Thank you, Donna and good morning everyone. I'd like to welcome you to Western Forest Products' 2020 first quarter conference call.

Joining me on the call today is Steve Williams, our Executive Vice President and Chief Financial Officer. We issued our 2020 first quarter results yesterday.

I'll provide you with some introductory comments and then ask Steve to take you through a summary of our financial results. I'll then share with you our outlook and discuss recent developments in our industry.

We'll then open the call up for your questions. I'd like to start off the call by discussing the impact of COVID-19 pandemic on our business.

At the onset of COVID-19, we created a senior executive task force that together with our operations team helped us speed the implementation of strict health and safety protocols across our business. The protocols were based on guidance from experts’, health officials and in compliance with regulatory orders and standards.

Protocols included travel restrictions, physical distancing measures, limiting site access to essential personnel only and increasing cleaning and sanitation in workplaces. We also moved to a work-from-home model for those able to do so.

We took some operational downtime in the quarter to confirm appropriate health and safety protocols were in place for our employees and to assess market conditions. The strict health and safety protocols implemented have kept our employees', contractors and communities safe.

Being designated an essential industry is something we and our team at Western take seriously and we understand the responsibility that comes with it. The health and safety of our employees remains our highest priority.

I want to recognize our employees' health officials and unions for their commitment to health and safety during this challenging period. So, in addition to our COVID-19 health and safety response, we took prudent measures to protect our balance sheet and liquidity, as well as provide financial flexibility to our business given the uncertain impacts of COVID-19.

These measures have included the suspension of our quarterly dividend. The Board will continue to review the dividend on a quarterly basis.

In addition to the suspension of our dividend, all strategic and discretionary capital projects will remain on hold until there is greater operational certainty. We'll continue with any safety environmental or previously committed capital.

We will continue to explore all other opportunities to strengthen our liquidity, including managing expenses and working capital levels, accelerating the receipt of income tax receivables and completing our TFL 44 Limited Partnership sale and evaluating various government relief programs. As we work through these uncertain times, we will continue to align our production volumes to match market demand, while first and foremost ensuring the health and safety of our employees.

Moving on to our first quarter results. Our first quarter results were significantly impacted by the USW strike, which continued through February.

The gradual restart of strike impacted operations and the negative impacts of the COVID-19 pandemic on markets in production. As a result of these challenges, we generated negative EBITDA of $17.4 million in the first quarter of 2020.

Despite the more challenging quarter, some highlights include, in February members of the USW ratified a new five-year collective agreement ending an eight-month strike. We're pleased to have reached a fair and equitable agreement and to have our employees and contractors back to work.

The new agreement recognizes the contributions of our employees provides for improved -- improvements to health and safety benefits -- sorry health and welfare benefits as well as maintains operational flexibility for Western. In March, we safely restarted operations in our timberlands and sawmills that were impacted by the strike.

Through the month, sawmill production continued to ramp up and we worked to replenish our timberland supply chain. The restart was interrupted by one week of downtime as we address business challenges related to COVID-19.

Also in March, we advanced our strategic partnership with Huu-ay-aht First Nations. We've agreed to sell additional ownership interest in two limited partnerships for $36.2 million.

The transaction is subject to various closing conditions and is expected to close in the third quarter of 2020. The transaction further highlights our commitment to building mutually beneficial relationships with First Nations.

I'll now turn it over to Steve to review our key financial results.

Thanks, Don. My comments will focus primarily on our financial results for the first quarter of 2020 by comparison to the first quarter of last year.

We reported first quarter adjusted EBITDA of negative $17.4 million as compared to $18.1 million in the same period of 2019 as the strike gradual restart of our operations and COVID-19 impacted results. We continue to operate our U.S.

assets, process logs at custom cut facilities and execute on our wholesale lumber strategy to service our customers and mitigate the impacts during the strike. We increased wholesale lumber shipments in the first quarter as compared to the same period last year.

Our average realized lumber pricing benefited from an improved specialty product mix and a weaker Canadian to U.S. dollar.

Specialty lumber represented 73% of first quarter shipments compared to 52% in the same period last year. Although, the average Canadian to U.S.

dollar foreign exchange rate declined just over 1% over the same period of 2019, significant foreign exchange volatility in March 2020 resulted in a 5% reduction in the closing exchange rate compared to the same period last year. To support our selected customers during the strike, we were forced to operate suboptimally, which resulted in higher transportation and operating costs.

An incremental, $13.8 million of strike-related operating expenses was recognized in the first quarter including curtailment costs during the strike production inefficiencies on start-up due to lower log quality and additional safety and maintenance procedures required to resume operations. Operating expense was also negatively impacted by $2.9 million of incremental timberlands provisions for degraded log inventory and silviculture.

The majority of the incremental silviculture provision was due to the decline in the discount rate applied to the liability. We also incurred $1.1 million of COVID-19 related operating expenses in March 2020.

First quarter selling and administration expense was $6.4 million, as compared to $8.8 million in the same period last year, due to lower share-based and performance compensation expense and as a result of minimizing expenses during the strike. From a profit and loss perspective, net loss was $21 million as compared to net income of $1.9 million in the first quarter of 2019.

Looking at first quarter, cash flow and capital management, cash used in operating activities was $12.5 million, as compared to $9.2 million in the same period of 2019. We reduced our non-cash working capital by $6.2 million in the quarter, to partly offset significantly reduced cash from operations, resulting from the strike.

Cash used in investing activities was $0.5 million, during the first quarter of 2020, as compared to $47.7 million during the same period last year. We reduced our capital spending in order to manage cash flow during the strike and to address uncertainty caused by COVID-19.

In the first quarter, we returned $8.4 million of capital to shareholders via dividends. Our liquidity at the end of the first quarter was $113.5 million, and our net debt to capitalization ratio was approximately 23%.

Liquidity remains a key priority and near-term focus. We continue to explore all opportunities to strengthen our liquidity, including managing expenses, CapEx and working capital levels, accelerating the receipt of our income tax receivables, and completing our TFL 44 Limited Partnership sale, as well as evaluating various government relief programs.

We expect sufficient liquidity will be available to meet our ongoing obligations. Don, that concludes my comments.

Thanks Steve. So, I'd like to start off our outlook section by discussing the impacts of COVID-19 on our business.

The onset of the COVID-19 pandemic brought to a virtual standstill, what was a promising start to the 2020 North American building season. Government actions to limit the spread of the virus, including stay-at-home orders and restrictions on construction, have caused significant demand disruptions in North America and in some of our key offshore markets.

The disruptions have caused some customers to divert shipments and other customers to limit purchases. As government restrictions are being lifted, we're beginning to see some improved activity, but I should caution its early days.

In the United States, the strong market sentiment for cedar products at the beginning of the year faded and demand slowed as we closed the first quarter. In the last couple of weeks however, we've seen some encouraging signs from the Home Center segment.

How this improved picture will impact the overall demand for cedar products in the U.S. remains to be seen.

Demand and pricing for our industrial niche products have been fairly resilient. We expect pricing and demand to remain stable through the second quarter provided, there are no additional COVID-19 related disruptions.

In contrast to the COVID-19 challenges faced in North America, Europe, Australia and New Zealand lumber and log demand has improved in China as the country emerged from its COVID-19 lockdown. As a result, we've been successful at building order files in that market.

In Japan, demand for Douglas fir and BC Coastal Hemlock products through the second quarter is expected to be stable unless there are unforeseen developments in Japan with respect to COVID-19. With respect to our operations typically in the second quarter our log harvest volumes increase as snow recedes and expand operations across the complete timber harvesting land base.

As harvest volumes increase, our log inventories tend to peak. That said, while we expect to see a build in log inventories by the end of the second quarter, we are going to be diligent, aligning our working capital and inventories to match market conditions.

As we look forward the COVID-19 outbreak has led to near-term market volatility and reduced business visibility. We will take all the necessary steps to match production to market demand and manage our business through these uncertain times.

I'd now like to provide an update on a couple of developments in the industry. On January 21, this year the BC government announced changes to the Manufactured Forest Products Regulation, the changes are to be effective July one of this year.

The amendments to the regulation require Western Red Cedar and yellow Cedar lumber to be fully manufactured to be eligible for export. Manufactured is defined as lumber that will not be kiln-dried planed or re-sawn at a facility outside of British Columbia and is subject to certain exemptions.

The province is working with industry stakeholders to develop the right exemptions to meet its stated objective and help define a workable process. We continue to collaboratively engage with the province to ensure that the desired outcome is met with unintended consequences to our global customers or employment in British Columbia.

The details of the policy have yet to be released, but the regulation as proposed today could have negative implications for global customers of BC cedar products, who through their purchases support thousands of jobs and communities in the coast of B.C. It can also have negative implications for the coast lumber business.

It is already being disproportionately impacted by the application of duties on our high-priced cedar shipments to the United States. Moving on to the softwood lumber dispute, on February 3, 2020 the U.S.

Department of Commerce issued preliminary revised countervailing and antidumping duty rates in the first administrative review of shipments for the years of 2017 and 2018. The preliminary revised all others combined rates for countervailing and antidumping duties were set at 8.37% for 2017 and 8.21% for 2018.

These rates are well below our current combined rate of 20.23%. In April of 2020, the Department of Commerce announced a COVID-19 administrative review extension that could delay the final rate determination, until late September 2020.

Cash deposits will continue to accrue at a combined rate of 20.23%, until the final determinations are published at which time the final 2018 combined rate will apply to deposits on lumber shipments to the U.S. Despite the lower revised preliminary rates for 2017 and 2018 no duties paid in excess of the revised final rate will be refunded, until the entire appeal process at the softwood lumber dispute concludes.

Currently, Western has over $72 million on deposit with the U.S. Treasury, which at current exchange rates is more than CAD100 million.

Looking to what's next, our top priority remains the health and safety of our employees, contractors and communities. We'll continue to adapt our procedures and protocols, as necessary, to ensure we keep our people safe.

We also remain focused on maintaining financial flexibility and a strong balance sheet. And as the COVID-19 pandemic evolves, we'll continue to align our production volumes to match market demand.

Despite the near term uncertainty, we remain focused on implementing our strategic initiatives to strengthen our foundation, grow our base and grow our business over the long-term. With that operator, we can open up the call for questions.

Thanks. Good morning everyone.

Couple of questions to start with. Don, your comments on cedar markets, I guess, I'm trying to reconcile those comments with what we're seeing in pricing, because it does look like, there's been relative strength and resilience for a number of Western Red Cedar lumber grades that we track even through the whole COVID onset, and I'm trying to gauge how much of that is just the coast not operating until very recently, and just very tight supply versus resilient demand from the repair and remodeling and market channels.

Okay, Sean. Good morning.

So as it relates to pricing, maybe I'll just talk about demand first. I think the R&R channel really drives the consumption of cedar, as you pointed out.

And I think we've seen some encouraging signs out of the Home Center segment for the R&R market. Another key component of the R&R market, however, is through the distribution channel and through the pro dealers and on the contractors.

So, specifically, when we see cedar we see kind of two things happening in the market; one, demand from the home center has been really strong for us. I think it's probably 20% ahead of the same pace last year.

However, the business in the distribution side of the business and through the contractor and pro dealer market has been slow. So while we're encouraged on the home center side, where pricing is firm churn and probably going up, the demand on the other side of the market has been weak, and there's probably if anything a little bit of price weakness.

So I think why you're seeing -- to conclude, why you're seeing prices showing some resiliency, you've got this divergence in the market. And we're hopeful that as the states start to reopen, we'll see a reenergized distribution business and as contractors get back to work and we'll see some more demand there.

That's good detail. Thanks, Don.

And question for Steve, regarding balance sheet durability and other levers you can pull to bolster liquidity. Is it safe to assume that beyond the Q3 asset sale that you've already lined up have other non-core asset sale processes essentially come to a standstill in the current context?

Are you able to advance any of those initiatives?

Yes. Maybe just for everybody's benefit just as we've communicated in the past, I think our larger non-core assets include the Northern Island Private timberlands on Vancouver Island, a royalty we receive from a quarry near Port McNeill and Vancouver Island and other feasible private lands and properties.

I think right now we don't have any further updates at this time, but we continue to look for opportunities that will allow us to capitalize on the differential between how the market values those assets versus how the valued specialty lumber producers. So I think right now that's probably all I can add Sean.

And Steve, there's the tax receivable on the balance sheet, you mentioned expediting the collection there. Can we assume that all comes over the next couple of quarters?

How should we think about that?

Yes. I would think so.

We're working on that now. I think, obviously, there's been some I'll call it government delays in terms of what's going on with COVID.

So I would expect that, yes.

Okay. Thanks guys.

I’ll get back in the queue.

Thanks, Sean.

Hi. Good morning.

Don, the press release referenced some, I guess, new agreements you guys had with the home centers and pro dealers in the quarter. Can you speak more to that?

And is -- how should, we expect that ramp up in the coming quarters?

Sure. So what we've been able to do over the last few months is to solidify our relationships with key specialty distributors and home centers both sides of the border.

What we're doing is we're trying to work collaboratively with our customers investing in marketing to drive demand going forward. That has been our focus for our cedar products, establishing specialty, branding and supporting that branding with marketing initiatives.

So that's what we're currently doing. And as I said in the previous answer, we've been pretty darn encouraged by the results thus far out of the Home Center business.

I think to put it in perspective Home Center business in the cedar side was probably about 15% of our business. And -- but we're seeing substantial growth there right now and we're looking to grow that.

Our estimate is about 40% of cedar is now consumed in the Home Center segment and we would like to see our position increase there. So the genesis of the work with our customers is in establishing product lines -- sorry, marketing initiatives that can drive more demand for products from Western Forest Products through the segments.

Great. And Don, do you have exposure to both of the big box stores, or have these changes resulted in maybe exclusivity with one?

No. We've got exposure to that those big boxes in the U.S.

Actually another one as well. So, it's actually all three.

Okay. And then just a question for Steve.

Could you give us a sense as to the likely CapEx budget for the year? And just remind us on what your sort of bare bones maintenance could be.

Sure. So -- and I think we mentioned this on the last call.

So our typical maintenance and roads CapEx historically been between about $30 million to $40 million on average with about another $30 million to $40 million of strategic investments. So due to COVID and its impact on global markets and operating through this we plan to only incur safety environmental maintenance and committed capital.

So, for 2020, we estimate our maintenance and road CapEx will be in the neighborhood of $25 million to $30 million depending on how COVID evolves right? So, as Don indicated strategic and discretionary capital projects will remain on hold until there's greater operational certainty.

Great. And Steve is there any risk that the transaction with that First Nations group doesn't close?

I'm Just thinking it was -- it came together sort of pre COVID what's the what's your thoughts on that right now?

Listen this is the third transaction that we've been working on with Huu-ay-aht and we have a great relationship and things are moving ahead. Obviously COVID played a role right now in terms of people getting together and advancing things but things are moving ahead.

Great. That's all I have.

Thanks.

Operator?

Yes, I'm right here.

Thanks. I just had a couple of follow-up questions.

So, on the cedar side Don you said 15% home centers 85% I guess that's distributors pro dealers. But the vision is to get that to 40%/60% over time?

And how long do you expect to take to get there?

Yes, Paul probably a couple of years but I think just to highlight that's sort of the distribution we expect to be growing our cedar business coming out of the strike. And if I could add to what I've already said we're pretty encouraged by the results thus far.

And we've been -- we're on strike for eight months and not able to necessarily provide the full suite of products that we normally would. So, we're pretty encouraged by the results coming out of the eight months strike with our Home Center business and look forward to seeing it growing further.

And also seeing the distributors -- the distribution business through the pro dealers get back up and going as the COVID-related shutdowns end.

Okay. And then just a little bit on the quarter, I mean I expect a lot better results given that you had one month.

Is there anything in the start-up of operations that you didn't anticipate or that was large that kept the results almost unchanged quarter-over-quarter?

Maybe at a high level I'll just talk about the start -- restart and then I'll push it over to Steve and he can give you some financial details. But Paul, yes, I mean we're really pleased with the restart.

The employees came back very supportive. We've done a lot of training with our supervisors and we got off to a very good start.

That said, whenever you're down for that long there's a significant amount of maintenance on the -- in both the timberlands and manufacturing. You have to go through to ensure that you are going to have a safe restart.

On the timberland side, it would be ensuring that we've got roads and -- accessible and in good condition and safe condition would be one of the larger developments. It also takes quite a while to get your supply chain back up and running getting the flow of logs through to the dry line sorts and then into a transportationable I guess form.

On the mill side, we had to invest in some specific small investments to ensure that we could come back in a safe manner. But Steve's got the actual numbers to that.

What interrupted us of course is a weaker downtime in the middle of a restart after eight months of downtime due to COVID but -- which added additional costs. I don't know Steve do you want to comment?

Yes. Paul and I highlighted on that I think as I was just going through the overview in terms of basically two months of shutdown.

We also had other provisions in timberlands that I touched on there as well that had a -- and the COVID week down in March had the impact -- negative impacts on results.

My questions were -- I already asked my questions.

Got to get back on the queue. She cut me off.

Maybe a question around this. I'm quite confused on this Manufactured Forest Products Regulation.

I mean this is a real game-changer. And it doesn't sound like you've got any information on what the regulation looks like.

And it's kind of three months before implementation really or less actually. Is there -- in your discussions is there a willingness on the part of the government to push this off given that current situation with COVID?

So, we would share your analysis and concern, Paul, that we're three months away from what would be a major change to customers that have supported the BC industry for many of the 50, 60 years. And we're just three months to go on this lack of clarity.

Yes, it's a bit perplexing. We're aware there's been a request need to defer.

That hasn't been answered yet by government. And I can't respond provide any more insights than that.

We haven't heard anything else other than what we've provided.

Okay. And then a question on what are the operating suites that are -- what's your running footprint right now?

What do you expect through the balance of the year?

Yes. Sure.

So, on the timberlands side, we're running at a reduced rate just -- but we are running in all our operations. The reduced rate is just reflective of limited markets and some of the cost challenges that we currently have on the coast from a harvesting perspective.

And the mills, we've got six mills running at -- and Alberni is running on a 40-hour configuration right now so one shift. We've got Duke Point, Saltair, Chemainus and Cowichan all running on two shifts and we've got our mill down in Vancouver, Washington, the Columbia Vista running on a 60-hour week.

All total that's about 75%, Paul, I would say at least in the cleaning operations to where we were when the strike began if that helps. And I guess to add we will continue to operate based upon order files.

So, if we see that we aren't able to meet and match our production with order files we'll have to take downtime.

Okay. And then maybe a question on the Huu-ay-aht agreement.

I'm pleased to see that partnership continues to grow and it's good. I just had a couple of questions.

There's a part in that agreement, I guess the initial press release that says you may sell an additional 26%. And I'm just looking at this from a liquidity standpoint to be able to monetize the most.

Why is it limited to 26%? And why couldn't you sell the majority of your position?

Yes, Paul, this is a term of the agreement right now. And again it's part of the reconciliation process.

It's to encourage greater First nations -- the details on that right now. I can say I think it's an opportunity to expanding the relationship and for the way to participate in the manufacturing side of the business.

Yes. I think the only thing -- if I can add Paul I mean the idea is to get the -- have the way to get closure on the manufacturing side and it's part of -- it fits with their strategy of trying to come up with a vibrant forest products business, not just harvesting, but also manufacturing in the region.

So we're certainly anxious to have them become partners in the operation and go forward with them to try to achieve their objectives.

Okay. So the $1 million isn't really reflective of the value of $12 million to $13 million for the sawmill, right?

Yes.

Yes.

Okay. And then just lastly working capital build in Q2 how much do you expect that to be?

Well yes. So I can take it on Steve might want to jump in.

But I think the biggest working capital build and you know this very well will occur on coastal operators in the second quarter, because we're going to build up long inventory to be able to operate through typical third quarters where we have fire closures and the like. So if you look at the first -- as we close the first quarter, we're going to need to rebuild the log inventory given the impacts of the strike.

We're going to be diligent and prudent about that but you can assume that as we look at the first quarter, we were about 30% lower than historic levels. You can expect us to build about $30 million I guess in log inventory through the second quarter.

But that said, the build and working capital is going to be offset by its corresponding growth in net accounts payable and other expected things like maybe income tax refund. So I think to conclude we're going -- we'll try -- we'll keep the lumber inventories about where we are.

We will build working capital on logs, but obviously they'll be offset by some recoveries elsewhere. And all that said of course I've got to caution you that the current market conditions are much different than they were in prior years.

So we're going to be prudent. And if we have to take curtailments to manage working capital and align our production with markets we will do so.

All right. That’s all I have.

Thanks guys.

Thank you, Paul.

Great. Well thanks Donna.

And thanks everyone for your continued support. I appreciate your interest in our company and your time on the call this morning.

Steve and I are both available if you have any follow-up questions and we look forward to sharing with you our second quarter results in August. With that have a great day.

Thanks.