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Press release from Marketwire

Stella-Jones Reports First Quarter Results: Annual Meeting of Shareholders Later this Morning

Tuesday, May 04, 2010

Stella-Jones Reports First Quarter Results: Annual Meeting of Shareholders Later this Morning07:01 EDT Tuesday, May 04, 2010 MONTREAL, QUEBEC--(Marketwire - May 4, 2010) - Stella-Jones Inc. (TSX:SJ) -- Sales of $99.4 million compared with $112.0 million last year -- Net earnings of $5.8 million compared with $7.7 million last year -- Diluted EPS of $0.46 versus $0.61 in 2009 -- Further debt reduction prior to the completion of the Tangent acquisition Stella-Jones Inc. (TSX:SJ) today announced financial results for its first quarter ended March 31, 2010. ------------------------------------------------------------- Financial highlights Quarters ended March 31, (in thousands of dollars, except per share data)(unaudited) 2010 2009 ------------------------------------------------------------- Sales 99,360 111,954 Gross profit 18,163 22,519 Cash flow from operations(1) 8,528 11,321 Net earnings for the period 5,814 7,687 Per share - basic ($) 0.46 0.61 Per share - diluted ($) 0.46 0.61 Weighted average shares outstanding (basic, in '000s) 12,688 12,566 ------------------------------------------------------------- (1) Before changes in non-cash working capital components. FIRST-QUARTER RESULTSSales were $99.4 million, a decrease of $12.6 million, or 11.2% from last year's sales of $112.0 million. Changes in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, decreased the value of U.S. dollar denominated sales by about $8.9 million when compared with the same period a year earlier. Adjusting for year-over-year currency fluctuations, sales decreased approximately 3.0% versus last year's first quarter, reflecting reduced railcar availability resulting from severe winter weather in the eastern United States at the beginning of the quarter, and, to a lesser extent, weaker demand and softer pricing for the Company's core products.Railway tie sales amounted to $48.2 million, down 21.5% from last year (or approximately 11.0% net of year-over-year currency translation effect), as a result of reduced railcar availability and slightly weaker industry demand in North America in comparison with the year earlier period. Utility pole sales totalled $36.5 million, a decrease of 2.2% from a year ago (or an increase of approximately 2.0% net of year-over-year currency translation effect). Industrial lumber sales declined marginally to $10.1 million, as solid demand for marine applications in Canada were offset by lower sales in the United States. Finally, sales of consumer lumber rose 65.6% to $4.5 million, largely due to favourable weather conditions at the end of the quarter in most of the Company's markets. "We are pleased with these results in light of difficulties in securing railcars to ship products, as well as adverse year-over-year currency movements," said Brian McManus, President and Chief Executive Officer of Stella-Jones. "More importantly, we started to see greater sales momentum in our core railway tie product category towards the end of the period."Gross profit was $18.2 million or 18.3% of sales, compared with $22.5 million or 20.1% of sales last year. The reduction in gross profit, as a percentage of sales, essentially stems from softer pricing in most product categories as well as a different product mix in the railway tie category. "The decrease in gross profit dollars also results from a significant reduction in the year-over-year average rate applied to convert gross profit from U.S. dollar denominated sales. Furthermore, first quarter results include approximately $1.8 million in general and administrative expenses directly related to the Tangent Rail Corporation ("Tangent") acquisition," added George Labelle, Senior Vice-President and Chief Financial Officer. Net earnings for the period stood at $5.8 million or $0.46 per share, fully diluted, compared with $7.7 million or $0.61 per share, fully diluted, last year. Cash flow from operating activities before changes in non-cash working capital components reached $8.5 million, versus $11.3 million in the same period a year ago.Stella-Jones' balance sheet as at March 31, 2010 reflects the financing components for the Tangent acquisition, which was successfully completed subsequent to the end of the period on April 1, 2010. Such components include long-term borrowings of US$65.0 million (Cdn$66.0 million) and net proceeds of $76.9 million from the issuance of subscription receipts. Conversely, current assets included restricted cash of $142.9 million, which was disbursed on April 1, 2010. Excluding these components, the Company's long-term debt, including the current portion, amounted to $83.0 million, representing a ratio of total long-term debt to shareholders' equity of 0.46:1, down from 0.48:1 three months earlier. In addition, a solid cash flow generation and better working capital resulted in a $6.3 million decrease in short-term bank indebtedness, which stood at $49.9 million as at March 31, 2010.OUTLOOK"The acquisition of Tangent has considerably enhanced Stella-Jones' position as a continent-wide producer. A successful integration will be a major performance driver in 2010 and beyond, as we gradually achieve all potential synergies. While our expectation for the year ahead is for demand levels to remain similar to those of last year, our aim will be to reap all the benefits that our newly enlarged network can provide. Our ongoing focus on network optimization and cost control should increase both our efficiencies and our margins as the economic recovery gains further momentum," concluded Mr. McManus.CONFERENCE CALLStella-Jones will hold a conference call to discuss these results on Tuesday, May 4, 2010, at 1:00 PM Eastern Time. Interested parties can join the call by dialling 647-427-7452 (Toronto or overseas) or 1-888-231-8191 (elsewhere in North America). Parties unable to call in at this time may access a tape recording of the meeting by calling 1-800-642-1687 and entering the passcode 67872162. This tape recording will be available on Tuesday, May 4, 2010 as of 3:00 PM Eastern Time until 11:59 PM Eastern Time on Tuesday, May 11, 2010. NON-GAAP MEASURECash flow from operations is a financial measure not prescribed by Canadian generally accepted accounting principles ("GAAP") and is not likely to be comparable to similar measures presented by other issuers. Management considers it to be useful information to assist knowledgeable investors in evaluating the cash generating capabilities of the Company.ABOUT STELLA-JONES Stella-Jones Inc. (TSX:SJ) is a leading producer and marketer of pressure treated wood products. The Company supplies North America's railroad operators with railway ties, timbers and recycling services; and the continent's electrical utilities and telecommunications companies with utility poles. Stella-Jones also provides industrial lumber and services for construction and marine applications, as well as consumer lumber to retailers and wholesalers for outdoor applications. The Company's common shares are listed on the Toronto Stock Exchange. Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, the ability of the Company to raise the capital required for acquisitions, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.Note to readers: Complete unaudited first-quarter financial statements are available on Stella-Jones' website at www.stella-jones.comFOR FURTHER INFORMATION PLEASE CONTACT: Source: Stella-Jones Inc. or Stella-Jones Inc. George T. Labelle, CA Senior Vice-President and Chief Financial Officer 514-934-8665 or MaisonBrison Martin Goulet, CFA 514-731-0000