EBITDA1 of $18 million on Sales of $457 million
Net Debt to Invested Capital1 of 21%; Liquidity of $363 millionVANCOUVER, British Columbia, Feb. 06, 2020 (GLOBE NEWSWIRE) — INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) recorded a net loss of $103.8 million, or $1.54 per share, in 2019, compared to net earnings of $111.1 million, or $1.59 per share in 2018. Adjusted EBITDA was $63.4 million on sales of $1.9 billion.Interfor recorded a net loss in Q4’19 of $41.7 million, or $0.62 per share, compared to $35.6 million, or $0.53 per share in Q3’19 and $13.5 million, or $0.20 per share in Q4’18. Adjusted net loss in Q4’19 was $17.4 million compared to $11.8 million in Q3’19 and $20.2 million in Q4’18.Adjusted EBITDA was $17.6 million on sales of $456.8 million in Q4’19 versus $16.8 million on sales of $486.5 million in Q3’19.Included in the Company’s results for Q4’19 are $22.7 million (after-tax) for capital asset write-downs and restructuring costs, or $30.4 million on a pre-tax basis. This includes $13.1 million of non-cash impairments for goodwill related to the reconfiguration of the Company’s B.C. Coastal business and $16.1 million of non-cash asset impairments on assets in the U.S. Northwest business to reflect their fair value, as well as cash costs of $1.2 million for discontinued operations.Notable items in the quarter included:• Mixed Lumber Price MovementsMovements in key benchmark prices were mixed compared to Q3’19 as the Western SPF Composite and KD H-F Stud 2×4 9’ benchmarks rose by US$16 to US$354 per mfbm and US$10 to US$347 per mfbm, respectively while the SYP Composite declined by US$15 to US$340 per mfbm.Interfor’s average lumber selling price fell $17 to $566 per mfbm, on 681 million board feet of lumber sales, partially due to a change in species mix and decline in specialty sales as a result of the closure of the Hammond sawmill.• Production Balanced with ShipmentsTotal lumber production was 668 million board feet, down 17 million board feet from Q3’19. Production in the B.C. region declined to 187 million board feet from 205 million board feet in the preceding quarter due to the previously announced closure of the Hammond sawmill. The U.S. South and U.S. Northwest regions accounted for 342 million board feet compared to 348 million board feet and 139 million board feet compared to 131 million board feet in Q3’19, respectively.Total lumber shipments were 681 million board feet, including Interfor produced volume of 671 million board feet and agency and wholesale volumes of 10 million board feet, or 11 million board feet lower than Q3’19.Lumber inventory levels ended at 4 million board feet lower than in Q3’19.• Continued Strong Financial PositionNet debt ended the quarter at $224.9 million, or 21.3% of invested capital, resulting in available liquidity of $363.1 million.Interfor generated $16.3 million of cash flow from operations before changes in working capital, or $0.24 per share. Total cash generated from operations was $24.6 million, resulting primarily from lower trade receivable balances.Capital spending was $37.0 million in Q4’19, including $26.6 million on high-return discretionary projects primarily in the U.S. South.• Softwood Lumber DutiesInterfor expensed $11.2 million of duties in the quarter, representing the full amount of countervailing (“CV”) and anti-dumping (“AD”) duties incurred on its Canadian shipments of softwood lumber into the U.S. at a combined rate of 20.23%.On February 3, 2020, the U.S. Department of Commerce (the “DoC”) issued preliminary revised combined rates of 8.37% for 2017 and 8.21% for 2018. These rates are the result of the DoC’s administrative review and are subject to change until its final rate determinations which are expected in August 2020. At such time, the final rates will be applied to new lumber shipments. No adjustments have been recorded in the financial statements as of December 31, 2019 to reflect the preliminary revised duty rates.Cumulative duties of US$94.2 million have been paid by Interfor since the inception of the current trade dispute and are held in trust by the U.S. Except for US$3.3 million in respect of overpayments arising from duty rate adjustments, Interfor has recorded the duty deposits as an expense.1 Refer to Adjusted EBITDA and Net debt to invested capital in the Non-GAAP Measures sectionReconfiguration of B.C. Coastal BusinessOn September 3, 2019, Interfor announced a plan to reconfigure its B.C. Coastal business, including the permanent closure of its Hammond sawmill, located in Maple Ridge, B.C., and the reorganization of its forestry and woodlands operations. Hammond ceased lumber production in early October 2019, sold most of the related log and lumber inventories in Q3’19 and Q4’19 and is expected to sell its remaining lumber inventories by the end of Q1’20. The Hammond site is no longer in use.Strategic Capital Plan UpdateInterfor’s previously announced Phase I strategic capital projects at the Meldrim, Georgia and Monticello, Arkansas sawmills were substantially completed at the end of Q2’19 and continue through the ramp-up phase. The Phase II projects at the Thomaston and Eatonton sawmills in Georgia and the Georgetown sawmill in South Carolina, with a budget of US$240 million, are on track for completion in various stages from 2020 to 2022. As of December 31, 2019, US$56.9 million has been capitalized and the projects remain on budget.Acquisition of B.C. Interior Cutting Rights from CanforOn June 3, 2019, Interfor entered into a purchase agreement with Canadian Forest Products Ltd. (“Canfor”) to acquire two replaceable timber licences with annual cutting rights of approximately 349,000 cubic metres, an interest in a non-replaceable forest licence and other related forestry assets in the Adams Lake area of the B.C. Interior.The transaction remains subject to various consents, including that by the Government of B.C. and is currently targeted to close in Q1’20 as consultation with stakeholders continues.Financial and Operating Highlights1 Notes:Figures in this table may not equal or sum to figures presented elsewhere due to rounding.Financial information has been restated for implementation of IFRS 16, Leases.Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s consolidated financial statements. Gross sales before duties.Based on Bank of Canada foreign exchange rates.LiquidityBalance SheetInterfor’s net debt at December 31, 2019 was $224.9 million, or 21.3% of invested capital, representing an increase of $161.0 million from the level of net debt at December 31, 2018. Net debt was positively impacted by a strengthened Canadian Dollar against the U.S. Dollar as all debt held was denominated in U.S. Dollars; this was partially offset by the Company’s U.S. Dollar cash balances.On March 28, 2019, the Company completed a modernization of its credit facilities. The new facility replaced the U.S. Operating Line, Canadian Operating Line, and Revolving Term Line with one consolidated facility. The new facility increased credit availability to $350 million and matures in March 2024. As at December 31, 2019, the Company had net working capital of $187.9 million and available liquidity of $363.1 million, including cash and borrowing capacity on its credit facility. These resources, in addition to cash generated from operations, will be used to support working capital requirements, debt servicing commitments and capital expenditures. We believe that Interfor will have sufficient liquidity to fund operating and capital requirements for the foreseeable future.Capital ResourcesThe following table summarizes Interfor’s credit facilities and availability as of December 31, 2019:As of December 31, 2019, the Company had commitments for capital expenditures totaling $93.5 million for both maintenance and discretionary capital projects and $60 million in respect of its purchase agreement with Canfor to acquire two replaceable timber licences and a non-replaceable forest licence and other related forestry assets.Non-GAAP MeasuresThis release makes reference to the following non-GAAP measures: Adjusted net earnings (loss), Adjusted net earnings (loss) per share, EBITDA, Adjusted EBITDA, Net debt to invested capital and Operating cash flow per share (before working capital changes) which are used by the Company and certain investors to evaluate operating performance and financial position. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company’s audited consolidated financial statements (unaudited for interim periods) prepared in accordance with IFRS:Notes: Financial information has been restated for implementation of IFRS 16, Leases.Net debt to invested capital as of the period end.
Notes:Financial information has been restated for implementation of IFRS 16, Leases.Notes:Financial information has been restated for implementation of IFRS 16, Leases.Notes:
Financial information has been restated for implementation of IFRS 16, Leases.FORWARD-LOOKING STATEMENTS
This release contains forward-looking information about the Company’s business outlook, objectives, plans, strategic priorities and other information that is not historical fact. A statement contains forward-looking information when the Company uses what it knows and expects today, to make a statement about the future. Generally, statements containing forward-looking information can be identified by the use of words such as: believe, expect, intend, forecast, plan, target, budget, outlook, opportunity, risk, strategy or variations or comparable language, or statements that certain actions, events or results may, could, would, should, might, or will occur or not occur. Readers are cautioned that actual results may vary from the forward-looking information in this release, and undue reliance should not be placed on such forward-looking information. Risk factors that could cause actual results to differ materially from the forward-looking information in this release are described in Interfor’s annual Management’s Discussion & Analysis under the heading “Risks and Uncertainties”, which is available on www.interfor.com and under Interfor’s profile on www.sedar.com. Material factors and assumptions used to develop the forward-looking information in this release include assumptions regarding selling prices for lumber, logs and wood chips; the Company’s ability to compete on a global basis; the availability and cost of log supply; the effects of natural or man-made disasters; currency exchange rates; changes in government regulations; the availability of the Company’s allowable annual cut (“AAC”); claims by and treaty settlements with Indigenous peoples; the Company’s ability to export its products; the softwood lumber dispute between Canada and the U.S.; stumpage fees payable to the Province of British Columbia; environmental impacts of the Company’s operations; labour disruptions; and the efficacy of information systems security. Unless otherwise indicated, the forward-looking information in this release is based on the Company’s expectations at the date of this release. Interfor undertakes no obligation to update such forward-looking information, except as required by law.ABOUT INTERFORInterfor is a growth-oriented forest products company with operations in Canada and the United States. The Company has annual production capacity of approximately 3.0 billion board feet and offers one of the most diverse lines of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.The Company’s 2019 audited consolidated financial statements and Management’s Discussion and Analysis are available at www.sedar.com and www.interfor.com. There will be an analyst conference call on Friday, February 7, 2020 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its fourth quarter and fiscal 2019 financial results.The dial-in number is 1-833-297-9919. The conference call will also be recorded for those unable to join in for the live discussion, and will be available until March 7, 2020. The number to call is
1-855-859-2056, Passcode 1874063.For further information:
Martin L. Juravsky, Senior Vice President and Chief Financial Officer
(604) 689-6873
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