================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 SEPTEMBER 14, 1999 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) ---------- LOUISIANA-PACIFIC CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------- DELAWARE 1-7107 93-0609074 (STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NUMBER) -------------- 111 S.W. FIFTH AVENUE, PORTLAND, OREGON 97204 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) (503) 221-0800 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ================================================================================
Louisiana-Pacific Corporation ("Louisiana-Pacific") hereby amends Item 7 of, and the exhibits to, its Current Report on Form 8-K dated September 14, 1999. Exhibits 2.1, 2.2, 99.1, 99.2, 99.3 and 99.4 listed below were previously filed with Louisiana-Pacific's Current Report dated September 14, 1999 and are not being changed by this amendment. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The financial statements and accountants' report required to be filed by Item 7(a) of Form 8-K are filed herewith as Exhibit 99.5. (b) PRO FORMA FINANCIAL INFORMATION. The pro forma financial information required to be filed by Item 7(b) of Form 8-K is filed herewith as Exhibit 99.6. (c) EXHIBITS. The following exhibits are filed with this report, as amended: 2.1 Amended and Restated Support Agreement, dated August 12, 1999, between Louisiana-Pacific and Forex (incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Louisiana-Pacific on August 18, 1999). 2.2 Amended and Restated Lock-up Agreement, dated August 12, 1999, among Louisiana-Pacific and each of the parties identified in Schedule B thereof (incorporated herein by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by Louisiana-Pacific on August 18, 1999). 23.1 Consent of KPMG LLP. 99.1 Circular Bid, dated August 16, 1999, of the Offeror (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Louisiana-Pacific on August 18, 1999). 99.2 Letter Agreement, dated September 8, 1999, between the Offeror and Bank of America, N.A., together with related Guaranty Agreement by Louisiana-Pacific in favor of Bank of America, N.A. (previously filed). 99.3 Loan Agreement, dated September 10, 1999, between the Offeror and Centric Capital Corporation, together with related Guaranty of Louisiana-Pacific in favor of Centric Capital Corporation (previously filed). 99.4 Press release, dated August 24, 1999, issued by Louisiana-Pacific (previously filed). 99.5 Unaudited Financial Statements of Le Groupe Forex Inc. as at June 30, 1999 and for the six months ended June 30, 1999 and 1998; and Audited Financial Statements of Le Groupe Forex Inc. as at December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and 1996 with Auditors' Report. 99.6 Unaudited Pro Forma Condensed Consolidated Balance Sheet of Louisiana-Pacific Corporation as of June 30, 1999; and Unaudited Pro Forma Condensed Consolidated Statements of Income of Louisiana-Pacific Corporation for the six months ended June 30, 1999 and for the year ended December 31, 1998.
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 hereunto duly authorized. LOUISIANA-PACIFIC CORPORATION By: /s/ Gary C. Wilkerson ---------------------------------- Gary C. Wilkerson Vice President and General Counsel Date: November 29, 1999
EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 2-97014, 33-42276, 33-62944, 333-10987, 333-53695, 333-53715, 333-73157, 333-87771, 333-87775, and 333-87803 of Louisiana-Pacific Corporation of our report dated January 29, 1999, with respect to the financial statements of Le Groupe Forex Inc. appearing in this Current Report on Form 8-K of Louisiana-Pacific Corporation dated September 14, 1999, as amended. /s/ KPMG LLP KPMG LLP Chartered Accountants Val-d'Or, Quebec November 29, 1999
EXHIBIT 99.5 Unaudited Consolidated Financial Statements of LE GROUPE FOREX INC. As at June 30, 1999 and for the six months ended June 30, 1999 and 1998
LE GROUPE FOREX INC. CONSOLIDATED BALANCE SHEET UNAUDITED, PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA (IN THOUSANDS OF CANADIAN DOLLARS) BALANCE SHEET AS AT JUNE 30 1999 - ---------------------------------------------------------------------------------------------- Current assets: Cash 8,423 Short-Term Investments 90,051 Accounts receivable 33,515 Income taxes receivable - Inventories 39,359 Prepaid expenses 2,980 --------------------- $ 174,328 Investments 2,224 Fixed assets 297,206 Other assets 10,137 -------------------------------------- $ 483,895 -------------------------------------- -------------------------------------- Current liabilities: Bank indebtedness - Accounts payable and accrued liabilities 33,158 Income taxes payable 10,519 Current portion of long-term debt 8,612 --------------------- $ 52,289 Long-term debt 196,903 Deferred income taxes 43,746 Shareholders' equity: Convertible debentures 14,983 Capital stock 17,805 Retained earnings 158,169 --------------------- $ 190,957 -------------------------------------- $ 483,895 -------------------------------------- -------------------------------------- - ------------------------------------------------------- ---------------- --------------------- WORKING CAPITAL $ 122,039 - ------------------------------------------------------- ---------------- ---------------------
LE GROUP FOREX INC. CONSOLIDATED STATEMENT OF EARNINGS UNAUDITED, PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA (IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT AMOUNTS PER SHARE) EARNINGS SIX MONTHS ENDED JUNE 30 1999 1998 - --------------------------------------------- ----------------- ---------------- REVENUE: Sales $ 204,548 $ 87,870 Interest 1,348 442 ----------------- ---------------- 205,896 88,312 EXPENSES: Cost of goods sold 111,981 67,354 Selling and administrative expenses 6,257 5,338 Financial expenses 8,437 6,233 Other expenses (revenues) 903 (959) ----------------- ---------------- 127,578 77,966 ----------------- ---------------- EARNINGS BEFORE INCOME TAXES 78,318 10,346 INCOME TAXES: CURRENT 17,318 3,096 DEFERRED 8,292 756 ----------------- ---------------- 25,610 3,852 ----------------- ---------------- NET EARNINGS BEFORE MINORITY INTEREST 52,708 6,494 MINORITY INTEREST (508) ----------------- ---------------- NET EARNINGS $ 52,708 $ 5,986 ----------------- ---------------- NET EARNINGS PER SHARE $ 3.25 $ 0.35 NET EARNINGS PER SHARE FULLY DILUTED $ 2.32 $ 0.29 - --------------------------------------------- ----------------- ----------------
LE GROUP FOREX INC. CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION UNAUDITED, PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA (IN THOUSANDS OF CANADIAN DOLLARS) CHANGES IN FINANCIAL POSITION SIX MONTHS ENDED JUNE 30 1999 1998 - --------------------------------------------- ----------------- ----------------- CASH PROVIDED BY (USED IN): OPERATIONS: NET EARNINGS $ 52,708 $ 5,986 ITEMS NOT INVOLVING CASH: DEPRECIATION OF FIXED ASSETS AND OTHER ASSETS 10,218 6,024 DEFERRED INCOME TAXES 8,292 756 LOSS ON DISPOSAL OF INVESTMENT AND FIXED ASSETS 453 - MINORITY INTEREST - 508 INTEREST ON THE EQUITY COMPONENT (623) (437) OF THE CONVERTIBLE DEBENTURE NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS 11,045 (3,357) ----------------- ---------------- $ 82,093 $ 9,470 INVESTMENTS: ACQUISITION OF FIXED ASSETS (9,734) (2,842) PROCEEDS ON SALE OF FIXED ASSETS - 10 ACQUISITION OF INVESTMENTS (59) (69) PROCEEDS ON SALE OF INVESTMENTS - 18 ACQUISITION OF A MINORITY INTEREST (49,908) (69,500) ACQUISITION OF OTHER ASSETS (1,413) (5,911) DISPOSAL OF OTHER ASSETS - 2,870 ----------------- ---------------- $ (61,114) $ (75,424) FINANCING: LONG-TERM DEBT 46,500 163,835 REPAYMENTS OF LONG-TERM DEBT (2,573) (104,363) ----------------- ---------------- $ 43,927 $ 59,472 INCREASE (DECREASE) IN CASH POSITION 64,906 (6,482) CASH POSITION, BEGINNING OF YEAR 33,568 19,100 ----------------- ---------------- CASH POSITION, END OF YEAR $ 98,474 $ 12,618 ----------------- ---------------- ----------------- ---------------- CASH POSITION: CASH 8,423 11,169 BANK INDEBTEDNESS - (3,150) TEMPORARY INVESTMENTS 90,051 4,599 ----------------- ---------------- $ 98,474 $ 12,618 - --------------------------------------------- ----------------- ----------------
LE GROUPE FOREX INC. Notes to Unaudited Consolidated Financial Statements As at June 30, 1999 and for the six month periods ended June 30, 1999 and 1998 (in thousands of Canadian dollars) 1. These consolidated summary financial statements should be read in conjunction with the consolidated financial statements and the notes thereto as at and for the years ended December 31, 1998, 1997 and 1996 included elsewhere in this report. These consolidated summary financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of the management, necessary to present fairly, in all material respects, the consolidated financial position and results of operations of Le Groupe Forex Inc. ("Forex") and its subsidiaries. Certain amounts have been reclassified to conform to the current period presentation. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. 2. Basic earnings per share are based on the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share include the effects of potentially dilutive common stock equivalents. 3. The preparation of interim financial statements requires the estimation of Forex's effective income tax rate based on estimated annual amounts of taxable income and expenses. These estimates are updated quarterly. 4. On March 31, 1998, Forex acquired the minority interest in each of its subsidiaries Forex St-Michel Inc. and Forex Maniwaki Inc. for a cash consideration of $71,843, including acquisition costs. The excess of the price paid of $14,307 over the book value of the net assets acquired has been allocated to fixed assets. On April 13, 1999, Forex acquired a joint venture partner's 50% interest in its subsidiary Panneaux Chambord Inc. for a total consideration of $63,560, including acquisition costs. Of the total consideration, $52,000 was paid in cash and $11,560 was paid through the issuance of promissory notes. The excess of the price paid of $23,046 over the book value of the net assets acquired has been allocated to fixed assets. 5. Forex is organized along its product lines. The following table sets forth selected segment data for the periods ended June 30, 1999 and 1998: 1999 SIX MONTHS ENDED JUNE 30 - ------------------------------------------------------------------------------------------------------------- CONSOLIDATED OSB LUMBER ALL OTHERS ELIMINATION FINANCIAL STATEMENTS - ------------------------------------------------------------------------------------------------------------- SALES FROM EXTERNAL CUSTOMERS $ 181,424 $ 19,840 $ 3,438 $ (154) $ 204,548 - ------------------------------------------------------------------------------------------------------------- SEGMENT EARNINGS (LOSS) BEFORE INCOME TAXES, DEPRECIATION, INTEREST AND MINORITY INTEREST 85,488 707 13,654 (4,009) 95,840 - ------------------------------------------------------------------------------------------------------------- SEGMENT ASSETS 310,403 33,524 37,850 102,118 483,895 - ------------------------------------------------------------------------------------------------------------- SEGMENT ACQUISITION OF CAPITAL ASSETS 9,470 (217) 481 9,734 - ------------------------------------------------------------------------------------------------------------- -4-
1998 SIX MONTHS ENDED JUNE 30 - ------------------------------------------------------------------------------------------------------------- CONSOLIDATED OSB LUMBER ALL OTHERS ELIMINATION FINANCIAL STATEMENTS - ------------------------------------------------------------------------------------------------------------- SALES FROM EXTERNAL CUSTOMERS $ 74,775 $ 9,362 $ 3,820 $ (87) $ 87,870 - ------------------------------------------------------------------------------------------------------------- SEGMENT EARNINGS (LOSS) BEFORE INCOME TAXES, DEPRECIATION, INTEREST AND MINORITY INTEREST 17,571 (46) 3,918 (874) 20,569 - ------------------------------------------------------------------------------------------------------------- SEGMENT ACQUISITION OF CAPITAL ASSETS 2,217 389 235 2 2,843 - ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30 RECONCILIATION TO NET EARNINGS 1999 1998 ----------------------------------------------------------------------------- SEGMENT EARNINGS BEFORE INCOME TAXES, DEPRECIATION, INTERESTS AND MINORITY INTEREST $ 95,840 $ 20,569 ----------------------------------------------------------------------------- AMORTIZATION OF FIXED ASSETS AND OTHER ASSETS (10,101) (6,024) ----------------------------------------------------------------------------- INTEREST EXPENSES (7,866) (5,600) ----------------------------------------------------------------------------- INTEREST REVENUES 1,348 442 ----------------------------------------------------------------------------- OTHER REVENUES (EXPENSES) (903) 959 ------------------------------- EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST $ 78,318 $ 10,346 ----------------------------------------------------------------------------- -5-
6. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES: The Forex unaudited consolidated summary financial statements were prepared in accordance with generally accepted accounting principles in Canada, which differ in some respects from those applicable in the United States ("U.S."). The following tables set forth the impact of material differences between Canadian GAAP and U.S. GAAP on Forex's unaudited consolidated summary financial statements. (A) CONSOLIDATED STATEMENTS OF EARNINGS: 1999 1998 Net earnings, as reported under Canadian GAAP $52,708 $5,986 Adjustments: Unrealized foreign exchange gain on long-term debt 5,589 163 Foreign exchange contracts (297) (358) Start-up costs 809 2,431 Interest expenses on convertible debentures (575) (444) Amortization of deferred financing costs (31) (31) Deferred income taxes (1,962) (2,944) Stock-based compensation (3,175) (184) Depreciation of fixed assets (585) (220) Deferred income taxes on the above adjustments 1,004 (474) -------- -------- Net earnings in accordance with U.S. GAAP $53,486 $3,925 ======= ====== Net earnings per share under U.S. GAAP: Basic $ 3.32 $ 0.25 Fully diluted $ 2.46 $ 0.23 (B) CONSOLIDATED BALANCE SHEET AS AT JUNE 30, 1999: CANADA UNITED STATES Current assets 174,328 174,328 Investments 2,224 2,121 Fixed assets 297,206 319,666 Other assets 10,137 7,279 Current liabilities 52,289 55,515 Long-term debt 196,903 211,792 Deferred income taxes 43,746 74,132 Shareholders' equity 190,957 161,955 (C) CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION: 1999 1998 ---- ---- Supplemental disclosure: (i) Cash paid during the year for: Interest 8,822 6,329 Income taxes 8,256 (425) (ii) Forex's statements of changes in financial position reconcile the changes in cash, temporary investments, bank indebtedness and bank loan. Under U.S. GAAP, changes in bank indebtedness and bank loan amounting to $335 in 1999 ($2,392 in 1998) would have been classified as financing activities. -6-
(iii) In a portion of 1999 (January 1 to April 13) and 1998, the consolidated statements of financial position in accordance with Canadian GAAP include Forex's proportionate share of activities of Panneaux Chambord Inc. 1999 1998 ---- ---- Operations 12,823 5,184 Investments (571) (318) Financing (181) (1,195) -7-
Consolidated Financial Statements of LE GROUPE FOREX INC. Years ended December 31, 1998, 1997 and 1996
LE GROUPE FOREX INC. Consolidated Financial Statements Years ended December 31, 1998, 1997 and 1996 AUDITORS' REPORT TO THE SHAREHOLDERS...................................... 1 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheet........................................... 2 Consolidated Statement of Earnings................................... 3 Consolidated Statement of Retained Earnings.......................... 4 Consolidated Statement of Changes in Financial Position.............. 5 Notes to Consolidated Financial Statements........................... 6
AUDITORS' REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheet of Le Groupe Forex Inc. as at December 31, 1998 and 1997 and the consolidated statements of earnings, retained earnings and changes in financial position for each of the years in the three year period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1998 and 1997 and the results of its operations and the changes in its financial position for each of the years in the three year period ended December 31, 1998 in accordance with generally accepted accounting principles in Canada. /s/KPMG LLP KPMG LLP Chartered Accountants Val-d'Or, Quebec January 29, 1999 -1-
LE GROUPE FOREX INC. Consolidated Balance Sheet December 31, 1998, with comparative figures for 1997 (In thousands of Canadian dollars) =============================================================================== 1998 1997 - ------------------------------------------------------------------------------- ASSETS Current assets: Cash $ 8,251 $ 5,178 Short-term investments (note 5) 25,652 19,464 Accounts receivable 20,504 12,199 Income taxes receivable -- 4,370 Inventories 40,614 34,486 Prepaid expenses 1,008 639 - ------------------------------------------------------------------------------- 96,029 76,336 Investments (note 6) 2,244 2,425 Fixed assets (note 7) 247,122 236,419 Other assets (note 8) 17,075 13,602 - ------------------------------------------------------------------------------- $362,470 $328,782 =============================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank indebtedness $ -- $ 5,242 Bank loan (note 9) 335 300 Accounts payable and accrued liabilities 23,063 25,123 Income taxes payable 1,457 -- Current portion of long-term debt 4,057 8,251 - ------------------------------------------------------------------------------- 28,912 38,916 Long-term debt (note 10) 167,742 114,357 Deferred income taxes 30,849 17,162 Minority interest -- 57,028 Shareholders' equity: Convertible debentures (note 11) 19,281 18,102 Capital stock (note 12) 9,867 9,867 Retained earnings 105,819 73,350 - ------------------------------------------------------------------------------- 134,967 101,319 Contingent liabilities (note 13) - ------------------------------------------------------------------------------- $362,470 $328,782 =============================================================================== See accompanying notes to consolidated financial statements. -2-
LE GROUPE FOREX INC. Consolidated Statement of Earnings Years ended December 31, 1998, with comparative figures for 1997 and 1996 (In thousands of Canadian dollars, except earnings per share) ==================================================================================== 1998 1997 1996 - ------------------------------------------------------------------------------------ Revenue: Sales $ 228,736 $ 120,748 $ 160,100 Interest 1,423 640 1,580 - ---------------------------------------------------------------------------------- 230,159 121,388 161,680 Cost of goods sold 151,934 111,884 115,386 Selling and administrative expenses 10,746 9,519 10,641 Financial expenses 16,878 4,502 5,237 - ---------------------------------------------------------------------------------- 179,558 125,905 131,264 - ---------------------------------------------------------------------------------- Earnings (loss) before income taxes and minority interest 50,601 (4,517) 30,416 Income taxes (note 3): Current (recovery) 2,758 (3,075) 6,204 Deferred 14,030 1,521 3,135 - ---------------------------------------------------------------------------------- 16,788 (1,554) 9,339 - ---------------------------------------------------------------------------------- Net earnings (loss) before minority interest 33,813 (2,963) 21,077 Minority interest 508 (568) 10,431 - ---------------------------------------------------------------------------------- Net earnings (loss) $ 33,305 $ (2,395) $ 10,646 ================================================================================== Net earnings (loss) per share (note 17) $ 2.05 $ (.19) $ .67 Net earnings (loss) per share fully diluted (note 17) $ 1.51 $ (.19) $ .61 ================================================================================== See accompanying notes to consolidated financial statements. -3-
LE GROUPE FOREX INC. Consolidated Statement of Retained Earnings Years ended December 31, 1998, with comparative figures for 1997 and 1996 (In thousands of Canadian dollars) ======================================================================================= 1998 1997 1996 - --------------------------------------------------------------------------------------- Balance, beginning of year $ 73,350 $ 76,351 $ 72,051 Net earnings (loss) 33,305 (2,395) 10,646 - -------------------------------------------------------------------------------------- 106,655 73,956 82,697 Dividends: Class A and B shares -- -- (6,346) Interest on equity component of convertible debentures net of taxes of $343 (1997 - $231) (note 11) (836) (606) -- - --------------------------------------------------------------------------------------- Balance, end of year $ 105,819 $ 73,350 $ 76,351 ======================================================================================= See accompanying notes to consolidated financial statements. -4-
LE GROUPE FOREX INC. Consolidated Statement of Changes in Financial Position Years ended December 31, 1998, with comparative figures for 1997 and 1996 (In thousands of Canadian dollars) ============================================================================================ 1998 1997 1996 - -------------------------------------------------------------------------------------------- Cash provided by (used in): Operations: Net earnings (loss) $ 33,305 $ (2,395) $ 10,646 Items not involving cash: Depreciation of fixed assets 12,502 7,754 8,199 Amortization of other assets 3,762 1,946 3,477 Amortization of deferred loss on foreign exchange 491 -- -- (Gain) loss on disposal of fixed assets (13) 128 107 Loss on write-down of investment 300 261 -- Loss on write-off of other assets -- 1,301 -- Deferred income taxes 14,030 1,521 3,135 Minority interest 508 (568) 10,431 Interest on the equity component of the convertible debentures (903) (608) -- Net change in non-cash working capital items (11,035) (4,126) (6,896) - ------------------------------------------------------------------------------------------ 52,947 5,214 29,099 Investments: Acquisition of investments (138) (469) (120) Proceeds on sale of investments 19 272 6,562 Acquisition of fixed assets (8,922) (56,348) (87,841) Proceeds on sale of fixed assets 37 304 547 Other assets (1,150) (11,310) (2,382) Acquisition of minority interest (note 2) (71,843) -- -- - ------------------------------------------------------------------------------------------ (81,997) (67,551) (83,234) Financing: Long-term debt 163,836 88,283 26,301 Principal payments on long-term debt (120,318) (55,259) (14,813) Investment by minority interest -- -- 14,120 Dividends paid by a subsidiary to minority interest -- -- (8,150) Issue of convertible debentures, net of costs -- 32,596 -- Deferred income taxes relative to issue costs -- (465) -- Dividends on Class A and B shares -- -- (6,346) - ------------------------------------------------------------------------------------------ 43,518 65,155 11,112 - ------------------------------------------------------------------------------------------ Increase (decrease) in cash position 14,468 2,818 (43,023) Cash position, beginning of year 19,100 20,575 63,598 Cash position, beginning of year Panneaux Chambord inc. (note 21) -- (4,293) -- - ------------------------------------------------------------------------------------------ Cash position, end of year (note 14) $ 33,568 $ 19,100 $ 20,575 ========================================================================================== See accompanying notes to consolidated financial statements. -5-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - ------------------------------------------------------------------------------- Le Groupe Forex Inc. is incorporated under Part 1A of the Quebec Business Corporations Act. The Company manages investments, manufactures finished lumber and OSB structural boards, sells forestry products, operates a helicopter transportation business and manufactures parts for optics and aeronautical lighting equipment. 1. SIGNIFICANT ACCOUNTING POLICIES: (a) Consolidation: These consolidated financial statements include the accounts of the Company and those of its subsidiary Forex St-Michel Inc. and of its joint-venture Panneaux Chambord Inc. On December 1998, Forex Maniwaki Inc. has been liquidated in Forex St-Michel Inc. Panneaux Chambord Inc. is under the joint control of its shareholders; consequently, it is proportionately consolidated in the statements of the company Le Groupe Forex Inc. (b) Inventories: Finished products, logs, raw materials and supplies are valued at the lower of cost or net realizable value. Cost is determined by the average cost method. Wood chips are valued at net realizable value. Parts are valued at the lower of cost or replacement cost. Cost is determined by the first in, first out method or by the average cost method. (c) Foreign exchange: Monetary assets and liabilities in foreign currency are translated using the year-end exchange rate. Transactions included in the statement of earnings are translated using the exchange rate at the date of the transaction. Gains and losses on exchange are included in earnings unless they relate to long-term monetary assets and liabilities in which case they are deferred and amortized over the remaining term of the asset or liability to which they relate. (d) Investments: Investments are carried at cost. Short term investments are carried at the lower of cost or market value. -6-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) =============================================================================== 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (e) Depreciation and amortization: Fixed assets are depreciated over their estimated useful lives according to the following methods, annual rates and periods: ============================================================================================================ Asset Method Rate and period - ------------------------------------------------------------------------------------------------------------ Land improvements Declining balance 10% Buildings Declining balance 5% Office furniture and data processing Declining balance, 10% to 30% equipment straight-line and 3 years Machinery and automotive equipment Declining balance 10% to 30% based on usage and useful lives estimated at 15 years Helicopters Straight-line with a 40% residual value 10% Logging roads Declining balance 7% Timber cutting rights Straight-line 25 years ============================================================================================================ The amortization of other assets is calculated according to the straight-line method over the following periods: ============================================================================================================ Start-up costs 5 years Financing costs Over the term of the debts Other deferred costs 3 years ============================================================================================================ 2. ACQUISITION OF MINORITY INTEREST: On March 31, 1998, the Company has acquired the minority interest in each of its subsidiaries Forex St-Michel Inc. and Forex Maniwaki inc. for a cash consideration of $71,843, including acquisition costs. The excess of the price paid of $14,307 over the book value of the net assets acquired has been allocated to fixed assets. -7-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) ================================================================================ 3. INCOME TAXES: The difference between the effective and basic tax rates results from the following: ========================================================================================= 1998 1997 1996 - ----------------------------------------------------------------------------------------- Federal and provincial basic tax rates 38.0 % 38.0 % 38.0 % Manufacturing and processing tax deductions (7.0)% (7.0)% (7.0)% Others 2.2 % 3.4 % (0.3)% - ----------------------------------------------------------------------------------------- 33.2 % 34.4 % 30.7 % ========================================================================================= The financial statements do not reflect potential tax reductions available through the application of capital losses. These losses amounting to $4,772 are deductible from future capital gains and are available for an indefinite period. 4. INFORMATION FROM THE EARNINGS STATEMENT: ======================================================================================= 1998 1997 1996 - --------------------------------------------------------------------------------------- Depreciation of purchased goodwill $ 87 $ 44 $ 15 Amortization of deferred loss on foreign exchange 491 -- -- Depreciation of fixed assets 12,502 7,754 8,199 Amortization of financing costs 2,341 1,116 1,503 Amortization of other assets 1,334 786 1,959 Interest on long-term debt 12,636 3,014 3,293 ======================================================================================= 5. SHORT-TERM INVESTMENTS: ======================================================================================= 1998 1997 - --------------------------------------------------------------------------------------- Term deposits and accrued interest $ 11,302 $ 19,464 Bankers' acceptances 14,350 -- - --------------------------------------------------------------------------------------- $25,652 $19,464 ======================================================================================= -8-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) ================================================================================ 6. INVESTMENTS: - ----------------------------------------------------------------------------------------------------- 1998 1997 - ----------------------------------------------------------------------------------------------------- Advances to an affiliated company, at prime rate plus 0.5%, without specified repayment term $ 1,661 $ 1,542 Others 583 883 - ----------------------------------------------------------------------------------------------------- $ 2,244 $ 2,425 ===================================================================================================== 7. FIXED ASSETS: =============================================================================================== 1998 1997 - ----------------------------------------------------------------------------------------------- Accumulated Net book Net book Cost depreciation value value - ----------------------------------------------------------------------------------------------- Land $ 1,459 $ -- $ 1,459 $ 1,446 Land improvements 3,659 850 2,809 2,614 Buildings 29,916 3,125 26,791 27,299 Office furniture and data processing equipment 4,206 2,405 1,801 2,183 Machinery and automotive equipment 239,733 37,380 202,353 195,205 Helicopters 5,001 1,087 3,914 3,977 Logging roads 1,923 450 1,473 1,604 Construction in progress 5,092 -- 5,092 594 Timber cutting rights 1,501 71 1,430 1,497 - ----------------------------------------------------------------------------------------------- $292,490 $ 45,368 $247,122 $236,419 =============================================================================================== 8. OTHER ASSETS: ============================================================================================== 1998 1997 - ---------------------------------------------------------------------------------------------- Start-up costs at unamortized cost $ 4,791 $ 9,019 Financing costs at unamortized cost 6,147 4,383 Deferred loss on foreign exchange related to long-term debt 6,085 -- Others 52 200 - ---------------------------------------------------------------------------------------------- $17,075 $13,602 ============================================================================================== -9-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) ================================================================================ 9. BANK LOAN: The Company has an authorized line of credit of $55,000, $335 of which is used as at December 31, 1998, secured by a charge on all the present and future assets of the Company and on the shares of its subsidiary. The interest rate varies in relation to the ratio of debt to earnings before interest, taxes, depreciation and amortization. The maximum interest rate is based on either the Canadian or US prime rate plus 1.5% or on the bankers' acceptance or eurodollar rate plus 2.5%. 10. LONG-TERM DEBT: =========================================================================================================================== 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Debt component of convertible debentures (note 11) $ 13,591 $ 14,494 Term loan (US$101,490), bearing interest at Libor plus 2.75%, repayable in semi-annual contractual defined amounts, due June 30, 2005, secured by a charge on all present and future assets and the shares of its subsidiary (a) (c) (d) 155,615 -- Loan, without interest, payable in annual instalments of $159, maturing June 1, 2000 318 478 Loan, maturing March 1999, payable in monthly instalments of $8, including interest at the rate of 4.38%, secured by a data processing equipment with a book value of $152 127 217 Bank loan, prime rate plus 0.75%, payable in one instalment of $565 and one last instalment of $590, maturing June 1999 (b) 1,155 3,415 Loan, 9.50% fixed rate, payable in monthly instalments of $12 including interest maturing May 2006, secured by an hypothec on an aircraft with a book value of $1,009 949 1,004 Loan, maturing February 2000, payable in monthly instalments of $7 including interest at the rate of 9.70%, secured by automotive equipment with a book value of $47 44 -- First mortgage bonds -- 83,000 Term loan -- 20,000 - --------------------------------------------------------------------------------------------------------------------------- 171,799 122,608 Current portion of long-term debt 4,057 8,251 - --------------------------------------------------------------------------------------------------------------------------- $167,742 $114,357 =========================================================================================================================== -10-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) =============================================================================== 10. LONG-TERM DEBT (CONTINUED): (a) Under the term loan agreement, the Company is limited in respect of its ability to increase its borrowings, to invest in a party, to use the proceeds of a new issue of capital stock, to repay certain debts, and to enter into business combinations, poolings, reorganizations and sell assets. (b) This bank loan is secured by a first ranking moveable hypothec on specific equipment and second and third ranking moveable hypothec on receivables and inventories. (c) The interest rate varies in relation to the ratio of debt to earnings before interest, taxes, depreciation and amortization (ebitda). The maximum interest rate is based on either the US base rate plus 1.5% or the eurodollar rate based on Libor plus 2.5%. (d) The Company has fixed the interest rate on the Libor based rate at 5.81% in respect of 75% of the principal amount of the loan, with a swap that expires in 2005. Instalments on long-term debt for the next five years are: 1999 - $4,057; 2000 - $2,977; 2001 -$2,972; 2002 - $3,111 and 2003 - $32,241. 11. CONVERTIBLE DEBENTURES: ================================================================================================================= Debt Equity 1998 1997 component component Total Total - ----------------------------------------------------------------------------------------------------------------- Convertible unsecured subordinated debentures (net of issue costs of $383) bearing interest at 8%, maturing March 12, 2007, convertible at $7.15 per subordinate Class B share at any time prior to March 12, 2002. Thereafter the debentures will be convertible at $7.90 per subordinate Class B share $ 13,591 $ 19,281 $ 32,872 $ 32,596 ================================================================================================================= Since the provisions of the debentures allow the Company to repay the holders with subordinate Class B shares, the debentures are presented with shareholders' equity net of the debt component and net of issue costs, net of income taxes. The Company calculated the debt component as the present value of the future interest payments discounted at the rate applicable to non-convertible debt at the time the debentures were issued. -11-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) ================================================================================ 12. CAPITAL STOCK: Authorized: Unlimited number of Class A shares, ten votes per share, participating, convertible into subordinate Class B shares on a share-for-share basis, without par value. Unlimited number of subordinate Class B shares, one vote per share, participating, without par value. Issued and paid: ================================================================================= 1998 1997 - --------------------------------------------------------------------------------- 11,176,783 (1997 - 11,181,883) Class A shares $ 6,581 $ 6,584 4,655,549 (1997 - 4,650,449) Class B shares 3,286 3,283 - --------------------------------------------------------------------------------- $ 9,867 $ 9,867 ================================================================================= Conversion: During the year, 5,100 Class A shares have been converted into 5,100 Class B shares. Shares reserved: The Company granted to employees options to purchase 1,625,000 Class B shares at prices ranging from $4.50 to $4.75 per share. These options can be exercised throughout a five year period ending January 31, 2001. The Company granted to a lender an option to purchase 1,000,000 subordinate Class B shares at a price of $4.50 per share. The option is exercisable for 5 years maturing October 10, 2002. The sale, the transfer and the exercise of this option are subject to a first right of refusal in favor of the Company. 13. CONTINGENT LIABILITIES: (a) Le Groupe Forex Inc. is a party to a lawsuit as a codefendant in a claim by First Nations. This claim is contested and management believes it will not have adverse effect on Forex's financial condition. (b) Le Groupe Forex Inc. has appealed a decision against the Company regarding the payment of stumpage rights for the year 1989-90, in an amount of $193 in principal plus interest. The amount has not been recorded in the financial statements. -12-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) ================================================================================ 13. CONTINGENT LIABILITIES (CONTINUED): (c) Some OSB Plants do not fully comply with environmental laws as their emissions are slightly higher than permitted under applicable environmental laws. In order to remediate this problem, the Company will purchase, during the next year, $2,250 of equipment and machinery. 14. CASH POSITION: =================================================================================== 1998 1997 1996 - ----------------------------------------------------------------------------------- Cash position: Cash $ 8,251 $ 5,178 $ -- Short-term investments 25,652 19,464 23,058 Restricted Funds -- -- 5,905 Bank indebtedness -- (5,242) (2,842) Bank loan (335) (300) (5,546) - ----------------------------------------------------------------------------------- $ 33,568 $ 19,100 $ 20,575 =================================================================================== 15. COMMITMENTS: As at December 31, 1998, the Company has signed contracts for the purchase of machinery and equipment for a total of $9,524. 16. RELATED COMPANY TRANSACTIONS: During the year, the Company concluded the following transactions with related companies: ================================================================================================================= 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------- Expenses paid to an affiliated company with respect to staff and others $ 13,720 $ 12,236 $ 13,570 Management fees $ 375 $ 905 $ 1,280 ================================================================================================================= Management is of the opinion that these transactions were undertaken under the same terms and conditions as transactions with non-related parties. -13-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) ================================================================================ 17. NET EARNINGS (LOSS) PER SHARE: The net earnings (loss) per share is calculated based on the net earnings (net loss) for the year of $33,305 (($2,395) in 1997 and $10,646 in 1996) adjusted for the interest on equity component of convertible debentures of $836 ($606 in 1997), divided by the weighted average number of Class A and B shares outstanding during the year, 15,832,332 (15,832,332 in 1997 and 15,832,332 in 1996). The fully diluted net earnings (loss) per share is calculated using the weighted average number of Class B shares which would have been outstanding assuming the additional shares had been issued at the beginning of the year or on the date of issue of the convertible debentures and the outstanding stock options. 18. FINANCIAL INSTRUMENTS: (a) Foreign currency rate risk: The Company realizes a significant portion of its sales in foreign currencies and enters into various types of foreign exchange contracts to manage its foreign exchange risk. The Company does not hold or issue financial instruments for trading purposes. At December 31, 1998, the Company held US$31,250 in forward contracts at an average rate of 1.5415 expiring at various dates to May 1999. The market rate for the forward contracts at December 31, 1998 is 1.5333. (b) Credit risk: The Company does not have a significant exposure to any individual customer or counter party. The Company reviews new customers' credit history before extending credit and conducts regular reviews of its customers' credit performance. The Company may require payment guarantees, such as letters of credit or obtain credit insurance coverage. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends and other information. The Company's short-term investments are mainly with various financial institutions with strong credit ratings and it has established guidelines relative to diversification and maturities to maintain safety and liquidity. The Company has not experienced any losses on its investments. -14-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) =============================================================================== 18. FINANCIAL INSTRUMENTS (CONTINUED): (c) Fair value of financial instruments: The carrying amount of cash, short-term investments, accounts receivable, bank loan and accounts payable approximate the fair value because of the near-term maturity of those instruments; similarly, long-term investments and variable rate debt have a carrying value which approximates their fair value. The fair value of long-term debt was $173,118 (1997, $122,966) as at December 31, 1998 compared to a book value of $171,799 (1997, $122,608). The fair value has been determined by discounting the future cash flows at the rate currently available for debt of similar terms (note 10). (d) Interest rate risk management: The Company has entered into an interest rate swap on its US denominated debt which fixed the interest rate on the debt with the expiring of the debt in 2005. Under the swap, the Company pays a fixed base rate of 5.8133% on 75% of the outstanding principal amount of the US debt from time to time. 19. SEGMENTED INFORMATION: The Company operates three Oriented Strand Board "OSB" plants as well as two sawmills. Their products are used into the residential and commercial construction sector and for repairs and renovations. Four business segments do not meet the quantitative criteria for separate disclosure. These sectors are the sale of forest products, helicopter transportation, manufacturing part of optics and aeronautical lighting equipment and head office. Accounting principles used for segment reporting are the same as those described in the accounting policies section. The Company assesses the performance based on operating income before taxes and minority interest, excluding non recurring gains and losses and foreign exchange gains or losses. The Company is organized along its products lines. -15-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 19. SEGMENTED INFORMATION (CONTINUED): ----------------------------------------------------------------------------------------------------------------------- 1998 ----------------------------------------------------------------------------------------------------------------------- Consolidated financial OSB Lumber All others Elimination statements ----------------------------------------------------------------------------------------------------------------------- Sales from external customers $ 197,603 $ 23,387 $ 7,746 $ - $ 228,736 Intersegment sales - - 13,698 (13,698) - Interest revenues 638 - 785 - 1,423 Segment earnings before income taxes, depreciation, interest and minority interest 69,099 666 11,747 668 82,180 Segment amortization of fixed assets and other assets 12,039 1,988 1,975 262 16,264 Intersegment interest revenues 531 - 4,624 (5,155) - Interest expense 2,820 - 11,717 - 14,537 Intersegment interest expenses 4,624 - 531 (5,155) - Segment assets 253,759 35,569 34,827 38,315 362,470 Segment acquisition of capital assets and other assets 7,357 947 618 - 8,922 ----------------------------------------------------------------------------------------------------------------------- -16-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 19. SEGMENTED INFORMATION (CONTINUED): ----------------------------------------------------------------------------------------------------------------------- 1997 ----------------------------------------------------------------------------------------------------------------------- Consolidated financial OSB Lumber All others Elimination statements ----------------------------------------------------------------------------------------------------------------------- Sales from external customers $ 88,508 $ 26,105 $ 6,135 $ - $ 120,748 Intersegment sales - - 5,047 (5,047) - Interest revenues 328 - 312 - 640 Segment earnings before income taxes, depreciation, interest and minority interest 4,128 3,230 2,413 488 10,259 Segment amortization of fixed assets and other assets 6,459 2,097 1,144 - 9,700 Intersegment interest revenues 1,635 - - (1,635) - Interest expense 2,452 - 934 - 3,386 Intersegment interest expenses 21 - 1,667 (1,688) - Segment assets 262,600 33,344 37,510 (4,672) 328,782 Segment acquisition of capital assets and other assets 62,075 608 804 4,171 67,658 ----------------------------------------------------------------------------------------------------------------------- -17-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 19. SEGMENTED INFORMATION (CONTINUED): ----------------------------------------------------------------------------------------------------------------------- 1996 ----------------------------------------------------------------------------------------------------------------------- Consolidated financial OSB Lumber All others Elimination statements ----------------------------------------------------------------------------------------------------------------------- Sales from external customers $ 127,042 $ 28,418 $ 3,806 $ 834 $ 160,100 Intersegment sales - - 10,096 (10,096) - Interest revenues 2,148 - 308 (876) 1,580 Segment earnings before income taxes, depreciation, interest and minority interest 35,891 3,442 7,478 (877) 45,934 Segment amortization of fixed assets and other assets 8,146 2,226 1,767 (462) 11,677 Intersegment interest revenues 433 - 185 (618) - Interest expense 3,232 380 163 (42) 3,733 Intersegment interest expenses - - 2,285 (2,285) - Segment assets 208,494 36,126 18,198 34,580 297,398 Segment acquisition of capital assets and other assets 86,155 4,115 1,970 (4,399) 87,841 ----------------------------------------------------------------------------------------------------------------------- -18-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 19. SEGMENTED INFORMATION (CONTINUED): Reconciliation to net earnings: ----------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------- Segment earnings before income taxes, depreciation, interests and minority interest $ 82,180 $ 10,259 $ 45,934 Amortization of fixed assets and other assets (16,264) (9,700) (11,677) Interest expenses (14,537) (3,386) (3,733) Amortization of deferred loss on foreign exchange (491) - - Other losses (287) (1,690) (108) ----------------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes and minority interest $ 50,601 $ (4,517) $ 30,416 ----------------------------------------------------------------------------------------------------------------------- Revenue by geographic area are as follows: ----------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------- Canada $ 66,907 $ 32,103 $ 33,803 United States 161,241 85,783 127,877 Overseas 2,011 3,502 - ----------------------------------------------------------------------------------------------------------------------- $ 230,159 $ 121,388 $ 161,680 ----------------------------------------------------------------------------------------------------------------------- -19-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 20. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES: The Company consolidated financial statements are prepared in accordance with generally accepted accounting principles (GAAP) in Canada which differ in some respects from those applicable in the United States (U.S.). The following table sets forth the impact of material differences between Canadian GAAP and U.S. GAAP on the Company's consolidated financial statements. (a) Consolidated statements of earnings: ------------------------------------------------------------------------------------------------------------------ 1998 1997 ------------------------------------------------------------------------------------------------------------------ Net earnings (loss), as reported under Canadian GAAP $ 33,305 $ (2,395) Adjustments: Unrealized foreign exchange loss on long-term debt (i) (6,085) - Forward exchange contracts (ii) 488 (206) Start-up costs (iii) 3,981 (6,137) Interest expenses on convertible debentures (iv) (903) (609) Amortization of deferred financing costs (iv) (61) (52) Deferred income taxes (v) (3,624) 543 Stock-based compensation (vi) (497) - Share in income of a company subject to significant influence (vii) 169 (283) Minority interest (viii) (31) 1,560 Depreciation of fixed assets (v) (713) - Deferred income taxes on the above adjustments (899) 2,218 ------------------------------------------------------------------------------------------------------------------ Net earnings (loss) in accordance with U.S. GAAP $ 25,130 $ (5,361) ------------------------------------------------------------------------------------------------------------------ Net earnings (loss) per share under U.S. GAAP (x): Basic $ 1.59 $ (0.34) Fully diluted 1.27 (0.34) ------------------------------------------------------------------------------------------------------------------ -20-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 20. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES (CONTINUED): (i) Unrealized foreign exchange loss on long-term debt: Under Canadian GAAP, unrealized exchange losses arising from the translation of long-term debt denominated in foreign currencies are deferred and amortized over the remaining life of the related debt. Under U.S. GAAP, these losses would have been included in income and, consequently, no amount would have been deferred in Other assets. (ii) Forward exchange contracts: Under Canadian GAAP, unrealized and realized gains and losses on foreign currency transactions identified as hedges may be deferred as long as there is reasonable assurance that the hedge will be effective. Under U.S. GAAP, deferral is allowed only on foreign currency transactions intended to hedge identifiable firm foreign currency commitments. (iii) Start-up costs: Under Canadian GAAP, certain costs incurred to start up new facility were deferred and amortized over future periods. Under U.S. GAAP, such costs were expensed as incurred. (iv) Convertible debentures: Under Canadian GAAP, the Company's convertible debentures are recorded in part as debt and in part as shareholders' equity. Under U.S. GAAP, the convertible subordinated debentures would be recorded as debt. Consequently, interest expenses and issue costs were adjusted. (v) Deferred income taxes: Under Canadian GAAP, income taxes are provided on the deferral method basis whereas under U.S. GAAP, income taxes are accounted for by liability method. Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. U.S. GAAP adjustments relate primarily to the recording of taxes on the difference between the book value and the tax value of the investment in Panneaux Chambord Inc., income tax consequences resulting from purchase price allocation following business combination accounted for as a purchase and the effect on income taxes as a result of changes in tax rates over the years. -21-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 20. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES (CONTINUED): (a) Consolidated statements of earnings (continued): (vi) Stock-based compensation: In accordance with U.S. GAAP, FAS 123 requires that all transactions in which goods or services are the consideration received for the issuance of equity instruments shall be accounted for based on fair value of the consideration received or the fair value of the equity instruments issued. In 1998, the Company granted to a lender an option to purchase 1,000,000 shares at a price of $4.50 per share. The fair value of the option was estimated at $1,626,000 and accounted for as deferred financing costs. These costs are being amortized over the period of the loan. (vii) Investment in company subject to significant influence: Share in income (loss) of a company subject to significant influence has been adjusted to take into consideration U.S. GAAP adjustment recorded for that company. (viii) Minority interest: Minority interest was adjusted to take into consideration minority interest resulting from the U.S. GAAP adjustments in each of the subsidiaries of the Company. (ix) Effect of proportionate consolidation on the financial statement: The Company has interests in a jointly controlled entity which have been proportionately consolidated in the Company's financial statements under Canadian GAAP. For purposes of U.S. GAAP, this interest would be accounted for by the equity method. Net income, earnings per share and shareholders' equity under U.S. GAAP are not impacted by the proportionate consolidation of this interest in a jointly controlled entity. In 1998 and 1997, the consolidated statements of earnings in accordance with Canadian GAAP include the Company's proportionate share of operations of Panneaux Chambord Inc. ------------------------------------------------------------------------------------------------------------ 1998 1997 ------------------------------------------------------------------------------------------------------------ Revenues $ 47,566 $ 21,648 Cost of goods sold 31,558 21,291 Selling and administrative expenses 470 1,411 Financial expenses 382 324 Income taxes (recovery) 4,799 (438) ------------------------------------------------------------------------------------------------------------ -22-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 20. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES (CONTINUED): (a) Consolidated statements of earnings (continued): (x) Earnings per share: For the purpose of reporting under U.S. GAAP, SFAS No. 128 requires to replace the presentation of primary earnings per share ("EPS") with a presentation of basic EPS. This is consistent with the calculation for Canadian GAAP. The statement also requires dual presentation of basic and fully diluted EPS ( which includes the effect of stock options and convertible debentures having a dilutive impact) for all entities with complex capital structures. In 1997, options and convertible debentures are anti-dilutive. (b) Consolidated statement of changes in financial position: Supplemental disclosure of cash flow information: (i) Cash paid during the year for: ------------------------------------------------------------------------------------------------------------- 1998 1997 ------------------------------------------------------------------------------------------------------------- Interests $ 15,374 $ 2,967 Income taxes 1,301 1,295 ------------------------------------------------------------------------------------------------------------- (ii) The Company's statements of changes in financial position reconcile the changes in cash, temporary investment, bank indebtedness and bank loan. Under the U.S. GAAP, changes in bank indebtedness and bank loan amounting to $5,542 in 1998 ($1,882 in 1997) would have been classified as financing activities. (iii)In 1998 and 1997, the consolidated statements of financial position in accordance with Canadian GAAP include the Company's proportionate share of activities of Panneaux Chambord Inc. ------------------------------------------------------------------------------------------------------------- 1998 1997 ------------------------------------------------------------------------------------------------------------- Operations $ 17,123 $ 5,617 Investments (936) (5,674) Financing (2,260) (2,260) ------------------------------------------------------------------------------------------------------------- -23-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 20. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES (CONTINUED): (c) Consolidated balance sheet: The following summarizes the balance sheet amounts in accordance with U.S. GAAP: ------------------------------------------------------------------------------------------------------------------ 1998 1997 ------------------------------------------------------------------------------------------------------------------ Canada United States Canada United States ------------------------------------------------------------------------------------------------------------------ Current assets (i), (ii) $ 96,029 $ 73,462 $ 76,336 $ 66,001 Investments (i), (iii), (iv) 2,244 40,908 2,425 27,415 Fixed assets (i), (v) 247,122 231,029 236,419 210,516 Other assets (i), (v), (vi) 17,075 7,696 13,602 3,740 Current liabilities (i), (ii) 28,912 20,814 38,916 32,308 Long-term debt (i), (vii) 167,742 186,901 114,357 131,458 Deferred income taxes (i), (v) 30,849 44,614 17,162 18,520 Minority interests (viii) - - 57,028 51,863 Shareholders' equity (ii), (iii), (iv), (v), (vi), (vii) and (viii) 134,967 100,766 101,319 73,523 ------------------------------------------------------------------------------------------------------------------ (i) The Company has interests in a jointly controlled entity which have been proportionately consolidated in the Company's financial statements under Canadian GAAP. For purposes of U.S. GAAP, this interest would be accounted for by the equity method. Net income, earnings per share and shareholders' equity under U.S. GAAP are not impacted by the proportionate consolidation of this interest in a jointly controlled entity. In 1998 and 1997, the consolidated balance sheet in accordance with Canadian GAAP include the Company's proportionate share of assets and liabilities of Panneaux Cambord Inc. ------------------------------------------------------------------------------------------------------------- 1998 1997 ------------------------------------------------------------------------------------------------------------- Current assets $ 22,850 $ 10,335 Fixed assets 25,093 25,903 Other assets 1,628 1,827 Current liabilities (8,462) (6,814) Long-term debt - (1,155) Deferred income taxes (4,841) (4,205) ------------------------------------------------------------------------------------------------------------- -24-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 20. RECONCILIATION BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND IN THE UNITED STATES (CONTINUED): (c) Consolidated balance sheet (continued): (ii) Refer to (a) (ii) above. (iii) Refer to (a) (vii) above. (iv) In accordance with U.S. GAAP, FAS 115 requires that investments available for sale be measured at fair value. Unrealized gains or losses were excluded from earnings and reported in shareholders' equity. (v) Refer to (a) (v) above. (vi) Refer to (a) (i), (iii) and (iv) above. (vii) Refer to (a) (iv) above. (viii) Refer to (a) (viii) above. (d) Consolidated statement of comprehensive income: SFAS 130, "Reporting comprehensive Income", requires that a statement of comprehensive income be displayed with the same prominence as other financial statements. Comprehensive income, which incorporates net income, includes all changes in equity during a period except those resulting from investments by and distributions to owners. There is no requirement to disclose comprehensive income under Canadian GAAP. ------------------------------------------------------------------------------------------------------------------ 1998 1997 ------------------------------------------------------------------------------------------------------------------ Net earnings (loss) in accordance with U.S. GAAP $ 25,130 $ (5,361) Other comprehensive earnings (loss), net of taxes: Unrealized losses on available-for-sale-securities 487 (281) ------------------------------------------------------------------------------------------------------------------ Consolidated comprehensive earnings (loss) $ 25,617 $ (5,642) ------------------------------------------------------------------------------------------------------------------ -25-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 21. PRO FORMA 1996 - PROPORTIONATE CONSOLIDATION: The conditions which had previously enabled Forex to consolidate in its financial statements those of Panneaux Chambord Inc. are not present anymore. Consequently, it was decided that beginning with the year commencing on January 1, 1997, the Company will consolidate Panneaux Chambord Inc. using the proportionate consolidation method. The summarized financial statements hereafter, for the year ended December 31, 1996, present the effect of this change on a pro forma basis: ---------------------------------------------------------------------------------------------------------------------- December 31, 1996 1996 1996 Chambord pro forma ---------------------------------------------------------------------------------------------------------------------- (1) (2) (3) Assets Non-cash working capital item $ 30,616 $ 8,171 $ 22,445 Investments 2,529 40 2,489 Fixed assets 211,503 23,246 188,257 Other assets 6,387 848 5,539 ---------------------------------------------------------------------------------------------------------------------- $ 251,035 $ 32,305 $ 218,730 ---------------------------------------------------------------------------------------------------------------------- Liabilities Long-term debt $ 80,767 $ 5,675 $ 75,092 Deferred income taxes 19,029 2,923 16,106 Minority interest 85,596 28,000 57,596 Shareholders' equity 86,218 - 86,218 ---------------------------------------------------------------------------------------------------------------------- 271,610 36,598 235,012 Cash position 20,575 4,293 16,282 ---------------------------------------------------------------------------------------------------------------------- $ 251,035 $ 32,305 $ 218,730 ---------------------------------------------------------------------------------------------------------------------- 1) Summarized financial statements. 2) Deduct 50% of Chambord. 3) Pro forma on proportionate consolidation basis. -26-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 21. PRO FORMA 1996 - PROPORTIONATE CONSOLIDATION (CONTINUED): ---------------------------------------------------------------------------------------------------------------------- December 31, 1996 1996 1996 Chambord pro forma ---------------------------------------------------------------------------------------------------------------------- (1) (2) (3) Earnings Revenue $ 161,680 $ 32,746 $ 128,934 Expenses 131,264 24,119 107,145 ---------------------------------------------------------------------------------------------------------------------- Earnings before income taxes and minority interest 30,416 8,627 21,789 Income taxes 9,339 2,776 6,563 ---------------------------------------------------------------------------------------------------------------------- Net earnings before minority interest 21,077 5,851 15,226 Minority interest 10,431 5,851 4,580 ---------------------------------------------------------------------------------------------------------------------- Net earnings $ 10,646 $ - $ 10,646 ---------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- Net earnings per share $ 0.67 $ - $ 0.67 Net earnings per share fully diluted $ 0.61 $ - $ 0.61 ---------------------------------------------------------------------------------------------------------------------- 1) Summarized financial statements. 2) Deduct 50% of Chambord. 3) Pro forma on proportionate consolidation basis. -27-
LE GROUPE FOREX INC. Notes to Consolidated Financial Statements, Continued Years ended December 31, 1998, 1997 and 1996 (In thousands of Canadian dollars) - -------------------------------------------------------------------------------- 22. UNCERTAINTY DUE TO YEAR 2000 ISSUE: The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. Date-sensitive systems may recognize the year 2000 as 1900 or some other date, resulting in errors when information using year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 Issue may be experienced before, on, or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range from minor errors to significant systems failure which could affect an entity's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 Issue affecting the entity, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. 23. COMPARATIVE FIGURES: Certain comparative figures have been reclassified to conform with the presentation adopted in the current year. -28-
EXHIBIT 99.6 PRO FORMA FINANCIAL DATA The unaudited pro forma financial statements presented below give effect to the acquisition of LeGroupe Forex Inc. ("Forex") and related financing transactions as if they had been consummated on June 30, 1999, in the case of the Unaudited Pro Forma Condensed Consolidated Balance Sheet, and at the beginning of the periods presented, in the case of the Pro Forma Condensed Consolidated Statements of Income. The Forex historical financial data included in the unaudited pro forma financial statements has been adjusted to conform to generally accepted accounting principles in the United States. The Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 1998 presented below does not give effect to the acquisition by Louisiana-Pacific Corporation ("Louisiana-Pacific") of ABT Building Products Corporation, which was consummated on February 25, 1999, and related financing transactions, or to the buyout by Forex of a joint venture partner's 50% interest in a Forex subsidiary, which was consummated on April 13, 1999. These unaudited pro forma financial statements should be read in conjunction with the consolidated financial statements (including the notes thereto) included in Louisiana-Pacific's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. These unaudited pro forma financial statements are presented for illustrative purposes only and are not necessarily indicative of what Louisiana-Pacific's actual financial position or results of operations would have been had such transactions been consummated on such date or of the financial position or results of operations that may be reported by Louisiana-Pacific in the future.
LOUISIANA-PACIFIC CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (IN MILLIONS OF US DOLLARS) AS OF JUNE 30, 1999 --------------------------------------------------------------------------- PRO FORMA ASSETS L-P FOREX ADJUSTMENTS PRO FORMA ---------------- ---------------- -------------- -------------- Cash and cash equivalents $ 152.9 $ 66.7 $ $ 219.6 Accounts receivable, net 204.2 22.7 226.9 Inventories 239.7 26.7 6.2(c)(d) 272.6 Prepaid expenses 19.6 2.0 21.6 Income tax refunds receivable - - - Deferred income taxes 121.8 - 121.8 ---------------- ---------------- -------------- -------------- Total current assets 738.2 118.1 6.2 862.5 Timber and Timberlands 498.4 1.9 112.8(c)(d) 613.1 Net property, plant and equipment 1,010.9 214.7 68.1(c)(d) 1,293.7 Goodwill, net of amortization 132.9 - 289.7(b) 422.6 Notes receivable from asset sales 403.8 - 403.8 Other assets 30.0 6.3 0.8(c) 37.1 ---------------- ---------------- -------------- -------------- TOTAL ASSETS $ 2,814.2 $ 341.0 $ 477.6 $ 3,632.8 ---------------- ---------------- -------------- -------------- ---------------- ---------------- -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt $ 23.2 $ 5.8 $ 33.5(b) $ 62.5 Short-term notes payable - - - Accounts payable and accrued 270.2 24.7 294.9 liabilities Current portion of contingency reserves 205.0 - 205.0 Income taxes payable 13.4 7.1 20.5 ---------------- ---------------- -------------- -------------- Total current liabilities 511.8 37.6 33.5 582.9 Limited recourse notes payable 396.5 - 396.5 Other debt 181.6 143.5 485.1(a)(b) 810.2 ---------------- ---------------- -------------- -------------- Total long-term debt, excluding Current portion 578.1 143.5 485.1 1,206.7 Contingency reserves, excluding current portion 102.9 - 102.9 Deferred income taxes and other 301.8 50.2 68.7(d) 420.7 Stockholders' equity: 1,319.6 109.7 (109.7)(a)(b) 1,319.6 ---------------- ---------------- -------------- -------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,814.2 $ 341.0 $ 477.6 $ 3,632.8 ---------------- ---------------- -------------- -------------- ---------------- ---------------- -------------- -------------- See notes to unaudited pro forma condensed consolidated information. 1
LOUISIANA-PACIFIC CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS OF US DOLLARS, EXCEPT PER SHARE DATA WHICH ARE IN US DOLLARS) PRO FORMA L-P FOREX ADJUSTMENTS PRO FORMA ------------------------------------------------------------------------- Net Sales $ 2,297.1 $ 122.3 $ $ 2,419.4 ---------------- ---------------- -------------- -------------- COSTS AND EXPENSES: Cost of sales 1,853.8 74.3 6.2(e) 1,934.3 Depreciation, amortization & depletion 185.4 11.9 27.1(c) 224.4 Selling and administrative 183.3 6.9 190.2 Settlements and other unusual items, 47.8 - 47.8 net Interest expense 37.5 8.8 28.2(a)(b) 74.5 Interest Income (24.7) (0.9) (25.6) ---------------- ---------------- -------------- -------------- Total costs and expenses 2,283.1 101.0 61.5 2,445.6 ---------------- ---------------- -------------- -------------- Income (loss) before taxes and minority interest 14.0 21.3 (61.5) 1,132.4 Provision (benefit) for income taxes 15.8 11.1 (16.9)(d) 10.0 Minority interest in income (loss) of consolidated subsidiary (3.8) 0.3 (3.5) Equity in earnings of unconsolidated subsidiary - 7.1 7.1 ---------------- ---------------- -------------- -------------- NET INCOME (LOSS) $ 2.0 $ 17.0 $ (44.6) $ (25.6) ---------------- ---------------- -------------- -------------- ---------------- ---------------- -------------- -------------- NET INCOME (LOSS) PER SHARE BASIC AND DILUTED $ 0.02 $ (0.24) ---------------- -------------- ---------------- -------------- Average shares of common stock (millions) - basic $ 108.4 $ 108.4 ---------------- -------------- ---------------- -------------- Average shares of common stock (millions) - diluted $ 108.6 ---------------- ---------------- See notes to unaudited pro forma condensed consolidated information. 2
LOUISIANA-PACIFIC CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED JUNE 30, 1999 (In millions of US dollars, except per share data which are in US dollars) PRO FORMA L-P FOREX ADJUSTMENTS PRO FORMA --------------------------------------------------------------------------- Net Sales $ 1,368.6 $ 126.4 $ $ 1,495.0 ---------------- ---------------- -------------- -------------- COSTS AND EXPENSES: Cost of sales 999.0 60.5 6.2(e) 1,065.7 Depreciation, amortization & depletion 88.5 7.2 13.6(c) 109.3 Selling and administrative 100.6 3.6 104.2 Settlements and other unusual items, (5.2) - (5.2) net Interest expense 20.1 6.0 14.1(a)(b) 40.2 Interest income (19.2) (0.7) (19.9) ---------------- ---------------- -------------- -------------- Total costs and expenses 1,183.8 76.6 33.9 1,294.3 ---------------- ---------------- -------------- -------------- Income (loss) before taxes and minority interest 184.8 49.8 (33.9) 200.7 Provision (benefit) for income taxes 73.2 16.6 (9.6)(d) 80.2 Minority interest in income (loss) of consolidated subsidiaries (0.5) - (0.5) Equity in earnings of unconsolidated subsidiary - 2.6 2.6 ---------------- ---------------- -------------- -------------- NET INCOME (LOSS) $ 112.1 $ 35.8 $ (24.3) $ 123.6 ---------------- ---------------- -------------- -------------- ---------------- ---------------- -------------- -------------- NET INCOME (LOSS) PER SHARE BASIC AND DILUTED $ 1.05 $ 1.16 ---------------- -------------- ---------------- -------------- AVERAGE SHARES OF COMMON STOCK (MILLIONS) - BASIC $ 106.4 $ 106.4 ---------------- -------------- ---------------- -------------- AVERAGE SHARES OF COMMON STOCK (MILLIONS) - DILUTED $ 106.6 ---------------- ---------------- See notes to unaudited pro forma condensed consolidated information. 3
LOUISIANA-PACIFIC CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The pro forma condensed consolidated balance sheet and the pro forma condensed consolidated income statements are based upon the consolidated financial statements of Le Groupe Forex Inc. and subsidiaries ("Forex"), adjusted to conform to generally accepted accounting principles in the United States, and of Louisiana-Pacific Corporation and subsidiaries ("Louisiana-Pacific"). The pro forma condensed consolidated financial statements have been prepared by Louisiana-Pacific management by applying the purchase accounting method to the acquisition in accordance with generally accepted accounting principles. The pro forma condensed consolidated financial statements may not be indicative of results that actually would have occurred if the proposed acquisition had taken place on the dates indicated, or the actual results to be expected in the future. The accounting policies used in the preparation of the pro forma condensed consolidated financial statements are those of Louisiana-Pacific and Forex as detailed in the notes to their respective audited financial statements for the year ended December 31, 1998. These pro forma condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Louisiana-Pacific and Forex for the year ended December 31, 1998. 2. PRO FORMA ASSUMPTIONS The pro forma condensed consolidated balance sheet gives effect to the acquisition by Louisiana-Pacific of all the outstanding shares of Forex as if the acquisition occurred on June 30, 1999. The pro forma condensed consolidated income statements give effect to the acquisition by Louisiana-Pacific of all the outstanding shares of Forex as if the acquisition had occurred at the beginning of the periods presented. No adjustments have been made to these pro forma condensed consolidated financial statements to reflect the operating synergies that are expected to result from this acquisition or any integration costs which may be incurred. No adjustments have been made to reflect possible favorable tax treatment of certain items associated with this transaction. The Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 1998 does not give effect to the purchase of ABT Building Products, Inc. by Louisiana-Pacific, which was consummated on February 25, 1999, and related financing transactions, or to the buyout by Forex of a joint venture partner's 50% interest in a Forex subsidiary, which was consummated on April 13, 1999. Except where expressed in Canadian dollars, all Canadian dollar amounts have been converted to U.S. dollar amounts on the basis of exchange rates in effect on June 30, 1999 in the pro forma balance sheet and on the basis of the daily average exchange rates in effect during the periods presented in the pro forma statements of income. All dollar amounts are stated in U.S. dollars unless otherwise noted. 4
LOUISIANA-PACIFIC CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 3. PRO FORMA ADJUSTMENTS - BALANCE SHEET The following pro forma adjustments have been made to the unaudited pro forma condensed consolidated balance sheet: (a) Adjustment to reflect the assumed conversion of the debt component of Forex's convertible debentures of $9.2 million into equity. (b) Adjustment to reflect the purchase of Forex shares by Louisiana-Pacific. For each common share of Forex acquired, the holder had the option to receive: Option 1 - Cdn. $33.00 cash. Option 2 - Cdn. $33.00 payable in five installments, together with interest thereon. Option 3 - A combination of Option 1 and Option 2. (c) Adjustment to reflect the estimated fair value of net assets of Forex, with the remainder of the purchase price allocated to goodwill. (d) Adjustment to reflect the estimated deferred tax impact of the increased carrying value of inventory, timber, timberlands and fixed assets. The total purchase price is assumed to be approximately $521.1 million, including $6.0 million of estimated financial advisory fees, printing costs, legal fees, accounting fees and other costs of the transaction. The entire purchase price is assumed to be debt financed by Louisiana-Pacific through a combination of notes payable issued to Forex shareholders and borrowings under bank credit facilities. This total purchase price will be allocated to the assets and liabilities of Forex based upon their estimated fair values. The purchase price of Forex has been allocated to inventories, timber and timberlands and fixed assets based on preliminary estimates of the fair values of those assets. The allocation of the purchase price may change as more information is obtained regarding the fair value of the assets and liabilities of Forex. 4. PRO FORMA ADJUSTMENTS - INCOME STATEMENTS The following pro forma adjustments have been made to the unaudited pro forma condensed consolidated income statement: (a) Adjustment to reflect additional interest expense on the $521.1 million of debt assumed to be incurred in connection with the acquisition. The average interest rate is approximately 6.0% per annum. (b) Adjustment to reflect a reduction in interest expense due to the assumed conversion of the Forex convertible debentures at the beginning of each period presented. 5
(c) Adjustment to reflect the amortization of estimated goodwill resulting from the acquisition over a period of 15 years, the amortization of the portion of the purchase price allocated to timber over a period of 25 years, and the depreciation of the portion of the purchase price allocated to fixed assets based on an average life of approximately 12 years. The amortization of goodwill is assumed to be non-deductible for income tax purposes. (d) Adjustment to reflect the income tax effect of the additional interest expense (as discussed in note 4(a) above) net of the reduction in interest expense (as discussed in note 4(b) above) at an assumed effective income tax rate of 38%. (e) Adjustment to reflect the allocation of the purchase price to value inventories at market value. 6