Ainsworth Lumber Co. Ltd.

Ainsworth Lumber Co. Ltd.

November 13, 2008 22:28 ET

Ainsworth Reports Financial Results for the Third Quarter of 2008

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 13, 2008) - Ainsworth Lumber Co. Ltd. (TSX:ANS) today reported its financial results for the quarter ended September 30, 2008.

The third quarter of 2008 was a period of significant change at Ainsworth. On July 29th, the Company completed a financial recapitalization which resulted in the realignment of equity and non-equity interests, significant de-leveraging of the balance sheet and a strengthened liquidity position.

Immediately following the recapitalization, the new management team moved quickly to lower overhead costs and improve operating efficiency. These measures include a dramatic decrease in staff, office space and general administrative costs. The company's aircraft was also put up for sale, though it has not yet been sold. To further reduce expenses we permanently closed the Grand Rapids, Minnesota OSB mill and indefinitely curtailed production at our other two northern Minnesota-based OSB mills in Cook and Bemidji. Many of the benefits of these difficult - but necessary - actions will only begin to materialize as we move into 2009. Near-term, recent decreases in the Canadian dollar and fuel prices have improved our competitive position and market reach.

Three months ended Nine months ended
Unaudited September 30 September 30
($ millions, except ------------------------------------------
per share data) 2008 (2) 2007 2008 (2) 2007
Sales $ 115.3 $ 150.8 $ 315.2 $ 442.3
Operating loss (11.9) (43.7) (46.8) (105.8)
Foreign exchange (loss) gain
on long-term debt (23.6) 69.1 (52.8) 158.2
Net loss from continuing
operations (42.0) (35.9) (162.1) (24.3)
Net loss (42.7) (37.2) (165.1) (32.0)
Net loss from continuing
operations: $ per share (0.63) (2.45) (4.73) (1.66)
Net loss: $ per share (0.64) (2.54) (4.82) (2.18)
Adjusted EBITDA (1) (0.3) (5.7) (12.5) (26.6)
Cash used in operating
activities (11.2) (18.6) (51.3) (63.2)
Weighted average number of
common shares outstanding
(millions) (3) 73.1 14.6 34.3 14.6

(1) Adjusted EBITDA, a non-GAAP financial measure, is defined as net (loss)
income before amortization, (gain) loss on disposal of capital assets,
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.

(2) On July 29, 2008 the Company completed a major financial
recapitalization of its balance sheet. In accordance with Canadian
Institute of Chartered Accountants Handbook Section 1625 -- Comprehensive
Revaluation of Assets and Liabilities, the Company adopted fresh start
accounting as at July 29, 2008. Reported sales and adjusted EBITDA were
relatively unaffected, as the Company's physical operations were not
impacted by the financial recapitalization. The results for the third
quarter of 2008, as disclosed above, include the period from July 1 to 29,
2008 before the recapitalization and the period from July 30 to September
30, 2008 under the recapitalized Company. Details regarding the financial
recapitalization are included in Note 1 of the interim consolidated
financial statements for the period ended September 30, 2008, which will
be available on SEDAR and the Company's website on November 14, 2008.

(3) 75,256,672 common shares and 10,094,488 noteholder warrants were
issued on July 29, 2008 bringing total common shares and noteholder
warrants outstanding to 100,000,000.

Net loss for the quarter was $42.7 million on sales of $115.3 million compared to net loss of $37.2 million on sales of $150.8 million for the same period in 2007. The decrease in sales is primarily the result of reduced shipment volumes due to production curtailments. On a year to date basis, net loss from continuing operations of $165.1 million represented a $133.1 million increase in losses from the same period in 2007. This reflects a $211.0 million decrease in unrealized foreign exchange gains on long-term debt partially offset by a $59.0 million reduction of operating loss.

Cash used in operations for the quarter was $11.2 million compared to $18.6 million in the third quarter of 2007. This change was due to an increase in earnings adjusted for non-cash items partially offset by a decrease in cash generated by working capital. For the year to date, cash used in operating activities was $51.3 million in 2008 compared to $63.2 million in 2007. The reduction in operating losses was partially offset by a decrease in cash generated by working capital.

North American demand for structural panels remains significantly below productive capacity and readily available supply. In September 2008, U.S. new home starts were at an annual rate of 817,000, down 31% from 1.19 million in September of 2007. Single-family housing starts, the primary driver of OSB demand, were at the lowest rate since February 1982. Housing demand faces many challenges, such as mortgage market contraction, an excess supply of new and existing homes, rising foreclosures, and home price deflation. As a result, housing starts are expected to remain very low in 2009.

The average of the market prices reported by Random Lengths during the third quarter of 2008 was U.S.$201 per msf (North Central region, on a 7/16th-inch basis) compared to U.S.$177 per msf in the third quarter of 2007. In the first nine months of the year, the average market price was U.S.$172 per msf in 2008 and U.S.$159 per msf in 2007.

OSB shipments of 481,354 msf in the third quarter of 2008 were 25% lower than in the same period of 2007 as a result of reduced customer demand and plant closures. Year to date, 2008 OSB shipments were 27% lower compared to 2007. Production at our jointly-owned OSB facility at High Level, Alberta was indefinitely curtailed as of December 20, 2007 and the mill remains closed. Our Cook, Minnesota facility began an indefinite production curtailment on January 16, 2008 while production at our Bemidji, Minnesota facility was indefinitely curtailed as of October 6, 2008.

Following a strategic review, we announced the permanent closure of our OSB mill in Grand Rapids, Minnesota on August 26, 2008. Production at the mill had been indefinitely curtailed since September 2006. Prior to the closure, this mill had an annual production capacity of 390 mmsf and approximately 190 employees.

The Company will hold a conference call on Monday, November 17, 2008 at 10:00 a.m. PST (1:00 pm EST) to discuss the Company's third quarter results. The dial-in phone number is 1-800-736-7549, Reservation #21399868. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21399868. This recording will be available until November 24, 2008.

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.

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