West Fraser Timber Co. Ltd.
TSX : WFT

West Fraser Timber Co. Ltd.

October 25, 2010 16:01 ET

West Fraser ("WFT") Announces Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 25, 2010) - West Fraser Timber Co. Ltd. (TSX:WFT) today reported earnings after discontinued operations of $45 million or $1.04 per share on sales of $707 million in the third quarter of 2010 and earnings after discontinued operations of $128 million or $2.95 per share, on sales of $2.2 billion for the first nine months of 2010.

"Although we are experiencing a slow recovery in some of our key markets, we are generally very pleased with our results. Our improved cash flows allow us the opportunity to reinvest in our operations which will better position us to take advantage of the eventual economic recovery," said Hank Ketcham, the Company's Chairman, President and CEO.

These results compare with previous periods as follows:



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($ million except earnings 2010 2009
per share ("EPS") YTD Q3 Q2 YTD Q3
-------------------------------------------------------- -----------------
Sales 2,167 707 772 1,782 612
EBITDA(1) 363 109 151 25 41
Operating earnings from
continuing operations 219 63 103 (179) (40)
Earnings from continuing
operations 143 46 62 (202) (100)
Earnings after discontinued
operations 128 45 63 (321) (199)
Diluted EPS after
discontinued operations ($) 2.95 1.04 1.46 (7.49) (4.64)
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(1) Throughout this News Release, reference is made to EBITDA (defined as
operating earnings plus amortization and asset impairments). Management of
the Company believes that, in addition to earnings, EBITDA is a useful
performance indicator and is a useful complementary measure of cash
available prior to debt service, capital expenditures and income taxes.
However, EBITDA is not a generally accepted earnings measure under Canadian
generally accepted accounting principles ("GAAP") and does not have a
standardized meaning prescribed by Canadian GAAP. Investors are cautioned
that EBITDA should not be considered as an alternative to earnings or cash
flow as determined in accordance with Canadian GAAP. As there is no
standardized method of calculating EBITDA, the Company's method of
calculating EBITDA may differ from the methods used by other entities and,
accordingly, the Company's use of that term may not be directly comparable
to similarly titled measures used by other entities.


Operational Results

In the quarter the lumber segment generated operating earnings of $22 million and EBITDA of $49 million. After a period of higher lumber prices in the second quarter of 2010, prices weakened in the third quarter reflecting a continuing weak U.S. housing market. SYP lumber prices were particularly hard hit. Shipments to China continued to increase in the quarter, supporting lumber prices.

The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $14 million and EBITDA of $20 million. Plywood prices came under pressure in the quarter with the average benchmark price declining 13% from the previous quarter as U.S.-produced plywood was sold into the Canadian market. The impact of this decline on panel segment results was largely offset by stronger MDF prices.

Pulp and paper operations generated operating earnings of $41 million and EBITDA of $55 million. Pulp prices increased in the quarter with the average NBSK benchmark price for the quarter increasing to US$1,000 per tonne compared to US$993 in the previous quarter. Record pulp production of over 300,000 tonnes for the quarter contributed to the strong segment results.

Outlook

The economic uncertainty in the U.S. continues to delay a recovery in U.S. new home construction, which is a key market for the Company's lumber, MDF and LVL. The Company expects pulp prices to be reasonable over the near term as a result of the improving global economy.

Mr. Ketcham concluded, "Despite the uncertain recovery, we are confident that our well capitalized mills, our strong balance sheet and our low cost culture will allow us to maintain our leadership position in our industry."

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 are included under the heading "Outlook", and 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 which are also described under this heading. Actual outcomes and results will depend on a number of factors. 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 Tuesday, October 26, 2010 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-866-226-1792 (toll-free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.

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

Management's Discussion & Analysis

This discussion and analysis by West Fraser's management ("MD&A") of the Company's financial performance during the third quarter of 2010 (the "current quarter") should be read in conjunction with the unaudited interim consolidated financial statements and accompanying notes included in this quarterly report and the 2009 annual MD&A included in the Company's 2009 Annual Report. Dollar amounts are expressed in Canadian currency, unless otherwise indicated.

This MD&A contains historical information, descriptions of current circumstances and statements about potential future developments and anticipated financial results. The latter, which are forward-looking statements, 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. Forward-looking statements are included under the headings "Discontinued Operations" (comment concerning expected sale of Eurocan inventory), "Business Outlook" and "New Accounting Pronouncements". 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 under "Risks and Uncertainties" in the 2009 annual MD&A, 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.

Throughout this MD&A reference is made to EBITDA (defined as operating earnings plus amortization and asset impairments). Management believes that, in addition to earnings, EBITDA is a useful performance indicator and is a useful complementary measure of cash available prior to debt service, capital expenditures and income taxes. EBITDA is not a generally accepted earnings measure under Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by Canadian GAAP. Investors are cautioned that EBITDA should not be considered as an alternative to earnings or cash flow, as determined in accordance with Canadian GAAP. As there is no standardized method of calculating EBITDA, the Company's method of calculating EBITDA may differ from the methods used by other entities and, accordingly, the Company's use of that term may not be directly comparable to similarly titled measures used by other entities.

This MD&A includes references to benchmark prices over selected periods for products of the type produced by West Fraser. These benchmark prices do not necessarily reflect the prices obtained by West Fraser for those products during such period. The information in this interim MD&A is as at October 25, 2010 unless otherwise indicated.

Production, Shipments and Financial Comparisons



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Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
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Production
Lumber - MMfbm
SPF 827 860 2,514 726 2,141
SYP 373 363 1,010 336 986
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1,200 1,223 3,524 1,062 3,127
Plywood - MMsf (3/8"
basis) 203 207 601 193 562
MDF - MMsf (3/4" basis) 52 47 147 52 149
LVL - Mcf 362 594 1,536 447 1,177
BCTMP - Mtonnes 160 139 455 156 343
NBSK - Mtonnes 143 116 384 134 390
Newsprint - Mtonnes 34 31 98 20 78
Linerboard and Kraft
Paper - Mtonnes - - 29 120 303
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Shipments
Lumber - MMfbm
SPF 837 842 2,509 773 2,300
SYP 382 346 998 337 1,034
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1,219 1,188 3,507 1,110 3,334
Plywood - MMsf (3/8"
basis) 218 192 591 178 563
MDF - MMsf (3/4" basis) 46 49 146 49 161
LVL - Mcf 363 580 1,507 456 1,201
BCTMP - Mtonnes 131 170 443 152 416
NBSK - Mtonnes 120 118 370 130 394
Newsprint - Mtonnes 33 36 104 28 70
Linerboard and Kraft
Paper - Mtonnes 8 22 120 110 270
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Financial Comparisons -
$ millions
Sales 707 772 2,167 612 1,782
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EBITDA 109 151 363 41 25
Amortization (46) (48) (144) (64) (187)
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Operating earnings before
asset impairments 63 103 219 (23) (162)
Asset impairments - - - (17) (17)
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Operating earnings 63 103 219 (40) (179)
Interest expense - net (6) (7) (21) (6) (22)
Exchange gain (loss) on
long-term debt 10 (15) 7 28 44
Other income (expense) 1 2 (5) (8) (5)
Provision for income
taxes (22) (21) (57) (74) (40)
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Earnings from continuing
operations 46 62 143 (100) (202)
Loss from discontinued
operations (1) 1 (15) (99) (119)
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Earnings 45 63 128 (199) (321)
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Cdn. $1.00 converted to
U.S.-average 0.962 0.972 0.965 0.911 0.855
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Selected Quarterly Information



($ millions, except earnings per share ("EPS") amounts which are in $)
--------------------------------------------------------------------------
Q3-10 Q2-10 Q1-10 Q4-09 Q3-09 Q2-09 Q1-09 Q4-08
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Sales(1) 707 772 688 570 612 612 558 662
Earnings(1) 46 62 35 8 (100) (23) (80) (75)
Earnings after
discontinued
operations 45 63 20 (20) (199) (39) (83) (70)
Basic EPS(1) 1.08 1.46 0.80 0.18 (2.34) (0.53) (1.86) (1.76)
Diluted EPS(1) 1.07 1.44 0.79 0.18 (2.34) (0.53) (1.86) (1.76)
Basic EPS after
discontinued
operations 1.05 1.48 0.45 (0.47) (4.64) (0.91) (1.94) (1.62)
Diluted EPS after
discontinued
operations 1.04 1.46 0.45 (0.47) (4.64) (0.91) (1.94) (1.62)
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1. From continuing operations.


Discussion & Analysis

Earnings for the current quarter were very positive although moderately weaker than the previous quarter's strong results. The decline in earnings was the result of weakening lumber prices, including sharply weaker SYP lumber prices, during the quarter as well as a modest decline in pulp prices in the latter part of the current quarter.

The current quarter selling, general and administrative expenses include $8 million related to equity-based compensation. Equity-based compensation varies based on the period-ending closing price of the Company's Common shares and had resulted in a recovery of $10 million in the previous quarter. The current quarter's results also include a gain on the translation of U.S. dollar-denominated debt of $10 million (after-tax $9 million or $0.21 per share), reflecting a strengthening of the Canadian dollar against its U.S. counterpart.

The Company's 2010 results represent a significant improvement over earnings for comparable periods of 2009, which have been restated to present results of the Eurocan linerboard and kraft paper business ("Eurocan") as a discontinued operation. Comparing third quarter results, the $146 million improvement in earnings from continuing operations reflects higher lumber and pulp prices as well as increased shipments of lumber as some previously-curtailed capacity was brought back into production. On a year-to-date basis, 2010 earnings from continuing operations improved by $345 million compared to the same period of 2009 as both SPF lumber and pulp prices improved dramatically and shipments of SPF lumber reached near capacity levels.

Cash flows from operations continued to be very positive as reflected in the net debt to total capitalization ratio of 6% at the end of the current quarter compared to 12% at the end of the previous quarter. Many of the Company's operations are benefiting from the combination of a lower cost structure and high operating rates in a very difficult market. In light of the Company's continued strong performance, during the quarter West Fraser's Board approved an increase of its quarterly dividend from $0.03 to $0.06 as well as a new $125 million capital expenditure program.

The change in value of the Canadian dollar relative to the U.S. dollar during the periods presented resulted in the following foreign exchange gains and losses from continuing operations:



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Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
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Included in other income
Translation of current
monetary items (3) 3 (4) (9) (11)
Gain (loss) on foreign
currency contracts - (1) - 3 3
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Gain (loss) on U.S.
dollar-denominated long-
term debt 10 (15) 7 28 44
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Translation gain (loss) on
investment in self-
sustaining foreign
operations (9) 14 (4) (34) (49)
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Discussion & Analysis by Product Segment

Lumber Segment



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Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
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Sales - $ millions 398 440 1,225 336 984
EBITDA - $ millions 49 75 190 3 (43)
EBITDA margin - % 12 16 15 - -
Operating earnings
before asset
impairments - $ millions 22 47 105 (36) (151)
Asset impairments - - - (17) (17)
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Operating earnings - $
millions 22 47 105 (53) (168)
Benchmark prices
(US$ per Mfbm)
SPF #2 & Better 2 x 4(1) 222 264 251 192 174
SYP #2 West 2 x 4(2) 248 377 315 234 241
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1. Source: Random Lengths - 2 x 4, #2 & Better - Net FOB mill.
2. Source: Random Lengths - 2 x 4 - Net FOB mill Westside.


The current U.S. housing collapse, which began in 2006 and was worsened by the global financial crisis which began in 2008, resulted in a sharp and extended decline in demand for lumber and other building products, including those manufactured by the Company. 2009 marked what many analysts consider a low point in the current lumber downcycle as production greatly exceeded demand and benchmark prices weakened sharply. In response, lumber producers, including the Company, curtailed higher-cost production and by early 2010 lumber prices had recovered to levels reflecting an improved, although fragile, balance between supply and demand. In the first half of 2010 benchmark prices for both SPF and SYP lumber spiked sharply higher, due in large part to constrained supply. In the case of SPF lumber, production curtailments and reduced log inventories during the spring breakup played a key role in constraining supply while in the case of SYP lumber, extreme weather conditions in many areas of the U.S. South caused the reduction or suspension of logging activities which resulted in production curtailments. By the end of the second quarter of 2010 these supply constraints had been substantially alleviated and benchmark prices weakened as a result. In the case of SYP lumber benchmark prices, the decline was significant.

Operating earnings for the lumber segment followed the same pattern as the Company's overall operating earnings, reflecting a moderate weakening in the current quarter compared to the previous quarter but a substantial improvement compared to the same quarter of 2009. Year-to-date 2010 operating earnings were $273 million higher than in the same period of 2009.

Lumber shipments were substantially the same as in the previous quarter but were 10% higher than in the third quarter of 2009. On a year-to-date basis, shipments were 5% higher in 2010 than in 2009. While U.S. demand continued to reflect the depressed housing market, lumber demand showed continued growth in China. Strong demand for all grades has allowed Canadian lumber to gain greater market share and geographic penetration in China.

The Company's Canadian mills continued to operate near capacity in the current quarter. SPF lumber production was slightly lower in the current quarter compared to the previous quarter but was 14% greater compared to the third quarter of 2009.

SYP production was slightly higher in the current quarter compared to the previous quarter and 11% higher compared to the third quarter of 2009. However, many of the Company's U.S. sawmills continued to operate on reduced shifts due to uncertain markets, achieving an overall operating rate of approximately 75% in the current quarter.

Amortization in the period was lower compared to the third quarter of 2009 largely due to asset impairment charges relating to certain sawmill assets recorded in the earlier period.

During the current quarter the benchmark lumber composite price decreased which resulted in the reinstatement of export taxes on certain Canadian softwood lumber exports to the United States under the 2006 Softwood Lumber Agreement (the "S.L.A."). During the months of May, June and July, 2010 the Company's Canadian lumber exports were subject to a 10%, 0% and 10% base tax rate, respectively. For the remaining months of 2010 and for all of 2009 West Fraser's lumber exports were subject to a 15% base tax rate. For any month where shipments from B.C. or Alberta exceed the provincial surge limit, the base tax rate will be increased by one-half. For several months in 2009 and 2010, lumber shipments from the province of Alberta exceeded the prescribed surge volumes which caused shipments in those months to be subject to a higher export tax.

As allowed under the S.L.A., in early October 2010 the U.S. government requested consultations with Canada, which is an initial step in the dispute resolution mechanism under that agreement. A dispute has arisen between the two countries which relates to the prices charged to harvest pine-beetle killed timber on public lands located in the interior region of B.C. and therefore could have implications for several of West Fraser's operations. If the dispute is not resolved through consultation, either party may require that the issue in dispute be referred to arbitration for determination. Representatives of the B.C. government, which sets prices for Crown timber harvested from public lands, have indicated that they believe that the U.S. complaint is without merit. West Fraser is currently unable, based on available information, to reasonably estimate the likelihood or effect of an adverse determination of this dispute.

In October 2010, the Company concluded collective bargaining in six of its B.C. solid wood operations and the agreements are expected to be ratified by early November.

Panels Segment



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Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
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Sales - $ millions 105 106 309 102 298
EBITDA - $ millions 20 20 51 19 31
EBITDA margin - % 18 19 16 19 10
Operating earnings -
$ millions 14 15 35 12 6
Benchmark price
Plywood (per Msf 3/8"
basis)(1) Cdn$ 327 377 345 379 332
MDF (per Msf 3/4"
basis)(2) US$ 550 536 520 480 493
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1. Source: Crow's Market Report - Delivered Toronto.
2. Source: Resource Information Systems, Inc. - MDF Western U.S. - Net FOB
mill.


The Company's panels segment is comprised of its plywood, MDF and LVL operations.

Operating earnings were comparable in the current and previous quarters as weakening plywood prices in the current quarter were substantially offset by lower plywood production costs and improved MDF prices. Operating earnings in the current quarter were slightly higher than in the third quarter of 2009 as MDF prices improved and amortization for the plywood segment declined as certain assets became fully depreciated.

Benchmark plywood prices were 13% lower in the current quarter compared to the previous quarter and the third quarter of 2009. As the Canadian dollar began its strengthening trend against the U.S. dollar in 2009, more U.S.-produced plywood began entering the Canadian market, putting downward pressure on plywood prices. MDF prices improved in the current quarter compared to the previous quarter and the third quarter of 2009, reflecting a reduction of overall supply in the North American market.

The Company's two MDF plants operated in the quarter at approximately 70% of capacity. In the previous quarter a press fire at the Quesnel MDF plant reduced production by approximately 8,300 Msf. The Company's LVL plant was reduced to running at 45% of capacity during the quarter as a result of weakened demand.

Pulp & Paper Segment



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Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
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Sales - $ millions 204 226 633 175 500
EBITDA - $ millions 55 49 143 18 30
EBITDA margin - % 27 22 23 10 6
Operating earnings -
$ millions 41 36 102 2 (21)
Benchmark price
NBSK (US$ per tonne)(1) 1,000 993 958 733 684
Newsprint (US$ per
tonne)(2) 635 598 595 445 579
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1. Source: Resource Information Systems, Inc. - U.S. list price delivered
U.S.
2. Source: Resource Information Systems, Inc. - delivered 48.8 gram
newsprint.


The pulp & paper segment includes operations that produce NBSK, BCTMP and newsprint. Results from the Eurocan business are included in discontinued operations.

While the average benchmark NBSK prices increased compared to the previous quarter, the effect was somewhat offset by a decline in BCTMP prices and reduced BCTMP sales volumes. Benchmark NBSK prices reached a peak of US$1,020 per tonne in June as worldwide pulp inventories hit a cyclical low during the second quarter 2010. The restart of Chilean pulp capacity, new capacity startups in China and a slowdown in Asian pulp demand contributed to an increase in inventories during the current quarter and a subsequent NBSK price decline to US$990 per tonne. BCTMP pricing declined by a wider margin during the quarter given that the majority of the demand for this product is in the Asian market. Towards the end of the quarter demand for BCTMP improved as Asian demand picked up.

The significant improvement in earnings in 2010 compared to 2009 reflect the substantial improvement in both NBSK and BCTMP prices.

A pulp production record was achieved in the current quarter as all plants operated well. Production was 19% higher than in the previous quarter as planned maintenance shutdowns occurred in the second quarter at both NBSK mills and the Quesnel BCTMP mill. Production in the current quarter was 5% higher than in the corresponding quarter in 2009 reflecting improved operating rates in each of the pulp mills.

Average unit pulp production costs were 10% lower in the current quarter than in the previous quarter, in spite of increased fibre costs, as energy, chemical and other conversion costs declined. In addition, $4 million of investment tax credits were applied to reduce production costs. Compared to the corresponding quarter in 2009, average unit production costs were 6% higher largely due to higher fibre and maintenance costs.

Newsprint prices have shown some improvement, increasing by 6% from the previous quarter and 43% from the third quarter of 2009. Newsprint production was 10% higher in the current quarter compared to the previous quarter as production was curtailed in the previous quarter due to high electricity costs. Production was substantially greater than in the corresponding quarter of 2009 due to downtime taken in the earlier period to permit modifications to the paper machine.

Average unit production costs for newsprint were higher in the current quarter compared to the previous quarter as higher electricity sales revenues generated in the previous quarter under the Company's power purchase agreement reduced average production costs. Unit production costs for the quarter were lower compared to the third quarter of 2009 due to the downtime taken during the earlier period.

Discontinued Operations

The Eurocan mill ceased operations in the first quarter of 2010 and by the end of the third quarter most of the finished product inventory had been sold or committed to specific customers. All remaining inventory should be sold by the end of the year. The mill recorded an after-tax loss of $1 million in the current quarter compared to after-tax earnings of $1 million in the previous quarter and an after-tax loss of $99 million in the corresponding quarter of 2009. The current quarter results include a small amount from the sale of product inventory as well as site security and other costs.

West Fraser has initiated the sale of various fixed assets associated with the Eurocan mill and completed the sale of one of two paper machines in October 2010. Further asset sales are expected to be completed over the next 12 months.

As at September 30, 2010 the assets and liabilities associated with the Eurocan business are as follows:



-----------------------------------
($ millions)
-----------------------------------
Current assets 11
Non-current assets 1
-----------------------------------
Total assets 12
-----------------------------------
-----------------------------------
Current liabilities (18)
Non-current liabilities (16)
-----------------------------------
Total liabilities (34)
-----------------------------------
-----------------------------------


The summarized results for the discontinued Eurocan business are as follows:



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($ millions) Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
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Sales 6 14 71 67 182
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Operating loss (1) (1) (23) (144) (170)
Gain on foreign
currency contracts - - - 7 10
Other income (expense) - 2 1 (4) (11)
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Loss before income tax (1) 1 (22) (141) (171)
Income tax recovery - - 6 42 52
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Loss (1) 1 (16) (99) (119)
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Cash flows from operating
and investing activities 6 25 23 (2) (16)
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Business Outlook

For a description of West Fraser's business outlook for 2010 see its 2009 annual MD&A under "Business Outlook" which is included in the Company's Annual Report.

A recovery of U.S. new home construction, which is a key market for the Company's lumber, MDF and LVL, continues to be hampered by economic uncertainty in the U.S., including high levels of unemployment and lack of consumer confidence. This uncertainty is expected to continue at least over the next several quarters. Although Canadian solid wood product prices reflect a degree of balance between supply and demand, current weak SYP lumber prices reflect a continuing oversupply of that U.S. product.

The strength of the Canadian dollar and a weak U.S. housing market is likely to continue to result in the import of U.S.-produced plywood into Canada which will continue to put downward pressure on plywood prices. This trend is likely to be reversed either by a decline in the value of the Canadian dollar against the U.S. dollar or a recovery of the U.S. housing market.

Although there may be a short-term weakening of certain key pulp markets, the general recovery of the global economy and limited sources of new production should support reasonable price levels over the next few years. However, as new supply does come onto the market, pulp prices may face downward pressure.

Capital Requirements and Liquidity

West Fraser's cash requirements, other than for operating purposes, are primarily for interest payments, repayment of debt, additions to property, plant, equipment and timber, acquisitions and payment of dividends. In normal business cycles and in years without a major acquisition or debt repayment, cash on hand and cash provided by operations have normally been sufficient to meet these requirements.

As at September 30, 2010 the Company had cash and short-term investments, less cheques issued in excess of funds on deposit, of $213 million. Its net debt (total debt less cash) as a proportion of its net debt plus shareholders equity was 6% compared to 24% as at December 31, 2009 and 12% as at June 30, 2010.

The Company has $605 million in revolving lines of credit as at September 30, 2010, of which $16 million (net of deferred financing cost of $4 million) was drawn and $38 million was allocated to issued letters of credit supported by these facilities.



Selected Cash Flow Items ($ millions)
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Q3-10 Q2-10 YTD-10 Q3-09 YTD-09
--------------------------------------------------------------------------
Operating Activities
Cash provided before
working capital changes 79 130 298 15 6
Non-cash working
capital change 37 83 112 67 137
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Cash provided from
operating activities 116 213 410 82 143
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Financing Activities
Debt and operating loans 7 (123) (161) (10) (45)
Dividends and other (3) (1) (8) (1) (8)
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Cash provided from
(used in) financing
activities 4 (124) (169) (11) (53)
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Investing Activities
Additions to property,
plant, equipment & timber (10) (6) (44) (1) (11)
Other - net 3 1 3 1 4
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Cash used in investing
activities (7) (5) (41) - (7)
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Change in cash from
continuing operations 113 84 200 71 83
Change in cash from
discontinued operations 6 25 23 (2) (16)
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Change in cash 119 109 223 69 67
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Capital Structure and Debt Ratings

At September 30, 2010 the Common share equity of the Company consisted of 40,019,484 Common shares and 2,806,478 Class B Common shares for a total of 42,825,962 shares issued and outstanding.

All of West Fraser's debt is secured and, with the exception of current borrowings incurred by its joint venture newsprint mill, ranks equally in right of payment.

The Company has historically maintained an investment grade rating by each of its three rating agencies. In 2009, as a result of the significant and prolonged downturn in the U.S. housing industry, each of these agencies downgraded its rating of the Company. However, during the current quarter, Standard & Poor's raised its rating from BB to BB+ while maintaining the stable outlook. West Fraser believes that the upgrade reflects positively on its current low leverage and operating performance. The Company's current rating by each of these agencies is as follows:

Debt Ratings



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Agency Rating Outlook
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Dominion Bond Rating Service BB (high) Negative
Moody's Ba1 Negative
Standard & Poor's BB+ Stable
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Risks and Uncertainties

For a review of the risks and uncertainties to which the Company is subject, see the 2009 annual MD&A which is included in the Company's 2009 Annual Report.

New Accounting Pronouncements

International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board confirmed that International Financial Reporting Standards ("IFRS") will replace Canada's current GAAP for publicly accountable profit-oriented enterprises effective January 1, 2011. IFRS requires that in the year of implementation the comparative financial statements be restated to conform to the standards.

Update on IFRS Conversion Plan

West Fraser has commenced the process to transition from GAAP to IFRS. The Company has established a project team and a project plan has been developed and is being implemented. Regular progress reporting to the Audit Committee of the Board of Directors on the status of the IFRS implementation project has been instituted.

The project plan consists of three major phases, which at times will run concurrently:



-- Assessment phase - This phase involves identifying the differences
between GAAP and IFRS. These differences are then analysed to determine
the possible effect on the Company including changes required to
existing accounting policies and information systems, together with
analysis of policy choices under IFRS.

-- Design phase - During this phase additional specialist personnel will be
identified to assist as necessary on system and process changes.
Training requirements for staff will be assessed and appropriate
training programs will be completed. In addition, optional exemptions
for first time adopters of IFRS and accounting policy choices under IFRS
will be evaluated.

-- Implementation phase - This phase includes execution of changes to
information systems and business processes, obtaining authorization for
recommended exemptions for first time adopters and for accounting policy
choices. During this phase draft IFRS-compliant financial statements
will be completed for discussion and approval by senior management and
the Audit Committee. Additional training will be provided to financial
and other staff as necessary.


The assessment and design phases have been completed and the Company is now in the implementation phase of the project plan. All financial staff in key control positions have been provided with initial IFRS training with additional training being provided to members of the project team.

Implementation of changes to ensure that information systems are capable of dual reporting of GAAP and IFRS information for 2010 has been completed. In addition, changes to the Company's fixed asset system to account for impairment accounting under IFRS are scheduled to be implemented in the fourth quarter of the year.

The expected effect of accounting policy choices and system changes on disclosure controls and internal controls over financial reporting is being monitored and appropriate control changes will be made prior to implementation of IFRS.

Differences between IFRS and GAAP

The standard-setting body of IFRS has significant ongoing projects that could affect the ultimate differences between GAAP and IFRS and these changes may have a material effect on the Company's financial statements. As a result, the final effect on the Company's consolidated financial statements will only be measurable once all of the applicable IFRS standards as at the date of the final changeover are known.

There are a number of differences between GAAP and IFRS that have been identified. Many of the differences identified are not expected to have a material effect on the reported results or the financial position of West Fraser. However, there may be significant changes resulting from the initial adoption of IFRS and accounting policy choices for certain areas. The adoption of IFRS is not expected to materially affect cash flows or debt covenant calculations as current covenants contemplate that they will continue to be calculated based on current GAAP.

While the qualitative effects of IFRS on future financial statements have not yet been determined, the Company has identified a number of key areas which are likely to be significantly affected, including property, plant, equipment and timber, impairment of assets, employee future benefits, asset retirement obligations (including reforestation obligations) and presentation of financial statements.

The IFRS 1 (First-Time Adoption of International Financial Reporting Standards) exemptions being considered by the Company that could have a material effect on the opening balance sheet are as follows:



---------------------------------------------------------------------------
Exemption Application of Exemption
---------------------------------------------------------------------------
Business combinations The Company expects to apply this exemption
and will not restate any business
combinations that took place before January
1, 2010.
---------------------------------------------------------------------------
Employee future benefits The Company expects to apply this exemption
which will allow it to recognize cumulative
actuarial gains and losses at January 1, 2010
as an adjustment to retained earnings.
---------------------------------------------------------------------------
Cumulative translation The Company expects to apply this exemption
differences which will allow it to transfer the January
1, 2010 cumulative translation account to
retained earnings.
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The key areas which are likely to be significantly affected by the adoption of IFRS are as follows:



---------------------------------------------------------------------------
Standards Difference from GAAP Potential Impact
---------------------------------------------------------------------------
Presentation and IFRS requires The increased disclosure
disclosure significantly more requirements will cause
disclosure than Canadian the Company to change
GAAP for certain financial reporting
standards processes to ensure the
appropriate data is
collected.
---------------------------------------------------------------------------
Impairment of assets IFRS requires the The differences in
assessment of asset methodology will result
impairment to be based in asset impairments
on discounted cash-flows upon transition to IFRS.
while GAAP only requires In addition, the
discounting if the potential for asset
carrying value of assets impairments will
exceeds the undiscounted increase in the future.
cash flows.

IFRS also requires the
reversal of any previous
asset impairments,
excluding goodwill,
where circumstances have
changed. GAAP prohibits
the reversal of
impairment losses.
---------------------------------------------------------------------------
Share-based IFRS requires the The differences in
compensation measurement of the methodology will result
Company's share option in an increase to the
plan to be based on a share option liability.
valuation model while
GAAP applies the
intrinsic rate method.
---------------------------------------------------------------------------
Asset retirement IFRS requires asset The differences in
obligations retirement obligations methodology will result
to be adjusted to the in an adjustment to
discount rate in affect retained earnings upon
at each balance sheet transition to IFRS and
date while GAAP retains will increase earnings
the historical discount volatility in future
rate. periods.
---------------------------------------------------------------------------
Employee future IFRS provides an The Company may elect to
benefits accounting policy choice adjust actuarial gains
to adjust actuarial and losses to equity.
gains and losses to
equity or to apply the
corridor approach as
recommended by GAAP.
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Disclosure Controls and Procedures and Internal Control Over Financial Reporting

West Fraser's management, including the Chairman, President and Chief Executive Officer and the Executive Vice-President, Finance and Chief Financial Officer acknowledge responsibility for the design of disclosure controls and procedures (DC&P) and internal controls over financial reporting (ICFR) as those terms are defined in NI52-109.

There were no changes in internal controls over financial reporting that occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, West Fraser's internal control over financial reporting.

Additional Information

Additional information relating to the Company, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.



West Fraser Timber Co. Ltd.
Consolidated Balance Sheets
(in millions of Canadian dollars - unaudited)

As at As at
September 30, December 31,
2010 2009
--------------------------------------------------------------------------
Assets
Current assets
Cash and short-term investments $ 221.5 $ 12.0
Accounts receivable 201.0 200.6
Income taxes receivable - 67.6
Inventories (note 3) 344.2 407.7
Prepaid expenses 29.6 15.8
--------------------------------------------------------------------------
796.3 703.7
Property, plant, equipment and timber 1,531.0 1,624.1
Deferred pension costs 122.8 132.7
Goodwill 263.7 263.7
Other assets (note 4) 84.1 88.9
--------------------------------------------------------------------------
$ 2,797.9 $ 2,813.1
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Liabilities
Current liabilities
Cheques issued in excess of funds on deposit $ 8.6 $ 21.8
Operating loans (note 6) 15.7 78.7
Accounts payable and accrued liabilities 254.9 252.6
Income taxes payable 54.2 -
Current portion of asset retirement obligations 39.6 41.5
Current portion of long-term debt (note 6) 0.3 100.3
--------------------------------------------------------------------------
373.3 494.9
Long-term debt (note 6) 309.5 315.9
Other liabilities (note 7) 174.2 166.9
Future income taxes 204.0 217.2
--------------------------------------------------------------------------
1,061.0 1,194.9
--------------------------------------------------------------------------

Shareholders' equity
Share capital 600.1 599.7
Accumulated other comprehensive earnings (63.9) (59.8)
Retained earnings 1,200.7 1,078.3
--------------------------------------------------------------------------
1,736.9 1,618.2
--------------------------------------------------------------------------
$ 2,797.9 $ 2,813.1
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Number of Common shares and Class B Common shares outstanding at October
22, 2010 was 42,827,042


West Fraser Timber Co. Ltd.
Consolidated Statements of Earnings and Comprehensive Earnings
(in millions of Canadian dollars - unaudited)

July 1 to September 30 January 1 to September 30
2010 2009 2010 2009
--------------------------------------------------------------------------

Sales $ 706.8 $ 612.3 $ 2,166.8 $ 1,782.3
--------------------------------------------------------------------------

Costs and expenses
Cost of products sold 441.6 432.7 1,338.8 1,351.2
Freight and other
distribution costs 104.9 101.2 328.9 301.9
Export taxes 13.0 13.8 43.0 34.0
Amortization 46.5 63.6 144.1 186.7
Selling, general and
administration 38.1 23.7 93.5 70.7
Asset impairments - 16.9 - 16.9
--------------------------------------------------------------------------
644.1 651.9 1,948.3 1,961.4
--------------------------------------------------------------------------
Operating earnings 62.7 (39.6) 218.5 (179.1)
Other
Interest expense - net (6.3) (6.6) (20.8) (21.7)
Exchange gain on
long-term debt 10.7 27.7 6.6 44.2
Other income (expense) 0.8 (7.6) (4.6) (5.2)
--------------------------------------------------------------------------
Earnings from continuing
operations before
income taxes 67.9 (26.1) 199.7 (161.8)
Provision for income
taxes (note 10) (21.5) (73.8) (56.5) (40.4)
--------------------------------------------------------------------------
Earnings from continuing
operations 46.4 (99.9) 143.2 (202.2)
Earnings from discontinued
operations (note 2) (1.6) (98.6) (15.7) (118.5)
--------------------------------------------------------------------------
Earnings $ 44.8 $ (198.5) $ 127.5 $ (320.7)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Earnings per share
(dollars) (note 11)
Basic from continuing
operations $ 1.08 $ (2.34) $ 3.34 $ (4.72)
Diluted from
continuing operations $ 1.07 $ (2.34) $ 3.31 $ (4.72)
Basic after
discontinued operations $ 1.05 $ (4.64) $ 2.98 $ (7.49)
Diluted after
discontinued operations $ 1.04 $ (4.64) $ 2.95 $ (7.49)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Comprehensive earnings

Earnings $ 44.8 $ (198.5) $ 127.5 $ (320.7)
Other comprehensive
earnings:
Foreign exchange
translation on
investment in self-
sustaining foreign
operations (9.1) (33.9) (4.1) (49.0)
--------------------------------------------------------------------------
Comprehensive earnings $ 35.7 $ (232.4) $ 123.4 $ (369.7)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


West Fraser Timber Co. Ltd.
Consolidated Statement of Changes in Equity
(in millions of Canadian dollars - unaudited)

Issued capital
----------------------
Translation
Number of
of foreign Retained Total
shares Amount operations earnings equity
--------------------------------------------------------------------------
Balance -
January 1, 2009 42,805,086 $ 599.4 $ 1.7 $ 1,428.9 $ 2,030.0

Changes in equity
for 2009
Foreign exchange
translation loss
on investment in
self-sustaining
foreign operations - - (61.5) - (61.5)
Issuance of
Common shares 10,723 0.3 - - 0.3
Earnings for
the year - - - (340.8) (340.8)
Dividends - - - (9.8) (9.8)
--------------------------------------------------------------------------
Balance -
December 31, 2009 42,815,809 599.7 (59.8) 1,078.3 1,618.2

Changes in equity
for 2010
Foreign exchange
translation gain
on investment in
self-sustaining
foreign operations - - (4.1) - (4.1)
Issuance of
Common shares 10,153 0.4 - - 0.4
Earnings for
the period - - - 127.5 127.5
Dividends - - - (5.1) (5.1)
--------------------------------------------------------------------------
Balance -
September 30,
2010 42,825,962 $ 600.1 $ (63.9) $ 1,200.7 $ 1,736.9
--------------------------------------------------------------------------
--------------------------------------------------------------------------


West Fraser Timber Co. Ltd.
Consolidated Statements of Cash Flows
(in millions of Canadian dollars - unaudited)

July 1 to September 30 January 1 to September 30
2010 2009 2010 2009
--------------------------------------------------------------------------
Cash flows from operating
activities
Earnings from continuing
operations $ 46.4 $ (99.9) $ 143.2 $ (202.2)
Items not affecting cash
Amortization 46.5 63.6 144.1 186.7
Asset impairments - 16.9 - 16.9
Change in deferred
maintenance 4.5 12.4 10.7 6.1
Change in deferred
charges 3.2 (16.6) 12.2 (18.1)
Exchange gain on long-
term debt (10.7) (27.7) (6.6) (44.2)
Change in reforestation
obligations (6.9) (12.1) 0.2 (9.0)
Change in other long-
term liabilities (1.0) 0.8 5.8 1.6
Future income taxes (0.5) 76.8 (10.9) 64.4
(Gain) loss on asset
sales (2.7) 0.3 (2.7) (1.7)
Other (0.3) 0.7 1.8 5.7
--------------------------------------------------------------------------
78.5 15.2 297.8 6.2
Net change in non-cash
working capital items 37.5 66.4 112.0 136.7
--------------------------------------------------------------------------
116.0 81.6 409.8 142.9
--------------------------------------------------------------------------
Cash flows from
financing activities
Repayment of
long-term debt - (0.2) (100.3) (17.4)
Repayment of
operating loans 6.5 (9.6) (60.2) (27.2)
Dividends (2.5) (1.3) (5.1) (8.6)
Other - 0.2 (3.3) 0.2
--------------------------------------------------------------------------
4.0 (10.9) (168.9) (53.0)
--------------------------------------------------------------------------
Cash flows from
investing activities
Additions to property,
plant, equipment and
timber (10.1) (0.6) (43.6) (11.3)
Proceeds from disposals
of property, plant,
equipment and timber 2.8 - 2.8 2.0
Change in other assets 0.1 1.1 (0.3) 1.9
--------------------------------------------------------------------------
(7.2) 0.5 (41.1) (7.4)
--------------------------------------------------------------------------
Change in cash from
continuing operations 112.8 71.2 199.8 82.5
Change in cash from
discontinued
operations (note 2) 6.4 (2.1) 22.9 (15.8)
Cash - beginning of period 93.7 1.3 (9.8) 3.7
--------------------------------------------------------------------------
Cash - end of period $ 212.9 $ 70.4 $ 212.9 $ 70.4
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Cash consists of
Cash and short-term
investments $ 221.5 $ 70.4 $ 221.5 70.4
Cheques issued in excess
of funds on deposit (8.6) - (8.6) -
--------------------------------------------------------------------------
$ 212.9 $ 70.4 $ 212.9 $ 70.4
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Supplemental information:
Interest paid $ 9.6 $ 1.1 $ 16.2 $ 16.4
--------------------------------------------------------------------------
Income taxes received
(paid) - net $ (2.0) $ (1.7) $ 67.6 $ 22.2
--------------------------------------------------------------------------
--------------------------------------------------------------------------


West Fraser Timber Co. Ltd.

Notes to Consolidated Financial Statements

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

1. Basis of presentation

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") for interim financial statements and do not contain all of the information that is required for annual financial statements. Accordingly, they should be read in conjunction with the consolidated annual financial statements for the year ended December 31, 2009.

These interim consolidated financial statements follow the same accounting policies and methods of their application as the December 31, 2009 consolidated annual financial statements.

2. Discontinued operation

In October 2009, the Company announced its decision to permanently close the Kitimat linerboard and kraft paper mill. In January 2010, the mill ceased operations. Accordingly, current and prior period results for this operation have been reclassified to discontinued operations.

The results of the discontinued operation is as follows:



July 1 to January 1 to
September 30 September 30
2010 2009 2010 2009
--------------------------------------------------------------------------
Sales $ 5.7 $ 66.6 $ 70.5 $ 182.4
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Operating loss $ (1.8) $(144.3) $ (22.6) $ (170.0)
Gain on foreign currency
contracts - 2.4 - 9.8
Other income (expense) 0.1 0.7 1.2 (10.5)
--------------------------------------------------------------------------
Loss before income tax (1.7) (141.2) (21.4) (170.7)
Income tax recovery 0.1 42.6 5.7 52.2
--------------------------------------------------------------------------
Loss $ (1.6) $ (98.6) $ (15.7) $ (118.5)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Cash flows from operating
activities $ 6.4 $ (1.8) $ 22.8 $ (14.7)
Cash flows from investing
activities - (0.3) 0.1 (1.1)
--------------------------------------------------------------------------
Increase (decrease) in cash $ 6.4 $ (2.1) $ 22.9 $ (15.8)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


3. Inventories

Inventories at September 30, 2010 were written down by $8.5 million (June 30, 2010 - $6.7 million; December 31, 2009 - $16.0 million) to reflect net realizable value being lower than cost.

4. Other assets



September 30, December 31,
2010 2009
--------------------------------------------------------------------------
Power purchase agreement - net $ 75.0 $ 80.5
Advances for timber and timber deposits 4.0 5.7
Investments and other 5.1 2.7
--------------------------------------------------------------------------
$ 84.1 $ 88.9
--------------------------------------------------------------------------
--------------------------------------------------------------------------


5. Restructuring charges

Restructuring charges relate to the closure of the Kitimat linerboard and kraft paper mill and certain indefinitely idled sawmills. A reconciliation of restructuring charges included in accounts payable and accrued liabilities is as follows:



July 1 to January 1 to
September 30, September 30,
2010 2010
--------------------------------------------------------------------------
Accrued liability - beginning of period $ 14.2 $ 34.1
Paid during the period (2.3) (28.6)
Change in accrual (0.5) 5.9
--------------------------------------------------------------------------
Accrued liability - end of period $ 11.4 $ 11.4
--------------------------------------------------------------------------
--------------------------------------------------------------------------


6. Long-term debt and operating loans

Long-term debt



September 30, December 31,
2010 2009
--------------------------------------------------------------------------
Term note due March 2010;
interest at floating rates $ - $ 100.0
US$300 million senior notes due
October 2014; interest at 5.2% 308.7 315.3
Note payable due in instalments to 2020;
interest at 5.5% 2.5 2.7
--------------------------------------------------------------------------
311.2 418.0
Less:
Current portion (0.3) (100.3)
Deferred financing costs (1.4) (1.8)
--------------------------------------------------------------------------
$ 309.5 $ 315.9
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Operating loans

The Company has $605.0 million in revolving lines of credit, of which $15.7 million (net of deferred financing costs of $3.9 million) was drawn as at September 30, 2010. Interest is payable at floating rates based on Prime, U.S. base, Bankers' Acceptances or LIBOR at the Company's option. The Company has also issued letters of credit in the amount of $37.6 million which are supported by these facilities. The revolving lines of credit include a $600.0 million committed facility maturing in March 2012.

The $600.0 million committed facility and the US$300 million senior notes are secured by the Company's assets.

7. Other liabilities



September 30, December 31,
2010 2009
--------------------------------------------------------------------------
Post-retirement obligations $ 69.6 $ 65.7
Timber damage deposits 17.6 15.6
Reforestation obligations - long-term 57.4 51.9
Other asset retirement obligations 22.3 26.0
Other long-term obligations 7.3 7.7
--------------------------------------------------------------------------
$ 174.2 $ 166.9
--------------------------------------------------------------------------
--------------------------------------------------------------------------


8. Long-term incentive plan

In the first quarter of 2010, the Company introduced a phantom share unit plan as part of its long-term incentive compensation. Units issued under this plan will provide for future cash payments to certain officers and employees based on criteria such as employment vesting period, changes in the Company's share price between the grant date and the vesting period, and in some cases relative financial performance compared to a peer group of forest products companies.

The Company recorded equity-based compensation expense of $0.8 million for the three months ended September 30, 2010 and an expense of $5.3 million for the nine months ended September 30, 2010 with respect to this plan, which was recorded in selling, general and administration expense.

9. Employee future benefits

The total benefit cost of the Company's defined benefit pension plans was $7.2 million for the three months ended September 30, 2010 (three months ended September 30, 2009 - $9.5 million) and $23.3 million for the nine months ended September 30, 2010 (nine months ended September 30, 2009 - $28.8 million).

10. Income taxes

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



July 1 to September 30
2010 2009
Amount % Amount %
--------------------------------------------------------------------------
Income taxes at statutory rates $ (19.3) (28.5) $ 7.8 30.0
Non-taxable amounts 1.8 2.7 4.6 17.5
Rate differentials between
jurisdictions and on
specified activities 1.0 1.4 1.4 5.2
Rate differential on
loss carry backs - - 0.5 2.1
Change in valuation allowance (4.5) (6.5) (84.7) (323.6)
Other (0.5) (0.8) (3.4) (13.2)
--------------------------------------------------------------------------
Income tax provision $ (21.5) (31.7) $ (73.8) (281.9)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

January 1 to September 30
2010 2009
Amount % Amount %
--------------------------------------------------------------------------
Income taxes at statutory rates $ (56.9) (28.5) $ 48.5 30.0
Non-taxable amounts 1.2 0.6 7.3 4.5
Rate differentials between
jurisdictions and on specified
activities 3.1 1.6 9.3 5.7
Rate differential on loss
carry backs - - 3.7 2.3
Reduction in statutory income
tax rates - - 4.7 2.9
Change in valuation allowance (0.8) (0.4) (110.5) (68.3)
Other (3.1) (1.6) (3.4) (2.1)
--------------------------------------------------------------------------
Income tax provision $ (56.5) (28.3) $ (40.4) (25.0)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


11. 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 assume the exercise of share options using the treasury stock method.



July 1 to September 30
2010 2009
From After From After
continuing discontined continuing discontined
operations operations operations operations
--------------------------------------------------------------------------
Earnings available
to shareholders $ 46.4 $ 44.8 $ (99.9) $ (198.5)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average
number of shares
Basic 42,824,410 42,824,410 42,808,194 42,808,194
Share options 320,841 320,841 - -
--------------------------------------------------------------------------
Diluted 43,145,251 43,145,251 42,808,194 42,808,194
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Earnings per
share (dollars)
Basic $ 1.08 $ 1.05 $ (2.34) $ (4.64)
Diluted $ 1.07 $ 1.04 $ (2.34) $ (4.64)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

January 1 to September 30
2010 2009
From After From After
continuing discontined continuing discontined
operations operations operations operations
--------------------------------------------------------------------------
Earnings available
to shareholders $ 143.2 $ 127.5 $ (202.2) $ (320.7)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average
number of shares
Basic 42,821,098 42,821,098 42,806,122 42,806,122
Share options 394,961 394,961 - -
--------------------------------------------------------------------------
Diluted 43,216,059 43,216,059 42,806,122 42,806,122
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Earnings per
share (dollars)
Basic $ 3.34 $ 2.98 $ (4.72) $ (7.49)
Diluted $ 3.31 $ 2.95 $ (4.72) $ (7.49)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


12. Derivative financial instruments

From time to time, the Company uses derivatives to manage its exposure to U.S. dollar exchange fluctuations and commodity prices. The Company does not utilize derivative financial instruments for trading or speculative purposes and it does not apply hedge accounting.

The foreign currency contracts outstanding at September 30, 2010 were as follows:



Average rate
Term US$ Cdn$/US$
---------------------------------------------------------------------------
0 to 2 months US dollar forwards 0.1 1.070
---------------------------------------------------------------------------
---------------------------------------------------------------------------


13. Segmented information



Pulp & Corporate Consoli-
Lumber Panels paper & other dated
--------------------------------------------------------------------------
July 1, 2010 to
September 30, 2010

Sales at market prices
To external customers $ 397.9 $ 105.2 $ 203.7 $ - $ 706.8
--------
--------
To other segments 25.3 2.1 - -
----------------------------------------------------------------
$ 423.2 $ 107.3 $ 203.7 $ -
----------------------------------------------------------------
----------------------------------------------------------------

EBITDA (1) $ 48.6 $ 19.6 $ 54.6 $ (13.6) $ 109.2
Amortization 27.0 5.2 13.6 0.7 46.5
--------------------------------------------------------------------------
Operating earnings 21.6 14.4 41.0 (14.3) 62.7
Interest expense - net (3.8) (0.6) (1.8) (0.1) (6.3)
Exchange gain on
long-term debt - - - 10.7 10.7
Other income (expense) 2.3 (0.3) (2.3) 1.1 0.8
--------------------------------------------------------------------------
Earnings from
continuing operations
before income taxes $ 20.1 $ 13.5 $ 36.9 $ (2.6) $ 67.9
--------------------------------------------------------------------------
--------------------------------------------------------------------------

July 1, 2009 to
September 30, 2009

Sales at market prices
To external customers $ 335.8 $ 102.0 $ 174.5 $ - $ 612.3
--------
--------
To other segments 25.8 1.7 - -
----------------------------------------------------------------
$ 361.6 $ 103.7 $ 174.5 $ -
----------------------------------------------------------------
----------------------------------------------------------------

EBITDA (1) $ 3.1 $ 19.0 $ 18.1 $ 0.7 $ 40.9
Amortization 38.8 7.5 16.4 0.9 63.6
Asset impairments 16.9 - - - 16.9
--------------------------------------------------------------------------
Operating earnings (52.6) 11.5 1.7 (0.2) (39.6)
Interest expense - net (3.9) (0.5) (1.7) (0.5) (6.6)
Exchange gain on
long-term debt - - - 27.7 27.7
Other expense (1.0) (0.7) (5.0) (0.9) (7.6)
--------------------------------------------------------------------------
Earnings from
continuing operations
before income taxes $ (57.5) $ 10.3 $ (5.0) $ 26.1 $ (26.1)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Non GAAP measure:
EBITDA is defined as operating earnings plus amortization and asset
impairments.

Pulp & Corporate Consoli-
Lumber Panels paper & other dated
--------------------------------------------------------------------------
January 1, 2010 to
September 30, 2010

Sales at market prices
To external customers $ 1,224.6 $ 309.2 $ 633.0 $ - $2,166.8
--------
--------
To other segments 72.0 5.9 - -
----------------------------------------------------------------
$ 1,296.6 $ 315.1 $ 633.0 $ -
----------------------------------------------------------------
----------------------------------------------------------------

EBITDA (1) $ 189.5 $ 50.8 $ 143.3 $ (21.0) $ 362.6
Amortization 84.6 16.1 41.1 2.3 144.1
--------------------------------------------------------------------------
Operating earnings 104.9 34.7 102.2 (23.3) 218.5
Interest expense - net (12.9) (2.4) (5.5) - (20.8)
Exchange gain on
long-term debt - - - 6.6 6.6
Other income (expense) 0.2 (0.7) (5.1) 1.0 (4.6)
--------------------------------------------------------------------------
Earnings from
continuing operations
before income taxes $ 92.2 $ 31.6 $ 91.6 $ (15.7) $ 199.7
--------------------------------------------------------------------------
--------------------------------------------------------------------------

January 1, 2009 to
September 30, 2009

Sales at market prices
To external customers $ 984.2 $ 298.4 $ 499.7 $ - $1,782.3
--------
--------
To other segments 72.2 5.1 - -
----------------------------------------------------------------

$ 1,056.4 $ 303.5 $ 499.7 $ -
----------------------------------------------------------------
----------------------------------------------------------------

EBITDA (1) $ (42.6) $ 31.4 $ 29.7 $ 6.0 $ 24.5
Amortization 108.5 25.1 50.5 2.6 186.7
Asset impairments 16.9 - - - 16.9
--------------------------------------------------------------------------
Operating earnings (168.0) 6.3 (20.8) 3.4 (179.1)
Interest expense - net (14.2) (2.4) (4.7) (0.4) (21.7)
Exchange gain on
long-term debt - - - 44.2 44.2
Other income (expense) (2.0) (1.1) (6.4) 4.3 (5.2)
--------------------------------------------------------------------------
Earnings from
continuing operations
before income taxes $ (184.2) $ 2.8 $ (31.9) $ 51.5 $ (161.8)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Non GAAP measure:
EBITDA is defined as operating earnings plus amortization and asset
impairments.


Contact Information

  • West Fraser Timber Co. Ltd.
    Gerry Miller
    Executive Vice-President, Finance & Chief Financial Officer
    (604) 895-2700
    or
    West Fraser Timber Co. Ltd.
    Rodger Hutchinson
    Vice-President, Corporate Controller
    (604) 895-2700
    (604) 681-6061 (FAX)
    www.westfraser.com