Enhanced Investments - Financial Portal

Published: 2021-10-27

West Fraser Timber Co. Ltd.Condensed Consolidated Balance Sheets(in millions of United States dollars, except where indicated - unaudited)
	Currency		Currency
		remeasurement		remeasurement
					September 30	December 31		January 1
						2021	2020		2020
AssetsCurrent assetsCash and short-term investments
						2,105	$	461	$	12			$
Receivables						535		277		199
Income taxes receivable		21				8		104
Inventories (note 5)						938		578		561
Prepaid expenses		53					12		7
						3,652		1,336		883
Property, plant and equipment						3,599		1,657		1,648
Timber licences						372		372		380
Goodwill and other intangibles						2,366		591		594
Export duty deposits (note 14)						181		178		61
Other assets		40					35		20
Deferred income tax assets		10				9		8
						10,220	$	4,178	$	3,594	$
LiabilitiesCurrent liabilitiesCheques issued in excess of funds on deposit
		-			$	-	$	12				$
Operating loans (note 6)		-				-		288
Payables and accrued liabilities						864		389		305
Current portion of long-term debt (note 6)		-				7		7
Current portion of reforestation and decommissioning obligations		37					34		32
Income taxes payable						378			98		-
						1,279		528		644
Long-term debt (note 6)						499		500		500
Other liabilities (note 7)						326		408		350
Deferred income tax liabilities						686		264		195
						2,790		1,700		1,689
Shareholders' EquityShare capital (note 9)
						3,442		481		480
Accumulated other comprehensive earnings						(252)		(240)		(272)
Retained earnings						4,240		2,237		1,697
						7,430		2,478		1,905
						10,220	$	4,178	$	3,594	$
Number of Common s ha res a nd Cl a s s B Common s ha res outs ta ndi ng a t October 26, 2021 wa s 106,868,559.

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		West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Changes in Shareholders' Equity(in millions of United States dollars, except where indicated - unaudited)
			Currency		Currency
						remeasurement	remeasurement
July 1 to September 30							January 1 to September 30
2021			2020	2021	2020
		Share capital Balance - beginning of period
3,820	$			480			$	481	$	480		$
		Issuance of Common shares (note 9)				1			1			3,491			1
		Repurchase of Common shares for cancellation (note 9)	(379)					-		(530)			-
		Balance - end of period	3,442	$				481	$	3,442		$	481		$
		Contributed surplusBalance - beginning of period
						-	$		-		$	-		$	-	$
		Acquired equity-settled share option plan (note 3)				-			-			14			-
		Equity-settled share option expense				-			-			1			-
		Convert equity-settled share option plan to cash-settled (note 9)				-			-			(15)			-
		Balance - end of period				-	$		-		$	-		$	-	$
		Accumulated other comprehensive earnings Balance - beginning of period
(239)	$			(339)			$	(240)	$	(272)		$
		Translation loss on foreign operations	(13)					-		(12)			-
		Translation effect on change in reporting currency				-			27			-			(40)
		Balance - end of period	(252)	$				(312)	$	(252)		$	(312)		$
		Retained earningsBalance - beginning of period
4,258	$			1,672			$	2,237	$	1,697		$
		Actuarial gain (loss) on post-retirement benefits, net of tax				60			18			145			(32)
		Repurchase of Common shares for cancellation (note 9)	(517)					-		(691)			-
		Earnings for the period	460					262		2,613			306
		Dividends declared	(21)					(10)		(64)			(29)
		Balance - end of period	4,240	$				1,942	$	4,240		$	1,942		$
		Shareholders' Equity	7,430	$				2,111	$	7,430		$	2,111		$

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	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Earnings and Comprehensive Earnings(in millions of United States dollars, except where indicated - unaudited)
		Currency		Currency
			remeasurement		remeasurement
July 1 to September 30						January 1 to September 30
2021		2020				2021	2020
	Sales	2,358							$	1,268	$			8,480		$	3,079	$
	Costs and expensesCost of products sold
1,213								628				3,487			1,873
	Freight and other distribution costs	220								132				639			390
	Export duties, net (note 14)	66								37				176			93
	Amortization	147								50				431			149
	Selling, general and administration	73								53				224			133
	Equity-based compensation	9								2			28				5
1,728								902				4,985			2,643
	Operating earnings	630								366				3,495			436
	Finance expense	(11)								(8)				(44)			(30)
	Other (note 10)	5								(8)			9				(1)
	Earnings before tax	624								350				3,460			405
	Tax provision (note 11)	(164)								(88)				(847)			(99)
	Earnings	460							$	262	$			2,613		$	306	$
	Earnings per share (dollars) (note 12)Basic
4.20							$	3.82	$			23.79		$	4.47	$
	Diluted	4.20							$	3.82	$			23.79		$	4.47	$
	Comprehensive earningsEarnings
460							$	262	$			2,613		$	306	$
	Other comprehensive earningsTranslation loss on foreign operations
(13)								-				(12)			-
	Translation effect on change in reporting currency	-								27			-				(40)
	Actuarial gain (loss) on post-retirement benefits, net of tax	60								18				145			(32)
	Comprehensive earnings	507							$	307	$			2,746		$	234	$

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	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Cash Flows(in millions of United States dollars, except where indicated - unaudited)
							Currency	Currency
				remeasurement	remeasurement
		July 1 to September 30				January 1 to September 30
	Cash provided by (used in)	2021	2020	2021	2020
	Operating activitiesEarnings
		460	$					262	$	2,613	$	306		$
	Adjustments
	Amortization	147						50		431		149
	Finance expense	11						8		44		30
	Foreign exchange (gain) loss	-						3		2		(3)
	Export duty deposits	-						(7)		-		(14)
	Export duties payable	39						-		64		-
	Post-retirement expense	23						17		65		54
	Contributions to post-retirement benefit plans	(16)						(8)		(42)		(29)
	Tax provision	164						88		847		99
	Income taxes (paid) received	(277)						11		(775)		75
	Reforestation and decommissioning obligations	(15)						(14)		(11)		(5)
	Other	(29)						9		(29)		3
	Changes in non-cash working capital
	Receivables	239						(51)		(28)			(119)
	Inventories	28						(20)		(21)		37
	Prepaid expenses	8						3		(30)		(6)
	Payables and accrued liabilities	132						114		132		115
		914						465		3,262		692
	Financing activitiesRepayment of long-term debt
		-						-		(667)		-
	Proceeds from (repayment of) operating loans	-						(269)		-			(280)
	Financing fees paid	(1)						-		(4)		-
	Make-whole premium paid (note 6)	-						-		(60)		-
	Finance expense paid	(3)						(3)		(28)		(21)
	Repurchase of Common shares for cancellation	(892)						-		(1,218)		-
	Issuance of Common shares	-						-		7		-
	Dividends paid	(24)						(10)		(54)		(30)
	Other	(5)						(1)		(10)		(2)
		(925)						(283)		(2,034)			(333)
	Investing activitiesAcquired cash and short-term investments (note 3)
		-						-		642		-
	Additions to capital assets	(106)						(47)		(234)			(135)
	Government assistance	-						-		3		1
	Proceeds from disposal of capital assets	-						5		1		9
	Other	1						-		1		1
		(105)						(42)		413			(124)
	Change in cash	(116)						140		1,641		235
	Foreign exchange effect on cash	(10)						1		3		(1)
	Cash - beginning of period	2,231						93		461		-
	Cash - end of period	2,105	$					234	$	2,105	$	234		$

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	West Fraser Timber Co. Ltd. Notes to Condensed Consolidated Interim Financial Statements (figures are in millions of United States dollars, except where indicated - unaudited)
	1. Nature of operations
	West Fraser Timber Co. Ltd. (“West Fraser”, “the Company”, “we”, “us” or “our”) is a diversified wood products company with more than 60 facilities in Canada, the United States (“U.S.”), the United Kingdom (“U.K.”), and Europe. From responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals and renewable energy. West Fraser’s products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials. Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. Our Common shares are listed for trading on the Toronto Stock Exchange (“TSX”) and on the New York Stock Exchange (“NYSE”) under the symbol WFG.
	2. Basis of presentation and statement of compliance
	These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting as issued by the International Accounting Standards Board and use the same accounting policies and methods of their application as the December 31, 2020, audited annual consolidated financial statements, except for the change in functional and reporting currency and the business combination as discussed below. These condensed consolidated interim financial statements should be read in conjunction with our 2020 audited annual consolidated financial statements, which are presented in Canadian dollars.
	These financial statements were authorized for issue by the Company’s Board of Directors on October 27, 2021.
	Change in functional and reporting currency
	Determination of functional currency may involve certain judgments to determine the primary economic environment. We reconsider the functional currency of our entities if there is a change in events and conditions which determine the primary economic environment. We have determined that as a result of the acquisition of Norbord Inc. (the “Acquisition”), the functional currency of our Canadian operations has changed from Canadian dollars (“CAD”) to United States dollars (“USD”). We considered a variety of factors when making this decision, the most significant being an increase in the level of sales made in U.S. dollars, a significant portion of operating expenses being incurred in U.S. dollars, and increased levels of U.S. dollar financing.
	Concurrent with the change in functional currency, we also changed our reporting currency from Canadian dollars to U.S. dollars. This change in reporting currency is to better reflect our business activities, following the increased presence in the U.S. as a result of the Acquisition and in connection with the listing of West Fraser’s common shares on the NYSE on February 1, 2021.
	A change in functional currency is applied prospectively and must be based on a change in economic facts, events and conditions. In contrast, a change in reporting currency requires retroactive restatement. Both changes have specific transition rules under IAS 21, The Effects of Changes in Foreign Exchange Rates.
	As at and for the year ended December 31, 2020 and all prior periods, the functional and reporting currency of the Company was the Canadian dollar as described in our audited annual consolidated financial statements. The currency remeasurement of our results applied the IAS 21 transitional rules.
	To prepare our December 31, 2020 and January 1, 2020 consolidated balance sheets, all assets and liabilities were translated into USD at the closing exchange rate on December 31, 2020 and December 31, 2019, as listed below.

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	Equity items were retroactively restated at historical exchange rates to give effect to the change in reporting currency. The accounting policy used to translate the equity items prior to 2020 was to use the annual average exchange rate for each equity transaction that occurred in the year. For 2020, equity items were translated quarterly using the average exchange rate for each quarter.
	To prepare our 2020 consolidated statement of earnings, all revenues and expenses were translated into USD at the average exchange rate for each quarter, with no adjustments to the measurement of or accounting for previously reported results. To prepare our 2020 consolidated statement of cash flow, all items were translated into USD at the average exchange rate for each quarter, with no adjustments to the measurement of or accounting for previously reported results.
	The exchange rates used to reflect the change in reporting currency were as follows:
	Canadian - USD exchange rate	Q1-20	Q2-20	Q3-20	Q4-20	Q4-19
	Closing rate	0.7049	0.7338	0.7497	0.7854	0.7699
	Average rate	0.7443	0.7221	0.7508	0.7676	n/a
	Foreign currency translation effective from February 1, 2021
	European operations
	Assets and liabilities of foreign operations having a functional currency other than the USD are translated at the rate of exchange prevailing at the reporting date, and revenues and expenses at average rates during the period. Gains or losses on translation are included as a component of shareholders’ equity in other comprehensive earnings.
	North American operations
	Foreign currency-denominated (non-U.S. currencies) monetary assets and liabilities are translated using the rate of exchange prevailing at the reporting date. Gains or losses on translation of these items are included in earnings and reported in other income or expense.
	Foreign currency fluctuation effective from February 1, 2021
	Our Canadian operations incur a portion of their operating expenses in Canadian dollars. Therefore, an increase in the value of the CAD relative to the USD increases the value of expenses in USD terms incurred by our Canadian operations, which reduces operating margin and the cash flow available to fund operations.
	The impact on USD equivalent of net CAD revenues and expenses for a $0.01 change results in a pre-tax earnings adjustment of $18 million.
	3. Norbord acquisition
	Business combinations are accounted for using the acquisition method. We measure goodwill at the acquisition date as the fair value of the consideration transferred less the fair value of the identifiable assets acquired and liabilities assumed. Customer lists acquired in a business combination that qualify for separate recognition are recognized as intangible assets at their fair value and amortized straight-line over 10 years. Transaction costs in connection with business combinations are expensed as incurred. The determination of the fair value of the assets acquired and liabilities assumed requires management to use estimates that contain uncertainty and critical judgments including the remaining estimated useful life of non-monetary assets. We have engaged a valuations expert to prepare the fair value for Norbord’s working capital, property, plant and equipment, and intangible assets. This work is expected to be complete by the end of the year.

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	On February 1, 2021, we acquired all of the outstanding shares of Norbord Inc. (“Norbord”). According to the terms of the Acquisition, Norbord shareholders received 0.675 of a West Fraser share for each Norbord share held. The result was the issuance of 54,484,188 Common shares of West Fraser at a price of US$63.90 per share (CAD$81.94 per share) for $3,482 million. The price per share was based on the West Fraser Common shares’ closing price as listed on the TSX on January 29, 2021, and a CAD/USD exchange rate of 0.7798.
	Included in the Acquisition are five OSB mills in Canada, seven OSB mills in the U.S., one OSB mill, one MDF plant and two particleboard plants in the U.K., one OSB mill in Belgium, and their related corporate offices.
	We have incorporated the North American operations of Norbord into our Panels segment and renamed that segment North America (“NA”) Engineered Wood Products (“EWP”). This segment includes the results from North American operations for OSB, plywood, MDF, and LVL. In addition, we have identified a Europe EWP segment, which includes the results from the U.K. and Belgium operations for OSB, MDF and particleboard. The EWP segments have been separated due to differences in the operating region, customer base, profit margins and sales volumes.
	The Acquisition has been accounted for as an acquisition of a business in accordance with IFRS 3, Business Combinations. We have allocated the purchase price based on our preliminary estimated fair value of the assets acquired and the liabilities assumed as follows:
	West Fraser purchase consideration:
	Fair value of 54 million West Fraser shares issued	$	3,482
	Fair value of equity-based compensation instruments		24
		$	3,506
	Preliminary fair value of net assets acquired:
	Cash and short-term investments	$	642
	Accounts receivable		232
	Inventories		339
	Prepaid expenses		12
	Property, plant and equipment		2,088
	Timber		10
	Other non-current assets		6
	Other intangibles		17
	Customer list intangible		470
	Goodwill		1,326
	Payables and accrued liabilities		(301)
	Income tax payable		(152)
	Current portion of reforestation and decommissioning obligations		(2)
	Long-term debt		(720)
	Other non-current liabilities		(36)
	Deferred income tax liabilities		(425)
		$	3,506
	Factors contributing to goodwill include the Norbord workforce, assets that are geographically complementary to our existing facilities and offer close access to large markets and timber baskets. The Acquisition also provides increased scale and geographic diversification of manufacturing and markets. The goodwill of $1,326 million is not deductible for tax purposes.
	The following tables represent Norbord’s actual results included in our statement of earnings and the proforma results of operations for the nine months ended September 30, 2021. The proforma results assume the Acquisition occurred on January 1, 2021 and include purchase price accounting for the Acquisition.

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	Norbord results ($ millions except as otherwise indicated)
		Norbord results for February 1
		to September 30, 20211
	Sales		3,324
	Operating earnings		1,6422
	Earnings		1,2172
	1.	Represents the results of the Norbord operations since the acquisition date that are included in our results.
	2.	Includes purchase price accounting impact of $93 million expense for the one-time inventory adjustment in cost of products sold.
	Proforma January 1 to September 30, 2021 (“YTD-21”) results ($ millions except as otherwise indicated)
				West Fraser	Norbord			West Fraser
				Actual	Proforma			Proforma
				Results YTD-21	Results1			Results1
		Jan-21			YTD-21
	Sales			8,480		277	8,757
	Operating earnings			3,4952		115	3,6102
	Earnings			2,6132		86	2,6992
	1.	These proforma results have been provided as required per IFRS 3 - Business Combinations. West Fraser proforma YTD-21 presents West Fraser’s results as if the Acquisition was completed on January 1, 2021.
	2.	Includes purchase price accounting impact of $93 million expense for the one-time inventory adjustment in cost of products sold.
	Balances that required significant fair value adjustments for purchase price accounting included inventory, property, plant and equipment, timber, and customer list intangibles. The resulting goodwill and deferred income tax liabilities were also significant.
	Acquisition costs of $17 million have been expensed in selling, general and administration.
	4. Seasonality of operations
	Our operating results are subject to seasonal fluctuations that may impact quarter-to-quarter comparisons. Consequently, interim operating results may not proportionately reflect operating results for a full year.
	Market demand varies seasonally, as homebuilding activity and repair-and-remodelling work are generally stronger in the spring and summer months. Extreme weather conditions, including wildfires in Western Canada and hurricanes in the U.S. South, may periodically affect operations, including logging, manufacturing and transportation. Log inventory is typically built up in the Northern regions of North America and Europe during the winter to sustain our lumber and EWP production during the second quarter when logging is curtailed due to wet and inaccessible land conditions. This inventory is generally consumed in the spring and summer months.
	5. Inventories
	Inventories at September 30, 2021 were subject to a valuation reserve of $16 million (June 30, 2021 - nil; December 31, 2020 - $2 million; September 30, 2020 - $2 million; January 1, 2020 - $30 million) to reflect net realizable value being lower than cost.
		Currency						Currency
									remeasurement	remeasurement
							September 30, 2021	December 31, 2020	January 1, 2020
	Manufactured products						$		428	$	270	$	262
	Logs and other raw materials								302		189		174
	Processing materials and supplies								208		119		125
							$		938	$	578	$	561

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	6. Operating loans and long-term debt
	Operating loans
	During the quarter, our $686 million (CAD$850 million) and $450 million revolving credit facilities were combined into a single $1 billion committed revolving credit facility with a five-year term. There were no other significant changes to the terms or conditions of the credit facilities.
	As at September 30, 2021, our revolving lines of credit consist of a $1 billion committed revolving credit facility which matures July 2026, a $25 million demand line of credit dedicated to our U.S. operations and a $6 million (CAD$8 million) demand line of credit dedicated to our jointly-owned newsprint operation.
	At September 30, 2021, our revolving credit facilities were undrawn and the associated deferred financing costs of $1 million were recorded in other assets.
	Interest on the facilities is payable at floating rates based on Prime, Base Rate Advances, Bankers’ Acceptances or LIBOR Advances at our option.
	In addition, we have credit facilities totalling $138 million dedicated to letters of credit, of which $94 million (CAD$120 million) is committed to our Canadian operations. On September 30, 2021, our letter of credit facilities supported $64 million open letters of credit.
	All debt is unsecured except the $6 million (CAD$8 million) jointly-owned newsprint operation demand line of credit, which is secured by that joint operation’s current assets.

	Long-term debt

			Currency			Currency
				remeasurement			remeasurement
		September 30, 2021				December 31, 2020		January 1, 2020
	Senior notes due October 2024;
	interest at 4.35%	$	300		$		300		$	300
	Term loan due August 2024;
	floating interest rate		200				200			200
	Note payable due March 2021;
	interest at 2%		-				7			7
	Notes payable		1				2			3
			501				509			510
	Less: deferred financing costs		(2)				(2)			(3)
	Less: current portion		-				(7)			(7)
		$	499		$		500		$	500
	As part of the Acquisition, we assumed Norbord’s $315 million senior notes due April 2023 (the “2023 Notes”), bearing interest at 6.25% and $350 million senior notes due July 2027 (the “2027 Notes”), bearing interest at 5.75%. The purchase price fair value adjustment resulted in an increase of $55 million for these notes.
	On March 2, 2021, we made a mandatory change of control offer for 2023 Notes and 2027 Notes, which expired on April 1, 2021. As a result of the change of control offer, $1 million of the 2023 Notes and $1 million of the 2027 Notes were redeemed and were repaid in the second quarter of 2021. On April 6, 2021, we elected to redeem the remaining 2027 Notes, which redemption occurred on May 6, 2021. On May 6, 2021, we elected to redeem the remaining 2023 Notes, which redemption occurred on June 7, 2021. After the completion of the redemptions of the 2023 Notes and the 2027 Notes, the principal value of long-term debt was reduced by $665 million from the date of the Acquisition. An additional make-whole premium of $60 million was paid on redemption resulting in a

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	$5 million loss on settlement of the debt recorded within finance expense as the carrying value of $720 million was derecognized.
	The fair value of the long-term debt at September 30, 2021, was $519 million (December 31, 2020 - $524 million) based on rates available to us at the balance sheet date for long-term debt with similar terms and remaining maturities.
	Interest rate swap contracts
	At September 30, 2021, the Company had interest rate swap contracts to pay fixed interest rates (weighted average interest rate of 1.14%) and receive variable interest rates equal to 3-month LIBOR on $200 million notional principal amount of indebtedness. These agreements terminate in August 2024.
	The agreements are accounted for as a derivative, and the gain or loss related to changes in the fair value is included in other income. For the nine months ended September 30, 2021, a $3 million gain was recorded.
	7. Other liabilities
				Currency			Currency
					remeasurement	remeasurement
		September 30, 2021			December 31, 2020	January 1, 2020
	Post-retirement (note 8)	$	146			$	295	$	242
	Long-term portion of reforestation		51				58			57
	Long-term portion of decommissioning		22				25			24
	Export duties payable (note 14)		64				-			-
	Other		43				30			27
		$	326			$	408	$	350
	8. Post-retirement benefits
	We maintain defined benefit and defined contribution pension plans covering a majority of our employees. The defined benefit plans generally do not require employee contributions and provide a guaranteed level of pension payable for life, based either on length of service or on earnings and length of service, and in most cases do not increase after the commencement of retirement. We also provide group life insurance, medical and extended health benefits to certain employee groups.
	The status of the defined benefit pension plans and other retirement benefit plans, in aggregate, is as follows:
										Currency				Currency
			remeasurement			remeasurement
		September 30, 2021	December 31, 2020			January 1, 2020
	Projected benefit
	obligations							$	(1,527)	$	(1,471)				$	(1,305)
	Fair value of plan assets								1,390						1,181					1,067
								$	(137)					$	(290)				$	(238)
	Represented by
	Post-retirement assets							$			9	$	5				$	4
	Post-retirement liabilities								(146)						(295)					(242)
								$	(137)					$	(290)				$	(238)

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	The significant actuarial assumptions used to determine our balance sheet date post-retirement assets and liabilities are as follows:
		September 30, 2021	June 30, 2021	December 31, 2020
	Discount rate	3.22%			3.00%		2.69%
	Future compensation rate increase	3.61%			3.62%		3.65%
	The actuarial gain on post-retirement benefits, included in other comprehensive earnings, is as follows:
		July 1 to September 30				January 1 to September 30
										Currency							Currency
remeasurement				remeasurement
								2021								2020		2021		2020
	Actuarial gain (loss)						$	80	$	24		$			194	$	(42)
	Tax (provision) recovery							(20)		(6)					(49)		10
							$	60	$	18		$			145	$	(32)
	9. Share Capital
	Authorized
	400,000,000 Common shares, without par value 20,000,000 Class B Common shares, without par value 10,000,000 Preferred shares, issuable in series, without par value
	Issued
							September 30, 2021	December 31, 2020
					Currency
				remeasurement
							Number		Amount					Number		Amount
	Common								104,809,065	$	3,442		66,397,144	$	481
	Class B Common						2,281,478						-	2,281,478					-
	Total Common								107,090,543	$	3,442		68,678,622	$	481
	As part of the Acquisition, we issued 54,484,188 of West Fraser Common shares at a price of US$63.90 per share (CAD$81.94 per share) for $3,482 million. The price per share is based on the West Fraser Common shares’ closing price as listed on the TSX on January 29, 2021, and a CAD/USD exchange rate of 0.7798.
	For the nine months ended September 30, 2021, we issued 129,429 Common shares of the Company under our share option plans and 2,946 under our employee share purchase plan.
	On April 20, 2021, our board of directors approved a change to the assumed Norbord option plans (“Assumed Option Plans”) to allow holders the right to elect to receive a cash payment in lieu of exercising an option to purchase Common shares. The change required us to fair value the Assumed Option Plans on April 20, 2021 and convert from equity-based accounting to cash-settled accounting for the Assumed Option Plans. Cash-settled accounting is consistent with the West Fraser option plan. Any changes in fair value from April 20, 2021, onwards will result in an expense or recovery over the vesting period in the same manner as the rest of our Plans. This change to the Assumed Option Plans did not in any way affect the value of the instruments to the holders.
	On February 17, 2021, we renewed our normal course issuer bid (“NCIB”) allowing us to acquire an additional 6,044,000 Common shares for cancellation until the expiry of the bid on February 16, 2022. This represents approximately 5% of the Company’s issued and outstanding Common shares. On June 11, 2021, we amended our

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	NCIB, allowing us to acquire an additional 3,538,470 Common shares for an aggregate of 9,582,470 Common shares, representing 10% of the Company’s issued and outstanding Common shares as at February 8, 2021.
	For the nine months ended September 30, 2021, we have repurchased 5,895,364 Common shares at an average price of US$72.77 (CAD$90.24) per share under this NCIB.
	Substantial Issuer Bid
	On July 12, 2021, we commenced a substantial issuer bid (“SIB”) under which the Company offered to purchase from shareholders for cancellation up to CAD$1.0 billion of Common shares. The SIB was made by way of a “modified Dutch auction” procedure with a tender price range from CAD$85.00 to CAD$98.00 per share. For the duration of the SIB, we suspended share repurchases under our current NCIB, but resumed after the expiration of the SIB.
	We have repurchased 10,309,278 Common shares at a price of CAD$97.00 (US$76.84) per share for an aggregate purchase price of CAD$1.0 billion (US$792 million) under the SIB. The Common shares purchased represent approximately 8.7% of the total number of West Fraser’s issued and outstanding Commons shares and Class B Common shares at the time the SIB was announced in early July 2021.
	Total Common shares repurchased under both the NCIB and SIB as of September 30, 2021, were 16,204,642, representing approximately 13% of the issued and outstanding Common shares following the Acquisition.
	10. Other
		July 1 to September 30	January 1 to September 30
		Currency						Currency
remeasurement						remeasurement
					2021		2020			2021				2020
	Foreign exchange (loss) gain $				- $		(2) $	(2) $	1
	Other				5		(6)	11	(2)
				$	5 $		(8) $	9 $				(1)
	11. Tax provision
	The tax provision differs from the amount that would have resulted from applying the British Columbia statutory income tax rate to earnings before tax as follows:
		July 1 to September 30	January 1 to September 30
		Currency						Currency
remeasurement						remeasurement
					2021		2020			2021				2020
	Income tax expense at
	statutory rate of 27%			$	(168) $					(95) $	(934) $				(110)
	Rate differential between
	jurisdictions									24	11	109	13
	Non-taxable amounts									(6)	(4)	(8)	(2)
	Other				(14)		-				(14)	-
				$	(164) $					(88) $	(847) $				(99)

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	12. Earnings per share
	Basic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B Common shares outstanding.
	Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the cash-settled share option expense (recovery) charged to earnings and after deducting a notional charge for cash-settled share options assuming the use of the equity-settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive and diluted earnings per share are deemed to be the same as basic earnings per share.
		July 1 to September 30	January 1 to September 30
						Currency							Currency
remeasurement							remeasurement
		2021	2020			2021					2020
	Earnings
	Basic			$	460			$	262					$	2,613	$	306
	Cash-settled share option
										expense		19					9	35		5
	Equity-settled share
										option adjustment		(1)					-	(5)	(2)
	Diluted			$	478			$	271					$	2,643	$	309

	Weighted average number of shares (thousands)
	Basic				109,652				68,674						109,862		68,670
	Share options				404				301						551		154
	Diluted				110,056				68,975						110,413		68,824
	Earnings per share (dollars)

	Basic			$	4.20			$	3.82					$	23.79	$	4.47
	Diluted			$	4.20			$	3.82					$	23.79	$	4.47

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	13. Segmented information
				Corporate &
		Lumber	NA EWP		Pulp & Paper Europe EWP	Other	Total
	July 1, 2021 to September 30, 2021Sales
	To external customers	$ 859 $ 1,075 $ 175 $ 249 $ - $ 2,358
	To other segments	24 2 - - (26) - $ 883 $ 1,077 $ 175 $ 249 $ (26) $ 2,358
	Cost of products sold	(586) (375) (140) (138) 26 (1,213)
	Freight and other distribution costs	(102) (70) (34) (14) - (220)
	Export duties, net	(66) - - - - (66)
	Amortization	(41) (73) (8) (23) (2) (147)
	Selling, general and administration	(36) (20) (8) (7) (2) (73)
	Equity-based compensation	- - - - (9) (9)
	Operating earnings	$ 52 $ 539 $ (15) $ 67 $ (13) $ 630
	Finance expense, net	(8) (1) (2) 1 (1) (11)
	Other	7 4 1 - (7) 5
	Earnings before tax	$ 51 $ 542 $ (16) $ 68 $ (21) $ 624
	Currency remeasurementJuly 1, 2020 to September 30, 2020Sales
	To external customers	$ 972 $ 130 $ 166 $ - $ - $ 1,268
	To other segments	27 2 - - (29) - $ 999 $ 132 $ 166 $ - $ (29) $ 1,268
	Cost of products sold	(459) (77) (121) - 29 (628)
	Freight and other distribution costs	(89) (11) (32) - - (132)
	Export duties, net	(37) - - - - (37)
	Amortization	(37) (3) (8) - (2) (50)
	Selling, general and administration	(36) (6) (9) - (2) (53)
	Equity-based compensation	- - - - (2) (2)
	Operating earnings	$ 341 $ 35 $ (4) $ - $ (6) $ 366
	Finance expense, net	(6) (1) (1) - - (8)
	Other	(3) 1 (6) - - (8)
		Earnings before tax		$ 332 $ 35 $ (11) $ - $ (6) $ 350

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							Corporate &
		Lumber	NA EWP											Pulp & Paper Europe EWP	Other		Total
	January 1, 2021 to September 30, 2021Sales
	To external customers	$ 3,942 $ 3,431 $ 568 $ 539 $ - $ 8,480
	To other segments	80 8 - - (88) - $ 4,022 $ 3,439 $ 568 $ 539 $ (88) $ 8,480
	Cost of products sold	(1,695) (1,123) (409) (348) 88 (3,487)
	Freight and other distribution costs	(311) (190) (104) (34) - (639)
	Export duties, net	(176) - - - - (176)
	Amortization	(119) (216) (25) (64) (7) (431)
	Selling, general and administration	(107) (55) (26) (17) (19) (224)
	Equity-based compensation	- - - - (28) (28)
	Operating earnings	$ 1,614 $ 1,855 $ 4 $ 76 $ (54) $ 3,495
	Finance expense, net	(18) (3) (5) - (18) (44)
	Other	4 4 4 - (3) 9
	Earnings before tax	$ 1,600 $ 1,856 $ 3 $ 76 $ (75) $ 3,460
	Currency remeasurementJanuary 1, 2020 to September 30, 2020Sales
	To external customers	$ 2,272 $ 318 $ 489 $ - $ - $ 3,079
	To other segments	74 5 - - (79) - $ 2,346 $ 323 $ 489 $ - $ (79) $ 3,079
	Cost of products sold	(1,384) (217) (351) - 79 (1,873)
	Freight and other distribution costs	(264) (31) (95) - - (390)
	Export duties, net	(93) - - - - (93)
	Amortization	(111) (9) (23) - (6) (149)
	Selling, general and administration	(91) (16) (24) - (2) (133)
	Equity-based compensation	- - - - (5) (5)
	Operating earnings	$ 403 $ 50 $ (4) $ - $ (13) $ 436
	Finance expense, net	(23) (3) (4) - - (30)
	Other	6 6 (5) - (8) (1)
	Earnings before tax	$ 386 $ 53 $ (13) $ - $ (21) $ 405
	The geographic distribution of external sales is as follows1:
		July 1 to September 30	January 1 to September 30
						Currency									Currency
remeasurement							remeasurement
		2021	2020				2021					2020
	Canada			$					352 $	256 $	1,388 $	589
	U.S.				1,557								851	5,919	1,978
	China								104	122	358	361
	Other Asia								95	35	261	136
	Europe2								248	4					549	13
	Other				2	-	5	2
				$	2,358 $								1,268 $	8,480 $	3,079
	1.	Sales distribution is based on the location of product delivery.
	2.	Includes sales to the U.K.
	14. Countervailing and antidumping duty dispute
	Additional details can be found in Note 25 - Countervailing (	"CVD") and antidumping ("ADD") duty dispute of our
	2020 annual audited consolidated financial statements.

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	Accounting policy for duties
	The CVD and ADD rates apply retroactively for each Period of Investigation (“POI”). We record CVD as export duty expense at the cash deposit rate until an Administrative Review (“AR”) finalizes a new applicable rate for each POI. We record ADD as export duty expense by estimating the rate to be applied for each POI by using our actual results and the same calculation methodology as the United States Department of Commerce (“USDOC”) and adjust when an AR finalizes a new applicable rate for each POI. The difference between the cash deposits and export duty expense is recorded on our balance sheet as export duty deposits or other liabilities as applicable, along with any true-up adjustments to finalized rates.
	The difference between the cash deposit amount and the amount that would have been due based on the final AR rate will incur interest based on the U.S. federally published interest rate. We record interest income on our duty deposits receivable and interest expense on our duty deposits payable based on this rate.
	Developments in CVD and ADD rates
	On April 24, 2017, the USDOC issued its preliminary determination in the CVD investigation, and on June 26, 2017, the USDOC issued its preliminary determination in the ADD investigation. On December 4, 2017, the duty rates were revised. On November 24, 2020, the USDOC finalized these rates based on its first AR of the first POI as listed below. The USDOC will continue to revise rates as it finalizes each AR POI.
	Effective November 30, 2020 for ADD and December 1, 2020 for CVD, shipments from Canada to the U.S. were subject to the new cash deposit rate of 7.57% for CVD and 1.40% for ADD. The cash deposit rate will change each time the USDOC finalizes a new duty rate for each AR POI.
	On May 20, 2021, the USDOC released the preliminary results from AR2 covering the 2019 calendar year, which indicated a rate of 4.80% for CVD and 6.58% for ADD for West Fraser. The duty rates are subject to an appeal process, and we will record an adjustment once the rates are finalized. If the AR2 rates were to be confirmed, it would result in a USD recovery of $54 million for the POI covered by AR2. This adjustment would be in addition to the amounts already recorded on our balance sheet. If these rates are finalized, our combined cash deposit rate would be revised to 11.38%.
	AR3, covering the 2020 calendar year, commenced in April 2021. Preliminary results are expected January 28, 2022 and final determination in August of 2022.

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	The respective Cash Deposit Rates, the AR POI Final Rate, and the West Fraser Estimated ADD rate for each period are as follows:
		Cash Deposit	AR POI Final
	Effective dates for CVD	Rate	Rate
	AR1 POI
	April 28, 2017 - August 24, 20171	24.12%	6.76%3
	August 25, 2017 - December 27, 20171			-	-
	December 28, 2017 - December 31, 20172	17.99%	6.76%3
	January 1, 2018 - December 31, 2018	17.99%	7.57%3
	AR2 POI
	January 1, 2019 - December 31, 2019	17.99%	n/a5
	AR3 POI
	January 1, 2020 - November 30, 2020	17.99%	n/a6
	December 1, 2020 - December 31, 20204	7.57%	n/a6
	AR4 POI
	January 1, 2021 - September 30, 2021	7.57%	n/a7
	1.	On April 24, 2017, the USDOC issued its preliminary rate in the CVD investigation. The requirement that we make cash deposits for CVD was suspended on August 24, 2017, until the USDOC published the revised rate.
	2.	On December 4, 2017, the USDOC revised our CVD Cash Deposit Rate effective December 28, 2017.
	3.	On February 3, 2020, the USDOC issued a preliminary CVD rate and, on November 24, 2020, a final CVD rate for the AR1 POI. This table only reflects the final rate.
	4.	Effective December 1, 2020, shipments from Canada to the U.S. were subject to the new Cash Deposit rate of 7.57% for CVD.
	5.	On May 20, 2021 the USDOC announced the CVD preliminary rate of 4.80% for AR2. The duty rates are subject to an appeal process, and we will record an adjustment once the rates are finalized in the fourth quarter of 2021.
	6.	The CVD rate for the AR3 POI will be adjusted when AR3 is complete and the USDOC finalizes the rate, which is not expected until 2022.
	7.	The CVD rate for the AR4 POI will be adjusted when AR4 is complete and the USDOC finalizes the rate, which is not expected until 2023.

			West Fraser
Cash Deposit		AR POI Final	Estimated
	Effective dates for ADD	Rate				Rate	Rate
	AR1 POI
	June 30, 2017 - December 3, 20171	6.76%		1.40%3	1.46%
	December 4, 2017 - December 31, 20172	5.57%		1.40%3	1.46%
	January 1, 2018 - December 31, 2018	5.57%		1.40%3	1.46%
	AR2 POI
	January 1, 2019 - December 31, 2019	5.57%				n/a 5	4.65%
	AR3 POI
	January 1, 2020 - November 29, 2020	5.57%				n/a6	3.40%
	November 30, 2020 - December 31, 20204	1.40%				n/a6	3.40%
	AR4 POI
	January 1, 2021 - September 30, 2021	1.40%				n/a7	7.20%
	1. On June 26, 2017, the USDOC issued its preliminary rate in the ADD investigation effective June 30, 2017. 2. On December 4, 2017, the USDOC revised our ADD Cash Deposit Rate effective December 4, 2017. 3. On February 3, 2020, the USDOC issued a preliminary ADD rate and, on November 24, 2020, a final CVD rate for the AR1 POI. This table
	only reflects the final rate.
	4. Effective November 30, 2020, shipments from Canada to the U.S. were subject to the new Cash Deposit Rate of 1.40% for ADD. 5. On May 20, 2021, the USDOC announced the ADD preliminary rate of 6.58% for AR2. The duty rates are subject to an appeal process, and
	we will record an adjustment once the rates are finalized in the fourth quarter of 2021.
	6. The ADD rate for the AR3 POI will be adjusted when AR3 is complete and the USDOC finalizes the rate, which is not expected until 2022. 7. The ADD rate for the AR4 POI will be adjusted when AR4 is complete and the USDOC finalizes the rate, which is not expected until 2023.

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	Impact on earnings
	The following table reconciles our cash deposits paid during the period to the amount recorded in our earnings statement.
		July 1 to September 30	January 1 to September 30
					Currency						Currency
							remeasurement							remeasurement
					2021						2020		2021		2020
	Cash deposits1			$	(27)	$					(44)	$	(112) $		(107)
	Adjust to West Fraser Estimated
	ADD rate2				(39)									7		(64)		14
	Export duties, net 3			$	(66)	$					(37)	$	(176) $				(93)
	1.	Represents combined CVD and ADD cash deposit rate of 8.97% for Q1, Q2 and Q3 of 2021, and 23.56% for Q1, Q2 and Q3 of 2020.
	2.	Represents adjustment to West Fraser Estimated ADD year to date rate of 7.20% at the end of Q3-21, 4.09% at the end of Q2-21, and 1.85% at the end of Q3-20.
	3.	The total represents the combined CVD cash deposit rate and West Fraser Estimated ADD year to date rate of 14.77% at the end of Q3-21, 11.66% at the end of Q2-21, and 19.84% at the end of Q3-20.
	Impact on the balance sheet
	Each POI is subject to independent administrative review by the USDOC, and the results of each POI may not be offset.
	Export duty deposits receivable is represented by:
											Currency remeasurement
	Export duty deposits	January 1 to			January 1 to December 31
September 30 2021						2020
	Beginning balance	$			178					$	61
	Export duties receivable related to AR1, AR2,
	and AR3				-	104
	Interest recognized on the long-term duty
	deposits receivable				3	13
	Ending balance	$			181					$	178
	For AR4, we have recorded a long-term duty payable related to ADD for the difference between the 1.40% Cash Deposit Rate and our West Fraser Estimated Rate of 7.20%.
	Export duties payable is represented by:
	Export duties payable (note 7)									January 1 to September 30 2021
	Beginning balance							$	-
	Export duties payable related to AR4								(64)
	Ending balance							$	(64)
	As at September 30, 2021, export duties paid and payable on deposit with the USDOC are $641 million.
	AR2, AR3 and AR4
	During the second quarter of 2021, the USDOC issued the preliminary duty rates for AR2 (POI January 1 to December 31, 2019) and these rates are expected to be finalized in the fourth quarter of 2021. AR3 (POI January 1 to December 31, 2020) commenced in April 2021, and the rates are expected to be finalized in August 2022. AR4 (POI January 1 to December 31, 2021) is expected to commence in 2022 with the results finalized in 2023. We

- 19 -
	have been selected as a mandatory respondent for AR3, which will result in West Fraser continuing to be subject to a company-specific rate.
	Appeals
	Our 2020 annual MD&A included in our 2020 Annual Report includes details on Softwood Lumber Dispute appeals.
	Notwithstanding the deposit rates assigned under the investigations, our final liability for CVD and ADD will not be determined until each annual administrative review process is complete and related appeal processes are concluded.
	15. Subsequent Events
	On October 12, 2021, we announced that we entered into an agreement to acquire the Angelina Forest Products lumber mill located in Lufkin, Texas for approximately $300 million, subject to certain post-closing adjustments. The transaction is anticipated to close following successful completion of U.S. regulatory reviews and satisfaction of customary conditions.
	On October 26, 2021, we announced that we entered into an agreement to acquire Georgia-Pacific’s OSB mill located near Allendale, South Carolina for approximately $280 million.  The transaction is anticipated to close following successful completion of U.S. regulatory reviews and satisfaction of customary conditions.