TimberWest announces 2007 first quarter results



    Company has good start to the year, generating distributable cash of
    $26.9 million, announces quarterly distribution of $0.269 per Stapled
    Unit payable on July 15.

    VANCOUVER, April 26 /CNW/ - TimberWest generated distributable cash(1) of
$26.9 million or $0.35 per stapled unit for the first quarter of 2007. This
compares to $31.5 million or $0.41 per unit for the first quarter of 2006 when
TimberWest had an additional $5.5 million in real estate sales.

    Operational Results

    Timberland results were fairly comparable to the same quarter last year.
Log sales volumes were lower at 823,100 m(3) compared to 889,200 m(3) in the
first quarter of 2006. Sales realizations were $95 per m(3) compared to $96
per m(3) for the comparable quarter last year. Despite weakness in the US
housing market and therefore the US lumber market, our average sales
realizations were comparatively strong. We anticipated a stronger Canadian
dollar and a weaker US housing market would have had a more detrimental effect
on our overall realizations than they have. Domestic sales were strong for the
quarter while sales to the US and Asia were lower than the same period last
year. Weather prevented higher elevation harvesting in the region for most of
the quarter which resulted in a significant shortage of hemlock and cedar logs
on the Coast. This combined with a shortage of pulp logs and chips to supply
coastal pulp facilities experiencing strong product demand and prices pushed
domestic log prices higher than they were in the first quarter of 2006. Log
sales volumes to the US were 147,400m(3) in the quarter, down 5% from the same
quarter last year; sales to Asian customers were 218,800m(3) in the quarter,
down 18% from the same quarter last year. Production costs were higher than
the first quarter of 2006 by $3.50 per m(3) attributable to higher proportions
of helicopter logging and contractor rate increases.
    "Safety remains a key focus for our operations and during the quarter
TimberWest received its SAFE company certification from the BC Forest Safety
Council," said President and CEO Paul McElligott. "We are one of the largest
companies to be certified in the industry so far and we received one of the
highest audit scores of 93.9%."
    "This quarter we had virtually no real estate sales compared to the first
quarter last year when we sold real estate for proceeds of $5.5 million,"
added McElligott. "We expect real estate sales to be strong for the balance of
2007." The southern Vancouver Island real estate market witnessed a 16% price
improvement overall in 2006 and real estate markets continue to show strength
throughout our land holdings on Vancouver Island.
    The Elk Falls mill stayed focused on the Japanese lumber market
throughout the quarter and took market-related downtime subsequent to quarter
end. Production for the quarter was 4.5% lower than Q1, 2006. The mill remains
for sale as we continue to work with prospective purchasers.
    During the quarter, we filed the Notice of Appeal on our Notice 102
lawsuit with the Government of Canada. "Subsequent to the quarter end," said
McElligott. "TimberWest sold its two Martin Mars water bombers to Coulson
Aircrane Ltd. of Port Alberni. Coulson plans to keep both planes in
firefighting service."

    Outlook

    In the near term, we expect log prices to be at similar levels to those
achieved in the first quarter and log sales volumes to pick up as the warmer
weather allows for improved log production. While the US and Japanese log
markets are expected to weaken somewhat in the near term, we expect continued
strength in domestic and other Asian markets. Some of the blocking pressure we
have been under should ease as Coastal crown tenure forest production
increases. We expect continuing pressure on costs as our contractors struggle
with higher input costs. The Coast Master Agreement with the United
Steelworkers Union expires on June 15, 2007 and we expect to begin bargaining
for a new contract with them in the first week of May. It is too early to
predict the outcome of these negotiations.
    With the addition of John Hendry, our new Vice President, Real Estate, we
will continue our evaluation of our real estate holdings and further develop
our strategic plan for these assets. John joins TimberWest with an extensive
real estate background. He has worked with the St. Joe Company since 1999.
Most recently he was Vice President and General Manager for St. Joe's Gulf
County Region. Prior to that, he was Vice President, Strategic Planning at
St. Joe's. John also worked as a Senior Planning Associate at EDAW for 3 years
in the late 90's. EDAW is a large international real estate consulting company
involved in urban architecture, planning and urban design, and environmental
planning work. During the first 20 years of his career, John worked in a
variety of real estate positions in England. We are very excited about the
prospects for growth in this part of our business.
    We have started 2007 off well and we continue to expect that we will
generate sufficient distributable cash in the year from our operations to fund
all of our unitholder distributions.

    
    Distributable Cash
    -------------------------------------------------------------------------
    (in millions of dollars)                      Three months   Three months
                                                     ended          ended
                                                    March 31,      March 31,
                                                      2007           2006
    -------------------------------------------------------------------------

    Net earnings                                   $       3.7   $       2.9
    Interest on Series A Subordinate Notes
     owned by unitholders                                 20.9          20.9
    -------------------------------------------------------------------------

    Earnings available for distribution                   24.6          23.8
    Future income tax recovery                            (0.3)         (2.6)
    -------------------------------------------------------------------------

    Earnings available for distribution before
     provision for future income taxes                    24.3          21.2
    Add (deduct):
      Depreciation, depletion and amortization             2.5           2.4
      Proceeds from sale of property, plant and
       equipment                                           0.2           5.5
      Loss (gain) on sale of property, plant
       and equipment                                      (0.1)          3.4
      Additions to property, plant and equipment          (0.5)         (0.4)
      Other non-cash items                                 0.5          (0.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                           2.6          10.3
    -------------------------------------------------------------------------
    Distributable cash                             $      26.9   $      31.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Per Stapled Unit amounts:
    -------------------------------------------------------------------------
    (in dollars)                                 Three months   Three months
                                                     ended          ended
                                                    March 31,      March 31,
                                                      2007           2006
    -------------------------------------------------------------------------

    Basic and diluted earnings available for
     distribution before provision for future
     income taxes per weighted average
    Stapled Unit                                   $      0.31   $      0.27

    Basic and diluted distributable cash per
     weighted average Stapled Unit                 $      0.35   $      0.41

    Cash distributions paid per Stapled Unit       $      0.27   $      0.27
    -------------------------------------------------------------------------
    The following table provides a reconciliation of cash flow from
    operations before changes in working capital to distributable cash:

    -------------------------------------------------------------------------
    (in millions of dollars)                      Three months   Three months
                                                     ended          ended
                                                    March 31,      March 31,
                                                      2007           2006
    -------------------------------------------------------------------------
    Cash flow from operations before changes
     in working capital                            $       6.4   $       6.7
    Add (deduct):
      Interest on Series A Subordinate Notes
       owned by unitholders                               20.9          20.9
      Proceeds from sale of property, plant
       and equipment                                       0.2           5.5
      Additions to property, plant and equipment          (0.5)         (0.4)
      Other non-cash items                                (0.1)         (1.2)
    -------------------------------------------------------------------------
                                                          20.5          24.8
    -------------------------------------------------------------------------
    Distributable cash                             $      26.9   $      31.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Distributable cash includes consolidated net earnings (loss), plus
interest expensed on Series A Subordinate Notes owned by unitholders, plus
non-cash income taxes, plus depreciation, depletion and amortization, plus
proceeds from the sale of property, plant and equipment net of their gain
(loss) on sale, less additions to property, plant and equipment and, from time
to time, adjustments for other items deemed appropriate by the Board of
Directors. Earnings available for distribution is comprised of consolidated
net earnings (loss) plus interest expensed on Series A Subordinate Notes. The
Series A Subordinate Notes are owned by the unitholders and interest thereon
is paid to the unitholders, therefore, earnings available for distribution to
unitholders reflects earnings before this interest charge.
    Earnings available for distribution and distributable cash are measures
that do not have a standardized meaning prescribed by GAAP and may not be
comparable to similar measures presented by other companies. Management
believes that the presentation of these measures will enhance an investor's
understanding of the Company's operating performance. Reconciliations of net
earnings (loss) and cash flow from operations before changes in working
capital, as determined in accordance with GAAP, and earnings available for
distribution and distributable cash are provided in the preceding tables.

    The following tables present a quarterly comparison of distributable cash
    generated, in total and on a per Stapled Unit basis:

    
    -------------------------------------------------------------------------
                          2007     2006     2005     2004     2003     2002
    ------------------------------------------------------------------------
    Distributable Cash
    (in millions of
     dollars)
    First quarter      $  26.9  $  31.5  $  23.9  $  27.7  $  25.7  $  21.2
    Second quarter                 35.5     15.4     43.5      4.7     10.6
    Third quarter                   9.3     (1.7)    35.9     12.0     34.1
    Fourth quarter                 27.5     29.7     18.1      9.0     24.2
    ------------------------------------------------------------------------
                       $  26.9  $ 103.8  $  67.3  $ 125.2  $  51.4  $  90.1
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------

    Distributable Cash
     per Stapled Unit(2)
    (in dollars)
    First quarter       $  0.35  $  0.41  $  0.31  $ 0.36   $  0.34  $  0.30
    Second quarter                  0.46     0.20    0.57      0.06     0.14
    Third quarter                   0.12    (0.02)   0.47      0.15     0.45
    Fourth quarter                  0.35     0.38    0.24      0.12     0.32
    ------------------------------------------------------------------------
                        $  0.35  $  1.34  $  0.87  $ 1.64   $  0.67  $  1.21
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------


    Financial Highlights
    -------------------------------------------------------------------------
                                                 Three months   Three months
                                                     ended          ended
                                                    March 31,      March 31,
    (in millions of dollars)                          2007           2006
    -------------------------------------------------------------------------
    Sales                                          $     112.3   $     125.7
    Operating earnings                                    27.2          25.3
    Operating earnings - % of sales                       24.2%         20.1%
    EBITDA(3)                                             30.3          27.5
    Income tax recovery                                    0.3           2.5
    Net earnings                                           3.7           2.9
    Distributable cash                             $      26.9   $      31.5
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
    

    Log sales revenues for the three months ended March 31, 2007, were down
compared to the first quarter of 2006 due to a 7% decrease in log sales
volume, with 823,100 m(3) of logs sold in the first quarter of 2007. Operating
earnings as a percentage of sales increased over the prior year quarter
primarily as a result of a real estate loss on the sale of a log sort in first
quarter of 2006.
    Earnings before interest, taxes, depreciation and amortization
(EBITDA)(3) for the three months ended March 31, 2007, were $30.3 million or
$0.39 per basic and diluted weighted average Stapled Unit compared to $27.5
million or $0.35 per basic and diluted weighted average Stapled Unit for the
comparative period in 2006. The Company reported an income tax recovery of
$0.3 million for the three months ended March 31, 2007, representing a
non-cash future income tax recovery. The Company generated net earnings for
the three months ended March 31, 2007, of $3.7 million, equating to basic and
diluted net earnings of $0.05 per weighted average common share compared to
net earnings of $2.9 million or basic and diluted net earnings of $0.04 per
weighted average common share for the comparative period in 2006.


    Highlights and Significant Transactions

    Adoption of New Accounting Policies - Financial Instruments

    During the first quarter, the Company adopted new accounting policies
issued by the Canadian Institute of Chartered Accountants ("CICA") and changed
its policy of accounting for financial instruments. Prior to January 1, 2007,
TimberWest recognized financial liabilities at carrying value. Effective
January 1, 2007, the Company measures its debentures and Series A Subordinate
Notes owned by unitholders at amortized cost using the effective interest
method. The effective interest method establishes the rate which equates the
estimated future cash flows with the net carrying amount of the financial
liability. The embedded derivative arising from the option to extend the
Series A Subordinate Notes for a further 10 year period is measured at fair
value. TimberWest adopted the new accounting policies on a retroactive basis
but prior years have not been restated.
    The adoption of new accounting policies for financial instruments has not
resulted in any significant changes to TimberWest's financial statements.

    Cash Distribution

    On April 26, 2007, TimberWest announced a distribution of $0.269 per
Stapled Unit, payable July 15, 2007, to unitholders of record on July 1, 2007.
From inception to March 31, 2007, the Company has generated distributable cash
of $794.8 million while, including the April 15, 2007 distribution of
$20.9 million, the Company has paid out $754.6 million to unitholders.
    Due to the seasonal and cyclical nature of TimberWest's business, cash
flows may fluctuate from quarter to quarter and from year to year. One of the
objectives of TimberWest's cash distribution policy is to make even
distributions to unitholders, which may differ from actual cash generated
during the period.

    Quarterly Conference Call

    TimberWest will hold a conference call at 8:00am PDT (11:00pm EDT) on
Friday, April 27, 2007, to discuss results of the first quarter. To access the
conference call, listeners should dial 1-800-298-3006. For those unable to
participate in the live call, a recording of the call will be available until
May 11, 2007, and can be accessed at 1-800-558-5253 using code 21334144. The
conference call will also be broadcast live over the internet via TimberWest's
website home page at http://www.timberwest.com. The webcast will be archived
and available for an additional 90 days.


    
    Operating Highlights
    -------------------------------------------------------------------------
                                                  Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------

    Log Sales (in millions of dollars)
      Domestic                                     $      38.0   $      35.4
      Export - Asia                                       27.1          35.6
      Export - US                                         13.2          14.6
    -------------------------------------------------------------------------
      Total log sales                              $      78.3   $      85.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log Sales Realizations ($/m(3))
      Domestic                                              83            76
      Export - Asia                                        124           134
      Export - US                                           90            93
    -------------------------------------------------------------------------
                                                            95            96
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log Sales Volume (thousand m(3))
      Domestic                                           456.9         467.1
      Export - Asia                                      218.8         266.3
      Export - US                                        147.4         155.8
    -------------------------------------------------------------------------
                                                         823.1         889.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log Sales Mix (thousand m(3))
      Fir                                                607.5         598.5
      Hembal                                             126.9         126.9
      Cedar                                               42.9          77.2
      Other                                               45.8          86.6
    -------------------------------------------------------------------------
                                                         823.1         889.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log Production Volume (thousand m(3))
      Public tenures                                     116.4         211.4
      Private timberlands                                963.4         881.6
    -------------------------------------------------------------------------
                                                       1,079.8       1,093.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Log sales revenues for the three months ended March 31, 2007, were down
compared to sales revenues for the first quarter of 2006 due to a decrease in
log sales volume and slightly lower average realizations. The higher log sales
volume in the first quarter of 2006 was due to increased harvest volumes to
take advantage of strong markets.
    Average domestic realizations for the first quarter of 2007 were higher
than the first quarter of 2006 as prices were higher primarily for hemlock and
cedar due to regional weather-related supply shortages and the increased
demand for fibre from the pulp sector. Average export realizations were lower
in the first quarter of 2007 compared to the first quarter of 2006 due to
weaker lumber markets in North America and increased supply of logs from North
America into Japan.
    Production costs for the first quarter of 2007 increased over the first
quarter of 2006 due to a higher proportion of helicopter volume and higher
interim rates for long term contractors, who continue to struggle with higher
input costs.

    
    -------------------------------------------------------------------------
                                                  Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------
    Sales by Product
    (in millions of dollars)
      Lumber                                       $      27.3   $      27.4
      Wood chips and residuals                             4.3           3.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sales Realizations
      Lumber ($/mfbm)                                      669           577
      Wood Chips and residuals ($/m(3))                     48            36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sales Volume
      Lumber (million fbm)                                40.8          47.5
      Wood Chips and residuals (thousand m(3))            90.9          96.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Lumber Production Volume (million fbm)                46.6          48.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Average lumber sales realizations compared to the same period in 2006
increased due to a higher proportion of Douglas fir production and a higher
value product mix in 2007. However, the fir lumber market in Japan began to
weaken near the end of the first quarter with significant oversupply emerging
in that market.
    Wood chips and residuals sales for the three month period ended March 31,
2007, of $4.3 million were up from $3.5 million for the comparative period in
2006, reflecting higher average chip sales realizations due to a shortage of
pulp logs and chips to supply coastal pulp facilities.

    
    -------------------------------------------------------------------------
                                                  Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------
    Real Estate Sales (in millions of dollars)     $       0.3   $       6.6
    Real Estate Net Proceeds (in millions
     of dollars)                                           0.2           5.5
    Real Estate Net Proceeds ($/acre)                   10,082         9,252
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Real estate sales in the first quarter of 2007 were lower than the first
quarter of 2006, reflecting timing differences in sales transactions.
    During 2006, the Company sold 3,188 acres for $32.9 million compared to
2005 when TimberWest sold 1,629 acres for $13.9 million.

    
    -------------------------------------------------------------------------
                                                  Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------
    Earnings Before Interest, Taxes, Depreciation
     and Amortization (EBITDA)(*)
     (in millions of dollars)
      Net earnings                                 $       3.7   $       2.9
      Add (deduct):
        Interest on Series A Subordinate Notes
         paid to unitholders                              20.9          20.9
        Interest on long-term debt                         0.1           3.8
        Interest on short-term debt                        3.4             -
        Income tax recovery                               (0.3)         (2.5)
        Depreciation, depletion and amortization           2.3           2.2
        Amortization of deferred financing
         costs (note 2)                                    0.2           0.2
    -------------------------------------------------------------------------
      EBITDA                                       $      30.3   $      27.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) EBITDA does not have a standardized meaning prescribed by Canadian
        generally accepted accounting principles and may not be comparable to
        similar measures presented by other companies. Management believes
        that the presentation of this measure will enhance an investor's
        understanding of the Company's operating performance.



    Financial Position
    -------------------------------------------------------------------------
                                                       As at         As at
    Summary of Financial Position                    March 31,   December 31,
    (in millions of dollars)                           2007          2006
    -------------------------------------------------------------------------

    Cash and cash equivalents                      $       3.9   $       9.3
    Current assets                                        93.9          83.1
    Current liabilities                                  257.0         253.8
    Current liabilities (excluding short-term debt)       62.3          58.8
    Long-term liabilities                                189.0         189.2
    Series A Subordinate notes owned by unitholders      697.8         697.0
    Unitholder's equity                                  245.9         241.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Cash and cash equivalents decreased at March 31, 2007, reflecting an
increase in non-cash working capital. Trade accounts receivable was
$17.3 million at March 31, 2007, comparable to $16.9 million at the end of
2006. Inventories have increased to $64.1 million at March 31, 2007, up from
$49.0 million at the end of 2006. Log inventory was $52.8 million at March 31,
2007, compared to $40.5 million at the end of 2006 and lumber inventory was
$10.1 million at March 31, 2007 compared to $7.3 million at the end of 2006.
The increases reflect an increased log harvest and increased lumber production
during the quarter relative to the fourth quarter of 2006. Prepaid expenses
and other current assets were $6.6 million at March 31, 2007, compared to
$5.6 million at the end of 2006, reflecting an increase in non-trade
receivables.
    Property, plant and equipment were $1,294.4 million as at March 31, 2007,
$1.9 million less than as at December 31, 2006. This decrease primarily
reflects the sale of higher and better use properties, with a net book value
of $0.1 million during the first quarter of 2007, as well as a provision for
depreciation of capital assets of $2.3 million recorded during the quarter.
These items were offset in part by capital additions of $0.5 million,
comprised primarily of logging roads.
    Other assets were $1.4 million at March 31, 2007, down from the balance
of $2.2 million at December 31, 2006. This decrease reflects $0.3 million of
receivables reclassified from long-term to current receivables, as well as the
reduction of $0.4 million in deferred debt issue costs that were reclassified
to offset the carrying value of the debentures as at January 1, 2007 resulting
from adoption of new accounting policies. (See Highlights and Significant
Transactions - Adoption of New Accounting Policies - Financial Instruments)
    Current liabilities as at March 31, 2007, includes the $194.7 million
aggregate net carrying value ($195.0 million principal amount) of 7.0%
unsecured senior debentures, which were reclassified from long-term to current
liabilities in the fourth quarter of 2006. Of note is that effective
January 1, 2007, the debentures are recorded at amortized cost using the
effective interest method from adoption of new accounting policies. (See
Highlights and Significant Transactions - Adoption of New Accounting Policies
- Financial Instruments) Excluding the debentures, current liabilities at
March 31, 2007 were $62.3 million. This quarterly variance in current
liabilities (excluding short-term debt) can be attributed to a $3.5 million
increase in accounts payable and accrued liabilities primarily attributed to
higher levels of production in March 2007 compared to December 2006.
    As at March 31, 2007, the Company had no borrowings on its available
credit facilities and had commitments of $17.1 million relating to outstanding
letters of credit, including $16.1 million issued under its demand bank
guarantee facility and $1.0 million issued under its $100.0 million long-term
unsecured revolving facility.
    As at March 31, 2007 the Company had no long-term financial liabilities,
as the $194.7 million aggregate net carrying value ($195.0 million principal
amount) of the 7.0% unsecured senior debentures due October 1, 2007, were
reclassified from long-term to current liabilities. The Company intends to
refinance these bonds prior to October 1, 2007.
    Other long-term liabilities as at March 31, 2007, included a silviculture
liability of $3.5 million, a $39.6 million liability relating to employee
future benefits and a future income tax liability of $145.9 million. These
balances are comparable to balances as at December 31, 2006.
    The Series A Subordinate Note component of the Company's Stapled Unit is
presented as a liability on the Company's consolidated balance sheets.
Effective January 1, 2007, the Series A Subordinate Note liability is recorded
at amortized cost using the effective interest method from adoption of new
accounting policies. (See Highlights and Significant Transactions - Adoption
of New Accounting Policies - Financial Instruments) As at March 31, 2007, the
carrying value of the Series A Subordinate Note liability was $697.8 million.
    During the three months ended March 31, 2007, 289,370 Stapled Unit
options were granted and options to purchase 86,462 Stapled Units were
exercised for proceeds of $1.3 million. As at April 26, 2007, the Company had
1,135,762 granted and outstanding Stapled Unit option awards and
77,724,396 issued and outstanding Stapled Units.

    
    Cash Flow and Liquidity
    -------------------------------------------------------------------------
                                                       As at         As at
    Selected Cash Flow Items                         March 31,     March 31,
    (in millions of dollars)                           2007          2006
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating activities:
      Cash provided by (used in) operations before
       changes in non-cash working capital         $       6.4   $       6.7
      Changes in non-cash working capital                (13.0)         12.5
    -------------------------------------------------------------------------
                                                          (6.6)         19.2
    -------------------------------------------------------------------------

    Financing activities:
      Issuance of Stapled Units on exercise
       of options                                          1.3           0.2
      Credit facilities                                      -         (26.0)
    -------------------------------------------------------------------------
                                                           1.3         (25.8)
    -------------------------------------------------------------------------

    Investing activities:
      Proceeds from sale of property, plant
       and equipment                                       0.2           5.5
      Additions to property, plant and equipment          (0.5)         (0.4)
      Other assets                                         0.2          (0.5)
    -------------------------------------------------------------------------
                                                          (0.1)          4.6
    -------------------------------------------------------------------------

    Decrease in cash and cash equivalents          $      (5.4)  $      (2.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the three months ended March 31, 2007, the Company issued 86,462
Stapled Units on the exercise of Stapled Unit options for net proceeds of
$1.3 million, compared to the issuance of 18,191 Stapled Units on the exercise
of Stapled Unit options for net proceeds of $0.2 million in the comparative
quarter in 2006. During the first quarter of 2007, there were no borrowings on
available credit facilities whereas $26.0 million was applied to reduce
amounts borrowed on available credit facilities in the comparative period in
2006.
    In the first quarter of 2007, the Company received net proceeds of
$0.2 million from the sale of property, plant and equipment, primarily from
the sale of higher use properties, and incurred $0.5 million for capital
expenditures, primarily for the construction of logging roads
    As at March 31, 2007, the principal amount of TimberWest's total debt(4)
outstanding was $195.0 million compared to total principal amount of debt
outstanding of $195.0 million as at December 31, 2006. The Company's
consolidated debt-to-total capitalization ratio(4) as at March 31, 2007 was
17:83, the same as at December 31, 2006.
    Total debt facilities available to the Company as at March 31, 2007, were
$386.3 million, comprised of $10.0 million available under a demand operating
credit facility, $16.3 million available under a demand bank guarantee
facility, $65.0 million available under a revolving facility due July 7, 2010,
$100.0 million available under a revolving facility due July 27, 2010 and
$195.0 million aggregate principal amount of 7.0% debentures maturing on
October 1, 2007. As at March 31, 2007 the Company had commitments of
$17.1 million relating to outstanding letters of credit issued to secure
various obligations of the Company, including $16.1 million issued under its
demand bank guarantee facility and $1.0 million issued under its
$100.0 million long-term unsecured revolving facility.

    Quarterly Financial Information

    The following table presents selected unaudited quarterly financial
information for each of the Company's last eight quarters. This data has been
derived from unaudited interim consolidated financial statements that have
been prepared on the same basis as the 2006 annual audited consolidated
financial statements. In the Company's opinion, the amounts include all normal
recurring adjustments necessary for the fair presentation of such information.
These financial results are not necessarily indicative of results for any
future period and should not be relied upon to predict future performance.

    
    -------------------------------------------------------------------------
    (in millions
     of dollars,
     except per
     common share
     and per
     Stapled
     Unit               2005                       2006                2007
     amounts) ---------------------------------------------------------------
                Q2      Q3      Q4      Q1      Q2      Q3      Q4      Q1
    -------------------------------------------------------------------------
    Sales     $107.6  $119.2  $132.8  $125.7  $145.0  $ 96.8  $110.6  $112.3
    Operating
     earnings $ 17.8  $ 14.0  $ 21.0  $ 25.3  $ 32.6  $ 11.3  $ 25.5  $ 27.2
    Net
     earnings
     (loss)   $ (6.7) $(17.0) $ 30.9  $  2.9  $ 12.2  $(12.8) $ 14.8  $  3.7
    Earnings
     available
     for
     distri-
     bution   $ 14.1  $  3.8  $ 51.8  $ 23.8  $ 33.1  $  8.1  $ 35.7  $ 24.6
    Earnings
     (loss)
     available
     for
     distri-
     bution
     before
     provision
     for
     future
     income
     taxes    $ 13.0  $ (6.9) $ 24.3  $ 21.2  $ 11.5  $  7.3  $ 22.5  $ 24.3
    Distri-
     butable
     cash     $ 15.4  $ (1.7) $ 29.7  $ 31.5  $ 35.5  $  9.3  $ 27.5  $ 26.9
    Distri-
     butions
     paid     $ 20.8  $ 20.8  $ 20.8  $ 20.9  $ 20.9  $ 20.9  $ 20.9  $ 20.9
    $ per
     common
     share(5)
    Basic net
     earnings
     (loss)   $(0.09) $(0.22) $ 0.40  $ 0.04  $ 0.16  $(0.17) $ 0.19  $ 0.05
    Diluted
     net
     earnings
     (loss)   $(0.09) $(0.22) $ 0.40  $ 0.04  $ 0.16  $(0.16) $ 0.19  $ 0.05
    $ per
     Stapled
     Unit(5)
    Basic and
     diluted
     earnings
     available
     for
     distri-
     bution   $ 0.18  $ 0.05  $ 0.67  $ 0.31  $ 0.43  $ 0.10  $ 0.46  $ 0.32
    Basic and
     diluted
     earnings
     (loss)
     available
     for
     distri-
     bution
     before
     provision
     for
     future
     income
     taxes    $ 0.17  $(0.09) $ 0.31  $ 0.27  $ 0.15  $ 0.09  $ 0.29  $ 0.31
    Basic and
     diluted
     distri-
     butable
     cash     $ 0.20  $(0.02) $ 0.38  $ 0.41  $ 0.46  $ 0.12  $ 0.35  $ 0.35
    Distri-
     butions
     paid     $ 0.27  $ 0.27  $ 0.27  $ 0.27  $ 0.27  $ 0.27  $ 0.27  $ 0.27
    

    Internal Controls over Financial Reporting

    During the quarter ended March 31, 2007, management corrected an internal
control design weakness related to procedures for accounting and disclosure of
its future income tax provision, and engaged an independent tax advisor to
perform the tax review.
    The Company did not make any other changes to its internal controls over
financial reporting that would have materially affected, or would likely
materially affect, such controls.

    The statements which are not historical facts contained in this report
are forward-looking statements that involve risks and uncertainties.
TimberWest's actual results could differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, general
economic conditions, variations in TimberWest's product prices and changes in
commodity prices generally, changes in market conditions, actions of
competitors, interest rate and foreign currency fluctuations, regulatory,
harvesting fee and trade policy changes and other actions by governmental
authorities, the ability to implement business strategies and pursue business
opportunities, labour relations, weather conditions, forest fires, insect
infestation, disease and other natural phenomena and other risks and
uncertainties described in TimberWest's public filings with securities
regulatory authorities.

    
                                   Notice

    The accompanying unaudited interim consolidated financial statements of
TimberWest Forest Corp. (the "Company") have not been reviewed by the
Company's auditors.


    Consolidated Statements of Operations and Comprehensive Income
    (in millions of dollars)
    Unaudited                                     Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------

    Sales                                          $     112.3   $     125.7

    Operating costs and expenses:
      Cost of sales                                       78.2          94.6
      Selling, administrative and other                    4.6           3.6
      Depreciation, depletion and amortization             2.3           2.2
    -------------------------------------------------------------------------
                                                          85.1         100.4
    -------------------------------------------------------------------------

    Operating earnings                                    27.2          25.3

    Interest expense:
      Series A Subordinate Notes owned by unitholders     20.9          20.9
      Long-term debt                                       0.1           3.8
      Short-term debt                                      3.4             -
    -------------------------------------------------------------------------
                                                          24.4          24.7
    Amortization of deferred financing costs               0.2           0.2
    Other income                                          (0.8)            -
    -------------------------------------------------------------------------
                                                          23.8          24.9
    -------------------------------------------------------------------------

    Earnings before income taxes                           3.4           0.4

    Income tax recovery (note 3)                          (0.3)         (2.5)
    -------------------------------------------------------------------------

    Net earnings and comprehensive income          $       3.7   $       2.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net earnings per
     common share (note 4)                         $      0.05   $      0.04
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained Earnings
    (in millions of dollars)
    Unaudited                                     Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------

    Retained earnings, beginning of period         $      50.1   $      33.2

    Adoption of new accounting policies for
     financial instruments (note 2)                          -             -
    -------------------------------------------------------------------------
    Retained earnings, January 1, 2007, after
     adoption                                             50.1          33.2
    -------------------------------------------------------------------------

    Net earnings and comprehensive income
     for the period                                        3.7           2.9
    -------------------------------------------------------------------------
    Retained earnings, end of period               $      53.8   $      36.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to unaudited interim consolidated financial
    statements.



    Consolidated Balance Sheets
    (in millions of dollars)                           As at
                                                     March 31,      As at
                                                       2007      December 31,
                                                    Unaudited        2006
    -------------------------------------------------------------------------

    Assets
      Current assets:
        Cash                                       $       3.9   $       9.3
        Accounts receivable                               17.3          16.9
        Inventories                                       64.1          49.0
        Prepaid expenses and other current assets          6.6           5.6
        Future income taxes                                2.0           2.3
    -------------------------------------------------------------------------
                                                          93.9          83.1
      Property, plant and equipment, net (note 5)      1,294.4       1,296.3
      Other assets (note 6)                                1.4           2.2
    -------------------------------------------------------------------------
                                                   $   1,389.7   $   1,381.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
      Current liabilities:
        Debentures (note 2)                        $     194.7   $     195.0
        Accounts payable and accrued liabilities          41.4          37.9
        Distribution payable                              20.9          20.9
    -------------------------------------------------------------------------
                                                         257.0         253.8
      Long-term silviculture liability                     3.5           3.6
      Employee future benefits (note 8)                   39.6          39.2
      Future income taxes                                145.9         146.4
    -------------------------------------------------------------------------
                                                         446.0         443.0
      Series A Subordinate Notes owned by
       unitholders (note 2)                              697.8         697.0
    -------------------------------------------------------------------------
                                                       1,143.8       1,140.0
    -------------------------------------------------------------------------

    Unitholders' equity:
      Share capital, consisting of common and
       preferred shares (note 7)                         190.9         190.4
      Contributed surplus                                  1.2           1.1
      Retained earnings                                   53.8          50.1
    -------------------------------------------------------------------------
                                                         245.9         241.6
    -------------------------------------------------------------------------
                                                   $   1,389.7   $   1,381.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to unaudited interim consolidated financial
    statements.



    Consolidated Statements of Cash Flows
    (in millions of dollars)
    Unaudited                                     Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating activities:
      Net earnings                                 $       3.7   $       2.9
      Items not involving cash:
        Depreciation, depletion and amortization           2.5           2.4
        Loss (gain) on sale of property, plant
         and equipment                                    (0.1)          3.4
        Future income tax recovery                        (0.3)         (2.6)
        Other non-cash items                               0.6           0.6
    -------------------------------------------------------------------------
                                                           6.4           6.7
      Changes in non-cash working capital:
        Accounts receivable                               (0.4)          0.8
        Inventories                                      (15.1)         (6.5)
        Prepaid expenses and other working capital        (1.0)          4.7
        Accounts payable and accrued liabilities           3.5          13.5
    -------------------------------------------------------------------------
                                                          (6.6)         19.2
    -------------------------------------------------------------------------

    Financing activities:
      Issuance of Stapled Units on exercise of
       options:
        Series A Subordinate Notes                         0.8           0.2
        Share capital                                      0.5             -
    -------------------------------------------------------------------------
                                                           1.3           0.2
      Revolving credit facilities                            -         (26.0)
    -------------------------------------------------------------------------
                                                           1.3         (25.8)
    -------------------------------------------------------------------------

    Investing activities:
      Proceeds from sale of property, plant and
       equipment                                           0.2           5.5
      Additions to property, plant and equipment          (0.5)         (0.4)
      Other assets                                         0.2          (0.5)
    -------------------------------------------------------------------------
                                                          (0.1)          4.6
    -------------------------------------------------------------------------

    Decrease in cash and cash equivalents                 (5.4)         (2.0)
    Cash and cash equivalents, beginning of period         9.3           3.0
    -------------------------------------------------------------------------

    Cash and cash equivalents, end of period       $       3.9   $       1.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental information:
      Interest on Series A Subordinate Notes paid
       to unitholders                              $      20.9   $      20.9
      Other interest paid                          $       0.1   $       0.4
      Income taxes paid                            $         -   $       0.1
    -------------------------------------------------------------------------

    See accompanying notes to unaudited interim consolidated financial
    statements.


    Notes to Unaudited Interim Consolidated Financial Statements

    For the three months ended March 31, 2007 and 2006

    Financial figures presented in the tables that follow are in millions of
    dollars, except per common share amounts.

    1.  Significant Accounting Policies

        The accompanying unaudited interim consolidated financial statements
        include the accounts of TimberWest Forest Corp. and its subsidiaries
        ("the Company"), have been prepared in accordance with Canadian
        generally accepted accounting principles and are expressed in
        Canadian dollars. Not all disclosures required by Canadian generally
        accepted accounting principles for annual financial statements are
        presented and, accordingly, these interim consolidated financial
        statements should be read in conjunction with the Company's most
        recent annual consolidated financial statements. These interim
        consolidated financial statements follow the same accounting policies
        and methods of application used in the Company's audited annual
        consolidated financial statements of December 31, 2006, except for
        the adoption of new accounting policies as described in note 2.

    2.  Adoption of New Accounting Policies

        Financial instruments:

        The Canadian Institute of Chartered Accountants ("CICA") issued
        Section 3855, Financial Instruments - Recognition and Measurement,
        Section 3861, Financial Instruments: Disclosure and Presentation,
        Section 3865, Hedges and Section 1530, Comprehensive Income, all
        applicable for annual or interim periods beginning on or after
        October 1, 2006. Sections 3855 and 3861 require all financial assets,
        financial liabilities and non-financial derivatives to be recognized
        on the balance sheet at the appropriate measurement and properly
        disclosed in the notes to the consolidated financial statements.
        Section 3865 sets out hedge accounting prerequisites and rules and
        builds on existing Canadian GAAP guidance by specifying how hedge
        accounting is applied and disclosed. Section 1530 introduces new
        standards for the presentation and disclosure of components of
        comprehensive income. Comprehensive income is defined as the change
        in net assets of an enterprise during a reporting period from
        transactions and other events and circumstances from non-owner
        sources. The Company has adopted the standards on January 1, 2007.

        Prior to January 1, 2007, the Company recognized financial
        liabilities at carrying value. Effective January 1, 2007, the Company
        adopted Handbook Section 3855 and now measures its debentures and
        Series A Subordinate Notes owned by unitholders at amortized cost
        using the effective interest method. The effective interest method
        establishes the rate which equates the estimated future cash flows
        with the net carrying amount of the financial liability. The embedded
        derivative arising from the option to extend the Series A Subordinate
        Notes for a further 10 year period is measured at fair value.

        The Company adopted the new accounting policies on a retroactive
        basis but prior years have not been restated.

        The adoption of new accounting policies for financial instruments has
        not resulted in any significant changes to TimberWest's financial
        statements.

    3.  Income Taxes
        ---------------------------------------------------------------------
                                                  Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
        ---------------------------------------------------------------------

        Current income tax expense - large
         corporation tax                           $         -   $       0.1
        Future income tax recovery                        (0.3)         (2.6)
        ---------------------------------------------------------------------
                                                   $      (0.3)  $      (2.5)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    4.  Earnings per Share
        ---------------------------------------------------------------------
                                                  Three months  Three months
                                                      ended         ended
                                                     March 31,     March 31,
                                                       2007          2006
        ---------------------------------------------------------------------

        Net earnings                               $       3.7   $       2.9
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Basic weighted average number of common
         shares                                     77,674,672    77,495,190
        Incremental common shares from potential
         exercise of options                           153,651        78,723
        ---------------------------------------------------------------------
        Diluted weighted average number of common
         shares                                     77,828,323    77,573,913
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Basic and diluted net earnings per common
         share                                     $      0.05   $      0.04
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  Property, Plant and Equipment

        Property, plant and equipment at March 31, 2007, includes private
        timberlands with a carrying value of $1,214.9 million. This amount
        includes a valuation increase adjustment of $389.8 million recorded
        in the year ended December 31, 2000, resulting from the adoption of
        Section 3465 - Income Taxes of the CICA Handbook, which was mandatory
        for fiscal years ending on or after January 1, 2000.

    6.  Other Assets
        ---------------------------------------------------------------------
                                                      As at         As at
                                                     March 31,   December 31,
                                                       2007          2006
        ---------------------------------------------------------------------

        Deferred debt issue costs (note 2)         $       0.3   $       0.8
        Receivable on sale of property, plant and
         equipment                                         0.5           0.5
        Other                                              0.6           0.9
        ---------------------------------------------------------------------
                                                   $       1.4   $       2.2
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  Stapled Units
        ---------------------------------------------------------------------
                                              Stapled Unit Components
                                     ----------------------------------------
                                                  Share Capital
                                                 (consisting of
                                      Series A      common and
                                     Subordinate    preferred
                         Number         Notes         shares)       Total
        ---------------------------------------------------------------------

        Three months
         ended March
         31, 2006:
        Balance,
         December 31,
         2005           77,487,571   $     695.7   $     189.8   $     885.5
        Issuance of
         Stapled Units
         on exercise
         of options         18,191           0.2             -           0.2
        ---------------------------------------------------------------------
        Balance, March
         31, 2006       77,505,762   $     695.9   $     189.8   $     885.7
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Three months
         ended March
         31, 2007:
        Balance,
         December 31,
         2006           77,635,254   $     697.0   $     190.4   $     887.4
        Issuance of
         Stapled Units
         on exercise
         of options         86,462           0.8           0.5           1.3
        ---------------------------------------------------------------------
        Balance, March
         31, 2007       77,721,716   $     697.8   $     190.9   $     888.7
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company issues equity by way of Stapled Units, each Stapled Unit
        consisting of approximately $8.98 face amount of Series A Subordinate
        Notes, 100 preferred shares and one common share. The securities
        comprising a Stapled Unit trade together as Stapled Units and cannot
        be transferred except with each other as part of a Stapled Unit until
        the date of maturity of the Series A Subordinate Notes or the payment
        of the principal amount of the Series A Subordinate Notes following
        an event of default and expiration of a remedies blockage period.

        Each Series A Subordinate Note has been issued with a face amount of
        $8.978806569, entitling the holder to an interest payment per unit of
        $1.077456788 per annum (12%). The Series A Subordinate Notes are
        unsecured and subordinate to all credit facilities and debentures.
        The principal amount of the Series A Subordinate Notes plus accrued
        and unpaid interest thereon are due on August 31, 2038, unless such
        date is extended by the Company at the time of the issuance of
        additional Subordinate Notes to a date not later than the earlier of:
        (i) the date of maturity of such additional Subordinate Notes; and
        (ii) August 31, 2048, and will be payable by cash or, at the option
        of the Company, by delivery of common shares to the Subordinate Note
        Trustee for the benefit of the holders of the Subordinate Notes.

        The Company may elect to pay the interest on the Series A Subordinate
        Notes held by unitholders in common or preferred shares of the
        Company, and may elect to pay the principal amount of the Series A
        Subordinate Notes held by unitholders in common shares of the
        Company.

    8.  Employee Benefits
        ---------------------------------------------------------------------
                                                      As at        As at
                                                     March 31,  December 31,
                                                       2007         2006
        ---------------------------------------------------------------------

        Pension benefits                           $       8.3   $       8.4
        Non-pension post-retirement benefits              31.3          30.8
        ---------------------------------------------------------------------
                                                   $      39.6   $      39.2
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company, through its subsidiaries, maintains pension plans that
        include defined benefit and defined contribution segments available
        to all salaried employees and to hourly employees not covered by
        union pension plans. For the three months ended March 31, 2007, the
        Company recorded an expense of $0.6 million for pension benefit costs
        (2006 - $0.3 million) and made cash payments of $0.8 million to fund
        current and future service costs (2006 - $1.0 million).

        The Company also provides non-pension benefits consisting of group
        life insurance and medical benefits to eligible retired employees,
        which the Company funds on an as-incurred basis. For the three months
        ended March 31, 2007, the Company recorded an expense of $1.0 million
        for non-pension benefit costs (2006 - $1.0 million) and made cash
        payments of $0.5 million to fund current benefit costs (2006 -
        $0.6 million).

    9.  Stock-based Compensation Plans

        Under the Company's Stapled Unit Option Plan, the Company may grant
        options for the purchase of Stapled Units to directors, officers or
        employees who are in active service or employment of the Company or
        of any of its subsidiaries. During the quarter ended March 31, 2007,
        289,370 Stapled Unit options were granted at an exercise price of
        $16.26 (2006 - 245,238 Stapled Unit options were granted at an
        average exercise price of $13.94).

        The Company has applied the fair value method of accounting for
        Stapled Unit option grants awarded on or after January 1, 2003. The
        fair value of each option granted was estimated on the date of grant
        using the Black-Scholes option pricing model using the following
        weighted average assumptions:

        ---------------------------------------------------------------------
                                                          2007          2006
        ---------------------------------------------------------------------

        Risk-free interest rate                            4.0%          4.1%
        Expected life (years)                              5.0           5.0
        Expected volatility                               21.4%         20.3%
        Dividend yield                                     6.5%          8.0%
        Number of options granted                      289,370       245,238
        Fair value of each option granted                $1.80         $0.92
        ---------------------------------------------------------------------

        The compensation cost for the 289,370 Stapled Unit options granted
        between January 1, 2007 and March 31, 2007 is $521,000 (2006 -
        245,238 Stapled Unit options were granted with a compensation cost of
        $226,000). The compensation cost of Stapled Unit option awards is
        amortized against earnings over the three-year vesting period of the
        underlying options and an expense of $234,000 has been recognized in
        net earnings for the three months ended March 31, 2007 (2006 -
        $114,000), with a corresponding credit to contributed surplus.

        Under the Company's Distribution Equivalent Plan, the Company awards
        Stapled Unit option holders an amount equal to actual distributions
        paid on the Company's Stapled Units. Awards granted under the
        Distribution Equivalent Plan vest under the same terms that apply to
        the corresponding options and can only be exercised at the time of
        exercise of the corresponding options. The Company applies the
        principles of the fair value-based method of accounting for stock-
        based compensation to awards granted under this plan.

        Awards are accrued on a basis equal to actual distributions paid on
        the Company's issued and outstanding Stapled Units and are charged to
        earnings as the underlying Stapled Unit options vest. For the three
        months ended March 31, 2007, $0.2 million has been accrued for awards
        granted under this plan (2006 - $0.2 million) and $0.3 million has
        been amortized against earnings for the quarter (2006 -
        $0.2 million).

        During the three months ended March 31, 2007, a total of 86,462
        Stapled Unit options with an average exercise price of $13.84 were
        exercised (2006 - 18,191 Stapled Unit options with an average
        exercise price of $12.14 were exercised).

    10. Comparative figures

        Certain comparative figures have been reclassified to conform to the
        current year presentation.


                                                   Three months  Three months
                                                       ended         ended
    Supplemental Information                          March 31,     March 31,
    Unaudited                                           2007          2006
    -------------------------------------------------------------------------

    Sales by Product
    (in millions of dollars)
      Log sales
        Domestic                                   $      38.0   $      35.4
        Export - Asia                                     27.1          35.6
        Export - US                                       13.2          14.6
    -------------------------------------------------------------------------
        Total log sales                                   78.3          85.6
      Lumber                                              27.3          27.4
      Wood chips and other                                 6.4           6.1
      Real estate                                          0.3           6.6
    -------------------------------------------------------------------------
                                                   $     112.3   $     125.7
    -------------------------------------------------------------------------

    Sales Volume
      Logs (thousand m(3))
        Domestic                                         456.9         467.1
        Export - Asia                                    218.8         266.3
        Export - US                                      147.4         155.8
    -------------------------------------------------------------------------
                                                         823.1         889.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Lumber (million fbm)                                40.8          47.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Log Sales Mix (thousand m(3))
      Fir                                                607.5         598.5
      Hembal                                             126.9         126.9
      Cedar                                               42.9          77.2
      Other                                               45.8          86.6
    -------------------------------------------------------------------------
                                                         823.1         889.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Production Volume
      Logs (thousand m(3))
        Public tenures                                   116.4         211.4
        Private timberlands                              963.4         881.6
    -------------------------------------------------------------------------
                                                       1,079.8       1,093.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Lumber (million fbm)                                46.6          48.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings Before Interest, Taxes, Depreciation
     and Amortization (EBITDA)(*)
    (in millions of dollars)
      Net earnings (loss)                          $       3.7   $       2.9
      Add (deduct):
        Interest on Series A Subordinate Notes
         paid to unitholders                              20.9          20.9
        Interest on long-term debt                         0.1           3.8
        Interest on short-term debt                        3.4             -
        Income tax recovery                               (0.3)         (2.5)
        Depreciation, depletion and amortization           2.3           2.2
        Amortization of deferred financing costs           0.2           0.2
    -------------------------------------------------------------------------
      EBITDA                                       $      30.3   $      27.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) EBITDA does not have a standardized meaning prescribed by Canadian
        generally accepted accounting principles and may not be comparable to
        similar measures presented by other companies. Management believes
        that the presentation of this measure will enhance an investor's
        understanding of the Company's operating performance.
    

    About TimberWest

    TimberWest Forest Corp. is uniquely positioned as the largest owner of
private forest lands in western Canada. The Company owns in fee simple
approximately 334,000 hectares or 825,000 acres of private timberland that,
over the previous five years, have provided an annual average harvest of 2.594
million m(3) of logs and have an approximate annual growth rate of 8.0 m(3)
per hectare per year on the productive land base. These timberlands are
located on Vancouver Island and the majority of the land base supports the
growth of Douglas fir, a premium tree species sought after for structural
purposes. TimberWest runs fully-contracted harvesting operations. With almost
80% of the Company's annual private land logging now being done in
second-growth stands, TimberWest leads the Coastal industry in the growing and
harvesting of second-growth timber.
    The Company's independent auditor, KPMG Performance Registrar Inc.,
periodically certifies that the forest management practices on the Company's
private timberland continue to meet all Sustainable Forestry Initiative
(SFI(R)) requirements. SFI requirements specify that forest harvesting is
integrated with environmental and conservation goals for soil, wildlife, water
quality protection, conservation of biodiversity, protection of special sites
and aesthetics in a manner that ensures a sustainable harvest over the
long-term.
    TimberWest also owns renewable Crown harvest rights to 0.7 million m(3)
of logs per year and operates a sawmill located near Campbell River, BC.
    In addition, approximately 38,000 hectares or 94,000 acres of the
Company's private forest lands have been identified as having greater value as
real estate properties and will progressively be made available for higher
uses over the next ten to fifteen years. The Company reviews its land base on
a periodic basis to update the size of its portfolio of higher use properties.

    Stapled Units of TimberWest Forest Corp. are traded on the Toronto Stock
Exchange under the symbol: TWF.UN

    Visit us at our web site: www.timberwest.com

    
    (1) Distributable cash, earnings available for distribution and EBITDA
        are measures that do not have a standardized meaning prescribed by
        Canadian generally accepted accounting principles (GAAP) and may not
        be comparable to similar measures presented by other companies.
        Management believes that the presentation of these measures will
        enhance an investor's understanding of the Company's operating
        performance. A reconciliation of net earnings as determined in
        accordance with GAAP and distributable cash and earnings available
        for distribution is provided in the Summary of Financial Results and
        a reconciliation of net earnings as determined in accordance with
        GAAP and EBITDA is provided in the Supplemental Information included
        in this press release.

    (2) Per Stapled Unit amounts by quarter do not necessarily add to the
        total of the year and year-to-date due to changes in the weighted
        average number of Stapled Units outstanding during the year.

    (3) EBITDA is a measure that does not have a standardized meaning
        prescribed by GAAP and may not be comparable to similar measures
        presented by other companies. Management believes that the
        presentation of this measure will enhance an investor's understanding
        of the Company's operating performance. A reconciliation of net
        earnings (loss) as determined in accordance with GAAP and EBITDA is
        provided in the supplemental information appended to this interim
        report.

    (4) Total debt and the debt-to-total capitalization ratio are measures
        that do not have a standardized meaning prescribed by GAAP and may
        not be comparable to similar measures presented by other companies.
        As the Company's Series A Subordinate Notes trade only as part of the
        Company's equity instrument, the Stapled Unit, they are not included
        in the Company's definition of debt. Management believes that the
        presentation of these measures will enhance an investor's
        understanding of the Company's financial resources and capital
        structure.

    (5) Per common share and per Stapled Unit amounts presented for each
        quarter have been determined based on the weighted average number of
        common shares or weighted average number of Stapled Units outstanding
        during the quarter. Per common share and per Stapled Unit amounts by
        quarter do not necessarily add to the total of the year due to
        changes in the weighted average number of common shares and Stapled
        Units outstanding during the year.
    

    %SEDAR: 00009326E




For further information:

For further information: TimberWest Forest Corp., Suite 2300, 1055 West
Georgia Street, PO Box 11101, Vancouver, BC, V6E 3P3, Telephone: (604)
654-4600, Facsimile: (604) 654-4571; Investor Relations Contact: Bev Park,
Executive Vice President and Chief Financial Officer, Telephone: (604)
654-4600, Facsimile: (604) 654-4662, Email: invest@timberwest.com

Organization Profile

TIMBERWEST FOREST CORP.

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