VANCOUVER, BRITISH COLUMBIA - (Marketwire - May 14, 2008) - Ainsworth Lumber Co. Ltd. (TSX:ANS) -
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Unaudited
(Millions of Canadian dollars, except shares and Three months ended
per share data, in accordance with Canadian GAAP) March 31
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2008 2007
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Sales $ 88.5 $ 135.0
Operating loss (38.0) (30.8)
Foreign exchange (loss) gain on long-term debt (36.1) 9.4
Net loss (88.2) (22.8)
Basic loss per share (6.02) (1.55)
Adjusted EBITDA (1) (27.6) (12.4)
Cash used in operating activities (40.5) (49.1)
Number of common shares outstanding (millions) 14.6 14.6
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(1) Adjusted EBITDA, a non-GAAP financial measure, is defined as net loss
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. today reported its financial results for the quarter ended March 31, 2008.
Net loss for the quarter was $88.2 million on sales of $88.5 million compared to net loss of $22.8 million on sales of $135.0 million in 2007. The decrease in sales is primarily the result of low OSB sales prices and the strong Canadian dollar, in combination with reduced shipment volumes due to production curtailments. The increased net loss is attributable mainly to lower production margins, a $36.1 million unrealized foreign exchange loss on long-term debt, reductions in tax recoveries, and additional financing transaction costs in the first quarter of 2008.
Cash used in operations for the quarter was $40.5 million compared to $49.1 million in the first quarter of 2007. An improvement in cash generated by working capital was partially offset by an increase in operating losses. Cash generated by working capital in the first quarter of 2008 was $4.4 million compared to $14.5 million in cash used in working capital build up in the first quarter of 2007. This change was primarily due to reduced log purchasing activities and log inventory write-downs.
OSB business 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 drop due to excess housing inventories and the constriction of credit availability in light of the mortgage credit market crisis.
The average of the market prices reported by Random Lengths during the first quarter of 2008 was U.S.$137 per msf (North Central region, on a 7/16th-inch basis) compared to U.S.$145 per msf in the first quarter of 2007.
OSB shipment volumes of 409,752 msf in the first quarter of 2008 were 24% lower than in the same period of 2007 as a result of reduced customer demand and additional plant closures. 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 quarter 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 was indefinitely curtailed in the first quarter of both 2008 and 2007.
Due to the protracted downturn in OSB demand as a result of weak U.S. housing markets and the significant appreciation of the Canadian dollar against the U.S. dollar, we continued to experience negative operating margins and net cash outflows. As a result, our ability to continue as a going concern will be dependent upon the continuing support of our creditors and suppliers, obtaining additional financing or refinancing our capital structure and, ultimately, achieving profitable operations. We are exploring strategic alternatives to strengthen our balance sheet and enhance our liquidity.
Excerpts from the company's interim financial statements for the three month period ended March 31, 2008 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/ans0514.pdf.
Forward-looking statements in this news release relating to strategic alternatives and projected liquidity and 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 and National Instrument 51-102 promulgated by the Canadian Securities Administrators. 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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March 31 December 31
2008 2007
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ASSETS
Current Assets
Cash and cash equivalents $ 26,899 $ 69,627
Short-term investments 880 835
Accounts receivable, net of allowance for
doubtful accounts of $22 (2007: $40) 21,508 21,537
Inventories 67,105 73,050
Prepaid expenses 7,252 11,113
Restricted cash 7,744 7,104
Current portion of future income tax assets 658 635
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132,046 183,901
Capital Assets, Net 829,528 830,102
Other Assets 24,767 22,887
Future Income Tax Assets 12,177 11,759
Goodwill 51,970 51,970
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$ 1,050,488 $ 1,100,619
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LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 47,511 $ 38,790
Income taxes payable 2,248 2,607
Current portion of future income tax
liabilities 18,713 23,682
Current portion of long-term debt 10,643 10,122
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79,115 75,201
Accrued Pension Benefit Liability 6,887 6,651
Reforestation Obligation 4,381 4,451
Long-term Debt 1,001,022 967,250
Future Income Tax Liabilities 34,259 34,327
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1,125,664 1,087,880
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SHAREHOLDERS' (DEFICIENCY) EQUITY
Capital Stock 55,827 55,827
(Deficit) Retained Earnings (31,953) 62,698
Accumulated Other Comprehensive Loss (99,050) (105,786)
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(75,176) 12,739
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$ 1,050,488 $ 1,100,619
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Operations
For the three months ended March 31
(In thousands of Canadian dollars, except per share data)
(Unaudited)
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2008 2007
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Sales $ 88,508 $ 135,035
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Costs and Expenses
Costs of products sold (exclusive of
amortization) 110,397 140,270
Selling and administration 6,655 8,865
Amortization of capital assets 11,221 15,139
(Gain) loss on disposal of capital assets (2,750) 261
Write-off of capital assets 837 -
Cost of class action lawsuit 146 1,251
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126,506 165,786
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Operating Loss (37,998) (30,751)
Finance Expense
Interest 17,619 19,043
Transaction costs 3,454 -
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21,073 19,043
Other Income 1,120 1,702
Foreign Exchange (Loss) Gain on Long-term Debt (36,081) 9,434
Other Foreign Exchange Gain (Loss) 3,659 (2,019)
Realized Currency Translation Loss (1,465) (570)
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Loss Before Income Taxes (91,838) (41,247)
Income Tax Recovery (3,655) (18,481)
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Net Loss $ (88,183) $ (22,766)
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Basic and diluted loss per common share $ (6.02) $ (1.55)
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Weighted average number of common shares
outstanding 14,649,140 14,649,140
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Comprehensive Loss
For the three months ended March 31
(In thousands of Canadian dollars)
(Unaudited)
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2008 2007
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Net Loss $ (88,183) $ (22,766)
Other Comprehensive Income (Loss)
Unrealized gain (loss) on translation of
self-sustaining foreign operations 5,271 (3,974)
Realized currency translation adjustments
(reclassified to net loss) 1,465 570
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6,736 (3,404)
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Comprehensive Loss $ (81,447) $ (26,170)
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Interim Consolidated Statements of Changes in
Shareholders' (Deficiency) Equity
For the three months ended March 31
(In thousands of Canadian dollars)
(Unaudited)
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2008 2007
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Capital Stock $ 55,827 $ 55,827
(Deficit) Retained Earnings
Beginning of period 62,698 279,153
Transitional adjustment on adoption of new
accounting policy (6,468) -
Net loss (88,183) (22,766)
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(31,953) 256,387
Accumulated Other Comprehensive Loss on Translation
of Self-Sustaining Foreign Operations
Beginning of period (105,786) (56,722)
Net unrealized gain (loss) on translation of
self-sustaining foreign operations in the period 6,736 (3,404)
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(99,050) (60,126)
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Total (Deficit) Retained Earnings and Accumulated
Other Comprehensive Loss (131,003) 196,261
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Total Shareholders' (Deficiency) Equity $ (75,176) $ 252,088
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AINSWORTH LUMBER CO. LTD.
Interim Consolidated Statements of Cash Flows
For the three months ended March 31
(In thousands of Canadian dollars)
(Unaudited)
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2008 2007
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (88,183) $ (22,766)
Items not affecting cash
Amortization of capital assets 11,221 15,139
Non-cash portion of interest expense 334 472
Foreign exchange loss (gain) on long-term debt 36,081 (9,434)
(Gain) loss on disposal of capital assets (2,750) 261
Write-off of capital assets 837 -
Change in non-current reforestation obligation (70) 1,119
Future income taxes (3,832) (19,938)
Realized currency translation adjustments 1,465 570
Change in non-cash operating working capital 4,427 (14,508)
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Cash used in operating activities (40,470) (49,085)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of long-term debt - 75
Repayment of long-term debt (2,047) (1,628)
Repayment of capital lease obligations (75) (81)
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Cash used in financing activities (2,122) (1,634)
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CASH FLOWS FROM INVESTING ACTIVITIES
Short-term investments (45) 35,029
Restricted cash (640) 43,880
Additions to capital assets (3,206) (41,613)
Decrease in other assets 371 1,043
Proceeds on disposal of capital assets 3,392 603
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Cash (used in) provided by investing activities (128) 38,942
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Effect of foreign exchange rate changes on cash
and cash equivalents (8) (25)
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NET CASH OUTFLOW (42,728) (11,802)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 69,627 74,312
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,899 $ 62,510
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SUPPLEMENTAL INFORMATION
Taxes paid $ 60 $ 4,309
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Interest paid $ 8,226 $ 7,405
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Website: www.ainsworth.ca
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