All figures in Canadian dollars unless otherwise noted.
Investors, analysts and other interested parties can access Acadian Timber
Corp.'s 2014 First Quarter Results conference call via webcast on Tuesday, May
13, 2014 at 1:00 p.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 12:50 p.m. ET. The recorded teleconference
rebroadcast can be accessed at 1-800-319-6413 or +1-604-638-9010 and enter
passcode 2826.
Acadian Timber Corp. ("Acadian" or the "Company") (TSX:ADN) today reported
financial and operating results(1) for the three months ended March 29, 2014
(the "first quarter").
"Acadian's operations ran well this quarter with favorable winter operating
conditions extending through the end of the quarter", said Reid Carter, Chief
Executive Officer of Acadian. "Recent announcements of capital investments and
additional operating shifts in the region are expected to result in continued
strong demand for softwood sawlogs going forward."
For the first quarter, Acadian generated net sales of $21.2 million on sales
volume of 350 thousand m3 which represents a $3.0 million, or 16%, increase in
net sales compared to the same period in 2013. Strong market demand, the
strengthening of the U.S. dollar and the discontinuation of the vendor managed
inventory ("VMI") program in our New Brunswick operation drove this improved
performance.
Adjusted EBITDA of $6.7 million for the first quarter was $2.0 million higher
than in the first quarter of 2013, while Adjusted EBITDA margin increased to 32%
from 26% in the same period of last year.
Acadian continues to actively pursue business development opportunities in
support of Acadian's global growth strategy. After a prolonged period of limited
investment opportunities, management is currently seeing an increasing number of
owners willing to test the market and is optimistic that Acadian will be in a
position to participate in attractive opportunities during 2014.
(1) This news release makes reference to Adjusted EBITDA and Free Cash Flow
which are key performance measures in evaluating Acadian's operations and are
important in enhancing investors' understanding of Acadian's operating
performance. Acadian's management defines Adjusted EBITDA as earnings before
interest, taxes, fair value adjustments, recovery of or impairment of land and
roads, unrealized exchange gain/loss on debt, depreciation and amortization and
Free Cash Flow as Adjusted EBITDA less interest paid, current income tax
expense, additions to, and gains from the sale of, fixed assets plus losses on,
and proceeds from, the sale of fixed assets. As these performance measures do
not have standardized meanings prescribed by International Financial Reporting
Standards ("IFRS"), 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, as determined in accordance with IFRS, to
Adjusted EBITDA and Free Cash Flow.
Financial and Operating Highlights
----------------------------------------------------------------------------
Three Months Ended
(CAD thousands, except per share
information) March 29, 2014 March 30, 2013
----------------------------------------------------------------------------
Sales volume (000s m3) 350.2 339.2
Net sales $ 21,243 $ 18,252
Operating earnings 6,465 4,514
Net income 697 1,291
Adjusted EBITDA 6,697 4,655
Free Cash Flow 5,600 3,911
Dividends declared 3,451 3,451
Per share (fully diluted)
Net income 0.04 0.08
Free Cash Flow 0.33 0.23
Dividends declared 0.21 0.21
----------------------------------------------------------------------------
Operating earnings for the period, at $6.5 million, increased $2.0 million
year-over-year reflecting improved log selling prices and sales volumes. Net
income totaled $0.7 million, or $0.04 per share, for the first quarter, a
decrease of $0.6 million or $0.04 per share from the same period in 2013. The
decrease in net income primarily reflects a higher non-cash fair value
adjustment to timber and an increased unrealized exchange loss on long-term
debt.
Acadian's operations ran well during the first quarter with favorable winter
operating conditions extending through the end of the quarter. Harvest volume
for the first quarter, excluding biomass, was 349 thousand m3, in line with the
same period in the prior year. Sales volume of 350 thousand m3 was up 3% from
the first quarter of 2013, with the increase coming from Acadian's operations in
New Brunswick.
Acadian's weighted average log price for the first quarter of 2014 increased 9%
year-over-year reflecting increased prices across most products and changes in
product mix. Stronger softwood sawlog markets and the strengthening of the U.S.
dollar resulted in a 7% increase in the weighted average softwood sawlog price
relative to the first quarter of 2013. Most of this benefit came from the Maine
operations. Hardwood sawlog markets improved for both the New Brunswick and
Maine operations with weighted average selling prices increasing by 16%. Prices
for softwood and hardwood pulpwood decreased 7% and increased 10%, respectively,
year-over-year. While market conditions for hardwood pulpwood continued to be
strong, softwood pulpwood markets were challenged during the quarter due to a
limited customer base. Biomass markets remained stable, however, realized gross
margins on this product decreased 23% year-over-year due to fewer export
customers.
New Brunswick Timberlands
The table below summarizes operating and financial results for New Brunswick
Timberlands.
Three Months Ended March 29, Three Months Ended March 30,
2014 2013
------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) ($000s) (000s m3) (000s m3) ($000s)
----------------------------------------------------------------------------
Softwood 120.6 100.1 $ 5,379 156.0 87.0 $ 4,573
Hardwood 123.9 115.7 7,759 94.6 97.0 6,055
Biomass 29.3 29.3 646 44.9 44.9 819
----------------------------------------------------------------------------
273.8 245.1 13,784 295.5 228.9 11,447
Other sales 662 706
----------------------------------------------------------------------------
Net sales $ 14,446 $ 12,153
----------------------------------------------------------------------------
Adjusted EBITDA $ 4,458 $ 2,992
Adjusted EBITDA margin 31% 25%
----------------------------------------------------------------------------
Softwood, hardwood and biomass shipments were 100 thousand m3, 116 thousand m3
and 29 thousand m3, respectively, during the first quarter. This represents a
year-over-year increase in sales volume of 7%. Approximately 38% of sales volume
was sold as sawlogs, 50% as pulpwood and 12% as biomass in the first quarter.
This compares to 27% sold as sawlogs, 53% as pulpwood and 20% as biomass in the
first quarter of 2013.
Net sales for the first quarter totaled $14.4 million compared to $12.2 million
for the same period last year, reflecting the positive impact of not operating
under the VMI program that resulted in the deferral of softwood sawlog sales
into the second quarter in 2013. Net sales also benefited from increases in
selling prices across most products and a more favourable product mix. The
weighted average log selling price was $60.88 per m3 in the first quarter, a 5%
increase from $57.77 per m3 in the same period of 2013.
Costs for the first quarter were $10.0 million, compared to $9.2 million in the
same period in 2013, due to 1% higher variable costs per m3 resulting primarily
from higher hardwood harvest volumes.
Adjusted EBITDA for the first quarter was $4.5 million, compared to $3.0 million
in the first quarter of 2013 reflecting improved market demand for most products
and the impact of the VMI program in 2013. Adjusted EBITDA margin increased to
31% from 25% in the prior year.
During the first quarter of 2014, NB Timberlands experienced no recordable
incidents among employees and one reportable incident among contractors.
Maine Timberlands
The table below summarizes operating and financial results for Maine Timberlands.
Three Months Ended March 29, Three Months Ended March 30,
2014 2013
------------------------------------------------------------
Harvest Sales Results Harvest Sales Results
(000s m3) (000s m3) ($000s) (000s m3) (000s m3) ($000s)
----------------------------------------------------------------------------
Softwood 71.6 71.3 $ 4,676 76.5 76.2 $ 4,342
Hardwood 32.5 27.1 1,991 25.7 26.4 1,607
Biomass 6.7 6.7 61 7.7 7.7 81
----------------------------------------------------------------------------
110.8 105.1 6,728 109.9 110.3 6,030
Other sales 69 69
----------------------------------------------------------------------------
Net sales $ 6,797 $ 6,099
----------------------------------------------------------------------------
Adjusted EBITDA $ 2,477 $ 2,028
Adjusted EBITDA margin 36% 33%
----------------------------------------------------------------------------
Softwood, hardwood and biomass shipments were 71 thousand m3, 27 thousand m3,
and 7 thousand m3, respectively, during the first quarter. This represents a
year-over-year decrease in sales volume of 5%. Approximately 55% of sales volume
was sold as sawlogs, 39% as pulpwood and 6% as biomass during the first quarter.
This compares to 56% sold as sawlogs, 37% as pulpwood and 7% as biomass in the
first quarter of 2013.
Net sales for the first quarter totaled $6.8 million compared to $6.1 million
for the same period last year. The improvement was the result of improved
pricing across most products and the positive impact of foreign exchange
movements. The weighted average log selling price was $67.75 per m3 in the first
quarter, a 17% increase from $57.95 per m3 in the same period of 2013 in
Canadian dollar terms. Weighted average log selling prices in U.S. dollar terms
increased 7% year-over-year.
Costs for the first quarter were $4.3 million, compared to $4.1 million during
the same period in 2013. This increase primarily reflects adverse foreign
exchange movements during the year as variable costs per m3 increased 11% in
Canadian dollar terms compared to 2% in U.S. dollar terms.
Adjusted EBITDA for the first quarter was $2.5 million, compared to $2.0 million
for the same period in 2013, while Adjusted EBITDA margin increased from 33% to
36%.
There were no recordable safety incidents among employees and contractors during
the first quarter of 2014.
Market Outlook
The following Market Outlook contains forward-looking statements about Acadian
Timber Corp.'s market outlook for the remainder of fiscal 2014. 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 of Acadian's
most recent Annual Report and Annual Information Form available on our website
at www.acadiantimber.com or filed with SEDAR at www.sedar.com.
The U.S. housing market has struggled in 2014 despite significant increases in
pent up demand. While severe winter weather is almost certainly behind much of
the slowdown, underlying demand remains weak as traditional buyers continue to
defer home purchases while they wait for employment conditions to strengthen
further. Although the current housing outlook is uncertain, almost all industry
watchers are forecasting year-over-year increases in total housing starts of
approximately 15% in 2014 with increases of the same magnitude forecast for
2015.
Meanwhile, Acadian's key solid wood customers continue to operate at high levels
and, following the New Brunswick government's announcement of its Forestry Plan
in mid-March, there have been announcements of significant capital investments
and additional operating shifts at Irving's St. Leonard and Kedgwick sawmills
and Twin Rivers' Plaster Rock sawmill. This is in addition to last summer's
announcement of Irving's new sawmill in Portage, Maine. As a result, we expect
to see continued strong demand for softwood sawlogs in the region.
In addition to our positive outlook for softwood sawlogs, markets for hardwood
sawlogs have been positive and are expected to remain stable while demand and
pricing for hardwood pulpwood continues to be strong. While Acadian has been
successful in selling its softwood pulpwood production, this market continues to
be challenging owing to the closure of regional groundwood mills. Fortunately,
this product represents only a small portion of Acadian's sales and an even
lower proportion of our operating earnings. Biomass markets are mixed owing to a
slowdown in export markets, with demand and pricing expected to remain
reasonable offering modest margins.
Quarterly Dividend
Acadian is pleased to announce a dividend of $0.20625 per share, payable on July
15, 2014 to shareholders of record on June 30, 2014.
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 in New Brunswick.
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 approximately 90 regional customers.
Acadian's business strategy is to maximize cash flows from its existing
timberland assets while growing our business by acquiring assets on a value
basis and utilizing our operations-oriented approach to drive improved
performance.
Acadian's shares are listed for trading on the Toronto Stock Exchange under the
symbol ADN.
For further information, please visit our website at www.acadiantimber.com.
Forward-Looking Statements
This News Release contains forward-looking information 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," "will," "intend," "should," "expect," "believe,"
"outlook," "predict," "remain," "anticipate," "estimate," "potential,"
"continue," "plan," "could," "might," "project," "targeting" or the negative of
these terms or other similar terminology. Forward-looking information in this
News Release includes, without limitation, statements made in the section
entitled "Market Outlook" and other statements regarding management's beliefs,
intentions, results, performance, goals, achievements, future events, plans and
objectives, business strategy, growth strategy and prospects, access to capital,
liquidity and trading volumes, dividends, taxes, capital expenditures, projected
costs, market trends and similar statements concerning anticipated future
events, results, achievements, circumstances, performance or expectations that
are not historical facts. These statements, which 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; Brookfield's ability to source and secure potential investment
opportunities; the availability of potential acquisitions that suit Acadian's
growth profile; and other risks and factors discussed under the heading "Risk
Factors" in each of the Annual Information Form dated March 28, 2014 and other
filings of Acadian made 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; anticipated market conditions; business prospects; the
economic situation of key customers; 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 obtain financing on acceptable terms. 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. 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.
Acadian Timber Corp.
Interim Consolidated Statements of Net Income
(unaudited)
----------------------------------------------------------------------------
Three Months Ended
(CAD thousands) March 29, 2014 March 30, 2013
----------------------------------------------------------------------------
Net sales $ 21,243 $ 18,252
----------------------------------------------------------------------------
Operating costs and expenses
Cost of sales 13,179 11,988
Selling, administration and other 1,463 1,604
Reforestation - 5
Depreciation and amortization 136 141
----------------------------------------------------------------------------
14,778 13,738
----------------------------------------------------------------------------
Operating earnings 6,465 4,514
Interest expense, net (797) (739)
Other items
Fair value adjustments (1,190) 19
Unrealized exchange loss on long-term debt (3,096) (1,842)
Gain on sale of timberlands 96 -
----------------------------------------------------------------------------
Earnings before income taxes 1,478 1,952
Current income tax expense (297) -
Deferred income tax expense (484) (661)
----------------------------------------------------------------------------
Net income $ 697 $ 1,291
----------------------------------------------------------------------------
Net income per share - basic and diluted $ 0.04 $ 0.08
----------------------------------------------------------------------------
Acadian Timber Corp.
Interim Consolidated Statements of Comprehensive Income
(unaudited)
----------------------------------------------------------------------------
Three Months Ended
(CAD thousands) March 29, 2014 March 30, 2013
----------------------------------------------------------------------------
Net income $ 697 $ 1,291
----------------------------------------------------------------------------
Other comprehensive income (loss)
Items that may be reclassified subsequently
to net income:
Unrealized foreign currency translation
income 3,697 2,209
Amortization of derivatives designated as
hedges (47) (49)
----------------------------------------------------------------------------
Comprehensive income $ 4,347 $ 3,451
----------------------------------------------------------------------------
Acadian Timber Corp.
Interim Consolidated Balance Sheets
(unaudited)
----------------------------------------------------------------------------
As at December 31,
(CAD thousands) March 29, 2014 2013
----------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 11,039 $ 8,564
Accounts receivable and other assets 8,154 7,673
Inventory 3,098 1,380
----------------------------------------------------------------------------
22,291 17,617
Timber 242,514 240,143
Land, roads and other fixed assets 32,730 32,268
Intangible assets 6,140 6,140
----------------------------------------------------------------------------
$ 303,675 $ 296,168
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 9,452 $ 7,680
Dividends payable to shareholders 3,451 3,451
----------------------------------------------------------------------------
12,903 11,131
Long-term debt 79,648 76,496
Deferred income tax liability 28,035 26,348
Shareholders' equity 183,089 182,193
----------------------------------------------------------------------------
$ 303,675 $ 296,168
----------------------------------------------------------------------------
Acadian Timber Corp.
Interim Consolidated Statements of Cash Flows
(unaudited)
----------------------------------------------------------------------------
Three Months Ended
(CAD thousands) March 29, 2014 March 30, 2013
----------------------------------------------------------------------------
Cash provided by (used for):
----------------------------------------------------------------------------
Operating activities
Net income $ 697 $ 1,291
Adjustments to net income:
Deferred income tax expense 484 661
Depreciation and amortization 136 141
Fair value adjustments 1,190 (19)
Unrealized exchange loss on long-term debt 3,096 1,842
Interest expense, net 797 739
Interest paid, net (801) (744)
Gain on sale of timberlands (96) -
Net change in non-cash working capital and
other 326 (154)
----------------------------------------------------------------------------
5,829 3,757
----------------------------------------------------------------------------
Financing activities
Dividends paid to shareholders (3,451) (3,451)
----------------------------------------------------------------------------
(3,451) (3,451)
----------------------------------------------------------------------------
Investing activities
Proceeds from sale of timberlands 97 -
----------------------------------------------------------------------------
97 -
----------------------------------------------------------------------------
Increase in cash and cash equivalents during
the period 2,475 306
Cash and cash equivalents, beginning of
period 8,564 6,136
----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 11,039 $ 6,442
----------------------------------------------------------------------------
Reconciliations to Adjusted EBITDA and Free Cash Flow
----------------------------------------------------------------------------
Three Months Ended
(CAD thousands) March 29, 2014 March 30, 2013
----------------------------------------------------------------------------
Net income $ 697 $ 1,291
Add (deduct):
Interest expense, net 797 739
Current income tax expense 297 -
Deferred income tax expense 484 661
Depreciation and amortization 136 141
Fair value adjustments 1,190 (19)
Unrealized exchange loss on long-term debt 3,096 1,842
----------------------------------------------------------------------------
Adjusted EBITDA 6,697 4,655
Add (deduct):
Interest paid on debt, net (801) (744)
Gain on sale of timberlands (96) -
Proceeds from sale of timberlands 97 -
Current income tax expense (297) -
----------------------------------------------------------------------------
Free cash flow $ 5,600 $ 3,911
----------------------------------------------------------------------------
Dividends declared $ 3,451 $ 3,451
----------------------------------------------------------------------------
Payout ratio 62% 88%
----------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
Acadian Timber Corp.
Robert Lee
Investor Relations and Communications
604-661-9607
rlee@acadiantimber.com
www.acadiantimber.com
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