VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct 31, 2012) - Ainsworth Lumber Co. Ltd. (ANS.TO)(ANS.WT) today announced its financial results for the third quarter ended September 30, 2012.
Third Quarter Highlights:
- Achieved positive adjusted EBITDA of $37.3 million - $20.2 million higher than the prior quarter and $36.6 million higher than the third quarter of 2011.
- Liquidity position improved by $32.4 million during the third quarter.
- Subsequent to the quarter end, announced a comprehensive refinancing plan; this transaction will significantly improve our financial position.
Ainsworth Performance Improves In Third Quarter
Ainsworth President and Chief Operating Officer, Jim Lake, said, "I am pleased to report that Ainsworth recorded strong financial results in the third quarter of 2012. Adjusted EBITDA for the third quarter was $37.3 million, an increase of $20.2 million compared to the prior quarter and $36.6 million compared to the same quarter last year. These were our best quarterly adjusted EBITDA results since the first quarter of 2006. The improvement in EBITDA reflects a strong pricing environment during the quarter. From an operational standpoint, all three mills ran efficiently and generated an increase in production volumes."
Sales were $115.6 million in the third quarter of 2012, an increase of $43.8 million from the third quarter of 2011 due to an improvement in market prices and an increase in shipment volumes. Adjusted EBITDA for the third quarter of 2012 was $37.3 million compared to adjusted EBITDA of $0.7 million in the same quarter last year. Ainsworth recorded net income from continuing operations of $32.6 million in the third quarter of 2012, compared to a net loss of $58.9 million in the third quarter of 2011. This change is primarily the result of a $61.2 million increase in foreign exchange gain on long-term debt, a $36.5 million increase in gross profit (sales less cost of products sold (exclusive of amortization)), and a $12.5 million increase in gain on derivative financial instrument. The increase was partially offset by a $15.4 million increase in income tax expense, a $1.9 million increase in foreign exchange loss from operations, and a $0.8 million increase in interest on long-term debt.
Year to date sales of $291.2 million for 2012 were $43.8 million higher than 2011 as a result of market price increases and higher shipment volumes. Adjusted EBITDA for the nine months ended September 30, 2012 was $64.4 million compared to adjusted EBITDA of $9.8 million in the same period last year. Net income from continuing operations increased from $5.9 million in the first nine months of 2011 to $22.0 million in the first nine months of 2012. The increase resulted from a $54.1 million increase in gross profit, a $45.7 million increase in foreign exchange gain on long-term debt, and an $11.9 million increase in gain on derivative financial instrument. The increase was partially offset by a one-time gain on the High Level acquisition of $72.5 million in 2011, a $17.8 million increase in income tax expense, a $2.8 million increase in interest on long-term debt, and a $1.9 million increase in foreign exchange loss from operations.
Adjusted EBITDA margin for the third quarter of 2012 was 32.3% compared to 1.0% in the first quarter of 2011. For the year to date, the 2012 adjusted EBITDA margin was 22.1% compared to 4.4% in the same period of 2011.
In the third quarter of 2012, the North Central price for the benchmark 7/16" OSB averaged U.S. $313 per msf, an increase of 70% relative to the third quarter of 2011. The increase compared to the second quarter of 2012 was 33%. The Western Canadian price for the benchmark 7/16" OSB averaged U.S. $310 per msf in the third quarter of 2012, an increase of 126% relative to the third quarter of 2011. The increase compared to the second quarter of 2012 was 34%.
Selected financial information is presented in the table below. The full financial report is available to be viewed at the following link: http://media3.marketwire.com/docs/ans1031i.pdf
|Selected Financial Information|
|In millions of Canadian dollars, except per share data|
|Three months ended September 30||Nine months ended September 30|
|Cost of products sold||74.3||67.1||215.2||201.9|
|Net income (loss) from continuing operations||32.6||(58.9||)||22.0||5.9|
|Net income (loss)||32.6||(59.2||)||21.7||5.5|
|Adjusted EBITDA (1)||37.3||0.7||64.4||9.8|
|Adjusted EBITDA margin (2)||32.3||%||1.0||%||22.1||%||4.4||%|
|Basic and diluted earnings (loss) per share:|
|Net income (loss) from continuing operations||0.32||(0.59||)||0.22||0.05|
|Net income (loss)||0.32||(0.59||)||0.22||0.05|
|Weighted average common shares outstanding (3)||100.8||100.6||100.8||100.6|
- 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, cost of curtailed operations, stock option expense, finance expense, foreign exchange (gain) loss on long-term debt, other foreign exchange loss (gain), income tax expense (recovery), and non-recurring items.
- Adjusted EBITDA margin, a non-IFRS financial measure, is defined as adjusted EBITDA divided by sales.
- 100,833,888 common shares were outstanding on September 30, 2012.
At September 30, 2012, Ainsworth''s available liquidity, consisting of cash and cash equivalents, and short-term investments, was $86.6 million, an improvement of $32.4 million during the third quarter, and $28.9 million since December 31, 2011 resulting from our strong operating results year to date.
Subsequent to the quarter end, Ainsworth announced its intention to proceed with a comprehensive refinancing plan involving a fully backstopped rights offering to raise gross proceeds of $175 million through the issue of common shares (the "Rights Offering"), and a debt financing for gross proceeds of approximately $350 million (the "Debt Financing"). The aggregate net proceeds received by Ainsworth from the Rights Offering and the Debt Financing will be used to repay in full Ainsworth''s outstanding Senior Secured Term Loan due June 2014, and 11% Senior Unsecured Notes due July 2015. This refinancing plan is expected to position us well across industry cycles through reduced debt, lower borrowing costs, and the extension of our maturity profile.
We continue to leverage on Ainsworth''s operational expertise, superior products and customer relationships to ensure the Company is also well positioned from an operational standpoint, to capitalize on a recovery in U.S. home construction and increased demand from Asia.
The U.S. housing market during the quarter continued to show signs of improvement with significant increases in housing starts and building permits being registered year-over-year and sequentially. On a seasonally adjusted annual rate, housing starts during the quarter increased 28% relative to the same period last year and 7% relative to the second quarter of 2012. More importantly, housing permits, which are a measure of future demand, increased 33% relative to the same period last year and 11% relative to the second quarter of 2012. Industry forecasts of U.S. housing starts for 2012 and 2013 have recently been raised to 760,000 and 930,000 respectively. These levels are a marked improvement relative to the 610,000 starts recorded in 2011.
We believe a recovery in U.S. housing is now underway and should accelerate over the next 12 to 24 months. This will be positive for Ainsworth, notwithstanding certain idle capacity in the industry. We will be prudent in the start up of our High Level mill and will do so when we have identified a market for its production in both the North American and export markets. The High Level mill would represent a 50% increase in our current operating capacity and is a significant growth opportunity. It is one of the largest production facilities in the industry and will be an efficient producer, benefiting from an abundance of high quality, low cost fiber.
During the quarter we welcomed Rick Eng to the senior management team as Vice President, Finance and Chief Financial Officer. He brings a depth of experience in corporate finance to the senior management team and will be a valuable contributor in his new role with our company.
Conference Call Information
Ainsworth will hold a conference call on Thursday, November 1, 2012 at 10:00 am PDT (1:00 pm EDT) to discuss the 2012 third 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 of the U.S. and Canada, reservation 4176#. The recording of this conference call will be available until the end of day November 8, 2012.
The financial results are based on International Financial Reporting Standards. Investors, analysts and other interested parties can access Ainsworth''s 2012 Third Quarter Results as well as the Shareholders'' Letter, and Supplemental Information on Ainsworth''s website under the Investors / Financial Reports section at www.ainsworthengineered.com.
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 and financial position 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.