West Fraser Announces Third Quarter Results

VANCOUVER, BC--(Marketwired - October 24, 2016) - West Fraser Timber Co. Ltd. (TSX: WFT) reported earnings of $107 million or $1.35 basic earnings per share on sales of $1,155 million in the third quarter of 2016. 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" of our 2016 third quarter Management's Discussion & Analysis.

Operational Results

In the quarter our lumber operations generated operating earnings of $114 million (Q2-16 - $78 million) and Adjusted EBITDA of $151 million (Q2-16 - $113 million). Higher U.S. dollar lumber prices contributed to the improvement in earnings.

The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $30 million (Q2-16 - $18 million) and Adjusted EBITDA of $33 million (Q2-16 - $21 million). Higher plywood prices were the main contributor to the improved earnings.

Our pulp & paper operations generated operating earnings of $22 million (Q2-16 - loss of $5 million) and Adjusted EBITDA of $31 million (Q2-16 - $4 million). Pulp and newsprint prices increased and pulp production was higher resulting in increased earnings.

Outlook

"We're pleased with the ongoing improvements from our capital spending program. I'm also very proud of our committed and focused employee group who continue to strive to improve operational performance each and every day," said Ted Seraphim, our President and CEO.

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 Report 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 2015 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 Tuesday, October 25, 2016 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-866-225-0198 (toll-free North America). The call may also be accessed through West Fraser's website at www.westfraser.com.

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, 2015 annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with our 2015 annual financial statements.

3. Inventories

Inventories at September 30, 2016 were written down by $10 million (June 30, 2016 - $11 million; December 31, 2015 - $21 million; September 30, 2015 - $37 million) to reflect net realizable value being lower than cost.

4. Long-term debt and operating loans

Long-term debt

The fair value of the long-term debt is $390 million (December 31, 2015 - $406 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 $616 million in revolving lines of credit of which $46 million (net of deferred financing costs of $3 million) were drawn as at September 30, 2016 (December 31, 2015 - $178 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, 2020, a $33 million (US$25 million) demand line of credit dedicated to our U.S. operations, 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 September 30, 2016, letters of credit in the amount of $47 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

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. 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:

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

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 gain (loss) on post-retirement benefits, included in other comprehensive earnings, as follows:

7. Share Capital

During the three months ended September 30, 2016 we purchased 1,284,558 of our Common shares (nine months ended September 30, 2016 - 3,914,306 Common shares) under our normal course issuer bid ("NCIB") program, which expired on September 16, 2016. The purchase price averaged $43.23 per share and totalled $56 million for the three months ended September 30, 2016 (nine months ended September 30, 2016 - $43.39 per share and $170 million).

On September 8, 2016 our Board of Directors authorized the renewal of our NCIB to repurchase for cancellation up to 3,834,226 Common shares or approximately 5% of our issued and outstanding Common shares. The NCIB will expire September 18, 2017.

8. Insurance proceeds

Our WestPine MDF mill, located in Quesnel British Columbia, was closed due to a fire on March 9, 2016 and will remain closed until repairs are complete. The mill is insured for property damage and business interruption. The impact on pre-tax earnings is as follows:

Estimated business interruption insurance is recorded as a reduction of cost of products sold in each period the mill remains closed. Estimated insurance proceeds to be spent to replace equipment are accounted for as proceeds of disposition, and the resulting gain has been included in other income.

The final amount of the insurance claim will be determined after the mill reconstruction is complete and the mill returns to expected production rates.

9. Other

In March 2016 the termination of our three-year power strip agreement was negotiated. In addition, Capital Power Corporation gave notice of its intent to terminate its role as buyer of the Sundance C Power Arrangement ("the Acquired PPA") effective March 24, 2016. As a result of this termination, our role as a party to the Power Syndicate Agreement also terminated. These agreements had provided us with a portion of the electricity generated from two power plants in Alberta at substantially predetermined rates.

Prior to the termination we recorded the agreements at fair value with the resulting gains or losses being recorded through other income. As at the release date of these condensed consolidated financial statements, we have been advised that the Government of Alberta has challenged the right of Capital Power Corporation to terminate the Acquired PPA. If the termination is successfully challenged additional losses would be incurred, although the amount of such losses is not reasonably determinable at this time. The amount of such loss will be recorded through earnings at such time as it can be determined.

10. Tax provision

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

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 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.

12. Segmented information

For more information:
Larry Hughes
Vice-President, Finance and Chief Financial Officer
Rodger Hutchinson
Vice-President, Corporate Controller and Investor Relations
(604) 895-2700
www.westfraser.com