WESTSHORE TERMINALS
INVESTMENT CORPORATION
ANNUAL REPORT
2016
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
2
3
4
23
48
Westshore Terminals Investment Corporation
Financial Highlights
(In thousands of Canadian dollars except share amounts)
2016
2015
Tonnage (in thousands)
Coal loading revenue
Profit before taxes
Profit for the year
Profit for the year per share
Dividends declared
Dividends declared per share
Shares outstanding at December 31
Share Trading Statistics
High
Low
Close
Annual Volume
Share price as of March 20, 2017 closed at $26.38
25,841
287,152
161,453
119,422
1.62
47,149
0.64
73,560,954
28.95
9.84
25.89
36,403,964
$
$
$
$
$
$
$
$
$
28,848
319,653
206,692
152,931
2.06
85,215
1.15
73,865,954
34.24
10.81
11.65
42,521,665
$
$
$
$
$
$
$
$
$
2
Westshore Terminals Investment Corporation
Dear Shareholder:
2016 resulted in a better year overall than we had anticipated this time last year. While early in the year we had
anticipated throughput levels to be approximately 24.5 million tonnes, 2016 actual throughput was just under 26
million tonnes. Coal prices rose significantly in the latter half of 2016. Even though they have since declined, their
improvement compared to this time last year is encouraging and has prompted our thermal coal customers to seek
out and secure additional sales. As the recent past has again demonstrated, it is not possible to predict future coal
prices in the short or long term.
With lower volumes compared to 2015, a key focus in 2016 was on managing costs, and we saw numerous areas
of success in this regard. This effort was, however, somewhat off-set by the increased costs associated with new
collective bargaining agreements and higher depreciation.
2016 also saw further progress on the capital project with the completion of the new offices and shops, the
new shiploader at Berth 1 being delivered and commissioned, and the first replacement stacker/reclaimer being
delivered and assembled, with commissioning anticipated in Q2 2017. This has been, and continues to be, a
significant undertaking for Westshore and, as anticipated, has resulted in some temporary reduction in capacity.
The second new stacker/reclaimer is expected to be delivered and assembled in 2017, and operational by early 2018.
The third new stacker/reclaimer (which was ordered in 2016) is due for delivery in mid 2018. The project remains
on time and under budget. Following completion of this capital project, Westshore will have an updated terminal
facility with modernized equipment and options to lease until 2066. Capital improvements and upgrades are part of
continuous review and management focus to improve the overall operations and capacity of the terminal.
During 2016, Westshore successfully concluded the negotiations of a new collective agreement with ILWU
local 502 (operations/maintenance) with a four-year term expiring January 31, 2020. A new collective agreement
was also reached in January 2017 with ILWU local 517 (clerical) expiring at the same time, and negotiations
continue with local 514 (foremen).
The Corporation renewed its normal course issuer bid (“NCIB”) effective April 11, 2016 for 12 months.
316,100 common shares were purchased during 2016 for a total of $6.1 million. In 2015, 384,062 common shares
were purchased for a total of $10.3 million.
For 2017, based on information from its customers and agreements in place, Westshore anticipates total
throughput volume to be approximately 28 – 28.5 million tonnes. Westshore expects throughput capacity to
increase as we complete key stages of the major capital project. We continue to work with existing and potential
customers to increase our throughput volume to match increasing capacity. In addition, Westshore continues to
review all facets of its operations with a view of reducing costs and maximizing efficiencies.
We look forward to continuing to build for the future by reinvesting in the terminal so we can best service our
existing and future customers.
For the Board of Directors,
(Signed) “William Stinson”
William Stinson
Chairman of the Board of Directors
Vancouver, B.C.
March 20, 2017
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, 2016. 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 20, 2017.
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 the
Canadian/US dollar exchange rate, the future cost of post-retirement benefits, expected timing for shipments from a new customer, cost of
and timing to complete capital projects and environmental upgrades 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 in the future 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 Business Corporations Act (British Columbia) 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”). Most of Westshore’s operating revenues are derived from rates charged for loading coal onto
seagoing vessels. During 2015 and 2016 Westshore received payments for restructuring certain contractual
commitments.
Westshore’s results are affected by the volume of coal shipped by each customer, and their contracted rate per
tonne as well as Westshore’s operating costs. Long-term customer contracts continue to provide fixed volume
commitments at fixed rates for a substantial portion of the Terminal’s estimated capacity which, as anticipated, is
somewhat reduced for the duration of our major capital project. Westshore also receives reservation payments from a
new customer developing a metallurgical coal mine in Alberta. The fees collected will be recognized as revenue over
the term of the loading contract.
This MD&A has been prepared by the Corporation to accompany the financial results of the Corporation for the
financial year ended December 31, 2016.
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 relationships. The Corporation holds all of the
limited partnership units of Westshore and all of the common shares of Westshore Terminals Ltd. (the “General
Partner”), 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 2017 Annual
Meeting.
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, 2016, 2015 and 2014, which were prepared in Canadian dollars using IFRS.
Revenue(2)
Profit before taxes and insurance proceeds
Profit before taxes
Profit for the year
Profit for the year per share(1)
Dividends declared
Dividends declared per share
Total assets
Total long term liabilities
2016
$
324,463
161,453
161,453
119,422
1.62
47,149
0.64
823,867
121,898
2015
$
365,817
206,692
206,692
152,931
2.06
85,215
1.15
752,906
120,516
2014
$
312,075
162,296
176,577
130,448
1.76
98,010
1.32
663,832
95,070
(1) The weighted average number of Common Shares outstanding for 2016 was 73,705,793, for 2015 was 74,128,107, and for 2014
was 74,250,016.
(2) 2015 and 2016 include as revenues some payments received in connection with the restructuring of certain agreements.
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
Revenue1
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Dec 31, 2016
$
Sep 30, 2016
$
Jun 30, 2016 Mar 31, 2016
$
$
88,133
43,665
32,349
0.44
11,770
0.16
80,309
35,135
25,989
0.35
11,774
0.16
73,787
39,519
29,234
0.40
11,786
0.16
82,234
43,134
31,850
0.43
11,819
0.16
(1) Includes as revenues some payments received in connection with the restructuring of certain agreements.
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)
Revenue1
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Dec 31, 2015
$
105,526
70,020
51,887
0.70
11,819
0.16
Three Months Ended
Sep 30, 2015
$
Jun 30, 2015 Mar 31, 2015
$
$
81,514
43,826
32,416
0.44
24,393
0.33
92,395
49,284
36,455
0.49
24,502
0.33
86,383
43,563
32,174
0.43
24,502
0.33
(1) Dec 31, 2015 includes revenues from some payments received in connection with the restructuring of certain agreements in Q4 2015.
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 the volume 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, therefore,
may affect the volume of coal handled by Westshore. Westshore has contracts to ship coal from five mines in British
Columbia and one mine in Alberta, as well as from three 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 74% of
Westshore’s throughput by volume in 2016 (2015 – 66%).
Coal is delivered to the Terminal in unit trains operated primarily by Canadian Pacific 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 18 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
S. America
Europe
India
Taiwan
Other
Total
2016
Tonnes
6,861
6,585
3,251
2,780
2,549
1,954
1,482
379
25,841
%
27
25
12
11
10
8
6
1
100
2015
Tonnes
9,370
6,198
3,972
3,055
3,599
1,326
1,093
235
28,848
%
32
21
14
11
12
5
4
1
100
2014
Tonnes
9,841
6,974
5,219
3,106
2,435
1,222
1,383
423
30,603
%
32
23
17
10
8
4
5
1
100
During 2016, 74% of Westshore’s volume was steel making coal (68% in 2015) and 26% was thermal coal (32% in
2015).
Westshore’s customers compete with other suppliers of coal throughout the world. With respect to steel-making
coal, Australian coal mines are the most prominent competitors. There have been significant variations in the supply-
demand balance in seaborne steel-making coal, resulting in notable 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. As was seen in 2015, the further weakening in the market for seaborne thermal coal
materially affected the ability of Westshore’s thermal coal customers to profit from the export market and resulted in
renegotiated contracts that are better aligned with fluctuating coal prices and give the customers some flexibility in
terms of shipping volumes.
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 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 Bulk
Terminals.
Westshore’s contracts with its US thermal coal producers have different expiry dates, with the earliest expiring in
2018 (with an option to extend for one year). In 2015 and 2016, Westshore renegotiated contracts with two US
customers following significant declines in seaborne thermal coal markets. The new contracts are better aligned with
fluctuating coal prices and give the customers some flexibility in terms of shipping volumes. In both years, Westshore
received payments as part of contract restructurings. US producers accounted for approximately 25% of Westshore’s
throughput by volume in 2016 (31% in 2015).
In 2014, Westshore entered into an agreement with Riversdale Resources Limited (“Riversdale”), a Canadian
company with a planned steel-making coal mine to be developed in Blairmore, Alberta. Under the terms of the
9
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
agreement, Riversdale will pay Westshore reservation fees to hold 4 million tonnes of capacity at Westshore. The
agreement provides for a 10 year throughput commitment at fixed rates. Production is expected to start in 2020 and
ramp up thereafter.
Labour
During 2016, Westshore successfully concluded the negotiations of a new collective agreement with ILWU local
502 (operations/maintenance) with a four year term expiring January 31, 2020. A new collective agreement was also
reached in January 2017 with ILWU local 517 (clerical) expiring at the same time, and negotiations continue with local
514 (foremen).
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
with 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 the throughput
volumes they desired. 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. After these upgrades, the estimated terminal throughput capacity was assessed to be 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 (referred to as the “Capital Project”). 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 approximately 30 years. The
Capital Project has replaced the various structures on the site including the 42-year old outdated and inefficient
administration, operations and maintenance buildings with one consolidated complex, which was completed in 2016,
resulting in increased coal storage space. This Capital Project is planned to be completed in stages, ending in early
2019.
The new equipment is being 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
10
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
efficiencies, and reduced maintenance downtime. Currently, and depending on our customer mix, it is estimated that
an additional 2 million tonnes per year of capacity could be achievable, but in any event not before 2019.
In 2016 the new shiploader for Berth 1 was delivered and commissioned, and the first replacement
stacker/reclaimer was delivered and assembled. Commissioning of the stacker/reclaimer is anticipated to be complete
in Q2 2017. This has been, and continues to be, a significant undertaking for Westshore, and has resulted in some
anticipated reduction in capacity. The second new stacker/reclaimer is expected to be delivered and assembled in
2017, and operational by early 2018. The third new stacker/reclaimer (which was ordered in 2016) is due for delivery
in mid 2018. The project remains on time and under budget. Following completion of the capital project, Westshore
will have an updated terminal facility with modernized equipment and options to lease until 2066.. Capital
improvements and upgrades are part of continuous review and management focus to improve the overall operations
and capacity of the terminal.
11
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Results of Operations
(In thousands of Canadian dollars)
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain (loss)
Gain (loss) on disposal of plant equipment
Net finance costs
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income (loss):
Total comprehensive income for the period
Quarterly analysis
Three Months Ended
Year Ended
December 31,
2016
$
December 31,
2015
$
December 31,
2016
$
December 31,
2015
$
70,567
17,566
88,133
39,192
4,287
43,479
(76)
3
(916)
43,665
11,316
32,349
26,729
59,078
70,893
34,633
105,526
31,743
3,892
35,635
1,021
-
(892)
70,020
18,132
51,888
(5,530)
46,358
287,152
37,311
324,463
143,904
15,111
159,015
162
(450)
(3,707)
161,453
42,031
119,422
15,584
135,006
319,653
46,164
365,817
143,548
14,751
158,299
2,845
-
(3,671)
206,692
53,761
152,931
(11,198)
141,733
Tonnage shipped for Q4 2016 was 6.4 million tonnes compared to 6.3 million tonnes for the same period in 2015.
Of the tonnes shipped in Q4 2016, 69% was metallurgical coal and 31% was thermal coal, compared to 74% and 26%
respectively for the same period in the prior year.
Coal loading revenue decreased by 0.5% to $70.6 million for Q4 2016 compared to $70.9 million for the same
period in 2015. Volumes were about flat for the quarter (year over year) and the average loading rate in Q4 2016 was
$11.01 per tonne compared to $11.19 per tonne through the same period in 2015.
Other revenue, totalling $17.6 million in Q4, consisted of payments from the restructuring of contracts and
wharfage fees. Other revenue for the same period in 2015 was $34.6 million. The 2015 amount included both
payments in respect of 2015 shortfalls from committed tonnage and consideration received for the reduction of
committed tonnes to be shipped in subsequent years by Westshore’s US customers under the restructured
agreements. Payments for the restructuring of certain agreements were for fixed amounts at set dates during 2016.
Operating expenses increased by 23.5% to $39.2 million for Q4 2016 compared to $31.7 million for the same
period in 2015. While all categories were up, the larger increases relate to additional benefit costs related to the
pension plan and the union contract negotiations, and higher depreciation as components of the Capital Project are
now in use.
12
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Administration expenses of $4.3 million in Q4 2016 increased from the $3.9 million incurred in the same period of
2015. The increase is due to the timing of the management incentive fee accrual.
Net finance costs were consistent at $0.9 million for both years. The net interest cost components of the employee
benefit plan expense are recorded in net finance costs.
Income tax expense decreased to $11.3 million in Q4 2016 from $18.1 million in Q4 2015 in line with the
decreased profit before taxes.
Profit in the quarter decreased to $32.3 million in 2016 from $51.9 million in 2015, primarily as a result of
decreased payments received in connection with the restructuring of certain agreements and increased operating
expenses (mostly pension related expenses).
Other comprehensive income or 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
performance (relative to actuarial expectations).
After tax other comprehensive income or loss for the fourth quarter increased to income of $26.7 million in 2016
from a loss of $5.5 million in 2015. The change in the fourth quarter of 2016 was caused by a 0.75% increase in the
discount rate, better plan asset performance relative to actuarial expectations, and better retiree medical costs than
actuarial expectations. The change in the fourth quarter of 2015 was primarily due to the discount rate decreasing by
0.25% offset by better plan asset performance relative to actuarial expectations.
Full year analysis
Tonnage shipped in 2016 was 25.8 million tonnes compared to 28.8 million tonnes in 2015. Of the tonnes shipped
in 2016, 74% was metallurgical coal and 26% was thermal coal, compared to 68% and 32% respectively for 2015. The
lower volumes for 2016 primarily resulted from reduced shipment levels from the Q4 2015 restructuring of certain
customer contracts.
Coal loading revenue decreased by 10.2% to $287.2 million in 2016 from $319.7 million in 2015. While volumes
were less, the average loading rate for 2016 was $11.11 per tonne compared to $11.08 per tonne for 2015.
Other revenue totalling $37.3 million consisted of payments from the restructuring of contracts and wharfage fees.
Other revenue for 2015 was $46.2 million. Payments for the restructuring of agreements have been recognized in
revenue as received.
Operating expenses increased by 0.2% to $143.9 million compared to $143.5 million for the same period in 2015.
In 2016, reduced operating costs related to reduced volumes and a focus by management to reduce costs in all aspects
of the operations were substantially offset by increased costs related to the renegotiated union agreement and
adjustments to pension obligations as referred to above, and higher depreciation as components of the capital project
are now in use.
Administrative expenses increased to $15.1 million in 2016 from $14.8 million in 2015. There was no single item
that accounted for the increase.
13
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Full year net finance costs were consistent at $3.7 million for both years. While interest costs were higher in 2016
on the larger post-retirement liabilities, these were offset by lower operating interest costs and hedging gains.
Income tax expense decreased to $42.0 million in 2016 from $53.8 million in 2015. The lower tax expense is due
to lower profits before taxes recognized in the period.
Profit decreased by $33.5 million to $119.4 million in 2016 from $152.9 million in 2015, as a result of lower
revenues in the current year.
Other comprehensive income or 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
performance (relative to actuarial expectations).
After tax other comprehensive income or loss increased to income of $15.6 million in 2016 from a loss of
$11.2 million in 2015. The change in 2016 was caused by better plan asset performance relative to actuarial
expectations, and better retiree medical costs than actuarial expectations. The change in 2015 was due to both a 0.25%
lower discount rate and weaker plan asset performance relative to actuarial expectations.
Cash Flows
(In thousands of Canadian dollars)
Operating cash flows before working capital
changes and income tax payments
Working capital changes
Income tax paid
Cash flows provided by operations
Cash flows used in financing activities
Cash flows used in investing activities
Increase (decrease) in cash and cash equivalents
Quarterly analysis
Three Months Ended
Year Ended
December 31,
2016
$
December 31,
2015
$
December 31,
2016
$
December 31,
2015
$
50,231
328
(10,799)
39,760
(12,169)
(33,670)
(6,079)
72,875
23,363
(10,501)
85,737
(24,867)
(21,585)
39,285
186,604
(16,609)
(54,679)
115,316
(52,788)
(69,725)
(7,197)
221,748
23,557
(47,102)
198,203
(108,292)
(77,598)
12,313
Cash flows from operations are available to the Corporation to fund capital and other expenditures, establish
reserves and pay dividends to shareholders. Operating cash flows before changes in working capital and income tax
payments for the fourth quarter decreased to $50.2 million in 2016 from $72.9 million for the same period in 2015.
The decrease was mainly due to lower payments received in connection with the restructuring of certain agreements,
higher operating expenses relating to pension obligation adjustments and the renegotiated union agreement. Working
capital changes in the fourth quarter decreased to a $0.3 million inflow in 2016 from a $23.4 million inflow for the
same period in 2015. Changes were primarily due to changes in accounts payable and deferred revenue which
fluctuates depending on timing of payments. Income tax payments in the fourth quarter increased to $10.8 million in
14
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
2016 from $10.5 million for the same period in 2015. Cash flow from operations in the fourth quarter decreased to a
$39.8 million inflow in 2016 from an inflow of $85.7 million for the same period in 2015.
Cash used in financing activities for the fourth quarter decreased to $12.2 million in 2016 from $24.9 million for
the same period in 2015 due to the dividends paid in 2016 being less than those paid in 2015 and fewer normal course
issuer bid share purchases. During Q4 2016, the Corporation purchased under its NCIB 35,700 shares for
approximately $0.9 million (Q4 2015 - 50,700 shares purchased for approximately $1.3 million) of which $0.3 million
remained unpaid at year-end due to the timing of settlements.
Cash used in investing activities for the fourth quarter increased to $33.7 million in 2016 from $21.6 million for the
same period in 2015 primarily due to timing of payments. The capital expenditures in both periods consisted
primarily of costs capitalized for the $270 million Capital Project, and at the end of the quarter, $25.1 million had been
incurred but was not yet invoiced or paid for.
Full year analysis
The operating cash flows before changes in working capital and income tax payments decreased to $186.6 million
in 2016 from $221.7 million in 2015. Cash flows from coal loading operations were lower in 2016 due to lower
volumes and lower payments received in connection with the restructuring of certain agreements. Working capital
changes decreased to a $16.6 million outflow in 2016 from a $23.6 million inflow in 2015, primarily due to the timing
of payments of accounts payable and deferred revenue. Income tax payments increased to $54.7 million in 2016 from
$47.1 million in 2015 even though profit was lower in 2016 as the first quarter tax payment is the final payment for
the prior tax year. Cash flow from operations decreased to a $115.3 million inflow in 2016 from an inflow of $198.2
million in 2015.
The cash flows used in financing activities decreased to $52.8 million in 2016 from $108.3 million in 2015. This
decrease is due to the dividends paid in 2016 being less than those paid in 2015 and fewer normal course issuer bid
share purchases. During 2016, the Corporation purchased under its NCIB 316,100 shares for approximately $6.1
million (YTD 2015 – 384,062 shares purchased for approximately $10.3 million) of which $0.3 million remained
unpaid at year-end due to the timing of settlements.
The cash flows used in investing activities decreased to $69.7 million in 2016 from $77.6 million in 2015. The
capital expenditures in both periods consisted primarily of costs capitalized for the $270 million Capital Project. The
decrease results from the timing of invoices and Westshore expects that $25.1 million of accruals will be paid in 2017.
15
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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 the replacement of the three older
stacker / reclaimers, a shiploader and related equipment. Together with the construction of the new office and shops,
these expenditures are projected to total under $270 million and are planned in phases, ending in early 2019. The
Capital Project is being financed through retention of cash flow. While not the primary reason for undertaking the
Capital Project, once it is complete, it is anticipated that the rated capacity of the terminal will increase by
approximately 2 million tonnes per annum. Whether additional throughput in fact results will depend on a variety of
factors which currently cannot be predicted.
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 previously had a $15.5 million operating facility and a $50 million revolving credit facility with a
Canadian chartered bank. During the year, Westshore replaced these two facilities with a new $30 million operating
facility that will be used for a letter of credit relating to pension funding and day to day operations. The new facility
will mature on August 30, 2019 and is secured by a pledge of all of the assets of Westshore. The operating facility will
bear interest at the 1 month BA rate plus a margin and no repayments will be required until maturity. During the year,
Westshore increased its outstanding letter of credit from $14.8 million to $15.3 million. This is the only amount
drawn on the facility at year end.
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 $7.7 million in 2016 (2015 – $10.8
million), which was comprised of $6.0 million (2015 – $9.4 million) for contributions to the pension plans and $1.7
million (2015 - $1.4 million) for payments for other post-retirement benefits. Pension funding in 2016 decreased
over the prior year as contributions in 2015 included $3.9 million of special payments to fund vested plan
improvements.
The balance sheet at December 31, 2016 reflects an $89.7 million net obligation for post-retirement pension
benefits and other post-retirement benefit plans compared to $99.3 million at December 31, 2015. The change in 2016
was primarily caused by strong plan asset performance and actual pension costs coming in lower than actuarial
assumptions, offset by increased obligations related to the negotiated union agreement. This balance would decline in
the future if long term interest rates increase, and increase if such rates were to fall. Based on current benefit levels,
every 0.25% decrease or increase in interest rates results in a $7.8 million increase or decrease respectively in the post-
retirement benefits obligations.
Future minimum payments under Westshore’s operating leases, primarily with the Vancouver Fraser Port
Authority (“VFPA”), are as follows:
16
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
2017
2018
2019
2020
2021
Thereafter
Terminal Lease
Other
Total
$
11,701
11,701
11,701
11,701
11,701
58,505
$
290
$
-
-
-
-
-
11,991
11,701
11,701
11,701
11,701
58,505
In addition to the above minimum operating lease payments, Westshore also pays an annual participation rental
fee to VFPA based on the volume of coal shipped in excess of 17.6 million tonnes.
As at December 31, 2016, Westshore has a commitment of $74.9 million with respect to equipment purchases. Of
that total commitment, $74.5 million relates to equipment to be delivered and paid for as part of the Capital Project.
Westshore does not have any material capital lease obligations, or other long-term obligations.
Westshore faces disputes and audits that have arisen in the ordinary course of business and believes that their
outcome will not have a material adverse effect on our operating results, liquidity or financial position.
Financial Instruments
Westshore receives some of its revenue in US dollars and is therefore exposed to foreign currency exchange rate
risk. Westshore enters into foreign currency contracts for a portion of its exposed revenue to mitigate that risk. The
value of these financial instruments fluctuates with changes in the USD/CAD dollar exchanges rate.
As at December 31, 2016, Westshore had entered into put options with notional amounts totalling US$18.0
million to exchange US dollars for Canadian dollars with a strike price of $1.379. The counterparty has call options
with notional amounts totalling US$18.0 million to exchange US dollars for Canadian dollars with a strike price of
$1.30.
As these foreign exchange contracts have not been designated as hedges, the fair value of these foreign exchange
contracts at December 31, 2016, being a liability of $94,000 (measured based on Level 2 of the fair value hierarchy),
has been recorded in other liabilities and a loss of $124,000 has been recognized in foreign exchange gain for the year
ended December 31, 2016.
The carrying amounts of these 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.
17
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Distributions
Distributions by the Corporation over the last two years were as follows:
(In thousands of Canadian dollars except per share amounts)
Total Dividends on Common Shares
Total Dividends per Common Share
2016
$
47,149
0.64
2015
$
85,215
1.15
In view of the decision to reinvest approximately $270 million over the next four years for the Capital Project and
the difficulties in the seaborne export coal market, the directors determined to continue its policy of incurring no debt
financing for the Capital Project. The Corporation had set a dividend rate of $0.33 per share per quarter, which was
paid up to the third quarter of 2015. Due to deteriorating market conditions in 2015 coupled with the restructuring of
two US thermal coal customer agreements during the year, the board, as of Q4 2015, reduced the dividend to $0.16
per share per quarter. Such dividend level is subject to regular review and possible change based on other
opportunities that may come before Westshore, other potential capital upgrade projects, actual operating performance
and current market conditions.
Outlook
The cash inflows of the Corporation are entirely dependent on Westshore’s operating results. They are affected by
the volume of coal shipped through the Terminal, the rates charged to customers for the handling of that coal, and
Westshore’s operating and administrative costs. Long-term customer contracts continue to provide significant
customer volume commitments at fixed rates.
The variance in revenues from 2016 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 throughput volume in 2017 to be approximately 28 -
28.5 million tonnes compared to 25.8 million tonnes in 2016.
In September, Westshore settled a four year collective agreement (expiring January 31, 2020) with Local 502
(operation/maintenance), which has been ratified and in January 2017 with Local 517 (clerical and janitorial) for the
same period. Negotiations are ongoing with Local 514 (foremen).
Related Party Transactions
Westar Management Ltd. (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 $1,500,000 (2015 - $1,250,000) was paid by Westshore for the year ended December 31, 2016. The
incentive fee for the year ended December, 31, 2016 was $5,197,000 and was paid subsequent to December 31, 2016
(2015 - $5,500,000 paid in 2016).
18
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Under the Management Agreement, Westshore will pay the Manager a base fee of $1,545,000 for 2017 and this fee
will escalate at 3% annually thereafter. The incentive fee remains subject to an annual cap. The cap for 2016 was $6.5
million, and will rise to $7.5 million in 2017, after which it will remain constant for the balance of the current term of
the Management Agreement.
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 fees payable to the Manager will be
$545,000 for 2017, and will increase thereafter by 3% per annum. The Corporation paid $500,000 to the Manager for
the year ended December 31, 2016.
Changes in Accounting Policies
The Corporation’s accounting policies are found in note 3 of the Corporation’s financial statements beginning on
page 28. There were no significant changes in accounting policies in 2016.
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 Westshore
will be required to settle the obligation. At the expiry of the Terminal’s lease, the VFPA has the option to acquire the
assets of the Terminal at fair value or require Westshore to return the site to its original condition. Westshore believes
that the probability that the VFPA will elect to enforce site restoration is remote. 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
19
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
loading rates, a decline in customer shipments, an increase in operating costs or an increase in discount rates could
result in an impairment of all or a portion of the goodwill carrying value in future periods.
Employee Future Benefits
Westshore has post-retirement benefit obligations under its pension plans and other post-retirement benefit plans,
the costs of which are based on estimates. Actuarial calculations of benefit costs and obligations depend on
Westshore’s assumptions about future events. Major estimates and assumptions relate to expected plan investment
performance, salary escalation, retirement ages of employees and expected health care costs, as well as discount rates,
withdrawal rates and mortality rates.
Deferred Income Taxes
Deferred income tax assets and liabilities have been recognized for temporary differences between the tax basis of
an asset or liability and its carrying amount on the balance sheet. The deferred income tax balances can be affected by
a change in the estimate of when temporary differences reverse, the likelihood of realization of deferred tax assets,
and the classification of assets for tax purposes.
Future Accounting Standards:
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers, which will supersede 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, 2018.
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.
IFRS 16 – Leases
On January 13, 2016 the IASB issued IFRS 16 – Leases, which will supersede IAS 17 – Leases. The standard
introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a
term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-
use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease
payments. The Corporation intends to adopt IFRS 16 in its financial statements for the annual period beginning on
January 1, 2019.
The extent of the impact of adoption of these standards has not yet been determined.
20
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Internal Controls Over Financial Reporting
The Corporation maintains a system of internal controls over financial reporting, as defined by National
Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (“National Instrument 52-109”), in
order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
information for external purposes in accordance with IFRS.
The Chief Executive Officer and Chief Financial Officer of the Corporation have caused to be evaluated under
their supervision, the effectiveness of the Corporation’s internal controls over financial reporting as of December 31,
2016. 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, 2016 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.
During the year, the Corporation completed a project to implement the updated Internal Control - Integrated
Framework (COSO 2013 Framework) as published by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
It should be noted that a control system, including the Corporation’s internal controls and procedures, no matter
how well conceived, can provide only reasonable, but not absolute, assurance that the objectives of the control system
will be met and it should not be expected that the disclosure and internal controls and procedures will prevent all
errors or fraud.
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.
Disclosure Controls And Procedures
“Disclosure controls and procedures” are defined as follows in National Instrument 52-109:
“Disclosure controls and procedures” means controls and other procedures of an issuer that are designed to
provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim
filings or other reports filed or submitted by it under provincial and territorial securities legislation is recorded,
processed, summarized and reported within the time periods specified in the provincial and territorial securities
legislation and include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in its annual filings, interim filings or other reports filed or submitted under provincial
and territorial securities legislation is accumulated and communicated to the issuer’s management, including its
chief executive officer and chief financial officer (or persons who perform similar functions to a chief executive
officer or a chief financial officer), as appropriate to allow timely decisions regarding required disclosure.”
As required by National Instrument 52-109, the Chief Executive Officer and the Chief Financial Officer of the
Corporation, in conjunction with management of the General Partner, have evaluated the effectiveness of the design
21
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
and tested the operation of the disclosure controls and procedures of Westshore, the General Partner and the
Corporation as of December 31, 2016 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.
During the year, the Corporation completed a project to implement the updated Internal Control - Integrated
Framework (COSO 2013 Framework) as published by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
Additional information relating to the Corporation and Westshore, including the Corporation’s annual information
form, is available at www.sedar.com.
Management’s Report
The consolidated financial statements and other information in this annual report have been prepared by and are
the responsibility of the management of the Corporation. The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and reflect where necessary management’s best estimates
and judgments.
Management is also responsible for maintaining systems of internal and administrative controls to provide
reasonable assurance that the Corporation’s assets are safeguarded, that transactions are properly executed in
accordance with appropriate authorization and that the accounting systems provide timely, accurate and reliable
financial information.
The Directors are responsible for assuring that management fulfills its responsibility for financial reporting and
internal control. The Directors perform this responsibility at meetings where significant accounting, reporting and
internal control matters are discussed and the consolidated financial statements and annual report are reviewed and
approved.
The consolidated financial statements have been audited on behalf of the shareholders by KPMG LLP, Chartered
Professional 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
22
KPMG LLP
Chartered Professional Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
Telephone
(604) 691-3000
(604) 691-3031
(604) 691-3031
Fax
Fax
www.kpmg.ca
Internet
Internet
www.kpmg.ca
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, 2016 and 2015, 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,
2016 and 2015, 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 Professional Accountants
March 20, 2017
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
Income taxes recoverable
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
Deferred revenue
Other liabilities
Dividends payable to shareholders
Deferred revenue
Deferred income taxes
Employee future benefits
Shareholders' equity (deficit):
Share capital
Deficit
Subsequent events (note 9)
Commitments (notes 14 & 15)
Note
December 31,
2016
December 31,
2015
$
$
$
90,755
9,426
13,217
5,413
767
119,578
811,144
(472,396)
338,748
365,541
-
823,867
61,898
-
2,484
94
11,770
76,246
16,365
15,794
89,739
198,144
1,690,176
(1,064,453)
625,723
$
$
$
97,952
9,342
12,716
6,226
-
126,236
733,924
(472,825)
261,099
365,541
30
752,906
55,721
11,194
9,582
139
11,819
88,455
10,239
11,006
99,271
208,971
1,697,444
(1,153,509)
543,935
$
823,867
$
752,906
5
13
13
9
8
11
9
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board:
(Signed) "William W. Stinson"
William W. Stinson
Director
(Signed) "M. Dallas H. Ross"
M. Dallas H. Ross
Director
23
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2016 and 2015
Note
2016
2015
$
$
$
287,152
37,311
324,463
143,904
15,111
159,015
162
(450)
(3,707)
161,453
42,031
119,422
21,059
(5,475)
15,584
135,006
1.62
73,705,793
$
$
$
319,653
46,164
365,817
143,548
14,751
158,299
2,845
-
(3,671)
206,692
53,761
152,931
(15,133)
3,935
(11,198)
141,733
2.06
74,128,107
4
6
7
11
7
10
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain
Loss on disposal of plant equipment
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
See accompanying notes to consolidated financial statements.
24
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2016 and 2015
Balance at January 1, 2015
$
1,706,265
$
(1,208,527)
$
497,738
Share capital
Deficit
Total
Profit for the year
Other comprehensive 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
-
-
-
-
Adjustments due to share repurchases
(8,821)
152,931
152,931
(11,198)
(11,198)
141,733
141,733
(85,215)
(1,500)
(85,215)
(10,321)
Balance at December 31, 2015
$
1,697,444
$
(1,153,509)
$
543,935
Balance as at January 1, 2016
$
1,697,444
$
(1,153,509)
$
543,935
Share capital
Deficit
Total
Profit for the year
Other comprehensive income:
Defined benefit plan actuarial gains, net of tax
Total comprehensive income for the year
Distributions to shareholders of the Corporation:
Dividends declared to shareholders
-
-
-
-
Adjustments due to share repurchases
(7,268)
119,422
119,422
15,584
15,584
135,006
135,006
(47,149)
1,199
(47,149)
(6,069)
Balance at December 31, 2016
$
1,690,176
$
(1,064,453)
$
625,723
See accompanying notes to consolidated financial statements.
25
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2016 and 2015
Cash provided by (used in):
Operations:
Profit for the year
Adjustments for:
Foreign exchange contracts
Depreciation
Employee future benefits liability
Net finance costs
Income tax expense
Loss on disposal of plant equipment
Changes in non-cash operating working capital and other:
Accounts receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Deferred revenue
Income taxes paid
Financing:
Interest received (paid)
Dividends paid to shareholders
Share purchases
Investments:
Property, plant and equipment, net
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Supplemental information:
Non-cash transactions:
Shares purchased but not settled at year end
Capital expenditures unpaid at year end
See accompanying notes to consolidated financial statements.
26
2016
2015
$
119,422
$
152,931
124
13,380
7,490
3,707
42,031
450
186,604
(84)
(501)
813
(15,865)
(972)
(16,609)
(54,679)
115,316
191
(47,198)
(5,781)
(52,788)
(69,725)
(7,197)
97,952
90,755
288
25,059
$
$
(30)
10,463
952
3,671
53,761
-
221,748
(479)
(675)
(5,137)
10,027
19,821
23,557
(47,102)
198,203
(72)
(97,899)
(10,321)
(108,292)
(77,598)
12,313
85,639
97,952
-
3,305
$
$
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
1. Reporting entity:
Westshore Terminals Investment Corporation was incorporated under the Business Corporation Act (British
Columbia) on September 28, 2010 and is domiciled in Canada. The registered and head office is located at Suite
1800, 1067 West Cordova Street, Vancouver, British Columbia, V6C 1C7. These consolidated financial statements
as at and for the year ended December 31, 2016 comprises Westshore Terminals Investment Corporation and its
subsidiaries (together referred to as the “Corporation”). The Corporation owns all of the limited partnership units
of Westshore Terminals Limited Partnership (“Westshore”), a 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.
2. Basis of preparation:
(a) Statement of compliance:
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS).
The consolidated financial statements were authorized for issue by the Board of Directors on March 20,
2017.
(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.
(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.
27
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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.
(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.
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.
28
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
Receivables
Receivables are classified as loans and receivables. Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market. After initial recognition these
are measured at amortized cost using the effective interest method, less provision for impairment.
Discounting is omitted where the effect of discounting is immaterial.
Individual receivables are considered for impairment when they are past due or when other objective
evidence is received that a specific counterparty will default.
Financial liabilities
Financial liabilities of the Corporation are classified as other financial liabilities. Other financial liabilities are
non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active
market. After initial recognition these liabilities are measured at amortized cost using the effective interest
method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial.
Other financial liabilities comprise accounts payable and accrued liabilities, dividends payable and the
revolving credit facility.
Derivative financial instruments
Changes in fair value of derivative financial instruments not designated in a hedge relationship are recognized
immediately in profit or loss.
(d) Property, plant and equipment:
(i) Recognition and measurement:
Items of property, plant, and equipment are measured at historical cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing the assets to a working condition for their intended use, the costs of dismantling and removing
the items and restoring the site on which they are located, and borrowing costs on qualifying assets.
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.
29
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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.
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.
30
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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
original 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.
(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.
31
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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 all revenue other than Coal loading revenue and principally relates to fees earned
under take or pay contracts where the coal has not been delivered. Other revenue also includes revenue
earned for securing future volumes which is initially deferred and recognized over the term of the contract
and wharfage fees which are recorded based upon the period of time a ship is at the terminal.
(j) Provisions:
A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation.
Decommissioning liabilities
The Corporation’s terminal site is leased from the Vancouver Fraser Port Authority (the “VFPA”). A new
lease agreement became effective as of January 1, 2015. 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.
32
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
(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, 2016, and have not been applied in preparing these consolidated financial
statements.
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers, which will supersede 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, 2018.
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.
33
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
IFRS 16 – Leases
On January 13, 2016 the IASB issued IFRS 16 – Leases, which will supersede IAS 17 – Leases. The standard
introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to
recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing
its obligation to make lease payments The Corporation intends to adopt IFRS 16 in its financial statements
for the annual period beginning on January 1, 2019.
The extent of the impact of adoption of these standards has not yet been determined.
4. Expenses:
Recorded in operating and administrative expenses on the consolidated statements of comprehensive income
was:
Salaries, wages and benefits
Depreciation
2016
2015
$ 115,046
13,380
$
115,880
10,463
34
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
5. Plant and equipment:
Buildings and land
improvements
Machinery and
equipment
Construction in
progress
Cost:
Balance at January 1, 2015
Additions
Transfers
Balance at December 31, 2015
Balance at January 1, 2016
Additions
Transfers
Disposals
Balance at December 31, 2016
Accumulated depreciation:
Balance at January 1, 2015
Depreciation
Balance at December 31, 2015
Balance at January 1, 2016
Depreciation
Disposals
Balance at December 31, 2016
Carrying amounts:
At December 31, 2015
At December 31, 2016
$
$
$
$
$
584,825
-
15,534
600,359
600,359
-
41,663
(9,580)
632,442
429,563
9,593
439,156
439,156
11,417
(9,580)
440,993
161,203
191,449
$
$
$
$
$
$
27,164
80,903
(45,866)
62,201
62,201
91,479
(50,892)
-
102,788
-
-
-
-
-
-
-
62,201
102,788
$
$
$
$
$
$
$
$
$
41,032
-
30,332
71,364
71,364
-
9,229
(4,679)
75,914
32,799
870
33,669
33,669
1,963
(4,229)
31,403
37,695
44,511
35
Total
653,021
80,903
-
733,924
733,924
91,479
-
(14,259)
811,144
462,362
10,463
472,825
472,825
13,380
(13,809)
472,396
261,099
338,748
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
6. Finance costs:
Interest expense (income), net
Employee benefit interest expense, net
Unrealized loss (gain) on interest hedging contracts
2016
2015
$
$
(191)
4,037
(139)
72
3,508
91
Net finance costs
$
3,707
$
3,671
7. Income tax expense:
Tax expense recognized in profit
Current income tax expense
Deferred tax recovery
2016
2015
$
$
42,718
(687)
42,031
54,211
(450)
53,761
Tax expense (recovery) recognized in other comprehensive income
Defined benefit plans
5,475
(3,935)
Reconciliation of effective tax rate:
Profit before income tax
Statutory rate
Expected income tax expense
Permanent differences
Other
2016
2015
$ 161,453
26.00%
$
206,692
26.00%
41,978
32
21
53,740
36
(15)
Actual income tax expense
$
42,031
$
53,761
36
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
8. Deferred tax assets and liabilities:
Deferred tax assets:
Non-pension defined benefits liability
Post-retirement benefits
Financing fees
Hedging
Total assets
Deferred tax liabilities:
Property, plant and equipment
Total liabilities
December 31,
2016
December 31,
2015
$
$
20,225
3,107
9
25
23,366
(39,160)
(39,160)
20,964
4,847
1
28
25,840
(36,846)
(36,846)
(11,006)
Net deferred income tax liabilities
$
(15,794)
$
9. Share capital:
Authorized:
Unlimited number of common shares, no par value
Issued:
Common shares
2016
2015
73,560,954 (2015 - 73,865,954) issued and outstanding
common shares
$
1,690,176
$
1,697,444
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.
During the year ended December 31, 2016, the Corporation repurchased 316,100 (2015 - 384,062) shares for
$6,069,000 (2015 - $10,321,000), under the Corporation’s normal course issuer bid, of which $288,000 remained
unpaid at year-end due to the timing of settlements.
Subsequent to year end, the Corporation repurchased 249,600 shares for a total cost of $6,441,000. The shares
have been cancelled and will result in a decrease to contributed surplus and common shares.
37
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
The Corporation has declared the following dividends in 2016 (2015 - $85,215,000).
Record Date
March 31
June 30
September 30
December 31
10. Profit per share:
Earnings per share:
Payment Date
April 15
July 15
October 15
January 15
$
Per Share
0.16
0.16
0.16
0.16
Total
11,819
11,787
11,774
11,770
47,149
$
$
The calculation of basic profit per share for the year ended December 31, 2016 was based on profit attributable to
shareholders and a weighted average number of common shares outstanding.
Profit for the year
$
119,422
$
152,931
Weighted average number of Common shares outstanding
73,705,793
74,128,107
Basic and diluted earnings per share
1.62
2.06
2016
2015
Shares repurchased
Total cost of shares repurchased
The Company has no dilutive securities.
11. Employee future benefits:
316,100
6,069
$
384,062
10,321
$
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.
38
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
Present value of unfunded obligations
Present value of funded obligations
Total present value of obligations
Fair value of plan assets
Recognized liability for defined benefit obligations
Plan assets are comprised of the following investments:
Equity securities
Fixed income securities
Cash and cash equivalents
December 31,
2016
December 31,
2015
$
$
$
$
77,789
132,504
210,293
(120,554)
$
80,630
125,193
205,823
(106,552)
89,739
$
99,271
2016
2015
86,083
31,745
2,726
120,554
$
$
73,168
32,021
1,362
106,552
Asset and Liability Movements:
Movement in the present value of the
defined benefit obligations
Pension obligations
December 31,
Other post retirement
benefits
December 31,
Defined benefit obligation at January 1
Benefits paid by the plan
Current and past service costs and
interest (see below)
Actuarial losses (gains) in other
comprehensive income (see below)
2016
2015
2016
2015
$
125,193
(6,557)
$
112,724
(5,520)
$
80,630
(1,678)
$
70,746
(1,407)
14,722
13,669
8,237
(854)
4,320
(9,400)
5,546
5,745
Defined benefit obligations
$
132,504
$
125,193
$
77,789
$
80,630
39
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
Movement in the fair value of the defined
benefit plan assets
Pension assets
December 31,
Other post retirement
benefits
December 31,
2016
2015
2016
2015
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 (losses) in other
$
$
106,552
5,993
(6,557)
3,981
(220)
$
103,792
9,345
(5,520)
4,223
(220)
comprehensive income (see below)
10,805
(5,068)
Fair value of plan assets
$
120,554
$
106,552
$
-
1,678
(1,678)
-
-
-
-
$
$
-
1,407
(1,407)
-
-
-
-
Profit and Loss:
Profit and loss includes the following amounts in respect of post-retirement obligations:
Pension obligations expense recognized in profit and loss
2016
2015
Service costs:
Current service costs
Past service costs
Non-investment expenses
Net interest costs
Interest cost
Expected return on plan assets
$
2,441
7,410
220
10,071
4,871
(3,981)
890
$
2,275
6,618
220
9,113
4,776
(4,223)
553
$
10,961
$
9,666
40
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
Other post-retirement benefits expense recognized in profit and loss
2016
2015
Current service costs
Past service costs
Interest costs
$
2,993
2,097
3,147
$
2,531
60
2,955
$
8,237
$
5,546
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
2016
2015
Cumulative amount at beginning of year
Actuarial gain (loss) - plan experience
Actuarial loss - financial assumption changes
Return on plan assets greater (less) than expected return
Cumulative amount at December 31
$
(40,132) $
15,449
(5,195)
10,805
(24,999)
(630)
(9,435)
(5,068)
$
(19,073) $
(40,132)
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, 2016, the Corporation made total contributions of $7,671,000 to all of its pension and other
benefit plans.
The financial information with respect to the defined benefit pension plan 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, 2016
January 1, 2016
January 1, 2017
January 1, 2019
41
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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):
2016
2015
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Benefit obligations:
Discount rate at December 31
3.75%
3.75%
3.75%
3.75%
Benefit costs:
Discount rate at January 1
Expected long-term rate of return on plan assets
3.75%
3.75%
3.75%
-
4.00%
4.00%
4.00%
-
For measurement purposes, a 7.5% per annum increase in the per capita cost of covered extended health care
benefits was assumed for 2016, grading down by 0.30% per annum to 4.50% in 2026. 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 2016:
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
$
15,491
$
(15,491)
15,698
(10,549)
(15,698)
13,104
The Corporation previously had a $15.5 million operating facility and a $50 million revolving credit facility with a
Canadian chartered bank. During the year, the Corporation replaced these two facilities with a new $30 million
operating facility that will be used for a letter of credit relating to pension funding and day to day operations. The
new facility will mature on August 30, 2019 and is secured by a pledge of all of the assets of the Corporation. The
operating facility will bear interest at the 1 month BA rate plus a margin and no repayments will be required until
maturity. There is an outstanding letter of credit of $15.3 million drawn on this facility (see Note 15 ).
42
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
Under its credit facility, the Corporation is required to comply with certain financial covenants. At December 31,
2016, 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.
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,
2016
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Financial liabilities:
Derivative instruments:
Foreign exchange contracts
$
94
-
$
94
-
As at December 31, 2016, Westshore had entered into put options with notional amounts totaling US$18.0
million to exchange US dollars for Canadian dollars with a strike price of $1.379. The counterparty has call
options with notional amounts totaling US$18.0 million to exchange US dollars for Canadian dollars with a strike
price of $1.30.
As these foreign exchange contracts have not been designated as hedges, the fair value of these foreign exchange
contracts at December 31, 2016, being a liability of $94,000 (December 31, 2015 - an asset of $30,000) (measured
based on Level 2 of the fair value hierarchy), has been recorded in other liabilities and a loss of $124,000 (year
ended December 31, 2015 - gain of $30,000) has been recognized in foreign exchange gain for the year ended
December 31, 2016.
The carrying amounts of these 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
43
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
$5,207,000 (2015 - $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 (2015 - $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 2016, the Corporation paid $7,839,455 (2015 - $9,290,770) in relation to the higher participation
rental fee.
Future minimum operating lease payments for the years ending December 31 (assuming minimum annual tonnes)
are as follows:
2017
2018
2019
2020
2021
Thereafter
Terminal Lease
Other
Total
$
11,701
11,701
11,701
11,701
11,701
58,505
$
290
$
-
-
-
-
-
11,991
11,701
11,701
11,701
11,701
58,505
15. Commitments and Contingencies:
The Corporation has provided a letter of credit of $15,269,000 (December 31, 2015: $14,845,000) related to
pension funding.
The Corporation has commitments of $74,927,000 with respect to equipment purchases. Of that total
commitment, $74,517,000 relates to equipment to be delivered and paid for as part of the Capital Project.
The Corporation also pays an annual participation rental fee based on the volume of coal shipped in excess of
17.6 million tonnes.
The Corporation faces disputes and audits that have arisen in the ordinary course of business and believes that
their outcome will not have a material adverse effect on our operating results, liquidity or financial position.
16. Major Customers:
The Corporation had certain customers whose throughput individually represented 10% or more of the
Corporation’s total throughput.
For the year ended December 31, 2016 and 2015, two customers accounted for 95% and three customers
accounted for 97% of throughput, respectively.
17. Financial risk management:
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.
44
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
(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.
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, 2016 and 2015, 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:
2016
90,755
9,426
-
$
2015
97,952
9,342
30
100,181
$
107,324
$
$
Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they become 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 maintains a $30 million operating facility that is used for pension funding. The
Corporation has an outstanding letter of credit for $15,269,000 against this facility.
(c) Market risk:
The significant market risk exposures affecting the financial instruments held by the Corporation are those
related to foreign currency exchange rates and interest rates.
(i) Foreign currency exchange rates:
45
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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, 2016, the
Corporation held US$10.4 million (2015 – US$5.3 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 $104,000 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, 2016 was $1,281,000 (2015 - $17,000).
The Corporation is exposed to foreign currency exchange rate risk on its foreign currency contracts. The
value of these financial instruments fluctuates with changes in the US/CAD dollar exchange rate. See
note 13 for more information.
(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.
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
had set a dividend rate of $0.33 per share per quarter, which was paid during all of 2013 and 2014. Due to
deteriorating market conditions in 2015 coupled with the restructuring of two US thermal coal customer
agreements during that year, the board, as of Q4 2015, reduced the dividend to $0.16 per share per quarter. 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.
46
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2016 and 2015
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
2016
2015
$
500
$
400
1,500
1,250
5,197
5,500
508
593
568
487
47
Westshore Terminals Investment Corporation
Directors
William W. Stinson
Corporate Director
M. Dallas H. Ross
Partner, Kinetic Capital Partners
Gordon Gibson
Corporate Director
Michael J. Korenberg
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
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
48
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
49