VANCOUVER, Feb. 8, 2017 /CNW/ - Canfor Corporation (TSX:
CFP) today reported net income attributable to shareholders
("shareholder net income") of $38.0
million, or $0.29 per share,
for the fourth quarter of 2016, compared to a net income
attributable to shareholders of $50.9
million, or $0.38 per share,
for the third quarter of 2016, and shareholder net income of
$1.6 million, or $0.01 per share, for the fourth quarter of
2015. For the twelve months ended December 31, 2016, the Company's shareholder net
income was $150.9 million, or
$1.14 per share, compared to
shareholder net income of $24.7
million, or $0.18 per share,
reported for the 2015 year.
The following table summarizes selected financial information
for the Company for the comparative periods:
(millions of Canadian
dollars, except per share amounts)
|
|
Q4
2016
|
|
Q3
2016
|
|
YTD
2016
|
|
Q4
2015
|
|
YTD
2015
|
|
|
|
|
|
Sales
|
$
|
1,043.5
|
$
|
1,101.2
|
$
|
4,234.9
|
$
|
1,053.0
|
$
|
3,925.3
|
Operating income
before amortization1
|
$
|
135.6
|
$
|
158.0
|
$
|
530.9
|
$
|
94.9
|
$
|
378.2
|
Operating
income1
|
$
|
72.0
|
$
|
97.4
|
$
|
288.6
|
$
|
35.0
|
$
|
164.2
|
Net income
attributable to equity shareholders
of the Company
|
$
|
38.0
|
$
|
50.9
|
$
|
150.9
|
$
|
1.6
|
$
|
24.7
|
Net income per share
attributable to equity
shareholders of the Company, basic and
diluted
|
$
|
0.29
|
$
|
0.38
|
$
|
1.14
|
$
|
0.01
|
$
|
0.18
|
Adjusted shareholder
net income
|
$
|
37.7
|
$
|
51.7
|
$
|
136.8
|
$
|
7.9
|
$
|
58.8
|
Adjusted shareholder
net income per share, basic and diluted
|
$
|
0.29
|
$
|
0.39
|
$
|
1.03
|
$
|
0.06
|
$
|
0.43
|
1 Adjusted
for one-time items, including a $2.0 million recovery related to
lower estimated Canal Flats closure costs recorded in the fourth
quarter of 2016, a gain of $15.5 million related to a legal
settlement in the second quarter of 2016, a $3.2 million expense
associated with pension plan legislative changes in the fourth
quarter of 2015 and a $19.4 million charge associated with the
permanent closure of the Canal Flats sawmill in the third quarter
of 2015.
|
The Company's adjusted shareholder net income for the fourth
quarter of 2016 was $37.7 million, or
$0.29 per share, compared to an
adjusted shareholder net income of $51.7
million, or $0.39 per share,
for the third quarter of 2016, and an adjusted shareholder net
income of $7.9 million, or
$0.06 per share for the fourth
quarter of 2015. For 2016, the Company's adjusted shareholder
net income was $136.8 million, or
$1.03 per share, compared to
$58.8 million, or $0.43 per share, for 2015.
The Company reported operating income, adjusted for one-time
items, of $72.0 million for the
fourth quarter of 2016, down $25.4
million from operating income of $97.4 million for the third quarter of 2016, with
the decline reflecting lower operating earnings in both the lumber
and pulp and paper segments. In the lumber segment, seasonally
lower lumber prices, along with challenging weather conditions,
which impacted log deliveries and productivity in Western Canada, were the major contributing
factors to a $19.7 million decline in
adjusted operating income. The Company's pulp and paper
segment results also reflected the inclement weather conditions, as
well as the pre-tax write-down of $7.0
million of advances made in connection with the biofuels
technology initiative with Licella Fibre Fuels Pty. Ltd.
("Licella"), a subsidiary of Ignite Energy Resources Ltd.
Notwithstanding the future benefits that may result from this
innovative effort, the write-down reflected the research and
development nature of the advances.
North American lumber demand remained steady in the fourth
quarter of 2016, with US housing starts, on a seasonally adjusted
basis, moderately higher than the prior quarter, averaging
1,216,000 units. Canadian housing starts in the fourth quarter of
2016 remained solid, averaging 201,000 units on a seasonally
adjusted basis. Offshore lumber shipments showed a modest increase
in the fourth quarter of 2016 reflecting steadily improving demand
in key offshore lumber markets, primarily China and Japan.
Western Spruce/Pine/Fir ("SPF") lumber unit sales realizations
increased slightly compared to the third quarter of 2016 as the
benefit of a 2 cent, or 2%, weaker
Canadian dollar and a higher-value product mix offset a slight
decline in the benchmark North American Random Lengths Western SPF
2x4 #2&Btr lumber price, which was down US$7 per Mfbm, or 2%. Southern Yellow Pine
("SYP") lumber unit sales realizations were down slightly compared
to the prior quarter largely reflecting seasonally lower prices for
wide-width SYP products.
Total lumber shipments and production showed modest declines
compared to the prior quarter, largely due to the weather-related
challenges and additional statutory holidays, which resulted in
lower production volumes in the current quarter. Unit manufacturing
costs in the fourth quarter of 2016 were moderately higher than the
previous quarter largely reflecting seasonally higher energy costs
and the unfavourable impact on unit costs from the aforementioned
weather-related disruption to operations and logging
activities.
Global softwood pulp markets were relatively stable through most
of the fourth quarter of 2016 as evidenced by the average China
US-dollar NBSK pulp list price, as published by RISI, remaining at
US$595 per tonne. NBSK pulp
unit sales realizations were broadly in line with the third quarter
of 2016, as the weaker Canadian dollar was offset by slightly
increased pricing pressure in North
America. BCTMP pulp unit sales realizations increased
significantly, reflecting the continued improvement in BCTMP
markets. Energy revenues moderately increased during the
current quarter, for the most part, reflecting increased power
generation and seasonally higher energy prices.
Pulp shipments were down 14% from the previous quarter
principally reflecting weather-related impacts on shipments,
including a delayed vessel shipment over the year end. Pulp
production was 3% lower than the previous quarter, primarily due to
the severe weather conditions, which more than offset the impacts
of scheduled maintenance outages in the previous quarter.
Pulp unit manufacturing costs were up slightly from the previous
quarter, reflecting higher energy usage combined with seasonally
higher energy costs, as well as the unfavourable per unit impact of
lower production volumes.
Commenting on the Company's fourth quarter results, Canfor's
President and Chief Executive Officer, Don
Kayne, said, "Despite severe weather challenges in
British Columbia and several of
our operating areas in the US South, our teams did an excellent job
in managing overall disruptions to our operations. Overall in 2016
we were encouraged by the improvement in the financial performance
of our wood products business due to operational improvements and
overall increasing demand for our products."
On November 25, 2016, a petition
was filed by the US Lumber Coalition to the US Department of
Commerce and the US International Trade Commission alleging certain
subsidies and administered fees below the fair market value of
timber that favour Canadian lumber producers, an assertion the
Canadian industry and Provincial and Federal Governments strongly
deny and have successfully disproven in international courts in the
past. Nevertheless, the US Department of Commerce will continue to
conduct its antidumping and countervailing duty investigations on
imports of these products from Canada, and is expected to announce its
countervailing duty in the second quarter of 2017 and its
preliminary antidumping duty determination approximately 60 days
thereafter. Canfor continues to cooperate with the Provincial and
Federal Governments of Canada who
have indicated they will vigorously defend the interests of the
industry.
Looking ahead, the US housing market is forecast to continue its
gradual recovery through 2017. North American lumber consumption is
projected to improve, reflecting steady demand in the residential
construction market and continued strength from the repair and
remodelling sector. There remains a risk of material antidumping
and countervailing duties being imposed on Canadian lumber
shipments destined to the US, absent a new Softwood Lumber
Agreement. The Company anticipates marketplace volatility as
investigations progress and determinations are made. For the
Company's key offshore lumber markets, demand is anticipated to
show a modest increase. In the pulp and paper segment, the Company
announced an increase of US$20 per
tonne for NBSK pulp list price for China, equating to US$630 per tonne, and an increase of US$10 per tonne for BCTMP. For the month of
February 2017, the Company announced
a further US$20 per tonne increase to
both its NBSK and BCTMP pulp list prices to China. Global
softwood markets are currently seeing positive pricing momentum,
for both NBSK and BCTMP, and this is anticipated to continue into
the second quarter of 2017. Subsequent to year end, on January 2, 2017, the Company completed the final
phase of the purchase of Beadles Lumber Company and Balfour Lumber
Company Inc., increasing its ownership interest to 100%.
Refer to the Company's annual Management's Discussion and
Analysis for further discussion on the Company's results for the
fourth quarter of 2016 on page 30.
Additional Information and Conference Call
A conference call to discuss the fourth quarter's financial and
operating results will be held on Thursday,
February 9, 2017 at 8:00 AM Pacific
time. To participate in the call, please dial
416-764-8688 or Toll-Free 888-390-0546. For instant replay
access until February 23, 2017,
please dial 888-390-0541 and enter participant pass code
073031#. The conference call will be webcast live and will be
available at www.canfor.com. This news release, the attached
financial statements and a presentation used during the conference
call can be accessed via the Company's website at
http://www.canfor.com/investor-relations/webcasts.
Non-IFRS Measures and Forward Looking Statements
Operating Income before Amortization and Adjusted Shareholder
Net Income and Adjusted Shareholder Net Income per Share are not
generally accepted earnings measures and should not be considered
as an alternative to net income or cash flows as determined in
accordance with IFRS. Refer to the Company's Annual Management's
Discussion and Analysis for a reconciliation of Operating Income
before Amortization to Operating Income and Adjusted Shareholder
Net Income to Net Income reported in accordance with IFRS.
Certain statements in this press release constitute
"forward-looking statements" which involve known and unknown risks,
uncertainties and other factors that may cause actual results to be
materially different from any future results, performance or
achievements expressed or implied by such statements. Words
such as "expects", "anticipates", "projects", "intends", "plans",
"will", "believes", "seeks", "estimates", "should", "may", "could",
and variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements
are based on management's current expectations and beliefs and
actual events or results may differ materially. There are
many factors that could cause such actual events or results
expressed or implied by such forward-looking statements to differ
materially from any future results expressed or implied by such
statements. Forward-looking statements are based on current
expectations and the Company assumes no obligation to update such
information to reflect later events or developments, except as
required by law.
Canfor is a leading integrated forest products company based
in Vancouver, British Columbia
("BC") with interests in BC, Alberta, Ontario, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas. Canfor
produces primarily softwood lumber and also owns a 53.6% interest
in Canfor Pulp Products Inc., which is one of the largest global
producers of market northern bleached softwood kraft pulp and a
leading producer of high performance kraft paper. Canfor
shares are traded on The Toronto Stock Exchange under the symbol
CFP.
Canfor Corporation
Condensed Consolidated Balance
Sheets
(millions of
Canadian dollars, unaudited)
|
|
As
at
December
31,
2016
|
As
at
December 31,
2015
|
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
156.6
|
$
|
97.5
|
Accounts
receivable
|
-
Trade
|
|
|
164.2
|
|
191.8
|
|
- Other
|
|
|
66.5
|
|
61.1
|
Inventories
|
|
|
549.0
|
|
587.2
|
Prepaid
expenses
|
|
|
50.6
|
|
53.2
|
Total current
assets
|
|
|
986.9
|
|
990.8
|
Property, plant
and equipment
|
|
|
1,460.8
|
|
1,445.1
|
Timber
licenses
|
|
|
532.7
|
|
515.2
|
Goodwill and other
intangible assets
|
|
|
238.8
|
|
241.0
|
Long-term
investments and other
|
|
|
50.7
|
|
98.6
|
Retirement benefit
surplus
|
|
|
5.9
|
|
2.7
|
Deferred income
taxes, net
|
|
|
1.3
|
|
1.2
|
Total
assets
|
|
$
|
3,277.1
|
$
|
3,294.6
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Operating
loans
|
|
$
|
28.0
|
$
|
158.0
|
Accounts payable and
accrued liabilities
|
|
|
384.1
|
|
350.3
|
Current portion of
deferred reforestation obligations
|
|
|
48.5
|
|
50.7
|
Forward purchase
liabilities
|
|
|
41.7
|
|
76.1
|
Total current
liabilities
|
|
|
502.3
|
|
635.1
|
Long-term
debt
|
|
|
448.0
|
|
456.2
|
Retirement benefit
obligations
|
|
|
302.2
|
|
258.6
|
Deferred
reforestation obligations
|
|
|
56.9
|
|
61.6
|
Other long-term
liabilities
|
|
|
23.7
|
|
20.1
|
Forward purchase
liability
|
|
|
-
|
|
43.0
|
Deferred income
taxes, net
|
|
|
205.5
|
|
192.3
|
Total
liabilities
|
|
$
|
1,538.6
|
$
|
1,666.9
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
|
$
|
1,047.7
|
$
|
1,047.7
|
Contributed surplus
and other equity
|
|
|
(4.6)
|
|
(74.5)
|
Retained
earnings
|
|
|
351.7
|
|
257.7
|
Accumulated other
comprehensive income
|
|
|
88.9
|
|
100.0
|
Total equity
attributable to equity shareholders of the Company
|
|
|
1,483.7
|
|
1,330.9
|
Non-controlling
interests
|
|
|
254.8
|
|
296.8
|
Total
equity
|
|
$
|
1,738.5
|
$
|
1,627.7
|
Total liabilities
and equity
|
|
$
|
3,277.1
|
$
|
3,294.6
|
|
|
|
|
|
|
Subsequent
Event (Note 7)
|
|
The accompanying
notes are an integral part of these condensed consolidated interim
financial statements.
|
APPROVED BY THE
BOARD
|
|
|
|
"R.S.
Smith"
|
"M.J.
Korenberg"
|
Director, R.S.
Smith
|
Director, M.J.
Korenberg
|
Canfor Corporation
Condensed Consolidated
Statements of Income
|
3 months ended
December 31,
|
12 months ended
December 31,
|
(millions of Canadian
dollars, except per share data, unaudited)
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
1,043.5
|
$
|
1,053.0
|
$
|
4,234.9
|
$
|
3,925.3
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
Manufacturing and
product costs
|
|
729.0
|
|
752.6
|
|
2,947.2
|
|
2,770.4
|
|
Freight and other
distribution costs
|
|
150.5
|
|
176.1
|
|
635.8
|
|
646.9
|
|
Export
taxes
|
|
-
|
|
3.3
|
|
-
|
|
28.1
|
|
Amortization
|
|
63.6
|
|
59.9
|
|
242.3
|
|
214.0
|
|
Selling and
administration costs
|
|
26.7
|
|
28.9
|
|
103.7
|
|
100.2
|
|
Restructuring, mill
closure and severance
costs
|
|
0.3
|
|
1.0
|
|
3.4
|
|
24.7
|
|
|
970.1
|
|
1,021.8
|
|
3,932.4
|
|
3,784.3
|
|
|
|
|
|
|
|
|
|
Equity
income
|
|
0.6
|
|
0.6
|
|
3.6
|
|
0.6
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
74.0
|
|
31.8
|
|
306.1
|
|
141.6
|
|
|
|
|
|
|
|
|
|
Finance expense,
net
|
|
(8.0)
|
|
(7.6)
|
|
(32.8)
|
|
(24.9)
|
Foreign exchange gain
(loss) on long-term debt
|
|
(3.1)
|
|
(5.9)
|
|
4.1
|
|
(5.9)
|
Gain (loss) on
derivative financial instruments
|
|
2.1
|
|
2.1
|
|
2.9
|
|
(28.1)
|
Other income
(expense), net (Note 6)
|
|
(4.1)
|
|
3.5
|
|
(12.5)
|
|
27.7
|
Net income before
income taxes
|
|
60.9
|
|
23.9
|
|
267.8
|
|
110.4
|
Income tax expense
(Note 2)
|
|
(16.7)
|
|
(4.3)
|
|
(63.9)
|
|
(18.5)
|
Net
income
|
$
|
44.2
|
$
|
19.6
|
$
|
203.9
|
$
|
91.9
|
|
|
|
|
|
|
|
|
|
Net income
attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders
of the Company
|
$
|
38.0
|
$
|
1.6
|
$
|
150.9
|
$
|
24.7
|
Non-controlling
interests
|
|
6.2
|
|
18.0
|
|
53.0
|
|
67.2
|
Net
income
|
$
|
44.2
|
$
|
19.6
|
$
|
203.9
|
$
|
91.9
|
|
|
|
|
|
|
|
|
|
Net income per
common share: (in Canadian dollars)
|
|
|
|
|
|
|
|
|
Attributable to
equity shareholders of the Company
|
|
|
|
|
|
|
|
|
|
- Basic
and diluted (Note 3)
|
$
|
0.29
|
$
|
0.01
|
$
|
1.14
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these condensed consolidated interim
financial statements.
|
Canfor Corporation
Condensed Consolidated
Statements of Other Comprehensive Income (Loss)
|
3 months ended
December 31,
|
12 months ended
December 31,
|
(millions of Canadian
dollars, unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
44.2
|
$
|
19.6
|
$
|
203.9
|
$
|
91.9
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Items that will not
be recycled through net income:
|
|
|
|
|
|
|
|
|
|
Defined benefit plan
actuarial gains (losses)
|
|
20.3
|
|
(2.8)
|
|
(50.9)
|
|
28.4
|
|
Income tax recovery
(expense) on defined benefit plan actuarial
|
|
|
|
|
|
|
|
|
|
|
gains (losses) (Note
2)
|
|
(5.3)
|
|
0.8
|
|
13.2
|
|
(7.3)
|
|
|
15.0
|
|
(2.0)
|
|
(37.7)
|
|
21.1
|
Items that may be
recycled through net income:
|
|
|
|
|
|
|
|
|
|
Foreign exchange
translation of foreign operations, net of tax
|
|
10.4
|
|
15.5
|
|
(11.1)
|
|
72.8
|
|
Change in fair value
of available-for-sale financial instruments, net
|
|
|
|
|
|
|
|
|
|
|
of tax
|
|
(0.2)
|
|
-
|
|
-
|
|
-
|
Other comprehensive
income (loss), net of tax
|
|
25.2
|
|
13.5
|
|
(48.8)
|
|
93.9
|
Total
comprehensive income
|
$
|
69.4
|
$
|
33.1
|
$
|
155.1
|
$
|
185.8
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income attributable to:
|
|
|
|
|
|
|
|
|
Equity shareholders
of the Company
|
$
|
62.1
|
$
|
14.9
|
$
|
107.4
|
$
|
115.9
|
Non-controlling
interests
|
|
7.3
|
|
18.2
|
|
47.7
|
|
69.9
|
Total
comprehensive income
|
$
|
69.4
|
$
|
33.1
|
$
|
155.1
|
$
|
185.8
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these condensed consolidated interim
financial statements.
|
Canfor Corporation
Condensed Consolidated
Statements of Changes in Equity
|
3 months ended
December 31,
|
12 months ended
December 31,
|
(millions of Canadian
dollars, unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
1,047.7
|
$
|
1,056.0
|
$
|
1,047.7
|
$
|
1,068.0
|
Share purchases (Note
3)
|
|
-
|
|
(8.3)
|
|
-
|
|
(20.3)
|
Balance at end of
period
|
$
|
1,047.7
|
$
|
1,047.7
|
$
|
1,047.7
|
$
|
1,047.7
|
|
|
|
|
|
|
|
|
|
Contributed
surplus and other equity
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
(4.6)
|
$
|
(74.5)
|
$
|
(74.5)
|
$
|
31.9
|
Forward purchase
liabilities related to acquisitions
|
|
-
|
|
-
|
|
69.9
|
|
(106.4)
|
Balance at end of
period
|
$
|
(4.6)
|
$
|
(74.5)
|
$
|
(4.6)
|
$
|
(74.5)
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
299.9
|
$
|
272.7
|
$
|
257.7
|
$
|
260.1
|
Net income
attributable to equity shareholders of the Company
|
|
38.0
|
|
1.6
|
|
150.9
|
|
24.7
|
Defined benefit plan
actuarial gains (losses), net of tax
|
|
13.8
|
|
(2.2)
|
|
(32.4)
|
|
18.4
|
Share purchases (Note
3)
|
|
-
|
|
(11.7)
|
|
-
|
|
(38.9)
|
Elimination of
non-controlling interests
|
|
-
|
|
-
|
|
(20.0)
|
|
-
|
Acquisition of
non-controlling interests
|
|
-
|
|
(2.7)
|
|
(4.5)
|
|
(6.6)
|
Balance at end of
period
|
$
|
351.7
|
$
|
257.7
|
$
|
351.7
|
$
|
257.7
|
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive income
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
78.6
|
$
|
84.5
|
$
|
100.0
|
$
|
27.2
|
Foreign exchange
translation of foreign operations, net of tax
|
|
10.4
|
|
15.5
|
|
(11.1)
|
|
72.8
|
Change in fair value
of available-for-sale financial instruments, net of tax
|
|
(0.1)
|
|
-
|
|
-
|
|
-
|
Balance at end of
period
|
$
|
88.9
|
$
|
100.0
|
$
|
88.9
|
$
|
100.0
|
|
|
|
|
|
|
|
|
|
Total equity
attributable to equity shareholders of the
Company
|
$
|
1,483.7
|
$
|
1,330.9
|
$
|
1,483.7
|
$
|
1,330.9
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
254.5
|
$
|
289.8
|
$
|
296.8
|
$
|
250.4
|
Net income
attributable to non-controlling interests
|
|
6.2
|
|
18.0
|
|
53.0
|
|
67.2
|
Defined benefit plan
actuarial gains (losses) attributable to non-controlling
|
|
|
|
|
|
|
|
|
|
interests, net of
tax
|
|
1.2
|
|
0.2
|
|
(5.3)
|
|
2.7
|
Change in fair value
of available-for-sale financial instruments, net of tax
|
|
(0.1)
|
|
-
|
|
-
|
|
-
|
Distributions to
non-controlling interests
|
|
(7.0)
|
|
(4.0)
|
|
(30.1)
|
|
(56.8)
|
Elimination of
non-controlling interests
|
|
-
|
|
-
|
|
(39.7)
|
|
-
|
Acquisition of
non-controlling interests
|
|
-
|
|
(7.0)
|
|
(19.9)
|
|
(19.0)
|
Non-controlling
interests arising on acquisitions
|
|
-
|
|
(0.2)
|
|
-
|
|
52.3
|
Balance at end of
period
|
$
|
254.8
|
$
|
296.8
|
$
|
254.8
|
$
|
296.8
|
|
|
|
|
|
|
|
|
|
Total
equity
|
$
|
1,738.5
|
$
|
1,627.7
|
$
|
1,738.5
|
$
|
1,627.7
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these condensed consolidated interim
financial statements.
|
Canfor Corporation
Condensed Consolidated
Statements of Cash Flows
|
3 months ended
December 31,
|
12 months ended
December 31,
|
(millions of Canadian
dollars, unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cash generated
from (used in):
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
44.2
|
$
|
19.6
|
$
|
203.9
|
$
|
91.9
|
|
Items not affecting
cash:
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
63.6
|
|
59.9
|
|
242.3
|
|
214.0
|
|
|
Income tax
expense
|
|
16.7
|
|
4.3
|
|
63.9
|
|
18.5
|
|
|
Long-term portion of
deferred reforestation obligations
|
|
(3.7)
|
|
-
|
|
(4.8)
|
|
(2.0)
|
|
|
Foreign exchange loss
(gain) on long-term debt
|
|
3.1
|
|
5.9
|
|
(4.1)
|
|
5.9
|
|
|
Changes in
mark-to-market value of derivative financial instruments
|
|
(0.5)
|
|
(5.8)
|
|
(4.9)
|
|
(4.1)
|
|
|
Employee future
benefits
|
|
3.3
|
|
5.7
|
|
13.0
|
|
16.8
|
|
|
Finance expense,
net
|
|
8.0
|
|
7.6
|
|
32.8
|
|
24.9
|
|
|
Gain on legal
settlement, net
|
|
-
|
|
-
|
|
(15.5)
|
|
-
|
|
|
Equity
income
|
|
(0.6)
|
|
(0.6)
|
|
(3.6)
|
|
(0.6)
|
|
|
Operations closure
provisions
|
|
(2.0)
|
|
-
|
|
(2.0)
|
|
19.4
|
|
|
Write-down of
advances to Licella (Note 6)
|
|
7.0
|
|
-
|
|
7.0
|
|
-
|
|
|
Other, net
|
|
1.3
|
|
4.9
|
|
1.7
|
|
3.4
|
|
Defined benefit plan
contributions, net
|
|
(7.7)
|
|
(6.1)
|
|
(33.3)
|
|
(5.9)
|
|
Cash received from
legal settlement
|
|
-
|
|
-
|
|
16.3
|
|
-
|
|
Income taxes paid,
net
|
|
0.2
|
|
(2.1)
|
|
(29.9)
|
|
(61.3)
|
|
|
132.9
|
|
93.3
|
|
482.8
|
|
320.9
|
|
Net change in
non-cash working capital (Note 4)
|
|
28.1
|
|
(58.5)
|
|
101.0
|
|
(66.3)
|
|
|
161.0
|
|
34.8
|
|
583.8
|
|
254.6
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
Change in operating
bank loans
|
|
(68.0)
|
|
(43.0)
|
|
(130.0)
|
|
90.0
|
|
Proceeds from
long-term debt, net
|
|
-
|
|
263.4
|
|
-
|
|
388.4
|
|
Repayment of
long-term debt, net
|
|
-
|
|
-
|
|
-
|
|
(175.0)
|
|
Finance expenses paid
|
|
(7.5)
|
|
(3.3)
|
|
(22.0)
|
|
(12.7)
|
|
Share purchases (Note
3)
|
|
-
|
|
(20.0)
|
|
-
|
|
(59.2)
|
|
Acquisition of
non-controlling interests
|
|
-
|
|
(9.6)
|
|
(24.7)
|
-
|
(25.3)
|
|
Cash distributions
paid to non-controlling interests
|
|
(5.4)
|
|
(4.0)
|
|
(28.5)
|
|
(56.8)
|
|
|
(80.9)
|
|
183.5
|
|
(205.2)
|
|
149.4
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Additions to
property, plant and equipment, timber and
intangible assets,
net
|
|
(63.4)
|
|
(83.7)
|
|
(233.8)
|
|
(240.0)
|
|
Acquisitions
|
|
-
|
|
(123.9)
|
|
(83.9)
|
|
(263.4)
|
|
Advances to Licella
(Note 6)
|
|
(3.5)
|
|
-
|
|
(7.0)
|
|
-
|
|
Change in restricted
cash
|
|
-
|
|
-
|
|
-
|
|
50.2
|
|
Timber investment
loan
|
|
-
|
|
-
|
|
-
|
|
(30.0)
|
|
Proceeds on sale of
Lakeland Winton
|
|
-
|
|
-
|
|
-
|
|
15.0
|
|
Other, net
|
|
(0.2)
|
|
(3.1)
|
|
6.9
|
|
(9.8)
|
|
|
(67.1)
|
|
(210.7)
|
|
(317.8)
|
|
(478.0)
|
Foreign exchange gain
(loss) on cash and cash equivalents
|
|
1.8
|
|
3.2
|
|
(1.7)
|
|
13.2
|
Increase
(decrease) in cash and cash equivalents*
|
|
14.8
|
|
10.8
|
|
59.1
|
|
(60.8)
|
Cash and cash
equivalents at beginning of period*
|
|
141.8
|
|
86.7
|
|
97.5
|
|
158.3
|
Cash and cash
equivalents at end of period*
|
$
|
156.6
|
$
|
97.5
|
$
|
156.6
|
$
|
97.5
|
|
*Cash and
cash equivalents include cash on hand less unpresented
cheques.
|
|
The accompanying
notes are an integral part of these condensed consolidated interim
financial statements.
|
Canfor Corporation
Notes to the Condensed
Consolidated Financial Statements
Three months and twelve
months ended December 31, 2016 and
2015
(unaudited, millions of Canadian dollars unless otherwise
noted)
1. Basis of Preparation
These condensed consolidated interim financial statements (the
"financial statements") include the accounts of Canfor Corporation
and its subsidiary entities, including Canfor Pulp Products Inc.
("CPPI"), hereinafter referred to as "Canfor" or "the
Company."
These financial statements do not include all of the disclosures
required by International Financial Reporting Standards ("IFRS")
for interim or annual financial statements. Additional disclosures
relevant to the understanding of these financial statements,
including the accounting policies applied, can be found in the
Company's Annual Report for the year ended December 31, 2016, available at www.canfor.com or
www.sedar.com.
Canfor's financial results are impacted by seasonal factors such
as weather and building activity. Adverse weather conditions can
cause logging curtailments, which can affect the supply of raw
materials to sawmills and pulp mills. Market demand also
varies seasonally to some degree. For example, building activity
and repair and renovation work, which affect demand for solid wood
products, are generally stronger in the spring and summer months.
Shipment volumes are affected by these factors as well as by global
supply and demand conditions.
These financial statements were authorized for issue by the
Company's Board of Directors on February 8,
2017.
Certain comparative amounts for the prior year have been
reclassified to conform to the current year's presentation.
Accounting Standards Issued and Not Applied
In May 2014, the International
Accounting Standards Board ("IASB") issued IFRS 15, Revenue from
Contracts with Customers, which will supersede IAS 18,
Revenue, IAS 11, Construction Contracts and related
interpretations. The new standard is effective for annual periods
beginning on or after January 1,
2018. The Company has performed a preliminary assessment of
the impact of the new standard, and currently anticipates no
significant impact on its financial statements.
In July 2014, the IASB issued IFRS
9, Financial Instruments. The required adoption date for
IFRS 9 is January 1, 2018 and the
Company does not anticipate the new standard to have a significant
impact on its financial statements.
In January 2016, the IASB issued
IFRS 16, Leases, which will supersede IAS 17, Leases
and related interpretations. The required adoption date for IFRS 16
is January 1, 2019 and the Company is
in the process of assessing the impact on the financial statements
of this new standard.
2. Income Taxes
|
3 months ended
December 31,
|
12 months
ended December 31,
|
(millions of Canadian
dollars, unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Current
|
$
|
(2.8)
|
$
|
(6.4)
|
$
|
(37.9)
|
$
|
(32.6)
|
Deferred
|
|
(13.9)
|
|
2.1
|
|
(26.0)
|
|
14.1
|
Income tax
expense
|
$
|
(16.7)
|
$
|
(4.3)
|
$
|
(63.9)
|
$
|
(18.5)
|
The reconciliation of income taxes calculated at the statutory
rate to the actual income tax provision is as follows:
|
3 months ended
December 31,
|
12 months
ended December 31,
|
(millions of Canadian
dollars, unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Income tax expense at
statutory rate of 26.0%
|
$
|
(15.8)
|
$
|
(6.2)
|
$
|
(69.6)
|
$
|
(28.7)
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
Non-taxable income
related to non-controlling interests
|
|
0.4
|
|
0.9
|
|
6.7
|
|
3.9
|
|
Entities with
different income tax rates and other tax adjustments
|
|
0.9
|
|
1.8
|
|
(0.4)
|
|
6.6
|
|
Permanent difference
from capital gains and other non-deductible items
|
|
(2.2)
|
|
(0.8)
|
|
(0.6)
|
|
(0.3)
|
Income tax
expense
|
$
|
(16.7)
|
$
|
(4.3)
|
$
|
(63.9)
|
$
|
(18.5)
|
In addition to the amounts recorded to net income, a tax expense
of $5.3 million was recorded in other
comprehensive income (loss) for the three months ended December 31, 2016 (three months ended
December 31, 2015 - recovery of
$0.8 million) in relation to the
actuarial gains/losses on the defined benefit plans. For the twelve
months ended December 31, 2016, the
tax recovery was $13.2 million
(twelve months ended December 31,
2015 - expense of $7.3
million).
Also included in other comprehensive income (loss) for the three
months ended December 31, 2016 was a
tax expense of $0.8 million related
to foreign exchange differences on translation of investments in
foreign operations (three months ended December 31, 2015 - expense of $1.4 million). For the twelve months ended
December 31, 2016, the tax recovery
was $1.2 million (twelve months ended
December 31, 2015 - expense of
$6.0 million).
3. Earnings Per Share and Normal Course Issuer Bid
Basic net income per share is calculated by dividing the net
income attributable to common equity shareholders by the weighted
average number of common shares outstanding during the period.
|
3 months
ended December 31,
|
12 months
ended December 31,
|
|
2016
|
2015
|
2016
|
2015
|
Weighted average
number of common shares
|
132,804,573
|
133,309,012
|
132,804,573
|
134,068,255
|
On March 7, 2016, the Company
renewed its normal course issuer bid whereby it can purchase for
cancellation up to 6,640,227 common shares or approximately 5% of
its issued and outstanding common shares as of March 1, 2016. The renewed normal course issuer
bid is set to expire on March 6,
2017. During the fourth quarter of 2016, Canfor did not
purchase any common shares. As at December
31, 2016 and February 8, 2017
there were 132,804,573 common shares of the Company
outstanding.
Under a separate normal course issuer bid, CPPI can purchase for
cancellation up to 3,446,139 common shares or approximately 5% of
its issued and outstanding common shares as of March 1, 2016. CPPI did not purchase any common
shares from non-controlling shareholders during the fourth quarter
of 2016. At December 31 2016 and
February 8, 2017, Canfor's ownership
interest in CPPI was 53.6%.
4. Net Change in Non-Cash Working Capital
|
3 months ended December 31,
|
12 months ended
December 31,
|
|
(millions of Canadian
dollars, unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Accounts
receivable
|
$
|
34.9
|
$
|
(51.0)
|
$
|
32.5
|
$
|
(76.7)
|
Inventories
|
|
(13.2)
|
|
(23.1)
|
|
45.7
|
|
(22.9)
|
Prepaid
expenses
|
|
29.2
|
|
30.5
|
|
4.2
|
|
10.6
|
Accounts payable and
accrued liabilities and current portion of deferred reforestation
obligations
|
|
(22.8)
|
|
(14.9)
|
|
18.6
|
|
22.7
|
Net decrease
(increase) in non-cash working capital
|
$
|
28.1
|
$
|
(58.5)
|
$
|
101.0
|
$
|
(66.3)
|
|
|
|
|
|
|
|
|
|
|
5. Segment Information
Canfor has two reportable segments (lumber segment and pulp and
paper segment), which offer different products and are managed
separately because they require different production processes and
marketing strategies.
Sales between segments are accounted for at prices that
approximate fair value. These include sales of residual fibre
from the lumber segment to the pulp and paper segment for use in
the pulp production process.
Information regarding the operations of each reportable segment
is included in the table below.
The Company's panels business does not meet the criteria to be
reported fully as a separate segment and is included in Unallocated
& Other below.
(millions of Canadian
dollars, unaudited)
|
|
Lumber
|
|
Pulp &
Paper
|
|
Unallocated
& Other
|
|
Elimination
Adjustment
|
Consolidated
|
3 months ended
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Sales to external
customers
|
$
|
785.7
|
$
|
257.8
|
$
|
-
|
$
|
-
|
$
|
1,043.5
|
Sales to other
segments
|
|
32.3
|
|
-
|
|
-
|
|
(32.3)
|
|
-
|
Operating income
(loss)
|
|
57.4
|
|
22.9
|
|
(6.3)
|
|
-
|
|
74.0
|
Amortization
|
|
43.6
|
|
19.2
|
|
0.8
|
|
-
|
|
63.6
|
Capital
expenditures1
|
|
42.2
|
|
18.3
|
|
2.9
|
|
-
|
|
63.4
|
3 months ended
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
Sales to external
customers
|
$
|
721.8
|
$
|
331.2
|
$
|
-
|
$
|
-
|
$
|
1,053.0
|
Sales to other
segments
|
|
46.8
|
|
-
|
|
-
|
|
(46.8)
|
|
-
|
Operating income
(loss)
|
|
3.7
|
|
38.6
|
|
(10.5)
|
|
-
|
|
31.8
|
Amortization
|
|
41.1
|
|
17.6
|
|
1.2
|
|
-
|
|
59.9
|
Capital
expenditures1
|
|
53.7
|
|
27.6
|
|
2.4
|
|
-
|
|
83.7
|
|
|
|
|
|
|
|
|
|
|
12 months ended
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Sales to external
customers
|
$
|
3,133.2
|
$
|
1,101.7
|
$
|
-
|
$
|
-
|
$
|
4,234.9
|
Sales to other
segments
|
|
147.1
|
|
0.2
|
|
-
|
|
(147.3)
|
|
-
|
Operating income
(loss)
|
|
237.4
|
|
98.2
|
|
(29.5)
|
|
-
|
|
306.1
|
Amortization
|
|
164.4
|
|
73.8
|
|
4.1
|
|
-
|
|
242.3
|
Capital
expenditures1
|
|
161.0
|
|
64.0
|
|
8.8
|
|
-
|
|
233.8
|
Identifiable
assets
|
|
2,257.3
|
|
785.2
|
|
234.6
|
|
-
|
|
3,277.1
|
12 months ended
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
Sales to external
customers
|
$
|
2,740.1
|
$
|
1,185.2
|
$
|
-
|
$
|
-
|
$
|
3,925.3
|
|
Sales to other
segments
|
|
168.2
|
|
-
|
|
-
|
|
(168.2)
|
|
-
|
Operating income
(loss)
|
|
30.2
|
|
144.8
|
|
(33.4)
|
|
-
|
|
141.6
|
Amortization
|
|
144.1
|
|
65.4
|
|
4.5
|
|
-
|
|
214.0
|
Capital
expenditures1
|
|
161.7
|
|
68.3
|
|
10.0
|
|
-
|
|
240.0
|
Identifiable
assets
|
|
2,259.9
|
|
823.9
|
|
210.8
|
|
-
|
|
3,294.6
|
1Capital
expenditures represent cash paid for capital assets during the
periods. Pulp & Paper includes capital expenditures by CPPI
that were partially financed by government grants. Capital
expenditures exclude the assets purchased as part of the
acquisitions of Scotch & Gulf Lumber, LLC, Beadles Lumber
Company & Balfour Lumber Company Inc., Southern Lumber Company
Inc. and Anthony Forest Products Company in 2015, and Wynndel Box
and Lumber Ltd. in 2016.
|
6. Licella Pulp Joint Venture
On May 27, 2016, Canfor's
subsidiary CPPI and Licella Fibre Fuel Pty Ltd. ("Licella") agreed
to form a joint venture under the name Licella Pulp Joint Venture
to investigate opportunities to integrate Licella's Catalytic
Hydrothermal Reactor platform into CPPI's pulp mills to
economically convert biomass into next generation biofuels and
biochemicals. Licella is a subsidiary of Ignite Energy Resources
Ltd. ("IER") an Australian energy technology development
company.
Under IFRS 11, Joint Arrangements, the joint venture is
classified as a joint operation and CPPI will recognize its assets,
liabilities and transactions, including its share of those incurred
jointly, in its consolidated financial statements. For the year
ended December 31, 2016, CPPI's share
of the joint venture's expenses was $1.6
million, which has been recognized in manufacturing and
product costs. CPPI is required to contribute the first
$20.0 million of any funding
requirements, including cash and non-cash contributions, to the
joint venture.
In conjunction with the joint venture agreement and CPPI's
commitment to innovation and the development of potentially
transforming technology, CPPI provided a convertible credit
facility to IER, the parent company of Licella, which matures on
June 21, 2019. The advances on
this credit facility are convertible, at CPPI's option, into common
shares of IER.
With regards to the convertible credit facility, during 2016,
CPPI advanced $7.0 million to Licella
and exercised its option to convert $3.5
million of the amount advanced into common shares of
IER. Due to the inherent nature of this type of innovation
and technology development, CPPI considers these advances to be
substantially research and development in nature. As a result, at
December 31, 2016, CPPI has
recognized losses of $7.0 million in
other income (expense). This reflects CPPI's consideration of the
intrinsic risk associated with these advances.
7. Subsequent Event
Subsequent to year end, on January 2,
2017, Canfor completed the final phase of the acquisition of
Beadles Lumber Company & Balfour Lumber Company Inc. ("Beadles
& Balfour") for $41.8 million
(US$31.1 million) bringing Canfor's
interest in Beadles & Balfour from 55% to 100%.
SOURCE Canfor Corporation