EBITDA1 of $43 million on Sales of $397 million 
Net Debt to Invested Capital1 of 22%; Liquidity of $497 million
Chief Financial Officer Appointment

VANCOUVER, British Columbia, Aug. 06, 2020 (GLOBE NEWSWIRE) -- INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX: IFP) Interfor recorded net earnings in Q2’20 of $3.2 million, or $0.05 per share, compared to $6.3 million, or $0.09 per share in Q1’20 and a net loss of $11.2 million, or $0.17 per share in Q2’19.  Adjusted net earnings were $10.6 million in Q2’20 compared to $0.7 million in Q1’20 and an Adjusted net loss of $16.2 million in Q2’19.

Adjusted EBITDA was $42.8 million on sales of $396.8 million in Q2’20 versus $36.6 million on sales of $479.6 million in Q1’20.

Notable items in the quarter included:

•  Strengthened Financial Position

  • Net debt ended the quarter at $239.1 million, or 21.6% of invested capital, resulting in available liquidity of $496.9 million. 

  • Interfor generated $37.6 million of cash flow from operations before changes in working capital, or $0.56 per share.  Working capital investment decreased by $65.4 million from efforts to optimize lumber and log inventory levels in response to the COVID-19 pandemic.

  • Capital spending was $23.6 million, including $18.9 million on high-return discretionary projects, primarily in the U.S. South.  US$76.1 million has been spent on the Company’s Phase II strategic capital plan through June 30, 2020.

  • With its strengthened financial position, Interfor has increased its planned capital expenditures for 2020 by $20 million to a total of approximately $120 million.

•  Lumber Production Decline Due to COVID-19 Related Curtailments

  • Total lumber production in Q2’20 was 421 million board feet, down 206 million board feet quarter-over-quarter. This decline reflects Interfor’s previously announced plan to temporarily reduce production across its operations in response to the COVID-19 pandemic.  By the end of Q2’20, the Company’s lumber production had returned to rates typical for the period preceding the pandemic.

  • Production in the B.C. region declined to 115 million board feet from 186 million board feet in the preceding quarter.  The U.S. South and U.S. Northwest regions accounted for 230 million board feet and 76 million board feet, respectively, compared to 311 million board feet and 130 million board feet in Q1’20. 

  • Lumber inventory levels decreased 68 million board feet over the course of Q2’20.   

•  Mixed Lumber Price Movements

  • Movements in the key benchmark prices were mixed quarter-over-quarter with the Western SPF Composite and KD H-F Stud 2x4 9’ benchmarks decreasing by US$30 and US$16 per mfbm to US$350 and US$415 per mfbm, respectively, while the SYP Composite increased by US$77 per mfbm to US$428 per mfbm.  Interfor’s average lumber selling price increased $53 from Q1’20 to $646 per mfbm.

  • While lumber prices fell sharply in the initial stages of COVID-19, industry-wide production curtailments and growing demand have contributed to the strengthening price environment since mid-April 2020.

•  Softwood Lumber Duties

  • Interfor expensed $7.4 million of duties in the quarter, representing the full amount of countervailing and anti-dumping duties incurred on its Canadian shipments of softwood lumber into the U.S. at a combined rate of 20.23%.  Cumulative duties of US$106.7 million have been paid by Interfor since the inception of the current trade dispute and are held in trust by U.S. Customs and Border Protection. 

  • On February 3, 2020 the U.S. Department of Commerce issued preliminary revised combined rates of 8.37% for 2017 and 8.21% for 2018.  These rates remain preliminary, with final rate determinations not expected until November 2020.  At such time, the final rates will be applied to new lumber shipments.  No adjustments have been recorded in the financial statements as of June 30, 2020 to reflect the preliminary revised duty rates.

1 Refer to Adjusted EBITDA and Net debt to invested capital in the Non-GAAP Measures section

Outlook

Near-term lumber demand is expected to remain strong, as repair and renovation lumber demand continues to be robust and U.S. housing starts recover from the initial impacts of the COVID-19 pandemic.  Industry-wide lumber production curtailments in March resulted in supply shortages and higher lumber prices.  However, recovery of the economy in North America continues to be impacted by uncertainties related to COVID-19. 

Interfor’s strategy of maintaining a diversified portfolio of operations allows the Company to both reduce risk and maximize returns on invested capital over the business cycle.  

While uncertainty remains as to the duration and extent of the economic impact from the COVID-19 pandemic, Interfor is well positioned with its strong balance sheet and significant available liquidity.

Chief Financial Officer Appointment

At its meeting earlier today, the Company’s Board of Directors confirmed the appointment of Rick Pozzebon as Senior Vice-President & Chief Financial Officer, effective August 6, 2020. Mr. Pozzebon, who is 42 and a CPA, CA and CFA Charterholder, joined Interfor in January 2014. As Vice President, Corporate Controller, he has led the Company’s corporate finance and tax functions. He has more than 18 years of experience working with one of the big four accounting firms in both the US and Canada and in various senior corporate finance roles.  

Financial and Operating Highlights1 

  For the 3 months ended For the 6 months ended
  Jun. 30Jun. 30Mar. 31 Jun. 30Jun. 30
 Unit202020192020 20202019
        
Financial Highlights2       
Total sales$MM396.8481.3479.6 876.4932.5
Lumber$MM322.1406.9379.3 701.4787.4
Logs, residual products and other$MM74.774.4100.3 175.0145.1
Operating earnings (loss)$MM13.3(18.2)14.6 27.9(35.0)
Net earnings (loss)$MM3.2(11.2)6.3 9.5(26.5)
Net earnings (loss) per share, basic$/share0.05(0.17)0.09 0.14(0.39)
Adjusted net earnings (loss)3$MM10.6(16.2)0.7 11.4(28.9)
Adjusted net earnings (loss) per share, basic3$/share0.16(0.24)0.01 0.17(0.43)
Operating cash flow per share
      (before working capital changes)3		$/share0.560.150.57 1.130.40
Adjusted EBITDA3$MM42.812.636.6 79.428.9
Adjusted EBITDA margin3%10.8%2.6%7.6% 9.1%3.1%
        
Total assets$MM1,538.81,459.81,569.5 1,538.81,459.8
Total debt$MM408.8261.7425.6 408.8261.7
Net debt3$MM239.1198.2322.0 239.1198.2
Net debt to invested capital3%21.6%17.9%26.7% 21.6%17.9%
Annualized return on invested capital3%14.8%4.6%12.9% 14.7%5.4%
        
Operating Highlights       
Lumber productionmillion fbm421647627 1,0471,293
Total lumber salesmillion fbm499674641 1,1401,295
Lumber sales - Interfor producedmillion fbm488664632 1,1201,274
Lumber sales - wholesale and commissionmillion fbm11109 2021
Lumber - average selling price4$/thousand fbm646603592 616608
        
Average USD/CAD exchange rate51 USD in CAD1.38621.33771.3449 1.36511.3336
Closing USD/CAD exchange rate51 USD in CAD1.36281.30871.4187 1.36281.3087
        

Notes:

  1. Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
  2. Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.
  3. Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s consolidated financial statements. 
  4. Gross sales before duties.
  5. Based on Bank of Canada foreign exchange rates.

Liquidity

Balance Sheet

Interfor’s net debt at June 30, 2020 was $239.1 million, or 21.6% of invested capital, representing an increase of $14.3 million since December 31, 2019. 

In response to COVID-19, the Company has taken steps to significantly reduce its working capital through balancing inventory levels with demand and reducing discretionary spending and commitments.  The Company also continues to actively review the evolving Canadian and U.S. government stimulus programs to access any available support for its business operations and employees.

As at June 30, 2020 the Company had net working capital of $275.7 million and available liquidity of $496.9 million, based on the full borrowing capacity under its $350 million Revolving Term Line.

The Revolving Term Line and Senior Secured Notes are subject to financial covenants, including net debt to total capitalization ratios, and an EBITDA interest coverage ratio that could affect the Company’s borrowing capacity under the Revolving Term Line.   

Management believes, based on circumstances known today, that Interfor has sufficient working capital and liquidity to fund operating and capital requirements for the foreseeable future. 

 For the 3 months ended Jun. 30,
 For the 6 months ended Jun. 30,
Thousands of Dollars20202019 20202019
         
Net debt        
Net debt, period opening$322,036$172,746 $224,860$63,825
Issuance of Senior Secured Notes - - 140,770 -
Term Line net drawings (repayments) - - (59) 750
Impact on U.S. Dollar denominated debt from (strengthening) weakening CAD (16,770) (5,520) 8,370 (11,850)
Decrease (increase) in cash and cash equivalents (71,640) 30,028 (140,624) 98,918
Decrease in marketable securities - - - 41,766
Impact on U.S. Dollar denominated cash and cash equivalents and marketable securities from strengthening CAD 5,488 955 5,798 4,800
Net debt, period ending$239,114$198,209 $239,114$198,209

On March 26, 2020, the Company issued US$50,000,000 of Series F Senior Secured Notes, bearing interest at 3.34%, and US$50,000,000 of Series G Senior Secured Notes, bearing interest at 3.25%. Each series of these Senior Secured Notes have equal payments of US$16,667,000 due on each of March 26, 2028, 2029 and on maturity in 2030. 

Capital Resources

The following table summarizes Interfor’s credit facilities and availability as of June 30, 2020:

 RevolvingSenior 
 TermSecured 
Thousands of Canadian DollarsLineNotesTotal
Available line of credit and maximum borrowing available$350,000$408,840$758,840
Less:   
Drawings-408,840408,840
Outstanding letters of credit included in line utilization22,849-22,849
Unused portion of facility$327,151$          -327,151
    
Add:   
Cash and cash equivalents  169,726
Available liquidity at June 30, 2020  $496,877

Interfor’s Revolving Term Line matures in March 2024 and its Senior Secured Notes have maturities principally in the years 2024-2030.

As of June 30, 2020, the Company had commitments for capital expenditures totaling $45.0 million for both maintenance and discretionary capital projects.

Non-GAAP Measures

This release makes reference to the following non-GAAP measures: Adjusted net earnings (loss), Adjusted net earnings (loss) per share, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net debt to invested capital, Operating cash flow per share (before working capital changes), and Return on invested capital which are used by the Company and certain investors to evaluate operating performance and financial position.  These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. 

The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company’s audited consolidated financial statements (unaudited for interim periods) prepared in accordance with IFRS:

 For the 3 months ended For the 6 months ended
 Jun. 30Jun. 30Mar. 31 Jun. 30Jun. 30
Thousands of Canadian Dollars except number of shares and per share amounts202020192020 20202019
       
Adjusted Net Earnings (Loss)       
Net earnings (loss)$3,235$(11,159)$6,309 $9,544$(26,461)
Add:      
Capital asset write-downs and restructuring costs11587371 4861,752
Other foreign exchange loss (gain)4,963321849 5,812(19)
Long term incentive compensation expense (recovery)5,629(851)(8,946) (3,317)1,132
Other (income) expense(586)(6,487)115 (471)(6,323)
Income tax effect of above adjustments(2,712)1,8662,043 (669)991
Adjusted net earnings (loss)$10,644$(16,223)$741 $11,385$(28,928)
Weighted average number of shares - basic ('000)67,260 67,252 67,260  67,260 67,300
Adjusted net earnings (loss) per share$0.16$(0.24)$0.01 $0.17$(0.43)
       
Adjusted EBITDA      
Net earnings (loss)$3,235$(11,159)$6,309 $9,544$(26,461)
Add:      
Depreciation of plant and equipment15,60119,41020,061 35,66239,132
Depletion and amortization of timber, roads and other8,10812,20110,530 18,63821,938
Capital asset write-downs and restructuring costs11587371 4861,752
Finance costs5,1853,3244,096 9,2817,500
Other foreign exchange loss (gain)4,963321849 5,812(19)
Income tax expense (recovery)563(4,196)3,205 3,768(9,704)
EBITDA37,77019,98845,421 83,19134,138
Add:      
Long term incentive compensation expense (recovery)5,629(851)(8,946) (3,317)1,132
Other (income) expense(586)(6,487)115 (471)(6,323)
Adjusted EBITDA$42,813$12,650$36,590 $79,403$28,947
Sales$396,778$481,345$479,646 $876,424$932,508
Adjusted EBITDA margin10.8%2.6%7.6% 9.1%3.1%
       
Net debt to invested capital      
Net debt      
Total debt$408,840$261,740$425,610 $408,840$261,740
Cash and cash equivalents(169,726)(63,531)(103,574) (169,726)(63,531)
Total net debt$239,114$198,209$322,036 $239,114$198,209
Invested capital      
Net debt$239,114$198,209$322,036 $239,114$198,209
Shareholders' equity869,443911,409882,917 869,443911,409
Total invested capital$1,108,557$1,109,618$1,204,953 $1,108,557$1,109,618
Net debt to invested capital121.6%17.9%26.7% 21.6%17.9%
       
Operating cash flow per share (before working capital changes)      
Cash provided by (used in) operating activities$103,003$32,302$19,319 $122,322$(26,048)
Cash used in (generated from) operating working capital(65,439)(22,443)19,103 (46,336)52,992
Operating cash flow (before working capital changes)$37,564$9,859$38,422 $75,986$26,944
Weighted average number of shares - basic ('000)67,260 67,252 67,260  67,260 67,300
Operating cash flow per share (before working capital changes)$0.56$0.15$0.57 $1.13$0.40
       
Annualized return on invested capital      
Adjusted EBITDA$42,813$12,650$36,590 $79,403$28,947
Invested capital, beginning of period$1,204,953$1,106,255$1,055,842 $1,055,842$1,032,591
Invested capital, end of period1,108,5571,109,6181,204,953 1,108,5571,109,618
Average invested capital$1,156,755$1,107,937$1,130,398 $1,082,200$1,071,105
Adjusted EBITDA divided by average invested capital3.7%1.1%3.2% 7.3%2.7%
Annualization factor4.04.04.0 2.02.0
Annualized return on invested capital14.8%4.6%12.9% 14.7%5.4%

Note: 1 Net debt to invested capital as of the period end.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
For the three and six months ended June 30, 2020 and 2019 (unaudited)
(thousands of Canadian Dollars except earnings per share)Three MonthsThree MonthsSix MonthsSix Months
  Jun. 30, 2020Jun. 30, 2019Jun. 30, 2020Jun. 30, 2019
      
Sales$396,778$481,345$876,424$932,508
Costs and expenses:    
 Production337,134448,043760,362861,226
 Selling and administration9,4449,80818,67220,373
 Long term incentive compensation expense (recovery)5,629(851)(3,317)1,132
 U.S. countervailing and anti-dumping duty deposits7,38710,84417,98721,962
 Depreciation of plant and equipment15,60119,41035,66239,132
 Depletion and amortization of timber, roads and other8,10812,20118,63821,938
  383,303499,455848,004965,763
     
Operating earnings (loss) before write-downs and     
restructuring costs13,475(18,110)28,420(33,255)
     
Capital asset write-downs and restructuring costs115874861,752
Operating earnings (loss)13,360(18,197)27,934(35,007)
     
Finance costs(5,185)(3,324)(9,281) (7,500)
Other foreign exchange gain (loss)(4,963)(321)(5,812)19
Other income (expense)5866,4874716,323
 (9,562)2,842(14,622)(1,158)
      
Earnings (loss) before income taxes3,798(15,355)13,312(36,165)
      
Income tax expense (recovery):    
 Current(193)233136393
 Deferred756(4,429)3,632(10,097)
 563(4,196)3,768(9,704)
      
Net earnings (loss)$3,235$(11,159)$9,544$(26,461)
     
Net earnings (loss) per share, basic and diluted$0.05$(0.17)$0.14$(0.39)


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the three and six months ended June 30, 2020 and 2019 (unaudited)
(thousands of Canadian Dollars)Three MonthsThree MonthsSix MonthsSix Months
 Jun. 30, 2020Jun. 30, 2019Jun. 30, 2020Jun. 30, 2019
     
Net earnings (loss)
$3,235$(11,159)$9,544$(26,461)
     
Other comprehensive income (loss):    
Items that will not be recycled to Net earnings (loss):    
Defined benefit plan actuarial gain (loss), net of tax(543)(439)(1,256)133
     
Items that are or may be recycled to Net earnings (loss):    
Foreign currency translation differences for    
foreign operations, net of tax(16,400)(10,728)29,683(23,601)
Total other comprehensive income (loss), net of tax(16,943)(11,167)28,427(23,468)
     
Comprehensive income (loss)$(13,708)$(22,326)$37,971$(49,929)


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and six months ended June 30, 2020 and 2019 (unaudited)
(thousands of Canadian Dollars)Three MonthsThree MonthsSix MonthsSix Months
 Jun. 30, 2020Jun. 30, 2019Jun. 30, 2020Jun. 30, 2019
     
Cash provided by (used in):    
Operating activities:    
Net earnings (loss)$3,235$(11,159)$9,544$(26,461)
Items not involving cash:    
Depreciation of plant and equipment15,60119,41035,66239,132
Depletion and amortization of timber, roads and other8,10812,20118,63821,938
Deferred income tax expense (recovery)756(4,429)3,632(10,097)
Current income tax expense (recovery)(193)233136393
Finance costs5,1853,3249,2817,500
Other assets(450)304486321
Reforestation liability(4,616)(3,250)(1,850)(743)
Provisions and other liabilities4,993(801)(5,300)(1,004)
Stock options234209490317
Write-down (recovery) of plant and equipment(53)88(53)1,811
Unrealized foreign exchange loss5,3502165,791160
Other income(586)(6,487)(471)(6,323)
 37,5649,85975,98626,944
Cash generated from (used in) operating working capital:    
Trade accounts receivable and other(6,164)(5,873)(29,577)(20,448)
Inventories65,96817,60567,323(9,565)
Prepayments4,020(2,873)1,907(5,742)
Trade accounts payable and provisions1,60913,8626,671(16,662)
Income tax refund (payment)6(278)12(575)
 103,00332,302122,322(26,048)
     
Investing activities:    
Additions to property, plant and equipment(21,116)(58,904)(45,988)(94,830)
Additions to roads and bridges(2,439)(5,661)(5,143)(13,505)
Additions to intangible assets-(20)-(72)
Acquisition of timber license, roads and other assets    
  net of assumed liabilities--(56,606)-
Proceeds on disposal of property, plant and equipment and other7058,0328678,140
Net proceeds from (additions to) marketable securities,    
deposits and other assets(681)(11)(879)46,760
 (23,531)(56,564)(107,749)(53,507)
     
Financing activities:    
Issuance of share capital, net of expenses -17-80
Share repurchases---(7,825)
Interest payments(4,751)(2,837)(8,509)(5,417)
Lease liability payments(3,074)(2,779)(6,008)(5,765)
Debt refinancing costs(7)(172)(143)(1,191)
Operating line net drawings (repayments)-5(59)5
Additions to long term debt--140,770197,925
Repayments of long term debt---(197,175)
 (7,832)(5,766)126,051(19,363)
     
Foreign exchange loss on cash and    
cash equivalents held in a foreign currency(5,488)(955)(5,798)(3,703)
Increase (decrease) in cash 66,152(30,983)134,826(102,621)
     
Cash and cash equivalents, beginning of period103,57494,51434,900166,152
     
Cash and cash equivalents, end of period$169,726$63,531$169,726$63,531


CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 
June 30, 2020 and December 31, 2019 (unaudited) 
(thousands of Canadian Dollars)  
 Jun. 30, 2020Dec. 31, 2019
  
Assets  
Current assets:  
 Cash and cash equivalents$169,726$34,900
 Trade accounts receivable and other119,71286,608
 Income taxes receivable1,8881,995
 Inventories119,934181,577
 Prepayments19,46020,449
  430,720325,529
   
Employee future benefits110673
Deposits and other assets9,9889,296
Right of use assets32,60032,780
Property, plant and equipment774,810739,515
Roads and bridges20,51424,353
Timber licences116,83760,596
Other intangible assets3,0323,480
Goodwill145,570138,734
Deferred income taxes4,6436,961
   
 $1,538,824$1,341,917
   
Liabilities and Shareholders’ Equity  
Current liabilities:  
 Trade accounts payable and provisions$120,095$114,358
 Current portion of long term debt7,381-
 Reforestation liability16,21613,021
 Lease liabilities11,21010,105
 Income taxes payable134163
 155,036137,647
    
Reforestation liability29,85327,401
Lease liabilities26,02327,718
Long term debt401,459259,760
Employee future benefits13,13211,843
Provisions and other liabilities14,13818,957
Deferred income taxes29,74027,609
   
Equity:  
 Share capital533,685533,685
 Contributed surplus4,9614,471
 Translation reserve86,44256,759
 Retained earnings244,355236,067
   
  869,443830,982
    
 $1,538,824$1,341,917

Approved on behalf of the Board:

“L. Sauder”  “Thomas V. Milroy”
Director  Director

FORWARD-LOOKING STATEMENTS

This release contains forward-looking information about the Company’s business outlook, objectives, plans, strategic priorities and other information that is not historical fact.  A statement contains forward-looking information when the Company uses what it knows and expects today, to make a statement about the future.  Statements containing forward-looking information may include words such as: will, could, should, believe, expect, anticipate, intend, forecast, projection, target, outlook, opportunity, risk or strategy.  Readers are cautioned that actual results may vary from the forward-looking information in this release, and undue reliance should not be placed on such forward-looking information.  Risk factors that could cause actual results to differ materially from the forward-looking information in this release are described in Interfor’s second quarter and annual Management’s Discussion & Analysis under the heading “Risks and Uncertainties”, which is available on www.interfor.com and under Interfor’s profile on www.sedar.com.  Material factors and assumptions used to develop the forward-looking information in this release include volatility in the selling prices for lumber, logs and wood chips; the Company’s ability to compete on a global basis; the availability and cost of log supply; natural or man-made disasters; currency exchange rates; changes in government regulations; the availability of the Company’s allowable annual cut (“AAC”); claims by and treaty settlements with Indigenous peoples; the Company’s ability to export its products; the softwood lumber trade dispute between Canada and the U.S.; stumpage fees payable to the Province of British Columbia; environmental impacts of the Company’s operations; labour disruptions; information systems security; and the existence of a public health crisis (such as the current COVID-19 pandemic).  Unless otherwise indicated, the forward-looking information in this release is based on the Company’s expectations at the date of this release.  Interfor undertakes no obligation to update such forward-looking information, except as required by law.

ABOUT INTERFOR

Interfor is a growth-oriented lumber company with operations in Canada and the United States.  The Company has annual production capacity of approximately 3.0 billion board feet and offers one of the most diverse lines of lumber products to customers around the world.  For more information about Interfor, visit our website at www.interfor.com.

The Company’s unaudited consolidated financial statements and Management’s Discussion and Analysis for Q2’20 are available at www.sedar.com and www.interfor.com. 

There will be a conference call on Friday, August 7, 2020 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its second quarter 2020 financial results.

The dial-in number is 1-833-297-9919.  The conference call will also be recorded for those unable to join in for the live discussion and will be available until September 6, 2020.  The number to call is 1-855-859-2056, Passcode 3361629.

For further information:
Ian Fillinger, President and Chief Executive Officer
(604) 689-6800


InterforNewLogo.jpg

Source: Interfor Corporation

2020 GlobeNewswire, Inc., source Press Releases