Western Forest Products Inc.
2015 Annual Report
Financial Highlights
(millions of Canadian dollars except ratios, per share and share amounts)
Revenue
Net income
Cash flow from operating activities
Basic net income per share
Diluted net income per share
Adjusted EBITDA (1)
Adjusted EBITDA margin
Weighted average shares outstanding - Basic ('000's)
Weighted average shares outstanding - Diluted ('000's)
Working capital
Total assets
Net debt (2)
Net debt to capitalization (3)
Total liquidity (4)
Year ended December 31,
2015
2014
1,081.9
1,036.9
73.7
99.1
68.4
87.4
$
0.19
$
0.17
$
0.18
$
0.17
117.1
10.8%
395,066
398,740
141.8
743.4
53.8
0.11
177.9
108.5
10.5%
392,267
396,892
121.3
694.2
77.9
0.16
134.4
(1)
(2)
(3)
(4)
See page 5 for definition of adjusted EBITDA. A quantitative reconciliation between net income and adjusted EBITDA
can be found in Appendix A to the Management's Discussion and Analysis.
Net debt is defined as the sum of long-term debt, current portion of long-term debt, revolving credit facility, less cash
and cash equivalents.
Capitalization comprises net debt and shareholders' equity.
Total liquidity comprises cash and cash equivalents and available credit under the Company’s revolving credit facility
and revolving term loan.
1
Letter to Shareholders
To Our Shareholders,
Our focus on producing specialty products delivered growth in revenue and annual adjusted EBTIDA,
and limited the impact of a significant decline in commodity lumber markets.
In 2015, Western leveraged our flexible operating platform to capitalize on sustained demand for our specialty
products and grew annual adjusted EBITDA by 8% compared to last year. We successfully focused on
specialty lumber production, leading to an improved sales mix and allowing us to overcome a 20% decline in
commodity lumber pricing1. Concentrating our sales into demand driven markets allowed us to capture the
benefits of a weakening Canadian dollar (“CAD”) and enabled us to surpass $1 billion in revenue for the
second consecutive year. On the strength of operating cash flows, we continued our balanced approach to
capital allocation in 2015, distributing $31.6 million in dividends to our shareholders, reinvesting $62.1 million
in our asset base and reducing net debt by $24.1 million.
Western’s 2015 financial highlights:
• Growing annual revenue to more than $1 billion, a 4% increase from the year prior
• Increasing adjusted EBITDA by 8% to $117.1 million
• Achieving a record average annual lumber sales price of $872 per thousand board feet
In addition, Western realized several operational achievements in 2015 including:
• Investing an additional $29.7 million in strategic capital projects
• Advancing relationships with coastal First Nations through joint interest in sustainably harvesting timber
• Maintaining lumber production with one less sawmill and operational downtime for capital implementation
Market Outlook
We remain confident in our view that over the mid to long term, the recovery of the new home construction
market in the United States (“US”), combined with growing demand from China and reduced lumber supply
from the British Columbia (“BC”) interior, will deliver an improved pricing environment for commodity lumber
products. In the near term, we expect commodity lumber pricing will continue to be volatile until US home
construction returns to more normal levels. We will continue to utilize our flexible operating platform to target
our lumber production to the products and markets that offer the highest margin.
We anticipate demand for our Western Red Cedar (“WRC”) products to grow through the first half of 2016,
as distributors position their inventories for the spring and summer building seasons. Improved demand and
limited supply due to lower harvest levels on the coast of BC should provide a favourable pricing environment
for our products.
Recent improvement in lumber demand in Japan is expected to continue in the first half of 2016, supported
by new home construction. Pricing is expected to remain competitive as global suppliers compete for market
share.
1 Based on performance of the United States dollar (“USD”) denominated 2x4 SPF lumber Index in 2015.
2
We anticipate that demand for lumber in China will continue to improve through the first quarter of 2016,
supported by what appears to be an improving housing market. Our commodity business will also benefit
from improved demand from North America as we enter the spring building season.
Our saw log markets are expected to remain firm in the first half of 2016. Reduced supply due to lower harvest
levels on the coast will support our domestic log sales while the weaker CAD will support price realizations
from competitive Asian export log markets. The pulp log market is expected to remain depressed as high
pulp log inventories at BC coastal pulp mills will keep the market oversupplied.
In 2015 we accelerated the implementation of our strategic capital plan that is expected to position
our mills as the most cost competitive facilities on the coast of BC. Key milestones included the
successful restart of the 2nd production line at our Duke Point sawmill and the completion of the $40 million
Saltair sawmill upgrade, the benefits of which should positively impact our 2016 results. In addition, we
continued the modernization of our Duke Point sawmill and planer, installed a new timber deck at our
Chemainus sawmill, and began the conversion of our Ladysmith sawmill to a single production line. We are
pleased with the early performance of these capital investments that are designed to improve productivity,
lower costs and increase product flexibility.
We are pleased to announce that the Board has approved an investment in the application of LiDAR
technology in our Timberlands operations. This $3 million investment will utilize proven technology that
will generate more detailed information on our forest inventory and should lead to more efficient planning,
engineering and harvest practices. With this latest announcement, we have implemented or announced $97
million of our $125 million capital investment plan, with all of the associated projects in commissioning or
installation phases. We continue to evaluate and refine additional strategic capital project plans that will
position Western as the only company on the coast of BC capable of competitively optimizing the complete
profile of the coastal forest.
Western continues to expand our relationship with coastal First Nations through a joint interest in
sustainably harvesting timber. In October 2015, the Government of BC and the ‘Namgis First Nation
announced a formal forestry funding agreement. This agreement led to further discussions between the
‘Namgis First Nation and Western which resulted in the creation of the Danyas Limited Partnership. Through
this entity, we will jointly harvest timber in an area of Tree Farm License (“TFL”) 37 that was previously
unavailable due to treaty negotiations. This relationship is expected to deliver economic benefits to the
‘Namgis, provide greater timber access for Western and improve our future operating certainty. The operating
model is similar to the Quatern Limited Partnership between Western and the Quatsino First Nation. Quatern
has been in operation for five years and in 2015, was awarded the Business of the Year award at the 2015
BC Aboriginal Business Awards.
We made significant strides this year to reposition the business to capitalize on existing
opportunities and prepare the business for future growth. In addition to continuing to consolidate our
operating platform, optimizing our operations and investing in systems in 2015, we also completed the
revitalization of our executive group. I am pleased to announce the appointment of two new leaders to our
senior leardership team. Jennifer Foster joined Western as Vice President, Human Resources in December
2015 following the promotion of Mike Cass to Vice President, Timberlands. Jennifer has 18 years of
experience in human resources, including the last ten years as Vice President, Human Resources for a global
automotive parts manufacturing company. Frank Turnbull joined Western in December 2015 as Vice-
President, Lumber Sales, filling the remaining senior leadership team vacancy. Frank has extensive
experience in sales in the BC forest sector and has a proven track record of developing and leading high-
performing sales and marketing teams that deliver strong results.
In safety we closed the year with a Company record quarterly MIR of 0.78. Western continues to
implement strategies designed to further improve safety awareness amongst our employees, including
accurately assessing risk and placing safety at the heart of the decision-making process. Safety remains a
key operating priority for our company.
3
On February 1, 2016, the Government of BC and First Nations announced the Great Bear Rainforest
(“GBR”) Land Use Order. This historic agreement will conserve one of the largest intact temperate
rainforests in the world. Using ecosystem-based management, 15% of the GBR will remain available for
sustainable harvest in old and second growth forests. We are pleased with the collaborative process with
stakeholders that led to a conflict-free resolution concerning this significant area. Contributing to this outcome
were Western’s professional foresters and management – the same group that leads our sustainable forest
management practices across all our tenures on BC’s coast.
I would like to thank our shareholders, customers, employees and the communities where we work for your
continued support of Western Forest Products.
Sincerely,
Don Demens
President and CEO
4
Management’s Discussion & Analysis
The following Management’s Discussion and Analysis (“MD&A”) reports and comments on the financial condition and results
of operations of Western Forest Products Inc. (the “Company”, “Western”, “us”, “we”, or “our”), on a consolidated basis, for the
three months and year ended December 31, 2015 to help security holders and other readers understand our Company and the
key factors underlying our financial results. This discussion and analysis should be read in conjunction with our audited annual
consolidated financial statements and notes thereto for the years ended December 31, 2015 and 2014, which can be found on
SEDAR at www.sedar.com.
The Company has prepared the consolidated financial statements for the years ended December 31, 2015 and 2014 in
accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards
Board. Amounts discussed herein are based on our audited annual consolidated financial statements and are presented in
millions of Canadian dollars unless otherwise noted. Certain prior period comparative figures have been reclassified to conform
to the current period’s presentation.
Reference is made in this MD&A to adjusted EBITDA1 and adjusted EBITDA margin2. Adjusted EBITDA is defined as operating
income prior to operating restructuring items and other income (expenses), plus amortization of property, plant, and equipment
and intangible assets, impairment adjustments, and changes in fair value of biological assets. Adjusted EBITDA margin is
adjusted EBITDA as a proportion of revenue. Western uses adjusted EBITDA and adjusted EBITDA margin as benchmark
measurements of our own operating results and as benchmarks relative to our competitors. We consider adjusted EBITDA to
be a meaningful supplement to operating income as a performance measure primarily because amortization expense,
impairment adjustments and changes in the fair value of biological assets are non-cash costs, and vary widely from company
to company in a manner that we consider largely independent of the underlying cost efficiency of their operating facilities.
Further, the inclusion of operating restructuring items which are unpredictable in nature and timing may make comparisons of
our operating results between periods more difficult. We also believe adjusted EBITDA and adjusted EBITDA margin are
commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Adjusted EBITDA does not represent cash generated from operations as defined by IFRS and it is not necessarily indicative of
cash available to fund cash needs. Furthermore, adjusted EBITDA does not reflect the impact of a number of items that affect
our net income. Adjusted EBITDA and adjusted EBITDA margin are not measures of financial performance under IFRSs, and
should not be considered as alternatives to measures of performance under IFRS. Moreover, because all companies do not
calculate adjusted EBITDA in the same manner, adjusted EBITDA and adjusted EBITDA margin calculated by Western may
differ from similar measures calculated by other companies. A reconciliation between the Company’s net income as reported
in accordance with IFRSs and adjusted EBITDA is included in Appendix A to this report.
Also in this MD&A, management uses key performance indicators such as net debt, net debt to capitalization and current assets
to current liabilities. Net debt is defined as long-term debt less cash and cash equivalents. Net debt to capitalization is a ratio
defined as net debt divided by capitalization, with capitalization being the sum of net debt and shareholder’s equity. Current
assets to current liabilities is defined as total current assets divided by total current liabilities. These key performance indicators
are non-GAAP financial measures that do not have a standardized meaning and may not be comparable to similar measures
used by other issuers. They are not recognized by IFRS; however, they are meaningful in that they indicate the Company’s
ability to meet their obligations on an ongoing basis, and indicate whether the Company is more or less leveraged than in prior
periods.
This MD&A contains statements which constitute forward-looking statements and forward-looking information within the
meaning of applicable securities laws. Those statements and information appear in a number of places in this document and
include statements and information regarding our current intent, belief or expectations primarily with respect to market and
general economic conditions, future costs, expenditures, available harvest levels and our future operating performance,
objectives and strategies. Such statements and information may be indicated by words such as “estimate”, “expect”,
“anticipate”, “plan”, “intend”, “believe”, “should”, “may” and similar words and phrases. Readers are cautioned that it would be
unreasonable to rely on any such forward-looking statements and information as creating any legal rights, and that the
statements and information are not guarantees and may involve known and unknown risks and uncertainties, and that actual
results and objectives and strategies may differ or change from those expressed or implied in the forward-looking statements
or information as a result of various factors. Such risks and uncertainties include, among others: general economic conditions,
competition and selling prices, changes in foreign currency exchange rates, labour disruptions, natural disasters, relations with
First Nations groups, changes in laws, regulations or public policy, misjudgments in the course of preparing forward-looking
statements or information, changes in opportunities and other factors referenced under the “Risk Factors” section herein. All
written and oral forward-looking statements or information attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the foregoing cautionary statements. Except as required by law, Western does not expect to update
forward-looking statements or information as conditions change.
Unless otherwise noted, the information in this discussion and analysis is updated to February 17, 2016.
1 Earnings Before Interest, Tax, Depreciation and Amortization
2 Adjusted EBITDA as a proportion of Revenue
5
Selected Annual Information (1)
(millions of dollars except per share amount)
2015
2014
2013
Year ended
December 31,
Revenue
Adjusted EBITDA
Adjusted EBITDA margin
Operating income prior to restructuring items and other income
Net income from continuing operations
Net income for the period
Basic earnings per share (in dollars)
Diluted earnings per share (in dollars)
Basic and diluted earnings per share (in dollars) - discontinued operations
$
1,081.9
117.1
10.8%
83.0
64.6
73.7
0.19
0.18
0.02
$
$
$
$
1,036.9
108.5
10.5%
80.3
68.4
68.4
0.17
$
$
0.17
$
-
$
977.5
128.8
13.2%
105.5
125.9
125.4
0.29
$
$
0.28
$
-
Total Assets
Net Debt (2)
$
743.4
$
694.2
$
670.5
$
53.8
$
77.9
$
82.9
(1) Included in Appendix A is a table of selected results for the last eight quarters.
(2) Net debt is defined as the sum of long-term debt, current portion of long-term debt, revolving credit facility, less cash and cash equivalents.
Overview
Western achieved adjusted EBITDA of $117.1 million in 2015, an 8% improvement over 2014. Our flexible
operating platform allowed us to capitalize on sustained demand for our specialty products and reduce our
exposure to weak commodity log and lumber markets.
In 2015, revenue grew 4% to a record $1,081.9 million compared to $1,036.9 million realized in 2014. An
improved lumber sales mix and the benefit of a weaker CAD relative to the USD overcame reduced demand
for logs and lumber in China and a significant decline in North American commodity lumber pricing.
Commodity lumber pricing in North America, as measured by the average USD 2x4 SPF Index, declined by
20% year over year. An 11% increase in WRC sales volumes drove overall specialty lumber shipments to
56% of total sales volumes, an increase of 4% as compared to 2014.
Throughout 2015 we leveraged our flexible operating platform by modifying planned production to address
changing market conditions and improve our lumber sales mix. The margin benefits of an increase in high-
value, specialty lumber production and shipments were partly offset by reduced lumber recovery and higher
conversion costs associated with specialty lumber production.
Log production remained flat as compared to 2014, at 5.1 million cubic metres, while overall 2015 timber
harvest decreased by 8% on the coast of BC, according to the Province of BC’s Harvest Billing system. We
overcame a constrained domestic market supply and maintained the delivery of logs to our sawmills by
internalizing certain log inventories that would have previously been sold. This strategy also enabled us to
limit our exposure to weak export log markets.
We continued to focus on the Company’s cost structure during 2015, including completing the consolidation
of our North Vancouver Island timberlands, and beginning a consolidation of our Central Vancouver Island
timberlands. We expect these and similar initiatives undertaken in 2014 will lead to reduced future operating
costs.
Net income of $73.7 million in 2015 increased from $68.4 million in 2014, primarily due to an increase in
adjusted EBITDA. Also included in 2015 net income is a reduction in restructuring charges, the realization
of deferred tax expense, and $9.1 million in incremental net income from the sale of the Company’s former
Squamish pulp mill site. Strong financial results in 2015 allowed us to return $31.6 million in dividends to our
shareholders and reduce our net debt by $24.1 million.
In November 2015, we amended certain terms and conditions of our revolving credit facility including the
removal of certain covenants and a reduction in applicable interest rates. The maturity date of this facility
was also extended by one year to December 14, 2016. At the same time, we amended certain terms and
conditions of the revolving term loan facility, including the removal of certain covenants.
6
Our liquidity position at December 31, 2015 has improved to $177.9 million, compared to $134.4 million at
the end of 2014. The increased liquidity in 2015 has primarily resulted from cash generated by operations
and proceeds from the sale of the Company’s former Squamish pulp mill site. We continue to pursue
opportunities to monetize our non-core assets.
Annual Operating Results
(millions of dollars)
Revenue
Lumber
Logs
By-products
Total revenue
Adjusted EBITDA
Adjusted EBITDA margin
Year ended
December 31,
2015
2014
$
$
$
770.0
243.1
68.8
1,081.9
$
729.0
244.2
63.7
1,036.9
117.1
10.8%
108.5
10.5%
In 2015 Western delivered adjusted EBITDA of $117.1 million on annual revenue of $1,081.9 million, as
compared to $108.5 million adjusted EBITDA on revenue of $1,036.9 million in 2014. The increase in
adjusted EBITDA was achieved by utilizing our flexible operating platform to capitalize on continued strength
in specialty lumber markets. In addition, the value of the CAD relative to the USD was, on average, 16%
lower in 2015 as compared to the prior year, supporting our average realized pricing.
In 2015, lumber revenue was $770.0 million, 6% higher than in 2014 despite a 3% year over year decline in
lumber sales volume to 883 million board feet. Improved sales mix and the positive impact of foreign
exchange supported an increase in our average realized lumber price by $70 to a record $872 per thousand
board feet in 2015. Our improved sales mix was led by an 11% increase in WRC shipments, on continued
growth in demand from a strong North American repair and renovation market. Conversely, commodity
lumber shipments declined by 11% as we proactively utilized our flexible operating platform to reduce our
exposure to an oversupplied commodity segment. Japan and Niche lumber shipments were consistent year-
over-year.
Log revenue of $243.1 million in 2015 remained flat in comparison to the prior year. The revenue impact of
decreases in export and pulp log shipments was offset by the benefit of a weak CAD and a 7% increase in
domestic sawlog shipments in 2015. We overcame a challenging China log market by increasing external
domestic specialty log shipments, the supply of which was constrained due to significantly reduced coastal
BC timber harvest. Additionally, exposure to weak export log markets in 2015 was reduced by redirecting a
greater proportion of certain export log inventories internally to our mills.
Sales of by-products in 2015 were $68.8 million, or $5.1 million higher than in 2014, primarily due a 3%
increase in average realized chip prices and a 3% increase in the volume of chips sold in 2015. Contributing
to the chip sales volume increase was greater purchase and resale volumes of third party chips.
In 2015, lumber production decreased by 2% to 891 million board feet, as compared to 2014. This was
achieved despite the temporary shutdown of multiple sawmills in 2015 for strategic capital projects, and the
permanent closure of the Nanaimo sawmill in late 2014. We limited our exposure to the weak commodity
lumber market in 2015 by leveraging our flexible operating platform to proportionately increase specialty
lumber production, including our high-value WRC products. This was further facilitated by internalizing a
broader range of our small WRC log harvest, including converting WRC shingle logs into lumber. Production
gains at certain sawmills, including Duke Point, were offset by reduced lumber recovery and higher
conversion costs associated with the consumption of smaller diameter WRC logs to increase specialty
lumber production.
Net log production in 2015 was consistent with 2014 at 5.1 million cubic metres, as we continued our
sustainable harvest of the coastal forest profile. Comparatively, the coastal BC harvest volume decreased
8% in 2015 according to the Province of BC’s Harvest Billing system. Further contributing to 2015 harvest
results were our management of logging programs to limit seasonal weather impacts and harvesting to
annual allowable cut limits in many operations in the year.
7
Sawlog purchase volume decreased 0.1 million cubic metres in 2015 as compared to 2014, as we focused
away from commodity sawlog purchases in alignment with our targeted production. Additionally, the reduced
coastal BC harvest in 2015 was a constraint to sawlog market availability.
Our log costs increased marginally from the prior year due to a 60,000 cubic metre increase in the use of
heli-logging and an increase in stumpage costs. In addition, we realized a full years’ impact of the United
Steel Workers labour agreement, which was ratified in mid-2014.
The consolidation of our Northern Vancouver Island timberland operations and a similar initiative in our
Central Vancouver Island timberland operations are expected to reduce future operating costs once fully
implemented. We continue to assess other opportunities for divisional consolidation as a means of
improving productivity and optimizing utilization of equipment, staffing and overhead in our timberlands.
Freight costs, which are predominantly denominated in USD, increased $1.6 million in 2015 to $88.4 million.
Higher freight costs in 2015 were the result of a weakening CAD, offset by a 3% decrease in lumber
shipments and a higher proportion of domestic rail volumes, as we directed sales away from volatile Chinese
commodity markets.
In 2015, selling and administration expenses were $26.1 million as compared to $29.6 million in the prior
year. The reduction was largely attributable to lower share-based compensation expense, and reduced
payroll costs arising from the consolidation of certain operations and sales offices. In 2015, we realized an
increase in performance related employee compensation costs, as well as greater legal costs incurred in
relation to the expired Softwood Lumber Agreement. As a percentage of revenues our selling and
administration costs were 2.4% for 2015, a decrease from the 2.9% reported in 2014.
Reversal of Impairments
There were no reversals of previously recognized impairments recorded during 2015. In 2014, Western
recorded a reversal of previously recognized impairments of $2.9 million on our Crown timber tenures, which
fully reversed all impairments previously recorded on our Crown timber tenures.
Operating Restructuring Items
In 2015, Western recorded restructuring expenses of $4.3 million. The expense is primarily attributable to
severance and associated expenses arising from the consolidation of the company’s Central Island
timberlands operations, and the termination of certain sales agent agreements. The Company also
recognized an incremental $0.8 million relating to the permanent closure of its Nanaimo sawmill. This
compares to restructuring expenses of $10.8 million in 2014 of which $8.1 million was recognized in
severance and other costs associated with the consolidation of the Company’s Nanaimo-area sawmill
operations. A further $2.7 million in restructuring expense was incurred in 2014 as the result of the fourth
quarter restructuring of the Company’s Japan division, in which we closed our Osaka office; an arbitration
settlement related to market-related mill curtailments occurring in 2009 and 2010, and other severance costs
that arose in 2014.
Finance Costs
Finance costs decreased $0.7 million from $5.7 million incurred in 2014 to $5.0 million in 2015. Net debt
was reduced by $24.1 million, resulting in an average outstanding debt on the Company’s credit facilities
that was $12.3 million lower than during the prior comparative year. These changes were realized in lower
interest expense year-over-year, and partially offset by an increase in other finance costs related to the
Company’s legacy defined benefit plans in 2015.
Other Income (Expense)
Other expense of $1.1 million was reported in 2015 as a result of asset impairments and remediation
provisions, offset by net gains on non-core property dispositions in the year. In 2014, other income of $1.4
million was reported and reflects net gains on non-core property sales in the year.
8
Income Taxes
At December 31, 2015, the Company and its subsidiaries had unused non-capital tax losses carried forward
totaling approximately $200.8 million, which expire between 2027 and 2035, and can be used to reduce
taxable income. In addition, the Company has unused capital losses of approximately $102.5 million, which
are available indefinitely, but can only be utilized to offset future tax based capital gains.
The Company has recognized deferred income tax assets of $31.3 million at December 31, 2015, with
respect to its remaining unrecognized non-capital tax losses and tax reserves associated with its legacy
defined benefit pension plans, as management has concluded that it is probable that future taxable profits
will be available against which these tax assets can be utilized. This represents a slight increase in deferred
income tax assets from the $29.9 million recognized at December 31, 2014. In 2015, the Company
recognized deferred income tax expense of $7.8 million through net income from continuing operations and
deferred income tax recovery of $9.1 million recognized through other comprehensive income.
Net Income from Continuing Operations
Net income from continuing operations in 2015 was $64.6 million, a decrease from the prior year figure of
$68.4 million. This decrease was due to the nature of deferred income tax assets recognized during the
year, as noted above, largely offset by increased operating income and a $6.5 million decrease in severance
and related expenses in 2015.
Discontinued Operations
Operations on the site of the former Squamish pulp mill were discontinued in 2006. Since that date, the
Company has expensed costs for supervision, security, property taxes and environmental remediation. On
February 6, 2015, the Company announced the completion of the sale of the former pulp mill site and related
assets for cash proceeds of $21.8 million, which were used to pay down outstanding debt and to further its
strategic capital programs.
In 2015, the Company reported net income from discontinued operations of $9.1 million (2014: nil). This
income was the result of gains on the disposal of property, plant and equipment; a gain on reversal of an
associated liability; and revenue from the sale of hydro-electric power generated at the site partly offset by
site operating costs incurred up to the sale completion date.
As economic and other circumstances allow, Western will continue to pursue opportunities to sell non-core
assets.
9
Financial Position and Liquidity
(millions of dollars except where noted)
Cash provided by operating activities, excluding non-cash working capital
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Cash used in capital logging roads
Cash used to acquire property, plant and equipment
Total liquidity (1)
Net debt (2)
Financial ratios:
Current assets to current liabilities
Net debt to capitalization (3)
Year ended
December 31,
2015
2014
$
105.5
99.1
(62.0)
(50.4)
(13.6)
(48.5)
$
94.4
87.4
(49.5)
(41.4)
(13.5)
(36.4)
December 31,
2015
December 31,
2014
$
177.9
53.8
$
134.4
77.9
2.30
0.11
2.29
0.16
(1) Total liquidity comprises cash and cash equivalents, and available credit under the Company’s revolving credit facility and revolving term loan.
(2) Net debt is defined as the sum of long-term debt, current portion of long-term debt, revolving credit facility, less cash and cash equivalents.
(3) Capitalization comprises net debt and shareholders equity.
Cash provided by operating activities in 2015 amounted to $99.1 million compared to $87.4 million provided
in 2014, with the increase primarily attributable to adjusted EBITDA generated from operations.
Cash of $62.0 million was used in investing activities in 2015, compared to $49.5 million invested in 2014.
The increase was largely driven by an $11.7 million increase in our strategic capital expenditures in 2015
compared to 2014, as we continue to successfully implement projects under our strategic capital program.
The strategic capital program is discussed in more detail in the “Strategy and Outlook” section.
Financing activities in 2015 used cash of $50.4 million compared to $41.4 million in 2014. Cash used in
financing activities increased in 2015 as strong cash flows from operations enabled net repayments of debt
that were $7.6 million higher than in 2014. This was partially offset by a decrease in interest paid, from $4.0
million in 2014 to $2.9 million in 2015, as we reduced our average outstanding debt over 2015 as compared
to 2014.
At December 31, 2015, we had total liquidity of $177.9 million, compared to $134.4 million at the end of
2014. The increase in liquidity was due to cash generated by operations, proceeds from the sale of non-
core assets, and an increased borrowing base under the revolving credit facility. Liquidity is comprised of
cash and cash equivalents of $9.4 million, unused availability under the secured revolving credit facility of
$122.5 million, and $46.0 million available under the revolving term loan facility. Based on our current
forecasts, we expect sufficient liquidity will be available to meet our obligations in 2016.
10
Fourth Quarter Results
(millions of dollars except per share amount)
Revenue
Adjusted EBITDA
Adjusted EBITDA margin
Operating income prior to restructuring items and other income
Net income from continuing operations
Net income for the period
Basic earnings per share (in dollars)
Diluted earnings per share (in dollars)
Basic and diluted earnings per share (in dollars) - discontinued operations
Three months ended
December 31,
2015
2014
$
265.6
29.6
11.1%
20.5
9.9
9.9
0.03
$
$
0.02
$
-
$
232.6
14.8
6.4%
11.5
12.9
12.9
0.03
$
$
0.03
$
-
In the fourth quarter of 2015 we generated adjusted EBITDA of $29.6 million, an increase of 100% from
adjusted EBITDA of $14.8 million in the same quarter last year. Growing demand for specialty lumber
products and increased WRC lumber production drove an improved sales mix and overcame the impact of
historical fourth quarter seasonal declines in shipments. In addition, the benefit of a weak CAD drove a
significant increase in our fourth quarter 2015 average price realizations.
Lumber revenue in the fourth quarter of 2015 was $194.4 million, a 17% increase from the same quarter of
2014. Our revenue growth was led by a 12% increase in average lumber price realizations and a 5%
increase in shipments as compared to the fourth quarter of 2014. Increased price realizations were the
result of an improved sales mix and an 18% decline in the average CAD relative to the USD, as compared
to the fourth quarter of 2014. A focus on specialty lumber production drove shipments of those products to
54% of total sales volumes, as compared to 48% in the fourth quarter of 2014. Increased specialty lumber
sales were primarily attributable to increased Japan and WRC lumber shipments of 17% and 18%,
respectively, as compared to the same quarter of 2014.
Log revenue was $53.6 million, an increase of $2.4 million from the same period in 2014. The benefit of
strong domestic sawlog demand, proportionately greater specialty logs sales, and a weaker CAD drove
increased average log price realizations in the quarter. These gains more than offset a 6% reduction in
sales volumes quarter over quarter, as a result of internalizing certain export logs for sawmill consumption
and a decline in pulp log shipments. The pulp log market continues to be impacted by pulp mill curtailments
on the BC coast.
By-products revenue was $17.6 million in the fourth quarter of 2015, as compared to $14.6 million in the
same period in 2014. Increased by-products revenue was primarily due to a significant increase in lumber
production in the fourth quarter of 2015 as compared to the same period last year.
Fourth quarter lumber production was 234 million board feet, an increase of 16% from the same period of
2014. We achieved significant productivity increases from our Duke Point and Saltair sawmills as we began
to realize the benefits of recently completed strategic capital projects and ongoing ramp-up in operations.
Custom cut production increased to address incremental demand for specialty lumber, and our Ladysmith
sawmill contributed to increased volumes as it was temporarily curtailed in the comparative period.
Strong year-to-date performance in timberlands harvest led to certain operations completing their harvest
programs earlier in the fourth quarter than in prior years. As a result, our timberlands harvest volume for the
fourth quarter was 1.1 million cubic metres, a decrease of 16% from the same quarter of 2014. We sustained
the supply of logs to our sawmills through a well-positioned fourth quarter opening log inventory and by
purchasing an additional 20,000 cubic metres of sawlogs as compared to the fourth quarter of 2014. We
also increased the consumption of small WRC sawlogs in our mills. Average log cost increased by 3% in
comparison to 2014 fourth quarter, driven primarily by stumpage costs and reduced harvest productivity due
to the timing of harvest program completion.
Fourth quarter freight costs were $21.6 million in 2015, an increase of 11% compared to the same period of
2014. Increased freight costs were primarily the result of a weaker CAD on USD-denominated freight, and
a 5% increase in lumber shipments as compared to the same period of last year. Countering these factors
11
were an 11% decline in export log sales and the impact of a greater proportion of lumber shipments destined
for North America, reducing vessel transportation costs.
Selling and administration expenses in the fourth quarter of 2015 were $7.8 million, an increase of $1.8
million from the fourth quarter of 2014. This increase was primarily attributable to greater performance
related compensation costs and higher non-recurring legal costs.
Fourth quarter net income of $9.9 million in 2015 decreased from $12.9 million reported for the same quarter
of 2014. The decrease was largely the result of the recognition of $7.8 million in deferred tax expense.
Other expenses were $0.9 million in the fourth quarter of 2015 compared to other income of $0.6 million in
the same quarter of 2014. Other expenses in the fourth quarter of 2015 included asset impairments.
Fourth quarter finance costs were $1.1 million in 2015, $0.1 million lower than the same quarter of 2014.
This decrease was primarily the result of lower interest expense as average outstanding debt in the fourth
quarter was reduced from $75.6 million in 2014 to $67.5 million in 2015.
Strategy and Outlook
In 2015 we continued to implement our strategy of optimizing our operations and investing in our mills to
improve margins and grow our business through increased production.
Key operational priorities in support of our strategy include:
1)
Implementing strategic capital to position our mills as the most competitive in the region;
2)
Increasing log availability through accessing additional log volume on the open market to increase
lumber production; and,
3)
Improving productivity through increased equipment utilization.
Market Outlook
We remain confident in our view that over the mid to long term the recovery in US new home construction
combined with growing demand from China and reduced lumber supply from the BC interior will deliver an
improved pricing environment for commodity lumber products. In the near-term we expect commodity
lumber pricing will continue to be volatile until US new home construction returns to more normalized levels.
In contrast to the supply driven characteristics that persist in the commodity lumber market, we expect that
continued strength in the North American repair and renovation segment will support demand and higher
pricing for our specialty products. We will continue to utilize our flexible operating platform to target our
lumber production to the products and markets that offer the highest margin.
We anticipate demand for our WRC products to grow through the first half of 2016, as distributors position
their inventories for the spring and summer building seasons. Improved demand and limited supply due to
lower harvest levels on the coast of BC should provide a favourable pricing environment for our products.
Mill realizations will be supported by the weak CAD. We expect demand for our Niche products in North
America to continue to be supported by the strong repair and renovation segment. Niche production will be
moderately impacted by three weeks of downtime at our Duke Point sawmill for a capital project in the first
quarter of 2016.
Recent improvement in lumber demand in Japan is expected to continue in the first half of 2016 supported
by new home construction. Pricing is expected to remain competitive as global suppliers compete for market
share. We anticipate shipments to Japan to be similar to last year, while pricing should benefit from a weaker
CAD.
Through the fourth quarter of 2015, lumber demand in China improved and our shipment volumes and pricing
increased from the late third quarter lows. We anticipate demand for lumber in China will continue to improve
through the first quarter of 2016, supported by low inventory levels and what appears to be an improving
housing market. Our ability to produce multiple sizes to service various regional markets will assist us in
improving our pricing. Our commodity business will also benefit from improved demand from North America
as we enter the spring building season.
Our saw log markets are expected to remain firm in the first half of 2016. Reduced supply due to lower
harvest levels on the coast of BC will support our domestic pricing while the weaker CAD will support price
12
realizations from competitive Asian export log markets. We expect log shipments will be lower in the first
quarter as we direct more logs to internal consumption. The pulp log market is expected to remain
depressed as reduced consumption levels from coastal BC pulp mills will keep the market oversupplied.
Strategic Capital Program Update
We continue to implement our strategic capital program, which is designed to position Western as the only
company on the coast of BC capable of consuming the complete profile of the coastal forest and
competitively manufacturing a diverse product mix. Our strategic capital program is focused on the
installation of proven technology that will deliver top quartile performance and improve our ability to
manufacture the products that yield the best margin. In addition to investments in our manufacturing assets,
we will also invest capital into strategic, high-return projects involving our information systems, timberland
assets and forest inventories.
To date, we have implemented or announced $94 million dollars of manufacturing investments, most of
which are in the commissioning or installation phase. In the fourth quarter of 2015, we commissioned our
$40 million Saltair sawmill upgrade; continued the modernization of our Duke Point sawmill and planer; and
installed a new timber deck at our Chemainus sawmill. The Ladysmith sawmill conversion to a single line
began late in the fourth quarter and was completed early in 2016. In total, our fourth quarter strategic capital
investment was $10.9 million.
In the first half of 2016, we will continue the commissioning of our recent investments at Saltair, Chemainus,
Ladysmith and at the Duke Point planer. We will take downtime at the Duke Point sawmill as we continue
Phase III of our capital project at the mill. During the scheduled downtime we will install a new stacking and
packaging line as well as optimization equipment on both head rigs.
Also in the first quarter of 2016, we will begin a newly approved $3 million capital project that will create a
more robust and detailed forest inventory, bringing our total to $97 million implemented or announced under
our strategic capital program. This project involves the use of LiDAR technology and will allow us to
streamline our engineering and planning process and ultimately reduce delivered log cost. We expect the
return on this project to be in excess of 30%.
Non-Core Assets Update
On February 6, 2015, Western announced the completion of the sale of its former pulp mill site and related
assets in Squamish, BC at a purchase price of $21.8 million. The Company used the proceeds of sale to
pay down outstanding debt and to further its strategic capital programs. We will continue to pursue the sale
of additional non-core assets as appropriate.
Summary of Contractual Obligations
The following table summarizes our contractual obligations at December 31, 2015 and our payments due
for each of the next five years and thereafter, including estimated interest payments:
(millions of Canadian dollars)
Accounts payable and
accrued liabilities
Long-term debt
Operating leases
Silviculture provision
Defined benefit pension
plan funding obligation
Total
2016
2017
2018
2019
2020
Thereafter
$
97.7
71.2
10.9
31.7
$
97.7
2.0
2.5
11.2
-
$
2.0
1.8
5.5
-
$
2.1
1.7
3.4
-
$
65.1
1.6
2.3
-
$
-
0.9
1.7
-
$
-
2.4
7.6
22.5
234.0
$
2.3
115.7
$
2.2
11.5
$
2.2
9.4
$
1.9
70.9
$
1.9
4.5
$
12.0
22.0
$
13
Critical Accounting Estimates
Silviculture Provision
Under BC law, we are responsible for reforesting areas that we log. These obligations are referred to as
silviculture liabilities. We accrue our silviculture liabilities based on estimates of future costs at the time the
timber is harvested. The estimate of future silviculture costs is based on a detailed analysis for all areas
that have been logged and includes estimates for the extent of planting seedlings versus natural
regeneration, the cost of planting including the cost of seedlings, the extent and cost of site preparation,
brushing, weeding, thinning and replanting and the cost of conducting silviculture surveys. Our registered
professional foresters conduct the analysis that is used to estimate these costs. However, these costs are
difficult to estimate and can be affected by weather patterns, forest fires and wildlife issues that could impact
the actual future costs incurred and thus result in material adjustments.
Valuation of Inventory
We value our log and lumber inventories at the lower of cost and net realizable value. We estimate net
realizable value by reviewing current market prices for the specific inventory items based on recent sales
prices and current sales orders. If the net realizable value is less than the cost amount, we will record a
write-down. The determination of net realizable value at a point in time is generally both objective and
verifiable. However, changes in product prices can occur suddenly, which could result in a material write-
down in inventories in future periods.
Valuation of Accounts Receivable
We record an allowance for the collection of doubtful accounts receivable based on our best estimate of
potentially uncollectible amounts. The best estimate considers past experience with our customer base and
a review of current economic conditions and specific customer issues. The Company’s general practice is
to insure substantially all North American lumber receivables for 90% of value with the Export Development
Corporation or Coface Canada, while all export sales are sold on either a cash basis or with secured
instruments, which reduces the Company’s exposure to bad debts.
Pension and Other Post Retirement Benefits
Western has various defined benefit and defined contribution plans, and a group RRSP that provide
retirement benefits to most of its salaried employees. A group RRSP is provided to certain hourly employees
not covered by forest industry union plans. The Company also provides other post-retirement benefits and
pension bridging benefits to eligible retired employees. While our defined benefit plans were closed to new
entrants effective June 30, 2006 and no further years of service accrue under the plans effective December
31, 2010, we retain independent actuarial consultants to perform actuarial valuations of plan obligations and
asset values, and advise on the amounts to be recorded in the financial statements. Actuarial valuations
include certain assumptions that directly affect the fair value of the assets and obligations and expenses
recorded in the financial statements. These assumptions include the discount rate used to determine the
net present value of obligations, the return on plan assets used to estimate the increase in the plan assets
available to fund obligations, and the increase in future compensation amounts and medical and health care
costs used to estimate obligations. Actual experience can vary materially from the estimates and impact the
cost of our pension and post-retirement medical and health plans and future cash flow requirements.
Environmental Provisions
We disclose environmental obligations when known and accrue costs associated with the obligations when
they are known and can be reasonably estimated. The Company owns a number of manufacturing sites
that have been in existence for significant periods of time and, as a result, we may have unknown
environmental obligations. However, until the sites are decommissioned and the plant and equipment are
removed, a complete environmental review cannot be undertaken.
14
Contingencies
Provisions for liabilities relating to legal actions and claims require judgments using management’s best
estimates regarding projected outcomes and the range of loss, based on such factors as historical
experience and recommendations of legal counsel. Actual results may vary from estimates and the
differences are recorded when known.
Valuation of Biological Assets
The Company values its biological assets at fair value less costs to sell. An annual valuation is performed
by an independent third party based on recent comparatives of standing timber sales, direct and indirect
costs of sustainable forest management, net present value of future cash flows for standing timber and log
pricing assumptions. Significant assumptions are used in the preparation of the valuation and actual results
may vary materially from estimates.
Impairments
Assets that are subject to amortization are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Impairment losses are recognized
in net income for the period for the amount by which the asset’s carrying amount exceeds its recoverable
amount. An impairment analysis requires the use of significant assumptions, including management and
independent third party input.
Deferred Income Taxes
The recognition of deferred income tax assets requires an assessment of the availability of future taxable
profit against which carry forward tax losses can be used. We estimate future income based on forecasts
which includes a number of variables that can be unpredictable and cyclical in nature. Changes in product
prices, in particular, can occur quite suddenly.
New accounting policies
Changes in accounting policies
Western has adopted the following new standards and amendments to standards, including any
consequential amendments to other standards with a date of initial application of January 1, 2015:
•
IFRS 8, Operating Segments
This standard was amended to require disclosure of judgments made by management in
aggregating segments, and a reconciliation of segment assets to the entity’s assets when segment
assets are reported. The application of this revised standard has not materially impacted the
financial statements.
•
IAS 24, Related Party Transactions
This standard was amended to revise the definition of “related party” to include an entity that
provides key management personnel services to the reporting entity or its parent, and to clarify
related disclosure requirements. The application of this revised standard has not materially
impacted the financial statements.
New standards and interpretations not yet adopted
The following amended IFRS standards are not yet effective for the year ended December 31, 2015 and
have not been applied in preparing these consolidated financial statements:
•
IFRS 9, Financial Instruments (“IFRS 9”)
IFRS 9 is effective for years commencing on or after January 1, 2018, and will replace IAS 39,
Financial Instruments: Recognition and Measurement. Under IFRS 9, financial assets will be
classified and measured based on the business model in which they are held and the characteristics
of the associated contractual cash flows. IFRS 9 also includes a new general hedge accounting
standard which will better align hedge accounting with risk management. The Company intends to
15
adopt IFRS 9 in it consolidated financial statements for the year commencing January 1, 2018; the
extent of the impact of adoption of the amendments has not yet been determined.
•
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
IFRS 15 is effective for years commencing on or after January 1, 2018, and will replace IAS 18,
Revenue, IAS 11, Construction Contracts, and a number of revenue related interpretations. IFRS
15 provides a single, principles based five-step model to be applied to all contracts with customers,
except insurance contracts, financial instruments, and lease contracts, which fall in the scope of
other IFRSs. The Company intends to adopt IFRS 15 in its consolidated financial statements for
the year commencing January 1, 2018. The extent of the impact of adoption of the standard has
not yet been determined.
•
IFRS 16, Leases (“IFRS 16”)
IFRS 16 is effective for years commencing on or after January 1, 2019, and will replace IAS 17,
Leases (“IAS 17”). IFRS 16 provides a single lessee accounting model, requiring the recognition of
assets and liabilities for all leases, unless the lease term is 12 months or less or the underlying asset
has a low value, while lessor accounting remains largely unchanged from IAS 17 and the distinction
between operating and finance leases is retained. The Company intends to adopt IFRS 16 in its
consolidated financial statements for the year commencing January 1, 2019. The extent of the
impact of adoption of the standard has not yet been determined.
•
•
IAS 1, Presentation of Financial Statements (“IAS 1”)
Amendments to IAS 1 are effective for years commencing on or after January 1, 2016. IAS 1 is
amended to improve presentation and disclosure in financial reports. The Company intends to adopt
these amendments in its financial statements for the year commencing January 1, 2016. The
Company does not expect the amendments to have a material impact on the financial statements.
IAS 16, Property, Plant and Equipment (“IAS 16”), and IAS 38, Intangible Assets (“IAS 38”)
Amendments to IAS 16 and IAS 38 are effective for years commencing on or after January 1, 2016.
IAS 16 is amended to explicitly state that revenue-based methods of depreciation cannot be used
for property, plant and equipment. IAS 38 is amended to introduce a rebuttable presumption that
the use of revenue-based amortization methods for intangible assets is inappropriate. The
Company intends to adopt the amendments to IAS 16 and IAS 38 in its financial statements for the
year commencing on January 1, 2016. The Company does not expect the amendments to have a
material impact on the financial statements.
• Annual Improvements to IFRS, (2012-2014) cycle
Amendments were made to clarify the following in their respective standards:
•
•
•
•
IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations;
IFRS 7 – Financial Instruments: Disclosures;
IAS 19 – Employee Benefits; and
IAS 34 – Interim Financial Reporting
The Company intends to adopt these amendments in its financial statements for the year
commencing January 1, 2016. The Company does not expect the amendments to have a material
impact on the financial statements.
Financial Instruments
Western has a program in place to reduce the impact of volatile foreign exchange rates on its net income.
The Company utilizes derivative financial instruments in the normal course of its operations as a means to
manage its foreign exchange risk. Therefore, Western may purchase foreign exchange forward contracts
or similar instruments to hedge anticipated sales to customers in the US and Japan. The Company does
not utilize derivative financial instruments for trading or speculative purposes. Western will consider whether
to apply hedge accounting on a case by case basis and if the instrument is not designated as a hedge, the
16
instrument is adjusted to fair value and marked to market each accounting period, with changes recorded in
net income
During 2015, the Company entered into foreign exchange futures contracts to sell forward USD and
Japanese Yen (“JPY”) in order to partially mitigate its foreign currency risk. At December 31, 2015, the
Company had forward contracts in place to sell USD 20.0 million and JPY 775.0 million (2014: USD 32.0
million; JPY 950 million). A net loss of $7.1 million was recognized on contracts which matured in the year
(2014: $1.5 million), which is included in sales in the consolidated statement of comprehensive income.
Other financial instruments, which for Western consist primarily of debt instruments, are discussed
elsewhere in this discussion and analysis.
Off-Balance Sheet Arrangements
Other than operating leases for vehicles, equipment and machinery, the Company does not have any off-
balance sheet arrangements as at December 31, 2015.
Related Party Transactions
During 2014, the Company had certain arrangements with entities related to Brookfield Asset Management
Ltd. to acquire and sell logs, lease certain facilities, provide access to roads and other areas, provide
financing, and acquire services including insurance, all in the normal course and at market rates or at cost.
Concurrent with the sale of all remaining Common Shares in the Company by Brookfield Special Situations
Management Limited through a secondary offering completed on September 10, 2014, Brookfield Asset
Management Ltd. is no longer a related party to the Company.
The following table summarizes purchases made and revenues received relating to these transactions:
Year ended December 31,
2015
2014
Costs incurred for:
Log purchases
Other
Income received for:
Log sales
-
$
-
$
-
$
$
9.6
9.2
18.8
$
-
$
-
$
$
12.4
12.4
Key personnel of the Company include the executive management team and members of the Board of
Directors. The compensation paid or payable to key personnel is shown below:
Year ended December 31,
2014
2015
$
$
6.5
0.2
2.1
8.8
6.5
0.3
2.2
9.0
$
$
Salaries and directors' fees
Post-employment benefits
Share-based payments
17
Risks and Uncertainties
The following risks and uncertainties may have a material adverse effect on our operations or our financial
condition:
Variable Operating Performance, Product Pricing and Demand Levels
A key factor affecting Western’s operating and financial performance is the price received for lumber, logs
and other products. Prices for these products are highly cyclical and have fluctuated significantly in the past
and may fluctuate significantly in the future. The markets for our products are also highly cyclical and are
characterized by periods of excess product supply due to many factors, including:
• Additions/curtailments to industry capacity and production;
• Periods of insufficient demand due to weak general economic activity or other causes including
weather factors;
• Customers experiencing reduced access to credit; and
•
Inventory de-stocking by customers.
Product demand is influenced to a significant degree by economic activity at the global level. Additionally,
although costs may increase, customers may not accept related price increases for those products. We are
not able to predict with certainty market conditions and prices for our products. Western’s results of
operations depend upon the prices we receive for lumber, logs and chips, and deterioration in prices of, or
demand for, these products could have a material adverse effect on our financial condition or results of
operations. We cannot provide any assurance or prediction as to the timing and extent of any price changes.
On an annualized basis and based on current operating metrics, we estimate that operating earnings would
increase or decrease by approximately $9 million for each incremental price increase or decrease,
respectively, of $10 per thousand board feet of lumber.
Western’s financial performance is also dependent on the rate at which production capacity is utilized. In
times of challenging conditions in any of our major markets the Company maintains inventory control by
aligning log supply and lumber production with anticipated sales volumes. When capacity utilization is
reduced in response to weak demand for products, the cost per unit of production may increase and
profitability decrease.
From time to time and in accordance with market influences, the Company will reduce production with
temporary logging and/or sawmilling curtailments. In extreme cases, such curtailments may become
permanent closures. When Western undertakes significant market-related curtailments of sawmills, the
volume of chips produced is reduced and accordingly there is greater risk that the Company may not meet
minimum contractual obligations under long-term chip supply agreements without incurring additional cost.
International Business and Risks of Exchange Rate Fluctuations
Western’s products are sold in international markets. Economic conditions in those markets, the strength of
the housing markets in the US and Japan, the rate of development in China, fluctuations in foreign exchange
rates and international sensitivity to interest rates, can all have a significant effect on our financial condition
and results of operations. In general, our sales are subject to the risks of international business, including:
•
•
•
•
fluctuations in foreign currencies;
changes in the economic strength of the countries in which we conduct business;
trade disputes;
changes in regulatory requirements;
tariffs and other barriers;
•
• quotas, duties, taxes and other charges or restrictions upon exports or imports;
•
•
transportation costs and the availability of carriers of any kind including those by land or sea; and
strikes or labour disputes in the transportation industry or related dock or container service
industries.
18
Depending on product mix, destination and exchange rates, between 40% and 50% of our total product
sales are denominated in USD and between 5% and 15% in JPY, while most operating costs and expenses
are incurred in CAD, with small portions in USD and JPY. The Company’s functional currency is the CAD
and financial results are reported in CAD. Significant variations in relative currency values, particularly
significant changes in the value of the CAD relative to the USD, have had, and in the future could have, a
material impact on our operating earnings and cash flows. We estimate that an increase or decrease of 1%
in the value of the CAD compared to the USD and JPY would decrease or increase annual operating
earnings by approximately $4.3 million, and $0.7 million, respectively.
The Softwood Lumber Agreement with the US expired October 12, 2015, eliminating export tax measures
applicable under the agreement subsequent to this date. A standstill provision within the Softwood Lumber
Agreement provides that no action may be taken with respect to the imposition of softwood lumber duties
from Canada for the twelve-month period following its expiry. We are unable to predict whether the
agreement will be renewed or in what form a renewal may take place, should it occur.
Employees and Labour Relations
Hourly paid employees at our manufacturing facilities, timber harvesting operations and a small group of
clerical employees are unionized. The majority of the unionized employees are represented by the United
Steel Workers (“USW”), which holds three collective agreements with the Company. Approximately 1,600
Western employees represented by the USW are covered by a five-year collective agreement, expiring June
15, 2019. The agreement for South Island Remanufacturing (18 employees) expires on May 22, 2017. An
agreement with the office clerical employees (3 employees) expires on December 31, 2016. The Pulp,
Paper & Woodworkers of Canada (“PPWC”) represents the remaining unionized employees. The PPWC
collective agreement for the Ladysmith Sawmill (67 employees), expires on December 31, 2019. The
collective agreement for the Value-Added Remanufacturing Operation (71 employees) expires on October
14, 2016. The Company also has one employee represented by the Canadian Merchant Service Guild.
This collective agreement expired on September 30, 2015 and is under negotiation.
Should the Company be unable to negotiate an acceptable contract after any of these collective agreements
expire with any of the unions, a strike or lockout could occur. A strike or lockout could involve significant
disruption of operations and/or an adverse material impact on our financial condition. Furthermore, a
negotiated settlement could result in unplanned increases in wages or benefits payable to unionized
employees. In addition, the Company relies on certain third parties, such as logging contractors, stevedores,
trucking companies and railways, whose workforces are unionized, to provide the Company with services
necessary to operate the business. If those workers/employers engage in a strike or lockout, our operations
could be disrupted.
Long-Term Competition
The markets for our products are highly competitive on a domestic and international level, with a large
number of major companies competing in each market, some of which have substantially greater financial
resources than Western. We also compete indirectly with firms that manufacture substitutes for solid wood
products, including non-wood and engineered wood products. While the principal basis for competition is
price, we also compete to a lesser extent on the basis of quality and customer service. In addition, market
acceptance of the environmental sustainability of our products as compared with substitutes could be a
challenge in the future. Changes in the level of competition, industry capacity and the global economy have
had, and are expected to continue to have, a significant impact on the selling prices of the Company’s
products and the overall profitability of the Company. Our competitive position will be influenced by factors
including the availability, quality and cost of fibre, energy and labour, and plant efficiencies and productivity
in relation to our competitors. Our competitive position could be affected by fluctuations in the value of the
CAD relative to the USD and/or the JPY, and by changes in the treatment of softwood lumber shipments to
the US subsequent to the expiry of the SLA.
Forest Resource Risk and Natural Catastrophes
Our timber tenures are subject to the risks associated with standing forests, in particular, forest fires, wind
storms, insect infestations and disease. Procedures and controls are in place to try and mitigate such risk
through prevention and early detection. Most of the timber that we harvest comes from Crown tenures and
insurance coverage is maintained only for loss of logs following harvesting due to fire and other occurrences.
However, this coverage does not extend to standing timber, and there is no assurance that this coverage
19
would be adequate to provide protection against all eventualities, including natural catastrophes. Western
has entered into a cost-sharing agreement with the Crown for our private timberlands to reduce individual
incident costs of mobilizing helicopters and aerial water tankers in the event of a fire on those lands.
In addition, our operations may be adversely affected by severe weather including wind, snow and rain that
may result in our operations being unable to harvest or transport logs to our manufacturing facilities for
extended periods of time. Although we anticipate and factor in a certain period of down-time due to weather,
extended periods of severe or unusual weather may adversely impact our financial results due to higher
costs and missed sales opportunities arising from fibre shortages or the deterioration of logs remaining on
the ground or in the water for extended periods of time.
Other than the sales office in Japan, all of our business operations are located on the BC coast, which is
geologically active and considered to be at risk from earthquakes.
Climate change over time is predicted to lead to changes in the frequency of storm events as well as their
severity. We also expect to see changes in the occurrence of wildfires and forest pest outbreaks. Long-
term climatic models are predicting that the optimum ranges of many species, including those of our major
tree species, will shift over time. We are unable to predict the impact of all of these factors on our tenures
or on forest practices.
While the Company maintains insurance coverage to the extent deemed prudent by us, we cannot guarantee
that all potential insurable risks have been foreseen or that adequate coverage is maintained against known
risks.
Impact of Mountain Pine Beetle Infestation
The north-central interior forests of BC and western parts of Alberta have been, and continue to be, seriously
damaged by North America’s largest recorded mountain pine beetle infestation. Western does not operate
in the affected area and lodgepole pine, the species most at risk from the infestation, is not a key source of
timber in the coastal forests. This natural disaster is causing widespread mortality of lodgepole pine. There
is growing evidence that, as the dead trees decay, they become more difficult and costly to manufacture into
lumber and that the quality of the residual wood chips may diminish. There may also be access issues over
time as developing second growth forests grow to a size that precludes efficient entry into remote pine beetle
damaged stands.
The mountain pine beetle has crossed into Alberta, and timber harvesting of lodgepole and jackpine in
Alberta may see an increase in Allowable Annual Cut (“AAC”) to promote salvage before decay, potentially
adding to downward price pressures as the lumber supply may increase. The Company is unable to predict
when or if the mountain pine beetle infestation will be halted or its impact on future lumber, chip and log
prices.
Pulp and Paper Market Variability
The selling price in CAD of our residual wood chips is tied by formula to published indices that reflect the
USD selling price of NBSK pulp. Fluctuations in pulp prices and foreign currencies will accordingly impact
the selling price of our residual wood chips. The price and demand for the pulp logs and other logs sold to
pulp and paper companies is also dependent on the market conditions for pulp and paper. If there is a
contraction in the coastal pulp and paper industry, we may need to find alternative customers for the pulp
logs and residual chips from our sawmills.
Dependency on Fibre Obtained from Government Timber Tenures
Currently, substantially all of the timberlands in which we operate are owned by the Province and are
currently administered by the Ministry of Forests, Lands and Natural Resource Operations (the “MFLNRO”).
The Forest Act (British Columbia) (the “Forest Act”) empowers the MFLNRO to grant timber tenures,
including Tree Farm Licences (“TFLs”), Forest Licences (“FLs”) and Timber Licences (“TLs”), to producers,
although no new TLs can be issued and the availability of extensions to expiring TLs is not assured. The
Provincial Chief Forester must conduct a review of the AAC for each Timber Supply Area and each TFL in
the Province on a periodic basis, at least once every ten years. This review is then used to determine the
AAC for licences issued by the Province under the Forest Act. Many factors affect the AAC such as timber
inventory, the amount of operable forest land, growth estimates of young forests, regulation changes and
environmental and social changes. Such assessments have in the past resulted and may in the future result
20
in reductions or increases to the AAC attributable to licences held by BC forest companies (without
compensation), including the licences that we hold. In addition, our AAC can be temporarily reduced (without
compensation for the first four years) in areas where logging has been suspended under Part 13 of the
Forest Act pending further consideration in land use planning. Land use planning, including critical habitat
designations as well as new harvesting regulations, can constrain access to timber and new parks can
permanently remove land from the timber harvesting land base. There can be no assurance that the
amounts of such future reductions on our licences, if any, will not be material or the amounts of
compensation, if any, for such reductions will be fair and adequate.
Forest Policy Changes in British Columbia
There have been significant legislative reforms in the BC Forest Industry over the last 40 years. One of the
more significant examples of this was seen in 2003 when the Province took back approximately 20% of the
AAC from major license holders, including Western, and provided monetary compensation in return. There
can be no assurance that the Province will not implement further policy changes, or that such changes will
not have a material adverse effect on our operations or our financial position.
First Nations Land Claims
First Nations groups have made claims of rights and title to substantial portions of land in British Columbia,
including areas where our timber tenures and operations are situated, creating uncertainty as to the status
of competing property rights and of legislation and Crown decisions that adversely affect such asserted
rights and title. The Supreme Court of Canada has held that aboriginal groups may have a spectrum of
constitutionally recognized and affirmed aboriginal rights and title in lands that have been traditionally used
or occupied by their ancestors; however, such rights or title are not absolute and may be infringed by
government in furtherance of a valid legislative objective, including forestry, subject to meeting a justification
test. The effect on any particular lands will not be determinable until the nature of historical use, occupancy
and rights in any particular piece of property have been clarified. The Supreme Court of Canada has also
held that even before claims of rights and title are proven, the Crown has a legal duty to consult with First
Nations, which can become a duty to seek possible accommodations, when the Crown has knowledge, real
or constructive, of the potential existence of an aboriginal right or title and contemplates conduct that might
adversely impact it. During the period before asserted claims are proven, the Crown is required to consult
in good faith with the intention of substantially addressing First Nation concerns, but First Nations agreement
is not required in these consultations.
First Nations are seeking compensation from governments (and in some instances from forest tenure
holders) with respect to these claims, and the effect of these claims on timber tenure rights, including our
timber tenures, cannot be estimated at this time. The Federal and Provincial Governments have been
seeking to negotiate treaty settlements with aboriginal groups in British Columbia in order to resolve these
claims.
On April 1, 2011, the first modern treaty affecting the Company’s tenures was brought into force. The
Maa’nulth Treaty extinguished the Company’s tenure rights on Maa’nulth Treaty Settlement lands within TFL
44 and permanently reduced the tenure’s AAC by 95,200 cubic metres. A treaty measure which created a
new Protected Area inside of TFL 44 permanently reduced the AAC by another 8,800 cubic metres. The
Company is in discussions with the Province on the magnitude of the treaty impacts on AAC, improvements,
soft cost investments and downstream business. As these discussions are ongoing, any settlement or the
amounts of compensation that we would receive for this or future reductions of our tenures as a result of this
process cannot be estimated at this time and none has been recorded as a receivable. Other treaty
processes involving the ‘Nam’gis, Ditidaht, Snuneymuxw, Heiltsuk, Hupacasath, Tlowitsis, K’omox and
Wuikinuxv First Nations are also well advanced and may lead to agreements impacting Western in 2015. It
is expected that through these and other treaty-related processes the Provincial Government will want to
remove areas out of the Company’s various forest tenures.
In June 2014, the Supreme Court of Canada (the “Court”) released its decision on the aboriginal title claim
by the Tsilqot’in First Nation of British Columbia, regarding land outside their traditional reserve area. The
Court recognized Tsilqot’in title to the area in dispute, including rights to decide how the land will be used,
occupancy, and economic benefits. The court ruling held that while the provincial government had the
constitutional authority to regulate forest activity on aboriginal title lands, it had not adequately consulted
with the Tsilqot’in. While the decision does not directly impact Western’s business as we do not have tenure
21
in this dispute area, we do operate on Crown tenures elsewhere that are subject to claims of aboriginal title.
The potential impact on Western’s tenure holdings is not ascertainable at this time.
Current Provincial Government policy requires that forest management and operating plans take into
account and not unreasonably infringe on aboriginal rights and title, proven or unproven, and provide for
consultation with First Nations. This policy is reflected in the terms of our timber tenures, which provide that
the MFLNRO may vary or refuse to issue cutting permits in respect of a timber tenure if it is determined by
a court that the forestry operation would unreasonably interfere with aboriginal rights or title. First Nations
have, at times, sought to restrict the Provincial Government from granting or replacing forest tenures and
other operating authorizations or from approving forest management plans on Crown lands without full
consultation and accommodation or their consent if these decisions could affect lands claimed by them.
There can be no assurance that denial of required approvals for, or changes to the terms of our timber
tenures, other operating authorizations or forest management plans as a consequence of such consultation
or action will not have an adverse effect on our financial condition or results of operations.
An unfavourable result in any of the First Nations litigation in which the Company is a party or which involves
assets of the Company could have a material adverse effect on our financial condition or results of
operations. See also “Legal Proceedings”.
Stumpage Fees
Stumpage is the fee that the Province charges forest companies for timber harvested from Crown land in
British Columbia. Approximately 95% of the timber we harvest is from Crown land. In response to US
Softwood Lumber dispute, the Provincial Government adopted a more open and competitive market pricing
system for timber from the Coastal region. Since February 29, 2004, stumpage has been set using the
Coast version of the Market Pricing System (“MPS”). MPS uses the winning bids and stand characteristics
of timber sold through British Columbia Timber Sales (“BCTS”) auctions to develop regression equations
that predict the market (i.e. auction) value of Crown timber harvested under long-term tenures. The auction
value is then adjusted to reflect costs that tenure holders incur that BCTS expends on behalf of bidders.
These costs, like forest planning and administration and silviculture, are referred to as ‘Tenure Obligation
Adjustments’. Coastal MPS has been updated every two to three years to reflect recent sale data and costs.
The most recent update occurred on January 1, 2014. Stumpage rates are also adjusted quarterly to reflect
changes in log prices.
There can be no assurance that future changes to the stumpage system or the Province’s administrative
policy will not have a material impact on the stumpage fees payable by us and consequently affect our
financial condition and results of operations.
Long-term Fibre Supply Agreements
The Company has a number of long-term commitments to supply chip fibre, saw logs and pulp logs to third
parties. Certain of these fibre supply agreements have minimum volume requirements. A failure to supply
the minimum volumes may result in additional costs or deferred obligations. In one case the failure to supply
the minimum volume could result in the loss of a TFL, but with a concurrent reduction in the future fibre
supply commitment under that agreement.
Safety
The Company’s safety policy reflects its values and commitment to providing a healthy and safe workplace
for its people, while at the same time ensuring compliance with our regulatory requirements under
WorkSafeBC. Workplace safety laws and regulations change over time and may involve new methodologies
and additional costs necessary to bring the Company into compliance.
22
Environmental Regulation
We are subject to extensive federal and provincial environmental laws and regulations. These laws and
regulations impose stringent standards on our operations and impose liability to remedy problems for which
we are legally responsible regarding, among other things:
• air emissions;
•
• operations or activities affecting watercourses or the natural environment;
land and water discharges;
• operations or activities affecting species at risk;
• use and handling of hazardous materials;
• use, handling, and disposal of waste; and
•
remediation of environmental contamination.
We may incur substantial costs to comply with current or future requirements, to respond to orders or
directions made, to remedy or to compensate others for the cost to remedy problems for which we are legally
responsible or to comply with new environmental laws that may be adopted from time to time. In addition,
we may discover currently unknown environmental problems or conditions affecting our operations or
activities or for which we are otherwise legally responsible. Western has closed certain operations and
although we have engaged specialists to advise us of environmental problems and conditions, normal site
clean-up may identify additional problems or conditions. Any such event could have a material adverse
effect on our financial condition and results of operations.
Western is one of five founding members of the Coast Forest Conservation Initiative (the “CFCI”). CFCI is
a collaborative effort amongst forest companies working in BC's Central and North Coast. Its purpose is to
define and support the development of an ecosystem-based management (“EBM”) as part of 2003 Land and
Resource Management Plan recommendations. In March 2006, interim legal objectives for EBM were
enacted. These objectives were further amended in March 2009 with final implementation deferred for 5
years while the concept, intended to be unique to this region, was fully defined. The CFCI Companies, along
with major environmental groups have delivered a suite of recommendations for consideration by the
Province and the 27 First Nations who live in the region. How final resolution of EBM will impact Western’s
timber supply is not known at this time. Further amendment of legal objectives were ongoing in 2015 and
expected to be completed in early 2016.
Regulatory Risks
Our forestry and sawmill operations are subject to extensive federal, provincial, municipal and other local
laws and regulations, including those governing forestry, exports, taxes, labour standards, occupational
health, safety, waste disposal, building structures/systems, environmental protection and remediation,
protection of endangered and protected species and land use and expropriation. Under certain laws and
regulations, we are also required to obtain permits, licences and other authorizations to conduct our
operations, which permits, licences and authorizations may impose additional conditions that must be
satisfied. Although we budget for expenditures to maintain compliance with such laws and permits, there
can be no assurance that these laws and regulations or government policy will not change in the future in a
manner that could have an adverse effect on our financial condition or results of operations or the manner
in which we operate. Nor can there be any assurance that administrative interpretation of existing laws and
regulation will not change or more stringent enforcement of existing laws will not occur, in response to
changes in the political or social environment in which we operate or otherwise, in a manner that could have
an adverse effect on our financial condition or results of operations or the manner in which we operate.
Log exports from our timber operations are subject to federal and provincial regulations. An export permit
from the Canadian Federal government must be obtained to export any logs harvested in BC and generally
the logs must be surplus to the supply required for domestic manufacturers. Logs from private timberlands
which were granted by the Crown prior to March 12, 1906 are subject to the Federal surplus test and logs
from private land granted after that date are subject to the Provincial surplus test. Logs harvested from
Crown land in BC are subject to the Provincial surplus test. The regulations also restrict the species and
grade permitted for export.
23
Under both the federal and provincial surplus tests, the logs must be advertised for local consumption. Logs
are declared surplus and may be exported if there are no offers on the advertised logs by domestic
manufacturers. In practice, domestic offers on export volume can satisfied with replacement volume to
minimize operational impacts. However, a substantial increase in domestic demand may adversely impact
timber operations as export pricing is generally at a premium to domestic pricing.
In July 2013, the Ehattesaht First Nation filed a petition with the BC Supreme Court against the Province of
British Columbia regarding a decision of the Crown on the amount of un-harvested volume in TFL 19 from
the 2007 to 2011 cut control period, which may subsequently be directly awarded to the Ehattesaht. The
Ehattesaht claim the Crown did not adequately consult them about the decision and that additional volume
must be made available to them based upon their asserted territory, rights, and economic interests. In 2014,
the court ruled in favor of the Ehattesaht requiring further consultation on un-harvested volume but made no
decision on the outcome of that consultation. It is too early to determine what the impacts of this decision
may have on WFP tenures.
In January 2008, the Ditidaht First Nation commenced litigation in the BC Supreme Court against the
Province of British Columbia, Canada, certain other First Nations and two forestry companies, including
Western, seeking amongst other things declarations of aboriginal title and rights in areas of Vancouver Island
that include areas covered by timber tenures held by the Company and declarations that provincial forestry
legislation and the Company's timber tenures are of no force or effect on the claimed aboriginal title lands.
In March 2013, the Ditidaht and BC Government entered an Interim Treaty Agreement (the “ITA”) which
included Ditidaht agreement not to initiate or proceed with litigation against the Crown for land dispositions
and land use authorizations during the term of the ITA. Consequently, unless the ITA is terminated in
accordance with the provisions for termination in the ITA, this litigation will not be pursued further by Ditidaht.
In April 2008, the Kwakiutl First Nation commenced litigation in the BC Supreme Court against the Province
of British Columbia, Western and the federal government seeking, amongst other things, orders to set aside
the Province’s decision to remove Western’s private lands from a TFL and the Province’s approval of the
Company’s Forest Stewardship Plan (“FSP”) on the Crown lands within their area of interest, based on
alleged infringements of their treaty rights and extinguished aboriginal title and rights. This case was decided
in June 2013, with the court upholding the Private Land withdrawal from TFL 6 and also the decision to
extend the term of our FSP. The Crown was found to have an ongoing duty to consult the Kwakiult in good
faith and to seek accommodations regarding their claim of extinguished Aboriginal rights, titles and interests
in respect of the Kwakiutl traditional territory. The Crown has subsequently filed an appeal of the decision
pertaining to their ongoing duty to consult with the Kwakiutl.
In 2005, the Hupacasath First Nation obtained an order of the BC Supreme Court requiring the Province of
BC to consult with them regarding certain Crown decisions, including a 2004 decision of the Minister of
Forests, Mines and Lands to remove private lands from TFL 44, a TFL subsequently acquired by the
Company. In 2008, the Court ordered that a mediator be appointed to address appropriate accommodation
for the effects of the Minister’s 2004 private land decision upon the asserted aboriginal rights of the
Hupacasath First Nation on their claimed territory, both with respect to the private lands that are now outside
the TFL and the Crown lands that remain within the Company’s TFL. In July 2012, the Hupacasath and BC
Government executed a mediated agreement which included the following accommodations within TFL 44
as a result of the 2004 decision to remove private land from TFL 44: a Government Action Regulation Order
for protection of a spiritual area at Thunder Mountain, 400 hectares of new Old Growth Management Areas
around Great Central Lake, a 20,000 cubic metre non replaceable forest licence in the vicinity of Great
Central Lake and a First Nations Woodland Licence also at Great Central Lake as per the previous Forestry
Revitalization Act timber volume allocation to the Hupacasath.
The Company is currently unable to predict the outcome of these First Nation legal proceedings on Western’s
ongoing operations or on any sale of its non-core assets and private forestry lands.
In addition, Western is subject to routine litigation incidental to our business, the outcome of which we do
not anticipate will have a materially adverse effect on our financial condition and results of operations.
Reliance on Directors, Management and Other Key Personnel
Western relies upon the experience and expertise of our personnel. No assurance can be given that we will
be able to retain our current personnel and attract additional personnel as necessary for the development
and operation of our business. Loss of or failure to attract and retain key personnel could have a material
adverse effect on Western’s business.
24
Continuation of the Dividend Program
We declared and paid total quarterly cash dividends of $0.08 per outstanding common share during the four
quarters ended December 31, 2015. Any decision to declare and pay dividends in the future will be made
at the discretion of our Board of Directors, after taking into account our operating results, financial condition,
cash requirements, financing agreement restrictions and other factors our Board may deem relevant. We
may be unable or may elect not to continue to declare and pay dividends, even if necessary financial
conditions are met and sufficient cash is available for distribution.
Evaluation of Disclosure Controls and Procedures
As required by Multilateral Instrument 52-109 issued by the Canadian Securities Administrators, Western
conducted an evaluation of the effectiveness of the disclosure controls and procedures and the system of
internal control over financial reporting based on the “Internal Control – Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management concluded that the Company’s system of internal control over financial reporting was effective
as at December 31, 2015. The evaluation was carried out under the supervision and with the participation
of the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”). Based on the evaluation,
Western’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective in
providing reasonable assurance that material information relating to Western and its consolidated
subsidiaries is made known to them by others within those entities, particularly during the period in which
the annual filings are being prepared. In addition, Western’s CEO and CFO concluded that the Company’s
internal controls over financial reporting are effective in providing reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for Western and its consolidated
subsidiaries for the period in which the annual filings are being prepared.
The CEO and CFO confirm that there were no changes in the controls which materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting during the last
quarter of 2015.
Outstanding Share Data
As of February 17, 2016, there were 395,245,407 Common Shares issued and outstanding.
Western has reserved 20,000,000 Common Shares for issuance upon the exercise of options granted under
the Company’s incentive stock option plan. During 2015, 446,000 previously granted options were
exercised, 1,607,667 options were granted, and 1,434,000 options were forfeited. As of February 17, 2016,
10,158,667 options were outstanding under the Company’s incentive stock option plan.
25
Management’s Discussion and Analysis – Appendix A
Summary of Selected Results for the Last Eight Quarters
(millions of dollars except per share amounts and
where noted)
Average Exchange Rate – CAD $ to purchase
one US $
Revenue
Lumber
Logs
By-products
Total revenue
Lum ber
Production – millions of board feet
Shipments – millions of board feet
Price – per thousand board feet
Logs
2015
2014
Year
4th
3rd
2nd
1st
Year
4th
3rd
2nd
1st
1.279
1.335
1.309
1.229
1.241
1.104
1.136
1.089
1.091
1.103
770.0
243.1
68.8
1,081.9
891
883
872
194.4
53.6
17.6
265.6
234
226
862
203.8
57.3
17.4
278.5
212
227
899
200.0
71.0
18.2
289.2
236
228
879
171.8
61.2
15.6
248.6
209
202
849
729.0
244.2
63.7
1,036.9
908
909
802
166.8
51.2
14.6
232.6
202
216
772
180.4
66.0
15.7
262.1
231
220
820
207.9
71.8
16.5
296.2
237
255
815
173.9
55.2
16.9
246.0
237
218
798
Net Production - thousands of cubic metres (1)
Shipments – thousands of cubic metres
Price – per cubic metre (2)
5,135
2,599
89
1,081
540
95
1,180
610
89
1,402
749
90
1,472
700
83
5,127
2,633
93
1,281
571
90
1,009
707
86
1,544
773
90
1,293
581
95
Selling and adm inistration
26.1
7.8
5.5
7.0
5.8
29.6
6.0
7.4
7.2
9.0
Adjusted EBITDA
Amortization
Changes in fair value of biological assets
Reversal of impairment
Operating restructuring items
Finance costs
Other income (expenses)
Deferred income tax recovery (expense)
Current income tax recovery (expense)
Net incom e from continuing operations
Net income from discontinued operations
Net incom e
117.1
29.6
28.7
29.2
29.6
108.5
14.8
20.0
40.9
32.8
(30.9)
(3.2)
-
(4.3)
(5.0)
(1.1)
(7.8)
(0.2)
64.6
9.1
73.7
(8.2)
(0.9)
-
(0.7)
(1.1)
(0.9)
(7.9)
-
9.9
-
9.9
(7.3)
-
-
(2.9)
(1.3)
(0.2)
0.1
-
(7.6)
(0.6)
-
(0.4)
(1.3)
(0.1)
(0.1)
-
17.1
19.1
-
-
17.1
19.1
(7.8)
(1.7)
-
(0.3)
(1.3)
0.1
0.1
(0.2)
18.5
9.1
27.6
(29.6)
(1.5)
2.9
(10.8)
(5.7)
1.4
3.4
(0.2)
68.4
-
(6.7)
0.5
2.9
(1.2)
(1.2)
0.6
3.2
-
12.9
-
68.4
12.9
(7.0)
(0.4)
-
(8.3)
(1.4)
-
-
(0.2)
2.7
-
2.7
(8.2)
(1.4)
-
(1.2)
(1.5)
0.6
-
-
(7.7)
(0.2)
-
(0.1)
(1.6)
0.2
0.2
-
29.2
23.6
-
-
29.2
23.6
Adjusted EBITDA margin
10.8% 11.1% 10.3% 10.1% 11.9%
10.5%
6.4%
7.6% 13.8% 13.3%
Earnings per share:
Net income, basic
Net income, diluted
0.19
0.18
0.03
0.02
0.04
0.04
0.05
0.05
0.07
0.07
0.17
0.17
0.03
0.03
0.01
0.01
0.07
0.07
0.06
0.06
(1) Net Production is sorted log production, net of residuals and w aste.
(2) The log revenue used to determine average price per cubic metre has been reduced by the associated shipping costs arranged in the respective periods
to enable comparability of unit prices.
In a normal operating year there is seasonality to the Company’s operations with higher lumber sales in the second and third
quarters when construction activity, particularly in the US, has historically tended to be higher. Logging activity may also vary
depending on weather conditions such as rain, snow and ice in the winter and the threat of forest fires in the summer.
Certain categories of transactions are presented separately above due to their unpredictable timing and to allow for greater
comparability of our operating results between periods. In the first quarter of 2015, the Company recognized $9.1 million of net
income from discontinued operations relating to its former Squamish pulp mill site that was sold on February 6, 2015. The third
quarter of 2014 included an $8.1 million restructuring provision related to the consolidation of its Nanaimo sawmill operations.
The fourth quarter of 2014 includes an impairment reversal of $2.9 million that had been taken on the Company’s timber licenses
(intangible assets). In the fourth quarters of 2015, the Company recognized changes in deferred tax balances with respect to
unutilized operating tax losses and actuarial gains and losses on its defined benefit plans, resulting in a $7.8 million deferred
income tax expense through net Income, and a deferred income tax recovery of $9.1 million through other comprehensive
Income. In the fourth quarter of 2014, the Company recognized incremental deferred income tax assets of $3.2 million with
respect to unutilized operating tax losses through net income. The third quarter of 2015 included a $2.9 million restructuring
charge primarily related to the consolidation of the Company’s Central Island timberlands operations.
26
Western Forest Products Inc.
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Management of Western Forest Products Inc. (“Western” or the “Company”) is responsible for the
accompanying Consolidated Financial Statements and all other information in the Management’s Discussion and
Analysis. The Consolidated Financial Statements have been prepared by Management in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board and,
where necessary, reflect Management’s best estimates and judgements at this time. The financial information
presented throughout the Management’s Discussion and Analysis dated February 17, 2016 is consistent with
that contained in the Consolidated Financial Statements.
Western maintains systems of internal accounting controls, policies and procedures to provide reasonable
assurances as to the reliability of the financial records and the safeguarding of its assets. Management meets
the objectives of internal accounting control on a cost-effective basis through the prudent selection and training
of personnel, adoption and communication of appropriate policies, and employment of an internal audit program.
The Board of Directors reviews through oversight of Management’s responsibilities with respect to the
Consolidated Financial Statements primarily through the activities of its Audit Committee, which is composed
solely of independent directors of the Company. This Committee meets with Management and the Company’s
independent auditors, KPMG LLP, to review the Consolidated Financial Statements and recommend their
approval by the Board of Directors. The Audit Committee is also responsible for making recommendations with
respect to the appointment, remuneration and the terms of engagement of the Company’s auditors. The Audit
Committee also meets with the auditors, without the presence of Management, to discuss the results of the audit,
related findings and their suggestions.
The Consolidated Financial Statements have been audited by KPMG LLP, who were appointed by the
shareholders at the annual shareholders’ meeting. The auditors’ report follows.
Don Demens
President & Chief Executive Officer
Stephen Williams
Senior Vice President & Chief Financial Officer
February 17, 2016
27
KPMG LLP
Chartered Professional Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Western Forest Products Inc.
We have audited the accompanying consolidated financial statements of Western Forest Products Inc.,
which comprise the consolidated statements of financial position as at December 31, 2015 and December
31, 2014, the consolidated statements of comprehensive income, changes in shareholders’ equity and cash
flows for the years then ended, and notes, comprising a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated
financial position of Western Forest Products Inc. as at December 31, 2015 and December 31, 2014, and
its consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board.
February 17, 2016
Vancouver, Canada
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
Western Forest Products Inc.
Consolidated Statements of Financial Position
(Expressed in millions of Canadian dollars)
Assets
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventory (Note 4)
Prepaid expenses and other assets
Non-current assets:
Property, plant and equipment (Note 5)
Intangible assets (Note 6)
Biological assets (Note 7)
Other assets (Note 8)
Deferred income tax assets (Note 11)
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities
Revolving credit facility (Note 9)
Silviculture provision (Note 13)
Discontinued operations (Note 24)
Non-current liabilities:
Long-term debt (Note 10)
Silviculture provision (Note 13)
Other liabilities (Note 12)
Deferred revenue
Discontinued operations (Note 24)
Shareholders’ equity:
Share capital (Note 14)
Contributed surplus
Deficit
December 31,
December 31,
2015
2014
$
9.4
75.0
148.5
17.8
250.7
$
1.8
65.6
139.4
8.8
215.6
271.3
125.2
53.7
11.2
31.3
249.3
129.3
56.9
13.2
29.9
$
743.4
$
694.2
$
97.7
$
76.6
-
11.2
-
108.9
63.2
19.6
35.4
60.4
-
287.5
505.5
7.6
(57.2)
455.9
6.7
10.7
0.3
94.3
73.0
19.0
32.9
62.4
4.5
286.1
504.4
7.0
(103.3)
408.1
$
743.4
$
694.2
Commitments and Contingencies (Note 18)
See accompanying notes to these consolidated financial statements
Approved on behalf of the Board:
Lee Doney, Chairman
James Arthurs, Director
29
Year ended
December 31,
2015
2014
$
1,081.9
$
1,036.9
880.8
3.6
88.4
26.1
-
998.9
83.0
(4.3)
(1.1)
77.6
(5.0)
72.6
(0.2)
(7.8)
64.6
9.1
73.7
(5.1)
9.1
4.0
4.0
843.1
-
86.8
29.6
(2.9)
956.6
80.3
(10.8)
1.4
70.9
(5.7)
65.2
(0.2)
3.4
68.4
-
68.4
(16.5)
-
(16.5)
(16.5)
$
77.7
$
51.9
$
$
$
$
$
0.19
0.18
0.17
0.16
0.02
0.17
$
0.17
$
0.17
$
$
0.17
$
-
395,066
398,740
392,267
396,892
Western Forest Products Inc.
Consolidated Statements of Comprehensive Income
(Expressed in millions of Canadian dollars except for share and per share amounts)
Revenue
Cost and expenses:
Cost of goods sold
Export tax
Freight
Selling and administration
Reversal of impairments (Note 6)
Operating income prior to restructuring items and other income
Operating restructuring items (Note 23)
Other income (expenses)
Operating income
Finance costs (Note 22)
Income before income taxes
Current income tax expense (Note 11)
Deferred income tax recovery (expense) (Note 11)
Net income from continuing operations
Net income from discontinued operations
Net income
Other comprehensive loss
Items that will not be reclassified to profit or loss:
Defined benefit plan actuarial loss (Note 20)
Income tax on other comprehensive income (Note 11)
Total items that will not be reclassified to profit or loss
Other comprehensive income (loss) for the period
Total comprehensive income
Net income per share (in dollars) (Note 16)
Basic earnings per share
Diluted earnings per share
Basic earnings per share - continuing operations
Diluted earnings per share - continuing operations
Basic and diluted earnings per share - discontinued operations
Weighted average number of common shares outstanding (thousands)
Basic
Diluted
See accompanying notes to these consolidated financial statements
30
Western Forest Products Inc.
Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in millions of Canadian dollars)
Balance at December 31, 2013
Net income
Other comprehensive loss:
Defined benefit plan actuarial loss recognized
Total comprehensive income
Share-based payment transactions recognized in equity
Exercise of stock options
Dividends
Total transactions with owners, recorded directly in equity
Balance at December 31, 2014
Balance at December 31, 2014
Net income
Other comprehensive loss:
Defined benefit plan actuarial loss recognized (Note 20)
Income tax on other comprehensive income (Note 11)
Total comprehensive income
Share-based payment transactions recognized in equity
Exercise of stock options
Dividends
Total transactions with owners, recorded directly in equity
Balance at December 31, 2015
See accompanying notes to these consolidated financial statements
Share
Capital
Contributed
Surplus
Deficit
Total
Equity
$
499.7
$
6.5
$
(123.8)
$
382.4
-
-
-
-
4.7
-
4.7
-
-
-
2.2
(1.7)
-
0.5
68.4
68.4
(16.5)
51.9
-
-
(31.4)
(31.4)
(16.5)
51.9
2.2
3.0
(31.4)
(26.2)
$
504.4
$
7.0
$
(103.3)
$
408.1
$
504.4
$
7.0
$
(103.3)
$
408.1
-
-
-
-
-
1.1
-
1.1
-
-
-
-
0.9
(0.3)
-
0.6
73.7
73.7
(5.1)
9.1
77.7
-
-
(31.6)
(31.6)
(5.1)
9.1
77.7
0.9
0.8
(31.6)
(29.9)
$
505.5
$
7.6
$
(57.2)
$
455.9
31
Western Forest Products Inc.
Consolidated Statements of Cash Flows
(Expressed in millions of Canadian dollars)
Cash provided by (used in):
Operating activities:
Net income from continuing operations
Items not involving cash:
Amortization of property, plant and equipment (Note 5)
Amortization of intangible assets (Note 6)
Gain on disposal of assets
Change in fair value of biological assets (Note 7)
Net finance costs
Reversal of impairments on intangible assets (Note 6)
Deferred income tax expense (recovery)
Other
Changes in non-cash working capital items:
Trade and other receivables
Inventory
Prepaid expenses and other assets
Silviculture provision
Accounts payable and accrued liabilities
Investing activities:
Additions to property, plant and equipment (Note 5)
Proceeds on disposal of assets
Financing activities:
Interest paid
Drawings under revolving credit facility
Repayment of revolving credit facility
Repayment of long-term debt
Dividends
Proceeds from exercise of stock options
Cash used in continuing operations
Proceeds on disposal of assets
Other
Cash provided by (used in) discontinued operations (Note 24)
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to these consolidated financial statements
32
Year ended
December 31,
2015
2014
$
64.6
$
68.4
26.8
4.1
-
3.2
5.0
-
7.8
(6.0)
105.5
(9.4)
(9.1)
(9.0)
0.5
20.6
(6.4)
99.1
(62.1)
0.1
(62.0)
(2.9)
2.5
(9.2)
(10.0)
(31.6)
0.8
(50.4)
(13.3)
21.8
(0.9)
20.9
7.6
25.7
3.9
(0.2)
1.5
5.7
(2.9)
(3.4)
(4.3)
94.4
3.4
(6.9)
1.3
(1.6)
(3.2)
(7.0)
87.4
(49.9)
0.4
(49.5)
(4.0)
6.7
-
(15.8)
(31.4)
3.1
(41.4)
(3.5)
-
(0.3)
(0.3)
(3.8)
1.8
9.4
$
5.6
1.8
$
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
1. Reporting entity
Western Forest Products Inc. (“Western” or the “Company”) is a major integrated softwood forest products
company, incorporated and domiciled in Canada, operating in the coastal region of British Columbia. The
address of the Company’s head office is Suite 510 – 700 West Georgia Street, Vancouver, British Columbia,
Canada. The Company’s primary business includes timber harvesting, reforestation, forest management,
sawmilling logs into lumber and wood chips, and value-added lumber remanufacturing. The Company is
listed on the Toronto Stock Exchange, under the symbol WEF.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRSs”), as issued by the International Accounting
Standards Board.
The presentation of financial statement note disclosure has been modified to include certain significant
accounting policies within their related note disclosure, where applicable. Certain accounting policies
remain in Notes 2 and 3 as they relate to multiple financial statement line items. Additionally, certain
comparative figures have been reclassified to conform with the current year’s presentation.
The consolidated financial statements were authorized for issue by the Board of Directors on February
17, 2016.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the
following material items in the statement of financial position:
• Biological assets are measured at fair value less costs to sell;
• Liabilities for cash-settled share-based payment transactions are measured at fair value at each
reporting period;
• Equity-settled share-based payments are measured at fair value at grant date;
• Derivative financial instruments are measured at fair value at each reporting date;
• The defined benefit pension liability is recognized as the net total of the fair value of the plan assets,
less the present value of the defined benefit obligation; and,
• Reforestation obligations are measured at the discounted value of expected future cash flows.
(c) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars which is the Company’s
functional currency. All amounts are presented in millions of Canadian dollars, unless otherwise
indicated.
(d) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by Western. Western controls an entity when it is exposed to,
or has rights to, variable returns from its investment with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in
the consolidated financial statements from the date on which control commences until the date on
which it ceases.
The principal wholly-owned operating subsidiaries of the Company at December 31, 2015 are
Western Lumber Sales Limited (which sells into the United States (“US”)), Western Forest Products
Japan Ltd. (which sells into Japan), and WFP Quatsino Navigation Limited (the beneficial owner of
a number of the Company’s non-core assets). During 2015, the Company’s Board of Directors
approved the wind-up of WFP Quatsino Navigation Limited. The wind-up was substantially
completed December 31, 2015.
33
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
2. Basis of preparation (continued)
(d) Basis of consolidation (continued)
(ii) Interests in equity-accounted investees
Western’s interests in equity-accounted investees comprise interests in joint ventures. A joint
venture is an arrangement in which Western has joint control, whereby it has the rights to the net
assets of the arrangement, rather than rights to all of its assets and obligations for all of its liabilities.
Interests in the joint venture are accounted for using the equity method. They are recognized initially
at cost, including transaction costs. Subsequent to initial recognition, the consolidated financial
statements include Western’s share of the profit and loss and other comprehensive income of equity
accounted investees, until the date on which significant influence or joint control ceases.
(iii) Transactions eliminated on consolidation
Inter-company balances and transactions, and any unrealized income and expenses arising from
inter-company transactions, are eliminated. Unrealized gains arising from transactions with equity
accounted investees are eliminated against the investment to the extent of Western’s interest in the
investee. Unrealized losses are eliminated in the same way, except to the extent that there is
evidence of impairment.
(e) Foreign currency translation
Foreign currency transactions are translated into Canadian dollars using the exchange rates prevailing
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the
reporting date are translated into Canadian dollars at the exchange rate on that date. Foreign currency
differences arising on translation are recognized in net income for the period. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated into Canadian dollars at foreign exchange rates at
the date the fair value was determined.
(f) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRSs requires Management
to make judgements, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognized prospectively.
(i) Judgements
The determination of appropriate cash generating units as described in Note 3(c) is a judgement
made in applying accounting policy that has a significant effect on the amounts recognized in the
consolidated financial statements.
(ii) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting
in a material adjustment within the next financial year is included in the following notes:
Note 4
Note 7
Note 11
Note 13
Note 15
Note 18
Note 20
Measurement of net realizable value of inventories
Measurement of fair value less costs to sell of standing timber
Recognition of deferred income tax assets: availability of future taxable profit
against which carry forward tax losses can be used
Measurement of the present value of silviculture provisions: key assumptions
about the likelihood and magnitude of an outflow of resources
Measurement of share-based payment transactions
Recognition and measurement of provisions and contingencies: key
assumptions about the likelihood and magnitude of an outflow of resources
Measurement of defined benefit obligations, key actuarial assumptions,
recognition of termination benefits
34
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
2. Basis of preparation (continued)
(f) Use of estimates and judgements (continued)
(ii) Assumptions and estimation uncertainties (continued)
Measurement of fair values – a number of Western’s accounting policies and disclosures require
the measurement of fair values for both financial and non-financial assets and liabilities. An
established framework is in place with respect to the measurement of fair values, including Level 3
fair values, on which significant unobservable inputs and valuation adjustments are reviewed
regularly. If third party information is used to measure fair values, Management assesses the
evidence obtained from the third parties to support the conclusion that such valuations meet the
requirements of IFRS, including the level in the fair value hierarchy in which such valuations would
be classified. Refer to Note 21 for more details.
When measuring the fair value of an asset or liability, Western uses market observable data as far
as is possible. Fair values are categorized into different levels in a fair value hierarchy based on
the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the assets
or liability, either directly or indirectly
• Level 3: inputs for the asset or liability that are not based on observable market data
If the inputs to measure the fair value of the asset or liability might be categorized in different levels
of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same
level of the hierarchy as the lowest level input that is significant to the entire measurement.
Transfers between levels of the fair value hierarchy are recognized at the end of the period in which
the change occurred.
(g) New accounting policies
(i) Changes in accounting policies
Western has adopted the following new standards and amendments to standards, including any
consequential amendments to other standards with a date of initial application of January 1, 2015:
IFRS 8, Operating segments
This standard was amended to require disclosure of judgements made by management in
aggregating segments, and a reconciliation of segment assets to the entity’s assets when segment
assets are reported. The application of this revised standard has not materially impacted the
financial statements.
IAS 24, Related party transactions
This standard was amended to revise the definition of “related party” to include an entity that
provides key management personnel services to the reporting entity or its parent, and to clarify
related disclosure requirements. The application of this revised standard has not materially impacted
the financial statements.
(ii) New standards and interpretations not yet adopted
The following amended IFRS standards are not yet effective for the year ended December 31, 2015
and have not been applied in preparing these consolidated financial statements:
IFRS 9, Financial Instruments (“IFRS 9”)
IFRS 9 is effective for years commencing on or after January 1, 2018, and will replace IAS 39,
Financial Instruments: Recognition and Measurement. Under IFRS 9, financial assets will be
classified and measured based on the business model in which they are held and the characteristics
of the associated contractual cash flows. IFRS 9 also includes a new general hedge accounting
standard which will better align hedge accounting with risk management. The Company intends to
adopt IFRS 9 in it consolidated financial statements for the year commencing January 1, 2018; the
extent of the impact of adoption of the amendments has not yet been determined.
35
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
2. Basis of presentation (continued)
(g) New accounting policies (continued)
(ii) New standards and interpretations not yet adopted (continued)
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
IFRS 15 is effective for years commencing on or after January 1, 2018, and will replace IAS 18,
Revenue, IAS 11, Construction Contracts, and a number of revenue related interpretations. IFRS
15 provides a single, principles based five-step model to be applied to all contracts with customers,
except insurance contracts, financial instruments, and lease contracts, which fall in the scope of
other IFRSs. The Company intends to adopt IFRS 15 in its consolidated financial statements for
the year commencing January 1, 2018. The extent of the impact of adoption of the standard has
not yet been determined.
IFRS 16, Leases (“IFRS 16”)
IFRS 16 is effective for years commencing on or after January 1, 2019, and will replace IAS 17,
Leases (“IAS 17”). IFRS 16 provides a single lessee accounting model, requiring the recognition of
assets and liabilities for all leases, unless the lease term is 12 months or less or the underlying asset
has a low value, while lessor accounting remains largely unchanged from IAS 17 and the distinction
between operating and finance leases is retained. The Company intends to adopt IFRS 16 in its
consolidated financial statements for the year commencing January 1, 2019. The extent of the
impact of adoption of the standard has not yet been determined.
IAS 1, Presentation of Financial Statements
Amendments to IAS 1 are effective for years commencing on or after January 1, 2016. IAS 1 is
amended to improve presentation and disclosure in financial reports. The Company intends to adopt
these amendments in its financial statements for the year commencing January 1, 2016. The
Company does not expect the amendments to have a material impact on the financial statements.
IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets
Amendments to IAS 16 and IAS 38 are effective for years commencing on or after January 1, 2016.
IAS 16 is amended to explicitly state that revenue-based methods of depreciation cannot be used
for property, plant and equipment. IAS 38 is amended to introduce a rebuttable presumption that
the use of revenue-based amortization methods for intangible assets is inappropriate. The Company
intends to adopt the amendments to IAS 16 and IAS 38 in its financial statements for the year
commencing on January 1, 2016. The Company does not expect the amendments to have a
material impact on the financial statements.
Annual Improvements to IFRS (2012-2014) cycle
Amendments were made to clarify the following in their respective standards:
•
•
•
•
IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations;
IFRS 7 – Financial Instruments: Disclosures;
IAS 19 – Employee Benefits; and
IAS 34 – Interim Financial Reporting
The Company intends to adopt these amendments in its financial statements for the year
commencing January 1, 2016. The Company does not expect the amendments to have a material
impact on the financial statements.
3. Significant accounting policies
Significant accounting policies not described elsewhere in these consolidated financial statements include:
(a) Cash and cash equivalents
Cash and cash equivalents include cash in bank accounts and highly liquid money market instruments
with maturities of 90 days or less from the date of acquisition, and are carried at fair value.
36
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
3. Significant accounting policies (continued)
(b) Revenue recognition
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable,
net of rebates and discounts, and after eliminating intercompany sales. Revenue is recognized as soon
as the substantial risks and rewards of ownership transfer from the Company to the customer. The
timing of the transfers of risks and rewards varies depending on the individual terms of the contract of
sale. Lumber and by-product sales are recorded at the time product is shipped and the collection of the
amount is reasonably assured. Consistent with industry practice, log sales are recorded when the
customer’s order is firm, the logs have been delivered to the transfer location and the collectability of the
amount is reasonably assured.
Amounts charged to customers for shipping and handling are recognized as revenue and shipping and
handling costs, lumber duties, and export taxes incurred by the Company are recorded in costs and
expenses.
(c) Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than
biological assets, inventories, and deferred income tax assets) to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash
generating units (“CGUs”). The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
Impairment losses are recognized in net income. They are allocated first to reduce the carrying amount
of goodwill (if any) to the CGU, and then to reduce the carrying amounts of the other assets in the CGU
on a pro-rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortization, if no impairment
loss had been recognized.
4.
Inventory
Accounting policy
Inventory, other than supplies which are valued at specific cost, are valued at the lower of cost and net
realizable value (“NRV”) as described below:
(i) Lumber by species (hemlock and balsam, douglas fir, and yellow and western red cedar) and facility;
(ii) Logs by sort by end use (saw logs and pulp logs).
The cost of inventories includes expenditures incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and condition.
The costs of lumber produced carry an average cost of production based on the species and facility where
they were produced. The cost of logs produced carry an average cost of production based on the operation
where the logs are produced, determined by actual log production costs divided by production volumes.
NRV is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses. The NRV for logs designated for lumber production is determined on the basis of the
logs being converted to lumber, and for the remaining logs it is based on market log prices.
The cost of logs transferred from biological assets (standing timber) is its fair value less costs to sell at the
date of harvest.
37
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
4.
Inventory (continued)
Supporting information
Logs
Lumber
Supplies and other inventory
Provision for write downs
Total value of inventory
December 31,
2015
December 31,
2014
$
$
102.0
50.7
12.0
(16.2)
148.5
101.3
38.9
11.4
(12.2)
139.4
$
$
The carrying amount of inventory recorded at net realizable value was $49.2 million at December 31, 2015
(2014: $39.8 million), with the remaining inventory recorded at cost.
During 2015, $880.8 million (2014: $843.1 million) of inventory was charged to cost of sales which includes
a $4.0 million increase (2014: $3.3 million increase) to the provision relating to inventory value write-downs.
The Company’s logs and lumber inventory is pledged as security against the revolving credit facility.
5. Property, plant and equipment
Accounting policy
All items of property, plant and equipment are measured at cost, less accumulated depreciation and any
accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition
of the asset. When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment. Subsequent costs
are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow to the Company and the cost of
the item can be measured reliably.
Depreciation is based on the depreciable amount of an item of property, plant and equipment, which is the
cost of an item, less its estimated residual value. Depreciation is calculated using the straight-line method
and is recognized in net income over the estimated useful life of each component of an item of property,
plant and equipment. Land is measured at cost and is not depreciated. The estimated useful lives for the
current and comparative periods are as follows:
• Buildings and equipment
• Logging roads
5 - 20 years
9 - 20 years
Residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.
Gains and losses on disposals are determined by comparing proceeds from disposal with the carrying
amount of the item of property, plant and equipment and are recognized in net income for the period in which
the disposal occurs.
38
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
5. Property, plant and equipment (continued)
Supporting information
Cost
Balance at January 1, 2014
Additions
Disposals
Impairments
Balance at December 31, 2014
Additions
Disposals
Balance at December 31, 2015
Accumulated amortization and impairments
Balance at January 1, 2014
Amortization
Disposals
Impairments
Balance at December 31, 2014
Amortization
Disposals
Balance at December 31, 2015
Carrying amounts
At December 31, 2014
At December 31, 2015
6.
Intangible assets
Accounting policy
Buildings &
equipment
$
$
$
Logging roads
137.8
$
13.5
-
-
151.3
13.6
-
$
164.9
Land
$
103.8
-
(0.1)
-
103.7
-
(13.1)
90.6
$
$
105.5
13.3
-
-
118.8
12.9
-
$
131.7
-
$
-
-
-
-
-
-
$
-
190.5
36.4
(1.9)
(10.6)
214.4
48.5
(1.3)
261.6
100.6
12.4
(1.6)
(10.1)
101.3
13.9
(1.1)
114.1
Total property,
plant &
equipment
$
$
$
432.1
49.9
(2.0)
(10.6)
469.4
62.1
(14.4)
517.1
206.1
25.7
(1.6)
(10.1)
220.1
26.8
(1.1)
245.8
$
$
$
113.1
$
32.5
$
103.7
$
249.3
$
147.5
$
33.2
$
90.6
$
271.3
Crown timber tenures are the contractual arrangements between the Company and the Provincial
Government whereby the Company gains the right to harvest timber. All of the Company’s timber licenses
are accounted for as acquired finite lived intangible assets. Accordingly, these are valued at their acquired
cost less accumulated amortization and any accumulated impairment losses. Amortization is recognized on
a straight-line basis over 40 years, the estimated useful life of these crown timber tenures. Amortization
methods, useful lives and residual values are reviewed, and adjusted if appropriate, at each reporting date.
Supporting information
Cost
Balance, beginning of year
Disposals
Balance, end of year
Accumulated amortization and impairments
Balance, beginning of year
Amortization
Reversal of impairments
Balance, end of year
Year ended December 31,
2015
2014
$
170.7
-
$
170.7
41.4
4.1
-
45.5
$
170.9
(0.2)
170.7
40.4
3.9
(2.9)
41.4
$
$
$
Carrying amount, end of year
$
125.2
$
129.3
39
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
6.
Intangible assets (continued)
As a result of continued losses by the Company prior to 2010, the Company recorded an impairment loss of
$51.2 million as at January 1, 2010, in respect of its Crown timber tenures. In subsequent periods, as a result
of improvements in log and lumber markets, the Company reassessed its previous estimates and has
reversed a total of $42.5 million of the initially recognized impairment, of which $2.9 million was reversed
during the year ended December 31, 2014. The final reversal of the impairment in 2014 allowed the Company
to reflect unimpaired carrying values of the Crown timber tenures at December 31, 2014.
There were no indicators of impairment identified in the year ended December 31, 2015, and accordingly,
no impairment adjustments were required during the year ended December 31, 2015.
7. Biological assets
Accounting policy
Standing timber on privately held forest land that is managed for timber production is characterized as a
biological asset. Accordingly, at each reporting date, the biological asset is valued at its fair value less costs
to sell with any change therein, including the impact of growth and harvest, recognized in net income for the
period. Costs to sell include all costs that would be necessary to sell the assets. Land under the standing
timber is measured at cost and included in property, plant and equipment.
Supporting information
(a) Reconciliation of carrying amount
Carrying value, beginning of year
Change in fair value resulting from growth and pricing
Harvested timber transferred to inventory in the year
Carrying value, end of year
Year ended December 31,
2015
2014
$
56.9
3.2
(6.4)
$
58.4
3.2
(4.7)
$
53.7
$
56.9
At December 31, 2015, private timberlands comprised an area of approximately 23,293 hectares
(December 31, 2014: 23,293 hectares) of land owned by the Company; standing timber on these
timberlands ranged from newly planted cut-blocks to old-growth forests. During the year ended
December 31, 2015, the Company harvested and scaled approximately 288,052 cubic metres (“m3”) of
logs from its private timberlands, which had a fair value less costs to sell of $98 per m3 at the date of
harvest (2014: 357,720 m3 and $79 per m3, respectively).
(b) Measurement of fair values
The table above reconciles the opening balances to the closing balances for Level 3 fair values. The
change in fair value resulting from price and growth is reflected in cost of goods sold. The fair value
measurements for the Company’s standing timber of $53.7 million has been categorized as Level 3 fair
value based on the inputs to the valuation technique used as discussed below.
Valuation technique
Significant unobservable inputs
Inter-relationship between key
unobservable inputs and fair value
measurement
Discounted cash flows: The valuation model
considers the present value of the net cash
flows expected to be generated by the
individual private timberlands utilizing a
harvest optimization approach. The cash
flow projections include specific estimates
for 25 years. The expected net cash flows
are discounted using a
risk-adjusted
discount rate.
•
•
•
•
Estimated future log prices per m3 ($68
- $137, weighted average $90).
Estimated harvest costs per m3 ($59 -
$81, weighted average $62).
Estimated harvest annual volume
(12,000 - 99,000 m3, weighted average
79,000 m3).
Risk-adjusted discount rate (2015: 7.0
- 7.5%, weighted average 7.1%; 2014:
7.5%).
The estimated fair value would increase
(decrease) if:
•
•
•
•
The estimated log prices per m3
were higher (lower);
The estimated harvest costs per m3
were lower (higher);
The estimated harvest volumes
were higher (lower); or
The risk-adjusted discount rates
were lower (higher).
40
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
7. Biological assets (continued)
(c) Risk management strategies related to biological assets
Western is exposed to the following risks relating to its private timberlands:
• The Company is exposed to risks arising from fluctuations in log prices and sales volumes. When
possible, Western aligns its harvest volumes to market supply and demand, and performs regular
industry trend analyses for projected harvest volumes and pricing in order to manage this risk.
• The standing timber is exposed to risk of damage as a result of severe weather conditions, forest
fires, insect infestation and disease. Western has processes and procedures in place to monitor
and mitigate these risks, including fire management strategies and regular inspection for pest
infestation.
8. Other assets
Investments
Discontinued operations (equipment) (Note 24)
Other
9. Revolving credit facility
December 31,
2015
December 31,
2014
$
$
11.1
-
0.1
11.2
9.7
2.8
0.7
13.2
$
$
The Company’s revolving credit facility (the “Facility”) provides for a maximum borrowing amount of $125.0
million, subject to a borrowing base, which is primarily based on eligible accounts receivable and inventory
balances. The Facility bears interest at Canadian Prime (if availability exceeds $40.0 million) or 0.25% (if
availability is less than $40.0 million) or at the Company’s option, at rates for Bankers’ Acceptances or LIBOR
based loans plus 1.25% or 1.50%, dependent on the same availability criteria. The interest rate for the
Facility was 2.70% at December 31, 2015 (December 31, 2014: 3.50%).
On November 2, 2015, certain terms and conditions of the Facility were amended, as disclosed above,
including the removal of certain covenants and a reduction in applicable interest rates. The maturity date of
the Facility was also extended by one year to December 14, 2016.
The Facility is secured by a first lien interest over accounts receivable and inventory and includes financial
covenants (see Note 17). At December 31, 2015, the Facility was unutilized (December 31, 2014: $6.7
million utilized) and $122.5 million of the facility was available to the Company (December 31, 2014: $96.6
million). The Company was in compliance with its financial covenants at December 31, 2015.
10. Long-term debt
Accounting policy
Long-term debt is recognized initially at fair value, net of transaction costs incurred. Long-term debt is
subsequently carried at amortized cost; any difference between the proceeds and the redemption value is
recognized in net income over the term of the long-term debt using the effective interest method.
Transaction costs are deferred and amortized to finance costs over the term of the Term Loan using the
effective interest rate method.
Supporting information
The Company’s revolving term loan facility (the “Term Loan”) provides for a maximum borrowing amount of
$110.0 million. The Term Loan bears interest at an index rate, determined as the higher of (i) the Canadian
Prime rate plus 0.15%, and (ii) the 30 day Banker’s Acceptance (“BA”) rate plus 1.65%, or at the election of
the Company, the applicable BA rate plus 1.65%. The interest rate for the Term Loan was 2.57% at
December 31, 2015 (December 31, 2014: 2.92%).
41
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
10. Long-term debt (continued)
The Term Loan is secured by a first lien interest over all of the Company’s properties and assets, excluding
those of the Englewood Logging Division and accounts receivable and inventory, over which it has second
lien interests, and includes financial covenants (see Note 17).
On November 2, 2015, certain terms and conditions of the Term Loan were amended including the removal
of certain covenants. The maturity date of June 29, 2019 remains unchanged.
The Company was in compliance with its financial covenants at December 31, 2015.
December 31,
2015
December 31,
2014
Long-term debt
Less transaction costs
11. Income taxes
Accounting policy
$
$
$
$
64.0
(0.8)
63.2
74.0
(1.0)
73.0
Income tax expense comprises current and deferred income tax. It is recognized in net income for the period
except to the extent that it relates to items recognized either in other comprehensive income or directly in
equity, in which case it is recognized in other comprehensive income or equity, respectively.
(a) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year
and any adjustment to tax payable or receivable in respect of the previous years. It is measured using
tax rates enacted or substantively enacted at the reporting date.
Current income tax assets and liabilities are offset only if certain criteria are met.
(b) Deferred income tax
Deferred income tax is recognized in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred
income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction,
other than a business combination, that at the time of the transaction affects neither accounting profit
nor taxable profit.
Deferred income tax assets are recognized for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be available against
which they can be used. Deferred income tax assets are reviewed at each reporting date and are
recognized to the extent that it is probable that the related tax benefit will be realized. Unrecognized
deferred income tax assets are reassessed at each reporting date and recognized to the extent that it is
probable that future taxable profits will be available against which they can be used.
Deferred income tax is measured at the rates that are expected to be applied to temporary differences
when they reverse, using rates enacted or substantively enacted at the reporting date. Deferred income
tax assets and liabilities are offset only if certain criteria are met.
42
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
11. Income taxes (continued)
Supporting information
Current tax expense
Current period
Deferred income tax expense
Origination and reversal of temporary differences
Recognition of previously unrecognized tax losses
Change in unrecognized deductible temporary differences
Year ended December 31,
2015
2014
$
$
0.2
0.2
$
$
0.2
0.2
$
$
36.2
(9.9)
(18.5)
7.8
40.3
(29.9)
(13.8)
(3.4)
$
$
Total income tax expense (recovery)
$
8.0
$
(3.2)
Income tax expense (recovery) differs from the amount that would be computed by applying the Company’s
combined Federal and Provincial statutory rate as follows:
Income before income taxes, continuing operations
Tax using the Company's domestic tax rate
Difference in tax rates
Over (under) provided for in prior periods
Other permanent differences
Temporary differences recorded to OCI
Recognition of previously unrecognized
tax losses
Change in unrecognized deductible temporary
differences
Year ended December 31, 2015
Year ended December 31, 2014
26.00%
0.41%
(0.69%)
0.00%
10.74%
(13.64%)
(11.85%)
11.01%
$
72.6
18.9
0.3
(0.5)
-
7.8
26.00%
0.77%
0.15%
(5.67%)
0.00%
$
65.2
17.0
0.5
0.1
(3.7)
-
(9.9)
(45.86%)
(29.9)
$
(8.6)
8.0
19.63%
(4.98%)
$
12.8
(3.2)
The components of recognized deferred income tax assets and liabilities are as follows:
For the Year ended December 31, 2015
Deferred income tax assets
Tax loss carry-forwards
Employee future benefits obligation
Provisions
Deferred income tax liabilities
Intangible assets
Biological assets
Property, plant and equipment
Opening
Balance
Recognized in
Profit or Loss
Recognized in
OCI
Ending
Balance
$
53.8
-
13.9
67.7
$
(0.8)
(0.6)
(1.9)
(3.3)
-
$
9.1
-
9.1
$
53.0
8.5
12.1
73.6
(31.7)
(7.8)
1.7
(37.8)
0.7
0.5
(5.7)
(4.5)
-
-
-
-
(31.0)
(7.3)
(4.0)
(42.3)
Total
$
29.9
$
(7.8)
$
9.1
$
31.3
For the Year ended December 31, 2014
Deferred income tax assets
Tax loss carry-forwards
Provisions
Property, plant and equipment
Deferred income tax liabilities
Intangible assets
Biological assets
$
49.8
9.8
6.5
66.1
$
4.0
4.1
(4.8)
3.3
$
-
-
-
-
$
53.8
13.9
1.7
69.4
(31.7)
(7.9)
(39.6)
-
0.1
0.1
-
-
-
(31.7)
(7.8)
(39.5)
Total
$
26.5
$
3.4
$
-
$
29.9
43
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
11. Income taxes (continued)
The Company has recognized deferred income tax assets in relation to unused tax losses that are available
to carry forward against future taxable income. At December 31, 2015, the Company and its subsidiaries
have unused non-capital tax losses carried forward of approximately $200.8 million (2014: $245.6 million),
which expire between 2027 and 2035, available to reduce taxable income, and capital losses of
approximately $102.5 million (2014: $121.3 million) available to be utilized against capital gains.
As at December 31, 2015, the Company recognized deferred income tax assets on non-capital losses,
unused tax credits and other deductible temporary differences that are probable to be utilized, net of taxable
temporary differences. Deferred income tax assets have not been recognized in respect of the following loss
carry-forwards and other deductible temporary differences:
Non-capital loss carry forwards
Temporary deductible differences
Capital loss carry forwards
Employee future benefits obligation
12. Other liabilities
Employee future benefits obligation (Note 20)
Environmental accruals
Other
13. Silviculture provision
Accounting policy
December 31,
2015
-
$
18.1
102.5
-
$
120.6
December 31,
2014
$
38.2
1.4
121.3
31.0
191.9
$
December 31,
2015
December 31,
2014
$
$
32.7
2.0
0.7
35.4
30.9
1.5
0.5
32.9
$
$
The Company’s provision for silviculture relates to the obligation for reforestation on Crown land and arises
as timber is harvested. Reforestation on private timberlands is expensed as incurred. The Company
recognizes a provision for silviculture at fair value in the period in which the legal obligation is incurred, with
the fair value of the liability at the reporting date determined with reference to the present value of estimated
future cash flows. The pre-tax discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability. The actual discount rate used
reflects the current risk-free rate given that risks are incorporated into the future cash flow estimates.
In periods subsequent to the initial measurement, changes in the liability resulting from revisions to estimated
future cost are recognized in cost of sales within net income for the period as they occur. The unwinding of
the discount associated with the provision to reflect the passage of time is included in finance costs within
net income for the period.
44
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
13. Silviculture provision (continued)
Supporting information
Changes in the silviculture provision are as follows:
Silviculture provision, beginning of year
Silviculture provision charged
Silviculture work payments
Unwind of discount
Silviculture provision, end of year
Less current portion
Year ended December 31,
2015
2014
$
$
29.7
9.9
(9.0)
0.2
30.8
11.2
19.6
30.0
9.1
(9.7)
0.3
29.7
10.7
19.0
$
$
The silviculture expenditures are expected to occur over the next one to ten years and have been discounted
at risk-free rates of 0.48% to 1.39% (2014: 0.99% to 1.79%). The total undiscounted amount of the estimated
future expenditures required to settle the silviculture obligation at December 31, 2015 is $31.7 million
(December 31, 2014: $30.9 million). Reforestation expense incurred on current production is included in
production costs and the unwinding of discount, or accretion cost, is included in finance costs for the year.
14. Share capital
Accounting policy
The Company’s authorized capital consists of an unlimited number of common shares (“the Common
Shares”) and an unlimited number of preferred shares. Common Shares and preferred shares are classified
as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction from the proceeds, net of any tax effects.
Supporting information
The Company has no outstanding Non-Voting and preferred shares. The Common Shares entitle the holders
thereof to one vote per share. The Non-Voting Shares do not entitle the holders to any votes at meetings of
the Company’s shareholders except that they will be entitled to one vote per share relating to certain matters
including liquidation, dissolution and winding-up. The Common Shares and Non-Voting Shares rank equally
as to participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up
of the Company and as to the entitlement to dividends.
The holders of the Non-Voting Shares have certain registration rights that enable them to require the
Company to assist them with a public offering of the Non-Voting Shares or Common Shares for which the
Non-Voting Shares may be exchanged, subject to certain limitations.
Issued and outstanding Common and Non-Voting Shares are as follows:
Number of
Common Shares
Amount
Balance at January 1, 2014
Exercise of stock options
Conversion of non-voting shares to common shares
Balance at December 31, 2014
Exercise of stock options
Balance at December 31, 2015
352,077,810
3,671,000
39,050,597
394,799,407
446,000
395,245,407
$
$
$
486.6
4.7
13.1
504.4
1.1
505.5
Number of
Non-Voting Shares
39,050,597
-
(39,050,597)
-
-
-
Amount
$
13.1
-
(13.1)
-
$
-
$
-
During the year ended December 31, 2015, cash dividends of $0.02 per Common Share were paid for each
of the quarters ended March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015. An
aggregate of $31.6 million in dividends was paid to shareholders in 2015.
45
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
15. Share-based compensation plan
Accounting policy
Stock options
The Company has established an incentive stock option plan (the “Option Plan”) for eligible directors, officers
and employees and accounts for these plans using the fair value method. The grant-date fair value of options
is recognized as an employee expense, with a corresponding increase in contributed surplus, over the period
that the individual becomes unconditionally entitled to the awards. When stock options are exercised, the
cash consideration received from employees is credited to share capital, as is the previously calculated fair
value included in contributed surplus.
Determining the fair value of share-based compensation awards at the grant date requires judgement. The
fair value of the options is determined using either the Black-Scholes or the Hull-White option pricing models
which take into account, as of the grant date, the exercise price, the expected life of the options, the current
price of the underlying stock and its expected volatility, expected dividends on the shares, and the risk-free
interest rate over the expected life of the option. The Company bases its estimates of volatility on historical
share prices of the Company itself as well as those of comparable companies with longer trading histories.
In the case of options issued since 2009, the options are only exercisable when the share price exceeds a
barrier price of $0.70 for 60 consecutive days on a volume weighted average price basis. With this additional
requirement for the share price to exceed a minimum level before the options become exercisable, it is
necessary to utilize the Hull-White model as this model takes into account the barrier price factor. All options
which were granted prior to 2009 and do not contain the minimum price requirement continue to be valued
using the Black-Scholes model.
Deferred share units and performance share units
The grant-date fair value of the amount payable to eligible directors, officers and employees in respect of
Deferred Share Units (“DSUs”), which are cash-settled, is recognized as an employee expense with a
corresponding increase in liabilities, over the period that the individuals become unconditionally entitled to
payment.
The grant-date fair value of the amount payable to eligible officers and employees in respect of Performance
Share Units (“PSUs”), which are cash-settled, is recognized as an employee expense with a corresponding
increase in liabilities, over a three year performance period.
The liabilities under the DSU and PSU Plans are re-measured at fair value at each reporting date and at
settlement date. For the PSU Plan, this includes re-measurement as the Company’s performance tracks
against the performance vesting targets. Any changes in the fair value of the liabilities are recognized in
employee expenses in net income for the period.
Supporting information
(a) Stock-option plan
The Option Plan permits the granting of options to eligible participants to purchase up to an aggregate
of 20,000,000 Common Shares. During 2015, the Company recorded compensation expense of $0.9
million (2014: $2.2 million) which has been credited to contributed surplus. Each option is exercisable,
subject to vesting terms of 20% at the end of each of the first five years after grant and immediately upon
a change in control of the Company, into one Common Share, subject to adjustments, at a price of not
less than the closing price of the Common Shares on the TSX on the day immediately preceding grant
date. Options granted under the Option Plan expire a maximum of ten years from the date of the grant.
During the year ended December 31, 2015, the Company granted 1,607,667 options with a fair value of
$0.7 million. Weighted average assumptions applied in the option pricing model included exercise price
of $2.20, risk-free interest rate of 0.99% volatility rates of 38% and an expected life of seven years.
46
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
15. Share-based compensation plan (continued)
(a) Stock-option plan (continued)
The following table summarizes the change in the options outstanding during the years ending
December 31, 2015 and 2014:
Outstanding, beginning of year
Granted
Exercised
Expired
Forfeited
Outstanding, end of year
Year ended December 31, 2015
Year ended December 31, 2014
Number of Options
10,431,000
1,607,667
(446,000)
-
(1,434,000)
10,158,667
Weighted average
exercise price
1.35
$
2.20
$
$
1.65
$
-
$
1.57
$
1.44
Number of Options
13,016,795
2,600,000
(3,671,000)
(24,795)
(1,490,000)
10,431,000
Weighted average
exercise price
$
$
$
$
$
$
0.97
2.58
0.35
12.10
1.25
1.35
Details of options outstanding under the Option Plan at December 31, 2015 are as follows:
Exercise
price
$
$
$
$
$
$
$
$
$
$
$
0.22
0.77
0.95
0.96
1.27
1.75
2.17
2.20
2.20
2.34
2.61
Number outstanding
December 31, 2015
1,000,000
500,000
1,030,000
2,000,000
2,040,000
95,000
116,000
80,000
1,371,667
300,000
1,626,000
Weighted average
remaining option life
(years)
4.2
5.2
6.2
6.6
7.1
0.5
9.9
1.7
9.2
8.8
8.1
Weighted average
exercise price
$
$
$
$
$
$
$
$
$
$
$
0.22
0.77
0.95
0.96
1.27
1.75
2.17
2.20
2.20
2.34
2.61
Number exercisable
December 31, 2015
1,000,000
400,000
618,000
1,200,000
816,000
95,000
-
80,000
-
60,000
325,200
Weighted average
exercise price
0.22
$
0.77
$
0.95
$
0.96
$
1.27
$
$
1.75
$
-
$
2.20
$
-
$
2.34
$
2.61
10,158,667
7.0
$
1.44
4,594,200
$
1.01
(b) Deferred share unit plan
The Company has a DSU Plan for directors and designated executive officers. Directors may elect to
take a portion of their fees in the form of DSUs and executive officers may elect to take a portion of their
annual incentive bonus in the form of DSUs. All DSU holders are entitled to DSU dividends, equivalent
to the dividend they would have received if they held their DSUs as common shares. For directors, the
number of DSUs allotted is determined by dividing the dollar portion of the quarterly fees a director elects
to take in DSUs by the share price value on the fifth day following each quarter end. For executive
officers, the number of DSUs allotted is determined by dividing the dollar portion of the bonus that an
executive elects to take in DSUs by the weighted average price of the Company’s Common Shares for
the five business days prior to the issue notification date. For dividends, the number of DSUs allotted is
determined by dividing the total dollar value of the dividend each DSU holder would have received, by
the closing share price on the dividend payment date (2014: by the average share price for the five days
leading up to the dividend date of record).
Effective January 1, 2015, DSUs are only granted to non-executive directors per the amended DSU
Plan.
During 2015, designated executive officers were allotted 11,266 DSUs at a weighted average price of
$1.95 per DSU. A further 86,802 DSUs were issued to a director at a weighted average price of $1.99
per DSU, and 43,262 DSUs were redeemed at a weighted average price of $2.57 per DSU. The
cumulative number of DSUs outstanding at December 31, 2015 was 981,495 (December 31, 2014:
926,689). In 2015, the Company recorded compensation recovery for these DSUs of $0.3 million (2014:
expense of $1.0 million), with a corresponding decrease to accounts payable and accrued liabilities.
47
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
15. Share-based compensation plan (continued)
(c) Performance share unit plan
During 2015, the Company established a PSU Plan for designated officers and employees of the
Company. Under the terms of the PSU Plan, participants are granted a number of PSUs based on a
target award divided by the value of the Company’s Common Shares at the effective date of grant. All
PSU holders are entitled to PSU dividends, equivalent to the dividend they would have received if they
held their PSUs as common shares.
Performance targets are set by the Management Resource & Compensation Committee of the
Company’s Board of Directors. The number of PSUs which will ultimately vest will be the original number
of PSUs granted plus PSUs equal to the value of accrued notional dividends over the performance
period. For dividends, the number of PSUs allotted is determined by dividing the total dollar value of the
dividend each PSU holder would have received, by the closing share price on the trading day
immediately after the dividend date of record. The redemption value of vested PSUs will be in a range
from 0% to 200% based on return on capital employed over a three year performance period.
Outstanding, beginning of year
Granted
Outstanding, end of year
Year ended December 31,
2015
2014
-
434,115
434,115
-
-
-
In 2015, the Company recorded PSU expense of $0.4 million (2014: nil), with a corresponding increase
to accounts payable and accrued liabilities.
16. Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its Common Shares and other
Non-Voting Shares. Basic EPS is calculated by dividing the net income attributable to Common and Non-
Voting shareholders of the Company by the weighted average number of shares outstanding during the
period. Diluted EPS is determined by adjusting the net income attributable to the shareholders and the
weighted average number of shares outstanding, for the effects of all dilutive potential shares, which
comprise share options granted to employees and directors.
17. Capital requirements
The Company’s strategy for managing capital is to maintain a capital position that provides financial flexibility
and achieves growth with the objective of maximizing long-term shareholder value. Western’s capital
requirements typically include major new investments designed to increase net income and disbursements
for other new equipment and ongoing enhancements, efficiency improvements, safety, and protection or
extension of the life of equipment. Significant expenditures are also required to fund new capital roads
allowing access to timber stands for harvesting purposes. During 2015, capital expenditures continued to
be monitored closely because of the changing economic climate, but spending on planned strategic capital
projects has continued because of Western’s stronger financial position and continued confidence in the
lumber markets.
The Company seeks to achieve a balance between the higher returns that may arise with higher levels of
borrowing and the advantages and security provided by a sound capital position. The Company monitors
the ratio of net debt to capitalization. Under the current market conditions the Company has decreased its
debt position and has a net capitalization to debt ratio of 11% as at December 31, 2015 (December 31, 2014:
16%). Net debt is defined as long-term debt plus amounts drawn on the revolving credit facility, less cash
and cash equivalents. Capitalization comprises net debt and shareholders’ equity.
Changes to the capital structure may be made as strategic opportunities arise. In order to maintain or adjust
the capital structure, the Company may buy back shares, issue new shares, source new debt, or sell assets
to reduce debt. The Company has internal controls to ensure changes to the capital structure are properly
reviewed and approved.
Beginning in 2013, the Company initiated a quarterly dividend program which is being paid from operating
cash flows, and is at the discretion of the Company’s Board of Directors.
48
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
17. Capital requirements (continued)
Under the current financing agreements, the Company is subject to financial covenants. The Facility has a
minimum fixed charge coverage ratio of 1.1:1.0 should availability fall below 12.5% of the borrowing base or
in the event of default. The Term Loan contains a maximum loan to value ratio financial covenant of 45%.
Loans for this covenant are defined as the total term loans outstanding and value is defined as the appraised
value of our Crown tenures and private timberlands; this financial covenant is measured on the last day of
each fiscal year and at the time of consummation of a sale or disposition of assets, with certain exceptions.
As at December 31, 2015, the Company is in compliance with all financial covenants, and expects to be in
compliance for the next 12 months.
The Company is not subject to any statutory capital requirements. Under the Company’s share-based
compensation plan, commitments exist to issue common shares.
There were no changes to the Company’s approach to managing capital during the year.
18. Commitments and contingencies
(a) Lumber duties and export tax
Under the softwood lumber agreement (“SLA”) between Canada and the United States (“US”), the
Company’s exports to the US were assessed an export tax by the Canadian Government. The SLA
expired on October 12, 2015, eliminating export tax measures applicable under this agreement
subsequent to this date. A standstill provision within the SLA precludes the US from bringing trade action
against Canadian softwood lumber producers for twelve months after the expiration.
The export tax rate varied according to the price of lumber based on the “Random Lengths Framing
Lumber Composite Index” (“Index”) and ranges from zero percent when the Index was above $355 per
thousand board feet US dollars (“USD”) to 15% when the Index was under USD$315 per thousand board
feet.
The export tax only applied to the first USD$500 per thousand board feet for any product sales. In
addition, if the monthly volume of exports from the British Columbia coastal region exceeded a certain
“Trigger Volume” as defined in the SLA, a “surge” mechanism was applicable to increase the rate of the
export tax for that month by 50% (for example, the 15% export tax rate would become 22.5% for that
month). During 2015, the Company recorded export tax expense of $3.6 million (2014: nil).
(b) Litigation and claims
In the normal course of its business activities, the Company may be subject to a number of claims and
legal actions that may be made by customers, unions, suppliers and others in respect of which either
provision has been made or for which no material liability is expected. The Company has claims filed
against it from logging contractors and unions with respect to various operating issues. Certain of the
claims are pending mediation or arbitration, while others have not yet reached this formal stage. Where
the Company is not able to determine the outcome of these disputes no amounts have been accrued in
these financial statements.
(c) Long-term fibre supply agreements
Accounting policy
Deferred revenue is the result of the contractual obligations incurred upon the acquisition of the
Englewood Logging Operation in March 2006, and calls for Western to deliver a specified volume of
fibre (chips and pulp logs) over the term of the contract. Accordingly, the deferred revenue is amortized
into net income for the period on a straight-line basis over 40 years, being the term of the related fibre
supply contract.
49
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
18. Commitments and contingencies (continued)
(c) Long-term fibre supply agreements (continued)
Supporting information
The Company has a number of long-term commitments to supply fibre to third parties including a 40
year agreement, entered into on March 17, 2006 (“40 Year Agreement”). As consideration for entering
into the 40 Year Agreement, the Company received a price premium of $80.0 million that will be earned
as wood chips are delivered under the agreement. Upon execution, a non-refundable prepayment of
the price premium of $35.0 million was received with the balance of $45.0 million set-off against the
consideration due by the Company on its acquisition of the Englewood Logging Division from the same
party to the fibre supply agreement. The Company recorded the price premium as deferred revenue
and has granted a first charge over the acquired assets (including a tree farm license with an allowable
annual cut of 844,000 cubic metres, 4,771 hectares of private timberlands and other capital
improvements and equipment) to secure certain of these obligations.
In addition, certain of the Company’s long term fibre supply agreements with third parties have minimum
volume requirements and may, in the case of a failure to produce the minimum volume, require the
Company to conduct whole log chipping, source the deficiency from third parties at additional cost to the
Company or pay the party to the fibre supply agreement a penalty calculated based on the provisions
contained in the relevant agreement. Should Western take significant market related curtailments in its
sawmills, the volume of chips produced is reduced and accordingly there is greater risk that the Company
may not meet its contractual obligations.
The Company has satisfied its annual fibre commitments for 2015.
(d) Operating leases
Accounting policy
Leases of property, plant and equipment that transfer to the Company substantially all of the risks and
rewards of ownership are classified as finance leases. The leased assets are measured initially at an
amount equal to the lower of their fair value and the present value of the minimum lease payments.
Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy
applicable to that asset.
Assets held under other leases are classified as operating leases and are not recognized in the
Company’s statement of financial position.
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the
term of the lease. Lease incentives received are recognized as an integral part of the total lease expense,
over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and
the reduction of the outstanding liability. The finance expense is allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Supporting information
Future minimum lease payments at December 31, 2015 under operating leases were as follows:
2016
2017
2018
2019
2020
Thereafter
$
2.5
1.8
1.7
1.6
0.9
2.4
10.9
$
(e) Pension funding commitments
The Company is committed to making estimated annual special payments in relation to its salaried
pension plans of $2.9 million a year for 2016 and approximately $1.7 million per year on average for
2017 to 2028, or until such time as a new funding valuation may lead to a change in the amount of
payments required.
50
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
19. Segmented information
Accounting policy
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments. The Company is an
integrated Canadian forest products company operating in one business segment comprised of timber
harvesting, log sales and lumber manufacturing and sales in world-wide markets.
A geographical segment is engaged in providing products or services within a particular economic
environment that is subject to risks and returns that are different from those of segments operating in other
economic environments. Western’s log and lumber products are currently sold in over 25 countries
worldwide, with sales to customers in Canada, the US, Asia and Europe representing over 97% of the
Company’s sales. Substantially all of Western’s property, plant and equipment, biological assets and
intangible assets are located in British Columbia, Canada. The Company manages its business as a single
operating segment. The Company purchases and harvests logs which are then manufactured into lumber
products at the Company’s sawmills, or sold.
Supporting information
The Company’s sales, based on the known origin of the customer, were as follows:
Year ended December 31,
2015
2014
Canada
United States
Japan
China
Other
Europe
20. Employee benefits
Accounting policy
(a) Termination benefits
$
$
473.0
231.7
161.3
126.5
51.8
37.6
1,081.9
441.8
189.3
163.8
162.9
42.9
36.2
1,036.9
$
$
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer
of those benefits and when the Company recognizes costs for a restructuring. If benefits are not
expected to be settled wholly within twelve months of the reporting date, then they are discounted.
(b) Short-term employee benefits
Short-term employee benefit obligations, including bonus plans, are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is recognized for the amount expected
to be paid if the Company has a present legal or constructive obligation to pay this amount as a result
of past service provided by the employee and the obligation can be estimated reliably.
(c) Employee future benefits
The Company has various defined benefit and defined contribution plans that provide pension or other
retirement benefits to most of its salaried employees and certain hourly employees not covered by forest
industry union plans. The Company also provides other post-employment benefits and pension bridging
benefits to eligible retired employees.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age, years of service and
compensation. The Company’s net obligation in respect of its defined benefit plans is calculated
separately for each plan by estimating the amount of future benefit that employees have earned in return
for their service in the current and prior periods; that benefit is discounted to determine its present value,
and the fair value of the plan assets is deducted in arriving at the obligation. The calculation is performed
annually by a qualified actuary using the actuarial cost projected unit credit method.
51
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
20. Employee benefits (continued)
When the calculation results in a potential asset to the Company, the recognized asset is limited to the
present value of economic benefits available in the form of any future refunds from the defined benefit
plan or reductions in future contributions to the defined benefit plan. In order to calculate the present
value of economic benefits, consideration is given to any minimum funding requirements that apply to
any defined benefit plan.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the
return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest),
are recognized immediately in other comprehensive income. The Company determines the net interest
expense (income) on the net defined liability for the period by applying the discount rate used to measure
the defined benefit obligation at the beginning of the annual period to the then-net defined liability, taking
into account any changes in the net defined benefit liability during the period as a result of contributions
and benefit payments. Net interest expense and other expenses related to defined benefit plans are
recognized in net income.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that
relates to past service or the gain or loss on curtailment is recognized immediately in net income. The
Company recognizes gains and losses on settlement of a defined benefit plan when the settlement
occurs. A defined contribution plan is a retirement plan under which the Company pays fixed
contributions into a separate entity. For Western’s defined contribution plan, the Company makes
contributions (currently, 7% of employee earnings) to privately administered investment funds on behalf
of the plan members. The Company has no further payment obligations once the contributions have
been paid. The contributions are recognized as employee benefit expense in net income for the period
during which services are rendered by employees. Prepaid contributions are recognized as an asset to
the extent that a cash refund or a reduction in the future payments is available.
For hourly employees covered by forest industry union defined benefit pension plans, the Company’s
contributions as required under the collective agreements are charged to net income for the period.
Supporting information
Information about the Company's defined benefit salaried pension plans and other non-pension benefits, in
aggregate, is as follows:
December 31, 2015
December 31, 2014
Salaried
Pension Plans
Non-pension
Plans
Salaried
Pension Plans
Non-pension
Plans
Plan assets:
Fair value, beginning of year
Company contributions
Benefits and administrative expenses paid
Actual return on assets
Fair value, end of year
Accrued benefit obligation:
Balance, beginning of year
Current service costs and administrative expenses
Benefits and administrative expenses paid
Interest cost
Actuarial loss
Balance, end of year
Deficit recognized in Statement of
Financial Position (Note 12)
Cumulative actuarial gains (losses), beginning of year
Actuarial losses recognized directly in OCI
Cumulative actuarial gains (losses), end of year
$
$
-
$
0.4
(0.4)
-
$
-
-
$
0.4
(0.4)
-
$
-
$
$
$
$
$
$
$
$
$
$
$
(26.8)
$
(5.9)
$
(24.8)
$
(6.1)
$
$
$
$
$
$
$
$
5.5
-
(0.4)
0.3
0.7
6.1
1.1
(0.7)
0.4
105.9
4.3
(8.7)
8.5
110.0
118.7
0.2
(8.7)
5.2
19.4
134.8
(14.7)
(15.8)
(30.5)
6.1
-
(0.4)
0.2
-
5.9
0.4
-
0.4
110.0
4.3
(8.5)
0.8
106.6
134.8
0.3
(8.5)
5.0
1.8
133.4
(30.5)
(5.1)
(35.6)
52
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
20. Employee benefits (continued)
Experience gains (losses):
Experience gains (losses) on plan assets:
Amount
Percentage of plan assets
Experience gains (losses) on plan liabilities:
December 31, 2015
December 31, 2014
Salaried
Pension Plans
Non-pension
Plans
Salaried
Pension Plans
Non-pension
Plans
$
(3.4)
(3.18)%
n/a
n/a
$
3.7
3.34%
n/a
n/a
Amount
Percentage of plan assets
$
-
(0.02)%
-
$
0.00%
$
(3.6)
2.68%
-
$
0.00%
The Company has several funded and unfunded defined benefit plans, a defined contribution pension plan
and a group RRSP that provide retirement benefits to substantially all salaried employees and certain hourly
employees. In addition, the Company provides other unfunded post-employment benefits to certain former
salaried and hourly employees. The funded and unfunded defined benefit pension plans were closed to new
entrants effective June 30, 2006, and effective December 31, 2010, no further benefits accrue under these
plans as members became eligible to participate in the defined contribution plan. All new salaried employees
are now provided with pension benefits through a defined contribution plan. The defined benefit plans are
based on years of service to December 31, 2010, and final average earnings. The Company’s other post-
employment benefit plans are non-contributory and include a range of health care and other benefits.
Total cash payments for employee future benefits for the year ended December 31, 2015 were $18.1 million
(December 31, 2014: $16.6 million), consisting of cash contributed by the Company to its funded pension
plans, cash payments directly to beneficiaries for its unfunded other benefit plans, and cash contributed to
the forest industry union defined benefit plans. In relation to defined benefit plans, the Company measures
the fair value of plan assets and the accrued benefit obligations for accounting purposes as at December 31
of each year. The most recent actuarial valuations of the funded defined benefit pension plans were
performed at December 31, 2013. The next actuarial valuation for both the funded and unfunded defined
benefit plans and other unfunded post-employment benefit plans will be prepared for December 31, 2016.
Included in the accrued benefit obligations and plan assets for salaried pension plans, presented above, are
accrued benefit obligations of $126.6 million at December 31, 2015 (December 31, 2014: $128.0 million) in
respect of plans that are wholly or partially funded.
The following is a breakdown of the defined benefit pension plan assets into their major investment
categories:
Equity securities
Debt securities
Other
December 31,
2015
December 31,
2014
33%
64%
3%
100%
37%
61%
2%
100%
53
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
20. Employee benefits (continued)
The significant actuarial assumptions adopted in measuring the Company's accrued benefit obligations
(expressed as weighted averages) are as follows:
December 31,
2015
December 31,
2014
December 31, 2015
Increase (Decrease) of Accrued Benefit
Discount rate, beginning of year for:
Pension plans
Non-pension plans
Discount rate, end of year for:
Pension plans
Non-pension plans
Rate of compensation increase for all plans
Health care cost trend rate
3.83%
3.65%
3.73%
3.60%
3.49%
4.56%
4.30%
3.83%
3.65%
3.49%
5.65% in 2016
5.90% in 2015
grading to 4.35% grading to 4.35%
in 2026
in 2026
Obligation w ith Change in Assumption
1% Decrease
1% Increase
n/a
n/a
n/a
n/a
14,437,000
515,300
(2,175,400)
(406,000)
(17,637,300)
(598,400)
1,938,300
380,400
Medical cost trend rate
Future mortality
n/a
n/a
n/a
n/a
(406,000)
315,600
380,400
(368,800)
The Company's salaried employees’ pension and non-pension benefits expense is as follows:
December 31, 2015
December 31, 2014
Salaried
Pension Plans
Non-pension
Plans
Salaried
Pension Plans
Non-pension
Plans
Defined benefit plans:
Current service costs and administrative expenses
Net interest costs
Cost of defined benefit plans
Cost of defined contribution plans
Total cost of employee post-retirement benefits
$
$
0.3
0.9
1.2
3.0
4.2
-
$
0.2
0.2
-
0.2
$
0.2
0.5
0.7
2.8
3.5
-
$
0.2
0.2
-
0.2
$
$
$
The Company expects to make funding contributions to its defined benefit plans of $2.9 million during 2016.
The Company’s unionized employees are members of industry-wide pension plans to which the Company
contributes a predetermined amount per hour worked by an employee. The Company’s liability is limited to
its contributions. The pension expense for these plans is equal to the Company’s contributions and for 2015
amounted to $10.6 million (2014: $9.1 million).
21. Financial instruments – fair values and risk management
Accounting policy
(a) Non-derivative financial assets
The Company classifies its non-derivative financial assets in the following categories: at fair value
through profit and loss, loans and receivables, held-to-maturity and available-for-sale. The classification
depends on the purpose for which the financial assets were acquired.
The Company initially recognizes loans and receivables on the date that they are originated. All other
financial assets are recognized initially on the trade date at which the Company becomes a party to the
contractual provisions of the instrument.
The Company derecognizes a financial asset when the contractual cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest
in transferred financial assets that is created or retained by the Company is recognized as a separate
asset or liability.
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is
designated as such upon initial recognition. Upon initial recognition, directly attributable transaction
costs are recognized in net income as incurred. Financial assets at fair value through profit or loss are
54
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Financial instruments – fair values and risk management (continued)
(a) Non-derivative financial assets (continued)
measured at fair value, and changes therein are recognized in net income. Financial assets at fair value
through profit or loss are comprised of certain investments and forward exchange contracts.
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in
an active market. Such assets are initially recognized at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized
cost using the effective interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, trade and other receivables. Cash and
cash equivalents comprises cash balances and short-term investments with original maturities of 90
days or less.
Held-to-maturity financial assets are debt securities for which the Company has the positive intent and
ability to hold to maturity. Held-to-maturity financial assets are recognized initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets
are measured at amortized cost using the effective interest method, less any impairment losses. Held-
to-maturity financial assets include certain investments held by the Company.
Available-for-sale financial assets are non-derivative financial assets that are designated as available-
for-sale and that are not classified in any of the previous categories. Available-for-sale financial assets
are measured at fair value and changes therein, other than impairment losses and foreign currency
differences on available-for-sale debt instruments, are recognized in other comprehensive income and
presented within equity in the fair value reserve. When an investment is derecognized, the cumulative
gain or loss in other comprehensive income is transferred to net income. The Company does not have
any financial assets classified as available-for-sale.
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows of that asset that can be estimated
reliably. The Company considers evidence of impairment for receivables and held-to-maturity financial
assets at both a specific asset and collective level. All individually significant receivables and held-to-
maturity financial assets are assessed for specific impairment. All individually significant receivables
and held-to-maturity financial assets found not to be specifically impaired are then collectively assessed
for any impairment that has been incurred but not yet identified. Receivables and held-to-maturity
financial assets that are not individually significant are collectively assessed for impairment by grouping
together receivables and held-to-maturity financial assets with similar risk characteristics.
In assessing for impairment at the collective level, the Company uses historical trends of the probability
of default, timing of recoveries and the amount of loss incurred, adjusted for Management’s judgement
for current economic and credit conditions.
An impairment loss is calculated as the difference between an asset’s carrying amount and the present
value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses
are recognized in net income for the period and reflected in an allowance against receivables. Interest
on impaired assets continues to be recognized through the unwinding of the discount. When a
subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss
is reversed through net income.
Impairment losses on available-for-sale financial assets are recognized by transferring the cumulative
loss that has been recognized in other comprehensive income, and presented in unrealized gains/losses
on available-for-sale financial assets in equity, to net income. The cumulative loss that is removed from
other comprehensive income and recognized in net income is the difference between the acquisition
cost, net of any principal repayment and amortization, and the current fair value, less any impairment
loss previously recognized in net income. Changes in impairment provisions attributable to time value
are reflected as a component of interest income.
55
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Financial instruments – fair values and risk management (continued)
(b) Non-derivative financial liabilities
The Company classifies its financial liabilities as other financial liabilities.
The Company initially recognizes debt issued on the date that it is originated. The Company
derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expire.
The Company’s non-derivative financial liabilities consist of long-term debt, the revolving credit facility
as well as accounts payable and accrued liabilities. These financial liabilities are recognized initially at
fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial
liabilities are measured at amortized cost using the effective interest method.
(c) Derivative financial instruments
The Company may enter into derivative financial instruments (foreign currency forward contracts) in
order to mitigate its exposure to foreign exchange risk. The Company’s policy is not to use derivative
financial instruments for trading or speculative purposes. These instruments have not been designated
as hedges for accounting purposes, and they are carried on the statement of financial position at fair
value with changes in value being recognized as gains or losses within sales in net income for the period.
Embedded derivatives are separated from the host contract and accounted for separately if (i) the
economic characteristics and risks of the host contract and the embedded derivative are not closely
related, (ii) a separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative, and (iii) the combined instrument is not measured at fair value through profit or
loss. Changes in the fair value of separable embedded derivatives are recognized immediately in net
income.
Financial assets and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Company has a legal right to offset the amounts and intends either
to settle on a net basis or to realize the asset and settle the liability simultaneously.
56
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Financial instruments – fair values and risk management (continued)
Supporting information
(d) Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities,
including their levels in the fair valuation hierarchy. It does not include fair value information for financial
assets not measured at fair value if the carrying amount is a reasonable approximation of fair value.
Carrying Amount
Fair Value
December 31, 2015
Financial assets measured at fair value
Investments
Other
Held to Designated Loans and
financial
maturity at fair value receivables liabilities
Total
Level Level Level
2
3
1
Total
$
$
5.1
5.1
$
-
$
-
$
-
$
-
$
-
$
-
$
$
5.1
5.1
-
5.1
-
5.1$
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
-
$
-
$
-
-
$
-
$
-
$
$
9.4
75.0
84.4
-
$
-
$
-
$
9.4
75.0
84.4
$
Financial liabilities measured at fair value
Foreign currency forward contracts
-
$
$
-
$
$
0.3
0.3
$
-
$
-
$
-
$
-
$
$
0.3
0.3
-
0.3
-
0.3$
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities
Long-term debt (Note 10)
-
$
-
$
-
-
$
-
$
-
-
$
-
$
-
$
97.4
63.2
160.6
$
$
97.4
63.2
160.6
$
December 31, 2014
Financial assets measured at fair value
Investments
$
$
5.0
5.0
$
-
$
-
$
-
$
-
$
-
$
-
$
$
5.0
5.0
-
5.0
-
5.0$
Financial assets not measured at fair value
Cash and cash equivalents
Trade and other receivables
-
$
-
$
-
-
$
-
$
-
$
$
1.8
65.6
67.4
-
$
-
$
-
$
1.8
65.6
67.4
$
Financial liabilities measured at fair value
Foreign currency forward contracts
-
$
$
-
$
$
0.3
0.3
$
-
$
-
$
-
$
-
$
$
0.3
0.3
-
0.3
-
0.3$
Financial liabilities not measured at fair value
Accounts payable and accrued liabilities
Long-term debt (Note 10)
-
$
-
$
-
-
$
-
$
-
-
$
-
$
-
(e) Financial risk management
$
76.3
73.0
149.3
$
$
76.3
73.0
149.3
$
The use of financial instruments exposes the Company to credit risk, liquidity risk, and market risk. Other
than as described below, Management does not consider the risks to be significant to the Company.
The Board of Directors has oversight responsibility for the Company’s risk management framework. The
Company identifies, analyzes and actively manages the financial market risks associated with changes
in foreign exchange rates, interest rates and commodity prices. Western has established risk
management policies and controls to identify and analyze the risks faced by the Company, to set
appropriate risk limits and to monitor risks and adherence to limits. Currently, the Company is only
engaged in foreign exchange forward contract activities.
57
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Financial instruments – fair values and risk management (continued)
(e) Financial risk management (continued)
(i) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet is contractual obligations and arises principally from the Company’s
receivable from customers, and cash and cash equivalents. The carrying amount of the Company’s
financial assets represents the maximum credit exposure.
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. However, Management also considers the demographics of the Company’s customer
base, including the default risk of the industry and country in which customers operate, as these
factors may have an influence on credit risk. The Company has determined that there is no
concentration of credit risk either geographically or by counterparty.
Sales transactions are made through the extension of credit to customers and are recorded at the
point in time the sale is recognized. Accordingly, fluctuations in collectability may affect the carrying
value of the underlying accounts receivable. Management balances the credit risk through
rigorously and continually reviewing customer credit profiles. The Company has established policies
and controls to review the creditworthiness of new customers, including review of credit ratings. The
Company’s general practice is to insure substantially all North American lumber receivables for 90%
of value with the Export Development Corporation or Coface Canada, while substantially all sales
outside of North America are sold on either a cash basis or with secured instruments, which reduces
the Company’s exposure to bad debts.
The Company regularly reviews the collectability of accounts receivable and makes provisions
where the collectability is uncertain. Historically the Company’s bad debts have been minimal and
as at December 31, 2015, the Company had an allowance for doubtful customer accounts of nil
(December 31, 2014: $0.1 million).
The aging of trade and other receivables at the reporting date that were not impaired was as follows:
December 31, 2015
December 31, 2014
Gross value
Impairment
Gross value
Impairment
Not past due
Past due, 0 - 30 days
Past due, 31 - 120 days
Past due, 120 - 365 days
More than 1 year
$
$
71.0
3.9
0.1
-
-
75.0
-
$
-
-
-
-
$
-
55.8
9.8
0.1
-
-
65.7
-
$
-
0.1
-
-
0.1
$
$
$
The Company held cash and cash equivalents of $9.4 million at December 31, 2015 (December 31,
2014: $1.8 million), which represents its maximum credit exposure on these assets. The cash and
cash equivalents are held at highly rated financial institutions and as such, the Company does not
believe that these are exposed to significant credit risk.
(ii) Interest rate risk
The Company is exposed to interest rate risk through its current financial assets and financial
obligations bearing variable interest rates. Based on the Company’s debt structure at December
31, 2015, a change of 1% in interest rates would have increased or decreased annual net income
by approximately $0.8 million (2014: $0.9 million). The Company does not currently use derivative
instruments to reduce its exposure to interest rate risk.
(iii) Currency risk
Certain of the Company’s sales transactions are denominated in foreign currencies, principally, the
USD and Japanese Yen (“JPY”), and accordingly the Company is exposed to currency risk
associated with changes in foreign exchange rates. To assist in managing this exchange risk, the
Company sells forward contracts with a maximum term for each transaction of up to one year. The
Company does not consider the credit risk associated with the counterparty risk to be significant.
58
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Financial instruments – fair values and risk management (continued)
(e) Financial risk management (continued)
(iii) Currency risk (continued)
During 2015, the Company entered into forward contracts to sell USD and JPY in order to mitigate
a portion of the foreign currency risk. At December 31, 2015, the Company had outstanding
obligations to sell an aggregate USD$20.0 million at an average exchange rate of CAD$1.38 per
USD with maturities through January 22, 2016, and to sell JPY 775.0 million at a rate of JPY 90.02
per CAD with maturities through February 29, 2016.
All foreign currency gains and losses to December 31, 2015 have been recognized in sales in the
consolidated statement of comprehensive income and the fair value of these instruments at
December 31, 2015 was a net liability of $0.3 million which is included in accounts payable and
accrued liabilities on the consolidated statement of financial position (December 31, 2014: $0.3
million). A net loss of $7.1 million (2014: net loss of $1.8 million) was recognized in sales in the
consolidated statement of comprehensive income on the change in fair values of the foreign
exchange contracts. An increase (decrease) of 1% in the value of the CAD as compared to the JPY
would result in a gain (loss) of approximately $0.1 million in relation to the JPY Yen/CAD foreign
exchange contracts held at December 31, 2015. An increase (decrease) of 1% in the value of the
CAD as compared to the USD would result in a gain (loss) of approximately $0.3 million in relation
to the USD foreign exchange contracts held at December 31, 2015.
Certain receivable balances at December 31, 2015 are denominated in foreign currencies,
principally, the USD. Accordingly, fluctuations in foreign exchange rates may affect the carrying
value of the underlying accounts receivable. As of December 31, 2015, the Company’s accounts
receivable denominated in USD totaled USD$22.4 million. An increase (decrease) in the value of
the Canadian dollar by USD$0.01 would result in a decrease (increase) in USD denominated
accounts receivable at year end of approximately $0.4 million. In addition, as at December 31,
2015, the Company had a total of USD$1.1 million in USD denominated cash and cash equivalents.
An increase (decrease) in the value of the Canadian dollar by USD$0.01 would result in an
immaterial change to USD denominated cash and cash equivalents at year end.
(iv) Commodity price risk
The Company does not enter into commodity contracts other than to meet the Company’s expected
usage and sale requirements and such contracts are not settled net.
(v) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled by delivering cash or another financial asset.
Management mitigates any liquidity risk associated with the subsequent payment of liabilities
through the continual monitoring of expenditures and forecasting of liquidity resources. The
Company maintains a revolving credit facility that can be drawn down to meet short-term financing
and liquidity needs.
As at December 31, 2015, the Company had $168.5 million (December 31, 2014: $132.6 million)
available under its credit facility and revolving term loan. The following are the contractual maturities
of financial liabilities, including estimated interest payments:
6 months
or less
$
97.7
0.5
1.0
99.2
$
6 - 12
months
-
$
0.5
1.0
1.5
$
2 - 3 years
-
$
-
4.1
4.1
$
4 - 5 years
-
$
-
65.1
65.1
$
More than 5
years
-
$
-
-
$
-
Accounts payable and accrued liabilities
Revolving credit facility
Revolving term loan
Carrying
amount
$
97.7
-
63.2
160.9
$
Contractual
cash flows
97.7
$
1.0
71.2
169.9
$
59
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
22. Finance Costs
Accounting policy
Finance costs comprise interest expense on long-term debt and the revolving credit facility, amortization of
deferred financing costs, unwinding of the discount on the silviculture provision, changes in the fair value of
investments recognized immediately through net income and net interest on the net defined benefit plan
obligation. All finance costs are recognized in net income during the period using the effective interest
method with the exception of the net interest on the net defined benefit obligation, which is recognized as
described in Note 20.
Supporting information
Long-term debt
Net interest - defined benefit plan obligation
Revolving credit facility
Amortization of deferred financing costs
Unwind of discount on provisions
Other
23. Operating restructuring items
Year ended December 31,
2015
2014
$
$
2.1
1.3
0.9
0.4
0.2
0.1
5.0
3.1
0.8
0.9
0.5
0.3
0.1
5.7
$
$
Operating restructuring items of $4.3 million in 2015 includes $0.7 million relating to additional ongoing costs
associated with the closure of the Nanaimo sawmill in 2014. The remaining operating restructuring costs
reflect costs including those expenses resulting from the consolidation of the Central Island forest operations
during the year.
Operating restructuring items for 2014 of $10.8 million related to the closure of the Nanaimo sawmill,
restructuring the Company’s Japan division, the arbitrated settlement of a union grievance issue relating to
the 2011 curtailment of the Duke Point and Nanaimo sawmills, and other unrelated severance costs.
24. Discontinued operations
Accounting policy
A discontinued operation is a component of Western’s business, the operations and cash flows of which can
be clearly distinguished from the rest of Western and which:
• Represents a separate major line of business or geographical area of operations;
• Is part of a single coordinated plan to dispose of a separate major line of business or geographical area
of operations; or
• Is a subsidiary acquired exclusively with a view to re-sale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the
criteria to be classified as held for sale.
Supporting information
In March 2006, the Company closed its Squamish pulp mill located on 212 acres on the mainland coast of
British Columbia and exited the pulp business. Subsequent to the closure, the Company sold substantially
all of the manufacturing assets of the mill. Ongoing costs including supervision, security and property taxes
have been expensed as incurred.
In January 2013, Western announced that it had entered into a conditional agreement for the sale of its
former Squamish pulp mill site. Closing was subject to certain conditions and Western was responsible for
the satisfactory remediation of the property to applicable environmental standards prior to closing the sale.
In 2014, the Company completed its remediation plan in accordance with the terms of the agreement.
On February 6, 2015, the Company completed the sale of its former Squamish pulp mill site for proceeds of
$21.8 million and recognized a gain on disposition of $5.4 million during the first quarter of 2015.
60
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2015 and 2014
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
24. Discontinued operations (continued)
The following table provides additional information with respect to the discontinued operations:
Net income from discontinued operations
Cash provided by discontinued operations
Assets of discontinued operations, excluding land
Liabilities of discontinued operations
25. Related parties
Accounting policy
Year ended December 31,
2015
2014
$
9.1
$
-
$
20.9
$
(0.3)
December 31,
2015
December 31,
2014
$
-
.
$
-
$
2.8
$
4.8
Key management personnel are the Company’s directors and executive officers as disclosed in its 2015 and
2014 Annual Reports as applicable.
Supporting information
Compensation of key management personnel
The key management personnel of the Company include the executive management team and members of
the Board of Directors. Key management personnel compensation comprised:
Year ended December 31,
2014
2015
Salaries, directors' fees and short-term benefits
Post-employment benefits
Share-based payments
$
$
5.8
0.2
2.1
8.1
6.5
0.3
2.2
9.0
$
$
At December 31, 2015, $4.1 million of key management compensation costs were included in accounts
payable and accrued liabilities (December 31, 2014: $3.8 million).
26. Expense categorization
Expenses by function:
Administration
Distribution expenses
Cost of goods sold
Costs by nature:
Compensation costs
Amortization in cost of goods sold
Amortization in selling and administration
61
Year ended December 31,
2015
2014
$
$
$
$
Year ended December 31,
2015
2014
$
$
$
$
18.3
99.8
880.8
998.9
219.9
30.7
0.2
250.8
23.8
95.2
840.5
959.5
214.4
29.4
0.2
244.0
Western Forest Products Inc.
Suite 510
700 West Georgia Street
T D Tower, PO Box 10032
Vancouver, British Columbia
Canada V7Y 1A1
Telephone: 604 648 4500
www.westernforest.com
info@westernforest.com
Trading on the TSX as “WEF”