Domtar Corporation reports preliminary third quarter 2009 financial results
Stronger pulp and paper volumes and better pulp prices benefit results
(All financial information is in U.S. dollars, and all earnings (loss)
per share results are diluted, unless otherwise noted.)
- Net earnings of $4.24 per share, earnings before items(1) of $1.32 per
share
- Free cash flow(1) of $220 million
- Lack-of-order downtime and machine slowdowns totaling 101 thousand tons
of paper
TICKER SYMBOL
UFS (NYSE, TSX)
</pre>
<p/>
<p><location>MONTREAL</location>, <chron>Oct. 30</chron> /CNW Telbec/ - Domtar Corporation (NYSE/TSX: UFS) today reported net earnings of <money>$183 million</money> (<money>$4.24</money> per share) for the third quarter of 2009 compared to net earnings of <money>$48 million</money> (<money>$1.12</money> per share) for the second quarter of 2009 and net earnings of <money>$43 million</money> (<money>$1.00</money> per share) for the third quarter of 2008. Sales for the third quarter of 2009 amounted to <money>$1.4 billion</money>. Excluding items(1) listed below, the Company earned <money>$57 million</money> (<money>$1.32</money> per share(1)) for the third quarter of 2009 compared to a loss of <money>$33 million</money> (<money>$0.76</money> per share(1)) for the second quarter of 2009 and earnings of <money>$51 million</money> (<money>$1.19</money> per share(1)) for the third quarter of 2008.</p>
<p/>
<pre>
Third quarter 2009 items:
-------------------------
- Refundable excise tax credit for the production and use of alternative
bio fuel mixtures of $159 million ($116 million after tax);
- Gains on sale of property, plant and equipment of $12 million
($12 million after tax); and
- Closure and restructuring costs of $4 million ($2 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).
Third quarter 2008 items:
-------------------------
- Costs of $10 million ($6 million after tax) related to synergies and
integration; and
- Closure and restructuring costs of $3 million ($2 million after tax).
</pre>
<p/>
<p>"All of our businesses posted improved profitability, most notably in pulp which benefited from higher prices, better demand and lower downtime costs due to the restart of our Woodland and Dryden pulp mills. In our paper business, market conditions improved slightly quarter-over-quarter, as we had better shipments while taking the same level of lack-of-order downtime as in the second quarter," said John D. Williams, President and Chief Executive Officer.</p>
<p>"Our initiatives to reduce working capital and improve procurement spending and the sustained focus of our employees on customers, costs, and cash have contributed to generating a strong free cash flow during the quarter. Operational performance and debt repayment remain our priority. The recently announced closure of fine paper capacity and repurposing of the assets at the Plymouth mill is part of our strategy to balance our supply with customer demand and optimize the use of our assets," added <person>Mr. Williams</person>.</p>
<p/>
<p>SEGMENT REVIEW</p>
<p/>
<p>Papers</p>
<p/>
<p>Operating income before items(1) was <money>$138 million</money> in the third quarter of 2009 compared to operating income before items(1) of <money>$23 million</money> in the second quarter of 2009. Depreciation and amortization totaled <money>$95 million</money> in the third quarter of 2009. When compared to the second quarter of 2009, paper shipments increased 5% while pulp shipments increased 13%. The shipments-to-production ratio for papers was 106% in the third quarter of 2009, compared to 102% in the second quarter of 2009. Paper and pulp inventories were lowered by 57,000 tons and 29,000 metric tons, respectively, at the end of September when compared to end of June levels.</p>
<p>The increase in operating income before items(1) in the third quarter of 2009 was the result of higher paper and pulp shipments, higher average selling prices for pulp, and lower materials costs. These factors were partially offset by lower average selling prices for paper and the impact of an unfavorable exchange rates including hedging.</p>
<p/>
<pre>
(In millions of dollars) 3Q 2009 2Q 2009
----------------------------------------------- ---------------------
Sales $1,211 $1,127
Operating income $294 $150
Operating income before items(1) $138 $23
Depreciation and amortization $95 $98
</pre>
<p/>
<p>Paper Merchants</p>
<p/>
<p>Operating income before items(1) was <money>$2 million</money> in the third quarter of 2009 compared to operating income before items(1) of <money>$2 million</money> in the second quarter of 2009. Depreciation and amortization was <money>$1 million</money> in the third quarter of 2009. Deliveries increased 20% when compared to the second quarter. Higher deliveries and lower costs were offset by lower prices.</p>
<p/>
<pre>
(In millions of dollars) 3Q 2009 2Q 2009
----------------------------------------------- ---------------------
Sales $239 $205
Operating income $2 $1
Operating income before items(1) $2 $2
Depreciation and amortization $1 $1
</pre>
<p/>
<p>Wood</p>
<p/>
<p>Operating loss before items(1) was <money>$9 million</money> in the third quarter of 2009, compared to operating loss before items(1) of <money>$11 million</money> in the second quarter of 2009. Depreciation and amortization totaled <money>$5 million</money> in the third quarter of 2009. When compared to the second quarter of 2009, lumber shipments increased 13%.</p>
<p>The decrease in operating loss before items(1) in the third quarter of 2009 was primarily the result of higher selling prices and higher shipments. These factors were partially offset by the impact of an unfavorable exchange rate including hedging.</p>
<p/>
<pre>
(In millions of dollars) 3Q 2009 2Q 2009
----------------------------------------------- ---------------------
Sales $59 $46
Operating loss ($1) ($12)
Operating loss before items(1) ($9) ($11)
Depreciation and amortization $5 $5
</pre>
<p/>
<p>LIQUIDITY AND CAPITAL</p>
<p/>
<p>Cash flow provided from operating activities amounted to <money>$244 million</money> and free cash flow(1) amounted to <money>$220 million</money> in the third quarter of 2009. Domtar's net debt-to-total capitalization ratio(1) stood at 38% at <chron>September 30, 2009</chron> compared to 50% at <chron>December 31, 2008</chron>. Amounts drawn on the off balance sheet receivables securitization program are unchanged since <chron>June 30</chron> and stood at <money>$20 million</money> at the end of September.</p>
<p>Domtar Corporation has been allocated CDN$143 million through the Pulp and Paper Green Transformation Program announced by the Government of <location>Canada</location>. The funds are to be spent on capital projects to improve energy efficiency and environmental performance in our Canadian pulp and paper mills. The investments must be made before the expiration of the program on <chron>March 31, 2012</chron>, and all projects are subject to the approval of the Government of <location>Canada</location>.</p>
<p/>
<p>OUTLOOK</p>
<p/>
<p>For the fourth quarter, we expect lower paper volumes due to the seasonality of our business as well as higher costs due to planned maintenance shutdowns when compared to the third quarter. The strengthening of the Canadian dollar will also negatively impact the profitability of our Canadian mills. However, we expect our Papers segment to benefit from recently announced price increases implemented in the fourth quarter. Inventory levels remain lean and Domtar will continue to balance its production with customer demand.</p>
<p/>
<p>EARNINGS CONFERENCE CALL</p>
<p/>
<p>The Company will hold a conference call today at <chron>11:00 a.m. (ET</chron>) to discuss its third quarter 2009 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 - <location>North America</location>) 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/>
<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 <location>North America</location> 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, Husky(R) 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. Domtar also produces lumber and other specialty and industrial wood products. The Company employs nearly 10,500 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 news 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 Form 10-K filed with the SEC as periodically updated by subsequently filed Form 10-Q's. 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 Nine Nine
months months months months
ended ended ended ended
September September September September
30 28 30 28
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
---------------(Unaudited)---------------
$ $ $ $
Selected Segment Information
Sales
Papers 1,211 1,364 3,444 4,200
Paper Merchants 239 257 661 762
Wood 59 76 148 209
-------------------------------------------------------------------------
Total for reportable segments 1,509 1,697 4,253 5,171
Intersegment sales - Papers (63) (64) (178) (220)
Intersegment sales - Wood (6) (8) (14) (22)
-------------------------------------------------------------------------
Consolidated sales 1,440 1,625 4,061 4,929
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Depreciation and amortization
Papers 95 111 287 331
Paper Merchants 1 1 3 2
Wood 5 7 14 20
-------------------------------------------------------------------------
Total for reportable segments 101 119 304 353
Write-down of property, plant
and equipment - Papers - - 35 -
-------------------------------------------------------------------------
Consolidated depreciation and
amortization and write-down of
property, plant and equipment 101 119 339 353
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating income (loss)
Papers 294 118 438 324
Paper Merchants 2 1 5 6
Wood (1) (11) (31) (45)
-------------------------------------------------------------------------
Total for reportable segments 295 108 412 285
Corporate - - - (3)
-------------------------------------------------------------------------
Consolidated operating income 295 108 412 282
Interest expense 34 35 88 111
-------------------------------------------------------------------------
Earnings before income taxes 261 73 324 171
Income tax expense 78 30 138 68
-------------------------------------------------------------------------
Net earnings 183 43 186 103
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per common share (in dollars)
Net earnings
Basic 4.26 1.00 4.33 2.40
Diluted 4.24 1.00 4.32 2.40
Weighted average number of
common and exchangeable
shares outstanding (millions)
Basic 43.0 43.0 43.0 43.0
Diluted 43.2 43.0 43.1 43.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash flows provided from
operating activities 244 131 607 271
Additions to property, plant
and equipment 24 49 66 114
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
Consolidated Statements of Earnings
(In millions of dollars, unless otherwise noted)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30 28 30 28
-------------------------------------------------------------------------
2009 2008 2009 2008
---------------(Unaudited)---------------
$ $ $ $
--------- --------
Sales 1,440 1,625 4,061 4,929
Operating expenses
Cost of sales, excluding
depreciation and amortization 1,124 1,293 3,363 3,971
Depreciation and amortization 101 119 304 353
Selling, general and
administrative 85 99 254 310
Write-down of property, plant
and equipment - - 35 -
Closure and restructuring
costs 4 3 34 15
Other operating (income)
expense (169) 3 (341) (2)
-------------------------------------------------------------------------
1,145 1,517 3,649 4,647
-------------------------------------------------------------------------
Operating income 295 108 412 282
Interest expense 34 35 88 111
-------------------------------------------------------------------------
Earnings before income taxes 261 73 324 171
Income tax expense 78 30 138 68
-------------------------------------------------------------------------
Net earnings 183 43 186 103
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per common share (in dollars)
Net earnings
Basic 4.26 1.00 4.33 2.40
Diluted 4.24 1.00 4.32 2.40
Weighted average number of
common and exchangeable shares
outstanding (millions)
Basic 43.0 43.0 43.0 43.0
Diluted 43.2 43.0 43.1 43.0
--------- --------
Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
September December
30 31
-------------------------------------------------------------------------
2009 2008
------(Unaudited)------
$ $
----------
Assets
Current assets
Cash and cash equivalents 433 16
Receivables, less allowances of $8 and $11 620 477
Inventories 765 963
Prepaid expenses 49 27
Income and other taxes receivable 233 56
Deferred income taxes 121 116
-------------------------------------------------------------------------
Total current assets 2,221 1,655
Property, plant and equipment, at cost 9,459 8,963
Accumulated depreciation (5,267) (4,662)
-------------------------------------------------------------------------
Net property, plant and equipment 4,192 4,301
Intangible assets, net of amortization 83 81
Other assets 64 67
-------------------------------------------------------------------------
Total assets 6,560 6,104
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Bank indebtedness 30 43
Trade and other payables 653 646
Income and other taxes payable 35 36
Long-term debt due within one year 13 18
-------------------------------------------------------------------------
Total current liabilities 731 743
Long-term debt 1,971 2,110
Deferred income taxes and other 941 824
Other liabilities and deferred credits 337 284
Shareholders' equity
Common stock - 5
Exchangeable shares 85 138
Additional paid-in capital 2,807 2,743
Accumulated deficit (340) (526)
Accumulated other comprehensive income (loss) 28 (217)
-------------------------------------------------------------------------
Total shareholders' equity 2,580 2,143
-------------------------------------------------------------------------
Total liabilities and shareholders' equity 6,560 6,104
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nine Nine
months months
ended ended
September September
30 28
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
------(Unaudited)------
$ $
Operating activities
----------
Net earnings 186 103
Adjustments to reconcile net earnings to
cash flows from operating activities
Depreciation and amortization 304 353
Deferred income taxes 122 46
Write-down of property, plant and equipment 35 -
Gain on repurchase of long-term debt (12) -
Net gains on disposals of property, plant
and equipment (12) (3)
Stock-based compensation expense 6 13
Gain on sale of trademarks - (6)
Other 8 8
Changes in assets and liabilities
Receivables (141) (84)
Inventories 234 (68)
Prepaid expenses (2) (26)
Trade and other payables 25 4
Income and other taxes (172) (1)
Difference between employer pension and other
post-retirement expense and contributions 10 (52)
Other assets and other liabilities 16 (16)
-------------------------------------------------------------------------
Cash flows provided from operating activities 607 271
-------------------------------------------------------------------------
Investing activities
Additions to property, plant and equipment (66) (114)
Proceeds from disposals of property, plant
and equipment 16 24
Proceeds from sale of trademarks - 6
Business acquisition - (12)
-------------------------------------------------------------------------
Cash flows used for investing activities (50) (96)
-------------------------------------------------------------------------
Financing activities
Net change in bank indebtedness (13) (27)
Change of revolving bank credit facility (60) (50)
Issuance of long-term debt 385 -
Repayment of long-term debt (451) (41)
Debt issue and tender offer costs (14) -
-------------------------------------------------------------------------
Cash flows used for financing activities (153) (118)
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 404 57
Translation adjustments related to cash and
cash equivalents 13 (1)
Cash and cash equivalents at beginning of period 16 71
-------------------------------------------------------------------------
Cash and cash equivalents at end of period 433 127
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information
Net cash payments for:
Interest 88 81
Income taxes (refund) paid (18) 46
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Domtar Corporation
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," "EBITDA," "EBITDA 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 typifying the Net earnings (loss) reported under U.S. GAAP. 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 from operating activities are the most directly comparable GAAP measures.</p>
<p/>
<pre>
---------------------------------------
2009
---------------------------------------
--------
Q1 Q2 Q3 Q4 YTD
---------------------------------------
Reconciliation of
"Earnings (Loss)
Before Items" to
Net earnings (loss)
Net earnings (loss) ($) (45) 48 183 186
(-) Alternative fuel tax
credits ($) (28) (79) (116) (223)
(-) Gains on sale of
property, plant and
equipment ($) (12) (12)
(+) Closure and
restructuring costs ($) 14 4 2 20
(-) Gain on debt
repurchase ($) (6) (6)
(+) Write-down of PP&E /
Impairment of PP&E
and intangible
assets ($) 21 21
(+) Impairment of
goodwill ($)
(+) Valuation allowance
on Canadian
deferred income
tax assets ($)
(+) Costs related to
synergies,
integration and
optimization ($)
(-) Reversal of a
provision for
unfavorable contract ($)
(-) Gain related to the
sale of trademarks ($)
(=) Earnings (Loss)
Before Items ($) (38) (33) 57 (14)
(/) Weighted avg. number
of common shares
outstanding
(diluted) (millions) 43.0 43.0 43.2 43.1
(=) Earnings (Loss)
Before Items per
diluted share ($) (0.88) (0.76) 1.32 (0.32)
Reconciliation of
"EBITDA" and "EBITDA
Before Items" to
Net earnings (loss)
Net earnings (loss) ($) (45) 48 183 186
(+) Income tax expense
(benefit) ($) (8) 68 78 138
(+) Interest expense ($) 31 23 34 88
(=) Operating income
(loss) ($) (22) 139 295 412
(+) Depreciation and
amortization ($) 99 104 101 304
(+) Write-down of PP&E /
Impairment of
goodwill, PP&E and
intangible assets ($) 35 35
(equal) EBITDA ($) 112 243 396 751
(-) Alternative fuel
tax credits ($) (46) (131) (159) (336)
(-) Gains on sale of
property, plant
and equipment ($) (12) (12)
(+) Closure and
restructuring
costs ($) 24 6 4 34
(-) Reversal of a
provision for
unfavorable
contract ($)
(+) Costs related to
synergies,
integration and
optimization ($)
(-) Gain related to the
sale of trademarks ($)
(=) EBITDA
Before Items ($) 90 118 229 437
Reconciliation of "Free
Cash Flow" to Cash flow
from operating activities
Cash flow provided
from operating
activities ($) 57 306 244 607
(-) Additions to
property, plant
and equipment ($) (24) (18) (24) (66)
(=) Free Cash
Flow ($) 33 288 220 541
Cash received from
alternative fuel
tax credits ($) 137 3 140
"Net Debt-to-Total
Capitalization"
Computation
Bank indebtedness ($) 52 24 30
(+) Current portion of
long-term debt ($) 18 13 13
(+) Long-term debt ($) 2,195 2,162 1,971
(-) Cash and cash
equivalents ($) (145) (381) (433)
(=) Net Debt ($) 2,120 1,818 1,581
(+) Shareholders'
equity ($) 2,073 2,264 2,580
(=) Total
capitalization ($) 4,193 4,082 4,161
Net debt ($) 2,120 1,818 1,581
(/) Total
capitalization ($) 4,193 4,082 4,161
(=) Net
Debt-to-Total
Capitalization (%) 51% 45% 38%
--------
---------------------------------------
---------------------------------------
2008
---------------------------------------
--------
Q1 Q2 Q3 Q4 YTD
---------------------------------------
Reconciliation of
"Earnings (Loss)
Before Items" to
Net earnings (loss) 36 24 43 (676) (573)
Net earnings (loss) ($)
(-) Alternative fuel tax
credits ($)
(-) Gains on sale of
property, plant and
equipment ($)
(+) Closure and
restructuring costs ($) 1 7 2 18 28
(-) Gain on debt
repurchase ($) (8) (8)
(+) Write-down of PP&E /
Impairment of PP&E
and intangible
assets ($) 270 270
(+) Impairment of
goodwill ($) 321 321
(+) Valuation allowance
on Canadian
deferred income
tax assets ($) 52 52
(+) Costs related to
synergies,
integration and
optimization ($) 5 5 6 3 19
(-) Reversal of a
provision for
unfavorable contract ($) (17) (17)
(-) Gain related to the
sale of trademarks ($) (4) (4)
(=) Earnings (Loss)
Before Items ($) 25 32 51 (20) 88
(/) Weighted avg. number
of common shares
outstanding
(diluted) (millions) 43.0 43.0 43.0 43.0 43.0
(=) Earnings (Loss)
Before Items per
diluted share ($) 0.58 0.74 1.19 (0.46) 2.05
Reconciliation of
"EBITDA" and "EBITDA
Before Items" to
Net earnings (loss)
Net earnings (loss) ($) 36 24 43 (676) (573)
(+) Income tax expense
(benefit) ($) 19 19 30 (65) 3
(+) Interest expense ($) 39 37 35 22 133
(=) Operating income
(loss) ($) 94 80 108 (719) (437)
(+) Depreciation and
amortization ($) 116 118 119 110 463
(+) Write-down of PP&E /
Impairment of
goodwill, PP&E and
intangible assets ($) 708 708
(equal) EBITDA ($) 210 198 227 99 734
(-) Alternative fuel
tax credits ($)
(-) Gains on sale of
property, plant
and equipment ($)
(+) Closure and
restructuring
costs ($) 1 11 3 28 43
(-) Reversal of a
provision for
unfavorable
contract ($) (23) (23)
(+) Costs related to
synergies,
integration and
optimization ($) 8 9 10 5 32
(-) Gain related to the
sale of trademarks ($) (6) (6)
(=) EBITDA Before
Items ($) 196 212 240 132 780
Reconciliation of "Free
Cash Flow" to Cash flow
from operating activities
Cash flow provided
from operating
activities ($) 27 113 131 (74) 197
(-) Additions to
property, plant
and equipment ($) (29) (36) (49) (49) (163)
(=) Free Cash
Flow ($) (2) 77 82 (123) 34
Cash received from
alternative fuel
tax credits ($)
"Net Debt-to-Total
Capitalization"
Computation
Bank indebtedness ($) 86 38 36 43
(+) Current portion of
long-term debt ($) 17 19 19 18
(+) Long-term debt ($) 2,155 2,122 2,118 2,110
(-) Cash and cash
equivalents ($) (57) (61) (127) (16)
(=) Net Debt ($) 2,201 2,118 2,046 2,155
(+) Shareholders'
equity ($) 3,172 3,217 3,194 2,143
(=) Total
capitalization ($) 5,373 5,335 5,240 4,298
Net debt ($) 2,201 2,118 2,046 2,155
(/) Total
capitalization ($) 5,373 5,335 5,240 4,298
(=) Net Debt-to-Total
Capitalization (%) 41% 40% 39% 50%
--------
---------------------------------------
</pre>
<p/>
<p>"Earnings (Loss) Before Items," "EBITDA," "EBITDA 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/>
<pre>
Domtar Corporation
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 Before Items" and "EBITDA 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 Before Items" by excluding the pre-tax effect of items considered by management as not typifying the segment Operating income (loss) reported under U.S. GAAP. 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 to "Operating Income
Before Items"
Operating income
(loss) ($) (6) 150 294 438
(-) Alternative fuel
tax credits ($) (46) (131) (159) (336)
(+) Closure and
restructuring costs ($) 22 4 4 30
(-) Gains on sale of
property, plant and
equipment ($) (1) (1)
(+) Write-down of
property, plant and
equipment ($) 35 35
(=) Operating Income
Before Items ($) 5 23 138 166
Reconciliation of
"Operating Income
Before Items" to "EBITDA
Before Items"
Operating Income
Before Items ($) 5 23 138 166
(+) Depreciation and
amortization ($) 94 98 95 287
(=) EBITDA Before
Items ($) 99 121 233 453
--------
---------------------------------------
---------------------------------------
Paper Merchants
---------------------------------------
--------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating Income
Before Items"
Operating income
(loss) ($) 2 1 2 5
(-) Alternative fuel
tax credits ($)
(+) Closure and
restructuring costs ($) 1 1
(-) Gains on sale of
property, plant and
equipment ($)
(+) Write-down of
property, plant and
equipment ($)
(=) Operating Income
Before Items ($) 2 2 2 6
Reconciliation of
"Operating Income
Before Items" to "EBITDA
Before Items"
Operating Income
Before Items ($) 2 2 2 6
(+) Depreciation and
amortization ($) 1 1 1 3
(=) EBITDA Before
Items ($) 3 3 3 9
--------
---------------------------------------
---------------------------------------
Wood
---------------------------------------
--------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating Income
Before Items"
Operating income
(loss) ($) (18) (12) (1) (31)
(-) Alternative fuel
tax credits ($)
(+) Closure and
restructuring costs ($) 2 1 3
(-) Gains on sale of
property, plant and
equipment ($) (8) (8)
(+) Write-down of
property, plant and
equipment ($)
(=) Operating Income
Before Items ($) (16) (11) (9) (36)
Reconciliation of
"Operating Income
Before Items" to "EBITDA
Before Items"
Operating Income
Before Items ($) (16) (11) (9) (36)
(+) Depreciation and
amortization ($) 4 5 5 14
(=) EBITDA Before
Items ($) (12) (6) (4) (22)
--------
---------------------------------------
---------------------------------------
Corporate
---------------------------------------
--------
Q1'09 Q2'09 Q3'09 Q4'09 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating Income
Before Items"
Operating income
(loss) ($)
(-) Alternative fuel
tax credits ($)
(+) Closure and
restructuring costs ($)
(-) Gains on sale of
property, plant and
equipment ($) (3) (3)
(+) Write-down of
property, plant and
equipment ($)
(=) Operating Income
Before Items ($) (3) (3)
Reconciliation of
"Operating Income
Before Items" to "EBITDA
Before Items"
Operating Income
Before Items ($) (3) (3)
(+) Depreciation and
amortization ($)
(=) EBITDA Before
Items ($) (3) (3)
--------
---------------------------------------
</pre>
<p/>
<p>"Operating Income Before Items" and "EBITDA 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/>
<pre>
Domtar Corporation
Reconciliation of Non-GAAP Financial Measures - By Segment 2008
(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 Before Items" and "EBITDA 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 Before Items" by excluding the pre-tax effect of items considered by management as not typifying the segment Operating income (loss) reported under U.S. GAAP. 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
---------------------------------------
--------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating
Income Before Items"
Operating income
(loss) ($) 114 92 118 (693) (369)
(+) Impairment and
write-down of
goodwill, PP&E
and intangible
assets ($) 694 694
(+) Closure and
restructuring costs ($) 1 11 3 23 38
(+) Costs related to
synergies,
integration and
optimization ($) 8 9 10 5 32
(-) Reversal of a
provision for
unfavorable
contract ($) (23) (23)
(-) Gain related to the
sale of trademarks ($) (6) (6)
(=) Operating Income
Before Items ($) 100 106 131 29 366
Reconciliation of
"Operating Income Before
Items" to "EBITDA Before
Items"
Operating Income
Before Items ($) 100 106 131 29 366
(+) Depreciation and
amortization ($) 110 110 111 104 435
(=) EBITDA Before
Items ($) 210 216 242 133 801
--------
---------------------------------------
---------------------------------------
Paper Merchants
---------------------------------------
--------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating
Income Before Items"
Operating income
(loss) ($) 3 2 1 2 8
(+) Impairment and
write-down of
goodwill, PP&E
and intangible
assets ($)
(+) Closure and
restructuring costs ($)
(+) Costs related to
synergies,
integration and
optimization ($)
(-) Reversal of a
provision for
unfavorable
contract ($)
(-) Gain related to the
sale of trademarks ($)
(=) Operating Income
Before Items ($) 3 2 1 2 8
Reconciliation of
"Operating Income Before
Items" to "EBITDA Before
Items"
Operating Income
Before Items ($) 3 2 1 2 8
(+) Depreciation and
amortization ($) 1 1 1 3
(=) EBITDA Before
Items ($) 3 3 2 3 11
--------
---------------------------------------
---------------------------------------
Wood
---------------------------------------
--------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating
Income Before Items"
Operating income
(loss) ($) (22) (12) (11) (28) (73)
(+) Impairment and
write-down of
goodwill, PP&E
and intangible
assets ($) 14 14
(+) Closure and
restructuring costs ($) 5 5
(+) Costs related to
synergies,
integration and
optimization ($)
(-) Reversal of a
provision for
unfavorable
contract ($)
(-) Gain related to the
sale of trademarks ($)
(=) Operating Income
Before Items ($) (22) (12) (11) (9) (54)
Reconciliation of
"Operating Income Before
Items" to "EBITDA Before
Items"
Operating Income
Before Items ($) (22) (12) (11) (9) (54)
(+) Depreciation and
amortization ($) 6 7 7 5 25
(=) EBITDA Before
Items ($) (16) (5) (4) (4) (29)
--------
---------------------------------------
---------------------------------------
Corporate
---------------------------------------
--------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
Reconciliation of Operating
income to "Operating
Income Before Items"
Operating income
(loss) ($) (1) (2) (3)
(+) Impairment and
write-down of
goodwill, PP&E
and intangible
assets ($)
(+) Closure and
restructuring costs ($)
(+) Costs related to
synergies,
integration and
optimization ($)
(-) Reversal of a
provision for
unfavorable
contract ($)
(-) Gain related to the
sale of trademarks ($)
(=) Operating Income
Before Items ($) (1) (2) (3)
Reconciliation of
"Operating Income Before
Items" to "EBITDA Before
Items"
Operating Income
Before Items ($) (1) (2) (3)
(+) Depreciation and
amortization ($)
(=) EBITDA Before
Items ($) (1) (2) (3)
--------
---------------------------------------
Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)
---------------------------------------
2009
---------------------------------------
Q1 Q2 Q3 Q4 YTD
---------------------------------------
Papers Segment
Sales ($) 1,106 1,127 1,211 3,444
Intersegment sales
- Papers ($) (60) (55) (63) (178)
Operating income (loss) ($) (6) 150 294 438
Depreciation &
amortization ($) 94 98 95 287
Impairment and write-down
of goodwill and PP&E ($) 35 35
Papers
Papers Production ('000 ST) 869 912 920 2,701
Papers Shipments ('000 ST) 913 929 972 2,814
Uncoated freesheet ('000 ST) 887 901 939 2,727
Coated groundwood ('000 ST) 26 28 33 87
Pulp
Pulp Shipments(a) ('000 ADMT) 314 393 446 1,153
Hardwood Kraft Pulp (%) 33% 33% 40% 36%
Softwood Kraft Pulp (%) 54% 54% 49% 52%
Fluff Pulp (%) 13% 13% 11% 12%
Paper Merchants Segment
Sales ($) 217 205 239 661
Operating income ($) 2 1 2 5
Depreciation &
amortization ($) 1 1 1 3
Wood Segment
Sales ($) 43 46 59 148
Intersegment sales
- Wood ($) (4) (4) (6) (14)
Operating loss ($) (18) (12) (1) (31)
Depreciation &
amortization ($) 4 5 5 14
Impairment of goodwill,
PP&E and intangible
assets ($)
Lumber
Production (Millions FBM) 121 131 147 399
Lumber
Shipments (Millions FBM) 125 135 153 413
Average Exchange Rates CAN 1.245 1.167 1.097 1.170
US 0.803 0.857 0.911 0.855
--------
---------------------------------------
---------------------------------------
2008
---------------------------------------
Q1 Q2 Q3 Q4 YTD
---------------------------------------
Papers Segment
Sales ($) 1,429 1,407 1,364 1,240 5,440
Intersegment sales
- Papers ($) (83) (73) (64) (56) (276)
Operating income (loss) ($) 114 92 118 (693) (369)
Depreciation &
amortization ($) 110 110 111 104 435
Impairment and write-down
of goodwill and PP&E ($) 694 694
Papers
Papers Production ('000 ST) 1,173 1,146 1,115 951 4,385
Papers Shipments ('000 ST) 1,205 1,137 1,079 985 4,406
Uncoated freesheet ('000 ST) 1,149 1,096 1,044 952 4,241
Coated groundwood ('000 ST) 56 41 35 33 165
Pulp
Pulp Shipments(a) ('000 ADMT) 347 347 325 353 1,372
Hardwood Kraft Pulp (%) 44% 43% 41% 37% 41%
Softwood Kraft Pulp (%) 47% 46% 47% 50% 48%
Fluff Pulp (%) 9% 11% 12% 13% 11%
Paper Merchants Segment
Sales ($) 262 243 257 228 990
Operating income ($) 3 2 1 2 8
Depreciation &
amortization ($) 1 1 1 3
Wood Segment
Sales ($) 63 70 76 59 268
Intersegment sales
- Wood ($) (6) (8) (8) (6) (28)
Operating loss ($) (22) (12) (11) (28) (73)
Depreciation &
amortization ($) 6 7 7 5 25
Impairment of goodwill,
PP&E and intangible
assets ($) 14 14
Lumber
Production (Millions FBM) 168 155 163 181 667
Lumber
Shipments (Millions FBM) 160 181 178 158 677
Average Exchange Rates CAN 1.004 1.010 1.042 1.212 1.067
US 0.996 0.990 0.960 0.825 0.937
--------
---------------------------------------
(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, (514) 848-5938
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