Mr. Jim Lake reports

AINSWORTH ANNOUNCES 2014 FOURTH QUARTER AND YEAR END RESULTS

Ainsworth Lumber Co. Ltd. has released its financial results for the fourth quarter and year ended Dec. 31, 2014.

Highlights:

• Adjusted EBITDA (1) of $27.5-million for the year;
• Shipment and production volumes were 9 per cent and 8 per cent higher, respectively, than in the prior year;
• 25 per cent year-over-year growth in shipments to key export markets in Asia;
• Obtained overwhelming shareholder approval of the pending merger with Norbord.

(1) Adjusted EBITDA, a non-IFRS (international financial reporting standards) financial measure, is defined as net income (loss) from continuing operations before amortization, loss (gain) on disposal of property, plant and equipment, cost of curtailed operations, share-based compensation expense, finance expense, foreign exchange loss (gain) on long-term debt, other foreign exchange loss (gain), loss (gain) on derivative financial instrument, interest income earned on investments, income tax expense (recovery), and non-recurring items.

Ainsworth president and chief executive officer Jim Lake said: "North American OSB [oriented strand board] market conditions continued to drift throughout the year, as the pace of demand growth did not materialize as expected. However, we remain optimistic that U.S. housing starts will return to more historical levels within the next several years, with various indicators pointing towards strong growth in 2015 versus 2014.

"We maintained the strong performance we saw in 2013 in our key export market in Japan and also made progress in China as we began commercial shipments of our industrial core stock products. Additionally, we progressed in the ongoing ramp-up of our High Level mill, including the completion of a number of strategic capital projects that will further position the mill to efficiently manufacture an enhanced range of products for North American and Asian customers."

Pending merger with Norbord

On Dec. 8, 2014, the company and Norbord Inc. announced that they had entered into an arrangement agreement under which the company and Norbord will merge to create a leading global wood products company focused on OSB across North America, Europe and Asia. Under the terms of the transaction, Norbord will acquire all of the outstanding common shares of the company in an all-share transaction. Ainsworth shareholders will receive 0.1321 of a share of Norbord for each Ainsworth share.

On Jan. 27, 2015, the transaction was overwhelmingly approved by over 99 per cent of votes cast by the shareholders of each of Norbord and the company. On Jan. 30, 2015, the Supreme Court of British Columbia granted a final order approving the combination of Norbord and the company by way of a plan of arrangement under the Business Corporations Act (British Columbia). In addition, the company and Norbord continue to work pro-actively with the U.S. Department of Justice to ensure an expedited review process. Subject to the satisfaction or waiver of all closing conditions, the transaction is expected to close by the end of the first quarter of 2015.

Further information about the transaction is set out in the joint management information circular and other filings which are available under Ainsworth's profile on SEDAR.

Financial results

Sales of $102.5-million in the fourth quarter of 2014 were $1.9-million lower than sales of $104.4-million for the same period in 2013. The decrease in sales was mainly due to a 4-per-cent decrease in realized pricing. Sales volumes increased by 2 per cent due to the continuing ramp-up of High Level, notwithstanding downtime taken during the fourth quarter. The impact of the U.S. benchmark declines on the company's realized pricing was moderated by factors including the effect of a weaker Canadian dollar relative to the fourth quarter of 2013 combined with stable export pricing in Japan.

Sales were $444.0-million in 2014 compared with $488.0-million in 2013. The $44.0-million decrease was primarily related to a 17-per-cent decrease in realized pricing, partially offset by a 9-per-cent increase in sales volumes. The impact of the U.S. benchmark declines on the company's realized pricing was again moderated by factors including the effect of a weaker Canadian dollar relative to 2013 combined with stable export pricing in Japan. The increase in volume from High Level was partially offset by the downtime taken at the company's various mills to complete maintenance and other projects during the year.

Adjusted EBITDA was a loss of $500,000 in the fourth quarter of 2014 compared with adjusted EBITDA of $11.3-million in the same period of 2013, due to lower North American OSB prices and higher overall unit costs. The increase in unit costs was attributable to a number of factors including raw material price increases, costs associated with the continuing ramp-up of High Level and additional costs incurred due to the downtime taken at the mills. Net loss of $33.5-million from continuing operations in the fourth quarter of 2014 was $22.9-million higher than net loss of $10.6-million in the prior year. Excluding the foreign exchange fluctuations on long-term debt, the loss on derivative financial instrument and the related income tax effects, adjusted loss for the fourth quarter of 2014 was $18.5-million. This represents a decrease of $15.5-million compared with the prior year.

Adjusted EBITDA for 2014 was $27.5-million compared with $148.9-million in 2013, due to a significant decrease in North American OSB prices and higher overall unit costs due to the same factors noted above. Net loss from continuing operations in 2014 was $71.1-million, compared with net income of $39.4-million for 2013, representing a decrease in net income of $110.5-million. Excluding the key non-cash accounting gains and losses noted above, adjusted loss for 2014 was $29.9-million. This represents a decrease of $86.2-million compared with adjusted earnings of $56.3-million for 2013.

Margins

Adjusted EBITDA margin on sales for the fourth quarter of 2014 was negative 0.5 per cent compared with positive 10.8 per cent in the same period of 2013 (6.2 per cent in 2014 compared with 30.5 per cent in 2013). The decreases were largely related to significantly lower realized pricing in North America and higher unit costs.

Benchmark OSB pricing decreased during the fourth quarter of 2014. The north-central U.S. and Western Canadian pricing for seven-16th-inch OSB averaged $216 (U.S.) and $172 (U.S.) per thousand square feet, respectively, representing decreases of 12 per cent and 21 per cent compared with the fourth quarter of 2013. Sequentially, the north-central benchmark price stayed flat, while the Western Canadian benchmark price decreased 8 per cent compared with the prior quarter. For the year, the north-central and Western Canadian benchmark prices averaged $218 (U.S.) and $196 (U.S.) per thousand square feet, respectively, representing decreases of 31 per cent and 34 per cent compared with 2013.

Liquidity

At Dec. 31, 2014, Ainsworth's available liquidity, consisting of cash and cash equivalents, was $75.6-million, a reduction of $61.8-million since Dec. 31, 2013, resulting primarily from financing the company's capital expenditures and interest payments, as well as debt repayments and additional working capital requirements. Ainsworth is also permitted under the terms of the company's senior secured notes to borrow at least an additional $170-million (U.S.) of senior secured and unsecured debt, subject to the limitations set forth in the indenture.

Outlook

While the pace of improvement in U.S. housing starts in 2014 was more gradual than anticipated, the company expects that the U.S. housing recovery will gain further traction in 2015. The company remains optimistic that U.S. housing starts will return to more historical levels within the next several years. The restart of the High Level mill will allow the company to meet the growing requirements of its existing customer base in North America and Asia, as well as service new market segments. It expects the merger with Norbord will allow the combined company to capitalize on the continuing recovery in the U.S. housing market, and growth opportunities in its traditional and emerging markets in Asia.

Selected financial information is presented in the attached table.

                      SELECTED FINANCIAL INFORMATION
       (in millions of Canadian dollars, except earnings per share)

                                           Q4        Q4
                                         2014      2013      2014      2013 

Sales                                  $102.5    $104.4    $444.0    $488.0 
Cost of products sold                    99.3      89.4     401.7     323.5 
Net (loss) income from                                                      
continuing operations                   (33.5)    (10.6)    (71.1)     39.4 
Basic EPS (1)                           (0.14)    (0.04)    (0.30)     0.16 
Adjusted EBITDA                          (0.5)     11.3      27.5     148.9 
Adjusted EBITDA margin (2)               -0.5%     10.8%      6.2%     30.5%
Adjusted (loss) earnings (3)            (18.5)     (3.0)    (29.9)     56.3 
Adjusted EPS (4)                        (0.08)    (0.01)    (0.12)     0.23 

(1) 240,956,309 common shares were outstanding on Dec. 31, 2014.        
(2) Adjusted EBITDA margin, a non-IFRS financial measure, is defined as     
    adjusted EBITDA divided by sales.
(3) Adjusted (loss) earnings, a non-IFRS financial measure, is defined as   
    net income (loss) from continuing operations before (gain) loss on
    derivative financial instrument, foreign exchange (gain) loss on 
    long-term debt and the related income tax effects.
(4) Adjusted earnings per share, a non-IFRS financial measure, is defined 
    as adjusted (loss) earnings divided by the weighted average number of
    common shares outstanding.

Conference call information

Ainsworth will hold a conference call on Friday, Feb. 27, 2015, at 10 a.m. PT (1 p.m. ET). The dial-in phone number is 1-800-319-4610 from inside the United States or Canada, and 1-604-638-5340 from outside of the U.S. and Canada. To access the replay line, dial 1-800-319-6413 or 1-604-638-9010, reservation No. 4176 followed by the number sign. This recording will be available until the end of the day on March 6, 2015.

The financial results are based on international financial reporting standards. Investors, analysts and other interested parties can access Ainsworth's 2014 fourth quarter and annual results, as well as the shareholders letter and supplemental information on Ainsworth's website under the investors/financial reports section.

We seek Safe Harbor.