2010 Annual Report
Leadership in a Sustainable World
notice of meeting
contentS
The Annual Meeting of Shareholders of PFB Corporation will
Corporate Profile
be held on May 26, 2011, at 1:30 p.m. (MST) at the offices of
Financial Overview
PFB Corporation which are located at:
100, 2886 Sunridge Way NE
Letter to Shareholders
The PFB Product Story
Sustainability Reporting
Calgary, Alberta, T1Y 7H9, Canada.
Management’s Discussion and Analysis
Management’s Report
Shareholders who are unable to attend the Annual Meeting
Auditors’ Report
are requested to complete and return the Form of Proxy at
Consolidated Financial Statements
their earliest convenience.
Notes to the Consolidated Financial Statements
Corporate Information
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PFB Corporation - Annual Report 2010
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corporate profile
PFB Corporation supports sustainability. We manufacture innovative, high-quality insulating building products and technologies
that are the core of energy-efficient residential and commercial structures.
“Better Building Ideas from PFB” offer solutions to customers that enable them, through the use of our insulation products
and insulating building systems, to conserve scarce energy resources and reduce operating costs in buildings resulting in
a reduction of harmful emissions into the atmosphere. PFB conducts its operations responsibly; mindful of the economic,
environmental and social impacts that its operations have on customers, employees, shareholders and the communities in
which we operate.
Our manufacturing operations are based in eleven facilities in Canada and the United States. Our long term revenue growth
strategy is built on extending the presence of our brands across North America.
Shares of PFB Corporation are listed for trading on the Toronto Stock Exchange under the symbol “PFB”.
financial overview
Years ended December 31, 2010, 2009, 2008, 2007, and 2006
(Thousands of dollars except per share data)
Operating Results
Sales
Gross profit
Income before other expenses, interest and taxes
Net income
Funds provided by operations 1
2010
2009
2008
2007
2006
$ 65,580
$ 65,930
$ 79,810
$ 82,918
$ 78,218
16,864
3,206
1,874
5,321
19,847
5,654
3,690
8,131
17,849
1,666
700
4,189
22,731
5,718
3,903
6,790
21,543
7,858
4,977
7,205
Per Common Share Data
Earnings per share – Basic
Earnings per share – Diluted
Dividend paid per share – Regular
Funds provided by operations 2
Book value 3
0.28
0.28
0.24
0.81
6.83
0.56
0.56
0.24
1.24
6.79
0.11
0.11
0.24
0.64
6.45
0.61
0.60
0.24
1.17
6.57
0.79
0.79
0.24
1.14
5.70
Non-GAAP financial measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Definitions of non-
GAAP measures used in the above table along with relevant other notes are as follows:
Funds provided by operations is defined as cash flow from operations before changes in non-cash working capital.
1
2 Funds provided by operations per share is defined as cash flow from operations before changes in non-cash working capital divided by the weighted average number of shares issued and outstanding.
3 Book value per share is defined as shareholders’ equity divided by the actual number of common shares outstanding at December 31.
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PFB Corporation - Annual Report 2010
letter to
ShareholderS
Financial results achieved by PFB Corporation during 2010 were reduced from those achieved in
2009 although sales volumes improved and revenues remained relatively constant. Gross margins
were reduced during the year as a result of higher raw material costs and this adverse impact affected
bottom line earnings. Other indirect costs showed continued improvement during the year but with
no opportunity to raise prices to customers during the year, the margin squeeze resulted in lower
operating profits and lower earnings per share. Nevertheless, a strong balance sheet was maintained
and at year end the company continues to be in excellent financial condition with cash balances
greater than long-term debt.
The general economic recovery that began in 2009 continues and provides a reason for optimism.
The risk scenario in our business environment is centered on the cost of raw materials and other commodity inputs that have led to higher costs
which are not accompanied by the opportunity to pass these costs on in the form of higher prices to customers. At a point in time, that we expect
will occur this year, higher prices will be achieved as there is a general recognition of the general necessity for them throughout the economy. Higher
commodity prices affect everyone and a general rise in price levels is the inevitable result.
PFB plans to continue its measured pace with regard to capital investment projects and to continue vigilance in maintaining cost efficiencies that
enable continued profitable operations. Cash management will continue to be a high priority in the year ahead.
In the fourth quarter, PFB announced it’s intent to acquire Precision Craft Homes. The transaction was closed effective February 1, 2011 at a cost
of $2,500,000 USD that was satisfied from working capital and a further payment of 166,667 PFB common shares that are subject to earn-out
provisions over a maximum five year period. A wholly owned subsidiary, named PFB America Corporation, has been formed and its focus will be the
operation of the Precision Craft, Riverbend Timber Framing and Insulspan operations.
Last year we initiated the reporting of “Cash flow from operations”. This measure is defined as “cash flow from operations before changes in non-
cash working capital”. This is a non-GAAP financial measure and does not have any standardized meaning prescribed by GAAP and is therefore
unlikely to be comparable to similar measures presented by other issuers. For the year 2010 this amount was $0.81 per common share while in
2009 this amount was $1.24.
Our regular quarterly dividends continue at $0.24 per share on an annualized basis and account for approximately 30% of this balance in 2010,
approximately 20% in 2009. Currently the PFB balance sheet is strong and access to liquidity through existing bank credit lines remains good.
The core of our corporate strategy remains our support of sustainable development principles in our product offering to our customers and in our
internal operations. We are working hard to insure that “Better Building Ideas from PFB” meet the needs of the present without compromising the
ability of future generations to meet their own needs.
PFB Corporation brands are innovative, high-quality insulating building products and technologies that provide the core for energy-efficient,
residential and commercial structures. The PFB product offering represents “Better Building Ideas” because our brands, when used alone or more
effectively integrated together as building systems, provide excellent insulating qualities and structural properties that, in a cost effective way, reduce
energy consumption in the heating and cooling of buildings where they are incorporated. Our products used in construction of buildings lead to
reduced energy consumption and reduced operating costs.
Throughout our operations we are constantly measuring and attempting to reduce our inputs of energy, water and materials in the manufacturing
process. We attempt to increase our output of products and reduce waste and emissions through our ISO quality programs.
As part of our focus on sustainability, we are attentive and respectful of our relationship with our employees. Our objective is to provide a safe and
dignified work environment. We recognize the individual accomplishments and contributions made by each employee. We expect our employees
to continuously improve their skills and expertise to support their growth within the organization. We thank them for their diligence and continued
support of our teams’ efforts.
Respectfully submitted on behalf of the Board,
c. alan Smith
President and Chief Executive Officer
March 3, 2011
PFB Corporation - Annual Report 2010
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Vertically integrated for better building ideas
What’s the best Way to build green?
There are as many different opinions as there are experts. But one thing the experts agree on is
the importance of a high performance building envelope. Loading a home with solar panels and
high tech systems may capture all the attention, but behind every LEED® Platinum project is a
building shell that is responsible for conserving energy and reducing greenhouse gas emissions.
From popular green building programs like LEED® for Homes and the National Green Building
Standard, to the ultra-energy-efficient Passive House certification, insulating building products
from PFB provide a direct route to the upper echelons of sustainable construction.
learn about leed®
LEED®, is the acronym for Leadership in Energy and Environmental Design, which was launched
in March 2000.
LEED® is an internationally recognized green building certification system. It provides third-
party verification that a building or community was designed and built using strategies aimed
at improving performance across all the metrics that matter most. These include energy
savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and
stewardship of resources and sensitivity to their impacts.
Learn more @ http://www.usgbc.org/
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PFB Corporation - Annual Report 2010
Plasti-Fab® EPS insulation can be used in a variety of applications,
including flat roofs, energy-efficient retrofits, and crucial under-slab
insulation. Plasti-Fab products are manufactured without HCFCs
and maintain a stable R-value over the life of a building.
twitter.com/PlastiFab
The Advantage ICF System® combines the strength and durability
of concrete with a continuous layer of EPS insulation for superior
insulation and air tightness.
twitter.com/AdvantageICF
Insulspan® Structural Insulating Panels (SIPs) offer unmatched energy
performance with their solid EPS core and continuous air barrier.
Insulspan’s ready-to-assemble system also helps builders save
valuable framing time and labor costs.
twitter.com/InsulspanSIPS
Riverbend® Timber Framing is one of North America’s premier
suppliers of precision-cut timber frames. Inside Riverbend’s award-
winning design department, the elegance of a natural wood timber
frame meets cutting edge insulating building products from PFB to
create fully integrated, sustainable homes.
twitter.com/RiverbendTF
To see our products in action, visit our
YouTube Channel:
http://www.youtube.com/user/PFBCorporation
Individually, PFB products are powerful insulating components for reducing home energy use. Together,
they are much more: a certification-level building envelope for any sustainable project. The PFB line of
products creates a whole-building solution, an opportunity to reach net-zero energy, and the future of
sustainable building. That is better building, from PFB.
PFB Corporation - Annual Report 2010
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When a tree fell on the Baker family cottage in Lakeside, Ohio, it
crushed what had been the family’s beloved summer getaway for
the past 15 years. For owner Frank Baker, there was little doubt
that he would rebuild his family’s cabin, and that he would rebuild
it green.
As a former engineer and founder of both Insulspan and
Riverbend Timber Framing, Baker has devoted 35 years to
advancing sustainable homebuilding technology. He set his sights
on the Emerald Level of the National Green Building Standard, the
top tier of one of the most comprehensive green building rating
A storm caused a large
tree to fall and damage the
Baker’s original lakeside
cottage beyond repair.
systems available.
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PFB Corporation - Annual Report 2010
Energy efficiency is a key element in any
sustainable home to reduce greenhouse gas
emissions and homeowner operating costs.
Baker was able to cut energy use in his
1,652 sq. ft. home by over 30 percent using
sustainable insulating building products from
PFB Corporation.
“You can forget all the rest if you haven’t done
a good job on the building envelope,” said
Baker. “the building envelope is what
ultimately determines the overall energy
consumption of the building.”
Assembling a certification-level building
envelope begins below grade with Plasti-Fab
DuroFoam® insulation installed beneath the
slab. Made with sustainable EPS insulation,
“
You can forget all the rest if you haven’t
done a good job on the building envelope,
the building envelope is what ultimately
determines the overall energy consumption
of the building. - Frank Baker
DuroFoam prevents heat loss through the concrete slab and will save over one hundred times
the energy required to produce the product over the home’s lifetime.
“You have to consider the entire envelope in a highly energy-efficient home,” said Baker. “You
can’t leave an area as substantial as a crawlspace ignored; and EPS is a very economical and
sustainable way to insulate it.”
To insulate the home’s below grade walls, Baker constructed the basement with the Advantage
ICF System. Above grade, Insulspan structural insulating panels (SIPs) provide equivalent
insulation and air tightness for consistent whole-house performance.
For Baker, the PFB products offered a complete sustainable solution for his new home and
greatly simplified the process of meeting the National Green Building Standard. Alone, each of
the products delivers enhanced energy efficiency, but together they create a complete system
for optimum whole-house performance, better indoor air quality, and an efficient use of natural
resources.
PFB Corporation - Annual Report 2010
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“Once you’ve used PFB products for the building envelope, you are in line to achieve at least a
Silver level on the National Green Building Standard, and Gold is easy to achieve from there,”
he said. “PFB’s insulating products alone garner 248 points of the necessary 406 to meet the
Silver level.”
Beneath the exterior is an exposed timber
frame that ties the home to its 100-year-old
predecessor and blends with the historic
Lakeside community. A team of experienced
designers at Riverbend Timber Framing
designed the home to maximize passive
solar gain and further reduce the need for
mechanical heating.
“
Once you’ve used PFB insulating building
products for the building envelope, you are
in line to achieve at least a Silver level on
the National Green Building Standard, and
Gold is easy to achieve from there.
- Frank Baker
“One of the services that PFB provides is design, and green building starts with good design,”
said Baker. “Once you have a well-designed and well-insulated building envelope, the demand
on the HVAC system will be miniscule compared to most other buildings.”
Incorporating PFB products provided Baker with more benefits than just energy efficiency.
Both the SIPs and ICFs used in his cottage earned points as resource-efficient structural
products. With PFB’s commitment to environmental sustainability, none of its insulating building
products contain volatile organic compounds and most factory waste is recycled into other EPS
products.
“Knowing that any scrap that occurred during the fabrication process would be recycled into
other products is assuring and helped us qualify for additional green certification points,” said
Baker. “Because PFB designs and manufactures a whole range of insulating materials that can
be incorporated into the entire building envelope, PFB is the one-stop shop of choice.”
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PFB Corporation - Annual Report 2010
Since transitioning from his career as an executive at General Motors to homebuilding in 1996,
Bob Burnside has built his business around delivering high quality and sustainable custom
homes. One of Fireside Home Construction’s flagship homes, Burnside’s Inn, was the first home
in the state of Michigan to receive LEED® for Homes Platinum certification and won an Energy
Value Housing Award from the U.S. Department of Energy.
When building to such a rigorous standard as LEED® Platinum, a whole-building design strategy
is a crucial element in reaching the strict energy efficiency requirements.
“We look at the house as a complete system. We try to maximize the efficiency of all the
pieces, but they have to be designed to work in concert as a system,” said Burnside. “The
building envelope is one of the most significant factors. You can install the most efficient
furnace in the world, but if a house is leaky, the heat is going to be leaking to the outside.”
PFB Corporation - Annual Report 2010
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Burnside chose the complete line of PFB
insulating products for the building envelope
as a sustainable solution to boost energy-
efficiency and help him meet the requirements
of the LEED® rating system. Starting with the
Advantage ICF System below grade, Burnside
focused on maintaining a well-insulated and
airtight building envelope with the Insulspan
SIP system for the above-grade walls and
roof of the home.
“The SIPs and ICFs work perfectly together
because they allow you to continue the high
R-value and tightly sealed space as you
transition from one system to the other,” said
Burnside.
The home is supported by an elegant timber
frame designed and manufactured by
Riverbend Timber Framing. Burnside credits
the home’s designers, Marty Birkencamp and
Jake Lappan, with tailoring the home’s design
for maximum energy and material efficiency.
Burnside’s Inn, was the first home in the state of
Michigan to receive LEED® for Homes Platinum
certification and won an Energy Value Housing
Award from the U.S. Department of Energy.
“It starts with the design, and one of the strongest things about working with PFB is that the
timber frame and SIP packages are designed in the same design department, manufactured in
the same place, and shipped together,” said Burnside.
With a single source of design and production, all of the building envelope components are
coordinated for easy assembly and create an integrated building design. PFB moves beyond
just providing quality products. By combining a line of high performance products with award-
winning design, you get a better building, by using PFB products.
“Everything is designed to work together,” said Burnside. “This is what they do. They are
experts at it, and it is a real advantage to anyone who wants to build one of these homes.”
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PFB Corporation - Annual Report 2010
“
Everything is
designed to work
together, this is
what they do.
They are experts
at it, and it is a
real advantage
to anyone who
wants to build
one of these
homes.
- Bob Burnside
PFB Corporation - Annual Report 2010
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PFB Corporation - Annual Report 2010
*For Illustrative purposes only, not a representation of code assemblies.
Products working together to build better homes
The energy efficiency achieved in a PFB home is a result of the
company’s vertically integrated suite of insulating products. In the
2,312 square-foot Cattail Lodge, PlastiSpan rigid insulation, Advantage
insulating concrete forms, Insulspan structural insulating panels and a
Riverbend timber frame were combined together to create a better building.
The insulating concrete forming system used below grade created a
comfortable and cozy space in the lower level. Above ground, the
beauty and strength of the timber frame adds elegance and charm
to the home, and allowed the homeowners the design flexibility to
incorporate cathedral ceilings and large windows that bring in plenty of
natural light and warmth.
Enclosing the frame is the structural
insulating panel system, which created a
super-tight enclosure that is strong, efficient
and sustainable. This home boasts the SIP
system for both the walls and the roof. PFB’s
PlastiSpan rigid insulation was used beneath
floors to insulate the hydronic heating system,
also known as radiant floor heating.
Alone these products are effective and
efficient. Combined together, they create a
better structure that is built with high-quality
materials and offers superior energy-efficiency,
strength & sustainability.
That is what you get with a PFB home:
Better Building Ideas.
The Cattail Lodge is a home designed by Riverbend
Timber Framing. To see more of this home visit:
http://www.riverbendtf.com/galleries/gallery_
cattaillodge.html
*For Illustrative purposes only, not a representation of code assemblies.
PFB Corporation - Annual Report 2010
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the timber frame - riVerbend timber framing
In timber framing, wooden posts and beams are joined with a centuries-old mortise-and-tenon
technique. One of the timber elements has wood cut away, leaving a tongue or “tenon” at its
end. The piece it joins has a pocket or “mortise” carved out to accept the tenon. Once the
pieces are precision cut and fitted together, wooden pegs are driven through the joint to keep
the mortise and tenon from separating.
We believe traditional wooden joinery is the best way to construct a durable and inherently
beautiful framework.
the floor - PlastisPan hydronic
insulation
PlastiSpan insulation board is used as a
component in the hydronic heating systems
(also known as Radiant floor heating) where
uniform heat distribution is desired throughout
a floor area. PlastiSpan insulation ensures that
heat loss will be minimized and the entire floor
area will be warmed faster.
PlastiSpan insulation is ideal for use beneath
concrete slabs as a component in radiant
floor heating systems as an effective means
to heat basements and turn them into
comfortable living space.”
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PFB Corporation - Annual Report 2010
*For Illustrative purposes only, not a representation of code assemblies.
the foundation - adVantage icf
The Advantage ICF System is a patented
insulating concrete forming system consisting
of two layers of expanded polystyrene (EPS)
insulation connected with web connectors
molded into the EPS insulation.
When the installed Advantage ICF System
blocks are filled with concrete, an insulated,
monolithic concrete wall of uniform thickness is
formed. The result is a superior, energy-efficient
wall that will provide long-term energy cost
savings while adding resale value to the building.
the enVeloPe - insulsPan siPs
Structural insulating panel systems (SIPS)
provide a building envelope that is strong,
energy-efficient, and comfortable to live in. With
the numerous sustainability attributes of panels,
they are ideal for incorporating in LEED certified
projects.
SIPS are an “insulation sandwich” made of
two sheets of structural oriented strand board
(OSB) laminated to a continuous core of
expanded polystyrene insulation (EPS). The
resulting panel can be used for walls and
roofs, allowing the structure to be erected
and insulated in one step. The span of solid
insulation leaves no room for air movement,
vastly improving energy efficiency compared
to traditionally framed construction.
*For Illustrative purposes only, not a representation of code assemblies.
*For Illustrative purposes only, not a representation of code assemblies.
PFB Corporation - Annual Report 2010
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simPly, better buildings
Energy efficiency is just as important in a commercial structure as it is for a home.
PFB Better Building Ideas are used in a multitude of commercial applications and result in an
energy-efficient building system. These applications include GeoSpan compressible fill material
beneath the grade beam, PlastiSpan insulation for insulating the foundation wall, PlastiSpan
insulation for insulating the concrete slab, PlastiSpan insulation as the insulating component in
the Exterior Insulation Finish System (EIFS), and PlastiSpan tapered roofing insulation.
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PFB Corporation - Annual Report 2010
*For Illustrative purposes only, not a representation of code assemblies.
As you move up to the above ground portion
of the building, the walls are insulated with
PlastiSpan insulation which, when used as a
component in EIFS, provides a fully insulated wall.
But don’t forget the roof! Insulating the roof
is integral to the success of the structure’s
overall energy efficiency.
PlastiSpan tapered roof insulation ensures
positive drainage while maintaining the economic
advantages of a structurally flat roof deck.
The PlastiSpan tapered roof insulation system
completes an energy-efficient structure.
PlastiSpan insulation reduces heat loss to
improve the energy efficiency of heating
and cooling systems, and can be used in
either new construction or remodeling and
renovation projects.
not Just for structures
The suite of PFB Better Building Ideas
extends beyond uses in homes or commercial
structures. With sustainability and conservation
being a key incentive, PFB Better Building
Ideas are used for geotechnical applications,
buoyancy, and packaging.
insulating from the ground uP
GeoSpan compressible fill material is an
engineered product designed to act as a
compressible inclusion beneath concrete
structures to reduce the effect of expansive soils.
With its outstanding resistance to moisture
absorption, PlastiSpan exterior foundation
insulation provides dependable long-term
thermal performance for foundation walls.
PlastiSpan insulation used to insulate
underneath a concrete slab reduces heat loss
to the soil to reduce energy consumption. It
can also be used as a component in hydronic
floor heating systems.
I love working with energy-efficient
products—there is really no other way to
build, - Scott Jackel
“
*For Illustrative purposes only, not a representation of code assemblies.
PFB Corporation - Annual Report 2010
17
the roof - PlastisPan taPered
roof insulation
PlastiSpan tapered roof insulation provides
the required positive slope to drain water
while retaining the structural and economic
advantages provided by a flat roof deck.
PlastiSpan tapered roof insulation board can
be used in new roof or reroofing projects of
all sizes. It is suitable for use with all types of
roofing systems, which makes it an ideal, cost-
effective roofing solution.
the walls - PlastisPan foundation
wall insulation
PlastiSpan or DuroFoam insulation board can
be used as an exterior insulating sheathing
over wood or steel studs to increase the
thermal resistance of a wall to any desired
value. To obtain maximum energy efficiency,
a layer of PlastiSpan insulation should be
placed over the entire exterior of the building
envelope.
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PFB Corporation - Annual Report 2010
*For Illustrative purposes only, not a representation of code assemblies.
the finish - PlastisPan efs
insulation board
PlastiSpan EFS insulation is a moulded
expanded polystyrene (EPS) insulation board
used in Exterior Insulation Finish Systems
(EIFS). EIFS are non-load bearing exterior
wall cladding systems typically consisting of
PlastiSpan EFS insulation with an exterior
finish applied to it.
PlastiSpan EFS insulation when used in EIFS
applications covers the outside of a building
so that the inside of the structure is protected
from wide climatic temperature fluctuations.
This reduces expansion and contraction of the
structure and stabilizes interior temperatures.
the foundation - geosPan
comPressible fill material
GeoSpan compressible fill materials are
expanded polystyrene (EPS) products
designed to act as a compressible medium,
reducing potential forces on structures in the
event soil expansion occurs after construction
is completed. They are designed for use
beneath structures that are self-supporting
(typically supported on pile foundations).
GeoSpan compressible fill materials act as a
compressible medium between the expansive
soil and the structure to reduce long-term
stresses transferred to the structure.
*For Illustrative purposes only, not a representation of code assemblies.
*For Illustrative purposes only, not a representation of code assemblies.
PFB Corporation - Annual Report 2010
19
SUStainaBilitY
throUgh action
Waste
emissions
Waste is a significant issue for manufacturers like PFB, both
Our focus has always been to reduce greenhouse-gas
from a cost perspective and its environmental impact. PFB is
emissions by using fossil fuels more efficiently.
continually looking for ways to eliminate waste by reusing and
recycling.
PFB has an ongoing initiative underway to substitute
raw material inputs with materials that contain less VOC
Total waste to landfill was reduced significantly in 2010.
expanding agent. In 2008, 7% of raw materials consumed
This was achieved by introducing products that support
contained reduced levels of VOCs. In 2009, we further
in-process waste recycling, by diverting scrap materials to
increased usage of low VOC materials to 26%. In 2010, we
alternate recycling streams and by improving production yields.
successfully increased the usage of low VOC alternatives to
59% of the total input. These changes resulted in a significant
reduction in VOC emissions per unit output.
For more information on our sustainability initiative, visit:
www.pfbsustainability.com
twitter.com/FrankGreenSpeak
http://franksgreenspeak.com/
energy
Total electricity and natural gas consumption in our operations
remained relatively unchanged in 2010 over the previous year.
During 2010, operations were able to maintain energy efficiency
levels by aligning energy consumption to production levels.
PFB will continue conducting energy audits and identifying ways
of improving the efficiency of its operations, equipment, and
buildings.
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PFB Corporation - Annual Report 2010
GHG emiSSiOnS vS. SavinGS POtential
Carbon dioxide, the principal green house gas (GHG)
emitted, arises from burning natural gas and other fuels in
our production operations. We calculate and report GHG
emissions in metric tonnes.
GHG Savings
GHG
10,138
Metric
Tonnes CO2
10,211
Metric
Tonnes CO2
8,958
Metric
Tonnes CO2
9,068
Metric
Tonnes CO2
estimated
ghg
reductions
per Year
from pfB
insulation
Sold in 2010*
Our insulating products provide customers with the means
to reduce their energy consumption and, consequently, their
2007
2008
2009
2010
GHG emissions. In 2010, PFB emitted 9,068 metric tonnes
of CO2 equivalents from its operations. The estimated GHG
reductions that could be achieved if all of the EPS insulation
products made by PFB in 2010 were applied to exterior
walls of single family residential housing in USA/Canada
would be 58,161 metric tonnes. A ratio of 6 to 1. Through
improvements in the energy-efficiency of our processes we
intend to focus on reducing our GHG emissions to further
improve the net benefits provided by our products.
*Estimated GHG emissions reductions potential due to the installation of PFB foam
insulation products sold during the reporting year - estimates based on data in “Energy and
Greenhouse Gas Savings for EPS Foam Insulation Applied to Exterior Walls of Single Family
Residential Housing In The U.S. and Canada”, Franklin Associates Ltd. February 2009.
GHG savings based on reduction in heating when insulation installed as per assumptions in
the Franklin report. Note that other insulation materials will provide equivalent reduction in
energy and GHG savings if installed to the same level of thermal performance.
eneRGy USeD in makinG PFB PRODUCtS
vS. eneRGy SaveD By CUStOmeRS
The energy savings potential from using PFB’s insulating
products over the minimum expected lifetime of those
products (assumed to be 50 years) exceeds the amount of
energy consumed in the manufacturing process by a ratio of
approximately 120:1.
*Estimated energy savings due to the installation of PFB foam insulation products per unit
mass. Estimates based on data in “Energy and Greenhouse Gas Savings for EPS Foam
Insulation Applied to Exterior Walls of Single Family Residential Housing In The U.S. and
Canada”, Franklin Associates Ltd. February 2009. Energy savings based on reduction in
heating when insulation installed as per assumptions in the Franklin report. Note that other
insulation materials will provide equivalent reduction in energy and GHG savings if installed to
the same level of thermal performance.
** Direct production energy includes embodied energy in raw materials as per “Energy and
Environmental Profile of the US Chemical Industry”, May 2000 by Energetics Inc. for US
Department of Energy.
a ratio of 6:1
58,161
Metric Tonnes CO2
Production energy**
50 year energy Saving Potential*
13,042
MJ/kg
a ratio of 120:1
110.3
MJ/kg
109.3
MJ/kg
109.0
MJ/kg
109.0
MJ/kg
2007
2008
2009
2010
50 year energy
Saving* Potential
PFB Corporation - Annual Report 2010
21
electricity (1000 kWh)
Gas (1000 m3)
8,866
8,491
8,131
8,393
DiReCt eneRGy
4,223
4,254
3,733
3,779
We measure and monitor the total amount of electricity and
natural gas consumed by our operations.
Energy usage in 2010 increased marginally over the
previous year. Production output in 2010 was comparable
to 2009; however, we experienced an increase in electricity
consumption. PFB will continue to monitor its energy
consumption to identify potential efficiency improvements and
energy reduction projects. A number of projects are planned
2007
2008
2009
2010
in 2011 focussed on reducing electricity consumption in our
manufacturing facilities.
measured as per unit output of ePS foam
WaSte
0.072
per unit
output
0.066
per unit
output
0.065
per unit
output
0.048
per unit
output
Waste per unit output improved considerably in 2010 over
previous years due to increased efforts to recycle in-process
waste materials. At our location in Crossfield, Alberta, we
installed equipment which facilitated recycling in-process
foam waste into saleable polystyrene. Efforts will continue
in 2011 to identify more sustainable methods for reducing
2007
2008
2009
2010
waste in our production streams.
Water m3
Water Discharge m3
WateR
125,458
109,537
109,264
122,700
56,456
49,292
55,215
49,169
Our operations consumed less water in 2010 over the
previous year. This was due to equipment and process
improvements in one of our facilities. Installation of new
equipment allowed us to reuse cooling water multiple times
and thus reduce overall raw water consumption. Efforts will
continue in 2011 on identifying further ways of reducing raw
water consumption through elimination and reuse.
2007
2008
2009
2010
22
PFB Corporation - Annual Report 2010
RaW mateRial USaGe PeR Unit OF
PRODUCt OUtPUt
We measure inputs of raw materials as a ratio of product
output to tell us how well we are doing in the conversion
process. For EPS foam, we measure inputs and outputs in
tonnes and a lower conversion ratio indicates higher levels of
recycling. For structural insulating panels, we measure inputs
of oriented strand board (OSB) and outputs of panels in m2. A
lower conversion ratio indicates an improvement in yield.
Note – in 2010 the calculation method was changed to allow
us to monitor and quantify the reuse of in-process waste. The
new calculation method has been applied to all historical data
indicated in the chart. This new calculation method provides
a more relevant measurement of raw material usage, process
yield and reuse of in-process waste.
PFB emiSSiOnS PeR Unit OF PRODUCt
OUtPUt
The key emissions that we track are GHG’s, VOCs, NOx
and SOx. We monitor the ratio of tonnes emitted as a ratio
of tonnes of EPS foam produced. Reductions in the ratios
indicate better performance.
Reduction in emissions per unit of foam products produced
continued in 2010 as efforts to introduce raw materials with
lower VOC content continued. PFB’s long term plan is to
continue converting products and manufacturing processes
to use lower VOC raw materials to continuously reduce our
impact on the environment.
2007
2008
2009
2010
6
2
2
.
2
2
2
.
9
1
2
.
2
2
2
.
0
1
1
.
7
0
1
.
0
1
1
.
9
0
1
.
expandable
Polystyrene Resin
(tonne) Per tonne
ePS Products
OSB (m2) Per m2
Panels
measured as units of input per unit output
2007
2008
2009
2010
8
7
6
.
0
1
5
6
.
0
0
2
6
.
0
9
3
6
.
0
0
5
0
.
0
1
5
0
.
0
7
4
0
.
0
4
4
0
.
0
ghg
(tonne)
voc
(tonne)
the emissions of nox and Sox both represent less than 0.5kg
per tonne of product produced.
PFB Corporation - Annual Report 2010
23
2010
ManageMent’s
Discussion
anD analysis
adviSor Y regarding forward-
looKing StatementS
Securities laws encourage public issuers to disclose forward-looking information in
their management’s discussion and analysis (MD&A) so that investors can get a better
understanding of the company’s future prospects and make informed investment decisions.
Forward-looking information and statements included in this MD&A about PFB’s objectives and
management’s expectations, beliefs, intentions or strategies for the future are not guarantees
of future performance and should not be unduly relied upon.
All forward-looking statements reflect management’s current views as at March 3, 2011, with
respect to future events, and they are subject to certain risks, uncertainties and assumptions
that may cause the actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such forward-looking
statements.
Such risks, uncertainties and assumptions include, but are not limited to: general economic
conditions; the cost and availability of capital; actions by government authorities; actions by
regulatory authorities; availability of raw materials; changes in raw materials prices; currency
exchange rates; interest rates; competitor activity; industry pricing pressures; seasonality of the
construction industry; and weather related factors.
You will find a more detailed assessment of the risks that could cause actual results to
materially differ from our current expectations in the Risk Management and Assessment
section of this MD&A.
other adviSorieS regarding thiS
md&a
The following MD&A of the operating results and financial condition of PFB Corporation
(“PFB” or the “Corporation”) for the years ended December 31, 2010 and 2009 should be
read in conjunction with the audited consolidated financial statements and related notes
included in PFB’s 2010 Annual Report.
The consolidated financial statements of PFB are prepared in accordance with Canadian
generally accepted accounting principles (GAAP) and are prepared in Canadian dollars.
Canadian GAAP require PFB to make certain estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, expenses, and related disclosure of
contingent assets and liabilities. Management believes that the estimates and assumptions
are reasonably based on information available at the time that such estimates and
assumptions were made. These estimates and assumptions have been discussed with the
Audit Committee of the Board of Directors of PFB Corporation. Actual results may differ under
different assumptions and conditions.
24
PFB Corporation - Annual Report 2010
BUSineSS overview
PFB, through its wholly-owned subsidiaries and under its “Better Building Ideas from PFB”
trademark, is a vertically-integrated manufacturer of proprietary insulating building products
based on closed cell expanded polystyrene (EPS) technology. Products are manufactured in
nine facilities in Canada and in two facilities in Michigan, USA; and distributed to industrial and
commercial customers and to the retail market.
Expandable polystyrene resin is manufactured at PFB’s polymer plant located in Crossfield,
Alberta, for use exclusively in downstream EPS manufacturing operations. Expandable
polystyrene resin is also sourced from other suppliers to supplement internally produced
raw materials. Plasti-Fab EPS Product Solutions supply the EPS foam core material used to
manufacture Insulspan SIPS (Structural Insulating Panel Systems). Riverbend Timber Framing
structures are typically sold with an accompanying Insulspan SIPS enclosure package.
Plasti-Fab EPS Product Solutions distributes the following products through various channels:
rigid insulation board; insulating building systems; geotechnical engineered applications;
buoyancy, and products for packaging and display applications. The Advantage ICF (Insulating
Concrete Forming) System, Insulspan SIPS, and Riverbend Timber Framing systems are
leading-edge, energy-efficient building systems that continue to grow in popularity across North
America.
The Corporation wholly-owns the following operating subsidiaries: Plasti-Fab Ltd. (“Plasti-Fab”)
and Insulspan Incorporated (“Insulspan”). These subsidiaries operate manufacturing facilities
and sales operations in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba,
and Ontario in Canada, and in the State of Michigan, USA. In 2009, two Canadian subsidiaries,
Riverbend Timber Framing Corporation (“Riverbend”) and PFB Construction Services Ltd.
(“Construction Services”), were voluntarily dissolved. Riverbend’s ongoing operations were
merged with Plasti-Fab and Construction Services ceased operations in 2008.
PFB is committed to
providing superior quality
products, excellent
customer service and expert
technical knowledge.
PFB’s primary business focus is manufacturing and selling Plasti-Fab EPS, Advantage ICF,
Insulspan SIPS, and Riverbend Timber Framing brands of insulating building products that can
be integrated to create cost-effective and energy-efficient building structures. PFB is committed
to providing superior quality products, excellent customer service and expert technical
knowledge. A reputation for quality, service and expertise has positioned PFB as a supplier of
leading brands in the EPS industry in North America, which also includes the Advantage ICF
product offering. Insulspan and Riverbend brands are leaders in the SIPS and timber framing
industries, respectively, across the United States. Revenue growth strategy is built on extending
the presence of all four brands and product lines across North America.
PFB Corporation - Annual Report 2010
25
financial highlightS SUmmar Y - Quarterly
Years ended December 31, 2010 and 2009
(Thousands of dollars, except gross profit percentage and per share amounts)
2010
2009
Sales
Gross profit
Gross profit %
Income (loss) before interest
and taxes
Net income (loss)
Earnings per share:
Basic
Diluted
Q2
Q3
Q4
Q1
$ 16,846 $ 20,425 $ 17,338 $ 10,971
2,127
19.4%
6,141
30.1%
4,609
27.4%
3,987
23.0%
Q3
Q4
Q2
$ 15,856 $ 18,834 $ 19,651
6,571
33.4%
6,169
32.8%
4,866
30.7%
Q1
$ 11,589
2,241
19.3%
1,172
699
2,631
1,758
508
271
(1,105)
(854)
1,401
1,180
2,550
1,594
2,940
1,977
(1,237)
(1,061)
0.10
0.10
0.27
0.27
0.04
0.04
(0.13)
(0.13)
0.18
0.18
0.24
0.24
0.30
0.30
(0.16)
(0.16)
PFB’s business exhibits seasonal variations concurrent with those that influence the construction industry, including the variability
in weather patterns. Typically, reported sales revenues are lowest in the first quarter and highest in the second or third quarters.
26
PFB Corporation - Annual Report 2010
financial highlightS SUmmar Y - annual
Years ended December 31, 2010, 2009, 2008, 2007, and 2006
(Thousands of dollars except per share data and selected financial ratios)
Operating Results
Sales
Gross profit
Income before other expenses,
interest and taxes
Net income
Funds provided by operations 1
Per Common Share Data
Earnings per share - Basic
Earnings per share - Diluted
Dividend paid per share - Regular
Funds provided by operations 2
Book value 3
Financial Condition
Total assets
Working capital 4
Capital assets (net)
Goodwill
Long-term debt and obligations under
capital lease (including current portion)
Shareholders’ equity
Selected Financial Ratios
Gross profit margin 5
Operating profit margin 6
Net income margin 7
Current ratio 8
Return on equity 9
2010
2009
2008
2007
2006
$ 65,580
16,864
$ 65,930
19,847
$ 79,810
17,849
$ 82,918
22,731
$ 78,218
21,543
3,206
1,874
5,321
0.28
0.28
0.24
0.81
6.83
62,860
16,060
31,016
5,887
8,883
45,177
25.7%
4.9%
2.9%
2.86x
4.2%
5,654
3,690
8,131
0.56
0.56
0.24
1.24
6.79
63,252
15,167
31,580
5,887
9,663
44,587
30.1%
8.6%
5.6%
2.61x
8.7%
1,666
700
4,189
0.11
0.11
0.24
0.64
6.45
61,668
11,946
32,915
5,887
10,206
42,375
22.4%
2.1%
0.9%
2.22x
1.6%
5,718
3,903
6,790
0.61
0.60
0.24
1.17
6.57
58,272
12,093
25,594
5,887
3,487
43,204
27.4%
6.9%
4.7%
1.93x
10.2%
7,858
4,977
7,205
0.79
0.79
0.24
1.14
5.70
53,136
13,052
23,764
4,044
4,310
38,274
27.5%
10.0%
6.4%
2.20x
14.2%
Non-GAAP financial measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Definitions of non-
GAAP measures used in the above table along with relevant other notes are as follows:
1 Funds provided by operations is defined as cash flow from operations before changes in non-cash working capital.
2 Funds provided by operations per share is defined as cash flow from operations before changes in non-cash working capital divided by the weighted average number of shares issued and outstanding.
3 Book value per share is defined as shareholders’ equity divided by the actual number of common shares outstanding at December 31.
4 Working capital is defined as current assets less current liabilities.
5 Gross profit margin is defined as gross profit divided by sales.
6 Operating profit margin is defined as income before other expenses, interest and taxes divided by sales.
7 Net income margin is defined as net income divided by sales.
8 Current ratio is defined as current assets divided by current liabilities.
9 Return on equity is defined as net income divided by opening shareholders’ equity.
PFB Corporation - Annual Report 2010
27
financial reSUltS anal YSiS
The following results of operations should be read in conjunction with PFB`s audited consolidated financial statements for the
years ended December 31, 2010 and 2009. All figures are stated in thousands of dollars except shares and per share amounts.
The results of Insulspan, Incorporated, a fully integrated subsidiary located in the United States of America, are translated into
Canadian dollars using the temporal method on a periodic basis for inclusion in the consolidated financial results.
COnSOliDateD SaleS
($ millions)
78.2
82.9
79.8
65.9
65.6
sales
The year ended December 31, 2010, continued to be
challenging for product sales in both Canada and the United
States, which was comparable to the conditions experienced
in 2009. Consolidated net sales for the year ended December
31, 2010 were $65,580 as compared with $65,930 in the prior
year, a decrease of $350 or 0.5%.
Overall, construction starts remained in the slump, which
began in 2009, spanning the key industry sectors of
commercial, industrial and residential construction.
2006
2007
2008
2009
2010
The Canadian government’s stimulus package launched in
2009 did not generate any noticeable increases in demand
for PFB’s products in 2010, despite some initial optimism.
Shipments of EPS Foam to a large public works project
in British Columbia during 2010 was well below our initial
expectations. Various site delays caused shipments to be
rescheduled into 2011. Annualized residential construction
starts in the United States fell to their lowest level in decades.
A summary of consolidated sales by geographical segment is outlined in the following table:
Canada
United States
Other
Total
2010
$ 57,183
8,397
-
$ 65,580
2009
$ 55,606
10,251
73
$ 65,930
% Change
2.8%
(18.1)%
(100.0)%
(0.5)%
In 2010, sales in Canada of $57,183 were 2.8% higher than sales of $55,606 reported in 2009. Canadian sales in the first six
months of 2010 lagged the pace of sales in the comparative year but sales recovered in the second half of the year and the
confirmed order book strengthened. Decreased sales in the refurbishment and renovations market across Canada in the current
year was believed to be directly linked to the ending of the government’s Home Renovations Tax Credit program which had been
successful in 2009.
PFB’s insulating building systems product sales in Canada, consisting of Advantage ICF, Insulspan SIPS, and Riverbend Timber
Framing are largely supplied to the residential construction market. This sector of the construction market remained depressed in
2010. Downwards pricing pressure featured in some areas as suppliers competed for smaller volumes.
28
PFB Corporation - Annual Report 2010
Sales in the United States of $8,397 were 18.1% lower than sales of $10,251 reported in 2009. The decrease in U.S. sales
in 2010 was indicative of the depressed statistics published for new residential home construction starts. However, improved
quoting activity led to increased levels of confirmed orders being booked in 2010 for shipments required in 2011. However, re-
scheduling of orders by customers to fit the changing dynamics of their construction and financing programs is always a risk to
the timing of when PFB will actually realize sales revenues on the order backlog.
PFB’s subsidiaries in aggregate supply a diverse range of customers with no single customer accounting for more than 5% of
consolidated net sales. No sales were made to Japan in 2010 whereas sales of $73 were made to Japan in 2009. Japan is not a
primary market for PFB’s products.
Cost of goods sold and gross Profit
Gross profit, expressed as a percentage of sales, decreased from 30.1% in 2009 to 25.7% in the current year. Accordingly,
gross profit decreased from $19,847 in 2009 to $16,864 in the current year.
Input costs for PFB’s main raw material had a volatile year in which we experienced a V-type trend around the mid-year point.
Correspondingly, margins were squeezed in the first half of the year, improved around mid-year then squeezed again as the year
moved towards its close. By contrast, raw material input costs in 2009, on average, were much lower than in 2010, particular
during the first quarter. Since the mid-year lows in 2010, there has been progressive price escalation which has continued into
early 2011. Somewhat predictable pricing cycles of the past have given way to increased volatility in recent years and that is a
trend that is expected to continue which will lead to fluctuating gross profit margins for PFB.
The appreciating value of the Canadian dollar versus the U.S. dollar created a natural hedge to increasing raw material input
costs, which are priced in U.S. dollars. Adherence to product pricing discipline in 2009 supported the improvement in gross
profit margins in that year resulting from lower priced raw
materials. However, a lack of sales pricing power in 2010 to
recover increased raw material input costs served to depress
the reported gross profit margin. The pricing of other major
raw materials input costs displayed less volatility particularly
for oriented strand board used in the manufacturing of
Insulspan SIPS and raw timbers used by Riverbend Timber
Framing. Depressed demand helped maintain stable pricing.
PFB’s manufacturing operations faced a number of
challenges in 2010 associated with erratic sales demand
and changes in product mix. In October 2010, the Riverbend
Timber Framing operation in Blissfield, Michigan, suffered
fire which compromised part of its manufacturing facility.
Operations resumed quickly following the fire and all
GROSS PROFit
($ millions)
21.5
22.7
17.8
19.8
16.9
2006
2007
2008
2009
2010
customer orders were satisfied without interruption. The
costs of repairs to the facility are covered by a replacement cost insurance policy and the facility is expected to be fully restored
to its original condition by the spring of 2011. In 2010, a gain of $65 arising from the insurance claim was recognized in cost of
sales and was attributed to insurance proceeds received to replace three fork-lift trucks destroyed in the fire.
The depreciation method for machinery and equipment was changed from a declining balance method to the straight-line
method effective January 1, 2010. Also, following a detailed review by management, buildings and major machinery and
equipment asset classes were componentized and the expected remaining lives of individual assets and components of assets
in those asset classes were evaluated and revised, where appropriate, to reflect future operating expectations. The revisions
PFB Corporation - Annual Report 2010
29
were based on historical performance data and experiences assembled over many years of operating our manufacturing
facilities and equipment. The combined effect of those changes was a reduction of approximately $1,200 in the amount
of depreciation expense included in cost of sales in the current year. This change in depreciation expense represented
approximately 1.8% of sales in the current year which had the effect of improving reported gross profit margins from 23.9% to
25.7%.
In 2009, PFB recognized an accrued benefit asset in the amount of $475 with respect to a defined benefit pension plan for
certain union employees based in Ontario. The balance was credited to cost of sales, consistent with where periodic service
and special payments made to the plan are reported, and the offset was recorded as a long-term asset on the balance sheet.
In 2010, the accrued benefit asset increased by $63, thereby increasing the long-term asset on the balance sheet to $538. PFB
monitors changes in the accrued benefit asset, as calculated by the plan’s actuary each year, and adjusts its financial results
accordingly.
selling and administratiVe eXPenses
Selling and administrative expenses, in aggregate, amounted to $13,661 in the current year as compared to $14,432 in 2009,
a decrease of $771 or 5.3%. Various cost containment initiatives which began in 2009 were continued through the current year
across the organization in the SG&A functions. The resulting actions were successful in scaling back fixed and discretionary
expenditures.
Selling and marketing costs were $8,711 representing 13.3% of consolidated sales in the current year as compared to $9,339
or 14.2% of consolidated sales in 2009. Approved marketing and promotional expenditures were carefully targeted over the
course of the year and aggregate expenditures were lower than in 2009.
Administrative costs amounted to $4,950 or 7.5% of consolidated sales in the current year, as compared to $5,093 or 7.7% of
consolidated sales in 2009. In the current year, administrative payroll costs were lower than in 2009 including a reduced accrual
for the Corporation’s employee profit sharing plan which reflected lower earnings.
foreign eXChange gains and losses
Foreign exchange gains and losses are classified as either realized or unrealized in the statement of operations.
Unrealized foreign exchange differences arise from two main sources: translating U.S. dollar denominated financial instruments
into Canadian dollars; and translating the assets and liabilities of United States-based operations into Canadian dollars at the
financial statement date.
The exchange rate between the Canadian dollar and the U.S. dollar trended in favour of PFB in both 2009 and 2010. A stronger
Canadian dollar is generally positive for PFB’s operations as it has an ongoing net exposure to buy U.S. dollars to pay for raw
materials purchases. By the end of 2010, the Canadian dollar had reach parity with the U.S. dollar, last seen around mid-year in
2008.
Foreign exchange gains and losses reported in fiscal years 2010 and 2009 are stated in the following table:
Realized foreign exchange loss
Unrealized foreign exchange gain (loss)
Total foreign exchange (gain) loss
2010
$ 145
(158)
$ (13)
2009
$ 202
51
$ 253
30
PFB Corporation - Annual Report 2010
interest inCome and interest eXPense
In the current year, interest income earned on cash and short-term investments increased to $41 from an amount of $26 in
2009, which was reflective of small increases in interest rates during the current year. Interest expense in the current year
decreased to $502, a decrease of $100 over interest expense of $602 reported in the previous year. Interest expense in 2010
arose on loans and capital leases. Two tranches of long-term debt, which originally had fixed rates of interest over their initial
five-year terms, were refinanced at lower market rates.
inCome taX eXPense
Income tax expense was $871 or 31.7% of pre-tax income in the current year as compared to income tax expense of $1,388
or 27.3% of pre-tax income in 2009. In 2010, the combined federal and provincial tax rates in Canada reduced from 30.2%
in 2009 to 28.8%. However, adjustments for permanent differences which have no tax basis, prior years adjustments, and
temporary differences which are expected to reverse in future years when tax rates will be lower than current rates caused the
effective rate in 2010 to be elevated higher than normal.
net inCome and earnings Per share
Net income in the current year was $1,874 compared with net income of $3,690 reported in fiscal 2009, a decrease of $1,816.
Accordingly, both basic and diluted earnings per common share decreased from $0.56 to $0.28 based on the weighted average
number of basic and fully diluted common shares outstanding.
COnSOliDateD net inCOme
($ millions)
BaSiC eaRninGS PeR SHaRe
($ per common share)
5.0
3.9
3.7
1.9
0.7
0.79
0.61
0.56
0.28
0.11
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
The major factors driving the decrease in net income in the current year as compared to net income in 2009 was the effect
of higher average raw material costs. The benefits of a stronger currency and decreased SG&A and interest expenses helped
to mitigate the full impact. Net income in 2009 included the tax effected credit of $353 attributed to recognizing the accrued
benefit asset of the defined benefits pension plan (a $475 credit to income less a future income taxes expense of $122) whereas
net income in 2010 included a tax effected credit of $47.
The current year’s results were also inclusive of the positive after tax effects of decreased depreciation expense in the
approximate amount of $890 or $0.13 per share in the current year. Decreased depreciation expense resulted from a combined
change in the depreciation method for machinery and equipment and a change in estimate where the expected remaining lives
of assets and components in the major asset classes of buildings and machinery and equipment were revised, as previously
described in the gross profit section of this MD&A. Prior period results have not been restated.
In both the current year and the prior year, no dilution in basic shares occurred. The basic and diluted weighted average number
of common shares outstanding increased to 6,598,703 from 6,570,906 reported in fiscal 2009. The increase was attributed to
the net effect of issuing 50,000 common shares as a result of an exercising of stock options less 5,900 common shares
PFB Corporation - Annual Report 2010
31
purchased for cancellation under a normal course issuer bid. In fiscal 2009, no stock options were exercised and 3,800 common shares were
purchased for cancellation under the bid.
reSUltS of operationS
fourth Quarter ended deCemBer 31, 2010
The following table discloses the consolidated results of operations of PFB for the fourth quarters ended December 31, 2010
and 2009:
Consolidated statements of oPerations and ComPrehensiVe inCome
Three Months Ended December 31, 2010 and 2009 (Unaudited)
Sales
Cost of goods sold
Selling and administrative expenses
Realized foreign exchange gain
Unrealized foreign exchange loss
Interest income
Interest expense
Income before income taxes
Income taxes
Net income and other comprehensive income
Earnings per common share - basic
Earnings per common share - diluted
2010
$ 16,846
(12,237)
4,609
(3,404)
76
(109)
1,172
12
(117)
1,067
(368)
$ 699
$ 0.10
$ 0.10
2009
$ 15,856
(10,990)
4,866
(3,459)
18
(24)
1,401
8
(134)
1,275
(95)
$ 1,180
$ 0.18
$ 0.18
Weighted average number of common shares outstanding
6,619,975
6,568,736
sales
Consolidated sales for the fourth quarter of 2010 were $16,846, an increase of $990 or 6.2% compared to sales of $15,856
reported in the comparative quarter of 2009.
A summary of consolidated sales by geographical segment for the fourth quarters of 2010 and 2009 are outlined in the following table:
Canada
United States
Japan
Total
2010
$ 14,433
2,413
-
$ 16,846
2009
$ 13,373
2,455
28
$ 15,856
% Change
7.9%
(1.7)%
(100.0)%
3.8%
Increased sales in Canada and the small decrease in U.S sales were complimented by improving levels of confirmed orders. The
small decrease in sales in the United States in the fourth quarter (as expressed in Canadian dollars) was adversely influenced by
the change in year-over-year exchange rates.
32
PFB Corporation - Annual Report 2010
Cost of goods sold and gross Profit
Gross profit, expressed as a percentage of sales, decreased from 30.7 % in the comparative quarter of 2009 to 27.4% in the
current quarter mainly attributed to increased raw materials costs in the current year. Gross profit was positively impacted in
the prior year quarter by a credit to cost of sales with respect to recognizing the accrued benefit pension asset of $475 versus
the corresponding credit of $63 recognized in the current year. The depreciation method for machinery and equipment was
changed from a declining balance method to the straight-line method effective January 1, 2010. The combined effect of those
changes was a reduction of approximately $300 in the amount of depreciation expense included in cost of sales in the current
quarter compared to in the corresponding quarter in 2009.
selling and administratiVe eXPenses
Selling and administrative expenses in the fourth quarter of 2010 amounted to $3,404, slightly lower than selling and
administrative expenses of $3,459 reported in the comparative quarter of 2009.
foreign eXChange gain and loss
Realized foreign exchange gains in the current year quarter were generally reflective of an appreciating Canadian dollar.
However, an unrealized foreign exchange loss arose on U.S. dollars purchased at par exchange in November were revalued to
market exchange rate at the year end which was above par.
interest inCome and interest eXPense
Interest income in the fourth quarter of 2010 was $12 as compared to interest income of $8 in the comparative period. Interest
rates on deposits were slightly higher in the current year than in 2009. Interest expense in the fourth quarter of 2010 was $117,
$17 lower than interest expense of $134 in the fourth quarter of 2009 also positively influenced by favourable interest rates.
net inCome and earnings Per share
Net income of $699 in the fourth quarter compares to net income of $1,180 in the fourth quarter of the comparative year. The
aforementioned after tax credit for the pension plan asset was one of the reasons for higher income in 2009 along with prior year
adjustments to taxes booked in the current year. The change in depreciation method in the current year improved net income in
the current quarter by approximately $220 compared to net income in the fourth quarter of 2009.
Net income in the fourth quarter of 2010 generated basic and diluted earnings per share of $0.10 as compared to a basic and
diluted loss per share of $0.18 reported in the fourth quarter of 2009.
The weighted average number of issued and outstanding shares increased from 6,568,736 in the fourth quarter of 2009 to
6,619,975 in the current quarter. This change was attributed to the net effect of shares issued as a result of stock options
exercised in the current year and the purchase of 5,900 common shares for cancellation under the normal course issuer bid
which all occurred in the fourth quarter. PFB did not purchase any common shares for cancellation in the fourth quarter of 2009.
.
PFB Corporation - Annual Report 2010
33
liQUiditY and capital reSoUrceS
PFB generated positive cash flow from operations in the current year which was deployed as investments in capital
expenditures, financing debt repayments and the payment of regular quarterly dividends. The Corporation maintained significant
unused bank lines.
PFB ended 2010 with a strong balance sheet which included cash and cash equivalents exceeding its total debt obligations.
PFB’s cash balances fluctuate with the seasonality of its business and it is anticipated that cash provided by operations, in
conjunction with the availability of unused revolving bank lines, will be sufficient to meet its overall cash requirements in the
upcoming year.
Cash and non-Cash Working CaPital
At December 31, 2010, PFB had $9,701 (2009 - $10,896) of cash and cash equivalents on hand.
A summary of the main components making up the increase in cash and cash equivalents in 2010 and 2009 is set out in the table below:
Net cash flows proveded by (used in):
Cash provided by operations
Change in non-cash working capital (including foreign exchange)
Operating activities
Financing activities
Investing activities
Effect of foreign exchange loss on cash held in foreign currency
Net increase (decrease) in cash and cash equivalents
2010
2009
$ 5,321
(2,413)
$ 2,908
(2,348)
(1,566)
(189)
$ (1,195)
$ 8,131
3,007
$ 11,138
(2,327)
(1,744)
(34)
$ 7,033
PFB’s non-cash working capital position at December 31, 2010, was $6,997 (2009 - $4,553). Non-cash working capital
components in the current year are indicated in the table below:
Accounts receivable
Inventories
Income taxes receivable
Prepaid expenses
Accounts payable and accrued liabilities
Customer deposits
Total non-cash working capital
2010
$ 6,861
6,976
167
664
(6,137)
(1,534)
$ 6,997
2009
$ 5,892
6,257
276
648
(7,016)
(1,504)
$ 4,553
Change
$ 969
719
(109)
16
879
(30)
$ 2,444
PFB’s current ratio as at December 31, 2010, was 2.86 times, an increase from 2.61 times as at December 31, 2009.
The increase in accounts receivable was reflective of increased fourth quarter sales in the current year as compared with 2009
and a small increase in the number of day’s sales outstanding. The ratio of day’s sales outstanding increased from 34 days in fiscal
2009 to 37 days in the current year. Day’s sales outstanding represents the ratio of actual sales in the fourth quarter divided by
the accounts receivables ending balance multiplied by the number of days in the quarter. The allowance for doubtful receivables
reserve as at December 31, 2010 was $548 compared with $474 in 2009. The increase in the reserve was driven by elevated
exposure to past due receivables with several long-standing customers in the United States.
34
PFB Corporation - Annual Report 2010
At December 31, 2010, the value of inventory had increased as compared to the position in 2009. The increase was attributed
to several factors including the effect of increased raw material costs and holding higher physical inventories of WIP and finished
goods, to support a large customer contract requiring an inventory buffer. The inventory position represented a ratio of 52 days of
fourth quarter cost of sales which was identical to the ratio at the end of fiscal 2009.
Income taxes receivable reduced from $276 as at December 31, 2009, to $167 at the end of the current year. Aggregate tax
instalments that were made in 2009 resulted in an overpayment position and the excess was refunded in 2010. Some non-capital
tax losses carried over from 2009 were utilized against taxable income in the current year which resulted in a reduction in cash
income taxes payable. Accelerated tax depreciation rates available on additions of machinery and equipment continued through
2010 and contributed to a lower current tax liability arising on Canadian taxable income.
Accounts payable and accrued liabilities decreased from $7,016 at the end of the previous year to $6,137 at the end of the current
year, a decrease of $879. The decrease mainly reflects the timing of when purchases were made and settled and carrying lower
accruals.
Cash ProVided By oPerating aCtiVities
The individual components of the cash provided by operations before changes in non-cash working capital are outlined in the
table below:
Net income
Add (deduct) items not requiring cash:
Depreciation and amortization
(Gain) Loss on disposal of capital assets
Stock-based compensation
Accrued benefit asset
Future income taxes
Unrealized foreign exchange (gain) loss
Cash provided by operations before changes
in non-cash working capital
2010
$ 1,874
2,491
(16)
67
(63)
810
158
2009
$ 3,690
3,668
14
114
(475)
1,171
(51)
Change
$ (1,816)
(1,177)
(30)
(47)
412
(361)
209
$ 5,321
$ 8,131
$ (2,810)
Cash flows provided by operating activities before changes in non-cash working capital decreased by $2,810. The main reasons
for the change was a decrease in net income of $1,816 and a decrease in depreciation and amortization expenses of $1,177.
The change in depreciation and amortization expense was mainly attributed to the change in depreciation method for machinery
and equipment and a review of expected remaining lives for buildings and major equipment.
Cash floW - finanCing
No draws on credit facilities were made in 2010 or 2009. Total cash used in financing activities amounted to $2,348 in the cur-
rent year, similar to the $2,327cash used in financing activities in fiscal 2009. Repayments of long-term debt and capital lease
obligations in the current year amounted to $997 as compared to $735 in 2009. The increase was mainly attributed to repay-
ments on auto leases which were reclassified from operating leases to capital leases in 2009. In 2009, auto lease payments
were included in SG&A expenses.
PFB Corporation - Annual Report 2010
35
Regular quarterly dividends payments of $0.06 per common share were made throughout the current year aggregating $1,583
(2009 - $1,577). Dividends were paid in the months of February, May, August, and November of each year. Dividends paid by
PFB qualify as eligible dividends and satisfy the enhanced gross-up and dividend tax credit change enacted under Canadian
income tax law.
Under a normal course issuer bid, 5900 (2009 – 3,800) common shares were purchased for cancellation during the current year
at an aggregate price of $33 (2009 - $15).
CaPital exPenDitUReS
($ millions)
10.8
5.9
4.5
Cash floW - inVesting
Due to continued uncertainties prevailing in the first
six months of 2010, the allocation of cash for capital
expenditure projects was restricted by the Company.
Accordingly, a reduced amount of $1,635 for capital asset
expenditures was incurred in 2010 similar to the amount in
2009 of $1,746. Expenditures in 2010 included equipment
upgrades plus other relatively minor maintenance capital.
Proceeds received from the sale of capital assets in 2010
1.7
1.6
was $54 (2009 - $7).
2006
2007
2008
2009
2010
Additions to intangible assets in 2010 were $50 as
compared to $5 in 2009. The additions represented the
purchase of application software.
finanCial instruments
PFB is exposed to a variety of risks that may affect the fair value of its financial instruments with each carrying varying degrees
of significance which could affect PFB’s ability to achieve its strategic objectives of growing its operations and increasing
shareholder returns.
A summary of the classifications, carrying values and fair values of financial instruments held by PFB as at December 31, 2010
and 2009, are stated in the following table:
2010
2009
Book value
Fair value
Book value
Fair value
Financial assets
Held for trading:
Cash and cash equivalents
$ 9,701
$ 9,701
$ 10,896
$ 10,896
Loans and receivables:
Accounts receivable
Financial liabilities
Other liabilities held for trading:
Accounts payable and
accrued liabilities
Other financial liabilities:
Long-term debt (total)
6,861
6,861
5,892
5,892
$ 6,137
$ 6,137
$ 7,016
$ 7,016
8,883
8,803
9,663
9,549
PFB’s financial instruments are defined in Note 2(m) and determination of fair value is discussed in Note 2(m)(i) of the 2010
consolidated financial statements.
36
PFB Corporation - Annual Report 2010
The CICA Handbook Section 3862, Financial Instruments – Disclosures establishes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:
Level 1: Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for
identical assets or liabilities.
Level 2: Values based on quoted prices in markets that are not active or model inputs that are observable either directly or
indirectly for substantially the full term of the asset or liability.
Level 3: values based on prices or valuation techniques that require inputs that are both unobservable and significant to
the overall fair value measurement.
The following table presents the company’s fair value hierarchy for those assets and liabilities measured at fair value on a
recurring basis as of December 31, 2010 and 2009:
total
level 1
level 2
level 3
Financial assets
Held for trading:
Cash and cash equivalents
December 31, 2010
December 31, 2009
$ 9,701
$ 10,896
$ 9,701
$ 10,896
-
-
-
-
The principal risks associated with financial instruments, to which PFB is exposed, along with its risk management policies are
described below:
(a) Credit Risk
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by fail-
ing to discharge its obligation.
PFB’s exposure to credit risk is associated with accounts receivable and the potential risk that a customer will be unable to
pay amounts due. Allowances for doubtful accounts and bad debts are estimated and maintained as at the balance sheet
date. The amounts reported for accounts receivable in the balance sheet are net of allowances for doubtful accounts and
bad debts and the net carrying value represents PFB’s maximum exposure to credit risk.
PFB’s subsidiaries provide trade credit to their customers in the normal course of business and PFB’s credit policy is univer-
sally adopted across all businesses. The policy requires the credit history of each new customer to be closely examined be-
fore credit is granted, which may involve performing solvency tests if a particular account is expected to become significant.
The diversity of PFB’s customer base and product offering combine to minimize overall exposures to credit risks.
Customers ordering highly customized manufactured products, usually involving detailed design work, are required to make
advance payments at various pre-defined stages of the sales contract. All payments received in advance are reported as
customer deposits under the current liability section of the balance sheet. Final contract balances are typically required to
be paid in full before products are shipped.
Management diligently reviews past due accounts receivable balances on a weekly basis to monitor potential credit risks.
Accounts are considered for impairment on a case-by-case basis when they are past due or when objective evidence is
received that a customer may default. A number of factors are considered in determining the likelihood of impairment. All
bad debt write-offs and changes in the doubtful accounts receivable reserve are expensed or credited, as applicable, to
selling and administrative expenses.
PFB Corporation - Annual Report 2010
37
The following table sets forth details of the ageing profile of accounts receivable and allowance for doubtful accounts as at
December 31:
Accounts receivable - current and past due for less than 30 days
Accounts receivable - past due for between 31 and 90 days
Accounts receivable - past due for 91 days or longer
Total gross accounts receivable
Allowance for doubtful accounts
Accounts receivable, net
2010
$ 4,924
1,901
584
7,409
(548)
$ 6,861
2009
$ 4,031
2,053
282
6,366
(474)
$ 5,892
PFB believes that credit risk associated with its accounts receivable is limited for the following reasons:
(i)
Accounts receivables balances are spread amongst a broad customer base which is dispersed across a
wide geographic range.
(ii)
(iii)
(iv)
(v)
The aging profile of accounts receivables balances are systematically monitored by management.
Larger customers are offered a discount of 1% off invoice value if full payment is received by an agreed
date in the month following the month of sale.
Payments for highly customized orders are received from customers in advance of products being shipped.
PFB’s largest individual customer, determined by annual purchases, represents less than 5% of total
consolidated sales revenues.
The credit risk on cash balances, cash equivalent short-term investments, and foreign exchange contracts is limited because
the counterparties are a large commercial bank in Canada and its associate in the United States. Short-term investments,
reported under cash and cash equivalents, comprise financial instruments issued by Canadian banks. No foreign exchange
contracts existed as at either December 31, 2010 or December 31, 2009.
PFB’s exposure to credit risk is limited to the carrying amounts of financial assets recognized at the balance sheet date, as
summarized in the table below:
Cash and cash equivalents
Accounts receivable
(b) Currency Risk
2010
$ 9,701
6,861
December 31
2009
$ 10,896
5,892
Currency risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates.
PFB operates in both Canada and the United States of America and is exposed to foreign exchange risks arising from
changes in foreign exchange rates between the two countries. At the present time, PFB has a net exposure to the United
States (U.S.) dollar, as the prices of most raw material supplies used in its businesses are denominated in U.S. dollars.
PFB purchases its U.S dollar requirements at the spot market rates. From time to time, PFB may utilize derivative financial
instruments in the normal course of operations as a means of management its foreign currency exposure. During the years
ended December 31, 2010 and 2009, PFB and its subsidiaries neither entered into nor held foreign exchange contracts.
Raw material supplies denominated in U.S. dollars are usually paid within thirty days or less of receiving product shipments,
which is consistent with industry practices.
38
PFB Corporation - Annual Report 2010
At December 31, 2010, the carrying amounts of PFB’s foreign currency denominated net monetary assets was USD $5,023
(2009 – USD $4,114) and foreign currency denominated net monetary liabilities was USD $2,314 (2009 – USD $2,667).
Based on the net foreign currency liability as at December 31, 2010, and assuming that all other variables remain constant,
a fluctuation of +/- 5.0% in the exchange rate between the Canadian dollar and the U.S. dollar would impact net income or
loss by approximately $95 (2009 - $55).
PFB is exposed to currency rate risk on a portion of its net monetary assets and liabilities and it does not currently hold
any financial instruments to mitigate those risks. Management believes that the potential adverse impact of currency rate
fluctuations on the current level of net monetary assets and liabilities exposed to currency rate risk will not be significant in
relation to its expected future earnings
(c) interest Rate Risk
Interest rate risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of change in market interest rates.
PFB is exposed to interest rate risk on a portion of its long-term debt and it does not currently hold any financial
instruments to mitigate those risks. Management believes that the potential adverse impact of interest rate fluctuations
on the current level of borrowings exposed to interest rate risk will not be significant in relation to its expected future
earnings.
As at December 31, 2010, PFB’s subsidiaries have in place a combination of revolving and non-revolving credit facilities.
Maximum revolving credit facilities of $8,000 and USD $1,500 were unused at the balance sheet date. The revolving
credit facilities are each secured by accounts receivables and inventories, and the maximum available limits may
fluctuate downwards if accounts receivable and inventory balances contract. The unused portion of non-revolving credit
facility with a Canadian bank was $4,230 (2009 - $4,196) which represents an approved limit of $4,300 less amounts
outstanding on Canadian capital leases financed by the bank.
(d) liquidity Risk
Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with finan-
cial liabilities.
Liquidity risk is the risk that PFB is not able to meet its financial obligations as they become due or that it can only
do so at an abnormally high cost. PFB’s future strategies can be financed through a combination of cash flows
provided by operations, borrowing under existing credit facilities, and the issuance of equity. One of management’s
primary goals is to maintain an optimum level of liquidity by actively managing assets, liabilities and cash flows.
Management prepares regular budgets and cash flow forecasts to help predict future changes in liquidity. Based on
PFB’s aggregate liquid assets as compared to its liabilities and commitments, management assesses PFB’s liquidity
risk to be low, subject to a continuing ability to generate positive cash flows from operations.
PFB’s liabilities having contractual maturities as at December 31, 2010, are as indicated in the following table:
Accounts payable and accrued liabilities
Long-term debt
Total liabilities
Current within
12 months
$ 6,137
948
$ 7,085
non current
1 - 5 years
Over 5 years
$ -
7,935
$ 7,935
$ -
-
$ -
PFB Corporation - Annual Report 2010
39
CaPitalization
The primary objective of PFB is to maintain a flexible capital structure to preserve its ability to meet its financial obligations and
to produce a targeted rate of return while safeguarding corporate assets. The components of PFB’s current capital structure are
shareholders’ equity and long-term debt. The core of PFB’s capital management activities is the successful management of cash.
PFB’s capital structure as at December 31, 2010 and December 31, 2009, is outlined in the following table:
Long-term debt
Shareholders’ equity
Balance, end of year
2010
$ 8,883
45,177
$ 54,060
2009
$ 9,663
44,587
$ 54,250
PFB considers the amount of capital it requires in proportion to the associated risks. Adjustments may be made to PFB’s capital
structure in light of changes in economic conditions and the risk characteristics of the underlying assets. The capital structure
can be maintained or adjusted in a variety of ways as circumstances may change, including: adjusting the amount of dividends
paid to shareholders; purchasing shares for cancellation (Normal Course Issuer Bid); issuing new shares; and increasing or
repaying long-term debt.
PFB pursues its capital management objectives by prudently managing the capital generated through internal growth of its
operations, optimizing the use of lower cost capital when required, and raising share capital, subject to market conditions, to
fund significant strategic growth initiatives.
Consistent with many other issuers, PFB monitors capital using the following non-GAAP ratios:
• Return on Shareholders’ Equity, which is defined as net income for the most recent twelve-month period divided by
total shareholders’ equity at the beginning of that twelve month period. Shareholders’ Equity is defined as all components
of shareholders’ equity (i.e. share capital, contributed surplus, and retained earnings).
• Net Debt divided by Shareholders’ Equity. Net debt is defined as total debt (the current portion plus long-term portion), as
shown in the balance sheet, less cash and cash equivalents.
• Current ratio, which is defined as current assets divided by current liabilities.
Actual ratios calculated at the dates stated are set out in the following table:
Return on Shareholders’ Equity
Net Debt to Shareholders’ Equity 1
Current Ratio
1 At December 31, 2010 and 2009, cash and cash equivalent balances exceeded total debt
December 31
2010
4.2%
-
2.86x
2009
8.7%
-
2.61x
Entities within PFB’s consolidated group have non-capital tax losses carried forward to be utilized against future taxable income
expected to be generated by those entities.
40
PFB Corporation - Annual Report 2010
PFB’s subsidiaries are subject to certain covenants on their credit facilities, one of which is a financial covenant to maintain a
Fixed Charge Coverage of not less than 1.25:1. Fixed Coverage Charge is defined as the ratio of EBITDA (net income from
continuing operations, excluding extraordinary gains or losses, plus interest expense and income taxes accrued during the
period, plus depreciation and amortization expenses deducted in the period) plus payments under operating leases less cash
income taxes and unfunded capital expenditures to fixed charges. Fixed charges are defined as the total of interest expense,
scheduled principal payments in respect of funded debt, payments under operating leases, and corporate distributions. PFB
has also provided a guarantee and postponement of claim to support certain facilities of subsidiaries. PFB monitors compliance
with its covenant ratio on a quarterly basis and reports any exceptions to its board of directors. As at December 31, 2010 and
2009, the financial covenant ratio was in compliance.
share CaPital and shareholders’ eQuity
A summary of PFB’s share capital as at December 31, 2010 and 2009 is set forth in the following table:
Balance, beginning of year
Shares issued as a result of stock
options exercised
Cancellation of repurchased shares
2010
2009
Shares
6,568,736
amount
$ 19,815
Shares
6,572,536
amount
$ 19,829
50,000
(5,900)
313
(18)
-
(3,800)
-
(14)
Balance, end of year
6,612,836
$ 20,110
6,568,736
$ 19,815
The individual components making up shareholders’ equity as at December 31, 2010 and 2009 are summarized in the table below:
Share capital
Contributed surplus
Retained earnings
Total Shareholders’ Equity
2010
$ 20,110
384
24,683
$ 45,177
2009
$ 19,815
365
24,407
$ 44,587
Change
$ 295
19
276
$ 590
A summary of transactions making up the change in shareholders’ equity in the twelve month period ended December 31,
2010, are outlined in the table below:
activity
Shares issued as part of stock options exercised
Shares purchased for cancellation under a normal
course issuer bid
total Change in Share Capital
Fair value of stock-based compensation
Exercise of stock options
total Change in Contributed Surplus
Change in retained earnings resulting from:
Net income
Dividends paid
Premium on redemption of common shares
total Change in Retained earnings
Balance Sheet account
Share Capital
amount
$ 313
Share Capital
Contributed Surplus
Contributed Surplus
Retained Earnings
Retained Earnings
Retained Earnings
(18)
$ 295
$ 67
(48)
$ 19
$ 1,874
(1,583)
(15)
$ 276
PFB Corporation - Annual Report 2010
41
stoCk oPtions
PFB did not grant any stock options in years 2010 and 2009 under its stock option plan.
The following table sets forth all outstanding stock options as of December 31, 2009 and 2008:
Outstanding, beginning of year
Granted
Exercised
Cancelled
Expired
Forfeited
Outstanding, end of year
2010
2009
number of Weighted average
exercise Price
Options
number of Weighted average
exercise Price
Options
200,000
-
(50,000)
-
-
(20,000)
130,000
$ 8.45
-
(5.30)
-
-
(9.50)
$ 9.50
200,000
$ 8.45
-
-
-
-
-
-
-
-
-
-
200,000
$ 8.45
ContraCtual oBligations
As at December 31, 2010, PFB’s long-term contractual obligations of $11,411 are as outlined in the table below:
Payment Due by Period
Contractual Obligations
Long-term debt
Capital lease obligations
Operating leases
Commitments for capital assets
and intangible assets
Other long-term obligations1
Total Contractual Obligations
total
$ 8,456
427
2,191
337
-
$ 11,411
2011
$ 736
212
720
337
-
$ 2,005
2012
$ 741
153
570
-
-
$ 1,464
2013
$ 5,619
62
308
-
-
$ 5,989
1 Other long-term obligations exclude future income tax liabilities as the exact timing of realizing these obligations is not readily determinable.
2014
$ 242
-
306
-
-
$ 548
2015
and later
$ 1,118
-
287
-
-
$ 1,405
Capital leases are for automobiles and materials handling equipment. In 2009, $297 of operating leases for automobiles were
reclassified from operating leases to capital leases. At December 31, 2010, there was an outstanding commitment for capital
expenditures in the amount of $337 for projects approved in 2010 but expected to be completed in the first quarter of 2011.
Under the terms of certain sales contracts, PFB is required to provide performance bonds to ensure that it performs under such
contracts. As at December 31, 2010, performance bonds outstanding aggregate $24,678 (2009 - $22,048).
off-BalanCe sheet arrangements and oPerating leases
As a regular part of its business, PFB’s subsidiaries enter into operating lease agreements to use facilities, vehicles, and
materials handling equipment. The Corporation has no off-balance sheet arrangements.
42
PFB Corporation - Annual Report 2010
related Party transaCtions
In fiscal 2010 and 2009, PFB had transactions with three related parties all of which are summarized in the table below. All related
party transactions are constituted in the ordinary course of business and they have been measured at the agreed to exchange
amounts which approximate fair value. All transactions with related parties have been approved by PFB’s Board of Directors.
Related Party
Aeonian Capital Corporation
Baker Investments, LLC
McCarthy Tetrault LLP
William H. Smith Professional Corp.
Totals
nature of transaction
Management services
Stipend and travel expenses
Legal services
Legal services
2010
$ 200
114
40
9
$ 363
2009
$ 200
118
85
-
$ 403
Change
$ -
(4)
(45)
9
$ (40)
As at December 31, 2010, Aeonian Capital Corporation (“Aeonian”), and its affiliates, owned 2,921,668 or 44.2% (2009 –
2,921,668 or 44.5%) of PFB’s issued and outstanding common shares. Aeonian is controlled by C. Alan Smith, President,
Chief Executive Officer, and a Director of the Corporation. PFB is charged fees by Aeonian for management services including
those provided by Mr. Smith. The fees for management services are reported under selling and administrative expenses. As at
December 31, 2010 and 2009 all fees had been paid in full in each respective year.
Mr. Frank Baker, a director of PFB, receives an annual stipend of USD $85 plus a travel and subsistence allowance to a
maximum of USD $25 per annum for representing and promoting PFB’s interests, including representation at various industry
and trade organizations. As at December 31, 2010, there was an account payable outstanding to Mr. Baker in the amount of
USD $26 with respect to the fourth quarter stipend and expenses which were settled in January 2011.
McCarthy Tetrault LLP provides legal services to PFB at which William H. Smith, QC, Corporate Secretary and a director of PFB,
was Counsel to the firm until July 1, 2010, at which time, McCarthy Tetrault LLP ceased to be a related party.
Effective July 1, 2010, William H. Smith Professional Corporation became a related party. As at December 31, 2010, a payable
to the professional corporation in the amount of $9 (2009 - $Nil) was outstanding
PFB Corporation - Annual Report 2010
43
oUtlooK
PFB’s operations in Canada continue to reflect a stronger economic environment than that persisting in the United States
although sales in Canada have not recovered to pre-recessionary levels. In the United States, PFB’s Insulspan SIPS and
Riverbend Timber Framing products have been traditionally sold to the custom-home residential sector where the prolonged
downturn has created challenging conditions for all participants. In February 2011, PFB completed the acquisition of Precision
Craft and associated companies based in Idaho, USA, to compliment its existing portfolio of building products (see subsequent
event section below). Operations in the United States are being refocused as a consolidated group as a result of this transaction.
Upwards price pressure for major raw materials that are priced in United States dollars remained a familiar theme entering 2011
with the potential for further escalation if world commodity prices trend higher as a result of weakness in the trading price of US
currency and political unrest in certain North African and Middle Eastern countries.
As in previous years, PFB will have a net overall exposure to the U.S. dollar in fiscal 2011. The appreciation of the Canadian
dollar versus the U.S. dollar in the last two years partially mitigated the impact of increasing raw material costs although currency
appreciation has the opposite effect when translating U.S. denominated sales into Canadian dollars. As fiscal 2010 closed, one
Canadian dollar was worth more than one U.S. dollar and more appreciation had occurred in the early part of 2011. This remains
a positive currency environment for PFB.
Management is confident that its growth strategy focussed on EPS-based insulating building products will achieve its objectives
of increasing shareholder value, increasing sales revenues and earnings per share, and generating acceptable rates of return on
capital invested. Achieving these goals will allow the generation of future cash flows to fund new product developments, increase
manufacturing capacity as required, repay contractual obligations, and pay regular dividends. We remain focused on increasing
market share in our markets and entering new markets while ensuring that our financial integrity remains intact.
Cash flow provided by operations, together with existing unused credit facilities, is considered adequate to meet all anticipated
liquidity requirements in 2011.
SUBSeQUent event
Effective February 1, 2011, PFB Corporation acquired 100% of the share capital of Precision Craft Homes, a company based in
Idaho, USA, which designs and builds luxury log and timber frame homes. The total consideration included USD $2,500 in cash
paid on closing plus the equivalent of CAD $1,000 in escrowed common shares (166,667 common shares nominally valued at
$6.00 per share) to be held in escrow and subject to an earn-out provision for a maximum period of five years.
diScloSUre controlS and procedUreS
PFB’s disclosure controls and procedures have been designed to provide reasonable assurance that all material information
relating to PFB and its operations is identified and communicated to the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) as it becomes known so that appropriate decisions can be made regarding public disclosures, as required under the
continuous disclosure requirements of securities legislation.
An evaluation of the effectiveness of the design and operation of PFB’s disclosure controls and procedures was conducted as of
December 31, 2010, under the supervision of the CEO and CFO. Based on this evaluation, the CEO and CFO have concluded
that PFB’s disclosure controls and procedures, as defined in National Instrument 52-109, Certification of Disclosure in Issuer’s
44
PFB Corporation - Annual Report 2010
Annual and Interim Filings, have been designed to provide reasonable assurance that material information relating to PFB,
including its consolidated subsidiaries, is made known to them by others in those entities, and to provide reasonable assurance
that accurate and complete disclosures in annual and interim filings is completed within the time periods specified.
Notwithstanding the foregoing, no absolute assurances can be made that PFB’s controls over disclosure will detect or prevent
all failures of individuals within the organization to disclose material information otherwise required to be set forth in reports or
news releases issued by the Corporation.
internal controlS over financial reporting
PFB Corporation’s management is responsible for establishing and maintaining adequate internal controls over financial
reporting. These controls include policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transaction and dispositions
of the assets of the Corporation;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and ensure that receipts and expenditures are being made only in accordance with authorizations
of management and directors of the Corporation; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized, use or disposition of the
Corporation’s assets that could have a material effect on the financial statements.
All control systems contain inherent limitations, no matter how well designed. As a result, PFB’s management acknowledges
that its internal controls over financial reporting will not prevent or detect all misstatements due to error or fraud. In addition,
management’s evaluation of controls can provide only reasonable, not absolute, assurance that all control issues that may result
in material misstatements, if any, have been detected.
PFB Corporation’s management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
framework to evaluate the effectiveness of the Corporation’s internal control over financial reporting. As at December 31,
2010, the CEO and CFO assessed the effectiveness of PFB’s internal control over financial reporting and concluded that it was
effective and that no material weaknesses in PFB Corporation’s internal control over financial reporting had been identified.
riSK management and aSSeSSment
PFB is subject to risks and uncertainties inherent in the operation of its business. Management defines risk as the possibility
that an event might happen in the future that could negatively affect the financial condition and/or results of operations of
the Corporation. The following section describes specific and general risks that could affect PFB. The Audit Committee and
the Board of Directors play an important role in developing risk management programs and reviewing and monitoring them
on a quarterly basis. As it is difficult to predict whether any risk will happen or its related consequences, the actual effect of
any risk on PFB’s business could be materially different from anticipated. The following descriptions of risk do not include all
possible risks as there may be other risks of which PFB is unaware.
PFB Corporation - Annual Report 2010
45
raW material PriCe and suPPly
The price of raw materials, in particular, styrene monomer, expandable polystyrene resin, polypropylene copolymers, oriented
strand board, and raw timbers represent a significant portion of the manufacturing costs in PFB’s businesses. Historically, there
has been considerable volatility in the price of these products which is outside the control of PFB. There is no futures market for
these products available to the Corporation, which limits the ability to lock in prices for fixed periods of time.
Nevertheless, PFB may from time to time build inventories of both raw materials and finished goods which can lead to the
assumption of risk due to an inability to match carrying costs to selling prices under fixed price sales contracts. Conversely, from
time to time, PFB may be short of inventory that has been contracted to be delivered under fixed price sales contracts that can
lead to the assumption of risk due to an inability to match costs to selling prices.
Hexabromocyclododecane (HBCD) is a brominated flame retardant used in EPS resin by manufacturers to ensure insulation
products meet strict building code fire performance requirements when used as a component in building assemblies. Recently,
Environment Canada has been conducting a review of the effect of many chemicals on the environment including HBCD.
Currently there are no commercially available alternatives to HBCD for EPS foam. Alternatives to HBCD are being developed in
the industry and PFB is continuing to work with flame retardant producers to expedite the transition. This issue is a risk to future
raw material supply.
Management continues to explore opportunities to minimize the impact of price swings of raw materials on earnings. The
changing dynamics in the petrochemical industry, primarily driven by world oil prices and other global events, and changing
dynamics affecting other industries are difficult to predict. Such changes may create the potential for raw material supply
disruptions or shortages which would be detrimental to PFB’s operations.
eConomiC and market Conditions
PFB’s business is affected by prevailing general economic conditions, consumer confidence and spending, and both the
demand for and prices of its EPS products and insulating building systems. Weaker economic conditions, the impact of
changing mortgage rates and other interest rates potentially affecting the construction industry, and the possibility of a slow
down in residential and/or commercial construction activity, typically evidenced by the change in the number of building permits
issued, may translate into lower demand for PFB’s products. Such effects may also adversely affect the financial condition and
credit risk of its customers, including their ability to obtain credit to finance their businesses, which could create uncertainty over
the collectability of receivables.
ComPetition
As a market leader in its industry, PFB faces intense and growing competition from other manufacturers of all sizes located in
both Canada and the United States, new entrants in the markets we serve, along with manufacturers of competing substitute
products. Competition can affect PFB’s pricing strategies and lower its sales revenues and net income. Competition can also
affect PFB’s ability to retain existing customers and attract new ones. A competitive business climate increases the resolve to
provide exceptional customer service, quality products, and the need to be price competitive. Management continues to identify
ways to reduce costs, grow revenues, manage expenses and increase productivity. This requires anticipating and responding
quickly to the constant changes in its businesses and markets.
CurrenCy
PFB has a net exposure to the U.S. dollar which makes it vulnerable to fluctuations in the foreign exchange rate between the
Canadian dollar and the U.S. dollar. The timing of foreign exchange rate fluctuations between the Canadian dollar and the U.S.
dollar can have a significant effect on PFB’s operating results, the effect and magnitude of which depends on the product mix of
sales and raw material purchases.
46
PFB Corporation - Annual Report 2010
From time to time, management may commit to utilizing derivative financial instruments in the normal course of business
as a means of management of its foreign currency exposure. Management attempts to make informed judgements in such
transactions but there is the possibility that markets may respond in ways not predicted. To the extent that PFB does not fully
hedge its foreign currency exposure and exchange rate risk, or PFB’s subsidiaries are not able or do not raise their selling prices
accordingly when exchange rates are moving in an unfavourable direction, the profitability of the business could be adversely
affected.
aCQuisitions
PFB’s growth strategy includes making strategic acquisitions when possible. There is no assurance that it will find suitable
companies to acquire or that it will have the financial resources needed to complete any acquisition. There could also be
challenges integrating the operations of any acquired company with existing operations.
funding
In developing business operations to their full potential, significant capital and operating expenditures are incurred on an ongoing
basis. PFB has historically generated sufficient cash flow from its operations to fund capital expenditures and maintain regular
dividend payments. Future development of new products and the growth of PFB’s business through internal expansion or by
acquisitions may depend on access to external funding. PFB’s cash position and existing debt facilities are considered adequate
to meet its current and medium-term needs. There is no guarantee that funding for future expansion of PFB’s operations will be
available on acceptable terms if required.
rePutation
Negative publicity regarding PFB’s business practices regardless of whether true or false could adversely affect PFB’s reputation
which could in turn affect its operations, customers, and share value. PFB manages this risk by placing the utmost importance
on corporate governance and full and fair disclosure. Good corporate governance practice emanates from an effective board
of directors. The majority of PFB’s board of directors consists of independent directors and the board and its committees have
been shaped to competently perform the role of overseeing the appropriate management of PFB’s affairs with the objective of
maximizing the long-term value of the Corporation. A detailed summary outlining PFB’s corporate governance practices can be
found in PFB’s Management Information Circular.
trade Credit
PFB’s subsidiaries provide trade credit to their customers in the normal course of business. PFB’s credit policy is universally
adopted across its businesses. The policy requires the credit history of each new customer to be closely examined before credit
is granted, which may include performing solvency tests if a particular account is expected to become significant. Management
diligently reviews past due receivables on a weekly basis which helps minimize credit risk. The diversity of PFB’s activities and
customer base also helps minimize the credit risk to which it may be exposed.
enVironmental Considerations
Environmental issues are gaining in importance for PFB’s stakeholders. PFB is committed to responsibly manage the
direct and indirect impact it has on the environment. PFB believes that it is in compliance with applicable environmental
laws in jurisdictions where it has operations. All construction materials must adhere to fire safety requirements during their
manufacture, transportation and storage. Hexabromocyclododecane (HBCD) is a brominated flame retardant used in EPS
resin by manufacturers to ensure insulation products meet strict building code fire performance requirements when used as a
component in building assemblies. In 2010, Environment Canada and Health Canada published a Draft Screening Level Risk
Assessment report of HBCD. The report concluded that HBCD is not entering the environment in a quantity or under conditions
that constitute or may constitute a risk in Canada to human life or health but that HBCD meets the criteria to be labeled as
toxic to the environment. PFB will continue to work with Environment Canada and other industry partners to develop a risk
PFB Corporation - Annual Report 2010
47
management strategy for HBCD. Currently there are no commercially available alternatives to HBCD for EPS foam. However,
alternatives are being developed and PFB is continuing to work with flame retardant producers to expedite the transition.
information teChnology
PFB makes extensive use of information technology in conducting its businesses. This involves web-based connections,
access to secure centralized databases, and maintaining existing and implementing new business software applications. The
security and safeguarding of information technology assets and protocols will continue to be increasingly important to PFB. PFB
minimizes its exposure to I.T. risks by continuously reviewing its access and application controls, performing disaster recovery
testing, locating its backbone I.T. assets in an industry-leading secure location, and hiring and training specialist employees with
respect to the protection and use of I.T. assets and related intellectual property.
seasonality and ClimatiC faCtors in the ConstruCtion industry
Due to the seasonal nature of the construction industry, PFB’s actual reported sales show variations when viewed on a quarter-
by-quarter basis. Typically, sales are weakest in the first quarter of the year and strongest in the third quarter. Sales in any
quarter can be significantly influenced by weather, specifically when winter begins and ends and its severity.
Plant and faCilities
The Corporation operates a number of manufacturing facilities across North America, most of which operate at or near capacity
for significant portions of the year. Any disruption to operations at any plant and facility arising from natural or man-made
causes such as fire, flood, labour disputes, disruption to access or egress, or other events, could have a material impact on the
Corporation and its business operations.
emPloyee future Benefits
A defined benefits pension plan (the Plan) exists for certain Ontario-based employees who are members of the United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied industrial and Service Workers International union. The latest actuarial
valuation was completed on March 31, 2010, and identified that the Plan had a funding deficit on a going-concern basis of
$94 (2009 - $119) and, on a solvency basis, the actuarial liabilities exceeded the value of assets by $82 (2009 - $30). As a
result, throughout 2010 and 2009, PFB made regular service and special payment contributions to the Plan. In fiscal 2010, total
contributions of $122 (2009 - $130) were made and PFB expects future annual contributions to continue at similar amounts until
the deficits are eliminated. However, the actual rate of return on plan assets and changes in interest rates and other variables
could result in changes in PFB’s funding requirements for the Plan. The Plan assets are not immune to market fluctuations and,
as a result, PFB may be required to make additional cash contributions in future.
off-BalanCe sheet arrangements and oPerating leases
PFB enters into operating lease contracts for certain properties, vehicles, and for materials handling equipment requirements.
The total non-discounted operating lease commitments as at December 31, 2010, total $2,191 as disclosed in Note 18(b) to
the consolidated financial statements. In the case of property leases, PFB’s subsidiaries are also responsible for their share of
operating costs. The Corporation has no off-balance sheet arrangements.
human resourCes
PFB’s ability to attract and retain qualified employees is an area of risk and uncertainty. PFB attempts to mitigate this risk by
offering a competitive compensation and benefits package, training, and a positive cultural environment.
48
PFB Corporation - Annual Report 2010
SUmmarY of accoUnting policieS and management
eStimateS
The Corporation’s consolidated financial statements for the year ended December 31, 2010 have been prepared in accordance
with Canadian GAAP. This section discusses key estimates and assumptions that management has made under these
principles, and how they affect the amounts reported in the financial statements and notes. Please refer to Note 2 – Significant
Accounting Policies in the consolidated financial statements for more detailed information concerning PFB’s accounting policies
used to prepare its consolidated financial statements.
key estimates and assumPtions
In conformity with Canadian GAAP, management make certain estimates and assumptions when accounting for and reporting
assets, liabilities, revenues and expenses in the consolidated financial statements. Estimates and assumptions are based on
past experience and other factors which are believed to be reasonable under the circumstances. Management has discussed
the development and selection of these key estimates and assumptions with the Audit Committee of the Board of Directors and
the Audit Committee has reviewed the disclosures described in this section.
aCCounts reCeiVaBle
Management frequently evaluates the recoverability of accounts receivable on a customer-by-customer basis taking into
account past trading experience, approved credit limits, the ageing profile of past due receivables, current market and
economic conditions, and credit information obtained from third parties. Allowances are maintained for doubtful accounts when
management determines that a customer’s ability to pay may be doubtful. The allowance is estimated based on the likelihood of
recovery. Credit losses absorbed in 2010 and in recent prior years have been within management’s expectations. The provision
for doubtful accounts represents approximately 8.0% of the year-end accounts receivable balance. The provision is consistent
with that of the most recent prior year.
inVentory oBsolesCenCe
The value of PFB’s inventory is reviewed by management on a monthly basis. Items identified as obsolete and items not saleable
at prices in excess of carrying amounts are written down to estimated net realizable amounts and the write down amount
charged to cost of sales. Inventory obsolescence provisions are determined by reviewing inventory turns, seasonality trends,
and slow moving inventory reports. To the extent that estimates made by management are incorrect, PFB’s operating expenses
and inventory carrying values may be higher or lower than the amounts reported. PFB’s customized products are manufactured
to order which limits the potential risk of inventory obsolescence for those products.
inCome taX Valuation alloWanCe
PFB has net future income tax assets resulting from operating losses that are available to reduce taxable income in future periods.
CICA Handbook Section 3465, Income Taxes requires that a valuation allowance be established when it is ‘more likely than not’
that all or a portion of the future income tax assets will not be realized. At December 31, 2010, management has not recorded a
valuation allowance against future income tax assets as it believes that it is more likely than not that sufficient taxable income in
future years will be sufficient to fully recover the future income tax assets.
useful life of CaPital assets
Management estimates the useful life of long-lived assets at the time of acquisition, which is then used to determine
depreciation expense. The estimated useful life of an asset is usually based on a combination of past experience, the purpose
for which an individual asset will be used, and the likelihood of future technological changes. A change in estimate may result in
a higher or lower depreciation expense charge in future periods or an impairment charge to reflect a write-down in the carrying
value of the asset.
PFB Corporation - Annual Report 2010
49
fair market Value for goodWill and imPairment testing
In connection with the business acquisitions completed by PFB in fiscal 2003 and 2004, PFB identified and estimated the fair
value of assets acquired and liabilities assumed. Any excess of the purchase price over the estimated fair value of the identified
net assets was assigned to goodwill.
PFB assesses the impairment of goodwill on an annual basis, or whenever a change in events or circumstances indicates that
carrying values may not be recoverable. In 2010 and 2009, no impairments in the carrying costs of goodwill were identified.
intangiBle assets
Intangible assets include computer software, product development costs, and patents. Product development costs that meet
specified criteria related to technology, market, and financial feasibility are deferred and amortised over a period of three years
post completion of the project. Costs that do not meet the criteria for deferral are expensed in the period they are incurred.
PFB’s policy for intangible assets requires the periodic review of the carrying value of such costs in order to determine if there
has been impairment in value based on a reduction in expected future cash flows. If it is determined that the carrying value
exceeds the recoverable amounts, the net asset is written down to the net recoverable amount.
recent changeS to accoUnting StandardS
In January 1, 2009, PFB adopted the following Canadian Institute of Chartered Accountants (CICA) Handbook
Recommendations:
Section 3064, Goodwill and Intangible Assets
Emerging Issues Committee (EIC) Abstract No. 173, Credit Risk and the Fair Value of Financial Assets
and Financial Liabilities
Section 3064, Goodwill and Intangible Assets replaces Section 3062, Goodwill and Other Intangible Assets and Section
3450, Research and Development Costs. Various changes have been made to other sections of the CICA Handbook for
consistency purposes. Section 3064 establishes standards for the recognition, measurement, presentation and disclosure
of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning
goodwill are unchanged from the standards included in the previous Section 3062. The adoption of this standard did
not have a material impact on PFB’s consolidated financial statements, except that certain existing capital assets were
reclassified as intangible assets under the new standard.
On January 1, 2009, the Corporation adopted EIC 173, Credit Risk and the Fair Value of Financial Assets and Financial
Liabilities. EIC 173 clarifies how an entity’s own credit risk and that of the relevant counterparty should be taken into
account in determining the fair value of financial assets and financial liabilities, including derivative instruments. The new
guidance did not have any impact on the financial position or earnings of the Corporation.
On June 1, 2009, the CICA amended Section 3862, Financial Instruments – Disclosures to improve disclosures related to
fair value measurements of financial instruments, including the relative reliability of the inputs used in those measurements,
and liquidity risk, in light of concerns that the nature and extent of liquidity risk requirements were unclear and difficult to
apply. These disclosures are effective for PFB’s December 31, 2009, annual consolidated financial statements. Adopting
these amendments did not have a significant impact on PFB’s results of operations or financial position. The adoption of
those sections resulted in additional disclosure in the Corporation’s consolidated financial statements (see Note 12).
50
PFB Corporation - Annual Report 2010
fUtUre changeS to accoUnting StandardS
CiCa handBook Changes
The following changes to CICA Handbook Recommendations have been announced and will be applicable to PFB commencing
January 1, 2011, with earlier adoption permitted:
Section 1582, Business Combinations
Section 1601, Consolidated Financial Statements
Section 1602, Non-Controlling Interests
Section 1582, Business Combinations is effective for business combinations with an acquisition date after January 1, 2011. The
standard was amended to require additional use of fair value measurements, recognition of additional assets and liabilities, and
increased disclosure. Adoption of the standard is expected to have a material effect on the way that the Corporation accounts
for future business combinations. Entities adopting Section 1582 will also be required to adopt Section 1601, Consolidated
Financial Statements and Section 1602, Non-Controlling Interests. These standards will require a change in the measurement
of non-controlling interest and will require the change to be presented as part of shareholders’ equity on the balance sheet. In
addition, the income statement of the controlling parent company will include 100 per cent of the subsidiary’s financial results
and present the allocation between the controlling interest and non-controlling interest. The changes resulting from adopting
Section 1582 will be applied prospectively and changes from adopting Section’s 1601 and 1602 will be applied retrospectively.
The Corporation does not currently have any non-controlling interests.
international finanCial rePorting standards
On February 13, 2008, the Canadian Accounting Standards Board (AcSB) confirmed that, for publicly accountable enterprises,
Canadian GAAP will be replaced by International Financial Reporting Standards (IFRS) for fiscal years beginning on or after
January 1, 2011. Upon adoption of IFRS, companies will be required to provide IFRS comparative information for the previous
fiscal year. Accordingly, the conversion from Canadian GAAP to IFRS will be applicable to the Corporation’s reporting for its
interim financial statements for the first quarter of 2011.
PFB has completed the following phases of its project plan for adopting IFRS:
•
•
•
•
Initial impact assessment and scoping of differences between Canadian GAAP and IFRS
Identification, evaluation and selection of accounting policies under IFRS
Determination of the impact on internal controls over financial reporting, disclosure controls and procedures,
and other business activities
Implemented information technology solutions necessary to support IFRS reporting, including the parallel
running under both Canadian GAAP and IFRS throughout 2010.
PFB has maintained Canadian GAAP for reporting purposes in 2010 and it has maintained reconciliations between Canadian
GAAP and IFRS for each interim/annual period throughout 2010, beginning with an opening balance sheet as at January
1, 2010, which is the IFRS transition date applicable to PFB. The reconciliations between Canadian GAAP and IFRS will be
presented during 2011, commencing with the release of the 2011 first quarter interim report.
IFRS 1, First-time Adoption of International Reporting Standards, provides guidance to entities adopting IFRSs for the first
time. The standard provides a number of optional exemptions and mandatory exceptions to the general requirement of full
retrospective application of IFRS.
PFB Corporation - Annual Report 2010
51
The table below provides a brief summary of the optional exemptions under IFRS 1 which are applicable to PFB and, where
an adjustment to the opening balance sheets results from making an election, the expected amount of the adjustment. The
Standard also includes a number of mandatory exemptions, none of which are applicable to PFB.
standard
oPtional eXemPtion
ChoiCe and imPaCt
Business
An optional exemption exists to not
PFB has elected to prospectively apply IFRS 3. Therefore,
Combinations
retrospectively apply IFRS 3 to business
an adjustment to the opening balance sheet will not be
combinations which occurred prior to the
required.
transition date. Without the exemption,
PFB would be required to re-state all past
business combinations to be in accor-
dance with IFRS 3.
Fair Value or
IFRS 1 permits an item of property, plant
PFB has elected to account for all items of property, plant
Revaluation as
and equipment to be measured at the date
and equipment using the cost model which uses the histori-
Deemed Cost
of acquisition at its fair value and using the
cal bases under Canadian GAAP as the cost under IFRS.
fair value amounts as deemed cost.
Therefore, an adjustment to the opening balance sheet as a
Borrowing Costs
IFRS 1 allows entities to choose the date
PFB has elected to prospectively apply the capitalization
from which it applies the requirement to
of borrowing costs relating to all qualifying assets from the
result of this election is not required.
capitalize borrowing costs relating to quali-
transition date.
fying assets.
Employee Benefits An optional exemption is available for enti-
PFB has elected to not recognize cumulative actuarial gains
ties which have defined benefit pension
and losses up to the date of transition. It has elected to
plans. The exemption, if elected, does
reset the “corridor” to zero as at the date of transition.
not require entities to calculate cumulative
actuarial gains and losses from the incep-
PFB has elected to recognize gains and losses in future
tion of a plan up to the date of transition to
years using the corridor approach.
IFRS.
Under Canadian GAAP, as at December 31, 2009, PFB
recognized an accrued benefit asset with respect to the
defined benefits pension plan in the amount of $475 which
decreases to approximately $50 under IFRS. As a result of
applying this exception, the adjustment creates a deferred
tax liability of approximately $100 for a combined approxi-
mate net reduction in retained earnings of $325.
In addition to the impact of the optional elections made under IFRS 1, there are other expected areas of difference arising
as a result of the requirements of certain IFRSs being different from Canadian GAAP. The table below provides a brief
summary of the details of such differences, the policy selections that PFB has made (where applicable), along with the
current and future impact of adopting those IFRS. The table is not comprehensive and may not include all of the differences
that PFB will experience between Canadian GAAP and certain IFRSs.
The IASB has several projects scheduled for 2011 that may impact PFB’s transition to IFRS and its financial statements.
PFB is required to comply with IFRS up to an including the date of its first annual consolidated financial statements, which,
for PFB is December 31, 2011.
52
PFB Corporation - Annual Report 2010
ifrs
key differenCes from Canadian gaaP
Current and future imPaCt on PfB
IAS 16 – Property,
Under Canadian GAAP, as at January 1, 2010, PFB
In 2010, depreciation expenses were lower than
Plant and Equip-
componentized the asset classes of buildings and
in the comparative year as a result of applying
ment (PP&E)
machinery and equipment (major items only). In con-
longer expected remaining lives to the net book
junction with those changes, the expected remaining
values.
Componentization:
useful lives of individual assets and components in
the two asset classes, as stated, were revised. The
new expected remaining useful lives were adopted
on a prospective basis for the calculation of future
depreciation expense.
Under IFRS, no additional changes were made to
Upon adopting IAS 16, the opening bal-
the componentization of the two assets classes. The
ance sheet values for the carrying amounts of
revised expected remaining useful lives of individual
property, plant and equipment increased by
assets and components were applied from their
approximately $6,400. The change resulted in
original date of acquisition and depreciation expense
the recognition of deferred tax liabilities of ap-
was recalculated using the revised useful lives. This
proximately $1,700. Accordingly, a net increase
resulted in higher net book values in aggregate under
in retained earnings of approximately $4,700
IFRS at the date of transition.
resulted.
.
IAS 36 – Impair-
IFRS introduces the concept of a Cash Generating
Under Canadian GAAP, PFB was considered to
ment of Assets
Unit (CGU) which does not exist under Canadian
be a fully-integrated operation consisting of a
GAAP. A CGU is defined as the smallest identifiable
single reporting unit. Accordingly, goodwill was
group of assets that generates cash inflows that are
managed at a highest level of aggregation. Un-
largely independent of the cash inflows from other
der IFRS, PFB has concluded it has two groups
assets or groups of assets. Goodwill acquired in a
of CGU’s and goodwill was allocated to each, as
business combination is required to be allocated to
appropriate.
each of the acquirer’s CGU’s or groups of CGU’s.
IFRS requires the assessment of asset impairment
be based on discounted future cash flows. Canadian
Based on the goodwill allocated to each CGU
GAAP generally applied a two-step approach to
group and applying discounted future cash flows
impairment testing; first comparing asset carrying val-
to test for impairment, PFB has determined that
ues with undiscounted future cash flows to determine
goodwill allocated to one CGU group was im-
whether impairment exists, and then measuring any
paired. Upon adopting IAS 36, the consolidated
impairment by comparing asset carrying values with
opening balance sheet values for the carrying
their fair values.
amounts of goodwill decreased by approxi-
mately $5,300 with a corresponding decrease in
IFRS allows for the future reversal of impairment
retained earnings.
losses, other than goodwill, should the indicators of
impairment change.
IFRS creates the potential for more frequent
recognition of impairment losses or reversals of
previous impairment losses, or parts thereof, as
compared to Canadian GAAP.
PFB Corporation - Annual Report 2010
53
ifrs
key differenCes from Canadian gaaP
Current and future imPaCt on PfB
IIAS 12 – Income
IAS 12, Income Taxes, in its current form, is similar to
Upon adopting IAS 12, the current portion of
Taxes:
Canadian GAAP with the exception that all deferred
a deferred tax asset recorded under Canadian
taxes assets and liabilities are treated as long-term
GAAP in the amount of $637 was reclassified to
on the balance sheet whereas Canadian GAAP ap-
a long-term deferred tax asset. The adjustment
proach is to allocate between current and long-term
had no impact on retained earnings..
portions.
IAS 21 – The Ef-
Under IFRS, non-monetary assets and liabilities of a
Upon adopting IAS 21, the consolidated opening
fects of Changes
foreign subsidiary whose functional currency is differ-
balance sheet values for the carrying amounts
in Foreign
Exchange
ent to that of PFB’s presentation currency, which is
of PP&E and intangible assets held by PFB’s
Canadian dollars, are required to be translated at the
foreign subsidiary, when translated into Canadian
closing exchange rate at the end of each reporting
dollars, decreased by approximately $265 and
period. Under Canadian GAAP. PFB’s foreign subsid-
$15, respectively, with a corresponding aggre-
iary qualified for foreign exchange translation using
gate decrease in retained earnings of $280. On a
the temporal method, non-monetary assets and
go-forward basis, the carrying values of non-
liabilities of the foreign subsidiary were translated at
monetary assets and liabilities held by the foreign
historical exchange rates. Income and expense items
subsidiary in its functional currency of USD
of the foreign subsidiary will continue to be translated
will be translated at current exchange rates on
at monthly average exchange rates on consolidation
consolidation. As exchange rates fluctuate the
under IFRS which is the same treatment as under
other comprehensive income will exhibit greater
Canadian GAAP.
volatility.
Under IFRS, the effects of foreign exchange rate
PFB`s foreign subsidiary has an interest bear-
changes when consolidating the assets and liabili-
ing inter-company loan payable to its Canadian
ties of PFB’s foreign subsidiary are recorded in other
parent which is denominated in CAD. Unrealized
comprehensive income. Under Canadian GAAP (tem-
foreign exchange gains and losses are recog-
poral method), foreign exchange gains and losses
nized in the U.S. subsidiary’s books as exchange
were recorded in income.
rates change. Under Canadian GAAP, the unreal-
ized foreign exchange gains and losses recorded
in the foreign subsidiary’s books were fully offset
on consolidation by gains or losses arising on
translating the USD equivalent value of the
Canadian dollar loan creating no impact in the
consolidated income statement. Under IFRS, the
effects of the unrealized foreign exchange gains
and losses in the foreign subsidiary will display
increased volatility in the income statement as
exchange rates fluctuate.
54
PFB Corporation - Annual Report 2010
ifrs
key differenCes from Canadian gaaP
Current and future imPaCt on PfB
IAS 19 – Employee
A difference between IAS 19 - Employee Benefits and
The accrued benefit asset recognized on PFB’s
Benefits
the equivalent Canadian GAAP (HB 3461 – Em-
consolidated balance sheet at the date of
ployee Future benefits) is that IAS 19 provides broad
transition will be lower under IFRS than under
guidance for all forms of consideration given by an
Canadian GAAP (see IFRS 1 table above).
entity in exchange for services rendered by em-
ployees whereas Canadian GAAP does not provide
The limit restriction had no impact on the amount
guidance for benefits applied to employees during
recognized on the opening balance sheet under
their active employment. Canadian GAAP guidance
IFRS as at the date of transition.
applies to benefits earned by active employees which
are expected to be provided to them when they are
no longer providing active service, pursuant to the
entity’s undertaking to provide such benefits.
PFB has a defined benefit plan for certain employees
in Ontario. In addition to aforementioned terminol-
ogy difference, other differences exist between IAS
19 and Canadian GAAP with respect to defined
benefit plans which include: measurement date of
plan assets and accrued benefit obligation; actuarial
assumptions; the rate used to discount post-employ-
ment benefit obligations; the test for minimum amor-
tization of actuarial gains and losses; the treatment of
past service costs; the treatment of defined benefit
assets; and greater disclosures under IFRS.
IFRS places a limit on the value of a defined benefit
asset recorded on the balance sheet, which cannot
exceed the future economic benefit expected to real-
ized from the asset.
Presentation and
Certain standards under IFRS require significantly
This will have a significant impact on PFB in
Disclosure
more disclosure than under Canadian GAAP.
terms of data collection to meet the disclosure
requirements. Processes for data capture are
being revised or created, as appropriate, to meet
the requirements.
PFB’s internal controls over financial reporting
framework is being updated to incorporate cer-
tain revisions as a result of adopting IFRS.
Stephen p. hardY
Vice President and Chief Financial Officer
March 3, 2011
PFB Corporation - Annual Report 2010
55
management’S report
The accompanying consolidated financial statements of PFB Corporation and all information
included in this annual report are the responsibility of the management of the Corporation and
have been reviewed and approved by the Board of Directors upon recommendation by the
Audit Committee. Management has prepared the consolidated financial statements based
on the information available and in accordance with Canadian generally accepted accounting
principles. The consolidated financial statements and other financial information have been
prepared using the accounting policies described in Note 2 to the consolidated financial
statements and reflect management’s best estimates and judgements based on available
information. Financial information presented throughout this report is consistent with data
presented in the consolidated financial statements.
PFB Corporation maintains systems of internal controls in order to provide reasonable
assurance that the consolidated financial statements are accurate and complete in all
material respects. These systems include established policies and procedures, the selection
and training of qualified personnel, and an organisation structure providing for appropriate
delegation of authority and segregation of responsibilities.
The Board of Directors discharges its duties related to the consolidated financial statements
by reviewing and approving financial information prepared by management and through
the activities of its Audit Committee. The Audit Committee, made up of five unrelated and
independent directors, periodically meets with management and its responsibilities include
reviewing the consolidated financial statements and other information in this annual report.
The Audit Committee also meets with the independent auditors to discuss the audit approach,
and the results of their audit examination prior to recommending approval of the consolidated
financial statements to the board of directors.
The shareholders’ auditor, Deloitte & Touche LLP, Chartered Accountants, have audited
the consolidated financial statements as at and for the year ended December 31, 2010 in
accordance with Canadian generally accepted accounting principles, and their independent
report is presented herein.
c. alan Smith
Stephen p. hardY
Chairman, President and
Vice President and
Chief Executive Officer
Chief Financial Officer
March 3, 2011
March 3, 2011
56
PFB Corporation - Annual Report 2010
independent aUditor’S report
To the Shareholders of
PFB Corporation:
We have audited the accompanying consolidated financial statements of PFB Corporation, which comprise the consolidated
balance sheets as at December 31, 2010 and 2009, and the consolidated statements of operations and comprehensive
income, retained earnings and cash flows for the years then ended, and 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 Canadian generally accepted accounting principles, 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.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of PFB
Corporation as at December 31, 2010 and December 31, 2009 and the results of its operations and its cash flows for the years
then ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
March 3, 2011
Calgary, Alberta
PFB Corporation - Annual Report 2010
57
2010
consoliDateD
Financial
stateMents
conSolidated Balance SheetS
Years Ended December 31, 2010 and 2009
In thousands of dollars
2010
2009
assets
Current assets
Cash and cash equivalents [Note 3]
Accounts receivable [Note 12 (a)]
Inventories [Note 4]
Income taxes receivable
Prepaid expenses
Future income taxes asset [Note 14]
total current assets
Capital assets [Note 5]
Goodwill
Intangible assets [Note 6]
Accrued benefit asset [Note 16]
Future income taxes asset [Note 14]
total assets
liaBilities
Current liabilities
Accounts payable and accrued liabilities
Customer deposits
Current portion of long-term debt [Note 8]
total current liabilities
Long-term debt [Note 8]
Future income taxes liability [Note 14]
total liabilities
shareholders’ eQuity
Share capital [Note 9]
Contributed surplus [Note 10]
Retained earnings
total shareholders’ equity
$ 9,701
6,861
6,976
167
664
310
24,679
31,016
5,887
167
538
573
62,860
$ 6,137
1,534
948
8,619
7,935
1,129
17,683
20,110
384
24,683
45,177
$ 10,896
5,892
6,257
276
648
637
24,606
31,580
5,887
260
475
444
63,252
$ 7,016
1,504
919
9,439
8,744
482
18,665
19,815
365
24,407
44,587
total liabilities and shareholders’ equity
$ 62,860
$ 63,252
Commitments and contingencies [Note 18]
See accompanying notes to the consolidated financial statements.
approved by the Board of Directors
c. alan Smith
John K. read
Director
Director
58
PFB Corporation - Annual Report 2010
conSolidated StatementS of operationS and
comprehenSive income
Years Ended December 31, 2010 and 2009
In thousands of dollars except shares and per share amounts
Sales
Cost of goods sold
Selling and administrative expenses
Gain (loss) on sale of assets
Realized foreign exchange gain [Note 12 (b)]
Unrealized foreign exchange gain (loss) [Note 12(b)]
Interest income
Interest expense
Income before income taxes
Income taxes [Note 14]
net income and other comprehensive income
Earnings per common share - basic: [Note 13]
Earnings per common share - diluted: [Note 13]
2010
2009
$ 65,580
(48,716)
16,864
(13,661)
16
145
(158)
3,206
41
(502)
2,745
(871)
$ 1,874
$ 0.28
$ 0.28
$ 65,930
(46,083)
19,847
(14,432)
(14)
202
51
5,654
26
(602)
5,078
(1,388)
$ 3,690
$ 0.56
$ 0.56
Weighted average number of common shares outstanding [Note 13]
6,598,703
6,570,906
See accompanying notes to the consolidated financial statements.
conSolidated StatementS of retained earningS
Years Ended December 31, 2010 and 2009
In thousands of dollars
Retained earnings, beginning of the year
Net income
Dividends paid
Premium on redemption of common shares [Note 9 (d)]
Retained earnings, end of the year
See accompanying notes to the consolidated financial statements.
2010
2009
$ 24,407
1,874
(1,583)
(15)
$ 24,683
$ 22,295
3,690
(1,577)
(1)
$ 24,407
PFB Corporation - Annual Report 2010
59
conSolidated StatementS of caSh flowS
Years Ended December 31, 2010 and 2009
In thousands of dollars
Cash ProVided By (used in):
oPerating
Net income
Add (deduct) items not requiring cash:
Depreciation and amortization
(Gain) loss on disposal of capital assets
Stock-based compensation
Accrued benefit asset
Future income taxes [Note 14]
Unrealized foreign exchange (gain) loss
Changes in non-cash working capital [Note 15]
Urealized foreign exchange loss (gain) relating to
non-cash working capital
finanCing
Repayment of long-term debt
Dividends paid
Exercise of stock options [Note 9(c)]
Purchase of common shares for cancellation [Note 9(d)]
inVesting
Purchase of capital assets [Note 5]
Purchase of intangible assets [Note 6]
Proceeds of insurance claim net of related expenses [Note 5]
Proceeds from sale of capital assets
Foreign exchange loss on cash held in
foreign currency
increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Supplemental cash flow information:
Interest paid
Interest received
Income taxes recovered
Capital asset additions financed by capital leases
See accompanying notes to the consolidated financial statements.
60
PFB Corporation - Annual Report 2010
2010
2009
$ 1,874
$ 3,690
2,491
(16)
67
(63)
810
158
5,321
(2,444)
31
2,908
(997)
(1,583)
265
(33)
(2,348)
(1,635)
(50)
65
54
(1,566)
(189)
(1,195)
10,896
$ 9,701
$ 502
41
40
258
3,668
14
114
(475)
1,171
(51)
8,131
3,007
-
11,138
(735)
(1,577)
-
(15)
(2,327)
(1,746)
(5)
-
7
(1,744)
(34)
7,033
3,863
$ 10,896
$ 597
26
586
328
2010
notes to the
consoliDateD
Financial
stateMents
noteS to the conSolidated
financial StatementS
December 31, 2010 and 2009
In thousands of dollars except shares and per share amounts
1. deScription of the BUSineSS
PFB Corporation (“PFB” or the “Corporation”) is incorporated under the Alberta Business
Corporations Act and has its headquarters in Calgary, Alberta, Canada.
The principal business activity of PFB is manufacturing insulating building products
from expanded polystyrene materials and marketing those products in North America
and Japan. The integrated product lines are marketed under Plasti-Fab, EPS Product
Solutions®, Advantage ICF Systems®, Insulspan® SIPS, and Riverbend Timber
Framing® brand names and trade marks.
The Corporation wholly-owns the following operating subsidiaries: Plasti-Fab Ltd.
(“Plasti-Fab”) and Insulspan Incorporated (“Insulspan”). These subsidiaries operate
manufacturing facilities and sales operations in the provinces of British Columbia, Alberta,
Saskatchewan, Manitoba, and Ontario in Canada, and in the State of Michigan, USA. In
2009, two Canadian subsidiaries, Riverbend Timber Framing Corporation (“Riverbend”)
and PFB Construction Services Ltd. (“Construction Services”), were voluntarily dissolved.
Riverbend’s ongoing operations were merged with Plasti-Fab and Construction Services
ceased operations in 2008.
2. Significant accoUnting policieS
(a) Basis of Presentation and Consolidation
These consolidated financial statements of PFB include the accounts of the
Corporation and all of its wholly-owned subsidiaries. The consolidated financial
statements and notes thereto have been prepared by management in accordance
with Canadian generally accepted accounting principles (“Canadian GAAP”) and are
stated in Canadian dollars unless otherwise stated. All of PFB’s operating subsidiaries
are considered to be fully integrated operations. All inter-company accounts and
transactions have been eliminated on consolidation. In preparing the consolidated
financial statements, management assessed the Corporation’s ability to continue as a
going concern.
PFB Corporation - Annual Report 2010
61
The consolidated financial statements reflect the accounting policies described below.
(b) Future Changes to accounting Standards
In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that, for publicly accountable
enterprises, Canadian GAAP will be replaced by International Financial Reporting Standards (IFRS) for fiscal
years beginning on or after January 1, 2011. Upon adoption of IFRS, companies will be required to provide IFRS
comparative information for the previous fiscal year. Accordingly, the conversion from Canadian GAAP to IFRS will be
applicable to the Corporation’s reporting for its interim financial statements for the first quarter of 2011.
The following changes to CICA Handbook Recommendations have been announced and will be applicable to PFB
commencing January 1, 2011, with earlier adoption permitted:
Section 1582, Business Combinations
Section 1601, Consolidated Financial Statements
Section 1602, Non-Controlling Interests
Section 1582, Business Combinations is effective for business combinations with an acquisition date after January
1, 2011. The standard was amended to require additional use of fair value measurements, recognition of additional
assets and liabilities, and increased disclosure. Adoption of the standard is expected to have a material effect on
the way that the Corporation accounts for future business combinations. Entities adopting Section 1582 will also be
required to adopt Section 1601, Consolidated Financial Statements and Section 1602, Non-Controlling Interests.
These standards will require a change in the measurement of non-controlling interest and will require the change to be
presented as part of shareholders’ equity on the balance sheet. In addition, the income statement of the controlling
parent company will include 100 per cent of the subsidiary’s financial results and present the allocation between the
controlling interest and non-controlling interest. The changes resulting from adopting Section 1582 will be applied
prospectively and changes from adopting Section’s 1601 and 1602 will be applied retrospectively. The Corporation
does not currently have any non-controlling interests.
(c) Goodwill
Goodwill represents the excess of the purchase price of business acquisitions over the value attributed to the fair values
of identifiable tangible and intangible assets acquired in such transactions. Goodwill is not subject to amortization into
income, but is tested at least annually for impairment or when indications of impairment are present. The goodwill is
first tested for recoverability (step 1) and, if the test determines that the carrying amount exceeds the fair value then
impairment is measured (step 2). In determining expected future cash flows, management takes into account in its
assumptions any uncertainties which may affect financial and economic conditions, and the markets served. Step one
consist of a comparison of the fair value of a reporting unit with its carrying amount, including the goodwill allocated
to the reporting unit. Measurement of the fair value of a reporting unit is based on one or more fair value measures,
including present value calculations of estimated future cash flows and estimated amounts at which the unit as a
whole could be bought or sold in a current transaction between willing parties. The Corporation also considers its
market capitalization as of the date of the impairment test. When the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is not considered to be impaired and the second step of the impairment test is
unnecessary. If the carrying amount of the reporting unit exceeds its fair value, step two requires the fair value of the
reporting unit to be allocated to the underlying assets and liabilities of that reporting unit, resulting in an implied fair value
of goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the reporting unit’s
goodwill, an impairment loss equal to the excess is recorded in earnings.
62
PFB Corporation - Annual Report 2010
In the years ended December 31, 2010 and 2009, there were no changes in the carrying amount of goodwill attributed
to either goodwill acquired or impairment losses recognized.
(d) Cash and Cash equivalents
Cash and cash equivalents consist of cash on hand, balances with banks, and investments in highly liquid money
market instruments with original maturities of 90 days or less on the date acquired.
(e)
inventories
Inventories, which comprise raw materials and supplies, work-in-progress and finished products, are carried at the
lower of cost and net realizable value. Cost is determined using the weighted average method and includes the
purchase price and other costs directly related to the acquisition of materials. Net realizable value is determined as
selling price less the cost to sell. The cost of work-in-process and finished product inventories include the cost of
materials, the cost of direct labour, and a systematic allocation of fixed and variable manufacturing overheads based on
a normal range of capacity for the respective production facilities.
(f)
impairment of long-lived and intangible assets
PFB reviews long-lived assets such as capital assets and intangible assets with finite useful lives for potential
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
If the fair value of undiscounted future cash flows expected from the use of an asset or group of assets is less than the
carrying amount, an impairment loss is recognized based on the difference between the discounted net future cash
flows and the carrying value of the asset or group of assets. Factors which could trigger can impairment review include,
but are not limited to, significant underperformance relative to historical or projected future operating results, significant
changes in the nature of use of the asset, a change in the overall strategy of the business, and significant negative
industry or economic trends.
(g) Capital assets
Capital assets, including equipment under capital leases, are carried at cost less accumulated depreciation. Gains and
losses arising on the disposal of individual assets are recognized in earnings in the year of disposal.
As a result of a comprehensive study on its depreciation method and useful lives of capital assets on January 1,
2010, PFB changed the depreciation method for machinery and equipment from a declining balance method to the
straight-line method. On the same date, the asset classes of buildings and major machinery and equipment were
componentized and the expected remaining lives of individual assets and components of assets in those asset classes
were evaluated and adjusted, where appropriate, to reflect future operating expectations. The revisions were based
on historical performance data and experiences assembled over many years of operating manufacturing facilities and
equipment. The combined effect of the change in estimates was a reduction of approximately $1,200 in the amount
of depreciation expense included in cost of sales in the current year. Prior period results have not been restated.
Management did not continue to track depreciation under the old model and therefore can not exactly calculate the
dollar impact of the change. Management views attempting to calculate the amount at this time as impractical and has
chosen to not present in the financial statements.
PFB Corporation - Annual Report 2010
63
Depreciation is provided for using the following rates and methods, which are designed to amortize the assets over their
estimated useful lives:
assets/Components
Current year - Rate and method
Previous year - Rate and method
Buildings:
- Assets
- Components
Machinery and equipment:
- Assets
- Components
Capital leases
-
2.5% to 6.7% straight line
5% straight line
-
At rates varying from 5% to
20% straight line
At rates varying from 5% to
20% straight line
Term of the lease
At rates varying from 10% to 20%
declining balance
-
Term of the lease
Computer and office
At rates varying from 10% to
At rates varrying from 10% to
equipment
33% straight line
33% straight line
Assets under construction
Depreciation commences when
Depreciation commences when
the asset is available for use.
the asset is available for use.
The costs for periodic repairs and maintenance are expensed in the period incurred to the extent the expenditures serve
only to restore the assets to their normal operating condition without enhancing the service potential or extending their
useful lives.
(h)
intangible assets
Intangible assets that meet the capitalization criteria in CICA HB 3064 are capitalized and amortized over their useful
lives. Intangible assets subject to amortization comprise product development costs (3 year amortization), non-integral
computer software applications (3 year amortization), and patents (17 year amortization). All intangible asset classes are
amortized on a straight-line basis and amortization commences when the asset is available for use.
(i) employee Future Benefits
The Corporation administers a defined benefits pension plan (the “Plan”) for specific Ontario-based employees who are
members of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers
International union, which is their certified bargaining agent.
The Plan is registered with the Financial Services Commission of Ontario and with the Canada Revenue Agency and
is funded in accordance with applicable legislation. The Plan’s assets are held by an independent trustee and monthly
contributions are paid into the Plan by the Corporation based on amounts determined by an independent actuary
using assumptions approved by the Corporation. As the Plan currently has a transfer ratio of less than 0.8, an actuarial
valuation is performed annually, typically at March 31. Future benefit increases which are incorporated into the collective
labour agreement are used to determine the accrued benefit obligation. The accrued benefit obligation and current
service cost were calculated using the projected benefit method pro-rated on service.
Past services cost arising from plan amendments, and net actuarial gains and loss that exceed 10% of the greater of
the accrued benefit obligation and fair value of plan assets, are expensed in equal amount over the expected average
remaining service life of the employee group.
64
PFB Corporation - Annual Report 2010
The accrued benefit asset recognized on the consolidated balance sheet is representative of contributions (normal
service plus special) being made by the Corporation exceeding its pension expense.
The plan assets are invested in marketable securities and the fair value can be determined on a frequent basis.
(j) Revenue Recognition
Sales revenue is recognized upon shipment of products, which is the date ownership risks and benefits transfer to
the customer, or when services have been provided to the customer and the collection of receivables is reasonably
assured. Sales revenue is reported net of any customer discounts, rebates, and freight expenses, where applicable.
Sales contracts for certain product lines that involve custom manufacturing require customers to sign a formal
agreement which typically requires deposits and/or progress payments to be made at various pre-determined stages
of completion of the contracts. All deposits and progress payments received are classified as customer deposits on
the consolidated balance sheet until such time the project is completely manufactured and shipped to the customer.
Revenue from these custom manufacturing contracts is recognized upon completion and shipment of these projects.
(k) Future income taxes
PFB uses the liability method of accounting for the tax effect of temporary differences between the tax bases of assets
and liabilities and their carrying amounts. Temporary differences arise when the realization of an asset or the settlement
of a liability would give rise to an increase or decrease in PFB’s income taxes payable for the year or a later period.
Future income taxes assets and liabilities are measured at the substantively enacted income tax rates that, at the
balance sheet date, are expected to apply when the future tax liability is settled or the future tax asset is realized. Future
income tax assets are recognized only to the extent that, in the opinion of PFB’s management, it is more likely than not
that the future income tax asset will be realized.
(l) earnings per Common Share
Basic earnings per common share is computed by dividing net income available to common shareholders by the
weighted average number of shares outstanding during the year.
PFB uses the treasury stock method of calculating diluted earnings per common share. The treasury stock method
is used to compute the dilutive effect of stock options, warrants, and similar instruments. Under this method, the
exercise of stock options is assumed to have occurred at the beginning of a period and the related common shares
are assumed issued at that time. The proceeds from exercise are assumed to have purchased common shares of the
Corporation for cancellation at the average market value price during the period. The incremental shares (the difference
between the number of shares assumed issued and the number of shares assumed purchased) are included in the
denominator of the diluted earnings per common share calculation. Diluted earnings per common share exclude all
potential dilutive common shares where the effect is anti-dilutive.
PFB Corporation - Annual Report 2010
65
(m) Financial instruments
PFB’s cash and cash equivalents, accounts receivable, accounts payables and accrued liabilities, and long-term debt
constitute financial instruments.
(i) Financial assets and liabilities
All financial assets and liabilities are classified into one of five categories; loans and receivables; assets held-to-
maturity; assets available-for-sale; other financial liabilities; and held-for-trading. The classification depends on
the purpose for which the financial instruments were acquired and their characteristics. Financial instruments that
are classified as held-for-trading or available-for-sale are re-measured each reporting period at fair value with the
resulting gain or loss recognized immediately in net income and other comprehensive income, respectively. All
other financial instruments are accounted for at amortized cost with foreign exchange gains and losses recognized
immediately in net income.
The fair value of fixed interest rate long-term debt is determined by comparing the floating interest rate that PFB
could obtain in the market for debt with similar terms to its fixed-rate debt. The fair value of the variable interest rate
debt does not differ significantly from its carrying value as the interest rate is subject to market fluctuations (see
Note 12 for additional disclosures and classification).
(ii) Commodity Price Risk
PFB’s main raw materials used in manufacturing its products are styrene monomer, expandable polystyrene
resin, polypropylene resin, oriented strand board (OSB), and various species of raw timbers. PFB is exposed to
fluctuations in the price of those raw materials.
(iii) Credit Risk
The concentration of credit risk in accounts receivable is limited due to a large number of diverse customers and
geographical spread. PFB’s subsidiary companies monitor the financial condition of their respective customers and
perform ongoing credit evaluations, but do not generally require collateral to support amounts receivable. Contracts
for the sale of customized building systems typically require customers to pay all or a significant amount of the
contract value in advance of shipping the products. Allowances for doubtful accounts are established based upon
the credit risk for particular customers, historical trends and other relevant information. PFB’s management does
not believe that the Corporation is exposed to an unusual level of credit risk.
(iv) Foreign Currency Risk
In the normal course of its operations, PFB is exposed to movements in the U.S. dollar and it purchases its U.S.
dollar requirements at spot market rates. From time to time, PFB may utilize derivative financial instruments in the
normal course of its operations as a means of managing its foreign currency exposure. PFB does not hold or issue
derivative financial instruments for trading or speculative purposes.
(v) interest Rate Risk
PFB’s long-term debt is primarily contracted at fixed rates of interest except for a term loan facility held by Insulspan
which currently operates on a floating interest rate. PFB is exposed to changes in interest rates in the United States.
66
PFB Corporation - Annual Report 2010
(n) Stock-Based Compensation Plan
PFB recognizes compensation expense in each reporting period using the fair value method of accounting for stock
options. PFB determines the fair value of each stock option grant using the Black-Scholes option pricing model and
compensation expense is charged to income over the related vesting period. The accumulated compensation expenses,
less amounts transferred to share capital on the exercise of options, are captured in the contributed surplus account.
(o) Use of estimates
The preparation of PFB’s consolidated financial statements in accordance with Canadian GAAP requires management
to make estimates and assumptions that affect: the reported amounts of assets and liabilities; the disclosure of
contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of
revenues and expenses during the reporting period presented.
Significant areas requiring the use of management estimates include: the useful life of capital assets for depreciation
and amortization purposes; the allowance for doubtful receivables; customer rebates; the provision for inventory
obsolescence; the estimated useful life of deferred product development costs; goodwill valuation; the provision
for income taxes; the fair value of financial instruments; the determination of future cash flows for the purpose of
impairment testing of long-lived assets; pension assets and obligations; and the determination of future income taxes
assets and liabilities. Actual results could differ from those estimates.
(p) Foreign Currency translation
The consolidated financial statements of PFB are reported in Canadian dollars. PFB’s subsidiary in the United States
uses the United States dollar as its measurement currency which is translated into Canadian dollars on consolidation
using the temporal method. The US subsidiary is considered to be a fully integrated foreign operation. Monetary assets
and liabilities denominated in a foreign currency are translated to Canadian dollars at the exchange rate prevailing at the
consolidated balance sheet dates. Transactions and non-monetary items are translated at the exchange rate prevailing
on the transaction date. Income and expenses are translated at the average exchange rates prevailing during the period
in which the transactions take place. Unrealized gains and losses arising from foreign currency translation are included
in the consolidated statement of operations and comprehensive income.
(q) management of Capital
The Corporation discloses its objectives, policies and processes for managing capital; quantitative data about what the
entity regards as capital; whether the entity has complied with any capital requirements; and, if it has not complied, the
consequences of such non-compliance. Additional disclosure in the Corporation’s financial statements can be found in
Note 11.
PFB Corporation - Annual Report 2010
67
3. caSh and caSh eQUivalentS
Cash and cash equivalents are comprised as follows:
Balances with banks
Short-term investments
2010
$ 6,699
3,002
$ 9,701
2009
$ 4,394
6,502
$ 10,896
Short-term investments represented cash invested in a premium investment account with a major Canadian bank with
maturities of 90 days or less. The interest rate available on the premium investment account as at December 31, 2010,
was in the range of 0.80% to 1.10% (2009 - 0.35% to 0.47%) varying by the principal amount invested.
Interest income earned on bank balances and short-term investments is reported as interest income in the consolidated
statement of operations.
4. inventorieS
Inventories are comprised as follows:
Raw materials and supplies
Work-in-progress
Finished goods
2010
$ 3,323
1,293
2,360
$ 6,976
2009
$ 3,510
1,068
1,679
$ 6,257
The carrying amount of inventories recognized as an expense in the year in which revenue was recognized was $47,373
(2009 - $45,236).
The cost of inventories recognized as an expense in the current year included $183 (2009 – $229) in respect of write-downs
from cost to net realizable value. There were no reversals of any write-downs during the current year.
68
PFB Corporation - Annual Report 2010
5. capital aSSetS
Capital assets are comprised as follows:
Cost:
Land
Buildings
Machinery and equipment
Computer and office equipment
Capital leases
Accumulated depreciation:
Land
Buildings
Machinery and equipment
Computer and office equipment
Capital leases
Net book value:
Land
Buildings
Machinery and equipment
Computer and office equipment
Capital leases
2010
$ 5,205
26,435
29,162
2,349
767
63,918
-
10,623
20,204
1,767
308
32,902
5,205
15,812
8,958
582
459
$ 31,016
2009
$ 5,205
24,456
30,409
2,435
608
63,113
-
8,462
21,167
1,741
163
31,533
5,205
15,994
9,242
694
445
$ 31,580
In the current year, capital assets were acquired at an aggregate cost of $1,828 (2009 - $2,074) of which $258 (2009 -
$328) was acquired by means of capital leases.
In the current year, $746 (2009 - $1,156) of redundant assets were written off. The aggregate net book value of the write-off
was $2 (2009 - $21) and was charged against income as a loss on disposal of capital assets.
Depreciation commences when the asset is available for use. Depreciation and amortization expense in the amount of
$1,950 (2009 - $3,094) is included in cost of goods sold, with an amount of $399 (2009 - $294) included in selling and
administrative expenses.
On October 15, 2010, a portion of the Riverbend Timber Framing manufacturing facility located in Blissfield, Michigan was
compromised by a fire. The restoration of the building was fully covered by a replacement cost insurance policy and the
restoration of the building to its original condition began in November 2010 and is expected to be fully completed by Spring
2011. As a result of the fire, the Corporation has realized a gain of $94 (2009 - $Nil), and a subsequent impairment loss of
$94 (2009 - $Nil). Other capital assets destroyed in the fire were limited to three forklift trucks which were replaced by new
units under the insurance policy. The new forklift trucks have been capitalized which resulted in a gain of $65 (2009 - $nil).
PFB Corporation - Annual Report 2010
69
6. intangiBle aSSetS
Intangible assets are comprised as follows:
Cost:
Product development costs
Software
Patents
Accumulated amortization:
Product development costs
Software
Patents
Net book value:
Product development costs
Software
Patents
2010
$ 925
1,891
70
2,886
869
1,826
24
2,719
56
65
46
$ 167
2009
$ 925
1,831
70
2,826
788
1,758
20
2,566
137
73
50
$ 260
Amortization expense in the amount of $90 (2009 - $183) is included in cost of goods sold, with an amount of $52 (2009 -
$96) included in selling and administrative expenses.
PFB has a continuous program of product development initiatives to obtain various code listings for its insulating building
products and, where applicable, obtain listings for the respective manufacturing locations in Canada and the USA. Code
listings increase selling opportunities for insulating building systems by making it easier for designers, architects and
specifiers to incorporate these products in their plans. Deferred product development costs are amortized over a three year
period commensurate with the validity period of the building code approvals. As at December 31, 2010, there were no in-
process product development projects.
PFB’s policy for product development costs requires the periodic review of the carrying values to determine if there
has been impairment in value-based expected future cash flows. If it is determined that the carrying value exceeds the
recoverable amount, the net asset is written down to the net recoverable amount.
7. operating credit facilitieS
Plasti-Fab has a revolving demand credit facility with a major Canadian bank for a maximum value of $8,000 (2009 -
$8,000). The revolving credit facility is secured by a first ranking security interest in accounts receivable and inventories
of Plasti-Fab. On March 27, 2009, the terms of Plasti-Fab’s non-revolving credit facility were revised to extend the
maturity dates of existing loans (See Note 8). Concurrent with this change, the interest rate on Plasti-Fab’s revolving
credit facility was increased from the Canadian bank’s prime rate plus 0.15% to the bank’s prime rate plus 0.50%. The
arrangement fee for the change to the revolving credit facility was five hundred dollars and there was no standby fee.
As at December 31, 2010 and 2009, the revolving credit facility of $8,000 was unused. Plasti-Fab is subject to certain
covenants on its credit facilities, one of which is a financial covenant to maintain a Fixed Charge Coverage of not less
than 1.25:1. Plasti-Fab was in compliance with this financial covenant at December 31 2010 and 2009.
70
PFB Corporation - Annual Report 2010
On April 22, 2009, Insulspan completed the annual renewal of its revolving credit facility with a U.S. bank, whose parent
company is a major Canadian bank. The maximum borrowing limit of USD $1,500 remained unchanged. The actual
borrowing limit is determined by eligible accounts receivable and inventories as defined by the bank. The interest rate on
bank indebtedness under the facility is the bank’s prime rate plus 0.25% but, under the renewal agreement, is subject
to a minimum rate of 4.0% at any time. As at December 31, 2010 and 2009, the revolving credit facility of USD $1,500
was unused. The revolving credit facility has a standby fee per month of minimal value.
8. long-term deBt
As at December 31, 2010, the total aggregate principal repayment amount outstanding on Plasti-Fab’s non-revolving
credit facility was $7,779 (2009 - $8,437). At that date, the unused portion of the non-revolving facility was $4,230
(2009 - $4,196) and represented an approved limit of $4,300 less principal amounts outstanding on capital leases
financed by the bank. Plasti-Fab is subject to certain covenants on its credit facilities, one of which is a financial
covenant to maintain a Fixed Charge Coverage of not less than 1.25:1. As at December 31, 2010 and 2009, the
financial covenant ratio was in compliance.
On December 24, 2009, the 5-year term for the fixed interest rate on a loan which commenced on December 24, 2004,
expired (see table below). On March 30, 2010, the 5-year term for the fixed interest rate on a loan which commenced
on December 24, 2004, expired (see table below). From that the date, the interest rate was reset to the equivalent of
the bank’s prime rate plus 0.85%. From that the refinancing dates, the interest rate on those loans was reset to the
equivalent of the bank’s prime rate plus 0.85%.
On June 25, 2008, Plasti-Fab made a draw of $5,000 on its non-revolving credit facility. The loan is being amortized
over a 15-year period at a fixed rate of interest of 6.05% per annum for a five-year term. The first monthly principal
repayment was deferred for one year and monthly repayments commenced on October 31, 2009. On September
30, 2008, Plasti-Fab made a second draw of $2,000 on the non-revolving credit facility with an amortization period of
15-years and a fixed rate of interest of 5.55% per annum for a five-year term. The first monthly principal repayment of
that draw was also deferred for one year and is scheduled to commence on January 31, 2010. On March 27, 2009, the
terms of Plasti-Fab’s non-revolving credit facility were revised to extend the maturity dates of existing loans.
Insulspan has a term loan facility with a U.S. bank, whose parent company is a major Canadian bank, which is secured
by manufacturing properties in Michigan, USA. At December 31, 2010, the outstanding principal amount of the term
loan was USD $679 (2009 – USD $747). The loan bears an interest rate of U.S. prime plus 0.25%. PFB provided a
guarantee and postponement of claim to the U.S. bank in the maximum amount of USD $1,050. Applicable financing
costs were expensed as incurred.
In the current year, new capital lease agreements in the total amount of $258 (2009 - $328) were entered into by PFB’s
subsidiaries principally for materials handling equipment and automobiles.
PFB Corporation - Annual Report 2010
71
Long-term debt commitments as at December 31, 2010 and 2009 were as follows:
Date of loan
Rate
term
2010
interest
Payable in Canadian Dollars:
Term loan
Term loan
Term loan
Term loan
Capital leases
Payable in U.S. dollars:
Term loan
Capital leases
Less: Current portion
Dec 24/09
Mar 30/10
Jun 25/08
Sep 30/08
Various
Renewed
Apr 28/08
Various
3.85%
3.85%
6.05%
5.55%
4.40% to
6.60%
Prime
+0.25%
3.70% to
7.50%
-
-
5 years
5 years
3 to 5
years
5 years
3 to 5
years
2009
$ 755
773
4,909
2,000
402
$ 679
701
4,545
1,855
402
676
785
25
8,883
(948)
$ 7,935
39
9,663
(919)
$ 8,744
All figures in the above table are stated in Canadian dollars.
Estimated long-term debt repayments for fiscal years 2011 through to maturity are set out below:
For the year ending:
2011
2012
2013
2014
2015 and beyond
Total
$ 948
894
5,681
242
1,118
$ 8,883
The fair value of long-term debt as at December 31, 2010 is $8,803 (2009 - $9,549). The fair value of long-term debt is
determined by taking each existing loan component and applying the prevailing interest rate at the balance sheet dates that
are representative for the remaining interest rate term (where applicable).
In the current year, interest expense on long-term debt commitments in the amount of $502 (2009 - $542) is included in
interest expense on the Consolidated Statements of Operations and Comprehensive Income.
9. Share capital
Share capital represents:
(a) authorized
Unlimited number of voting common shares without nominal or par value.
Unlimited number of preferred shares without nominal or par value, issuable in series at the discretion of the directors
of the Corporation, of which none are outstanding.
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PFB Corporation - Annual Report 2010
(b) Common Shares issued
Balance, beginning of year
Shares issued as a result of stock
options exercised
Cancellation of repurchased shares
Balance, end of year
(c) Stock-Based Compensation
2010
2009
Shares
6,568,736
50,000
(5,900)
6,612,836
amount
$ 19,815
313
(18)
$ 20,110
Shares
6,572,536
-
(3,800)
6,568,736
amount
$19,829
-
(14)
$ 19,815
A stock option entitles the option holder to acquire common shares of PFB at the strike price established at the time of
grant, after vesting and before expiry. The strike price of each stock option equals the weighted average market price
of the Corporation’s common shares determined two business days preceding the effective date of grant, and the
stock options expire on the fifth anniversary of the effective date. The maximum number of common shares issuable
under PFB’s stock option plan is equal to 10% of the common shares that are issued and outstanding. At December
31, 2010, 6,612,836 (2009 – 6,568,736) common shares were issued and outstanding and total stock options of
130,000 (2009 – 200,000) representing 2.0% (2009 – 3.0%) of the total issued and outstanding common shares had
been granted but not exercised. No stock options were granted in 2010 or 2009.
The following table sets forth all outstanding stock options as of December 31:
Outstanding, beginning of year
Exercised
Forfeited
Outstanding, end of year
2010
2009
number of Weighted average
exercise Price
$ 8.45
(5.30)
(9.50)
$ 9.50
Options
200,000
(50,000)
(20,000)
130,000
number of Weighted average
exercise Price
$ 8.45
-
-
$ 8.45
Options
200,000
-
-
200,000
The following table sets forth information concerning share options granted and vested under the stock option plan as
at December 31, 2010:
exercise Price
in Dollars
$ 9.50
number of
Options
Weighted average
Remaining Contract
Weighted
average
number of
Weighted
average
Outstanding
130,000
life (months)
19.0
exercise Price
$ 9.50
Options
130,000
exercise Price
$ 9.50
Options Outstanding
Options exercisable
Amortization of the fair value amounts attributed to stock options are reported as compensation expense on the
Consolidated Statement of Operations and Comprehensive Income each period with the off-set recorded in the
contributed surplus account on the Consolidated Balance Sheet.
PFB Corporation - Annual Report 2010
73
(d) normal Course issuer Bid
In September 2010, PFB obtained approval from The Toronto Stock Exchange to renew its Normal Course Issuer
Bid program for a 12-month period which commenced on September 3, 2010 and ending no later than September
2, 2011. The renewal allows PFB to purchase, no later than September 2, 2011, up to a maximum of 330,936 of its
common shares, representing 5% of PFB’s 6,618,736 issued and outstanding common shares as September 3, 2010,
subject to daily maximum purchases of 1,000 common shares. PFB will purchase, from time to time, its common
shares at market price by means of open market transactions on The Toronto Stock Exchange.
In the year ended December 31, 2010, PFB purchased and cancelled 5,900 (2009 – 3,800) of its common shares
under the normal course issuer bid for an aggregate price of $33 (2009 - $15), of which $15 (2009 - $1) was charged
to retained earnings as premium on redemption of the common shares.
10. contriBUted SUrplUS
The following table sets forth the reconciliation of contributed surplus with respect to stock-based compensation:
Balance, beginning of year
Stock-based compensation expense
Exercise of stock options
Balance, end of year
2010
$ 365
67
(48)
$ 384
2009
$ 251
114
-
$ 365
11. management of capital
The primary objective of PFB is to maintain a flexible capital structure to preserve its ability to meet its financial obligations and
to produce a targeted rate of return while safeguarding corporate assets. The components of PFB’s current capital structure
are shareholders’ equity and long-term debt. The core of PFB’s capital management activities is the successful management of
cash.
PFB’s capital structure as at December 31, 2010 and December 31, 2009, is outlined in the following table:
Long-term debt [Note 8]
Shareholders’ equity
Total capital structure
2010
$ 8,883
45,177
$ 54,060
2009
$ 9,663
44,587
$ 54,250
PFB considers the amount of capital it requires in proportion to the associated risks. Adjustments may be made to PFB’s
capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. The capital
structure can be maintained or adjusted in a variety of ways as circumstances may change, including: adjusting the amount
of dividends paid to shareholders; purchasing shares for cancellation (Normal Course Issuer Bid); issuing new shares; and
increasing or repaying long-term debt.
PFB pursues its capital management objectives by prudently managing the capital generated through internal growth of its
operations, optimizing the use of lower cost capital when required, acquire more debt and/or raise share capital, subject to
market conditions, to fund significant strategic growth initiatives.
74
PFB Corporation - Annual Report 2010
Consistent with many other issuers, PFB monitors capital using the following non-standardized GAAP measures:
• Return on Shareholders’ Equity, which is defined as net income for the most recent twelve-month period divided
by total shareholders’ equity at the beginning of that twelve month period. Shareholders’ Equity is defined as all
components of shareholders’ equity (i.e. share capital, contributed surplus, and retained earnings).
• Net Debt divided by Shareholders’ Equity. Net debt is defined as total debt (the current portion plus long-term
portion), as shown in the balance sheet, less cash and cash equivalents.
• Current ratio, which is defined as current assets divided by current liabilities.
Actual ratios calculated at the dates stated are set out in the following table:
Return on Shareholders’ Equity
Net Debt to Shareholders’ Equity 1
Current Ratio
1 At December 31, 2010 and 2009, cash and cash equivalent balances exceeded total debt.
December 31
2010
4.2%
-
2.86x
2009
8.7%
-
2.61x
Entities within PFB’s consolidated group have non-capital tax losses carried forward to be utilized against future taxable
income expected to be generated by those entities.
PFB’s subsidiaries are subject to certain covenants on their credit facilities, one of which is a financial covenant to maintain
a Fixed Charge Coverage of not less than 1.25:1. Fixed Coverage Charge is defined as the ratio of EBITDA (net income
from continuing operations, excluding extraordinary gains or losses, plus interest expense and income taxes accrued
during the period, plus depreciation and amortization expenses deducted in the period) plus payments under operating
leases less cash income taxes and unfunded capital expenditures to fixed charges. Fixed charges are defined as the
total of interest expense, scheduled principal payments in respect of funded debt, payments under operating leases, and
corporate distributions. PFB has also provided a guarantee and postponement of claim to support certain facilities of
subsidiaries. PFB monitors compliance with its covenant ratio on a quarterly basis and reports any exceptions to its board
of directors. As at December 31, 2010 and 2009, the financial covenant ratio was in compliance.
12. financial inStrUmentS
PFB is exposed to a variety of risks that may affect the fair value of its financial instruments with each carrying varying
degrees of significance which could affect PFB’s ability to achieve its strategic objectives of growing its operations and
increasing shareholder returns.
PFB Corporation - Annual Report 2010
75
A summary of the classifications, carrying values and fair values of financial instruments held by PFB as at December 31,
2010 and 2009, are stated in the following table:
Financial assets
Held for trading:
Cash and cash equivalents
$ 9,701
$ 9,701
$ 10,896
$ 10,896
2010
2009
Book value
Fair value
Book value
Fair value
Loans and receivables:
Accounts receivable
Financial liabilities
Other financial liabilities:
Accounts payable and
accrued liabilities
Long-term debt (total)
6,861
6,861
5,892
5,892
$ 6,137
8,883
$ 6,137
8,792
$ 7,016
9,663
$ 7,016
9,549
PFB’s financial instruments are defined in Note 2(m) and determination of fair value is discussed in Note 2(m)(i).
The CICA Handbook Section 3862, Financial Instruments – Disclosures establishes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:
Level 1: Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for
identical assets or liabilities.
Level 2: Values based on quoted prices in markets that are not active or model inputs that are observable either
directly or indirectly for substantially the full term of the asset or liability.
Level 3: values based on prices or valuation techniques that require inputs that are both unobservable and significant
to the overall fair value measurement.
The following table presents the Corporation’s fair value hierarchy for those financial assets and liabilities measured at fair
value on a recurring basis as of December 31, 2010 and 2009:
total
level 1
level 2
level 3
Financial assets
Held for trading:
Cash and cash equivalents
December 31,2010
December 31, 2009
$ 9,701
$ 10,896
$ 9,701
$ 10,896
-
-
-
-
76
PFB Corporation - Annual Report 2010
The principal risks associated with financial instruments, to which PFB is exposed, along with its risk management policies are
described below:
(a) Credit Risk
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge its obligation.
PFB’s exposure to credit risk is associated with accounts receivable and the potential risk that a customer will be unable
to pay amounts due. Allowances for doubtful accounts and bad debts are estimated and maintained as at the balance
sheet date. The amounts reported for accounts receivable in the balance sheet are net of allowances for doubtful
accounts and bad debts and the net carrying value represents PFB’s maximum exposure to credit risk.
PFB’s subsidiaries provide trade credit to their customers in the normal course of business and PFB’s credit policy is
universally adopted across all businesses. The policy requires the credit history of each new customer to be closely
examined before credit is granted, which may involve performing solvency tests if a particular account is expected to
become significant. The diversity of PFB’s customer base and product offering combine to minimize overall exposures to
credit risks.
Customers ordering highly customized manufactured products, usually involving detailed design work, are required
to make advance payments at various pre-defined stages of the sales contract. All payments received in advance are
generally non-refundable and they are reported as customer deposits under the current liability section of the balance
sheet. Final contract balances are typically required to be paid in full before products are shipped.
Management diligently reviews past due accounts receivable balances on a weekly basis to monitor potential credit risks.
Accounts are considered for impairment on a case-by-case basis when they are past due or when objective evidence is
received that a customer may default. A number of factors are considered in determining the likelihood of impairment. All
bad debt write-offs and changes in the doubtful accounts receivable reserve are expensed or credited, as applicable, to
selling and administrative expenses.
The following table sets forth details of the ageing profile of accounts receivable and allowance for doubtful accounts as
at December 31:
Accounts receivable - current and past due for less than 30 days
Accounts receivable - past due for between 31 and 90 days
Accounts receivable - past due for 91 days or longer
Total gross accounts receivable
Allowance for doubtful accounts
Accounts receivable, net
2010
$ 4,924
1,901
584
7,409
(548)
2009
$ 4,031
2,053
282
6,366
(474)
$ 6,861
$ 5,892
PFB Corporation - Annual Report 2010
77
PFB believes that credit risk associated with its accounts receivable is limited for the following reasons:
(i) Accounts receivables balances are spread amongst a broad customer base which is dispersed across a wide
geographic range.
(ii) The aging profile of accounts receivables balances are systematically monitored by management.
(iii) Larger customers are offered a discount of 1% off invoice value if full payment is received by an agreed date in
the month following the month of sale.
(iv) Payments for highly customized orders are received from customers in advance of products being shipped.
(v) PFB’s largest individual customer, determined by annual purchases, represents less than 5% of total consolidated
sales revenues.
The credit risk on cash balances, cash equivalent short-term investments, and foreign exchange contracts is limited
because the counterparties are a large commercial bank in Canada and its associate in the United States. Short-term
investments, reported under cash and cash equivalents, comprise financial instruments issued by Canadian banks. No
foreign exchange contracts existed as at either December 31, 2010 or December 31, 2009.
PFB’s exposure to credit risk is limited to the carrying amounts of financial assets recognized at the balance sheet date,
as summarized in the table below:
Cash and cash equivalents
Accounts receivable
(b) Currency Risk
2010
$ 9,701
6,861
December 31
2009
$ 10,896
5,892
Currency risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates.
PFB operates in both Canada and the United States of America and is exposed to foreign exchange risks arising
from changes in foreign exchange rates between the two countries. At the present time, PFB has a net exposure to
the United States (U.S.) dollar, as the prices of most raw material supplies used in its businesses are denominated in
U.S. dollars. PFB purchases its U.S dollar requirements at the spot market rates. From time to time, PFB may utilize
derivative financial instruments in the normal course of operations as a means of management its foreign currency
exposure. During the years ended December 31, 2010 and 2009, PFB and its subsidiaries neither entered into nor held
foreign exchange contracts. Raw material supplies denominated in U.S. dollars are usually paid within thirty days or less
of receiving product shipments, which is consistent with industry practices.
At December 31, 2010, the carrying amounts of PFB’s foreign currency denominated net monetary assets was USD
$5,023 (2009 – USD $4,114) and foreign currency denominated net monetary liabilities was USD $2,314 (2009 – USD
$2,667). Based on the net foreign currency liability as at December 31, 2010, and assuming that all other variables
remain constant, a fluctuation of +/- 5.0% in the exchange rate between the Canadian dollar and the U.S. dollar would
impact net income or loss by approximately $95 (2009 - $55).
PFB is exposed to currency rate risk on a portion of its net monetary assets and liabilities and it does not currently hold
any financial instruments to mitigate those risks. Management believes that the potential adverse impact of currency
rate fluctuations on the current level of net monetary assets and liabilities exposed to currency rate risk will not be
significant in relation to its expected future earnings.
78
PFB Corporation - Annual Report 2010
(c) interest Rate Risk
Interest rate risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of change in market interest rates.
PFB is exposed to interest rate risk on a portion of its long-term debt and it does not currently hold any financial
instruments to mitigate those risks. Management believes that the potential adverse impact of interest rate fluctuations
on the current level of borrowings exposed to interest rate risk will not be significant in relation to its expected future
earnings.
As at December 31, 2010, PFB’s subsidiaries have in place a combination of revolving and non-revolving credit
facilities. Maximum revolving credit facilities of $8,000 and USD $1,500 were unused at the balance sheet date. The
revolving credit facilities are each secured by accounts receivables and inventories, and the maximum available limits
may fluctuate downwards if accounts receivable and inventory balances contract. The unused portion of non-revolving
credit facility with a Canadian bank was $4,230 (2009 - $4,196) which represents an approved limit of $4,300 less
amounts outstanding on Canadian capital leases financed by the bank.
(d) liquidity Risk
Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities.
Liquidity risk is the risk that PFB is not able to meet its financial obligations as they become due or that it can only do
so at an abnormally high cost. PFB’s future strategies can be financed through a combination of cash flows provided by
operations, borrowing under existing credit facilities, and the issuance of equity. One of management’s primary goals is
to maintain an optimum level of liquidity by actively managing assets, liabilities and cash flows. Management prepares
regular budgets and cash flow forecasts to help predict future changes in liquidity. Based on PFB’s aggregate liquid
assets as compared to its liabilities and commitments, management assesses PFB’s liquidity risk to be low, subject to a
continuing ability to generate positive cash flows from operations.
PFB’s liabilities having contractual maturities as at December 31, 2010, are as indicated in the following table:
Accounts payable and accrued liabilities
Long-term debt [Note 8]
Total liabilities
Current within
12 months
$ 6,137
948
$ 7,085
non current
1 - 5 years
Over 5 years
$ -
7,935
$ 7,935
$ -
-
$ -
PFB Corporation - Annual Report 2010
79
13. earningS per common Share
The following table sets forth the reconciliation of basic and diluted earnings per share:
Net income
Weighted average number of common shares outstanding - basic
Shares assumed issued 1
Shares assumed purchased 1
Weighted average number of common shares outstanding - diluted
Earnings per share:
Basic
Diluted
2010
$ 1,874
2009
$ 3,690
6,598,703
6,570,906
-
-
6,598,703
-
-
6,570,906
$ 0.28
$ 0.28
$ 0.56
$ 0.56
1 150,000 stock options granted in the third quarter of 2007 (See Note 9(c)) were anti-dilutive as at December 31, 2010 (balance of 130,000 stock options after forfeiture) and 2009 and, therefore, they
have not been included in the calculation of shares assumed issued and shares assumed purchased. 50,000 stock options granted in the 2005 (See Note 9(c)) and exercised in 2010 were anti-dilutive as
at December 31, 2009 and, therefore, they have not been included in the calculation of shares assumed issued and shares assumed purchased in 2009.
14. income taXeS
The effective income tax rate of PFB differed from the expected combined federal and provincial income tax rate for the
following reasons:
Income before income taxes
Rates applied to income before
income taxes
Higher tax jurisdiction (USA)
Enacted tax rate reduction
Expenses without tax basis
Foreign exchange translation of
U.S. subsidiary
Prior year rate adjustments
Prior year adjustments
Other
2010
% of Pre-tax
earnings
amount
$ 2,745
2009
% of Pre-tax
earnings
amount
$ 5,078
791
(44)
(65)
48
(39)
67
82
31
$ 871
28.8
(1.6)
(2.4)
1.8
(1.4)
2.4
3.0
1.2
31.7
1,534
(112)
(100)
64
(168)
-
213
(43)
$ 1,388
30.2
(2.2)
(2.0)
1.3
3.3
-
4.2
(0.9)
27.3
2009
$ 217
1,171
$ 1,388
The provision for income taxes is comprised of the following:
Current
Future
2010
$ 61
810
$ 871
80
PFB Corporation - Annual Report 2010
The table below shows PFB’s future income taxes resulting from temporary differences between the carrying amounts of
assets for accounting purposes and the amounts used for tax purposes:
Future income taxes asset (liability):
Capital assets
Intangible assets
Non-capital losses carried forward
Reserves
Other
2010
$ (939)
(22)
306
208
201
$ (246)
Non-capital losses carried forward expire in years 2027 through 2030.
Future income taxes are presented in the consolidated financial statements as follows:
Future income taxes asset - current
Future income taxes asset - long term
Future income taxes liability - long-term
2010
$ 310
573
(1,129)
$ (246)
15. changeS in non-caSh worKing capital
Accounts receivable
Inventories
Income taxes receivable
Prepaid expenses
Accounts payable and accrued liabilities
Customer deposits
2010
$ (969)
(719)
109
(16)
(879)
30
$ (2,444)
2009
$ (286)
(21)
414
243
249
$ 599
2009
$ 637
444
(482)
$ 599
2009
$ 1,999
631
822
121
607
(1,173)
$ 3,007
16. emploYee fUtUre BenefitS
The Corporation has a defined benefits pension plan for specific Ontario-based employees who are members of the United
Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International union. The latest
actuarial valuation was completed on March 31, 2010, and identified that the Plan had a funding deficit on a going-concern
basis of $94 (2009 - $119) and, on a solvency basis, the actuarial liabilities exceeded the value of assets by $82 (2009 –
surplus $1).
PFB Corporation - Annual Report 2010
81
In addition to actuarial valuations being performed on March 31 each year, the Plan’s accrued benefit obligation and the fair
value of plan assets for accounting purposes was also measured as at December 31, 2010 and 2009. The discount rate used
at the end of the fiscal year was 5.5% (2009 – 6.5%) and the expected rate of return on plan assets was 6.0% (2009 – 5.0%)
Information about the Plan as at December 31 is as follows:
Fair value of plan assets:
Balance at beginning of year
Actual return on plan assets
Employer contributions
Employee contributions
Benefits paid
Balance at end of year
accrued benefit obligation:
Balance at beginning of year
Valuation effect
Total current service costs
Interest cost
Benefits paid
Actuarial gains
Plan amendments (prior service costs)
Balance at end of year
Funded status:
Fair value of plan assets
Accrued benefit obligation
Funded status at end of year - (deficit) excess
Unamortized net actuarial gains
Unamortized past service costs
Accrued benefit asset at end of year
2010
$ 916
30
122
-
(78)
$ 990
$ 871
-
28
56
(78)
203
-
$ 1,080
$ 990
(1,080)
(90)
475
153
$ 538
Employer contributions to the Plan are expensed in the period and reported in cost of sales.
Plan assets by category as at December 31 are as follows:
Fixed income
Other
Balance at end of year
2010
95.2%
4.8%
100.0%
17. related partY tranSactionS
2009
$ 763
44
130
-
(21)
$ 916
$ 757
-
24
58
(21)
53
-
$ 871
$ 916
(871)
45
267
163
$ 475
2009
95.1%
4.9%
100.0%
In 2010 and 2009, PFB had transactions with three related parties which are summarized in the table below. All related
party transactions are constituted in the ordinary course of business and they have been measured at the agreed to
exchange amounts which approximate fair value.
82
PFB Corporation - Annual Report 2010
Aeonian Capital Corporation
Baker Investments LLC
McCarthy Tetrault LLP
William H. Smith Professional Corporation
All figures in the above table are stated in Canadian dollars.
2010
$ 200
114
40
9
$ 363
2009
$ 200
118
85
-
$ 403
As at December 31, 2010, Aeonian Capital Corporation (“Aeonian”), and its affiliates, owned 2,921,668 or 44.2% (2009 –
2,921,668 or 44.5%) of PFB’s issued and outstanding common shares. Aeonian is controlled by C. Alan Smith, President,
Chief Executive Officer, and a Director of the Corporation. PFB is charged fees by Aeonian for management services
provided by Mr. Smith. The fees for management services are reported under selling and administrative expenses. As at
December 31, 2010 and 2009 all fees had been paid in full in each respective year.
Mr. Frank Baker, a director of PFB, receives an annual stipend of USD $85 plus a travel and subsistence allowance to
a maximum of USD $25 per annum for representing and promoting PFB’s interests, including representation at various
industry and trade organizations. As at December 31, 2010, there was an account payable outstanding to Mr. Baker in the
amount of USD $26 with respect to the fourth quarter stipend and expenses which were settled in January 2011.
McCarthy Tetrault LLP provides legal services to PFB at which William H. Smith, QC, Corporate Secretary and a director of
PFB, was Counsel to the firm until July 1, 2010, at which time, McCarthy Tetrault LLP ceased to be a related party. Effective
July 1, 2010, William H. Smith Professional Corporation became a related party. As at December 31, 2010, a payable to
the professional corporation in the amount of $9 (2009 - $Nil) was outstanding.
18. commitmentS and contingencieS
(a) Commitments
The Corporation is required, from time to time under the terms of certain sales contracts, to provide performance
bonds that ensure that it performs under such contracts. As at December 31, 2010, performance bonds outstanding
aggregate $24,678 (2009 - $22,048).
(b) Operating leases
The Corporation’s subsidiaries rent assets under operating lease commitments with respect to certain premises,
equipment and vehicles. Annual future rental commitments on operating lease agreements require annual payments
as follows:
2011
2012
2013
2014
2015 and beyond
$ 720
570
308
306
287
$ 2,191
PFB’s subsidiaries are obligated to pay their share of the operating costs for property leases.
PFB Corporation - Annual Report 2010
83
(c) Capital and intangible asset expenditures
PFB has an ongoing program of investment in property, plant and equipment and intangible assets in the normal
course of its business and outstanding commitments for capital expenditures as at December 31, 2010 amounted to
$337 (2009 - $424).
(d) Contingent liabilities
In the normal course of operations, PFB and its subsidiaries may occasionally become involved in various claims.
While the final outcome with respect to any claims pending cannot be predicted with certainty, it is the opinion of
management that their resolution will not have a material adverse effect on PFB’s consolidated financial position or
consolidated results of operations.
(e) environment
PFB’s subsidiaries are subject to various laws, regulations and government policies relating to health and safety,
production operations, storage and transportation of goods, disposal and environmental emissions of various
substances and materials, and to the protection of the environment in general. It is the opinion of management that
PFB and its subsidiaries are in compliance with such laws, regulations and government policies in all material respects.
19. Segmented information
PFB is organized and managed as a single reportable business focused on selling proprietary products that use expanded
polystyrene rigid insulation. All of PFB’s subsidiaries in Canada and the United States are wholly-owned and considered to
be fully integrated operations.
Selected financial information is as follows:
Sales
Canada
United States
Japan
Capital assets, intangible assets and goodwill
Canada
United States
Total assets
Canada
United States
84
PFB Corporation - Annual Report 2010
2010
$ 57,183
8,397
-
$ 65,580
$ 29,576
7,494
$ 37,070
$ 52,029
10,831
$ 62,860
2009
$ 55,606
10,251
73
$ 65,930
$ 30,049
7,677
$ 37,726
$ 52,607
10,645
$ 63,252
20. SUBSeQUent eventS
Effective February 1, 2011, PFB Corporation acquired 100% of the share capital of Precision Craft Homes, a company
based in Idaho, USA, which designs and builds luxury log and timber frame homes. The total consideration included USD
$2,500 in cash paid on closing plus the equivalent of CAD $1,000 in escrowed common shares (166,667 common shares
nominally valued at $6.00 per share) to be held in escrow and subject to an earn-out provision for a maximum period of five
years.
21. comparative figUreS
Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.
PFB Corporation - Annual Report 2010
85
direCtors
the Honourable Harvie andre ¹
President
Wenzel Downhole Tools Ltd.
Frank B. Baker
Director
Bruce m. Carruthers
Chief Operating Officer
PFB Corporation
Donald J. Douglas ¹
President and CEO
United Communities Inc.
edward H. kernaghan ¹
Executive Vice President
Kernaghan Securities Ltd.
John k. Read ¹
President
John K. Read Investments Ltd.
C. alan Smith
President
Aeonian Capital Corporation
William H. Smith, Q.C.
Counsel to McCarthy Tetrault, LLP
Gordon G. tallman ¹
Corporate Director
¹ Member of the Audit Committee
offiCers
C. alan Smith
Chairman, President and
Chief Executive Officer
Stephen P. Hardy
Vice President and
Chief Financial Officer
Bruce m. Carruthers
Chief Operating Officer
William H. Smith, Q.C.
Corporate Secretary
86
PFB Corporation - Annual Report 2010
suBsidiaries
Plasti-Fab Ltd.
Delta, British Columbia
Calgary, Alberta
Crossfield, Alberta
Edmonton, Alberta
Saskatoon, Saskatchewan
Winnipeg, Manitoba
Kitchener, Ontario
Ajax, Ontario
Insulspan Division of Plasti-Fab Ltd.
Delta, British Columbia
Insulspan, Incorporated
Riverbend Timber Framing, LLC
Blissfield, Michigan, USA
Riverbend Timber Framing Division of Plasti-Fab Ltd.
Calgary, Alberta
WeBsites
www.pfbcorp.com
www.plastifab.com
www.insulspan.com
www.advantageicf.com
www.riverbendtf.com
www.pfbsustainability.com
soCial media
YouTube Channel
YouTube.com/user/PFBCorporation
Twitter
twitter.com/PlastiFab
twitter.com/AdvantageICF
twitter.com/InsulspanSIPS
twitter.com/RiverbendTF
twitter.com/FrankGreenSpeak
Bankers
Royal Bank of Canada
transfer agent and registrar
Alliance Trust Company
auditors
Deloitte & Touche LLP
legal Counsel
McCarthy Tétrault LLP
stoCk eXChange listing
The Toronto Stock Exchange
stoCk symBol
PFB
2010 Annual Report
Leadership in a Sustainable World