Eacom Timber Corporation (TSXV:ETR)
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MONTREAL AND VANCOUVER, April 19 /CNW/ --
MONTREAL AND VANCOUVER, April 19 /CNW Telbec/ - EACOM Timber Corporation
(TSXV: ETR) ("EACOM", or the "Company") is pleased to announce its
fourth quarter and year end results for the three and nine-month
periods ended December 31, 2010.
The Company has changed its year-end to December 31 from March 31
effective with the fiscal year ended December 31, 2010, which contains
only nine months or three quarters of operations. This modification was
made as a result of the acquisition of the Domtar forest products
business, which had a December year-end.
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. The Company began operating these newly acquired assets on
July 1, 2010. As a result, only six months or two quarters of
operations are indicative of the Company's ongoing operations.
OVERVIEW OF FINANCIAL RESULTS
The Company's operating results are significantly affected by lumber
prices and the CDN$/US$ exchange rate. From July 1, 2010 when the
Company first began operating the newly acquired assets, declining
lumber prices and a strengthening Canadian dollar have negatively
impacted its results. The Company recorded for the nine-month period
ended December 31, 2010 a negative EBITDA of $18,381, and a negative
EBITDA excluding specific items of $8,604. The net loss and
comprehensive loss for the nine-month period amounted to $23,721 or
$0.08 per common share.
For the nine-month period, the Company recognized sales of $142,239. The
Company's sales include both lumber and by-product sales. During the
period, the Company shipped 291 million board feet of lumber and
294,000 oven-dried metric tons of by-products. Benchmark lumber prices
declined during the second half of calendar 2010, averaging US$290/Mfbm
for studs and US$333/Mfbm for random lengths delivered Great Lakes,
down from lumber prices prevailing during the first six months of
calendar 2010. Price declines were seen for all grades and dimensions,
but were particularly notable for studs. In addition, the exchange rate
averaged 0.974 during the period, closing at 1.005 on December 31,
2010.
Production for the nine-month period was 270 million board feet of
lumber. During the period, the Company operated at 53% of its capacity
with two of the eight sawmills acquired from Domtar idled, Ear Falls in
Ontario and Ste-Marie in Quebec. The remaining sawmills were subject to
downtime as a result of poor market conditions, low lumber prices and
scheduled maintenance. Unit costs were consistent with those experienced in the past for these operations.
QUARTER ENDED DECEMBER 31, 2010 vs. QUARTER ENDED SEPTEMBER 30, 2010
During the quarter ended December 31, 2010, lumber prices somewhat
firmed up, offset however by a stronger Canadian dollar. The Company
recorded for the quarter a negative EBITDA of $8,464 ($7,381 for the
quarter ended September 30, 2010), and a negative EBITDA excluding
specific items of $2,191 ($5,351 for the preceding quarter). The net
loss and comprehensive loss for the quarter amounted to $10,459 or
$0.03 per common share ($10,728 or $0.03 per common share for the
preceding quarter).
For the quarter ended December 31, 2010, the Company recorded sales of
$68,096, against sales of $73,639 for the preceding quarter. During the
quarter, the Company shipped 136 million board feet of lumber (151
million board feet in the earlier quarter) and 148,000 oven-dried
metric tons of by-products (147,000 oven-dried metric tons in the
preceding quarter). The pricing environment firmed up somewhat with
benchmark lumber prices averaging US$296/Mfbm for studs and US$350/Mfbm
for random lengths delivered Great Lakes. However, the positive impact
of a firmer pricing environment was offset by a strengthening Canadian
dollar, with the exchange rate averaging 0.987 during the quarter and
closing at 1.005 on December 31, 2010. As well, discounts observed on
studs relative to random lengths enlarged to record levels during the
quarter, reflecting the slow housing market. The mix of grades and
dimensions was consistent with our expectations and has remained
constant over the past two quarters.
Lumber production for the quarter ended December 31, 2010 was 140
million board feet of lumber, compared to 130 million board feet in the
preceding quarter. During the quarter, the Company operated at 55% of
its capacity with two of the eight sawmills acquired from Domtar idled
(51% during the earlier quarter with no change to idled mills). Unit
costs were consistent with those experienced in the past for these operations.
FINANCIAL POSITION
At December 31, 2010, the Company had cash and cash equivalents of
$10,476, availability under its revolving credit facility of $3,547,
and working capital of $73,136.
SUBSEQUENT EVENT
On April 4, 2011, the Company announced a private placement of
60,000,000 common shares at $0.50 per share for gross proceeds of $30
million. The financing will be sold on a commercially reasonable best
efforts basis conducted by a syndicate of agents. The Company has also
granted the agents an over-allotment option to sell up to an additional
10,000,000 common shares on the same terms and conditions, exercisable
48 hours prior to the closing of the financing. The net proceeds of the
financing will be used for working capital and general corporate
purposes, including for potential acquisitions. This financing is
expected to close on or around April 20, 2011.
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 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.
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 Canadian GAAP. For
example, "EBITDA" and "EBITDA excluding specific items" are measures
used by management to assess the operating and financial performance of
the Company. Moreover, 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 Canadian
GAAP. 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 Canadian GAAP, 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.
SELECTED QUARTERLY INFORMATION
The following table provides an overview of the Company's financial
results for the quarters ended December 31 and September 30, 2010,
along with some key operating metrics.
(in thousands of dollars, except where Quarter ended Quarter ended
otherwise December 31 September 30
noted)
Sales 68,096 73,639
EBITDA (8,464) (7,381)
Net loss (10,459) (10,728)
Average lumber price in US$ - RL 2×4 #1&2 ( 350 316
(1))
Average lumber price in US$ - Stud 2×4×8 ( 296 283
(1))
Average exchange rate 0.987 0.962
Production - SPF lumber (MMfbm) 140 130
Shipments - SPF lumber (MMfbm) 116 128
Shipments - wholesale lumber (MMfbm) 20 23
U.S. housing starts (thousands of units) 534 588
((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 December 31 and
September 30, 2010, the Company's net loss as reported in accordance
with Canadian GAAP to EBITDA and EBITDA excluding specific items,
providing an overview of those specific items affecting comparability
of the Company's EBITDA and net loss as reported.
(in thousands of dollars) Quarter ended Quarter ended
December 31 September 30
Net loss as reported (10,459) (10,728)
Add (subtract):
Depreciation 3,305 3,143
Income tax recovery (1,461) -
Other (income) loss 151 204
EBITDA (8,464) (7,381)
Add (subtract) specific items included:
Inventory valuation adjustments( (1)) 194 1,663
Adjustment to working capital acquired ( 5,710 -
(2))
Stock-based compensation 369 367
EBITDA excluding specific items (2,191) (5,351)
(1) In accordance with Canadian GAAP, EACOM records its log and
lumber inventories at the lower of cost and net realizable
value. In a period when lumber prices have declined markedly,
this may result in a significant inventory valuation
write-down, especially when inventories are high. To the extent
that these inventories are still on hand at the end of a
subsequent period and lumber prices have increased, this may
result in a significant inventory valuation write-up to
original cost, creating volatility in the Company's reported
results. Generally, inventories are highest in the first
calendar quarter to ensure sufficient volume of logs to operate
the mills during the second calendar quarter when road access
to timberlands is limited because of seasonal conditions.
(2) During the quarter ended December 31, 2010, the Company revised
its preliminary estimate of the fair values of the assets
acquired and liabilities assumed from Domtar on June 30, 2010,
increasing working capital - mostly inventories - by $5,710.
Since inventories were realized in the third and fourth
quarters of 2010, this adjustment negatively impacted the
Company's operating results.
To view this news release in HTML formatting, please use the following URL: http://www.cnw.ca/en/releases/archive/April2011/19/c5610.html
p bInvestors:/bbr/ Marc Girardbr/ Executive Vice-President and Chief Financial Officerbr/ (514) 848-5133 /p p align="justify" bMedia Relations:/bbr/ Frédéric Bérardbr/ HKDPbr/ (514) 917-1040 /p