EACOM Timber Corporation (TSX VENTURE: ETR) ("EACOM" or the
"Company") today reported its financial results for the quarter
ended June 30, 2010.
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 2009.
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 ADMINSTRATION
Personnel expenses
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
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 acquisition.
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.
Facilities
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.
Travel
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.
STOCK-BASED COMPENSATION
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.
OTHER INCOME
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 funds.
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.
About EACOM
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.
Forward-Looking Statements
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
Statement dated January 8, 2010 and the current MD&A for EACOM
Timber Corporation on file with the Canadian Securities
Commissions.
EACOM Timber Corporation
Interim Consolidated Balance Sheets
(Unaudited)
(in thousands of Canadian dollars)
June 30, March 31,
2010 2010
----------------------------
Assets
Current assets
Cash and cash equivalents $ 42,920 $ 2,244
Accounts receivable 8,832 374
Inventories 54,675 37
Prepaid expenses 2,072 146
----------------------------
108,499 2,801
Property, plant and equipment 96,991 3,598
Restricted cash 1,176 145,751
Pension assets 7,200 -
Future income taxes 2,690 -
Deferred costs - 488
----------------------------
$ 216,556 $ 152,638
----------------------------
----------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 30,632 $ 2,165
Asset retirment obligations 3,001 413
Pension and post-employment obligations 3,800 -
Future income taxes 1,734 -
Subscription receipts helds in trust - 145,000
----------------------------
39,167 147,578
Shareholders' equity
Capital stock 162,752 6,033
Contributed surplus 9,018 1,762
Deficit (5,269) (2,735)
----------------------------
Total equity attributable to sharholders of
the company 166,501 5,060
Non-controlling interests 10,888 -
----------------------------
177,389 5,060
----------------------------
$ 216,556 $ 152,638
----------------------------
----------------------------
On behalf of the board
Terry Lyons
Rick Doman (signed) (signed)
President and CEO Director
Director
See accompanying notes to the interim consolidated financial statements
EACOM Timber Corporation
Interim Consolidated Statements of Loss, Comprehensive Loss and Deficit
(Unaudited)
(in thousands of Canadian dollars)
For the Three Months Ended
------------------------------------
June 30, 2010 June 30, 2009
------------------------------------
Sales $ 504 $ 1,062
------------------------------------
Operating expenses
Cost of sales 490 1,011
Depreciation and amortization - 7
Selling, general, and administration 1,075 254
Stock based compensation 43 25
------------------------------------
1,608 1,297
------------------------------------
Operating loss (1,104) (235)
------------------------------------
Non-operating income (loss)
Acquisition related costs (1,431) -
(Loss) gain on invetsments held for
trading (124) 25
Interest income 125 5
------------------------------------
(1,430) 30
------------------------------------
Loss and comprehensive loss for the
period (2,534) (205)
Deficit, beginning of period (2,735) (142,128)
------------------------------------
Deficit, end of period $ (5,269) $ (142,333)
------------------------------------
Per common share (in dollars)
Loss attributable to equity shareholders
of the company
Basic and diluted loss per common share (0.03) (0.01)
------------------------------------
------------------------------------
Weighted average number of common shares
outstanding 74,676,890 36,545,344
------------------------------------
------------------------------------
See accompanying notes to the interim consolidated financial statements
EACOM Timber Corporation
Interim Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of Canadian dollars)
For the Three Months Ended
----------------------------------
June 30, 2010 June 30, 2009
----------------------------------
Cash flows from operating activities
Loss for the period $ (2,534) $ (205)
Items not affecting cash:
Amortization of property, equipment,
patents and licenses - 7
Interest income - (1)
Unrealized loss (gain) on investments
held for trading 34 9
Stock-based compensation 43 24
----------------------------------
(2,457) (166)
Changes in non-cash working capital 1,848 (249)
----------------------------------
(609) (415)
----------------------------------
Cash flows from financing activities
Proceeds from the conversion of subscription
receipts 145,000 -
Financing costs related to subscription
receipts (8,800) -
Proceeds from exercise of warrants 720 -
----------------------------------
136,920 -
Cash flows from investing activities
Purchase of investments held-for-trading - (49)
Proceeds from sale of investments held for
trading - 38
Purchase of forest products business (95,017) -
Purchase of computer software (193)
Increase in restricted cash (425) -
----------------------------------
(95,635) (11)
----------------------------------
Increase (decrease) in cash and cash
equivalents 40,676 (426)
Cash and cash equivalents, beginning of
period 2,244 1,233
----------------------------------
Cash and cash equivalents, end of period $ 42,920 $ 807
----------------------------------
----------------------------------
Supplemental disclosure of cash flow
information
Interest received 125 -
Issuance of common shares for the
acquisition of Domtar forest products
business 27,400 -
Reclassification of deferred costs 488 -
See accompanying notes to the interim consolidated financial statements
The TSX Venture Exchange has neither approved nor disapproved
the contents of this press release. All directorships are subject
to TSX Venture Exchange approval.
Contacts: Hill and Knowlton Me Frederic Berard Media relations
(514) 917-1040
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