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Press release from Marketwire

West Fraser Announces Fourth Quarter Results

Thursday, February 14, 2013

West Fraser Announces Fourth Quarter Results17:01 EST Thursday, February 14, 2013VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 14, 2013) -West Fraser Timber Co. Ltd. (TSX:WFT) 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"))20122011Q4Q3YTDYTDQ4Sales7737723,0002,762650EBITDA17610227922618Operating earnings376612758(22)Earnings (loss) from continuing operations22558727(11)Basic EPS from continuing operations ($)0.511.272.020.63(0.25)Adjusted earnings (loss) from continuing operations2535513823(15)Adjusted basic EPS from continuing operations ($)21.251.273.220.54(0.35)Earnings225587736Basic EPS ($)0.511.272.021.700.14Diluted EPS ($)0.511.272.021.470.141. 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 ResultsIn 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.OutlookWe 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 SuccessionThe 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 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, 2013 to shareholders of record on March 22, 2013.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 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 CallInvestors 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 312012December 31 2011AssetsCurrent assetsCash and short-term investments$102$68Receivables251266Income taxes receivable-4Inventories (note 3)459398Prepaid expenses119823745Property, plant and equipment959936Timber licences496490Goodwill and other intangibles330336Other assets1011$2,618$2,518LiabilitiesCurrent liabilitiesPayables and accrued liabilities$322$274Income taxes payable20-Reforestation and decommissioning obligations4341385315Long-term debt300306Other liabilities313270Deferred income taxes1281441,1261,035Shareholders' EquityShare capital602601Accumulated other comprehensive earnings(9)(6)Retained earnings8998881,4921,483$2,618$2,518Number 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 31January 1 to December 312012201120122011Retained earningsBalance - beginning of period$836$902$888$943Actuarial gain (loss) on employee future benefits (net of tax)47(14)(52)(104)Earnings for the period2268773Dividends(6)(6)(24)(24)Balance - end of period$899$888$899$888Accumulated other comprehensive earningsBalance - beginning of period$(12)$1$(6)$(10)Translation gain (loss) on foreign operations3(7)(3)4Balance - end of period$(9)$(6)$(9)$(6)Share capitalBalance - beginning of period$602$601$601$601Issuance of Common shares--1-Balance - end of period$602$601$602$601Shareholders' equity$1,492$1,483$1,492$1,483Condensed Consolidated Statements of Earnings and Comprehensive Earnings(in millions of Canadian dollars, except where indicated - unaudited)October 1 to December 31January 1 to December 312012201120122011Sales$773$650$3,000$2,762Costs and expensesCost of products sold5054762,0201,917Freight and other distribution costs118111477460Export taxes11154858Amortization3940152168Selling, general and administration3326115104Equity-based compensation30461(3)7366722,8732,704Operating earnings37(22)12758Finance expense(5)(5)(19)(20)Exchange gain (loss) on long-term debt(3)97(7)Other income21-14Earnings from continuing operations before tax provision31(17)11545Tax recovery (provision) (note 4)(9)6(28)(18)Earnings from continuing operations22(11)8727Earnings from discontinued operations (note 5)-17-46Earnings$22$6$87$73Earnings per share (dollars) (note 6)Basic from continuing operations$0.51$(0.25)$2.02$0.63Diluted from continuing operations$0.51$(0.25)$2.02$0.41Basic after discontinued operations$0.51$0.14$2.02$1.70Diluted after discontinued operations$0.51$0.14$2.02$1.47Comprehensive earningsEarnings$22$6$87$73Other comprehensive earningsTranslation gain (loss) on foreign operations3(7)(3)4Actuarial gain (loss) on employee future benefits47(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 31January 1 to December 312012201120122011Operating activitiesEarnings from continuing operations$22$(10)$87$27AdjustmentsAmortization3940152168Finance expense551920Exchange loss (gain) on long-term debt3(9)(7)7Tax provision (recovery)9(6)2818Income taxes received (paid)(1)-2(75)Reforestation and decommissioning obligations(3)-(2)6Employee future benefits expense973835Contributions to employee future benefit plans(39)(64)(64)(93)Other1(3)(8)(9)Changes in non-cash working capitalReceivables232(22)8Inventories(36)(40)(58)(24)Prepaid expenses24(2)(1)Payables and accrued liabilities8(7)32(2)Cash flows from operating activities21(51)19585Financing activitiesRepayment 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 activitiesAcquisition(30)-(30)-Additions to capital assets(44)(89)(150)(213)Proceeds from Green Transformation Program454937Proceeds from disposal of capital assets--910Other2132Cash flows from investing activities(68)(83)(119)(164)Change in cash from continuing operations(62)(149)34(138)Change in cash from discontinued operations-9-45Cash - beginning of period16420868161Cash - end of period$102$68$102$68West Fraser Timber Co. Ltd.Notes to Condensed Consolidated Interim Financial Statements(figures are in millions of dollars, except where indicated - unaudited)1. Nature of operationsWest 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 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 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. InventoriesInventories at December 31, 2012 were written down by $3 million (September 30, 2012 - $6 million; December 31, 2011 - $15 million) to reflect net realizable value being lower than cost.4. Tax provisionThe tax provision differs from the amount that would have resulted from applying the Canadian statutory income tax rates to earnings before income taxes as follows:October 1 to December 31January 1 to December 312012201120122011Income tax expense at statutory rate of 25% (2011 - 26.5%)$(8)$4$(29)$(12)Non-taxable amounts(5)2(9)2Rate differentials between jurisdictions and on specified activities-1(1)6Recognized (unrecognized) tax assets3(1)11(12)Other1--(2)Tax recovery (provision)$(9)$6$(28)$(18)5. Discontinued operationsWe 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 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 3120122011From continuing operationsAfter discontinued operationsFrom continuingoperationsAfter discontinued operationsEarningsBasic$22$22$(11)$6Share option expense232333Diluted$45$45$(8)$9Weighted average number of shares (thousands)Basic42,86242,86242,84542,845Share options675675280280Diluted43,53743,53743,12543,125Earnings per share (dollars)Basic$0.51$0.51$(0.25)$0.14Diluted$0.51$0.51$(0.25)$0.14January 1 to December 3120122011From continuing operationsAfter discontinued operationsFrom continuing operationsAfter discontinued operationsEarningsBasic$87$87$27$73Share option expense (recovery)4545(6)(6)Equity settled share option adjustment(3)(3)(3)(3)Diluted$129$129$18$64Weighted average number of shares (thousands)Basic42,85742,85742,84042,840Share options555555434434Diluted43,41243,41243,27443,274Earnings per share (dollars)Basic$2.02$2.02$0.63$1.70Diluted$2.02$2.02$0.41$1.477. Segmented informationPulp &paperCorporate& otherLumberPanelsConsolidatedOctober 1, 2012 to December 31, 2012Sales at market pricesTo external customers$477$109$187$-$773To other segments181--$495$110$187$-EBITDA 1$75$12$24$(35)$76Amortization(23)(5)(11)-(39)Operating earnings52713(35)37Finance expense(2)(1)(2)-(5)Exchange loss on long-term debt---(3)(3)Other income (expense)(1)-4(1)2Earnings from continuing operations before tax provision$49$6$15$(39)$311. Non-IFRS measure:EBITDA is defined as operating earnings plus amortization. Pulp &paperCorporate& otherLumberPanelsConsolidatedOctober 1, 2011 to December 31, 2011Sales at market pricesTo external customers$370$93$187$-$650To other segments221--$392$94$187$-EBITDA 1$(8)$4$26$(4)$18Amortization(22)(4)(13)(1)(40)Operating earnings(30)-13(5)(22)Finance expense(2)(1)(1)(1)(5)Exchange gain on long-term debt---99Other income (expense)2-(6)51Earnings from continuing operations before tax provision$(30)$(1)$6$8$(17)1. Non-IFRS measure:EBITDA is defined as operating earnings plus amortization. Pulp &paperCorporate& otherLumberPanelsConsolidatedJanuary 1, 2012 to December 31, 2012Sales at market pricesTo external customers$1,783$442$775$-$3,000To other segments726--$1,855$448$775$-EBITDA 1$180$55$109$(65)$279Amortization(86)(16)(48)(2)(152)Operating earnings943961(67)127Finance expense(10)(3)(6)-(19)Exchange gain on long-term debt---77Other income (expense)(4)-13-Earnings from continuing operations before tax provision$80$36$56$(57)$1151. Non-IFRS measure:EBITDA is defined as operating earnings plus amortization. Pulp &CorporateLumberPanelspaper& otherConsolidatedJanuary 1, 2011 to December 31, 2011Sales at market pricesTo external customers$1,579$370$813$-$2,762To other segments918--$1,670$378$813$-EBITDA 1$65$8$148$5$226Amortization(85)(15)(65)(3)(168)Operating earnings(20)(7)83258Finance expense(11)(3)(6)-(20)Exchange loss on long-term debt---(7)(7)Other income10-3114Earnings from continuing operations before tax provision$(21)$(10)$80$(4)$451. Non-IFRS 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 312012201120122011United States$368$318$1,435$1,303Canada194157747652China13996513456Other Asia4753201229Other2526104122$773$650$3,000$2,762Sales distribution is based on the location of product delivery by the Company.FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: West Fraser Timber Co. Ltd.Larry HughesVice-President, Finance and Chief Financial Officer(604) 895-2700West Fraser Timber Co. Ltd.Rodger HutchinsonVice-President, Corporate Controller(604) 895-2700(604) 681-6061 (FAX)www.westfraser.com