Ainsworth grew exports in 2013
Mar. 25, 2014 - Ainsworth Lumber generated an annual adjusted EBITDA of $148.9 million in 2013 versus $105.5 million in 2012, according to its financial results for the fourth quarter and year ended December 31, 2013. The company also had continued strong export growth.
Ainsworth President and Chief Executive Officer, Jim Lake said, "Ainsworth benefited in 2013 from the continued North American housing market recovery, although OSB prices did moderate in the second half of the year. Notwithstanding some near-term challenges in 2014 including transportation issues and extreme weather that have impacted OSB shipments and demand, the overall outlook remains positive with the consensus forecast for U.S. housing starts calling for further recovery in 2014. I am also pleased to report that our export markets exhibited strong growth, particularly in Japan."
LP acquisition of Ainsworth
On September 4, 2013, Ainsworth entered into an agreement with Louisiana-Pacific Corporation 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, which will be carried out by way of a court-approved plan of arrangement, was approved by approximately 99.9% of the votes cast by the shareholders of the company at a special meeting that took place on October 29, 2013, and subsequently received approval from the Supreme Court of British Columbia on October 31, 2013. 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. Subject to obtaining required regulatory approvals and the satisfaction or waiver of other conditions of the agreement, Ainsworth currently expects the acquisition to close during the second quarter of 2014.
Sales of $104.4 million in the fourth quarter of 2013 were $13.5 million lower than sales of $117.9 million for the same period in 2012. The decrease in sales was mainly due to an 18% decrease in realized pricing. The impact of the U.S. benchmark declines on realized pricing was moderated by the effect of a weaker Canadian dollar relative to the fourth quarter of 2012 combined with stronger export pricing. Notwithstanding transportation issues that restricted shipments in the fourth quarter, sales volumes increased 2.8% due to the onset of production at High Level.
Adjusted EBITDA was $11.3 million in the fourth quarter of 2013 compared to $42.0 million in the same period of 2012, largely as a result of lower realized pricing. Net loss from continuing operations in the fourth quarter of 2013 was $10.6 million compared to net income of $6.7 million in the fourth quarter of 2012. The $17.3 million decrease was due to the reduction in gross profit and increased selling and administration expense, partially offset by a reduction in finance expense, and fluctuations in non-cash accounting gains and losses and income tax expense.
Sales of $488.0 million in 2013 were $78.9 million higher than sales of $409.1 million in 2012. This increase was mainly due to a 22% increase in realized pricing for the year. The impact of the U.S. benchmark increases on the company's realized pricing was enhanced by the effect of a weaker Canadian dollar in 2013 on average relative to 2012 combined with stronger export pricing. Partially offsetting the price increases, there was a 0.7% decline in sales volumes as additional production from High Level was more than offset by maintenance downtime at our various mills and transportation issues toward the end of 2013.
Adjusted EBITDA for the year was $148.9 million in 2013 compared to $105.5 million in 2012, largely as a result of higher realized pricing. Net income from continuing operations was $39.4 million in 2013 compared to $28.4 million in 2012, representing an increase of $11.0 million. The increase included an increase in gross profit and a decrease in finance expense, partially offset by increased costs of curtailed operations, increased selling and administration expense, and fluctuations in non-cash accounting gains and losses and income tax expense.
Adjusted EBITDA margin on sales for the fourth quarter of 2013 was 10.8% compared to 35.6% in the fourth quarter of 2012. For the full year, adjusted EBITDA margin on sales was 30.5% in 2013 compared to 25.8% in 2012.
Benchmark OSB pricing remained stable during the fourth 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.$245 per msf (a decrease of 26% compared to the fourth quarter of 2012, and a 3% decrease compared to prior quarter). The Western Canadian price for 7/16" OSB averaged U.S.$219 per msf in the fourth quarter of 2013 (a decrease of 34% compared to the fourth quarter of 2012, and a 5% decrease compared to prior quarter).
At December 31, 2013, Ainsworth's available liquidity, consisting of cash and cash equivalents, was $137.4 million, an improvement of $30.6 million since December 31, 2012 resulting from our stronger operating results, partially offset by debt repayments and capital expenditures.
The overall long-term outlook remains positive for the U.S. housing market. Additionally, Ainsworth continues to experience growth in export markets, including Japan and China. As a result, the company remains confident that the market will require additional supply in the years ahead. The restart of the High Level mill will allow the company to meet the growing requirements of its existing customer base in North America and Asia as well as service new market segments.