West Fraser Timber Co. Ltd.
TSX : WFT

West Fraser Timber Co. Ltd.

February 16, 2012 17:01 ET

West Fraser ("WFT") Announces Fourth Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 16, 2012) - West Fraser Timber Co. Ltd. (TSX:WFT) today reported earnings after discontinued operations of $6 million or $0.14 per share on sales of $650 million in the fourth quarter of 2011 and earnings after discontinued operations of $73 million or $1.47 per share, on sales of $2,762 million for 2011.

These results compare with previous periods as follows:


($ millions except earnings per share ("EPS"))
2011 2010
Q4 Q3 YTD YTD Q4
Sales 650 705 2,762 2,886 719
EBITDA1 18 66 226 460 82
Operating earnings (22) 23 58 275 43
Earnings (loss) from continuing operations (11) 6 27 182 28
Basic EPS from continuing operations ($) (0.25) 0.14 0.63 4.24 0.65
Adjusted earnings (loss) from continuing operations2 (15) 2 23 199 37
Adjusted basic EPS from continuing operations ($)2 (0.35) 0.05 0.54 4.65 0.86
Earnings after discontinued operations 6 37 73 186 43
Basic EPS after discontinued operations ($) 0.14 0.87 1.70 4.35 1.00
Diluted EPS after discontinued operations ($) 0.14 0.44 1.47 4.35 1.00
  1. In this News Release, reference is made to EBITDA (defined as operating earnings plus amortization). Our management believes that, in addition to earnings, EBITDA is a useful performance indicator and is a useful measure of cash available prior to debt service, capital expenditures and income taxes. Reference is also made to Adjusted earnings (loss) from continuing operations (calculated as set out in the tables described in footnote 2 and Adjusted EPS (collectively, with EBITDA, "these measures"). 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, earnings per share 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.
  2. Refer to the tables titled "Annual Earnings Adjustments for Certain Non-Operational Items" and "Quarterly Earnings Adjustments for Certain Non-Operational Items" in Management's Discussion and Analysis of our 2011 results for details of adjustments.

"We ended a challenging year with a difficult quarter as markets for our products continue to be unsettled." said Hank Ketcham, West Fraser's Chairman, President and CEO. "We are very encouraged with the results of our capital investment program as well as the continued commitment of our employees to West Fraser's long-term success."

Operational Results

In the quarter our lumber operations generated an operating loss of $30 million (Q3 - negative $15 million) and EBITDA of negative $8 million (Q3 - $6 million). The decline in our results reflects weaker prices for lower-grade SPF lumber and wider-dimension SYP lumber and reduced shipments.

The panel segment, which includes plywood, LVL and MDF, did not generate any operating earnings in the quarter (Q3 - negative $2 million) and EBITDA of $4 million (Q3 - $2 million) as Canadian dollar plywood and MDF prices showed some improvement.

Pulp and paper operations generated operating earnings in the quarter of $13 million (Q3 - $19 million) and EBITDA of $27 million (Q3 - $36 million). Pulp prices weakened during the quarter with the NBSK benchmark averaging 7% lower than in the third quarter.

Outlook

We are approaching 2012 with conservatism and caution in light of ongoing economic uncertainty in our key markets and the continuing volatility of the Canadian dollar. We will continue to invest in our existing facilities in order to maintain and improve our competitiveness.

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

The Company's consolidated financial statements for the year ended December 31, 2011 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 $0.14 per share on the Common shares and the Class B Common shares in the capital of the Company, payable on April 5, 2012 to shareholders of record on March 23, 2012.

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 2011 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 17, 2012 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-800-952-6845 (toll-free North America). The call may also be accessed through West Fraser's website at www.westfraser.com. A presentation summarizing the fourth quarter results will also be available on the Company's website.

West Fraser shares trade on the Toronto Stock Exchange under the symbol: "WFT".

West Fraser Timber Co. Ltd.
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars - unaudited)
December December
31 31
2011 2010
Assets
Current assets
Cash and short-term investments $ 67.8 $ 163.1
Receivables 266.7 246.0
Income taxes receivable 4.4 -
Inventories (note 4) 397.8 372.4
Prepaid expenses 8.6 7.6
745.3 789.1
Property, plant and equipment 935.7 924.7
Timber licences 490.1 509.6
Goodwill and other intangibles 336.6 345.4
Other assets 29.6 41.5
$ 2,537.3 $ 2,610.3
Liabilities
Current liabilities
Cheques issued in excess of funds on deposit $ - $ 2.4
Operating loans - 8.8
Payables and accrued liabilities 273.9 271.0
Income taxes payable - 58.3
Reforestation and decommissioning 41.0 48.2
Current portion of long-term debt 0.3 0.3
315.2 389.0
Long-term debt 306.3 299.5
Other liabilities 289.0 225.7
Deferred income taxes 143.8 162.3
1,054.3 1,076.5
Shareholders' equity
Share capital 600.9 600.5
Accumulated other comprehensive earnings (5.5) (9.6)
Retained earnings 887.6 942.9
1,483.0 1,533.8
$ 2,537.3 $ 2,610.3

Number of Common shares and Class B Common shares outstanding at February 16, 2012 was 42,848,017.

West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
(in millions of Canadian dollars - unaudited)
October 1 to December 31 January 1 to December 31
2011 2010 2011 2010
Sales $ 650.0 $ 719.1 $ 2,762.1 $ 2,885.9
Costs and expenses
Cost of products sold 475.7 460.7 1,916.6 1,787.0
Freight and other distribution costs 111.2 112.3 460.3 441.2
Export taxes 14.9 16.7 57.7 59.7
Amortization 40.0 38.2 167.7 185.0
Selling, general and administration 26.2 28.6 104.7 107.0
Equity-based compensation 4.1 19.3 (2.7) 31.4
672.1 675.8 2,704.3 2,611.3
Operating earnings (22.1) 43.3 57.8 274.6
Interest expense (4.7) (6.0) (20.1) (27.7)
Exchange gain (loss) on long-term debt 9.3 10.3 (6.7) 16.9
Other income (expense) 1.1 (3.8) 13.9 (8.5)
Earnings from continuing operations before tax provision (16.4) 43.8 44.9 255.3
Tax provision (note 5) 5.8 (16.0) (18.1) (73.5)
Earnings from continuing operations (10.6) 27.8 26.8 181.8
Earnings from discontinued operations (note 6) 16.7 15.2 45.9 4.6
Earnings $ 6.1 $ 43.0 $ 72.7 $ 186.4
Earnings per share (dollars) (note 7)
Basic from continuing operations $ (0.25) $ 0.65 $ 0.63 $ 4.24
Diluted from continuing operations $ (0.25) $ 0.65 $ 0.41 $ 4.24
Basic after discontinued operations $ 0.14 $ 1.00 $ 1.70 $ 4.35
Diluted after discontinued operations $ 0.14 $ 1.00 $ 1.47 $ 4.35
Comprehensive earnings
Earnings $ 6.1 $ 43.0 $ 72.7 $ 186.4
Other comprehensive earnings
Translation gain (loss) on foreign operations (6.8) (6.1) 4.1 (9.6)
Actuarial loss on employee future benefits (14.4) (17.0) (104.0) (59.1)
Comprehensive earnings $ (15.1) $ 19.9 $ (27.2) $ 117.7
West Fraser Timber Co. Ltd.
Condensed Consolidated Statement of Changes in Equity
(in millions of Canadian dollars - unaudited)
October 1 to December 31 January 1 to December 31
2011 2010 2011 2010
Retained earnings
Balance - beginning of period $ 902.0 $ 919.5 $ 942.9 $ 823.3
Actuarial loss on employee future benefits (14.4) (17.0) (104.0) (59.1)
Earnings for the period 6.1 43.0 72.7 186.4
Dividends (6.1) (2.6) (24.0) (7.7)
Balance - end of period $ 887.6 $ 942.9 $ 887.6 $ 942.9
Accumulated other comprehensive earnings
Balance - beginning of period $ 1.3 $ (3.5) $ (9.6) $ -
Translation (loss) gain on foreign operations (6.8) (6.1) 4.1 (9.6)
Balance - end of period $ (5.5) $ (9.6) $ (5.5) $ (9.6)
Share capital
Balance - beginning of period $ 600.8 $ 600.1 $ 600.5 $ 599.7
Issuance of Common shares 0.1 0.4 0.4 0.8
Balance - end of period $ 600.9 $ 600.5 $ 600.9 $ 600.5
Shareholders' equity $ 1,483.0 $ 1,533.8 $ 1,483.0 $ 1,533.8
West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Cash Flows
(in millions of Canadian dollars - unaudited)
October 1 to December 31 January 1 to December 31
2011 2010 2011 2010
Operating activities
Earnings from continuing operations $ (10.6) $ 27.8 $ 26.8 $ 181.8
Adjustments
Amortization 40.0 38.2 167.7 185.0
Interest expense 4.7 6.0 20.1 27.7
Exchange (gain) loss on long-term debt (9.3) (10.3) 6.7 (16.9)
Tax provision (5.8) 16.0 18.1 73.5
Income taxes (paid) received - (1.5) (75.1) 66.1
Reforestation and decommissioning obligations (0.1) 5.4 6.3 3.6
Employee future benefits expense 5.9 11.1 35.0 28.9
Contributions to employee future benefit plans (64.7) (58.4) (93.2) (66.2)
Other 0.9 (2.3) (7.9) (12.9)
Changes in non-cash working capital
Receivables 31.4 (44.6) 7.7 (87.0)
Inventories (40.3) (31.2) (23.9) (14.9)
Prepaid expenses 4.5 5.1 (0.9) 2.3
Payables and accrued liabilities (7.2) 23.8 (2.4) 50.1
Cash flows from operating activities (50.6) (14.9) 85.0 421.1
Financing activities
Repayment of long-term debt - - (0.3) (100.3)
Proceeds from (repayment of) operating loans 0.2 (4.0) (14.7) (64.2)
Interest paid (9.0) (10.0) (19.8) (23.8)
Dividends (6.1) (2.6) (24.0) (7.7)
Other (0.8) (2.2) (0.5) (5.6)
Cash flows from financing activities (15.7) (18.8) (59.3) (201.6)
Investing activities
Additions to capital assets (89.7) (18.6) (213.4) (89.1)
Proceeds from Green Transformation Program 5.4 0.2 36.9 1.6
Proceeds from disposal of capital assets 0.5 (0.1) 10.4 3.2
Other - 0.5 1.8 1.0
Cash flows from investing activities (83.8) (18.0) (164.3) (83.3)
Change in cash from continuing operations (150.1) (51.7) (138.6) 136.2
Change in cash from discontinued operations 9.9 (0.5) 45.7 34.3
Cash - beginning of period 208.0 212.9 160.7 (9.8)
Cash - end of period $ 67.8 $ 160.7 $ 67.8 $ 160.7
Cash consists of
Cash and short-term investments $ 67.8 $ 163.1
Cheques issued in excess of funds on deposit - (2.4)
$ 67.8 $ 160.7

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

The Company is an integrated wood products company producing lumber, wood chips, LVL, MDF, plywood, pulp and newsprint with facilities in Canada and the southern United States. The Company's executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. The Company was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. The Company is listed on the Toronto Stock Exchange under the symbol WFT.

2. Transition to International Financial Reporting Standards ("IFRS")

The Company adopted IFRS effective January 1, 2011. Prior to the adoption of IFRS, the Company prepared its financial statements in accordance with Canadian generally accepted accounting principles. Comparative figures have been restated to conform to IFRS.

3. 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 and using the accounting policies disclosed in the Company's annual consolidated financial statements for the year ended December 31, 2011. These financial statements can be found on the Company's website at www.westfraser.com and on the System for Electronic Document Analysis and Retrieval at www.sedar.com under the Company's profile.

These condensed consolidated interim financial statements should be read in conjunction with the Company's 2011 annual consolidated financial statements.

4. Inventories

Inventories at December 31, 2011 were written down by $14.9 million (September 30, 2011 - $10.7 million; December 31, 2010 - $3.8 million) to reflect net realizable value being lower than cost.

5. Tax provision

The Company's effective tax rate on earnings from continuing operations is as follows:

October 1 to December 31
2011 2010
Amount % Amount %
Income taxes at statutory rates 1 $ 4.4 26.5 $ (12.5) (28.5)
Non taxable amounts 1.4 8.6 (3.6) (8.2)
Rate differentials between jurisdictions and on specified activities 1.0 6.1 3.5 8.0
Unrecognized tax assets (0.7) (4.2) (4.1) (9.4)
Other (0.3) (1.8) 0.7 1.6
Tax provision $ 5.8 35.2 $ (16.0) (36.5)
January 1 to December 31
2011 2010
Amount % Amount %
Income taxes at statutory rates 1 $ (11.9) (26.5) $ (72.8) (28.5)
Non taxable amounts 1.7 3.8 (2.4) (0.9)
Rate differentials between jurisdictions and on specified activities 5.9 13.1 5.6 2.2
Unrecognized tax assets (11.7) (26.1) (1.4) (0.6)
Other (2.1) (4.6) (2.5) (1.0)
Tax provision $ (18.1) (40.3) $ (73.5) (28.8)
1. The statutory tax rate decreased by 2% from December 31, 2010 due to a federal corporate tax rate reduction.

6. Discontinued operation

The Company permanently closed its linerboard and kraft paper mill, located in Kitimat, B.C. in January 2010. The results of the discontinued operation are as follows:

October 1 to December 31 January 1 to December 31
2011 2010 2011 2010
Sales $ - $ 1.3 $ 0.2 $ 71.8
Operating earnings $ - $ 6.8 $ - $ (8.4)
Other income 21.9 14.4 56.4 15.3
Earnings before tax provision 21.9 21.2 56.4 6.9
Tax provision (5.2) (6.0) (10.5) (2.3)
Earnings $ 16.7 $ 15.2 $ 45.9 $ 4.6

During the year the Company sold its remaining assets associated with Kitimat for proceeds of $50.0 million resulting in a gain of $48.7 million.

7. 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 (recovery) 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
2011 2010
From After From After
continuing discontinued continuing discontinued
operations operations operations operations
Earnings
Basic $ (10.6) $ 6.1 $ 27.8 $ 43.0
Share option expense 3.2 3.2 16.7 16.7
Equity settled share option adjustment (0.3) (0.3) (0.3) (0.3)
Diluted $ (7.7) $ 9.0 $ 44.2 $ 59.4
Weighted average number of shares
Basic 42,844,571 42,844,571 42,828,502 42,828,502
Share options 280,190 280,190 474,178 474,178
Diluted 43,124,761 43,124,761 43,302,680 43,302,680
Earnings per share (dollars)
Basic $ (0.25) $ 0.14 $ 0.65 $ 1.00
Diluted $ (0.25) $ 0.14 $ 0.65 $ 1.00
January 1 to December 31
2011 2010
From After From After
continuing discontinued continuing discontinued
operations operations operations operations
Earnings
Basic $ 26.8 $ 72.7 $ 181.8 $ 186.4
Share option (recovery) expense (6.2) (6.2) 23.5 23.5
Equity settled share option adjustment (3.1) (3.1) (1.1) (1.1)
Diluted $ 17.5 $ 63.4 $ 204.2 $ 208.8
Weighted average number of shares
Basic 42,840,180 42,840,180 42,822,949 42,822,949
Share options 433,685 433,685 424,557 424,557
Diluted 43,273,865 43,273,865 43,247,506 43,247,506
Earnings per share (dollars)
Basic $ 0.63 $ 1.70 $ 4.24 $ 4.35
Diluted $ 0.41 $ 1.47 $ 4.24 $ 4.35

8. Segmented information

Lumber Panels Pulp &
paper
Corporate
& other
Consolidated
October 1, 2011 to December 31, 2011
Sales at market prices
To external customers $ 370.8 $ 92.2 $ 187.0 $ - $ 650.0
To other segments 21.0 2.0 - -
$ 391.8 $ 94.2 $ 187.0 $ -
EBITDA 1 $ (7.6) $ 3.6 $ 26.5 $ (4.6) $ 17.9
Amortization (21.9) (3.8) (13.6) (0.7) (40.0)
Operating earnings (29.5) (0.2) 12.9 (5.3) (22.1)
Interest expense (2.3) (0.7) (1.5) (0.2) (4.7)
Exchange gain on long-term debt - - - 9.3 9.3
Other income (expense) 2.0 0.1 (5.5) 4.5 1.1
Earnings from continuing operations before tax provision $ (29.8) $ (0.8) $ 5.9 $ 8.3 $ (16.4)
October 1, 2010 to December 31, 2010
Sales at market prices
To external customers $ 396.8 $ 92.0 $ 230.3 $ - $ 719.1
To other segments 21.6 2.3 - -
$ 418.4 $ 94.3 $ 230.3 $ -
EBITDA 1 $ 41.1 $ 6.4 $ 48.8 $ (14.8) $ 81.5
Amortization (15.8) (3.3) (18.4) (0.7) (38.2)
Operating earnings 25.3 3.1 30.4 (15.5) 43.3
Interest expense (3.8) (0.4) (1.8) - (6.0)
Exchange gain on long-term debt - - - 10.3 10.3
Other expense (0.4) (0.3) (2.4) (0.7) (3.8)
Earnings from continuing operations before tax provision $ 21.1 $ 2.4 $ 26.2 $ (5.9) $ 43.8
January 1, 2011 to December 31, 2011
Sales at market prices
To external customers $ 1,579.4 $ 369.5 $ 813.2 $ - $ 2,762.1
To other segments 90.7 8.6 - -
$ 1,670.1 $ 378.1 $ 813.2 $ -
EBITDA 1 $ 65.2 $ 7.8 $ 148.0 $ 4.5 $ 225.5
Amortization (84.7) (15.4) (65.0) (2.6) (167.7)
Operating earnings (19.5) (7.6) 83.0 1.9 57.8
Interest expense (10.8) (3.2) (6.1) - (20.1)
Exchange loss on long-term debt - - - (6.7) (6.7)
Other income 9.8 0.2 3.3 0.6 13.9
Earnings from continuing operations before tax provision $ (20.5) $ (10.6) $ 80.2 $ (4.2) $ 44.9
January 1, 2010 to December 31, 2010
Sales at market prices
To external customers $ 1,621.4 $ 401.2 $ 863.3 $ - $ 2,885.9
To other segments 93.6 8.2 - -
$ 1,715.0 $ 409.4 $ 863.3 $ -
EBITDA 1 $ 232.3 $ 57.6 $ 202.9 $ (33.2) $459.6
Amortization (94.0) (17.7) (70.3) (3.0) (185.0)
Operating earnings 138.3 39.9 132.6 (36.2) 274.6
Interest expense (17.4) (2.8) (7.4) (0.1) (27.7)
Exchange gain on long-term debt - - - 16.9 16.9
Other (expense) income (0.2) (1.0) (7.6) 0.3 (8.5)
Earnings from continuing operations before tax provision $ 120.7 $ 36.1 $ 117.6 $ (19.1) $255.3
1. Non GAAP measure:
EBITDA is defined as operating earnings plus amortization.
The geographic distribution of external sales is as follows:
October 1 to December 31 January 1 to December 31
2011 2010 2011 2010
United States $ 317.6 $ 327.3 $ 1,303.2 $ 1,409.8
Canada 156.9 166.8 651.6 704.1
China 96.1 132.0 456.2 354.3
Other Asia 53.0 43.4 229.4 281.8
Other 26.4 49.6 121.7 135.9
$ 650.0 $719.1 $ 2,762.1 $ 2,885.9

Sales distribution is based on the location of product delivery by the Company.

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
    (604) 895-2700
    (604) 681-6061 (FAX)
    www.westfraser.com