Ainsworth Announces 2012 Fourth Quarter and Year End Results
AINSWORTH ANNOUNCES 2012 FOURTH QUARTER AND YEAR END RESULTS
March 7, 2013 - Vancouver, British Columbia - Ainsworth Lumber Co. Ltd. (TSX: ANS and ANS.WT) today announced its financial results for the fourth quarter and year ended December 31, 2012.
Achieved best annual operating results since 2005, with annual adjusted EBITDA of $106.7 million versus $12.5 million in 2011
Exceeded previous annual production record by 4% for the three currently operating mills
Completed comprehensive refinancing during the fourth quarter and significantly improved our balance sheet
Commenced plans to restart our High Level, Alberta OSB facility in the second half of 2013
Ainsworth's Performance Continues to Improve
Ainsworth President and Chief Executive Officer, Jim Lake said, "I am pleased to report that Ainsworth's adjusted EBITDA for the year was $106.7 million in 2012, an increase of $94.2 million compared to 2011. Adjusted EBITDA margins were 26.1% on shipment volumes of 1.62 billion square feet (3/8" basis) and sales of $409.1 million. These impressive results not only reflect improving market conditions but were also made possible by our unrelenting focus on operational performance and our strategic commitment to value-added products and markets."
"Our three operating mills continued to generate efficiency gains, which enabled us to increase shipments and benefit from higher OSB prices. In 2012, we exceeded our prior year output by over 5% while also establishing a new annual production record. Looking forward into 2013, we expect that demand will remain strong and we are working towards restarting the High Level mill in the second half of the year, to meet both North American and export market demand."
Fourth quarter sales were $117.9 million in 2012 compared to $69.5 million in 2011. The $48.4 million increase in sales was mainly due to a 59.4% increase in realized pricing and a 6.4% increase in sales volumes as the Company responded to increased demand from the customers. Adjusted EBITDA for the fourth quarter of 2012 was $42.3 million compared to $2.7 million in the fourth quarter of 2011. Net income from continuing operations was $6.7 million in the fourth quarter of 2012 compared to $1.7 million in the same quarter last year. The $5.0 million increase in net income included a $39.1 million increase in gross profit. This increase was largely offset by fluctuations in non-cash accounting gains and losses and income tax expense.
Full year sales were $409.1 million in 2012 compared to $293.3 million in 2011. The $115.8 million increase in sales was the result of a 32.6% increase in realized pricing and a 5.2% increase in sales volume. Annual adjusted EBITDA was $106.7 million in 2012 compared to $12.5 million in 2011. Net income from continuing operations was $28.8 million in 2012 compared to $7.6 million in 2011. The $21.2 million increase in net income included a $93.2 million increase in gross profit. This increase was largely offset by fluctuations in non-cash accounting gains and losses and income tax expense.
Adjusted EBITDA margin on sales was 35.9% compared to 3.9% in the same period of 2011. For the full year, adjusted EBITDA margin on sales was 26.1% in 2012 compared to 4.3% in 2011.
The North Central price indicator for the benchmark 7/16" OSB averaged U.S.$271/msf in 2012 (a 46% increase over 2011) with the Western Canadian price indicator for the benchmark 7/16" OSB very close behind at U.S.$269/msf (a 75% increase over 2011). During the fourth quarter, pricing continued to strengthen, with the North Central and Western Canada price indicators averaging U.S.$332 and U.S.$331/msf, respectively.
During the fourth quarter of 2012, the Company completed a private placement of U.S.$350 million of Senior Secured Notes and a fully backstopped equity rights offering for gross proceeds of $175 million. The net proceeds from the Senior Secured Notes issuance and the rights offering were used to repay the Company's Senior Secured term loan and Senior Unsecured Notes, which were otherwise due in 2014 and 2015. The Senior Secured Notes are secured by substantially all of the Company's assets on a first priority basis. These refinancing transactions have increased our financial flexibility by reducing our debt levels, lowering our borrowing costs, and extending our debt maturity profile substantially to 2017.
At December 31, 2012, Ainsworth's available liquidity, consisting of cash and cash equivalents, was $106.8 million, an improvement of $20.2 million from September 30, 2012, and $49.1 million since December 31, 2011 resulting from our stronger operating results. Ainsworth is also permitted under the terms of the Senior Secured Notes to borrow at least an additional U.S.$170 million of senior secured and unsecured debt subject to the limitations set forth in the indenture.
At the time of this news release, all indicators regarding market conditions are positive. U.S. foreclosures and existing home inventories are trending down, home prices and builder confidence are improving and housing forecasts are being upgraded. At the same time, OSB inventories in the supply chain are lean, mill order files are long and structural panel prices are at the highest levels since May 2004. Against this backdrop of optimism with respect to market demand, structural panel producers are making some plans to bring idle capacity back on line. However, we are of the view that supply will come on gradually and lag demand growth in the near-term.
We are actively working towards restarting our High Level mill in the second half of this year. At 860 million square feet of production capacity, the mill is one of the largest facilities in the industry and will be an efficient producer with strong access to high quality, low cost fiber. High Level will enable us to continue to meet the growing requirements of our existing customer base while allowing us to service new market segments, both in terms of geography and technical innovation. The unique characteristics of the High Level continuous press and equipment will also enable us to expand our reach into industrial applications as well as markets such as China where we have identified and are developing significant opportunities for innovative and proprietary products. These diversification efforts are strategic to our Company as we establish a sustainable business throughout the cycle.
The Board of Directors is pleased to announce the appointment of Jim Lake as President and Chief Executive Officer of the Company, effective immediately. Mr. Lake joined Ainsworth in June 2010 and has held the role of President and Chief Operating Officer since September 2011. "We look forward to Jim's continued strong leadership as Ainsworth executes its strategy as a leading forest products company," said Peter Gordon, Chairman of the Board. In addition, Mr. Lake has been appointed to the Board of Directors.
Conference Call Information
Ainsworth will hold a conference call on Friday, March 8, 2013 at 10:00 am PDT (1:00 pm EDT) to discuss the 2012 fourth quarter and year end 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. A recording of this conference call will be available until the end of day March 15, 2013. To access the post-view line, dial 1-800-319-6413, or +1-604-638-9010, reservation 4176#.
The financial results are based on International Financial Reporting Standards. Investors, analysts and other interested parties can access Ainsworth's Financial Statements, Management's Discussion and Analysis, 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.
Vice President, Finance and Chief Financial Officer