Domtar Corporation News
Domtar Corporation reports preliminary fourth quarter and fiscal year 2007 results
Fourth quarter 2007: —————————— - Charge of $96 million ($66 million after tax) related to the impairment of goodwill and property, plant and equipment; - Gains of $51 million ($35 million after tax) for lawsuit and insurance claim settlements; - Expenses of $25 million ($17 million after tax) related to the debt restructuring; - Costs of $21 million ($14 million after tax) related to synergies, integration and optimization; - Gain of $11 million related to a change in statutory income tax rates; - Closure and restructuring costs of $7 million ($5 million after tax); and - Gains of $2 million ($1 million after tax) related to financial instruments. Third quarter 2007: —————————- - Costs of $14 million ($8 million after tax) related to synergies, integration and optimization; - Gains of $6 million ($4 million after tax) related to financial instruments; - Charge of $3 million related to a change in statutory income tax rates; and - Closure and restructuring costs of $2 million ($1 million after tax).
Commenting on the financial results,
FISCAL YEAR 2007 HIGHLIGHTS
For fiscal year 2007, net income amounted to
"This has been a historic year for Domtar," added
SEGMENT REVIEW PAPERS
Operating income, including a
Excluding the
(In millions of dollars) 3Q 2007 4Q 2007 ————————————————— ——————- —————- Sales $1,411 $1,401 Operating income $133 $25 Depreciation and amortization $122 $124 Impairment of PP&E - $92 PAPER MERCHANTS
Operating income was
When compared to the third quarter, the decrease in operating income is the result of a decrease in allowance for doubtful accounts recorded in the third quarter and higher costs. These factors were partially mitigated by higher deliveries.
(In millions of dollars) 3Q 2007 4Q 2007 ————————————————— ——————- —————- Sales $249 $262 Operating income $6 $1 Depreciation and amortization - $1 WOOD
The operating loss, including a
Excluding the
(In millions of dollars) 3Q 2007 4Q 2007 ————————————————— ——————- —————- Sales $88 $79 Operating loss ($13) ($26) Depreciation and amortization $6 $8 Impairment of goodwill - $4 OUTLOOK
For 2008, inflation pressures on energy-related costs, including those related to fiber and chemicals, are expected to remain while costs related to integration are expected to decelerate in the second half of the year. Average paper price realizations are expected to increase after giving effect to price increases implemented toward the end of 2007 and additional pricing initiatives announced for 2008. Paper volumes are expected to stay relatively steady when compared to 2007. While there are indications that growth in the U.S. economy may continue to slow in the next months, this has not yet translated into Domtar's Papers business.
EARNINGS CONFERENCE CALL
The Company will hold a conference call today at
THE TRANSACTION
Domtar Corporation started its operations on
The financial results of Domtar Corporation cover certain periods prior to the Transaction. For accounting and financial reporting purposes, Weyerhaeuser Fine Paper Business is considered to be the "predecessor" to Domtar Corporation and as a result, its historical financial statements now constitute the historical financial statements of Domtar Corporation. The results reported for the third and fourth quarter of 2007 include the results of operations of the new Company for the entire period. The results reported for the fiscal year 2006 include only the results of operations of the Weyerhaeuser Fine Paper Business, on a carve-out basis, for the entire period. The results reported for the fiscal year 2007 include the results of operations of the Weyerhaeuser Fine Paper Business, on a carve-out basis, for the period from
ABOUT DOMTAR
Domtar Corporation (NYSE/TSX: UFS) is the largest integrated producer of uncoated freesheet paper in
FORWARD-LOOKING STATEMENTS
All statements in this press 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-Q 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.
Domtar Corporation Consolidated Statements of Income (In millions of US dollars, unless otherwise noted) ————————————————————————————————————- ————————————————————————————————————- Thirteen Fourteen Fifty-two Fifty-three weeks weeks weeks weeks ended ended ended ended ————————————————————————————————————- December December December December 30 31 30 31 2007 2006 2007 2006 (Unaudited) (Unaudited) —————— ————— ————— —————- —————— ————— ————— —————- $ $ $ $ Sales 1,653 873 5,947 3,306 Operating expenses Cost of sales, excluding depreciation and amortization 1,319 671 4,757 2,676 Depreciation and amortization 133 82 471 311 Selling, general and administrative 136 43 408 174 Impairment of goodwill and property, plant and equipment 96 - 96 749 Closure and restructuring costs 7 (1) 14 15 Antidumping and countervailing duties refund - (65) - (65) Other operating expenses (income) (45) - (69) 2 ————————————————————————————————————— 1,646 730 5,677 3,862 ————————————————————————————————————- Operating income (loss) 7 143 270 (556) Interest expense 65 - 171 - ————————————————————————————————————- Income (loss) before income taxes (58) 143 99 (556) Income tax expense (benefit) (32) 41 29 53 ————————————————————————————————————- Net income (loss) (26) 102 70 (609) ————————————————————————————————————- ————————————————————————————————————- Per common share (in dollars) Net income (loss) Basic (0.05) 0.36 0.15 (2.14) Diluted (0.05) 0.36 0.15 (2.14) Weighted average number of common and exchangeable shares outstanding (millions) Basic 515.4 284.1 474.1 284.1 Diluted 515.4 284.1 475.9 284.1 ————————————————————————————————————- ————————————————————————————————————- Domtar Corporation Consolidated Balance Sheets As at (In millions of US dollars) ————————————————————————————————————- ————————————————————————————————————- December 30 December 31 ————————————————————————————————————- 2007 2006 (Unaudited) $ $ Assets Current assets Cash and cash equivalents 71 1 Receivables, less allowances of $9 and $2 570 340 Inventories 936 520 Prepaid expenses 14 6 Income and other taxes receivable 53 - Deferred income taxes 181 22 ————————————————————————————————————- Total current assets 1,825 889 Property, plant and equipment, at cost 9,685 6,696 Accumulated depreciation (4,323) (3,631) ————————————————————————————————————- Net property, plant and equipment 5,362 3,065 Goodwill 393 14 Intangible assets, net of amortization 111 - Other assets 119 30 ————————————————————————————————————- Total assets 7,810 3,998 ————————————————————————————————————- ————————————————————————————————————- Liabilities and shareholders' equity Current liabilities Bank indebtedness 63 - Trade and other payables 789 250 Income and other taxes payable 50 6 Long-term debt due within one year 17 12 ————————————————————————————————————- Total current liabilities 919 268 Long-term debt 2,213 32 Deferred income taxes 1,066 758 Other liabilities and deferred credits 440 25 Shareholders' equity Business Unit equity - 2,852 Common stock 5 - Exchangeable shares 293 - Additional paid-in capital 2,548 - Retained earnings 46 - Accumulated other comprehensive income 280 63 ————————————————————————————————————- Total shareholders' equity 3,172 2,915 ————————————————————————————————————- Total liabilities and shareholders' equity 7,810 3,998 ————————————————————————————————————- ————————————————————————————————————- Domtar Corporation Consolidated Statements of Cash Flows (In millions of US dollars) ————————————————————————————————————- ————————————————————————————————————- Thirteen Fourteen Fifty-two Fifty-three weeks weeks weeks weeks ended ended ended ended ————————————————————————————————————- December December December December 30 31 30 31 2007 2006 2007 2006 (Unaudited) (Unaudited) —————— ————— ————— —————- —————— ————— ————— —————- $ $ $ $ Operating activities Net income (loss) (26) 102 70 (609) Adjustments to reconcile income to cash flows from operating activities Depreciation and amortization 133 82 471 311 Deferred income taxes (48) (30) (73) (52) Closure and restructuring costs 7 (1) 14 15 Impairment of goodwill and property, plant and equipment 96 - 96 749 Debt restructuring costs 25 - 25 - Other (4) 3 (2) 4 Changes in assets and liabilities, net of effects of acquisition Receivables 23 9 (103) (19) Inventories 17 (1) 38 43 Prepaid expenses 10 2 6 (2) Trade and other payables 30 (16) 88 (79) Income and other taxes (19) - 49 - Other assets and other liabilities (61) (5) (67) (4) Payments of closure and restructuring costs (1) - (6) - ————————————————————————————————————- Cash flows provided from operating activities 182 145 606 357 ————————————————————————————————————- Investing activities Additions to property, plant and equipment (51) (11) (116) (64) Proceeds from disposals of property, plant and equipment 6 1 29 1 Business acquisitions - cash acquired - - 573 - Other - - (1) - ————————————————————————————————————- Cash flows provided from (used for) investing activities (45) (10) 485 (63) ————————————————————————————————————- Financing activities Net change in bank indebtedness (12) - (21) - Drawdown of revolving bank credit 50 - 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 (155) (3) (311) (7) Debt issue costs (15) - (39) - Premium on redemption of long-term debt (40) - (40) - Repurchase of minority interest (24) - (24) - Distribution to Weyerhaeuser prior to March 7, 2007 - (132) (1,431) (287) Other - - (5) - ————————————————————————————————————- Cash flows used for financing activities (196) (135) (1,021) (294) ————————————————————————————————————- Net increase (decrease) in cash and cash equivalents (59) - 70 - Translation adjustments related to cash and cash equivalents (6) - - - Cash and cash equivalents at beginning of year 136 1 1 1 ————————————————————————————————————- Cash and cash equivalents at end of year 71 1 71 1 ————————————————————————————————————- ————————————————————————————————————- Supplemental cash flow information Net cash payments for: Interest 60 - 148 - Income taxes 74 - 112 - ————————————————————————————————————- Domtar Corporation Supplemental Segmented Information (In millions of dollars, unless otherwise noted) ————————————————————— 2007 ————————————————————— Q1 Q2 Q3 Q4 YTD ————————————————————— Papers Segment Sales(a) ($) $955 $1,349 $1,411 $1,401 $5,116 Operating Income ($) $71 $92 $133 $25 $321 Depreciation & amortization ($) $72 $126 $122 $124 $444 Impairment of PP&E(b) ($) $92 $92 Papers Papers Production ('000 ST) 826 1,216 1,187 1,182 4,411 Papers Shipments ('000 ST) 871 1,209 1,261 1,160 4,501 Uncoated freesheet ('000 ST) 814 1,163 1,194 1,104 4,275 Coated groundwood ('000 ST) 57 46 67 56 226 20-lb repro bond, 92 bright (copy)(c) list price ($/ton) $930 $963 $990 $990 $968 50-lb offset, rolls(c) list price ($/ton) $810 $810 $803 $847 $818 Coated publication # 5, 40-lb offset, rolls(c) list price ($/ton) $778 $748 $782 $840 $787 Pulp Pulp Shipments(d) ('000 ADMT) 249 330 333 411 1,323 Hardwood Kraft Pulp (%) 21% 46% 48% 45% 42% Softwood Kraft Pulp (%) 61% 41% 40% 46% 46% Fluff Pulp (%) 18% 13% 12% 9% 12% Pulp NBSK - U.S. market(c) list price ($/ADMT) $790 $810 $837 $858 $824 Pulp NBHK - Japan market(c)(e) list price ($/ADMT) $640 $640 $658 $683 $655 Paper Merchants Segment Sales(a) ($) $76 $226 $249 $262 $813 Operating Income ($) $4 $2 $6 $1 $13 Depreciation & amortization ($) $1 $1 $2 Wood Segment Sales(a) ($) $47 $90 $88 $79 $304 Operating Loss ($) ($4) ($20) ($13) ($26) ($63) Depreciation & amortization ($) $5 $6 $6 $8 $25 Impairment of goodwill ($) $4 $4 Lumber Production (Millions FBM) 68 152 164 158 542 Lumber Shipments (Millions FBM) 88 227 197 172 684 Lumber G.L. 2x4x8 studs(c) prices ($/MFBM) $317 $335 $336 $294 $321 Lumber G.L. 2x4 R/L, no. 1 & no. 2(c) prices ($/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 1.020 0.931 ————————————————————— (a) Sales represent sales before intersegment sales. (b) Includes $92 million related to the impairment of assets due to the fourth quarter announcement of reorganization at our Dryden, Ontario mill. (c) Source: Pulp & Paper Week and Random Lengths. (d) 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. (e) Based on Pulp & Paper Week's Southern Bleached Hardwood Kraft pulp prices for Japan, increased by an average differential of $15/ADMT between Northern and Southern Bleached Hardwood Kraft pulp prices. Domtar Corporation Reconciliation of Non-GAAP Financial Measures (In millions of dollars, unless otherwise noted)
The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified as "Earnings Before Items," "EBITDA," "EBITDA Before Items," "Free Cash Flow" and "Net Debt-to-Total Capitalization." Management believes that the financial metrics presented are frequently used by investors and are useful to evaluate the ability to service debt and the overall credit profile of the company. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.
The company calculates "Earnings Before Items" and "EBITDA Before Items" by excluding the after-tax (pre-tax) effect of items considered by management as not typifying the net income (loss) reported under U.S. GAAP. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with net income (loss) provides for a more complete analysis of the results of operations. Net income (loss) is the most directly comparable GAAP measure.
————————————————————— 2007 ————————————————————— Q1 Q2 Q3 Q4 YTD ————————————————————— Reconciliation of \"Earnings Before Items\" to Net Income (Loss) Net income (loss) ($) 49 11 36 (26) 70 (+) 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 ($) 17 17 (+) Costs related to synergies, integration and optimization ($) 4 4 8 14 30 (-) Gain related to change in statutory income tax rate ($) (6) (1) 3 (11) (15) (+) Closure and restructuring costs ($) 2 1 1 5 9 (-) 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 Income (Loss) Net income (loss) ($) 49 11 36 (26) 70 (+) Income tax expense (benefit) ($) 11 11 39 (32) 29 (+) Interest expense ($) 11 47 48 65 171 (+) Depreciation and amortization ($) 78 132 128 133 471 (+) Impairment of goodwill and property, plant and equipment ($) 96 96 (=) EBITDA ($) 149 201 251 236 837 (-) Gains for lawsuit & insurance claim settlements ($) (51) (51) (+) Costs related to synergies, integration and optimization ($) 7 6 14 21 48 (+) Closure and restructuring costs ($) 3 2 2 7 14 (-) Gains related to financial instruments ($) (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 ($) (14) (32) (19) (51) (116) (=) Free cash flow ($) 77 157 125 131 490 \"Net Debt-to-Total Capitalization\" Reconciliation 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) - (=) Net debt ($) 2,577 2,438 2,314 2,222 - (+) Shareholders' equity ($) 2,941 3,094 3,212 3,172 - (=) Total capitalization ($) 5,518 5,532 5,526 5,394 - Net debt ($) 2,577 2,438 2,314 2,222 - (/) Total capitalization ($) 5,518 5,532 5,526 5,394 - (=) 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 income (loss), or any other income 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.
SOURCE Domtar Corporation
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