US $
- Q2 adjusted EBITDA of $108
million / net income of $0.20
per share, excluding special items
- Significant cost and margin improvement following
weather-affected Q1
- Strong lumber and paper shipments
- GAAP net loss of $2 million /
$0.02 per share
MONTREAL,
July 31, 2014 /PRNewswire/ - Resolute
Forest Products Inc. (NYSE: RFP) (TSX: RFP) today reported net
income for the quarter ended June 30,
2014, excluding special items, of $19
million, or $0.20 per share,
up from net income, excluding special items, of $18 million, or $0.19 per share, in the second quarter of
2013. GAAP net loss was $2
million, or $0.02 per share,
compared to a net loss of $43
million, or $0.45 per share,
in the second quarter of 2013. Sales were $1.1 billion in the quarter, down $16 million from the second quarter of 2013.
"Costs and margins normalized this
quarter after the disappointing weather-affected first
quarter, delivering much stronger performances in each of our four
segments," said Richard Garneau,
president and chief executive officer. "We generated 50%
of our adjusted EBITDA from our wood products and market pulp
businesses in the last twelve months. Our competitive
advantage rests on our cost-focused strategy and diversified asset
base, giving us the tools to maximize earnings power in this
challenging industry."
Non-GAAP financial measures, such as adjustments
for special items and adjusted EBITDA, are explained and reconciled
below.
Consolidated Quarterly Operating Income
Variance Against Year-Ago Period
The Company recorded an operating loss of
$8 million in the second quarter,
compared to operating income of $3
million in the year-ago period. Overall pricing was
essentially unchanged in the quarter, as the 8% increase in market
pulp prices was offset with lower average transaction prices in
newsprint, specialty papers and wood products. Newsprint
shipments rose by 3% and wood products by 22%, while specialty
papers shipments were 2% lower. The increase in lumber shipments
reflects an increase to production capacity and better market
demand. Market pulp shipments were down by 15%, however, in
part due to more internal consumption of hardwood kraft pulp and
slowing North American demand, particularly softwood and recycled
grades. With lower start-up costs and pension and
other postretirement benefit expenses, overall manufacturing costs
continued to improve. The Company also benefitted from its
electricity cogeneration assets and asset optimization initiatives,
offset in part by an increase in overall fiber costs and in
maintenance and repair costs. The weaker Canadian dollar had
a $22 million favorable effect on
operating income.
The Company incurred $52
million of accelerated depreciation and other
closure-related costs, most of which came from the permanent
closure of an idled paper machine at its Catawba mill in
South Carolina. Selling,
general and administrative expenses were $3
million lower in the quarter, primarily because of a
reduction in project costs and the weaker Canadian dollar.
Segment Operating Income Variance Against
Prior Quarter
Newsprint
At $18 million in the second quarter,
newsprint generated $33 million more
operating income compared to the first quarter. Shipments
rose by 6%, or 32,000 metric tons, as the Company recovered from
weather-related production disruptions and mechanical failures
experienced in the first quarter, despite fiber availability
limitations at certain mills in Québec. Export shipments
represented 40% of total newsprint volume, compared to 44% in all
of 2013. Average transaction price was essentially unchanged
but the realized margin rose significantly due to a 9% drop in
operating cost per unit (the "delivered cost"), to
$568 per metric ton. The change
in the delivered cost is due to the influence of the severe winter
in the first quarter and lower, non-weather related maintenance
costs in the second quarter. Finished goods inventory rose by
14%.
Specialty Papers
Specialty papers generated an operating loss of $3 million in the quarter, compared to a loss of
$24 million in the previous
quarter. While the overall average transaction price was
unchanged, higher realized pricing for white papers was offset by
the effect of lower pricing for coated mechanical grades and, to a
lesser degree, supercalender grades. Volume rose by 8%
overall, led mostly by stronger shipments of white papers but also
including improvements in other grades. The increase reflects
a seasonal pick-up in catalogue and retail end-uses from first
quarter lows as well as better production consistency following the
weather-related production disruptions and mechanical failures
experienced in the first quarter. The delivered costs
normalized to seasonally-consistent levels, falling by 7%.
There was a 15% increase in finished goods inventory.
Market Pulp
Operating income in the market pulp segment rose by $16 million in the second quarter, to
$24 million. Better realized
pricing, strongest in fluff pulp grades but also meaningful in
softwood and recycled grades, led to an overall 4% increase in
average transaction price. Shipments did not improve as
expected following the effects of weather-related production
disruptions and distribution constraints in the first
quarter. This reflects greater internal consumption of
hardwood kraft pulp and softening North American demand,
particularly softwood and recycled grades. The delivered cost
fell by 3%, to $652 per metric ton,
normalizing to seasonally-consistent levels following the
difficulties in the first quarter. Finished goods inventory
rose by 15,000 metric tons, or 15%.
Wood Products
Compared to the first quarter, operating income in the wood
products segment rose by $3 million,
to $15 million. The average
transaction price was unchanged, reflecting the largely offsetting
effect of higher market prices for stud lumber grades and lower
market prices for random length lumber grades. Despite
continued distribution constraints for lack of carrier availability
carried over from the first quarter, shipments were 19% higher,
which in turn cut finished goods inventory by 13% from the high
levels reached in the first quarter. The delivered cost rose
by 1% in the quarter.
Outlook
Mr. Garneau added: "Our conscious effort to reduce lumber
inventory in the second quarter helped improve shipments in this
segment. With inventories closer to normal levels, we expect
shipments to normalize in the third quarter. Despite the
ongoing slow recovery in U.S. housing starts, prices for eastern
grades held up in July. With our scale, financial strength
and lower-cost operating platform, we've positioned ourselves as a
long-term, reliable supplier for our customers, and our newsprint
business has responded well, especially in the domestic
market. But we're not expecting much improvement in export
markets for the remainder of the year, based on lower international
demand. As some major hardwood pulp capacity
increases are coming online, the balance of the year remains
somewhat uncertain for pulp. Pricing in specialty papers is
also more uncertain because of the pressure of lower operating
rates in coated papers and supercalender grades, although we do
expect to see seasonal improvement in shipment
volumes."
Earnings Conference Call
The Company will hold a conference call to discuss the financial
results at 9:00 a.m. (ET)
today. The public is invited to join the call at (888)
789-9572 (pass code 9740024) at least fifteen minutes before its
scheduled start time. A simultaneous webcast will also be
available using the link provided under "Presentations and
Webcasts" in the "Investors" section of www.resolutefp.com. A
replay of the webcast will be archived on the Company's
website. A phone replay will also be available until
August 14 by dialing (800) 408-3053
with the pass code 1311668.
Description of Special Items
Special items |
|
|
Second quarter |
|
Second quarter |
(in millions) |
|
|
2014 |
|
2013 |
Foreign currency translation (gain)
loss |
|
$ |
(17) |
$ |
7 |
Closure costs, impairment and other
related charges |
|
|
52 |
|
12 |
Inventory write-downs related to
closures |
|
|
3 |
|
1 |
Start-up costs |
|
|
1 |
|
13 |
Net gain on disposition of assets |
|
|
(2) |
|
(2) |
Net loss on extinguishment of
debt |
|
|
- |
|
59 |
Transaction costs |
|
|
- |
|
2 |
Other income, net |
|
|
(3) |
|
(1) |
Income tax effect of special
items |
|
|
(13) |
|
(30) |
|
Total |
|
$ |
21 |
$ |
61 |
Cautionary Statements Regarding
Forward-Looking Information
Statements in this press release and the
earnings conference call referred to above that are not reported
financial results or other historical information of Resolute
Forest Products Inc. are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
They include, for example, statements relating to our: efforts to
continue to reduce costs and increase revenues and profitability,
including our cost-reduction initiatives; business and operating
outlook, including the impact of weather; assessment of market
conditions; prospects, growth strategies and the industry in which
we operate; and strategies for achieving our goals generally.
Forward-looking statements may be identified by the use of
forward-looking terminology such as the words "should," "would,"
"could," "will," "may," "expect," "believe," "anticipate,"
"attempt," "project" and other terms with similar meaning
indicating possible future events or potential impact on our
business or Resolute's shareholders.
The reader is cautioned not to place undue
reliance on these forward-looking statements, which are not
guarantees of future performance. These statements are based
on management's current assumptions, beliefs and expectations, all
of which involve a number of business risks and uncertainties that
could cause actual results to differ materially. The
potential risks and uncertainties that could cause Resolute's
actual future financial condition, results of operations and
performance to differ materially from those expressed or implied in
the presentation referred to above include, but are not limited to,
the potential risks and uncertainties set forth under the heading
"Risk Factors" in Part 1, Item 1A of Resolute's annual report on
Form 10-K for the year ended December 31,
2013.
All forward-looking statements in the
presentation referred to above are expressly qualified by the
cautionary statements contained or referred to above and in
Resolute's other filings with the U.S. Securities and Exchange
Commission and the Canadian securities regulatory authorities.
Resolute disclaims any obligation to publicly update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, except as required by
law.
About Resolute Forest Products
Resolute Forest Products is a global leader in the forest products
industry with a diverse range of products, including newsprint,
specialty papers, market pulp and wood products. The Company owns
or operates nearly 40 pulp and paper mills and wood products
facilities in the United States,
Canada and South Korea, and power generation assets in
Canada. Marketing its products in
close to 90 countries, Resolute has third-party certified 100% of
its managed woodlands to at least one of three internationally
recognized sustainable forest management standards. The shares of
Resolute Forest Products trade under the stock symbol RFP on both
the New York Stock Exchange and the Toronto Stock Exchange.
Resolute and other member companies of the
Forest Products Association of Canada, as well as a number of environmental
organizations, are partners in the Canadian Boreal Forest
Agreement. The group works to identify solutions to conservation
issues that meet the goal of balancing equally the three pillars of
sustainability linked to human activities: environmental,
social and economic.
Resolute is proud to be ranked by Corporate
Knights as one of Canada's Best 50 Corporate Citizens for
2014. Corporate Knights is an organization recognized globally for
its transparent and objective approach to measuring corporate
sustainability performance.
RESOLUTE FOREST PRODUCTS INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited, in millions except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Six
Months |
|
Ended June 30, |
|
Ended June 30, |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
1,091 |
|
$ |
1,107 |
|
$ |
2,107 |
|
$ |
2,181 |
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding
depreciation, amortization and distribution costs |
|
812 |
|
|
859 |
|
|
1,633 |
|
|
1,715 |
|
Depreciation and amortization |
|
62 |
|
|
61 |
|
|
124 |
|
|
121 |
|
Distribution costs |
|
134 |
|
|
130 |
|
|
254 |
|
|
253 |
|
Selling, general and
administrative expenses |
|
41 |
|
|
44 |
|
|
77 |
|
|
88 |
|
Closure costs, impairment and
other related charges (1) |
|
52 |
|
|
12 |
|
|
62 |
|
|
52 |
|
Net gain on disposition of
assets |
|
(2) |
|
|
(2) |
|
|
(2) |
|
|
(2) |
Operating (loss)
income |
|
(8) |
|
|
3 |
|
|
(41) |
|
|
(46) |
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(11) |
|
|
(13) |
|
|
(23) |
|
|
(27) |
|
Other income (expense), net
(2) |
|
20 |
|
|
(65) |
|
|
7 |
|
|
(47) |
Income (loss) before
income taxes |
|
1 |
|
|
(75) |
|
|
(57) |
|
|
(120) |
Income tax (provision)
benefit |
|
(1) |
|
|
31 |
|
|
7 |
|
|
71 |
Net loss including
noncontrolling interests |
|
- |
|
|
(44) |
|
|
(50) |
|
|
(49) |
Net (income) loss
attributable to noncontrolling interests |
|
(2) |
|
|
1 |
|
|
(2) |
|
|
1 |
Net loss attributable
to Resolute Forest Products Inc. |
$ |
(2) |
|
$ |
(43) |
|
$ |
(52) |
|
$ |
(48) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
attributable to Resolute Forest Products Inc. common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.02) |
|
$ |
(0.45) |
|
$ |
(0.55) |
|
$ |
(0.51) |
|
Diluted |
|
(0.02) |
|
|
(0.45) |
|
|
(0.55) |
|
|
(0.51) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of Resolute Forest Products Inc. common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
94.6 |
|
|
94.8 |
|
|
94.6 |
|
|
94.8 |
|
Diluted |
|
94.6 |
|
|
94.8 |
|
|
94.6 |
|
|
94.8 |
RESOLUTE FOREST
PRODUCTS INC. |
CONSOLIDATED
BALANCE SHEETS |
(Unaudited, in
millions) |
|
|
|
|
|
|
|
June
30, |
|
December 31, |
|
2014 |
|
2013 |
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
263 |
|
$ |
322 |
|
Accounts receivable
trade, net |
|
521 |
|
|
536 |
|
Accounts receivable
other |
|
89 |
|
|
98 |
|
Inventories, net |
|
579 |
|
|
529 |
|
Deferred income tax
assets |
|
32 |
|
|
32 |
|
Other current
assets |
|
62 |
|
|
45 |
|
|
Total current assets |
|
1,546 |
|
|
1,562 |
Fixed assets, net |
|
2,184 |
|
|
2,289 |
Amortizable intangible
assets, net |
|
64 |
|
|
66 |
Deferred income tax
assets |
|
1,237 |
|
|
1,266 |
Other assets |
|
216 |
|
|
202 |
|
|
Total assets |
$ |
5,247 |
|
$ |
5,385 |
|
|
|
|
|
|
Liabilities and
equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable and
accrued liabilities |
$ |
556 |
|
$ |
533 |
|
Current portion of
long-term debt |
|
1 |
|
|
2 |
|
Deferred income tax
liabilities |
|
32 |
|
|
32 |
|
|
Total current liabilities |
|
589 |
|
|
567 |
Long-term debt, net of
current portion |
|
597 |
|
|
597 |
Pension and other
postretirement benefit obligations |
|
1,146 |
|
|
1,294 |
Deferred income tax
liabilities |
|
25 |
|
|
26 |
Other long-term
liabilities |
|
48 |
|
|
62 |
|
|
Total liabilities |
|
2,405 |
|
|
2,546 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
Common stock |
|
- |
|
|
- |
|
Additional paid-in
capital |
|
3,753 |
|
|
3,751 |
|
Deficit |
|
(644) |
|
|
(592) |
|
Accumulated other
comprehensive loss |
|
(220) |
|
|
(271) |
|
Treasury stock at
cost |
|
(61) |
|
|
(61) |
|
|
Total Resolute Forest Products
Inc. shareholders' equity |
|
2,828 |
|
|
2,827 |
|
Noncontrolling
interests |
|
14 |
|
|
12 |
|
|
Total equity |
|
2,842 |
|
|
2,839 |
|
|
Total liabilities and equity |
$ |
5,247 |
|
$ |
5,385 |
RESOLUTE FOREST
PRODUCTS INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited, in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months |
|
Ended June 30, |
|
2014 |
|
2013 |
Cash flows from operating activities: |
|
|
|
|
|
Net loss including noncontrolling interests |
$ |
(50) |
|
$ |
(49) |
Adjustments to reconcile net loss including
noncontrolling interests to net cash provided by operating
activities: |
|
|
|
|
|
|
Share-based compensation |
|
2 |
|
|
4 |
|
Depreciation and amortization |
|
124 |
|
|
121 |
|
Closure costs, impairment and other related
charges |
|
54 |
|
|
46 |
|
Inventory write-downs related to closures |
|
4 |
|
|
5 |
|
Deferred income taxes |
|
(8) |
|
|
(71) |
|
Net pension contributions and other postretirement
benefit payments |
|
(74) |
|
|
(35) |
|
Net gain on disposition of assets |
|
(2) |
|
|
(2) |
|
Loss on translation of foreign currency denominated
deferred income taxes |
|
6 |
|
|
80 |
|
Gain on translation of foreign currency denominated
pension and other postretirement benefit obligations |
|
(6) |
|
|
(78) |
|
Gain on forgiveness of note payable |
|
- |
|
|
(12) |
|
Net loss on extinguishment of debt |
|
- |
|
|
59 |
|
Net planned major maintenance payments |
|
(6) |
|
|
(7) |
|
Dividends received from equity method investees in
excess of income |
|
- |
|
|
3 |
|
Changes in working capital: |
|
|
|
|
|
|
|
Accounts receivable |
|
36 |
|
|
(5) |
|
|
Inventories |
|
(55) |
|
|
14 |
|
|
Other current assets |
|
(9) |
|
|
(2) |
|
|
Accounts payable and accrued liabilities |
|
5 |
|
|
(16) |
|
Other, net |
|
1 |
|
|
(7) |
|
|
|
Net cash provided by operating activities |
|
22 |
|
|
48 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Cash invested in fixed assets |
|
(82) |
|
|
(86) |
Disposition of assets |
|
2 |
|
|
3 |
Proceeds from insurance
settlements |
|
- |
|
|
4 |
Decrease in restricted cash |
|
1 |
|
|
3 |
(Increase) decrease in deposit
requirements for letters of credit, net |
|
(1) |
|
|
1 |
|
|
|
Net cash used in investing activities |
|
(80) |
|
|
(75) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Issuance of long-term debt |
|
- |
|
|
594 |
Premium paid on extinguishment of
debt |
|
- |
|
|
(84) |
Payments of debt |
|
(1) |
|
|
(497) |
Payments of financing and credit
facility fees |
|
(1) |
|
|
(9) |
Contribution of capital from
noncontrolling interest |
|
- |
|
|
8 |
|
|
|
Net cash (used in) provided by financing activities |
|
(2) |
|
|
12 |
Effect of exchange rate changes on cash and cash
equivalents |
|
1 |
|
|
- |
Net decrease in cash and cash equivalents |
|
(59) |
|
|
(15) |
Cash and cash equivalents: |
|
|
|
|
|
|
Beginning of period |
|
322 |
|
|
263 |
|
End of period |
$ |
263 |
|
$ |
248 |
RESOLUTE FOREST PRODUCTS INC. |
STATEMENTS OF OPERATING INCOME AND NET INCOME ADJUSTED FOR
SPECIAL ITEMS |
|
|
|
|
|
|
|
|
|
A
reconciliation of our operating income, net income and net income
per share reported before special items |
is
presented in the tables below. See Note 3 to the Unaudited
Consolidated Financial Statement Information |
regarding our use of non-GAAP measures. |
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2014 |
Operating |
|
|
|
|
|
|
(unaudited, in
millions except per share amounts) |
income (loss) |
|
Net income (loss) |
|
EPS |
|
|
|
|
|
|
|
|
|
GAAP as
reported |
$ |
(8) |
|
$ |
(2) |
|
$ |
(0.02) |
|
|
|
|
|
|
|
|
|
Adjustments for
special items: |
|
|
|
|
|
|
|
|
|
Foreign currency translation
gain |
|
- |
|
|
(17) |
|
|
(0.18) |
|
Closure costs, impairment and
other related charges |
|
52 |
|
|
52 |
|
|
0.55 |
|
Inventory write-downs related to
closures |
|
3 |
|
|
3 |
|
|
0.03 |
|
Start up costs |
|
1 |
|
|
1 |
|
|
0.01 |
|
Net gain on disposition of
assets |
|
(2) |
|
|
(2) |
|
|
(0.02) |
|
Other income, net |
|
- |
|
|
(3) |
|
|
(0.03) |
|
Income tax effect of special
items |
|
- |
|
|
(13) |
|
|
(0.14) |
|
|
|
|
|
|
|
|
|
GAAP as adjusted for
special items |
$ |
46 |
|
$ |
19 |
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2013 |
Operating |
|
|
|
|
|
|
(unaudited, in
millions except per share amounts) |
income (loss) |
|
Net income (loss) |
|
EPS |
|
|
|
|
|
|
|
|
|
GAAP as
reported |
$ |
3 |
|
$ |
(43) |
|
$ |
(0.45) |
|
|
|
|
|
|
|
|
|
Adjustments for
special items: |
|
|
|
|
|
|
|
|
|
Foreign currency translation
loss |
|
- |
|
|
7 |
|
|
0.07 |
|
Closure costs, impairment and
other related charges |
|
12 |
|
|
12 |
|
|
0.13 |
|
Inventory write-downs related to
closures |
|
1 |
|
|
1 |
|
|
0.01 |
|
Start up costs |
|
13 |
|
|
13 |
|
|
0.14 |
|
Net gain on disposition of
assets |
|
(2) |
|
|
(2) |
|
|
(0.02) |
|
Net loss on extinguishment of
debt |
|
- |
|
|
59 |
|
|
0.62 |
|
Transaction costs |
|
2 |
|
|
2 |
|
|
0.02 |
|
Other income, net |
|
- |
|
|
(1) |
|
|
(0.01) |
|
Income tax effect of special
items |
|
- |
|
|
(30) |
|
|
(0.32) |
|
|
|
|
|
|
|
|
|
GAAP as adjusted for
special items |
$ |
29 |
|
$ |
18 |
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2014 |
Operating |
|
|
|
|
|
|
(unaudited, in
millions except per share amounts) |
income (loss) |
|
Net income (loss) |
|
EPS |
|
|
|
|
|
|
|
|
|
GAAP as
reported |
$ |
(41) |
|
$ |
(52) |
|
$ |
(0.55) |
|
|
|
|
|
|
|
|
|
Adjustments for
special items: |
|
|
|
|
|
|
|
|
|
Foreign currency translation
gain |
|
- |
|
|
(3) |
|
|
(0.03) |
|
Closure costs, impairment and
other related charges |
|
62 |
|
|
62 |
|
|
0.66 |
|
Inventory write-downs related to
closures |
|
4 |
|
|
4 |
|
|
0.04 |
|
Start up costs |
|
1 |
|
|
1 |
|
|
0.01 |
|
Net gain on disposition of
assets |
|
(2) |
|
|
(2) |
|
|
(0.02) |
|
Other income, net |
|
- |
|
|
(4) |
|
|
(0.04) |
|
Income tax effect of special
items |
|
- |
|
|
(13) |
|
|
(0.14) |
|
|
|
|
|
|
|
|
|
GAAP as adjusted for
special items |
$ |
24 |
|
$ |
(7) |
|
$ |
(0.07) |
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2013 |
Operating |
|
|
|
|
|
|
(unaudited, in
millions except per share amounts) |
income (loss) |
|
Net income (loss) |
|
EPS |
|
|
|
|
|
|
|
|
|
GAAP as
reported |
$ |
(46) |
|
$ |
(48) |
|
$ |
(0.51) |
|
|
|
|
|
|
|
|
|
Adjustments for
special items: |
|
|
|
|
|
|
|
|
|
Foreign currency translation
loss |
|
- |
|
|
12 |
|
|
0.13 |
|
Closure costs, impairment and
other related charges |
|
52 |
|
|
52 |
|
|
0.55 |
|
Inventory write-downs related to
closures |
|
5 |
|
|
5 |
|
|
0.05 |
|
Start up costs |
|
28 |
|
|
28 |
|
|
0.30 |
|
Net gain on disposition of
assets |
|
(2) |
|
|
(2) |
|
|
(0.02) |
|
Net loss on extinguishment of
debt |
|
- |
|
|
59 |
|
|
0.62 |
|
Transaction costs |
|
5 |
|
|
5 |
|
|
0.05 |
|
Other income, net |
|
- |
|
|
(24) |
|
|
(0.25) |
|
Income tax effect of special
items |
|
- |
|
|
(41) |
|
|
(0.43) |
|
|
|
|
|
|
|
|
|
GAAP as adjusted for
special items |
$ |
42 |
|
$ |
46 |
|
$ |
0.49 |
RESOLUTE FOREST
PRODUCTS INC. |
STATEMENTS OF
EBITDA AND ADJUSTED EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation of our net income including noncontrolling interests
to EBITDA and Adjusted EBITDA is presented in the tables
below. |
See Note 3 to the
Unaudited Consolidated Financial Statement Information regarding
our use of non-GAAP measures EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
2014
(unaudited, in millions) |
Newsprint |
Specialty
papers |
Market pulp |
Wood products |
Corporate and
other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) including
noncontrolling interests |
$ |
18 |
$ |
(3) |
$ |
24 |
$ |
15 |
$ |
(54) |
$ |
- |
Interest expense |
|
|
|
|
|
|
|
|
|
11 |
|
11 |
Income tax provision |
|
|
|
|
|
|
|
|
|
1 |
|
1 |
Depreciation and amortization |
|
17 |
|
22 |
|
13 |
|
8 |
|
2 |
|
62 |
EBITDA |
|
35 |
|
19 |
|
37 |
|
23 |
|
(40) |
|
74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
gain |
|
|
|
|
|
|
|
|
|
(17) |
|
(17) |
Closure costs, impairment and
other related charges |
|
|
|
|
|
|
|
|
|
52 |
|
52 |
Inventory write-downs related to
closures |
|
|
|
|
|
|
|
|
|
3 |
|
3 |
Start up costs |
|
|
|
|
|
|
|
|
|
1 |
|
1 |
Net gain on disposition of
assets |
|
|
|
|
|
|
|
|
|
(2) |
|
(2) |
Other income, net |
|
|
|
|
|
|
|
|
|
(3) |
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
35 |
$ |
19 |
$ |
37 |
$ |
23 |
$ |
(6) |
$ |
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
2013
(unaudited, in millions) |
Newsprint |
Specialty
papers |
Market
pulp |
Wood products |
Corporate and
other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) including
noncontrolling interests |
$ |
10 |
$ |
2 |
$ |
10 |
$ |
16 |
$ |
(82) |
$ |
(44) |
Interest expense |
|
|
|
|
|
|
|
|
|
13 |
|
13 |
Income tax benefit |
|
|
|
|
|
|
|
|
|
(31) |
|
(31) |
Depreciation and amortization |
|
18 |
|
19 |
|
13 |
|
9 |
|
2 |
|
61 |
EBITDA |
|
28 |
|
21 |
|
23 |
|
25 |
|
(98) |
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
loss |
|
|
|
|
|
|
|
|
|
7 |
|
7 |
Closure costs, impairment and
other related charges |
|
|
|
|
|
|
|
|
|
12 |
|
12 |
Inventory write-downs related to
closures |
|
|
|
|
|
|
|
|
|
1 |
|
1 |
Start up costs |
|
|
|
|
|
|
|
|
|
13 |
|
13 |
Net gain on disposition of
assets |
|
|
|
|
|
|
|
|
|
(2) |
|
(2) |
Net loss on extinguishment of
debt |
|
|
|
|
|
|
|
|
|
59 |
|
59 |
Transaction costs |
|
|
|
|
|
|
|
|
|
2 |
|
2 |
Other income, net |
|
|
|
|
|
|
|
|
|
(1) |
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
28 |
$ |
21 |
$ |
23 |
$ |
25 |
$ |
(7) |
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
2014
(unaudited, in millions) |
Newsprint |
Specialty
papers |
Market
pulp |
Wood products |
Corporate and
other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) including
noncontrolling interests |
$ |
3 |
$ |
(27) |
$ |
32 |
$ |
27 |
$ |
(85) |
$ |
(50) |
Interest expense |
|
|
|
|
|
|
|
|
|
23 |
|
23 |
Income tax benefit |
|
|
|
|
|
|
|
|
|
(7) |
|
(7) |
Depreciation and amortization |
|
35 |
|
44 |
|
26 |
|
16 |
|
3 |
|
124 |
EBITDA |
|
38 |
|
17 |
|
58 |
|
43 |
|
(66) |
|
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
gain |
|
|
|
|
|
|
|
|
|
(3) |
|
(3) |
Closure costs, impairment and
other related charges |
|
|
|
|
|
|
|
|
|
62 |
|
62 |
Inventory write-downs related to
closures |
|
|
|
|
|
|
|
|
|
4 |
|
4 |
Start up costs |
|
|
|
|
|
|
|
|
|
1 |
|
1 |
Net gain on disposition of
assets |
|
|
|
|
|
|
|
|
|
(2) |
|
(2) |
Other income, net |
|
|
|
|
|
|
|
|
|
(4) |
|
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
38 |
$ |
17 |
$ |
58 |
$ |
43 |
$ |
(8) |
$ |
148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
2013
(unaudited, in millions) |
Newsprint |
Specialty
papers |
Market pulp |
Wood products |
Corporate and
other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) including
noncontrolling interests |
$ |
8 |
$ |
10 |
$ |
5 |
$ |
32 |
$ |
(104) |
$ |
(49) |
Interest expense |
|
|
|
|
|
|
|
|
|
27 |
|
27 |
Income tax benefit |
|
|
|
|
|
|
|
|
|
(71) |
|
(71) |
Depreciation and amortization |
|
36 |
|
38 |
|
26 |
|
18 |
|
3 |
|
121 |
EBITDA |
|
44 |
|
48 |
|
31 |
|
50 |
|
(145) |
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
loss |
|
|
|
|
|
|
|
|
|
12 |
|
12 |
Closure costs, impairment and
other related charges |
|
|
|
|
|
|
|
|
|
52 |
|
52 |
Inventory write-downs related to
closures |
|
|
|
|
|
|
|
|
|
5 |
|
5 |
Start up costs |
|
|
|
|
|
|
|
|
|
28 |
|
28 |
Net gain on disposition of
assets |
|
|
|
|
|
|
|
|
|
(2) |
|
(2) |
Net loss on extinguishment of
debt |
|
|
|
|
|
|
|
|
|
59 |
|
59 |
Transaction costs |
|
|
|
|
|
|
|
|
|
5 |
|
5 |
Other income, net |
|
|
|
|
|
|
|
|
|
(24) |
|
(24) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
44 |
$ |
48 |
$ |
31 |
$ |
50 |
$ |
(10) |
$ |
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
RESOLUTE FOREST PRODUCTS INC.
Notes to the Unaudited Consolidated Financial Statement
Information
1. Closure costs, impairment and other related charges for the
three and six months ended June 30,
2014 and 2013 were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited, in
millions) |
Impairment
of Assets (1) |
|
Accelerated
Depreciation |
|
Pension Plan
Settlement
Gain |
|
Severance
and Other
Costs |
|
Total |
Permanent
closures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paper machine in
Catawba, South Carolina (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter |
$ |
- |
|
$ |
45 |
|
$ |
- |
|
$ |
- |
|
$ |
45 |
|
|
First six months |
|
- |
|
|
45 |
|
|
- |
|
|
1 |
|
|
46 |
|
Paper machine in Fort
Frances, Ontario |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter |
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|
2 |
|
|
First six months |
|
- |
|
|
- |
|
|
- |
|
|
8 |
|
|
8 |
|
Paper machine in
Iroquois Falls, Ontario |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
First six months |
|
- |
|
|
3 |
|
|
- |
|
|
- |
|
|
3 |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter |
|
5 |
|
|
- |
|
|
- |
|
|
- |
|
|
5 |
|
|
First six months |
|
6 |
|
|
- |
|
|
- |
|
|
(1) |
|
|
5 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter 2014 |
$ |
5 |
|
$ |
45 |
|
$ |
- |
|
$ |
2 |
|
$ |
52 |
|
|
First six months 2014 |
|
6 |
|
|
48 |
|
|
- |
|
|
8 |
|
|
62 |
|
|
Second quarter 2013 |
$ |
- |
|
$ |
9 |
|
$ |
- |
|
$ |
3 |
|
$ |
12 |
|
|
First six months 2013 |
|
- |
|
|
44 |
|
|
(1) |
|
|
9 |
|
|
52 |
(1) |
Due to declining market conditions, we recorded long-lived
assets impairment charges of $4 million and $5 million for the
three and six months ended June 30, 2014 related to our recycling
assets to reduce the carrying value of the assets to their
estimated fair value, which was determined based on estimated
market prices for similar assets. |
(2) |
On May 22, 2014, we announced the permanent closure of our
previously idled paper machine in Catawba. |
2. Other income (expense), net for the three and six months
ended June 30, 2014 and 2013 was
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
(Unaudited, in millions) |
2014 |
|
2013 |
|
2014 |
|
2013 |
Foreign exchange gain (loss) |
$ |
17 |
|
$ |
(7) |
|
$ |
3 |
|
$ |
(12) |
Net loss on extinguishment of debt |
|
- |
|
|
(59) |
|
|
- |
|
|
(59) |
Gain on forgiveness of note payable |
|
- |
|
|
- |
|
|
- |
|
|
12 |
Gain on liquidation settlement |
|
- |
|
|
- |
|
|
- |
|
|
9 |
Miscellaneous income |
|
3 |
|
|
1 |
|
|
4 |
|
|
3 |
|
$ |
20 |
|
$ |
(65) |
|
$ |
7 |
|
$ |
(47) |
3. Tables represent a reconciliation of certain financial
statement line items reported under generally accepted accounting
principles ("GAAP") to our use of non-GAAP measures of operating
income (loss), net income (loss) and net income (loss) per share
("EPS"), in each case adjusted for special items, as well as EBITDA
and adjusted EBITDA, in each case by reportable segment. We believe
that these measures are useful because they allow the reader to
more easily compare our ongoing operations, financial performance,
and EPS from period to period. They are also consistent with
the indicators management uses internally to measure our
performance. These non-GAAP measures should be considered in
addition to and not a substitute for measures of financial
performance calculated and presented in accordance with GAAP in our
Consolidated Statement of Operations in our filings with the
Securities and Exchange Commission. Consequently, readers should
rely on GAAP operating income (loss), operating income (loss) by
reportable segment, net income (loss) and EPS. Non-GAAP measures
included in our press release include:
Operating income (loss) adjusted for special items - is defined
as operating income (loss) from our Consolidated Statements of
Operations excluding special items, such as closure costs,
impairment and other related charges, inventory write-downs related
to closures, start up costs,gains and losses on disposition of
assets, transaction costs and other charges or credits that are
excluded from our segment's performance from GAAP operating income
(loss).
Net income (loss) adjusted for special items - is defined as net
income (loss) from our Consolidated Statements of Operations
excluding the same items as under operating income (loss) adjusted
for the special items, in addition to the effects of foreign
currency translation, net loss on extinguishment of debt, and other
income (expense).
EPS adjusted for special items - is defined as diluted EPS
calculated based on the net income (loss) adjusted for special
items as described above.
EBITDA by reportable segment - is defined as net income (loss)
including noncontrolling interests from our Consolidated Statements
of Operations, allocated to each of our reportable segments
(newsprint, specialty papers, market pulp and wood products) in
accordance with FASB ASC 290, "Segment Reporting," and adjusted for
depreciation and amortization. EBITDA for the corporate and
other segment is defined as net income (loss) including
noncontrolling interests from our Consolidated Statements of
Operations after the allocation to reportable segments, adjusted
for interest expense, income taxes and depreciation and
amortization.
Adjusted EBITDA - is defined as EBITDA excluding the special
items described above.
SOURCE Resolute Forest Products Inc.