West Fraser Announces Fourth Quarter Results

Marketwired

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 14, 2013) - West Fraser Timber Co. Ltd. (WFT.TO) today reported earnings of $22 million or $0.51 per share on sales of $773 million in the fourth quarter of 2012 and earnings of $87 million or $2.02 per share, on sales of $3 billion for 2012.

These results compare with previous periods as follows:

($ millions except earnings per
share ("EPS"))
2012 2011
Q4 Q3 YTD YTD Q4
Sales 773 772 3,000 2,762 650
EBITDA1 76 102 279 226 18
Operating earnings 37 66 127 58 (22)
Earnings (loss) from continuing operations 22 55 87 27 (11)
Basic EPS from continuing operations ($) 0.51 1.27 2.02 0.63 (0.25)
Adjusted earnings (loss) from continuing operations2 53 55 138 23 (15)
Adjusted basic EPS from continuing operations ($)2 1.25 1.27 3.22 0.54 (0.35)
Earnings 22 55 87 73 6
Basic EPS ($) 0.51 1.27 2.02 1.70 0.14
Diluted EPS ($) 0.51 1.27 2.02 1.47 0.14
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 2012 results for details of adjustments.      

"In the second half of 2012 we saw encouraging signs that the U.S. housing market is recovering," said Hank Ketcham, West Fraser's Chairman and CEO. "This has led to gradual improvement of results from our building products operations."

Operational Results

In the quarter our lumber operations generated operating earnings of $52 million (Q3 -$37 million) and EBITDA of $75 million (Q3 - $58 million). The improvement in our results reflects improved prices for SPF and SYP lumber.

The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $7 million (Q3 -$22 million) and EBITDA of $12 million (Q3 - $25 million) as Canadian dollar plywood prices weakened from third quarter levels.

Pulp and paper operations generated operating earnings in the quarter of $13 million (Q3 - $17 million) and EBITDA of $24 million (Q3 - $28 million). Improved NBSK pricing was offset by weakening BCTMP and newsprint markets.

Outlook

We are approaching 2013 with guarded optimism that the long-awaited U.S. housing recovery is taking hold. We will continue to invest in our existing facilities in order to maintain and improve our competitiveness.

Leadership Succession

The Company also announced that, as part of its ongoing leadership succession process, effective March 1, 2013 Hank Ketcham will assume the role of Executive Chairman and Ted Seraphim, who is currently the Company's President and Chief Operating Officer, will be appointed President and Chief Executive Officer. Mr. Seraphim will also be nominated for election as a director of the Company at the Company's April 30, 2013 Annual General Meeting.

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

The Company's consolidated financial statements for the year ended December 31, 2012 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, 2013 to shareholders of record on March 22, 2013.

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 2012 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 15, 2013 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.

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, except where indicated - unaudited)
     
  December 31
2012
December 31
2011
 
Assets    
Current assets    
Cash and short-term investments $ 102 $ 68
Receivables   251   266
Income taxes receivable   -   4
Inventories (note 3)   459   398
Prepaid expenses   11   9
    823   745
Property, plant and equipment   959   936
Timber licences   496   490
Goodwill and other intangibles   330   336
Other assets   10   11
  $ 2,618 $ 2,518
         
Liabilities        
Current liabilities        
Payables and accrued liabilities $ 322 $ 274
Income taxes payable   20   -
Reforestation and decommissioning obligations   43   41
    385   315
Long-term debt   300   306
Other liabilities   313   270
Deferred income taxes   128   144
    1,126   1,035
         
Shareholders' Equity        
Share capital   602   601
Accumulated other comprehensive earnings   (9)   (6)
Retained earnings   899   888
    1,492   1,483
  $ 2,618 $ 2,518
 
Number of Common shares and Class B Common shares outstanding at February 14, 2013 was 42,863,296.     
 
 
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
  2012 2011 2012 2011
         
Retained earnings        
Balance - beginning of period $ 836 $ 902 $ 888 $ 943
Actuarial gain (loss) on employee future benefits (net of tax)   47   (14)   (52)   (104)
Earnings for the period   22   6   87   73
Dividends   (6)   (6)   (24)   (24)
Balance - end of period $ 899 $ 888 $ 899 $ 888
                 
Accumulated other comprehensive earnings                
Balance - beginning of period $ (12) $ 1 $ (6) $ (10)
Translation gain (loss) on foreign operations   3   (7)   (3)   4
Balance - end of period $ (9) $ (6) $ (9) $ (6)
                 
Share capital                
Balance - beginning of period $ 602 $ 601 $ 601 $ 601
Issuance of Common shares   -   -   1   -
Balance - end of period $ 602 $ 601 $ 602 $ 601
                 
Shareholders' equity $ 1,492 $ 1,483 $ 1,492 $ 1,483
                 
                 
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
  2012 2011 2012 2011
         
Sales $ 773 $ 650 $ 3,000 $ 2,762
                 
Costs and expenses                
Cost of products sold   505   476   2,020   1,917
Freight and other distribution costs   118   111   477   460
Export taxes   11   15   48   58
Amortization   39   40   152   168
Selling, general and administration   33   26   115   104
Equity-based compensation   30   4   61   (3)
    736   672   2,873   2,704
Operating earnings   37   (22)   127   58
Finance expense   (5)   (5)   (19)   (20)
Exchange gain (loss) on long-term debt   (3)   9   7   (7)
Other income   2   1   -   14
Earnings from continuing operations before tax provision   31   (17)   115   45
Tax recovery (provision) (note 4)   (9)   6   (28)   (18)
Earnings from continuing operations   22   (11)   87   27
Earnings from discontinued operations (note 5)   -   17   -   46
Earnings $ 22 $ 6 $ 87 $ 73
                 
Earnings per share (dollars) (note 6)                
Basic from continuing operations $ 0.51 $ (0.25) $ 2.02 $ 0.63
Diluted from continuing operations $ 0.51 $ (0.25) $ 2.02 $ 0.41
Basic after discontinued operations $ 0.51 $ 0.14 $ 2.02 $ 1.70
Diluted after discontinued operations $ 0.51 $ 0.14 $ 2.02 $ 1.47
                 
Comprehensive earnings                
Earnings $ 22 $ 6 $ 87 $ 73
Other comprehensive earnings                
Translation gain (loss) on foreign operations   3   (7)   (3)   4
Actuarial gain (loss) on employee future benefits   47   (14)   (52)   (104)
Comprehensive earnings $ 72 $ (15) $ 32 $ (27)
                 
                 
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
  2012 2011 2012 2011
Operating activities        
Earnings from continuing operations $ 22 $ (10) $ 87 $ 27
  Adjustments                
  Amortization   39   40   152   168
  Finance expense   5   5   19   20
  Exchange loss (gain) on long-term debt   3   (9)   (7)   7
  Tax provision (recovery)   9   (6)   28   18
  Income taxes received (paid)   (1)   -   2   (75)
  Reforestation and decommissioning obligations   (3)   -   (2)   6
  Employee future benefits expense   9   7   38   35
  Contributions to employee future benefit plans   (39)   (64)   (64)   (93)
  Other   1   (3)   (8)   (9)
Changes in non-cash working capital                
  Receivables   2   32   (22)   8
  Inventories   (36)   (40)   (58)   (24)
  Prepaid expenses   2   4   (2)   (1)
  Payables and accrued liabilities   8   (7)   32   (2)
Cash flows from operating activities   21   (51)   195   85
                 
Financing activities                
Repayment of operating loans   -   -   -   (15)
Finance expense paid   (8)   (9)   (18)   (20)
Dividends   (6)   (6)   (24)   (24)
Other   (1)   -   -   -
Cash flows from financing activities   (15)   (15)   (42)   (59)
                 
Investing activities                
Acquisition   (30)   -   (30)   -
Additions to capital assets   (44)   (89)   (150)   (213)
Proceeds from Green Transformation Program   4   5   49   37
Proceeds from disposal of capital assets   -   -   9   10
Other   2   1   3   2
Cash flows from investing activities   (68)   (83)   (119)   (164)
                 
Change in cash from continuing operations   (62)   (149)   34   (138)
Change in cash from discontinued operations   -   9   -   45
Cash - beginning of period   164   208   68   161
Cash - end of period $ 102 $ 68 $ 102 $ 68

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. We are listed 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 and using the same accounting policies and methods of their application as the December 31, 2012 annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with the Company's 2012 annual financial statements.

3. Inventories

Inventories at December 31, 2012 were written down by $3 million (September 30, 2012 - $6 million; December 31, 2011 - $15 million) to reflect net realizable value being lower than cost.

4. Tax provision

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

  October 1 to December 31 January 1 to December 31
    2012   2011   2012   2011
Income tax expense at statutory rate of 25% (2011 - 26.5%) $ (8) $ 4 $ (29) $ (12)
Non-taxable amounts   (5)   2   (9)   2
Rate differentials between jurisdictions and on specified activities   -   1   (1)   6
Recognized (unrecognized) tax assets   3   (1)   11   (12)
Other   1   -   -   (2)
Tax recovery (provision) $ (9) $ 6 $ (28) $ (18)

5. Discontinued operations

We permanently closed our linerboard and kraft paper mill, located in Kitimat, B.C. in January 2010 and the windup was substantially completed in December 2011. 

6. 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
  2012 2011
  From continuing operations After discontinued operations From continuingoperations After discontinued operations
Earnings                
Basic $ 22 $ 22 $ (11) $ 6
Share option expense   23   23   3   3
Diluted $ 45 $ 45 $ (8) $ 9
                 
Weighted average number of shares (thousands)                
Basic   42,862   42,862   42,845   42,845
Share options   675   675   280   280
Diluted   43,537   43,537   43,125   43,125
Earnings per share (dollars)                
Basic $ 0.51 $ 0.51 $ (0.25) $ 0.14
Diluted $ 0.51 $ 0.51 $ (0.25) $ 0.14
     
     
    January 1 to December 31
    2012   2011
    From continuing operations   After discontinued operations   From continuing operations   After discontinued operations
Earnings                
Basic $ 87 $ 87 $ 27 $ 73
Share option expense (recovery)   45   45   (6)   (6)
Equity settled share option adjustment   (3)   (3)   (3)   (3)
Diluted $ 129 $ 129 $ 18 $ 64
                 
Weighted average number of shares (thousands)                
Basic   42,857   42,857   42,840   42,840
Share options   555   555   434   434
Diluted   43,412   43,412   43,274   43,274
Earnings per share (dollars)                
Basic $ 2.02 $ 2.02 $ 0.63 $ 1.70
Diluted $ 2.02 $ 2.02 $ 0.41 $ 1.47

 7. Segmented information

      Pulp &
paper
Corporate
& other
 
  Lumber Panels Consolidated
October 1, 2012 to December 31, 2012          
           
Sales at market prices          
To external customers $ 477 $ 109 $ 187 $ - $ 773
To other segments   18   1   -   -    
  $ 495 $ 110 $ 187 $ -    
                     
EBITDA 1 $ 75 $ 12 $ 24 $ (35) $ 76
Amortization   (23)   (5)   (11)   -   (39)
Operating earnings   52   7   13   (35)   37
Finance expense   (2)   (1)   (2)   -   (5)
Exchange loss on long-term debt   -   -   -   (3)   (3)
Other income (expense)   (1)   -   4   (1)   2
Earnings from continuing operations before tax provision $ 49 $ 6 $ 15 $ (39) $ 31
1. Non-IFRS measure:          
EBITDA is defined as operating earnings plus amortization.      
             
             
            Pulp &
paper
  Corporate
& other
   
    Lumber   Panels   Consolidated
October 1, 2011 to December 31, 2011                    
                     
Sales at market prices                    
To external customers $ 370 $ 93 $ 187 $ - $ 650
To other segments   22   1   -   -    
  $ 392 $ 94 $ 187 $ -    
                     
EBITDA 1 $ (8) $ 4 $ 26 $ (4) $ 18
Amortization   (22)   (4)   (13)   (1)   (40)
Operating earnings   (30)   -   13   (5)   (22)
Finance expense   (2)   (1)   (1)   (1)   (5)
Exchange gain on long-term debt   -   -   -   9   9
Other income (expense)   2   -   (6)   5   1
Earnings from continuing operations before tax provision $ (30) $ (1) $ 6 $ 8 $ (17)
1. Non-IFRS measure:          
EBITDA is defined as operating earnings plus amortization.      
         
         
      Pulp &
paper
Corporate
& other
 
  Lumber Panels Consolidated
January 1, 2012 to December 31, 2012          
           
Sales at market prices          
  To external customers $ 1,783 $ 442 $ 775 $ - $ 3,000
  To other segments   72   6   -   -    
  $ 1,855 $ 448 $ 775 $ -    
                     
EBITDA 1 $ 180 $ 55 $ 109 $ (65) $ 279
Amortization   (86)   (16)   (48)   (2)   (152)
Operating earnings   94   39   61   (67)   127
Finance expense   (10)   (3)   (6)   -   (19)
Exchange gain on long-term debt   -   -   -   7   7
Other income (expense)   (4)   -   1   3   -
Earnings from continuing operations before tax provision $ 80 $ 36 $ 56 $ (57) $ 115
1. Non-IFRS measure:          
EBITDA is defined as operating earnings plus amortization.      
             
             
            Pulp &   Corporate    
    Lumber   Panels   paper   & other   Consolidated
January 1, 2011 to December 31, 2011                    
                     
Sales at market prices                    
  To external customers $ 1,579 $ 370 $ 813 $ - $ 2,762
  To other segments   91   8   -   -    
  $ 1,670 $ 378 $ 813 $ -    
                     
EBITDA 1 $ 65 $ 8 $ 148 $ 5 $ 226
Amortization   (85)   (15)   (65)   (3)   (168)
Operating earnings   (20)   (7)   83   2   58
Finance expense   (11)   (3)   (6)   -   (20)
Exchange loss on long-term debt   -   -   -   (7)   (7)
Other income   10   -   3   1   14
Earnings from continuing operations before tax provision $ (21) $ (10) $ 80 $ (4) $ 45
1. Non-IFRS 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
    2012   2011   2012   2011
United States $ 368 $ 318 $ 1,435 $ 1,303
Canada   194   157   747   652
China   139   96   513   456
Other Asia   47   53   201   229
Other   25   26   104   122
  $ 773 $ 650 $ 3,000 $ 2,762

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

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

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