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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 December 15, 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 101(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 January 12, 2006 By /s/ Paul Ireland
-------------------------------------
(Signature)*
Paul Ireland, Chief Financial Officer
- ----------
* Print the name and title under the signature of the signing officer.
SEC 1815 (09-05) 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.
FORM 51-102F3
MATERIAL CHANGE REPORT
ITEM 1. NAME AND ADDRESS OF COMPANY
Western Forest Products Inc. ("Western" or the "Company")
3rd Floor, 435 Trunk Road
Duncan, British Columbia
V9L 2P9
ITEM 2. DATE OF MATERIAL CHANGE
December 15, 2005
ITEM 3. NEWS RELEASE
The news release was disseminated in Vancouver via Canada Newswire on
December 15, 2005.
ITEM 4. SUMMARY OF MATERIAL CHANGE
On December 15, 2005, the Company announced the closure of its pulp
mill located in Squamish, BC, effective March 9, 2006.
Following the closure of the Squamish mill, wood chips from Western's
currently owned Vancouver Island sawmills previously consumed at the
Squamish pulp mill and surplus to the Company's other long-term
commitments will be sold under a new agreement (the "Fibre Agreement")
to be made with a partnership (the "Fiber Partnership") of Canadian
Forest Products Ltd. ("Canfor") and Oji Paper Canada Ltd. ("Oji").
Western has entered into a definitive agreement (the "Acquisition
Agreement") to acquire substantially all of the assets associated with
Canfor's Englewood Logging Division, including 945,000 cubic metres of
annual harvest rights under Tree Farm License 37 ("TFL 37"), for $45
million plus the value of certain log inventories at closing.
ITEM 5. FULL DESCRIPTION OF MATERIAL CHANGE
Western announced the closure of its pulp mill located in Squamish,
BC, effective March 9, 2006. The mill, which has an annual capacity of
275,000 tonnes of NBSK pulp, will continue production until the week
of January 23, 2006, after which time shutdown activities would
commence.
The closure affects 323 employees in various locations. Western's
preliminary estimates indicate the closure of the Squamish pulp mill
will result in a pre-tax restructuring charge in the fourth quarter of
approximately $80 million, including a non-cash charge of
approximately $46 million relating to the write-down of fixed assets
and supplies inventories.
Under the Fibre Agreement, wood chips from Western's currently owned
Vancouver Island sawmills that were previously consumed at the
Squamish pulp mill and are surplus to the Company's other long-term
commitments will be sold to the Fibre Partnership for consumption at
the Howe Sound Pulp and Paper mill.
As consideration for entering the Fibre Agreement, Western will
receive a non-refundable payment of $35 million in cash on closing in
the form of a pre-payment against future deliveries of chips. Cash
proceeds from the transaction will be used by Western to fund closure
costs at the Squamish pulp mill. Under the Fibre Agreement, Western is
required to sell a minimum of 200,000 volumetric units of chips per
year and at least 900,000 volumetric units of chips during any three
year period for the initial ten year contractual period. The price for
chips sold under the Fibre Agreement is based on the market price
under long-term chip contracts on the coast of British Columbia, plus
a fixed premium. Western receives the market price for its chips in
cash for each delivery made. The $35 million cash pre-payment received
by Western will be amortized for the purposes of the Fibre Agreement
at a rate equal to the fixed premium against future deliveries over
approximately ten years. Under the Fibre Agreement, Western will also
sell all pulp logs harvested from its Crown tenures and timberlands to
the Fibre Partnership at market prices. The Fibre Agreement will have
an initial 40 year term and, subject to mutual agreement, is
extendable for an additional five years.
2
Western has entered into the Acquisition Agreement to acquire
substantially all of the assets associated with Canfor's Englewood
Logging Division, including 945,000 cubic metres of annual harvest
rights under TFL 37, for $45 million plus the value of certain log
inventories at closing. The $45 million purchase price will be paid
for by the amortization of the balance of the fixed premium, after the
$35 million cash prepayment has been amortized in full, against future
deliveries of chips under the Fibre Agreement. Western will pay for
the log inventories, net of certain adjustments, in cash at closing.
To secure payment of the $45 million fixed purchase price and certain
minimum performance obligations under the Fibre Agreement, Western has
agreed to grant a security interest in TFL 37 and the associated
assets, which security will be released on the tenth anniversary of
the Fibre Agreement.
The Englewood Logging Division is located on northern Vancouver Island
adjacent to Western's main logging operations. The harvest rights
under TFL 37 include approximately 4,725 hectares of private lands.
The acquisition also includes three timber licenses on Vancouver
Island, existing capital improvements and infrastructure; machinery,
equipment and railway rolling stock. Western will assume certain
contracts and equipment leases and will offer employment to
approximately 275 employees currently involved in harvesting
operations. Western will not assume any other material liabilities
relating to the acquired assets prior to the closing of the
acquisition. By combining and streamlining operations with its own
activities, Western expects to capture annual synergies in excess of
$6 million within 48 months of closing.
Execution of the Fibre Agreement and closing of the acquisition of the
Englewood Logging Division under the Acquisition Agreement is expected
to occur early in the first quarter of 2006 and is subject to the
receipt of regulatory approvals under the Acquisition Agreement.
A copy of the November 10, 2005 press release is attached as Schedule
"A".
ITEM 6. RELIANCE ON SUBSECTION 7.1(2) OR (3) OF NATIONAL INSTRUMENT 51-102
Not applicable.
ITEM 7. OMITTED INFORMATION
No significant facts remain confidential in, and no information has
been omitted from, this report.
ITEM 8. EXECUTIVE OFFICER
The following executive officer of Western is knowledgeable about the
material change report and may be contacted respecting the change:
Paul Ireland
Chief Financial Officer
250-715-2209
ITEM 9. DATE OF REPORT
December 23, 2005
Per: "R. Hert"
----------------------------------
Name: Reynold Hert
Title: Chief Executive Officer and
President
[GRAPHIC - 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 FOREST PRODUCTS ANNOUNCES CLOSURE OF SQUAMISH PULP MILL
& THE ACQUISITION OF CANFOR'S ENGLEWOOD LOGGING DIVISION
DECEMBER 15, 2005 -- DUNCAN, BRITISH COLUMBIA. Western Forest Products today
announced the closure of its pulp mill located in Squamish, BC effective March
9, 2006. The mill, which has an annual capacity of 275,000 tonnes of NBSK pulp,
will continue production until the week of January 23, 2006 after which time
shutdown activities would commence. The closure affects 323 employees in various
locations.
"Financial results from the pulp segment of our business have been unacceptable
for many years," said Reynold Hert, President and Chief Executive Officer.
"Having considered the long-term market outlook, the impact of rising fibre and
energy costs and the high capital requirements, we determined that the best
long-term decision for Western was to exit the pulp segment and narrow our focus
to our lumber business. We pursued the sale of the mill for an extensive period
but were ultimately unsuccessful and, as a result we are proceeding with the
closure plans announced today."
"This is a difficult decision as many long-term employees are affected,"
continued Hert. "Our team at Squamish have worked hard to improve operations but
it is a relatively small mill by industry standards with outdated technology and
high costs. We met with employees this afternoon and assured them that people
will be treated fairly and according to the terms of the collective agreement
and statutory requirements."
Preliminary estimates indicate the closure of the Squamish pulp mill will result
in a pre-tax restructuring charge in the fourth quarter of approximately $80
million, including a non-cash charge of approximately $46 million relating to
the write-down of fixed assets and supplies inventories.
Replacement Fibre Supply Arrangements
Wood chips from Western's four Vancouver Island sawmills previously consumed at
the Squamish pulp mill and surplus to the Company's other long-term commitments
will be sold under a new agreement with a partnership of Canadian Forest
Products Ltd. and Oji Paper Canada Ltd. for consumption at the Howe Sound Pulp
and Paper mill. As consideration for entering the fibre supply agreement,
Western will receive a non-refundable payment of $35 million in cash on closing
in the form of a pre-payment against future deliveries of chips. Cash proceeds
from the transaction will be used by Western to fund closure costs at the
Squamish pulp mill.
Under the new fibre supply agreement, Western is required to sell a minimum of
200,000 volumetric units of chips per year and at least 900,000 volumetric units
of chips during any three year period for the initial ten year contractual
period based on the market price under long-term chip contracts on the coast of
-2-
British Columbia plus a fixed premium. The $35 million cash pre-payment received
by Western will be amortized for the purposes of the agreement at a rate equal
to the fixed premium against future deliveries over approximately ten years.
Western will also sell all pulp logs harvested off of its Crown tenures and
timberlands at market prices under the agreement. The agreement will have an
initial 40 year term and subject to mutual agreement, is extendable for an
additional five years.
Acquisition of Englewood Logging Division
In a related transaction, Western has entered into a definitive agreement to
acquire substantially all of the assets associated with Canfor's Englewood
Logging Division, including 945,000 cubic metres of annual harvest rights under
Tree Farm License 37 ("TFL 37"), for $45 million plus the value of certain log
inventories at closing. The $45 million purchase price will be paid for by the
amortization of the balance of the fixed premium, after the $35 million cash
prepayment has been amortized in full, against future deliveries of chips under
the previously discussed fibre supply agreement. Payment for the log
inventories, net of certain adjustments, will be made by Western in cash at
closing. To secure payment of the $45 million fixed purchase price and certain
minimum performance obligations under the fibre supply agreement, Western has
agreed to grant a security interest in TFL 37 and the associated assets, which
security will be released on the tenth anniversary of the fibre supply
agreement.
The Englewood Logging Division is located on northern Vancouver Island adjacent
to Western's main logging operations. The harvest rights under TFL 37 include
approximately 4,725 hectares of private lands. In addition, the acquisition
includes three timber licenses also on Vancouver Island, existing capital
improvements and infrastructure; machinery, equipment and railway rolling stock.
Western will assume certain contracts and equipment leases and will offer
employment to approximately 275 employees currently involved in harvesting
operations but will not assume any other material liabilities relating to the
assets prior to closing. By combining and streamlining operations with its own
activities, Western expects to capture annual synergies in excess of $6 million
within 48 months of closing.
Closing of the fibre supply agreement and the acquisition of the Englewood
Logging Division is expected to occur early in the first quarter of 2006 and is
subject to the receipt of regulatory approvals.
"The forest products sector on the coast of British Columbia has been under
significant pressure for the past two decades. We believe that today's moves
when combined with our previously announced acquisition of Cascadia Forest
Products Ltd. give us the opportunity of building a stronger and sustainable
lumber business capable of competing in global softwood markets," said Hert.
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 Western's operations, employees
and corporate facilities are located in the coastal region of British Columbia
and its products are sold in over 25 countries worldwide.
Forward Looking Statement
This press release contains 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
-3-
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", "anticipate", "plan", "intend", "believe", "will",
"should", "may" 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 the "Risk Factors"
section of Western's Annual Information Form and under the "Risk Factors"
section of Western's Form 20-F/A 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.
FOR FURTHER INFORMATION CONTACT:
INVESTORS: MEDIA:
REYNOLD HERT 250 715 2207 GARY LEE 604 787-5467
Paul Ireland 250 715 2209