EBITDA⁽¹⁾ of $81.1 million on Sales of $527.6 million
Operating Cash Flow⁽¹⁾ of $1.08 per share
32% Return on Invested Capital

VANCOUVER, British Columbia, May 03, 2018 (GLOBE NEWSWIRE) -- INTERFOR CORPORATION (“Interfor” or the “Company”) (TSX:IFP) recorded net earnings in Q1’18 of $33.0 million, or $0.47 per share, compared to $36.2 million, or $0.52 per share in Q4’17 and $19.7 million, or $0.28 per share in Q1’17. Adjusted net earnings in Q1’18 were $36.8 million or $0.52 per share, compared to $45.1 million, or $0.64 per share in Q4’17 and $22.7 million, or $0.32 per share in Q1’17.

Adjusted EBITDA was $81.1 million on sales of $527.6 million in Q1’18 versus $89.5 million on sales of $532.8 million in Q4’17.

Notable items in the quarter included:

• Higher Lumber Prices

The key benchmark prices improved quarter-over-quarter with the SYP Composite, Western SPF Composite and KD H-F Stud 2x4 9’ increasing by US$37, US$33 and US$63 per mfbm, respectively. Interfor’s average lumber selling price increased $38 from Q4’17 to a record $688 per mfbm.

• Increased Production/Reduced Shipments

Total lumber production was 666 million board feet or 11 million board feet more than the prior quarter. Production in the U.S. South region increased to 302 million board feet from 296 million board feet in the preceding quarter. The B.C. and U.S. Northwest regions accounted for 218 million board feet and 146 million board feet, respectively, compared to 219 million board feet and 140 million board feet in Q4’17, respectively.
Total lumber shipments were 648 million board feet, including agency and wholesale volumes, or 38 million board feet lower than Q4’17. This reduction was the result of industry-wide logistics issues, particularly due to weather-impacted rail constraints in B.C.

• Continued Financial Flexibility

Net debt ended the quarter at $127.1 million, or 12.4% of invested capital, resulting in available liquidity of $444.6 million.
Interfor generated $75.5 million of cash from operations before changes in working capital, or $1.08 per share. Total cash generated from operations was $18.5 million after considering an increase in working capital, including a $34.0 million increase in inventories, a $10.9 million increase in accounts receivable due primarily to higher lumber prices, and the payment of annual employee incentive compensation.
Capital spending was $18.1 million on a mix of high-return discretionary, maintenance and woodlands projects.

• Softwood Lumber Duties

Interfor expensed $12.9 million of duties in the quarter, representing the full amount of countervailing (“CV”) and anti-dumping (“AD”) duties incurred on its Canadian shipments of softwood lumber into the U.S. at a combined mandated final rate of 20.23%.

^{(1) Refer to Adjusted EBITDA and Operating cash flow per share in the Non-GAAP Measures section}

Strategic Capital Plan

Interfor continues to make progress on its multi-year strategic capital plan that involves a number of discretionary projects designed to capture the opportunities within its current operating platform and to pursue opportunities for further growth.
The previously announced projects at the Company’s Meldrim and Monticello sawmills are on track for completion in Q1’19.
The Company completed the installation of an autograding system at its Perry, Georgia sawmill in Q1’18.
Other large capital projects to enhance existing operations are continuing to be advanced from an engineering and feasibility standpoint. In particular, the Company is refining plans for a series of substantial capital investment opportunities at three of its U.S. South sawmills. It is expected that these projects could be completed between 2019 and 2021. These projects will be subject to Board approval in the normal course.
The greenfield sawmill opportunity in the Central Region of the U.S. South is in the final stages of assessment with a decision on the project expected by mid-2018.

Financial and Operating Highlights⁽¹⁾


		For the three months ended
		Mar. 31		Mar. 31		Dec. 31
	Unit	2018		2017		2017

Financial Highlights⁽²⁾
Total sales	$MM	527.6		456.8		532.8
Lumber	$MM	445.9		389.6		446.0
Logs, residual products and other	$MM	81.7		67.2		86.8
Operating earnings	$MM	46.5		30.4		47.9
Net earnings	$MM	33.0		19.7		36.2
Net earnings per share, basic	$/share	0.47		0.28		0.52
Adjusted net earnings⁽³⁾	$MM	36.8		22.7		45.1
Adjusted net earnings per share, basic⁽³⁾	$/share	0.52		0.32		0.64
Operating cash flow per share (before working capital changes)⁽³⁾	$/share	1.08		0.85		1.19
Adjusted EBITDA⁽³⁾	$MM	81.1		60.3		89.5
Adjusted EBITDA margin⁽³⁾	%	15.4	%	13.2	%	16.8	%

Total assets	$MM	1,410.1		1,318.8		1,353.0
Total debt	$MM	257.9		325.4		250.9
Net debt to invested capital⁽³⁾	%	12.4	%	27.6	%	12.3	%
Return on invested capital⁽³⁾	%	32.4	%	22.0	%	36.4	%

Operating Highlights
Lumber production	million fbm	666		640		655
Total lumber sales	million fbm	648		645		686
Lumber sales - Interfor produced	million fbm	635		624		666
Lumber sales - wholesale and commission	million fbm	13		21		20
Lumber - average selling price⁽⁴⁾	$/thousand fbm	688		604		650

Average USD/CAD exchange rate⁽⁵⁾	1 USD in CAD	1.2647		1.3238		1.2713
Closing USD/CAD exchange rate⁽⁵⁾	1 USD in CAD	1.2894		1.3322		1.2545


Notes:
	(1)	Figures in this table may not equal or sum to figures presented elsewhere due to rounding.
	(2)	Financial information presented for interim periods in this release is prepared in accordance with IFRS and is unaudited.
	(3)	Refer to the Non-GAAP Measures section of this release for definitions and reconciliations of these measures to figures reported in the Company’s consolidated financial statements.
	(4)	Gross sales before duties.
	(5)	Based on Bank of Canada foreign exchange rates.

Liquidity

Balance Sheet

Interfor maintained a strong financial position throughout Q1’18. Net debt at March 31, 2018 was $127.1 million, or 12.4% of invested capital, representing a decrease of $179.6 million from March 31, 2017, and an increase of $7.8 million from December 31, 2017. The majority of the increase in net debt in Q1’18 is as a result of the weakened Canadian Dollar against the U.S. Dollar as all debt held was denominated in U.S. Dollars.


	For the three months ended
	Mar. 31,			Dec. 31,			Mar. 31,
Thousands of Dollars	2018				2017		2017

Net debt
Net debt, period opening, CAD	$	119,300		$	177,787		$	289,551
Net drawing (repayment) on credit facilities, CAD		(1	)		(1	)		19,250
Impact on U.S. Dollar denominated debt from (strengthening) weakening CAD		6,981			1,301			(2,704	)
Increase in cash and cash equivalents, CAD		784			(59,787	)		579
Net debt, period ending, CAD	$	127,064		$	119,300		$	306,676

Net debt components by currency
U.S. Dollar debt, period opening, USD	$	200,000		$	200,000		$	230,000
Net repayment on credit facilities, USD		-			-			5,979
U.S. Dollar debt, period ending, USD		200,000			200,000			235,979

Spot rate, period end		1.2894			1.2545			1.3322

U.S. Dollar debt expressed in CAD		257,880			250,900			314,371
Canadian Dollar debt, CAD		-			-			4,987
Canadian Dollar operating line, CAD		-			-			6,009
Total debt, CAD		257,880			250,900			325,367
Cash and cash equivalents, CAD		(130,816	)		(131,600	)		(18,691	)
Net debt, period ending, CAD	$	127,064		$	119,300		$	306,676

As at March 31, 2018, the Company had net working capital of $316.0 million and available liquidity of $444.6 million, including cash and borrowing capacity on operating and term line facilities.

These resources, in addition to cash generated from operations, will be used to support capital expenditures, working capital requirements, and debt servicing commitments. We believe that Interfor will have sufficient liquidity to fund operating and capital requirements for the foreseeable future.

Capital Resources

The following table summarizes Interfor’s credit facilities and availability as of March 31, 2018:

			Revolving		Senior		U.S.
	Operating		Term		Secured		Operating
Thousands of Canadian Dollars	Line		Line		Notes		Line		Total
Available line of credit	$	65,000	$	200,000	$	257,880	$	64,470	$	587,350
Maximum borrowing available	$	65,000	$	200,000	$	257,880	$	64,470	$	587,350
Less:
Drawings		-		-		257,880		-		257,880
Outstanding letters of credit included in line utilization		12,168		-		-		3,172		15,340
Unused portion of facility	$	52,832	$	200,000	$	-	$	61,298		314,130

Add: Unrestricted cash and cash equivalents										130,453
Available liquidity at March 31, 2018									$	444,583

As of March 31, 2018, the Company had commitments for capital expenditures totaling $29.5 million.

Non-GAAP Measures

This release makes reference to the following non-GAAP measures: Adjusted net earnings, Adjusted net earnings per share, EBITDA, Adjusted EBITDA, Net debt to invested capital, Operating cash flow per share (before working capital changes) and Return on invested capital which are used by the Company and certain investors to evaluate operating performance and financial position. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company’s unaudited interim consolidated financial statements prepared in accordance with IFRS:


			For the three months ended
		Mar. 31,		Mar. 31,			Dec. 31,
Thousands of Canadian Dollars except number of shares and per share amounts		2018			2017			2017

Adjusted Net Earnings
Net earnings	$	32,976		$	19,667		$	36,196
Add:
Restructuring costs and capital asset write-downs		236			345			7,422
Other foreign exchange loss (gain)		(111	)		181			(412	)
Long term incentive compensation expense		4,858			3,593			3,110
Other expense		178			189			995
Post closure wind-down costs and losses		4			8			5
Income tax effect of above adjustments		(1,374	)		(1,249	)		(2,260	)
Adjusted net earnings	$	36,767		$	22,734		$	45,056
Weighted average number of shares - basic ('000)		70,033			70,030			70,030
Adjusted net earnings per share	$	0.52		$	0.32		$	0.64

Adjusted EBITDA
Net earnings	$	32,976		$	19,667		$	36,196
Add:
Depreciation of plant and equipment		20,068			19,603			19,217
Depletion and amortization of timber, roads and other		9,417			6,297			11,879
Restructuring costs and capital asset write-downs		236			345			7,422
Finance costs		2,905			4,062			3,139
Other foreign exchange loss (gain)		(111	)		181			(412	)
Income tax expense		10,533			6,320			7,968
EBITDA		76,024			56,475			85,409
Add:
Long term incentive compensation expense		4,858			3,593			3,110
Other expense		178			189			995
Post closure wind-down costs and losses		4			8			5
Adjusted EBITDA	$	81,064		$	60,265		$	89,519

Net debt to invested capital
Net debt
Total debt	$	257,880		$	325,367		$	250,900
Cash and cash equivalents		(130,816	)		(18,691	)		(131,600	)
Total net debt	$	127,064		$	306,676		$	119,300
Invested capital
Net debt	$	127,064		$	306,676		$	119,300
Shareholders' equity		901,176			804,748			854,188
Total invested capital	$	1,028,240		$	1,111,424		$	973,488
Net debt to invested capital⁽¹⁾		12.4	%		27.6	%		12.3	%

Operating cash flow per share (before working capital changes)
Cash provided by operating activities	$	18,511		$	4,682		$	86,749
Cash used in (generated from) operating working capital		56,973			55,033			(3,332	)
Operating cash flow (before working capital changes)	$	75,484		$	59,715		$	83,417
Weighted average number of shares - basic ('000)		70,033			70,030			70,030
Operating cash flow per share (before working capital changes)	$	1.08		$	0.85		$	1.19

Return on invested capital
Adjusted EBITDA	$	81,064		$	60,265		$	89,519
Invested capital, beginning of period	$	973,488		$	1,076,218		$	995,463
Invested capital, end of period		1,028,240			1,111,424			973,488
Average invested capital	$	1,000,864		$	1,093,821		$	984,476
Adjusted EBITDA divided by average invested capital		8.1	%		5.5	%		9.1	%
Annualization factor		4.0			4.0			4.0
Return on invested capital		32.4	%		22.0	%		36.4	%

Notes:
	(1)		Net debt to invested capital as of the period end.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the three months ended March 31, 2018 and 2017 (unaudited)

(thousands of Canadian Dollars except earnings per share)

Three Months

Mar. 31, 2018

Mar. 31, 2017

Sales
Costs and expenses:

527,644

456,780

Production

419,582

384,077

Selling and administration

14,073

12,446

Long term incentive compensation

4,858

3,593

U.S. countervailing and anti-dumping duty deposits

12,929

Depreciation of plant and equipment

20,068

19,603

Depletion and amortization of timber, roads and other

9,417

6,297

480,927

426,016

Operating earnings before restructuring costs

46,717

30,764

Restructuring costs

236

345

Operating earnings

46,481

30,419

Finance costs

(2,905

)

(4,062

)

Other foreign exchange gain (loss)

111

(181

)

Other expense

(178

)

(189

)

(2,972

)

(4,432

)

Earnings before income taxes

43,509

25,987

Income tax expense:

Current

770

306

Deferred

9,763

6,014

10,533

6,320

Net earnings

32,976

19,667

Net earnings per share, basic and diluted

0.47

0.28



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended March 31, 2018 and 2017 (unaudited)
(thousands of Canadian Dollars)		Three Months		Three Months
		Mar. 31, 2018		Mar. 31, 2017

Net earnings		$	32,976	$	19,667

Other comprehensive income (loss):
Items that will not be recycled to Net earnings:
	Defined benefit plan actuarial gain, net of tax		885		824

Items that are or may be recycled to Net earnings:
	Foreign currency translation differences for foreign operations, net of tax		12,847		(2,505	)
	Loss in fair value of interest rate swaps		-		(11	)
	Total items that are or may be recycled to Net earnings		12,847		(2,516	)
Total other comprehensive income (loss), net of tax			13,732		(1,692	)

Comprehensive income		$	46,708	$	17,975

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2018 and 2017 (unaudited)

(thousands of Canadian Dollars)

Three Months

Mar. 31, 2018

Mar. 31, 2017

Cash provided by (used in):
Operating activities:

Net earnings

32,976

19,667

Items not involving cash:

Depreciation of plant and equipment

20,068

19,603

Depletion and amortization of timber, roads and other

9,417

6,297

Income tax expense

10,533

6,320

Finance costs

2,905

4,062

Other assets

(295

)

(49

)

Reforestation liability

2,289

2,543

Provisions and other liabilities

(2,842

)

815

Stock options

137

106

Write-down of intangibles

219

Unrealized foreign exchange gains and other

(101

)

Other expense

178

359

75,484

59,715

Cash used in operating working capital:

Trade accounts receivable and other

(10,896

)

(15,568

)

Inventories

(34,037

)

(15,240

)

Prepayments and other

(4,325

)

(2,784

)

Trade accounts payable and accrued liabilities

(7,544

)

(21,150

)

Income taxes paid

(171

)

(291

)

18,511

4,682

Investing activities:

Additions to property, plant and equipment

(12,039

)

(12,743

)

Additions to roads and bridges

(6,082

)

(7,102

)

Additions to timber and other intangible assets

(834

)

Proceeds (costs) on disposal of property, plant and equipment

109

(25

)

Investments and other assets

(486

)

(117

)

(18,485

)

(20,821

)

Financing activities:

Issuance of share capital, net of expenses

143

Interest payments

(2,676

)

(3,542

)

Debt refinancing costs

)

(128

)

Change in operating line components of long-term debt

)

40,853

Additions to long term debt

76,107

Repayments of long term debt

(97,710

)

(2,535

)

15,580

Foreign exchange gain (loss) on cash and cash equivalents

held in a foreign currency

1,725

(20

)

Decrease in cash and cash equivalents

(784

)

(579

)

Cash and cash equivalents, beginning of period

131,600

19,270

Cash and cash equivalents, end of period

130,816

18,691



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31, 2018 and December 31, 2017 (unaudited)
(thousands of Canadian Dollars)
	Mar. 31, 2018		Dec. 31, 2017

Assets Current assets:

Cash and cash equivalents	$	130,816	$	131,600
Trade accounts receivable and other		124,310		112,470
Income taxes receivable		917		1,289
Inventories		201,070		165,156
Prepayments and other		17,193		12,562
		474,306		423,077

Employee future benefits		1,577		502
Investments and other assets		7,032		6,404
Property, plant and equipment		673,912		670,830
Roads and bridges		23,141		24,092
Timber licences		65,968		66,589
Other intangible assets		12,362		14,170
Goodwill		150,809		147,081
Deferred income taxes		976		251

	$	1,410,083	$	1,352,996

Liabilities and Shareholders’ Equity
Current liabilities:
Trade accounts payable and provisions	$	144,455	$	152,854
Reforestation liability		13,526		12,873
Income taxes payable		341		224
		158,322		165,951

Reforestation liability		29,965		27,535
Long term debt		257,880		250,900
Employee future benefits		8,234		8,249
Provisions and other liabilities		24,122		26,976
Deferred income taxes		30,384		19,197

Equity:
Share capital		555,602		555,388
Contributed surplus		8,648		8,582
Translation reserve		53,567		40,720
Retained earnings		283,359		249,498

		901,176		854,188

	$	1,410,083	$	1,352,996

Approved on behalf of the Board:

“L. Sauder”		“D.W.G. Whitehead”
Director		Director

FORWARD-LOOKING STATEMENTS

This release contains information and statements that are forward-looking in nature, including, but not limited to, statements containing the words “believes”, “will”, “should”, “expects”, “annualized” and similar expressions. Such statements involve known and unknown risks and uncertainties that may cause Interfor’s actual results to be materially different from those expressed or implied by those forward-looking statements. Such risks and uncertainties include, among other things: price volatility, competition, availability and cost of log supply, natural or man-made disasters, currency exchange sensitivity, regulatory changes, allowable annual cut reductions, Aboriginal title and rights claims, potential countervailing and anti-dumping duties, stumpage fee variables and changes, environmental impact and performance, labour disruptions, cyber-security measures, and other factors referenced herein and in Interfor’s Annual Report available on www.sedar.com and www.interfor.com. The forward-looking information and statements contained in this release are based on Interfor’s current expectations and beliefs. Readers are cautioned not to place undue reliance on forward-looking information or statements. Interfor undertakes no obligation to update such forward-looking information or statements, except where required by law.

ABOUT INTERFOR

Interfor is a growth-oriented lumber company with operations in Canada and the United States. The Company has annual production capacity of approximately 3.1 billion board feet and offers one of the most diverse lines of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.

The Company’s unaudited consolidated financial statements and Management’s Discussion and Analysis for Q1’18 are available at www.sedar.com and www.interfor.com.

There will be a conference call on Friday, May 4, 2018 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company’s release of its first quarter 2018 financial results.

The dial-in number is 1-866-559-8291. The conference call will also be recorded for those unable to join in for the live discussion, and will be available until June 3, 2018. The number to call is 1-855-859-2056, Passcode 9897303.

For further information:
Martin L. Juravsky, Senior Vice President and Chief Financial Officer
(604) 689-6873

Interfor Reports Q1’18 Results

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