On January 24, 2013, the Company also obtained a financing commitment from a U.S. lender for a US$20 million Operating Line ("U.S. Line"). The U.S. Line will be secured by accounts receivable and in ventories of Interfor U.S. Inc. (formerly Interfor Pacific Inc.), and have an initial term of two years.
OUTLOOK
Business conditions are expected to continue to improve, albeit slowly. In the U.S. the housing market is expected to continue to recover, China remains an important market for North American lumber and further growth is expected. Building activity in Japan is expected to gain momentum in 2013 in anticipation of a planned increase in the consumption tax and as a result of reconstruction efforts following the 2011 earthquake and tsunami. Interest rates are forecasted to remain low and the Canadian dollar is expected to trade at close to parity against the U.S. Dollar.
Interfor's recently announced acquisition of the three Rayonier mills will add another 360 million board feet to the Company's production capacity. While the near term outlook is more positive than it has been for some years, there are numerous challenges to the global economy that have the potential to undermine the economic recovery. With this uncertainty in mind, Interfor intends to maintain its disciplined approach to production, cost control, and inventory management while, at the same time, remaining alert to opportunities to position the Company for long-term success.
ADDITIONAL INFORMATION
Additional information relating to the Company and its operations can be found on its website at www.interfor.com and in the Annual Information Form and on SEDAR at www.sedar.com. Interfor's trading symbol on the Toronto Stock Exchange is IFP.A.
FORWARD LOOKING INFORMATION
This report contains forward-looking statements. Forward-looking statements are statements that address or discuss activities, events or developments that the Company expects or anticipates may occur in the future. Forward-looking statements are included in the description of areas which are likely to be impacted by the description of future cash flows and liquidity under the headings "Overview", "Income Taxes", "Acquisition of Rayonier's Wood Products Business"; changes in accounting policy under the heading "Future Accounting Policy Changes"; and in the description of economic conditions under the heading "Outlook". These forward-looking statements reflect management's current expectations and beliefs and are based on certain assumptions including assumptions as to general business and economic conditions in Canada, the U.S., Japan and China, as well as other factors management believes are appropriate in the circumstances. Such forward-looking statements are subject to risks and uncertainties and no assurance can be given that any of the events anticipated by such statements will occur or, if they do occur, what benefit the Company will derive from them. A number of factors could cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements, including those matters described herein and in Interfor's current Annual Information Form available on www.sedar.com. Accordingly, readers should exercise caution in relying upon forward-looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstance, except as required by law.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)For the three months and years ended December 31, 2012 and 2011 (unaudited) 3 Months 3 Months Year Year(thousands of Canadian dollars Dec. 31, Dec. 31, Dec. 31, Dec. 31, except loss per share) 2012 2011 2012 2011----------------------------------------------------------------------------Sales (note 3(a)) $222,400 $188,690 $849,196 $758,245Costs and expenses: Production 196,037 173,412 758,893 681,363 Selling and administration 5,162 5,300 20,719 20,548 Long term incentive compensation expense 6,245 934 10,065 449 Export taxes 1,768 2,313 9,044 9,029 Depreciation of plant and equipment (note 8) 7,565 6,751 28,745 27,291 Depletion and amortization of timber, roads and other (note 8) 7,528 6,208 23,648 24,263 -------------------------------------------------------------------------- 224,305 194,918 851,114 762,943----------------------------------------------------------------------------Operating loss before restructuring costs (1,905) (6,228) (1,918) (4,698)Restructuring (costs) recovery (note 9) (283) 104 (529) (580)----------------------------------------------------------------------------Operating loss (2,188) (6,124) (2,447) (5,278)Finance costs (note 10) (1,527) (1,268) (6,324) (7,094)Other foreign exchange gain 174 1,135 189 (25)Other income (expense) (note 11) (5) (45) 334 371---------------------------------------------------------------------------- (1,358) (178) (5,801) (6,748)----------------------------------------------------------------------------Loss before income taxes (3,456) (6,302) (8,248) (12,026)Income tax expense (recovery): Current 137 282 640 817 Deferred (54) (117) (182) 610 -------------------------------------------------------------------------- 83 165 458 1,427----------------------------------------------------------------------------Net loss $ (3,629) $ (6,467) $ (8,706) $(13,453)--------------------------------------------------------------------------------------------------------------------------------------------------------Net loss per share, basic and diluted (note 12) $ (0.06) $ (0.12) $ (0.16) $ (0.25)--------------------------------------------------------------------------------------------------------------------------------------------------------CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)For the three months and year ended December 31, 2012 and 2011 (unaudited)---------------------------------------------------------------------------- 3 Months 3 Months Year Year Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2012 2011 2012 2011----------------------------------------------------------------------------Net loss $(3,629) $(6,467) $ (8,706) $(13,453)Other comprehensive income (loss): Foreign currency translation differences - foreign operations 1,492 (3,907) (2,805) 2,632 Defined benefit plan actuarial losses 439 1,030 (3,568) (4,541) Gain (loss) in fair value of interest rate swaps (note 14) 90 (3) 371 (503) Income tax on other comprehensive income 44 (117) (84) 250 -------------------------------------------------------------------------- 2,065 (2,997) (6,086) (2,162)----------------------------------------------------------------------------Total comprehensive loss for the period $(1,564) $(9,464) $(14,792) $(15,615)--------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to consolidated financial statementsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2012 and 2011 (unaudited) Year Year Dec. 31, Dec. 31,(thousands of Canadian dollars) 2012 2011----------------------------------------------------------------------------Cash provided by (used in):Operating activities: Net loss $ (8,706) $ (13,453) Items not involving cash: Depreciation of plant and equipment 28,745 27,291 Depletion and amortization of timber, roads and other 23,648 24,263 Deferred income tax expense (recovery) (182) 610 Current income tax expense 640 817 Finance costs 6,324 7,094 Other assets (1,953) 238 Reforestation liability (516) (90) Other liabilities and provisions (1,361) (2,761) Write-down (recovery) of plant and equipment 164 (423) Unrealized foreign exchange losses and other 150 191 Other (note 11) (309) (184) -------------------------------------------------------------------------- 46,644 43,593 Cash generated from (used in) operating working capital: Trade accounts receivable and other (3,798) 3,191 Inventories (879) (25,613) Prepayments (1,087) (1,698) Trade accounts payable and accrued liabilities 5,592 9,588 Income taxes paid (1,090) (622) -------------------------------------------------------------------------- 45,382 28,439Investing activities: Additions to property, plant and equipment (39,830) (16,099) Additions to logging roads (20,662) (19,987) Additions to timber and other intangible assets (319) (126) Proceeds on disposal of property, plant, and equipment 537 273 Cash received on acquisition of subsidiary - 4,846 Investments and other assets (298) (921) -------------------------------------------------------------------------- (60,572) (32,014)Financing activities: Issuance of capital stock, net of share issue expenses - 56,256 Interest payments (5,241) (5,629) Additions to long-term debt (note 6(b)) 82,000 100,000 Repayments of long-term debt (note 6(b)) (57,000) (146,000) -------------------------------------------------------------------------- 19,759 4,627Foreign exchange gain (loss) on cash and cash equivalents held in a foreign currency (10) 82----------------------------------------------------------------------------Increase in cash 4,559 1,134Cash and cash equivalents, beginning of year 10,435 9,301----------------------------------------------------------------------------Cash and cash equivalents, end of period $ 14,994 $ 10,435--------------------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to consolidated financial statementsCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONDecember 31, 2012 and 2011 (unaudited) Dec. 31, Dec. 31,(thousands of Canadian dollars) 2012 2011----------------------------------------------------------------------------AssetsCurrent assets: Cash and cash equivalents (note 6(c)) $ 14,994 $ 10,435 Trade accounts receivable and other 47,392 44,000 Inventories (note 5) 98,024 97,645 Prepayments 11,749 10,757 -------------------------------------------------------------------------- 172,159 162,837Employee future benefits 878 1,256Other investments and assets 4,198 2,836Property, plant and equipment 349,779 340,034Logging roads and bridges 17,316 16,753Timber licences 73,796 76,792Other intangible assets 738 1,250Goodwill 13,078 13,078Deferred income taxes 98 ----------------------------------------------------------------------------- $632,040 $614,836--------------------------------------------------------------------------------------------------------------------------------------------------------Liabilities and EquityCurrent liabilities: Trade accounts payable and accrued liabilities $ 70,597 $ 60,692 Reforestation liability 10,864 14,121 Income taxes payable 593 1,058 -------------------------------------------------------------------------- 82,054 75,871Reforestation liability 17,621 17,777Long-term debt (note 6(b)) 135,046 110,713Employee future benefits 9,631 8,186Other liabilities and provisions 11,658 11,467Equity: Share capital (note 7) Class A subordinate voting shares 342,285 342,285 Class B common shares 4,080 4,080 Contributed surplus 7,476 7,476 Reserves (7,950) (5,432) Retained earnings 30,139 42,413 -------------------------------------------------------------------------- 376,030 390,822---------------------------------------------------------------------------- $632,040 $614,836--------------------------------------------------------------------------------------------------------------------------------------------------------Contingencies (note 15)Subsequent events (note 16)
