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Press release from Marketwire

West Fraser ("WFT") Announces Fourth Quarter Results

Thursday, February 16, 2012

West Fraser ("WFT") Announces Fourth Quarter Results17:01 EST Thursday, February 16, 2012VANCOUVER, 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"))20112010Q4Q3YTDYTDQ4Sales6507052,7622,886719EBITDA1186622646082Operating earnings(22)235827543Earnings (loss) from continuing operations(11)62718228Basic EPS from continuing operations ($)(0.25)0.140.634.240.65Adjusted earnings (loss) from continuing operations2(15)22319937Adjusted basic EPS from continuing operations ($)2(0.35)0.050.544.650.86Earnings after discontinued operations6377318643Basic EPS after discontinued operations ($)0.140.871.704.351.00Diluted EPS after discontinued operations ($)0.140.441.474.351.00In 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. 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 ResultsIn 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.OutlookWe 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 DeclaredThe 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 CompanyWest 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 StatementsThis 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 CallInvestors 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)DecemberDecember313120112010AssetsCurrent assetsCash and short-term investments$ 67.8$ 163.1Receivables266.7246.0Income taxes receivable4.4-Inventories (note 4)397.8372.4Prepaid expenses8.67.6745.3789.1Property, plant and equipment935.7924.7Timber licences490.1509.6Goodwill and other intangibles336.6345.4Other assets29.641.5$ 2,537.3$ 2,610.3LiabilitiesCurrent liabilitiesCheques issued in excess of funds on deposit$ -$ 2.4Operating loans-8.8Payables and accrued liabilities273.9271.0Income taxes payable-58.3Reforestation and decommissioning41.048.2Current portion of long-term debt0.30.3315.2389.0Long-term debt306.3299.5Other liabilities289.0225.7Deferred income taxes143.8 162.31,054.31,076.5Shareholders' equityShare capital600.9600.5Accumulated other comprehensive earnings(5.5)(9.6)Retained earnings887.6942.91,483.01,533.8$ 2,537.3$ 2,610.3Number 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 31January 1 to December 312011201020112010Sales$ 650.0$ 719.1$ 2,762.1$ 2,885.9Costs and expensesCost of products sold475.7460.71,916.61,787.0Freight and other distribution costs111.2112.3460.3441.2Export taxes14.916.757.759.7Amortization40.038.2167.7185.0Selling, general and administration26.228.6104.7107.0Equity-based compensation4.119.3(2.7)31.4672.1675.82,704.32,611.3Operating earnings(22.1)43.357.8274.6Interest expense(4.7)(6.0)(20.1)(27.7)Exchange gain (loss) on long-term debt9.310.3(6.7)16.9Other income (expense)1.1(3.8)13.9(8.5)Earnings from continuing operations before tax provision(16.4)43.844.9255.3Tax provision (note 5)5.8(16.0)(18.1)(73.5)Earnings from continuing operations(10.6)27.826.8181.8Earnings from discontinued operations (note 6)16.715.245.94.6Earnings$ 6.1$ 43.0$ 72.7$ 186.4Earnings per share (dollars) (note 7)Basic from continuing operations$ (0.25)$ 0.65$ 0.63$ 4.24Diluted from continuing operations$ (0.25)$ 0.65$ 0.41$ 4.24Basic after discontinued operations$ 0.14$ 1.00$ 1.70$ 4.35Diluted after discontinued operations$ 0.14$ 1.00$ 1.47$ 4.35Comprehensive earningsEarnings$ 6.1$ 43.0$ 72.7$ 186.4Other comprehensive earningsTranslation 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)$ 117.7West Fraser Timber Co. Ltd.Condensed Consolidated Statement of Changes in Equity(in millions of Canadian dollars - unaudited)October 1 to December 31January 1 to December 312011201020112010Retained earningsBalance - beginning of period$ 902.0$ 919.5$ 942.9$ 823.3Actuarial loss on employee future benefits(14.4)(17.0)(104.0)(59.1)Earnings for the period6.143.072.7186.4Dividends(6.1)(2.6)(24.0)(7.7)Balance - end of period$ 887.6$ 942.9$ 887.6$ 942.9Accumulated other comprehensive earningsBalance - 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 capitalBalance - beginning of period$ 600.8$ 600.1$ 600.5$ 599.7Issuance of Common shares0.10.40.40.8Balance - end of period$ 600.9$ 600.5$ 600.9$ 600.5Shareholders' equity$ 1,483.0$ 1,533.8$ 1,483.0$ 1,533.8West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Cash Flows(in millions of Canadian dollars - unaudited)October 1 to December 31January 1 to December 312011201020112010Operating activitiesEarnings from continuing operations$ (10.6)$ 27.8$ 26.8$ 181.8AdjustmentsAmortization40.038.2167.7185.0Interest expense4.76.020.127.7Exchange (gain) loss on long-term debt(9.3)(10.3)6.7(16.9)Tax provision(5.8)16.018.173.5Income taxes (paid) received-(1.5)(75.1)66.1Reforestation and decommissioning obligations(0.1)5.46.33.6Employee future benefits expense5.911.135.028.9Contributions to employee future benefit plans(64.7)(58.4)(93.2)(66.2)Other0.9(2.3)(7.9)(12.9)Changes in non-cash working capitalReceivables31.4(44.6)7.7(87.0)Inventories(40.3)(31.2)(23.9)(14.9)Prepaid expenses4.55.1(0.9)2.3Payables and accrued liabilities(7.2)23.8(2.4)50.1Cash flows from operating activities(50.6)(14.9)85.0421.1Financing activitiesRepayment of long-term debt--(0.3)(100.3)Proceeds from (repayment of) operating loans0.2(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 activitiesAdditions to capital assets(89.7)(18.6)(213.4)(89.1)Proceeds from Green Transformation Program5.40.236.91.6Proceeds from disposal of capital assets0.5(0.1)10.43.2Other-0.51.81.0Cash flows from investing activities(83.8)(18.0)(164.3)(83.3)Change in cash from continuing operations(150.1)(51.7)(138.6)136.2Change in cash from discontinued operations9.9(0.5)45.734.3Cash - beginning of period208.0212.9160.7(9.8)Cash - end of period$ 67.8$ 160.7$ 67.8$ 160.7Cash consists ofCash and short-term investments$ 67.8$ 163.1Cheques issued in excess of funds on deposit-(2.4)$ 67.8$ 160.7West Fraser Timber Co. Ltd.Notes to Condensed Consolidated Interim Financial Statements(figures are in millions of dollars except where indicated - unaudited)1. Nature of operationsThe 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 complianceThese 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. InventoriesInventories at December 31, 2011 were written down by $14.9 million (September 30, 2011 - $10.7 million; December 31, 2010 - $3.8 million) to reflect net realizable value being lower than cost.5. Tax provisionThe Company's effective tax rate on earnings from continuing operations is as follows:October 1 to December 3120112010Amount%Amount%Income taxes at statutory rates 1$ 4.426.5$ (12.5)(28.5)Non taxable amounts1.48.6(3.6)(8.2)Rate differentials between jurisdictions and on specified activities1.06.13.58.0Unrecognized tax assets(0.7)(4.2)(4.1)(9.4)Other(0.3)(1.8)0.71.6Tax provision$ 5.835.2$ (16.0)(36.5)January 1 to December 3120112010Amount%Amount%Income taxes at statutory rates 1$ (11.9)(26.5)$ (72.8)(28.5)Non taxable amounts1.73.8(2.4)(0.9)Rate differentials between jurisdictions and on specified activities5.913.15.62.2Unrecognized 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 operationThe 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 31January 1 to December 312011201020112010Sales$ -$ 1.3$ 0.2$ 71.8Operating earnings$ -$ 6.8$ -$ (8.4)Other income21.914.456.415.3Earnings before tax provision21.921.256.46.9Tax provision(5.2)(6.0)(10.5)(2.3)Earnings$ 16.7$ 15.2$ 45.9$ 4.6During the year the Company sold its remaining assets associated with Kitimat for proceeds of $50.0 million resulting in a gain of $48.7 million.7. Earnings per shareBasic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B common shares outstanding.Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the actual share option expense (recovery) charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive and diluted earnings per share are deemed to be the same as basic earnings per share.October 1 to December 3120112010FromAfterFromAftercontinuingdiscontinuedcontinuingdiscontinuedoperationsoperationsoperationsoperationsEarningsBasic$ (10.6)$ 6.1$ 27.8$ 43.0Share option expense3.23.216.716.7Equity settled share option adjustment(0.3)(0.3)(0.3)(0.3)Diluted$ (7.7)$ 9.0$ 44.2$ 59.4Weighted average number of sharesBasic42,844,57142,844,57142,828,50242,828,502Share options280,190280,190474,178474,178Diluted43,124,76143,124,76143,302,68043,302,680Earnings per share (dollars)Basic$ (0.25)$ 0.14$ 0.65$ 1.00Diluted$ (0.25)$ 0.14$ 0.65$ 1.00January 1 to December 3120112010FromAfterFromAftercontinuingdiscontinuedcontinuingdiscontinuedoperationsoperationsoperationsoperationsEarningsBasic$ 26.8$ 72.7$ 181.8$ 186.4Share option (recovery) expense(6.2)(6.2)23.523.5Equity settled share option adjustment(3.1)(3.1)(1.1)(1.1)Diluted$ 17.5$ 63.4$ 204.2$ 208.8Weighted average number of sharesBasic42,840,18042,840,18042,822,94942,822,949Share options433,685433,685424,557424,557Diluted43,273,86543,273,86543,247,50643,247,506Earnings per share (dollars)Basic$ 0.63$ 1.70$ 4.24$ 4.35Diluted$ 0.41$ 1.47$ 4.24$ 4.358. Segmented informationLumberPanelsPulp & paperCorporate & otherConsolidatedOctober 1, 2011 to December 31, 2011Sales at market pricesTo external customers$ 370.8$ 92.2$ 187.0$ -$ 650.0To other segments21.02.0--$ 391.8$ 94.2$ 187.0$ -EBITDA 1$ (7.6)$ 3.6$ 26.5$ (4.6)$ 17.9Amortization(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---9.39.3Other income (expense)2.00.1(5.5)4.51.1Earnings from continuing operations before tax provision$ (29.8)$ (0.8)$ 5.9$ 8.3$ (16.4)October 1, 2010 to December 31, 2010Sales at market pricesTo external customers$ 396.8$ 92.0$ 230.3$ -$ 719.1To other segments21.62.3--$ 418.4$ 94.3$ 230.3$ -EBITDA 1$ 41.1$ 6.4$ 48.8$ (14.8)$ 81.5Amortization(15.8)(3.3)(18.4)(0.7)(38.2)Operating earnings25.33.130.4(15.5)43.3Interest expense(3.8)(0.4)(1.8)-(6.0)Exchange gain on long-term debt---10.310.3Other 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)$ 43.8January 1, 2011 to December 31, 2011Sales at market pricesTo external customers$ 1,579.4$ 369.5$ 813.2$ -$ 2,762.1To other segments90.78.6--$ 1,670.1$ 378.1$ 813.2$ -EBITDA 1$ 65.2$ 7.8$ 148.0$ 4.5$ 225.5Amortization(84.7)(15.4)(65.0)(2.6)(167.7)Operating earnings(19.5)(7.6)83.01.957.8Interest expense(10.8)(3.2)(6.1)-(20.1)Exchange loss on long-term debt---(6.7)(6.7)Other income9.80.23.30.613.9Earnings from continuing operations before tax provision$ (20.5)$ (10.6)$ 80.2$ (4.2)$ 44.9January 1, 2010 to December 31, 2010Sales at market pricesTo external customers$ 1,621.4$ 401.2$ 863.3$ -$ 2,885.9To other segments93.68.2--$ 1,715.0$ 409.4$ 863.3$ -EBITDA 1$ 232.3$ 57.6$ 202.9$ (33.2)$459.6Amortization(94.0)(17.7)(70.3)(3.0)(185.0)Operating earnings138.339.9132.6(36.2)274.6Interest expense(17.4)(2.8)(7.4)(0.1)(27.7)Exchange gain on long-term debt---16.916.9Other (expense) income(0.2)(1.0)(7.6)0.3(8.5)Earnings from continuing operations before tax provision$ 120.7$ 36.1$ 117.6$ (19.1)$255.31. Non GAAP measure:EBITDA is defined as operating earnings plus amortization.The geographic distribution of external sales is as follows:October 1 to December 31January 1 to December 312011201020112010United States$ 317.6$ 327.3$ 1,303.2$ 1,409.8Canada156.9166.8651.6704.1China96.1132.0456.2354.3Other Asia53.043.4229.4281.8Other26.449.6121.7135.9$ 650.0$719.1$ 2,762.1$ 2,885.9Sales distribution is based on the location of product delivery by the Company.FOR FURTHER INFORMATION PLEASE CONTACT: Larry HughesWest Fraser Timber Co. Ltd.Vice-President, Finance and Chief Financial Officer(604) 895-2700ORRodger HutchinsonWest Fraser Timber Co. Ltd.Vice-President, Corporate Controller(604) 895-2700(604) 681-6061 (FAX)www.westfraser.com