EACOM Timber Corporation announces its fourth quarter and year end results

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 otherwise      
noted)
Quarter ended
December 31
Quarter ended
September 30
     
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 (1) 350 316
Average lumber price in US$ - Stud 2×4×8 (1) 296 283
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
December 31
Quarter ended
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 (2) 5,710 -
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.

SOURCE EACOM Timber Corporation

For further information:

Investors:
Marc Girard
Executive Vice-President and Chief Financial Officer
(514) 848-5133

Media Relations:
Frédéric Bérard
HKDP
(514) 917-1040

Profil de l'entreprise

EACOM Timber Corporation

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