Domtar Corporation Reports Preliminary First Quarter 2015 Financial Results

Previously
Reported

(In millions of dollars)

1Q 2015

4Q 2014

4Q 2014

Sales

$1,348

$1,379

$1,379

Operating income (loss)

Pulp and Paper segment

75

88

76

Personal Care segment

10

11

12

Corporate

(14)

(13)

(2)

Total

71

86

86

Operating income before items¹

90

115

115

Depreciation and amortization

90

93

93

Domtar Corporation

Highlights

(In millions of dollars, unless otherwise noted)

Three months
ended March 31

Three months
ended March 31

2015

2014

(Unaudited)

$

$

Selected Segment Information

Sales 

Pulp and Paper

1,146

1,168

Personal Care

218

233

Total for reportable segments

1,364

1,401

Intersegment sales - Pulp and Paper

(16)

(7)

Consolidated sales

1,348

1,394

Depreciation and amortization and impairment and write-down of property, plant and equipment

Pulp and Paper

74

83

Personal Care

16

16

Total for reportable segments

90

99

Impairment and write-down of property, plant and equipment - Pulp and Paper

19

-

Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment

109

99

Operating income (loss)¹ 

Pulp and Paper

75

89

Personal Care

10

14

Corporate

(14)

(24)

Consolidated operating income 

71

79

Interest expense, net

26

25

Earnings before income taxes 

45

54

Income tax expense 

9

15

Net earnings

36

39

Per common share (in dollars)

Net earnings 

Basic

0.56

0.60

Diluted

0.56

0.60

Weighted average number of common and exchangeable shares outstanding (millions)

Basic

63.8

64.9

Diluted

63.9

65.0

Cash flows provided from operating activities 

127

141

Additions to property, plant and equipment

70

45

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 fo numbers for Operating income (loss) are as follows; Pulp and Paper: $69M, Personal Care: $15M, Corporate: $(5)M).

Domtar Corporation

Consolidated Statements of Earnings 

(In millions of dollars, unless otherwise noted)

Three months
ended March 31

Three months
ended March 31

2015

2014

(Unaudited)

$

$

Sales

1,348

1,394

Operating expenses

Cost of sales, excluding depreciation and amortization

1,062

1,103

Depreciation and amortization

90

99

Selling, general and administrative

100

114

Impairment and write-down of property, plant and equipment

19

-

Closure and restructuring costs

1

1

Other operating loss (income), net

5

(2)

1,277

1,315

Operating income 

71

79

Interest expense, net

26

25

Earnings before income taxes 

45

54

Income tax expense 

9

15

Net earnings 

36

39

Per common share (in dollars)

Net earnings

Basic

0.56

0.60

Diluted

0.56

0.60

Weighted average number of common and exchangeable shares outstanding (millions)

Basic

63.8

64.9

Diluted

63.9

65.0

Domtar Corporation

Consolidated Balance Sheets at

(In millions of dollars)

March 31

December 31

2015

2014

(Unaudited)

$

$

Assets

Current assets

Cash and cash equivalents

183

174

Receivables, less allowances of $10 and $6

660

628

Inventories

704

714

Prepaid expenses

28

25

Income and other taxes receivable

12

54

Deferred income taxes

78

75

Total current assets

1,665

1,670

Property, plant and equipment, at cost

8,726

8,909

Accumulated depreciation

(5,731)

(5,778)

Net property, plant and equipment

2,995

3,131

Goodwill

537

567

Intangible assets, net of amortization

612

661

Other assets

151

156

Total assets

5,960

6,185

Liabilities and shareholders' equity

Current liabilities

Bank indebtedness

6

10

Trade and other payables

697

721

Income and other taxes payable

39

26

Long-term debt due within one year

169

169

Total current liabilities

911

926

Long-term debt

1,179

1,181

Deferred income taxes and other

790

810

Other liabilities and deferred credits

370

378

Shareholders' equity

Common stock

1

1

Additional paid-in capital

2,000

2,012

Retained earnings 

1,155

1,145

Accumulated other comprehensive loss

(446)

(268)

Total shareholders' equity

2,710

2,890

Total liabilities and shareholders' equity

5,960

6,185

Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)

Three months

ended March 31

Three months
ended March 31

2015

2014

(Unaudited)

$

$

Operating activities

Net earnings 

36

39

Adjustments to reconcile net earnings to cash flows from operating activities

Depreciation and amortization 

90

99

Deferred income taxes and tax uncertainties

(15)

-

Impairment and write-down of property, plant and equipment

19

-

Net gain on disposal of property, plant and equipment 

(1)

-

Stock-based compensation expense

2

1

Other

(1)

3

Changes in assets and liabilities, excluding the effects of acquisition of business

Receivables

(44)

9

Inventories

(12)

(14)

Prepaid expenses

2

3

Trade and other payables

(10)

(23)

Income and other taxes  

55

20

Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense

2

(2)

Other assets and other liabilities

4

6

Cash flows provided from operating activities 

127

141

Investing activities

Additions to property, plant and equipment

(70)

(45)

Proceeds from disposal of property, plant and equipment 

1

-

Acquisition of business, net of cash acquired

-

(546)

Cash flows used for investing activities

(69)

(591)

Financing activities

Dividend payments

(24)

(18)

Net change in bank indebtedness

(4)

(8)

Change in revolving bank credit facility 

-

(80)

Proceeds from receivables securitization facilities

-

90

Payments on receivables securitization facilities

-

(58)

Repayment of long-term debt

(1)

-

Stock repurchase

(13)

-

Other

1

1

Cash flows used for financing activities

(41)

(73)

Net increase (decrease) in cash and cash equivalents

17

(523)

Impact of foreign exchange on cash

(8)

(2)

Cash and cash equivalents at beginning of period

174

655

Cash and cash equivalents at end of period

183

130

Supplemental cash flow information

Net cash payments for:

Interest 

27

22

Income taxes refund, net

(23)

(1)

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

Q1

Q2

Q3

Q4

YTD

Reconciliation of "Earnings before items" to Net earnings 

Net earnings 

($)

36

39

40

281

71

431

(+)

Impairment and write-down of property, plant and equipment 

($)

12

-

-

-

2

2

(+)

Closure and restructuring costs

($)

1

1

-

2

18

21

(-)

Net gain on disposal of property, plant and equipment 

($)

(1)

-

-

-

-

-

(+)

Impact of purchase accounting

($)

-

2

-

-

-

2

(-)

Alternative fuel tax credits

($)

-

-

-

(18)

-

(18)

(-)

Internal Revenue Service audit settlement items

($)

-

-

-

(204)

-

(204)

(=)

Earnings before items

($)

48

42

40

61

91

234

( / )

Weighted avg. number of common and exchangeable shares outstanding (diluted)

(millions)

63.9

65.0

65.1

64.9

64.4

64.9

(=)

Earnings before items per diluted share

($)

0.75

0.65

0.61

0.94

1.41

3.61

Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings 

Net earnings 

($)

36

39

40

281

71

431

(+)

Income tax expense (benefit)

($)

9

15

13

(186)

(12)

(170)

(+)

Interest expense, net

($)

26

25

26

25

27

103

(=)

Operating income 

($)

71

79

79

120

86

364

(+)

Depreciation and amortization

($)

90

99

96

96

93

384

(+)

Impairment and write-down of property, plant and equipment 

($)

19

-

-

-

4

4

(-)

Net gain on disposal of property, plant and equipment 

($)

(1)

-

-

-

-

-

(=)

EBITDA

($)

179

178

175

216

183

752

(/)

Sales

($)

1,348

1,394

1,385

1,405

1,379

5,563

(=)

EBITDA margin

(%)

13%

13%

13%

15%

13%

14%

EBITDA

($)

179

178

175

216

183

752

(-)

Alternative fuel tax credits

($)

-

-

-

(18)

-

(18)

(+)

Closure and restructuring costs

($)

1

1

-

2

25

28

(+)

Impact of purchase accounting 

($)

-

3

-

-

-

3

(=)

EBITDA before items

($)

180

182

175

200

208

765

(/)

Sales

($)

1,348

1,394

1,385

1,405

1,379

5,563

(=)

EBITDA margin before items

(%)

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

141

104

203

186

634

(-)

Additions to property, plant and equipment

($)

(70)

(45)

(56)

(56)

(79)

(236)

(=)

Free cash flow

($)

57

96

48

147

107

398

"Net debt-to-total capitalization" computation

Bank indebtedness

($)

6

8

15

3

10

(+)

Long-term debt due within one year

($)

169

15

7

170

169

(+)

Long-term debt

($)

1,179

1,490

1,410

1,202

1,181

(=)

Debt

($)

1,354

1,513

1,432

1,375

1,360

(-)

Cash and cash equivalents

($)

(183)

(130)

(85)

(134)

(174)

(=)

Net debt

($)

1,171

1,383

1,347

1,241

1,186

(+)

Shareholders' equity

($)

2,710

2,771

2,826

2,938

2,890

(=)

Total capitalization

($)

3,881

4,154

4,173

4,179

4,076

Net debt

($)

1,171

1,383

1,347

1,241

1,186

( / )

Total capitalization

($)

3,881

4,154

4,173

4,179

4,076

(=)

Net debt-to-total capitalization

(%)

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

-

-

-

75

10

-

-

-

10

(14)

-

-

-

(14)

71

-

-

-

71

(+)

Impairment and write-down of property, plant and equipment 

($)

19

-

-

-

19

-

-

-

-

-

-

-

-

-

-

19

-

-

-

19

(-)

Net gain on disposal of property, plant and equipment

($)

-

-

-

-

-

-

-

-

-

-

(1)

-

-

-

(1)

(1)

-

-

-

(1)

(+)

Closure and restructuring costs

($)

-

-

-

-

-

1

-

-

-

1

-

-

-

-

-

1

-

-

-

1

(=)

Operating income (loss) before items

($)

94

-

-

-

94

11

-

-

-

11

(15)

-

-

-

(15)

90

-

-

-

90

Reconciliation of "Operating income (loss) before items" to "EBITDA before items"

Operating income (loss) before items

($)

94

-

-

-

94

11

-

-

-

11

(15)

-

-

-

(15)

90

-

-

-

90

(+)

Depreciation and amortization

($)

74

-

-

-

74

16

-

-

-

16

-

-

-

-

-

90

-

-

-

90

(=)

EBITDA before items

($)

168

-

-

-

168

27

-

-

-

27

(15)

-

-

-

(15)

180

-

-

-

180

(/)

Sales

($)

1,146

-

-

-

1,146

218

-

-

-

218

-

-

-

-

-

1,364

-

-

-

1,364

(=)

EBITDA margin before items

(%)

15%

-

-

-

15%

12%

-

-

-

12%

-

-

-

-

-

13%

-

-

-

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

119

88

370

14

12

12

11

49

(24)

(7)

(11)

(13)

(55)

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