Domtar Posts Net Earnings of $10 Million in First Quarter of 2005 TICKER SYMBOL DTC (TSX, NYSE) MONTREAL, April 28 /PRNewswire-FirstCall/ -- Domtar Inc. announced today net earnings of $10 million ($0.04 per common share) in the first quarter of 2005 compared to a net loss of $44 million ($0.19 per common share) in the first quarter of 2004 and a net loss of $26 million ($0.11 per common share) in the fourth quarter of 2004. DOMTAR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three months ended March 31, 2005 (In millions of Canadian dollars, unless otherwise noted) 1. BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited interim consolidated financial statements, prepared in accordance with Canadian generally accepted accounting principles, contain all adjustments necessary to present fairly Domtar Inc.'s (Domtar) financial position as at March 31, 2005 and December 31, 2004, as well as its results of operations and its cash flows for the three months ended March 31, 2005 and 2004. While management believes that the disclosures presented are adequate, these unaudited interim consolidated financial statements and notes should be read in conjunction with Domtar's annual consolidated financial statements. These unaudited interim consolidated financial statements follow the same accounting policies as the most recent annual consolidated financial statements, except as described in Note 2. 2. ACCOUNTING CHANGE Consolidation of variable interest entities In June 2003, the Canadian Institute of Chartered Accountants (CICA) issued Accounting Guideline No. 15 (AcG-15) "Consolidation of Variable Interest Entities." AcG-15 applies to annual and interim periods beginning on or after November 1, 2004. The application of this guideline does not have an impact on Domtar's unaudited interim consolidated financial statements under Canadian GAAP. 3. UNITED STATES DOLLAR AMOUNTS The unaudited interim consolidated financial statements are expressed in Canadian dollars and, solely for the convenience of the reader, the 2005 unaudited interim consolidated financial statements and the tables of certain related notes have been translated into U.S. dollars at the March 2005 month- end rate of CAN$1.00 equals US$0.8267. This translation should not be construed as an application of the recommendations relating to the accounting for foreign currency translation, but rather as supplemental information for the reader. 4. CLOSURE AND RESTRUCTURING COSTS In 2004, Domtar's management committed to workforce reduction and restructuring plans throughout the Corporation in Canada and the United States. In addition to the reconciling items in the table below, training costs of $1 million and other closure related costs of $3 million were incurred for the three-month period ended March 31, 2005. The following table provides a reconciliation of all closure and restructuring cost provisions: