Stella-Jones Inc.

Stella-Jones Inc.

May 04, 2005 09:59 ET

Stella-Jones Announces Strong Q1 Results at Annual and Special Meeting


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: STELLA-JONES INC.

TSX SYMBOL: SJ

MAY 4, 2005 - 09:59 ET

Stella-Jones Announces Strong Q1 Results at Annual and
Special Meeting

WESTMOUNT, QUEBEC--(CCNMatthews - May 4, 2005) - Stella-Jones Inc.
(TSX:SJ) - All amounts are expressed in Canadian dollars.



- Net earnings increase by 50% to $1.5 million, or $0.15 per share
- Revenues increase 24.1%
- Company to continue strategy of accretive growth and industry
consolidation


Stella-Jones Inc. (TSX:SJ) today announced strong first quarter results
for the period ended March 31, 2005 at its Annual and Special Meeting.
The strong results continued the upward growth of a landmark 2004,
during which the Company's sales and earnings hit historic highs driven
by strategic acquisitions, organic growth and rigorous cost cutting.

Sales for Stella-Jones in the first quarter of this year were $30.9
million, a $6.0 million or 24.1% increase over last year's first quarter
sales of $24.9 million. Net earnings increased by 50.0% to $1.5
million, or $0.15 per share in the first quarter compared to $1.0
million, or $0.10 per share one year earlier.

All product categories posted sales increases over last year's first
quarter results. Domestic utility pole sales were particularly strong in
the first three months of the year compared to 2004, with both
industrial treated wood and residential lumber sales also making
significant advances.

"As you can see from the first quarter results, we have continued the
momentum generated throughout 2004 and we have made a solid start to the
year," said Brian McManus, President and CEO of Stella-Jones Inc. at the
Company's annual meeting. "This is a further demonstration that our
business model is working and producing sustained, profitable results."

Gross margin in the first three months of 2005 was 17.1% of sales, a
slight decrease from the gross margin of 17.6% sales in the first
quarter of 2004. Higher energy costs were the primary contributing
factors to this decrease. Selling and administrative expenses increased
$300,000 to $1.9 million in the quarter, but these costs as a percentage
of sales actually declined from 6.5% to 6.0% due to the higher level of
operating activities.

"The strong start to the 2005 fiscal year bodes well for continued
improvements in our financial performance from our core markets," George
Labelle, Senior Vice-President and Chief Financial Officer, told
shareholders. "We are seeing increased ordering activity in certain
sectors of the domestic pole market and plant specialization has
improved operating efficiencies in all product categories, allowing us
to better control costs in the face of increasing energy expenses."

2004: A Milestone Year for Stella-Jones

During the Company's annual meeting, shareholders were informed that the
past year was a significant milestone in the history of Stella-Jones.
For the first time ever, Stella-Jones surpassed the $125 million mark in
revenues. Sales grew an unprecedented 33.6% during the year, to $129.0
million compared with $96.5 million in 2003. Other highlights of the
year included:



- Year-over-year sales growth of 59.5% in railway ties and 21.1% in
consumer lumber
- Year-over-year net earnings increase of $3.5 million, or 94.2%
- Earnings per share of $0.72 for 2004, compared to $0.40 per share
for 2003
- The acquisition of the wood treating assets of Les Industries
Legare Inc.


During the year Stella-Jones moved decisively to consolidate plant
capacity and reduce operating costs. The Company's strategy for reducing
costs included implementation of a plan for plant specialization, which
saw a number of Stella-Jones facilities transformed into product
specialty centers. The Company also centralized its East Coast treating
operations and consolidated its Quebec forestry and pole peeling
operations during the year. Finally, the Company completed the
integration of the 2003 acquisition of Cambium Group Inc.

"Clearly, our strategy of reducing costs through economies of scale is
working. We are on track to solidify our competitive position as the
leading low cost producer of high quality treated wood products in our
industry," concluded Mr. McManus.

ABOUT STELLA-JONES

Stella-Jones Inc. (TSX:SJ) is a leading Canadian producer and marketer
of industrial structures and support components produced with pressure
treated wood products, specializing in the production of treated wood
poles supplied to electrical utilities and telecommunications companies
on both a national and international basis. Other principal products
include railway ties, marine and foundation pilings, construction
timbers, highway guardrail posts and treated wood for bridges. The
Company also specializes in providing customized services to lumber
companies and wholesalers for the treatment of consumer lumber products
for outdoor applications. The Company's common shares are listed on the
Toronto Stock Exchange. Visit our website: www.stella-jones.com

Forward-Looking Statements

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, and general market
trends or economic changes. As a result, readers are advised that actual
results may differ from expected results.



HEAD OFFICE

4269 Ste-Catherine Street West
7th Floor
Westmount, Quebec
H3Z 1P7
Tel.: (514) 934-8666
Fax: (514) 934-5327

EXCHANGE LISTINGS

The Toronto Stock Exchange
Stock Symbol: "SJ"

TRANSFER AGENT
AND REGISTRAR

Computershare Trust Company of Canada
INVESTOR RELATIONS

George Labelle
Senior Vice-President and
Chief Financial Officer
Tel.: (514) 934-8665
Fax: (514) 934-5327
glabelle@stella-jones.com

NOTICE

The interim unaudited consolidated financial statements of Stella-
Jones Inc. for the first quarter ended March 31, 2005 have not been
reviewed by the Company's external auditors.

(Signed)

George Labelle
Senior Vice-President and Chief Financial Officer

Westmount, Quebec
May 4, 2005



CONSOLIDATED BALANCE SHEETS

March 31, December 31,
2005 2004
($) ($)
as at March 31, 2005 and December 31, 2004 unaudited
---------------------------------------------------------------------
---------------------------------------------------------------------

ASSETS
CURRENT ASSETS
Accounts receivable 18,868,989 13,205,649
Inventories 54,521,972 52,769,898
Prepaid expenses 723,484 857,582
Future income taxes 512,000 522,000
---------------------------------------------------------------------

74,626,445 67,355,129
PROPERTY, PLANT AND EQUIPMENT 31,528,775 30,543,495
FUTURE INCOME TAXES 309,000 301,000
---------------------------------------------------------------------

106,464,220 98,199,624
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES

CURRENT LIABILITIES
Bank indebtedness 19,942,912 11,420,760
Accounts payable and accrued liabilities 14,814,678 13,878,043
Income taxes 164,660 1,774,917
Current portion of long-term debt 3,608,132 3,699,048
---------------------------------------------------------------------
38,530,382 30,772,768

LONG-TERM DEBT 11,525,337 12,485,436
FUTURE INCOME TAXES 4,636,000 4,784,000
EMPLOYEE FUTURE BENEFITS 917,380 872,380
---------------------------------------------------------------------

55,609,099 48,914,584
---------------------------------------------------------------------
---------------------------------------------------------------------

SHAREHOLDERS' EQUITY
CAPITAL STOCK 20,982,043 20,954,892
RETAINED EARNINGS 29,873,078 28,330,148
---------------------------------------------------------------------

50,855,121 49,285,040
---------------------------------------------------------------------

106,464,220 98,199,624
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying Notes.



CONSOLIDATED STATEMENTS OF EARNINGS
unaudited


three months ended March 31,
2005 2004
($) ($)
---------------------------------------------------------------------
---------------------------------------------------------------------

SALES 30,903,483 24,946,777
---------------------------------------------------------------------

EXPENSES
Cost of sales 25,623,517 20,547,310
Selling and administrative 1,861,664 1,615,855
Foreign exchange (gain) loss (9,188) 20,046
Amortization of property, plant and equipment 756,602 747,793
---------------------------------------------------------------------

28,232,595 22,931,004
---------------------------------------------------------------------

OPERATING EARNINGS 2,670,888 2,015,773
INTEREST ON LONG-TERM DEBT 210,527 236,028
OTHER INTEREST 158,431 203,189
---------------------------------------------------------------------

EARNINGS BEFORE INCOME TAXES 2,301,930 1,576,556
---------------------------------------------------------------------

PROVISION FOR INCOME TAXES 759,000 568,000
---------------------------------------------------------------------

NET EARNINGS FOR THE PERIOD 1,542,930 1,008,556
---------------------------------------------------------------------
---------------------------------------------------------------------

NET EARNINGS PER COMMON SHARE 0.15 0.10

DILUTED NET EARNINGS PER COMMON SHARE 0.15 0.10
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying Notes.



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
unaudited

2005 2004
for the three months ended March 31, 2005 and 2004 ($) ($)
---------------------------------------------------------------------
---------------------------------------------------------------------

BALANCE - BEGINNING OF YEAR 28,330,148 21,846,564
Net earnings for the period 1,542,930 1,008,556
---------------------------------------------------------------------

BALANCE - END OF PERIOD 29,873,078 22,855,120
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying Notes.



CONSOLIDATED STATEMENTS OF CASH FLOWS
unaudited three months ended March 31,
2005 2004
($) ($)
---------------------------------------------------------------------
---------------------------------------------------------------------
CASH FLOWS FROM
Operating activities
Net earnings for the period 1,542,930 1,008,556
Adjustments for:
Amortization of property,
plant and equipment 756,602 747,793
Gain on disposal of property,
plant and equipment - (31,900)
Employee future benefits 45,000 18,750
Stock-based compensation 4,000 4,310
Future income taxes (146,000) 96,000
---------------------------------------------------------------------

2,202,532 1,843,509
---------------------------------------------------------------------
Change in non-cash working capital components
Decrease (increase) in:
Accounts receivable (5,663,340) (4,679,177)
Inventories (1,752,074) (4,682,405)
Prepaid expenses 134,098 (662,620)

Increase (decrease) in:
Accounts payable and accrued liabilities 936,635 1,225,948
Income taxes (1,610,257) 73,943
---------------------------------------------------------------------

(7,954,938) (8,724,311)
---------------------------------------------------------------------

(5,752,406) (6,880,802)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in bank indebtedness 8,522,152 3,163,998
Increase in long-term debt 15,000 4,759,889
Repayment of long-term debt (1,066,015) (507,632)
Proceeds from issuance of common shares 23,151 18,762
---------------------------------------------------------------------

7,494,288 7,435,017
---------------------------------------------------------------------
Investing activities
Purchase of property, plant and equipment (1,741,882) (586,115)
Proceeds from disposal of property,
plant and equipment - 31,900
---------------------------------------------------------------------

(1,741,882) (554,215)

NET CHANGE IN CASH AND CASH
EQUIVALENTS DURING THE PERIOD - -
---------------------------------------------------------------------

CASH AND CASH EQUIVALENTS
- BEGINNING AND END OF THE PERIOD - -
---------------------------------------------------------------------
---------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
Interest paid 316,088 340,536
Income taxes paid 2,506,757 389,790
---------------------------------------------------------------------
See accompanying Notes.


NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

unaudited

NOTE 1 - Accounting Policies

These unaudited interim consolidated financial statements have been
prepared following the same accounting policies as the December 31, 2004
audited consolidated financial statements. These unaudited interim
consolidated financial statements and notes should be read in
conjunction with the Company's latest annual consolidated financial
statements.

NOTE 2 - Employee Future Benefits

For the three months ended March 31, 2005, the benefit cost recognized
for employee future benefits was $48,868 (2004 - $22,642).

NOTE 3- Share Information

As at May 4, 2005, the capital stock issued and outstanding consisted of
10,242,355 common shares (10,234,639 as at December 31, 2004).

NOTE 4- Seasonality

The Company's domestic operations follow a seasonal pattern, with pole,
tie and industrial lumber shipments strongest in the second quarter to
provide industrial end users with product for their summer maintenance
projects. Consumer lumber treatment sales also follow the same seasonal
pattern. Inventory levels of railway ties and utility poles are
typically highest in the first quarter in advance of the summer shipping
season. The first, third and fourth quarters usually generate similar
sales.

-30-

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