SJ Stella Jones Inc

Stella-Jones Inc. (TSX:SJ)



--  Sales of $99.4 million compared with $112.0 million last year 
--  Net earnings of $5.8 million compared with $7.7 million last year 
--  Diluted EPS of $0.46 versus $0.61 in 2009 
--  Further debt reduction prior to the completion of the Tangent
    acquisition 



Stella-Jones Inc. (TSX:SJ) today announced financial results for its first
quarter ended March 31, 2010. 




-------------------------------------------------------------
Financial highlights                 Quarters ended March 31,
(in thousands of dollars, except per                         
 share data)(unaudited)                      2010        2009
-------------------------------------------------------------
Sales                                      99,360     111,954
Gross profit                               18,163      22,519
Cash flow from operations(1)                8,528      11,321
Net earnings for the period                 5,814       7,687
  Per share - basic ($)                      0.46        0.61
  Per share - diluted ($)                    0.46        0.61
Weighted average shares outstanding                          
 (basic, in '000s)                         12,688      12,566
-------------------------------------------------------------
(1) Before changes in non-cash working capital components.                



FIRST-QUARTER RESULTS

Sales were $99.4 million, a decrease of $12.6 million, or 11.2% from last year's
sales of $112.0 million. Changes in the value of the Canadian dollar,
Stella-Jones' reporting currency, versus the U.S. dollar, decreased the value of
U.S. dollar denominated sales by about $8.9 million when compared with the same
period a year earlier. Adjusting for year-over-year currency fluctuations, sales
decreased approximately 3.0% versus last year's first quarter, reflecting
reduced railcar availability resulting from severe winter weather in the eastern
United States at the beginning of the quarter, and, to a lesser extent, weaker
demand and softer pricing for the Company's core products.


Railway tie sales amounted to $48.2 million, down 21.5% from last year (or
approximately 11.0% net of year-over-year currency translation effect), as a
result of reduced railcar availability and slightly weaker industry demand in
North America in comparison with the year earlier period. Utility pole sales
totalled $36.5 million, a decrease of 2.2% from a year ago (or an increase of
approximately 2.0% net of year-over-year currency translation effect).
Industrial lumber sales declined marginally to $10.1 million, as solid demand
for marine applications in Canada were offset by lower sales in the United
States. Finally, sales of consumer lumber rose 65.6% to $4.5 million, largely
due to favourable weather conditions at the end of the quarter in most of the
Company's markets. 


"We are pleased with these results in light of difficulties in securing railcars
to ship products, as well as adverse year-over-year currency movements," said
Brian McManus, President and Chief Executive Officer of Stella-Jones. "More
importantly, we started to see greater sales momentum in our core railway tie
product category towards the end of the period."


Gross profit was $18.2 million or 18.3% of sales, compared with $22.5 million or
20.1% of sales last year. The reduction in gross profit, as a percentage of
sales, essentially stems from softer pricing in most product categories as well
as a different product mix in the railway tie category. 


"The decrease in gross profit dollars also results from a significant reduction
in the year-over-year average rate applied to convert gross profit from U.S.
dollar denominated sales. Furthermore, first quarter results include
approximately $1.8 million in general and administrative expenses directly
related to the Tangent Rail Corporation ("Tangent") acquisition," added George
Labelle, Senior Vice-President and Chief Financial Officer. 


Net earnings for the period stood at $5.8 million or $0.46 per share, fully
diluted, compared with $7.7 million or $0.61 per share, fully diluted, last
year. Cash flow from operating activities before changes in non-cash working
capital components reached $8.5 million, versus $11.3 million in the same period
a year ago.


Stella-Jones' balance sheet as at March 31, 2010 reflects the financing
components for the Tangent acquisition, which was successfully completed
subsequent to the end of the period on April 1, 2010. Such components include
long-term borrowings of US$65.0 million (Cdn$66.0 million) and net proceeds of
$76.9 million from the issuance of subscription receipts. Conversely, current
assets included restricted cash of $142.9 million, which was disbursed on April
1, 2010. Excluding these components, the Company's long-term debt, including the
current portion, amounted to $83.0 million, representing a ratio of total
long-term debt to shareholders' equity of 0.46:1, down from 0.48:1 three months
earlier. In addition, a solid cash flow generation and better working capital
resulted in a $6.3 million decrease in short-term bank indebtedness, which stood
at $49.9 million as at March 31, 2010.


OUTLOOK

"The acquisition of Tangent has considerably enhanced Stella-Jones' position as
a continent-wide producer. A successful integration will be a major performance
driver in 2010 and beyond, as we gradually achieve all potential synergies.
While our expectation for the year ahead is for demand levels to remain similar
to those of last year, our aim will be to reap all the benefits that our newly
enlarged network can provide. Our ongoing focus on network optimization and cost
control should increase both our efficiencies and our margins as the economic
recovery gains further momentum," concluded Mr. McManus.


CONFERENCE CALL

Stella-Jones will hold a conference call to discuss these results on Tuesday,
May 4, 2010, at 1:00 PM Eastern Time. Interested parties can join the call by
dialling 647-427-7452 (Toronto or overseas) or 1-888-231-8191 (elsewhere in
North America). Parties unable to call in at this time may access a tape
recording of the meeting by calling 1-800-642-1687 and entering the passcode
67872162. This tape recording will be available on Tuesday, May 4, 2010 as of
3:00 PM Eastern Time until 11:59 PM Eastern Time on Tuesday, May 11, 2010. 


NON-GAAP MEASURE

Cash flow from operations is a financial measure not prescribed by Canadian
generally accepted accounting principles ("GAAP") and is not likely to be
comparable to similar measures presented by other issuers. Management considers
it to be useful information to assist knowledgeable investors in evaluating the
cash generating capabilities of the Company.


ABOUT STELLA-JONES 

Stella-Jones Inc. (TSX:SJ) is a leading producer and marketer of pressure
treated wood products. The Company supplies North America's railroad operators
with railway ties, timbers and recycling services; and the continent's
electrical utilities and telecommunications companies with utility poles.
Stella-Jones also provides industrial lumber and services for construction and
marine applications, as well as consumer lumber to retailers and wholesalers for
outdoor applications. The Company's common shares are listed on the Toronto
Stock Exchange. 


Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of future
events. Such factors may include, without excluding other considerations,
fluctuations in quarterly results, evolution in customer demand for the
Company's products and services, the impact of price pressures exerted by
competitors, the ability of the Company to raise the capital required for
acquisitions, and general market trends or economic changes. As a result,
readers are advised that actual results may differ from expected results.


Note to readers: Complete unaudited first-quarter financial statements are
available on Stella-Jones' website at www.stella-jones.com

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