Sino-Forest Corporation Reports Third Quarter 2004 Results; 'All amounts are expressed in U.S. dollars, unless otherwise indicated'.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Sino-Forest Corporation ("we" or the "Company") (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :TRE TRE Tampere (Finland) TRE Tribunal Regional Eleitoral (Brazil) TRE Trinity Railway Express (Texas) TRE Theologische Realenzyklopädie ) today announced its results for the three months ended September September: see month. 30, 2004. Sino-Forest reported third quarter net income increased 35.5%, to $16.4 million compared to $12.1 million in the third quarter of 2003. Net income was $0.12 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share in the third quarter of 2004 compared to $0.11 per diluted share in the third quarter of 2003. Our gross profit(1) increased 60.9%, to $32.5 million in the third quarter of 2004, compared to $20.2 million in the third quarter of 2003. Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. increased to 34.4% in the third quarter of 2004, compared to 25.5% in the third quarter of 2003. Our gross profit margin from sales of standing timber timber: see lumber; wood. increased to 70.4% in the third quarter of 2004, compared to 54.2% in the third quarter of 2003. Cash flows from operating activities increased 16.1%, to $14.4 million in the third quarter of 2004, compared to $12.4 million in the third quarter of 2003 as a result of an increase in cash provided by operation offset by an increase in funding for working capital balances in the third quarter of 2004 compared to the third quarter of 2003. Revenue increased 19.7%, to $94.7 million in the third quarter of 2004, compared to $79.1 million in the third quarter of 2003. The increase in revenue was mainly due to the increase in revenue from wood chips and standing timber sales. Revenue from sales of standing timber increased 81.0%, from $15.3 million in the third quarter of 2003 to $27.7 million in the third quarter of 2004. We sold 7,235 hectares of standing timber, compared to 5,789 hectares in the third quarter of 2003. The average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of our standing timber in the third quarter was $3,829 per hectare hectare (hĕk`târ, –tär), abbr. ha, unit of area in the metric system, equal to 10,000 sq m, or about 2.47 acres. compared to $2,638 per hectare in the third quarter of 2003. The increase in average selling price in the third quarter reflected the sale of pine trees from our purchased tree plantations PLANTATIONS. Colonies, (q.v.) dependencies. (q.v.) 1 Bl. Com. 107. In England, this word, as it is used in St. 12, II. c. 18, is never applied to, any of the British dominions in Europe, but only to the colonies in the West Indies and America. 1 Marsh. Ins, B. 1, c. 3, Sec. 2, page 64. which command higher average selling prices compared to the sale of eucalyptus eucalyptus (y  'kəlĭp`təs): see myrtle. eucalyptus trees. In the third quarter of 2004, we sold 6,478 hectares of pine trees and 757 hectares of eucalyptus trees compared to 5,789 hectares of eucalyptus trees sold in the third quarter of 2003. Revenue from sales of wood chips increased 7.8%, from $40.8 million in the third quarter of 2003 to $44.0 million in the third quarter of 2004. We sold 463,200 bone dry metric tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. of wood chips in our wood chips trading operations, compared to 441,400 bone dry metric tons in the third quarter of 2003. The average selling price of wood chips in the third quarter was $95 per bone dry metric ton, compared to $92 per bone dry metric ton in the third quarter of 2003. Revenue from sales of wood-based products were $18.5 million in the third quarters of 2003 and 2004. Revenue from commission income for the third quarters of each of 2003 and 2004 was $4.5 million. Agency fees on the sale of 304,300 bone dry metric tons and 306,100 bone dry metric tons of wood chips in the third quarters of 2003 and 2004 respectively were $14.7 per bone dry metric ton. Costs and expenses were $70.9 million in the third quarter of 2004, an increase of $9.2 million from $61.7 million in the third quarter of 2003. Our selling, general and administrative expenses increased from $2.3 million in the third quarter of 2003 to $8.0 million in the third quarter of 2004, primarily due to a charge for stock-based compensation expense of $3.1 million and the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of certain fees and expenses totaling $1.8 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the aborted a·bort v. a·bort·ed, a·bort·ing, a·borts v.intr. 1. To give birth prematurely or before term; miscarry. 2. To cease growth before full development or maturation. 3. plan to list the ordinary shares of Sino-Wood Partners, Limited in Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. . Interest expense increased to $4.6 million in the third quarter of 2004 from $3.2 million in the third quarter of 2003, reflecting the issuance of the non-convertible guaranteed senior notes in the third quarter of 2004. We had an exchange loss 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. of $0.5 million in the third quarter of 2004, compared to an exchange loss on long-term debt of $0.2 million, reflecting the strengthening of the Euro against the U.S. dollars in the third quarter of 2004. We have completed the final documentation to purchase the initial 50,000 hectares of mature pine pursuant to the Heyuan Heyuan (河源) is a prefecture-level city of Guangdong Province in the People's Republic of China. Heyuan has a population of about 207,600. The majority of the people are Cantonese and Hakka. Heyuan includes many rainforests. Pine Acquisition Undertaking. We have also commenced the sale of pine logs in October October: see month. 2004 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 our plan. (1) Gross profit for any period is defined as total revenue less cost of sales. Gross profit is presented as additional information because we believe that it is a useful measure for certain investors to determine our operating performance. Gross profit is not a recognized term under 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. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and should not be considered as an alternative to net income as an 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 our operating performance or any other measure of performance derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance with Canadian GAAP. Because it is not a Canadian GAAP measure, gross profit may not be comparable to similar measures presented by other companies. Gross profit is determined as follows:
3 Months Ended September 30 9 Months Ended September 30
2004 2003 2004 2003
---- ---- ---- ----
$000's $000's $000's $000's
------ ------ ------ ------
Total revenue 94,715 79,066 200,316 183,403
Cost of sales (62,166) (58,908) (137,655)(138,864)
------- ------- ------- -------
Gross profit 32,549 20,158 62,661 44,539
------- ------- ------- -------
------- ------- ------- -------
Please note: This press release may contain projections and forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events. Such forward-looking statements are not guarantees of future performance of the Company and are subject to risks and uncertainties that could cause actual results and company plans and objectives to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include, but not limited to, changes in China and international economies; changes in currency exchange rates; changes in worldwide demand for the Company's products; changes in worldwide production and production capacity in the forest products industry; competitive pricing pressures for the Company's products and changes in wood and timber costs.
SINO-FOREST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Expressed in thousands of U.S. dollars, except for earnings per
share information)
(Unaudited)
3 Months Ended 9 Months Ended
September 30 September 30
2004 2003 2004 2003
$ $ $ $
--------------------------------------------------------------------
Revenue
Sales 90,205 74,580 191,022 174,114
Commission income 4,510 4,486 9,294 9,289
--------------------------------------------------------------------
94,715 79,066 200,316 183,403
--------------------------------------------------------------------
Costs and expenses
Cost of sales 62,166 58,908 137,655 138,864
Selling, general and
administration 7,958 2,262 13,339 7,318
Depreciation and amortization 809 492 2,246 1,451
--------------------------------------------------------------------
70,933 61,662 153,240 147,633
--------------------------------------------------------------------
Income from operations 23,782 17,404 47,076 35,770
Interest expense (note 2) (4,573) (3,188) (8,386) (9,063)
Exchange gain (loss) on
long-term debt (498) (170) 190 (1,969)
Interest income 448 39 592 179
Amortization of deferred financing
costs (1,129) (248) (1,609) (594)
--------------------------------------------------------------------
Income before income taxes 18,030 13,837 37,863 24,323
Provision for income taxes (1,642) (1,732) (2,861) (2,179)
--------------------------------------------------------------------
Net income for the period 16,388 12,105 35,002 22,144
--------------------------------------------------------------------
--------------------------------------------------------------------
Earnings per share (note 8)
Basic 0.12 0.15 0.30 0.29
--------------------------------------------------------------------
--------------------------------------------------------------------
Diluted 0.12 0.11 0.30 0.23
--------------------------------------------------------------------
--------------------------------------------------------------------
Retained Earnings
Retained earnings, beginning of
period 177,533 147,353
Net income for the period 35,002 22,144
--------------------------------------------------------------------
Retained earnings, end of period 212,535 169,497
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes
SINO-FOREST CORPORATION
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars) (Unaudited)
As at As at
September 30, December 31,
2004 2003
$ $
--------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents 71,137 6,929
Short-term deposits 176,371 21,674
Accounts receivable 66,553 67,345
Due from PRC CJV partners 2,700 6,688
Deposit for the purchase of plantations 6,041 6,041
Other receivables and prepaid expenses 4,855 5,818
Inventories 2,416 1,170
--------------------------------------------------------------------
Total current assets 330,073 115,665
--------------------------------------------------------------------
Capital assets, net 380,957 298,410
Deferred financing costs, net 9,193 4,230
Other assets 638 549
--------------------------------------------------------------------
720,861 418,854
--------------------------------------------------------------------
--------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (note 3) 30,248 39,025
Accounts payable and accrued liabilities
(note 10) 21,216 22,051
Income taxes payable 16,323 13,465
Current portion of long-term debt (note 4) - 43,388
--------------------------------------------------------------------
Total current liabilities 67,787 117,929
--------------------------------------------------------------------
Long-term debt (note 4) 300,000 55,953
--------------------------------------------------------------------
Total liabilities 367,787 173,882
--------------------------------------------------------------------
Shareholders' equity
Share capital (note 5) 134,795 67,439
Contributed surplus (note 6) 5,744 -
Retained earnings 212,535 177,533
--------------------------------------------------------------------
Total shareholders' equity 353,074 244,972
--------------------------------------------------------------------
720,861 418,854
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes
SINO-FOREST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)(Unaudited)
3 Months Ended 9 Months Ended
September 30 September 30
2004 2003 2004 2003
$ $ $ $
--------------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income for the period 16,388 12,105 35,002 22,144
Add (deduct) items not
affecting cash
Depletion of timber holdings 8,212 7,036 20,272 21,065
Accretion of Exchangeable Notes 6 1,187 23 3,820
Exchange loss (gain) on
long-term debt 498 170 (190) 1,969
Depreciation and amortization 809 492 2,246 1,451
Stock-based compensation 3,051 - 5,744 -
Amortization of redemption
premium on long-term debt 558 731 2,015 1,641
Amortization of deferred
financing costs 1,129 248 1,609 594
Provision for impairment of an
interest rate cap agreement 196 - 391 -
--------------------------------------------------------------------
30,847 21,969 67,112 52,684
Net change in non-cash working
capital balances (note 7) (16,420) (9,619) 10,066 (15,953)
--------------------------------------------------------------------
Cash flows from operating
activities 14,427 12,350 77,178 36,731
--------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of long-term debt 300,000 - 300,000 19,017
Increase (decrease) in bank
indebtedness 340 551 (8,777) (977)
Issuance of shares, net of
issue costs 77 12,483 67,356 12,483
Increase in deferred financing
costs (9,003) - (9,353) (1,191)
Repayment of long-term debt (94,385) - (101,189) (941)
Decrease in amounts due to
related parties (note 10) (5,655) - (3,937) -
--------------------------------------------------------------------
Cash flows from financing
activities 191,374 13,034 244,100 28,391
--------------------------------------------------------------------
CASH FLOWS USED IN INVESTING
ACTIVITIES
Additions to capital assets (30,955) (19,911) (102,284) (62,855)
Decrease (increase) in short
term deposits (106,243) 2,619 (154,697) 6,814
Increase in other assets (89) - (89) -
--------------------------------------------------------------------
Cash flows used in investing
activities (137,287) (17,292) (257,070) (56,041)
--------------------------------------------------------------------
Net increase in cash and cash
equivalents 68,514 8,092 64,208 9,081
Cash and cash equivalents,
beginning of period 2,623 2,167 6,929 1,178
--------------------------------------------------------------------
Cash and cash equivalents, end
of period 71,137 10,259 71,137 10,259
--------------------------------------------------------------------
--------------------------------------------------------------------
Supplemental cash flow
information
Cash payment for interest
charged to income 1,758 722 4,195 2,893
Cash payment for interest
capitalized 26 112 1,677 1,288
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Tabular figures are expressed in thousands of U.S. dollars, unless
otherwise indicated)
(Unaudited)
1. Basis of presentation The unaudited interim 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 do not conform in all respects to the requirements of 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. Accordingly, these interim consolidated financial statements 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 consolidated financial statements and notes included in the Company's Annual Report for the year ended December December: see month. 31, 2003. These interim consolidated financial statements follow 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 used in the consolidated financial statements for the year ended December 31, 2003. The quarterly results are not necessarily indicative indicative: see mood. of results to be expected for the entire year. The revenue for the third quarter of the year typically represents 25% to 30% of the entire year. 2. Interest expense
3 Months Ended 9 Months Ended
September 30 September 30
2004 2003 2004 2003
$ $ $ $
--------------------------------------------------------------------
Interest on long-term debt 3,621 1,985 5,150 6,064
Interest on short-term debt 394 472 1,221 1,358
Amortization of redemption premium
on long-term debt 558 731 2,015 1,641
--------------------------------------------------------------------
4,573 3,188 8,386 9,063
--------------------------------------------------------------------
--------------------------------------------------------------------
3. 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. Certain of the Company's banking facilities are collateralized by: (a) charges over certain of the Company's land-use rights, buildings and timber holdings which have an aggregate net book value at 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. date of $8,326,000 (December 31, 2003 - $9,161,000); and (b) certain short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. deposits at the consolidated balance sheet date of $8,780,000 (December 31, 2003 - $8,540,000). In respect of the timber holdings pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. in (a) above, the PRC CJV CJV Cooperative Joint Venture partners have undertaken to counter-indemnify the Company from their 30% share of the harvested timber. 4. Long-term debt On August 17, 2004, the Company issued $300 million non-convertible guaranteed senior notes. The notes bear interest at a rate of 9.125% per annum Per annum Yearly. and payable semi-annually. The notes mature on August 17, 2011. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $94 million of the proceeds from the notes offering were used to repay all the other long-term debts of the Company. Effective August 16, 2004, the Company entered into a currency swap Currency Swap A swap that involves the exchange of principal and interest in one currency for the same in another currency. Notes: Currency swaps were originally done to get around the problem of exchange controls. contract. Under the terms of the contract, the Company hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. RMB RMB Right Mouse Button RMB Regional Management Board (USACE) RMB Rolf Maier Bode (musician, band) RMB Ren Min Bi (currency of People's Republic of China) 113,290,070 on each of August 17 and February February: see month. 17 in exchange for $13,687,500. The U.S. dollars will be used to fully pay the Company's interest payments on the $300 million senior notes due on those dates. The term of the contract is five years. The Company received $750,000 from the counter party to enter into this contract. This amount will be amortized into income over the term of the contract. 5. Share capital Pursuant to a special resolution passed on June June: see month. 21, 2004, the Class A Subordinate-Voting Shares of the Company were reclassified as common shares. During the nine-month period ended September 30, 2004, 200,000 stock options have been exercised for proceeds of $272,000 and 200,000 common shares were issued. In May 2004, the Company completed a placement of 38,970,000 common shares for aggregate gross proceeds of $74,284,000. Share issue costs relating to the placement amounted to $7,277,000. In conjunction with the completion of the equity offering in May 2004, the Company purchased from management certain rights to acquire shares in Sino-Wood Partners, Limited pursuant to securities purchase agreements for approximately Cdn$12,000,000. The amount is paid by the issuance of 2,400,000 common shares valued at Cdn$2.65 per share based upon the offering price. One half of the shares will vest 90 days following the completion of the offering and the remaining one half will vest on the first anniversary of the completion of the offering. The Company will record compensation expense of approximately $7,800,000 over the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. The compensation expense recorded in the third quarter of 2004 amounted to $2,846,000. On May 11, 2004, options to acquire 2,820,000 common shares were granted to employees and independent directors at an exercise price of Cdn$2.72 in accordance with the Company's stock option plan. The options granted will vest over 3 years and expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on May 10, 2009. The fair value of the stock options granted was estimated to be $2,458,000 on the date of grant using the Black & Scholes Scholes(/skowlz/ or /šowlz/) could refer to the following places: United Kingdom:
-------------------------------------------------------------------- Dividend Yield 0.0% Volatility 54.6% Risk-free interest rate 3.7% Expected option lives (in years) 3.5 Weighted average fair value of each option (in U.S. dollars) $0.87 -------------------------------------------------------------------- -------------------------------------------------------------------- The compensation expense recorded for the third quarter of 2004 with respect to the above option granted amounted to $205,000. 6. Contributed surplus The contributed surplus of $5,744,000 represents stock-based compensation and options granted over the vesting period which was charged to the income statement during the period ended September 30, 2004. 7. Net change in non-cash working capital balances The net change in non-cash working capital balances comprises the following:
3 Months Ended 9 Months Ended
September 30 September 30
2004 2003 2004 2003
$ $ $ $
--------------------------------------------------------------------
Accounts receivable (20,609) (17,874) 792 (33,480)
Due from LFB - 6,621 - 10,202
Due from PRC CJV partners (97) (2,197) 3,988 2,684
Other receivables and prepaid
expenses 954 (494) 572 (897)
Inventories (389) 618 (1,246) (239)
Accounts payable and accrued
liabilities 2,080 1,977 3,102 3,608
Income taxes payable 1,641 1,730 2,858 2,169
--------------------------------------------------------------------
(16,420) (9,619) 10,066 (15,953)
--------------------------------------------------------------------
--------------------------------------------------------------------
8. Earnings per share Basic earnings per share is based on the weighted average number of common shares outstanding during the period. The common shares pledged under the Company's share purchase loans were deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. from the weighted average number of common shares outstanding in calculating basic earnings per share. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of is based on the weighted average number of common shares outstanding, adjusted for stock options outstanding, shares to be issued for the purchase of certain rights to acquire shares in Sino-Wood Partners, Limited and shares acquired under share purchase loans. The weighted average number of common shares outstanding for the period were as follows:
--------------------------------------------------------------------
Weighted average
Basic Diluted
--------------------------------------------------------------------
3 months ended September 30, 2004 136,029,000 137,034,000
9 months ended September 30, 2004 116,311,000 116,577,000
3 months ended September 30, 2003 80,727,000 90,903,000
9 months ended September 30, 2003 77,382,000 81,816,000
--------------------------------------------------------------------
--------------------------------------------------------------------
9. Segmented information
By industry segment
3 Months Ended 3 Months Ended
September 30, 2004 September 30, 2003
--------------------- ---------------------
Plant- Wood- Plant- Wood-
ation Based Total ation Based Total
$ $ $ $ $ $
--------------------------------------------------------------------
Revenue from external
customers
Sale of wood chips 43,963 - 43,963 40,791 - 40,791
Sale of wood-based
products - 18,536 18,536 - 18,516 18,516
Sale of standing
timber 27,706 - 27,706 15,273 - 15,273
Commission income 4,510 - 4,510 4,486 - 4,486
--------------------------------------------------------------------
76,179 18,536 94,715 60,550 18,516 79,066
--------------------------------------------------------------------
--------------------------------------------------------------------
Income (loss) from
operations 25,295 (1,513) 23,782 18,432 (1,028) 17,404
--------------------------------------------------------------------
--------------------------------------------------------------------
Identifiable assets 586,790 134,071 720,861 297,336 104,492 401,828
--------------------------------------------------------------------
--------------------------------------------------------------------
Interest income 432 16 448 35 4 39
--------------------------------------------------------------------
--------------------------------------------------------------------
Interest expense 2,329 2,244 4,573 375 2,813 3,188
--------------------------------------------------------------------
--------------------------------------------------------------------
Depreciation and
amortization 103 706 809 16 476 492
--------------------------------------------------------------------
--------------------------------------------------------------------
Provision for
(recovery of)
income taxes 1,720 (78) 1,642 1,772 (40) 1,732
--------------------------------------------------------------------
--------------------------------------------------------------------
Depletion of timber
holdings included
in cost of sales 8,212 - 8,212 7,036 - 7,036
--------------------------------------------------------------------
--------------------------------------------------------------------
Additions to capital
assets 29,694 1,261 30,955 19,156 755 19,911
--------------------------------------------------------------------
--------------------------------------------------------------------
By industry segment
9 Months Ended 3 Months Ended
September 30, 2004 September 30, 2003
--------------------- ---------------------
Plant- Wood- Plant- Wood-
ation Based Total ation Based Total
$ $ $ $ $ $
--------------------------------------------------------------------
Revenue from external
customers
Sale of wood chips 92,015 - 92,015 85,823 - 85,823
Sale of wood-based
products - 43,367 43,367 - 48,827 48,827
Sale of standing
timber 55,640 - 55,640 39,464 - 39,464
Commission income 9,294 - 9,294 9,289 - 9,289
--------------------------------------------------------------------
156,949 43,367 200,316 134,576 48,827 183,403
--------------------------------------------------------------------
--------------------------------------------------------------------
Income (loss) from
operations 50,224 (3,148) 47,076 37,875 (2,105) 35,770
--------------------------------------------------------------------
--------------------------------------------------------------------
Identifiable assets 586,790 134,071 720,861 297,336 104,492 401,828
--------------------------------------------------------------------
--------------------------------------------------------------------
Interest income 432 160 592 36 143 179
--------------------------------------------------------------------
--------------------------------------------------------------------
Interest expense 3,248 5,138 8,386 1,168 7,895 9,063
--------------------------------------------------------------------
--------------------------------------------------------------------
Depreciation and
amortization 121 2,125 2,246 62 1,389 1,451
--------------------------------------------------------------------
--------------------------------------------------------------------
Provision for
(recovery of)
income taxes 3,028 (167) 2,861 2,212 (33) 2,179
--------------------------------------------------------------------
--------------------------------------------------------------------
Depletion of timber
holdings included
in cost of sales 20,272 - 20,272 20,479 586 21,065
--------------------------------------------------------------------
--------------------------------------------------------------------
Additions to capital
assets 99,715 2,569 102,284 56,623 6,232 62,855
--------------------------------------------------------------------
--------------------------------------------------------------------
By geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. segment The Company conducts substantially all of its operations in one geographic area, East Asia East Asia A region of Asia coextensive with the Far East. East Asian adj. & n. . During the quarter ended September 30, 2004, sales in the PRC and to other countries amounted to approximately $90,205,000 (September 30, 2003 - $73,134,000) and $nil (September 30, 2003 - $1,446,000), respectively. 10. Related party transactions (a) Pursuant to the respective service agreements, the Company pays consultancy fees consultancy fee n → honoraires mpl d'expert consultancy fee n → onorario di consulenza to companies controlled by certain directors who are also executives officers in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. their compensation. The consultancy fees incurred for the period amounted to $398,000 (September 30, 2003 - $410,000). In addition, as at September 30, 2004, the Company had an aggregate amount of $19,000 (December 31, 2003 - $1,249,000) owed to these related companies. (b) The Company had provided interest free loans to employees under its stock option plan to finance the acquisition of common shares upon the exercise of options. When the Company made these loans, the proceeds of the sale of the relevant common shares were delivered to the Company, the loan was repaid, and the balance of the proceeds was held by the Company on behalf of the employees. During the third quarter ended September 30, 2004, $3,937,000 (December 31, 2003 - $3,937,000) of the proceeds held by the Company was repaid. These amounts were non-interest bearing and payable on demand. The Company had also assisted its employees in facilitating the sale of blocks of common shares held by employees. The proceeds of these sales were deposited in the Company's accounts on a temporary basis to be held by the Company on behalf of the employees. During the first quarter of 2004, the Company facilitated the sale of common shares for an executive officer. During the third quarter ended September 30, 2004, the balance of $1,718,000 (December 31, 2003 - nil) due to this executive officer was repaid. This amount was non-interest bearing and payable on demand. The Company does not intend to facilitate sales of common shares for employees in the future. (c) Interest expenses for the period ended September 30, 2004 on the Exchangeable Notes was $27,000 (September 30, 2003 - $4,235,000) in which one of the directors of the Company is an officer and shareholder in a management company that provides certain advisory, management and general administrative services to the entity that ultimately holds the Exchangeable Notes. (d) Interest expense and redemption premium redemption premium See call premium. charged for the period ended September 30, 2004 on the Convertible Instruments amounted to $433,000 (September 30, 2003 - $347,000) and $1,614,000 (September 30, 2003 - $1,314,000) respectively in which one of the directors of the Company is an officer and shareholder in a management company that provides certain advisory, management and general administrative services to the entity that ultimately holds the Convertible Instruments. 11. Commitments As at September 30, 2004, the Company has various commitments to make capital contributions to the PRC wholly foreign owned enterprises Wholly Foreign Owned Enterprises (WFOEs) have become the investment vehicle of choice for the international investor wishing to manufacture, process, or assemble in China. It negates the need for a Chinese partner and does not require large amounts of registered capital to fund. of $16,617,000 (December 31, 2003 - $18,442,000). In addition, the Company has capital commitments in respect of buildings, timber holdings, plant and machinery of $19,631,000 (December 31, 2003 - $15,887,000). Commitments under operating leases Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. for land and buildings are as follows:
$
--------------------------------------------------------------------
Within 1 year 858
In the second year 683
In the third year 306
In the fourth year 307
In the fifth year 294
Thereafter 21,213
--------------------------------------------------------------------
23,661
--------------------------------------------------------------------
--------------------------------------------------------------------
12. Comparative Financial Statements The comparative consolidated financial statements have been reclassified from statements previously presented to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the presentation of the September 30, 2004 consolidated financial statements. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion