Ainsworth Lumber Co. Ltd.

Ainsworth Lumber Co. Ltd.

May 12, 2011 19:38 ET

Ainsworth Announces 2011 First Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 12, 2011) - Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) -


  • Recorded adjusted EBITDA of $6.4 million, at an EBITDA margin of 9.0%
  • Operated at above 90% capacity at its three operating mills
  • Acquired remaining 50% joint venture interest in 860 mmsf High Level mill and recorded a $72.5 purchase gain on the transaction
  • Sales in export markets increased 45% over Q1 2010
  • Maintained strong cash position during the quarter

Ainsworth Lumber Co. Ltd. today reported its financial results for the first quarter of 2011.

Adjusted EBITDA for the first quarter of 2011 was $6.4 million compared to $16.2 million in the same quarter of 2010. The decline was the result of lower shipment volumes due to weather related transportation issues, weaker pricing and a stronger Canadian dollar. We achieved an adjusted EBITDA margin of 9.0% in the quarter despite these challenging conditions.

In the first quarter of 2011, the Company recorded positive net income from continuing operations of $77.7 million, a significant increase compared to $16.7 million in the same period of 2010. The increase was due primarily to a $72.5 million purchase gain on the acquisition of the remaining 50% interest in the High Level, Alberta mill from Grant Forest Products.

Ainsworth President and CEO Rick Huff said, "In the first quarter of 2011, we continued to execute on a strategic plan that advances our ability to deliver innovative, value-added products, increases the geographic diversity of our sales, and positions the Company for long term growth. Our ability to deliver sustainable value in what continues to be a challenging environment is directly related to the progress we are making against this plan."

"As part of this plan, we are targeting growth through increased penetration of key overseas markets, particularly Japan and China, the latter of which is one of the world's fastest growing markets for wood building products. It is too soon to gauge the full market potential in China, but I believe it is a promising opportunity for Ainsworth in 2011 and beyond," added Mr. Huff.

The North Central price for 7/16" oriented strand board ("OSB") was U.S. $199 per msf in the first quarter of 2011, a decrease of 7% from an average quarterly price of U.S. $214 per msf in the first quarter of 2010. The average Western Canadian published price for 7/16" OSB was U.S. $182 per msf in the first quarter of 2011, down 19% from U.S. $226 msf in the same period of 2010. OSB prices were unexpectedly high in the first quarter of 2010 due to weather related supply disruptions in the southern United States which did not occur in the first quarter of 2011.

Selected Financial Information
In millions of Canadian dollars, except per share data
Three months ended
March 31
Sales$ 71.5$ 87.0
Cost of products sold60.966.1
Net income from continuing operations(1)77.716.7
Net income(1)77.716.4
Adjusted EBITDA(2)6.416.2
Adjusted EBITDA margin(3)9.0%18.6%
Basic and diluted earnings per share:
Net income from continuing operations0.770.17
Net income0.770.16
Weighted average common shares outstanding(4)100.6100.1
(1)Net income includes a purchase gain of $72.5 million on the acquisition of the High Level mill.
(2)Adjusted EBITDA, a non-IFRS 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.
(3)Adjusted EBITDA margin, a non-IFRS financial measure, is defined as adjusted EBITDA divided by sales.
(4)100,602,222 common shares were outstanding on March 31, 2011.

Performance and Operational Efficiency

In the first quarter of 2011, Ainsworth recorded sales of $71.5 million, a decrease of $15.5 million compared to sales of $87.0 million in the first quarter of 2010. The decrease in sales for the year was the result of a 11.0% decrease in volume combined with lower realized sale prices. OSB shipments from continuing operations were 355,976 msf (3/8") for the first quarter of 2011.

Costs of products sold for the first quarter of 2011 was $60.9 million compared to $66.1 million for the first quarter of 2010. The decrease was the result of lower volume and a stronger Canadian dollar relative to the U.S. dollar.

On February 17, 2011, Ainsworth completed the purchase of the remaining 50% of Footner Forest Products Inc. and its oriented strand board 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 the High Level mill, which 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 keep the High Level mill on a care and maintenance basis until market conditions support re-starting production at the mill.


As of March 31, 2011, Ainsworth's adjusted working capital was $111.8 million, compared to adjusted working capital of $134.5 million on December 31, 2010. 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.

To view the complete financial statements, including the notes to the financial statements, click on the following link:

Conference Call Information

Ainsworth will hold a conference call on Friday, May 13, 2011 at 10:00 a.m. PDT (1:00 p.m. EDT) to discuss the 2011 first quarter 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 May 20, 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.

Condensed Interim Consolidated Statements of Financial Position
(In thousands of Canadian dollars)

March 31December 31January 1
Current Assets
Cash and cash equivalents$ 34,813$ 67,577$ 92,075
Short-term investments52,43059,41361,654
Trade and other receivables19,54215,53713,730
Income taxes receivable--509
Prepaid expenses6,1836,5574,429
Assets held for disposal-71,868
Property, Plant and Equipment652,122535,192545,328
Intangible Assets20,55521,43915,934
Other Assets12,66410,05311,276
Assets Held for Disposal6,1007,0427,133
$ 863,091$ 762,217$ 793,118
Current Liabilities
Trade and other payables$ 33,585$ 24,833$ 23,475
Income taxes payable1,3101,302-
Current portion of long-term debt19,85822,27011,075
Liabilities related to assets held for disposal8068345,009
Accrued Pension Benefit Liability10,44510,4453,351
Reforestation Obligation3,4732,0762,072
Long-term Debt478,786485,625531,795
Deferred Income Tax Liabilities49,18727,20834,116
Liabilities Related to Assets Held for disposal1,6001,6691,394
Capital Stock411,161410,950409,880
Contributed Surplus1,5331,349958
Accumulated Other Comprehensive Loss(9,414)(9,414)(1,151)
$ 863,091$ 762,217$ 793,118

Condensed Interim Consolidated Statements of Operations and Comprehensive Income
(In thousands of Canadian dollars, except share and per share data)

Three months ended March 31
Sales$ 71,460$ 86,996
Costs and Expenses
Costs of products sold (exclusive of amortization)60,94866,128
Selling and administration4,5594,913
Amortization of property, plant and equipment and intangible assets5,6478,802
Income before Other Items3067,153
Finance Expense(12,380)(13,387)
Foreign Exchange Gain12,05618,175
Gain on Derivative Financial Instrument4,5285,030
Costs of Curtailed Operations(490)(1,329)
Gain on Acquisition of High Level72,544-
Other Items(1,066)1,302
Income Before Income Taxes75,49816,944
Income Tax (Recovery) Expense(2,192)232
Income from Continuing Operations77,69016,712
Net Income (Loss) from Discontinued Operations1(257)
Net Income, being Total Comprehensive Income$ 77,691$ 16,455
Basic and diluted net income (loss) per common share:
Continuing operations$ 0.77$ 0.17
Discontinued operations0.00(0.01)
Basic and diluted net income per common share$ 0.77$ 0.16
Weighted average number of common shares outstanding100,580,000100,100,000
Effect of dilutive stock options on continuing operations622,612417,160

Condensed Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)

Three months ended March 31
Net Income$ 77,691$ 16,455
Items not affecting cash
Amortization of property, plant and equipment and intangibles5,6478,802
Non-cash portion of interest expense5,3445,370
Non-cash stock based compensation22188
Foreign exchange gain on long-term debt(12,516)(19,288)
Gain on derivative financial instrument(4,528)(5,030)
Loss (Gain) on disposal of property, plant and equipment273(32)
Write-down of property, plant and equipment1,043-
Write-down of long-term wood deposits-648
Change in non-current reforestation obligation24110
Deferred taxes(2,202)207
Adjustment to net accrued pension benefit liability(69)(29)
Gain on acquisition of High Level(72,544)-
Change in non-cash operating working capital(12,057)(14,726)
Interest paid(1,663)(1,799)
Income taxes paid(2)(23)
Cash used in operating activities(15,018)(8,921)
Reduction in long-term debt(2,191)(2,109)
Exercise of stock-options174-
Increase (Reduction) in finance lease obligations111(16)
Cash used in financing activities(1,906)(2,125)
Short-term investments6,983(95)
Acquisition of High Level(20,000)-
Additions to property, plant and equipment(2,332)(4,531)
Proceeds on disposal of property, plant and equipment6363
Increase in other assets(234)(199)
Cash used in investing activities(15,520)(4,762)
Effect of foreign exchange rate changes on cash and cash equivalents(320)(326)
NET CASH OUTFLOW(32,764)(16,134)
Cash and cash equivalents24,49165,817
Restricted cash10,32210,124
$ 34,813$ 75,941

Contact Information