WESTSHORE TERMINALS
INVESTMENT CORPORATION
ANNUAL REPORT
2013
W
estshore Terminals Investment Corporation owns all of the
limited
partnership units of Westshore Terminals Limited Partnership, a partnership
established under the laws of British Columbia (“Westshore”). It derives its cash inflows
from its investment in Westshore by way of distributions on its limited partnership units.
Westshore operates a coal storage and loading terminal at Roberts Bank, British Columbia,
which is the largest coal loading facility on the west coast of the Americas. The principal
office of the entities is located at 1800 - 1067 West Cordova Street, Vancouver, British
Columbia, V6C 1C7.
Table of Contents
Financial Highlights
Directors' Letter and Report to Shareholders
Management's Discussion and Analysis
Consolidated Financial Statements
Corporate Information
1
2
4
20
47
Westshore Terminals Investment Corporation
Financial Highlights
(In thousands of Canadian dollars except per share and Note Receipt amounts)
Tonnage (in thousands)
Revenue
Coal loading
Other
Profit for the period
Profit for the period per share
Interest paid/accrued on Holdings Notes
Interest paid/accrued per Note Receipt
Dividends declared
Dividends declared per share
Shares outstanding at December 31
Share Trading Statistics
High
Low
Close
Annual Volume
2013
2012 (1)
30,094
26,094
$
$
$
$
$
$
$
$
$
$
$
$
286,703
9,022
295,725
133,426
1.80
-
-
98,010
1.32
74,250,016
36.17
25.69
34.61
27,855,000
$
$
$
$
$
$
$
$
$
$
$
$
232,442
8,253
240,695
64,657
0.87
19,491
0.263
71,651
0.96
74,250,016
30.15
22.90
27.55
22,920,000
(1) Certain 2012 amounts have been restated due to the adoption of IAS 19R (amended employee benefits standard). Further
details can be found in the “Changes in Accounting Policies” section of this document.
1
Westshore Terminals Investment Corporation
Directors’ Letter and Report to Shareholders
Dear Shareholder:
2013 represented a year of many challenges and opportunities for Westshore and included total throughput
volumes of 30.1 million tonnes, the highest level in Westshore’s history. During the first two months of 2013,
Westhore was challenged with repair efforts to the trestle at Berth 1, which was rendered inoperable following the
damage caused by the Cape Apricot, a cape sized vessel, which ran through it in December 2012. Repair and clean
up efforts proceeded very smoothly and expeditiously under the circumstances, and there were no environmental
issues. Insurance proceeds of $32.3 million were recovered from Westshore’s insurers during the year and a further
$6.2 million (for a total of $38.5 million) will be recovered by the second quarter of 2014. An action on behalf of
Westshore and its insurers against the Cape Apricot and its insurers to recover damages caused by the incident
continues.
During 2013, the board of directors also approved the next capital upgrade project which will involve the
replacement of the three older stacker reclaimers (all between 30 - 40 years old), replacement of a shiploader at
Berth 1 (approximately 30 years old) and the replacement and consolidation of the current office and maintenance
shop complex (approximately 40 years old). As announced by Westshore on March 18, 2014 following extensive
additional engineering work and negotiations with machine suppliers, the budget for the capital upgrade project has
been updated and is now anticipated to cost approximately $275 million. The increased costs are attributable to
a10% deterioration in the Canadian/U.S. dollar exchange rate, upgraded machine design and an increase in
attributable B.C. PST. The increase in up front capital costs is anticipated to be more than recovered in reduced
maintenance costs and reduced downtime (allowing for better continuous productivity) over the life of the stacker
reclaimers.
Permits necessary to proceed with these upgrades have been obtained and the total project is anticipated to be
completed in 2018. Once the upgrade is complete, Westshore will have new equipment to enable it to sustain the
current rated capacity of 33 million tonnes with the potential to add 2-3 million tonnes of further capacity. The new
equipment is expected to be delivered and installed over the next 4-5 years, in a phased sequence so as to minimize
the disruptions to the operations. This project does not increase Westshore’s overall operational footprint. Once
fully operational, the new equipment is projected to increase the potential rated capacity at the terminal by 2-3
million tonnes per year. Actual throughput increases will be dependent on a number of factors outside of
Westshore’s control, including the performance of the other parties along the coal chain (rail and ship) and overall
demand for coal. In any event, the new equipment will enable Westshore to maintain higher throughput levels over
the longer term.
Upon completion, this project will also conclude a ten-plus year, $380 million capital upgrade of the terminal
resulting in a total increase in rated throughput capacity from 23 million tonnes to 35-36 million tonnes
(representing a capital cost per tonne of expansion of roughly $30-31/tonne, a very competitive cost for capacity
upgrades by international industry standards), and effectively result in a newer, more modern and better-equipped
terminal, capable of maintaining higher throughput levels on a sustainable basis. These amounts do not include an
additional $20 million plus in improved and updated environmental systems over the same period.
In 2013, Westshore also spent $14 million to upgrade its environmental systems, including new state of the art
spray towers for dust suppression.
2
Westshore Terminals Investment Corporation
Directors’ Letter and Report to Shareholders
With customer agreements currently in place, which were secured in 2011 and 2012, most of Westshore’s
capacity is committed through to 2021. For 2014, the average loading rate is expected to be slightly higher than in
2013 and total throughput is anticipated to be 31-32 million tonnes.
We look forward to all the opportunities and challenges the coal markets are expected to bring.
For the Board of Directors,
(Signed) “William Stinson”
William Stinson
Chairman of the Board of Directors
Vancouver, B.C.
March 18, 2014
3
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with information contained in the Consolidated Financial
Statements of Westshore Terminals Investment Corporation (“the Corporation”) and the notes thereto for the year ended December 31,
2013. This discussion and analysis has been based upon the consolidated financial statements prepared in accordance with International
Financial Reporting Standards (“IFRS”). This discussion and analysis is the responsibility of management of the Corporation.
Additional information and disclosure can be found on SEDAR at www.sedar.com. Unless otherwise indicated, the information
presented in this Management’s Discussion and Analysis (“MD&A”) is stated as at March 18, 2014.
All amounts are presented in Canadian dollars unless otherwise noted.
Caution Concerning Forward-Looking Statements
This MD&A contains certain forward-looking statements, which reflect the current expectations of the Corporation and Westshore (as
defined below) with respect to future events and performance. Forward-looking statements are based on information available at the time
they are made, assumptions by management, and management’s good faith belief with respect to future events. They speak only as of the
date of this MD&A, and are subject to inherent risks and uncertainties, including those risk factors outlined in the annual information
form of the Corporation filed on www.sedar.com, that could cause actual performance or results to differ materially from those reflected
in the forward-looking statements, historical results or current expectations.
Forward-looking information included in this document includes statements with respect to future revenues, expected loading rates,
strength of markets for metallurgical and thermal coal, expected throughput volumes, future throughput capacity, the proportion of
throughput expected to be shipped at variable rates, the effect of Canadian/U.S. dollar exchange rate, the future cost of post-retirement
benefits, customer contract renegotiations, cost of and timing to complete capital projects and the anticipated level of dividends.
Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate
indications of whether, or the times at which, such performance or results will be achieved. There is significant risk that estimates,
predictions, forecasts, conclusions and projections will not prove to be accurate, that assumptions may not be correct and that actual results
may differ materially from such estimates, predictions, forecasts, conclusions or projections. Readers of this MD&A should not place undue
reliance on forward-looking statements as a number of risk factors could cause actual results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. Specific risk factors include
global demand and competition in the supply of seaborne coal, the ability of customers to maintain or increase sales or deliver coal to the
Terminal (as defined below), fluctuations in exchange rates, and the Corporation’s ability to renegotiate key customer contracts on
favourable terms or at all. See the risk factors outlined in the annual information form referred to above.
4
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
General
The Corporation was incorporated under the British Columbia Business Corporations Act on September 28, 2010 and is
domiciled in Canada. The registered and head office of the Corporation is located at Suite 1800, 1067 West Cordova
Street, Vancouver, British Columbia, V6C 1C7. The Corporation owns all of the limited partnership units of
Westshore Terminals Limited Partnership (“Westshore”), a partnership established under the laws of British
Columbia. Prior to 2011 those units were owned by Westshore Terminals Income Fund.
The Corporation derives its cash inflows from its investment in Westshore by way of distributions on Westshore’s
limited partnership units. Westshore operates a coal storage and loading terminal at Roberts Bank, British Columbia
(the “Terminal”). Substantially all of Westshore’s operating revenues are derived from rates charged for loading coal
onto seagoing vessels.
Westshore’s results are significantly affected by the volumes of coal shipped by different customers for sale in the
export market, the rates per tonne charged by Westshore and Westshore’s costs. Contracts entered into over the last
two years provide customer volume commitments, much of which are at fixed rates, for approximately 90% of the
Terminal’s estimated current capacity through to 2021. Shipments under those contracts are expected to provide a
stable base for revenues over the next several years, with the possibility of increased revenues from higher than
committed shipments and increased rates under certain contracts that provide a limited element of price participation.
This MD&A has been prepared by the Corporation to accompany the financial results of the Corporation for the
financial year ended December 31, 2013.
Structure
The following chart illustrates the Corporation’s primary structural and contractual relationships. The Corporation
holds all of the limited partnership units of Westshore. Westshore Terminals Ltd. (the “General Partner”) is the
general partner of Westshore. Westar Management Ltd. (the “Manager”) provides management services to Westshore
and administrative services to the Corporation, and appoints three of the seven directors of the General Partner.
Details of these arrangements will be included in the Information Circular for the Corporation’s 2014 Annual
Meeting.
5
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Shareholders
Common Shares
Westshore Terminals
Investment
Corporation
Administration Agreement
Westar
Management Ltd.
LP Units
Westshore
Terminals Ltd.
Governance
Agreement
Westshore
Terminals LP
General Partner
Management Agreement
This MD&A refers to certain measures other than those prescribed by IFRS. These measures do not have
standardized meanings and may not be comparable to similar measures presented by other corporations. They are
however determined by reference to the Corporation’s financial statements. These non-IFRS measures are discussed
because the Corporation believes they provide investors with useful information in understanding the results of the
Corporation’s and Westshore’s operations and financial position.
6
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Selected Financial Information
The following financial data is derived from the Corporation’s audited consolidated financial statements for the
years ended December 31, 2013, 2012 and 2011, which were prepared in Canadian dollars using IFRS.
Revenue
Profit before taxes
Profit for the period
Profit for the period per share(1)
Interest paid/accrued on Holdings Notes(2)
Interest paid/accrued per Note Receipt
Dividends declared
Dividends declared per share
Total assets
Total long term liabilities
2013
$
295,725
179,912
133,426
1.80
-
-
98,010
1.32
632,994
77,415
2012(3)
$
240,695
86,005
64,657
0.87
19,491
0.263
71,651
0.96
588,397
89,780
2011
$
212,837
58,924
42,993
0.58
38,981
0.525
40,095
0.54
569,091
428,215
(1) The number of Common Shares outstanding for all years was 74,250,016.
(2) Prior to July 1, 2012 the Corporation’s subsidiary Westshore Terminals Holdings Ltd. had outstanding Notes (the “Holdings
Notes”) that were represented by Note Receipts that traded with the Corporation’s common shares.
(3) Certain 2012 amounts have been restated due to the adoption of IAS 19R (amended employee benefits standard). Further
details can be found in the “Changes in Accounting Policies” section of this document.
The following tables set out selected consolidated financial information for the Corporation on a quarterly basis for
the last eight quarters.
(In thousands of Canadian dollars except per share and Note
Receipt amounts)
Revenue
Profit before income taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Three Months Ended
Dec 31, 2013
$
78,135
42,253
31,476
0.42
24,503
0.33
Sep 30, 2013
$
81,347
39,778
29,470
0.40
24,503
0.33
Jun 30, 2013 Mar 31, 2013
$
78,805
54,249
39,761
0.54
24,503
0.33
$
57,438
43,632
32,719
0.44
24,503
0.33
7
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
(In thousands of Canadian dollars except per share and Note
Receipt amounts)
Revenue
Profit before income taxes
Profit for the period
Profit for the period per share
Interest paid/accrued on Holdings Notes
Interest paid/accrued per Note Receipt
Dividends declared
Dividends declared per share
Three Months Ended
Dec 31, 2012
$
55,346
22,976
17,206
0.23
-
-
20,419
0.27
Sep 30, 2012
$
71,211
37,223
27,917
0.38
-
-
24,502
0.33
Jun 30, 2012 Mar 31, 2012
$
65,581
20,682
15,690
0.21
9,745
0.131
14,108
0.19
$
48,557
5,124
3,844
0.05
9,745
0.131
12,622
0.17
(1) Certain 2012 amounts have been restated due to the adoption of IAS 19R
Summary Description of Business
General
Westshore operates a coal storage and loading facility at Roberts Bank, British Columbia that is the largest coal
loading facility on the west coast of the Americas. Westshore operates on a throughput basis and receives handling
charges from its customers based on volumes of coal exported through the Terminal. Westshore does not take title to
the coal it handles. Market conditions for coal affect the competitiveness of Westshore’s customers and, together with
changes in customers’ mine output, affect the volume of coal handled by Westshore. Westshore handles coal from
mines in British Columbia and Alberta, as well as from mines in the north-western United States. Coal shipped from
the mines owned by Teck, which is Westshore’s largest customer, accounted for 56% of Westshore’s throughput by
volume in 2013 (2012 –57%).
Coal is delivered to the Terminal in unit trains operated by the Canadian Pacific, CN and BNSF Railways and is
then unloaded and either directly transferred onto a ship or stockpiled for future ship loading. Ultimately, the coal is
loaded onto ships that are destined for approximately 20 countries world-wide, with the largest volumes being shipped
to Asia.
Markets & Customers
Shipments of coal through the Terminal by destination for the past three years were as follows:
8
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Shipments by Destination
(Expressed in thousands of metric tonnes)
Korea
China
Japan
Europe
Taiwan
S. America
Other
Total
2013
Tonnes
11,906
6,497
6,291
1,712
1,656
1,294
738
30,094
%
40
22
21
6
5
4
2
100
2012
Tonnes
9,185
4,894
5,256
2,372
1,374
2,474
539
26,094
%
35
19
20
9
5
10
2
100
2011
Tonnes
11,761
2,412
5,606
3,684
447
2,810
586
27,306
%
43
9
21
13
2
10
2
100
During 2013, 60% of Westshore’s volume was metallurgical coal (61% in 2012), 39% was thermal coal (38% in
2012) and 1% was petroleum coking coal in both years. Of the 6.5 million tonnes of coal shipped to China, 5.2
million tonnes were metallurgical coal, and approximately 1.3 million tonnes were thermal coal, of which 0.4 million
tonnes was from a Canadian customer. Of the coal shipped by Westshore’s US customers, 8.4 million tonnes of the
9.3 million tonnes was shipped to Korea and Japan, with the balance shipped to China. Any weakening in the market
for seaborne thermal coal could materially affect the ability of Westshore’s thermal coal customers to sustain sales at
the levels experienced in 2012 and 2013.
Westshore’s customers compete with other suppliers of coal throughout the world. With respect to metallurgical
coal, Australian coal mines are the most significant competitors. Over the last decade there have been significant
variations in the supply-demand balance in seaborne metallurgical coal, resulting in significant variations in the prices
obtained by Westshore’s customers. Prices for metallurgical coal are now being established on a quarterly basis.
Pricing of coal is crucial to the results of Westshore’s customers who must obtain adequate prices to sustain their
operations. Westshore has limited direct exposure to rates that vary with coal prices.
With its five mines in British Columbia and one in Alberta, Teck is Westshore’s largest customer. It is the second
largest supplier of seaborne hard coking coal in the world. Westshore’s current contract to handle coal from Teck’s
mines runs to March 31, 2021. Under this contract, Teck has committed to ship not less than 19 million tonnes per
contract year, at fixed rates. Westshore expects that Teck will ship most of the remaining coal from its mines through
Neptune Terminals, with some being shipped through Ridley Terminals in Prince Rupert.
Westshore has a contract with Coal Valley Resources Ltd. (formerly Luscar Ltd.) (“Coal Valley”) which covers
thermal coal from the Coal Valley mine and the Obed mine. Westshore’s contract with Coal Valley runs to 2022.
During 2013, Coal Valley shipped 2.0 million tonnes of thermal coal through the Terminal compared to 2.2 million
tonnes in 2012. The pricing mechanism under this contract is based on fixed rates with escalation.
Westshore’s contract with Grande Cache Coal Corporation (“Grande Cache”) for handling coal produced from its
operations in Alberta runs to March 31, 2022. Westshore loaded 1.7 million tonnes under this contract in 2013,
compared to 1.1 million tonnes in 2012. The contract with Grande Cache provides for shipments through Westshore
exclusively.
9
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Westshore has entered into contracts with U.S. thermal coal producers that run to 2022. Contracts with these
producers provide for a variable rate based on the U.S. dollar price received for the product, subject to a floor price.
These producers accounted for approximately 31% of Westshore’s throughput in 2013.
Labour
Labour agreements with all three locals of the International Longshore and Warehouse Union (the longshoremen,
foreman and the clerical workers) are in place and expire on January 31, 2016.
Facilities
Commencing in 2007, Westshore undertook two significant equipment upgrades at an aggregate cost of
approximately $110 million. Prior to those improvements the Terminal’s functional throughput capacity was assessed
at somewhat less than 24 million tonnes per annum.
The first program, completed in 2010, involved the addition of a fourth stacker/reclaimer and associated conveyor
system, and conversion of the second barrel of the tandem rotary dumper to accommodate shorter aluminum rail
cars, the use of which has become the industry norm. All four stacker/reclaimers were automated and other systems
were updated. This program increased the Terminal’s capacity, allowing it to handle a then record 27.3 million tonnes
in 2011.
Despite this program Westshore was unable to make commitments to its existing customers for all the levels of
service they were requesting. Accordingly, Westshore undertook a further capital upgrade consisting of replacing the
existing single dumper with a double dumper and addition of related equipment, at a cost of $45 million. This project
was completed late in 2012 and initially was partly financed with bank debt. In addition, a significant maintenance
program was completed in 2012 to replace chutes in four transfer towers at a cost of $12 million to improve the flow
of product. It is now estimated that the terminal throughput capacity is approximately 33 million tonnes, under
current and foreseeable operating conditions. The interruption of operations at Berth 1 prevented normal operations
during January and early-February 2013.
In early 2013, Westshore approved a further capital expenditure program to replace the three oldest stacker-
reclaimers and a shiploader at Berth 1 with new equipment. By acquiring this new equipment, Westshore will be able
to significantly enhance its operational efficiencies in several respects, including standardizing spare parts, and
reduction in overall maintenance downtime and costs involved in maintaining older equipment. The new stacker-
reclaimers will have an anticipated useful life of 30-40 years. The project will also involve combining the various
structures on the site including the 42 year old outdated and inefficient administration, operations and maintenance
buildings into one consolidated complex. It will also result in storage optimization. The project is expected to be
completed in stages ending in 2018.
No additional equipment is being added to the site, nor is the site footprint being increased. Any additional
throughput capacity would only result from the improved productivity of the new equipment, operating efficiencies,
and reduced maintenance downtime, and would only be utilized if other participants in the coal chain can also
improve efficiencies and increase sales. Currently, it is estimated that an additional 2-3 million tonnes per year might
be achievable, but in any event not before 2018.
10
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
The new equipment is expected to be delivered and installed over the next 4-5 years, in a phased sequence so as to
minimize the disruptions to the operations. This project does not increase Westshore’s overall operational footprint.
Once fully operational, the new equipment is projected to increase the potential rated capacity at the terminal by 2-3
million tonnes per year. Actual throughput increases will be dependent on a number of factors outside of Westshore’s
control, including the performance of the other parties along the coal chain (rail and ship) and overall demand for
coal. In any event, the new equipment will enable Westshore to maintain higher throughput levels over the longer
term.
Upon completion, this project will also conclude a ten-plus year, $380 million capital upgrade of the terminal
resulting in a total increase in rated throughput capacity from 23 million tonnes to 35-36 million tonnes (representing
a capital cost per tonne of expansion of roughly $30-31/tonne, a very competitive cost for capacity upgrades by
international industry standards), and effectively result in a newer, more modern and better-equipped terminal, capable
of maintaining higher throughput levels on a sustainable basis. These amounts do not include an additional $20
million plus in improved and updated environmental systems over the same period.
In 2013 Westshore spent $14 million for new, state of the art dust suppression systems and related environmental
control equipment which was completed in 2013.
Results of Operations
Westshore loaded 30.1 million tonnes during 2013 as compared to 26.1 million tonnes during 2012. First quarter
2013 shipments and revenues were negatively impacted by the loss of use of Berth 1 following the damage to the
trestle at Berth 1, as a result of which Westshore lost approximately 3 million tonnes of shipments from December 7,
2012 to February 7, 2013. Coal loading revenue increased by 23.4% to $286.7 million in 2013 compared with $232.4
million in 2012. The increase was due to higher tonnage at a higher average rate. In the fourth quarter of 2013,
Westshore shipped 7.5 million tonnes, compared with 5.6 million tonnes shipped during the same period in 2012,
which was impacted by the Berth 1 outage. The average loading rate in 2013 was $9.53 per tonne compared to
$8.91 per tonne for 2012.
Other income, consisting of wharfage and ancillary services income, increased from $8.3 million in the 2012 to
$9.0 million in 2013.
Operating expenses increased by 9.6% from $120.6 million in 2012 to $132.2 million in 2013, consistent with the
increased volume loaded. Administration expenses increased by 32% from $10.0 million in 2012 to $13.2 million in
2013 primarily due to an increase in the incentive fee to Westar Management Ltd. (the “Manager”).
An additional $6 million of insurance proceeds relating to the Berth 1 incident were recorded in the fourth quarter
of 2013 ($32.3 million received for the year). Accounting standards require these proceeds to be recorded as income.
$6.2 million of additional insurance recoveries from Westshore’s insurers are anticipated to be fully recovered during
the second quarter of 2014for total recoveries of $38.5 million. Recovery from the MV Cape Apricot (and/or its
insurers) is also being pursued, but the ultimate amount and timing of any of such recoveries is unknown at this time.
Westshore has used $18.3 million of the insurance proceeds to cover its out of pocket expenses to repair and rebuild
the damaged trestle at Berth 1 which were incurred in Q4 2012 and the first half of 2013, with remaining amounts to
11
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
be applied to the $275 million capital upgrade projects that will take place over the next 4-5 years (refer to “Liquidity
and Capital Resources” below).
Net finance costs for 2013 were lower than 2012 as there is no longer interest on the Holdings Notes. Interest
expense in 2013 was $0.7 million compared to interest income of $0.2 million for the prior year. In the prior year,
interest expense on the long-term debt was capitalized to property, plant and equipment as the new dumper was
constructed, whereas interest expense on outstanding debt incurred in the current year was expensed.
The net interest cost components of the employee benefit plan expense are now recorded in net finance costs in
accordance with the new employee benefits accounting standard adopted in the current year. Net employee benefit
interest of $2.9 million was recorded in 2013, consistent with $2.7 million net employee benefit interest in 2012.
Income tax expense increased to $46.5 million in 2013 from $21.3 million in 2012. The increase resulted from an
increase in profit before income taxes compared to the prior year and an increase in the tax rate. The increase in
profit before income taxes was driven by higher tonnes shipped, higher loading rates, insurance proceeds received and
the elimination of interest expense on the Holdings Notes
Other comprehensive income increased from a $2.9 million loss in 2012 to a $5.8 million gain in 2013. Other
comprehensive income includes actuarial gains and losses on the defined benefit post-retirement obligations which are
primarily impacted by the discount rate used and the plan asset value performance. The discount rate used to calculate
post-retirement liabilities increased in 2013 resulting in a reduced obligation liability. In both 2012 and 2013, plan
asset values increased due to positive returns in the stock markets.
Profit was higher in 2013 at $133.4 million, as compared to $64.7 million in 2012. The significant increase was due
to increased operating profits, $32.3 million in insurance proceeds and extinguishment of the interest expense on the
Holdings Notes. Westshore has used the insurance proceeds to cover its out of pocket expenses to repair and rebuild
the damaged trestle at Berth 1 which were incurred in Q4 2012 and the first half of 2013 with the remaining amounts
to be applied to the capital upgrade projects that will take place over the next 4-5 years (refer to “Liquidity and Capital
Resources” below).
Cash Flows
Cash flows from operations are available to the Corporation to fund capital and other expenditures and pay
dividends to shareholders. Cash flow from operations increased from $100.1 million in 2012 to $176.1 million in
2013. Cash flows before changes in working capital and income tax payments increased from $115.8 million in 2012
to $202.4 million in 2013 due to the insurance proceeds received, past service costs that were immediately expensed
but were funded with a letter of credit in the current year, and increased profits resulting from both higher average
loading rates and higher volumes shipped.
Working capital changes in 2013 were lower by $26.6 million than in 2012 as accounts receivable balances and
accounts payable and accrued liabilities balances returned to a more normal level at the end of 2013. At the end of
2012, receivables and payables were low and high respectively due to the timely collection of receivables and payables
being higher due to the timing of payments.
Cash used for financing activities for 2013 was $124.6 million as opposed to cash used of $59.9 million for 2012.
The Corporation drew $30 million on the revolving credit facility in 2012, but repaid it in 2013. Dividend and interest
payments for 2012 were $3.8 million lower than dividend only payments in 2013.
12
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Cash used in investing activities decreased from $61.9 million in 2012 to $33.9 million in the 2013. The higher
capital expenditures in the prior year were incurred as part of the double dumper and chute upgrade projects, whereas
capital expenditures in the current year consisted of the replacement Berth 1 trestle and the new dust suppression
system.
Liquidity and Capital Resources
It is not anticipated that the Corporation will require significant capital resources to maintain its investment in
Westshore on an ongoing basis or to meet its working capital requirements. Capital expenditures required to maintain
the Terminal’s existing throughput capacity and refurbish equipment in the ordinary course of business have increased
over the past several years. As explained under “Facilities”, rather than continuing to incur increasing costs of this
nature on an ongoing basis, the Corporation has determined to undertake replacement of the three older stacker-
reclaimers and shiploader. These projects will be financed through a combination of retention of cash flow and
borrowings which are expected to be in the $100 million range.
Meeting annual capital requirements, along with managing variations in working capital, are well within
Westshore’s financial capacity based solely on revenues less expenses, without any need for financing except for
material capital improvements. As a result, the Corporation does not anticipate any liquidity concerns with the
ongoing operations of Westshore.
Westshore has a $15 million operating facility with a Canadian chartered bank which, if required, can be utilized to
fund working capital requirements. This facility was not used during the fourth quarter and remained undrawn at
December 31, 2013, although Westshore has an outstanding letter of credit for $11.8 million related to pension
funding. The term of the operating facility expires on August 29, 2014.
Westshore has a $50 million revolving credit facility to be utilized for capital expenditures and investments, which
was not drawn at December 31, 2013. The credit facility has a term ending August 31, 2016, and is secured by a
pledge of all of the assets of the Corporation. The revolving credit facility bears interest at the 1 month BA rate plus a
margin and no repayments are required until maturity. As noted above, additional borrowing will be required to
finance the further capital upgrade projects announced in 2013. Given the low debt level within the Corporation, it
anticipates no difficulty in securing such borrowing.
Westshore has post-retirement benefit obligations under its pension plans and other post-retirement benefit plans
which it is required to fund each year. Westshore’s funding requirements were $5.3 million in 2013 (2012 – $7.2
million), which comprised $4.0 million (2012 – $5.8 million) for contributions to the pension plans and $1.3 million
(2012 - $1.4 million) for payments for other post-retirement benefits. Westshore anticipates that its funding
requirements in 2014 will be higher than in 2013 but will partially be funded by an increase to the letter of credit
rather than with cash. Westshore does not anticipate any problems satisfying its 2014 funding obligations out of
current cash flows. The balance sheet reflects a $62.2 million obligation for post-retirement benefits and other post
retirement benefit plans compared to $59.8 million for the prior year. This balance would be expected to decline in
the future if interest rates increase.
Future minimum operating lease payments for the years ending December 31 (assuming minimum annual tonnes)
are as follows:
13
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
2014
2015
2016
2017
2018
Thereafter
Terminal Lease
Other
$
$
11,701
11,701
11,701
11,701
11,701
93,607
$
290
-
-
-
-
-
Total
11,991
11,701
11,701
11,701
11,701
93,607
Westshore has a commitment of $4.1 million with respect to equipment purchases that are to be delivered and
paid for in the next 12 months.
The Corporation does not have any material capital lease obligations, or other long-term obligations.
Distributions
Distributions by the Corporation over the last two years were as follows:
(In thousands of Canadian dollars except per share and Note Receipt amounts)
Total Dividends on Common Shares
Total Dividends per Common Share
Total Interest on Holdings Notes
Total Interest per Note Receipt
2013
$
98,010
1.32
-
-
2012
$
71,651
0.965
19,491
0.263
In view of the decision to reinvest approximately $275 million over the next four to five years in projects
consisting principally of replacement of the three older stacker-reclaimers, new shiploader and office redevelopment
at the Terminal site, the directors determined to initiate a capital projects fund to enable the Corporation to lessen the
amount of additional bank debt financing that would otherwise be required to pay for the projects. The Corporation
has been holding back some funds, which commenced with the Q2 2013 dividend, by setting a dividend rate of $0.33
per share per quarter. This was the level of distribution paid during all of 2013. Such dividend level is, subject to
change based on other opportunities that may come before Westshore, and based on the Terminal handling 30 million
tonnes or more (under its existing customer contracts) for the next several years. As part of this fund, the
Corporation also expects to use insurance recoveries received in respect of lost income from the Berth 1 trestle
incident. Westshore will have completed its collection of insurance proceeds from its insurers, which totaled $38.5
million, by April 2014. Recovery efforts on behalf of Westshore and its insurers against the Cape Apricot and its
insurers continue. This dividend policy will be subject to regular review, and actual operating performance at the
Terminal and the ultimate costs for these projects may impact future dividends positively or negatively.
14
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Outlook
The cash inflows of the Corporation are entirely dependent on Westshore’s operating results. They are affected by
the volume and mix of coal shipped through the Terminal, the rates charged to customers for that coal, and
Westshore’s operating and administrative costs. Contracts entered into in 2011 and 2012 provide significant customer
volume commitments over the next several years, much of which are at fixed rates. Shipments under those contracts
are expected to provide a stable base for revenues over the next several years, with the possibility of increased
revenues from higher than committed shipments and increased rates under contracts that provide some element of
price participation.
The variance in revenues from 2013 will ultimately be impacted by numerous factors, including total volumes
shipped through the Terminal, the distribution of throughput by customer, prices realized by certain shippers and
foreign exchange rates. Based on the information currently available to it, Westshore is anticipating volume levels in
2014 to be higher than in 2013 and at slightly higher rates than in 2013. If Westshore’s profit for the calendar year
exceeds $42 million, incentive fees will be payable by Westshore to the Manager under the Management Agreement,
to a maximum of $5 million.
Related Party Transactions
The Manager provides management services to Westshore pursuant to a management agreement dated
December 31, 2010 (the “Management Agreement”). Westshore pays an annual management fee to the Manager and
an incentive fee based on a percentage of profit above $42 million, starting at 1.5% and rising to 6%, subject to an
annual cap on the incentive fee of $5 million. The annual base management fee is paid in monthly installments, and
$979,000 was paid in this regard by Westshore for the twelve month period ended December 31, 2013. The incentive
fee for the twelve month period ended December, 31, 2013 was $4,161,000 and was paid subsequent to year-end.
The Governance Agreement between the Corporation and the Manager governs the composition of the board of
directors of the General Partner. Since January 1, 2011, the board of directors of the General Partner consists of
seven directors, three of whom are nominated by the Manager.
The Manager also provides administration services to the Corporation pursuant to an administration agreement
dated December 31, 2010. The Corporation pays an annual administration fee in monthly installments. $335,000 was
paid by the Corporation to the Manager for the twelve month period ended December 31, 2013.
Changes in Accounting Policies
The Corporation’s accounting policies are found in note 3 of the Corporation’s financial statements beginning on
page 24.
Amendments to IAS 19 Employee Benefits
The Corporation adopted IAS 19 Employee Benefits (2011) with a date of initial application of January 1, 2013 and
changed its basis for determining the income or expense related to defined benefit plans as required.
As a result of the change, the Corporation now determines the net interest expense (income) on the net defined
benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at
the beginning of the annual period to the net defined benefit liability (asset) at the beginning of the annual period. It
15
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
takes into account any changes in the net defined liability (asset) during the period as a result of contributions and
benefit payments. The net interest on the net defined benefit liability (asset) comprises:
•
•
Interest cost on the defined benefit obligation; and
Interest income on plan assets.
Previously, the Corporation determined interest income on plan assets based on their long-term rate of expected
return. This net interest is disclosed as a component of financing costs. In addition, the Corporation is now required
to recognize past service costs in full immediately in profit or loss.
The change in accounting policy has been applied retrospectively.
The following table summarizes the financial effects on the statement of comprehensive income on
implementation of the new accounting policy as compared to amounts previously presented:
Decrease (increase in):
Operating expenses
Finance costs, net
Income taxes
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Twelve Months Ended
December 31, 2012
$
$
963
(2,672)
428
1,281
(1,281)
-
The change in accounting policy had no impact on net assets as at December 31, 2012 and had an immaterial
impact on earnings per share for the comparative period.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in accordance with IFRS requires the Corporation
to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and
contingencies. These estimates are based on historical experience and on assumptions that are considered at the time
to be reasonable under the circumstances. Under different assumptions or conditions, the actual results may differ,
potentially materially, from those previously estimated.
The following is a discussion of the accounting estimates that are significant in determining the Corporation’s
financial results.
Plant and equipment: Depreciation
Plant and equipment are stated at cost less accumulated depreciation. Cost at the date of transition to IFRS was
determined by reference to Canadian GAAP. Depreciation is calculated using the straight line method over the
estimated useful production life of the assets. The estimated useful lives of plant and equipment range from 3 to 35
years and are reviewed annually. A change in the estimated useful lives of plant and equipment could result in either a
higher or lower depreciation charge to profit for the period.
16
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Asset Retirement Obligations
Westshore is required to recognize the fair value of an estimated asset retirement obligation when a legal obligation
is present and a reasonable estimate of fair value can be made. At the expiry of the Terminal’s lease, the VFPA has the
option to acquire the assets of the Terminal at fair value or require Westshore to return the site to its original
condition. Westshore believes that the probability that the VFPA will elect to enforce site restoration is negligible and
any liability related to an asset retirement obligation would not be material, although any change in the estimate of site
restoration costs or the probability of incurring those costs could have a material impact on the asset retirement
obligation.
Goodwill
Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances
indicate that the asset might be impaired, by comparing the fair value of Westshore to its carrying value, including
goodwill. If the fair value of Westshore is less than its carrying value, a goodwill impairment loss is recognized as the
excess of the carrying value of the goodwill over the fair value of the goodwill. The determination of fair value
requires management to make assumptions and estimates about future coal loading rates, customer shipments,
operating costs, foreign exchange rates and discount rates. Changes in any of these assumptions, such as lower coal
loading rates, a decline in customer shipments, an increase in operating costs or an increase in discount rates could
result in an impairment of all or a portion of the goodwill carrying value in future periods.
Employee Future Benefits
Westshore has post-retirement benefit obligations under its pension plans and other post-retirement benefit plans,
the costs of which are based on estimates. Actuarial calculations of benefit costs and obligations depend on
Westshore’s assumptions about future events. Major estimates and assumptions relate to expected plan investment
performance, salary escalation, retirement ages of employees and expected health care costs, as well as discount rates,
withdrawal rates and mortality rates.
Deferred Income Taxes
Deferred income tax assets and liabilities have been recognized for temporary differences between the tax basis of
an asset or liability and its carrying amount on the balance sheet. The deferred income tax balances can be affected by
a change in the estimate of when temporary differences reverse, the likelihood of realization of deferred tax assets,
and the classification of assets for tax purposes.
Future Accounting Standards:
IFRS 9 – Financial Instruments
IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to
classification and measurement of financial assets and financial liabilities, as defined in IAS 39. The standard was
initially effective for annual periods beginning on or after January 1, 2013, but Amendments to IFRS 9 Mandatory
Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, changed the mandatory effective date
to undetermined. The company will quantify the effect in conjunction with the other phases, when the final standard,
including all phases, is issued.
17
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Internal Controls Over Financial Reporting
The Corporation maintains a system of internal controls over financial reporting, as defined by National
Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (“National Instrument 52-109”), in
order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
information for external purposes in accordance with IFRS.
The Chief Executive Officer and Chief Financial Officer of the Corporation have caused to be evaluated under
their supervision, the effectiveness of the Corporation’s internal controls over financial reporting as of December 31,
2013. Based on that assessment, it was determined that the internal controls over financial reporting were
appropriately designed and were operating effectively. No material changes were identified in the Corporation’s
internal controls over financial reporting during the year ended December 31, 2013 that have materially affected the
Corporation’s internal controls over financial reporting, or are reasonably likely to materially affect the Corporation’s
internal controls over financial reporting.
It should be noted that a control system, including the Corporation’s internal controls and procedures, no matter
how well conceived, can provide only reasonable, but not absolute, assurance that the objectives of the control system
will be met and it should not be expected that the disclosure and internal controls and procedures will prevent all
errors or fraud.
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.
Disclosure Controls And Procedures
“Disclosure controls and procedures” are defined as follows in National Instrument 52-109:
“Disclosure controls and procedures” means controls and other procedures of an issuer that are designed to
provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim
filings or other reports filed or submitted by it under provincial and territorial securities legislation is recorded,
processed, summarized and reported within the time periods specified in the provincial and territorial securities
legislation and include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in its annual filings, interim filings or other reports filed or submitted under provincial
and territorial securities legislation is accumulated and communicated to the issuer’s management, including its
chief executive officer and chief financial officer (or persons who perform similar functions to a chief executive
officer or a chief financial officer), as appropriate to allow timely decisions regarding required disclosure.”
As required by National Instrument 52-109, the Chief Executive Officer and the Chief Financial Officer of the
Corporation, in conjunction with management of the General Partner, have evaluated the effectiveness of the design
and tested the operation of the disclosure controls and procedures of Westshore, the General Partner and the
Corporation as of December 31, 2013 and have concluded that such disclosure controls and procedures provide
reasonable assurance that information required to be disclosed in the annual filings, interim filings or other reports
18
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
filed or submitted under provincial and territorial securities legislation is recorded, processed, summarized and
reported within the time periods specified in such legislation.
Additional information relating to the Corporation and Westshore, including the Corporation’s annual information
form, is available at www.sedar.com
Management’s Report
The consolidated financial statements and other information in this annual report have been prepared by and are
the responsibility of the management of the Corporation. The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and reflect where necessary management’s best estimates
and judgments.
Management is also responsible for maintaining systems of internal and administrative controls to provide
reasonable assurance that the Corporation’s assets are safeguarded, that transactions are properly executed in
accordance with appropriate authorization and that the accounting systems provide timely, accurate and reliable
financial information.
The Directors are responsible for assuring that management fulfills its responsibility for financial reporting and
internal control. The Directors perform this responsibility at meetings where significant accounting, reporting and
internal control matters are discussed and the consolidated financial statements and annual report are reviewed and
approved.
The consolidated financial statements have been audited on behalf of the shareholders by KPMG LLP, Chartered
Accountants, in accordance with International Financial Reporting Standards. The Auditors’ Report outlines the
scope of their examination and their independent professional opinion on the fairness of these financial statements.
(Signed) “William W. Stinson”
William W. Stinson
Director
(Signed) “M. Dallas H. Ross”
M. Dallas H. Ross
Director
____________________________________________________________________________________________________
19
KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Westshore Terminals Investment Corporation
We have audited the accompanying consolidated financial statements of Westshore Terminals Investment
Corporation, which comprise the consolidated statements of financial position as at December 31, 2013 and 2012,
the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended,
and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ 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 our 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, we consider 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 consolidated financial
position of Westshore Terminals Investment Corporation as at December 31, 2013 and 2012, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards.
KPMG LLP (signed)
Chartered Accountants
March 18, 2014
Vancouver, Canada
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
Property, plant, and equipment:
At cost
Accumulated depreciation
Goodwill
Deferred income taxes
Other assets
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
Income tax payable
Dividends payable to shareholders
Deferred income taxes
Employee future benefits
Revolving credit facility
Shareholders' equity (deficit):
Share capital
Deficit
Subsequent events (note 4)
Commitments (note 15)
Note
December 31,
2013
December 31,
2012
$
$
$
$
61,408
18,218
10,439
1,028
91,093
629,499
(453,161)
176,338
365,541
-
22
632,994
$
$
37,922
17,887
24,503
80,312
15,210
62,205
-
157,727
1,706,265
(1,230,998)
475,267
43,873
11,247
9,033
872
65,025
593,168
(441,760)
151,408
365,541
6,423
-
588,397
38,817
5,353
20,419
64,589
-
59,780
30,000
154,369
1,706,265
(1,272,237)
434,028
$
632,994
$
588,397
5
8
13
9
8
11
12
9
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board:
(Signed) “William W. Stinson”
William W. Stinson
Director
(Signed) “M. Dallas H. Ross”
M. Dallas H. Ross
Director
20
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2013 and 2012
Note
2013
2012
(restated - note 3)
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain (loss)
Insurance proceeds
Gain on disposal (loss on write-down) of plant and
equipment
Profit from operating activities
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income (loss):
Defined benefit plan actuarial gains (losses)
Income tax recovery (expense) on other
comprehensive income (loss)
Other comprehensive income (loss) for the
year, net of income tax
Total comprehensive income for the year
Profit per share:
Basic and diluted earnings per share
Weighted average number of shares outstanding
4
6
7
11
10
21
$
$
$
286,703
9,022
295,725
132,159
13,229
145,388
807
32,325
12
183,481
3,569
179,912
46,486
133,426
7,869
(2,046)
5,823
139,249
1.80
74,250,016
$
$
$
232,442
8,253
240,695
120,638
9,951
130,589
(368)
-
(1,766)
107,972
21,967
86,005
21,348
64,657
(3,910)
978
(2,932)
61,725
0.87
74,250,016
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2013 and 2012
Share capital
Deficit
(restated-note 3)
Total
(restated-note 3)
Balance at January 1, 2012
$
1,335,015 $
(1,262,311) $
72,704
Profit for the year
Other comprehensive income (loss):
Defined benefit plan actuarial losses, net of tax
Total comprehensive income for the year
-
-
-
64,657
64,657
(2,932)
(2,932)
61,725
61,725
Contributions by and distributions to shareholders of the Corporation:
Issuance of common shares on exchange of note
receipts
Dividends declared to shareholders
371,250
-
-
(71,651)
371,250
(71,651)
Balance at December 31, 2012
$
1,706,265 $
(1,272,237) $
434,028
Balance as at January 1, 2013
$
1,706,265 $
(1,272,237) $
434,028
Share capital
Deficit
Total
Profit for the year
Other comprehensive income (loss):
Defined benefit plan actuarial gains, net of tax
Total comprehensive income for the year
Distributions to shareholders of the Corporation:
Dividends declared to shareholders
-
-
-
-
133,426
133,426
5,823
5,823
139,249
139,249
(98,010)
(98,010)
Balance at December 31, 2013
$
1,706,265 $
(1,230,998) $
475,267
See accompanying notes to consolidated financial statements.
22
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statement of Cash Flows
(Expressed in thousands of Canadian dollars)
2013
2012
(restated-note 3)
$
133,426
$
64,657
11,528
7,359
3,569
46,486
(12)
202,356
(6,971)
(1,406)
(156)
(3,406)
(11,939)
(14,365)
176,052
(656)
-
(93,926)
40,000
(70,000)
(124,582)
(33,935)
(33,935)
17,535
43,873
61,408
$
9,870
(3,767)
21,888
21,348
1,766
115,762
10,533
(725)
(138)
5,095
14,765
(30,460)
100,067
202
(29,236)
(60,885)
30,000
-
(59,919)
(61,863)
(61,863)
(21,714)
65,587
43,873
Years ended December 31, 2013 and 2012
Cash provided by (used in):
Operations:
Profit for the year
Adjustments for:
Depreciation
Employee future benefits liability
Net finance costs
Income tax expense
Loss (gain) on disposal of fixed assets
Changes in non-cash operating working capital and other:
Accounts receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes paid
Financing:
Interest received (paid)
Interest paid to noteholders
Dividends paid to shareholders
Drawings on revolving credit facility
Repayments on revolving credit facility
Investments:
Property, plant and equipment, net
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
$
See accompanying notes to consolidated financial statements.
23
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
1. Reporting entity:
The Corporation was incorporated under the British Columbia Business Corporation Act on September 28, 2010 and is
domiciled in Canada. The registered and head office of the Corporation is located at Suite 1800, 1067 West
Cordova Street, Vancouver, British Columbia, V6C 1C7. The Corporation owns all of the limited partnership
units of Westshore Terminals Limited Partnership (“Westshore”), a partnership established under the laws of
British Columbia. Prior to 2011 these units were owned by Westshore Terminals Income Fund.
The Corporation derives its cash inflows from its investment in Westshore by way of distributions on
Westshore’s limited partnership units. Westshore operates a coal storage and loading terminal at Roberts Bank,
British Columbia (the “Terminal”). Substantially all of Westshore’s operating revenues are derived from rates
charged for loading coal onto seagoing vessels.
The consolidated financial statements of the Corporation as at and for the year ended December 31, 2013
comprise the Corporation and its subsidiaries (together referred to as the “Corporation”).
2. Basis of preparation:
(a) Statement of compliance:
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs).
The consolidated financial statements were authorized for issue by the Board of Directors on March 18,
2014.
(b) Basis of measurement:
These consolidated financial statements have been prepared on the historical cost basis except for the
following material items in the statement of financial position:
• financial instruments classified as fair value through profit or loss are measured at fair value;
• derivative financial instruments are measured at fair value; and
• the defined benefit obligation is recognized as the present value of the defined benefit obligation,
measured at fair value, less plan assets at fair value.
(c) Functional and presentation currency:
These consolidated financial statements are presented in Canadian dollars, which is the Corporation and its
subsidiaries’ functional currency. All financial information presented in Canadian dollars has been rounded to
the nearest thousand.
(d) Use of estimates and judgments:
The preparation of the consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates, and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimates are revised and in any future periods affected.
24
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
2. Basis of preparation (continued):
(d) Use of estimates and judgments (continued):
Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
relate to the determination of net recoverable value of assets, useful lives of plant and equipment, asset
retirement obligations, measurement of defined benefit obligations, derivative instruments and income tax
amounts.
(e) Comparative figures:
Certain of the figures presented for comparative purposes have been reclassified to conform with the
financial statement presentation adopted for the current period.
3. Significant accounting policies:
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, unless otherwise indicated.
(a) Basis of consolidation:
(i) Subsidiaries:
Subsidiaries are entities controlled by the Corporation. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date the
control ceases.
(ii) Transactions eliminated on consolidation:
Intra-corporation balances and transactions, and any unrealized income and expenses arising from intra-
corporation transactions, are eliminated in preparing the consolidated financial statements.
(b) Foreign currency:
The functional and reporting currency of the Corporation and its subsidiaries is the Canadian dollar.
Transactions which are denominated in other currencies are translated into their Canadian dollar equivalents
at exchange rates prevailing at the transaction date. The carrying values of monetary assets and liabilities
denominated in foreign currencies are adjusted at each reporting date to reflect exchange rates prevailing at
that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in
the functional currency at the beginning of the period, adjusted for effective interest and payments during the
period, and the amortized cost in the foreign currency translated at the exchange rate at the end of the period.
Foreign exchange gains and losses are recognized under ‘Foreign exchange gain (loss)’ in profit or loss.
(c) Financial instruments:
Financial assets and financial liabilities are recognized when the Corporation becomes a party to the
contractual provisions of the financial instrument. Financial assets are derecognized when the contractual
rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or
expires.
25
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(c) Financial instruments (continued):
Financial assets and financial liabilities are measured initially at fair value plus transactions cost, except for
financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially
at fair value.
Cash and cash equivalents
The Corporation considers deposits in banks, certificates of deposit and short-term investments with original
maturities of three months or less when acquired as cash and cash equivalents. Cash and cash equivalents are
classified as loans and receivables.
Receivables
Receivables are classified as loans and receivables. Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market. After initial recognition these
are measured at amortized cost using the effective interest method, less provision for impairment.
Discounting is omitted where the effect of discounting is immaterial.
Individual receivables are considered for impairment when they are past due or when other objective
evidence is received that a specific counterparty will default.
Financial liabilities
Financial liabilities of the Corporation are classified as other financial liabilities. Other financial liabilities are
non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active
market. After initial recognition these liabilities are measured at amortized cost using the effective interest
method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial.
Other financial liabilities comprise accounts payable and accrued liabilities, dividends payable and the
revolving credit facility.
Derivative financial instruments
Changes in fair value of derivative financial instruments not designated in a hedge relationship are recognized
immediately in profit or loss.
(d) Property, plant and equipment:
(i) Recognition and measurement:
Items of property, plant, and equipment are measured at historical cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing the assets to a working condition for their intended use, the costs of dismantling and removing
the items and restoring the site on which they are located, and borrowing costs on qualifying assets for
which the commencement date for capitalization is on or after January 1, 2010.
26
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(d) Property, plant and equipment (continued):
(i) Recognition and measurement (continued):
Borrowing costs attributable to the construction of a qualifying asset are included in the cost of the asset.
Other borrowing costs are recognized as an expense.
When parts of an item of property, plant, and equipment have different useful lives, they are accounted
for as separate items of property, plant, and equipment.
The gain or loss on disposal of an item of property, plant, and equipment is determined by comparing the
proceeds from disposal with the carrying amount of the property, plant, and equipment, and is
recognized net within other income/expenses in profit or loss.
(ii) Depreciation:
Depreciation is based on the cost of an asset less its residual value. Significant components of individual
assets are assessed, and if a component has a useful life that is different from the remainder of the asset,
then that component is depreciated separately.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each
component of an item of property, plant, and equipment. The estimated useful live for the current and
comparative periods are as follows:
Asset
Automobiles
Conveyor belts
Computer software
Mobile equipment
Land improvements
Buildings
Fixed machinery
Term
3 years
5 years
3 years to 5 years
5 years to 25 years
15 years to 30 years
8 years to 35 years
8 years to 35 years
Depreciation methods, useful lives, and residual values are reviewed at each financial year end and
adjusted if appropriate.
27
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(e) Impairment:
Non-Financial assets
The carrying values of the Corporation’s non-financial assets are reviewed at each reporting date to assess
whether there is any indication of impairment. If any such indication is present, then the recoverable amount
of the assets is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. For the purposes of impairment testing, assets are grouped at the lowest levels
that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets
or groups of assets (the “cash-generating unit”).
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its
estimated recoverable amount. Impairment losses are recognized in profit and loss. Impairment losses
recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment charge is reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized.
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it
is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that asset.
Objective evidence that financial assets are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Corporation on terms that the Corporation would not consider
otherwise, or indications that a debtor or issuer will enter bankruptcy.
The Corporation considers evidence of impairment for financial assets, and in particular receivables, at both a
specific asset and collective level.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows, discounted at the
effective interest rate.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss is recognized. For financial assets measured at amortized cost, this reversal is recognized in
profit or loss.
28
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(f) Goodwill:
Goodwill is recognized on a business combination at the acquisition date and is initially measured at the fair
value of the consideration transferred less the net recognized amount (generally fair value) of the identifiable
assets acquired and liabilities assumed.
Goodwill is subsequently measured at cost less accumulated impairment losses. Goodwill is tested for
impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the
asset might be impaired. Any excess of the carrying value over fair value is charged to profit or loss in the
period in which the impairment is determined.
(g) Inventories:
Inventories of spare parts and supplies are measured at the lower of cost and net realizable value. Cost is
determined using the weighted average cost method and includes the invoiced cost and other directly
attributable costs of acquiring the inventory.
(h) Employee benefits:
Defined benefit plans
A defined benefit plan is a post-retirement benefit plan other than a defined contribution plan. The
Corporation’s net obligation in respect of defined benefit pension plans is calculated separately for each plan
by estimating the amount of future benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present value and the fair value of plan
assets is deducted. The discount rate used to determine the present value of the obligation is the yield at the
reporting date on high quality corporate bonds that have maturity dates approximating the term of the
Corporation’s obligations and that are denominated in the same currency in which the benefits are expected
to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit method. When
the calculation results in a benefit to the Corporation, the recognized asset is limited to the present value of
economic benefits available in the form of any future refunds from the plan or reductions in the future
contributions to the plan. In order to calculate the present value of economic benefits, consideration is given
to any minimum funding requirements that apply to any plan in the Corporation. An economic benefit is
available to the Corporation if it is realizable during the life of the plan, or on settlement of the plan liabilities.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by
employees is recognized in profit or loss on the date of improvement.
The Corporation recognizes all actuarial gains and losses arising from defined benefit plans immediately in
other comprehensive income and expenses related to defined benefit plans in profit or loss.
29
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(h) Employee benefits (continued):
Other long-term employee benefits
The Corporation’s net obligation in respect of long-term employee benefits other than pension plans is the
amount of future benefit that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and the fair value of any related assets is
deducted. The discount rate is the yield at the reporting date on high quality corporate bonds that have
maturity dates approximating the terms of the Corporation’s obligations. The calculation is performed using
the projected unit credit method. Any actuarial gains and losses are recognized immediately in other
comprehensive income in the period in which they arise.
Amendments to IAS 19 Employee Benefits
The Corporation adopted IAS 19 Employee Benefits (2011) with a date of initial application of January 1, 2013
and changed its basis for determining the income or expense related to defined benefit plans as required.
As a result of the change, the Corporation now determines the net interest expense (income) on the net
defined benefit liability (asset) for the period by applying the discount rate used to measure the defined
benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) at the
beginning of the annual period. It takes into account any changes in the net defined liability (asset) during the
period as a result of contributions and benefit payments. The net interest on the net defined benefit liability
(asset) comprises:
•
•
Interest cost on the defined benefit obligation; and
Interest income on plan assets.
Previously, the Corporation determined interest income on plan assets based on their long-term rate of
expected return. This net interest is disclosed as a component of financing costs. In addition, the Corporation
is now required to recognize past service costs in full immediately in profit or loss.
The change in accounting policy has been applied retrospectively.
30
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(h) Employee benefits (continued):
The following table summarizes the financial effects on the statement of comprehensive income on
implementation of the new accounting policy as compared to amounts previously presented:
Decrease (increase in):
Operating expenses
Finance costs, net
Income taxes
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Twelve Months Ended
December 31, 2012
$
$
963
(2,672)
428
1,281
(1,281)
-
The change in accounting policy had no impact on net assets as at December 31, 2012 and had an immaterial
impact on earnings per share for the comparative period.
(i) Revenue:
Coal loading revenue is recognized when a customer’s coal is completely loaded onto a ship and ready for
export from the terminal site. Coal loading revenue is recorded based on contract specific loading rates.
Other revenue includes wharfage fees which are recorded based upon the period of time a ship is at the
terminal.
(j) Provisions:
A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation.
Decommissioning liabilities
The Corporation’s terminal site is leased from the Vancouver Fraser Port Authority (the “VFPA”). A new
lease agreement became effective as of January 1, 2012. The current lease runs until December 31, 2026, and
may be extended at the Partnership's option for further periods up to 25 years. At the expiry of the lease
term, assuming the Corporation has not been successful in further extending the lease, the VFPA has the
option to acquire the assets of the terminal at fair value or require the Corporation to return the site to its
original condition. The Corporation believes that the probability that the VFPA will elect to enforce site
restoration is remote.
31
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
3. Significant accounting policies (continued):
(k) Income tax:
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit
or loss except to the extent they relate to items recognized directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary difference, to
the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
(l) New standards and interpretations not yet adopted:
A number of new standards, and amendments to standards and interpretations, are not yet effective for the
year ended December 31, 2013, and have not been applied in preparing these consolidated financial
statements. None of these are expected to have a significant effect on the consolidated financial statements
of the Corporation.
IFRS 9 – Financial Instruments
IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to
classification and measurement of financial assets and financial liabilities, as defined in IAS 39. The standard
was initially effective for annual periods beginning on or after January 1, 2013, but Amendments to IFRS 9
Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, change the
mandatory effective date to undetermined. The company will quantify the effect in conjunction with the
other phases, when the final standard, including all phases, is issued.
4. Insurance proceeds:
On December 7, 2012 the MV Cape Apricot, a large cape size coal vessel, ran through the trestle at Berth 1
rendering it unusable. Repairs to the trestle were completed to a point sufficient to bring Berth 1 back into
operations in early February 2013, with final repairs to the road-way on the trestle completed in April 2013.
$32.3 million has been recovered to December 31, 2013 from the Corporation’s insurers.
32
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
4. Insurance proceeds (continued):
Subsequent to year end, an additional $6.2 million has been agreed to with the Corporation’s insurers and is
expected to be received by April 2014. Efforts on behalf of the Corporation and its insurers to recover losses
from the ship’s owners and insurers are ongoing.
5. Plant and equipment:
Cost:
Balance at January 1, 2012
Additions
Capitalized interest(1)
Transfers
Disposals
Balance at December 31, 2012
Additions
Transfers
Disposals
Balance at December 31, 2013
Accumulated depreciation:
Balance at January 1, 2012
Depreciation for the year
Disposals
Balance at December 31, 2012
Depreciation for the year
Disposals
Balance at December 31, 2013
Carrying amounts:
At December 31, 2012
At December 31, 2013
Buildings and land
improvements
Machinery and
equipment
Construction in
progress
$
$
$
$
$
$
$
$
$
$
34,465
554
-
-
-
35,019
5,786
-
-
40,805
29,975
943
-
30,918
1,026
-
31,944
4,101
8,861
490,849
60,856
473
7,014
(6,754)
552,438
-
29,625
(134)
581,930
406,883
8,927
(4,968)
410,842
10,502
(127)
421,217
141,596
160,713
$
$
12,725
-
-
(7,014)
-
5,711
30,678
(29,625)
-
6,764
-
-
-
-
-
-
-
5,711
6,764
$
$
$
$
$
$
$
$
Total
538,039
61,410
473
-
(6,754)
593,168
36,464
-
(134)
629,499
436,858
9,870
(4,968)
441,760
11,528
(127)
453,161
151,408
176,338
1 The capitalization rate for 2012 was 3.0% and depreciation was recorded in operating expenses on the
consolidated statements of comprehensive income.
33
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
6. Finance costs:
Interest expense (income), net
Employee benefit interest expense, net
Interest accrued to noteholders
Unrealized gain on interest rate hedging contracts
2013
2012
(restated - note 3)
$
656
2,935
-
(22)
$
(196)
2,672
19,491
-
Net finance costs
$
3,569
$
21,967
During the year ended December 31, 2013, the Corporation has capitalized $ nil (2012 – $ 473,000) of interest
expense to property, plant and equipment.
7. Income tax expense:
Tax expense recognized in profit
Current income tax expense
Deferred tax expense
Tax expense (recovery) recognized directly in equity
Defined benefit plans
Reconciliation of effective tax rate:
Profit before income tax
Statutory rate
Expected income tax expense
Permanent differences
Rate changes
Other
Actual income tax expense
34
2013
2012
(restated - note 3)
$
26,899
19,587
46,486
$ 20,407
941
21,348
(2,046)
978
2013
2012
(restated - note 3)
$ 179,912
25.75%
46,327
50
467
(358)
46,486
$
$ 86,006
25.00%
21,501
25
-
(178)
$ 21,348
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
8. Deferred tax assets and liabilities:
Deferred tax assets:
Non-pension defined benefits liability
Pension defined benefits liability
Financing fees
Non-capital loss carryfowards
Total assets
Deferred tax liabilities:
Property, plant and equipment
Hedging contracts
Total liabilities
Net deferred income tax assets (liabilities)
9. Share capital:
Authorized:
Unlimited number of common shares, no par value.
Issued:
December 31,
2013
December 31,
2012
$
$
15,151
1,023
2
-
16,176
(31,380)
(6)
(31,386)
(15,210)
$
12,584
2,361
2
1,600
16,547
(10,124)
-
(10,124)
$
6,423
Common shares
2013
2012
74,250,016 issued and outstanding common shares
$
1,706,265
$
1,706,265
The holders of the common shares are entitled to receive dividends as declared from time to time, and are entitled
to one vote per share at meetings of the Corporation.
The Corporation has declared dividends of $98,010,000 ($1.32 per share) in equal quarterly amounts in 2013 (2012
- $71,651,000 or $0.965 per share).
35
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
10. Profit per share:
Earnings per share:
The calculation of basic profit per share for the year ended December 31, 2013 was based on profit attributable to
shareholders and a weighted average number of common shares outstanding.
2013
2012
(restated - note 3)
Profit for the year
$
133,426
$
64,657
Weighted average number of common shares outstanding
74,250,016
74,250,016
Basic and diluted earnings per share
1.80
0.87
11. Employee benefits:
Present value of unfunded obligations
Present value of funded obligations
Total present value of obligations
Fair value of plan assets
December 31,
2013
December 31,
2012
$
58,272
98,044
156,316
(94,111)
$
50,336
91,866
142,202
(82,422)
Recognized liability for defined benefit obligations
$
62,205
$
59,780
The Corporation makes contributions to two non-contributory defined benefit plans that provide pension benefits
for employees upon retirement. The Corporation also provides two non-contributory, other post retirement
benefit plans that provide retiring allowances and other medical benefits after retirement.
36
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
11. Employee benefits (continued):
Plan Assets:
Plan assets are comprised of the following investments:
Equity securities
Fixed income securities
Cash and cash equivalents
2013
67,011
24,806
2,294
94,111
$
$
2012
56,292
23,505
2,625
82,422
$
$
2013
2012
Actual return on plan assets
$
13,134
$
7,827
Asset and Liability Movements:
Movement in the present value of the
defined benefit obligations
Pension obligations
2012
2013
Other post retirement
benefits
2013
2012
Defined benefit obligation at January 1
Benefits paid by the plan
Current and past service costs and
interest (see below)
Actuarial losses in other
comprehensive income (see below)
$
91,866
(5,254)
$
85,471
(4,414)
$
50,336
(1,278)
$ 44,952
(1,447)
11,383
49
5,798
5,011
7,470
3,621
1,744
3,210
Defined benefit obligations at December 31
$
98,044
$
91,866
$
58,272
$ 50,336
The discount rate used to calculate the benefit obligations increased from 4.25% as at December 31, 2012 to
4.50% as at December 31, 2013.
37
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
11. Employee benefits (continued):
Asset and Liability Movements (continued):
Movement in the fair value of the defined
benefit plan assets
Pension assets
2013
2012
Other post retirement
benefits
2013
2012
Fair value of plan assets at January 1
Contributions paid into the plan
Benefits paid by the plan
Expected return on plan assets (see below)
Non-investment expense (see below)
Actuarial gains in other
$
82,422
4,056
(5,254)
3,472
(247)
$
73,458
5,772
(4,414)
3,516
(221)
$
-
1,278
(1,278)
-
-
comprehensive income (see below)
9,662
4,311
Fair value of plan assets at December 31
$
94,111
$
82,422
$
-
-
$
$
-
1,447
(1,447)
-
-
-
-
Profit and Loss:
Profit and loss includes the following amounts in respect of post-retirement obligations:
Pension obligations expense recognized in profit and loss
Service costs:
Current service costs
Past service costs
Non-investment expenses
Net interest costs
Interest cost
Expected return on plan assets
2013
2012
(restated - note 3)
$
1,691
5,615
247
7,553
4,077
(3,472)
605
$
1,399
378
221
1,998
4,021
(3,516)
505
$
8,158
$
2,503
38
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
11. Employee benefits (continued):
Profit and Loss (continued):
Other post retirement benefits expense recognized in profit and loss
Current service costs
Past service costs
Interest costs
2013
2012
(restated - note 3)
$
1,661
3,479
2,330
$
1,400
54
2,167
$
7,470
$
3,621
The current and past service costs are recognized in operating expenses and net interest costs are included in net
finance costs.
Actuarial gains (losses) recognized in other comprehensive income
2013
2012
Cumulative amount at beginning of year
Recognized during the year
Cumulative amount at December 31
Funding and Assumptions:
$
(19,399) $
7,869
(15,489)
(3,910)
$
(11,530) $
(19,399)
The pension plans are entirely funded by the Corporation. The Corporation’s contributions to the pension plans
are based on independent actuarial valuations. The other benefit plans have no assets and an annual expense is
recorded on an accrual basis based on independent actuarial determinations, considering among other factors,
health care cost escalation.
As at December 31, 2013, the Corporation estimated that it will make contributions of $5,059,000 to its pension
plan in 2014 based on the last actuarial valuation for funding purposes and $1,324,000 to its other benefit plan in
2014.
The financial information with respect to the defined benefit pension plans and other benefit obligations is based
on the following funding valuations:
39
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
11. Employee benefits (continued):
Funding and Assumptions (continued):
Union Pension plan
Salaried Retirement plan
Most recent valuation
date
Date of next required
valuation
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2016
The significant actuarial assumptions adopted in measuring the Corporation's accrued benefit obligations (and
costs) are as follows (weighted average assumptions as of December 31):
2013
2012
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Benefit obligations:
Discount rate at December 31
Rate of increase in future compensation
4.50%
3.00%
4.50%
-
4.25%
3.00%
4.25%
-
Benefit costs:
Discount rate at January 1
Rate of increase in future compensation
Expected long-term rate of return on plan assets
4.25%
3.50%
4.25%
4.25%
3.50%
-
4.75%
3.50%
4.75%
4.75%
3.50%
-
The average rate of compensation increase is expected to be inflation with an adjustment for merit and
productivity gains.
For measurement purposes, an 8% per annum increase in the per capita cost of covered extended health care
benefits was assumed for 2014, grading down by 0.50% per annum to 4.50% in 2023. The per annum increase in
the per capita cost of medical service plan is 4.00%. The annual rate of increase in the per capita cost of dental
benefits is 4.00%.
40
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
11. Employee benefits (continued):
Sensitivity Analysis:
Assumed discount rates and medical cost trend rates have a significant effect on the accrued benefit obligation. A
one percentage point change in these assumptions would have the following effects on the accrued benefit
obligation for 2013:
Pension benefit plans
Discount rate
Other post retirement benefit plans
Discount rate
Initial medical cost trend rate
12. Loans and borrowings:
1% decrease
1% increase
$
11,082
$
(11,082)
8,905
(7,547)
(8,905)
9,326
This note provides information about the contractual terms of the Corporation's interest-bearing loans and
borrowings, which are measured at amortized cost.
Non-current liabilities:
Revolving credit facility
December 31,
2013
December 31,
2012
$
$
-
-
$
$
30,000
30,000
The Corporation has an operating facility of $15 million, which has an $11,753,000 letter of credit outstanding
against it (see note 15) at December 31, 2013. The term of this operating facility expires in August 2014.
The Corporation has a $50 million revolving credit facility to be utilized for capital expenditures and investments,
none of which was drawn at December 31, 2013. The credit facility has a term ending August 31, 2016, and is
secured by a pledge of all of the assets of the Corporation. The revolving credit facility bears interest at the 1
month BA rate plus a margin and no repayments are required until maturity.
Under its credit facilities, the Corporation is required to comply with certain financial covenants. At December
31, 2013, the Corporation was in compliance with these financial covenants.
For more information about the Corporation’s exposure to interest rate, foreign currency and liquidity risk, please
see note 17.
41
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
13. Financial instruments:
The carrying amounts of financial assets and liabilities reported in the consolidated statement of financial position
approximate their fair values.
Financial instruments carried at fair value, by the levels in the fair value hierarchy, are as follows:
Fair value measurement at reporting date using:
Quoted prices in
active markets
identical assets
(Level 1)
December 31,
2013
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Financial assets (liabilities):
Derivative instruments:
Interest rate hedging contracts $
22 $
- $
22
$
-
On May 7, 2013, the Corporation entered into two interest rate swaps, each with notional value of $15,000,000
and maturing on August 31, 2016. Under the terms of the swaps, the Corporation pays an amount based on a
fixed annual interest rate of 1.56% and 1.46% respectively, and receives a 1 month BA CDOR which is
recalculated at set interval dates.
As these interest rate swaps have not been designated as hedges, the fair value of these interest rate swaps at
December 31, 2013, being an asset of $22,000 (measured based on Level 2 of the fair value hierarchy), has been
recorded in other assets and a gain of $22,000 has been recognized in net finance costs for the period ended
December 31, 2013.
The carrying amounts of interest rate hedging contracts are equal to fair value, which is based on valuations
obtained from the counterparty. The mark-to-market value is determined by the counterparty by multiplying the
notional amount of the trade with the difference between the forward rate and the contract rate and discounting
the resultant asset or liability by an applicable discount factor.
14. Operating leases:
The Corporation is committed under operating leases to the rental of property, facilities, and equipment.
The Corporation's terminal site is leased from the Vancouver Fraser Port Authority. The term of the lease is until
December 31, 2026 with the Corporation having further options to extend the term to December 31, 2051.
Charges payable by the Corporation under the lease comprise an annual base land and waterlot rental fee of
$5,207,000 (2012 - $5,207,000) and an annual participation rental fee based on the volume of coal shipped. A
minimum participation rental fee of $6,494,000 (2012 - $6,494,000) is charged based on a minimum annual
tonnage (MAT) of 17.6 million tonnes. A higher participation rental fee per tonne is charged on tonnage in excess
of the MAT. In 2013, the Corporation paid $9,870,000 (2012 - $7,962,000) in relation to the higher participation
rental fee.
42
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
14. Operating leases (continued):
Future minimum operating lease payments for the years ending December 31 (assuming minimum annual tonnes)
are as follows:
2014
2015
2016
2017
2018
Thereafter
15. Commitments:
Terminal Lease
Other
$
$
11,701
11,701
11,701
11,701
11,701
93,607
$
290
-
-
-
-
-
Total
11,991
11,701
11,701
11,701
11,701
93,607
The Corporation has provided a letter of credit of $11,753,000 (December 31, 2012: $4,080,000).
The Corporation has commitments of $4,111,000 with respect to equipment purchases that are to be delivered
and paid for in the next 12 months.
16. Major Customers:
The following customers accounted for throughput of greater than 10% of total throughput:
Teck Coal Partnership
Other customer A
Other customer B
17. Financial risk management:
2013
56%
14%
17%
2012
57%
14%
12%
The Corporation is exposed to various risks associated with its financial instruments, which include credit risk,
liquidity risk and market risk. Further quantitative disclosures are included throughout these consolidated financial
statements.
(a) Credit risk:
Credit risk is the risk of financial loss to the Corporation if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. Credit risk arises primarily from accounts receivable and
cash and cash equivalents. Credit risk can also arise on foreign currency contracts held by the Corporation.
43
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
17. Financial risk management (continued):
(a) Credit risk (continued):
The Corporation’s exposure to credit risk is influenced by the profitability of coal mining companies, which is
heavily impacted by the price of the coal. The Corporation does not have any collateral or security for its
receivables. The Corporation monitors the financial health of its customers and regularly reviews its accounts
receivable for impairment. As at December 31, 2013 and 2012, there were no trade accounts receivable past
due which were considered uncollectible and no reserve in respect of doubtful accounts was recorded.
The Corporation limits its exposure to credit risk arising from cash equivalents by only investing in money
market funds with a major Canadian financial institution. The Corporation does not expect any credit losses
in the event of non-performance by counter parties to its foreign exchange forward contracts as the counter
parties are major Canadian financial institutions.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure
to credit risk is:
Cash and cash equivalents
Accounts receivable
Other assets - interest rate contracts
(b) Liquidity risk:
2013
61,408
18,218
22
79,648
$
$
2012
43,873
11,247
-
55,120
$
$
Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they fall due. The
Corporation continually monitors its financial position to ensure that it has sufficient liquidity to discharge its
obligations when due.
The current financial liabilities of the Corporation, which include accounts payable and accrued liabilities,
income tax payable and dividends payable to shareholders, have a contractual maturity of less than 1 year.
The Corporation also has interest rate swaps with a notional value of $30 million outstanding at December
31, 2013.
The Corporation also maintains a $15 million operating facility that can be drawn down to meet short term
financing needs. This facility was not used during the year and remained undrawn at December 31, 2013,
although the Corporation has an outstanding letter of credit for $11,753,000.
The Corporation has a $50 million revolving credit facility to be utilized for capital expenditures and
investments, none of which was drawn at December 31, 2013. The credit facility has a term ending August
31, 2016, and is secured by a pledge of all of the assets of the Corporation. The revolving credit facility bears
interest at the 1 month BA rate plus a margin and no repayments are required until maturity.
44
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
17. Financial risk management (continued):
(c) Market risk:
The significant market risk exposures affecting the financial instruments held by the Corporation are those
related to foreign currency exchange rates and interest rates.
(i) Foreign currency exchange rates:
The Corporation holds some cash denominated in foreign currencies and the Canadian-dollar value of
these cash balances fluctuates with changes in the exchange rate. As at December 31, 2013, the
Corporation held US$12.1 million (2012 – US$10.9 million). A $0.01 increase in the US/Canadian
exchange rate would have increased the Canadian dollar value of this cash balance and increased foreign
exchange gains by $121,000 for the year.
The accounts receivable due from US customers are denominated in US dollars. The US dollar
denominated accounts receivable outstanding as at December 31, 2013 was $2,450,000 (2012 - $49,000).
The Corporation does not have any outstanding foreign currency contracts at December 31, 2013.
(ii) Interest rates:
The Corporation has limited exposure to interest rate risk on the cash equivalents. Money market fund
returns are correlated with Canadian T-bills and Bankers’ Acceptances of major Canadian financial
institutions.
The Corporation also has interest rate risk on the revolving credit facility. The revolving credit facility
carries an interest rate that floats with market rates.
The Corporation has two outstanding interest rate swaps at December 31, 2013. The fair market value of
the Corporations interest rate swaps is an asset of $22,000. It has been recorded in other assets and a
gain of $22,000 has been recognized in net finance costs for the year ended December 31, 2013.
18. Capital management:
The capital of the Corporation consists solely of shareholders’ equity which includes issued share capital and
deficit.
The objective of the Corporation is to maintain a stable capital base and ensure that the capital structure does not
interfere with the Corporation’s ability to meet its distribution policy or fund future projects. The Corporation
expects to declare and pay dividends to holders of its Common Shares equal to $0.33 per share per quarter on the
basis that the Corporation handles approximately 30 million tonnes of coal or more annually under the existing
customer agreements. This approach will be reviewed on a regular basis. The Corporation expects that its
quarterly dividends to shareholders will be funded by earnings and operating cash flows, and surplus cash will be
added to the Corporation’s available capital for future capital projects.
45
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except unit amounts)
Years ended December 31, 2013 and 2012
19. Related party transactions:
Administration agreement
Westar Management Ltd.
Management agreement:
Westar Management Ltd. - base fee
Management agreement:
Westar Management Ltd. - Incentive fee
Vehicle leases:
Affiliate of Westar Management Ltd.
Director fees:
Director fees
2013
2012
$
335
$
325
979
950
4,161
1,939
508
417
390
308
46
Westshore Terminals Investment Corporation
Stock Exchange Listing
Toronto Stock Exchange
Trading Symbol
WTE
Registrar and Transfer Agent
Computershare Investor Services Inc.
Vancouver and Toronto
Auditors
KPMG LLP
Vancouver, British Columbia
Principal Office
1800 – 1067 West Cordova Street
Vancouver, British Columbia V6C 1C7
Telephone:
Facsimile: 604.687.2601
604.688.6764
Directors
William W. Stinson
Corporate Director
M. Dallas H. Ross
Partner, Kinetic Capital Partners
Gordon Gibson
Corporate Director
Michael J. Korenberg
Deputy Chairman & Managing Director,
The Jim Pattison Group; Chariman,
Canfor Corporation and Canfor Pulp Products Inc.
Brian A. Canfield
Chair, TELUS Corporation
Doug Souter
Corporate Director
Glen Clark
President, The Jim Pattison Group
Officers
William W. Stinson
Chairman, Chief Executive Officer &President
M. Dallas H. Ross
Chief Financial Officer
Nick Desmarais
Secretary & Vice President of Corporate Development
47
Westshore Terminals Ltd.
William W. Stinson
Director & President and Chairman
M. Dallas H. Ross
Director
Glen Clark
Director
Gordon Gibson
Director
Michael J. Korenberg
Director
Doug Souter
Director
Brian A. Canfield
Director
Denis Horgan
Vice-President & General Manager
Nick Desmarais
Secretary
48