SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(x) Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997.
or
( ) Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to ____________.
Commission file number 1-3439
STONE CONTAINER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2041256
(State or other jurisdiction of ) (I.R.S. employer incorporation or
organization) identification no.)
150 North Michigan Avenue, Chicago, Illinois 60601
(Address of principal executive offices) (Zip code)
Registrant's telephone number: 312 346-6600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock New York Stock Exchange
Rights to purchase Series D
Preferred Stock New York Stock Exchange
$1.75 Series E Cumulative
Convertible Exchangeable
Preferred Stock New York Stock Exchange
12-5/8% Senior Notes due
July 15, 1998 New York Stock Exchange
11-7/8% Senior Notes due
December 1, 1998 New York Stock Exchange
11% Senior Subordinated Notes due
August 15, 1999 New York Stock Exchange
9-7/8% Senior Notes due
February 1, 2001 New York Stock Exchange
10-3/4% Senior Subordinated
Debentures due April 1, 2002 New York Stock Exchange
Series B 10-3/4% Senior
Subordinated Debentures due
April 1, 2002 and 1-1/2% Supplemental
Interest Certificates New York Stock Exchange
10-3/4% First Mortgage Notes due
October 1, 2002 New York Stock Exchange
11-1/2% Senior Notes due
October 1, 2004 New York Stock Exchange
6-3/4% Convertible Subordinated
Debentures due February 15, 2007 New York Stock Exchange
Rating Adjustable Senior Notes
due August 1, 2016 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ( )
The aggregate market value as of March 26, 1998 of the voting common stock
held by non-affiliates of the Registrant was approximately $1,181,000,000.
The number of shares of common stock outstanding at March 26, 1998 was
99,717,665.
The Proxy Statement, to be filed on or before April 30, 1998, for the
Annual Meeting of Stockholders scheduled May 12, 1998 is partially
incorporated by reference into Part III, Items 10, 11, 12 and 13; and Part
IV, Item 14, excluding the sections entitled "Compensation Committee Report
on Executive Compensation" and "Performance Graph."
The registrant hereby amends the following items, financial statements,
exhibits or other portions of its Annual Report for 1997 on Form 10-K as
set forth in the pages attached hereto.
PART IV
Item 14(a)2. Financial Statement Schedules
Financial Statements of Abitibi-Consolidated Inc.
Item 14(d). Separate Financial Statements of Affiliates
<TABLE>
CONSOLIDATED EARNINGS
<CAPTION>
Year ended December 31
(millions of Canadian dollars, except per share amounts)
1997 1996 1995
<S> <C> <C> <C>
Gross sales $4,166 $4,456 $4,259
Freight expenses 419 374 351
Net sales 3,747 4,082 3,908
Cost of sales 3,127 3,072 2,693
Depreciation and amortization 325 301 219
Selling, general and administrative expenses 176 185 145
Non-recurring expenses relating to the
amalgamation (note 4) 77 - -
Restructuring expenses (note 5) 10 28 6
Operating profit from continuing operations 32 496 845
Interest expense on long-term debt 115 113 99
Debt extinguishment costs and write-off of
redundant fixed assets relating to the
amalgamation (note 4) 98 - -
Unusual items (note 6) - (27) 37
Other expense (income), net (note 7) - (6) -
Earnings (loss) from continuing operations
before income taxes (181) 416 709
Recovery of (provision for) income taxes
(note 8) 49 (154) (251)
Earnings (loss) from continuing operations (132) 262 458
Earnings from discontinued operations, net of
Income tax expense of $7
(1996 - $4; 1995 - $3)(note 13) 11 6 5
Net earnings (loss) for the year $ (121) $ 268 $ 463
Per common share
Earnings (loss) from continuing operations $(0.68) $ 1.35 $ 2.89
Net earnings (loss) for the year
Basic (0.62) 1.39 2.92
Fully diluted (0.62) 1.37 2.62
Weighted average number of common shares
outstanding (millions)
Basic 194.0 193.4 156.0
Fully diluted 197.5 197.2 179.8
Fully diluted number of common shares
outstanding at year-end (millions) 197.5 197.3 195.1
</TABLE>
<TABLE>
Consolidated Retained Earnings
<CAPTION>
Year ended December 31
(millions of Canadian dollars)
1997 1996 1995
<S> <C> <C> <C>
Retained earnings, beginning of year $ 804 $ 572 $ 285
Net earnings (loss) for the year (121) 268 463
Dividends declared (67) (36) (25)
Transaction costs of amalgamation, net of
Deferred income tax recoveries of $8 (27) - -
Purchase of common shares in excess of
average stated capital (note 15(b)) - - (140)
Unamortized convertible subordinated debenture
issue costs, net of deferred income tax
recoveries of $1 - - (3)
Interest on equity element of convertible
debentures, net of deferred income tax
recoveries of $3 - - (8)
Retained earnings, end of year $ 589 $ 804 $ 572
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
(millions of Canadian dollars)
1997 1996
<S> <C> <C>
ASSETS
Current assets
Cash and deposits $ 46 $ 76
Accounts receivable (note 9) 481 529
Inventories (note 10) 417 497
Prepaid expenses 28 30
Current assets of discontinued operations (note 13) 232 156
1,204 1,288
Fixed assets (note 11) 4,104 4,016
Investments and other assets (note 12) 43 84
Deferred pension cost 170 181
Goodwill 733 755
Non-current assets of discontinued operations (note 13) 41 44
$6,295 $6,368
LIABILITIES
Current liabilities
Bank indebtedness $ - $ 15
Accounts payable and accrued liabilities
Continuing operations 663 668
Discontinued operations 92 72
Dividends payable 19 9
Current portion of long-term debt
Recourse (note 14(a)) 90 130
Non-recourse (note 14(b)) 17 22
Preferred shares (note 15(c)) - 10
881 926
Long-term debt
Recourse (note 14(a)) 1,338 1,147
Non-recourse (note 14(b)) 294 249
Deferred income taxes 594 647
3,107 2,969
SHAREHOLDERS' EQUITY
Common shares (note 15(b)) 2,599 2,595
Retained earnings 589 804
3,188 3,399
$6,295 $6,368
</TABLE?
Approved by the Board
James Doughan Ronald Y. Oberlander John Tory
Director Director Director
</TABLE>
<TABLE>
CHANGES IN CONSOLIDATED CASH POSITION
<CAPTION>
Year ended December 31
(millions of Canadian dollars)
1997 1996 1995
<S> <C> <C> <C>
Continuing operating activities
Earnings (loss) from continuing operations $(132) $ 262 $ 458
Depreciation 304 279 203
Goodwill amortization 21 22 16
Provision for (recovery of) deferred income
Taxes (55) 124 245
Non-recurring expenses relating to the
Amalgamation 115 - -
Restructuring expenses 10 28 -
Other non-cash items 5 (6) 17
268 709 939
Changes in non-cash operating working capital
components of continuing operations 123 (93) (96)
Cash generated by continuing operating
Activities 391 616 843
Financing activities of continuing operations
Increase in long-term debt and bank
Indebtedness 1,502 483 392
Repayment of long-term debt and bank
Indebtedness (1,373) (393) (152)
Transaction costs of amalgamation (35) - -
Issuance of common shares on conversion of
convertible debentures and on acquisition - 25 802
Purchase of common shares for cancellation - - (194)
Issuance of redeemable preferred shares on
Acquisition - - 500
Preferred shares redeemed and cancelled (10) (100) (401)
Retirement of convertible debentures - (24) (626)
Other 7 (1) (12)
Cash generated by (used in) financing
activities of continuing operations 91 (10) 309
Investing activities of continuing operations
Additions to fixed assets (437) (670) (597)
Acquisition (note 3) - - (731)
Decrease in investments and other assets 24 12 5
Cash used in investing activities of
continuing operations (413) (658) (1,323)
Dividends paid to common shareholders (57) (36) (16)
Cash generated by (used in) continuing
Operations 12 (88) (187)
Cash used in discontinued operations (42) (24) -
Decrease in cash during the year (30) (112) (187)
Cash and deposits, beginning of year 76 188 375
Cash and deposits, end of year $ 46 $ 76 $ 188
</TABLE>
<TABLE>
CONSOLIDATED BUSINESS SEGMENTS
<CAPTION>
Year ended December 31
(millions of Canadian dollars)
Net Cost of Gross
1997 Sales Sales Profit
<S> <C> <C> <C>
Newsprint $1,830 $1,511 $ 319
Value-added groundwood paper 1,139 904 235
Non-recurring expenses relating
to the amalgamation - - -
Total Paper (1) & (2) 2,969 2,415 554
Kraft pulp (1) 73 65 8
Lumber (5) 170 127 43
Newsprint purchased and resold
and commissions (3) & (4) 535 520 15
$3,747 $3,127 $ 620
1996
Newsprint $1,950 $1,394 $ 556
Value-added groundwood paper 1,237 841 396
Total Paper (1) & (2) 3,187 2,235 952
Kraft pulp (1) 61 58 3
Lumber 131 95 36
Newsprint purchased and resold
and commissions (3) & (4) 703 684 19
$4,082 $3,072 $1,010
1995
Newsprint $2,079 $1,321 $ 758
Value-added groundwood paper 1,175 761 414
Total Paper (1) & (2) 3,254 2,082 1,172
Kraft pulp (1) 16 7 9
Lumber 67 50 17
Newsprint purchased and resold
and commissions (3) & (4) 571 554 17
$3,908 $2,693 $1,215
<FN>
(1) On November 1, 1995, the Company acquired Rainy River Forest Products
Inc. (see note 3) increasing annual newsprint, value-added paper and kraft
pulp capacity by 870,000 tonnes.
(2) The Paper Business consists of the Company's 16 wholly-owned paper
mills and 50% of the Company's two newsprint joint venture mills.
(3) The Newsprint purchased and resold and commissions business segment
consists of sales of the Company's joint venture partners' share of
production of the newsprint joint venture mills and as of November 1, 1995
the 387,000 tonnes of newsprint from Boise Cascade's DeRidder, Louisiana
mill. Also included are commissions received on sales of 160,000 (1996 -
154,000; 1995 - 171,000) tonnes of newsprint for the Pine Falls Paper
Company and 245,000 (1996 - 260,000; 1995 - 282,000) tonnes of newsprint
sold for Stone Container Corporation's Snowflake, Arizona mill.
</TABLE>
Selling, Non-
General recurring
and and Paper
Adminis- Depreciation Restruct- Operat- Pro- Paper Fixed
trative and uring ing uction Sales Asset Total
Expenses Amortization Expenses Profit (000s of tonnes) Additions(7) Assets
$ 119 $ 195 $ - $ 5 2,756 2,825 $ 243 $3,583
54 118 10 53 1,306 1,340 168 2,127
- - 77 (77)
173 313 87 (19) 4,062 4,165 411 5,710
3 3 - 2 120 115 7 86
7 9 - 27 19 201
(7)(6) - - 22 726 728 - 25
$ 176 $ 325 $ 87 $ 32 4,908 5,008 $ 437 $6,022
$ 117 $ 182 $ 15 $242 2,450 2,444 $ 342 $3,616
65 108 13 210 1,334 1,211 286 2,314
182 290 28 452 3,784 3,655 628 5,930
4 3 - (4) 89 110 5 85
2 8 - 26 37 134
(3)(6) - - 22 688 690 - 19
$ 185 $ 301 $ 28 $496 4,561 4,455 $ 670 $6,168
$ 93 $ 133 $ 4 $528 2,418 2,443
56 82 2 274 1,197 1,129
149 215 6 802 3,615 3,572
1 - - 8 20 14
2 4 - 11
(7)(6) - - 24 370 365
$ 145 $ 219 $ 6 $845 4,005 3,951
(4) In 1995 and 1996, this business segment also included the Company's
lumber and panelboard brokerage operations which was discontinued in the
third quarter of 1996. Sales for lumber and panelboard were $373 million
and $504 million in 1996 and 1995, respectively. Operating profit related
to lumber and panelboard brokerage was $2 million and $9 million in 1996
and 1995, respectively.
(5) In 1997, Lumber production was 439 million board feet (1996 - 332
million; 1995 - 237 million). In 1997, Lumber sales were 410 million board
feet (1996 - 327 million; 1995 - 213 million).
(6) Selling, general and administrative expenses include commission income
of $12 million (1996 - $14 million; 1995 - $15 million).
(7) Fixed asset additions include adjustments for amounts in accounts
payable and accrued liabilities related to capital expenditures.
<TABLE>
CONSOLIDATED GEOGRAPHIC SEGMENTS(1)
<CAPTION>
Year ended December 31
(millions of Canadian dollars)
Net Cost of Gross
1997 Sales Sales Profit
<S> <C> <C> <C>
Canada $ 325 $ 256 $ 69
U.S.A. 2,577 2,164 413
International(2) 845 707 138
Non-recurring expenses relating to
the amalgamation - - -
$3,747 $ 3,127 $ 620
1996
Canada $ 361 $ 251 $ 110
U.S.A. 3,043 2,310 733
International (2) 678 511 167
$4,082 $ 3,072 $ 1,010
1995
Canada $ 462 $ 299 $ 163
U.S.A. 2,779 1,944 835
International (2) 667 450 217
$3,908 $ 2,693 $ 1,215
</TABLE>
<TABLE>
(1) Geographic segments reflect the ultimate sales destination for the
products. Sales and cost of sales by manufacturing location are as follows:
<CAPTION>
1997 1996 1995
Net Cost Net Cost Net Cost
Sales of Sales Sales of Sales Sales of Sales
<S> <C> <C> <C> <C> <C> <C>
Canada $2,656 $2,115 $2,909 $2,074 $3,054 $1,922
U.S.A. 875 837 927 821 620 562
International 216 175 246 177 234 209
$3,747 $3,127 $4,082 $3,072 $3,908 $2,693
</TABLE>
Selling, Non-
General recurring
and and Paper
Adminis- Depreciation Restruct- Operat- Pro- Paper Fixed
trative and uring ing uction(3) Sales Asset Total
Expenses Amortization Expenses Profit (000s of tonnes) Additions(4) Assets
$ 17 $ 29 $ 1 $ 22 3,438 302 $ 43 $ 549
113 215 8 77 1,222 3,454 291 3,988
46 81 1 10 248 1,252 103 1,485
- - 77 (77)
$ 176 $ 325 $ 87 $ 32 4,908 5,008 $ 437 $6,022
$ 18 $ 31 $ 3 $ 58 3,188 249 $ 78 $ 642
133 216 20 364 1,133 2,950 483 4,450
34 54 5 74 240 1,256 109 1,094
$ 185 $ 301 $ 28 $496 4,561 4,455 $ 670 $6,168
$ 20 $ 30 $ 1 $112 3,051 354
99 150 4 582 707 2,514
26 39 1 151 247 1,083
$ 145 $ 219 $ 6 $845 4,005 3,951
(2) International markets consist of all markets outside Canada and the
United States.
(3) All of the Company's production of lumber occurs in Canada. In 1997,
43% (1996 - 55%; 1995 - 48%) of lumber was sold in the United States and
57% (1996 - 45%; 1995 - 52%) was sold in Canada.
(4) Fixed asset additions include adjustments for amounts in accounts
payable and accrued liabilities related to capital expenditures.
Notes to Consolidated Financial Statements
December 31, 1997, 1996, and 1995 (tabular amounts in millions of Canadian
dollars)
1. Summary of significant accounting policies
These financial statements are expressed in Canadian dollars and are
prepared in accordance with Canadian generally accepted accounting
principles (Canadian GAAP). These financial statements are not intended to
provide disclosures which would typically be found in financial statements
prepared in accordance with United States generally accepted accounting
principles (U.S. GAAP). Form 40-F, filed with the United States Securities
and Exchange Commission, includes a description of the differences between
Canadian GAAP and U.S. GAAP as they apply to the Company.
(a) Basis of presentation
The amalgamation of Abitibi-Price Inc. (Abitibi-Price) and Stone-
Consolidated Corporation (Stone-Consolidated) was approved by the
shareholders of the companies effective May 30, 1997. On amalgamation each
common share of Abitibi-Price was exchanged for one common share of Abitibi-
Consolidated Inc. and each common share of Stone-Consolidated was exchanged
for 1.0062 common shares of Abitibi-Consolidated Inc. All common share
numbers have been restated to reflect this share exchange ratio. In these
financial statements the amalgamation has been accounted for as a pooling
of interests and, as a result, the consolidated balance sheets, statements
of earnings, retained earnings and changes in cash position have been
prepared as though Abitibi-Price and Stone-Consolidated had been combined
since their inception. Under this method, the assets and liabilities have
been recorded at historical carrying values and the earnings of Abitibi-
Consolidated Inc. are comprised of the earnings of Abitibi-Price and Stone-
Consolidated.
The net assets of each combining company as at May 30, 1997 were as
follows:
Abitibi- Stone-
Price Consolidated
Total assets $2,610 $3,924
Total liabilities 1,552 1,685
Net assets $1,058 $2,239
The net sales and losses of each combining company for the period January
1, 1997 to May 30, 1997 were as follows:
Abitibi- Stone-
Price Consolidated
Net sales $ 973 $ 781
Net loss 30 70
Upon amalgamation, the issued, and then outstanding, common shares of
Abitibi-Consolidated Inc. totalled 193.9 million of which approximately 46%
were held by the former shareholders of Abitibi-Price and approximately 54%
were held by the former shareholders of Stone-Consolidated. The quoted
market value of these shares, on the first trading day after amalgamation,
was $4.8 billion.
These financial statements consolidate the accounts of Abitibi-
Consolidated Inc., its subsidiary companies, the Company's proportionate
interest in its U.S. joint venture partnerships comprising Augusta
Newsprint Company (Augusta) - 50%, Alabama River Newsprint Company
(Alabama) - 50% and Alabama River Recycling Company (Alabama Recycling) -
50%, Voyageur Panel Limited - 21%, Star Lake Hydro Partnership - 51% and
the Company's investments in joint venture sawmills in Quebec.
(b) Use of estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the amounts of revenues and expenses for the
reported period. Actual results could differ from those estimates.
(c) Translation of foreign currencies
Assets and liabilities denominated in foreign currencies are translated at
year end exchange rates. Revenues and expenses are translated at prevailing
market rates.
The net U.S. dollar assets of self-sustaining joint ventures and
subsidiaries hedge a portion of the Company's U.S. dollar debt. Any
remaining U.S. dollar debt, is generally hedged by future U.S. dollar
revenue. Exchange gains or losses on U.S. dollar debt, hedged by future
revenue, are deferred and included in earnings in the period that the
revenue is earned.
Realized gains and losses on option and forward exchange rate contracts
that hedge anticipated revenues are included in earnings when the revenue
is earned. Option and forward exchange rate contracts that do not provide
an effective hedge are recorded at market value and any gains or losses
(realized or unrealized) are included in earnings.
(d) Inventories
Inventories are valued at the lower of average cost and net recoverable
amount. Cost is calculated using the absorption cost method including
depreciation.
(e) Fixed assets and depreciation
Fixed assets are recorded at cost, including capitalized interest and
preproduction costs. Investment tax credits and government capital grants
received reduce the cost of the related fixed assets.
Depreciation is provided at rates which amortize the fixed asset cost
over the productive life of the asset. The principal fixed asset category
is production equipment which is generally depreciated over 20 years on a
straight-line basis.
(f) Environmental costs
Environmental expenditures that continue to benefit the Company are
recorded at cost and capitalized as part of fixed assets. Depreciation is
charged to income over the estimated future benefit period of the asset.
Environmental expenditures that do not provide a benefit to the Company in
future periods are expensed as incurred.
(g) Investments
Long-term investments are recorded at the lower of cost and net recoverable
amount.
(h) Pension costs
Earnings are charged with the cost of pension benefits earned by employees
as services are rendered. Pension expense is determined using management's
best estimates of expected investment yields, wage and salary escalation,
mortality rates, terminations and retirement ages. Adjustments arising from
pension plan amendments, experience gains and losses, and assumption
changes are amortized to earnings over the average remaining service lives
of the members.
Any difference between pension expense (determined on an accounting
basis) and funding (as required by regulatory authorities) gives rise to
deferred pension costs.
Employee post-retirement costs are expensed on a "pay-as-you-go" basis.
(i) Goodwill
Goodwill is recorded at the lower of book value and net recoverable amount
and is amortized over its estimated period of future benefit - generally 40
years. Any impairment in value is recorded in earnings when it is
identified based on management's projected undiscounted future cash flows
from the related operations.
(j) Income taxes
Income taxes are recorded by the deferral method of accounting using
historical income tax rates. Deferred income taxes result from differences
in the timing of income and expense recognition for accounting and tax
purposes.
(k) Research and development costs
Research costs are expensed as incurred. Development costs for technically
and commercially feasible products or processes which management intends to
produce and market and/or use are deferred until commercial use begins. At
that time, these costs are charged to earnings over the estimated
commercial life of the product or process. In 1997, the Company expensed
$11 million (1996 - $12 million; 1995 - $8 million) of these costs.
Notes to Consolidated Financial Statements
December 31, 1997, 1996, and 1995 (tabular amounts in millions of Canadian
dollars)
2. Newsprint joint ventures
The Company's investments in newsprint joint ventures are accounted for
using the proportionate consolidation method. The Company's results of
operations, changes in cash position and financial position include the
impact of the joint ventures as follows:
1997
Proportionate
Equity Accounting
Accounting for Joint
for Joint Increase Venture as
Ventures (Decrease) Reported
Consolidated Earnings Statements
from continuing operations
Net sales $3,747 $ - $3,747
Operating profit (3) 35 32
Income from joint ventures 9 (9) -
Interest expense (89) (26) (115)
Amalgamation costs (98) - (98)
Unusual items and other
income and expense, net - - -
Earnings (loss) before income
taxes (181) - (181)
Net earnings (loss) from
continuing operations (132) - (132)
Changes in Consolidated
Cash Position from
continuing operations
Operating activities $ 362 $ 29 $ 391
Financing activities 113 (22) 91
Investing activities (406) (7) (413)
Dividends paid (57) - (57)
Cash generated by (used in)
continuing operations $ 12 $ - $ 12
Consolidated Balance Sheets
Current assets $1,184 $ 20 $1,204
Fixed assets 3,734 370 4,104
Investments in joint ventures 103 (103) -
Deferred pension cost 176 (6) 170
Other assets 807 10 817
Total assets $6,004 $ 291 $6,295
Current liabilities $ 863 $ 18 $ 881
Long-term debt:
Recourse 1,338 - 1,338
Non-recourse 21 273 294
Deferred income taxes 594 - 594
Shareholders' equity 3,188 - 3,188
Total liabilities and equity $6,004 $ 291 $6,295
2. Newsprint joint ventures (continued)
1996 1995
Proportionate Proportionate
Equity Accounting Equity Accounting
Accounting for Joint Accounting for Joint
for Joint Increase Venture as for Joint Increase Ventures as
Ventures (Decrease) Reported Ventures (Decrease) Reported
Consolidated Earnings Statements
from continuing operations
Net sales $4,082 $ - $4,082 $3,908 $ - $3,908
Operating
profit 433 63 496 769 76 845
Income from
joint ventures 38 (38) - 45 (45) -
Interest
Expense (88) (25) (113) (67) (32) (99)
Amalgamation
Costs - - - - - -
Unusual items
and other
income and
expense, net 33 - 33 (38) 1 (37)
Earnings (loss)
before income
taxes 416 - 416 709 - 709
Net earnings
(loss) from
continuing
operations 262 - 262 458 - 458
Changes in Consolidated
Cash Position from
continuing operations
Operating
Activities $ 542 $ 74 $ 616 $ 778 $ 65 $ 843
Financing
Activities 87 (97) (10) 348 (39) 309
Investing
Activities (651) (7) (658) (1,313) (10) (1,323)
Dividends
Paid (36) - (36) (16) - (16)
Cash generated
by (used in)
continuing
operations $ (58) $ (30) $ (88) $ (203) $ 16 $ (187)
Consolidated
Balance Sheets
Current
Assets $ 1,268 $ 20 $ 1,288
Fixed
Assets 3,645 371 4,016
Investments
in joint
ventures 131 (131) -
Deferred
pension
cost 187 (6) 181
Other
Assets 872 11 883
Total
Assets $ 6,103 $ 265 $ 6,368
Current
Liabilities $ 903 $ 23 $ 926
Long-term debt:
Recourse 1,147 - 1,147
Non-
Recourse 7 242 249
Deferred
income
taxes 647 - 647
Shareholders'
Equity 3,399 - 3,399
Total
Liabilities
and
equity $ 6,103 $ 265 $ 6,368
Notes to Consolidated Financial Statements
December 31, 1997, 1996, and 1995
(tabular amounts in millions of Canadian dollars)
3. Acquisition
Rainy River Forest Products Inc.
On November 1, 1995, the Company acquired and subsequently amalgamated with
Rainy River Forest Products Inc. (Rainy River). Rainy River was a
manufacturer and marketer of newsprint, value-added groundwood papers and
kraft pulp. It owned and operated three integrated pulp and paper mills
located in Kenora and Fort Frances, Ontario and West Tacoma, Washington
(U.S.A.).
The purchase method was used to account for the business combination and
the results of operations of Rainy River are included from the date of
acquisition. The allocation of the purchase price was as follows:
Assets acquired
Working capital $ 94
Fixed assets 844
Goodwill 292
Other 17
1,247
Liabilities assumed
Long-term debt 148
Deferred income taxes 99
Convertible subordinated debentures 269
516
Net assets acquired at fair value $ 731
Consideration
Issuance of 11.9 million common shares $ 216
Issuance of 23.2 million cumulative
preferred shares with an 8% dividend
rate per annum 500
Cash 15
$ 731
4. Amalgamation costs
Charges of $175 million relating to the amalgamation were expensed in 1997
as follows:
Employee severance and related expenses $ 35
Moving expenses 14
Pension plan settlement expense 15
Other 13
77
Debt extinguishment costs 59
Write-off of redundant fixed assets 39
98
$ 175
5. Restructuring expenses
1997 1996 1995
Machine closure at the Kenogami mill $ 10 $ - $ -
Thermo-mechanical pulping conversions - 28 -
Relocation of inside sales and customer
service offices - - 6
$ 10 $ 28 $ 6
In 1997, the Company incurred one-time restructuring charges on the closure
of a paper machine at the Kenogami mill, which consisted of $2 million for
the write-off of a paper machine and $8 million for employee severance and
retraining.
In 1996, the Company incurred one-time restructuring charges on the
start-up of two thermo-mechanical pulping plants, which consisted of $19
million for the write-off of redundant fixed assets and $9 million for
employee severance.
6. Unusual items
1997 1996 1995
Net proceeds from insurance claims relating to
assets destroyed by flooding at the Kenogami
mill and hydro plant and Port Alfred mill $ - $ (27) $ -
Gain on sale of Thunder Bay, Ontario newsprint
Mill - - (4)
Redemption expenses - - 41
$ - $ (27) $ 37
The redemption expenses of $41 million, in 1995, consist primarily of $37
million for early debt repayment.
7. Other expense (income), net
1997 1996 1995
Interest income $ (13) $ (14) $ (24)
Discounts on sales of accounts receivable
(note 9) 6 11 13
Other 7 (3) 11
$ - $ (6) $ -
8. Income taxes
The Company's recovery of (provision for) income taxes and effective income
tax rates are:
1997 1996 1995
Earnings (loss) from continuing operations
before income taxes $(181) $ 416 $ 709
Recovery of (provision for) income taxes 49 (154) (251)
Effective income tax rate 27% 37% 35%
Reconciliation to statutory tax rate:
Average combined Canadian federal/provincial
income tax rate 39% 39% 38%
Manufacturing and processing allowances (7) (4) (6)
Non-deductible goodwill amortization (5) 2 1
Canadian large corporations tax (5) 2 1
Difference in tax rates for foreign subsidiaries 2 - 1
Other 3 (2) -
Effective income tax rate 27% 37% 35%
At December 31, 1997, the Company's U.S. and Canadian operations had $404
million in tax loss carry-forwards which are available to reduce taxable
income in future years and expire between 2004 and 2009. Also, at December
31, 1997, the Company's U.K. subsidiaries had $65 million in tax loss carry-
forwards which are available to reduce taxable income indefinitely. The
benefits of these non-capital tax loss carry-forwards were recorded in
earnings in the years incurred.
9. Accounts receivable
The Company had an ongoing program to sell accounts receivable, with
minimal recourse, to major banks pursuant to sale agreements. The Company
acted as a service agent and administered the collection of the accounts
receivable sold pursuant to these agreements. These agreements were
terminated when the Company refinanced its debt on amalgamation in May
1997. In December 1997, the Company resumed the practice of selling trade
accounts receivable to a major bank and these proceeds were used to repay
long-term debt. At December 31, 1997, the Company had sold $287 million
(1996 - $174 million) of accounts receivable to major banks. The maximum
credit risk exposure to the Company at December 31, 1997 was $17 million
(1996 - $13 million).
10. Inventories
1997 1996
Finished goods $ 134 $ 211
Materials and supplies 200 194
Pulpwood 83 92
$ 417 $ 497
11. Fixed assets
1997 1996
Accumulated Net Book Accumulated Net Book
Cost Depreciation Value Cost Depreciation Value
Property, plant
and equipment $6,281 $2,226 $4,055 $5,900 $1,931 $3,969
Timberlands 74 25 49 77 30 47
$6,355 $2,251 $4,104 $5,977 $1,961 $4,016
During the year, $7 million (1996 - $17 million; 1995 - $18 million) of
interest was capitalized to fixed assets. In addition, the Company recorded
$1 million (1996 - $6 million) of investment tax credits that reduced the
cost of the related fixed assets.
12. Investments and other assets
1997 1996
Pine Falls Paper Company Limited
Subordinated $37 million debenture maturing
in 2004, accruing 10% simple interest to 2000, and
17% semi-annual compound interest payable thereafter;
repaid in 1997 $ - $ 27
Unamortization portion of debt financing costs 14 29
Exchange loss on long-term debt hedged by future revenue
and other 29 28
$ 43 $ 84
13. Discontinued operations
In December 1997, the Company decided to sell its Office Products Division.
The Company subsequently signed a letter of intent to sell its U.S. and
Mexican operations for U.S.$110 million. This transaction is expected to be
completed in the first half of 1998. Net proceeds on the disposition of
this Division are expected to exceed net book value and any gain will be
recorded when realized.
Accordingly, the Company's Office Products Division has been classified
as discontinued operations. The following amounts related to the Office
Products Division have been included in these financial statements:
1997 1996
Cash $ 15 $ 11
Accounts receivable 111 51
Inventories 104 93
Prepaid expenses 2 1
Current assets of discontinued operations $ 232 $ 156
Fixed and other assets $ 11 $ 13
Goodwill 30 31
Non-current assets of discontinued operations $ 41 $ 44
Sales $ 817 $ 647
Effective July 1, 1996, the Company acquired all of the outstanding shares
of Tenex Data Corporation (Tenex), of Toronto, Ontario, a distributor of
computer supplies and data storage products and a paper converter, for cash
consideration of $22 million. The purchase method was used to account for
the business combination and the results of operations of Tenex are
included in discontinued operations from the date of acquisition.
14. Long-term debt
(a) Recourse
The debt described below has recourse to specific assets or the general
credit of Abitibi-Consolidated Inc. and consists of:
1997 1996
Term credit facilities:
5-year $800 million revolving facility bearing
interest at prime or LIBOR $ 107 $ -
7-year $1.3 billion term loan bearing interest at
prime or LIBOR, 5% annually to be repaid during
the first five years, plus 25% in years six and
seven, with the remainder being repaid at maturity
(U.S. portion - U.S. $474 million 1,042 -
Facilities due 2000 bearing interest approximating
prime plus 1% - 368
Floating rate revolving facility bearing interest at
LIBOR plus 0.875% (U.S. portion - U.S.$67 million) - 124
U.S.$178 million (1996 - U.S.$200 million) maturing in
2005 bearing interest at 7.92% 255 274
U.S.$225 million due 2000 bearing interest at 10.25% - 308
U.S.$110 million due 2001 bearing interest at 10.75% - 151
Other 24 52
1,428 1,277
Less: Current portion of long-term debt (90) (130)
$1,338 $ 1,147
In connection with the amalgamation, the Company secured from a syndicate
of lenders the two new term credit facilities noted above. Of the total
facility, $1.4 billion is available in the form of prime rate Canadian
dollar loans and $700 million is available by way of LIBOR U.S. dollar
loans. The proceeds were used to repay $996 million of long-term debt
facilities and $15 million of bank indebtedness.
The Company's debt agreements contain certain restrictive financial and
other covenants.
(b) Non-recourse
The Company's interest in the long-term debt of its U.S. newsprint and
other joint ventures is without recourse to the assets of Abitibi-
Consolidated Inc. These non-recourse loans are secured by $370 million
(1996 - $371 million) of joint venture fixed assets and consist of the
following debt:
1997 1996
Alabama
LIBOR plus 1.875% term loans, rising to LIBOR plus
2% in 1999, maturing in 2002, with quarterly
principal repayments of U.S.$2.5 million (U.S.
$139 million; 1996 - U.S.$149 million) $ 199 $ 205
Alabama Recycling
10.50% senior notes, maturing in 2008 (U.S.
$12 million; 1996 - U.S.$13 million) 17 18
Augusta
10.01% senior secured notes, maturing from
2001 to 2007 (U.S.$25 million) 36 34
7.7% senior secured notes, maturing 2004 to
2007 (U.S.$25 million) 36 -
Other 23 14
311 271
Less: Current portion of long-term debt (17) (22)
$ 294 $ 249
At December 31, 1997, Alabama had interest rate agreements with major
banks, which expire between 1998 and 2000, that provide an effective
interest rate of 9.6% (1996 - 9.6%; 1995 - 8.5%) on $71 million of the $199
million non-recourse debt outstanding (1996 - $68 million of $205 million).
In 1997, the effective interest rate on the Alabama debt was 9.1% (1996 -
8.8%; 1995 - 8.6%).
Augusta has a line of credit of U.S.$13 million bearing prevailing
market interest rates. This line of credit was undrawn as at December 31,
1997 and 1996.
Partnership distributions are subject to certain restrictions until
these loans are repaid in accordance with the loan agreements.
In 1998, Alabama may not be in compliance with certain debt covenants
under certain circumstances. The outcome of these matters is not
determinable. The assets less the liabilities of Alabama included in the
consolidated financial statements were $24 million at December 31, 1997.
Notes to Consolidated Financial Statements
December 31, 1997, 1996, and 1995 (tabular amounts in millions of Canadian
dollars)
(c) Scheduled long-term debt repayments are as follows:
(d)
Recourse Non-Recourse
Debt Debt
1998 $ 90 $ 17
1999 90 17
2000 94 17
2001 89 27
2002 305 154
Thereafter 760 79
$ 1,428 $ 311
(d) The estimated fair value of the long-term debt at the period end dates
is as follows:
1997 1996
Recourse $1,433 $1,345
Non-recourse 324 279
$1,757 $1,624
15. Capital stock
(a)The Company continued under the Canada Business Corporations Act
pursuant to the amalgamation referred to in note 1, and is authorized to
issue an unlimited number of preferred shares and common shares.
(b) Common shares
1997 1996 1995
Millions Millions Millions
of shares $ of shares $ of shares $
Common shares,
beginning of year 193.6 2,595 191.8 2,570 152.9 1,822
Shares issued for:
Conversion of
convertible
subordinated debentures 1.6 24 35.6 585
Acquisition of Rainy
River - - - - 11.9 216
Exercise of stock
options 0.6 4 0.2 1 0.1 1
Shares purchased and
cancelled for $194 million - - - - (8.7)
(54)
Common shares, end of year 194.2 2,599 193.6 2,595 191.8 2,570
The $140 million excess of purchase price over the average stated capital
of shares purchased and cancelled in 1995 was charged to retained earnings.
At December 31, 1997, the Company had 3.3 million (1996 - 3.7 million;
1995 - 3.3 million) management stock options outstanding. These options are
exercisable at prices between $12.25 and $22.69 and expire between 1998 and
2005.
The payment of a cash dividend on the Company's common stock is
restricted under certain debt agreements. The Company satisfied all the
conditions of the debt agreements prior to declaring dividends.
(c) Preferred shares
1997 1996 1995
Millions Millions Millions
of shares $ of shares $ of shares $
Preferred shares,
beginning of year 0.9 10 5.5 110 1.0 11
Acquisition of Rainy
River - - - - 23.2 500
Shares redeemed and
Cancelled (0.9) (10) (4.6) (100) (18.6) (400)
Shares retracted by
Holders - - - - (0.1) (1)
Preferred shares,
end of year - - 0.9 10 5.5 110
16. Pension plans
The Company primarily has contributory, defined benefit pension plans that
provide benefits based on length of service and final average earnings. The
Company has an obligation to ensure these plans have sufficient funds to
pay the benefits earned. The Company's contributions are made in accordance
with the annual regulatory contribution requirements.
At December 31, the funded status, on an accounting basis, of the
Company's pension plans is:
1997 1996
Market value of assets $1,918 $1,711
Actuarial present value of accumulated plan
benefits based on current service and
compensation levels:
Vested 1,498 1,459
Non-vested 56 77
1,554 1,536
Excess of market value of assets over accumulated
benefit obligations $ 364 $ 175
In 1997, pension plan assets were increased by Company and employee
contributions of $47 million (1996 - $52 million) and pension plan
investment gains of $284 million (1996 - $232 million). The plan assets
were reduced by benefit payments of $116 million (1996 - $115 million) and
$8 million (1996 - $8 million) paid for pension fund expenses. Effective
January 1, 1996 plan assets were also reduced by $11 million, the value of
past service benefits for non-union employees who elected to transfer to a
new defined contribution plan offered by the Company.
On a going concern basis, using assumptions required by regulatory
authorities, the pension plans had an aggregate unfunded liability of $28
million (1996 - $111 million) at the time of the latest actuarial valuation
reports.
17. Financial instruments
The Company is subject to foreign exchange exposures which arise from its
foreign currency sales and international operations. Of the Company's net
sales, 82% is U.S. dollar denominated; and 65% of its non-North American
sales are U.S. dollar denominated with the remainder in local currencies.
The Company partially manages its foreign exchange exposure with a
program of foreign exchange forward contracts with major banks as
counterparties for periods up to 5 years. The Company has a maximum of 40%
of its foreign exchange forward contracts which may be outstanding with any
one bank.
The Company had the following U.S. dollar foreign exchange forward
contracts outstanding at December 31 for the purchase of foreign
currencies:
Average
U.S. Dollar Contract Amount of Contract
Maturity Rate to buy $1 Cdn. U.S. Dollars (millions)
1997 1996 1997 1996
1997 - 75.13 - $725
1998 75.36 76.59 $844 $420
1999 75.68 76.61 $476 $239
2000 76.03 76.92 $338 $172
2001 76.19 76.60 $219 $138
2002 74.48 - $142 -
At December 31, 1997, the Company would have had to pay $205 million to
settle its then outstanding U.S. foreign exchange contracts and other
financial instruments.
18. Lease commitments
As at December 31, 1997, the Company has operating lease agreements for the
rental of property, equipment and the charter of cargo vessels. The minimum
annual rental payments under these leases are as follows:
1998 $ 19
1999 11
2000 10
2001 9
2002 8
Thereafter 17
$ 74
19. Contingent liabilities
The Company and its U.S. subsidiary, Abitibi-Price Corporation, have been
named as defendants in several lawsuits, including purported class actions,
filed on behalf of homeowners in the United States relating to certain
hardboard siding products which were manufactured by Abitibi-Price
Corporation prior to October 1992. In each of the lawsuits, the plaintiffs
generally allege that Abitibi-Price Corporation's hardboard siding was
defective for the purposes for which it was sold. The Company denies this
allegation and is vigorously defending the claims made in these actions.
The Company and its indirect U.S. subsidiaries, Abitibi Consolidated
Sales Corporation and Abitibi-Price Alabama Corporation, have been named as
defendants in two lawsuits filed in the State of Alabama. The lawsuits have
been filed allegedly on behalf of the Company's joint venture partnership,
Alabama River Newsprint Company, and the partnership's two corporate
partners, including Parsons & Whittemore Alabama Newsprint Corp. In the
lawsuits, the plaintiffs allege a breach of the sales agreement with
respect to the promotion and volume of sales of the joint venture
partnership mill, and that the Abitibi-Consolidated partner breached its
fiduciary duty to its joint venture partner. The Company denies these
allegations and is vigorously defending the claims made in these actions.
Each of the lawsuits appears to seek substantial damages in a trial by
jury. It is not possible at this time to quantify meaningfully the amount
of, or the range of, damages implicated by plaintiffs' claims. Management
cannot at this time assess the likelihood that the Company will incur a
loss or obtain an unfavorable result in connection with any one of these
actions.
On September 20, 1996, a motion of permission to lodge a class action
suit against the Company was filed with the Superior Court of the
Chicoutimi District ("Superior Court") with respect to the Saguenay floods
of July, 1996. On October 20, 1997, the Superior Court granted the motion
permitting a class action suit to be filed against the Company. To date no
such class action suit has been filed. The Company is insured against such
potential claims up to a maximum of $100 million which the Company believes
to be sufficient.
The Company is subject to a number of other unrelated claims in respect
of which either an adequate provision has been made or for which no
material liability is expected.
20. Related party transactions
The Company undertakes a number of transactions with its major shareholder,
Stone Container (Canada) Inc. (Stone Container), and its affiliated
companies.
The following table summarizes the transactions between the Company and
related parties which are in the normal course of business at normal trade
terms:
1997 1996 1995
Newsprint sales to a Stone Container
Affiliate $ - $ 32 $ 32
Pulp purchases from Stone Container and
Affiliates 15 15 20
Newsprint brokerage commissions from a Stone
Container affiliate 10 11 12
Expenses charged to Stone Container for services 6 4 5
Expenses charged by a Stone Container affiliate
for services - 2 4
<TABLE>
ELEVEN-YEAR FINANCIAL REVIEW(1)
<CAPTION>
(unaudited)
(millions of Canadian dollars, except per share amounts)
1997 1996 1995
<S> <C> <C> <C>
CONSOLIDATED EARNINGS
Net sales $ 3,747 $ 4,082 $ 3,908
Cost of sales 3,127 3,072 2,693
Depreciation and amortization 325 301 219
Selling, general and administrative
Expenses 176 185 145
Non-recurring expenses relating to
the Amalgamation 77 - -
Restructuring expenses 10 28 6
Operating profit (loss) from
continuing Operations 32 496 845
Interest expense on long-term debt 115 113 99
Debt extinguishment costs and
write-off of redundant fixed assets
relating to the amalgamation 98 - -
Unusual items - (27) 37
Other expense (income), net - (6) -
Earnings (loss) from continuing
operations, before income taxes (181) 416 709
Recovery of (provision for) income
Taxes 49 (154) (251)
Earnings (loss) from continuing
Operations (132) 262 458
Earnings (loss) from discontinued
operations, net of tax 11 6 5
Net earnings (loss) for the year $ (121) $ 268 $ 463
PER BASIC COMMON SHARE
Earnings (loss) from continuing
Operations $ (0.68) $ 1.35 $ 2.89
Net earnings (loss) for the year (0.62) 1.39 2.92
Dividends declared (2) 0.40 0.40 0.30
Dividends paid 0.40 0.40 0.20
Common shareholders' equity 16.43 17.56 16.38
OTHER
Return on average common
shareholders' equity - 8% 16%
Net debt/net debt plus shareholders'
Equity 35% 30% 30%
Number of employees at December 31 12,900 13,406 12,916
<FN>
(1) The amalgamation of Abitibi-Price Inc. and Stone-Consolidated
Corporation was completed on May 30, 1997 and has been accounted for as a
pooling of interests. As a result, these consolidated financial statements
have been prepared as though the companies had always been combined.
Certain comparative balances have been reclassified to conform to the
current year's financial statement presentation.
These financial statements include the results of Stone-Consolidated
Corporation from December 17, 1993, the date that Stone-Consolidated
Corporation began operations as a corporation and became a publicly-
traded company. The financial statements for the years 1987 to 1994 have
been restated to reflect the adoption of the proportionate consolidation
method of accounting for the Company's investments in joint venture.
</TABLE>
consolidated financial statements
December 31, 1997
REPORT OF INDEPENDENT ACCOUNTANTS
Our audit of the consolidated financial statements referred to in our
report dated January 30, 1998, appearing on page 42 of the Annual Report to
Shareholders of Abitibi-Consolidated Inc. (which report and financial
statements are incorporated by reference in this Annual Report on Form 40-
F) also included an audit of the presentation of financial information in
Item 6 of this Form 40-F. In our opinion, the presentation of financial
information in Item 6 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
Price Waterhouse
Chartered Accountants
January 30, 1998
Montreal, Quebec, Canada
Differences between Canadian and United States generally accepted
accounting principles
Abitibi-Consolidated Inc.'s (the "Company") financial statements included
in its Form 40-F have been prepared in accordance with generally accepted
accounting principles ("GAAP") in Canada which, in the case of the Company,
conform in all material respects with U.S. GAAP, with the following
material exceptions:
(a) The Company defers exchange gains and losses on U.S. dollar debt hedged
by anticipated future revenue. Under U.S. GAAP, any unrealized exchange
gains or losses on U.S. dollar debt hedged by anticipated future revenue
would be recognized in income immediately.
(b) The Company has outstanding foreign exchange forward contracts which it
designates as a hedge of anticipated future revenue. Under U.S. GAAP, any
unrealized gains or losses on such foreign exchange forward contracts would
be recognized in income immediately.
(c) The Company follows the deferral method of accounting for income taxes.
Under U.S. GAAP, the asset and liability method of accounting for income
taxes would be used.
(d) The Company accounts for its joint venture investments using the
proportionate consolidation method. Under U.S. GAAP, these joint ventures
would be accounted for using the equity method.
(e) The amalgamation of Abitibi-Price Inc. and Stone-Consolidated
Corporation was accounted for as a pooling of interests. Under U.S. GAAP,
the amalgamation would be accounted for by Stone-Consolidated Corporation
using the purchase method and the results of Abitibi-Price Inc.'s
operations would be included only from the date of amalgamation. In
addition, certain amalgamation related costs were expensed or charged to
retained earnings under Canadian GAAP. Under the purchase method, certain
of these costs amounting to $83 million (of which $61 million was expensed
and $22 million was charged to retained earnings under Canadian GAAP) would
be capitalized and increase the amount of recorded goodwill.
The allocation of the purchase price of Abitibi-Price Inc. would be as
follows (in millions of Canadian dollars):
Assets acquired
Current assets $ 712
Fixed assets 1,354
Goodwill 1,003
Investments and other assets 223
3,292
Liabilities assumed
Current liabilities (434)
Long-term debt (633)
Deferred income taxes (180)
Other (82)
Net assets acquired for fair value
consideration of 89.2 million common shares
of the Company $1,963
Goodwill is being amortized over 40 years.
The following financial information is presented in accordance with U.S.
GAAP, reflecting the adjustments disclosed above.
<TABLE>
CONSOLIDATED EARNINGS
(in millions of Canadian dollars, except per share amounts)
<CAPTION>
Year ended December 31
1997 1996 1995
<S> <C> <C> <C>
Gross sales $ 3,466 $ 2,286 $ 1,728
Freight sales 320 149 129
Net sales 3,146 2,137 1,599
Cost of sales 2,617 1,606 1,091
Depreciation and amortization 270 176 105
Selling, general and 122 52 27
administrative expenses
Non-recurring expenses relating to 42 - -
the amalgamation
Restructuring expenses 10 - -
Operating profit from continuing 85 303 376
operations
Interest expense on long-term 77 72 41
debt
Debt extinguishment costs and write-
off of redundant fixed assets 72 - -
relating to the amalgamation
Unusual items - (22) 41
Other expense (income), net 17 (12) (7)
Mark-to-market of foreign 117 - -
exchange forward contracts
Earnings (loss) from continuing
operations before income taxes (198) 265 301
Recovery of (provision for) 49 (89) (109)
income taxes
Earnings (loss) from continuing (149) 176 192
operations
Earnings from discontinued
operations, net of income tax 7 - -
expense of $4
Net earnings (loss) for the year $ (142) $ 176 $ 192
Per common share
Earnings (loss) from continuing $ (0.95) $ 1.68 $ 2.67
operations
Net earnings (loss) for the year
Basic (0.91) 1.68 2.67
Fully diluted (0.91) 1.68 2.67
Weighted average number of common
shares outstanding (millions)
Basic 156.8 104.7 72.0
Fully diluted 159.4 105.8 84.4
Fully diluted number of common
shares outstanding at year-end 197.5 105.8 105.3
(millions)
</TABLE>
<TABLE>
CONSOLIDATED RETAINED EARNINGS
(in millions of Canadian dollars)
<CAPTION>
Year ended December 31
1997 1996 1995
<C> <S> <S> <S>
Retained earnings (deficit), $ 319 $ 143 $ (49)
beginning of year
Net earnings (loss) for the year (142) 176 192
Dividends declared (58) - -
Retained earnings, end of year $ 119 $ 319 $ 143
CHANGES IN CONSOLIDATED CASH POSITION
(in millions of Canadian dollars)
Year ended December 31
1997 1996 1995
Continuing operating activities
Earnings (loss) from continuing $ (149) $ 176 $ 192
operations
Depreciation 234 155 90
Goodwill amortization 36 21 15
Provision for (recovery of) (57) 63 96
deferred income taxes
Non-recurring expenses relating to
the amalgamation 54 - -
Restructuring expenses 10 - -
Other non-cash items 110 - (12)
Changes in non-cash operating
working capital components of
continuing operations
Decrease (increase) in current
assets of continuing operations
Accounts receivable 152 71 (48)
Inventories 79 (93) (44)
Prepaid expenses 10 (4) (2)
(Decrease) increase in accounts
payable and accrued liabilities
of continuing operations 32 (29) 29
Cash generated by continuing 511 360 316
operating activities
Financing activities of
continuing operations
Increase in long-term debt and - 377 392
bank indebtedness
Repayment of long-term debt and
bank indebtedness (127) (309) (85)
Issuance of common shares on 1,963 - -
acquisition
Preferred shares redeemed and - (100) (400)
cancelled
Other 8 - -
Cash generated by (used in)
financing activities of 1,844 (32) (93)
continuing operations
Investing activities of
continuing operations
Additions to fixed assets (354) (327) (257)
Acquisitions (1,963) - (73)
Decrease (increase) in
investments and other assets (7) 10 18
Cash used in investing activities
of continuing operations (2,324) (317) (312)
Dividends paid to common (39) - -
shareholders
Cash generated by (used in)
continuing operations (8) 11 (89)
Cash generated by discontinued 19 - -
operations
Increase (decrease) in cash 11 11 (89)
during the year
Cash and deposits, during the 27 16 105
year
Cash and deposits, end of year $ 38 $ 27 $ 16
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)
<CAPTION>
December 31
1997 1996
<S> <C> <C>
Assets
Current assets
Cash and deposits $ 38 $ 27
Accounts receivable 484 359
Inventories 402 318
Prepaid expenses 28 13
Current assets of discontinued operations 232 -
1,184 717
Fixed assets 3,734 2,273
Investments and other assets 131 26
Deferred pension cost 160 64
Goodwill 1,632 745
Non-current assets of discontinued 91 -
operations
$ 6,932 $ 3,825
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Continuing operations $ 661 $ 357
Discontinued operations 92 -
Dividends payable 19 -
Current portion of long-term debt
Recourse 90 85
Non-recourse 1 -
863 442
Long-term debt
Recourse 1,338 770
Non-recourse 22 -
Deferred income taxes 441 309
Other 226 28
2,890 1,549
Shareholders' equity
Common shares 3,923 1,957
Retained earnings 119 319
4,042 2,276
$ 6,932 $ 3,825
</TABLE>
