Domtar Corporation reports preliminary fourth quarter and fiscal year 2014 financial results

Strong fourth quarter results despite competitive paper market environment
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

  • Fourth quarter 2014 net earnings of $1.10 per share; earnings before items1 of $1.41 per share
  • Announced capital project to convert a paper machine to a fluff pulp line at Ashdown mill
  • Record sales in European Personal Care business

TICKER SYMBOL
(NYSE: UFS) (TSX: UFS)

MONTREAL, Feb. 6, 2015 /CNW Telbec/ - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $71 million ($1.10 per share) for the fourth quarter of 2014 compared to net earnings of $281 million ($4.33 per share) for the third quarter of 2014 and net earnings of $65 million ($1.00 per share) for the fourth quarter of 2013. Sales for the fourth quarter of 2014 were $1.4 billion.

Excluding items listed below, the Company had earnings before items1 of $91 million ($1.41 per share) for the fourth quarter of 2014 compared to earnings before items1 of $61 million ($0.94 per share) for the third quarter of 2014 and earnings before items1 of $68 million ($1.05 per share) for the fourth quarter of 2013.

Fourth quarter 2014 items:

  • Closure and restructuring costs of $25 million ($18 million after tax); and
  • Impairment of property, plant & equipment of $4 million ($2 million after tax).

Third quarter 2014 items:

  • Deferred tax benefit of $204 million for the settlement of IRS audit, primarily related to Alternative Fuel Tax Credits;
  • Recognition of $18 million of Alternative Fuel Tax Credits ($18 million after tax); and
  • Closure and restructuring costs of $2 million ($2 million after tax).

Fourth quarter 2013 items:

  • Net gain on sale of property, plant and equipment and business for $5 million ($4 million after tax); and
  • Charge of $7 million ($7 million after tax) for impairment of property, plant and equipment.

FISCAL YEAR 2014 HIGHLIGHTS

For fiscal year 2014, net earnings amounted to $431 million ($6.64 per share) compared to net earnings of $91 million ($1.36 per share) for fiscal year 2013. The Company had earnings before items1 of $234 million ($3.61 per share) for fiscal 2014 compared to earnings before items1 of $158 million ($2.37 per share) for fiscal 2013. Sales amounted to $5.6 billion for fiscal year 2014.

Commenting on the full-year results, John D. Williams, President and Chief Executive Officer, said, "Looking back at 2014, we delivered a year of strong results with solid free cash flow generation. Overall, we had good operating performance despite lack-of-order downtime in paper and we continued to adjust to rapidly changing market conditions. We also turned an important corner on our journey to build a growing, fiber-based business through acquisitions, strategic investments in manufacturing capacity and the additional repurposing of existing assets. We ended the year with strengthened earnings potential for the long-term."

QUARTERLY REVIEW

Operating income before items1 was $115 million in the fourth quarter of 2014 compared to an operating income before items1 of $104 million in the third quarter of 2014. Depreciation and amortization totaled $93 million in the fourth quarter of 2014.

Commenting on the fourth quarter results, Mr. Williams said, "In the fourth quarter, our results were strong despite a competitive paper market environment while pulp benefitted from good operating performance. During the quarter, we announced a fluff pulp conversion project that will further expand our presence in a growing business and help balance our paper supply with our customers' demand."

Mr. Williams added, "In Personal Care, our European business continued to perform well, posting a record sales performance but we did face some challenges in the U.S. market in addition to an extended ramp-up period. Momentum in the business is growing and we now have a state-of-the-art, low-cost, global manufacturing platform designed to provide our customers with differentiated product solutions to help them win in their markets."   

(In millions of dollars)


4Q 2014


3Q 2014

Sales


$1,379


$1,405

Operating income (loss)






Pulp and Paper segment


76


109


Personal Care segment


12


13


Corporate


(2)


(2)


Total


86


120

Operating income before items1


115


104

Depreciation and amortization


93


96

The increase in operating income before items1 in the fourth quarter of 2014 was the result of lower costs for planned maintenance, higher other operating income, better productivity in pulp and paper, a favorable exchange rate and higher shipments in personal care. These factors were partially offset by lower average selling prices for paper and pulp, higher selling, general and administrative costs and higher raw material costs.    

When compared to the third quarter of 2014, manufactured paper shipments were up 1.2% and pulp shipments increased 0.8%. The shipments-to-production ratio for paper was 101% in the fourth quarter of 2014, compared to 102% in the third quarter of 2014. Paper inventories decreased by 1,000 tons while pulp inventories increased by 21,000 metric tons at the end of December when compared to September levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $186 million and capital expenditures were $79 million, resulting in free cash flow1 of $107 million for the fourth quarter of 2014. Domtar's net debt-to-total capitalization ratio1 stood at 29% at December 31, 2014 compared to 30% at September 30, 2014.

In 2014, cash flow provided from operating activities amounted to $634 million and capital expenditures were $236 million, resulting in free cash flow1 of $398 million.

OUTLOOK

We expect North American demand for uncoated freesheet to decline in 2015 with long-term secular trends. We anticipate some short-term volatility in pulp markets due to the recent strengthening of the U.S. dollar. Our new manufacturing platform is expected to generate revenue and earnings growth in our Personal Care business. A weak Canadian dollar is expected to benefit our pulp and paper mills in Canada while a weak Euro will negatively impact the translation of our Personal Care Euro results. We anticipate that oil-based input costs will be down year-over-year.   

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal 2014 financial results. Financial analysts are invited to participate in the call by dialing 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International) at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its first quarter 2015 earnings results on April 30, 2015 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

____________________________

About Domtar
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and absorbent hygiene products. The foundation of its business is a network of world class wood fiber converting assets that produce papergrade, fluff and specialty pulps. The majority of its pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar® , Lynx ® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice ®. Domtar is also a leading marketer and producer of a broad line of absorbent hygiene products marketed primarily under the Attends®, IncoPack and Indasec® brand names. In 2014, Domtar had sales of $5.6 billion from some 50 countries. The Company employs approximately 9,800 people. To learn more, visit www.domtar.com .

Forward-Looking Statements
Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under "Outlook," are "forward-looking statements." Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under "Risk Factors" in our Form 10-K for 2013 as filed with the SEC and as updated by subsequently filed Form 10-Q's. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

________________________
1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.  

Domtar Corporation
Highlights
(In millions of dollars, unless otherwise noted)



Three months
ended December 31

Three months
ended December 31

Twelve months
ended December 31

Twelve months
ended December 31


2014

2013

2014

2013


(Unaudited)


$

$

$

$






Selected Segment Information










Sales 







Pulp and Paper

1,160

1,193

4,674

4,843



Personal Care

230

172

928

566

Total for reportable segments

1,390

1,365

5,602

5,409



Intersegment sales - Pulp and Paper

(11)

(6)

(39)

(18)

Consolidated sales

1,379

1,359

5,563

5,391

Depreciation and amortization and impairment and write-down of property, plant and equipment







Pulp and Paper

78

85

319

345



Personal Care

15

10

65

31

Total for reportable segments

93

95

384

376



Impairment and write-down of property, plant and equipment - Pulp and Paper

4

5

4

20



Impairment and write-down of property, plant and equipment - Personal Care

-

2

-

2

Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment

97

102

388

398






Operating income (loss) 







Pulp and Paper

76

75

323

171



Personal Care

12

9

54

43



Corporate

(2)

9

(13)

(53)

Consolidated operating income 

86

93

364

161

Interest expense, net

27

22

103

89

Earnings before income taxes and equity loss

59

71

261

72

Income tax (benefit) expense 

(12)

6

(170)

(20)

Equity loss, net of taxes

-

-

-

1

Net earnings

71

65

431

91






Per common share (in dollars)






Net earnings







Basic

1.10

1.00

6.65

1.37



Diluted

1.10

1.00

6.64

1.36

Weighted average number of common and exchangeable shares outstanding (millions)





Basic

64.3

64.9

64.8

66.6



Diluted

64.4

65.0

64.9

66.7






Cash flows provided from operating activities 

186

124

634

411

Additions to property, plant and equipment

79

62

236

242

Domtar Corporation
Consolidated Statements of Earnings
(In millions of dollars, unless otherwise noted)









Three months
ended December 31

Three months
ended December 31

Twelve months
ended December 31

Twelve months
ended December 31



2014

2013

2014

2013



(Unaudited)



$

$

$

$







Sales

1,379

1,359

5,563

5,391

Operating expenses







Cost of sales, excluding depreciation and amortization

1,080

1,081

4,396

4,361



Depreciation and amortization

93

95

384

376



Selling, general and administrative

103

100

416

381



Impairment and write-down of property, plant and equipment

4

7

4

22



Closure and restructuring costs

25

-

28

18



Other operating (income) loss, net

(12)

(17)

(29)

72



1,293

1,266

5,199

5,230

Operating income 

86

93

364

161

Interest expense, net

27

22

103

89

Earnings before income taxes and equity loss

59

71

261

72

Income tax (benefit) expense

(12)

6

(170)

(20)

Equity loss, net of taxes

-

-

-

1

Net earnings 

71

65

431

91







Per common share (in dollars)











Net earnings







Basic

1.10

1.00

6.65

1.37



Diluted

1.10

1.00

6.64

1.36

Weighted average number of common and exchangeable shares outstanding (millions)







Basic

64.3

64.9

64.8

66.6



Diluted

64.4

65.0

64.9

66.7

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)











December 31

December 31





2014

2013





(Unaudited)





$

$

Assets



Current assets




Cash and cash equivalents

174

655


Receivables, less allowances of $6 and $4

628

601


Inventories

714

685


Prepaid expenses

25

23


Income and other taxes receivable

54

61


Deferred income taxes

75

52



Total current assets

1,670

2,077







Property, plant and equipment, at cost

8,909

8,883

Accumulated depreciation

(5,778)

(5,594)



Net property, plant and equipment

3,131

3,289

Goodwill

567

369

Intangible assets, net of amortization

661

407

Other assets

156

136




Total assets

6,185

6,278




Liabilities and shareholders' equity



Current liabilities




Bank indebtedness

10

15


Trade and other payables

721

673


Income and other taxes payable

26

17


Long-term debt due within one year

169

4



Total current liabilities

926

709




Long-term debt

1,181

1,510

Deferred income taxes and other

810

923

Other liabilities and deferred credits

378

354





Shareholders' equity




Common stock

1

-


Exchangeable shares

-

44


Additional paid-in capital

2,012

1,999


Retained earnings 

1,145

804


Accumulated other comprehensive loss

(268)

(65)



Total shareholders' equity

2,890

2,782




Total liabilities and shareholders' equity

6,185

6,278

Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)







Twelve months
ended December 31

Twelve months
ended December 31



2014

2013



(Unaudited)



$

$





Operating activities



Net earnings 

431

91

Adjustments to reconcile net earnings to cash flows from operating activities




Depreciation and amortization 

384

376


Deferred income taxes and tax uncertainties

(201)

(8)


Impairment and write-down of property, plant and equipment

4

22


Net losses on disposals of property, plant and equipment and sale of business

-

4


Stock-based compensation expense

4

5


Equity loss, net

-

1


Other

3

(2)

Changes in assets and liabilities, excluding the effects of acquisition and sale of businesses




Receivables

39

(70)


Inventories

(29)

(8)


Prepaid expenses

1

1


Trade and other payables

(33)

(11)


Income and other taxes  

12

(26)


Difference between employer pension and other post-retirement

 contributions and pension and other post-retirement expense

16

31


Other assets and other liabilities

3

5


Cash flows provided from operating activities 

634

411




Investing activities



Additions to property, plant and equipment

(236)

(242)

Proceeds from disposals of property, plant and equipment and sale of business 

1

61

Acquisition of businesses, net of cash acquired

(546)

(287)

Other


(5)

(1)


Cash flows used for investing activities

(786)

(469)




Financing activities



Dividend payments

(84)

(67)

Net change in bank indebtedness

(6)

(3)

Change in revolving bank credit facility 

(160)

160

Proceeds from receivables securitization facilities

90

-

Payments on receivables securitization facilities

(129)

-

Issuance of long-term debt

-

249

Repayment of long-term debt

(4)

(102)

Stock repurchase

(38)

(183)

Other


5

-


Cash flows (used for) provided from financing activities

(326)

54




Net decrease in cash and cash equivalents

(478)

(4)

Impact of foreign exchange on cash

(3)

(2)

Cash and cash equivalents at beginning of year

655

661

Cash and cash equivalents at end of year

174

655






Supplemental cash flow information




Net cash payments for:





Interest (including $2 million of redemption premiums in 2013)

92

81



Income taxes paid, net

18

5

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures
(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified in bold as "Earnings before items", "Earnings before items per diluted share", "EBITDA", "EBITDA margin", "EBITDA before items", "EBITDA margin before items", "Free cash flow", "Net debt" and "Net debt-to-total capitalization." Management believes that the financial metrics presented are frequently used by investors and are useful to evaluate our ability to service debt and our overall credit profile. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.


The Company calculates "Earnings before items" and "EBITDA before items" by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our current operations. Management uses these measures, as well as EBITDA and Free cash flow, to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Net earnings provides for a more complete analysis of the results of operations. Net earnings and Cash flow provided from operating activities are the most directly comparable GAAP measures.











2014

2013





Q1

Q2

Q3

Q4

YTD

Q1

Q2

Q3

Q4

YTD

Reconciliation of "Earnings before items" to Net earnings (loss)














Net earnings (loss)

($)

39

40

281

71

431

45

(46)

27

65

91


(+)

Impairment and write-down of property, plant and equipment 

($)

-

-

-

2

2

7

3

-

7

17


(+)

Closure and restructuring costs

($)

1

-

2

18

21

-

13

-

-

13


(-)

Net (gains) losses on disposals of property, plant and equipment and business

($)

-

-

-

-

-

(6)

-

12

(4)

2


(+)

Impact of purchase accounting

($)

2

-

-

-

2

-

-

2

-

2


(+)

Alternative fuel tax credits

($)

-

-

(18)

-

(18)

18

-

-

-

18


(-)

Cellulosic biofuel producer credits

($)

-

-

-

-

-

(33)

-

-

-

(33)


(+)

Loss on repurchase of long-term debt

($)

-

-

-

-

-

2

-

-

-

2


(+)

Weston litigation settlement

($)

-

-

-

-

-

-

46

-

-

46


(-)

Internal Revenue Service audit settlement items

($)

-

-

(204)

-

(204)

-

-

-

-

-


(=)

Earnings before items

($)

42

40

61

91

234

33

16

41

68

158


( / )

Weighted avg. number of common and exchangeable shares outstanding (diluted)

(millions)

65.0

65.1

64.9

64.4

64.9

69.7

66.9

65.4

65.0

66.7


(=)

Earnings before items per diluted share

($)

0.65

0.61

0.94

1.41

3.61

0.47

0.24

0.63

1.05

2.37















Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings (loss)














Net earnings (loss)

($)

39

40

281

71

431

45

(46)

27

65

91


(+)

Equity loss, net of taxes

($)

-

-

-

-

-

1

-

-

-

1


(+)

Income tax expense (benefit)

($)

15

13

(186)

(12)

(170)

(22)

(5)

1

6

(20)


(+)

Interest expense, net

($)

25

26

25

27

103

25

21

21

22

89


(=)

Operating income (loss)

($)

79

79

120

86

364

49

(30)

49

93

161


(+)

Depreciation and amortization

($)

99

96

96

93

384

95

93

93

95

376


(+)

Impairment and write-down of property, plant and equipment 

($)

-

-

-

4

4

10

5

-

7

22


(-)

Net (gains) losses on disposals of property, plant and equipment and business

($)

-

-

-

-

-

(10)

-

19

(5)

4


(=)

EBITDA

($)

178

175

216

183

752

144

68

161

190

563


(/)

Sales

($)

1,394

1,385

1,405

1,379

5,563

1,345

1,312

1,375

1,359

5,391


(=)

EBITDA margin

(%)

13%

13%

15%

13%

14%

11%

5%

12%

14%

10%



EBITDA

($)

178

175

216

183

752

144

68

161

190

563


(+)

Alternative fuel tax credits

($)

-

-

(18)

-

(18)

26

-

-

-

26


(+)

Closure and restructuring costs

($)

1

-

2

25

28

-

18

-

-

18


(+)

Impact of purchase accounting 

($)

3

-

-

-

3

-

-

2

-

2


(+)

Weston litigation settlement

($)

-

-

-

-

-

-

49

-

-

49


(=)

EBITDA before items

($)

182

175

200

208

765

170

135

163

190

658


(/)

Sales

($)

1,394

1,385

1,405

1,379

5,563

1,345

1,312

1,375

1,359

5,391


(=)

EBITDA margin before items

(%)

13%

13%

14%

15%

14%

13%

10%

12%

14%

12%















Reconciliation of "Free cash flow" to Cash flow provided from operating activities














Cash flow provided from operating activities

($)

141

104

203

186

634

63

120

104

124

411


(-)

Additions to property, plant and equipment

($)

(45)

(56)

(56)

(79)

(236)

(56)

(62)

(62)

(62)

(242)


(=)

Free cash flow

($)

96

48

147

107

398

7

58

42

62

169















"Net debt-to-total capitalization" computation














Bank indebtedness

($)

8

15

3

10


13

2

6

15



(+)

Long-term debt due within one year

($)

15

7

170

169


8

7

6

4



(+)

Long-term debt

($)

1,490

1,410

1,202

1,181


1,104

1,102

1,102

1,510



(=)

Debt

($)

1,513

1,432

1,375

1,360


1,125

1,111

1,114

1,529



(-)

Cash and cash equivalents

($)

(130)

(85)

(134)

(174)


(513)

(432)

(191)

(655)



(=)

Net debt

($)

1,383

1,347

1,241

1,186


612

679

923

874



(+)

Shareholders' equity

($)

2,771

2,826

2,938

2,890


2,842

2,652

2,681

2,782



(=)

Total capitalization

($)

4,154

4,173

4,179

4,076


3,454

3,331

3,604

3,656




Net debt

($)

1,383

1,347

1,241

1,186


612

679

923

874



( / )

Total capitalization

($)

4,154

4,173

4,179

4,076


3,454

3,331

3,604

3,656



(=)

Net debt-to-total capitalization

(%)

33%

32%

30%

29%


18%

20%

26%

24%


"Earnings before items", "Earnings before items per diluted share", "EBITDA", "EBITDA margin", "EBITDA before items", "EBITDA margin before items", "Free cash flow", "Net debt" and "Net debt-to-total capitalization" have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Net earnings, Operating income or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies.


Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2014
(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP"), financial metrics identified in bold as "Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.


The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.













Pulp and Paper 

Personal Care(1)

Corporate

Total





Q1'14

Q2'14

Q3'14

Q4'14

YTD

Q1'14

Q2'14

Q3'14

Q4'14

YTD

Q1'14

Q2'14

Q3'14

Q4'14

YTD

Q1'14

Q2'14

Q3'14

Q4'14

YTD

Reconciliation of Operating income (loss) to "Operating income (loss) before items"
























Operating income (loss)

($)

69

69

109

76

323

15

14

13

12

54

(5)

(4)

(2)

(2)

(13)

79

79

120

86

364


(+)

Alternative fuel tax credits

($)

-

-

(18)

-

(18)

-

-

-

-

-

-

-

-

-

-

-

-

(18)

-

(18)


(+)

Closure and restructuring costs

($)

-

-

2

25

27

1

-

-

-

1

-

-

-

-

-

1

-

2

25

28


(+)

Impact of purchase accounting 

($)

-

-

-

-

-

3

-

-

-

3

-

-

-

-

-

3

-

-

-

3


(+)

Impairment and write-down of property, plant and equipment  

($)

-

-

-

4

4

-

-

-

-

-

-

-

-

-

-

-

-

-

4

4


(=)

Operating income (loss) before items

($)

69

69

93

105

336

19

14

13

12

58

(5)

(4)

(2)

(2)

(13)

83

79

104

115

381

























Reconciliation of "Operating income (loss) before items" to "EBITDA before items"
























Operating income (loss) before items

($)

69

69

93

105

336

19

14

13

12

58

(5)

(4)

(2)

(2)

(13)

83

79

104

115

381


(+)

Depreciation and amortization

($)

83

79

79

78

319

16

17

17

15

65

-

-

-

-

-

99

96

96

93

384


























(=)

EBITDA before items

($)

152

148

172

183

655

35

31

30

27

123

(5)

(4)

(2)

(2)

(13)

182

175

200

208

765


(/)

Sales

($)

1,168

1,160

1,186

1,160

4,674

233

234

231

230

928

-

-

-

-

-

1,401

1,394

1,417

1,390

5,602


(=)

EBITDA margin before items

(%)

13%

13%

15%

16%

14%

15%

13%

13%

12%

13%

-

-

-

-

-

13%

13%

14%

15%

14%

"Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP.

It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies.


(1) On January 2, 2014, the Company acquired 100% of the shares of Laboratorios Indas, S.A.U. in Spain.


Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2013
(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP"), financial metrics identified in bold as "Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.


The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.













Pulp and Paper (1)

Personal Care (2)

Corporate

Total





Q1'13

Q2'13

Q3'13

Q4'13

YTD

Q1'13

Q2'13

Q3'13

Q4'13

YTD

Q1'13

Q2'13

Q3'13

Q4'13

YTD

Q1'13

Q2'13

Q3'13

Q4'13

YTD

Reconciliation of Operating income (loss) to "Operating income (loss) before items"
























Operating income (loss)

($)

38

16

42

75

171

13

10

11

9

43

(2)

(56)

(4)

9

(53)

49

(30)

49

93

161


(+)

Impairment and write-down of property, plant and equipment 

($)

10

5

-

5

20

-

-

-

2

2

-

-

-

-

-

10

5

-

7

22


(-)

Net (gain) loss on disposal of property, plant and equipment and business

($)

(10)

-

19

1

10

-

-

-

-

-

-

-

-

(6)

(6)

(10)

-

19

(5)

4


(+)

Reversal of alternative fuel tax credits

($)

26

-

-

-

26

-

-

-

-

-

-

-

-

-

-

26

-

-

-

26


(+)

Weston litigation settlement

($)

-

-

-

-

-

-

-

-

-

-

-

49

-

-

49

-

49

-

-

49


(+)

Closure and restructuring costs

($)

-

10

-

-

10

-

2

-

-

2

-

6

-

-

6

-

18

-

-

18


(+)

Impact of purchase accounting 

($)

-

-

-

-

-

-

-

2

-

2

-

-

-

-

-

-

-

2

-

2


(=)

Operating income (loss) before items

($)

64

31

61

81

237

13

12

13

11

49

(2)

(1)

(4)

3

(4)

75

42

70

95

282

























Reconciliation of "Operating income (loss) before items" to "EBITDA before items"
























Operating income (loss) before items

($)

64

31

61

81

237

13

12

13

11

49

(2)

(1)

(4)

3

(4)

75

42

70

95

282


(+)

Depreciation and amortization

($)

89

87

84

85

345

6

6

9

10

31

-

-

-

-

-

95

93

93

95

376


























(=)

EBITDA before items

($)

153

118

145

166

582

19

18

22

21

80

(2)

(1)

(4)

3

(4)

170

135

163

190

658


(/)

Sales

($)

1,238

1,208

1,204

1,193

4,843

111

108

175

172

566

-

-

-

-

-

1,349

1,316

1,379

1,365

5,409


(=)

EBITDA margin before items

(%)

12%

10%

12%

14%

12%

17%

17%

13%

12%

14%

-

-

-

-

-

13%

10%

12%

14%

12%

"Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies.


(1) On May 31, 2013, the Company acquired Xerox's paper print and media product's assets in the United States and Canada.


(2) On July 1, 2013, the Company acquired 100% of the shares of Associated Hygiene Products LLC.


Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)











2014

2013





Q1

Q2

Q3

Q4

YTD

Q1

Q2

Q3

Q4

YTD

Pulp and Paper Segment













Sales

($)

1,168

1,160

1,186

1,160

4,674

1,238

1,208

1,204

1,193

4,843


Operating income 

($)

69

69

109

76

323

38

16

42

75

171


Depreciation and amortization

($)

83

79

79

78

319

89

87

84

85

345


Impairment and write-down of property, plant and equipment

($)

-

-

-

4

4

10

5

-

5

20
















Paper













Paper Production

('000 ST)

801

786

758

777

3,122

793

829

813

810

3,245


Paper Shipments - Manufactured

('000 ST)

804

779

776

786

3,145

828

801

814

817

3,260



Communication Papers

('000 ST)

678

647

649

661

2,635

706

676

694

701

2,777



Specialty and Packaging

('000 ST)

126

132

127

125

510

122

125

120

116

483


Paper Shipments - Sourced from 3rd parties

('000 ST)

50

42

47

34

173

83

85

73

41

282


Paper Shipments - Total

('000 ST)

854

821

823

820

3,318

911

886

887

858

3,542


Pulp













Pulp Shipments(a)

('000 ADMT)

318

336

367

370

1,391

372

344

352

377

1,445



Hardwood Kraft Pulp

(%)

12%

11%

12%

11%

12%

17%

14%

14%

14%

15%



Softwood Kraft Pulp

(%)

58%

63%

63%

60%

61%

56%

57%

59%

57%

57%



Fluff Pulp

(%)

30%

26%

25%

29%

27%

27%

29%

27%

29%

28%















Personal Care Segment













Sales

($)

233

234

231

230

928

111

108

175

172

566


Operating income 

($)

15

14

13

12

54

13

10

11

9

43


Depreciation and amortization

($)

16

17

17

15

65

6

6

9

10

31


Impairment and write-down of property, plant and equipment

($)

-

-

-

-

-

-

-

-

2

2















Average Exchange Rates

$US / $CAN

1.103

1.091

1.089

1.136

1.105

1.009

1.023

1.039

1.050

1.030




$CAN / $US

0.906

0.917

0.918

0.881

0.906

0.991

0.977

0.963

0.953

0.971




€EUR / $US

1.370

1.371

1.324

1.249

1.329

1.320

1.306

1.325

1.362

1.329

(a)

Figures are gross of market pulp purchased from other producers on the open market for some of our paper making operations. Pulp Shipments represent the amount of pulp produced in excess of our internal requirement.




Note: the term "ST" refers to a short ton and the term "ADMT" refers to an air dry metric ton.

SOURCE Domtar Corporation

For further information: INVESTOR RELATIONS: Nicholas Estrela, Director, Investor Relations, Tel.: 514-848-5555 x 85979; MEDIA RELATIONS: David Struhs, Vice-President, Corporate Communications and Sustainability, Tel.: 803-802-8031

RELATED LINKS
http://www.domtar.com

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