Stella-Jones Reports the Eleventh Consecutive Year of Growth in Net Income

MONTREAL, QUEBEC--(Marketwire - March 16, 2012) - Stella-Jones Inc. SJ

--  Q4 sales of $147.5 million, up 10.9% from $133.1 million last year 
--  25.5% increase in Q4 net income to $13.4 million, or $0.83 per share,
    fully diluted, up from $10.7 million, or $0.67, fully diluted, in Q4
    2010 
--  61.8% increase in 2011 net income to $55.7 million, or $3.48 per share,
    fully diluted, up from $34.4 million, or $2.26 per share, fully diluted
    in 2010 
--  Adoption of a new dividend policy and declaration of a quarterly
    dividend of $0.15 per share 

Stella-Jones Inc. SJ today announced financial results for its fourth quarter and fiscal year ended December 31, 2011. These results reflect the adoption, on January 1, 2011, of International Financial Reporting Standards ("IFRS"). Results for the prior year have been restated.

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Financial highlights                                                        
(in thousands of Canadian                                                   
 dollars, except per share                                                  
 data)                         Quarters ended Dec. 31,  Years ended Dec. 31,
                                                                            
                                      2011        2010        2011      2010
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Sales                              147,520     133,071     640,148   561,046
Operating income                    20,399      19,194      87,968    60,690
Net income for the period           13,369      10,650      55,709    34,441
  Per share - basic ($)               0.84        0.67        3.49      2.27
  Per share - diluted ($)             0.83        0.67        3.48      2.26
Cash flow from operations 1         24,760      23,153      99,627    78,063
Weighted average shares                                                     
 outstanding (basic, in '000s)      15,953      15,912      15,946    15,163
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1 Before changes in non-cash working capital components and interest and    
income tax paid.                                                            

"2011 marked Stella-Jones' eleventh year of uninterrupted growth in net income. These results reflect the successful execution of our operating strategy based on continental expansion and industry consolidation. Demand for our core railway tie and utility pole products remained solid throughout the year, as evidenced by double-digit sales growth excluding acquisitions and currency variations. More importantly, our continued focus on optimizing network efficiency and overall operations led to solid improvements in profitability," said Brian McManus, President and Chief Executive Officer.

FOURTH QUARTER RESULTS

Sales totalled $147.5 million, up 10.9% from last year's fourth-quarter sales of $133.1 million. This increase is attributable to solid industry demand for the Company's core products, including strong advanced deliveries of railway ties, as well as a $1.7 million contribution from the Thompson Industries, Inc. ("Thompson") operations, acquired on December 7, 2011. The conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, had a marginal negative impact of $0.4 million on the value of U.S. dollar denominated sales when compared with last year. Excluding these factors, sales increased approximately 10.0%.

Fourth quarter sales of railway ties amounted to $74.4 million in 2011, up from $62.4 million in the fourth quarter of 2010. This 19.2% increase, reflects strong industry demand, including advanced deliveries, and a $1.5 million contribution from the Thompson operations. Utility pole sales rose 3.8% to $50.6 million, compared with $48.7 million a year earlier, as a result of higher sales of transmission poles related to special projects. Industrial product sales stood at $20.6 million, up from $19.8 million a year ago, in part due to the contribution of the Thompson operations. Residential lumber sales were $2.0 million, versus $2.2 million last year.

Operating income amounted to $20.4 million, or 13.8% of sales, compared with $19.2 million, or 14.4% of sales, last year. Of note, results for the fourth quarter of 2011 included an asset impairment charge of $2.2 million related to the non-cash reversal of a customer relationship intangible asset, whereas results for the fourth quarter of 2010 included several items representing net revenues of $1.8 million, principally due to the sale of certain assets of the Terre Haute, Indiana facility. Excluding these elements, operating income for the fourth quarter of 2011 was $22.6 million, compared with $17.4 million a year earlier.

Net income for the period reached $13.4 million, or $0.83 per share, fully diluted, up 25.5% from $10.7 million, or $0.67 per share, fully diluted, last year. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid was $24.8 million, compared with $23.2 million a year ago.

YEAR-END RESULTS

For the year ended December 31, 2011, sales reached $640.1 million, up 14.1% from $561.0 million a year earlier. Excluding additional contributions of $37.7 million from the Tangent Rail Corporation operations in the first quarter of 2011 and of $1.7 million from the Thompson operations in the last three weeks of the fourth quarter of 2011, and net of a $21.3 million conversion effect from fluctuations in the value of the Canadian dollar versus the U.S. currency, sales increased approximately 11.0%.

Operating income amounted to $88.0 million, or 13.7% of sales, versus $60.7 million, or 10.8% of sales a year earlier. Net income for 2011 totalled $55.7 million, or $3.48 per share, fully diluted, versus $34.4 million, or $2.26 per share, fully diluted, in 2010, representing a year-over-year increase of 61.8%. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 27.6% to $99.6 million.

SOLID FINANCIAL POSITION

As at December 31, 2011, the Company's financial position remained solid with total debt, including short-term bank indebtedness, of $182.7 million, compared with $157.8 million at the end of the previous year. The increase is essentially attributable to the acquisition of Thompson three weeks prior to year-end. As at December 31, 2011, the ratio of total debt to total capitalization was 0.35:1, down from 0.36:1 twelve months earlier.

"A strong cash flow generation enabled Stella-Jones to conclude the year with a healthy financial position. This provides the Company with the flexibility to further expand its product and service offering, as well as its continental reach," added George Labelle, Senior Vice-President and Chief Financial Officer.

NEW DIVIDEND POLICY AND QUARTERLY DIVIDEND OF $0.15 PER SHARE

On March 15, 2012, the Board of Directors modified the Company's dividend policy to consider the declaration of a dividend on a quarterly rather than on a semi-annual basis. In light of the Company's results, the Board declared a quarterly dividend of $0.15 per common share payable on April 30, 2012 to shareholders of record at the close of business on April 2, 2012.

OUTLOOK

"We expect demand for our core products to remain solid in 2012, as North American railroad operators continue to invest in their network, while demand is expected to hold in utility poles. Our short-term priority is to integrate the Thompson operations and benefit from greater market penetration, synergies and additional operating efficiencies from a larger network. Already well established as one of the largest North American providers of industrial treated wood products, Stella-Jones will continue to assess prospective business opportunities that create additional value for its shareholders," concluded Mr. McManus.

CONFERENCE CALL

Stella-Jones will hold a conference call to discuss these results on Friday, March 16, 2012, at 10:00 AM Eastern Time. Interested parties can join the call by dialling 416-644-3426 (Toronto or overseas) or 1-800-731-5319 (elsewhere in North America). Parties unable to call in at this time may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 4511444#. This tape recording will be available on Friday, March 16, 2012 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, March 23, 2012.

NON-IFRS FINANCIAL MEASURES

Operating income and cash flow from operations are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these measures to be useful information to assist knowledgeable investors in evaluating the cash generating capabilities of the Company.

ABOUT STELLA-JONES

Stella-Jones Inc. 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 products and services for construction and marine applications, as well as residential 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.