Note: Financial references in US dollars unless otherwise
indicated.
2019 HIGHLIGHTS
- Full-year adjusted EBITDA of $138
million and an adjusted loss of $0.37 per diluted share
- Reduced North American unit manufacturing costs by 1%
despite significant production curtailments throughout the
year
- Record annual production at four mills (two in North America and two in Europe)
- Termed out 2020 senior secured notes to 2027 at 5.75%
coupon; upsized principal by $110
million to bolster liquidity
- Returned $130 million in cash
to shareholders through dividends and share repurchases
- Declared quarterly variable dividend of C $0.20 per share for shareholders of record on
February 28, 2020
TORONTO, Feb. 5, 2020 /CNW/ - Norbord Inc. (TSX and
NYSE: OSB) today reported Adjusted EBITDA of $138 million for the full-year 2019 compared to
$724 million in 2018 on significantly
lower realized North American oriented strand board (OSB) prices
and shipment volumes, as well as lower European panel prices. North
American operations generated Adjusted EBITDA of $85 million compared to $652 million in the prior year and European
operations delivered Adjusted EBITDA of $64
million compared to $86
million in the prior year.
For the fourth quarter of 2019, Norbord recorded Adjusted EBITDA
of $27 million versus $33 million in the third quarter of 2019 and
$70 million in the fourth quarter of
2018. The quarter-over-quarter decline was primarily due to lower
shipment volumes attributed to higher downtime, partially offset by
modestly higher North American OSB prices. The year-over-year
decline was primarily due to lower North American OSB prices as
well as lower shipment volumes.
"2019 was a challenging year for Norbord," said Peter
Wijnbergen, Norbord's President and CEO. "Our financial results
were disappointing relative to our record performance in 2018, as
the slowdown in US housing starts through most of 2019 decreased
North American OSB demand and a slowing of German industrial
production put downward pressure on European panel prices. In the
face of these challenges, we focused on reducing both costs and
production, by indefinitely curtailing operations at our 100 Mile
House, British Columbia mill and
Line 1 at our Cordele, Georgia
mill."
"Despite the tough markets, Norbord's mills performed well. In
North America, we consolidated
downtime across our mill portfolio, which allowed us to more
efficiently allocate production volumes. This resulted in record
production at two mills and lower North American unit manufacturing
costs. In Europe, we had record
production at both our OSB mills, including at our expanded
Inverness, Scotland mill, which
continues to ramp production to meet growing demand. We reinvested
more than $140 million in our mills
and returned $130 million in cash to
our shareholders through a combination of dividends and share
buybacks."
"While our fourth quarter results reflected the continued
weakness in North American housing markets, OSB prices have started
to recover in recent weeks. Further, the outlook for new home
construction in 2020 is encouraging, with December's seasonally
adjusted annualized pace of permits for US housing starts up nearly
6% year-over-year to 1.42 million. We expect a healthy pick-up in
OSB demand as the spring building season approaches. In
Europe, our panel business is set
for another solid year as OSB demand in our key markets is
supported by the ongoing trend of substitution against plywood and
our reinvested Inverness, Scotland
mill continues to ramp up. With a solid balance sheet and a
diversification strategy that is growing non-traditional end uses
for OSB to help cushion against volatility in housing demand, we
believe Norbord is well positioned for 2020 and beyond."
For the full-year 2019, Norbord recorded an Adjusted loss of
$30 million or $0.37 per share (basic and diluted) versus
Adjusted earnings of $412 million or
$4.74 per diluted share ($4.76 per basic share) in 2018. Norbord recorded
an Adjusted loss of $11 million or
$0.13 per share (basic and diluted)
in the fourth quarter of 2019 versus a $9
million Adjusted loss or $0.11
per share (basic and diluted) in the prior quarter and versus
Adjusted earnings of $26 million or
$0.30 per share (basic and diluted)
in the same quarter last year. Adjusted (loss) earnings exclude
non-recurring or other items and use a normalized income tax
rate:
$
millions
|
Q4
2019
|
Q3
2019
|
Q4
2018
|
2019
|
2018
|
(Loss)
earnings
|
(12)
|
(17)
|
(28)
|
(42)
|
371
|
Adjusted
for:
|
|
|
|
|
|
Impairment of
assets
|
-
|
10
|
80
|
10
|
80
|
Loss on disposal of
assets
|
2
|
-
|
2
|
3
|
2
|
Stock-based
compensation and related costs
|
1
|
-
|
-
|
3
|
4
|
Costs on early
extinguishment of 2020 Notes
|
-
|
-
|
-
|
10
|
-
|
Costs related to 100
Mile House
indefinite
|
|
|
|
|
|
curtailment
|
-
|
-
|
-
|
2
|
-
|
Reported income tax
(recovery) expense
|
(6)
|
(6)
|
(26)
|
(27)
|
100
|
Adjusted pre-tax
(loss) earnings
|
(15)
|
(13)
|
28
|
(41)
|
557
|
Income tax recovery
(expense) at statutory rate(1)
|
4
|
4
|
(2)
|
11
|
(145)
|
Adjusted (loss)
earnings
|
(11)
|
(9)
|
26
|
(30)
|
412
|
(1)
|
Represents Canadian
combined federal and provincial statutory rate (2019 and 2018 –
26%). Q1 to Q3 of 2018 were based on a rate of 27% and a true-up
for the full year rate of 26% was reflected in Q4.
|
Market Conditions
US housing starts were up 3% year-over-year to 1.29 million and
the seasonally adjusted annualized pace of permits, the more
forward-looking indicator, was 1.42 million in December, a 6%
year-over-year increase. Single-family starts, which use
approximately three times more OSB than multifamily, increased by
1% in 2019 and represented 69% of total starts, down slightly from
70% in 2018. Of note, however, the actual pace of US housing
activity lagged prior year levels through most of 2019, only
turning positive in November. US housing economists are forecasting
2020 starts of approximately 1.33 million, which suggests an
increase of 3% over 2019.
According to APA–The Engineered Wood Association, North American
OSB production, which is a proxy for OSB demand, was approximately
23.0 Bsf (3/8-inch basis) in 2019, down 2% from the prior year and
approximately 83% of the industry's available production
capacity.
North American benchmark OSB prices remained below historical
averages throughout 2019. Benchmark OSB prices decreased steadily
in the first half of the year due to lower demand from the
continued pullback in US homebuilding activity, which started in
the second half of 2018. As affordability concerns that had
negatively affected US housing demand in recent quarters began to
moderate, driven by lower mortgage rates and real wage growth,
benchmark OSB prices improved modestly in the fourth quarter of
2019. The North Central benchmark OSB price ranged from a low of
$180 per Msf (7⁄16-inch basis) in
April to a high of $230 per Msf in
November and averaged $210 per Msf
for the year.
The table below summarizes average benchmark prices ($ per Msf,
7/16-inch basis) by region for the relevant periods:
North American
region
|
% of Norbord's
operating capacity
|
Q4
2019
|
Q3 2019
|
Q4 2018
|
2019
|
2018
|
North
Central
|
15%
|
223
|
217
|
243
|
210
|
351
|
South East
|
36%
|
199
|
168
|
203
|
187
|
315
|
Western
Canada
|
29%
|
190
|
164
|
184
|
166
|
307
|
In Europe, average panel prices
declined 3% in 2019 (in local currency terms) from the very strong
levels of the past two years and OSB demand was stable in Norbord's
key markets. In the UK, where three of Norbord's four European
mills are located, GDP growth was 1.1%, unemployment remained low
at 4.0% and housing starts remained steady. In Germany, Europe's largest continental OSB market, GDP
growth moderated to 0.6% on a slowdown in industrial production
while housing starts were in line with the previous year.
Performance
Norbord's Occupational Safety and Health Administration (OSHA)
recordable injury rate was 1.31 in 2019 and two mills completed
recordable injury-free years.
In North America, full-year
shipment volumes decreased 5% driven primarily by the production
curtailments taken to match the Company's supply with customer
demand. Fourth quarter shipments were 19% lower than the prior
quarter and 17% lower than the same quarter last year primarily due
to the curtailments taken during the fourth quarter as well as
fewer fiscal days in the current quarter.
Annual production records were achieved at two of the Company's
North American OSB mills. For the full year, Norbord's operating
OSB mills produced at 85% of available capacity compared to 95% in
2018 (excluding the curtailed Chambord,
Quebec mill). The decrease in capacity utilization was
driven by the December 31, 2018
restatement of annual production capacities at a number of mills as
well as the downtime and indefinite curtailments taken during the
year. Norbord's 2019 North American OSB cash production costs per
unit (excluding mill profit share) decreased 1% versus the prior
year due to improved productivity, lower resin prices and the
foreign exchange translation impact of a weaker Canadian dollar,
partially offset by higher raw material usages and increased
curtailments.
European shipment volume was slightly higher in 2019 due to
changes in product mix. Annual production records were achieved at
the Company's two European OSB mills. All of Norbord's panel mills
ran on full production schedules excluding maintenance and holiday
shutdowns and produced at 88% of stated capacity in both 2019 and
2018. Norbord expects to ship more OSB in 2020 from the continued
ramp-up of the reinvested Inverness mill as well as the completion of
the second wood room and dryer.
For 2019, the Company generated modest Margin Improvement
Program (MIP) gains as improved productivity and product mix were
offset by the efficiency impact of significant production
curtailments across the North American mills. MIP is measured
relative to the prior year at constant prices and exchange
rates.
Capital investments totaled $141
million ($144 including
intangible assets) in 2019, including the second phase of the
Inverness, Scotland project and
the continued rebuild project at the Chambord, Quebec mill.
Included in capital investments was $28
million of the $46 million
(£35 million) budgeted for the second phase investment to further
expand capacity at the Inverness
mill by 225 MMsf (3/8-inch basis) (200,000 cubic metres)
through the addition of a second wood room and dryer. This project
is expected to be completed by the second half of 2020 and is
consistent with the Company's strategy of growing its European OSB
capacity to serve continued substitution growth in its key
markets.
Also included in capital investments was $24 million ($51
million project-to-date) of the $71
million budget to rebuild the indefinitely curtailed
Chambord mill for an eventual
restart. The Company has not yet made a restart decision, however,
and will only do so when it is sufficiently clear that customers
require more product.
Norbord's 2020 capital expenditure budget is approximately
$100 million for maintenance of
business projects and projects focused on reducing manufacturing
costs across the mills, as well as a portion of the Chambord mill rebuild and the Inverness expansion project. It also includes
investments to support the Company's strategy to increase the
production of specialty products for industrial applications and
exports.
Operating working capital increased by $32 million during the year to $120 million at year-end primarily due to lower
accounts payable and accrued liabilities. Higher inventory was
offset by lower accounts receivable. The lower accounts payable and
accrued liabilities were primarily attributed to lower mill profit
share and bonus accruals due to lower earnings as well as lower
accrued capital expenditures. Higher inventory was primarily a
result of higher finished goods inventory levels due to the timing
of mill curtailments. Lower accounts receivable was primarily
attributed to lower North American pricing and shipment volumes.
Working capital continues to be managed at minimal levels across
the Company.
At year-end, the Company had unutilized liquidity of
$272 million, comprising $20 million in cash and cash equivalents,
$237 million in revolving bank lines
and $15 million in available drawings
under its accounts receivable securitization program. The Company's
tangible net worth was $999 million
and net debt to capitalization on a book basis was 40%, with both
values well within bank covenants.
Dividend
The Board of Directors declared a quarterly variable dividend of
C $0.20 per common share, payable on
March 23, 2020 to shareholders of
record on February 28, 2020,
unchanged from the prior quarter's level. Any dividends reinvested
on March 23, 2020 under the Company's
Dividend Reinvestment Plan will be used by the transfer agent to
purchase common shares on the open market.
Norbord's dividends are declared in Canadian dollars. Registered
and beneficial shareholders may opt to receive their dividends in
either Canadian dollars or the US dollar equivalent. Unless they
request the US dollar equivalent, shareholders will receive
dividends in Canadian dollars. The US dollar equivalent of the
dividend will be based on the Bloomberg FX Fixings Service (BFIX)
noon exchange rate on the record date or, if the record date falls
on a weekend or holiday, on the BFIX noon exchange rate of the
preceding business day.
Registered shareholders wishing to receive the US dollar
dividend equivalent should contact Norbord's transfer agent, AST
Trust Company (Canada), by phone
at 1-800-387-0825 or by email at inquiries@canstockta.com.
Beneficial shareholders (i.e., those holding their Norbord shares
with their brokerage) should contact the broker with whom their
shares are held.
Norbord's variable dividend policy targets the payment to
shareholders of a portion of free cash flow based upon the
Company's financial position, results of operations, cash flow,
capital requirements and restrictions under the Company's revolving
bank lines, as well as the market outlook for the Company's
principal products and broader market and economic conditions,
among other factors. The Board retains the discretion to amend the
Company's dividend policy in any manner and at any time as it may
deem necessary or appropriate in the future. For these reasons, as
well as others, the Board in its sole discretion can decide to
increase, maintain, decrease, suspend or discontinue the payment of
cash dividends in the future.
Normal Course Issuer Bid
In October 2019, Norbord renewed
its normal course issuer bid (NCIB) in accordance with TSX rules.
During 2019, 0.2 million shares were purchased under this bid at a
cost of $5 million. In December 2019, the Company entered into an
automatic share purchase plan (ASPP) in order to facilitate the
repurchase of its common shares under its NCIB during the regularly
scheduled quarterly trading blackout period and in January 2020, the Company repurchased an
additional 0.1 million shares under the ASPP at a cost of
$2 million.
In October 2018, Norbord renewed
its prior NCIB in accordance with TSX rules. During 2018, 3.8
million shares were purchased at a cost of $102 million and during 2019, 1.4 million shares
were purchased at a cost of $39
million. The Company exhausted this NCIB limit with a total
of 5.2 million shares repurchased for $141
million.
Additional Information
Norbord's year-end 2019 letter to shareholders, news release,
management's discussion and analysis, annual consolidated audited
financial statements and notes to the financial statements have
been filed on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and are
available in the investor section of the Company's website at
www.norbord.com. Shareholders may receive a hard copy of Norbord's
audited annual financial statements free of charge upon request.
The Company has also made available on its website presentation
materials containing certain historical and forward-looking
information relating to Norbord, including materials that contain
additional information about the Company's financial results.
Shareholders are encouraged to read this material.
Conference Call
Norbord will hold a conference call for analysts and
institutional investors on Wednesday,
February 5, 2020 at 11:00 a.m.
ET. The call will be broadcast live over the internet via
www.norbord.com and www.newswire.ca. An accompanying presentation
will be available in the "Investors/Conference Call" section of the
Norbord website prior to the start of the call. A replay number
will be available approximately one hour after completion of the
call and will be accessible until March 6,
2020 by dialing 1-888-203-1112 or 647-436-0148 (passcode
6868999 and pin 8172). Audio playback and a written transcript will
be available on the Norbord website.
Norbord Profile
Norbord Inc. is a leading global manufacturer of wood-based
panels and the world's largest producer of oriented strand board
(OSB). In addition to OSB, Norbord manufactures particleboard,
medium density fibreboard and related value-added products. Norbord
has assets of approximately $1.9
billion and employs approximately 2,400 people at 17 plant
locations in the United States,
Canada and Europe. Norbord is a publicly traded company
listed on the Toronto Stock Exchange and New York Stock Exchange
under the symbol "OSB".
This news release contains forward-looking statements, as
defined by applicable securities legislation, including statements
related to our strategy, projects, plans, future financial or
operating performance and other statements that express
management's expectations or estimates of future performance.
Often, but not always, forward-looking statements can be identified
by the use of words such as "set up," "on track," "expect,"
"estimate," "forecast," "target," "outlook," "schedule,"
"represent," "continue," "intend," "should," "would," "could,"
"will," "can," "might," "may," and other expressions which are
predictions of or indicate future events, trends or prospects and
which do not relate to historical matters identify forward-looking
statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Norbord to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements.
Although Norbord believes it has a reasonable basis for
making these forward-looking statements, readers are cautioned not
to place undue reliance on such forward-looking information. By its
nature, forward-looking information involves numerous assumptions,
inherent risks and uncertainties, both general and specific, which
contribute to the possibility that the predictions, forecasts and
other forward-looking statements will not occur. These factors
include, but are not limited to: (1) assumptions in connection with
the economic and financial conditions in the US, Europe, Canada and globally; (2) risks inherent to
product concentration and cyclicality; (3) effects of competition
and product pricing pressures; (4) risks inherent to customer
dependence; (5) effects of variations in the price and availability
of manufacturing inputs, including continued access to fibre
resources at competitive prices and the impact of third-party
certification standards; (6) availability of transportation
services, including truck and rail services, and port facilities;
(7) various events that could disrupt operations, including
natural, man-made or catastrophic events and ongoing relations with
employees; (8) impact of changes to, or non-compliance with,
environmental or other regulations; (9) government restrictions,
standards or regulations intended to reduce greenhouse gas
emissions; (10) impact of weather and climate change on Norbord's
operations or the operations or demand of its suppliers and
customers; (11) impact of any product liability claims in excess of
insurance coverage;(12) risks inherent to a capital intensive
industry; (13) impact of future outcomes of tax exposures; (14)
potential future changes in tax laws, including tax rates; (15)
effects of currency exposures and exchange rate fluctuations; (16)
future operating costs; (17) availability of financing, bank lines
and/or securitization programs; (18) impact of future cross-border
trade rulings or agreements; (19) implementation of important
strategic initiatives and identification, completion and
integration of acquisitions; (20) ability to implement new or
upgraded information technology infrastructure; (21) impact of
information technology service disruptions or failures; and (22)
changes in government policy and regulation.
The above list of important factors affecting forward-looking
information is not exhaustive. Additional factors are noted
elsewhere, and reference should be made to the other risks
discussed in filings with Canadian and US securities regulatory
authorities. Except as required by applicable law, Norbord does not
undertake to update any forward-looking statements, whether written
or oral, that may be made from time to time by, or on behalf of,
the Company, whether as a result of new information, future events
or otherwise, or to publicly update or revise the above list of
factors affecting this information. See the "Caution Regarding
Forward-Looking Information" statement in the February 4, 2020 Annual Information Form and the
cautionary statement contained in the "Forward-Looking Statements"
section of the 2019 Management's Discussion and
Analysis dated February 4,
2020.
Norbord defines Adjusted EBITDA as earnings determined in
accordance with International Financial Reporting Standards (IFRS)
before finance costs, interest income, income taxes, depreciation,
amortization and non-recurring or other items; Adjusted earnings
(loss) as earnings determined in accordance with IFRS before
non-recurring or other items and using a normalized income tax
rate; and Adjusted earnings per share is Adjusted earnings divided
by the weighted average number of common shares outstanding (on a
basic or diluted basis, as specified). Adjusted EBITDA, Adjusted
earnings, and Adjusted earnings per share are non-IFRS financial
measures, do not have any standardized meaning prescribed by IFRS
and are therefore unlikely to be comparable to similar measures
presented by other companies. See "Non-IFRS Financial Measures" in
Norbord's 2019 Management's Discussion and Analysis dated
February 4, 2020 for a quantitative
reconciliation of Adjusted EBITDA and Adjusted earnings to earnings
(the most directly comparable IFRS measure).
February 5, 2020
To Our Shareholders:
Fiscal 2019 was a challenging year for Norbord, and for the
North American wood products industry more generally, as a slow US
housing market created headwinds for our industry. We worked
diligently as a company to confront these issues and undertook a
number of initiatives to adjust our operations to the current
realities. In particular, we took significant downtime across our
mills and made the difficult but necessary decisions to
indefinitely curtail production at two of our North American
mills.
We generated $138 million of
Adjusted EBITDA in 2019, well down from our record result in 2018,
an extraordinary year in which we generated the highest Adjusted
EBITDA in Norbord's history. We were challenged by market
conditions that resulted in persistently weak OSB prices throughout
2019. In response, we consolidated downtime across our operating
North American mills, which allowed us to more efficiently allocate
production volumes, resulting in record production at two mills and
lower North American unit manufacturing costs. This reflects our
team's fundamental focus on continuous improvement and operational
discipline, and our ongoing commitment to cost management.
We also continued our balanced approach to creating shareholder
value. We saw a compelling opportunity to buy back $44 million of our shares at prices we view to be
well below intrinsic value. We also used our variable dividend
policy in the way it is intended, adjusting it to the current
business conditions while still returning $86 million of cash to shareholders. On the
strength of our prudent approach to capital allocation, we ended
the year with a solid balance sheet, giving us the continued
flexibility to evaluate and pursue value enhancement
opportunities.
Managing Through Challenging Conditions
Despite favourable underlying indicators, US homebuilding demand
was slow to translate into construction activity in the second half
of 2018 and through most of 2019. This trend did not begin to
improve until the end of 2019 as a buildup of unsold housing
inventory was eventually absorbed, mortgage rates continued to ease
and builders adjusted their product offerings to suit growing
demand for more affordable, entry-level homes.
In response to the backdrop of softer OSB demand through most of
the year, we took deliberate action to adjust our production,
indefinitely curtailing our 100 Mile House, British Columbia mill and Line 1 of our mill
in Cordele, Georgia. Combined,
these curtailments reduced our available North American capacity by
nearly 12%, aligning our production to customer demand. These were
necessary but difficult decisions that impacted our experienced,
hard-working team of employees at both mills. I would like to once
again thank them for their efforts and commitment.
Our North American specialty products sales volumes were mixed
in 2019. While our export sales were impacted by global trade
uncertainty, our industrial sales increased. We remain focused on
fulfilling the real opportunities we see for industrial products
growth. The investments we have made in the finishing ends at many
of our mills have given us new product capabilities, allowing us to
work with customers on new applications, such as the use of OSB for
the core of products like countertops and other overlay
applications. We will continue to adapt our production capabilities
to expand the overall OSB market.
In Europe, slower industrial
production in Germany and the
continued uncertainty from Brexit caused prices to decline from
recent peaks toward historic averages. As a result, our EBITDA
decreased but remained above the longer-term average, and 2019
still represented the third-best year ever for our European
business. While prices will fluctuate and influence our margins,
overall European OSB demand continues to grow, supported by the
ongoing trend of OSB substitution for plywood. Our expanded
Inverness, Scotland mill is an
important strategic asset, positioning us to benefit from the
steady increase expected in European OSB demand. As the ramp-up at
Inverness continues, we expect the
mill's productivity and cost performance to further
improve.
Safety is an overarching priority for Norbord and 2019 was a
source of both disappointment and optimism. Our OSHA recordable
injury rate increased to 1.31, though fortunately none of the
injuries were serious. As part of our commitment to achieving
world-class safety performance, last year we launched "Stronger
Together," a new company-wide safety initiative aimed at
reinforcing the importance of safety to both our employees and our
company performance. We are encouraged by the level of employee
engagement we have seen to-date and are confident this commitment
will support our efforts toward continuous safety
improvement.
Priorities for 2020
Our focus in 2020 is on seizing the opportunities of an
improving OSB market in North
America and regaining momentum. Seasonally adjusted annual
US housing permits were 1.42 million in December (up 6%
year-over-year) and we are encouraged by the demand we are seeing
from our customers in the first weeks of the year. Additionally,
consensus forecasts from US housing economists point to 3%
year-over-year growth in starts, and industry experts expect North
American OSB markets to tighten in 2020 as demand increases and the
2019 capacity shutdowns are fully realized.
We are undertaking a number of initiatives across our mill
portfolio to support operational productivity. We have consolidated
the downtime and curtailments we took in 2019 and will focus on
running our mills even more efficiently. Consistent with this
focus, we are implementing projects to reduce manufacturing costs
and making investments to support our strategy to increase
production of specialty products for industrial applications and
exports.
We will continue to allocate our capital with discipline. We
have set a 2020 capital budget of $100
million, which is sufficient to support our product growth
objectives and our focus on operating efficiently and safely, but
which is about half of our annual investment over the past three
years. A portion of our 2020 budget includes further work on the
second phase investment at our Inverness mill as well as additional capital
at our Chambord, Quebec mill,
where we continue to prepare for an eventual restart, though no
decision has yet been made about timing. We also remain committed
to returning excess cash to our shareholders, and our variable
dividend policy gives us the flexibility to balance capital
allocation decisions with the inherent cyclicality in our
business.
Similarly, we will continue to carefully examine our production
capacity. We have the ability to bring back indefinitely curtailed
capacity when market conditions warrant, but these decisions will
continue to be guided by market analysis and customer
demand.
In 2020, we will also provide greater disclosure of our ESG
(Environmental, Social and Governance) performance. We have always
focused on our environmental performance as a positive attribute
for our business. We believe we have a good story to tell on the
ESG front as wood is a renewable resource and wood products like
OSB actually sequester carbon. In fact, we estimate the net impact
of the OSB production from our operations offsets the annual
emissions from approximately 900,000 vehicles.
While 2019 was a difficult year, we managed our operations and
balance sheet in a prudent manner that we believe positions our
company well for the coming year and beyond. We are confident that
a strengthening OSB market will translate into better financial
performance in 2020 and, as always, we thank our shareholders for
their investment in Norbord.
In closing, I would like to recognize Nigel Banks, who is retiring as Senior Vice
President, Corporate Services at the end of February. Nigel joined
Norbord in 2010 and made several lasting contributions to our
company, having helped shape our culture, introduced organizational
effectiveness tools and enhanced our view of the importance of
talent management in our company's success. On behalf of everyone
at Norbord, I would like to thank Nigel for his service and wish
him well for the future. I would also like to introduce
Greg Mackie, our Vice President of
Human Resources & Environment, Health and Safety, as Nigel's
successor. Greg came to Norbord via the merger with Ainsworth in
2015 and has held increasingly senior roles in human resources
management. With his nearly 20 years of experience across the
manufacturing, transportation and forestry sectors, we are pleased
that Greg is part of our senior leadership team.
Peter Wijnbergen
President & CEO
This letter includes forward-looking statements, as defined
by applicable securities legislation. See the Caution Regarding
Forward-Looking Information statement in the February 4, 2020 Annual Information Form and the
cautionary statement contained in the Forward-Looking Statements
section of the 2019 Management's Discussion and Analysis dated
February 4, 2020.
Adjusted EBITDA, Adjusted earnings (loss) and Adjusted
earnings (loss) per share are non-IFRS financial measures. See the
Non-IFRS Financial Measures section in Norbord's 2019 Management's
Discussion and Analysis dated February 4,
2020.
Consolidated Balance Sheets
|
|
|
(US $
millions)
|
Dec 31,
2019
|
Dec 31,
2018
|
Assets
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
20
|
$
|
128
|
Accounts
receivable
|
136
|
149
|
Taxes
receivable
|
63
|
—
|
Inventory
|
230
|
220
|
Prepaids
|
13
|
12
|
|
462
|
509
|
Non-current
assets
|
|
|
Property, plant and
equipment
|
1,427
|
1,402
|
Intangible
assets
|
21
|
20
|
Deferred income tax
assets
|
2
|
6
|
Other
assets
|
9
|
5
|
|
1,459
|
1,433
|
|
$
|
1,921
|
$
|
1,942
|
Liabilities and
shareholders' equity
|
|
|
Current
liabilities
|
|
|
Accounts payable and
accrued liabilities
|
$
|
259
|
$
|
293
|
Accrued liability
under ASPP
|
—
|
42
|
Taxes
payable
|
1
|
28
|
|
260
|
363
|
Non-current
liabilities
|
|
|
Long-term
debt
|
657
|
550
|
Other long-term
debt
|
68
|
—
|
Other
liabilities
|
40
|
34
|
Deferred income tax
liabilities
|
192
|
172
|
|
957
|
756
|
Shareholders'
equity
|
704
|
823
|
|
$
|
1,921
|
$
|
1,942
|
Consolidated Statements of (Loss) Earnings
|
|
|
Years ended December
31, (US $ millions, except per share information)
|
2019
|
2018
|
Sales
|
$
|
1,731
|
$
|
2,424
|
Cost of
sales
|
(1,582)
|
(1,686)
|
General and
administrative expenses
|
(14)
|
(18)
|
Depreciation and
amortization
|
(136)
|
(134)
|
Loss on disposal of
assets, net
|
(3)
|
(2)
|
Impairment of
assets
|
(10)
|
(80)
|
Costs related to 100
Mile House indefinite curtailment
|
(2)
|
—
|
Operating (loss)
income
|
(16)
|
504
|
Non-operating
(expense) income:
|
|
|
Finance
costs
|
(45)
|
(37)
|
Interest
income
|
2
|
4
|
Costs on early
extinguishment of 2020 Notes
|
(10)
|
—
|
(Loss) earnings
before income tax
|
(69)
|
471
|
Income tax recovery
(expense)
|
27
|
(100)
|
(Loss)
earnings
|
$
|
(42)
|
$
|
371
|
(Loss) earnings per
common share
|
|
|
Basic
|
$
|
(0.51)
|
$
|
4.29
|
Diluted
|
(0.51)
|
4.27
|
Consolidated Statements of Comprehensive (Loss)
Income
Years ended December
31, (US $ millions)
|
2019
|
2018
|
(Loss)
earnings
|
$
|
(42)
|
$
|
371
|
Other comprehensive
income (loss), net of tax
|
|
|
Items that may be
reclassified subsequently to earnings:
|
|
|
Foreign currency
translation gain (loss) on foreign operations
|
14
|
(21)
|
Other comprehensive
income (loss), net of tax
|
14
|
(21)
|
Comprehensive (loss)
income
|
$
|
(28)
|
$
|
350
|
Consolidated Statements of Changes in Shareholders'
Equity
Years ended December
31, (US $ millions)
|
2019
|
2018
|
Share
capital
|
|
|
Balance, beginning of
year
|
$
|
1,280
|
$
|
1,350
|
Issue of common
shares upon exercise of options and DRIP
|
1
|
11
|
Common shares
repurchased and cancelled
|
(27)
|
(57)
|
Common shares
repurchased and cancelled under ASPP
|
24
|
(24)
|
Balance, end of
year
|
$
|
1,278
|
$
|
1,280
|
Merger
reserve
|
$
|
(96)
|
$
|
(96)
|
Contributed
surplus
|
|
|
Balance, beginning of
year
|
$
|
4
|
$
|
8
|
Stock-based
compensation
|
1
|
1
|
Stock options
exercised
|
(1)
|
(1)
|
Common shares
repurchased and cancelled
|
—
|
(4)
|
Balance, end of
year
|
$
|
4
|
$
|
4
|
Retained
deficit
|
|
|
Balance, beginning of
year
|
$
|
(168)
|
$
|
(67)
|
(Loss)
earnings
|
(42)
|
371
|
Common share
dividends
|
(86)
|
(417)
|
Common shares
repurchased and cancelled
|
(21)
|
(37)
|
Common shares
repurchased and cancelled under ASPP
|
18
|
(18)
|
Balance, end of
year(i)
|
$
|
(299)
|
$
|
(168)
|
Accumulated other
comprehensive loss
|
|
|
Balance, beginning of
year
|
$
|
(197)
|
$
|
(176)
|
Other comprehensive
income (loss), net of tax
|
14
|
(21)
|
Balance, end of
year
|
$
|
(183)
|
$
|
(197)
|
Shareholders'
equity
|
$
|
704
|
$
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Retained deficit
comprised of:
|
|
Deficit arising on
cashless exercise of warrants in 2013
|
$
|
(263)
|
$
|
(263)
|
All other retained
(deficit) earnings
|
(36)
|
95
|
|
$
|
(299)
|
$
|
(168)
|
Consolidated Statements of Cash Flows
Years ended December
31, (US $ millions)
|
2019
|
2018
|
CASH PROVIDED BY
(USED FOR):
|
|
|
Operating
activities
|
|
|
(Loss)
earnings
|
$
|
(42)
|
$
|
371
|
Items not affecting
cash:
|
|
|
Depreciation and
amortization
|
136
|
134
|
Deferred income
tax
|
20
|
19
|
Impairment of
assets
|
10
|
80
|
Costs on early
extinguishment of 2020 Notes
|
10
|
—
|
Costs related to 100
Mile House indefinite curtailment
|
1
|
—
|
Loss on disposal of
assets, net
|
3
|
2
|
Other
items
|
16
|
(5)
|
|
154
|
601
|
Net change in
non-cash operating working capital balances
|
(47)
|
52
|
Net change in taxes
receivable and taxes payable
|
(88)
|
(45)
|
|
19
|
608
|
Investing
activities
|
|
|
Investment in
property, plant and equipment
|
(146)
|
(210)
|
Investment in
intangible assets
|
(4)
|
(1)
|
|
(150)
|
(211)
|
Financing
activities
|
|
|
Issuance of
debt
|
350
|
—
|
Repayment of
debt
|
(240)
|
—
|
Premium on early
extinguishment of 2020 Notes
|
(9)
|
—
|
Debt issuance
costs
|
(6)
|
—
|
Accounts receivable
securitization drawings, net
|
68
|
—
|
Repayment of lease
obligations
|
(10)
|
—
|
Common share
dividends paid
|
(86)
|
(411)
|
Repurchase of common
shares
|
(48)
|
(98)
|
Issue of common
shares
|
1
|
4
|
|
20
|
(505)
|
Foreign exchange
revaluation on cash and cash equivalents held
|
3
|
(5)
|
Cash and cash
equivalents
|
|
|
Decrease during
year
|
(108)
|
(113)
|
Balance, beginning of
year
|
128
|
241
|
Balance, end of
year
|
$
|
20
|
$
|
128
|
View original
content:http://www.prnewswire.com/news-releases/norbord-reports-2019-earnings-declares-quarterly-dividend-300999145.html
SOURCE Norbord Inc.