Interim Condensed Consolidated Financial Statements GLV INC. (Unaudited) Three-month periods ended June 30, 2013 and 2012

Transcription

1 Interim Condensed Consolidated Financial Statements GLV INC.

2 Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statements of Financial Position... 1 Interim Condensed Consolidated Statements of Earnings (Loss)... 2 Interim Condensed Consolidated Statements of Comprehensive Income (Loss)... 3 Interim Condensed Consolidated Statements of Changes in Equity... 4 Interim Condensed Consolidated Statements of Cash Flows

3 Interim Condensed Consolidated Statements of Financial Position (In thousands of Canadian dollars) Notes March 31, 2013 Restated June 30, 2013 see note 2(b) Assets Current assets Cash and cash equivalents 18,146 13,294 Trade and other receivables 123, ,883 Income taxes receivable 3,671 1,091 Derivative financial assets Inventories 39,268 36,660 Contracts in progress 152, ,466 Prepaid expenses 6,252 3, , ,256 Non-current assets Property, plant and equipment 27,003 26,064 Intangible assets 62,386 62,044 Goodwill 62,656 60,309 Restricted cash 4,400 4,597 Deferred taxes 2,998 3,034 Other assets 114 1, , ,606 Total assets 503, ,862 Liabilities Current liabilities Accounts payable and accrued liabilities 152, ,940 Provisions 4 13,994 17,926 Income taxes payable 1,070 1,130 Derivative financial liabilities 3 1,284 2,860 Deferred revenues 58,889 36,347 Current portion of long-term debt 5 16, , ,518 Non-current liabilities Provisions 4 2,950 2,628 Long-term debt 5 72,874 53,708 Retirement benefits 11,346 11,001 Deferred taxes 6,342 5,847 Other liabilities 4,464 5,388 97,976 78,572 Total liabilities 325, ,090 Equity Share capital 313, ,841 Contributed surplus 6,748 6,658 Accumulated deficit (144,057) (145,346) Accumulated other comprehensive income (loss) 1,327 (5,371) Attributable to shareholders of GLV Inc. 177, ,782 Non-controlling interests (30) (10) Total equity 177, ,772 Total liabilities and equity 503, ,862 The accompanying notes are an integral part of the interim condensed consolidated financial statements. 1

4 Interim Condensed Consolidated Statements of Earnings (Loss) (In thousands of Canadian dollars, except per share amounts) Notes Revenues New equipment 88,055 96,025 Sale of parts and provision of services 56,650 50,719 Total revenues 144, ,744 Cost of contracts and goods sold (excluding amortization) 9 110, ,365 33,708 35,379 Selling and administrative expenses (excluding amortization) 9 28,765 28,806 Restructuring costs ,074 28,806 Earnings before amortization, net financial expenses, foreign exchange loss (gain), loss (gain) related to derivative financial instruments and income taxes related to continuing operations 4,634 6,573 Amortization 9 2,912 3,131 Operating income from continuing operations 1,722 3,442 Net financial expenses 11 1,720 1,830 Foreign exchange loss (gain) (598) 1,009 Loss (gain) related to derivative financial instruments (2,238) 1,901 Earnings (loss) before income taxes related to continuing operations 2,838 (1,298) Income taxes 12 1,568 2,539 Net earnings (loss) from continuing operations 1,270 (3,837) Net loss from discontinued operations 13 (1,703) Net earnings (loss) 1,270 (5,540) Net earnings (loss) attributable to: Shareholders of GLV Inc. 1,289 (5,540) Non-controlling interests (19) 1,270 (5,540) Net earnings (loss) per share attributable to shareholders of GLV Inc. Basic and diluted: Continuing operations 0.03 (0.09) Discontinued operations (0.04) 0.03 (0.13) Weighted average number of participating shares outstanding (in thousands): 14 Basic 44,092 44,092 Diluted 44,105 44,092 The accompanying notes are an integral part of the interim condensed consolidated financial statements. 2

5 Interim Condensed Consolidated Statements of Comprehensive Income (Loss) (In thousands of Canadian dollars) Net earnings (loss) 1,270 (5,540) Item that may be reclassified to net earnings (loss): Unrealized exchange difference on translation of foreign operations 6, Comprehensive income (loss) 7,967 (5,474) Comprehensive income (loss) attributable to: Shareholders of GLV Inc. 7,987 (5,475) Non-controlling interests (20) 1 7,967 (5,474) The accompanying notes are an integral part of the interim condensed consolidated financial statements. 3

6 Interim Condensed Consolidated Statements of Changes in Equity (In thousands of Canadian dollars) Notes Share capital Attributable to shareholders of GLV Inc. Contributed surplus Accumulated deficit Accumulated other comprehensive income (loss) Total Noncontrolling interests $ Total Balance as at March 31, 2012 Restated see note 2(b) 313,841 5,957 (129,082) (3,997) 186,719 (7) 186,712 Comprehensive income (loss): Net loss (5,540) (5,540) (5,540) Unrealized exchange difference on translation of foreign operations Total comprehensive income (loss) (5,540) 65 (5,475) 1 (5,474) Stock-based compensation Balance as at June 30, 2012 Restated see note 2(b) 313,841 6,226 (134,622) (3,932) 181,513 (6) 181,507 Balance, as at March 31, 2013 Restated see note 2(b) 313,841 6,658 (145,346) (5,371) 169,782 (10) 169,772 Comprehensive income (loss): Net income (loss) 1,289 1,289 (19) 1,270 Unrealized exchange difference on translation of foreign operations 6,698 6,698 (1) 6,697 Total comprehensive income (loss) 1,289 6,698 7,987 (20) 7,967 Stock-based compensation Balance as at June 30, ,841 6,748 (144,057) 1, ,859 (30) 177,829 The accompanying notes are an integral part of the interim condensed consolidated financial statements. 4

7 Interim Condensed Consolidated Statements of Cash Flows (In thousands of Canadian dollars) Operating activities: Notes Net earnings (loss) 1,270 (5,540) Less: Net loss from discontinued operations (1,703) Net earnings (loss) from continuing operations 1,270 (3,837) Non-cash items in net earnings (loss): Loss on disposal of property, plant and equipment Amortization Property, plant and equipment 1,266 1,295 Amortization Intangible assets 1,646 1,836 Stock-based compensation Deferred taxes 377 2,033 Changes in fair value of derivative financial instruments (1,172) 1,887 Cash flows provided by operating activities of continuing operations before net change in non-cash items 3,851 3,405 Net change in non-cash items related to operating activities 15 (372) (19,335) Cash flows provided by (used in) operating activities of continuing operations 3,479 (15,930) Cash flows used in operating activities of discontinued operations (1,561) Financing activities: 3,479 (17,491) Net change in revolving credit facilities 19,106 7,960 Repayment of long-term debt (16,725) (8) Cash flows provided by financing activities of continuing operations 2,381 7,952 Investing activities: Additions to property, plant and equipment (1,922) (977) Proceeds from sale of property, plant and equipment 23 2,310 Additions to intangible assets Increase in restricted cash (260) (207) (1) (568) Decrease in restricted cash 194 Other assets 449 (10) Cash flows provided by (used in) investing activities of continuing operations (1,517) 548 Effect of changes in foreign exchange rates on cash and cash equivalents 509 (233) Net increase (decrease) in cash and cash equivalents 4,852 (9,224) Cash and cash equivalents, beginning of period 13,294 35,583 Cash and cash equivalents, end of period 18,146 26,359 Interest and income taxes included in operating activities: Interest paid 2,871 2,711 Interest received (193) (194) Income taxes paid 3, Income taxes received (12) (3,043) The accompanying notes are an integral part of the interim condensed consolidated financial statements. 5

8 1. Nature of operations and organization: GLV Inc. ( GLV Group or the Corporation designates, as the case may be, GLV Inc. and its subsidiaries and divisions, or GLV Inc. or one of its subsidiaries or divisions) is an international company operating primarily in the water treatment (Ovivo) and pulp and paper (GL&V Pulp and Paper) sectors, offering comprehensive technological solutions as well as services and equipment tailored to specific client needs. GLV Group companies operate in more than 25 countries. Ovivo designs and markets equipment and integrated solutions for the filtration, clarification, treatment and purification of water that will be used or reused in various industrial and municipal processes, returned into the environment or used for domestic purposes. GL&V Pulp and Paper designs and globally markets equipment used in various stages, from pulp preparation to paper production. It is also recognized worldwide for its rebuilding, upgrading and optimization services for existing equipment, as well as for the sale of spare parts. GLV Inc. was incorporated under the Canada Business Corporations Act on May 15, 2007 in connection with the transfer of net assets and the continuation of the Water Treatment Group and Pulp and Paper Group of Groupe Laperrière & Verreault Inc. The Corporation s head office is located at 2001 McGill College Avenue, Suite 2100, Montréal, Québec, Canada, H3A 1G1. 2. Significant accounting policies: (a) Basis of presentation: The interim condensed consolidated financial statements of the Corporation for the three -month periods ended June 30, 2013 and 2012 have been prepared in accordance with IAS 34, Interim Financial Reporting, which forms part of International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ). The interim condensed consolidated financial statements are presented in Canadian dollars and include the accounts of the Corporation and all of its Canadian and foreign subsidiaries. These unaudited interim condensed consolidated financial statements have been prepared to provide an update to the annual consolidated financial statements presented as at March 31, Accordingly, since they do not include all of the information presented in the aforementioned consolidated financial statements, they should be read in conjunction with said statements. The accounting policies used in the interim condensed consolidated financial statements are the same as and are applied consistently with those presented in note 2 to the annual consolidated financial statements as at March 31, 2013 except as indicated in note 2(b). The interim condensed consolidated financial statements have not been reviewed or audited by the Corporation s external auditors. On August 8, 2013, the Corporation s Board of Directors approved the release of these unaudited interim condensed consolidated financial statements. The preparation of the Corporation s interim condensed consolidated financial statements requires management to exercise judgment in developing estimates and making forward-looking assumptions that affect the amounts reported in the interim condensed consolidated financial statements. Actual results could give rise to significant adjustments to the reported amounts of assets, liabilities and earnings (loss) in subsequent periods. The Corporation s most significant estimates and assumptions for the three-month periods ended June 30, 2013 and 2012 are the same as those presented in note 2(c) to the annual consolidated financial statements as at March 31,

9 2. Significant accounting policies [Cont d] (b) Initial adoption and changes in accounting policies The following standards and interpretations were applied by the Corporation on April 1, 2013 and, unless otherwise indicated, have no impact on the Corporation s financial performance and may give rise to additional disclosures: IFRS 10, Consolidated Financial Statements IFRS 10 replaces the guidance provided in IAS 27, Separate Financial Statements, and SIC 12, Consolidation Special Purpose Entities. The objective of this standard is to establish principles for the presentation and preparation of consolidated financial statements, and more specifically, to define the principle of control and determine when financial statements are to be consolidated. IFRS 11, Joint Arrangements IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities: Non-Monetary Contributions by Venturers. This standard prohibits consolidating joint ventures using the proportionate consolidation method and eliminates the distinction between jointly controlled assets and jointly controlled operations. IAS 27, Separate Financial Statements, and IAS 28, Investments in Associates and Joint Ventures, were amended subsequent to the release of IFRS 10 and IFRS 11. IFRS 12, Disclosure of Interests in Other Entities On May 12, 2011, the IASB released IFRS 12, Disclosure of Interests in Other Entities, which contains all of the disclosure requirements for interests in other entities, including subsidiaries, associates, joint ventures and structured entities. The objective of this standard is to require an entity to disclose information that enables users of its financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance and cash flows. IFRS 12 therefore imposes supplementary disclosure requirements. IFRS 13, Fair Value Measurement IFRS 13, Fair Value Measurement, provides a single definition of fair value, eliminating inconsistencies between other definitions set out in various existing standards (financial instruments, property, plant and equipment, investment properties, etc.). In addition, the standard carries forward fair value disclosure requirements for financial instruments and extends their scope to all items measured at fair value. IAS 19, Employee Benefits The amendments to IAS 19 affecting the Corporation s accounting policies introduce a net interest cost approach which replaces expected return on plan assets and interest expense related to the defined benefit obligation by a single net interest cost component computed by multiplying the net defined benefit asset or liability recognized by the discount rate used to determine the defined benefit obligation. In addition, total past service costs will now be recognized through earnings (loss) when the plan is amended with deferral to future service periods no longer permitted. In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, the amendments have been applied retrospectively. 7

10 2. Significant accounting policies [Cont d] (b) Initial adoption and changes in accounting policies [Cont d] Adoption of these amendments to IAS 19 as at April 1, 2013 had no impact on net earnings (loss) and comprehensive income (loss) for the three-month periods ended June 30, 2013 and 2012, and had no material effect on net loss and comprehensive loss for the years ended March 31, 2013 and 2012, as indicated in the following table: Years ended March Increase of net loss Retirement benefits Actuarial losses (25) (48) Increase (decrease) of comprehensive loss 10 (1) Given the insignificant impact of the adoption of these amendments on the statement of financial position, these interim condensed consolidated financial statements do not include the statement of financial position as at April 1, 2011, but the following table indicates the nature and amounts of the adjustments: Impact on financial position March 31, March 31, April 1, $ Decrease in the obligation related to retirement benefits Decrease in accumulated deficit (c) Future changes in accounting policies The following changes will be effective for the Corporation as of the fiscal year beginning on April 1, 2015 for IFRS 9 and as of the fiscal year beginning on April 1, 2014 for amended IAS 32 and IAS 36. IFRS 9, Financial Instruments In November 2009, the IASB released IFRS 9, Financial Instruments, which provides a model for the recognition, classification and measurement of financial instruments, replacing the guidance set out in IAS 39, Financial Instruments: Recognition and Measurement. IAS 32, Financial Instruments: Presentation In December 2011, the IASB amended this standard for consistency in the application of certain financial asset and financial liability offsetting criteria. IAS 36, Impairment of Assets In May 2013, the IASB amended this standard, arising from the drafting of IFRS 13, to impose a disclosure requirement regarding the recoverable amount of impaired assets in cases where the recoverable amount is based on fair value less costs of disposal. The Corporation is currently assessing the impacts of adopting these new or amended standards. 8

11 3. Derivative financial instruments Derivative financial instruments are used to manage the Corporation s exposure to foreign exchange risk, interest rate risk and equity price risk in connection with stock-based compensation. The Corporation does not hold or issue derivative financial instruments for speculative purposes. As at June 30 and March 31, 2013, the fair value of these derivative financial instruments was detailed as follows: June 30, 2013 March 31, 2013 Derivative financial assets: Foreign exchange contracts Interest rate swap 45 Cross currency interest rate swap 99 Embedded derivatives in contracts 247 1, ,900 Current portion Non-current portion [presented under Other assets] 75 1,075 Derivative financial liabilities: Foreign exchange contracts 1,113 1,244 Total return swap 2,107 3,127 Interest rate swap 12 Cross currency interest rate swap 684 Embedded derivatives in contracts 386 1,472 3,606 6,539 Current portion 1,284 2,860 Non-current portion [presented under Other liabilities] 2,322 3, Provisions Provisions for contracts Other Total $ Balance as at April 1, ,782 3,772 20,554 Increases 1, ,172 Utilization (2,680) (2,513) (5,193) Reversals (857) (4) (861) Effect of changes in exchange rates Balance as at June 30, ,951 1,993 16,944 Current portion 12,973 1,021 13,994 Non-current portion 1, ,950 Provisions for contracts represent the estimated warranty costs for contracts in progress and completed, as well as certain expected losses on contracts in progress. The Other category represents pending claims and litigation and provisions for restructuring costs. 9

12 5. Long-term debt Revolving credit facilities with a maximum amount of $100,000; rates vary based on the Canadian or U.S. prime rates plus 0.75% to 2.50%, and/or the bankers acceptance rates and/or LIBOR and/or the European rates plus 1.75% to 3.50%, maturing in December 2016 June 30, 2013 March 31, 2013 Denominated in Canadian dollars 47,249 25,500 Denominated in U.S. dollars 359 1,607 Non-convertible debentures, unsecured, bearing interest at 9.5%, maturing in November ,000 25,000 Loans denominated in euros ( ): Debentures, repaid in April ,315 Revolving credit facilities with a maximum amount of 2,500 ($3,410), variable rate based on indicators such as LIBOR or EONIA plus a premium, and also according to currency (the agreement s euro reference rate of 3.5%), maturing in December ,335 Other (debt denominated in Indian rupees, South African rand, Tunisian dinars and Brazilian real) Total 72,874 70,023 Current portion 16,315 Non-current portion 72,874 53, Stock option plan and other stock-based compensation (a) Stock option plan During the three-month period ended June 30, 2013, the Corporation cancelled zero (25,000 in 2012) stock options for Class A subordinate voting shares. During the same periods, the Corporation recorded a stock-based compensation expense in respect of the stock option plan of $90 and $269, respectively. Number June 30, 2013 June 30, 2012 Weighted average Weighted average exercise price Number exercise price Balance, beginning of period 2,113, ,167, Cancelled (25,000) Balance, end of period 2,113, ,142,

13 6. Stock option and other stock-based compensation [Cont d] (a) Stock option plan [Cont d] The following table summarizes the information on the stock options outstanding as at June 30, 2013 and 2012: Exercise price Options outstanding Weighted average remaining contractual life (in years) Weighted average exercise price Options exercisable Weighted average exercise price Number of options Number of options (1) $ , , , , , , , , ,135, ,135, ,113, ,556, , , , , , , ,155, , , , , , ,142, ,167, (1) Based on the time requirement, notwithstanding achievement of target prices when the requirement applies. (b) Other stock-based compensation The Corporation has put in place several long-term incentive programs for granting stock appreciation rights ( SARs ) linked to Class A subordinate voting shares of the Corporation s share capital. See the consolidated financial statements for the fiscal year ended March 31, 2013 for more information regarding the conditions applying to the different programs. The Corporation recorded a $307 stock-based compensation expense related to the stock option plan for the three-month period ended June 30, 2013 ($115 decrease in expense in 2012). On July 15, 2013, the Corporation s Board of Directors approved implementation of a new performance share unit ( PSU ) plan as a long-term incentive plan for certain senior executives and/or key position holders. Under this plan, PSU grants may be awarded annually and will vest after three years based on achievement of certain performance criteria. The first grant, dated July 15, 2013, set the base price of the PSUs issued at $3.71, which is the weighted average price of the Class A subordinate voting shares for the five trading days immediately preceding the grant date of the PSUs, and will be the basis for determining the number of PSUs issued. The grant expiry date is July 15,

14 7. Segmented information The Corporation and its subsidiaries conduct their activities in two main groups: Ovivo and GL&V Pulp and Paper. The two groups are managed separately, as they require different marketing strategies. In addition, the Corporation owns a manufacturing unit and a division, Van Der Molen, presented under the Other group, which also includes head office expenses. As of the three-month period ended June 30, 2013, manufacturing unit Ramivo, which was formerly reported in the Other group, is included in Ovivo. The comparative figures for the previous year have been reclassified to provide an appropriate comparison. The accounting policies for each group are identical to those used for the consolidated financial statements of the Corporation. Intersegment sales are concluded at an agreed upon amount between the segments involved. The following amounts represent the indicators used by management: Revenues Ovivo 84,621 85,142 GL&V Pulp and Paper 50,533 54,177 Other 10,684 11,551 Intersegment sales Other (1,133) (4,126) 144, ,744 Restructuring costs Ovivo 160 GL&V Pulp and Paper 149 Other 309 Earnings (loss) before amortization, net financial expenses, foreign exchange loss (gain), loss (gain) related to derivative financial instruments and income taxes related to continuing operations Ovivo 3,808 4,786 GL&V Pulp and Paper 3,351 4,230 Other (2,525) (2,443) 4,634 6,573 Amortization Ovivo 1,637 1,643 GL&V Pulp and Paper Other ,912 3,131 Operating income (loss) related to continuing operations Ovivo 2,171 3,143 GL&V Pulp and Paper 2,796 3,674 Other (3,245) (3,375) 1,722 3,442 Additions to property, plant and equipment Ovivo GL&V Pulp and Paper Other ,

15 8. Compensation Employee compensation and benefit expense for the three-month periods ended June 30, 2013 and 2012 is detailed as follows: Salaries and other employee benefits 38,165 38,570 Stock-based compensation ,562 38, Amortization by function Amortization expense by function for the three-month periods ended June 30, 2013 and 2012 is detailed as follows: Costs of contracts and goods sold 1,843 1,939 Selling and administrative expenses 1,069 1,192 2,912 3, Restructuring costs For the three-month period ended June 30, 2013, restructuring costs at Ovivo and GL&V Pulp and Paper incurred, in particular, to finalize the restructuring announced during the fiscal year ended March 31, 2013, amounted to $160 and $149, respectively. These amounts primarily consist of severance benefits and relocation costs. 11. Net financial expenses Interest expense and other financial expenses Interest on long-term debt 1,428 1,378 Other ,913 2,024 Interest income (193) (194) 1,720 1,830 13

16 12. Income taxes The following table reconciles income taxes computed at the Canadian statutory tax rate and the total income tax expense for the three-month periods ended June 30, 2013 and 2012: Income taxes computed at the Canadian statutory tax rate 763 (769) Impact of foreign tax rate differences ,154 (216) Increase (decrease) resulting from: Permanent differences (712) 99 Unrecognized tax savings resulting from losses and temporary differences 489 1,285 Impact of changes in income tax rates on deferred taxes Other ,664 Income taxes 1,568 2,448 Income tax recovery related to discontinued operations (91) Income taxes related to continuing operations 1,568 2, Discontinued operations In December 2012, the Corporation elected to discontinue its Waste to Energy industrial operations. On December 31, 2012, the Corporation entered into an agreement to sell its interest in its joint venture Ovivo GW&E for a consideration of $1. The disposal was carried out as part of the reorganization of Ovivo s operations, specifically the discontinuation of the Waste to Energy industrial operations, which also included some of the operations of an Ovivo subsidiary. Accordingly, the comparative figures have been restated to take into account the presentation of various related items under discontinued operations. The following table shows the results of the discontinued operations for the three-month period ended June 30, 2012: $ Revenues New equipment 728 Costs of contracts and goods sold 2,170 (1,442) Selling and administrative expenses 119 (1,561) Share of earnings of a joint venture 233 Loss from operating activities of discontinued operations (1,794) Income tax recovery 91 Net loss from discontinued operations (1,703) 14

17 14. Earnings per share Weighted average number of participating shares: As at June 30, 2013, 2,076,589 outstanding stock options on Class A subordinate voting shares were excluded from the calculation of diluted earnings per share as they were anti-dilutive given the fact that their exercise price exceeded the weighted average price of the Class A voting shares. The weighted average number of participating shares outstanding as at June 30, 2013 and 2012 was detailed as follows: (in thousands) Weighted average number of shares outstanding basic 44,092 n/a Potential dilutive effect of the exercise of stock options 13 n/a Weighted average number of shares outstanding diluted 44,105 n/a 15. Information on cash flows and earnings Net change in non-cash items related to operations Trade and other receivables 347 5,374 Inventories (1,865) (1,044) Contracts in progress (8,026) 1,872 Prepaid expenses (3,100) (287) Accounts payable and accrued liabilities, provisions and other liabilities (6,330) (24,402) Deferred revenues 21,194 (3,938) Income taxes receivable/payable (2,592) 3, Guarantees (372) (19,335) The Corporation is committed under letters of credit, corporate guarantees and insurance surety bonds for the performance of its contracts. As at June 30, 2013, the Corporation had commitments totalling $204,118 ($186,660 as at March 31, 2013), including letters of credit guaranteed by Export Development Canada. 17. Reclassifications Certain comparative figures were reclassified according to the presentation used for the current period. 15