flooring operation. On May 1, 2012, a fire
destroyed one of its two operating sawmills.
Saw-Master Company purchases
and then harvests standing timber
from landowners. It then transports
the timber back to its sawmills. At the
sawmills, the bark is removed from the
timber, processed and sold for landscaping mulch. The logs are then moved by
a conveyor to a “head rig,” which consists of a large saw and carriage. The saw
squares up the log by cutting a slab from
each of its sides. The slabs are processed
and sold to paper mills and certain metal processors. The sawdust generated by
the sawmill is used as fuel on site and
also sold to manufacturers and farmers
for various purposes. The mulch, chips,
and sawdust all generate a significant
stream of revenue.
For the purpose of discussion, the
two mills that were operating on May 1,
2012, will be called “Mill Y” and Mill “Z.”
Mill Y was designed primarily for small,
low-grade logs. It sawed logs for the pur-
pose of: (a) producing lumber used by
other companies/customers to assemble
pallets, and (b) producing logs to be re-
sawed into lumber at Mill Z.
Compared to the restaurant fire, the BI loss
analysis of the sawmill was far more complex.
Many factors had to be considered before selecting
the appropriate base period to project financial
operations during the period of restoration.
sisted of two head-rigs and a fast, efficient
re-saw, which processed both the logs
received from Mill Y and those received
directly from the timber farms.
From January 1, 2009 through May
31, 2011, the company had a third mill
(“Mill X”), which had a circular saw.
Thus, from January 1, 2009 through May
2011, the company had three operating
sawmills. Mill X was destroyed by fire on
May 31, 2011.
Shortly after the Mill X fire, the com-
mills—Mill X, Y and Z—were operat-
ing. Although the modification to Mill Y
commenced shortly after the Mill X fire,
Mill Y was not operating at or near its
intended production capability until two
weeks before its May 1, 2012 fire.