EACOM Timber Corporation (TSX VENTURE:ETR)("EACOM", or the "Company") is pleased
to announce its third quarter results for the three-month period ended September
30, 2011.
On June 30, 2010, EACOM completed the acquisition of the Domtar forest products
business, which transformed the Company from a lumber trading 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 fifteen months or five
quarters of operations are indicative of the Company's current activities and a
comparison of the Company's financial results for the nine-month periods ended
September 30, 2011 and 2010 respectively may not be meaningful. However, for the
first time with the current quarter ended September 30, 2011, a comparison of
the quarterly financial results against those of the same period last year is
provided. All amounts are expressed in thousands of Canadian dollars unless
otherwise specified.
OVERVIEW OF FINANCIAL RESULTS
The Company's operating results are significantly affected by lumber prices and
the CDN$/US$ exchange rate. For the quarter ended September 30, 2011, compared
to the same quarter last year, higher lumber prices, somewhat offset by a
stronger Canadian dollar, translated into an improved EBITDA. The Company
recorded for the quarter a negative EBITDA of $4,004 ($6,088 in the third
quarter of 2010). The net loss and comprehensive loss attributable to
shareholders for the quarter amounted to $564 or $0.00 per common share ($9,054
or $0.02 per common share in the third quarter of 2010). This improvement is
primarily attributable to better operating results, a gain of $4,339 on the sale
of the Big River mill and a $2,940 recovery of income taxes as a result of the
acquisition of the remaining one-third interest in the Elk Lake sawmill.
QUARTER ENDED SEPTEMBER 30, 2011 vs. QUARTER ENDED SEPTEMBER 30, 2010
For the quarter ended September 30, 2011, the Company recorded sales of $61,396,
against sales of $71,902 in the same quarter of 2010. The Company's sales
include both lumber and by-product sales. During the quarter, the Company
shipped 135 million board feet of lumber (151 million board feet in the third
quarter of 2010) and 138,000 oven-dried metric tons of by-products (140,000
oven-dried metric tons in the third quarter of 2010). This decrease in shipments
compared to last year is attributable to weak market conditions and lower
production with three mills taking market-related downtime during the quarter
ended September 30, 2011. Benchmark lumber prices have slightly improved in the
third quarter of 2011 but still reflect a slow housing market, averaging
US$318/Mfbm for studs and US$332/Mfbm for random lengths delivered Great Lakes,
compared to US$283/Mfbm and US$316/Mfbm respectively in the third quarter of
2010. A firmer pricing environment was somewhat offset by a strengthening
Canadian dollar, the exchange rate averaging 1.020 during the third quarter of
2011 compared to 0.962 in the third quarter of 2010. And, on July 1, 2011, the
Canadian government removed the additional 10% export tax following an
announcement that the full amount to be collected had been fully recovered. The
mix of lumber grades sold and prices of by-products have remained similar over
these two quarters.
Lumber production for the quarter ended September 30, 2011 was 127 million board
feet of lumber, compared to 130 million board feet in the same quarter last
year. During the quarter, the Company operated at 49% of its capacity with two
of the eight sawmills acquired from Domtar idled, Ear Falls in Ontario and
Ste-Marie in Quebec (51% during the same quarter last year with no change to
idled mills). Sawmills were subject to longer market-related downtime during the
third quarter of 2011 compared to the same quarter last year. Unit costs
improved slightly compared to those experienced in the year earlier quarter as a
result of those mills taking market-related downtime being the higher cost
mills.
FINANCIAL POSITION
At September 30, 2011, the Company had cash and cash equivalents of $5,694 and
its credit facility was undrawn against a borrowing availability of $7,907,
compared to cash and cash equivalents of $13,577 and outstanding borrowings of
$3,330 under its revolving credit facility against a borrowing availability of
$12,119 at June 30, 2011. For the third quarter, cash operating losses of $4,679
were offset by a non-cash working capital recovery of $3,096, resulting in
$1,583 being used in operating activities. The Company's working capital
requirements vary during the year due to the seasonality of forestry operations.
Those requirements are usually substantial in the first and second calendar
quarters whereas in the third and fourth quarters, the Company benefits from its
working capital. Part of the net proceeds of $32,346 from a private placement of
the Company's common shares completed in the second quarter were used to acquire
the remaining one-third interest in the Elk Lake sawmill and to repay
outstanding borrowings under the revolving credit facility. And, on September
19, 2011, the Company sold its Big River mill for a cash consideration of
$7,500.
SUBSEQUENT EVENT
On October 8, 2011, the Company experienced a fire at its Gogama mill site with
substantial losses to log and lumber inventories. However, the mill is intact
and operations should resume in the fourth quarter. Losses incurred, including
business interruption, are fully covered under the Company's insurance policy,
less a deductible.
About EACOM
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 eight sawmills, all located in Eastern Canada, and related
tenures. The mills are Timmins, Nairn Centre, Gogama, Elk Lake and Ear Falls in
Ontario, and Val-d'Or, Ste-Marie and Matagami in Quebec. The mills in Ear Falls,
Ontario, and Ste-Marie, Quebec, are currently idled. EACOM also owns a
remanufacturing facility in Val-d'Or, Quebec, and a 50% interest in an "I" joist
plant in Sault Ste-Marie, Ontario.
Forward-Looking Statements
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" is a
measure 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 flows will be sufficient to fund our cash requirements. In addition,
our definition of EBITDA may differ from that 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.
SELECTED QUARTERLY INFORMATION
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The following table provides an overview of the Company's financial results
for the quarters ended September 30, 2011 and 2010, and for the nine-month
period ended September 30, 2011, along with some key operating metrics.
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(in thousands of dollars, Quarter ended Quarter ended Nine-month period
except where otherwise September 30, September 30, ended September
noted) 2011 2010 30, 2011
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Sales 61,396 71,902 212,522
EBITDA (4,004) (6,088) (17,359)
Net loss and comprehensive
loss (564) (9,054) (20,357)
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Average lumber price in US$ -
RL 2x4 #1&2 (1) 332 316 350
Average lumber price in US$ -
Stud 2x4x8 (1) 318 283 320
Average exchange rate 1.020 0.962 1.023
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Production - SPF lumber
(MMfbm) 127 130 412
Shipments - SPF lumber
(MMfbm) 114 128 394
Shipments - wholesale lumber
(MMfbm) 21 23 69
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U.S. housing starts
(thousands of units) 615 584 591
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(1) Eastern spruce/pine/fir, per thousand board feet delivered Great Lakes
(Source: Random Lengths Publications, Inc.)
The following table reconciles, for the quarters ended September 30, 2011
and 2010, and for the nine-month period ended September 30, 2011, the
Company's net loss and comprehensive loss attributable to shareholders as
reported in accordance with IFRS to EBITDA.
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Quarter ended Quarter ended Nine-month period
September 30, September 30, ended September
(in thousands of dollars) 2011 2010 30, 2011
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Net loss and comprehensive
loss, as reported (564) (9,054) (20,357)
Add (subtract):
Depreciation 3,435 2,890 10,057
Interest expense 397 76 1,134
Gain on sale of property,
plant and equipment (4,332) - (4,423)
Income tax recovery (2,940) - (3,770)
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EBITDA (4,004) (6,088) (17,359)
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