VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 30, 2013) - Ainsworth Lumber Co. Ltd. (TSX:ANS) today announced its financial results for the third quarter ended September 30, 2013.
Highlights:
- Generated adjusted EBITDA of $24.4 million during the quarter ($137.6 million year to date)
- Restarted the High Level mill in September
- Continued strong export growth
- With improved liquidity, exercised optional redemption of U.S.$35 million of our senior secured notes
- Obtained overwhelming shareholder approval of the proposed acquisition by LP
Ainsworth President and Chief Executive Officer, Jim Lake said, "While lower OSB prices caused our results to decline versus the previous quarter, we generated adjusted EBITDA of $24.4 million in the third quarter of 2013, bringing our year to date adjusted EBITDA to $137.6 million. We also continued to experience growth in our export markets, and are pleased to report that we have recommenced commercial operations at our High Level mill."
Financial Results
Sales of $114.3 million in the third quarter of 2013 were stable compared to the third quarter of 2012. During the third quarter of 2013, the average U.S. benchmark price for the North Central and Western Canada regions decreased by 19% and 26%, respectively, compared to the same period in 2012. The impact of the U.S. benchmark declines on our realized pricing was moderated by the timing of price fluctuations, as well as the effect of a weaker Canadian dollar relative to the third quarter of 2012. We also experienced stronger export pricing. Adjusted EBITDA was $24.4 million in the third quarter of 2013 compared to $37.0 million in the same period of 2012. Net income from continuing operations in the third quarter of 2013 was $10.7 million compared to $32.5 million in the third quarter of 2012. The $21.8 million decrease was due to a reduction in gross profit, increased costs of curtailed operations related to the start-up of the High Level mill, and a loss on the optional repayment of 10% of our senior notes, partially offset by a reduction in finance expense, and fluctuations in non-cash accounting gains and losses and income tax expense.
In the first nine months of 2013, sales were $383.7 million compared to $291.2 million in the same period of 2012. The $92.5 million increase was related to a 40.0% increase in realized pricing, partially offset by a 1.8% decrease in sales volumes. Adjusted EBITDA for the year to date was $137.6 million in 2013 compared to $63.5 million in 2012. Net income from continuing operations in the first nine months of 2013 was $50.0 million, compared to $21.7 million for the same period in 2012, representing an increase of $28.3 million. The increase included an increase in gross profit, and a decrease in finance expense, partially offset by increased costs of curtailed operations, and fluctuations in non-cash accounting gains and losses and income tax expense.
Margins
Adjusted EBITDA margin on sales for the third quarter of 2013 was 21.3% compared to 32.0% in the third quarter of 2012 (35.9% in the first nine months of 2013 compared to 21.8% in the same period of 2012).
Benchmark OSB pricing remained stable during the third quarter of 2013, although down from the previous quarter and the same period last year, with the North Central price for 7/16" OSB averaging U.S.$252 per msf (a decrease of 19% compared to the third quarter of 2012, and a 27% decrease compared to prior quarter). The Western Canadian price for 7/16" OSB averaged U.S.$230 per msf in the third quarter of 2013 (a decrease of 26% compared to the third quarter of 2012, and a 30% decrease compared to prior quarter).
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/ans1030fs.pdf.
| |
|
| Selected Financial Information |
|
| In millions of Canadian dollars, except per share data |
|
| |
|
| |
Three months ended September 30 |
|
Nine months ended September 30 |
|
| |
2013 |
|
2012 |
|
2013 |
|
2012 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
$ |
114.3 |
|
$ |
115.6 |
|
$ |
383.6 |
|
$ |
291.2 |
|
| Cost of products sold |
|
86.0 |
|
|
74.4 |
|
|
234.1 |
|
|
215.6 |
|
| Net income from continuing operations |
|
10.7 |
|
|
32.5 |
|
|
50.0 |
|
|
21.7 |
|
| Net income |
|
10.6 |
|
|
32.5 |
|
|
49.5 |
|
|
21.5 |
|
| Adjusted EBITDA (1) |
|
24.4 |
|
|
37.0 |
|
|
137.6 |
|
|
63.5 |
|
| Adjusted EBITDA margin (2) |
|
21.3 |
% |
|
32.0 |
% |
|
35.9 |
% |
|
21.8 |
% |
| Basic and diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income from continuing operations |
|
0.04 |
|
|
0.32 |
|
|
0.20 |
|
|
0.22 |
|
| |
Net income |
|
0.04 |
|
|
0.32 |
|
|
0.20 |
|
|
(0.21 |
) |
| |
Weighted average common shares outstanding (3) |
|
240.9 |
|
|
100.8 |
|
|
241.6 |
|
|
100.8 |
|
| (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. Adjusted EBITDA for 2012 has been restated to reflect an increase in pension expense related to the adoption of the amended IAS 19 - Employee Benefits, and to exclude interest income earned on investments. |
| (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 September 30, 2013. |
Liquidity
At September 30, 2013, Ainsworth's available liquidity, consisting of cash and cash equivalents, was $150.8 million, an improvement of $44.0 million since December 31, 2012 resulting from our stronger operating results. During the third quarter of 2013, we exercised an option to redeem U.S.$35 million of our 7.5% senior secured notes, which represented 10% of the outstanding principal balance.
Outlook
U.S. housing indicators continue to show improvement. Additionally, we continue to experience growth in our export markets, including Japan. As a result, we remain confident that the market will require additional supply in the years ahead. The restart of our High Level mill will allow us to meet the growing requirements of our existing customer base in North America and Asia as well as service new market segments.
100 Mile House Union Agreement
We reached a new four-year agreement with the unionized employees at our 100 Mile House mill, which was ratified on September 9, 2013. Key provisions of the agreement include: a four year term expiring on June 30, 2017, with a lump sum payment of $2,500 per person in Year 1 followed by wage increases of 2%, 2% and 2.5% in the following years. We now have collective agreements in place at both of our unionized facilities.
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 a total consideration which equates to $3.76 per Ainsworth common share, based on the closing price of LP common shares on September 3, 2013. The proposed transaction has a total value of approximately U.S.$1.1 billion, including the assumption of net debt.
On October 29, 2013, the transaction was approved at the Company's special meeting of shareholders, with approximately 99.9% of the votes cast at the meeting voting in favour of the Arrangement Agreement. Subject to obtaining Court and regulatory approvals and the satisfaction or waiver of other conditions of the Arrangement Agreement, Ainsworth expects the acquisition to close by the end of 2013 or during the first quarter of 2014.
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.
Conference Call Information
Ainsworth will hold a conference call on Thursday, October 31, 2013 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 November 7, 2013.
The financial results are based on International Financial Reporting Standards. Investors, analysts and other interested parties can access Ainsworth's 2013 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 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 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.
About Ainsworth
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.