Donald E. Demens - President and Chief Executive Officer Stephen D.

A. Williams - Senior Vice President and Chief Financial Officer

Mark Kennedy - CIBC world Markets Daryl Swetlishoff - Raymond James Paul C. Quinn - RBC Capital Markets

Thank you, operator and good morning everyone. I’d like to welcome you to Western’s fourth quarter conference call.

Joining me on the call is Stephen Williams, our Senior Vice President and Chief Financial Officer. With respect to the fourth quarter and year-end results which we released yesterday, I’ll begin by making some introductory comments and then ask Steve to take you through a summary of our financial results.

I’ll then wrap up by providing our near-term outlook and then we can open up to you for questions. As we look back at 2014, I’d like to begin the call by remembering the loss two colleagues and winning of two others due to shooting at our Nanaimo sawmill in April.

Thankfully, both of our injured employees have returned to work. We continue to support all those impacted by the tragic event.

And as a result of the incident we’ve instituted new security measures at all ourfacilities. I’d like to begin our presentation by discussing seasonality, we either can have a significant impact on our business on a quarter-to-quarter basis.

Typical fourth quarter result and reduced demand in lower prices for lumber products and higher costs due to lower production and tougher logging conditions. As explained on our last investor call the third quarter of 2014 was particularly difficult from a seasonality perspective.

As we experience, significant downtime in our timberlands due to the second worse fire season and prevention history. The lower log production in the third quarter led to lower opening log inventories, which had an impact on our fourth quarter results.

Also as indicated in our last call we are facing significant challenges in our export markets due to weak demand in Japan and an over inventory Chinese log in lumber market. In the fourth quarter we’ve utilized our flexible operating platform to somewhat offset the weaker export lumber markets by increasing production of high value Western Red Cedar and Niche specialty lumber products.

In addition, we are able to partially offset the reduced log supply for our mills by purchasing additional log supplyfrom the open market. EBITDA for the quarter was $14.8 million down from the record result we achieved in Q4 2013 of $24 million.

The major difference between the two time periods was the weakness this year in both export lumber and export log markets. Some financial highlights that we achieved during the fourth quarter include surpassing a $1 billion in annual sales.

We distributed another $7.9 million in dividends to our shareholders in the fourth quarter and throughout 2014 we distributed more than $31 million to our shareholders through our dividend program. We improved our liquidity compared to last year by 6% to $134 million.

Subsequent to the fourth quarter, we realized the sale of the Squamish Pulp Mill site and received $21.8 million which really used to reduce debt and further invest in our business. In reviewing 2014, we achieved exceptional safety results, we continue to increase access to external fiber purchasing are increasing our solar purchased volumes by 27%.

We increased lumber production and we delivered record revenue exceeding a $1 billion for the first time in company history. So with that I will turn it over to Steve to discuss our quarterly financials.

Thanks Don and good morning. Let me start by discussing our EBITDA results.

EBITDA for the quarter was $14.8 million, a decrease of $9.6 million from the same period in 2013. As Don previously mentioned, we were impacted by challenging markets in Japan and China and opening log inventory below normal levels.

From a profit and loss perspective, net income of $12.9 million as a decrease from $49.9 million in the same quarter last year. The decrease can primarily be explained by the fourth quarter decrease in EBITDA that we have already discussed.

A $26.5 million gain on initial recognition of a deferred tax asset in last years income or as we recognized an incremental $3.4 million in tax assets through income in 2014. And additional severance charges of $1.2 million due to business optimization initiatives underway.

Finance costs decreased by $0.5 million reflecting lower outstanding debt levels and lower interest rates. Diluted earnings per share this quarter were $0.03 per share compared to $0.13 per share in the same period last year, while annual diluted earnings per share were $0.17 in 2014 and $0.28 in 2013.

Moving on to cash flow, cash provided by operating activities in Q4, 2014 was $14.5 million compared to $20.6 million provided in the same quarter last year. The decline in operating cash flow was due to lower net income in the fourth quarter of 2014 being offset by a slight reduction in working capital.

Our capital expenditures totaled $23.1 million in the current quarter as we accelerated capital spending. For the year, we generated $87 million of cash from operating activities compared to a $111 million in 2013.

Capital expenditures of $50 million compared to $59 million in 2013. Also during the fourth quarter we paid a dividend of $7.9 million to shareholders, year-to-date we have returned to total of $31.4 million in dividends to our shareholders.

At December 31, 2014 we had total liquidity via $134.4 million compared to $125.9 million at the start of the year. This increased liquidity has been driven by cash generated by operations.

Subsequent to year-end the sale of this former Pulp Mill site was completed with proceeds of $21.8 million further adding to our liquidity. With net debt at the end of the year of $77.9 million and debt to capitalization of 16% we continue to be in a strong financial position to implement our strategic capital plan.

Don that concludes my comments.

Great, thanks Steve. So looking forward I think as we look into the future we believe the strength in the U.S.

repair and renovation market, a gradual recovery of U.S. new home construction and continued growth in lumber consumption in China supports our positive long-term outlook for lumber prices and volumes.

As we look at the beginning of 2014, we expect export lumber markets to remain challenging, while the normal seasonal increase in demand in North America should lead to an improved pricing environment. Specifically, in Japan we believe that the housing market has stabilized which should support marginally improved demand and pricing later in the spring.

In China, we expect demand to remain at current levels in the near-term. But anticipate that a decrease in inventories in China will lead to gradually improving shipment levels from Canada through 2015.

In Cedar and Niche continued demand from the North American repair and renovation segments are expected to support improved pricing and importantly we anticipate realizing a significant share of the gains from the strength in the U.S. dollar in these product lines.

So let me turn to log markets. The export log markets are being negatively impacted by high inventories in China and we believe export log prices are going to remain flat until those inventories come into balance.

In a domestic market, because coastal log production remains at close to full AEC and because we expect to see continued demand in the market we anticipate pricing is going to remain strong. During the year we’ll be concentrating on items that safely grow our business in volume and revenue.

We will continue to implement strategies that grow or access the fiber including mutually beneficial partnerships with First Nations. We will continue to invest strategic capital to modernize our sawmilling and processing equipment for using our overall cost structure and we will continue to rationalize our business platform to increase our utilization rates at our operations to reduce costs.

We anticipate accelerating the implementation of our strategic capital programs as we move through 2015 and as a start I am pleased to announce we are moving forward with a $5 million upgrade of planner facility at Duke Point which will be completed by the third quarter of 2015. The planner project is a first step in the modernization of our secondary processing facilities.

The planner will focus on the production of specialty products and is consistent with our strategy to consolidate production, to increase efficiencies and deliver lower costs. We continue to work on additional plans that will position Western as a top cortile producer in our targeted product lines.

That’s it from my comments. Operator I can now open it up for questions.

Thanks. Good morning everyone.

A couple of questions Don to start with. The 6% quarter-over-quarter correction you had in your limber price realizations, it is a little steeper than we expected I guess especially given the weaker Canadian dollar.

Can you give a little bit more detail on mix changes Q4 versus the third quarter and how that affected your price realizations?

Good morning Sean, yes great question. So you have articulated on of the bigger challenger we of course was seasonality and one of the keys to the pricing decrease was the fact that we reduced the volume Cedar that we would ship from Q3 to Q4 and typically if you look at shipments out of British Columbia as a bellwether, volumes will drop about 20% and of course what we experienced this year, even though year-over-year our volumes were up in Cedar.

So that probably explains the biggest component of the variance, but I should highlight weakening commodity lumber pricing into china was also a big impact for us as well.

Yes, okay. And on the capital program you have given some detail on some of the near-term initiatives you are moving ahead with.

Where are we in the big picture $125 million program over the four, five years, are we about half way through now and to that point what's the annual total CapEx guidance 2015 and 2016.

Sure and that’s great. So yes, our plans for this year include about $40 million in discretionary maintained and road capital and another $12 million at already approved strategic capital.

I think importantly to give you some direction I mean our new boards indicate a desire to accelerate our strategic capital as we create a global competitive business here in the coast. So thus far, we’ve identified the $52 million or so for this year.

And we are in the process of engineering and analyzing additional projects for consideration in the coming months. I think importantly in addition we’ve added staff, an additional staff to our capital project team to speed the project implementation and ensure projects we do choose are going to be effectively implemented.

So to conclude we got projects underway. We expect to be in a position to bring new projects forward for consideration and in the coming months.

And I think Steve said it best when he said that we’re in the process of accelerating the program. And we got good board support to do that.

Okay and are you seeing any backlogs in terms of getting equipment delivered to the sawmills for the discretionary projects?

I think it Sean it depends on the type of equipment much of the things we are doing right now are not as in backlog is some of the big components, which would be primary breakdown. But in general is I think we’ve talked before as you probably heard from others the industry that supplying the [force trucks] industry.

So the capital equipment business has not ramped up. And so we are seeing longer timelines and delivery times than we would like to see, but nothing that we have been expecting.

Okay thanks, Don.

Thanks, Sean.

Thanks Don just following up on Sean’s questions about CapEx. There is a bit of down time in the fourth quarter related to strategic capital.

And if you look forward and again kind of a big picture when do you think you are going to be through the majority of the strategic capital when Western’s kind of going to be at a steady state run rate with all the benefits and efficiencies in capacity increases of your program is it just a 2017 event or…

I think I mean good question Daryl good morning. I think the reality is we are going to continue to want to invest in our business to improve productivity and utilize new technology.

So are you ever finished, so I think the leaders in the industry continue to invest, and I think that’s what we are going to do? For this first major sort of repositioning of the business and capital I could see we could be through this 2016 with projects either completed or announced and you will have good visibility.

Okay that’s helpful.

And to be clear some of the expenditures in those projects may end up going into 2017, and you will have the visibility to see those.

Right, right.

Okay.

Okay that’s good. And then just what do you experiencing today I mean look out the window and it’s nice and feels like spring.

What are the logging conditions on your tenures on that crown and looking like right now and what’s your ability to get logs off?

Yes, the weather here for the guys in the East, the weather here back in Vancouver and the West Coast have been pretty mild this year. And so we’ve been pretty happy with the production levels, we’ve been receiving from out of Timberland’s and haven’t had any real out of NGF they have restricted harvest.

So we are out there harvesting everything we can right now.

Are you able to catch up on some of the lost production in the fourth quarter?

I think the reality is you are not going to catch up until you get through the second quarter, when you got both higher elevations and lower elevations going at the same time. And that’s just the realities of operating in the coast.

There is still a risk if we get into our higher elevations now where we will be blocked out, if a major snow event occurs. So it will take us into second quarter to really build those inventories.

Okay, so if I’m just paraphrasing you then Don, first calendar quarter 2015 to be kind of normal logging volumes and maybe an ability to catch up as we move into the spring?

I think you’ve articulated better than I did.

Okay. Hey, thanks very much.

I’ll turn it over.

Thank you very much.

Good morning, Don and Steve. Just a couple of question, so first of all just sticking with the log business for a minute I just wanted to see what do you expect your total harvest levels will be in 2015 compared to 2014, something similar?

Well, similar Mark, we did miss significant time in third quarter and a few at start of the fourth quarter. So you could expect about a 5% increase from where we saw the harvest volumes in 2014.

Okay, and the way you characterize the market I mean obviously the export log market is seeing some weakness right now, you were saying the domestic log market is seeing some strength. So when you net those two off, is that a net positive or net negative for Western would you say?

I think it has to be kind of a net negative, let me explain why. The domestic market has been fairly steady for a significant period of time and the log we sell into the domestic market have been steady although at good levels.

The export market was significantly impacted in a price and volume perspective starting in about mid-year last year. And so the impact of that significant price decrease is not going to be offset by the strength and continued strength that we’re seeing domestically.

Okay. And then just my last question, I mean that the first mill that’s seen the bulk of your capital spending was the Saltair mill just a question in the fourth quarter have you seen sort of all the cost benefits you’ve expected to see there or is there more to come this year?

Yes, so you’re right Mark, Saltair is the one that seen the bulk of the initial capital. What we did in the fourth quarter was to install a log in-feed - new log in-feed which has delivered exactly we expected more reliable log delivery to our main breakdown unit, but we still have another key component of the project to go which is the merchandiser and until we get that installed in the third quarter, we won’t be able to achieve all of the benefits that we expected and so it’s going to be the third quarter and we are doing that as we indicated in our notes here that to avoid any downtime and what is the seasonally strong second quarter which is when the equipment would be ready.

Okay, that’s helpful. Thanks very much.

Thank you, Mark.

Yes, thanks Don, Steve good morning. Just a question overall, we’ve seen a material move in the Canadian dollar just wondering how you are now positioned relative to the competition in a lot of your major markets such as China, Japan and the U.S.?

Great, good morning Paul. So at a high level what we like to say let maybe go back what is the weakening Canadian dollars like to strengthen the U.S.

dollar mean to our business. All things being equal we should see for every percent change in the dollar, but a $4 million positive impact in EBITDA is weakening.

But again that’s all things being equal, so when you look at the specific markets we are in whether its China or Japan those markets are what I would term supply driven and in those types of conditions what happens is quite often and in this case what is happening is the buyers are getting the benefit of that dollar weakening on a positive - so we are not seeing that translate back into our mill that’s as we would call them or net realizable or net realized pricing. What is key though and we’ve articulated well is that we are in a better position relative to our competition especially in Japan and compared to the Pacific Northwest.

And so that’s going to bode well as the markets stabilizes in Japan and as we see a little more demand. Long weighted answer sorry, but when we look at repair and renovation and the demands we are seeing for this year, we anticipate getting most if not all of that again in the Canadian dollar weakness and that’s what we are seeing.

So it’s really a tail of two markets demand driven and supply driven and our competitive position in Japan is certainly enhanced by the weaker dollar.

Okay and I actually like the answer. So it’s a complicated – or it’s hard to figure out all the moving pieces.

We’ve heard a lot of increase Russian log exports and Russian lumber as well, what did your guys experienced on that. Are you seeing increased competition in some of those?

Great question and I can tell you a lot of investors are asking the same question and we just had some guys in the markets two weeks ago, they went after the board to see if there was a material change in log flows. In our opinion, the large flows and lumber flows haven’t changed significantly; it’s our view that the infrastructure in Russia will take some time to be developed to have a material supply impact.

That said, what we are seeing is Russian lumber being milled from Russian logs, and China is more competitive and it is able to move throughout the market because it’s more competitive. So I think we're seeing a little bit of competitive improvement for Russian limber, but we haven’t seen a big increase in availability.

Great. That’s all I had.

Bet of luck guys.

Well thank you Paul. End of Q&A

Well great operator, thank you. So to close, I would like to thank everyone today for your attention, we certainly remain positive with the long-term view of our markets and we believe our capital plan is will deliver a globally competitive manufacturing platform here on the BC coast providing quality wood products to our customers around the world.

So with that I look forward reviewing our first quarter results with you in May and wish you a good day. Thank you.