WESTSHORE TERMINALS
INVESTMENT CORPORATION
ANNUAL REPORT
2019
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
5
23
55
Financial Highlights
(In thousands of Canadian dollars except tonnage and share amounts)
2019
2018
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
31,033
387,536
190,998
139,385
2.09
42,650
0.64
17,780
20.92
66,473,855
24.26
17.64
18.95
46,898,530
$
$
$
$
$
$
$
$
$
$
$
30,464
356,034
169,883
122,131
1.76
44,036
0.64
89,650
24.21
67,289,787
27.50
19.95
20.58
33,862,585
$
$
$
$
$
$
$
$
$
$
$
2
Westshore Terminals Investment Corporation
Directors’ Letter and Report to Shareholders
Dear Shareholder:
2019 was a very good year for Westshore, both operationally and financially.
Westshore shipped just over 31.0 million tonnes (compared to 30.5 million tonnes in 2018), the highest volume
in Westshore’s history.
Financially, Westshore’s total revenues of $395.4 million surpassed 2018 revenues of $363.4 million and reflect
volume growth and an increase in throughput rates. Profit before taxes of $191.0 million was up 12%, compared to
$169.9 million in 2018, with profit per share increasing by 18%
The recent capital project, which started in 2014 and represents the single largest capital project Westshore has
undertaken, was completed in 2019, on schedule and for $240 million, well under budget and without incurring any
debt. Westshore’s management and workforce are to be congratulated for successfully completing the project while
maintaining throughput. The completion of the project positions us well to meet the needs of our customers for
years to come.
For 2020, throughput volume is anticipated to be approximately 30.5 million tonnes at rates comparable to 2018
rates.
On March 31, 2021, our 10-year agreement with Teck Resources Limited. (“Teck”) expires. Teck are expanding
their capacity at Neptune Bulk Terminals, and have announced they have secured additional capacity at Ridley
Terminals. While we are willing to handle Teck product beyond the current agreement on acceptable terms, there
should be no expectation that a new agreement will be entered into with Teck.
Westshore has secured additional volume from existing and new customers which will offset some of the reduction
in volume from Teck. We are currently anticipating a material reduction in throughput volumes in 2021 and 2022 as
compared to recent years. Westshore will adjust elements of its operations to materially reduce costs accordingly.
Westshore is well positioned to handle a range of bulk commodities in addition to coal. We continue to attract the
interest of producers of other products, and we will evaluate the feasibility of these opportunities as they arise.
The Corporation renewed its normal course issuer bid (“NCIB”) effective April 11, 2019 for another year, allowing
it to acquire up to 3,334,831 common shares until April 10, 2020. During 2019, 850,090 common shares were
purchased for a total of $17.8 million, of which 88,108 common shares at a cost of $1.7 million were settled in 2020.
In 2018, 3,702,700 common shares were purchased for a total of $89.7 million, of which 54,950 common shares at a
cost of $1.1 million were settled in 2019. Year to date in 2020, a total of 818,908 shares have been purchased for $14.1
million. The calendar year covers parts of two NCIB buying years.
For the Board of Directors,
(Signed) “William Stinson”
William Stinson
Chairman of the Board of Directors
Vancouver, B.C.
March 13, 2020
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, 2019. 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 13, 2020.
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, expected
throughput volumes, renewal and non-renewal of customer contracts future throughput capacity, the effect of the Canadian/US dollar exchange
rate, the future cost of post-retirement benefits, expected timing for shipments from new customers, negotiations of new collective agreement,
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 2020 are 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. Westshore has received reservation payments from two companies which are developing
metallurgical coal mines in Alberta and BC.
This MD&A has been prepared by the Corporation to accompany the financial statements of the Corporation for
the financial year ended December 31, 2019.
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 2020 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, 2019, 2018 and 2017, which were prepared in Canadian dollars using IFRS.
(In thousands)
Revenue
Profit before taxes
Profit for the year
Profit for the year per share(1)
Dividends declared
Dividends declared per share
Total assets
Total long term liabilities
2019
$
395,422
190,998
139,385
2.09
42,650
0.64
1,207,307
420,882
2018
$
363,369
169,883
122,131
1.76
44,036
0.64
1,128,820
404,760
2017
$
330,031
145,310
106,739
1.47
46,093
0.64
1,149,205
425,043
(1) The weighted average number of Common Shares outstanding for 2019 was 66,724,299, for 2018 was 69,206,278, and for 2017
was 72,397,447.
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)
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, 2019
$
102,991
49,994
36,484
0.55
10,637
0.16
312
5,858
Sep 30, 2019
$
104,918
55,774
40,704
0.61
10,670
0.16
-
-
Jun 30, 2019 Mar 31, 2019
$
$
98,714
47,923
34,960
0.52
10,672
0.16
-
-
88,799
37,307
27,237
0.41
10,671
0.16
538
11,922
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, 2018
$
Sep 30, 2018
$
Jun 30, 2018 Mar 31, 2018
$
$
90,062
42,129
30,910
0.46
10,767
0.16
734
17,583
96,140
47,907
34,394
0.50
10,956
0.16
1,032
26,626
93,248
48,647
34,062
0.49
11,049
0.16
1,344
31,537
83,919
31,200
22,765
0.32
11,264
0.16
593
13,904
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 on a per tonne basis.
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 and 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.
The Terminal’s unique location provides strategic advantages with rail access, storage capacity and vessel handling.
These advantages are capable of being utilized for handling other bulk commodities. Westshore will continue to evaluate
the feasibility of proposals to handle other commodities as opportunities arise.
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
China and Hong Kong
Europe
Taiwan
Vietnam
S. America
Other
Total
2019
Tonnes
10,456
8,301
3,599
3,126
2,444
1,745
628
264
470
31,033
%
34
27
11
10
8
6
2
1
1
100
2018
Tonnes
12,164
6,490
2,708
2,551
2,677
1,314
793
1,539
228
30,464
%
40
21
9
8
9
4
3
5
1
100
2017
Tonnes
10,848
6,316
1,399
3,786
2,385
2,145
257
1,669
229
29,034
%
37
22
5
13
8
7
1
6
1
100
During 2019, 66% of Westshore’s volume was steel making coal (57% in 2018) and 34% was thermal coal (42% in
2018).
Westshore’s customers compete with other coal miners throughout the world. The major competitors for
Westshore’s customers are producers with mines in Australia, Indonesia, South Africa and Columbia.
Customer Contracts
Westshore operates under term contracts with its customers. Most of the contracts entered into in the last five years
have terms in the range of five to seven years. In certain cases, Westshore has made short term contracts with new
customers being introduced to the Terminal, in anticipation of such contracts leading to longer term arrangements, as
has usually happened. Contracts are often renegotiated and extended prior to their expiry.
In 2019 Westshore shipped product for nine distinct customers, and has contracts in place with all of those
customers for 2020.
Westshore’s contract with Teck Resources, which has been Westshore’s largest customer, expires March 31, 2021.
Teck is expanding the coal handling capacity of Neptune Terminals and has also announced agreements for additional
tonnage through Ridley Terminals. While Westshore remains willing to handle Teck product on acceptable terms, there
should be no expectation that a new agreement will be entered into with Teck for shipments after March 31, 2021.
Westshore has entered into contracts with two companies that have metallurgical coal mines under development in
Alberta and BC. Those companies are paying reservation fees to secure capacity for future shipments, which are
expected to commence after 2022.
9
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Labour
All three union locals (502, 514, & 517 of the International Longshore and Warehouse Union) have collective
agreements with Westshore that expired on January 31, 2020. Negotiations on new collective agreements are expected
to begin shortly and continue through 2020.
Results of Operations
(In thousands of Canadian dollars)
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain (loss)
Loss on disposal of property, plant and
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,
2019
$
December 31,
2018
$
Years Ended
December 31,
2019
$
December 31,
2018
$
100,721
2,270
102,991
44,907
5,390
50,297
88,199
1,863
90,062
39,615
4,726
44,341
387,536
7,886
395,422
176,709
17,030
193,739
356,034
7,335
363,369
163,813
16,645
180,458
(145)
(542)
867
(1,075)
-
(2,555)
49,994
13,510
36,484
(113)
(2,937)
42,129
11,219
30,910
(152)
(11,400)
190,998
51,613
139,385
(113)
(11,840)
169,883
47,752
122,131
11,379
(79)
(2,920)
17,340
47,863
30,831
136,465
139,471
Tonnage shipped for Q4 2019 was 8.2 million tonnes, up 10.9% from 7.4 million tonnes for the same period in
2018. 8.2 million tonnes is the highest volume loaded by Westshore in any Q4 in its history. Of the tonnes shipped in
Q4 2019, 67% was metallurgical coal and 33% was thermal coal, compared to 65% and 35% respectively for the same
period in the prior year. Coal loading revenue increased by 14.2% to $100.7 million for Q4 2019 compared to
$88.2 million for the same period in 2018, and the average loading rate in Q4 2019 was $12.27 per tonne compared to
$11.92 per tonne for the same period in 2018.
10
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Operating expenses increased by 13.4% to $44.9 million for Q4 2019 compared to $39.6 million for the same
period in 2018.
Administration expenses of $5.4 million in Q4 2019 increased from the $4.7 million incurred in the same period of
2018.
Net finance costs decreased slightly, primarily driven by higher interest income on cash reserves, to $2.6 million in
Q4 2019 from $2.9 million during the same period of 2018. The net interest cost components of the employee benefit
plan expense, and the right-of-use capital lease interest costs are recorded in net finance costs.
Income tax expense increased to $13.5 million in Q4 2019 from $11.2 million in Q4 2018 due to higher profits
before taxes in 2019.
Profit in the quarter increased to $36.5 million in 2019 from $30.9 million in 2018 as a result of higher revenues,
partially offset by higher operating costs and income taxes.
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 (loss) for the fourth quarter increased to an income of $11.4 million in
2019 from a loss of $0.1 million in 2018. The change in the fourth quarter of 2019 was caused by a 0.25% increase in
the discount rate which decreased the post-retirement obligations and plan experience changes from the inclusion of
the most recent valuation for the post employment benefit plans. 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 elimination of MSP premiums after 2019.
Full year analysis
Tonnage shipped in 2019 was 31.0 million tonnes, up 1.9% from 30.5 million tonnes in 2018. Of the tonnes
shipped in 2019, 66% was metallurgical coal and 34% was thermal coal, compared to 57% and 42% respectively for
2018. Coal loading revenue increased by 8.8% to $387.5 million in 2019 from $356.0 million in 2018, and the average
loading rate for 2019 was $12.49 per tonne compared to $11.69 per tonne for 2018.
Operating expenses increased by 7.9% to $176.7 million compared to $163.8 million in 2018.
Administrative expenses increased to $17.0 million in 2019 from $16.6 million in 2018.
Net finance costs decreased to $11.4 million in 2019 from $11.8 million in 2018, primarily driven by higher interest
income on cash reserves. The net interest cost components of the employee benefit plan expense, and the right-of-use
capital lease interest costs are recorded in net finance costs.
Income tax expense increased to $51.6 million in 2019 from $47.8 million in 2018 due to the higher profits before
taxes.
11
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Profit increased to $139.4 million in 2019 from $122.1 million in 2018, as a result of higher revenues partially
offset by higher operating costs and income taxes. On a per share basis this is an increase of 18.4% at $2.09 in 2019
compared to $1.76 in 2018.
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 (loss) decreased to a loss of $2.9 million in 2019 from an income of
$17.3 million in 2018. The change in 2019 was caused by a 0.75% decrease in the discount rate which increased the
post-retirement obligations. This was partially offset by plan assets performing better than actuarial expectations and
plan experience changes from the inclusion of the most recent valuation for the post employment benefit plans. 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 elimination of 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.
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
December 31,
2019
$
December 31,
2018
$
Years Ended
December 31,
2019
$
December 31,
2018
$
Operating cash flows before working capital
changes, lease obligation interest and
income tax payments
Working capital changes
Lease obligation interest paid
Income tax paid
Cash flows provided by operations
Cash flows used in financing activities
Cash flows used in investing activities
Increase (decrease) in cash and cash
equivalents
58,929
7,363
(2,300)
(9,601)
54,391
(14,871)
(1,235)
51,825
9,194
(2,319)
(12,401)
46,299
(41,454)
(14,503)
226,371
(5,955)
(9,198)
(47,202)
164,016
(61,491)
(20,715)
206,582
4,020
(9,275)
(37,581)
163,746
(134,918)
(47,298)
38,285
(9,658)
81,810
(18,470)
12
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, lease obligation interest payments and income tax
payments for the fourth quarter increased by 14% to $58.9 million in 2019 from $51.8 million for the same period in
2018. Working capital changes in the fourth quarter resulted in a $7.4 million inflow in 2019 compared to a $9.2
million inflow for the same period in 2018, primarily due to changes in accounts receivable and accounts payable
which fluctuate depending on timing of receipts and payments. Capital lease interest payments are marginally lower as
the lease liability is paid down. Income tax payments in the fourth quarter decreased to $9.6 million in 2019 from
$12.4 million for the same period in 2018 due to the timing of tax payments. Cash flow from operations in the fourth
quarter increased to $54.4 million in 2019 from $46.3 million for the same period in 2018.
Cash used in financing activities for the fourth quarter decreased to $14.9 million in 2019 from $41.5 million for
the same period in 2018. During Q4 2019, the Corporation purchased under its NCIB 311,878 shares for
approximately $5.9 million of which $1.7 million remained unpaid at year end due to the timing of settlements (Q4
2018 - 733,467 shares purchased for approximately $17.6 million of which $1.1 million remained unpaid at year end).
During Q4 2018, the Corporation paid $13.6 million for shares repurchased at the end of the previous quarter. Total
cash outlay for dividends paid to shareholders also decreased compared to 2018 as there are fewer shares outstanding.
Cash used in investing activities for the fourth quarter decreased to $1.2 million in 2019 from $14.5 million for the
same period in 2018 primarily due to timing of payments for capital expenditures. At the end of the quarter, $5.9
million had been incurred but was not yet invoiced or paid for.
Full year analysis
Operating cash flows before changes in working capital, lease obligation interest payments and income tax
payments increased by 10% to $226.4 million in 2019 from $206.6 million in 2018. Working capital changes resulted
in a $6.0 million outflow in 2019 compared to a $4.0 million inflow in 2018, primarily due to changes in accounts
receivable and accounts payable which fluctuate depending on timing of receipts and payments. Capital lease interest
payments are marginally lower as the lease liability is paid down. Income tax payments increased to $47.2 million in
2019 from $37.6 million in 2018. Tax instalment payments are based on the previous year’s profit, and a final payment
for the prior year taxes payable is made in the first quarter of each year. Cash flow from operations increased to
$164.0 million in 2019 from $163.7 million in 2018.
Cash flows used in financing activities decreased to $61.5 million in 2019 from $134.9 million in 2018. This
decrease is due to normal course issuer bid share purchases. For the year ended December 31, 2019, the Corporation
purchased 850,090 shares under its NCIB for approximately $17.8 million of which $1.7 million remained unpaid at
year end due to the timing of settlements. The Corporation also paid $1.1 million for shares repurchased at the end of
the previous year, resulting in a total cash outflow of $17.2 million for share buybacks. For the year ended December
31, 2018, 3,702,700 shares were purchased for approximately $89.7 million of which $1.1 million remained unpaid at
year end due to the timing of settlements.
13
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Cash flows used in investing activities decreased to $20.7 million in 2019 from $47.3 million in 2018 primarily
driven from a decrease in capital expenditures. The capital expenditures in both periods consisted primarily of costs
capitalized for the recent capital project to replace aging equipment which is now complete. Westshore expects that
$5.9 million of accruals will be paid within the next 12 months.
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.
In July 2019, Westshore increased its $30 million operating facility to $40 million and extended the maturity date.
The facility is primarily used for a letter of credit related to pension funding and the increase was to assist with day to
day operational liquidity. The facility now matures on August 30, 2022 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 period 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 $5.7 million in 2019 (2018 -
$5.9 million), which is comprised of $3.6 million (2018 - $4.3 million) for contributions to the pension plans and $2.1
million (2018 - $1.6 million) for payments for other post-retirement benefits.
The balance sheet at December 31, 2019 reflects $80.9 million of net obligations for post-retirement pension
benefits and other post-retirement benefits compared to $73.7 million at December 31, 2018. The change in 2019 was
primarily caused by a decrease in the discount rate, somewhat offset by stronger plan asset performance and plan
experience changes from the inclusion of the most recent valuation for the post employment benefit plans. Based on
current benefit levels, every 0.25% decrease or increase in interest rates results in a $9.5 million increase or decrease
respectively in the post-retirement benefits obligations.
Future undiscounted minimum payments under Westshore’s material lease obligations are as follows:
(In thousands of Canadian dollars)
Less than 1 year
Between 1 and 5 years
More than 5 years
December 31,
2019
11,701
46,856
500,158
558,715
$
$
In addition to the above minimum lease payments, Westshore also pays an annual participation rental fee to
Vancouver Fraser Port Authority (“VFPA”) based on the volume of coal shipped in excess of 17.6 million tonnes.
14
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
As at December 31, 2019, Westshore has a commitment of $10.7 million with respect to equipment purchases that
are to be delivered and paid for in the next 12 months.
Westshore does not have any material 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, 2019, Westshore had entered into put options with notional amounts totalling US$21.0
million to exchange U.S. dollars for Canadian dollars with a strike price of $1.338. The counterparty has call options
with notional amounts totalling US$21.0 million to exchange U.S. dollars for Canadian dollars with a strike price of
$1.275.
As these foreign exchange contracts have not been designated as hedges, the fair value of these foreign exchange
contracts at December 31, 2019, reflects an asset of $50,000 (measured based on Level 2 of the fair value hierarchy),
and has been recorded in other assets and a gain of $1,068,000 has been recognized in foreign exchange gain (loss) for
the year ended December 31, 2019.
The carrying amounts of these contracts are equal to fair value, which is based on valuations obtained from the
counterparty. The mark-to-market value is determined by the counterparty by multiplying the notional amount of the
trade with the difference between the forward rate and the contract rate and discounting the resultant asset or liability
by an applicable discount factor.
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
2019
$
42,650
0.64
2018
$
44,036
0.64
The dividend 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.
15
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.
The variance in revenues from in 2020 from 2019 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, 2020 throughput volumes are anticipated to be approximately 30.5 million tonnes at
loading rates comparable to 2018 rates.
On March 31, 2021 the 10-year agreement with Teck, which provided for 19 million tonnes of volume annually
through Westshore, will expire. As of the date of this report, there is no agreement with Teck to handle coal beyond
March 31, 2021.
Westshore is currently anticipating a material reduction in throughput volumes in 2021 and 2022 as compared
to recent years.
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
2019 was $1,639,000 (2018 - $1,591,000) which will escalate at 3% annually. The incentive fee for the year ended
December 31, 2019 was $6,759,000 and was paid subsequent to December 31, 2019 (2018 - $5,831,000 paid in 2019).
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 2019 was
$546,000 (2018 - $530,000), 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 2019 except for the adoption of the new accounting standards for leases
(IFRS 16). For further details, please see note 3 (m) in the audited consolidated financial statements.
16
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
Critical Accounting Estimates
The preparation of financial statements and related disclosures in accordance with IFRS requires the Corporation
to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and
contingencies. These estimates are based on historical experience and on assumptions that are considered at the time
to be reasonable under the circumstances. Under different assumptions or conditions, the actual results may differ,
potentially materially, from those previously estimated.
The following is a discussion of the accounting estimates that are significant in determining the Corporation’s
financial results.
Property, plant and equipment: Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease
incentives received. Depreciation is calculated using the straight line method over the estimated useful production life
of the assets. The estimated useful lives of property, plant and equipment range from 3 to 35 years and are reviewed
annually. A change in the estimated useful lives of property, 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.
Capital Lease Obligation
The capital lease obligation is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using Westshore’s incremental borrowing rate. The lease liability is measured at
amortised cost using the effective interest rate method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in Westshore’s estimate of the amount
expected to be payable under a residual value guarantee or if Westshore changes its assessment of whether it will
exercise a purchase, extension or termination option. Any change in the incremental borrowing rate of Westshore
could have a material impact on the lease obligation.
17
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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.
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, 2019.
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, 2019 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.
18
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, 2019 and have concluded that such disclosure controls and procedures provide
reasonable assurance that information required to be disclosed in the annual filings, interim filings or other reports filed
or submitted under provincial and territorial securities legislation is recorded, processed, summarized and reported
within the time periods specified in such legislation.
Additional information relating to the Corporation and Westshore, including the Corporation’s annual information
form, is available at www.sedar.com.
Management’s Report
The consolidated financial statements and other information in this annual report have been prepared by and are
the responsibility of the management of the Corporation. The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards and reflect where necessary management’s best estimates
and judgments.
Management is also responsible for maintaining systems of internal and administrative controls to provide reasonable
assurance that the Corporation’s assets are safeguarded, that transactions are properly executed in accordance with
appropriate authorization and that the accounting systems provide timely, accurate and reliable financial information.
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.
19
Westshore Terminals Investment Corporation
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
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
20
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
Right-of-use assets
Goodwill
Other assets
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
Income tax payable
Deferred revenue
Other liabilities
Lease obligation current portion
Dividends payable to shareholders
Deferred revenue
Deferred income taxes
Employee future benefits
Lease obligation
Shareholders' equity (deficit):
Share capital
Deficit
Note
5
3
13
13
3
9
8
11
3
9
December 31, December 31,
2018
January 1,
2018
(Restated note 3) (Restated note 3)
2019
$
$
$
131,858 $
20,252
16,122
2,319
4,330
174,881
645,987
(260,008)
385,979
280,040
365,541
866
1,207,307 $
56,244 $
-
7,126
-
2,582
10,637
76,589
22,940
31,045
80,910
285,987
497,471
50,048 $
15,430
14,360
2,181
-
82,019
635,257
(241,628)
393,629
285,998
365,541
1,633
1,128,820 $
66,671 $
3,866
5,511
1,018
2,426
10,767
90,259
22,929
19,518
73,667
288,646
495,019
68,518
16,733
14,283
2,134
13,432
115,100
822,485
(448,651)
373,834
291,956
365,541
2,774
1,149,205
76,759
-
5,611
-
2,426
11,350
96,146
20,239
20,231
93,501
291,072
521,189
1,525,522
(815,686)
709,836
1,545,057
(911,256)
633,801
1,630,145
(1,002,129)
628,016
$
1,207,307 $
1,128,820 $
1,149,205
Commitments and contingencies (note 15)
See accompanying notes to the 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
21
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2019 and 2018
Note
2019
2018
(Restated note 3)
Revenue:
Coal loading
Other
Expenses:
Operating
Administrative
Other:
Foreign exchange gain (loss)
Loss on disposal of property, plant and equipment
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income (loss):
Items that will not be recycled to net income:
Defined benefit plan actuarial gains (losses)
Income tax recovery (expense) on other
comprehensive loss
Other comprehensive income (loss) for the
year, net of income tax
Total comprehensive income for the year
Profit per share:
Basic and diluted earnings per share
Weighted average number of shares outstanding
See accompanying notes to consolidated financial statements.
22
$
$
$
387,536
7,886
395,422
176,709
17,030
193,739
867
(152)
(11,400)
190,998
51,613
139,385
(4,000)
1,080
(2,920)
136,465
2.09
66,724,299
$
$
$
356,034
7,335
363,369
163,813
16,645
180,458
(1,075)
(113)
(11,840)
169,883
47,752
122,131
23,754
(6,414)
17,340
139,471
1.76
69,206,278
4
6
7
11
7
10
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2019 and 2018
Balance at January 1, 2018, as previously reported
Impact of change in accounting policy (note 3)
Restated balance at January 1, 2018
$
$
1,630,145
-
1,630,145
$
(1,001,003)
(1,126)
(1,002,129)
629,142
(1,126)
628,016
Share capital
Deficit
Total
Restated profit for the year
Other comprehensive income:
Defined benefit plan actuarial gains, net of tax
Restated total comprehensive income for the year
Distributions to shareholders of the Corporation:
Dividends declared to shareholders
-
-
-
-
Adjustments due to share repurchases
(85,088)
122,131
122,131
17,340
17,340
139,471
139,471
(44,036)
(4,562)
(44,036)
(89,650)
Restated balance at December 31, 2018
$
1,545,057
$
(911,256)
$
633,801
Balance as at January 1, 2019, as previously reported
Impact of change in accounting policy (note 3)
Restated balance as at January 1, 2019
$
$
1,545,057
-
1,545,057
$
(907,552)
(3,704)
(911,256)
637,505
(3,704)
633,801
Share capital
Deficit
Total
Profit for the year
Other comprehensive loss:
Defined benefit plan actuarial losses, net of tax
Total comprehensive income for the year
Distributions to shareholders of the Corporation:
Dividends declared to shareholders
-
-
-
-
Adjustments due to share repurchases
(19,535)
139,385
139,385
(2,920)
(2,920)
136,465
136,465
(42,650)
1,755
(42,650)
(17,780)
Balance at December 31, 2019
$
1,525,522
$
(815,686)
$
709,836
See accompanying notes to consolidated financial statements.
23
WESTSHORE TERMINALS INVESTMENT CORPORATION
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Years ended December 31, 2019 and 2018
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 property, plant and equipment
Changes in non-cash operating working capital and other:
Accounts receivable
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
Deferred revenue
Lease obligation interest paid
Income taxes paid
Financing:
Interest received
Dividends paid to shareholders
Share purchases
Lease obligation
Investments:
Property, plant and equipment, net
Other assets
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Supplemental information:
Non-cash transactions:
Shares purchased but not settled at year end
Capital expenditures unpaid at year end
See accompanying notes to consolidated financial statements.
$
$
24
2019
2018
(Restated note 3)
$
139,385
$
122,131
(1,068)
24,868
21
11,400
51,613
152
226,371
(4,822)
(1,762)
(138)
(859)
1,626
(5,955)
(9,198)
(47,202)
164,016
1,020
(42,780)
(17,228)
(2,503)
(61,491)
(21,532)
817
(20,715)
81,810
50,048
131,858
(1,688)
5,942
$
$
1,343
22,690
713
11,840
47,752
113
206,582
1,303
(77)
(47)
251
2,590
4,020
(9,275)
(37,581)
163,746
642
(44,620)
(88,514)
(2,426)
(134,918)
(48,114)
816
(47,298)
(18,470)
68,518
50,048
(1,136)
16,062
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, 2019 and 2018
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, 2019 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 13,
2020.
(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;
the defined benefit obligation is recognized as the present value of the defined benefit obligation, less plan
assets at fair value; and
lease obligations are measured at amortised cost using the effective interest rate method.
(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.
25
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, 2019 and 2018
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimates are revised and in any future periods affected.
Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
relate to the determination of net recoverable value of assets, useful lives of plant and equipment, asset
retirement obligations, measurement of lease 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.
26
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, 2019 and 2018
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 FVTPL. 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.
FVTPL – 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.
27
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2019 and 2018
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.
28
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2019 and 2018
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) Leases
The Corporation has applied IFRS 16 using the full retrospective approach with comparative prior periods
restated to reflect the changes.
At inception of a contract, the Corporation assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. To assess whether a contract conveys the right to control the use of an
identified asset, the Corporation uses the definition of a lease in IFRS 16.
29
WESTSHORE TERMINALS INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
(Tabular amounts expressed in thousands of Canadian dollars, except share amounts)
Years ended December 31, 2019 and 2018
As a lessee:
At commencement or on modification of a contract that contains a lease component, the Corporation
allocates the consideration in the contract to each lease component on the basis of its relative stand-alone
prices. However, for the leases of property the Corporation has elected not to separate non-lease components
and account for the lease and non-lease components as a single lease component.
The Corporation recognises a right-of-use asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted
for any lease payments made at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site
on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the
Corporation by the end of the lease term or the cost of the right-of-use asset reflects that the Corporation will
exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the
underlying asset, which is determined on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Corporation’s incremental borrowing rate. Generally, the Corporation uses its incremental
borrowing rate as the discount rate.
The Corporation determines its incremental borrowing rate by obtaining interest rates from various external
financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
-
-
-
-
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at
the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Corporation is reasonably certain to exercise, lease
payments in an optional renewal period if the Corporation is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Corporation is reasonably certain not to
terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in the
Corporation’s estimate of the amount expected to be payable under a residual value guarantee, if the
Corporation changes its assessment of whether it will exercise a purchase, extension or termination option or
if there is a revised in-substance fixed lease payment.
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, 2019 and 2018
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has
been reduced to zero.
The Corporation presents right-of-use assets that do not meet the definition of investment property in ‘right-
of-use asset’ and lease liabilities in ‘lease obligation’ in the statement of financial position.
Short-term leases and leases of low-value assets
The Corporation has elected not to recognise right-of-use assets and lease liabilities for leases of low-value
assets and short-term leases, including IT equipment and vehicles. The Corporation recognises the lease
payments associated with these leases as an expense on a straight-line basis over the lease term.
(h) 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.
(i) 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.
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, 2019 and 2018
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.
(j) 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.
(k) 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”). The
current lease agreement became effective as of January 1, 2015 and runs until December 31, 2026. It may be
extended at Westshore’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.
(l) 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.
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, 2019 and 2018
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.
(m) Comparative information:
Certain of the information presented for comparative purposes has been reclassified to conform to the
financial statement presentation adopted for the current year.
(n) Changes in accounting policies:
IFRS 16 – Leases
The Corporation has applied IFRS 16 - Leases with a date of initial application of January 1, 2019. As a result,
the Corporation has changed its accounting policy for lease contracts as detailed below. The Corporation has
applied this standard using the full retrospective approach.
At inception of a contract, the Corporation assesses whether a contract is, or contains a lease. A contract is, or
contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to control the use of an identified
asset, the Corporation assesses whether:
The contract involves the use of an identified asset – this may be specified explicitly or implicitly, and
should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If
the supplier has a substantive substitution right, then the asset is not identified;
The Corporation has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use; and
The Corporation has the right to direct the use of the asset. The Corporation has this right when it has the
decision-making rights that are most relevant to changing how and for what purpose the asset is used. In
rare cases where all the decisions about how and for what purpose the asset is used are predetermined, the
Corporation has the right to direct the use of the asset if either:
- The Corporation has the right to operate the asset; or
- The Corporation designed the asset in a way that predetermines how and for what purpose it will be
used.
The Corporation has applied this approach to contracts entered into or changed on or after January 1, 2019.
The Corporation’s approach to other contracts is explained below.
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, 2019 and 2018
The Corporation recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date
to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated
useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the Corporation’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
Fixed payments, including in-substance fixed payments;
Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at
the commencement date;
Amounts expected to be payable under a residual value guarantee; and
The exercise price under a purchase option that the Corporation is reasonably certain to exercise, lease
payments in an optional renewal period if the Corporation is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Corporation is reasonably certain not to
terminate early.
The lease liability is measured at amortised cost using the effective interest rate method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in the
Corporation’s estimate of the amount expected to be payable under a residual value guarantee or if the
Corporation changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Corporation has a land lease with the Vancouver Fraser Port Authority (“VFPA”) which has been
identified as a material lease contract. Information about this lease is presented below. No other material lease
contracts were identified.
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, 2019 and 2018
Right-of-use asset
2018
Balance at January 1 (restated)
Depreciation charge for the year (restated)
Balance at December 31 (restated)
2019
Balance at January 1
Depreciation charge for the year
Balance at December 31
291,956
(5,958)
285,998
285,998
(5,958)
280,040
There were no additions to right-of-use assets during 2019 (2018 – nil).
Lease liability
2019
2018
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at year end
Lease liabilities included in the statement of financial position
at year end
Current
Non-current
Amounts recognised in profit or loss
Interest on lease liabilities
Variable lease payments not included in the measurement of lease
liabilities
Expenses relating to short-term and low value asset leases
11,701
46,856
500,158
558,715
288,569
2,582
285,987
2019
9,198
10,097
199
11,792
46,918
511,911
570,621
291,072
2,426
288,646
2018
9,275
9,959
275
Amounts recognised in the statement of cash flows
Total cash outflow for leases
2019
11,900
2018
11,976
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, 2019 and 2018
Definition of a lease:
Previously, the Corporation determined at contract inception whether an arrangement is or contains a lease
under IFRIC 4. Under IFRS 16, the Corporation assesses whether a contract is or contains a lease based on
the definition of a lease. Under IFRIC 4, the Corporation assessed a lease based on the assessment of whether:
Fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
The arrangement conveyed a right to use the asset. An arrangement conveyed the right to use the asset if
one of the following was met:
- The purchaser had the ability or right to operate the asset while obtaining or controlling more than an
insignificant amount of the output;
- The purchaser had the ability or right to control physical access to the asset while obtaining or
controlling more than an insignificant amount of the output; or
- Facts and circumstances indicated that other parties would take more than an insignificant amount of
the output, and the price per unit was neither fixed per unit of output nor equal to the current market
price per unit of output.
On transition to IFRS 16, the Corporation elected to apply the practical expedient to grandfather the assessment
of which transactions are leases. The Corporation applied the definition of a lease under IFRS 16 to contracts
entered into or changed on or after January 1, 2019.
The Corporation previously classified leases as operating or finance leases based on its assessment of whether
the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to
the Corporation. Under IFRS 16, the Corporation recognizes right-of-use assets and lease liabilities for most
leases on the balance sheet.
The Corporation has applied the recognition exemptions to short-term leases of machinery and leases of IT
equipment. For leases of other assets, which were classified as operating under IAS 17, the Corporation
recognized right-of-use assets and lease liabilities.
For leases that were not covered by the recognition exemptions under IFRS 16, the Corporation recognized
right-of-use assets and lease liabilities measured under IFRS 16. The Corporation also tested right-of-use assets
for impairment. None of the leased assets were impaired for the period ended December 31, 2019.
Impacts on financial statements:
Adoption of the standard resulted in the following changes to the Corporation’s consolidated financial
statements:
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, 2019 and 2018
Consolidated Statements of Financial Position
January 1, 2018
Right-of-use assets
Other
Total assets
Lease obligation current portion
Lease obligation
Deferred income taxes
Other
Total liabilities
Share capital
Deficit
Total shareholders' equity (deficit)
December 31, 2018
Right-of-use assets
Other
Total assets
Lease obligation current portion
Lease obligation
Deferred income taxes
Other
Total liabilities
Share capital
Deficit
Total shareholders' equity (deficit)
Impact of change in accounting policy
As previously
reported Adjustments
As restated
-
857,249
857,249
-
-
20,647
207,460
228,107
1,630,145
(1,001,003)
629,142
291,956
-
291,956
2,426
291,072
(416)
-
293,082
-
(1,126)
(1,126)
291,956
857,249
1,149,205
2,426
291,072
20,231
207,460
521,189
1,630,145
(1,002,129)
628,016
Impact of change in accounting policy
As previously
reported Adjustments
As restated
-
842,822
842,822
-
-
20,888
184,429
205,317
1,545,057
(907,552)
637,505
285,998
-
285,998
2,426
288,646
(1,370)
-
289,702
-
(3,704)
(3,704)
285,998
842,822
1,128,820
2,426
288,646
19,518
184,429
495,019
1,545,057
(911,256)
633,801
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, 2019 and 2018
Consolidated Statements of Comprehensive Income
For the year ended December 31, 2018
reported Adjustments
As restated
Impact of change in accounting policy
As previously
Revenue
Operating expenses
Administrative expenses
Foreign exchange loss
Loss on disposal of plant equipment
Net finance cost
Income tax expense
Profit for the period
Total comprehensive income for the period
Consolidated Statements of Cash Flows
363,369
169,556
16,645
1,075
113
2,565
48,706
124,709
142,049
-
(5,743)
-
-
-
9,275
(954)
(2,578)
(2,578)
363,369
163,813
16,645
1,075
113
11,840
47,752
122,131
139,471
For the period ended December 31, 2018
reported Adjustments
As restated
Impact of change in accounting policy
As previously
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
Lease obligation interest paid
Income taxes paid
Net cash from operating activities
Lease obligation
Other
Net cash from financing activities
Net cash from investing activities
124,709
(2,578)
122,131
1,343
16,732
713
2,565
48,706
113
4,020
-
(37,581)
161,320
-
(132,492)
(132,492)
(47,298)
-
5,958
-
9,275
(954)
-
-
(9,275)
-
2,426
(2,426)
-
(2,426)
-
1,343
22,690
713
11,840
47,752
113
4,020
(9,275)
(37,581)
163,746
(2,426)
(132,492)
(134,918)
(47,298)
Application of the new standard does not have a negative impact on any bank covenant calculations.
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, 2019 and 2018
4. Expenses:
Recorded in operating and administrative expenses on the consolidated statements of comprehensive income
was:
Salaries, wages and benefits
Depreciation
Other
Expenses
2019
2018
$
96,789
24,868
72,082
$ 193,739
$
92,186
22,690
65,582
$ 180,458
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, 2019 and 2018
5. Property, plant and equipment:
Buildings and land
improvements
Machinery and
equipment
Construction in
progress
Cost:
Balance at January 1, 2018
Additions
Transfers
Disposals(1)
Balance at December 31, 2018
Balance at January 1, 2019
Additions
Transfers
Disposals
Balance at December 31, 2019
Accumulated depreciation:
Balance at January 1, 2018
Depreciation
Disposals(1)
Balance at December 31, 2018
Balance at January 1, 2019
Depreciation
Disposals
Balance at December 31, 2019
Carrying amounts:
At December 31, 2018
At December 31, 2019
$
$
$
$
$
$
$
$
$
$
80,616
-
-
-
80,616
80,616
-
1,878
-
82,494
33,131
1,816
-
34,947
34,947
1,769
-
36,716
45,669
45,778
$
643,868
-
38,444
(223,873)
458,439
458,439
-
83,280
(731)
540,988
415,520
14,916
(223,755)
206,681
206,681
17,141
(530)
223,292
251,758
317,696
$
$
$
$
$
$
$
$
$
98,001
36,645
(38,444)
-
96,202
96,202
11,461
(85,157)
-
22,506
-
-
-
-
-
-
-
-
96,202
22,506
Total
822,485
36,645
-
(223,873)
635,257
635,257
11,461
-
(731)
645,987
448,651
16,732
(223,755)
241,628
241,628
18,910
(530)
260,008
393,629
385,979
(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.
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, 2019 and 2018
6. Finance costs:
Interest income, net
Employee benefit interest expense, net
Lease interest
2019
2018
$
$
(1,020)
3,222
9,198
(642)
3,207
9,275
Net finance costs
$
11,400
$
11,840
7. Income tax expense:
Tax expense recognized in profit
Current income tax expense
Deferred tax expense (recovery)
Tax expense (recovery) 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
Audit reassessments
2019
2018
$
$
39,006
12,607
51,613
$
(1,080)
$
$
$
54,879
(7,127)
47,752
6,414
2019
2018
$ 190,998
27.00%
$ 169,883
27.00%
51,570
43
-
45,868
43
1,841
Actual income tax expense
$
51,613
$
47,752
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, 2019 and 2018
8. Deferred tax assets and liabilities:
Deferred tax assets:
Non-pension defined benefits liability
Post-retirement benefits
Financing fees
Hedging
Capital lease obligation
Total assets
Deferred tax liabilities:
Property, plant and equipment
Right-of-use assets
Total liabilities
December 31,
2019
December 31,
2018
$
21,619
227
15
(13)
77,914
99,762
(55,196)
(75,611)
(130,807)
$
19,252
638
6
275
78,589
98,760
(41,058)
(77,220)
(118,278)
Net deferred income tax liabilities
$
(31,045)
$
(19,518)
9. Share capital:
Authorized:
Unlimited number of common shares, no par value
Issued:
Common shares
2019
2018
66,473,855 (2018 - 67,289,787) issued and outstanding
common shares
$
1,525,522
$
1,545,057
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, 2019, the Corporation repurchased 850,090 (2018 - 3,702,700) shares for
$17,780,000 (2018 - $89,650,000), under the Corporation’s normal course issuer bid. Of these shares, 89,108 shares
valued at $1,688,000 settled in 2020.
Subsequent to year end, the Corporation repurchased 818,908 shares for a total cost of $14,142,000. The shares
have been cancelled and will result in a decrease to deficit and common shares.
The Corporation has declared the following dividends in 2019 (2018 - $44,036,000).
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, 2019 and 2018
Record Date
March 31
June 30
September 30
December 31
10. Profit per share:
Payment Date
April 15
July 15
October 15
January 15
$
Per Share
0.16
0.16
0.16
0.16
Total
10,671
10,672
10,670
10,637
42,650
$
$
The calculation of basic profit per share for the year ended December 31, 2019 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 Corporation has no dilutive securities.
11. Employee future benefits:
2019
2018
139,385
$
122,131
66,724,299
69,206,278
2.09
850,090
17,780
$
$
1.76
3,702,700
89,650
$
$
$
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.
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, 2019 and 2018
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,
2019
December 31,
2018
$
80,070
146,954
-
227,024
(146,114)
$
71,303
134,228
57
205,588
(131,921)
Recognized liability for defined benefit obligations
$
80,910
$
73,667
Plan assets are comprised of the following investments:
Equity securities
Fixed income securities
Alternatives
Cash and cash equivalents
$
2019
70,266
36,090
36,558
3,200
$
2018
60,444
35,763
30,313
5,401
$
146,114
$
131,921
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
2019
2018
2019
2018
$ 134,228
(5,690)
$ 145,061
$
(5,396)
71,303
(2,146)
$
83,768
(1,704)
7,838
7,611
5,792
6,513
comprehensive income (see below)
10,578
(13,048)
5,121
(17,274)
Defined benefit obligations
$ 146,954
$ 134,228
$
80,070
$
71,303
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, 2019 and 2018
Movement in the fair value of the defined
benefit plan assets
Pension assets
December 31,
Other post retirement
benefits
December 31,
2019
2018
2019
2018
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
$ 131,921
3,560
(5,690)
4,903
(220)
$
$ 135,328
4,343
(5,396)
4,377
(220)
-
2,146
(2,146)
-
-
comprehensive income (see below)
11,640
(6,511)
Fair value of plan assets
$ 146,114
$ 131,921
$
-
-
$
$
-
1,704
(1,704)
-
-
-
-
Profit and Loss:
Profit and loss includes the following amounts in respect of post-retirement obligations:
Pension obligations expense recognized in profit and loss
2019
2018
Service costs:
Current service costs
Past service costs
Non-investment expenses
Net interest costs
Interest cost
Expected return on plan assets
$
1,732
1,003
220
2,955
5,105
(4,903)
202
$
1,831
1,038
220
3,089
4,742
(4,377)
365
$
3,157
$
3,454
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, 2019 and 2018
Other post-retirement benefits expense recognized in profit and loss
2019
2018
Current service costs
Interest costs
$
$
2,770
3,022
$
3,671
2,842
5,792
$
6,513
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
2019
2018
Cumulative amount at beginning of year
Actuarial gain - plan experience
Actuarial gain - demographic assumption changes
Actuarial gain (loss) - financial assumption changes
Actuarial gain (loss) - maximum balance sheet item
Return on plan assets greater (less) than expected return
Cumulative amount at December 31
$
$
5,611
9,519
-
(25,218)
59
11,640
(18,143)
910
6,091
23,321
(57)
(6,511)
$
1,611
$
5,611
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, 2019, the Corporation made total contributions of $5,706,000 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, 2019
January 1, 2019
January 1, 2020
January 1, 2022
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, 2019 and 2018
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):
2019
2018
Pension
benefits
Other
benefits
Pension
benefits
Other
benefits
Benefit obligations:
Discount rate at December 31
3.00%
3.00%
3.75%
3.75%
Benefit costs:
Discount rate at January 1
Expected long-term rate of return on plan assets
3.75%
3.75%
3.75%
-
3.25%
3.25%
3.25%
-
For measurement purposes, a 7.0% per annum increase in the per capita cost of covered extended health care
benefits was assumed for 2019, grading down by 0.25% per annum to 4.50% in 2029. The per annum increase in
the per capita cost of medical service plan is 0% for 2019 and no coverage from 2020 onwards. 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 2019:
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
$
20,796
$
(20,796)
17,371
(12,789)
(17,371)
12,789
During the year ended December 31, 2019, the Corporation increased its $30 million operating facility to $40
million and extended the maturity date. The facility is primarily used for a letter of credit relating to pension
funding and day to day operations. The facility matures on August 30, 2022 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,
2019, the Corporation was in compliance with these financial covenants.
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, 2019 and 2018
For more information about the Corporation’s exposure to interest rate, foreign currency and liquidity risk, please
see Note 17.
13. Financial instruments:
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including
their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial
liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Fair value measurement at reporting date using:
Quoted prices in
active markets
identical assets
(Level 1)
December 31,
2019
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
Financial assets:
Derivative instruments:
Foreign exchange contracts
$
50
- $
50
-
As at December 31, 2019, Westshore had entered into put options with notional amounts totaling US$21.0 million
to exchange U.S. dollars for Canadian dollars with a strike price of $1.338. The counterparties have call options
with notional amounts totaling US$21.0 million to exchange U.S. dollars for Canadian dollars with a strike price of
$1.275.
As these foreign exchange contracts have not been designated as hedges, the fair value of these foreign exchange
contracts at December 31, 2019, being an asset of $50,000 (December 31, 2018 - a liability of $1,018,000 recorded
in other liabilities) (measured based on Level 2 of the fair value hierarchy), has been recorded in other assets and a
gain of $1,068,000 (year ended December 31, 2018 - loss of $1,343,000) has been recognized in foreign exchange
gain (loss) for the year ended December 31, 2019.
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
(2018 - $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 (2018 - $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
2019, the Corporation paid $10,097,000 (2018 - $9,959,000) in relation to the higher participation rental fee.
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, 2019 and 2018
Future undiscounted minimum payments under the Corporation’s material lease obligations are as follows:
(In thousands of Canadian dollars)
Less than 1 year
Between 1 and 5 years
More than 5 years
15. Commitments and Contingencies:
December 31,
2019
11,701
46,856
500,158
558,715
$
$
The Corporation has provided a letter of credit of $15,269,000 (December 31, 2018: $15,269,000) related to pension
funding.
The Corporation has commitments of $10,721,000 with respect to equipment purchases that are to be delivered
and paid for in the next 12 months.
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, 2019, two customers accounted for 81% (2018 - 80%) and three customers
accounted for 92% (2018 - 94%) 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, 2019 and 2018, there were no trade accounts receivable past
due which were considered uncollectible and no reserve in respect of doubtful accounts was recorded.
The Corporation limits its exposure to credit risk arising from cash equivalents by only investing in money
market funds with a major Canadian financial institution. The Corporation does not expect any credit losses
in the event of non-performance by counter parties to its foreign exchange forward contracts as the counter
parties are major Canadian financial institutions.
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, 2019 and 2018
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:
2019
131,858
20,252
152,110
$
$
2018
50,048
15,430
65,478
$
$
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 $40 million operating facility that is primarily 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 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, 2019, the Corporation
held US$9.8 million (2018 – US$0.3 million). A $0.01 increase in the US/Canadian exchange rate would
have increased the Canadian dollar value of this cash balance and increased foreign exchange gains by
$98,000 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, 2019 was $5,506,000
(2018 - $3,690,000).
The Corporation is exposed to foreign currency exchange rate risk on its foreign currency contracts. The
value of these financial instruments fluctuates with changes in the US/CAD dollar exchange rate. See Note
13 for more information.
(ii) Interest rates:
The Corporation has limited exposure to interest rate risk on the cash equivalents. Money market fund
returns are correlated with Canadian T-bills and Bankers’ Acceptances of major Canadian financial
institutions.
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, 2019 and 2018
The Corporation also has interest rate risk on the revolving credit facility. The revolving credit facility
carries an interest rate that floats with market rates.
18. Capital management:
The capital of the Corporation consists solely of shareholders’ equity which includes issued share capital and deficit.
The objective of the Corporation is to maintain a stable capital base and ensure that the capital structure does not
interfere with the Corporation’s ability to meet its distribution policy or fund future projects. The Corporation’s
quarterly dividend 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
2019
2018
$
546
$
530
1,639
1,591
6,759
5,831
992
199
653
904
275
582
51
Corporate Information
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
Chartered Accountant and Corporate Director
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
Dianne 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
52
Corporate Information
Westshore Terminals Ltd.
William W. Stinson
Corporate Director
M. Dallas H. Ross
Partner, Kinetic Capital Partners
H. Clark Hollands
Chartered Accountant and Corporate Director
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
Dianne Watts
Corporate Director
53