VANCOUVER, July 27 /CNW/ - West Fraser Timber Co. Ltd. today reported
earnings of $104 million or $2.41 per share on sales of $888 million in the
second quarter of 2006 compared to earnings of $6 million or $0.14 per share
on sales of $902 million in the first quarter of 2006 and earnings of
$38 million or $0.88 per share on sales of $953 million in the second quarter
of 2005. For the first half of 2006, earnings were $110 million or $2.55 per
share, on sales of $1,790 million. This compares to earnings of $81 million or
$1.87 per share, on sales of $1,855 million for the first half of 2005.
EBITDA(1) was $87 million or 10% of sales for the quarter compared to
EBITDA of $115 million or 13% of sales for the first quarter of 2005 and
$137 million or 14% of sales for the second quarter of 2005. For the first
half of 2006 EBITDA was $202 million or 11% of sales compared to $279 million
or 15% of sales for the first half of 2005.
Second quarter 2006 earnings reflect the following after-tax items:
<<
- Recovery of $4 million or $0.08 per share related to share option
expense;
- Gain of $13 million or $0.30 per share related to the translation of
U.S. dollar denominated debt;
- Gain of $51 million or $1.18 per share related to sale of an interest
in a power purchase agreement;
- Gain of $9 million or $0.21 per share related to the B.C. timber
take-back compensation; and
- Recovery of $33 million or $0.77 per share related to statutory
income tax rate reductions enacted in the quarter.
"A number of non-recurring items contributed to second quarter earnings"
says Hank Ketcham, Chairman, President & Chief Executive Officer. "Price
declines in lumber and plywood from the first quarter and the planned
maintenance shutdowns at our two NBSK mills and at our linerboard and kraft
paper mill contributed to lower operating earnings compared to the first
quarter of the year."
Second quarter 2005 earnings reflected the following after-tax items:
- Recovery of $3 million or $0.07 per share related to share option
expense; and
- Expense of $7 million or $0.15 per share related to the translation
of U.S. denominated debt.
>>
Operational Results
Lumber EBITDA for the quarter was $49 million or 10% of sales compared to
$91 million or 17% of sales in the first quarter of 2006. The decline in
EBITDA resulted primarily from lower lumber prices combined with the stronger
Canadian dollar during the quarter. Benchmark SPF 2X4 lumber prices averaged
US $316 per Mfbm for the quarter compared to US $343 per Mfbm in the first
quarter of 2006. The Canadian dollar averaged US $0.89 in the second quarter
compared to US $0.87 in the first quarter of 2006.
Softwood lumber duties continued to affect the Company's financial
results. West Fraser expensed $22 million in lumber duty payments in each of
the first and second quarters of 2006(2).
All sawmills operated at or near capacity during the quarter. Fewer
operating days in the quarter resulted in a production decline from the
previous quarter. The Quesnel, B.C. sawmill rebuild remains on schedule with
production to commence in the fourth quarter of this year.
On June 30, 2006, the Company reached an agreement with the Province of
B.C. for compensation of $29 million for 1,275,000 cubic metres of timber
rights expropriated under the government's Forestry Revitalization Plan. An
additional $2 million was received in the quarter for certain related assets.
A gain of $14 million ($9 million after-tax) is included in the second quarter
results.
Panel operations generated EBITDA for the quarter of $16 million or 12%
of sales compared to $16 million or 13% of sales in the first quarter of 2006.
MDF quarterly records were achieved for both production and shipments.
The pulp and paper operations generated EBITDA of $18 million or 6% of
sales compared to EBITDA of $13 million or 5% of sales in the first quarter of
2006. The EBITDA improvement compared to the first quarter was primarily due
to improved product prices partially offset by the impact of the maintenance
shutdowns and the stronger Canadian dollar.
West Fraser's two NBSK pulp mills and the Kitimat linerboard and kraft
paper mill completed their regularly scheduled annual maintenance shutdowns in
the second quarter of 2006. Various factors caused the maintenance shutdowns
to be extended beyond the planned outages resulting in a reduction from normal
operating production of approximately 60,000 tonnes compared to an anticipated
reduction of 45,000 tonnes.
Power Purchase Agreements
Effective May 31, 2006 the Company sold its interests in a power purchase
agreement related to the power generated by an Alberta power plant for
proceeds of $68 million while concurrently acquiring an additional interest in
an agreement related to the power generated by a different power plant in
Alberta. A gain of $62 million (after-tax $51 million) was recorded in the
quarter related to the sale. As a result of the transactions, West Fraser's
percentage entitlement to the output generated by the power plant is constant
through 2020, providing a more consistent energy hedge and substantially
protecting its Alberta energy position.
Lumber Trade Dispute
On July 1, 2006, Canadian and U.S. government representatives agreed to
the terms of a softwood lumber agreement. In order to be implemented, the
agreement requires legislation to be passed by the Canadian parliament and the
withdrawal of litigation by Canadian and U.S. parties, amongst other
conditions. Many concerns have been raised by Canadian interests and it is not
clear if the agreement will be implemented in its present form.
On July 21, 2006, the U.S. Court of International Trade ruled in a
unanimous decision that there is no valid legal basis for the imposition of
antidumping and countervailing duties against Canadian softwood lumber. The
court said that duties collected since November 4, 2004 should be returned to
Canada, plus interest, and the court has requested additional briefing on the
issue of refund of deposits prior to November 4, 2004. This is the first U.S.
court ruling related to the current dispute, and it has resulted in clear
support of the Canadian position.
In the absence of a negotiated settlement, West Fraser believes that
given the series of legal decisions that have decisively favoured the Canadian
position, a revocation of the orders and refund of deposits should eventually
occur.
Forward-Looking Statements
Some information contained in this release is prospective and may be
affected by known or unknown risks and uncertainties, which are mostly outside
the control of West Fraser. The results or events mentioned in such
prospective information may differ substantially from actual results or
events.
Conference Call
Investors are invited to listen to the quarterly conference call on
Friday, July 28 at 8:00 a.m. Pacific Daylight Time (11:00 a.m. Eastern
Daylight Time) by dialing 1-888-575-8232 (toll-free North America). The call
may also be accessed through West Fraser's web site at www.westfraser.com.
West Fraser is an integrated forest products company producing lumber,
LVL, MDF, plywood, pulp, linerboard, kraft paper and newsprint. The Company
has 6,900 employees and operations in British Columbia, Alberta and the
southern United States.
--------------------
(1) Throughout this news release, reference is made to EBITDA (defined as
operating earnings plus amortization of property, plant, equipment
and timber, plus restructuring charge), which the Company considers
to be a key performance indicator. EBITDA is not a generally accepted
earnings measure and should not be considered as an alternative to
earnings or cash flows as determined in accordance with Canadian
generally accepted accounting principles. As there is no standardized
method of calculating EBITDA, the Company's use of the term may not
be directly comparable with similarly titled measures used by other
companies.
(2) As at June 30, 2006, the total amount on deposit related to duties is
US $409 million, excluding amounts deposited by Weldwood prior to its
acquisition by West Fraser, refunds of which are for the account of
the previous owner.
MANAGEMENT'S DISCUSSION & ANALYSIS
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The following discussion and analysis should be read in conjunction with
the unaudited consolidated interim financial statements included in this
quarterly report and the Management's Discussion & Analysis included in the
Company's 2005 Annual Report. Additional information relating to the Company,
including the Company's Annual Information Form is available on SEDAR at
www.sedar.com.
The information contained in this report includes forward-looking
statements the accuracy of which depends on a number of assumptions and is
subject to risks and uncertainties. These include, but are not limited to,
uncertainties associated with the effect of general economic conditions on
demand for the Company's products, foreign exchange rate fluctuations, trade
sanctions, the availability of fibre and changes in stumpage fees,
competition, operational curtailments and transportation limitations, natural
disasters, insect infestation, the effects of forestry, land use,
environmental and other government regulations, First Nations claims, and the
ability of the Company to execute its business plans. Accordingly, actual
results, performance and achievements of the Company may differ materially
from those projected.
Throughout this report, reference is made to EBITDA (defined as operating
earnings plus amortization of property, plant, equipment and timber, plus
restructuring charge), which West Fraser considers to be a key performance
indicator. EBITDA is not a generally accepted earnings measure and should not
be considered as an alternative to earnings or cash flows as determined in
accordance with Canadian generally accepted accounting principles. As there is
no standardized method of calculating EBITDA, the Company's use of the term
may not be directly comparable with similarly titled measures used by other
companies.
The information in this report is as at July 27, 2006.
<<
REVENUE AND EARNINGS COMPARISON
2006 2005
Q2 Q1 YTD Q2 YTD
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Financial Highlights
(Millions of $, except as noted)
Sales 888 902 1,790 953 1,855
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Operating earnings 27 15 42 77 157
Amortization of property, plant,
equipment & timber 60 62 122 60 122
Restructuring charge - 38 38 - -
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EBITDA 87 115 202 137 279
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EBITDA margin (%) 10 13 11 14 15
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Gain on sale of power purchase
agreement 62 - 62 - -
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Gain on timber take-back 14 - 14 3 3
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Earnings 104 6 110 38 81
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Diluted earnings per share ($) 2.41 0.14 2.55 0.88 1.87
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$CDN / $US - average 1.121 1.155 1.138 1.244 1.235
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Operating Highlights
Lumber (MMfbm)
Production 1,080 1,136 2,216 1,105 2,163
Shipments 1,131 1,098 2,229 1,123 2,050
Panels
Plywood (MMsf - 3/8")
Production 190 184 374 185 363
Shipments 190 176 366 194 348
LVL (Mcf)
Production 797 781 1,578 819 1,633
Shipments 811 750 1,561 795 1,616
MDF (MMsf - 3/4")
Production 76 71 147 75 146
Shipments 78 78 156 75 146
Pulp & Paper (Mtonnes)
Linerboard & Kraft Paper
Production 102 121 223 101 220
Shipments 120 124 244 126 229
NBSK
Production 112 141 253 129 280
Shipments 139 145 284 126 274
BCTMP
Production 144 140 284 138 268
Shipments 164 163 327 125 273
Newsprint
Production 32 32 64 34 67
Shipments 31 32 63 33 66
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SELECTED QUARTERLY INFORMATION
($ millions, except earnings per share amounts which are in $)
Q2-06 Q1-06 Q4-05 Q3-05 Q2-05 Q1-05 Q4-04 Q3-04
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Sales 888 902 832 890 953 902 552 700
Earnings 104 6 9 18 38 43 41 78
Basic EPS 2.43 0.14 0.20 0.42 0.89 1.00 1.10 2.12
Diluted EPS 2.41 0.14 0.20 0.42 0.88 0.99 0.94 1.95
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>>
Lower lumber prices combined with the strengthening Canadian dollar
continued to adversely affect the Company's earnings in the second quarter of
2006. If not for the effect of a non-recurring restructuring charge of
$38 million recorded in the first quarter of 2006, second quarter operating
earnings would have declined from the prior quarter. Quarterly earnings also
reflect the adverse impact of the regularly scheduled maintenance shutdowns at
the kraft pulp and paper operations which was offset partially by higher
shipment volumes for most products.
The combination of lower lumber prices, a stronger Canadian dollar and
the $38 million restructuring charge contributed to lower operating earnings
in the quarter and first half of the year compared to the same periods of
2005. The operating earnings reduction was offset in part by higher production
and shipment volumes in most products and by lower duty payments.
Interest expense was $11 million for the quarter (first half 2006 -
$21 million) compared to $16 million in the second quarter of 2005 (first half
2005 - $28 million). The decrease in interest from last year was due mainly to
interest earned on cash held on deposit in 2006 and deferred charges of
$3 million expensed in the second quarter of 2005 related to debt that was
prepaid.
The change in value of the Canadian dollar against the U.S. dollar
resulted in an exchange gain of $16 million on the Company's U.S. denominated
long-term debt in the second quarter. This compares to an exchange loss of
$2 million in the first quarter of 2006 and $7 million in the second quarter
of 2005. In the first half of 2006 there was a gain of $14 million compared to
an exchange loss of $10 million in the first half of 2005. The currency change
also resulted in a loss on translation of U.S. denominated receivables and
foreign operations of $12 million in the second quarter compared to a
$3 million gain in the second quarter of 2005. For the first half of 2006 the
exchange loss was $8 million compared to a $2 million gain in the first half
of 2005. Other income also includes gains on the sale of property, plant,
equipment and timber.
Effective May 1, 2006 the Company sold its interests in one of two power
purchase agreements to which it is a party for proceeds of $68 million while
concurrently acquiring a greater interest in the remaining agreement for
$86 million. The transactions were accounted for as a sale and purchase
respectively, resulting in a gain of $62 million. See note 3 to the
consolidated financial statements.
The Company entered into the sales transaction as the price obtained
provided a higher return than management's estimate of the value of the future
cash flows to be generated from the agreement. The Company also agreed to the
sales transaction in order to accommodate the sale to a third party of the
entire interest in the sold agreement. The opportunity to increase the
Company's share in the remaining agreement was provided as an inducement to
participate in the sale. The reinvestment of the proceeds of $68 million
combined with the additional investment of $18 million in the remaining
agreement provides the Company with an increased interest in the power
purchase agreement related to a newer and lower cost power plant. An
additional benefit of the transactions is that the Company's percentage
entitlement to the output of the power plant remains constant through 2020,
providing a more consistent energy hedge and substantially protecting its
energy position.
During the quarter, the Company reached an agreement with the Province of
British Columbia for compensation for timber rights expropriated by the
Province under the government's Forestry Revitalization Plan. The Company will
receive approximately $29 million from the Province in compensation for the
loss of approximately 1,275,000 cubic metres of its replaceable forest tenures
and received an additional $2 million in the quarter for certain related
assets. A gain of $14 million is included in second quarter earnings.
The effective tax rate for the quarter differed significantly from the
statutory rate primarily due to reductions in federal and Alberta tax rates
that were enacted in the second quarter and the exchange gain on U.S.
denominated long-term debt and gain on sale of power purchase agreement both
of which are taxed at capital gains rates. Note 9 to the consolidated
financial statements provides a reconciliation to the effective tax rate.
<<
LUMBER
2006 2005
Q2 Q1 YTD Q2 YTD
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Sales - $ millions 480 505 985 560 1,058
EBITDA - $ millions 49 91 140 108 210
EBITDA margin - % 10 17 14 18 19
Operating Earnings - $ millions 21 64 85 81 155
Benchmark Price
SPF No. 2 & Better 2 x 4
(US$ per Mfbm)(1) 316 343 329 361 379
SYP No. 2 West 2 x 4
(US$ per Mfbm)(2) 351 409 380 433 413
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(1) Source: Random Lengths - 2x4, No. 2 & Better - Net FOB mill.
(2) Source: Random Lengths - 2x4 - Net FOB mill westside
>>
The decline in operating earnings in the second quarter of 2006 compared
to the prior quarter was due primarily to lower lumber prices partially offset
by higher shipment volumes. The main contributing factors to the decline in
operating earnings in the second quarter and in the first half of 2006
compared to the same periods in 2005 were lower lumber and chip prices and the
stronger Canadian dollar partially offset by lower export duties and higher
shipment volumes.
Lumber production was lower in the second quarter of 2006 compared to the
first quarter of 2006 and the second quarter of 2005 as there were fewer
operating days this quarter. Year-to-date production is higher than the
comparative period of 2005 due primarily to third shifts being added at two
sawmills and improved lumber recovery at a number of operations.
The U.S. softwood lumber duties continued to affect the Company's
financial results. In the second quarter of 2006, West Fraser expensed lumber
duty deposits of $22 million compared to $43 million in the second quarter of
2005 reflecting reduced duty rates and lumber prices. West Fraser's duties on
deposit, excluding interest thereon, total US $409 million or Cdn $457 million
as at June 30, 2006. The following table presents duties expensed in the
periods indicated.
<<
Export Duties
($ millions)
Q1 Q2 Q3 Q4 Total
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2006 22 22 - - 44
2005 40 43 39 29 151
2004 31 42 52 31 156
2003 23 26 31 32 112
2002(1) 2 (13) 29 24 42
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(1) After 2001 reversals.
>>
The Company has commenced the process of selling its approximate 90%
interests in the Burns Lake and Decker Lake sawmills. The mills have an annual
capacity of approximately 365 MMfbm and AAC of 450,000 m(3) of timber tenures.
These divestitures are required in accordance with an agreement made by West
Fraser with the Canadian Competition Commissioner upon acquiring Weldwood.
Although housing starts have remained strong in the first half of the
year, many analysts predict that U.S. housing starts will weaken over the
second half of 2006 which may have a negative impact on demand for building
products and which could result in lower prices. Lumber prices have declined
during the quarter with the benchmark SPF 2x4 price ending the second quarter
of 2006 at US $300 per Mfbm.
<<
PANELS
2006 2005
Q2 Q1 YTD Q2 YTD
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Sales - $ millions 127 124 251 134 264
EBITDA - $ millions 16 16 32 17 39
EBITDA margin - % 12 13 13 13 15
Operating Earnings - $ millions 5 7 12 9 21
Benchmark Price
MDF (US$ per MSF 3/4" basis)(1) 431 414 423 418 418
Plywood (Cdn$ per MSF 3/8"
basis)(2) 360 375 367 358 398
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(1) Source: Resource Information Systems, Inc. - MDF Western U.S. - Net
FOB mill.
(2) Source: Crow's Market Report - Delivered Toronto
>>
Lower plywood prices reduced panel operating earnings during the quarter,
although the effect was partially offset by increased MDF prices. The
operating earnings decline in the first half of 2006 compared to the first
half of 2005 was due primarily to lower plywood and Canadian dollar MDF prices
partially offset by higher shipment volumes. The lower plywood prices are
consistent with the decline in other building product prices. LVL continues to
be a solid contributor to operating earnings with steady pricing and
production levels.
<<
PULP & PAPER
2006 2005
Q2 Q1 YTD Q2 YTD
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Sales - $ millions 281 273 554 258 533
EBITDA - $ millions 18 13 31 15 44
EBITDA margin - % 6 5 6 6 8
Operating Earnings - $ millions (5) (48) (53) (9) (3)
Benchmark Price
NBSK (US$ per tonne)(1) 705 653 679 653 662
Linerboard (US$ per tonne)(2) 568 513 527 484 490
Newsprint (US$ per tonne)(3) 658 644 651 589 580
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(1) Source: Resource Information Systems, Inc. - U.S. list price,
delivered U.S.
(2) Source: Pulp & Paper Week - Unbleached linerboard kraft, East
(3) Source: Resource Information Systems, Inc. - U.S. delivered 48.8 gram
newsprint
>>
The operating earnings improvement in the second quarter of 2006 compared
to the first quarter of 2006 was primarily due to the first quarter
$38 million restructuring charge and improved product pricing. This was
partially offset by the stronger Canadian dollar and higher NBSK unit
production costs mainly due to lower production resulting from the maintenance
shutdowns. The operating earnings improvements in the second quarter of 2006
compared to the second quarter of 2005 is the result of lower furnish costs
and higher prices and shipment volumes partially offset by the stronger
Canadian dollar and higher unit production costs at the NBSK mills. Operating
earnings in the first half of 2006 were lower than the first half of 2005 due
primarily to the $38 million restructuring charge, the impact of the stronger
Canadian dollar and higher NBSK unit production costs as a result of the lower
production volumes.
The scheduled annual maintenance shutdowns at the Hinton and Cariboo pulp
mills and the Kitimat linerboard and kraft paper mill were completed in the
second quarter of 2006. Each shutdown was extended beyond the planned
schedules, mostly as a result of additional and unexpected maintenance work.
The Cariboo Pulp joint venture mill shutdown and startup was complicated
by a failure of a tank in the bleach plant. This event idled the bleach plant
for approximately 20 days. During this time approximately 15,000 tonnes of
unbleached kraft pulp were produced. The unbleached pulp, of which 50% is to
West Fraser's account, has been sold. The production of unbleached pulp
reduced the costs associated with the additional 20 days of downtime in the
bleach plant.
West Fraser's production loss associated with the annual maintenance
shutdowns at the Hinton, Cariboo and Kitimat mills was approximately 60,000
tonnes compared to the planned production loss of approximately 45,000 tonnes.
The production losses associated with the extended shutdowns resulted in
increased unit production costs, especially at the NBSK mills. All of the
planned maintenance shutdowns are now complete and each mill has resumed
normal operation and production levels.
Both BCTMP mills ran very well in the quarter and the first half of the
year with increased production relative to the comparative periods of 2005.
In March 2006, the Company announced the permanent closure of Hinton
Pulp's No. 1 pulp machine and wood room and a $20 million upgrade of the
remaining pulp machine. These closures will occur during the fourth quarter of
2006 and the upgrade is expected to be completed in the second quarter of
2007. After completion of the closures and upgrade the annual capacity of the
mill will be reduced by approximately 70,000 tonnes to 350,000 tonnes. In the
first quarter of 2006 the Company recorded a charge of $35 million against
property, plant, equipment and timber and a charge of $3 million for other
restructuring costs.
Pulp price increases in the second quarter compared to the first quarter
of 2006 more than offset the stronger Canadian dollar, translating into
improved mill nets for both NSBK and BCTMP. However, compared to the second
quarter of 2005, mill nets were lower in the current quarter as the stronger
Canadian dollar more than offset the benefit of higher pulp prices. Pulp
markets are expected to remain strong through the remainder of 2006 and should
result in a positive pricing environment for the balance of the year.
Second quarter U.S. dollar denominated linerboard prices were higher than
both the first quarter of 2006 and the second quarter of 2005. The increase in
prices resulted in higher mill nets for the second quarter compared to the
first quarter. However, the stronger Canadian dollar more than offset the
higher prices compared to the second quarter of 2005. The outlook for
linerboard is for continued strength in both demand and pricing through to the
end of the year.
The Alberta Newsprint mill benefited from efficient operations and
continued pricing strength in the North American newsprint market.
CAPITAL STRUCTURE
The Company issued 3,291 Common shares pursuant to the Employee Share
Purchase Plan during the three months ended June 30, 2006 (first half of 2006
- 6,713 Common shares). The shares issued and outstanding at June 30, 2006 are
presented in the table below.
<<
June 30, 2006 December 31, 2005
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Common 37,878,499 37,871,786
Class B common 4,885,206 4,885,206
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Total Common 42,763,705 42,756,992
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>>
Common shares and Class B common shares are equal in all respects except
that each Class B common share may be exchanged for one Common share.
CAPITAL REQUIREMENTS AND LIQUIDITY
<<
Summary of Financial Position
June 30, 2006 December 31, 2005
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Net Cash(1) - $ millions 8 18
Current Assets - $ millions 940 988
Current Liabilities - $ millions 552 617
Ratio of current assets to current liabilities 1.7 1.6
Net Debt(2) - $ millions 772 775
Shareholders' Equity - $ millions 1,964 1,866
Net Debt to Capitalization - %(2) 28 29
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(1) Net cash consists of cash and short-term investments less cheques
issued in excess of funds on deposit.
(2) Net debt (total debt less cash and short-term investments) divided by
net debt plus shareholders' equity.
>>
West Fraser's cash requirements, other than for operating purposes, are
primarily for interest, repayment of debt, additions to property, plant,
equipment and timber, acquisitions and payment of common share dividends. In
years without a major acquisition or significant debt repayment, cash on hand
and cash provided by operations have normally been sufficient to meet these
requirements.
<<
Selected Cash Flow Items
($ millions)
2006 2005
Q2 Q1 YTD Q2 YTD
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Cash provided from (used in):
Operating Activities
Cash provided before working
capital changes 26 102 128 91 204
Non-cash working capital items 118 (117) 1 70 (230)
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Total operating activities 144 (15) 129 161 (26)
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Financing Activities
Debt and operating loans (74) 75 1 (101) (166)
Dividends & other (6) (6) (12) (6) (12)
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Total financing activities (80) 69 (11) (107) (178)
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Investing Activities
Additions to property, plant,
equipment & timber (63) (55) (118) (67) (102)
Other (15) 5 (10) 4 1
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Total investing activities (78) (50) (128) (63) (101)
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Change in cash (14) 4 (10) (9) (305)
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>>
Lower finished product and log inventories partially offset by lower
accounts payable contributed to the $118 million cash flow from non-cash
working capital in the second quarter of 2006. Reduced log inventories and the
related payables is a normal occurrence in the second quarter due to the
cessation of logging activities for the spring breakup in the Company's
logging areas. Year-to-date 2005 non-cash working capital items include cash
tax payments of $225 million.
Additions to property, plant, equipment and timber of $63 million in the
quarter include $21 million related to the Quesnel sawmill rebuild.
At June 30, 2006, the Company had unused committed credit facilities of
approximately $363 million.
STUMPAGE
On April 1, 2006, the Province of British Columbia changed the way logs
are graded and the way stumpage is calculated for beetle-infested trees. The
changes were designed to be revenue neutral to the Province but will change
the distribution of stumpage across the Interior Region of B.C. Generally,
timber stands that are heavily damaged by mountain pine beetle will incur
higher stumpage with a corresponding reduction in stumpage in less severely
damaged or unaffected stands.
The Ministry of Forests has calculated an adjustment to stumpage for
every cutting permit in the B.C. Interior, effective April 1, 2006. Licensees
will have the option to accept the adjustment or to reassess the level of
damage in the timber stands and follow new appraisal procedures to calculate a
new stumpage rate. The new stumpage rates are expected to increase West
Fraser's costs by two to three dollars per cubic metre harvested from West
Fraser's affected B.C. tenures.
On July 1, 2006, the B.C. government enacted a new timber pricing system
for the B.C. Interior. A change to market based timber pricing has been
anticipated for some time since it was announced as part of the Province's
Forestry Revitalization Plan in 2003. Under this new pricing system, stumpage
will be based on timber sales data derived from publicly auctioned timber
rather than on the Statistics Canada lumber and chip price indices. The impact
of this proposed change on West Fraser's stumpage costs is not expected to be
material for the balance of the year.
SOFTWOOD LUMBER DISPUTE UPDATE
On July 1, 2006, Canadian and U.S. government representatives agreed to
the terms of a softwood lumber agreement. The basic terms include replacing
the existing duty deposits with a Canadian-imposed export tax, or a
combination of a lower tax and quota, both of which may vary based on the
price of lumber and the level of shipments to the United States. In addition,
out of the existing duty deposits of approximately US$ 5 billion, the U.S.
will retain approximately US$1 billion with the balance returned to the
Canadian companies with interest. The agreement requires both sides to
withdraw all litigation, the U.S. industry petitioners to execute letters
waiving their right to file another case while the agreement is in effect and
substantially all of the Canadian industry to consent to the distribution of
duty deposits. The agreement requires legislation to be passed by the Canadian
parliament which is expected in September of this year.
A significant portion of the Canadian forest industry and some Provinces
have identified deficiencies in the agreement and in the meantime litigation
relating to the duty deposit orders continues. As a result, there is
uncertainty as to whether the agreement will be implemented.
On July 21, 2006, the U.S. Court of International Trade ruled in a
unanimous decision that there is no valid legal basis for the imposition of
antidumping and countervailing duties against Canadian softwood lumber. The
court said that duties collected since November 4, 2004 should be returned to
Canada, plus interest, and the court has requested additional briefing on the
issue of refund of deposits prior to November 4, 2004.
West Fraser believes that recording a reversal of previously expensed
duty deposits is not appropriate at this time due to the continuing
uncertainty related to the timing and amount of potential refunds. Refunds
will be reflected in the Company's earnings when receipt is reasonably
certain.
<<
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars - unaudited)
As at As at
June 30, December 31,
2006 2005
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ASSETS
------
Current assets
Cash and short-term investments $ 41.2 $ 62.2
Accounts receivable 324.8 308.5
Inventories 498.0 572.0
Prepaid expenses 45.1 14.1
Current assets held for sale (note 2) 30.5 30.7
-------------------------
939.6 987.5
Property, plant, equipment & timber 2,172.1 2,230.1
Deferred charges 32.0 27.1
Goodwill 263.7 263.7
Other assets (note 3) 135.3 61.6
Long-term assets held for sale (note 2) 63.3 63.7
-------------------------
$ 3,606.0 $ 3,633.7
-------------------------
-------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Cheques issued in excess of funds on deposit $ 33.2 $ 43.9
Operating loans (note 4) 166.5 165.1
Accounts payable and accrued liabilities 279.3 333.1
Income tax payable 12.9 4.6
Current portion of reforestation obligation 52.3 52.3
Current portion of long-term debt 3.9 4.5
Current liabilities held for sale (note 2) 3.7 13.6
-------------------------
551.8 617.1
Long-term debt 609.8 623.9
Other liabilities (note 5) 141.7 133.0
Future income taxes 314.8 377.6
Long-term liabilities held for sale (note 2) 23.8 16.2
-------------------------
1,641.9 1,767.8
-------------------------
Shareholders' equity (note 6) 1,964.1 1,865.9
-------------------------
-------------------------
$ 3,606.0 $ 3,633.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Number of Common shares outstanding at July 26, 2006 was 42,764,718.
>>
<<
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(in millions of Canadian dollars - unaudited)
April 1 to June 30 January 1 to June 30
2006 2005 2006 2005
-------------------------------------------------------------------------
Sales $ 887.9 $ 952.8 $ 1,789.9 $ 1,855.2
--------------------------------------------
Costs and expenses
Cost of products sold 609.6 606.3 1,199.3 1,161.3
Freight and other
distribution costs 146.1 137.0 291.5 263.9
Countervailing and
antidumping duties 21.7 42.8 44.1 83.6
Amortization 60.0 59.9 121.8 122.6
Selling, general and
administration 28.9 34.0 57.5 64.0
Share option (recovery)
expense (5.3) (4.5) (4.4) 3.1
Restructuring charge
(note 7) - - 37.6 -
--------------------------------------------
861.0 875.5 1,747.4 1,698.5
Operating earnings 26.9 77.3 42.5 156.7
Other
Interest expense - net (10.7) (15.5) (20.7) (27.9)
Exchange gain (loss) on
long-term debt 15.5 (6.7) 14.0 (9.9)
Gain on sale of power
purchase agreement (note 3) 61.8 - 61.8 -
Gain on timber take-back
(note 8) 13.6 3.3 13.6 3.3
Other income (expense) (11.8) 1.8 (5.6) 5.3
--------------------------------------------
Earnings before income
taxes and non-controlling
interest 95.3 60.2 105.6 127.5
Income tax recovery
(expense) (note 9) 8.9 (21.5) $ 5.1 $ (45.4)
--------------------------------------------
Earnings before
non-controlling interest 104.2 38.7 110.7 82.1
Non-controlling interest (0.4) (0.7) (0.8) (1.2)
--------------------------------------------
Earnings $ 103.8 $ 38.0 $ 109.9 $ 80.9
--------------------------------------------
--------------------------------------------
Earnings per share (note 11)
Basic $ 2.43 $ 0.89 $ 2.57 $ 1.89
Diluted $ 2.41 $ 0.88 $ 2.55 $ 1.87
-------------------------------------------------------------------------
-------------------------------------------------------------------------
RETAINED EARNINGS
Balance - beginning of
period $ 1,268.9 $ 1,222.0 $ 1,268.8 $ 1,185.1
Earnings 103.8 38.0 109.9 80.9
--------------------------------------------
1,372.7 1,260.0 1,378.7 1,266.0
Common share dividends (6.0) (6.0) (12.0) (12.0)
--------------------------------------------
Balance - end of period $ 1,366.7 $ 1,254.0 $ 1,366.7 $ 1,254.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
<<
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars - unaudited)
April 1 to June 30 January 1 June 30
2006 2005 2006 2005
-------------------------------------------------------------------------
Cash Flows From Operating Activities
------------------------------------
Earnings $ 103.8 $ 38.0 $ 109.9 $ 80.9
Items not affecting cash
Amortization of property, plant,
equipment & timber 60.0 59.9 121.8 122.6
Write down of pulp assets (note 7) - - 34.8 -
Exchange (gain) loss on
long-term debt (15.5) 6.7 (14.0) 9.9
Change in reforestation
obligation (11.3) (6.6) 1.1 5.7
Change in other long-term
liabilities 0.9 0.3 7.4 1.2
Change in deferred charges (0.4) (0.1) (4.9) 2.2
Future income taxes (39.4) (5.5) (54.8) (17.6)
Gain on asset sales (73.9) (2.9) (74.8) (3.5)
Other 1.8 1.2 1.6 2.4
---------------------------------------
26.0 91.0 128.1 203.8
Net change in non-cash
working capital items 117.7 70.1 0.9 (229.6)
---------------------------------------
143.7 161.1 129.0 (25.8)
Cash Flows From Financing
Activities
Repayment of long-term debt (0.3) (100.6) (0.6) (100.6)
Net proceeds from (repayment of)
operating loans (73.5) - 1.4 (66.0)
Common share dividends (6.0) (6.0) (12.0) (12.0)
Issuance of Common shares 0.2 0.1 0.3 0.2
---------------------------------------
(79.6) (106.5) (10.9) (178.4)
---------------------------------------
Cash Flows From Investing
Activities
Additions to property, plant,
equipment & timber (63.1) (67.1) (117.8) (102.3)
Proceeds from disposal of
property, plant, equipment
& timber 0.1 4.9 3.3 6.7
Increase in other assets (15.3) (1.0) (13.9) (5.4)
---------------------------------------
(78.3) (63.2) (128.4) (101.0)
---------------------------------------
Decrease in net cash(x) (14.2) (8.6) (10.3) (305.2)
Net cash - beginning of period 22.2 53.0 18.3 349.6
---------------------------------------
Net cash - end of period $ 8.0 $ 44.4 $ 8.0 $ 44.4
---------------------------------------
---------------------------------------
(x)Net cash consists of cash and short term investments, and cheques
issued in excess of funds on deposit.
Supplemental information:
Interest paid $ 19.0 $ 18.1 $ 21.7 $ 25.4
Income taxes paid $ 18.1 $ 54.8 $ 53.6 $ 225.4
>>
<<
SECOND QUARTER SEGMENTED INFORMATION
(in millions of Canadian dollars - unaudited)
Pulp & Corporate Consol-
Lumber Panels paper & other idated
April 1, 2006 to
June 30, 2006
Sales
To external
customers $ 480.2 $ 127.2 $ 280.5 $ - $ 887.9
----------
----------
To other segments 20.2 1.4 - -
----------------------------------------
$ 500.4 $ 128.6 $ 280.5 $ -
----------------------------------------
----------------------------------------
EBITDA(1) $ 48.5 $ 15.6 $ 18.1 $ 4.7 $ 86.9
Amortization of
property, plant,
equipment & timber 26.8 9.8 22.7 0.7 60.0
--------------------------------------------------
Operating earnings
(loss) 21.7 5.8 (4.6) 4.0 26.9
Interest expense - net (6.2) (1.6) (2.8) (0.1) (10.7)
Exchange gain on
long-term debt - - - 15.5 15.5
Gain on sale of power
purchase agreement - - 61.8 - 61.8
Gain on timber
take-back 13.6 - - - 13.6
Other income
(expense) 0.4 0.1 (1.7) (10.6) (11.8)
--------------------------------------------------
Earnings before
income taxes and
non-controlling
interest $ 29.5 $ 4.3 $ 52.7 $ 8.8 $ 95.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
April 1, 2005 to
June 30, 2005
Sales
To external
customers $ 560.3 $ 134.2 $ 258.3 $ - $ 952.8
----------
----------
To other segments 25.5 2.7 - -
----------------------------------------
$ 585.8 $ 136.9 $ 258.3 $ -
----------------------------------------
----------------------------------------
EBITDA(1) $ 107.6 $ 17.4 $ 14.6 $ (2.4) $ 137.2
Amortization of
property, plant,
equipment & timber 26.8 8.9 23.4 0.8 59.9
--------------------------------------------------
Operating earnings
(loss) 80.8 8.5 (8.8) (3.2) 77.3
Interest expense - net (9.2) (3.1) (2.2) (1.0) (15.5)
Exchange loss on
long-term debt - - - (6.7) (6.7)
Other income
(expense) 2.7 (0.6) 0.5 2.5 5.1
--------------------------------------------------
Earnings (loss)
before income taxes
and non-controlling
interest $ 74.3 $ 4.8 $ (10.5) $ (8.4) $ 60.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Non GAAP measure:
EBITDA is defined as operating earnings plus amortization of
property, plant, equipment and timber plus restructuring charge.
>>
<<
SECOND HALF SEGMENTED INFORMATION
(in millions of Canadian dollars - unaudited)
Pulp & Corporate Consol-
Lumber Panels Paper & Other idated
January 1, 2006 to
June 30, 2006
Sales
To external
customers $ 985.4 $ 251.0 $ 553.5 $ - $1,789.9
----------
----------
To other segments 41.2 4.0 - -
----------------------------------------
$1,026.6 $ 255.0 $ 553.5 $ -
----------------------------------------
----------------------------------------
EBITDA(1) $ 139.9 $ 32.0 $ 30.6 $ (0.6) $ 201.9
Amortization of
property, plant,
equipment & timber 54.7 19.6 45.9 1.6 121.8
Restructuring charge - - 37.6 - 37.6
--------------------------------------------------
Operating earnings
(loss) 85.2 12.4 (52.9) (2.2) 42.5
Interest expense - net (11.4) (3.4) (5.7) (0.2) (20.7)
Exchange gain on
long-term debt - - - 14.0 14.0
Gain on sale of power
purchase agreement - - 61.8 - 61.8
Gain on timber
take-back 13.6 - - - 13.6
Other income (expense) 2.4 0.3 (0.4) (7.9) (5.6)
--------------------------------------------------
Earnings before
income taxes and
non-controlling
interest $ 89.8 $ 9.3 $ 2.8 $ 3.7 $ 105.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
January 1, 2005 to June 30, 2005
Sales
To external
customers $1,058.0 $ 264.2 $ 533.0 $ - $1,855.2
----------
----------
To other segments 44.7 3.7 - -
----------------------------------------
$1,102.7 $ 267.9 $ 533.0 $ -
----------------------------------------
----------------------------------------
EBITDA(1) $ 210.3 $ 38.9 $ 44.1 $ (14.0) $ 279.3
Amortization of
property, plant,
equipment & timber 55.6 18.2 47.2 1.6 122.6
--------------------------------------------------
Operating earnings
(loss) 154.7 20.7 (3.1) (15.6) 156.7
Interest income
(expense) - net (16.0) (6.3) (5.9) 0.3 (27.9)
Exchange loss on
long-term debt - - - (9.9) (9.9)
Other income 4.4 0.1 1.0 3.1 8.6
--------------------------------------------------
Earnings (loss) before
income taxes and
non-controlling
interest $ 143.1 $ 14.5 $ (8.0) $ (22.1) $ 127.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Non GAAP measure:
EBITDA is defined as operating earnings plus amortization of
property, plant, equipment and timber plus restructuring charge.
>>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(figures are in millions of dollars except where indicated - unaudited)
1. Basis of presentation
These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
included in the Company's annual report for the year ended
December 31, 2005.
These interim consolidated financial statements follow the same
accounting policies and methods of their application as the
December 31, 2005 consolidated annual financial statements.
2. Assets held for sale
The Company has commenced activities to sell its approximate 90%
interest in two sawmills and their related timber harvesting rights.
The non-controlling interest that relates to these operations is
included in long-term liabilities held for sale.
In addition, the Company is selling a harvesting and road maintenance
business and related equipment located in Alberta.
The sales of these operations are expected to occur in 2006. The
results of operations from these assets held for sale are included in
the consolidated statement of earnings. Effective January 1, 2006,
amortization was discontinued on the assets held for sale.
3. Other assets
<<
June 30, 2006 December 31, 2005
---------------------------------------------------------------------
Power purchase agreements $ 106.1 $ 28.7
Investments 13.5 16.3
Advances for timber & timber deposits 15.7 16.6
---------------------------------------------------------------------
$ 135.3 $ 61.6
---------------------------------------------------------------------
---------------------------------------------------------------------
>>
Power purchase agreements
The Company entered into two power purchase agreements to acquire a
portion of the electricity generated from two power plants in Alberta
beginning January 1, 2001, at substantially predetermined prices.
Effective May 1, 2006, the Company sold its interest in one of the
agreements for proceeds of $68.2 million while concurrently acquiring
a greater interest in the remaining agreement for $85.7 million. The
transactions were accounted for as a sale and purchase respectively,
resulting in a gain of $61.8 million.
The Company sells the electricity acquired under the power purchase
agreements at prevailing market prices. At the same time, the
Company's Alberta operations purchase electricity at prevailing
market prices. Prior to the transactions described above, the
Company's share of electricity generated from power plants subject to
the agreements was expected to be 130 megawatts per year to and
including 2013 and 100 megawatts per year for the period 2014 to
2020. Following the transactions, the Company's share of electricity
generated is expected to be 120 megawatts for 2006 and 115 megawatts
per year for the period 2007 to 2020. The power purchase agreements
are amortized over the life of the underlying agreements.
4. Operating loans
The Company has approximately $530.0 million in revolving lines of
credit available, $166.5 million of which was drawn as at June 30,
2006. The Company has also issued $15.4 million under various letters
of credit. All lines of credit are unsecured except for a
$5.0 million joint-venture line of credit, and bear interest at
floating rates based on Prime, US base, Bankers' Acceptances or LIBOR
at the Company's option.
5. Other liabilities
<<
June 30, 2006 December 31, 2005
---------------------------------------------------------------------
Post-retirement obligations $ 51.7 $ 44.2
Timber damage deposits 11.2 10.9
Reforestation obligation - long-term 69.4 68.2
Other asset retirement obligations 9.4 9.7
---------------------------------------------------------------------
$ 141.7 $ 133.0
---------------------------------------------------------------------
---------------------------------------------------------------------
>>
6. Shareholders' equity
<<
June 30, 2006 December 31, 2005
Number of Number of
Shares Issued Amount Shares Issued Amount
---------------------------------------------------------------------
Common 37,878,499 $ 597.3 37,871,786 $ 597.0
Class B common 4,885,206 0.5 4,885,206 0.5
---------------------------------------------------------------------
Total Common 42,763,705 597.8 42,756,992 597.5
Retained earnings 1,366.7 1,268.8
Share purchase loans (0.4) (0.4)
---------------------------------------------------------------------
Shareholders' equity $ 1,964.1 $ 1,865.9
---------------------------------------------------------------------
---------------------------------------------------------------------
>>
Common shares
For the three months ended June 30, 2006, the Company issued 3,291
Common shares for cash of $0.2 million (for the six months ended
June 30, 2006 the Company issued 6,713 Common shares for cash of
$0.3 million).
7. Restructuring charge
In the first quarter of 2006, the Company expensed $37.6 million
related to a restructuring of the pulp mill in Hinton, Alberta. Of
this amount, $34.8 million was for the write down of property, plant,
equipment and timber with the balance for other restructuring costs.
8. The Forestry Revitalization Plan ("FRP")
In 2003, the Government of B.C. ("Crown") enacted the FRP that
provides for changes to Crown forest policy and to the existing
allocation of Crown timber tenures to licensees. The harvesting
rights associated with replaceable tenures in excess of certain
annual volumes were reduced by 20%, and assets such as roads and
bridges in the affected areas were also expropriated. The effect of
the timber take-back was a reduction of approximately 1,275,000 cubic
meters of the Company's existing allowable annual cut on replaceable
tenures. During the quarter, the Company agreed to compensation of
$30.7 million for the tenure reduction and certain related assets,
resulting in a gain of $13.6 million.
9. Income taxes
The Company's effective tax rate is as follows:
<<
April 1 to April 1 to
June 30, 2006 June 30, 2005
Amount % Amount %
---------------------------------------------------------------------
Income taxes at statutory rates $ (32.4) (34.1) $ (20.7) (34.9)
Non - taxable amounts 13.4 14.1 (2.4) (4.1)
Rate differentials between
jurisdictions and on specified
activities 0.4 0.1 3.1 5.2
Reductions in income tax rates 33.1 34.9 - -
Other (5.6) (5.7) (1.5) (2.2)
---------------------------------------------------------------------
Income tax recovery (expense) $ 8.9 9.3 $ (21.5) (36.0)
---------------------------------------------------------------------
---------------------------------------------------------------------
January 1 to January 1 to
June 30 2006 June 30 2005
Amount % Amount %
---------------------------------------------------------------------
Income taxes at statutory rates $ (35.8) (34.1) $ (44.1) (34.9)
Non - taxable amounts 13.1 12.5 (3.7) (2.9)
Rate differentials between
jurisdictions and on specified
activities 1.8 1.7 5.0 3.9
Reductions in statutory income
tax rates 33.1 31.6 - -
Other (7.1) (6.9) (2.6) (2.0)
---------------------------------------------------------------------
---------------------------------------------------------------------
Income tax recovery (expense) $ 5.1 4.8 $ (45.4) (35.9)
---------------------------------------------------------------------
---------------------------------------------------------------------
>>
10. Employee future benefits
The total benefit cost of the Company's defined benefit pension plans
was $6.7 million for the three months ended June 30, 2006 (three
months ended June 30,2005 - $6.8 million) and $12.4 million for the
six months ended June 30, 2006 (six months ended June 30,2005 -
$14.8 million).
11. 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 outstanding. Diluted earnings per share
assume the exercise of share options using the treasury stock method.
<<
April 1 to January 1 to
June 30 June 30
2006 2005 2006 2005
---------------------------------------------------------------------
Earnings $103.8 $ 38.0 $109.9 $ 80.9
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average number of shares
(thousands)
Weighted average shares - basic 42,744 42,723 42,742 42,722
Share options - treasury stock method 384 538 385 587
---------------------------------------------------------------------
Weighted average shares - diluted 43,128 43,261 43,127 43,309
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per share (dollars)
Basic $ 2.43 $ 0.89 $ 2.57 $ 1.89
Diluted $ 2.41 $ 0.88 $ 2.55 $ 1.87
---------------------------------------------------------------------
---------------------------------------------------------------------
>>
12. Countervailing and antidumping duties
In 2002, the U.S. Department of Commerce ("USDOC") issued its final
determination in the countervailing and antidumping investigations,
which resulted in a countervailing duty ("CVD") rate of 18.79% and an
antidumping duty ("ADD") rate specific to the Company of 2.18%, both
to be posted by cash deposits effective from May 22, 2002.
On April 21, 2004, the USDOC issued a response to an earlier North
American Free Trade Agreement ("NAFTA") ruling regarding specific
challenges made to the ADD rate calculation. The USDOC concluded that
West Fraser's ADD rate would be reduced from 2.18% to 1.79%
representing de minimis level, with the result that West Fraser would
be exempted from the ADD order. In response to a July 11, 2005 USDOC
remand determination which did not revoke the antidumping order
against the Company, on July 21, 2005, a NAFTA panel affirmed its
prior instruction that the anti-dumping order against West Fraser
must be revoked.
On September 10, 2004, the U.S. International Trade Commission
("ITC") issued, in response to a NAFTA remand decision, a
determination finding that the U.S. lumber industry was not
threatened with material injury by reason of lumber imports from
Canada. On November 24, 2004, the U.S. government launched an
Extraordinary Challenge of the legality of the decision of the NAFTA
panel. On August 10, 2005, a NAFTA Extraordinary Challenge Committee
upheld a NAFTA panel ruling that evidence relied upon by the U.S. did
not support its finding that Canadian imports threatened to injure
the U.S. industry and further confirmed the panel's specific
instruction that the U.S. find no threat of injury. This ruling was
expected to result in the U.S. withdrawal of the CVD and ADD cases,
and the refund of cash deposits with interest. The U.S. has so far
refused to comply with the ruling.
Effective December 20, 2004 the Company's CVD and ADD deposit rates
were reduced to 17.18% and 0.92%, respectively, as a result of the
final determination in the first Administrative Review. These
deposits were further reduced due to a ministerial error and
recalculated to 16.37% for CVD on February 24, 2005 and to 0.91% for
ADD on January 17, 2005.
Effective December 12, 2005, the Company's CVD and ADD deposit rates
were reduced to 8.70% and 0.51% respectively, as a result of the
final determination in the second Administrative Review.
On July 1, 2006, Canadian and U.S. government representatives agreed
to the terms of a softwood lumber agreement. The basic terms include
replacing the existing duty deposits with a Canadian-imposed export
tax, or a combination of a lower tax and quota, both of which may
vary based on the price of lumber and the level of shipments to the
United States. In addition, out of the existing duty deposits of
approximately US$ 5 billion, the U.S. will retain approximately
US$1 billion with the balance returned to the Canadian companies with
interest. The agreement requires both sides to withdraw all
litigation, the U.S. industry petitioners to execute letters waiving
their right to file another case while the agreement is in effect and
substantially all of the Canadian industry to consent to the
distribution of duty deposits. The agreement requires legislation to
be passed by the Canadian parliament. At this time, it is not
possible to determine if the agreement will be successfully
implemented.
The Company has recorded an expense for CVD and ADD equal to the
amount paid as cash deposits throughout applicable periods. A refund
of deposits will be recorded as income when receipt is reasonably
certain. As at June 30, 2006, the total amount on deposit from
May 22, 2002 related to CVD and ADD was US$370.4 million and
US$38.7 million respectively. These amounts do not include the
amounts on deposit from Weldwood prior to the acquisition by the
Company on December 31, 2004, as the previous owner is entitled to
any refunds on these amounts.
<<
For the use of CANADA NEWS WIRE SERVICE only
West Fraser shares trade on the Toronto Stock Exchange
under the symbol: "WFT".
>>
%SEDAR: 00002660E
