Domtar Corporation reports preliminary second quarter 2015 financial results

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

Strong operational results in Pulp and Paper and Personal Care
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).

• Second quarter 2015 net earnings of $0.60 per share; earnings before items¹ of $0.61 per share
• Cash flow from operating activities of $122 million
• Sales and margin momentum building in Personal Care

FORT MILL, SC, July 30, 2015 /CNW Telbec/ - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $38 million ($0.60 per share) for the second quarter of 2015 compared to net earnings of $36 million ($0.56 per share) for the first quarter of 2015 and net earnings of $40 million ($0.61 per share) for the second quarter of 2014. Sales for the second quarter of 2015 were $1.3 billion.

Excluding items listed below, the Company had earnings before items¹ of $39 million ($0.61 per share) for the second quarter of 2015 compared to earnings before items¹ of $48 million ($0.75 per share) for the first quarter of 2015 and earnings before items¹ of $40 million ($0.61 per share) for the second quarter of 2014.

Second quarter 2015 items:

• Closure and restructuring costs of $1 million ($1 million after tax);
• Gain on disposal of property, plant and equipment of $14 million ($11 million after tax); and
• Impairment of property, plant & equipment of $18 million ($11 million after tax).

First quarter 2015 items:

• Closure and restructuring costs of $1 million ($1 million after tax);
• Gain on disposal of property, plant and equipment of $1 million ($1 million after tax); and
• Impairment of property, plant & equipment of $19 million ($12 million after tax).

Second quarter 2014 items:

• None

"Our pulp and paper business performed largely in-line with expectations. Our operations ran well despite the seasonally high level of scheduled maintenance at our mills. The flooding in the U.S. South negatively impacted some of our wood costs and supply, but production curtailments were limited," said John D. Williams, President and CEO. "Our paper shipments year-to-date are outperforming the broader North American uncoated freesheet market by 2.3%. As the trade case progresses, we will continue to monitor further opportunities resulting from lower cut-size imports while continuing to balance our capacity versus our customer demand."

Mr. Williams added, "Personal Care turned in a solid performance. Same currency sales increased 3% year over year while our cost savings program continued to deliver according to plan, driving a 300 basis-point margin improvement. Momentum in the business is growing, and we are operating and executing with more consistency. We remain focused on sharpening our strategies and capabilities that will deliver sustainable growth and value creation in this segment."  

QUARTERLY REVIEW

Operating income before items¹ was $67 million in the second quarter of 2015 compared to an operating income before items¹ of $90 million in the first quarter of 2015. Depreciation and amortization totaled $91 million in the second quarter of 2015.

(In millions of dollars)			2Q 2015			1Q 2015
Sales			$	1,310		$	1,348
Operating income (loss)
	Pulp and Paper segment			55			75
	Personal Care segment			17			10
	Corporate			(10)			(14)
	Total			62			71
Operating income before items^1				67			90
Depreciation and amortization				91			90

The decrease in operating income before items¹ in the second quarter of 2015 was the result of higher costs for planned maintenance, lower paper and pulp prices, lower paper and pulp shipments, higher freight costs and overall unfavorable exchange rates. These factors were partially offset by lower raw material and other costs and lower selling, general and administrative expenses. In addition, the first quarter was impacted by a bad debt expense.

When compared to the first quarter of 2015, manufactured paper shipments were down 2.6% and pulp shipments decreased 1.4%. The shipments-to-production ratio for paper was 97% in the second quarter of 2015, compared to 100% in the first quarter of 2015. Paper inventories increased by 23,000 tons while pulp inventories decreased by 15,000 metric tons in June when compared to March levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $122 million and capital expenditures were $66 million, resulting in free cash flow¹ of $56 million for the second quarter of 2015. Domtar's net debt-to-total capitalization ratio¹ stood at 29% at June 30, 2015 compared to 30% at March 31, 2015.

During the quarter, Domtar repurchased $17 million of common stock under its stock repurchase program.

OUTLOOK

Looking into the second half of 2015, Domtar paper shipments are expected to trend with market demand and should benefit from lower import volumes in North America. We expect some short-term pricing volatility in pulp, as normal seasonal factors in certain markets take hold. Inflation on input costs is expected to be relatively flat; fiber costs will remain high in certain markets, but are not expected to increase further, while energy costs should remain favorable. Personal Care is expected to benefit from further cost savings and market growth, but the segment will be impacted by some seasonality in the third quarter.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its second quarter 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 third quarter 2015 earnings results on October 29, 2015 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

About Domtar 

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

Forward-Looking Statements

Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under "Outlook," are "forward-looking statements." Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under "Risk Factors" in our Form 10-K for 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.

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

Domtar Corporation
Highlights
(In millions of dollars, unless otherwise noted)
				Three months ended   June 30, 2015		Three months ended   June 30, 2014		Six months ended June 30, 2015		Six months ended June 30, 2014
				(Unaudited)
				$		$		$		$
Selected Segment Information
Sales
		Pulp and Paper		1,110		1,160		2,256		2,328
		Personal Care		216		234		434		467
Total for reportable segments				1,326		1,394		2,690		2,795
		Intersegment sales		(16)		(9)		(32)		(16)
Consolidated sales				1,310		1,385		2,658		2,779
Depreciation and amortization and impairment and write-down of property, plant and equipment
		Pulp and Paper		75		79		149		162
		Personal Care		16		17		32		33
Total for reportable segments				91		96		181		195
		Impairment and write-down of property, plant and equipment - Pulp and Paper		18		—		37		—
Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment				109		96		218		195
Operating income (loss)^1
		Pulp and Paper		55		74		130		163
		Personal Care		17		12		27		26
		Corporate		(10)		(7)		(24)		(31)
Consolidated operating income				62		79		133		158
Interest expense, net				25		26		51		51
Earnings before income taxes				37		53		82		107
Income tax (benefit) expense				(1)		13		8		28
Net earnings				38		40		74		79
Per common share (in dollars)
	Net earnings
		Basic		0.60		0.62		1.16		1.22
		Diluted		0.60		0.61		1.16		1.22
Weighted average number of common shares outstanding (millions)
		Basic		63.6		65.0		63.7		64.9
		Diluted		63.7		65.1		63.8		65.0
Cash flows provided from operating activities				122		104		249		245
Additions to property, plant and equipment				66		56		136		101

¹As 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 six months ended June 30, 2014 are as follows; Pulp and Paper: $69M and $138M, respectively, Personal Care: $14M and $29M, respectively, Corportate: $(4)M and $(9)M, respectively).

Domtar Corporation
Consolidated Statements of Earnings
(In millions of dollars, unless otherwise noted)
				Three months ended   June 30, 2015		Three months ended   June 30, 2014		Six months ended   June 30, 2015		Six months ended   June 30, 2014
				(Unaudited)
				$		$		$		$
Sales				1,310		1,385		2,658		2,779
Operating expenses
		Cost of sales, excluding depreciation and amortization		1,052		1,108		2,114		2,211
		Depreciation and amortization		91		96		181		195
		Selling, general and administrative		99		100		199		214
		Impairment and write-down of property, plant and equipment		18		—		37		—
		Closure and restructuring costs		1		—		2		1
		Other operating (income) loss, net		(13)		2		(8)		—
				1,248		1,306		2,525		2,621
Operating income				62		79		133		158
Interest expense, net				25		26		51		51
Earnings before income taxes				37		53		82		107
Income tax (benefit) expense				(1)		13		8		28
Net earnings				38		40		74		79
Per common share (in dollars)
	Net earnings
		Basic		0.60		0.62		1.16		1.22
		Diluted		0.60		0.61		1.16		1.22
Weighted average number of common shares outstanding (millions)
		Basic		63.6		65.0		63.7		64.9
		Diluted		63.7		65.1		63.8		65.0

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)
					June 30,		December 31,
					2015		2014
				(Unaudited)
					$		$
Assets
Current assets
	Cash and cash equivalents				207		174
	Receivables, less allowances of $10 and $6				640		628
	Inventories				721		714
	Prepaid expenses				36		25
	Income and other taxes receivable				13		54
	Deferred income taxes				78		75
		Total current assets			1,695		1,670
	Property, plant and equipment, at cost				8,817		8,909
	Accumulated depreciation				(5,858)		(5,778)
		Net property, plant and equipment			2,959		3,131
Goodwill					546		567
Intangible assets, net of amortization					621		661
Other assets					142		156
		Total assets			5,963		6,185
Liabilities and shareholders' equity
Current liabilities
	Bank indebtedness				1		10
	Trade and other payables				687		721
	Income and other taxes payable				36		26
	Long-term debt due within one year				169		169
		Total current liabilities			893		926
Long-term debt					1,178		1,181
Deferred income taxes and other					765		810
Other liabilities and deferred credits					366		378
Shareholders' equity
	Common stock				1		1
	Additional paid-in capital				1,985		2,012
	Retained earnings				1,168		1,145
	Accumulated other comprehensive loss				(393)		(268)
		Total shareholders' equity			2,761		2,890
			Total liabilities and shareholders' equity		5,963		6,185

Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)
				For the six months ended
				June 30, 2015		June 30, 2014
				(Unaudited)
				$		$
Operating activities
Net earnings				74		79
Adjustments to reconcile net earnings to cash flows from operating activities
		Depreciation and amortization		181		195
		Deferred income taxes and tax uncertainties		(32)		(6)
		Impairment and write-down of property, plant and equipment		37		—
		Net gains on disposal of property, plant and equipment		(15)		—
		Stock-based compensation expense		3		3
		Other		—		6
Changes in assets and liabilities, excluding the effects of acquisition of business
		Receivables		—		24
		Inventories		(23)		(18)
		Prepaid expenses		(10)		(9)
		Trade and other payables		(18)		(43)
		Income and other taxes		46		23
		Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense		3		(6)
		Other assets and other liabilities		3		(3)
	Cash flows provided from operating activities			249		245
Investing activities
Additions to property, plant and equipment				(136)		(101)
Proceeds from disposals of property, plant and equipment				7		1
Acquisition of business, net of cash acquired				—		(546)
Other				9		-
	Cash flows used for investing activities			(120)		(646)
Financing activities
Dividend payments				(50)		(36)
Stock repurchase				(30)		—
Net change in bank indebtedness				(9)		—
Change in revolving bank credit facility				—		(140)
Proceeds from receivables securitization facilities				—		90
Payments on receivables securitization facilities				—		(84)
Repayment of long-term debt				(2)		(3)
Other				1		4
	Cash flows used for financing activities			(90)		(169)
Net increase (decrease) in cash and cash equivalents				39		(570)
Impact of foreign exchange on cash				(6)		—
Cash and cash equivalents at beginning of period				174		655
Cash and cash equivalents at end of period				207		85
Supplemental cash flow information
	Net cash payments for:
		Interest		48		44
		Income taxes paid, net		2		19

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		YTD		Q1		Q2		Q3		Q4		YTD
Reconciliation of "Earnings before items" to Net earnings
		Net earnings		($)		36		38		74		39		40		281		71		431
	(+)	Impairment and write-down of property, plant and equipment		($)		12		11		23		—		—		—		2		2
	(+)	Closure and restructuring costs		($)		1		1		2		1		—		2		18		21
	(-)	Net gains on disposal of property, plant and equipment		($)		(1)		(11)		(12)		—		—		—		—		—
	(+)	Impact of purchase accounting		($)		—		—		—		2		—		—		—		2
	(-)	Alternative fuel tax credits		($)		—		—		—		—		—		(18)		—		(18)
	(-)	Internal Revenue Service audit settlement items		($)		—		—		—		—		—		(204)		—		(204)
	(=)	Earnings before items		($)		48		39		87		42		40		61		91		234
	(/)	Weighted avg. number of common and exchangeable shares outstanding (diluted)		(millions)		63.9		63.7		63.8		65.0		65.1		64.9		64.4		64.9
	(=)	Earnings before items per diluted share		($)		0.75		0.61		1.36		0.65		0.61		0.94		1.41		3.61
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings
		Net earnings		($)		36		38		74		39		40		281		71		431
	(+)	Income tax expense (benefit)		($)		9		(1)		8		15		13		(186)		(12)		(170)
	(+)	Interest expense, net		($)		26		25		51		25		26		25		27		103
	(=)	Operating income		($)		71		62		133		79		79		120		86		364
	(+)	Depreciation and amortization		($)		90		91		181		99		96		96		93		384
	(+)	Impairment and write-down of property, plant and equipment		($)		19		18		37		—		—		—		4		4
	(-)	Net gains on disposal of property, plant and equipment		($)		(1)		(14)		(15)		—		—		—		—		—
	(=)	EBITDA		($)		179		157		336		178		175		216		183		752
	(/)	Sales		($)		1,348		1,310		2,658		1,394		1,385		1,405		1,379		5,563
	(=)	EBITDA margin		(%)		13%		12%		13%		13%		13%		15%		13%		14%
		EBITDA		($)		179		157		336		178		175		216		183		752
	(-)	Alternative fuel tax credits		($)		—		—		—		—		—		(18)		—		(18)
	(+)	Closure and restructuring costs		($)		1		1		2		1		—		2		25		28
	(+)	Impact of purchase accounting		($)		—		—		—		3		—		—		—		3
	(=)	EBITDA before items		($)		180		158		338		182		175		200		208		765
	(/)	Sales		($)		1,348		1,310		2,658		1,394		1,385		1,405		1,379		5,563
	(=)	EBITDA margin before items		(%)		13%		12%		13%		13%		13%		14%		15%		14%
Reconciliation of "Free cash flow" to Cash flow provided from operating activities
		Cash flow provided from operating activities		($)		127		122		249		141		104		203		186		634
	(-)	Additions to property, plant and equipment		($)		(70)		(66)		(136)		(45)		(56)		(56)		(79)		(236)
	(=)	Free cash flow		($)		57		56		113		96		48		147		107		398
"Net debt-to-total capitalization" computation
		Bank indebtedness		($)		6		1				8		15		3		10
	(+)	Long-term debt due within one year		($)		169		169				15		7		170		169
	(+)	Long-term debt		($)		1,179		1,178				1,490		1,410		1,202		1,181
	(=)	Debt		($)		1,354		1,348				1,513		1,432		1,375		1,360
	(-)	Cash and cash equivalents		($)		(183)		(207)				(130)		(85)		(134)		(174)
	(=)	Net debt		($)		1,171		1,141				1,383		1,347		1,241		1,186
	(+)	Shareholders' equity		($)		2,710		2,761				2,771		2,826		2,938		2,890
	(=)	Total capitalization		($)		3,881		3,902				4,154		4,173		4,179		4,076
		Net debt		($)		1,171		1,141				1,383		1,347		1,241		1,186
	(/)	Total capitalization		($)		3,881		3,902				4,154		4,173		4,179		4,076
	(=)	Net debt-to-total capitalization		(%)		30%		29%				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)		($)		75		55		—		—		130		10		17		—		—		27		(14)		(10)		—		—		(24)		71		62		—		—		133
	(+)	Impairment and write-down of property, plant and equipment		($)		19		18		—		—		37		—		—		—		—		—		—		—		—		—		—		19		18		—		—		37
	(-)	Net gains on disposal of property, plant and equipment		($)		—		(14)		—		—		(14)		—		—		—		—		—		(1)		—		—		—		(1)		(1)		(14)		—		—		(15)
	(+)	Closure and restructuring costs		($)		—		1		—		—		1		1		—		—		—		1		—		—		—		—		—		1		1		—		—		2
	(=)	Operating income (loss) before items		($)		94		60		—		—		154		11		17		—		—		28		(15)		(10)		—		—		(25)		90		67		—		—		157
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"
		Operating income (loss) before items		($)		94		60		—		—		154		11		17		—		—		28		(15)		(10)		—		—		(25)		90		67		—		—		157
	(+)	Depreciation and amortization		($)		74		75		—		—		149		16		16		—		—		32		—		—		—		—		—		90		91		—		—		181
	(=)	EBITDA before items		($)		168		135		—		—		303		27		33		—		—		60		(15)		(10)		—		—		(25)		180		158		—		—		338
	(/)	Sales		($)		1,146		1,110		—		—		2,256		218		216		—		—		434		—		—		—		—		—		1,364		1,326		—		—		2,690
	(=)	EBITDA margin before items		(%)		15%		12%		—		—		13%		12%		15%		—		—		14%		—		—		—		—		—		13%		12%		—		—		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 allocated 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, plant and equipment		($)		—		—		—		4		4		—		—		—		—		—		—		—		—		—		—		—		—		—		4		4
	(=)	Operating income (loss) before items		($)		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		YTD		Q1		Q2		Q3		Q4		YTD
Pulp and Paper Segment
	Sales			($)		1,146		1,110		2,256		1,168		1,160		1,186		1,160		4,674
	Operating income^(a)			($)		75		55		130		89		74		101		88		352
	Depreciation and amortization			($)		74		75		149		83		79		79		78		319
	Impairment and write-down of property, plant and equipment			($)		19		18		37		—		—		—		4		4
	Paper
	Paper Production			('000 ST)		808		806		1,614		801		786		758		777		3,122
	Paper Shipments - Manufactured			('000 ST)		804		783		1,587		804		779		776		786		3,145
		Communication Papers		('000 ST)		669		653		1,322		678		647		649		661		2,635
		Specialty and Packaging		('000 ST)		135		130		265		126		132		127		125		510
	Paper Shipments - Sourced from 3rd parties			('000 ST)		35		29		64		50		42		47		34		173
	Paper Shipments - Total			('000 ST)		839		812		1,651		854		821		823		820		3,318
	Pulp
	Pulp Shipments^(b)			('000 ADMT)		350		345		695		318		336		367		370		1,391
		Hardwood Kraft Pulp		(%)		9%		8%		9%		12%		11%		12%		11%		12%
		Softwood Kraft Pulp		(%)		65%		65%		65%		58%		63%		63%		60%		61%
		Fluff Pulp		(%)		26%		27%		26%		30%		26%		25%		29%		27%
Personal Care Segment
	Sales			($)		218		216		434		233		234		231		230		928
	Operating income^(a)			($)		10		17		27		14		12		12		11		49
	Depreciation and amortization			($)		16		16		32		16		17		17		15		65
Average Exchange Rates				$US / $CAN		1.241		1.229		1.235		1.103		1.091		1.089		1.136		1.105
				$CAN / $US		0.806		0.813		0.810		0.906		0.917		0.918		0.881		0.906
				€ / $US		1.126		1.106		1.116		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

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