Ainsworth Lumber Co. Ltd.
TSX : ANS

Ainsworth Lumber Co. Ltd.

August 11, 2006 21:27 ET

Ainsworth Reports Financial Results for the Second Quarter of 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 11, 2006) - Ainsworth Lumber Co. Ltd. (TSX:ANS) -



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Unaudited Three months ended Six months ended
($ millions, except June 30 June 30
per share data) ----------------------------------------
2006 2005 2006 2005
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Sales $234.3 $329.9 $526.8 $675.5

Operating (loss) earnings (6.0) 77.6 40.2 186.4

Foreign exchange gain
(loss) on long-term debt 40.6 (12.6) 36.9 (18.5)

Net income 27.3 31.3 50.0 86.5

Earnings: $ per share 1.87 2.14 3.41 5.90

Adjusted EBITDA (1) 13.5 104.9 91.0 238.4

Cash provided by
operating activities 20.4 73.1 40.0 88.2
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(1) Adjusted EBITDA, a non-GAAP financial measure, represents
operating earnings before amortization of capital assets,
finance expense, tax expense and foreign exchange gain/(loss)
on long-term debt.


Ainsworth Lumber Co. Ltd. today reported its financial results for the quarter ended June 30, 2006.

The second quarter of 2006 was characterized by falling market prices for commodity OSB. The average benchmark North Central OSB price was U.S.$238 per msf (on a 7/16th-inch basis) compared to U.S.$297 per msf in the comparative period of 2005. Company shipment volumes decreased 9.9% compared to the second quarter of 2005. On a year to date basis, the 2006 shipment volumes were 4.9% lower than the volumes sold in the first six months of 2005. The reduction in shipment volumes in the second quarter of 2006 was primarily due to the extensive downtime taken at our Grand Rapids facility.

The decline in sales prices and volumes reduced both sales and operating earnings. Sales were further reduced by the continuing strength of the Canadian dollar. During the second quarter we recorded a $6.7 million write down on log inventories at our Minnesota operations, reflecting our assessment of net realizable value of logs in the current poor OSB pricing environment. These events combined to reduce adjusted EBITDA to $13.5 million for the quarter versus an adjusted EBITDA of $104.9 million for the second quarter of 2005. Foreign exchange gains on long term debt and income tax recoveries helped offset the decline in operating earnings. The foreign exchange gain in the quarter was $40.6 million and $36.9 million year to date.

Cash provided by operating activities was lower than 2005 for both the quarter and the year to date as a result of the decline in net income. We ended the quarter with adjusted working capital of $323.2 million, compared to $340.2 million as at December 31, 2005. Capital spending on the expansion of our Grande Prairie facility and the modernization of our Grand Rapids facility continued throughout the second quarter. Capital spending was $48.8 million for the quarter compared to $5.5 million in the second quarter of 2005. During the quarter, we issued an additional U.S.$75.0 million in senior unsecured notes. The proceeds from this issue of debt are intended to partially fund the expansion of the Grande Prairie facility.

We also paid dividends of $1.00 per share during the second quarter, reflecting our strong 2005 performance.

We will hold a conference call on Wednesday, August 16, 2006 at 8:30 A.M. PST (11:30 A.M. EST) to discuss our second quarter results. The dial-in phone number is 1-800-337-2650, Reservation #21301552. To access the post-view line, dial 1-800-558-5253 or 1-416-626-4100, Reservation #21301552. This recording will be available until August 23, 2006.



AINSWORTH LUMBER CO. LTD.
Interim Consolidated Balance Sheets
(In thousands of dollars)
Unaudited
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June 30 December 31
2006 2005
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ASSETS
Current Assets
Cash and cash equivalents $ 123,926 $ 209,201
Short-term investments 94,762 -
Accounts receivable, net of
allowance for doubtful
accounts of $Nil (2005: $Nil) 54,194 61,579
Inventories 105,914 108,530
Income taxes receivable 25,565 28,409
Prepaid expenses 5,568 14,762
Restricted cash 42,705 39,016
Timber licence deposits - 5,998
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452,634 467,495
Capital Assets 931,605 875,896
Intangible Assets 13,641 14,209
Other Assets 60,907 52,432
Goodwill 102,970 102,970
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$ 1,561,757 $ 1,513,002
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 37,986 $ 30,348
Accrued liabilities 48,645 51,979
Current portion of future income taxes 30,229 31,362
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116,860 113,689
Reforestation Obligation 3,285 4,348
Long-term Debt 908,926 859,540
Future Income Taxes 106,047 120,256
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1,135,118 1,097,833
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Commitments
Contingencies

SHAREHOLDERS' EQUITY
Capital stock 55,827 55,827
Cumulative translation adjustment (82,225) (58,343)
Retained earnings 453,037 417,685
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426,639 415,169
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$ 1,561,757 $ 1,513,002
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Approved by the Board:

Catherine Ainsworth Allen Ainsworth
DIRECTOR DIRECTOR


AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Operations and Retained Earnings
(In thousands of dollars, except share and per share data)
Unaudited
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Three months ended Six months ended
June 30 June 30
---------------------- ---------------------
2006 2005 2006 2005
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Sales $ 234,267 $ 329,892 $ 526,825 $ 675,470
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Costs and
Expenses

Costs of products
sold (exclusive
of amortization) 204,435 219,238 415,833 423,696

Selling and
administration 11,536 7,754 19,739 15,079

Amortization of
capital assets 24,353 25,326 51,009 50,280
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240,324 252,318 486,581 489,055
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Operating (Loss)
Earnings (6,057) 77,574 40,244 186,415

Finance Expense

Interest 17,077 16,978 32,783 33,228
Amortization of
financing costs
and fees 1,359 1,230 2,588 2,454
Loss on
repurchase of
long-term debt - 1,485 - 1,485
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18,436 19,693 35,371 37,167

Other (Expense)
Income (4,748) 1,971 (218) 1,674

Foreign Exchange
Gain (Loss) on
Long-term Debt 40,637 (12,587) 36,887 (18,480)
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Income Before
Income Taxes 11,396 47,265 41,542 132,442

Income Tax
(Recovery)
Expense (15,939) 15,932 (8,459) 45,989
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Net Income 27,335 31,333 50,001 86,453

Retained
Earnings,
Beginning of
Period 440,351 333,862 417,685 278,742
Dividends Paid (14,649) (14,649) (14,649) (14,649)
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Retained
Earnings, End of
Period $ 453,037 $ 350,546 $ 453,037 $ 350,546
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Basic and diluted
earnings per
common share $ 1.87 $ 2.14 $ 3.41 $ 5.90
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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 dollars)
Unaudited
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Three months ended Six months ended
June 30 June 30
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2006 2005 2006 2005
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CASH FLOWS FROM
OPERATING
ACTIVITIES
Net income $ 27,335 $ 31,333 $ 50,001 $ 86,453
Amounts not
affecting cash
Amortization of
capital assets 24,353 25,326 51,009 50,280
Amortization of
deferred
financing costs
and fees 1,359 1,230 2,588 2,454
Foreign exchange
(gain) loss on
long-term debt (40,637) 12,587 (36,887) 18,480
Loss on
repurchase of
long-term debt - 1,485 - 1,485
Gain on disposal
of capital assets - (11) - (11)
Change in
non-current
reforestation
obligation (502) (399) (1,063) 5
Future income
taxes (19,307) 29,261 (14,513) 60,938
Change in
non-cash
operating working
capital 27,846 (27,676) (11,102) (131,860)
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Cash provided by
operating
activities 20,447 73,136 40,033 88,224
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CASH FLOWS FROM
FINANCING
ACTIVITIES
Decrease in
capital lease
obligations - (131) - (174)
Proceeds from
issue of
long-term debt 85,507 - 85,507 -
Repurchase of
long-term debt - (31,062) - (31,062)
Dividends paid (14,649) (14,649) (14,649) (14,649)
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Cash provided by
(used in)
financing
activities 70,858 (45,842) 70,858 (45,885)
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CASH FLOWS FROM
INVESTING
ACTIVITIES
Short-term
investments (54,710) - (94,762) -
Restricted cash (5,875) (4,084) (3,689) (4,107)
Additions to
capital assets (48,838) (5,521) (91,431) (17,507)
Increase in other
assets (1,186) (4,580) (4,648) (6,447)
Proceeds on
disposal of
capital assets - 11 - 11
Timber licence
deposits - - - (36,249)
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Cash used in
investing
activities (110,609) (14,174) (194,530) (64,299)
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Effect of foreign
exchange rate
changes on cash
and cash
equivalents (22) - (1,636) -
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NET CASH OUTFLOW (19,326) 13,120 (85,275) (21,960)

CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 143,252 170,983 209,201 206,063
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 123,926 $ 184,103 $ 123,926 $ 184,103
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SUPPLEMENTAL
INFORMATION
Taxes paid $ 2,000 $ 9,917 $ 2,101 $ 59,305
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Interest paid $ 28,536 $ 24,698 $ 31,929 $ 27,670
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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 cots, 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.

To view the full financial statements, including the notes to the financial statements, please click on the following link: http://www.ccnmatthews.com/docs/ANS0811.pdf

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