June 15, 2011 – Montréal, Québec and Vancouver, British Columbia – EACOM Timber Corporation (ETR: TSX-V) (“EACOM”, or the “Company”) is pleased to announce its first quarter results for the three-month period ended March 31, 2011.
On June 30, 2010, EACOM completed the acquisition of the Domtar forest products business, which transformed the Company from a lumber trading business to a lumber manufacturing, marketing and distribution business capable of producing approximately 900 million board feet annually. The Company began operating these newly acquired assets on July 1, 2010. As a result, only nine months or three quarters of operations are indicative of the Company’s ongoing operations. A sequential quarterly comparison of the financial results for the quarters ended March 31, 2011 and December 31, 2010 is provided, such a comparison being considered more representative of ongoing operations.
OVERVIEW OF FINANCIAL RESULTS
The Company’s operating results are significantly affected by lumber prices and the CDN$/US$ exchange rate. During the quarter ended March 31, 2011, lumber prices somewhat firmed up, offset however by a stronger Canadian dollar. The Company recorded for the quarter a negative EBITDA of $3,637 ($12,065 for the quarter ended December 31, 2010), and a negative EBITDA excluding specific items of $3,637 ($6,355 for the preceding quarter). The net loss and comprehensive loss for the quarter amounted to $6,131 or $0.01 per common share ($13,725 or $0.03 per common share for the preceding quarter).
QUARTER ENDED MARCH 31, 2011 vs. QUARTER ENDED DECEMBER 31, 2010
For the quarter ended March 31, 2011, the Company recorded sales of $79,955, against sales of $65,386 for the preceding quarter. During the quarter, the Company shipped 170 million board feet of lumber (136 million board feet in the earlier quarter) and 161,000 oven-dried metric tons of by-products (148,000 oven-dried metric tons in the preceding quarter). The pricing environment improved with benchmark lumber prices averaging US$327/Mfbm for studs and US$383/Mfbm for random lengths delivered Great Lakes, compared to US$296/Mfbm and US$350/Mfbm respectively for the quarter ended December 31, 2010. However, the positive impact of a firmer pricing environment was partially offset by a strengthening Canadian dollar, with the exchange rate averaging 1.015 during the first quarter of 2011, compared to an average of 0.987 during the preceding quarter. As well, discounts observed on studs relative to random lengths remained at record levels during the quarter, reflecting the slow housing market. The mix of lumber grades and dimensions deteriorated slightly during the first quarter due to sawmill operations being negatively impacted by winter conditions. Prices of by-products have remained constant over the past two quarters.
Lumber production for the quarter ended March 31, 2011 was 166 million board feet of lumber, compared to 140 million board feet in the preceding quarter. During the quarter, the Company operated at 65% of its capacity with two of the eight sawmills acquired from Domtar idled (55% during the earlier quarter with no change to idled mills). Some sawmills were subject to market-related downtime during both quarters. Unit costs were consistent with those experienced in the earlier quarter, except for a lower recovery factor and higher drying costs due to seasonal conditions. SG&A expenses were lower in the first quarter of 2011 as compared to the previous quarter, which included some non-recurring costs incurred in connection with the acquisition of the Domtar forest products business.
At March 31, 2011, the Company had cash and cash equivalents of $1,257, and working capital of $68,432 ($7,206 and $64,772 respectively at December 31, 2010). Outstanding borrowings under its revolving credit facility amounted to $20,500 ($9,000 at December 31, 2010). During the three-month period ended March 31, 2011, the Company used $17,147 in operating activities as a result of cash operating losses and a net increase in non-cash working capital. The Company’s working capital requirements vary during the year due to the seasonality of forestry operations, and those requirements are usually substantial in the first and second calendar quarters. Cash drawn from the revolving credit facility was used to finance the seasonal increase in working capital.
On April 20, 2011, the Company closed a private placement of 69,122,500 common shares sold at $0.50 per share for gross proceeds of $34,561. The net proceeds of the financing will be used for working capital and general corporate purposes, including for potential acquisitions. And, on May 13, 2011, the Company entered into an asset purchase agreement with Liskeard Lumber Limited to acquire the remaining one-third of the Elk Lake sawmill for a cash consideration of approximately $15 million. The Company currently owns two-thirds of the mill. The transaction is subject to customary closing conditions, and closing is expected on July 31, 2011. Part of the proceeds from the financing will be used to pay the purchase price.
EACOM Timber Corporation is a TSX-V listed company. The business activities of EACOM consist of the manufacturing, marketing and distribution of lumber, wood chips and wood-based value-added products, and the management of forest resources. EACOM owns seven sawmills and an equity interest in an eighth sawmill, all located in Eastern Canada, and related tenures. The mills are Timmins, Nairn Centre, Gogama and Ear Falls in Ontario, and Val-d’Or, Ste-Marie and Matagami in Quebec. The equity interest is in the Elk Lake sawmill located in Ontario. The sawmills in Ear Falls, Ontario, and Ste-Marie, Quebec, are currently idled. EACOM also owns an idled sawmill in Big River, Saskatchewan, a remanufacturing facility and a 50% interest in an “I” joist plant.
All statements in this news release that are not based on historical facts are “forward-looking statements”. While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties and other factors, many of which are beyond our control and could cause actual results to materially differ from such statements. Such risks, uncertainties and other factors include, but are not necessarily limited to, those set forth under “Risk Factors” in the Company’s Filing Statement dated January 8, 2010 and “Risks and Uncertainties” in the Company’s current MD&A filed with the Canadian Securities Commissions.
The financial information included in this release also contains certain data that are not measures of performance under IFRS. For example, “EBITDA” and “EBITDA excluding specific items” are measures used by management to assess the operating and financial performance of the Company. We believe that EBITDA is a measure often used by investors to assess a company’s operating performance. EBITDA has limitations and you should not consider this item in isolation, or as a substitute for an analysis of our results as reported under IFRS. Because of these limitations, EBITDA should not be used as a substitute for net loss or cash flows from operating activities as determined in accordance with IFRS, nor is it necessarily indicative of whether or not cash flow will be sufficient to fund our cash requirements. In addition, our definitions of EBITDA may differ from those of other companies. A reconciliation of EBITDA to net loss is set forth under “OVERVIEW OF FINANCIAL RESULTS – Supplemental Information on Non-GAAP Measures” in the Company’s current MD&A.
Additional information relating to EACOM is available on SEDAR at www.sedar.com.
Executive Vice‐President and Chief Financial Officer
Tel: 514-395‐0375 ext. 259