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TimberWest Releases 2008 Second Quarter Results and Announces a Review of Distribution Policy and Potential Capital Reorganization
VANCOUVER, Aug. 14 /CNW/ - "Market conditions continue to be extremely
difficult and TimberWest is therefore staying the course with its harvest
deferral strategy," said Paul McElligott, President and CEO of TimberWest
Forest Corp. With log sales volumes down 24% in Q2, 2008 relative to the same
period in 2007 and sales realizations down 18%, the Company generated a
Distributable Cash loss of $3.2 million in the quarter, after taking a
restructuring charge in May of $7.7 million for the permanent closure of Elk
Falls, its last remaining sawmill. Non-core real estate sales were
$4.9 million during the quarter. Stronger real estate sales, lower harvesting
costs, and aggressive management of working capital resulted in the Company
ending the quarter with $211.9 million of debt, $6.9 million higher than at
the end of the first quarter. The Company remained in compliance with all of
its debt covenants for the quarter, however, it is possible that the Company
may not be able to remain in compliance with its covenants later in the year.
"We continue to work on resolving this issue and by the end of the third
quarter expect to either amend the existing facilities or put new ones in
place," said Mr. McElligott.
Safety
Safety continues to be a priority for the Company and its MIR results
continue to show improvement at 0.61 for the first half of 2008 compared to
1.19 for the same period last year. In addition, 82 of its 109 contractors are
now SAFE Certified by the BC Forest Safety Council and the Company expects the
remainder to achieve their SAFE company certifications by year end. Beginning
in 2009, only SAFE Certified contractors will be permitted to work on
TimberWest's land base. TimberWest successfully concluded its Safe Company
certification review audit during the quarter with a score of 97%.
Real Estate Operational Results
The Company is pleased with the momentum of the sales program so far this
year. Net proceeds from the sale of non-core real estate for the second
quarter of 2008 were $4.6 million, or $10,000 per acre compared with
$0.3 million or $6,800 per acre a year earlier. Net sales proceeds on a year
to date basis were $7.0 million, or $14,000 per acre compared with
$0.5 million or $7,800 per acre a year earlier.
During the quarter, TimberWest hosted analysts for a presentation and
tour of its real estate assets. It was well received and a copy of the
presentation can be found on TimberWest's website. A few highlights from that
presentation include the fact that TimberWest owns approximately 40% of the
southeast quadrant of Vancouver Island; part or all of 82 lake bottoms and 75
kilometers of waterfront; that 94% of the population of Vancouver Island lives
within 20 minutes of its development nodes; and that over $6.3 billion in
major private and public construction projects are currently underway
throughout Vancouver Island.
Many of TimberWest's development properties are in the process of being
rezoned. During the quarter, the Provincial Agricultural Land Commission
approved the exclusion from the Agricultural Land Reserve of 166 hectares
(410 acres) of TimberWest land in Campbell River in return for including
480 hectares (1,186 acres) of higher quality agricultural land in the Reserve.
The excluded land, between Campbell River Airport and the Island Highway, has
been serviced with water and sewer facilities and has been designated for
industrial use in the City's Official Community Plan. It will be marketed to
manufacturing, distribution, and service businesses best able to benefit from
its excellent location. Discussions also continued with potential joint
venture partners on different development nodes during the quarter.
Logging and Lumber Manufacturing Operational Results
Weak North American log markets, high shipping costs to Asia and the
strong Canadian dollar depressed sales realizations for all species. Fir and
hemlock values remained low and cedar prices have also begun to come off with
demand deteriorating in the US. The Company booked a value recovery of
$2.4 million for the quarter reflecting an improvement in the ending value of
the inventory compared to last quarter.
As a result of the harvest deferral strategy, log sales volumes were
678,000 m(3) for the quarter, down 24% from Q2, 2007. For the first half of
2008, log sales volumes are approximately 1.0 million m(3), down 40% compared
to the first half of 2007. Exports to Japan remain TimberWest's highest value
sales, with volumes into that market at 192,000 m(3) for the quarter and
298,000 m(3) for the first half. The Company is making good progress on
increasing its fir volumes to the Japanese plywood sector and its prospects
for other Asian markets look promising.
Despite lower harvesting volumes, production costs are approximately
$10 per m(3) lower than Q2 last year. About half of this cost reduction
represents a timing difference between quarters related to road construction,
and a higher proportion of more costly helicopter logging in the second
quarter of 2007. The rest of the cost savings is attributable to the fact that
the Company has used competitive bid contractors for much of its harvest this
year instead of higher cost long term contractors.
In a decision dated July 14, 2008, Arbitrator McPhillips determined that,
even though the collective agreement between TimberWest and the United
Steelworkers of America ("USWA") had expired, upon the insolvency of a
Woodlands Contractor, the employees of the Woodlands Contractor automatically
revert to TimberWest as employees. TimberWest has initiated an appeal of the
McPhillips decision. Despite this ruling, the Company said it has no intention
of resuming logging operations and will seek alternate Woodlands Contractors
once market conditions improve. At the present time there are no immediate
plans to seek replacement Woodlands Contractors. TimberWest is committed to
harvesting its land through the contractor model, however it is presently
without a collective agreement with the USWA. It remains the intention of
TimberWest to negotiate amendments to the collective agreement to improve the
viability of the contractor model through sub-division of the current
operations. "We believe safety will be enhanced, logging costs will be
lowered, and former TimberWest employees will be provided with a more stable
employment base as they transfer to mid-sized logging contractors," said Mr.
McElligott.
In May, an audit team from KPMG Performance Registrar Inc. carried out
its second five-year re-certification audit of TimberWest's public and private
timberland operations under the SFI and ISO certifications. The
re-certification audit involved 52 days of comprehensive audit work for the
SFI/ISO certification team. "The results were simply excellent," said Mr.
McElligott. "The audit did not raise even a single finding of minor
non-conformance. I am extremely proud of this result and of the commitment
everyone at TimberWest has shown for the stewardship of the asset base and the
sustainability of its excellent forest practices."
The Elk Falls sawmill in Campbell River was permanently closed on May 9,
2008. At quarter end, mill management had sold all but 7.4 million board feet
of lumber. Site decommissioning is underway. The remaining lumber was sold by
the end of July and TimberWest expects the decommissioning and demolition to
be substantially complete by the end of November. Modest net proceeds from
machinery and equipment sales are anticipated. "All of the mill employees are
to be congratulated for winding down this operation in a safe and professional
manner," said Mr. McElligott.
In addition to the $7.7 million Elk Falls restructuring costs, the
Company expects to incur an additional $8 million of restructuring charges in
2008 related to contractor issues, sub-division and chip commitments.
Outlook
TimberWest believes that weak conditions will persist for the balance of
2008 and 2009. Specifically the Company anticipates weak log markets and a
strong Canadian dollar. In order to maximize unitholder value in this climate
of weak prices, the Company expects to continue to defer harvests and log at a
rate that is about 60% of our normal levels. Based on TimberWest's view of the
markets in 2009, the Company expects to continue to defer the harvest next
year as well. As communicated in previous unitholder material, the Company
believes the harvest deferral strategy is the right response in today's market
conditions. With the combination of higher projected future log prices, the
incremental volume growth of the trees, and the expectation of lower projected
harvesting costs, we believe unitholder value is enhanced by leaving the trees
to grow. By reducing harvests when margins are low and increasing harvests
when margins are high, the net asset value of the Company will increase.
"We also continue to believe that our real estate strategy is the right
long term approach for unitholders," added Mr. McElligott. "We will not sell
core development properties before their time. Planning and zoning will
enhance real estate values significantly on the development lands and over
time raise the value of the entire portfolio. TimberWest's efforts in this
area will help communities achieve sustainable development that brings with it
jobs, homes, new infrastructure and recreational opportunities for generations
to come."
Looking beyond these near term market challenges, the Company expects to
see demand and pricing for log and lumber products in the region improve when
US housing activity returns to more normal levels and as Asian countries
continue to diversify their supply sources. This view is based, in part, upon
the Company's assessment of the positive demographics in the US, which should
result in the return to a strong housing market. In addition, the impact of
the inevitable future supply shortages caused by the mountain pine beetle
infestation in Western Canada, harvest reductions in Eastern Canada,
expectations regarding continuing growth in demand for wood products in Asia
and escalating Russian log export taxes will all positively affect demand and
pricing. When margins improve, the Company will go back and harvest the
undercut.
As a result of weak business conditions, TimberWest has not been
generating sufficient distributable cash to meet distribution requirements and
expects this to be the case through 2009. While the Company is paying the
October 15, 2008 distribution, the Company is concerned about continuing to
borrow to fund distributions at the current level beyond October. The Company
will complete more detailed short and long term business planning by this fall
and will share with unitholders our views on the best course for managing this
business to maximize long-term value. This will include an outline of our
thinking regarding distribution policy in 2009 and beyond. During the business
planning review, the Company will consider a range of options from a deferral
of distributions to a reorganization of the capital structure. A
reorganization would be designed to better match the underlying cash flows of
the real estate and timberland businesses with the components of the capital
structure. "The Company is confident that the value of these businesses is in
excess of its current trading price and will remain focused on growing
long-term unitholder value, while preserving a strong balance sheet for the
future," said Mr. McElligott.
Distributable Cash
-------------------------------------------------------------------------
(in millions of dollars) Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Net loss from continuing
operations $ (18.9) $ (4.7) $ (41.8) $ (2.0)
Interest on Series A
Subordinate Notes owned
by unitholders 21.0 20.9 42.0 41.8
-------------------------------------------------------------------------
Earnings from continuing
operations available for
distribution 2.1 16.2 0.2 39.8
Future income tax recovery (0.5) (2.3) (5.2) (2.6)
-------------------------------------------------------------------------
Earnings (loss) from
continuing operations
available for distribution
before provision for
future income taxes 1.6 13.9 (5.0) 37.2
Add (deduct):
Depreciation, depletion
and amortization 1.4 1.8 2.7 3.7
Proceeds from sale of
property, plant and
equipment 4.6 5.5 7.0 5.7
Gain on sale of property,
plant and equipment (3.3) (5.3) (3.8) (5.4)
Additions to property,
plant and equipment (0.3) (0.8) (0.8) (1.3)
Other non-cash items 0.3 0.5 0.7 1.0
-------------------------------------------------------------------------
2.7 1.7 5.8 3.7
-------------------------------------------------------------------------
Distributable cash from
continuing operations(*) 4.3 15.6 0.8 40.9
-------------------------------------------------------------------------
Distributable cash from
discontinued operations (7.5) (2.0) (7.9) (0.4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributable cash $ (3.2) $ 13.6 $ (7.1) $ 40.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(*) The Company permanently closed its Elk Falls sawmill operations on
May 9, 2008. These operations have been classified as discontinued
operations and prior period financial statements have been restated
Per Stapled Unit amounts:
(in dollars)
------------------------------------------------------------------------
Basic and diluted earnings
(loss) from continuing
operations available for
distribution before
provision for future
income taxes per weighted
average Stapled Unit $ 0.02 $ 0.18 $ (0.06) $ 0.48
Basic and diluted
distributable cash from
continuing operations per
weighted average Stapled
Unit $ 0.06 $ 0.20 $ 0.01 $ 0.53
Basic and diluted
distributable cash from
discontinued operations
per weighted average
Stapled Unit $ (0.10) $ (0.03) $ (0.10) $ (0.01)
Basic and diluted
distributable cash per
weighted average Stapled
Unit $ (0.04) $ 0.17 $ (0.09) $ 0.52
Cash distributions paid
per Stapled Unit $ 0.27 $ 0.27 $ 0.54 $ 0.54
-------------------------------------------------------------------------
The following table provides a reconciliation of cash flow from operations
before changes in working capital to distributable cash from continuing
operations:
-------------------------------------------------------------------------
(in millions of dollars) Three months ended Six months ended
June 30 June 30
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Cash used in continuing
operations $ (13.7) $ (38.9) $ (35.4) $ (44.1)
Add (deduct):
Change in non-cash
working capital (7.3) 28.2 (11.8) 38.2
Interest on Series A
Subordinate Notes owned
by unitholders 21.0 20.9 42.0 41.8
Proceeds from sale of
property, plant and
equipment 4.6 5.5 7.0 5.7
Additions to property,
plant and equipment (0.3) (0.8) (0.8) (1.3)
Other non-cash items - 0.7 (0.2) 0.6
-------------------------------------------------------------------------
18.0 54.5 36.2 85.0
-------------------------------------------------------------------------
Distributable cash from
continuing operations 4.3 15.6 0.8 40.9
-------------------------------------------------------------------------
Distributable cash from
discontinued operations (7.5) (2.0) (7.9) (0.4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributable cash $ (3.2) $ 13.6 $ (7.1) $ 40.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributable cash from continuing operations includes consolidated net
earnings (loss) from continuing operations, 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 from continuing
operations available for distribution is comprised of consolidated net
earnings (loss) from continuing operations 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 from
continuing operations available for distribution to unitholders reflects
earnings before this interest charge.
Earnings from continuing operations available for distribution and
distributable cash from continuing operations 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 continuing operations before changes in working capital, as
determined in accordance with GAAP, and earnings from continuing operations
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:
-------------------------------------------------------------------------
2008 2007 2006 2005 2004 2003
-------------------------------------------------------------------------
Distributable Cash
(in millions of
dollars)
First quarter $ (3.9) $ 26.9 $ 31.5 $ 23.9 $ 27.7 $ 25.7
Second quarter (3.2) 13.6 35.5 15.4 43.5 4.7
Third quarter (5.6) 9.3 (1.7) 35.9 12.0
Fourth quarter 55.4 27.5 29.7 18.1 9.0
-------------------------------------------------------------------------
$ (7.1) $ 90.3 $ 103.8 $ 67.3 $ 125.2 $ 51.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributable Cash
per Stapled Unit(1)
(in dollars)
First quarter $ (0.05) $ 0.35 $ 0.41 $ 0.31 $ 0.36 $ 0.34
Second quarter (0.04) 0.17 0.46 0.20 0.57 0.06
Third quarter (0.07) 0.12 (0.02) 0.47 0.15
Fourth quarter 0.71 0.35 0.38 0.24 0.12
-------------------------------------------------------------------------
$ (0.09) $ 1.16 $ 1.34 $ 0.87 $ 1.64 $ 0.67
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) 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.
Financial Highlights
-------------------------------------------------------------------------
(in millions of dollars) Three months ended Six months ended
June 30 June 30
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Sales $ 57.0 $ 82.0 $ 89.0 $ 161.8
Operating earnings from
continuing operations 4.1 12.4 0.1 38.6
Operating earnings - % of
sales 7% 15% 0.1% 24%
Earnings before interest,
taxes, depreciation and
amortization(2) from
continuing operations 5.5 19.5 2.8 48.2
Earnings before interest,
taxes, depreciation and
amortization from
continuing operations per
basic and diluted weighted
average Stapled Unit(2) 0.07 0.25 0.04 0.62
Loss before interest,
taxes, depreciation and
amortization from
discontinued operations (7.5) (2.0) (7.9) (0.4)
Loss before interest,
taxes, depreciation and
amortization from
discontinued operations
per basic and diluted
weighted average Stapled
Unit(2) (0.10) (0.02) (0.11) (0.01)
Earnings (loss) before
interest, taxes,
depreciation and
amortization (2.0) 17.5 (5.1) 47.8
Earnings (loss) before
interest, taxes,
depreciation and
amortization per basic and
diluted weighted average
Stapled Unit(2) (0.03) 0.23 (0.07) 0.61
Distributable cash $ (3.2) $ 13.6 $ (7.1) $ 40.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(2) Earnings (loss) before interest, taxes, depreciation and amortization
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 earnings (loss) before interest, taxes,
depreciation and amortization is provided in the supplemental
information appended to this interim report.
Sales revenues from continuing operations for the three months ended
June 30, 2008 were lower compared to the second quarter of 2007 due to
significant decreases in log sales volumes and sales realizations. Real estate
sales were ahead of the same quarter last year. Similarly, year to date sales
volumes and realizations for logs were well below the same period last year,
with real estate sales ahead of year to date June 2007.
Weakness in the US housing market and a continuing strong Canadian dollar
have continued to negatively affect log sales in 2008.
Operating earnings from continuing operations as a percentage of sales
were lower for the quarter and year to date compared to the prior periods and
is due to the sharp decline in revenues.
Highlights and Significant Transactions
Adoption of New Accounting Policies
During the first quarter, the Company adopted new accounting policies and
disclosure requirements issued by the Canadian Institute of Chartered
Accountants ("CICA"). TimberWest changed its policy of accounting for
inventories and adopted enhanced disclosure requirements for inventories,
financial instruments, capital management, and going concern assessment.
Prior to January 1, 2008, TimberWest accounted for inventories other than
supplies at the lower of average cost and net realizable value on an aggregate
basis for each of logs and for lumber. Effective January 1, 2008, inventories
other than supplies are recorded at the lower of average cost and net
realizable value on an item-by-item basis defined as end-use-sorts for logs
and grade levels for lumber. TimberWest adopted the new accounting policy on a
prospective basis and prior years have not been restated. Accordingly, the
opening log inventory and opening retained earnings as at January 1, 2008 have
been written down by $2.0 million.
The opening lumber inventory and opening retained earnings as at
January 1, 2008 have been written down by $0.8 million as a result of the new
accounting policy to measure inventories at the lower of average cost and net
realizable value on an item-by-item basis.
Cash Distribution
On August 14, 2008, TimberWest announced a distribution of $0.269 per
Stapled Unit, payable October 15, 2008 to unitholders of record on October 1,
2008. From inception to June 30, 2008, the Company has generated distributable
cash of $851.1 million while, including the July 15, 2008 distribution of
$21.0 million, the Company has paid out $859.4 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. Any difference will be added to or subtracted from either
cash reserves or available credit facilities.
Quarterly Conference Call
TimberWest will hold a conference call at 7:30am PDT (10:30am EDT) on
Friday, August 15, 2008, to discuss results of the second quarter. To access
the conference call, listeners should dial 1-800-920-4317. For those unable to
participate in the live call, a recording of the call will be available until
August 29, 2008, and can be accessed at 1-800-558-5253 using code 21387315.
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 ended Six months ended
June 30 June 30
Timberland Operations: 2008 2007 2008 2007
-------------------------------------------------------------------------
Log Sales Revenue
(in millions of dollars)
Domestic $ 26.4 $ 44.8 $ 39.4 $ 82.8
Export - Asia 20.6 19.1 34.1 46.2
Export - US 3.5 16.4 5.2 29.6
-------------------------------------------------------------------------
Total log sales $ 50.5 $ 80.3 $ 78.7 $ 158.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Log Sales Realizations
($/m(3))
Domestic 68 84 68 84
Export - Asia 90 117 94 121
Export - US 56 83 62 86
-------------------------------------------------------------------------
74 90 77 92
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Log Sales Volume
(thousand m(3))
Domestic 387.4 530.7 581.2 987.6
Export - Asia 227.8 163.2 362.3 382.0
Export - US 63.0 198.4 84.4 345.8
-------------------------------------------------------------------------
678.2 892.3 1,027.9 1,715.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Log Sales Mix
(thousand m(3))
Fir 476.8 590.9 705.8 1,198.4
Hembal 131.7 187.0 210.7 313.9
Cedar 39.3 69.3 55.0 112.1
Other 30.4 45.1 56.4 91.0
-------------------------------------------------------------------------
678.2 892.3 1,027.9 1,715.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Log Production Volume
(thousand m(3))
Public tenures 87.4 170.7 194.8 287.1
Private timberlands 514.5 931.6 791.4 1,895.0
-------------------------------------------------------------------------
601.9 1,102.3 986.2 2,182.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Log Production Costs
($/m(3)) 60 70 65 65
Timberland operating margin
(% of log sales) 11% 22% 7% 31%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Log sales revenues for the three and six months ended June 30, 2008, were
down compared to sales revenues for the same periods of 2007 due to overall
poor log markets and depressed prices, affirming the Company's decision to
lower harvest levels in 2008.
Logging production costs were $10 per m(3) lower than the same quarter in
2007 primarily due to location and timing of harvest contributing to lower
road building costs and lower cost competitive bid contractors performing the
work. On a year-to-date basis, production costs are comparable on a per m(3)
basis to 2007. Lower contractor costs have been offset by higher indirect and
regional costs which are negatively impacted by lower volumes.
Three months ended Six months ended
June 30 June 30
Real Estate Business Unit: 2008 2007 2008 2007
-------------------------------------------------------------------------
Real Estate Sales
(in millions of dollars) $ 4.9 $ 0.3 $ 7.7 $ 0.6
Real Estate Net Proceeds
(in millions of dollars) 4.6 0.3 7.0 0.5
Real Estate Net Proceeds
($/acre) 10,081 6,792 14,339 7,808
-------------------------------------------------------------------------
Real estate sales in the second quarter of 2008 comprised four property
sales from non-core real estate assets.
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Earnings (Loss) Before
Interest, Taxes,
Depreciation and
Amortization (EBITDA)(*)
(in millions of dollars)
Net loss from continuing
operations $ (18.9) $ (4.7) $ (41.8) $ (2.0)
Add (deduct):
Interest on Series A
Subordinate Notes paid
to unitholders 21.0 20.9 42.0 41.8
Interest on long-term
debt 1.9 0.4 4.4 0.5
Interest on short-term
debt 0.6 3.4 0.7 6.8
Income tax recovery (0.5) (2.3) (5.2) (2.6)
Depreciation, depletion
and amortization 1.3 1.7 2.5 3.4
Amortization of
deferred financing
costs 0.1 0.1 0.2 0.3
-------------------------------------------------------------------------
Earnings from continuing
operations before
Interest, Taxes,
Depreciation and
Amortization 5.5 19.5 2.8 48.2
-------------------------------------------------------------------------
Loss from discontinued
operations before
Interest, Taxes,
Depreciation and
Amortization (7.5) (2.0) (7.9) (0.4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (Loss) before
Interest, Taxes,
Depreciation and
Amortization (2.0) 17.5 (5.1) 47.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(*) 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.
Discontinued Operations
Three months ended Six months ended
June 30 June 30
Elk Falls Sawmill: 2008 2007 2008 2007
-------------------------------------------------------------------------
Sales Revenue by Product
(in millions of dollars)
Lumber $ 20.0 $ 19.0 $ 29.8 $ 46.3
Wood chips and residuals 1.7 2.5 4.6 6.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales Realizations
Lumber ($/mfbm) 641 605 618 641
Wood chips ($/m(3)) 45 48 43 46
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales Volume
Lumber (million fbm) 31.2 31.4 48.2 72.2
Wood chips and residuals
(thousand m(3)) 35.9 49.1 101.9 140.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Lumber Production Volume
(million fbm) 14.9 23.2 43.3 69.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales realizations and volumes for the three months ended June 30, 2008,
were comparable to the second quarter of 2007. The sawmill shutdown on May 9,
2008 with lumber production ceasing and the planermill finishing and packaging
lumber until mid June. All lumber had been shipped from the sawmill site by
the end of the second quarter, with final sales of lumber inventory scheduled
for July/August 2008.
Financial Position
-------------------------------------------------------------------------
Summary of Financial Position from As at As at
Continuing Operations June December
(in millions of dollars) 30, 2008 31, 2007
-------------------------------------------------------------------------
Cash and cash equivalents $ - $ 1.2
Current assets 41.4 47.2
Current liabilities 96.1 36.2
Current liabilities (excluding short-term debt) 46.1 36.2
Long-term debt 161.9 187.5
Long-term liabilities 155.4 159.6
Series A Subordinate notes owned by unitholders 698.2 698.1
Unitholder's equity 158.4 210.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Trade accounts receivable increased to $9.7 million at June 30, 2008,
compared to $4.9 million at the end of 2007, due to increased log shipments in
the second quarter of 2008 compared to the fourth quarter of 2007. Log
inventory was $23.8 million at June 30, 2008, compared to $32.9 million at the
end of 2007, This reduction is primarily due to reduced log harvest levels
during this period. Prior to January 1, 2008, TimberWest recorded inventories
at a lower of average cost and net realizable value on an aggregate basis for
each of logs and for lumber. On January 1, 2008 TimberWest changed its policy
of accounting for inventories to record inventories at the lower of average
cost and net realizable value on an item-by-item basis defined as
end-use-sorts for logs. (See Highlights and Significant Transactions -
Adoption of New Accounting Policies) This change in accounting policy for
inventories resulted in an additional $2.3 million decrease of log inventory
values as at June 30, 2008 compared to the end of 2007. Prepaid expenses and
other current assets were $5.7 million at June 30, 2008, compared to $6.1
million at the end of 2007, reflecting a decrease in non-trade receivables.
Property, plant and equipment were $1,225.0 million as at June 30, 2008,
$5.0 million less than as at December 31, 2007. This decrease primarily
reflects the sale of higher and better use properties and other capital
assets, with a net book value of $3.3 million, as well as a provision for
depreciation of capital assets of $2.5 million recorded during this period.
These items were offset in part by capital additions of $0.8 million,
comprised primarily of logging roads.
Other assets were $1.8 million at June 30, 2008, comparable to the
balance of $2.0 million at December 31, 2007.
Current liabilities as at June 30, 2008, include borrowings of
$50.0 million on the Tranche B short-term unsecured revolving credit facility.
Excluding the short-term credit facility, current liabilities at June 30, 2008
were $46.1 million. This variance in current liabilities (excluding short-term
debt) can be attributed to a $9.9 million increase in accounts payable and
accrued liabilities primarily attributed to increased trade payables and
accruals for property taxes.
As at June 30, 2008, the Company had combined borrowings of
$211.9 million on its available credit facilities, including borrowings of
$161.9 million on its Tranche A $216.7 million long-term unsecured revolving
facility, and $50.0 million on its Tranche B $108.3 million short-term
unsecured revolving facility. In addition, the Company had commitments of
$17.3 million relating to outstanding letters of credit issued under its
Tranche A $216.7 million long-term unsecured revolving facility. The Company's
$16.3 million demand credit facility expired on June 30, 2008 and was not
renewed. TimberWest is currently in compliance with all of its debt covenants,
however, it is possible that TimberWest may not be able to remain in
compliance with its debt to EBITDA covenant later in 2008.
Other long-term liabilities as at June 30, 2008, included a silviculture
liability of $3.4 million, a $37.8 million liability relating to employee
future benefits and a future income tax liability of $114.2 million. The
silviculture liability and the liability relating to employee future benefits
are comparable to balances as at December 31, 2007. The decrease in the
liability for future income taxes from the balance of $119.2 million at
December 31, 2007, is primarily attributable to a $4.3 million future income
tax recovery to reflect the effects of changes in the provincial income tax
rates that were substantively enacted during the first quarter of 2008.
The Series A Subordinate Note component of the Company's Stapled Unit is
presented as a liability on the Company's consolidated balance sheets. As at
June 30, 2008, the carrying value of the Series A Subordinate Note liability
was $698.2 million.
During the quarter ended June 30, 2008, no Stapled Unit options were
granted and options to purchase 12,577 Stapled Units were exercised for
proceeds of $0.1 million and 8,178 options were cancelled. During the six
months ended June 30, 2008, no Stapled Units options were granted, options to
purchase 15,297 Stapled Units were exercised for proceeds of $0.1 million and
9,678 options were cancelled. As at August 14, 2008, the Company had 1,127,180
granted and outstanding Stapled Unit option awards and 77,765,440 issued and
outstanding Stapled Units.
Current assets from discontinued operations as at June 30, 2008, included
accounts receivables of $1.3 million, lumber inventories of $3.9 million and
prepaid expenses and other current assets of $0.2 million. Comparatively,
current assets from discontinued operations as at December 31, 2007, included
accounts receivables of $8.5 million, lumber inventories of $8.2 million and
prepaid expenses and other current assets of $0.5 million. Current liabilities
from discontinued operations are comprised of accounts payable and accrued
liabilities and were $3.6 million as at June 30, 2008 compared to $4.3 million
at December 31, 2007. Current assets and liabilities from discontinued
operations have decreased due to the permanent closure of the Elk Falls
sawmill on May 9, 2008.
Cash Flow and Liquidity Three months ended Six months ended
Selected Cash Flow Items June 30 June 30
(in millions of dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities from
continuing operations:
Cash used in operations
before changes in
non-cash working
capital $ (21.0) $ (10.7) $ (47.2) $ (5.9)
Changes in non-cash
working capital 7.3 (28.2) 11.8 (38.2)
-------------------------------------------------------------------------
(13.7) (38.9) (35.4) (44.1)
-------------------------------------------------------------------------
Financing activities from
continuing operations:
Issuance of Stapled Units
on exercise of options 0.1 0.1 0.1 1.4
Revolving credit facilities 6.9 24.5 24.4 24.5
Demand credit facility - 1.2 - 1.2
-------------------------------------------------------------------------
7.0 25.8 24.5 27.1
-------------------------------------------------------------------------
Investing activities from
continuing operations:
Proceeds from sale of
other assets 4.6 5.5 7.0 5.7
Additions to property,
plant and equipment (0.3) (0.8) (0.8) (1.3)
Other assets 0.1 0.1 0.2 0.3
-------------------------------------------------------------------------
4.4 4.8 6.4 4.7
-------------------------------------------------------------------------
Cash provided by
discontinued operations: 2.2 4.4 3.3 3.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Decrease in cash and cash
equivalents $ (0.1) $ (3.9) $ (1.2) $ (9.3)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the three months ended June 30, 2008, the Company issued 12,577
Stapled Units on the exercise of Stapled Unit options for net proceeds of
$0.1 million, compared to the issuance of 8,084 Stapled Units on the exercise
of Stapled Unit options for net proceeds of $0.1 million in the comparative
quarter in 2007. During the second quarter of 2008, $6.9 million was borrowed
on available credit facilities, compared to $25.7 million that was borrowed on
available credit facilities during the same period in 2007.
For the six months ended June 30, 2008, the Company issued 15,297 Stapled
Units on the exercise of Stapled Unit options for net proceeds of
$0.1 million, compared to the issuance of 95,546 Stapled Units on the exercise
of Stapled Unit options for net proceeds of $1.4 million in the comparative
period in 2007. During the first six months of 2008, $24.4 million was
borrowed on available credit facilities, compared to $25.7 million that was
borrowed on available credit facilities during the same period in 2007.
In the second quarter of 2008, the Company received net proceeds of
$4.6 million from the sale of other assets, primarily from the sale of higher
use properties, and incurred $0.3 million for capital expenditures, primarily
for the construction of logging roads. For the six months ended June 30, 2008,
the Company received net proceeds of $7.0 million from the sale of other
assets, primarily from the sale of higher use properties, and incurred
$0.8 million for capital expenditures, primarily for the construction of
logging roads.
As at June 30, 2008, the principal amount of TimberWest's total debt(3)
outstanding was $211.9 million compared to total principal amount of debt
outstanding of $187.5 million as at December 31, 2007. The Company's
consolidated debt-to-total capitalization ratio(3) as at June 30, 2008 was
20:80, compared to 17:83 as at December 31, 2007.
Cash provided by discontinued operations was the result of changes in
non-cash working capital from operating activities.
Total debt facilities available to the Company as at June 30, 2008, were
$325.0 million, comprised of $108.3 million available under Tranche B, a
short-term revolving facility due September 24, 2008 and $216.7 million
available under Tranche A, a long-term revolving facility due September 24,
2012. As at June 30, 2008 the Company had commitments of $17.3 million
relating to outstanding letters of credit issued to secure various obligations
of the Company issued under Tranche A, the $216.7 million long-term unsecured
revolving facility.
-------------------
(3) 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.
Internal Controls over Financial Reporting
During the quarter ended June 30, 2008, the Company did not make any
changes to its internal controls over financial reporting that would have
materially affected, or would reasonably likely materially affect, such
controls.
International Financial Reporting Standards ("IFRS")
On February 13, 2008, the Canadian Accounting Standards Board ("AcSB")
confirmed the use of International Financial Reporting Standards ("IFRS") to
commence in 2011 for publicly accountable profit-oriented enterprises. IFRS
will replace Canada's Generally Accepted Accounting Principles ("GAAP") and
the official changeover date is for interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011.
TimberWest will adopt IFRS according to requirements outlined by the
AcSB, and is in the process of preparing for the adoption of IFRS, including
qualitative disclosure at the end of 2008, and throughout 2009 and 2010, and
with adoption of IFRS on January 1, 2011.
Forward Looking Statements
The statements which are not historical facts contained in this release
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 (Loss)
(in millions of dollars) Three months ended Six months ended
Unaudited June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Sales $ 57.0 $ 82.0 $ 89.0 $ 161.8
Operating costs and
expenses:
Cost of sales 48.3 63.2 80.1 110.8
Selling, administrative
and other 3.3 4.7 6.3 9.0
Depreciation, depletion
and amortization 1.3 1.7 2.5 3.4
-------------------------------------------------------------------------
52.9 69.6 88.9 123.2
-------------------------------------------------------------------------
Operating earnings from
continuing operations 4.1 12.4 0.1 38.6
Interest expense:
Series A Subordinate Notes
owned by unitholders 21.0 20.9 42.0 41.8
Long-term debt 1.9 0.4 4.4 0.5
Short-term debt 0.6 3.4 0.7 6.8
-------------------------------------------------------------------------
23.5 24.7 47.1 49.1
Amortization of deferred
financing costs 0.1 0.1 0.2 0.3
Other income (0.1) (5.4) (0.2) (6.2)
-------------------------------------------------------------------------
23.5 19.4 47.1 43.2
-------------------------------------------------------------------------
Loss before income taxes
from continuing operations (19.4) (7.0) (47.0) (4.6)
Income tax recovery
(note 4) (0.5) (2.3) (5.2) (2.6)
-------------------------------------------------------------------------
Net loss and
comprehensive loss from
continuing operations (18.9) (4.7) (41.8) (2.0)
Net loss and
comprehensive loss from
discontinued operations (7.5) (2.6) (7.9) (1.6)
-------------------------------------------------------------------------
Net loss and
comprehensive loss $ (26.4) $ (7.3) $ (49.7) $ (3.6)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted loss
from continuing
operations per common
share (note 5) $ (0.24) $ (0.06) $ (0.54) $ (0.03)
Basic and diluted loss
from discontinued
operations per
common share $ (0.10) $ (0.03) $ (0.10) $ (0.02)
Basic and diluted
loss per common share
(note 5) $ (0.34) $ (0.09) $ (0.64) $ (0.05)
Consolidated Statements of Retained Earnings (Deficit)
(in millions of dollars) Three months ended Six months ended
Unaudited June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Retained earnings
(deficit), beginning of
period, as previously
reported $ (7.8) $ 53.8 $ 18.3 $ 50.1
Adoption of new accounting
policy for inventories
(note 2(a)) - - (2.8) -
-------------------------------------------------------------------------
Retained earnings,
beginning of period,
as adjusted (7.8) 53.8 15.5 50.1
-------------------------------------------------------------------------
Net loss and comprehensive
loss for the period (26.4) (7.3) (49.7) (3.6)
-------------------------------------------------------------------------
Retained earnings
(deficit), end of period $ (34.2) $ 46.5 $ (34.2) $ 46.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited interim consolidated financial
statements.
Consolidated Balance Sheets
(in millions of dollars)
As at As at
June 30, December 31,
2008 2007
Unaudited
-------------------------------------------------------------------------
Assets
Current assets:
Cash $ - $ 1.2
Accounts receivable 9.7 4.9
Inventories (note 2(a) and 6) 23.8 32.9
Prepaid expenses and other current assets 5.7 6.1
Future income taxes 2.2 2.1
Discontinued operations 5.4 17.2
-------------------------------------------------------------------------
46.8 64.4
Property, plant and equipment, net (note 7) 1,225.0 1,230.0
Other assets (note 8) 1.8 2.0
-------------------------------------------------------------------------
$ 1,273.6 $ 1,296.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Unitholders' Equity
Current liabilities:
Revolving credit facilities $ 50.0 $ -
Accounts payable and accrued liabilities 25.1 15.2
Distribution payable 21.0 21.0
Discontinued operations 3.6 4.2
-------------------------------------------------------------------------
99.7 40.4
Revolving credit facilities 161.9 187.5
Long-term silviculture liability 3.4 3.2
Employee future benefits (note 9) 37.8 37.2
Future income taxes 114.2 119.2
-------------------------------------------------------------------------
417.0 387.5
Series A Subordinate Notes owned by
unitholders (note 10) 698.2 698.1
-------------------------------------------------------------------------
1,115.2 1,085.6
-------------------------------------------------------------------------
Unitholders' equity:
Share capital, consisting of common and
preferred shares (note 10) 191.0 191.0
Contributed surplus 1.6 1.5
Retained earnings (deficit) (34.2) 18.3
-------------------------------------------------------------------------
158.4 210.8
-------------------------------------------------------------------------
$ 1,273.6 $ 1,296.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to unaudited interim consolidated financial
statements.
On behalf of the Board of Directors:
Paul J. McElligott V. Edward Daughney
Director Director
Consolidated Statements of Cash Flows
(in millions of dollars) Three months ended Six months ended
Unaudited June 30 June 30
2008 2007 2008 2007
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net loss from
continuing operations $ (18.9) $ (4.7) $ (41.8) $ (2.0)
Items not involving
cash:
Depreciation,
depletion and
amortization 1.4 1.8 2.7 3.7
Gain on sale of
property, plant
and equipment (3.3) (5.3) (3.8) (5.4)
Future income tax
recovery (0.5) (2.3) (5.2) (2.6)
Other non-cash items 0.3 (0.2) 0.9 0.4
-------------------------------------------------------------------------
(21.0) (10.7) (47.2) (5.9)
Changes in non-cash
working capital:
Accounts receivable (2.1) (8.7) (4.8) (8.6)
Inventories 3.9 (19.2) 6.3 (31.3)
Prepaid expenses and
other working capital (0.2) (5.6) 0.4 (6.5)
Accounts payable and
accrued liabilities 5.7 5.3 9.9 8.2
-------------------------------------------------------------------------
7.3 (28.2) 11.8 (38.2)
-------------------------------------------------------------------------
(13.7) (38.9) (35.4) (44.1)
-------------------------------------------------------------------------
Financing activities:
Issuance of Stapled Units
on exercise of options:
Series A Subordinate
Notes 0.1 0.1 0.1 0.9
Share capital - - - 0.5
-------------------------------------------------------------------------
0.1 0.1 0.1 1.4
Demand credit facility - 1.2 - 1.2
Revolving credit
facilities 6.9 24.5 24.4 24.5
-------------------------------------------------------------------------
7.0 25.8 24.5 27.1
-------------------------------------------------------------------------
Investing activities:
Proceeds from sale of
property, plant and
equipment 4.6 5.5 7.0 5.7
Additions to property,
plant and equipment (0.3) (0.8) (0.8) (1.3)
Other assets 0.1 0.1 0.2 0.3
-------------------------------------------------------------------------
4.4 4.8 6.4 4.7
-------------------------------------------------------------------------
Cash provided by
discontinued operations 2.2 4.4 3.3 3.0
Decrease in cash and cash
equivalents (0.1) (3.9) (1.2) (9.3)
Cash and cash equivalents,
beginning of period 0.1 3.9 1.2 9.3
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ - $ - $ - $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental information:
Interest on Series A
Subordinate Notes
paid to unitholders $ 21.0 $ 20.9 $ 42.0 $ 41.8
Other interest paid $ 2.5 $ 7.3 $ 5.1 $ 7.4
Income taxes paid $ - $ - $ - $ -
-------------------------------------------------------------------------
See accompanying notes to unaudited interim consolidated financial
statements.
Notes to Unaudited Interim Consolidated Financial Statements
For the three and six months ended June 30, 2008 and 2007
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, 2007, except for
the adoption of new accounting policies as described in note 2.
As described in note 3, the Company permanently closed its Elk Falls
sawmill operations on May 9, 2008. These operations have been
classified as discontinued operations and prior period financial
statements have been restated as required by CICA Section 3475,
Disposal of Long-lived Assets and Discontinued Operations.
2. Adoption of New Accounting Policies
(a) Inventories, Section 3031
In June 2007, the CICA issued Section 3031, Inventories, that
supersedes Section 3030 and applies to interim and annual periods
beginning on or after January 1, 2008. This section establishes
increased guidance on the measurement of inventory and enhances
disclosure requirements. The changes in measurement requirements
include measuring inventories at the lower of cost and net realizable
value, increased guidelines on the grouping of inventories including
requirement for the Company to use a consistent cost formula for
inventory of a similar nature and use, the allocation of overhead
based on normal capacity, the use of specific cost method for
inventories that are not ordinarily interchangeable or goods and
services produced for specific purposes, and the reversal of previous
write-downs to net realizable value when the value of inventories
increase subsequent to the write-downs.
Prior to January 1, 2008, TimberWest accounted for log and lumber
inventories other than supplies at the lower of average cost and net
realizable value on an aggregate basis for each of logs and for
lumber. Supplies were recorded at the lower of cost and replacement
value.
TimberWest adopted Section 3031 on January 1, 2008 on a prospective
basis and prior periods are not restated. Accordingly, inventories
other than supplies are recorded at the lower of average cost and net
realizable value on an item-by-item basis defined as end-use-sorts
for logs and grade levels for lumber. The opening log inventory and
opening retained earnings as at January 1, 2008 have been written
down by $2.0 million.
The opening lumber inventory and opening retained earnings as at
January 1, 2008 have been written down by $0.8 million.
Supplies continue to be recorded at the lower of cost and replacement
value according to the new accounting policy.
(b) Financial Instruments - Disclosures and Presentation, Sections
3862 and 3863
The CICA issued Section 3862 on disclosures, and Section 3863 on
presentation. The two new Sections replace Section 3861, and set out
additional financial instruments disclosure requirements while
carrying forward unchanged its presentation requirements. These
sections are applicable to interim and annual financial statements
relating to fiscal years beginning on or after October 1, 2007.
TimberWest adopted Section 3862 and 3863 effective January 1, 2008
and provides qualitative and quantitative disclosures related to the
nature and extent of risks arising from financial instruments (see
note 11).
(c) Capital Disclosures, Section 1535
The Company adopted Section 1535, Capital Disclosures, effective
January 1, 2008. This section requires additional disclosures
relating to capital management strategies to enable users of its
financial statements to evaluate the Company's objectives, policies
and processes for managing capital.
(d) Assessing Going Concern, Section 1400
In June 2007, Section 1400 was amended to include requirements for
management to assess and disclose an entity's ability to continue as
a going concern. This section applies to interim and annual periods
beginning on or after January 1, 2008.
TimberWest adopted this amendment on January 1, 2008. The current
economic environment for the North American forest products industry
is challenging with substantially lower than average prices, a strong
Canadian dollar compared to the US dollar and high input costs due to
low production and rising fuel prices. TimberWest has responded to
these conditions by reducing logging production and permanently
closing its last sawmill operation. The Company has a working capital
deficit of $52.9 million primarily due to the current portion of
revolving credit facilities of $50.0 million. Despite these
challenges, management forecasts that the Company will remain a going
concern in the foreseeable future given its abilities to adjust
distributions and obtain additional financing if required.
3. Discontinued Operations
TimberWest has been engaged in a process to sell the Elk Falls
sawmill since October 2005. Despite widespread exposure across Canada
and elsewhere, no purchasers came forward with a bid proposal to
acquire the sawmill. The sawmill had high operating costs, a history
of losses, and required significant capital investment even before
the most recent decline in lumber markets and the strengthening of
the Canadian dollar.
On May 9, 2008, the Elk Falls sawmill in Campbell River, B.C. was
permanently closed. This sawmill closure included the associated
shipping operations at Stuart Channel Wharves located in Crofton,
B.C. Subsequent to the closure, TimberWest will dispose of
substantially all of the assets of the sawmill. Ongoing costs such as
property taxes continue to be expensed as incurred. The Company is
assessing alternatives for the former sawmill site.
---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Sales $ 22.4 $ 22.0 $ 35.4 $ 54.5
Loss before
income taxes $ (7.5) $ (2.6) $ (7.9) $ (1.6)
Net loss $ (7.5) $ (2.6) $ (7.9) $ (1.6)
---------------------------------------------------------------------
---------------------------------------------------------------------
Sales from the logging operations to the sawmill operations have been
recorded at fair value in accordance with the Company's internal
policies. Inter-divisional sales for the three and six months ended
June 30, 2008 were $4.4 million and $13.0 million (2007 -
$8.1 million and $26.2 million).
---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Cash flow from
operating activities $ 2.1 $ 4.4 $ 3.2 $ 3.0
Cash flow from
financing activities - - - -
Cash flow from
investing activities 0.1 - 0.1 -
---------------------------------------------------------------------
Cash provided by
operations $ 2.2 $ 4.4 $ 3.3 $ 3.0
---------------------------------------------------------------------
---------------------------------------------------------------------
4. Income Taxes
---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Current income tax
expense $ - $ - $ - $ -
Future income tax
recovery (0.5) (2.3) (5.2) (2.6)
---------------------------------------------------------------------
$ (0.5) $ (2.3) $ (5.2) $ (2.6)
---------------------------------------------------------------------
---------------------------------------------------------------------
In the first quarter of 2008, British Columbia provincial tax
legislation was substantively enacted, resulting in the reduction of
the provincial corporate tax rate to 11% as of July 1, 2008. This
rate change resulted in a future income tax recovery of $4.3 million
for the six months ended June 30, 2008.
5. Earnings (loss) per Share
---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Net loss from
continuing operations $ (18.9) $ (4.7) $ (41.8) $ (2.0)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net loss $ (26.4) $ (7.3) $ (49.7) $ (3.6)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic weighted
average number of
common shares 77,754,160 77,726,775 77,752,764 77,700,868
Incremental common
shares from
potential exercise
of options 31,421 206,455 34,027 178,116
---------------------------------------------------------------------
Diluted weighted
average number of
common shares 77,785,581 77,933,230 77,786,791 77,878,984
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and diluted
net loss from
continuing operations
per common share $ (0.24) $ (0.06) $ (0.54) $ (0.03)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and diluted
net loss per common
share $ (0.34) $ (0.09) $ (0.64) $ (0.05)
---------------------------------------------------------------------
---------------------------------------------------------------------
6. Inventories
---------------------------------------------------------------------
As at As at
June 30, December 31,
2008 2007
---------------------------------------------------------------------
Logs $ 23.8 $ 32.9
---------------------------------------------------------------------
---------------------------------------------------------------------
For the three months ended June 30, 2008, log inventory has been
written up by $1.5 million. For the six months ended June 30, 2008,
log inventories have been written down by $0.3 million, which has
been expensed to cost of sales for the period.
7. Property, Plant and Equipment
Property, plant and equipment at June 30, 2008, includes private
timberlands with a carrying value of $1,172.3 million. This amount
includes a valuation increase adjustment of $376.4 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.
During the second quarter of 2008, the Company sold 456 acres (2007 -
40 acres) of land with a net book value of $1.3 million (2007 -
$0.1 million) for a gain of $3.3 million (2007 - $0.1 million). For
the six months ended June 30, 2008, the Company sold 490 acres
(2007 - 58 acres) of land with a net book value of $2.8 million (2007
- $0.3 million) for a gain of $3.7 million (2007 - $0.2 million).
8. Other Assets
---------------------------------------------------------------------
As at As at
June 30, December 31,
2008 2007
---------------------------------------------------------------------
Deferred debt issue costs $ 0.4 $ 0.5
Receivable on sale of property, plant
and equipment 0.5 0.5
Other 0.9 1.0
---------------------------------------------------------------------
$ 1.8 $ 2.0
---------------------------------------------------------------------
---------------------------------------------------------------------
9. Employee Benefits
---------------------------------------------------------------------
As at As at
June 30, December 31,
2008 2007
---------------------------------------------------------------------
Pension benefits $ 8.9 $ 8.8
Non-pension post-retirement benefits 28.9 28.4
---------------------------------------------------------------------
$ 37.8 $ 37.2
---------------------------------------------------------------------
---------------------------------------------------------------------
The Company, through its subsidiaries, maintains pension plans that
include defined benefit and defined contribution segments available
to all salaried employees and a small number of retired hourly
employees not covered by union pension plans. For the three months
ended June 30, 2008, the Company recorded an expense of $0.5 million
for pension benefit costs (2007 - $0.5 million) and made cash
payments of $0.5 million to fund current service costs (2007 -
$0.4 million). For the six months ended June 30, 2007, the Company
recorded an expense of $1.0 million for pension benefit costs (2007 -
$1.1 million) and made cash payments of $1.0 million (2007 -
$1.1 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 June 30, 2008, the Company recorded an expense of $0.9 million
for non-pension benefit costs (2007 - $1.0 million) and made cash
payments of $0.6 million to fund current benefit costs (2007 -
$0.6 million). For the six months ended June 30, 2008, the Company
recorded an expense of $1.7 million for non-pension benefit costs
(2007 - $2.0 million) and made cash payments of $1.1 million to fund
current benefit costs (2007 - $1.1 million).
10. Stapled Units
---------------------------------------------------------------------
Stapled Unit Components
------------------------------------
Share Capital
(consisting of
Series A common and
Subordinate preferred
Number Notes shares) Total
---------------------------------------------------------------------
Six months ended
June 30, 2007:
Balance,
December 31, 2006 77,635,254 $ 697.0 $ 190.4 $ 887.4
Issuance of Stapled
Units on exercise
of options 94,546 0.9 0.5 1.4
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Balance,
June 30, 2007 77,729,800 $ 697.9 $ 190.9 $ 888.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Six months ended
June 30, 2008:
Balance,
December 31, 2007 77,750,143 698.1 191.0 889.1
Issuance of Stapled
Units on exercise
of options 15,297 0.1 - 0.1
---------------------------------------------------------------------
Balance,
June 30, 2008 77,765,440 698.2 191.0 889.2
---------------------------------------------------------------------
---------------------------------------------------------------------
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.
11. 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 June 30, 2008,
no Stapled Unit options were granted. (2007 - 50,000 Stapled Unit
options were granted at an average exercise price of $17.64). For the
six months ended June 30, 2008, no Stapled Unit options were granted.
(2007 - 339,370 Stapled Unit options were granted at an average
exercise price of $16.46).
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 with the weighted
average assumptions below. As no Stapled Unit options were granted
for the six months ended June 30, 2008, no weighted average
assumptions are shown for 2008.
---------------------------------------------------------------------
2008 2007
---------------------------------------------------------------------
Risk-free interest rate - 4.1%
Expected life (years) - 5.0
Expected volatility - 21.6%
Dividend yield - 6.5%
Number of options granted - 339,370
Fair value of each option granted - $1.84
---------------------------------------------------------------------
No Stapled Unit options were granted between January 1, 2008 and
June 30, 2008. The compensation cost for the 339,370 Stapled Unit
options that were granted in the same period in 2007 was $628,000.
The compensation cost of Stapled Unit option awards is amortized
against earnings over the three-year vesting period of the underlying
options, or for employees eligible to retire, at the grant date
rather than over the vesting period. An expense of $63,000 and
$127,000 has been recognized in net earnings for the three and six
months ended June 30, 2008 (2007 - $127,000 and $361,000,
respectively), 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 June 30, 2008, $0.3 million has been accrued for awards
granted under this plan (2007 - $0.3 million) and $0.3 million has
been amortized against earnings for the quarter (2007 -
$0.3 million). For the six months ended June 30, 2008, $0.6 million
has been accrued for awards granted under the plan (2007 -
$0.5 million) and $0.6 million has been amortized against earnings
for this period (2007 - $0.6 million).
During the three months ended June 30, 2008, a total of 12,577
Stapled Unit options with an average exercise price of $12.21 were
exercised and 8,178 Stapled Unit options with an average exercise
price of $15.88 were cancelled (2007 - 8,084 Stapled Unit options
with an average exercise price of $12.70 were exercised). For the six
months ended June 30, 2008, a total of 15,297 Stapled Unit options
with an average exercise price of $12.15 were exercised and 9,678
Stapled Unit options with an average exercise price of $15.94 were
cancelled (2007 - 94,546 Stapled Unit options with an average
exercise price of $13.75 were exercised).
12. Financial Instruments
(a) Accounting for financial instruments
TimberWest has classified its cash and cash equivalents as held-for-
trading and recorded them at fair value. Accounts receivable, and
receivables on the sale of property, plant and equipment, are
classified as loans and receivables and measured at amortized cost.
The Company's drawings on available credit facilities, accounts
payable and accrued liabilities, distribution payable, including
interest payable, are classified as other liabilities, all of which
are measured at amortized cost.
The Company measures its 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 carrying values of accounts receivable, accounts payable and
accrued liabilities and distribution payable approximate their fair
values due to the short term to maturity of these instruments.
The carrying values of receivables on the sale of property, plant and
equipment are estimated to approximate their fair values due to their
short term to maturity.
The carrying values of drawings on available credit facilities
approximate their fair values, as they bear floating interest rates
that approximate market rates and have a short term to maturity.
The carrying value of accrued liabilities for future silviculture
costs approximate their fair value as determined based on the present
value of future cash flows associated with these liabilities.
At June 30, 2008, the Company's Series A Subordinate Notes owned by
unitholders had a carrying value of $698.2 million measured at the
amortized cost using the effective interest method. The Series A
Subordinate Notes are a component of the Company's Stapled Units,
which include one common share, 100 preferred shares and
approximately $8.98 face amount of the 12% Series A Subordinate
Notes. The Stapled Units are listed on the Toronto Stock Exchange.
The embedded derivative arising from the option to extend the Series
A Subordinate notes for a further 10 year period from 2038 to 2048 is
measured at fair value. The fair value of this option is determined
by an independent financial institution and it is insignificant to
TimberWest's consolidated financial statements.
(b) Nature and extent of risks arising from financial instruments
TimberWest is exposed to the following risks as a result of holding
financial instruments: credit risk, market risk, and liquidity risk.
The following is a description of the risks and how the Company
manages its exposure to them.
(i) Credit risk:
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to
the Company. The Company is exposed to credit risk on accounts
receivable from customers. To mitigate and manage its credit
risk, the Company regularly reviews customer credit limits,
monitors the financial status of customers, and assesses the
collectibility of accounts receivable. In certain offshore
markets, the Company requires bank letters of credit. The
maximum exposure to credit risk as at June 30, 2008 is the
carrying value of the Company's accounts receivable. As at
June 30, 2008, approximately 93% of accounts receivable are
current or outstanding for less than 30 days.
(ii) Market risk:
Market risk refers to the risk of loss that may arise from
changes in market factors such as interest rates, and foreign
exchange rates.
Interest rate risk refers to the risk that the fair value or
future cash flows of a financial instrument will fluctuate due
to changes in market interest rates.
TimberWest has two credit facilities as at June 30, 2008: the
first facility, Tranche A, is long-term financing in the amount
of $216.7 million, due on September 24, 2012; the second
facility, Tranche B, is short-term financing in the amount of
$108.3 million, due on September 24, 2008. Under both
facilities, funds are available to the Company in both Canadian
and US dollars by way of adjusted prime rate-based loans,
bankers' acceptances, LIBOR plus 0.9% loans and letters of
credit or guarantee.
The Company normally enters into Bankers' Acceptance for less
than 30-day periods for both credit facilities and could
therefore be exposed to fluctuations in interest rates at the
Bankers' Acceptance expiration.
For the three months ended June 30, 2008, with other variables
unchanged, an interest rate change of 1% per annum related to
both of the credit facilities would affect net earnings by
approximately $0.6 million.
Foreign exchange risk refers to the risk that the fair value or
future cash flow of a financial instrument will fluctuate
because of changes in foreign exchange rate.
TimberWest sells a substantial volume of product outside of
Canada (55% of sales for the six months ended 2008), all in US
dollars. As such, the relative strength of the Canadian dollar
versus its US counterpart has an effect on sales and earnings.
Results can be adversely affected by a strengthening Canadian
dollar. The relative strength of the Japanese yen, European
euro, and the Russian ruble also affect the Company's
competitiveness in the markets where it sells its products.
TimberWest does not hedge its foreign exchange risk.
Cash, accounts receivable, and accounts payable are denominated
in US and Canadian dollars. As at June 30, 2008, with other
variables unchanged, the effect of a $0.01 US change per
Canadian dollar on cash, accounts receivable, and accounts
payable would be less than $0.1 million.
(iii) Liquidity risk:
Liquidity risk refers to the risk that TimberWest may be unable
to generate or obtain sufficient cash or cash equivalents in a
timely and cost-effective manner to meet its commitments as
they come due.
The Company manages liquidity risk by continuously monitoring
and reviewing both actual and forecasted cash flows to maintain
adequate cash and cash equivalent balances.
The following table provides a summary of the contractual
undiscounted cash flow requirements for financial liabilities
as at June 30, 2008. This table details payments due in each of
the next five years and thereafter for the Company's revolving
credit facilities and outstanding letters of credit:
(in millions
of dollars) 2008 2009 2010 2011 2012 2013+ Total
Reflected on
the consoli-
dated balance
sheets:
Revolving
credit
facilities $ 50.0 $ - $ - $ - $161.9 $ - $211.9
---------------------------------------------------------------------
Not reflected
on the
consolidated
balance
sheets:
Outstanding
letters of
credit 6.3 11.0 - - - - 17.3
---------------------------------------------------------------------
$ 56.3 $ 11.0 $ - $ - $161.9 $ - $229.2
---------------------------------------------------------------------
Letters of credit are committed in perpetuity, renew annually and the
liability will diminish over time.
The Company has a working capital deficit of $52.9 million due to the
current portion of the revolving credit facilities of $50.0 million
included in the table above. Management is closely monitoring its
cash flows to manage liquidity. In addition, management is in
discussions with lenders for additional liquidity if required and
monitoring its distribution levels.
13. Capital Management
TimberWest's objectives for managing capital are to safeguard its
ability to continue as a going concern, to provide a sufficient
return to its unitholders, and to meet external capital requirements
on its debt and credit facilities.
The Company manages its capital by monitoring its consolidated debt-
to-total capitalization ratio. Debt is the total amount of borrowings
on its revolving credit facilities on the balance sheet. Total
capitalization is calculated as sum of Series A Subordinate Notes,
plus unitholders' equity which includes share capital, contributed
surplus, and retained earnings. 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.
TimberWest's consolidated debt-to-total capitalization ratio as at
June 30, 2008 was 20:80, compared to 17:83 as at December 31, 2007.
14. Comparative figures
Certain comparative figures have been reclassified to conform to the
current year presentation.
Supplemental Information Three months ended Six months ended
Unaudited June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Sales Revenue by
Product
(in millions of
dollars)
Log sales
Domestic $ 26.4 $ 44.8 $ 39.4 $ 82.8
Export - Asia 20.6 19.1 34.1 46.2
Export - US 3.5 16.4 5.2 29.6
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Total log sales 50.5 80.3 78.7 158.6
Real estate 4.9 0.3 7.7 0.6
Other 1.6 1.4 2.6 2.6
---------------------------------------------------------------------
$ 57.0 $ 82.0 $ 89.0 $ 161.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Sales Volume
Logs (thousand m(3))
Domestic 387.4 530.7 581.2 987.6
Export - Asia 227.8 163.2 362.3 382.0
Export - US 63.0 198.4 84.4 345.8
---------------------------------------------------------------------
678.2 892.3 1,027.9 1,715.4
---------------------------------------------------------------------
---------------------------------------------------------------------
Log Sales Mix
(thousand m(3))
Fir 476.8 590.9 705.8 1,198.4
Hembal 131.7 187.0 210.7 313.9
Cedar 39.3 69.3 55.0 112.1
Other 30.4 45.1 56.4 91.0
---------------------------------------------------------------------
678.2 892.3 1,027.9 1,715.4
---------------------------------------------------------------------
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Production Volume
Logs (thousand m(3))
Public tenures 87.4 170.7 194.8 287.1
Private timberlands 514.5 931.6 791.4 1,895.0
---------------------------------------------------------------------
601.9 1,102.3 986.2 2,182.1
---------------------------------------------------------------------
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Discontinued Operations Three months ended Six months ended
Unaudited June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Sales Revenue by
Product
(in millions of
dollars)
Lumber, wood chips
and other $ 22.4 $ 22.0 $ 35.4 $ 54.5
Sales Volume
Lumber (million fbm) 31.2 31.4 48.2 72.2
Production Volume
Lumber (million fbm) 14.9 23.2 43.3 69.8
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Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------
Earnings (Loss) Before
Interest, Taxes,
Depreciation and
Amortization
(EBITDA)(*)
(in millions of
dollars)
Net loss from
continuing
operations $ (18.9) $ (4.7) $ (41.8) $ (2.0)
Add (deduct):
Interest on
Series A
Subordinate
Notes paid to
unitholders 21.0 20.9 42.0 41.8
Interest on
long-term debt 1.9 0.4 4.4 0.5
Interest on
short-term debt 0.6 3.4 0.7 6.8
Income tax
recovery (0.5) (2.3) (5.2) (2.6)
Depreciation,
depletion and
amortization 1.3 1.7 2.5 3.4
Amortization of
deferred
financing costs 0.1 0.1 0.2 0.3
---------------------------------------------------------------------
Earnings from
continuing operations
before Interest,
Taxes, Depreciation
and Amortization 5.5 19.5 2.8 48.2
---------------------------------------------------------------------
Loss from discontinued
operations before
Interest, Taxes,
Depreciation and
Amortization (7.5) (2.0) (7.9) (0.4)
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings (Loss) before
Interest, Taxes,
Depreciation and
Amortization (2.0) 17.5 (5.1) 47.8
---------------------------------------------------------------------
---------------------------------------------------------------------
(*) 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 Western Canada's
largest private land management company. The Company owns in fee simple
approximately 322,000 hectares or 796,000 acres of private land, including
75 kilometres of waterfront that over the previous five calendar years, have
provided an annual average timber harvest of 2.565 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 lands 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. TimberWest
also owns renewable Crown harvest rights to 0.7 million m(3) of logs per year.
The Company operated a sawmill located near Campbell River, BC until
May 9, 2008.
In addition, approximately 54,000 hectares, or 134,000 acres
(approximately 17% of the Company's landholdings) of the Company's 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. Five land classifications have been developed for the Company's
39,000 acres of core development lands. An additional 41,000 acres adjacent to
our core development lands have yet to be classified for specific development
opportunities, and some 54,000 acres of non-core higher and better use lands
will be sold "as is" over time with little additional planning or zoning work
undertaken. The Company reviews its land base on a periodic basis to update
the size of its portfolio of higher use properties.
The Company's independent auditor, KPMG Performance Registrar Inc.,
periodically certifies that the forest management practices on both the
Company's private and public timberlands 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.
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
%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
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