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

Ainsworth Lumber Co. Ltd.

August 05, 2011 17:03 ET

Ainsworth Announces 2011 Second Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 5, 2011) - Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) -

Highlights

  • Export market sales grew to 38% of total sales from 7% in Q2 2010
  • Recorded adjusted EBITDA of $2.7 million, at an EBITDA margin of 3.4%
  • Barwick OSB mill recorded best quarter of production since its purchase in 2004
  • Maintained strong cash position during the quarter

Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) today reported its financial results for the second quarter of 2011.

Ainsworth President and CEO Rick Huff said, "Despite persistently challenging market conditions, Ainsworth achieved improvements in operational efficiency at our three OSB mills and a marked increase in overseas sales volumes as we worked to fulfill our commitment to supply our valued, long-term customers in Japan with the building materials they need to continue their recovery effort."

"The decision we made to implement strategic capital projects in the fourth quarter of 2010, which is typically a period of seasonally lower demand, resulted in operational efficiency gains in the second quarter of 2011. I am particularly pleased to report that, in Q2, our OSB mill in Barwick, Ontario recorded its highest volumes of production since its purchase in 2004. Additionally, the dryer improvements at 100 Mile House and the press overhaul at Grande Prairie enabled both mills to complete seamless changes in product mix," added Mr. Huff.

Adjusted EBITDA for the second quarter of 2011 was $2.7 million compared to $35.1 million in the same quarter of 2010. The difference was primarily the result of significantly lower North American OSB pricing in the second quarter of 2011 compared to the second quarter of 2010, a period recognized for extraordinarily high North American OSB pricing. In the second quarter of 2011, the published benchmark North Central price for 7/16" oriented strand board ("OSB") was U.S. $174 per msf, a decrease of 41% from an average quarterly price of U.S. $294 per msf in the second quarter of 2010. The average Western Canadian published price for 7/16" OSB was U.S. $151 per msf in the second quarter of 2011, down 49% from U.S. $299 msf in the same period of 2010.

In the second quarter of 2011, Ainsworth recorded a net loss from continuing operations of $12.9 million compared to a loss of $17.3 million in the second quarter of 2010. This decrease is primarily due to a $27.2 million increase in the unrealized foreign exchange gain on long-term debt, a $3.0 million decrease in amortization expense, a $1.1 million decrease in finance expense and a $10.9 million increase in income tax recovery, partially offset by a $33.1 million decrease in gross profit.

Selected Financial Information
In millions of Canadian dollars, except per share data
(Unaudited)
Three months ended Six months ended
June 30 June 30
2011 2010 2011 2010
Sales $ 80.5 $ 106.4 $ 151.9 $ 193.4
Cost of products sold 73.9 66.7 134.8 132.8
Net income from continuing operations (1) (12.9) (17.3) 64.8 (0.6)
Net income (loss) (1) (13.0) (17.8) 64.7 (1.4)
Adjusted EBITDA (2) 2.7 35.1 9.0 51.3
Adjusted EBITDA margin (3) 3.4% 33.0% 5.9% 26.5%
Basic and diluted earnings (loss) per share:
Net income from continuing operations (0.13) (0.17) 0.64 (0.01)
Net income (loss) (0.13) (0.18) 0.64 (0.02)
Weighted average common shares outstanding (4) 100.6 100.1 100.6 100.1
(1) Net income for the six months ended June 30, 2011 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 June 30, 2011.

Performance and Operational Efficiency

In the second quarter of 2011, Ainsworth recorded sales of $80.5 million, a decrease of $25.9 million compared to sales of $106.4 million in the second quarter of 2010. The decrease in sales for the year was the result of a 32.1% decrease in realized sale prices offset by a 11.4% increase in sales volume.

In the first six months of 2011, Ainsworth recorded sales of $151.9 million, a decrease of $41.5 million compared to sales of $193.4 million for the same period in 2010. The decrease in sales revenue was a result of a 21.8% decrease in realized pricing. Sale volume did not change significantly compared to 2010.

Costs of products sold for the second quarter of 2011 was $73.9 million compared to $66.7 million for the second quarter of 2010. The increase was the result of higher sales and increased sales of value-added products.

Costs of products sold for the first six months of 2011 was $134.8 million, a 1.5% increase over costs of $132.8 million over the same period in 2010. The increase in cost of products sold was a result of the small increase in sales volume, higher freight costs due to increased sales overseas, increased resin and wax pricing partially offset by a strengthened Canadian dollar and reductions in labour, repairs and maintenance, and subcontractor expenses.

Liquidity

As of June 30, 2011, Ainsworth's adjusted working capital was $103.7 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.

Conference Call Information

Ainsworth will hold a conference call on Monday, August 8, 2011 at 2:00 p.m. PDT (5:00 p.m. EDT) to discuss the 2011 second 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 August 15, 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
Condensed Interim Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
(Unaudited)
June 30 December 31
2011 2010
ASSETS
Current Assets
Cash and cash equivalents $ 28,511 $ 67,577
Short-term investments 50,341 59,413
Trade and other receivables 24,805 15,537
Inventories 40,144 39,400
Prepaid expenses 6,656 6,557
150,457 188,484
Property, Plant and Equipment 648,212 535,192
Intangible Assets 20,211 21,439
Other Assets 9,015 10,053
Assets Held for Disposal 5,546 7,042
$ 833,441 $ 762,210
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade and other payables $ 22,473 $ 24,833
Income taxes payable 1,310 1,302
Current portion of long-term debt 17,922 22,270
Liabilities related to assets held for disposal 968 827
42,673 49,232
Accrued Pension Benefit Liability 10,335 10,445
Reforestation Obligation 2,974 2,076
Long-term Debt 479,193 485,625
Deferred Income Tax Liabilities 45,354 27,208
Liabilities Related to Assets Held for Disposal 1,701 1,669
582,230 576,255
SHAREHOLDERS' EQUITY
Capital Stock 411,161 410,950
Contributed Surplus 1,733 1,349
Accumulated Other Comprehensive Loss (9,414) (9,414)
Deficit (152,269) (216,930)
251,211 185,955
$ 833,441 $ 762,210
AINSWORTH LUMBER CO. LTD.
Condensed Interim Consolidated Statements of Operations and Comprehensive Income
(In thousands of Canadian dollars, except share and per share data)
(Unaudited)
Three months ended
Six months ended
June 30 June 30
2011 2010 2011 2010
Sales $ 80,487 $ 106,447 $ 151,947 $ 193,443
Costs and Expenses
Costs of products sold (exclusive of amortization) 73,861 66,681 134,809 132,809
Selling and administration 4,080 5,437 8,639 10,350
Amortization of property, plant and equipment and intangible assets 6,337 9,318 11,984 18,120
84,278 81,436 155,432 161,279
(Loss) Income before Other Items (3,791) 25,011 (3,485) 32,164
Finance Expense (11,830) (12,944) (24,210) (26,331)
Foreign Exchange Gain (Loss) 2,364 (23,117) 14,420 (4,942)
(Loss) Gain on Derivative Financial Instrument (3,724) 649 804 5,679
Costs of Curtailed Operations (899) (458) (1,389) (1,787)
Gain on Acquisition of High Level - - 72,544 -
Other Items 1,161 605 95 1,907
(Loss) Income Before Income Taxes (16,719) (10,254) 58,779 6,690
Income Tax (Recovery) Expense (3,832) 7,026 (6,024) 7,258
(Loss) Income from Continuing Operations (12,887) (17,280) 64,803 (568)
Net Loss from Discontinued Operations (143) (491) (142) (748)
Net (Loss) Income, being Total Comprehensive (Loss) Income $ (13,030) $ (17,771) $ 64,661 $ (1,316)
Basic and diluted net (loss) income per common share:
Continuing operations $ (0.13) $ (0.17) $ 0.64 $ (0.01)
Discontinued operations (0.00) (0.01) (0.00) (0.01)
Basic and diluted net (loss) income per common share $ (0.13) $ (0.18) $ 0.64 $ (0.02)
Weighted average number of common shares outstanding 100,602,222 100,100,000 100,591,172 100,100,000
Effect of dilutive stock options on continuing operations - - 550,556 -
100,602,222 100,100,000 101,141,728 100,100,000
AINSWORTH LUMBER CO. LTD.
Condensed Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
Three months ended Six months ended
June 30 June 30
2011 2010 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (13,030) $ (17,771) $ 64,661 $ (1,316)
Items not affecting cash
Amortization of property, plant and equipment and intangibles 6,337 9,318 11,984 18,120
Non-cash portion of interest expense 5,092 5,300 10,436 10,670
Non-cash stock based compensation 223 211 444 299
Foreign exchange (gain) loss on long-term debt (2,468) 24,772 (14,984) 5,484
Gain on derivative financial instrument 3,724 (649) (804) (5,679)
Loss (Gain) on disposal of property, plant equipment (5) (82) 268 (114)
Write-down of property, plant and equipment 571 - 1,614 -
Write-down of long-term wood deposits - - - 648
Change in non-current reforestation obligation (499) (105) (475) 5
Deferred taxes (3,833) 7,163 (6,035) 7,370
Adjustment to net accrued pension benefit liability (9) 41 (78) 12
Gain on acquisition of High Level - - (72,544) -
Other 244 (514) 564 (188)
(3,653) 27,684 (4,949) 35,311
Change in non-cash operating working capital 14,541 15,667 2,484 941
Interest paid (13,332) (13,958) (14,995) (15,757)
Income taxes paid (1) - (3) (23)
Cash (used in) from operating activities (2,445) 29,393 (17,463) 20,472
CASH FLOWS FROM FINANCING ACTIVITIES
Reduction in long-term debt (2,824) (3,576) (5,015) (5,685)
Exercise of stock-options - - 174 -
Reduction in finance lease obligations (1,330) (176) (1,219) (192)
Cash used in financing activities (4,154) (3,752) (6,060) (5,877)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption (Purchase) of short-term investments 2,089 (9,471) 9,072 (9,566)
Acquisition of High Level - - (20,000) -
Additions to property, plant and equipment (1,513) (4,430) (3,845) (8,961)
Proceeds on disposal of property, plant and equipment 40 90 103 153
Increase in other assets (75) 36 (309) (163)
Cash used in investing activities 541 (13,775) (14,979) (18,537)
Effect of foreign exchange rate changes on cash and cash equivalents (244) 514 (564) 188
NET CASH OUTFLOW (6,302) 12,380 (39,066) (3,754)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,813 75,941 67,577 92,075
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 28,511 $ 88,321 $ 28,511 $ 88,321
Cash and cash equivalents 18,409 76,369 18,409 76,369
Restricted cash 10,102 11,952 10,102 11,952
$ 28,511 $ 88,321 $ 28,511 $ 88,321

To view a copy of the Financial Statements and Notes, visit the following link: http://media3.marketwire.com/docs/Q2_2011_FS.pdf

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