Fourth Quarter
- Sales of
$1.129 billion - Lower fibre costs improve lumber earnings compared to third quarter
- Adjusted EBITDA of
$80 million or 7.1% of sales - Quarterly cash dividend of
$0.20 declared
2019
- Sales of
$4.877 billion - Adjusted EBITDA of
$301 million - Cash provided by operating activities of
$115 million - Invested
$410 million in capital projects - Year-end liquidity strong with
$505 million of available bank lines, net debt to capital ratio at 30%
Recent Developments
On
Results Compared to Previous Periods
($ millions except earnings per share ("EPS")) | Q4-19 | Q3-19 | YTD-19 | Q4-18 | YTD-18 |
Sales | 1,129 | 1,190 | 4,877 | 1,274 | 6,118 |
Adjusted EBITDA1 | 80 | 55 | 301 | 120 | 1,538 |
Operating earnings | (31) | (54) | (159) | 15 | 1,072 |
Earnings | (42) | (45) | (150) | 29 | 810 |
Basic EPS ($) | (0.61) | (0.65) | (2.18) | 0.42 | 10.88 |
Adjusted Earnings1 | (11) | (15) | (21) | 43 | 945 |
Adjusted basic EPS ($)1 | (0.16) | (0.22) | (0.31) | 0.63 | 12.70 |
1. | In this News Release, reference is made to Adjusted EBITDA, Adjusted earnings and Adjusted basic EPS (collectively "these measures"). We believe that, in addition to earnings, these measures are useful performance indicators. None of these measures is a generally accepted earnings measure under International Financial Reporting Standards ("IFRS") and none has a standardized meaning prescribed by IFRS. Investors are cautioned that these measures should not be considered as an alternative to earnings, EPS or cash flow, as determined in accordance with IFRS. As there is no standardized method of calculating any of these measures, our method of calculating each of them may differ from the methods used by other entities and, accordingly, our use of any of these measures may not be directly comparable to similarly titled measures used by other entities. Reconciliations of our Non-IFRS measures to our earnings statement are shown in the various tables of our year-end 2019 Management's Discussion & Analysis. |
Operational results
Our lumber segment generated an operating loss of
Our panels segment generated operating earnings in the quarter of
Our pulp & paper segment generated an operating loss of
Outlook
The fourth quarter was a slight improvement over the prior two quarters in what has been a very difficult year.
We expect lumber production for 2020 to increase by approximately 350 MMFBM over 2019 production and reach approximately 6,250 MMFBM. Pulp production is expected to be slightly improved in 2020. Capital expenditure is planned to be in the range of
Recent
Annual Financial Statements and Management's Discussion & Analysis ("MD&A")
The Company's consolidated financial statements for the year ended
Dividend Declared
The Board of Directors of the Company has declared a dividend of
Dividends are designated to be eligible dividends pursuant to subsection 89(14) of the Income Tax Act (
The Company
Forward‑Looking Statements
This Report contains historical information, descriptions of current circumstances and statements about potential future developments. The latter, which are forward‑looking statements, are presented to provide reasonable guidance to the reader but their accuracy depends on a number of assumptions and is subject to various risks and uncertainties. Forward-looking statements include reference to the "anticipated start up of the
Conference Call
Investors are invited to listen to the quarterly conference call on
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars, except where indicated - unaudited)
2019 | 2018 | |||
Assets | ||||
Current assets | ||||
Cash and short-term investments | $ | 16 | $ | 160 |
Receivables | 258 | 332 | ||
Income taxes receivable | 135 | 48 | ||
Inventories (note 4) | 729 | 791 | ||
Prepaid expenses | 9 | 14 | ||
1,147 | 1,345 | |||
Property, plant and equipment | 2,140 | 2,056 | ||
Timber licences | 493 | 513 | ||
772 | 767 | |||
Export duty deposits (note 9) | 80 | 75 | ||
Other assets | 26 | 32 | ||
Deferred income tax assets | 10 | 3 | ||
$ | 4,668 | $ | 4,791 | |
Liabilities | ||||
Current liabilities | ||||
Cheques issued in excess of funds on deposit | $ | 16 | $ | 13 |
Operating loans | 374 | 61 | ||
Payables and accrued liabilities | 396 | 448 | ||
Current portion of long-term debt | 10 | - | ||
Current portion of reforestation and decommissioning obligations | 41 | 39 | ||
Income taxes payable | - | 34 | ||
837 | 595 | |||
Long-term debt | 650 | 692 | ||
Other liabilities | 454 | 316 | ||
Deferred income tax liabilities | 253 | 292 | ||
2,194 | 1,895 | |||
Shareholders' Equity | ||||
Share capital | 483 | 491 | ||
Accumulated other comprehensive earnings | 132 | 170 | ||
Retained earnings | 1,859 | 2,235 | ||
2,474 | 2,896 | |||
$ | 4,668 | $ | 4,791 | |
'Number of Common shares and Class |
Condensed Consolidated Statements of Changes in Shareholders' Equity
(in millions of Canadian dollars, except where indicated - unaudited)
2019 | 2018 | 2019 | 2018 | |||||
Share capital | ||||||||
Balance - beginning of period | $ | 483 | $ | 503 | $ | 491 | $ | 549 |
Issuance of Common shares | - | 1 | 1 | 1 | ||||
Repurchase of Common shares | - | (13) | (9) | (59) | ||||
Balance - end of period | $ | 483 | $ | 491 | $ | 483 | $ | 491 |
Accumulated other comprehensive earnings | ||||||||
Balance - beginning of period | $ | 146 | $ | 129 | $ | 170 | $ | 108 |
Translation gain (loss) on foreign operations | (14) | 41 | (38) | 62 | ||||
Balance - end of period | $ | 132 | $ | 170 | $ | 132 | $ | 170 |
Retained earnings | ||||||||
Balance - beginning of period | $ | 1,952 | $ | 2,354 | $ | 2,235 | $ | 2,069 |
Actuarial gain (loss) on post-retirement benefits | (37) | (28) | (99) | 24 | ||||
Repurchase of Common shares | - | (106) | (72) | (617) | ||||
Earnings for the period | (42) | 29 | (150) | 810 | ||||
Dividends | (14) | (14) | (55) | (51) | ||||
Balance - end of period | $ | 1,859 | $ | 2,235 | $ | 1,859 | $ | 2,235 |
Shareholders' Equity | $ | 2,474 | $ | 2,896 | $ | 2,474 | $ | 2,896 |
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
(in millions of Canadian dollars, except where indicated - unaudited)
2019 | 2018 | 2019 | 2018 | |||||
Sales | $ | 1,129 | $ | 1,274 | $ | 4,877 | $ | 6,118 |
Costs and expenses | ||||||||
Cost of products sold | 830 | 917 | 3,652 | 3,617 | ||||
Freight and other distribution costs | 166 | 174 | 713 | 732 | ||||
Export duties (note 9) | 35 | 37 | 162 | 202 | ||||
Amortization | 66 | 69 | 259 | 257 | ||||
Selling, general and administration | 53 | 63 | 211 | 231 | ||||
Equity-based compensation | 2 | (1) | 6 | 7 | ||||
Restructuring and impairment charges | 8 | - | 33 | - | ||||
1,160 | 1,259 | 5,036 | 5,046 | |||||
Operating earnings | (31) | 15 | (159) | 1,072 | ||||
Finance expense | (13) | (9) | (49) | (37) | ||||
Other (note 5) | (2) | 22 | (11) | 37 | ||||
Earnings before tax | (46) | 28 | (219) | 1,072 | ||||
Tax recovery (provision) (note 6) | 4 | 1 | 69 | (262) | ||||
Earnings | $ | (42) | $ | 29 | $ | (150) | $ | 810 |
Earnings per share (dollars)(note 7) | ||||||||
Basic | $ | (0.61) | $ | 0.42 | $ | (2.18) | $ | 10.88 |
Diluted | $ | (0.61) | $ | 0.29 | $ | (2.34) | $ | 10.62 |
Comprehensive earnings | ||||||||
Earnings | $ | (42) | $ | 29 | $ | (150) | $ | 810 |
Other comprehensive earnings | ||||||||
Translation gain (loss) on foreign operations | (14) | 41 | (38) | 62 | ||||
Actuarial gain (loss) on post-retirement benefits | (37) | (28) | (99) | 24 | ||||
Comprehensive earnings | $ | (93) | $ | 42 | $ | (287) | $ | 896 |
Condensed Consolidated Statements of Cash Flows
(in millions of Canadian dollars, except where indicated - unaudited)
Cash provided by (used in) | 2019 | 2018 | 2019 | 2018 | ||||
Operating activities | ||||||||
Earnings | $ | (42) | $ | 29 | $ | (150) | $ | 810 |
Adjustments | ||||||||
Amortization | 66 | 69 | 259 | 257 | ||||
Restructuring and impairment charges | 8 | - | 33 | - | ||||
Restructuring charges paid | (1) | - | (7) | - | ||||
Finance expense | 13 | 9 | 49 | 37 | ||||
Foreign exchange loss (gain) on long-term financing | 1 | (6) | 3 | (10) | ||||
Foreign exchange loss (gain) on export duty deposits | 2 | (4) | 4 | (5) | ||||
Export duty deposits | (3) | (5) | (5) | (31) | ||||
Post-retirement expense | 20 | 24 | 80 | 84 | ||||
Contributions to post-retirement benefit plans | (24) | (24) | (85) | (103) | ||||
Tax provision (recovery) | (4) | (1) | (69) | 262 | ||||
Income taxes received (paid) | 23 | (41) | (62) | (316) | ||||
Other | 2 | 8 | - | (2) | ||||
Changes in non-cash working capital | ||||||||
Receivables | 38 | 72 | 70 | 39 | ||||
Inventories | (76) | (77) | 51 | (105) | ||||
Prepaid expenses | 9 | 7 | 5 | (3) | ||||
Payables and accrued liabilities | 8 | (48) | (61) | (5) | ||||
40 | 12 | 115 | 909 | |||||
Financing activities | ||||||||
Proceeds from operating loans | 61 | 63 | 314 | 63 | ||||
Finance expense paid | (16) | (12) | (43) | (32) | ||||
Repurchase of Common shares | - | (118) | (81) | (675) | ||||
Dividends and other | (14) | (14) | (60) | (37) | ||||
31 | (81) | 130 | (681) | |||||
Investing activities | ||||||||
Additions to capital assets | (87) | (86) | (410) | (370) | ||||
Government assistance | - | 1 | 5 | 6 | ||||
Proceeds from disposal of capital assets | 2 | 10 | 14 | 11 | ||||
Other | (2) | (1) | - | (1) | ||||
(87) | (76) | (391) | (354) | |||||
Change in cash | (16) | (145) | (146) | (126) | ||||
Foreign exchange effect on cash | 3 | 10 | (1) | 15 | ||||
Cash - beginning of period | 13 | 282 | 147 | 258 | ||||
Cash - end of period | $ | - | $ | 147 | $ | - | $ | 147 |
Cash consists of | ||||||||
Cash and short-term investments | $ | 16 | $ | 160 | ||||
Cheques issued in excess of funds on deposit | (16) | (13) | ||||||
$ | - | $ | 147 |
Notes to Condensed Consolidated Interim Financial Statements
(figures are in millions of dollars, except where indicated - unaudited)
1. Nature of operations
2. Basis of presentation and statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as issued by the
3. Seasonality of operations
Our operating results are subject to seasonal fluctuations that impact quarter-to-quarter comparisons. Log availability has a direct impact on our operations. We build up log inventory in
4. Inventories
Inventories at
5. Other
2019 | 2018 | 2019 | 2018 | |||||
Foreign exchange gain (loss) on working capital | $ | (3) | $ | 9 | $ | (7) | $ | 13 |
Foreign exchange gain (loss) on intercompany financing1 | (14) | 41 | (36) | 65 | ||||
Foreign exchange gain (loss) on long-term debt | 13 | (35) | 33 | (55) | ||||
Foreign exchange gain (loss) on export duty deposits receivable | (2) | 4 | (4) | 5 | ||||
Insurance gain on disposal of equipment2 | - | - | 4 | - | ||||
Gain on disposal of intangible assets and gain on sale of lumber futures | - | 4 | 1 | 11 | ||||
Other | 4 | (1) | (2) | (2) | ||||
$ | (2) | $ | 22 | $ | (11) | $ | 37 |
1. | Relates to |
2. | Represents the insurance gain of |
6. Tax provision
The tax provision differs from the amount that would have resulted from applying the
2019 | 2018 | 2019 | 2018 | |||||
Income tax recovery (expense) at statutory rate of 27% | $ | 12 | $ | (7) | $ | 59 | $ | (289) |
Non-taxable amounts | (1) | 2 | 2 | 2 | ||||
Rate differentials between jurisdictions and on specified activities | (1) | 2 | (3) | 20 | ||||
Decrease in | 1 | - | 18 | - | ||||
Other | (7) | 4 | (7) | 5 | ||||
Tax recovery (provision) | $ | 4 | $ | 1 | $ | 69 | $ | (262) |
1. | Represents the re-measurement of deferred income tax assets and liabilities for the 2019 Alberta rate change from 12% to 8% over the next four years. |
7. Earnings per share
Basic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B Common shares outstanding.
Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the actual share option expense (recovery) charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity-settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive and diluted earnings per share are deemed to be the same as basic earnings per share.
2019 | 2018 | 2019 | 2018 | |||||
Earnings | ||||||||
Basic | $ | (42) | $ | 29 | $ | (150) | $ | 810 |
Share option expense (recovery) | 3 | (9) | (8) | (9) | ||||
Equity-settled share option adjustment | - | - | (4) | (3) | ||||
Diluted | $ | (39) | $ | 20 | $ | (162) | $ | 798 |
Weighted average number of shares (thousands) | ||||||||
Basic | 68,661 | 70,346 | 68,882 | 74,451 | ||||
Share options | 232 | 482 | 290 | 652 | ||||
Diluted | 68,893 | 70,828 | 69,172 | 75,103 | ||||
Earnings per share (dollars) | ||||||||
Basic | $ | (0.61) | $ | 0.42 | $ | (2.18) | $ | 10.88 |
Diluted | $ | (0.61) | $ | 0.29 | $ | (2.34) | $ | 10.62 |
8. Segmented information
The table below provides a reconciliation of our non-IFRS measure Adjusted EBITDA. This measurement is used by management to evaluate the operating and financial performance of our operating segments, generate future operating plans, and make strategic decisions, including those relating to operating earnings.
Lumber | Panels | Pulp & Paper | Corporate & Other | Total | ||||||
Sales | ||||||||||
To external customers | $ | 757 | $ | 140 | $ | 232 | $ | - | $ | 1,129 |
To other segments | 28 | 2 | - | (30) | - | |||||
$ | 785 | $ | 142 | $ | 232 | $ | (30) | $ | 1,129 | |
Cost of products sold | (573) | (108) | (179) | 30 | (830) | |||||
Freight and other distribution costs | (106) | (15) | (44) | (1) | (166) | |||||
Selling, general and administration | (37) | (6) | (10) | - | (53) | |||||
Adjusted EBITDA | $ | 69 | $ | 13 | $ | (1) | $ | (1) | $ | 80 |
Export duties | (35) | - | - | - | (35) | |||||
Equity-based compensation | - | - | - | (2) | (2) | |||||
Amortization | (49) | (5) | (11) | (1) | (66) | |||||
Restructuring and impairment charges | (8) | - | - | - | (8) | |||||
Operating earnings | $ | (23) | $ | 8 | $ | (12) | $ | (4) | $ | (31) |
Finance expense | (10) | (1) | (3) | 1 | (13) | |||||
Other | (4) | - | 3 | (1) | (2) | |||||
Earnings before tax | $ | (37) | $ | 7 | $ | (12) | $ | (4) | $ | (46) |
Sales | ||||||||||
To external customers | $ | 858 | $ | 148 | $ | 268 | $ | - | $ | 1,274 |
To other segments | 40 | 3 | - | (43) | - | |||||
$ | 898 | $ | 151 | $ | 268 | $ | (43) | $ | 1,274 | |
Cost of products sold | (669) | (120) | (171) | 43 | (917) | |||||
Freight and other distribution costs | (120) | (15) | (39) | - | (174) | |||||
Selling, general and administration | (41) | (7) | (11) | (4) | (63) | |||||
Adjusted EBITDA | $ | 68 | $ | 9 | $ | 47 | $ | (4) | $ | 120 |
Export duties | (37) | - | - | - | (37) | |||||
Equity-based compensation | - | - | - | 1 | 1 | |||||
Amortization | (53) | (5) | (11) | - | (69) | |||||
Operating earnings | $ | (22) | $ | 4 | $ | 36 | $ | (3) | $ | 15 |
Finance expense | (6) | - | (3) | - | (9) | |||||
Other | 10 | - | 7 | 5 | 22 | |||||
Earnings before tax | $ | (18) | $ | 4 | $ | 40 | $ | 2 | $ | 28 |
Lumber | Panels | Pulp & Paper | Corporate & Other | Total | ||||||
Sales | ||||||||||
To external customers | $ | 3,317 | $ | 594 | $ | 966 | $ | - | $ | 4,877 |
To other segments | 125 | 11 | - | (136) | - | |||||
$ | 3,442 | $ | 605 | $ | 966 | $ | (136) | $ | 4,877 | |
Cost of products sold | (2,588) | (466) | (734) | 136 | (3,652) | |||||
Freight and other distribution costs | (477) | (63) | (173) | - | (713) | |||||
Selling, general and administration | (146) | (25) | (39) | (1) | (211) | |||||
Adjusted EBITDA | $ | 231 | $ | 51 | $ | 20 | $ | (1) | $ | 301 |
Export duties | (162) | - | - | - | (162) | |||||
Equity-based compensation | - | - | - | (6) | (6) | |||||
Amortization | (196) | (16) | (43) | (4) | (259) | |||||
Restructuring and impairment charges | (33) | - | - | - | (33) | |||||
Operating earnings | $ | (160) | $ | 35 | $ | (23) | $ | (11) | $ | (159) |
Finance expense | (35) | (4) | (10) | - | (49) | |||||
Other | (7) | - | 4 | (8) | (11) | |||||
Earnings before tax | $ | (202) | $ | 31 | $ | (29) | $ | (19) | $ | (219) |
Sales | ||||||||||
To external customers | $ | 4,291 | $ | 664 | $ | 1,163 | $ | - | $ | 6,118 |
To other segments | 165 | 12 | - | (177) | - | |||||
$ | 4,456 | $ | 676 | $ | 1,163 | $ | (177) | $ | 6,118 | |
Cost of products sold | (2,635) | (461) | (698) | 177 | (3,617) | |||||
Freight and other distribution costs | (503) | (63) | (166) | - | (732) | |||||
Selling, general and administration | (162) | (25) | (41) | (3) | (231) | |||||
Adjusted EBITDA | $ | 1,156 | $ | 127 | $ | 258 | $ | (3) | $ | 1,538 |
Export duties | (202) | - | - | - | (202) | |||||
Equity-based compensation | - | - | - | (7) | (7) | |||||
Amortization | (196) | (15) | (44) | (2) | (257) | |||||
Operating earnings | $ | 758 | $ | 112 | $ | 214 | $ | (12) | $ | 1,072 |
Finance expense | (25) | (2) | (10) | - | (37) | |||||
Other | 20 | - | 11 | 6 | 37 | |||||
Earnings before tax | $ | 753 | $ | 110 | $ | 215 | $ | (6) | $ | 1,072 |
The geographic distribution of external sales is as follows1:
2019 | 2018 | 2019 | 2018 | |||||
$ | 213 | $ | 269 | $ | 979 | $ | 1,239 | |
684 | 723 | 2,890 | 3,661 | |||||
153 | 191 | 650 | 734 | |||||
Other | 71 | 83 | 321 | 442 | ||||
Other | 8 | 8 | 37 | 42 | ||||
$ | 1,129 | $ | 1,274 | $ | 4,877 | $ | 6,118 |
1. | Sales distribution is based on the location of product delivery. |
9. Countervailing ("CVD") and antidumping ("ADD") duty dispute
On
Additional details can be found in Note 27 "Countervailing ("CVD") and antidumping ("ADD") duty dispute" of our 2019 annual audited consolidated financial statements.
Export duties incurred in the period are as follows:
2019 | 2018 | 2019 | 2018 | |||||
Countervailing duties | $ | 29 | $ | 33 | $ | 127 | $ | 178 |
Antidumping duties | 9 | 9 | 40 | 55 | ||||
Total | $ | 38 | $ | 42 | $ | 167 | $ | 233 |
Recognized in the financial statements as:
2019 | 2018 | 2019 | 2018 | |||||
Export duties recognized as expense in consolidated statements of earnings | $ | 35 | $ | 37 | $ | 162 | $ | 202 |
Export duties recognized as export duty deposits receivable in consolidated balance sheets | 3 | 5 | 5 | 31 | ||||
Total | $ | 38 | $ | 42 | $ | 167 | $ | 233 |
As at
SOURCE
© Canada Newswire, source