Financial Highlights
For the complete Annual Report for the year ended December 31, 2009 please visit Quarterly & Annual Reports. Selected Annual Financial Information
| (in millions of dollars except where otherwise noted) |
2009 | 2008 | 2007 |
| Sales | $ | 150.3 | $ | 163.7 | $ | 318.4 |
| Net earnings (loss) from continuing operations | | (55.4) | | 240.7 | | (13.3) |
| Net loss from continuing operations excluding unusual items1 | | (0.8) | | (101.3) | | (13.3) |
| Net earnings (loss) | | (55.8) | | 235.3 | | (31.8) |
| Net loss excluding unusual items1 | | (1.2) | | (106.7) | | (31.8) |
| Per common share – basic and diluted (in dollars) | | | | | | |
| Net earnings (loss) from continuing operations | $ | (0.71) | $ | 3.10 | $ | (0.17) |
| Net loss from continuing operations excluding unusual items1 | | (0.01) | | (1.30) | | (0.17) |
| Net earnings (loss) | | (0.72) | | 3.03 | | (0.41) |
| Net loss excluding unusual items1 | | (0.02) | | (1.37) | | (0.41) |
| Total assets | $ | 1,264.4 | $ | 1,300.2 | $ | 1,296.4 |
| Total long-term financial liabilities, excluding Series A Subordinate Notes | | 360.4 | | 189.8 | | 187.5 |
| Interest payments on Series A Subordinate Notes held by unitholders. | $ | - | $ | 84.0 | $ | 83.6 |
1 Net loss from continuing operations excluding unusual items and net loss excluding unusual items are non-GAAP measures. Unusual items are defined as the following, net of their associated income tax impact: (i)gain on modification of Series A Subordinate Notes; (ii) accretion expense on the Series A Subordinate Notes; and (iii) change in fair value of financial instruments held for trading.
These unusual items, net of their income tax impact, are quantified in the following table:
| (in millions of dollars) | | 2009 | 2008 | 2007 |
| Accretion expense on Series A Subordinate Notes Accretion expense on Series A Subordinate Notes | | $ | (6.6) | $ | - | $ | - |
| Change in fair value of financial instruments held for trading | | | (54.4) | | - | | - |
| Gain on modification of Series A Subordinate Notes | | | - | | 461.6 | | - |
| Total unusual items | | | (61.0) | | 461.6 | | - |
| Income tax recognized on unusual items | | | 6.4 | | (119.6) | | - |
| Total unusual items, net of income tax | | $ | (54.6) | $ | 342.0 | $ | - |
| Total unusual items per common share – basic and diluted (in dollars) | | $ | (0.70) | $ | 4.40 | $ | - |
| | | | | | | | |
2009 vs. 2008
The balance sheet is stronger year over year due to improved liquidity as a result of $150 million raised through the issuance of convertible debentures during 2009. The business used approximately $33.5 million in cash during the year. Asset sales covered fixed operating costs and cash used to cover refinancing costs and cash interest obligations.
The decrease in total sales of $13.4 million in 2009 was due to a decrease of $21.7 million in log sales offset by increases of $3.3 million in real estate sales and increases of $5.0 million in other sales in 2009 compared to 2008. Average sales realizations and sales volumes for logs were lower in 2009 as a result of overall weak markets and the continuation of the Company’s deferred harvest strategy on private lands. 2009 real estate sales included proceeds of $1.8 million relating to two right-of-way agreements entered into during the year. Other sales in 2009 include $4.5 million of revenue generated as a result of TimberWest chartering its own vessels to ship to Asian markets. This revenue is offset by costs associated with chartering ships. This was the first year TimberWest chartered its own vessels.
Continuing operations generated a net loss of $0.8 million before unusual items in 2009 compared to a 2008 net loss of $101.3 million. This variance is primarily the result of lower interest expense on the Series A Subordinate Notes due to the reduction of the per annum interest rate from 12% (fixed) to 2% (variable) that came into effect on December 31, 2008 and a future income tax recovery before unusual items of $55.7 million in 2009 compared to a future income tax recovery before unusual items of $5.1 million in 2008. 2009 net loss from continuing operations includes a change in fair value of financial instruments of $54.4 million, financing transaction costs of $5.5 million and a non-cash future income tax recovery of $62.1 million. 2008 net earnings from continuing operations included restructuring costs of $9.4 million and a non-cash future income tax expense of $114.5 million. Including discontinued operations, the net loss for the year ended December 31, 2009 was $55.8 million compared to net earnings of $235.3 million for 2008.
The 2009 long-term debt, excluding the Series A Subordinate Notes was $306.0 million, which was comprised of $152.6 million drawn on the long-term revolving credit facility and the issuance of the 9% five-year convertible debentures with a face value of $153.4 million. Comparatively, the 2008 long-term debt was $189.8 million drawn on the unsecured revolving facility. In 2009, no cash interest payments were made on the Series A Subordinate Note component of the Stapled Units held by unitholders as the payments were deferred commencing with the January 15, 2009 payment. In 2008, the interest payments on the Series A Subordinate Note were $1.08 per Stapled Unit. The balance sheet is stronger year over year due to improved liquidity as a result of $150 million raised through the issuance of convertible debentures during 2009.
Q4 2009 vs. Q4 2008
Total sales increased by $8.5 million in Q4 2009 over Q4 2008 due to an increase in log sales volumes. Real estate sales were flat at $0.3 million for both Q4 2009 and Q4 2008.
Continuing operations generated net earnings of $39.2 million before accretion and fair value adjustments of financial instruments net of income tax in Q4 2009 compared to a Q4 2008 net loss of $29.7 million after adjusting for the 2008 $342.0 million gain on modification of the Series A Subordinate Notes net of income tax. This variance is primarily the result of lower interest expense on the Series A Subordinate Notes due to the reduction of the per annum interest rate from 12% (fixed) to 2% (variable) that came into effect on December 31, 2008, and a non-cash future income tax recovery of $53.0 million recognized in Q4 2009.
Timberlands
| (in millions of dollars except where otherwise noted) | | Q4 2009 | Q4 2008 |
| Log sales | | | | | | | | |
| Domestic | | | | $ | 22.2 | | $ | 14.8 |
| Export – Asia | | | | | 17.5 | | | 17.1 |
| Export - USA | | | | | 0.4 | | | 3.0 |
| Total log sales | | | | | 40.1 | | | 34.9 |
| Log sales realizations ($/m3) | | | | | | | | |
| Domestic | | | | | 59 | | | 54 |
| Export – Asia | | | | | 86 | | | 118 |
| Export - USA | | | | | 63 | | | 64 |
| Total log sales realizations | | | | | 69 | | | 75 |
| Log sales volume (thousand m3) | | | | | | | | |
| Domestic | | | | | 374.5 | | | 272.9 |
| Export – Asia | | | | | 203.9 | | | 145.7 |
| Export - USA | | | | | 5.4 | | | 46.6 |
| Total log sales volume | | | | | 583.8 | | | 465.2 |
| Log sales mix (thousand m3) | | | | | | | | |
| Fir | | | | | 277.0 | | | 284.0 |
| Hembal | | | | | 225.9 | | | 131.5 |
| Cedar | | | | | 30.2 | | | 18.4 |
| Other | | | | | 50.7 | | | 31.3 |
| Total log sales mix | | | | | 583.8 | | | 465.2 |
| Log production volume (thousand m3) | | | | | | | | |
| Public tenures | | | | | 153.6 | | | 35.1 |
| Private timberlands | | | | | 456.0 | | | 414.3 |
| Total production volume | | | | | 609.6 | | | 449.4 |
| Log production costs ($/m3) | | | | | 62 | | | 71 |
| Timberland cost of sales ($/m3) | | | | | 64 | | | 73 |
| Timberland operating margin (% of log sales) | | | | | 6% | | | 1% |
| | | | | | | | | |
The increase in domestic log sales volumes in Q4, 2009 compared to Q4, 2008 was due to a log supply shortage resulting from reduced harvest levels on the BC coast. Higher log sales volumes to Asia in Q4, 2009 were offset by soft log sales realizations compared to Q4, 2008 as a result of the strengthening Canadian dollar against the US dollar in the fourth quarter.
Timberland operations generated other sales of $4.0 million in the fourth quarter of 2009, compared to $0.7 million in Q4, 2008. Other sales in Q4 2009 include $1.4 million of revenue generated as a result of TimberWest chartering its own vessels to ship to Asian markets. This was the first year TimberWest chartered its own vessels.
Real Estate
In Q4 2009, one property was sold for gross proceeds of $0.3 million or $8,824 per acre. In Q4 2008, one property was sold for gross proceeds of $0.3 million or $16,390 per acre.
Discontinued Operations
During the quarter ending December 31, 2009, the Company incurred a net loss of $0.1 million with respect to its discontinued operations compared to net earnings of $2.3 million for the prior year comparable period.
Net earnings (loss)
Q4 net earnings from continuing operations include a change in fair value of financial instruments of $29.7 million, and a non-cash future income tax recovery of $53.0 million. 2008 Q4 net earnings from continuing operations included restructuring costs of $4.4 million and a non-cash future income tax expense of $120.3 million. Including discontinued operations, the net earnings for the quarter ended December 31, 2009 was $8.2 million compared to net earnings of $314.6 million for Q4 2008.
EBITDA
EBITDA from continuing operations for the quarter ended December 31, 2009, increased to $(1.0) million, compared to $(7.5) million for Q4 2008. On a per weighted average Stapled Unit basis, EBITDA from continuing operations increased to $(0.01) for Q4 2009, from $(0.10) in Q4 2008. Including discontinued operations, EBITDA for the quarter ended December 31, 2009 increased to $(1.1) million, compared to $(5.2) million for Q4 2008. On a per weighted average Stapled Unit basis EBITDA increased to $(0.01) for Q4 2009 from $(0.07) for Q4 2008.
Distributable cash
Distributable cash from continuing operations for Q4 2009 was $(10.1) million, an improvement of $1.3 million from $(11.4) million in Q4 2008.
Highlights & Significant Transactions
Cash distribution on the Stapled Units
As announced in November, 2008, the January 15, 2009 distribution payment was deferred for up to 27 months pursuant to the terms of the Note Indenture and all 2009 distribution payments, payable at 2%, were deferred for 18 months. The Company has set the variable interest rate at 2% for 2010 and intends to defer cash distribution payments for the foreseeable future. As deferred distributions become payable, the Company intends to make payment in kind by the issuance of additional Stapled Units. The first deferred distribution becomes payable on October 15, 2010.
Interest payment on the convertible debentures
The Company made cash interest payments up to July 15, 2009, and commenced paying interest on the convertible debentures in kind starting with the October 15, 2009 interest payment. As a result, additional convertible debentures with a face value of $3.4 million were issued on both October 15, 2009 and January 15, 2010. The Company intends to make interest payments in kind by the issuance of additional convertible debentures for the foreseeable future. At the Annual General Meeting in May 2010, the Company will seek approval from unitholders to make future interest payments in kind by the issuance of additional convertible debentures.
Property taxes
During 2009 the City of Campbell River increased its property tax rate on Class 7 managed forest lands. TimberWest filed a petition with the B.C. Supreme Court on June 9, 2009 to challenge this tax increase and a court hearing was held in September. TimberWest has paid the full assessed taxes of $1.2 million. On December 31, 2009, the British Columbia Supreme Court ruled in the Company’s favour and declared the tax was unlawfully levied by the City of Campbell River. Subsequent to the year end, the Company received a refund of over $1.0 million and will receive the remainder. The Company awaits the resetting of the 2009 property tax rate on Class 7 managed forests by the City of Campbell River.
Unit Distribution History
Since inception through 2008, TimberWest has distributed approximately $880 million to unitholders.
| 2009: | $31.5 million deferred, or $0.40 per unit |
| 2008: | $84.0 million distributed, or $1.08 per unit |
| 2007: | $83.6 million distributed, or $1.08 per unit |
| 2006: | $83.6 million distributed, or $1.08 per unit |
| 2005: | $83.1 million distributed, or $1.08 per unit |
| 2004: | $82.3 million distributed, or $1.08 per unit |
| 2003: | $82.1 million distributed, or $1.08 per unit |
| 2002: | $78.9 million distributed, or $1.08 per unit |
| 2001: | $69.9 million distributed, or $1.08 per unit |
| 2000: | $73.2 million distributed, or $1.08 per unit |
| 1999: | $75.0 million distributed, or $1.08 per unit |
| 1998: | $73.6 million distributed, or $1.06 per unit |
| 1997: | $11.1 million distributed, or $0.325 per unit |
*Distributable cash, earnings available for distribution and EBITDA are measures that do not have a standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and may not be comparable to similar measures presented by other companies. Management believes that the presentation of this measure will enhance an investor's understanding of the Company's operating performance. A reconciliation of net earnings as determined in accordance with GAAP and these measures is provided in the Company's 2009 Annual Report.