HispanicBusiness

Quarterly trends normally reflect the seasonality of the Company's operations. Logging operations are seasonal due to a number of factors including weather, ground conditions and fire season closures. Generally, the Company's B.C. Coastal logging divisions experience higher production levels in the latter half of the first quarter, throughout the second and third quarters and in the first half of the fourth quarter. Logging activity in the B.C. Interior is generally higher in the first half of the first quarter, slows during spring thaw and increases in the third and fourth quarters. Sawmill operations are less seasonal than logging operations but are dependent on the availability of logs from logging operations, including those from suppliers. In addition, the market demand for lumber and related products is generally lower in the winter due to reduced construction activity, which increases during the spring, summer and fall.

Production levels started strong in the first half, 2011, as a result of the rapid growth in demand from export markets, particularly China, offset by weak North American demand due to record low housing starts. Rates tapered marginally through the end of the third quarter, 2011, as China introduced measures to cool its overheated housing market and U.S. demand remained weak. Demand from China stabilized through 2012, and steady recoveries in the U.S. housing market helped drive up domestic demand and pricing through the end of 2012. Building on the positive momentum of fourth quarter, 2012 U.S. housing starts continued to surge, supporting higher lumber prices and positive net earnings in the first quarter, 2013. In addition, the acquisition of three sawmills in Georgia, U.S.A. towards the end of the first quarter, 2013 was immediately accretive to net earnings.

With one minor exception, no deferred tax assets arising from loss carry-forwards were recognized over the last eight quarters.

Acquisition of Rayonier Inc.'s Wood Products Business

On March 1, 2013, the Company concluded the acquisition of Rayonier Inc.'s Wood Products Business in Georgia, U.S.A. for $86.6 million, including working capital of $10.1 million. The acquisition included three sawmills located in Baxley, Swainsboro and Eatonton, Georgia with a combined annual capacity of 360 million board feet, which increased the Company's annual production capacity to more than 2 billion board feet and broadened the product mix to include Southern Yellow Pine.

The acquisition was financed through the Company's existing credit lines. The total consideration and purchase price allocation are preliminary and subject to adjustment in accordance with the Rayonier Asset Purchase Agreement. The purchase price has been allocated on a preliminary basis to the fair value of assets acquired and related liabilities arising from the transaction based on management's best estimates to March 31, 2013, but may require further refinement as updated information is available. Transaction costs related to the acquisition total $0.8 million and have been expensed in Selling and administration in the first quarter, 2013.

Agreement to Purchase Springer Creek Timber Tenure

On March 19, 2013, the Company entered into an agreement to purchase two timber tenures in the Kootenay Region of British Columbia from Springer Creek Management Ltd. The tenures have a combined Allowable Annual Cut of approximately 174,000 cubic metres and will support an increase in production at Interfor's Castlegar sawmill. Regulatory approvals were received and the transaction closed on May 1, 2013.