Domtar Corporation reports preliminary second quarter 2010 financial results
Strong operational results despite cost impact of higher level of
maintenance downtime
(All financial information is in U.S. dollars, and all earnings per share
results are diluted, unless otherwise noted.)
- Net earnings of $0.71 per share, earnings before items(1) of $2.67 per
share
- EBITDA before items(1) of $264 million
- Closed sale of the Wood business
- Company repurchased 340,130 shares of its common stock in the second
quarter of 2010
TICKER SYMBOL
UFS (NYSE, TSX)
</pre>
<p/>
<p><span class="xn-location">MONTREAL</span>, <span class="xn-chron">July 30</span> /CNW Telbec/ - Domtar Corporation (NYSE/TSX: UFS) today reported net earnings of <span class="xn-money">$31 million</span> (<span class="xn-money">$0.71</span> per share) for the second quarter of 2010 compared to net earnings of <span class="xn-money">$58 million</span> (<span class="xn-money">$1.34</span> per share) for the first quarter of 2010 and net earnings of <span class="xn-money">$48 million</span> (<span class="xn-money">$1.12</span> per share) for the second quarter of 2009. Sales for the second quarter of 2010 amounted to <span class="xn-money">$1.5 billion</span>. Excluding items listed below, the Company had earnings before items(1) of <span class="xn-money">$116 million</span> (<span class="xn-money">$2.67</span> per share) for the second quarter of 2010 compared to earnings before items(1) of <span class="xn-money">$69 million</span> (<span class="xn-money">$1.59</span> per share) for the first quarter of 2010 and a loss before items(1) of <span class="xn-money">$33 million</span> (<span class="xn-money">$0.77</span> per share) for the second quarter of 2009.</p>
<p/>
<pre>
Second quarter 2010 items:
--------------------------
- Loss on sale of the Wood business of $50 million ($50 million after
tax);
- Costs for debt repurchase, including premium paid, of $40 million
($24 million after tax);
- Charge of $14 million ($9 million after tax) related to the impairment
and write-down of property, plant and equipment;
- Closure and restructuring costs of $5 million ($4 million after tax);
and
- Gain on sale of property, plant and equipment of $2 million ($2 million
after tax).
First quarter 2010 items:
-------------------------
- Refundable excise tax credit for the production and use of alternative
bio fuel mixtures of $25 million ($18 million after tax);
- Charge of $22 million ($16 million after tax) related to the impairment
and write-down of property, plant and equipment;
- Closure and restructuring costs of $20 million ($14 million after tax);
and
- Gain on sale of property, plant and equipment of $1 million ($1 million
after tax).
Second quarter 2009 items:
--------------------------
- Refundable excise tax credit for the production and use of alternative
bio fuel mixtures of $131 million ($79 million after tax);
- Gain on debt repurchase of $9 million ($6 million after-tax); and
- Closure and restructuring costs of $6 million ($4 million after tax).
</pre>
<p/>
<p>"We continue to execute remarkably well to deliver strong financial results. I am pleased that these efforts, coupled with our successful debt tender, have been recognized by rating agencies," said John D. Williams, President and Chief Executive Officer. Commenting on strategic initiatives, <span class="xn-person">Mr. Williams</span> added, "We continue our work to streamline our portfolio; we exited the coated groundwood paper business and successfully closed the sale of our Wood business. We also announced an exciting and innovative partnership in the development of fiber-based nanotechnologies. As we continue to look for opportunities to address our issues of cyclicality and the secular decline of paper demand, our strong balance sheet provides us with financial flexibility to consider various options to create sustainable, long term value for our stockholders."</p>
<p/>
<p>SEGMENT REVIEW</p>
<p/>
<p>Papers</p>
<p/>
<p>Operating income before items(1) was <span class="xn-money">$165 million</span> in the second quarter of 2010 compared to operating income before items(1) of <span class="xn-money">$137 million</span> in the first quarter of 2010. Depreciation and amortization totaled <span class="xn-money">$95 million</span> in the second quarter of 2010. When compared to the first quarter of 2010, paper shipments decreased by 7% while pulp shipments increased by 25%. The shipments-to-production ratio for paper was 101% in the second quarter of 2010, compared to 106% in the first quarter of 2010. Paper and pulp inventories decreased by 9,000 tons and 95,000 metric tons, respectively, at the end of June when compared to end of March levels.</p>
<p>The increase in operating income before items(1) in the second quarter of 2010 was the result of higher average selling prices in pulp and paper, and higher shipments for pulp. These factors were partially offset by higher costs related to scheduled maintenance downtime, lower shipments for paper, and an unfavorable exchange rate including hedging.</p>
<p/>
<pre>
(In millions of dollars) 2Q 2010 1Q 2010
----------------------------------------------- ----------- -----------
Sales $1,317 $1,245
Operating income $149 $120
Operating income before items(1) $165 $137
Depreciation and amortization $95 $96
</pre>
<p/>
<p/>
<p>Paper Merchants</p>
<p/>
<p>Operating loss was <span class="xn-money">$1 million</span> in the second quarter of 2010 compared to operating income of <span class="xn-money">$1 million</span> in the first quarter of 2010. Depreciation and amortization was <span class="xn-money">$1 million</span> in the second quarter of 2010. Deliveries remained flat when compared to the first quarter of 2010.</p>
<p>The decrease in operating income in the second quarter of 2010 was primarily the result of margins temporarily contracting due to supplier price increases. This factor was partially offset by higher selling prices.</p>
<p/>
<pre>
(In millions of dollars) 2Q 2010 1Q 2010
----------------------------------------------- ----------- -----------
Sales $213 $212
Operating income (loss) ($1) $1
Depreciation and amortization $1 $1
</pre>
<p/>
<p/>
<p>Wood</p>
<p/>
<p>Operating income before items(1) was nil in the second quarter of 2010, compared to an operating loss before items(1) of <span class="xn-money">$6 million</span> in the first quarter of 2010. Depreciation and amortization totaled <span class="xn-money">$5 million</span> in the second quarter of 2010. When compared to the first quarter of 2010, lumber shipments increased 14%.</p>
<p>The decrease in operating loss before items(1) in the second quarter of 2010 was primarily the result of higher shipments and higher average selling prices. These factors were partially offset by an unfavorable exchange rate including hedging.</p>
<p/>
<pre>
(In millions of dollars) 2Q 2010 1Q 2010
----------------------------------------------- ----------- -----------
Sales $83 $67
Operating loss ($49) ($5)
Operating income (loss) before items(1) $- ($6)
Depreciation and amortization $5 $5
</pre>
<p/>
<p/>
<p>LIQUIDITY AND CAPITAL</p>
<p/>
<p>Cash flow provided from operating activities amounted to <span class="xn-money">$610 million</span> and free cash flow(1) amounted to <span class="xn-money">$567 million</span> in the second quarter of 2010. Cash received with regards to the alternative fuel tax credits amounted to <span class="xn-money">$368 million</span> in the second quarter of 2010. Domtar's net debt-to-total capitalization ratio(1) stood at 22% at <span class="xn-chron">June 30, 2010</span> compared to 33% at <span class="xn-chron">March 31, 2010</span>.</p>
<p/>
<p>OUTLOOK</p>
<p/>
<p>The Company expects third quarter paper shipments to be flat compared to the second quarter, before gradually declining towards year-end due to seasonal factors. Selling prices for paper grade pulp are expected to come under pressure. As previously communicated, costs related to planned maintenance shutdowns will be materially reduced in the third quarter. Inflation on input costs is expected to be marginal for the second half of the year.</p>
<p/>
<p>EARNINGS CONFERENCE CALL</p>
<p/>
<p>The Company will hold a conference call today at <span class="xn-chron">11:00 a.m. (ET</span>) to discuss its second quarter 2010 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (866) 321-8231 (toll free - <span class="xn-location">North America</span>) or 1 (416) 642-5213 (International), while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at <a href="http://www.domtar.com">www.domtar.com</a>.</p>
<p>The Company will release its third quarter 2010 earnings on <span class="xn-chron">October 29, 2010</span> before markets open, followed by a conference call at <span class="xn-chron">10:00 a.m. (ET</span>) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the earnings release date.</p>
<p/>
<pre>
---------------------------
</pre>
<p/>
<p>About Domtar</p>
<p/>
<p>Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in <span class="xn-location">North America</span> and the second largest in the world based on production capacity, and is also a manufacturer of papergrade, fluff and specialty pulp. The Company designs, manufactures, markets and distributes a wide range of business, commercial printing and publishing as well as converting and specialty papers including recognized brands such as Cougar(R), Lynx(R) Opaque Ultra, Husky(R) Opaque Offset, First Choice(R) and Domtar EarthChoice(R) Office Paper, part of a family of environmentally and socially responsible papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. The Company employs over 9,000 people. To learn more, visit <a href="http://www.domtar.com">www.domtar.com</a>.</p>
<p/>
<p>Forward-Looking Statements</p>
<p/>
<p>All statements in this press release that are not based on historical fact are "forward-looking statements." While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the captions "Forward-Looking Statements" and "Risk Factors" of the latest Annual Report on Form 10-K filed with the SEC as updated by the Company's latest Quarterly Report on Form 10-Q. Unless specifically required by law, we assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances.</p>
<p/>
<pre>
(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 Three Six Six
months months months months
ended ended ended ended
June 30 June 30 June 30 June 30
-------------------------------------------------------------------------
2010 2009 2010 2009
--------------(Unaudited)--------------
$ $ $ $
Selected Segment Information
Sales
Papers 1,317 1,127 2,562 2,233
Paper Merchants 213 205 425 422
Wood 83 46 150 89
-------------------------------------------------------------------------
Total for reportable segments 1,613 1,378 3,137 2,744
Intersegment sales - Papers (60) (55) (122) (115)
Intersegment sales - Wood (6) (4) (11) (8)
-------------------------------------------------------------------------
Consolidated sales 1,547 1,319 3,004 2,621
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Depreciation and amortization and
impairment and write-down of
property, plant and equipment
Papers 95 98 191 192
Paper Merchants 1 1 2 2
Wood 5 5 10 9
-------------------------------------------------------------------------
Total for reportable segments 101 104 203 203
Impairment and write-down of
property, plant and equipment
- Papers 14 - 36 35
-------------------------------------------------------------------------
Consolidated depreciation and
amortization and impairment and
write-down of property, plant and
equipment 115 104 239 238
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating income (loss)
Papers 149 150 269 144
Paper Merchants (1) 1 - 3
Wood (49) (12) (54) (30)
Corporate (3) - (3) -
-------------------------------------------------------------------------
Consolidated operating income 96 139 212 117
Interest expense 70 23 102 54
-------------------------------------------------------------------------
Earnings before income taxes 26 116 110 63
Income tax expense (benefit) (5) 68 21 60
-------------------------------------------------------------------------
Net earnings 31 48 89 3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per common share (in dollars)
Net earnings
Basic 0.72 1.12 2.07 0.07
Diluted 0.71 1.12 2.05 0.07
Weighted average number of common
and exchangeable shares
outstanding (millions)
Basic 43.0 43.0 43.0 43.0
Diluted 43.4 43.0 43.4 43.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows provided from
operating activities 610 306 733 363
Additions to property, plant and
equipment 43 18 74 42
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
Consolidated Statements of Earnings
(In millions of dollars, unless otherwise noted)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
June 30 June 30 June 30 June 30
-------------------------------------------------------------------------
2010 2009 2010 2009
--------------(Unaudited)--------------
$ $ $ $
Sales 1,547 1,319 3,004 2,621
Operating expenses
Cost of sales, excluding
depreciation and amortization 1,207 1,116 2,349 2,239
Depreciation and amortization 101 104 203 203
Selling, general and
administrative 69 86 153 169
Impairment and write-down of
property, plant and equipment 14 - 36 35
Closure and restructuring
costs 5 6 25 30
Other operating loss (income),
net 55 (132) 26 (172)
-------------------------------------------------------------------------
1,451 1,180 2,792 2,504
-------------------------------------------------------------------------
Operating income 96 139 212 117
Interest expense 70 23 102 54
-------------------------------------------------------------------------
Earnings before income taxes 26 116 110 63
Income tax expense (benefit) (5) 68 21 60
-------------------------------------------------------------------------
Net earnings 31 48 89 3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per common share (in dollars)
Net earnings
Basic 0.72 1.12 2.07 0.07
Diluted 0.71 1.12 2.05 0.07
Weighted average number of common
and exchangeable shares
outstanding (millions)
Basic 43.0 43.0 43.0 43.0
Diluted 43.4 43.0 43.4 43.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
June 30 December 31
-------------------------------------------------------------------------
2010 2009
-------------------------------------------------------------------------
(Unaudited)
$ $
Assets
Current assets
Cash and cash equivalents 514 324
Receivables, less allowances of $8 and $8 659 536
Inventories 616 745
Prepaid expenses 37 46
Income and other taxes receivable 38 414
Deferred income taxes 137 137
-------------------------------------------------------------------------
Total current assets 2,001 2,202
Property, plant and equipment, at cost 9,269 9,575
Accumulated depreciation (5,401) (5,446)
-------------------------------------------------------------------------
Net property, plant and equipment 3,868 4,129
Intangible assets, net of amortization 62 85
Other assets 120 103
-------------------------------------------------------------------------
Total assets 6,051 6,519
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Bank indebtedness 30 43
Trade and other payables 678 686
Income and other taxes payable 41 31
Long-term debt due within one year 30 11
-------------------------------------------------------------------------
Total current liabilities 779 771
Long-term debt 1,186 1,701
Deferred income taxes and other 1,033 1,019
Other liabilities and deferred credits 411 366
Shareholders' equity
Exchangeable shares 73 78
Additional paid-in capital, includes
treasury stock of $29 2,792 2,816
Accumulated deficit (138) (216)
Accumulated other comprehensive loss (85) (16)
-------------------------------------------------------------------------
Total shareholders' equity 2,642 2,662
-------------------------------------------------------------------------
Total liabilities and shareholders'
equity 6,051 6,519
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months Six months
ended ended
June 30 June 30
-------------------------------------------------------------------------
2010 2009
-------------------------------------------------------------------------
--------(Unaudited)------
$ $
Operating activities
Net earnings 89 3
Adjustments to reconcile net earnings to cash
flows from operating activities
Depreciation and amortization 203 203
Deferred income taxes 3 59
Impairment and write-down of property, plant
and equipment 36 35
Loss (gain) on repurchase of long-term debt 40 (15)
Net losses on disposals of property, plant and
equipment and sale of business 47 -
Stock-based compensation expense 2 5
Other (6) 8
Changes in assets and liabilities
Receivables (147) (117)
Inventories 79 171
Prepaid expenses (12) (1)
Trade and other payables 5 (24)
Income and other taxes 392 18
Difference between employer pension and other
post-retirement contributions and pension and
other post-retirement expense 3 15
Other assets and other liabilities (1) 3
-------------------------------------------------------------------------
Cash flows provided from operating activities 733 363
-------------------------------------------------------------------------
Investing activities
Additions to property, plant and equipment (74) (42)
Proceeds from disposals of property, plant and
equipment 14 1
Proceeds from sale of business 97 -
-------------------------------------------------------------------------
Cash flows provided from (used for) investing
activities 37 (41)
-------------------------------------------------------------------------
Financing activities
Net change in bank indebtedness (13) (19)
Change of revolving bank credit facility - 90
Issuance of long-term debt - 385
Repayment of long-term debt (530) (409)
Borrowings under accounts receivable
securitization program 20 -
Debt issue and tender offer costs (26) (13)
Stock repurchase (19) -
Prepaid on structured stock repurchase (10) -
Other (3) -
-------------------------------------------------------------------------
Cash flows provided from (used for) financing
activities (581) 34
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 189 356
Translation adjustments related to cash and cash
equivalents 1 9
Cash and cash equivalents at beginning of period 324 16
-------------------------------------------------------------------------
Cash and cash equivalents at end of period 514 381
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures
(In millions of dollars, unless otherwise noted)
</pre>
<p/>
<p>The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified in bold as "Earnings (Loss) Before Items", "Earnings (Loss) 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 the 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.</p>
<p>The Company calculates "Earnings (Loss) Before Items" and "EBITDA Before Items" by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our ongoing 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 (loss) provides for a more complete analysis of the results of operations. Net earnings (loss) and Cash flow provided from operating activities are the most directly comparable GAAP measures.</p>
<p/>
<pre>
-----------------------------------
2010
-----------------------------------
Q1 Q2 YTD
-----------------------------------
Reconciliation of
"Earnings (Loss) Before
Items" to Net earnings
(loss)
Net earnings (loss) ($) 58 31 89
(-) Alternative fuel tax
credits ($) (18) - (18)
(+) Write-down of PP&E /
Impairment of PP&E
and intangible
assets ($) 16 9 25
(+) Closure and
restructuring costs ($) 14 4 18
(-) (Gains) Losses on
sale of property,
plant and equipment
and business ($) (1) 48 47
(-) (Gain) Loss on debt
repurchase ($) - 24 24
(=) Earnings (Loss)
Before Items ($) 69 116 185
(/) Weighted avg. number
of common shares
outstanding
(diluted) (millions) 43.3 43.4 43.4
(=) Earnings (Loss)
Before Items per
diluted share ($) 1.59 2.67 4.26
Reconciliation of "EBITDA"
and "EBITDA Before Items"
to Net earnings (loss)
Net earnings (loss) ($) 58 31 89
(+) Income tax expense
(benefit) ($) 26 (5) 21
(+) Interest expense ($) 32 70 102
(=) Operating income
(loss) ($) 116 96 212
(+) Depreciation and
amortization ($) 102 101 203
(+) Write-down of PP&E /
Impairment of
goodwill, PP&E and
intangible assets ($) 22 14 36
(-) (Gains) Losses on
sale of property,
plant and equipment
and business ($) (1) 48 47
(equal) EBITDA ($) 239 259 498
(/) Sales ($) 1,457 1,547 3,004
(=) EBITDA
Margin (%) 16% 17% 17%
EBITDA ($) 239 259 498
(-) Alternative fuel tax
credits ($) (25) - (25)
(+) Closure and
restructuring costs ($) 20 5 25
(=) EBITDA Before
Items ($) 234 264 498
(/) Sales ($) 1,457 1,547 3,004
(=) EBITDA Margin
Before Items (%) 16% 17% 17%
Reconciliation of "Free
Cash Flow" to Cash flow
provided from operating
activities
Cash flow provided
from operating
activities ($) 123 610 733
(-) Additions to
property, plant and
equipment ($) (31) (43) (74)
(=) Free Cash
Flow ($) 92 567 659
"Net Debt-to-Total
Capitalization"
Computation
Bank indebtedness ($) 19 30
(+) Current portion of
long-term debt ($) 31 30
(+) Long-term debt ($) 1,600 1,186
(equal) Debt ($) 1,650 1,246
(-) Cash and cash
equivalents ($) (314) (514)
(=) Net
Debt ($) 1,336 732
(+) Shareholders' equity ($) 2,748 2,642
(=) Total
capitalization ($) 4,084 3,374
Net debt ($) 1,336 732
(/) Total capitalization ($) 4,084 3,374
(=) Net Debt-to-Total
Capitalization (%) 33% 22%
-----------------------------------
-----------------------------------
2009
-----------------------------------
Q1 Q2 Q3 Q4 YTD
-----------------------------------
Reconciliation of
"Earnings (Loss) Before
Items" to Net earnings
(loss)
Net earnings (loss) ($) (45) 48 183 124 310
(-) Alternative fuel tax
credits ($) (28) (79) (116) (113) (336)
(+) Write-down of PP&E /
Impairment of PP&E
and intangible
assets ($) 21 - - 22 43
(+) Closure and
restructuring costs ($) 14 4 2 24 44
(-) (Gains) Losses on
sale of property,
plant and equipment
and business ($) - - (12) 3 (9)
(-) (Gain) Loss on debt
repurchase ($) - (6) - - (6)
(=) Earnings (Loss)
Before Items ($) (38) (33) 57 60 46
(/) Weighted avg. number
of common shares
outstanding
(diluted) (millions) 43.0 43.0 43.2 43.3 43.2
(=) Earnings (Loss)
Before Items per
diluted share ($) (0.88) (0.77) 1.32 1.39 1.06
Reconciliation of "EBITDA"
and "EBITDA Before Items"
to Net earnings (loss)
Net earnings (loss) ($) (45) 48 183 124 310
(+) Income tax expense
(benefit) ($) (8) 68 78 42 180
(+) Interest expense ($) 31 23 34 37 125
(=) Operating income
(loss) ($) (22) 139 295 203 615
(+) Depreciation and
amortization ($) 99 104 101 101 405
(+) Write-down of PP&E /
Impairment of
goodwill, PP&E and
intangible assets ($) 35 - - 27 62
(-) (Gains) Losses on
sale of property,
plant and equipment
and business ($) - - (12) 5 (7)
(equal) EBITDA ($) 112 243 384 336 1,075
(/) Sales ($) 1,302 1,319 1,440 1,404 5,465
(=) EBITDA
Margin (%) 9% 18% 27% 24% 20%
EBITDA ($) 112 243 384 336 1,075
(-) Alternative fuel tax
credits ($) (46) (131) (159) (162) (498)
(+) Closure and
restructuring costs ($) 24 6 4 29 63
(=) EBITDA Before
Items ($) 90 118 229 203 640
(/) Sales ($) 1,302 1,319 1,440 1,404 5,465
(=) EBITDA Margin
Before Items (%) 7% 9% 16% 14% 12%
Reconciliation of "Free
Cash Flow" to Cash flow
provided from operating
activities
Cash flow provided
from operating
activities ($) 57 306 244 185 792
(-) Additions to
property, plant and
equipment ($) (24) (18) (24) (40) (106)
(=) Free Cash
Flow ($) 33 288 220 145 686
"Net Debt-to-Total
Capitalization"
Computation
Bank indebtedness ($) 52 24 30 43
(+) Current portion of
long-term debt ($) 18 13 13 11
(+) Long-term debt ($) 2,195 2,162 1,971 1,701
(equal) Debt ($) 2,265 2,199 2,014 1,755
(-) Cash and cash
equivalents ($) (145) (381) (433) (324)
(=) Net
Debt ($) 2,120 1,818 1,581 1,431
(+) Shareholders' equity ($) 2,073 2,264 2,580 2,662
(=) Total
capitalization ($) 4,193 4,082 4,161 4,093
Net debt ($) 2,120 1,818 1,581 1,431
(/) Total capitalization ($) 4,193 4,082 4,161 4,093
(=) Net Debt-to-Total
Capitalization (%) 51% 45% 38% 35%
-----------------------------------
</pre>
<p/>
<p>"Earnings (Loss) Before Items", "Earnings (Loss) 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 (loss), 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.</p>
<p/>
<p/>
<pre>
Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2010
(In millions of dollars, unless otherwise noted)
</pre>
<p/>
<p>The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified 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.</p>
<p>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.</p>
<p/>
<pre>
------------------------------------------
Papers Paper Merchants
------------------------------------------
Q1'10 Q2'10 YTD Q1'10 Q2'10 YTD
------------------------------------------
Reconciliation of
Operating Income (Loss)
to "Operating Income
(Loss) Before Items"
Operating income
(loss) ($) 120 149 269 1 (1) -
(+) Alternative fuel
tax credits ($) (25) - (25) - - -
(+) Write-down of
property, plant
and equipment ($) 22 14 36 - - -
(+) Closure and
restructuring
costs ($) 20 5 25 - - -
(-) (Gains) Losses on
sale of property,
plant and
equipment and
business ($) - (3) (3) - - -
(=) Operating Income
(Loss) Before
Items ($) 137 165 302 1 (1) -
Reconciliation of
"Operating Income (Loss)
Before Items" to "EBITDA
Before Items"
Operating Income
(Loss) Before
Items ($) 137 165 302 1 (1) -
(+) Depreciation and
amortization ($) 96 95 191 1 1 2
(=) EBITDA Before
Items ($) 233 260 493 2 - 2
(/) Sales ($) 1,245 1,317 2,562 212 213 425
(=) EBITDA Margin
Before Items (%) 19% 20% 19% 1% - -
------------------------------------------
------------------------------------------
Wood Corporate
------------------------------------------
Q1'10 Q2'10 YTD Q1'10 Q2'10 YTD
------------------------------------------
Reconciliation of
Operating Income (Loss)
to "Operating Income
(Loss) Before Items"
Operating income
(loss) ($) (5) (49) (54) - (3) (3)
(+) Alternative fuel
tax credits ($) - - - - - -
(+) Write-down of
property, plant
and equipment ($) - - - - - -
(+) Closure and
restructuring
costs ($) - - - - - -
(-) (Gains) Losses on
sale of property,
plant and
equipment and
business ($) (1) 49 48 - 2 2
(=) Operating Income
(Loss) Before
Items ($) (6) - (6) - (1) (1)
Reconciliation of
"Operating Income (Loss)
Before Items" to "EBITDA
Before Items"
Operating Income
(Loss) Before
Items ($) (6) - (6) - (1) (1)
(+) Depreciation and
amortization ($) 5 5 10 - - -
(=) EBITDA Before
Items ($) (1) 5 4 - (1) (1)
(/) Sales ($) 67 83 150 - - -
(=) EBITDA Margin
Before Items (%) - 6% 3% - - -
------------------------------------------
</pre>
<p/>
<p>"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.</p>
<p/>
<p/>
<pre>
Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2009
(In millions of dollars, unless otherwise noted)
</pre>
<p/>
<p>The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified 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.</p>
<p>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.</p>
<p/>
<pre>
-----------------------------------
Papers
-----------------------------------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
-----------------------------------
Reconciliation of Operating
Income (Loss) to "Operating
Income (Loss) Before Items"
Operating income (loss) ($) (6) 150 294 212 650
(-) Alternative fuel tax
credits ($) (46) (131) (159) (162) (498)
(+) Write-down of property,
plant and equipment ($) 35 - - 27 62
(+) Closure and restructuring
costs ($) 22 4 4 22 52
(-) (Gains) Losses on sale of
property, plant and
equipment ($) - - (1) 5 4
(=) Operating Income
(Loss) Before Items ($) 5 23 138 104 270
Reconciliation of "Operating
Income (Loss) Before Items" to
"EBITDA Before Items"
Operating Income (Loss)
Before Items ($) 5 23 138 104 270
(+) Depreciation and
amortization ($) 94 98 95 95 382
(=) EBITDA Before
Items ($) 99 121 233 199 652
(/) Sales ($) 1,106 1,127 1,211 1,188 4,632
(=) EBITDA Margin
Before Items (%) 9% 11% 19% 17% 14%
-----------------------------------
-----------------------------------
Paper Merchants
-----------------------------------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
-----------------------------------
Reconciliation of Operating
Income (Loss) to "Operating
Income (Loss) Before Items"
Operating income (loss) ($) 2 1 2 2 7
(-) Alternative fuel tax
credits ($) - - - - -
(+) Write-down of property,
plant and equipment ($) - - - - -
(+) Closure and restructuring
costs ($) - 1 - 1 2
(-) (Gains) Losses on sale of
property, plant and
equipment ($) - - - - -
(=) Operating Income
(Loss) Before Items ($) 2 2 2 3 9
Reconciliation of "Operating
Income (Loss) Before Items" to
"EBITDA Before Items"
Operating Income (Loss)
Before Items ($) 2 2 2 3 9
(+) Depreciation and
amortization ($) 1 1 1 - 3
(=) EBITDA Before
Items ($) 3 3 3 3 12
(/) Sales ($) 217 205 239 212 873
(=) EBITDA Margin
Before Items (%) 1% 1% 1% 1% 1%
-----------------------------------
-----------------------------------
Wood
-----------------------------------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
-----------------------------------
Reconciliation of Operating
Income (Loss) to "Operating
Income (Loss) Before Items"
Operating income (loss) ($) (18) (12) (1) (11) (42)
(-) Alternative fuel tax
credits ($) - - - - -
(+) Write-down of property,
plant and equipment ($) - - - - -
(+) Closure and restructuring
costs ($) 2 1 - 6 9
(-) (Gains) Losses on sale of
property, plant and
equipment ($) - - (8) - (8)
(=) Operating Income
(Loss) Before Items ($) (16) (11) (9) (5) (41)
Reconciliation of "Operating
Income (Loss) Before Items" to
"EBITDA Before Items"
Operating Income (Loss)
Before Items ($) (16) (11) (9) (5) (41)
(+) Depreciation and
amortization ($) 4 5 5 6 20
(=) EBITDA Before
Items ($) (12) (6) (4) 1 (21)
(/) Sales ($) 43 46 59 63 211
(=) EBITDA Margin
Before Items (%) - - - 2% -
-----------------------------------
-----------------------------------
Corporate
-----------------------------------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
-----------------------------------
Reconciliation of Operating
Income (Loss) to "Operating
Income (Loss) Before Items"
Operating income (loss) ($) - - - - -
(-) Alternative fuel tax
credits ($) - - - - -
(+) Write-down of property,
plant and equipment ($) - - - - -
(+) Closure and restructuring
costs ($) - - - - -
(-) (Gains) Losses on sale of
property, plant and
equipment ($) - - (3) - (3)
(=) Operating Income
(Loss) Before Items ($) - - (3) - (3)
Reconciliation of "Operating
Income (Loss) Before Items" to
"EBITDA Before Items"
Operating Income (Loss)
Before Items ($) - - (3) - (3)
(+) Depreciation and
amortization ($) - - - - -
(=) EBITDA Before
Items ($) - - (3) - (3)
(/) Sales ($) - - - - -
(=) EBITDA Margin
Before Items (%) - - - - -
-----------------------------------
</pre>
<p/>
<p>"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.</p>
<p/>
<p/>
<pre>
Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)
-----------------------------------
2010
-----------------------------------
Q1 Q2 YTD
-----------------------------------
Papers Segment
Sales ($) 1,245 1,317 2,562
Intersegment
sales - Papers ($) (62) (60) (122)
Operating income
(loss) ($) 120 149 269
Depreciation &
amortization ($) 96 95 191
Impairment and
write-down of PP&E ($) 22 14 36
Papers
Papers Production ('000 ST) 906 882 1,788
Papers Shipments ('000 ST) 960 891 1,851
Uncoated
freesheet ('000 ST) 925 889 1,814
Coated
groundwood ('000 ST) 35 2 37
Pulp
Pulp Shipments(a) ('000 ADMT) 388 486 874
Hardwood Kraft
Pulp (%) 40% 38% 39%
Softwood Kraft
Pulp (%) 49% 52% 51%
Fluff Pulp (%) 11% 10% 10%
Paper Merchants
Segment
Sales ($) 212 213 425
Operating income
(loss) ($) 1 (1) -
Depreciation &
amortization ($) 1 1 2
Wood Segment
Sales ($) 67 83 150
Intersegment
sales - Wood ($) (5) (6) (11)
Operating loss ($) (5) (49) (54)
Depreciation &
amortization ($) 5 5 10
Lumber Production (Millions FBM) 172 165 337
Lumber Shipments (Millions FBM) 164 187 351
Average Exchange Rates CAN 1.041 1.028 1.034
US 0.961 0.973 0.967
-----------------------------------
-----------------------------------
2009
-----------------------------------
Q1 Q2 Q3 Q4 YTD
-----------------------------------
Papers Segment
Sales ($) 1,106 1,127 1,211 1,188 4,632
Intersegment
sales - Papers ($) (60) (55) (63) (53) (231)
Operating income
(loss) ($) (6) 150 294 212 650
Depreciation &
amortization ($) 94 98 95 95 382
Impairment and
write-down of PP&E ($) 35 - - 27 62
Papers
Papers Production ('000 ST) 869 912 920 903 3,604
Papers Shipments ('000 ST) 913 929 972 943 3,757
Uncoated
freesheet ('000 ST) 887 901 939 890 3,617
Coated
groundwood ('000 ST) 26 28 33 53 140
Pulp
Pulp Shipments(a) ('000 ADMT) 314 393 446 386 1,539
Hardwood Kraft
Pulp (%) 33% 33% 40% 35% 36%
Softwood Kraft
Pulp (%) 54% 54% 49% 54% 52%
Fluff Pulp (%) 13% 13% 11% 11% 12%
Paper Merchants
Segment
Sales ($) 217 205 239 212 873
Operating income
(loss) ($) 2 1 2 2 7
Depreciation &
amortization ($) 1 1 1 - 3
Wood Segment
Sales ($) 43 46 59 63 211
Intersegment
sales - Wood ($) (4) (4) (6) (6) (20)
Operating loss ($) (18) (12) (1) (11) (42)
Depreciation &
amortization ($) 4 5 5 6 20
Lumber Production (Millions FBM) 121 131 147 161 560
Lumber Shipments (Millions FBM) 125 135 153 161 574
Average Exchange Rates CAN 1.245 1.167 1.097 1.056 1.142
US 0.803 0.857 0.911 0.947 0.876
-----------------------------------
(a) Figures are gross of market pulp purchased from other producers on
the open market for some of our paper making operations. Pulp
shipments represents the amount of pulp produced in excess of our
internal requirement.
Note: the term "ST" refers to a short ton, the term "ADMT" refers to
an air dry metric ton, and the term "FBM" refers to foot board
measure.
For further information: Media and Investor Relations: Pascal Bossé, Vice-President, Corporate Communications and Investor Relations, Tel.: 514-848-5938
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