WESTSHORE TERMINALS
INVESTMENT CORPORATION
ANNUAL REPORT
2018
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
22
54
Financial Highlights
(In thousands of Canadian dollars except tonnage and share amounts)
2018
2017
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
Funds applied to repurchase shares
Average price paid per repurchased share
Shares outstanding at December 31
Share Trading Statistics
High
Low
Close
Annual Volume
Share price as of March 18, 2019 closed at $18.63
30,464
356,034
173,415
124,709
1.80
44,036
0.64
89,650
24.21
67,289,787
27.50
19.95
20.58
33,862,585
$
$
$
$
$
$
$
$
$
$
$
29,034
322,199
148,916
109,392
1.51
46,093
0.64
60,568
23.19
70,937,537
29.05
19.07
26.29
29,507,127
$
$
$
$
$
$
$
$
$
$
$
2
Dear Shareholder:
2018 was another solid year of performance for Westshore. We saw steady progress on our capital upgrade
project as well as significant improvements in financial results compared to 2017.
We met our throughput volume commitments for all of our customers, for a total of 30.5 million tonnes
shipped during the year. This figure reflects the top end of our guidance, and compares to 29.0 million tonnes in 2017.
Longer term, our objective is to maximize our annual throughput volume and to that end we will work with existing
customers and aim to contract with new customers. At the same time, Westshore continues to review all facets of its
operations with a view of reducing costs and maximizing efficiencies.
Total revenues of $363.4 million surpassed 2017 revenues of $330.0 million and reflect volume growth and
an increase in throughput rates. Profit before taxes of $173.4 million was up 16%, compared to $148.9 million in
2017, with profit per share increasing by 19%.
The $270 million capital upgrade project was completed on time and under budget at the end of the first
quarter of 2019. The new shiploader, and three new stacker/reclaimers are operational and performing as expected.
Based on current information, 2019 throughput volumes are anticipated to be approximately 29-30 million
tonnes, at rates higher than 2018 rates. The volume is reduced somewhat from initial guidance as some of our
customers have reduced their planned shipments for 2019, but some of this reduction has been offset by new
customers. Throughput will depend on customer mine performance, customer sales, rail performance, and operational
performance at Westshore.
The Corporation renewed its normal course issuer bid (“NCIB”) effective April 11, 2018 for another year
allowing it to acquire up to 3,510,375 common shares until April 10, 2019. During 2018, 3,702,700 common shares
were purchased for a total of $89.7 million – the calendar year covered parts of two NCIB buying years. In 2017,
2,612,317 common shares were purchased for a total of $60.6 million.
For the Board of Directors,
(Signed) “William Stinson”
William Stinson
Chairman of the Board of Directors
Vancouver, B.C.
March 18, 2019
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, 2018. This discussion and analysis has been based upon the consolidated financial
statements prepared in accordance with International Financial Reporting Standards (“IFRS”). This discussion and
analysis is the responsibility of management of the Corporation. Additional information and disclosure can be found
on SEDAR at www.sedar.com. Unless otherwise indicated, the information presented in this Management’s
Discussion and Analysis (“MD&A”) is stated as at March 18, 2019.
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, effect of capital projects, including
anticipated operational efficiencies, and environmental upgrades, adoption and impact of new accounting standards and the anticipated level
of dividends and share repurchases.
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”). Substantially all of Westshore’s operating revenues in 2019 are expected to be derived from rates
charged for loading coal onto seagoing vessels.
Westshore’s results are affected by various factors, including the volume of coal shipped by each customer, and their
contracted rate per tonne, as well as Westshore’s operating costs. Customer contracts continue to provide fixed volume
commitments at fixed rates for a substantial portion of the Terminal’s estimated capacity. Westshore has received
reservation payments from a customer developing a metallurgical coal mine in Alberta. These payments 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 statements of the Corporation for
the financial year ended December 31, 2018.
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 eight directors of the General
Partner. Details of these arrangements will be included in the Information Circular for the Corporation’s 2019 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, 2018, 2017 and 2016, which were prepared in Canadian dollars using IFRS.
Revenue(1)
Profit before taxes
Profit for the year
Profit for the year per share(2)
Dividends declared
Dividends declared per share
Total assets
Total long term liabilities
2018
$
363,369
173,415
124,709
1.80
44,036
0.64
842,822
117,484
2017
$
330,031
148,916
109,392
1.51
46,093
0.64
857,249
134,387
2016
$
324,463
161,453
119,422
1.62
47,149
0.64
823,867
121,898
(1) 2016 includes as revenues payments received in connection with the restructuring of certain agreements.
(2) The weighted average number of Common Shares outstanding for 2018 was 69,206,278, for 2017 was 72,397,447, and for 2016
was 73,705,793.
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 and
where noted)
Three Months Ended
Dec 31, 2018
$
Sep 30, 2018
$
Jun 30, 2018 Mar 31, 2018
$
$
Revenue
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Shares repurchased (000 shares)
Cost of shares repurchased
96,140
48,791
35,040
0.51
10,956
0.16
1,032
26,626
93,248
49,529
34,705
0.50
11,049
0.16
1,344
31,537
83,919
32,083
23,410
0.33
11,264
0.16
593
13,904
90,062
43,012
31,554
0.47
10,767
0.16
734
17,583
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 and
where noted)
Revenue
Profit before taxes
Profit for the period
Profit for the period per share
Dividends declared
Dividends declared per share
Shares repurchased (000 shares)
Cost of shares repurchased
Three Months Ended
Dec 31, 2017
$
Sep 30, 2017
$
Jun 30, 2017 Mar 31, 2017
$
$
80,789
35,788
25,704
0.36
11,350
0.16
630
15,410
96,277
49,607
36,702
0.51
11,459
0.16
608
14,599
86,388
44,822
33,160
0.45
11,560
0.16
1,092
23,262
66,577
18,699
13,826
0.19
11,724
0.16
283
7,297
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 in North America. Westshore receives handling charges from its customers in line with shipped
throughput volume. 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 mines in British Columbia, Alberta, Montana.
Coal is delivered to the Terminal in unit trains operated by Canadian Pacific Railway, BNSF Railway, and Canadian
National Railway. The product is unloaded and either directly loaded onto a ship or stockpiled for future ship loading.
The loaded ships are destined around the globe to approximately 18 different countries, 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
India
Europe
China
S. America
Taiwan
Vietnam
Other
Total
2018
Tonnes
12,164
6,490
2,708
2,677
2,551
1,539
1,314
793
228
30,464
%
40
21
9
9
8
5
4
3
1
100
2017
Tonnes
10,848
6,316
1,399
2,385
3,786
1,669
2,145
257
229
29,034
%
37
22
5
8
13
6
7
1
1
100
2016
Tonnes
6,861
6,585
1,954
2,550
3,328
2,780
1,482
176
125
25,841
%
27
25
8
10
12
11
6
1
-
100
During 2018, 57% of Westshore’s volume was steel making coal (61% in 2017) and 42% was thermal coal (39% in
2017).
Westshore’s customers compete with other coal miners throughout the world. With respect to steel-making coal,
Australian coal mines are the most prominent competitors. Our thermal coal customers compete mainly with Australia
and Indonesia.
Customer Contracts
Teck is Westshore’s largest customer, and is the second largest supplier of seaborne steel making coal in the world.
Westshore’s current contract with Teck 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 the majority of Teck’s coal not shipped through
Westshore will be exported via Neptune Bulk Terminals (“Neptune”). Teck has announced expenditures of $470 million
on a project to expand Neptune’s capacity, which Teck anticipates will be completed in the third quarter of 2020. Teck
has advised Westshore that it does not expect to ship the current contracted volume of 19 million tonnes through
Westshore after the current contract expires in 2021.
Westshore has unique contracts with each of its U.S. thermal coal producers. The duration, rates, and specific terms
of each contract vary according to customer needs.
In 2018, Westshore entered into an agreement with CST Canada Coal to ship steel-making coal from its mine in
Grande Prairie, Alberta, the former Grande Cache mine which has shipped through Westshore in the past. The contract
provides for handing of specified volumes at fixed rates.
9
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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. Riversdale has paid Westshore
reservation fees to hold 4.5 million tonnes of capacity, and plans to commence shipments through Westshore in 2021.
The agreement provides for a throughput commitment at fixed rates through 2030.
Labour
During 2017, Westshore successfully concluded negotiation of a new collective agreement with ILWU local 514
(foremen). All three union locals (502, 514, & 517) now have collective agreements expiring on January 31, 2020.
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. Westshore undertook a further capital upgrade, completed in 2012, to replace the single
dumper with a second double dumper and addition of related equipment, at a cost of $45 million. A significant
maintenance program was also 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, terminal throughput capacity was estimated to be approximately 33
million tonnes, under then current operating conditions.
In early 2013, Westshore approved a further capital expenditure program to build a consolidated
operations/maintenance complex and replace three stacker/reclaimers and the shiploader at Berth 1 (the “Capital
Project”). The Capital Project extends the life of Westshore’s operations and is expected to significantly enhance
operational efficiencies. Additional throughput capacity is expected to result only from the improved productivity of
the new equipment, operating 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 following
completion of the Capital Project. This is estimated to take the terminal capacity to approximately 35 million tonnes
annually. The Capital Project was completed in stages and was completed in Q1 2019, on time and slightly under budget.
Westshore now has an updated terminal facility with modernized equipment and options to lease until December
31, 2066. Capital improvements and upgrades are part of continuous review and management focus to improve the
overall operations and capacity of the terminal.
10
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)
Loss on disposal of plant equipment
Net finance costs
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income (loss), net of
income tax:
Total comprehensive income for the
period
Quarterly analysis.
Three Months Ended
December 31,
2018
$
December 31,
2017
$
Years Ended
December 31,
2018
$
December 31,
2017
$
88,199
1,863
90,062
41,051
4,726
45,777
(542)
(113)
(618)
43,012
11,458
31,554
78,354
2,435
80,789
41,073
3,864
44,937
568
-
(632)
35,788
10,084
25,704
356,034
7,335
363,369
169,556
16,645
186,201
(1,075)
(113)
(2,565)
173,415
48,706
124,709
322,199
7,832
330,031
164,784
14,967
179,751
1,429
-
(2,793)
148,916
39,524
109,392
(79)
(3,766)
17,340
688
31,475
21,938
142,049
110,080
Tonnage shipped for Q4 2018 was 7.4 million tonnes compared to 7.1 million tonnes for the same period in 2017.
Of the tonnes shipped in Q4 2018, 65% was metallurgical coal and 35% was thermal coal, compared to 54% and 46%
respectively for the same period in the prior year.
Coal loading revenue increased by 12.6% to $88.2 million for Q4 2018 compared to $78.4 million for the same
period in 2017. Shipped volume in Q4 2018 was 7.4 million tonnes compared to 7.1 million tonnes in 2017. Average
loading rate in Q4 2018 was $11.92 per tonne compared to $11.01 per tonne through the same period in 2017.
Other revenue, totalling $1.9 million in Q4, consisted primarily of wharfage fees. Other revenue for the same period
in 2017 was $2.4 million which included $0.6 million of customer shortfall payments.
Operating expenses were consistent at $41.1 million for Q4 of 2018 and 2017.
Administration expenses of $4.7 million in Q4 2018 increased from the $3.9 million incurred in the same period of
2017.
11
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Net finance costs were consistent at $0.6 million for both years. The net interest cost components of the employee
benefit plan expense are recorded in net finance costs.
Income tax expense increased to $11.5 million in Q4 2018 from $10.1 million in Q4 2017 due to a higher tax rate
and higher profit in 2018.
Profit in the quarter increased to $31.6 million in 2018 from $25.7 million in 2017.
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 loss for the fourth quarter decreased to $0.1 million in 2018 from $3.8 million in
2017. The change in the fourth quarter of 2018 was caused by plan assets performing worse than actuarial expectations,
partially offset by changes related to the British Columbia government’s intention to eliminate MSP premiums after
2019. The change in the fourth quarter of 2017 was caused by a 0.50% decrease in the discount rate since the end of
the third quarter which increased the post-retirement obligations. This large decrease was partially offset by a gain
resulting from the reduction of MSP premiums and plan assets performing better than actuarial expectations.
Full year analysis
Tonnage shipped in 2018 was 30.5 million tonnes compared to 29.0 million tonnes in 2017. Of the tonnes shipped
in 2018, 57% was metallurgical coal and 42% was thermal coal, compared to 61% and 39% respectively for 2017.
Coal loading revenue increased by 10.5% to $356.0 million in 2018 from $322.2 million in 2017. Average loading
rate for 2018 was $11.69 per tonne compared to $11.10 per tonne for 2017.
Other revenue totalling $7.3 million, consisted primarily of wharfage income. Other revenue for the same period in
2017 was $7.8 million and included $0.6 million of customer shortfall payments.
Operating expenses increased by 2.9% to $169.6 million compared to $164.8 million for the same period in 2017.
Administrative expenses increased to $16.6 million in 2018 from $15.0 million in 2017, primarily resulting from an
increase in accrued management incentive fee which is performance based.
Net finance costs decreased to $2.6 million in 2018 from $2.8 million in 2017. The net interest cost components of
the employee benefit plan expense are recorded in net finance costs.
Income tax expense increased to $48.7 million in 2018 from $39.5 million in 2017. The higher tax expense is due to
a higher tax rate in 2018 and higher profits before taxes recognized in the period.
Profit increased to $124.7 million in 2018 from $109.4 million in 2017. On a per share basis this is an increase of
19.2% at $1.80 in 2018 compared to $1.51 in 2017.
12
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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 increased to $17.3 million in 2018 from $0.7 million in 2017. The change in
2018 was caused by a 0.50% increase in the discount rate used to assess future obligations, and changes related to the
British Columbia government’s intention to eliminate MSP premiums after 2019, both of which decreased the post-
retirement obligations. This was partially offset by plan assets performing worse during the period relative to actuarial
expectations. The change in 2017 was caused by a 0.50% decrease in the discount rate which increased the post-
retirement obligations, offset by a gain resulting from the reduction of MSP premiums and better plan asset performance
relative to actuarial expectations.
Cash Flows
Cash flows from operations are available to the Corporation to fund capital and other expenditures, establish reserves
and pay dividends to and repurchase shares from shareholders.
(In thousands of Canadian dollars)
Three Months Ended
Years Ended
December 31,
2018
$
December 31,
2017
$
December 31,
2018
$
December 31,
2017
$
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
48,900
9,194
(12,401)
45,693
(40,848)
(14,503)
41,079
2,861
(15,977)
27,963
(27,943)
(26,423)
194,881
4,020
(37,581)
161,320
(132,492)
(47,298)
169,466
11,313
(47,578)
133,201
(106,612)
(48,826)
Decrease in cash and cash equivalents
(9,658)
(26,403)
(18,470)
(22,237)
13
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Quarterly analysis
Operating cash flows before changes in working capital and income tax payments for the fourth quarter increased
by 19% to $48.9 million in 2018 from $41.1 million for the same period in 2017. Working capital changes in the fourth
quarter increased to a $9.2 million inflow in 2018 from a $2.9 million inflow for the same period in 2017, primarily due
to changes in accounts receivable and deferred revenue which fluctuate depending on timing of receipts and payments.
Current year tax instalment payments are based on prior year profit. Income tax payments in the fourth quarter
decreased to $12.4 million in 2018 from $16.0 million for the same period in 2017 due to the timing of tax payments.
Cash flow from operations in the fourth quarter increased to $45.7 million in 2018 from $28.0 million for the same
period in 2017.
Cash used in financing activities for the fourth quarter increased to $40.8 million in 2018 from $27.9 million for the
same period in 2017. During Q4 2018, the Corporation paid $13.6 million for shares repurchased at the end of the
previous quarter. The Corporation purchased under its NCIB 733,467 shares for approximately $17.6 million (Q4 2017
- 629,900 shares purchased for approximately $15.4 million) of which $1.1 million remained unpaid at year-end due to
the timing of settlements. Total cash outlay for dividends paid to shareholders also decreased compared to 2017 as there
are fewer shares outstanding.
Cash used in investing activities for the fourth quarter decreased to $14.5 million in 2018 from $26.4 million for the
same period in 2017 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, a liability of $16.1 million had
been incurred but was not yet invoiced or paid for.
Full year analysis
Operating cash flows before changes in working capital and income tax payments increased by 15% to $194.9 million
in 2018 from $169.5 million in 2017. Working capital changes decreased to a $4.0 million inflow in 2018 from a $11.3
million inflow in 2017, primarily due to changes in accounts receivable, accounts payable and deferred revenue which
fluctuate depending on timing of receipts and payments. Income tax payments decreased to $37.6 million in 2018 from
$47.6 million in 2017. Current year tax instalment payments are based on prior year profit. Cash flow from operations
increased to $161.3 million in 2018 from $133.2 million in 2017.
Cash flows used in financing activities increased to $132.5 million in 2018 from $106.6 million in 2017. This increase
is due to normal course issuer bid share purchases offset by a decrease in dividends paid. For the year ended December
31, 2018, the Corporation purchased 3,702,700 shares under its NCIB for approximately $89.7 million (December 31,
2017 – 2,612,317 shares purchased for approximately $60.6 million) of which $1.1 million remained unpaid at period-
end due to the timing of settlements.
Cash flows used in investing activities decreased to $47.3 million in 2018 from $48.8 million in 2017. The capital
expenditures in both periods consisted primarily of costs capitalized for the $270 million Capital Project. Westshore
expects that $16.1 million of accruals will be paid within the next 12 months.
14
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Capital Project was entirely financed through the retention of cash and was completed on schedule and under
budget. Meeting annual capital requirements, along with managing variations in working capital, are well within
Westshore’s financial capacity based solely on revenues less expenses, without any need for financing except for material
capital improvements. As a result, the Corporation does not anticipate any liquidity concerns with the ongoing
operations of Westshore.
Westshore has a $30 million operating facility with a Canadian chartered bank that is used for a letter of credit related
to pension funding and is available for day to day operations. The facility matures on August 30, 2019 and is secured by
a pledge of all the assets of Westshore. The operating facility bears 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 issued under this
facility. 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 $5.9 million in 2018 (2017 -
$6.7 million), which was comprised of $4.3 million (2017 - $5.2 million) for contributions to the pension plans and $1.6
million (2017 - $1.5 million) for payments for other post-retirement benefits.
The balance sheet at December 31, 2018 reflects $73.7 million of net obligations for post-retirement pension benefits
and other post-retirement benefits compared to $93.5 million at December 31, 2017. The change in 2018 was primarily
caused by an increase in the discount rate and the changes related to the British Columbia government’s intention to
eliminate MSP premiums after 2019, somewhat offset by weaker plan asset performance. This balance would decline in
the future if long term interest rates increase and would increase if such rates were to fall. Based on current benefit
levels, every 0.25% decrease or increase in interest rates results in a $8.5 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:
2019
2020
2021
2022
2023
Thereafter
Terminal Lease
Other
Total
$
$
11,701
11,701
11,701
11,701
11,701
35,103
$
91
47
34
24
8
-
11,792
11,748
11,735
11,725
11,709
35,103
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.
15
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
As at December 31, 2018, Westshore has a commitment of $20.5 million with respect to equipment purchases. Of
that total commitment, $19.1 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.
Financial Instruments
Westshore receives some of its revenue in U.S. 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 exchange rate.
As at December 31, 2018, Westshore had entered into put options with notional amounts totalling US$54.0 million
to exchange U.S. dollars for Canadian dollars with a strike price of $1.365. The counterparties have call options with
notional amounts totalling US$54.0 million to exchange U.S. dollars for Canadian dollars with a strike price of $1.290.
As these foreign exchange contracts have not been designated as hedges, the fair value of these foreign exchange
contracts at December 31, 2018, being a liability of $1,018,000 (measured based on Level 2 of the fair value hierarchy),
has been recorded in other liabilities and a loss of $1,343,000 has been recognized in foreign exchange loss for the year
ended December 31, 2018.
The carrying amounts of these contracts are equal to fair value, which is based on valuations obtained from the
counterparties. 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.
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
2018
$
44,036
0.64
2017
$
46,093
0.64
The same dividend level has been in effect since the fourth quarter of 2015 and is subject to periodic review based
on factors including operating performance, current and anticipated market conditions, funds applied to repurchase
shares, other opportunities that may come before Westshore, and other potential capital upgrade projects. Provided our
share price continues to make share repurchases advantageous to the Corporation, we anticipate using a portion of any
excess cash from our operations to repurchase common shares.
16
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Outlook
The cash inflows of the Corporation are entirely dependent on Westshore’s operating results. They are affected by
the volume and mix of coal shipped through the Terminal, the rates charged to customers for 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 2018 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 current
information, 2019 throughput volumes are anticipated to be approximately 29-30 million tonnes, at rates higher than
2018 rates. The volume is reduced somewhat from initial guidance as some of our customers have reduced their planned
shipments for 2019, but some of this reduction has been offset by new customer volumes.
Related Party Transactions
The Manager provides management services to Westshore pursuant to a management agreement (the “Management
Agreement”). Westshore pays an annual management fee to the Manager and an incentive fee based on a percentage
of annual profit above $42 million, subject to a cap of $7.5 million per annum. The annual base management fee for
2018 was $1,591,350 (2017 - $1,545,000) which will escalate at 3% annually. The incentive fee for the year ended
December, 31, 2018 was $5,831,000 and was paid subsequent to December 31, 2018 (2017 - $4,254,000 paid in 2018).
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 fee paid to the Manager for 2018 was
$530,450 (2017 - $515,000), which will increase by 3% per annum.
Changes in Accounting Policies
The Corporation’s accounting policies are found in note 3 of the Corporation’s financial statements. There were
no significant changes in accounting policies in 2018 except for the adoption of the new accounting standards for
revenue (IFRS 15) and financial instruments (IFRS 9). The adoption of IFRS 15 and 9 had no significant impact on
the Corporation. For further details, please see note 3 (l) in the audited consolidated financial statements.
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.
17
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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 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.
Income Tax Disputes
Current and deferred taxes are recorded after considering the Corporation’s estimate of the likely outcomes of
disputed tax positions. A provision for disputed income taxes may be recorded if it is probable that the exposure will
18
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
materialize and the actual resolution of any tax dispute may result in tax liabilities that are different than the recorded
amounts.
Future Accounting Standards:
IFRS 16 – Leases
In January 2016, IFRS 16 – Leases was issued to replace IAS 17 - Leases. The new standard sets out a comprehensive
model for the identification of lease arrangements and their treatment in the financial statements. All leases identified
under the new reporting standard are required to be brought on-balance sheet through the recognition of a ‘right-of-
use’ asset and the related lease liability at the commencement of the lease. The right of use asset is measured at the
amount of the lease liability plus any initial direct costs incurred by the lessee. Under the cost model, the right of use
asset is measured at cost less accumulated depreciation. The lease liability is initially measured at the present value of
the lease payments due over the term of the lease, discounted at the lessee incremental cost of borrowing, and considers
any amount expected to be due under a residual value guarantee. The lease liability will subsequently be measured at
amortized cost using the effective interest rate method. Lease expense, which is currently recorded as an operating
expense, will be replaced by depreciation on the right-of-use asset and interest expense on the lease obligation. This
standard is effective for annual periods beginning on or after January 1, 2019.
The Corporation is in the final stages of validating its calculations of the financial impact of adoption of IFRS 16 on
January 1, 2019. Adoption of the standard is expected to result in a right-of-use asset and related lease liability for the
VFPA lease of $285,998,000 and $291,072,000 respectively. There are no other material leases. The Corporation
intends to adopt the new standard on a retrospective basis with comparative prior periods restated to reflect the changes.
For further details, please see note 3 (m) in the audited consolidated financial statements.
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, 2018.
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, 2018 that have materially affected the Corporation’s internal
controls over financial reporting or are reasonably likely to materially affect the Corporation’s internal controls over
financial reporting.
It should be noted that a control system, including the Corporation’s internal controls and procedures, no matter
how well conceived, can provide only reasonable, but not absolute, assurance that the objectives of the control system
will be met, and it should not be expected that the disclosure and internal controls and procedures will prevent all errors
or fraud.
19
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
The design of any system of controls is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions.
Disclosure Controls And Procedures
“Disclosure controls and procedures” are defined as follows in National Instrument 52-109:
“Disclosure controls and procedures” means controls and other procedures of an issuer that are designed to provide
reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other
reports filed or submitted by it under provincial and territorial securities legislation is recorded, processed, summarized
and reported within the time periods specified in the provincial and territorial securities legislation and include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in its
annual filings, interim filings or other reports filed or submitted under provincial and territorial securities legislation is
accumulated and communicated to the issuer’s management, including its chief executive officer and chief financial
officer (or persons who perform similar functions to a chief executive officer or a chief financial officer), as appropriate
to allow timely decisions regarding required disclosure.”
As required by National Instrument 52-109, the Chief Executive Officer and the Chief Financial Officer of the
Corporation, in conjunction with management of the General Partner, have evaluated the effectiveness of the design
and tested the operation of the disclosure controls and procedures of Westshore, the General Partner and the
Corporation as of December 31, 2018 and have concluded that such disclosure controls and procedures provide
reasonable assurance that information required to be disclosed in the annual filings, interim filings or other reports filed
or submitted under provincial and territorial securities legislation is recorded, processed, summarized and reported
within the time periods specified in such legislation.
Additional information relating to the Corporation and Westshore, including the Corporation’s annual information
form, is available at www.sedar.com.
20
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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
21
KPMG LLP
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
Fax (604) 691-3031
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Westshore Terminals Investment Corporation
Opinion
We have audited the consolidated financial statements of Westshore Terminals Investment
Corporation (“the Corporation”), which comprise:
•
•
•
•
the consolidated statements of financial position as at December 31, 2018 and December 31, 2017;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of cash flows for the years then ended;
the consolidated statements of changes in equity for the years then ended; and
notes to the consolidated statements, including a summary of significant accounting policies
•
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Corporation as at December 31, 2018 and December 31, 2017,
and its consolidated financial performance and consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit
of the Financial Statements” section of our auditors’ report.
We are independent of the Corporation in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance
with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
22
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
Page 2
Other Information
Management is responsible for the other information. Other information comprises:
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions. If, based on the work we have performed on this other information, we
conclude that there is a material misstatement of this other information, we are required to report that fact
in the auditors’ report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the 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.
In preparing the financial statements, management is responsible for assessing the Corporation’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Corporation or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation‘s financial reporting
process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
consolidated financial statements.
23
Westshore Terminals Investment Corporation
Page 3
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Corporation's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Corporation's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report
to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Corporation to cease to continue
as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represents the underlying
transactions and events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
24
Westshore Terminals Investment Corporation
Page 4
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
Chartered Professional Accountants
The engagement partner on the audit resulting in this independent auditors’ report is John Desjardins,
FCPA, FCA.
Vancouver, Canada
March 18, 2019
25
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
Note
December 31,
2018
December 31,
2017
$
$
$
50,048
15,430
14,360
2,181
-
82,019
635,257
(241,628)
393,629
365,541
1,633
842,822
66,671
3,866
5,511
1,018
10,767
87,833
22,929
20,888
73,667
205,317
1,545,057
(907,552)
637,505
$
$
$
68,518
16,733
14,283
2,134
13,432
115,100
822,485
(448,651)
373,834
365,541
2,774
857,249
76,759
-
5,611
-
11,350
93,720
20,239
20,647
93,501
228,107
1,630,145
(1,001,003)
629,142
$
842,822
$
857,249
5
13
13
9
8
11
9
Commitments and contingencies (note 15)
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board:
(Signed) “William W. Stinson”
William W. Stinson
Director
(Signed) “M. Dallas H. Ross”
M. Dallas H. Ross
Director
26
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2018 and 2017
Note
2018
2017
$
$
$
356,034
7,335
363,369
169,556
16,645
186,201
(1,075)
(113)
(2,565)
173,415
48,706
124,709
23,754
(6,414)
17,340
142,049
1.80
69,206,278
$
322,199
7,832
330,031
164,784
14,967
179,751
1,429
-
(2,793)
148,916
39,524
109,392
930
(242)
688
$
$
110,080
1.51
72,397,447
4
6
7
11
7
10
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain (loss)
Loss on disposal of plant equipment
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income:
Items that will not be recycled to net income:
Defined benefit plan actuarial gains
Income tax expense on other
comprehensive loss
Other comprehensive income 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.
27
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2018 and 2017
Balance at January 1, 2017
$
1,690,176
$
(1,064,453)
$
625,723
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
(60,031)
109,392
109,392
688
688
110,080
110,080
(46,093)
(537)
(46,093)
(60,568)
Balance at December 31, 2017
$
1,630,145
$
(1,001,003)
$
629,142
Balance as at January 1, 2018
$
1,630,145
$
(1,001,003)
$
629,142
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
(85,088)
124,709
124,709
17,340
142,049
(44,036)
(4,562)
17,340
142,049
(44,036)
(89,650)
Balance at December 31, 2018
$
1,545,057
$
(907,552)
$
637,505
See accompanying notes to consolidated financial statements.
28
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2018 and 2017
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
Dividends paid to shareholders
Share purchases
Investments:
Property, plant and equipment, net
Other assets
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.
29
2018
2017
$
124,709
$
109,392
1,343
16,732
713
2,565
48,706
113
194,881
1,303
(77)
(47)
251
2,590
4,020
(37,581)
161,320
642
(44,620)
(88,514)
(132,492)
(48,114)
816
(47,298)
(18,470)
68,518
50,048
(1,136)
16,062
$
$
(419)
17,034
1,142
2,793
39,524
-
169,466
(7,307)
(1,066)
13
12,672
7,001
11,313
(47,578)
133,201
757
(46,513)
(60,856)
(106,612)
(49,643)
817
(48,826)
(22,237)
90,755
68,518
288
27,536
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, 2018 and 2017
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, 2018 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 18,
2019.
(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.
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, 2018 and 2017
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 instruments comprise cash and cash equivalents, accounts receivable, derivative instruments and
accounts payable and accrued liabilities. The Corporation uses derivative financial instruments in the normal
course of its operations as a means to manage its foreign exchange risk. The Corporation’s policy is not to
utilize derivative financial instruments for trading or speculative purposes. The Corporation’s derivative
financial instruments are not designated as hedges for accounting purposes.
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, 2018 and 2017
The Corporation’s financial instruments are classified and measured as follows:
Financial Assets
Cash and cash equivalents
Accounts receivable
Financial Liabilities
Accounts payable and accrued liabilities
Derivative instruments
Classification and measurement of financial assets
Amortized cost
Amortized cost
Amortized cost
FVTPL
Financial assets are classified as: measured at amortized cost; fair value through other comprehensive income
(“FVOCI”); or fair value through profit and loss (“FVTPL”) based on the business model in which a
financial asset is managed and its contractual cash flow characteristics and when certain conditions are met:
Amortized cost – measured at amortized cost using the effective interest rate method. Where applicable,
amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and
impairment are recognized in net income.
FVOCI – measured at FVOCI if not designated as FVTLP. Interest income, foreign exchange gains and
losses and impairment are recognized in net income. Other net gains and losses are recognized in other
comprehensive income (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified
to net income.
FVTLP – measured at FVTPL if not classified as amortized cost or FVOCI with net gains and losses,
including any interest or dividend income, recognized in net income.
Equity investments are required to be classified as measured at fair value. However, on initial recognition of
an equity investment that is not held-for-trading, the Corporation may irrevocably elect to present subsequent
changes in the investments fair value in OCI. This election is made on an investment by investment basis.
The Corporation does not have any equity investments.
Classification and measurement of financial liabilities
Financial liabilities are classified as either measured at amortized cost or FVTPL. A financial liability is
classified as FVTPL if it is held-for-trading, a derivative or it is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at fair value with net gains and losses, including interest expense,
recognized in net income. Other financial liabilities are subsequently measured at amortized cost using the
effective interest rate method. Interest expense and foreign exchange gains and losses are recognized in net
income. Any gains or losses on derecognition are also recognized in net income.
(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.
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, 2018 and 2017
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.
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 lives 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.
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, 2018 and 2017
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.
The Corporation applies the simplified approach in determining expected credit losses (“ECLs”), which
requires a probability-weighted estimate of expected lifetime credit losses to be recognized upon initial
recognition of financial assets measured at amortized cost, contract assets and debt investments at FVOCI.
Credit losses are measured as the present value of cash shortfalls from all possible default events, discounted
at the effective interest rate of the financial asset. Loss allowances for financial assets at amortized cost are
deducted from the gross carrying amount of the assets.
(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.
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, 2018 and 2017
(h) Employee benefits:
Defined benefit plans
A defined benefit plan is a post-retirement benefit plan other than a defined contribution plan. The
Corporation’s net obligation in respect of defined benefit pension plans is calculated separately for each plan
by estimating the amount of future benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present value and the fair value of plan
assets is deducted. The discount rate used to determine the present value of the obligation is the yield at the
reporting date on high quality corporate bonds that have maturity dates approximating the term of the
Corporation’s obligations and that are denominated in the same currency in which the benefits are expected
to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit method. When
the calculation results in a benefit to the Corporation, the recognized asset is limited to the present value of
economic benefits available in the form of any future refunds from the plan or reductions in the future
contributions to the plan. In order to calculate the present value of economic benefits, consideration is given
to any minimum funding requirements that apply to any plan in the Corporation. An economic benefit is
available to the Corporation if it is realizable during the life of the plan, or on settlement of the plan liabilities.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by
employees is recognized in profit or loss on the date of improvement.
The Corporation recognizes all actuarial gains and losses arising from defined benefit plans immediately in
other comprehensive income and expenses related to defined benefit plans in profit or loss.
Other long-term employee benefits
The Corporation’s net obligation in respect of long-term employee benefits other than pension plans is the
amount of future benefit that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and the fair value of any related assets is
deducted. The discount rate is the yield at the reporting date on high quality corporate bonds that have
maturity dates approximating the terms of the Corporation’s obligations. The calculation is performed using
the projected unit credit method. Any actuarial gains and losses are recognized immediately in other
comprehensive income in the period in which they arise.
(i) Revenue:
Coal loading revenue is recognized when a customer’s coal is loaded onto a ship. 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.
35
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, 2018 and 2017
(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.
(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) Changes in accounting policies:
The Corporation has initially adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial
Instruments from January 1, 2018. The adoption of these new standards does not have a material effect on the
Corporation’s financial statements.
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognized. It replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations.
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, 2018 and 2017
The Corporation has adopted IFRS 15 using the cumulative effect method (without practical expedients),
with the effect of initially applying this standard recognized at the date of initial application (i.e. January 1,
2018). Accordingly, the information presented for 2017 has not been restated – i.e. it is presented, as
previously reported, under IAS 18, IAS 11 and related interpretations. There were no changes to reporting
between the old and the new standard to highlight.
IFRS 9 sets out requirements for recognizing and measuring financial assets, financial liabilities and some
contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments:
Recognition and Measurement. There is no impact on the opening balances for the transition to IFRS 9.
The details of new significant accounting policies and the nature and effect of the changes to previous
accounting policies are set out below.
Classification and measurement of financial assets and financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial
liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans
and receivables and available for sale.
The adoption of IFRS 9 has not had a significant effect on the Corporation’s accounting policies related to
financial liabilities. The impact of IFRS 9 on the classification and measurement of financial assets is set out
below.
Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortized cost; fair value
through other comprehensive income (“FVOCI”) – debt investment; FVOCI – equity investment; or fair
value through profit and loss (“FVTPL”). The classification of financial assets under IFRS 9 is generally
based on the business model in which a financial asset is managed and its contractual cash flow
characteristics.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not
designated as at FVTPL:
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not
designated as at FVTPL:
it is held within a business model whose objective is achieved by both collecting contractual cash flows
and selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at
FVTPL.
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, 2018 and 2017
Subsequent measurement of financial assets
Financial assets at FVTPL
Financial assets at amortised cost
Debt investments at FVOCI
Equity investments at FVOCI
These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
These assets are subsequently measured at amortised cost using the
effective interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and impairment
are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
These assets are subsequently measured at fair value. Interest income
calculated using the effective interest method, foreign exchange gains and
losses and impairment are recognised in profit or loss. Other net gains and
losses are recognised in OCI. On derecognition, gains and losses
accumulated in OCI are reclassified to profit or loss.
These assets are subsequently measured at fair value. Dividends are
recognised as income in profit or loss unless the dividend clearly represents
a recovery of part of the cost of the investment. Other net gains and losses
are recognised in OCI and are never reclassified to profit or loss.
There was no effect of adopting IFRS 9 on the carrying amounts of financial assets at January 1, 2018.
The following table and the accompanying notes below explain the original measurement categories under IAS 39
and the new measurement categories under IFRS 9 for each class of the Corporation’s financial assets as at
January 1, 2018.
Original classification
under IAS 39
New classification
under IFRS 9
Original
carrying
amount
under IAS
39
New carrying
amount
under IFRS 9
Financial Assets:
Cash and cash equivalents
Accounts receivable
Loans and receivables
Loans and receivables
Amortized cost
Amortized cost
68,518
16,733
68,518
16,733
IFRS 9 also replaces the incurred loss model in IAS 39 with an expected credit loss (“ECL”) model. Under IFRS
9, loss allowances are measured on either of 12 month ECLs where the ECLs result from all possible default
events within the 12 months after the reporting date; or lifetime ECLs, where the ECLs result from all possible
default events over the expected life of a financial instrument.
The Corporation measures loss allowances at an amount equal to twelve months ECLs for cash and cash
equivalent balances where credit risk has not increased significantly since initial recognition. The Corporation has
elected to measure loss allowances for trade receivables and any future contract assets at an amount equal to
lifetime ECLs. The adoption of the ECL model resulted in no change to opening balances at January 1, 2018.
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, 2018 and 2017
(m) New standards and interpretations not yet adopted:
IFRS 16 – Leases
In January 2016, IFRS 16 – Leases was issued to replace IAS 17 - Leases. The new standard sets out a
comprehensive model for the identification of lease arrangements and their treatment in the financial
statements. All leases identified under the new reporting standard are required to be brought on-balance
sheet through the recognition of a ‘right-of-use’ asset and the related lease liability at the commencement of
the lease. The right of use asset is measured at the amount of the lease liability plus any initial direct costs
incurred by the lessee. Under the cost model, the right of use asset is measured at cost less accumulated
depreciation. The lease liability is initially measured at the present value of the lease payments due over the
term of the lease, discounted at the lessee incremental cost of borrowing, and considers any amount expected
to be due under a residual value guarantee. The lease liability will subsequently be measured at amortized cost
using the effective interest rate method. Lease expense, which is currently recorded as an operating expense,
will be replaced by depreciation on the right-of-use asset and interest expense on the lease obligation. This
standard is effective for annual periods beginning on or after January 1, 2019.
The Corporation intends to adopt IFRS 16 in its financial statements for the annual period beginning on
January 1, 2019. The Corporation intends to adopt the new standard using the full retrospective approach
with comparative prior periods restated to reflect the changes. The Corporation expects to utilize certain
practical expedients and apply exemptions for short term and low-value leases.
The Corporation is in the final stages of validating its calculations of the financial impact of adoption of IFRS
16 on January 1, 2019. Adoption of the standard is expected to result in the following changes to the
Corporation’s consolidated financial statements:
Statement of Financial Position
Right of use Asset, net of accumulated
amortization
Lease obligation
Equity
Increase to Assets
Increase to Liabilities
Decrease to Equity
285,998
(291,072)
5,074
Estimated impact as
at January 1, 2019
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, 2018 and 2017
Statement of Comprehensive Income
Operating costs
Depreciation
Finance costs
Net earnings
Net earnings per share
Statement of Cash Flows
Cash provided by:
Operating activities
Financing activities
Estimated impact for the year
ended December 31, 2018
Decrease
Increase
Increase
Decrease
Decrease
(11,701)
5,958
9,275
(3,532)
(0.05)
Estimated impact for the year
ended December 31, 2018
Increase
Decrease
9,275
(9,275)
The figures presented may change as a result of finalizing adjustments required on transition during the first
quarter of 2019.
Application of the new standard is not anticipated to have a negative impact on any bank covenant
calculations.
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, 2018 and 2017
4. Expenses:
Recorded in operating and administrative expenses on the consolidated statements of comprehensive income
was:
Salaries, wages and benefits
Depreciation
5. Plant and equipment:
2018
2017
$ 133,342
16,732
$ 130,313
17,034
Buildings and land
improvements
Machinery and
equipment
Construction in
progress
Cost:
Balance at January 1, 2017
Additions
Transfers
Disposals
Balance at December 31, 2017
Balance at January 1, 2018
Additions
Transfers
Disposals(1)
Balance at December 31, 2018
$
$
75,914
-
4,702
-
80,616
80,616
-
-
-
80,616
$
$
$
632,442
-
52,205
(40,779)
643,868
643,868
-
38,444
(223,873)
458,439
$
102,788
52,120
(56,907)
-
98,001
98,001
36,645
(38,444)
-
96,202
$
$
Total
811,144
52,120
-
(40,779)
822,485
822,485
36,645
-
(223,873)
635,257
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, 2018 and 2017
Accumulated depreciation:
Balance at January 1, 2017
Depreciation
Disposals
Balance at December 31, 2017
Balance at January 1, 2018
Depreciation
Disposals(1)
Balance at December 31, 2018
Carrying amounts:
At December 31, 2017
At December 31, 2018
$
$
$
$
$
$
31,403
1,728
-
33,131
33,131
1,816
-
34,947
47,485
36,226
$
421,584
15,306
(21,370)
415,520
415,520
14,916
(223,755)
206,681
228,348
261,201
$
$
-
-
-
-
-
-
-
-
98,001
96,202
$
$
$
452,987
17,034
(21,370)
448,651
448,651
16,732
(223,755)
241,628
373,834
393,629
(1) During 2018, the Corporation identified certain fully amortized assets that are no longer in use. These assets
have been disposed of for no consideration and no gain.
6. Finance costs:
Interest income, net
Employee benefit interest expense, net
2018
2017
$
$
(642)
3,207
(757)
3,550
Net finance costs
$
2,565
$
2,793
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, 2018 and 2017
7. Income tax expense:
Tax expense recognized in profit
Current income tax expense
Deferred tax expense (recovery)
Tax expense recognized in other comprehensive income
Defined benefit plans
Reconciliation of effective tax rate:
Profit before income tax
Statutory rate
Expected income tax expense
Permanent differences
Rate changes
Audit reassessments
Other
2018
2017
$
54,879
(6,173)
48,706
$
34,912
4,612
39,524
6,414
242
2018
2017
$ 173,415
27.00%
$ 148,916
26.00%
46,822
43
-
1,841
-
38,718
40
768
-
(2)
Actual income tax expense
$
48,706
$
39,524
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, 2018 and 2017
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,
2018
December 31,
2017
$
$
19,252
638
5
275
20,170
(41,058)
(41,058)
22,618
2,628
7
(88)
25,165
(45,812)
(45,812)
(20,647)
Net deferred income tax liabilities
$
(20,888)
$
The Corporation underwent an income tax audit and the Canada Revenue Agency provided reassessments for the
2012 to 2015 taxation years resulting from disputed capital cost allowance (“CCA”) claims. The audit has been
settled and total reassessed taxes and interest of $11.4 million has been paid. The majority of the reassessed amounts
relate to timing of CCA claims and will be recovered over time.
9. Share capital:
Authorized:
Unlimited number of common shares, no par value
Issued:
Common shares
2018
2017
67,289,787 (2017 - 70,937,537) issued and outstanding
common shares
$
1,545,057
$
1,630,145
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, 2018, the Corporation repurchased 3,702,700 (2017 - 2,612,317) shares for
$89,650,000 (2017 - $60,568,000), under the Corporation’s normal course issuer bid.
Subsequent to year end, the Corporation repurchased 538,212 shares for a total cost of $11,922,000. The shares
have been cancelled and will result in a decrease to contributed surplus and common shares.
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, 2018 and 2017
The Corporation has declared the following dividends in 2018 (2017 - $46,093,000).
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
11,264
11,049
10,956
10,767
44,036
$
$
The calculation of basic profit per share for the year ended December 31, 2018 was based on profit attributable to
shareholders and a weighted average number of common shares outstanding.
Profit for the year
Weighted average number of Common shares outstanding
Basic and diluted earnings per share
Shares repurchased
Total cost of shares repurchased
The Company has no dilutive securities.
11. Employee future benefits:
2018
2017
124,709
$
109,392
69,206,278
72,397,447
1.80
3,702,700
89,650
$
$
1.51
2,612,317
60,568
$
$
$
The Corporation makes contributions to two non-contributory defined benefit plans and one non-contributory
defined contribution plan 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.
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, 2018 and 2017
Present value of unfunded obligations
Present value of funded obligations
Impact of maximum balance sheet item
Total present value of obligations
Fair value of plan assets
December 31,
2018
December 31,
2017
$
71,303
134,228
57
205,588
(131,921)
$
83,768
145,061
-
228,829
(135,328)
Recognized liability for defined benefit obligations
$
73,667
$
93,501
Plan assets are comprised of the following investments:
Equity securities
Fixed income securities
Alternatives
Cash and cash equivalents
$
2018
60,444
35,763
30,313
5,401
$
2017
99,412
33,615
-
2,301
$
131,921
$
135,328
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
2018
2017
2018
2017
$ 145,061
(5,396)
$ 132,504
$
(5,220)
83,768
(1,704)
$
77,789
(1,537)
7,611
9,508
6,513
6,245
1,271
comprehensive income (see below)
(13,048)
8,269
(17,274)
Defined benefit obligations
$ 134,228
$ 145,061
$
71,303
$
83,768
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, 2018 and 2017
Movement in the fair value of the defined
benefit plan assets
Pension assets
December 31,
Other post retirement
benefits
December 31,
2018
2017
2018
2017
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
$ 135,328
4,343
(5,396)
4,377
(220)
$
$ 120,554
5,227
(5,220)
4,517
(220)
-
1,704
(1,704)
-
-
comprehensive income (see below)
(6,511)
10,470
Fair value of plan assets
$ 131,921
$ 135,328
$
-
-
$
$
-
1,537
(1,537)
-
-
-
-
Profit and Loss:
Profit and loss includes the following amounts in respect of post-retirement obligations:
Pension obligations expense recognized in profit and loss
2018
2017
Service costs:
Current service costs
Past service costs
Non-investment expenses
Net interest costs
Interest cost
Expected return on plan assets
$
1,831
1,038
220
3,089
4,742
(4,377)
365
$
1,798
2,635
220
4,653
5,075
(4,517)
558
$
3,454
$
5,211
47
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, 2018 and 2017
Other post-retirement benefits expense recognized in profit and loss
2018
2017
Current service costs
Past service costs
Interest costs
$
3,671
-
2,842
$
3,017
236
2,992
$
6,513
$
6,245
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
2018
2017
Cumulative amount at beginning of year
Actuarial gain - plan experience
Actuarial gain (loss) - demographic assumption changes
Actuarial gain (loss) - financial assumption changes
Actuarial loss - maximum balance sheet item
Return on plan assets greater (less) than expected return
Cumulative amount at December 31
$
(18,143) $
910
6,091
23,321
(57)
(6,511)
(19,073)
646
(1,613)
(8,573)
-
10,470
$
5,611
$
(18,143)
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.
During the year ended December 31, 2018, the Corporation made total contributions of $6,046,000 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, 2018
January 1, 2016
January 1, 2019
January 1, 2019
48
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, 2018 and 2017
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):
2018
2017
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Benefit obligations:
Discount rate at December 31
3.75%
3.75%
3.25%
3.25%
Benefit costs:
Discount rate at January 1
Expected long-term rate of return on plan assets
3.25%
3.25%
3.25%
-
3.75%
3.75%
3.75%
-
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 2018:
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
$
16,218
$
(16,218)
13,022
(9,437)
(13,793)
11,723
The Corporation has a $30 million operating facility with a Canadian chartered bank that is used for a letter of
credit relating to pension funding and day to day operations. The facility matures on August 30, 2019 and is
secured by a pledge of all of the assets of the Corporation. The operating facility bears 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).
Under its credit facility, the Corporation is required to comply with certain financial covenants. At December 31,
2018, 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.
49
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, 2018 and 2017
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,
2018
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Financial liabilities:
Derivative instruments:
Foreign exchange contracts
$
1,018
- $
1,018
-
As at December 31, 2018, Westshore had entered into put options with notional amounts totaling US$54.0 million
to exchange U.S. dollars for Canadian dollars with a strike price of $1.365. The counterparties have call options
with notional amounts totaling US$54.0 million to exchange U.S. dollars for Canadian dollars with a strike price of
$1.290.
As these foreign exchange contracts have not been designated as hedges, the fair value of these foreign exchange
contracts at December 31, 2018, being a liability of $1,018,000 (December 31, 2017 - an asset of $325,000 recorded
in other assets) (measured based on Level 2 of the fair value hierarchy), has been recorded in other liabilities and a
loss of $1,343,000 (year ended December 31, 2017 - gain of $419,000) has been recognized in foreign exchange loss
for the year ended December 31, 2018.
The carrying amounts of these contracts are equal to fair value, which is based on valuations obtained from the
counterparties. The mark-to-market value is determined by the counterparty by multiplying the notional amount
of the trade with the difference between the forward rate and the contract rate and discounting the resultant asset
or liability by an applicable discount factor.
14. Operating leases:
The Corporation is committed under operating leases to the rental of property, facilities, and equipment.
The Corporation's terminal site is leased from the Vancouver Fraser Port Authority. The term of the lease is until
December 31, 2026 with the Corporation having further options to extend the term to December 31, 2066. Charges
payable by the Corporation under the lease comprise an annual base land and waterlot rental fee of $5,207,000
(2017 - $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 (2017 - $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
2018, the Corporation paid $9,959,000 (2017 - $9,381,000) in relation to the higher participation rental fee.
50
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, 2018 and 2017
Future minimum operating lease payments for the years ending December 31 (assuming minimum annual tonnes)
are as follows:
2019
2020
2021
2022
2023
Thereafter
Terminal Lease
Other
Total
$
$
11,701
11,701
11,701
11,701
11,701
35,103
91
47
34
24
8
-
$
11,792
11,748
11,735
11,725
11,709
35,103
15. Commitments and Contingencies:
The Corporation has provided a letter of credit of $15,269,000 (December 31, 2017: $15,269,000) related to pension
funding.
The Corporation has commitments of $20,528,000 with respect to equipment purchases. Of that total commitment,
$19,072,000 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 (Note 14).
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, 2018, two customers accounted for 81% (2017 - 82%) and three customers
accounted for 95% (2017 - 95%) of throughput.
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.
(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, 2018 and 2017, there were no trade accounts receivable past
due which were considered uncollectible and no reserve in respect of doubtful accounts was recorded.
51
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, 2018 and 2017
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
(b) Liquidity risk:
2018
50,048
15,430
65,478
$
$
2017
68,518
16,733
85,251
$
$
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:
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, 2018, the
Corporation held US$0.3 million (2017 – US$9.7 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 $3,000 for the year.
The accounts receivable due from U.S. customers are denominated in U.S. dollars. The U.S. dollar
denominated accounts receivable outstanding as at December 31, 2018 was $3,690,000
(2017 - $2,086,000).
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.
52
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, 2018 and 2017
(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 same dividend
level has been in effect since the fourth quarter of 2015 and is subject to periodic review based on factors including
funds applied to repurchase shares, other opportunities that may come before Westshore, other potential capital
upgrade projects, operating performance and current market conditions.
19. Related party transactions:
Administration agreement
Westar Management Ltd.
Management agreement:
Westar Management Ltd. - base fee
Management agreement:
Westar Management Ltd. - Incentive fee
Insurance premiums:
Affiliate of Westar Management Ltd.
Vehicle leases:
Affiliate of Westar Management Ltd.
Director fees:
Director fees
2018
2017
$
530
$
515
1,591
1,545
5,831
4,254
904
275
582
806
394
551
53
Westshore Terminals Investment Corporation
Stock Exchange Listing
Toronto Stock Exchange
Trading Symbol
WTE
Registrar and Transfer Agent
Computershare Investor Services Inc.
Vancouver and Toronto
Auditors
KPMG LLP
Vancouver, British Columbia
Principal Office
1800 – 1067 West Cordova Street
Vancouver, British Columbia V6C 1C7
Telephone:
Facsimile:
604.688.6764
604.687.2601
Directors
William W. Stinson
Corporate Director
M. Dallas H. Ross
Partner, Kinetic Capital Partners
H. Clark Hollands
Private Investor
Steve Akazawa
Corporate Director
Brian A. Canfield
Corporate Director
Nick Desmarais
Managing Director Legal Services, The Jim Pattison
Group
Glen Clark
President, The Jim Pattison Group
Diane Watts
Corporate Director
Officers
William W. Stinson
Chairman, Chief Executive Officer &President
M. Dallas H. Ross
Chief Financial Officer
Nick Desmarais
Secretary & Vice President of Corporate Development
54
Westshore Terminals Ltd.
William W. Stinson
Corporate Director
M. Dallas H. Ross
Partner, Kinetic Capital Partners
H. Clark Hollands
Private Investor
Steve Akazawa
Corporate Director
Brian A. Canfield
Corporate Director
Nick Desmarais
Managing Director Legal Services, The Jim Pattison
Group
Glen Clark
President, The Jim Pattison Group
Diane Watts
Corporate Director
55