The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Ainsworth Announces 2010 First Quarter Results

Thursday, May 13, 2010

Ainsworth Announces 2010 First Quarter Results19:36 EDT Thursday, May 13, 2010VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 13, 2010) - Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) - Highlights- Third consecutive quarter of positive adjusted EBITDA- EBITDA margin of 18.3% compared to 1.6% in 2009- Strong growth in sales despite negative foreign exchange impact- Average North Central 7/16" OSB price for Q1 2010 rose to U.S.$214 (per msf)- No demand related downtime taken during the quarter- Maintained exceptional safety and operational efficiency record- Continued to replace commodity production with higher margin productsAinsworth Lumber Co. Ltd. today reported its unaudited financial results for the first quarter ended March 31, 2010.In the first quarter of 2010, Ainsworth recorded positive adjusted EBITDA of $14.8 million, relative to positive adjusted EBITDA of $1.1 million in the first quarter of 2009. This improvement was primarily the result of a $14.0 million improvement in gross profit in the first quarter of 2010 compared to the same period in 2009. Net income from continuing operations for the first quarter of 2010 was $15.7 million, relative to a net loss of $34.0 million in the first quarter of 2009.OSB prices strengthened in the first quarter of 2010. The average North Central price for 7/16" OSB during the first quarter of 2010 was U.S.$214/msf, an increase of U.S.$60/msf from the first quarter of 2009. The reported North Central price reached U.S.$248/msf in the last week of March 2010.Ainsworth President and CEO Rick Huff said, "The first quarter of 2010 was marked by improving financial performance for Ainsworth. With the changes we made to the business in 2009, we entered 2010 lean, focused and well positioned to benefit from the rise in OSB prices during the first three months of the year.""We are continuing to execute on the strategic plan we developed in 2009. This plan advances our ability to deliver innovative value-added products, increases the geographic diversity of our sales, positions the Company well for future growth, and supports our commitment to managing our cash responsibly while operating safely and efficiently," added Mr. Huff. Selected Financial Information Three months ended In millions of Canadian dollars, except share and March 31 per share data ------------------------ (Unaudited) 2010 2009 --------------------------------------------------------------------------- Sales $ 81.0 $ 69.2 Cost of products sold 61.6 63.7 Net income (loss) from continuing operations 15.7 (34.0) Net income (loss) 15.4 (54.2) Adjusted EBITDA (1) 14.8 1.1 Adjusted EBITDA margin (2) 18.3% 1.6% --------------------------------------------------------------------------- Basic and diluted earnings (loss) per share: Net income (loss) from continuing operations 0.16 (0.34) Net income (loss) 0.15 (0.54) Weighted average common shares outstanding (in millions) (3) 100.1 100.0 (1) Adjusted EBITDA, a non-GAAP financial measure, is defined as net income (loss) from continuing operations before amortization, gain on disposal of property, plant and equipment, costs of curtailed operations, stock option expense, finance expense, foreign exchange (gain) loss on long- term debt, other foreign exchange (gain) loss, income tax recovery and non-recurring items. (2) Adjusted EBITDA margin, a non-GAAP financial measure, is defined as adjusted EBITDA divided by sales. (3) 90,005,712 common shares and noteholder warrants exercisable for 10,094,288 common shares (for no additional consideration) were outstanding on March 31, 2010 bringing total common shares and noteholder warrants outstanding to 100,100,000. Performance and Operational EfficiencyOSB shipments rose by 10% in the first quarter relative to the same period in 2009 due to a decrease in unscheduled maintenance compared with 2009. Sales in the first quarter of 2010 were $81.0 million; an increase of $11.8 million from sales of $69.2 million in the first quarter of 2009 despite the fact the Canadian dollar was an average 16 cents stronger relative to the U.S. dollar in the first quarter of 2010 as compared to the first quarter of 2009.In the first quarter of 2010, total cost of products sold decreased 3.3% relative to the same period in 2009. Cost of products sold decreased as a result of the stronger Canadian dollar, with further savings in freight costs and reduced energy pricing. Selling and administrative expenses were down 2% for the quarter relative to the first quarter of 2009.LiquidityWe are continuing to take a disciplined approach to managing our cash and we are confident in our ability to fund any shortfall from operations, interest payments, debt repayments, and essential capital expenditures. Our debt principal repayments are scheduled to total $11 million in 2010 and $24 million in 2011. Our U.S.$350 million Senior Unsecured Notes mature in 2015 and our U.S.$103 million term loan is scheduled to mature in 2014.Ainsworth is permitted, under the terms of the Company's indenture, to borrow an additional U.S.$125 million of senior secured debt and U.S.$75 million of senior unsecured debt. The availability of this funding is dependent on credit markets.Subsequent EventEffective May 11, 2010, Brookfield Special Situations II (OSB) L.P. ("BSS") completed the acquisition of 14,905,712 common shares and warrants to acquire 10,094,288 common shares of Ainsworth. BSS exercised all of the purchased warrants on closing of the transaction and now beneficially owns or exercises control or direction over approximately 53.5% of the issued and outstanding common shares on a fully diluted basis. The result for Ainsworth is a change of control for Canadian tax purposes. The potential impact has not been determined at this time.Excerpts from the Company's financial statements for the period ended March 31, 2010 are attached. To view the complete financial statements, including the notes to the financial statements, click on the following link: Call InformationAinsworth will hold a conference call on Friday, May 14, 2010 at 10:00 am PDT (1:00 pm EDT) to discuss the first quarter 2010 results. The dial-in phone number is 1-800-925-3017, Reservation #21466317. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21466317. This recording will be available until the end of the day on May 21, 2010.Forward Looking StatementsForward-looking information provided in this news release relating to the Company's expectations regarding OSB demand and pricing and the Company's future prospects are forward-looking information pursuant to National Instrument 51-102 promulgated by the Canadian Securities Administrators. The Company believes that expectations reflected in such information are reasonable, but no assurance is given that such expectations will be correct. Forward-looking information is based on the Company's beliefs and assumptions based on information available at the time the assumption was made and on management's experience and perception of historical trends, current conditions and expected further developments as well as other factors deemed appropriate in the circumstances. Investors are cautioned that there are risks and uncertainties related to such forward-looking information and actual results may vary. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking information include, without limitation, factors detailed from time to time in the Company's periodic reports filed with the Canadian Securities Administrators and other regulatory authorities. The forward-looking information is made as of the date of this news release and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as explicitly required by securities laws. AINSWORTH LUMBER CO. LTD. Interim Consolidated Balance Sheets (In thousands of Canadian dollars) (Unaudited) --------------------------------------------------------------------------- March 31 December 31 2010 2009 --------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 75,941 $ 92,075 Short-term investments 61,749 61,654 Accounts receivable 20,602 13,730 Inventories 53,747 39,182 Income taxes receivable 448 509 Prepaid expenses 3,944 3,822 Assets held for disposal 1,223 2,475 --------------------------------------------------------------------------- 217,654 213,447 Property, Plant and Equipment 533,752 538,787 Intangible Assets 74,084 75,602 Other Assets 15,859 11,276 Assets Held for Disposal 7,103 7,133 --------------------------------------------------------------------------- $ 848,452 $ 846,245 --------------------------------------------------------------------------- --------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 28,970 $ 23,475 Current portion of future income tax liabilities 7,653 7,649 Current portion of long-term debt 10,285 10,743 Liabilities related to assets held for disposal 2,596 5,009 --------------------------------------------------------------------------- 49,504 46,876 Accrued Pension Benefit Liability 2,485 2,484 Reforestation Obligation 2,182 2,072 Long-term Debt 534,175 550,582 Future Income Tax Liabilities 35,615 35,209 Liabilities Related to Assets Held for Disposal 855 885 --------------------------------------------------------------------------- 624,816 638,108 SHAREHOLDERS' EQUITY Capital Stock 409,880 409,880 Contributed Surplus 939 876 Deficit (187,183) (202,619) --------------------------------------------------------------------------- 223,636 208,137 --------------------------------------------------------------------------- $ 848,452 $ 846,245 --------------------------------------------------------------------------- --------------------------------------------------------------------------- AINSWORTH LUMBER CO. LTD. Interim Consolidated Statements of Operations For the three months ended March 31 (In thousands of Canadian dollars, except per share and per share data) (Unaudited) --------------------------------------------------------------------------- 2010 2009 --------------------------------------------------------------------------- Sales $ 81,039 $ 69,208 --------------------------------------------------------------------------- Costs and Expenses Costs of products sold 61,557 63,718 Selling and administration 4,888 5,042 Amortization of property, plant and equipment and intangible assets 9,026 8,586 --------------------------------------------------------------------------- 75,471 77,346 --------------------------------------------------------------------------- Income (loss) before other items 5,568 (8,138) Finance expense (12,622) (14,513) Foreign exchange gain (loss) 18,175 (19,579) Gain on derivative financial instrument 5,030 - Costs of curtailed operations (1,329) (268) Other items 1,302 (904) --------------------------------------------------------------------------- Income (loss) before income taxes 16,124 (43,402) Income tax expense (recovery) 431 (9,427) --------------------------------------------------------------------------- Net income (loss) from continuing operations 15,693 (33,975) Net loss from discontinued operations (257) (20,262) --------------------------------------------------------------------------- Net income (loss) $ 15,436 (54,237) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Basic and diluted net income (loss) per common share: Continuing operations $ 0.16 $ (0.34) Discontinued operations (0.01) (0.20) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Basic and diluted net loss per common share $ 0.15 $ (0.54) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Weighted average number of common shares outstanding 100,100,000 100,000,000 Effect of dilutive stock options on continuing operations 417,160 - --------------------------------------------------------------------------- 100,517,160 100,000,000 --------------------------------------------------------------------------- --------------------------------------------------------------------------- AINSWORTH LUMBER CO. LTD. Interim Consolidated Statements of Cash Flows For the three months ended March 31 (In thousands of Canadian dollars) (Unaudited) --------------------------------------------------------------------------- 2010 2009 --------------------------------------------------------------------------- Cash Flows Used in Operating Activities Net income (loss) $ 15,436 $ (54,237) Items not affecting cash Amortization of property, plant and equipment 9,026 8,587 Non-cash portion of interest expense 4,622 5,450 Non-cash stock based compensation 63 - Foreign exchange (gain) loss on long-term debt (19,288) 21,727 Gain on derivative financial instrument (5,030) - Gain on disposal of property, plant and equipment (32) (180) Write-down of long-term wood deposits 648 - Adjustment to accrued pension benefit liability (29) - Impairment of property, plant and equipment of discontinued operations - 14,303 Change in non-current reforestation obligation 110 (258) Future income taxes 410 (9,770) Unrealized foreign exchange loss (gain) 326 (764) --------------------------------------------------------------------------- 6,262 (15,142) Change in non-cash operating working capital (16,548) (20,052) --------------------------------------------------------------------------- Cash used in operating activities (10,286) (35,194) --------------------------------------------------------------------------- Cash Flows Used in Financing Activities Repayment of long-term debt (2,109) (1,708) Repayment of capital lease obligations (89) (100) --------------------------------------------------------------------------- Cash used in financing activities (2,198) (1,808) --------------------------------------------------------------------------- Cash Flows Used in Investing Activities Short-term investments (95) (15) Additions to property, plant and equipment (3,093) (1,273) Proceeds on disposal of property, plant and equipment 63 289 (Increase) decrease in other assets (199) 81 --------------------------------------------------------------------------- Cash used in investing activities (3,324) (918) --------------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents (326) 848 --------------------------------------------------------------------------- Net Cash Outflow (16,134) (37,072) Cash and Cash Equivalents, Beginning of Period 92,075 197,928 --------------------------------------------------------------------------- Cash and Cash Equivalents, End of Period $ 75,941 $ 160,856 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Cash and cash equivalents $ 65,817 $ 156,433 Restricted cash 10,124 4,423 --------------------------------------------------------------------------- $ 75,941 $ 160,856 --------------------------------------------------------------------------- --------------------------------------------------------------------------- SUPPLEMENTAL INFORMATION Taxes paid $ 23 $ 6 Interest paid 1,799 2,004 --------------------------------------------------------------------------- --------------------------------------------------------------------------- FOR FURTHER INFORMATION PLEASE CONTACT: Ainsworth Lumber Co. Ltd. Bruce Gibson Investor Relations Contact 604-661-3200 604-661-3201 (FAX)