West Fraser Timber Co. Ltd.
Notes to Condensed Consolidated Interim Financial Statements
(figures are in millions of dollars, except where indicated - unaudited)
1. Nature of operations
West Fraser Timber Co. Ltd. ("West Fraser", "we", "us" or "our") is an integrated wood products company producing lumber, wood chips, LVL, MDF, plywood, pulp and newsprint with facilities in western Canada and the southern United States. Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. We are listed on the Toronto Stock Exchange under the symbol WFT.
2. Basis of presentation and statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board and using the same accounting policies and methods of their application as the December 31, 2012 annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with the Company's 2012 annual financial statements.
3. Inventories
Inventories at December 31, 2012 were written down by $3 million (September 30, 2012 - $6 million; December 31, 2011 - $15 million) to reflect net realizable value being lower than cost.
4. Tax provision
The tax provision differs from the amount that would have resulted from applying the Canadian statutory income tax rates to earnings before income taxes as follows:
-------------------------------------------------------------------------- October 1 to December 31 January 1 to December 31 2012 2011 2012 2011---------------------------------------------------------------------------Income tax expense at statutory rate of 25% (2011 - 26.5%) $ (8) $ 4 $ (29) $ (12)Non-taxable amounts (5) 2 (9) 2Rate differentials between jurisdictions and on specified activities - 1 (1) 6Recognized (unrecognized) tax assets 3 (1) 11 (12)Other 1 - - (2)---------------------------------------------------------------------------Tax recovery (provision) $ (9) $ 6 $ (28) $ (18)------------------------------------------------------------------------------------------------------------------------------------------------------
5. Discontinued operations
We permanently closed our linerboard and kraft paper mill, located in Kitimat, B.C. in January 2010 and the windup was substantially completed in December 2011.
6. Earnings per share
Basic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B Common shares outstanding.
Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the actual share option expense (recovery) charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive and diluted earnings per share are deemed to be the same as basic earnings per share.
October 1 to December 31 2012 2011--------------------------------------------------------------------------- From After From After continuing discontinued continuing discontinued operations operations operations operations---------------------------------------------------------------------------EarningsBasic $ 22 $ 22 $ (11) $ 6Share option expense 23 23 3 3---------------------------------------------------------------------------Diluted $ 45 $ 45 $ (8) $ 9---------------------------------------------------------------------------Weighted average number of shares (thousands)Basic 42,862 42,862 42,845 42,845Share options 675 675 280 280---------------------------------------------------------------------------Diluted 43,537 43,537 43,125 43,125---------------------------------------------------------------------------Earnings per share (dollars)Basic $ 0.51 $ 0.51 $ (0.25) $ 0.14Diluted $ 0.51 $ 0.51 $ (0.25) $ 0.14--------------------------------------------------------------------------- January 1 to December 31 2012 2011--------------------------------------------------------------------------- From After From After continuing discontinued continuing discontinued operations operations operations operations---------------------------------------------------------------------------EarningsBasic $ 87 $ 87 $ 27 $ 73Share option expense (recovery) 45 45 (6) (6)Equity settled share option adjustment (3) (3) (3) (3)---------------------------------------------------------------------------Diluted $ 129 $ 129 $ 18 $ 64---------------------------------------------------------------------------Weighted average number of shares (thousands)Basic 42,857 42,857 42,840 42,840Share options 555 555 434 434---------------------------------------------------------------------------Diluted 43,412 43,412 43,274 43,274---------------------------------------------------------------------------Earnings per share (dollars)Basic $ 2.02 $ 2.02 $ 0.63 $ 1.70Diluted $ 2.02 $ 2.02 $ 0.41 $ 1.47---------------------------------------------------------------------------
