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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of May 4, 2005.
Commission File Number 033-74656-99
WESTERN FOREST PRODUCTS INC.
- --------------------------------------------------------------------------------
(Translation of registrant's name into English)
3rd Floor, 435 Trunk Road, Duncan, British Columbia Canada V9L 2P9
- --------------------------------------------------------------------------------
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):______
NOTE: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):______
NOTE: Regulation S-T Rule 10l(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-___________________.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WESTERN FOREST PRODUCTS INC.
----------------------------
(Registrant)
Date as of May 4, 2005
- ---------------------- By /s/ Paul Ireland
----------------------------
(Signature)*
Paul Ireland
Chief Financial Officer
- -----------
* Print the name and title under the signature of the signing officer
PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER
SEC 1815 (11-02)
[WFP LOGO]
WESTERN FOREST PRODUCTS INC.
435 Trunk Road
Duncan, British Columbia
Canada V9L 2P9
Telephone: 250 748 3711
Facsimile: 250 748 6045
WESTERN FOREST PRODUCTS INC.
FOR IMMEDIATE RELEASE TSX: WEF
WESTERN ANNOUNCES 1ST QUARTER RESULTS
May 4, 2005 - Duncan, British Columbia. Western Forest Products Inc. ("Western"
or the "Company") announced today the Company's results for the 1st quarter
ended March 31, 2005. The Company will host a teleconference call on Monday, May
9, 2005 at 10:00 a.m. PST (1:00 p.m. EST) on the Company's results. (See below
for details on participation.)
The Company's operations generated EBITDA of $8.7 million during the first three
months of 2005, an improvement over the EBITDA loss of $15.8 million during the
fourth quarter of 2004. After applicable deductions, the Company reported a net
loss of $5.3 million ($0.21 per share) in the quarter compared to a net loss of
$19.6 million ($0.76 per share) in the immediately preceding quarter.
Q1 2005 HIGHLIGHTS
- EBITDA for the solid wood segment of $11 million, an increase of
$21.3 million over the previous quarter reflecting an improvement in
lumber sales volumes, pricing, a weaker Canadian dollar and changes
in inventory provisions.
- The pulp segment generated $1.9 million of EBITDA, an improvement
over the loss of $1.8 million in the prior quarter on higher prices
and a more favourable exchange rate.
- The Company reached agreement with the BC Government for the
reimbursement of $5.8 million covering certain project engineering
and related costs that had been previously incurred on lands taken
back under the Forestry Revitalization Plan.
- Bank indebtedness decreased by $10.9 million in the quarter from the
application of cash flow from operations.
- The Company established a working capital reserve account under the
terms of the Bond Indenture to be funded by the proceeds of asset
sales. The balance available in the reserve account is currently $33
million following the sale of a former mill site in early April. The
amounts in the reserve account are available for operational
requirements.
Reynold Hert, President & CEO commenting on the results noted, "The results for
the quarter are encouraging and reflect the improvement in lumber and pulp
markets as well as the impact of the movement in our pulp log and lumber
inventory cost and market provisions. We are expecting to see increases in the
volume of our lumber sales for the remainder of the year compared to this
quarter although there may be some softening in prices as the year progresses."
About Western:
Western is an integrated Canadian forest products company and the second largest
coastal woodland operator in British Columbia. Principal activities conducted by
Western and its subsidiaries include timber harvesting, reforestation,
sawmilling logs into lumber and wood chips, value-added remanufacturing and
producing NBSK pulp. Over 95% of Western's logging is conducted on government
owned timberlands in British Columbia. All of
-2-
Western's operations, employees and corporate facilities are located in the
coastal region of British Columbia and its products are sold in 30 countries
worldwide.
Forward Looking Statement
This press release and the documents attached hereto contain statements that are
forward-looking in nature. Those statements appear in a number of places herein
and include statements regarding the intent, belief or current expectations of
Western, primarily with respect to market and general economic conditions,
future costs, expenditures, available harvest levels and future operating
performance of Western. Such statements may be indicated by words such as
"estimate", "expect", "intend", "believes" and similar words and phrases.
Readers are cautioned that any such forward-looking statements are not
guarantees and may involve known and unknown risks and uncertainties, and that
actual results may differ from those expressed or implied in the forward-looking
statements as a result of various factors, including general economic and
business conditions, product selling prices, raw material and operating costs,
changes in foreign-currency exchange rates, changes in government regulation,
fluctuations in demand and supply for Western's products, industry production
levels, the ability of Western to execute its business plan and misjudgements in
the course of preparing forward-looking statements. The information contained
under "Risks and Uncertainties" section of Western's annual management's
discussion and analysis and under the "Risk Factors" section of Western's Annual
Information Form identifies important factors that could cause such differences.
All written and oral forward-looking statements attributable to Western or
persons acting on behalf of Western are expressly qualified in their entirety by
the foregoing cautionary statements. Western does not expect to update
forward-looking statements as conditions change.
TELECONFERENCE CALL NOTIFICATION: MONDAY, MAY 9, 2005 AT 10:00 A.M. PST/1:00
P.M. EST
ON MONDAY, MAY 9, 2005, WESTERN FOREST PRODUCTS INC. WILL HOST A TELECONFERENCE
CALL AT 10:00 A.M. PST (1:00 P.M. EST). TO PARTICIPATE IN THE TELECONFERENCE
PLEASE DIAL 1-800-814-4860 IN CANADA AND THE U.S. (TOLL FREE) AND IN TORONTO OR
INTERNATIONALLY, 416-640-4127 BEFORE 10:00 A.M. PST (1:00 P.M. EST). THIS CALL
WILL BE TAPED, AVAILABLE ONE HOUR AFTER THE TELECONFERENCE, AND ON REPLAY UNTIL
MAY 19, 2005. TO HEAR A COMPLETE REPLAY, PLEASE CALL 1-877-289-8525 IN CANADA
AND THE U.S. (TOLL FREE), PASSCODE 21123246# OR IN TORONTO AND INTERNATIONALLY,
416-640-1917, PASSCODE 21123246#. THIS CALL WILL ALSO BE WEBCAST FROM WESTERN'S
WEBSITE AT WWW.WESTERNFOREST.COM.
FOR FURTHER INFORMATION
CONTACT: REYNOLD HERT 250 715 2207 PAUL IRELAND 250 715 2209
[WFP LOGO]
WESTERN FOREST PRODUCTS INC. - 2005 FIRST QUARTER REPORT
MANAGEMENT'S DISCUSSION & ANALYSIS
The following discussion and analysis reports and comments on the financial
condition and results of operations of Western Forest Products Inc. (the
"Company", "us", "we", or "our"), on a consolidated basis, for our first quarter
ended March 31, 2005 to help security holders and other readers understand our
Company and the key factors underlying our financial results. You should read
this discussion and analysis in conjunction with our consolidated financial
statements and related notes thereto, for the first quarter ended March 31,
2005, and our audited consolidated financial statements and management's
discussion and analysis ("MD&A") for the period from July 28, 2004 to December
31, 2004 (the "2004 Annual Report") which are filed on SEDAR at (www.sedar.com)
under our Company's name.
We acquired the solid wood and pulp business of Doman Industries Limited
("Doman") and certain of its subsidiaries (collectively with Doman, the
"Predecessor") on July 27, 2004 in connection with the implementation of the
Predecessor's Plan of Compromise and Arrangement under the Companies' Creditors
Arrangement Act (Canada) and Reorganization under the Canada Business
Corporations Act (the "Plan"). This discussion and analysis also compares our
results for the first quarter ended March 31, 2005 with our Predecessor's 2004
first quarter results. The consolidated financial and other information of the
Company issued subsequent to the Plan implementation may not be comparable with
the consolidated financial information and other information issued by the
Predecessor prior to the Plan implementation. Accordingly, the discussion and
analysis of our financial condition and results of operations compared to our
Predecessor should be reviewed with caution.
Unless otherwise noted, the information in this discussion and analysis is
updated to May 2, 2005. All financial references are in Canadian dollars unless
otherwise noted.
SUMMARY OF SELECTED RESULTS FOR THE QUARTER
1st Quarter
1st Quarter 4th Quarter 2004
2005 2004 Predecessor
(millions of dollars) Company Company (1)
- --------------------- ----------- ----------- -----------
Sales $ 162.7 $ 165.8 $ 163.0
Countervailing & anti-dumping duties $ 8.6 $ 9.3 $ 9.5
EBITDA $ 8.7 $ (15.8) $ 15.8
Operating earnings (loss) $ 2.5 $ (24.5) $ 4.4
Interest expense $ (11.8) $ (11.2) $ (30.0)
Foreign exchange gain (loss) on long-term debt $ (1.6) $ 12.5 $ (10.0)
Net loss $ (5.3) $ (19.6) $ (44.3)
----------- ----------- -----------
Per share:
Basic $ (0.21) $ (0.76) $ (1.07)
Diluted $ (0.21) $ (0.76) $ (1.07)
(1) Q1 2004 restated for the sale of the Port Alice pulp mill by our Predecessor
in May, 2004.
2
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
OVERVIEW
The net loss for the first quarter of 2005 was $5.3 million ($0.21 per share)
compared to a net loss of $19.6 million ($0.76 per share) in the immediately
preceding quarter and a net loss of $44.3 million recorded by our Predecessor in
the first quarter of 2004. The results for the quarter benefited from higher
lumber and pulp prices and a slight weakening in the Canadian dollar compared to
the previous quarter.
These factors also resulted in positive EBITDA of $8.7 million in the quarter
compared to negative $15.8 million in the previous quarter and positive $15.8
million in the first quarter of 2004. The $24.5 million improvement in EBITDA
compared to the previous quarter was partly offset by the $14.1 million negative
impact of exchange rates on the Company's long-term debt that is denominated in
US dollars as the Company recorded a loss in the quarter of $1.6 million on the
translation of this debt compared to a gain of $12.5 million in the previous
quarter.
As disclosed in our 2004 Annual Report, the deposit rate that Western pays with
respect to the countervailing and antidumping duties in the softwood lumber
dispute with the US decreased from 27.22% through to December 20, 2004 to 20.96%
until February 24, 2005 and 20.15% thereafter. Softwood lumber duties expensed
in the quarter totalled $8.6 million compared to $9.3 million in the immediately
preceding quarter and $9.5 million in the first quarter of 2004.
Included in other income during the quarter is $5.8 million for reimbursements
agreed to date with the BC Government for project engineering and other costs
incurred by our Predecessor with respect to certain timber cutting rights taken
back by the BC Government under the Forestry Revitalisation Plan. We received
$2.7 million during the quarter and the balance of $3.1 million is included in
accounts receivable at March 31, 2005.
The following table reconciles EBITDA as reported in the previous quarter to the
current quarter:
(millions of dollars)
- ---------------------
EBITDA for the three months ended December 31, 2004 $ (15.8)
Improvement in average prices realised 5.0
Impact of weakening (strengthening) Canadian dollar 3.7
Change in volumes sold (1.3)
Impact of changes in lower of cost and market to inventory values 15.8
Other 1.3
---------
EBITDA for the three months ended March 31, 2005 $ 8.7
=========
EBITDA for the current quarter compared to the previous quarter: the improvement
in average prices realised is for lumber and pulp; the Canadian dollar weakened
by approximately 3% resulting in higher revenues as approximately 70% of lumber
sales and all pulp sales are denominated in US dollars; lumber sales volumes
increased in the quarter (impact is shown at the previous quarters negative
margins); and both the pulp log and lumber inventory lower of cost and market
write-down movements positively impacted the current quarter.
EBITDA in the current quarter decreased to $8.7 million compared to the $15.8
million recorded by our Predecessor in the first quarter of 2004. The decrease
of $7.1 million is primarily attributable to the changes in the accounting
policy for the treatment of spur roads (we expense directly whereas our
Predecessor capitalized and amortised), lower realised sales prices for logs and
pulp, the impact of lower log production levels on costs and higher general
corporate costs, offset to some extent by higher lumber prices and lower pulp
operating costs.
3
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
SOLID WOOD SEGMENT
1st Quarter 4th Quarter 1st Quarter
2005 2004 2004
(millions of dollars except where noted) Company Company Predecessor
- ---------------------------------------- ----------- ----------- -----------
Lumber sales $ 97.3 $ 87.8 $ 101.1
Log sales 18.2 27.7 14.1
By-product sales 7.1 5.7 5.3
----------- ----------- -----------
$ 122.6 $ 121.2 $ 120.5
=========== =========== ===========
EBITDA $ 11.0 $ (10.3) $ 17.7
EBITDA margin 9.0% (8.5)% 14.7%
Operating earnings (loss) $ 5.5 $ (18.6) $ 8.5
Total assets employed $ 584.1 $ 594.0 $ 471.1
Lumber sales (MMfbm) 162 158 175
Log sales (thousands m(3)) 166 236 100
Lumber production (MMfbm) 185 158 155
Log production (thousands m(3)) 498 894 769
Average lumber sales revenue per Mfbm $ 599 $ 557 $ 577
Average log sales revenue per m(3) $ 110 $ 117 $ 141
The solid wood segment had operating income of $5.5 million in the quarter
compared to an operating loss of $18.6 million in the previous quarter and
operating income of $8.5 million in the comparative quarter of 2004. EBITDA
similarly improved to $11.0 million in the quarter compared to negative $10.3
million in the previous quarter and positive $17.7 million in the comparative
quarter of 2004. The main factors driving the improvement in results compared to
the previous quarter are the improvement in lumber pricing and a weaker Canadian
dollar that resulted in an increase of 7.5% in average revenue per thousand
board feet, the $15.8 million impact of the change in pulp log and lumber
inventories lower of cost and market write-downs, lower depreciation and
amortization expense as a result of the fourth quarter including cumulative
adjustments resulting from the completion of the "fresh start" allocation
process and lower countervailing and anti-dumping duties resulting from the
lower deposit rates.
Lumber sales were lower than expected in the first quarter of 2005 being
impacted by un-seasonally poor weather on both the Atlantic and Pacific coasts.
In addition, we experienced some logistical difficulties in obtaining rail cars
to move our lumber into the United States. Demand from the Japanese market was
lower than expected as was demand for western red cedar in the quarter and as a
consequence production at both the Nanaimo and Silvertree mills was reduced to
one shift in early March. Operations at both mills are expected to resume to two
shifts later in the second quarter with the anticipated recovery in the Japanese
and western red cedar market.
The start up of logging operations after the year end break were delayed as a
result of higher than optimum inventories following the increased logging effort
in the previous quarter to meet our cut control requirements and lower than
expected lumber sales discussed above. As a result, log production was lower in
the first quarter of 2005 compared to the previous quarter and the 2004 first
quarter comparative. The lower log production also resulted in lower log sales
compared to the previous quarter. The Vancouver log market remained fairly
static in the quarter compared with the previous quarter with prices received
weakening slightly to an average of $110 per m(3) compared to $117 per m(3).
4
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
PULP SEGMENT
1st Quarter
1st Quarter 4th Quarter 2004
2005 2004 Predecessor
(millions of dollars except where noted) Company Company (1)
- ---------------------------------------- ----------- ----------- -----------
Sales $ 40.1 $ 44.6 $ 42.4
EBITDA $ 1.9 $ (1.8) $ 0.1
EBITDA margin 4.7% (4.0)% 0.2%
Operating earnings (loss) $ 1.2 $ (2.2) $ (2.2)
Total assets employed $ 86.5 $ 84.6 $ 220.9
Pulp sales (thousands of tonnes) 62 75 61
Pulp production (thousands of tonnes) 67 73 64
Average pulp revenue per tonne $ 651 $ 601 $ 697
Average pulp price delivered to Northern Europe-(US$ per
tonne)(2) $ 640 $ 600 $ 590
(1) 2004 restated for the sale of the Port Alice pulp mill which was sold by our
Predecessor in May 2004.
(2) Benchmark prices sourced from Resource Information Systems, Inc.
Operating earnings from the pulp segment during the quarter were $1.2 million
compared to negative $2.2 million in the previous quarter and the comparative
quarter of 2004. EBITDA for the pulp segment in the quarter was $1.9 million
compared to negative $1.8 million in the previous quarter and $0.1 million in
the first quarter of 2004. Results in the quarter were positively impacted by
improved pulp market prices and the slight weakening of the Canadian dollar
compared to the fourth quarter.
Production in the quarter was negatively impacted compared to the previous
quarter due to both fewer production days (86 days compared to 90 days) and a
lower daily production rate (777 tonnes compared to 807 tonnes) as a result of
lower equipment reliability and employee turnover. We are developing a plan to
address these items.
OTHER CORPORATE ITEMS
Selling and administration expense increased to $6.2 million in the quarter
compared to $5.8 million in the previous quarter and $4.9 million recorded by
our Predecessor in the first quarter of 2004 primarily as a result of additional
legal and consulting costs incurred by the Company.
CHANGES IN FINANCIAL POSITION AND LIQUIDITY
1st Quarter 4th Quarter 1st Quarter
2005 2004 2004
(millions of dollars except where noted) Company Company Predecessor(1)
- ---------------------------------------- ----------- ----------- --------------
Cash flow from operations $ 15.2 $ (22.8) $ 0.1
Capital additions $ (2.5) $ (4.4) $ (5.7)
Change in bank indebtedness $ (10.9) $ 24.2 $ 2.5
Financial ratios:
Current assets to current liabilities 1.93 1.76 n/a
Debt to shareholders equity 1.83 1.78 n/a
Debt to market capitalization 2.43 2.62 n/a
(1) Q1 2004 restated for the sale of the Port Alice pulp mill by our Predecessor
in May, 2004.
Cash flow from operations in the quarter of $15.2 million compares to a cash
outflow of $22.8 million in the previous quarter and $0.1 million in the first
quarter of 2004. The $38.0 million improvement in cash flow from operations
compared to the previous quarter is primarily attributable to the improvement in
markets that drove the increase in EBITDA of $24.5 million. In addition, the
fourth quarter of 2004 included an interest payment on the long-term secured
debt of $17.0 million. Interest on the debt is payable on June 30 and December
31 each year.
5
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
Additions to property, plant and equipment in the first quarter were $2.5
million, almost all of it being for road construction in the logging sector.
This was lower than expected due to the slow start up of logging operations as
previously discussed.
Bank indebtedness decreased by $10.9 million in the quarter to $67.2 million as
the cash flow from operations was used to reduce the balance outstanding.
At March 31, 2005 the Company had a cash balance of $12.0 million plus available
credit of $29.8 million under its credit facility to meet its operational
requirements. In addition, on March 24, the Company established a working
capital reserve account as defined in the Bond Indenture with a permissible
ceiling of up to $50.0 million. Proceeds from asset sales will be credited to
the reserve account and be available for operational requirements, if needed. At
March 31, 2005, proceeds from asset sales amounted to $21.3 million and now form
the balance in the working capital reserve account and are shown on the balance
sheet as restricted cash. A further $11.7 million was credited to the account
following the sale of one of the Company's former mill sites subsequent to the
quarter end increasing the balance in the account to $33.0 million.
SELECTED QUARTERLY INFORMATION
To assist shareholders and other readers understand our business, we have
included as Appendix A to the MD&A a table of the financial results and
operating data for the Company and its Predecessor for the last eight quarters.
Note that in the case of the Predecessor the amounts shown do not extend beyond
the operating earnings (loss) line as a comparison of items below that line is
not meaningful as a result of the Predecessors different capital structure.
In a normal operating year, there is some seasonality to the Company's
operations with higher activity in the second and third quarters as construction
activity, particularly in the US tends to be higher. Logging activity may also
vary depending on weather conditions due to snow and ice in the winter and the
threat of forest fires in the summer.
RISKS AND UNCERTAINTIES
A discussion of risks and uncertainties is included in our 2004 Annual Report
and Annual Information Form.
OUTLOOK
Lumber prices in the US were stronger during the first quarter of 2005 driven by
continuing high US housing starts as well as supply problems caused by very wet
weather and rail car shortages in western Canada. Although the number of new
building permits issued in the US remains high we are anticipating a softening
in the market as we move into the second half of the year due to higher interest
rates. We expect the Japanese market to begin to recover towards the middle of
the year as noted earlier.
We anticipate increases in the volume of lumber sales for the remainder of the
year compared to this quarter driven by the anticipated recovery in the Japanese
market, increased availability of rail cars following the move of our rail
loading activity to a third party provider, and an increase in the amount of dry
lumber produced. The three kilns at our Saltair mill with a drying capacity for
dimensional lumber of 130 million board feet are being brought back into service
at a cost of $0.3 million.
With respect to pulp markets, we have seen short term pricing weakness for
softwood kraft pulp due to production and consumption imbalances in the market
place. Producer inventories have risen as buyers de-stocked in the face of
stalled prices. For the market as a whole, the ratio of demand to capacity for
2005 is the highest it has been for many years. As a result, we expect to see
prices for softwood pulp firm over the next couple of months as maintenance
curtailment takes effect and softwood demand improves. Pricing should recover
further over the third and fourth quarters.
We continue to pursue our strategy of managing cash flow and interest costs,
growing the business and enhancing corporate governance.
The initial review of alternatives to refinance our US$221 million Secured Bonds
indicates that the high yield debt market has become more expensive in the last
month due to a number of negative factors. We will pursue
6
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
opportunities to refinance the Bonds at a lower cost and can redeem them at any
time after July 27, 2005, subject to certain terms and conditions.
OUTSTANDING SHARE DATA
As of May 2, 2005, 25,635,424 of our Common Shares are issued and outstanding.
In addition, we have issued 569,373 Tranche 1 Class C Warrants, 854,146 Tranche
2 Class C Warrants, and 1,423,743 Tranche 3 Class C Warrants (collectively, the
"Class C Warrants"). We have reserved up to 2,847,262 Common shares for issuance
upon the exercise of the Class C Warrants. We have also reserved 2,500,000
Common shares for issuance upon the exercise of options granted under our
incentive stock option plan. As of May 2, 2005 we have granted 299,590 options
under our incentive stock option plan.
OTHER MATTERS
There has been no change to the information provided in our MD&A for the period
from July 28, 2004 to December 31, 2004, dated March 24, 2005 ("2004 Annual
MD&A") in respect of the following items: Contractual Obligations (other than
ordinary course), Financial Instruments, Off-balance Sheet Arrangements,
Transactions with Related Parties, Critical Accounting Estimates, Changes in
Accounting Policy and Risks and Uncertainties. Please see our 2004 Annual MD&A
for information on these items.
Additional information about the Company, including our Annual Information Form
is available at (www.sedar.com) under the Company name, Western Forest Products
Inc. Information about the operation of our business by our Predecessor prior to
the implementation of the Plan, including our Predecessor's last Form 20-F, is
available at (www.sedar.com) under the Predecessor's name, Doman Industries
Limited.
On behalf of the Board of Directors
John MacIntyre Reynold Hert
Chairman President and Chief Executive Officer
Duncan, BC
May 2, 2005
Note:
We have prepared the financial information contained in this discussion and
analysis in accordance with Canadian generally accepted accounting principles
("GAAP"). Reference is also made to EBITDA. EBITDA refers to operating earnings
(losses) before interest, taxes, amortization and other non-operating income and
expenses and in the case of our Predecessor, also before restructuring costs and
asset write-downs. We have included information concerning EBITDA because the
Company understands that it is used by certain investors as a measure of the
Company's performance. As EBITDA is a non-GAAP measure, it may not be comparable
to EBITDA calculated by others. EBITDA does not represent cash generated from
operations as defined by Canadian GAAP and it is not necessarily indicative of
cash available to fund cash needs. "EBIT" refers to operating earnings (losses)
before interest, income and capital taxes and other non-operating income and
expenses.
THE FOREGOING CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934. THOSE
STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS DOCUMENT AND INCLUDE STATEMENTS
REGARDING OUR INTENT, BELIEF OR CURRENT EXPECTATIONS PRIMARILY WITH RESPECT TO
MARKET AND GENERAL ECONOMIC CONDITIONS, FUTURE COSTS, EXPENDITURES, AVAILABLE
HARVEST LEVELS AND OUR FUTURE OPERATING PERFORMANCE. SUCH STATEMENTS MAY BE
INDICATED BY WORDS SUCH AS "ESTIMATE", "EXPECT", "INTEND", "BELIEVES" AND
SIMILAR WORDS AND PHRASES. READERS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES AND MAY INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER FROM THOSE EXPRESSED OR
IMPLIED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING GENERAL ECONOMIC AND BUSINESS CONDITIONS, PRODUCT SELLING PRICES, RAW
MATERIAL AND OPERATING COSTS, CHANGES IN FOREIGN CURRENCY EXCHANGE RATES,
CHANGES IN GOVERNMENT REGULATION, FLUCTUATIONS IN DEMAND AND SUPPLY FOR OUR
PRODUCTS, INDUSTRY PRODUCTION LEVELS, OUR ABILITY TO EXECUTE OUR BUSINESS PLAN
AND MISJUDGMENTS IN THE COURSE OF PREPARING FORWARD-LOOKING STATEMENTS. THE
INFORMATION CONTAINED UNDER "RISKS AND UNCERTAINTIES" IN OUR 2004 ANNUAL MD&A
7
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
AND UNDER "RISK FACTORS" IN OUR ANNUAL INFORMATION FORM IDENTIFIES IMPORTANT
FACTORS THAT COULD CAUSE SUCH DIFFERENCES. ALL WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE FOREGOING CAUTIONARY STATEMENTS.
8
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS - APPENDIX A
SUMMARY OF SELECTED RESULTS FOR THE LAST EIGHT QUARTERS
SELECTED FINANCIAL INFORMATION
(millions of Canadian dollars except per unit sales prices)
QUARTER
-----------------------------------------------------------------------------------------
2005 2004 2004 2003
--------- ------------------- ------------------------------ ----------------------------
1st 4th 3rd 3rd 2nd 1st 4th 3rd 2nd
--------- ------------------- ------------------------------ ----------------------------
(July 28 (July 1
-Sept 30) -July 27)
---------------------------- -----------------------------------------------------------
Predecessor (restated for sale of Port Alice pulp mill in
Company May, 2004)
---------------------------- -----------------------------------------------------------
AVERAGE EXCHANGE RATE - CDN $ TO
PURCHASE ONE U.S. $ $ 1.2259 $ 1.2219 $ 1.3227 $ 1.3338 $ 1.3489 $ 1.3190 $ 1.3226 $ 1.3794 $ 1.4232
NET SALES
Lumber $ 97.3 $ 87.8 $ 85.5 $ 21.4 $ 116.4 $ 101.1 $ 81.3 $ 92.2 $ 79.2
Logs 18.2 27.7 31.8 13.5 53.4 14.1 25.9 22.1 26.3
By-Products 7.1 5.7 5.2 3.0 6.5 5.3 6.2 5.5 4.9
-------- -------- -------- -------- --------- -------- -------- -------- --------
Solid wood segment 122.6 121.2 122.5 37.9 176.3 120.5 113.4 119.8 110.4
Pulp segment 40.1 44.6 35.8 6.4 52.2 42.4 43.4 40.1 39.4
-------- -------- -------- -------- --------- -------- -------- -------- --------
162.7 165.8 158.3 44.3 228.5 163.0 156.8 159.9 149.8
Costs and expenses 154.0 181.6 140.5 44.8 181.5 147.2 162.7 164.2 169.7
-------- -------- -------- -------- --------- -------- -------- -------- --------
Operating earnings (loss) before
amortization (EBITDA) 8.7 (15.8) 17.8 (0.5) 47.0 15.8 (5.9) (4.3) (19.9)
Amortization of property, plant
and equipment 6.2 8.7 5.5 4.4 17.3 11.4 12.2 9.5 12.8
-------- -------- -------- -------- --------- -------- -------- -------- --------
Operating earnings (loss) (EBIT) $ 2.5 $ (24.5) $ 12.3 $ (4.9) $ 29.7 $ 4.4 $ (18.1) $ (13.8) $ (32.7)
======== ======== ======== ======== ========= ======== ======== ======== ========
NET EARNINGS (LOSS) $ (5.3) $ (19.6) $ 14.1
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.21) $ (0.76) $ 0.55
SALES VOLUMES
Lumber - millions of board feet 162 158 135 30 171 175 156 164 153
Logs - thousands of cubic metres 166 236 291 120 449 100 176 171 168
Pulp - thousands of tonnes 62 75 51 9 66 61 67 64 61
PRODUCTION VOLUMES
Lumber - millions of board feet 185 158 132 59 175 155 165 143 141
Logs - thousands of cubic metres 498 894 681 422 1,158 769 709 473 754
Pulp - thousands of tonnes 67 73 46 11 72 64 62 59 61
SALES PRICES
Lumber - per thousand board feet $ 599 $ 557 $ 633 $ 712 $ 681 $ 577 $ 521 $ 562 $ 518
Logs - per cubic metre $ 110 $ 117 $ 109 $ 113 $ 119 $ 141 $ 147 $ 129 $ 157
Pulp - per tonne $ 651 $ 601 $ 694 $ 734 $ 797 $ 697 $ 648 $ 627 $ 646
EBITDA
Solid wood segment $ 11.0 $ (10.3) $ 19.7 $ 10.9 $ 37.0 $ 17.7 $ (1.1) $ (1.6) $ (4.5)
Pulp segment 1.9 (1.8) 0.5 (10.7) 12.2 0.1 (2.2) (1.0) (14.0)
General corporate (4.2) (3.7) (2.4) (0.7) (2.1) (2.0) (2.6) (1.6) (1.5)
-------- -------- -------- -------- --------- -------- -------- -------- --------
AMORTIZATION $ 8.7 $ (15.8) $ 17.8 $ (0.5) $ 47.1 $ 15.8 $ (5.9) $ (4.2) $ (20.0)
======== ======== ======== ======== ========= ======== ======== ======== ========
Solid wood segment $ 5.6 $ 8.3 $ 4.8 $ 4.0 $ 14.6 $ 9.2 $ 9.8 $ 7.3 $ 10.4
Pulp segment 0.6 0.4 0.7 0.4 2.5 2.3 2.4 2.3 2.3
-------- -------- -------- -------- --------- -------- -------- -------- --------
EBIT $ 6.2 $ 8.7 $ 5.5 $ 4.4 $ 17.1 $ 11.5 $ 12.2 $ 9.6 $ 12.7
======== ======== ======== ======== ========= ======== ======== ======== ========
Solid wood segment $ 5.5 $ (18.6) $ 14.9 $ 6.9 $ 22.4 $ 8.5 $ (10.9) $ (8.9) $ (14.9)
Pulp segment 1.2 (2.2) (0.2) (11.1) 9.7 (2.2) (4.6) (3.3) (16.3)
General corporate (4.2) (3.7) (2.4) (0.7) (2.1) (2.0) (2.6) (1.6) (1.8)
-------- -------- -------- -------- --------- -------- -------- -------- --------
$ 2.5 $ (24.5) $ 12.3 $ (4.9) $ 30.0 $ 4.3 $ (18.1) $ (13.8) $ (32.7)
======== ======== ======== ======== ========= ======== ======== ======== ========
Our results for the fourth quarter compared to the third quarter of 2004 reflect
the weaker lumber and pulp markets, a stronger Canadian dollar and the
write-down of pulp log inventories. The 2003 quarterly operating losses of our
Predecessor primarily reflect weak lumber markets and the strengthening Canadian
dollar. These results improved in 2004 as the markets and prices improved
significantly, particularly in the second quarter of 2004.
9
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars)
March 31, 2005 December 31, 2004
-------------- -----------------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash $ 12,027 $ 5,005
Accounts receivable 81,727 77,970
Inventory 174,097 176,709
Restricted cash (note 5) 21,319 -
Prepaid expenses 4,723 5,204
------------ ------------
293,893 264,888
Restricted assets (note 5) - 24,428
Investments 7,272 7,166
Property, plant and equipment 389,912 395,554
Other assets 1,265 1,397
------------ ------------
$ 692,342 $ 693,433
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 4) $ 67,217 $ 78,113
Accounts payable and accrued liabilities 84,812 72,174
------------ ------------
152,029 150,287
Long-term debt (note 5) 255,790 253,522
Future income taxes 10,537 10,537
Other liabilities 29,604 29,382
------------ ------------
447,960 443,728
Shareholders' equity
Common Shares 255,175 255,175
Deficit (10,793) (5,470)
------------ ------------
244,382 249,705
------------ ------------
$ 692,342 $ 693,433
============ ============
Commitments and Contingencies (note 6)
See accompanying notes to consolidated financial statements
Approved on behalf of the Board:
"Reynold Hert" Director
"John MacIntyre" Director
10
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Expressed in thousands of Canadian dollars, except for share and per share
amounts)
Three months ended March 31
---------------------------
2005 2004
----------- -----------
Predecessor
Company (Restated)
Sales $ 162,735 $ 163,003
Cost and expenses
Cost of goods sold 124,958 119,021
Anti-dumping and countervailing duties 8,573 9,537
Freight expenses 14,316 13,736
Amortization of property, plant and equipment 6,193 11,462
Selling and administration 6,164 4,865
----------- -----------
160,204 158,621
----------- -----------
Operating earnings 2,531 4,382
Interest expense (11,807) (30,007)
Foreign exchange loss on translation of long-term debt (1,593) (9,961)
Other income 5,797 59
Financial restructuring costs - (3,308)
----------- -----------
Loss before income taxes (5,072) (38,835)
Income taxes (251) (363)
----------- -----------
Net loss from continuing operations (5,323) (39,198)
Net loss from discontinued operations - (5,143)
----------- -----------
Net loss (5,323) (44,341)
Provision for dividends on preferred shares - (1,203)
----------- -----------
Net loss attributable to common and non-voting shares $ (5,323) $ (45,544)
=========== ===========
Loss per share:
Basic $ (0.21) $ (1.07)
Diluted $ (0.21) $ (1.07)
Weighted average number of common and non-voting shares outstanding
(thousands of shares) 25,635 42,481
See accompanying notes to the consolidated financial statements
11
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Expressed in thousands of Canadian dollars)
Three months ended March 31
-----------------------------
2005 2004
------------ ------------
Predecessor
Company (Restated)
Cash provided by (used in):
Operations:
Net loss from continuing operations $ (5,323) $ (39,198)
Items not involving cash:
Amortization of property, plant and equipment 6,193 11,462
Amortization and write-down of deferred charges 44 1,094
Foreign currency translation loss 1,593 9,961
Accretion of debt discount 676 -
Gain on property, plant and equipment disposals (42) (412)
Other 116 586
------------ ------------
3,257 (16,507)
------------ ------------
Changes in non-cash working capital items:
Accounts receivable (3,757) (16,102)
Inventory 2,612 (6,178)
Prepaid expenses 481 (2,027)
Accounts payable and accrued liabilities 12,638 23,933
Accounts payable and accrued liabilities subject to compromise - 19,673
------------ ------------
11,974 19,299
------------ ------------
Cash provided by continuing operations 15,231 2,792
Cash used by discontinued operations (2,671)
------------ ------------
15,231 121
------------ ------------
Investments:
Additions to property, plant and equipment (437) (39)
Additions to capitalized roads (2,014) (5,706)
Disposals of property, plant and equipment 1,941 1,025
Restricted cash (18,436) -
Bill 28 take back proceeds and infrastructure advance (note 6(a)) 21,545
Other 88 146
------------ ------------
2,687 (4,574)
------------ ------------
Financing:
Bank indebtedness (10,896) 2,539
------------ ------------
(10,896) 2,539
------------ ------------
Increase (decrease) in cash 7,022 (1,914)
Cash, beginning of period 5,005 21,561
------------ ------------
Cash, end of period $ 12,027 $ 19,647
============ ============
See accompanying notes to the consolidated financial statements
12
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Tabular amounts expressed in thousands of Canadian dollars)
1. BASIS OF PRESENTATION
Western Forest Products Inc.'s (the "Company") business is the harvesting
of timber and the manufacturing and sale of lumber and pulp for worldwide
markets.
The Company acquired all of its operating assets from Doman Industries
Limited and certain of it subsidiaries ("Doman" or the "Predecessor") on
July 27, 2004. For a complete discussion of the Company's acquisition of
Doman's assets and Doman's reorganization, please see the Company's annual
report filed on Sedar at www.sedar.com.
The Predecessor's financial information has been presented to provide
additional information for the reader. In reviewing the Predecessor's
financial information, readers are reminded that they do not reflect the
effects of the financial reorganization or the application of its
accounting described in the Company's 2004 annual report. Certain amounts
presented in the Predecessor's financial information have been
reclassified to conform with the presentation adopted by the Company and
have also been restated to reflect the classification of the Port Alice
pulp mill as discontinued operations.
2. SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements do not include all
disclosures required by Canadian generally accepted accounting principles
for annual financial statements and, accordingly, should be read in
conjunction with the Company's most recent audited annual consolidated
financial statements. These interim consolidated financial statements
follow the same accounting policies and methods of application used in the
Company's consolidated financial statements as at December 31, 2004 and
for the period from July 28, 2004 to December 31, 2004.
3. ADOPTION OF NEW ACCOUNTING POLICY
The new Canadian Institute of Chartered Accountants Accounting Guideline
15 "Consolidation of Variable Interest Entities" is effective for fiscal
years commencing after November 1, 2004. The Guideline provides criteria
for identifying Variable Interest Entities and their consolidation. The
Company has determined that the Guideline does not materially impact the
Company's Consolidated Interim Financial Statements.
4. CREDIT FACILITY
On July 27, 2004 the Company established a three-year revolving credit
facility, secured by receivables and inventory, which bears an interest
rate of prime plus 0.75%. The size of this asset backed facility is
determined by the level of outstanding receivables and inventory, but
cannot exceed $100,000,000.
At March 31, 2005, of the full $100,000,000 of the facility that was
available to the Company, $67,217,000 had been drawn down and $2,966,000
was used to support standby letters of credit leaving a balance of
$29,817,000 available for future use.
5. LONG-TERM DEBT
On July 27, 2004 the Company issued US$221,000,000 of 15% Secured Bonds
due in 2009 for proceeds of US$210,000,000. Interest is payable
semi-annually in arrears on December 31 and June 30 of each year
commencing December 31, 2004. The Company has the right to defer payment
of up to one-half of the interest payable on any interest payable date for
up to five years but not beyond the maturity date of the Secured Bonds.
The Secured Bonds are secured by a first priority charge over all of the
fixed assets of the Company including timber tenures, sawmills and the
value-added lumber remanufacturing plant. The security ranks subordinate
to the security provided under the working capital facility (see note 4).
The Secured Bonds are redeemable at the option of the Company at any time
after July 27, 2005 at their principal amount plus (i) a premium (which
decreases annually to their 2009 maturity date resulting in a
13
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
redemption price of: 2005 - 107.50%; 2006 - 105.50%; 2007 - 103.50%; 2008
- 101.50%) and (ii) any accrued and unpaid interest.
The indenture governing the Secured Bonds contains certain restrictions
regarding, among other things, the ability of the Company to incur
additional indebtedness (with certain exceptions) and limitations on the
payment of dividends and other restricted payments. Subject to ensuring
adequate liquidity, proceeds from asset sales, a softwood lumber duty
settlement and capital market transactions are generally to be used to
redeem Secured Bonds. On March 24, the Company established a working
capital reserve account as defined in the Bond Indenture with a
permissible ceiling of up to $50,000,000. Proceeds from asset sales will
be credited to the reserve account and be available for operational
requirements, if needed. At March 31, 2005, proceeds from asset sales
amounted to $21,319,000 and now form the balance in the working capital
reserve account and are shown on the balance sheet as restricted cash.
6. COMMITMENTS AND CONTINGENCIES
(a) THE FORESTRY REVITALIZATION PLAN
Retroactive to March 31, 2003, the Government of British Columbia (the
"Crown" or "Provincial Government") as part of the Forestry Revitalization
Plan (the "FR Plan"), reduced the Crown land portion of the allowable
annual cut ("AAC") from major tenure holders by 20%, less an exemption for
the first 200,000 cubic metres, in exchange for compensation payable by
the Crown. In January 2005, pursuant to terms of the settlement framework
agreement negotiated in late 2004, the Company received $16,545,000 in
compensation for the loss of 685,216 cubic metres of AAC and 827 hectares
of timber licences. Under this agreement, the Company also received an
advance payment of $5,000,000 towards compensation for improvements the
Company made to Crown land in the take-back areas ($4,000,000 was recorded
as a reduction in capitalized roads and $1,000,000 has been recorded in
accounts payable for future site obligations). The amounts were included
as receivables in restricted assets as of December 31, 2004 and these
proceeds resulted in no gain or loss due to the fair value allocations as
at July 28, 2004.
Negotiations in 2005 will finalize take-back areas, complete the
compensation payments for improvements and determine if there will be cost
recovery for costs already incurred for planning and inventories. Included
in other income during the quarter is $5.8 million for reimbursements
agreed to date with the BC Government for project engineering and other
costs incurred by our Predecessor with respect to certain timber cutting
rights taken back by the BC Government. We received $2.7 million during
the quarter and the balance of $3.1 million is included in accounts
receivable at March 31, 2005. The final comprehensive settlement agreement
is expected to be reached in 2005.
(b) SOFTWOOD LUMBER DUTIES
The Company has recorded countervailing and antidumping duties assessed on
Canadian softwood lumber exports to the United States totalling $8,573,000
for the first quarter of 2005. Cumulative duties from May 22, 2002, when
cash deposits were made necessary for shipments of Canadian lumber into
the US, until March 31, 2005, total US$80,600,000.
The Company and other Canadian forest product companies, the Federal
Government and Canadian Provincial Governments ("Canadian Interests")
categorically deny the US allegations and strongly disagree with the final
countervailing and antidumping determinations made. Canadian Interests
continue to aggressively defend the Canadian industry in this U.S. trade
dispute and have appealed the US decisions to NAFTA panels and the WTO.
A NAFTA Panel has ruled that the US authorities have not been able to
provide the NAFTA Panel with substantive evidence to support their ruling
of "threat of injury". The NAFTA Panel requested that they reverse their
ruling on "threat of injury" with which they reluctantly complied. US
interests are appealing this ruling to an Extraordinary Challenge
Committee ("ECC") Panel. If the ECC Panel upholds this finding by the
NAFTA Panel, the Company would expect that all prior duties paid would be
refunded with interest. However, there can be no certainty that they would
comply with this ruling and US industry and trade groups have indicated
that they may even challenge the constitutional validity of NAFTA in US
courts.
14
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
The final amount of countervailing and antidumping duties that may be
assessed on the Company's Canadian softwood lumber exports to the U.S.
cannot be determined at this time and will depend on appeals of the final
determinations to any reviewing courts, NAFTA or WTO panels.
Notwithstanding the final rates established in the investigations, the
final liability for the assessment of countervailing and antidumping
duties will not be determined until each annual administrative review
process is complete, including appeals.
(c) LITIGATION AND CLAIMS
In the normal course of its business activities, the Company is subject to
a number of claims and legal actions that may be made by customers,
suppliers and others in respect of which either provision has been made or
for which no material liability is expected. Subsequent to the quarter end
the Company and the Province of British Columbia resolved a number of
outstanding claims and counterclaims in settlement of which the Company
will receive $1.3 million in cash.
7. SEGMENTED INFORMATION
The Company is an integrated Canadian forest products company operating in
two industry segments. The Solid Wood Segment comprises the Company's
timber harvesting, reforestation, sawmilling, value-added lumber
remanufacturing and lumber marketing operations. The Pulp Segment
comprises the Company's NBSK pulp manufacturing and sales operations.
Quarter ended March 31, 2005
--------------------------------------
Solid wood Pulp Total
---------- ---------- ----------
Sales to external customers $ 122,595 $ 40,140 $ 162,735
Sales to other segment 7,751 -- 7,751
---------- ---------- ----------
$ 130,346 $ 40,140 $ 170,486
---------- ---------- ----------
Quarter ended March 31, 2005
--------------------------------------
Solid wood Pulp Total
---------- -------- --------
Segmented operating earnings $ 5,503 $ 1,250 $ 6,753
General corporate expenses (4,222)
Interest expense (11,807)
Foreign exchange loss on
translation of long-term debt (1,593)
Other income 5,797
Income tax expense (251)
--------
Net loss $ (5,323)
========
8. PENSION EXPENSE
The Company has defined benefit pension plans which cover substantially
all salaried employees. The plans provide pensions based on length of
service and final average earnings. The Company also has health care plans
covering certain hourly and retired salaried employees. The Company
recorded expense of $934,000 in the three months ended March 31, 2005 with
respect to these defined benefit plans and a further $2,119,000 with
respect to the contributions to the hourly paid employee union pension
plans.
9. FINANCIAL INSTRUMENTS
The Company has significant exposures to individual customers including
one customer which comprised 12% of the Company's sales for the quarter.
The accounts receivable balance from the same customer comprised 24% of
the Company's outstanding receivables at March 31, 2005 and was insured
through the Export Development Corporation as to approximately 44% of the
balance outstanding. The Company's general practice is to make sales on a
cash basis, without credit terms, or to insure them for 90% of their sales
value with the Export Development Corporation. The uninsured portion
primarily results from the increased sales activity with this customer and
is expected to be temporary while insurance levels and trade terms are
modified.
15
WESTERN FOREST PRODUCTS INC. 2005 FIRST QUARTER REPORT
[WFP LOGO]
HEAD OFFICE
435 Trunk Road
Duncan, British Columbia FINANCIAL STATEMENTS ON THE INTERNET
Canada V9L 2P9 www.westernforest.com
[TELEPHONE LOGO] (250) 748-3711 www.sedar.com
Fax: (250) 748-6045
E-mail: info@westernforest.com