WESTSHORE TERMINALS
INVESTMENT CORPORATION
ANNUAL REPORT
2014
W
estshore Terminals Investment Corporation (the “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 the coal storage and loading terminal at Roberts Bank, British
Columbia (the “Terminal”), 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
3
4
6
22
47
Westshore Terminals Investment Corporation
Financial Highlights
(In thousands of Canadian dollars except share amounts)
Tonnage (in thousands)
Coal loading revenue
Profit before taxes and insurance proceeds
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Shares outstanding at December 31
Share Trading Statistics
High
Low
Close
Annual Volume
2014
30,603
303,819
162,296
176,577
130,448
1.76
98,010
1.32
74,250,016
38.02
28.68
31.63
26,314,000
$
$
$
$
$
$
$
$
$
$
2013
30,094
286,703
147,587
179,912
133,426
1.80
98,010
1.32
74,250,016
36.17
25.69
34.61
27,855,000
$
$
$
$
$
$
$
$
$
$
2
Westshore Terminals Investment Corporation
Directors’ Letter and Report to Shareholders
Dear Shareholders:
2014 represented a year of solid progress for Westshore, despite challenges in seaborne coal markets.
Westshore achieved a record year of throughput volumes at 30.6 million tonnes compared to the 30.1 million
tonnes in 2013, and record coal loading revenues in excess of $300 million. Q1 2014 saw a slower start to the year
due to weather related events and Q4 experienced higher maintenance downtime than planned, much of it
attributable to the age of the equipment, which resulted in lower throughput in the quarter than planned. The steel
making and thermal coal markets continue to be oversupplied and our customers are experiencing downward
pressure on pricing, but are performing well despite the challenges they face.
In January 2014, Westshore received its permits from Port Metro Vancouver to proceed with its $270 million
capital upgrade project. This project involves 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), all of which is
expected to be completed by early 2019. Once completed, it is anticipated that overall throughput capacity will
increase by some 2-3 million tonnes.
Over the last two years Westshore has spent over $15 million on state of the art improvements for
environmental projects to improve dust suppression efforts on site and a new water treatment plant, and additional
environmental upgrade projects are ongoing during the 2015 – 2019 period totalling a further anticipated $19
million, all of which are part of Westshore’s ongoing operational improvements.
Over the course of the year, Westshore renegotiated contracts with certain Canadian and US customers
resulting in extensions of substantial tonnage to December 31, 2024 at fixed rates, and an agreement with a new
Canadian steel-making coal customer, expected to come on line in 2018 when Westshore expects to have increased
capacity resulting from the capital upgrade project described above.
During the year, Westshore and its insurers concluded a settlement of the Cape Apricot claim (a 2012 incident
reported previously) resulting in total recovery of some $43.5 million from the Cape Apricot’s insurers. Westshore’s
total recovery on this claim was $46.6 million, $14.3 million of which was recovered in 2014, and over $28 million
of which will be used to help fund the capital upgrade project (the balance having been used for the costs to repair
the damaged trestle).
For 2015, the average loading rate is expected to be slightly higher than in 2014 and total throughput is
anticipated to be 31-32 million tonnes. Throughput capacity in 2015 will be somewhat impacted by some
anticipated material maintenance to one of the dumpers and Berth 1.
We look forward to all the opportunities and challenges the coal markets are expected to bring.
For the Board of Directors,
(Signed) “William W. Stinson”
William W. Stinson
Chairman of the Board of Directors
Vancouver, B.C.
March 17, 2015
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, 2014. 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 17, 2015.
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
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 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, 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 limited partnership established under the laws of British
Columbia.
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, which run to 2021 or
later, provide customer volume commitments at fixed rates for substantially all of the Terminal’s estimated current
capacity. 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.
This MD&A has been prepared by the Corporation to accompany the financial results of the Corporation for the
financial year ended December 31, 2014.
5
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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 2015 Annual
Meeting.
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
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, 2014, 2013 and 2012, which were prepared in Canadian dollars using IFRS.
Revenue
Profit before taxes and insurance proceeds
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
2014
$
312,075
162,296
176,577
130,448
1.76
-
-
98,010
1.32
663,832
95,070
2013
$
295,725
147,587
179,912
133,426
1.80
-
-
98,010
1.32
632,994
77,415
2012
$
240,695
86,005
86,005
64,657
0.87
19,491
0.263
71,651
0.96
588,397
89,780
(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.
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 amounts)
Three Months Ended
Revenue
Profit before taxes and insurance proceeds
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Dec 31, 2014
$
69,976
31,724
31,738
23,298
0.31
24,503
0.33
Sep 30, 2014
$
88,474
51,216
59,216
43,787
0.59
24,503
0.33
Jun 30, 2014 Mar 31, 2014
$
85,085
48,280
48,311
35,761
0.48
24,503
0.33
$
68,539
31,077
37,313
27,601
0.37
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 amounts)
Three Months Ended
Dec 31, 2013
$
78,135
36,253
42,253
31,476
0.42
24,503
0.33
Sep 30, 2013
$
81,347
39,778
39,778
29,470
0.40
24,503
0.33
Jun 30, 2013 Mar 31, 2013
$
78,805
47,924
54,249
39,761
0.54
24,503
0.33
$
57,438
23,633
43,633
32,719
0.44
24,503
0.33
Revenue
Profit before taxes and insurance proceeds
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
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 Coal Limited (“Teck”), which is Westshore’s largest customer, accounted for 58% of
Westshore’s throughput by volume in 2014 (2013 –56%).
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
Japan
China
South America
Europe
Taiwan
Other
Total
2014
Tonnes
9,841
6,974
5,219
3,106
2,435
1,383
1,645
30,603
%
32
23
17
10
8
5
5
100
2013
Tonnes
11,906
6,291
6,497
1,294
1,712
1,656
738
30,094
%
40
21
22
4
6
5
2
100
2012
Tonnes
9,185
5,256
4,894
2,474
2,372
1,374
539
26,094
%
35
20
19
10
9
5
2
100
During 2014, 61% of Westshore’s volume was steel-making coal (60% in 2013), 38% was thermal coal (39% in
2013) and 1% was petroleum coke (1% in 2013). 4.4 million of the 5.2 million tonnes of coal shipped to China was
steel-making coal, and 800,000 tonnes was thermal coal, of which 200,000 tonnes was from a Canadian customer. Of
the coal shipped by Westshore’s U.S. customers, 8.9 million tonnes was shipped to Korea, Japan, and Chile with
approximately 0.6 million tonnes shipped to China and no volumes shipped to India.
Westshore’s customers compete with other suppliers of coal throughout the world. With respect to steel-making
coal, Australian coal mines are our primary competitors. Over the last decade there have been significant variations in
the supply-demand balance in seaborne steel-making coal, resulting in material variations in the prices obtained by
Westshore’s customers. Pricing of coal is crucial to the results of Westshore’s customers who must obtain adequate
prices to sustain their operations. Westshore has no direct exposure to rates that vary with coal prices. Further
weakening in the market for seaborne thermal coal could materially affect the ability of Westshore’s thermal coal
customers to sustain sales at expected levels.
Customer Contracts
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 steel making 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’s contract with Grande Cache Coal Corporation (“Grande Cache”) for handling coal produced from its
operations in Alberta was amended in 2014 and now provides, from January 1, 2015 through December 31, 2021, the
requirement to ship one million tonnes per year at fixed rates. In 2014, Westshore loaded 1.4 million tonnes for
Grande Cache compared to 1.7 million tonnes in 2013.
9
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Westshore’s contracts with its U.S. thermal coal producers were renegotiated in 2014 and now run through 2024
for annual minimum tonnages at fixed rates. In one case the renegotiation was in conjunction with the termination of
the contract of another customer. The US producers accounted for approximately 31% of Westshore’s throughput in
2014.
Westshore has entered into a letter of intent with Riversdale Resources Limited, a Canadian company with a
planned steel-making coal mine to be developed in Blairmore, Alberta, under the terms of which Riversdale will pay
Westshore an annual reservation fee to hold up to 2 million tonnes of capacity at Westshore. Production is slated to
start in late 2018 and ramp up in 2019. The agreement with Riversdale will then provide for a 10 year throughput
commitment at fixed rates.
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 at a cost of $51 million, 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 $14 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.
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
reducing overall maintenance downtime and the costs involved in maintaining older equipment. The new
stacker/reclaimers will have an anticipated useful life of 30-40 years. The project (the “Capital Project”) involves
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 coal storage optimization.
The Capital Project is planned to be completed in stages, ending in early 2019.
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 in a phased sequence so as to minimize disruption to
the operations. No additional equipment is being added to the site, nor is the site footprint being increased. Additional
throughput capacity is expected to result only from the improved productivity of the new equipment, operating
efficiencies, and reduced maintenance downtime. Currently, it is estimated that an additional 2-3 million tonnes per
year might be achievable, but in any event not before 2018.
Upon completion, the Capital Project will 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). The result is expected to be a more modern and better-equipped terminal, capable of
maintaining higher throughput levels on a sustainable basis.
The $380 million does not include an additional $43 million in improved and updated environmental systems over
the same period, of which over $15 million was spent in the last two years on state of the art improvements for
environmental projects to improve dust suppression on site and a new water treatment plant. Additional
environmental upgrade projects are ongoing during the 2015 -2019 period at a cost of an additional anticipated $19
million, which are all part of Westshore’s ongoing operational continuous improvements.
Results of Operations
Westshore loaded 30.6 million tonnes during 2014 compared to 30.1 million tonnes during 2013. Coal loading
revenue increased by 6.0% to $303.8 million in 2014 compared with $286.7 million in 2013. The increase was due to
both higher tonnage and a higher average rate. In the fourth quarter of 2014, Westshore shipped 6.7 million tonnes,
compared with 7.5 million tonnes shipped during the same period in 2013, due primarily to unanticipated downtime
for maintenance work on two of the stacker reclaimers and to replace a torn conveyer belt at Berth 1. The average
loading rate in 2014 was $9.93 per tonne compared to $9.53 per tonne for 2013.
Other income, which includes wharfage and payments from a former customer, decreased from $9.0 million in
2013 to $8.3 million in 2014.
Operating expenses increased by 1.0% from $132.2 million in 2013 to $133.5 million in 2014. The increase was
primarily due to additional maintenance expenses offset by pension (primarily past service) expenses decreasing by
$6.9 million from 2013. Administration expenses increased by 10% from $13.2 million in 2013 to $14.6 million in
2014 primarily due to an increase in the incentive fee to Westar Management Ltd. (the “Manager”) and management
personnel costs.
In 2013 and Q1 2014, Westshore recovered an aggregate of $38.6 million from its insurers arising from the Cape
Apricot incident (which occurred in December 2012). In mid-September 2014, Westshore and its insurers reached a
collective settlement of their claims with the ship’s owners and insurers. Westshore’s share of the settlement amount
was $8.0 million (over and above the $38.6 million previously recovered), and was received in Q4 2014. Insurance
proceeds recovered over and above the $18 million repair costs to the terminal are being applied towards funding the
Capital Project.
Net finance costs decreased by 17% from $3.6 million in 2013 to $3.0 million in 2014 due to the repayment of
debt in mid-2013. The net interest cost components of the employee benefit plan expense are recorded in net finance
11
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
costs. Net employee benefit interest of $2.9 million was recorded in 2014, consistent with $2.9 million net employee
benefit interest in 2013.
Income tax expense decreased from $46.5 million in 2013 to $46.1 million in 2014.
Profit decreased from $133.4 million in 2013 to $130.4 million in 2014. 2013 had higher insurance proceeds which
more than offset the lower profit from coal loading operations.
Other comprehensive income (loss) decreased from a $5.8 million gain after tax in 2013 to a $10.0 million loss
after tax in 2014. Other comprehensive income (loss) includes actuarial gains and losses on the defined benefit post-
retirement obligations which are primarily impacted by the discount rate used, membership assumptions and the plan
asset value performance (relative to actuarial expectations). The discount rate used to calculate post-retirement
liabilities decreased in 2014 resulting in an increased obligation liability. Updated membership data obtained from the
latest valuation, and the adoption of the latest mortality tables issued by the Canadian Institute of Actuaries also
resulted in a larger obligation. This was offset by better plan asset value performance relative to actuarial expectations.
In 2013, an increased discount rate and better plan asset value had performance resulted in a reduced obligation
liability.
Cash Flows
(In thousands of Canadian dollars)
Operating cash flows before working capital changes and income tax
Working capital changes
Income tax paid
Cash flow from operations
Cash flows used in financing activities
Cash flows used in investing activities
December 31, 2014
December 31, 2013
$
$
191,128
6,731
(56,250)
141,609
(98,001)
(19,377)
202,356
(11,939)
(14,365)
176,052
(124,582)
(33,935)
Cash flows from operations are available to the Corporation to fund capital and other expenditures and pay
dividends to shareholders. Operating cash flows before changes in working capital and income tax payments
decreased from $202.4 million in 2013 to $191.1 million in 2014. While cash flows from coal loading operations were
higher in 2014, insurance recoveries were $18.0 million lower than in 2013. Timing of working capital changes and
income tax payments resulted in cash flow from operations decreasing from a $176.1 million net inflow in 2013 to an
inflow of $141.6 million in 2014.
Working capital changes in 2014 were higher by $18.7 million over 2013, primarily due to the timing of collection
of accounts receivable and payment of accounts payable.
Cash used in financing activities decreased from $124.6 million in 2013 to $98.0 million in 2014. In 2013, a net
$30 million was applied to debt repayment. 2013 dividend payments of $93.9 million were lower than the 2014
dividend payments of $98.0 million as the December 2012 dividend that was paid in January 2013 was lower due to
the Berth 1 incident.
Cash used in investing activities decreased from $33.9 million in 2013 to $19.4 million in 2014. The capital
expenditures in the prior year consisted of the replacement of the Berth 1 trestle and the new dust suppression
12
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
system, whereas capital expenditures in the current year primarily consisted of costs capitalized for the Capital Project.
Westshore expects that capital expenditures will be higher in the coming years as the Capital Project proceeds.
Liquidity and Capital Resources
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. Rather than continuing to incur increasing
costs of this nature on an ongoing basis, the Corporation determined to undertake replacement of the three older
stacker-reclaimers, a shiploader and related equipment. Together with the construction of new premises, these
expenditures are expected to total approximately $270 million (all of which comprise the Capital Project) are planned
in phases ending in early 2019. The Capital Project will be financed through a combination of retention of cash flow
and borrowings. The Corporation expects that borrowings will not exceed $50 million. Once the Capital Project is
complete, it is anticipated that the rated capacity of the terminal will increase by 2-3 million tonnes.
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 and for a letter of credit related to pension funding. During 2014, Westshore
increased its outstanding letter of credit related to pension funding from $11.8 million to $13.4 million. The term of
the operating facility was extended and now expires on August 28, 2015.
Westshore has a $50 million revolving credit facility to be utilized for capital expenditures and investments, which
was not drawn at December 31, 2014. 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.
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 cash funding requirements were $4.7 million in 2014 (2013 – $5.3
million), which is comprised of $3.3 million (2013 – $4.0 million) for contributions to the pension plans and $1.4
million (2013 - $1.3 million) for payments for other post-retirement benefits. In the current year, Westshore increased
its letter of credit by $1.7 million to $13.4 million to satisfy some of the funding requirement of the pension plan.
With the recent drop in interest rates, pension funding is expected to increase for 2015 but this has not been
quantified yet. The statement of financial position reflects a $79.7 million net obligation for post-retirement pension
benefits and other post-retirement benefit plans compared to $62.2 million for the prior year. This balance would
decline in the future if interest rates increase, and increase if interest rates were to fall.
13
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Future minimum operating lease payments for the years ending December 31 (assuming minimum annual tonnes)
are as follows:
2015
2016
2017
2018
2019
Thereafter
Terminal Lease
Other
$
$
11,701
11,701
11,701
11,701
11,701
81,906
$
290
-
-
-
-
-
Total
11,991
11,701
11,701
11,701
11,701
81,906
In addition to the above minimum operating lease payments, the Corporation also pays an annual participation
rental fee based on the volume of coal shipped in excess of 17.6 million tonnes. In 2014, Westshore paid $10.0
million (2013 – $9.9 million) in relation to the higher participation rental fee.
As at December 31, 2014, Westshore has a commitment of $166.1 million with respect to equipment purchases
that are to be delivered and paid for as part of the Capital Project.
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 amounts)
Total Dividends declared on Common Shares
Total Dividends declared per Common Share
2014
$
2013
$
98,010
1.32
98,010
1.32
In view of the decision to reinvest approximately $270 million over the next four years for the Capital Project, 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 project. 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 declared during all of 2013 and 2014. 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 will also
use insurance recoveries received in respect of lost income from the Berth 1 trestle incident. 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 and revised since 2011 provide significant
customer volume commitments through to 2021 or later at fixed rates. Shipments under those contracts are expected
to provide a stable base for revenues over the next several years.
The variance in revenues from 2014 will ultimately be impacted by numerous factors, including total volumes
shipped through the Terminal, the distribution of throughput by customer, and foreign exchange rates. Based on the
information currently available to it, Westshore is anticipating volume levels in 2015 to be higher than in 2014 and at
slightly higher rates than in 2014. If Westshore’s profit for 2015 exceeds $42 million, incentive fees will be payable by
Westshore to the Manager under the Management Agreement, to a maximum of $5.5 million.
Related Party Transactions
The Manager provides management services to Westshore pursuant to a management agreement (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. The annual base management fee is paid in monthly installments, and
$1,008,000 was paid in this regard by Westshore for the year ended December 31, 2014. The incentive fee for the
year ended December, 31, 2014 was $4,989,000 and was paid subsequent to December 31, 2014 (2013 - $4,161,000
paid in 2014).
The Management Agreement provides for rolling five-year renewals. In anticipation of the next renewal,
Westshore and the Manager agreed in 2014 to extend the term of the Management Agreement to 2024 (subject to
further renewals) and amended the Agreement in certain respects, in view of the significant growth in Westshore’s
business in recent years, and the Manager’s contribution and role in ongoing additional initiatives. Under the revised
Management Agreement, Westshore will pay the Manager a base fee of $1,250,000 for 2015, $1,500,000 for 2016 and
for each year thereafter the previous year’s fee escalated at 3% annually. The calculation of the incentive fee will
include an additional level at 7.5% of net income in excess of $66 million. The incentive fee remains subject to an
annual cap (previously $5 million annually) which will rise by increments to $7.5 million in 2017 and remain constant
for the balance of the term of the Management Agreement.
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 seven current directors are the same people as the
directors of the Corporation.
The Manager also provides administration services to the Corporation pursuant to an administration agreement.
The Corporation pays an annual administration fee in monthly installments. The Corporation paid $345,000 to the
Manager for the year ended December 31, 2014 (2013 - $335,000). The administration agreement was amended in
December 2014. The fees payable to the Manager will be $400,000 for 2015 and $500,000 for 2016, and will increase
annually thereafter by 3% per annum.
Changes in Accounting Policies
The Corporation’s accounting policies are found in note 3 of the Corporation’s financial statements beginning on
page 25.
15
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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. 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.
Asset Retirement Obligations
Westshore is required to recognize the fair value of an estimated asset retirement obligation when a legal or
constructive obligation is present, a reliable estimate of the obligation can be made and it is probable that the
Corporation will be required to settle the obligation. At the expiry of the Terminal’s lease, the Vancouver Fraser Port
Authority (“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. Any change in the estimate of the probability of incurring such 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.
16
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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 statement of financial position. 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 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers, which will supercede IAS 18 – Revenue
and related interpretations. The standard contains a single model that applies to contracts with customers and two
approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step
analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and
judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The
Corporation intends to adopt IFRS 15 in its financial statements for the annual period beginning on January 1, 2017.
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 Corporation
intends to adopt IFRS 9 in its financial statements for the annual period beginning on January 1, 2018.
The extent of the impact of adoption of these standards has not yet been determined.
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,
2014. 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, 2014 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.
17
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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, 2014 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
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.
18
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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
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, 2014 and 2013, 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, 2014 and 2013, 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 17, 2015
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
Other assets
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
Income tax payable
Other liabilities
Dividends payable to shareholders
Deferred income taxes
Employee future benefits
Shareholders' equity (deficit):
Share capital
Deficit
Note
December 31,
2014
December 31,
2013
$
$
$
85,639
8,863
12,041
1,089
107,632
653,021
(462,362)
190,659
365,541
-
663,832
42,389
4,084
48
24,503
71,024
15,392
79,678
166,094
1,706,265
(1,208,527)
497,738
$
$
$
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
$
663,832
$
632,994
5
13
13
9
8
11
9
Commitments (note 15)
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, 2014 and 2013
Note
2014
2013
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain
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 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
See accompanying notes to consolidated financial statements.
21
$
$
$
303,819
8,256
312,075
133,497
14,591
148,088
1,218
14,281
63
179,549
2,972
176,577
46,129
130,448
(13,469)
3,502
(9,967)
120,481
1.76
74,250,016
$
$
$
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
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2014 and 2013
Balance 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 losses, 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
Balance as at January 1, 2014
$
1,706,265 $
(1,230,998) $
475,267
Share capital
Deficit
Total
Profit for the year
Other comprehensive income (loss):
Defined benefit plan actuarial losses, net of tax
Total comprehensive income for the year
Distributions to shareholders of the Corporation:
Dividends declared to shareholders
-
-
-
-
130,448
130,448
(9,967)
(9,967)
120,481
120,481
(98,010)
(98,010)
Balance at December 31, 2014
$
1,706,265 $
(1,208,527) $
497,738
See accompanying notes to consolidated financial statements.
22
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
2014
2013
$
130,448
$
133,426
10,549
1,093
2,972
46,129
(63)
191,128
9,355
(1,602)
(61)
(961)
6,731
(56,250)
141,609
9
(98,010)
-
-
(98,001)
(19,377)
(19,377)
24,231
61,408
85,639
$
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
Years ended December 31, 2014 and 2013
Cash provided by (used in):
Operations:
Profit for the year
Adjustments for:
Depreciation
Employee future benefits liability
Net finance costs
Income tax expense
Gain on disposal of property, plant and equipment
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)
Dividends paid to shareholders
Drawings on revolving credit facility
Repayments on revolving credit facility
Investments:
Property, plant and equipment, net
Increase 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, 2014 and 2013
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, 2014
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 17,
2015.
(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:
• Non derivative 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.
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, 2014 and 2013
(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.
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 deferred
income tax amounts.
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, 2014 and 2013
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. 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, 2014 and 2013
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.
(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.
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, 2014 and 2013
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.
(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.
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, 2014 and 2013
(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.
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.
(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.
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, 2014 and 2013
(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 40 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.
(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, 2014, and have not been applied in preparing these consolidated financial
statements.
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, 2014 and 2013
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers, which will supercede IAS 18 –
Revenue and related interpretations. The standard contains a single model that applies to contracts with
customers and two approaches to recognising revenue: at a point in time or over time. The model features a
contract-based five-step analysis of transactions to determine whether, how much and when revenue is
recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount
and/or timing of revenue recognized. The Corporation intends to adopt IFRS 15 in its financial statements
for the annual period beginning on January 1, 2017.
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
Corporation intends to adopt IFRS 9 in its financial statements for the annual period beginning on January 1,
2018.
The extent of the impact of adoption of these standards has not yet been determined.
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.
In mid-September 2014, the Corporation and its insurers reached a collective settlement of their claims with the
ship’s owners and insurers. The Corporation has recovered $14.3 million in 2014 (2013 - $32.3 million) for a total
of $46.6 million from its insurers, the ship’s owners and their insurers.
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, 2014 and 2013
5. Plant and equipment:
Buildings and land
improvements
Machinery and
equipment
Construction in
progress
Total
Cost:
Balance at January 1, 2013
Additions
Transfers
Disposals
Balance at December 31, 2013
Balance at January 1, 2014
Additions
Transfers
Disposals
Balance at December 31, 2014
Accumulated depreciation:
Balance at January 1, 2013
Depreciation
Disposals
Balance at December 31, 2013
Balance at January 1, 2014
Depreciation
Disposals
Balance at December 31, 2014
Carrying amounts:
At December 31, 2013
At December 31, 2014
$
$
$
$
$
$
$
$
$
$
35,019
5,786
-
-
40,805
40,805
-
227
-
41,032
30,918
1,026
-
31,944
31,944
855
-
32,799
8,861
8,233
552,438
-
29,625
(133)
581,930
581,930
216
4,149
(1,470)
584,825
410,842
10,502
(127)
421,217
421,217
9,694
(1,348)
429,563
160,713
155,262
$
$
$
$
$
5,711
30,678
(29,625)
-
6,764
6,764
24,776
(4,376)
-
27,164
-
-
-
-
-
-
-
-
6,764
27,164
$
$
$
$
$
593,168
36,464
-
(133)
629,499
629,499
24,992
-
(1,470)
653,021
441,760
11,528
(127)
453,161
453,161
10,549
(1,348)
462,362
176,338
190,659
Depreciation was recorded in operating expenses on the consolidated statements of comprehensive income.
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, 2014 and 2013
6. Finance costs:
Interest expense (income), net
Employee benefit interest expense, net
Unrealized loss (gain) on interest hedging contracts
2014
2013
$
$
(9)
2,911
70
656
2,935
(22)
Net finance costs
$
2,972
$
3,569
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
2014
2013
$
$
42,447
3,682
46,129
$
$
26,899
19,587
46,486
$
(3,502)
$
2,046
2014
2013
$
176,577
26.00%
$
179,912
25.75%
45,910
77
-
142
46,327
50
467
(358)
Actual income tax expense
$
46,129
$
46,486
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, 2014 and 2013
8. Deferred tax assets and liabilities:
Deferred tax assets:
Non-pension defined benefits liability
Post-retirement benefits
Financing fees
Hedging contracts
Total assets
Deferred tax liabilities:
Property, plant and equipment
Hedging contracts
Total liabilities
Net deferred income tax liabilities
9. Share capital:
Authorized:
Unlimited number of common shares, no par value
Issued:
December 31,
2014
December 31,
2013
$
$
18,394
2,322
1
12
20,729
(36,121)
-
(36,121)
(15,392)
$
$
15,151
1,023
2
-
16,176
(31,380)
(6)
(31,386)
(15,210)
Common shares
2014
2013
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 both 2014
and 2013.
10. Profit per share:
Earnings per share:
The calculation of basic profit per share for the year ended December 31, 2014 was based on profit attributable to
shareholders and a weighted average number of common shares outstanding.
34
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, 2014 and 2013
Profit for the year
$
130,448
$
133,426
Weighted average number of common shares outstanding
74,250,016
74,250,016
Basic and diluted earnings per share
1.76
1.80
2014
2013
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,
2014
December 31,
2013
$
70,746
112,724
183,470
(103,792)
$
58,272
98,044
156,316
(94,111)
Recognized liability for defined benefit obligations
$
79,678
$
62,205
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.
Plan Assets:
Plan assets are comprised of the following investments:
Equity securities
Fixed income securities
Cash and cash equivalents
2014
2013
$
73,919
28,223
1,650
$
103,792
$
$
67,011
24,806
2,294
94,111
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, 2014 and 2013
Asset and Liability Movements:
Movement in the present value of the
defined benefit obligations
Pension obligations
2013
2014
Other post retirement
benefits
2014
2013
Defined benefit obligation at January 1
Benefits paid by the plan
Current and past service costs and
interest (see below)
Actuarial losses in other
$
98,044
(5,351)
$
91,866
(5,254)
$
58,272
(1,384)
$ 50,336
(1,278)
7,914
11,383
4,766
7,470
comprehensive income (see below)
12,117
49
9,092
1,744
Defined benefit obligations at December 31
$
112,724
$
98,044
$
70,746
$ 58,272
The discount rate used to calculate the benefit obligations decreased from 4.50% as at December 31, 2013 to
4.00% as at December 31, 2014.
Movement in the fair value of the defined
benefit plan assets
Pension assets
2014
2013
Other post retirement
benefits
2014
2013
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
$
94,111
3,327
(5,351)
4,185
(220)
$
82,422
4,056
(5,254)
3,472
(247)
$
-
1,384
(1,384)
-
-
comprehensive income (see below)
7,740
9,662
Fair value of plan assets at December 31
$
103,792
$
94,111
$
-
-
$
$
-
1,278
(1,278)
-
-
-
-
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, 2014 and 2013
Profit and Loss:
Profit and loss includes the following amounts in respect of post-retirement obligations:
Pension obligations expense recognized in profit and loss
2014
2013
Service costs:
Current service costs
Past service costs
Non-investment expenses
Net interest costs
Interest cost
Expected return on plan assets
$
1,795
1,713
220
3,728
4,406
(4,185)
221
$
1,691
5,615
247
7,553
4,077
(3,472)
605
$
3,949
$
8,158
Other post retirement benefits expense recognized in profit and loss
2014
2013
Current service costs
Past service costs
Interest costs
$
2,022
54
2,690
$
1,661
3,479
2,330
$
4,766
$
7,470
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
2014
2013
Cumulative amount at beginning of year
Actuarial loss – plan experience
Actuarial loss – demographic assumption changes
Actuarial loss – financial assumptions changes
Return on plan assets greater than discount rate
Cumulative amount at December 31
$
(11,530) $
(1,967)
(8,955)
(10,287)
7,740
(19,399)
(3,179)
(2,785)
4,171
9,662
$
(24,999) $
(11,530)
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, 2014 and 2013
Funding and Assumptions:
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, 2014, the Corporation made contributions of $3,327,000 to its pension plan in 2014 and
$1,384,000 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:
Union Pension plan
Salaried Retirement plan
Most recent valuation
date
Date of next required
valuation
January 1, 2014
January 1, 2013
January 1, 2015
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):
2014
2013
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Benefit obligations:
Discount rate at December 31
Rate of increase in future compensation
4.00%
3.00%
4.00%
-
4.50%
3.00%
4.50%
-
Benefit costs:
Discount rate at January 1
Rate of increase in future compensation
Expected long-term rate of return on plan assets
4.50%
3.50%
4.50%
4.50%
3.50%
-
4.25%
3.50%
4.25%
4.25%
3.50%
-
The average rate of compensation increase is expected to be inflation with an adjustment for merit and
productivity gains.
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, 2014 and 2013
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%.
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 2014:
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
$
13,507
$
(13,507)
10,403
(9,269)
(10,403)
11,454
This note provides information about the contractual terms of the Corporation's interest-bearing loans and
borrowings, which are measured at amortized cost.
The Corporation has an operating facility of $15 million which has a letter of credit outstanding against it. During
the year, the Corporation increased its outstanding letter of credit from $11,753,000 to $13,444,100 (see note 15).
The term of this operating facility was extended during the current year and expires in August 2015.
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, 2014. 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 one
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, 2014, 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.
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, 2014 and 2013
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,
2014
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Financial assets (liabilities):
Derivative instruments:
Interest rate swap contracts
$
(48) $
- $
(48) $
-
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, 2014, being a liability of $48,000 (measured based on Level 2 of the fair value hierarchy), has been
recorded in other liabilities and a loss of $70,000 has been recognized in net finance costs for the year ended
December 31, 2014.
The carrying amounts of interest rate swaps 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, 2066.
Charges payable by the Corporation under the lease comprise an annual base land and waterlot rental fee of
$5,207,000 (2013 - $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 (2013 - $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 2014, the Corporation paid $9,992,591 (2013 - $9,870,000) in relation to the higher
participation rental fee.
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, 2014 and 2013
Future minimum operating lease payments for the years ending December 31 (assuming minimum annual tonnes)
are as follows:
2015
2016
2017
2018
2019
Thereafter
15. Commitments:
Terminal Lease
Other
$
$
11,701
11,701
11,701
11,701
11,701
81,906
$
290
-
-
-
-
-
Total
11,991
11,701
11,701
11,701
11,701
81,906
The Corporation has provided a letter of credit of $13,444,100 (December 31, 2013: $11,753,000).
The Corporation has commitments of $166,081,000 with respect to equipment purchases that are to be delivered
and paid for as part of the terminal reinvestment project.
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:
2014
58%
12%
18%
2013
56%
14%
17%
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.
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, 2014 and 2013
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, 2014 and 2013, 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:
2014
85,639
8,863
-
94,502
$
$
2013
61,408
18,218
22
79,648
$
$
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, 2014.
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, 2014,
although the Corporation has an outstanding letter of credit for $13,444,100.
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, 2014. 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.
(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.
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, 2014 and 2013
(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, 2014, the
Corporation held US$21.7 million (2013 – 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 $217,000 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, 2014 was $2,676,000 (2013 - $49,000).
The Corporation does not have any outstanding foreign currency contracts at December 31, 2014.
(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, 2014. The fair market value of
the Corporations interest rate swaps is a liability of $48,000. It has been recorded in other liabilities and a
loss of $70,000 has been recognized in net finance costs for the year ended December 31, 2014.
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.
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, 2014 and 2013
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
2014
2013
$
345
$
335
1,008
979
4,989
4,161
632
508
389
390
44
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:
604.688.6764
604.687.2601
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; Chairman,
Canfor Corporation and Canfor Pulp Products Inc.
Brian A. Canfield
Corporate Director
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
45
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
Glenn Dudar
Vice-President & General Manager
Nick Desmarais
Secretary
46