Q: Thanks for answering my previous question on WEF (western forest products). I have been taking a closer look at wef and trying to decide if I should liquidate my smallish position. One thing I noticed is that WEF has nearly $300 million 'on deposit' with the USA government. This is for the softwood lumber tariffs that they have had to pay over various years. This is a unique situation but what does it mean to be 'on deposit". Does any of this money ever get returned to a Canadian lumber producer? If not, then why does WEF even mention it? I found out about this in a WEF press release and I made a perfunctory search of the balance sheet and I could not find anything, although I am certainly not any expert navigating balance sheets. Does it appear on the balance sheet but I just missed it? Is this a complete non-issue or is it a hidden source of future revenue for WEF?
5i Research Answer:
WEF has $264M on deposit with the US treasury. This relates to the softwood lumber dispute which is still ongoing. This is disclosed in on page 22/23 of the annual report. Technically it is a deposit, and if some agreement were to be reached, it could be returned and this is why it has to be accounted for as a deposit, at least while the dispute is ongoing. But in all practical terms, especially considering the current trade wars, we would not expect this to be coming back to the company. Odds of any recovery are more than 0%, but certainly pretty close to 0%, in our view.