EACOM Timber Corporation
TSX VENTURE : ETR

EACOM Timber Corporation

August 31, 2010 00:33 ET

EACOM Timber Corporation Announces Financial Results for the Quarter Ended June 30, 2010

VANCOUVER, BRITISH COLUMBIA and MONTREAL, QUEBEC--(Marketwire - Aug. 30, 2010) - 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.

Contact Information

  • Hill and Knowlton
    Me Frederic Berard
    Media relations
    (514) 917-1040