2012 - Chemtrade Logistics Inc.

Transcription

Chemtrade Logistics
Income Fund
2012 Annual Report
Corporate Profile
Chemtrade operates a diversified business providing industrial chemicals
and services to customers in North America and around the world.
Chemtrade is one of North America’s largest suppliers of sulphuric acid,
liquid sulphur dioxide and sodium hydrosulphite, and a leading processor of
spent acid. Chemtrade is also a leading regional supplier of sulphur, sodium
chlorate, phosphorous pentasulphide, zinc oxide, and water treatment
chemicals. Chemtrade also provides industrial services such as processing
hydrogen sulphide and other by-products and waste streams.
Visit our website
Chemtrade’s Website – www.chemtradelogistics.com – is our primary medium for communicating
with our unitholders. The site is regularly updated with news releases concerning distributions, financial
results and other important developments, as well as presentations made to investor conferences and
our annual meeting presentation. An electronic copy of this report is available on the website.
We encourage our unitholders to visit the site regularly.
Contents
1
3
25
26
27
31
IBC
Letter to Unitholders
Management’s Discussion & Analysis
Management’s Responsibility for Financial Reporting
Auditors’ Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Unitholder Information
CHE.UN
Letter to Unitholders
Chemtrade had another strong year in 2012. The benefits of the successful
integration of the Marsulex businesses acquired in mid-2011, continued focus on
operational excellence, and financial prudence resulted in our strong financial
position and operating performance.
Although economic conditions were uncertain throughout the year, demand for
most of our products remained stable. Distributable cash after maintenance capital
expenditures for 2012 was $86.4 million, which is the highest amount we have ever
generated. This equates to $2.07 per unit, well in excess of our annual distribution
rate of $1.20 per unit.
2012 Financial Results1
Cash flow from operating activities in 2012 was $108.3 million (2011: $77.1 million) and distributable cash after
maintenance capital expenditures was $86.4 million or $2.07 per unit, compared with $73.2 million or $2.01 per
unit in 2011. Consolidated revenue for 2012 was $919.4 million (2011: $880.6 million) and EBITDA in 2012 was
$141.6 million (2011: $114.8 million).
Executing Our Plan
A large part of Chemtrade’s continuing success can be attributed to the consistent application of our four-pronged
strategic plan.
1. Growth – to increase the size and diversity of our earnings;
2. Business model – to mitigate the effects of typical commodity risks;
3. Operational excellence – to ensure sustainable earnings through reliable and efficient operations; and
4. Financial prudence – to provide financial flexibility to sustain our distribution rate, and enable us to pursue
initiatives to enhance and extend our business.
2012 was no exception.
Growth continued with the successful integration of the Marsulex businesses and their contribution for the full year.
As well as increasing the size and diversity of our earnings, this accretive acquisition enhanced the quality of our
earnings. We also achieved organic growth with the expansion of our ultra-pure acid plant in Tulsa, Oklahoma.
Our business model is a cornerstone of our strategy, and proved once again that even in uncertain economic conditions it delivers consistently strong results. The balance between various elements, such as contractual protection
and diversity in products and end markets mitigates the financial impact of typical chemical commodity risks.
Reliable and efficient plants are at the heart of operational excellence. In 2012 all our plants operated smoothly,
enabling Chemtrade to provide uninterrupted services to our customers and thereby enhancing our reputation
as a reliable and competitive supplier. We continue to protect this competitive advantage and the long term
sustainability of our earnings by investing in our capital equipment, our processes and our people.
ANNUAL REPORT 2012 - CHEMTRADE LOGISTICS INCOME FUND
1
Application of our policy of financial prudence remained a priority in 2012. During the year we continued to reduce
debt. In March 2012 we further strengthened our balance sheet by amending our credit agreement by increasing
the size of the facility to $400 million and by extending the term by almost two years. Virtually all of our senior credit
facilities are now revolving in nature, giving us tremendous flexibility to manage our cash and debt positions.
People
The skills and dedication of the Chemtrade team once again were a large factor in our success in 2012. Our people
are critical to the strong relationships we have with our customers and our industry-leading reputation for excellent
service. During the year we continued to invest in organizational development and greatly enhanced the learning
and development opportunities for our employees as well as the recognition of employees for their contributions.
In August, Susan J. McArthur joined the Board of Trustees of the Fund. Susan has extensive corporate advisory
experience with leading investment banks in North America and Europe. She is a valuable addition to our Board,
whose guidance and counsel are important elements in our ongoing success.
Conclusion2
2012 was a strong year for Chemtrade despite the uncertain economic environment that prevailed throughout the
year. Although macro-economic uncertainty remains, we expect demand levels for most of our products to remain
stable during 2013. We will continue to focus on the key building blocks that have made us successful, namely,
operational excellence, supply reliability and an engaged and active work force. We will also continue to optimize
our existing assets while seeking opportunities to expand the size, scale and scope of our business with new
businesses that complement our business model.
With our strong balance sheet and stable demand for our products, we remain confident that the current
distribution rate is sustainable going forward.
Mark Davis
President and Chief Executive Officer
March 4, 2013
2
1
Further detailed discussion of the Fund’s financial performance, including information on non-IFRS measures
and reconciliations with appropriate IFRS measures are contained in Management’s Discussion & Analysis.
2
See cautionary statements contained in Forward-looking Statements in Management’s Discussion & Analysis,
which also apply to the Letter to Unitholders.
Management’s Discussion and Analysis
The information in this Management’s Discussion and Analysis, or MD&A, is intended to assist the reader in the
understanding and assessment of the trends and significant changes in the results of operations and financial condition
of Chemtrade Logistics Income Fund (the “Fund”). Throughout this MD&A, the term “Chemtrade” refers to the Fund
and its consolidated subsidiaries. The terms “we”, “us” or “our” similarly refers to Chemtrade. This MD&A should be
read in conjunction with the audited consolidated financial statements of Chemtrade for the year ended December 31,
2012.
Chemtrade’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”).
Chemtrade’s reporting currency is the Canadian dollar. In this MD&A per unit amounts are calculated using the weighted
average number of units outstanding for the applicable period unless otherwise indicated.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this MD&A constitute forward-looking statements within the meaning of certain securities laws, including the Securities Act (Ontario). Forward-looking statements can be generally identified by the use of
words such as “anticipate”, “continue”, “estimate”, “expect”, “expected”, “intend”, “may”, “will”, “project”, “plan”,
“should”, “believe” and similar expressions. Specifically, forward-looking statements in this MD&A include statements
respecting certain future expectations about: prices and demand for commodities, products and services; capital expenditures; the sustainability of the Fund’s distributions; the ability of Chemtrade to access tax losses and tax attributes;
material compliance with legal and regulatory environmental requirements; sources, use and sufficiency of cash flows;
the amount of any long-term incentive compensation; Chemtrade’s ability to renew its term debt at maturity and to renew
certain key contracts; the impact and timing of Vale’s reduction in sulphuric acid production; and the effect of changes
in the exchange and interest rates and the prices of key products. Forward-looking statements in this MD&A describe
the expectations of Chemtrade as of the date hereof. These statements involve known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements for a variety of reasons, including without limitation the risks and uncertainties detailed under the RISK
FACTORS section of the Fund’s latest Annual Information Form and the RISKS AND UNCERTAINTIES section below.
Although Chemtrade believes the expectations reflected in these forward-looking statements and the assumptions upon
which they are based are reasonable, no assurance can be given that actual results will be consistent with such
forward-looking statements, and they should not be unduly relied upon. With respect to the forward-looking statements
contained in this MD&A, Chemtrade has made assumptions regarding: there being no significant disruptions affecting
the operations of Chemtrade, whether due to labour disruptions, supply disruptions, power disruptions, transportation
disruptions, damage to equipment or otherwise; the ability of Chemtrade to obtain products, raw materials, equipment,
transportation, services and supplies in a timely manner to carry out its activities and at prices consistent with current
levels or in line with Chemtrade’s expectations; the timely receipt of required regulatory approvals; the cost of regulatory and environmental compliance being consistent with current levels or in line with Chemtrade’s expectations; the
ability of Chemtrade to successfully access tax losses and tax attributes; the ability of Chemtrade to obtain financing on
acceptable terms; currency, exchange and interest rates being consistent with current levels or in line with Chemtrade’s
expectations; and global economic performance.
Chemtrade disclaims any intention or obligation to update any forward-looking statement even if new information
becomes available, as a result of future events or for any other reason. The forward-looking statements contained
herein are expressly qualified in their entirety by this cautionary statement.
3
RECENT DEVELOPMENTS AND ACQUISITION
Modification of Long-Term Debt In March 2012, Chemtrade modified its long-term debt agreement entered into in 2011 (“2011 Credit Facilities”) by
increasing the size of the facility to $400.0 million. Almost the entire revised facility is revolving in nature, whereas
previously the majority was term debt. Additionally, the maturity date of the 2011 Credit Facilities was extended by
almost two years to March 2017.
Marsulex Acquisition On June 24, 2011, Chemtrade completed the purchase of 100% of the outstanding shares of Marsulex Inc.
(“Marsulex”) (the “Marsulex Acquisition”). Consequently, the year ended December 31, 2012 is not directly
comparable with the same period of 2011 since 2012 results include Marsulex, whereas 2011 has only six months
of results from the Marsulex business.
Additionally, during the year ended December 31, 2011, acquisition costs of $14.8 million were recorded in selling
and administrative expenses.
4
FINANCIAL HIGHLIGHTS
These financial highlights have been presented in accordance with IFRS.
Three Months Ended
Year Ended
December 31,December 31, December 31, December 31,December 31, ($’000 except per unit amounts)
2012 2011 2012 2011 2010
Revenue
$223,032
$247,220 $919,367 $
Earnings
$15,700 $3,580$ 39,027$
Earnings per unit - Basic
- Diluted
$0.38
$0.09$
$0.28
$0.09$
Total assets $973,592
Current portion of long-term debt
$2,731$2,539$ 2,731$
Long-term bank debt
$225,260
$298,008 $225,260 $ 298,008$
Convertible unsecured subordinated
debentures
$178,905
$169,420 $178,905 $ 169,420$ 92,700
EBITDA (1)
EBITDA per unit (1)(2)
$34,684 $32,624 $141,571 $ 114,778$ 71,338
$0.83
$0.78$ 3.40$
3.15$ 2.33
0.94$
0.94$
$
558,070
60,283$ 28,107
1.66$
1.48$
0.92
0.92
$1,075,602 $973,592 $1,075,602 $480,576
Cash flows from operating activities
$39,571 $38,013 $108,306 $
per unit (2)
$0.95
$0.91$ 2.60$
Adjusted cash flows
from operating activities (1)
$28,612 $25,567 $116,228 $
Adjusted cash flows
from operating activities per unit (1)(2)
$0.69
$0.61$ 2.79$
Distributable cash after maintenance
capital expenditures (1)
capital expenditures per unit (1)(2)
880,592
$13,830 $12,262$ 86,367$
$0.33
$0.29$
2.07$
2,539$ 75,776
-
77,104$ 56,922
2.12$
1.86
96,725$ 51,093
2.66$
1.67
73,236$ 36,331
2.01$
1.18
Distributions declared
Distributions declared per unit (3)
$12,500 $12,499$ 49,998$
$0.30
$0.30$ 1.20$
44,500$ 36,805
1.20$ 1.20
Distributions paid
Distributions paid per unit (3)
$12,499 $12,499$ 49,997$
$0.30
$0.30$ 1.20$
43,401$ 36,805
1.20$ 1.20
(1)
See NON-IFRS MEASURES.
(2)
Based on weighted average
number of units outstanding
for the period of: 41,665,06841,664,47041,664,620 36,423,49530,670,470
(3)
Based on actual number of units
outstanding on record date.
5
NON-IFRS MEASURES
EBITDA
Throughout this MD&A, the term EBITDA is used to describe earnings before any deduction for net finance costs, taxes, depreciation and
amortization and other charges such as unrealized foreign exchange (gain) loss. EBITDA is a metric used by many investors and analysts
to compare organizations on the basis of ability to generate cash from operations. Management considers EBITDA (as defined) to be an
indirect measure of operating cash flow, which is a significant indicator of the success of any business. EBITDA is not intended to be
representative of cash flow from operations or results of operations determined in accordance with IFRS or cash available for distribution.
EBITDA is not a recognized measure under IFRS. Chemtrade’s method of calculating EBITDA may differ from methods used by other
income trusts or companies, and accordingly may not be comparable to similar measures presented by other organizations. A reconciliation
of EBITDA to earnings follows:
Three Months Ended
Year Ended
December 31, December 31, December 31, December 31, December 31,
($’000)
2012
2011
2012
Earnings
$15,700
$3,580$ 39,027$
Add:
Unrealized foreign exchange loss (gain) 1,586 (4,793) (3,566)
Depreciation and amortization
19,933 19,361 77,523
Loss on disposal of property,
plant and equipment
384
450
384
Net finance costs 2,091 15,312 31,711
Income tax recovery
(5,010) (1,286) (3,508)
EBITDA 2011
2010
60,283$ 28,107
5,477
351
56,504 43,448
701
751
17,436 17,013
(25,623) (18,332)
$34,684
$32,624$ 141,571$ 114,778$ 71,338
Cash Flow
The following table is derived from, and should be read in conjunction with, the consolidated statements of cash flows.Management
believes this supplementary disclosure provides useful additional information related to the cash flows of Chemtrade including the amount
of cash available for distribution to Unitholders, repayment of debt and other investing activities. Certain sub-totals presented within the cash
flows table below, such as “Adjusted cash flows from operating activities”, “Distributable cash after maintenance capital expenditure” and
“Distributable cash after all capital expenditure”, are not defined terms under IFRS. These sub-totals are used by Management as measures
of internal performance and as a supplement to the consolidated statements of cash flows. Investors are cautioned that these measures
should not be construed as an alternative to using earnings as a measure of profitability or as an alternative to the IFRS consolidated
statements of cash flows. Further, Chemtrade’s method of calculating each measure may not be comparable to calculations used
by other income trusts bearing the same description.
6
Three Months Ended
Year Ended
December 31,December 31, December 31, December 31, December 31,
($’000)
2012 2011 2012 2011 2010
$39,571$38,013 $108,306 $ 77,104$ 56,922
Add (deduct):
Changes in non-cash working capital
and other items
(10,959)
(12,446) 7,92219,621 (5,829)
Adjusted cash flows from operating activities
28,61225,567116,228 96,725 51,093
Less:
Maintenance capital expenditure
14,78213,30529,86123,489 14,762
capital expenditure 13,830 12,26286,36773,236 36,331
Less:
Non-maintenance capital expenditure (1)
Distributable cash after all
capital expenditure
(1)
$
3,210 1,95113,31710,053
10,620
769
$10,311$ 73,050 $ 63,183$ 35,562
Non-maintenance capital expenditures are: (a) pre-funded, usually as part of a significant acquisition and related financing; (b) considered to expand
the capacity of Chemtrade’s operations; (c) significant environmental capital expenditures that are considered to be non-recurring; or (d) capital
expenditures to be reimbursed by a third party.
CONSOLIDATED OPERATING RESULTS
Consolidated revenue for the fourth quarter of 2012 was $223.0 million, which was $24.2 million lower than the level recorded
during the fourth quarter of 2011. On a year-to-date basis, revenue for 2012 was $919.4 million, which was $38.8 million
higher than the revenue recorded for the same period in 2011. The primary reason for the decrease in revenues during the
fourth quarter of 2012 was lower volume and lower prices of sulphuric acid in the International segment. On a year-to-date
basis, the increase in revenues during 2012 was due to the inclusion of revenues of Marsulex which was acquired in June
2011. See RECENT DEVELOPMENTS AND ACQUISITION. This was partially offset by lower revenues in the International
segment.
Chemtrade’s EBITDA for the fourth quarter of 2012 was $2.1 million higher than the same period of 2011. This improvement
was mainly due to strength in the SPPC segment and due to lower Corporate costs in 2012. On a year-to-date basis, EBITDA
during 2012 was $26.8 million higher than the same period in 2011. This improvement in EBITDA is mainly due to the inclusion of results of Marsulex in 2012 and due to strength in certain products within the SPPC segment. Additionally, 2011 EBITDA
was adversely affected by the inclusion of $14.8 million of acquisition costs. Finally, the magnitude of the improvement would
have been greater but it was reduced by the recovery of $8.3 million relating to the settlement of the Beaumont business interruption claim (as described in the BEAUMONT INCIDENT section) recorded during the first quarter of 2011. Earnings during
the fourth quarter of 2012 were higher than the fourth quarter of 2011 mainly due to lower finance costs in the fourth quarter
of 2012 relative to 2011 and due to an improvement in EBITDA. Despite the higher level of EBITDA generated during the year
of 2012, earnings were lower than the same period of 2011 when a large income tax recovery of $25.6 million was recorded,
whereas in 2012 an income tax recovery of only $3.5 million was recorded. Additionally, during 2011, there was an unrealized
gain of $3.3 million on the mark-to-market valuation of the convertible unsecured subordinated debentures (the “debentures”)
recorded in net finance costs, whereas during 2012, a mark-to-market valuation loss of $9.5 million on the debentures was
recorded. Finally, there were higher levels of depreciation and amortization recorded in 2012 compared with 2011 as 2012
includes depreciation and amortization of assets acquired as part of the Marsulex Acquisition.
7
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
SPPC
Three Months Ended
Year Ended
December 31, December 31, December 31, December 31,
($’000)
2012 2011 2012 2011
Revenue
$146,964 $150,070 $606,333 $514,359
Earnings before the under-noted (EBITDA)
36,370
34,637
155,353125,986
(17,552)(17,107)(68,083) (47,341)
Loss on disposal of assets (166) (264) (166)
(519)
Net finance costs (2,624)(3,948)(12,270) (10,842)
Income tax (expense) recovery 5,756 (898) 1,185 34,868
Earnings
$21,784$12,420$ 76,019$102,152
SPPC markets, removes and/or produces merchant, regenerated and ultra pure sulphuric acid, liquid sulphur
dioxide, sodium hydrosulphite, elemental sulphur, hydrogen sulphide, carbon disulphide and phosphorus pentasulphide. The SPPC segment also provides water treatment chemicals and services and processing or handling of
industrial byproducts or waste streams. These products are marketed primarily to North American customers.
For the fourth quarter of 2012, SPPC generated revenue of $147.0 million, which was $3.1 million lower than
the level generated in the fourth quarter of 2011. The main reason for the decreased revenue was lower prices of
sulphur relative to 2011. EBITDA for the fourth quarter of 2012 was $1.7 million higher than the fourth quarter of
2011 as most products within this segment showed improvements. The lower net finance costs are primarily due
to lower debt levels in 2012 relative to 2011. Finally, there was an income tax expense in the fourth quarter 2011
compared with an income tax recovery in the fourth quarter of 2012, when the benefit of certain tax assets was
recognized.
2012 Revenues and EBITDA were higher than levels achieved during 2011 by $92.0 million and $29.4 million,
respectively, mainly due to the inclusion of results of the Marsulex business. Despite the higher EBITDA levels in
2012, earnings in 2012 were lower as there was a large income tax recovery recorded in 2011. Additionally, 2012
had higher depreciation and amortization expenses compared with 2011.
The income tax recovery during 2011 was due mainly to the recognition of the tax benefit of losses available in
foreign operations not previously recognized. Chemtrade has determined that it is more likely than not that the
deferred tax assets will be realized as a result of the acquisition of Marsulex. Net finance costs during 2012 were
higher than 2011, primarily due to the additional debt incurred to finance the Marsulex acquisition. Also, the
acquired assets were the main reason for the higher level of depreciation and amortization recorded during 2012
relative to 2011.
8
Pulp Chemicals
Three Months Ended
Year Ended
($’000)
2012201120122011
Revenue
$13,130 $12,694 $51,005
Loss on disposal of assets
Income tax (expense) recovery
Earnings
$50,460
3,0853,08711,302 13,245
(1,949)(1,785)(7,708) (7,324)
(218) (190)(218) (190)
(21)
-2,407
-
$897
$1,112 $5,783 $5,731
Pulp Chemicals produces sodium chlorate and crude tall oil (“CTO”), both of which are chemicals used in the pulp and
paper industry. Sodium chlorate is used to bleach pulp and CTO is used as a less expensive alternative energy source to
natural gas.
Revenues during the fourth quarter and year ended 2012 were higher than the same periods of 2011 by $0.4 million and
$0.5 million, respectively. EBITDA during the fourth quarter of 2012 was similar to the fourth quarter of 2011. EBITDA for
the year ended 2012 was lower than 2011 by $1.9 million mainly due to higher input costs. Earnings during the fourth
quarter and year ended 2012 were similar to the same periods of 2011. On a year-to-date basis, the decrease in EBITDA
from 2011 is offset by an income tax recovery recorded in 2012.
9
International
Three Months Ended
Year Ended
($’000)
2012 2011 2012 2011
Revenue $62,938$84,456 $262,029 $315,773
Gain on disposal of assets
Net finance income Income tax (expense) recovery Earnings
3,8384,77212,232 17,590
(432) (469) (1,732) (1,839)
-
4
-
8
6
8
33 151
(1,088) 438(2,626) (1,771)
$2,324
$4,753$ 7,907 $14,139
International operations provide removal and marketing services for elemental sulphur and sulphuric acid. These products
are marketed to customers globally.
During the fourth quarter of 2012, International’s revenue was $21.5 million lower than the level achieved during the
fourth quarter of 2011, mainly due to lower volumes and lower prices for sulphuric acid. This was also the primary reason
for EBITDA during the fourth quarter of 2012 being lower than the fourth quarter of 2011.
Revenues in 2012 were $53.7 million lower than 2011 mainly due to lower volumes and lower prices for sulphuric acid
and lower volumes of sulphur, which in turn led to lower levels of net earnings and EBITDA being realized during 2012
relative to 2011.
Corporate
Three Months Ended
Year Ended
($’000)
2012 2011 2012 2011
Cost of services
$8,609
$9,872$
Loss before the under-noted (EBITDA)
Unrealized foreign exchange (loss) gain
Net finance income (costs) Income tax recovery (expense)
Loss
37,316$42,043
(8,609) (9,872) (37,316) (42,043)
(1,586) 4,793 3,566 (5,477)
527(11,372) (19,474) (6,745)
363 1,746 2,542 (7,474)
$(9,305)
$(14,705)$
(50,682)$(61,739)
The Corporate segment includes the administrative costs of corporate activities such as treasury, finance, information
technology, human resources, legal and risk management, which are not directly allocable to an operating segment.
10
For the fourth quarter of 2012, corporate costs, excluding unrealized foreign exchange gains and losses, net
finance costs and income taxes were $1.3 million lower than the fourth quarter of 2011, primarily due to fair value
adjustments on the Total Return Long-Term Incentive Plan (“TR LTIP”). For the year ended December 31, 2012,
corporate costs, excluding unrealized foreign exchange gains and losses, were $4.7 million lower than the year
ended December 31, 2011, when costs were unusually high due to the recording of $14.8 million of acquisition
related costs. This was partially offset by higher corporate costs in 2012 due to the increased scale of corporate
activities resulting from the Marsulex Acquisition. TR LTIP expenses were also $3.0 million higher in 2012 than in
2011 due to fair value adjustments.
The comments on TR LTIP expenses relate to the 2010-2012, 2011-2013, and 2012-2014 TR LTIPs. The 20102012, 2011-2013, and 2012-2014 TR LTIP payouts are payable at the beginning of 2013, 2014 and 2015,
respectively and will be based upon total return achieved over the three year performance periods of each plan.
The nature of this calculation makes it difficult to forecast the amount of TR LTIP expenses that will be recorded
in any period, as it is based upon a valuation model which considers several variables.
The Corporate segment includes unrealized foreign exchange gains and losses on the translation of U.S. dollar
denominated debt, which was a result of changes in the value of the Canadian dollar relative to the U.S. dollar
during both periods. This exchange rate fluctuation also resulted in off-setting unrealized foreign exchange gains
and losses on the translation of U.S. dollar denominated assets in self-sustaining foreign operations. However, in
accordance with accounting rules, gains and losses resulting from these foreign exchange translations are required
to be shown in other comprehensive income rather than in earnings.
Net finance costs for the fourth quarter of 2012 were lower than the fourth quarter of 2011 due to gains recorded
on the fair value adjustment of the debentures in the fourth quarter of 2012 compared with losses in 2011. Net
finance costs were higher on a year-to-date basis primarily due to interest on the additional debentures issued in
December 2011. This was partially offset by transaction costs incurred on the issuance of the debentures in 2011.
Additionally, for the year ended December 31, 2011 a $3.3 million gain was recorded relating to the fair value of
the debentures versus a loss of $9.5 million in 2012. See LIQUIDITY AND CAPITAL RESOURCES - Financing
Activities.
During the fourth quarter of 2012 income tax recovery was $0.4 million compared with a $1.7 million recovery in
2011. During the year ended 2012 an income tax recovery of $2.5 million was recorded, whereas an expense of
$7.5 million was recorded during the year ended 2011. The recovery in 2012 was due to an increase in deductible
temporary differences partially offset by a deferred tax asset that was not permitted to be recognized under IFRS.
The expense in 2011 was due to a decrease in the tax rate applicable to deductible temporary differences from
prior periods that were transferred to a corporate subsidiary. See INCOME TAXES for more details.
BEAUMONT INCIDENT
In May 2010, a fire occurred at Chemtrade’s Beaumont, Texas facility. During the year ended December 31, 2010,
Chemtrade received partial payment of US$3.0 million related to its business interruption claim. During 2011,
Chemtrade concluded its business interruption claim and received a final payment of an additional US$8.6 million.
The related income has been recorded as a reduction to selling and administrative expenses in the SPPC segment
in 2011. The Beaumont plant was back on-line during the fourth quarter of 2010.
During 2010, Chemtrade wrote off the value of equipment that was damaged in the fire. The costs to repair and
replace these assets are recoverable under Chemtrade’s property insurance policy. At December 31, 2012, a
balance of $2.1 million related to these costs is included in trade and other receivables.
11
U.S. ENVIRONMENTAL PROTECTION AGENCY (“EPA”) SETTLEMENT
In January 2009, Chemtrade and Marsulex reached a settlement with the EPA and certain States, whereby new
emission limitations were established at each of Chemtrade’s five sulphuric acid manufacturing facilities and at
Marsulex’s Ohio sulphuric acid manufacturing facility. The agreement with Chemtrade arose from a broader EPA
initiative regarding the domestic sulphuric acid manufacturing industry. These plants are required to meet these
stricter limits by various agreed dates ranging from December 2009 to December 2012. All compliance deadlines
have been met and Chemtrade will continue to fulfill its obligations under this agreement.
FOREIGN EXCHANGE
Chemtrade has certain non-Canadian operating subsidiaries that use the U.S. dollar as their functional currency.
As Chemtrade reports in Canadian dollars, its reported earnings are exposed to fluctuations in the Canadian/U.S.
dollar exchange rate. Chemtrade currently estimates that on an unhedged basis, a one-cent increase in the
Canadian/U.S. dollar exchange rate reduces Distributable cash after maintenance capital expenditure by less
than $0.1 million on an annual basis and vice-versa.
In order to manage the effect of volatility of foreign exchange rates, Chemtrade has entered into a series of foreign
exchange contracts with its principal bankers. All foreign exchange contracts are under International Swap and
Derivatives Association (“ISDA”) agreements. Contracts in place at December 31, 2012 include future contracts
to sell US$2,765, $6,589, US$6,800, and €2,536 at weighted average exchange rates of €0.77,€0.75, $1.00,
and US$1.32, respectively, for periods through April 2013.
The purpose of these contracts is to manage foreign exchange risk on specific transactions in a foreign currency.
The amount of the related derivative is recorded at fair value at the period end and is included with prepaid
expenses and other assets or trade and other payables on the consolidated statements of financial position. The
resultant non-cash charge or gain is included in selling and administrative expenses. The impact of this non-cash
charge or gain is excluded from the computation of EBITDA and Distributable cash after maintenance capital
expenditures. See NON-IFRS MEASURES – Cash Flow.
Certain of Chemtrade’s International and U.S. based operations have foreign functional currencies. As a result,
gains or losses arising from the translation of the assets and liabilities are recorded in other comprehensive
income. The changes recorded in the accumulated other comprehensive income account since December 31,
2011 were a result of changes in the Canadian/U.S. dollar exchange rate between December 31, 2011 and
December 31, 2012.
During the first quarter of 2011, Chemtrade undertook a corporate restructuring related to its subsidiaries. As part
of this restructuring, Chemtrade’s U.S. subsidiaries repaid the remaining long-term debt of US$76.4 million and
its Canadian subsidiaries borrowed US$76.4 million pursuant to an amendment to the credit agreement related
to the original long-term bank debt (“2005 Credit Facilities”). Since this restructuring, the gains or losses arising
from the translation of these loans, as well as any gains and losses from the translation of U.S. denominated
borrowings on the 2011 Credit Facilities, are recorded in selling and administrative expenses on the consolidated
statements of comprehensive income.
The gains and losses on the translation of long-term debt recorded in selling and administrative expenses partially
offset the gains and losses recorded in other comprehensive income from the translation of assets and liabilities
of Chemtrade’s foreign operations, as mentioned above.
The rate of exchange used to translate U.S. denominated balances has decreased from a rate of US$1.00 =
$1.02 at December 31, 2011 to US$1.00 = $0.99 at December 31, 2012. See RISKS AND UNCERTAINTIES for
additional comments on foreign exchange
12
FINANCE INCOME AND COSTS
Net finance costs were $2.1 million in the fourth quarter of 2012 compared with net finance costs of $15.3 million in the
fourth quarter of 2011. Net finance costs were lower in 2012 mainly due to gains recorded on the fair value adjustment of
debentures in the fourth quarter of 2012 compared with losses in 2011. Additionally, there were $3.7 million of transaction costs related to the issuance of debentures in December 2011. Finally, there were higher debt levels in the fourth
quarter of 2011 compared with 2012. On a year-to-date basis, net finance costs in 2012 were $14.3 million higher than
the same period of 2011, due to losses recorded in 2012 relating to the fair value adjustment of the debentures compared
with gains in 2011. Additionally, there were higher debt levels in 2012 due to the additional debt incurred as part of the
Marsulex Acquisition. (See LIQUIDITY AND CAPITAL RESOURCES - Financing Activities).
The weighted average effective annual interest rate on senior debt at December 31, 2012 was 3.61% (December 31,
2011 - 4.14%). See LIQUIDITY AND CAPITAL RESOURCES - Financial Instruments for information concerning swap
arrangements.
Net finance costs include the change in the fair value of Chemtrade’s debentures. The revaluation of debentures resulted
in a gain of $3.0 million during the fourth quarter of 2012 and a loss of $3.9 million during the fourth quarter of 2011.
For the full year, there were losses of $9.5 million in 2012 and gains of $3.3 million in 2011.
During the years ended December 31, 2012 and December 31, 2011, Chemtrade recorded accretion expense of $1.3
million and $1.0 million, respectively, due to the amortization of transaction costs related to Chemtrade’s borrowings.
See LIQUIDITY AND CAPITAL RESOURCES - Financing Activities.
INCOME TAXES
The Fund is a mutual fund trust and a specified investment flow-through trust (“SIFT”) for income tax purposes. The
Fund is subject to current income taxes at the top marginal tax rate applicable to individuals of approximately 47.97% on
all taxable income not distributed to Unitholders. The Fund is also subject to current income taxes on all taxable income,
other than dividends, earned from Canadian corporate and flow-through subsidiaries (other than Canadian subsidiaries
that earn certain investment income) at a tax rate similar to the corporate tax rate. The Fund will not be subject to tax on
income received from non-Canadian subsidiaries, provided that the income is distributed to Unitholders during the year.
Based on the current organization of the Fund and its subsidiaries, it expects that its income distributed to Unitholders
will not be subject to SIFT tax.
Taxable income distributed by the Fund to its Unitholders is considered taxable income of those Unitholders.
Current income tax expense was $1.3 million and $5.0 million for the fourth quarter and year ended December 31, 2012
compared with current income tax expense of $0.8 million and $3.1 million for the fourth quarter and year ended
December 31, 2011 respectively. The increase in current income tax expense is primarily due to withholding tax paid
in the current year on intercompany interest arising from prior years, an increase in US federal alternative minimum tax
and US state income tax payable, as well as current income tax arising from the deemed disposition of assets resulting
from an internal reorganization. There were deferred income tax recoveries of $6.3 million and $8.5 million, for the fourth
quarter and year ended December 31, 2012, respectively. There were deferred income tax recoveries of $2.1 million and
$28.7 million for the fourth quarter of 2011 and the year ended December 31, 2011, respectively. The effective tax rate
for the fourth quarter and year ended December 31, 2012 differs from the statutory tax rate of 26.7% primarily due to the
deduction of taxable income distributed to Unitholders, a lower tax rate applicable to gains on account of capital, and a
lower tax rate on operations in countries with different effective income tax rates, partially offset by losses resulting from
changes in the fair value of the debentures not deductible for tax, and a change in tax rates applied to timing differences.
For 2011, the effective tax rate differs from the statutory tax rate primarily due to the recognition of a previously unrecognized deferred tax asset from foreign operations and the deduction for a portion of the income distributed to Unitholders
which was partially offset by an increase in the tax rate due to certain acquisition fees that are not deductible for
tax purposes.
The net increase in deferred tax liabilities of $0.7 million at December 31, 2012 relative to December 31, 2011 is the
result of recognition of the reversal of taxable temporary differences.
13
The Fund does not record deferred taxes related to its deductible temporary differences or those of its flow-through
subsidiaries as these differences primarily relate to investments in corporate subsidiaries and are expected to reverse
without tax consequences to the Fund.
EXCESS CASH FLOWS AND EARNINGS OVER DISTRIBUTIONS PAID
The following table presents excess cash flows from operating activities and earnings over distributions paid for the three
months and year ended December 31, 2012 and for the years ended December 31, 2011 and 2010.
Three Months Ended
Year Ended
($’000)
2012 2012 2011
2010
Earnings
Distributions paid during period
Excess of cash flows from
operating activities over cash
distributions paid
Excess (shortfall) of earnings over
cash distributions paid
$39,571 $ 108,306
$
77,104
$
56,922
15,700 39,027 60,283 28,107
12,499 49,997 43,401 36,805
$27,072 $
58,309 $ 33,703$
20,117
$ 3,201 $(10,970) $ 16,882$
(8,698)
Chemtrade considers the amount of cash generated by the business in determining the amount of distributions payable
to its Unitholders. In general, Chemtrade does not take into account quarterly working capital fluctuations as these tend
to be temporary in nature. Chemtrade does not generally consider earnings in setting the level of distributions as this is a
non-cash metric and is not reflective of the level of cash flow that Chemtrade can generate. This divergence is particularly
relevant for Chemtrade as it has a relatively high level of depreciation and amortization expenses, foreign exchange gains
and losses, and deferred tax expenses and recoveries.
14
Distributions
Distributions to Unitholders for the three months and year ended December 31, 2012 were declared as follows:
Record Date
Payment Date Distribution Per Unit
Total ($’000)
Three months ended December 31, 2012:
October 31, 2012
November 30, 2012
$
November 30, 2012
December 31, 2012
December 31, 2012
January 31, 2013
0.10
$
0.10
0.10
Sub-Total$
0.30
$
12,500
Three months ended September 30
Three months ended June 30
Three months ended March 31
$
$
$
0.30
0.30
0.30
$
$
$
12,499
12,500
12,499
Total for the year ended December 31
$
1.20
$
49,998
4,167
4,166
4,167
Distributions to Unitholders for the three months and year ended December 31, 2011 were declared as follows:
Record Date
Payment Date Distribution Per Unit
Total ($’000)
Three months ended December 31, 2011:
October 31, 2011
November 30, 2011
$
November 30, 2011
December 30, 2011
December 30, 2011
January 31, 2012
0.10
$
0.10
0.10
Sub-Total$
0.30
$
12,499
Three months ended September 30
Three months ended June 30
Three months ended March 31
$
$
$
0.30
0.30
0.30
$
$
$
12,500
10,300
9,201
Total for the year ended December 31
$
1.20
$
44,500
4,167
4,166
4,166
Treatment of Chemtrade’s distributions for Canadian Income Tax purposes for 2011 and 2012 is as follows:
2011 2012
Other Income
Dividends
11.3%
21.0%
(1)
51.1%
47.5%
Foreign Non-Business Income
Total
37.6%
100.0%
31.5%100.0%
These dividends are not considered to be eligible dividends for Canadian resident Unitholders and therefore not eligible
for the enhanced tax credit.
(1)
15
LIQUIDITY AND CAPITAL RESOURCES
The Fund’s distributions to Unitholders are sourced entirely from its investments in operating subsidiary
companies. The Fund’s investments are financed by trust units held by Unitholders, bank debt, debentures and
operating lines of credit. The cash flow of Chemtrade is required to fund distributions to Unitholders, capital
expenditures and payment of interest. See RECENT DEVELOPMENTS AND ACQUISITION regarding the
modification of the 2011 Credit Facilities in 2012. Chemtrade intends to renew its long-term debt prior to its
maturity in March 2017.
Cash Flow from Operating Activities
Cash flow from operating activities for the fourth quarter of 2012 was an inflow of $39.6 million, an increase of
$1.6 million from the level generated during the fourth quarter of 2011. The increase is primarily due to higher
EBITDA earned in 2012, relative to the same period in 2011. Cash flow from operating activities for the year
ended December 31, 2012 was $108.3 million, an increase of $31.2 million from the level generated during the
the year ended December 31, 2011. The increase in cash flow from operations in the year ended December 31,
2012 relative to 2011 is primarily due to higher levels of EBITDA earned in 2012 compared with 2011.
Additionally, there was a negative impact on cash flow from operations in 2011 due to the payment of certain
liabilities related to the Marsulex Acquisition in 2011.
Investing Activities
Investment in capital expenditures was $18.0 million in the fourth quarter of 2012, compared with $15.3 million
in the fourth quarter of 2011. These amounts included $14.8 million in the fourth quarter of 2012 and $13.3
million in the fourth quarter of 2011 for maintenance capital requirements. Investment in capital expenditures was
$43.2 million for the year ended December 31, 2012, compared with $33.5 million for the year ended December
31, 2011. These amounts included $29.9 million in the year ended December 31, 2012 and $23.5 million in the
year ended December 31, 2011 for maintenance capital requirements. Chemtrade intends to continue upgrading
its manufacturing assets and expects to incur between $35.0 million and $40.0 million of maintenance capital
expenditure in 2013.
Investment in non-maintenance capital expenditures was $3.2 million during the fourth quarter of 2012 compared with approximately $2.0 million during the fourth quarter of 2011. Investment in non-maintenance capital
expenditures was $13.3 million during the year ended December 31, 2012 compared with $10.1 million during
the year ended December 31, 2011. Non-maintenance capital expenditures are: (i) pre-funded, usually as part of
a significant acquisition and related financing; (ii) considered to expand or improve the capacity of Chemtrade’s
operations; (iii) significant environmental capital expenditures that are considered to be non-recurring; or
(iv) capital expenditures to be reimbursed by a third party.
2011 investing activities included the Marsulex Acquisition with net assets acquired of $393.5 million, as well as
the sale of the Petcoke facilities for $25.8 million.
Financing Activities
During the first quarter of 2011, the Fund undertook a corporate restructuring related to its subsidiaries. As part of
this restructuring, the U.S. subsidiaries repaid the remaining long-term bank debt of US$76.4 million of the 2005
Credit Facilities and its Canadian subsidiaries borrowed US$76.4 million pursuant to an amendment to the 2005
Credit Facilities’ credit agreement.
During the second quarter of 2011, Chemtrade entered into the 2011 Credit Facilities, which consisted of a term
loan of $365.0 million and a revolving facility of $80.0 million. Chemtrade used $275.0 million of the proceeds of
the term loan to partially fund the Marsulex Acquisition. It also used US$76.4 million of the proceeds to repay the
amount outstanding on its 2005 Credit Facilities. The related financing costs of $9.4 million were deferred and are
being amortized over the term of the debt using the effective interest method.
16
During the second quarter of 2011, Chemtrade also issued 10,994,000 units for proceeds of $148.4 million to partially fund the
Marsulex Acquistion. Chemtrade incurred $8.4 million of costs related to the equity issuance. In the third quarter of 2011, Chemtrade
used the proceeds of the Petcoke sale to repay US$22.0 million of the 2011 Credit Facilities. Related transaction costs of $0.5 million
were written off as a result of the repayment in 2011.
During the fourth quarter of 2011, Chemtrade issued $80.0 million principal amount of debentures. Chemtrade incurred transaction
costs of $3.7 million, which included the underwriters’ fee and other expenses of the offering. Part of the proceeds of the offering was
used to repay $68.5 million of the 2011 Credit Facilities.
During the first quarter of 2012, Chemtrade modified the terms of the 2011 Credit Facilities making it almost entirely revolving in nature.
See RECENT DEVELOPMENTS AND ACQUISITION. Net payments on the revolving facility for the fourth quarter of 2012 and the year
ended 2012 were $24.9 million and $66.9 million, respectively.
Distributions to Unitholders during the year ended December 31, 2012 were higher than the year ended December 31, 2011 due to the
increase in the number of units resulting from the Marsulex Acquisition. For additional information on cash distributions, see NON-IFRS
MEASURES - Cash Flow and EXCESS CASH FLOWS AND EARNINGS OVER DISTRIBUTIONS PAID.
Financial Instruments
In July 2011, Chemtrade entered into new swap arrangements with its principal bankers, which fix the variable components of its
interest rates on $125.0 million and US$50.0 million of its outstanding debt until June 2015. These swaps have been formally
designated as hedges at the date of inception. All changes in the fair value of the swap arrangements have been recorded in other
comprehensive income in the consolidated statements of comprehensive income.
Cash Balances
At December 31, 2012 Chemtrade had net cash balances of $6.1 million and a working capital deficit of $12.3 million. Comparable
numbers for December 31, 2011 were $64.0 million and $13.9 million, respectively. Chemtrade defines working capital to exclude
cash, operating line of credit, distributions payable and current portion of long-term debt. Cash generated by Chemtrade will be used
to fund cash distributions to Unitholders, capital requirements, interest, general corporate purposes and other legal obligations.
Future Liquidity
The future liquidity of Chemtrade will be primarily dependent on cash flows of its operating subsidiaries. These cash flows will be used
to finance ongoing expenditures, including maintenance capital, distributions to Unitholders and normal course financial commitments.
Cash flows are sensitive to changes in volume, sales prices and input costs and any changes in these may impact future liquidity.
Management believes that cash flows from operating activities will be sufficient for Chemtrade to meet future obligations and commitments that arise in the normal course of business activities. In addition, Chemtrade has revolving credit facilities which can be used
for general corporate purposes, including to fund capital expenditures. See Capital Resources below for more details.
17
Capital Resources
At December 31, 2012, under Chemtrade’s 2011 Credit Facilities of approximately $400.0 million, $209.6 million was drawn
on the revolving credit facility. The revolving credit facility is due in March 2017. At December 31, 2012, Chemtrade had
committed a total of $12.8 million of its revolving credit facility towards standby letters of credit. See RECENT DEVELOPMENTS AND ACQUISITION regarding the 2011 Credit Facilities.
At December 31, 2012, Chemtrade had a long-term loan of $24.0 million related to facilities at Syncrude’s Mildred Lake oil
sands facility in Alberta that it acquired as part of the Marsulex Acquisition. The loan is secured by the assets in this facility.
The loan bears interest at a fixed rate of 7.3% per annum with monthly principal repayments due until December 2019.
At December 31, 2012, Chemtrade had debentures of $178.9 million outstanding, with a par value $170.0 million, which
mature on dates ranging from March 31, 2017 to December 31, 2018.
Debt Covenants
As at December 31, 2012, Chemtrade was compliant with all debt covenants contained in its credit agreements.
SUMMARY OF QUARTERLY RESULTS
Three Months Ended
December 31, September 30,
June 30,
March 31,
($’000) 2012 2012 2012 2012
Revenue
$223,032 $ 240,876 $ 227,555 $ 227,904
Cost of sales and services
(191,796)
(204,495)
(194,751)
(195,248)
Gross profit
Selling and administrative expenses
31,236
(18,455)
36,381
(13,448)
32,804
(19,396)
32,656
(14,548)
Operating income
Net finance costs
Income tax recovery (expense)
12,781
(2,091)
5,010
22,933
(11,419)
(915)
13,408
(3,068)
(1,809)
18,108
(15,133)
1,222
Earnings
$15,700 $ 10,599 $
8,531 $
4,197
Three Months Ended
December 31,September 30,
June 30,
March 31,
($’000) 20112011 2011 2011
Revenue
$247,220 $ 268,533 $ 195,259 $ 169,580
(216,968)
(227,310)
(171,388)
(144,917)
Gross profit
30,252
(12,646)
41,223
(26,899)
23,871
(25,872)
24,663
(2,496)
Operating income (loss)
Net finance (costs) income Income tax recovery (expense)
17,606
(15,312)
1,286
14,324
229
(6,824)
(2,001)
67
37,526
22,167
(2,420)
(6,365)
35,592
13,382
Earnings 18
$
3,580
$
7,729
$
$
In general, seasonality has had a limited impact on financial results. Below are some of the key items that had a significant
impact on financial results over the last eight quarters.
Sales volumes of most products and sulphuric acid prices increased in the first and second quarters of 2011. Beginning in
the third quarter of 2011, revenues were positively impacted by the inclusion of revenues of Marsulex. Sales volumes of most
products were higher in the third quarter of 2012.
Selling and administrative expenses during the first quarter of 2011 were low as they included insurance recoveries of US$8.6
million. Selling and administrative expenses were high during the second quarter of 2011 as they included $13.2 million of
costs directly related to the Marsulex Acquisition. Selling and administrative expenses remained high in the third quarter of
2011 due to unrealized foreign exchange losses of $13.8 million, mainly driven by the translation of U.S. denominated debt. In
the second quarter of 2012, selling and administrative expenses were high due to unrealized foreign exchange losses of $4.2
million. In the third quarter of 2012, selling and administrative expenses were low due to an unrealized foreign exchange gain
of $6.6 million. In the fourth quarter of 2012, there was an unrealized foreign exchange loss of $1.6 million.
Net finance costs decreased in the second and third quarters of 2011 due to fair value adjustments related to Chemtrade’s
debentures. Additionally, in the second quarter of 2011, there were foreign exchange gains realized as a result of the
repayment of the 2005 Credit Facilities. These foreign exchange gains were included in finance income for the period since it
related to the extinguishment of long-term debt. Net finance costs were high in the fourth quarter of 2011 due to transaction
costs recognized on the issuance of debentures, as well as a negative fair value adjustment relating to the debentures. They
continued to be high in the first quarter of 2012 due to a loss of $8.6 million recognized on the fair value adjustment of
debentures. In the second and fourth quarters of 2012, finance costs were low due to gains realized on the fair value
adjustment of debentures of $2.3 million and $3.0 million, respectively.
Income tax recoveries were high during the second quarter of 2011 due to the recognition of previously unrecognized deferred
tax assets.
19
OUTSTANDING SECURITIES OF CHEMTRADE
At February 21, 2013, Chemtrade had 41,665,095 units (December 31, 2012 - 41,665,095) and 169,990 debentures
outstanding (December 31, 2012 - 169,990). The debentures are convertible into 9,624,375 units
(December 31, 2012 - 9,624,375).
CONTRACTUAL OBLIGATIONS
Information concerning contractual obligations, which may differ from carrying values, is shown below:
Contractual Obligations ($’000)
TotalLess Than 1 Year
Long-term debt
$ 233,600
$
2,731
$
Convertible unsecured subordinated debentures 169,990
-
1-3 Years
$
8,156
-
89,990
80,000
22,524
23,573
11,107
6,747
Interest on long-term debt 35,094
8,337
Interest on convertible unsecured subordinated debentures
50,550
10,000
16,041
10,081
635
20,000
15,950
4,600
Operating leases Total contractual obligations
63,951
$553,185
$
43,592
$
6,096
65,710
$
4-5 YearsAfter 5 Years
216,617
$ 343,745
$ 100,138
RISKS AND UNCERTAINTIES
Chemtrade is one of North America’s largest suppliers of sulphuric acid (“acid”), liquid sulphur dioxide (“SO2”) and sodium
hydrosulphite (“SHS”) and a leading provider of spent acid processing services. Chemtrade’s value-added services to refineries include the processing of hydrogen sulphide gas, the processing of liquid sulphur into prilled sulphur for export shipment,
and the treatment of emissions to produce ammonium sulphate. Chemtrade is also a leading regional supplier of sulphur,
sodium chlorate, phosphorus pentasulphide, zinc oxide and water treatment chemicals. Chemtrade faces various risks associated with its business. These risks include, amongst others, a general reduction in demand for its products, the loss of a
portion of its customer base, the interruption of the supply of sulphur-based products or raw materials, price fluctuations in
the products sold and/or raw materials purchased, industry over capacity, acquisition integration and operational and product
hazard risks associated with the nature of its business. Chemtrade imports key raw materials and products from overseas
and as such has additional risks associated with the sourcing activity. Chemtrade makes extensive use of the railway system
to transport material within North America. Certain locations are serviced by a sole carrier and thus a disruption in service
could have a significant negative impact on results. In addition, Chemtrade sells a significant portion of its major products to
large customers. While many of these customers are under contract, there can be no assurance that these contracts will be
renewed. As Chemtrade’s business is international in nature, it is exposed to foreign exchange risks related to the payment of
dividends and other transactions by its foreign subsidiaries. For a more detailed discussion of Chemtrade’s risks, please refer
to the RISK FACTORS section of the most recently filed Annual Information Form.
Chemtrade manages the risks associated with its customer base and sales price by seeking to obtain contractual protection to
mitigate these risks. Chemtrade also seeks to differentiate its products and services with customers to mitigate price fluctuations and uses its scale to obtain beneficial raw material contracts.
Chemtrade’s Board of Trustees periodically reviews a framework identifying the principal risks of Chemtrade’s business, and
ensures the implementation of appropriate systems to manage these risks. The Audit Committee reviews major operations and
financial risks, the systems implemented to monitor those risks and the strategies in place to manage those risks. In addition,
Chemtrade maintains an extensive insurance program which includes general liability and environmental coverage.
20
Reliance on Customers and Successful Contract Re-negotiations
Chemtrade’s business is dependent on the production of a number of by-products and waste streams by its customers,
particularly Vale Limited, Suncor Energy Inc. and Syncrude Canada Ltd.
In January, 2013, Vale Limited announced that it plans to move to a single-furnace operation at its Copper Cliff, Ontario
smelter, which would reduce the amount of by-product acid that Chemtrade receives from Vale. The amount of the reduction
is not yet determinable and is not expected to occur until the end of 2016.
Chemtrade enters into contracts of varying lengths with customers and producers of by-products. Although some of these
contracts are renewable (or renew automatically unless notice of termination is given), there can be no assurance that such
contracts will be renewed (or that notice of termination will not be given). The failure of Chemtrade to renew those contracts
could materially adversely affect results of the operations.
Credit Risk
Credit risk arises from the non-performance by counter-parties of contractual financial obligations. Chemtrade manages credit
risk for trade and other receivables through established credit monitoring activities. Chemtrade does not have a significant
concentration of credit risk with any single counter-party or group of counter-parties. The primary counter-parties related to the
foreign exchange forward contracts, commodity price contracts and interest rate swaps carry investment grade ratings.
Chemtrade’s maximum exposure to credit risk at the reporting date is the carrying value of its receivables and derivative assets.
Operating Risks
Chemtrade’s revenues are dependent on the continued operation of its various manufacturing facilities. The occurrence of
significant operational problems may have a material adverse effect on Chemtrade’s business, results of operations and
financial condition, including increased capital expenditures.
Risks of Acquisitions and the Failure to Integrate Acquired Businesses
As part of its long-term strategy, Chemtrade has grown by acquisition and intends to acquire additional complementary
businesses where such transactions are economically and strategically justified. However, there can be no assurance that
Chemtrade will continue to identify attractive acquisition candidates in the future, or that it will succeed at effectively
managing the integration of acquired businesses. If the expected synergies from such transactions (either present or future)
do not materialize or Chemtrade fails to successfully integrate such new businesses into its existing businesses, Chemtrade’s
results from the acquired operations could be adversely affected.
Capital Expenditures
Chemtrade has several manufacturing plants and has significantly increased its projected level of capital expenditures as
a result of the Marsulex acquisition. There is a risk that actual capital expenditures may differ from these projections.
Additionally, there is a risk of effective capital utilization in the execution of these capital projects.
Exchange Rates
Chemtrade is exposed to fluctuations in the exchange rate of the U.S. dollar relative to the Canadian dollar, as a portion of
Chemtrade’s Distributable cash after maintenance capital expenditures is earned in U.S. dollars. On an unhedged basis,
Chemtrade currently estimates that a one-cent change in the exchange rate would have an impact on Distributable cash
after maintenance capital expenditures of less than $0.1 million per annum.
On an unhedged basis, Chemtrade also currently estimates that a one-cent change in the exchange rate would have an impact
on the translation of the earnings of its U.S. currency based subsidiaries of less than $0.2 million per annum. On an unhedged
basis, a one-cent change in the exchange rate would also have an impact of approximately $0.9 million on Chemtrade’s
earnings because of its U.S. dollar denominated term debt.
21
Interest Rates
Chemtrade has a credit facility with term debt and operating lines of credit which bear variable rates of interest. As at
December 31, 2012, on an unhedged basis, a change in interest rates of 1% per annum would have an impact of
approximately $2.1 million per annum.
Sulphuric Acid Pricing
A change in sulphuric acid pricing, net of freight, of $1 per tonne, would have an impact on annual revenues in North
America of approximately $1.5 million. In any specific period, the exact impact would depend upon the volume that is subject
to sales contracts where pricing has been fixed for a period of time. The magnitude of realized price changes also depends
upon regional market dynamics. It is difficult to reliably estimate the impact of price changes on earnings as this depends
upon the volume subject to risk-sharing supply contracts and changes in sulphur costs for manufactured sulphuric acid.
These factors lessen the impact of price changes on earnings relative to revenue.
Sulphur Costs
Chemtrade uses sulphur in the manufacturing of several of its products, including sulphuric acid. At current operating levels,
an increase of $1 per tonne would have an impact of approximately $0.3 million per annum on cost of sales. It is important to
note that a change in the cost of sulphur is likely to lead to a change in the price for sulphuric acid as this is a key input cost
in the manufacturing of sulphuric acid. Thus, the net impact on earnings of changes in sulphur costs would depend upon
changes in sulphuric acid pricing. Increasingly, the pricing of sulphuric acid is being adjusted for changes in sulphur costs
and consequently future changes in the cost of sulphur are expected to be offset by changes in sulphuric acid pricing.
Other Input Costs
There are several other large input costs, such as natural gas, zinc, salt and electricity, but in most cases there are
contractual arrangements with customers, or other offsets within the business, which mitigate the exposure to changes
in these costs.
Labour Relations
Chemtrade has several collective bargaining agreements and expiry dates range from March 2013 to October 2018.
Chemtrade’s operations could be disrupted if new collective bargaining agreements are not concluded prior to their
expiry dates.
22
CRITICAL JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimates are revised and in any future periods affected.
Key Sources of Estimation Uncertainty
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
within the next financial year are included in the following notes to the audited consolidated financial statements of Chemtrade
for the year ended December 31, 2012:
(i) Allowance for doubtful accounts - Chemtrade uses estimates in determining the allowance for doubtful accounts by taking into consideration the financial stability of the customer and the age of the balance.
(ii) Intangible assets - When determining the value in use of goodwill and intangible assets during impairment testing,
Chemtrade uses the following critical estimates: the timing of forecasted earnings; future selling prices and margins; future sales volumes; maintenance and other capital expenditures; and discount rates.
(iii) Provisions - Chemtrade uses estimates to determine the value of asset retirement obligations including: amount
required for site restoration; timing of expected asset retirement; and discount rates.
(iv) Employee benefits - The net obligations associated with the post-employment plans are actuarially valued using:
expected rate of return on assets, salary escalation and life expectancy; medical trend rates; and discount rates.
(v) Share-based payments - Chemtrade estimates the fair value of the LTIP using the Monte Carlo sampling method.
(vi) Income taxes - Current income tax assets and liabilities are measured at the amount expected to be paid to tax
authorities, net of recoveries, based on the tax rates and laws enacted or substantively enacted at the
balance sheet date.
Deferred income tax assets are recognized for all deductible temporary differences, carryforward of unused tax
credits and unused tax losses, to the extent that it is probable that the deductions, tax credits and tax losses can be
utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realized or the liability settled, based on the tax rates and laws that have been enacted or
substantively enacted at the balance sheet date.
In the normal course of operations, judgement is required in assessing tax interpretations, regulations and
legislation and in determining the provision for income taxes, deferred tax assets and liabilities. To the extent that a
recognition or derecognition of a deferred tax asset is required, current period earnings or other comprehensive
income will be affected.
(vii) Financial instruments - Chemtrade estimates the fair value of cash flow hedges using forecasted interest rates
and discount rates.
IFRS STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
For information regarding IFRS standards and interpretations not yet adopted, please refer to note 3(p) of the audited
consolidated financial statements of Chemtrade for the year ended December 31, 2012.
23
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
Chemtrade maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in
the reports that Chemtrade publicly files is recorded, processed, summarized and reported within a timely manner and that such
information is accumulated and communicated to Chemtrade’s Management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief
Financial Officer have evaluated Chemtrade’s disclosure controls procedures as of December 31, 2012 through inquiry and
review. The Chief Executive Officer and the Chief Financial Officer have concluded that, as at December 31, 2012, Chemtrade’s
disclosure control procedures were effective.
Chemtrade also maintains a system of internal controls over financial reporting designed under the supervision of Chemtrade’s
Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS.
Chemtrade’s Management, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing
and maintaining adequate internal control over financial reporting and evaluating its effectiveness. Management has used The
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework to evaluate the effectiveness of
Chemtrade’s internal control over financial reporting as of December 31, 2012. Based on this evaluation, Management has
concluded that as at December 31, 2012, Chemtrade’s internal controls over financial reporting were effective. There have been
no changes to the design of internal controls over financial reporting that occurred during the year ended December 31, 2012
that have materially affected or are reasonably likely to materially affect the internal controls over financial reporting.
OUTLOOK
Our businesses continue to demonstrate strength. While macro-economic concerns persist, we expect continued stability in
demand for our products.
The nature of our business model, combined with our strong balance sheet, is more than sufficient to sustain our current
distribution rate.
OTHER
Additional information concerning Chemtrade, including the Annual Information Form, is filed on SEDAR and can be accessed
at www.sedar.com
February 21, 2013
24
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of Chemtrade Logistics Income Fund (the “Fund”) and
all the information in this annual report are the responsibility of the management of the Fund. The consolidated
financial statements have been prepared in accordance with International Financial Reporting Standards and
where appropriate include management’s best estimates and judgements. Management has reviewed the
financial information presented throughout this report and has ensured it is consistent with the consolidated
financial statements.
Management has developed and maintains a system of internal control over financial reporting. These controls
are designed to provide reasonable assurance that assets are safeguarded, transactions are accurately recorded
and financial information is timely and reliable.
The Trustees of the Fund are responsible for ensuring that management fulfills its financial reporting
responsibilities and are ultimately responsible for reviewing and approving the consolidated financial statements.
The Trustees carry out this responsibility principally through the Audit Committee. The Audit Committee is
comprised entirely of independent Trustees.
The Audit Committee meets periodically with management and the external auditors to discuss internal controls
over financial reporting, policies and procedures, and financial reporting issues. Acting on the recommendation
of the Audit Committee, the Trustees approve the consolidated financial statements. KPMG LLP, an independent
firm of Chartered Accountants, has been appointed by the Unitholders to express an independent professional
opinion on the fairness of the consolidated financial statements. KPMG LLP has full and free access to the
Audit Committee.
Mark DavisRohit Bhardwaj
President & Chief Executive Officer
Vice-President, Finance & CFO
Toronto, Canada
February 21, 2013
25
Independent Auditors’ Report
To the Unitholders of Chemtrade Logistics Income Fund
We have audited the accompanying consolidated financial statements of Chemtrade Logistics Income Fund, which
comprise the consolidated statements of financial position as at December 31, 2012 and December 31, 2011, the
consolidated statements of comprehensive income, changes in unitholders’ equity and cash flows for the years then
ended, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of Chemtrade Logistics Income Fund as at December 31, 2012 and December 31, 2011, and its
consolidated financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards.
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
February 21, 2013
26
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
Notes
December 31, 2012
December 31, 2011
ASSETS
Current assets
Cash and cash equivalents
$6,075$63,958
Trade and other receivables 5 115,103122,770
Inventories 7 29,34535,413
Prepaid expenses and other assets 1,7802,246
Total current assets
Non-current assets
Property, plant and equipment Other assets Intangible assets
Deferred tax assets
152,303224,387
8 414,996418,585
9
5,5637,115
10 391,087425,515
24
9,643
-
Total non-current assets 821,289851,215
Total assets
$973,592
$1,075,602
LIABILITIES AND UNITHOLDERS’ EQUITY
Current liabilities
Trade and other payables 11 $ 153,808
$
165,340
Distributions payable 4,1674,166
Provisions
12
1,3435,054
Income taxes payable 3,3853,890
13
2,7312,539
Total current liabilities 165,434180,989
Non-current liabilities
Long-term debt 13 225,260298,008
Convertible unsecured subordinated debentures
14 178,905169,420
Other long-term liabilities 15 12,044
16,926
Employee benefits 16 13,61111,873
Provisions
12
2,1702,070
Deferred tax liabilities
24 54,73754,068
Total non-current liabilities 486,727
552,365
Total liabilities 652,161
733,354
Unitholders’ equity Units 17 519,312519,301
Contributed surplus 17
9,720
9,720
Deficit
(197,611)(184,845)
Accumulated other comprehensive loss
(9,990)(1,928)
Total unitholders’ equity 321,431342,248
19
Commitments and contingencies
Total liabilities and unitholders’ equity
$973,592
$1,075,602
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board of Trustees
Lorie Waisberg
Lucio Di Clemente
27
Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars, except per unit amounts)
Notes
Year ended
December 31, 2012
Year ended
December 31, 2011
Revenue
20 $919,367$
(786,290)
880,592
(760,583)
Gross profit
133,077
21(65,847)
120,009
(67,913)
Operating income Finance income
Finance costs
67,230
23 209
23(31,920)
Earnings before income tax
35,519
Income tax (expense) recovery
24
Current(4,950)
Deferred 8,458
5,204
(22,640)
34,660
(3,054)
28,677
3,508
25,623
Earnings 39,027
60,283
Other comprehensive (loss) income
Items that may subsequently be reclassified to income:
Foreign currency translation differences
for foreign operations
(8,835)
Effective portion of change in the fair value of cash flow hedges,
net of tax expense of $287 (2011 - recovery of $1,287)
773
Items that will not be reclassified to income:
Defined benefit plan actuarial losses,
net of tax recovery of $423 (2011 - $988)
16(1,795)
(2,942)
$29,170$
65,054
17
$ 0.94$
$ 0.94
$
1.66
1.48
(3,254)
4,771
Total comprehensive income
Earnings per unit Basic earnings per unit
Diluted earnings per unit
10,967
(9,857)
28
52,096
Consolidated Statements of Changes in Unitholders’ Equity
Cumulative
Unrealized
Total
Contributed translation gains/losses onunitholders’
Units
surplus
Deficit account*cash flow hedges*
equity
Balance at January 1, 2011
$377,144 $
9,720 $ (197,686)
$ (9,201) $
(440) $ 179,537
Earnings- -
60,283-
-
60,283
-
-
(2,942)
10,967
(3,254)
4,771
Distributions- -
(44,500)-
-
(44,500)
Issuance of units (note 4) 142,157
-
-
-
- 142,157
Balance at December 31, 2011
$ 519,301
$
9,720
$
(184,845)
$
1,766
$
Earnings- -
39,027-
-
-
(1,795)
(8,835)
Distributions- -
(49,998)-
Issuance of units (note 17)
11
-
-
-
$ 519,312
$
9,720
$
(197,611)
$
(7,069)
$
(3,694) $ 342,248
-
39,027
773
(9,857)
-
(49,998)
-
11
(2,921) $ 321,431
* Accumulated other comprehensive loss.
29
Consolidated Statements of Cash Flows
Notes
Year ended
December 31, 2012
Cash flows from operating activities:
Earnings
$39,027 $
Adjustments for:
2277,523 Loss on disposal of assets
384 Income tax recovery
(3,508)
Net interest costs
20,504 Accretion expense
1,406 Debt extinguishment costs
436 Change in fair value of convertible unsecured subordinated debentures
9,496
Transaction costs - Gain on settlement of insurance claim
-
Unrealized foreign exchange (gain) loss
(3,566) 56,504
701
(25,623)
13,819
1,113
2,134
(3,280)
3,728
(760)
5,477
141,702 114,096
Increase in working capital
Interest paid
Interest received
Income taxes paid
(7,177)
(20,951)
187 (5,455)
60,283
(9,632)
(15,741)
508
(12,127)
Net cash flows from operating activities108,306 77,104
Cash flow from investing activities:
Decrease (increase) in restricted cash
1,391
Additions to property, plant and equipment, net of insurance proceeds
(43,178)
Decrease in other assets
64 Proceeds from disposal of property, plant and equipment - Acquisitions 4
-
(338)
(33,542)
752
25,860
(393,535)
Net cash used in investing activities
(41,723)
(400,803)
Cash flow from financing activities:
Distributions to unitholders
(49,997)
Issuance of convertible unsecured subordinated debentures
- Issuance of units, net of issuance costs
4
- Issuance of term debt
13
- Payment of term debt
13(3,539)
Net change in revolving credit facility
13
(66,858)
Decrease in other long-term liabilities
(2,781)
Financing transaction costs
(671)
(43,401)
80,000
140,057
440,956
(241,882)
(3,792)
(13,159)
Net cash flows (used in) from financing activities
(123,846) 358,779
(57,263) 63,958 (620) 35,080
27,856
1,022
Cash and cash equivalents, end of year $6,075$
63,958
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effect of exchange rates on cash held in foreign currencies
30
Year ended
December 31, 2011
Notes to Consolidated Financial Statements
(in thousands of Canadian dollars, except amounts per unit and per tonne)
December 31, 2012
1. CORPORATE INFORMATION:
Chemtrade Logistics Income Fund (“Chemtrade”) is a publicly listed Income Trust incorporated in Canada and its units are
listed on the Toronto Stock Exchange. Chemtrade commenced operations on July 18, 2001 when it completed an Initial
Public Offering. Chemtrade operates in four business segments: Sulphur Products & Performance Chemicals (“SPPC”),
Pulp Chemicals (“Pulp”), International (“Intl”) and Corporate (“Corp”). For additional information regarding Chemtrade’s
business segments see note 27.
Chemtrade is an entity domiciled in Canada. The head office, principal address, and registered and records office of
Chemtrade are located at 155 Gordon Baker Road, Suite 300, Toronto, Ontario, M2H 3N5.
Chemtrade’s financial statements and those of all of its controlled subsidiaries (“consolidated financial statements”) have
been prepared on a going concern basis, which contemplates the realization of assets and settlements of liabilities in the
normal course of business.
2. BASIS OF PREPARATION:
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”). The consolidated financial statements were authorized for issue by the Board of Trustees on February 21, 2013.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following material
items in the consolidated statements of financial position:
• Derivative financial instruments are measured at fair value;
• Financial instruments at fair value through profit or loss are measured at fair value;
• Liabilities for cash settled share-based payment arrangements are measured at fair value;
• The defined benefit liability is recognized as the net total of the plan assets, plus unrecognized past service costs and the present value of the defined benefit obligation; and
• Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to temporary
differences when they reverse.
(c) Presentation currency
These consolidated financial statements are presented in thousands of Canadian dollars, except for earnings per unit
information which is presented in Canadian dollars.
(d) Critical judgements and sources of estimation uncertainty
The preparation of the consolidated financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in any future periods affected.
31
Key sources of estimation uncertainty
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within
the next financial year are included in the following notes:
(i) Allowance for doubtful accounts (note 5) - Chemtrade uses estimates in determining the allowance for doubtful accounts by taking into consideration the financial stability of the customer and the age of the balance.
(ii) Intangible assets (note 10) - When determining the value in use of goodwill and intangible assets during impairment
testing, Chemtrade uses the following critical estimates: the timing of forecasted earnings; future selling prices and
margins; future sales volumes; maintenance and other capital expenditures; and discount rates.
(iii) Provisions (note 12) - Chemtrade uses estimates to determine the value of asset retirement obligations including: amount required for site restoration; timing of expected asset retirement; and discount rates.
(iv) Employee benefits (note 16) - The net obligations associated with the post-employment plans are actuarially valued using: expected rate of return on assets, salary escalation and life expectancy; medical trend rates; and discount rates.
(v) Share-based payments (note 18) - Chemtrade estimates the fair value of the LTIP using the Monte Carlo sampling method.
(vi) Income taxes (note 24) - Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries, based on the tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred income tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that the deductions, tax credits and tax losses can be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realized or the liability settled, based on the tax rates and laws that have been enacted or substantively enacted at the
balance sheet date.
In the normal course of operations, judgement is required in assessing tax interpretations, regulations and legislation and in determining the provision for income taxes, deferred tax assets and liabilities. To the extent that a recognition or derecognition of a deferred tax asset is required, current period earnings or other comprehensive income will be affected.
(vii) Financial instruments (note 25) - Chemtrade estimates the fair value of cash flow hedges using forecasted interest rates and discount rates.
3. SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies set out below have been applied consistently by Chemtrade’s entities to all periods presented in these
consolidated financial statements.
(a) Basis of consolidation
The consolidated financial statements include the financial statements of Chemtrade and its controlled subsidiaries. Control is
achieved when Chemtrade has the power to govern the financial and operating policies of an entity so as to obtain benefits from
its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statements of comprehensive
income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
(i) Business combinations:
Acquisitions on or after January 1, 2010
For acquisitions on or after January 1, 2010, Chemtrade measures goodwill as the fair value of the consideration transferred less
the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the
acquisition date. When the difference is negative, a bargain purchase gain is recognized immediately in comprehensive income.
Transaction costs, other than those associated with the issue of debt or equity securities, that Chemtrade incurs in connection
with a business combination are expensed as incurred.
32
Acquisitions prior to January 1, 2010
As part of its transition to IFRS, Chemtrade elected to re-state only those business combinations that occurred on or after January
1, 2010. For acquisitions prior to January 1, 2010, goodwill represents the amount recognized under previous Canadian GAAP.
(ii) Transactions eliminated on consolidation:
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
(b) Foreign currency
(i) Foreign currency transactions:
Transactions in foreign currencies are translated to the respective functional currencies of Chemtrade and its subsidiaries at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting
date are re-translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary
items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective
interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of
the period. Foreign currency differences arising on re-translation are recognized in earnings, except for differences arising on the
re-translation of qualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign currency gains and losses are reported on a net basis within selling and administrative expenses.
(ii) Foreign operations:
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated
to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to
Canadian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognized in other comprehensive loss and in the cumulative translation account in unitholders’
equity.
Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of
which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net
investment in the foreign operation, are recognized in other comprehensive income and in the cumulative translation account in
equity.
(c) Inventories
Finished goods inventory is valued at the lower of average cost and net realizable value. Average cost includes all costs of purchase, costs of conversion and other costs incurred to bring inventories to their present location and condition. Costs of conversion
include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished
goods. The allocation of fixed production overheads is based on normal production capacity. Raw material inventory and operating
supplies are recorded at the lower of cost determined on a first-in, first-out basis, and net realizable value. Net realizable value is
the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(d) Property, plant and equipment
(i) Recognition and measurement:
Items of property, plant and equipment are measured at cost less accumulated depreciation and net accumulated impairment
losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets
includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition
for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and
borrowing costs on qualifying assets for which the commencement date for capitalization is on or after January 1, 2010.
33
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment, and are recognized within cost of sales and
selling and administrative expenses in comprehensive income.
(ii) Subsequent costs:
The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the
item if it is probable that the future economic benefits embodied within the part will flow to Chemtrade, and its cost can
be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing
of property, plant and equipment are recognized in comprehensive income as incurred.
(iii) Depreciation:
Depreciation is calculated over the depreciable amount, which is the cost of an asset less its residual value.
Depreciation is recognized in comprehensive income on a straight-line basis over the estimated useful life of each part
of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the
future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods of plant and equipment are as follows:
• Building 5 - 20 years
• Equipment 5 - 15 years
• Furniture and other 3 - 5 years
Facilities and equipment under construction do not begin to be depreciated until substantially completeand ready for
productive use.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if
appropriate.
(e) Intangible assets
(i) Goodwill:
Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the
amounts allocated to the identifiable assets acquired, less liabilities assumed, based on their fair values. Goodwill is
allocated as of the date of the business combination to Chemtrade’s Cash Generating Units (“CGUs”) that are expected
to benefit from the synergies of the business combination. In respect of acquisitions prior to January 1, 2010, goodwill
is included on the basis of its deemed cost.
(ii) Other intangible assets:
Other intangible assets include the estimated fair value, based on the value-in-use methodology, at the date of
acquisition of long-term customer and vendor relationships and other intangible assets.
(iii) Amortization of intangibles:
Amortization of intangible assets, excluding goodwill, is calculated over the estimated fair value upon recognition of the
asset less its residual value.
34
Amortization is recognized in comprehensive income on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the assets. The estimated useful lives for the current and comparative periods are as follows:
• Customer and vendor relationships 6 - 15 years
• Other intangible assets 5 years
(f) Impairment
(i) Trade and other receivables:
In relation to trade and other receivables, a provision for impairment is made and an impairment loss is recognized in profit
and loss when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the
debtor) that Chemtrade will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are written off against the
allowance account when they are assessed as uncollectible. Any subsequent reversal of an impairment loss is recognized in
comprehensive income.
(ii) Goodwill:
At the end of each reporting period, Chemtrade reviews the carrying amounts of its CGUs to determine whether there is an
indication that those assets are impaired.
Chemtrade performs an annual test for goodwill impairment in the fourth quarter of each fiscal year.
Valuation techniques
The recoverable value of each CGU is based on the higher of its value in use and its fair value less costs to sell. The values
assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both
external sources and internal sources.
If the recoverable value of the CGU is estimated to be less than its carrying amount, the carrying amount of the CGU is
reduced to its recoverable value. An impairment loss is recognized immediately in comprehensive income. Any impairment
loss on goodwill that is recognized cannot be reversed.
Value in use approach
The value in use approach is predicated upon the value of the future cash flows that a business will generate going forward.
The discounted cash flow method is used which involves projecting cash flows and converting them into a present value
equivalent through discounting. The discounting process uses a rate of return that is commensurate with the risk associated
with the business or asset and the time value of money. This approach requires assumptions about revenue, operating
margins, tax rates, growth rates and discount rates.
The following is a description of significant assumptions in obtaining the value in use.
Growth
The assumptions are based on Chemtrade’s internal budget. Chemtrade projects revenue, operating margins and cash flows
for a period of five years, and applies a perpetual long-term growth rate thereafter. In arriving at its forecasts, Chemtrade
considers past experience, economic trends such as GDP growth and inflation as well as industry and market trends. The
projections also take into account the expected impact from new product initiatives, customer retention and integration
programs, and the maturity of the markets in which each business operates.
35
Discount rate
Chemtrade assumes a pre-tax discount rate in order to calculate the present value of its projected cash flows. The discount
rate represents a weighted average cost of capital (“WACC”). The WACC is an estimate of the overall required rate of return
on an investment for both debt and equity owners and serves as the basis for developing an appropriate discount rate.
Determination of the WACC requires separate analysis of the cost of equity and debt, and considers a risk premium based on
an assessment of risks related to the projected cash flow of each CGU.
Fair value less costs to sell approach
Fair value less costs to sell is the amount obtainable from the sale of a CGU in an arm’s length transaction between
knowledgeable, willing parties, less the costs of disposal. The appropriate market price is usually based on a multiplier
of earnings.
(iii) Other non-financial assets carried at amortized cost:
If there is objective evidence that an impairment loss on a non-financial asset carried at amortized cost has been incurred,
the amount of the loss is measured as the difference between the asset’s carrying amount and its recoverable value. The
carrying amount of the non-financial asset is then reduced by the amount of the impairment and the loss is recognized in
comprehensive income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss
is reversed to the extent that the carrying value of the non-financial asset does not exceed the amortized cost had the
impairment not been recognized.
(g) Employee benefits
(i) Defined contribution plans:
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution pension plans are recognized as an employee benefit expense in comprehensive income in the periods during
which services are rendered by employees.
(ii) Defined benefit plans:
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Chemtrade’s net obligation
in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods. That benefit is then discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount
rate is the yield at the reporting date on high quality bonds that have maturity dates approximating the terms of Chemtrade’s
obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is
performed annually by a qualified actuary using the projected unit credit method.
Chemtrade recognizes all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive
income, and reports them in deficit. Depending on the plan, expenses such as plan amendments, current service costs and
interest costs are recorded in either cost of sales or selling and administrative expenses within comprehensive income.
(iii) Multi-employer plans:
Chemtrade participates in multi-employer pension plans, which are accounted for as either defined benefit plans or defined
contribution plans depending on their attributes. Chemtrade does not administer these plans but rather the administration
and the investment of these assets are controlled by a board of trustees consisting of union and employer representatives.
Chemtrade’s responsibility to make contributions to these plans is established pursuant to its collective agreements.
36
(iv) Share-based compensation:
Chemtrade operates a Total Return Long-Term Incentive Plan (“TR LTIP”) which grants cash awards based on total
Unitholder return. Total Unitholder return is the aggregate of unit price changes and per unit distributions paid to
Unitholders over the performance period. These awards are accounted for as liabilities with the value of these liabilities
being re-measured at each reporting period, based upon changes in the fair value of the awards. Any gains or losses on
re-measurement are recorded in selling and administrative expenses, provided that the compensation cost accrued
during the performance period is not adjusted below zero.
(h) Revenue recognition
(i) Sale of products:
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received
or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists,
usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred
to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated
reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured
reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is
recognized as a reduction of revenue as the sales are recognized. The timing of the transfers of risks and rewards varies
depending on the individual terms of the contract of sale.
(ii) Processing services:
Revenue earned on processing services is recognized when the services have been rendered in accordance with contractual
terms. Monies received in advance of services provided is recorded as deferred revenue.
(iii) Other:
Revenue on the sale of certain commodities within the International segment is recorded on a net basis. Revenue is
recognized when selling prices have been fixed or are determinable, significant risks and rewards of ownership have been
transferred to the buyer, and collection is reasonably assured.
(i) Provisions
A provision is recognized if, as a result of a past event, Chemtrade has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
(i) Onerous contracts:
A provision for onerous contracts is recognized when the expected benefits to be derived by Chemtrade from a contract are
lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value
of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before
a provision is established, Chemtrade considers whether an impairment loss on the assets associated with that contract
needs to be recognized, and if appropriate recognizes such loss.
(ii) Site restoration:
Chemtrade recognizes provisions for statutory, contractual, constructive or legal obligations associated with site restoration in
respect of Chemtrade’s plants.
The fair value of estimated asset retirement obligations is recognized when identified and a reasonable estimate of fair value
can be made. The asset retirement cost, equal to the estimated fair value of the asset retirement obligation, is capitalized as
part of the cost of the related long-lived asset. The asset retirement cost is depreciated over the asset’s estimated useful life
and included in cost of sales and services. Increases in the asset retirement obligation resulting from the passage of time are
recorded as accretion of the asset retirement obligation.
37
(j) Financial instruments
(i) Non-derivative financial assets:
Chemtrade initially recognizes loans and receivables at fair value on the date that they are originated. All other financial
assets (including assets designated at fair value through profit or loss) are recognized at fair value on the trade date at which
Chemtrade becomes a party to the contractual provisions of the instrument.
Chemtrade de-recognizes a financial asset when the contractual rights to the cash flows from the asset expire. Financial
assets and liabilities are offset and the net amount presented in the consolidated statements of financial position when
Chemtrade has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle
the liability simultaneously.
Chemtrade’s only non-derivative financial assets are loans and receivables and cash and cash equivalents. Loans and
receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets
are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans
and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and
receivables comprise trade and other receivables and note receivable.
Cash is composed of cash at banks and on hand. Cash equivalents are highly liquid investments having original terms to
maturity of 90 days or less when acquired and are valued at fair value. Restricted cash is restricted for reimbursement of
significant non-routine maintenance costs at one of Chemtrade’s facilities.
(ii) Non-derivative financial liabilities:
Chemtrade initially recognizes long-term debt and convertible unsecured subordinated debentures at fair value on the date
that they are originated. All other financial liabilities are recognized initially at fair value on the trade date at which Chemtrade
becomes a party to the contractual provisions of the instrument.
Chemtrade de-recognizes a financial liability when its contractual obligations are discharged, cancelled or expire. Financial
assets and liabilities are offset and the net amount presented in the statement of financial position when Chemtrade has
a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability
simultaneously.
Chemtrade’s non-derivative financial liabilities include trade and other payables, distributions payable, income tax payable,
long-term debt and convertible unsecured subordinated debentures. Such financial liabilities, other than convertible
unsecured subordinated debentures, are recognized initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
The convertible unsecured subordinated debentures are recognized initially at fair value. Transaction costs related to the
convertible unsecured subordinated debentures are expensed as incurred. Subsequent to initial recognition, the convertible unsecured subordinated debentures are measured at fair value at each period end date with the changes recorded in
(iii) Units:
Units are classified as equity. Incremental costs directly attributable to the issue of units are recognized as a deduction from
equity, net of any tax effects. Distributions thereon are recognized as distributions within equity.
When units recognized as equity are re-purchased, the amount of the consideration paid, which includes directly attributable
costs, net of any tax effects, is recognized as a deduction from equity.
(iv) Derivative financial instruments:
Chemtrade holds derivative financial instruments to mitigate its foreign currency, commodity, and interest rate risk
exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic
characteristics and risks of the host contract and the embedded derivative are not closely related.
38
Derivatives are recognized initially at fair value; attributable transaction costs are recognized in comprehensive income as
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized
immediately in comprehensive income, except for derivatives designated as cash flow hedges as noted below.
(v) Hedging:
On initial designation of the hedge, Chemtrade formally documents the relationship between the hedging instruments and
hedged items, including the risk management objectives and strategy in undertaking the hedge transaction, together with the
methods that will be used to assess the effectiveness of the hedging relationship. Chemtrade makes an assessment, both at
the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be
“highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period
for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent.
For a forecast transaction to be considered a cash flow hedge, the transaction should be highly probable to occur and
should present an exposure to variations in cash flows that could ultimately affect reported earnings.
Derivatives are recognized initially at fair value; attributable transaction costs are recognized in comprehensive income as
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as
described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction that could affect earnings, the
effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in
unrealized gains/losses on cash flow hedges in equity. The amount recognized in other comprehensive income is removed
and included in earnings in the same period as the hedged cash flows affect earnings under the same line item in the consolidated statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the
derivative is recognized immediately in earnings.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the
designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in unrealized gains/losses on cash flow hedges in equity remains there
until the forecast transaction affects earnings. When the hedged item is a non-financial asset, the amount recognized in
other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecast
transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in
earnings. In other cases the amount recognized in other comprehensive income is transferred to earnings in the same period
that the hedged item affects earnings.
(k) Lease payments
Payments made under operating leases are recognized in comprehensive income on a straight-line basis over the term of the
lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.
(l) Finance income and finance costs
Finance income is comprised of interest income on funds invested, changes in the fair value of financial assets and liabilities
at fair value through profit or loss, and gains on hedging instruments that are recognized in comprehensive income. Interest
income is recognized as it accrues in comprehensive income, using the effective interest method.
Finance costs are comprised of interest expense on borrowings, transaction costs and related accretion, changes in the fair
value of financial liabilities at fair value through profit or loss and losses on the ineffective portion of hedging instruments that
are recognized in comprehensive income. Borrowing costs that are not directly attributable to the construction or production
of a qualifying asset are recognized in comprehensive income using the effective interest method.
39
(m) Income tax
Income tax expense is comprised of current and deferred tax. Current tax and deferred tax are recognized in earnings except
to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates and laws
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
• temporary differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future;
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profits; and
• taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based
on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are
offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
In determining the amount of current and deferred tax Chemtrade takes into account the impact of uncertain tax provisions
and whether additional taxes and interest may be due. Chemtrade believes that its accruals for tax liabilities are adequate for
all open tax years based on its assessment of many factors, including interpretations of tax laws and prior experience. This
assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes Chemtrade to change its judgement regarding the adequacy of existing tax liabilities;
such changes to tax liabilities will impact tax expense in the period that such a determination is made.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that
it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
(n) Earnings per unit
Chemtrade presents basic and diluted earnings per unit (“EPU”) data for its units. Basic EPU is calculated by dividing the
earnings attributable to Unitholders of Chemtrade by the weighted average number of units outstanding during the period.
Diluted EPU is determined by adjusting the earnings attributable to Unitholders and the weighted average number of units
outstanding for the effects of all dilutive potential units, which currently consist of convertible unsecured subordinated
debentures.
(o) Segment reporting
An operating segment is a component of Chemtrade that engages in business activities from which it may earn revenues and
incur expenses, including revenues and expenses that relate to transactions with any of Chemtrade’s other components. All
operating segments’ operating results are reviewed regularly by Chemtrade’s Chief Executive Officer (“CEO”) to make decisions about resources to be allocated to each segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily Chemtrade’s headquarters),
head office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and
intangible assets other than goodwill, excluding acquisitions for the segment.
40
(p) Standards and interpretations not yet adopted
The IASB published IFRS 13 Fair Value Measurement, which is effective prospectively for annual periods beginning on or after January 1,
2013. Chemtrade does not expect IFRS 13 to have a material impact on the consolidated financial statements.
The IASB published an amended version of IAS 19 Employee Benefits. Adoption of the amendment is required for annual periods beginning on or after January 1, 2013, with early adoption permitted. Chemtrade intends to adopt the amendments in its consolidated financial
statements for the annual period beginning on January 1, 2013. Chemtrade does not expect IFRS 19 to have a material impact on the
consolidated financial statements.
In May 2011 the IASB issued IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, which are
effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. IFRS 10 replaces the guidance in IAS 27
Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities, while IFRS 12 contains the disclosure requirements for entities that have interests in subsidiaries and unconsolidated structured entities. Chemtrade intends to adopt IFRS
10 and 12, including the amendments issued in June 2012, in its consolidated financial statements for the annual period beginning on
January 1, 2013. Chemtrade does not expect IFRS 10 or 12 to have a material impact on the consolidated financial statements because
of the nature of Chemtrade’s interests in other entities.
The IASB issued IFRS 9 (2010) Financial Instruments (IFRS 9) effective for annual periods beginning on or after January 1, 2015. IFRS 9
replaces the guidance in IAS 39 Financial Instruments: Recognition and Measurement, on the classification and measurement of financial
assets and liabilities. Chemtrade intends to adopt IFRS 9 in its consolidated financial statements for the annual period beginning on
January 1, 2015. The extent of the impact of adoption of IFRS 9 has not yet been determined.
4. ACQUISITION:
Acquisitions are accounted for under the acquisition method of accounting, and the results of operations since the respective dates of
acquisition are included in comprehensive income. From time to time, as a result of the timing of acquisitions in relation to Chemtrade’s
reporting schedule and the availability of information, certain information relating to the purchase allocations and valuations may not be
finalized at the time of reporting. Purchase price allocations are completed after the vendors’ final financial statements and income tax
returns have been prepared and accepted by Chemtrade within one year from acquisition. Such preliminary purchase price allocations
are based on management’s best estimates of the fair value of the acquired assets and liabilities. Upon finalization, adjustments to the
initial estimates may be required.
On June 24, 2011 Chemtrade completed the purchase of 100% of the outstanding common shares of all the businesses of Marsulex Inc.
(“Marsulex”), other than Marsulex Environmental Technologies Corporation. Marsulex, based in Toronto, Ontario, was a leading provider
of industrial services, including processing or handling of industrial by-products or waste streams, and a producer and marketer of
sulphur-based industrial chemicals. Marsulex’s services and products were provided to a broad base of industrial customers in a wide
range of industries.
The business combination was structured as a share acquisition for net proceeds of $392,018. The transaction was financed through a
combination of an underwritten equity offering and syndicated senior secured credit facilities. Chemtrade completed an equity offering of
10,994,000 units for total proceeds of $148,419. This included 1,434,000 units issued pursuant to the exercise in full of the underwriters’
over-allotment option. Issuance costs in relation to the equity offering amounted to $8,362 and are reflected in unitholders’ equity. The
senior secured credit facilities were comprised of a $365,000 four year term loan and $80,000 revolving credit facility. Costs related to the
credit facility amounted to $9,431 and are reflected in long-term debt. The costs are being amortized to finance costs in comprehensive
income using the effective interest method.
41
The aggregate consideration for this acquisition was allocated as follows:
June 24, 2011
Cash
$392,018
Final allocation
Property, plant and equipment
$
269,117
Other assets
200
Intangible assets (1)280,227
Assets classified as held for sale
27,130
Net working capital
(47,166)
Deferred revenue
(4,700)
Employee benefits
(3,266)
Provisions(1,340)
Long-term debt
(24,926)
Liabilities directly associated with assets classified as held for sale
(1,277)
Deferred tax liabilities (101,981)
Net assets acquired including bank indebtedness
Bank indebtedness acquired
Net assets acquired
(1)
$
392,018
1,517
393,535
Includes goodwill of $108,644.
Chemtrade also assumed two standby letters of credit amounting to $2,229 related to the Fort McMurray facility.
The purchase price allocation for this acquisition has been finalized. There have been no adjustments since the year ended
December 31, 2011.
Goodwill is comprised of the value of expected synergies arising from the acquisition, the expertise and reputation of the
assembled workforce acquired, and the geographic location of the acquiree. None of the goodwill recognized is deductible
for tax purposes.
In 2011, directly attributable acquisition-related costs of $14,769 have been expensed and are included in selling and
administrative expenses in comprehensive income.
The amount of revenue and earnings attributable to Marsulex since June 24, 2011 has been included in comprehensive
income and is included in the SPPC business segment. If the Marsulex acquisition had occurred at January 1, 2011, the
pro forma consolidated revenue and earnings for 2011 are estimated to have been $984,747 and $70,950, respectively.
Sale of petcoke business
On July 1, 2011, Chemtrade sold the petcoke cutting and handling operations acquired in the Marsulex acquisition to
Savage Companies for final proceeds of US$26,388, including an adjustment for working capital. This operation was
considered to be a non-core asset for Chemtrade.
42
5. TRADE AND OTHER RECEIVABLES:
2012
2011
Trade and other receivables
$116,748$
Less: allowance for doubtful accounts
(1,645)
124,985
(2,215)
$115,103$
122,770
Net trade and other receivables
As disclosed in note 25, Chemtrade is exposed to normal credit and currency risks with respect to its accounts receivable.
At December 31, 2012, 97.6% (2011 - 94.1%) of accounts receivable are less than 30 days past due.
While Chemtrade evaluates a customer’s credit worthiness before credit is extended, provisions for potential credit losses are
also maintained. The change in allowance for doubtful accounts was as follows:
2012
2011
Balance at beginning of year
$2,215$
3,333
Adjustments made during the year
533
1,291
Write-offs
(1,103)
(2,409)
Balance at end of year
$1,645$
2,215
6. INSURANCE CLAIM:
In May 2010, a fire occurred at Chemtrade’s Beaumont, Texas facility. During the year ended December 31, 2010,
Chemtrade received partial payment of US$3,000 related to its business interruption claim. During 2011, Chemtrade
concluded its business interruption claim and received a final payment of an additional US$8,598. The related income has
been recorded as a reduction to selling and administrative expenses in the SPPC segment in 2011. The Beaumont plant
was back on-line during the fourth quarter of 2010.
During 2010, Chemtrade wrote off the value of equipment that was damaged in the fire. The costs to repair and replace
these assets are recoverable under Chemtrade’s property insurance policy. At December 31, 2012, a balance of $2,103
(2011 - $1,703) related to these costs is included in trade and other receivables.
7. INVENTORIES:
Chemtrade’s inventories are as follows:
2012
2011
Raw materials and work in process
$7,362$
Finished goods
18,405
Operating supplies
3,578
8,638
22,956
3,819
$
29,345$
35,413
The amount of inventories recognized as an expense during the year ended December 31, 2012 is $598,930 (2011 - $606,581).
43
8. PROPERTY, PLANT AND EQUIPMENT:
Chemtrade’s property, plant and equipment are as follows:
Facilities and
Plant andequipment under
Land equipmentconstruction
Cost Balance at January 1, 2011
$
3,904
$
Acquisition (note 4)
9,257
Additions
-
Additions reimbursed by insurance
-
Transfers
-
Reclassification to other assets
-
Asset retirement
-
Translation
79
260,424
$
244,706
-
-
21,771
-
(3,660)
6,558
529,799
$
Additions
Additions reimbursed by insurance
Transfers
Asset retirement
Translation
$
$
-
-
-
-
(78)
13,162
$
$
-
-
48,890
(2,587)
(5,762)
570,340
$
57,568
$
43,178
3,609
(48,890)
-
(1,009)
54,456
$
288,840
269,117
33,542
4,344
730
(3,754)
7,788
600,607
43,178
3,609
(2,587)
(6,849)
637,958
Accumulated depreciation Balance at January 1, 2011
$
-
$
Current year depreciation
-
Asset retirement
-
Translation
-
Depreciation allocated to inventory
-
(149,589)
$
(32,462)
3,045
(2,858)
(158)
-
$
-
-
-
-
(149,589)
(32,462)
3,045
(2,858)
(158)
(182,022)
-
$
(182,022)
-
-
-
-
(45,920)
2,201
2,871
(92)
$
Current year depreciation
Asset retirement
Translation
Depreciation allocated to inventory
44
13,240
24,512
$
15,154
33,542
4,344
(21,771)
730
(94)
1,151
Total
$
-
$
-
-
-
-
$
(45,920)
2,201
2,871
(92)
$
(222,962)
Net carrying amount
December 31, 2011
$
13,240
$
347,777
$
57,568
$
December 31, 2012
$
13,162
$
347,378
$
54,456
$
418,585
414,996
-
$
(222,962)
$
-
9. OTHER ASSETS:
Chemtrade’s other assets are as follows:
2012
2011
Restricted cash
$1,082$
2,473
Note receivable (note 28)
2,487
2,543
Deferred rent expense
1,855
1,918
Other
139
181
$5,563$
7,115
10. INTANGIBLE ASSETS:
Chemtrade’s intangibles and goodwill are as follows:
Customer Vendor
Goodwill Relationships Relationships Total
Cost Balance at January 1, 2011
$
80,213
$
193,968
$
108,644
171,583 Translation
1,333
3,361
7,731 $
-
539
281,912
280,227
5,233
8,270 567,372
$
Assets fully amortized
Translation
$
190,190
$
-
(1,492)
188,698
$
368,912 $
(16,090) (2,767) 350,055 $
$
- (54) 8,216 $
(16,090)
(4,313)
546,969
Accumulated amortization Balance at January 1, 2011
$
-
$
(111,702)
$
Current year amortization
-
(23,176)
Translation
-
(1,490) (4,381)
$
(866)
(242) (116,083)
(24,042)
(1,732)
(5,489)
$
(141,857)
-
$
(812)
34
16,090
(31,603)
1,488
$
Assets fully amortized
$
Current year amortization
Translation
$
-
$
-
$
-
-
-
$
Net carrying amount
December 31, 2011
$
190,190
$
December 31, 2012
$
188,698
$
(136,368)
$
16,090
$
(30,791)
1,454
(149,615)
$
(6,267)
$
232,544
200,440
$
$
2,781
1,949
$
$
(155,882)
425,515
391,087
45
Impairment testing for cash-generating units containing goodwill
Chemtrade performed its annual test for goodwill impairment in the fourth quarter of 2012 in accordance with its policy
described in note 3. The recoverable amount of all CGUs exceeded their carrying values. As a result, no goodwill
impairment was recorded. In Chemtrade’s case, the recoverable amount is based on the value in use approach.
The carrying value of goodwill for the SPPC CGUs is $166,566 (2011 - $167,616) and for the International CGU is $22,132
(2011 - $22,574). The fair value for each CGU was in excess of its carrying value.
The key assumptions used in performing the impairment test for all CGU’s were as follows:
2012
Discount rate
Perpetual growth rate
Time period
10.92%
2.5%
5 years
Fair value less costs to sell approach
Fair value less costs to sell is Chemtrade’s market price less the costs of disposal. The appropriate market price is usually
based on a multiplier of earnings.
11. TRADE AND OTHER PAYABLES:
Chemtrade’s payables are as follows:
2012
2011
Trade payables
$94,386$
Derivative instruments (note 25)
233
Non-trade payables and accrued expenses
59,189
$153,808$
103,776
375
61,189
165,340
12. PROVISIONS:
Current Non-Current
Onerous Site
ContractsRestoration
Total
Balance at January 1, 2011
$
4,287
$
610
$
4,897
671
-
671
-
1,340
1,340
Accretion
-
76
76
Translation
96
44
140
$
5,054
$
(3,621)
Accretion
-
Translation
(90)
46
$
1,343
$
2,070
$
7,124
-
(3,621)
131
131
(31)
(121)
2,170
$
3,513
(a) Onerous contracts
Onerous contracts relate to customer/supplier contracts with terms that are unfavourable to Chemtrade. Management has
made estimates for provisions of losses relating to these contracts and has accrued for them accordingly.
(b) Site restoration
Chemtrade has estimated a retirement obligation for its plants and has accrued for this obligation.
13. LONG-TERM DEBT:
2012
2011
Term bank debt
US $nil (2011 - US$153,000)
$-$
Canadian dollar denominated
-
Revolving credit facility
US $85,000 (2011 - $nil)
84,567
Canadian dollar denominated
Less: Transaction costs
Long-term bank debt (note (a))
125,000
(5,202)
$204,365$
155,601
125,000
(6,235)
274,366
23,626
26,181
$227,991$
Less: Current portion
(2,731)
300,547
(2,539)
$225,260$
298,008
Long-term loan - Fort McMurray facility (note (b))
Long-term debt
(a) Long-term debt
During the first quarter of 2011, Chemtrade undertook an internal corporate restructuring. As part of this restructuring,
Chemtrade’s U.S. subsidiaries repaid the remaining long-term debt of US$76,368 and its Canadian subsidiaries borrowed
US$76,368 pursuant to an amendment to the existing credit agreement. As a result of this extinguishment of the original
long-term debt (“2005 Credit Facilities”), Chemtrade wrote off the remaining transaction costs in the amount of $180,
which was recorded in finance costs in comprehensive income. In addition, as a result of the extinguishment of the original
long-term debt, Chemtrade recognized a loss of $677 related to the value of the interest rate swap arrangements that had
been previously included in accumulated other comprehensive income at December 31, 2010. This loss was recorded in
finance costs in comprehensive income in 2011.
In June 2011, Chemtrade partially financed the acquisition of Marsulex with a $365,000 four year term loan (the 2011
Credit Facilities). Part of the proceeds from the 2011 Credit Facilities was used to repay the existing term bank debt of
US$76,368. Chemtrade realized a foreign exchange gain of $1,138. This gain was included in finance income in
comprehensive income in 2011. Chemtrade also collapsed the interest rate swap arrangements related to the previous
credit facilities that were repaid. As a result of collapsing these arrangements, Chemtrade had to pay $276 to settle the
arrangements. This cost was recorded in finance costs in comprehensive income in 2011.
During the third quarter of 2011, Chemtrade repaid a portion of the long-term bank debt of US$22,000. As a result,
previously deferred transaction costs of $543 relating to this portion of the debt were written off in finance costs in
In March 2012, Chemtrade modified the 2011 Credit Facilities by increasing the size of the facility to $400,000. The
modified facility consists of $399,000 revolving credit facility and the balance as term debt. Additionally, the maturity
date of the credit facilities was extended to March 2017. Chemtrade incurred $693 of transaction costs as a result of the
modification. This amount has been included in long-term debt and will be recognized over the remaining term of the loan,
using the effective interest rate method.
47
At December 31, 2012, Chemtrade had drawn $209,567 on the revolving credit facility and had committed a total of
$12,764 of this facility towards standby letters of credit. There is no remaining balance of term debt outstanding. The 2011
Credit Facilities are secured by all the property, plant and equipment of Chemtrade, excluding the Fort McMurray facility.
At December 31, 2012, the weighted average effective interest rate of the facilities is 3.2%.
(b) Long-term loan – Fort McMurray facility
The Fort McMurray facility, acquired by Chemtrade as part of the Marsulex acquisition detailed in note 4, operates
processing facilities at Syncrude’s Mildred Lake oil sands facility in Alberta. In order to finance a portion of the construction
of such facilities, a separate loan secured by the assets, was entered into and remains outstanding. This loan bears interest
at a fixed rate of 7.3% per annum with monthly principal repayments due until December 2019.
14. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES:
In 2010, Chemtrade issued $90,000 principal amount of convertible unsecured subordinated debentures. These convertible
unsecured subordinated debentures bear interest at a rate of 6% per annum and are convertible, at the option of the holder,
into units of Chemtrade at any time prior to the maturity date of March 31, 2017 and may be redeemed by Chemtrade in
certain circumstances.
During the fourth quarter of 2011, Chemtrade issued an additional $80,000 of convertible unsecured subordinated
debentures which bear an interest rate of 5.75% per annum and are convertible, at the option of the holder, into units of
Chemtrade at any time prior to the maturity date of December 31, 2018 and may be redeemed by Chemtrade in certain
circumstances. Chemtrade incurred transaction costs of $3,728 in 2011 which includes the underwriter’s fee and other
expenses related to the offering.
Chemtrade has designated the convertible unsecured subordinated debentures as a financial liability at fair value through
profit or loss. At December 31, 2012 the fair value of the convertible unsecured subordinated debentures was $178,905
(December 31, 2011 - $169,420). For the year ended December 31, 2012, the net finance costs related to these
convertible unsecured subordinated debentures were costs of $19,496 (2011 - costs of $6,087), which included losses
from the increase in the fair value of the convertible unsecured subordinated debentures of $9,496 (2011 - gain of $3,280),
interest expense of $10,000 (2011 - $5,639) and transaction costs of $nil (2011 - $3,728).
15. OTHER LONG-TERM LIABILITIES:
Chemtrade’s other long-term liabilities are as follows:
2012
2011
Deferred revenue
$3,167$
4,207
Long-term portion of TR LTIP liability (note 18)
4,289
6,933
Interest rate swap liability (note 25)
3,920
4,980
Other
668
806
48
$
12,044$
16,926
16. EMPLOYEE BENEFITS:
Chemtrade provides certain health care and pension benefits for certain SPPC, Pulp and International employees upon
retirement. As part of the Marsulex acquisition in 2011, Chemtrade acquired two non-contributory defined benefit pension
plans and three other post-employment benefit plans.
2012
2011
Present value of unfunded obligations
$
Present value of wholly or partially funded obligations
6,990
$
25,914
6,029
22,325
Total present value of obligations
Unamortized unvested past service cost
Fair value of plan assets
32,904
(27)
(19,266)
28,354
(32)
(16,449)
Recognized liability for defined benefit obligations
$13,611$
11,873
2012
2011
Components of net periodic benefit cost
Current service cost
$993$
Interest cost
1,116
Recognition of vested past service cost
4
Expected return on assets
(687)
Net periodic benefit cost recognized
$1,426$
649
744
4
(479)
918
2012
2011
Net periodic benefit cost allocation
Cost of sales
$805$
621
Net periodic benefit cost recognized
$1,426$
351
567
918
2012
2011
Weighted average assumptions
Discount rate 3.59%4.46%
Expected rate of return on assets
4.38%5.70%
Ultimate other medical trend rate
4.79%5.38%
Salary escalation
1.75%1.79%
49
2012
2011
Change in accrued benefit obligation
Accrued benefit obligation at beginning of year
$28,354$
Acquisitions (note 4)
-
Current service cost 993
Interest cost
1,116
Contributions
230
Benefits paid
(774)
Foreign exchange (gain) loss
(17)
Actuarial loss (gain)
3,002
Accrued benefit obligation at end of year
$32,904$
10,506
13,418
649
744
202
(752)
181
3,406
28,354
2012
2011
Change in plan assets
Plan assets at beginning of year
$16,449$
Acquisitions (note 4)
-
Expected return on plan assets
687
Contributions
2,125
Benefits paid
(774)
Foreign exchange (loss) gain
(5)
Actuarial gain (loss)
784
Plan assets at end of year
$19,266$
5,846
10,152
479
1,148
(752)
101
(525)
16,449
The asset mix in the plan is approximately 58.3% bonds (2011 - 59.9%) and approximately 41.7% equity securities
(2011 - 40.1%).
Assumed health care cost trend rates have an effect on the amounts recognized in comprehensive income.
A one percentage point change in assumed medical cost trend rates would have the following effects:
One percentage
point increase
One percentage
point decrease
Effect on the aggregate current service and interest cost
$49$
Effect on defined benefit obligation
337
50
(46)
(303)
Historical information:
20122011 2010
Present value of the defined benefit obligation
$25,914 $22,325 $ 6,571
Fair value of plan assets
(19,266)(16,449) (5,846)
Deficit in the plan
$6,648 $ 5,876$
Experience adjustments arising on plan liabilities
$282 $
49$
-
Experience adjustments arising on plan assets
$(784) $
525$
-
725
Chemtrade expects $1,332 in contributions to be paid to its defined benefits plans in 2013.
Pulp hourly employees participate in the Pulp and Paper Industry Pension Trust Fund, a multi-employer, defined
contribution pension plan. The plan is funded by employer and employee contributions. The employer-related expense
under this plan in 2012 was $179 (2011 - $175).
17. UNITS AND OTHER COMPONENTS OF EQUITY:
(a) Units
Chemtrade has authorized an unlimited number of units. Chemtrade’s units have no par value. The following table presents
the number of units outstanding:
2012 2011
Number of
Units Amount Number of
Units Amount
Units
Balance – January 1
41,664,470 $519,301 30,670,470$ 377,144
Issued
625 11 10,994,000 148,419
Issuance costs
(net of taxes)
-
-
- (6,262)
Balance – December 31
41,665,095 $519,312
41,664,470$ 519,301
(b) Contributed surplus
Chemtrade’s contributed surplus relates to the re-purchase of units under a normal course issuer bid.
(c) Accumulated other comprehensive loss (AOCL)
AOCL is comprised of the following separate components of equity:
Cumulative translation account
The cumulative translation account comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations.
Unrealized gains/losses on cash flow hedges
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
51
(d) Distributions
Distributions paid for the year ended December 31, 2012 were $49,997 (2011 - $43,401) or $1.20 per unit (2011 - $1.20
per unit). All of Chemtrade’s distributions are discretionary.
Subsequent to year end, Chemtrade declared distributions of $4,167 or $0.10 per unit.
(e) Net earnings per unit
Net earnings per unit have been calculated on the basis of the weighted average number of units outstanding. The following
table provides a breakdown of the numerator and denominator used in the calculation of net earnings per unit and diluted
net earnings per unit.
2012
2011
Numerator
Net earnings
$39,027$
60,283
Net interest and fair value adjustment on convertible debentures
-
2,285
Diluted net earnings
$39,027$
2012
62,568
2011
Denominator
Weighted average number of units
41,664,620 36,423,495
Weighted average convertible debenture dilutive units
- 5,844,178
Weighted average number of diluted units
41,664,620 42,267,673
For the year ended December 31, 2012, the potential conversion of the convertible unsecured subordinated debentures has
not been included as the effect on earnings per unit would be anti-dilutive.
18. SHARE-BASED PAYMENTS:
Chemtrade operates a TR LTIP which grants cash awards based on total Unitholder return over a performance period. Total
Unitholder return consists of changes in unit price and distributions paid to Unitholders. Chemtrade treats these awards as
liabilities with the value of these liabilities being re-measured at each reporting period, based upon changes in the fair value
of the awards. Any gains or losses on re-measurement are recorded in selling and administrative expenses in comprehensive
income, provided that the aggregate compensation cost accrued during the performance period is not adjusted below zero.
For the year ended December 31, 2012, Chemtrade recorded expenses of $9,263 (2011 - expenses of $6,293) related
to the TR LTIP. As at December 31, 2012 a liability of $16,199 (December 31, 2011 - $17,373) has been recorded, of
which $11,910 (December 31, 2011 - $10,440) is included in trade and other payables and $4,289 (December 31, 2011 $6,933) is included in other long-term liabilities.
52
Inputs for measurement of fair values
The fair value of the TR LTIP is measured based on the Monte Carlo sampling method. Base price is the average unit
price for the first 10 business days at the beginning of each TR LTIP performance period. Expected volatility is estimated
by considering historic average unit price volatility. The risk free interest rate is based on Canadian government bonds and
Canadian government treasury bills. The inputs used in the measurement of the fair value of the TR LTIP are the following:
Average base price
Period end unit price
Average risk free interest rate Average expected volatility
Average expected remaining term
20122011
$15.05$13.47
$16.32$14.85
1.12%0.94%
20.51%24.95%
1.50 years
1.50 years
19. COMMITMENTS AND CONTINGENCIES:
(a) Operating leases
Chemtrade enters into operating leases in the ordinary course of business, primarily for real property and equipment.
Payments for these leases are contractual obligations as scheduled per each agreement. Operating lease payments in 2012
were $20,710 (2011 - $18,915). The future aggregate minimum lease payments under non-cancellable operating leases
are as follows:
2013$
2014 2015
2016
2017
2018 and thereafter
$
22,524
14,004
9,569
7,064
4,043
6,747
63,951
Chemtrade has recorded deferred rent expense of $1,855 (2011 - $1,918) in other assets.
(b) Environmental clean-up costs
Chemtrade’s operations are subject to numerous laws, regulations and guidelines relating to air emissions, water discharges,
solid and hazardous wastes, transportation and handling of hazardous substances and employee health and safety in
Canada, the United States and other foreign countries where they operate. These environmental regulations are continually
changing and are generally becoming more restrictive.
Chemtrade owns a number of sites as a result of the acquisitions of certain businesses. Subject to certain limitations,
Chemtrade has been indemnified by certain of the vendors for any remediation costs or environmental actions that may
arise as a result of conditions existing at the time of acquisition of these sites and consequently Chemtrade has not accrued
any amount in this respect except for in the acquisition of Marsulex. Environmental assessments were conducted prior to the
purchase of the sites as a basis to, among other things, evaluate indemnity protections and, where applicable, to verify the
appropriateness of estimates for remediation costs.
53
(c) Other claims
Chemtrade is involved in certain claims arising from the ordinary course and conduct of its business which, in the opinion of
management, will not have a material impact upon the financial position of Chemtrade. Chemtrade has received indemnities
from certain vendors with respect to claims arising prior to the related acquisitions.
20. REVENUE:
The revenues for Chemtrade are as follows:
2012
2011
Sales of products and other
$800,693$
Processing services
118,674
$919,367$
801,092
79,500
880,592
21. SELLING AND ADMINISTRATIVE EXPENSES:
The components of selling and administrative expenses are as follows:
2012
2011
Wages, salaries and benefits, including bonuses
$38,402$
Share-based payments
9,263
Other selling, general and administrative expenses
20,195
Unrealized foreign exchange (gain) loss
(3,566)
1,553
$65,847$
32,076
6,293
22,496
5,477
1,571
67,913
22. DEPRECIATION AND AMORTIZATION:
The components of depreciation expense of property, plant and equipment and amortization expense of intangible assets
are as follows:
2012
2011
Cost of sales:
Depreciation expense (note 8)
$44,367$
Amortization expense (note 10)
31,603
Selling and administrative expenses:
Depreciation expense (note 8)
54
1,553
$77,523$
30,891
24,042
1,571
56,504
23. FINANCE INCOME AND COSTS:
The components of finance income and costs are as follows:
2012
2011
Interest revenue
$209$
Non-cash gain on derivatives
-
Fair value of convertible debentures
-
508
1,416
3,280
Finance income
5,204
$
209$
Interest expense on long-term debt
$10,713$
Debt extinguishment costs
436
Interest expense on convertible debentures
10,000
Transaction costs on convertible debentures
-
Fair value of convertible debentures
9,496
Accretion expense on transaction costs
1,275
10,103
2,134
5,639
3,728
1,036
Finance costs
22,640
$
31,920$
24. INCOME TAXES:
Chemtrade is a mutual fund trust and a specified investment flow-through trust (“SIFT”) for income tax purposes. Chemtrade
is subject to current income taxes at the top marginal tax rate applicable to individuals of approximately 47.97% on all taxable
income not distributed to Unitholders. Chemtrade is also subject to current income taxes on all taxable income, other than
dividends, earned from Canadian corporate and flow-through subsidiaries (other than Canadian subsidiaries that earn certain
investment income) at a tax rate similar to the corporate tax rate. Chemtrade will not be subject to tax on income received from
non-Canadian subsidiaries, provided that the income is distributed to Unitholders during the year. Based on the current
organization of Chemtrade and its subsidiaries, it expects that its income distributed to Unitholders will not be subject to SIFT tax.
(a) Current tax expense
2012
2011
Tax recognized in earnings
$4,950$
3,054
Current tax expense
$4,950$
3,054
Deferred tax expense:
Origination and reversal of temporary differences
Recognition of previously unrecognized net tax losses
Tax impact of reorganization (8,458)
-
- 4,358
(36,088)
3,053
Deferred tax recovery
$(8,458)$
(28,677)
Total tax recovery
$(3,508)$
(25,623)
55
(b) Reconciliation of the effective tax rate
The provision for income taxes in comprehensive income represents an effective rate different than the Canadian corporate
statutory rate of 26.66% (2011 - 28.31%). The differences are as follows:
2012
2011
Earnings before income taxes $35,519$
Computed income tax expense at Canadian statutory rate
9,469
Increase (decrease) resulting from:
Income of trust taxed directly to unitholders
Difference in substantially enacted tax rate
International income tax rate differences
Non-recognition (recognition) of deferred tax assets
Difference between capital gain tax rate and full rate
Tax deductions not utilized (current year)
(12,161)
3,328
137
2,139
(2,992)
-
Foreign exchange
Transaction costs not deductible
Other
(1,943)
-
(1,485)
Income tax (recovery) expense
$(3,508)$
34,660
9,812
(6,813)
3,131
(1,213)
(36,088)
425
674
2,644
1,805
(25,623)
(c) Recognized deferred tax assets and liabilities
Recognized deferred tax assets and liabilities are attributed to the following:
2012
2011
Deferred tax assets: Other assets $5,705 $
Losses available for carry forward
41,222
Long-term debt and deferred interest
8,208 Other long-term liabilities and employee benefits 7,489 5,672
45,667
11,245
7,594
62,624 70,178
Reclassification to deferred tax liabilities Total deferred tax assets $
(52,981)
9,643$
Deferred tax liabilities: Property, plant and equipment $64,590 $
Intangible assets
43,333
Other liabilities (205) 107,718 Reclassification from deferred tax assets Total deferred tax liabilities 56
$
(70,178)
-
72,506
50,162
1,578
124,246
(52,981)
(70,178)
54,737 $
54,068
(d) Movement in deferred tax balances
Movement in deferred tax balances during the year are as follows:
Recognized in
Balance, Purchase Foreign
other Balance,
January 1,Recognized
price exchange comprehensiveDecember 31,
2012in earnings allocation
impact
income
2012
$
Intangible assets
Net other assets and liabilities
Other long-term liabilities
and employee benefits
(72,506)
$
(50,162)
4,094
45,667
11,245
7,916
$
6,829
1,816
(4,826)
(3,037)
-
$
-
-
-
-
-
$
-
-
381
-
- $
-
-
-
-
7,594
(240)
-
-
135
$ (54,068) $
8,458 $
-
$
381
$
(64,590)
(43,333)
5,910
41,222
8,208
7,489
135$ (45,094)
Recognized in
Balance, Purchase Foreign
other Balance,
January 1,Recognized
price exchange comprehensiveDecember 31,
2011in earnings allocation
impact
income
2011
$
Intangible assets
Net other assets and liabilities
Other long-term liabilities
and employee benefits
(18,149)
$
(9,654)
6,485
15,923
13,538
(1,752) $
7,903
(4,167)
30,870
(2,318)
(52,605)
$
(48,411)
489
(2,770)
25
-
$
-
-
1,644
-
- $
-
1,287
-
-
7,173
(1,858)
1,291
-
988
$15,316 $28,678$(101,981) $1,644
(72,506)
(50,162)
4,094
45,667
11,245
7,594
$ 2,275
$(54,068)
(e) Unrecognized deferred tax assets
During the year Chemtrade did not recognize $2,139 of deferred tax assets as management did not believe that it is probable that
the deductible temporary differences giving rise to the deferred tax asset will be utilized.
During 2011 Chemtrade recognized $56,246 of previously unrecognized tax losses of a US subsidiary, as management considered it
probable that future taxable profits resulting from the acquisition of a business during the year would be available to utilize the losses
before they expire.
(f) Unrecognized deferred tax liabilities
As at December 31, 2012, Chemtrade had unrecognized deferred tax liabilities arising from taxable temporary differences of
$94,420 (2011 - $87,000) relating to an investment in a subsidiary that was not recognized because Chemtrade controls whether
the liability would be incurred and it was satisfied that it would not be incurred in the foreseeable future. Chemtrade has taxable
temporary differences relating to certain subsidiaries that it expects will reverse in the foreseeable future without the incidence of
tax and has accordingly not provided for deferred income taxes with respect to these investments.
57
25. FINANCIAL INSTRUMENTS:
(a) Categories of financial assets and liabilities
The carrying values of Chemtrade’s financial instruments are as follows:
2012
2011
Assets carried at fair value
Derivative instruments
$225$
439
Assets carried at amortized cost
Cash and cash equivalents
6,075
Trade and other receivables
115,103
Restricted cash (note 9)
1,082
Note receivable (note 9)
2,487
63,958
122,770
2,473
2,543
Liabilities carried at fair value
Derivative instruments (note 11)
233 375
178,905
16,199
3,920
169,420
17,373
4,980
Liabilities carried at amortized cost
Trade and other payables
141,665
Distributions payable
4,167
2,731
Long-term debt
225,260
154,525
4,166
2,539
298,008
Convertible unsecured subordinated debentures
TR LTIP liability (note 18)
Interest rate swap liability (note 25)
(b) Derivatives and hedging
2012 2011
Fair Value Fair Value
Notional Notional
Amount Asset Liability Amount AssetLiability
Derivatives designated
in a formal hedging relationship
Interest rate swaps
US$50,000 $
Interest rate swaps
$ 125,000
-$ 1,383US$ 50,000
$
- 2,537 $125,000
Derivatives not designated
in a formal hedging relationship
Foreign exchange contracts (1)
$- $
64$
Commodity forward contracts (2) N/A 161
Total
$ 225$
58
72 $
161
See below for notional amounts.
(2)
Includes commitments to buy and sell commodities and commodity forward contracts related to those commitments.
-
$ 329$ 265
N/A 110 110
4,153
(1)
- $ 1,011
- 3,969
$
439$ 5,355
As described in note 13, during the second quarter of 2011, Chemtrade repaid all of its 2005 Credit Facilities and as a result, collapsed
all of the interest rate swap agreements that it had previously entered into. Prior to this, during the three months ended March 31,
2011, Chemtrade undertook an internal corporate restructuring. As part of this restructuring, Chemtrade’s US subsidiaries repaid the
remaining long-term bank debt of US $76,368 and its Canadian subsidiaries borrowed US$76,368 pursuant to an amendment to the
existing credit agreement related to the 2005 Credit Facilities.
All changes in the fair market value of the previous swap arrangements had been recorded in financing costs in comprehensive
income. Losses are included in trade and other payables and gains are included in prepaid expenses and other assets. In addition,
Chemtrade was amortizing the remaining amount in accumulated other comprehensive loss related to the initial fair value liability of
the swap arrangements, when they were entered into in the first quarter of 2009, to comprehensive income over the remaining term
of the swap arrangements. As a result of the extinguishment of the original long-term bank debt, Chemtrade recognized the remaining
amount in accumulated other comprehensive loss to finance costs in comprehensive income in 2011.
On July 25, 2011, Chemtrade entered into new swap arrangements with its principal bankers, which fix the LIBOR and BA
components of its interest rates on $125,000 and US$50,000 of its outstanding term debt until June 2015. These swaps were formally
designated as hedges at the date of inception and any changes in the fair value of the effective portion of the swaps are being
recognized in other comprehensive income.
Chemtrade has entered into foreign exchange contracts to manage certain of its exposure to foreign currencies. Chemtrade buys and
sells specific amounts of currencies at pre-determined dates and exchange rates, which are matched with the anticipated operational
cash flows. Contracts in place at December 31, 2012 include future contracts to sell US$2,765, $6,589, US$6,800, and €2,536 at
weighted average exchange rates of €0.77, €0.75, $1.00, and US$1.32, respectively, for periods through to April 2013.
Chemtrade’s International business segment has commitments to buy and sell commodities and has entered into commodity forward
contracts to manage its exposure to commodity price changes.
The commitments to buy and sell commodities are treated as derivatives and are measured at fair value. The commodity forward
contracts are derivatives and are measured at fair value.
(c) Fair values of financial instruments
Fair value is the value that would be agreed upon in an arm’s length transaction between willing and knowledgeable counter-parties.
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables and distributions payable
approximate their fair values because of the short-term maturity of these financial instruments. The carrying amount of restricted cash
and notes receivable approximates their fair value. The carrying amount of long-term debt, excluding transaction costs, approximates
fair value as the debt accrues interest at prevailing market rates.
For fair value estimates relating to the convertible unsecured subordinated debentures and derivatives, Chemtrade classifies fair value
measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value
hierarchy has the following levels:
Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and
liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
59
The following is a summary of the fair value hierarchy levels of Chemtrade’s financial instruments:
2012
Level 1
Level 2
Level 3
Total
Instruments designated as fair
value through profit and loss
Foreign exchange contracts
$
Convertible unsecured
subordinated debentures
-
$
(8)
$
-
$
(8)
(178,905)
-
-
(178,905)
-
(3,920)
-
(3,920)
(3,928)
-
value through other
comprehensive income
Interest rate swaps
Total
$(178,905)
2011
$
Level 1
$
Level 2
$
Level 3
(182,833)
Total
value through profit and loss
Foreign exchange contracts
$
-
$
64
$
-
$
64
(169,420)
-
-
(169,420)
-
(4,980)
-
(4,980)
(4,916)
-
value through other
comprehensive income
Interest rate swaps
Total
$(169,420)
$
$
$
(174,336)
The fair value of the foreign exchange contracts is the difference between the forward exchange rate and the contract
rate. The fair value of the interest rate swap arrangements is the difference between the forward interest rates and the
contract rates discounted. All of Chemtrade’s derivative financial instruments are classified within Level 2 because they
are based on rates quoted by banks and other public data sources.
The convertible unsecured subordinated debentures are classified within Level 1 because the convertible unsecured
subordinated debentures actively trade on the Toronto Stock Exchange (“TSX”) and the fair value is based on the
quoted prices on the TSX.
60
(d) Risks associated with financial instruments
(i) Credit risk
Credit risk arises from the non-performance by counter-parties of contractual financial obligations. Chemtrade manages credit
risk for trade and other receivables through established credit monitoring activities. Chemtrade does not have a significant
concentration of credit risk with any single counter-party. The primary counter-parties related to the foreign exchange forward contracts, commodity price contracts and interest rate swaps carry investment grade ratings. Chemtrade’s maximum exposure to credit risk at the reporting date is the carrying value of its receivables and derivative assets.
(ii) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
Chemtrade manages liquidity risk by maintaining adequate cash and cash equivalent balances, and by appropriately utilizing its lines of credit. Chemtrade continuously monitors and reviews both actual and forecasted cash flows, and also matches the
maturity profile of financial assets and liabilities.
Chemtrade’s financial liabilities recorded in trade and other payables, including derivatives, accrued and other liabilities, and distributions payable are generally due within one year. The undiscounted cash flow requirements for long-term
financial liabilities as at December 31, 2012 are as follows:
Carrying
Value
Total
Long-term debt (note 13)
$ 227,991 $
Interest on long-term debt
-
(note 14) 178,905
Interest on convertible unsecured
-
Total
Less Than
1 Year 1-3 Years
4-5 Years
After
5 Years
233,600
$
35,094
2,731
$
8,337
6,096
$
16,041
216,617 $
10,081
8,156
635
169,990
-
-
89,990
80,000
50,550
10,000
20,000
15,950
4,600
$406,896 $ 489,234 $
21,068
$ 42,137 $
332,638 $ 93,391
(iii) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk comprises of three types of risk: currency risk, interest rate risk and other price risk. Chemtrade’s market risks are as follows:
(a) Currency risk
Chemtrade is exposed to fluctuations in the exchange rate of the US dollar relative to the Canadian dollar as a portion of Chemtrade’s earnings are in US dollars. On an unhedged basis, Chemtrade currently estimates that a one-cent change in the exchange rate would have an impact on the translation of the net earnings of its US currency based subsidiaries of less than $200 per annum. On an unhedged basis, a one-cent change in the exchange rate would also have an impact of
approximately $900 on Chemtrade’s net earnings because of the translation of its US dollar denominated long-term debt.
(b) Interest rate risk
Chemtrade has a credit facility with long-term debt and operating lines of credit which bear variable rates of interest. As at December 31, 2012, on an unhedged basis, a change in interest rates of 1% per annum would have an impact of
approximately $2,100 on Chemtrade’s net earnings per annum. As at December 31, 2012, Chemtrade had fixed interest rates on 85.1% of its total long-term debt.
61
(c) Other price risks
Sulphuric acid pricing
A change in sulphuric acid pricing, net of freight, of $1 per tonne, would have an impact on annual revenues in North America of approximately $1,500. In any specific period, the exact impact would depend upon the volume that is
subject to sales contracts where pricing has been fixed for a period of time. The magnitude of realized price changes also depends upon regional market dynamics. It is difficult to reliably estimate the impact of price changes on
earnings as this depends upon the volume subject to risk-sharing supply contracts and changes in sulphur costs for manufactured sulphuric acid. These factors lessen the impact of price changes on earnings relative to revenue.
Sulphur costs
Chemtrade uses sulphur in the manufacturing of several of its products, including sulphuric acid. At current
operating levels, an increase of $1 per tonne would have an impact of approximately $300 per annum on cost of sales. It is important to note that a change in the cost of sulphur is likely to lead to a change in the price for sulphuric acid as this is a key input cost in the manufacturing of sulphuric acid. Thus, the net impact on earnings of changes in sulphur costs would depend upon changes in sulphuric acid pricing. Increasingly, the pricing of sulphuric acid is being adjusted for changes in sulphur costs and consequently future changes in the cost of sulphur are expected
to be offset by changes in sulphuric acid pricing. 26. CAPITAL MANAGEMENT:
Chemtrade’s objective when managing its capital is to safeguard Chemtrade’s assets and its ability to continue as a going
concern, to meet external capital requirements related to its credit facilities, and to maximize the growth of its business
and the returns to its Unitholders. Chemtrade’s capital structure is comprised of units, convertible unsecured subordinated
debentures and long-term debt. The long-term bank debt does not require payment until March 2017. The convertible
unsecured subordinated debentures mature on dates ranging from March 2017 to December 2018.
Chemtrade intends to maintain a flexible capital structure consistent with the objectives stated above and to respond to
changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital
structure, Chemtrade may purchase units for cancellation, issue new units, raise debt (secured, unsecured, convertible
and/or other types of available debt instruments) or refinance existing debt with different characteristics.
Chemtrade utilizes annual capital and operating expenditure budgets to facilitate the management of its capital requirement.
These budgets are approved by the Board of Trustees. Budgets are updated if there are significant changes in fundamental
underlying assumptions during a period.
Chemtrade is subject to certain covenants on its credit facilities, which include a net debt to EBITDA ratio (as both terms
are defined in the credit agreement) and an interest coverage ratio. Chemtrade monitors these ratios and reports them to
its lenders on a quarterly basis. As at December 31, 2012 and December 31, 2011, Chemtrade was in compliance with the
above covenants.
There were no changes in Chemtrade’s approach to managing capital during the year.
27. BUSINESS SEGMENTS:
Chemtrade operates in four reportable segments: Sulphur Products & Performance Chemicals (“SPPC”), Pulp Chemicals
(“Pulp”), International (“Intl”) and Corporate (“Corp”). The reportable segments of Chemtrade are strategic business groups
that offer products and services to target markets, as described below. The accounting policies applied by the segments are
the same as those applied by Chemtrade.
SPPC, including the Marsulex business acquired in 2011, markets, removes and/or produces merchant and regenerated
sulphuric acid, liquid sulphur dioxide, sodium hydrosulphite, elemental sulphur and phosphorous pentasulphide. The SPPC
segment also provides water treatment chemicals and services and processing or handling of industrial by-products or waste
streams. These products are marketed primarily to North American customers.
62
Pulp produces sodium chlorate and crude tall oil. These products are marketed primarily to Canadian customers.
Intl provides removal and marketing services for elemental sulphur and sulphuric acid. These products are marketed to customers in
Europe, the Mediterranean, North Africa, Central and South America, North America, as well as in the Pacific region.
Corp is a non-operating segment that provides centralized services such as treasury, finance, information systems, human
resources, legal and risk management.
Year Ended December 31, 2012
SPPC Pulp
Revenue Intl Corp Total
$606,333 $ 51,005 $262,029 $
- $919,367
87,104 3,376 10,500
(33,750)
67,230
Net finance (costs) income
(12,270) -
33
(19,474) (31,711)
1,185
2,407
(2,626)
2,542 3,508
Earnings (loss)
76,019 5,783
7,907 (50,682)
39,027
Total assets
827,450
71,113
73,838
1,191 973,592
Total liabilities
418,835 8,674
40,545
184,107 652,161
Intangible assets
346,658 20,387
24,042
-
391,087
Capital expenditures
29,517 12,437
1,008
216
43,178
68,083 7,708
1,732
-
77,523
Loss on disposal of assets
166 218
-
-
384
Year Ended December 31, 2011
SPPC Pulp
Revenue Intl Corp Total
$514,359 $ 50,460 $315,773 $
- $880,592
78,126 5,731 15,759
(47,520)
52,096
Net finance (costs) income
(10,842) -
151
(6,745) (17,436)
34,868
-
(1,771)
(7,474) 25,623
Earnings (loss)
102,152 5,731
14,139 (61,739)
60,283
Total assets
919,149
68,422
84,529
Total liabilities
500,162 7,066
48,012
178,114 733,354
Intangible assets
376,230 23,985
25,300
-
425,515
Capital expenditures
29,656 2,928
157
801
33,542
47,341 7,324
1,839
-
56,504
Loss (gain) on disposal of assets
519 190
(8)
-
701
3,502 1,075,602
63
Geographic segments
Chemtrade operates primarily in Canada, the United States and Europe. Revenue is attributed to customers based on
location of sale.
Revenue
2012
2011
Canada
$260,632$
202,225
United States
396,706 362,594
Europe
262,029 315,773
$919,367$
880,592
Property, Plant and Equipment, and Intangible Assets
2012
2011
Canada
$499,087$
519,140
United States
276,693
293,331
Europe
30,303
31,629
$
806,083$
844,100
For the year ended December 31, 2012, no customers (2011 - one customer in the Intl segment) accounted for more than
10% of Chemtrade’s total revenues.
28. RELATED PARTIES:
Note receivable
Chemtrade has invested US$2,500 in Meranol S.A.C.I. (“Meranol”). Meranol is based in Buenos Aires, Argentina and is a
leading Argentine producer of sulphuric acid and other sulphur products. The arrangement allows Chemtrade to collect the
amount invested over five years. As at December 31, 2012 and December 31, 2011, no impairment loss was recognized
against the investment.
Key management personnel compensation
Key management personnel is comprised of Trustees and the senior leadership team of Chemtrade. Trustees receive compensation in the form of an annual retainer. In addition to their salaries, Chemtrade also provides non-cash benefits to the
senior leadership team. One such benefit is the contribution to a post-employment defined contribution plan on their behalf.
These plans for the senior leadership team are identical to the plans offered to all employees in the same jurisdiction.
The Annual Incentive Compensation (“Annual IC”) plan entitles the senior leadership team to annual cash awards based on
(i) Chemtrade’s success in achieving financial objectives (financial achievement is weighted at 75% of the total Annual IC
award for 2012); and (ii) their individual success in accomplishing personal objectives (weighted at 25% of the total Annual
IC award for 2012) as set out in their objectives for the fiscal year.
64
Unitholder Information
Trustees
Executive Officers
Head Office
Lorie Waisberg (Chair)
Toronto, Ontario
Mark Davis
President & CEO
155 Gordon Baker Road, Suite 300
Toronto, Ontario, Canada
M2H 3N5
David Colcleugh
Mississauga, Ontario
Rohit Bhardwaj
Lucio Di Clemente
Toronto, Ontario
Leon Aarts
Vice-President
David Gee
Honey Harbour, Ontario
Doug Cadwell
Vice-President
Susan McArthur
Toronto, Ontario
Tab McCullough
Vice-President
Stock Exchange Listing
The Toronto Stock Exchange
Stock symbol: CHE.UN
Transfer Agent and Registrar
Maryann Romano
Vice-President, Human Resources
Michael St. Pierre
Vice-President
Susan Paré
Corporate Secretary
Valiant Trust Company
Suite 710, 130 King Street West
P. O. Box 34
Toronto, ON
M5X 1A9
Investor Relations Line:
Toll Free 1-866-313-1872
Email
[email protected]
Website
www.valianttrust.com Investor
Information
Investor Information
Annual Meeting
Unitholders or other interested
parties seeking financial information
about the Fund are invited to call:
The Annual Meeting of Unitholders will be held
on May 16, 2013 at 9:30 a.m. at the Gallery,
TSX Broadcast Centre, The Exchange Tower,
130 King Street West, Toronto
Rohit Bhardwaj
(416) 496-5856
www.chemtradelogistics.com
HEAD OFFICE
155 Gordon Baker Road, Suite 300
Toronto, ON Canada M2H 3N5
www.chemtradelogistics.com

2012 - Chemtrade Logistics Inc.

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