Published: August 05, 2010
Ainsworth Announces 2010 Second Quarter Results
Ainsworth Lumber Co. Ltd. (TSX: ANS)(TSX: ANS.WT) today reported its unaudited financial results for the second quarter ended June 30, 2010.
Highlights
-- Company was well positioned to benefit from period of high OSB prices in
first half of 2010
-- Recorded fourth consecutive quarter of positive adjusted EBITDA
-- Adjusted EBITDA margin of 35.4% in Q2 2010 compared to -1.3% in Q2 2009
-- 35.7% growth in sales relative to Q2 2009 as a result of increased OSB
prices
-- Cash balance increased by $22.0 million in Q2 2010, closing at $159.6
million
In the second quarter of 2010, Ainsworth recorded positive adjusted EBITDA of $34.0 million, a $34.9 million improvement over negative $0.9 million in the same period of 2009. Adjusted EBITDA margin on sales was positive 35.4% compared to negative 1.3% in the second quarter of 2009. This improvement was primarily the result of a $35.3 million improvement in gross profit (sales less cost of products sold (exclusive of amortization)).
OSB prices remained relatively high in the second quarter of 2010 before declining toward the end of the quarter. The average publicly reported North Central price for 7/16" OSB during the second quarter of 2010 was U.S.$294 (per thousand square feet "msf" 7/16-inch basis), an increase of 101% relative to the U.S.$146/msf average price reported during second quarter of 2009. Prices reached U.S.$395/msf during the week ended April 30, 2010 but finished the quarter at U.S.$205/msf during the week ended June 25, 2010.
Ainsworth recorded a net loss from continuing operations of $17.3 million in the second quarter of 2010, compared to net income of $29.8 million in the second quarter of 2009, despite an increase in gross profit of $35.3 million. This reduction is primarily due to a $75.2 million increase in the unrealized foreign exchange loss on long-term debt and a $9.2 million increase in income tax expense.
Ainsworth President and CEO Rick Huff said, "Based on the work we have done to streamline the business and execute on our strategy, we were able to take full advantage of what proved to be very favourable demand conditions in the first six months of the year."
"As OSB prices return to what forecasters predict will be more modest and sustainable prices, we believe the same qualities that benefited us in the first half of 2010 - being customer oriented and committed to working safely and efficiently - will serve us well in the second half of the year. Our aim is to continue building the foundations of a business at Ainsworth that can be strong and profitable over the long term," said Mr. Huff.
On May 11, 2010, Brookfield Special Situations II (OSB) L.P. ("BSS") acquired 14,905,712 common shares and warrants to acquire 10,094,288 common shares of Ainsworth in a privately negotiated transaction. As a result, BSS now holds approximately 53.5% of the issued and outstanding common shares of Ainsworth on a fully diluted basis.
Selected Financial Information
In millions of Canadian dollars, except per share data
(Unaudited)
Three months ended Six months ended
June 30 June 30
-------------------------------------
2010 2009 2010 2009
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Sales $ 96.1 $ 70.8 $ 177.2 $ 140.0
Cost of products sold 57.5 67.4 119.0 131.2
Net (loss) income from
continuing operations (17.3) 29.8 (1.6) (4.1)
Net (loss) income (17.8) 24.7 (2.4) (29.5)
Adjusted EBITDA (1) 34.0 (0.9) 49.0 0.2
Adjusted EBITDA margin (2) 35.4% -1.3% 27.7% 0.1%
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Basic and diluted earnings
(loss) per share:
Net (loss) income from
continuing operations (0.17) 0.30 (0.01) (0.04)
Net (loss) income (0.18) 0.25 (0.02) (0.29)
Weighted average common
shares outstanding (3) 100.1 100.0 100.1 100.0
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(1) Adjusted EBITDA, a non-GAAP financial measure, is defined as net (loss)
income 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) 100,100,000 common shares were outstanding on June 30, 2010.
Performance and Operational Efficiency
Sales of $96.1 million in the second quarter of 2010 were $25.3 million higher than sales of $70.8 million for the same period in 2009. The increase in sales was due to a 46.6% increase in our realized sales price offset by a 7.4% decrease in volume as compared to the high production rates achieved in the second quarter of 2009.
During the first half of 2010, realized sales prices increased by 25.5% while volume increased by 1.0%, resulting in an overall increase in sales to $177.2 million compared to $140.0 million in the first half of 2009.
Cost of products sold was $57.5 million in the second quarter of 2010, representing a 14.7% decrease over costs of $67.4 million in the second quarter of 2009. During the first half of 2010, cost of products sold decreased by 9.3% to $119.0 million compared to the first half of 2009. The decrease for both periods is the result of a stronger Canadian dollar relative to the U.S. dollar, and savings in freight costs. These cost decreases were partially offset by increases in resin and wax pricing.
Liquidity
With respect to liquidity, we believe we have the necessary working capital to manage the Company effectively through all phases of the business cycle. We continue to take a disciplined approach to managing our cash and we are confident in our ability to fund any shortfall from operations, interest payments, debt principal repayments and essential capital expenditures.
Debt Maturities
Our debt principal repayments are scheduled to total $5 million in 2010 and $24 million in 2011. Our U.S. dollar Senior Secured Term Loan is scheduled to mature in 2014 and our U.S. dollar Senior Unsecured Notes mature in 2015. Ainsworth is permitted, under the terms of the Company's indenture, to borrow an additional U.S.$125 million of senior secured debt and U.S.$75 million of senior unsecured debt. The availability of this funding is dependent on credit markets.
Excerpts from the Company's financial statements for the period ended June 30, 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/Q2Ainsworth.pdf
Conference Call Information
Ainsworth will hold a conference call on Friday, August 6, 2010 at 10:00 am PDT (1:00 pm EDT) to discuss the second quarter 2010 results. The dial-in phone number is 1-800-624-2161, Reservation #21477302. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21477302. This recording will be available until the end of the day on August 13, 2010.
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.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
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June 30 December 31
2010 2009
--------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 88,321 $ 92,075
Short-term investments 71,220 61,654
Accounts receivable 20,894 13,730
Inventories 43,509 39,182
Income taxes receivable - 509
Prepaid expenses 4,854 3,822
Assets held for disposal 321 2,475
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229,119 213,447
Property, Plant and Equipment 529,212 538,787
Intangible Assets 73,952 75,602
Other Assets 16,472 11,276
Assets Held for Disposal 7,042 7,133
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$ 855,797 $ 846,245
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 21,727 $ 23,475
Income taxes payable 379 -
Current portion of future income tax liabilities 7,619 7,649
Current portion of long-term debt 10,614 10,743
Liabilities related to assets held for disposal 1,487 5,009
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41,826 46,876
Accrued Pension Benefit Liability 2,484 2,484
Reforestation Obligation 2,077 2,072
Long-term Debt 559,512 550,582
Future Income Tax Liabilities 43,007 35,209
Liabilities Related to Assets Held for Disposal 897 885
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649,803 638,108
SHAREHOLDERS' EQUITY
Capital Stock 409,880 409,880
Contributed Surplus 1,075 876
Deficit (204,961) (202,619)
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205,994 208,137
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$ 855,797 $ 846,245
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Operations
(In thousands of Canadian dollars, except share and per share data)
(Unaudited)
--------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2010 2009 2010 2009
--------------------------------------------------------------------------
Sales $ 96,147 $ 70,821 $ 177,186 $ 140,029
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Costs and Expenses
Costs of products sold 57,486 67,449 119,043 131,167
Selling and administration 5,362 5,067 10,250 10,109
Amortization of property,
plant and equipment and
intangible assets 8,864 9,932 17,890 18,519
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71,712 82,448 147,183 159,795
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Income (loss) before
other items 24,435 (11,627) 30,003 (19,766)
Finance expense (12,176) (13,362) (24,798) (27,875)
Foreign exchange
(loss) gain (23,117) 46,580 (4,942) 27,001
Gain on derivative
financial instrument 649 - 5,679 -
Costs of curtailed
operations (458) (487) (1,787) (755)
Other items 605 6,698 1,907 5,795
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(Loss) income before
income taxes (10,062) 27,802 6,062 (15,600)
Income tax expense
(recovery) 7,225 (2,022) 7,656 (11,449)
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(Loss) income from
continuing operations (17,287) 29,824 (1,594) (4,151)
Net loss from discontinued
operations (491) (5,120) (748) (25,382)
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Net (loss) income $ (17,778) 24,704 $ (2,342) (29,533)
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Basic and diluted net
(loss) income per
common share:
Continuing operations $ (0.17) $ 0.30 $ (0.01) $ (0.04)
Discontinued operations (0.01) (0.05) (0.01) (0.25)
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Basic and diluted
net loss per
common share $ (0.18) $ 0.25 $ (0.02) $ (0.29)
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Weighted average
number of common
shares outstanding 100,100,000 100,000,000 100,100,000 100,000,000
Effect of dilutive stock
options on continuing
operations 1,014,646 39,919 497,693 10,709
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101,114,646 100,039,919 100,597,693 100,010,709
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
--------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2010 2009 2010 2009
--------------------------------------------------------------------------
Cash Flows Used in
Operating Activities
Net (loss) income $ (17,778) $ 24,704 $ (2,342) $ (29,533)
Items not affecting cash
Amortization of
property, plant and
equipment and
intangible assets 8,864 9,932 17,890 18,519
Non-cash portion of
interest expense 4,560 4,850 9,182 10,300
Non-cash stock
based compensation 136 711 199 711
Foreign exchange
loss (gain) on
long-term debt 24,772 (50,448) 5,484 (28,721)
Gain on derivative
financial instrument (649) - (5,679) -
Gain on disposal of
property, plant and
equipment (82) (2,114) (114) (2,294)
Write-down of long-term
wood deposits - - 648 -
Adjustment to accrued
pension benefit liability 41 - 12 -
Impairment of property,
plant and equipment
of discontinued operations - - - 14,303
Write-down of property,
plant and equipment
held for sale - 8,219 - 8,219
Change in non-current
reforestation obligation (105) (298) 5 (556)
Future income taxes 7,358 (8,132) 7,768 (17,902)
Unrealized foreign
exchange loss (514) 2,536 (188) 1,772
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26,603 (10,040) 32,865 (25,182)
Change in non-cash
operating working capital 1,709 8,518 (14,839) (11,534)
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Cash provided by (used in)
operating activities 28,312 (1,522) 18,026 (36,716)
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Cash Flows Used in
Financing Activities
Repayment of
long-term debt (3,576) (3,315) (5,685) (5,023)
Repayment of capital
lease obligations (90) (93) (179) (193)
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Cash used in
financing activities (3,666) (3,408) (5,864) (5,216)
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Cash Flows Used in
Investing Activities
Short-term investments (9,471) 25 (9,566) 10
Additions to property,
plant and equipment (3,435) (636) (6,528) (1,909)
Proceeds on disposal of
property, plant and
equipment 90 4,241 153 4,530
Decrease (increase)
in other assets 36 2,035 (163) 2,116
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Cash (used in) provided by
investing activities (12,780) 5,665 (16,104) 4,747
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Effect of foreign exchange
rate changes on cash
and cash equivalents 514 (2,727) 188 (1,879)
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Net Cash Inflow (Outflow) 12,380 (1,992) (3,754) (39,064)
Cash and Cash Equivalents,
Beginning of Period 75,941 160,856 92,075 197,928
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Cash and Cash Equivalents,
End of Period $ 88,321 $ 158,864 $ 88,321 $ 158,864
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Cash and cash equivalents $ 76,369 $ 154,527 $ 76,369 $ 154,527
Restricted cash 11,952 4,337 11,952 4,337
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$ 88,321 $ 158,864 $ 88,321 $ 158,864
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SUPPLEMENTAL INFORMATION
Taxes paid $ - $ 104 $ 23 $ 110
Interest paid 13,958 14,582 $ 15,757 16,586
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