VANCOUVER, BC, Feb. 11, 2021 /PRNewswire/ - West Fraser Timber
Co. Ltd. ("West Fraser", "we", "us", "our", or the "Company") (TSX
and NYSE both under the trading symbol WFG) today reported the
fourth quarter and annual results of 2020. All dollar amounts
in this news release are expressed in Canadian dollars.
Despite a year filled with uncertainty, West Fraser maintained
its strategy and delivered strong results. We minimized
COVID-19 related business disruptions, thanks to our focus on
workplace safety and the agility of our people and operations, and
benefitted from strong demand for our products. The
acquisition of Norbord Inc. ("Norbord") was completed on
February 1, 2021.
Norbord's complementary products and operations expand West
Fraser's geographic and product diversification and positions the
Company as a leading wood-based building products producer.
Except where specifically noted, the financial information set out
in this news release relates solely to West Fraser prior to giving
effect to the acquisition of Norbord.
Fourth Quarter
- Sales of $1.689 billion in the
quarter
- Earnings of $366 million or 22%
of sales
- Adjusted EBITDA of $544
million
- A quarterly cash dividend of $0.20 declared
- Additional export duty recovery of $124
million for the finalization of the 2017 and 2018
administrative review
2020
- Sales of $5.850 billion in the
year
- Earnings of $776 million or 13%
of sales
- Adjusted EBITDA of $1.460
billion
- Cash provided by operating activities of $1.295 billion
- Invested $241 million in capital
projects
- Year-end liquidity strong at $1.619
billion and net debt to capital ratio at 2%
Recent Developments
On February 1, 2021, we completed
the acquisition of Norbord in an all-stock transaction.
Norbord's OSB production further diversifies West Fraser's
product portfolio and expands our reach into the European
market. For additional information, refer to the section
titled "Norbord Acquisition" in our 2020 Management's
Discussion & Analysis ("2020 MD&A").
Concurrent with the completion of the Norbord acquisition, the
Common shares of West Fraser commenced trading on the New York
Stock Exchange ("NYSE") on February 1,
2021 under the symbol WFG. In addition, the trading
symbol for the Common shares on the Toronto Stock Exchange ("TSX")
was changed to WFG on February 1,
2021.
On November 24, 2020, the U.S.
Department of Commerce ("USDOC") issued its final duty rates for
the first Administrative Review ("AR") Period of Investigation
("POI") dated April 28, 2017 to
December 31, 2018. The cash
deposit rate for shipments is a combined 8.97%, which marks a
significant decrease from the 23.56% deposit rate previously
required by the USDOC. The AR2 for the 2019 fiscal period is
continuing, and the USDOC has initiated AR3 for the 2020 fiscal
period. Preliminary results for AR2 are expected in
May 2021 and final results in
November 2021. For additional
information, refer to the section titled "Discussion & Analysis
of Annual Results by Product Segment - Lumber - Softwood Lumber
Dispute" in our 2020 MD&A.
Results Compared to Previous Periods
($ millions
except earnings per share ("EPS"))
|
Q4-20
|
Q3-20
|
YTD-20
|
Q4-19
|
YTD-19
|
Sales
|
1,689
|
1,690
|
5,850
|
1,129
|
4,877
|
Adjusted
EBITDA1
|
544
|
605
|
1,460
|
80
|
301
|
Operating
earnings
|
515
|
487
|
1,098
|
(31)
|
(159)
|
Earnings
|
366
|
350
|
776
|
(42)
|
(150)
|
Basic EPS
($)
|
5.34
|
5.09
|
11.30
|
(0.61)
|
(2.18)
|
Adjusted
earnings1
|
338
|
402
|
843
|
(11)
|
(21)
|
Adjusted basic
EPS1 ($)
|
4.92
|
5.85
|
12.27
|
(0.16)
|
(0.31)
|
1.
|
Throughout this news
release, reference is made to Adjusted EBITDA, Adjusted earnings,
Adjusted basic earnings per share, and liquidity (collectively
"Non-IFRS measures"). For information on these Non-IFRS
measures see below under the heading "Non-IFRS
Measures".
|
Operational Results
Our lumber segment generated operating earnings in the quarter
of $503 million (Q3-20 - $454 million) and Adjusted EBITDA of $508 million (Q3-20 - $552
million). Current quarter operating earnings includes
a $124 million duty recovery related
to the AR1 duty rate finalization. Adjusted EBITDA, which
excludes duties, declined due to lower lumber prices, a stronger
Canadian dollar relative to the U.S. dollar, and higher SPF log
costs resulting from increased Alberta stumpage rates. Higher SPF
shipment volumes partially offset the decline. We remain
encouraged by the progress we have seen with the capital that we
have invested in the U.S. south.
Our panels segment generated operating earnings in the quarter
of $57 million (Q3-20 - $47 million) and Adjusted EBITDA of $62 million (Q3-20 - $51
million). Increased plywood pricing and robust plywood
demand positively impacted the panels segment earnings for the
quarter, partially offset by a decrease in plywood, MDF, and LVL
shipments and higher log costs from increased Alberta stumpage rates. The positive
price variance increased Adjusted EBITDA by $26 million compared to the previous quarter.
Our pulp & paper segment generated an operating loss in the
quarter of $36 million (Q3-20 - loss
of $5 million) and Adjusted EBITDA of
negative $26 million (Q3-20 -
positive $5 million).
Hinton pulp's annual major
maintenance and Quesnel pulp's
minor maintenance shutdowns occurred in the quarter resulting in
significantly higher maintenance costs than the previous
quarter. Despite this challenging quarter, the reliability of
our Hinton pulp mill improved in
2020.
Outlook
We expect lumber production for 2021 to increase by
approximately 340 MMfbm over 2020 production and reach
approximately 6,300 MMfbm. Pulp production is expected to
slightly improve in 2021.
Capital expenditures are expected to be roughly $550 million in 2021, including estimates for the
acquired Norbord operations post-close. With respect to the
acquired North American facilities, production at the previously
curtailed mill in Chambord,
Quebec, will resume in spring 2021. Our focus in 2021
is integrating our newly acquired OSB and panel operations and
realizing gains from previous investments in capital.
The U.S. housing starts published in December 2020 remained strong and exceeded that
of the previous two years. Industry forecasts for housing in
2021 are for continued strength of which our diversified products
are well-positioned to supply. We expect continued
improvement and sustainable growth as we execute on our capital
improvement strategy.
Our results of operations for 2021 will incorporate the results
of operations of Norbord effective February
1, 2021. As part of the acquisition of Norbord, we
have assumed Norbord's US$315 million
senior notes due April 2023, bearing
interest at 6.25% and US$350 million
senior notes due July 2027, bearing
interest at 5.75% ("Norbord Bonds"). Pursuant to the terms of
the Norbord Bonds, we are required to make an offer to repurchase
them at 101% of their principal amount, plus accrued and unpaid
interest. Any Norbord Bonds not purchased under this offer
will remain outstanding. Details of the offer will be
provided in a notice of the offer to be mailed to the holders of
the Norbord Bonds.
Normal Course Issuer Bid
West Fraser also announced today that it is proceeding with a
normal course issuer bid ("NCIB") for up to 6,044,000 Shares of the
Company, representing approximately 5% of the issued and
outstanding Shares. The Company has received approval from
the TSX to commence this bid on February 17, 2021.
All purchases of Shares under the NCIB may be made on the TSX,
at the market price at the time of purchase in accordance with the
rules and policies of the TSX or on the NYSE in compliance with
Rule 10b-18 under the United
States Securities Exchange Act of 1934 (the "Exchange Act").
Purchases may also be made through alternative trading
systems in Canada and/or
the United States, if eligible.
The rules and policies of the TSX contain restrictions on the
number of Shares that can be purchased under the NCIB, based on the
average daily trading volumes on the TSX. Similarly, the safe
harbor conditions of Rule 10b-18
under the Exchange Act impose certain limitations on the number of
Shares that can be purchased on the NYSE per day.
As a result of the restrictions, subject to certain exceptions
for block purchases, the maximum number of Shares which can be
purchased per day during the NCIB on the TSX is 102,450 based on
25% of the average daily trading volume on the TSX for the prior
six months (being 409,801 Shares on the TSX). Subject to
certain exceptions for block purchases, the maximum number of
Shares which can be purchased per day on the NYSE will be 25% of
the average daily trading volume on NYSE for the four calendar
weeks preceding the date of purchase (which may not be commenced
prior to March 1, 2021). Subject to regulatory
requirements, the actual number of Shares purchased and the timing
of such purchases, if any, will be determined by the Company having
regard to future price movements and other factors. All
Shares purchased by the Company under the NCIB will be
cancelled.
The NCIB will terminate on February 16, 2022 or earlier if
the maximum number of Shares authorized for repurchase under the
NCIB have been purchased. The Company reserves the right to
terminate the NCIB earlier if it feels it is appropriate to do
so. The Company believes that the market price of its Shares
at certain times may be attractive and that the repurchase of
Shares at such market prices is an appropriate use of corporate
funds and in the best interests of the Company.
Risks and Uncertainties
Risk and uncertainty disclosures are included under the heading
"Risks and Uncertainties" in our 2020 MD&A. These risks
and uncertainties include risks and uncertainties related to the
business of Norbord, and the integration of the business of Norbord
into our business.
MD&A
Our 2020 MD&A is available on our website at
www.westfraser.com and the System for Electronic Document Analysis
and Retrieval (''SEDAR'') at www.sedar.com and the Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR") website at
www.sec.gov/edgar.shtml under the Company's profile.
Financial Information regarding Norbord
Norbord will be filing its audited financial statements for the
year ended December 31, 2020
("Norbord 2020 Audited Financial Statements"), its annual MD&A
for the year ended December 31, 2020
("Norbord 2020 MD&A") and annual information form for the year
ended December 31, 2020 ("Norbord
2020 AIF") (together, the "Norbord Annual Filings") on SEDAR and
EDGAR concurrently or shortly following the dissemination of this
news release. The Norbord Annual Filings include important
information regarding the business of Norbord and the financial
results of Norbord on a stand-alone basis in United States dollars for the year ended
December 31, 2020. This news
release does not include a discussion of the financial results or
operations of Norbord for the year ended December 31, 2020, and investors are referred to
Norbord's Annual MD&A for this discussion. In addition,
investors are referred to the Norbord 2020 AIF for information on
Norbord's business.
Responsibility Report
West Fraser's full Environmental, Social, and Governance (ESG)
Responsibility Report is available on the Company's website at
www.westfraser.com. This report reviews the Company's key ESG
topics, opportunities and performance and includes information
aligned with the Sustainable Accounting Standards Board (SASB),
Global Reporting Initiative (GRI), and the recommendations of the
Task Force on Climate-Related Disclosures (TFCD).
Dividend Declared
The Board of Directors of the Company has declared a dividend of
$0.20 per share on the Common shares
and the Class B Common shares in the capital of the Company,
payable on April 1, 2021 to
shareholders of record on March 18, 2021.
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, OSB, LVL, MDF, plywood, pulp, newsprint, wood chips, other
residuals, and energy with facilities across Canada, in the southern United States and in Europe.
Conference Call
Representatives of West Fraser will hold a joint earnings call
to discuss both West Fraser's and Norbord's 2020 fourth quarter and
annual financial and operating results on Friday, February 12, 2021 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time). To participate in
the call, please dial: 1-888-390-0605 (toll-free North America) or 416-764-8609 (toll) or
connect on the webcast. The call and an earnings presentation
may also be accessed through West Fraser's website at
www.westfraser.com. Please let the operator know you wish to
participate in the joint West Fraser and Norbord earnings call
chaired by Mr. Ray Ferris, President
and Chief Executive Officer of the Company.
Following management's discussion of the quarterly and annual
results, investors and the analyst community will be invited to ask
questions. The call will be recorded for webcasting purposes
and will be available on the West Fraser website at
www.westfraser.com and on the Norbord website at
www.norbord.com.
Forward-Looking Statements
This news release contains "forward-looking information" and
"forward-looking statements" within the meaning of Canadian
provincial securities laws and "forward-looking statements" within
the meaning of the U.S. Securities Act of 1933, the U.S.
Securities Exchange Act of 1934, and the "safe harbor"
provisions of the United States Private Securities Litigation
Reform Act of 1995. Forward-looking statements include
statements that are predictive in nature, depend upon or refer to
future events or conditions, include statements which reflect
management's expectations regarding the operations, business,
financial condition, expected financial results, performance,
prospects, opportunities, priorities, targets, goals, ongoing
objectives, strategies and outlook of West Fraser and its
subsidiaries, including Norbord, as well as the outlook for North
American and international economies for the current fiscal year
and subsequent periods, and include words such as "expects,"
"anticipates," "plans," "believes," "estimates," "seeks,"
"intends," "targets," "projects," "forecasts" or negative versions
thereof and other similar expressions, or future or conditional
verbs such as "may," "will," "should," "would" and "could."
In particular, this news release contains forward-looking
statements under the headings "Recent Developments" (regarding
preliminary and finalization of AR2 duty rates),
"Outlook" (regarding lumber and pulp production, capital
expenditures, the integration of newly-acquired OSB and panel
operations, resumption of production at the Chambord mill, U.S. housing starts and the
benefits thereof, and the expansion of our operating footprint and
global market reach), and "Normal Course Issuer Bid" (potential
future purchases by West Fraser of its Shares pursuant to the
NCIB).
By their nature, forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and
specific, which contribute to the possibility that the predictions,
forecasts, and other forward-looking statements will not occur.
Factors that could cause actual results to differ materially
from those contemplated or implied by forward-looking statements
include, but are not limited to: (1) the impact of the COVID-19
pandemic on our operations and on customer demand, supply and
distribution and other factors; (2) assumptions in connection with
the economic and financial conditions in the U.S., Canada, Europe and globally and consequential demand
for our products; (3) risks inherent in our product concentration
and cyclicality; (4) effects of competition and product pricing
pressures; (5) risks inherent to customer dependence; (6) effects
of variations in the price and availability of manufacturing
inputs, including continued access to fibre resources at
competitive prices and the impact of third-party certification
standards; (7) availability of transportation services, including
truck and rail services, and port facilities; (8) various events
that could disrupt operations, including natural, man-made or
catastrophic events and ongoing relations with employees; (9)
impact of changes to, or non-compliance with, environmental or
other regulations; (10) government restrictions, standards or
regulations intended to reduce greenhouse gas emissions; (11)
impact of weather and climate change on our operations or the
operations or demand of our suppliers and customers; (12) impact of
any product liability claims in excess of insurance coverage; (13)
risks inherent to a capital intensive industry; (14) impact of
future outcomes of tax exposures; (15) potential future changes in
tax laws, including tax rates; (16) effects of currency exposures
and exchange rate fluctuations; (17) future operating costs; (18)
availability of financing, bank lines, securitization programs
and/or other means of liquidity; (19) impact of future cross border
trade rulings or agreements; (20) implementation of important
strategic initiatives and identification, completion and
integration of acquisitions; (21) ability to implement new or
upgraded information technology infrastructure; (22) impact of
information technology service disruptions or failures; (23)
changes in government policy and regulation; and (24) integration
of the Norbord business.
In addition, actual outcomes and results of these statements
will depend on a number of factors, including those matters
described under "Risks and Uncertainties" in our 2020 MD&A, and
may differ materially from those anticipated or projected.
This list of important factors affecting forward-looking statements
is not exhaustive, and reference should be made to the other
factors discussed in public filings with securities regulatory
authorities. Accordingly, readers should exercise caution in
relying upon forward-looking statements, and we undertake no
obligation to update or revise any forward-looking statements
publicly, whether written or oral, to reflect subsequent events or
circumstances except as required by applicable securities laws.
Non-IFRS Measures
Throughout this news release, reference is made to Adjusted
EBITDA, Adjusted earnings, Adjusted basic earnings per share,
available liquidity, and total and net debt to total capital ratio
(collectively "these Non-IFRS measures"). We believe that, in
addition to earnings, these Non-IFRS measures are useful
performance indicators for investors with regard to operating and
financial performance. Adjusted EBITDA is also used to
evaluate the operating and financial performance of our operating
segments, generate future operating plans, and make strategic
decisions. These Non-IFRS measures are not generally accepted
financial measures under IFRS and do not have standardized meanings
prescribed by IFRS. Investors are cautioned that none of
these Non-IFRS 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 Non-IFRS 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 Non-IFRS measures may not be
directly comparable to similarly titled measures used by other
entities. Accordingly, these Non-IFRS measures are intended
to provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS. The reconciliation of the Non-IFRS
measures used and presented by the Company to the most directly
comparable IFRS measures is set out in our 2020 MD&A.
West Fraser Timber
Co. Ltd.
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
(in millions of
Canadian dollars, except where indicated -
unaudited)
|
|
|
|
|
|
|
December
31
|
December
31
|
|
2020
|
2019
|
Assets
|
|
|
Current
assets
|
|
|
Cash and short-term
investments
|
$
|
587
|
$
|
16
|
Receivables
|
353
|
258
|
Income taxes
receivable
|
10
|
135
|
Inventories (note
5)
|
735
|
729
|
Prepaid
expenses
|
16
|
9
|
|
1,701
|
1,147
|
Property, plant
and equipment
|
2,110
|
2,140
|
Timber
licences
|
473
|
493
|
Goodwill and other
intangibles
|
753
|
772
|
Export duty
deposits (note 10)
|
227
|
80
|
Other
assets
|
44
|
26
|
Deferred income
tax assets
|
12
|
10
|
|
$
|
5,320
|
$
|
4,668
|
|
|
|
Liabilities
|
|
|
Current
liabilities
|
|
|
Cheques issued in
excess of funds on deposit
|
$
|
-
|
$
|
16
|
Operating
loans
|
-
|
374
|
Payables and accrued
liabilities
|
495
|
396
|
Current portion of
long-term debt
|
10
|
10
|
Current portion of
reforestation and decommissioning obligations
|
44
|
41
|
Income taxes
payable
|
124
|
-
|
|
673
|
837
|
Long-term
debt
|
637
|
650
|
Other
liabilities
|
519
|
454
|
Deferred income
tax liabilities
|
336
|
253
|
|
2,165
|
2,194
|
|
|
|
Shareholders'
Equity
|
|
|
Share
capital
|
484
|
483
|
Accumulated other
comprehensive earnings
|
105
|
132
|
Retained
earnings
|
2,566
|
1,859
|
|
3,155
|
2,474
|
|
$
|
5,320
|
$
|
4,668
|
Number of Common
shares and Class B Common shares outstanding at February 11, 2021
was 123,163,635.
|
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
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Share
capital
|
|
|
|
|
Balance - beginning
of period
|
$
|
484
|
$
|
483
|
$
|
483
|
$
|
491
|
Issuance of Common
shares
|
-
|
-
|
1
|
1
|
Repurchase of Common
shares
|
-
|
-
|
-
|
(9)
|
Balance - end of
period
|
$
|
484
|
$
|
483
|
$
|
484
|
$
|
483
|
|
|
|
|
|
Accumulated other
comprehensive earnings
|
|
|
|
|
Balance - beginning
of period
|
$
|
151
|
$
|
146
|
$
|
132
|
$
|
170
|
Translation loss on
foreign operations
|
(46)
|
(14)
|
(27)
|
(38)
|
Balance - end of
period
|
$
|
105
|
$
|
132
|
$
|
105
|
$
|
132
|
|
|
|
|
|
Retained
earnings
|
|
|
|
|
Balance - beginning
of period
|
$
|
2,181
|
$
|
1,952
|
$
|
1,859
|
$
|
2,235
|
Actuarial gain (loss)
on post-retirement benefits
|
33
|
(37)
|
(14)
|
(99)
|
Repurchase of Common
shares
|
-
|
-
|
-
|
(72)
|
Earnings for the
period
|
366
|
(42)
|
776
|
(150)
|
Dividends
|
(14)
|
(14)
|
(55)
|
(55)
|
Balance - end of
period
|
$
|
2,566
|
$
|
1,859
|
$
|
2,566
|
$
|
1,859
|
|
|
|
|
|
Shareholders'
Equity
|
$
|
3,155
|
$
|
2,474
|
$
|
3,155
|
$
|
2,474
|
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 December
31
|
January 1 to December
31
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
Sales
|
$
|
1,689
|
$
|
1,129
|
$
|
5,850
|
$
|
4,877
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
Cost of products
sold
|
896
|
830
|
3,434
|
3,652
|
Freight and other
distribution costs
|
182
|
166
|
709
|
713
|
Export duties, net
(note 10)
|
(47)
|
35
|
79
|
162
|
Amortization
|
71
|
66
|
272
|
259
|
Selling, general and
administration
|
67
|
53
|
247
|
211
|
Equity-based
compensation
|
5
|
2
|
11
|
6
|
Restructuring and
impairment charges
|
-
|
8
|
-
|
33
|
|
1,174
|
1,160
|
4,752
|
5,036
|
Operating
earnings
|
515
|
(31)
|
1,098
|
(159)
|
Finance expense,
net
|
3
|
(13)
|
(37)
|
(49)
|
Other (note
6)
|
(17)
|
(2)
|
(19)
|
(11)
|
Earnings before
tax
|
501
|
(46)
|
1,042
|
(219)
|
Tax recovery
(provision) (note 7)
|
(135)
|
4
|
(266)
|
69
|
Earnings
|
$
|
366
|
$
|
(42)
|
$
|
776
|
$
|
(150)
|
|
|
|
|
|
Earnings per share
(dollars) (note 8)
|
|
|
|
|
Basic
|
$
|
5.34
|
$
|
(0.61)
|
$
|
11.30
|
$
|
(2.18)
|
Diluted
|
$
|
5.34
|
$
|
(0.61)
|
$
|
11.30
|
$
|
(2.34)
|
|
|
|
|
|
Comprehensive
earnings
|
|
|
|
|
Earnings
|
$
|
366
|
$
|
(42)
|
$
|
776
|
$
|
(150)
|
Other
comprehensive earnings
|
|
|
|
|
Translation loss on
foreign operations
|
(46)
|
(14)
|
(27)
|
(38)
|
Actuarial gain (loss)
on post-retirement benefits
|
33
|
(37)
|
(14)
|
(99)
|
Comprehensive
earnings
|
$
|
353
|
$
|
(93)
|
$
|
735
|
$
|
(287)
|
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
|
Cash provided by
(used in)
|
2020
|
2019
|
2020
|
2019
|
Operating
activities
|
|
|
|
|
Earnings
|
$
|
366
|
$
|
(42)
|
$
|
776
|
$
|
(150)
|
Adjustments
|
|
|
|
|
Amortization
|
71
|
66
|
272
|
259
|
Restructuring and
impairment charges
|
-
|
8
|
-
|
33
|
Restructuring charges
paid
|
-
|
(1)
|
-
|
(7)
|
Finance expense,
net
|
(3)
|
13
|
37
|
49
|
Exchange loss on
long-term financing
|
3
|
1
|
1
|
3
|
Exchange loss on
export duty deposits
|
8
|
2
|
5
|
4
|
Export duty
deposits
|
(118)
|
(3)
|
(136)
|
(5)
|
Post-retirement
expense
|
25
|
20
|
100
|
80
|
Contributions to
post-retirement benefit plans
|
(25)
|
(24)
|
(66)
|
(85)
|
Tax provision
(recovery)
|
135
|
(4)
|
266
|
(69)
|
Income taxes received
(paid)
|
(44)
|
23
|
59
|
(62)
|
Other
|
1
|
2
|
(1)
|
-
|
Changes in non-cash
working capital
|
|
|
|
|
Receivables
|
54
|
38
|
(106)
|
70
|
Inventories
|
(67)
|
(76)
|
(9)
|
51
|
Prepaid
expenses
|
2
|
9
|
(7)
|
5
|
Payables and accrued
liabilities
|
(43)
|
8
|
104
|
(61)
|
|
365
|
40
|
1,295
|
115
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Proceeds from
(repayment of) operating loans
|
-
|
61
|
(377)
|
314
|
Finance expense
paid
|
(12)
|
(16)
|
(41)
|
(43)
|
Repurchase of Common
shares
|
-
|
-
|
-
|
(81)
|
Dividends
|
(14)
|
(14)
|
(55)
|
(55)
|
Other
|
-
|
-
|
(3)
|
(5)
|
|
(26)
|
31
|
(476)
|
130
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Additions to capital
assets
|
(62)
|
(87)
|
(241)
|
(410)
|
Government
assistance
|
4
|
-
|
5
|
5
|
Proceeds from
disposal of capital assets
|
1
|
2
|
14
|
14
|
Other
|
-
|
(2)
|
-
|
-
|
|
(57)
|
(87)
|
(222)
|
(391)
|
|
|
|
|
|
Change in
cash
|
282
|
(16)
|
597
|
(146)
|
Foreign exchange
effect on cash
|
(8)
|
3
|
(10)
|
(1)
|
Cash - beginning
of period
|
313
|
13
|
-
|
147
|
Cash - end of
period
|
$
|
587
|
$
|
-
|
$
|
587
|
$
|
-
|
|
|
|
|
|
Cash consists
of
|
|
|
|
|
Cash and short-term
investments
|
|
|
$
|
587
|
$
|
16
|
Cheques issued in
excess of funds on deposit
|
|
|
-
|
(16)
|
|
|
|
$
|
587
|
$
|
-
|
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, other residuals 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 ("TSX")
under the symbol WFT.
As disclosed in the subsequent event note 11, on February 1, 2021, West Fraser completed the
acquisition of Norbord Inc. (the "Acquisition"), listed its shares
on the New York Stock Exchange ("NYSE") and began trading under the
symbol WFG. At the same time, the symbol on the TSX was also
changed to WFG.
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 use the same
accounting policies and methods of their application as the
December 31, 2020, annual audited consolidated financial
statements. These condensed consolidated interim financial
statements should be read in conjunction with our 2020 annual
audited consolidated financial statements.
3. Use of estimates and judgments and
Coronavirus ("COVID-19")
Financial statement preparation requires management to use
accounting estimates and make judgments and assumptions that affect
the amounts reported in the consolidated financial statements and
accompanying notes. The estimates and underlying assumptions
are based on historical experience and other factors, including
expectations of future events that are considered to be reasonable
under the circumstances.
Given the ongoing and dynamic nature of the COVID-19 outbreak,
it is challenging to predict the impact on our Company. The
extent of such impact will depend on future developments, which are
highly uncertain, including the resurgence of COVID-19 as
restrictions are eased or lifted, new information that may emerge
concerning the spread and severity of COVID-19, and actions taken
to address its impact, among others. It is difficult to
predict how this virus may affect our business in the future,
including its effect (positive or negative; long or short term) on
the demand and price for our products. It is possible that
COVID-19, particularly if it has a prolonged duration, could have a
material adverse effect on our supply chain, market pricing,
customer demand, and distribution networks. These factors may
further impact our operating plans, business, financial condition,
liquidity, and operating results, which would, in turn, affect our
estimates, including the valuation of inventories, allowance for
expected credit losses, fair value measurements, the valuation of
long-lived assets, and cash flow projections used for impairment
testing. Actual results may materially differ from these
estimates.
4. Seasonality of operations
Our operating results are subject to seasonal fluctuations that
impact quarter-to-quarter comparisons. Log availability has a
direct impact on our operations. We build up log inventory in
Canada during the winter to
sustain our lumber and plywood production during the second quarter
when logging is curtailed due to wet and inaccessible land
conditions. Extreme weather conditions, wildfires in
Western Canada and hurricanes in
the U.S. south may periodically affect operations, including
logging, manufacturing and transportation. Consequently,
interim operating results may not proportionately reflect operating
results for a full year.
5. Inventories
Inventories at December 31, 2020
were subject to a valuation reserve of $3
million (September 30, 2020 -
$2 million; December 31, 2019 -
$39 million) to reflect net
realizable value being lower than cost.
6. Other
|
October 1 to
December 31
|
January 1 to
December 31
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Foreign exchange loss
on working capital
|
$
|
(10)
|
$
|
(3)
|
$
|
(8)
|
$
|
(7)
|
Foreign exchange loss
on intercompany financing1
|
|
(33)
|
|
(14)
|
|
(13)
|
|
(36)
|
Foreign exchange gain
on long-term debt
|
|
30
|
|
13
|
|
12
|
|
33
|
Foreign exchange loss
on export duty deposits receivable
|
|
(8)
|
|
(2)
|
|
(5)
|
|
(4)
|
Insurance gain on
involuntary disposal of equipment2
|
|
-
|
|
-
|
|
7
|
|
4
|
Gain (loss) on
interest rate swap contracts
|
|
1
|
|
1
|
|
(5)
|
|
(3)
|
Power Purchase
dispute3
|
|
1
|
|
-
|
|
(7)
|
|
-
|
Other
|
|
2
|
|
3
|
|
-
|
|
2
|
|
$
|
(17)
|
$
|
(2)
|
$
|
(19)
|
$
|
(11)
|
1.
|
Foreign exchange
relates to financing provided to our U.S. operations of US$550
million from January to the beginning of November 2020 and US$539
million thereafter (2019 - US$550 million). IAS 21 requires
that the exchange gain or loss be recognized through earnings as
the financing is not considered part of our permanent investment in
our U.S. subsidiaries. The balance sheet amounts and related
financing expenses are eliminated in these consolidated financial
statements.
|
2.
|
The 2020 gain
represents insurance proceeds related to the settlement of
WestPine's 2016 involuntary disposal of equipment. The 2019
gain represents insurance gain related to the 2017 involuntary
disposal of equipment at our 50%‑owned NBSK plant in Quesnel,
B.C.
|
3.
|
In 2020, as a result
of certain administrative proceedings, we determined that a
liability related to certain retroactive adjustments to charges
under a purchase power agreement, terminated in 2016, should be
recorded as a contingent liability. Although we dispute
responsibility for such retroactive adjustments and the associated
liability, we have accrued $7 million for such contingent
liability. However, recognizing the expense does not
prejudice our position that the liability is not our
responsibility.
|
7. Tax provision
The tax provision differs from the amount that would have
resulted from applying the British
Columbia statutory income tax rate to earnings before tax as
follows:
|
October 1 to
December 31
|
January 1 to
December 31
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Income tax recovery
(expense) at statutory rate of 27%
|
$
|
(135)
|
$
|
12
|
$
|
(281)
|
$
|
59
|
Non-taxable
amounts
|
|
(5)
|
|
(1)
|
|
(7)
|
|
2
|
Rate differentials
between jurisdictions and on specified activities
|
|
11
|
|
(1)
|
|
28
|
|
(3)
|
Decrease in Alberta
provincial tax rate1
|
|
-
|
|
1
|
|
-
|
|
18
|
Other
|
|
(6)
|
|
(7)
|
|
(6)
|
|
(7)
|
Tax recovery
(provision)
|
$
|
(135)
|
$
|
4
|
$
|
(266)
|
$
|
69
|
1.
|
Represents the
re-measurement of deferred income tax assets and liabilities for
the Alberta tax rate reduction from 12% to 8% initially to be
phased in over four years. On December 9, 2020, the Alberta
government substantially enacted an expedited rate reduction to 8%
effective July 1, 2020, but this had no impact on our 2020 tax
provision as it was previously recognized.
|
8. 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
|
January 1 to
December 31
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Earnings
|
|
|
|
|
|
|
|
|
Basic
|
$
|
366
|
$
|
(42)
|
$
|
776
|
$
|
(150)
|
Share option expense
(recovery)
|
|
20
|
|
3
|
|
27
|
|
(8)
|
Equity-settled share
option adjustment
|
|
-
|
|
-
|
|
(3)
|
|
(4)
|
Diluted
|
$
|
386
|
$
|
(39)
|
$
|
800
|
$
|
(162)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares (thousands)
|
Basic
|
|
68,677
|
|
68,661
|
|
68,672
|
|
68,882
|
Share
options
|
|
349
|
|
232
|
|
191
|
|
290
|
Diluted
|
|
69,026
|
|
68,893
|
|
68,863
|
|
69,172
|
|
|
|
|
|
|
|
|
|
Earnings per
share (dollars)
|
|
|
|
|
|
|
|
|
Basic
|
$
|
5.34
|
$
|
(0.61)
|
$
|
11.30
|
$
|
(2.18)
|
Diluted
|
$
|
5.34
|
$
|
(0.61)
|
$
|
11.30
|
$
|
(2.34)
|
9. Segmented information
|
Lumber
|
Panels
|
Pulp &
Paper
|
Corporate
&
Other
|
Total
|
October 1, 2020 to
December 31, 2020
|
|
|
|
|
|
Sales
|
|
|
|
|
|
To external
customers
|
$
|
1,289
|
$
|
194
|
$
|
206
|
$
|
-
|
$
|
1,689
|
To other
segments
|
31
|
3
|
-
|
(34)
|
-
|
|
$
|
1,320
|
$
|
197
|
$
|
206
|
$
|
(34)
|
$
|
1,689
|
Cost of products
sold
|
(637)
|
(113)
|
(180)
|
34
|
(896)
|
Freight and other
distribution costs
|
(127)
|
(14)
|
(41)
|
-
|
(182)
|
Export duties,
net
|
47
|
-
|
-
|
-
|
47
|
Amortization
|
(52)
|
(5)
|
(10)
|
(4)
|
(71)
|
Selling, general and
administration
|
(48)
|
(8)
|
(11)
|
-
|
(67)
|
Equity-based
compensation
|
-
|
-
|
-
|
(5)
|
(5)
|
Operating
earnings
|
$
|
503
|
$
|
57
|
$
|
(36)
|
$
|
(9)
|
$
|
515
|
Finance expense,
net
|
7
|
(1)
|
(3)
|
-
|
3
|
Other
|
(11)
|
(1)
|
(5)
|
-
|
(17)
|
Earnings before
tax
|
$
|
499
|
$
|
55
|
$
|
(44)
|
$
|
(9)
|
$
|
501
|
|
|
|
|
|
|
October 1, 2019 to
December 31, 2019
|
|
|
|
|
|
Sales
|
|
|
|
|
|
To external
customers
|
$
|
757
|
$
|
140
|
$
|
232
|
$
|
-
|
$
|
1,129
|
To other
segments
|
28
|
2
|
-
|
(30)
|
-
|
|
$
|
785
|
$
|
142
|
$
|
232
|
$
|
(30)
|
$
|
1,129
|
Cost of products
sold
|
(573)
|
(108)
|
(179)
|
30
|
(830)
|
Freight and other
distribution costs
|
(106)
|
(15)
|
(44)
|
(1)
|
(166)
|
Export duties,
net
|
(35)
|
-
|
-
|
-
|
(35)
|
Amortization
|
(49)
|
(5)
|
(11)
|
(1)
|
(66)
|
Selling, general and
administration
|
(37)
|
(6)
|
(10)
|
-
|
(53)
|
Equity-based
compensation
|
-
|
-
|
-
|
(2)
|
(2)
|
Restructuring and
impairment charges
|
(8)
|
-
|
-
|
-
|
(8)
|
Operating
earnings
|
$
|
(23)
|
$
|
8
|
$
|
(12)
|
$
|
(4)
|
$
|
(31)
|
Finance expense,
net
|
(10)
|
(1)
|
(3)
|
1
|
(13)
|
Other
|
(4)
|
-
|
3
|
(1)
|
(2)
|
Earnings before
tax
|
$
|
(37)
|
$
|
7
|
$
|
(12)
|
$
|
(4)
|
$
|
(46)
|
|
Lumber
|
Panels
|
Pulp &
Paper
|
Corporate
&
Other
|
Total
|
January 1, 2020 to
December 31, 2020
|
|
|
|
|
|
Sales
|
|
|
|
|
|
To external
customers
|
$
|
4,359
|
$
|
624
|
$
|
867
|
$
|
-
|
$
|
5,850
|
To other
segments
|
132
|
10
|
-
|
(142)
|
-
|
|
$
|
4,491
|
$
|
634
|
$
|
867
|
$
|
(142)
|
$
|
5,850
|
Cost of products
sold
|
(2,513)
|
(408)
|
(655)
|
142
|
(3,434)
|
Freight and other
distribution costs
|
(485)
|
(55)
|
(169)
|
-
|
(709)
|
Export duties,
net
|
(79)
|
-
|
-
|
-
|
(79)
|
Amortization
|
(201)
|
(16)
|
(42)
|
(13)
|
(272)
|
Selling, general and
administration
|
(171)
|
(30)
|
(43)
|
(3)
|
(247)
|
Equity-based
compensation
|
-
|
-
|
-
|
(11)
|
(11)
|
Operating
earnings
|
$
|
1,042
|
$
|
125
|
$
|
(42)
|
$
|
(27)
|
$
|
1,098
|
Finance expense,
net
|
(24)
|
(4)
|
(8)
|
(1)
|
(37)
|
Other
|
(5)
|
7
|
(11)
|
(10)
|
(19)
|
Earnings before
tax
|
$
|
1,013
|
$
|
128
|
$
|
(61)
|
$
|
(38)
|
$
|
1,042
|
|
|
|
|
|
|
January 1, 2019 to
December 31, 2019
|
|
|
|
|
|
Sales
|
|
|
|
|
|
To external
customers
|
$
|
3,317
|
$
|
594
|
$
|
966
|
$
|
-
|
$
|
4,877
|
To other
segments
|
125
|
11
|
-
|
(136)
|
-
|
|
$
|
3,442
|
$
|
605
|
$
|
966
|
$
|
(136)
|
$
|
4,877
|
Cost of products
sold
|
(2,588)
|
(466)
|
(734)
|
136
|
(3,652)
|
Freight and other
distribution costs
|
(477)
|
(63)
|
(173)
|
-
|
(713)
|
Export duties,
net
|
(162)
|
-
|
-
|
-
|
(162)
|
Amortization
|
(196)
|
(16)
|
(43)
|
(4)
|
(259)
|
Selling, general and
administration
|
(146)
|
(25)
|
(39)
|
(1)
|
(211)
|
Equity-based
compensation
|
-
|
-
|
-
|
(6)
|
(6)
|
Restructuring and
impairment charges
|
(33)
|
-
|
-
|
-
|
(33)
|
Operating
earnings
|
$
|
(160)
|
$
|
35
|
$
|
(23)
|
$
|
(11)
|
$
|
(159)
|
Finance expense,
net
|
(35)
|
(4)
|
(10)
|
-
|
(49)
|
Other
|
(7)
|
-
|
4
|
(8)
|
(11)
|
Earnings before
tax
|
$
|
(202)
|
$
|
31
|
$
|
(29)
|
$
|
(19)
|
$
|
(219)
|
Adjusted EBITDA by segment
Adjusted EBITDA is used to evaluate the operating and financial
performance of our operating segments, generate future operating
plans, and make strategic decisions. Adjusted EBITDA is
defined as earnings determined in accordance with IFRS adding back
the following line items from the statements of earnings and
comprehensive earnings: finance expense, tax provision or recovery,
amortization, export duties, equity-based compensation,
restructuring and impairment charges, and other.
The following table reconciles Adjusted EBITDA by segment to the
most directly comparable IFRS measures.
Quarterly Adjusted EBITDA by segment
October 1, 2020
to
December 31,
2020
|
|
Lumber
|
|
Panels
|
|
Pulp &
Paper
|
|
Corporate
& Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
tax
|
$
|
499
|
$
|
55
|
$
|
(44)
|
$
|
(9)
|
$
|
501
|
Add (deduct): Finance
expense, net
|
|
(7)
|
|
1
|
|
3
|
|
-
|
|
(3)
|
Add:
Amortization
|
|
52
|
|
5
|
|
10
|
|
4
|
|
71
|
Add: Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
5
|
|
5
|
Deduct: Export
duties, net
|
|
(47)
|
|
-
|
|
-
|
|
-
|
|
(47)
|
Add: Other
|
|
11
|
|
1
|
|
5
|
|
-
|
|
17
|
Adjusted EBITDA by
segment
|
$
|
508
|
$
|
62
|
$
|
(26)
|
$
|
-
|
$
|
544
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2019
to
December 31,
2019
|
|
Lumber
|
|
Panels
|
|
Pulp &
Paper
|
|
Corporate
& Other
|
|
Total
|
Earnings before
tax
|
$
|
(37)
|
$
|
7
|
$
|
(12)
|
$
|
(4)
|
$
|
(46)
|
Add (deduct): Finance
expense, net
|
|
10
|
|
1
|
|
3
|
|
(1)
|
|
13
|
Add:
Amortization
|
|
49
|
|
5
|
|
11
|
|
1
|
|
66
|
Add: Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
2
|
|
2
|
Add: Export duties,
net
|
|
35
|
|
-
|
|
-
|
|
-
|
|
35
|
Add: Restructuring
and impairment charges
|
|
8
|
|
-
|
|
-
|
|
-
|
|
8
|
Add (deduct):
Other
|
|
4
|
|
-
|
|
(3)
|
|
1
|
|
2
|
Adjusted EBITDA by
segment
|
$
|
69
|
$
|
13
|
$
|
(1)
|
$
|
(1)
|
$
|
80
|
Annual Adjusted EBITDA by segment
January 1, 2020
to
December 31,
2020
|
|
Lumber
|
|
Panels
|
|
Pulp &
Paper
|
|
Corporate &
Other
|
|
Total
|
Earnings before
tax
|
$
|
1,013
|
$
|
128
|
$
|
(61)
|
$
|
(38)
|
$
|
1,042
|
Add: Finance expense,
net
|
|
24
|
|
4
|
|
8
|
|
1
|
|
37
|
Add:
Amortization
|
|
201
|
|
16
|
|
42
|
|
13
|
|
272
|
Add: Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
11
|
|
11
|
Add: Export duties,
net
|
|
79
|
|
-
|
|
-
|
|
-
|
|
79
|
Add (deduct):
Other
|
|
5
|
|
(7)
|
|
11
|
|
10
|
|
19
|
Adjusted EBITDA by
segment
|
$
|
1,322
|
$
|
141
|
$
|
-
|
$
|
(3)
|
$
|
1,460
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2019
to
December 31,
2019
|
|
Lumber
|
|
Panels
|
|
Pulp &
Paper
|
|
Corporate &
Other
|
|
Total
|
Earnings before
tax
|
$
|
(202)
|
$
|
31
|
$
|
(29)
|
$
|
(19)
|
$
|
(219)
|
Add: Finance expense,
net
|
|
35
|
|
4
|
|
10
|
|
-
|
|
49
|
Add:
Amortization
|
|
196
|
|
16
|
|
43
|
|
4
|
|
259
|
Add: Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
6
|
|
6
|
Add: Export duties,
net
|
|
162
|
|
-
|
|
-
|
|
-
|
|
162
|
Add: Restructuring
and impairment charges
|
|
33
|
|
-
|
|
-
|
|
-
|
|
33
|
Add (deduct):
Other
|
|
7
|
|
-
|
|
(4)
|
|
8
|
|
11
|
Adjusted EBITDA by
segment
|
$
|
231
|
$
|
51
|
$
|
20
|
$
|
(1)
|
$
|
301
|
The geographic distribution of external sales is as
follows1:
|
October 1 to
December 31
|
January 1 to
December 31
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Canada
|
$
|
344
|
$
|
213
|
$
|
1,140
|
$
|
979
|
United
States
|
|
1,152
|
|
684
|
|
3,824
|
|
2,890
|
China
|
|
138
|
|
153
|
|
627
|
|
650
|
Other Asia
|
|
49
|
|
71
|
|
233
|
|
321
|
Other
|
|
6
|
|
8
|
|
26
|
|
37
|
|
$
|
1,689
|
$
|
1,129
|
$
|
5,850
|
$
|
4,877
|
1.
|
Sales distribution is
based on the location of product delivery.
|
10. Countervailing ("CVD") and antidumping
("ADD") duty dispute
Additional details can be found in note 25 "Countervailing
("CVD") and antidumping ("ADD") duty dispute" of our 2020 annual
audited consolidated financial statements.
Developments in CVD and ADD rates
On April 24, 2017, the U.S.
Department of Commerce ("USDOC") issued its preliminary
determination in the CVD investigation, and on June 26, 2017, the USDOC issued its preliminary
determination in the ADD investigation. On December 4, 2017, the duty rates were
revised. On November 24, 2020,
the USDOC finalized these rates based on its first Administrative
Review ("AR") of the first Period of Investigation ("POI").
Effective November 30, 2020 for
ADD and December 1, 2020 for CVD,
shipments from Canada to the U.S.
were subject to the new cash deposit rate of 7.57% for CVD and
1.40% for ADD.
Impact on earnings
The following table reconciles our cash deposits paid during the
period to the amount recorded in our earnings statement.
|
October 1 to
December 31
|
January 1 to
December 31
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash deposits
paid1
|
$
|
(70)
|
$
|
(38)
|
$
|
(215)
|
$
|
(167)
|
Adjust to West Fraser
Estimated ADD rate2
|
|
(7)
|
|
3
|
|
12
|
|
5
|
Effective export
duties expense for period3
|
$
|
(77)
|
$
|
(35)
|
$
|
(203)
|
$
|
(162)
|
Export duties
recovery attributable to AR14
|
|
124
|
|
-
|
|
124
|
|
-
|
Export duties,
net
|
$
|
47
|
$
|
(35)
|
$
|
(79)
|
$
|
(162)
|
Interest income on
duty deposits attributable to West Fraser Estimated rate
adjustments
|
$
|
-
|
$
|
1
|
$
|
2
|
$
|
4
|
Interest income on
the AR1 duty deposits receivable5
|
|
14
|
|
-
|
|
14
|
|
-
|
Interest income on
duty deposits
|
$
|
14
|
$
|
1
|
$
|
16
|
$
|
4
|
1.
|
Represents combined
CVD and ADD cash deposit rate of 23.56% from January 1, 2019 to
November 30, 2020, and 8.97% from December 1 to December 31,
2020.
|
2.
|
Represents adjustment
to West Fraser Estimated ADD rate of 3.40% for 2020 and 4.65% for
2019.
|
3.
|
The total represents
the combined CVD cash deposit rate and West Fraser Estimated ADD
rate of 21.39% from October 1 to November 30, 2020, 10.97% from
December 1 to December 31, 2020 and 22.64% for 2019.
|
4.
|
$124 million
represents the true-up to the final AR1 duty rates for the 2017 and
2018 POI.
|
5.
|
$14 million
represents interest income accrued on the $124 million duty deposit
receivable.
|
Impact on the balance sheet
Export duty deposits receivable
|
January 1 to
December 31
|
January 1 to
December 31
|
|
|
2020
|
|
2019
|
Beginning
balance
|
$
|
80
|
$
|
75
|
Export duties
recognized as long-term duty deposits receivable in consolidated
balance sheets
|
|
136
|
|
5
|
Interest recognized
on the long-term duty deposits receivable
|
|
16
|
|
4
|
Exchange on the
long-term duty deposits
|
|
(5)
|
|
(4)
|
Ending
balance
|
$
|
227
|
$
|
80
|
11. Subsequent event
We completed the acquisition of 100% of the issued and
outstanding shares of Norbord Inc. ("Norbord") on February 1, 2021 (the "Acquisition"). The
Norbord shareholders received 0.675 of a Common share for each
Norbord Common share held. We issued 54,484,188 Common shares
to the shareholders of Norbord in connection with this Acquisition,
and Norbord is now a wholly owned subsidiary of West Fraser.
The value of the shares issued in consideration of the transaction
is $4.5 billion, based on West
Fraser's January 29, 2020 closing
price of $81.94 per share multiplied
by 54,484,188 Common shares issued.
On the completion of the Acquisition, we issued replacement
share purchase options (the "Replacement Options") in exchange for
share purchase options that were outstanding under Norbord's stock
option plans. In total, an additional 887,966 Common shares
have become issuable on the exercise of these Replacement
Options. These Replacement Options continue with their
original vesting schedule and exercise price (as adjusted in
accordance with the exchange ratio under the Acquisition).
Concurrent with the closing of the Acquisition, we amended our
$850 million revolving credit
facility to accommodate the new subsidiaries acquired. In
addition, our $150 million revolving
credit facility was replaced with a US$450
million revolving credit facility that matures on
April 9, 2024.
At the closing of the Acquisition, Norbord terminated its
revolving credit facilities and accounts receivable securitization
facilities. As part of the Acquisition, we assumed Norbord's
US$315 million senior notes due
April 2023, bearing interest at 6.25%
and US$350 million senior notes due
July 2027, bearing interest at 5.75%
(the "Norbord Bonds"). Pursuant to the terms of the Norbord
Bonds, we are required to make an offer to repurchase the Norbord
Bonds at 101% of their principal amount, plus accrued and unpaid
interest. Any Norbord Bonds not purchased under this offer
will remain outstanding. Details of the offer will be
provided in a notice of the offer to be mailed to the holders of
the Norbord Bonds.
On February 1, 2021, our Common
shares commenced trading on the NYSE and began trading under the
symbol WFG. At the same time, our stock symbol on the TSX was
changed to WFG. It was determined that as a result of the
transaction, the functional currency of West Fraser's Canadian
operations has become the U.S. dollar and West Fraser has also
determined that a change in reporting currency to the U.S. dollar
is appropriate. Starting with first quarter 2021 results,
West Fraser will report its results in U.S. dollars. We began
consolidating the operating results, cash flows and net assets of
Norbord from February 1, 2021
onwards. As the Acquisition closed on February 1, 2021, we will undertake to allocate
the purchase price to the assets and liabilities acquired. We
will disclose a preliminary purchase price allocation in our first
quarter 2021 interim financial statements.
View original
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SOURCE West Fraser Timber Co. Ltd.