West Fraser Timber Co. Ltd.
TSX : WFT

West Fraser Timber Co. Ltd.

February 19, 2015 17:01 ET

West Fraser ("WFT") Announces Fourth Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb. 19, 2015) - West Fraser Timber Co. Ltd. (TSX:WFT) today reported earnings of $43 million or $0.51 per share on sales of $964 million in the fourth quarter of 2014 and earnings of $259 million or $3.06 per share, on sales of $3,856 million for 2014. Earnings per share figures for prior periods have been adjusted to reflect a stock dividend paid January 13, 2014. The stock dividend had the same effect as a two-for-one share subdivision.

Adjusted EBITDA, Adjusted earnings and adjusted basic EPS as described in this news release reflect the adjustments described in the tables referred to in the section titled "Non-IFRS Measures" of our 2014 Management's Discussion & Analysis.

These results compare with previous periods as follows:

($ millions except earnings per 2014 2013
share ("EPS")) Q4 Q3 YTD Q4 YTD
Sales 964 1,030 3,856 833 3,474
Adjusted EBITDA1 157 167 621 112 583
Operating earnings 83 111 406 30 345
Earnings 43 70 259 118 349
Basic EPS ($) 0.51 0.83 3.06 1.37 4.07
Adjusted Earnings1 84 94 327 50 328
Adjusted basic EPS ($)1 1.00 1.12 3.86 0.58 3.82
1. In this News Release, reference is made to Adjusted EBITDA, Adjusted earnings and Adjusted earnings per share (collectively "these measures"). We believe that, in addition to earnings, these measures are useful performance indicators. None of these measures is a generally accepted earnings measure under International Financial Reporting Standards ("IFRS") and none has a standardized meaning prescribed by IFRS. Investors are cautioned that none of these measures should be considered as an alternative to earnings, EPS or cash flow, as determined in accordance with IFRS. As there is no standardized method of calculating any of these measures, our method of calculating each of them may differ from the methods used by other entities and, accordingly, our use of any of these measures may not be directly comparable to similarly titled measures used by other entities. Refer to the tables in the section titled "Non-IFRS Measures" in Management's Discussion and Analysis of our 2014 results for details of these adjustments.

Operational Results

In the quarter our lumber operations generated operating earnings of $90 million (Q3 - $101 million) and Adjusted EBITDA of $121 million (Q3 - $131 million). The benefit provided by a weaker Canadian dollar was offset by the effect of reduced shipments. Lumber markets remained relatively positive in the quarter despite declines in the U.S.-dollar prices for some lumber grades and dimensions. Shipments were adversely affected by some ongoing capital projects and fewer operating days.

The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $22 million (Q3 - $25 million) and Adjusted EBITDA of $25 million (Q3 - $29 million), mostly reflecting reduced plywood prices in the quarter due to a seasonal slowdown in the Canadian building industry.

Pulp and paper operations generated operating earnings in the quarter of $3 million (Q3 - a loss of $2 million) and Adjusted EBITDA of $12 million (Q3 - $9 million). Although Canadian dollar equivalent NBSK prices improved, our NBSK production continued to be adversely affected by operational difficulties at our Hinton pulp mill following an extended maintenance shutdown in the previous quarter. Production at the mill improved by the end of the quarter.

Outlook

"We are guardedly optimistic about 2015 as we see continued recovery of the U.S. housing market and we are seeing the results of some of our capital investment program. Although we have completed a majority of our capital investments, with over $400 million invested in 2014, we still have more to go." said Ted Seraphim, President and CEO. "Also in 2014, we acquired three sawmills, which, in combination with some major capital investments, has increased our lumber capacity by 400 million board feet this year."

Annual Financial Statements and Management's Discussion & Analysis ("MD&A")

The Company's consolidated financial statements for the year ended December 31, 2014 and related MD&A is available on the Company's website: www.westfraser.com and on the System for Electronic Document Analysis and Retrieval at www.sedar.com under the Company's profile.

Dividend Declared

The Board of Directors of the Company has declared a dividend of $0.07 per share on the Common shares and the Class B Common shares in the capital of the Company, payable on April 2, 2015 to shareholders of record on March 20, 2015.

The Company

West Fraser is an integrated wood products company producing lumber, wood chips, LVL, MDF, plywood, pulp and newsprint. The Company has operations in western Canada and the southern United States.

Forward-Looking Statements

This news release contains historical information, descriptions of current circumstances and statements about potential future developments. The latter, which are forward-looking statements and are included under the heading "Outlook", are presented to provide reasonable guidance to the reader but their accuracy depends on a number of assumptions and is subject to various risks and uncertainties. Actual outcomes and results will depend on a number of factors that could affect the ability of the Company to execute its business plans, including those matters described in the 2014 annual Management's Discussion & Analysis under "Risks and Uncertainties", and may differ materially from those anticipated or projected. Accordingly, readers should exercise caution in relying upon forward-looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable securities laws.

Conference Call

Investors are invited to listen to the quarterly conference call on Friday, February 20, 2015 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-800-769-8320 (toll- free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.

West Fraser Timber Co. Ltd.
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars, except where indicated - unaudited)
December 31 December 31
2014 2013
Assets
Current assets
Cash and short-term investments $ 21 $ 162
Receivables 288 279
Inventories 586 519
Prepaid expenses 12 11
907 971
Property, plant and equipment 1,469 1,144
Timber licences 530 489
Goodwill and other intangibles 350 321
Other assets 79 83
Deferred income tax assets 62 96
$ 3,397 $ 3,104
Liabilities
Current liabilities
Cheques issued in excess of funds on deposit $ 36 $ -
Operating loans 103 -
Payables and accrued liabilities 411 385
Income taxes payable 26 30
Reforestation and decommissioning obligations 40 39
Current portion of long-term debt - 319
616 773
Long-term debt 354 9
Other liabilities 244 197
Deferred income tax liabilities 154 178
1,368 1,157
Shareholders' Equity
Share capital 587 602
Accumulated other comprehensive earnings 55 10
Retained earnings 1,387 1,335
2,029 1,947
$ 3,397 $ 3,104
Number of Common shares and Class B Common shares outstanding at February 19, 2015 was 83,527,690.
West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Changes in Shareholders' Equity
(in millions of Canadian dollars, except where indicated - unaudited)
October 1 to December 31 January 1 to December 31
2014 2013 2014 2013
Share capital
Balance - beginning of period $ 589 $ 602 $ 602 $ 602
Issuance of Common shares - - - 1
Common share repurchases (2 ) - (15 ) (1 )
Balance - end of period $ 587 $ 602 $ 587 $ 602
Accumulated other comprehensive earnings
Balance - beginning of period $ 36 $ - $ 10 $ (9 )
Translation gain on foreign operations 19 10 45 19
Balance - end of period $ 55 $ 10 $ 55 $ 10
Retained earnings
Balance - beginning of period $ 1,404 $ 1,166 $ 1,335 $ 899
Actuarial gain (loss) on post-retirement benefits (net of tax) (38 ) 57 (87 ) 113
Common share repurchases (16 ) - (96 ) (2 )
Earnings for the period 43 118 259 349
Dividends (6 ) (6 ) (24 ) (24 )
Balance - end of period $ 1,387 $ 1,335 $ 1,387 $ 1,335
Shareholders' Equity $ 2,029 $ 1,947 $ 2,029 $ 1,947
West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Earnings and
Comprehensive Earnings
(in millions of Canadian dollars, except where indicated - unaudited)
October 1 to December 31 January 1 to December 31
2014 2013 2014 2013
Sales $ 964 $ 833 $ 3,856 $ 3,474
Costs and expenses
Cost of products sold 631 560 2,538 2,260
Freight and other distribution costs 137 122 548 491
Export taxes - 3 - 9
Amortization 43 43 170 160
Selling, general and administration 39 36 149 131
Equity-based compensation 31 15 45 54
Restructuring charges - 24 - 24
881 803 3,450 3,129
Operating earnings 83 30 406 345
Finance expense (6 ) (8 ) (26 ) (29 )
Exchange loss on long-term debt (12 ) (10 ) (29 ) (21 )
Other income 5 18 24 22
Earnings before tax 70 30 375 317
Tax recovery (provision) (note 3) (27 ) 88 (116 ) 32
Earnings $ 43 $ 118 $ 259 $ 349
Earnings per share (dollars) (note 4)
Basic and diluted $ 0.51 $ 1.37 $ 3.06 $ 4.07
Comprehensive earnings
Earnings $ 43 $ 118 $ 259 $ 349
Other comprehensive earnings
Translation gain on foreign operations 19 10 45 19
Actuarial gain (loss) on post-retirement benefits 1 (38 ) 57 (87 ) 113
Comprehensive earnings $ 24 $ 185 $ 217 $ 481
1. Net of tax recovery of $14 million for the three months ended December 31, 2014 (three months ended December 31, 2013 - $16 million provision) and $31 million tax recovery for the year-ended December 31, 2014 (year-ended December 31, 2013 - $34 million provision).
West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Cash Flows
(in millions of Canadian dollars, except where indicated - unaudited)
October 1 to December 31 January 1 to December 31
2014 2013 2014 2013
Operating activities
Earnings $ 43 $ 118 $ 259 $ 349
Adjustments
Amortization 43 43 170 160
Finance expense 6 8 26 29
Exchange loss on long-term debt 12 10 29 21
Tax provision (recovery) 27 (88 ) 116 (32 )
Income taxes paid (14 ) (10 ) (68 ) (36 )
Post-retirement expense 13 11 54 54
Contributions to post-retirement benefit plans (27 ) (38 ) (69 ) (106 )
Other (2 ) 7 (27 ) (7 )
Changes in non-cash working capital
Receivables 25 14 3 (15 )
Inventories (60 ) (49 ) (28 ) (55 )
Prepaid expenses 7 5 - -
Payables and accrued liabilities (32 ) 2 10 57
Cash flows from operating activities 41 33 475 419
Financing activities
Repayment of long-term debt (339 ) - (339 ) -
Proceeds from long-term debt 339 - 339 8
Proceeds from operating loans 61 - 106 -
Financing fees paid (4 ) - (4 ) -
Finance expense paid (10 ) (8 ) (22 ) (18 )
Dividends (6 ) (6 ) (24 ) (24 )
Common share repurchases (18 ) - (111 ) (3 )
Other 1 (1 ) - (2 )
Cash flows from financing activities 24 (15 ) (55 ) (39 )
Investing activities
Acquisitions (5 ) - (208 ) -
Additions to capital assets (89 ) (119 ) (410 ) (338 )
Government assistance 4 10 17 11
Other - (2 ) (9 ) 1
Cash flows from investing activities (90 ) (111 ) (610 ) (326 )
Change in cash (25 ) (93 ) (190 ) 54
Foreign exchange effect on cash 3 3 13 6
Cash - beginning of period 7 252 162 102
Cash - end of period $ (15 ) $ 162 $ (15 ) $ 162
Cash consists of
Cash and short-term investments $ 21 $ 162
Cheques issued in excess of funds on deposit (36 ) -
$ (15 ) $ 162

West Fraser Timber Co. Ltd.

Notes to Condensed Consolidated Interim Financial Statements

(figures are in millions of dollars, except where indicated - unaudited)

1. Nature of operations

West Fraser Timber Co. Ltd. ("West Fraser", "we", "us" or "our") is an integrated wood products company producing lumber, wood chips, LVL, MDF, plywood, pulp and newsprint with facilities in western Canada and the southern United States. Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. Our Common shares are listed for trading on the Toronto Stock Exchange under the symbol WFT.

2. Basis of presentation and statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB") and using the same accounting policies and methods of their application as the December 31, 2014 annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with our 2014 annual financial statements.

3. Tax recovery (provision)

The tax recovery (provision) differs from the amount that would have resulted from applying the Canadian statutory income tax rates to earnings before tax as follows:

October 1 to December 31 January 1 to December 31
2014 2013 2014 2013
Income tax expense at statutory rate of 26% (2013 - 25.75%) $ (19 ) $ (8 ) $ (98 ) $ (82 )
Non-taxable amounts (7 ) (4 ) (11 ) (12 )
Rate differentials between jurisdictions and on specified activities (2 ) - (8 ) (10 )
Recognized tax assets - 101 - 140
Increase in statutory tax rate - - - (2 )
Other 1 (1 ) 1 (2 )
Tax recovery (provision) $ (27 ) $ 88 $ (116 ) $ 32

4. Earnings per share

Basic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B Common shares outstanding.
Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the actual share option expense charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive and diluted earnings per share are deemed to be the same as basic earnings per share.

October 1 to December 31 January 1 to December 31
2014 2013 2014 2013
Earnings
Basic $ 43 $ 118 $ 259 $ 349
Share option expense 27 13 36 44
Equity settled share option adjustment (1 ) (1 ) (3 ) (3 )
Diluted $ 69 $ 130 $ 292 $ 390
Weighted average number of shares (thousands)
Basic 83,687 85,670 84,742 85,712
Share options 1,406 1,382 1,430 1,628
Diluted 85,093 87,052 86,172 87,340
Earnings per share (dollars)
Basic and diluted $ 0.51 $ 1.37 $ 3.06 $ 4.07

5. Segmented information

Pulp & Corporate
Lumber Panels paper & other Total
October 1, 2014 to December 31, 2014
Sales
To external customers $ 640 $ 132 $ 192 $ - $ 964
To other segments 23 2 - -
$ 663 $ 134 $ 192 $ -
Operating earnings before the following: $ 121 $ 25 $ 12 $ (32 ) $ 126
Amortization (31 ) (3 ) (9 ) - (43 )
Operating earnings 90 22 3 (32 ) 83
Finance expense (4 ) (1 ) (1 ) - (6 )
Exchange loss on long-term debt - - - (12 ) (12 )
Other income 4 - 1 - 5
Earnings before tax $ 90 $ 21 $ 3 $ (44 ) $ 70
October 1, 2013 to December 31, 2013
Sales
To external customers $ 522 $ 108 $ 203 $ - $ 833
To other segments 19 2 - -
$ 541 $ 110 $ 203 $ -
Operating earnings before the following: $ 83 $ 6 $ 24 $ (16 ) $ 97
Amortization (27 ) (4 ) (11 ) (1 ) (43 )
Restructuring charges (24 ) - - - (24 )
Operating earnings 32 2 13 (17 ) 30
Finance expense (4 ) (2 ) (2 ) - (8 )
Exchange loss on long-term debt - - - (10 ) (10 )
Other income 12 1 4 1 18
Earnings before tax $ 40 $ 1 $ 15 $ (26 ) $ 30
Pulp & Corporate
Lumber Panels paper & other Total
January 1, 2014 to December 31, 2014
Sales
To external customers $ 2,526 $ 518 $ 812 $ - $ 3,856
To other segments 96 8 - -
$ 2,622 $ 526 $ 812 $ -
Operating earnings before the following: $ 465 $ 78 $ 83 $ (50 ) $ 576
Amortization (114 ) (14 ) (41 ) (1 ) (170 )
Operating earnings 351 64 42 (51 ) 406
Finance expense (16 ) (3 ) (7 ) - (26 )
Exchange loss on long-term debt - - - (29 ) (29 )
Other income 15 1 8 - 24
Earnings before tax $ 350 $ 62 $ 43 $ (80 ) $ 375
January 1, 2013 to December 31, 2013
Sales
To external customers $ 2,234 $ 460 $ 780 $ - $ 3,474
To other segments 81 7 - -
$ 2,315 $ 467 $ 780 $ -
Operating earnings before the following: $ 437 $ 43 $ 103 $ (54 ) $ 529
Amortization (99 ) (15 ) (45 ) (1 ) (160 )
Restructuring charges (24 ) - - - (24 )
Operating earnings 314 28 58 (55 ) 345
Finance expense (15 ) (5 ) (9 ) - (29 )
Exchange loss on long-term debt - - - (21 ) (21 )
Other income (expense) 16 1 8 (3 ) 22
Earnings before tax $ 315 $ 24 $ 57 $ (79 ) $ 317

The geographic distribution of external sales is as follows1:

October 1 to December 31 January 1 to December 31
2014 2013 2014 2013
Canada $ 210 $ 184 $ 1,110 $ 821
United States 521 436 1,781 1,761
China 147 131 598 537
Other Asia 66 59 274 263
Other 20 23 93 92
$ 964 $ 833 $ 3,856 $ 3,474
1. Sales distribution is based on the location of product delivery.

Contact Information

  • West Fraser Timber Co. Ltd.
    Larry Hughes
    Vice-President, Finance and Chief Financial Officer
    (604) 895-2700

    West Fraser Timber Co. Ltd.
    Rodger Hutchinson
    Vice-President, Corporate Controller and Investor Relations
    (604) 895-2700
    www.westfraser.com