HispanicBusiness

Investing activities used cash of $40.8 million in the first quarter of 2013, compared to $36.8 million in the previous quarter and $105.0 million in the same quarter in 2012. Cash used for capital additions was $46.4 million, down $3.1 million from the fourth quarter of 2012, and down $7.2 million from the first quarter of 2012. Capital additions for lumber operations in the current quarter included the upgrades at the Company's Elko, Mackenzie and Conway sawmills. In the pulp segment, current quarter capital expenditures of $6.9 million largely related to equipment being built for the turbine upgrades at the Company's Northwood Pulp Mill planned for later in 2013. Investing cash flows in the current quarter also included $7.0 million in distributions received from the Canfor-LP OSB limited partnership, compared to $6.0 million received in the previous quarter and $3.0 million in contributions paid in the same quarter of the previous year. The first quarter of 2012 cash flows also included payment of $64.9 million for the acquisition of the Kootenay area mills and tenure.

Liquidity and Financial Requirements

At March 31, 2013, the Company on a consolidated basis had cash of $6.2 million and $40.0 million drawn on its operating loans, with an additional $27.7 million reserved for several standby letters of credit. Total remaining available operating loans were $399.8 million. In the first quarter of 2013, the Company extended the maturity on its $350.0 million principal operating loan facility from October 31, 2015 to February 28, 2018. All other terms on the operating loan facility remain unchanged.

The Company and Canfor Pulp remained in compliance with the covenants relating to their operating loans and long-term debt during the quarter, and expect to remain so for the foreseeable future.

On April 1, 2013, the Company repaid its US$75 million 5.42% term debt. Canfor Pulp has US$110.0 million of term debt that is scheduled for repayment on November 30, 2013.

The Company's consolidated net debt to total capitalization at the end of the first quarter of 2013 was 18.8%. For Canfor, excluding Canfor Pulp, net debt to capitalization at the end of the first quarter was 16.0%.

Investment in Joint Venture Held for Sale

In November 2012, the Company entered into a Letter of Intent with Louisiana-Pacific to sell its 50% share in Canfor-LP OSB, which owns the Peace Valley OSB mill, for a price of $70.0 million plus working capital. As part of the sale, Canfor may receive additional annual consideration over a 3 year period based on Peace Valley OSB's annual adjusted earnings before interest, tax, depreciation and amortization. On completion of the sale, Louisiana-Pacific will become the sole owner of the Peace Valley OSB mill. At December 31, 2012, the $75.1 million equity investment in Canfor-LP OSB was reclassified as held for sale and was measured at the lower of the carrying amount and the fair value less cost to sell.

In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, upon classification of the investment as held for sale, the Company ceased the equity method of accounting. As such, Canfor's $11.0 million share of Canfor-LP OSB's operating income was not recognized in the first quarter of 2013. The carrying value of Canfor's investment in Canfor-LP OSB was reduced by distributions received of $7.0 million during the first quarter of 2013. The transaction is currently scheduled to close in the second quarter of 2013.