Ainsworth Announces 2010 Third Quarter Results
- Recorded fifth consecutive quarter of positive adjusted EBITDA
- Adjusted EBITDA margin of 10.9% in Q3 2010 compared to 3.3% in Q3 2009
- Secured long-term labour agreements at all facilities during the quarter
- Maintained strong cash position through the third quarter
Vancouver, British Columbia – Ainsworth Lumber Co. Ltd. (TSX: ANS and ANS.WT) today reported its unaudited financial results for the third quarter ended September 30, 2010.
In the third quarter of 2010, Ainsworth recorded adjusted EBITDA of $8.8 million, an increase of $6.2 million compared to $2.6 million recorded in the third quarter of 2009. Adjusted EBITDA margin on sales was 10.9% compared to 3.3% in the third quarter of 2009. This improvement was primarily the result of a $6.0 million improvement in gross profit (sales less cost of products sold (exclusive of amortization)).
North American OSB prices in the third quarter of 2010 were marginally higher relative to prices in the third quarter of 2009. The average publicly reported North Central price for 7/16” OSB during the third quarter of 2010 was U.S.$180 (per thousand square feet “msf” 7/16-inch basis), compared to the U.S. $178/msf average price reported during the third quarter of 2009.
Ainsworth recorded net income from continuing operations of $10.1 million in the third quarter of 2010, compared to net income of $22.3 million in the third quarter of 2009, despite an increase in gross profit of $6.0 million. This reduction is primarily due to a $30.0 million decrease in the unrealized foreign exchange gain on long-term debt.
Ainsworth President and CEO Rick Huff said, “We are pleased to report another quarter of strong performance for Ainsworth in terms of sales and EBITDA margins, despite a sharp decline in OSB prices. While macro economic trends in the U.S. indicate that a recovery in home building will be protracted, Ainsworth, as evidenced by its performance in the third quarter, is continuing to build a solid foundation for the business. Our aim is to have the flexibility to capitalize on near-term opportunities as well as the financial strength and incremental capacity to take full advantage of a return to normalized construction activity over the longer-term.”
“As we look ahead to the fourth quarter and the end of 2010, we will continue to fine tune our operations, capitalize on opportunities to grow our share in international markets, and further expand the mix of value-added product sales,” added Mr. Huff.
As previously disclosed, Ainsworth reached new four-year labour agreements with employees at its 100 Mile House, British Columbia and Barwick, Ontario mills during the third quarter. The Company now has long-term labour agreements in place with employees at all its unionized facilities.
(1) Adjusted EBITDA, a non-GAAP financial measure, is defined as net income (loss) 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) 100,502,222 common shares were outstanding on September 30, 2010.
Performance and Operational Efficiency
Sales of $81.1 million in the third quarter of 2010 were $2.3 million higher than sales of $78.8 million for the same period in 2009. The increase in sales was due to an 8.3% increase in our realized sales price offset by a 5.0% decrease in volume as compared to the high production rates achieved in the third quarter of 2009.
During the first nine months of 2010, realized sales prices increased by 27.0% while volume decreased by 1.2%, resulting in an overall increase in sales to $274.5 million compared to $218.8 million during the same period in 2009.
Costs of products sold were $67.8 million in the third quarter of 2010, representing a 5.2% decrease over costs of $71.6 million in the third quarter of 2009. The decrease for the quarter 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.
Costs of products sold during the first nine months of 2010 were not substantially different compared to the first nine months of 2009.
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.
Conference Call Information
Ainsworth will hold a conference call on Friday November 5, 2010 at 10:00 a.m. PDT (1:00 p.m. EDT) to discuss the third quarter 2010 results. The dial-in phone number is 1-800-319-4610, Reservation #4176. To access the post-view 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 12, 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.
For further information please contact:
Ainsworth Lumber Co. Ltd.
Suite 3194, Bentall 4
P.O. Box 49307
1055 Dunsmuir Street
Vancouver, B.C. V7X 1L3
Investor Relations Contact: