VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 1, 2014) - Ainsworth Lumber Co. Ltd. (ANS.TO) today announced its financial results for the first quarter ended March 31, 2014.
First Quarter Highlights:
- Generated adjusted EBITDA of $10.2 million notwithstanding logistical issues and weaker North American markets
- 60% improvement in safety results quarter over quarter
- Ongoing ramp up of High Level mill to meet customer needs
- Continued strong performance in key export markets
Ainsworth President and Chief Executive Officer, Jim Lake said, "Ainsworth had a challenging quarter as transportation issues and extreme weather impacted OSB shipments and demand. North American OSB prices were nearly 50% or U.S.$200/msf lower than the first quarter of 2013. Despite the recent weaker pricing, we believe that the outlook remains positive with further anticipated recovery of the U.S. housing market in 2014 as we move past the worst of the weather issues. We continue to see steady growth in our well-established export market of Japan as well as other markets such as China. From an operational perspective, I am pleased to report a significant improvement in our safety performance this quarter."
LP Acquisition of Ainsworth
On September 4, 2013, we entered into an agreement (the "Arrangement Agreement") with Louisiana-Pacific Corporation ("LP") under which LP will acquire all of the outstanding common shares of Ainsworth for $1.94 in cash plus 0.114 LP common shares per each Ainsworth common share, on a fully pro-rated basis. The transaction remains subject to obtaining regulatory approvals and the satisfaction or waiver of other conditions pursuant to the Arrangement Agreement. On April 18, 2014, the outside date for completion of the transaction was extended to June 2, 2014. The Arrangement Agreement permits either party to further extend the outside date for an additional 45 day period if required to obtain certain regulatory approvals. Both Ainsworth and LP continue to work with the Canadian Competition Bureau and the U.S. Department of Justice as they conduct their regulatory reviews of the transaction.
Further information about the Arrangement Agreement is set out in Ainsworth's management proxy circular dated September 24, 2013, which is available under Ainsworth's profile on www.sedar.com.
Sales of $107.8 million in the first quarter of 2014 were $34.0 million lower than sales of $141.8 million for the same period in 2013. The decrease in sales was mainly due to a 25.3% decrease in realized pricing. The impact of the U.S. benchmark declines on our realized pricing was moderated by the effect of a weaker Canadian dollar relative to the first quarter of 2013 and stable export pricing, combined with a 1.8% increase in sales volumes due to additional production from High Level. The increase in volume from High Level was partially offset by transportation issues during the first quarter of 2014.
Adjusted EBITDA was $10.2 million in the first quarter of 2014 compared to $62.5 million in the same period of 2013, largely as a result of lower realized pricing. Net loss from continuing operations in the first quarter of 2014 was $14.5 million compared to net income of $36.5 million in the first quarter of 2013. The $51.0 million decrease was due to a reduction in gross profit and increased selling and administration expense, combined with fluctuations in non-cash accounting gains and losses and income tax expense.
Adjusted EBITDA margin on sales was 9.5% compared to 44.1% in the same period of 2013. The decrease was largely related to the decrease in gross profit.
Benchmark OSB pricing was down significantly from the same period last year, with North Central and Western Canadian pricing for 7/16" OSB both averaging U.S.$219 per msf (a decrease of 47% and 48%, respectively). Sequentially, the North Central benchmark price decreased 11% versus the prior quarter, while the Western Canadian benchmark price was flat.
At March 31, 2014, Ainsworth's available liquidity, consisting of cash and cash equivalents, was $115.5 million, a reduction of $21.9 million since December 31, 2013 resulting from our seasonal log inventory build and capital expenditures.
Despite a weaker quarter for OSB pricing, we are optimistic about the outlook as U.S. housing indicators continue to show overall improvement. Additionally, we continue to experience growth and stable pricing in our traditional export market of Japan. We are also continuing to advance our opportunities in export markets such as China for industrial applications of OSB. The restart of our High Level mill will allow us to meet the growing requirements of our existing North American and export customers as well as service new market segments over the longer term.
Selected financial information is presented in the tables below. The full financial report is available to be viewed at the following link: http://media3.marketwire.com/docs/943220-fs.pdf
Selected Financial Information
|Three months ended March 31|
|(in millions of Canadian dollars, except per share data)|
|Cost of products sold||93.8||75.4|
|Net (loss) income from continuing operations||(14.5||)||36.5|
|Net (loss) income||(15.3||)||36.3|
|Adjusted EBITDA (1)||10.2||62.5|
|Adjusted EBITDA margin (2)||9.5||%||44.1||%|
|Basic and diluted earnings per share:|
|Net (loss) income from continuing operations||(0.06||)||0.15|
|Net (loss) income||(0.06||)||0.15|
|Weighted average common shares outstanding (3)||240.9||240.8|
|(1)||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), interest income earned on investments, income tax expense (recovery), and non-recurring items.|
|(2)||Adjusted EBITDA margin, a non-IFRS financial measure, is defined as adjusted EBITDA divided by sales.|
|(3)||240,906,309 common shares were outstanding on March 31, 2014.|
Reconciliation of Net Income to Adjusted EBITDA
|(in millions of Canadian dollars)|
|Net (loss) income from continuing operations||$||(14.5||)||$||36.5|
|Foreign exchange loss on long-term debt||13.6||7.6|
|Amortization of property, plant and equipment||7.3||6.4|
|Costs related to LP acquisition||2.4||-|
|Loss on disposal of property, plant and equipment||0.2||-|
|Income tax expense||(0.4||)||13.5|
|Gain on derivative financial instrument||(4.0||)||(8.1||)|
|Stock-based compensation expense||-||0.1|
|Cost of curtailed operations||-||1.6|
Conference Call Information
Ainsworth will hold a conference call on Friday, May 2, 2014 at 10:00 a.m. PT (1:00 p.m. ET). The dial-in phone number is 1-800-319-4610 from inside the USA or Canada, and +1-604-638-5340 from outside of the USA and Canada. To access the replay 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 May 9, 2014.
The financial results are based on International Financial Reporting Standards. Investors, analysts and other interested parties can access Ainsworth's 2014 First 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.
Ainsworth Lumber Co. Ltd. is a leading manufacturer and marketer of oriented strand board ("OSB") with a focus on value-added specialty products for markets in North America and Asia. Ainsworth's four OSB manufacturing mills, located in Alberta, British Columbia and Ontario, have a combined annual capacity of 2.5 billion square feet (3/8-inch basis). Ainsworth is a publicly traded company listed on the Toronto Stock Exchange under the symbol ANS.