Ainsworth Lumber Co. Ltd.
TSX : ANS

Ainsworth Lumber Co. Ltd.

August 13, 2007 19:45 ET

Ainsworth Reports Financial Results for the Second Quarter of 2007

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 13, 2007) - Ainsworth Lumber Co. Ltd. (TSX:ANS) -



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Unaudited Three months ended Six months ended
($ millions, June 30 June 30
except per share data) -------------------------------------
2007 2006 2007 2006
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Sales $ 157.5 $ 234.3 $ 292.6 $ 526.8

Operating (loss) earnings (37.8) (6.0) (68.5) 40.2

Foreign exchange gain on long-term
debt 79.6 40.6 89.0 36.9

Net income 27.9 24.9 5.2 47.6

Earnings: $ per share 1.91 1.70 0.35 3.25

Adjusted EBITDA(1) (19.2) 13.6 (34.9) 91.0

Cash provided by (used in) operating
activities 4.5 25.1 (44.6) 55.3

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 and income tax (recovery)
expense.


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

The net income for the quarter was $27.9 million on sales of $157.5 million compared to net income of $24.9 million on sales of $234.3 million in 2006. On a year to date basis, net income of $5.2 million for the first half of 2007 was $42.4 million lower than net income for the same period of 2006. Low OSB sales prices, in combination with reduced shipment volumes due to production curtailments, were the primary reason for the decline in profitability. The strengthening Canadian dollar resulted in a significant foreign exchange gain on long-term debt, which partially offset the decrease in earnings.

The second quarter of 2007 saw some improvement in the benchmark OSB prices compared to the first quarter of 2007, but prices remained substantially lower than in the second quarter of 2006. On average the reported market price in the North Central region was U.S.$156 per msf (on a 7/16th-inch basis) compared to U.S.$238 per msf in the second quarter of 2006. The sharp drop in U.S. new home construction in 2006 and early 2007 caused a large decrease in North American demand for structural wood panels. Market prices for structural wood panels began to decline in the second quarter of 2006 as a result of the reduced construction activity. The decline in OSB prices and new home construction continued throughout 2006. Since the beginning of 2007, housing starts have fluctuated within a narrow band of 1.4 to 1.5 million units (seasonally adjusted annual rates) and OSB selling prices have remained near or below manufacturing costs. Reported market prices appreciated a modest 5% during the quarter relative to the first quarter of 2007.

Our OSB shipment volume remained lower than the prior periods both for the second quarter and the year to date as a result of the curtailment of production at unprofitable facilities. Both the Cook and Grand Rapids OSB facilities in Minnesota were shut down effective 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 as a result of significantly lower log costs and other improvements in the cost structure of the mill. The Grand Rapids facility remains temporarily closed.

Cash from operations decreased compared to the second quarter of 2006 and the first six months of 2006 as a result of the unfavourable market conditions, which reduced profitability. As of June 30, 2007, our adjusted working capital was $222.4 million, compared to $186.6 million as at December 31, 2006. This increase is attributable to a new financing agreement we entered into in June of 2007, generating proceeds of U.S.$102.6 million to finance working capital and other corporate expenditures. Additions to capital assets were $14.4 million in the second quarter of 2007, down from $53.5 million in the second quarter of 2006. Year to date capital spending was $56.0 million compared to $96.1 million in the first six months of 2006. This decrease reflects our decision to put any discretionary capital expenditures, including the expansion of Grande Prairie, on hold until market conditions improve.

The company will hold a conference call at 10:00 A.M. PDT (1:00 P.M. EDT) on Thursday, August 23, 2007 to discuss the company's second quarter results. The dial-in phone number is 1-800-926-5093, Reservation #21346394. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21346394. This recording will be available until August 30, 2007.

Excerpts from the company's interim financial statements for the three and six month periods ended June 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_Q2Financials.pdf



AINSWORTH LUMBER CO. LTD.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
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June 30 December 31
2007 2006
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ASSETS
Current Assets
Cash and cash equivalents $ 163,781 $ 74,312
Short-term investments 835 35,864
Accounts receivable, net of allowance
for doubtful accounts of $Nil (2006: $Nil) 41,964 38,848
Inventories 78,441 95,515
Prepaid expenses 12,706 13,869
Restricted cash 12,136 62,184
Current portion of future income tax assets 1,697 1,697
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311,560 322,289
Capital Assets, Net 946,192 968,539
Intangible Assets 13,108 14,243
Other Assets 30,429 53,810
Future Income Tax Assets 54,763 42,348
Goodwill 102,970 102,970
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$ 1,459,022 $ 1,504,199
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 62,655 $ 58,763
Income taxes payable 3,045 2,552
Current portion of future income
tax liabilities 2,838 10,708
Current portion of long-term debt 9,631 10,523
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78,169 82,546
Accrued Pension Benefit Liability 5,515 6,034
Reforestation Obligation 5,574 4,621
Long-term Debt 1,044,300 1,027,595
Future Income Tax Liabilities 74,267 89,293
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1,207,825 1,210,089
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SHAREHOLDERS' EQUITY
Capital Stock 55,827 55,827
Retained Earnings 284,329 295,005
Accumulated Other Comprehensive Loss (88,959) (56,722)
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251,197 294,110
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$ 1,459,022 $ 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 June 30 Six months ended June 30
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2007 2006 2007 2006
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Sales $ 157,531 $ 234,267 $ 292,566 $ 526,825
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Costs and Expenses
Costs of products
sold (exclusive
of amortization) 166,052 204,435 306,322 415,833
Selling and
administration 9,692 11,536 19,808 19,739
Amortization of
capital assets 19,534 24,353 34,673 51,009
Loss on disposal
of capital assets 46 - 307 -
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195,324 240,324 361,110 486,581
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Operating (Loss)
Earnings (37,793) (6,057) (68,544) 40,244

Finance Expense
Interest 17,925 17,077 36,968 32,783
Transaction costs 2,897 - 2,897 -
Amortization of
financing fees - 1,359 - 2,588
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20,822 18,436 39,865 35,371

Other Expense (988) (4,748) (1,305) (218)
Realized Currency
Translation Loss (3,597) (2,400) (4,167) (2,400)
Foreign Exchange
Gain on Long-term
Debt 79,615 40,637 89,049 36,887
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Income (Loss) Before
Income Taxes 16,415 8,996 (24,832) 39,142
Income Tax Recovery (11,527) (15,939) (30,008) (8,459)
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Net Income $ 27,942 $ 24,935 $ 5,176 $ 47,601
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Basic and diluted
earnings per
common share $ 1.91 $ 1.70 $ 0.35 $ 3.25
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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 June 30 Six months ended June 30
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2007 2006 2007 2006
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CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 27,942 $ 24,935 $ 5,176 $ 47,601
Items not affecting
cash
Amortization of
capital assets 19,534 24,353 34,673 51,009
Non-cash portion
of interest expense 341 - 813 -
Amortization of
financing fees - 1,359 - 2,588
Foreign exchange
gain on long-
term debt (79,615) (40,637) (89,049) (36,887)
Loss on disposal
of capital assets 46 - 307 -
Change in
non-current
reforestation
obligation (166) (502) 953 (1,063)
Future income taxes (12,954) (19,307) (32,892) (14,513)
Realized currency
translation loss 3,597 2,400 4,167 2,400
Change in non-cash
operating working
capital 45,805 32,504 31,297 4,208
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Cash provided by
(used in) operating
activities 4,530 25,105 (44,555) 55,343
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CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issue
of long-term debt 109,750 85,507 109,825 85,507
Repayment of
long-term debt (2,182) - (3,810) -
Repayment of capital
lease obligations (76) - (157) -
Dividends paid - (14,649) - (14,649)
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Cash provided by
financing activities 107,492 70,858 105,858 70,858
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CASH FLOWS FROM
INVESTING ACTIVITIES
Short-term investments - (54,710) 35,029 (94,762)
Restricted cash 6,168 (5,875) 50,048 (3,689)
Additions to
capital assets (14,350) (53,496) (55,963) (106,741)
Increase in
other assets (2,746) (1,186) (1,703) (4,648)
Proceeds on disposal
of capital assets 173 - 776 -
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Cash (used in) provided
by investing activities (10,755) (115,267) 28,187 (209,840)
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Effect of foreign
exchange rate changes
on cash and cash
equivalents 4 (22) (21) (1,636)
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NET CASH INFLOW
(OUTFLOW) 101,271 (19,326) 89,469 (85,275)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 62,510 143,252 74,312 209,201
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 163,781 $ 123,926 $ 163,781 $ 123,926
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SUPPLEMENTAL
INFORMATION
Taxes paid $ 1,085 $ 2,000 $ 5,394 $ 2,101
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Interest paid $ 14,698 $ 28,536 $ 22,103 $ 31,929
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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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