TICKER SYMBOL
UFS (NYSE, TSX)
Improved earnings and strong cash flow from operations despite lower
volumes
- Net earnings of $0.08 per diluted share, earnings before items(1) of
$0.10 per diluted share
- Free cash flow(1) of $82 million in the third quarter
- $127 million of cash at quarter end; net debt(1) reduced by
$176 million year-to-date
- No borrowings under the $750 million revolving credit facility
- Company announced yesterday the closure of # 1 paper machine at
Dryden, ON mill
MONTREAL, Nov. 5 /PRNewswire-FirstCall/ - Domtar Corporation (NYSE/TSX: UFS) today reported net earnings of $43 million ($0.08 per diluted share) for the third quarter of 2008 compared to net earnings of $24 million ($0.05 per diluted share) for the second quarter of 2008 and $36 million ($0.07 per diluted share) for the third quarter of 2007. Sales for the third quarter amounted to $1.6 billion. Excluding the items listed below, the Company earned $51 million ($0.10 per diluted share) for the third quarter of 2008 compared to $32 million ($0.06 per diluted share) for the second quarter of 2008 and $44 million ($0.09 per diluted share) for the third quarter of 2007.
Third quarter 2008:
-------------------
- 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).
Second quarter 2008:
--------------------
- Closure and restructuring costs of $11 million ($7 million after tax);
- Costs of $9 million ($5 million after tax) related to synergies and
integration; and
- Gain of $6 million ($4 million after tax) related to the sale of
trademarks.
Third quarter 2007:
-------------------
- Costs of $14 million ($8 million after tax) related to synergies and
integration;
- Gains of $6 million ($4 million after tax) related to financial
instruments;
- Cost of $3 million related to a change in statutory income tax rates;
and
- Closure and restructuring costs of $2 million ($1 million after tax).
"I am encouraged by the results, which we achieved despite high input
costs, weak fine paper demand and a worsening economic environment. Our
earnings increased from last year's third quarter, our free cash flow is
strong, our balance sheet is sound with no upcoming debt maturities and we
were recently upgraded by credit agencies in tough credit market conditions,"
said Raymond Royer, President and Chief Executive Officer. "Our team is
executing well and our prudent approach to managing the business provides us
with a measure of stability. I am pleased with the support we are getting from
customers as we position ourselves as an efficient, stable, financially strong
supplier of choice," added Mr. Royer.
SEGMENT REVIEW
Papers
Operating income before items(2) was $131 million in the third quarter of
2008 compared to operating income before items(2) of $106 million in the
second quarter of 2008. Depreciation and amortization totaled $111 million in
the third quarter. When compared to the second quarter, paper and pulp
shipments decreased 5.1% and 6.3%, respectively. The shipments-to-production
ratio for papers was 97% in the third quarter, compared to 99% in the second
quarter. Paper inventories were 24,000 tons higher at the end of September
when compared to end of June levels.
The increase in operating income before items(2) in the third quarter was
the result of higher average selling prices for paper, lower usage for energy
and chemicals, lower costs related to planned maintenance shutdowns, a
favorable exchange rate and lower other costs. These factors were partially
mitigated by higher costs related to chemicals, freight, fiber and energy, and
lower paper and pulp shipments.
(In millions of dollars) 3Q 2008 2Q 2008
--------------------------------------------- ----------- -----------
Sales $1,364 $1,407
Operating income $118 $92
Operating income before items(2) $131 $106
Depreciation and amortization $111 $110
Paper Merchants
Operating income was $1 million in the third quarter of 2008 compared to
operating income of $2 million in the second quarter of 2008. Depreciation and
amortization was $1 million in the third quarter. Deliveries increased 5.3%
when compared to the second quarter.
The decrease in operating income in the third quarter was the result of
higher costs stemming from higher paper prices and an increase in allowance
for doubtful accounts. These factors were partially mitigated by higher paper
deliveries and higher average selling prices.
(In millions of dollars) 3Q 2008 2Q 2008
--------------------------------------------- ----------- -----------
Sales $257 $243
Operating income $1 $2
Depreciation and amortization $1 $1
Wood
Operating loss was $11 million in the third quarter of 2008, compared to
operating loss of $12 million in the second quarter of 2008. Depreciation and
amortization totaled $7 million in the third quarter. When compared to the
second quarter, lumber shipments decreased 1.7% and the
shipments-to-production ratio was 109% in the third quarter compared to 117%
in the second quarter.
The decrease in operating loss in the third quarter was the result of
higher average selling prices, lower costs and a favorable exchange rate.
These factors were partially mitigated by lower shipments.
(In millions of dollars) 3Q 2008 2Q 2008
--------------------------------------------- ----------- -----------
Sales $76 $70
Operating loss ($11) ($12)
Depreciation and amortization $7 $7
OUTLOOK
For the remainder of the year, we expect paper prices to remain flat and
pulp and lumber prices to decrease. Volumes should be down from the third
quarter across all businesses due to the weaker economy and typical
seasonality of our business. However, we expect a favorable foreign exchange
rate, savings from our synergy program and lower energy prices to benefit
Domtar's profitability in the fourth quarter.
On the outlook for 2009, Mr. Royer said, "the depth and duration of the
economic slowdown and the impact this may have on office employment and demand
for our products are uncertain. Still, Domtar will continue to track its order
books and balance supply with its customer demand in uncoated freesheet
papers."
EARNINGS CONFERENCE CALL
The Company will hold a conference call today at 10:00 a.m. (ET) to
discuss its third quarter 2008 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 - North America) 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
www.domtar.com.
About Domtar
Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer
and marketer of uncoated freesheet paper in North America 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
publication 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 13,000 people. To learn more, visit
www.domtar.com.
Forward-Looking Statements
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 Form 10-K
filed with the SEC. Unless specifically required by law, we assume no
obligation to update or revise these forward-looking statements to reflect new
events or circumstances.
--------------------
(1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP
financial measures in the appendix.
(2) 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)
-------------------------------------------------------------------------
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Thirty- Thirty-
Thirteen Thirteen nine nine
weeks weeks weeks weeks
ended ended ended ended
-------------------------------------------------------------------------
September September September September
28 2008 30 2007 28 2008 30 2007
-----(Unaudited)----- -----(Unaudited)------
$ $ $ $
--------- ---------
Selected Segment
Information
Sales
Papers 1,364 1,411 4,200 3,715
Paper Merchants 257 249 762 551
Wood 76 88 209 225
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Total for reportable
segments 1,697 1,748 5,171 4,491
Intersegment sales -
Papers (64) (72) (220) (162)
Intersegment sales -
Paper Merchants - - - (1)
Intersegment sales -
Wood (8) (16) (22) (34)
-------------------------------------------------------------------------
Consolidated sales 1,625 1,660 4,929 4,294
-------------------------------------------------------------------------
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Depreciation and
amortization
Papers 111 122 331 320
Paper Merchants 1 - 2 1
Wood 7 6 20 17
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Consolidated depreciation
and amortization 119 128 353 338
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating income (loss)
Papers 118 133 324 296
Paper Merchants 1 6 6 12
Wood (11) (13) (45) (37)
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Total for reportable
segments 108 126 285 271
Corporate - (3) (3) (8)
-------------------------------------------------------------------------
Consolidated operating
income 108 123 282 263
Interest expense 35 48 111 106
-------------------------------------------------------------------------
Earnings before income taxes 73 75 171 157
Income tax expense 30 39 68 61
-------------------------------------------------------------------------
Net earnings 43 36 103 96
-------------------------------------------------------------------------
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Per common share (in dollars)
Net earnings
Basic 0.08 0.07 0.20 0.21
Diluted 0.08 0.07 0.20 0.21
Weighted average number of
common and exchangeable
shares outstanding
(millions)
Basic 515.5 515.4 515.5 459.6
Diluted 515.7 517.8 515.9 461.5
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Cash flows provided from
operating activities 131 144 271 424
Additions to property,
plant and equipment 49 19 114 65
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Domtar Corporation
Consolidated Statements of Earnings
(In millions of dollars, unless otherwise noted)
Thirty- Thirty-
Thirteen Thirteen nine nine
weeks weeks weeks weeks
ended ended ended ended
-------------------------------------------------------------------------
September September September September
28 2008 30 2007 28 2008 30 2007
-----(Unaudited)----- -----(Unaudited)------
$ $ $ $
--------- ---------
Sales 1,625 1,660 4,929 4,294
Operating expenses
Cost of sales,
excluding depreciation
and amortization 1,293 1,292 3,971 3,438
Depreciation and
amortization 119 128 353 338
Selling, general and
administrative 102 115 308 248
Closure and
restructuring costs 3 2 15 7
-------------------------------------------------------------------------
1,517 1,537 4,647 4,031
-------------------------------------------------------------------------
Operating income 108 123 282 263
Interest expense 35 48 111 106
-------------------------------------------------------------------------
Earnings before income
taxes 73 75 171 157
Income tax expense 30 39 68 61
-------------------------------------------------------------------------
Net earnings 43 36 103 96
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per common share (in dollars)
Net earnings
Basic 0.08 0.07 0.20 0.21
Diluted 0.08 0.07 0.20 0.21
Weighted average number of
common and exchangeable
shares outstanding
(millions)
Basic 515.5 515.4 515.5 459.6
Diluted 515.7 517.8 515.9 461.5
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Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
September 28 December 30
-------------------------------------------------------------------------
2008 2007
--------(Unaudited)--------
$ $
-------------
Assets
Current assets
Cash and cash equivalents 127 71
Receivables, less allowances of $10 and $9 582 504
Inventories 985 936
Prepaid expenses 37 14
Income and other taxes receivable 81 69
Deferred income taxes 180 182
-------------------------------------------------------------------------
Total current assets 1,992 1,776
Property, plant and equipment, at cost 9,586 9,685
Accumulated depreciation (4,595) (4,323)
-------------------------------------------------------------------------
Net property, plant and equipment 4,991 5,362
Goodwill 351 372
Intangible assets, net of amortization 98 111
Other assets 102 105
-------------------------------------------------------------------------
Total assets 7,534 7,726
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Bank indebtedness 36 63
Trade and other payables 760 765
Income and other taxes payable 38 28
Long-term debt due within one year 19 17
-------------------------------------------------------------------------
Total current liabilities 853 873
Long-term debt 2,118 2,213
Deferred income taxes 1,010 1,003
Other liabilities and deferred credits 359 440
Shareholders' equity
Common stock 5 5
Exchangeable shares 153 293
Additional paid-in capital 2,724 2,573
Retained earnings 150 47
Accumulated other comprehensive income 162 279
-------------------------------------------------------------------------
Total shareholders' equity 3,194 3,197
-------------------------------------------------------------------------
Total liabilities and shareholders'
equity 7,534 7,726
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-----------
Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Thirty- Thirty-
Thirteen Thirteen nine nine
weeks weeks weeks weeks
ended ended ended ended
-------------------------------------------------------------------------
September September September September
28 2008 30 2007 28 2008 30 2007
-----(Unaudited)----- -----(Unaudited)------
$ $ $ $
--------- ---------
Operating activities
Net earnings 43 36 103 96
Adjustments to reconcile
net earnings to cash flows
from operating activities
Depreciation and
amortization 119 128 353 338
Deferred income taxes 33 (10) 46 (25)
Net gains on disposals of
property, plant and
equipment (2) - (3) -
Stock-based compensation
expense 4 3 13 4
Gain on sale of trademark - - (6) -
Other 4 1 8 2
Changes in assets and
liabilities, net of
effects of acquisitions
Receivables (26) (60) (84) (79)
Inventories (68) 4 (68) 31
Prepaid expenses (4) 3 (26) (4)
Trade and other payables 35 28 4 66
Income and other taxes (2) 27 (1) 43
Difference between
employer pension and
other post-retirement
contributions and
pension and other post-
retirement expense (5) (13) (52) (42)
Other assets and other
liabilities - (3) (16) (6)
-------------------------------------------------------------------------
Cash flows provided from
operating activities 131 144 271 424
-------------------------------------------------------------------------
Investing activities
Additions to property,
plant and equipment (49) (19) (114) (65)
Proceeds from disposals
of property, plant and
equipment 2 1 24 23
Proceeds from sale of
trademark - - 6 -
Business acquisition -
cash acquired - - - 573
Business acquisition (12) - (12) -
Other - 3 - (1)
-------------------------------------------------------------------------
Cash flows provided from
(used for) investing
activities (59) (15) (96) 530
-------------------------------------------------------------------------
Financing activities
Net change in bank
indebtedness (1) (6) (27) (9)
Repayment of revolving bank
credit facility - - (50) -
Issuance of short-term debt - - - 1,350
Issuance of long-term debt - - - 800
Repayment of short-term debt - - - (1,350)
Repayment of long-term debt (4) (75) (41) (156)
Debt issue costs - - - (24)
Distribution to Weyerhaeuser
prior to March 7, 2007 - - - (1,431)
Other - - - (5)
-------------------------------------------------------------------------
Cash flows used for
financing activities (5) (81) (118) (825)
-------------------------------------------------------------------------
Net increase in cash and
cash equivalents 67 48 57 129
Translation adjustments
related to cash and
cash equivalents (1) 8 (1) 6
Cash and cash equivalents
at beginning of period 61 80 71 1
-------------------------------------------------------------------------
Cash and cash equivalents
at end of period 127 136 127 136
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow
information
Net cash payments for:
Interest 26 45 81 88
Income taxes - 17 46 38
-------------------------------------------------------------------------
---------- ----------
Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)
---------------------------------------
---------------------------------------
2008
-------
---------------------------------------
---------------------------------------
Q1 Q2 Q3 Q4 YTD
---------------------------------------
---------------------------------------
Papers Segment
Sales ($) 1,429 1,407 1,364 4,200
Intersegment sales -
Papers ($) (83) (73) (64) (220)
Operating income ($) 114 92 118 324
Depreciation &
amortization ($) 110 110 111 331
Impairment of PP&E ($)
Papers
Papers Production ('000 ST) 1,173 1,146 1,115 3,434
Papers Shipments ('000 ST) 1,205 1,137 1,079 3,421
Uncoated
freesheet ('000 ST) 1,149 1,096 1,044 3,289
Coated
groundwood ('000 ST) 56 41 35 132
20-lb repro bond,
92 bright (copy)(a)
list price ($/ton) 1,007 1,050 1,103 1,053
50-lb offset, rolls(a)
list price ($/ton) 860 907 944 904
Coated publication
# 5, 40-lb offset,
rolls(a) list price ($/ton) 900 975 1,000 958
Pulp
Pulp Shipments(b) ('000 ADMT) 347 347 325 1,019
Hardwood Kraft
Pulp (%) 44% 43% 41% 43%
Softwood Kraft
Pulp (%) 47% 46% 47% 47%
Fluff Pulp (%) 9% 11% 12% 11%
Pulp NBSK - U.S.
market(a) list price ($/ADMT) 880 880 882 881
Pulp NBHK - Japan
market(a)(c) list
price ($/ADMT) 715 755 785 752
Paper Merchants Segment
Sales ($) 262 243 257 762
Intersegment sales -
Paper Merchants ($)
Operating income ($) 3 2 1 6
Depreciation &
amortization ($) 1 1 2
Wood Segment
Sales ($) 63 70 76 209
Intersegment sales -
Wood ($) (6) (8) (8) (22)
Operating loss ($) (22) (12) (11) (45)
Depreciation &
amortization ($) 6 7 7 20
Impairment of goodwill ($)
Lumber
Production (Millions FBM) 168 155 163 486
Lumber
Shipments (Millions FBM) 160 181 178 519
Lumber G.L.
2x4x8 studs(a)
prices ($/MFBM) 277 306 290 291
Lumber G.L.
2x4 R/L, no. 1 &
no. 2(a) prices ($/MFBM) 291 309 346 315
Average Exchange Rates CAN 1.004 1.010 1.042 1.018
US 0.996 0.990 0.960 0.982
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2007
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---------------------------------------
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Q1 Q2 Q3 Q4 YTD
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Papers Segment
Sales ($) 955 1,349 1,411 1,401 5,116
Intersegment sales -
Papers ($) (24) (66) (72) (73) (235)
Operating income ($) 71 92 133 25 321
Depreciation &
amortization ($) 72 126 122 124 444
Impairment of PP&E ($) 92 92
Papers
Papers Production ('000 ST) 826 1,216 1,187 1,182 4,411
Papers Shipments ('000 ST) 871 1,209 1,261 1,160 4,501
Uncoated freesheet ('000 ST) 814 1,163 1,194 1,104 4,275
Coated groundwood ('000 ST) 57 46 67 56 226
20-lb repro bond,
92 bright (copy)(a)
list price ($/ton) 930 963 990 990 968
50-lb offset, rolls(a)
list price ($/ton) 810 810 803 847 818
Coated publication
# 5, 40-lb offset,
rolls(a) list price ($/ton) 778 748 782 840 787
Pulp
Pulp Shipments(b) ('000 ADMT) 249 335 334 411 1,329
Hardwood Kraft
Pulp (%) 21% 46% 48% 45% 42%
Softwood Kraft
Pulp (%) 61% 41% 40% 46% 46%
Fluff Pulp (%) 18% 13% 12% 9% 12%
Pulp NBSK - U.S.
market(a) list price ($/ADMT) 790 810 837 858 824
Pulp NBHK - Japan
market(a)(c) list
price ($/ADMT) 640 640 658 683 655
Paper Merchants Segment
Sales ($) 76 226 249 262 813
Intersegment sales -
Paper Merchants ($) (1) (1)
Operating income ($) 4 2 6 1 13
Depreciation &
amortization ($) 1 1 2
Wood Segment
Sales ($) 47 90 88 79 304
Intersegment sales -
Wood ($) (3) (15) (16) (16) (50)
Operating loss ($) (4) (20) (13) (26) (63)
Depreciation &
amortization ($) 5 6 6 8 25
Impairment of goodwill ($) 4 4
Lumber
Production (Millions FBM) 68 152 164 158 542
Lumber
Shipments (Millions FBM) 88 227 197 172 684
Lumber G.L.
2x4x8 studs(a)
prices ($/MFBM) 317 335 336 294 321
Lumber G.L.
2x4 R/L, no. 1 &
no. 2(a) prices ($/MFBM) 332 332 343 308 329
Average Exchange Rates CAN 1.172 1.098 1.044 0.981 1.074
US 0.854 0.911 0.958 1.019 0.931
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(a) Source: Pulp & Paper Week and Random Lengths.
(b) 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.
(c) Based on Pulp & Paper Week's Southern Bleached Hardwood Kraft pulp
prices for Japan, increased by an average differential of $15/ADMT
between Northern and Southern Bleached Hardwood Kraft pulp prices.
Domtar Corporation
Reconciliation of Non-GAAP Financial Measures
(In millions of dollars, unless otherwise noted)
The following table sets forth certain non-U.S. generally accepted
accounting principles ("GAAP") financial metrics identified in bold as
"Earnings Before Items," "EBITDA," "EBITDA Before Items," "Free Cash Flow,"
"Net Debt" and "Net Debt-to-Total Capitalization." Management believes that
the financial metrics presented are frequently used by investors and are
useful to evaluate our ability to service debt and the overall credit profile.
Management believes these metrics are also useful to measure the operating
performance and benchmark with peers within the industry. These metrics are
presented as a complement to enhance the understanding of operating results
but not in substitution for GAAP results.
The company calculates "Earnings Before Items" and "EBITDA Before Items"
by excluding the after-tax (pre-tax) effect of items considered by management
as not typifying the Net earnings (loss) reported under U.S. GAAP. Management
uses these measures to focus on ongoing operations and believes that it is
useful to investors because it enables them to perform meaningful comparisons
between periods. Domtar believes that using this information along with Net
earnings (loss) provides for a more complete analysis of the results of
operations. Net earnings (loss) is the most directly comparable GAAP measure.
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2008
-------
---------------------------------------
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Q1 Q2 Q3 Q4 YTD
---------------------------------------
---------------------------------------
Reconciliation of "Earnings
Before Items" to Net
Earnings (Loss)
Net earnings (loss) ($) 36 24 43 103
(-) Reversal of a
provision for
unfavorable contract ($) (17) (17)
(+) Costs related to
synergies, integration
and optimization ($) 5 5 6 16
(+) Closure and
restructuring costs ($) 1 7 2 10
(-) Gain related to
the sale of
trademarks ($) (4) (4)
(+) Impairment of goodwill
and property, plant
and equipment ($)
(-) Gains for lawsuit and
insurance claim
settlements ($)
(+) Expenses related to the
debt restructuring ($)
(-) Gain related to change
in statutory income
tax rate ($)
(-) Gains related to
financial instruments ($)
= Earnings Before
Items ($) 25 32 51 108
Reconciliation of "EBITDA"
and "EBITDA Before Items" to
Net Earnings (Loss)
Net earnings (loss) ($) 36 24 43 103
(+) Income tax expense
(benefit) ($) 19 19 30 68
(+) Interest expense ($) 39 37 35 111
(=) Operating
income ($) 94 80 108 282
(+) Depreciation and
amortization ($) 116 118 119 353
(+) Impairment of goodwill
and property, plant
and equipment
equal EBITDA ($) 210 198 227 635
(-) Reversal of a
provision for
unfavorable contract ($) (23) (23)
(+) Costs related to
synergies, integration
and optimization ($) 8 9 10 27
(+) Closure and
restructuring costs ($) 1 11 3 15
(-) Gain related to
the sale of
trademarks ($) (6) (6)
(-) Gains for lawsuit and
insurance claim
settlements ($)
(-) Gains related to
financial instruments ($)
= EBITDA Before
Items ($) 196 212 240 648
Reconciliation of "Free Cash
Flow" to Cash Flow from
Operating Activities
Cash flow provided from
operating activities ($) 27 113 131 271
(-) Additions to property,
plant and equipment ($) (29) (36) (49) (114)
equal Free Cash Flow ($) (2) 77 82 157
"Net Debt-to-Total
Capitalization" Computation
Bank indebtedness ($) 86 38 36
(+) Current portion of
long-term debt ($) 17 19 19
(+) Long-term debt ($) 2,155 2,122 2,118
(-) Cash and cash
equivalents ($) (57) (61) (127)
= Net debt ($) 2,201 2,118 2,046
(+) Shareholders' equity ($) 3,172 3,217 3,194
= Total
capitalization ($) 5,373 5,335 5,240
Net debt ($) 2,201 2,118 2,046
(/) Total capitalization ($) 5,373 5,335 5,240
= Net Debt-to-Total
Capitalization (%) 41% 40% 39%
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2007
-------
---------------------------------------
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Q1 Q2 Q3 Q4 YTD
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Reconciliation of "Earnings
Before Items" to Net
Earnings (Loss)
Net earnings (loss) ($) 49 11 36 (26) 70
(-) Reversal of a
provision for
unfavorable contract ($)
(+) Costs related to
synergies, integration
and optimization ($) 4 4 8 14 30
(+) Closure and
restructuring costs ($) 2 1 1 5 9
(-) Gain related to
the sale of
trademarks ($)
(+) Impairment of goodwill
and property, plant
and equipment ($) 66 66
(-) Gains for lawsuit and
insurance claim
settlements ($) (35) (35)
(+) Expenses related to the
debt restructuring ($) 17 17
(-) Gain related to change
in statutory income
tax rate ($) (6) (1) 3 (11) (15)
(-) Gains related to
financial instruments ($) (6) (4) (1) (11)
= Earnings Before
Items ($) 49 9 44 29 131
Reconciliation of "EBITDA"
and "EBITDA Before Items" to
Net Earnings (Loss)
Net earnings (loss) ($) 49 11 36 (26) 70
(+) Income tax expense
(benefit) ($) 11 11 39 (32) 29
(+) Interest expense ($) 11 47 48 65 171
= Operating
income ($) 71 69 123 7 270
(+) Depreciation and
amortization ($) 78 132 128 133 471
(+) Impairment of goodwill
and property, plant
and equipment ($) 96 96
equal EBITDA ($) 149 201 251 236 837
(-) Reversal of a
provision for
unfavorable contract ($)
(+) Costs related to
synergies, integration
and optimization ($) 7 6 14 21 48
(+) Closure and
restructuring costs ($) 3 2 2 7 14
(-) Gain related to
the sale of
trademarks ($)
(-) Gains for lawsuit and
insurance claim
settlements ($) (51) (51)
(-) Gains related to
financial instruments ($) (10) (6) (2) (18)
= EBITDA Before
Items ($) 159 199 261 211 830
Reconciliation of "Free Cash
Flow" to Cash Flow from
Operating Activities
Cash flow provided from
operating activities ($) 91 189 144 182 606
(-) Additions to property,
plant and equipment ($) (14) (32) (19) (51) (116)
equal Free Cash Flow ($) 77 157 125 131 490
"Net Debt-to-Total
Capitalization" Computation
Bank indebtedness ($) 89 74 75 63
(+) Current portion of
long-term debt ($) 21 19 19 17
(+) Long-term debt ($) 2,577 2,425 2,356 2,213
(-) Cash and cash
equivalents ($) (110) (80) (136) (71)
equal Net debt ($) 2,577 2,438 2,314 2,222
(+) Shareholders' equity ($) 2,941 3,094 3,212 3,197
= Total
capitalization ($) 5,518 5,532 5,526 5,419
Net debt ($) 2,577 2,438 2,314 2,222
(/) Total capitalization ($) 5,518 5,532 5,526 5,419
= Net Debt-to-Total
Capitalization (%) 47% 44% 42% 41%
---------------------------------------
---------------------------------------
-------
"Earnings Before Items," "EBITDA," "EBITDA Before Items," "Free Cash Flow"
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.
Domtar Corporation
Reconciliation of Non-GAAP Financial Measures - By Segment 2008
(In millions of dollars, unless otherwise noted)
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.
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 Net earnings (loss) provides for a more complete analysis of the results
of operations. Operating Income (loss) by segment is the most directly
comparable GAAP measure.
---------------------------------------
---------------------------------------
Papers
-------
---------------------------------------
---------------------------------------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) 114 92 118 324
(-) Reversal of a provision
for unfavorable
contract ($) (23) (23)
(+) Costs related to
synergies, integration
and optimization ($) 8 9 10 27
(+) Closure and
restructuring costs ($) 1 11 3 15
(-) Gain related to
the sale of
trademarks ($) (6) (6)
= Operating Income
Before Items ($) 100 106 131 337
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income
Before Items ($) 100 106 131 337
(+) Depreciation and
amortization ($) 110 110 111 331
= EBITDA Before
Items ($) 210 216 242 668
---------------------------------------
---------------------------------------
-------
---------------------------------------
---------------------------------------
Paper Merchants
-------
---------------------------------------
---------------------------------------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) 3 2 1 6
(-) Reversal of a provision
for unfavorable
contract ($)
(+) Costs related to
synergies, integration
and optimization ($)
(+) Closure and
restructuring costs ($)
(-) Gain related to
the sale of
trademarks ($)
= Operating Income
Before Items ($) 3 2 1 6
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income Before
Items ($) 3 2 1 6
(+) Depreciation and
amortization ($) 1 1 2
= EBITDA Before
Items ($) 3 3 2 8
---------------------------------------
---------------------------------------
-------
---------------------------------------
---------------------------------------
Wood
-------
---------------------------------------
---------------------------------------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) (22) (12) (11) (45)
(-) Reversal of a provision
for unfavorable
contract ($)
(+) Costs related to
synergies, integration
and optimization ($)
(+) Closure and
restructuring costs ($)
(-) Gain related to
the sale of
trademarks ($)
= Operating Income
Before Items ($) (22) (12) (11) (45)
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income Before
Items ($) (22) (12) (11) (45)
(+) Depreciation and
amortization ($) 6 7 7 20
= EBITDA Before
Items ($) (16) (5) (4) (25)
---------------------------------------
---------------------------------------
-------
---------------------------------------
---------------------------------------
Corporate
-------
---------------------------------------
---------------------------------------
Q1'08 Q2'08 Q3'08 Q4'08 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) (1) (2) (3)
(-) Reversal of a provision
for unfavorable
contract ($)
(+) Costs related to
synergies, integration
and optimization ($)
(+) Closure and
restructuring costs ($)
(-) Gain related to
the sale of
trademarks ($)
= 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)
---------------------------------------
---------------------------------------
-------
"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.
Domtar Corporation
Reconciliation of Non-GAAP Financial Measures - By Segment 2007
(In millions of dollars, unless otherwise noted)
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.
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 Net earnings (loss) provides for a more complete analysis of the results
of operations. Operating Income (loss) by segment is the most directly
comparable GAAP measure.
---------------------------------------
---------------------------------------
Papers
-------
---------------------------------------
---------------------------------------
Q1'07 Q2'07 Q3'07 Q4'07 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) 71 92 133 25 321
(+) Costs related to
synergies, integration
and optimization ($) 7 6 14 21 48
(-) Gains for lawsuit and
insurance claim
settlements ($) (39) (39)
(-) Gains related to
financial instruments ($) (10) (6) (2) (18)
(+) Closure and
restructuring costs ($) 2 2 2 7 13
(+) Impairment of goodwill
and property, plant
and equipment ($) 92 92
= Operating Income
Before Items ($) 80 90 143 104 417
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income Before
Items ($) 80 90 143 104 417
(+) Depreciation and
amortization ($) 72 126 122 124 444
= EBITDA Before
Items ($) 152 216 265 228 861
---------------------------------------
---------------------------------------
-------
---------------------------------------
---------------------------------------
Paper Merchants
-------
---------------------------------------
---------------------------------------
Q1'07 Q2'07 Q3'07 Q4'07 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) 4 2 6 1 13
(+) Costs related to
synergies, integration
and optimization ($)
(-) Gains for lawsuit and
insurance claim
settlements ($)
(-) Gains related to
financial instruments ($)
(+) Closure and
restructuring costs ($)
(+) Impairment of goodwill
and property, plant
and equipment ($)
= Operating Income Before
Items ($) 4 2 6 1 13
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income Before
Items ($) 4 2 6 1 13
(+) Depreciation and
amortization ($) 1 1 2
= EBITDA Before
Items ($) 5 2 6 2 15
---------------------------------------
---------------------------------------
-------
---------------------------------------
---------------------------------------
Wood
-------
---------------------------------------
---------------------------------------
Q1'07 Q2'07 Q3'07 Q4'07 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) (4) (20) (13) (26) (63)
(+) Costs related to
synergies, integration
and optimization ($)
(-) Gains for lawsuit and
insurance claim
settlements ($)
(-) Gains related to
financial instruments ($)
(+) Closure and
restructuring costs ($) 1 1
(+) Impairment of goodwill
and property, plant
and equipment ($) 4 4
= Operating Income
Before Items ($) (3) (20) (13) (22) (58)
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income Before
Items ($) (3) (20) (13) (22) (58)
(+) Depreciation and
amortization ($) 5 6 6 8 25
= EBITDA Before
Items ($) 2 (14) (7) (14) (33)
---------------------------------------
---------------------------------------
-------
---------------------------------------
---------------------------------------
Corporate
-------
---------------------------------------
---------------------------------------
Q1'07 Q2'07 Q3'07 Q4'07 YTD
---------------------------------------
---------------------------------------
Reconciliation of Operating
Income to "Operating Income
Before Items"
Operating Income (loss) ($) (5) (3) 7 (1)
(+) Costs related to
synergies, integration
and optimization ($) (12) (12)
(-) Gains for lawsuit and
insurance claim
settlements ($)
(-) Gains related to
financial instruments ($)
(+) Closure and
restructuring costs ($)
(+) Impairment of goodwill
and property, plant
and equipment ($)
= Operating Income
Before Items ($) (5) (3) (5) (13)
Reconciliation of "Operating
Income Before Items" to
"EBITDA Before Items"
Operating Income Before
Items ($) (5) (3) (5) (13)
(+) Depreciation and
amortization ($)
= EBITDA Before
Items ($) (5) (3) (5) (13)
---------------------------------------
---------------------------------------
-------
"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.
