Enhanced Investments - Financial Portal

Published: 2020-07-27

West Fraser Timber Co. Ltd.Condensed Consolidated Balance Sheets(in millions of Canadian dollars, except where indicated - unaudited)
	June 30 December 31
	2020	2019
AssetsCurrent assetsCash and short-term investments
	127		$	16			$
Receivables	365			258
Income taxes receivable	30			135
Inventories (note 5)	655			729
Prepaid expenses	21			9
	1,198			1,147
Property, plant and equipment	2,178			2,140
Timber licences	483			493
Goodwill and other intangibles	789			772
Export duty deposits (note 14)	95			80
Other assets	24			26
Deferred income tax assets	10			10
	4,777		$	4,668		$
LiabilitiesCurrent liabilitiesCheques issued in excess of funds on deposit
				-	$	16		$
Operating loans (note 6)	358			374
Payables and accrued liabilities	388			396
Current portion of long-term debt (note 6)	10			10
Current portion of reforestation and decommissioning obligations	44			41
	800			837
Long-term debt (note 6)	682			650
Other liabilities (note 7)	595			454
Deferred income tax liabilities	230			253
	2,307			2,194
Shareholders' EquityShare capital
	484			483
Accumulated other comprehensive earnings	166			132
Retained earnings	1,820			1,859
	2,470			2,474
	4,777		$	4,668		$
Number of Common shares and Class B Common shares outstanding at July 27, 2020 was 68,673,981.

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	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Changes in Shareholders' Equity(in millions of Canadian dollars, except where indicated - unaudited)
		April 1 to June 30		January 1 to June 30
		2020	2019	2020	2019
	Share capital Balance - beginning of period
		484	$			487	$	483	$	491	$
	Issuance of Common shares	-				-		1		1
	Repurchase of Common shares	-				(4)		-		(9)
	Balance - end of period	484	$			483	$	484	$	483	$
	Accumulated other comprehensive earnings Balance - beginning of period
		198	$			153	$	132	$	170	$
	Translation gain (loss) on foreign operations	(32)				(16)		34		(33)
	Balance - end of period	166	$			137	$	166	$	137	$
	Retained earningsBalance - beginning of period
		1,947	$			2,135	$	1,859	$	2,235	$
	Actuarial loss on post-retirement benefits	(161)				(36)		(71)		(72)
	Repurchase of Common shares	-				(27)		-		(72)
	Earnings for the period	48				(58)		60		(63)
	Dividends	(14)				(13)		(28)		(27)
	Balance - end of period	1,820	$			2,001	$	1,820	$	2,001	$
	Shareholders' Equity	2,470	$			2,621	$	2,470	$	2,621	$

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	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Earnings and Comprehensive Earnings(in millions of Canadian dollars, except where indicated - unaudited)
		April 1 to June 30		January 1 to June 30
		2020	2019	2020	2019
	Sales	1,276				$	1,317	$	2,471	$	2,558	$
	Costs and expensesCost of products sold
		854					1,013		1,700		1,916
	Freight and other distribution costs	184					196		352		366
	Export duties (note 14)	42					51		77		83
	Amortization	65					63		135		128
	Selling, general and administration	54					52		108		110
	Equity-based compensation	(6)					-		3		3
	Restructuring and impairment charges	-					26		-		26
		1,193					1,401		2,375		2,632
	Operating earnings	83					(84)		96		(74)
	Finance expense	(13)					(13)		(29)		(24)
	Other (note 10)	(3)					(6)		9		(11)
	Earnings before tax	67					(103)		76		(109)
	Tax recovery (provision) (note 11)	(19)					45		(16)		46
	Earnings	48				$	(58)	$	60	$	(63)	$
	Earnings per share (dollars) (note 12)Basic
		0.70				$	(0.85)	$	0.88	$	(0.92)	$
	Diluted	0.70				$	(0.92)	$	0.76	$	(1.04)	$
	Comprehensive earningsEarnings
		48				$	(58)	$	60	$	(63)	$
	Other comprehensive earningsTranslation gain (loss) on foreign operations
		(32)					(16)		34		(33)
	Actuarial loss on post-retirement benefits	(161)					(36)		(71)		(72)
	Comprehensive earnings	(145)				$	(110)	$	23	$	(168)	$

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	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Cash Flows(in millions of Canadian dollars, except where indicated - unaudited)
				April 1 to June 30	January 1 to June 30
	Cash provided by (used in)	2020			2019	2020	2019
	Operating activitiesEarnings
				48	$			(58)		$	60		$	(63)		$
	Adjustments
	Amortization			65				63			135			128
	Restructuring and impairment charges			-				26			-			26
	Finance expense			13				13			29			24
	Exchange loss (gain) on long-term financing			3				2			(3)			3
	Exchange loss (gain) on export duty deposits			3				1			(4)			3
	Export duty deposits			(2)				1			(10)			(4)
	Post-retirement expense			25				20			50			41
	Contributions to post-retirement benefit plans			(16)				(21)			(29)			(38)
	Tax provision (recovery)			19				(45)			16			(46)
	Income taxes received (paid)			90				(18)			89			(95)
	Reforestation and decommissioning obligations			(13)				(11)			11			6
	Other			(12)				4			(7)			6
	Changes in non-cash working capital
	Receivables			(26)				26			(91)			(23)
	Inventories	280				240			85			60
	Prepaid expenses			(9)				(12)			(13)			(16)
	Payables and accrued liabilities			(29)				(44)			(1)			(53)
439			187			317			(41)
	Financing activitiesProceeds from (repayment of) operating loans
(325)			(81)			(17)			185
	Finance expense paid			(16)				(16)			(25)			(21)
	Repurchase of Common shares			-				(31)			-			(81)
	Dividends			(14)				(14)			(28)			(28)
	Other			1				(1)			-			(1)
(354)			(143)			(70)			54
	Investing activitiesAdditions to capital assets
				(60)				(82)			(119)			(190)
	Government assistance			1				5			1			5
	Proceeds from disposal of capital assets			-				7			6			7
	Other			1				1			1			1
				(58)				(69)			(111)			(177)
	Change in cash			27				(25)			136			(164)
	Foreign exchange effect on cash			6				1			(9)			(3)
	Cash - beginning of period			94				4			-			147
	Cash - end of period	127	$			(20)		$	127		$	(20)			$
	Cash consists ofCash and short-term investments
			127		$	16						$
	Cheques issued in excess of funds on deposit		-			(36)
			127		$	(20)						$

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	West Fraser Timber Co. Ltd. Notes to Condensed Consolidated Interim Financial Statements (figures are in millions of dollars, except where indicated - unaudited)
	1. Nature of operations
	West Fraser Timber Co. Ltd. ("West Fraser", "we", "us" or "our") is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States. Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. Our Common shares are listed for trading on the Toronto Stock Exchange under the symbol WFT.
	2. Basis of presentation and statement of compliance
	These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as issued by the International Accounting Standards Board, and use the same accounting policies and methods of their application as the December 31, 2019 annual audited consolidated financial statements. These condensed consolidated interim financial statements should be read in conjunction with our 2019 annual audited consolidated financial statements.
	3. Use of estimates and judgments and Coronavirus (“COVID-19”)
	The preparation of financial statements requires management to use accounting estimates and to make judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The estimates and underlying assumptions are based on historical experience and other factors, including expectations of future events that are considered to be reasonable under the circumstances.
	Given the ongoing and dynamic nature of the COVID-19 outbreak, it is challenging to predict the impact on our Company. The extent of such impact will depend on future developments, which are highly uncertain, including the resurgence of COVID-19 as restrictions are eased or lifted, new information that may emerge concerning the spread and severity of COVID-19, and actions taken to address its impact, among others. It is difficult to predict how this virus may affect our business in the future, including the effect it may have (positive or negative; long or short term) on the demand and price for our products. It is possible that COVID-19, particularly if it has a prolonged duration, could have a material adverse effect on our supply chain, market pricing and customer demand, and distribution networks. These factors may further impact our operating plans, business, financial condition, liquidity, and operating results, which would, in turn, affect our estimates, including the valuation of inventories, allowance for expected credit losses, fair value measurements, the valuation of long-lived assets, and cash flow projections used for impairment testing. Actual results may materially differ from these estimates.
	4. Seasonality of operations
	Our operating results are subject to seasonal fluctuations that impact quarter-to-quarter operating results. Log availability has a direct impact on our operations. We build up log inventory in Canada during the winter to sustain our lumber and plywood production during the second quarter when logging is curtailed due to wet and inaccessible land conditions. Extreme weather conditions, wildfires in Western Canada, and hurricanes in the U.S. South may periodically affect operations, including logging, manufacturing, and transportation. Consequently, interim operating results may not proportionately reflect operating results for a full year.
	5. Inventories
	Inventories at June 30, 2020 were subject to a valuation reserve of $13 million (March 31, 2020 - $23 million; December 31, 2019 - $39 million; June 30, 2019 - $47 million) to reflect net realizable value being lower than cost.

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			June 30, 2020		December 31, 2019
	Manufactured products	$	298	$	341
	Logs and other raw materials		188		226
	Processing materials and supplies		169		162
		$	655	$	729
	6. Operating loans and long-term debt
	Operating loans
	Our revolving lines of credit consist of an $850 million committed revolving credit facility which matures August 25, 2024, a $150 million committed revolving credit facility with a two-year term, a $34 million (US$25 million) demand line of credit dedicated to our U.S. operations, and an $8 million demand line of credit dedicated to our jointly-owned newsprint operation. On June 30, 2020, $361 million was drawn under our revolving credit facility. Deferred financing costs of $3 million related to these facilities were deducted against the operating loans for balance sheet presentation.
	Interest on the facilities is payable at floating rates based on Prime, Base Rate Advances, Bankers' Acceptances or LIBOR Advances at our option plus an applicable margin.
	In addition, we have credit facilities totalling $130 million dedicated to letters of credit, of which US$15 million is dedicated to our U.S. operations. On June 30, 2020, our letter of credit facilities supported $59 million of open letters of credit.
	All debt is unsecured except the $8 million joint operation demand line of credit, which is secured by that joint operation's current assets.
	Long-term debt
			June 30, 2020			December 31, 2019
	US$300 million senior notes due October 2024;
	interest at 4.35%	$	409	$	390
	US$200 million term loan due August 2024; floating
	interest rate		273		260
	US$8 million note payable due October 2020; interest
	at 2%						10	10
	Notes payable						3		3
			695		663
	Less: deferred financing costs						(3)		(3)
	Less: current portion related to the US$8 million note
	payable due October 2020		(10)		(10)
		$	682	$	650
	The fair value of the long-term debt at June 30, 2020, was $695 million (December 31, 2019 - $677 million) based on rates available to us at the balance sheet date for long-term debt with similar terms and remaining maturities.
	On March 9, 2020, we extended the duration of our interest rate swap from August 2022 to August 2024 resulting in a change to the fixed interest rate on the swap from 2.47% to 1.78% through August of 2024. We continue to receive a floating interest rate equal to 3-month LIBOR over the duration. The result is a fixed interest rate of 2.47% for the period of May 28, 2019 to February 25, 2020 and 1.78% for the period of February 25, 2020 to August 25, 2024. On April 15, 2020, we entered into additional interest rate swaps for a total notional amount of

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	US$100 million. Under the agreements, we pay a combined fixed interest rate of 0.51% and receive a floating interest rate equal to 3-month LIBOR.
	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 six months ended June 30, 2020, a $7 million loss was recorded.
	7. Other liabilities
			June 30, 2020		December 31, 2019
	Post-retirement (note 8)	$	437	$	314
	Long-term portion of reforestation					82		74
	Long-term portion of decommissioning					36		31
	Other					40		35
		$	595	$	454
	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:
			June 30, 2020		December 31, 2019
	Projected benefit obligations	$	(1,852)	$	(1,693)
	Fair value of plan assets		1,420		1,385
		$				(432)	$	(308)
	Represented by
	Post-retirement assets	$				5	$	6
	Post-retirement liabilities					(437)		(314)
		$				(432)	$	(308)
	The significant actuarial assumptions used to determine our balance sheet date post-retirement assets and liabilities are as follows:
					June 30, 2020	March 31, 2020		December 31, 2019
	Discount rate	2.75%							4.00%	3.00%
	Future compensation rate increase	3.50%							3.50%	3.50%
	For the six months ended June 30, 2020, we recognized in other comprehensive earnings a before-tax loss of $95 million to reflect the changes in the valuation of the post-retirement benefit plans. The loss reflects the decrease in the discount rate used to calculate plan liabilities from the beginning of the year, partially offset by the return on plan assets.

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	The actuarial gain (loss) on post-retirement benefits, included in other comprehensive earnings, is as follows:
		April 1 to June 30		January 1 to June 30
				2020			2019		2020			2019
	Actuarial loss		$	(216)		$	(46)	$	(95)		$	(95)
	Tax provision			55			10		24			23
			$	(161)		$	(36)	$	(71)		$	(72)
	9. Share Capital
	We are authorized under our Normal Course Issuer Bid ("NCIB"), which expires on September 19, 2020, to purchase up to 3,318,823 of our Common shares. Under this bid, there were no Common shares repurchased for cancellation. During the six months ended June 30, 2019, we repurchased 1,178,400 Common shares under our previous NCIB, which expired on September 18, 2019, at an average price of $68.30 per share for a cost of approximately $81 million.
	10. Other
		April 1 to June 30		January 1 to June 30
				2020			2019		2020			2019
	Exchange gain (loss) on working capital		$	(1)		$	(2)	$				5	$	(5)
	Exchange gain (loss) on intercompany
	financing1			(31)			(16)		35			(31)
	Exchange gain (loss) on long-term debt			28			14		(32)			28
	Exchange gain (loss) on export duty
	deposits receivable			(3)			(1)					4		(3)
	Insurance gain on involuntary disposal of
	equipment2			7			-					7		-
	Loss on interest rate swap contracts (note 6)	(2)			(2)		(7)			(3)
	Other			(1)			1		(3)			3
			$	(3)		$	(6)	$				9	$	(11)
	1.	Relates to US$590 million (2019 - US$550 million) of financing provided to our U.S. operations. IAS 21 requires that the exchange gain or loss be recognized through earnings as the financing is not considered part of our permanent investment in our U.S. subsidiaries. The balance sheet amounts and related financing expense are eliminated in these consolidated financial statements.
	2.	Represents insurance proceeds related to the settlement of WestPine's 2016 involuntary disposal of equipment.
	Insurance claim settlement
	During this quarter, we settled the insurance claim related to the fire that occurred at our WestPine MDF plant in March 2016.
								The impact of the settlement on pre-tax earnings is as follows:
						June 30, 2020
	Business interruption1				$	7
	Insurance gain on involuntary disposal of equipment2					7
					$	14
	1.	Recognized in cost of products sold for the panels segment.
	2.	Recognized in other income for the panels segment.

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	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:
		April 1 to June 30		January 1 to June 30
				2020			2019		2020			2019
	Income tax recovery (expense) at
	statutory rate of 27%		$	(18)		$	28	$	(20)			30
	Non-taxable amounts			(4)			1		2			1
	Rate differentials between jurisdictions
	and on specified activities			3			(1)		2			(2)
	Decrease in Alberta provincial tax rate1			-			17		-			17
			$	(19)		$	45	$	(16)		$	46
	1.						Represents the re-measurement of deferred income tax assets and liabilities for the 2019 Alberta tax rate change from 12% to 8% over the next four years.

	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 actual share option expense (recovery) charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity-settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive, and diluted earnings per share are deemed to be the same as basic earnings per share.
		April 1 to June 30		January 1 to June 30
				2020			2019		2020			2019
	Earnings
	Basic		$	48		$	(58)	$	60		$	(63)
	Share option expense (recovery)			12			(5)		(6)			(6)
	Equity-settled share option adjustment	-			-		(2)			(3)
	Diluted		$	60		$	(63)	$	52		$	(72)

	Weighted average number of shares
	(thousands)
	Basic			68,670			68,779		68,667			69,106
	Share options			77			314		94			350
	Diluted			68,747			69,093		68,761			69,456

	Earnings per share (dollars)
	Basic		$	0.70		$	(0.85)	$	0.88		$	(0.92)
	Diluted		$	0.70		$	(0.92)	$	0.76		$	(1.04)

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	13. Segmented information
	The table below provides a reconciliation of our Non-IFRS measure Adjusted EBITDA. This measurement is used by management to evaluate the operating and financial performance of our operating segments, generate future operating plans, and make strategic decisions, including those relating to operating earnings.
					Corporate &
		Lumber	Panels	Pulp & Paper	Other	Total
	April 1, 2020 to June 30, 2020Sales
	To external customers	$ 939 $ 118 $ 219 $ - $ 1,276
	To other segments	37 3 - (40) - $ 976 $ 121 $ 219 $ (40) $ 1,276
	Cost of products sold	(655) (82) (157) 40 (854)
	Freight and other distribution costs	(130) (12) (42) - (184)
	Selling, general and administration	(35) (7) (10) (2) (54)
	Adjusted EBITDA	$ 156 $ 20 $ 10 $ (2) $ 184
	Export duties	(42) - - - (42)
	Equity-based compensation	- - - 6 6
	Amortization	(48) (3) (11) (3) (65)
	Operating earnings	$ 66 $ 17 $ (1) $ 1 $ 83
	Finance expense	(10) (1) (2) - (13)
	Other	(5) 7 (2) (3) (3)
	Earnings before tax	$ 51 $ 23 $ (5) $ (2) $ 67
	April 1, 2019 to June 30, 2019Sales
	To external customers	$ 919 $ 156 $ 242 $ - $ 1,317
	To other segments	33 3 - (36) - $ 952 $ 159 $ 242 $ (36) $ 1,317
	Cost of products sold	(740) (126) (183) 36 (1,013)
	Freight and other distribution costs	(138) (17) (41) - (196)
	Selling, general and administration	(35) (6) (11) - (52)
	Adjusted EBITDA	$ 39 $ 10 $ 7 $ - $ 56
	Export duties	(51) - - - (51)
	Equity-based compensation	- - - - -
	Amortization	(48) (3) (11) (1) (63)
	Restructuring and impairment charges	(26) - - - (26)
	Operating earnings	$ (86) $ 7 $ (4) $ (1) $ (84)
	Finance expense	(9) (2) (2) - (13)
	Other	(3) - - (3) (6)
	Earnings before tax	$ (98) $ 5 $ (6) $ (4) $ (103)

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		Corporate &
			Lumber	Panels	Pulp & Paper	Other				Total
	January 1, 2020 to June 30, 2020Sales
	To external customers		$ 1,775 $ 256 $ 440 $ - $ 2,471
	To other segments		65 5 - (70) - $ 1,840 $ 261 $ 440 $ (70) $ 2,471
	Cost of products sold		(1,264) (192) (314) 70 (1,700)
	Freight and other distribution costs		(240) (27) (85) - (352)
	Selling, general and administration		(74) (14) (20) - (108)
	Adjusted EBITDA		$ 262 $ 28 $ 21 $ - $ 311
	Export duties		(77) - - - (77)
	Equity-based compensation		- - - (3) (3)
	Amortization		(100) (7) (22) (6) (135)
	Operating earnings		$ 85 $ 21 $ (1) $ (9) $ 96
	Finance expense		(23) (2) (4) - (29)
	Other		11 7 2 (11) 9
	Earnings before tax		$ 73 $ 26 $ (3) $ (20) $ 76
	January 1, 2019 to June 30, 2019Sales
	To external customers		$ 1,740 $ 308 $ 510 $ - $ 2,558
	To other segments		69 6 - (75) - $ 1,809 $ 314 $ 510 $ (75) $ 2,558
	Cost of products sold		(1,361) (243) (387) 75 (1,916)
	Freight and other distribution costs		(249) (32) (85) - (366)
	Selling, general and administration		(76) (14) (20) - (110)
	Adjusted EBITDA		$ 123 $ 25 $ 18 $ - $ 166
	Export duties		(83) - - - (83)
	Equity-based compensation		- - - (3) (3)
	Amortization		(98) (7) (21) (2) (128)
	Restructuring and impairment charges		(26) - - - (26)
	Operating earnings		$ (84) $ 18 $ (3) $ (5) $ (74)
	Finance expense		(16) (3) (5) - (24)
	Other		(6) - - (5) (11)
	Earnings before tax		$ (106) $ 15 $ (8) $ (10) $ (109)

	The geographic distribution of external sales is as follows1:
		April 1 to June 30			January 1 to June 30
				2020				2019		2020		2019
	Canada		$	217			$	270	$	454	$	531
	United States			787				785		1,537		1,486
	China			187				173		327		342
	Other Asia			79				78		138		176
	Other			6				11		15		23
			$	1,276			$	1,317	$	2,471	$	2,558
	1.	Sales distribution is based on the location of product delivery.

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	14. Countervailing ("CVD") and antidumping ("ADD") duty dispute
	On November 25, 2016, a coalition of U.S. lumber producers petitioned the U.S. Department of Commerce ("USDOC") and the U.S. International Trade Commission ("USITC") to investigate alleged subsidies to Canadian softwood lumber producers and levy countervailing and antidumping duties against Canadian softwood lumber imports. We were chosen by the USDOC as a "mandatory respondent" to both the countervailing and antidumping investigations and, as a result, have received unique company-specific rates.
	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 February 3, 2020, the USDOC reassessed these rates based on its first Administrative Review ("AR") as noted in the tables below.
	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 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 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 receivable.
	On February 3, 2020, the USDOC released the preliminary results from AR1, as shown in the table below. On July 21, 2020, the USDOC issued a new tolling memorandum which extends the finalization of the AR1 duty rates until November 2020. The duty rates are subject to an appeal process, and we will record an adjustment once the rates are finalized. If the AR1 rates were to be confirmed, it would result in a U.S. dollar adjustment of $93 million for the POI covered by AR1. In the event that these rates are finalized, our combined cash deposit rate would be revised to 9.08%. The following table reconciles our AR1 cash deposits to what they would have been if we deposited at the combined rate of 9.08%.
AR1 Cash		AR1 Liability at	AR1 Excess
		Deposits1		9.08%	Deposits
	US$ millions			US$	US$	US$
	CVD			176	78	98
	ADD			68	20	48
	Total			244	98	146
	Recognized as export duty deposits receivable					(53)
	Estimated export duty deposit receivable to be
	recognized.		93
	1.	Cash deposit rates changed during AR1, see footnotes under the CVD and ADD tables below.
	On January 1, 2020, we entered AR3 for POI January 1 to December 31, 2020. For the six months ended June 30, 2020, we expensed ADD at the West Fraser Estimated Rate of 2.27% and CVD at the Cash Deposit Rate of 17.99%. The ADD Cash Deposit Rate remained at 5.57% for the quarter.

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				AR1 Preliminary
Cash Deposit			Revised Rate2		Rate3
	Effective dates for CVD	Rate	(Dec. 4, 2017)	(Feb. 3, 2020)
	AR1 POI
	April 28, 2017 - August 24, 20171	24.12%	17.99%		7.07%
	August 25, 2017 - December 27, 20171	-				-	-
	December 28, 2017 - December 31, 2017	17.99%	17.99%		7.07%
	January 1, 2018 - December 31, 2018	17.99%	17.99%		7.51%
	AR2 POI
	January 1, 2019 - December 31, 2019	17.99%	17.99%		n/a4
	AR3 POI
	January 1, 2020 - June 30, 2020	17.99%	17.99%		n/a5
	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 Revised Rate was published by the USITC.
	2.	On December 4, 2017, the USDOC Revised our CVD Rate effective December 28, 2017.
	3.	On February 3, 2020, the USDOC issued its Preliminary CVD Rate for the AR1 POI.
	4.	The CVD rate for the AR2 POI will be adjusted when AR2 is complete and the USDOC finalizes the rate, which is not expected until 2021.
	5.	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.

						AR1	West Fraser
						Preliminary	Estimated
							Cash Deposit	Revised Rate2 (Dec. 4, 2017)			Rate3	Rate
	Effective dates for ADD	Rate						(Feb. 3, 2020)
	AR1 POI
	June 30, 2017 - December 3, 20171	6.76%							5.57%	1.57%	1.46%6
	December 4, 2017 - December 31, 2017	5.57%							5.57%	1.57%	1.46%6
	January 1, 2018 - December 31, 2018	5.57%							5.57%	1.57%	1.46%
	AR2 POI
	January 1, 2019 - December 31, 2019	5.57%							5.57%	n/a4	4.65%
	AR3 POI
	January 1, 2020 - June 30, 2020	5.57%							5.57%	n/a5	2.27%
	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 Rate effective December 4, 2017.
	3.	On February 3, 2020, the USDOC issued its Preliminary ADD Rate for the AR1 POI.
	4.	The ADD rate for the AR2 POI will be adjusted when AR2 is complete and the USDOC finalizes the rate, which is not expected until 2021.
	5.	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.
	6.	In fiscal 2017, our Estimated ADD was recorded at a rate of 0.9%. AR1 covers both the 2017 and 2018 periods. In 2018 we recorded ADD such that the cumulative rate for the periods covered by AR1 would be 1.46%.
	Duty expense and cash deposits
		April 1 to June 30						January 1 to June 30
	Export duties incurred in the period							2020						2019		2020	2019
	Countervailing duties						$	34	$	39			$		66	$		67
	Antidumping duties							10		11					21			20
	Total						$	44	$	50			$		87	$		87

		April 1 to June 30						January 1 to June 30
	Recognized in the financial statements as							2020						2019		2020	2019
	Export duties recognized as expense in
	consolidated statements of earnings						$	42	$	51			$		77	$		83
	Export duties recognized as export duty
	deposits receivable in consolidated balance sheets
								2		(1)					10			4
	Total						$	44	$	50			$		87	$		87

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	We have recorded long-term duty deposits receivable related to CVD for the excess of deposits made at the Cash Deposit Rate of 24.12% compared to the December 4, 2017, Revised Rate of 17.99%, and to ADD for the difference between the 5.57% Cash Deposit Rate and our West Fraser Estimated Rate. The details are as follows:
		January 1 to June 30		January 1 to December 31
	Export duty deposits receivable				2020		2019
	Beginning balance	$			80	$	75
	Export duties recognized as long-term duty
	deposits receivable in consolidated balance sheets
			10			5
	Interest recognized on the long-term duty
	deposits receivable				1		4
	Exchange on the long-term duty deposits				4		(4)
	Ending balance	$			95	$	80
	As at June 30, 2020, export duties paid and payable on deposit with the USDOC are US$323 million for CVD and US$113 million for ADD for a total of US$436 million.
	AR2 and AR3
	AR2 covers the POI from January 1, 2019 through December 31, 2019. The USDOC commenced AR2 during the second quarter of 2020. AR3 covers the POI from January 1, 2020 through December 31, 2020 and is expected to commence in 2021. The results of AR2 are not expected to be finalized until 2021 and AR3 until 2022. Notwithstanding the deposit rates assigned under the investigations, our final liability for the assessment of CVD and ADD will not be determined until each annual administrative review process is complete and related appeal processes are concluded.
	Appeals
	We, together with other Canadian forest product companies and the Canadian federal and provincial governments (the "Canadian Interests"), categorically deny the allegations by the coalition of U.S. lumber producers and disagree with the countervailing and antidumping determinations by the USDOC and the USITC. The Canadian Interests continue to aggressively defend the Canadian industry in this trade dispute and have appealed the decisions to North America Free Trade Agreement ("NAFTA") panels and the World Trade Organization ("WTO").
	On May 22, 2020, the NAFTA Panel issued its final decision on "Injury." The Panel rejected the Canadian parties' arguments and upheld the USITC’s remand determination in its entirety. Notwithstanding this decision regarding "Injury," the Canadian parties still have pending WTO and NAFTA challenges to the USDOC’s underlying CVD and ADD determinations that have yet to be resolved. We remain confident that those proceedings will yield favorable results as they have done in the past and that the duties will be ruled to be unwarranted.