West Fraser Announces Fourth Quarter Results
VANCOUVER, BC--(Marketwired - February 11, 2016) - West Fraser (TSX: WFT) reported a loss $15 million or $(0.18) basic earnings per share on sales of $1,013 million in the fourth quarter of 2015 and earnings of $104 million or $1.25 basic earnings per share on sales of $4,100 million for 2015. These results compare with previous periods as shown in the table below.
Adjusted EBITDA, Adjusted earnings and Adjusted basic EPS as described in this News Release reflect the adjustments described in the tables referred to in the section titled "Non-IFRS Measures" on page 22 of our 2015 Management's Discussion & Analysis.
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($millions except earnings per 2015 2014
share ("EPS")) Q4 Q3 YTD Q4 YTD
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Sales 1,013 1,044 4,100 964 3,856
Adjusted EBITDA(1) 90 82 417 157 621
Operating earnings 18 88 249 83 406
Earnings (15) 56 104 43 259
Basic EPS ($) (0.18) 0.67 1.25 0.51 3.06
Adjusted earnings(1) 30 36 176 84 327
Adjusted basic EPS ($)(1) 0.38 0.42 2.12 1.00 3.86
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1. In this News Release, reference is made to Adjusted EBITDA, Adjusted
earnings and Adjusted basic EPS (collectively "these measures"). We believe
that, in addition to earnings, these measures are useful performance
indicators. 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, EPS 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 in the section titled "Non-IFRS Measures" on page 22 of our 2015
Management's Discussion & Analysis for details of these adjustments.
Operational Results
In the quarter our lumber operations generated operating earnings of $17 million (Q3-15 -- operating loss of $9 million) and Adjusted EBITDA of $55 million (Q3-15 -- $26 million). An increase in U.S. SYP and low-grade SPF lumber prices and a slightly weaker Canadian dollar were major factors in the improvement on a quarter to quarter basis. The benefit of increased shipments from our Canadian mills was offset by a decrease in production and shipments from our U.S. sawmills.
Our panels segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $16 million (Q3-15 -- $26 million) and Adjusted EBITDA of $19 million (Q3-15 -- $29 million). Plywood and MDF markets experienced a seasonal decline and prices decreased accordingly.
Our pulp & paper segment generated operating earnings of $8 million (Q3-15 -- $14 million) and Adjusted EBITDA of $17 million (Q3-15 -- $25 million). Production and shipments from our pulp mills were similar to the previous quarter but key prices declined. Newsprint shipments improved but prices continued their secular decline.
Outlook
"We weathered a sharp deterioration in lumber prices in 2015 which was the result of a number of external factors such as a delayed building season due to poor weather in the first quarter of 2015 and a significant slowdown in demand from China during the third quarter. We expect U.S. housing to continue to improve in 2016 and currently are experiencing strong demand for lumber from our customers in China. We are continuing to focus on those factors that are within our control: all the elements of operational excellence. On that front, I am encouraged that we are improving many aspects of our performance and that throughout our Company our people are focused on taking advantage of all the opportunities that are presented to us," said Ted Seraphim, our President and CEO.
We are also announcing that on April 19, 2016 Hank Ketcham will relinquish the title of Executive Chairman and will become our non-executive Chairman of the Board. This step completes the transition of our senior executive position to Ted Seraphim, our President and Chief Executive Officer. Hank Ketcham has been the senior member of our executive team since his appointment as President and Chief Executive Officer in 1985. Ted Seraphim commented: "I know that Hank will continue to play a key role at West Fraser and I look forward to receiving his counsel and advice in the future."
Annual Financial Statements and Management's Discussion & Analysis ("MD&A")
The Company's consolidated financial statements for the year ended December 31, 2015 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.
/EINPresswire.com/ -- Dividend Declared
The Board of Directors of the Company has declared a dividend of $0.07 per share on the Common shares and the Class B Common shares in the capital of the Company, payable on April 4, 2016 to shareholders of record on March 21, 2016.
Dividends are designated to be eligible dividends pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial legislation pertaining to eligible dividends.
The Company
West Fraser is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States.
Forward-Looking Statements
This Report 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 2015 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 12, 2016 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-866-225-0198 (toll- free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.
West Fraser Timber Co. Ltd.
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars, except where indicated -- unaudited)
December 31 December 31
2015 2014
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Assets
Current assets
Cash and short-term investments $ 13 $ 21
Receivables 298 288
Income taxes receivable 11 -
Inventories (note 3) 631 586
Prepaid expenses 18 12
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971 907
Property, plant and equipment 1,609 1,469
Timber licences 570 530
Goodwill and other intangibles 369 350
Other assets 36 79
Deferred income tax assets 80 62
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$ 3,635 $ 3,397
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Liabilities
Current liabilities
Cheques issued in excess of funds on deposit $ 29 $ 36
Operating loans 178 103
Payables and accrued liabilities 351 411
Income taxes payable - 26
Reforestation and decommissioning obligations 48 40
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606 616
Long-term debt 423 354
Other liabilities 269 244
Deferred income tax liabilities 190 154
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1,488 1,368
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Shareholders' Equity
Share capital 579 587
Accumulated other comprehensive earnings 164 55
Retained earnings 1,404 1,387
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2,147 2,029
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$ 3,635 $ 3,397
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Number of Common shares and Class B Common shares outstanding at February
11, 2016 was 82,457,433.
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 January 1 to
December 31 December 31
2015 2014 2015 2014
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Share capital
Balance -- beginning of period $ 579 $ 589 $ 587 $ 602
Common share repurchases - (2) (8) (15)
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Balance -- end of period $ 579 $ 587 $ 579 $ 587
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Accumulated other comprehensive
earnings
Balance -- beginning of period $ 139 $ 36 $ 55 $ 10
Translation gain on foreign
operations 25 19 109 45
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Balance -- end of period $ 164 $ 55 $ 164 $ 55
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Retained earnings
Balance -- beginning of period $ 1,406 $ 1,404 $ 1,387 $ 1,335
Actuarial gain (loss) on post-
retirement benefits 19 (38) (12) (87)
Common share repurchases - (16) (52) (96)
Earnings for the period (15) 43 104 259
Dividends (6) (6) (23) (24)
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Balance -- end of period $ 1,404 $ 1,387 $ 1,404 $ 1,387
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Shareholders' Equity $ 2,147 $ 2,029 $ 2,147 $ 2,029
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West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
(in millions of Canadian dollars, except where indicated - unaudited)
October 1 to January 1 to
December 31 December 31
2015 2014 2015 2014
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Sales $ 1,013 $ 964 $ 4,100 $ 3,856
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Costs and expenses
Cost of products sold 712 631 2,874 2,538
Freight and other distribution
costs 160 137 627 548
Export taxes 3 - 29 -
Amortization 50 43 191 170
Selling, general and
administration 48 39 153 149
Equity-based compensation 22 31 (23) 45
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995 881 3,851 3,450
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Operating earnings 18 83 249 406
Finance expense (6) (6) (29) (26)
Other (note 4) (16) (7) (64) (5)
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Earnings before tax (4) 70 156 375
Tax provision (note 5) (11) (27) (52) (116)
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Earnings $ (15) $ 43 $ 104 $ 259
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Earnings per share (dollars)
(note 6)
Basic $ (0.18) $ 0.51 $ 1.25 $ 3.06
Diluted $ (0.18) $ 0.51 $ 0.89 $ 3.06
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Comprehensive earnings
Earnings $ (15) $ 43 $ 104 $ 259
Other comprehensive earnings
Translation gain on foreign
operations 25 19 109 45
Actuarial gain (loss) on post-
retirement benefits (1) 19 (38) (12) (87)
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Comprehensive earnings $ 29 $ 24 $ 201 $ 217
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1. Net of tax provision of $7 million for the three months ended December
31, 2015 (three months ended December 31, 2014 -- $14 million recovery) and
$5 million tax recovery for the year ended December 31, 2015 (year ended
December 31, 2014 -- $31 million recovery).
West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Cash Flows
(in millions of Canadian dollars, except where indicated -- unaudited)
October 1 to December January 1 to December
31 31
2015 2014 2015 2014
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Operating activities
Earnings $ (15) $ 43 $ 104 $ 259
Adjustments
Amortization 50 43 191 170
Finance expense 6 6 29 26
Exchange loss on long-term
debt 15 12 67 29
Fair value adjustment to power
agreements 3 2 32 2
Tax provision 11 27 52 116
Income taxes paid (5) (14) (67) (68)
Post-retirement expense 20 13 71 54
Contributions to post-
retirement benefit plans (34) (27) (78) (69)
Other (7) (4) (21) (29)
Changes in non-cash working
capital
Receivables 20 25 1 3
Inventories (68) (60) (16) (28)
Prepaid expenses 2 7 (4) -
Payables and accrued
liabilities (26) (32) (60) 10
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Cash flows from operating
activities (28) 41 301 475
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Financing activities
Repayment of long-term debt - (339) - (339)
Proceeds from long-term debt - 339 - 339
Proceeds from operating loans 137 61 68 106
Finance expense paid (10) (10) (22) (22)
Dividends (6) (6) (23) (24)
Common share repurchases - (18) (60) (111)
Other - (3) (1) (4)
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Cash flows from financing
activities 121 24 (38) (55)
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Investing activities
Acquisitions (76) (5) (76) (208)
Additions to capital assets (51) (89) (220) (410)
Government assistance 4 4 4 17
Other (1) - 4 (9)
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Cash flows from investing
activities (124) (90) (288) (610)
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Change in cash (31) (25) (25) (190)
Foreign exchange effect on cash 12 3 24 13
Cash - beginning of period 3 7 (15) 162
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Cash - end of period $ (16) $ (15) $ (16) $ (15)
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Cash consists of
Cash and short-term investments $ 13 $ 21
Cheques issued in excess of
funds on deposit (29) (36)
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$ (16) $ (15)
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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 a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy 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. Our Common shares are listed for trading on the Toronto Stock Exchange under the symbol WFT.
2. Basis of presentation
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 -- Interim Financial Reporting and using the same accounting policies and methods of their application as the December 31, 2015 annual audited consolidated financial statements and their accompanying notes ("Financial Statements"). These condensed consolidated interim financial statements should be read in conjunction with our 2015 Financial Statements.
3. Inventories
Inventories at December 31, 2015 were written down by $21 million (September 30, 2015 -- $37 million; December 31, 2014 -- $5 million) to reflect net realizable value being lower than cost.
4. Other
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October 1 to January 1 to
December 31 December 31
2015 2014 2015 2014
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Foreign exchange gain on working
capital $ 9 $ 5 $ 28 $ 13
Foreign exchange gain on
intercompany financing 1 2 9 5
Foreign exchange loss on long-
term debt (15) (12) (67) (29)
Writedown of investment (7) - (7) -
Fair value adjustment to power
agreements (3) (2) (32) (2)
Gain on asset sales 1 1 2 3
Other (2) (1) 3 5
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$ (16) $ (7) $ (64) $ (5)
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5. Tax provision
The tax provision differs from the amount that would have resulted from applying the Canadian statutory income tax rates to earnings before tax as follows:
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October 1 to January 1 to
December 31 December 31
2015 2014 2015 2014
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Income tax expense at statutory
rate of 26% $ 2 $ (19) $ (40) $ (98)
Non-taxable amounts (8) (7) (1) (11)
Rate differentials between
jurisdictions and on specified
activities 1 (2) 5 (8)
Unrecognized capital losses (6) - (9) -
Increase in Alberta statutory
tax rate - - (7) -
Other - 1 - 1
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Tax provision $ (11) $ (27) $ (52) $ (116)
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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 (recovery) expense 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.
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October 1 to January 1 to
December 31 December 31
2015 2014 2015 2014
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Earnings
Basic $ (15) $ 43 $ 104 $ 259
Share option (recovery) expense 20 27 (26) 36
Equity settled share option
adjustment - (1) (3) (3)
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Diluted $ 5 $ 69 $ 75 $ 292
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Weighted average number of
shares (thousands)
Basic 82,455 83,687 83,104 84,742
Share options 1,074 1,406 1,295 1,430
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Diluted 83,529 85,093 84,399 86,172
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Earnings per share (dollars)
Basic $ (0.18) $ 0.51 $ 1.25 $ 3.06
Diluted $ (0.18) $ 0.51 $ 0.89 $ 3.06
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7. Segmented information
Pulp & Corporate
Lumber Panels paper & other Total
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October 1, 2015 to
December 31, 2015
Sales
To external
customers $ 656 $ 137 $ 220 $ - $ 1,013
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To other segments 28 2 - -
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$ 684 $ 139 $ 220 $ -
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Operating earnings
before amortization $ 55 $ 19 $ 17 $ (23) $ 68
Amortization (38) (3) (9) - (50)
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Operating earnings 17 16 8 (23) 18
Finance expense (4) - (2) - (6)
Other (4) (1) 2 (13) (16)
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Earnings before tax $ 9 $ 15 $ 8 $ (36) $ (4)
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October 1, 2014 to
December 31, 2014
Sales
To external
customers $ 640 $ 132 $ 192 $ - $ 964
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To other segments 23 2 - -
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$ 663 $ 134 $ 192 $ -
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Operating earnings
before amortization $ 121 $ 25 $ 12 $ (32) $ 126
Amortization (31) (3) (9) - (43)
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Operating earnings 90 22 3 (32) 83
Finance expense (4) (1) (1) - (6)
Other 4 - 1 (12) (7)
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Earnings before tax $ 90 $ 21 $ 3 $ (44) $ 70
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Pulp & Corporate
Lumber Panels paper & other Total
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January 1, 2015 to
December 31, 2015
Sales
To external
customers $ 2,654 $ 546 $ 900 $ - $ 4,100
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To other segments 110 8 - -
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$ 2,764 $ 554 $ 900 $ -
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Operating earnings
before amortization $ 243 $ 95 $ 80 $ 22 $ 440
Amortization (138) (13) (39) (1) (191)
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Operating earnings 105 82 41 21 249
Finance expense (18) (3) (8) - (29)
Other 9 (3) (5) (65) (64)
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Earnings before tax $ 96 $ 76 $ 28 $ (44) $ 156
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January 1, 2014 to
December 31, 2014
Sales
To external
customers $ 2,526 $ 518 $ 812 $ - $ 3,856
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To other segments 96 8 - -
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$ 2,622 $ 526 $ 812 $ -
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Operating earnings
before amortization $ 465 $ 78 $ 83 $ (50) $ 576
Amortization (114) (14) (41) (1) (170)
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Operating earnings 351 64 42 (51) 406
Finance expense (16) (3) (7) - (26)
Other 15 1 8 (29) (5)
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Earnings before tax $ 350 $ 62 $ 43 $ (80) $ 375
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The geographic distribution of external sales is as follows(1):
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October 1 to January 1 to
December 31 December 31
2015 2014 2015 2014
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Canada $ 229 $ 210 $ 898 $ 894
United States 577 521 2,249 1,997
China 110 147 580 598
Other Asia 75 66 299 274
Other 22 20 74 93
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$ 1,013 $ 964 $ 4,100 $ 3,856
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1. Sales distribution is based on the location of product delivery.
West Fraser shares trade on the Toronto Stock Exchange under the symbol: "WFT".
For more information:
Larry Hughes
Vice President, Finance and Chief Financial Officer
Rodger Hutchinson
Vice President, Corporate Controller and Investor Relations
(604) 895-2700
www.westfraser.com
