Stella-Jones Inc.

Stella-Jones Inc.

March 17, 2005 09:00 ET

Stella-Jones Inc. Announces Record Sales and Profits for the Year Ended December 31, 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: STELLA-JONES INC.

TSX SYMBOL: SJ

MARCH 17, 2005 - 09:00 ET

Stella-Jones Inc. Announces Record Sales and Profits
for the Year Ended December 31, 2004

WESTMOUNT, QUEBEC--(CCNMatthews - March 17, 2005) - The Board of
Directors of Stella-Jones Inc. (TSX:SJ) is pleased to announce its
financial results for the Corporation's year ended December 31, 2004.

Fiscal 2004 compared to 2003 was marked by unprecedented sales growth of
33.6%, an improvement in net earnings of 94.2% and, for the second year
in a row, the Corporation also grew through acquisition with the
purchase of certain wood treating assets of Les Industries Legare (1998)
Ltee ("Legare") in April 2004.

For the year ended December 31, 2004, the Corporation's sales were
$129.0 million compared with sales of $96.5 million in 2003, an
increase of $32.5 million. This significant increase is, in part, a
result of a full year's sales contribution from the operations of the
three treating plants acquired from Cambium Group Inc. in July 2003,
compared to the five-month contribution included in last year's sales.
The Corporation also achieved solid sales growth of 59.5% and 21.1% in
its core business categories of railway ties and consumer lumber,
respectively. Finally, this year's sales include eight months of the
revenues generated from the former clients of Legare, following its
acquisition in April 2004. Net earnings for the year increased to $7.3
million or $0.72 per share, compared with $3.8 million or $0.40 per
share a year earlier.

Sales for the fourth quarter ended December 31, 2004 were $26.5 million,
compared with $22.2 million for the corresponding quarter of 2003. All
product sectors sales were ahead of last year, with railway ties and
domestic utility poles accounting for over 67% of the $4.3 million
quarterly sales increase. The Corporation recorded net earnings of $1.3
million, or $0.12 per share for the fourth quarter of 2004, compared to
net earnings of $658,000, or $0.06 per share for the same period in
2003.

The Corporation's working capital as at December 31, 2004 increased to
$36.6 million from $25.9 million at the prior year end, as the Company
significantly reduced its short-term bank indebtedness over the course
of 2004. The Company's current ratio was 2.19:1 at year end versus
1.72:1 one year earlier. The long term debt to equity ratio was an
enviable 0.33:1 at year end and the Company's strong balance sheet and
existing capital sources will allow it to finance both internal and
external growth opportunities.

Shareholders' equity increased to $49.3 million in 2004, representing a
book value of $4.82 per common share as compared with $42.3 million or
$4.22 per share a year earlier.

Commenting on the Corporation's results, President Brian McManus stated:
"Our strategy of reducing costs through economies of scale and plant
specialization is working. We have successfully integrated our recent
acquisitions without significantly adding to our sales and management
infrastructure. We are on track for another successful year in 2005."

Stella-Jones Inc. 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



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 fourth quarter ended December 31, 2004 have
not been reviewed by the Company's external auditors.

(Signed)

George Labelle
Senior Vice-President and Chief Financial Officer

Westmount, Quebec
March 16, 2005


CONSOLIDATED BALANCE SHEETS

as at December 31, 2004 and December 31, 2003 2004 2003
($) ($)
--------------------------------------------------------------------
--------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Accounts receivable 13,205,649 11,973,823
Inventories 52,769,898 48,578,915
Prepaid expenses 857,582 532,925
Future income taxes 522,000 610,000
--------------------------------------------------------------------
67,355,129 61,695,663

PROPERTY, PLANT AND EQUIPMENT 30,543,495 31,383,850
FUTURE INCOME TAXES 301,000 271,000
--------------------------------------------------------------------
98,199,624 93,350,513
--------------------------------------------------------------------
--------------------------------------------------------------------

LIABILITIES
CURRENT LIABILITIES
Bank indebtedness 11,420,760 19,527,592
Accounts payable and accrued liabilities 13,878,043 13,683,318
Income taxes 1,774,917 136,478
Current portion of long-term debt 3,699,048 2,474,636
--------------------------------------------------------------------
30,772,768 35,822,024

LONG-TERM DEBT 12,485,436 10,308,220
FUTURE INCOME TAXES 4,784,000 4,149,000
EMPLOYEE FUTURE BENEFITS 872,380 785,517
--------------------------------------------------------------------
48,914,584 51,064,761
--------------------------------------------------------------------
--------------------------------------------------------------------

SHAREHOLDERS' EQUITY
CAPITAL STOCK 20,954,892 20,439,188
RETAINED EARNINGS 28,330,148 21,846,564
--------------------------------------------------------------------
49,285,040 42,285,752
--------------------------------------------------------------------
98,199,624 93,350,513
--------------------------------------------------------------------
--------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF EARNINGS

three months ended twelve months ended
Dec. 31, Dec. 31,

2004 2003 2004 2003
($) ($) ($) ($)
unaudited unaudited
--------------------------------------------------------------------
--------------------------------------------------------------------
SALES 26,454,186 22,182,722 128,972,067 96,544,003
--------------------------------------------------------------------
EXPENSES
Cost of sales 21,844,183 19,130,503 105,745,054 81,612,161
Selling and
administrative 1,729,143 1,127,717 7,319,579 5,004,173
Foreign exchange loss 145,692 2,959 360,008 385,358
Amortization of
property, plant and
equipment 841,949 733,856 3,076,849 2,634,918
Write-down of property,
plant and equipment --- --- 273,956 ---
Gain on disposal of
property, plant and
equipment (126,936) (21,977) (520,320) (21,977)
--------------------------------------------------------------------
24,434,031 20,973,058 116,255,126 89,614,633
--------------------------------------------------------------------
OPERATING EARNINGS 2,020,155 1,209,664 12,716,941 6,929,370
INTEREST ON
LONG-TERM DEBT 228,403 187,881 943,631 495,383
OTHER INTEREST 139,199 260,187 725,201 834,207
--------------------------------------------------------------------
EARNINGS BEFORE
INCOME TAXES 1,652,553 761,596 11,048,109 5,599,780
--------------------------------------------------------------------

PROVISION FOR
INCOME TAXES 374,000 104,000 3,757,000 1,846,000
--------------------------------------------------------------------

NET EARNINGS FOR
THE PERIOD 1,278,553 657,596 7,291,109 3,753,780
--------------------------------------------------------------------
--------------------------------------------------------------------

NET EARNINGS PER
COMMON SHARE 0.12 0.06 0.72 0.40

DILUTED NET EARNINGS
PER COMMON SHARE 0.12 0.06 0.70 0.39
--------------------------------------------------------------------
--------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

for the years ended December 31, 2004 and 2003 2004 2003
($) ($)
--------------------------------------------------------------------
--------------------------------------------------------------------
BALANCE - BEGINNING OF YEAR 21,846,564 18,855,355
Net earnings for the year 7,291,109 3,753,780
Dividends on common shares (807,525) (762,551)
--------------------------------------------------------------------
BALANCE - END OF YEAR 28,330,148 21,846,564
--------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF CASH FLOWS

three months ended twelve months ended
Dec. 31, Dec. 31,
2004 2003 2004 2003
($) ($) ($) ($)
unaudited unaudited
--------------------------------------------------------------------
--------------------------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net earnings for
the period 1,278,553 657,596 7,291,109 3,753,780
Adjustments for:
Amortization of
property, plant
and equipment 841,949 733,856 3,076,849 2,634,918
Write down of
property, plant
and equipment --- --- 273,956 ---
Gain on disposal
of property, plant
and equipment (126,936) (21,977) (520,320) (21,977)
Employee future
benefits 30,613 25,573 86,863 81,823
Stock-based
compensation 4,312 17,300 17,244 17,300
Future income taxes 203,000 (354,840) 693,000 359,161
--------------------------------------------------------------------
2,231,491 1,057,508 10,918,701 6,825,005
--------------------------------------------------------------------
Change in non-cash
working capital
components
Decrease (increase) in:
Accounts receivable 5,852,985 4,065,433 (1,231,826) 5,216,110
Inventories (2,748,766) (3,928,078) (2,734,331) (3,317,937)
Prepaid expenses (442,434) 300,401 (324,657) 34,206
Increase (decrease) in:
Accounts payable
and accrued
liabilities (1,189,031) (1,633,889) 631,023 (2,297,416)
Income taxes (274,832) (62,007) 1,638,439 (1,576,013)
--------------------------------------------------------------------
1,197,922 (1,258,140) (2,021,352) (1,941,050)
--------------------------------------------------------------------
3,429,413 (200,632) 8,897,349 4,883,955
--------------------------------------------------------------------

FINANCING ACTIVITIES
(Decrease) increase
in bank
indebtedness (2,718,268) 2,668,640 (8,106,832) 8,343,679
Increase in
long-term debt 999,940 165,790 5,759,829 9,980,032
Repayment of
long-term debt (677,094) (1,929,479) (2,358,201) (7,294,190)
Proceeds from issuance
of common shares 163,082 9,587 498,460 3,922,327
Dividends (406,705) (400,332) (807,525) (762,551)
--------------------------------------------------------------------
(2,639,045) 514,206 (5,014,269) 14,189,297
--------------------------------------------------------------------

INVESTING ACTIVITIES
Business acquisition 22,948 158,416 (1,883,704)(15,306,235)
Purchase of property,
plant and equiment (1,316,517) (493,967) (2,914,542) (3,788,994)
Proceeds from disposal
of property, plant
and equipment 503,201 21,977 915,166 21,977
---------------------------------------------------------------------
(790,368) (313,574) (3,883,080)(19,073,252)
---------------------------------------------------------------------

NET CHANGE IN CASH
AND CASH EQUIVALENTS
DURING THE PERIOD --- --- --- ---
CASH AND CASH EQUIVALENTS
- BEGINNING AND END
OF THE PERIOD --- --- --- ---
---------------------------------------------------------------------
---------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
Interest paid 437,558 522,336 1,668,924 1,313,337
Income taxes paid 490,126 281,719 1,433,060 3,308,932
---------------------------------------------------------------------


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, 2003
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 - Changes in Accounting Policies

Generally accepted accounting principles and financial statement
presentation

Effective January 1, 2004, the Company adopted the new Canadian
Institute of Chartered Accountants' (CICA) Handbook sections 1100,
"Generally Accepted Accounting Principles", and 1400, "General Standards
of Financial Statement Presentation". Section 1100 describes what
constitutes Canadian Generally Accepted Accounting Principles ("GAAP")
and its sources and provides guidance on sources to consult when
selecting accounting policies and determining appropriate disclosures
when a matter is not dealt with explicitly in the primary sources of
GAAP. Section 1400 provides general guidance on financial statement
presentation and further clarifies what constitutes fair presentation in
accordance with GAAP.

The impact on the results of the Company is that delivery costs are no
longer recorded as a reduction of gross sales but recorded under cost of
sales. For the three months ended December 31, 2004, delivery costs
amounted to $1,322,698 (2003 - $851,732) and for the twelve months ended
December 31, 2004, delivery costs amounted to $5,282,074 (2003 -
$4,511,290). The adoption of these recommendations has no other
significant impact on these unaudited interim consolidated financial
statements.

Hedging relationships

Effective January 1, 2004, the Company adopted on a prospective basis,
the new CICA recommendations relating to hedging relationships. This
accounting guideline addresses the identification, designation,
documentation and effectiveness of the hedging relationships for the
purpose of applying hedge accounting. In addition, it deals with the
discontinuance of hedge accounting and establishes conditions for
applying hedge accounting. Under this guideline, documentation of the
information related to hedging relationships is required and the
effectiveness of the hedges must be demonstrated and documented.
Effective January 1, 2004, the Company has in place all necessary hedge
documentation to be able to apply hedge accounting for its foreign
exchange forward contracts.

Employee future benefits

In 2004, the CICA amended CICA Handbook Section 3461 "Employee Future
Benefits". Section 3461 requires additional disclosures about the
periodic benefit cost of employee future benefit plans. The Company
offers employees benefits consisting of group health and dental care,
life insurance and complementary retirement benefits. These plans are
not funded. The new annual disclosures are effective for years ending
on or after June 30, 2004, and new interim disclosures are effective for
periods ending on or after that date. As at September 30, 2004, the
Company adopted the amendments of Section 3461 and the additional
interim period disclosures of the employee future benefit plans can be
found in Note 3.

NOTE 3 - Employee Future Benefits

For the three months ended December 31, 2004, the benefit cost
recognized for employee future benefit plans was $37,083 (2003 -
$32,356). For the twelve months ended December 31, 2004, the benefit
cost recognized was $101,669 (2003 - $95,704).

NOTE 4 - Business Acquisition

On April 26, 2004, the Company acquired certain wood treating assets of
Les Industries Legare (1998) Ltee, a privately held producer and
marketer of pressure treated wood products primarily serving the
industrial market. Assets acquired consisted of inventories and certain
production equipment related to the pressure treated wood operations.
The total purchase price was $2,033,704. The consideration was cash,
except for a balance of sale of $150,000 payable in one year from the
date of acquisition, and was financed through the Company's existing
bank operating line. The acquisition has been accounted for using the
purchase method and, accordingly, the purchase price was allocated to
the assets acquired based on their estimated fair values as of the
acquisition date, as follows:



ASSETS ACQUIRED:
Inventory $1,456,652
Equipment 577,052
-----------------------------------------
$2,033,704
-----------------------------------------
-----------------------------------------


NOTE 5 - Share Information

As at December 31, 2004, the capital stock issued and outstanding
consisted of 10,234,639 common shares (10,012,961 as at December 31,
2003).

NOTE 6 - 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.

NOTE 7 - Comparative Figures

Certain comparative figures have been reclassified in order to comply
with the basis of presentation adopted in the current year.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    STELLA-JONES INC.
    George Labelle
    Senior Vice-President and Chief Financial Officer
    (514) 934-8665