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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