EX-99.5 6 exhibit99-5.htm EXHIBIT 99.5 Tembec Inc.: Exhibit 99.5 - Filed by newsfilecorp.com

Exhibit 99.5

Unaudited supplemental condensed consolidating financial information of

TEMBEC INC.

Nine months ended June 28, 2014 and June 29, 2013


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
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 June 28, 2014 and June 29, 2013, the statements of comprehensive earnings (loss) and the statements of cash flows for the nine-month period 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. The Company adopted the amended IAS 19, Employee Benefits, and has restated its comparative period results accordingly. Details on the effect of adopting amended IAS 19 are included in note 2 of the unaudited interim consolidated financial statements for the quarter ended June 28, 2014.

TEMBEC Supplemental Information for third quarter 2014 1


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Balance Sheets
 
(unaudited)(in millions of Canadian dollars)

 

                    June 28, 2014  

 

  Parent     Subsidiary     Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries       Subsidiaries       Adjustments     Consolidated    

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  -   $  -   $  8   $  18   $  -   $  26  

   Restricted cash

  -     -     -     3     -     3  

   Trade and other receivables

  37     379     405     98     (745 )   174  

   Income tax receivable

  -     1     -     4     -     5  

   Inventories

  -     -     228     37     -     265  

   Prepaid expenses

  -     2     7     2     -     11  

   Assets classified as held for sale

  -     -     5     -     -     5  

 

  37     382     653     162     (745 )   489  
                                     

Investments

  325     498     -     -     (823 )   -  

Property, plant and equipment

  -     6     459     135     -     600  

Biological assets

  -     -     2     -     -     2  

Employee future benefits

  -     4     29     -     -     33  

Other long-term receivables

  -     8     -     1     -     9  

Deferred tax assets

  -     -     -     6     -     6  

 

$  362   $  898   $  1,143   $  304   $  (1,568 ) $  1,139  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Operating bank loans

$  -   $  -   $  79   $  8   $  -   $  87  

   Trade, other payables
and accrued charges

  121     265     517     53     (745 )   211  

   Interest payable

  -     1     1     -     -     2  

   Income tax payable

  -     -     -     -     -     -  

   Provisions

  -     5     -     -     -     5  

   Current portion of long-term debt

  1     -     2     16     -     19  

 

  122     271     599     77     (745 )   324  

 

                                   

Long-term debt

  1     315     115     10     (3 )   438  

Provisions

  -     -     11     -     -     11  

Employee future benefits

  -     92     16     17     -     125  

Other long-term liabilities

  -     -     2     -     -     2  

 

  123     678     743     104     (748 )   900  

 

                                   

Shareholders' equity:

                                   

   Share capital

  568     555     774     34     (1,363 )   568  

   Retained earnings (deficit)

  (344 )   (350 )   (374 )   151     573     (344 )

   Accumulated other comprehensive
earnings (loss)

  15     15     -     15     (30 )   15  

 

  239     220     400     200     (820 )   239  

 

$  362   $  898   $  1,143   $  304   $  (1,568 ) $  1,139  

TEMBEC Supplemental Information for third quarter 2014 2


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Balance Sheets (continued)
 
(unaudited)(in millions of Canadian dollars)

 

                    September 28, 2013 (restated(1) )

 

  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  

   Income tax receivable

  -     -     -     -     -     -  

   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

  256     462     -     -     (718 )   -  

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  

 

$  292   $  795   $  892   $  299   $  (1,257 ) $  1,021  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Operating bank loans

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

   Trade, other payables and
accrued charges

  71     187     416     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     202     470     87     (539 )   292  

 

                                   

Long-term debt

  1     303     53     15     (3 )   369  

Provisions

  -     -     12     -     -     12  

Employee future benefits

  -     91     16     20     -     127  

Other long-term liabilities

  -     -     2     -     -     2  

 

  73     596     553     122     (542 )   802  

 

                                   

Shareholders' equity:

                                   

   Share capital

  567     555     731     34     (1,320 )   567  

   Retained earnings (deficit)

  (354 )   (362 )   (392 )   137     617     (354 )

   Accumulated other comprehensive
earnings (loss)

  6     6     -     6     (12 )   6  

 

  219     199     339     177     (715 )   219  

 

$  292   $  795   $  892   $  299   $  (1,257 ) $  1,021  

(1) See note 2 of the unaudited interim consolidated financial statements for the quarter ended June 28, 2014

TEMBEC Supplemental Information for third quarter 2014 3


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Balance Sheets (continued)
(unaudited)(in millions of Canadian dollars)

 

                    June 29, 2013 (restated(1)

 

  Parent     Subsidiary     Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries       Subsidiaries       Adjustments      Consolidated   

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  -   $  -   $  58   $  36   $  -   $  94  

   Restricted cash

  -     -     -     -     -     -  

   Trade and other receivables

  36     324     233     77     (517 )   153  

   Income tax receivable

  -     -     -     -     -     -  

   Inventories

  -     -     198     40     -     238  

   Prepaid expenses

  -     1     6     1     -     8  

   Assets classified as held for sale

  -     -     -     -     -     -  

 

  36     325     495     154     (517 )   493  

Investments

  204     407     -     -     (611 )   -  

Property, plant and equipment

  -     6     338     118     -     462  

Biological assets

  -     -     4     -     -     4  

Employee future benefits

  -     -     -     -     -     -  

Other long-term receivables

  -     9     -     2     -     11  

Deferred tax assets

  1     (2 )   -     3     -     2  

 

$  241   $  745   $  837   $  277   $  (1,128 ) $  972  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Operating bank loans

$  -   $  -   $  57   $  -   $  -   $  57  

   Trade, other payables
and accrued charges

  70     168     411     53     (517 )   185  

   Interest payable

  -     1     1     -     -     2  

   Income tax payable

  -     (1 )   -     6     -     5  

   Provisions

  -     6     -     -     -     6  

   Current portion of long-term debt

  1     -     -     15     -     16  

 

  71     174     469     74     (517 )   271  

Long-term debt

  1     310     41     21     (8 )   365  

Provisions

  -     -     12     -     -     12  

Employee future benefits

  -     113     14     26     -     153  

Other long-term liabilities

  -     -     2     -     -     2  

 

  72     597     538     121     (525 )   803  

 

                                   

Shareholders' equity:

                                   

   Share capital

  567     555     731     40     (1,326 )   567  

   Retained earnings (deficit)

  (401 )   (410 )   (432 )   113     729     (401 )

   Accumulated other comprehensive
earnings (loss)

  3     3     -     3     (6 )   3  

 

  169     148     299     156     (603 )   169  

 

$  241   $  745   $  837   $  277   $  (1,128 ) $  972  

(1) See note 2 of the unaudited interim consolidated financial statements for the quarter ended June 28, 2014

TEMBEC Supplemental Information for third quarter 2014 4


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Comprehensive Earnings (Loss)
 
(unaudited)(in millions of Canadian dollars, unless otherwise noted)

 

  Nine months ended June 28, 2014  

 

  Parent     Subsidiary       Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries       Subsidiaries       Adjustments     Consolidated    

Sales

$  -   $  -   $  936   $  196   $  (12 ) $  1,120  

Freight and other deductions

  -     -     133     10     -     143  

Lumber export taxes

  -     -     -     -     -     -  

Cost of sales (excluding depreciation
and amortization)

  -     -     745     131     (12 )   864  

Selling, general and administrative

  -     3     36     11     -     50  

Share-based compensation

  -     2     -     -     -     2  

Depreciation and amortization

  -     1     18     7     -     26  

Other items

  -     10     (31 )   -     -     (21 )

Operating earnings (loss)

  -     (16 )   35     37     -     56  
                                     

Interest, foreign exchange and other

  7     (9 )   18     (7 )   19     28  

Exchange loss on long-term debt

  -     11     -     -     -     11  

Net finance costs (income)

  7     2     18     (7 )   19     39  

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

  (7 )   (18 )   17     44     (19 )   17  

Income tax expense (recovery)

  -     (1 )   -     14     -     13  

Share of results for equity accounting

  11     23     -     -     (34 )   -  

Net earnings (loss)

  4     6     17     30     (53 )   4  
                                 

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

                               

   Defined benefit pension plans and other
benefit plans

  7     7     1     3     (11 )   7  

   Income tax recovery (expense)

  (1 )   (1 )   -     -     1     (1 )

   Foreign currency translation differences
for foreign operations

  9     9     -     9     (18 )   9  

Other comprehensive earnings for the period

  15     15     1     12     (28 )   15  

Total comprehensive earnings

$  19   $  21   $  18   $  42   $  (81 ) $  19  

Basic and diluted net earnings in dollars per share

                              $  0.04  

TEMBEC Supplemental Information for third quarter 2014 5


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Comprehensive Earnings (Loss) (continued)
 
(unaudited)(in millions of Canadian dollars, unless otherwise noted)

 

                    Nine months ended June 29, 2013 (restated (1)  )

 

  Parent      Subsidiary      Guarantor     Other     Consolidation        

 

  Company     Issuer      Subsidiaries       Subsidiaries      Adjustments      Consolidated   

Sales

$  -   $  2   $  1,009   $  188   $  (17 ) $  1,182  

Freight and other deductions

  -     -     149     13     (4 )   158  

Lumber export taxes

  -     -     2     -     -     2  

Cost of sales (excluding depreciation
and amortization)

  -     -     794     111     (13 )   892  

Selling, general and administrative

  -     6     39     11     -     56  

Share-based compensation

  -     1     -     -     -     1  

Depreciation and amortization

  -     -     23     6     -     29  

Other items

  -     1     26     1     -     28  

Operating earnings (loss)

  -     (6 )   (24 )   46     -     16  
                                     

Interest, foreign exchange and other

  4     (3 )   16     (1 )   16     32  

Exchange loss on long-term debt

  -     21     -     -     -     21  

Net finance costs (income)

  4     18     16     (1 )   16     53  

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

  (4 )   (24 )   (40 )   47     (16 )   (37 )

Income tax expense (recovery)

  (1 )   1     -     16     -     16  

Share of results for equity accounting

  (50 )   (27 )   -     -     77     -  

Net earnings (loss)

  (53 )   (52 )   (40 )   31     61     (53 )
                                 

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

                               

   Defined benefit pension plans and other
benefit plans

  107     107     37     13     (157 )   107  

   Income tax recovery (expense)

  -     -     -     -     -     -  

   Foreign currency translation differences
for foreign operations

  12     12     -     12     (24 )   12  

 

                                   

Other comprehensive earnings for the period

  119     119     37     25     (181 )   119  

Total comprehensive earnings (loss)

$  66   $  67   $  (3 ) $  56   $  (120 ) $  66  

Basic and diluted net loss in dollars per share

                              $  (0.53 )

(1) See note 2 of the unaudited interim consolidated financial statements for the quarter ended June 28, 2014

TEMBEC Supplemental Information for third quarter 2014 6


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Cash Flows
 
(unaudited)(in millions of Canadian dollars)

 

                    Nine months ended June 28, 2014  

 

  Parent     Subsidiary       Guarantor     Other      Consolidation         

 

  Company     Issuer     Subsidiaries       Subsidiaries       Adjustments      Consolidated   

Cash flows from operating activities:

                                   

   Net earnings (loss)

$  4   $  6   $  17   $  30   $  (53 ) $  4  

   Adjustments for:

                                   

       Depreciation and amortization

  -     1     18     7     -     26  

       Net finance costs (income)

  7     2     18     (7 )   19     39  

       Income tax expense (recovery)

  -     (1 )   -     14     -     13  

       Income tax paid

  -     -     -     (27 )   -     (27 )

       Excess cash contributions over employee
future benefits expense

  -     (10 )   (3 )   (3 )   -     (16 )

       Impairment loss

  -     -     -     -     -     -  

       Share of results for equity accounting

  (11 )   (23 )   -     -     34     -  

       Gain on sale of assets

  -     -     (35 )   -     -     (35 )

       Settlement loss on pension plan

  -     7     -     -     -     7  

       Other

  -     3     1     -     -     4  

 

  -     (15 )   16     14     -     15  

Change in non-cash working capital:

                                   

   Trade and other receivables

  (1 )   (70 )   (130 )   (20 )   207     (14 )

   Inventories

  -     -     (28 )   -     -     (28 )

   Prepaid expenses

  -     -     (3 )   (1 )   -     (4 )

   Trade, other payables and accrued charges

  49     82     91     1     (207 )   16  

 

  48     12     (70 )   (20 )   -     (30 )

 

  48     (3 )   (54 )   (6 )   -     (15 )

Cash flows from investing activities:

                                   

   Disbursements for property, plant and equipment

  -     -     (106 )   (13 )   -     (119 )

   Proceeds from sale of assets

  -     1     39     -     -     40  

   Change in restricted cash

  -     -     -     (2 )   -     (2 )

   Investments in a subsidiary

  (42 )   -     -     -     42     -  

   Interest received

  -     43     9     1     (53 )   -  

   Other

  -     -     -     -     -     -  

 

  (42 )   44     (58 )   (14 )   (11 )   (81 )

Cash flow from financing activities:

                                   

   Change in operating bank loans

  -     -     26     4     -     30  

   Increase in long-term debt

  -     -     63     1     -     64  

   Repayments of long-term debt

  -     -     -     (5 )   -     (5 )

   Proceeds from issue of share capital

  -     -     42     -     (42 )   -  

   Interest paid

  (6 )   (41 )   (30 )   (19 )   53     (43 )

 

  (6 )   (41 )   101     (19 )   11     46  

 

  -     -     (11 )   (39 )   -     (50 )

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

  -     -     -     3     -     3  

Net decrease in cash and cash equivalents

  -     -     (11 )   (36 )   -     (47 )
                                     

Cash and cash equivalents, beginning of period

  -     -     19     54     -     73  

Cash and cash equivalents, end of period

$  -   $  -   $  8   $  18   $  -   $  26  

TEMBEC Supplemental Information for third quarter 2014 7


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
June 28, 2014
 
Supplemental condensed consolidating financial information
 

Condensed Consolidated Statements of Cash Flows (continued)
 
(unaudited)(in millions of Canadian dollars)

 

              Nine months ended June 29, 2013 (restated (1)  )

 

  Parent      Subsidiary      Guarantor     Other     Consolidation          

 

  Company     Issuer      Subsidiaries     Subsidiaries       Adjustments     Consolidated    

Cash flows from operating activities:

                                   

   Net earnings (loss)

$  (53 ) $  (52 ) $  (40 ) $  31   $  61   $  (53 )

   Adjustments for:

                                   

       Depreciation and amortization

  -     -     23     6     -     29  

       Net finance costs (income)

  4     18     16     (1 )   16     53  

       Income tax expense (recovery)

  (1 )   1     -     16     -     16  

       Income tax paid

  -     -     -     (13 )   -     (13 )

       Excess cash contributions over employee
future benefits expense

  -     (20 )   (4 )   (1 )   -     (25 )

       Provisions

  -     -     -     -     -     -  

       Impairment loss

  -     -     22     -     -     22  

       Gain on sale of assets

  -     -     (1 )   -     -     (1 )

       Share of results for equity accounting

  50     27     -     -     (77 )   -  

       Other

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

 

  -     (27 )   18     35     -     26  

Change in non-cash working capital:

                                   

   Trade and other receivables

  -     (29 )   (50 )   (10 )   112     23  

   Inventories

  -     -     13     (10 )   -     3  

   Prepaid expenses

  -     -     (1 )   -     -     (1 )

   Trade, other payables and accrued charges

  33     55     (3 )   (7 )   (112 )   (34 )

 

  33     26     (41 )   (27 )   -     (9 )

 

  33     (1 )   (23 )   8     -     17  

Cash flows from investing activities:

                                   

   Disbursements for property, plant and equipment

  -     (1 )   (84 )   (8 )   -     (93 )

   Proceeds from sale of net assets

  -     -     99     -     -     99  

   Change in restricted cash

  -     -     5     -     -     5  

   Investments in a subsidiary

  (31 )   -     -     -     31     -  

   Interest received

  -     36     3     1     (40 )   -  

   Other

  -     2     -     -     -     2  

 

  (31 )   37     23     (7 )   (9 )   13  

Cash flow from financing activities:

                                   

   Change in operating bank loans

  -     -     (8 )   (3 )   -     (11 )

   Increase in long-term debt

  -     -     28     -     -     28  

   Repayments of long-term debt

  -     -     -     (5 )   -     (5 )

   Proceeds from issue of share capital

  -     -     31     -     (31 )   -  

   Interest paid

  (2 )   (37 )   (23 )   (16 )   40     (38 )

   Other

  -     -     1     (1 )   -     -  

 

  (2 )   (37 )   29     (25 )   9     (26 )

 

  -     (1 )   29     (24 )   -     4  

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

  -     -     -     3     -     3  

Net increase (decrease) in cash and cash equivalents

  -     (1 )   29     (21 )   -     7  
                                     

Cash and cash equivalents, beginning of period

  -     1     29     57     -     87  

Cash and cash equivalents, end of period

$  -   $  -   $  58   $  36   $  -   $  94  

(1) See note 2 of the unaudited interim consolidated financial statements for the quarter ended June 28, 2014

TEMBEC Supplemental Information for third quarter 2014 8