PFB CORPORATION (TSX:PFB) SPECIAL SITUATIONS … · FINANCIAL FORECASTS PFB Corporation (TSX: ... rigid insulation products and proprietary EPS based ... Advantage ICF System, Insulspan

ACUMEN CAPITAL FINANCE PARTNERS LIMITED | SUITE 700 – 404 – 6th AVENUE SW | CALGARY, AB | T2P 0R9 MAIN PHONE: 403.571.0300 | TOLL FREE: 1.888.422.8636

September 14, 2015

Initiating Coverage on PFB Corporation We are introducing coverage on PFB Corporation, a Calgary based company focused on the manufacturing and

distribution of innovative and high-quality insulating building products throughout North America. PFB is a vertically

integrated manufacturer of expanded polystyrene (EPS) rigid insulation products and proprietary EPS based building

systems. PFB owns and promotes several recognizable and well respected brands in both Canada and the US. PFB is a

market leader within the foamed insulation segment and they hold a dominant position in Canada among the reseller

businesses (e.g. Home Depot, Rona, Lowe’s, etc.).

PFB has seen a resurgence in corporate margins over the past year as a result of several factors, most notable being

the decline in commodity prices. The company’s main input cost is an oil based resin which is manufactured through

a petrochemical plant. This reduction in COGS has led to an expanding set of profitability measures for the company.

Adjusted EBITDA has shown substantial growth in the last year with Q2/15 numbers increasing >196% Y/Y to $4.4MM

(16% adj. EBITDA margin vs 6% LY). The company has over $8MM cash on the balance sheet at the end of Q2/15, up

from $2.7MM in Q2/14.

Strong housing and construction growth in the US, and to a lesser extent Canada, has led to pricing power not seen

since prior to the 2008 market collapse, and has created better project visibility. Growth in US sales is attributed to a

strong custom homes division and the introduction of their products into US based Home Depot stores in the

Ohio/Michigan corridor. Opportunities for further expansion are evident in both Canada and the US via M&A of

existing facilities, with management guiding to a clear capital allocation strategy requiring new expansions to meet a

20% ROA hurdle.

Overall, we think PFB is a very compelling story with several avenues for continued growth. Excellent management,

high insider ownership, strong margins, strict capital allocation and expanding US sales provide the foundation for a

strong name with good upside potential.

We initiate coverage on PFB Corporation (TSX:PFB) with a Speculative Buy recommendation and $13.00/sh target

price.

COMPANY DESCRIPTION: PFB Corporation is a vertically integrated manufacturer of high-quality insulation products across North America. PFB’s core competency is their expertise in expanded polystyrene (EPS) rigid insulation products and proprietary EPS based building systems.

ACUMEN CAPITAL | RESEARCH ENERGY. GROWTH. VALUE.

Brian D. Pow, MBA |VP Research & Equity Analyst | (403) 571-0303 | [email protected] Mike McMeeken |Associate Analyst| (403) 571-0530 | [email protected]

PFB CORPORATION (TSX:PFB) SPECIAL SITUATIONS RESEARCH

Recommendation: Speculative Buy 12-Month Target: $13.00

Implied Total Return: 45%

mailto:[email protected]


September 14, 2015 ACUMEN CAPITAL | RESEARCH IDEAS. GROWTH. OPPORTUNITY.

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Acumen Capital Finance Partners Limited #700, 404 – 6 Avenue SW | Calgary, AB | T2P 0R9| Main Phone: 403-571-0300

FINANCIAL FORECASTS

PFB Corporation (TSX:PFB) ACUMEN CAPITAL PARTNERSAnalyst: Brian D. Pow, MBA (403.571.0303)Associate Analyst: Mike McMeeken (403.571.0530)

Capital Markets Profile Return ProfileYear End 31-Dec Avg Daily Trading Volume Last Price $9.13Stock Exchange Listings TSX (last 30 trading days) 5,796 12-Month Target Price $13.0052 Week Price Range $9.52 - $3.58 Insider Ownership 71.2% Investment Rating SPEC BUYCommon Shares O/S (MM) 6.7 Float (MM) 1.9 Capital Gain 42%Fully Diluted (MM) 6.7 Trading Volume (MM) 5.9 Yield 2.6%Market Cap ($MM) 61.3 TTM Float Turnover 305% Total Implied return 45%Net Debt ($MM) 5.0 Quarterly Dividend 0.06Enterprise Value ($MM) 66.4 Annual Dividend 0.24

Valuation ($MM) 2010 2011 2012 2013 2014 2015F 2016FEnterprise Value/ Adj. EBITDA 12.1x 8.9x 18.7x 12.9x 10.5x 6.0x 5.2xPrice/Sales 0.9x 0.7x 0.7x 0.7x 0.7x 0.6x 0.6xPrice/Equity 45.9x 24.4x 463.4x (131.7x) 66.9x 15.0x 12.2xDebt/Equity 0.2x 0.2x 0.1x 0.3x 0.3x 0.3x 0.3xPrice/Free Cash Flow (215.2x) 17.5x (34.4x) (8.0x) 27.7x 12.9x 7.0xNet Debt/EBITDA (1.8x) (1.2x) (0.4x) 1.1x 0.9x 0.5x (0.0x)

Ratios 2010 2011 2012 2013 2014 2015F 2016FBook Value per Share 6.48 6.64 6.41 6.31 6.35 6.89 7.40

Return on Assets (ROA) 2.1% 3.7% 0.2% -0.7% 1.3% 5.4% 6.1%Return on Equity (ROE) 3.0% 5.6% 0.3% -1.1% 2.2% 8.8% 10.1%Dividend Yield 2.6% 2.6% 2.6% 13.6% 2.6% 2.6% 2.6%Payout Ratio 56.5% 24.7% 118.4% 384.7% 30.3% 20.5% 13.6%Sustainability Ratio 112.1% 45.7% 549.4% 872.4% 71.8% 78.6% 38.8%

Key Metrics ($MM) 2010 2011 2012 2013 2014 2015F 2016FTotal Sales $70.0 $89.2 $82.1 $84.5 $89.9 $99.9 $106.4

Y/Y Growth n/a 27% -8% 3% 6% 11% 6%Normalized Net Income $1.3 $2.5 $0.1 -$0.5 $0.9 $4.1 $5.0

Y/Y Growth n/a 89% -95% -458% -297% 347% 22%Adj. EBITDA 5.5 7.4 3.5 5.2 6.3 11.1 12.73

Y/Y Growth n/a 36% -52% 45% 23% 75% 15%Free Cash Flow -0.3 3.5 -1.8 -7.7 2.2 4.8 8.8

Y/Y Growth n/a -1333% -151% 338% -129% 115% 84%

Key Metrics per Share (FD) 2010 2011 2012 2013 2014 2015F 2016FNormalized Earnings/sh $0.20 $0.37 $0.02 -$0.07 $0.14 $0.61 $0.75Adj. EBITDA/sh 0.83 1.13 0.54 0.77 0.94 1.65 1.90Free Cash Flow/sh -0.04 0.52 -0.27 -1.14 0.33 0.71 1.30

EBITDA Breakdown ($MM) 2010 2011 2012 2013 2014 2015F 2016FNet Income (loss) 1.4 3.2 0.1 6.8 0.9 4.1 5.0

Income tax (Recovery) 0.7 1.2 -0.4 0.9 0.4 1.7 2.3Net Finance Costs 0.5 0.5 0.5 1.0 1.2 1.2 1.2Non-Cash Charges 2.9 3.3 3.4 3.8 3.7 4.1 4.2

EBITDA 5.5 8.2 3.5 12.5 6.3 11.1 12.7

Abnormal Losses (Gains) -0.1 -0.7 0.0 -7.3 0.0 0.0 0.0Adjusted EBITDA 5.5 7.4 3.5 5.2 6.3 11.1 12.7

Cash Flow Breakdown ($MM) 2010 2011 2012 2013 2014 2015F 2016FNet Cash from Operating Activities 2.8 6.6 1.4 2.2 5.3 7.9 11.9

less: Maintenance Capex 1.5 1.5 1.5 1.5 1.5 1.5 1.5

less: Dividends 1.6 1.6 1.6 8.3 1.6 1.6 1.6

Free Cash Flow -0.3 3.5 -1.8 -7.7 2.2 4.8 8.8




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COMPANY HISTORY

The company was founded in 1968 and incorporated under the predecessor name Plasti-Fab Ltd. Plasti-Fab is a

vertically integrated manufacturer of expanded polystyrene (EPS) rigid insulation products and proprietary EPS based

building systems. PFB Corporation was incorporated in the Province of Alberta in 2003 and has two wholly owned

subsidiaries, Plasti-Fab Ltd. in Alberta and PFB America Corporation in Delaware. Products are manufactured and

distributed from nine Canadian facilities and four US facilities. PFB established a dividend policy in 1997 and has been

paying a quarterly dividend of $0.06/sh since 2005.

The company has grown both organically and through M&A over the years. PFB’s most recent acquisition of a plant

formerly owned by Knauf USA Polystyrene in Lebanon, Ohio in April 2012, was the next step in a strategy to expand

operations in the US market. Through this acquisition, PFB gained access to an undersupplied market, and has since

started distributing their insulating products throughout Home Depot locations in Ohio-Michigan corridor.

In March 2013, the company closed on a Sale-Leaseback transaction with a publically traded REIT on four of its

Canadian properties. Under the terms of the agreement, the wholly-owned properties were sold, and subsequently

leased back from the purchaser for a term of 20 years. Gross proceeds from the $25.3MM transaction were used to

repay all outstanding bank debt, declare a special dividend of $1.00/sh, and for general corporate purposes. See

appendix I for corporate timeline.

Management

PFB is led by Mr. Alan Smith, who has been the CEO and Chairman of the Board since January 1993. Mr. Smith also

manages Aeonian Capital Corporation which has a substantial stake in PFB with ~44% ownership. Mr. Smith brings

with him a wealth of industry experience, and has historically been involved in the natural resource and technology

sectors. Mr. Smith, and the rest of the PFB team, have been paramount in transitioning the company over the past 20

years, from a small Canadian based insulation business, to a highly successful and diversified growth story with multi-

avenue expansion potential. Management’s goals are clearly aligned with that of the corporation as insiders account

for 71% of total share ownership. See appendix II for full corporate biographies.

PRODUCT OVERVIEW

PFB sells proprietary insulating building products that utilize expanded polystyrene rigid insulation. PFB owns and

promotes several recognizable and well respected brands in both Canada and the US. Canadian brands include: Plasti-

Fab EPS Product Solutions, Advantage ICF System, Insulspan SIPS, and DuroFoam. US brands include: Plasti-Fab EPS

Product Solutions, Insulspan SIPS, and DuroSpan, in addition to a growing custom home and design unit. The custom

home brands include: Riverbend Timber Framing, Precision Craft Log & Timber Homes, M.T.N. Design, Total Home

Solution, Point Zero, and TimberScape. All subsidiaries have a high-degree of integration and are wholly owned. Plasti-

Fab markets its products through a permanent, technically-oriented sales force whose sales efforts are directed at

building owners, designers, engineers, developers, contractors, distributors, wholesalers, retailers, and governments.

Product Solutions

Plasti-Fab EPS Manufactured EPS Resin. Plasti-Fab manufactures EPS resin at its polymer plant located in Crossfield,

Alberta, for exclusive use in its downstream EPS manufacturing operations. PFB is the only fully-integrated company

in North America to make both EPS resin and pre-formed products. Plasti-Fab also sources EPS resin from other

suppliers to supplement internal production requirements (e.g. BASF, Nova Chemicals, and Flint Hills Resources). The

major raw material used in the manufacturing of EPS resin is Styrene Monomer, a downstream derivative of crude oil




Page 4 of 28



(benzene), and represents a significant portion of the company’s total manufacturing cost of the resin. The underlying

price of styrene monomer is denominated in USD currency. Further styrene information is located on pages 9-10.

Plasti-Fab EPS Product Solutions. EPS products are used in a wide range of applications, including: insulation for

residential and commercial construction, geotechnical use, and packaging and display. The EPS products are

manufactured in seven facilities located across Canada and are distributed to customers both directly, or through

construction and building material supply outlets. Products can be grouped into three categories: Block moulded

products, Shape moulded products, and Building Systems’ products. See appendix III for a full breakdown of PFB’s

proprietary building systems’ products.

Advantage ICF System – Insulating Concrete Forms. Designed to build insulated foundations and walls from concrete

in residential and commercial markets. This system consists of two sheets of shape moulded rigid EPS insulation

connected together with a number of integral plastic web connectors. Upon completing the interlocked wall, the cavity

is filled with concrete. The key benefits of this product include higher energy efficiency, lower utility costs, and flexibly

in design, in addition to being environmentally friendly.

Insulspan - Structural Insulating Panel System (SIPS). Used to create structural walls and roof decks thereby

eliminating the need for trusses. A SIP typically consists of two sheets of OSB laminated (chemically welded) under

pressure to an EPS foam core. The result is a panel with the ability to carry structural loads, which provide higher

effective thermal resistance and lower air infiltration than comparable building systems.

Custom Home Group

Riverbend Timber Framing. Riverbend produces traditional timber frame homes that are highly energy efficient due

to the inclusion of Advantage ICF’s and Insulspan SIPS. Insulspan SIPS creates a strong, energy-efficient building

envelope around the internally exposed timber frame structure. Riverbend timber frames are manufactured in

Blissfield, Michigan with a geographical reach that extends into the Western regions of both Canada and the United

States

Precision Craft Log & Timber Homes. Precision is a designer and producer of luxury log and timber frame homes that

showcase large diameter logs and heavy timbers which range in size from 1,500 to over 6,000 sq ft. The operations

located in Boise, Idaho, have been providing quality manufacturing and professional installation services for over

twenty years. Their product and service offerings include a Total Home Solution package that employs a beginning-to-

end approach.

Point Zero – High Performance Homes. Builds net zero capable high performance homes using advanced energy

efficient techniques that incorporate SIPS and ICF’s, for the energy-conscious client looking for unique and

architecturally superior design.

M.T.N. Design. An exclusive award winning in-house group which provides design services for the PFB Custom Homes

group. M.T.N. Design creates imaginative architecture for specialized building styles starting with initial conceptual

drawings all the way through to detailed construction plans.

TimberScape – Outdoor Living Structures. An extension of the log and timber home brands, providing unique outdoor

designs using large timbers to create amazing outdoor spaces. We review the geographical scope of PFB’s operations

in figure 1 and summarize their principle facilities in appendix IV.




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FIGURE 1 |PFB CORPORATION | NORTH AMERICAN MARKETS

Source: Company Reports, Acumen Capital Partners,

FINANCIALS

PFB’s financials have been trending in a favorable direction for a few years now, with the most pronounced changes

occurring over the last four quarters. Revenues are up 18% Y/Y on a quarterly basis to $27.3MM in Q2/15. The increase

in revenues is attributed to strong market growth, as well as, the rising percentage of US revenues that have worked

out favorably with the appreciation of the US dollar relative to Canada. US revenues have increased 24% Y/Y while the

CAD/USD exchange rate has dropped 18% over that period (from 0.92 to 0.75). In addition to these trends, the

corporation has experienced pricing power for the first time since 2007 and have been able to raise prices of their

products. These factors, combined with a 36% drop in styrene monomer prices over the last year (styrene accounts

for a significant portion of COGS), have led to strong gross margins of 28% in Q2/15 (vs 17% LY).

As mentioned previously, adjusted EBITDA has shown substantial growth in the last year, increasing >196% Y/Y to

$4.4MM (16% EBITDA margin vs 6% LY). Free cash flow, expressed as net cash from operating activities less

maintenance capex and dividends, has also grown considerably over this period, up 52% to $2.7MM in Q2/15. See

figure 2 for the Y/Y changes in corporate profitability.

FIGURE 2 |PFB CORPORATION | Y/Y CHANGES IN PROFITABILITY

Source: Company Reports, Acumen Capital Partners, Figures subject to rounding

LEGEND

MICHIGAN

OHIO

IDAHO

Revenue COGS Gross Margin Adj. EBITDA Free Cash Flow

Q2/14 23,068 19,125 3,943 1,470 1,752

Q2/15 27,316 19,711 7,605 4,353 2,664

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$ (

00

0's

)

Y/Y Changes in Profitability

Q2/14 Q2/15

↑ 52%

↑ 18%

↑ 3%

↑ 93%↑ 196%




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Corporate margins were constrained following the 2008 market crash as the company was not able to adjust pricing

fast enough to account for the increased material costs resulting from the bounce-back in commodity prices. PFB

doesn’t have the ability to hedge input costs as there is no futures market for the key component of COGS – styrene

monomer. While the commodity markets rallied from 2009 onwards, the US housing market and manufacturing

sectors lagged, leaving PFB in no position to raise prices. This led to a prolonged tightening of corporate margins.

However, over that span of time, PFB has been active in expanding markets and growing corporate revenues. We

highlight in figure 3 the growing trend in quarterly revenues since 2010.

FIGURE 3 |PFB CORPORATION | STRONG QUARTERLY REVENUE GROWTH

Source: Company Reports, Acumen Capital Partners, Figures subject to rounding

The Company’s product sales generally follow seasonal trends in the North American construction industry. Sales tend

to decline in late fall and remain slow through the winter months, recovering in spring, with peak volumes normally

experienced between the months of June and October (see figure 4). Therefore, winter weather patterns can

dramatically impact the timing of when products are required to be shipped to customers.

FIGURE 4 |PFB CORPORATION | REVENUE SEASONALITY

Source: Company Reports, Acumen Capital Partners, Figures Subject to Rounding

$0

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Q1 Q2 Q3 Q4

Tota

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s ($

000

's)

Quarterly Revenue Growth

Q1 Q2 Q3 Q4

2015

F

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2010

2011

2012

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2010

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Q1 Q2 Q3 Q4

Pe

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f An

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eve

nu

es

Corporate Revenue Seasonality

Q1 Avg: 18%

Q4 Avg: 25%

Q3 Avg: 30%Q2 Avg: 27%




Page 7 of 28



The US experiences less seasonality than Canada due in part to less dramatic weather changes. Therefore, as the

corporate revenue weighting continues to increase in the US (21% of total revenues in Q2/15 vs 13% in Q2/10),

seasonality will become less of a factor. See figure 5 for PFB’s revenue breakout by country. See appendix V for

historical financial statements.

FIGURE 5 |PFB CORPORATION | REVENUE BREAKDOWN


INDUSTRY

Demand for PFB’s products is impacted by changes in building construction activity, as insulation is an integral

component in all types of structures. Over the years, insulation use has increased on a per building basis, leaving

overall demand highly correlated with construction spending. Insulation demand was dramatically affected by the US

housing market crash in 2008/09 with residential construction dropping 50% between 2006 and 2011, while demand

in non-residential construction dropped 20%. Since 2010, US residential housing starts have recovered and grown at

an average CAGR of 13.2% per year. Both the residential and non-residential construction markets have realized this

turn and have reacted favorably (see figure 6). Recent Bloomberg data shows residential construction spending

increased 16.2% Y/Y in July 2015 and non-residential spending increased 12.7% over the same period.

FIGURE 6 |PFB CORPORATION | US CONSTRUCTION SPENDING

Source: Bloomberg, Acumen Capital Partners

% U

S R

even

ues

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2010 2011 2012 2013 2014 2015F

% U

S R

even

ues

Rev

enu

e ($

MM

)

Revenue Breakdown by Country

Canada US % US Revenues

0.0

0.3

0.6

0.9

1.2

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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US Construction Spending

Non-Residential Residential Residential Housing Starts




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The Canadian market has seen less construction volatility than the US. Although growth hasn’t been as lucrative, the

numbers are trending in the right direction, and housing starts have been increasing at a steady rate of 4.9% per year

since 2009. Over this timeframe, Canadian construction spending has continued to increase reaching $292MM in 2014

from $205MM in 2009. Within construction spending, non-residential accounts for the largest portion (63% of the

total) and has grown at 8.4% per year. Residential construction has grown at 5.7% per year over this span. (See figure

7).

FIGURE 7 |PFB CORPORATION | CANADIAN CONSTRUCTION SPENDING

Source: CMHC, Acumen Capital Partners,

US demand for insulation materials have continued to rally following the housing crash, totaling $7.1B in 2012, but

down from 2006 highs of $8.3B. We outline US insulation demand in figure 8.

FIGURE 8 |PFB CORPORATION | US INSULATION DEMAND

Source: The Freedonia Group, Acumen Capital Partners

Market share for this industry is comprised of three main insulating materials: fiberglass with ~47%, foamed plastic

with ~46%, and mineral wool with ~1.7% of the overall market share. Niche products represent just over 5% of the

market and most commonly include cellulose, perlite, and vermiculite, among others. See figure 9 for the US insulation

demand chart.

0

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Co

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($ m

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s)

Canadian Construction Spending

Non-Residential Residential Residential Housing Starts

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

0

50

100

150

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2006 2007 2008 2009 2010 2011 2012

Y/Y

Ch

an

ge

in

Gro

wth

Bill

ion

Sq

Ft

of

R-1

US Insulation Demand Trends

Billion Sq ft of R-1 Y/Y % Change

32.9%

35.1%

20.3%

11.6%

US Insulation Demand by Market, 2012 ($7.1 Billion)

Industrial & HVAC

Other Markets

Residential Buildings

Commercial Buildings




Page 9 of 28



FIGURE 9 |PFB CORPORATION | US INSULATION DEMAND BY PRODUCT

Source: The Freedonia Group, Acumen Capital Partners

The US insulation market has four major providers; Owens Corning, Dow Chemical, CertainTeed (subsidiary of Saint-

Gobain of France), and Johns Manville (subsidiary of Berkshire Hathaway) which represent 46% of the US market. The

remaining market share can be separated between companies with >$150MM in annual sales (representing 21%) and

companies with <$150MM in sales (33% of the market). PFB competes within, and represents the largest player in the

sub $150MM/year sales market.

PFB sells within the Foamed Plastic segment and competes with all industry participants at different levels of the

organization, with no one competitor representing a significant advantage. PFB is the largest competitor with sales

under $150MM annually, and due to the geographic reach of their business hold a firm grasp as a market leader.

INDUSTRY OUTLOOK

According to independent market research provider Freedonia Group, demand for insulation materials in the US is

projected to grow at a rate of 7.0% per year and reach $10.4B by 2019, from $7.1B in 2012.

Demand for foamed plastic insulation, is also forecasted to grow ~7% per year and reach $4.6 billion by 2017. This

segment has traditionally been utilized more extensively in the nonresidential market, as many builders/designers

elect to use foamed plastic products because of their high R-value. However, the residential market will offer solid

growth prospects going forward, as building code changes require higher insulating qualities in homes. This will boost

the use of these products in spite of their higher costs compared to fiberglass insulation.

Since the economic crisis of 2009, retrofitting has become one of the major sources of new revenue for insulation

providers. Within the consumer market, we are seeing the replacement of older insulation materials with products

that provide superior energy saving qualities. Gains will be boosted further by changes in building codes and

construction practices that require structures to have higher insulating qualities.

Styrene Monomer

A significant cost associated with the manufacturing of foamed plastic insulation is styrene monomer. Liquid styrene

monomer is a downstream derivative of crude oil (benzene) and is available throughout North America and overseas.

Styrene is not sold forward in a futures market, which makes it difficult to anticipate go-forward pricing. However, due

to the refinery process, styrene has reflected the change in refined gasoline prices with strong correlation. In fact,

over the last two and a half years, the correlation between gasoline and styrene prices has been 0.94. See figure 10

below for this historical comparison.

2.2%2.0%

1.7%

1.2%

46.7%

46.2%

US Insulation Demand by Product

Foamed Plastic

Fiberglass

Other Insulation

Mineral Wool

Reflective & Radiant

Cellulose




Page 10 of 28



FIGURE 10 |PFB CORPORATION | STYRENE vs GASOLINE PRICING

Source: Bloomberg, Acumen Capital Partners

Using this correlation, we are able to forecast a range in styrene prices using the current Gasoline futures contract. In

figure 11, we highlight three cases for go-forward styrene cost expectations. Our Best estimate is based on the prior

2.5 year average price of styrene as a percentage of Gasoline (blue dashed line in chart), which shows an average 3

year price expectation of $0.42/pound. The High and Low case price curves represent a range of two standard

deviations from our best estimate. It should be noted that this is not an absolute styrene price forecast. Instead, it is

the strong probability that styrene prices will react in-line with Gasoline futures, and to a larger scale, crude prices.

Although, the recent volatility in the commodity markets has made it very difficult to project go-forward prices with

any amount of confidence, we do not anticipate commodity prices regaining traction in the near-term, as a cloud of

uncertainty remains in the market.

FIGURE 11 |PFB CORPORATION | LOW STYRENE PRICES EXPECTED

Source: Bloomberg, Acumen Capital Partners,

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Pricing Correlation: Styrene vs Gasoline

Gasoline Contract Styrene

Correlation: 0.94

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Gasoline Futures with Implied Styrene Pricing

Gasoline Futures Contract Styrene - Best Estimate

High Case

Low Case

Forecasted 3 Year Styrene PriceBest Estimate: $0.42/Pound




Page 11 of 28



OUTLOOK & GROWTH

PFB is looking to reach $200MM of revenues within 6 years. At the current market growth rate of 7% annually and

forecasted 2015 revenues of $100MM, PFB will have to be active in the M&A market to make-up a shortfall of ~$30-

40MM in revenues. Based on historical acquisitions, it would likely take 2-3 new plants/facilities to make up the

difference.

Historically, the company has followed an acquisition strategy that prices assets on a replacement value basis. In

addition to this, management has stated that they will adhere to a strict capital allocation strategy, whereby new

expansions are done with a 20% ROA threshold. The US market presents the best opportunities for growth, most

notably in retail distribution markets, which has been PFB’s strength in Canada. Canada offers several immediate

acquisition targets, as PFB is noticing transitional ownership changes in the market that present buying opportunities.

On top of M&A growth, PFB has the ability to expand and grow the company organically. We have broken down

growth prospects between the US and Canada and explain which areas provide the largest near-term potential.

US GROWTH

Home Depot expansion in the Ohio/Michigan area is underway, with first shipments to store locations in May 2015.

The company views this current US expansion into Home Depot as being a trial run, with success resulting in the ability

to further expand throughout the US into new markets. Management is encouraged by the initial rollout and is already

ahead of internal expectations. Sales per store in the US is less than in Canada, but the scale of growth is much larger.

To put into perspective, PFB is currently in 55 Canadian Home Depot locations across the country. In contrast, they

are supplying 50 Home Depot locations in the Ohio/Michigan corridor alone. The scale of expansion available through

Home Depot is enormous with over 1,900 locations across the continental US (see figure 12).

FIGURE 12 |PFB CORPORATION | US HOME DEPOT STORE LOCATIONS BY STATE


CANADIAN GROWTH

PFB’s fastest growing segment in Canada is the new and replacement roofing business, with management seeing

continued opportunities to expand. Not only do they provide standard commercial roofing alternatives (e.g. Built Up,

Total US Locations: 1,951




Page 12 of 28



Singly Ply, and Standing Seam Roofing), they are also a major supplier to the market of engineered sloping flat roofs

in Canada. These roofs are typically located on larger structures that require engineered draining systems, such as

warehouses, schools, and hospitals.

Canadian building codes are changing, which present new opportunities for PFB’s insulation in the previously un-

tapped residential markets. Many of the new provisions are targeted towards reducing building energy consumption,

with some of the notable changes including increased minimum R-values of exterior walls, roofs, floors, foundations,

windows, and doors. Of PFB’s core Canadian markets, British Columbia was the first to adopt the new regulations in

January of 2015, with Alberta and Ontario anticipated to follow suit in January 2016. These changes present a

significant opportunity for PFB and their residential products. To date, management has noticed a significant increase

in Insulspan SIPS sales.

PFB’s Geotechnical Applications segment is becoming a more significant part of the company’s go-forward strategy.

The Geotechnical segment is division of Plasti-Fab and involves the use of PFB’s proprietary block moulded product:

Geofoam. Geofoam replaces soil on infrastructure projects (e.g. roads, bridge approach fills, embankments, levees,

berms, and foundations). This division has seen strong growth in recent years, most notably in the Ontario region. The

geotechnical market is fragmented with lots of regional competitors. However, the projects tend to be very large in

scale, minimizing the ability for small regional players to compete with PFB on bids. Management feels they control

over 50% of the market share in Canada and represent a significant player in the US.

On top of organic growth, PFB has benefitted from the decreasing Canadian dollar. In addition to foreign exchange

gains from the growing percentage of revenues that occur in USD, the company has seen a material decrease in both

competitive imports and direct competition coming out of the US over the past year. Although the majority of raw

material costs (eg. styrene monomer and EPS resin) are priced in USD, the uplift in revenues and reduced competition

outweigh the negatives.

FORECASTS

With continued growth in the insulation market, we see top-line sales growth tracking along the industry average of

7% per year. Within our revenue growth assumptions, we anticipate US sales to lead the near-term outlook for PFB

with a 15% growth rate forecasted for 2015 and a 10% rate in 2016. These growth rates are backed by stronger housing

market expansion in the US relative to Canada, and on the perceived strength and growth opportunity of US Home

Depot expansion. We have forecasted Canadian growth at a slower pace than the US, at 10% this year and dropping

to ~5% for 2016. We anticipate a slowdown in the Canadian market going into 2016, with tepid growth projected in

manufacturing and the likelihood of a slowing market due to decreased commodity prices.

We anticipate low styrene costs over the next 3 years, leading to sustainable gross margins of ~25% per year. These

margins are comparable to pre-2007 levels, where PFB last had pricing power and stable input prices. We feel

confident that demand for their products will allow them to dictate pricing and maintain margins, even if a bounce

back in crude oil prices occurs. Corporate income tax rates increased in 2015 and are expected to bump up in early

2016. We are forecasting a ~31% corporate tax rate for 2016 go-forward.

Our current capital expenditure estimates don’t include any future acquisitions. Instead, expenditures are only

forecasted to cover maintenance expense of ~$1.5MM per year, and discretionary expenditures of ~$8.5MM over the

next 5 years. Discretionary expenditures will be timely and take advantage of prevailing f/x rates in the market. These

expenditures include upgrades to equipment and machinery, new product lines, and additional capacity. See figure

13 for projected profitability tables. See appendix VI for forecasted financial statements.




Page 13 of 28



FIGURE 13 |PFB CORPORATION | FORECASTED INCOME STATEMENT / EBITDA / FREE CASH FLOW

Source: Acumen Capital Partners, Company Filings, Figures Subject to Rounding

Sensitivity Analysis

Corporate growth rates and gross margin percentage are the largest drivers in our forecasts. Our current estimates

are using an 11% corporate growth rate in 2015 (6.5% in 2016) and a 22.5% gross margin rate (increasing to 23.5% in

2016). The sensitivities of these inputs on 2016 estimates are as follows:

2% change in corporate growth rates alters: Adj. EBITDA by $0.3MM (or by ~2.5%) Free Cash Flow by $0.4MM (or by ~4.9%)

1% change in gross margin rate alters: Adj. EBITDA by $1.1MM (or by ~8.3%) Free Cash Flow by $1.1MM (or by ~12.3%)

VALUATION

We utilize a blended approach to arrive at our target price that uses a peer based EV/EBITDA multiple and a DCF

analysis. In our view, PFB should trade at a discount to its peer group median valuation given its smaller market cap,

lack of liquidity, and gross margin sensitivity. We employ a 25% reduction to the peer group multiple to account for

these risks, which brings our peer based multiple to 6.2x 2016 EV/EBITDA vs 8.3x observed (see figure 14).

Income Statement ($MM) Q3/15 Q4/15 2015F Q1/16 Q2/16 Q3/16 Q4/16 2016FTotal Revenues 30.0 25.1 99.9 21.3 26.6 31.1 27.4 106.4

Cost of Goods Sold 23.8 19.9 77.5 16.6 20.5 23.7 20.7 81.4Gross Margin 6.1 5.2 22.5 4.7 6.1 7.5 6.7 25.0

Selling Expenses 2.7 2.4 10.0 3.0 2.7 2.8 2.2 10.6Administrative Expenses 1.3 1.4 5.5 1.5 1.5 1.4 1.5 5.9

Income from Operating Activities 2.1 1.4 6.9 0.2 2.0 3.3 3.0 8.5Finance Costs 0.4 0.4 1.4 0.4 0.4 0.4 0.4 1.4Investment Income 0.0 0.0 -0.2 0.0 0.0 0.0 0.0 -0.2

Net Income before tax 1.8 1.1 5.8 -0.1 1.7 3.0 2.7 7.3Income tax (Recovery) 0.5 0.3 1.7 0.0 0.5 0.9 0.8 2.3

Net Income 1.3 0.8 4.1 -0.1 1.2 2.0 1.9 5.0Abnormal Losses (Gains) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Normailized Net Income 1.3 0.8 4.1 -0.1 1.2 2.0 1.9 5.0Other Comprehensive Income 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0

Normalized Net Income & Comprehensive Income 1.3 0.8 5.3 -0.1 1.2 2.0 1.9 5.0

EBITDA Breakdown ($MM) Q3/15 Q4/15 2015F Q1/16 Q2/16 Q3/16 Q4/16 2016FNet Income (loss) 1.3 0.8 4.1 -0.1 1.2 2.0 1.9 5.0

Income tax (Recovery) 0.5 0.3 1.7 0.0 0.5 0.9 0.8 2.3Net Finance Costs 0.3 0.3 1.2 0.3 0.3 0.3 0.3 1.2Non-Cash Charges 1.0 1.2 4.1 1.0 1.0 1.0 1.1 4.2

EBITDA 3.1 2.6 11.1 1.2 3.0 4.3 4.2 12.7Abnormal Losses (Gains) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Adjusted EBITDA 3.1 2.6 11.1 1.2 3.0 4.3 4.2 12.7

Cash Flow Breakdown ($MM) Q3/15 Q4/15 2015F Q1/16 Q2/16 Q3/16 Q4/16 2016FNet Cash from Operating Activities 1.2 4.7 7.9 2.8 0.7 2.5 5.8 11.9

less: Maintenance Capex 0.4 0.4 1.5 0.4 0.4 0.4 0.4 1.5less: Dividends 0.4 0.4 1.6 0.4 0.4 0.4 0.4 1.6

Free Cash Flow 0.4 4.0 4.8 2.1 -0.1 1.8 5.0 8.8




Page 14 of 28



FIGURE 14 |PFB CORPORATION | PEER GROUP

Source: Bloomberg, CapitalIQ, Acumen Capital Partners,

To verify our target multiple, we have shown the past 10 years of PFB’s EV/TTM-EBITDA multiple (see figure 15). PFB

is currently trading at ~4.0x EV/TTM-EBITDA, which falls at the bottom of trading multiples over that period. In fact,

the average EV/TTM-EBITDA multiple for PFB over that time was ~7.0x, indicating a cautious and justified target price

multiple.

FIGURE 15 |PFB CORPORATION | HISTORICAL EV/EBITDA TRADING MULTIPLES


Target Price

Our 12 month target price of $13.00/share is based on a 6.2x 2016 EV/EBITDA multiple and a discounted cash flow

analysis (see figure 16). We place an emphasis on the peer based valuation methodology to account for the volatility

in the DCF assumptions. We provide target price sensitivity tables in figure 17.

FIGURE 16 |PFB CORPORATION | VALUATION SUMMARY


Price

Peer Group Ticker 9/11/2015 2015F 2016F 2017F 2015F 2016F 2017F

Building Products:

STOCK BUILDING SUPPLY HOLDING STCK-US $18.47 $483.6M $564.1M $43.7M $65.8M $77.4M 12.9x 8.6x 7.3x - -

OWENS CORNING OC-US $45.66 $5.4B $7.5B $795.4M $922.9M $1003.0M 9.4x 8.1x 7.4x $0.64 1.4%

Industrial Conglomerates:

CARLISLE COMPANIES INC. CSL-US $99.12 $6.5B $7.2B $0.64B $0.72B $0.82B 11.2x 10.0x 8.8x $0.94 0.9%

THE DOW CHEMICAL COMPANY DOW-US $43.78 $50.7B $70.4B $9.20B $9.58B $10.42B 7.7x 7.4x 6.8x $1.53 3.5%

Median 10.3x 8.3x 7.4x 1.4%

Mean 10.3x 8.5x 7.6x 1.9%

Dividend

Yield

Market

Cap

Enterprise

Value

EBITDA EV/EBITDA Annual

Dividend

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EV/

TTM

-EB

ITD

A M

ult

iple

Historical EV/ TTM-EBITDA Multiple

PFB Corp - EV/ TTM-EBITDA Multiple Average

Valuation Metric FactorImplied 12-month

share priceWeighting

Weighted Average

Valuation

F16E EV/EBITDA 6.2x $11.93 70.0% $8.35

DCF Analysis 7.6x / 13.2% $15.29 30.0% $4.59

Target Price (rounded) $13.00

Multiple Expansion Opportunity




Page 15 of 28



FIGURE 17 |PFB CORPORATION | TARGET PRICE ANALYSIS


RECOMMENDATION

PFB is a compelling story with a proven management team and an excellent suite of products. We see the Company

as an attractive investment for the following reasons:

1. Margin consistency in the near term as oil prices remain at trough levels;

2. Exposure to a growing insulation industry;

3. Valuation that is supported by organic growth alone;

4. Clear opportunity for expansion via M&A in select regions.

We initiate coverage on PFB Corporation (TSX:PFB) with a Speculative Buy recommendation and $13.00/sh target

price.

EV/EBITDA Sensitivity

$11.93 $11.5 $12.1 $12.7 $13.4 $14.0

5.6x $9.68 $10.21 $10.74 $11.28 $11.81

5.9x $10.21 $10.77 $11.33 $11.90 $12.46

6.2x $10.74 $11.33 $11.93 $12.52 $13.11

6.6x $11.28 $11.90 $12.52 $13.14 $13.76

6.9x $11.81 $12.46 $13.11 $13.76 $14.41

2016 EV

Multiple

2016 Adj. EBITDA ($MM)

DCF Sensitivity

WACC WACC

$15.29 15.2% 14.2% 13.2% 12.2% 11.2%

2.0% $12.03 $13.05 $14.27 $15.71 $17.48

2.5% $12.36 $13.45 $14.75 $16.32 $18.25

3.0% $12.71 $13.88 $15.29 $17.00 $19.12

3.5% $13.10 $14.36 $15.88 $17.75 $20.10

4.0% $13.52 $14.88 $16.53 $18.59 $21.23

Long-term

growth rate




Page 16 of 28



RISKS

A commodity price recovery will increase input costs?

o A combination of strong North American construction growth and changing building codes should allow

competitors within the insulation industry to adjust prices in-line with a potential increase in input costs.

The likelihood of this reasoning is reinforced by the assumption that a recovering commodity market will

improve the North American economy, leading to an even stronger building environment.

The Canadian market slows, most notably Alberta?

o With a slowdown in the Canadian economy likely, competitors with diversified operations will be able to

weather the storm. Companies with operations in the US will continue to benefit from a strong

construction environment, regardless of a Canadian pullback. Other factors that should help offset a

slowdown, would be building code changes and retrofitting.

Styrene Shortage?

o PFB has already shown they can mitigate the loss of a key supplier of styrene monomer. When Shell’s

Scotford refinery went down in April of this year, after a problem with the Sulphur recovery unit, the

company was able to source the needed styrene from multiple suppliers. The refinery has since come

back on-stream, but the interruption showcased PFB’s resourcefulness when supply is constrained. By

maintaining relationships over the years, PFB has positioned itself in an enviable spot, as major suppliers

of styrene in Eastern Canada, the Gulf Coast, and China are willing to sell their products at attractive

market prices. The margins from these suppliers are not as lucrative as the Alberta supplier, due to

transportation costs, but savings are still present to pass along the value chain.




Page 17 of 28



APPENDIX I: Corporate Timeline .

February 1968 Originally incorporated in Alberta under the name: Plasti-Fab Ltd.

March 1989 Amalgamation under the Business Corporations Act of Plasti-Fab Ltd. with its subsidiary Morval-

Durofoam Limited and 339381 Alberta Ltd.

May 2003 Acquired full interest in Advantage Wallsystems Inc, and Alberta based company, and their

patented Advantage ICF System for total consideration of ~$1.4MM. PFB had acquired 41.5% of

Advantage in January 2002 for an initial investment of $750K, and acquired the remaining 58.5% in

May 2003 through the issuance of 211,744 common shares at $2.38/sh.

April 2004 Acquired EnerGreen Structural Insulated Panel Company Inc. for total consideration of ~$1.6MM,

consisting of $500K in cash and 200,000 common shares at $5.50/sh. In November 2014, EnerGreen

changed its name it Insulspan Corporation.

October 2004 Insulspan Inc., the newly-formed subsidiary of PFB, acquired all outstanding common shares of

Riverbend Timber Framing Inc., located in the state of Michigan, for consideration of ~$4MM.

Consideration consisted of 800,000 shares at an average price of ~$5.00/sh. The industry leading

timber framing operation provided a niche distribution channel for the newly standardized

Insulspan SIP Systems.

August 2005 Changed the dividend policy from an annual $0.15/sh dividend (payable in March), to quarterly

dividends of $0.06/sh, the first of which to be paid in August.

2006 PFB launched its “Another way to spell Green” marketing campaign, to promote its energy-efficient

insulating building systems.

September 2008 Completed construction of a new manufacturing facility in Crossfield, Alberta for a total cost of

~$9.2MM, of which $1.9MM was incurred in fiscal 2007. Overall expenditures came in below the

budgeted cost of $9.5MM.

February 2011 Completed the acquisition of Precision Craft Group located in Idaho, USA, for total consideration of

~$3.45MM. Total consideration consisted of $2.45MM in cash and $0.97MM of contingent

consideration (166,667 shares at a deemed value of $5.81/sh).

April 2012 Purchased EPS moulding assets located in Lebanon, Ohio. The asset purchase was funded out of

working capital. The assets were not in operation at the time of purchase, and additional

remediations were needed to get the plant up and running. Production from this plant commenced

in November 2012.

December 2012 Announced purchase and sale agreement to sell four of its wholly-owned Canadian properties and

executed separate leasing agreements with the buyer for each property.

March 2013 Closed sale-leaseback transaction with a lease term of twenty years for gross proceeds of $25.3MM.

Proceeds of the sale were used to repay all outstanding bank debt, pay a special dividend of

$1.00/sh to shareholders, and for general working capital purposes.

May 2015 Began distributing products throughout US Home Depot stores in the Ohio/Michigan area.




Page 18 of 28



APPENDIX II: Management and Board of Directors (Source: PFB Corporation Website)

C. Alan Smith – President, CEO and Chairman of the Board

Mr. Smith is a graduate of the University of Alberta with a Bachelor of Commerce and is a member of the Canadian Institute of Chartered Accountants. He was appointed Chairman of the Board and Chief Executive Officer of PFB Corporation in January, 1993. Since 1981, through an affiliated company, Aeonian Capital Corporation has provided equity capital and management to early stage and emerging companies in the natural resources and high technology sectors and, accordingly, Mr. Smith has served as a director of many stock exchange listed companies. Mr. Smith is a member of the World Presidents Organization.

Bruce M. Carruthers – COO and Director

Mr. Carruthers graduated from the Southern Alberta Institute of Technology with a diploma in Business Administration in 1971 and immediately after completing his diploma he joined Plasti-Fab Ltd. His first appointment with Plasti-Fab was Plant Manager and Sales Representative. During his career with the company spanning over 35 years, Mr. Carruthers has held progressively senior positions and has been instrumental in the company’s development to become a significant player in the North American market for expanded polystyrene rigid insulation products. Mr. Carruthers has been a director of PFB Corporation since 1992, and he was appointed Chief Operating Officer of PFB Corporation in March 2007.

Frank B. Baker – Director

Mr. Frank Baker, founder and CEO of Riverbend Timber Framing, Inc. and Insulspan, Inc. began his career as a mechanical engineer in the late 60’s with the Chevrolet division of General Motors. Educated at Kettering University, formerly known as General Motors Institute. Frank started Riverbend Timber Framing in 1979 after 16 years with GM. Mr. Baker is also a charter member and past president of both the Timber Frame Business Council and SIPA (Structural Insulated Panel Association). He was recently re-elected as president of SIPA. Other affiliations include the NAHB, Timber Framers Guild, and Rotary International.

Donald J. Douglas – Director

Mr. Douglas has served as President of United Communities Inc. since it commenced operations in July 1993 and served as President of its predecessor companies, United Inc., United Management Inc. (1991 to 1993) and United Management Ltd. (1984 to 1991). Prior to joining United Management Ltd., Mr. Douglas was President of L.K. Resources Ltd. from 1981 to 1984; Vice-President, Corporate Development of Turbo Resources Ltd. from 1978 to 1980; and prior to that, he was involved in the investment industry. Mr. Douglas has been, and continues to be, a director of numerous investment and management companies in Alberta, including Trafina Energy, Grande Cache Coal Corporation and PFB Corporation. Mr. Douglas holds a Masters of Business Administration degree from IMEDE Management Development Institute in Lausanne, Switzerland and a Bachelor of Commerce degree from the University of Alberta.

John K. Read – Director

Mr. John Read graduated from the University of Saskatchewan in 1970 with a B.Sc. in Mechanical Engineering. Following assignments with oil and gas operating companies, John accepted an offer in 1974 to join a new start up company, Colt Engineering. Over his career with Colt he held various engineering and project management positions, was General Manager of one of the engineering divisions and was the founding General Manager of Cord Projects, Colt’s construction division. In 1983, John assumed the role of President and CEO of the Colt Companies, a position he held until 2006 when he retired. During this time, the Colt Companies became one of Canada’s leading engineering and construction firms with 4,500 employees in Calgary, Edmonton, Sarnia, Toronto and Anchorage, Alaska.

William H. Smith – Corporate Secretary and Director

William (Bill) Smith, Q.C. is a partner of the Calgary Office of McCarthy Tétrault LLP. Bill is involved in the legal aspects of local, national, and international business transactions. He is an advisor to public and private companies, individuals, and corporate boards involved in a wide variety of businesses. Bill has served on the Board of Directors and as Corporate Secretary of PFB Corporation since 1985.

Gordon G. Tallman – Director

Mr. Tallman retired as the Senior Vice-President, Royal Bank, Prairies Region, after a banking career spanning 42 years. He is a member of the Board of Directors/Trustees of Big Rock Brewery Income Trust, ECL Group of Companies Ltd., Investment Saskatchewan Inc., Oilsands Quest Inc., PFB Corporation, Chairman of the Board of CV Technologies, Inc., and Chairman of the Board of Trustees of Enbridge Income Fund. He has also served on the Boards of Canadian Utilities Ltd., Calgary and Gwich’n Development Corporation, Inuvik, NWT.

Edward Kernaghan – Director

Mr. Edward Kernaghan has over 15 years of experience in the financial services business. He held the position of Executive Vice-President at Kernaghan Securities, a firm he started along with his father, Ted Kernaghan, in 2001. He is currently a partner at Kernaghan & Partners and also serves on the board of four TSX Listed Companies. Edward is a graduate of the University of Toronto with a Master of Science in Theoretical Physics, and he has a Bachelor of Science, Honors degree from Queens University.




Page 19 of 28



APPENDIX III: Plasti-Fab Product Groups

Block Moulded Products. In the block moulding process, EPS resin is pre-expanded using steam under controlled conditions to create expanded polystyrene referred to as pre-foam. EPS blocks manufactured in Plasti-Fab’s facilities ranges in sizes ranging up to 1.2 meters square by 4.9 meters long. Following the moulding process, individual blocks are cut into various shapes. Sheet products resulting from the cutting process are then packaged for use by customers in a number of applications including foundations, as well as, floor, wall, and roof insulation. Whole and partial blocks are used in geotechnical engineering applications, such as, under roadways, to create embankments or in lightweight fill applications. Blocks are also sold to customers who further process them into various shapes for construction applications, protective packaging and display applications (e.g. movie sets). Plasti-Fab also processes blocks internally for a number of specific customer applications. Shape Moulded Products. The shape moulding production process is very similar to the block moulding process, except products produced are generally smaller and are often completed in complex shapes. Plasti-Fab only shape moulds proprietary products, the largest of them being its Advantage ICF system. Building Systems’ Products. Plasti-Fab currently has two building systems’ products: the Advantage ICF System and the Insulspan SIPs. The Advantage ICF System consists of two sheets of shape moulded rigid EPS insulation connected together with a number of integral plastic web connectors. The resulting assembly is commonly referred to as an ICF block. Plasti-Fab produces a number of different Advantage ICF System parts including: 90 degree corners; standard blocks; 45-degree corners; and brick ledges. The Advantage ICF system wall is held in place using a job-site constructed bracing system. Upon completing the interlocked wall, the cavity is filled with concrete. Plasti-Fab also markets Insulspan SIPs. A SIP typically consists of two sheets of OSB laminated (chemically welded) under pressure to an EPS foam core. The result is a panel, which has high insulating properties and the ability to carry structural loads. The panels are cut and further processed in a factory environment or on a construction site to create components used in a building envelope system.

APPENDIX IV: Principle Facilities

Location Facilities

Square

Footage

Owned/

Leased

Canada:

Delta, BC EPS Moulding plant and sales office 46,500 Leased

Delta, BC SIPS manufacturing plant and design office 54,000 Leased

Calgary, AB Corporate Office 11,900 Leased

Crossfield, AB Polymer plant 11,000 Leased

EPS Moulding plant and sales office 59,000 Leased

EPS Moulding plant and sales office 80,000 Leased

Technical Centre 3,000 Leased

Edmonton, AB Sales office and distribution warehouse 10,000 Leased

Saskatoon, SK EPS Moulding plant and sales office 18,000 Leased

Winnipeg, MB EPS Moulding plant and sales office 25,000 Owned

Sales office and warehouse 3,000 Leased

Kitchener, ON EPS Moulding plant and sales office 106,000 Owned

Ajax, ON EPS Moulding plant 54,000 Leased

United States:

Blissfield, MI: Insulspan SIPS manufacturing plant 32,000 Owned

Timber Framing manufacturing plant 17,000 Owned

Design centre, sales and administrative

offices and storage facilities16,000 Owned

Boise, ID Design centre, sales and administrative

offices and manufacturing facility27,800 Leased

Lebanon, OH EPS Moulding plant and sales office 90,000 Owned




Page 20 of 28



APPENDIX V.1: Income Statement – Last 5 Years

Income Statement ($MM) 2010 2011 2012 2013 2014Total Revenues 70.0 89.2 82.1 84.5 89.9

Cost of Goods Sold 53.6 70.7 67.3 70.5 73.4Gross Margin 16.4 18.5 14.8 14.1 16.5

Selling Expenses 13.6 14.4 8.0 8.2 9.0Administrative Expenses 0.0 0.0 5.2 5.0 4.9Administrative Expenses - on-time, non-op. 0.0 0.0 1.3 0.4 0.0Other Losses (Gains) 0.2 -0.1 0.2 -1.0 0.1

Income from Operating Activities 2.5 4.2 0.1 1.5 2.6Finance Costs 0.5 0.5 0.5 1.2 1.4Loss (Gain) on sale of Real Estate 0.0 0.0 0.0 -7.3 0.0Contingent Shares - loss 0.0 0.0 -0.1 0.1 0.0Investment Income 0.0 0.0 0.0 -0.2 -0.2Other -0.1 -0.7 0.0 0.0 0.0

Net Income before tax 2.1 4.5 -0.3 7.7 1.3Income tax (Recovery) 0.7 1.2 -0.4 0.9 0.4

Net Income 1.4 3.2 0.1 6.8 0.9Abnormal Losses (Gains) -0.1 -0.7 0.0 -7.3 0.0

Normailized Net Income 1.3 2.5 0.1 -0.5 0.9Foreign Currency Translation Adjustments 0.0 0.0 0.0 -0.1 1.1Unrealized Gain (Loss) on AFS assets (net of Tax) 0.0 0.0 0.0 -0.1 -0.1Defined Benefit PP - Unrealized Gain (Loss) 0.0 0.0 -0.1 0.2 0.0

Normalized Net Income & Comprehensive Income 1.4 2.5 0.1 -0.5 1.9




Page 21 of 28



APPENDIX V.2: Cash Flow Statement – Last 5 Years

Cash Flow Statement ($MM) 2010 2011 2012 2013 2014Operating Activities:

Net Income 1.4 3.2 0.1 6.8 0.9Adjustments in Operating Activities:

Depreciation Expense 2.9 3.3 3.2 3.5 3.5Amortization Expense 0.0 0.0 0.2 0.3 0.2Loss (Gain) on Sale of PP&E 0.0 -0.1 0.0 0.0 0.0Loss (Gain) on sale of Real Estate 0.0 0.0 0.0 -7.3 0.0Defined Benefit Pension Plan -0.1 0.0 -0.1 -0.1 -0.1Contingent Shares - loss 0.0 0.0 -0.1 0.1 0.0Finance expense 0.0 0.0 0.5 1.2 1.4Investment Income 0.0 0.0 0.0 -0.2 -0.2Income tax (recovery) 0.7 0.5 -0.4 0.9 0.4Unrealized Foreign Exchange Gain (Loss) 0.3 -0.2 0.2 -1.1 0.0Other 0.0 -0.7 0.0 0.0 0.0

Funds from Operations 5.3 6.0 3.6 4.1 6.2Changes in non-cash working capital -2.4 0.5 -1.0 -1.3 0.1Unrealized Foreign Exchange Gain 0.0 0.0 -0.1 0.1 0.1∆ in Deferred Operating Lease Obligations 0.0 0.0 0.0 0.0 0.2

Cash from Operating Activities 2.8 6.6 2.6 2.9 6.6Income Taxes Paid 0.0 0.0 -1.2 -0.7 -1.3

Net cash from operating activities 2.8 6.6 1.4 2.2 5.3Investing Activities:

Purchase of property & equipment -1.5 -1.3 -5.9 -0.9 -2.2Purchase of Intangible Assets -0.1 -0.1 -0.3 0.0 0.0Acquisitions 0.0 -2.1 0.0 0.0 0.0Dispositions 0.1 0.1 0.1 9.7 0.1Interest Received 0.0 0.0 0.0 0.1 0.0Distributions Received from Securities 0.0 0.0 0.0 0.1 0.2

Cash Flow from Investing Activities -1.5 -3.4 -6.0 9.0 -1.9Financing Activities:

Proceeds from Leaseback Financing, net of costs 0.0 0.0 0.0 12.4 0.0Long-term debt (decrease) -1.0 -1.6 -0.7 -6.4 0.0Repayment of Finance Lease Obligations 0.0 0.0 -0.3 -0.4 -0.3Proceeds on issue of Common shares 0.3 0.0 0.0 0.0 0.0Finance Costs Paid 0.0 0.0 -0.5 -1.2 -1.4Dividends on Common Shares -1.6 -1.6 -1.6 -8.3 -1.6Payment for buy-back of Common Shares 0.0 -0.1 0.0 -0.1 0.0

Cash Flow from Financing Activities -2.3 -3.3 -3.1 -4.0 -3.4

Cash & Cash Equivalents, Beginning of Period 10.9 9.7 9.5 1.7 8.9∆ in Cash & Cash Equivalents -1.0 -0.1 -7.8 7.1 0.0Unrealized F/X Gain on Cash -0.1 -0.1 0.0 0.1 0.0

Cash & Cash Equivalents, End of Period 9.7 9.5 1.7 8.9 8.9




Page 22 of 28



APPENDIX V.3: Balance Sheet Statement – Last 5 Years

Balance Sheet ($MM) 2010 2011 2012 2013 2014Assets:

Cash & cash equivalents 9.7 9.5 1.7 8.9 8.9Trade Receivables 6.8 8.3 8.3 8.8 8.9Inventories 7.0 7.8 7.8 8.3 8.9Prepaid expenses & deposits 0.7 0.6 0.6 0.7 0.8Other 0.0 0.0 3.5 0.0 0.0

Total Current Assets 24.3 26.2 21.8 26.7 27.5Property, plant & equipment 36.5 37.1 36.4 34.9 34.5Restricted Marketable Securities 0.0 0.0 0.0 2.4 2.2Intangible assets 0.2 1.5 1.5 1.4 1.3Goodwill 0.6 1.7 1.9 2.0 2.1Deferred Income Tax assets 0.6 0.2 0.9 1.6 1.6Other assets 0.2 0.6 0.0 0.0 0.0

Total Assets 62.3 67.3 62.6 68.9 69.2

Liabilities and Shareholders Equity:Trade & other payables 6.1 8.3 7.6 7.0 7.1Deferred revenue 1.5 2.3 1.4 1.9 2.7Income Taxes Payable 0.0 0.6 0.0 1.0 0.5Finance Lease Obligations 0.0 0.2 0.2 0.3 0.3Loans and borrowings 0.9 0.7 5.5 0.0 0.0

Total Current Liabilities 8.6 12.2 14.7 10.1 10.6Long Term Loans and borrowings 7.9 6.4 0.9 0.0 0.0Finance Lease Obligations 0.0 0.2 0.2 14.2 14.1Deferred Operating Lease Obligations 0.0 0.0 0.0 0.0 0.2Accrued Defined Benefit PP 0.0 0.4 0.4 0.1 0.1Deferred Income Tax liabilities 2.3 2.6 2.5 2.2 1.7Other 0.0 1.0 0.9 0.0 0.0

Total Liabilities 18.8 22.7 19.5 26.5 26.6Share capital 20.1 20.1 20.1 21.0 20.9Accumulated other comprehensive income 0.4 0.4 0.0 -0.1 0.9Retained earnings (deficit) 23.0 24.1 23.0 21.5 20.7

Total Equity 43.5 44.6 43.1 42.4 42.6

Total Liabilities and Shareholders Equity 62.3 67.3 62.6 68.9 69.2




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APPENDIX VI.1: Forecasted Cash Flow Statement

Cash Flow Statement ($MM) Q3/15 Q4/15 2015F Q1/16 Q2/16 Q3/16 Q4/16 2016FOperating Activities:

Net Income 1.3 0.8 4.1 -0.1 1.2 2.0 1.9 5.0Adjustments in Operating Activities:

Depreciation Expense 0.9 1.1 3.8 1.0 1.0 1.0 1.1 4.0Amortization Expense 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.2

Loss (Gain) on sale of Real Estate 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0Finance expense 0.4 0.4 1.4 0.4 0.4 0.4 0.4 1.4Investment Income 0.0 0.0 -0.2 0.0 0.0 0.0 0.0 -0.2Income tax (recovery) 0.5 0.3 1.7 0.0 0.5 0.9 0.8 2.3

Funds from Operations 3.1 2.6 11.0 1.2 3.0 4.3 4.2 12.7Changes in non-cash working capital -1.9 2.2 -2.3 1.6 -2.3 -1.8 1.7 -0.9Unrealized Foreign Exchange Gain 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0∆ in Deferred Operating Lease Obligations 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0

Cash from Operating Activities 1.2 4.7 8.7 2.8 0.7 2.5 5.8 11.9Income Taxes Paid 0.0 0.0 -0.8 0.0 0.0 0.0 0.0 0.0

Net cash from operating activities 1.2 4.7 7.9 2.8 0.7 2.5 5.8 11.9Investing Activities:

Purchase of property & equipment -1.8 -1.8 -4.5 -0.8 -0.8 -0.8 -0.8 -3.0Purchase of Intangible Assets -0.1 -0.1 -0.2 -0.1 -0.1 -0.1 -0.1 -0.2Dispositions 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0Distributions Received from Securities 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0

Cash Flow from Investing Activities -1.9 -1.9 -4.5 -0.8 -0.8 -0.8 -0.8 -3.2Financing Activities:

Repayment of Finance Lease Obligations 0.0 0.0 -0.2 0.0 0.0 0.0 0.0 0.0Finance Costs Paid -0.4 -0.4 -1.4 -0.4 -0.4 -0.4 -0.4 -1.4Dividends on Common Shares -0.4 -0.4 -1.6 -0.4 -0.4 -0.4 -0.4 -1.6

Cash Flow from Financing Activities -0.8 -0.8 -3.2 -0.8 -0.8 -0.8 -0.8 -3.1

Cash & Cash Equivalents, Beginning of Period 8.6 7.2 8.9 9.3 10.6 9.7 10.6 9.3∆ in Cash & Cash Equivalents -1.5 2.1 0.1 1.3 -0.9 1.0 4.2 5.6Unrealized F/X Gain on Cash 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0

Cash & Cash Equivalents, End of Period 7.2 9.3 9.3 10.6 9.7 10.6 14.9 14.9




Page 24 of 28



APPENDIX VI.2: Forecasted Balance Sheet Statement

Balance Sheet ($MM) Q3/15 Q4/15 2015F Q1/16 Q2/16 Q3/16 Q4/16 2016FAssets:

Cash & cash equivalents 7.2 9.3 9.3 10.6 9.7 10.6 14.9 14.9Trade Receivables 13.4 11.2 11.2 9.6 12.0 13.9 12.2 12.2Inventories 13.0 10.9 10.9 9.1 11.3 12.9 11.3 11.3Prepaid expenses & deposits 1.1 0.9 0.9 0.8 0.9 1.1 1.0 1.0

Total Current Assets 34.6 32.2 32.2 30.1 33.9 38.6 39.4 39.4Property, plant & equipment 35.1 35.8 35.8 35.6 35.4 35.1 34.8 34.8

Restricted Marketable Securities 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4

Intangible assets 1.4 1.4 1.4 1.5 1.5 1.6 1.6 1.6

Goodwill 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2

Deferred Income Tax assets 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9Total Assets 77.7 76.0 76.0 73.7 77.4 81.8 82.3 82.3

Liabilities and Shareholders Equity:Trade & other payables 9.6 8.0 8.0 6.7 8.3 9.5 8.3 8.3Deferred revenue 4.6 3.8 3.8 3.3 4.1 4.8 4.2 4.2Income Taxes Payable 1.3 1.6 1.6 1.6 2.1 3.1 3.9 3.9Finance Lease Obligations 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Total Current Liabilities 15.8 13.8 13.8 12.0 14.9 17.7 16.7 16.7Long Term Loans and borrowings 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Finance Lease Obligations 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0Deferred Operating Lease Obligations 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3Accrued Defined Benefit PP 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1Deferred Income Tax liabilities 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6

Total Liabilities 31.8 29.7 29.7 27.9 30.8 33.6 32.6 32.6Share capital 20.9 20.9 20.9 20.9 20.9 20.9 20.9 20.9Accumulated other comprehensive income 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1Retained earnings (deficit) 22.8 23.2 23.2 22.8 23.5 25.2 26.6 26.6

Total Equity 45.9 46.3 46.3 45.8 46.6 48.2 49.7 49.7

Total Liabilities and Shareholders Equity 77.7 76.0 76.0 73.7 77.4 81.8 82.3 82.3




Page 25 of 28



NOTES:




Page 26 of 28



NOTES:




Page 27 of 28



ISSUER: PFB Corporation (TSX:PFB)

Disclosure Requirements

Is this an issuer related or industry related publication? Issuer Industry

Does the Analyst/Associate have a financial interest in securities of the subject issuer? If yes, nature of interest:

Yes No

Is Acumen Capital Partners a market maker in the issuer’s securities at the date of this report?

Yes No

Does Acumen Capital Partners beneficially own more than 1% of any class of common equity of the issuer?

Yes No

Does Acumen Capital Partners or the Analyst/Associate have any actual material conflicts of interest with the issuer? Explanation:

Yes No

Does the Analyst/Associate or Household member serve as a Director, Officer, or Advisory Board Member of the issuer?

Yes No

Has the Analyst/Associate received any direct compensation from the subject company in the past 12 months?*

Yes No

Has Acumen Capital Partners managed or co-managed an offering of securities by the issuer in the past 12 months?

Yes No

Has Acumen Capital Partners received compensation for investment banking and related services from the issuer in the past 12 months?

Yes No

Other disclosures:

* Acumen has a pool for compensation purposes, which includes research analysts, investment banking personnel, sales people and institutional traders. Revenue in the pool includes trading commissions, advisory fees, new issue commissions and broker warrant proceeds.

Acumen Recommendation Structure: Buy , Speculative Buy , Hold, Reduce , Under Review , Tender Full Recommendation Structure explanation can be found at the Acumen Capital Partners website: www.acumencapital.com

The information transmitted is privileged, confidential, may be subject to copyright and is intended solely for the use of the individual or entity to which the transmission is addressed. This transmission is provided for informational purposes only, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such would be prohibited, nor in any jurisdiction where Acumen is not registered to do so. The views expressed are those of the sender and not necessarily those of Acumen Capital Finance Partners Limited or its subsidiaries. Any unauthorized use, distribution, review or disclosure is prohibited. If you received this in error, please notify the sender and delete or destroy this message and any copies. Acumen does or seeks to do business with companies covered in our research comments and reports. As a result, investors should be aware that the firm may be in a conflict of interest. Investors should consider this report as only a single factor in making their investment decision©2015.



http://www.acumencapital.com/


Page 28 of 28



ACUMEN CAPITAL | STAFF LIST

RESEARCH

Brian D. Pow, MBA Vice President Research, Equity Analyst (403) 571-0303 [email protected]

Trevor Reynolds Oil and Gas Research Analyst (403) 410-6842 [email protected]

Mike McMeeken Research Associate (403) 571-0530 [email protected]

Oliver Shao Research Associate (403) 410-6840 [email protected]

INSTITUTIONAL SALES

Brian Parker President & CEO, Institutional Sales (403) 571-2514 [email protected]

Douglas S. Gowland, C.A., CFA Vice President, Institutional Sales (403) 571-0317 [email protected]

Andre Drouillard, CFA Vice President, Institutional Sales (403) 571-0685 [email protected]

Robert Cooper, CFA Institutional Sales (403) 571-0324 [email protected]

TRADING

Liam Farrell Head Trader (403) 571-0318 [email protected]

David Waite Institutional Trading (403) 410-6730 [email protected]

Jesse Ahlan Institutional Trading (403) 571-0148 [email protected]

Crystal Bellefountaine Associate (403) 571-0314 [email protected]

INVESTMENT BANKING

Kelly Hughes Vice President, Investment Banking (403) 571-5036 [email protected]

Ian Thomson Vice President, Investment Banking (403) 571-0301 [email protected]

Shawn Ostrow Investment Banking Associate (403) 571-0319 [email protected]

RETAIL SALES

Robert Laidlaw Vice President (403) 571-2522 [email protected]

Imran Mulji Investment Advisor (403) 571-0112 [email protected]

Margaret Samson Investment Advisor Assistant (403) 441-0536 [email protected]

Sheldon LeLievre Vice President, Sr. Investment Advisor (403) 571-0315 [email protected]

Craig Madill Investment Advisor (403) 410-6018 [email protected]

Erin Williams Investment Advisor Assistant (403) 571-2416 [email protected]

Donny Woo Vice President, Sr. Investment Advisor (403) 571-2510 [email protected]

Darren Fong Investment Advisor (403) 441-2754 [email protected]

Alan Tolg Investment Advisor (403) 410-2042 [email protected]

Ron Cairns Investment Advisor (403) 410-2040 [email protected]

Scott Barnett Investment Advisor (403) 571-0532 [email protected]

Curtis Schirrmacher Investment Advisor (403) 571-0113 [email protected]

Grant Gowland Associate (403) 441-0537 [email protected]

Matthew Wiens Associate (403) 441-5672 [email protected]

TREASURY AND OPERATIONS

Cindy Marthaller Operations Manager (403) 571-8045 [email protected]

Myja Miller CFO, COO (403) 571-0308 [email protected]

Govind Achyuthan Chief Compliance Officer (403) 571-0689 [email protected]

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