Algoma Steel Announces Results for the Quarter Ended September 30, 2001.Business Editors SAULT STE. MARIE Sault Sainte Marie — pronounced "Soo Saint Marie" (IPA /su seɪnt məˈɹi/) — is the name of two cities on the Saint Marys River, which forms part of the boundary between the United States and Canada. , Ontario--(BUSINESS WIRE)--Nov. 2, 2001 Algoma Steel ''See also Algoma (Disambiguation) Algoma Steel Corporation (TSX: AGA) was founded in 1902 by Francis Clergue, an American entrepreneur who had settled in Sault Ste. Marie, Ontario. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :ALG ALG antilymphocyte globulin. ALG antilymphocyte globulin. ALG Antilymphocyte globulin, see there .)
FINANCIAL HIGHLIGHTS
2000 2001
---------------------------------------------------------------------
Q3 Q4 Q1(1) Q2 Q3
----------------------------------------- -------------------------
($ millions except per share data)
Sales $269.9 $227.8 $227.5 $230.9 $241.8
EBITDA (2) $22.2 $6.9 $(35.5) $(25.4) $1.7
Operating Income (Loss) $4.1 $(10.7) $(52.9) $(42.9) $(16.0)
Loss Before Taxes $(18.1) $(32.7) $(166.0) $(47.3) $(61.5)
Net Loss $(19.3) $(33.1) $(166.5) $(47.8) $(61.9)
Net Loss Per Share $(0.36) $(0.62) $(3.10) $(0.89) $(1.16)
Weighted average number
of common shares
outstanding (millions) 53.33 53.55 53.65 53.65 53.65
Per Ton Shipped
----------------
Revenue $553 $521 $464 $477 $478
EBITDA (2) $46 $16 $(73) $(53) $3
(1) First Quarter 2001 results include a restatement to reflect a
charge of $89.7 million related to a reclassification of First
Mortgage Notes as a current liability.
(2) Earnings before interest, taxes, depreciation and amortization,
foreign exchange on First Mortgage Notes and reorganization
expenses.
Steel Shipments (000's of net tons)
------------------------------------
2000 2001
---------------------------------------------------------------------
Q3 Q4 Q1 Q2 Q3
----------------------------------------- -------------------------
Sheet 398 362 394 375 393
Plate 88 71 95 109 113
Tubulars 2 4 1 0 0
---------------------------------------------------------------------
Total 488 437 490 484 506
---------------------------------------------------------------------
SUMMARY The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in the third quarter declined to $16.0 million from $42.9 million in the second quarter. The improvement was due mainly to lower operating costs operating costs npl → gastos mpl operacionales and a writedown of a trade receivable in the second quarter. The net loss increased to $61.9 million from a $47.8 million loss in the second quarter reflecting a foreign exchange loss on the First Mortgage Notes of $22.5 million in the quarter as compared to a foreign exchange gain on the First Mortgage Notes in the second quarter of $21.8 million. Cash conservation efforts have been very successful to date, contributing to a reduction in bank indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. of $7.5 million in the quarter and no draw at September 30 on the Debtor-In-Possession (DIP) facility provided by the banking syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism . RESTRUCTURING restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). STATUS Algoma filed a Plan of Arrangement with the Court on October 24, 2001. This is the beginning of a formal process which is expected to result in votes by creditors and implementation of the Plan in early January, 2002. The Company has received an extension of protection under the Companies' Creditors Arrangement Act until December 10, 2001. Algoma's wholly-owned subsidiary, Cannelton Iron Ore Company (CIOC CIOC Chief Information Officers Council CIOC Community Information Online Consortium CIOC Combined/Current Intelligence Operations Center CIOC Counter-Insurgency Operations Command CIOC COMBICON I/O Connector ), has reached agreement in principle with Cleveland Cliffs (Cliffs) respecting a transfer to Cliffs of CIOC's 45% interest in the Tilden Mine for the assumption by Cliffs of CIOC's share of Tilden Mine liabilities. Under this arrangement, Algoma would enter into an exclusive 15-year iron ore supply agreement with Cliffs. This transaction will result in reduced annual operating costs for Algoma. It is conditional on finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of definitive agreements and Algoma's successful restructuring. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial The following discussion and analysis should be read in conjunction with the Management Discussion and Analysis and the annual audited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and notes contained in the Corporation's 2000 Annual Report and with the interim financial statements and notes contained in this report. Financial and Operating Results The operating loss in the third quarter declined to $16.0 million from $42.9 million in the second quarter. A substantial reduction in operating costs and a $16.8 million writedown of a trade receivable in the second quarter were the major reasons for the improvement. Selling prices increased slightly but were a minor factor in the improvement, with average revenue per ton up $1 from the second quarter to $478 per ton. Steel markets were stronger through part of the third quarter but weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. substantially by the end of the quarter as a result of the
events of September 11, 2001.The decline in operating costs relates primarily to cost reduction initiatives and spending restraints. Other factors include lower natural gas costs and unit cost reductions originating from higher production levels. A temporary improvement in market conditions contributed to an increase in raw steel production and shipments in the quarter. Raw steel production increased by 26,000 tons from the second quarter to 585,000 tons, while shipments were higher by 22,000 tons at 506,000 tons. The operating loss for nine months reached $111.8 million which compares to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $40.3 million for the same period in 2000. The deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. was caused mainly by a continuation of lower selling prices initially caused by a surge of imported steel in the second half of 2000 and weakness in some sectors of the economy in 2001. These factors also caused a decline in shipments and resulted in higher unit costs due to lower production volumes. Sales in the first nine months totaled $700.2 million which is substantially lower than the $878.1 million for the first nine months of 2000. The decline was due mainly to the high level of imports and the economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. . Average revenue per ton declined to $473 from $556 in the first nine months of 2000, while shipments dropped by 99,000 tons to 1,480,000 tons. The CCAA CCAA Comunidades Autónomas CCAA China Center of Adoption Affairs CCAA Companies' Creditors Arrangement Act (Canada) CCAA California Collegiate Athletic Association CCAA Commercial Collection Agency Association filing and defaults on certain financial covenants at the end of the first quarter resulted in a reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of the First Mortgage Notes liability of $550.8 million as a current liability and a related non-recurring charge to earnings of $89.7 million. This charge was composed of deferred foreign exchange losses, deferred debt issue costs and unamortized debt discounts related to the First Mortgage Notes and is classified as reorganization expenses along with various fees totaling $8.8 million related to the restructuring process. The net loss for the third quarter includes a foreign exchange loss of $22.5 million on the First Mortgage Notes, while the second quarter results included a $21.8 million foreign exchange gain. This relates to the reclassification of the debt as current and the need to immediately record foreign exchange gains or losses rather than amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. gains or losses over the remaining term of the debt. This reclassification also results in the interest on the Notes being reported as other interest rather than interest on long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . The third quarter net loss also includes reorganization expenses of $3.0 million (see note 7). The net loss for the nine months of 2001 of $276.2 million compares to a net loss of $27.2 million in the same period for 2000. The deterioration was due mainly to the weaker steel markets and reorganization expenses of $98.5 million. Liquidity A cash drain from operations of $25.9 million was more than offset by a reduction in working capital of $36.7 million. Positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses and continuing cuts to the capital expenditure program, with only $3.9 million expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. in the quarter, resulted in a reduction in bank indebtedness of $7.5 million. Bank indebtedness decreased to $142.5 million at September 30, 2001 from $150.0 million at June 30, 2001. The Company funds its short-term lending needs through two loan agreements with a banking syndicate. A Senior Loan facility (see note 5) provides access to a maximum of $180 million to December 31, 2001 subject to various covenants and other conditions. This facility is secured by a first charge on substantially all of the Company's inventory and receivables. The Company defaulted on certain covenants in the first quarter and remains in breach of these covenants, but the banking syndicate has agreed to forbear for·bear 1 v. for·bore , for·borne , for·bear·ing, for·bears v.tr. 1. To refrain from; resist: forbear replying. See Synonyms at refrain1. from acting on their rights and remedies subject to certain conditions through an "Amendment and Accommodation Agreement". The Company was also provided with a Debtor-In-Possession (DIP) facility which provides financing to December 31, 2001 to a maximum of $50 million and is subject to various covenants and conditions. The Company was in compliance with these covenants at September 30, 2001. A CCAA Court order currently limits the use of the DIP facility to a maximum of $35 million. The DIP facility is secured by a first charge on fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → and a second charge on inventory and receivables. The DIP facility can only be used when the full availability of the Senior facility is exhausted. At September 30, 2001, the borrowings of $142.5 million were entirely from the Senior facility with no borrowings under the DIP facility. TRADE In August, 2001, the Canadian International Trade Tribunal The Canadian International Trade Tribunal is an independent quasi-judicial group operating in Canada's trade remedy system. The administrative tribunal, which considers cases of dumping and subsidizing, reports to Parliament through the Minister of Finance. (CITT CITT Canadian International Trade Tribunal CITT Citizens’ Independent Transportation Trust CITT Canadian Institute for Theatre Technology (Canadian equivalent of USITT) CITT Canadian Institute of Traffic and Transportation ) determined that certain hot rolled carbon and alloy alloy (ăl`oi, əloi`) [O. Fr.,=combine], substance with metallic properties that consists of a metal fused with one or more metals or nonmetals. steel sheet products originating in or exported from Brazil, Bulgaria, China, Chinese Taipei Chinese Taipei (Traditional Chinese: 中華臺北; Simplified Chinese: 中华台北; Hanyu Pinyin: , India, Macedonia, South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. , Ukraine and Yugoslavia and the subsidizing of the goods originating in or exported from India have caused material injury to the domestic industry. As a result of the injury finding, dumping dumping, selling goods at less than the normal price, usually as exports in international trade. It may be done by a producer, a group of producers, or a nation. and countervailing duty Noun 1. countervailing duty - a duty imposed to offset subsidies by foreign governments tariff, duty - a government tax on imports or exports; "they signed a treaty to lower duties on trade between their countries" (India only) will be applied to imports from those countries. The CITT also determined that imports from Korea, New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. and Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. have not caused and
were not threatening to cause injury to the domestic industry.The finding is being challenged at the Federal Court by one of the Chinese exporters. In October, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. International Trade Commission ruled, in their global safeguard investigation under Section 201 of the Trade Act of 1974, that global imports of many steel products were injuring the domestic steel industry. The ruling found that flat rolled steel products imported from Canada were not injuring the U.S. industry with the result that it recommended that Canada be excluded on those products from any remedies that will be applied to other countries. The matter is now referred to the President's office for his determination of an appropriate remedy. The U.S. finding of injury against offshore imports is in stark contrast to the CITT decisions in the Canadian cases. In a ruling in early October, the CITT determined that certain cold rolled steel sheet products originating in or exported from Brazil, China, Chinese Taipei, Korea and South Africa have not caused injury or retardation retardation: see mental retardation. and are not threatening to cause injury to the domestic industry. The Company is astonished a·ston·ish tr.v. as·ton·ished, as·ton·ish·ing, as·ton·ish·es To fill with sudden wonder or amazement. See Synonyms at surprise. by the CITT's determination in the cold rolled case and in the hot rolled determination relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Korea. The CITT's failure to find injury in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or where the Canadian steel industry has so manifestly man·i·fest adj. Clearly apparent to the sight or understanding; obvious. See Synonyms at apparent. tr.v. man·i·fest·ed, man·i·fest·ing, man·i·fests 1. suffered grievous harm at the hand of unfairly traded imports is very difficult to understand. The Company continues to work with the Government of Canada The Government of Canada is the federal government of Canada. The powers and structure of the federal government are set out in the Constitution of Canada. In modern Canadian use, the term "government" (or "federal government") refers broadly to the cabinet of the day and in the ongoing effort to provide appropriate measures to safeguard the Canadian steel industry from unfairly traded steel. Algoma is carefully monitoring the imports of steel entering the Canadian market from offshore producers and is very concerned that imports destined des·tine tr.v. des·tined, des·tin·ing, des·tines 1. To determine beforehand; preordain: a foolish scheme destined to fail; a film destined to become a classic. 2. to the U.S. may now be diverted di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. to the Canadian market which has been left extremely vulnerable due to the CITT decisions. OUTLOOK The deterioration in economic conditions following the events of September 11, 2001 has contributed to weaker demand for steel. This, combined with seasonal low shipments in December, will result in reduced shipments in the quarter. An improvement in market conditions is expected at some point in 2002. A. ADAM H. EARL JOUDRIE PRESIDENT AND CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER This news release contains forward-looking information with respect to Algoma's operations and future financial results. Actual results may differ from expected results for a variety of reasons including the factors discussed in the Corporation's Management's Discussion and Analysis section of its 2000 Annual Report.
Algoma Steel Inc.
Consolidated Statements of Loss and Retained Earnings (Deficit)
(Unaudited)
(millions of Canadian dollars - except per share amounts)
Three months ended Nine months ended
September 30 September 30
2001 2000 2001 2000
--------------------------------------------------------------------
Sales $ 241.8 $ 269.9 $ 700.2 $ 878.1
--------------------------------------------------------------------
Operating expenses
Cost of sales 230.3 237.7 731.1 753.4
Administrative and
selling 9.8 10.0 28.3 29.5
Depreciation and
amortization 17.7 18.1 52.6 54.9
--------------------------------------------------------------------
257.8 265.8 812.0 837.8
--------------------------------------------------------------------
Income (loss) from
operations (16.0) 4.1 (111.8) 40.3
Financial expenses
(note 6)
Interest on
long-term debt - 16.0 16.5 47.7
Foreign exchange
loss on First
Mortgage Notes 22.5 1.3 2.9 3.4
Other interest 20.0 4.9 45.1 13.5
--------------------------------------------------------------------
42.5 22.2 64.5 64.6
--------------------------------------------------------------------
Loss before
reorganization
expenses (58.5) (18.1) (176.3) (24.3)
Reorganization
expenses (note 7) 3.0 - 98.5 -
--------------------------------------------------------------------
Loss before income
taxes (61.5) (18.1) (274.8) (24.3)
Provision for
income taxes - current 0.4 0.5 1.4 1.8
- future - 0.7 - 1.1
--------------------------------------------------------------------
0.4 1.2 1.4 2.9
--------------------------------------------------------------------
Net loss $ (61.9) $ (19.3) $ (276.2) $ (27.2)
--------------------------------------------------------------------
--------------------------------------------------------------------
Net loss per common
share $ (1.16) $ (0.36) $ (5.15) $ (0.51)
--------------------------------------------------------------------
--------------------------------------------------------------------
Weighted average
number of common
shares outstanding -
millions 53.65 53.33 53.65 53.21
--------------------------------------------------------------------
--------------------------------------------------------------------
Retained Earnings
(Deficit)
Balance, beginning
of period $ (85.8) $ 180.8 $ 128.5 $ 148.4
Net loss (61.9) (19.3) (276.2) (27.2)
Pension and income
tax adjustment - - - 40.3
--------------------------------------------------------------------
Balance, end of
period $ (147.7) $ 161.5 $ (147.7) $ 161.5
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
SUPPLEMENTAL NON-FINANCIAL
INFORMATION
Operations
(thousands of net tons)
Raw steel
production 585 613 1,640 1,848
Steel shipments 506 488 1,480 1,579
See accompanying notes.
Algoma Steel Inc.
Consolidated Statements of Financial Position (Unaudited)
(millions of Canadian dollars)
September 30 December 31
2001 2000
--------------------------------------------------------------------
Current assets
Accounts receivable (note 4) $ 163.8 $ 162.1
Inventories 244.1 305.4
Prepaid expenses 7.3 3.7
--------------------------------------------------------------------
415.2 471.2
--------------------------------------------------------------------
Other assets
Fixed assets, net 849.7 885.1
Deferred charges - 37.5
Future income tax asset 53.9 51.2
--------------------------------------------------------------------
903.6 973.8
--------------------------------------------------------------------
Total assets $ 1,318.8 $ 1,445.0
--------------------------------------------------------------------
--------------------------------------------------------------------
Current liabilities
Liabilities not subject
to compromise
Bank indebtedness (note 5) $ 142.5 $ 107.3
Accounts payable and
accrued liabilities 125.4 167.3
Income and other taxes
payable 10.5 10.0
Current portion of
long-term debt 0.8 0.7
Liabilities subject to
compromise (note 3) 652.1 -
--------------------------------------------------------------------
931.3 285.3
--------------------------------------------------------------------
Other liabilities
Liabilities not subject
to compromise
Long-term debt, net of
current portion 1.5 495.9
Accrued pension liability
and post-employment
benefit obligation 15.9 428.4
Liabilities subject to
compromise (note 3) 410.9 -
--------------------------------------------------------------------
428.3 924.3
--------------------------------------------------------------------
Shareholders' equity
(deficiency)
Common shares (note 8) 188.0 188.0
Shareholders' deficiency
on 1992 restructuring (81.1) (81.1)
Retained earnings (deficit) (147.7) 128.5
--------------------------------------------------------------------
(40.8) 235.4
--------------------------------------------------------------------
Total liabilities and
shareholders' equity
(deficiency) $ 1,318.8 $ 1,445.0
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes.
Algoma Steel Inc.
Consolidated Statements of Cash Flows (Unaudited)
(millions of Canadian dollars)
Three months ended Nine months ended
September 30 September 30
2001 2000 2001 2000
--------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net loss $ (61.9) $ (19.3) $ (276.2) $ (27.2)
Adjustment for items not
affecting cash 36.0 26.4 147.4 71.0
--------------------------------------------------------------------
(25.9) 7.1 (128.8) 43.8
Changes in operating
working capital 36.7 (30.2) 110.4 (71.4)
--------------------------------------------------------------------
10.8 (23.1) (18.4) (27.6)
--------------------------------------------------------------------
Investing activities
Fixed asset expenditures (3.9) (14.0) (17.1) (38.3)
--------------------------------------------------------------------
Financing activities
Net proceeds from
(repayment of) long-term
debt 0.6 0.2 0.3 (0.1)
Net proceeds from common
shares issued - 0.1 - 0.6
Financing expenses - - - (0.5)
Increase (decrease) in
bank indebtedness (7.5) 36.8 35.2 65.9
--------------------------------------------------------------------
(6.9) 37.1 35.5 65.9
--------------------------------------------------------------------
Cash
Change during the period - - - -
Balance, beginning of
period - - - -
--------------------------------------------------------------------
Balance, end of period $ - $ - $ - $ -
--------------------------------------------------------------------
See accompanying notes.
Algoma Steel Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
(millions of Canadian dollars)
1. Financial restructuring and basis of presentation On April 23, 2001 (the "Filing Date"), the Company obtained protection under the Companies' Creditors Arrangement Act ("CCAA") in the Ontario Superior Court of Justice The Superior Court of Justice for Ontario, Canada is the successor to the former Ontario Court of Justice (General Division), and was created on April 19 1999. Its predecessor, the Ontario Court (General Division) was the result of the 1990 merger and discontinuance of the previous (the "Court"). The Company has received several extensions and has recently been granted an extension of its CCAA protection until December 10, 2001. This allows the Company to continue operating as it negotiates a restructuring plan with its stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. by preventing legal action being brought against the Company and by staying substantially all unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. and undersecured claims as of the Filing Date (note 3). Additional financing has been obtained providing for continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the through the anticipated restructuring period (note 5). On October 24, 2001, the Company filed a Plan of Arrangement and Reorganization (the "Plan") with the Court which provides for contributions from all stakeholders that will significantly reduce costs and improve cash flow in future years. The Plan provides for, among other things: -- the cancellation of currently outstanding common shares and the issuance of new common shares; -- the cancellation of the First Mortgage Notes and related interest obligation in exchange for $150 million of new debt and 75% of the new common shares; -- a payment of $2 million in cash and 5% of the new common shares in satisfaction of the claims of the unsecured creditors; -- the issuance of 20% of the new common shares to employees and new collective bargaining agreements which will include wage and benefit reductions, pension benefit changes and manning reductions; and -- a new board of directors. The Plan must be approved by the employees and by each class of creditor An individual to whom an obligation is owed because he or she has given something of value in exchange. One who may legally demand and receive money, either through the fulfillment of a contract or due to injury sustained as a result of another's Negligence of the Company. It may be amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. prior to the votes. If no Plan can be confirmed among all stakeholders, the Company may face liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of its assets under the Bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most and Insolvency insolvency Condition in which liabilities exceed assets so that creditors cannot be paid. It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet Act. The unaudited interim consolidated financial statements have been prepared on a "going concern" basis in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). This assumes that the Company will continue in operation for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future and will be able to realize its assets and discharge its liabilities in the normal course of business. These assumptions are subject to significant uncertainty due to the CCAA reorganization proceedings, the Company's current debt structure and recent operating losses and cash flow problems. These consolidated financial statements do not reflect any adjustments that would be necessary if the "going concern" principle was not appropriate. If the "going concern" principle was not appropriate, significant adjustments would be required in the carrying values Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of assets and liabilities, reported revenues and expenses, and the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. classifications used. 2. Accounting Policies The unaudited interim consolidated financial statements have been prepared in accordance with Canadian GAAP on a basis consistent with those described in the fiscal 2000 Annual Report. This requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Management believes that the estimates are reasonable, however, actual results could differ from these estimates. The interim consolidated financial statements do not conform in all respects to the requirements of Canadian GAAP for annual financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the financial statements and notes included in the fiscal 2000 Annual Report. 3. Liabilities subject to compromise Liabilities Subject to Compromise refers to the Debtors' liabilities incurred prior to the commencement of the Chapter 11 Cases. This amount represents the debtors' estimate of known or potential pre-petition claims to be resolved in connection with the Chapter 11 cases. The principal categories of obligations stayed under the CCAA and classified as liabilities subject to compromise are identified below. The Company believes that provisions have been made in the consolidated financial statements for all potential claims that could reasonably be estimated at September 30, 2001. The amounts of the claims to be filed by creditors could be significantly different than the amount of the liabilities recorded by the Company.
Current
12.375 % First Mortgage Notes due 2005
(U.S. $349 million) $ 551.5
Accrued interest on First Mortgage Notes 48.4
Accounts payable 52.2
----------
652.1
----------
Other
Accrued pension liability 265.1
Accrued post-employment benefit obligation 145.8
----------
410.9
----------
$ 1,063.0
----------
----------
4. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying On May 16, 2001, one of the Company's customers filed for and received CCAA protection from its creditors. At September 30, 2001, a bad debt allowance of $16.8 million has been recorded against the entire account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. stayed under the CCAA. 5. Banking facilities The Company's Revolving Credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. Facility ("Senior Loan Facility") which expires on December 31, 2001 was amended effective April 23, 2001. The Amendment and Accommodation Agreement addressed several covenant defaults which occurred at the end of the first quarter and reduced the availability under this facility to the lesser of $180 million and a borrowing base determined by the levels of the Company's accounts receivable and inventories less certain reserves. The facility is secured by a first charge on the Company's accounts receivable and inventories. Under the Senior Loan Facility, the Company may borrow in either Canadian or United States (U.S.) funds at 4.5% over either the Canadian or U.S. prime bank rate or, at the Company's option, at 5.5% over the bankers' acceptance A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the rate or London interbank in·ter·bank adj. Relating to, involving, or connecting two or more banks: interbank borrowing; an interbank network of automated teller machines. offering rate (LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). ) for $U.S. loans. In addition to the Senior Loan Facility, effective April 23, 2001, in conjunction with filing for protection under the CCAA, the Company was provided with a Debtor-in-Possession ("DIP") Facility by the existing banking syndicate. The DIP Facility provides financing to a maximum of $50 million to December 31, 2001 and is secured by a first charge on fixed assets and a second charge on inventories and receivables. The Company is required to meet certain covenants relating to capital expenditures, liquidity and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
6. Long-term debt At the end of each fiscal quarter in 2001, the Company was in violation of financial covenants with respect to its First Mortgage Notes, resulting in the Notes being reclassified as a current liability subject to compromise under the CCAA (note 3). Accordingly, gains and losses resulting from the translation of the $U.S. denominated Notes are now recorded in the consolidated statement of loss as incurred. For the three and nine-month periods ended September 30, 2001, accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. on the Notes in the amounts of $16.7 million and $33.4 million, respectively, has been classified with other interest in the consolidated statement of loss. The consolidated financial statements for the interim period ended March 31, 2001 have been restated to reflect a charge of $89.7 million comprised of deferred foreign exchange losses, deferred debt issue costs and unamortized debt discount (note 7). 7. Reorganization expenses Reorganization expenses for the three and nine-month periods ended September 30, 2001 were as follows:
Three months Nine months
ended ended
September 30 September 30
-------------- ----------------
Professional fees and other costs $ 3.0 $ 8.8
Deferred exchange loss on
First Mortgage Notes - 53.0
Unamortized discount on
First Mortgage Notes - 29.5
Deferred debt issue costs - 7.2
-------------- ----------------
$ 3.0 $ 98.5
-------------- ----------------
-------------- ----------------
8. Share capital At September 30, 2001, there were 53.65 million common shares issued and outstanding |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion