Western Forest Products Inc. (TSX: WEF) ('Western' or the 'Company') reported negative adjusted EBITDA of $17.4 million in the first quarter of 2020.

Results were impacted by strike action that concluded in mid-February at the majority of its BC-based operations, a graduated return to work through the second half of the quarter, weak North American markets, and the novel Coronavirus pandemic ('COVID-19'). The Company mitigated losses arising from labour disruptions by selling available inventory and minimizing certain expenditures. Western curtailed production at its manufacturing operations for one-week in March to implement enhanced health and safety protocols and re-evaluate market conditions arising from COVID-19. In accordance with directions from provincial and federal authorities, the Company resumed operations to continue to service customers and provide support for thousands of industry jobs. As a result of business uncertainty caused by COVID-19, Western has suspended its quarterly dividend. The Company's Board of Directors will continue to review the dividend quarterly.

Summary of First Quarter 2020 Results

First quarter results were significantly impacted by strike action (the 'Strike') by the United Steelworkers Local 1-1937 ('USW'), the gradual restart of certain Strike-curtailed British Columbia ('BC') operations, and the negative impacts of the novel Coronavirus pandemic ('COVID-19') on markets and production. As a result, our BC operations operated on a limited basis in the quarter. We took steps during the Strike to mitigate the impact on our customers, business and cash flows by actively selling unencumbered inventories and drawing down working capital. On February 15, 2020, USW members voted in support of a tentative agreement to replace the collective agreement that expired on June 14, 2019, resulting in the end of the Strike. Following the Strike, we performed the necessary safety and maintenance procedures before commencing a gradual restart of certain Strike-curtailed BC operations. Upon restart, our manufacturing productivity was impacted by the consumption of lower quality log inventory that degraded due to the duration of the Strike. Operating efficiency improved through March as we improved the mix of our log and lumber inventories. We curtailed certain operations for one-week in late March to implement enhanced health and safety protocols and to re-evaluate market conditions arising from COVID-19. For more details on these health and safety measures, refer to the 'COVID-19' section. Adjusted EBITDA for the first quarter of 2020 was negative $17.4 million, as compared to positive EBITDA of $18.1 million from the same period last year. Operating loss prior to restructuring and other items was $28.4 million, as compared to operating income of $5.7 million in the same period last year. Our near-term focus remains on ensuring the health and safety of our employees, managing our balance sheet, and servicing our customers.

Softwood Lumber Dispute and US Market Update

The US application of duties on Canadian lumber imports continues a long-standing pattern of US protectionist action against Canadian lumber producers. We disagree with the inclusion of specialty lumber products, particularly WRC and Yellow Cedar products in this commodity lumber focused dispute. As duties paid are determined on the value of lumber exported, and as our shipments to the US market are predominantly high-value, appearance grade lumber, we are disproportionately impacted by these duties. Western expensed $4.0 million of export duties in the first quarter of 2020, comprised of CVD and AD at a combined rate of 20.23% on all lumber it sold into the US. On February 3, 2020, the US Department of Commerce ('DoC') issued preliminary revised rates in the CVD and AD first administrative review of shipments for the years ended December 31, 2017 and 2018. The combined preliminary revised rates were 8.37% for 2017 and 8.21% for 2018. The DoC may revise these rates between preliminary and final determination. On April 24, 2020, the DoC announced a COVID-19 administrative review extension that is expected to delay the final rate determination until late September 2020. Cash deposits continue at the current rate of 20.23% until the final determinations are published, at which time the 2018 rate will apply to US-destined lumber sales. The Canadian government's appeal of the US International Trade Commission determination that softwood lumber products from Canada materially injured US producers has been delayed due to COVID-19. At March 31, 2020, Western had US$72.6 million of cash on deposit with the US Department of Treasury in respect of these softwood lumber duties. Including wholesale lumber shipments, our sales to the US market represented approximately 27% of our total revenue in 2019. Our distribution and processing centre in Arlington, Washington and our Columbia Vista division in Vancouver, Washington are expected to partially mitigate the damaging effects of duties on our products destined for the US market. We intend to leverage our flexible operating platform to continue to partially mitigate any challenges that arise from this trade dispute.

Forward Looking Statements and Information

This press release contains statements that may constitute forward-looking statements under the applicable securities laws. Readers are cautioned against placing undue reliance on forward-looking statements. All statements herein, other than statements of historical fact, may be forward-looking statements and can be identified by the use of words such as 'will', 'estimate', 'expect', 'anticipate', 'plan', 'intend', 'believe', 'seek', 'should', 'may', 'likely', 'continue' and similar references to future periods. Forward-looking statements in this press release include, but are not limited to, statements relating to our current intent, belief or expectations with respect to: domestic and international market conditions, demands and growth; economic conditions; our growth, marketing, product, wholesale, operational and capital allocation plans and strategies, including but not limited to, payment of a dividend; fibre availability and regulatory developments; the impact of the Coronavirus pandemic; the timing or anticipated closing of the Transaction and the selling of additional incremental ownership interest in TFL 44 LP and APD LP in the future.. Although such statements reflect management's current reasonable beliefs, expectations and assumptions as to, amongst other things, the future supply and demand of forest products, global and regional economic activity and the consistency of the regulatory framework within which the Company currently operates, there can be no assurance that forward-looking statements are accurate, and actual results and performance may materially vary. Many factors could cause our actual results or performance to be materially different including: economic and financial conditions, international demand for forest products, competition and selling prices, international trade disputes, changes in foreign currency exchange rates, labour disputes and disruptions, natural disasters, relations with First Nations groups, the availability of fibre and allowable annual cut, development and changes in laws and regulations affecting the forest industry, changes in the price of key materials for our products, changes in opportunities, future developments in the Coronavirus pandemic and other factors referenced under the 'Risks and Uncertainties' section of our MD&A in our 2019 Annual Report dated February 11, 2020. The foregoing list is not exhaustive, as other factors could adversely affect our actual results and performance. Forward-looking statements are based only on information currently available to us and refer only as of the date hereof. Except as required by law, we undertake no obligation to update forward-looking statements. Reference is made in this press release to adjusted EBITDA which is defined as operating income prior to operating restructuring items and other income, plus amortization of property, plant, equipment, and intangible assets, impairment adjustments, and changes in fair value of biological assets. Adjusted EBITDA margin is EBITDA presented as a proportion of revenue. Western uses adjusted EBITDA and adjusted EBITDA margin as benchmark measurements of our own operating results and as benchmarks relative to our competitors. We consider adjusted EBITDA to be a meaningful supplement to operating income as a performance measure primarily because amortization expense, impairment adjustments and changes in the fair value of biological assets are non-cash costs, and vary widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of their operating facilities. Further, the inclusion of operating restructuring items which are unpredictable in nature and timing may make comparisons of our operating results between periods more difficult. We also believe adjusted EBITDA and adjusted EBITDA margin are commonly used by securities analysts, investors and other interested parties to evaluate our financial performance. Adjusted EBITDA does not represent cash generated from operations as defined by International Financial Reporting Standards ('IFRS') and it is not necessarily indicative of cash available to fund cash needs. Furthermore, adjusted EBITDA does not reflect the impact of a number of items that affect our net income. Adjusted EBITDA and adjusted EBITDA margin are not measures of financial performance under IFRS, and should not be considered as alternatives to measure performance under IFRS. Moreover, because all companies do not calculate adjusted EBITDA and adjusted EBITDA margin in the same manner, these measures as calculated by Western may differ from similar measures as calculated by other companies. A reconciliation between the Company's net income as reported in accordance with IFRS and adjusted EBITDA is included in the Company's Management's Discussion & Analysis for the year ended December 31, 2019, which is available under the Company's profile on SEDAR at www.sedar.com. Also in this press release management uses key performance indicators such as net debt, net debt to capitalization and current assets to current liabilities. Net debt is defined as long-term debt less cash and cash equivalents. Net debt to capitalization is a ratio defined as net debt divided by capitalization, with capitalization being the sum of net debt and equity. Current assets to current liabilities is defined as total current assets divided by total current liabilities. These key performance indicators are non-GAAP financial measures that do not have a standardized meaning and may not be comparable to similar measures used by other issuers. They are not recognized by IFRS, however, they are meaningful in that they indicate the Company's ability to meet their obligations on an ongoing basis, and indicate whether the Company is more or less leveraged than the prior year. Western is an integrated forest products company building a margin-focused log and lumber business to compete successfully in global softwood markets. With operations and employees located primarily on the coast of British Columbia and Washington State, Western is a premier supplier of high-value, specialty forest products to worldwide markets. Western has a lumber capacity in excess of 1.1 billion board feet from eight sawmills and four remanufacturing facilities. The Company sources timber from its private lands, long-term licenses, First Nations arrangements, and market purchases. Western supplements its production through a wholesale program providing customers with a comprehensive range of specialty products.

Contact:

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