Ainsworth Lumber Co. Ltd.
TSX : ANS

Ainsworth Lumber Co. Ltd.

November 05, 2007 21:37 ET

Ainsworth Reports Financial Results for the Third Quarter of 2007

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 5, 2007) - Ainsworth Lumber Co. Ltd. (TSX:ANS) -



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Unaudited Three months ended Nine months ended
($ millions, September 30 September 30
except per share data) ---------------------------------------
2007 2006 2007 2006
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Sales $ 150.8 $ 181.1 $ 443.4 $ 707.9

Operating loss (45.0) (106.7) (113.5) (66.5)

Foreign exchange gain (loss)
on long-term debt 69.1 (1.2) 158.2 35.7

Net loss (37.2) (77.5) (32.0) (29.9)

Net loss: $ per share (2.54) (5.29) (2.18) (2.04)

Adjusted EBITDA(1) (7.0) (15.1) (34.3) 83.4

Cash (used in) provided by
operating activities (18.6) 16.6 (63.2) 71.9

Number of common shares
outstanding (millions) 14.6 14.6 14.6 14.6
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(1) Adjusted EBITDA, a non-GAAP financial measure, is defined as net
(loss) income before amortization, loss on disposal of capital assets,
finance expense, realized currency translation adjustments, foreign
exchange (gain) loss on long-term debt, income tax (recovery) expense
and non-recurring items.


Ainsworth Lumber Co. Ltd. today reported its financial results for the quarter ended September 30, 2007.

The net loss for the quarter of 2007 was $37.2 million on sales of $150.8 million, compared to a net loss of $77.5 million on sales of $181.1 million in 2006. The reduced loss for the third quarter of 2007 reflected production curtailments and other cost control measures implemented by the Company as well as a significant foreign exchange gain on long-term debt. The reported results for the 2007 quarter included a $52.1 million tax valuation allowance on previously benefited tax losses, an $8.6 million impairment charge on intangible assets, and an $8.6 million legal settlement provision. On a year to date basis, the net loss of $32.0 million for 2007 was $2.1 million higher than the net loss in the same period of 2006. Low OSB sales prices, in combination with reduced shipment volumes due to production curtailments, were partially offset by a significant foreign exchange gain on long-term debt.

On average the reported market price in the North Central region was U.S.$177 per msf (on a 7/16th-inch basis) compared to U.S.$181 per msf in the third quarter of 2006. On a year to date basis, average North Central market prices of U.S.$159 per msf declined 30% from U.S.$227 per msf in the first nine months of 2006. Our realized sales prices also continued to be negatively impacted as a result of the strong Canadian dollar.

Our OSB shipment volumes are lower than the prior periods both for the third quarter and the year to date as a result of the curtailment of production at certain facilities and the permanent closure of one production line at our Bemidji OSB facility in 2006. Both the Cook and Grand Rapids OSB facilities in Minnesota were shut down on September 22, 2006 in response to high production costs and low prices prevailing in the marketplace. The Cook facility resumed production on March 21, 2007 but the Grand Rapids facility remains closed.

Cash from operations decreased compared to the third quarter of 2006 and the first nine months of 2006 as a result of the unfavourable market conditions, which reduced profitability. As of September 30, 2007, our adjusted working capital was $170.6 million, compared to $186.6 million as at December 31, 2006. Additions to capital assets were $7.4 million in the third quarter of 2007, down from $60.1 million in the third quarter of 2006. Year to date capital spending was $65.7 million in 2007 compared to $166.9 million in 2006. This decrease reflects our decision to put any discretionary capital expenditures, including the expansion of Grande Prairie, on hold until market conditions improve.

Excerpts from the company's interim financial statements for the three and six month periods ended September 30, 2007 are attached. To view the complete interim financial statements, including the notes to the interim financial statements, click on the following link: http://www.ccnmatthews.com/docs/ans_FinancialsQ3.pdf.

The company will hold a conference call at 10:00 A.M. PST (1:00 P.M. EST) on Friday, November 9, 2007 to discuss the company's third quarter results. The dial-in phone number is 1-800-943-2431, Reservation #21354747. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21354747. This recording will be available until November 16, 2007.



AINSWORTH LUMBER CO. LTD.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
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September 30 December 31
2007 2006
-------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 133,451 $ 74,312
Short-term investments 835 35,864
Accounts receivable, net of allowance
for doubtful accounts of $Nil (2006: $Nil) 37,481 38,848
Inventories 68,986 95,515
Prepaid expenses 13,365 13,869
Restricted cash 12,289 62,184
Current portion of future income tax assets 4,707 1,697
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271,114 322,289
Capital Assets, Net 916,599 968,539
Intangible Assets 3,638 14,243
Other Assets 26,294 53,810
Future Income Tax Assets 10,621 42,348
Goodwill 102,970 102,970
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$ 1,331,236 $ 1,504,199
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 71,016 $ 58,763
Income taxes payable 3,251 2,552
Current portion of future income
tax liabilities - 10,708
Current portion of long-term debt 9,218 10,523
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83,485 82,546
Accrued Pension Benefit Liability 5,149 6,034
Reforestation Obligation 5,706 4,621
Long-term Debt 973,057 1,027,595
Future Income Tax Liabilities 72,314 89,293
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1,139,711 1,210,089
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SHAREHOLDERS' EQUITY
Capital Stock 55,827 55,827
Retained Earnings 247,157 295,005
Accumulated Other Comprehensive Loss (111,459) (56,722)
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191,525 294,110
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$ 1,331,236 $ 1,504,199
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Operations
(In thousands of Canadian dollars, except share and per share data)
(Unaudited)
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Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
2007 2006 2007 2006
------------------------ ------------------------

Sales $ 150,827 $ 181,054 $ 443,393 $ 707,879
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Costs and Expenses
Costs of products
sold (exclusive
of amortization) 151,758 191,729 458,080 607,562
Selling and
administration 7,589 7,158 23,976 26,506
Amortization of
capital assets 17,871 23,802 52,544 74,811
(Gain) loss on disposal
of capital assets (115) 433 192 433
Cost of class
action lawsuit 10,106 2,591 13,527 2,982
Impairment of
intangible assets 8,602 - 8,602 -
Write-down of
capital assets - 55,290 - 55,290
Closure of
production line - 4,417 - 4,417
Write-down of
timber licence deposit - 2,364 - 2,364
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195,811 287,784 556,921 774,365
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Operating Loss (44,984) (106,730) (113,528) (66,486)

Finance Expense
Interest 19,281 17,791 56,249 50,574
Transaction costs - - 2,897 -
Amortization of
financing fees - 1,385 - 3,973
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19,281 19,176 59,146 54,547

Other Income 1,492 2,695 4,409 9,629
Foreign Exchange Gain
(Loss) on Long-term Debt 69,117 (1,237) 158,166 35,650
Other Foreign
Exchange (Loss) Gain (9,053) 751 (13,275) (6,401)
Realized Currency
Translation Loss (1,391) - (5,558) (2,400)
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Loss Before Income Taxes (4,100) (123,697) (28,932) (84,555)
Income Tax Expense
(Recovery) 33,072 (46,172) 3,064 (54,631)
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Net Loss $ (37,172) $ (77,525) $ (31,996) $ (29,924)
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Basic and diluted
loss per common share $ (2.54) $ (5.29) $ (2.18) $ (2.04)
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Weighted average
number of common
shares outstanding 14,649,140 14,649,140 14,649,140 14,649,140
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
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Three months ended Nine months ended
September 30 September 30
------------------------ ------------------------
2007 2006 2007 2006
------------------------ ------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (37,172) $ (77,525) $ (31,996) $ (29,924)
Items not
affecting cash
Amortization of
capital assets 17,871 23,802 52,544 74,811
Non-cash portion of
interest expense 329 - 1,142 -
Amortization of
financing fees - 1,385 - 3,973
Foreign exchange (gain)
loss on long-term debt (69,117) 1,237 (158,166) (35,650)
(Gain) loss on
disposal of capital
assets (115) 433 192 433
Impairment of
intangible assets 8,602 - 8,602 -
Write-down of
capital assets - 55,290 - 55,290
Write-down of timber
licence deposit - 2,364 - 2,364
Change in non-current
reforestation
obligation 132 31 1,085 (1,032)
Future income taxes 32,999 (47,177) 107 (61,690)
Realized currency
translation loss 1,391 - 5,558 2,400
Change in non-cash
operating working
capital 26,449 56,711 57,746 60,919
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Cash (used in) provided
by operating activities (18,631) 16,551 (63,186) 71,894
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CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issue
of long-term debt - 84,019 109,825 169,526
Repayment of
long-term debt (2,796) - (6,606) -
Repayment of capital
lease obligations (72) (90) (229) (90)
Dividends paid - - - (14,649)
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Cash (used in) provided
by financing activities (2,868) 83,929 102,990 154,787
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CASH FLOWS FROM
INVESTING ACTIVITIES
Short-term investments - (27,886) 35,029 (122,648)
Restricted cash (153) (33,897) 49,895 (37,586)
Additions to
capital assets (7,395) (60,123) (65,654) (166,864)
(Increase) decrease
in other assets (23) (2,690) 570 (7,338)
Proceeds on disposal
of capital assets 171 - 947 -
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Cash (used in) provided
by investing activities (7,400) (124,596) 20,787 (334,436)
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Effect of foreign
exchange rate changes on
cash and cash equivalents (1,431) (17) (1,452) (1,653)
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NET CASH (OUTFLOW) INFLOW (30,330) (24,133) 59,139 (109,408)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 163,781 123,926 74,312 209,201
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 133,451 $ 99,793 $ 133,451 $ 99,793
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SUPPLEMENTAL INFORMATION
Taxes paid $ 577 $ 846 $ 5,971 $ 2,947
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Interest paid $ 17,832 $ 6,257 $ 39,935 $ 38,186
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Forward-looking statements in this news release relating to the Company's expectations regarding OSB demand and pricing are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995. When used herein, words such as "expect" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions made by and information available to Ainsworth Lumber Co. Ltd. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements include, without limitation, the future demand for, and sales volumes of, the Company's products, future production volumes, efficiencies and operating costs, increases or decreases in the prices of the Company's products, the Company's future stability and growth prospects, the Company's future profitability and capital needs, including capital expenditures, and the outlook for and other future developments in the Company's affairs or in the industries in which the Company participates and factors detailed from time to time in the Company's periodic reports filed with the United States Securities and Exchange Commission, and other regulatory authorities. The Company has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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