On August 25, 2011, the Company entered into two interest rate swaps, each with a notional value of $25,000,000 and maturing July 28, 2015. Under the terms of the swaps the Company pays an amount based on a fixed annual interest rate of 1.56% and receives a 90 day BA CDOR which is recalculated at set interval dates. The intent of these swaps is to convert floating-rate interest expense to fixed-rate interest expense. As these interest rate swaps have been designated as cash flow hedges the fair value of these interest rate swaps at December 31, 2012, being a liability of $133,000 (measured based on Level 2 of the fair value hierarchy), has been recorded in Trade accounts payable and accrued liabilities (December 31, 2011 - $503,000 liability recorded in Trade accounts payable and accrued liabilities measured based on Level 2 of the fair value hierarchy) and a gain of $371,000 (December 31, 2011 - $503,000 loss) has been recognized in Other comprehensive income for the year ending December 31, 2012. For the fourth quarter, 2012 a gain of $90,000 (Quarter 4, 2011 - $3,000 loss) was recognized in Other comprehensive income.
The Company also traded lumber futures to manage price risk and which were designated as held for trading with changes in fair value recorded in Other income (expense) in net earnings. At December 31, 2012 there were no outstanding lumber futures contracts and a gain of $25,000 was recognized in Other income (expense) on completed contracts for the year ended December 31, 2012 (December 31, 2011 - $187,000 gain). There were no lumber futures traded in the fourth quarter, 2012 (Quarter 4, 2011 - $1,000 loss).
In April, 2012 the U.S. Lumber Coalition approached the U.S. Trade Representative's office asserting that the B.C. government is undercharging B.C. Coastal forest companies for timber harvested on Crown lands. As this complaint is in the very preliminary stages of investigation, the existence of any potential claim has not been determined and no provision has been recorded in the financial statements as at December 31, 2012.
16. Subsequent events:
On January 21, 2013, the Company reached an agreement to acquire three sawmills in Georgia, U.S.A. from Rayonier, Inc. ("Rayonier Acquisition") for US$73,900,000 plus working capital. The transaction is scheduled to close on March 1, 2013.
(b) Bank financing:
On January 24, 2013, the Company obtained a financing commitment from its lenders to increase and extend its syndicated credit facilities. The Revolving Term Line will increase from $200,000,000 to $250,000,000, conditional upon completion of the Rayonier Acquisition. The existing Operating Line remains unchanged. The financing is scheduled to close on February 27, 2013 and have a term of four years, extended from July 28, 2015.
All other terms remain substantially unchanged except for a reduction in pricing.
On January 24, 2013, the Company obtained a financing commitment from a U.S. lender for a US$20,000,000 Operating Line ("U.S. Line"). The U.S. Line will be secured by accounts receivable and inventories of Interfor U.S. Inc. (formerly Interfor Pacific Inc.), and have a term of two years.
International Forest Products Limited
John A. Horning
Senior Vice President and Chief Financial Officer
(604) 688-0313 (FAX)
Most Popular Stories
- Slow Week Ahead of December FOMC Meeting
- Hispanics Seek to Grow School Board Members
- U.S. Companies Eager for Iranian Business
- 'Knockout Game': Myth or Menace?
- Questions Remain in Jenni Rivera's Death
- Banks Fret as Volcker Vote Approaches
- Bitcoin Used to Buy Tesla Car
- GM Bailout Saved 1.2 Million U.S. Jobs, Report Says
- Paul Walker Fans Pay Respects
- Entrepreneurs' Next Creation May Be New Laws