Ainsworth Releases Financial Statements for the First Quarter of 2006
Posted on: Friday, 12 May 2006, 06:08 CDT
Ainsworth Lumber Co. Ltd. (TSX:ANS) - today reported its financial results for the quarter ended March 31, 2006.
The company will hold a conference call at 8:30 A.M. PST (11:30 A.M. EST) on Friday, May 12, 2006 to discuss the company's first quarter results. The dial-in phone number is 1-800-840-6238, Reservation #21291934. To access the post-view line, dial 1-800-558-5253 or 1-416-626-4100, Reservation #21291934. This recording will be available until May 19, 2006.
Forward-looking statements in this news release relating to the Company's expectations regarding OSB demand and pricing are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. When used herein, words such as "expect" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions made by and information available to Ainsworth Lumber Co. Ltd. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements include, without limitation, the future demand for, and sales volumes of, the Company's products, future production volumes, efficiencies and operating cots, increases or decreases in the prices of the Company's products, the Company's future stability and growth prospects, the Company's future profitability and capital needs, including capital expenditures, and the outlook for and other future developments in the Company's affairs or in the industries in which the Company participates and factors detailed from time to time in the Company's periodic reports filed with the United States Securities and Exchange Commission, and other regulatory authorities. The Company has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
AINSWORTH LUMBER CO. LTD. Interim Consolidated Balance Sheets (In thousands of dollars) Unaudited --------------------------------------------------------------------- --------------------------------------------------------------------- March 31 December 31 2006 2005 ------------------------------ ASSETS Current Assets Cash and cash equivalents $ 143,252 $ 209,201 Short-term investments (Note 3) 40,052 - Accounts receivable, net of allowance for doubtful accounts of $Nil (2005: $Nil) 71,315 61,579 Inventories (Note 4) 150,596 108,530 Income taxes receivable 25,522 28,409 Prepaid expenses 5,549 14,762 Restricted cash 36,830 39,016 Timber licence deposits 5,998 5,998 --------------------------------------------------------------------- 479,114 467,495 Capital Assets 905,177 875,896 Intangible Assets 14,274 14,209 Other Assets 56,993 52,432 Goodwill 102,970 102,970 --------------------------------------------------------------------- $ 1,558,528 $ 1,513,002 --------------------------------------------------------------------- --------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 51,229 $ 30,348 Accrued liabilities 44,150 51,979 Current portion of future income taxes 35,822 31,362 --------------------------------------------------------------------- 131,201 113,689 Reforestation Obligation 3,787 4,348 Long-term Debt 863,668 859,540 Future Income Taxes 120,531 120,256 --------------------------------------------------------------------- 1,119,187 1,097,833 --------------------------------------------------------------------- Commitments (Note 8) Contingencies (Note 9) SHAREHOLDERS' EQUITY Capital stock 55,827 55,827 Cumulative translation adjustment (56,837) (58,343) Retained earnings 440,351 417,685 --------------------------------------------------------------------- 439,341 415,169 --------------------------------------------------------------------- $ 1,558,528 $ 1,513,002 --------------------------------------------------------------------- --------------------------------------------------------------------- The accompanying Notes to the Interim Consolidated Financial Statements are an integral part of these statements. Approved by the Board: 'Signed' 'Signed' Catherine Ainsworth Allen Ainsworth DIRECTOR DIRECTOR AINSWORTH LUMBER CO. LTD. Interim Consolidated Statements of Operations and Retained Earnings (In thousands of dollars, except share and per share data) Unaudited -------------------------------------------------------------------- Three months ended March 31 --------------------------- 2006 2005 -------------------------------------------------------------------- Sales $ 292,558 $ 345,578 -------------------------------------------------------------------- Costs and Expenses Costs of products sold (exclusive of amortization) 211,398 204,458 Selling and administration 8,203 7,325 Amortization of capital assets 26,656 24,954 -------------------------------------------------------------------- 246,257 236,737 -------------------------------------------------------------------- Operating Earnings 46,301 108,841 Finance Expense Interest 15,706 16,250 Amortization of financing costs and fees 1,229 1,224 -------------------------------------------------------------------- 16,935 17,474 Other Income (Expense) 4,530 (297) Foreign Exchange Loss on Long-term Debt (3,750) (5,893) -------------------------------------------------------------------- Income Before Income Taxes 30,146 85,177 Income Tax Expense 7,480 30,057 -------------------------------------------------------------------- Net Income 22,666 55,120 Retained Earnings, Beginning of Period 417,685 278,742 -------------------------------------------------------------------- Retained Earnings, End of Period $ 440,351 $ 333,862 -------------------------------------------------------------------- -------------------------------------------------------------------- Basic and diluted earnings per common share $ 1.55 $ 3.76 -------------------------------------------------------------------- -------------------------------------------------------------------- Weighted average number of common shares outstanding 14,649,140 14,649,140 -------------------------------------------------------------------- -------------------------------------------------------------------- The accompanying Notes to the Interim Consolidated Financial Statements are an integral part of these statements. AINSWORTH LUMBER CO. LTD. Interim Consolidated Statements of Cash Flows (In thousands of dollars) Unaudited -------------------------------------------------------------------- Three months ended March 31 --------------------------- 2006 2005 --------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 22,666 $ 55,120 Amounts not affecting cash Amortization of capital assets 26,656 24,954 Amortization of deferred financing costs and fees 1,229 1,224 Foreign exchange loss on long-term debt 3,750 5,893 Change in non-current reforestation obligation (561) 404 Future income taxes 4,794 31,677 Change in non-cash operating working capital (Note 7) (38,948) (104,184) -------------------------------------------------------------------- Cash provided by operating activities 19,586 15,088 -------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in capital lease obligations - (43) -------------------------------------------------------------------- Cash used in financing activities - (43) -------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Short-term investments (40,052) - Restricted cash 2,186 (23) Additions to capital assets (42,593) (11,986) Increase in other assets (3,462) (1,867) Timber licence deposits - (36,249) -------------------------------------------------------------------- Cash used in investing activities (83,921) (50,125) -------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents (1,614) - -------------------------------------------------------------------- NET CASH OUTFLOW (65,949) (35,080) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 209,201 206,063 -------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 143,252 $ 170,983 -------------------------------------------------------------------- -------------------------------------------------------------------- SUPPLEMENTAL INFORMATION Taxes paid $ 101 $ 49,388 -------------------------------------------------------------------- -------------------------------------------------------------------- Interest paid $ 3,393 $ 2,972 -------------------------------------------------------------------- -------------------------------------------------------------------- The accompanying Notes to the Interim Consolidated Financial Statements are an integral part of these statements.
1. BASIS OF PRESENTATION
These unaudited interim consolidated financial statements do not include all disclosures normally provided in annual financial statements and accordingly, should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2005. The Company's accounting policies are in accordance with accounting principles generally accepted in Canada. These accounting policies are consistent with those outlined in the 2005 annual audited financial statements. In management's opinion, these unaudited interim consolidated financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly such information. The results of operations for the interim periods are not necessarily indicative of the results to be expected in future periods.
Consolidation
These consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries and partnerships which include Ainsworth Engineered Corp., Ainsworth Engineered (USA), LLC, Ainsworth Corp., Chatham Forest Products, Inc., and Ainsworth Engineered Canada Limited Partnership.
Other Information Regarding Canadian GAAP
i. Comprehensive Income. Commencing with the Company's 2007 fiscal year, the new recommendations of the CICA for accounting for comprehensive income (CICA Handbook Section 1530), for the recognition and measurement of financial instruments (CICA Handbook Section 3855) and for hedges (CICA Handbook Section 3865) will apply to the Company. The concept of comprehensive income for purposes of Canadian GAAP will be to include changes in shareholders' equity arising from unrealized changes in the values of financial instruments. Comprehensive income as prescribed by U.S. GAAP is largely aligned with comprehensive income as prescribed by Canadian GAAP. In the Company's instance, however, there is a difference in other comprehensive income in that U.S. GAAP includes the concept of minimum pension liabilities and the cumulative translation adjustment and Canadian GAAP does not.
ii. Business Combinations. Commencing with the Company's 2007 fiscal year, the proposed amended recommendations of the CICA for accounting for business combinations will apply to the Company's business combinations, if any, with an acquisition date of January 1, 2007, or later. Whether the Company would be materially affected by the proposed amended recommendations would depend upon the specific facts of the business combinations, if any, occurring on or after January 1, 2007. Generally, the proposed recommendations will result in measuring business acquisitions at the fair value of the acquired entities and a prospectively applied shift from a parent company conceptual view of consolidation theory (which results in the parent company recording the book values attributable to non-controlling interests) to an entity conceptual view (which results in the parent company recording the fair values attributable to non-controlling interests).
2. SEGMENTED INFORMATION
The Company operates principally in Canada and the United States in one business segment, manufacturing wood panel products.
Sales attributed to countries based on location of customer are as follows:
Three months ended March 31 2006 2005 --------- ----------- Canada $ 16,066 $ 30,443 United States 269,407 306,642 Europe 2,897 3,320 Asia 4,188 5,173 -------------------------------------------------------------------- Total $ 292,558 $ 345,578 -------------------------------------------------------------------- -------------------------------------------------------------------- Capital assets attributed to countries based on location are as follows: March 31 December 31 2006 2005 --------- ----------- Canada $ 472,193 $ 437,768 United States 432,984 438,128 -------------------------------------------------------------------- Total $ 905,177 $ 875,896 -------------------------------------------------------------------- -------------------------------------------------------------------- Goodwill of $102,970,000 (2005: $102,970,000) is attributable to the acquisition of Voyageur Panel Canada Limited which is located in Canada. 3. SHORT-TERM INVESTMENTS Short-term investments consist of investments in high grade commercial paper with market values closely approximating book values at March 31, 2006. 4. INVENTORIES March 31 December 31 2006 2005 --------- ----------- Logs $ 89,792 $ 52,001 Panel products 22,606 20,652 Materials and supplies 38,198 35,877 -------------------------------------------------------------------- $ 150,596 $ 108,530 -------------------------------------------------------------------- --------------------------------------------------------------------
5. PENSION EXPENSE
Pension expense related to the Company's defined benefit plans is $1,595,000 (2005: $1,003,000) and is estimated using assumptions consistent with those applied in the Company's annual audited financial statements. Amortization of past service cost and the net actuarial gain is calculated in a manner consistent with that disclosed in the annual audited financial statements and is not considered significant to disclose separately. The Company made contributions of $Nil (2005: $336,500) for the period.
6. RELATED PARTY TRANSACTIONS
During the quarter, the Company paid $30,000 (March 31, 2005: $30,000) to a company owned by officers of the Company for rental charges relating to mobile forestry and transportation equipment. These transactions were conducted on normal commercial terms and prices.
7. CHANGE IN NON-CASH OPERATING WORKING CAPITAL
-------------------------------------------------------------------- Three months ended March 31 2006 2005 --------------------------- Accounts receivable (7,653) (20,558) Inventories (44,980) (37,718) Income taxes receivable 2,796 (51,172) Prepaid expenses 4,451 667 Accounts payable and accrued liabilities 6,438 4,597 -------------------------------------------------------------------- (38,948) (104,184) -------------------------------------------------------------------- --------------------------------------------------------------------
8. COMMITMENTS
As part of the Grande Prairie expansion project, the Company has entered into agreements to purchase machinery, equipment, engineering and management support services totaling approximately $135.7 million (December 31, 2005: $150.0 million). The terms of the contracts are varied and extend to 2007.
9. CONTINGENCIES
On September 28, 2005, the Company filed a notice of claim against Potlatch Corporation ("Potlatch") for the reimbursement of repair and related costs at the three Minnesota OSB mills purchased from Potlatch on September 22, 2004. The basis of the claim is that certain of the equipment and buildings were not in the condition and state of repair warranted by Potlatch at the time of purchase. The proceeds from the claim, if any, will be recorded when the terms of the settlement are certain.
In February and March 2006, the Company, along with other North American OSB producers, was named as a defendant in several lawsuits alleging violations of United States antitrust laws in relation to the pricing and supply of OSB from mid-2002 to the present. The claim is in its initial stages and the outcome is not determinable at this time.
In the normal course of its business activities, the Company is subject to a number of claims and legal actions that may be made by customers, suppliers and others. While the final outcome with respect to the actions outstanding or pending as at March 31, 2006 cannot be predicted with certainty, the Company believes either an adequate provision has been made or the resolution will not have a material effect on the Company's financial position, earnings or cash flows.
10. SUBSEQUENT EVENTS
On April 11, 2006 the Company entered into a purchase agreement with Deutsche Bank Securities Inc. in connection with the private placement of $87.6 million (U.S.$75.0 million) aggregate principal amount of new Senior Unsecured Notes. The Notes mature on April 1, 2013 and bear interest at a rate per annum, reset quarterly, equal to LIBOR plus 4%. Interest on the Notes is payable quarterly beginning on June 30, 2006. The net proceeds of the offering will partially finance the construction of a second production line at the Grande Prairie, Alberta facility. The closing of the offering of the Notes occurred on April 18, 2006.
On May 1, 2006 the Company reached an agreement with the union representing employees at the Grand Rapids, Minnesota mill. The contract covers a term of six years and has been ratified by the union.
On May 9, 2006, the Company signed an Agreement with the Government of Manitoba for the future construction and operation of an engineered wood production facility in an area north and east of Winnipeg, Manitoba. As part of the commitment, the Company is to provide $2.5 million performance security. In return the Company will be offered a Forest Management Licence for 838,000 cubic meters of suitable timber per year on a renewable 20 year basis. The Agreement is subject to a successful process of consultation with First Nations communities, and the successful negotiation and execution by all parties of related Operation Agreements and approvals.
Contacts: Ainsworth Lumber Co. Ltd. Robert Allen Chief Financial Officer (604) 661-3200 robert.allen@ainsworth.ca Ainsworth Lumber Co. Ltd. Bruce Rose General Manager, Corporate Development (604) 661-3200 (604) 661-3201 (FAX) bruce.rose@ainsworth.ca Ainsworth Lumber Co. Ltd. Suite 3194, Bentall 4, P.O. Box 49307 1055 Dunsmuir Street, Vancouver, B.C. V7X 1L3 (604) 661-3200 (604) 661-3201 (FAX) www.ainsworth.ca
SOURCE: Ainsworth Lumber Co. Ltd.
Source: MARKET WIRE
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