2013 Annual Report
Value-Added
Growth
5N Table of Contents
1
2
5
25
34
73
Our Vision
Message to Shareholders
Management’s Discussion and Analysis
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Corporate Information
Germanium
substrate
Space
solar power
Bismuth
chemicals
Pigments
Cadmium
telluride
Thin film
solar modules
Micron size
metallic powder
Solder powder
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
1
Our Vision
Sustainable growth through
innovation and product excellence.
2
Message
to
Shareholders
Dear shareholders,
Another year in which we have made great strides towards our stated objectives
of realigning our organization for more growth in value-added opportunities.
This alignment first implies a will, which has been articulated in a clear message
conveyed throughout our organization, then a strategy, and corresponding
roadmap that each employee can relate to, and finally an ability to execute.
Our conveyed message is all around sustainable growth, recognizing the need to grow
and the numerous opportunities which are increasingly presenting themselves to a materials’
company such as ours. Addressing relatively open-ended markets and taking advantage of our
unique positioning in minor metals, we have and will continue to grow, building on our global
platform, with operations and extensive commercial activities throughout the world, and our unique
set of technical competencies. Our ability to grow is perhaps best appreciated by looking at our
track record over the last five years in which our revenues grew from $31 million to $459 million
or 1381%, enabling us to be amongst the Deloitte Fast 500TM for a fourth consecutive year, in line
with several growth icons such as Tesla and Facebook, ranking 101st in North America, 5th in Canada
and number one in Quebec.
Although revenues actually fell in 2013 when compared to 2012, largely as a result of decreasing
prices in underlying commodities, 2013 still remained in many respects a year of growth with record
shipments of our bismuth products, our most significant product by volume, and our germanium
substrates for satellite power applications, as well as increases in market share for most products
in our electronic materials business unit. We also announced during the year commissioning
of our new facility in Korea, further highlighting our growth ambitions as we expand our Asian
footprint. 2013 was also a year in which we introduced several new products including zinc telluride
for solar modules, lead nitrate for the mining industry and some new bismuth chemical formulations
for both industrial and pharmaceutical applications. We were also able to build more sustainability
in our business practices throughout the year and hence provide a more solid foundation for
future growth.
With respect to strategy, we have crafted an approach based on increasing value-added
products and processes that we believe will provide better financial performance and improve
predictability, enabling us to create more value for our shareholders. Leveraging our strong
commercial leadership in minor metals, we intend to develop both a stronger foothold in terms of
supply and increase the complexity of our products and product offering.
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
3
We made progress on both fronts in 2013. On one hand we entered into an exclusive bismuth
off-take agreement with Masan Resources through their Nui Phao mine located in Vietnam and we
also strengthened our relationship with several of our suppliers throughout the world. On the other
hand, we expanded our efforts in the semiconductor substrate business, increasing our ownership
in Sylarus to 100%, and also entered the fine metal powder business through our partnership
with, and soon to be completed acquisition of AM&M. We intend to devote significant resources to
rapidly expand these businesses which hold great promise. Through our Sylarus platform, which
has been renamed 5N Plus Semiconductors, we intend to both grow our existing germanium and
III-V semiconductor substrate business, as well as leverage our skillset in crystal growth to other
material systems. As for our fine metal powder business we see great promise in not only existing
markets, such as metals pastes and inks for electronic packaging applications, but also in new
applications such as additive manufacturing and 3D printing.
In terms of execution, we have focused on improving efficiency and intend on continuing
to do so as we have yet to reach our stated objectives and thus reap the full benefits of this exercise.
We believe this requires streamlining and consolidation of some sites, a task that was undertaken
in 2013 with the closure of our Trail operations and their relocation for the most part to St-George,
Utah within 5N Plus Semiconductors. We also believe that improvements in our management
systems, including supply chain management and costing will enable us to further reduce our costs
and working capital. This focus on reducing working capital should enable us to redeploy capital
to support our value-added strategy and our stated objective of sustainable growth, promoting a
culture of discipline and accountability throughout the group. We also settled favorably the dispute
with the former shareholders of MCP.
Our financial performance in 2013 was quite spectacular as we reported $44.7 million of
earnings before income tax mainly associated with the settlement of the dispute with the former
shareholders of MCP. This contributed significantly to the reduction in our net debt levels together
with our focus on working capital reductions, enabling us to greatly improve our financial flexibility
and our ability to execute on our growth strategy. We are particularly pleased by our ability to
report positive EBITDA and net earnings levels, which is a significant improvement compared to our
financial performance in 2012. This is especially true given the challenging environment we have
been operating in since the acquisition of MCP, characterized by significant structural changes in
the solar industry which led to numerous corporate casualties, and a largely unfavorable pricing
environment for many of the underlying commodities we deal with.
4
So where do we go from here and what does the future hold in light of our sustainable
growth commitments? Key elements of this future include:
• A continuing focus on improving profitability favored by tailwinds in commodities and positive
developments in many market segments allowing us to redeploy capital towards key components
of our growth strategy;
• Execution on our strategic growth plan aiming to increase value-added activities, broaden our
footprint in Asia and expand our recycling business leveraging our international platform;
• Further improvements in efficiency as we aim to make better use of our industrial assets and
reduce the financial requirements associated with our working capital;
• Increasing investments in R&D together with fast tracking of our value-added opportunities aiming
to speed up their impact on our top and bottom line;
• An acquisition roadmap that will enable us to take advantage of existing and future synergies
as we move the company to the next level; and
• A management team with greater bandwidth as we recently welcomed Mr. Richard Perron as
our new Chief Financial Officer and a revamped board of directors with strong international
experience. Our three new director nominees are Ms. Jennie S. Hwang, Ms. Nathalie Le Prohon,
and Mr. James T. Fahey, whose biographies can be consulted in our Management Proxy Circular.
We wish Messrs. Dennis Wood, Chairman of the Board and John Davis, member of the Board and
Chairman of the Compensation Committee, all the best in their retirement endeavors and we
thank them for their invaluable dedication and contribution to the company over the years.
On behalf of our employees and our management team, let me thank you again for your confidence
and support. We remain more than ever confident in our ability to provide sustainable long-term
value to all of you, shareholders, through growth as we execute on our value-added strategy.
Jacques L’Ecuyer
President and Chief Executive Officer
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
5
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations is intended to
assist readers in understanding 5N Plus Inc. (the “Company” or “5N Plus”), its business environment, strategies,
performance and risk factors. This MD&A should be read in conjunction with the audited consolidated financial
statements and the accompanying notes for the year ended December 31, 2013. This MD&A has been prepared in
accordance with the requirements of the Canadian Securities Administrators
Information contained herein includes any significant developments to February 25, 2014, the date on which the MD&A
was approved by the Company’s board of directors. Unless otherwise indicated, the terms “we”, “us” “our” and “the
group” as used herein refer to the Company together with its subsidiaries.
The “Q4 2013” and the “Q4 2012” refer to the three‐month periods ended December, 2013 and 2012. All amounts in this
MD&A are expressed in U.S. dollars, and all amounts in the tables are in thousands of U.S. dollars, unless otherwise
indicated. All quarterly information disclosed in this MD&A is based on unaudited figures.
Non‐IFRS Measures
This MD&A also includes certain figures that are not performance measures consistent with IFRS. These measures are
defined at the end of this MD&A under the heading Non‐IFRS Measures.
Notice Regarding Forward‐Looking Statements
Certain statements in this MD&A may be forward‐looking within the meaning of applicable securities laws. Forward‐
looking information and statements are based on the best estimates available to the Company at the time and involve
known and unknown risks, uncertainties or other factors that may cause the Company’s actual results, performance or
achievements to be materially different from any future results, performance or achievements expressed or implied by
such forward‐looking statements. Factors of uncertainty and risk that might result in such differences include the risks
related to the possible failure to realize anticipated benefits of acquisitions, credit, interest rate, inventory pricing,
commodity pricing, legal proceedings, currency fluctuation, fair value, source of supply, environmental regulations,
competition, dependence on key personnel, business interruptions, protection of intellectual property, international
operations, collective agreements and being a public issuer. A description of the risks affecting the Company’s business
and activities appears under the heading “Risk and Uncertainties” of 5N Plus’ of this MD&A. Forward‐looking statements
can generally be identified by the use of terms such as “may”, “should”, “would”, “believe”, “expect”, the negative of
these terms, variations of them or any similar terms. No assurance can be given that any events anticipated by the
forward‐looking information in this MD&A will transpire or occur, or if any of them do so, what benefits that 5N Plus will
derive therefrom. In particular, no assurance can be given as to the future financial performance of 5N Plus. The
forward‐looking information contained in this MD&A is made as of the date hereof and the Company has no obligation to
publicly update such forward‐looking information to reflect new information, subsequent or otherwise, unless required
by applicable securities laws. The reader is warned against placing undue reliance on these forward‐looking statements.
6
Management’s Discussion and Analysis
Overview
5N Plus is the leading producer of specialty metal and chemical products. Fully integrated with closed‐loop recycling
facilities, the Company is headquartered in Montreal, Quebec, Canada and operates manufacturing facilities and sales
offices in several locations in Europe, the Americas and Asia. 5N Plus deploys a range of proprietary and proven
technologies to produce products which are used in a number of advanced pharmaceutical, electronic and industrial
applications. Typical products include purified metals such as bismuth, gallium, germanium, indium, selenium and
tellurium, inorganic chemicals based on such metals and compound semiconductor wafers. Many of these are critical
precursors and key enablers in markets such as solar, light‐emitting diodes and eco‐friendly materials.
Reportable Segments
The Company has two reportable segments, namely Electronic Materials and Eco‐Friendly Materials. Corresponding
operations and activities are managed accordingly by the Company’s key decision makers. Segmented operating and
financial information, labelled key performance indicators, are available and used to manage these business segments,
review performance and allocate resources. Financial performance of any given segment is evaluated primarily in terms
of revenues and adjusted EBITDA which is reconciled to consolidated numbers by taking into account corporate income
and expenses.
The Electronic Materials segment is headed by a Vice President who oversees locally managed operations in the
Americas, Europe and Asia. The Electronic Materials segment manufactures and sells refined metals, compounds and
alloys which are primarily used in a number of electronic applications. Typical end‐markets include photovoltaics (solar
energy), light emitting diodes (LED), displays, high‐frequency electronics, medical imaging and thermoelectrics. Main
products are associated with the following metals: cadmium, gallium, germanium, indium and tellurium. These are sold
either in elemental or alloyed form as well as in the form of chemicals and compounds. Revenues and earnings
associated with recycling services and activities provided to customers of the Electronic Materials segment are also
included in the Electronic Materials segment and management of such activities is also the responsibility of the Electronic
Materials Vice President.
The Eco‐Friendly Materials segment is so labelled because it is mainly associated with bismuth, one of the very few heavy
metals which have no detrimental effect on either human health or in the environment. As a result, bismuth is being
increasingly used in a number of applications as a replacement for more harmful metals and chemicals. The Eco‐Friendly
Materials segment is headed by a Vice President who oversees locally managed operations in Europe and Asia. The Eco‐
Friendly Materials segment manufactures and sells refined bismuth and bismuth chemicals, low melting point alloys as
well as refined selenium and selenium chemicals. These are used in the pharmaceutical and animal‐feed industry as well
as in a number of industrial applications including coatings, pigments, metallurgical alloys and electronics.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses
together with financing costs, gains and/or losses on foreign exchange and derivative have been regrouped under the
heading Corporate.
5N Plus Inc. [2]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
Highlights of Q4 2013 and Fiscal Year 2013
7
EBITDA1 increased by $26.1 million, from ($18.1) million in Q4 2012 to $7.9 million in Q4 2013 and by $32.9 million,
from ($12.7) million in 2012 to $20.2 million in 2013.
Revenues decreased by $9.2 million, or 7%, from $128.6 million in Q4 2012 to $119.4 million in Q4 2013 and by $92.7
million, or 17%, from $551.7 million in 2012 to $459.0 million in 2013. These decreases are mainly due to lower
commodity prices.
Net debt1 decreased by $78.2 million, from $136.5 million as at December 31, 2012 to $58.3 million as at December
31, 2013. The Net debt1 to adjusted EBITDA1 ratio improved in 2013, from 3.6 in 2012 to 1.9 in 2013.
Net earnings of $1.6 million and adjusted net earnings1 of $2.1 million in Q4 2013 compared to net losses of $212.0
million and $6.9 million in Q4 2012. Net earnings of $42.8 million and adjusted net earnings of $10.8 million in 2013
compared to net loss of $227.9 million and adjusted net loss of $2.9 million in 2012.
Bookings1 increased by 18% to $156.1 million compared to $132.1 million in the fourth quarter of last year. Backlog1
as at December 31, 2013 stood at $170.1 million which compares to backlog of $165.8 million one year ago.
On November 13, 2013, the Company was named for a fourth consecutive year as one of Canada’s fastest growing
technology companies in the Deloitte Technology Fast 50TM based on the percentage of revenue growth over five
years. 5N Plus' increase in revenues of 1,681% from 2008 to 2012 resulted in a number 5 ranking. The Company was
also ranked 101 on Deloitte’s Technology Fast 500TM, a list of the 500 fastest growing technology, media,
telecommunications, life sciences and clean technology companies in North America.
On October 24, 2013, the Company announced that it had entered into an exclusive long‐term off‐take agreement of
bismuth with Masan Resources, one of the largest private sector natural resources companies in Vietnam.
On July 9, 2013, the Company announced that it had entered into an exclusive option to acquire all of the issued and
outstanding shares in the capital of AM&M Advanced Machine and Materials Inc., a corporation specialized in the
manufacturing of micron size metallic powders.
On June 18, 2013, the Company announced that it had entered into a full and final settlement agreement with former
shareholders of MCP Group SA ("MCP"), in relation with the dispute previously announced by the Corporation on
December 21, 2012.
On June 11, 2013, the Company announced an investment in a new gallium chemicals facility located in South Korea
and that it had entered into an agreement with a local chemical distributor for the supply of operating services and
logistics of the new facility. This initiative was taken to meet the growing demand for gallium in LED manufacturing in
North East Asia.
1 See Non‐IFRS Measures
5N Plus Inc. [3]
8
Management’s Discussion and Analysis
The Company ended the year with a relatively strong quarter with EBITDA levels reaching close to $8 million and
quarterly revenues at their highest level since the beginning of the year, reflecting a more favorable business
environment despite the typical year‐end demand softness patterns. 5N Plus was also able to continue its quarter‐over‐
quarter reduction in net debt level which was cut by more than half during the year and now stands at less than $60
million providing greater financial flexibility. Underlying commodity prices together with inventory levels are now more
manageable enabling the Company to perform much more effectively than it has been able to ever since the
transformational acquisition made in 2011. Combined with its efforts aimed at improving overall efficiency, instilling
greater discipline and reducing costs, the Company was able to report positive net earnings for a fourth consecutive
quarter and break the trend of impairment charges every alternating quarter. Although the latter remains somewhat
dependent on underlying commodity pricing trends, and thus to some extent beyond the Company’s control, 5N Plus
believes that it is now much better positioned to anticipate and take advantage of these pricing trends in the future.
In its respective markets, bismuth sales volumes reached a record level in both the quarter and the year reflecting
growing demand and increases in market share. Demand for solar products also remained healthy, despite some year‐
end decreases resulting from unusual customer buying patterns, with a relatively bullish outlook for 2014 as the solar
in a number of unsubsidized
industry gradually recovers and demonstrates
markets. Combined sales of electronic metals, namely gallium, indium and germanium, also increased primarily as a
result of higher sales of gallium and related chemicals for the LED market, a market which is expected to continue to
grow in the future as the use of LEDs for general lighting applications expands. As for the germanium substrate business,
the Company made great progress during the year and is now fully qualified with both of the main US based suppliers of
space solar cells. Overall, this relatively bright outlook in terms of markets is further confirmed by the bookings recorded
in the quarter which reached their highest levels since the last two years enabling the backlog to increase back to its June
2012 level despite lower average underlying commodity prices.
its overall competitiveness
5N Plus continues to execute its strategic plan which aims to increase value added activities, broaden its footprint in Asia
and expand its recycling business leveraging and its international platform. As a result, the Company announced during
the year commissioning of its new facility in Korea, its plans to enter the ultrafine metal powder business through the
acquisition of AM&M and its breakthrough atomization technology, and its exclusive long‐term bismuth off‐take
agreement with Masan Resources. The Company also intends to develop, manufacture and market selenium based
chemicals for the animal feed, fertilizer, glass and metallurgical industry. Related investments at its Lao facility are
underway and the Company intends to produce and sell such products before year‐end.
The Company would like to thank its employees for their dedication and hard work in what was a very challenging year.
Fortunately through our combined efforts, the Company was able to make tremendous progress and now have every
reason to be optimistic on its ability to increase shareholder value in the future. The Company also thanks its
stakeholders and shareholders for their confidence and continued support.
5N Plus Inc. [4]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
Historical Financial Information – Years Ended December 31
(in thousands of United States dollars except per share amounts)
Consolidated Results
Revenues
EBITDA1
Adjusted EBITDA1
Net earnings (loss) attributable to equity holders of 5N Plus
Basic earnings (loss) per share attributable to equity holders of 5N Plus
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Funds from operations1
Balance Sheet Data
Total assets
Net debt (net cash)1
Retirement benefit obligation
Shareholders’ equity
Quarterly Financial Information
9
2013
$
459,012
20,193
30,375
42,661
$0.51
42,780
$0.51
$0.51
20,033
365,240
58,330
15,887
190,052
2012
$
551,675
(12,729)
37,856
(227,738)
($2.91)
(227,849)
($2.91)
($2.91)
25,393
385,396
136,547
16,667
144,955
7 months ended
2011
$
391,712
2,625
37,415
(21,641)
($0.31)
(22,464)
($0.32)
($0.32)
27,338
782,344
260,575
12,850
339,710
(in thousands of United States dollars (except per share amounts)
Q4 2013
$
Q3 2013
$
Q2 2013
$
Q1 2013
$
Q4 2012
$
Q3 2012
$
Q2 2012
$
Q1 2012
$
Revenues
EBITDA1
Adjusted EBITDA1
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Net earnings (loss) attributable to equity holders of 5N Plus
Basic earnings (loss) per share attributable to equity holders of 5N Plus I
Adjusted net earnings (loss)1
Basic adjusted net earnings (loss) per share1
Backlog1
119,416
7,942
7,942
1,638
$0,02
$0,02
2,022
$0.02
2,068
$0.02
170,013
108,570
5,775
5,775
1,323
$0.02
$0.02
1,083
$0.01
1,517
$0.02
133,352
112,637
(3,639)
6,543
34,281
$0.41
$0.41
34,185
$0.41
959
$0.01
153,277
118,389
10,115
10,115
5,538
$0.07
$0.07
5,371
$0.06
6,296
$0.08
166,290
128,620
(18,121)
6,395
(211,953)
($2.70)
($2.70)
(212,006)
($2.71)
(6,880)
($0.08)
165,790
120,744
9,001
9,001
1,275
$0.02
$0.02
1,218
$0.02
648
$0.01
162,323
140,076
(20,474)
5,594
(22,062)
($0.30)
($0.30)
(21,922)
($0.29)
(1,911)
($0.03)
188,982
162,235
16,867
16,867
4,891
$0.07
$0.07
4,972
$0.07
5,250
$0.07
215,588
Summary of Results
Revenues
Operating expenses
Adjusted EBITDA1
Impairment of inventory
EBITDA1
Gain related to the settlement of the purchase price of MCP
Litigation and restructuring costs
Impairment of property, plant and equipment
Reversal of impairment of property, plant and equipment
Impairment of intangible assets and goodwill
Interest on long‐term debt and other interest expense
Foreign exchange and derivative (gain) loss
Depreciation and amortization
Earnings (loss) before income tax
Income tax
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Q4 2013
$
119,416
111,474
7,942
‐
7,942
‐
569
‐
‐
‐
1,779
525
2,419
2,650
1,012
1,638
$0.02
$0.02
Q4 2012
$
128,620
122,225
6,395
24,517
(18,122)
‐
932
39,239
‐
165,507
1,463
(360)
5,628
(230,531)
(18,578)
(211,953)
($2.70)
($2.70)
2013
$
459,012
428,637
30,375
10,182
20,193
(45,188)
4,068
‐
‐
‐
8,524
(2,590)
10,686
44,693
1,913
42,780
$0.51
$0.51
2012
$
551,675
513,819
37,856
50,585
(12,729)
‐
2,781
39,239
(932)
165,507
8,828
2,759
21,159
(252,070)
(24,221)
(227,849)
($2.91)
($2.91)
1 See Non‐IFRS Measures
5N Plus Inc. [5]
10
Management’s Discussion and Analysis
Revenues by Segment
Electronic Materials Segment
Eco‐Friendly Materials Segment
Total revenues
Q4 2013
$
46,264
73,152
119,416
Q4 2012
$
55,254
73,366
128,620
% Change
‐15%
‐2%
‐7%
2013
$
179,368
279,644
459,012
2012
$
232,013
319,662
551,675
% Change
‐23%
‐13%
‐17%
Revenues decreased by $9.2 million, or 7%, from $128.6 million in Q4 2012 to $119.4 million in Q4 2013 and by $92.7
million, or 17%, from $551.7 million in 2012 to $459.0 million in 2013. Demand for the Company’s products remained
strong throughout the quarter and year with record sales of bismuth bearing products but revenues were negatively
impacted by lower commodity prices, competitive pressures on sales price and by the restructuring of a portion of the
business which was the subject of a dispute with former shareholders of MCP.
The Electronic Materials segment revenues decreased by $7.9 million, or 15%, from $54.2 million in Q4 2012 to $46.3
million in Q4 2013 due to exceptionally high sales volume of solar products in Q4 2012. The Eco‐Friendly Materials
segment delivered strong sales and reported record sales of bismuth bearing products in both Q4 2013 and 2013.
Revenues remained stable compared to Q4 2012 despite lower commodity prices.
The Electronic Materials segment revenues decreased by $52.6 million, or 23%, from $232.0 million in 2012 to $179.4
million in 2013. The Eco‐Friendly Materials segment decreased by $40.0 million, or 13%, from $319.7 million in 2012 to
$279.6 in 2013. The decrease in revenues is due to the same factors mentioned above.
Net earnings (loss) and Adjusted net earnings (loss)
Net earnings (loss)
Basic net earnings (loss) per share
Adjusted net earnings (loss)
Basic adjusted net earnings (loss) per share
Q4 2013
$
1,638
$0.02
2,068
$0.02
Q4 2012
$
(211,953)
($2.71)
(6,880)
($0.08)
2013
$
42,780
$0.51
10,834
$0.13
2012
$
(227,849)
($2.91)
(2,893)
($0.04)
Net earnings increased by $213.7 million, from ($212.0) million in Q4 2012 to $1.7 million in Q4 2013 and adjusted net
earnings1 increased by $9.0 million, from ($6.9) million in Q4 2012 to $2.1 million in Q4 2013. The Company had
recorded in Q4 2012 impairment charges of $229.3 million.
Net earnings increased by $270.6 million, from ($227.9) million in 2012 to $42.8 million in 2013 and adjusted net
earnings1 increased by $13.7 million, from ($2.9) million in 2012 to $10.8 million in 2013. The Company had recorded
impairment charges of $255.3 million in 2012.
The decrease in operating expenses, SG&A, amortization and financial expenses was offset by lower gross profit due to
the decline in commodity prices, competitive pressures on sales price and by the restructuring of a portion of the
business which was the subject of a dispute with former shareholders of MCP.
The non‐recurring gain of $45.2 million recorded in the second quarter of 2013 resulting from the reduction of the
purchase price of MCP announced on June 18, 2013, was partially offset by an inventory impairment charge of $10.2
million recorded in the same quarter on bismuth and selenium. For 2012, the Company recorded an inventory
impairment charge of $50.6 million, mainly on bismuth, gallium, tellurium and selenium.
Impairment Charges
Impairment of inventories
Impairment of PPE
Impairment of intangible assets
Impairment of goodwill
Impairment charges
1 See Non‐IFRS Measures
Q4 2013
$
‐
‐
‐
‐
‐
Q4 2012
$
24,517
39,239
40,597
124,910
229,263
2013
$
10,182
‐
‐
‐
10,182
2012
$
50,585
39,239
40,597
124,910
255,331
5N Plus Inc. [6]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
EBITDA and Adjusted EBITDA
11
Electronic Materials
Eco‐Friendly Materials
Corporate
EBITDA1
Electronic Materials
Eco‐Friendly Materials
Inventory write‐down
Electronic Materials
Eco‐Friendly Materials
Corporate
Adjusted EBITDA1
Q4 2013
$
4,006
6,474
(2,538)
7,942
‐
‐
‐
4,006
6,474
(2,538)
7,942
Q4 2012
$
(1,733)
(11,700)
(4,689)
(18,122)
8,226
16,291
24,517
6,493
4,591
(4,689)
6,395
2013
$
22,316
6,253
(8,376)
20,193
150
10,032
10,182
22,466
16,285
(8,376)
30,375
2012
$
10,903
(8,203)
(15,429)
(12,729)
23,750
26,835
50,585
34,653
18,632
(15,429)
37,856
EBITDA increased to $7.9 million and $20.2 million in Q4 2013 and 2013 compared to ($18.1) million and ($12.7) million
in Q4 2012 and 2012 respectively. The Company recorded in 2013 an inventory write‐down of $10.2 million compared to
$50.6 million in 2012. Cost reduction initiatives were offset by gross margin pressure and by lower levels of profitability
due to fully valued inventories resulting from the decreasing trend in underlying commodity pricing. EBITDA was also
negatively impacted by the restructuring of a portion of the business which was the subject of a dispute with the former
shareholders of MCP.
Bookings and Backlog
Electronic Materials
Eco‐Friendly Materials
Total
Q4 2013
$
80,382
89,691
170,073
BACKLOG1
Q3 2013
$
72,309
61,043
133,352
Q4 2012
$
100,718
65,072
165,790
Q4 2013
$
54,337
101,800
156,137
BOOKINGS1
Q3 2013
$
31,588
57,057
88,645
Q4 2012
$
59,342
72,744
132,086
Bookings recorded in the quarter reached their highest levels since the last two years enabling the backlog to increase
back to its June 2012 level despite lower average underlying commodity prices.
Q4 2013 vs Q4 2012
Backlog as at December 31, 2013, for the Electronic Materials segment stood at $80.4 million, and decreased by $20.3
million, or 20%, over the backlog of last year. The backlog for the Eco‐Friendly Materials stood at $89.7 million, an
increase of $24.6 million, or 38%, over the backlog of a year ago. Overall the backlog, as at December 31, 2013, stood at
$170.1 million following the renewal pattern of most contracts which generally occurs in the fourth quarter.
Bookings for the Electronic Materials decreased by $5.0 million, or 8%, from $59.3 million in Q4 2012 to $54.3 million in
Q4 2013. Bookings for the Eco‐Friendly Materials increased by $29.1 million, or 40.0%, from $72.7 million in Q4 2012 to
$101.8 million in Q4 2013.
Q4 2013 vs Q3 2013
Bookings for the Electronic Materials increased by $22.8 million, or 72%, and by $44.7 million, or 78%, for the Eco‐
Friendly Materials compared to the previous quarter.
Backlog as at December 31, 2013, increased by $8.1 million for the Electronic Materials and increased by $28.6 million for
the Eco‐Friendly Materials compared to the previous quarter.
1 See Non‐IFRS Measures
5N Plus Inc. [7]
12
Management’s Discussion and Analysis
Expenses
Depreciation and amortization
SG&A
Litigation and restructuring costs
Financial expenses
Income taxes
Q4 2013
$
2,419
8,607
569
2,304
1,012
Q4 2012
$
5,628
12,561
932
1,103
(18,578)
% Change
‐57%
‐31%
‐39%
109%
n/a
2013
$
10,686
36,066
4,068
5,934
1,913
2012
$
21,159
45,742
2,781
11,587
(24,221)
% Change
‐49%
‐21%
46%
‐49%
n/a
Depreciation and Amortization
Due to impairment charges to property, plant and equipment (“PPE”) and intangible assets incurred in 2012, depreciation
and amortization expenses in Q4 2013 and 2013 decreased to $2.4 million and $10.7 million compared to $5.6 million
and $21.2 million in Q4 2012 and 2012 respectively.
SG&A
SG&A expenses decreased by $4 million, or 31%, from $12.6 million in Q4 2012 to $8.6 million in Q4 2013 and by $9.7
million, or 21%, from $45.7 million in 2012 to $36.1 million in 2013. This performance primarily reflects successful
execution of the Company's cost reduction program, mainly on salaries, professional fees and maintenance.
Litigation and Restructuring costs
The Company recorded litigation and restructuring costs of $0.6 million and $4.1 million for Q4 2013 and 2013
respectively mainly related to attorney’s and other professional fees for the legal proceedings and employee severance
costs. In 2012, the Company recorded a $0.9 million and a $2.8 million expense respectively related to an incident that
occurred in one of its U.S. sites and to employee severance costs.
Financial Expenses
Financial expenses for Q4 2013 amounted to $2.3 million compared to $1.1 million for the same period last year. This
increase is mainly due to foreign exchange and derivative expense of $0.5 million recorded in Q4 2013 compared to a
gain of $0.4 million in Q4 2012. For 2013, financial expenses decreased by $5.7 million and totalled $5.9 million
compared to $11.6 million for 2012 due to a foreign exchange and derivative gain of $2.6 million recorded in 2013
compared to a foreign exchange and derivative expense of $2.8 million in 2012.
Income Taxes
Effective income tax rate was 4% in 2013 due to a non‐taxable gain of $45.2 million resulting from the reduction in the
purchase price of MCP. For 2012, the effective income tax rate was 10% mainly due to the goodwill impairment charge
which was not deductible for tax purposes.
Liquidity and Capital Resources
Funds from operations1
Net changes in non‐cash working capital items
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rate changes on cash and cash equivalents related to
operations
Net increase (decrease) in cash and cash equivalents
Q4 2013
$
9,043
372
9,415
(3,755)
3,510
Q4 2012
$
4,243
2,686
6,929
(4,346)
(100)
2013
$
20,033
27,930
47,963
(11,748)
(22,410)
2012
$
25,393
76,419
101,812
33,637
(154,964)
(382)
8,788
(276)
2,207
(913)
12,892
(399)
(19,914)
For Q4 2013 and 2013, cash generated by operating activities was $9.4 million and $48.0 million respectively compared
to $6.9 million and $101.8 million in Q4 2012 and 2012 respectively. This decrease in 2013 is mainly attributable to the
inventory reduction of $95.6 million in 2012.
1 See Non‐IFRS Measures
5N Plus Inc. [8]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
13
Investing activities consumed $3.8 million in Q4 2013 and $11.7 million in 2013 compared to $4.3 million and cash
provided of $33.6 million in Q4 2012 and 2012 respectively. In 2012, cash generated in investing activities was mainly due
to a reduction in temporary investments resulting from repayment of loans in Hong Kong dollars.
Cash provided by financing activities amounted to $3.5 million in Q4 2013 and cash consumed of $22.4 million in 2013
compared to cash consumed of $0.1 million and $155.0 million in Q4 2012 and 2012 respectively, associated with
reduction in the amounts drawn under the multi‐currency revolving facility. In 2012, the Company had received $38.6
million in proceeds from the issuance of new shares and decreased its debt by $192.2 million.
Working Capital
Inventories
Other current assets
Current liabilities
Working capital1
Working capital current ratio1
As at December 31, 2013
$
174,374
97,233
(86,861)
184,746
3.13
As at December 31, 2012
$
170,293
121,144
(104,789)
186,648
2.78
The decrease in working capital, which has now reached its lowest level since the acquisition of MCP is mainly due to
lower accounts receivable, income taxes receivable and higher accounts payables and is consistent with the Company’s
efforts aimed at reducing indebtedness and increasing financial flexibility.
Net Debt
Bank indebtedness and short‐term debt
Long‐term debt including current portion
Total Debt
Cash and cash equivalents and temporary investments (restricted)
Net Debt1
As at December 31, 2013
$
10,462
72,785
83,247
(24,917)
58,330
As at December 31, 2012
$
8,014
140,425
148,439
(11,892)
136,547
Total debt decreased by $65.2 million to $83.2 million as at December 31, 2013, compared to $148.4 million as at
December 31, 2012. The variation was mainly due to net reimbursement of $22.7 million and to the non‐recurring gain of
$45.2 million in Q2 2013 resulting from the reduction of the purchase price reached with the former shareholders of
MCP.
Net debt after taking into account cash and cash equivalents and restricted temporary investments decreased by $78.2
million, from $136.5 million as at December 31, 2012 to $58.3 million as at December 31, 2013. The Company intends to
continue reducing its debt through cost reductions and decreases in working capital as it has done over the last several
months but an increase is possible if the price of commodities has an increasing trend in the following months.
Available Short‐Term Capital Resources
Cash and cash equivalents
Available bank indebtedness and short‐term debt
Available revolving credit facility
Available short‐term capital resources
As at December 31, 2013
$
22,427
12,912
11,980
47,319
As at December 31, 2012
$
9,535
26,424
127,787
163,746
The Company believes that its cash flows from operating activities, combined with its available short‐term capital
resources of $47.3 million as at December 31, 2013 will enable it to support its growth, its working capital needs and its
planned capital expenditures.
Starting March 31, 2013, the senior secured multi‑currency revolving credit facility was reduced to $100 million.
However, there was a maximum drawing limit of $80 million until February 15, 2014. Such amendment established new
5N Plus Inc. [9]
14
Management’s Discussion and Analysis
financial covenants for the year 2013 and maintained the original maturity (August 2015). The interest rate has been
changed and is linked to the Net Senior Debt/EBITDA ratio, and can vary from LIBOR, banker’s acceptance rate or
EURIBOR plus 3.00% to 4.50% or US base rate or prime rate plus 2.00% to 3.5%. Standby fees from 0.75% to 1.125% are
paid on the unused portion. At any time, 5N Plus has the option to request that the credit facility be expanded to $140
million through the exercise of an additional $40 million accordion feature, subject to approval by the lenders.
Funds from Operations
Funds from operations1
Net acquisition of PPE and intangible assets
Working capital changes
Issuance of common shares
Settlement of the purchase price of MCP
Others
Total movement in net debt1
Net debt1, beginning of period
Net debt1, end of period
Q4 2013
$
9,043
(4,013)
372
‐
‐
(212)
(3,853)
5,190
(63,520)
(58,330)
Q4 2012
$
4,243
(4,196)
2,686
‐
‐
948
(562)
3,681
(140,228)
(136,547)
2013
$
20,033
(11,615)
27,930
‐
45,188
(3,319)
58,184
78,217
(136,547)
(58,330)
2012
$
25,393
(15,888)
76,419
38,636
‐
(532)
98,635
124,028
(260,575)
(136,547)
Funds from operations increased to $9.0 million in Q4 2013 compared to $4.2 million in Q4 2012 and decreased from
$25.4 million in 2012 to $20.0 million in 2013.
The decrease in 2013 was mainly attributable to the decreasing underlying commodity pricing trend which negatively
impacted selling prices and in turn led to lower profit margins.
Net debt1 to annualized adjusted EBITDA ratio
Annualized funds from operations1 to net debt (%)
Q4 2013
1.84
62.0
Q4 2012
5.34
12.4
2013
1.92
34.3
2012
3.60
18.6
Net debt to annualized adjusted EBITDA ratio for Q4 2013 was 1.84 and 1.92 for 2013. Annualized funds from operations
generated in the same periods represented 62.0% and 34.3% of our net debt.
Share Information
Issued and outstanding shares
Stock options potentially issuable
Warrants potentially issuable
As at February 25, 2014
83,908,269
1,637,951
6,451,807
As at December 31, 2013
83,908,269
1,637,951
6,451,807
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan (the “Plan”) replacing the previous plan (the “Old Plan”)
in place since October 2007, with the same features as the Old Plan with the exception of a maximum number of options
granted which cannot exceed five million. The aggregate number of shares which could be issued upon the exercise of
options granted under the Old Plan could not exceed 10% of the issued shares of the Company at the time of granting the
options. Options granted under the Old Plan may be exercised during a period not exceeding ten years from the date of
grant. The stock options outstanding as at December 31, 2013 may be exercised during a period not exceeding six years
from their date of grant. Options vest at a rate of 25% (100% for directors) per year, beginning one year following the
grant date of the options. Any unexercised options will expire one month after the date a beneficiary ceases to be an
employee, director or officer.
1 See Non‐IFRS Measures
5N Plus Inc. [10]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
15
The number of stock options and the weighted average exercise price for each share‐based compensation plan are as
follows:
Outstanding, beginning of period
Granted
Cancelled
Exercised
Expired
Outstanding, end of period
Exercisable, end of period
Number of
options
1,585,448
546,939
(141,386)
‐
(353,050)
1,637,951
1,001,826
2013
Weighted average
exercise price
CA$
4.67
2.39
5.55
‐
3.00
4.19
4.94
Number of
options
1,543,211
325,840
(240,072)
(43,531)
‐
1,585,448
1,024,656
2012
Weighted average
exercise price
CA$
5.28
2.22
5.60
3.36
‐
4.67
4.94
Off‐Balance Sheet Arrangements
The Company has certain off‐balance sheet arrangements, consisting of leasing certain premises and equipment under
the terms of operating leases and contractual obligations in the normal course of business.
The Company is exposed to currency risk on sales in Euro and other currencies and therefore periodically enters into
foreign currency forward contracts to protect itself against currency fluctuation. The reader will find more details related
to these contracts in Notes 17 and 26 of the audited consolidated financial statements for the year ended December 31,
2013.
The contractual maturities of the Company’s financial liabilities as at December 31, 2013 are as follows:
Bank indebtedness and short‐term debt
Trade and accrued liabilities
Derivative financial instruments
Long‐term debt
Total
Carrying amount
$
10,462
65,016
4,237
72,785
152,500
1 year
$
11,137
65,016
3,284
6,017
85,454
2‐3 years
$
4‐5 years Beyond 5 years
$
$
‐
‐
953
69,553
70,506
‐
‐
‐
173
173
‐
‐
‐
19
19
Total
$
11,137
65,016
4,237
75,762
156,152
Contingencies
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or
assets. As at February 25, 2014, the Company was not aware of any significant events that would have a material effect
on its consolidated financial statements.
The Company settled its dispute with the former shareholders of MCP, thereby prohibiting further related action by
either party involved in the settlement. As of the date hereof, the Company does not believe that it is probable that an
outflow of resources, which could be material to the consolidated financial statements, will be required by the Company
following potential third party claims pertaining to actions or events related to the alleged breaches of representations
and warranties by the Vendors.
Governance
As required by Multilateral Instrument 52‐109 of the Canadian Securities Administrators («MI 52‐109 »), 5N Plus has filed
certificates signed by the Chief Executive Officer and the Chief Financial Officer that, among others, attest to the design
of the disclosure controls and procedures and the design and effectiveness of internal control over financial reporting.
Disclosure Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer have designed disclosure controls and procedures, or have
caused them to be designed under their supervision, in order to provide reasonable assurance that:
5N Plus Inc. [11]
16
Management’s Discussion and Analysis
material information relating to the Company has been made known to them; and
information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported
within the time periods specified in securities legislation.
An evaluation was carried out, under the supervision of the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the disclosure controls and procedures are effective.
Internal Control over Financial Reporting
The Chief Executive Officer and the Chief Financial Officer have also designed internal controls over financial reporting, or
have caused them to be designed under their supervision, in order to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
An evaluation was carried out under the supervision of the Chief Executive Officer and the Chief Financial Officer, of the
design of the Company’s internal controls over financial reporting. Based on this evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the internal controls over financial reporting are effective, using the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Changes in Internal Control over Financial Reporting
No changes were made to our internal controls over financial reporting during fiscal year ended December 31, 2013 that
have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Accounting Policies and Changes
The Company established its accounting policies and methods used in the preparation of its audited consolidated
financial statements for the fiscal year 2013 in accordance with IFRS. The Company’s significant accounting policies are
described in Note 2 of the December 31, 2013 audited consolidated financial statements. The key assumptions and basis
for estimates that management has made under IFRS, and their impact on the amounts reported in the consolidated
financial statements and notes, remain substantially unchanged from those described in the Company’s audited
consolidated financial statements for the fiscal year ended December 31, 2012.
Changes in Accounting Policies
The Company has adopted the following new and revised standards, along with any consequential amendments, effective
January 1, 2013. These changes were made in accordance with the application transitional provisions.
IAS 1, “Presentations of Financial Statement”. These amendments required the Company to group other comprehensive
income item by those that will be reclassified subsequently to the consolidated statement of earnings and those that will
not. The Company has reclassified comprehensive income items of the comparative period. These changes did not result
in any net adjustments to other comprehensive income or comprehensive income.
IAS 19, “Employee Benefits”, was amended in June 2011. The impact on the Company will be as follows: to immediately
recognize all past service costs and to replace interest cost and expected return on plan assets with a net interest amount
that is calculated by applying the discount rate to the net defined benefit liability (asset). Furthermore, the amendments
to IAS 19 enhance the disclosure requirements for defined benefit plans and the risks that the Company is exposed
through participation in those plans. The impact of the adoption of IAS 19 is presented in Note 4 of the consolidated
financial statements for the year ended December 31, 2013.
IFRS 10, “Consolidated Financial Statements”, builds on existing principles by identifying the concept of control as the
determining factor in whether an entity should be included within the consolidated financial statements of the parent
company. The standard provides additional guidance to assist in the determination of control where this is difficult to
assess. The impact of the adoption of IFRS 10 did not result in any change in the consolidation status of any of its
subsidiaries or investees.
IFRS 12, “Disclosures of interests in other entities”, includes the disclosure requirements for all forms of interests in other
entities, including joint arrangements, associates, special‐purpose vehicles and other unconsolidated structured entities.
5N Plus Inc. [12]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
17
The standard carries forward existing disclosures and also introduces significant additional disclosure that address the
nature of, and risks associated with, an entity’s interests in other entities. The Corporation has incorporated the new
disclosure requirements within these financial statements. IFRS 13, “Fair Value Measurement”, provides a single
framework for measuring fair value. The measurement of the fair value of an asset or liability is based on assumptions
that market participants would use when pricing the asset or liability under current market conditions, including
assumptions about risk. The adoption of IFRS 13 did not require any adjustments to the valuation techniques used by the
Company to measure fair value and did not result in any measurement adjustments as at January 1, 2013.
In May 2013, the IASB amended IAS 36, Impairment of assets regarding disclosures for non‐financial assets. This
amendment removed certain disclosures related to the recoverable amount of CGUs which had been included in IAS 36
by the issue of IFRS 13. The amendment is not mandatory until January 1st, 2014, however the Company has decided to
early adopt the amendment as of January 1, 2013.
IFRS 7, Financial instruments — disclosure ("IFRS 7") — The amendments to IFRS 7 contain new disclosure requirements
for financial assets and liabilities that are either offset in the consolidated balance sheet or subject to master netting
arrangements or other similar arrangements. The amendments are to be applied retrospectively. The impact of the
adoption of IFRS 7 did not result in any change in the disclosure about offsetting of financial assets and financial liabilities.
Future Changes in Accounting Standards
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning
after January 1, 2014, and have not been applied in preparing the consolidated financial statements. None of these is
expected to have a significant effect on the Company’s consolidated financial statements, except the following set out
below.
IFRS 9, Financial Instruments, as issued, reflects the current status of the IASB’s work plan on the replacement of IAS 39
and applies to classification and measurement of financial assets and financial liabilities, as defined in IAS 39. The IASB is
also addressing hedge accounting and impairment of financial assets. In December 2013 the IASB removed the
mandatory effective date of IFRS 9 until all phases of the project have been completed. The mandatory effective date has
yet to be determined however it has been deferred beyond annual periods beginning on or after January 1, 2015.
The Company has not yet quantified the effect of the published phases of the Standard nor does it intend at this time to
early adopt the Standard until the mandatory effective date.
IFRIC 21, Levies — IFRIC 21 provides guidance on accounting for levies in accordance with the requirements of IAS 37,
Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity
imposed by a government in accordance with legislation and confirms that a liability for a levy is recognized only when
the triggering event specified in the legislation occurs. The interpretation is effective for annual periods beginning on or
after January 1, 2014 however the Corporation has not yet assessed the impact of this interpretation.
Significant Management Estimation and Judgment in Applying Accounting Policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Estimation Uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
5N Plus Inc. [13]
18
Management’s Discussion and Analysis
Impairment of Non‐Financial Assets
An impairment loss is recognized for the amount by which an asset’s or Cash Generating Units (“CGU”), carrying amount
exceeds its recoverable amount, which is the higher of fair value less cost to sell and value in use.
To determine value in use, management estimates expected future cash flows from each asset or CGU and determines a
suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected
future cash flows, management makes assumptions about future operating results. These assumptions relate to future
events and circumstances. The actual results may vary, and may cause significant adjustments to the Company’s assets in
future periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to
market risk and the appropriate adjustment to asset‐specific risk factors.
Inventories
Inventories are measured at the lower of cost and net realizable value, with cost determined on the average cost
method. In estimating net realizable values, management takes into account the most reliable evidence available at the
time the estimates are made. The Company’s core business is subject to changes in foreign policies and internationally
accepted metal prices which may cause selling prices to change rapidly. The Company evaluates its inventory on an
individual items basis and considered events that have occurred between the balance sheet date and the date of the
completion of the financial statements. Net realizable value held to satisfy a specific sale contract is measured at the
contract price.
Income Taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent upon its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgment regarding future profitability may
change due to future market conditions, changes in tax legislation and other factors that could adversely affect the
ongoing value of the deferred income tax assets. These changes, if any, may require the material adjustment of these
deferred income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment
would reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized
and would be recorded in the period such a determination was to be made.
Related Party Transactions
The Company’s related parties are its joint ventures, directors and executive members. Transactions with these related
parties are described in Note 25 and Note 28 in the 2013 consolidated financial statements of the Company.
Financial Instruments and Risk Management
Fair Value of financial instruments
A detailed description of the methods and assumptions used to measure the fair value of the Company financial
instruments and their fair value are discussed in Note 17 – Categories of Financial Assets and Financial Liabilities in the
2013 consolidated financial statements of the Company.
5N Plus Inc. [14]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
The fair value of the derivative financial instruments was as follows:
19
Assets (Liabilities)
Interest rate swap
Foreign exchange forward contracts
Derivative forward contracts
Options
Warrants
Total
December 31, 2013
$
(2,588)
(1,468)
955
‐
(181)
(3,282)
December 31, 2012
$
(3,870)
(1,080)
‐
(239)
(1,165)
(6,354)
Interest rate risk
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates. The
Company is exposed to interest rate fluctuations on its revolving credit facility, which bears a floating interest rate.
As at December 31, 2013, the Company has an outstanding interest rate swap contract to hedge part of its interest rate
risk on the revolving credit facility. The nominal value is $100,000 commencing in January 2013 and ending in August
2015. This interest rate swap fixed the LIBOR interest rate at 1.82%. The Company received $1,700 when entering into
this interest rate swap in September 2011, which was the fair value of the instrument on signing. The fair value of the
contract is ($2,588) as at December 31, 2013 and is recorded as part of derivative financial liabilities in the consolidated
statement of financial position.
Currency Risk
The Company’s sales are primarily denominated in U.S. dollars whereas a portion of its operating costs are realized in
local currencies, such as Euros, Canadian dollars and Pounds Sterling. Even though, the purchases of raw materials are
denominated in U.S. dollars, which reduce to some extent exchange rate fluctuations, we are subject to currency
translation risk which can negatively impact our results. Management has implemented a policy for managing foreign
exchange risk against the relevant functional currency. The Company manages the foreign exchange risk by entering into
various foreign exchange forward contracts.
Foreign exchange forward contracts are described in Note 17 in the 2013 consolidated financial statements of the
Company.
The Company had the following currency exposures on December 31, 2013:
Cash and cash equivalents
Temporary investments (restricted)
Accounts receivable
Bank indebtedness and short‐term debt
Trade and accrued liabilities
Long‐term debt
Net financial (liabilities) assets
CA$
351
‐
564
‐
(1,724)
(897)
(1,706)
EUR
GBP
RMB
4,847
2,490
15,131
‐
(15,827)
(3,448)
3,193
1,398
‐
2,506
‐
(1,642)
‐
2,262
7,188
‐
3,541
(10,462)
(6,073)
‐
(5,806)
HK$
10
‐
276
‐
(172)
‐
114
The following table shows the impact on earnings before income tax of a one‐percentage point strengthening or
weakening of foreign currencies against the US dollar as at December 31, 2013 for the Company’s financial instruments
denominated in non‐functional currencies:
1% Strengthening
Earnings (loss) before tax
1% Weakening
Earnings (loss) before tax
CA$
(17)
17
EUR
GBP
RMB
HK$
32
(32)
23
(23)
(58)
58
1
(1)
Options
The market value of those financial instruments depends on several factors, such as foreign exchange rate market
volatility, the remaining duration of the instruments and other market conditions. For these reasons, it is very difficult for
5N Plus Inc. [15]
20
Management’s Discussion and Analysis
the Company to evaluate market risk. The Company believes that a sensitivity analysis would be unrepresentative.
Warrants
In June 2012, the Company issued 12,903,613 units at a price of CA$3.10 per unit. Each unit comprises one common
share and one‐half of a common share purchase warrant. The Company issued 6,451,807 warrants, which are recorded
as part of derivative financial liabilities at fair value based on the stock exchange market. The fair value was ($0.2) million
as at December 31, 2013 and ($1.2) million as at December 31, 2012. Fair value depends on several factors, such as
market volatility, foreign exchange rate volatility, interest rate fluctuations, the Company’s market activity and other
market conditions. For these reasons, it is very difficult for the Company to evaluate market risk. The Company believes
that a sensitivity analysis would be unrepresentative.
Credit risk
Credit risk corresponds to the risk of loss due to the client’s inability to fulfill its obligations with respect to trade and
other receivables as well as contracts. The Company has a large number of clients and is no longer dependent on a
specific client. The Company has a credit policy that defines standard credit practices. This policy dictates that all new
customer accounts be reviewed prior to approval and establishes the maximum amount of credit exposure per customer.
The creditworthiness and financial well‐being of the customer are monitored on an ongoing basis.
The Company establishes an allowance for doubtful accounts as determined by management based on its assessment of
collection; therefore, the carrying amount of accounts receivable generally represents the maximum credit exposure. As
at December 31, 2013 and 2012, the Company had an allowance for doubtful accounts of $0.2 million. The provision for
doubtful accounts, if any, will be included in SG&A expenses in the consolidated statements of earnings (loss), and will be
net of any recoveries that were provided for in prior periods.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The
Company manages liquidity risk through the management of its capital structure. It also manages liquidity risk by
continually monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and
matching the maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the
Company’s annual operating and capital budgets, as well as any material transactions out of the ordinary course of
business, including proposals on acquisitions and other major investments. Under the terms of its credit facility, the
Company is required to satisfy certain restrictive covenants. In order to comply with these covenants, the Company has
prepared, and will need to execute on, its budgeted EBITDA and cash flow estimates. Management believes that the
assumptions used by the Company in preparing its budgets are reasonable and that it is not likely that the financial
covenants on the credit facility during a certain period will be violated in the next 12 months. However, risk remains.
Successful achievement of these budgeted results is dependent on stability in the price of metals and other raw
materials, the reduction of debt due to the optimization of the Company’s working capital and the continued viability and
support of the Company’s banks.
Risks and Uncertainties
The Company is subject to a number of risk factors which may limit its ability to execute its strategy and achieve its long‐
term growth objectives. Management analyses these risks and implements strategies in order to minimize their impact
on the Company's performance.
Possible Failure to Realize Anticipated Benefits of Acquisitions
There is a risk that some of the expected benefits will fail to materialize, or may not occur within the time periods
anticipated by management. The realization of such benefits may be affected by a number of factors, many of which are
beyond our control. These factors include achieving the benefits of the acquisition and any future acquisitions that we
may complete and will depend in part on successfully consolidating functions and integrating operations, procedures and
personnel in a timely and efficient manner, as well as our ability to realize the anticipated growth opportunities and
synergies from combining the acquired businesses and operations with ours. The integration of acquired businesses
requires the dedication of substantial management effort, time and resources which may divert management’s focus and
resources from other strategic opportunities and from operational matters during this process. The integration process
5N Plus Inc. [16]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
21
may result in the loss of key employees, significant expenses and the disruption of ongoing business, customer and
employee relationships that may adversely affect our ability to achieve the anticipated benefits of these acquisitions.
International Operations
We operate in a number of countries, including China, and, as such, face risks associated with international business
activities. We could be significantly affected by such risks, which include the integration of international operations,
challenges associated with dealing with numerous legal systems, the potential for volatile economic and labor conditions,
political instability, expropriation, and changes in taxes, tariffs and other regulatory costs. Although we operate primarily
in countries with relatively stable economic and political climates, there can be no assurance that our business will not be
adversely affected by the risks inherent in international operations.
Environmental Regulations
Our operations involve the use, handling, generation, processing, storage, transportation, recycling and disposal of
hazardous materials and are subject to extensive environmental laws and regulations at the national, provincial, local and
international level. These environmental laws and regulations include those governing the discharge of pollutants into the
air and water, the use, management and disposal of hazardous materials and wastes, the clean‐up of contaminated sites
and occupational health and safety. We have incurred and will continue to incur capital expenditures in order to comply
with these laws and regulations. In addition, violations of, or liabilities under, environmental laws or permits may result in
restrictions being imposed on our operating activities or in our being subject to substantial fines, penalties, criminal
proceedings, third party property damage or personal injury claims, clean‐up costs or other costs. While we believe that
we are currently in compliance with applicable environmental requirements, future developments such as more
aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery of
currently unknown environmental conditions may require expenditures that could have a material adverse effect on our
business, results of operations and financial condition. Former MCP’s facility in Tilly, Belgium is currently undergoing
corrective measures under a remediation plan as a result of industrial legacy at this site, which has been in industrial use
for more than 100 years, and in order to comply with more stringent environmental regulations. The remediation plan
has been approved by the local authorities and estimated resulting costs have been properly accounted for by the
Company.
Competition risk
We are the leading producer of specialty metal and chemical products and have a limited number of competitors, none
of which are as fully integrated as we are or have a similar range of products. Accordingly, they are not in a position to
provide the same comprehensive set of services and products as we do. However, there can be no guarantee that this
situation will continue in the future and competition could arise from new low‐cost metal refiners or from certain of our
customers who could decide to backward integrate. The forecasted growth in demand for our main products may attract
more metal refiners into this industry and increase competition. Although we believe that our operations and our
commercial network are important competitive advantages, greater competition could have an adverse effect on our
revenues and operating margins if our competitors gain market share and we are unable to compensate for the volume
lost to our competition.
Commodity price risk
The price we pay for, and availability of, various inputs fluctuates due to numerous factors beyond our control, including
economic conditions, currency exchange rates, global demand for metal products, trade sanctions, tariffs, labor costs,
competition, over capacity of producers and price surcharges. Fluctuations in availability and cost of inputs may
materially affect our business, financial condition, results of operations and cash flows. To the extent that we are not able
to pass on any increases, our business, financial condition, results of operations and cash flows may be materially
adversely affected.
Sources of Supply
We may not be able to secure the critical raw material feedstock on which we depend for our operations. We currently
procure our raw materials from a number of suppliers with whom we have had long‐term commercial relationships. The
loss of any one of these suppliers or a reduction in the level of deliveries to us may reduce our production capacity and
impact our deliveries to customers. This would in turn negatively impact our sales, net margins and may lead to liabilities
with respect to some of our supply contracts.
5N Plus Inc. [17]
22
Management’s Discussion and Analysis
Protection of Intellectual Property
Protection of our proprietary processes, methods and other technologies is important to our business. We rely almost
exclusively on a combination of trade secrets and employee confidentiality agreements to safeguard our intellectual
property. We have deliberately chosen to limit our patent position to avoid disclosing valuable information. Failure to
protect and monitor the use of our existing intellectual property rights could result in the loss of valuable technologies
and processes.
Inventory price risk
The Company monitors its risk associated with the value of its inventories in relation to the market price of such
inventories. Because of the highly illiquid nature of many of its inventories, we rely on a combination of standard risk
measurement techniques, such as value at risk as well as a more empirical assessment of the market conditions.
Decisions on appropriate physical stock levels are taken by considering both the value at risk calculations and the market
conditions.
Business Interruptions
We may incur losses resulting from business interruptions. In many instances, especially those related to our long‐term
contracts, we have contractual obligations to deliver product in a timely manner. Any disruption in our activities which
leads to a business interruption could harm our customers’ confidence level and lead to the cancellation of our contracts
and legal recourse against us. Although we believe that we have taken the necessary precautions to avoid business
interruptions and carry business interruption insurance, we could still experience interruptions which would adversely
impact our financial results.
Dependence on Key Personnel
The Company relies on the expertise and know‐how of its personnel to conduct its operations. The loss of any member of
our senior management team could have a material adverse effect on us. Our future success also depends on our ability
to retain and attract our key employees, train, retain and successfully integrate new talent into our management and
technical teams. Recruiting and retaining talented personnel, particularly those with expertise in the specialty metals
industry and refining technology is vital to our success and may prove difficult. We cannot provide assurance that we will
be able to attract and retain qualified personnel when needed.
Collective Agreements
A portion of our workforce is unionized and we are party to collective agreements that are due to expire at various times
in the future. If we are unable to renew these collective agreements on similar terms as they become subject to
renegotiation from time to time, this could result in work stoppages or other labour disturbances, such as strikes,
walkouts or lock‐outs, potentially affecting our performance.
Risks Associated with Public Issuer Status
The Company’s shares are publicly traded and, as such, it is subject to all of the obligations imposed on "reporting
issuers" under applicable securities laws in Canada and all of the obligations applicable to a listed company under stock
exchange rules. Direct and indirect costs associated with public company status have escalated in recent years and
regulatory initiatives under consideration may further increase the costs of being public in Canada. Those costs could
have a material adverse effect on the Company’s financial condition.
Non‐IFRS Measures
In this Management’s Report, the Company’s management uses certain measures which are not in accordance with IFRS.
Non‐IFRS measures are useful supplemental information but may not have a standardized meaning according to IFRS.
Backlog represents the expected value of orders we have received but have not yet executed and that are expected to
translate into sales within the next 12 months. Bookings represents the value of orders received during the period
considered and is calculated by adding revenues to the increase or decrease in backlog for the period considered. We
use backlog to provide an indication of expected future revenues, and bookings to determine our ability to sustain and
increase our revenues.
5N Plus Inc. [18]
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
Management’s Discussion and Analysis
23
EBITDA means net earnings (loss) before financial expenses (income), income taxes, depreciation and amortization,
impairment or reversal of impairment of PPE and intangible assets, impairment of goodwill, litigation and restructuring
costs, acquisition‐related costs and the settlement of purchase price of MCP. We use EBITDA because we believe it is a
meaningful measure of the operating performance of our ongoing business without the effects of certain expenses. The
definition of this non‐IFRS measure used by the Company may differ from that used by other companies.
EBITDA margin is defined as EBITDA divided by revenues.
Adjusted EBITDA means EBITDA as defined above before impairment of inventories. We use adjusted EBITDA because we
believe it is a meaningful measure of the operating performance of our ongoing business without the effects of inventory
write‐downs. The definition of this non‐IFRS measure used by the Company may differ from that used by other
companies.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted net earnings means the net earnings (loss) before the effect of charge and reversal of impairment related to
inventory, PPE and intangible assets, impairment of goodwill, litigation and restructuring costs, settlement of purchase
price and acquisitions costs net of the related income tax. We use adjusted net earnings (loss) because we believe it is a
meaningful measure of the operating performance of our ongoing business without the effects of unusual inventory
write‐downs and property plant and equipment and intangible asset impairment charges, litigation and restructuring
costs, the settlement of purchase price and acquisition costs. The definition of this non‐IFRS measure used by the
Company may differ from that used by other companies.
Basic adjusted net earnings (loss) per share means adjusted net earnings (loss) divided by the weighted average number
of outstanding shares. We use basic adjusted net earnings (loss) per share because we believe it is a meaningful measure
of the operating performance of our ongoing business without the effects of unusual inventory write‐downs and property
plant and equipment and intangible asset impairment charges, litigation and restructuring costs, the settlement of
purchase price and acquisition costs per share. The definition of this non‐IFRS measure used by the Company may differ
from that used by other companies.
Funds from operations means the amount of cash generated from operating activities before changes in non‐cash
working capital balances related to operations. This amount appears directly in the consolidated statements of cash flows
of the Company. We consider funds from operations to be a key measure as it demonstrates the Company’s ability to
generate cash necessary for future growth and debt repayment.
Net debt or net cash is a measure we use to monitor how much debt we have after taking into account cash and cash
equivalents and temporary investments. We use it as an indicator of our overall financial position, and calculate it by
taking our total debt, including the current portion, and subtracting cash and cash equivalents and temporary
investments.
Working capital is a measure of liquid assets that is calculated by taking current assets and subtracting current
liabilities. Given that the company is currently indebted, we use it as an indicator of our financial efficiency and aim to
maintain it at the lowest possible level.
Working capital ratio is calculated by dividing current assets by current liabilities.
Additional Information
Our common shares trade on the Toronto Stock Exchange (TSX) under the ticker symbol VNP. Additional information
relating to the Company, including the Company’s annual information form is available under the Company’s profile on
SEDAR at www.sedar.com.
5N Plus Inc. [19]
24
5N PLUS INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(Figures in thousands of United States dollars)
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
25
5N PLUS INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(Figures in thousands of United States dollars)
26
Management’s Report
To the Shareholders of 5N Plus Inc.
The accompanying consolidated financial statements are the responsibility of the management of
5N Plus Inc. and have been reviewed by the Audit Committee and approved by the Board of
Directors.
These consolidated financial statements and related notes have been prepared by management
in conformity with International Financial Reporting Standards and necessarily include amounts
based on management’s informed judgments and estimates.
Management is also responsible for all other information included in this Annual Report and for
ensuring that this information is consistent with the Company’s consolidated financial statements
and business activities.
Management is responsible for the design, establishment and maintenance of appropriate
internal controls and procedures for financial reporting, to ensure that financial statements for
external purposes are fairly presented in conformity with International Financial Reporting
Standards. Such internal control systems are designed to provide reasonable assurance on the
reliability of the financial information and the safeguarding of assets.
The Company’s external auditors have free and independent access to the Audit Committee,
which is comprised of independent directors. The Audit Committee, which meets regularly
throughout the year with members of management, reviews the consolidated financial statements
and recommends their approval to the Board of Directors.
The consolidated financial statements have been audited by PricewaterhouseCoopers LLP.
SIGNED
Jacques L’Ecuyer
President and Chief Executive Officer
SIGNED
David Langlois, CPA, CA
Chief Financial Officer
Montréal, Canada
February 25, 2014
February 25, 2014
Independent Auditor’s Report
To the Shareholders of
5N Plus Inc.
We have audited the accompanying consolidated financial statements of 5N Plus Inc., which comprise the
consolidated statements of financial position as at December 31, 2013 and 2012 and the consolidated
statements of earnings (loss), statements of comprehensive income (loss), statements of cash flows and
statements of changes in equity for the years then ended, and the related notes, which comprise a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2800, Montréal, Quebec, Canada H3B 2G4
T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
27
February 25, 2014
Independent Auditor’s Report
To the Shareholders of
5N Plus Inc.
We have audited the accompanying consolidated financial statements of 5N Plus Inc., which comprise the
consolidated statements of financial position as at December 31, 2013 and 2012 and the consolidated
statements of earnings (loss), statements of comprehensive income (loss), statements of cash flows and
statements of changes in equity for the years then ended, and the related notes, which comprise a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2800, Montréal, Quebec, Canada H3B 2G4
T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.
28
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of 5N Plus Inc. as at December 31, 2013 and 2012 and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards. 1
5N PLUS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Figures in thousands of United States dollars)
December 31,
December 31,
CPA auditor, CA, public accountancy permit No. A116853
Investments accounted for using the equity method (Note 10)
ASSETS
Current
Cash and cash equivalents
Temporary investments, restricted
Accounts receivable (Note 5)
Inventories (Note 6)
Income tax receivable
Derivative financial assets (Note 17)
Other current assets
Total current assets
Property, plant and equipment (Note 7)
Intangible assets (Note 8)
Deferred tax asset (Note 16)
Other assets (Note 11)
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Current
Bank indebtedness and short-term debt (Note 13)
Trade and accrued liabilities (Note 12)
Income tax payable
Derivative financial liabilities (Note 17)
Long-term debt due within one year (Note 13)
Total current liabilities
Long-term debt (Note 13)
Deferred tax liability (Note 16)
Retirement benefit obligation (Note 14)
Derivative financial liabilities (Note 17)
Other liabilities (Note 15)
Total non-current liabilities
Total liabilities
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
Commitments and contingencies (Note 24)
The accompanying notes are an integral part of these consolidated financial statements.
As at
2013
$
22,427
2,490
60,616
174,374
8,455
955
2,290
271,607
59,614
13,143
13,387
444
7,045
93,633
365,240
10,462
65,016
3,660
3,284
4,439
86,861
68,346
1,600
15,887
953
1,064
87,850
174,711
190,052
477
190,529
365,240
As at
2012
(Note 4)
$
9,535
2,357
87,807
170,293
18,931
-
2,514
291,437
55,548
16,010
12,650
503
9,248
93,959
385,396
8,014
62,214
2,217
2,817
29,527
104,789
110,898
2,632
16,667
3,537
1,560
135,294
240,083
144,955
358
145,313
385,396
1
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
29
5N PLUS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Figures in thousands of United States dollars)
As at
December 31,
2013
$
As at
December 31,
2012
(Note 4)
$
ASSETS
Current
Cash and cash equivalents
Temporary investments, restricted
Accounts receivable (Note 5)
Inventories (Note 6)
Income tax receivable
Derivative financial assets (Note 17)
Other current assets
Total current assets
Property, plant and equipment (Note 7)
Intangible assets (Note 8)
Deferred tax asset (Note 16)
Investments accounted for using the equity method (Note 10)
Other assets (Note 11)
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Current
Bank indebtedness and short-term debt (Note 13)
Trade and accrued liabilities (Note 12)
Income tax payable
Derivative financial liabilities (Note 17)
Long-term debt due within one year (Note 13)
Total current liabilities
Long-term debt (Note 13)
Deferred tax liability (Note 16)
Retirement benefit obligation (Note 14)
Derivative financial liabilities (Note 17)
Other liabilities (Note 15)
Total non-current liabilities
Total liabilities
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
Commitments and contingencies (Note 24)
The accompanying notes are an integral part of these consolidated financial statements.
22,427
2,490
60,616
174,374
8,455
955
2,290
271,607
59,614
13,143
13,387
444
7,045
93,633
365,240
10,462
65,016
3,660
3,284
4,439
86,861
68,346
1,600
15,887
953
1,064
87,850
174,711
190,052
477
190,529
365,240
9,535
2,357
87,807
170,293
18,931
-
2,514
291,437
55,548
16,010
12,650
503
9,248
93,959
385,396
8,014
62,214
2,217
2,817
29,527
104,789
110,898
2,632
16,667
3,537
1,560
135,294
240,083
144,955
358
145,313
385,396
1
30
5N PLUS INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
5N PLUS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Figures in thousands of United States dollars, except per share information)
(Figures in thousands of United States dollars, except per share information)
Revenues
Cost of sales (Note 28)
Selling, general and administrative expenses (Note 28)
Other expenses, net (Note 28)
Share of loss from joint ventures
Operating earnings (loss)
Financial expenses
Interest on long-term debt
Other interest expense (Note 28)
Foreign exchange and derivative loss (gain)
Earnings (loss) before income tax
Income tax expense (recovery) (Note 16)
Net earnings (loss) for the year
Attributable to:
Equity holders of 5N Plus Inc.
Non-controlling interest
Earnings (loss) per share attributable to equity holders of 5N Plus Inc. (Note 22)
Basic earnings (loss) per share
Diluted earnings (loss) per share
For the
year ended
December 31,
2013
$
For the
year ended
December 31,
2012
$
459,012
405,114
36,066
(32,854)
59
408,385
50,627
5,935
2,589
(2,590)
5,934
44,693
1,913
42,780
42,661
119
42,780
0.51
0.51
0.51
551,675
520,247
45,742
225,836
333
792,158
(240,483)
8,012
816
2,759
11,587
(252,070)
(24,221)
(227,849)
(227,738)
(111)
(227,849)
(2.91)
(2.91)
(2.91)
Net earnings (loss) for the year
Other comprehensive income (loss), net of tax
i)
Items that may be reclassified subsequently to the
consolidated statement of earnings (loss)
Cash flow hedges, net of income tax of $(345); 2012 – $406
De-designation of cash flow hedges, net of income tax of $103;
2012 – $(312)
Currency translation adjustment
ii) Items that will not be reclassified subsequently to
the consolidated statement of earnings (loss)
Retroactive remeasurements of retirement benefit obligation, net of income tax of nil
;2012 – $1,252 (Note 4)
Remeasurements of retirement benefit obligation, net of income tax of $414; 2012 – nil
Other comprehensive income (loss), net of tax
Comprehensive income (loss) for the year
Attributable to equity holders of 5N Plus Inc.
Attributable to non-controlling interest
For the
For the
year ended
year ended
December 31,
December 31,
2013
$
2012
$
42,780
(227,849)
937
(282)
291
946
-
923
923
(1,102)
848
215
(39)
(2,788)
-
(2,788)
1,869
(2,827)
44,649
44,530
119
(230,676)
(230,565)
(111)
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
2
3
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
31
5N PLUS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Figures in thousands of United States dollars, except per share information)
Net earnings (loss) for the year
Other comprehensive income (loss), net of tax
i)
Items that may be reclassified subsequently to the
consolidated statement of earnings (loss)
Cash flow hedges, net of income tax of $(345); 2012 – $406
De-designation of cash flow hedges, net of income tax of $103;
2012 – $(312)
Currency translation adjustment
ii) Items that will not be reclassified subsequently to
the consolidated statement of earnings (loss)
Retroactive remeasurements of retirement benefit obligation, net of income tax of nil
;2012 – $1,252 (Note 4)
Remeasurements of retirement benefit obligation, net of income tax of $414; 2012 – nil
Other comprehensive income (loss), net of tax
Comprehensive income (loss) for the year
Attributable to equity holders of 5N Plus Inc.
Attributable to non-controlling interest
The accompanying notes are an integral part of these consolidated financial statements.
For the
year ended
December 31,
2013
$
For the
year ended
December 31,
2012
$
42,780
(227,849)
937
(282)
291
946
-
923
923
(1,102)
848
215
(39)
(2,788)
-
(2,788)
1,869
(2,827)
44,649
44,530
119
(230,676)
(230,565)
(111)
3
32
5N PLUS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
5N PLUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Figures in thousands of United States dollars, except number of shares)
(Figures in thousands of United States dollars)
Total Equity
Shareholders’ Equity
Share capital
Balance at beginning of year
Common shares issued on exercise of stock options
Common shares issued for cash (Note 18)
Balance at end of year
Contributed surplus
Balance at beginning of year
Share-based compensation expense
Exercise of stock options
Balance at end of year
Retained earnings (deficit)
Balance at beginning of year
Net earnings (loss) attributable to equity holders of
5N Plus Inc. for the year
Share issuance expense (net of income tax of nil;
2012 – $436) (Note 18)
Balance at end of year
Accumulated other comprehensive loss
Balance at beginning of year
Cash flow hedges (net of income tax of $(345);
2012 – $406)
De-designation of cash flow hedges (net of income
tax of $103; 2012 – $(312))
Currency translation adjustment
Remeasurements of retirement benefit obligation
(net of deferred tax of $(414); 2012 – $1,252)
Balance at end of year
Total shareholders’ equity at end of year
Non-controlling interest
Balance at beginning of year
Share of profit (loss)
Balance at end of year
Total Equity
Number
of shares
83,908,269
-
-
83,908,269
For the
year ended
December 31,
2013
Amount
$
343,272
-
-
343,272
3,180
567
-
3,747
(198,073)
42,661
-
(155,412)
(3,424)
937
(282)
291
923
(1,555)
190,052
358
119
477
190,529
Number
of shares
70,961,125
43,531
12,903,613
83,908,269
For the
year ended
December 31,
2012
(Note 4)
Amount
$
305,928
225
37,119
343,272
2,691
563
(74)
3,180
30,850
(227,738)
(1,185)
(198,073)
(597)
(1,102)
848
215
(2,788)
(3,424)
144,955
469
(111)
358
145,313
The accompanying notes are an integral part of these consolidated financial statements.
Operating activities
Net earnings (loss) for the year
Adjustments to reconcile net earnings (loss) to cash flows
Depreciation of property, plant and equipment and amortization
of intangible assets
Amortization of other assets
Share-based compensation expense
Deferred income tax
Share of loss from joint ventures
Gain related to the settlement of the purchase price of MCP Group SA (Note 13)
Impairment of inventories (Note 6)
Impairment of property, plant and equipment (Note 7)
Impairment of intangible assets (Note 8)
Impairment of goodwill (Note 9)
Reversal of impairment of property, plant and equipment (Note 7)
Unrealized gain on non-hedge financial instruments
Unrealized foreign exchange loss on assets and liabilities
Funds from operations before the following
Net change in non-cash working capital balances related to operations (Note 20)
Cash flows from operating activities
Investing activities
Additions to property, plant and equipment
Disposal of property, plant and equipment
Acquisition of intangible assets
Temporary investments
Temporary investments, restricted
Cash flows from (used in) investing activities
Financing activities
Repayment of long-term debt
Net increase (decrease) in bank indebtedness and short-term debt
Issuance of common shares and warrants (Note 18)
Share issuance expense
Financial instruments
Cash flows used in financing activities
Effect of foreign exchange rate changes on cash and cash
equivalents related to operations
Net increase (decrease) in cash and cash equivalents during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information(a)
Net income tax paid (recovered)
Interest paid
For the
year ended
For the
year ended
December 31,
December 31,
2013
$
2012
$
42,780
(227,849)
10,686
2,017
567
(1,769)
59
(45,188)
10,182
-
-
-
-
(847)
1,546
20,033
27,930
47,963
(11,063)
245
(797)
-
(133)
(11,748)
(25,186)
2,448
-
-
328
(22,410)
(913)
12,892
9,535
22,427
(7,636)
5,472
21,159
1,040
563
(25,037)
333
-
50,585
39,239
40,597
124,910
(932)
(1,338)
2,123
25,393
76,419
101,812
(16,460)
919
(347)
49,525
-
33,637
(126,826)
(65,416)
38,636
(1,621)
263
(154,964)
(399)
(19,914)
29,449
9,535
7,520
8,434
(a) Amounts paid for interest and income tax were reflected as cash flows from operating activities in the consolidated statements of cash flows.
The accompanying notes are an integral part of these consolidated financial statements.
4
5
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
33
5N PLUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Figures in thousands of United States dollars)
Operating activities
Net earnings (loss) for the year
Adjustments to reconcile net earnings (loss) to cash flows
Depreciation of property, plant and equipment and amortization
of intangible assets
Amortization of other assets
Share-based compensation expense
Deferred income tax
Share of loss from joint ventures
Gain related to the settlement of the purchase price of MCP Group SA (Note 13)
Impairment of inventories (Note 6)
Impairment of property, plant and equipment (Note 7)
Impairment of intangible assets (Note 8)
Impairment of goodwill (Note 9)
Reversal of impairment of property, plant and equipment (Note 7)
Unrealized gain on non-hedge financial instruments
Unrealized foreign exchange loss on assets and liabilities
Funds from operations before the following
Net change in non-cash working capital balances related to operations (Note 20)
Cash flows from operating activities
Investing activities
Additions to property, plant and equipment
Disposal of property, plant and equipment
Acquisition of intangible assets
Temporary investments
Temporary investments, restricted
Cash flows from (used in) investing activities
Financing activities
Repayment of long-term debt
Net increase (decrease) in bank indebtedness and short-term debt
Issuance of common shares and warrants (Note 18)
Share issuance expense
Financial instruments
Cash flows used in financing activities
Effect of foreign exchange rate changes on cash and cash
equivalents related to operations
Net increase (decrease) in cash and cash equivalents during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information(a)
Net income tax paid (recovered)
Interest paid
(a) Amounts paid for interest and income tax were reflected as cash flows from operating activities in the consolidated statements of cash flows.
The accompanying notes are an integral part of these consolidated financial statements.
For the
year ended
December 31,
2013
$
For the
year ended
December 31,
2012
$
42,780
(227,849)
10,686
2,017
567
(1,769)
59
(45,188)
10,182
-
-
-
-
(847)
1,546
20,033
27,930
47,963
(11,063)
245
(797)
-
(133)
(11,748)
(25,186)
2,448
-
-
328
(22,410)
(913)
12,892
9,535
22,427
(7,636)
5,472
21,159
1,040
563
(25,037)
333
-
50,585
39,239
40,597
124,910
(932)
(1,338)
2,123
25,393
76,419
101,812
(16,460)
919
(347)
49,525
-
33,637
(126,826)
(65,416)
38,636
(1,621)
263
(154,964)
(399)
(19,914)
29,449
9,535
7,520
8,434
5
34
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 1 – GENERAL INFORMATION
Nature of operations
5N Plus Inc. (“5N Plus” or the “Company”) is a Canadian-based international company. 5N Plus is a producer of
specialty metal and chemical products. Fully integrated with closed-loop recycling facilities, the Company’s head
office is located at 4385 Garand Street, Saint-Laurent, Quebec (Canada) H4R 2B4. The Company operates
manufacturing facilities and sales offices in several locations in Europe, the Americas and Asia. The Company’s
shares are listed on the Toronto Stock Exchange (“TSX”). 5N Plus and its subsidiaries represent the “Company”
mentioned throughout these consolidated financial statements. The Company has two reportable business segments,
namely Electronic Materials and Eco-Friendly Materials.
The Electronic Materials segment is headed by a vice president who oversees locally managed operations in North
America, Europe and Asia. Its main products are associated with the following metals: cadmium, gallium,
germanium, indium and tellurium. These metals are sold as elements, alloys, chemicals and compounds.
The Eco-Friendly Materials segment is headed by a vice president who oversees locally managed operations in
Europe and China. The segment manufactures and sells refined bismuth and bismuth chemicals and low melting-point
alloys as well as refined selenium and selenium chemicals.
The Company’s operations are not subject to seasonal fluctuations.
These consolidated financial statements were authorized for issuance by the Company’s Board of Directors on
February 25, 2014.
Acquisition-related costs are expensed as incurred.
NOTE 2 – SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting
principles as set forth in Part 1 of the Chartered Professional Accountants of Canada (CPA Canada) Handbook –
Accounting, which incorporates International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared under the historical
cost convention, except for derivative financial instruments.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements, are also further disclosed in this note, in the Significant
management estimation and judgment in applying accounting policies section.
a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Company has control. Control exists
when the Company is exposed to, or has the rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through the power over the entity.
The subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The Company applies the acquisition method to account for business combinations. The consideration transferred
for the acquisition of a subsidiary corresponds to the fair value of the assets transferred, the liabilities incurred to
the former owners of the acquiree and the equity interests issued by the Company. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair value at the acquisition date. The Company recognizes any non-controlling interest in the acquiree on
an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of
the recognized amounts of the acquiree’s identifiable net assets.
The following table includes the principal subsidiaries which significantly impact the results or assets of the
Company:
5N Plus Inc.
5N PV Gmbh
5N Plus Lübeck Gmbh
5N Plus UK Limited
5N Plus Belgium SA
5N Plus Asia Limited
5N Plus Wisconsin Inc
Country of incorporation
Canada
Germany
Germany
United Kingdom
Belgium
Hong Kong
United States
% Equity interest
2013
2012
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously
held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising
from such remeasurement are recognized in profit or loss.
Any contingent consideration to be transferred by the Company is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognized in accordance with International Accounting Standard (“IAS”) 39, “Financial Instruments:
Recognition and Measurement”, either in profit or loss or as a change to other comprehensive income. Contingent
consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for in
equity.
loss.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value
of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration
is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or
Intercompany transactions, balances, income and expenses on transactions between group companies are
eliminated. Profits and losses resulting from intercompany transactions that are recognized in assets are also
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Company.
b) Associates
All associates are entities over which the Company has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are
accounted for using the equity method of accounting. Under this method, the investment is initially recognized at
cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of
the investee after the date of acquisition. The Company’s investment in associates includes goodwill identified on
acquisition.
6
7
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
35
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The Company applies the acquisition method to account for business combinations. The consideration transferred
for the acquisition of a subsidiary corresponds to the fair value of the assets transferred, the liabilities incurred to
the former owners of the acquiree and the equity interests issued by the Company. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair value at the acquisition date. The Company recognizes any non-controlling interest in the acquiree on
an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of
the recognized amounts of the acquiree’s identifiable net assets.
The following table includes the principal subsidiaries which significantly impact the results or assets of the
Company:
5N Plus Inc.
5N PV Gmbh
5N Plus Lübeck Gmbh
5N Plus UK Limited
5N Plus Belgium SA
5N Plus Asia Limited
5N Plus Wisconsin Inc
Country of incorporation
Canada
Germany
Germany
United Kingdom
Belgium
Hong Kong
United States
% Equity interest
2012
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously
held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising
from such remeasurement are recognized in profit or loss.
Any contingent consideration to be transferred by the Company is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognized in accordance with International Accounting Standard (“IAS”) 39, “Financial Instruments:
Recognition and Measurement”, either in profit or loss or as a change to other comprehensive income. Contingent
consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for in
equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value
of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration
is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or
loss.
Intercompany transactions, balances, income and expenses on transactions between group companies are
eliminated. Profits and losses resulting from intercompany transactions that are recognized in assets are also
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Company.
b) Associates
All associates are entities over which the Company has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are
accounted for using the equity method of accounting. Under this method, the investment is initially recognized at
cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of
the investee after the date of acquisition. The Company’s investment in associates includes goodwill identified on
acquisition.
7
36
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share
of the amounts previously recognized in other comprehensive income (loss) is reclassified to profit or loss where
appropriate.
The Company’s share of post-acquisition profit or loss is recognized in the consolidated statements of earnings
(loss), and its share of post-acquisition movements in other comprehensive income (loss) is recognized in other
comprehensive income (loss) with a corresponding adjustment to the carrying amount of the investment. When
the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Company does not recognize further losses, unless it has incurred legal or constructive
obligations or made payments on behalf of the associate.
The Company determines at each reporting date whether there is any objective evidence that the investment in
the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to
share of profits (loss) of associates in the consolidated statements of earnings (loss).
Profits and losses resulting from upstream and downstream transactions between the Company and its associate
are recognized in the Company’s consolidated financial statements only to the extent of unrelated investor’s
interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been changed where necessary to
ensure consistency with the policies adopted by the Company.
Dilution gains and losses arising in investments in associates are recognized in the consolidated statements of
earnings (loss).
Foreign currency translation
a) Functional and presentation currency
The Company’s functional and presentation currency is the US dollar. Functional currency is determined for each
of the Company’s entities, and items included in the financial statements of each entity are measured using that
functional currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of earnings
(loss), except when deferred in other comprehensive income (loss) as qualifying cash flow hedges and qualifying
net investment hedges. Foreign exchange gains and losses are presented in the consolidated statements of
earnings (loss) within “foreign exchange and derivative loss (gain)”.
Changes in the fair value of monetary securities denominated in foreign currencies classified as available for sale
are analyzed between translation differences resulting from changes in the amortized cost of the security and
other changes in the carrying amount of the security. Translation differences related to changes in amortized cost
are recognized in profit or loss, and other changes in the carrying amount are recognized in other comprehensive
income (loss).
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through
profit or loss are recognized in profit or loss. Translation differences on non-monetary financial assets, such as
equities classified as available for sale, are included in other comprehensive income (loss).
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
c) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
i)
assets and liabilities for each statement of financial position presented are translated at the closing rate
at the date of that statement of financial position;
ii)
income and expenses for each statement of earnings (loss) are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and
iii) all resulting exchange differences are recognized in other comprehensive income (loss).
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in
other comprehensive income (loss).
Segment reporting
In identifying its operating segments, management generally follows the Company’s service lines, which represent the
main products provided by the Company. The Company operates two principal segments: Electronic Materials and
Eco-Friendly Materials. Discrete operating and financial information is available for these segments and is used to
determine the operating performance of each segment and to allocate resources.
The Electronic Materials segment is associated with the following metals: cadmium, gallium, germanium, indium
and tellurium. These are sold as elements, alloys, chemicals and compounds.
The Eco-Friendly Materials segment manufactures and sells refined bismuth and bismuth chemicals and low melting-
point alloys as well as refined selenium and selenium chemicals.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses
together with financing costs and foreign exchange and derivative loss (gain) have been regrouped under the heading
“Corporate and unallocated”. Corresponding operations and activities are managed accordingly by the Company’s
key decision-makers.
Each operating segment is managed separately as each of these service lines requires different technologies, resources
and marketing approaches. The financial information of the recycling and trading of complex material is allocated to
the two main segments. All intersegment transactions between the Electronic Materials and the Eco-Friendly
Materials segments have been eliminated on consolidation.
Revenue recognition
Revenue comprises the sale of manufactured products and the rendering of services and is measured at the fair value
of the sale of manufactured products, net of intercompany sales, value-added tax, and estimated customer returns and
allowances at the time of recognition. The estimates of fair value are based on the Company’s historical experience
with each customer and the specifics of each arrangement.
Revenue from the sale of manufactured products and custom refining activities is recognized when the risks and
rewards of ownership have been transferred to the buyer (which generally occurs upon shipment) and collectibility of
the related receivables is reasonably assured. Revenue is recognized when (i) it can be measured reliably; (ii) it is
probable that the economic benefits associated with the transaction will flow to the Company; and (iii) the costs
incurred or to be incurred can be measured reliably.
8
9
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
37
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
c) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
i)
ii)
assets and liabilities for each statement of financial position presented are translated at the closing rate
at the date of that statement of financial position;
income and expenses for each statement of earnings (loss) are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and
iii) all resulting exchange differences are recognized in other comprehensive income (loss).
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in
other comprehensive income (loss).
Segment reporting
In identifying its operating segments, management generally follows the Company’s service lines, which represent the
main products provided by the Company. The Company operates two principal segments: Electronic Materials and
Eco-Friendly Materials. Discrete operating and financial information is available for these segments and is used to
determine the operating performance of each segment and to allocate resources.
The Electronic Materials segment is associated with the following metals: cadmium, gallium, germanium, indium
and tellurium. These are sold as elements, alloys, chemicals and compounds.
The Eco-Friendly Materials segment manufactures and sells refined bismuth and bismuth chemicals and low melting-
point alloys as well as refined selenium and selenium chemicals.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses
together with financing costs and foreign exchange and derivative loss (gain) have been regrouped under the heading
“Corporate and unallocated”. Corresponding operations and activities are managed accordingly by the Company’s
key decision-makers.
Each operating segment is managed separately as each of these service lines requires different technologies, resources
and marketing approaches. The financial information of the recycling and trading of complex material is allocated to
the two main segments. All intersegment transactions between the Electronic Materials and the Eco-Friendly
Materials segments have been eliminated on consolidation.
Revenue recognition
Revenue comprises the sale of manufactured products and the rendering of services and is measured at the fair value
of the sale of manufactured products, net of intercompany sales, value-added tax, and estimated customer returns and
allowances at the time of recognition. The estimates of fair value are based on the Company’s historical experience
with each customer and the specifics of each arrangement.
Revenue from the sale of manufactured products and custom refining activities is recognized when the risks and
rewards of ownership have been transferred to the buyer (which generally occurs upon shipment) and collectibility of
the related receivables is reasonably assured. Revenue is recognized when (i) it can be measured reliably; (ii) it is
probable that the economic benefits associated with the transaction will flow to the Company; and (iii) the costs
incurred or to be incurred can be measured reliably.
9
38
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated over their estimated useful lives on a straight-line
basis over 25 years for buildings, 10 years for production equipment, ranging from 3 to 10 years for furniture, office
equipment and rolling stock, and over the term of the lease for leasehold improvements. As no finite useful life for
land can be determined, related carrying amounts are not depreciated. Consistent with IAS 16, “Property, Plant and
Equipment”, “significant components” with different useful lives from the original asset purchased or constructed are
identified and depreciated using a representative useful life. Maintenance and repairs are charged to expense as
incurred.
However, “major overhauls and replacements” are capitalized to the consolidated statements of financial position as a
separate component, with the replaced part or previous overhaul derecognized from the statement.
Construction in progress is not depreciated until the assets are put into use. Costs are only capitalized if they are
directly attributable to the construction or development of the assets.
Residual values, method of depreciation and useful life of the assets are reviewed annually and adjusted if
appropriate.
The carrying values of property, plant and equipment which exceed their recoverable amounts are written down to
their recoverable amount and are recognized in the consolidated statements of earnings (loss) (see impairment
section below). Gains or losses arising on the disposal of property, plant and equipment are determined as the
difference between the disposal proceeds and the carrying amount of the assets and are recognized in the
consolidated statements of earnings (loss) in “Other expenses, net”.
Leases
Leases are classified as finance leases if the Company bears substantially all risks and rewards of ownership of the
leased asset. At inception of the lease, the related asset is recognized at the lower of fair value and the present value of
the minimum lease payments, and a corresponding amount is recognized as a finance lease obligation. Lease
payments are split between finance charges and the reduction of the finance lease obligation to achieve a constant
proportion of the capital balance outstanding. Finance charges are charged to net earnings (loss) over the lease term.
All other leases are classified as operating leases. Operating lease payments are recognized as an expense on a
straight-line basis over the lease term.
Goodwill and intangible assets
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable assets
acquired and liabilities assumed. Goodwill is tested for impairment on an annual basis or whenever facts or
circumstances indicate that the carrying amount may exceed its recoverable amount.
Intangible assets other than goodwill are amortized on a straight-line basis over the periods stated below.
b) Loans and receivables
Customer relationships
Technology
Trade name and non-compete agreements
Software
Intellectual property
Development costs
Period
10 years
5 years
2 to 5 years
5 years
10 years
Not exceeding 10 years
10
11
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Impairment of non-financial assets
Impairment of goodwill
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely
independent cash inflows. As a result, some assets are tested individually for impairment and some are tested at the
cash-generating unit (“CGU”) level. Goodwill is allocated to CGUs or groups of CGUs for impairment testing
purposes based on the level at which management monitors it, which is not higher than an operating segment. The
allocation is made to those CGUs or group of CGUs that are expected to benefit from synergies of the related business
combination in which the goodwill arises.
Impairment of other non-financial assets
Non-financial assets with finite lives are tested for impairment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. In addition, non-financial assets that are not amortized are subject
to an annual impairment assessment. Any impairment loss is recognized for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (CGUs). The Company evaluates impairment losses for potential reversals, other
than goodwill impairment, when events or changes in circumstances warrant such consideration.
Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be
recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower
of carrying amount and fair value less costs to sell.
Financial assets
Classification
The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and
receivables, and available for sale. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition.
a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also
categorized as held for trading unless they are designated as hedges. Assets in this category are classified as
current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for maturities greater than 12 months after the end
of the reporting period. These are classified as non-current assets. The Company’s loans and receivables
comprise “accounts receivable”, “cash and cash equivalents” and “temporary investments, restricted” in the
consolidated statements of financial position.
c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified
in any of the other categories. They are included in non-current assets unless the investment matures or
management intends to dispose of them within 12 months of the end of the reporting period.
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
39
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Impairment of non-financial assets
Impairment of goodwill
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely
independent cash inflows. As a result, some assets are tested individually for impairment and some are tested at the
cash-generating unit (“CGU”) level. Goodwill is allocated to CGUs or groups of CGUs for impairment testing
purposes based on the level at which management monitors it, which is not higher than an operating segment. The
allocation is made to those CGUs or group of CGUs that are expected to benefit from synergies of the related business
combination in which the goodwill arises.
Impairment of other non-financial assets
Non-financial assets with finite lives are tested for impairment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. In addition, non-financial assets that are not amortized are subject
to an annual impairment assessment. Any impairment loss is recognized for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (CGUs). The Company evaluates impairment losses for potential reversals, other
than goodwill impairment, when events or changes in circumstances warrant such consideration.
Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be
recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower
of carrying amount and fair value less costs to sell.
Financial assets
Classification
The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and
receivables, and available for sale. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition.
a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also
categorized as held for trading unless they are designated as hedges. Assets in this category are classified as
current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for maturities greater than 12 months after the end
of the reporting period. These are classified as non-current assets. The Company’s loans and receivables
comprise “accounts receivable”, “cash and cash equivalents” and “temporary investments, restricted” in the
consolidated statements of financial position.
c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified
in any of the other categories. They are included in non-current assets unless the investment matures or
management intends to dispose of them within 12 months of the end of the reporting period.
11
40
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Recognition and measurement
Regular purchases and sales of financial assets are recognized on the trade date, the date on which the Company
commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all
financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or
loss are initially recognized at fair value, and transaction costs are expensed in the consolidated statements of earnings
(loss). Financial assets are derecognized when the rights to receive cash flows from the investments have expired or
been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-sale
financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans
and receivables are subsequently carried at amortized cost using the effective interest method.
Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are
presented in the consolidated statements of earnings (loss) within foreign exchange and derivative loss (gain) in the
period in which they arise.
Impairment of financial assets
Assets carried at amortized cost
The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include: indications that the debtor or a group of debtors is experiencing significant
financial difficulty, default or delinquency in interest or principal payments; the probability that they will enter
bankruptcy or other financial reorganization; and where observable data indicates that there is a measurable decrease
in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is
reduced and the amount of the loss is recognized in the consolidated statements of earnings (loss). If a loan has a
variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. As a practical expedient, the Company may measure impairment on the basis of an
instrument’s fair value, using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the
reversal of the previously recognized impairment loss is recognized in the consolidated statements of earnings (loss).
Financial liabilities
The Company’s financial liabilities include bank indebtedness, short-term debt and long-term debt (“borrowings”),
trade and accrued liabilities and derivative financial instruments. Financial liabilities are measured at amortized cost
using the effective interest method, except for financial liabilities held for trading or designated at fair value through
profit or loss, which are carried subsequently at fair value with gains or losses recognized in net earnings (loss).
All derivative financial instruments that are not designated and effective as hedging instruments are accounted for at
fair value through the consolidated statements of earnings (loss). All interest-related charges and, if applicable,
changes in an instrument’s fair value that are reported in the consolidated statements of earnings (loss) are included in
foreign exchange and derivative loss (gain).
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument and, if so, the nature of the item being hedged. The Company designates certain
derivatives as either:
a)
hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge);
b) hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast
transaction (cash flow hedge); or
c)
hedges of a net investment in a foreign operation (net investment hedge).
The Company documents at the inception of a transaction the relationship between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The
Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 17.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity
of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the
hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
a) Fair value hedge
b) Cash flow hedge
The Company generally applies fair value hedge accounting to certain interest-rate derivatives to hedge the
exposures to changes in the fair value of recognized financial assets and financial liabilities. In a fair value hedge
relationship, gains or losses from the measurement of derivative hedging instruments at fair value are recorded in
net earnings (loss), while gains or losses on hedged items attributable to the hedged risks are accounted for as an
adjustment to the carrying amount of hedged items and are recorded in net earnings (loss).
The Company generally applies cash flow hedge accounting to foreign exchange forward contracts and
interest-rate derivatives entered into to hedge foreign exchange risks on forecasted transactions. In a cash flow
hedge relationship, the portion of gains or losses on the hedging item that is determined to be an effective
hedge is recognized in other comprehensive income (loss), while the ineffective portion is recorded in net
earnings (loss). The amounts recognized in other comprehensive income (loss) are reclassified in net earnings
(loss) as a reclassification adjustment when the hedged item affects net earnings (loss).
c) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other
comprehensive income (loss). The gain or loss relating to the ineffective portion is recognized in the
consolidated statements of earnings (loss). Gains and losses accumulated in equity are included in the
consolidated statements of earnings (loss) when the foreign operation is partially disposed of or sold.
12
13
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
41
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument and, if so, the nature of the item being hedged. The Company designates certain
derivatives as either:
hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge);
a)
b) hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast
transaction (cash flow hedge); or
hedges of a net investment in a foreign operation (net investment hedge).
c)
The Company documents at the inception of a transaction the relationship between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The
Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 17.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity
of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the
hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
a) Fair value hedge
The Company generally applies fair value hedge accounting to certain interest-rate derivatives to hedge the
exposures to changes in the fair value of recognized financial assets and financial liabilities. In a fair value hedge
relationship, gains or losses from the measurement of derivative hedging instruments at fair value are recorded in
net earnings (loss), while gains or losses on hedged items attributable to the hedged risks are accounted for as an
adjustment to the carrying amount of hedged items and are recorded in net earnings (loss).
b) Cash flow hedge
The Company generally applies cash flow hedge accounting to foreign exchange forward contracts and
interest-rate derivatives entered into to hedge foreign exchange risks on forecasted transactions. In a cash flow
hedge relationship, the portion of gains or losses on the hedging item that is determined to be an effective
hedge is recognized in other comprehensive income (loss), while the ineffective portion is recorded in net
earnings (loss). The amounts recognized in other comprehensive income (loss) are reclassified in net earnings
(loss) as a reclassification adjustment when the hedged item affects net earnings (loss).
c) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other
comprehensive income (loss). The gain or loss relating to the ineffective portion is recognized in the
consolidated statements of earnings (loss). Gains and losses accumulated in equity are included in the
consolidated statements of earnings (loss) when the foreign operation is partially disposed of or sold.
13
42
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost includes all expenditures directly attributable
to the manufacturing process as well as suitable portions of related production overheads based on normal operating
capacity. Costs of ordinarily interchangeable items are assigned using weighted average cost. Net realizable value is
the estimated selling price in the ordinary course of business less any applicable selling expenses. When the
circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear
evidence of an increase in net realizable value because of changed economic circumstances, the amount of the
impairment is reversed (i.e. the reversal is limited to the amount of the original impairment) so that the new carrying
amount is the lower of the cost and the revised net realizable value.
From time to time, when substantially all required raw materials are in inventories, the Company may choose to enter
into long-term sales contracts at fixed prices. The quantity of raw materials required to fulfill these contracts is
specifically assigned, and the average cost of these raw materials of this inventory are accounted for throughout the
duration of the contract.
Trade receivables
Trade receivables are amounts due from customers for the sale of manufactured products and the rendering of services
performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current
assets. If not, they are presented as non-current assets.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the
effective interest method, less provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits.
Temporary investments, restricted
Temporary investments represent restricted deposits held to secure certain liabilities of the Company.
deferred income tax liability is settled.
Trade and accrued liabilities
Trade and accrued liabilities are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Trade and accrued liabilities are classified as current liabilities if payment is due
within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-
current liabilities.
Trade and accrued liabilities are recognized initially at fair value and subsequently measured at amortized cost using
the effective interest method.
Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently
carried at amortized cost: any difference between the proceeds (net of transaction costs) and the redemption value is
recognized in the consolidated statements of earnings (loss) over the period of the borrowings using the effective
interest method.
Employee future benefits
benefits are as follows:
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it
is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown
occurs. To the extent there is no evidence that it is probable that same or all of the facility will be drawn down, the
fee is capitalized as a pre-payment for liquidity services and amortized over the term of the facility to which it
relates.
14
15
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Income taxes
respectively.
The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated statements of
earnings (loss), except to the extent that it relates to items recognized in other comprehensive income (loss) or directly
in equity. In which case, the tax is also recognized in other comprehensive income (loss) or directly in equity,
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of
the consolidated statements of financial position in the countries where the Company and its subsidiaries operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income
tax is determined using tax rates (and laws) that are enacted or substantively enacted at the date of the consolidated
statements of financial position and are expected to apply when the related deferred income tax asset is realized or the
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
Deferred income tax is provided for on temporary differences arising on investments in subsidiaries and associates,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by
the Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
The Company contributes to a defined benefit pension plan. The significant policies related to employee future
The cost of pension and other post-retirement benefits earned by employees is actuarially determined using
the projected benefit method pro-rated on service, market interest rates and management’s best estimate of
expected plan investment performance, retirement ages of employees and expected health care costs.
Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets.
Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income (loss) in the period in which they arise.
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
43
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Income taxes
The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated statements of
earnings (loss), except to the extent that it relates to items recognized in other comprehensive income (loss) or directly
in equity. In which case, the tax is also recognized in other comprehensive income (loss) or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of
the consolidated statements of financial position in the countries where the Company and its subsidiaries operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income
tax is determined using tax rates (and laws) that are enacted or substantively enacted at the date of the consolidated
statements of financial position and are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
Deferred income tax is provided for on temporary differences arising on investments in subsidiaries and associates,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by
the Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
Employee future benefits
The Company contributes to a defined benefit pension plan. The significant policies related to employee future
benefits are as follows:
The cost of pension and other post-retirement benefits earned by employees is actuarially determined using
the projected benefit method pro-rated on service, market interest rates and management’s best estimate of
expected plan investment performance, retirement ages of employees and expected health care costs.
Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets.
Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income (loss) in the period in which they arise.
15
44
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Share-based payments
The fair value of the equity-settled share-based payment plan is determined using the Black-Scholes model on the
grant date. Measurement inputs include the share price on the measurement date, the exercise price of the instrument,
expected volatility, weighted average expected life of the instrument, expected dividends, expected forfeiture rate, and
the risk-free interest rate. The impact of service and non-market vesting conditions is not taken into account in
determining fair value. The compensation expense of the equity-settled awards is recognized in the consolidated
statements of earnings (loss) over the graded vesting period, where the fair value of each tranche is recognized over
its respective vesting period.
For cash-settled share-based payment plans, the compensation expense is determined based on the fair value of the
liability incurred at each reporting date until the award is settled. The fair value of the liability is measured using the
Black-Scholes model, taking into consideration the terms and conditions attached to each grant and the extent to
which the employees have rendered service to date.
Earnings (loss) per share
Basic earnings (loss) per share is calculated by dividing net earnings (loss) for the period attributable to equity owners
of the Company by the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per share is calculated using the treasury stock method. Under this method, earnings (loss) per
share data is computed as if the options were exercised at the beginning of the year (or at the time of issuance, if later)
and as if the funds obtained from the exercise were used to purchase common shares of the Company at the average
market price during the period.
Provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognized when: the group has a
present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be
required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease
termination penalties and employee termination payments. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using
a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognized as interest expense.
Significant management estimation and judgment in applying accounting policies
The following are significant management judgments used in applying the accounting policies of the Company that
have the most significant effect on the consolidated financial statements.
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Impairment of non-financial assets
An impairment loss is recognized for the amount by which an asset’s or CGU’s carrying amount exceeds its
recoverable amount, which is the higher of fair value less cost to sell and value in use.
To determine value in use, management estimates expected future cash flows from each asset or CGU and
determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of
measuring expected future cash flows, management makes assumptions about future operating results. These
assumptions relate to future events and circumstances. The actual results may vary, and may cause significant
adjustments to the Company’s assets in future periods. In most cases, determining the applicable discount rate
involves estimating the appropriate adjustment to market risk and to asset-specific risk factors (Notes 7, 8 and 9).
Inventories are measured at the lower of cost and net realizable value, with cost determined using the average cost
method. In estimating net realizable values, management takes into account the most reliable evidence available at the
time the estimates are made. The Company’s core business is subject to changes in foreign policies and
internationally accepted metal prices which may cause future selling prices to change rapidly. The Company evaluates
its inventories using a group of similar items basis and considers expected future prices as well as events that have
occurred between the statement of financial position date and the date of the completion of the financial statements.
Net realizable value held to satisfy a specific sales contract is measured at the contract price.
Inventories
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of
the Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income
and the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future
profitability may change due to future market conditions, changes in tax legislation and other factors that could
adversely affect the ongoing value of the deferred income tax assets. These changes, if any, may require the material
adjustment of these deferred income tax asset balances through an adjustment to the carrying value thereon in the
future. This adjustment would reduce the deferred income tax asset to the amount that is considered to be more likely
than not to be realized and would be recorded in the period such a determination was to be made.
NOTE 3 – CHANGES IN ACCOUNTING POLICIES
The Company has adopted the following new and revised standards, along with any consequential amendments,
effective January 1, 2013. These changes were made in accordance with the application transitional provisions.
The Company has adopted the amendment to IAS 1, “Presentation of Financial Statements”. These amendments
required the Company to group other comprehensive income items by those that will be reclassified subsequently to
the interim consolidated statement of earnings and those that will not. The Company has reclassified comprehensive
income items for the comparative period. These changes did not result in any net adjustments to other comprehensive
income (loss) or comprehensive income (loss).
16
17
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
45
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Impairment of non-financial assets
An impairment loss is recognized for the amount by which an asset’s or CGU’s carrying amount exceeds its
recoverable amount, which is the higher of fair value less cost to sell and value in use.
To determine value in use, management estimates expected future cash flows from each asset or CGU and
determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of
measuring expected future cash flows, management makes assumptions about future operating results. These
assumptions relate to future events and circumstances. The actual results may vary, and may cause significant
adjustments to the Company’s assets in future periods. In most cases, determining the applicable discount rate
involves estimating the appropriate adjustment to market risk and to asset-specific risk factors (Notes 7, 8 and 9).
Inventories
Inventories are measured at the lower of cost and net realizable value, with cost determined using the average cost
method. In estimating net realizable values, management takes into account the most reliable evidence available at the
time the estimates are made. The Company’s core business is subject to changes in foreign policies and
internationally accepted metal prices which may cause future selling prices to change rapidly. The Company evaluates
its inventories using a group of similar items basis and considers expected future prices as well as events that have
occurred between the statement of financial position date and the date of the completion of the financial statements.
Net realizable value held to satisfy a specific sales contract is measured at the contract price.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of
the Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income
and the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future
profitability may change due to future market conditions, changes in tax legislation and other factors that could
adversely affect the ongoing value of the deferred income tax assets. These changes, if any, may require the material
adjustment of these deferred income tax asset balances through an adjustment to the carrying value thereon in the
future. This adjustment would reduce the deferred income tax asset to the amount that is considered to be more likely
than not to be realized and would be recorded in the period such a determination was to be made.
NOTE 3 – CHANGES IN ACCOUNTING POLICIES
The Company has adopted the following new and revised standards, along with any consequential amendments,
effective January 1, 2013. These changes were made in accordance with the application transitional provisions.
The Company has adopted the amendment to IAS 1, “Presentation of Financial Statements”. These amendments
required the Company to group other comprehensive income items by those that will be reclassified subsequently to
the interim consolidated statement of earnings and those that will not. The Company has reclassified comprehensive
income items for the comparative period. These changes did not result in any net adjustments to other comprehensive
income (loss) or comprehensive income (loss).
17
46
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(Figures in thousands of United States dollars)
IAS 19, “Employee Benefits”, was amended in June 2011. The impact on the Company will be as follows: to
immediately recognize all past service costs and to replace interest cost and expected return on plan assets with a net
interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). Furthermore,
the amendments to IAS 19 enhance the disclosure requirements for defined benefit plans and the risks that the
Company is exposed through participation in those plans. The impact of the adoption of IAS 19 is presented in
Note 4.
IFRS 10, “Consolidated Financial Statements”, builds on existing principles by identifying the concept of control as
the determining factor in whether an entity should be included within the consolidated financial statements of the
parent company. The standard provides additional guidance to assist in the determination of control where this is
difficult to assess. The impact of the adoption of IFRS 10 did not result in any change in the consolidation status of
any of its subsidiaries or investees.
IFRS 12, “Disclosure of interests in other entities”, includes the disclosure requirements for all forms of interests in
other entities, including joint arrangements, associates, special-purpose vehicles and other unconsolidated structured
entities. The standard carries forward existing disclosures and also introduces significant additional disclosures that
address the nature of, and risks associated with, an entity’s interests in other entities. The Company has incorporated
the new disclosure requirements within these financial statements.
IFRS 13, “Fair Value Measurement”, provides a single framework for measuring fair value. The measurement of the
fair value of an asset or liability is based on assumptions that market participants would use when pricing the asset or
liability under current market conditions, including assumptions about risk. The adoption of IFRS 13 did not require
any adjustments to the valuation techniques used by the Company to measure fair value and did not result in any
measurement adjustments as at January 1, 2013.
In May 2013, the IASB amended IAS 36, “Impairment of Assets”, regarding disclosures for non-financial assets. This
amendment removed certain disclosures related to the recoverable amount of CGUs which had been included in
IAS 36 by the issue of IFRS 13. The amendment is not mandatory until January 1, 2014, however the Company has
decided to early adopt the amendment as of January 1, 2013.
IFRS 7, Financial Instruments: Disclosures — The amendments to IFRS 7 contain new disclosure requirements for
financial assets and liabilities that are either offset in the consolidated statement of financial position or subject to
master netting arrangements or other similar arrangements. The amendments are to be applied retrospectively. The
impact of the adoption of IFRS 7 did not result in any change in the disclosure of offsetting of financial assets and
financial liabilities.
New standards not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning
on or after January 1, 2014, and have not been applied in preparing these consolidated financial statements. None of
these is expected to have a significant effect on the Company’s consolidated financial statements, except the
following set out below.
IFRS 9, “Financial Instruments”, as issued, reflects the current status of the IASB’s work plan on the replacement of
IAS 39 and applies to classification and measurement of financial assets and financial liabilities, as defined in IAS 39.
The IASB is also addressing hedge accounting and impairment of financial assets. In December 2013 the IASB
removed the mandatory effective date of IFRS 9 until all phases of the project have been completed. The mandatory
effective date has yet to be determined however it has been deferred beyond annual periods beginning on or after
January 1, 2015.
The Company has not yet quantified the effect of the published phases of IFRS 9 nor does it intend at this time to
early adopt IFRS 9 until the mandatory effective date.
18
International Financial Reporting Interpretations Committee Interpretation 21, “Levies”, provides guidance on
accounting for levies in accordance with the requirements of IAS 37, “Provisions, Contingent Liabilities and
Contingent Assets”. The interpretation defines a levy as an outflow from an entity imposed by a government in
accordance with legislation and confirms that a liability for a levy is recognized only when the triggering event
specified in the legislation occurs. The interpretation is effective for annual periods beginning on or after January 1,
2014, however the Company has not yet assessed the impact of this interpretation.
NOTE 4 – IAS 19, EMPLOYEE BENEFITS
Adjustments to the statements of financial position:
Increase in deferred tax assets related to the retirement benefit obligation
Equity before accounting change
Increase in retirement benefit obligation
Net change
Equity after accounting change
Adjustments to comprehensive loss:
Comprehensive income (loss) before accounting change
Decrease in other comprehensive income for retroactive remeasurements of retirement benefit obligation,
net of deferred tax of $1,252
Comprehensive loss after accounting change
Adjustments to accumulated other comprehensive income (loss):
Opening balance before accounting change
Decrease in other comprehensive income for remeasurements of retirement benefit
obligation
Opening balance after accounting change
NOTE 5 – ACCOUNTS RECEIVABLE
Gross trade receivables
Allowance for doubtful accounts
Trade receivables
Sales taxes receivable
Other receivables
Total accounts receivable
December 31,
2012
$
148,470
(4,575)
1,418
(3,157)
145,313
2012
$
(227,888)
(2,788)
(230,676)
2013
$
(267)
(3,157)
(3,424)
2013
$
54,008
(218)
53,790
4,413
2,413
60,616
2012
$
(228)
(369)
(597)
2012
$
79,249
(168)
79,081
4,604
4,122
87,807
19
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
47
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
International Financial Reporting Interpretations Committee Interpretation 21, “Levies”, provides guidance on
accounting for levies in accordance with the requirements of IAS 37, “Provisions, Contingent Liabilities and
Contingent Assets”. The interpretation defines a levy as an outflow from an entity imposed by a government in
accordance with legislation and confirms that a liability for a levy is recognized only when the triggering event
specified in the legislation occurs. The interpretation is effective for annual periods beginning on or after January 1,
2014, however the Company has not yet assessed the impact of this interpretation.
NOTE 4 – IAS 19, EMPLOYEE BENEFITS
Adjustments to the statements of financial position:
Equity before accounting change
Increase in retirement benefit obligation
Increase in deferred tax assets related to the retirement benefit obligation
Net change
Equity after accounting change
Adjustments to comprehensive loss:
Comprehensive income (loss) before accounting change
Decrease in other comprehensive income for retroactive remeasurements of retirement benefit obligation,
net of deferred tax of $1,252
Comprehensive loss after accounting change
Adjustments to accumulated other comprehensive income (loss):
Opening balance before accounting change
Decrease in other comprehensive income for remeasurements of retirement benefit
obligation
Opening balance after accounting change
NOTE 5 – ACCOUNTS RECEIVABLE
Gross trade receivables
Allowance for doubtful accounts
Trade receivables
Sales taxes receivable
Other receivables
Total accounts receivable
December 31,
2012
$
148,470
(4,575)
1,418
(3,157)
145,313
2012
$
(227,888)
(2,788)
(230,676)
2013
$
(267)
(3,157)
(3,424)
2013
$
54,008
(218)
53,790
4,413
2,413
60,616
2012
$
(228)
(369)
(597)
2012
$
79,249
(168)
79,081
4,604
4,122
87,807
19
48
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(Figures in thousands of United States dollars)
All of the Company’s accounts receivable are short term. The net carrying value of accounts receivable is considered
a reasonable approximation of fair value. The Company reviews all amounts periodically for indications of
impairment and the amounts impaired have been provided for as an allowance for doubtful accounts.
The Company’s exposure to credit risks and impairment losses related to accounts receivable is disclosed in Note 26.
Most of the accounts receivable are pledged as security for the revolving credit facility (Note 13).
NOTE 6 – INVENTORIES
Raw materials
Work in progress and finished goods
Total inventories
2013
$
45,356
129,018
174,374
2012
$
60,410
109,883
170,293
For the year ended December 31, 2013, a total of $373,548 of inventories was included as an expense in cost of sales
(2012 – $517,604). This includes $10,182 of impairment of inventories ($10,032 for the Eco-Friendly Materials
segment and $150 for the Electronic Materials segment) (2012 – $50,585 ($26,835 for the Eco-Friendly Materials
segment and $23,750 for the Electronic Materials segment)).
For the year ended December 31, 2013, a total of $25,627 previously written down was recognized as a reduction of
expenses in cost of sales ($19,623 for the Eco-Friendly Materials segment and $6,004 for the Electronic Materials
segment) (2012 – $56,137 ($19,647 for the Eco-Friendly Materials segment and $36,490 for the Electronic Materials
segment)).
The majority of inventories are pledged as security for the revolving credit facility (Note 13).
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
Effect of foreign exchange and adjustment
Year ended December 31, 2012
As at December 31, 2011
Additions
Disposals
Impairment losses(a)(b)
Reversal of impairment(c)
Depreciation
As at December 31, 2012
As at December 31, 2012
Cost
Accumulated depreciation
Net book value
Year ended December 31, 2013
As at December 31, 2012
Additions
Disposals
Depreciation
Effect of foreign exchange
As at December 31, 2013
As at December 31, 2013
Cost
Accumulated depreciation
Net book value
Furniture, office
equipment and
rolling stock
improvements
Leasehold
Production
equipment
$
Land and
buildings
$
-
-
37,602
5,653
(18,899)
(1,784)
90
22,662
26,058
(3,396)
22,662
22,662
1,187
(41)
(1,297)
93
22,604
27,140
(4,536)
22,604
45,367
9,762
(705)
(19,225)
932
(5,885)
(163)
30,083
35,772
(5,689)
30,083
30,083
9,498
(182)
(4,676)
(65)
34,658
44,016
(9,358)
34,658
$
2,445
1,635
(192)
(878)
-
(1,494)
(19)
1,497
2,752
(1,255)
1,497
1,497
621
(22)
(925)
1
1,172
3,060
(1,888)
1,172
$
-
-
-
-
1,069
614
(22)
(237)
(118)
1,306
1,952
(646)
1,306
1,306
(124)
(2)
1,180
1,952
(772)
1,180
Total
$
86,483
17,664
(919)
(39,239)
932
(9,281)
(92)
55,548
66,534
(10,986)
55,548
55,548
11,306
(245)
(7,022)
27
59,614
76,168
(16,554)
59,614
(a) As at December 31, 2012, the Company recognized an impairment of $28,235 in other expenses, due to the longer than anticipated pricing softness in
minor metals, and a significant reduction in market capitalization. The impairment expense relates to the Eco-Friendly Materials segment (Note 9).
(b) Following the announcement of the closure of a site, the Company has recognized an impairment loss of $11,004 in the Electronic Materials segment.
The impairment represents the excess of the carrying amount over the recoverable value of the related asset.
(c) For the 12-month period ended December 31, 2012, a total of $932 previously written down in the Electronic Materials segment was reversed due
mainly to the activation of some activities.
20
21
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
49
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
Year ended December 31, 2012
As at December 31, 2011
Additions
Disposals
Impairment losses(a)(b)
Reversal of impairment(c)
Depreciation
Effect of foreign exchange and adjustment
As at December 31, 2012
As at December 31, 2012
Cost
Accumulated depreciation
Net book value
Year ended December 31, 2013
As at December 31, 2012
Additions
Disposals
Depreciation
Effect of foreign exchange
As at December 31, 2013
As at December 31, 2013
Cost
Accumulated depreciation
Net book value
Land and
buildings
$
Production
equipment
$
Furniture, office
equipment and
rolling stock
$
Leasehold
improvements
$
37,602
5,653
-
(18,899)
-
(1,784)
90
22,662
26,058
(3,396)
22,662
22,662
1,187
(41)
(1,297)
93
22,604
27,140
(4,536)
22,604
45,367
9,762
(705)
(19,225)
932
(5,885)
(163)
30,083
35,772
(5,689)
30,083
30,083
9,498
(182)
(4,676)
(65)
34,658
44,016
(9,358)
34,658
2,445
1,635
(192)
(878)
-
(1,494)
(19)
1,497
2,752
(1,255)
1,497
1,497
621
(22)
(925)
1
1,172
3,060
(1,888)
1,172
1,069
614
(22)
(237)
-
(118)
-
1,306
1,952
(646)
1,306
1,306
-
-
(124)
(2)
1,180
1,952
(772)
1,180
Total
$
86,483
17,664
(919)
(39,239)
932
(9,281)
(92)
55,548
66,534
(10,986)
55,548
55,548
11,306
(245)
(7,022)
27
59,614
76,168
(16,554)
59,614
(a) As at December 31, 2012, the Company recognized an impairment of $28,235 in other expenses, due to the longer than anticipated pricing softness in
minor metals, and a significant reduction in market capitalization. The impairment expense relates to the Eco-Friendly Materials segment (Note 9).
(b) Following the announcement of the closure of a site, the Company has recognized an impairment loss of $11,004 in the Electronic Materials segment.
The impairment represents the excess of the carrying amount over the recoverable value of the related asset.
(c) For the 12-month period ended December 31, 2012, a total of $932 previously written down in the Electronic Materials segment was reversed due
mainly to the activation of some activities.
21
50
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 8 – INTANGIBLE ASSETS
Customer
relationships
$
Trade name and
non-compete
agreements
$
Software,
intellectual property
and development
$
Technology
$
10,458
-
10,458
1,828
1,048
2,876
5,625
-
5,625
1,862
1,157
3,019
3,062
-
3,062
1,417
372
1,789
3,706
797
4,503
1,734
1,087
2,821
Total
$
22,851
797
23,648
6,841
3,664
10,505
7,582
2,606
1,273
1,682
13,143
Customer
relationships
$
Technology
$
Trade name and
non-compete
agreements
$
Software,
intellectual property
and development
$
42,966
-
-
(32,508)
10,458
3,131
4,380
-
(5,683)
1,828
23,108
-
-
(17,483)
5,625
3,029
4,620
-
(5,787)
1,862
7,781
-
(21)
(4,698)
3,062
1,886
2,159
(6)
(2,622)
1,417
3,369
347
(10)
-
3,706
1,030
719
(15)
-
1,734
Total
$
77,224
347
(31)
(54,689)
22,851
9,076
11,878
(21)
(14,092)
6,841
8,630
3,763
1,645
1,972
16,010
Cost
As at December 31, 2012
Additions
As at December 31, 2013
Accumulated amortization
As at December 31, 2012
Amortization
As at December 31, 2013
Net book value as at
December 31, 2013
Cost
As at December 31, 2011
Additions
Adjustment
Impairment losses(a)
As at December 31, 2012
Accumulated amortization
As at December 31, 2011
Amortization
Adjustment
Impairment losses(a)
As at December 31, 2012
Net book value as at
December 31, 2012
(a) As at December 31, 2012, the Company recognized an impairment of $40,597 in other expenses, due to the longer than anticipated pricing softness in
minor metals, and a significant reduction in market capitalization. The impairment expense was split $8,403 and $32,194 between the Electronic
Materials and Eco-Friendly Materials segments respectively (Note 9).
As at December 31, 2013, there was no indication that the intangible asset value had increased. Therefore, there is no
impairment reversal.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 9 – GOODWILL
$
-
124,910
(124,910)
As at December 31, 2011
Impairment losses
As at December 31, 2012
segments respectively.
The impairment in 2012 was split $14,450 and $110,460 between the Eco-Friendly Materials and Electronic Materials
Impairment of goodwill, intangible assets and property, plant and equipment
As at December 31, 2012, for the purposes of the annual assessment of impairment testing of property, plant and
equipment and intangible assets with finite useful lives, the Company determined that it has four cash-generating
units: (i) the solar sector; (ii) the germanium and related business; (iii) the remaining Electronic Materials segment;
and (iv) the Eco-Friendly Materials segment (which represent the same level used to test goodwill). The Company
concluded that there were no trigger events which would require an impairment calculation for the solar sector and the
germanium and related business. However, the Company has determined that an impairment calculation was
necessary on the remaining Electronic Materials segment, due mainly to lower than anticipated growth in the light-
emitting diode (LED) sector related to gallium metal and the lower than expected growth in the indium metal-related
sector. For the year ended December 31, 2012, the Company recorded an impairment of $8,403 related to its other
Electronic Materials cash-generating unit, which was all attributed to intangible assets.
Also, the Company completed the required annual impairment testing for goodwill at the CGU level of the
Eco-Friendly Materials and Electronic Materials segments, which represent the lowest level at which management
monitors goodwill. As at December 31, 2012, it was concluded there was impairment of goodwill in both the
Eco-Friendly Materials and Electronic Materials segments, following longer than anticipated pricing softness in
minor metals, and a significant reduction in the market capitalization of the Company. As a result, the year ended
December 31, 2012 includes $124,910 of goodwill impairment, of which $14,450 relates to the Eco-Friendly
Materials segment and $110,460 relates to the Electronic Materials segment. In addition, the year ended
December 31, 2012 includes $60,429 of impairment charges related to the excess of the carrying value of the Eco-
Friendly Materials CGU over its recoverable amount, of which $32,194 was attributed to intangible assets and
$28,235 to property, plant and equipment.
The fair value less costs to dispose was used to determine the recoverable amount of these CGUs by applying
discounted projections of future cash flows based on financial forecast approved by management. Average growth
rates of 4.5% were used for extrapolating the budget estimates over the years, in addition to a discount rate of 11.4%,
working capital requirements of 37.5% of sales and a weighted average income tax rate of 23.0%.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and
factors. As a result, there can be no assurance that the estimates and assumptions made for the purposes of the long-
lived assets and annual goodwill impairment test will prove to be an accurate prediction of the future. Events or
circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately
impact the estimated fair value of the Eco-Friendly Materials and Electronic Materials segments are, to name a few,
lower than expected anticipated growth and change in the industry related to the Company’s metals.
22
23
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
51
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 9 – GOODWILL
As at December 31, 2011
Impairment losses
As at December 31, 2012
$
124,910
(124,910)
-
The impairment in 2012 was split $14,450 and $110,460 between the Eco-Friendly Materials and Electronic Materials
segments respectively.
Impairment of goodwill, intangible assets and property, plant and equipment
As at December 31, 2012, for the purposes of the annual assessment of impairment testing of property, plant and
equipment and intangible assets with finite useful lives, the Company determined that it has four cash-generating
units: (i) the solar sector; (ii) the germanium and related business; (iii) the remaining Electronic Materials segment;
and (iv) the Eco-Friendly Materials segment (which represent the same level used to test goodwill). The Company
concluded that there were no trigger events which would require an impairment calculation for the solar sector and the
germanium and related business. However, the Company has determined that an impairment calculation was
necessary on the remaining Electronic Materials segment, due mainly to lower than anticipated growth in the light-
emitting diode (LED) sector related to gallium metal and the lower than expected growth in the indium metal-related
sector. For the year ended December 31, 2012, the Company recorded an impairment of $8,403 related to its other
Electronic Materials cash-generating unit, which was all attributed to intangible assets.
Also, the Company completed the required annual impairment testing for goodwill at the CGU level of the
Eco-Friendly Materials and Electronic Materials segments, which represent the lowest level at which management
monitors goodwill. As at December 31, 2012, it was concluded there was impairment of goodwill in both the
Eco-Friendly Materials and Electronic Materials segments, following longer than anticipated pricing softness in
minor metals, and a significant reduction in the market capitalization of the Company. As a result, the year ended
December 31, 2012 includes $124,910 of goodwill impairment, of which $14,450 relates to the Eco-Friendly
Materials segment and $110,460 relates to the Electronic Materials segment. In addition, the year ended
December 31, 2012 includes $60,429 of impairment charges related to the excess of the carrying value of the Eco-
Friendly Materials CGU over its recoverable amount, of which $32,194 was attributed to intangible assets and
$28,235 to property, plant and equipment.
The fair value less costs to dispose was used to determine the recoverable amount of these CGUs by applying
discounted projections of future cash flows based on financial forecast approved by management. Average growth
rates of 4.5% were used for extrapolating the budget estimates over the years, in addition to a discount rate of 11.4%,
working capital requirements of 37.5% of sales and a weighted average income tax rate of 23.0%.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and
factors. As a result, there can be no assurance that the estimates and assumptions made for the purposes of the long-
lived assets and annual goodwill impairment test will prove to be an accurate prediction of the future. Events or
circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately
impact the estimated fair value of the Eco-Friendly Materials and Electronic Materials segments are, to name a few,
lower than expected anticipated growth and change in the industry related to the Company’s metals.
23
52
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(Figures in thousands of United States dollars)
NOTE 10 – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
NOTE 13 – BANK INDEBTEDNESS, SHORT- AND LONG-TERM DEBT
Beginning of year
Reversal due to acquisition of remaining 50% interest(a)
Share of loss from joint ventures
End of year
2013
$
503
-
(59)
444
2012
$
1,513
(677)
(333)
503
a) Bank indebtedness and short-term debt
The Company has credit lines with financial institutions in China. These credit lines are guaranteed by certain
assets of the Company in China.
The Chinese renminbi (“RMB”) credit line bears interest at 105% to 110% of the RMB base rate.
(a) The Company acquired the remaining 50% interest of MCP Crystal and MCP Shenzhen for the total price of $0.6 million.
The following summarizes financial information of the Company’s share of assets, liabilities, revenue and expenses
of Ingal Stade GmbH (“Ingal”), in which the Company holds a 50% interest, and MCP Crystal and MCP Shenzhen, in
which the Company held a 50% interest until their acquisition in 2012.
Share of:
Assets
Liabilities
Revenue
Net earnings (loss)
NOTE 11 – OTHER ASSETS
Deferred costs
Deposit
Loan receivable from a related party (Note 25)
Other
Total other assets
NOTE 12 – TRADE AND ACCRUED LIABILITIES
Trade payables
Accrued liabilities
Total trade and accrued liabilities
Trade payables are non-interest bearing.
2013
$
4,767
4,285
2,428
(59)
2013
$
1,243
106
4,014
1,682
7,045
2013
$
54,556
10,460
65,016
2012
$
5,057
4,575
4,127
(333)
2012
$
2,676
1,500
3,958
1,114
9,248
2012
$
49,500
12,714
62,214
As at December 31, 2013
Contractual currency
Facility available
Amount drawn
As at December 31, 2013
Reporting currency
Facility available
Amount drawn
As at December 31, 2012
Contractual currency
Facility available
Amount drawn
As at December 31, 2012
Reporting currency
Facility available
Amount drawn
RMB
Total
155,000
63,911
155,000
63,911
US$
23,374
10,462
Total
23,374
10,462
RMB
Total
217,000
50,500
217,000
50,500
US$
34,438
8,014
Total
34,438
8,014
24
25
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
53
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 13 – BANK INDEBTEDNESS, SHORT- AND LONG-TERM DEBT
a) Bank indebtedness and short-term debt
The Company has credit lines with financial institutions in China. These credit lines are guaranteed by certain
assets of the Company in China.
The Chinese renminbi (“RMB”) credit line bears interest at 105% to 110% of the RMB base rate.
As at December 31, 2013
Contractual currency
Facility available
Amount drawn
As at December 31, 2013
Reporting currency
Facility available
Amount drawn
As at December 31, 2012
Contractual currency
Facility available
Amount drawn
As at December 31, 2012
Reporting currency
Facility available
Amount drawn
RMB
Total
155,000
63,911
155,000
63,911
US$
23,374
10,462
Total
23,374
10,462
RMB
Total
217,000
50,500
217,000
50,500
US$
34,438
8,014
Total
34,438
8,014
25
54
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
b) Long-term debt
Unsecured balance of purchase price and holdback to the former shareholders of MCP Group
SA for an amount of €2,500. The holdback is repayable in April 2014(a).
Senior secured revolving facility of $100,000 with a syndicate of banks, maturing in
August 2015(b)
Term loan, non-interest bearing, repayable under certain conditions, maturing in 2023. If the
loan has not been repaid in full by the end of 2023, the balance will be forgiven(c)
Debt, bearing interest at a rate of three-month LIBOR plus 3.00%, repaid in April 2013
Other loans
Less: Current portion of long-term debt
2013
$
2012
$
3,448
68,020
733
-
584
72,785
4,439
68,346
65,928
72,213
797
769
718
140,425
29,527
110,898
(a) The Company entered into a full and final settlement agreement with Florinvest SA, Heresford Ltd., Metals Corp., SCRL and SRIW SA (the
“Vendors”), which are all former shareholders of MCP Group SA (“MCP”), in relation to the dispute previously announced by the Company.
The Company acquired MCP from the Vendors on April 11, 2011, from which remained a balance of the purchase price and accrued interest. The
Company filed a counterclaim in arbitration proceedings against the Vendors, as it estimated that the Vendors had breached the representations and
warranties of the acquisition agreement. Other civil proceedings were then commenced by the Company and the Vendors before reaching a settlement.
This full and final settlement entails: (i) a final adjustment to the purchase price of MCP through the final payment by the Company of an all-inclusive
lump-sum amount of €17.5 million to the Vendors from which €15 million was paid in June 2013, with the balance to be paid on April 9, 2014; (ii) the
withdrawal and cancellation of all arbitration and civil proceedings; and (iii) the granting of mutual releases and discharges.
In June 2013, the Company recorded a gain of $45,188 related to this settlement coming from the total amount due under the promissory note, holdback
and accrued interest less the total all-inclusive amount of €17.5 million and related expenses.
(b)
In March 2013, the Company signed an amendment to its senior secured multi-currency revolving credit facility, under which the facility was reduced to
$100,000 starting March 31, 2013. The amendment established new financial covenants for the year 2013 and maintained the original maturity (August
2015). The interest rate was changed and is linked to the Debt/EBITDA ratio, and can vary from LIBOR banker’s acceptance rate or EURIBOR plus
3.00% to 4.50% or US base rate or prime rate plus 2.00% to 3.50%. Standby fees from 0.75% to 1.125% are paid on the unused portion. At any time, the
Company has the option to request that the credit facility be expanded to $140,000 through the exercise of an additional $40,000 accordion feature,
subject to review and approval by the lenders. This revolving credit facility can be drawn in US dollars, Canadian dollars or Euros. The amount drawn as
at December 31, 2013 is in US dollars. The amount drawn as at December 31, 2012 was $1,052 in Canadian dollars and $71,161 in US dollars. The
facility is subject to covenants. As at December 31, 2013, the Company has met all covenants.
(c) The term loan has been reclassified as short-term debt since these amounts could become payable on demand.
Under the terms of its credit facility, the Company is required to satisfy certain restrictive covenants as to financial
ratios, including a maximum drawing limit on the credit facility of $80,000 from August 16, 2013 to February 15,
2014. In order to comply with these covenants, the Company has prepared and will need to execute on its budgeted
EBITDA and cash flow estimates. Management believes that the assumptions used by the Company in preparing its
budgets are reasonable and that it is not likely that the financial covenants, including the addition of a new temporary
maximum withdrawal limit on the credit facility, will be violated in the next 12 months.
NOTE 14 – RETIREMENT BENEFIT OBLIGATION
The Company operates a defined pension plan in Germany based on employee pensionable earnings and length of
service. Former general and senior managers had been provided with direct benefit commitments. Employees had
been provided with indirect benefit commitments via the Unterstützungseinrichtung der HEK GmbH e.V. Such
promises had been made for employees with entry date of December 31, 1993 or earlier.
Present value of unfunded obligations
2013
$
15,887
2012
$
16,667
26
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Movement in the defined benefit obligation is as follows:
2013
$
16,667
94
509
689
(734)
(1,338)
15,887
2013
3.4%
2.0%
2.0%
2012
$
12,850
73
627
(525)
(398)
4,040
16,667
2012
3.1%
2.0%
2.0%
Beginning of year
Current service cost
Interest cost
Effect of foreign exchange
Benefits paid
Actuarial losses (gains)
End of year
Discount rate
Salary growth rate
Pension growth rate
Discount rate
Salary growth rate
Pension growth rate
Life expectancy
Pension liability
At December 31, 2013
Pension liability
At December 31, 2012
The principal actuarial assumptions as at year ended were as follows:
The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each plan
of a change in an assumption are weighted proportionately to the total plan obligations to determine the total impact
for each assumption presented.
Impact on defined benefit obligation
Increase in
Decrease in
Change in
assumption
0.50%
0.50%
0.50%
liability
(6.26)%
0.52%
5.29%
Increase
by 1 year
liability
6.97%
(0.49)%
(4.87)%
Decrease
by 1 year
in assumption
in assumption
3.52%
(3.16)%
The weighted average duration of the defined benefit obligation is 13.50 years (2012 – 13.92 years).
Expected maturity analysis of undiscounted pension liability:
Less than a year
5 years
Over 5 years
Total
Between 1 and
762
710
3,196
2,980
22,792
26,750
23,690
27,380
27
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
55
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Movement in the defined benefit obligation is as follows:
Beginning of year
Current service cost
Interest cost
Effect of foreign exchange
Benefits paid
Actuarial losses (gains)
End of year
The principal actuarial assumptions as at year ended were as follows:
Discount rate
Salary growth rate
Pension growth rate
2013
$
16,667
94
509
689
(734)
(1,338)
15,887
2013
3.4%
2.0%
2.0%
2012
$
12,850
73
627
(525)
(398)
4,040
16,667
2012
3.1%
2.0%
2.0%
The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each plan
of a change in an assumption are weighted proportionately to the total plan obligations to determine the total impact
for each assumption presented.
Discount rate
Salary growth rate
Pension growth rate
Life expectancy
Impact on defined benefit obligation
Change in
assumption
0.50%
0.50%
0.50%
Increase in
liability
(6.26)%
0.52%
5.29%
Decrease in
liability
6.97%
(0.49)%
(4.87)%
Increase
by 1 year
in assumption
3.52%
Decrease
by 1 year
in assumption
(3.16)%
The weighted average duration of the defined benefit obligation is 13.50 years (2012 – 13.92 years).
Expected maturity analysis of undiscounted pension liability:
Pension liability
At December 31, 2013
Pension liability
At December 31, 2012
Less than a year
Between 1 and
5 years
Over 5 years
Total
762
710
3,196
2,980
22,792
26,750
23,690
27,380
27
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets:
To be recovered within 12 months
To be recovered after 12 months
Deferred tax liabilities:
To be recovered within 12 months
To be recovered after 12 months
Deferred tax assets (liabilities) – (net)
Movement in the deferred income tax amounts is as follows:
Beginning of year
Tax charge relating to components of other comprehensive income (loss)
Charged to consolidated statements of earnings (loss)
Tax charged directly to equity
Retroactive remeasurements of retirement benefit obligation (Note 4)
End of year
2013
$
2012
(Note 4)
$
2,313
11,074
1,685
10,965
-
(1,600)
11,787
-
(2,632)
10,018
2013
$
10,018
(656)
2,425
-
-
11,787
2012
(Note 4)
$
(16,437)
137
24,464
436
1,418
10,018
56
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 15 – OTHER LIABILITIES
At December 31, 2011
Utilized
At December 31, 2012 – non-current liabilities
Additional provisions
Utilized
As at December 31, 2013 – non-current liabilities
NOTE 16 – INCOME TAX
Current tax:
Current tax on net earnings (loss) for the year
Adjustment in respect of prior years
Total current tax
Deferred tax:
Recognition and reversal of temporary differences
Total deferred tax
Income tax expense (recovery)
Site
provision
$
884
(884)
-
-
-
-
Deferred
revenues
$
1,060
(1,050)
10
215
(161)
64
Other
$
2,227
(677)
1,550
224
(774)
1,000
2013
$
4,744
(406)
4,338
Total
$
4,171
(2,611)
1,560
439
(935)
1,064
2012
$
1,167
(924)
243
(2,425)
(2,425)
1,913
(24,464)
(24,464)
(24,221)
The tax on the Company’s profit before tax differs from the amount that would arise using the applicable federal and
provincial statutory tax rate applicable to profits of the consolidated entities as follows:
Tax on earnings (loss) at local statutory rate
Increase (decrease) resulting from:
Unrecorded losses carried forward
Non-deductible expenses (non-taxable gain) for tax
purposes(a)
Non-deductible impairment of goodwill
Benefits arising from a financing structure
Non-taxable foreign exchange
Effect of difference of foreign tax rates compared to
Canadian tax rates
Prior year adjustments
Other
Total income tax expense (recovery)
$
12,038
1,405
(11,044)
-
(938)
171
527
(162)
(84)
1,913
2013
%
26.9
3.2
(24.7)
-
(2.1)
0.4
1.1
(0.3)
(0.2)
4.3
$
(67,807)
7,319
1,718
33,600
(1,030)
(178)
530
1,344
283
(24,221)
2012
%
26.9
(2.9)
(0.7)
(13.4)
0.4
0.1
(0.2)
(0.5)
(0.1)
9.6
(a) The effective tax rate for the year ended December 31, 2013, is mainly affected by the gain related to the settlement of the purchase price of MCP, which
decreases the effective rate by 26.33%.
28
29
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
57
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets:
To be recovered within 12 months
To be recovered after 12 months
Deferred tax liabilities:
To be recovered within 12 months
To be recovered after 12 months
Deferred tax assets (liabilities) – (net)
Movement in the deferred income tax amounts is as follows:
Beginning of year
Tax charge relating to components of other comprehensive income (loss)
Charged to consolidated statements of earnings (loss)
Tax charged directly to equity
Retroactive remeasurements of retirement benefit obligation (Note 4)
End of year
2013
$
2012
(Note 4)
$
2,313
11,074
1,685
10,965
-
(1,600)
11,787
-
(2,632)
10,018
2013
$
10,018
(656)
2,425
-
-
11,787
2012
(Note 4)
$
(16,437)
137
24,464
436
1,418
10,018
29
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D
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
0
3
(Figures in thousands of United States dollars)
The deferred tax assets of $13,387, as reported on the consolidated statements of financial position, are dependent on
projection of future taxable profits for entities that have suffered a loss in the current period.
Deferred income tax liabilities have not been recognized for the withholding tax and taxes that would be payable on
the unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled
$40,448 as at 2013 (2012 – $43,364).
As at December 31, 2013, the Company had the following operating tax losses available for carryforward for which no
deferred tax benefit has been recorded in the account.
$
25,574
17,388
8,716
153
355
7,172
59,358
Expiry
No limit
No limit
2031–2033
No limit
2015–2016
2018-2019
United Kingdom
Belgium
United States
Malaysia
Peru
China
Total
Fair value
NOTE 17 – CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
All financial assets classified as loans and receivables, as well as financial liabilities classified as other liabilities, are
initially measured at their fair values and subsequently at their amortized cost using the effective interest method. All
financial assets and financial liabilities classified as held for trading are measured at their fair values. Gains and losses
related to periodic revaluations are recorded in net earnings (loss).
The Company has determined that the carrying value of its short-term financial assets and financial liabilities,
including cash and cash equivalents, temporary investments, restricted, accounts receivable, bank indebtedness and
short-term debt and trade and accrued liabilities approximates their carrying value due to the short-term maturities of
these instruments.
As at December 31, 2013 and 2012, the fair value of long-term debt approximates its carrying value and is calculated
using the present value of future cash flows at the year-end rate for similar debt with the same terms and maturities.
The following table presents financial assets and financial liabilities measured at fair value in the consolidated
statements of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and
financial liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial
assets and financial liabilities. The fair value hierarchy has the following levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
31
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
59
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The deferred tax assets of $13,387, as reported on the consolidated statements of financial position, are dependent on
projection of future taxable profits for entities that have suffered a loss in the current period.
Deferred income tax liabilities have not been recognized for the withholding tax and taxes that would be payable on
the unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled
$40,448 as at 2013 (2012 – $43,364).
As at December 31, 2013, the Company had the following operating tax losses available for carryforward for which no
deferred tax benefit has been recorded in the account.
United Kingdom
Belgium
United States
Malaysia
Peru
China
Total
$
25,574
17,388
8,716
153
355
7,172
59,358
Expiry
No limit
No limit
2031–2033
No limit
2015–2016
2018-2019
NOTE 17 – CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Fair value
All financial assets classified as loans and receivables, as well as financial liabilities classified as other liabilities, are
initially measured at their fair values and subsequently at their amortized cost using the effective interest method. All
financial assets and financial liabilities classified as held for trading are measured at their fair values. Gains and losses
related to periodic revaluations are recorded in net earnings (loss).
The Company has determined that the carrying value of its short-term financial assets and financial liabilities,
including cash and cash equivalents, temporary investments, restricted, accounts receivable, bank indebtedness and
short-term debt and trade and accrued liabilities approximates their carrying value due to the short-term maturities of
these instruments.
As at December 31, 2013 and 2012, the fair value of long-term debt approximates its carrying value and is calculated
using the present value of future cash flows at the year-end rate for similar debt with the same terms and maturities.
The following table presents financial assets and financial liabilities measured at fair value in the consolidated
statements of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and
financial liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial
assets and financial liabilities. The fair value hierarchy has the following levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
31
60
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(Figures in thousands of United States dollars)
The level in which the financial asset or financial liability is classified is determined based on the lowest level of
significant input to the fair value measurement. The financial assets and financial liabilities measured at fair value
in the consolidated statements of financial position are grouped into the fair value hierarchy as follows as at
December 31:
December 31, 2013
Financial assets (liabilities)
Interest rate swap
Foreign exchange forward contracts
Derivative forward contracts
Warrants
Total
December 31, 2012
Financial assets (liabilities)
Interest rate swap
Foreign exchange forward contracts
Options
Warrants
Total
Derivative assets and liabilities
Level 1
$
-
-
-
(181)
(181)
Level 1
$
-
-
-
(1,165)
(1,165)
Level 2
$
(2,588)
(1,468)
955
-
(3,101)
Level 2
$
(3,870)
(1,080)
(239)
-
(5,189)
The Company currently has derivative financial instruments which relate to the following:
Interest rate swap to fix the interest rate on part of its revolving credit facility;
Foreign exchange forward contracts to sell US dollars in exchange for Euros or Canadian dollars; and to sell
Euros in exchange for US dollars, related to hedge strategies;
Derivative forward contracts to sell precious metals at a fixed price; and
Warrants.
Assets (liabilities)
Interest rate swap(a)
Foreign exchange forward contracts(b)
Options
Derivative forward contracts(c)
Warrants(d)
Total
2013
$
(2,588)
(1,468)
-
955
(181)
(3,282)
2012
$
(3,870)
(1,080)
(239)
-
(1,165)
(6,354)
(a) The interest rate swap has a nominal value of $100,000 commencing in January 2013 and ending in August 2015. Under this swap, the Company will pay
a fixed interest rate of 1.82%. The Company received $1,700 when entering into this forward starting interest rate swap in September 2011. This amount
forms part of the fair value that is recorded as a long-term liability. The Company initially designated this contract as a cash flow hedge of anticipated
variable payments of interest on a nominal amount of $100,000 of the revolving line of credit, and the change in its fair value was recorded in the
consolidated statements of comprehensive income (loss). On September 4, 2012, the Company repaid part of its credit facility and de-designated $30,000
of nominal value of the swap. The Company reclassified the estimated fair value of this portion of the swap from accumulated other comprehensive
income to unrealized loss on de-designation within the consolidated statement of earnings (loss).
The Company assessed the effectiveness of the cash flow hedge as at December 31, 2013.
(b) The foreign exchange contracts are to cover projected Euro surpluses and Canadian dollar requirements. As of December 31, 2013, the contracts are as
follows:
(cid:127) The Company entered into twelve monthly foreign exchange collar contracts in June 2013, effective from July 2013 to June 2014, to sell US dollars in
exchange for Canadian dollars. The six remaining contracts covering January to June 2014 were amended in December 2013. Under these collars, if
the US$/CA$ rate is between 0.9950 and 1.0700, a monthly nominal amount of $750 is exchanged at the rate of 1.0700. If the US$/CA$ rate is higher
than 1.0700, a monthly nominal amount of $1,500 is exchanged at the rate of 1.0700. If the US$/CA$ rate is below 0.9950, no nominal amount is
exchanged and the monthly contract is terminated.
(cid:127) The Company entered into six monthly foreign exchange collar contracts in December 2013, effective from July 2014 to December 2014, to sell US
dollars in exchange for Canadian dollars. Under these collars, if the US$/CA$ rate is below $1.0620, a monthly nominal amount of $750 is exchanged
at the rate of 1.0620. If the US$/CA$ rate is between 1.0620 and 1.1100, no nominal amount is exchanged. If the US$/CA$ rate is above 1.1100, a
monthly nominal amount of $1,500 is exchanged at the rate of 1.0700.
(cid:127) The Company entered into twelve monthly foreign exchange collar contracts in October 2013, effective from January 2014 to December 2014, to sell
Euro in exchange for US dollars. Under these contracts, if the Euro/US$ rate is between 1.2750 and 1.4025, a monthly nominal amount of $3,000 is
exchanged at the rate of 1.4025. If the Euro/US$ rate is higher than 1.4025, a monthly nominal amount of $6,000 is exchanged at the rate of 1.4025. If
the Euro/US$ rate is below 1.275, no nominal amount is exchanged, and the monthly contract is terminated.
(cid:127) The Company entered into a foreign exchange synthetic collar contract in December 2013, maturing on December 15, 2014, to sell Euro in exchange
for US dollars, in order to cover its expected excess Euro cash flows in the first quarter of fiscal year 2015. Under this contract, the Company bought a
put for 12,000 Euros at 1.3025 Euro/US$, and sold a call on 18,000 Euros at 1.3625 Euro/US$.
(c)
In March 2013, the Company entered into derivative forward contracts to sell silver metal at fixed price at $30.43 per ounce as at March 4, 2014 to cover
purchases of materials containing precious metal (silver). The nominal value of the contracts was approximately $2,600 at inception. Gains or losses on
these derivative forward contracts are recorded as part of the cost of sales.
(d) On June 6, 2012, the Company issued 6,451,807 warrants (Note 18), which expire on June 6, 2014. Gains or losses on these warrants are recorded in
foreign exchange and derivative loss (gain).
The following methods were used to estimate fair value:
(cid:127) Interest rate swap: Estimated by discounting expected future cash flows using period-end interest rate yield curves;
(cid:127) Foreign exchange forward contracts: Estimated by discounting expected future cash flows using period-end currency rate;
(cid:127) Derivative forward contracts: Estimated by discounting expected future cash flows using period-end market price of the precious metal (silver);
(cid:127) Options: Standard Black-Scholes model using period-end market data as input; and
(cid:127) Warrants: Fair value based on the TSX closing price. The ticker symbol of the publicly traded warrants is VNP.WT.
NOTE 18 – ISSUANCE OF UNITS
On June 6, 2012, the Company closed a placement for total gross proceeds of CA$40,001 (US$38,485). The financing
consisted of the issuance of 12,903,613 units at a price of CA$3.10 per unit. Each unit consisted of one common share
and one–half of a common share purchase warrant, with each such whole warrant entitling the holder to subscribe for
one additional common share at a price of CA$5.00 until June 6, 2014.
The initial fair value of the 6,451,807 warrants was estimated using the Black-Scholes option pricing model based on the
following assumptions: risk-free interest rate of 1.25%, average expected volatility of 40%, expected dividend per share
of nil and expected life of warrants of two years. As a result, the fair value of the common share purchase warrants was
estimated at CA$1,419 (US$1,366) after a pro rata allocation of the fair value of the units’ components.
This amount was allocated to warrants, and the balance of CA$38,582 (US$37,119) to share capital. The warrants were
recorded as a derivative liability. In accordance with IFRS, an obligation to issue shares for a price that is not fixed in
the Company’s functional currency and that does not qualify as a rights offering to all shareholders of that class must
be classified as a derivative liability and measured at fair value, with changes recognized in the consolidated
statements of earnings (loss) as they arise.
32
33
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
61
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(b) The foreign exchange contracts are to cover projected Euro surpluses and Canadian dollar requirements. As of December 31, 2013, the contracts are as
follows:
(cid:127) The Company entered into twelve monthly foreign exchange collar contracts in June 2013, effective from July 2013 to June 2014, to sell US dollars in
exchange for Canadian dollars. The six remaining contracts covering January to June 2014 were amended in December 2013. Under these collars, if
the US$/CA$ rate is between 0.9950 and 1.0700, a monthly nominal amount of $750 is exchanged at the rate of 1.0700. If the US$/CA$ rate is higher
than 1.0700, a monthly nominal amount of $1,500 is exchanged at the rate of 1.0700. If the US$/CA$ rate is below 0.9950, no nominal amount is
exchanged and the monthly contract is terminated.
(cid:127) The Company entered into six monthly foreign exchange collar contracts in December 2013, effective from July 2014 to December 2014, to sell US
dollars in exchange for Canadian dollars. Under these collars, if the US$/CA$ rate is below $1.0620, a monthly nominal amount of $750 is exchanged
at the rate of 1.0620. If the US$/CA$ rate is between 1.0620 and 1.1100, no nominal amount is exchanged. If the US$/CA$ rate is above 1.1100, a
monthly nominal amount of $1,500 is exchanged at the rate of 1.0700.
(cid:127) The Company entered into twelve monthly foreign exchange collar contracts in October 2013, effective from January 2014 to December 2014, to sell
Euro in exchange for US dollars. Under these contracts, if the Euro/US$ rate is between 1.2750 and 1.4025, a monthly nominal amount of $3,000 is
exchanged at the rate of 1.4025. If the Euro/US$ rate is higher than 1.4025, a monthly nominal amount of $6,000 is exchanged at the rate of 1.4025. If
the Euro/US$ rate is below 1.275, no nominal amount is exchanged, and the monthly contract is terminated.
(cid:127) The Company entered into a foreign exchange synthetic collar contract in December 2013, maturing on December 15, 2014, to sell Euro in exchange
for US dollars, in order to cover its expected excess Euro cash flows in the first quarter of fiscal year 2015. Under this contract, the Company bought a
put for 12,000 Euros at 1.3025 Euro/US$, and sold a call on 18,000 Euros at 1.3625 Euro/US$.
(c)
In March 2013, the Company entered into derivative forward contracts to sell silver metal at fixed price at $30.43 per ounce as at March 4, 2014 to cover
purchases of materials containing precious metal (silver). The nominal value of the contracts was approximately $2,600 at inception. Gains or losses on
these derivative forward contracts are recorded as part of the cost of sales.
(d) On June 6, 2012, the Company issued 6,451,807 warrants (Note 18), which expire on June 6, 2014. Gains or losses on these warrants are recorded in
foreign exchange and derivative loss (gain).
The following methods were used to estimate fair value:
(cid:127) Interest rate swap: Estimated by discounting expected future cash flows using period-end interest rate yield curves;
(cid:127) Foreign exchange forward contracts: Estimated by discounting expected future cash flows using period-end currency rate;
(cid:127) Derivative forward contracts: Estimated by discounting expected future cash flows using period-end market price of the precious metal (silver);
(cid:127) Options: Standard Black-Scholes model using period-end market data as input; and
(cid:127) Warrants: Fair value based on the TSX closing price. The ticker symbol of the publicly traded warrants is VNP.WT.
NOTE 18 – ISSUANCE OF UNITS
On June 6, 2012, the Company closed a placement for total gross proceeds of CA$40,001 (US$38,485). The financing
consisted of the issuance of 12,903,613 units at a price of CA$3.10 per unit. Each unit consisted of one common share
and one–half of a common share purchase warrant, with each such whole warrant entitling the holder to subscribe for
one additional common share at a price of CA$5.00 until June 6, 2014.
The initial fair value of the 6,451,807 warrants was estimated using the Black-Scholes option pricing model based on the
following assumptions: risk-free interest rate of 1.25%, average expected volatility of 40%, expected dividend per share
of nil and expected life of warrants of two years. As a result, the fair value of the common share purchase warrants was
estimated at CA$1,419 (US$1,366) after a pro rata allocation of the fair value of the units’ components.
This amount was allocated to warrants, and the balance of CA$38,582 (US$37,119) to share capital. The warrants were
recorded as a derivative liability. In accordance with IFRS, an obligation to issue shares for a price that is not fixed in
the Company’s functional currency and that does not qualify as a rights offering to all shareholders of that class must
be classified as a derivative liability and measured at fair value, with changes recognized in the consolidated
statements of earnings (loss) as they arise.
33
As at December 31, 2013
Total assets excluding the following:
Investment accounted for using the equity method
Deferred tax asset
As at December 31, 2012
Total assets excluding the following:
Investment accounted for using the equity method
Deferred tax asset
Eco-Friendly
Materials
Electronic
Materials
Corporate
and unallocated
$
-
$
-
154,309
9,451
$
189,397
444
3,936
162,073
5,291
$
204,578
503
5,996
7,703
$
-
-
$
-
5,592
1,363
Total
$
351,409
444
13,387
Total
$
372,243
503
12,650
Eco-Friendly
Materials
Electronic
Materials
Corporate
and unallocated
(1) Earnings (loss) before income tax, depreciation and amortization and the following: interest on long-term debt and other interest expense,
litigation and restructuring costs, impairment of inventories, reversal of impairment of property, plant and equipment, impairment of property,
plant and equipment, intangible assets and goodwill, acquisition-related costs, foreign exchange and derivative loss (gain) and settlement of the
purchase price of MCP.
(2) The foreign exchange and derivative loss (gain) excludes the loss (gain) on foreign exchange forward contracts on US$/CA$ recorded as part of
wages and salaries and the loss (gain) on derivative forward contracts to sell silver metal recorded as part of cost of goods sold.
(3) The total revenues of $42,416 from the recycling and trading of complex materials is allocated to the Eco-Friendly materials and Electronic
(4) The total adjusted EBITDA of $8,644 from the recycling and trading of complex materials is allocated to the Eco-Friendly materials and
The geographic distribution of the Company’s revenues based on the location of the customers for the years ended
December 31, 2013 and 2012, and the identifiable non-current assets as at December 31, 2013 and 2012 are
62
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(Figures in thousands of United States dollars)
The total issuance costs of the units amounting to $1,185 (net of income tax of $436) was attributed to retained
earnings.
Number
12,903,613
Amount
CA$
40,001
(1,419)
38,582
Amount
US$
38,485
(1,366)
37,119
Units issued for cash
Less: Warrants
Net amount attributable to share capital
No issuance of units in 2013.
NOTE 19 – OPERATING SEGMENTS
The following tables summarize the information reviewed by the Company’s management when measuring
performance:
For the year ended December 31, 2013
Segment revenues
Adjusted EBITDA(1)
Interest on long-term debt and other interest expense
Litigation and restructuring costs
Impairment of inventories (Note 6)
Gain related to the settlement of the
purchase price of MCP
Foreign exchange and derivative loss (gain)(2)
Depreciation and amortization
Earnings before income tax
Capital expenditures
For the year ended December 31, 2012
Segment revenues
Adjusted EBITDA(1)
Interest on long-term debt and other interest expense
Litigation and restructuring costs
Impairment of inventories (Note 6)
Impairment of property, plant and equipment (Note 7)
Impairment of intangible assets (Note 8)
Impairment of goodwill (Note 9)
Foreign exchange and derivative loss (gain)(2)
Depreciation and amortization
Reversal of impairment of property, plant and equipment
(Note 7)
Loss before income tax
Capital expenditures
Eco-Friendly
Materials
$
Electronic
Materials
$
Corporate
and unallocated
$
279,644(3)
16,285(4)
-
1,080
10,032
-
-
3,957
1,216
7,126
179,368(3)
22,466(4)
-
441
150
-
-
6,569
15,306
4,180
-
(8,376)
8,524
2,547
-
(45,188)
(2,590)
160
28,171
-
Eco-Friendly
Materials
$
Electronic
Materials
$
Corporate
and unallocated
$
319,662
18,632
-
1,325
26,835
28,235
32,194
14,450
-
11,470
232,013
34,653
-
1,456
23,750
11,004
8,403
110,460
-
9,563
-
(95,877)
7,445
(932)
(129,051)
8,830
-
(15,429)
8,828
-
-
-
-
-
2,759
126
-
(27,142)
1,389
Total
$
459,012
30,375
8,524
4,068
10,182
(45,188)
(2,590)
10,686
44,693
11,306
Total
$
551,675
37,856
8,828
2,781
50,585
39,239
40,597
124,910
2,759
21,159
(932)
(252,070)
17,664
34
materials segments.
Electronic materials segments.
summarized as follows:
Revenues
Asia
China
Japan
Others
Americas
Other
Europe
United States
France
Germany
United Kingdom
Other
Other
Total
Asia
Hong Kong
Other
United States
Canada
Europe
Belgium
Germany
Other
Total
Non-current assets as at
2013
$
50,578
7,633
94,274
82,764
19,982
27,668
66,611
22,628
79,264
7,610
459,012
2013
$
8,510
11,295
6,634
20,552
11,874
28,635
6,133
93,633
2012
$
72,672
10,425
106,575
102,344
21,231
33,067
90,455
27,021
84,097
3,788
551,675
2012
$
10,801
9,543
6,058
27,133
10,582
23,755
6,087
93,959
35
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
63
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
As at December 31, 2013
Total assets excluding the following:
Investment accounted for using the equity method
Deferred tax asset
As at December 31, 2012
Total assets excluding the following:
Investment accounted for using the equity method
Deferred tax asset
Eco-Friendly
Materials
$
154,309
-
9,451
Electronic
Materials
$
189,397
444
3,936
Corporate
and unallocated
$
7,703
-
-
Eco-Friendly
Materials
$
162,073
-
5,291
Electronic
Materials
$
204,578
503
5,996
Corporate
and unallocated
$
5,592
-
1,363
Total
$
351,409
444
13,387
Total
$
372,243
503
12,650
(1) Earnings (loss) before income tax, depreciation and amortization and the following: interest on long-term debt and other interest expense,
litigation and restructuring costs, impairment of inventories, reversal of impairment of property, plant and equipment, impairment of property,
plant and equipment, intangible assets and goodwill, acquisition-related costs, foreign exchange and derivative loss (gain) and settlement of the
purchase price of MCP.
(2) The foreign exchange and derivative loss (gain) excludes the loss (gain) on foreign exchange forward contracts on US$/CA$ recorded as part of
wages and salaries and the loss (gain) on derivative forward contracts to sell silver metal recorded as part of cost of goods sold.
(3) The total revenues of $42,416 from the recycling and trading of complex materials is allocated to the Eco-Friendly materials and Electronic
materials segments.
(4) The total adjusted EBITDA of $8,644 from the recycling and trading of complex materials is allocated to the Eco-Friendly materials and
Electronic materials segments.
The geographic distribution of the Company’s revenues based on the location of the customers for the years ended
December 31, 2013 and 2012, and the identifiable non-current assets as at December 31, 2013 and 2012 are
summarized as follows:
Revenues
Asia
China
Japan
Others
Americas
United States
Other
Europe
France
Germany
United Kingdom
Other
Other
Total
Non-current assets as at
Asia
Hong Kong
Other
United States
Canada
Europe
Belgium
Germany
Other
Total
2013
$
50,578
7,633
94,274
82,764
19,982
27,668
66,611
22,628
79,264
7,610
459,012
2013
$
8,510
11,295
6,634
20,552
11,874
28,635
6,133
93,633
2012
$
72,672
10,425
106,575
102,344
21,231
33,067
90,455
27,021
84,097
3,788
551,675
2012
$
10,801
9,543
6,058
27,133
10,582
23,755
6,087
93,959
35
64
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
For the year ended December 31, 2013, one customer represented approximately 11.58 % (2012 – 13.3%) of the
revenues, and is included in the Electronic Materials revenues.
NOTE 20 – SUPPLEMENTAL CASH FLOW INFORMATION
Net change in non-cash working capital balances related to operations consists of the following:
Decrease (increase) in assets:
Accounts receivable
Inventories
Income tax receivable
Other current assets
Increase (decrease) in liabilities:
Trade and accrued liabilities
Income tax payable
Net change
The consolidated statements of cash flows exclude or include the following transactions:
a) Excluded additions unpaid at end of year:
Additions to property, plant and equipment
b) Included additions unpaid at beginning of year:
Additions to property, plant and equipment
NOTE 21 – SHARE CAPITAL
2013
$
28,104
(14,263)
10,235
466
1,945
1,443
27,930
2013
$
1,637
1,394
2012
$
(10,549)
95,615
(7,816)
1,221
(3,915)
1,863
76,419
2012
$
1,394
190
Authorized:
An unlimited number of common shares, participating, with no par value, entitling the holder to one vote per
share
An unlimited number of preferred shares, issuable in one or more series with specific terms, privileges and
restrictions to be determined for each class by the Board of Directors. As at December 31, 2013 and 2012, no
preferred shares were issued
None of the Company’s shares is held by any subsidiary or joint venture.
36
37
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 22 – EARNINGS (LOSS) PER SHARE
share.
Numerators
Net earnings (loss) attributable to equity holders of 5N Plus Inc.
Net earnings (loss) for the year
The following table reconciles the numerators and denominators used for the computation of basic and diluted loss per
2013
$
42,661
42,780
2012
$
(227,738)
(227,849)
2013
2012
83,908,269
78,352,364
67,123
-
83,975,392
78,352,364
A total number of 11,629,951 stock options and a total number of 6,451,807 warrants were excluded from the
computation of diluted loss per share due to their anti-dilutive effect because of the Company’s stock price for the year
ended December 31, 2013.
Given the Company’s stock price for the year ended December 31, 2012 and given the consolidated net loss incurred
by the Company for that period, stock options and warrants were excluded from the computation of diluted loss per
share due to their anti-dilutive effect.
Weighted average number of shares outstanding – Basic
Effect of dilutive securities
Weighted average number of shares outstanding – Diluted
NOTE 23 – SHARE-BASED COMPENSATION
As at December 31, 2013, the Company had the following share-based compensation plans.
Stock option plan
On April 11, 2011, the Company adopted a new stock option plan replacing the previous plan (the “Old Plan”), in
place since October 2007, with the same features as the Old Plan with the exception of a maximum number of options
granted which cannot exceed 5,000,000. The aggregate number of shares which could be issued upon the exercise of
options granted under the Old Plan could not exceed 10% of the issued shares of the Company at the time of granting
the options. Options granted under the Old Plan may be exercised during a period not exceeding ten years from the
date of grant. The stock options outstanding as at December 31, 2013 may be exercised during a period not exceeding
six years from their date of grant. Options vest at a rate of 25% (100% for directors) per year, beginning one year
following the grant date of the options. Any unexercised options will expire one month after the date a beneficiary
ceases to be an employee, director or officer and one year for retired directors.
Restricted share unit incentive plan
On June 7, 2010, the Company adopted a Restricted Share Unit (“RSU”) Plan to complement the stock option plan.
The RSU Plan enables the Company to award to eligible participants phantom share units that vest after a three-year
period. The RSU is settled in cash and is recorded as a liability. The measurement of the compensation expense and
corresponding liability for these awards is based on the fair value of the award, and is recorded as a charge to selling,
general and administrative (“SG&A”) expenses over the vesting period of the award. At the end of each financial
period, changes in the Company’s payment obligation due to changes in the market value of the common shares on
the TSX are recorded as a charge to SG&A expenses. For the year ended December 31, 2013, the Company granted
190,000 RSUs (2012 – 33,978), 26,720 of RSUs were paid (2012 – nil) and there were no cancellations (2012 –
12,385). As at December 31, 2013, 242,760 RSUs were outstanding (2012 – 79,480).
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
65
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 22 – EARNINGS (LOSS) PER SHARE
The following table reconciles the numerators and denominators used for the computation of basic and diluted loss per
share.
Numerators
Net earnings (loss) attributable to equity holders of 5N Plus Inc.
Net earnings (loss) for the year
2013
$
42,661
42,780
2012
$
(227,738)
(227,849)
A total number of 11,629,951 stock options and a total number of 6,451,807 warrants were excluded from the
computation of diluted loss per share due to their anti-dilutive effect because of the Company’s stock price for the year
ended December 31, 2013.
Given the Company’s stock price for the year ended December 31, 2012 and given the consolidated net loss incurred
by the Company for that period, stock options and warrants were excluded from the computation of diluted loss per
share due to their anti-dilutive effect.
Weighted average number of shares outstanding – Basic
Effect of dilutive securities
Weighted average number of shares outstanding – Diluted
2013
2012
83,908,269
78,352,364
67,123
-
83,975,392
78,352,364
NOTE 23 – SHARE-BASED COMPENSATION
As at December 31, 2013, the Company had the following share-based compensation plans.
Stock option plan
On April 11, 2011, the Company adopted a new stock option plan replacing the previous plan (the “Old Plan”), in
place since October 2007, with the same features as the Old Plan with the exception of a maximum number of options
granted which cannot exceed 5,000,000. The aggregate number of shares which could be issued upon the exercise of
options granted under the Old Plan could not exceed 10% of the issued shares of the Company at the time of granting
the options. Options granted under the Old Plan may be exercised during a period not exceeding ten years from the
date of grant. The stock options outstanding as at December 31, 2013 may be exercised during a period not exceeding
six years from their date of grant. Options vest at a rate of 25% (100% for directors) per year, beginning one year
following the grant date of the options. Any unexercised options will expire one month after the date a beneficiary
ceases to be an employee, director or officer and one year for retired directors.
Restricted share unit incentive plan
On June 7, 2010, the Company adopted a Restricted Share Unit (“RSU”) Plan to complement the stock option plan.
The RSU Plan enables the Company to award to eligible participants phantom share units that vest after a three-year
period. The RSU is settled in cash and is recorded as a liability. The measurement of the compensation expense and
corresponding liability for these awards is based on the fair value of the award, and is recorded as a charge to selling,
general and administrative (“SG&A”) expenses over the vesting period of the award. At the end of each financial
period, changes in the Company’s payment obligation due to changes in the market value of the common shares on
the TSX are recorded as a charge to SG&A expenses. For the year ended December 31, 2013, the Company granted
190,000 RSUs (2012 – 33,978), 26,720 of RSUs were paid (2012 – nil) and there were no cancellations (2012 –
12,385). As at December 31, 2013, 242,760 RSUs were outstanding (2012 – 79,480).
37
66
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Restricted share unit incentive plan for foreign employees
On June 7, 2010, the Company adopted a Restricted Share Unit for Foreign Employees (“RSUFE”) Plan. Under this
Plan, the RSUFE granted may be exercised during a period not exceeding ten years from the date of grant. The RSUFE
outstanding as at December 31, 2013 may be exercised during a period not exceeding six years from their date of
grant. RSUFE vest at a rate of 25% per year beginning one year following the grant date of the award. For the
12-month period ended December 31, 2013, the Company granted 15,000 RSUFE and cancelled 1,725 RSUFE. As at
December 31, 2013, 67,639 RSUFE were outstanding (2012 – 54,364).
Stock Appreciation Rights
On November 1, 2011, the Company granted 247,000 Stock Appreciation Rights (“SARs”) to most of its employees
except senior management. The SARs are vested and paid over a period of three years. The SARs are exercisable
automatically for cash at each anniversary date and the Company is obligated to pay the holders. The amount of cash
payout is calculated based on the number of SARs multiplied by the average price of the Company’s shares for the
month immediately before vesting. At the end of each financial period, changes in the Company’s payment obligations
due to changes in the market value of the common shares on the TSX are recorded as an expense. For the year ended
December 31, 2013, 23,153 SARs were cancelled and 51,816 SARs were paid. As at December 31, 2013,
48,198 SARs were outstanding (2012 – 123,167).
The following table presents information concerning all outstanding stock options:
2013
Weighted
average
exercise
price
CA$
4.67
2.39
5.55
-
3.00
4.19
4.94
Number
of options
1,585,448
546,939
(141,386)
-
(353,050)
1,637,951
1,001,826
Outstanding, beginning of year
Granted
Cancelled
Exercised
Expired
Outstanding, end of year
Exercisable, end of year
The outstanding stock options as at December 31, 2013 are as follows:
Maturity
June and August 2014
October 2014
January 2015 to October 2016
June and September 2017
December 2017
April 2018
November 2018
May 2019
Low
CA$
9.13
3.81
4.87
8.50
6.16
3.61
2.22
2.20
Number
of options
1,543,211
325,840
(240,072)
(43,531)
-
1,585,448
1,024,656
Exercise
price
High
CA$
9.13
3.81
5.47
8.64
6.16
3.61
2.22
2.20
2012
Weighted
average
exercise
price
CA$
5.28
2.22
5.60
3.36
-
4.67
4.94
Number of
options
7,500
2,500
534,987
226,840
7,500
65,284
318,340
475,000
1,637,951
38
Expense
Stock options
SARs
RSUs
Total
Liability
RSUs
RSUFE
SARs
Total
Commitments
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The fair value of stock options at the grant date was measured using the Black-Scholes option pricing model. The
historical share price of the Company’s common shares is used to estimate expected volatility, and government bond
rates are used to estimate the risk-free interest rate. The following table illustrates the inputs used in the measurement
of the fair values of the stock options at the grant date granted during the years ended December 31, 2013 and 2012:
Expected stock price volatility
Dividend
Risk-free interest rate
Expected option life
Fair value – weighted average of options issued
The following table shows the share-based compensation expense recorded in the consolidated statements of earnings
(loss) for the years ended December 31, 2013 and 2012:
The following table shows the carrying amount and the intrinsic value of the share-based compensation liabilities:
NOTE 24 – COMMITMENTS AND CONTINGENCIES
The Company rents certain premises and equipment under the terms of operating leases. Future minimum payments
excluding operating costs are as follows:
Within one year
After one year but not more than five years
Total commitments
Contingencies
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or
assets. As at the date of issue of the consolidated financial statements, the Company was not aware of any significant
events that would have a material effect on its consolidated financial statements, except for the following.
As further described in Note 13(b), in 2013, the Company settled its case with the former shareholders of MCP,
thereby prohibiting further related action by either party involved in the settlement. As of the date hereof, the Company
does not believe that it is probable that an outflow of resources, which could be material to the consolidated financial
statements, will be required by the Company following potential third party claims pertaining to actions or events
related to the alleged breaches of representations and warranties by the Vendors.
2013
59%
None
1.10%
4 years
$1.00
2013
$
567
15
148
730
2013
182
$
4
124
310
2013
$
2,265
3,635
5,900
2012
53%
None
1.07%
4 years
$0.93
2012
$
563
92
-
655
2012
$
92
10
189
291
2012
$
2,148
2,612
4,760
39
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
67
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The fair value of stock options at the grant date was measured using the Black-Scholes option pricing model. The
historical share price of the Company’s common shares is used to estimate expected volatility, and government bond
rates are used to estimate the risk-free interest rate. The following table illustrates the inputs used in the measurement
of the fair values of the stock options at the grant date granted during the years ended December 31, 2013 and 2012:
Expected stock price volatility
Dividend
Risk-free interest rate
Expected option life
Fair value – weighted average of options issued
2013
59%
None
1.10%
4 years
$1.00
2012
53%
None
1.07%
4 years
$0.93
The following table shows the share-based compensation expense recorded in the consolidated statements of earnings
(loss) for the years ended December 31, 2013 and 2012:
Expense
Stock options
SARs
RSUs
Total
2013
$
567
15
148
730
2012
$
563
92
-
655
The following table shows the carrying amount and the intrinsic value of the share-based compensation liabilities:
Liability
RSUs
RSUFE
SARs
Total
2013
$
182
4
124
310
2012
$
92
10
189
291
NOTE 24 – COMMITMENTS AND CONTINGENCIES
Commitments
The Company rents certain premises and equipment under the terms of operating leases. Future minimum payments
excluding operating costs are as follows:
Within one year
After one year but not more than five years
Total commitments
Contingencies
2013
$
2,265
3,635
5,900
2012
$
2,148
2,612
4,760
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or
assets. As at the date of issue of the consolidated financial statements, the Company was not aware of any significant
events that would have a material effect on its consolidated financial statements, except for the following.
As further described in Note 13(b), in 2013, the Company settled its case with the former shareholders of MCP,
thereby prohibiting further related action by either party involved in the settlement. As of the date hereof, the Company
does not believe that it is probable that an outflow of resources, which could be material to the consolidated financial
statements, will be required by the Company following potential third party claims pertaining to actions or events
related to the alleged breaches of representations and warranties by the Vendors.
39
68
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
(Figures in thousands of United States dollars)
NOTE 25 – RELATED PARTY TRANSACTIONS
The Company’s related parties are its joint ventures, associates, directors and executive members.
Unless otherwise stated, none of the transactions incorporates special terms and conditions and no guarantees were
given or received. Outstanding balances are usually settled in cash.
Ingal, a 50% joint venture, supplies gallium metal to other companies of the group. During the year ended
December 31, 2013, the Company purchased $4,850 worth of gallium from Ingal (2012 – $5,994).
As at December 31, 2013, the Company has a loan receivable from Ingal of $4,014 (€2,911) (2012 – $3,958 (€3,000)
(Note 11).
NOTE 26 – FINANCIAL RISK MANAGEMENT
In the normal course of operations, the Company is exposed to various financial risks. These risk factors include
market risk (currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates, equity prices and interest rates, will
affect the Company’s net earnings (loss) or the value of financial instruments.
The objective of market risk management is to mitigate exposures within acceptable limits, while maximizing
returns.
(i) Currency risk
Currency risk refers to the fluctuation of financial commitments, assets, liabilities, income or cash flows due to
changes in foreign exchange rates. The Company conducts business transactions and owns assets in several countries
and is therefore subject to fluctuations in the currencies in which it operates. The Company’s revenues and expenses
are exposed to currency risk largely in the following ways:
(cid:127)
(cid:127)
Translation of foreign currency-denominated revenues and expenses into US dollars, the Company’s
functional currency – When the foreign currency changes in relation to the US dollar, earnings reported in US
dollars will change. The impact of a weakening foreign currency in relation to the US dollar for foreign
currency-denominated revenues and expenses will result in lower net earnings (higher net loss) because the
Company has more foreign currency-denominated revenues than expenses.
Translation of foreign currency-denominated debt and other monetary items – A weakening foreign currency
in respect of the Company’s foreign currency-denominated debt will decrease the debt in US dollar terms and
generate foreign exchange gain on bank advances and other short-term debt, which is recorded in earnings
(loss). The Company calculates the foreign exchange on short-term debt using the difference in foreign
exchange rates at the beginning and end of each reporting period. Other foreign currency-denominated
monetary items will also be affected by changes in foreign exchange rates.
2013
HK$
$
10
276
(172)
-
-
-
114
HK$
$
1
(1)
The following table summarizes in US dollar equivalents the Company’s major currency exposures as at
December 31, 2013:
Cash and cash equivalents
Temporary investments, restricted
Accounts receivable
Bank indebtedness and short-term debt
Trade and accrued liabilities
Long-term debt
Net financial assets (liabilities)
CA$
$
351
564
-
-
(1,724)
(897)
(1,706)
EUR
$
4,847
2,490
15,131
-
(15,827)
(3,448)
3,193
GBP
$
1,398
2,506
-
-
-
(1,642)
RMB
7,188
$
-
-
3,541
(10,462)
(6,073)
2,262
(5,806)
The following table shows the impact on earnings (loss) before income tax of a one-percentage point strengthening or
weakening of foreign currencies against the US dollar as at December 31, 2013 for the Company’s financial
instruments denominated in non-functional currencies:
1% Strengthening
Earnings (loss) before tax
1% Weakening
Earnings (loss) before tax
CA$
$
(17)
17
EUR
$
GBP
$
RMB
$
32
23
(32)
(23)
(58)
58
Occasionally, the Company will enter into short-term foreign exchange forward contracts to sell US dollars in
exchange for Canadian dollars, Euros, Hong Kong dollars and British pounds sterling. These contracts would hedge a
portion of ongoing foreign exchange risk on the Company’s cash flows since much of its non-US dollar expenses
outside China are incurred in Canadian dollars, Euros, Hong Kong dollars and British pounds sterling.
(ii) Interest rate risk
interest rate.
(iii) Other price risk
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest
rates. The Company is exposed to interest rate fluctuations on its revolving credit facility, which bears a floating
As at December 31, 2013, the Company has an outstanding interest rate swap contract to hedge part of its interest
rate risk on the revolving credit facility. The nominal value is $100,000 commencing in January 2013 and ending in
August 2015. This interest rate swap fixed the LIBOR interest rate at 1.82%. The Company received $1,700 when
entering into this interest rate swap in September 2011, which was the fair value of the instrument on signing. The
fair value of the contract is $(2,588) as at December 31, 2013 and is recorded as part of derivative financial
liabilities in the consolidated statement of financial position.
Other price risk is the risk that fair value or future cash flows will fluctuate because of changes in market prices,
other than those arising from interest rate risk or currency risk. The Company is exposed to other price risk with
respect to the underlying risks of the held-for-trading financial instruments included in the consolidated statements
of financial position.
In March 2013, the Company entered into derivative forward contracts to sell silver metal at fixed at $30.43 per
ounce as at March 4, 2014 to cover purchases of materials containing precious metal (silver). The nominal value of
the contracts was approximately $2,600 at inception (Note 17).
40
41
5N PLUS 2013 ANNUAL REPORT
5 N P L U S
2 0 1 3 A N N U A L R E P O R T
69
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
The following table summarizes in US dollar equivalents the Company’s major currency exposures as at
December 31, 2013:
Cash and cash equivalents
Temporary investments, restricted
Accounts receivable
Bank indebtedness and short-term debt
Trade and accrued liabilities
Long-term debt
Net financial assets (liabilities)
CA$
$
351
-
564
-
(1,724)
(897)
(1,706)
EUR
$
4,847
2,490
15,131
-
(15,827)
(3,448)
3,193
GBP
$
1,398
-
2,506
-
(1,642)
-
2,262
RMB
$
7,188
-
3,541
(10,462)
(6,073)
-
(5,806)
2013
HK$
$
10
-
276
-
(172)
-
114
The following table shows the impact on earnings (loss) before income tax of a one-percentage point strengthening or
weakening of foreign currencies against the US dollar as at December 31, 2013 for the Company’s financial
instruments denominated in non-functional currencies:
1% Strengthening
Earnings (loss) before tax
1% Weakening
Earnings (loss) before tax
CA$
$
(17)
17
EUR
$
GBP
$
RMB
$
32
23
(32)
(23)
(58)
58
HK$
$
1
(1)
Occasionally, the Company will enter into short-term foreign exchange forward contracts to sell US dollars in
exchange for Canadian dollars, Euros, Hong Kong dollars and British pounds sterling. These contracts would hedge a
portion of ongoing foreign exchange risk on the Company’s cash flows since much of its non-US dollar expenses
outside China are incurred in Canadian dollars, Euros, Hong Kong dollars and British pounds sterling.
(ii) Interest rate risk
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest
rates. The Company is exposed to interest rate fluctuations on its revolving credit facility, which bears a floating
interest rate.
As at December 31, 2013, the Company has an outstanding interest rate swap contract to hedge part of its interest
rate risk on the revolving credit facility. The nominal value is $100,000 commencing in January 2013 and ending in
August 2015. This interest rate swap fixed the LIBOR interest rate at 1.82%. The Company received $1,700 when
entering into this interest rate swap in September 2011, which was the fair value of the instrument on signing. The
fair value of the contract is $(2,588) as at December 31, 2013 and is recorded as part of derivative financial
liabilities in the consolidated statement of financial position.
(iii) Other price risk
Other price risk is the risk that fair value or future cash flows will fluctuate because of changes in market prices,
other than those arising from interest rate risk or currency risk. The Company is exposed to other price risk with
respect to the underlying risks of the held-for-trading financial instruments included in the consolidated statements
of financial position.
In March 2013, the Company entered into derivative forward contracts to sell silver metal at fixed at $30.43 per
ounce as at March 4, 2014 to cover purchases of materials containing precious metal (silver). The nominal value of
the contracts was approximately $2,600 at inception (Note 17).
41
70
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Warrants
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Liquidity risk
In June 2012, the Company issued 12,903,613 units at a price of CA$3.10 per unit. Each unit comprises one
common share and one-half of a common share purchase warrant. The Company issued 6,451,807 warrants,
which are recorded as part of derivative financial liabilities at fair value based on the stock exchange market.
The fair value is $(181) as at December 31, 2013 (2012 – $(1,165)). Fair value depends on several factors, such
as market volatility, foreign exchange rate volatility, interest rate fluctuations, the Company’s market activity
and other market conditions.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due (Note
13(b)). The Company manages liquidity risk through the management of its capital structure. It also manages liquidity
risk by continually monitoring actual and projected cash flows, taking into account the Company’s sales and receipts
and matching the maturity profile of financial assets and financial liabilities. The Board of Directors reviews and
approves the Company’s annual operating and capital budgets as well as any material transactions out of the ordinary
course of business, including proposals on acquisitions and other major investments.
Credit risk
The following table reflects the contractual maturity of the Company’s financial liabilities as at December 31, 2013:
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract
and, as a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit
practice. This policy dictates that all new customer accounts be reviewed prior to approval and establishes the
maximum amount of credit exposure per customer. The creditworthiness and financial well-being of the customer are
monitored on an ongoing basis.
The Company establishes an allowance for doubtful accounts as determined by management based on its assessment
of collection; therefore, the carrying amount of accounts receivable generally represents the maximum credit
exposure. As at December 31, 2013 and 2012, the Company has an allowance for doubtful accounts of $218 and
$168 respectively. The provision for doubtful accounts, if any, is included in selling, general and administrative
expenses in the consolidated statements of earnings (loss), and is net of any recoveries that were provided for in
prior periods.
Counterparties to financial instruments may expose the Company to credit losses in the event of non-performance.
Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are
monitored on an ongoing basis. Counterparty credit assessments are based on the financial health of the institutions
and their credit ratings from external agencies. As at December 31, 2013, no financial assets are past due except for
trade receivables. The aging analysis of the latter two categories of trade receivables is as follows:
Up to 3 months
More than 3 months
2013
$
20,889
625
21,514
The following table summarizes the changes in the allowance for doubtful accounts for trade receivables:
Beginning of year
Provision for impairment
Trade receivables written off during the year as uncollectible(a)
Unused amounts reversed
End of year
2013
$
168
50
-
-
218
2012
$
22,966
1,395
24,361
2012
$
482
1,333
(1,647)
-
168
(a) For the year ended December 31, 2012, a client from the Eco-Friendly Materials segment had significant difficulties and the Company wrote
off the account receivable of $1.4 million (€1.1 million).
Less: Cash and cash equivalents and temporary investments, restricted
Amounts charged to the allowance account are generally written off when there is no expectation of recovering
additional cash.
Total borrowings
Net debt
Shareholders’ equity
Debt-to-equity ratio
42
Bank indebtedness and short-term debt
Trade and accrued liabilities
Derivative financial instruments
Long-term debt
Total
Carrying
amount
$
10,462
65,016
4,237
72,785
152,500
1 year
$
11,137
65,016
3,284
6,017
85,454
2-3
4-5
years
years
Beyond
5 years
$
-
-
953
69,553
70,506
$
-
-
-
173
173
$
-
-
-
19
19
2013
Total
$
11,137
65,016
4,237
75,762
156,152
NOTE 27 – CAPITAL MANAGEMENT
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may amend the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company requires the approval of its lenders on some of the capital transactions such as the payment of
dividends and capital expenditures over a certain level.
The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt divided by
total equity. Net debt is calculated as total borrowings (comprising bank indebtedness and short-term debt and long-
term debt in the consolidated statements of financial position) less cash and cash equivalents and temporary
investments, restricted. Total equity is the equity attributable to equity holders of 5N Plus Inc. in the consolidated
statements of financial position.
Debt-to-equity ratios as at December 31, 2013 and 2012 are as follows:
2013
$
83,247
(24,917)
58,330
190,052
31%
2012
$
148,439
(11,892)
136,547
144,955
94%
43
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
71
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due (Note
13(b)). The Company manages liquidity risk through the management of its capital structure. It also manages liquidity
risk by continually monitoring actual and projected cash flows, taking into account the Company’s sales and receipts
and matching the maturity profile of financial assets and financial liabilities. The Board of Directors reviews and
approves the Company’s annual operating and capital budgets as well as any material transactions out of the ordinary
course of business, including proposals on acquisitions and other major investments.
The following table reflects the contractual maturity of the Company’s financial liabilities as at December 31, 2013:
Bank indebtedness and short-term debt
Trade and accrued liabilities
Derivative financial instruments
Long-term debt
Total
Carrying
amount
$
10,462
65,016
4,237
72,785
152,500
1 year
$
11,137
65,016
3,284
6,017
85,454
2-3
years
$
4-5
years
$
Beyond
5 years
$
-
-
953
69,553
70,506
-
-
-
173
173
-
-
-
19
19
2013
Total
$
11,137
65,016
4,237
75,762
156,152
NOTE 27 – CAPITAL MANAGEMENT
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may amend the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company requires the approval of its lenders on some of the capital transactions such as the payment of
dividends and capital expenditures over a certain level.
The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt divided by
total equity. Net debt is calculated as total borrowings (comprising bank indebtedness and short-term debt and long-
term debt in the consolidated statements of financial position) less cash and cash equivalents and temporary
investments, restricted. Total equity is the equity attributable to equity holders of 5N Plus Inc. in the consolidated
statements of financial position.
Debt-to-equity ratios as at December 31, 2013 and 2012 are as follows:
Total borrowings
Less: Cash and cash equivalents and temporary investments, restricted
Net debt
Shareholders’ equity
Debt-to-equity ratio
2013
$
83,247
(24,917)
58,330
190,052
31%
2012
$
148,439
(11,892)
136,547
144,955
94%
43
72
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Figures in thousands of United States dollars)
NOTE 28 – KEY MANAGEMENT COMPENSATION AND EXPENSES BY NATURE
Key management compensation
Key management includes directors (executive and non-executive) and certain senior management. The compensation
expense paid or payable to key management for employee services is as follows:
Key management compensation
Wages and salaries
Share-based compensation
Total
Expenses by nature
Wages and salaries(1)
Share-based compensation expense
Depreciation of property, plant and equipment and amortization of
intangible assets
Amortization of other assets
Research and development, net of tax credit
Litigation and restructuring costs
Impairment of goodwill
Impairment of inventories
Impairment of property, plant and equipment
Impairment of intangible assets
Reversal of impairment of property, plant and equipment
Gain related to the settlement of the purchase price of MCP
Gain related to the derivative forward contracts to sell silver metal (Note 17)
(1) Includes gain on foreign exchange forward contracts related to US$/CA$ (Note 17)
2013
$
4,427
636
5,063
2013
$
39,525
730
10,686
2,017
3,758
4,068
-
10,182
-
-
-
(45,188)
(955)
2012
$
4,731
219
4,950
2012
$
43,006
655
21,159
1,040
1,410
2,781
124,910
50,585
39,239
40,597
(932)
-
-
44
5N PLUS 2013 ANNUAL REPORT 5 N P L U S
2 0 1 3 A N N U A L R E P O R T
73
Corporate Information
Stock Exchange
For more information, please contact:
5N Plus is listed on the Toronto Stock Exchange,
under the symbol VNP.
Transfer Agent and Registrar
Computershare Investor Services Inc.
Auditors
PricewaterhouseCoopers LLP
Head Office
4385 Garand Street
Montreal, Quebec
H4R 2B4
Annual Meeting
Investor Relations
5N Plus Inc.
4385 Garand Street
Montreal, Quebec
H4R 2B4
T: 514-856-0644
F: 514-856-9611
invest@5nplus.com
Si vous souhaitez obtenir une copie en français
de ce rapport annuel, communiquez avec :
Relations avec les investisseurs
The annual shareholders meeting will be
5N Plus inc.
held on Wednesday, May 7, 2014 at 10:30 a.m.
4385, rue Garand
Club Saint-James
1145 Union Avenue
Montreal, Quebec
Montréal (Québec)
H4R 2B4
Aussi disponible à l’adresse :
www.5nplus.com
100%
Printed in Canada
5N Plus Inc.
4385 Garand Street
Montreal, Quebec
H4R 2B4
Canada
www.5nplus.com
5N