U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2017
Commission File No.:
001-04192
MFC Bancorp Ltd.
(Translation of Registrant’s name
into English)
Suite #1860 - 400 Burrard Street, Vancouver,
British Columbia, Canada V6C 3A6
(Address of principal executive office)
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark whether the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
¨
Note:
Regulation S-T Rule 101(b)(1)
only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark whether the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
¨
Note:
Regulation S-T
Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that
the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant
is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of
the home country exchange on which the registrant’s securities are traded, as long as the report or other document is
not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if
discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing
the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If “Yes” is marked, indicate
below the file number assigned to the Registrant in connection with Rule 12g3-2(b):
¨
Quarterly Report for the Three Months
Ended March 31, 2017
(May 15, 2017)
In this document:
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the terms “we”, “us” and “our”
mean MFC Bancorp Ltd. and our subsidiaries, unless otherwise indicated. Due to rounding, numbers presented throughout this document
may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figures; and
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all references to “$” and “dollars”
are to Canadian dollars, all references to “US$” are to United States dollars and all references to “Euro”
or “€” are to the European Union Euro, unless otherwise indicated.
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The following report and the discussion
and analysis of our financial condition and results of operations for the three months ended March 31, 2017 should be read in
conjunction with our unaudited interim financial statements and notes thereto for the three months ended March 31, 2017, our annual
audited financial statements and notes thereto for the year ended December 31, 2016 and our 2016 annual report on Form 20-F filed
with the United States Securities and Exchange Commission, referred to as the “SEC”, and applicable Canadian securities
regulators. Our financial statements for the three months ended March 31, 2017 have been prepared in accordance with International
Financial Reporting Standards, referred to as “IFRS”, as issued by the International Accounting Standards Board, referred
to as “IASB”, and may not be comparable to financial statements prepared in accordance with United States generally
accepted accounting principles.
Disclaimer for Forward-Looking Information
Certain statements in this document are
forward-looking statements or forward-looking information, within the meaning of applicable securities laws, which reflect our
expectations regarding our future growth, results of operations, performance and business prospects and opportunities. Forward-looking
statements consist of statements that are not purely historical, including statements regarding our business plans, proposed plan
of arrangement, anticipated future gains and recoveries, our strategy to reduce trade receivables and inventories, future business
prospects and any statements regarding beliefs, expectations or intentions regarding the future. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as “plans”, “expects”, “is
expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates”, “believes”, variations or comparable language of such words and phrases or statements that
certain actions, events or results “may”, “could”, “would”, “should”, “might”
or “will be taken”, “occur” or “be achieved” or the negative connotation thereof.
While these forward-looking statements,
and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. No assurance can be given that any of the events anticipated by the forward-looking
statements will occur or, if they do occur, what benefits we will obtain from them. These forward-looking statements reflect our
current views and are based on certain assumptions and speak only as of the date hereof. These assumptions, which include our
current expectations, estimates and assumptions about our business and the markets we operate in, the global economic environment,
interest rates, commodities prices, exchange rates, counterparty risks related to our trading and finance activities, our ability
to complete our proposed plan of arrangement as contemplated, or at all, and our ability to realize upon the anticipated benefits
of the plan, may prove to be incorrect. No forward-looking statement is a guarantee of future results. A number of risks and uncertainties
could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Additional
information about these and other assumptions, risks and uncertainties is set out in the “Risk Factors” section of
this report and in our annual report on Form 20-F for the year ended December 31, 2016 filed with the SEC and Canadian securities
regulators. Such forward-looking statements should therefore be construed in light of such factors. Although we have attempted
to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements,
there may be other factors that cause results not to be as anticipated, estimated or intended. Investors are cautioned not to
place undue reliance on these forward-looking
statements. Other than in accordance with
our legal or regulatory obligations, we are not under any obligation and we expressly disclaim any intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-IFRS Financial Measures
This document includes “non-IFRS
financial measures”, that is, financial measures that either exclude or include amounts that are not excluded or included
in the most directly comparable measure calculated and presented in accordance with IFRS. Specifically, we make use of the non-IFRS
measure “Operating EBITDA”.
Operating EBITDA is defined as earnings
before interest, taxes, depreciation, depletion, amortization and impairment. Our management uses Operating EBITDA as a measure
of our operating results and considers it to be a meaningful supplement to net income as a performance measurement, primarily
because we incur significant depreciation and depletion and the exclusion of impairment losses in Operating EBITDA eliminates
the non-cash impact.
Operating EBITDA is used by investors
and analysts for the purpose of valuing an issuer. The intent of Operating EBITDA is to provide additional useful information
to investors and the measure does not have any standardized meaning under IFRS. Accordingly, this measure should not be considered
in isolation or used in substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate
Operating EBITDA differently. For a reconciliation of net income to Operating EBITDA, please see “
Results of Operations
”.
DEAR FELLOW SHAREHOLDERS AND BUSINESS
PARTNERS:
In the first quarter of 2017, we continued
to progress our strategy to exit product lines and geographies with unsatisfactory margins, deleverage, and reallocate capital
to our merchant banking business.
To this end, since the beginning of 2017,
we have:
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rationalized our inventories by reducing them by
37% from $32.0 million at December 31, 2016 to $20.2 million at March 31, 2017;
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deleveraged through repayment of short-term bank
borrowings, reducing them by 29% from $95.4 million at December 31, 2016 to $67.4 million at March 31, 2017;
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completed the sale of a non-core commodities trading
business;
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reduced our total debt by 31% from $116.8 million
at December 31, 2016 to $80.3 million at March 31, 2017; and
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allocated resources for the expansion of our merchant
banking business.
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Inventory Reduction
In the first quarter of 2017, we reduced
our inventories by $11.7 million, from $32.0 million as at December 31, 2016 to $20.2 million as at March 31, 2017. This was a
result of exiting certain product lines and geographical markets.
The following table sets forth our inventories
as at March 31, June 30, September 30, and December 31,2016 and March 31, 2017:
INVENTORIES
(In thousands)
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March 31,
2016
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June 30,
2016
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September 30,
2016
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December 31,
2016
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March 31,
2017
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Inventories
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$
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197,406
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$
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154,703
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$
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129,454
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$
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31,954
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$
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20,229
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Debt Reduction
We strive to match our assets and liabilities
so that our long-term assets are financed with long-term debt and equity, and our short-term assets are financed with short-term
debt and equity. As we streamlined our operations and rationalized underperforming subsidiaries, we have reduced our debt accordingly.
In the first quarter of 2017, we reduced our total long-term debt to $80.3 million from $116.8 million as at December 31, 2016
and $282.2 million as of September 30, 2016 by repaying debts that became due and paying down loans which had financed assets
which were rationalized.
Letter to Shareholders
(i)
Financial Highlights
The following table highlights selected
figures on our financial position as at March 31, 2017 and December 31, 2016:
FINANCIAL POSITION
(In thousands, except ratios and per share amount)
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March 31,
2017
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December 31,
2016
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Cash and cash equivalents
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$
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61,257
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$
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120,676
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Short-term securities
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4,990
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5,018
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Trade receivables
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145,025
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135,962
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Tax receivables
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11,711
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11,743
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Other receivables
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29,297
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35,251
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Inventories
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20,229
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31,954
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Total current assets
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287,392
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400,954
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Total current liabilities
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124,365
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214,676
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Working capital
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163,027
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186,278
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Current ratio
(1)
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2.31
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1.87
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Acid-test ratio
(2)
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2.04
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1.68
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Total assets
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536,241
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650,338
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Short-term bank borrowings
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67,432
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95,416
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Total long-term debt
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80,279
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116,813
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Long-term debt-to-equity
(1)
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0.20
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0.25
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Total liabilities
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214,291
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320,908
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Shareholders’ equity
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319,695
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327,520
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Net book value per share
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5.10
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5.19
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Notes:
(1)
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The current ratio is calculated as current assets divided
by current liabilities and the long-term debt-to-equity ratio is calculated as long-term debt, less current portion, divided by
shareholders’ equity.
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(2)
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The acid-test ratio is calculated as cash plus account
receivables plus short-term securities, divided by current liabilities (excluding liabilities related to assets held for sale).
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Operating EBITDA
Operating EBITDA is defined as earnings
before interest, taxes, depreciation, depletion, amortization and impairment. Operating EBITDA is a non-IFRS financial measure
and should not be considered in isolation or as a substitute for performance measures under IFRS. Management uses Operating EBITDA
as a measure of our operating results and considers it to be a meaningful supplement to net income as a performance measure, primarily
because we incur depreciation and depletion from time to time.
For the three months ended March 31, 2017,
our Operating EBITDA was $5.7 million compared to $9.4 for the same period of 2016.
The following is a reconciliation of our
net (loss) income to Operating EBITDA for the three months ended March 31, 2017 and 2016:
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Three months Ended
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OPERATING EBITDA
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March 31,
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(In thousands)
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2017
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2016
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(Re-presented
(1)
)
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Net (loss) income
(2)
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$
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(1,739
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)
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$
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270
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Income tax expense
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1,611
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1,553
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Finance costs
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3,627
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5,502
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Amortization, depreciation and depletion
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2,220
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2,059
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Operating EBITDA
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$
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5,719
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$
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9,384
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Notes:
(1)
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In connection with the reclassification of our mining interest
and hydrocarbon properties to continuing operations in 2016, costs of sales and services have been re-presented for this period.
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(2)
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Includes net income attributable to non-controlling interests.
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Letter to Shareholders
(ii)
Update on the Proposed Plan of Arrangement
On March 31, 2017, we announced our intention
to pursue a proposed plan of arrangement (the “Plan”) under British Columbia corporate law, pursuant to which, among
other things, we would reduce our shareholders’ capital by an amount equal to our retained deficit, complete a consolidation,
followed by a split, of our common shares and our existing common shares would be exchanged for the shares of a new parent company
incorporated under the laws of the Cayman Islands (“New MFC”), which would become the new publicly traded parent company
of our group. The Plan is subject to, among other things, finalization and requisite court, shareholder and board approvals. We
currently expect to complete the Plan in the late second quarter or early third quarter of 2017.
The Company believes that the benefits
of the Plan are, among other things:
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Flexible Corporate Structure
. The separation of
the public parent company from its operating businesses will facilitate future strategic transactions, such as spin-offs and corporate
reorganizations as well as provide additional options for future financing structures.
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Fiscal Flexibility
. By being located in an international
financial center with advantageous tax laws, New MFC will have enhanced flexibility with respect to fiscal and tax planning. The
Cayman Islands has no corporate income, dividends or capital gains taxes and no withholding taxes on distributions to shareholders.
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Reduced Expenses.
We have a large number of very
small shareholders, as such we believe that by eliminating odd lot holders under the Plan, we will reduce our ongoing administrative
costs and allow fractional shareholders to receive cash for their fractional shares without incurring brokerage commissions or
expenses.
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Enhanced Global Exposure
. We are a global company,
with operations spanning internationally and New MFC’s jurisdiction of incorporation of the Cayman Islands, a recognized
international financial center, is more reflective of the international nature of our operations. New MFC would also consider
a secondary listing of its shares on a second stock exchange after completion of the Plan to obtain additional global exposure
and liquidity.
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Credit Lines and Facilities
We established, utilized and maintain
various kinds of credit lines and facilities with banks and insurers. Most of these facilities are short-term. These facilities
are used in our day-to-day merchant banking business. The amounts drawn under such facilities fluctuate with the type and level
of transactions being undertaken.
As at March 31, 2017, we had credit facilities
aggregating $345.5 million as follows: (i) we had unsecured revolving credit facilities aggregating $69.1 million from banks.
The banks generally charge an interest rate at inter-bank rates plus an interest margin; (ii) we also had revolving credit facilities
aggregating $52.2 million from banks for structured solutions, a special trade financing. The margin is negotiable when the facility
is used; (iii) we had a specially structured non-recourse factoring arrangement with a bank up to a credit limit of $198.4 million
for our merchant banking activities. We factor certain of our trade receivables upon invoicing, at the inter-bank rate plus a
margin; and (iv) we had foreign exchange credit facilities of $25.8 million with banks.
All of these facilities are either renewable
on a yearly basis or usable until further notice. Many of our credit facilities are denominated in Euros and, accordingly, such
amounts may fluctuate when reported in Canadian dollars.
We continue to evaluate the benefits of
certain facilities that may not have strategic long-term relevance to our business and priorities going forward and may modify
or eliminate additional facilities in the future. We do not anticipate that this will have a material impact on our overall liquidity.
Our Future
Going forward, we intend to expand our
merchant banking activities. Our plan to exit unsatisfactory product lines and geographies, significantly reducing our inventories
and receivables and reallocating the capital to more profitable business units, is proceeding well. We believe these actions and
the announcement of the Plan will help reduce expenses and ultimately result in an adequate return on our equity.
Letter to Shareholders
(iii)
Stakeholder Communications
Management welcomes any questions you
may have and looks forward to discussing our operations, results and plans with stakeholders and:
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all stakeholders are encouraged to read our entire management’s
discussion and analysis for the three months ended March 31, 2017 as set forth herein and our unaudited financial statements for
the three months ended March 31, 2017 for a greater understanding of our business and operations; and
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any stakeholders who have questions regarding the information in our quarterly report for the
three months ended March 31, 2017 may call our North American toll free line:
1 (844) 331 3343
(International callers:
+1
(604) 662 8873
) to book a conference call with our senior management. Questions may also be emailed to Rene Randall at
rrandall@bmgmt.com.
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Respectfully Submitted,
Michael J. Smith
President and Chief Executive Officer
Letter to Shareholders
(iv)
Corporate information
BOARD OF DIRECTORS
Michael J. Smith
Chairman
Director since 1987
Indrajit Chatterjee
Director since 2005
Silke S. Stenger*
Director since 2013
Dr. Shuming Zhao*
Director since 2014
Gerardo Cortina
Director since 2014
Friedrich Hondl*
Director since 2015
Jochen P. Duemler*
Director since 2016
AUDITORS
PricewaterhouseCoopers LLP
Suite 700
250 Howe Street
Vancouver, BC V6C 3S7
Canada
Telephone: (1) 604 806 7000
www.pwc.com/ca
STOCK LISTING
New York Stock Exchange
11 Wall Street
New York, NY 10005
USA
Telephone: (1) 212 656 3000
Email: nyselistings@nyse.com
Trading symbol: MFCB
CORPORATE WEBSITE
www.mfcbancorpltd.com
TRANSFER AGENT
Computershare Limited
480 Washington Blvd
27th Floor
Jersey City, NJ 07310
USA
Telephone: (1) 888 478 2338
www.computershare.com
CORPORATE OFFICE
MFC Bancorp Ltd.
400 Burrard Street
Suite 1860
Vancouver, BC V6C 3A6
Canada
Telephone: (1) 604 683 8286
Email: rrandall@bmgmt.com
* Member of the Audit Committee
Letter to Shareholders
(v)
MANAGEMENT’S DISCUSSION AND ANALYSIS
Nature of Business
We are a merchant bank that provides financial
services and facilitates structured trade for corporations and institutions. We specialize in markets that are not adequately
addressed by traditional sources of supply and finance, with an emphasis on providing solutions for small and medium sized enterprises.
We operate in multiple geographies and participate in industries including manufacturing, natural resources and medical equipment
and services.
As a supplement to our operating business,
we commit proprietary capital to assets and projects where intrinsic values are not properly reflected. These investments can
take many forms, and our activities are generally not passive. The structure of each of these opportunities is tailored to each
individual transaction.
Our business is divided into two operating
segments: (i) Merchant Banking, which includes our marketing activities, captive supply assets, structured solutions, financial
services and proprietary investing activities; and (ii) All Other, which encompasses our corporate and other investments and business
interests, primarily being its business activities in medical equipment, instruments, supplies and services.
Recent Developments
Reallocation of Resources to More
Profitable Operations
In the first quarter of 2017, we continued
to advance our plan, which commenced in 2016, to focus our resources on our merchant banking activities, including exiting product
lines and geographies with unsatisfactory margins in order to reallocate capital to higher return operations. To this end, in
2017, we have, among other things:
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rationalized our inventories, reducing them by 37% from
$32.0 million at December 31, 2016 to $20.2 million at March 31, 2017;
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•
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deleveraged through reducing our short-term bank borrowings
by 29% from $95.4 million at December 31, 2016 to $67.4 million at March 31, 2017;
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•
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reduced our total debt by 31% from $116.8 million at December
31, 2016 to $80.3 million at March 31, 2017;
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completed the sale of a non-core commodities trading business;
and
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allocated resources for the expansion of our merchant banking
business.
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Discussion of Operations
The following discussion and analysis
of our financial condition and results of operations for the three months ended March 31, 2017 and 2016 should be read in conjunction
with our unaudited condensed consolidated financial statements and related notes.
General
We are a merchant bank that provides financial
services and facilitates structured trade for corporations and institutions. Our business activities involve customized structured
financial solutions and are supported by captive sources and products secured from third parties. We do business in multiple geographies
and specialize in a wide range of industrial products.
We also commit our own capital to promising
enterprises and invest and otherwise capture investment opportunities for our own account. We seek to invest in businesses or
assets whose intrinsic value is not properly reflected in their share price or value. Our investing activities are generally not
passive. We actively seek investments where our financial expertise and management can add or unlock value.
Prior Periods
On June 30, 2016 and September 30, 2016,
we ceased to classify our interest as lessor under a mining sub-lease of the lands upon which an iron ore mine is situated and
our remaining hydrocarbon properties, respectively, as assets held for sale as the criteria for assets classified as assets held
for sale were no longer met. Accordingly, the results of operations of these disposal groups for the three months ended March
31, 2016 have been reclassified to continuing operations in our unaudited condensed consolidated financial statements for the
three months ended March 31, 2017.
Business Environment
Our financial performance is, and our
consolidated results in any period can be, materially affected by economic conditions and financial markets generally, including
the availability of capital, the availability of credit and the level of market and commodity price volatility. Our results of
operations may also be materially affected by competitive factors. Our competitors include firms traditionally engaged in merchant
banking and trade finance as well as other capital sources such as hedge funds and private equity firms and other companies engaged
in similar activities in Europe, Asia and globally.
Ongoing economic conditions and uncertainties,
including slower economic growth in China and continuing economic uncertainty in Europe, continued to impact markets and cause
significant volatility in commodity prices in 2016. During 2016 and into the first quarter of 2017, significant events in the
global political landscape have introduced macroeconomic and political risks that are difficult to quantify and could have far-reaching
implications for the global economy. These events increased the uncertainty surrounding the probable future direction of interest
rates, inflation, foreign exchange rates, trade volumes and fiscal and monetary policy. As a result, the evolution of the global
economy and regional economies is increasingly difficult to predict.
We operate internationally and therefore
our financial performance and position are impacted by changes in the Canadian dollar, our reporting currency, against the other
functional currencies of our international subsidiaries and operations, particularly the Euro. Changes in currency rates affect
our financial performance and position because our European subsidiaries’ assets, liabilities, revenues and operating costs
are denominated in Euros. Accordingly, a weakening of the Canadian dollar against the Euro would have the effect of increasing
the value of such assets, liabilities, revenues and operating costs when translated into Canadian dollars, our reporting currency.
Conversely, a strengthening of the Canadian dollar against these currencies would have the effect of decreasing such values. In
addition, we also have exposure to the Chinese yuan and the United States dollar.
As at March 31, 2017, the Canadian dollar
had weakened by 0.6% against the Euro from the end of 2016. We recognized a net $4.5 million currency translation adjustment loss
accumulated under other comprehensive income within equity in the three months ended March 31, 2017, compared to $21.2 million
in the comparative period of 2016.
Results of Operations
Summary of Quarterly Results
The following tables provide selected
unaudited financial information for the most recent eight quarters:
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March 31,
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December 31,
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September 30,
|
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June 30,
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2017
|
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2016
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2016
|
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2016
|
|
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(In thousands, except per share amounts)
|
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Gross revenues
|
|
$
|
110,625
|
|
|
$
|
186,719
|
|
|
$
|
257,421
|
|
|
$
|
329,935
|
|
Net loss
(1)
|
|
|
(2,095
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)
|
|
|
(16,696
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)
|
(2)
|
|
(7,968
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)
|
|
|
(636
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)
|
Loss, per share
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
|
|
(0.03
|
)
|
|
|
(0.26
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)
|
|
|
(0.13
|
)
|
|
|
(0.01
|
)
|
Diluted
|
|
|
(0.03
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)
|
|
|
(0.26
|
)
|
|
|
(0.13
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)
|
|
|
(0.01
|
)
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Notes:
(1)
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Attributable to our shareholders.
|
(2)
|
Includes a net non-cash reversal of $8.6 million in connection
with prior impairments on our hydrocarbon properties.
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March 31,
|
|
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December 31,
|
|
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September 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
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2015
|
|
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2015
|
|
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(In thousands, except per share amounts)
|
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Gross revenues
|
|
$
|
357,582
|
|
|
$
|
414,598
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|
|
$
|
417,024
|
|
|
$
|
431,764
|
|
Net (loss) income from continuing operations
(1)
|
|
|
(61
|
)
|
|
|
(48,446
|
)
|
(2)
|
|
(208,119
|
)
|
(3)
|
|
4,586
|
|
(Loss) earnings from continuing operations, per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
—
|
|
|
|
(0.77
|
)
|
(2)
|
|
(3.30
|
)
|
(3)
|
|
0.07
|
|
Diluted
|
|
|
—
|
|
|
|
(0.77
|
)
|
(2)
|
|
(3.30
|
)
|
(3)
|
|
0.07
|
|
Net (loss) income
(1)
|
|
|
(61
|
)
|
|
|
(111,807
|
)
|
(2)
|
|
(392,208
|
)
|
(3)(4)
|
|
8,548
|
|
(Loss) earnings, per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
—
|
|
|
|
(1.77
|
)
|
(2)
|
|
(6.21
|
)
|
(3)(4)
|
|
0.14
|
|
Diluted
|
|
|
—
|
|
|
|
(1.77
|
)
|
(2)
|
|
(6.21
|
)
|
(3)(4)
|
|
0.14
|
|
Notes:
(1)
|
Attributable to our shareholders.
|
(2)
|
Includes losses of $51.4 million related to a customer
that filed for insolvency in February 2016, $9.9 million on long-term off-take agreements entered into by a subsidiary acquired
in 2014, which have since been terminated, and the reversal of non-cash impairment losses of $30.0 million and recognition of
a deferred tax liability of $7.8 million in connection with our mining interest.
|
(3)
|
Includes non-cash impairments of $265.9 million, consisting
of $47.7 million and $218.2 million on our hydrocarbon properties and mining interest, respectively, before an income tax recovery
of $54.3 million recognized on our mining interest.
|
(4)
|
Includes a non-cash impairment of interests in resource
properties of $123.3 million before a reduction of deferred tax assets of $50.9 million.
|
Three Months Ended March 31, 2017
Compared to Three Months Ended March 31, 2016
The following table sets forth our selected
operating results and other financial information for each of the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented
(1)
)
|
|
|
|
(In thousands,
except per share amounts)
|
|
Gross revenues
|
|
$
|
110,625
|
|
|
$
|
357,582
|
|
Costs and expenses
|
|
|
110,753
|
|
|
|
355,759
|
|
Costs of sales and services
|
|
|
91,665
|
|
|
|
333,302
|
|
Selling, general and administrative expenses
|
|
|
14,486
|
|
|
|
20,555
|
|
Finance costs
|
|
|
3,627
|
|
|
|
5,502
|
|
Exchange differences on foreign currency transactions, net loss (gain)
|
|
|
975
|
|
|
|
(3,600
|
)
|
Net loss
(2)
|
|
|
(2,095
|
)
|
|
|
(61
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.03
|
)
|
|
|
—
|
|
Diluted
|
|
|
(0.03
|
)
|
|
|
—
|
|
Notes:
(1)
|
In connection with the reclassification of our mining interest
and hydrocarbon properties to continuing operations in 2016, revenues, costs and expenses and income taxes have been re-presented
for this period.
|
(2)
|
Attributable to our shareholders.
|
The following is a breakdown of our gross
revenues by segment for each of the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented
(1)
)
|
|
|
|
(In thousands)
|
|
Gross Revenues:
|
|
|
|
|
|
|
|
|
Merchant banking
|
|
$
|
100,657
|
|
|
$
|
348,283
|
|
All other
|
|
|
9,968
|
|
|
|
9,299
|
|
|
|
$
|
110,625
|
|
|
$
|
357,582
|
|
Note:
(1)
|
In connection with the reclassification of our mining interest
and hydrocarbon properties to continuing operations in 2016, revenues have been re-presented for this period.
|
In the first quarter of 2017, 74% of our
revenues were from Europe, 16% were from the Americas and 10% were from Asia and other regions.
In the first quarter of 2017, our proportionate
revenues by product were: (i) 40% from metals; (ii) 22% from steel products; (iii) 34% from minerals, chemicals and alloys; and
(iv) 4% from other.
Based upon the average exchange rates
for the first quarter of 2017, the Canadian dollar strengthened by approximately 7% in value against the Euro compared to the
same quarter of 2016. As a substantial portion of our revenues are generated in Euros, the strengthening of the Canadian dollar
against the Euro negatively impacted our revenues in the first quarter of 2017.
Revenues for the first quarter of 2017
decreased to $110.6 million from $357.6 million in the same quarter of 2016, primarily as a result of the sale of non-core subsidiaries
in the fourth quarter of 2016 and first quarter of 2017, our decision to exit certain product lines and geographies and, to a
lesser extent, the strengthening of the Canadian dollar during the period.
Revenues for our merchant banking business
for the first quarter of 2017 decreased to $100.7 million from $348.3 million in the same quarter of 2016, primarily as a result
of the sale of non-core subsidiaries in the fourth quarter of 2016 and first quarter of 2017, our decision to exit certain product
lines and geographies and, to a lesser extent, the strengthening of the Canadian dollar during the period.
Revenues for our all other segment were
$10.0 million in the first quarter of 2017, compared to $9.3 million in the same quarter of 2016.
Costs of sales and services decreased
to $91.7 million during the first quarter of 2017 from $333.3 million for the same quarter in 2016, primarily as a result of the
sale of non-core subsidiaries in the fourth quarter of 2016 and first quarter of 2017, our decision to exit certain product lines
and geographies and, to a lesser extent, the strengthening of the Canadian dollar against the Euro in the first quarter of 2017.
The following is a breakdown of our costs of sales and services for each of the periods indicated:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented
(1)
)
|
|
|
|
(In thousands)
|
|
Merchant banking products and services
|
|
$
|
89,096
|
|
|
$
|
330,368
|
|
Credit losses on loans and receivables
|
|
|
1,242
|
|
|
|
384
|
|
Market value increase on commodity inventories
|
|
|
(869
|
)
|
|
|
(961
|
)
|
Gain on derivative contracts, net
|
|
|
(1,671
|
)
|
|
|
(252
|
)
|
Gain on sale of subsidiaries
|
|
|
(57
|
)
|
|
|
—
|
|
Other
|
|
|
3,924
|
|
|
|
3,763
|
|
Total costs of sales and services
|
|
$
|
91,665
|
|
|
$
|
333,302
|
|
Note:
(1)
|
In connection with the reclassification of our mining interest
and hydrocarbon properties to continuing operations in 2016, costs of sales and services have been re-presented for this period.
|
Selling, general and administrative expenses
decreased to $14.5 million in the first quarter of 2017 from $20.6 million in the same quarter of 2016, primarily as a result
of the closure of certain offices.
In the first quarter of 2017, finance
costs decreased to $3.6 million from $5.5 million in the same quarter of 2016, primarily as a result of a decrease in bank indebtedness.
In the first quarter of 2017, we recognized
a net foreign currency transaction loss of $1.0 million, compared to a net foreign currency transaction gain of $3.6 million in
the same quarter of 2016, in the consolidated statement of operations. The foreign currency transaction loss represents exchange
differences arising on the settlement of monetary items or on translating monetary items into our functional currencies at rates
different from those at which they were translated on initial recognition during the period or in previous financial statements.
We recognized an income tax expense (other
than resource property revenue taxes) of $1.4 million in the first quarter of 2017, compared to $1.6 million in the same period
of 2016. Our income tax paid in cash, excluding resource property revenue taxes, during the first quarter of 2017 was $0.5 million,
compared to $1.3 million in the same quarter of 2016. We also recognized resource property revenue taxes of $0.2 million in the
first quarter of 2017, compared to $nil in the same period of 2016. Overall, we recognized an income tax expense of $1.6 million
(income tax expense of $1.4 million and resource property revenue taxes of $0.2 million) in the first quarter of 2017, compared
to $1.6 million in the same period of 2016.
In the first quarter of 2017, our net
loss attributable to shareholders was $2.1 million, or $0.03 per share on a basic and diluted basis, compared to $61,000, or $nil
per share on a basic and diluted basis, in the same quarter of 2016.
For the first quarter of 2017, our Operating
EBITDA decreased to $5.7 million from $9.4 million in the same quarter of 2016.
The following is a reconciliation of our
net (loss) income to Operating EBITDA for each of the periods indicated.
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented
(1)
)
|
|
|
|
(In thousands)
|
|
Operating EBITDA
|
|
|
|
|
|
|
|
|
Net (loss) income
(2)
|
|
$
|
(1,739
|
)
|
|
$
|
270
|
|
Income tax expense
(3)
|
|
|
1,611
|
|
|
|
1,553
|
|
Finance costs
|
|
|
3,627
|
|
|
|
5,502
|
|
Amortization, depreciation and depletion
|
|
|
2,220
|
|
|
|
2,059
|
|
Operating EBITDA
|
|
$
|
5,719
|
|
|
$
|
9,384
|
|
Notes:
(1)
|
In connection with the reclassification of our mining interests
and hydrocarbon properties to continuing operations in 2016, revenues, costs and expenses and income taxes have been re-presented
for this period.
|
(2)
|
Including non-controlling interests.
|
(3)
|
The income tax paid in cash, excluding resource property
revenue taxes, during the first quarter of 2017 was $0.5 million, compared to $1.3 million in the same quarter of 2016.
|
Please see “
Non-IFRS Financial
Measures
” for additional information.
Liquidity and Capital Resources
General
We set the amount of capital in proportion
to risk. We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics
of the underlying assets. In order to maintain or adjust this capital structure, we may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in our industry,
we monitor capital on the basis of our net debt-to-equity ratio and long-term debt-to-equity ratio. The net debt-to-equity ratio
is calculated as net debt divided by shareholders’ equity. Net debt is calculated as total debt less cash and cash equivalents.
The long-term debt-to-equity ratio is calculated as long-term debt, less current portion divided by shareholders’ equity.
The computations are based on continuing operations.
The following table sets forth the calculation
of our net debt-to-equity ratio as at the dates indicated:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands, except ratio amounts)
|
|
Total long-term debt
|
|
$
|
80,279
|
|
|
$
|
116,813
|
|
Less: cash and cash equivalents
|
|
|
(61,257
|
)
|
|
|
(120,676
|
)
|
Net debt
|
|
|
19,022
|
|
|
|
Not applicable
|
|
Shareholders’ equity
|
|
|
319,695
|
|
|
|
327,520
|
|
Net debt-to-equity ratio
|
|
|
0.06
|
|
|
|
Not applicable
|
|
There were no amounts in accumulated other
comprehensive income relating to cash flow hedges, nor were there any subordinated debt instruments as at March 31, 2017 and December
31, 2016. Our net debt-to-equity was 0.06 as at March 31, 2017. Our net debt-to-equity ratio as at December 31, 2016 was not applicable
as we had a net cash and cash equivalents balance.
The following table sets forth the calculation
of our long-term debt-to-equity ratio as at the dates indicated:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands, except ratio amounts)
|
|
Long-term debt, less current portion
|
|
$
|
63,178
|
|
|
$
|
80,564
|
|
Shareholders’ equity
|
|
|
319,695
|
|
|
|
327,520
|
|
Long-term debt-to-equity ratio
|
|
|
0.20
|
|
|
|
0.25
|
|
During the three months ended March 31,
2017, our strategy, which remained unchanged from prior periods, was to maintain our net debt-to-equity ratio and long-term debt-to-equity
ratio at manageable levels. Our long-term debt-to-equity ratio was 0.20 as at March 31, 2017 and was 0.25 as at December 31, 2016.
Cash Flows
Due to the number of businesses we engage
in, our cash flows are not necessarily reflective of net earnings and net assets for any reporting period. As a result, instead
of using a traditional cash flow analysis solely based on cash flow statements, our management believes it is more useful and
meaningful to analyze our cash flows by overall liquidity and credit availability. Please see the discussion on our financial
position, short-term bank loans, facilities and long-term debt below.
Our business can be cyclical and our cash
flows can vary accordingly. Our principal operating cash expenditures are for our working capital, proprietary investments and
general and administrative expenses.
Working capital levels fluctuate throughout
the year and are affected by the level of our merchant banking operations, the markets and prices for commodities, the timing
of collection of receivables and the payment of payables and expenses. Changes in the volume of transactions can affect the level
of receivables and influence overall working capital levels. We currently have a sufficient level of cash on hand, credit facility
amounts and expected cash flows from operations to meet our working capital and other requirements as well as unexpected cash
demands.
The following table presents a summary
of cash flows for each of the periods indicated:
|
|
Three Months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented
(1)
)
|
|
|
|
(In thousands)
|
|
Cash flows (used in) provided by operating activities
|
|
$
|
(20,490
|
)
|
|
$
|
104,120
|
|
Cash flows used in investing activities
|
|
|
(122
|
)
|
|
|
(26,003
|
)
|
Cash flows used in financing activities
|
|
|
(36,522
|
)
|
|
|
(7,172
|
)
|
Exchange rate effect on cash and cash equivalents
|
|
|
(2,285
|
)
|
|
|
(16,716
|
)
|
(Decrease) increase in cash and cash equivalents
|
|
|
(59,419
|
)
|
|
|
54,229
|
|
Note:
(1)
|
In connection with the reclassification of our mining interest
and hydrocarbon properties to continuing operations in 2016, cash flows from operating, investing and financing activities have
been re-presented for this period.
|
Cash Flows from Operating Activities
Operating activities used cash
of $20.5 million in the three months ended March 31, 2017, compared to providing cash of $104.1 million in the same period
of 2016. In the three months ended March 31, 2017, a decrease in short-term bank borrowings used cash of $34.0 million,
compared to an increase in short-term bank borrowings providing cash of $151.7 million in the same period of 2016. A decrease
in assets held for sale, relating to the sale of our non-core Latin America-focused commodities business, provided cash of
$12.6 million in the three months ended March 31, 2017. A decrease in inventories provided cash of $10.8 million in the
three months ended March 31, 2017, compared to $45.9 million in the same period of 2016. A decrease in account payables and
accrued expenses used cash of $6.4 million in the three months ended March 31, 2017, compared to $31.5 million in the same
period of 2016. An increase in receivables used cash of $2.9 million in the three months ended March 31, 2017, compared to
$58.0 million in the same period of 2016.
Cash Flows from Investing Activities
Investing activities used cash of $0.1
million in the three months ended March 31, 2017, compared to $26.0 million in the same period of 2016. Our acquisition of a western
European bank which, net of cash and cash equivalents acquired, used cash of $23.9 million in the three months ended March 31,
2016. In the three months ended March 31, 2017, net purchases of property, plant and equipment used net cash of $0.2 million,
compared to $0.7 million in the same period of 2016.
Cash Flows from Financing Activities
Net cash used by financing activities
was $36.5 million in the three months ended March 31, 2017, compared to $7.2 million in the same period of 2016. A net decrease
in debt used cash of $36.5 million in the three months ended March 31, 2017, compared to $7.2 million in the same period of 2016.
Financial Position
The following table sets out our selected
financial information as at the dates indicated:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Cash and cash equivalents
|
|
$
|
61,257
|
|
|
$
|
120,676
|
|
Short-term cash deposits
|
|
|
183
|
|
|
|
182
|
|
Short-term securities
|
|
|
4,990
|
|
|
|
5,018
|
|
Securities – derivatives (current)
|
|
|
914
|
|
|
|
1,240
|
|
Trade receivables
|
|
|
145,025
|
|
|
|
135,962
|
|
Tax receivables
|
|
|
11,711
|
|
|
|
11,743
|
|
Other receivables
|
|
|
29,297
|
|
|
|
35,251
|
|
Inventories
|
|
|
20,229
|
|
|
|
31,954
|
|
Real estate held for sale (current)
|
|
|
1,072
|
|
|
|
1,066
|
|
Deposits, prepaid and other
|
|
|
12,714
|
|
|
|
12,195
|
|
Assets held for sale
|
|
|
—
|
|
|
|
45,667
|
|
Total assets
|
|
|
536,241
|
|
|
|
650,338
|
|
Working capital
|
|
|
163,027
|
|
|
|
186,278
|
|
|
|
|
|
|
|
|
|
|
Short-term bank borrowings
|
|
|
67,432
|
|
|
|
95,416
|
|
Debt, current portion
|
|
|
17,101
|
|
|
|
36,249
|
|
Account payables and accrued expenses
|
|
|
35,135
|
|
|
|
45,114
|
|
Financial liabilities – derivatives (current and long-term)
|
|
|
3,677
|
|
|
|
6,454
|
|
Income tax liabilities
|
|
|
1,704
|
|
|
|
2,486
|
|
Liabilities relating to assets held for sale
|
|
|
—
|
|
|
|
29,897
|
|
Long-term debt, less current portion
|
|
|
63,178
|
|
|
|
80,564
|
|
Decommissioning obligations
|
|
|
13,505
|
|
|
|
13,219
|
|
Shareholders’ equity
|
|
|
319,695
|
|
|
|
327,520
|
|
We maintain an adequate level of liquidity,
with a portion of our assets held in cash and cash equivalents and securities. The liquid nature of these assets provides us with
flexibility in managing and financing our business and the ability to realize upon investment or business opportunities as they
arise. We also use this liquidity in client-related services by acting as a financial intermediary for third parties (e.g., by
acquiring a position or assets and reselling such position or assets) and for our own proprietary trading and investing activities.
As at March 31, 2017, cash and cash equivalents
decreased to $61.3 million from $120.7 million as at December 31, 2016, primarily as a result of repayments of short-term bank
borrowings and debt.
Trade receivables and other receivables
were $145.0 million and $29.3 million, respectively, as at March 31, 2017, compared to $136.0 million and $35.3 million, respectively,
as at December 31, 2016. The increase in trade receivables was primarily as a result of a reduction in inventories and other factors,
which we expect to reverse as collections occur. Credit risk from trade receivables is substantially mitigated through credit
insurance, bank guarantees, letters of credit and other risk mitigation measures.
As previously reported, in the fourth
quarter of 2015, one of our customers in the wood products market experienced financial difficulties and, in February 2016, filed
for insolvency. We had net trade receivables of $100.5 million due from this former customer group as at March 31, 2017, compared
to $100.0 million as at December 31, 2016. The carrying amount of such receivables is based on our management’s review of
various factors and is most sensitive to the assumptions regarding the likelihood of recovering amounts based on the various sources
of collateral, with the timing of the resolution of the uncertainty related to the recoverability of these receivables being dependent
on the legal processes being followed to recover such amounts.
Inventories decreased to $20.2 million
as at March 31, 2017, from $32.0 million as at December 31, 2016, primarily as a result of our decision to rationalize certain
product lines and geographies. $10.4 million of our inventories were contracted at fixed prices or hedged as at March 31, 2017.
Deposits, prepaid and other assets were
$12.7 million as at March 31, 2017, compared to $12.2 million as at December 31, 2016.
Tax receivables, consisting primarily
of refundable value-added taxes, were $11.7 million as at March 31, 2017 and December 31, 2016.
We had short-term securities of $5.0 million
as at March 31, 2017 and December 31, 2016.
Our assets held for sale decreased to
$nil as at March 31, 2017 from $45.7 million as at December 31, 2016 and our liabilities related to assets held for sale decreased
to $nil as at March 31, 2017 from $29.9 million as at December 31, 2016. The decrease was primarily the result of the completion
of the sale of a former subsidiary in the first quarter of 2017.
We had short-term financial assets relating
to hedging derivatives of $0.9 million as at March 31, 2017, compared to $1.2 million as at December 31, 2016. We had current
liabilities relating to hedging derivatives of $3.0 million as at March 31, 2017, compared to $5.5 million as at December 31,
2016. We had long-term assets and liabilities relating to hedging derivatives of $25,000 and $0.7 million, respectively, as at
March 31, 2017, compared to $nil and $0.9 million, respectively, as at December 31, 2016.
Account payables and accrued expenses
were $35.1 million as at March 31, 2017, compared to $45.1 million as at December 31, 2016. The decrease was primarily due to
repayments.
Our short-term bank
borrowings decreased to $67.4 million as at March 31, 2017, from $95.4 million as at December 31, 2016. The decrease was
primarily due to repayments. Total long-term debt decreased to $80.3 million as at March 31, 2017, from $116.8 million as at
December 31, 2016, primarily due to repayments.
As at March 31, 2017, we had decommissioning
obligations of $13.5 million relating to our existing hydrocarbon properties, compared to $13.2 million as at December 31, 2016.
Short-Term Bank Loans and Facilities
As part of our operations, we establish,
utilize and maintain various kinds of credit lines and facilities with banks and insurers. Most of these facilities are short-term.
These facilities are used in our day-to-day structured solutions and merchant banking business. The amounts drawn under such facilities
fluctuate with the kind and level of transactions being undertaken.
As at March 31, 2017, we had credit facilities
aggregating $345.5 million comprised of: (i) unsecured revolving credit facilities aggregating $69.1 million from banks. The banks
generally charge an interest rate of inter-bank rates plus an interest margin; (ii) revolving credit facilities aggregating $52.2
million from banks for structured solutions, a special trade financing. The margin is negotiable when the facility is used; (iii)
a non-recourse specially structured factoring arrangement with a bank for up to a credit limit of $198.4 million for our merchant
banking activities. We may factor our receivable accounts upon invoicing at the inter-bank rate plus a margin; and (iv) foreign
exchange credit facilities of $25.8 million with banks. All of these facilities are either renewable on a yearly basis or usable
until further notice. A substantial portion of our credit facilities are denominated in Euros and, accordingly, such amounts may
fluctuate when reported in Canadian dollars.
In the three months ended March 31, 2017,
we reduced and eliminated certain customer- and subsidiary-specific credit facilities with which we no longer commercially transact
as well as certain foreign exchange credit facilities which were underutilized. We continue to evaluate the benefits of certain
facilities that may not have strategic long-term relevance to our business and priorities going forward and may modify or eliminate
additional facilities in the future. We do not anticipate that this will have a material impact on our corporate vision or our
liquidity.
Long-Term Debt
Other than lines of credit drawn and as
may be outstanding for trade financing and structured solutions activities, as at March 31, 2017, the maturities of long-term
debt were as follows:
Maturity
|
|
Principal
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
12 months
|
|
$
|
17,101
|
|
|
$
|
2,695
|
|
|
$
|
19,796
|
|
12 – 24 months
|
|
|
23,941
|
|
|
|
2,013
|
|
|
|
25,954
|
|
24 – 36 months
|
|
|
11,903
|
|
|
|
1,283
|
|
|
|
13,186
|
|
36 – 48 months
|
|
|
13,688
|
|
|
|
737
|
|
|
|
14,425
|
|
48 – 60 months
|
|
|
4,796
|
|
|
|
344
|
|
|
|
5,140
|
|
Thereafter
|
|
|
8,850
|
|
|
|
389
|
|
|
|
9,239
|
|
|
|
$
|
80,279
|
|
|
$
|
7,461
|
|
|
$
|
87,740
|
|
We expect our maturing debt to be satisfied
primarily through the settlement of underlying merchant banking transactions, cash on hand and cash flows from operations. Much
of our maturing debt may either subsequently be made re-available to us by the applicable financial institution or we may replace
such facilities with new facilities depending upon particular capital requirements.
Future Liquidity
We expect that there will be acquisitions
of businesses or commitments to projects in the future. To achieve the long-term goals of expanding our assets and earnings, capital
resources will be required. Depending on the size of a transaction, the capital resources that will be required can be substantial.
The necessary resources will be generated from cash flows from operations, cash on hand, borrowings against our assets, sales
of proprietary investments or the issuance of securities.
Foreign Currency
Substantially all of our operations are
conducted in international markets and our consolidated financial results are subject to foreign currency exchange rate fluctuations.
Our presentation currency is the Canadian
dollar. We translate subsidiaries’ assets and liabilities into Canadian dollars at the rate of exchange on the balance sheet
date. Revenues and expenses are translated at exchange rates approximating those at the date of the transactions or, for practical
reasons, the average exchange rates for the applicable periods, when they approximate the exchange rate as at the dates of the
transactions. As a substantial amount of revenues is generated in Euros, the financial position for any given period, when reported
in Canadian dollars, can be significantly affected by the exchange rates for these currencies prevailing during that period. In
addition, we also have exposure to the Chinese yuan and the United States dollar.
In the three months ended March 31, 2017,
we reported a net $4.5 million currency translation adjustment loss under other comprehensive loss within equity. This compared
to a net loss of $21.2 million in the same period of 2016. This currency translation adjustment did not affect our profit and
loss statement.
Contractual Obligations
The following table sets out our contractual
obligations and commitments as at December 31, 2016 in connection with our long-term liabilities.
|
|
Payments Due by Period
(1)
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
|
Contractual Obligations
(2)
|
|
1 Year
|
|
|
1 – 3 Years
|
|
|
3 – 5 Years
|
|
|
5 Years
|
|
|
Total
|
|
Long-term debt obligations, including interest
|
|
$
|
40,383
|
|
|
$
|
52,204
|
|
|
$
|
25,766
|
|
|
$
|
9,213
|
|
|
$
|
127,566
|
|
Operating lease obligations
|
|
|
1,079
|
|
|
|
948
|
|
|
|
79
|
|
|
|
—
|
|
|
|
2,106
|
|
Purchase obligations
|
|
|
13,747
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,747
|
|
Other long-term liabilities
|
|
|
1,911
|
|
|
|
619
|
|
|
|
258
|
|
|
|
93
|
|
|
|
2,881
|
|
Total
|
|
$
|
57,120
|
|
|
$
|
53,771
|
|
|
$
|
26,103
|
|
|
$
|
9,306
|
|
|
$
|
146,300
|
|
Notes:
(2)
|
This table does not include non-financial instrument liabilities,
guarantees and liabilities relating to assets held for sale.
|
There have been no significant changes
to the foregoing, other than to our long-term debt obligations, since December 31, 2016. Please refer to “
Liquidity and
Capital Resources - Long-Term Debt
” for the maturities of our long-term debt, as at March 31, 2017.
Risk Management
Risk is an inherent part of our business
and operating activities. The extent to which we properly and effectively identify, assess, monitor and manage each of the various
types of risk involved in our activities is critical to our financial soundness and profitability. We seek to identify, assess,
monitor and manage the following principal risks involved in our business activities: market, credit, liquidity, operational,
legal and compliance, new business, reputational and other. Risk management is a multi-faceted process that requires communication,
judgment and knowledge of financial products and markets. Our management takes an active role in the risk management process and
requires specific administrative and business functions to assist in the identification, assessment and control of various risks.
Our risk management policies, procedures and methodologies are fluid in nature and are subject to ongoing review and modification.
Inflation
We do not believe that inflation has had
a material impact on our revenues or income over the past two fiscal years. However, increases in inflation could result in increases
in our expenses, which may not be readily recoverable in the price of goods or services provided to our clients. To the extent
that inflation results in rising interest rates and has other adverse effects on capital markets, it could adversely affect our
financial position and profitability.
Application of Critical Accounting
Policies
The preparation of financial statements
in conformity with IFRS requires our management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods.
Our management routinely makes judgments
and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting
the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex. We have
identified certain accounting policies that are the most important to the portrayal of our current financial condition and results
of operations. Please refer to Note 1 to our audited consolidated financial statements for the year ended December 31, 2016 for
a discussion of the significant accounting policies.
The following accounting policies are
the most important to our ongoing financial condition and results of operations:
Allowance for Credit Losses
We apply credit risk assessment and valuation
methods to our trade and other receivables. Credit losses arise primarily from receivables but may also relate to other credit
instruments issued by or on our behalf, such as guarantees and letters of credit. An allowance for credit losses is increased
by provisions which are charged to income and reduced by write-offs net of any recoveries.
Provisions are established on an individual
receivable basis as well as on gross customer exposures. A country risk provision may be made based on exposures in less developed
countries and on our management’s overall assessment of the underlying economic conditions in those countries.
Our allowance for credit losses is maintained
at an amount considered adequate to absorb estimated credit-related losses. Such allowance reflects our management’s best
estimate of the losses in our receivables and judgments about economic conditions. The assessment of allowance for credit losses
is a complex process, which involves a significant degree of judgment and a high level of estimation uncertainty. The input factors
include our legal rights and obligations under all the contracts and the expected future cash flows from the receivables and their
collateral, which include inventories, mortgages and other credit enhancement instruments. The major source of estimation uncertainty
relates to the likelihood of the various scenarios under which different amounts are expected to be recovered through the security
in place on the receivables. The expected future cash flows are projected under different scenarios and weighted by probability,
which involves the exercise of significant judgment. Estimates and judgments could change in the near-term and could result in
a significant change to a recognized allowance.
In addition, we also provide credit losses
for our credit exposures arising from guarantees we issued. The loss assessment process, as well as the exercise of judgment and
estimation uncertainty, is similar to the preceding paragraph.
Classification of Assets Held for
Sale
We apply judgment to determine whether
an asset (disposal group) is available for immediate sale in its present condition and that its sale is highly probable and therefore
should be classified as held for sale at the balance sheet date. In order to assess whether it is highly probable that the sale
can be completed within one year or the extension period in certain circumstances, our management reviews the business and economic
factors, both macro and micro, which include the industry trends and capital markets. It is also open to all forms of sales, including
exchanges of non-current assets for other non-current assets when the exchange will have commercial substance in accordance with
IAS 16,
Property, Plant and Equipment
.
Non-Cash Impairment of Non-Financial
Assets
We assess at the end of each reporting
period whether there is any indication that an asset may be impaired. If any such indication exists, we estimate the recoverable
amount of the asset. In assessing whether there is any indication that an asset may be impaired, we consider, as a minimum, the
following indications:
External sources of information
|
(a)
|
during the period, the asset’s market value has declined
significantly more than would be expected as a result of the passage of time or normal use;
|
|
(b)
|
significant changes with an adverse effect on the entity
have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment
in which the entity operates or in the market to which an asset is dedicated;
|
|
(c)
|
market interest rates or other market rates of return on
investments have increased during the period, and those increases are likely to affect the discount rate used in calculating an
asset’s value in use and decrease the asset’s recoverable amount materially;
|
|
(d)
|
the carrying amount of the net assets of the entity is
more than its market capitalization;
|
Internal sources of information
|
(e)
|
evidence is available of obsolescence or physical damage
of an asset;
|
|
(f)
|
significant changes with an adverse effect on the entity
have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which,
an asset is used or is expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure
the operation to which an asset belongs, plans to dispose of an asset before the previously expected date and reassessing the
useful life of an asset as finite rather than indefinite; and
|
|
(g)
|
evidence is available from internal reporting that indicates
that the economic performance of an asset is, or will be, worse than expected.
|
Income Taxes
Management believes that it has adequately
provided for income taxes based on all of the information that is currently available. The calculation of income taxes in many
cases, however, requires significant judgment in interpreting tax rules and regulations, which are constantly changing.
Our tax filings are also subject to audits,
which could materially change the amount of current and deferred income tax assets and liabilities. Any change would be recorded
as a charge or a credit to income tax expense. Any cash payment or receipt would be included in cash from operating activities.
We currently have deferred income tax
assets, which are comprised primarily of tax loss carry-forwards and deductible temporary differences, both of which will reduce
taxable income in the future. The amounts recorded for deferred income tax assets are based upon various judgments, assumptions
and estimates. We assess the realization of these deferred income tax assets on a periodic basis to determine to what extent it
is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of
unused tax credits and unused tax losses can be utilized. We determine whether it is probable that all or a portion of the deferred
income tax assets will be realized, based on currently available information, including, but not limited to, the following:
|
•
|
the history of the tax loss carry-forwards and their expiry
dates;
|
|
•
|
future reversals of temporary differences;
|
|
•
|
our projected earnings; and
|
|
•
|
tax planning opportunities.
|
On the reporting date, we also reassess
unrecognized deferred income tax assets. We recognize a previously unrecognized deferred income tax asset to the extent that it
has become probable that future taxable profit will allow the deferred income tax asset to be recovered.
We provide for future liabilities in respect
of uncertain tax positions where additional tax may become payable in future periods and such provisions are based on our management’s
assessment of exposures. We do not recognize the full deferred income tax liability on taxable temporary differences associated
with investments in subsidiaries, joint ventures and associates where we are able to control the timing of the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. We may change
our investment decision in the normal course of our business, thus resulting in additional tax liability.
New Standards and Interpretations Adopted
and Not Yet Adopted
IFRS 9,
Financial Instruments
,
referred to as “IFRS 9”
,
issued in July 2014 is the IASB’s replacement of IAS 39,
Financial Instruments:
Recognition and Measurement
. IFRS 9 includes requirements for recognition and measurement, impairment, derecognition and general
hedge accounting. The version of IFRS 9 issued in 2014 supersedes all previous versions and is mandatorily effective for periods
beginning on or after January 1, 2018. Management expects to complete the assessment of the impacts of IFRS 9 before the end of
the third quarter of 2017.
IFRS 15, Revenue from Contracts with Customers,
referred to as “IFRS 15”, specifies how and when an entity will recognize revenue and requires such entities to provide
users of financial statements with more informative, relevant disclosures. The standard provides a single, principles-based five-step
model to be applied to all contracts with customers. IFRS 15 applies to annual periods beginning on or after January 1, 2018.
Management expects to complete the assessment of the impacts of IFRS 15 on our consolidated financial statements before the end
of the third quarter of 2017.
In December 2016, the IASB issued IFRIC
22,
Foreign Currency Transactions and Advance Consideration
, referred to as “IFRIC 22”. The interpretation
covers foreign currency transactions when an entity recognizes a non-monetary asset or non-monetary liability arising from the
payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The consensus of
IFRIC 22 comprises: (i) the date of the transaction, for the purpose of determining the exchange rate, is the date of initial
recognition of the non-monetary prepayment asset or deferred income liability; and (ii) if there are multiple payments or receipts
in advance, a date of transaction is established for each payment or receipt. The interpretation is effective for annual reporting
periods beginning on or after 1 January 2018. Earlier application is permitted.
IFRS 16,
Leases
, referred to as
“IFRS 16”, issued in January 2016, introduces a single on-balance sheet model of accounting for leases by lessees
under a single model that eliminates the distinction between operating and finance leases. Lessor accounting remains largely unchanged
and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17,
Leases
, and related interpretations,
and is effective for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted if IFRS
15 has also been applied. Management will adopt IFRS 16 in 2019 and is currently assessing the impacts of IFRS 16 on our consolidated
financial statements.
Transactions with Related Parties
Other than as disclosed herein, to the
best of our knowledge, since January 1, 2017, there have been no material transactions or loans between our company and: (a) enterprises
that directly or indirectly through one or more intermediaries control or are controlled by, or are under common control with,
our company; (b) associates; (c) individuals owning, directly or indirectly, an interest in the voting power of our company that
gives them significant influence over our company, and close members of any such individual’s family; (d) key management
personnel of our company, including directors and senior management of our company and close members of such individuals’
families; or (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person
described in (c) or (d) or over which such a person is able to exercise significant influence.
In the normal course of operations, we
enter into transactions with related parties, which include, among others, affiliates whereby we have a significant equity interest
(10% or more) in the affiliates or have the ability to influence the affiliates’ or our operating and financing policies
through significant shareholding, representation on the board of directors, corporate charter and/or bylaws. Our affiliates also
include certain of our directors, our President, Chief Executive Officer, Chief Financial Officer, Treasurer, Chief Operating
Officer and their close family members. These related party transactions are conducted in arm’s-length transactions at normal
market prices and on normal commercial terms.
In the first quarter of 2017, in connection
with our previously announced strategy to re-allocate capital and resources and exit certain products and geographies, we sold
the shares of a non-core Latin America focused commodities trading subsidiary to a company controlled by our former President.
Under the transaction, we received total consideration of approximately $14.4 million, including 450,000 common shares of our
common shares at US$1.84 a share and the release of any further obligations to issue shares in connection with a prior share purchase
agreement between the parties.
Financial and Other Instruments
We are exposed to various market risks
from changes in interest rates, foreign currency exchange rates and equity prices that may affect our results of operations and
financial condition and, consequently, our fair value. Generally, our management believes that our current financial assets and
financial liabilities, due to their short-term nature, do not pose significant financial risks. We use various financial instruments
to manage our exposure to various financial risks. The policies for controlling the risks associated with financial instruments
include, but are not
limited to, standardized company procedures
and policies on matters such as hedging of risk exposures, avoidance of undue concentration of risk and requirements for collateral
(including letters of credit) to mitigate credit risk. We have risk managers to perform audits and checking functions to ensure
that company procedures and policies are complied with.
We use derivative instruments to manage
certain exposures to commodity price and currency exchange rate risks. The use of derivative instruments depends on our management’s
perception of future economic events and developments. These types of derivatives are often very volatile, as they are highly
leveraged, given that margin requirements are relatively low in proportion to their notional amounts.
Many of our strategies, including the
use of derivative instruments and the types of derivative instruments selected by us, are based on historical trading patterns
and correlations and our management’s expectations of future events. However, these strategies may not be fully effective
in all market environments or against all types of risks. Unexpected market developments may affect our risk management strategies
and unanticipated developments could impact our risk management strategies in the future. If any of the variety of instruments
and strategies we utilize is not effective, we may incur losses.
Please refer to Note 29 of our consolidated
financial statements for the year ended December 31, 2016 for a qualitative and quantitative discussion of our exposure to market
risks and the sensitivity analysis of interest rate, currency and other price risks at December 31, 2016.
Outstanding Share Data
Our share capital consists of an unlimited
number of common shares, class A common shares, and class A preference shares, issuable in series. Our common shares are listed
on the NYSE under the symbol “MFCB”. As of May 15, 2017, we had 62,692,272 common shares, 200,000 stock options and
no share purchase warrants issued and outstanding.
Disclosure Controls and Procedures
We maintain a set of disclosure controls
and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized and reported within
the time periods specified in provincial securities legislation. We evaluated our disclosure controls and procedures as defined
under National Instrument 52-109 –
Certification of Disclosure in Issuers
, referred to as “NI 52-109”,
as at March 31, 2017. This evaluation was performed by our Chief Executive Officer and Chief Financial Officer. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective.
Changes in Internal Control over Financial
Reporting
We maintain internal controls over financial
reporting that have been designed to provide reasonable assurance of the reliability of external financial reporting in accordance
with IFRS, as required by NI 52-109.
Management, including our Chief Executive
Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2016. In conducting this evaluation, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in
Internal Control — Integrated Framework (2013)
.
There were no changes in our internal
control over financial reporting that occurred during the three months ended March 31, 2017 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness
of Controls
Internal control over financial reporting
has inherent limitations and is a process that involves human diligence and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper
management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected
on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate,
this risk.
Legal Proceedings
We are subject to routine litigation incidental
to our business and are named from time to time as a defendant in various legal actions arising in connection with our activities,
certain of which may include large claims for punitive damages. Further, due to the size, complexity and nature of our operations,
various legal and tax matters
are outstanding from time to time,
including a currently ongoing audit by the Canadian taxation authority of our domestic and international transactions
covering the years ended December 31, 2006 to April 19, 2013. Currently, based upon information available to us, we do not
believe any such matters would have a material adverse effect upon our financial condition or results of operations. However,
due to the inherent uncertainty of litigation, we cannot provide certainty as to their outcome. If our current assessments
are incorrect or if we are unable to resolve any of these matters favorably, there may be a material adverse impact on our
financial performance, cash flows or results of operations.
Risk Factors
Statements in this report that are not
reported financial results or other historical information are “forward-looking statements” within the meaning of
applicable securities legislation including the
Private Securities Litigation Reform Act of 1995
, as amended. These statements
appear in a number of different places in this report and can be identified by words such as “anticipate”, “could”,
“project”, “should”, “expect”, “seek”, “may”, “intend”,
“likely”, “will”, “plan”, “estimate”, “believe” and similar expressions
suggesting future outcomes or statements regarding an outlook or their negative or other comparable words. Also discussions of
strategy that involve risks and uncertainties share this “forward-looking” character.
There are a number of important factors,
many of which are beyond our control, that could harm our business, operating or financial condition or that could cause actual
conditions, events or results to differ significantly from those described in the forward-looking statements. These factors include,
but are not limited to, the following:
|
•
|
our financial results may fluctuate substantially from
period to period;
|
|
•
|
a weakening of the global economy, including capital and
credit markets, could adversely affect our business and financial results and have a material adverse effect on our liquidity
and capital resources;
|
|
•
|
our earnings and, therefore, our profitability may be affected
by price volatility in our various products;
|
|
•
|
the merchant banking business is highly competitive;
|
|
•
|
if the fair values of our long-lived assets fall below
our carrying values, we would be required to record non-cash impairment losses that could have a material impact on our results
of operations;
|
|
•
|
we may face a lack of suitable acquisition, merger or other
proprietary investment candidates, which may limit our growth;
|
|
•
|
strategic investments or acquisitions and joint ventures,
or our entry into new business areas, may result in additional risks and uncertainties in our business;
|
|
•
|
our merchant banking activities are subject to counterparty
risks associated with the performance of obligations by our counterparties;
|
|
•
|
larger and more frequent capital commitments in our merchant
banking business increase the potential for significant losses;
|
|
•
|
we are subject to transaction risks that may have a material
adverse effect on our business, results of operations, financial condition and cash flow;
|
|
•
|
our risk management strategies may leave us exposed to
unidentified or unanticipated risks that could impact our risk management strategies in the future and could negatively affect
our results of operations and financial condition;
|
|
•
|
derivative transactions may expose us to unexpected risk
and potential losses;
|
|
•
|
the operations of our banking subsidiary are subject to
regulation and risks faced by other financial institutions, which could adversely affect our business and operations;
|
|
•
|
any failure to remain in compliance with sanctions, anti-money
laundering laws or other applicable regulations in the jurisdictions in which we operate could harm our reputation and/or cause
us to become subject to fines, sanctions or legal enforcement, which could have an adverse effect on our business, financial condition
and results of operations;
|
|
•
|
fluctuations in interest rates and foreign currency exchange
rates may affect our results of operations and financial condition;
|
|
•
|
some of our operations are subject to environmental laws
and regulations that may increase the costs of doing business and may restrict such operations;
|
|
•
|
there can be no assurance that we will be able to obtain
adequate financing in the future or that the terms of such financing will be favourable and, as a result, we may have to raise
additional capital through the issuance of additional equity, which will result in dilution to our shareholders;
|
|
•
|
limitations on our access to capital could impair our liquidity
and our ability to conduct our businesses;
|
|
•
|
our existing and future financing arrangements that contain
operating and financial restrictions may restrict our business and financing activities;
|
|
•
|
we may substantially increase our debt in the future;
|
|
•
|
as a result of our global operations, we are exposed to
political, economic, environmental, legal, operational and other risks that could adversely affect our business, results of operations,
financial condition and cash flow;
|
|
•
|
we are exposed to litigation risks in our business that
are often difficult to assess or quantify and we could incur significant legal expenses every year in defending against litigation;
|
|
•
|
we rely significantly on the skills and experience of our
executives and the loss of any of these individuals may harm our business;
|
|
•
|
we may experience difficulty attracting and retaining qualified
management and technical personnel to efficiently operate our business and the failure to operate our business effectively could
have a material adverse effect on our profitability, financial condition and results of operations;
|
|
•
|
we conduct business in countries with a history of corruption
and transactions with foreign governments and doing so increases the risks associated with our international activities;
|
|
•
|
the operation of the iron ore mine underlying our royalty
interest was closed in 2014. Its operation is generally determined by a third-party operator and we currently have no decision-making
power as to how the property is operated. In addition, we have no or very limited access to technical or geological data respecting
the mine, including as to mineralization or reserves. The operator’s failure to perform or other operating decisions could
have a material adverse effect on our revenue, results of operations and financial condition;
|
|
•
|
our hydrocarbon and related operations are subject to inherent
risks and hazards;
|
|
•
|
future environmental and reclamation obligations respecting
our resource properties and interests may be material;
|
|
•
|
tax audits or disputes, or changes in the tax laws applicable
to us, could materially increase our tax payments;
|
|
•
|
employee misconduct could harm us and is difficult to detect
and deter;
|
|
•
|
we may incur losses as a result of unforeseen or catastrophic
events, including the emergence of a pandemic, terrorist attacks or natural disasters;
|
|
•
|
failures or security breaches of our information technology
systems could disrupt our operations and negatively impact our business;
|
|
•
|
investors’ interests may be diluted and investors
may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity
securities; and
|
|
•
|
certain factors may inhibit, delay or prevent a takeover
of our company, which may adversely affect the price of our common shares.
|
Additional Information
We file annual and other reports, proxy
statements and other information with certain Canadian securities regulatory authorities and with the SEC in the United States.
The documents filed with the SEC are available to the public from the SEC’s website at http://www.sec.gov. The documents
filed with the Canadian securities regulatory authorities are available at http://www.sedar.com.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS March 31, 2017
UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
In accordance with National
Instrument 51-102 released by the Canadian Securities Administrators, MFC Bancorp Ltd. discloses that its auditors have not
reviewed the unaudited financial statements for the period ended March 31, 2017.
NOTICE TO READER OF THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The preparation of the accompanying interim
condensed consolidated statements of financial position of MFC Bancorp Ltd. as at March 31, 2017 and the related condensed consolidated
statements of operations, comprehensive income, changes in equity and cash flows for the three and nine months then ended is the
responsibility of management. These condensed consolidated financial statements have not been reviewed on behalf of the shareholders
by the independent external auditors of MFC Bancorp Ltd.
The interim condensed consolidated financial
statements have been prepared by management and include the selection of appropriate accounting principles, judgments and estimates
necessary to prepare these financial statements in accordance with IFRS.
MFC BANCORP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(Unaudited)
(Canadian Dollars in Thousands)
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
61,257
|
|
|
$
|
120,676
|
|
Short-term cash deposits
|
|
|
183
|
|
|
|
182
|
|
Securities
|
|
|
4,990
|
|
|
|
5,018
|
|
Securities – derivatives
|
|
|
914
|
|
|
|
1,240
|
|
Trade receivables
|
|
|
145,025
|
|
|
|
135,962
|
|
Tax receivables
|
|
|
11,711
|
|
|
|
11,743
|
|
Other receivables
|
|
|
29,297
|
|
|
|
35,251
|
|
Inventories
|
|
|
20,229
|
|
|
|
31,954
|
|
Real estate held for sale
|
|
|
1,072
|
|
|
|
1,066
|
|
Deposits, prepaid and other
|
|
|
12,714
|
|
|
|
12,195
|
|
Assets held for sale
|
|
|
—
|
|
|
|
45,667
|
|
Total current assets
|
|
|
287,392
|
|
|
|
400,954
|
|
Non-current Assets
|
|
|
|
|
|
|
|
|
Securities
|
|
|
617
|
|
|
|
561
|
|
Securities – derivatives
|
|
|
25
|
|
|
|
—
|
|
Real estate held for sale
|
|
|
13,068
|
|
|
|
13,035
|
|
Investment property
|
|
|
35,832
|
|
|
|
35,663
|
|
Property, plant and equipment
|
|
|
98,188
|
|
|
|
99,443
|
|
Interests in resource properties
|
|
|
78,696
|
|
|
|
79,147
|
|
Deferred income tax assets
|
|
|
17,122
|
|
|
|
16,647
|
|
Other
|
|
|
4,482
|
|
|
|
4,072
|
|
Other, restricted
|
|
|
819
|
|
|
|
816
|
|
Total non-current assets
|
|
|
248,849
|
|
|
|
249,384
|
|
|
|
$
|
536,241
|
|
|
$
|
650,338
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Short-term bank borrowings
|
|
$
|
67,432
|
|
|
$
|
95,416
|
|
Debt, current portion
|
|
|
17,101
|
|
|
|
36,249
|
|
Account payables and accrued expenses
|
|
|
35,135
|
|
|
|
45,114
|
|
Financial liabilities – derivatives
|
|
|
2,993
|
|
|
|
5,514
|
|
Income tax liabilities
|
|
|
1,704
|
|
|
|
2,486
|
|
Liabilities relating to assets held for sale
|
|
|
—
|
|
|
|
29,897
|
|
Total current liabilities
|
|
|
124,365
|
|
|
|
214,676
|
|
Long-term Liabilities
|
|
|
|
|
|
|
|
|
Debt, less current portion
|
|
|
63,178
|
|
|
|
80,564
|
|
Financial liabilities – derivatives
|
|
|
684
|
|
|
|
940
|
|
Accrued pension obligations, net
|
|
|
3,271
|
|
|
|
3,259
|
|
Decommissioning obligations
|
|
|
13,505
|
|
|
|
13,219
|
|
Deferred income tax liabilities
|
|
|
8,420
|
|
|
|
7,353
|
|
Other
|
|
|
868
|
|
|
|
897
|
|
Total long-term liabilities
|
|
|
89,926
|
|
|
|
106,232
|
|
Total liabilities
|
|
|
214,291
|
|
|
|
320,908
|
|
Equity
|
|
|
|
|
|
|
|
|
Capital stock, fully paid
|
|
|
417,060
|
|
|
|
419,916
|
|
Treasury stock
|
|
|
(61,085
|
)
|
|
|
(61,085
|
)
|
Contributed surplus
|
|
|
13,790
|
|
|
|
15,417
|
|
Deficit
|
|
|
(87,850
|
)
|
|
|
(88,920
|
)
|
Accumulated other comprehensive income
|
|
|
37,780
|
|
|
|
42,192
|
|
Shareholders’ equity
|
|
|
319,695
|
|
|
|
327,520
|
|
Non-controlling interests
|
|
|
2,255
|
|
|
|
1,910
|
|
Total equity
|
|
|
321,950
|
|
|
|
329,430
|
|
|
|
$
|
536,241
|
|
|
$
|
650,338
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
MFC BANCORP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Three Months Ended March 31,
2017 and 2016
(Unaudited)
(Canadian Dollars in Thousands, Except
Per Share Amounts)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented)
|
|
Gross revenues
|
|
$
|
110,625
|
|
|
$
|
357,582
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Costs of sales and services
|
|
|
91,665
|
|
|
|
333,302
|
|
Selling, general and administrative
|
|
|
14,486
|
|
|
|
20,555
|
|
Finance costs
|
|
|
3,627
|
|
|
|
5,502
|
|
Exchange differences on foreign currency transactions, net loss (gain)
|
|
|
975
|
|
|
|
(3,600
|
)
|
|
|
|
110,753
|
|
|
|
355,759
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(128
|
)
|
|
|
1,823
|
|
Income tax expense:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
(1,449
|
)
|
|
|
(1,553
|
)
|
Resource property revenue taxes
|
|
|
(162
|
)
|
|
|
—
|
|
|
|
|
(1,611
|
)
|
|
|
(1,553
|
)
|
Net (loss) income for the period
|
|
|
(1,739
|
)
|
|
|
270
|
|
Net income attributable to non-controlling interests
|
|
|
(356
|
)
|
|
|
(331
|
)
|
Net loss attributable to owners of the parent company
|
|
$
|
(2,095
|
)
|
|
$
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03
|
)
|
|
$
|
(0.00
|
)
|
Diluted
|
|
|
(0.03
|
)
|
|
|
(0.00
|
)
|
|
|
$
|
(0.03
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
– basic
|
|
|
62,842,272
|
|
|
|
63,142,272
|
|
– diluted
|
|
|
62,842,272
|
|
|
|
63,142,272
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
MFC BANCORP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
For the Three Months Ended March 31,
2017 and 2016
(Unaudited)
(Canadian Dollars in Thousands)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented)
|
|
Net (loss) income for the period
|
|
$
|
(1,739
|
)
|
|
$
|
270
|
|
Other comprehensive loss, net of income taxes:
|
|
|
|
|
|
|
|
|
Exchange differences arising from translating financial statements of foreign operations
|
|
|
(4,463
|
)
|
|
|
(21,185
|
)
|
Fair value gain on available-for-sale securities, net
|
|
|
34
|
|
|
|
87
|
|
Remeasurement of net defined benefit liabilities
|
|
|
6
|
|
|
|
8
|
|
|
|
|
(4,423
|
)
|
|
|
(21,090
|
)
|
Total comprehensive loss for the period
|
|
|
(6,162
|
)
|
|
|
(20,820
|
)
|
Comprehensive income attributable to non-controlling interests
|
|
|
(345
|
)
|
|
|
(198
|
)
|
Comprehensive loss attributable to owners of the parent company
|
|
$
|
(6,507
|
)
|
|
$
|
(21,018
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of income taxes, comprised amounts:
|
|
|
|
|
|
|
|
|
will not be reclassified subsequently to profit or loss
|
|
$
|
6
|
|
|
$
|
8
|
|
will be reclassified subsequently to profit or loss when specific conditions are met
|
|
|
(4,429
|
)
|
|
|
(21,098
|
)
|
|
|
$
|
(4,423
|
)
|
|
$
|
(21,090
|
)
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
MFC BANCORP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY
For the Three Months Ended March 31,
2017 and 2016
(Unaudited)
(Canadian Dollars in Thousands)
|
|
Capital Stock
|
|
|
Treasury Stock
|
|
|
Contributed
Surplus
|
|
|
|
|
|
Accumulated Other
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Share-
based
Com-
pensa-
tion
|
|
|
Contin-
gently
Issuable
Shares
|
|
|
Deficit
|
|
|
Available-
for-sale
Securities
|
|
|
Defined
Benefit
Obliga-
tions
|
|
|
Currency
Transla-
tion
Adjust-
ment
|
|
|
Share-
holders’
Equity
|
|
|
Non-
con-
trolling
Interests
|
|
|
Total
Equity
|
|
Balance at December 31, 2016
|
|
|
68,092,082
|
|
|
$
|
419,916
|
|
|
|
(4,949,810
|
)
|
|
$
|
(61,085
|
)
|
|
$
|
13,790
|
|
|
$
|
1,627
|
|
|
$
|
(88,920
|
)
|
|
$
|
(29
|
)
|
|
$
|
(307
|
)
|
|
$
|
42,528
|
|
|
$
|
327,520
|
|
|
$
|
1,910
|
|
|
$
|
329,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase and cancellation of shares and equity instruments
|
|
|
(450,000
|
)
|
|
|
(2,856
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,627
|
)
|
|
|
3,165
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,318
|
)
|
|
|
—
|
|
|
|
(1,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,095
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,095
|
)
|
|
|
356
|
|
|
|
(1,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value gain
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34
|
|
|
|
—
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on remeasurements
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net exchange differences
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,452
|
)
|
|
|
(4,452
|
)
|
|
|
(11
|
)
|
|
|
(4,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2017
|
|
|
67,642,082
|
|
|
$
|
417,060
|
|
|
|
(4,949,810
|
)
|
|
$
|
(61,085
|
)
|
|
$
|
13,790
|
|
|
$
|
—
|
|
|
$
|
(87,850
|
)
|
|
$
|
5
|
|
|
$
|
(301
|
)
|
|
$
|
38,076
|
|
|
$
|
319,695
|
|
|
$
|
2,255
|
|
|
$
|
321,950
|
|
|
|
Capital Stock
|
|
|
Treasury Stock
|
|
|
Contributed
Surplus
|
|
|
|
|
|
Accumulated Other
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Number
of Shares
|
|
|
Amount
|
|
|
Share-
based
Com-
pensa-
tion
|
|
|
Contin-
gently
Issuable
Shares
|
|
|
Deficit
|
|
|
Available-
for-sale
Securities
|
|
|
Defined
Benefit
Obliga-
tions
|
|
|
Currency
Transla-
tion
Adjust-
ment
|
|
|
Share-
holders’
Equity
|
|
|
Non-
con-
trolling
Interests
|
|
|
Total
Equity
|
|
Balance at December 31, 2015
|
|
|
68,092,082
|
|
|
$
|
419,916
|
|
|
|
(4,949,810
|
)
|
|
$
|
(61,085
|
)
|
|
$
|
13,790
|
|
|
$
|
1,627
|
|
|
$
|
(63,559
|
)
|
|
$
|
(97
|
)
|
|
$
|
(499
|
)
|
|
$
|
57,099
|
|
|
$
|
367,192
|
|
|
$
|
2,008
|
|
|
$
|
369,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(61
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(61
|
)
|
|
|
331
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value gain
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87
|
|
|
|
—
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on remeasurements
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net exchange differences
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,052
|
)
|
|
|
(21,052
|
)
|
|
|
(133
|
)
|
|
|
(21,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2016
|
|
|
68,092,082
|
|
|
$
|
419,916
|
|
|
|
(4,949,810
|
)
|
|
$
|
(61,085
|
)
|
|
$
|
13,790
|
|
|
$
|
1,627
|
|
|
$
|
(63,620
|
)
|
|
$
|
(10
|
)
|
|
$
|
(491
|
)
|
|
$
|
36,047
|
|
|
$
|
346,174
|
|
|
$
|
2,206
|
|
|
$
|
348,380
|
|
|
|
Owners of
|
|
|
Non-
|
|
|
|
|
|
|
the parent
|
|
|
controlling
|
|
|
|
|
Total Comprehensive Loss for the Three Months Ended March 31:
|
|
company
|
|
|
interests
|
|
|
Total
|
|
2016
|
|
$
|
(21,018
|
)
|
|
$
|
198
|
|
|
$
|
(20,820
|
)
|
2017
|
|
|
(6,507
|
)
|
|
|
345
|
|
|
|
(6,162
|
)
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
MFC BANCORP LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
For the Three Months Ended March 31,
2017 and 2016
(Unaudited)
(Canadian Dollars in Thousands)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Re-presented)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net (loss) income for the period
|
|
$
|
(1,739
|
)
|
|
$
|
270
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Amortization, depreciation and depletion
|
|
|
2,220
|
|
|
|
2,059
|
|
Exchange differences on foreign currency transactions, net loss (gain)
|
|
|
975
|
|
|
|
(3,600
|
)
|
Loss on short-term securities
|
|
|
1
|
|
|
|
43
|
|
Gain on dispositions of subsidiaries
|
|
|
(57
|
)
|
|
|
—
|
|
Deferred income taxes
|
|
|
663
|
|
|
|
798
|
|
Market value increase on commodity inventories
|
|
|
(869
|
)
|
|
|
(961
|
)
|
Interest accretion
|
|
|
96
|
|
|
|
799
|
|
Credit losses
|
|
|
1,242
|
|
|
|
393
|
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
Short-term cash deposits
|
|
|
—
|
|
|
|
31
|
|
Short-term securities
|
|
|
—
|
|
|
|
(7,580
|
)
|
Restricted cash
|
|
|
—
|
|
|
|
283
|
|
Receivables
|
|
|
(2,932
|
)
|
|
|
(57,957
|
)
|
Inventories
|
|
|
10,788
|
|
|
|
45,873
|
|
Deposits, prepaid and other
|
|
|
(469
|
)
|
|
|
4,452
|
|
Assets held for sale
|
|
|
12,636
|
|
|
|
—
|
|
Short-term bank borrowings
|
|
|
(34,032
|
)
|
|
|
151,708
|
|
Account payables and accrued expenses
|
|
|
(6,439
|
)
|
|
|
(31,455
|
)
|
Income tax liabilities
|
|
|
(777
|
)
|
|
|
(380
|
)
|
Accrued pension obligations, net
|
|
|
(6
|
)
|
|
|
(98
|
)
|
Other
|
|
|
(1,791
|
)
|
|
|
(558
|
)
|
Cash flows (used in) provided by operating activities
|
|
|
(20,490
|
)
|
|
|
104,120
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment, net
|
|
|
(171
|
)
|
|
|
(677
|
)
|
Increase in loan receivables
|
|
|
(282
|
)
|
|
|
—
|
|
Decrease in loan receivables
|
|
|
204
|
|
|
|
278
|
|
Acquisition of a subsidiary, net of cash and cash equivalents acquired
|
|
|
—
|
|
|
|
(23,924
|
)
|
Other
|
|
|
127
|
|
|
|
(1,680
|
)
|
Cash flows used in continuing investing activities
|
|
|
(122
|
)
|
|
|
(26,003
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Debt repayment
|
|
|
(36,522
|
)
|
|
|
(13,351
|
)
|
Debt borrowing
|
|
|
—
|
|
|
|
6,179
|
|
Cash flows used in financing activities
|
|
|
(36,522
|
)
|
|
|
(7,172
|
)
|
Exchange rate effect on cash and cash equivalents
|
|
|
(2,285
|
)
|
|
|
(16,716
|
)
|
(Decrease) increase in cash and cash equivalents
|
|
|
(59,419
|
)
|
|
|
54,229
|
|
Cash and cash equivalents, beginning of period
|
|
|
120,676
|
|
|
|
197,519
|
|
Cash and cash equivalents, included in assets held for sale, net
|
|
|
—
|
|
|
|
2,314
|
|
Cash and cash equivalents, end of period
|
|
$
|
61,257
|
|
|
$
|
254,062
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period consisted of:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
61,257
|
|
|
$
|
189,174
|
|
Money market and highly liquid funds
|
|
|
—
|
|
|
|
64,888
|
|
|
|
$
|
61,257
|
|
|
$
|
254,062
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
MFC BANCORP LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2017
(Unaudited)
Note 1. Nature of Business
MFC Bancorp Ltd. (“MFC Bancorp”
or the “Company”) is incorporated under the laws of British Columbia, Canada. MFC Bancorp and the entities it controls
are collectively known as the Group in these condensed consolidated financial statements. The Group is a merchant bank that provides
financial services and facilitates structured trade for corporations and institutions. The Group commits its own capital to promising
enterprises and invests and otherwise captures investment opportunities for its own account. The Group seeks to invest in businesses
or assets whose intrinsic value is not properly reflected. The Group’s investing activities are generally not passive. The
Group actively seeks investments where its financial expertise and management can add or unlock value.
Note 2. Basis of Presentation and Significant
Accounting Policies
These condensed consolidated financial
statements include the accounts of MFC Bancorp and entities it controls. The presentation currency of these condensed consolidated
financial statements is the Canadian dollar ($), as rounded to the nearest thousand (except per share amounts).
This interim financial report has been
prepared by MFC Bancorp in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (the “IASB”). The Group’s interim condensed consolidated financial statements for
the three months ended March 31, 2017 are in compliance with IAS 34,
Interim Financial Reporting
(“IAS 34”).
The same accounting policies and methods of computation are followed in these interim consolidated financial statements as compared
with the most recent annual financial statements. In accordance with IAS 34, certain information and footnote disclosure normally
included in annual financial statements have been omitted or condensed.
The measurement procedures to be followed
in an interim financial report are designed to ensure that the resulting information is reliable and that all material financial
information that is relevant to an understanding of the financial position or performance of the Group is appropriately disclosed.
While measurements in both annual and interim financial reports are often based on reasonable estimates, the preparation of the
interim financial report generally requires a greater use of estimation methods than the annual financial report.
In the opinion of MFC Bancorp, its unaudited
interim condensed consolidated financial statements contain all normal recurring adjustments necessary in order to present a fair
statement of the results of the interim periods presented. These interim condensed consolidated financial statements should be
read together with the audited consolidated financial statements and the accompanying notes included in MFC Bancorp’s latest
annual report on Form 20-F. The results for the periods presented herein are not indicative of the results for the entire year.
The revenues from the Group’s merchant banking activities involve seasonality and cyclicality.
Re-presentation
In 2015, the Board of Directors of the
Company approved a plan to sell all of the Group’s resource properties. Pursuant to the resolution, an active program to
locate buyers and complete the plan was initiated. Management was of the opinion that the disposal groups were actively marketed
for sale at a price that was reasonable in relation to their current fair value and the sales were expected to be completed within
one year. As such, the assets of the disposal groups were classified as assets held for sale effective September 30, 2015. In
compliance with IFRS 5,
Non-current Assets Held for Sale and Discontinued Operations,
the operations and cash flows of
the disposal groups were accounted for as discontinued operations.
On June 30 and September 30, 2016, the
Group ceased to classify the remaining disposal groups as held for sale as the criteria for assets classified as held for sale
were no longer met. Accordingly, the results of operations of these disposal groups for the period ended March 31, 2016 have been
reclassified to continuing operations in these condensed consolidated financial statements.
MFC BANCORP LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2017
(Unaudited)
Note 3. Accounting Policy Developments
New accounting policy for 2017
Disclosure Initiative (Amendments to IAS
7,
Statement of Cash Flows
) was issued in January 2016 and requires that the following changes in liabilities arising from
financing activities are disclosed (to the extent necessary): (a) changes from financing cash flows; (b) changes arising from
obtaining or losing control of subsidiaries or other businesses; (c) the effect of changes in foreign exchange rates; (d) changes
in fair values; and (e) other changes. The IASB defines liabilities arising from financing activities as liabilities “for
which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from financing activities”.
The new disclosure requirements also relate to changes in financial assets if they meet the same definition. Finally, the amendments
state that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets
and liabilities. The amendments are effective for annual periods beginning on or after January 1, 2017 on a prospective basis.
Management expects that additional disclosures will be required for the Group’s annual financial statements ending December
31, 2017.
Future Accounting Changes
IFRS 9,
Financial Instruments,
(“IFRS
9”), issued in July 2014, is the IASB’s replacement of IAS 39. IFRS 9 includes requirements for recognition and measurement,
impairment, derecognition and general hedge accounting. The version of IFRS 9 issued in 2014 supersedes all previous versions
and is mandatorily effective for annual reporting periods beginning on or after January 1, 2018. Management expects to complete
the assessment of the impacts of IFRS 9 on the Group’s consolidated financial statements before the end of the third quarter
in 2017.
IFRS 15,
Revenue from Contracts with
Customers
(“IFRS 15”), specifies how and when an entity will recognize revenue as well as requiring such entities
to provide users of financial statements with more informative, relevant disclosures. The standard provides a single, principles
based five-step model to be applied to all contracts with customers. IFRS 15 is effective for annual reporting periods beginning
on or after January 1, 2018. Management expects to complete the assessment of the impacts of IFRS 15 on the Group’s consolidated
financial statements before the end of the third quarter in 2017.
In December 2016, IASB issued IFRIC
22,
Foreign Currency Transactions and Advance Consideration
. The interpretation applies to foreign currency
transactions when an entity recognises a non-monetary asset or non-monetary liability arising from the payment or receipt of
advance consideration before the entity recognises the related asset, expense or income. The consensus of IFRIC 22 comprises:
(i) the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the
non-monetary prepayment asset or deferred income liability; and (ii) If there are multiple payments or receipts in advance, a
date of transaction is established for each payment or receipt. The interpretation is effective for annual reporting periods
beginning on or after 1 January 2018. Earlier application is permitted.
IFRS 16,
Leases
(“IFRS 16”),
issued in January 2016, introduces a single on-balance sheet model of accounting for leases by lessees that eliminates the distinction
between operating and finance leases. Lessor accounting remains largely unchanged and the distinction between operating and finance
leases is retained. IFRS 16 supersedes IAS 17,
Leases
, and related interpretations and is effective for annual reporting
periods beginning on or after January 1, 2019, with earlier application permitted if IFRS 15 has also been applied. Management
will adopt IFRS 16 in 2019 and is currently assessing the impacts of IFRS 16 on the Group’s consolidated financial statements.
Note 4. Business Segment Information
The Group is primarily in the merchant
banking business, which includes marketing activities, captive supply assets, financial services and proprietary investing activities.
In reporting to management, the Group’s
operating results are categorized into the following operating segments: merchant banking and all other segments.
MFC BANCORP LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2017
(Unaudited)
Note 4. Business Segment Information
(continued)
Basis of Presentation
In reporting segments, certain of the
Group’s business lines have been aggregated where they have similar economic characteristics and are similar in each of
the following areas: (a) the nature of the products and services; (b) the methods of distribution; and (b) the types or classes
of customers/clients for the products and services.
The Group’s merchant banking segment
includes its marketing activities, captive supply assets, structured solutions, financial services and proprietary investing activities.
The Group is a merchant bank that provides financial services and facilitates structured trade for corporations and institutions.
The Group specializes in markets that are not adequately addressed by traditional sources of supply and finance, with an emphasis
on providing solutions for small and medium sized enterprises. The Group’s merchant banking business operates in multiple
geographies, and participates in industries including manufacturing and natural resources. The Group also seeks investments in
many industries, emphasizing those business opportunities where the perceived intrinsic value is not properly recognized. The
Group uses its financial and management expertise to add or unlock value within a relatively short time period.
The all other segment includes the Group’s
corporate and operating segments whose quantitative amounts do not exceed 10% of any of the Group’s: (a) reported revenue;
(b) net income; or (c) total assets. The Group’s all other operating segment primarily includes business activities in medical
equipment, instruments, supplies and services.
The accounting policies of the operating
segments are the same as those described in the summary of significant accounting policies in Note 2B to the Company’s audited
consolidated financial statements for the year ended December 31, 2016. The chief operating decision maker evaluates performance
on the basis of income or loss from operations before income taxes and does not consider acquisition accounting adjustments in
assessing the performance of the Group’s reporting segments. The segment information presented below is prepared according
to the following methodologies: (a) revenues and expenses directly associated with each segment are included in determining pre-tax
earnings; (b) intersegment sales and transfers are accounted for as if the sales or transfers were to third parties at current
market prices; (c) certain selling, general and administrative expenses paid by corporate, particularly incentive compensation
and share-based compensation, are not allocated to reporting segments; (d) all intercompany investments, receivables and payables
are eliminated in the determination of each segment’s assets and liabilities; and (e) deferred income tax assets and liabilities
are not allocated.
Segment Operating Results
|
|
Three Months ended March 31, 2017
|
|
|
|
Merchant
|
|
|
|
|
|
|
|
|
|
banking
|
|
|
All other
|
|
|
Total
|
|
Revenues from external customers
|
|
$
|
100,657
|
|
|
$
|
9,968
|
|
|
$
|
110,625
|
|
Intersegment sale
|
|
|
675
|
|
|
|
81
|
|
|
|
756
|
|
Interest expense
|
|
|
1,571
|
|
|
|
—
|
|
|
|
1,571
|
|
(Loss) income before income taxes
|
|
|
(856
|
)
|
|
|
728
|
|
|
|
(128
|
)
|
|
|
Three Months ended March 31, 2016
|
|
|
|
Merchant
|
|
|
|
|
|
|
|
|
|
banking
|
|
|
All other
|
|
|
Total
|
|
Revenues from external customers
|
|
$
|
348,283
|
|
|
$
|
9,299
|
|
|
$
|
357,582
|
|
Intersegment sale
|
|
|
1,033
|
|
|
|
77
|
|
|
|
1,110
|
|
Interest expense
|
|
|
4,499
|
|
|
|
—
|
|
|
|
4,499
|
|
Income before income taxes
|
|
|
1,007
|
|
|
|
816
|
|
|
|
1,823
|
|
MFC BANCORP LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2017
(Unaudited)
Note 5. Capital Stock
Currently, MFC Bancorp has three classes
of capital stock: common shares (the “Common Shares”), class A common shares and Class A Preference shares. As at
March 31, 2017, there are 62,692,272 Common Shares issued and outstanding.
All the Company’s treasury stock
are held by the wholly-owned subsidiaries.
Note 6. Condensed Consolidated Statements
of Operations
Revenues
The Group’s gross revenues comprised:
Three months ended March 31:
|
|
2017
|
|
|
2016
|
|
Merchant banking products and services
|
|
$
|
98,608
|
|
|
$
|
344,668
|
|
Interest
|
|
|
384
|
|
|
|
803
|
|
Other
|
|
|
11,633
|
|
|
|
12,111
|
|
Gross revenues
|
|
$
|
110,625
|
|
|
$
|
357,582
|
|
The Group’s revenues include the
revenues of MFC Merchant Bank Ltd. from February 1, 2016 in its merchant banking segment.
In December 2016, the Group disposed of
a majority of each of the FESIL group of companies and Elsner group of companies.
Effective January 31, 2017, the Group
completed the sale of a non-core commodities trading subsidiary which focused on Latin America.
Expenses
The Group’s costs of sales and services
comprised:
Three months ended March 31:
|
|
2017
|
|
|
2016
|
|
Merchant banking products and services
|
|
$
|
89,096
|
|
|
$
|
330,368
|
|
Credit losses on loans and receivables
|
|
|
1,242
|
|
|
|
384
|
|
Market value increase on commodity inventories
|
|
|
(869
|
)
|
|
|
(961
|
)
|
Gain on derivative contracts, net
|
|
|
(1,671
|
)
|
|
|
(252
|
)
|
Gain on sale of subsidiaries
|
|
|
(57
|
)
|
|
|
—
|
|
Other
|
|
|
3,924
|
|
|
|
3,763
|
|
Total costs of sales and services
|
|
$
|
91,665
|
|
|
$
|
333,302
|
|
Note 7. Earnings per Share
Earnings per share data for the three
months ended March 31 from continuing operations is summarized as follows:
Three months ended March 31:
|
|
2017
|
|
|
2016
|
|
Basic loss available to holders of common shares
|
|
$
|
(2,095
|
)
|
|
$
|
(61
|
)
|
Effect of dilutive securities:
|
|
|
—
|
|
|
|
—
|
|
Diluted earnings
|
|
$
|
(2,095
|
)
|
|
$
|
(61
|
)
|
|
|
Number of Shares
|
|
|
|
2017
|
|
|
2016
|
|
Weighted average number of common shares outstanding — basic
|
|
|
62,842,272
|
|
|
|
63,142,272
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
Contingently issuable shares
|
|
|
—
|
|
|
|
—
|
|
Weighted average number of common shares outstanding — diluted
|
|
|
62,842,272
|
|
|
|
63,142,272
|
|
MFC BANCORP LTD.
SELECTED EXPLANATORY NOTES TO CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2017
(Unaudited)
Note 8. Related Party Transactions
In the normal course of operations, the
Group enters into transactions with related parties which include affiliates in which the Group has a significant equity interest
(10% or more) or has the ability to influence the operating and financing policies through significant shareholding, representation
on the board of directors, corporate charter and/or bylaws. The related parties also include MFC Bancorp’s directors, President,
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and their close family members, as well as any person
and entity which have significant influence over MFC Bancorp. These related party transactions are conducted in arm’s length
transactions at normal market prices and on normal commercial terms. In addition to transactions disclosed elsewhere in these
condensed consolidated financial statements, the Group had the following transaction with a related party during the three months
ended March 31, 2017:
In January 2017, in connection with its previously announced strategy to re-allocate capital and resources
and exit certain products and geographies, the Group sold the shares of a non-core Latin America focused commodities trading subsidiary
to a company controlled by the former President of MFC Bancorp. Under the transaction, the Group received total consideration
of $14,413, including 450,000 common shares of MFC Bancorp and the release of any further obligations to issue shares in connection
with a prior share purchase agreement between the parties.
Note 9. Changes in Contingent Liabilities
or Contingent Assets Since the End of the Last Annual Reporting Period
Litigation
The Group is subject to litigation in
the normal course of business. Management considers the aggregate liability which may result from such litigation not material
as at March 31, 2017.
Guarantees
Guarantees are accounted for as contingent
liabilities unless it becomes probable that the Group will be required to make a payment under the guarantee.
In the normal course of its merchant banking
activities, the Group issues guarantees to its trade and financing partners in order to secure financing facilities. Upon the
use or drawdown of the underlying financing facilities, the financing facilities are recorded as liabilities on the consolidated
statement of financial position such as short-term bank borrowings or debt. Accordingly, the issued guarantees relating to such
financing facilities that are used or drawn are not considered contingent liabilities or off-balance sheet transactions. As at
March 31, 2017, the Group had unrecorded contingent liabilities of $11,298 relating to outstanding guarantees issued to its trade
and financing partners in the normal course of its merchant banking activities.
Inventories
As at March 31, 2017, inventories aggregating
$ 10,368 had been hedged or contracted at fixed prices.
Note 10. Subsequent Event
On March 31, 2017, the Group announced
a proposed plan of arrangement (the “Plan”) under British Columbia corporate law, pursuant to which, among other things,
the Company would reduce its shareholders’ capital by an amount equal to its retained deficit, complete a consolidation
followed by a split of its common shares and the Company’s existing common shares would be exchanged for the shares of a
new parent company incorporated under the laws of the Cayman Islands, which would become the new publicly traded parent company
of the Group. The Plan is subject to, among other things, finalization and requisite court, shareholder and board approvals.
Note 11. Approval of Consolidated Financial
Statements
This interim financial report was approved
by the Board of Directors and authorized for issue on May 14, 2017.
|
NEWS
RELEASE
MFC Bancorp Ltd.
Rene Randall
Corporate Vice President
1 (604) 683 8286 ex 2
rrandall@bmgmt.com
|
|
MFC BANCORP LTD. REPORTS RESULTS FOR THE
THREE
MONTHS ENDED MARCH 31, 2017
|
NEW YORK (May 15, 2017) . . . MFC Bancorp
Ltd. (the “Company” or “MFC”) (NYSE: MFCB) announces its results for the three months ended March 31,
2017 and provides an update on its recent corporate developments. The Company’s financial statements are prepared in accordance
with International Financial Reporting Standards (“IFRS”).
(All references to dollar amounts are in Canadian dollars
unless otherwise stated.)
In the first quarter of 2017, we continued
to progress our strategy to exit product lines and geographies with unsatisfactory margins, deleverage, and reallocate capital
to our merchant banking business.
To this end, since the beginning of 2017,
we have:
|
•
|
rationalized our inventories by reducing them by
37% from $32.0 million at December 31, 2016 to $20.2 million at March 31, 2017;
|
|
|
|
|
•
|
deleveraged through repayment of short-term bank
borrowings, reducing them by 29% from $95.4 million at December 31, 2016 to $67.4 million at March 31, 2017;
|
|
|
|
|
•
|
completed the sale of a non-core commodities trading
business;
|
|
|
|
|
•
|
reduced our total debt by 31% from $116.8 million
at December 31, 2016 to $80.3 million at March 31, 2017; and
|
|
|
|
|
•
|
allocated resources for the expansion of our merchant
banking business.
|
Inventory Reduction
In the first quarter of 2017, we reduced
our inventories by $11.7 million, from $32.0 million as at December 31, 2016 to $20.2 million as at March 31, 2017. This was a
result of exiting certain product lines and geographical markets.
The following table sets forth our inventories
as at March 31, June 30, September 30, and December 31,2016 and March 31, 2017:
INVENTORIES
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
March 31,
|
|
(In thousands)
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
2017
|
|
Inventories
|
|
$
|
197,406
|
|
|
$
|
154,703
|
|
|
$
|
129,454
|
|
|
$
|
31,954
|
|
|
$
|
20,229
|
|
Debt Reduction
We strive to match our assets and liabilities
so that our long-term assets are financed with long-term debt and equity, and our short-term assets are financed with short-term
debt and equity. As we streamlined our operations and rationalized underperforming subsidiaries, we have reduced our debt accordingly.
In the first quarter of 2017, we reduced our total long-term debt to $80.3 million from $116.8 million as at December 31, 2016
and $282.2 million as of September 30, 2016 by repaying debts that became due and paying down loans which had financed assets
which were rationalized.
Financial Highlights
The following table highlights selected
figures on our financial position as at March 31, 2017 and December 31, 2016:
FINANCIAL POSITION
|
|
March 31,
|
|
|
December 31,
|
|
(In thousands, except ratios and per share
amount)
|
|
2017
|
|
|
2016
|
|
Cash and cash equivalents
|
|
$
|
61,257
|
|
|
$
|
120,676
|
|
Short-term securities
|
|
|
4,990
|
|
|
|
5,018
|
|
Trade receivables
|
|
|
145,025
|
|
|
|
135,962
|
|
Tax receivables
|
|
|
11,711
|
|
|
|
11,743
|
|
Other receivables
|
|
|
29,297
|
|
|
|
35,251
|
|
Inventories
|
|
|
20,229
|
|
|
|
31,954
|
|
Total current assets
|
|
|
287,392
|
|
|
|
400,954
|
|
Total current liabilities
|
|
|
124,365
|
|
|
|
214,676
|
|
Working capital
|
|
|
163,027
|
|
|
|
186,278
|
|
Current ratio
(1)
|
|
|
2.31
|
|
|
|
1.87
|
|
Acid-test ratio
(2)
|
|
|
2.04
|
|
|
|
1.68
|
|
Total assets
|
|
|
536,241
|
|
|
|
650,338
|
|
Short-term bank borrowings
|
|
|
67,432
|
|
|
|
95,416
|
|
Total long-term debt
|
|
|
80,279
|
|
|
|
116,813
|
|
Long-term debt-to-equity
(1)
|
|
|
0.20
|
|
|
|
0.25
|
|
Total liabilities
|
|
|
214,291
|
|
|
|
320,908
|
|
Shareholders’ equity
|
|
|
319,695
|
|
|
|
327,520
|
|
Net book value per share
|
|
|
5.10
|
|
|
|
5.19
|
|
Notes:
(1)
|
The current ratio is calculated as current assets divided
by current liabilities and the long-term debt-to-equity ratio is calculated as long-term debt, less current portion, divided by
shareholders’ equity.
|
(2)
|
The acid-test ratio is calculated as cash plus account
receivables plus short-term securities, divided by current liabilities (excluding liabilities related to assets held for sale).
|
Operating EBITDA
Operating EBITDA is defined as earnings
before interest, taxes, depreciation, depletion, amortization and impairment. Operating EBITDA is a non-IFRS financial measure
and should not be considered in isolation or as a substitute for performance measures under IFRS. Management uses Operating EBITDA
as a measure of our operating results and considers it to be a meaningful supplement to net income as a performance measure, primarily
because we incur depreciation and depletion from time to time.
For the three months ended March 31, 2017,
our Operating EBITDA was $5.7 million compared to $9.4 for the same period of 2016.
The following is a reconciliation of our
net income (loss) to Operating EBITDA for the three months ended March 31, 2017 and 2016:
|
|
Three months Ended
|
|
OPERATING EBITDA
|
|
March 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(Re-presented
(1)
)
|
|
Net (loss) income
(2)
|
|
$
|
(1,739
|
)
|
|
$
|
270
|
|
Income tax expense
|
|
|
1,611
|
|
|
|
1,553
|
|
Finance costs
|
|
|
3,627
|
|
|
|
5,502
|
|
Amortization, depreciation and depletion
|
|
|
2,220
|
|
|
|
2,059
|
|
Operating EBITDA
|
|
$
|
5,719
|
|
|
$
|
9,384
|
|
Notes:
(1)
|
In connection with the reclassification of our mining interest
and hydrocarbon properties to continuing operations in 2016, costs of sales and services have been re-presented for this period.
|
(2)
|
Includes net income attributable to non-controlling interests.
|
Update on the Proposed Plan of Arrangement
On March 31, 2017, we announced our intention
to pursue a proposed plan of arrangement (the “Plan”) under British Columbia corporate law, pursuant to which, among
other things, we would reduce our shareholders’ capital by an amount equal to our retained deficit, complete a consolidation,
followed by a split, of our common shares and our existing common shares would be exchanged for the shares of a new parent company
incorporated under the laws of the Cayman Islands (“New MFC”), which would become the new publicly traded parent company
of our group. The Plan is subject to, among other things, finalization and requisite court, shareholder and board approvals. We
currently expect to complete the Plan in the late second quarter or early third quarter of 2017.
The Company believes that the benefits
of the Plan are, among other things:
|
•
|
Flexible Corporate Structure
. The separation of
the public parent company from its operating businesses will facilitate future strategic transactions, such as spin-offs and corporate
reorganizations as well as provide additional options for future financing structures.
|
|
|
|
|
•
|
Fiscal Flexibility
. By being located in an international
financial center with advantageous tax laws, New MFC will have enhanced flexibility with respect to fiscal and tax planning. The
Cayman Islands has no corporate income, dividends or capital gains taxes and no withholding taxes on distributions to shareholders.
|
|
|
|
|
•
|
Reduced Expenses.
We have a large number of very
small shareholders, as such we believe that by eliminating odd lot holders under the Plan, we will reduce our ongoing administrative
costs and allow fractional shareholders to receive cash for their fractional shares without incurring brokerage commissions or
expenses.
|
|
|
|
|
•
|
Enhanced Global Exposure
. We are a global company,
with operations spanning internationally and New MFC’s jurisdiction of incorporation of the Cayman Islands, a recognized
international financial center, is more reflective of the international nature of our operations. New MFC would also consider
a secondary listing of its shares on a second stock exchange after completion of the Plan to obtain additional global exposure
and liquidity.
|
Credit Lines and Facilities
We established, utilized and maintain
various kinds of credit lines and facilities with banks and insurers. Most of these facilities are short-term. These facilities
are used in our day-to-day merchant banking business. The amounts drawn under such facilities fluctuate with the type and level
of transactions being undertaken.
As at March 31, 2017, we had credit facilities
aggregating $345.5 million as follows: (i) we had unsecured revolving credit facilities aggregating $69.1 million from banks.
The banks generally charge an interest rate at inter-bank rates plus an interest margin; (ii) we also had revolving credit facilities
aggregating $52.2 million from banks for structured solutions, a special trade financing. The margin is negotiable when the facility
is used; (iii) we had a specially structured non-recourse factoring arrangement with a bank up to a credit limit of $198.4 million
for our merchant banking activities. We factor certain of our trade receivables upon invoicing, at the inter-bank rate plus a
margin; and (iv) we had foreign exchange credit facilities of $25.8 million with banks.
All of these facilities are either renewable
on a yearly basis or usable until further notice. Many of our credit facilities are denominated in Euros and, accordingly, such
amounts may fluctuate when reported in Canadian dollars.
We continue to evaluate the benefits of
certain facilities that may not have strategic long-term relevance to our business and priorities going forward and may modify
or eliminate additional facilities in the future. We do not anticipate that this will have a material impact on our overall liquidity.
President’s Comments
Michael Smith, President and CEO of the
Company, commented: “Going forward, we intend to expand our merchant banking activities. Our plan to exit unsatisfactory
product lines and geographies, significantly reducing our inventories and receivables and reallocating the capital to more profitable
business units, is proceeding well.”
Mr. Smith concluded: “We
believe these actions and the announcement of the Plan will help reduce expenses and ultimately result in an adequate return
on our equity.”
Stakeholder Communications
Management welcomes any questions you
may have and looks forward to discussing our operations, results and plans with stakeholders and:
|
•
|
all stakeholders are encouraged to read our entire management’s
discussion and analysis for the three months ended March 31, 2017 and our unaudited financial statements for the three months
ended March 31, 2017, which are available under the Company’s profile at www.sedar.com or at www.sec.gov, for a greater
understanding of our business and operations; and
|
|
|
|
|
•
|
any stakeholders who have questions regarding the information in our quarterly report for the
three months ended March 31, 2017 may call our North American toll free line:
1 (844) 331 3343
(International callers:
+1
(604) 662 8873
) to book a conference call with our senior management. Questions may also be emailed to Rene Randall at
rrandall@bmgmt.com.
|
About MFC
MFC is a merchant bank that provides financial
services and facilitates structured trade for corporations and institutions. We specialize in markets that are not adequately
addressed by traditional sources of supply and finance, with an emphasis on providing solutions for small and medium sized enterprises.
We operate in multiple geographies and industries. As a supplement to our operating business, we commit proprietary capital to
assets and projects where intrinsic values are not properly reflected. These investments can take many forms, and our activities
are generally not passive. The structure of each of these opportunities is tailored to each individual transaction.
Disclaimer for Forward-Looking Information
This news release
contains statements which are, or may be deemed to be, “forward-looking statements” which are prospective in
nature, including, without limitation, statements regarding the Company’s business plans, its strategy to reduce
trade receivables and inventories, the completion and anticipated benefits of the Plan, future business prospects and
any statements regarding beliefs, expectations or intentions regarding the future. Forward-looking statements are not based
on historical facts, but rather on current expectations and projections about future events, and are therefore subject to
risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by
the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of
forward-looking words such as “plans”, “expects” or “does not expect”, “is
expected”, “scheduled”, “estimates”, “forecasts”, “projects”,
“intends”, “anticipates” or “does not anticipate”, or “believes”, or
variations of such words and phrases or statements that certain actions, events or results “may”,
“could”, “should”, “would”, “might” or “will” be taken, occur or
be achieved. Such statements are qualified in their entirety by the inherent
risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, revenues, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Important factors that could cause our actual results, revenues, performance or achievements to differ materially from our
expectations include, among other things:(i) periodic fluctuations in financial results as a result of the nature of our
business; (ii) commodities price volatility; (iii) economic and market conditions; (iv) competition in our business segments;
(v) our ability to realize the anticipated benefits of our acquisitions; (vi) additional risks and uncertainties resulting
from strategic investments, acquisitions or joint ventures; (vi) counterparty risks related to our trading and finance
activities; (vii) our ability to complete the Plan as contemplated, or at all, and our ability to realize on the anticipated
benefits of the plan; (viii) operating hazards; and (ix) other factors beyond our control. Such forward-looking statements
should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations,
the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information
about these and other assumptions are set forth in our management’s discussion and analysis for the three months ended
March 31,2017 and our annual report on Form 20-F for the year ended December 31, 2016, each filed with the Securities and
Exchange Commission and Canadian securities regulators.
MFC BANCORP LTD.
FORM 51-102F6
STATEMENT OF EXECUTIVE COMPENSATION
(for financial year ending December
31, 2016)
The following information is presented
by MFC Bancorp Ltd. (the
“Company”
or
“MFC”
) in accordance with Canadian National Instrument
Form 51-102F6 –
Statement of Executive Compensation
and sets forth a summary of compensation for services in all
capacities to the Company and its subsidiaries for the most recently completed financial year in respect of the individuals comprised
of any persons who acted as either the Chief Executive Officer or the Chief Financial Officer of the Company for any part of such
year, and each of the other three most highly compensated executive officers of the Company whose total compensation for the most
recently completed financial year exceeded $150,000, and any individual, if any, who would have satisfied these criteria but for
the fact that the individual was not serving as an executive officer, nor acting in a similar capacity, at the end of the most
recently completed financial year (the
“NEOs”
).
Compensation Discussion and Analysis
In determining executive compensation,
the Compensation Committee aims to encourage and reward performance in order to maintain the position of the Company in a highly
competitive environment. The Compensation Committee endeavours to ensure that the Company’s compensation policies:
|
•
|
attract and retain highly qualified and experienced executives
and managers as well as align the compensation level of each executive to that executive’s level of responsibility;
|
|
|
|
|
•
|
recognize and reward contributions to the success of the
Company as measured by the accomplishment of specific performance objectives; and
|
|
|
|
|
•
|
ensure that a significant proportion of compensation is
at risk and directly linked to the success of the Company.
|
The Compensation Committee
believes that compensation packages for the Company’s executives must be designed to attract and retain executives
critical to the success of the Company, ensure that executive compensation is linked to both individual and corporate
performance and focus executives on business factors that impact shareholder value. The Compensation Committee also considers
the recommendations of the Chief Executive Officer for executives other than the Chief Financial Officer, and relies on the
Company’s Board of Directors’ (the
“Board”
) discussions in its analysis and recommendations.
Compensation for NEOs generally consists of: (i) base salary; (ii) annual incentive bonus; (iii) long term equity incentives
granted on a discretionary basis under the Company’s Equity Incentive Plan (the
“2014 Plan”
); and
(iv) customary perquisites and other executive benefits.
The Company did not award any annual incentive
bonuses to NEOs in respect of fiscal 2016 and it did not grant any long-term equity incentives in 2016 or to date in 2017.
Base Salary
Base salary reflects annual compensation
received by an executive for the position he or she holds and the role he or she performs within the Company. The objective of
the base salary, consistent with market practice, is to provide a portion of compensation as a fixed cash amount. Base salaries
are intended to attract and retain talented executives and to reflect the skill and level of responsibility of an executive, taking
into account market conditions and salaries paid by the Company’s competitors. Base salaries are targeted at median market
values and balanced with relative roles and responsibilities within the Company. The relative base salary of executive officers
reflects their experience, the accountability of their respective roles and the incumbent’s performance in such roles. Base
salaries are benchmarked internally against similar roles and are then adjusted depending on a NEO’s past performance, experience,
individual qualifications, promotion or other change in responsibilities and expected future contributions to the Company.
Annual Incentive Bonuses
The Company’s annual incentive bonuses
are designed to reinforce the Company’s business strategy, as approved by the Board. The objective of awarding annual performance
incentives is to provide a component of compensation that rewards near term performance results of the Company as a whole. Such
incentives focus attention on the achievement of short term profitability with lesser emphasis on revenues. The annual incentive
bonuses provide executives with the opportunity to earn cash incentives based on the achievement of individual performance objectives.
Awards vary as a percentage of base salary and incentive targets for all levels are reviewed periodically to ensure ongoing market
competitiveness. Performance objectives are based on the Company’s business plan for the fiscal year, as approved by the
Board, and are intended to be challenging but achievable.
Annual incentive bonuses are an important
component of the total compensation that may be received by an NEO, primarily because they provide the NEO with the potential
to receive an annual financial reward based on the achievement of specific goals. Annual incentive bonuses are designed to achieve
three important objectives:
|
•
|
to motivate and reward eligible executives who contribute
to successfully achieving Company goals;
|
|
|
|
|
•
|
to provide executives with a competitive total compensation
package; and
|
|
|
|
|
•
|
to attract and retain talented executives.
|
Long-Term Equity Incentives
Long-term equity incentives are awarded
pursuant to the 2014 Plan. The purpose of the 2014 Plan is to promote the long-term success of the Company and the creation of
shareholder value by encouraging the attraction and retention of employees and non-employee directors with exceptional qualifications,
encouraging them to focus on the critical long-range objectives of the Company and linking their interests directly to shareholder
interests through increased share ownership. The 2014 Plan is intended to achieve this purpose by providing for awards to participants
in the form of restricted shares, restricted stock units, performance shares, performance share units, options and/or stock appreciation
rights. The Company believes it is important to have flexibility to grant various types of equity awards to its employees so that
it can react appropriately to the changing environment.
Long-term equity incentives aim to align
pay for performance, as any declines in share price have a negative impact on executive pay, while increases have a positive impact.
Such incentives also aim to mitigate against achieving short-term benefits at the expense of long-term sustainability and shareholder
value.
No long-term equity incentives were awarded
by the Company in 2016 or, to date, in 2017.
Perquisites and Other Executive Benefits
Perquisites and other executive benefits
are structured to be within a reasonably competitive range relating to comparable companies. Perquisites and other executive benefits
generally include: (i) medical and health benefits, including periodic physical consultations, dental and pharmaceutical benefits;
(ii) automobile benefits, including the lease of a vehicle along with maintenance costs thereon; and/or (iii) housing benefits.
The value of perquisites and other executive benefits received by each NEO is included in the “All Other Compensation”
column of the Summary Compensation Table below.
Risk Management
The Company has taken steps to ensure
its executive compensation program does not incent risk outside the Company’s risk appetite. Some of the risk management
initiatives currently employed by the Company are as follows:
|
•
|
appointing a Compensation Committee comprised entirely
of independent directors to oversee the executive compensation program; and
|
|
|
|
|
•
|
use of discretion in adjusting bonus payments (if any)
up or down as the Compensation Committee deems appropriate and recommends.
|
The Board and the Compensation Committee
have discussed and assessed risk related to the Company’s compensation policies and practices and are of the view that,
when looked at in their totality, the Company’s compensation policies and practices do not incentivize risk taking outside
the Company’s risk appetite. The Company does not have any formal policy respecting the purchase by an NEO or a director
of financial instruments.
Compensation Governance
The Company has a Compensation
Committee, comprised entirely of independent directors, being Silke S. Stenger, Indrajit Chatterjee, Jochen Dümler and
Dr. Shuming Zhao. The Compensation Committee is responsible for, among other things, developing the Company’s approach
to executive compensation and periodically reviewing the compensation of the directors. The Compensation Committee reviews
and approves annual salaries, bonuses and other forms and items of compensation for the Company’s senior officers and
employees. Except for plans that are, in accordance with their terms or as required by law, administered by the Board or
another particularly designated group, the Compensation Committee also administers and implements the 2014 Plan, the 1997
Stock Option Plan and the 2008 Incentive Plan and any plans emanating or deriving therefrom (collectively, with the 1997
Stock Option Plan, the
“Prior Plans”
) and all other stock-based and equity-based benefit plans (including
performance-based plans) of the Company, recommends changes or additions to those plans and reports to the Board on
compensation matters. The Board adopted a revised charter for the Compensation Committee on October 26, 2013, a copy of which
is available online at MFC’s website at www.mfcbancorpltd.com. The responsibilities, powers and operation of the
Compensation Committee are detailed in the Compensation Committee’s charter.
The members of the Compensation
Committee have direct experience relevant to executive compensation from their broad business experience and are well-versed
in executive compensation matters. The members similarly bring a wide range of skills and experience that helps them make
decisions in respect of the Company’s compensation policies and practices and assess performance on both an individual
and an organizational level. These skills and experiences include, but are not limited to: industry knowledge; operational
experience; financial knowledge; and international business experience.
Performance Graph
The following chart compares the cumulative
total return assuming a US$100 investment in the common shares of the Company (the
“Common Shares”
) with the
cumulative total return of the Russell 2000 Index over the five most recently completed financial years, assuming that the US$100
investment was made on January 1, 2012 and assuming the reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL
RETURN*
Between MFC Bancorp Ltd. and the
Russell 2000 Index
(United States Dollars)
*US$100 invested on 1/1/12 in stock or
index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2017 Russell Investment
Group. All rights reserved.
|
|
1/1/12
|
31/12/12
|
31/12/13
|
31/12/14
|
31/12/15
|
31/12/16
|
MFC Bancorp Ltd.
|
US$100.00
|
US$125.59
|
US$120.69
|
US$110.69
|
US$30.49
|
US$30.49
|
Russell 2000 Index
|
US$100.00
|
US$116.35
|
US$161.52
|
US$169.43
|
US$161.95
|
US$196.45
|
The performance of the Common Shares as
set out in the graph above does not necessarily indicate future price performance. Executive compensation has generally followed
the trend in shareholder returns. As described above, the Compensation Committee considers various factors in determining the
compensation of the NEOs. The Compensation Committee does not consider the price of the Common Shares to be a strong indicator
of performance.
Option- and Share-Based Awards
Pursuant to the terms of the 2014 Plan
and the Prior Plans, the Compensation Committee currently administers and implements the 2014 Plan and the Prior Plans, including
recommending any changes or additions thereto. The Compensation Committee determines all option- and share-based awards to be
granted pursuant to the 2014 Plan and any special terms, including any exercise price or vesting provisions applicable thereto.
When determining whether to grant new option- or share-based awards to executive officers, the Compensation Committee takes into
account previous grants of such awards.
2014 Equity Incentive Plan
At the Company’s annual and special
meeting of our shareholders held in November 2014, the Company’s shareholders passed a resolution approving the 2014 Plan
to further align the interests of employees and directors with those of MFC shareholders by providing incentive compensation opportunities
tied to the performance of the Common Shares and promoting increased ownership of the Common Shares by such individuals. The 2014
Plan replaced the Prior Plans; provided, however, that each applicable Prior Plan continues to govern prior awards granted under
such Prior Plan until all awards granted under such Prior Plan prior to November 14, 2014 have been exercised, forfeited, cancelled,
expired or otherwise terminated in accordance with the terms thereof.
Pursuant to the terms of the 2014 Plan,
the Board, the Compensation Committee or such other committee as is appointed by the Board to administer the 2014 Plan, may grant
stock options, restricted stock rights, restricted stock, performance share awards, performance share units and stock appreciation
rights under the 2014 Plan, establish the terms and conditions for those awards, construe and interpret the 2014 Plan and establish
the rules for the 2014 Plan’s administration. Such awards may be granted to employees, non-employee directors, officers
or consultants of the Company’s or any affiliate or any person to whom an offer of employment with the Company or any affiliate
is extended. Such committee has the authority to determine which employees, non-employee directors, officers, consultants and
prospective employees should receive such awards.
The maximum number of Common Shares that
may be issuable pursuant to all awards granted under the 2014 Plan is 2,877,018 Common Shares, being 2,000,000 plus the number
of Common Shares available for awards under the Prior Plans as of the effective date of the 2014 Plan. Notwithstanding the foregoing,
the maximum number of shares that may be issued as incentive stock options under the 2014 Plan is 2,000,000. Forfeited, cancelled,
returned and lapsed awards are not counted against the 2,000,000 Common Shares. Any awards granted under the 2014 Plan, or portions
thereof, that are settled in cash and not by issuance of the Common Shares are not counted against the foregoing limits. No awards
had been issued pursuant to the 2014 Plan as at December 31, 2016.
As at December 31, 2016, no awards were
outstanding under the 1997 Stock Option Plan and 200,000 stock options were outstanding under the 2008 Incentive Plan.
Summary Compensation Table
During the fiscal year ended December
31, 2016, the Company paid an aggregate of approximately $3.1 million in cash compensation to its officers, excluding directors’
fees. The following table (and notes thereto) states the name of each NEO, his or her total annual compensation, consisting of
salary, bonus and other annual compensation, and long-term compensation, for example the 2014 Plan and/or Prior Plan awards, for
the three most recently completed financial years of the Company.
SUMMARY COMPENSATION TABLE
(1)
|
|
|
|
|
|
Non-equity
Incentive
Compensation Plan
Compensation
($)
(2)
|
|
|
|
Name and
|
|
Salary
|
Share-
based
Awards
|
Option-
based
Awards
|
Annual
Incentive
|
Long-
term
Incentive
|
Pension
Value
|
All Other
Compensation
|
Total
Compensation
|
Principal Position
|
Year
|
($)
|
($)
|
($)
|
Plans
|
Plans
|
($)
|
($)
|
($)
|
Michael J. Smith
Chairman, Managing
Director, President and
Chief Executive Officer
(3)
|
2016
2015
2014
|
609,593
596,895
432,038
|
—
—
—
|
—
—
—
|
—
135,083
114,492
|
—
—
—
|
—
—
—
|
290,055
(4)
275,278
(4)
2,115,498
(5)
|
899,648
1,007,256
2,662,028
|
Gerardo Cortina
|
2016
|
859,842
|
—
|
—
|
—
|
—
|
—
|
142,866
(4)
|
899,648
|
Former President and
|
2015
|
840,645
|
—
|
—
|
226,328
|
—
|
—
|
123,026
(7)
|
1,189,999
|
Chief Executive Officer
(6)
|
2014
|
589,356
|
—
|
—
|
154,630
|
—
|
—
|
94,146
(7)
|
838,132
|
Samuel Morrow
Chief Financial Officer
and Deputy Chief
Executive Officer
(8)
|
2016
2015
2014
|
377,801
312,332
201,901
|
—
—
—
|
—
—
211,434
(9)
|
—
205,840
111,517
|
—
—
—
|
—
—
—
|
15,468
(10)
3,259
(11)
13,152
(11)
|
393,269
521,431
538,004
|
Ferdinand Steinbauer
Treasurer
(12)
|
2016
2015
2014
|
578,475
462,182
390,864
|
—
—
—
|
—
—
—
|
—
205,840
153,775
|
—
—
—
|
—
—
—
|
—
—
5,578
(13)
|
578,475
668,022
550,217
|
Roland Schulien
|
2016
|
221,187
|
—
|
—
|
—
|
—
|
—
|
—
|
221,187
|
Senior Vice President
|
2015
|
211,973
|
—
|
—
|
14,079
|
—
|
—
|
—
|
226,052
|
Finance, Europe
|
2014
|
209,918
|
—
|
—
|
11,263
|
—
|
—
|
—
|
221,181
|
Notes:
(1)
|
Compensation amounts were translated into Canadian dollars
at the applicable exchange rate at the date of the transactions, or, for practical reasons, the average exchange rates for the
applicable periods, when they approximate the exchange rate as at the dates of the transactions.
|
(2)
|
All awards under MFC’s non-equity incentive compensation
plans are paid during the financial year they were earned.
|
(3)
|
Mr. Smith ceased acting as the Company’s Chief Financial
Officer and Chairman in March 2014 and Chief Executive Officer in May 2014. Mr. Smith was appointed the Company’s Managing
Director in May 2014 and as Chairman in March 2016. Mr. Smith was appointed the Company’s President and Chief Executive
Officer in March 2017 to fill the vacancy created by Mr. Cortina’s resignation.
|
(4)
|
Consists of housing allowances and expenses.
|
(5)
|
Consists of (i) housing allowances of US$0.2 million and
(ii) termination benefits of approximately US$1.8 million which were paid to Mr. Smith in full and final settlement of the Company’s
obligations under Mr. Smith’s former independent consulting agreement with the Company as a result of the occurrence of
a change of control under the terms of such agreement.
|
(6)
|
Mr. Cortina resigned as the Company’s President and
Chief Executive Officer in March 2017.
|
(7)
|
Consists of housing and car allowances and other customary perquisites.
|
(8)
|
Mr. Morrow was appointed as the Company’s Deputy
Chief Executive Officer in May 2014 and as the Company’s Chief Financial Officer in June 2014.
|
(9)
|
The fair value of option-based compensation at the date
of grant is determined using the Black-Scholes-Merton model, with the following assumptions: a weighted average expected life
of 5 years, expected volatility of 34.72%, risk-free interest rate of 1.64% and expected dividend yield of 3.03%. The Company
uses this model because it is a generally accepted valuation model for stock options.
|
(10)
|
Consists of medical and other customary
perquisites.
|
(11)
|
Consists of housing allowances and other customary perquisites.
|
(12)
|
Mr. Steinbauer was appointed as the Company’s Treasurer
in May 2014.
|
Incentive Plan Awards
Outstanding Share-based Awards and
Option-based Awards for NEOs
The following table states the name of
each NEO, the number of options available for exercise, the option exercise price and the expiration date for each option. As
at December 31, 2016 the value of “in-the-money” unexercised options held by the NEOs was $nil.
Name
|
Option-based
Awards
|
Share-based
Awards
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
|
Option
Exercise
Price
(US$)
|
Option
Expiration
Date
(dd/mm/
yyyy)
|
Value
of
Unexercised
In-the-
Money
Options
($)
|
Number
of Shares
or Units of
Shares That
Have Not
Vested
(#)
|
Market
or Payout
Value of
Share-based
Awards
That Have
Not Vested
($)
|
Market
or
Payout Value
of Vested
Share-based
Awards Not
Paid Out or
Distributed
($)
|
Michael J. Smith
Chairman, Managing
Director, President
and Chief Executive
Officer
(1)
|
Nil
|
Nil
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Gerardo Cortina
Former President
and Chief Executive
Officer
(1)
|
Nil
|
Nil
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Samuel Morrow
Chief Financial Officer
and Deputy Chief
Executive Officer
|
100,000
|
8.01
|
02/04/2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Ferdinand Steinbauer Treasurer
|
Nil
|
Nil
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Roland Schulien
Senior Vice President
Finance, Europe
|
Nil
|
Nil
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Notes:
(1)
|
Mr. Smith was appointed the Company’s Chairman in
March 2016. Mr. Smith was appointed as President and Chief Executive Officer of the Company in March 2017 to fill the vacancy
created by Mr. Cortina’s resignation.
|
(2)
|
Mr. Cortina resigned as the Company’s President and
Chief Executive Officer in March 2017.
|
Incentive Plan Awards – Value
Vested or Earned During the Year for NEOs
During the Company’s most recently
completed financial year, no value vested and no amounts were earned in respect of option-based awards, share-based awards and
non-equity incentive plan compensation for NEOs of the Company.
Narrative Discussion
Pension Plan Benefits
As at December 31, 2016, the Company did
not have any defined benefit, defined contribution or deferred compensation plans for any of its NEOs.
Employment Agreements
Michael Smith
In July 2014, the Company entered into
a two-year consulting agreement with Mr. Smith in connection with his appointment as Managing Director of the Company. Pursuant
to the agreement, among other things, the Company agreed to pay Mr. Smith an annual base fee of US$460,000 and an annual discretionary
bonus and provide him certain customary perquisites. The term of this agreement expired in July 2016. As such, the Company and
Mr. Smith are not currently party to a written employment agreement.
Gerardo Cortina
The Company entered into an employment
agreement with Mr. Cortina effective May 2014, in connection with his appointment as the President and Chief Executive Officer
of the Company. Pursuant to the agreement, Mr. Cortina was entitled to an annual base salary of US$650,000 (subject to annual
review), an annual discretionary bonus and certain customary perquisites. The employment agreement was terminated on March 3,
2017 with Mr. Cortina’s resignation as President and Chief Executive Officer of the Company.
Samuel Morrow
The Company entered into an employment
agreement with Mr. Morrow, the Company’s Chief Financial Officer, effective May 2014 (as amended), in connection with his
appointment as an officer of the Company. Pursuant to the agreement, the Company pays Mr. Morrow a current annual base salary
of US$302,400 (subject to annual review), and an annual discretionary bonus and provide him certain customary perquisites.
If Mr. Morrow’s employment is terminated
by the Company other than for just cause or by Mr. Morrow for good reason, he will be entitled to a severance payment, payable
in twelve equal monthly instalments, equal to of the sum of (i) his current annual base salary and (ii) the higher of (A) his
current bonus and (B) the average bonus received by him in the three years prior to termination. Assuming Mr. Morrow’s employment
is terminated by the Company other than for just cause or by Mr. Morrow for good reason, effective December 31, 2016, the Company
would have been required to make a severance payment to Mr. Morrow in the aggregate amount of US$389,714 pursuant to the terms
of his employment agreement. If Mr. Morrow’s employment is terminated by the Company other than for just cause or by Mr.
Morrow for good reason in contemplation of, or within six months of, a change of control, he will be entitled to a lump sum cash
payment equal to one and one quarter times the sum of (i) his current annual base salary and (ii) the average bonus received by
him in the three years prior to termination. Assuming Mr. Morrow’s employment is terminated by the Company other than for
just cause or by Mr. Morrow for good reason in contemplation of, or within six months of, a change of control, effective December
31, 2016, the Company would have been required to make a lump sum cash payment to Mr. Morrow in the aggregate amount of US$487,143
pursuant to the terms of his employment agreement.
Ferdinand Steinbauer
The Company entered into an employment
agreement with Mr. Steinbauer effective June 2014, in connection with his appointment as the Treasurer of the Company. Pursuant
to the agreement, the Company pays Mr. Steinbauer a current annual base salary of €325,000 (subject to annual review) and
an annual discretionary bonus and provide him certain customary perquisites.
If Mr. Steinbauer’s employment is
terminated by the Company other than for just cause or by Mr. Steinbauer for good reason, he will be entitled to a severance payment,
payable in fifteen equal monthly instalments, equal to one and one quarter times the sum of (i) his current annual base salary
and (ii) the higher of (A) his current bonus and (B) the average bonus received by him in the three years prior to termination.
Assuming Mr. Steinbauer’s employment is terminated by the Company other than for just cause or by Mr. Steinbauer for good
reason, effective December 31, 2016, the Company would have been required to make a severance payment to Mr. Steinbauer in the
aggregate amount of €510,399 pursuant to the terms of his employment agreement. If Mr. Steinbauer’s employment is
terminated by the Company other than for just cause or by Mr. Steinbauer for good reason in contemplation of, or within six months
of, a change of control, he will be entitled to a lump sum cash payment equal to one and a half times the sum of (i) his current
annual base salary and (ii) the average bonus received by him in the three years prior to termination. Assuming Mr. Steinbauer’s
employment is terminated by the Company other than for just cause or by Mr. Steinbauer for good reason in contemplation of, or
within six months of, a change of control, effective December 31, 2016, the Company would have been required to make a lump sum
cash payment to Mr. Steinbauer in the aggregate amount of €612,479 pursuant to the terms of his employment agreement.
Director Compensation
The following table provides a summary
of compensation, consisting wholly of directors’ fees, paid by the Company during the fiscal year ended December 31, 2016
to the directors of the Company.
DIRECTOR COMPENSATION TABLE
(1)
|
|
|
|
|
Non-equity
|
|
|
|
|
Fees
|
Share-based
|
Option-based
|
Incentive Plan
|
Pension
|
All Other
|
|
|
Earned
|
Awards
|
Awards
|
Compensation
|
Value
|
Compensation
|
Total
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
Dr. Shuming Zhao
|
110,092
|
—
|
—
|
—
|
—
|
—
|
110,092
|
Indrajit Chatterjee
|
103,428
|
—
|
—
|
—
|
—
|
—
|
103,428
|
Silke S. Stenger
|
158,207
|
—
|
—
|
—
|
—
|
—
|
158,207
|
Friedrich Hondl
|
207,295
(2)
|
—
|
—
|
—
|
—
|
—
|
207,295
(2)
|
Jochen
Dümler
(3)
|
146,390
|
—
|
—
|
—
|
—
|
—
|
146,390
|
Notes:
(1)
|
Compensation provided to Mr. Smith, in his capacity as
Managing Director, and Mr. Cortina, in his former capacity as Chief Executive Officer, is disclosed in the table above under the
heading “Summary Compensation Table”.
|
(2)
|
Includes $91,625 paid to, or earned by, Mr. Hondl during
the year ended December 31, 2016 in connection with a retainer and meeting and committee fees relating to his acting as a director
and board committee member for the Company’s regulated bank subsidiary.
|
(3)
|
Mr. Dümler was appointed as a director
in January 2016.
|
Narrative Discussion
A total of $0.7 million was paid to directors
of the Company for services rendered as directors or for committee participation or assignments, during the most recently completed
financial year. The Company’s non-executive directors are each paid an annual fee of US$25,000 and US$2,500 for each directors’
meeting attended as well as additional fees, as applicable, for their respective participation on the Company’s Audit, Nominating
and Corporate Governance and Compensation Committees and, where applicable, for acting as board members for the Company’s
subsdiaries. The Company also reimburses its directors and officers for expenses incurred in connection with their services as
directors and officers.
Incentive Plan Compensation for Directors
Outstanding Share-based Awards and
Option-based Awards for Directors
The following table states the name of
each director, the number of options available for exercise, the option exercise price and the expiration date for each option.
As at December 31, 2016 the value of “in-the-money” unexercised options held by the directors was $nil.
|
|
Option-based Awards
|
Share-based
Awards
|
|
|
|
|
|
|
Market
|
Market or
|
|
|
|
|
|
|
or Payout
|
Payout Value
|
|
Number of
|
|
|
Value of
|
Shares or
|
Value of
|
of Vested
|
|
Securities
|
|
Option
|
Unexercised
|
Units of
|
Share-Based
|
Share-based
|
|
Underlying
|
Option
|
Expiration
|
In-the-
|
Shares That
|
Awards That
|
Awards Not
|
|
Unexercised
|
Exercise
|
Date
|
money
|
Have Not
|
Have Not
|
Paid Out or
|
|
Options
|
Price
|
(dd/mm/
|
Options
|
Vested
|
Vested
|
Distributed
|
Name
|
(#)
|
(US$)
|
yyyy)
|
($)
|
(#)
|
($)
|
($)
|
Dr. Shuming Zhao
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Indrajit Chatterjee
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Silke S. Stenger
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Friedrich Hondl
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Jochen
Dümler
(1)
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Note:
(1)
|
Mr. Dümler was appointed as a director in January
2016.
|
Incentive Plan Awards – Value
Vested or Earned During the Year for Directors
During the Company’s most recently
completed financial year, no value vested and no amounts were earned in respect of option-based awards, share-based awards and
non-equity incentive plan compensation for directors of the Company.
SIGNATURES
Pursuant to the requirements of the
Securities
Exchange Act of 1934
, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MFC BANCORP LTD.
|
|
|
By:
|
/s/
Michael J. Smith
|
|
|
Michael J. Smith
|
|
|
President and Chief Executive Officer
|
|
Date:
|
May 15, 2017
|
|
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