Domtar Corporation reports preliminary fourth quarter and fiscal year 2015 financial results

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

Strong shipments and a solid operational performance drive fourth quarter earnings improvement         
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).

• Fourth quarter 2015 net earnings of $0.91 per share; earnings before items¹ of $1.11 per share
• Paper shipments increased 2.3% when compared to the third quarter 2015
• Personal Care EBITDA¹ 23% higher when compared to the fourth quarter 2014

FORT MILL, SC, Feb. 5, 2016 /CNW Telbec/ - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $57 million ($0.91 per share) for the fourth quarter of 2015 compared to net earnings of $11 million ($0.17 per share) for the third quarter of 2015 and net earnings of $71 million ($1.10 per share) for the fourth quarter of 2014. Sales for the fourth quarter of 2015 were $1.3 billion.

Excluding items listed below, the Company had earnings before items¹ of $70 million ($1.11 per share) for the fourth quarter of 2015 compared to earnings before items¹ of $54 million ($0.86 per share) for the third quarter of 2015 and earnings before items¹ of $91 million ($1.41 per share) for the fourth quarter of 2014.

Fourth quarter 2015 items:

• Closure and restructuring costs of $1 million ($1 million after tax); and
• Impairment of property, plant & equipment of $20 million ($12 million after tax).

Third quarter 2015 items:

• Closure and restructuring costs of $1 million ($1 million after tax);
• Impairment of property, plant & equipment of $20 million ($12 million after tax); and
• Debt refinancing costs of $42 million ($30 million after tax).

Fourth quarter 2014 items:

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

FISCAL YEAR 2015 HIGHLIGHTS

For fiscal year 2015, net earnings amounted to $142 million ($2.24 per share) compared to net earnings of $431 million ($6.64 per share) for fiscal year 2014. The Company had earnings before items¹ of $211 million ($3.33 per share) for fiscal 2015 compared to earnings before items¹ of $234 million ($3.61 per share) for fiscal 2014. Sales amounted to $5.3 billion for fiscal year 2015.

Commenting on the full-year results, John D. Williams, President and Chief Executive Officer, said, "I am pleased with our full-year performance. Our businesses generated strong free cash flow, and we further advanced on our Personal Care growth plan with a number of important customer wins. Our solid performance enabled us to return cash to shareholders, manage our balance sheet to preserve financial flexibility and better position Domtar for sustainable, long-term growth.  Our business transformation is still underway, but our financial results are starting to show the benefits of investments we are making in our facilities, in our people, and in our future."

QUARTERLY REVIEW

"We had our best EBITDA performance of 2015 despite the impact of lower prices. Our pulp and paper shipments were strong, and our operations ran exceptionally well with productivity gains across the mill system," said John D. Williams, President and Chief Executive Officer. "Our average production costs continue to trend lower as we focus on taking measures to run our assets more efficiently and improve our manufacturing processes."

Mr. Williams added, "In Personal Care, momentum continues to build. We had our best sales quarter to date on a same-currency basis, and we delivered strong year-over-year EBITDA growth. We have made solid progress on capturing the benefits of cost savings from our new manufacturing platform while executing on our growth commitments with top-line benefits expected in 2016."

Operating income before items¹ was $115 million in the fourth quarter of 2015 compared to an operating income before items¹ of $82 million in the third quarter of 2015. Depreciation and amortization totaled $89 million in the fourth quarter of 2015.

(In millions of dollars)			4Q 2015			3Q 2015
Sales			$	1,314		$	1,292
Operating income (loss)
	Pulp and Paper segment			86			54
	Personal Care segment			16			18
	Corporate			(8)			(11)
	Total			94			61
Operating income before items^1				115			82
Depreciation and amortization				89			89

The increase in operating income before items¹ in the fourth quarter of 2015 was the result of lower costs for planned maintenance, higher volume, higher productivity, lower raw material costs, a favorable exchange rate and lower freight and other costs. These factors were partially offset by lower average selling prices and higher selling, general and administrative expense.

When compared to the third quarter of 2015, manufactured paper shipments were up 2.3% and pulp shipments increased 15.9%. The shipments-to-production ratio for paper was 95% in the fourth quarter of 2015, compared to 98% in the third quarter of 2015. Paper inventories increased by 41,000 tons and pulp inventories decreased by 21,000 metric tons in December when compared to September levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $137 million and capital expenditures were $87 million, resulting in free cash flow¹ of $50 million for the fourth quarter of 2015. Domtar's net debt-to-total capitalization ratio¹ stood at 30% at December 31, 2015 and at September 30, 2015.

OUTLOOK

In 2016, we expect our paper shipments to be in-line with market demand while pulp shipments should be higher due to the conversion of a paper machine to a fluff pulp line. We anticipate some volatility in softwood and fluff pulp markets due to the strengthening of the U.S. dollar and announced new capacity additions. Our 2016 results are expected to be negatively impacted by approximately $23 million, related to the fluff pulp conversion outage at our Ashdown mill. In Personal Care, new customer wins are expected to generate above-market revenue growth. Costs for raw materials are expected to marginally increase.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 11:00 a.m. (ET) to discuss its fourth quarter and fiscal 2015 financial results. Financial analysts are invited to participate in the call by dialing 1 [phone] (toll free - North America) or 1 [phone] (International) at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its first quarter 2016 earnings results on April 28, 2016, before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

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

__________________________

About Domtar 
Domtar is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. With approximately 9,850 employees serving more than 50 countries around the world, Domtar is driven by a commitment to turn sustainable wood fiber into useful products that people rely on every day. Domtar's annual sales are approximately $5.3 billion and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar's principal executive office is in Fort Mill, South Carolina. To learn more, visit www.domtar.com.

Forward-Looking Statements
Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under "Outlook," are "forward-looking statements." Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under "Risk Factors" in our Form 10-K for 2014 as filed with the SEC and as updated by subsequently filed Form 10-Q's. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

Domtar Corporation
Highlights
(In millions of dollars, unless otherwise noted)
			Three months ended		Three months ended		Twelve months ended		Twelve months ended
			December 31,		December 31,		December 31,		December 31,
			2015		2014		2015		2014
			(Unaudited)
			$		$		$		$
Selected Segment Information
Sales
		Pulp and Paper	1,110		1,160		4,458		4,674
		Personal Care	221		230		869		928
Total for reportable segments			1,331		1,390		5,327		5,602
		Intersegment sales	(17)		(11)		(63)		(39)
Consolidated sales			1,314		1,379		5,264		5,563
Depreciation and amortization and impairment and write-down of property, plant and equipment
		Pulp and Paper	73		78		297		319
		Personal Care	16		15		62		65
Total for reportable segments			89		93		359		384
		Impairment and write-down of property, plant and equipment - Pulp and Paper	20		4		77		4
Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment			109		97		436		388
Operating income (loss)^1
		Pulp and Paper	86		88		270		352
		Personal Care	16		11		61		49
		Corporate	(8)		(13)		(43)		(37)
Consolidated operating income			94		86		288		364
Interest expense, net			17		27		132		103
Earnings before income taxes			77		59		156		261
Income tax expense (benefit)			20		(12)		14		(170)
Net earnings			57		71		142		431
Per common share (in dollars)
	Net earnings
		Basic	0.91		1.10		2.24		6.65
		Diluted	0.91		1.10		2.24		6.64
Weighted average number of common shares outstanding (millions)
		Basic	62.8		64.3		63.3		64.8
		Diluted	62.9		64.4		63.4		64.9
Cash flows provided from operating activities			137		186		453		634
Additions to property, plant and equipment			87		79		289		236

¹ As a result of changes in the Company's organization structure, we have changed the way we allocate certain Corporate general and administrative costs to the segments. Further, certain Corporate costs not related to segment activities, as well as the mark-to-market impact on stock-based compensation awards, will be presented on the Corporate line. As a result, we have revised our 2014 segment disclosures to conform to our 2015 presentation. (Previously reported numbers for Operating income (loss) for the three and twelve months ended December 31, 2014 are as follows; Pulp and Paper: $76M and $323M, respectively, Personal Care: $12M and $54M, respectively, Corporate: $(2)M and $(13)M, respectively).

Domtar Corporation
Consolidated Statements of Earnings (In millions of dollars, unless otherwise noted)
				Three months ended		Three months ended		Twelve months ended		Twelve months ended
				December 31,		December 31,		December 31,		December 31,
				2015		2014		2015		2014
			(Unaudited)
				$		$		$	$
Sales				1,314		1,379		5,264		5,563
Operating expenses
		Cost of sales, excluding depreciation and amortization		1,007		1,080		4,147		4,396
		Depreciation and amortization		89		93		359		384
		Selling, general and administrative		100		103		394		416
		Impairment and write-down of property, plant and equipment		20		4		77		4
		Closure and restructuring costs		1		25		4		28
		Other operating loss (income), net		3		(12)		(5)		(29)
				1,220		1,293		4,976		5,199
Operating income				94		86		288		364
Interest expense, net				17		27		132		103
Earnings before income taxes				77		59		156		261
Income tax expense (benefit)				20		(12)		14		(170)
Net earnings				57		71		142		431
Per common share (in dollars)
	Net earnings
		Basic		0.91		1.10		2.24		6.65
		Diluted		0.91		1.10		2.24		6.64
Weighted average number of common shares outstanding (millions)
		Basic		62.8		64.3		63.3		64.8
		Diluted		62.9		64.4		63.4		64.9

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)
					December 31,		December 31,
					2015		2014
					(Unaudited)
Assets					$		$
Current assets
	Cash and cash equivalents				126		174
	Receivables, less allowances of $6 and $6				627		628
	Inventories				766		714
	Prepaid expenses				21		25
	Income and other taxes receivable				14		54
	Deferred income taxes				—		75
		Total current assets			1,554		1,670
Net property, plant and equipment					2,835		3,131
Goodwill					539		567
Intangible assets, net of amortization					601		661
Other assets					134		156
		Total assets			5,663		6,185
Liabilities and shareholders' equity
Current liabilities
	Bank indebtedness				—		10
	Trade and other payables				720		721
	Income and other taxes payable				27		26
	Long-term debt due within one year				41		169
		Total current liabilities			788		926
Long-term debt					1,219		1,181
Deferred income taxes and other					654		810
Other liabilities and deferred credits					350		378
Shareholders' equity
	Common stock				1		1
	Additional paid-in capital				1,966		2,012
	Retained earnings				1,186		1,145
	Accumulated other comprehensive loss				(501)		(268)
		Total shareholders' equity			2,652		2,890
			Total liabilities and shareholders' equity		5,663		6,185

Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)
				For the twelve months ended
				December 31, 2015		December 31, 2014
				(Unaudited)
				$		$
Operating activities
Net earnings				142		431
Adjustments to reconcile net earnings to cash flows from operating activities
		Depreciation and amortization		359		384
		Deferred income taxes and tax uncertainties		(56)		(201)
		Impairment and write-down of property, plant and equipment		77		4
		Net gains on disposal of property, plant and equipment		(15)		—
		Stock-based compensation expense		5		4
		Other		4		3
Changes in assets and liabilities, excluding the effects of acquisition of business
		Receivables		(22)		39
		Inventories		(84)		(29)
		Prepaid expenses		5		1
		Trade and other payables		—		(33)
		Income and other taxes		38		12
		Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense		(1)		16
		Other assets and other liabilities		1		3
	Cash flows provided from operating activities			453		634
Investing activities
Additions to property, plant and equipment				(289)		(236)
Proceeds from disposals of property, plant and equipment				36		1
Acquisition of business, net of cash acquired				—		(546)
Other				9		(5)
	Cash flows used for investing activities			(244)		(786)
Financing activities
Dividend payments				(100)		(84)
Stock repurchase				(50)		(38)
Net change in bank indebtedness				(11)		(6)
Change in revolving bank credit facility				50		(160)
Proceeds from receivables securitization facilities				—		90
Payments on receivables securitization facilities				—		(129)
Issuance of long-term debt				300		—
Repayment of long-term debt				(439)		(4)
Other				1		5
	Cash flows used for financing activities			(249)		(326)
Net decrease in cash and cash equivalents				(40)		(478)
Impact of foreign exchange on cash				(8)		(3)
Cash and cash equivalents at beginning of year				174		655
Cash and cash equivalents at end of year				126		174
Supplemental cash flow information
	Net cash payments for:
		Interest (including $40 million of redemption premiums in 2015)		133		92
		Income taxes paid, net		34		18

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures

(In millions of dollars, unless otherwise noted)

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

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

						2015										2014
						Q1		Q2		Q3		Q4		YTD		Q1		Q2		Q3		Q4		YTD
Reconciliation of "Earnings before items" to Net earnings
		Net earnings		($)		36		38		11		57		142		39		40		281		71		431
	(+)	Impairment and write-down of property, plant and equipment		($)		12		11		12		12		47		—		—		—		2		2
	(+)	Closure and restructuring costs		($)		1		1		1		1		4		1		—		2		18		21
	(-)	Net gains on disposal of property, plant and equipment		($)		(1)		(11)		—		—		(12)		—		—		—		—		—
	(+)	Impact of purchase accounting		($)		—		—		—		—		—		2		—		—		—		2
	(-)	Alternative fuel tax credits		($)		—		—		—		—		—		—		—		(18)		—		(18)
	(+)	Debt refinancing costs		($)		—		—		30		—		30		—		—		—		—		—
	(-)	Internal Revenue Service audit settlement items		($)		—		—		—		—		—		—		—		(204)		—		(204)
	(=)	Earnings before items		($)		48		39		54		70		211		42		40		61		91		234
	(/)	Weighted avg. number of common and exchangeable shares outstanding (diluted)		(millions)		63.9		63.7		63.0		62.9		63.4		65.0		65.1		64.9		64.4		64.9
	(=)	Earnings before items per diluted share		($)		0.75		0.61		0.86		1.11		3.33		0.65		0.61		0.94		1.41		3.61
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings
		Net earnings		($)		36		38		11		57		142		39		40		281		71		431
	(+)	Income tax expense (benefit)		($)		9		(1)		(14)		20		14		15		13		(186)		(12)		(170)
	(+)	Interest expense, net		($)		26		25		64		17		132		25		26		25		27		103
	(=)	Operating income		($)		71		62		61		94		288		79		79		120		86		364
	(+)	Depreciation and amortization		($)		90		91		89		89		359		99		96		96		93		384
	(+)	Impairment and write-down of property, plant and equipment		($)		19		18		20		20		77		—		—		—		4		4
	(-)	Net gains on disposal of property, plant and equipment		($)		(1)		(14)		—		—		(15)		—		—		—		—		—
	(=)	EBITDA		($)		179		157		170		203		709		178		175		216		183		752
	(/)	Sales		($)		1,348		1,310		1,292		1,314		5,264		1,394		1,385		1,405		1,379		5,563
	(=)	EBITDA margin		(%)		13%		12%		13%		15%		13%		13%		13%		15%		13%		14%
		EBITDA		($)		179		157		170		203		709		178		175		216		183		752
	(-)	Alternative fuel tax credits		($)		—		—		—		—		—		—		—		(18)		—		(18)
	(+)	Closure and restructuring costs		($)		1		1		1		1		4		1		—		2		25		28
	(+)	Impact of purchase accounting		($)		—		—		—		—		—		3		—		—		—		3
	(=)	EBITDA before items		($)		180		158		171		204		713		182		175		200		208		765
	(/)	Sales		($)		1,348		1,310		1,292		1,314		5,264		1,394		1,385		1,405		1,379		5,563
	(=)	EBITDA margin before items		(%)		13%		12%		13%		16%		14%		13%		13%		14%		15%		14%
Reconciliation of "Free cash flow" to Cash flow provided from operating activities
		Cash flow provided from operating activities		($)		127		122		67		137		453		141		104		203		186		634
	(-)	Additions to property, plant and equipment		($)		(70)		(66)		(66)		(87)		(289)		(45)		(56)		(56)		(79)		(236)
	(=)	Free cash flow		($)		57		56		1		50		164		96		48		147		107		398
"Net debt-to-total capitalization" computation
		Bank indebtedness		($)		6		1		1		—				8		15		3		10
	(+)	Long-term debt due within one year		($)		169		169		42		41				15		7		170		169
	(+)	Long-term debt		($)		1,179		1,178		1,245		1,219				1,490		1,410		1,202		1,181
	(=)	Debt		($)		1,354		1,348		1,288		1,260				1,513		1,432		1,375		1,360
	(-)	Cash and cash equivalents		($)		(183)		(207)		(128)		(126)				(130)		(85)		(134)		(174)
	(=)	Net debt		($)		1,171		1,141		1,160		1,134				1,383		1,347		1,241		1,186
	(+)	Shareholders' equity		($)		2,710		2,761		2,659		2,652				2,771		2,826		2,938		2,890
	(=)	Total capitalization		($)		3,881		3,902		3,819		3,786				4,154		4,173		4,179		4,076
		Net debt		($)		1,171		1,141		1,160		1,134				1,383		1,347		1,241		1,186
	(/)	Total capitalization		($)		3,881		3,902		3,819		3,786				4,154		4,173		4,179		4,076
	(=)	Net debt-to-total capitalization		(%)		30%		29%		30%		30%				33%		32%		30%		29%

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

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2015

(In millions of dollars, unless otherwise noted)

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

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

						Pulp and Paper										Personal Care										Corporate										Total
						Q1'15		Q2'15		Q3'15		Q4'15		YTD		Q1'15		Q2'15		Q3'15		Q4'15		YTD		Q1'15		Q2'15		Q3'15		Q4'15		YTD		Q1'15		Q2'15		Q3'15		Q4'15		YTD
Reconciliation of Operating income (loss)
to "Operating income (loss) before items"
		Operating income (loss)^(1)		($)		75		55		54		86		270		10		17		18		16		61		(14)		(10)		(11)		(8)		(43)		71		62		61		94		288
	(+)	Impairment and write-down of property, plant and equipment		($)		19		18		20		20		77		—		—		—		—		—		—		—		—		—		—		19		18		20		20		77
	(-)	Net gains on disposal of property, plant and equipment		($)		—		(14)		—		—		(14)		—		—		—		—		—		(1)		—		—		—		(1)		(1)		(14)		—		—		(15)
	(+)	Closure and restructuring costs		($)		—		1		1		1		3		1		—		—		—		1		—		—		—		—		—		1		1		1		1		4
	(=)	Operating income (loss) before items		($)		94		60		75		107		336		11		17		18		16		62		(15)		(10)		(11)		(8)		(44)		90		67		82		115		354
Reconciliation of "Operating income (loss)
before items" to "EBITDA before items"
		Operating income (loss) before items		($)		94		60		75		107		336		11		17		18		16		62		(15)		(10)		(11)		(8)		(44)		90		67		82		115		354
	(+)	Depreciation and amortization		($)		74		75		75		73		297		16		16		14		16		62		—		—		—		—		—		90		91		89		89		359
	(=)	EBITDA before items		($)		168		135		150		180		633		27		33		32		32		124		(15)		(10)		(11)		(8)		(44)		180		158		171		204		713
	(/)	Sales		($)		1,146		1,110		1,092		1,110		4,458		218		216		214		221		869		—		—		—		—		—		1,364		1,326		1,306		1,331		5,327
	(=)	EBITDA margin before items		(%)		15%		12%		14%		16%		14%		12%		15%		15%		14%		14%		—		—		—		—		—		13%		12%		13%		15%		13%

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

⁽¹⁾ As a result of changes in the Company's organization structure, we have changed the way we allocate certain Corporate general and administrative costs to the segments. Further, certain Corporate costs not related to segment activities, as well as the mark-to-market impact on stock-based compensation awards, will be presented on the Corporate line. As a result, we have revised our 2014 segment disclosures to conform to our 2015 presentation.  

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2014

(In millions of dollars, unless otherwise noted)

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

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

						Pulp and Paper										Personal Care^(1)										Corporate										Total
						Q1'14		Q2'14		Q3'14		Q4'14		YTD		Q1'14		Q2'14		Q3'14		Q4'14		YTD		Q1'14		Q2'14		Q3'14		Q4'14		YTD		Q1'14		Q2'14		Q3'14		Q4'14		YTD
Reconciliation of Operating income (loss)
to "Operating income (loss) before items"
		Operating income (loss)^(2)		($)		89		74		101		88		352		14		12		12		11		49		(24)		(7)		7		(13)		(37)		79		79		120		86		364
	(-)	Alternative fuel tax credits		($)		—		—		—		—		—		—		—		—		—		—		—		—		(18)		—		(18)		—		—		(18)		—		(18)
	(+)	Closure and restructuring costs		($)		—		—		2		25		27		1		—		—		—		1		—		—		—		—		—		1		—		2		25		28
	(+)	Impact of purchase accounting		($)		—		—		—		—		—		3		—		—		—		3		—		—		—		—		—		3		—		—		—		3
	(+)	Impairment and write-down of property,		($)		—		—		—		4		4		—		—		—		—		—		—		—		—		—		—		—		—		—		4		4
		plant and equipment
	(=)	Operating income (loss) before items		($)		89		74		103		117		383		18		12		12		11		53		(24)		(7)		(11)		(13)		(55)		83		79		104		115		381
Reconciliation of "Operating income (loss)
before items" to "EBITDA before items"
		Operating income (loss) before items		($)		89		74		103		117		383		18		12		12		11		53		(24)		(7)		(11)		(13)		(55)		83		79		104		115		381
	(+)	Depreciation and amortization		($)		83		79		79		78		319		16		17		17		15		65		—		—		—		—		—		99		96		96		93		384
	(=)	EBITDA before items		($)		172		153		182		195		702		34		29		29		26		118		(24)		(7)		(11)		(13)		(55)		182		175		200		208		765
	(/)	Sales		($)		1,168		1,160		1,186		1,160		4,674		233		234		231		230		928		—		—		—		—		—		1,401		1,394		1,417		1,390		5,602
	(=)	EBITDA margin before items		(%)		15%		13%		15%		17%		15%		15%		12%		13%		11%		13%		—		—		—		—		—		13%		13%		14%		15%		14%

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

⁽¹⁾ On January 2, 2014, the Company acquired 100% of the shares of Laboratorios Indas, S.A.U. in Spain.
⁽²⁾ As a result of changes in the Company's organization structure, we have changed the way we allocate certain Corporate general and administrative costs to the segments. Further, certain Corporate costs not related to segment activities, as well as the mark-to-market impact on stock-based compensation awards, will be presented on the Corporate line. As a result, we have revised our 2014 segment disclosures to conform to our 2015 presentation.

Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)
				2015									2014
				Q1	Q2	Q3	Q4	YTD	Q1	Q2	Q3	Q4	YTD
Pulp and Paper Segment
	Sales		($)	1,146	1,110	1,092	1,110	4,458	1,168	1,160	1,186	1,160	4,674
	Operating income^(a)		($)	75	55	54	86	270	89	74	101	88	352
	Depreciation and amortization		($)	74	75	75	73	297	83	79	79	78	319
	Impairment and write-down of property, plant and equipment		($)	19	18	20	20	77	—	—	—	4	4
	Paper
	Paper Production		('000 ST)	808	806	794	837	3,245	801	786	758	777	3,122
	Paper Shipments -Manufactured		('000 ST)	804	783	779	797	3,163	807	779	777	785	3,148
		Communication Papers	('000 ST)	669	653	648	669	2,639	681	647	649	660	2,637
		Specialty and Packaging	('000 ST)	135	130	131	128	524	126	132	128	125	511
	Paper Shipments -Sourced from 3rd parties		('000 ST)	35	29	35	28	127	47	42	46	35	170
	Paper Shipments - Total		('000 ST)	839	812	814	825	3,290	854	821	823	820	3,318
	Pulp
	Pulp Shipments^(b)		('000 ADMT)	350	345	333	386	1,414	318	336	367	370	1,391
		Hardwood Kraft Pulp	(%)	9%	8%	8%	8%	8%	12%	11%	12%	11%	12%
		Softwood Kraft Pulp	(%)	65%	65%	65%	69%	66%	58%	63%	63%	60%	61%
		Fluff Pulp	(%)	26%	27%	27%	23%	26%	30%	26%	25%	29%	27%
	Personal Care Segment
	Sales		($)	218	216	214	221	869	233	234	231	230	928
	Operating income^(a)		($)	10	17	18	16	61	14	12	12	11	49
	Depreciation and amortization		($)	16	16	14	16	62	16	17	17	15	65
Average Exchange Rates			$US / $CAN	1.241	1.229	1.309	1.335	1.279	1.103	1.091	1.089	1.136	1.105
			$CAN / $US	0.806	0.813	0.765	0.749	0.782	0.906	0.917	0.918	0.881	0.905
			€ / $US	1.126	1.106	1.112	1.095	1.110	1.370	1.371	1.324	1.249	1.329

^(a)  As a result of changes in the Company's organization structure, we have changed the way we allocate certain Corporate general and administrative costs to the segments. Further, certain Corporate costs not related to segment activities, as well as the mark-to-market impact on stock-based compensation awards, will be presented on the Corporate line. As a result, we have revised our 2014 segment disclosures to conform to our 2015 presentation.

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

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

SOURCE Domtar Corporation

INVESTOR RELATIONS: Nicholas Estrela, Director, Investor Relations, Tel.: [phone] x 85979; MEDIA RELATIONS: David Struhs, Vice-President, Corporate Services and Sustainability, Tel.: [phone]