Ainsworth Lumber Co. Ltd.
TSX : ANS
TSX : ANS.WT

Ainsworth Lumber Co. Ltd.

February 26, 2011 00:22 ET

Ainsworth Announces 2010 Fourth Quarter and Year End Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 25, 2011) - Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) -

Highlights

  • Sales increased by $43.6 million from $285.9 million in 2009 to $329.5 million in 2010
  • Increased adjusted EBITDA to $53.7 million in 2010, up from $5.2 million in 2009
  • Expanded adjusted EBITDA margin to 16.3% in 2010, up from 1.8% in 2009
  • Took advantage of seasonal low in Q4 to complete significant operational upgrades
  • Acquired remaining 50% of Footner OSB mill, increased incremental capacity at low-cost
  • Maintained strong cash position through the year

Ainsworth Lumber Co. Ltd. today reported its audited financial results for the fourth quarter and full year ended December 31, 2010.

Ainsworth President and CEO Rick Huff said, "With the full support of our employees, we have taken steps over the past two years to reduce costs, to focus on our core oriented strand board ("OSB") producing assets, and to target growth in value-added products. We have built a solid foundation for this business. During the year, Ainsworth made progress and advanced a number of important initiatives, including securing long term labour contracts with all of our unionized employees, completing critical maintenance and upgrades, growing our sales in key market segments, and strategically expanding our incremental capacity at an affordable cost. We entered 2011 with a positive momentum in our business and a clear focus towards building strong, sustainable value for our shareholders."

Ainsworth recorded net income of $9.4 million for the full year ended December 31, 2010, compared to a net loss of $21.6 million in 2009. For the fourth quarter of 2010, the Company recorded net income of $1.8 million, compared to a net loss of $12.4 million in the fourth quarter of 2009.

In 2010, Ainsworth recorded adjusted EBITDA of $53.7 million compared to adjusted EBITDA of $5.2 million in 2009. Adjusted EBITDA margin for the full year 2010 was 16.3% compared to an adjusted EBITDA margin of 1.8% in 2009. This improvement was primarily the result of the rapid rise in OSB prices in the first half of the year.

In the fourth quarter of 2010 Ainsworth performed significant maintenance and upgrades that required shutdowns at all three of the Company's mills. The 100 Mile House mill completed a major dryer improvement project, which will enhance the mill's ability to process trees infected by the Mountain Pine Beetle. Other projects included the replacement and improvement of certain press components at Grande Prairie, which will increase efficiency, as well as major maintenance and minor upgrades throughout Barwick. The maintenance downtime and the stronger Canadian dollar were the primary causes for an adjusted EBITDA loss of $3.8 million in the fourth quarter of 2010 compared to positive adjusted EBITDA of $2.4 million in the fourth quarter of 2009. Adjusted EBITDA margin on sales in the fourth quarter was negative 6.9% compared to a positive adjusted EBITDA margin of 3.6% for the same period in 2009.

In 2010, the average annual North Central market price for 7/16" oriented strand board (OSB) was U.S. $219 per msf, an increase of 33% from an average annual price of U.S. $162 per msf in 2009. The average annual Western Canadian market price for 7/16" OSB was U.S. $213 per msf in 2010, up 45% from U.S. $145 per msf in 2009. OSB prices peaked in the second quarter of 2010 with an average annual North Central market price of U.S. $294 per msf.

In the fourth quarter of 2010, the average North Central market price for 7/16" oriented strand board (OSB) was U.S. $191 per msf compared to U.S. $171 per msf in the fourth quarter of 2009. The average Western Canadian market price for 7/16" OSB was U.S. $166 per msf in the fourth quarter of 2010 compared to U.S. $169 per msf in the fourth quarter of 2009.

Selected Financial Information        
In millions of Canadian dollars, except per share data        
(Unaudited)        
  Three months ended Year ended
  December 31 December 31
  2010 2009 2010 2009
 
Sales $ 55.0 $ 67.1 $ 329.5 $ 285.9
Cost of products sold 56.4 60.4 259.6 263.1
Net income from continuing operations 1.8 (2.2) 10.3 15.9
Net income (loss) 1.8 (12.4) 9.4 (21.6)
Adjusted EBITDA(1) (3.8) 2.4 53.7 5.2
Adjusted EBITDA margin(2) -6.9% 3.6% 16.3% 1.8%
Basic and diluted earnings (loss) per share:        
  Net income from continuing operations 0.02 (0.02) 0.10 0.16
  Net income (loss) 0.02 (0.12) 0.09 (0.22)
  Weighted average common shares outstanding(3) 100.3  100.0  100.3 100.0
(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 loss (gain) on long-term debt, other foreign exchange (gain) loss, income tax expense (recovery) and non-recurring items.
(2) Adjusted EBITDA margin, a non-GAAP financial measure, is defined as adjusted EBITDA divided by sales.
(3) 100,502,222 common shares were outstanding on December 31, 2010.

Performance and Operational Efficiency

In 2010, Ainsworth recorded annual sales of $329.5 million, an increase of $43.6 million compared to sales of $285.9 million in 2009. The increase in sales for the year was the result of a 22.3% increase in realized sale prices. In the fourth quarter of 2010, Ainsworth recorded sales of $55.0 million compared to sales of $67.1 million in the same period in 2009. The decrease in sales in the fourth quarter, which has historically been a slower time for the business, was the result of planned downtime at all three OSB mills to complete a number of significant upgrades and perform scheduled maintenance. OSB shipments from continuing operations were 285,900 msf (3/8") and 1,456,900 msf (3/8") for the fourth quarter and full year 2010 respectively.

Costs of products sold for the full year 2010 were $259.6 million compared to $263.1 million for 2009. In the fourth quarter of 2010, the costs of products sold were $56.5 million, an 6.6% decrease compared to costs of $60.4 million in the fourth quarter of 2009.

On February 17, 2011, Ainsworth completed the purchase of the remaining 50% of Footner Forest Products Inc. and its oriented strand board (OSB) facility in High Level, Alberta from Grant Forest Products Inc. Total consideration of $20 million was financed with cash on hand. The Company now owns 100% of Footner. The Footner mill was originally designed to produce 860 million square feet per year (3/8th basis). Production at the mill was indefinitely curtailed in December of 2007. Ainsworth will continue to operate the Footner mill on a care and maintenance basis until market conditions support re-starting production at the mill.

Liquidity

As of December 31, 2010, Ainsworth's adjusted working capital was $134.6 million, compared to adjusted working capital of $163.7 million on December 31, 2009. Our working capital requirements in the short term are to fund any potential shortfalls from operations, interest payments, debt principal repayments and essential capital expenditures. Ainsworth continues to take a disciplined approach to managing its expenses. The Company believes it has the necessary working capital to manage effectively through all phases of the business cycle.

Excerpts from the Company's financial statements for the period ended December 31, 2010 are attached. To view the complete financial statements, including the notes to the financial statements, click on the following link: http://media3.marketwire.com/docs/2010%20Final%20Financial%20statements.pdf

Conference Call Information

Ainsworth will hold a conference call on Monday, February 28, 2011 at 10:00 a.m. PDT (1:00 p.m. EDT) to discuss the 2010 fourth quarter and year end results. The dial-in phone number is 1-800-319-4610 from inside the U.S. or Canada and 1-604-638-5340 from outside the U.S. or Canada. To access the post-view line, dial 1-800-319-6413, or 1-604-638-9010, Reservation 4176#. This recording will be available until the end of the day on March 7, 2011.

Forward Looking Statements

Forward-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.
Consolidated Balance Sheets
(In thousands of Canadian dollars)

  December 31 December 31
  2010 2009
 
ASSETS    
Current Assets    
  Cash and cash equivalents $ 67,577 $ 92,075
  Short-term investments 59,413 61,654
  Accounts receivable 15,537 13,730
  Inventories 39,400 39,182
  Income taxes receivable - 509
  Prepaid expenses 6,557 4,429
  Assets held for disposal 7 1,868
  188,491 213,447
Property, Plant and Equipment 525,707 538,787
Intangible Assets 78,519 75,602
Other Assets 11,371 11,276
Assets Held for Disposal 7,042 7,133
  $ 811,130 $ 846,245
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current Liabilities    
  Accounts payable and accrued liabilities $ 24,833 $ 23,475
  Income taxes payable 1,302 -
  Current portion of future income tax liabilities 5,324 7,649
  Current portion of long-term debt 22,107 10,743
  Liabilities related to assets held for disposal 834 5,009
  54,400 46,876
Accrued Pension Benefit Liability - 2,484
Reforestation Obligation 2,076 2,072
Long-term Debt 501,434 550,582
Future Income Tax Liabilities 33,400 35,209
Liabilities Related to Assets Held for Disposal 1,036 885
  592,346 638,108
     
     
SHAREHOLDERS' EQUITY    
Capital Stock 410,950 409,880
Contributed Surplus 1,013 876
Deficit (193,179) (202,619)
  218,784 208,137
  $ 811,130 $ 846,245

AINSWORTH LUMBER CO. LTD.
Consolidated Statements of Operations
(In thousands of Canadian dollars, except per share data)

  Year ended Year ended
  December 31 December 31
  2010 2009
 
Sales $ 329,486 $ 285,915
 
Costs and Expenses    
  Costs of products sold 259,555 263,131
  Selling and administration 18,590 19,717
  Amortization of property, plant and equipment and intangible assets 29,302 36,268
  307,447 319,116
 
Income (Loss) before other items 22,039 (33,201)
Finance expense (49,502) (53,061)
Foreign exchange gain 28,965 80,623
Gain on derivative financial instrument 6,234 -
Costs of curtailed operations (2,108) (2,532)
Other items 5,275 3,756
Income (Loss) before income taxes 10,903 (4,415)
Income tax expense (recovery) 597 (20,322)
Net income from continuing operations 10,306 15,907
Net loss from discontinued operations (866) (37,542)
Net income (loss) $ 9,440 $ (21,635)
 
Basic and diluted net income (loss) per common share:    
  Continuing operations $ 0.10 $ 0.16
  Discontinued operations (0.01) (0.38)
Basic and diluted net income (loss) per common share $ 0.09 $ (0.22)
Weighted average number of common shares outstanding 100,252,341 100,013,151
Effect of dilutive stock options on continuing operations 412,233 61,375
  100,664,574 100,074,526

AINSWORTH LUMBER CO. LTD.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)

  Year ended Year ended
  December 31 December 31
  2010 2009
CASH FLOWS USED IN OPERATING ACTIVITIES    
  Net income (loss) $ 9,440 $ (21,635)
  Items not affecting cash    
    Amortization of property, plant and equipment and intangible assets 29,302 36,268
    Non-cash portion of interest expense 18,351 19,684
    Non-cash stock based compensation 508 968
    Foreign exchange gain on long-term debt (30,368) (87,141)
    Gain on derivative financial instrument (6,234) -
    Gain on disposal of property, plant and equipment (470) (3,382)
    Write-down of long-term wood deposits 648 -
    Impairment of property, plant and equipment - 2,152
    Impairment of property, plant and equipment held for sale - 25,391
    Impairment of other assets of discontinued operations - 207
    Change in non-current reforestation obligation 4 (167)
    Future income taxes (4,134) (23,593)
    Adjustment to accrued pension benefit liability (3,651) (3,276)
    Other (1,373) 5,308
  12,023 (49,216)
    Change in non-cash operating working capital (5,250) 13,965
Cash provided by (used in) operating activities 6,773 (35,251)
CASH FLOWS USED IN FINANCING ACTIVITIES    
  Reduction in long-term debt (23,503) (10,326)
  Exercise of stock-options 700 174
  Repayment of capital lease obligations (362) (377)
Cash used in financing activities (23,165) (10,529)
CASH FLOWS USED IN INVESTING ACTIVITIES    
  Short-term investments 2,241 (60,068)
  Additions to property, plant and equipment (10,186) (6,838)
       
  Proceeds on disposal of property, plant and equipment 612 8,870
  Decrease (increase) in other assets (243) 3,271
Cash used in investing activities (7,576) (54,765)
Effect of foreign exchange rate changes on cash and cash equivalents (530) (5,308)
NET CASH OUTFLOW (24,498) (105,853)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 92,075 197,928
CASH AND CASH EQUIVALENTS, END OF YEAR $ 67,577 $ 92,075
  Cash and cash equivalents 56,736 81,631
  Restricted cash 10,841 10,444
  $ 67,577 $ 92,075
SUPPLEMENTAL INFORMATION    
  Taxes paid 23 112
  Interest paid 31,218 31,764

Contact Information