VANCOUVER, B.C. MONTREAL, QUEBEC— EACOM Timber Corporation (TSX VENTURE: ETR;
“EACOM” or the “Company”) today reported its financial results for the quarter ended June 30,
The quarter was highlighted by the closing of the $145 million private placement financing and
the acquisition of Domtar’s Forest Products Business on June 30, 2010. EACOM acquired seven
sawmills, a 66.7% equity interest in an eighth sawmill, a remanufacturing facility and a 50%
interest in a second remanufacturing facility. As of July 1, 2010, EACOM became a
manufacturer, marketer and distributer of lumber, chips and wood-based value-added products
as well as the manager of the related forest resources. The sawmills have an annual
production capacity of approximately 890 million board feet and an annual allowable cut of 3.5
million cubic metres of timber.
The total consideration paid was cash of approximately $102 million and EACOM common
shares valued at approximately $27 million (approximately 48 million common shares). The
preliminary fair value allocation to net assets was $121 million, net of approximately $8 million
in cash included in the acquisition. The total acquisition related expenses were approximately
$1.4 million for the quarter. Consolidated cash and cash equivalents at June 30, 2010, was
$42.9 million following completion of the financing (net of financing expenses) and acquisition.
The results of operations below do not include any operations of the acquired Forest Products
Business because acquisition was completed on June 30, 2010, the quarter end.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2010 (all amounts are in $000’s
except for amounts per common share)
The loss and comprehensive loss for the quarter ended June 30, 2010 was $2,534 ($0.03 per
common share) compared to $205 ($0.01 per common share) for the quarter ended June 30,
2009, an increase of $2,329. This increase was due mainly to higher professional and due
diligence fees, travel expenses and Big River Sawmill holding costs for the quarter ended June
30, 2010 compared to the same period in 2009. In addition, there was a loss from investments
held for trading of $124 realized in the first quarter of this year compared to a gain of $25 in
SALES, COST OF SALES AND OPERATING LOSS
For the quarter ended June 30, 2010, the Company recognized sales of $504. Operating
expenses consisted of cost of sales of $490, and general and administration expenses of
$1,075. The operating loss was $1,061. During the quarter ended June 30, 2009 the Company
recognized sales of $1,062, cost of sales of $1,011, depreciation and amortization of $7, and
general and administration expenses of $254 for an operating loss of $210.
GENERAL AND ADMINISTRATION
Personnel expenses for the current quarter were $85 versus $71 for the corresponding quarter
last year. The increase of $14 was due to an increase of 2 employees in the current quarter
compared to the corresponding quarter of the prior year.
Professional fees were $1,663 for the quarter ended June 30, 2010, compared to $54 in the
same quarter of 2009. The increase was due primarily to higher consulting and advisory
service fees related to due diligence and legal matters for the Domtar Forest Products Business
Shareholder and other corporate expenses
For the quarter ended June 30, 2010 shareholder and other corporate expenses were $86
compared to $33 in the corresponding quarter last year. The increase relates to additional filing
fees associated with the Company’s issuance of shares and warrants in relation to the Domtar
Forest Products Business acquisition.
Insurance and other office
For the current quarter, insurance and other office expenses were $475 compared to $48 in the
same period prior year, an increase of $427. The increase was mainly due to costs related to
the Big River Sawmill, which the Company didn’t own in the prior period.
For the quarter ended June 30, 2010, facility expenses were $38 compared to $27 in the prior
year for an increase of $11. The increase was due to the recognition of the costs to return a
portion of the Company’s laboratory space to warehouse space partially offset by reduced
facility maintenance expenses.
For the current quarter travel expenses were $159 compared to $20 in the corresponding
quarter last year. The increase of $139 was due primarily to travel related to the acquisition of
the Domtar Forest Products Business.
For the quarter ended June 30, 2010, stock based compensation were $43 compared to $25 in
the 2009. This increase was due primarily to a higher fair value of options granted during the
current quarter resulting in a higher amortized expense recognized during the quarter.
GAIN/LOSS ON INVESTMENTS HELD FOR TRADING
During the first quarter the Company held equity securities and entered into lumber futures
contracts. The Company recognized a loss of $124 compared to a gain of $25 in the
corresponding quarter last year.
For the quarter ended June 30, 2010, other income was $125 compared to $5 in the
corresponding quarter of the prior year. The increase of $120 was due primarily to interest
received on the escrowed funds related to the Domtar Forest Products Business acquisition.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2010 the Company’s cash and cash equivalents totalled $42,920 compared to
$2,244 at March 31, 2010. Working capital at June 30, 2010 was $77,867 compared to $636 at
March 31, 2010. The trade receivable balance acquired as part of the working capital was low
because certain trade receivables of the forest products business were excluded from the
acquisition. These excluded receivables were part of Domtar’s securitization program and
could not be transferred to EACOM. Accordingly, the Company had low cash receipts during its
first month of operations (July 2010) while having normal cash disbursements to fund
operations during this period. Cash receipts are now occurring normally as trade receivables
are turning over as expected, nevertheless, the cash balance is expected to be lower at the end
of the next reporting period. The Company is seeking to further improve its liquidity by
reducing inventory levels and accessing an operating loan facility. Included in accounts
payable and accrued liabilities at June 30, 2010 are accrued liabilities of $3,000 related to the
due diligence and professional fees for the completion of the closing of the acquisition of the
Domtar Forest Products business.
During the quarter, the Company reported cash used in operations of $609 compared to cash
used in operations for the corresponding quarter last year of $415. The net loss for the quarter
ended June 30, 2010 increased to $2,534 from $205 but the cash used in operations did not
increase to the same extent as the impact of the increased loss was partially offset by a change
in non-cash working capital of a $1,848 inflow in 2010 compared to a $249 outflow in 2009.
Cash from financing activities was $137 for the quarter June 30, 2010 compared to $nil from
financing activities for same quarter last year. Cash from financing activities in the current
period relates to gross proceeds from the release of the $145,000 that had closed in escrow on
March 26, 2010 and $720 received from the exercise of warrants. The Company incurred
$8,800 in share issue costs in the quarter in relation to the shares issued for the escrowed
Cash consumed from investing activities for the quarter ended June 30, 2010 was $95,635
compared with $11 in the corresponding period of the prior year. Cash used for investing in
2010 was primarily related to a net $95,017 used for the acquisition of the Domtar Forest
Products Business assets. An additional $425 was used for the acquisition of restricted cash
and $193 used for the purchase of software in the current quarter.
EACOM Timber Corporation is a TSX-V listed company. 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 one idle mill in Big River Saskatchewan. EACOM also owns a remanufacturing
facility and a 50% interest in an “I” joist plant.
The TSX Venture Exchange has neither approved nor disapproved the contents of this press
release. All directorships are subject to TSX Venture Exchange approval.
All statements in this news release that are not based on historical fact 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 outside of our control that 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 the captions “Risk Factors” of the Filing Statementdated January 8, 2010 and the current MD&A for EACOM Timber Corporation on file with the Canadian Securities Commissions.
Me Frédéric Bérard
Hill and Knowlton