10. Related Party Transactions
The Company depends on Canfor to provide approximately 63% (2012 - 58%) of its fibre supply as well as to provide certain key business and administrative services. As a result of these relationships the Company considers its operations to be dependent on its ongoing relationship with Canfor.
The transactions with Canfor are consistent with the transactions described in the December 31, 2012 audited consolidated financial statements of CPPI and the Partnership and are based on agreed upon amounts between the parties. Transactions and payables to Canfor include purchases of wood chips, pulp and administrative services. These are summarized below:
3 months ended March 31,(millions of Canadian dollars) 2013 2012---------------------------------------------------------------------------TransactionsCanfor - purchase of wood chips and other $ 31.3 $ 28.3------------------------------------------------------------------------------------------------------------------------------------------------------ As at As at March 31, December 31,(millions of Canadian dollars) 2013 2012---------------------------------------------------------------------------Balance SheetIncluded in accounts payable and accrued liabilities: Canfor $ 15.4 $ 12.9Included in trade and other accounts receivable: Products marketed for Canfor $ 2.8 $ 4.4 Canfor(1) 5.0 3.0------------------------------------------------------------------------------------------------------------------------------------------------------(1) Market rate of interest is charged on all amounts receivable fromCanfor.
11. Acquisition of Interest in Canfor Pulp Limited Partnership
In the first quarter of 2012, as a result of the Exchange described in Note 1, CPPI increased its interest in both the Partnership and the General Partner from 49.8% to 100% and Canfor acquired a 50.2% interest in CPPI.
The transaction was accounted for as a reverse acquisition under IFRS, with Canfor's interest in the Pulp Business being the acquirer for accounting purposes and CPPI the acquiree for accounting purposes. The Pulp Business is continuing to operate under CPPI, the legal parent. The financial statements have been presented from the accounting perspective that Canfor's interest in the Pulp Business is the continuing entity after the exchange transaction as it gained control of the Company through a reverse transaction. Prior to March 2, 2012 49.8% of the Pulp Business was held by CPPI and reflected as non-controlling interest. Net income and comprehensive income attributable to CPPI's non-controlling interest in the Pulp business was $4.3 million for the three months ended March 30, 2012. Canfor's interest in the Pulp Business was deemed to acquire CPPI on March 2, 2012 and the non-controlling interest was eliminated on that date.
Management estimated that the fair value of CPPI's assets and liabilities approximated their carrying values at March 2, 2012 (note - CPPI's investment in the Partnership eliminates upon consolidation). Excluding the investment in the Partnership, the carrying values of the assets and liabilities of CPPI at March 2, 2012 were as follows:
As at(millions of Canadian dollars) March 2, 2012---------------------------------------------------------------------------Assets acquired: Cash and cash equivalents $ 6.8Liabilities assumed: Due to Canfor Pulp Limited Partnership $ 0.1 Income taxes payable $ 0.2 Deferred income tax liability $ 31.4------------------------------------------------------------------------------------------------------------------------------------------------------
As a result of the exchange there was no change in control for the Pulp Business. The difference between the carrying value of the non-controlling interest and the assets and liabilities acquired was recognized directly in equity as a charge to retained earnings (deficit).
(millions of Canadian dollars) Total---------------------------------------------------------------------------Cash $ 6.8Deferred taxes (63.2)Income taxes payable (1.3)Other liabilities (0.1)---------------------------------------------------------------------------Charge to retained earnings (deficit) as at March 2, 2012 $ (57.8)------------------------------------------------------------------------------------------------------------------------------------------------------
12. Insurance Claim Receivable
During the second quarter of 2012, an incident at the Northwood Pulp Mill resulted in an unscheduled shutdown and subsequent repairs of the recovery boiler. The Company recognized a property damage insurance receivable of $5.6 million, which substantially offset the additional maintenance costs related to this incident. In addition, the Company recognized a business interruption insurance receivable of $9.7 million, less a deductible of $5.0 million, to recover the estimated impact of lost production.
As at March 31, 2013, the total insurance receivable amount, net of advances received, of $6.3 million is included within Other Accounts Receivable.
13. Subsequent Event
On April 30, 2013, the Board of Directors declared a quarterly dividend of $0.05 per share, payable on May 21, 2013 to shareholders of record on May 13, 2013.
Contacts:
Canfor Corporation - Media Contact
Christine Kennedy
Vice President, Public Affairs & Corporate Communications
(604) 661-5225
Christine.Kennedy@canfor.com
Canfor Corporation - Investor Contact
Pat Elliott
Vice President & Treasurer
(604) 661-5441
Patrick.Elliott@canfor.com
Canfor Pulp Products Inc. - Investor Contact
Richard Remesch
Corporate Controller
(604) 661-5221
Rick.Remesch@canforpulp.com
www.canforpulp.com
