the global economic downturn and focus on cash, discretionary
capital expenditures continued to be severely curtailed. Capital expenditures
for the fourth quarter of 2009 totaled $4.0 million, primarily for road
construction. Capital expenditures for the fourth quarter of 2008 totaled $31.0
million, primarily for construction of the new Adams Lake sawmill, roads and the
preparation of the former Queensboro sawmill site for sale.
In the fourth quarter, 2009, the Company received a $3.1 million advance from
Seaboard, which it used together with drawings of $15.0 million on its Revolving
Term Line to fund cash used in operations and priority capital expenditures.
The Company had cash and deposits at December 31, 2009 totaling $3.8 million,
working capital of $61.3 million, and total debt of $147.6 million.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and years ended December 31, 2009 and 2008 (unaudited)
---------------------------------------------------------------------------
(thousands of Canadian
dollars
except earnings
per share) 3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
(restated- (restated-
note 2(a)) note 2(a))
Sales $ 125,504 $ 93,490 $ 389,775 $ 437,221
Costs and
expenses:
Production 113,998 90,746 374,488 411,479
Selling and
administration 3,762 3,554 16,445 16,867
Long term incentive
compensation
expense
(recovery) 1,504 (909) 3,211 (1,990)
Export taxes 1,485 319 3,903 3,433
Amortization of plant
and equipment 7,549 4,434 24,838 21,335
Depletion and
amortization of
timber, roads
and other 4,977 3,412 13,340 19,619
---------------------------------------------------------------------------
133,275 101,556 436,225 470,743
---------------------------------------------------------------------------
Operating loss before
restructuring costs (7,771) (8,066) (46,450) (33,522)
Restructuring costs
and asset write-downs
(note 10) (55) (787) (4,367) (34,888)
---------------------------------------------------------------------------
Operating loss (7,826) (8,853) (50,817) (68,410)
Interest expense on
long-term debt (1,769) (2,001) (6,442) (4,543)
Other interest
expense (232) (463) (1,401) (588)
Other foreign
exchange gain (loss) (77) 884 37 912
Other income
(note 9) 613 255 22,965 1,418
Equity in earnings of
investee company 947 1,925 1,885 4,825
---------------------------------------------------------------------------
(518) 600 17,044 2,024
---------------------------------------------------------------------------
Loss before
income taxes (8,344) (8,253) (33,773) (66,386)
Income taxes
(recovery):
Current (207) (5,677) (183) (18,533)
Future (3,103) 16,120 (9,703) 7,538
---------------------------------------------------------------------------
(3,310) 10,443 (9,886) (10,995)
---------------------------------------------------------------------------
Net loss $ (5,034) $ (18,696) $ (23,887) $ (55,391)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net loss per share,
basic and
diluted (note 11) $ (0.11) $ (0.40) $ (0.51) $ (1.18)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the three months and years ended December 31, 2009 and 2008 (unaudited)
---------------------------------------------------------------------------
(thousands of Canadian
dollars) 3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
(restated- (restated-
note 2(a)) note 2(a))
Retained earnings,
beginning of period $ 93,895 $ 131,444 $ 112,748 $ 168,139
Net loss (5,034) (18,696) (23,887) (55,391)
---------------------------------------------------------------------------
Retained earnings,
end of period $ 88,861 $ 112,748 $ 88,861 $ 112,748
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months and years ended Dec. 31, 2009 and 2008 (unaudited)
---------------------------------------------------------------------------
(thousands of Canadian
dollars) 3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
(restated- (restated-
note 2(a)) note 2(a))
Cash
provided
by (used in):
Operating
activities:
Net loss $ (5,034) $ (18,696) $ (23,887) $ (55,391)
Items not
involving cash:
Amortization of plant
and equipment 7,549 4,434 24,838 21,335
Depletion and
amortization
of timber, roads
and other 4,977 3,412 13,340 19,619
Future income
taxes (recovery) (3,103) 16,120 (9,703) 7,538
Other assets 682 (586) 759 (544)
Reforestation
liability (1,574) (669) (961) (4,421)
Other long-
term liabilities 2,183 (986) 2,909 (1,678)
Equity in earnings of
investee company (947) (1,925) (1,885) (4,825)
Write-down of plant and
equipment (note 10) - 434 3,067 29,010
Unrealized foreign
exchange loss (gain)
and other non-cash
items (1,205) 1,390 (6,969) 3,941
Other (note 9) (732) (292) (23,089) (1,541)
---------------------------------------------------------------------------
2,796 2,636 (21,581) 13,043
Cash generated from
(used in)
operating working capital:
Accounts
receivable (10,408) 7,334 (8,580) 13,335
Inventories (8,162) 12,306 16,882 12,025
Prepaid expenses (257) 1,191 (625) (117)
Accounts payable and
accrued liabilities 3,569 (18,728) 2,702 (16,358)
Income taxes (207) (7,333) 15,976 (8,187)
---------------------------------------------------------------------------
(12,669) (2,594) 4,774 13,741
Investing activities:
Additions to property,
plant and equipment (461) (27,554) (20,781) (73,364)
Additions to
logging roads
and timber (3,573) (3,448) (6,811) (17,512)
Proceeds on disposal of
property,
equipment, timber and
roads 326 3,121 36,985 5,096
Acquisitions - 7,010 - (76,919)
Deposit held in
escrow for
acquisition - - - 8,943
Investments and
other assets (76) (384) (942) (2,116)
---------------------------------------------------------------------------
(3,784) (21,255) 8,451 (155,872)
Financing activities:
Issuance of
share capital - - - 56
Increase (decrease) in
bank indebtedness, net (23) 25,191 (30,589) 30,589
Proceeds from loan from
Seaboard (note 5) 3,096 3,651 3,096 3,651
Additions to
long-term debt
(note 7(b)) 15,000 5,000 59,000 139,064
Repayments of long-
term debt
(note 7(b)) - (10,000) (41,000) (48,925)
---------------------------------------------------------------------------
18,073 23,842 (9,493) 124,435
Foreign exchange gain
(loss) on cash and
cash equivalents
held in a foreign
currency (3) 191 (114) 85
---------------------------------------------------------------------------
Increase (decrease) in
cash and cash
equivalents 1,617 184 3,618 (17,611)
Cash and cash
equivalents,
beginning of period 2,185 - 184 17,795
---------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 3,802 $ 184 $ 3,802 $ 184
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Supplementary
disclosures
Cash interest
paid $ 2,001 $ 2,464 $ 7,843 $ 5,131
Cash income
taxes received 24 123 16,179 12,330
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
December 31, 2009 (unaudited) and December 31, 2008 (audited)
--------------------------------------------------------------------------
Dec. 31, Dec. 31,
(thousands of Canadian dollars) 2009 2008
--------------------------------------------------------------------------
(restated -
note 2(a))
Assets
Current assets:
Cash and cash equivalents $ 3,802 $ 184
Accounts receivable 32,951 25,441
Income taxes recoverable 230 16,225
Inventories (note 6) 60,159 78,991
Prepaid expenses 7,777 7,779
Future income taxes 2,974 2,890
--------------------------------------------------------------------------
107,893 131,510
Investments and other assets (note 5) 17,060 19,372
Property, plant and equipment, net of accumulated
amortization 357,501 395,727
Timber tenures, net of accumulated depletion 67,010 69,827
Logging roads and bridges, net of accumulated
amortization 16,485 20,598
Goodwill and other intangible assets 13,078 13,078
Long-lived assets held for sale 3,424 15,138
--------------------------------------------------------------------------
$ 582,451 $ 665,250
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness (note 7(a)) $ - $ 30,589
Accounts payable and accrued liabilities 43,510 45,163
Payable to investee company (note 5) 3,096 3,651
--------------------------------------------------------------------------
46,606 79,403
Reforestation liability, net of current portion 14,724 15,685
Long-term debt (note 7(b)) 144,525 137,414
Other long-term liabilities 15,316 12,407
Future income taxes 3,286 14,159
Shareholders' equity:
Share capital (note 8)
Class A subordinate voting shares 284,500 284,500
Class B common shares 4,080 4,080
Contributed surplus 5,408 5,408
Accumulated other comprehensive income (loss) (24,855) (554)
Retained earnings (note 2(a)) 88,861 112,748
--------------------------------------------------------------------------
357,994 406,182
--------------------------------------------------------------------------
$ 582,451 $ 665,250
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Commitment and contingency (note 15)
See accompanying notes to consolidated financial statements
On behalf of the Board:
E.L. Sauder G.H. MacDougall
Director Director
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the three months and years ended December 31, 2009 and 2008 (unaudited)
--------------------------------------------------------------------------
3 Months 3 Months Year Year
(thousands of Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Canadian dollars) 2009 2008 2009 2008
--------------------------------------------------------------------------
(restated - (restated -
note 2(a)) note 2(a))
Net loss $ (5,034) $ (18,696) $ (23,887) $ (55,391)
Other comprehensive
income (loss):
Net change in unrealized
foreign currency
translation gains
(losses) on translation
of self-sustaining
foreign subsidiaries (2,593) 20,738 (24,301) 33,218
--------------------------------------------------------------------------
Other comprehensive
income (loss) (2,593) 20,738 (24,301) 33,218
--------------------------------------------------------------------------
Comprehensive income
(loss) $ (7,627) $ 2,042 $ (48,188) $ (22,173)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
For the three months and years ended December 31 , 2009 and 2008 (unaudited)
---------------------------------------------------------------------------
3 Months 3 Months Year Ended Year Ended
(thousands of Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Canadian dollars) 2009 2008 2009 2008
---------------------------------------------------------------------------
(restated - (restated -
note 2(a)) note 2(a))
Accumulated other
comprehensive loss,
beginning of period $ (22,262) $ (21,292) $ (554) $ (33,772)
Other comprehensive
income (loss) (2,593) 20,738 (24,301) 33,218
---------------------------------------------------------------------------
Accumulated other
comprehensive loss, end
of period $ (24,855) $ (554) $ (24,855) $ (554)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
INTERNATIONAL FOREST PRODUCTS LIMITED
Notes to Unaudited Interim Consolidated Financial Statements
(Tabular amounts expressed in thousands except per share amounts)
Three months and years ended December 31, 2009 and 2008 (unaudited)
1. Significant accounting policies:
These unaudited interim consolidated financial statements include the accounts
of International Forest Products Limited and its subsidiaries (collectively
referred to as "Interfor" or the "Company"). These interim consolidated
financial statements do not include all disclosures required by Canadian
generally accepted accounting principles for annual financial statements, and
accordingly, these interim consolidated financial statements should be read in
conjunction with Interfor's most recent annual consolidated financial
statements. These interim consolidated financial statements follow the same
accounting policies and methods of application used in the Company's audited
annual consolidated financial statements as at and for the year ended December
31, 2008, except for the new accounting policy adopted subsequent to that date,
as discussed in Note 2.
2. Adoption of changes in accounting policies:
Effective January 1, 2009, the Company adopted two new Canadian Institute of
Chartered Accountants ("CICA") accounting standards. The main requirements of
these new standards are described below.
(a) Goodwill and Intangible Assets:
Effective January 1, 2009, the Company adopted the new Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3064, Goodwill and Intangible
Assets on a retrospective basis. This section replaces CICA Handbook Section
3062, Goodwill and Intangible Assets, and establishes revised standards for the
recognition, measurement, presentation and disclosure of goodwill and intangible
assets. The new standard also provides guidance for the treatment of various
preproduction and start-up costs and requires that these costs be expensed as
incurred, with the concurrent withdrawal of CICA Emerging Issues Committee
Abstract 27 ("EIC 27").
The Company previously deferred start-up costs on major plant construction to
the extent these costs met the criteria under EIC 27 and the site met
sustainable production levels defined as the earlier of:
(i) Seventy percent of production capacity for two consecutive months; or
(ii) Six months
and to a maximum of twenty percent of the total project.
Start-up costs were amortized over five years on a straight-line basis.
The following changes to historical financial statements have been made to
reflect the new policy:
---------------------------------------------------------------------------
As
previously As
reported Adjustment adjusted
---------------------------------------------------------------------------
Consolidated Statement of Operations
for the three months ended December
31, 2008:
Amortization of plant and equipment $ 4,484 $ (50) $ 4,434
Restructuring costs 787 - 787
Future income tax expense 15,904 216 16,120
Net loss (18,530) (166) (18,696)
Net loss per share, basic and diluted (0.39) (0.01) (0.40)
Consolidated Statement of Operations for
the year ended December 31, 2008:
Amortization of plant and equipment 21,846 (511) $ 21,335
Restructuring costs 37,305 (2,417) 34,888
Future income tax expense 6,410 1,128 7,538
Net loss (57,191) 1,800 (55,391)
Net loss per share, basic and diluted (1.21) 0.03 (1.18)
Consolidated Statement of Retained
Earnings for the three months
ended December 31, 2008:
Retained earnings, beginning 131,923 (479) 131,444
Retained earnings, ending 113,393 (645) 112,748
Consolidated Statement of Retained
Earnings for the year ended December 31,
2008:
Retained earnings, beginning 170,584 (2,445) 168,139
Retained earnings, ending 113,393 (645) 112,748
Consolidated Balance Sheet as at December
31, 2008:
Property, plant and equipment, net of
accumulated amortization 396,387 (660) 395,727
Accumulated other comprehensive loss 539 15 554
Retained earnings, ending 113,393 (645) 112,748
Consolidated Statement of Comprehensive
Income for the three months
ended December 31, 2008:
Net loss (18,530) (166) (18,696)
Other comprehensive income 20,845 (107) 20,738
Comprehensive income (loss) 2,315 (273) 2,042
Consolidated Statement of Comprehensive
Income for the year
ended December 31, 2008:
Net loss (57,191) 1,800 (55,391)
Other comprehensive income 33,353 (135) 33,218
Comprehensive income (loss) (23,838) 1,665 (22,173)
Accumulated Other Comprehensive Income
for the three months
ended December 31, 2008:
Accumulated other comprehensive loss,
beginning $ (21,384) $ 92 $ (21,292)
Other comprehensive income 20,845 (107) 20,738
Accumulated other comprehensive loss,
ending (539) (15) (554)
Consolidated Statement of Accumulated
Other Comprehensive Income
for the year ended December 31, 2008:
Accumulated other comprehensive loss,
beginning (33,892) 120 (33,772)
Other comprehensive income 33,353 (135) 33,218
Accumulated other comprehensive loss,
ending (539) (15) (554)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(b) Financial instruments disclosure:
Handbook Section 3862, Financial Instruments - Disclosures establishes revised
standards for the disclosure of financial instruments. The new standard
establishes a three-tier hierarchy as a framework for disclosing fair value of
financial instruments based on inputs used to value the Company's investments.
The hierarchy of inputs and description of inputs is described as follows:
- Level 1 - fair values are based on quoted prices (unadjusted) in active
markets for identical assets or liabilities;
- Level 2 - fair values are based on inputs other than quoted prices included in
Level 1 that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices); or
- Level 3 - fair values are based on inputs for the asset or liability that are
not based on observable market data, which are unobservable inputs.
Changes in valuation methods may result in transfers into or out of an
investment's assigned level.
This additional disclosure has been provided in note 14.
3. Comparative figures:
Certain of the prior period's figures have been reclassified to conform to the
presentation adopted in the current year.
4. Seasonality of operating results:
The Company operates in the solid wood business which includes logging and
manufacturing operations. Logging activities vary throughout the year due to a
number of factors including weather, ground and fire season conditions.
Generally, the Company operates the bulk of its logging divisions in the latter
half of the first quarter, throughout the second and third quarters and in the
first half of the fourth quarter. Manufacturing operations are less seasonal
than logging operations but do depend on the availability of logs from the
logging operations and from third party suppliers. In addition, the market
demand for lumber and related products is generally lower in the first quarter
due to reduced construction activity which increases during the spring, summer
and fall.
5. Payable to investee company:
On December 29, 2009, the Seaboard Limited Partnership ("the Seaboard
Partnership"), made an advance to its partners, with Interfor's share of the
advance being $3,096,000. The Company signed an unsecured promissory note which
is payable on demand on or before January 4, 2010 and is non-interest bearing
until January 4, 2010 and bears interest at the rate of 4% per annum thereafter.
This advance was subsequently repaid (see Subsequent events, note 16(a)).
On December 29, 2008, the Seaboard Limited Partnership ("the Seaboard
Partnership"), made an advance to its partners, with the Company's share of the
advance being $3,651,000. The Company signed an unsecured promissory note which
was payable on demand on or before January 2, 2009 and was non-interest bearing
until January 2, 2009.
On January 2, 2009, the Seaboard Partnership declared an income distribution to
its partners, of which the Company's share of $3,651,000 was received by way of
setoff against the promissory note payable to the Seaboard Partnership. In
accordance with equity accounting, the income distribution was recorded as a
reduction of the investment in Seaboard.
6. Inventories:
-----------------------------------------------------------------
Dec. 31, 2009 Dec. 31, 2008
-----------------------------------------------------------------
Logs $ 31,011 $ 51,158
Lumber 24,301 22,484
Other 4,847 5,349
-----------------------------------------------------------------
$ 60,159 $ 78,991
-----------------------------------------------------------------
-----------------------------------------------------------------
Inventory expensed in the period includes production costs, amortization of
plant and equipment, and depletion and amortization of timber, roads and other.
The inventory writedown in order to record inventory at the lower of cost and
net realizable value at December 31, 2009 was $9,578,000 (December 31, 2008 -
$20,270,000).
7. Cash, bank indebtedness and long-term debt:
(a) Bank indebtedness:
----------------------------------------------------------------------------
Canadian U.S.
Operating Operating
December 31, 2009 Facility Facility Total
----------------------------------------------------------------------------
Available line of credit $ 65,000 $ - $ 65,000
Maximum borrowing available 61,926 - 61,926
Operating Line drawings - - -
Outstanding letters of credit included
in line utilization 4,997 - 4,997
Unused portion of line 56,929 - 56,929
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2008
----------------------------------------------------------------------------
Available line of credit $ 100,000 $ 12,180 $ 112,180
Maximum borrowing available 54,234 7,836 62,070
Operating Line drawings 25,747 6,090 31,837
Outstanding letters of credit included
in line utilization 5,105 146 5,251
Unused portion of line 23,382 1,600 24,982
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On April 21, 2009, the Company amended and extended its existing syndicated
credit facilities. The existing Canadian operating line of credit ("Operating
Line") decreased from $100,000,000 to $65,000,000 and the maturity date was
extended to April 23, 2010. As part of the amendment, margining availability was
extended to include inventory domiciled in the United States. Except for an
increase in pricing and the margining amendment, all other terms and conditions
of the line remained substantially unchanged.
As a consequence of the extension of margining coverage, all U.S. working
capital is included in its syndicated operating facility and the US$10,000,000
U.S. operating facility was not extended when it matured on April 24, 2009 and
all outstanding drawings were repaid. As at December 31, 2008, the U.S.
operating line of credit was drawn by US$5,000,000.
The Operating Line may be drawn in either CAD$ or US$ advances, and bears
interest at bank prime plus a margin or, at the Company's option, at rates for
Bankers' Acceptances or LIBOR based loans plus a margin, and in all cases
dependent upon a financial ratio. Borrowing levels under the line are subject to
a borrowing base calculation dependent on certain accounts receivable and
inventories. The Operating Line is secured by a general security agreement which
includes a security interest in all accounts receivable and inventories, charges
against timber tenures, and mortgage security on sawmills. The Operating Line is
subject to certain financial covenants including a minimum working capital
requirement and a maximum ratio of total debt to total capitalization and a
minimum net worth calculation. As at December 31, 2009, there were no drawings
under the Operating Line (December 31, 2008 - $25,747,000).
Offsetting drawings under the operating lines at December 31, 2008 are cash
balances net of outstanding cheques of $1,248,000.
On December 14, 2009, the Company received a financing commitment with respect
to its Operating Line from its lenders, details of which are described in note
16(b).
(b) Long-term debt:
On April 21, 2009, the Company amended and extended its existing syndicated
credit facilities. The Company's revolving term line of credit ("Revolving Term
Line") increased from $115,000,000 to $150,000,000, with no change to its
maturity date of April 24, 2011. Except for an increase in pricing, all other
terms and conditions of the line remained substantially unchanged.
The Revolving Term Line may be drawn in either CAD$ or US$ advances, and bears
interest at bank prime plus a margin or, at the Company's option, at rates for
Bankers' Acceptances or LIBOR based loans plus a margin, and in all cases
dependent upon a financial ratio.
As at December 31, 2009, the Revolving Term Line was drawn by US$30,200,000
(December 31, 2008 - US$30,200,000) revalued at the year-end exchange rate to
$31,740,000 (December 31, 2008 - $36,784,000), and $76,000,000 (December 31,
2008 - $58,000,000) for total drawings of $107,740,000 (December 31, 2008 -
$94,784,000), leaving an unused available line of $42,260,000. The Company
repaid $8,000,000 of advances under the Revolving Term Line in the first
quarter, 2009, drew $10,000,000 in the second quarter, 2009, drew $1,000,000,
net of repayments, in the third quarter, 2009, and drew $15,000,000 in the
fourth quarter. The portion of the line drawn in $US funds was designated as a
hedge against the Company's investment in its self-sustaining U.S. operations
effective October 1, 2008 and unrealized foreign exchange gains of $5,043,000
(December 31, 2008 - $4,645,000 loss) arising on revaluation of the
Non-Revolving Term Line for the year ending December 31, 2009 were recognized in
Other comprehensive income.
The U.S. dollar non-revolving term line (the "Non-Revolving Term Line") remains
fully drawn at US$35,000,000 (December 31, 2008 - US$35,000,000) and was
revalued at the year-end exchange rate to $36,785,000 (December 31, 2008 -
$42,630,000). The Non-Revolving Term Line bears interest at rates based on bank
prime plus a margin or, at the Company's option, at rates for LIBOR based loans
plus a margin, in all cases depending upon a financial ratio and matures on
September 1, 2010. The foreign exchange gain of $5,845,000 arising on
revaluation of the Non-Revolving Term Line for the year ended December 31, 2009
(December 31, 2008 - $7,934,000 loss) was recognized in Other foreign exchange
gain (loss) on the Statement of Operations.
Both of the term lines are secured by a general security agreement which
includes a security interest in all accounts receivable and inventories, charges
against timber tenures, and mortgage security on sawmills. The term lines are
subject to certain financial covenants including a minimum working capital
requirement and a maximum ratio of total debt to total capitalization and a
minimum net worth calculation.
On December 14, 2009, the Company received a financing commitment with respect
to its Revolving Term Line from its lenders extending and modifying its
syndicated credit facilities effective January 15, 2010 (see Subsequent events,
note 16(b)). In conjunction with the amendments to its credit facilities, the
Company drew on its new Revolving Term Line, being a long-term facility, and
repaid and cancelled its existing Non-Revolving Term Line of US$35,000,000 on
January 15, 2010. Accordingly, the Non-Revolving Term Line has been classified
as long-term.
Minimum principal amounts due on long-term debt within the next five years are
follows:
--------------------------------------------------------------
2010 $ 36,785(1)
2011 107,740(1)
2012 -
2013 -
2014 -
--------------------------------------------------------------
$ 144,525
--------------------------------------------------------------
--------------------------------------------------------------
1 The long-term debt was refinanced on January 15, 2010, and
maturity dates were extended (see Subsequent events,
note 16(b) for further details).
8. Share capital:
On January 3, 2008, the Company commenced a normal course issuer bid ("NCIB 06")
to acquire up to 1,300,000 Class A Subordinate Voting shares ("Class A Shares").
NCIB 06 terminated on January 7, 2009 with no share purchases.
9. Other income:
---------------------------------------------------------------------------
3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
Gain on disposal of
surplus
property, plant
and equipment,
and investment $ 732 $ 76 $ 22,085 $ 794
Gain on settlement
of timber takeback - 216 1,004 747
Other expense (119) (37) (124) (123)
---------------------------------------------------------------------------
$ 613 $ 255 $ 22,965 $ 1,418
---------------------------------------------------------------------------
---------------------------------------------------------------------------
In the first quarter of 2009, the Company disposed of surplus property and
buildings in Maple Ridge, B.C., previously classified as held for sale. This
disposition, combined with minor sales of surplus equipment in the first and
second quarters, generated proceeds of $4,584,000 and a gain of $634,000.
In the third quarter, 2009, the Company completed the sale of its former
Queensboro mill site, located in New Westminster, B.C. and its remaining surplus
equipment, yielding net proceeds of $29,987,000 and a gain of $ $20,715,000. In
addition, the Company received $2,000,000 as an advance of compensation under
the Forest Act for timber, roads and bridges resulting from the 2006 legislated
takeback of certain logging rights on the B.C. Coast, and recorded a gain of
$1,004,000 (see also note 15(b)). Other minor sales of surplus equipment in the
third quarter, 2009, contributed an additional gain of $4,000.
In the fourth quarter, 2009, the Company recognized a gain of $732,000 on
surplus equipment disposals and the wind-up of an investment.
In the second quarter of 2008, the Company received compensation through the
Forest Revitalization Act for obsolete infrastructure due to the timber
takeback. This, coupled with sales of surplus equipment in the first and second
quarters of 2008, generated sales proceeds of $865,000 and a gain of $622,000.
Additional surplus equipment, an investment and a timber licence were sold in
the third quarter, 2008, for sales proceeds of $1,110,000 and a gain of
$627,000.
In the fourth quarter, 2008, the Company received further compensation from the
Province of British Columbia for a timber takeback in the Central Coast which
combined with further disposals of surplus equipment to generate additional
proceeds of $3,121,000 and a gain of $292,000.
10. Restructuring costs and asset write-downs:
----------------------------------------------------------------------------
3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
----------------------------------------------------------------------------
Plant and equipment
writedowns $ - $ 434 $ 3,067 $ 29,010
Severance costs 55 353 1,565 4,852
Other (recovery) - - (265) 1,026
----------------------------------------------------------------------------
$ 55 $ 787 $ 4,367 $ 34,888
----------------------------------------------------------------------------
----------------------------------------------------------------------------
During 2009, the Company recorded total severance costs of $1,565,000 as it
downsized its workforce in response to reduced operating rates. In the second
quarter, 2009, the Company was successful in defending a legal dispute and was
able to reverse restructuring costs previously accrued. The Company recorded
$3,067,000 in asset write-downs in the third quarter, 2009, as it determined
certain assets were impaired in the current operating environment.
During the first quarter of 2008, the Company recorded severance costs of
$2,240,000, as it permanently closed its Albion remanufacturing operation
located in Maple Ridge, B.C., and also offered voluntary severance to hourly
workers at its idled Queensboro sawmill located in New Westminster, B.C. In the
second quarter of 2008, the Queensboro sawmill was permanently closed following
more than one year of curtailment, and further severance and remediation costs
totalling $3,259,000 were recorded, together with an impairment charge of
$27,333,000 on the plant and equipment.
In the third quarter, 2008, due to deteriorating market conditions, the Company
indefinitely curtailed the old Adams Lake sawmill and recorded an impairment
charge of $1,243,000 on the plant and equipment and severance costs of $26,000.
The Company took an impairment charge on timber of $434,000 as well as incurring
further severance costs of $353,000 in the fourth quarter, 2008.
11. Net earnings (loss) per share:
---------------------------------------------------------------------------
3 Months Dec. 31, 2009 3 Months Dec. 31, 2008
---------------------------- -------------------------------
Net loss Shares Per share Net loss Shares Per share
---------------------------------------------------------------------------
Basic
earnings
(loss) per
share $ (5,034) 47,117 $ (0.11) $ (18,696) 47,117 $ (0.40)
Share
options - - - - -
---------------------------------------------------------------------------
Diluted
earnings
(loss) per
share $ (5,034) 47,117 $ (0.11) $ (18,696) 47,117 $ (0.40)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
--------------------------------------------------------------------------
Year December 31, 2009 Year December 31, 2008
----------------------------- ------------------------------
Net loss Shares Per share Net loss Shares Per share
Basic
earnings
(loss) per
share $ (23,887) 47,117 $ (0.51) $ (55,391) 47,109 $ (1.18)
Share
options - - - - 45(i) -
--------------------------------------------------------------------------
Diluted
earnings
(loss) per
share $ (23,887) 47,117 $ (0.51) $ (55,391) 47,109 $ (1.18)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(i) Where the addition of share options to the total shares outstanding has
an anti-dilutive impact on the diluted earnings (loss) per share
calculation, those share options have not been included in the total
shares outstanding for purposes of the calculation of diluted earnings
(loss) per share.
12. Segmented information:
The Company manages its business as a single operating segment, solid wood. The
Company purchases and harvests logs which are then manufactured into lumber
products at the Company's sawmills, or sold. Substantially all of the Company's
operations are located in British Columbia, Canada and the U.S. Pacific
Northwest, U.S.A.
The Company sells to both foreign and domestic markets as follows:
---------------------------------------------------------------------------
3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
Canada $ 36,681 $ 26,341 $ 116,655 $ 162,825
United States 51,812 40,408 160,955 162,352
Japan 15,339 12,625 54,542 40,823
Other export 21,672 14,116 57,623 71,221
---------------------------------------------------------------------------
$ 125,504 $ 93,490 $ 389,775 $ 437,221
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Sales by product line are as follows:
---------------------------------------------------------------------------
3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
Lumber $ 93,083 $ 65,559 $ 288,627 $ 297,434
Logs 17,311 18,311 60,443 103,620
Wood chips
and other by
products 12,188 8,869 34,349 30,610
Other 2,922 751 6,356 5,557
---------------------------------------------------------------------------
$ 125,504 $ 93,490 $ 389,775 $ 437,221
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The Company has capital assets, goodwill and other intangible assets located in:
---------------------------------------------------------------------------
Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
Canada $ 299,365 $ 317,141
United States 158,133 197,227
---------------------------------------------------------------------------
$ 457,498 $ 514,368
---------------------------------------------------------------------------
---------------------------------------------------------------------------
13. Employee future benefits:
The total benefits cost under its various pension plans, retirement savings and
other post-retirement benefit plans (described in the Company's audited annual
consolidated financial statements) are as follows:
---------------------------------------------------------------------------
3 Months 3 Months Year Year
Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008
---------------------------------------------------------------------------
Canadian employees'
deferred profit
sharing plan $ 259 $ 286 $ 1,145 $ 1,273
Defined benefit
plan 103 62 440 156
Unionized employees'
pension plan 351 249 1,276 1,492
Post-retirement
benefits plan 17 53 72 53
U.S. employees'
401(k) plan 164 138 573 495
Senior
management
supplementary
pension plan 91 92 459 467
---------------------------------------------------------------------------
Total pension
expense $ 985 $ 880 $ 3,965 $ 3,936
---------------------------------------------------------------------------
---------------------------------------------------------------------------
14. Financial instruments:
The Company employs financial instruments, such as interest rate swaps and
foreign currency forward and option contracts, to manage exposure to
fluctuations in interest rates and foreign exchange rates. The Company does not
expect any credit losses in the event of non-performance by counter parties as
the counterparties are the Company's Canadian bankers, which are highly rated.
As at December 31, 2009, the Company has outstanding obligations to sell a
maximum of US$16,900,000 at an average rate of CAD$1.0638 to the USD$1.00, buy a
maximum of US$35,000,000 at an average rate of CAD$1.0467 to the USD$1.00, and
sell Japanese yens 50,000,000 at an average rate of yens 92.41 to the CAD$1.00,
during 2010. All foreign currency gains or losses to December 31, 2009 have been
recognized in the Statement of Operations and the fair value of these foreign
currency contracts being an asset of $403,000 and measured based on Level 1 has
been recorded in accounts receivable (2008 - $113,000 liability fair value
measured based on Level 1 and recorded in accounts payable and accrued
liabilities).
During September 2005, the Company entered into a cross currency interest rate
swap. The Company had agreed to receive US$20,000,000 at maturity on September
1, 2009 in exchange for payment of CAD$23,530,000 (an exchange rate of 1.1765).
In addition, during the term of the swap the Company paid an amount based on
annual interest of 5.84% on the CAD$23,530,000 and received a 90 day LIBOR plus
a spread of 200 basis points on the US$20,000,000. LIBOR was recalculated at set
interval dates. The swap matured on September 1, 2009 and foreign exchange
losses of $2,050,000 for 2009 (2008 - $4,179,000 gain) were recognized in the
Statement of Operations. The fair value of this cross currency interest rate
swap was an asset of $409,000 at December 31, 2008 and was recorded in accounts
receivable.
15. Commitment and contingency:
(a) Acquisition:
On July 3, 2009, the Company finalized a revised agreement to acquire a timber
tenure and related reforestation liabilities in the Kamloops region from
Weyerhaeuser Company Limited. The transfer of the tenure requires regulatory
approval. Subject to receiving the required approval, the Company expects to
conclude this transaction in early 2010.
(b) Central and North Coast land use decisions:
In 2006, the Government of B.C. ("the Crown") announced land use decisions for
the Central Coast and the North Coast regions of B.C. which recently resulted in
permanent reductions in the Company's allowable annual cut ("AAC") in the plan
areas. The Company has not been harvesting its full AAC in this region for a
number of years due to temporary reductions put in place during the negotiation
period and uncertainty around operating areas.
In the third quarter, 2009, the Company received $2,500,000 as an advance of
compensation under the Forest Act for timber, roads and bridges, and forestry
and engineering work related to timber returned pursuant to the Plan. The
Company recorded $2,000,000 as proceeds on disposition of related assets, and
$500,000 as a recovery of production costs.
The amount and timing of any further compensation payable to the Company as a
result of the AAC reductions is not yet determinable, and will be recorded when
the amounts can be reasonably estimated.
16. Subsequent events:
(a) Seaboard Partnership income distribution:
On January 4, 2010, the Seaboard Partnership declared an income distribution to
its partners. Interfor's share was $3,096,000 and was paid to the Company by way
of setoff against the promissory note payable to the Seaboard Partnership.
(b) Bank financing
On December 14, 2009, the Company obtained a written financing commitment from
its lenders extending and modifying its syndicated credit facilities effective
January 15, 2010. The maturity of the Operating Line was extended from April 23,
2010 to February 28, 2011. The credit available under the Revolving Term Line
increased from $150,000,000 to $200,000,000 and the maturity date was extended
from April 24, 2011 to February 28, 2012 with all other terms and conditions of
the lines substantially unchanged.
In conjunction with the amendments to its credit facilities, the Company repaid
and cancelled its existing Non-Revolving Term Line of US$35,000,000 on January
15, 2010.
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