EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 Tembec Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Unaudited supplemental condensed consolidating financial information of

TEMBEC INC.

Six months ended March 24, 2012 and March 26, 2011


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
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 March 24, 2012, September 24, 2011 and March 26, 2011, and the statements of comprehensive earnings (loss) and cash flows for the six months ended March 24, 2012 and March 26, 2011, 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), 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 unaudited interim consolidated financial statements for the quarter ended March 24, 2012.

TEMBEC Supplemental Information for second quarter 2012 1


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated balance sheets

(unaudited)(in millions of Canadian dollars)

 

  March 24, 2012  

 

  Parent      Subsidiary      Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated   

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  -   $  -   $  83   $  37   $  -   $  120  

   Cash held in trust

  -     -     2     5     -     7  

   Trade and other receivables

  36     310     159     64     (384 )   185  

   Inventories

  -     -     266     28     -     294  

   Prepaid expenses

  -     2     4     3     -     9  

   Assets held for sale

  -     -     -     -     -     -  

 

  36     312     514     137     (384 )   615  

Investments

  169     451     -     -     (620 )   -  

Property, plant and equipment

  -     5     385     96     -     486  

Biological assets

  -     -     4     -     -     4  

Employee future benefits

  -     -     -     1     -     1  

Other long-term receivables

  -     9     1     2     -     12  

Deferred tax assets

  -     -     (1 )   10     -     9  

 

$  205   $  777   $  903   $  246   $  (1,004 ) $  1,127  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Bank indebtedness

$  -   $  -   $  -   $  -   $  -   $  -  

   Operating bank loans

  -     -     65     4     -     69  

   Trade, other payables and accrued charges

  2     119     438     58     (384 )   233  

   Interest payable

  -     10     -     -     -     10  

   Provisions

  -     1     1     -     -     2  

   Current portion of long-term debt

  4     -     -     15     -     19  

   Liabilities held for sale

  -     -     -     -     -     -  

 

  6     130     504     77     (384 )   333  

Long-term debt

  1     293     -     26     (6 )   314  

Provisions

  -     5     10     -     -     15  

Employee future benefits

  -     172     54     39     -     265  

Other long-term liabilities

  -     -     2     -     -     2  

 

  7     600     570     142     (390 )   929  

 

                                   

Shareholders' equity:

                                   

   Share capital

  564     555     668     40     (1,263 )   564  

   Retained earnings (deficit)

  (363 )   (375 )   (335 )   67     643     (363 )

   Accumulated other comprehensive earnings (loss)

  (3 )   (3 )   -     (3 )   6     (3 )

 

  198     177     333     104     (614 )   198  

 

$  205   $  777   $  903   $  246   $  (1,004 ) $  1,127  

TEMBEC Supplemental Information for second quarter 2012 2


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated balance sheets (continued)

(unaudited)(in millions of Canadian dollars)

 

  September 24, 2011  

 

  Parent      Subsidiary      Guarantor     Other      Consolidation         

 

  Company     Issuer     Subsidiaries       Subsidiaries       Adjustments      Consolidated   

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  -   $  -   $  40   $  59   $  -   $  99  

   Cash held in trust

  -     -     -     6     -     6  

   Trade and other receivables

  35     339     100     49     (341 )   182  

   Inventories

  -     -     232     29     -     261  

   Prepaid expenses

  -     1     5     -     -     6  

   Assets held for sale

  -     -     -     -     -     -  

 

  35     340     377     143     (341 )   554  

Investments

  205     473     -     -     (678 )   -  

Property, plant and equipment

  -     5     393     93     -     491  

Biological assets

  -     -     4     -     -     4  

Employee future benefits

  -     -     -     1     -     1  

Other long-term receivables

  -     25     1     2     -     28  

Deferred tax assets

  -     -     -     15     -     15  

 

$  240   $  843   $  775   $  254   $  (1,019 ) $  1,093  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Bank indebtedness

$  -   $  -   $  -   $  -   $  -   $  -  

   Operating bank loans

  -     -     -     6     -     6  

   Trade, other payables and accrued charges

  -     191     313     83     (341 )   246  

   Interest payable

  -     8     -     -     -     8  

   Provisions

  -     -     8     -     -     8  

   Current portion of long-term debt

  5     -     -     13     -     18  

   Liabilities held for sale

  -     -     -     -     -     -  

 

  5     199     321     102     (341 )   286  

Long-term debt

  2     249     -     26     (6 )   271  

Provisions

  -     -     16     -     -     16  

Employee future benefits

  -     181     62     42     -     285  

Other long-term liabilities

  -     -     2     -     -     2  

 

  7     629     401     170     (347 )   860  

 

                                   

Shareholders' equity:

                                   

   Share capital

  564     555     668     40     (1,263 )   564  

   Retained earnings (deficit)

  (333 )   (343 )   (294 )   42     595     (333 )

   Accumulated other comprehensive earnings (loss)

  2     2     -     2     (4 )   2  

 

  233     214     374     84     (672 )   233  

 

$  240   $  843   $  775   $  254   $  (1,019 ) $  1,093  

TEMBEC Supplemental Information for second quarter 2012 3


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated balance sheets (continued)

(unaudited)(in millions of Canadian dollars)

 

  March 26, 2011  

 

  Parent      Subsidiary      Guarantor     Other      Consolidation         

 

  Company     Issuer     Subsidiaries       Subsidiaries     Adjustments      Consolidated   

ASSETS

                                   

Current assets:

                                   

   Cash and cash equivalents

$  2   $  -   $  -   $  29   $  (5 ) $  26  

   Cash held in trust

  -     -     -     6     -     6  

   Trade and other receivables

  35     286     153     52     (329 )   197  

   Inventories

  -     -     287     22     -     309  

   Prepaid expenses

  -     2     6     1     -     9  

   Assets held for sale

  -     -     13     -     -     13  

 

  37     288     459     110     (334 )   560  

Investments

  273     520     -     -     (793 )   -  

Property, plant and equipment

  -     4     384     85     -     473  

Biological assets

  -     -     7     -     -     7  

Employee future benefits

  -     -     -     -     -     -  

Other long-term receivables

  -     26     -     1     -     27  

Deferred tax assets

  -     (1 )   -     22     -     21  

 

$  310   $  837   $  850   $  218   $  (1,127 ) $  1,088  

 

                                   

LIABILITIES AND SHAREHOLDERS' EQUITY

                                   

Current liabilities:

                                   

   Bank indebtedness

$  -   $  -   $  5   $  3   $  (5 ) $  3  

   Operating bank loans

  -     -     -     2     -     2  

   Trade, other payables and accrued charges

  -     166     321     75     (329 )   233  

   Interest payable

  -     8     -     -     -     8  

   Provisions

  -     -     6     -     -     6  

   Current portion of long-term debt

  5     -     -     12     -     17  

   Liabilities held for sale

  -     -     -     -     -     -  

 

  5     174     332     92     (334 )   269  

Long-term debt

  4     237     -     23     (6 )   258  

Provisions

  -     -     20     -     -     20  

Employee future benefits

  -     143     51     42     -     236  

Other long-term liabilities

  4     2     2     -     -     8  

 

  13     556     405     157     (340 )   791  

 

                                   

Shareholders' equity:

                                   

   Share capital

  564     555     668     42     (1,265 )   564  

   Retained earnings (deficit)

  (269 )   (276 )   (223 )   17     482     (269 )

   Accumulated other comprehensive earnings (loss)

  2     2     -     2     (4 )   2  

 

  297     281     445     61     (787 )   297  

 

$  310   $  837   $  850   $  218   $  (1,127 ) $  1,088  

TEMBEC Supplemental Information for second quarter 2012 4


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated statements of comprehensive earnings (loss)

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

 

  Six months ended March 24, 2012  

 

  Parent      Subsidiary      Guarantor     Other     Consolidation        

 

  Company     Issuer       Subsidiaries      Subsidiaries      Adjustments      Consolidated   

Sales

$  -   $  1   $  677   $  139   $  (9 ) $  808  

Freight and other deductions

  -     -     102     10     (2 )   110  

Lumber export taxes

  -     -     5     -     -     5  

Cost of sales (excluding depreciation and amortization)

  -     -     564     85     (7 )   642  

Selling, general and administrative

  -     3     31     2     -     36  

Share-based compensation

  -     1     -     -     -     1  

Depreciation and amortization

  -     -     19     3     -     22  

Other items

  (1 )   18     (20 )   -     -     (3 )

Operating earnings (loss)

  1     (21 )   (24 )   39     -     (5 )

Interest, foreign exchange and other

  -     2     17     1     -     20  

Exchange gain on long-term debt

  -     (8 )   -     -     -     (8 )

Net finance costs (income)

  -     (6 )   17     1     -     12  

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

  1     (15 )   (41 )   38     -     (17 )

Income tax expense

  -     -     -     13     -     13  

Share of results for equity accounting

  (31 )   (17 )   -     -     48     -  

Net earnings (loss)

  (30 )   (32 )   (41 )   25     48     (30 )

Other comprehensive earnings (loss):

                                   

    Foreign currency translation differences for foreign operations

  (5 )   (5 )   -     (5 )   10     (5 )

Total comprehensive earnings (loss)

$  (35 ) $  (37 ) $  (41 ) $  20   $  58   $  (35 )

Basic and diluted net loss in dollars per share

                              $  (0.30 )

TEMBEC Supplemental Information for second quarter 2012 5


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated statements of comprehensive earnings (loss) (continued)

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

 

  Six months ended March 26, 2011  

 

  Parent      Subsidiary      Guarantor     Other     Consolidation        

 

  Company     Issuer      Subsidiaries       Subsidiaries      Adjustments      Consolidated   

Sales

$  -   $  2   $  769   $  112   $  (9 ) $  874  

Freight and other deductions

  -     -     114     8     (3 )   119  

Lumber export taxes

  -     -     7     -     -     7  

Cost of sales (excluding depreciation and amortization)

  -     -     583     78     (6 )   655  

Selling, general and administrative

  (1 )   6     29     3     -     37  

Share-based compensation

  -     10     -     -     -     10  

Depreciation and amortization

  -     -     22     2     -     24  

Other items

  -     2     6     -     -     8  

Operating earnings (loss)

  1     (16 )   8     21     -     14  

Interest, foreign exchange and other

  -     3     19     2     -     24  

Exchange gain on long-term debt

  -     (11 )   -     -     -     (11 )

Net finance costs (income)

  -     (8 )   19     2     -     13  

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

  1     (8 )   (11 )   19     -     1  

Income tax expense

  -     -     -     6     -     6  

Share of results for equity accounting

  (5 )   2     -     -     3     -  

Net earnings (loss)

  (4 )   (6 )   (11 )   13     3     (5 )

Other comprehensive earnings (loss):

                                   

    Foreign currency translation differences for foreign operations

  2     2     -     2     (4 )   2  

Total comprehensive earnings (loss)

$  (2 ) $  (4 ) $  (11 ) $  15   $  (1 ) $  (3 )

Basic and diluted net loss in dollars per share

                              $  (0.05 )

TEMBEC Supplemental Information for second quarter 2012 6


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated statements of cash flows

(unaudited)(in millions of Canadian dollars)

 

  Six months ended March 24, 2012  

 

  Parent     Subsidiary       Guarantor     Other     Consolidation          

 

  Company     Issuer     Subsidiaries     Subsidiaries     Adjustments     Consolidated  

Cash flows from operating activities:

                                   

   Net earnings (loss)

$  (30 ) $  (32 ) $  (41 ) $  25   $  48   $  (30 )

   Adjustments for:

                                   

       Depreciation and amortization

  -     -     19     3     -     22  

       Net finance costs

  -     (6 )   17     1     -     12  

       Income tax expense

  -     -     -     13     -     13  

       Income tax paid

  -     -     -     (10 )   -     (10 )

       Excess cash contributions over employee future benefits expense

  -     (8 )   (7 )   (2 )   -     (17 )

       Share of results for equity accounting

  31     17     -     -     (48 )   -  

       Other

  (1 )   34     (37 )   -     -     (4 )

 

  -     5     (49 )   30     -     (14 )

Change in non-cash working capital:

                                   

   Trade and other receivables

  -     28     77     (16 )   (109 )   (20 )

   Inventories

  -     -     (68 )   (1 )   -     (69 )

   Prepaid expenses

  -     -     -     (3 )   -     (3 )

   Trade, other payables and accrued charges

  1     (72 )   (21 )   (19 )   109     (2 )

 

  1     (44 )   (12 )   (39 )   -     (94 )

 

  1     (39 )   (61 )   (9 )   -     (108 )

Cash flows from investing activities:

                                   

   Additions to property, plant and equipment

  -     -     (41 )   (10 )   -     (51 )

   Proceeds from sale of net assets

  1     3     79     -     -     83  

   Other

  -     -     3     -     -     3  

 

  1     3     41     (10 )   -     35  

Cash flow from financing activities:

                                   

   Change in operating bank loans

  -     -     65     (2 )   -     63  

   Cash held in trust

  -     -     (2 )   -     -     (2 )

   Increase in long-term debt

  -     51     -     4     -     55  

   Repayments of long-term debt

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

   Interest paid

  -     (15 )   -     -     -     (15 )

   Other

  -     -     -     (1 )   -     (1 )

 

  (2 )   36     63     -     -     97  

 

  -     -     43     (19 )   -     24  

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

  -     -     -     (3 )   -     (3 )

Net increase (decrease) in cash and cash equivalents

  -     -     43     (22 )   -     21  

Cash and cash equivalents, beginning of period

  -     -     40     59     -     99  

Cash and cash equivalents, net of bank indebtedness, end of period

$  -   $  -   $  83   $  37   $  -   $  120  

TEMBEC Supplemental Information for second quarter 2012 7


TEMBEC INC.
SUPPLEMENTAL INFORMATION
 
March 24, 2012
 
Supplemental condensed consolidating financial information
 

Condensed consolidated statements of cash flows (continued)

(unaudited)(in millions of Canadian dollars)

 

  Six months ended March 26, 2011  

 

  Parent     Subsidiary       Guarantor     Other     Consolidation        

 

  Company     Issuer     Subsidiaries        Subsidiaries     Adjustments     Consolidated  

Cash flows from operating activities:

                                   

   Net earnings (loss)

$  (4 ) $  (6 ) $  (11 ) $  13   $  3   $  (5 )

   Adjustments for:

                                   

       Depreciation and amortization

  -     -     22     2     -     24  

       Net finance costs

  -     (8 )   19     2     -     13  

       Income tax expense

  -     -     -     6     -     6  

       Income tax paid

  -     -     -     -     -     -  

       Excess cash contributions over employee future benefits expense

  -     (3 )   (6 )   (1 )   -     (10 )

       Share of results for equity accounting

  5     (2 )   -     -     (3 )   -  

       Other

  -     13     (16 )   (1 )   -     (4 )

 

  1     (6 )   8     21     -     24  

Change in non-cash working capital:

                                   

   Trade and other receivables

  3     -     21     (11 )   (2 )   11  

   Inventories

  -     -     (55 )   1     -     (54 )

   Prepaid expenses

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

   Trade, other payables and accrued charges

  -     16     5     (22 )   2     1  

 

  3     15     (30 )   (32 )   -     (44 )

 

  4     9     (22 )   (11 )   -     (20 )

Cash flows from investing activities:

                                   

   Additions to property, plant and equipment

  -     -     (9 )   (6 )   -     (15 )

   Proceeds from sale of net assets

  -     -     -     -     -     -  

   Other

  -     -     2     -     -     2  

 

  -     -     (7 )   (6 )   -     (13 )

Cash flow from financing activities:

                                   

   Change in operating bank loans

  -     -     -     1     -     1  

   Cash held in trust

  -     -     -     -     -     -  

   Increase in long-term debt

  -     -     -     1     -     1  

   Repayments of long-term debt

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

   Interest paid

  -     (9 )   -     -     -     (9 )

   Other

  -     -     -     (2 )   -     (2 )

 

  (2 )   (9 )   -     (1 )   -     (12 )

 

  2     -     (29 )   (18 )   -     (45 )

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

  -     -     -     -     -     -  

Net increase (decrease) in cash and cash equivalents

  2     -     (29 )   (18 )   -     (45 )

Cash and cash equivalents, beginning of period

  -     -     24     44     -     68  

Cash and cash equivalents, net of bank indebtedness, end of period

$  2   $  -   $  (5 ) $  26   $  -   $  23  

TEMBEC Supplemental Information for second quarter 2012 8