EX-99.3 4 exhibit99-3.htm EXHIBIT 99.3 Tembec Inc.: Exhibit 99.3 - Filed by newsfilecorp.com

Exhibit 99.3

Unaudited supplemental condensed consolidating financial information of

TEMBEC INC.

Years ended September 28, 2013 and September 29, 2012


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

The following condensed consolidating financial information is prepared in compliance with National Instrument 51-102 – Continuous Disclosure Obligations, under Canadian securities laws.

The senior secured notes (the “Notes”) of Tembec Industries Inc. (the "Subsidiary Issuer") are fully and unconditionally guaranteed on a joint and several basis by Tembec Inc. (the "Parent Company") and most of the Subsidiary Issuer’s subsidiaries located in Canada (the “Guarantor Subsidiaries”). The Subsidiary Issuer and each of the Guarantor Subsidiaries are 100% owned by the Parent Company. The Notes are not guaranteed by the Company’s other subsidiaries (the “Other Subsidiaries”).

The following supplemental condensed consolidating financial information sets forth, on an unconsolidated basis, the balance sheets as at September 28, 2013 and September 29, 2012, the statements of comprehensive earnings (loss) and the statements of cash flows for the years then ended, for the Parent Company and for the Subsidiary Issuer. It also provides the same information on a combined basis for the Guarantor Subsidiaries and the Other Subsidiaries.

The supplemental condensed consolidating financial information, which has been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), reflects the investments of the Parent Company in the Subsidiary Issuer using the equity method. Investments of the Subsidiary Issuer in the Guarantor Subsidiaries and Other Subsidiaries are also accounted for using this method.

More information on the Company and its significant accounting policies are included in the audited consolidated financial statements for the year ended September 28, 2013.

TEMBEC Supplemental Information for fiscal 2013 1


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Balance Sheets

(unaudited)(in millions of Canadian dollars)

 

  September 28, 2013  

 

  Parent     Subsidiary     Guarantor     Other      Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  -   $  -   $  19   $  54   $  -   $  73  

   Restricted cash

  -     -     -     1     -     1  

   Trade and other receivables

  36     311     273     76     (539 )   157  

   Inventories

  -     -     200     37     -     237  

   Prepaid expenses

  -     1     4     1     -     6  

   Assets classified as held for sale

  -     -     7     -     -     7  

 

  36     312     503     169     (539 )   481  

 

                                   

Investments

  257     463     -     -     (720 )   -  

Property, plant and equipment

  -     7     366     123     -     496  

Biological assets

  -     -     5     -     -     5  

Employee future benefits

  -     6     18     -     -     24  

Other long-term receivables

  -     8     -     2     -     10  

Deferred tax assets

  -     -     -     5     -     5  

 

$  293   $  796   $  892   $  299   $  (1,259 ) $  1,021  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Operating bank loans

$  -   $  -   $  53   $  4   $  -   $  57  

   Trade, other payables and accrued charges

  71     188     415     60     (539 )   195  

   Interest payable

  -     10     -     -     -     10  

   Income tax payable

  -     (1 )   -     9     -     8  

   Provisions

  -     6     -     -     -     6  

   Current portion of long-term debt

  1     -     1     14     -     16  

 

  72     203     469     87     (539 )   292  

 

                                   

Long-term debt

  1     303     53     15     (3 )   369  

Provisions

  -     -     12     -     -     12  

Employee future benefits

  -     90     16     20     -     126  

Other long-term liabilities

  -     -     2     -     -     2  

 

  73     596     552     122     (542 )   801  

 

                                   

Shareholders' equity:

                                   

   Share capital

  567     555     731     34     (1,320 )   567  

   Retained earnings (deficit)

  (353 )   (361 )   (391 )   137     615     (353 )

   Accumulated other comprehensive earnings (loss)

  6     6     -     6     (12 )   6  

 

  220     200     340     177     (717 )   220  

 

$  293   $  796   $  892   $  299   $  (1,259 ) $  1,021  

TEMBEC Supplemental Information for fiscal 2013 2


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Balance Sheets (continued)

(unaudited)(in millions of Canadian dollars)

 

  September 29, 2012  

 

  Parent     Subsidiary     Guarantor     Other      Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  -   $  1   $  29   $  57   $  -   $  87  

   Restricted cash

  -     -     5     -     -     5  

   Trade and other receivables

  36     307     210     65     (418 )   200  

   Inventories

  -     -     228     27     -     255  

   Prepaid expenses

  -     1     5     1     -     7  

   Assets classified as held for sale

  -     -     -     -     -     -  

 

  36     309     477     150     (418 )   554  

 

                                   

Investments

  102     372     -     -     (474 )   -  

Property, plant and equipment

  -     6     379     100     -     485  

Biological assets

  -     -     4     -     -     4  

Employee future benefits

  -     -     -     -     -     -  

Other long-term receivables

  -     10     -     2     -     12  

Deferred tax assets

  -     (1 )   -     5     -     4  

 

$  138   $  696   $  860   $  257   $  (892 ) $  1,059  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Operating bank loans

$  -   $  -   $  65   $  3   $  -   $  68  

   Trade, other payables and accrued charges

  34     113     442     59     (418 )   230  

   Interest payable

  -     10     -     -     -     10  

   Income tax payable

  -     -     -     3     -     3  

   Provisions

  -     1     2     -     -     3  

   Current portion of long-term debt

  1     -     -     15     -     16  

 

  35     124     509     80     (418 )   330  

 

                                   

Long-term debt

  1     289     18     23     (8 )   323  

Provisions

  -     5     12     -     -     17  

Employee future benefits

  -     195     52     38     -     285  

Other long-term liabilities

  -     -     2     -     -     2  

 

  36     613     593     141     (426 )   957  

 

                                   

Shareholders' equity:

                                   

   Share capital

  564     555     696     40     (1,291 )   564  

   Retained earnings (deficit)

  (453 )   (463 )   (429 )   85     807     (453 )

   Accumulated other comprehensive earnings (loss)

  (9 )   (9 )   -     (9 )   18     (9 )

 

  102     83     267     116     (466 )   102  

 

$  138   $  696   $  860   $  257   $  (892 ) $  1,059  

TEMBEC Supplemental Information for fiscal 2013 3


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)(in millions of Canadian dollars, unless otherwise noted)

 

  Year ended September 28, 2013  

 

  Parent    Subsidiary     Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

Sales

$  -   $  2   $  1,296   $  259   $  (23 ) $  1,534  

Freight and other deductions

  -     -     189     17     (5 )   201  

Lumber export taxes

  -     -     3     -     -     3  

Cost of sales (excluding depreciation and amortization)

  -     -     1,024     153     (18 )   1,159  

Selling, general and administrative

  -     8     51     13     -     72  

Share-based compensation

  -     1     -     -     -     1  

Depreciation and amortization

  -     2     30     8     -     40  

Other items

  -     -     27     2     -     29  

Operating earnings (loss)

  -     (9 )   (28 )   66     -     29  
                                     

Interest, foreign exchange and other

  5     (5 )   18     (6 )   16     28  

Exchange loss (gain) on long-term debt

  -     14     -     -     -     14  

Net finance costs (income)

  5     9     18     (6 )   16     42  

Earnings (loss) before income taxes and share of results for equity accounting

  (5 )   (18 )   (46 )   72     (16 )   (13 )

Income tax expense (recovery)

  -     -     -     21     -     21  

Share of results for equity accounting

  (29 )   (14 )   -     -     43     -  

Net earnings (loss)

  (34 )   (32 )   (46 )   51     27     (34 )

 

                                   

Other comprehensive earnings (loss), net of income taxes:

                                   

   Defined benefit pension plans and other benefit plans

  132     132     84     15     (231 )   132  

   Income tax

  2     2     -     2     (4 )   2  

   Foreign currency translation differences for foreign operations

  15     15     -     15     (30 )   15  

Total comprehensive earnings (loss)

$  115   $  117   $  38   $  83   $  (238 ) $  115  

Basic and diluted net loss in dollars per share

                              $  (0.34 )

TEMBEC Supplemental Information for fiscal 2013 4


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Comprehensive Earnings (Loss) (continued)

(unaudited)(in millions of Canadian dollars, unless otherwise noted)

 

  Year ended September 29, 2012  

 

  Parent     Subsidiary     Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

Sales

$  -   $  1   $  1,409   $  279   $  (23 ) $  1,666  

Freight and other deductions

  -     -     217     20     (5 )   232  

Lumber export taxes

  -     -     7     -     -     7  

Cost of sales (excluding depreciation and amortization)

  -     -     1,132     176     (18 )   1,290  

Selling, general and administrative

  -     8     59     7     -     74  

Share-based compensation

  -     (1 )   -     -     -     (1 )

Depreciation and amortization

  -     1     39     6     -     46  

Other items

  (1 )   19     32     -     -     50  

Operating earnings (loss)

  1     (26 )   (77 )   70     -     (32 )
                                     

Interest, foreign exchange and other

  -     3     38     -     -     41  

Exchange loss (gain) on long-term debt

  -     (13 )   -     -     -     (13 )

Net finance costs (income)

  -     (10 )   38     -     -     28  

Earnings (loss) before income taxes and share of results for equity accounting

  1     (16 )   (115 )   70     -     (60 )

Income tax expense (recovery)

  1     (1 )   -     22     -     22  

Share of results for equity accounting

  (82 )   (67 )   -     -     149     -  

Net earnings (loss)

  (82 )   (82 )   (115 )   48     149     (82 )
                                     

Other comprehensive earnings (loss), net of income taxes:

                                   

   Defined benefit pension plans and other benefit plans

  (38 )   (38 )   (20 )   (5 )   63     (38 )

   Income tax

  -     -     -     -     -     -  

   Foreign currency translation differences for foreign operations

  (11 )   (11 )   -     (11 )   22     (11 )

Total comprehensive earnings (loss)

$  (131 ) $  (131 ) $  (135 ) $  32   $  234   $  (131 )

Basic and diluted net loss in dollars per share

                              $  (0.82 )

TEMBEC Supplemental Information for fiscal 2013 5


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Cash Flows

(unaudited)(in millions of Canadian dollars)

 

  Year ended September 28, 2013  

 

  Parent     Subsidiary     Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

Cash flows from operating activities:

                                   

   Net earnings (loss)

$  (34 ) $  (32 ) $  (46 ) $  51   $  27   $  (34 )

   Adjustments for:

                                   

         Depreciation and amortization

  -     2     30     8     -     40  

         Net finance costs

  5     9     18     (6 )   16     42  

         Income tax expense (recovery)

  -     -     -     21     -     21  

         Income tax paid

  -     -     -     (15 )   -     (15 )

         Excess cash contributions over employee future benefits expense

  -     (23 )   (7 )   (4 )   -     (34 )

         Provisions

  -     -     -     -     -     -  

         Share of results for equity accounting

  29     14     -     -     (43 )   -  

         Impairment loss

  -     -     22     -     -     22  

         Gain on sale of assets

  -     -     -     -     -     -  

         Other

  -     (2 )   (3 )   (1 )   -     (6 )

 

  -     (32 )   14     54     -     36  

Change in non-cash working capital:

                                   

   Trade and other receivables

  -     (16 )   (92 )   (10 )   134     16  

   Inventories

  -     -     12     (9 )   -     3  

   Prepaid expenses

  -     -     1     -     -     1  

   Trade, other payables and accrued charges

  34     43     26     (2 )   (134 )   (33 )

 

  34     27     (53 )   (21 )   -     (13 )

 

  34     (5 )   (39 )   33     -     23  

Cash flows from investing activities:

                                   

   Disbursements for property, plant and equipment

  -     (1 )   (109 )   (17 )   -     (127 )

   Proceeds from sale of net assets

  -     -     100     -     -     100  

   Change in restricted cash

  -     -     5     (1 )   -     4  

   Investments in a subsidiary

  (31 )   -     -     -     31     -  

   Interest received

  -     42     5     1     (48 )   -  

   Other

  -     1     -     -     -     1  

 

  (31 )   42     1     (17 )   (17 )   (22 )

Cash flow from financing activities:

                                   

   Change in operating bank loans

  -     -     (12 )   1     -     (11 )

   Increase in long-term debt

  -     -     40     -     -     40  

   Repayments of long-term debt

  -     -     -     (8 )   -     (8 )

   Proceeds from issue of share capital

  -     -     31     -     (31 )   -  

   Interest paid

  (3 )   (37 )   (31 )   (17 )   48     (40 )

   Other

  -     (1 )   -     1     -     -  

 

  (3 )   (38 )   28     (23 )   17     (19 )

 

  -     (1 )   (10 )   (7 )   -     (18 )

Foreign exchange gain (loss) on cash and cash equivalents held in foreign currencies

  -     -     -     4     -     4  

Net increase (decrease) in cash and cash equivalents

  -     (1 )   (10 )   (3 )   -     (14 )
                                     

Cash and cash equivalents, beginning of year

  -     1     29     57     -     87  

Cash and cash equivalents, end of year

$  -   $  -   $  19   $  54   $  -   $  73  

TEMBEC Supplemental Information for fiscal 2013 6


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
September 28, 2013
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)(in millions of Canadian dollars)

 

  Year ended September 29, 2012  

 

  Parent      Subsidiary     Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

Cash flows from operating activities:

                                   

   Net earnings (loss)

$  (82 ) $  (82 ) $  (115 ) $  48   $  149   $  (82 )

   Adjustments for:

                                   

         Depreciation and amortization

  -     1     39     6     -     46  

         Net finance costs

  -     (10 )   38     -     -     28  

         Income tax expense (recovery)

  1     (1 )   -     22     -     22  

         Income tax paid

  -     -     -     (14 )   -     (14 )

         Excess cash contributions over employee future benefits expense

  -     (15 )   (12 )   (7 )   -     (34 )

         Provisions

  -     6     6     -     -     12  

         Share of results for equity accounting

  82     67     -     -     (149 )   -  

         Impairment loss

  -     16     51     -     -     67  

         Gain on sale of assets

  (1 )   (3 )   (26 )   -     -     (30 )

         Other

  (1 )   2     (3 )   -     -     (2 )

 

  (1 )   (19 )   (22 )   55     -     13  

Change in non-cash working capital:

                                   

   Trade and other receivables

  -     29     19     (20 )   (58 )   (30 )

   Inventories

  -     -     (40 )   -     -     (40 )

   Prepaid expenses

  -     -     -     (1 )   -     (1 )

   Trade, other payables and accrued charges

  33     (62 )   (33 )   (10 )   58     (14 )

 

  33     (33 )   (54 )   (31 )   -     (85 )

 

  32     (52 )   (76 )   24     -     (72 )

Cash flows from investing activities:

                                   

   Disbursements for property, plant and equipment

  -     (2 )   (86 )   (20 )   -     (108 )

   Proceeds from sale of net assets

  1     3     80     -     -     84  

   Change in restricted cash

  -     -     (5 )   5     -     -  

   Investments in a subsidiary

  (28 )   -     -     -     28     -  

   Interest received

  -     34     -     -     (34 )   -  

   Other

  -     (1 )   -     -     -     (1 )

 

  (27 )   34     (11 )   (15 )   (6 )   (25 )

Cash flow from financing activities:

                                   

   Change in operating bank loans

  -     -     65     (3 )   -     62  

   Increase in long-term debt

  -     50     18     6     -     74  

   Repayments of long-term debt

  (5 )   -     -     (6 )   -     (11 )

   Proceeds from issue of share capital

  -     -     28     -     (28 )   -  

   Interest paid

  -     (31 )   (35 )   (2 )   34     (34 )

   Other

  -     -     -     -     -     -  

 

  (5 )   19     76     (5 )   6     91  

 

  -     1     (11 )   4     -     (6 )

Foreign exchange loss on cash and cash equivalents held in foreign currencies

  -     -     -     (6 )   -     (6 )

Net increase (decrease) in cash and cash equivalents

  -     1     (11 )   (2 )   -     (12 )

 

                                   

Cash and cash equivalents, beginning of year

  -     -     40     59     -     99  

Cash and cash equivalents, end of year

$  -   $  1   $  29   $  57   $  -   $  87  

TEMBEC Supplemental Information for fiscal 2013 7