VANCOUVER, BRITISH COLUMBIA -- (MARKET WIRE) -- 07/23/08 -- Ainsworth Lumber Co. Ltd. (TSX: ANS) -
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Three months ended Six months ended
June 30 June 30
Unaudited --------------------------------------
($ millions, except per share data) 2008 2007 2008 2007
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Sales $ 111.4 $ 157.5 $ 199.9 $ 292.6
Operating earnings (loss) 0.8 (37.8) (37.2) (68.5)
Foreign exchange gain (loss) on 6.8 79.6 (29.3) 89.0
long-term debt
Net (loss) income (34.2) 27.9 (122.4) 5.2
(Loss) earnings: $ per share (2.33) 1.91 (8.35) 0.35
Adjusted EBITDA(1) 13.0 (14.9) (14.6) (27.1)
Cash provided by (used in) 0.4 4.5 (40.1) (44.6)
operating activities
Number of common shares 14.6 14.6 14.6 14.6
outstanding (millions)
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(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.
Ainsworth Lumber Co. Ltd. (TSX: ANS) today reported its financial results for the quarter ended June 30, 2008.
Net loss for the quarter was $34.2 million on sales of $111.4 million compared to net income of $27.9 million on sales of $157.5 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 of $122.4 million represented a $127.6 million decline from net income of $5.2 million for the six months ended June 30, 2007. The change in net loss is attributable mainly to a $118.3 million decrease in the unrealized foreign exchange gain on long-term debt, a $41.9 million increase in tax expense, and financing transaction costs of $13.1 million incurred in the first half of 2008.
Cash provided by operations for the quarter was $0.4 million compared to $4.5 million in the second quarter of 2007. This change was due to a decrease in cash generated by working capital partially offset by an increase in earnings adjusted for non-cash items. For the year to date, cash used in operating activities was $40.1 million in 2008 compared to $44.6 million in 2007. The increase in operating earnings was partially offset by a decrease in cash generated by working capital.
OSB market conditions continue to be challenging, as the U.S. housing industry, a key driver of OSB demand, remains in a protracted downturn. U.S. housing starts continued to decline due to excess housing inventories and the constriction of credit availability in light of the U.S. mortgage credit market.
The average of the market prices reported by Random Lengths during the second quarter of 2008 was U.S.$176 per msf (North Central region, on a 7/16th-inch basis) compared to U.S.$156 per msf in the second quarter of 2007. In the first six months of the year, the average market price was U.S.$157 per msf in 2008 and U.S.$151 per msf in 2007.
OSB shipment volumes of 485,618 msf in the second quarter of 2008 were 31% lower than in the same period of 2007 as a result of reduced customer demand and plant closures. For the first six months of 2008, OSB shipment volumes were 28% lower in 2008 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 remained closed throughout the first half of 2008. Our Cook, Minnesota facility began an indefinite production curtailment on January 16, 2008. Our Grande Prairie, Alberta and 100 Mile, British Columbia OSB facilities took temporary shutdowns totaling 38 days and 14.5 days of production time, respectively, during the first quarter of 2008. In addition, production at our Grand Rapids, Minnesota facility has been indefinitely curtailed since September 2006.
Due to the protracted downturn in the OSB market and the significant long-term appreciation of the Canadian dollar against the U.S. dollar, for the year to date we continued to experience negative operating margins and net cash outflows. As a result, our ability to continue as a going concern is dependent on obtaining additional financing, refinancing our capital structure and, ultimately, achieving profitable operations.
A recapitalization proposal will be voted on by our shareholders and senior noteholders at meetings on July 24, 2008. Subject to an affirmative vote at those meetings, and court and regulatory approvals thereafter, the recapitalization will become effective on July 29, 2008. More detailed information about the recapitalization is available on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and our website (www.ainsworth.ca).
Excerpts from the company's interim financial statements for the three and twelve month periods ended December 31, 2007 are attached. To view the complete interim financial statements, including the notes to the interim financial statements, click on the following link: http://media3.marketwire.com/docs/ans0723.pdf
Forward-looking information provided in this news release relating to the Company's recapitalization are forward-looking statements made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and 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, an adverse result at the meetings of our shareholders or noteholders on July 24, 2008 or the failure to receive court or regulatory approval of the recapitalization, as well as factors detailed from time to time in the Company's periodic reports filed with the Canadian Securities Administrators, the United States Securities and Exchange Commission, 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.
AINSWORTH LUMBER CO. LTD.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
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June 30 December 31
2008 2007
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ASSETS
Current Assets
Cash and cash equivalents $ 28,389 $ 69,627
Short-term investments 886 835
Accounts receivable, net of allowance for
doubtful accounts of $22 (2007: $40) 28,821 21,537
Inventories 59,684 73,050
Income taxes receivable 4,845 -
Prepaid expenses 9,481 11,113
Restricted cash 6,975 7,104
Current portion of future income tax assets 653 635
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139,734 183,901
Capital Assets, Net 811,180 830,102
Other Assets 25,755 22,887
Future Income Tax Assets 12,096 11,759
Goodwill 51,970 51,970
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$ 1,040,735 $ 1,100,619
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LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 62,625 $ 38,790
Income taxes payable - 2,607
Current portion of future income tax liabilities 20,327 23,682
Current portion of long-term debt 10,572 10,122
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93,524 75,201
Accrued Pension Benefit Liability 6,841 6,651
Reforestation Obligation 4,187 4,451
Long-term Debt 990,831 967,250
Future Income Tax Liabilities 55,709 34,327
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1,151,092 1,087,880
SHAREHOLDERS' (DEFICIENCY) EQUITY
Capital Stock 55,827 55,827
(Deficit) Retained Earnings (66,155) 62,698
Accumulated Other Comprehensive Loss (100,029) (105,786)
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(110,357) 12,739
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$ 1,040,735 $ 1,100,619
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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 Six months ended
June 30 June 30
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2008 2007 2008 2007
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Sales $ 111,428 $ 157,531 $ 199,936 $ 292,566
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Costs and Expenses
Costs of products sold
(exclusive of
amortization) 91,915 166,052 202,312 306,322
Selling and
administration 7,286 7,522 13,941 16,387
Amortization of capital
assets 11,614 19,534 22,835 34,673
(Gain) loss on disposal
of capital assets (374) 46 (3,124) 307
Write-off of capital
assets - - 837 -
Cost of class action
lawsuit 172 2,170 318 3,421
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110,613 195,324 237,119 361,110
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Operating Earnings
(Loss) 815 (37,793) (37,183) (68,544)
Finance Expense
Interest 16,247 17,925 33,866 36,968
Transaction costs 9,624 2,897 13,078 2,897
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25,871 20,822 46,944 39,865
Other Income 691 1,215 1,811 2,917
Foreign Exchange Gain
(Loss) on
Long-term Debt 6,811 79,615 (29,270) 89,049
Other Foreign Exchange
(Loss) Gain (1,093) (2,203) 2,566 (4,222)
Realized Currency
Translation Loss - (3,597) (1,465) (4,167)
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(Loss) Income Before
Income Taxes (18,647) 16,415 (110,485) (24,832)
Income Tax Expense
(Recovery) 15,555 (11,527) 11,900 (30,008)
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Net (Loss) Income $ (34,202) $ 27,942 $ (122,385) $ 5,176
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Basic and diluted (loss)
earnings per common
share $ (2.33) $ 1.91 $ (8.35) $ 0.35
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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 Comprehensive Loss
(In thousands of Canadian dollars)
(Unaudited)
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Three months ended Six months ended
June 30 June 30
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2008 2007 2008 2007
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Net (Loss) Income $ (34,202) $ 27,942 $ (122,385) $ 5,176
Other Comprehensive
(Loss) Income
Unrealized (loss) gain
on translation of
self-sustaining
foreign operations (979) (32,430) 4,292 (36,404)
Realized currency
translation loss
(reclassified to net
income (loss)) - 3,597 1,465 4,167
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(979) (28,833) 5,757 (32,237)
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Comprehensive Loss $ (35,181) $ (891) $ (116,628) $ (27,061)
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Interim Consolidated Statements of Changes in Shareholders' (Deficiency)
Equity
(In thousands of Canadian dollars)
(Unaudited)
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Three months ended Six months ended
June 30 June 30
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2008 2007 2008 2007
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Capital Stock $ 55,827 $ 55,827 $ 55,827 $ 55,827
(Deficit) Retained
Earnings
Beginning of period (31,953) 256,387 62,698 279,153
Transitional adjustment
on adoption of
new accounting policies - - (6,468) -
Net (loss) income (34,202) 27,942 (122,385) 5,176
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(66,155) 284,329 (66,155) 284,329
Accumulated Other
Comprehensive
Loss on Translation
of Self-
Sustaining Foreign
Operations
Beginning of period (99,050) (60,126) (105,786) (56,722)
Net unrealized loss on
translation of
self-sustaining
foreign operations
in the period (979) (28,833) 5,757 (32,237)
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(100,029) (88,959) (100,029) (88,959)
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Total (Deficit) Retained
Earnings and
Accumulated Other
Comprehensive Loss (166,184) 195,370 (166,184) 195,370
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Total Shareholders'
(Deficiency) Equity $ (110,357) $ 251,197 $ (110,357) $ 251,197
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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 Six months ended
June 30 June 30
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2008 2007 2008 2007
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CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) income $ (34,202) $ 27,942 $ (122,385) $ 5,176
Items not affecting cash
Amortization of capital
assets 11,614 19,534 22,835 34,673
Non-cash portion of
interest expense 340 341 674 813
Foreign exchange (gain)
loss on long-
term debt (6,811) (79,615) 29,270 (89,049)
(Gain) loss on disposal
of capital assets (374) 46 (3,124) 307
Write-off of capital
assets - - 837 -
Change in non-current
reforestation
obligation (194) (166) (264) 953
Future income taxes 23,065 (12,954) 19,233 (32,892)
Realized currency
translation loss - 3,597 1,465 4,167
Change in non-cash
operating working
capital 6,931 45,805 11,358 31,297
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Cash provided by (used
in) operating
activities 369 4,530 (40,101) (44,555)
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CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issue of
long-term debt - 109,750 - 109,825
Repayment of long-term
debt (3,715) (2,182) (5,762) (3,810)
Repayment of capital
lease obligations (75) (76) (150) (157)
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Cash (used in) provided
by financing
activities (3,790) 107,492 (5,912) 105,858
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CASH FLOWS FROM
INVESTING ACTIVITIES
Short-term investments (6) - (51) 35,029
Restricted cash 769 6,168 129 50,048
Additions to capital
assets (868) (14,350) (4,074) (55,963)
Increase in other assets (993) (2,746) (622) (1,703)
Proceeds on disposal of
capital assets 3,151 173 6,543 776
Settlement of warranty
holdback 2,852 - 2,852 -
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Cash provided by (used
in) investing
activities 4,905 (10,755) 4,777 28,187
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Effect of foreign
exchange rate changes
on cash and cash
equivalents 6 4 (2) (21)
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NET CASH INFLOW
(OUTFLOW) 1,490 101,271 (41,238) 89,469
CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD 26,899 62,510 69,627 74,312
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CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 28,389 $ 163,781 $ 28,389 $ 163,781
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SUPPLEMENTAL INFORMATION
Taxes paid $ 105 $ 1,085 $ 165 $ 5,394
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Interest paid $ 4,626 $ 14,698 $ 12,852 $ 22,103
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Contacts:
Ainsworth Lumber Co. Ltd. - Investor Relations Contact
Robert Allen
Chief Financial Officer
(604) 661-3200
Email: robert.allen@ainsworth.ca
Ainsworth Lumber Co. Ltd. - Investor Relations Contact
Bruce Rose
General Manager, Corporate Development
(604) 661-3200
(604) 661-3201 (FAX)
Email: bruce.rose@ainsworth.ca
Website: www.ainsworth.ca