Interfor Corporation Vancouver, B.C. May 4, 2017

Transcription

1 Interfr Crpratin Vancuver, B.C. May 4, 2017 Interfr Reprts Q1 17 Results Recrd EBITDA 1 f $60.3 millin n Sales f $456.8 millin Higher Lumber Prices Significant Gains Frm Operatinal Imprvement Initiatives INTERFOR CORPORATION ( Interfr r the Cmpany ) (TSX: IFP) recrded net earnings in Q1 17 f $19.7 millin, r $0.28 per share, cmpared t $26.6 millin, r $0.38 per share in Q4 16 and $0.8 millin, r $0.01 per share in Q1 16. Adjusted net earnings 1 (which takes int accunt the effects f share-based cmpensatin expense and nn-recurring items) in Q1 17 were $22.7 millin r $0.32 per share, cmpared t $17.7 millin, r $0.25 per share in Q4 16 and $2.7 millin, r $0.04 per share in Q1 16. Adjusted EBITDA was $60.3 millin n sales f $456.8 millin in Q1 17 versus $51.3 millin n sales f $442.3 millin in Q4 16. Ntable items in the quarter included: Higher Lumber Prices Key benchmark lumber prices increased during Q1 17 as a result f strng demand in bth Nrth American and internatinal markets. The Suthern Pine Cmpsite increased US$23 t US$416 per mfbm, while the Western SPF Cmpsite and KD H-F Stud 2x4 9 benchmarks were up US$34 t US$339 per mfbm and US$42 t US$360 per mfbm, respectively. Interfr s average lumber selling price increased frm $588 per mfbm in Q4 16 t $604 per mfbm in Q1 17. A substantial prtin f the annunced price increases that ccurred in Q1 17 were realized in the later part f the quarter. Therefre, Interfr s average lumber selling price fr the mnth f March, 2017 was $27 per mfbm higher than the average lumber selling price fr Q1 17. Strng Cash Flw Interfr generated $59.7 millin in cash frm peratins in Q1 17, r $0.85 per share, befre cnsidering wrking capital changes. Wrking capital increased by $55.0 millin during the quarter as a result f several seasnal and nn-recurring items, including: (i) the US$10 millin cntingent payment that was made t the frmer wner f the Tacma sawmill; (ii) a $7.5 millin increase in B.C. Interir lg inventries ahead f spring breakup; (iii) an $11.0 millin increase in lumber inventries due t an increase in prductin and varius lgistics issues; (iv) a $15.6 millin increase in accunts receivables driven by increased lumber shipments and lumber prices twards the end f the quarter; and (v) $12.4 millin in payments related t annual emplyee incentive plans. Capital spending was $20.7 millin in Q1 17 as cmpared t $19.8 millin in Q4 16. Net debt ended the quarter at $306.7 millin, r 27.6% f invested capital. 1 Refer t Adjusted EBITDA and Adjusted net earnings in Nn-GAAP Measures sectin

2 Prductin Gains Acrss Mst Regins In rder t meet strng custmer demand, Interfr increased lumber prductin in mst f its regins. This resulted in 640 millin bard feet f prductin in Q1 17, up 33 millin bard feet ver the preceding quarter. Sales f Interfr prduced lumber were 624 millin bard feet in Q1 17 versus 598 millin bard feet in Q4 16. Prductin in the U.S. Suth regin was up in Q1 17, increasing t 285 millin bard feet (equivalent t an perating rate f 86%) frm 260 millin bard feet in the preceding quarter. The B.C. and U.S. Nrthwest regins accunted fr 215 millin bard feet (equivalent t perating rates f 97% in the B.C. Interir and 43% n the B.C. Cast) and 140 millin bard feet (equivalent t an perating rate f 88%) in Q1 17, respectively, cmpared with 209 millin bard feet and 137 millin bard feet in Q4 16, respectively. The B.C. Cast lgging business was negatively impacted by difficult winter cnditins that resulted in lg prductin and lg revenues declining by 18% and 39%, respectively, in Q1 17 versus Q4 16. Prgress n Optimizatin Initiative and EBITDA Gains In early 2016, Interfr launched a Business Optimizatin Initiative t capture additinal margin pprtunities acrss the Cmpany s perating platfrm, with a particular fcus n the U.S. Suth regin, where $35 millin in annualized EBITDA gains were targeted by yearend In Q1 17, the Cmpany realized n 45% f the targeted EBITDA gains. The Q1 17 gains were mstly realized in the later part f the quarter when varius peratinal and prduct mix imprvements allwed the Cmpany t prceed with its plan t add incremental perating hurs at certain mills. The Cmpany previusly stated that its gal was t achieve an perating rate in the Suth f 90% r mre by Q4 17. The Cmpany is ahead f schedule, with the perating rate averaging 91% during the mnth f March. Sftwd Lumber Duties Fllwing the quarter end, the U.S. Department f Cmmerce ( DC ) preliminarily ruled n its case against Canadian sftwd lumber prducers. As a result, the U.S. Custms and Brder Prtectin Agency will begin cllecting depsits frm Interfr n April 28, 2017, fr cuntervailing duties at a preliminary rate f 19.88% n its shipments f sftwd lumber frm Canada int the U.S. In additin, the DC has taken the unjustified psitin that mst Canadian lumber prducers, including Interfr, may be required t submit a depsit fr retractive cuntervailing duties fr the 90-day perid frm January 28 t April 27, Interfr des nt believe the retractive applicatin f duties will stand up under final scrutiny which, in turn, shuld result in a full return f the related depsit t the Cmpany. In Q1 17, Interfr shipped apprximately 100 millin bard feet frm its Canadian peratins t the U.S. market, which represented apprximately 16% f the Cmpany s ttal lumber sales. Interfr is f the view that the DC s psitins are withut merit and are plitically driven. Interfr intends t vigrusly defend the Cmpany s and the Canadian industry s psitins thrugh varius appeal prcesses, in cnjunctin with the B.C. and Canadian Gvernments. 2

3 Summary f Quarterly Results (1) Unit Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Financial Perfrmance (Unaudited) Ttal sales $MM Lumber $MM Lgs, residual prducts and ther $MM Operating earnings (lss) $MM (6.3) (11.6) (25.8) Net earnings (lss) $MM (3.5) (6.1) (20.6) Net earnings (lss) per share, basic $/share (0.05) (0.09) (0.29) Adjusted net earnings (lss) (2) $MM (16.6) (10.3) Adjusted net earnings (lss) per share, basic (2) $/share (0.24) (0.15) Adjusted EBITDA (2) $MM Shares utstanding - end f perid millin Shares utstanding - weighted average millin Operating Perfrmance Lumber prductin millin fbm Ttal lumber sales millin fbm Lumber sales - Interfr prduced millin fbm Lumber sales - whlesale and cmmissin millin fbm Lumber - average selling price (3) $/thusand fbm Average USD/CAD exchange rate (4) 1 USD in CAD Clsing USD/CAD exchange rate (4) 1 USD in CAD Ntes: (1) Figures in this table may nt add due t runding. (2) Refer t the Nn-GAAP Measures sectin f this release fr a definitin and recnciliatin f this measure t figures reprted in the Cmpany s cnslidated financial statements. (3) Grss sales befre exprt taxes. (4) Based n Bank f Canada freign exchange rates. Liquidity Balance Sheet Net debt at March 31, 2017 was $306.7 millin, r 27.6% f invested capital, representing a decrease f $121.4 millin frm March 31, 2016 and an increase f $17.1 millin frm December 31, A slightly strnger Canadian Dllar against the U.S. Dllar ffset Q1 17 brrwings by $2.7 millin as the majrity f debt is denminated in U.S. Dllars. 3

4 Fr the 3 mnths ended March 31, Thusands f dllars Net debt Net debt, perid pening, CAD $ 289,551 $ 452,303 Net drawing n credit facilities, CAD 19, Impact n U.S. Dllar denminated debt frm strengthening CAD (2,704) (29,495) Decrease in cash and cash equivalents, CAD 579 5,201 Net debt, perid ending, CAD $ 306,676 $ 428,062 Net debt cmpnents by currency U.S. Dllar debt, perid pening, USD $ 230,000 $ 338,699 Net drawing (repayment) n credit facilities, USD 5,979 (7) U.S. Dllar debt, perid ending, USD 235, ,692 Spt rate, perid end U.S. Dllar debt expressed in CAD 314, ,317 Canadian Dllar debt, including bank indebtedness, CAD 4,987 - Canadian Dllar perating line, CAD 6,009 - Ttal debt, CAD 325, ,317 Cash and cash equivalents, CAD (18,691) (11,255) Net debt, perid ending, CAD $ 306,676 $ 428,062 Capital Resurces The fllwing table summarizes Interfr s credit facilities and availability as f March 31, 2017: Revlving Senir U.S. Operating Term Secured Operating Thusands f Canadian dllars Line Line Ntes Line Ttal Available line f credit $ 65,000 $ 200,000 $ 266,440 $ 66,610 $ 598,050 Maximum brrwing available $ 65,000 $ 200,000 $ 266,440 $ 66,610 $ 598,050 Less: Drawings 10,996 13, ,440 34, ,367 Outstanding letters f credit included in line utilizatin 10, ,230 14,624 Unused prtin f facility $ 43,610 $ 186,678 $ - $ 27,771 $ 258,059 Add cash and cash equivalents 18,691 Available liquidity at Mar. 31, 2017 $ 276,750 As f March 31, 2017, the Cmpany had cmmitments fr capital expenditures ttaling $7.6 millin, related t bth maintenance and discretinary prjects. Interfr cntinues t maintain its disciplined fcus n mnitring discretinary capital expenditures, ptimizing inventry levels and matching prductin with ffshre and dmestic demand. As at March 31, 2017, the Cmpany had net wrking capital f $190.8 millin and available capacity n perating and term facilities f $258.1 millin. These resurces, in additin t cash generated frm peratins, will be used t supprt wrking capital requirements, debt servicing cmmitments and capital expenditures. We believe that Interfr will have sufficient liquidity t fund perating and capital requirements fr the freseeable future. 4

5 Nn-GAAP Measures This release makes reference t the fllwing nn-gaap measures: Adjusted net earnings (lss), Adjusted net earnings (lss) per share, EBITDA, Adjusted EBITDA, Pre-tax return n ttal assets, Net debt t invested capital and Operating cash flw per share (befre wrking capital changes) which are used by the Cmpany and certain investrs t evaluate perating perfrmance and financial psitin. These nn-gaap measures d nt have any standardized meaning prescribed by IFRS and are therefre unlikely t be cmparable t similar measures presented by ther issuers. The fllwing table prvides a recnciliatin f these nn-gaap measures t figures as reprted in the Cmpany s unaudited interim cnslidated financial statements prepared in accrdance with IFRS: Fr the 3 mnths ended Mar. 31 Mar. 31 Dec. 31, Thusands f Canadian dllars except number f shares and per share amunts ,667 Net earnings $ $ 795 $ 26,550 Adjusted Net Earnings (1) Add: Restructuring csts and capital asset write-dwns 345 1,203 2,281 Other freign exchange lss (gain) (1,072) Lng term incentive cmpensatin expense 3, Other (incme) expense 189 (93) (14,452) Beaver sawmill pst-clsure wind-dwn csts Tacma sawmill pst-acquisitin lsses and clsure csts (13) Incme tax effect f abve adjustments (1,249) (754) 4,895 Recgnitin f previusly unrecgnized deferred tax assets (769) Adjusted net earnings $ 22,734 $ 2,724 $ 17,747 Weighted average number f shares - basic ('000) 70,030 70,030 70,030 Adjusted net earnings per share $ 0.32 $ 0.04 $ 0.25 Adjusted EBITDA Net earnings Ntes: $ 19,667 $ 795 $ 26,550 Add: Depreciatin f plant and equipment 19,603 20,169 18,534 Depletin and amrtizatin f timber, rads and ther 6,297 7,969 7,833 Restructuring csts and capital asset write-dwns 345 1,203 2,281 Finance csts 4,062 5,184 4,074 Other freign exchange lss (gain) (1,072) Incme tax expense (recvery) 6,320 (3,326) 7,236 EBITDA 56,475 32,893 65,436 Add: Lng term incentive cmpensatin expense 3, Other (incme) expense 189 (93) (14,452) Beaver sawmill pst-clsure wind-dwn csts Tacma sawmill pst-acquisitin lsses and clsure csts (13) Adjusted EBITDA $ 60,265 $ 33,358 $ 51,298 Pre-tax return n ttal assets Operating earnings befre restructuring csts $ 30,764 $ 4,662 $ 24,617 Ttal assets (2) $ 1,301,648 $ 1,389,796 $ 1,326,792 Pre-tax return n ttal assets (3) 9.5% 1.3% 7.4% Net debt t invested capital Net debt Ttal debt $ 325,367 $ 439,317 $ 308,821 Cash and cash equivalents (18,691) (11,255) (19,270) Ttal net debt $ 306,676 $ 428,062 $ 289,551 Invested capital Net debt $ 306,676 $ 428,062 $ 289,551 Sharehlders' equity 804, , ,667 Ttal invested capital $ 1,111,424 $ 1,133,276 $ 1,076,218 Net debt t invested capital (4) 27.6% 37.8% 26.9% Operating cash flw per share (befre wrking capital changes) Cash prvided by perating activities $ 4,682 $ 20,043 $ 48,981 Cash used in perating wrk capital 55,033 10,979 1,399 Operating cash flw (befre wrking capital changes) $ 59,715 $ 31,022 $ 50,380 Weighted average number f shares - basic ('000) 70,030 70,030 70,030 Operating cash flw per share (befre wrking capital changes) $ 0.85 $ 0.44 $ 0.72 (1) Certain histrical perids have been recast t exclude the recgnitin f previusly unrecgnized deferred tax assets frm Adjusted net earnings. (2) Ttal assets at perid beginning fr three mnth perids. (3) Annualized rate. (4) Net debt t invested capital as f the perid end. 5

6 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Fr the three mnths ended March 31, 2017 and 2016 (unaudited) (thusands f Canadian dllars except earnings per share) 3 Mnths 3 Mnths Mar. 31, 2017 Mar. 31, 2016 Sales $ 456,780 $ 433,944 Csts and expenses: Prductin 384, ,136 Selling and administratin 12,446 10,830 Lng term incentive cmpensatin 3, Depreciatin f plant and equipment 19,603 20,169 Depletin and amrtizatin f timber, rads and ther 6,297 7, , ,282 Operating earnings befre restructuring csts 30,764 4,662 Restructuring csts 345 1,203 Operating earnings 30,419 3,459 Finance csts Other freign exchange lss Other incme (expense) (4,062) (5,184) (181) (899) (189) 93 (4,432) (5,990) Earnings (lss) befre incme taxes 25,987 (2,531) Incme tax expense (recvery) Current Deferred 6,014 (3,457) 6,320 (3,326) Net earnings $ 19,667 $ 795 Net earnings per share, basic and diluted $ 0.28 $ 0.01 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Fr the three mnths ended March 31, 2017 and 2016 (unaudited) 3 Mnths 3 Mnths Mar. 31, 2017 Mar. 31, 2016 Net earnings $ 19,667 $ 795 Other cmprehensive incme (lss): Items that will nt be recycled t Net earnings: Defined benefit plan actuarial gain, net f tax Items that are r may be recycled t Net earnings: Freign currency translatin differences fr freign peratins, net f tax (2,505) (21,439) Lss in fair value f interest rate swaps (11) (107) Ttal items that are r may be recycled t Net earnings (2,516) (21,546) Ttal ther cmprehensive lss, net f tax (1,692) (20,912) Cmprehensive incme (lss) $ 17,975 $ (20,117) See accmpanying ntes t cnslidated financial statements 6

7 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Fr the three mnths ended March 31, 2017 and 2016 (unaudited) (thusands f Canadian dllars) 3 Mnths 3 Mnths Mar. 31, 2017 Mar. 31, 2016 Cash prvided by (used in): Operating activities: Net earnings $ 19,667 $ 795 Items nt invlving cash: Depreciatin f plant and equipment 19,603 20,169 Depletin and amrtizatin f timber, rads and ther 6,297 7,969 Incme tax expense (recvery) 6,320 (3,326) Finance csts 4,062 5,184 Other assets (49) (201) Refrestatin liability 2,543 1,614 Prvisins and ther liabilities 815 (1,175) Stck ptins Unrealized freign exchange (gain) lss (8) 9 Other 359 (93) Cash generated frm (used in) perating wrking capital: 59,715 31,022 Trade accunts receivable and ther (15,568) (919) Inventries (15,240) 2,744 Prepayments and ther (2,784) (2,147) Trade accunts payable and prvisins (21,150) (10,399) Incme taxes paid (291) (258) 4,682 20,043 Investing activities: Additins t prperty, plant and equipment (12,743) (12,551) Additins t lgging rads and bridges (7,102) (5,089) Additins t timber licences and ther intangible assets (834) (136) Prceeds (csts) n dispsal f prperty, plant and equipment (25) 175 Investments and ther assets (117) (789) (20,821) (18,390) Financing activities: Interest payments (3,542) (6,811) Debt refinancing csts (128) (732) Change in perating line cmpnents f lng term debt 40,853 6,734 Additins t lng term debt 76,107 - Repayments f lng term debt (97,710) (6,680) 15,580 (7,489) Freign exchange gain (lss) n cash and cash equivalents held in a freign currency (20) 635 Decrease in cash (579) (5,201) Cash and cash equivalents, beginning f perid 19,270 16,456 Cash and cash equivalents, end f perid $ 18,691 $ 11,255 See accmpanying ntes t cnslidated financial statements 7

8 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION March 31, 2017 and December 31, 2016 (unaudited) (thusands f Canadian dllars) Mar. 31, Dec. 31, Assets Current assets: Cash and cash equivalents $ 18,691 $ 19,270 Trade accunts receivable and ther 110,297 95,059 Incme tax receivable Inventries 169, ,535 Prepayments and ther 17,120 14,016 Investments and ther assets 3,061 2, , ,013 Emplyee future benefits 3,374 2,471 Investments and ther assets 2,286 2,341 Prperty, plant and equipment 719, ,981 Lgging rads and bridges 23,969 20,739 Timber licences 68,589 69,273 Other intangible assets 18,005 19,017 Gdwill 155, ,502 Deferred incme taxes 9,426 14,311 $ 1,318,784 $ 1,301,648 Liabilities and Sharehlders Equity Current liabilities: Trade accunts payable and prvisins $ 115,467 $ 138,029 Refrestatin liability 12,070 11,609 Incme taxes payable , ,955 Refrestatin liability 28,585 25,931 Lng term debt 325, ,821 Emplyee future benefits 8,009 8,136 Prvisins and ther liabilities 21,831 21,290 Deferred incme taxes 2, Equity: Share capital 555, ,388 Cntributed surplus 8,105 7,999 Translatin reserve 67,069 69,574 Hedge reserve - 11 Retained earnings 174, , , ,667 $ 1,318,784 $ 1,301,648 Apprved n behalf f the Bard: L. Sauder Directr D.W.G. Whitehead Directr 8

9 FORWARD-LOOKING STATEMENTS This release cntains infrmatin and statements that are frward-lking in nature, including, but nt limited t, statements cntaining the wrds believes, will, shuld, expects, annualized and similar expressins. Such statements invlve knwn and unknwn risks and uncertainties that may cause Interfr s actual results t be materially different frm thse expressed r implied by thse frward-lking statements. Such risks and uncertainties include, amng ther things: price vlatility, cmpetitin, availability and cst f lg supply, natural r man-made disasters, currency exchange sensitivity, regulatry changes, allwable annual cut reductins, Abriginal title and rights claims, ptential cuntervailing and anti-dumping duties, stumpage fee variables and changes, envirnmental impact and perfrmance, labur disruptins, and ther factrs referenced herein and in Interfr s Annual Reprt available n and The frward-lking infrmatin and statements cntained in this release are based n Interfr s current expectatins and beliefs. Readers are cautined nt t place undue reliance n frward-lking infrmatin r statements. Interfr undertakes n bligatin t update such frward-lking infrmatin r statements, except where required by law. ABOUT INTERFOR Interfr is a grwth-riented lumber cmpany with peratins in Canada and the United States. The Cmpany has annual prductin capacity f apprximately 3 billin bard feet and ffers ne f the mst diverse lines f lumber prducts t custmers arund the wrld. Fr mre infrmatin abut Interfr, visit ur website at The Cmpany s unaudited cnslidated financial statements and Management s Discussin and Analysis fr Q1 17 are available at and There will be a cnference call n Friday, May 5, 2017 at 8:00 a.m. (Pacific Time) hsted by INTERFOR CORPORATION fr the purpse f reviewing the Cmpany s release f its first quarter 2017 financial results. The dial-in number is The cnference call will als be recrded fr thse unable t jin in fr the live discussin, and will be available until June 4, The number t call is , Passcde Fr further infrmatin: Jhn A. Hrning, Executive Vice President and Chief Financial Officer (604) Martin L. Juravsky, Senir Vice President, Crprate Develpment and Strategy (604)