VANCOUVER, BC, July 28, 2021 /CNW/ - West Fraser Timber Co. Ltd.
("West Fraser" or the "Company") (TSX and NYSE: WFG)
reported today the second quarter results of 2021. The
Company also announced that it will hold a virtual Investor Event
in which members of the Company's senior management team will
provide a corporate update to investors and analysts. The event
will be webcast on September 16, 2021
at 11:00 a.m. Pacific
Time/2:00 p.m. Eastern Time
with further details to follow.
The results of operations presented and discussed below include
those of Norbord from February 1,
2021, the date of the completion of the acquisition of
Norbord. All dollar amounts in this news release are
expressed in U.S. dollars unless noted otherwise.
Second Quarter Highlights
- Sales increased 61% from the prior quarter to $3.779 billion
- Earnings increased to $1,488
million, or 39% of sales, from $665
million in the prior quarter
- Adjusted EBITDA increased to $2.160
billion from $1.008 billion in
the prior quarter
- Repurchased $233 million of WFG
shares for cancellation under normal course issuer bid
("NCIB")
- Increased authorization of the NCIB to 9.58 million shares of
WFG
- Redeemed Norbord Notes and retired $665
million of debt
- Finished the quarter with liquidity at $3.392 billion and net debt to total capital
ratio of (28)%
- Initiated a CAD$1.0 billion
substantial issuer bid ("SIB") subsequent to quarter-end
Results Compared to Previous Periods
($ millions
except earnings per share ("EPS"))
|
|
|
|
|
|
|
Q2-211
|
Q1-211
|
YTD-211
|
Q2-20
|
YTD-20
|
Sales
|
3,779
|
2,343
|
6,122
|
921
|
1,811
|
Adjusted
EBITDA3,4
|
2,160
|
1,0082
|
3,1682
|
104
|
172
|
Operating
earnings
|
1,986
|
879
|
2,865
|
61
|
70
|
Earnings
|
1,488
|
665
|
2,153
|
35
|
44
|
Basic EPS
($)
|
12.32
|
6.96
|
19.90
|
0.51
|
0.64
|
Diluted EPS
($)
|
12.32
|
6.96
|
19.90
|
0.51
|
0.55
|
1.
|
The results of the
operations of Norbord from the date of the acquisition of February
1, 2021, are included in West Fraser's financial
results.
|
2.
|
Cost of products sold
was increased and Adjusted EBITDA decreased by a one-time charge of
$93 million related to inventory purchase price
accounting.
|
3.
|
See section "Non-IFRS
Measures" in the Q2 2021 MD&A.
|
4.
|
Effective January 1, 2021, and for all
comparative periods, export duties are no longer excluded
from the definition of Adjusted EBITDA.
|
Operational Results Summary
Our Lumber segment generated operating earnings in the quarter
of $955 million (Q1-21 - $607 million) and Adjusted EBITDA of $994 million (Q1-21 - $646
million). Adjusted EBITDA increased due to higher
lumber prices and higher shipment volumes that recovered from
the seasonal railcar shortages in Canada and a period of extreme winter
conditions in the U.S. South in the previous quarter. Adjusted
EBITDA was negatively affected by higher manufacturing costs due in
part to increased SPF log costs, and to a lesser degree, increased
SYP log costs, higher expenditures related
to increased employee costs in the U.S. South
associated with managing through
COVID-19 impacts and other input cost
inflation.
Our NA EWP segment generated operating earnings in the quarter
of $1,017 million (Q1-21 -
$299 million) and Adjusted EBITDA of
$1,106 million (Q1-21 - $353 million). Segment operating earnings
and Adjusted EBITDA in the prior quarter were decreased by a
one-time charge of $86 million
related to inventory fair value adjustments from purchase price
accounting. The contribution of a full three months from our
OSB operations from the Norbord acquisition, higher plywood pricing
and recovery of plywood shipment volumes from the weather-related
railcar shortages experienced in the previous quarter positively
impacted Adjusted EBITDA for the quarter. Higher log costs from
increased B.C., Alberta and
Ontario stumpage rates and higher
resin costs negatively impacted Adjusted EBITDA.
Our Pulp & Paper segment generated operating earnings in the
quarter of $17 million (Q1-21 -
$2 million) and Adjusted EBITDA of
$25 million (Q1-21 - $11 million) while the Europe EWP segment
generated operating earnings in the quarter of $15 million (Q1-21 – negative $6 million) and Adjusted EBITDA of $39 million (Q1-21 - $11
million). Our Europe EWP segment operating earnings
and Adjusted EBITDA were decreased by a one-time charge of
$7 million in the prior quarter
related to inventory fair value adjustments from purchase price
accounting.
Capital Allocation
Strong second quarter results increased quarter-end available
liquidity to $3,392 million from
$2,551 million at the end of the
prior quarter. This balance sheet improvement has afforded us
greater flexibility to undertake strategic capital investments,
repay debt and repurchase shares.
Debt Repayment
Concurrent with the closing of the Norbord acquisition, we
assumed Norbord's $315 million senior
notes due April 2023 (the "2023
Notes"), bearing interest at 6.25%, and $350
million senior notes due July
2027 (the "2027 Notes"), bearing interest at 5.75%.
During the second quarter, we elected to redeem the remaining
2027 Notes. We also gave notice to redeem the 2023 Notes.
Both Notes were redeemed with cash on hand and are no longer
outstanding. With the redemptions of the 2023 Notes and the
2027 Notes we have now retired $665
million of the principal value of long-term debt and reduced
annual interest expense by approximately $40
million.
Normal Course Issuer Bid
On February 17, 2021, we renewed our normal course issuer
bid ("NCIB"), allowing us to acquire an additional 6,044,000 Common
shares until the expiry of the bid on February 16, 2022.
On June 11, 2021, we amended our
NCIB, allowing us to acquire an additional 3,538,470 Common shares
for an aggregate of 9,582,470 Common shares. In the second quarter
of 2021, we repurchased approximately 3.01 million shares under the
NCIB at an average share price of CAD$90.85 ($74.53)
for aggregate consideration of $233
million. All shares purchased by the Company under the
NCIB will be cancelled.
Outlook
Western Canadian Wildfires
Western Canada is presently facing extreme heat
and dry ground
conditions, resulting in a significant number
of wildfires. As a result, the province of British Columbia declared a provincial state
of emergency on July 20, 2021. The
wildfires are affecting access to logging
areas in some of our operating areas and impacting
transportation networks we rely on to move our products. This
has resulted in temporary suspensions of production due to raw
material shortages, evacuation orders and difficulties in moving
our finished product by truck and rail. At this time, we
cannot estimate when the situation will be alleviated or estimate
the impact on our production and shipments.
Markets
The most significant uses for our lumber and OSB products are
residential construction, repair and remodelling, and industrial
applications. Low mortgage rates, low volumes of homes
available for resale, favourable demographics, increasing
acceptance of remote working and the underlying housing
construction deficit due to several years of underbuilding appear
to be positively influencing the demand for new housing in
North America. An aging
housing stock and repair and renovation spending should also
continue to drive lumber, plywood and OSB demand.
Canadian lumber exports to Asia may be impacted
by competition from suppliers in other countries and current
North American pricing will continue to impact export
markets. Lumber exports are also expected to be
negatively impacted in the near-term by wildfires that in
some cases are impeding rail access to shipping ports.
Our balance sheet remains strong and well equipped to face
potential volatility that may exist in our markets over the coming
quarters and to support capital expenditure plans and returning
capital to shareholders.
Operations
In order to address the wildfire situation in Western Canada (including evacuation alerts
and orders, and a provincial state of emergency declaration),
transportation challenges, log cost and availability, variability
in short term demand and overall inventory levels, we may from time
to time adjust activity levels at our operations. Starting in the
second half of June, we have been making such adjustments to
activity levels at our operations to address the current situation
and will continue to do so as required. As a result, we expect that
our production and shipments in the second half of 2021 will be
impacted. The extent of this impact will be dependent on the
severity of the wildfire situation, any state of emergency or
evacuation orders issued by governments and resulting impacts to
operations, log cost and availability, fluidity of transportation
and overall demand for our products.
In addition, our operations and results could be negatively
affected by the availability of labour due to the continuing
impacts of COVID-19, adverse weather conditions in our operating
areas, intense competition for logs in the B.C. Interior, and
elevated stumpage fees. On January 1,
2021, stumpage rates increased in B.C. due to the
market-based adjustments related to lumber prices and purchase
log costs. A further increase in B.C. stumpage
rates occurred on July 1,
2021 and we expect a further increase in
B.C. stumpage on October 1,
2021. In Alberta, stumpage rates have started to
decline from levels earlier in the year, as they are closely linked
to the price of lumber and OSB and respond rapidly to changes in
lumber and OSB prices. We expect the SYP log
cost to remain relatively steady in
the third quarter after moderating in
the second quarter of 2021. We also have periodic
planned maintenance outages at our EWP and pulp
facilities.
Strategic Capital Program
We continue to expect to move forward with approximately
$180 million of additional capital
projects identified under West Fraser's strategic capital
program. As previously indicated, work on these projects will
begin the second half of 2021 and continue through 2023. This
investment program will support safety, cost improvements and
strategic growth initiatives as we continue our focus on capital
execution and operational excellence. The average project
payback period for this strategic capital program is expected to be
three to four years. Notwithstanding the addition of these
capital projects, as a result of lengthening lead times on projects
currently underway, we are reducing our 2021 capital expenditure
target to a range of approximately $400
million to $450 million from
our prior guidance of approximately $450
million.
Norbord Integration Update
The integration of the Norbord business is still in the early
stages and remains a Company focus. We remain on track to
achieve targeted annual synergies of $61
million over the next 12-18 months.
Substantial Issuer Bid
On July 12, 2021, we commenced a
substantial issuer bid ("SIB") pursuant to which the Company has
offered to purchase from shareholders for cancellation up to
CAD$1.0 billion of Common shares. The
SIB is by way of a "modified Dutch auction" procedure with a tender
price range from CAD$85.00 to
CAD$98.00 per share. The SIB will
expire on August 17, 2021, unless
extended or withdrawn. Upon expiry of the SIB, the Company will
determine the lowest purchase price (which will be not less than
CAD$85.00 per share and not more than
CAD$98.00 per share) that will allow
it to purchase the maximum number of shares properly tendered to
the SIB, and not properly withdrawn, having an aggregate purchase
price not exceeding CAD$1.0 billion.
In addition, our completion of the SIB is subject to the
conditions to the closing of the SIB, as set out in the SIB, being
satisfied. We have suspended share repurchases under our
current NCIB, and no NCIB purchases will be made until after the
expiration of the SIB, if and when we determine to recommence
repurchases under the NCIB.
Risks and Uncertainties
Risk and uncertainty disclosures are included in our 2020 annual
MD&A, in our 2020 Annual Report, as well as in our public
filings with securities regulatory authorities, including those set
out in our Base Shelf Prospectus under the heading "Risk Factors".
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 second quarter 2021 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 Related to the Norbord
Acquisition
We have applied purchase price accounting to the Norbord
acquisition, resulting in a significant increase from the
historical cost base of Norbord and $1,374
million of goodwill. Note 3 to our Financial
Statements provides details on the purchase price allocation.
For additional information, refer to the section titled "Norbord
Acquisition" in our second quarter 2021 MD&A.
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).
The Company
West Fraser is a diversified wood products company with more
than 60 facilities in Canada,
the United States, the
United Kingdom, and Europe. From responsibly sourced and
sustainably managed forest resources, the Company produces lumber,
engineered wood products (OSB, LVL, MDF, plywood, and
particleboard), pulp, newsprint, wood chips, other residuals and
renewable energy. West Fraser's products are used in home
construction, repair and remodelling, industrial applications,
papers, tissue, and box materials.
Conference Call
West Fraser will hold an analysts' conference call to discuss
the Company's second quarter 2021 financial and operating results
on Thursday, July 29, 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 West Fraser conference call chaired by Mr.
Ray Ferris, President and Chief
Executive Officer of the Company.
Following management's discussion of the quarterly 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.
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 "Capital Allocation" (regarding
flexibility to undertake strategic capital investments, repay debt
and repurchase shares), "Outlook - Western Canadian
Wildfires" (regarding the estimated impact on production and
shipments), "Outlook - Markets" (regarding lumber, OSB and
plywood demand, lumber exports and the strength and ability of our
balance sheet to weather potential market volatility), "Outlook -
Operations" (regarding activity levels at our operations,
the impact on production and shipments and negative impacts on
operations and results, including COVID-19, fibre costs and other
factors), "Outlook - Strategic Capital Program" (regarding
the amount and timing of planned capital expenditures and payback
period), "Outlook - Norbord Integration Update" (regarding
achievement of synergies and integration of Norbord), and "Outlook
- Substantial Issuer Bid" (regarding terms of the
substantial issuer bid and purchases under 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) assumptions in
connection with the economic and financial conditions in the U.S.,
Canada, Europe and globally and consequential demand
for our products; (2) risks inherent to product concentration and
cyclicality; (3) effects of competition and product pricing
pressures, including reductions or deferral of demand in response
to lumber and/or OSB price increases; (4) effects of variations in
the price and availability of manufacturing inputs, including
continued access to log supply and fibre resources at competitive
prices and the impact of third-party certification standards; (5)
availability of transportation services, including truck and rail
services, and port facilities, and impacts on transportation
services from wildfires; (6) various events that could disrupt
operations, including natural, man-made or catastrophic events
including wildfires and any state of emergency and/or evacuation
orders issued by governments, and ongoing relations with employees;
(7) risks inherent to customer dependence; (8) impact of future
cross border trade rulings or agreements; (9) implementation of
important strategic initiatives and identification, completion and
integration of acquisitions; (10) impact of changes to, or
non-compliance with, environmental or other regulations; (11) the
impact of the COVID-19 pandemic on our operations and on customer
demand, supply and distribution and other factors; (12) government
restrictions, standards or regulations intended to reduce
greenhouse gas emissions; (13) changes in government policy and
regulation; (14) impact of weather and climate change on our
operations or the operations or demand of its suppliers and
customers; (15) ability to implement new or upgraded information
technology infrastructure; (16) impact of information technology
service disruptions or failures; (17) impact of any product
liability claims in excess of insurance coverage; (18) risks
inherent to a capital intensive industry; (19) impact of future
outcomes of tax exposures; (20) potential future changes in tax
laws, including tax rates; (21) effects of currency exposures and
exchange rate fluctuations; (22) future operating costs; (23)
availability of financing, bank lines, securitization programs
and/or other means of liquidity; (24) integration of the Norbord
business; (25) the extent to which shareholders tender under our
substantial issuer bid, and the prices at which shares are
tendered; (26) a determination by us that the conditions for
completion of the substantial issuer bid have not been satisfied;
and (27) other risks detailed from time-to-time in our annual
information forms, annual reports, MD&A, quarterly reports and
material change reports filed with and furnished to securities
regulators.
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, 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 Q2 2021 MD&A.
West Fraser Timber
Co. Ltd
|
Condensed
Consolidated Balance Sheets
|
(in millions of
United States dollars, except where indicated -
unaudited)
|
|
|
|
|
|
|
|
|
|
|
Currency
remeasurement
|
|
Currency
remeasurement
|
|
June
30
|
December
31
|
January
1
|
|
2021
|
2020
|
2020
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and short-term
investments
|
$
|
2,231
|
$
|
461
|
$
|
12
|
Receivables
|
|
777
|
|
277
|
|
199
|
Income taxes
receivable
|
|
22
|
|
8
|
|
104
|
Inventories (note
5)
|
|
966
|
|
578
|
|
561
|
Prepaid
expenses
|
|
62
|
|
12
|
|
7
|
|
|
4,058
|
|
1,336
|
|
883
|
Property, plant
and equipment
|
|
3,625
|
|
1,657
|
|
1,648
|
Timber
licences
|
|
375
|
|
372
|
|
380
|
Goodwill and other
intangibles
|
|
2,426
|
|
591
|
|
594
|
Export duty
deposits (note 14)
|
|
180
|
|
178
|
|
61
|
Other
assets
|
|
42
|
|
35
|
|
20
|
Deferred income
tax assets
|
|
5
|
|
9
|
|
8
|
|
$
|
10,711
|
$
|
4,178
|
$
|
3,594
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Cheques issued in
excess of funds on deposit
|
$
|
-
|
$
|
-
|
$
|
12
|
Operating loans (note
6)
|
|
-
|
|
-
|
|
288
|
Payables and accrued
liabilities
|
|
745
|
|
389
|
|
305
|
Current portion of
long-term debt (note 6)
|
|
-
|
|
7
|
|
7
|
Current portion of
reforestation and decommissioning obligations
|
|
39
|
|
34
|
|
32
|
Income taxes
payable
|
|
491
|
|
98
|
|
-
|
|
|
1,275
|
|
528
|
|
644
|
Long-term debt
(note 6)
|
|
499
|
|
500
|
|
500
|
Other
liabilities (note 7)
|
|
380
|
|
408
|
|
350
|
Deferred income
tax liabilities
|
|
718
|
|
264
|
|
195
|
|
|
2,872
|
|
1,700
|
|
1,689
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
Share capital (note
9)
|
|
3,820
|
|
481
|
|
480
|
Accumulated other
comprehensive earnings
|
|
(239)
|
|
(240)
|
|
(272)
|
Retained
earnings
|
|
4,258
|
|
2,237
|
|
1,697
|
|
|
7,839
|
|
2,478
|
|
1,905
|
|
$
|
10,711
|
$
|
4,178
|
$
|
3,594
|
Number of Common
shares and Class B Common shares outstanding at July 28, 2021
was 118,725,654.
|
West Fraser Timber
Co. Ltd
|
Condensed
Consolidated Statements of Changes in Shareholders'
Equity
|
(in millions of
United States dollars, except where indicated -
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
remeasurement
|
|
Currency
remeasurement
|
|
|
|
|
April 1 to June
30
|
|
January 1 to June
30
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
|
|
|
|
|
Balance - beginning
of period
|
$
|
3,917
|
$
|
480
|
$
|
481
|
$
|
480
|
Issuance of Common
shares (note 9)
|
|
3
|
|
-
|
|
3,490
|
|
-
|
Repurchase of Common
shares for cancellation (note 9)
|
|
(100)
|
|
-
|
|
(151)
|
|
-
|
Balance - end of
period
|
$
|
3,820
|
$
|
480
|
$
|
3,820
|
$
|
480
|
|
|
|
|
|
|
|
|
|
Contributed
surplus
|
|
|
|
|
|
|
|
|
Balance - beginning
of period
|
$
|
15
|
$
|
-
|
$
|
-
|
$
|
-
|
Acquired
equity-settled share option plan (note 3)
|
|
-
|
|
-
|
|
14
|
|
-
|
Equity-settled share
option expense
|
|
-
|
|
-
|
|
1
|
|
-
|
Convert
equity-settled share option plan to cash-settled (note
9)
|
|
(15)
|
|
-
|
|
(15)
|
|
-
|
Balance - end of
period
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive earnings
|
|
|
|
|
|
|
|
|
Balance - beginning
of period
|
$
|
(239)
|
$
|
(391)
|
$
|
(240)
|
$
|
(272)
|
Translation gain on
foreign operations
|
|
-
|
|
-
|
|
1
|
|
-
|
Translation effect on
change in reporting currency
|
|
-
|
|
52
|
|
-
|
|
(67)
|
Balance - end of
period
|
$
|
(239)
|
$
|
(339)
|
$
|
(239)
|
$
|
(339)
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
|
|
|
|
|
|
Balance - beginning
of period
|
$
|
2,921
|
$
|
1,764
|
$
|
2,237
|
$
|
1,697
|
Actuarial (loss) gain
on post-retirement benefits, net of tax
|
|
(4)
|
|
(117)
|
|
85
|
|
(50)
|
Repurchase of Common
shares for cancellation (note 9)
|
|
(123)
|
|
-
|
|
(174)
|
|
-
|
Earnings for the
period
|
|
1,488
|
|
35
|
|
2,153
|
|
44
|
Dividends
declared
|
|
(24)
|
|
(10)
|
|
(43)
|
|
(19)
|
Balance - end of
period
|
$
|
4,258
|
$
|
1,672
|
$
|
4,258
|
$
|
1,672
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
$
|
7,839
|
$
|
1,813
|
$
|
7,839
|
$
|
1,813
|
West Fraser Timber
Co. Ltd
|
Condensed
Consolidated Statements of Earnings and Comprehensive
Earnings
|
(in millions of
United States dollars, except where indicated -
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
remeasurement
|
Currency
remeasurement
|
|
|
|
|
April 1 to June
30
|
|
January 1 to June
30
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
3,779
|
$
|
921
|
$
|
6,122
|
$
|
1,811
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
1,235
|
|
615
|
|
2,274
|
|
1,245
|
Freight and other
distribution costs
|
|
238
|
|
133
|
|
419
|
|
258
|
Export duties, net
(note 14)
|
|
73
|
|
30
|
|
110
|
|
56
|
Amortization
|
|
162
|
|
47
|
|
284
|
|
99
|
Selling, general and
administration
|
|
73
|
|
39
|
|
151
|
|
80
|
Equity-based
compensation
|
|
12
|
|
(4)
|
|
19
|
|
3
|
|
|
1,793
|
|
860
|
|
3,257
|
|
1,741
|
Operating
earnings
|
|
1,986
|
|
61
|
|
2,865
|
|
70
|
Finance
expense
|
|
(20)
|
|
(10)
|
|
(33)
|
|
(22)
|
Other (note
10)
|
|
-
|
|
(2)
|
|
4
|
|
7
|
Earnings before
tax
|
|
1,966
|
|
49
|
|
2,836
|
|
55
|
Tax provision (note
11)
|
|
(478)
|
|
(14)
|
|
(683)
|
|
(11)
|
Earnings
|
$
|
1,488
|
$
|
35
|
$
|
2,153
|
$
|
44
|
|
|
|
|
|
|
|
|
|
Earnings per
share (dollars) (note 12)
|
|
|
|
|
|
|
|
|
Basic
|
$
|
12.32
|
$
|
0.51
|
$
|
19.90
|
$
|
0.64
|
Diluted
|
$
|
12.32
|
$
|
0.51
|
$
|
19.90
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings
|
|
|
|
|
|
|
|
|
Earnings
|
$
|
1,488
|
$
|
35
|
$
|
2,153
|
$
|
44
|
Other
comprehensive earnings
|
|
|
|
|
|
|
|
|
Translation gain on
foreign operations
|
|
-
|
|
-
|
|
1
|
|
-
|
Translation effect on
change in reporting currency
|
|
-
|
|
52
|
|
-
|
|
(67)
|
Actuarial (loss) gain
on post-retirement benefits, net of tax
|
|
(4)
|
|
(117)
|
|
85
|
|
(50)
|
Comprehensive
earnings
|
$
|
1,484
|
$
|
(30)
|
$
|
2,239
|
$
|
(73)
|
West Fraser Timber
Co. Ltd
|
Condensed
Consolidated Statements of Cash Flows
|
(in millions of
United States dollars, except where indicated -
unaudited)
|
|
Currency
remeasurement
|
Currency
remeasurement
|
|
April 1 to
June 30
|
January 1 to June
30
|
Cash provided by
(used in)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Operating
activities
|
|
|
|
|
|
|
|
|
Earnings
|
$
|
1,488
|
$
|
35
|
$
|
2,153
|
$
|
44
|
Adjustments
|
|
|
|
|
|
|
|
|
Amortization
|
|
162
|
|
47
|
|
284
|
|
99
|
Finance
expense
|
|
20
|
|
10
|
|
33
|
|
22
|
Foreign exchange
(gain) loss
|
|
(4)
|
|
4
|
|
2
|
|
(6)
|
Export duty
deposits
|
|
(8)
|
|
(1)
|
|
-
|
|
(7)
|
Export duties
payable
|
|
25
|
|
-
|
|
25
|
|
-
|
Post-retirement
expense
|
|
17
|
|
18
|
|
42
|
|
37
|
Contributions to
post-retirement benefit plans
|
|
(13)
|
|
(11)
|
|
(26)
|
|
(21)
|
Tax
provision
|
|
478
|
|
14
|
|
683
|
|
11
|
Income taxes (paid)
received
|
|
(252)
|
|
65
|
|
(498)
|
|
64
|
Reforestation and
decommissioning obligations
|
|
(9)
|
|
(9)
|
|
4
|
|
9
|
Other
|
|
13
|
|
(10)
|
|
-
|
|
(6)
|
Changes in non-cash
working capital
|
|
|
|
|
|
|
|
|
Receivables
|
|
(95)
|
|
(19)
|
|
(267)
|
|
(68)
|
Inventories
|
|
172
|
|
202
|
|
(49)
|
|
57
|
Prepaid
expenses
|
|
(34)
|
|
(6)
|
|
(38)
|
|
(9)
|
Payables and accrued
liabilities
|
|
(74)
|
|
(21)
|
|
-
|
|
1
|
|
|
1,886
|
|
318
|
|
2,348
|
|
227
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Repayment of
long-term debt
|
|
(665)
|
|
-
|
|
(667)
|
|
-
|
Proceeds from
(repayment of) operating loans
|
|
-
|
|
(230)
|
|
-
|
|
(11)
|
Financing fees
paid
|
|
-
|
|
-
|
|
(3)
|
|
-
|
Make-whole premium
paid (note 6)
|
|
(60)
|
|
-
|
|
(60)
|
|
-
|
Finance expense
paid
|
|
(22)
|
|
(11)
|
|
(25)
|
|
(18)
|
Repurchase of Common
shares for cancellation
|
|
(233)
|
|
-
|
|
(326)
|
|
-
|
Issuance of Common
shares
|
|
2
|
|
-
|
|
7
|
|
-
|
Dividends
paid
|
|
(19)
|
|
(10)
|
|
(30)
|
|
(20)
|
Other
|
|
(3)
|
|
(1)
|
|
(5)
|
|
(1)
|
|
|
(1,000)
|
|
(252)
|
|
(1,109)
|
|
(50)
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Acquired cash and
short-term investments (note 3)
|
|
-
|
|
-
|
|
642
|
|
-
|
Additions to capital
assets
|
|
(66)
|
|
(43)
|
|
(128)
|
|
(88)
|
Government
assistance
|
|
-
|
|
1
|
|
3
|
|
1
|
Proceeds from
disposal of capital assets
|
|
1
|
|
-
|
|
1
|
|
4
|
Other
|
|
1
|
|
1
|
|
-
|
|
1
|
|
|
(64)
|
|
(41)
|
|
518
|
|
(82)
|
|
|
|
|
|
|
|
|
|
Change in
cash
|
|
822
|
|
25
|
|
1,757
|
|
95
|
Foreign exchange
effect on cash
|
|
9
|
|
2
|
|
13
|
|
(2)
|
Cash - beginning
of period
|
|
1,400
|
|
66
|
|
461
|
|
-
|
Cash - end of
period
|
$
|
2,231
|
$
|
93
|
$
|
2,231
|
$
|
93
|
West Fraser Timber Co. Ltd.
Notes to Condensed
Consolidated Interim Financial Statements
(figures are in millions of United
States 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 with more than 60
facilities in Canada, the United States ("U.S."), the United Kingdom ("U.K."), and Europe.
From responsibly sourced and sustainably managed forest resources,
the Company produces lumber, engineered wood products (OSB, LVL,
MDF, plywood, and particleboard), pulp, newsprint, wood chips,
other residuals and renewable energy. West Fraser's products
are used in home construction, repair and remodelling, industrial
applications, papers, tissue, and box materials. 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")
and on the New York Stock Exchange ("NYSE") under the symbol
WFG.
2. Basis of presentation and statement of compliance
These condensed consolidated interim financial statements
have been prepared in accordance with International Accounting
Standard ("IAS") 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, audited annual consolidated financial
statements, except for the change in functional and reporting
currency and the business combination as discussed below.
These condensed consolidated interim financial statements should be
read in conjunction with our 2020 audited annual consolidated
financial statements, which are presented in Canadian dollars.
Change in functional and reporting currency
Determination of functional currency may involve certain
judgments to determine the primary economic environment. We
reconsider the functional currency of our entities if there is a
change in events and conditions which determine the primary
economic environment. We have determined that as a result of
the acquisition of Norbord Inc. (the "Acquisition"), the functional
currency of our Canadian operations has changed from Canadian
dollars ("CAD") to United States
dollars ("USD"). We considered a variety of factors when
making this decision, the most significant being an increase
in the level of sales made in U.S. dollars, a significant portion
of operating expenses being incurred in U.S. dollars, and increased
levels of U.S. dollar financing.
Concurrent with the change in functional currency, we also
changed our reporting currency from Canadian dollars to U.S.
dollars. This change in reporting currency is to better
reflect our business activities, following the increased presence
in the U.S. as a result of the Acquisition and in connection with
the listing of West Fraser's common shares on the NYSE on
February 1, 2021.
A change in functional currency is applied prospectively and
must be based on a change in economic facts, events and conditions.
In contrast, a change in reporting currency requires
retroactive restatement. Both changes have specific
transition rules under IAS 21, The Effects of Changes in Foreign
Exchange Rates.
As at and for the year ended December 31,
2020 and all prior periods, the functional and reporting
currency of the Company was the Canadian dollar as described in our
audited annual consolidated financial statements. The
currency remeasurement of our results applied the IAS 21
transitional rules.
To prepare our December 31, 2020
and January 1, 2020 consolidated
balance sheets, all assets and liabilities were translated into USD
at the closing exchange rate on December 31,
2020 and December 31, 2019, as
listed below. Equity items were retroactively restated at
historical exchange rates to give effect to the change in reporting
currency. The accounting policy used to translate the equity
items prior to 2020 was to use the annual average exchange rate for
each equity transaction that occurred in the year. For 2020,
equity items were translated quarterly using the average exchange
rate for each quarter.
To prepare our 2020 consolidated statement of earnings, all
revenues and expenses were translated into USD at the average
exchange rate for each quarter, with no adjustments to the
measurement of or accounting for previously reported results.
To prepare our 2020 consolidated statement of cash flow, all items
were translated into USD at the average exchange rate for each
quarter, with no adjustments to the measurement of or accounting
for previously reported results.
The exchange rates used to reflect the change in reporting
currency were as follows:
Canadian - USD
exchange rate
|
Q1-20
|
Q2-20
|
Q3-20
|
Q4-20
|
Q4-19
|
Closing
rate
|
0.7049
|
0.7338
|
0.7497
|
0.7854
|
0.7699
|
Average
rate
|
0.7443
|
0.7221
|
0.7508
|
0.7676
|
n/a
|
Foreign currency translation effective from February 1, 2021
European operations
Assets and liabilities of foreign operations having a functional
currency other than the USD are translated at the rate of exchange
prevailing at the reporting date, and revenues and expenses at
average rates during the period. Gains or losses on
translation are included as a component of shareholders' equity in
other comprehensive earnings.
North American operations
Foreign currency-denominated (non-U.S. currencies) monetary
assets and liabilities are translated using the rate of exchange
prevailing at the reporting date. Gains or losses on
translation of these items are included in earnings and reported
other income or expense.
Foreign currency fluctuation effective from February 1, 2021
Our Canadian operations incur a portion of their operating
expenses in Canadian dollars. Therefore, an increase in the
value of the CAD relative to the USD increases the value of
expenses in USD terms incurred by our Canadian operations, which
reduces operating margin and the cash flow available to fund
operations.
The impact on USD equivalent of net CAD revenues and expenses
for a $0.01 change results in a
pre-tax earnings adjustment of $18
million.
3. Norbord acquisition
Business combinations are accounted for using the
acquisition method. We measure goodwill at the acquisition
date as the fair value of the consideration transferred less the
fair value of the identifiable assets acquired and liabilities
assumed. Customer lists acquired in a business combination
that qualify for separate recognition are recognized as intangible
assets at their fair value and amortized straight-line over 10
years. Transaction costs in connection with business
combinations are expensed as incurred. The determination of
the fair value of the assets acquired and liabilities assumed
requires management to use estimates that contain uncertainty and
critical judgments including the remaining estimated useful life of
non-monetary assets. We have engaged a valuations expert to
prepare the fair value for Norbord's working capital, property,
plant and equipment, and intangible assets. This work is
expected to be complete by the end of the year.
On February 1, 2021, we acquired
all of the outstanding shares of Norbord Inc. ("Norbord").
According to the terms of the Acquisition, Norbord
shareholders received 0.675 of a West Fraser share for each Norbord
share held. The result was the issuance of 54,484,188 Common
shares of West Fraser at a price of US$63.90 per share (CAD$81.94 per share) for $3,482 million. The price per share was
based on the West Fraser Common shares' closing price as listed on
the TSX on January 29, 2021, and a
CAD/USD exchange rate of 0.7798.
Included in the Acquisition are five OSB mills in Canada, seven OSB mills in the U.S., one OSB
mill, one MDF plant and two particleboard plants in the U.K., one
OSB mill in Belgium, and their
related corporate offices.
We have incorporated the North American operations of Norbord
into our Panels segment and renamed that segment North America ("NA") Engineered Wood Products
("EWP"). This segment includes the results from North
American operations for OSB, plywood, MDF, and LVL. In
addition, we have identified a Europe EWP segment, which includes
the results from the U.K. and Belgium operations for OSB, MDF and
particleboard. The EWP segments have been separated due to
differences in the operating region, customer base, profit margins
and sales volumes.
The Acquisition has been accounted for as an acquisition of a
business in accordance with IFRS 3, Business Combinations.
We have allocated the purchase price based on our preliminary
estimated fair value of the assets acquired and the liabilities
assumed as follows:
West Fraser
purchase consideration:
|
|
Fair value of 54
million West Fraser shares issued
|
$
|
3,482
|
Fair value of
equity-based compensation instruments
|
|
24
|
|
$
|
3,506
|
Preliminary fair
value of net assets acquired:
|
|
|
Cash and short-term
investments
|
$
|
642
|
Accounts
receivable
|
|
232
|
Inventories
|
|
339
|
Prepaid
expenses
|
|
12
|
Property, plant and
equipment
|
|
2,084
|
Timber
|
|
10
|
Other non-current
assets
|
|
6
|
Other
intangibles
|
|
17
|
Customer list
intangible
|
|
470
|
Goodwill
|
|
1,374
|
Deferred income tax
assets
|
|
3
|
Payables and accrued
liabilities
|
|
(300)
|
Income tax
payable
|
|
(144)
|
Current portion of
reforestation and decommissioning obligations
|
|
(2)
|
Long-term
debt
|
|
(720)
|
Other non-current
liabilities
|
|
(37)
|
Deferred income tax
liabilities
|
|
(480)
|
|
$
|
3,506
|
Factors contributing to goodwill include the Norbord workforce,
assets that are geographically complementary to our existing
facilities and offer close access to large markets and timber
baskets. The Acquisition also provides increased scale and
geographic diversification of manufacturing and markets. The
goodwill of $1,374 million is not
deductible for tax purposes.
The following tables represent Norbord's actual results included
in our statement of earnings and the proforma results of operations
for the six months ended June 30,
2021 assuming the Acquisition occurred on January 1, 2021 and including purchase price
accounting for the Acquisition.
Norbord results
($ millions except as otherwise
indicated)
|
Norbord results
for February 1
to June 30, 20211
|
Sales
|
2,187
|
Operating
earnings
|
1,1022
|
Earnings
|
8082
|
1.
|
Represents the
results of the Norbord operations since the acquisition date that
are included in our results.
|
2.
|
Includes purchase
price accounting impact of $93 million expense for the one-time
inventory adjustment in cost of products sold.
|
Proforma January 1 to June 30,
2021 ("YTD-21") results
($ millions except as
otherwise indicated)
|
West
Fraser
Actual
Results
YTD-21
|
Norbord
Proforma Results1
Jan-21
|
West Fraser
Proforma Results1
YTD-21
|
Sales
|
6,122
|
277
|
6,399
|
Operating
earnings
|
2,8652
|
115
|
2,9802
|
Earnings
|
2,1532
|
86
|
2,2392
|
1.
|
These proforma
results have been provided as required per IFRS 3 - Business
Combinations. West Fraser proforma YTD-21 presents West
Fraser's results as if the Acquisition was completed on January 1,
2021.
|
2.
|
Includes purchase
price accounting impact of $93 million expense for the one-time
inventory adjustment in cost of products sold.
|
Balances that required significant fair value adjustments for
purchase price accounting included inventory, property, plant and
equipment, timber, and customer list intangibles. The
resulting goodwill and deferred income tax liabilities were also
significant.
Acquisition costs of $16 million
have been expensed in selling, general and administration.
4. Seasonality of operations
Our operating results are subject to seasonal fluctuations
that may impact quarter-to-quarter comparisons. Consequently,
interim operating results may not proportionately reflect operating
results for a full year.
Market demand varies seasonally, as homebuilding activity and
repair-and-remodelling work are generally stronger in the spring
and summer months. Extreme weather conditions, including
wildfires in Western Canada and
hurricanes in the U.S. South, may periodically affect operations,
including logging, manufacturing and transportation. Log
inventory is typically built up in the Northern regions of
North America and Europe during the winter to sustain our lumber
and EWP production during the second quarter when logging is
curtailed due to wet and inaccessible land conditions. This
inventory is generally consumed in the spring and summer
months.
5. Inventories
At June 30, 2021, no
inventory valuation reserve was recognized (March 31, 2021 - nil; December 31, 2020 -
$2 million; June 30, 2020 - $10
million; January 1, 2020 -
$30 million) to reflect net
realizable value being lower than cost.
|
|
June 30,
2021
|
|
Currency
remeasurement
December 31,
2020
|
|
Currency
remeasurement
January 1,
2020
|
Manufactured
products
|
$
|
461
|
$
|
270
|
$
|
262
|
Logs and other raw
materials
|
|
292
|
|
189
|
|
174
|
Processing materials
and supplies
|
|
213
|
|
119
|
|
125
|
|
$
|
966
|
$
|
578
|
$
|
561
|
6. Operating loans and long-term debt
Operating loans
As at June 30, 2021, our revolving
lines of credit consist of a $686
million (CAD$850 million)
committed revolving credit facility which matures August 2024, a $450
million committed revolving credit facility which matures
April 2024, a $25 million demand line of credit dedicated to
our U.S. operations and a $6 million
(CAD$8 million) demand line of credit
dedicated to our jointly‑owned newsprint operation.
At June 30, 2021, our revolving credit facilities were
undrawn and the associated deferred financing costs of $4 million were recorded in other assets.
Interest on the facilities is payable at floating rates based on
Prime, Base Rate Advances, Bankers' Acceptances or LIBOR Advances
at our option.
In addition, we have credit facilities totalling $121 million dedicated to letters of credit, of
which $96 million (CAD$120 million) is committed to our Canadian
operations. On June 30, 2021,
our letter of credit facilities supported $59 million open letters of credit.
All debt is unsecured except the $6
million (CAD$8 million)
jointly-owned newsprint operation demand line of credit, which is
secured by that joint operation's current assets.
On July 28, 2021, we completed an
amendment to our revolving credit facilities. Our
$686 million (CAD$850 million) and $450
million revolving credit facilities have been combined into
a single $1 billion committed
revolving credit facility with a five-year term. There were
no other significant changes to the terms or conditions of the
credit facilities.
Long-term debt
|
|
June 30,
2021
|
|
Currency
remeasurement
December 31,
2020
|
|
Currency
remeasurement
January
1,
2020
|
Senior notes due
October 2024; interest at 4.35%
|
$
|
300
|
$
|
300
|
$
|
300
|
Term loan due August
2024; floating interest rate
|
|
200
|
|
200
|
|
200
|
Note payable due
March 2021; interest at 2%
|
|
-
|
|
7
|
|
7
|
Notes
payable
|
|
1
|
|
2
|
|
3
|
|
|
501
|
|
509
|
|
510
|
Less: deferred
financing costs
|
|
(2)
|
|
(2)
|
|
(3)
|
Less: current
portion
|
|
-
|
|
(7)
|
|
(7)
|
|
$
|
499
|
$
|
500
|
$
|
500
|
As part of the Acquisition, we assumed Norbord's $315 million senior notes due April 2023 (the "2023 Notes"), bearing interest
at 6.25% and $350 million senior
notes due July 2027 (the "2027
Notes"), bearing interest at 5.75%. The purchase price fair
value adjustment resulted in an increase of $55 million for these notes.
On March 2, 2021, we made a
mandatory change of control offer for 2023 Notes and 2027 Notes,
which expired on April 1, 2021.
As a result of the change of control offer, $1 million of the 2023 Notes and $1 million of the 2027 Notes were redeemed and
were repaid in the second quarter of 2021. On April 6, 2021, we elected to redeem the remaining
2027 Notes, which redemption occurred on May
6, 2021. On May 6, 2021,
we elected to redeem the remaining 2023 Notes, which redemption
occurred on June 7, 2021. After the completion of the
redemptions of the 2023 Notes and the 2027 Notes, the principal
value of long-term debt was reduced by $665
million from the date of the Acquisition. An
additional make-whole premium of $60
million was paid on redemption resulting in a $5 million loss on settlement of the debt
recorded within finance expense as the carrying value of
$720 million was derecognized.
The fair value of the long-term debt at June 30, 2021, was $512
million (December 31, 2020 -
$524 million) based on rates
available to us at the balance sheet date for long-term debt with
similar terms and remaining maturities.
Interest rate swap contracts
At June 30, 2021, the Company had
interest rate swap contracts to pay fixed interest rates (weighted
average interest rate of 1.14%) and receive variable interest rates
equal to 3-month LIBOR on $200
million notional principal amount of indebtedness.
These agreements terminate in August
2024.
The agreements are accounted for as a derivative, and the gain
or loss related to changes in the fair value is included in other
income. For the six months ended June
30, 2021, a $3 million gain
was recorded.
7. Other liabilities
|
|
June 30,
2021
|
|
|
Currency
remeasurement
December 31,
2020
|
|
Currency
remeasurement
January 1,
2020
|
Post-retirement (note
8)
|
$
|
223
|
|
$
|
295
|
$
|
242
|
Long-term portion of
reforestation
|
|
67
|
|
|
58
|
|
57
|
Long-term portion of
decommissioning
|
|
22
|
|
|
25
|
|
24
|
Export duties payable
(note 14)
|
|
25
|
|
|
-
|
|
-
|
Other
|
|
43
|
|
|
30
|
|
27
|
|
$
|
380
|
|
$
|
408
|
$
|
350
|
8. Post-retirement benefits
We maintain defined benefit and defined contribution
pension plans covering a majority of our employees. The
defined benefit plans generally do not require employee
contributions and provide a guaranteed level of pension payable for
life, based either on length of service or on earnings and length
of service, and in most cases do not increase after the
commencement of retirement. We also provide group life
insurance, medical and extended health benefits to certain employee
groups.
The status of the defined benefit pension plans and other
retirement benefit plans, in aggregate, is as follows:
|
|
June 30,
2021
|
|
|
Currency
remeasurement
December 31,
2020
|
|
Currency
remeasurement
January 1, 2020
|
Projected benefit
obligations
|
$
|
(1,598)
|
|
$
|
(1,471)
|
$
|
(1,305)
|
Fair value of plan
assets
|
|
1,384
|
|
|
1,181
|
|
1,067
|
|
$
|
(214)
|
|
$
|
(290)
|
$
|
(238)
|
Represented
by
|
|
|
|
|
|
|
|
Post-retirement
assets
|
$
|
9
|
|
$
|
5
|
$
|
4
|
Post-retirement
liabilities
|
|
(223)
|
|
|
(295)
|
|
(242)
|
|
$
|
(214)
|
|
$
|
(290)
|
$
|
(238)
|
The significant actuarial assumptions used to determine our
balance sheet date post-retirement assets and liabilities are as
follows:
|
June 30,
2021
|
March 31,
2021
|
December 31,
2020
|
Discount
rate
|
3.00%
|
3.24%
|
2.69%
|
Future compensation
rate increase
|
3.62%
|
3.62%
|
3.65%
|
For the six months ended June 30,
2021, we recognized in other comprehensive earnings a before
tax gain of $114 million to reflect
the changes in the valuation of the post-retirement benefit plans.
The actuarial gain on post-retirement benefits, included in
other comprehensive earnings, is as follows:
|
April 1 to June
30
|
January 1 to June
30
|
|
|
|
|
Currency
remeasurement
|
|
|
|
Currency
remeasurement
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Actuarial (loss)
gain
|
$
|
(5)
|
$
|
(157)
|
$
|
114
|
$
|
(66)
|
Tax recovery
(provision)
|
|
1
|
|
40
|
|
(29)
|
|
16
|
|
$
|
(4)
|
$
|
(117)
|
$
|
85
|
$
|
(50)
|
9. Share Capital
Authorized
400,000,000 Common shares, without par value
20,000,000 Class B Common shares, without par value
10,000,000 Preferred shares, issuable in series, without par
value
Issued
|
June 30,
2021
|
December 31,
2020
|
|
Number
|
|
Amount
|
Number
|
|
Currency
remeasurement
Amount
|
Common
|
116,444,176
|
$
|
3,820
|
66,397,144
|
$
|
481
|
Class B
Common
|
2,281,478
|
|
-
|
2,281,478
|
|
-
|
Total
Common
|
118,725,654
|
$
|
3,820
|
68,678,622
|
$
|
481
|
As part of the Acquisition, we issued 54,484,188 of West Fraser
Common shares at a price of US$63.90
per share (CAD$81.94 per share) for
$3,482 million. The price per
share is based on the West Fraser Common shares' closing price as
listed on the TSX on January 29,
2021, and a CAD/USD exchange rate of 0.7798.
For the first six months ended June 30,
2021, we issued 128,429 Common shares of the Company under
our share option plans and 2,946 under our employee share purchase
plan.
On April 20, 2021, our board of
directors approved a change to the assumed Norbord option plans
("Assumed Option Plans") to allow holders the right to elect to
receive a cash payment in lieu of exercising an option to purchase
Common shares. The change required us to fair value the
Assumed Option Plan on April 20, 2021
and convert from equity-based accounting to cash-settled accounting
for the Assumed Option Plan. Cash-settled accounting is
consistent with the West Fraser option plan. Any
changes in fair value from April 20,
2021, onwards will result in an expense or recovery over the
vesting period in the same manner as the rest of our Plans.
This change to the Assumed Option Plans did not in any way affect
the value of the instruments to the holders.
On February 17, 2021, we renewed
our normal course issuer bid ("NCIB") allowing us to acquire an
additional 6,044,000 Common shares for cancellation until the
expiry of the bid on February 16,
2022. This represents approximately 5% of the Company's
issued and outstanding Common shares. On June 11, 2021, we amended our NCIB, allowing us
to acquire an additional 3,538,470 Common shares for an aggregate
of 9,582,470 Common shares.
For the six months ended June 30,
2021, we have repurchased 4,568,531 Common shares at an
average price of US$71.37
(CAD$88.12) per share under this
NCIB.
Substantial Issuer Bid
On July 12, 2021, we commenced a
substantial issuer bid ("SIB") under which the Company has offered
to purchase from shareholders for cancellation up to CAD$1.0 billion of Common shares. The SIB
will proceed by way of a "modified Dutch auction" procedure with a
tender price range from CAD$85.00 to
CAD$98.00 per share. The SIB
will expire on August 17, 2021,
unless extended or withdrawn. Upon expiry of the SIB, the
Company will determine the lowest purchase price (which will be not
less than CAD$85.00 per share and not
more than CAD$98.00 per share) that
will allow it to purchase the maximum number of shares properly
tendered to the SIB, and not properly withdrawn, having an
aggregate purchase price not exceeding CAD$1.0 billion. We have suspended share
repurchases under our current NCIB, and no NCIB purchases will be
made until after the expiration of the SIB if and when we determine
to recommence repurchases under the NCIB.
10. Other
|
April 1 to June
30
|
January 1 to June
30
|
|
|
2021
|
|
Currency
remeasurement
2020
|
|
2021
|
|
Currency
remeasurement
2020
|
Foreign exchange gain
(loss)
|
$
|
4
|
$
|
(5)
|
$
|
(2)
|
$
|
9
|
Other
|
|
(4)
|
|
3
|
|
6
|
|
(2)
|
|
$
|
-
|
$
|
(2)
|
$
|
4
|
$
|
7
|
11. 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:
|
April 1 to June
30
|
January 1 to June
30
|
|
|
2021
|
|
Currency
remeasurement
2020
|
|
2021
|
|
Currency
remeasurement
2020
|
Income tax expense at
statutory rate of 27%
|
$
|
(531)
|
$
|
(13)
|
$
|
(766)
|
$
|
(15)
|
Rate differential
between jurisdictions
|
|
56
|
|
(3)
|
|
84
|
|
2
|
Non-taxable
amounts
|
|
-
|
|
2
|
|
(2)
|
|
2
|
Other
|
|
(3)
|
|
-
|
|
1
|
|
-
|
|
$
|
(478)
|
$
|
(14)
|
$
|
(683)
|
$
|
(11)
|
12. 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
cash-settled share option expense (recovery) charged to earnings
and after deducting a notional charge for cash-settled share
options 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.
|
April 1 to June
30
|
January 1 to
June 30
|
|
|
2021
|
|
Currency
remeasurement
2020
|
|
2021
|
|
Currency
remeasurement
2020
|
Earnings
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1,488
|
$
|
35
|
$
|
2,153
|
$
|
44
|
Cash-settled share
option expense (recovery)
|
|
7
|
|
9
|
|
16
|
|
(4)
|
Equity-settled share
option adjustment
|
|
(1)
|
|
-
|
|
(4)
|
|
(2)
|
Diluted
|
$
|
1,494
|
$
|
44
|
$
|
2,165
|
$
|
(38)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares (thousands)
|
|
|
|
|
Basic
|
|
120,696
|
|
68,670
|
|
108,183
|
|
68,668
|
Share
options
|
|
619
|
|
77
|
|
638
|
|
94
|
Diluted
|
|
121,315
|
|
68,747
|
|
108,821
|
|
68,762
|
Earnings per
share (dollars)
|
|
|
|
|
|
|
|
|
Basic
|
$
|
12.32
|
$
|
0.51
|
$
|
19.90
|
$
|
0.64
|
Diluted
|
$
|
12.32
|
$
|
0.64
|
$
|
19.90
|
$
|
0.55
|
13. Segmented information
|
Lumber
|
NA
EWP
|
Pulp &
Paper
|
Europe
EWP
|
Corporate
&
Other
|
Total
|
April 1, 2021 to
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
To external
customers
|
$
|
1,808
|
$
|
1,577
|
$
|
216
|
$
|
178
|
$
|
-
|
$
|
3,779
|
To other
segments
|
|
31
|
|
4
|
|
-
|
|
-
|
|
(35)
|
|
-
|
|
$
|
1,839
|
$
|
1,581
|
$
|
216
|
$
|
178
|
$
|
(35)
|
$
|
3,779
|
Cost of products
sold
|
|
(619)
|
|
(384)
|
|
(144)
|
|
(123)
|
|
35
|
|
(1,235)
|
Freight and other
distribution costs
|
|
(118)
|
|
(72)
|
|
(37)
|
|
(11)
|
|
-
|
|
(238)
|
Export duties,
net
|
|
(73)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(73)
|
Amortization
|
|
(39)
|
|
(89)
|
|
(8)
|
|
(24)
|
|
(2)
|
|
(162)
|
Selling, general and
administration
|
|
(35)
|
|
(19)
|
|
(10)
|
|
(5)
|
|
(4)
|
|
(73)
|
Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(12)
|
|
(12)
|
Operating
earnings
|
$
|
955
|
$
|
1,017
|
$
|
17
|
$
|
15
|
$
|
(18)
|
$
|
1,986
|
Finance expense,
net
|
|
(5)
|
|
(1)
|
|
(1)
|
|
(1)
|
|
(12)
|
|
(20)
|
Other
|
|
(10)
|
|
-
|
|
2
|
|
-
|
|
8
|
|
-
|
Earnings before
tax
|
$
|
940
|
$
|
1,016
|
$
|
18
|
$
|
14
|
$
|
(22)
|
$
|
1,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
remeasurement
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2020 to
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
To external
customers
|
$
|
678
|
$
|
85
|
$
|
158
|
$
|
-
|
$
|
-
|
$
|
921
|
To other
segments
|
|
26
|
|
2
|
|
-
|
|
-
|
|
(28)
|
|
-
|
|
$
|
704
|
$
|
87
|
$
|
158
|
$
|
-
|
$
|
(28)
|
$
|
921
|
Cost of products
sold
|
|
(472)
|
|
(58)
|
|
(113)
|
|
-
|
|
28
|
|
(615)
|
Freight and other
distribution costs
|
|
(93)
|
|
(9)
|
|
(31)
|
|
-
|
|
-
|
|
(133)
|
Export duties,
net
|
|
(30)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(30)
|
Amortization
|
|
(35)
|
|
(3)
|
|
(7)
|
|
-
|
|
(2)
|
|
(47)
|
Selling, general and
administration
|
|
(26)
|
|
(5)
|
|
(7)
|
|
-
|
|
(1)
|
|
(39)
|
Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
4
|
|
4
|
Operating
earnings
|
$
|
48
|
$
|
12
|
$
|
-
|
$
|
-
|
$
|
1
|
$
|
61
|
Finance expense,
net
|
|
(8)
|
|
(1)
|
|
(1)
|
|
-
|
|
-
|
|
(10)
|
Other
|
|
(3)
|
|
5
|
|
(2)
|
|
-
|
|
(2)
|
|
(2)
|
Earnings before
tax
|
$
|
37
|
$
|
16
|
$
|
(3)
|
$
|
-
|
$
|
(1)
|
$
|
49
|
|
Lumber
|
NA
EWP
|
Pulp &
Paper
|
Europe
EWP
|
Corporate &
Other
|
Total
|
January 1, 2021 to
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
To external
customers
|
$
|
3,083
|
$
|
2,356
|
$
|
393
|
$
|
290
|
$
|
-
|
$
|
6,122
|
To other
segments
|
|
56
|
|
6
|
|
-
|
|
-
|
|
(62)
|
|
-
|
|
$
|
3,139
|
$
|
2,362
|
$
|
393
|
$
|
290
|
$
|
(62)
|
$
|
6,122
|
Cost of products
sold
|
|
(1,109)
|
|
(748)
|
|
(269)
|
|
(210)
|
|
62
|
|
(2,274)
|
Freight and other
distribution costs
|
|
(209)
|
|
(120)
|
|
(70)
|
|
(20)
|
|
-
|
|
(419)
|
Export duties,
net
|
|
(110)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(110)
|
Amortization
|
|
(78)
|
|
(143)
|
|
(17)
|
|
(41)
|
|
(5)
|
|
(284)
|
Selling, general and
administration
|
|
(71)
|
|
(35)
|
|
(18)
|
|
(10)
|
|
(17)
|
|
(151)
|
Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(19)
|
|
(19)
|
Operating
earnings
|
$
|
1,562
|
$
|
1,316
|
$
|
19
|
$
|
9
|
$
|
(41)
|
$
|
2,865
|
Finance expense,
net
|
|
(10)
|
|
(2)
|
|
(3)
|
|
(1)
|
|
(17)
|
|
(33)
|
Other
|
|
(3)
|
|
-
|
|
3
|
|
-
|
|
4
|
|
4
|
Earnings before
tax
|
$
|
1,549
|
$
|
1,314
|
$
|
19
|
$
|
8
|
$
|
(54)
|
$
|
2,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
remeasurement
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2020 to
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
To external
customers
|
$
|
1,300
|
$
|
188
|
$
|
323
|
$
|
-
|
$
|
-
|
$
|
1,811
|
To other
segments
|
|
47
|
|
3
|
|
-
|
|
-
|
|
(50)
|
|
-
|
|
$
|
1,347
|
$
|
191
|
$
|
323
|
$
|
-
|
$
|
(50)
|
$
|
1,811
|
Cost of products
sold
|
|
(925)
|
|
(140)
|
|
(230)
|
|
-
|
|
50
|
|
(1,245)
|
Freight and other
distribution costs
|
|
(175)
|
|
(20)
|
|
(63)
|
|
-
|
|
-
|
|
(258)
|
Export duties,
net
|
|
(56)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(56)
|
Amortization
|
|
(74)
|
|
(6)
|
|
(15)
|
|
-
|
|
(4)
|
|
(99)
|
Selling, general and
administration
|
|
(55)
|
|
(10)
|
|
(15)
|
|
-
|
|
-
|
|
(80)
|
Equity-based
compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(3)
|
|
(3)
|
Operating
earnings
|
$
|
62
|
$
|
15
|
$
|
-
|
$
|
-
|
$
|
(7)
|
$
|
70
|
Finance expense,
net
|
|
(17)
|
|
(2)
|
|
(3)
|
|
-
|
|
-
|
|
(22)
|
Other
|
|
9
|
|
5
|
|
1
|
|
-
|
|
(8)
|
|
7
|
Earnings before
tax
|
$
|
54
|
$
|
18
|
$
|
(2)
|
$
|
-
|
$
|
(15)
|
$
|
55
|
The geographic distribution of external sales is as
follows1:
|
April 1 to June
30
|
January 1 to June
30
|
|
|
2021
|
|
Currency
remeasurement
2020
|
|
2021
|
|
Currency
remeasurement
2020
|
Canada
|
$
|
629
|
$
|
157
|
$
|
1,036
|
$
|
333
|
U.S.
|
|
2,726
|
|
568
|
|
4,362
|
|
1,127
|
China
|
|
136
|
|
135
|
|
254
|
|
239
|
Other Asia
|
|
102
|
|
57
|
|
166
|
|
101
|
Europe2
|
|
184
|
|
4
|
|
301
|
|
9
|
Other
|
|
2
|
|
-
|
|
3
|
|
2
|
|
$
|
3,779
|
$
|
921
|
$
|
6,122
|
$
|
1,811
|
1.
|
Sales distribution is
based on the location of product delivery.
|
2.
|
Includes sales to the
U.K.
|
14. Countervailing and antidumping 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.
Accounting policy for duties
The CVD and ADD rates apply retroactively for each Period of
Investigation ("POI"). We record CVD as export duty expense
at the cash deposit rate until an Administrative Review ("AR")
finalizes a new applicable rate for each POI. We record ADD
as export duty expense by estimating the rate to be applied for
each POI by using our actual results and the same calculation
methodology as the United States Department of Commerce ("USDOC")
and adjust when an AR finalizes a new applicable rate for each
POI. The difference between the cash deposits and export duty
expense is recorded on our balance sheet as export duty deposits or
other liabilities as applicable, along with any true-up adjustments
to finalized rates.
The difference between the cash deposit amount and the amount
that would have been due based on the final AR rate will incur
interest based on the U.S. federally published interest rate.
We record interest income on our duty deposits receivable based on
this rate and will record an interest expense if the balance
becomes a liability.
Developments in CVD and ADD rates
On April 24, 2017, the 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 AR of the first
POI as listed below. The USDOC will continue to revise rates
as it finalizes each AR 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. The cash deposit rate will change each time
the USDOC finalizes a new duty rate for each AR POI.
On May 20, 2021, the USDOC
released the preliminary results from AR2 covering the 2019
calendar year, which indicated a rate of 4.80% for CVD and 6.58%
for ADD for West Fraser. The duty rates are subject to
an appeal process, and we will record an adjustment once the rates
are finalized. If the AR2 rates were to be confirmed, it
would result in a USD recovery of $54
million for the POI covered by AR2.
This adjustment would be in addition to the amounts
already recorded on our balance sheet. If these rates are
finalized, our combined cash deposit rate would be revised to
11.38%.
The respective Cash Deposit Rates, the AR POI Final Rate, and
the West Fraser Estimated ADD Rate for each period are as
follows:
Effective dates
for CVD
|
Cash Deposit
Rate
|
AR POI Final
Rate
|
AR1
POI
|
|
|
April 28, 2017 -
August 24, 20171
|
24.12%
|
6.76%3
|
August 25, 2017 -
December 27, 20171
|
-
|
-
|
December 28, 2017 -
December 31, 20172
|
17.99%
|
6.76%3
|
January 1, 2018 -
December 31, 2018
|
17.99%
|
7.57%3
|
AR2
POI
|
|
|
January 1, 2019 -
December 31, 2019
|
17.99%
|
n/a5
|
AR3
POI
|
|
|
January 1, 2020 -
November 30, 2020
|
17.99%
|
n/a6
|
December 1, 2020 -
December 31, 20204
|
7.57%
|
n/a6
|
AR4
POI
|
|
|
January 1, 2021 -
June 30, 2021
|
7.57%
|
n/a7
|
1.
|
On April 24, 2017,
the USDOC issued its preliminary rate in the CVD investigation.
The requirement that we make cash deposits for CVD was
suspended on August 24, 2017, until the USDOC published the revised
rate.
|
2.
|
On December 4, 2017,
the USDOC revised our CVD Cash Deposit Rate effective December 28,
2017.
|
3.
|
On February 3, 2020,
the USDOC issued a preliminary CVD rate and, on November 24, 2020,
a final CVD rate for the AR1 POI. This table only reflects
the final rate.
|
4.
|
Effective December 1,
2020, shipments from Canada to the U.S. were subject to the new
Cash Deposit rate of 7.57% for CVD.
|
5.
|
On May 20, 2021 the
USDOC announced the CVD preliminary rate of 4.80% for AR2. The duty
rates are subject to an appeal process, and we will record an
adjustment once the rates are finalized sometime in the fourth
quarter of 2021.
|
6.
|
The CVD rate for the
AR3 POI will be adjusted when AR3 is complete and the USDOC
finalizes the rate, which is not expected until 2022.
|
7.
|
The CVD rate for the
AR4 POI will be adjusted when AR4 is complete and the USDOC
finalizes the rate, which is not expected until 2023.
|
Effective dates
for ADD
|
Cash Deposit
Rate
|
AR POI Final
Rate
|
West Fraser
Estimated
Rate
|
AR1
POI
|
|
|
|
June 30, 2017 -
December 3, 20171
|
6.76%
|
1.40%3
|
1.46%
|
December 4, 2017 -
December 31, 20172
|
5.57%
|
1.40%3
|
1.46%
|
January 1, 2018 -
December 31, 2018
|
5.57%
|
1.40%3
|
1.46%
|
AR2
POI
|
|
|
|
January 1, 2019 -
December 31, 2019
|
5.57%
|
n/a
5
|
4.65%
|
AR3
POI
|
|
|
|
January 1, 2020 -
November 29, 2020
|
5.57%
|
n/a6
|
3.40%
|
November 30, 2020 –
December 31, 20204
|
1.40%
|
n/a6
|
3.40%
|
AR4
POI
|
|
|
|
January 1, 2021 -
June 30, 2021
|
1.40%
|
n/a7
|
4.09%
|
1.
|
On June 26, 2017, the
USDOC issued its preliminary rate in the ADD investigation
effective June 30, 2017.
|
2.
|
On December 4, 2017,
the USDOC revised our ADD Cash Deposit Rate effective December 4,
2017.
|
3.
|
On February 3, 2020,
the USDOC issued a preliminary ADD Rate and, on November 24, 2020,
a final CVD rate for the AR1 POI. This table only reflects
the final rate.
|
4.
|
Effective November
30, 2020, shipments from Canada to the U.S. were subject to the new
Cash Deposit Rate of 1.40% for ADD.
|
5.
|
On May 20, 2021, the
USDOC announced the ADD preliminary rate of 6.58% for AR2.
The duty rates are subject to an appeal process, and we will record
an adjustment once the rates are finalized sometime in the fourth
quarter of 2021.
|
6.
|
The ADD rate for the
AR3 POI will be adjusted when AR3 is complete and the USDOC
finalizes the rate, which is not expected until 2022.
|
7.
|
The ADD rate for the
AR4 POI will be adjusted when AR4 is complete and the USDOC
finalizes the rate, which is not expected until 2023.
|
Impact on earnings
The following table reconciles our cash deposits paid during the
period to the amount recorded in our earnings statement.
|
April 1 to June
30
|
January 1 to June
30
|
|
|
|
|
Currency
remeasurement
|
|
|
|
Currency
remeasurement
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cash deposits
paid1
|
$
|
(55)
|
$
|
(31)
|
$
|
(84)
|
$
|
(63)
|
Adjust to West Fraser
Estimated ADD rate2
|
|
(18)
|
|
1
|
|
(26)
|
|
7
|
Export duties, net
3
|
$
|
(73)
|
$
|
(30)
|
$
|
(110)
|
$
|
(56)
|
1.
|
Represents combined
CVD and ADD cash deposit rate of 8.97% for Q1 and Q2 of 2021 and
23.56% for Q1 and Q2 of 2020.
|
2.
|
Represents adjustment
to West Fraser Estimated ADD rate of 4.09% for Q2-21, 3.77% for
Q1-21 and 2.27% for Q2-20.
|
3.
|
The total represents
the combined CVD cash deposit rate and West Fraser Estimated ADD
rate of 11.66% for Q2-21, 11.34% for Q1-21, and 20.26%
for Q2-20.
|
Impact on the balance sheet
Each period of investigation is subject to independent
administrative reviews performed by the USDOC, and the results must
be accounted for separately.
Export duty deposits receivable is represented by:
Export duty
deposits
|
|
January 1 to June
30
2021
|
|
Currency
remeasurement
January 1 to
December 31
2020
|
Beginning
balance
|
$
|
178
|
$
|
61
|
Export duties
recognized as long-term duty deposits receivable related to AR1,
AR2, and AR3
|
|
-
|
|
104
|
Interest recognized
on the long-term duty deposits receivable
|
|
2
|
|
13
|
Ending
balance
|
$
|
180
|
$
|
178
|
For AR4, we have recorded a long-term duty payable related to
ADD for the difference between the 1.40% Cash Deposit Rate and our
West Fraser Estimated Rate of 4.09%. However, the final
liabilities associated with the export duties is not determined
until the completion of the administrative review performed by the
USDOC.
Export duties payable is represented by:
Export duties payable
(note 7)
|
|
January 1 to June
30
2021
|
Beginning
balance
|
$
|
-
|
Export duties
recognized as long-term duties payable related to AR4
|
|
(25)
|
Ending
balance
|
$
|
(25)
|
As at June 30, 2021, export duties
paid and payable on deposit with the USDOC are $621 million.
AR2, AR3 and AR4
During the second quarter of 2021, the USDOC issued the
preliminary duty rates for AR2 (POI January
1 to December 31, 2019) and these rates are expected to be
finalized by the fourth quarter of 2021. AR3 (POI
January 1 to December 31, 2020)
commenced in April 2021, and the
rates are expected to be finalized sometime in 2022. AR4 (POI
January 1 to December 31, 2021) is
expected to commence in 2022 with the results finalized in
2023. We have been selected as a mandatory respondent for
AR3, which will result in West Fraser continuing to be subject to a
company-specific rate.
Appeals
Notwithstanding the deposit rates assigned under the
investigations, our final liability for CVD and ADD will not be
determined until each annual administrative review process is
complete and related appeal processes are concluded.
View original
content:https://www.prnewswire.com/news-releases/west-fraser-announces-2021-second-quarter-results-and-2021-virtual-investor-event-301343618.html
SOURCE West Fraser Timber Co. Ltd.