Domtar Corporation Reports Preliminary Third Quarter 2019 Financial Results

Lower maintenance and raw material costs drive improved results
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).

  • Third quarter 2019 net earnings of $0.32 per share; earnings before items1 of $0.89 per share
  • Announced reduction of 204,000 tons of uncoated freesheet capacity in Paper
  • $137 million of share repurchases

FORT MILL, S.C.–(BUSINESS WIRE)–Oct. 25, 2019– Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $20 million ($0.32 per share) for the third quarter of 2019 compared to net earnings of $18 million ($0.28 per share) for the second quarter of 2019 and net earnings of $99 million ($1.57 per share) for the third quarter of 2018. Sales for the third quarter of 2019 were $1.3 billion.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20191025005182/en/

Excluding items listed below, the Company had earnings before items1 of $55 million ($0.89 per share) for the third quarter of 2019 compared to earnings before items1 of $36 million ($0.57 per share) for the second quarter of 2019 and earnings before items1 of $92 million ($1.46 per share) for the third quarter of 2018.

ITEMS

Description

Segment

Line item

Amount

After tax effect

EPS impact (per share)

 

 

 

(in millions)

 

Third quarter 2019

 

 

 

 

 

 

 

 

 

 

 

  • Paper machine closures

Pulp and Paper

Impairment of long-lived assets

$32

$25

$0.40

 

 

 

 

 

 

  • Paper machine closures

Pulp and Paper

Closure and restructuring costs

$5

$4

$0.07

 

 

 

 

 

 

  • Margin improvement plan

Personal Care

Impairment of long-lived assets

$1

$1

$0.02

 

 

 

 

 

 

  • Margin improvement plan

Personal Care

Closure and restructuring costs

$6

$5

$0.08

 

 

 

 

 

 

Second quarter 2019

 

 

 

 

 

 

 

 

 

 

 

  • Margin improvement plan

Personal Care

Impairment of long-lived assets

$15

$12

$0.19

 

 

 

 

 

 

  • Margin improvement plan

Personal Care

Closure and restructuring costs

$8

$6

$0.10

 

 

 

 

 

 

Third quarter 2018

 

 

 

 

 

 

 

 

 

 

 

  • U.S. Tax Reform

Corporate

Income tax benefit

$7

$7

$0.11

QUARTERLY REVIEW

“Our results in Paper improved with lower maintenance and raw material costs offsetting market related downtime costs. Our paper machines ran well and cost performance was strong, resulting in a 300 basis point margin expansion for this business,” said John D. Williams, President and Chief Executive Officer. “In Pulp, downward price adjustments continued in most regions but we are seeing increasing signs of improvement in supply and demand fundamentals.”

Mr. Williams added, “In Personal Care, EBITDA and margin performance were one of the best in several quarters as we continue to make excellent progress in executing our business plan, with a strong focus on commercial initiatives, cost performance and delivering on our margin improvement plan.”

Operating income was $29 million in the third quarter of 2019 compared to operating income of $34 million in the second quarter of 2019. Depreciation and amortization totaled $72 million in the third quarter of 2019.

Operating income before items1 was $73 million in the third quarter of 2019 compared to an operating income before items1 of $57 million in the second quarter of 2019.

(In millions of dollars)

 

3Q 2019

 

 

2Q 2019

 

 

 

 

 

 

 

 

 

 

Sales

 

$

1,283

 

 

$

1,317

 

Operating income (loss)

 

 

 

 

 

 

 

 

Pulp and Paper segment

 

 

31

 

 

 

62

 

Personal Care segment

 

 

2

 

 

 

(18

)

Corporate

 

 

(4

)

 

 

(10

)

Total operating income

 

 

29

 

 

 

34

 

Operating income before items1

 

 

73

 

 

 

57

 

Depreciation and amortization

 

 

72

 

 

 

74

 

The decrease in operating income in the third quarter of 2019 was the result of lower selling prices in pulp, market-related downtime costs and the Espanola outage. These factors were partially offset by lower maintenance and raw material costs, lower selling, general and administrative expenses and lower freight, fixed and other costs.

When compared to the second quarter of 2019, manufactured paper shipments were down 1% and pulp shipments increased 12%. The shipment-to-production ratio for paper was 103% in the third quarter of 2019, compared to 98% in the second quarter of 2019. Paper inventories decreased by 19,000 tons, and pulp inventories decreased by 9,000 metric tons when compared to the second quarter of 2019.

LIQUIDITY AND CAPITAL

Cash flow from operating activities amounted to $108 million and capital expenditures were $56 million, resulting in free cash flow1 of $52 million for the third quarter of 2019. Domtar’s net debt-to-total capitalization ratio1 stood at 26% at September 30, 2019 compared to 22% at June 30, 2019.

OUTLOOK

For the fourth quarter, maintenance is expected to be higher while Paper is expected to be negatively impacted in part by a seasonally unfavorable mix. We anticipate some volatility in softwood and fluff pulp markets while Personal Care is expected to benefit from our margin improvement plan and increased sales driven by a stronger order book.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 11:00 a.m. (ET) to discuss its third quarter 2019 financial results. Financial analysts are invited to participate in the call by dialing 1 (866) 548-4713 (toll free – North America) or 1 (323) 794-2093 (International) at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its fourth quarter 2019 earnings results on February 7, 2020 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

About Domtar
Domtar is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. With approximately 10,000 employees serving more than 50 countries around the world, Domtar is driven by a commitment to turn sustainable wood fiber into useful products that people rely on every day. Domtar’s annual sales are approximately $5.5 billion, and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar’s principal executive office is in Fort Mill, South Carolina. To learn more, visit www.domtar.com.

Forward-Looking Statements
Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under “Outlook,” are “forward-looking statements.” Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under “Risk Factors” in our Form 10-K for 2018 as filed with the SEC and as updated by subsequently filed Form 10-Qs. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

Domtar Corporation
Highlights
(In millions of dollars, unless otherwise noted)

                       

 

 

Three months ended

 

 

Three months ended

 

 

Nine months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Selected Segment Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp and Paper

 

 

1,071

 

 

 

1,146

 

 

 

3,314

 

 

 

3,369

 

Personal Care

 

 

227

 

 

 

237

 

 

 

711

 

 

 

746

 

Total for reportable segments

 

 

1,298

 

 

 

1,383

 

 

 

4,025

 

 

 

4,115

 

Intersegment sales

 

 

(15

)

 

 

(16

)

 

 

(49

)

 

 

(50

)

Consolidated sales

 

 

1,283

 

 

 

1,367

 

 

 

3,976

 

 

 

4,065

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp and Paper

 

 

56

 

 

 

58

 

 

 

171

 

 

 

180

 

Personal Care

 

 

16

 

 

 

17

 

 

 

48

 

 

 

53

 

Total for reportable segments

 

 

72

 

 

 

75

 

 

 

219

 

 

 

233

 

Impairment of long-lived assets – Pulp and Paper

 

 

32

 

 

 

 

 

 

32

 

 

 

 

Impairment of long-lived assets – Personal Care

 

 

1

 

 

 

 

 

 

26

 

 

 

 

Consolidated depreciation and amortization and impairment of long-lived assets

 

 

105

 

 

 

75

 

 

 

277

 

 

 

233

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp and Paper

 

 

31

 

 

 

135

 

 

 

237

 

 

 

290

 

Personal Care

 

 

2

 

 

 

(3

)

 

 

(24

)

 

 

7

 

Corporate

 

 

(4

)

 

 

(18

)

 

 

(35

)

 

 

(44

)

Consolidated operating income

 

 

29

 

 

 

114

 

 

 

178

 

 

 

253

 

Interest expense, net

 

 

12

 

 

 

15

 

 

 

38

 

 

 

47

 

Non-service components of net periodic benefit cost

 

 

(2

)

 

 

(4

)

 

 

(7

)

 

 

(13

)

Earnings before income taxes and equity loss

 

 

19

 

 

 

103

 

 

 

147

 

 

 

219

 

Income tax (benefit) expense

 

 

(1

)

 

 

3

 

 

 

28

 

 

 

22

 

Equity loss, net of taxes

 

 

 

 

 

1

 

 

 

1

 

 

 

1

 

Net earnings

 

 

20

 

 

 

99

 

 

 

118

 

 

 

196

 

Per common share (in dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

0.33

 

 

 

1.57

 

 

 

1.89

 

 

 

3.12

 

Diluted

 

 

0.32

 

 

 

1.57

 

 

 

1.88

 

 

 

3.11

 

Weighted average number of common shares outstanding (millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

61.5

 

 

 

62.9

 

 

 

62.5

 

 

 

62.8

 

Diluted

 

 

61.7

 

 

 

63.2

 

 

 

62.7

 

 

 

63.1

 

Cash flows from operating activities

 

 

108

 

 

 

70

 

 

 

282

 

 

 

337

 

Additions to property, plant and equipment

   

56

     

49

     

157

     

111

 

Domtar Corporation
Consolidated Statements of Earnings
(In millions of dollars, unless otherwise noted)

                       

 

 

Three months ended

 

 

Three months ended

 

 

Nine months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

1,283

 

 

 

1,367

 

 

 

3,976

 

 

 

4,065

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales, excluding depreciation and amortization

 

 

1,041

 

 

 

1,059

 

 

 

3,172

 

 

 

3,239

 

Depreciation and amortization

 

 

72

 

 

 

75

 

 

 

219

 

 

 

233

 

Selling, general and administrative

 

 

94

 

 

 

115

 

 

 

322

 

 

 

343

 

Impairment of long-lived assets

 

 

33

 

 

 

 

 

 

58

 

 

 

 

Closure and restructuring costs

 

 

11

 

 

 

 

 

 

23

 

 

 

 

Other operating loss (income), net

 

 

3

 

 

 

4

 

 

 

4

 

 

 

(3

)

 

 

 

1,254

 

 

 

1,253

 

 

 

3,798

 

 

 

3,812

 

Operating income

 

 

29

 

 

 

114

 

 

 

178

 

 

 

253

 

Interest expense, net

 

 

12

 

 

 

15

 

 

 

38

 

 

 

47

 

Non-service components of net periodic benefit cost

 

 

(2

)

 

 

(4

)

 

 

(7

)

 

 

(13

)

Earnings before income taxes and equity loss

 

 

19

 

 

 

103

 

 

 

147

 

 

 

219

 

Income tax (benefit) expense

 

 

(1

)

 

 

3

 

 

 

28

 

 

 

22

 

Equity loss, net of taxes

 

 

 

 

 

1

 

 

 

1

 

 

 

1

 

Net earnings

 

 

20

 

 

 

99

 

 

 

118

 

 

 

196

 

Per common share (in dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

0.33

 

 

 

1.57

 

 

 

1.89

 

 

 

3.12

 

Diluted

 

 

0.32

 

 

 

1.57

 

 

 

1.88

 

 

 

3.11

 

Weighted average number of common shares outstanding (millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

61.5

 

 

 

62.9

 

 

 

62.5

 

 

 

62.8

 

Diluted

 

 

61.7

 

 

 

63.2

 

 

 

62.7

 

 

 

63.1

 

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

98

 

 

 

111

 

Receivables, less allowances of $8 and $6

 

 

618

 

 

 

670

 

Inventories

 

 

798

 

 

 

762

 

Prepaid expenses

 

 

33

 

 

 

24

 

Income and other taxes receivable

 

 

53

 

 

 

22

 

Total current assets

 

 

1,600

 

 

 

1,589

 

Property, plant and equipment, net

 

 

2,499

 

 

 

2,605

 

Operating lease right-of-use assets

 

 

77

 

 

 

 

Intangible assets, net

 

 

568

 

 

 

597

 

Other assets

 

 

140

 

 

 

134

 

Total assets

 

 

4,884

 

 

 

4,925

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Bank indebtedness

 

 

1

 

 

 

 

Trade and other payables

 

 

646

 

 

 

757

 

Income and other taxes payable

 

 

28

 

 

 

25

 

Operating lease liabilities due within one year

 

 

26

 

 

 

 

Long-term debt due within one year

 

 

1

 

 

 

1

 

Total current liabilities

 

 

702

 

 

 

783

 

Long-term debt

 

 

938

 

 

 

853

 

Operating lease liabilities

 

 

68

 

 

 

 

Deferred income taxes and other

 

 

479

 

 

 

476

 

Other liabilities and deferred credits

 

 

258

 

 

 

275

 

Shareholders’ equity

 

 

 

 

 

 

 

 

Common stock

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

1,842

 

 

 

1,981

 

Retained earnings

 

 

1,058

 

 

 

1,023

 

Accumulated other comprehensive loss

 

 

(462

)

 

 

(467

)

Total shareholders’ equity

 

 

2,439

 

 

 

2,538

 

Total liabilities and shareholders’ equity

 

 

4,884

 

 

 

4,925

 

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

     

 

 

For the nine months ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

Operating activities

 

 

 

 

 

 

 

 

Net earnings

 

 

118

 

 

 

196

 

Adjustments to reconcile net earnings to cash flows from operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

219

 

 

 

233

 

Deferred income taxes and tax uncertainties

 

 

1

 

 

 

3

 

Impairment of long-lived assets

 

 

58

 

 

 

 

Net gains on disposals of property, plant and equipment

 

 

 

 

 

(4

)

Stock-based compensation expense

 

 

7

 

 

 

7

 

Equity loss, net

 

 

1

 

 

 

1

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Receivables

 

 

50

 

 

 

(7

)

Inventories

 

 

(34

)

 

 

(23

)

Prepaid expenses

 

 

(4

)

 

 

(4

)

Trade and other payables

 

 

(111

)

 

 

(6

)

Income and other taxes

 

 

(27

)

 

 

(16

)

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

 

 

(3

)

 

 

(46

)

Other assets and other liabilities

 

 

7

 

 

 

3

 

Cash flows from operating activities

 

 

282

 

 

 

337

 

Investing activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(157

)

 

 

(111

)

Proceeds from disposals of property, plant and equipment

 

 

1

 

 

 

4

 

Other

 

 

 

 

 

(6

)

Cash flows used for investing activities

 

 

(156

)

 

 

(113

)

Financing activities

 

 

 

 

 

 

 

 

Dividend payments

 

 

(83

)

 

 

(81

)

Stock repurchase

 

 

(139

)

 

 

 

Net change in bank indebtedness

 

 

2

 

 

 

 

Change in revolving credit facility

 

 

45

 

 

 

 

Proceeds from receivables securitization facility

 

 

150

 

 

 

 

Repayments of receivables securitization facility

 

 

(110

)

 

 

(25

)

Repayments of long-term debt

 

 

(1

)

 

 

 

Other

 

 

(1

)

 

 

1

 

Cash flows used for financing activities

 

 

(137

)

 

 

(105

)

Net (decrease) increase in cash and cash equivalents

 

 

(11

)

 

 

119

 

Impact of foreign exchange on cash

 

 

(2

)

 

 

(2

)

Cash and cash equivalents at beginning of period

 

 

111

 

 

 

139

 

Cash and cash equivalents at end of period

 

 

98

 

 

 

256

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Net cash payments for:

 

 

 

 

 

 

 

 

Interest

 

 

39

 

 

 

48

 

Income taxes

 

 

55

 

 

 

40

 

 

Domtar Corporation
Quarterly 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 that the financial metrics are useful to understand our 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.

 

 

 

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

Q1

 

 

Q2

 

 

Q3

 

 

YTD

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

Year

 

Reconciliation of “Earnings before items” to Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

($)

 

 

80

 

 

 

18

 

 

 

20

 

 

 

118

 

 

 

54

 

 

 

43

 

 

 

99

 

 

 

87

 

 

 

283

 

 

(+)

Impairment of long-lived assets

 

($)

 

 

8

 

 

 

12

 

 

 

26

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

 

(+)

Closure and restructuring costs

 

($)

 

 

3

 

 

 

6

 

 

 

9

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

6

 

 

(+)

Litigation settlement

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

(-)

Net gains on disposals of property, plant and equipment

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(2

)

 

 

 

 

 

 

 

 

(3

)

 

(-)

U.S. Tax Reform

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

5

 

 

 

(2

)

 

(=)

Earnings before items

 

($)

 

 

91

 

 

 

36

 

 

 

55

 

 

 

182

 

 

 

55

 

 

 

41

 

 

 

92

 

 

 

103

 

 

 

291

 

 

(/)

Weighted avg. number of common shares outstanding (diluted)

 

(millions)

 

 

63.2

 

 

 

63.3

 

 

 

61.7

 

 

 

62.7

 

 

 

62.9

 

 

 

63.2

 

 

 

63.2

 

 

 

63.0

 

 

 

63.1

 

 

(=)

Earnings before items per diluted share

 

($)

 

 

1.44

 

 

 

0.57

 

 

 

0.89

 

 

 

2.90

 

 

 

0.87

 

 

 

0.65

 

 

 

1.46

 

 

 

1.63

 

 

 

4.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of “EBITDA” and “EBITDA before items” to Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

($)

 

 

80

 

 

 

18

 

 

 

20

 

 

 

118

 

 

 

54

 

 

 

43

 

 

 

99

 

 

 

87

 

 

 

283

 

 

(+)

Equity loss, net of taxes

 

($)

 

 

1

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

2

 

 

(+)

Income tax expense (benefit)

 

($)

 

 

24

 

 

 

5

 

 

 

(1

)

 

 

28

 

 

 

11

 

 

 

8

 

 

 

3

 

 

 

35

 

 

 

57

 

 

(+)

Interest expense, net

 

($)

 

 

13

 

 

 

13

 

 

 

12

 

 

 

38

 

 

 

16

 

 

 

16

 

 

 

15

 

 

 

15

 

 

 

62

 

 

(+)

Depreciation and amortization

 

($)

 

 

73

 

 

 

74

 

 

 

72

 

 

 

219

 

 

 

79

 

 

 

79

 

 

 

75

 

 

 

75

 

 

 

308

 

 

(+)

Impairment of long-lived assets

 

($)

 

 

10

 

 

 

15

 

 

 

33

 

 

 

58

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

 

(-)

Net gains on disposals of property, plant and equipment

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(3

)

 

 

 

 

 

 

 

 

(4

)

 

(=)

EBITDA

 

($)

 

 

201

 

 

 

125

 

 

 

136

 

 

 

462

 

 

 

159

 

 

 

143

 

 

 

193

 

 

 

220

 

 

 

715

 

 

(/)

Sales

 

($)

 

 

1,376

 

 

 

1,317

 

 

 

1,283

 

 

 

3,976

 

 

 

1,345

 

 

 

1,353

 

 

 

1,367

 

 

 

1,390

 

 

 

5,455

 

 

(=)

EBITDA margin

 

(%)

 

 

15

%

 

 

9

%

 

 

11

%

 

 

12

%

 

 

12

%

 

 

11

%

 

 

14

%

 

 

16

%

 

 

13

%

 

 

EBITDA

 

($)

 

 

201

 

 

 

125

 

 

 

136

 

 

 

462

 

 

 

159

 

 

 

143

 

 

 

193

 

 

 

220

 

 

 

715

 

 

(+)

Closure and restructuring costs

 

($)

 

 

4

 

 

 

8

 

 

 

11

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

 

(+)

Litigation settlement

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

(=)

EBITDA before items

 

($)

 

 

205

 

 

 

133

 

 

 

147

 

 

 

485

 

 

 

161

 

 

 

143

 

 

 

193

 

 

 

228

 

 

 

725

 

 

(/)

Sales

 

($)

 

 

1,376

 

 

 

1,317

 

 

 

1,283

 

 

 

3,976

 

 

 

1,345

 

 

 

1,353

 

 

 

1,367

 

 

 

1,390

 

 

 

5,455

 

 

(=)

EBITDA margin before items

 

(%)

 

 

15

%

 

 

10

%

 

 

11

%

 

 

12

%

 

 

12

%

 

 

11

%

 

 

14

%

 

 

16

%

 

 

13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of “Free cash flow” to Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

($)

 

 

55

 

 

 

119

 

 

 

108

 

 

 

282

 

 

 

90

 

 

 

177

 

 

 

70

 

 

 

217

 

 

 

554

 

 

(-)

Additions to property, plant and equipment

 

($)

 

 

(46

)

 

 

(55

)

 

 

(56

)

 

 

(157

)

 

 

(25

)

 

 

(37

)

 

 

(49

)

 

 

(84

)

 

 

(195

)

 

(=)

Free cash flow

 

($)

 

 

9

 

 

 

64

 

 

 

52

 

 

 

125

 

 

 

65

 

 

 

140

 

 

 

21

 

 

 

133

 

 

 

359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“Net debt-to-total capitalization” computation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank indebtedness

 

($)

 

 

3

 

 

 

3

 

 

 

1

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

(+)

Long-term debt due within one year

 

($)

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

 

 

(+)

Long-term debt

 

($)

 

 

853

 

 

 

824

 

 

 

938

 

 

 

 

 

 

 

1,103

 

 

 

1,103

 

 

 

1,103

 

 

 

853

 

 

 

 

 

 

(=)

Debt

 

($)

 

 

857

 

 

 

828

 

 

 

940

 

 

 

 

 

 

 

1,104

 

 

 

1,105

 

 

 

1,104

 

 

 

854

 

 

 

 

 

 

(-)

Cash and cash equivalents

 

($)

 

 

(94

)

 

 

(93

)

 

 

(98

)

 

 

 

 

 

 

(152

)

 

 

(264

)

 

 

(256

)

 

 

(111

)

 

 

 

 

 

(=)

Net debt

 

($)

 

 

763

 

 

 

735

 

 

 

842

 

 

 

 

 

 

 

952

 

 

 

841

 

 

 

848

 

 

 

743

 

 

 

 

 

 

(+)

Shareholders’ equity

 

($)

 

 

2,608

 

 

 

2,619

 

 

 

2,439

 

 

 

 

 

 

 

2,493

 

 

 

2,458

 

 

 

2,553

 

 

 

2,538

 

 

 

 

 

 

(=)

Total capitalization

 

($)

 

 

3,371

 

 

 

3,354

 

 

 

3,281

 

 

 

 

 

 

 

3,445

 

 

 

3,299

 

 

 

3,401

 

 

 

3,281

 

 

 

 

 

 

 

Net debt

 

($)

 

 

763

 

 

 

735

 

 

 

842

 

 

 

 

 

 

 

952

 

 

 

841

 

 

 

848

 

 

 

743

 

 

 

 

 

 

(/)

Total capitalization

 

($)

 

 

3,371

 

 

 

3,354

 

 

 

3,281

 

 

 

 

 

 

 

3,445

 

 

 

3,299

 

 

 

3,401

 

 

 

3,281

 

 

 

 

 

 

(=)

Net debt-to-total capitalization

 

(%)

 

 

23

%

 

 

22

%

 

 

26

%

 

 

 

 

 

 

28

%

 

 

25

%

 

 

25

%

 

 

23

%

 

 

 

 

“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 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 2019
(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

 

Corporate

 

Total

 

 

 

 

 

 

Q1’19

 

Q2’19

 

Q3’19

 

Q4’19

 

YTD

 

Q1’19

 

Q2’19

 

Q3’19

 

Q4’19

 

YTD

 

Q1’19

 

Q2’19

 

Q3’19

 

Q4’19

 

YTD

 

Q1’19

 

Q2’19

 

Q3’19

 

Q4’19

 

YTD

Reconciliation of Operating income (loss) to “Operating income (loss) before items”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

($)

 

144

 

62

 

31

 

 

237

 

(8)

 

(18)

 

2

 

 

(24)

 

(21)

 

(10)

 

(4)

 

 

(35)

 

115

 

34

 

29

 

 

178

 

(+)

Impairment of long-lived assets

 

($)

 

 

 

32

 

 

32

 

10

 

15

 

1

 

 

26

 

 

 

 

 

 

10

 

15

 

33

 

 

58

 

(+)

Closure and restructuring costs

 

($)

 

 

 

5

 

 

5

 

4

 

8

 

6

 

 

18

 

 

 

 

 

 

4

 

8

 

11

 

 

23

 

(=)

Operating income (loss) before items

 

($)

 

144

 

62

 

68

 

 

274

 

6

 

5

 

9

 

 

20

 

(21)

 

(10)

 

(4)

 

 

(35)

 

129

 

57

 

73

 

 

259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of “Operating income (loss)

before items” to “EBITDA before items”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) before items

 

($)

 

144

 

62

 

68

 

 

274

 

6

 

5

 

9

 

 

20

 

(21)

 

(10)

 

(4)

 

 

(35)

 

129

 

57

 

73

 

 

259

 

(+)

Non-service components of net periodic benefit cost

 

($)

 

3

 

3

 

2

 

 

8

 

 

 

 

 

 

 

(1)

 

 

 

(1)

 

3

 

2

 

2

 

 

7

 

(+)

Depreciation and amortization

 

($)

 

57

 

58

 

56

 

 

171

 

16

 

16

 

16

 

 

48

 

 

 

 

 

 

73

 

74

 

72

 

 

219

 

(=)

EBITDA before items

 

($)

 

204

 

123

 

126

 

 

453

 

22

 

21

 

25

 

 

68

 

(21)

 

(11)

 

(4)

 

 

(36)

 

205

 

133

 

147

 

 

485

 

(/)

Sales

 

($)

 

1,147

 

1,096

 

1,071

 

 

3,314

 

247

 

237

 

227

 

 

711

 

 

 

 

 

 

1,394

 

1,333

 

1,298

 

 

4,025

 

(=)

EBITDA margin before items

 

(%)

 

18%

 

11%

 

12%

 

 

14%

 

9%

 

9%

 

11%

 

 

10%

 

 

 

 

 

 

15%

 

10%

 

11%

 

 

12%

“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.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2018
(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

 

Corporate

 

Total

 

 

 

 

 

 

Q1’18

 

Q2’18

 

Q3’18

 

Q4’18

 

Year

 

Q1’18

 

Q2’18

 

Q3’18

 

Q4’18

 

Year

 

Q1’18

 

Q2’18

 

Q3’18

 

Q4’18

 

Year

 

Q1’18

 

Q2’18

 

Q3’18

 

Q4’18

 

Year

Reconciliation of Operating income (loss) to “Operating income (loss) before items”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

($)

 

76

 

79

 

135

 

148

 

438

 

8

 

2

 

(3)

 

(12)

 

(5)

 

(7)

 

(19)

 

(18)

 

(3)

 

(47)

 

77

 

62

 

114

 

133

 

386

 

(+)

Impairment of long-lived assets

 

($)

 

 

 

 

 

 

 

 

 

7

 

7

 

 

 

 

 

 

 

 

 

7

 

7

 

(-)

Net gains on disposals of property, plant and

equipment

 

($)

 

(1)

 

(3)

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

(1)

 

(3)

 

 

 

(4)

 

(+)

Closure and restructuring costs

 

($)

 

 

 

 

 

 

 

 

 

8

 

8

 

 

 

 

 

 

 

 

 

8

 

8

 

(+)

Litigation settlement

 

($)

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

2

 

2

 

 

 

 

2

 

(=)

Operating income (loss) before items

 

($)

 

75

 

76

 

135

 

148

 

434

 

8

 

2

 

(3)

 

3

 

10

 

(5)

 

(19)

 

(18)

 

(3)

 

(45)

 

78

 

59

 

114

 

148

 

399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of “Operating income (loss) before items” to “EBITDA before items”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) before items

 

($)

 

75

 

76

 

135

 

148

 

434

 

8

 

2

 

(3)

 

3

 

10

 

(5)

 

(19)

 

(18)

 

(3)

 

(45)

 

78

 

59

 

114

 

148

 

399

 

(+)

Non-service components of net periodic benefit cost

 

($)

 

4

 

6

 

4

 

5

 

19

 

 

 

 

 

 

 

(1)

 

 

 

(1)

 

4

 

5

 

4

 

5

 

18

 

(+)

Depreciation and amortization

 

($)

 

61

 

61

 

58

 

58

 

238

 

18

 

18

 

17

 

17

 

70

 

 

 

 

 

 

79

 

79

 

75

 

75

 

308

 

(=)

EBITDA before items

 

($)

 

140

 

143

 

197

 

211

 

691

 

26

 

20

 

14

 

20

 

80

 

(5)

 

(20)

 

(18)

 

(3)

 

(46)

 

161

 

143

 

193

 

228

 

725

 

(/)

Sales

 

($)

 

1,100

 

1,123

 

1,146

 

1,154

 

4,523

 

262

 

247

 

237

 

254

 

1,000

 

 

 

 

 

 

1,362

 

1,370

 

1,383

 

1,408

 

5,523

 

(=)

EBITDA margin before items

 

(%)

 

13%

 

13%

 

17%

 

18%

 

15%

 

10%

 

8%

 

6%

 

8%

 

8%

 

 

 

 

 

 

12%

 

10%

 

14%

 

16%

 

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.

Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)

               

 

 

 

 

2019

 

 

2018

 

 

 

 

 

Q1

 

 

Q2

 

 

Q3

 

 

YTD

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

Year

 

Pulp and Paper Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

($)

 

 

1,147

 

 

 

1,096

 

 

 

1,071

 

 

 

3,314

 

 

 

1,100

 

 

 

1,123

 

 

 

1,146

 

 

 

1,154

 

 

 

4,523

 

Operating income

 

($)

 

 

144

 

 

 

62

 

 

 

31

 

 

 

237

 

 

 

76

 

 

 

79

 

 

 

135

 

 

 

148

 

 

 

438

 

Depreciation and amortization

 

($)

 

 

57

 

 

 

58

 

 

 

56

 

 

 

171

 

 

 

61

 

 

 

61

 

 

 

58

 

 

 

58

 

 

 

238

 

Impairment of long-lived assets

 

($)

 

 

 

 

 

 

 

 

32

 

 

 

32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paper

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paper Production

 

(‘000 ST)

 

 

757

 

 

 

697

 

 

 

653

 

 

 

2,107

 

 

 

739

 

 

 

739

 

 

 

743

 

 

 

757

 

 

 

2,978

 

Paper Shipments – Manufactured

 

(‘000 ST)

 

 

736

 

 

 

681

 

 

 

672

 

 

 

2,089

 

 

 

769

 

 

 

754

 

 

 

727

 

 

 

721

 

 

 

2,971

 

Communication Papers

 

(‘000 ST)

 

 

615

 

 

 

567

 

 

 

563

 

 

 

1,745

 

 

 

640

 

 

 

615

 

 

 

596

 

 

 

595

 

 

 

2,446

 

Specialty and Packaging Papers

 

(‘000 ST)

 

 

121

 

 

 

114

 

 

 

109

 

 

 

344

 

 

 

129

 

 

 

139

 

 

 

131

 

 

 

126

 

 

 

525

 

Paper Shipments – Sourced from

3rd parties

 

(‘000 ST)

 

 

23

 

 

 

21

 

 

 

25

 

 

 

69

 

 

 

28

 

 

 

26

 

 

 

30

 

 

 

25

 

 

 

109

 

Paper Shipments – Total

 

(‘000 ST)

 

 

759

 

 

 

702

 

 

 

697

 

 

 

2,158

 

 

 

797

 

 

 

780

 

 

 

757

 

 

 

746

 

 

 

3,080

 

Pulp

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp Shipments(a)

 

(‘000 ADMT)

 

 

349

 

 

 

370

 

 

 

416

 

 

 

1,135

 

 

 

374

 

 

 

377

 

 

 

390

 

 

 

395

 

 

 

1,536

 

Pulp Shipments mix(b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardwood Kraft Pulp

 

(%)

 

 

2

%

 

 

2

%

 

 

5

%

 

 

3

%

 

 

4

%

 

 

3

%

 

 

3

%

 

 

3

%

 

 

4

%

Softwood Kraft Pulp

 

(%)

 

 

53

%

 

 

56

%

 

 

55

%

 

 

55

%

 

 

58

%

 

 

56

%

 

 

56

%

 

 

55

%

 

 

56

%

Fluff Pulp

 

(%)

 

 

45

%

 

 

42

%

 

 

40

%

 

 

42

%

 

 

38

%

 

 

41

%

 

 

41

%

 

 

42

%

 

 

40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal Care Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

($)

 

 

247

 

 

 

237

 

 

 

227

 

 

 

711

 

 

 

262

 

 

 

247

 

 

 

237

 

 

 

254

 

 

 

1,000

 

Operating (loss) income

 

($)

 

 

(8

)

 

 

(18

)

 

 

2

 

 

 

(24

)

 

 

8

 

 

 

2

 

 

 

(3

)

 

 

(12

)

 

 

(5

)

Depreciation and amortization

 

($)

 

 

16

 

 

 

16

 

 

 

16

 

 

 

48

 

 

 

18

 

 

 

18

 

 

 

17

 

 

 

17

 

 

 

70

 

Impairment of long-lived assets

 

($)

 

 

10

 

 

 

15

 

 

 

1

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Exchange Rates

 

$US / $CAN

 

 

1.329

 

 

 

1.337

 

 

 

1.321

 

 

 

1.329

 

 

 

1.264

 

 

 

1.290

 

 

 

1.307

 

 

 

1.321

 

 

 

1.296

 

 

 

$CAN / $US

 

 

0.752

 

 

 

0.748

 

 

 

0.757

 

 

 

0.752

 

 

 

0.791

 

 

 

0.775

 

 

 

0.765

 

 

 

0.757

 

 

 

0.772

 

 

 

€ / $US

 

 

1.136

 

 

 

1.124

 

 

 

1.111

 

 

 

1.124

 

 

 

1.229

 

 

 

1.192

 

 

 

1.163

 

 

 

1.141

 

 

 

1.181

 

(a) Figures represent Pulp Shipments to third parties.

(b) Percentages include Pulp Shipments to our Personal Care segment.

Note: the term “ST” refers to a short ton and the term “ADMT” refers to an air dry metric ton.


1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

Source: Domtar Corporation

INVESTOR RELATIONS
Nicholas Estrela
Director
Investor Relations
Tel.: 514-848-5049

MEDIA RELATIONS
David Struhs
Vice-President
Corporate Services and Sustainability
Tel.: 803-802-8031

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