Ainsworth Financial Results for the Second Quarter of 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 12, 2009) - Ainsworth Lumber Co. Ltd. ANSANS today reported its unaudited financial results for the quarter ended June 30, 2009. During the second quarter of 2009, Ainsworth's three active OSB mills, all in Canada, took no demand related downtime. Net income from continuing operations for the second quarter of 2009 was $19.5 million compared to a net loss of $33.5 million for the same period in 2008. The improvement was largely attributable to foreign exchange gains associated with the Company's outstanding debt. Beginning with the recapitalization of the Company in July 2008, Ainsworth has taken a number of substantive measures to realign its business with the current economic environment. In addition to previously announced mill closures in Minnesota and temporarily curtailing production at three of its six Canadian mills, Ainsworth has implemented a number of cost reduction initiatives, including minimizing all discretionary expenditures. Until market conditions improve, the Company is committed to focusing its resources on its best performing assets. Over the near term our priorities will continue to be managing our costs and returning our company to EBITDA positive results. Strategically, Ainsworth is focused on diversifying its business geographically, expanding its value-added product offerings, and leveraging the Company's proven track record of operational excellence, innovation and technical product development to become a company that is sustainable and profitable throughout business cycles. /T/ Selected Financial Information In millions of Canadian dollars, except share and per share data (Unaudited) Three months ended Six months ended June 30 June 30 -------------------------------------------------------------------------- 2009 2008(1) 2009 2008(1) ------- ---------- -------- --------- Sales $ 81.0 $ 97.2 $ 162.0 $ 170.9 Operating (loss) earnings (19.1) 0.9 (30.1) (25.0) Foreign exchange gain (loss) on long-term debt 50.4 6.8 28.7 (29.3) Net income (loss) from continuing operations 19.5 (33.5) (15.2) (111.2) Net income (loss) 24.7 (34.2) (29.5) (122.4) Adjusted EBITDA(2) (3.5) 11.6 (3.9) (5.7) Basic earnings (loss) per share: Net income (loss) from continuing operations 0.20 (2.29) (0.15) (7.59) Net income (loss) 0.25 (2.33) (0.29) (8.35) Weighted average common shares outstanding (in millions)(3) 100.0 14.6 100.0 14.6 (1) On July 29, 2008 the Company completed a major financial recapitalization of its balance sheet. The results for the three and six month periods ended June 30, 2008, as disclosed above, are the results of the Predecessor Company while the results for the three and six month periods ended June 30, 2009 are the results of the recapitalized Company. Details regarding the financial recapitalization are included in Note 1 of the consolidated financial statements for the period ended December 31, 2008, which are available on SEDAR and the Company's website. (2) Adjusted EBITDA, a non-GAAP financial measure, is defined as net (loss) income from continuing operations before amortization, (gain) loss on disposal of capital assets, finance expense, foreign exchange (gain) loss on long-term debt, other foreign exchange (gain) loss, income tax recovery and non-recurring items. See our Management's Discussion and Analysis for the quarter ended June 30, 2009 for a reconciliation of non-GAAP measures. (3) 89,905,712 common shares and noteholder warrants exercisable for 10,094,288 common shares (for no additional consideration) were outstanding on June 30, 2009 bringing total common shares and noteholder warrants outstanding to 100,000,000. /T/ Adjusted EBITDA was negative $3.5 million in the second quarter of 2009 compared with positive $11.6 million in the same period of 2008. The decline in adjusted EBITDA was primarily the result of lower realized prices and an increase in costs of products sold, which reduced our gross profit (sales less costs of products sold (exclusive of amortization)). Foreign exchange partially offset the decline in gross profit as the Canadian dollar was an average of 13 cents lower in the second quarter of 2009 compared with the second quarter of 2008. The foreign exchange impact on adjusted EBITDA was an estimated $4.9 million improvement compared with the second quarter of 2008. In the first six months of 2009, adjusted EBITDA was negative $3.9 million, which was an improvement of $1.8 million from negative $5.7 million in the first six months of 2008. The average of the market prices reported by Random Lengths during the second quarter of 2009 was U.S.$147 per msf (North Central region, on a 7/16th-inch basis) compared to U.S.$176 per msf in the second quarter of 2008. OSB shipments from our continuing operations of 408,944 msf in the second quarter of 2009 were 1.2% higher than in the same period of 2008. Our operating OSB facilities experienced 1.25 days of unplanned maintenance down time during the second quarter of 2009. On July 29, 2008 we completed a recapitalization which resulted in a realignment of equity and non-equity interests. The outcome of the recapitalization was a significant de-leveraging of our balance sheet. Our total debt and cash interest expense was reduced, and we are in a significantly better position to meet future market challenges. Details regarding the financial recapitalization are included in Note 1 of the consolidated financial statements for the period ended December 31, 2008, which are available on SEDAR and the Company's website. Until North American market conditions improve, we have minimized all discretionary capital expenditures. In the meantime, we continue to focus on maintaining sufficient working capital to fund any shortfall from operations, interest payments, debt repayments and essential capital expenditures. During the fourth quarter of 2008 and the first half of 2009, as a result of the global economic crisis, the terms and availability of debt and equity capital have been materially restricted. As of June 30, 2009, our adjusted working capital was $200.8 million, compared to $226.8 million as at December 31, 2008. Excerpts from the Company's financial statements for the period ended June 30, 2009 are attached. To view the complete financial statements, including the notes to the financial statements, click on the following link: http://media3.marketwire.com/docs/Q2ANSfs.pdf The Company will hold a conference call on Thursday, August 13, 2009 at 1:00 pm PDT (4:00 pm EDT) to discuss the second quarter 2009 results. The dial-in phone number is 1-800-909-4792, Reservation #21434155. To access the post-view line, dial 1-800-558-5253, or 1-416-626-4100, Reservation #21434155. This recording will be available until the end of the day on August 20, 2009. 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. /T/ AINSWORTH LUMBER CO. LTD. Interim Consolidated Balance Sheets (In thousands of Canadian dollars) (Unaudited) -------------------------------------------------------------------------- June 30 December 31 2009 2008 ------------------------- ASSETS Current Assets Cash and cash equivalents $ 154,527 $ 192,584 Short-term investments 1,576 1,586 Accounts receivable 26,852 19,916 Inventories 43,276 53,251 Prepaid expenses 6,737 5,681 Restricted cash 4,337 5,344 Assets held for disposal 4,023 5,337 -------------------------------------------------------------------------- 241,328 283,699 Capital Assets, Net 635,690 652,448 Other Assets 12,638 14,512 Assets Held for Disposal 8,320 33,019 -------------------------------------------------------------------------- $ 897,976 $ 983,678 -------------------------------------------------------------------------- -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 20,747 $ 27,539 Income taxes payable 2,093 2,764 Current portion of future income tax liabilities 3,621 8,492 Current portion of long-term debt 11,832 12,366 Liabilities related to assets held for disposal 1,469 8,933 -------------------------------------------------------------------------- 39,762 60,094 Accrued Pension Benefit Liability 4,278 4,278 Other Liabilities 2,956 3,512 Long-term Debt 604,011 627,115 Future Income Tax Liabilities 47,129 60,160 Liabilities Related to Assets Held for Disposal 2,260 2,368 -------------------------------------------------------------------------- 700,396 757,527 SHAREHOLDERS' EQUITY Capital Stock 409,613 409,613 Contributed Surplus 711 - Deficit (210,517) (180,984) Accumulated Other Comprehensive Loss (2,227) (2,478) -------------------------------------------------------------------------- 197,580 226,151 -------------------------------------------------------------------------- $ 897,976 $ 983,678 -------------------------------------------------------------------------- -------------------------------------------------------------------------- AINSWORTH LUMBER CO. LTD. Interim Consolidated Statements of Operations (In thousands of Canadian dollars, except share data) (Unaudited) -------------------------------------------------------------------------- Three months Six months ended June 30 ended June 30 ---------------------------------------------- 2009 2008 2009 2008 The The The The Company Predecessor Company Predecessor -------------------------------------------------------------------------- Sales $ 80,994 $ 97,163 $ 161,989 $ 170,927 -------------------------------------------------------------------------- Costs and Expenses Costs of products sold (exclusive of amortization) 79,382 79,450 156,231 165,563 Selling and administration 5,117 6,797 10,182 12,768 Amortization of capital assets 9,932 9,545 18,519 18,244 Net gain on disposal of capital assets (364) (201) (899) (2,114) Write-down of capital assets held for sale 8,219 - 8,219 - Write-down of inventory related to assets held for sale 4,262 - 4,262 - (Net proceeds) cost of claim (6,463) 489 (4,435) 1,173 Cost of class action lawsuit - 172 - 318 -------------------------------------------------------------------------- 100,085 96,252 192,079 195,952 -------------------------------------------------------------------------- Operating (Loss) Earnings (19,091) 911 (30,090) (25,025) Finance Expense Interest 13,362 16,247 27,875 33,866 Transaction costs - 9,624 - 13,078 -------------------------------------------------------------------------- 13,362 25,871 27,875 46,944 Other (Loss) Income (44) 574 570 1,689 Foreign Exchange Gain (Loss) on Long-term Debt 50,448 6,811 28,721 (29,270) Other Foreign Exchange (Loss) Gain (3,868) (363) (1,720) 246 -------------------------------------------------------------------------- Income (Loss) Before Income Taxes 14,083 (17,938) (30,394) (99,304) Income Tax (Recovery) Expense (5,452) 15,555 (15,147) 11,900 -------------------------------------------------------------------------- Net Income (Loss) from Continuing Operations 19,535 (33,493) (15,247) (111,204) Net Income (Loss) from Discontinued Operations 5,169 (709) (14,286) (11,181) -------------------------------------------------------------------------- Net Income (Loss) $ 24,704 $ (34,202) $ (29,533) $ (122,385) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Earnings (loss) per share: Basic Continuing operations $ 0.20 $ (2.29) $ (0.15) $ (7.59) Discontinued operations 0.05 (0.04) (0.14) (0.76) -------------------------------------------------------------------------- Net Income (Loss) $ 0.25 $ (2.33) $ (0.29) $ (8.35) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Diluted Continuing operations $ 0.20 $ (2.29) $ (0.15) $ (7.59) Discontinued operations 0.05 (0.04) (0.14) (0.76) -------------------------------------------------------------------------- Net Income (Loss) $ 0.25 $ (2.33) $ (0.29) $ (8.35) -------------------------------------------------------------------------- -------------------------------------------------------------------------- AINSWORTH LUMBER CO. LTD. Interim Consolidated Statements of Cash Flows (In thousands of Canadian dollars) (Unaudited) -------------------------------------------------------------------------- Three months Six months ended June 30 ended June 30 ---------------------------------------------- 2009 2008 2009 2008 The The The The Company Predecessor Company Predecessor -------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 24,704 $ (34,202) $ (29,533) $ (122,385) Items not affecting cash Amortization of capital assets 9,934 11,614 18,521 22,835 Non-cash portion of interest expense 4,850 340 10,300 674 Non-cash stock based compensation 711 - 711 - Foreign exchange (gain) loss on long-term debt (50,448) (6,811) (28,721) 29,270 Gain on disposal of capital assets (2,114) (374) (2,294) (2,287) Impairment of capital assets of discontinued operations - - 14,303 - Write-down of capital assets held for sale 8,219 - 8,219 - Change in non-current reforestation obligation (298) (194) (556) (264) Future income taxes (8,132) 23,065 (17,902) 19,233 Unrealized foreign exchange loss 2,536 - 1,772 - Realized currency translation adjustments - - - 1,465 Change in non-cash operating working capital 8,516 6,931 (11,536) 11,358 -------------------------------------------------------------------------- Cash (used in) provided by operating activities (1,522) 369 (36,716) (40,101) -------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt (3,315) (3,715) (5,023) (5,762) Repayment of capital lease obligations (93) (75) (193) (150) -------------------------------------------------------------------------- Cash used in financing activities (3,408) (3,790) (5,216) (5,912) -------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Short-term investments 25 (6) 10 (51) Restricted cash 86 769 1,007 129 Additions to capital assets (636) (868) (1,909) (4,074) Decrease (increase) in other assets 2,035 (993) 2,116 (622) Proceeds on disposal of capital assets 4,241 3,151 4,530 6,543 Settlement of warranty holdback - 2,852 - 2,852 -------------------------------------------------------------------------- Cash provided by investing activities 5,751 4,905 5,754 4,777 -------------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents (2,727) 6 (1,879) (2) -------------------------------------------------------------------------- NET CASH (OUTFLOW) INFLOW (1,906) 1,490 (38,057) (41,238) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 156,433 26,899 192,584 69,627 -------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 154,527 $ 28,389 $ 154,527 $ 28,389 -------------------------------------------------------------------------- -------------------------------------------------------------------------- SUPPLEMENTAL INFORMATION Taxes paid $ 104 $ 105 $ 110 $ 165 Interest paid 14,582 4,626 16,586 12,852 -------------------------------------------------------------------------- -------------------------------------------------------------------------- /T/