Exhibit 99.6
Unaudited supplemental condensed consolidating financial information of
TEMBEC INC.
Years ended September 29, 2012 and September 24, 2011
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 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 September 29, 2012, September 24, 2011 and September 26, 2010, the statements of comprehensive earnings (loss) and the statements of cash flows for the years ended September 29, 2012 and September 24, 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) 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. An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided on pages 9 to 14. The explanation of transition to IFRS includes reconciliations of equity, net earnings (loss), comprehensive earnings (loss) and cash flows for prior years reported under the previous Canadian Generally Accepted Accounting Principles (GAAP) to those reported for those years under IFRS.
More information on the Company and its significant accounting policies are included in the audited consolidated financial statements for the year ended September 29, 2012.
| TEMBECSupplemental Information for fourth quarter 2012 | 1 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Condensed Consolidated Balance Sheets | ||||||||||||||||||
| (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 | ||||||
Cash held in trust | - | - | 5 | - | - | 5 | ||||||||||||
Trade and other receivables | 36 | 307 | 210 | 65 | (418 | ) | 200 | |||||||||||
Inventories | - | - | 228 | 27 | - | 255 | ||||||||||||
Prepaid expenses | - | 1 | 5 | 1 | - | 7 | ||||||||||||
| 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 | |||||
| TEMBECSupplemental Information for fourth quarter 2012 | 2 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 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 | ||||||||||||
| 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: | ||||||||||||||||||
Operating bank loans | $ | - | $ | - | $ | - | $ | 6 | $ | - | $ | 6 | ||||||
Trade, other payables and accrued charges | - | 191 | 313 | 77 | (341 | ) | 240 | |||||||||||
Interest payable | - | 8 | - | - | - | 8 | ||||||||||||
Income tax payable | - | - | - | 6 | - | 6 | ||||||||||||
Provisions | - | - | 8 | - | - | 8 | ||||||||||||
Current portion of long-term debt | 5 | - | - | 13 | - | 18 | ||||||||||||
| 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 | ||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 3 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Condensed Consolidated Balance Sheets (continued) | ||||||||||||||||||
| (unaudited)(in millions of Canadian dollars) | ||||||||||||||||||
| September 26, 2010 | ||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidation | ||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Adjustments | Consolidated | |||||||||||||
ASSETS | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | - | $ | 1 | $ | 24 | $ | 43 | $ | - | $ | 68 | ||||||
Cash held in trust | - | - | - | 6 | - | 6 | ||||||||||||
Trade and other receivables | 38 | 350 | 175 | 41 | (395 | ) | 209 | |||||||||||
Inventories | - | - | 231 | 24 | - | 255 | ||||||||||||
Prepaid expenses | - | 1 | 5 | 1 | - | 7 | ||||||||||||
| 38 | 352 | 435 | 115 | (395 | ) | 545 | |||||||||||
Investments | 277 | 453 | - | - | (730 | ) | - | |||||||||||
Property, plant and equipment | - | 5 | 409 | 82 | - | 496 | ||||||||||||
Biological assets | - | - | 7 | - | - | 7 | ||||||||||||
Employee future benefits | - | - | - | - | - | - | ||||||||||||
Other long-term receivables | - | 25 | 2 | 1 | - | 28 | ||||||||||||
Deferred tax assets | 1 | - | - | 26 | - | 27 | ||||||||||||
| $ | 316 | $ | 835 | $ | 853 | $ | 224 | $ | (1,125 | ) | $ | 1,103 | |||||
| ||||||||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Operating bank loans | $ | - | $ | - | $ | - | $ | 1 | $ | - | $ | 1 | ||||||
Trade, other payables and accrued charges | - | 154 | 317 | 157 | (395 | ) | 233 | |||||||||||
Interest payable | - | 3 | - | - | - | 3 | ||||||||||||
Income tax payable | - | - | - | - | - | - | ||||||||||||
Provisions | - | - | 5 | - | - | 5 | ||||||||||||
Current portion of long-term debt | 5 | - | - | 12 | - | 17 | ||||||||||||
| 5 | 157 | 322 | 170 | (395 | ) | 259 | |||||||||||
Long-term debt | 6 | 248 | - | 23 | (6 | ) | 271 | |||||||||||
Provisions | - | - | 17 | - | - | 17 | ||||||||||||
Employee future benefits | - | 146 | 57 | 45 | - | 248 | ||||||||||||
Other long-term liabilities | 5 | 2 | 1 | - | - | 8 | ||||||||||||
| 16 | 553 | 397 | 238 | (401 | ) | 803 | |||||||||||
| ||||||||||||||||||
Shareholders' equity: | ||||||||||||||||||
Share capital | 564 | 551 | 668 | (27 | ) | (1,192 | ) | 564 | ||||||||||
Retained earnings (deficit) | (264 | ) | (269 | ) | (212 | ) | 13 | 468 | (264 | ) | ||||||||
Accumulated other comprehensive earnings (loss) | - | - | - | - | - | - | ||||||||||||
| 300 | 282 | 456 | (14 | ) | (724 | ) | 300 | |||||||||||
| $ | 316 | $ | 835 | $ | 853 | $ | 224 | $ | (1,125 | ) | $ | 1,103 | ||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 4 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Condensed Consolidated Statements of Comprehensive Earnings (Loss) | ||||||||||||||||||
| (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 | (42 | ) | (42 | ) | (24 | ) | (5 | ) | 71 | (42 | ) | |||||||
Other benefit plans | 4 | 4 | 4 | (8 | ) | 4 | ||||||||||||
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 | ) | |||||||||||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 5 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| 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 24, 2011 | ||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidation | ||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Adjustments | Consolidated | |||||||||||||
| Sales | $ | - | $ | 3 | $ | 1,503 | $ | 255 | $ | (18 | ) | $ | 1,743 | |||||
| Freight and other deductions | - | - | 224 | 19 | (6 | ) | 237 | |||||||||||
| Lumber export taxes | - | - | 13 | - | - | 13 | ||||||||||||
| Cost of sales (excluding depreciation and amortization) | - | - | 1,173 | 160 | (12 | ) | 1,321 | |||||||||||
| Selling, general and administrative | (1 | ) | 10 | 56 | 7 | - | 72 | |||||||||||
| Share-based compensation | - | 2 | - | - | - | 2 | ||||||||||||
| Depreciation and amortization | - | 1 | 41 | 6 | - | 48 | ||||||||||||
| Other items | - | 3 | 4 | (4 | ) | - | 3 | |||||||||||
| Operating earnings (loss) | 1 | (13 | ) | (8 | ) | 67 | - | 47 | ||||||||||
| Interest, foreign exchange and other | (4 | ) | 1 | 31 | 3 | - | 31 | |||||||||||
| Exchange loss (gain) on long-term debt | - | 1 | - | - | - | 1 | ||||||||||||
| Net finance costs (income) | (4 | ) | 2 | 31 | 3 | - | 32 | |||||||||||
| Earnings (loss) before income taxes and share of results for equity accounting | 5 | (15 | ) | (39 | ) | 64 | - | 15 | ||||||||||
| Income tax expense (recovery) | - | - | - | 20 | - | 20 | ||||||||||||
| Share of results for equity accounting | (10 | ) | 4 | - | - | 6 | - | |||||||||||
| Net earnings (loss) | (5 | ) | (11 | ) | (39 | ) | 44 | 6 | (5 | ) | ||||||||
| Other comprehensive earnings (loss), net of income taxes: | ||||||||||||||||||
| Defined benefit pension plans | (64 | ) | (63 | ) | (43 | ) | (6 | ) | 112 | (64 | ) | |||||||
| Other benefit plans | - | - | - | - | - | - | ||||||||||||
| Foreign currency translation differences for foreign operations | 2 | 2 | - | 2 | (4 | ) | 2 | |||||||||||
| Total comprehensive earnings (loss) | $ | (67 | ) | $ | (72 | ) | $ | (82 | ) | $ | 40 | $ | 114 | $ | (67 | ) | ||
| Basic and diluted net loss in dollars per share | $ | (0.05 | ) | |||||||||||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 6 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Condensed Consolidated Statements of Cash Flows | ||||||||||||||||||
| (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 and deconsolidation of a subsidiary | (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: | ||||||||||||||||||
Additions to property, plant and equipment | - | (2 | ) | (86 | ) | (20 | ) | - | (108 | ) | ||||||||
Proceeds from sale of net assets | 1 | 3 | 80 | - | - | 84 | ||||||||||||
Investments in a subsidiary | (28 | ) | - | - | - | 28 | - | |||||||||||
Interest received | - | 34 | - | - | (34 | ) | - | |||||||||||
Other | - | (1 | ) | - | - | - | (1 | ) | ||||||||||
| (27 | ) | 34 | (6 | ) | (20 | ) | (6 | ) | (25 | ) | |||||||
Cash flow from financing activities: | ||||||||||||||||||
Change in operating bank loans | - | - | 65 | (3 | ) | - | 62 | |||||||||||
Cash held in trust | - | - | (5 | ) | 5 | - | - | |||||||||||
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 | 71 | - | 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 period | - | - | 40 | 59 | - | 99 | ||||||||||||
Cash and cash equivalents, end of period | $ | - | $ | 1 | $ | 29 | $ | 57 | $ | - | $ | 87 | ||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 7 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Condensed Consolidated Statements of Cash Flows (continued) | ||||||||||||||||||
| (unaudited)(in millions of Canadian dollars) | ||||||||||||||||||
| Year ended September 24, 2011 | ||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidation | ||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Adjustments | Consolidated | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||||
Net earnings (loss) | $ | (5 | ) | $ | (11 | ) | $ | (39 | ) | $ | 44 | $ | 6 | $ | (5 | ) | ||
Adjustments for: | ||||||||||||||||||
Depreciation and amortization | - | 1 | 41 | 6 | - | 48 | ||||||||||||
Net finance costs | (4 | ) | 2 | 31 | 3 | - | 32 | |||||||||||
Income tax expense (recovery) | - | - | - | 20 | - | 20 | ||||||||||||
Income tax paid | - | - | - | (1 | ) | - | (1 | ) | ||||||||||
Excess cash contributions over employee future benefits expense | - | (6 | ) | (11 | ) | (5 | ) | - | (22 | ) | ||||||||
Provisions | - | - | 1 | - | - | 1 | ||||||||||||
Share of results for equity accounting | 10 | (4 | ) | - | - | (6 | ) | - | ||||||||||
Impairment loss | - | - | - | - | - | - | ||||||||||||
Gain on sale of assets and deconsolidation of a subsidiary | - | - | (3 | ) | (4 | ) | - | (7 | ) | |||||||||
Other | - | - | (3 | ) | 1 | - | (2 | ) | ||||||||||
| 1 | (18 | ) | 17 | 64 | - | 64 | |||||||||||
Change in non-cash working capital: | ||||||||||||||||||
Trade and other receivables | 3 | 11 | 43 | (9 | ) | (15 | ) | 33 | ||||||||||
Inventories | - | - | (2 | ) | (5 | ) | - | (7 | ) | |||||||||
Prepaid expenses | - | - | - | 1 | - | 1 | ||||||||||||
Trade, other payables and accrued charges | - | - | 11 | (18 | ) | 15 | 8 | |||||||||||
| 3 | 11 | 52 | (31 | ) | - | 35 | |||||||||||
| 4 | (7 | ) | 69 | 33 | - | 99 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||||
Additions to property, plant and equipment | - | - | (46 | ) | (19 | ) | - | (65 | ) | |||||||||
Proceeds from sale of net assets | - | - | 17 | - | - | 17 | ||||||||||||
Investments in subsidiary | - | - | - | - | - | - | ||||||||||||
Interest received | - | 27 | - | - | (27 | ) | - | |||||||||||
Other | - | 4 | 2 | (4 | ) | - | 2 | |||||||||||
| - | 31 | (27 | ) | (23 | ) | (27 | ) | (46 | ) | ||||||||
Cash flow from financing activities: | ||||||||||||||||||
Change in operating bank loans | - | - | - | 5 | - | 5 | ||||||||||||
Cash held in trust | - | - | - | - | - | - | ||||||||||||
Increase in long-term debt | - | - | - | 8 | - | 8 | ||||||||||||
Repayments of long-term debt | (4 | ) | - | - | (4 | ) | - | (8 | ) | |||||||||
Proceeds from issue of share capital | - | - | - | - | - | - | ||||||||||||
Interest paid | - | (23 | ) | (26 | ) | (3 | ) | 27 | (25 | ) | ||||||||
Other | - | (2 | ) | - | - | - | (2 | ) | ||||||||||
| (4 | ) | (25 | ) | (26 | ) | 6 | 27 | (22 | ) | ||||||||
| - | (1 | ) | 16 | 16 | - | 31 | |||||||||||
Foreign exchange loss on cash and cash equivalents held in foreign currencies | - | - | - | - | - | - | ||||||||||||
Net increase (decrease) in cash and cash equivalents | - | (1 | ) | 16 | 16 | - | 31 | |||||||||||
Cash and cash equivalents, beginning of period | - | 1 | 24 | 43 | - | 68 | ||||||||||||
Cash and cash equivalents, end of period | $ | - | $ | - | $ | 40 | $ | 59 | $ | - | $ | 99 | ||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 8 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
Explanation of transition to IFRS
The accounting policies set out in note 3 of the Company’s audited consolidated financial statements for the year ended September 29, 2012, have been applied in preparing supplemental condensed consolidating financial information for the same date and for the comparative figures, except for the use of the equity method as explain on page 1.
In preparing its opening IFRS balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous Canadian GAAP. An explanation of how the transition from previous GAAP to IFRS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.
In such tables, reclassification has been made to conform to IAS 1 –Presentation of Financial Statements,minimum disclosure requirements. Additionally, in preparing its consolidated financial statements in accordance with IFRS 1 -First-time Adoption of International Financial Reporting Standards, the Company applied the mandatory exemptions and elected to apply the following optional exemptions from full retrospective application:
Employee benefits exemption
IFRS 1 provides the option to retrospectively apply IAS 19,Employee Benefits, for the recognition of unamortized actuarial gains and losses, past service costs and transitional obligations and assets or to recognize these balances previously deferred under previous Canadian GAAP in opening retained earnings as at September 26, 2010 (the “Transition Date”). The Company has elected to recognize all unamortized cumulative actuarial losses and past service costs at the Transition Date as an adjustment to opening retained earnings for all of its employee future benefit plans.
Foreign currency translation differences
Retrospective application of IFRS would require the Company to determine cumulative currency translation differences in accordance with IAS 21,The Effects of Changes in Foreign Exchange Rates, from the date a subsidiary or equity method investee was formed or acquired. IFRS 1 permits cumulative translation gains and losses to be reset to zero at the Transition Date. The Company elected to reset all cumulative translation gains and losses to zero in opening retained earnings at its Transition Date.
Event driven fair value of property, plant and equipment as deemed cost
IFRS 1 provides the choice of recording assets and liabilities based on a deemed cost, which can be an event driven valuation where some or all of the assets and liabilities were valued and recognized at fair value under previous Canadian GAAP. As a result of the recapitalization transaction that occurred within the Company in 2008, the Company has elected to apply this exemption to property, plant and equipment and used such event driven fair value measurements as deemed cost for IFRS at the date of that measurement.
Business combinations exemption
IFRS 1 provides the option to apply IFRS 3,Business Combinations, retrospectively or prospectively - either from the Transition Date or a particular date prior to the Transition Date. The Company has elected to apply IFRS 3 prospectively to business combinations that occur after the Transition Date. Accordingly, business combinations prior to this date have not been restated.
Share-based payment transaction exemption
IFRS 1 provides an optional exemption to the application of IFRS 2,Share-based Payment, for those share options granted subsequent to November 7, 2002, that have fully vested as at the Transition Date and to liabilities arising from share-based payment transactions that were settled before the Transition Date. The Company has elected this exemption.
Borrowing costs
IFRS 1 provides the option to apply IAS 23,Borrowing Costs, retrospectively or prospectively from the Transition Date. IAS 23 requires an entity to capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The Company elected to apply this exemption prospectively in respect of qualifying assets for which the commencement date for capitalization was on or after the Transition Date.
| TEMBECSupplemental Information for fourth quarter 2012 | 9 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Changes in Condensed Consolidated Shareholders’ Equity under IFRS | |||||||||||||||||||||
| The effect of the IFRS adjustments on the condensed consolidated shareholders’ equity is as follows: | |||||||||||||||||||||
| September 24, 2011 | |||||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidated | |||||||||||||||||
| Notes | Company | Issuer | Subsidiaries | Subsidiaries | Adjustment | Consolidated | |||||||||||||||
Shareholders' equity as per previous Canadian GAAP | $ | 362 | $ | 342 | $ | 514 | $ | 112 | $ | (968 | ) | $ | 362 | ||||||||
| |||||||||||||||||||||
Biological assets | (a) | - | - | 4 | - | - | 4 | ||||||||||||||
Component accounting | (b) | - | - | 6 | - | - | 6 | ||||||||||||||
Translation of foreign operations | (c) | - | - | - | (7 | ) | - | (7 | ) | ||||||||||||
Site restoration | (d) | - | - | (1 | ) | - | - | (1 | ) | ||||||||||||
Recognition of unamortized actuarial balances into equity | (e) | (1 | ) | 40 | (151 | ) | (20 | ) | - | (132 | ) | ||||||||||
Warrants | (f) | - | - | - | - | - | - | ||||||||||||||
Provisions | (g) | - | - | 2 | - | - | 2 | ||||||||||||||
Deferred tax liabilities | (e) | - | - | - | (1 | ) | - | (1 | ) | ||||||||||||
Share of results for equity accounting | (128 | ) | (168 | ) | - | - | 296 | - | |||||||||||||
Shareholders' equity as per IFRS | $ | 233 | $ | 214 | $ | 374 | $ | 84 | $ | (672 | ) | $ | 233 | ||||||||
| September 26, 2010 | |||||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidated | |||||||||||||||||
| Notes | Company | Issuer | Subsidiaries | Subsidiaries | Adjustment | Consolidated | |||||||||||||||
Shareholders' equity as per previous Canadian GAAP | $ | 365 | $ | 341 | $ | 545 | $ | 11 | $ | (897 | ) | $ | 365 | ||||||||
| |||||||||||||||||||||
Biological assets | (a) | - | - | 7 | - | - | 7 | ||||||||||||||
Component accounting | (b) | - | - | 6 | - | - | 6 | ||||||||||||||
Translation of foreign operations | (c) | - | - | - | (7 | ) | - | (7 | ) | ||||||||||||
Site restoration | (d) | - | - | (1 | ) | - | - | (1 | ) | ||||||||||||
Recognition of unamortized actuarial balances into equity | (e) | - | 54 | (103 | ) | (18 | ) | - | (67 | ) | |||||||||||
Warrants | (f) | (5 | ) | - | - | - | - | (5 | ) | ||||||||||||
Provisions | (g) | - | - | 2 | - | - | 2 | ||||||||||||||
Deferred tax liabilities | - | - | - | - | - | - | |||||||||||||||
Share of results for equity accounting | (60 | ) | (113 | ) | - | - | 173 | - | |||||||||||||
Shareholders' equity as per IFRS | $ | 300 | $ | 282 | $ | 456 | $ | (14 | ) | $ | (724 | ) | $ | 300 | |||||||
| TEMBECSupplemental Information for fourth quarter 2012 | 10 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
| Changes in Condensed Consolidated Statements of Comprehensive Earnings (Loss) under IFRS | |||||||||||||||||||||
| The effect of the IFRS adjustments on the condensed consolidated statement of comprehensive earnings (loss) is as follows: | |||||||||||||||||||||
| Year ended September 24, 2011 | |||||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidated | |||||||||||||||||
| Notes | Company | Issuer | Subsidiaries | Subsidiaries | Adjustment | Consolidated | |||||||||||||||
Net earnings (loss) as per previous Canadian GAAP | $ | (3 | ) | $ | (3 | ) | $ | (30 | ) | $ | 49 | $ | (16 | ) | $ | (3 | ) | ||||
| |||||||||||||||||||||
Cost of sales | (a)(b)(e) | - | - | 3 | - | - | 3 | ||||||||||||||
Depreciation and amortization | (b) | - | - | (3 | ) | - | - | (3 | ) | ||||||||||||
Other items | (e) | - | 1 | - | (3 | ) | - | (2 | ) | ||||||||||||
Interest, foreign exchange and other | (c)(d)(e)(f)(g) | 4 | 7 | (9 | ) | (1 | ) | - | 1 | ||||||||||||
Deferred income tax expense | (e) | - | - | - | (1 | ) | - | (1 | ) | ||||||||||||
Share of results for equity accounting | (6 | ) | (16 | ) | - | - | 22 | - | |||||||||||||
Net earnings (loss) as per IFRS | $ | (5 | ) | $ | (11 | ) | $ | (39 | ) | $ | 44 | $ | 6 | $ | (5 | ) | |||||
| |||||||||||||||||||||
Basic and diluted net loss in dollars per share as per IFRS | $ | (0.05 | ) | ||||||||||||||||||
| |||||||||||||||||||||
Other comprehensive earnings (loss) as per previous Canadian GAAP | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||
| |||||||||||||||||||||
Pension and other benefits plans, net of income taxes | (e) | (64 | ) | (63 | ) | (43 | ) | (6 | ) | 112 | (64 | ) | |||||||||
Translation of foreign operations | (c) | 2 | 2 | - | 2 | (4 | ) | 2 | |||||||||||||
Other comprehensive earnings (loss) as per IFRS | $ | (62 | ) | $ | (61 | ) | $ | (43 | ) | $ | (4 | ) | $ | 108 | $ | (62 | ) | ||||
| |||||||||||||||||||||
Total comprehensive earnings (loss) as per IFRS | $ | (67 | ) | $ | (72 | ) | $ | (82 | ) | $ | 40 | $ | 114 | $ | (67 | ) | |||||
| TEMBECSupplemental Information for fourth quarter 2012 | 11 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
Changes in Condensed Consolidated Statements of Cash Flows
The adoption of IFRS has had no impact on the net cash flows of the Company. The changes made to the consolidated balance sheet and to the consolidated statements of net earnings (loss) have resulted in reclassifications of various amounts on the consolidated statements of cash flows. There have been no significant changes to the net cash flows, other than the Company’s accounting policy choice to classify interest paid as financing activity and interest received as investing activity under IFRS compared to operating activity under previous Canadian GAAP.
| Year ended September 24, 2011 | ||||||||||||||||||
| Parent | Subsidiary | Guarantor | Other | Consolidated | ||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Adjustment | Consolidated | |||||||||||||
Cash flow from operating activities as per previous Canadian GAAP | $ | 4 | $ | (4 | ) | $ | 41 | $ | 28 | $ | - | $ | 69 | |||||
Reclassification for interest | - | (4 | ) | 26 | 3 | - | 25 | |||||||||||
Other | - | 1 | 2 | 2 | - | 5 | ||||||||||||
As per IFRS | $ | 4 | $ | (7 | ) | $ | 69 | $ | 33 | $ | - | $ | 99 | |||||
| ||||||||||||||||||
Cash flow from investing activities as per previous Canadian GAAP | - | 4 | (25 | ) | (22 | ) | - | (43 | ) | |||||||||
Reclassification for interest received | - | 27 | - | - | (27 | ) | - | |||||||||||
Other | - | - | (2 | ) | (1 | ) | - | (3 | ) | |||||||||
As per IFRS | $ | - | $ | 31 | $ | (27 | ) | $ | (23 | ) | $ | (27 | ) | $ | (46 | ) | ||
| ||||||||||||||||||
Cash flow from financing activities as per previous Canadian GAAP | (4 | ) | (1 | ) | - | 10 | - | 5 | ||||||||||
Reclassification for interest paid | - | (23 | ) | (26 | ) | (3 | ) | 27 | (25 | ) | ||||||||
Other | - | (1 | ) | - | (1 | ) | - | (2 | ) | |||||||||
As per IFRS | $ | (4 | ) | $ | (25 | ) | $ | (26 | ) | $ | 6 | $ | 27 | $ | (22 | ) | ||
| TEMBECSupplemental Information for fourth quarter 2012 | 12 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
Notes to the reconciliation of equity and statement of comprehensive earnings (loss)
The numbers provided in the following notes are presented on a consolidated basis. The allocation of these adjustments between the Parent Company, the Subsidiary Issuer, the Guarantor Subsidiaries and the Other Subsidiaries are provided in the respective tables on page 10 and 11.
| (a) | Biological assets |
In accordance with IAS 41,Agriculture, the Company’s standing timber on its private timberlands is considered to be a biological asset that is measured at fair value less costs to sell at each reporting date, with changes in fair value less costs to sell recognized in net earnings (loss) at each period. As a result of this IFRS guidance, the Company’s standing timber on its private timberlands has been separately identified on the consolidated balance sheet as biological assets and recorded at fair value less costs to sell. | |
The effect of the above on the Company’s balance sheet resulted in an increase in biological assets of $4 million at September 24, 2011 (September 26, 2010 - $7 million), and resulted in a decrease of the deficit of $4 million (September 26, 2010 - $7 million). | |
The impact on total comprehensive loss for the year ended September 24, 2011, increased by $3 million. | |
| (b) | Component accounting |
Under previous Canadian GAAP, the Company did not apply component accounting to the significant separable component parts of an item of property, plant and equipment since no guidance was provided on evaluating the cost of a component, replacement of a component and the level at which component accounting was required. Under IFRS, the major assets must be separated into components and the cost of replacement or overhaul of these components are considered to be a part of property, plant and equipment, and are amortized over their individual estimated useful lives. | |
The effect of the above on the Company’s balance sheet resulted in an increase in property, plant and equipment of $6 million at September 24, 2011 (September 26, 2010 - $6 million), and resulted in a decrease of the deficit of $6 million (September 26, 2010 - $6 million). | |
The impact on total comprehensive loss for the year ended September 24, 2011, was negligible. | |
| (c) | Translation of foreign operations |
Under previous Canadian GAAP, non-monetary assets and liabilities of the foreign operations were translated to Canadian dollars at the historical rate relevant to the particular transaction date at which such assets or liabilities were originated. Under IFRS, all assets and liabilities of the foreign operations with functional currencies other than the Canadian dollar are translated to Canadian dollar at the exchange rate prevailing at period-end and are recognized in other comprehensive loss. In accordance with IFRS 1, the Company elected to reset all cumulative translation gains and losses to zero in opening deficit at its Transition Date. | |
The effect of the above on the Company’s balance sheet resulted in a decrease in property, plant and equipment of $7 million at September 24, 2011 (September 26, 2010 - $7 million), and resulted in an increase of the deficit of $9 million (September 26, 2010 - $7 million) and an increase of accumulated other comprehensive earnings of $2 million (September 26, 2010 - nil). | |
The impact on total comprehensive loss for the year ended September 24, 2011, decreased by $2 million. | |
| (d) | Site restoration |
Under previous Canadian GAAP, the cost of decommissioning and restoration of landfill sites were part of property, plant and equipment and depreciated over the estimated useful life of the landfill site. Under IFRS, decommissioning and restoration costs incurred through the production of inventory are included as part of inventory costs. | |
The effect of the above on the Company’s balance sheet resulted in a decrease in property, plant and equipment of $1 million at September 24, 2011 (September 26, 2010 - $1 million), and resulted in an increase of the deficit of $1 million (September 26, 2010 - $1 million). | |
For the year ended September 24, 2011, the impact on total comprehensive loss was negligible. |
| TEMBECSupplemental Information for fourth quarter 2012 | 13 |
| TEMBEC INC. |
| SUPPLEMENTAL INFORMATION |
| September 29, 2012 |
| Supplemental condensed consolidating financial information |
Notes to the reconciliation of equity and statement of comprehensive earnings (loss) (continued)
| (e) | Recognition of unamortized actuarial losses at date of transition to IFRS into equity |
As permitted by previous Canadian GAAP, the Company measured its employee future benefits obligation for accounting purposes as at June 30 of each fiscal year. This was often referred as the early measurement date accounting policy choice. Under IAS 19 -Employee Benefit, the measurement date of the employee future benefits obligation must coincide with the fiscal year-end of the Company. Therefore, upon transition to IFRS, the Company measured its employee future benefits obligation at the date of the opening balance sheet in accordance with IAS 19. | |
In addition, as permitted by IFRS 1 -First-time Adoption of International Financial Reporting Standards, management elected the optional exemption to recognize all unamortized cumulative actuarial losses at the Transition Date as an adjustment to opening retained earnings for all of its employee future benefit plans. | |
Under IFRS, the Company’s accounting policy is to recognize all actuarial gains and losses, arising on its defined benefit pension and other non-pension post retirement plans, immediately in other comprehensive earnings (loss). | |
The cumulative effect of the above on the Company's balance sheet was to decrease employee future benefits assets by $15 million at September 24, 2011 (September 26, 2010 - $6 million), and increase the employee future benefits liabilities by $117 million (September 26, 2010 - $61 million), which resulted in a corresponding increase to deficit of $132 million (September 26, 2010 - $67 million). | |
The impact on total comprehensive loss for the year ended September 24, 2011 increased by $65 million. | |
| (f) | Warrants |
Under IFRS, the warrants have been classified as a liability because of the possibility that they may be settled in cash in the event of a change of control. They are recorded at fair value with value being adjusted every quarter. | |
The effect of the above on the Company’s balance sheet resulted in a decrease in share capital of $6 million at September 24, 2011 (September 26, 2010 - $6 million), and resulted in an increase of the other long-term liabilities by a negligible amount (September 26, 2010 - $5 million), and a decrease of the deficit of $6 million (September 26, 2010 - $1 million). | |
Total comprehensive loss decreased by $5 million for the year ended September 24, 2011. | |
| (g) | Provisions |
IAS 37 –Provisions, Contingent Liabilities and Contingent Assets, has measurement differences when compared to previous Canadian GAAP. These measurement differences include the requirement to reflect the risks associated with the Company’s provisions in either the cash flows or the discount rate. | |
The effect of the above on the Company’s balance sheet resulted in a decrease in long-term provisions of $2 million at September 24, 2011 (September 26, 2010 - $2 million), and resulted in a decrease of the deficit of $2 million (September 26, 2010 - $2 million). | |
For the year ended September 24, 2011, the impact on total comprehensive loss was negligible. | |
| (h) | Contributed surplus |
The previous Canadian GAAP requires that a future income tax asset that was not recognized at the date of a comprehensive revaluation as a result of a financial reorganization be subsequently recognized first as a reduction of any unamortized intangible asset and then in a manner consistent with the revaluation adjustment recorded at the date of the comprehensive revaluation. Under IFRS, this recognition of a future income tax asset is recorded to profit and loss. | |
The effect of the above on the Company’s balance sheet resulted in a decrease in contributed surplus of $5 million at September 24, 2011 (September 26, 2010 - $5 million), and resulted in a decrease of the deficit of $5 million (September 26, 2010 - $5 million). | |
For the year ended September 24, 2011, the impact on total comprehensive loss was nil. |
| TEMBECSupplemental Information for fourth quarter 2012 | 14 |