West Fraser reports Q1 earnings of C$67M, up from loss of C$19M a year earlier, on sales up 26.7% to C$863M; CEO cites recovering US housing market, says outlook for all building products 'cautiously optimistic'

VANCOUVER, Canada , April 25, 2013 (press release) – VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 25, 2013) - West Fraser Timber Co. Ltd. ("WFT") (TSX:WFT) today reported earnings of $67 million or $1.57 per share on sales of $863 million in the first quarter of 2013. These results compare with previous periods as follows:

($ millions except earnings per share ("EPS")) Q1-13 Q4-12 Q1-12
Sales 863 773 681
EBITDA1 141 75 17
Operating earnings 101 36 (23)
Earnings (loss) 67 20 (19)
Basic EPS ($) 1.57 0.46 (0.45)
Adjusted earnings (loss)2 103 51 (13)
Adjusted basic EPS ($)2 2.42 1.19 (0.32)

1 In this News Release, reference is made to EBITDA (defined as operating earnings plus amortization). Our management believes that, in addition to earnings, EBITDA is a useful performance indicator and is a useful measure of cash available prior to debt service, capital expenditures and income taxes. Reference is also made to Adjusted earnings (loss) (calculated as set out in the tables described in footnote 2) and Adjusted basic EPS (collectively, with EBITDA, "these measures"). None of these measures is a generally accepted earnings measure under International Financial Reporting Standards ("IFRS") and none have a standardized meaning prescribed by IFRS. Investors are cautioned that these measures should not be considered as an alternative to earnings, earnings per share or cash flow, as determined in accordance with IFRS. As there is no standardized method of calculating any of these measures, our method of calculating each of them may differ from the methods used by other entities and, accordingly, our use of any of these measures may not be directly comparable to similarly titled measures used by other entities.
2 Refer to the table titled "Earnings Adjustments for Certain Non-Operational Items" in Management's Discussion and Analysis of our first quarter 2013 results for details of these adjustments.

Operational Results

In the quarter our lumber operations generated operating earnings of $122 million and EBITDA of $146 million. The improvement over the prior quarter reflects improved prices for SPF and SYP lumber.

The panel segment, which includes plywood, LVL and MDF, generated $14 million of operating earnings and EBITDA of $18 million in the quarter, reflecting higher plywood prices.

Pulp and paper operations generated an operating loss of $4 million in the quarter and EBITDA of $8 million. The decline from the prior quarter occurred despite the increase in pulp prices as the results were adversely affected by production issues at our NBSK mills.

Outlook

Both SPF and SYP lumber prices steadily improved throughout the quarter as we headed into the spring building season. B.C. and Alberta stumpage costs are set to increase in the next quarter but lumber productivity and cost improvements are expected to continue to improve over the next few quarters as we complete various major capital projects.

"We've been encouraged by the recovery of the U.S. housing market over the last few quarters," West Fraser's President and CEO Ted Seraphim said. "Our outlook remains cautiously optimistic for all our building products."

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 an integrated wood products company producing lumber, wood chips, LVL, MDF, plywood, pulp and newsprint. The Company has operations in western Canada and the southern United States.

Forward-Looking 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 2012 annual Management's Discussion & Analysis under "Risks and Uncertainties", and may differ materially from those anticipated or projected. Accordingly, readers should exercise caution in relying upon forward-looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable securities laws.

Conference Call

Investors are invited to listen to the quarterly conference call on Friday, April 26, 2013 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-800-952-6845 (toll- free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.

West Fraser shares trade on the Toronto Stock Exchange under the symbol: "WFT".

West Fraser Timber Co. Ltd.
Condensed Consolidated Balance Sheets
(in millions of Canadian dollars, except where indicated - unaudited)
 
  March 31 December 31
    2013   2012
Assets        
Current assets        
Cash and short-term investments $ 61 $ 102
Receivables   329   251
Inventories (note 4)   572   459
Prepaid expenses   16   11
    978   823
Property, plant and equipment   974   959
Timber licences   492   496
Goodwill and other intangibles   327   330
Other assets   9   10
  $ 2,780 $ 2,618
 
Liabilities        
Current liabilities        
Cheques issued in excess of funds on deposit $ 11 $ -
Payables and accrued liabilities   371   322
Income taxes payable   31   20
Reforestation and decommissioning obligations   42   43
    455   385
Long-term debt (note 5)   306   300
Other liabilities (note 6)   407   313
Deferred income taxes   106   128
    1,274   1,126
 
Shareholders' Equity        
Share capital   602   602
Accumulated other comprehensive earnings   (4)   (9)
Retained earnings   908   899
    1,506   1,492
  $ 2,780 $ 2,618

Number of Common shares and Class B Common shares outstanding at April 25, 2013 was 42,864,668.

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
  2013 2012
Share capital        
Balance - beginning and end of period $ 602 $ 601
 
Accumulated other comprehensive earnings        
Balance - beginning of period $ (9) $ (6)
Translation gain (loss) on foreign operations   5   (4)
Balance - end of period $ (4) $ (10)
 
Retained earnings        
Balance - beginning of period $ 899 $ 888
Actuarial loss on employee future benefits (net of tax)   (52)   (12)
Earnings for the period   67   (19)
Dividends   (6)   (6)
Balance - end of period $ 908 $ 851
 
Shareholders' equity $ 1,506 $ 1,442
         
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
  2013 2012
         
Sales $ 863 $ 681
         
Costs and expenses        
Cost of products sold   541   496
Freight and other distribution costs   117   117
Export taxes   -   13
Amortization   40   40
Selling, general and administration   32   26
Equity-based compensation   32   12
    762   704
Operating earnings   101   (23)
Finance expense (note 8)   (7)   (7)
Exchange gain (loss) on long-term debt   (6)   6
Other expense (note 9)   (3)   -
Earnings before tax provision   85   (24)
Tax recovery (provision) (note 10)   (18)   5
Earnings $ 67 $ (19)
         
Earnings per share (dollars) (note 11)        
Basic $ 1.57 $ (0.45)
Diluted $ 1.57 $ (0.45)
         
Comprehensive earnings        
Earnings $ 67 $ (19)
Other comprehensive earnings        
Translation gain (loss) on foreign operations1   5   (4)
Actuarial loss on employee future benefits2   (52)   (12)
Comprehensive earnings $ 20 $ (35)

1 Reclassified through earnings in the event of a reduction in net investment in foreign operations.
2 Not reclassified through earnings. Net of income tax of $17 million (three months ended March 31, 2012 - $4 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
  2013 2012
Operating activities        
Earnings $ 67 $ (19)
Adjustments        
  Amortization   40   40
  Finance expense   7   7
  Exchange loss (gain) on long-term debt   6   (6)
  Tax provision (recovery)   18   (5)
  Income taxes received (paid)   (12)   4
  Reforestation and decommissioning obligations   18   12
  Employee future benefits expense   12   10
  Contributions to employee future benefit plans   (6)   (4)
  Other   -   (1)
Changes in non-cash working capital        
  Receivables   (77)   (50)
  Inventories   (112)   (80)
  Prepaid expenses   (5)   (3)
  Payables and accrued liabilities   46   26
Cash flows from operating activities   2   (69)
 
Financing activities        
Proceeds from operating loans   -   56
Finance charges paid   (1)   (1)
Dividends   (6)   (6)
Other   -   1
Cash flows from financing activities   (7)   50
 
Investing activities        
Additions to capital assets   (49)   (51)
Proceeds from Green Transformation Program   1   16
Proceeds from disposal of capital assets   1   2
Cash flows from investing activities   (47)   (33)
 
Change in cash   (52)   (52)
Cash - beginning of period   102   68
Cash - end of period $ 50 $ 16
 
Cash consists of        
Cash and short-term investments $ 61 $ 30
Cheques issued in excess of funds on deposit   (11)   (14)
  $ 50 $ 16

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