DOMT
AR
2016 ANNUAL
REPORT
1
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REVENUE
DRIVERS
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PULP AND PAPER SEGMENT
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OVERVIEW
We are the largest North American producer of uncoated freesheet communication papers. Our customers are long-term partners who recognize and
appreciate our responsibly-made products backed by a reliable and flexible supply chain.
Our copy paper is available through a variety of distribution channels such as major North American retailers, independent office supply dealers,
and paper merchants. Commercial printing and publishing papers are sold to printers and converters who further process the paper into its final
end-use
state. These products include envelopes, business forms,
notebooks, books, advertising materials and more.
We market
recognized paper brands such as Xerox
®
Paper and Specialty Media, Cougar
®
,
Lynx
®
Opaque Ultra, Husky
®
Opaque Offset, First Choice
®
and EarthChoice
®
. We also work with customers to develop their own house brands.
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PRIORITIES
North American demand for uncoated freesheet is declining. We will continue to work with customers who are winning in their space and be a
supplier of choice by operating efficient, reliable assets and providing superior customer service.
Our commitment to the North American uncoated freesheet market is further reflected in our strong advocacy of paper-based communications through
contributions to the
Paper & Packaging - How Life Unfolds
TM
program, an industry effort to promote paper usage and increase packaging demand, as well as our
PaperBecause
®
campaign.
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DOMT
AR
2016 ANNUAL
REPORT
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REVENUE
DRIVERS
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PULP AND PAPER SEGMENT
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OVERVIEW
We are an important supplier of specialty papers manufactured in North America. Our products include a wide array of specifically engineered and
customized paper products for converter customers that must also meet the needs of their customersand ultimately, end users.
We specialize in food packaging, medical disposables and thermal papers. Food packaging includes everything from hamburger wrappers and foil
pouches to sugar packets, popcorn bags, butter wrap, baking cups and pan liners. Medical applications include bandage wraps, sterilizable pouches, surgical gowns and medical wipes. Our thermal papers are used for cash register receipts and ATM print
outs, as well as lottery and entertainment tickets.
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PRIORITIES
Specialty papers is an attractive market that is growing in step with the economy. Existing paper producers looking for growing markets are drawn
to its potential while
non-paper
substitutes are available in some
sub-segments,
resulting in a competitive market. We succeed through innovation and by placing the
highest priority on service and flexibility to meet customer needs, supported by highly experienced technical resources.
Last year, we began supplying a broad range of unbleached food packaging papers to further diversify our offering in a segment that is growing at
a higher rate largely due to
end-user
demand for natural products. In 2017, we will maintain a strong innovation pipeline and bring new products to market while maximizing the flexibility of our assets to be
the partner of choice for our customers.
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DOMT
AR
2016 ANNUAL
REPORT
3
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REVENUE
DRIVERS
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PULP AND PAPER SEGMENT
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OVERVIEW
We are a large pulp manufacturer with more than 60 years of global industry knowledge, a talented team of experts and an extensive product mix.
Our high-quality papergrade, fluff and specialty pulps are sold to customers in North America, China, Japan, Southeast Asia, Europe, the Middle East and North Africa.
Our papergrade pulp is essential for manufacturing everyday consumer products such as bathroom and facial tissue, as well as paper towels, all of
which are growing markets. Domtar Lighthouse
®
fluff pulp is used in the absorbent core of personal care products such as infant diapers, adult incontinence products, feminine hygiene products
and airlaid
non-wovens.
It is also used in absorbent toweling, and other more specialized applications. Our specialty pulp customers produce a wide variety of products ranging from specialty and packaging
papers to electrical insulating papers and building products.
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PRIORITIES
The global pulp market continues to experience modest demand growth. We aim to grow in the towel and tissue segment, as well as in hygiene
products with multinational consumer goods companies. We are also actively adding specialty pulps to our offering to address niche markets.
With the
ramp-up
of the new machine at our Ashdown mill during 2017, we will have the flexibility to
increase production of fluff pulp and papergrade pulp, depending on demand in their respective markets. This new capacity also makes us a more reliable supplier for major customers by adding a second manufacturing location for fluff pulp to our mill
network.
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4
DOMT
AR
2016 ANNUAL
REPORT
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REVENUE
DRIVERS
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PERSONAL CARE SEGMENT
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OVERVIEW
We are a leading manufacturer of high-quality and innovative absorbent hygiene products, serving customers primarily in North America and Europe.
We design and produce adult incontinence products such as protective underwear, briefs, underpads, pads and washcloths, as well as infant diapers and training pants.
We are experts in the development of ultrathin disposable absorbent composites. While using our innovations in our own product lines, such as
Attends
®
, Indasec
®
and Comfees
®
, our EAM business manufactures and supplies
airlaid and ultrathin laminated absorbent cores for some of the worlds largest branded and private label feminine hygiene, adult incontinence, infant diaper, healthcare and packaging companies.
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PRIORITIES
In 2016, we grew sales, further integrated our operations, and delivered cost savings through operational efficiencies. Our consumer-centric focus is leading to greater insights for product innovation, an example of which is the
launch of our Attends Discreet
®
product line. We are further developing our capabilities to better reach
end-users
where they live, shop and work. The
acquisition of HDIS (Home Delivery Incontinent Supplies Co.) expanded our
direct-to-consumer
business, allowing us to reach even more consumers. We have invested in our
manufacturing locations, including new lines, retrofits, and supporting infrastructure to better serve our customers while reducing costs.
Priorities in 2017 include capturing sales growth and higher margins by continuing to evolve and differentiate the way we sell our products and
expanding our partner-brand strategy. We are working with retailers to build their own brands by contributing product knowledge, manufacturing capabilities and consumer insights. We will also focus on growing our brands in healthcare, particularly
in the fast-growing home care segment.
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DOMT
AR
2016 ANNUAL
REPORT
5
MESSAGE
TO SHAREHOLDERS
WORKING
TO MAKE DOMTAR STRONGER
Domtars journey to sustainable growth remains firmly on track and our actions in 2016 will further advance our
progress. Our manufacturing efficiency is improving each year and we continue to deliver innovation, quality and excellent service to our customers. As a result, we are generating strong cash flow to support the execution of our growth strategy
while also returning capital to our shareholders.
Strong sales growth of personal care products was a highlight of 2016. In uncoated freesheet, we generated solid
margins and maintained our leadership position in North America. The successful
start-up
of the worlds most modern fluff pulp line at our Ashdown mill, a major capital project, marked the second half of
the year. As well, process and other improvements across Domtar delivered meaningful efficiency gains and cost savings. With these achievements in both of our divisions, we built momentum for our growth strategy for years to come.
PERSONAL CARE DIVISION
Our personal care business made notable progress in
2016 in both adult incontinence and infant diapers, with sales increasing 6%.
New customer wins through our partner-brand model resulted in significantly higher
volumes in North America and Europe, supported by operational cost savings from recent investments in our manufacturing platform. We also completed a number of capital projects including strategic investments in capacity to keep pace with customer
demand in both our adult incontinence and infant diaper businesses.
We expect to build on our sales momentum in 2017 by winning additional volume through our partner-brand model and new
marketing initiatives in the North American institutional healthcare channel. Growth is anticipated to be driven by additional production capacity for our retail brands in Europe and expansion of
direct-to-consumer
sales in the U.S., a new channel established through the acquisition of HDIS in the fourth quarter.
PULP AND PAPER DIVISION
In our pulp and paper businesses, our relentless
focus on execution and operational excellence continued to unlock value from our assets.
We maintained margins in our core paper business through lower production
costs and price increases in some paper grades. Our continuous improvement and reliability programs generated savings across our mill network, and we closely matched production volumes with our customer demand. We took market downtime and
permanently removed 364,000 short tons of paper capacity early in the year with the closing of a paper machine at our Ashdown mill.
Our pulp business benefitted
from strong demand and productivity throughout the year. In late 2016, we began the qualification process at our new fluff line in Ashdown, with very good initial results. This line will add up to 516,000 air dry metric tons of high-quality pulp
capacity to our system with the capability of switching between fluff pulp and softwood bales depending on market demand. This positions Domtar as a significant player in this growing global market.
6
DOMT
AR
2016 ANNUAL
REPORT
As fiber innovators, we are also accelerating our research and development program in biomaterials, including advanced
fibers, extractives, lignin, biofuels and wood-based cellulose derivatives. These are longer-term opportunities and we are casting a wide net to attract potential commercial partners.
TRANSITION TO GROWTH
Domtar is now a supplier of choice in three markets
with growing demandpersonal care, pulp and specialty papers. We aim to grow our scale and profitability in these markets, and in adjacent markets, while maintaining our leadership in communication papers.
Our objective is to generate $300 to $500 million in EBITDA from growing businesses; we currently have the capacity to reach close to the
half-way
point of our target with our new fluff line at Ashdown and our growing personal care business.
A solid balance sheet
and our proven ability to sustain strong cash generation provide the means to fund continued growth while returning cash to shareholders. We will continue to pursue this balanced approach to capital deployment in the years ahead.
ACKNOWLEDGEMENTS
The performance of our people was exemplary in 2016. Our
employees are working smart every day and living our values of agility, caring and innovation. They are making Domtar a stronger company, and I thank them sincerely for their dedication. Protecting their safety and wellness is a top priority, backed
by rigorous programs. Health and safety performance was positive across Domtar in 2016, and we remain committed to continuous improvement.
OUR EMPLOYEES ARE WORKING
SMART EVERY DAY AND LIVING
OUR VALUES OF AGILITY, CARING
AND INNOVATION.
I also wish to reiterate our deep attachment to the
communities we call home. In 2016, Domtar employees doubled the number of volunteer hours invested in company-sponsored community programs in support of literacy, health and wellness, and sustainabilitya striking example of caring.
Finally, I wish to thank our shareholders for supporting our journey to sustainable growth.
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John D. Williams
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President and Chief Executive Officer
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The term EBITDA referred to in this message is a
non-GAAP
|
financial measure. Please see Reconciliation of
non-GAAP
financial
|
measures at the end of this document.
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DOMT
AR
2016 ANNUAL
REPORT
7
8
DOMT
AR
2016 ANNUAL
REPORT
WORKING SMART
EVERY DAY
ENGAGING OUR PEOPLE
IN CONTINUOUS IMPROVEMENT
For our pulp and paper division, working smart means taking a disciplined, methodical and measured
approach to continuous improvement (CI). Using a common set of tools, processes and metrics, Domtar colleagues are finding savings and increasing productivity across the mill system.
The entire success of our CI program is dependent on the support, participation and commitment of our employees, says Michael D. Garcia,
President, Pulp and Paper Division. The power in CI is really about engaging the people closest to the work, getting their ideas on how to make improvements and giving them the opportunity to make processes run better.
CI initiatives driven by engaged people are instrumental in optimizing Domtars pulp and paper operations and
reducing manufacturing costs per ton, in many cases with little or no capital spending. From increasing machine uptime to reducing scrap, there is no shortage of areas for improvement in a complex manufacturing process such as ours.
By actively working with all of our bleached pulp mills in 2016 to reduce variability and optimize targets, we reduced the cost per ton of
chemicals.
An ongoing and focused CI effort at our Plymouth mill resulted in more stable and efficient digester cooking and chemical bleaching operating
parameters that helped lower manufacturing costs and set annual production records in 2016.
Despite more frequent grade changes
and shorter runs, our Johnsonburg mill improved downtime, reduced the amount of paper being put back in the pulper, as well as time spent on grade changes. This led to an increase in machine efficiency in 2016.
New and ongoing CI projects are expected to support cost reduction and productivity increases across our mill system in 2017. The same principles are also being
successfully applied to Domtar-wide health and safety initiatives. We will continue to maximize the contribution of reliable and efficient assets through the efforts of engaged and motivated employees who are empowered to make a difference.
DOMT
AR
2016 ANNUAL
REPORT
9
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DOMT
AR
2016 ANNUAL
REPORT
DOMT
AR
2016 ANNUAL
REPORT
11
12
DOMT
AR
2016 ANNUAL
REPORT
WORKING SMART
EVERY DAY
WORKING SMART MEANS
WORKING SAFE
At Domtar, working smart goes hand in hand with working safe. Our focus is on maintaining
hazard-free
work environments through the development and application of various strategies, including Human Performance Improvement principles, to continually reduce injuries. Every colleague at Domtar knows
that their safety and wellbeing is our number one priority.
LEAP FORWARD FOR PULP AND PAPER
In 2016, the pulp and paper division continued to drive safety performance improvements across the mill system, supported by improved data analysis, corrective action
tracking, and predictive analytics to provide proactive and preventative measures.
Results for the year show a 19% reduction in recordable events and a 28%
reduction in serious events classified as lost time. This represents the most significant improvement since 2012, and is ahead of the plan to reach a total frequency rate of 0.50 by 2020.
HEALTH AND SAFETY ACCOLADES
In 2016, nine Domtar locations won Pulp and Paper Safety Association awards, including five converting sites, three pulp and paper mills and one
personal care facility.
RECORD FOR PERSONAL CARE
The
personal care division achieved a record low total frequency rate in 2016 of 0.68, a 23% improvement over the prior year. All sites executed a hand safety campaign in early 2016, which led to a reduction in hand injuries from nine in 2015 to only
five in 2016.
Over 200 colleagues in personal care were trained to become safety leaders during the year, and all remaining sites completed
Domtars safety audit program. The division ended the year with the last 80 days injury free.
TOTAL FREQUENCY RATES
DOMT
AR
2016 ANNUAL
REPORT
13
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DOMT
AR
2016 ANNUAL
REPORT
MANAGEMENT COMMITTEE AND
BOARD OF DIRECTORS
WORKING
STARTS AT THE TOP
Domtar upholds the highest standards of business integrity and social responsibility. Our commitment to operating
responsibly is supported by our
Code of Business Conduct and Ethics
applicable to Board members and employees alikestrict
Corporate Governance Guidelines
and a robust compliance program.
We have adopted a wide range of policies, regularly reviewed and updated, to promote strong governance, best practices, diversity and sustainability. Often going
beyond what the law requires, our policies set the tone for the way we conduct our business at all levels and at all times, providing a solid foundation for working smart.
For more information on governance at Domtar, or to consult our proxy statement, please visit
domtar.com.
MANAGEMENT COMMITTEE
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John D. Williams
President
and Chief Executive
Officer
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Daniel Buron
Senior Vice
President
and Chief Financial
Officer
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Michael D. Garcia
President
Pulp and Paper Division
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Michael Fagan
President
Personal Care Division
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Zygmunt Jablonski
Senior
Vice President
and Chief Legal
and Administrative
Officer
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Patrick Loulou
Senior
Vice President
Corporate Development
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BOARD OF DIRECTORS
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Robert J. Steacy
Chairman of the Board
Domtar Corporation
Toronto, Ontario
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Louis P. Gignac
Chairman
G Mining Services Inc.
Montreal, Quebec
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David G. Maffucci
Corporate Director
Isle of Palms,
South Carolina
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John D. Williams
President and
Chief Executive Officer
Domtar Corporation
Charlotte, North Carolina
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Giannella Alvarez
Chief
Executive Officer
Harmless Harvest, Inc.
San Francisco, California
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David J. Illingworth
Corporate Director
Orchid, Florida
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Pamela B. Strobel
Corporate Director
Chicago, Illinois
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Mary A. Winston
President
WinsCo Enterprises, Inc.
Charlotte, North Carolina
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Robert E. Apple
Chief
Operating Officer
MasTec, Inc.
Miami, Florida
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Brian M. Levitt
Chairman
of the Board
The Toronto Dominion
Bank and Vice-Chair
Osler, Hoskin & Harcourt LLP
Montreal, Quebec
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Denis Turcotte
President
and CEO
North Channel Management
Sault Ste. Marie, Ontario
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DOMT
AR
2016 ANNUAL
REPORT
15
16
DOMT
AR
2016 ANNUAL
REPORT
DOMT
AR
2016 ANNUAL
REPORT
17
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FINANCIAL
OVERVIEW
SELECTED FINANCIAL FIGURES
|
|
Years ended December 31
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
(In
millions of dollars unless otherwise noted)
|
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|
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Consolidated sales
per segment
|
|
|
|
|
|
|
|
|
|
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Pulp and
Paper
|
|
|
4,674
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|
|
|
4,458
|
|
|
|
4,239
|
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Intersegment
salesPulp and Paper
|
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|
(39)
|
|
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|
(63)
|
|
|
|
(58
|
)
|
Personal Care
|
|
|
928
|
|
|
|
869
|
|
|
|
917
|
|
Consolidated
sales
|
|
|
5,563
|
|
|
|
5,264
|
|
|
|
5,098
|
|
Operating income
(loss) per segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp and
Paper
|
|
|
352
|
|
|
|
270
|
|
|
|
217
|
|
Personal
Care
|
|
|
49
|
|
|
|
61
|
|
|
|
57
|
|
Corporate
|
|
|
(37)
|
|
|
|
(43)
|
|
|
|
(51
|
)
|
Operating
income
|
|
|
364
|
|
|
|
288
|
|
|
|
223
|
|
Net
earnings
|
|
|
431
|
|
|
|
142
|
|
|
|
128
|
|
Cash flow from
operating activities
|
|
|
634
|
|
|
|
453
|
|
|
|
465
|
|
Capital expenditures
|
|
|
236
|
|
|
|
289
|
|
|
|
347
|
|
Free cash flow
(1)
|
|
|
398
|
|
|
|
164
|
|
|
|
118
|
|
Total
assets
|
|
|
6,175
|
|
|
|
5,654
|
|
|
|
5,680
|
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Long-term debt,
including current portion
|
|
|
1,340
|
|
|
|
1,251
|
|
|
|
1,281
|
|
Net
debt-to-total
capitalization ratio
(1)
|
|
|
29%
|
|
|
|
30%
|
|
|
|
30%
|
|
Total
shareholders equity
|
|
|
2,890
|
|
|
|
2,652
|
|
|
|
2,676
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Weighted average number of common and exchangeable shares outstanding in millions
(diluted)
|
|
|
64.9
|
|
|
|
63.4
|
|
|
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62.7
|
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1)
Non-GAAP
financial measure. Please see Reconciliation of
non-GAAP
financial measures at the end of this document.
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18
DOMT
AR
2016 ANNUAL REPORT
|
PULP AND PAPER SEGMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
(In millions of dollars unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
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Sales
(including sales to Personal Care)
|
|
|
4,674
|
|
|
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4,458
|
|
|
|
4,239
|
|
Operating income
|
|
|
352
|
|
|
|
270
|
|
|
|
217
|
|
Depreciation and amortization
|
|
|
319
|
|
|
|
297
|
|
|
|
284
|
|
Capital expenditures
|
|
|
161
|
|
|
|
221
|
|
|
|
287
|
|
Total assets
|
|
|
3,915
|
|
|
|
3,667
|
|
|
|
3,637
|
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Paper shipmentsmanufactured (000 ST)
|
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|
3,148
|
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|
|
3,163
|
|
|
|
3,021
|
|
Pulp shipments
(000
ADMT)
|
|
|
1,391
|
|
|
|
1,414
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|
|
|
1,513
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MANUFACTURING CAPACITY BY REGION
PERSONAL CARE SEGMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
(1)
|
(In millions of dollars unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
928
|
|
|
|
869
|
|
|
|
917
|
|
Operating income
|
|
|
49
|
|
|
|
61
|
|
|
|
57
|
|
Depreciation and amortization
|
|
|
65
|
|
|
|
62
|
|
|
|
64
|
|
Capital expenditures
|
|
|
86
|
|
|
|
57
|
|
|
|
55
|
|
Total assets
|
|
|
1,963
|
|
|
|
1,822
|
|
|
|
1,884
|
|
SALES BY PRODUCT CATEGORY
(1)
1) Including HDIS since October 1, 2016
DOMT
AR
2016 ANNUAL
REPORT
19
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
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 these metrics are also useful to measure the
operating performance and benchmark with peers within the industry. The Company calculates Earnings before items and EBITDA before items by excluding the
after-tax
(pre-tax)
effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.
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|
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|
|
|
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|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
|
|
2016
|
|
Reconciliation of Earnings before items to
Net earnings
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
($
|
)
|
|
|
431
|
|
|
|
142
|
|
|
|
|
|
128
|
|
(+)
|
|
Impairment of property, plant and equipment
|
|
|
($
|
)
|
|
|
2
|
|
|
|
47
|
|
|
|
|
|
22
|
|
(+)
|
|
Closure and restructuring costs
|
|
|
($
|
)
|
|
|
21
|
|
|
|
4
|
|
|
|
|
|
25
|
|
(+)
|
|
Litigation settlement
|
|
|
($
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
(-)
|
|
Net gains on disposals of property, plant and equipment
|
|
|
($
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
(+)
|
|
Impact of purchase accounting
|
|
|
($
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
1
|
|
(-)
|
|
Alternative fuel tax credits
|
|
|
($
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
(+)
|
|
Debt refinancing costs
|
|
|
($
|
)
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
(-)
|
|
Internal Revenue Service audit settlement items
|
|
|
($
|
)
|
|
|
(204
|
)
|
|
|
|
|
|
|
|
|
|
|
(=)
|
|
Earnings before items
|
|
|
($
|
)
|
|
|
234
|
|
|
|
211
|
|
|
|
|
|
178
|
|
(/)
|
|
Weighted avg. number of common and exchangeable shares outstanding (diluted)
|
|
|
(millions
|
)
|
|
|
64.9
|
|
|
|
63.4
|
|
|
|
|
|
62.7
|
|
(=)
|
|
Earnings before items per diluted share
|
|
|
($
|
)
|
|
|
3.61
|
|
|
|
3.33
|
|
|
|
|
|
2.84
|
|
|
|
|
|
|
|
Reconciliation of EBITDA and EBITDA
before items to Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
($
|
)
|
|
|
431
|
|
|
|
142
|
|
|
|
|
|
128
|
|
(+)
|
|
Income tax (benefit) expense
|
|
|
($
|
)
|
|
|
(170
|
)
|
|
|
14
|
|
|
|
|
|
29
|
|
(+)
|
|
Interest expense, net
|
|
|
($
|
)
|
|
|
103
|
|
|
|
132
|
|
|
|
|
|
66
|
|
(=)
|
|
Operating income
|
|
|
($
|
)
|
|
|
364
|
|
|
|
288
|
|
|
|
|
|
223
|
|
(+)
|
|
Depreciation and amortization
|
|
|
($
|
)
|
|
|
384
|
|
|
|
359
|
|
|
|
|
|
348
|
|
(+)
|
|
Impairment of property, plant and equipment
|
|
|
($
|
)
|
|
|
4
|
|
|
|
77
|
|
|
|
|
|
29
|
|
(-)
|
|
Net gains on disposals of property, plant and equipment
|
|
|
($
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(=)
|
|
EBITDA
|
|
|
($
|
)
|
|
|
752
|
|
|
|
709
|
|
|
|
|
|
600
|
|
(/)
|
|
Sales
|
|
|
($
|
)
|
|
|
5,563
|
|
|
|
5,264
|
|
|
|
|
|
5,098
|
|
(=)
|
|
EBITDA margin
|
|
|
(%
|
)
|
|
|
14
|
%
|
|
|
13
|
%
|
|
|
|
|
12%
|
|
|
|
EBITDA
|
|
|
($
|
)
|
|
|
752
|
|
|
|
709
|
|
|
|
|
|
600
|
|
(-)
|
|
Alternative fuel tax credits
|
|
|
($
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
(+)
|
|
Closure and restructuring costs
|
|
|
($
|
)
|
|
|
28
|
|
|
|
4
|
|
|
|
|
|
32
|
|
(+)
|
|
Impact of purchase accounting
|
|
|
($
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
1
|
|
(+)
|
|
Litigation settlement
|
|
|
($
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
(=)
|
|
EBITDA before items
|
|
|
($
|
)
|
|
|
765
|
|
|
|
713
|
|
|
|
|
|
635
|
|
(/)
|
|
Sales
|
|
|
($
|
)
|
|
|
5,563
|
|
|
|
5,264
|
|
|
|
|
|
5,098
|
|
(=)
|
|
EBITDA margin before items
|
|
|
(%
|
)
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
|
|
12%
|
|
|
|
|
|
|
|
Reconciliation of Free cash flow to Cash
flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
|
($
|
)
|
|
|
634
|
|
|
|
453
|
|
|
|
|
|
465
|
|
(-)
|
|
Additions to property, plant and equipment
|
|
|
($
|
)
|
|
|
(236
|
)
|
|
|
(289
|
)
|
|
|
|
|
(347)
|
|
(=)
|
|
Free cash flow
|
|
|
($
|
)
|
|
|
398
|
|
|
|
164
|
|
|
|
|
|
118
|
|
DOMT
AR
2016 ANNUAL
REPORT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
Net
debt-to-total
capitalization computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
($)
|
|
|
10
|
|
|
|
|
|
|
|
12
|
|
|
|
(+)
|
|
Long-term debt due within one year
|
|
($)
|
|
|
169
|
|
|
|
41
|
|
|
|
63
|
|
|
|
(+)
|
|
Long-term debt
|
|
($)
|
|
|
1,171
|
|
|
|
1,210
|
|
|
|
1,218
|
|
|
|
(=)
|
|
Debt
|
|
($)
|
|
|
1,350
|
|
|
|
1,251
|
|
|
|
1,293
|
|
|
|
(-)
|
|
Cash and cash equivalents
|
|
($)
|
|
|
(174
|
)
|
|
|
(126
|
)
|
|
|
(125
|
)
|
|
|
(=)
|
|
Net debt
|
|
($)
|
|
|
1,176
|
|
|
|
1,125
|
|
|
|
1,168
|
|
|
|
(+)
|
|
Shareholders equity
|
|
($)
|
|
|
2,890
|
|
|
|
2,652
|
|
|
|
2,676
|
|
|
|
(=)
|
|
Total capitalization
|
|
($)
|
|
|
4,066
|
|
|
|
3,777
|
|
|
|
3,844
|
|
|
|
|
|
Net debt
|
|
($)
|
|
|
1,176
|
|
|
|
1,125
|
|
|
|
1,168
|
|
|
|
(/)
|
|
Total capitalization
|
|
($)
|
|
|
4,066
|
|
|
|
3,777
|
|
|
|
3,844
|
|
|
|
(=)
|
|
Net
debt-to-total
capitalization
|
|
(%)
|
|
|
29
|
%
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
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.
RECONCILIATION OF
NON-GAAP
FINANCIAL MEASURES BY SEGMENT
(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 are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the
segmented Operating income (loss) before items by excluding the
pre-tax
effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but
not in substitution for GAAP results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp and Paper
|
|
|
Personal Care
1
|
|
|
Corporate
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Reconciliation of Operating income (loss) to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) before items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
($)
|
|
|
352
|
|
|
|
270
|
|
|
|
217
|
|
|
|
49
|
|
|
|
61
|
|
|
|
57
|
|
|
|
(37
|
)
|
|
|
(43
|
)
|
|
|
(51
|
)
|
(+)
|
|
Impairment of property, plant and equipment
|
|
($)
|
|
|
4
|
|
|
|
77
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(-)
|
|
Net gains on disposal of property,
plant and equipment
|
|
($)
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
(-)
|
|
Alternative fuel tax credits
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
(+)
|
|
Litigation settlement
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--
|
|
|
|
|
|
|
|
2
|
|
(+)
|
|
Closure and restructuring costs
|
|
($)
|
|
|
27
|
|
|
|
3
|
|
|
|
31
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
(+)
|
|
Impact of purchase accounting
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(=)
|
|
Operating income (loss) before items
|
|
($)
|
|
|
383
|
|
|
|
336
|
|
|
|
277
|
|
|
|
53
|
|
|
|
62
|
|
|
|
59
|
|
|
|
(55
|
)
|
|
|
(44
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before items to EBITDA before items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) before items
|
|
($)
|
|
|
383
|
|
|
|
336
|
|
|
|
277
|
|
|
|
53
|
|
|
|
62
|
|
|
|
59
|
|
|
|
(55
|
)
|
|
|
(44
|
)
|
|
|
(49
|
)
|
(+)
|
|
Depreciation and amortization
|
|
($)
|
|
|
319
|
|
|
|
297
|
|
|
|
284
|
|
|
|
65
|
|
|
|
62
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(=)
|
|
EBITDA before items
|
|
($)
|
|
|
702
|
|
|
|
633
|
|
|
|
561
|
|
|
|
118
|
|
|
|
124
|
|
|
|
123
|
|
|
|
(55
|
)
|
|
|
(44
|
)
|
|
|
(49
|
)
|
(/)
|
|
Sales
|
|
($)
|
|
|
4,674
|
|
|
|
4,458
|
|
|
|
4,239
|
|
|
|
928
|
|
|
|
869
|
|
|
|
917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(=)
|
|
EBITDA margin before items
|
|
(%)
|
|
|
15%
|
|
|
|
14%
|
|
|
|
13%
|
|
|
|
13%
|
|
|
|
14%
|
|
|
|
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) On January 2, 2014, the Company acquired 100% of
the shares of Laboratorios Indas, S.A.U. in Spain.
On October 1, 2016, the Company acquired 100% of the shares of Home Delivery Incontinent Supplies Co. in the United States.
DOMT
AR
2016 ANNUAL
REPORT
|
|
|
|
|
|
|
|
|
SHAREHOLDER
INFORMATION
|
|
|
|
|
DIVIDENDS DECLARED IN 2016
|
|
|
|
|
Declared
|
|
Record Date
|
|
Payable Date
|
|
Amount
|
|
|
|
|
|
|
|
February 23, 2016
|
|
April 4, 2016
|
|
April 15, 2016
|
|
$0.400
|
|
|
|
|
|
|
|
May 3, 2016
|
|
July 5, 2016
|
|
July 15, 2016
|
|
$0.415
|
|
|
|
|
|
|
|
August 2, 2016
|
|
October 3, 2016
|
|
October 17, 2016
|
|
$0.415
|
|
|
|
|
|
|
|
November 1, 2016
|
|
January 3, 2017
|
|
January 17, 2017
|
|
$0.415
|
|
|
|
|
|
|
|
|
|
EXCHANGE LISTINGS
NYSE: UFS
TSX: UFS
DIVIDEND POLICY
Subject to approval by its Board of
Directors, Domtar pays a quarterly
dividend on its common stock.
TRANSFER
AGENT
AND REGISTRAR
Computershare
P.O. BOX
30170
College Station, TX 77845-3170
North American Toll Free Number:
1-877-282-1168
Tel.:
1-781-575-2879
computershare.com/investor
|
|
INVESTOR RELATIONS
Investor Relations Department
Domtar Corporation
395 de
Maisonneuve Blvd. West
Montreal, QC Canada H3A 1L6
Tel.:
514-848-5555
Voice Recognition: Investor Relations
Email: ir@domtar.com
Electronic versions of this
report, SEC
filings and other publications are
available at
domtar.com
ANNUAL MEETING
Wednesday, May 3,
2017, 7:45 a.m. ET
Domtar Corporate Office
234 Kingsley Park Drive
Fort Mill, SC 29715
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TENTATIVE EARNINGS SCHEDULE
First Quarter 2017: Thursday, April 27, 2017
Second Quarter 2017: Thursday, July 27, 2017
Third
Quarter 2017: Thursday, October 26, 2017
Fourth Quarter 2017: Thursday, February 8, 2018
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DOMT
AR
2016 ANNUAL
REPORT
PRODUCTION
NOTES
Paper
Cover printed on 80 lb. Cougar
®
Cover, Smooth Finish. Insert printed on 70 lb. Cougar
®
Text, Smooth Finish.
Form 10-K
printed
on 40 lb. Lynx
®
Opaque Ultra Text, Smooth Finish.
Printing
Cover and insert printed with UV inks on a Heidelberg Speedmaster CD 102 press
6-color
units with
in-line
coater and full inter-deck and
end-of-press
extended
delivery UV drying systems.
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Domtar is pleased to make an annual
contribution of $425,000 to
WWF from the
sale of FSC
®
Certified EarthChoice
®
products.
®WWF Registered Trademark. Panda Symbol © 1986 WWF.
© 1986 Panda symbol
WWF-World
Wide Fund for Nature
(also known as World Wildlife Fund).
®WWF is a WWF Registered
Trademark.
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Cougar
®
paper contains
10% post-consumer fiber
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Learn the environmental, social and economic impacts
of Domtar
products at domtarpapertrail.com.
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