Ainsworth Lumber Co. Ltd.
TSX : ANS
TSX : ANS.WT

Ainsworth Lumber Co. Ltd.

February 25, 2010 23:37 ET

Ainsworth Announces 2009 Fourth Quarter and Year End Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 25, 2010) - Ainsworth Lumber Co. Ltd. (TSX:ANS)(TSX:ANS.WT) reported its unaudited financial results for the fourth quarter and full year ended December 31, 2009 today.

Highlights

- Recorded positive adjusted EBITDA of $5.2 million in 2009 compared to a loss of $0.1 million in 2008

- Completed a full strategic review of the business

- Added considerable depth and breadth of experience to the management team

- Divested all of the company's non-core assets, focused resources on the best operations

- Continue to focus on transitioning to higher margin products

In 2009, Ainsworth recorded a net loss of $21.6 million, relative to a net loss of $321.8 million in 2008. For the fourth quarter, the Company recorded a net loss of $12.4 million in 2009, compared to a net loss of $156.7 million in the fourth quarter of 2008. For the full year ended December 31, 2009, Ainsworth recorded positive adjusted EBITDA of $5.2 million for the full year, compared to an adjusted EBITDA of negative $0.1 million in 2008. In the fourth quarter of 2009, the Company recorded positive adjusted EBITDA of $2.4 million, relative to negative adjusted EBITDA of $0.7 million for the same period in 2008.

Ainsworth completed a full strategic review, divested its portfolio of non-core assets, strengthened the management team and continued to find ways to cut costs and improve operational efficiency. The Company's President and CEO Rick Huff said, "2009 saw us take decisive action to streamline the business, strengthen our foundation and ensure we emerge from this period stronger and well positioned for growth. In all, we ended the year with positive adjusted EBITDA for the first time since 2006, despite North American housing starts falling by 33% in 2009."

"Ainsworth began 2010 with a clear strategic direction. We are focusing our resources on our best assets, leveraging our highly skilled workforce and flexible mill technology to produce more high value, high margin products, and continuing to pursue opportunities in overseas markets. With a strong balance sheet, great assets, exceptional people, and approximately 1.1 billion square feet of incremental capacity that will be available to us in the future, we are well positioned to anticipate an increase in the demand for OSB," added Mr. Huff.

Performance, Operational Efficiency and Liquidity

OSB shipments from our continuing operations were 361,598 msf and 1,546,825 msf for the 2009 fourth quarter and full year respectively. On a full year basis, OSB shipments increased by 3.8% in 2009 compared to the previous year.

Until North American market conditions improve we have minimized all discretionary capital expenditures. In the meantime, we continue to focus on maintaining sufficient working capital to fund any shortfall from operations, interest payments, debt repayments and essential capital expenditures. As of December 31, 2009, our adjusted working capital from continuing operations was $166.8 million, compared to $215.5 million as at December 31, 2008.

Ainsworth successfully divested all of its non-core assets, including the Savona specialty plywood mill, the Lillooet veneer mill and its three Minnesota mills in 2009. This has enabled the Company to focus its resources on its best assets and continue to drive improvements in operational efficiency.



Selected Financial Information

Selected Financial Information
In millions of Canadian dollars, except share and per share data
(Unaudited)
Three months ended Year ended
December 31 December 31
-----------------------------------------------------------------------
2009 2008 2009 2008(1)
----------- ---------- ---------- ----------
Sales $ 67.1 $ 79.1 $ 285.9 $ 290.7
Operating (loss)
earnings (9.4) (10.6) (32.6) (42.9)
Foreign exchange gain
(loss) on long-term debt 10.6 (79.1) 87.1 (131.9)
Net income (loss) from
continuing operations (2.2) (79.6) 15.9 (231.9)
Net income (loss) (12.4) (156.7) (21.6) (321.8)

Adjusted EBITDA (2) 2.4 (0.7) 5.2 (0.1)

Basic and diluted
earnings (loss)
per share:
Net income (loss)
from continuing
operations (0.02) (0.80) 0.16 (4.60)
Net income (loss) (0.12) (1.57) (0.22) (6.33)
Weighted average common
shares outstanding
(in millions) (3) 100.1 100.0 100.0 50.8

(1) On July 29, 2008 the Company completed a major financial
recapitalization of its balance sheet. The results for the year 2008, as
disclosed above, include the period from January 1 to July 29, 2008
before the recapitalization and the period from July 30 to December,
2008 under the recapitalized Company. Details regarding the financial
recapitalization are included in Note 1 of the consolidated financial
statements for the period ended December 31, 2008.

(2) Adjusted EBITDA, a non-GAAP financial measure, is defined as net (loss)
income before amortization, (gain) loss on disposal of property, plant
and equipment, costs of curtailed operations, stock option expense,
finance expense, realized currency translation adjustments, foreign
exchange (gain) loss on long-term debt, other foreign exchange (gain)
loss, income tax recovery and other non-recurring items. See our
Management's Discussion and Analysis for the year ended December 31,
2009 for a reconciliation of non-GAAP measures.

(3) Adjusted working capital, a non-GAAP financial measure, is defined as
current assets less restricted cash, current portion of future income
tax assets and current liabilities plus current portion of future income
tax liabilities.


Market Conditions and Outlook

In 2009, the average annual North Central market price for 7/16" oriented strand board (OSB) was $162 (per msf), down 5.8% from $172 in 2008. The average annual Western Canadian market price for 7/16" OSB was $145 (per msf) in 2009, down 7.6% from $157 in 2008.

In 2008 and through the balance of 2009, North American housing starts, the key measure of demand for our products, remained at historic lows. Looking ahead, we are cautiously optimistic about the return of stronger market fundamentals in the U.S., Canada and Japan in 2010. We expect to see a modest increase in housing starts in North America in 2010, but not a return to the peak levels seen earlier in the decade.

In the U.S., the Company's primary market, macroeconomic trends such as high unemployment and tight credit markets are expected to continue to put downward pressure on home prices and demand for new home construction. Over the long term, however, demographic trends clearly indicate there will be strong, sustainable demand for our products as new home construction returns.

The outlook for OSB prices is also expected to be turbulent. As demand for OSB increases with a gradual rise in new home construction, we expect prices to fluctuate as OSB manufacturers bring idled capacity back on line to increase supply.

Conference Call Information

Excerpts from the Company's financial statements for the year ended December 31, 2009 are attached. To view the complete financial statements, including the notes to the financial statements, click on the following link: http://media3.marketwire.com/docs/ans.pdf.

Ainsworth will hold a conference call on Friday, February 26, 2010 at 10:00 am PDT (1:00 pm EDT) to discuss the fourth quarter and full year 2009 results. The dial-in phone number is 1-800-954-0650, Reservation #21459032. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21459032. This recording will be available until the end of the day on March 5, 2010.

Forward Looking Statements

Forward-looking information provided in this news release relating to the Company's expectations regarding OSB demand and pricing and the Company's future prospects are forward-looking information pursuant to National Instrument 51-102 promulgated by the Canadian Securities Administrators. The Company believes that expectations reflected in such information are reasonable, but no assurance is given that such expectations will be correct. Forward-looking information is based on the Company's beliefs and assumptions based on information available at the time the assumption was made and on management's experience and perception of historical trends, current conditions and expected further developments as well as other factors deemed appropriate in the circumstances. Investors are cautioned that there are risks and uncertainties related to such forward-looking information and actual results may vary. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking information include, without limitation, factors detailed from time to time in the Company's periodic reports filed with the Canadian Securities Administrators and other regulatory authorities. The forward-looking information is made as of the date of this news release and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as explicitly required by securities laws.



AINSWORTH LUMBER CO. LTD.
Consolidated Balance Sheets
(In thousands of Canadian dollars)

--------------------------------------------------------------------------
December 31 December 31
2009 2008
--------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents 92,075 $ 197,928
Short-term investments 61,654 1,586
Accounts receivable 13,730 18,795
Inventories 39,182 38,279
Income taxes receivable 509 -
Prepaid expenses 4,429 5,394
Assets of discontinued operations 1,868 21,717
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213,447 283,699
Property, Plant and Equipment 538,787 575,212
Intangible Assets 75,602 70,146
Other Assets 11,276 14,512
Assets of Discontinued Operations 7,133 40,109
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846,245 $ 983,678
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities 23,475 $ 26,095
Income taxes payable - 2,764
Current portion of future income tax liabilities 7,649 8,492
Current portion of long-term debt 10,743 12,366
Liabilities related to discontinued operations 5,009 10,378
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46,876 60,095
Accrued Pension Benefit Liability 2,484 4,277
Reforestation Obligation 2,072 1,871
Long-term Debt 550,582 627,115
Future Income Tax Liabilities 35,209 60,160
Liabilities Related to Discontinued Operations 885 4,009
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638,108 757,527
Commitments and Guarantees
Contingencies

SHAREHOLDERS' EQUITY
Capital Stock 409,880 409,613
Contributed Surplus 876 -
Deficit (202,619) (180,984)
Accumulated Other Comprehensive Loss - (2,478)
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208,137 226,151
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846,245 $ 983,678
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AINSWORTH LUMBER CO. LTD.
Consolidated Statements of Operations
(In thousands of Canadian dollars, except per share data)

The
The Company Predecessor
--------------------------------------------------------------------------
Five months
Year ended to Seven months
December 31 December 31 to July 29
2009 2008 2008
--------------------------------------------------------------------------
Sales $ 285,915 $ 133,430 $ 157,294
--------------------------------------------------------------------------

Costs and Expenses
Costs of products sold 263,131 122,204 146,609
Selling and administration 19,717 9,915 14,668
Amortization of property,
plant and equipment and
intangible assets 36,268 13,007 20,448
--------------------------------------------------------------------------
319,116 145,126 181,725
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Loss before other items (33,201) (11,696) (24,431)

Finance expense (53,061) (22,811) (64,899)
Foreign exchange gain (loss) 80,623 (74,228) (32,882)
Costs of curtailed operations (2,532) (1,150) (2,919)
Other items 3,756 (11,010) 1,240
--------------------------------------------------------------------------

Loss before income taxes (4,415) (120,895) (123,891)

Income tax (recovery) expense (20,322) (15,718) 2,911
--------------------------------------------------------------------------

Net income (loss) from
continuing operations 15,907 (105,177) (126,802)

Net loss from discontinued
operations (37,542) (75,807) (13,998)
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Net loss $ (21,635) (180,984) $ (140,800)
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--------------------------------------------------------------------------

Basic and diluted net income
(loss) per common share:
Continuing operations $ 0.16 $ (1.05) $ (8.66)
Discontinued operations (0.38) (0.76) (0.96)
--------------------------------------------------------------------------
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Basic and diluted net loss
per common share $ (0.22) $ (1.81) $ (9.61)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Weighted average number of
common shares outstanding 100,013,151 100,000,000 14,649,140
Effect of dilutive stock
options on continuing operations 61,375 - -
--------------------------------------------------------------------------
100,074,526 100,000,000 14,649,140
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AINSWORTH LUMBER CO. LTD.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
The
The Company Predecessor
--------------------------------------------------------------------------
Five months
Year ended to Seven months
December 31 December 31 to July 29
2009 2008 2008
--------------------------------------------------------------------------
CASH FLOWS USED IN
OPERATING ACTIVITIES
Net loss $ (21,635) $ (180,984) $ (140,800)
Items not affecting cash
Amortization of property,
plant and equipment and
intangible assets 36,268 14,244 27,153
Non-cash portion of
interest expense 19,684 7,899 929
Non-cash stock based
compensation 968 - -
Foreign exchange (gain) loss
on long-term debt (87,141) 98,720 33,261
Loss on derivative
financial instrument - 9,857 -
Gain on disposal of property,
plant and equipment (3,382) (429) (3,264)
Impairment of property,
plant and equipment 2,152 - 837
Impairment of property,
plant and equipment of
discontinued operations 25,391 69,900 -
Impairment of other assets
of discontinued operations 207 - -
Change in non-current
reforestation obligation (167) 129 (405)
Future income taxes (23,593) (8,076) 11,146
Adjustment to net accrued
pension benefit asset (3,276) (4,541) -
Unrealized foreign
exchange loss 5,308 - -
Realized currency
translation adjustment - - 1,465
Change in non-cash operating
working capital 13,965 (16,118) 23,520
--------------------------------------------------------------------------
Cash used in
operating activities (35,251) (9,399) (46,158)
--------------------------------------------------------------------------
CASH FLOWS USED IN
FINANCING ACTIVITIES
Repayment of long-term debt (10,326) (5,926) (5,762)
Exercise of stock-options 174 - -
Repayment of capital
lease obligations (377) (161) (179)
--------------------------------------------------------------------------
Cash used in
financing activities (10,529) (6,087) (5,941)
--------------------------------------------------------------------------
CASH FLOWS (USED IN) PROVIDED
BY INVESTING ACTIVITIES
Short-term investments (60,068) (699) (51)
Additions to property,
plant and equipment (6,838) (4,086) (4,530)
Proceeds on disposal of
property, plant and equipment 8,870 382 6,764
Decrease (increase)
in other assets 3,271 1,551 (133)
Settlement of
warranty holdback - - 2,852
--------------------------------------------------------------------------
Cash (used in) provided
by investing activities (54,765) (2,852) 4,902
--------------------------------------------------------------------------
Effect of foreign exchange
rate changes on cash
and cash equivalents (5,308) 442 30
--------------------------------------------------------------------------
NET CASH OUTFLOW (105,853) (17,896) (47,167)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 197,928 215,824 76,731
--------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 92,075 $ 197,928 $ 29,564
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Cash and cash equivalents 81,631 192,584 69,627
Restricted cash 10,444 5,344 7,104
--------------------------------------------------------------------------
$ 92,075 $ 197,928 $ 76,731
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SUPPLEMENTAL INFORMATION
Net proceeds of
recapitalization $ - $ - $ 186,261
Taxes paid 112 2,377 345
Interest paid 31,764 15,448 13,406
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