HispanicBusiness

Overview

The Company recorded a net loss of $3.6 million, or $0.06 per share, for the fourth quarter of 2012 compared to a net loss of $6.5 million, or $0.12 per share in the fourth quarter, 2011. Before restructuring costs, long term incentive compensation, certain foreign exchange gains (losses), certain other one-time items and the effect of unrecognized tax assets, the Company's net earnings for the fourth quarter, 2012 was $3.7 million, or $0.07 per share, as compared to a net loss of $2.8 million, or $0.05 per share for the fourth quarter, 2011.

EBITDA and Adjusted EBITDA for the fourth quarter of 2012 were $13.2 million and $19.4 million, respectively, compared to $6.7 million and $7.7 million, for the same period in 2011.

During the fourth quarter of 2012, lumber prices in the North American market continued their rise, with the average price reported by Random Lengths for SPF 2x4 #2&Btr at US$335 per mfbm for the fourth quarter, 2012 as compared to US$238 per mfbm for the same quarter in 2011, and US$35 per mfbm higher than the third quarter, 2012. Higher prices also drove lower export tax rates in the fourth quarter, 2012 vis-a-vis the same quarter, 2011, positively impacting sales realizations.

The stronger average Canadian dollar in the fourth quarter, 2012, which appreciated by 3 cents relative to its U.S. counterpart, had a negative impact on sales as compared to the same period, 2011.

Sales

The Company's record lumber shipments achieved in the third quarter, 2012 were surpassed in the fourth quarter, 2012 as the Company's lumber sales volumes reached 384 million fbm, an improvement of 21% over the fourth quarter, 2011. Increases reflect the stronger domestic demand driven by improved U.S. housing starts which increased from an average of 678,000 units in the fourth quarter, 2011 to 898,000 units, or 32% in the fourth quarter, 2012.

Fourth quarter, 2012 shipments to North America grew rapidly relative to the previous three quarters, 2012, and exceeded shipments in the same quarter, 2011 by 30% in response to higher demand. Increases in operating rates allowed the Company to also meet export demand, as shipments to export markets remained constant in the fourth quarter, 2012 vis-a-vis the same quarter, 2011.

Improvements in average unit lumber sales values of $32 per mfbm, or 8%, in the fourth quarter, 2012 over the respective period, 2011 reflects the higher North American pricing, supplemented by higher realizations in China.

Log sales were up $1.6 million, or 7%, for the fourth quarter, 2012 despite a decline in B.C. log sales volumes of 44,000 m3 or 14% over the same period in 2011. On the B.C. Coast, where the majority of log sales are transacted, the price per cubic meter improved by 14% in the fourth quarter of 2012, compared to the same period in 2011 reflecting tight supply as a result of an extended fire season, higher export volume and improved log markets.

Compared to the same periods of 2011, pulp chip and other residuals revenues for the fourth quarter of 2012 were down $1.7 million, resulting from lower overall chip prices. Average chip prices for the fourth quarter, 2012 decreased by 22% over the same quarter, 2011, reflecting slower pulp markets and, in the U.S. Pacific Northwest, decreases in export logs which increased the availability of fibre used in whole log chipping.

Operations

Production costs for the fourth quarter of 2012 increased by $22.6 million, or 13% compared to the same quarter, 2011. The Company continued to achieve close to record lumber production, at 347 million fbm, an 18% improvement over the same quarter, 2011. Market driven increases in operating rates, supported by the availability of economic fibre supply for the U.S. Pacific Northwest sawmills more than offset curtailments at the Grand Forks sawmill for start - up of the new production line.