West Fraser Announces First Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 23, 2015) - West Fraser Timber Co. Ltd. (WFT.TO) today reported earnings of $49 million or $0.58 basic earnings per share on sales of $1,014 million in the first quarter of 2015. These results compare with previous periods as shown in the table below.

Adjusted EBITDA, Adjusted earnings and Adjusted basic EPS as described in this News Release reflect the adjustments described in the tables referred to in the section titled "Non-IFRS Measures" on page 15 of our 2015 first quarter Management's Discussion & Analysis.

($ millions except earnings per share ("EPS"))	Q1-15	Q4-14	Q1-14
Sales	1,014	964	809
Adjusted EBITDA1	173	157	149
Operating earnings	125	83	106
Earnings	49	43	72
Basic EPS ($)	0.58	0.51	0.84
Adjusted earnings1	100	85	84
Adjusted basic EPS ($)1	1.19	1.02	0.97

1 In this News Release, reference is made to Adjusted EBITDA, Adjusted earnings and Adjusted earnings per share (collectively "these measures"). We believe that, in addition to earnings, these measures are useful performance indicators. None of these measures is a generally accepted earnings measure under International Financial Reporting Standards ("IFRS") and none has a standardized meaning prescribed by IFRS. Investors are cautioned that none of these measures should be considered as an alternative to earnings, EPS or cash flow, as determined in accordance with IFRS. As there is no standardized method of calculating any of these measures, our method of calculating each of them may differ from the methods used by other entities and, accordingly, our use of any of these measures may not be directly comparable to similarly titled measures used by other entities. Refer to the tables in the section titled "Non-IFRS Measures" on page 15 of our 2015 first quarter Management's Discussion & Analysis of our first quarter 2015 results for details of these adjustments.

Operational Results

In the quarter our lumber operations generated operating earnings of $84 million (Q4-14 - $90 million) and Adjusted EBITDA of $117 million (Q4-14 - $121 million). Reduced shipments and lower U.S. prices for SPF lumber were substantially offset by the benefit provided by a weaker Canadian dollar. Lumber markets weakened in the quarter, largely reflecting adverse weather conditions in eastern Canada and the U.S., as well as in parts of the U.S. south.

The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $23 million (Q4-14 - $22 million) and Adjusted EBITDA of $26 million (Q4-14 - $25 million), mostly reflecting increased Canadian dollar MDF prices. Plywood prices and shipments were reduced, reflecting both the weather-related constraints on Canadian construction as well as the oil and gas-related uncertainties in western Canada.

Pulp and paper operations generated operating earnings in the quarter of $20 million (Q4-14 - $3 million) and Adjusted EBITDA of $30 million (Q4-14 - $12 million). Canadian dollar equivalent NBSK prices improved and our increased NBSK production and shipments reflected positive developments at our Hinton pulp mill following extended reliability issues both in the previous quarter and the early part of 2015.

Outlook

As weather conditions improve in eastern Canada and U.S. we expect increased construction activity will improve demand for our building products. Ted Seraphim, our President and CEO, said "The first quarter reminded us that we are still in the early stages of the U.S. housing recovery and as such volatility in lumber markets should be expected. Nevertheless we remain optimistic regarding the medium term outlook for lumber markets. We are continuing to execute on our major capital investment program and I am pleased that we are seeing some very positive results from many of our completed projects."

Management's Discussion & Analysis ("MD&A")

The Company's MD&A is available on the Company's website: www.westfraser.com and on the System for Electronic Document Analysis and Retrieval at www.sedar.com under the Company's profile.

The Company

West Fraser is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States.

Forward-Looking Statements

This News Release contains historical information, descriptions of current circumstances and statements about potential future developments. The latter, which are forward-looking statements and are included under the heading "Outlook", are presented to provide reasonable guidance to the reader but their accuracy depends on a number of assumptions and is subject to various risks and uncertainties. Actual outcomes and results will depend on a number of factors that could affect the ability of the Company to execute its business plans, including those matters described in the 2014 annual Management's Discussion & Analysis under "Risks and Uncertainties", and may differ materially from those anticipated or projected. Accordingly, readers should exercise caution in relying upon forward-looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable securities laws.

Conference Call

Investors are invited to listen to the quarterly conference call on Friday, April 24, 2015 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-800-355-4959 (toll- free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.

West Fraser Timber Co. Ltd.
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars, except where indicated - unaudited)
	March 31		December 31
	2015		2014
Assets
Current assets
Cash and short-term investments	$	12	$	21
Receivables		349		288
Inventories (note 3)		655		586
Prepaid expenses		13		12
		1,029		907
Property, plant and equipment		1,528		1,469
Timber licences		525		530
Goodwill and other intangibles		356		350
Other assets		50		79
Deferred income tax assets		62		62
	$	3,550	$	3,397
Liabilities
Current liabilities
Cheques issued in excess of funds on deposit	$	4	$	36
Operating loans (note 4)		156		103
Payables and accrued liabilities		416		411
Income taxes payable		8		26
Reforestation and decommissioning obligations		42		40
		626		616
Long-term debt (note 4)		386		354
Other liabilities (note 5)		331		244
Deferred income tax liabilities		129		154
		1,472		1,368
Shareholders' Equity
Share capital		587		587
Accumulated other comprehensive earnings		106		55
Retained earnings		1,385		1,387
		2,078		2,029
	$	3,550	$	3,397
Number of Common shares and Class B Common shares outstanding at April 22, 2015 was 83,529,504.

West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Changes in Shareholders' Equity
(in millions of Canadian dollars, except where indicated - unaudited)
	January 1 to March 31
	2015			2014
Share capital
Balance - beginning and end of period	$	587		$	602
Accumulated other comprehensive earnings
Balance - beginning of period	$	55		$	10
Translation gain on foreign operations		51			17
Balance - end of period	$	106		$	27
Retained earnings
Balance - beginning of period	$	1,387		$	1,335
Actuarial loss on post-retirement benefits		(45	)		(4	)
Earnings for the period		49			72
Dividends		(6	)		(6	)
Balance - end of period	$	1,385		$	1,397
Shareholders' Equity	$	2,078		$	2,026

West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Earnings and
Comprehensive Earnings
(in millions of Canadian dollars, except where indicated - unaudited)
	January 1 to March 31
	2015		2014
Sales	$	1,014	$	809
Costs and expenses
Cost of products sold		657		516
Freight and other distribution costs		144		109
Amortization		47		42
Selling, general and administration		40		35
Equity-based compensation		1		1
		889		703
Operating earnings		125		106
Finance expense		(8)		(6)
Exchange loss on long-term debt		(32)		(13)
Fair value adjustment to power agreements (note 7)		(30)		-
Other income (note 8)		15		13
Earnings before tax		70		100
Tax provision (note 9)		(21)		(28)
Earnings	$	49	$	72
Earnings per share (dollars) (note 10)
Basic	$	0.58	$	0.84
Diluted	$	0.53	$	0.79
Comprehensive earnings
Earnings	$	49	$	72
Other comprehensive earnings
Translation gain on foreign operations		51		17
Actuarial loss on post-retirement benefits1		(45)		(4)
Comprehensive earnings	$	55	$	85
1 Net of tax recovery of $17 million (three months ended March 31, 2014 - $2 million).

West Fraser Timber Co. Ltd.
Condensed Consolidated Statements of Cash Flows
(in millions of Canadian dollars, except where indicated - unaudited)
		January 1 to March 31
		2015			2014
Operating activities
Earnings		$	49		$	72
Adjustments
	Amortization		47			42
	Finance expense		8			6
	Exchange loss on long-term debt		32			13
	Fair value adjustment to power agreements		30			-
	Tax provision		21			28
	Income taxes paid		(42	)		(37	)
	Post-retirement expense		13			14
	Contributions to post-retirement benefit plans		(3	)		(7	)
	Other		5			11
Changes in non-cash working capital
	Receivables		(54	)		(11	)
	Inventories		(57	)		(165	)
	Prepaid expenses		(1	)		(3	)
	Payables and accrued liabilities		(2	)		(2	)
Cash flows from operating activities			46			(39	)
Financing activities
Proceeds from operating loans			49			61
Finance expense paid			(2	)		(1	)
Dividends			(6	)		(6	)
Cash flows from financing activities			41			54
Investing activities
Acquisitions			-			(60	)
Additions to capital assets			(69	)		(93	)
Government assistance			-			9
Other			-			(1	)
Cash flows from investing activities			(69	)		(145	)
Change in cash			18			(130	)
Foreign exchange effect on cash			5			2
Cash - beginning of period			(15	)		162
Cash - end of period		$	8		$	34
Cash consists of
Cash and short-term investments		$	12		$	49
Cheques issued in excess of funds on deposit			(4	)		(15	)
		$	8		$	34

West Fraser Timber Co. Ltd.

Notes to Condensed Consolidated Interim Financial Statements

(figures are in millions of dollars, except where indicated - unaudited)

1. Nature of operations

West Fraser Timber Co. Ltd. ("West Fraser", "we", "us" or "our") is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States. Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. Our Common shares are listed for trading on the Toronto Stock Exchange under the symbol WFT.

2. Basis of presentation 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 using the same accounting policies and methods of their application as the December 31, 2014 annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with our 2014 annual financial statements.

3. Inventories

Inventories at March 31, 2015 were written down by $7 million (December 31, 2014 - $5 million; March 31, 2014 - $4 million) to reflect net realizable value being lower than cost.

4. Long-term debt and operating loans

Long-term debt

		March 31, 2015			December 31, 2014
US$300 million senior notes due October 2024; interest at 4.35%	$	380		$	348
US$8 million note payable due October 2020; interest at 2%		9			9
Note payable due in installments to 2020; interest at 5.5%		2			2
		391			359
Deferred financing costs		(5	)		(5	)
	$	386		$	354

The fair value of the long-term debt is $399 million (December 31, 2014 - $354 million) based on rates available to us at the balance sheet date for long-term debt with similar terms and remaining maturities.

Operating loans

We have $583 million in revolving lines of credit of which $156 million (net of deferred financing costs of $3 million) were drawn as at March 31, 2015 (December 31, 2014 - $103 million, net of deferred financing costs of $3 million).

Our revolving lines of credit consist of a $500 million revolving credit facility which matures September 30, 2018, two demand lines of credit totalling $75 million dedicated to letters of credit, and an $8 million demand line of credit dedicated to our jointly owned newsprint operation. Interest on the facilities is payable at floating rates based on Prime, U.S. base, Bankers' Acceptances or LIBOR at our option. As at March 31, 2015, letters of credit in the amount of $55 million have been issued under these facilities.

All debt is unsecured except the $8 million joint operation demand line of credit, which is secured by that joint operation's current assets.

5. Other liabilities

		March 31, 2015		December 31, 2014
Post-retirement (note 6)	$	199	$	129
Reforestation		83		71
Decommissioning		25		23
Other		24		21
	$	331	$	244

6. 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 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:

		March 31, 2015			December 31, 2014
Projected benefit obligations	$	(1,603	)	$	(1,464	)
Fair value of plan assets		1,415			1,354
Impact of minimum funding requirement		(3	)		(5	)
	$	(191	)	$	(115	)
Represented by
Post-retirement assets	$	8		$	14
Post-retirement liabilities (note 5)		(199	)		(129	)
	$	(191	)	$	(115	)

The significant actuarial assumptions used to determine our balance sheet date post-retirement assets and liabilities are as follows:

	March 31, 2015	December 31, 2014	March 31, 2014
Discount rate	3.50%	4.00%	4.50%
Future compensation rate increase	3.50%	3.50%	3.50%

The change in the discount rate on obligations and the difference between the actual rate of return and the discount rate on plan assets generated an actuarial loss on post-retirement benefits, included in other comprehensive earnings, as follows:

	January 1 to March 31
		2015			2014
Actuarial loss	$	(62	)	$	(6	)
Tax recovery on actuarial loss		17			2
	$	(45	)	$	(4	)

7. Power agreements

Effective October 1, 2014 certain power agreements were classified as derivative financial instruments and are recorded at fair value at each balance sheet date, (see note 12 to our 2014 annual financial statements). The fair value adjustment for the first quarter of 2015 resulted in an unrealized loss of $30 million (quarter ended December 31, 2014 - unrealized loss of $2 million).

8. Other income

	January 1 to March 31
		2015			2014
Foreign exchange gain	$	17		$	8
Other		(2	)		5
	$	15		$	13

9. Tax provision

The tax provision differs from the amount that would have resulted from applying the Canadian statutory income tax rates to earnings before tax as follows:

	January 1 to March 31
		2015			2014
Income tax at statutory rate of 26%	$	(18	)	$	(26	)
Non-taxable amounts		(3	)		(1	)
Rate differentials between jurisdictions and on specified activities		-			(1	)
Tax provision	$	(21	)	$	(28	)

10. 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.

		January 1 to March 31
			2015			2014
Earnings
	Basic	$	49		$	72
	Share option recovery		(2	)		(1	)
	Equity-settled share option adjustment		(2	)		(2	)
	Diluted	$	45		$	69
Weighted average number of shares (thousands)
	Basic		83,528			85,672
	Share options		1,418			1,541
	Diluted		84,946			87,213
Earnings per share (dollars)
	Basic	$	0.58		$	0.84
	Diluted	$	0.53		$	0.79

11. Segmented information

						Pulp &		Corporate
		Lumber		Panels		paper		& other		Total
January 1, 2015 to March 31, 2015
Sales
	To external customers	$ 655		$ 129		$ 230		$ -		$ 1,014
	To other segments	26		2		-		-
		$ 681		$ 131		$ 230		$ -
Operating earnings before amortization		$ 117		$ 26		$ 30		$ (1	)	$ 172
Amortization		(33	)	(3	)	(10	)	(1	)	(47	)
Operating earnings		84		23		20		(2	)	125
Finance expense		(5	)	(1	)	(2	)	-		(8	)
Exchange loss on long-term debt		-		-		-		(32	)	(32	)
Fair value adjustment to power agreements		(1	)	(3	)	(26	)	-		(30	)
Other income		9		-		6		-		15
Earnings before tax		$ 87		$ 19		$ (2	)	$ (34	)	$ 70
January 1, 2014 to March 31, 2014
Sales
	To external customers	$ 502		$ 112		$ 195		$ -		$ 809
	To other segments	22		2		-		-
		$ 524		$ 114		$ 195		$ -
Operating earnings before amortization		$ 107		$ 11		$ 32		$ (2	)	$ 148
Amortization		(28	)	(4	)	(10	)	-		(42	)
Operating earnings		79		7		22		(2	)	106
Finance expense		(4	)	-		(2	)	-		(6	)
Exchange loss on long-term debt		-		-		-		(13	)	(13	)
Other income		8		-		5		-		13
Earnings before tax		$ 83		$ 7		$ 25		$ (15	)	$ 100

The geographic distribution of external sales is as follows:

	January 1 to March 311
		2015		2014
Canada	$	218	$	193
United States		533		434
China		164		104
Other Asia		80		51
Other		19		27
	$	1,014	$	809

1 Sales distribution is based on the location of product delivery.