VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 10/26/10 -- Investors, analysts and other interested parties can access Acadian Timber Corp.'s 2010 Third Quarter Results conference call via webcast on Wednesday, October 27, 2010 at 10:00 a.m. ET at www.acadiantimber.com or via teleconference at 1-800-319-4610, toll free in North America. For overseas calls please dial +1-604-638-5340, at approximately 9:50 a.m. ET. The teleconference taped rebroadcast can be accessed at 1-800-319-6413 or +1-604-638-9010 and enter passcode 2826.
All figures in Canadian dollars unless otherwise noted
Acadian Timber Corp. ("Acadian") (TSX: ADN) today reported financial and operating results(1) for the three months ended September 25, 2010 (the "third quarter"). EBITDA of $4.8 million for the third quarter of 2010 was $4.1 million higher than Acadian's EBITDA in the third quarter of 2009, excluding the $0.6 million gain from a land sale in the prior year. EBITDA margin increased to 27% from 9% in the comparable period of 2009.
"Demand for softwood sawlogs was relatively strong during the third quarter and we were able to merchandise effectively to achieve a larger proportion of sales from this higher margin product. In addition, Acadian saw average selling prices increase for all primary products", said Reid Carter, Chief Executive Officer of Acadian. "Acadian was also very successful in its corporate initiatives by arranging a new 5 year loan at a very attractive interest rate with a flexible covenant package to replace its term debt maturing in February 2011."
Subsequent to the third quarter, Acadian obtained a commitment letter from a major institutional lender for a 5 year, US$72.5 million loan to refinance the existing debt maturing on February 27, 2011. The terms of this financing, including the interest rates, are very favourable. Acadian anticipates that at the time of issuance of this new loan the effective interest rate will be approximately 3.4%, a rate management believes reflects the high credit quality of Acadian's assets. Compared to the existing debt facilities, Acadian expects incremental free cash flow of approximately $1.3 million per year resulting from the lower interest costs and the company will also benefit from a more flexible covenant package.
For the third quarter of 2010, Acadian generated net sales of $17.9 million on sales volume of 345.8 thousand m3, which represents a $3.5 million, or 24% improvement in net sales revenue over the same period in 2009. This increase was driven primarily by higher prices across all primary products, a greater proportion of sales being softwood sawlogs and the greater contribution from the Crown land service agreement.
For the nine months ended September 25, 2010, Acadian generated net sales of $50.5 million on sales volume of 1,016.8 thousand m3 as compared to net sales of $46.7 million on sales volume of 915.3 thousand m3 in the comparable period of 2009. EBITDA of $11.6 million during the nine months ended September 25, 2010 is $2.1 million more than the comparable period of 2009, excluding the $0.6 million gain from a land sale in the prior year.
Review of Operations
2010 Financial and Operating Highlights
Three Months Ended Nine Months Ended
---------------------------------------------
(CAD millions except per share Sept 25, Sept 26, Sept 25, Sept 26,
information) 2010 2009 2010 2009
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Net sales $ 17.9 $ 14.4 $ 50.5 $ 46.7
EBITDA 4.8 1.3 11.6 10.1
Free cash flow 3.6 (0.3) 8.3 6.8
Dividends declared 0.9 3.5 2.8 10.3
Net income (loss)(1) 1.5 (0.2) 3.4 9.3
Per share - fully diluted
Net Income (loss)(1) 0.09 (0.01) 0.20 0.30
Free cash flow 0.22 (0.02) 0.50 0.41
Dividends declared 0.05 0.21 0.17 0.62
Sales volume (000s m3) 345.8 330.6 1,016.8 915.3
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(1) Net income includes the impact of future income tax recovery, and
depreciation and depletion expense, which are non-cash items recorded in
each respective period. Net income for the nine months ended September 26,
2009 only, included the impact of the revaluation of the Class B Interest
Liability of a subsidiary.
Included in the net income for the three month period ended September 25, 2010 is a non-cash future income tax expense of $0.6 million (2009 - recovery of $0.5 million). The future income tax asset of Acadian is based on differences between the financial reporting and tax basis of assets and liabilities of its subsidiaries, which have been measured using the substantially enacted tax rates and laws that are expected to be in effect at the time the differences are anticipated to reverse. The reduction in the future income tax asset, and related expense, recorded during the period is largely a result of changes in the timing of when the differences are anticipated to reverse.
The nine month period ended September 26, 2009 included a non-cash gain related to the Class B Interest Liability of a subsidiary. On February 3, 2009, an affiliate of Brookfield Asset Management Inc. converted all units representing the Class B Interest Liability into Class A units of Acadian Timber Income Fund on a one-for-one basis. For the nine-month period ended September 26, 2009, the revaluation of this interest resulted in a gain of $4.7 million. The gain was comprised of a $4.1 million mark-to-market gain plus an additional $0.6 million foreign exchange gain due to the weakening of the Canadian currency in the quarter.
New Brunswick Timberlands
The table below summarizes operating and financial results for Acadian's New Brunswick Timberlands.
Three Months Ended September Three Months Ended September
25, 2010 26, 2009
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Harvest Sales Harvest Sales
(000s (000s Results (000s (000s Results
m3) m3) (millions) m3) m3) (millions)
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Softwood 94.1 98.5 $ 5.2 68.6 67.8 $ 3.5
Hardwood 102.0 96.5 5.5 137.5 125.5 6.4
Biomass 68.1 68.2 0.7 80.2 80.2 1.4
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264.2 263.2 11.4 286.3 273.5 11.3
Other sales 1.9 0.3
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Net sales $ 13.3 $ 11.6
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EBITDA $ 3.7 $ 1.3
EBITDA margin 28% 11%
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Nine Months Ended September Nine Months Ended September
25, 2010 26, 2009
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Harvest Sales Harvest Sales
(000s (000s Results (000s (000s Results
m3) m3) (millions) m3) m3) (millions)
----------------------------------------------------------------------------
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Softwood 299.9 293.1 $ 15.4 279.1 260.9 $ 15.1
Hardwood 315.9 337.3 18.9 295.3 288.8 14.5
Biomass 176.3 176.3 2.3 176.6 176.6 3.4
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792.1 806.7 36.6 751.0 726.3 33.0
Other sales 2.9 2.5
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Net sales $ 39.5 $ 35.5
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EBITDA $ 9.8 $ 8.3
EBITDA margin 25% 23%
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Softwood, hardwood and biomass shipments were 98 thousand m3, 97 thousand m3 and 68 thousand m3, respectively, for the third quarter of 2010. Approximately 35% was sold as sawlogs, 39% as pulpwood and 26% as biomass. This compares to 29% sold as sawlogs, 42% as pulpwood and 29% as biomass in the third quarter of 2009.
Net sales for the third quarter of 2010 was $13.3 million (2009 - $11.6 million) with an average selling price across all products of $43.47 per m3 which compares to an average selling price of $41.46 per m3 during the third quarter of 2009. The year-over-year increase in the average selling price resulted from a high percentage of softwood sawlog sales and improved prices for hardwood pulpwood, which accounted for 31% of sales volume. Net sales for the first nine months ended September 25, 2010 was $39.5 million, an increase of $4.0 million over the comparable period of 2009.
Costs in the third quarter were $9.6 million (2009 - $10.3 million). Variable costs per m3 were 7% lower than the third quarter of 2009 as a result of an increased proportion of sales made to closer proximity markets and from the woodyard which resulted in lower transportation costs.
EBITDA for the third quarter was $3.7 million, compared to $1.3 million in the comparable period of 2009. For the nine months ended September 25, 2010, EBITDA was $9.8 million as compared to $8.3 million for the same period last year. EBITDA margin increased to 28%, as compared to 11% for the third quarter of 2009, primarily reflecting the impact of higher contribution from the Crown land service agreement and a greater proportion of sales of higher margin softwood sawlogs.
During the third quarter of 2010, NB Timberlands experienced no recordable safety incidents among employees and one recordable incident among contractors from which the individual has since fully recovered.
Maine Timberlands
The table below summarizes operating and financial results for Acadian's Maine Timberlands.
Three Months Ended September Three Months Ended September
25, 2010 26, 2009
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Harvest Sales Harvest Sales
(000s (000s Results (000s (000s Results
m3) m3) (millions) m3) m3) (millions)
----------------------------------------------------------------------------
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Softwood 58.4 58.4 $ 3.0 38.5 40.9 $ 2.1
Hardwood 23.1 21.3 1.3 12.4 12.1 0.5
Biomass 3.0 2.9 0.1 4.1 4.1 0.1
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84.5 82.6 4.4 55.0 57.1 2.7
Other sales 0.2 0.1
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Net sales $ 4.6 $ 2.8
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EBITDA $ 1.3 $ 0.8
EBITDA margin 28% 29%
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Nine Months Ended September Nine Months Ended September
25, 2010 26, 2009
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Harvest Sales Harvest Sales
(000s (000s Results (000s (000s Results
m3) m3) (millions) m3) m3) (millions)
----------------------------------------------------------------------------
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Softwood 152.3 152.0 $ 7.8 152.3 152.0 $ 9.6
Hardwood 51.3 49.2 2.7 24.1 23.4 1.1
Biomass 9.0 8.9 0.2 13.6 13.6 0.2
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212.6 210.1 10.7 190.0 189.0 10.9
Other sales 0.3 0.3
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Net sales $ 11.0 $ 11.2
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EBITDA $ 2.7 $ 3.5
EBITDA margin 25% 31%
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Softwood, hardwood and biomass shipments were 58 thousand m3, 21 thousand m3 and 3 thousand m3, respectively, for the third quarter of 2010. Approximately 54% was sold as sawlogs, 42% as pulpwood and 4% as biomass. This compares to 49% sold as sawlogs, 44% as pulpwood and 7% as biomass in the third quarter of 2009.
Net sales for the third quarter of 2010 was $4.6 million (2009 - $2.8 million) with an average selling price across all products of $53.38 per m3 which compares to an average selling price of $46.33 per m3 during the third quarter of 2009. This increase in average sales price is primarily the result of improved demand and pricing for spruce-fir sawlogs and hardwood pulpwood, partially offset by the strengthened Canadian dollar. Net sales for the first nine months ended September 25, 2010 was $11.0 million, a decrease of $0.2 million over the same period of 2009.
Costs for the third quarter were $3.3 million (2009 - $2.6 million, excluding the effect of the land sale in the prior year). Variable costs per m3 increased 1% in Canadian dollar terms and 6% in U.S. dollar terms. This increase reflects longer hauling distances with less sales made from the woodyard as compared to the prior year.
EBITDA for the third quarter was $1.3 million, compared to $0.8 million in the comparable period of 2009. For the nine months ended September 25, 2010, EBITDA was $2.7 million as compared to $3.5 million for the same period of 2009. The 2009 results for the quarter and year include a $0.6 million one-time gain from a land sale. Excluding this gain, EBITDA margin in the third quarter of 28% was 21% higher than the third quarter of 2009.
We are pleased to report that Acadian's Maine Timberlands experienced no recordable safety incidents among employees or contractors during the third quarter of 2010.
Outlook
The following Outlook contains forward-looking statements about Acadian Timber Corp.'s outlook for fiscal 2010 and 2011. Reference should be made to the "Forward-Looking Statements" section of this news release. For a description of material factors that could cause actual results to differ materially from the forward-looking statements in the following, please see the Risk Factors section of our management's discussion and analysis (MD&A) of Acadian Timber Income Fund's most recent Annual Report and Acadian Timber Corp.'s Annual Information Form available on our website at www.acadiantimber.com or filed with SEDAR at www.sedar.com.
Acadian has benefited from the continued return to operation of many of its softwood sawmilling customers. Acadian has also benefited in its Maine operations from a stable labour force while several regional competitors are struggling to find contractors, owing to state government efforts to limit Canadian laborer's access to work in Maine. This has created additional demand and supported pricing. Despite these positives, we remain cautious in our outlook for softwood sawlog demand through at least the first quarter of 2011 as lumber demand and pricing is expected to remain weak.
Markets for hardwood sawlogs are expected to remain stable and positive through year end and into 2011. Acadian has benefited from the current strong markets for market pulp with strong demand for pulpwood throughout 2010. However, global pulp inventories increased during the third quarter and demand and pricing are expected to soften throughout the fourth quarter. High log inventories at regional pulp mills are expected to further soften demand through year end. To date Acadian's major hardwood pulpwood customers are all operating and taking deliveries and, despite this weak outlook, we expect prices to remain relatively stable through the fourth quarter. We view the recent announcement of the sale of Domtar's Woodland pulpmill to International Grand Investment Corp. favourably as this is expected to ensure a more consistent operating level for this key hardwood pulpwood customer going forward. While biomass demand and prices are currently weak, we expect demand and prices to improve with winter weather conditions as regional consumers move to increase the proportion of biomass in their fuel mix.
Acadian's strong performance to date this year has led to a payout ratio that is well below the target level. With continuing performance improvement expected and reduced interest costs resulting from the refinancing to be completed in February 2011, Acadian is well positioned to revisit the payout ratio in the first quarter of next year.
Quarterly Dividend
Acadian is pleased to announce a dividend of $0.05 per share, payable on January 14, 2011 to shareholders of record on December 31, 2010.
Acadian Timber Corp. is a leading supplier of primary forest products in Eastern Canada and the Northeastern U.S. With a total of 2.4 million acres of land under management, Acadian is the second largest timberland operator in New Brunswick and Maine.
Acadian owns and manages approximately 1.1 million acres of freehold timberlands in New Brunswick and Maine, and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands. Acadian also owns and operates a forest nursery in Second Falls, New Brunswick. Acadian's products include softwood and hardwood sawlogs, pulpwood and biomass by-products, sold to over 110 regional customers.
Acadian's shares are listed for trading on the Toronto Stock Exchange under the symbol ADN.
Forward-Looking Statements
This News Release contains forward-looking information and other forward-looking statements within the meaning of applicable Canadian securities laws that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Acadian Timber Corp. and its subsidiaries (collectively, "Acadian"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this News Release, such statements may contain such words as "may," "expect," "believe," "outlook," "remain," "anticipate," "continue," "plan," "could," or the negative of these terms or other similar terminology. Forward-looking information in this News Release includes, without limitation, statements regarding management's beliefs, intentions, results, performance, goals, achievements, future events, plans and objectives, business strategy, access to capital, liquidity and trading volumes, dividends, taxes, capital expenditures, projected costs, and similar statements concerning anticipated future events, results, achievements, circumstances, performance or expectations that are not historical facts. These statements reflect management's current expectations regarding future events and operating performance are based on information currently available to management and speak only as of the date of this News Release. All forward-looking statements in this News Release are qualified by these cautionary statements. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, should not be unduly relied upon, and will not necessarily be accurate indications of whether or not such results will be achieved. Factors that could cause actual results to differ materially from the results discussed in the forward-looking statements include, but are not limited to: general economic and market conditions; product demand; concentration of customers; commodity pricing; interest rate and foreign currency fluctuations; seasonality; weather and natural conditions; regulatory, trade or environmental policy changes; changes in Canadian income tax law; economic situation of key customers; and other risks and factors discussed under the heading "Risk Factors" in each of the Annual Information Form dated March 26, 2010 and the Management Information Circular dated March 26, 2010, and other filings of Acadian with securities regulatory authorities, which are available on SEDAR at www.sedar.com.
Forward-looking information is based on various material factors or assumptions, which are based on information currently available to Acadian. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: anticipated financial performance; business prospects; strategies; regulatory developments; exchange rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the ability to execute agreements in respect of a recently obtained financing commitment, which are subject to change based on commodity prices, market conditions for timber and wood products, and the economic situation of key customers. Readers are cautioned that the preceding list of material factors or assumptions is not exhaustive. Although the forward-looking statements contained in this News Release are based upon what management believes are reasonable assumptions, Acadian cannot assure readers that actual results will be consistent with these forward-looking statements. Certain statements in this New Release may also be considered "financial outlook" for the purposes of applicable Canadian securities laws, and such financial outlook may not be appropriate for purposes other than this News Release. The forward-looking statements in this News Release are made as of the date of this News Release, and should not be relied upon as representing Acadian's views as of any date subsequent to the date of this News Release. Acadian assumes no obligation to update or revise these forward-looking statements to reflect new information, events, circumstances or otherwise, except as may be required by applicable law.
(1) This news release makes reference to earnings before interest, taxes, depletion, depreciation and amortization ("EBITDA") and free cash flow. Management believes that EBITDA and free cash flow are key performance measures in evaluating Acadian's operations and are important in enhancing investors' understanding of the Company's operating performance. As EBITDA and free cash flow do not have a standardized meaning prescribed by Canadian GAAP, they may not be comparable to similar measures presented by other companies. As a result, we have provided in this news release reconciliations of net income and cash flow from operations, as determined in accordance with Canadian GAAP, to EBITDA and free cash flow.
(2) On January 1, 2010, Acadian Timber Income Fund completed a plan of arrangement which allowed for it's conversion from an income trust to a corporation. Subsequent to the conversion, Acadian began operating as Acadian Timber Corp. Comparative results for the nine-month period ended September 26, 2009 reflect the results of Acadian Timber Income Fund and results for the three and nine month periods ended September 25, 2010 reflect the results of Acadian Timber Corp. References to "dividends", "free cash flow" and "shareholders" reflect distributions, distributable cash from operations and unitholders, respectively, of Acadian Timber Income Fund for the comparative period in 2009.
Acadian Timber Corp.
Interim Consolidated Balance Sheet
(unaudited)
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As at (CAD millions) September 25, 2010 December 31, 2009
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ASSETS
Current assets:
Cash and cash equivalents $ 3.0 $ 2.1
Accounts receivable and other assets 8.7 6.2
Note receivable - 4.0
Inventory 1.7 1.8
Future income tax asset 1.7 -
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15.1 14.1
Intangible assets 6.1 6.1
Timberlands, logging roads and fixed assets 183.9 190.0
Future income tax asset 13.8 -
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$ 218.9 $ 210.2
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 6.0 $ 4.3
Dividends payable to shareholders 0.8 -
Debt 75.5 -
Deferred credit 1.4 -
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83.7 4.3
Deferred credit 18.4 -
Future income tax liability 4.7 13.9
Long-term debt - 80.7
Shareholders' equity 112.1 111.3
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$ 218.9 $ 210.2
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Acadian Timber Corp.
Interim Consolidated Statement of Operations and Deficit
(unaudited)
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Three Months Ended Nine Months Ended
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Sept 25, Sept 26, Sept 25, Sept 26,
(CAD millions) 2010 2009 2010 2009
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Net sales $ 17.9 $ 14.4 $ 50.5 $ 46.7
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Operating costs and expenses
Cost of sales 11.4 11.4 33.8 31.2
Selling, administration and other 1.7 2.3 5.1 6.0
Depreciation and depletion 1.7 1.2 4.9 5.5
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14.8 14.9 43.8 42.7
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Operating earnings (loss) 3.1 (0.5) 6.7 4.0
Gain on sale of timberlands - (0.6) - (0.6)
Gain on Class B Interest Liability
of a subsidiary - - - (4.7)
Interest:
Interest expense on long-term debt 1.0 0.8 2.8 2.4
Class B Interest Liability of a
subsidiary - - - 0.3
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Earnings (loss) before income taxes 2.1 (0.7) 3.9 6.6
Income tax recovery (expense)
Current - - - -
Future (0.6) 0.5 (0.5) 2.7
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Net income (loss) for the period 1.5 (0.2) 3.4 9.3
Deficit, beginning of period (23.0) (17.9) (23.0) (20.9)
Shareholders' dividends declared (0.9) (3.5) (2.8) (10.0)
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Deficit, end of period $ (22.4) $ (21.6) $ (22.4) $ (21.6)
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Net income (loss) per share - basic $ 0.09 $ (0.01) $ 0.20 $ 0.58
Net income (loss) per share -
diluted $ 0.09 $ (0.01) $ 0.20 $ 0.30
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Acadian Timber Corp.
Interim Consolidated Statement of Comprehensive Income (Loss)
(unaudited)
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Three Months Ended Nine Months Ended
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Sept 25, Sept 26, Sept 25, Sept 26,
(CAD millions) 2010 2009 2010 2009
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Net income (loss) $ 1.5 $ (0.2) $ 3.4 $ 9.3
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Other comprehensive loss
Unrealized foreign currency
translation loss (0.2) (2.0) (0.8) (4.8)
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Comprehensive income (loss) $ 1.3 $ (2.2) $ 2.6 $ 4.5
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Acadian Timber Corp.
Interim Consolidated Statement of Cash Flows
(unaudited)
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Three Months Ended Nine Months Ended
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Sept 25, Sept 26, Sept 25, Sept 26,
(CAD millions) 2010 2009 2010 2009
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Cash provided by (used for):
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Operating activities
Net income (loss) $ 1.5 $ (0.2) $ 3.4 $ 9.3
Items not affecting cash:
Future income tax expense
(recovery) 0.6 (0.5) 0.5 (2.7)
Depreciation and depletion 1.7 1.2 4.9 5.5
Gain on sale of timberlands - (0.6) - (0.6)
Gain on Class B Interest Liability
of a subsidiary - - - (4.7)
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3.8 (0.1) 8.8 6.8
Net change in non-cash working
capital balances and other - (0.4) (0.9) (3.2)
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3.8 (0.5) 7.9 3.6
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Investing activities
Proceeds from sale of timberlands - 0.6 - 0.6
Additions to timberlands, logging
roads and fixed assets - (0.7) (0.3) (0.8)
Silviculture expenditures (0.2) (0.1) (0.2) (0.1)
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(0.2) (0.2) (0.5) (0.3)
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Financing activities
Repayment of credit facility (1.0) - (4.5) -
Dividends paid to shareholders (0.9) (3.5) (2.0) (10.0)
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(1.9) (3.5) (6.5) (10.0)
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Increase (decrease) in cash and cash
equivalents during the period 1.7 (4.2) 0.9 (6.7)
Cash and cash equivalents, beginning
of period 1.3 6.5 2.1 9.0
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Cash and cash equivalents, end of
period $ 3.0 $ 2.3 $ 3.0 $ 2.3
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Reconciliation to EBITDA and Free Cash Flow
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Three Months Ended Nine Months Ended
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Sept 25, Sept 26, Sept 25, Sept 26,
(CAD millions) 2010 2009 2010 2009
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Net income (loss)(1) $ 1.5 $ (0.2) $ 3.4 $ 9.3
Add (deduct):
Interest expense on debt 1.0 0.8 2.8 2.4
Distribution on Class B Interest
Liability of a subsidiary - - - 0.3
Income tax expense (recovery) 0.6 (0.5) 0.5 (2.7)
Depreciation and depletion 1.7 1.2 4.9 5.5
Gain on Class B Interest Liability
of a subsidiary - - - (4.7)
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EBITDA 4.8 1.3 11.6 10.1
Add (deduct):
Interest expense on debt (1.0) (0.8) (2.8) (2.4)
Silviculture and capital
expenditures (0.2) (0.4) (0.5) (0.5)
Non-cash gain on sale of
timberlands - (0.6) - (0.6)
Proceeds from sale of timberlands - 0.6 - 0.6
Acquisition of timberlands - (0.4) - (0.4)
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Free cash flow $ 3.6 $ (0.3) $ 8.3 $ 6.8
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Dividends declared $ 0.9 $ 3.5 $ 2.8 $ 10.3
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(1) Net income includes the impact of future income tax recovery, and
depreciation and depletion expense, which are non-cash items recorded in
each respective period.Net income for the nine months ended September 26,
2009 only, included the impact of the revaluation of the Class B Interest
Liability of a subsidiary.
Contacts:
Acadian Timber Corp.
Robert Lee
Investor Relations and Communications
+1-604-661-9607
rlee@acadiantimber.com
www.acadiantimber.com
