Press release from Marketwire
EACOM Timber Corporation Announces Its Third Quarter Results
Tuesday, November 15, 2011
EACOM Timber Corporation Announces Its Third Quarter Results16:52 EST Tuesday, November 15, 2011MONTRÉAL, QUÉBEC and VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 15, 2011) - 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 StatementsAll 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 INFORMATIONThe 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.(in thousands of dollars, except where otherwise noted)Quarter ended September 30, 2011Quarter ended September 30, 2010Nine-month period ended September 30, 2011Sales61,39671,902212,522EBITDA(4,004)(6,088)(17,359)Net loss and comprehensive loss(564)(9,054)(20,357)Average lumber price in US$ - RL 2×4 #1&2 (1)332316350Average lumber price in US$ - Stud 2×4×8 (1)318283320Average exchange rate1.0200.9621.023Production - SPF lumber (MMfbm)127130412Shipments - SPF lumber (MMfbm)114128394Shipments - wholesale lumber (MMfbm)212369U.S. housing starts (thousands of units)615584591(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.(in thousands of dollars)Quarter ended September 30, 2011Quarter ended September 30, 2010Nine-month period ended September 30, 2011Net loss and comprehensive loss, as reported(564)(9,054)(20,357)Add (subtract):Depreciation3,4352,89010,057Interest expense397761,134Gain on sale of property, plant and equipment(4,332)-(4,423)Income tax recovery(2,940)-(3,770)EBITDA(4,004)(6,088)(17,359)FOR FURTHER INFORMATION PLEASE CONTACT: Marc GirardInvestors:Executive Vice-President and Chief Financial Officer(514) 848-5133ORFrederic BerardMedia Relations:HKDP(514) 917-1040The TSX Venture Exchange has neither approved nor disapproved the content of this press release. All director and officer appointments are subject to TSX Venture Exchange approval.