Ainsworth Lumber Co. Ltd.
TSX : ANS

Ainsworth Lumber Co. Ltd.

November 08, 2006 14:40 ET

Ainsworth Reports Financial Results for the Third Quarter of 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 8, 2006) - 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) ------------------------------------------
2006 2005 2006 2005
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Sales $ 181.1 $ 270.7 $ 707.9 $ 946.2
Operating (loss) earnings (106.7) 26.1 (66.5) 212.5
Foreign exchange
(loss) gain on long-term debt (1.2) 47.0 35.7 28.5
Net (loss) income (77.5) 46.8 (27.5) 133.2
(Loss) earnings: $ per share (5.29) 3.19 (1.88) 9.09
Adjusted EBITDA (1) (21.4) 55.9 69.6 294.3
Cash provided by
operating activities 16.6 43.3 71.9 131.5
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(1) Adjusted EBITDA, a non-GAAP financial measure, represents operating
earnings before amortization of capital assets, write-down of capital
assets, loss on disposal of capital assets, write-down of timber licence
deposits, 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 September 30, 2006.

Third quarter net loss was $77.5 million on sales of $181.1 million, compared to net income of $46.8 million on sales of $270.7 million in the third quarter of 2005. Year to date, we reported a net loss of $27.5 million on sales of $707.9 million. In the first nine months of 2005, our net income was $133.2 million on sales of $946.2 million. The decrease in earnings compared to 2005 reflects the continued decline in OSB pricing levels, exacerbated by the continued strength of the Canadian dollar, in combination with production curtailments at our Minnesota facilities. Results for 2006 include a one-time write down of capital assets of $55.3 million and severance and other expenses of $4.4 million resulting from the closure of one of two production lines at our Bemidji, Minnesota OSB facility.

Low prices for commodity OSB prevailed throughout the third quarter. On average the benchmark North Central OSB price was U.S.$181 per msf (on a 7/16th-inch basis) compared to U.S.$276 per msf in the same period of 2005. For the year to date, the average OSB benchmark price was U.S.$227 per msf compared to U.S.$322 per msf for the first nine months of 2005. The decline in prices reflects weakened demand as U.S. housing starts fell compared to 2005.

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 $262.1 million, compared to $340.2 million as at December 31, 2005. Capital spending on the expansion of our Grande Prairie facility continued throughout the third quarter. Capital spending was $60.1 million for the quarter compared to $14.7 million in the third quarter of 2005. During the quarter, we negotiated an additional $84.0 million in debt, which will primarily be used to fund the expansion of the Grande Prairie facility.

We will hold a conference call on Tuesday, November 14, 2006 at 8:30 A.M. PST (11:30 A.M. EST) to discuss our third quarter results. The dial-in phone number is 1-800-708-7127, Reservation #21309502. To access the post-view line, dial 1-800-558-5253 or 1-416-626-4100, Reservation #21309502. This recording will be available until November 21, 2006.

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.



AINSWORTH LUMBER CO. LTD.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
Unaudited
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September 30 December 31
2006 2005
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ASSETS
Current Assets
Cash and cash equivalents $ 99,793 $ 209,201
Short-term investments (Note 3) 122,648 -
Accounts receivable, net of
allowance for doubtful
accounts of $Nil (2005: $Nil) 42,148 61,579
Inventories (Note 4) 94,728 108,530
Income taxes receivable 5,547 28,409
Prepaid expenses 2,912 14,762
Restricted cash (Note 6) 76,602 39,016
Timber licence deposits - 5,998
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444,378 467,495
Capital Assets (Note 5) 912,137 875,896
Intangible Assets 13,659 14,209
Other Assets 58,872 52,432
Goodwill 102,970 102,970
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$ 1,532,016 $ 1,513,002
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 30,677 $ 30,348
Accrued liabilities 64,886 51,979
Current portion of long-term debt
(Note 6) 10,087 -
Current portion of future income taxes 16,111 31,362
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121,761 113,689
Reforestation Obligation 3,316 4,348
Long-term Debt (Note 6) 984,401 859,540
Future Income Taxes 72,992 120,256
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1,182,470 1,097,833
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Commitments (Note 13)
Contingencies (Note 14)

Shareholders' Equity
Capital stock 55,827 55,827
Cumulative translation adjustment (81,793) (58,343)
Retained earnings 375,512 417,685
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349,546 415,169
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$ 1,532,016 $ 1,513,002
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The accompanying Notes to the Interim Consolidated Financial Statements
are an integral part of these statements.

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 Canadian dollars, except share and per share data)
Unaudited
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Three months ended Nine months ended
September 30 September 30
2006 2005 2006 2005
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Sales $ 181,054 $ 270,697 $ 707,879 $ 946,167
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Costs and Expenses
Costs of products
sold (exclusive of
amortization) 191,729 210,597 607,562 634,293
Selling and
administration 9,749 6,286 29,488 21,365
Amortization of
capital assets 23,802 27,680 74,811 77,960
Loss on disposal
of capital assets 433 - 433 -
Write-down of capital
assets (Note 7) 55,290 - 55,290 -
Closure of production
line (Note 7) 4,417 - 4,417 -
Write-down of timber
licence deposit (Note 8) 2,364 - 2,364 -
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287,784 244,563 774,365 733,618
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Operating (Loss)
Earnings (106,730) 26,134 (66,486) 212,549

Finance Expense
Interest 17,791 15,954 50,574 49,182
Amortization of financing
costs and fees 1,385 1,217 3,973 3,671
Loss on repurchase
of long-term debt - - - 1,485
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19,176 17,171 54,547 54,338

Other Income (Expense) 3,446 2,088 3,228 3,762
Foreign Exchange (Loss)
Gain on Long-term Debt (1,237) 47,018 35,650 28,538
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(Loss) Income Before
Income Taxes (123,697) 58,069 (82,155) 190,511
Income Tax Expense
(Recovery) (Note 11) (46,172) 11,310 (54,631) 57,299
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Net (Loss) Income (77,525) 46,759 (27,524) 133,212
Retained Earnings,
Beginning of Period 453,037 350,546 417,685 278,742
Dividends Paid (Note 15) - - (14,649) (14,649)
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Retained Earnings,
End of Period $ 375,512 $ 397,305 $ 375,512 $ 397,305
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Basic and diluted (loss)
earnings per common share $ (5.29) $ 3.19 $ (1.88) $ 9.09
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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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The accompanying Notes to the Interim Consolidated Financial Statements
are an integral part of these statements.


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
2006 2005 2006 2005
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CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) income $ (77,525) $ 46,759 $ (27,524) $ 133,212
Amounts not affecting cash
Amortization of capital
assets 23,802 27,680 74,811 77,960
Amortization of deferred
financing costs and fees 1,385 1,217 3,973 3,671
Foreign exchange loss
(gain) on long-term debt 1,237 (47,018) (35,650) (28,538)
Loss on repurchase of
long-term debt - - - 1,485
Write-down of capital
assets 55,290 - 55,290 -
Loss (gain) on disposal
of capital assets 433 - 433 (11)
Write-down of timber
licence deposit 2,364 - 2,364 -
Change in non-current
reforestation obligation 31 (22) (1,032) (17)
Future income taxes (47,177) 11,922 (61,690) 72,860
Change in non-cash
operating working
capital (Note 12) 56,711 2,776 60,919 (129,084)
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Cash provided by
operating activities 16,551 43,314 71,894 131,538
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CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of capital lease
obligations (90) (24) (90) (198)
Proceeds from issue of
long-term debt 84,019 - 169,526 -
Repurchase of long-term debt - - - (31,062)
Dividends paid - - (14,649) (14,649)
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Cash provided by (used in)
financing activities 83,929 (24) 154,787 (45,909)
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CASH FLOWS FROM INVESTING
ACTIVITIES
Short-term investments (27,886) - (122,648) -
Restricted cash (33,897) (30,663) (37,586) (34,770)
Additions to capital
assets (60,123) (14,710) (166,864) (32,217)
Increase in other assets (2,690) (4,473) (7,338) (10,920)
Proceeds on disposal of
capital assets - - - 11
Acquisition of intangible
assets - (7,141) - (7,141)
Timber licence deposits - - - (36,249)
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Cash used in investing
activities (124,596) (56,987) (334,436) (121,286)
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Effect of foreign
exchange rate changes
on cash and
cash equivalents (17) (1,410) (1,653) (1,410)
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NET CASH OUTFLOW (24,133) (15,107) (109,408) (37,067)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD 123,926 184,103 209,201 206,063
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 99,793 $ 168,996 $ 99,793 $ 168,996
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SUPPLEMENTAL INFORMATION
Taxes paid $ 846 $ 2,173 $ 2,947 $ 61,478
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Interest paid $ 6,257 $ 3,420 $ 38,186 $ 36,542
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The accompanying Notes to the Interim Consolidated Financial Statements
are an integral part of these statements.


To view the full financial statements, including the notes to the financial statements, please click on the following link:
http://www.ccnmatthews.com/docs/ANS1.pdf


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