Riverside Forest Products Releases 11-Month Results.KELOWNA Kelowna (kĭlō`nə), city (1991 pop. 75,950), S British Columbia, Canada, on Okanagan Lake. Kelowna is a tourist resort and serves as a trade center for a fruit-growing and lumbering area. , British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography -- Riverside Riverside. 1 City (1990 pop. 226,505), seat of Riverside co., S Calif.; inc. 1883. One of the fastest growing U.S. cities in the late 20th cent., it is famous for its orange industry. Forest Products Limited (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : RFP (Request For Proposal) A document that invites a vendor to submit a bid for hardware, software and/or services. It may provide a general or very detailed specification of the system. 1. (business) RFP - Request for Proposal. 2. ) today released the attached unaudited 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 as at and for the 11-month period ended August 31, 2004. The Company reported net earnings for the two months ended August 31, 2004 of $21.4 million or $2.27 per share. This brings the net earnings for the eleven months ended August 31, 2004 to $69.3 million or $7.63 per share compared to a net loss of $1.3 million or $0.15 per share for the year ended September September: see month. 30, 2003. 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.
Gordon Gordon, river in W Tasmania, Australia, 125 mi (200 km) long. Flowing from mountains to the W coast, its main tributaries are the Franklin and Denison from the N, and Serpentine and Olga to the S. W. Steele, Riverside Chairman, President and Chief Executive Officer, said: "In light of Tolko Tolko Industries Ltd. is a privately owned forest products company based in Vernon, British Columbia. It manufactures and markets specialty forest products to world markets. Tolko's products include lumber, plywood, veneer, oriented strand board, and kraft papers. Industries Ltd.'s recent offer to purchase all of the outstanding common shares of the Company, we wanted to ensure that shareholders have Riverside's most recent financial information available to them. In our view, the strength of the Company's financial results and its balance sheet confirm the financial inadequacy of the Tolko bid." Riverside Forest Products Limited is the fourth largest lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to producer in British Columbia with over 1.0 Bbf of annual capacity and an annual allowable cut of 3.1 million cubic metres Noun 1. cubic metre - a metric unit of volume or capacity equal to 1000 liters cubic meter, kiloliter, kilolitre metric capacity unit - a capacity unit defined in metric terms . The company is also the second largest plywood plywood, manufactured board composed of an odd number of thin sheets of wood glued together under pressure with grains of the successive layers at right angles. Laminated wood differs from plywood in that the grains of its sheets are parallel. and veneer veneer (vənēr`), thin leaf of wood applied with glue to a panel or frame of solid wood. The art of veneer developed with early civilization. producer in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Riverside Forest Products Limited 11 months ended August 31, 2004 Continued Strong Performance SUMMARY FINANCIAL INFORMATION
OPERATING RESULTS FOR THE PAST ELEVEN MONTHS
2 months 11 months
(in $ millions, except ended ended
per share data) Q1-04 Q2-04 Q3-04 Aug-04 Aug-04
----- ----- ----- ------ ------
Sales 145.1 169.1 290.9 205.5 810.6
Operating earnings 16.9 21.3 49.5 32.0 119.7
Foreign exchange gain (loss)
on long-term debt 1.8 (1.8) (3.6) 3.1 (0.5)
Net income 12.0 9.5 26.4 21.4 69.3
Earnings per share 1.36 1.08 2.80 2.27 7.63
EBITDA(1) 22.4 26.9 56.2 36.3 141.8
Cash flow from operations(2) 20.2 18.6 33.0 23.2 95.0
Outstanding shares (weighted
average) 8.8 8.8 9.4 9.4 9.1
EARNINGS SUMMARY
2 months ended 11 months ended
August 2004 August 2004
----------------------- -----------------------
Earnings Earnings
(millions Shares (millions Shares
$) (3) EPS $) (3) EPS
-------- ------ ----- -------- ------ -----
Earnings as reported $21.4 9.4 $2.27 $69.3 9.1 $7.63
After tax impacts of:
Prepayment penalty - - - 2.3 9.1 0.25
Unrealized (gain)
loss on debt
translation (2.6) 9.4 (0.28) 0.4 9.1 0.04
Integration costs - - - 2.4 9.1 0.26
-------- ------ ----- -------- ------ -----
$18.8 9.4 $1.99 $74.4 9.1 $8.18
-------- ------ ----- -------- ------ -----
-------- ------ ----- -------- ------ -----
BALANCE SHEET and CONTINGENT ITEMS
As at
August 31,
2004 Per share
Shareholders Equity $249 million $26.43
Duties accrued from May 2002 to
August 2004 ($US 88.4 million at
1.313) (after taxes) $ 75 million(4) $ 8.00
------
$34.43
------
------
Approximate cash value of 430,954 m3
subject to take-back based on average
paid per m3 of tenures since the
1994 acquisitions (after taxes) $ 28 million(5) $ 3.00
Cash on hand $169 million $17.88
Working capital $213 million $22.60
Long-Term Debt $197 million $20.87
Long-Term Debt to Long-Term Debt
plus Shareholders Equity 44%
Net Debt (6) to Net Debt plus
Shareholders Equity 10%
1) EBITDA represents net earnings before income taxes, unrealized foreign exchange loss (gain) 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. , interest on long-term debt, depreciation and amortization, net operating interest expense (income) and prepayment penalties Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. on the early repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of long-term debt. We have presented EBITDA as we believe that, in addition to net income, EBITDA provides investors with a basis to evaluate our operating performance and ability to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and service debt and to fund capital expenditures. 2) Cash provided by operations before changes in non-cash working capital. 3) Weighted average number of shares outstanding in millions. 4) Based on a 100% recovery, within a reasonable time and that is not assured. 5) The Government of BC has said that it will pay fair compensation for the tenures taken back, but no agreement on value or method of determination of compensation has yet been reached. 6) Net Debt equals Long-Term Debt minus Cash on hand. OPERATING RESULTS The Company reported net earnings for the two months ended August 31, 2004 of $21.4 million or $2.27 per share. This brings the net earnings for the eleven months ended August 31, 2004 to $69.3 million or $7.63 per share compared to a net loss of $1.3 million or $0.15 per share for the year ended September 30, 2003. Earnings before interest, taxes, depreciation and amortization (EBITDA - see note 1 below) was $36.3 million for the two months ended August 31, 2004. This brings EBITDA for the eleven months ended August 31, 2004 to $141.8 million compared to $17.3 million for the year ended September 30, 2003. The earnings potential of the Company has improved over the last 11 months and this potential is best illustrated by the following reconciliation of the EBITDA for the 11 months ended August 31, 2004 to the EBITDA for the year ended September 30, 2003.
EBITDA year ended September 30, 2003 $ 17.3
Improvements over 2003
Increase in Armstrong Cogeneration plant EBITDA 4.3
Lignum operations EBITDA for the 5 months
ended August 31, 2004 27.2
Improvements in the cost structure
Logging costs 8.2
Product recovery rates 5.3
Conversion costs 6.4 51.4
--------------------
EBITDA before other effects 68.7
Market effects
Increased pricing for all products 74.1
Increased volumes sold 15.4
Increased stumpage (1.2)
Foreign exchange gains 3.3 91.6
--------------------
Cost effects
Make whole provision on debt repayment (3.5)
Integration costs related to the Lignum
acquisition (3.7)
Performance rewards, including increase
in value of share appreciation rights (11.3) (18.5)
--------------------
EBITDA 11 months ended August 31, 2004 $ 141.8
--------
--------
The profitability base of our Company has increased as a result of: - The acquisition of Lignum Noun 1. lignum - woody tissue plant tissue - the tissue of a plant ligneous plant, woody plant - a plant having hard lignified tissues or woody parts especially stems , - The long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contract with BC Hydro BC Hydro and Power Authority is one of the largest electric utilities in Canada, serving more than 1.7 million customers[2] in an area containing over 94 per cent of British Columbia's population is mandated to provide, "reliable power, at low cost, for generations. for power from the Armstrong cogeneration cogeneration In power systems, use of steam for both power generation and heating. High-temperature, high-pressure steam from a boiler and superheater first passes through a turbine to produce power. plant, and - The continuous improvements in our cost structure from the combination of operating at higher capacity levels, the application of strategic capital expenditures and our FAST (For a Stronger Tomorrow) employee participation program. The markets for our products have been strong throughout the past year resulting in increased realizations as well as increased volumes sold. Stumpage stump·age n. 1. Standing timber regarded as a commodity. 2. The value of standing timber. 3. The right to cut standing timber. stumpage 1. has increased in relation to the market pricing increase for our products. The volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. relationship between the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. and US dollar during 2003 has slowed resulting in less of an exchange rate based fluctuation Fluctuation A price or interest rate change. on our net mill realizations. With the improved profitability, performance rewards have been accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. to recognize our employees for their valuable contribution throughout this period. 1) EBITDA represents net earnings before income taxes, unrealized foreign exchange loss (gain) on long-term debt, interest on long-term debt, depreciation and amortization, net operating interest expense (income) and prepayment penalties on the early repayment of long-term debt. We have presented EBITDA as we believe that, in addition to net income, EBITDA provides investors with a basis to evaluate our operating performance and ability to incur and service debt and to fund capital expenditures. OUTLOOK Robust demand continues in the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market place with US housing starts near a 17-year high, an active repair and remodeling remodeling /re·mod·el·ing/ (re-mod´el-ing) reorganization or renovation of an old structure. bone remodeling market and improving economic fundamentals. Demand is expected to remain strong throughout 2005 as a result of the above as well as the low interest-rate environment, the continued strength in the housing market and the improving labour markets. The deposit rate for the duties should be cut in half in December December: see month. and with the recent wins at NAFTA NAFTA in full North American Free Trade Agreement Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's we are anticipating a positive resolution to the US Canada Softwood softwood Timber obtained from coniferous trees (mainly of the pine and fir families). With the exception of bald cypress, tamarack, and larch, softwood trees are evergreens. lumber dispute. Although the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents remains strong, commodity pricing has adjusted such that the Canadian dollar net mill realizations are in line with historical (i.e. pre- pre- word element [L.], before (in time or space). pre- pref. 1. Earlier; before; prior to: prenatal. 2. 2003) relationships. We expect continued strong results for the month of September. Although we also expect the December 2004 quarter to be strong, we do expect the normal softening softening /sof·ten·ing/ (sof´en-ing) malacia. softening a change of consistency, with loss of firmness or hardness. as a result of seasonal influences. Gordon W. Steele, Chairman, President and Chief Executive Officer Kelowna, B.C. September 14, 2004 Additional information related to our Company, including the 2003 Annual Information Form, may be found on our website at www.riverside.bc.ca or on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com
Riverside Forest Products Limited
Consolidated Statement of Operations and Retained Earnings
--------------------------------------------------------------------
(in thousands of dollars)
2 months 11 months Year
ended ended ended
August 31, August 31, Sept 30,
2004 2004 2003
---------- ---------- ----------
(unaudited) (unaudited) (restated
note 2)
Sales (note 8) $ 205,440 $ 810,563 $ 531,967
---------- ---------- ----------
Cost of sales 135,592 525,316 399,800
Freight and other
distribution costs 13,470 63,374 58,138
Countervailing and
anti-dumping duties 16,507 62,609 42,879
Selling and
administration 4,829 21,231 17,552
Integration costs - 3,663 -
Depreciation and
amortization 4,723 23,566 24,989
Other income (1,708) (8,915) (3,743)
---------- ---------- ----------
173,413 690,844 539,615
---------- ---------- ----------
Operating earnings (loss) 32,027 119,719 (7,648)
Interest on long-term debt 2,543 8,368 5,930
Amortization of deferred
financing costs 216 1,018 382
Unrealized foreign exchange
loss (gain) on long-term debt (3,120) 450 (8,121)
Prepayment penalty on
long-term debt - 3,557 -
---------- ---------- ----------
(361) 13,393 (1,809)
---------- ---------- ----------
Earnings (loss) before
income taxes 32,388 106,326 (5,839)
Income tax expense (recovery)
Current 12,102 43,574 (842)
Future (1,153) (6,579) (3,659)
---------- ---------- ----------
10,949 36,995 (4,501)
Net earnings (loss) $ 21,439 $ 69,331 $ (1,338)
Retained earnings,
beginning of period 140,736 93,919 96,049
Dividends (566) (1,641) (792)
---------- ---------- ----------
Retained earnings, end of
period $ 161,609 $ 161,609 $ 93,919
---------- ---------- ----------
---------- ---------- ----------
Net earnings (loss) per
common share, basic and
diluted $ 2.27 $ 7.63 $ (0.15)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number
of common shares
outstanding, basic and
diluted 9,434,987 9,092,178 8,803,993
Riverside Forest Products Limited
Consolidated Statement of Cash Flow
--------------------------------------------------------------------
(in thousands of dollars)
2 months 11 months Year
ended ended ended
August 31, August 31, Sept 30,
2004 2004 2003
---------- ---------- ----------
Cash Provided by (used in) (unaudited) (unaudited) (restated
note 2)
Operations
Net earnings (loss) $ 21,439 $ 69,331 $ (1,338)
Items not involving cash
Depreciation and
amortization 4,939 24,584 25,371
Unrealized foreign
exchange loss (gain) on
debt revaluation (3,120) 450 (8,121)
Gain on disposal of
property, plant and
equipment (29) (110) (43)
Future income taxes (1,479) (7,231) (3,659)
Change in reforestation
obligation 1,376 7,940 1,141
---------- ---------- ----------
23,126 94,964 13,351
Changes in non-cash
operating working capital
Change in accounts
receivable 2,935 (14,463) (2,707)
Change in inventory 1,000 (21,681) 16,256
Change in prepaid
expenses (3,322) 2,276 223
Change in accounts
payable and accrued
liabilities 17,129 51,892 (7,887)
---------- ---------- ----------
17,742 18,024 5,885
---------- ---------- ----------
40,868 112,988 19,236
---------- ---------- ----------
Investing
Change in investments and
advances (3,512) (4,005) 1,757
Proceeds on disposal of
property, plant and
equipment 28 390 495
Purchase of property,
plant and equipment (3,021) (7,044) (3,873)
Increase in deferred
finance costs - (10,493) -
Acquisition (note 3) - (86,276) -
---------- ---------- ----------
(6,505) (107,428) (1,621)
---------- ---------- ----------
Financing
Proceeds from issue of
long-term debt - 196,500 10,000
Repayment of long-term
debt - (64,530) (30,518)
Change in other long-term
liabilities 1,042 (1,621) 1,339
Share issuance costs paid - (16) -
Dividends paid (566) (1,641) (792)
---------- ---------- ----------
476 128,692 (19,971)
---------- ---------- ----------
Change in cash 34,839 134,252 (2,356)
Cash, beginning of period 133,898 34,485 36,841
---------- ---------- ----------
Cash, end of period $ 168,737 $ 168,737 $ 34,485
---------- ---------- ----------
---------- ---------- ----------
Supplementary Information
Interest paid $ 8,074 $ 10,237 $ 7,124
Income taxes paid
(recovered) $ (671) $ 1,821 $ (1,931)
Non-cash investing activity:
Common shares issued in
acquisition (note 3) $ - $ 10,000 $ -
Riverside Forest Products Limited
Consolidated Balance Sheet
--------------------------------------------------------------------
(in thousands of dollars)
As at As at
August 31 September 30
2004 2003
------------ ------------
(unaudited) (restated
note 2)
Assets
Current assets
Cash $ 168,737 $ 34,485
Accounts receivable 75,361 38,694
Inventory (note 4) 101,028 52,138
Prepaid expenses 4,153 3,365
------------ ------------
349,279 128,682
Investments and advances 10,739 4,649
Capital assets
Property, plant and equipment 153,018 121,950
Timber licenses and roads 137,306 92,992
Goodwill 7,259 -
------------ ------------
297,583 214,942
Deferred financing costs 9,955 480
------------ ------------
$ 667,556 $ 348,753
------------ ------------
------------ ------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 95,184 $ 57,644
Current portion of long-term debt - 27,698
Income taxes payable 40,836 -
------------ ------------
136,020 85,342
------------ ------------
Reforestation obligation 19,479 11,056
Long-term debt (note 5) 196,950 36,832
Other long-term liabilities 10,576 7,618
Future income taxes 55,133 36,181
Shareholders' equity
Share capital (note 7):
Authorized: 25,000,000 common shares,
no par value
Issued: 9,434,987 common shares
(September 30, 2003 -
8,803,993) 87,789 77,805
Retained earnings 161,609 93,919
------------ ------------
249,398 171,724
------------ ------------
$ 667,556 $ 348,753
------------ ------------
------------ ------------
On behalf of the Board
Gordon W. Steele Gerald E. Raboch
Director Director
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Business of Riverside Riverside operates in the solid wood business, which includes the production and sale of lumber, plywood, veneer and woodchips, as well as the operating of a related wholesale wood products brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. business. The production of these products includes logging operations, which are carried out by independent contractors A person who contracts to do work for another person according to his or her own processes and methods; the contractor is not subject to another's control except for what is specified in a mutually binding agreement for a specific job. on behalf of Riverside. Logging operations are seasonal due to a number of factors including weather, ground and fire season conditions. As a result of the timing of logging operations, Riverside normally experiences substantial increases in log inventories during the first and second quarters. Lumber and plywood inventories are less seasonal but are subject to market demands. 2. Basis of Presentation and Significant Accounting Policies These interim consolidated financial statements are unaudited; however, they reflect all adjustments, consisting of normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. adjustments including the adjustment set out below necessary for a fair presentation of the results of the periods presented. These interim consolidated financial statements do not include all disclosures required by 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 for annual financial statements and accordingly should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the September 30, 2003 audited consolidated financial statements and notes below. These interim consolidated financial statements have been prepared 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 the same accounting policies and methods of computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. as the annual financial statements as at September 30, 2003 with the following changes: a) Woodlands Woodlands refers to several places:
In the December 2003 quarter, the Company changed its accounting policy for expensing woodlands production costs in its interim quarterly financial statements from a units of production basis to an incurred cost basis. This change does not impact the Company's annual consolidated financial statements. Prior period quarterly results have been restated to reflect the new accounting policy as follows:
Quarter ended
(in thousands of dollars) Year
------------------------------------- ended
Dec 02 Mar 03 June 03 Sept 03 Sept 03
-------- -------- -------- ------- --------
Net earnings (loss)
As reported $ (5,247) $ (1,684) $ (3,523) $ 9,116 $ (1,338)
Adjustment - 1,932 (1,932) - -
-------- -------- -------- ------- --------
As restated $ (5,247) $ 248 $ (5,455) $ 9,116 $ (1,338)
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
b) Shipping and Handling Costs Effective January January: see month. 1, 2004, the CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) introduced new recommendations for the application of generally accepted accounting principles (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), which, among other things, provides guidance on alternate alternate /al·ter·nate/ (awl´ter-nit) 1. following in turns. 2. pertaining to every other one in a series. 3. occurring in place of another; acting as a substitute. sources to consult with when an issue is not specifically addressed by Canadian GAAP. Prior to January 1, 2004, Riverside, along with other companies in the forest industry, presented sales net of shipping and handling costs. As a result of applying this new standard, effective April 1, 2004, Riverside has presented shipping and handling costs in accordance with the US EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 00-10 Accounting for Shipping and Handling Fees and Costs. EITF 00-10 specifies that shipping and handling costs recovered from customers should be included in sales, while shipping and handling costs incurred should be included in cost of sales. Countervailing and anti-dumping duties, which previously were presented as a deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. to gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. , have also been reclassified to cost of sales in accordance with the new GAAP standard. The prior periods have been reclassified for comparability. 3. Lignum Acquisition On March 31, 2004, the Company acquired all of the outstanding common shares of Lignum Limited ("Lignum"). The results of Lignum's operations have been included in the consolidated financial statements since that date. Lignum's principle business activities include the production and sale of lumber, as well as the operating of a related wholesale wood products brokerage business. To acquire Lignum, the Company issued 630,994 of common shares of the Company with a fair value of $10,000,000 and an additional $87,350,000, which was financed through a new term debt facility (see note 5). The fair value of the common shares of the Company was determined based on the average closing price of the Riverside's common shares for the twenty day trading Day trading Establishing and liquidating the same position or positions within one day's trading. period preceding the period after the terms of the acquisition were agreed to and announced which approximates the market price for the two days before and after the date the terms of the acquisition were agreed to and announced. This acquisition has been accounted for under the purchase method with the purchase price, including the impacts of Lignum's operation for the period from February February: see month. 1, 2004 to March 31, 2004, allocated as follows:
(in thousands
Net Assets acquired: of dollars)
Cash $ 1,074
Accounts receivable 22,204
Inventory 27,209
Prepaid expenses 3,064
Other long-term assets 2,085
Property, plant and equipment 47,454
Timber licenses and roads 44,730
Goodwill 7,259
Accounts payable and accrued liabilities (18,551)
Reforestation obligation (8,416)
Other long-term liabilities (4,579)
Future income taxes (26,183)
------------
$ 97,350
------------
------------
Consideration:
Cash $ 87,350
Common shares 10,000
------------
$ 97,350
------------
------------
The purchase price allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as is preliminary and subject to potential adjustments related to further valuation work being completed on the assets acquired. Cash paid on the acquisition of Lignum as disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statements of cash flow is determined as follows:
Cash paid $ (87,350)
Cash acquired 1,074
------------
Net cash paid $ (86,276)
------------
------------
Goodwill is not amortized, but is tested for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. annually, or more frequently if events or changes 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 indicate that the asset might be impaired See assistive technology. . Timber timber: see lumber; wood. tenures are amortized on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis over 40 years commencing in the year of acquisition. Substantially all of the amounts recorded above for goodwill and timber tenures are not deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). for income tax purposes. In addition to the above, transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). of $10,493,000 were incurred predominately in relation to the financing of the acquisition and $3,557,000 of prepayment penalties were made in order to retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. the pre-existing Adj. 1. pre-existing - existing previously or before something; "variations on pre-existent musical themes" pre-existent, preexistent, preexisting antecedent - preceding in time or order debt. Lignum Limited was re-named Riverside Forest Products (Marketing) Limited on May 19, 2004.
4. Inventory
(in thousands of dollars)
August 31, September 30,
2004 2003
------------ ------------
------------ ------------
Veneer $ 1,269 $ 1,277
Plywood 3,580 4,057
Finished lumber 25,497 6,546
Rough lumber 6,199 4,724
Logs 41,256 15,443
Ties 7,892 9,379
Parts, supplies, bins and chips 15,335 10,712
------------ ------------
$ 101,028 $ 52,138
------------ ------------
------------ ------------
5. Operating Line of Credit and Long-Term Debt a) Operating Line of Credit The Company has an available operating line of credit totaling CAD CAD: see computer-aided design. (Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software. $60 million, which was unused at August 31, 2004. The line of credit bears interest on a sliding scale slid·ing scale n. A scale in which indicated prices, taxes, or wages vary in accordance with another factor, as wages with the cost-of-living index or medical charges with a patient's income. dependent on certain financial indicators. The debt is secured by General Security Agreements. The term of the facility expires on March 31, 2007. b. Long-Term Debt Long-term debt consists of USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. $150 million in 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. senior notes that bear interest at 7 7/8%, payable in arrears Adv. 1. in arrears - in debt; "he fell behind with his mortgage payments"; "a month behind in the rent"; "a company that has been run behindhand for years"; "in arrears with their utility bills" behindhand, behind on March 1 and September 1. The entire principal of the senior notes is repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. on March 1, 2014. The notes contain covenants that, based on certain financial ratios, may place limitations upon the incurrence In`cur´rence n. 1. The act of incurring, bringing on, or subjecting one's self to (something troublesome or burdensome); as, the incurrence of guilt, debt, responsibility, etc. s> Noun 1. of additional debt and on the application of proceeds from the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of assets.
August 31, September 30,
(in thousands of dollars) 2004 2003
------------ ------------
------------ ------------
US $150,000,000 unsecured senior
notes, due March 1, 2014 $ 196,950 $ -
Senior Notes payable - 46,197
HSBC Capital loan - 18,333
------------ ------------
$ 196,950 $ 64,530
------------ ------------
------------ ------------
Current $ - $ 27,698
Long-term 196,950 36,832
------------ ------------
$ 196,950 $ 64,530
------------ ------------
------------ ------------
6. Contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. a) Income Tax Canada Revenue Agency The Canada Revenue Agency (CRA) administers:
adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2,500,000, which would be partially offset by a future tax reduction of approximately $2,100,000. Riverside has filed Notices of Objection A formal attestation or declaration of disapproval concerning a specific point of law or procedure during the course of a trial; a statement indicating disagreement with a judge's ruling. in respect of these reassessments. Riverside has not recorded any charge to the current year's provision for income taxes with respect to the disputed reassessments. If Riverside is not successful in its appeal, any adjustments will be reflected in the period in which they become determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. . b) The Forestry forestry, the management of forest lands for wood, water, wildlife, forage, and recreation. Because the major economic importance of the forest lies in wood and wood products, forestry has been chiefly concerned with timber management, especially reforestation, Revitalization re·vi·tal·ize tr.v. re·vi·tal·ized, re·vi·tal·iz·ing, re·vi·tal·iz·es To impart new life or vigor to: plans to revitalize inner-city neighborhoods; tried to revitalize a flagging economy. Plan In March 2003, the Government of B.C. ("Crown") introduced the Forestry Revitalization Plan (the "Plan") that provides for significant changes to Crown forest policy and to the existing allocation of Crown timber tenures to licensees. The changes prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). in the Plan include; the elimination of minimum cut control regulations, the elimination of existing timber processing regulations, and the elimination of restrictions limiting the transfer and subdivision of existing licenses. As well, through legislation, licensees, including Riverside, will be required to return 20% of their replaceable tenure tenure, in education tenure, in education, a guarantee of the permanence of a college or university teacher's position, awarded upon successful completion of a probationary period, usually seven years. to the Crown. The Plan states that approximately half of this volume will be redistributed re·dis·trib·ute tr.v. re·dis·trib·ut·ed, re·dis·trib·ut·ing, re·dis·trib·utes To distribute again in a different way; reallocate. Adj. 1. to open up opportunities for woodlots, community forests and First Nations and the other half will be available for public auction. The Crown has acknowledged that licensees will be fairly compensated compensated /com·pen·sat·ed/ (kom´pen-sa?tid) counterbalanced; offset. for the return of tenure and related costs such as roads and bridges. The effect of the timber take-back is expected to result in a reduction of approximately 431,000 m3 of the company's existing annual allowable cut on their replaceable tenures. The effect of the Plan on Riverside's financial position and results of operations cannot be determined at this time. Riverside will record the effects of the Plan at the time the amounts to be recorded are determined. c) Countervailing and Anti-Dumping Duties On March 21, 2002 and further adjusted on April 25, 2002, the US Department of Commerce (USDOC USDOC United States Department of Commerce ) issued its final determination in the countervailing and anti-dumping investigations. The USDOC's final determination in the countervailing investigation resulted in a duty rate of 18.79% to be posted by cash deposits from the effective date of a Final Order (May 22, 2002 as discussed below). The USDOC's final determination in the anti-dumping investigation resulted in company specific duty rates ranging from 2.18% to 12.44% on the six companies investigated and an all other rate of 8.43% for all other companies including Riverside. On May 16, 2002, the USITC USITC United States International Trade Commission (US Federal agency) published its final written determination on injury and stated that Canadian softwood lumber threatens material injury to the US industry. As a result, cash deposits were required for shipments at the rates determined by the USDOC effective from a Final Order date of May 22, 2002. All prior bonds or cash deposits posted prior to May 22, 2002 have been refunded. Riverside has accrued $121,883,000 for the period from May 22, 2002 to August 31, 2004 representing the combined final countervailing and anti-dumping duties of 27.22%. For the eleven months ended August 31, 2004, Riverside has accrued $64,250,000 in combined countervailing and anti-dumping duties. Any further adjustments resulting from a change in the countervailing and anti-dumping duty rates will be made prospectively. On June June: see month. 3, 2004, the US Department of Commerce announced its preliminary administrative review of the duties. The preliminary countervail coun·ter·vail v. coun·ter·vailed, coun·ter·vail·ing, coun·ter·vails v.tr. 1. To act against with equal force; counteract. 2. To compensate for; offset. v.intr. duty rate was set at 9.2% and the "all-other" anti-dumping rate at 4.0%. The final determination is scheduled to be made in December 2004. This preliminary ruling does not affect the cash deposit rate. On August 31, 2004 the NAFTA panel ordered the USITC to make a determination that the evidence on record does not support a finding of threat of material injury to the US industry. On September 10, 2004 the ITC ITC (Brit) n abbr (= Independent Television Commission) → Fernseh-Aufsichtsgremium ITC n abbr (BRIT) (= Independent Television Commission) → complied and determined that Canadian lumber poses no threat to US lumber producers. Duties have remained in place while the USDOC considers whether to file an appeal. The final amount and effective date of countervailing and anti-dumping duties that may be assessed on Canadian softwood lumber exports to the US cannot be determined at this time and will depend on appeals of the final determinations to any reviewing courts, NAFTA or WTO See World Trade Organization. panels. Riverside and other Canadian forest product companies, the Canadian federal government and Canadian provincial Provincial has several meanings and may refer to:
hurt - give trouble or pain to; "This exercise will hurt your back" the final countervailing and 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. determinations made by the USITC and USDOC. Canadian Interests continue to aggressively defend the Canadian industry in this US trade dispute. Canadian Interests may appeal the decision of these administrative agencies An official governmental body empowered with the authority to direct and supervise the implementation of particular legislative acts. In addition to agency, such governmental bodies may be called commissions, corporations (e.g. to the appropriate courts, NAFTA panels and the WTO. Notwithstanding the final rates established in the investigations, the final liability for the assessment of countervailing and anti-dumping duties will not be determined until each annual administrative review process is complete. 7. Share Capital
Authorized: 25,000,000 common shares, no par value
Issued:
Amount
Number of (in thousands
Shares of dollars)
------------ ------------
------------ ------------
September 30, 2003 8,803,993 $ 77,805
Shares issued March 31, 2004 for
acquisition (see note 3) 630,994 10,000
Share issue costs - (16)
------------ ------------
9,434,987 $ 87,789
------------ ------------
------------ ------------
8. Segmented Information The Company manages its business as a single operating segment: solid wood. The Company harvests logs, which are sorted by species, size and quality and then manufactured into solid wood products at the Company's facilities. All operations are located in British Columbia, Canada.
(in thousands of dollars) 2 months 11 months Year
ended ended ended
August 31, August 31, Sept 30,
2004 2004 2003
--------- --------- ---------
--------- --------- ---------
Sales
Stud and dimension lumber $ 143,888 $ 512,161 $ 306,267
Plywood and veneer 40,762 210,254 163,880
Wood chips 11,411 47,358 35,002
Other products 9,379 40,790 26,818
--------- --------- ---------
$ 205,440 $ 810,563 $ 531,967
--------- --------- ---------
--------- --------- ---------
Sales volumes
Stud and dimension lumber (mfbm) 253,416 991,766 726,881
Plywood and veneer (msf) 100,294 489,172 466,028
Wood chips (bdu) 122,893 575,734 514,404
Geographic distribution
of sales dollars
Canada $ 70,709 $ 259,432 $ 182,782
United States 124,555 498,363 304,466
Japan 9,254 46,485 40,433
Europe - 135 753
Other 922 6,148 3,533
--------- --------- ---------
Sales $ 205,440 $ 810,563 $ 531,967
--------- --------- ---------
--------- --------- ---------
9. Comparative Figures Certain comparative figures have been restated to conform with the financial statement presentation adopted for the current period. 10. EBITDA EBITDA represents net earnings (loss) before income taxes (recovery), unrealized foreign exchange loss (gain) on long-term debt, interest on long-term debt, depreciation and amortization, net operating interest expense (income) and prepayment penalties on the early repayment of long-term debt. Riverside considers EBITDA a key indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of operating performance. Management uses EBITDA as an internal measure of performance and in its evaluation of potential acquisitions. As EBITDA is a non-GAAP measure, it may not be comparable to EBITDA as calculated by others. In addition, as EBITDA is not a substitute for other GAAP measures such as net earnings, readers should consider those GAAP measures in evaluating Riverside's performance. A reconciliation of EBITDA to net earnings (loss) is as follows:
2 months 11 months Year
ended ended ended
August 31, August 31, Sept 30,
(in thousands of dollars) 2004 2004 2003
--------- --------- ---------
--------- --------- ---------
Net earnings (loss) $ 21,439 $ 69,331 $ (1,338)
Income taxes (recovery) 10,949 36,995 (4,501)
Unrealized foreign exchange loss
(gain) on long-term debt (3,120) 450 (8,121)
Interest on long-term debt 2,543 8,368 5,930
Depreciation and amortization 4,939 24,584 25,371
Net operating interest
expense (income) (519) (1,526) 7
Prepayment penalties on
the repayment of long-term debt - 3,557 -
--------- --------- ---------
EBITDA $ 36,231 $ 141,759 $ 17,348
--------- --------- ---------
--------- --------- ---------
EBITDA Quarter by Quarter for the year to date is as follows:
3 months 3 months 3 months 2 months
ended ended ended ended
Dec 31, March 31, June 30, August 31,
2003 2004 2004 2004
--------- --------- --------- ---------
Net earnings (loss) $ 11,985 $ 9,527 $ 26,380 $ 21,439
Income taxes (recovery) 5,516 5,303 15,227 10,949
Unrealized foreign
exchange loss (gain) on
long-term debt (1,756) 1,756 3,570 (3,120)
Interest on long-term debt 1,140 718 3,967 2,543
Depreciation and
amortization 5,818 6,285 7,542 4,939
Net operating interest
expense (income) (290) (218) (499) (519)
Prepayment penalties on the
repayment of long-term debt - 3,557 - -
--------- --------- --------- ---------
EBITDA $ 22,413 $ 26,928 $ 56,187 $ 36,231
--------- --------- --------- ---------
--------- --------- --------- ---------
Riverside Forest
Products Limited
CORPORATE DATA
BOARD OF DIRECTORS
Gordon W. Steele - Vernon, B.C.
Gerald E. Raboch - Vernon, B.C.
John C. Kerr - Vancouver, B.C.
Hamish C. Cameron - Vancouver, B.C.
John F. Ellett - Vernon, B.C.
John R. McLernon - Vancouver, B.C.
OFFICERS
Gordon W. Steele
Chairman, President and Chief Executive Officer
Gerald E. Raboch
Chief Operating Officer
John C. Kerr
Vice-Chairman of Riverside and President of
Riverside Forest Products (Marketing) Limited
Conrad A. Pinette
Executive Vice-President
Michael E. Moore
Chief Financial Officer and Secretary Treasurer
HEAD OFFICE
820 Guy Street, Kelowna, B.C., V1Y 7R5
(250) 762-3411
STOCK EXCHANGE
Toronto
TRADING SYMBOL
RFP
INVESTOR RELATIONS
investorrelations@riverside.bc.ca
WEBSITE
www.riverside.bc.ca
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