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Domtar Corporation reports preliminary third quarter 2013 financial results


Domtar Corporation reports preliminary third quarter 2013 financial results

Third quarter highlighted by improved pulp productivity and continued growth in personal care earnings (All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)


    --  Third quarter 2013 net earnings of $0.82 per share, earnings
        before items(1) of $1.25 per share
    --  Closed the sale of the Ariva U.S. business
    --  Price increases announced for several uncoated freesheet paper
        grades

TICKER SYMBOL 
(NYSE: UFS) (TSX: UFS)

MONTREAL, Oct. 24, 2013 /CNW Telbec/ - Domtar Corporation (NYSE: UFS) (TSX: 
UFS) today reported net earnings of $27 million ($0.82 per share) for the 
third quarter of 2013 compared to a net loss of $46 million ($1.38 per share) 
for the second quarter of 2013 and net earnings of $66 million ($1.84 per 
share) for the third quarter of 2012. Sales for the third quarter of 2013 were 
$1,375 million.

Excluding items listed below, the Company had earnings before items(1) of $41 
million ($1.25 per share) for the third quarter of 2013 compared to earnings 
before items(1) of $16 million ($0.48 per share) for the second quarter of 
2013 and earnings before items(1) of $67 million ($1.87 per share) for the 
third quarter of 2012.

Third quarter 2013 items:
    --  Loss on sale of business of $19 million ($12 million after
        tax); and
    --  Negative impact of purchase accounting of $2 million ($2
        million after tax).

Second quarter 2013 items:
    --  Litigation settlement of $49 million ($46 million after tax);
    --  Closure and restructuring charges of $18 million ($13 million
        after tax); and
    --  Charge of $5 million ($3 million after tax) related to the
        impairment and write-down of property, plant and equipment.

Third quarter 2012 items:
    --  Closure and restructuring costs of $2 million ($1 million after
        tax).

Our third quarter results were driven by improved productivity in our pulp 
business and continued growth in our personal care business," said John D. 
Williams, President and Chief Executive Officer. "Pulp and paper plays a vital 
role as the cash-generation platform in our journey to expand into 
higher-growth opportunities, and we are focused on running the business as 
efficiently as possible to ensure that we continue to extract maximum value 
from our assets.  During the quarter, we finished the reconfiguration of our 
Kamloops pulp mill following the closure of a pulp line and a recovery boiler, 
and we continue to look for opportunities to further improve our output.  
Additionally, closing the sale of the Ariva U.S. business marked further 
progress in our transformation as we work to drive enhanced value for our 
shareholders.

Mr. Williams added, "Our personal care business continues its earnings 
progression with the ongoing integration of the recent AHP acquisition. While 
third quarter results were negatively impacted by an inventory adjustment at a 
large retail customer, we are enthusiastic about the long-term prospects for 
personal care and remain on track to deliver more than $200 million of EBITDA 
by 2017 with our existing platform."

QUARTERLY REVIEW

Operating income before items(1) was $70 million in the third quarter of 2013 
compared to an operating income before items(1) of $42 million in the second 
quarter of 2013. Depreciation and amortization totaled $93 million in the 
third quarter of 2013.

(In millions of dollars)           3Q 2013   2Q 2013
                                                    

Sales                               $1,375    $1,312
                                                    

Operating income (loss)                             
                                                    

  Pulp and Paper segment                42        16
                                                    

  Personal Care segment                 11        10
                                                    

  Corporate                            (4)      (56)
                                                    

  Total                                 49      (30)
                                                    

Operating income before items(1)        70        42
                                                    

Depreciation and amortization           93        93

The increase in operating income before items(1) in the third quarter of 2013 
was the result of lower costs for maintenance, higher productivity in pulp, 
the inclusion of Associated Hygienic Products since July 1 and the exclusion 
of Ariva U.S. since July 31st, lower raw material costs, higher average 
selling prices for pulp and favorable exchange rates. These factors were 
partially offset by higher fixed costs and lower average selling prices for 
paper.

When compared to the second quarter of 2013, paper shipments increased 1.6% 
and pulp shipments increased 2.3%. The shipments-to-production ratio for paper 
was 98% in the third quarter of 2013, compared to 96% in the second quarter of 
2013. Lack-of-order downtime and machine slowdowns in pulp and paper totaled 
18,000 short tons in the third quarter of 2013. Paper inventories increased by 
5,000 tons while pulp inventories increased by 3,000 metric tons at the end of 
September, compared to June levels.

On July 31st, Domtar sold the Ariva U.S. business and the results of the 
former Distribution segment have been reclassified under the Pulp and Paper 
segment.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $287 million and 
capital expenditures were $180 million, resulting in free cash flow(1) of $107 
million for the first nine months of 2013. Domtar's net debt-to-total 
capitalization ratio(1) stood at 26% at September 30, 2013 compared to 16% at 
December 31, 2012.

Domtar returned a total of $233 million to its shareholders through a 
combination of dividends and share buybacks in the first nine months of 2013. 
Under its stock repurchase program, Domtar repurchased a total of 533,327 
shares of common stock at an average price of $68.85 in the third quarter of 
2013, and a total of 11,170,506 shares of common stock at an average price of 
$78.48 since the implementation of the program in May 2010. At the end of the 
third quarter of 2013, Domtar had $121 million remaining under this program.

OUTLOOK

Our pulp business should benefit from accelerating momentum in global demand, 
notably in China. The recently announced price increases for several paper 
grades are expected to positively impact results towards the end of the 
quarter. We expect higher input costs due to higher usage in the winter months 
and we should see lower paper sales volumes in the fourth quarter due to 
seasonality. Looking out to 2014, we should continue to benefit from the 
recently announced paper price increases and our personal care business will 
continue to see earnings growth.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss 
its third quarter 2013 financial results. Financial analysts are invited to 
participate in the call by dialing 1 (866) 321-8231 (toll free - North 
America) or 1 (416) 642-5213 (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.

A replay will be available by dialing 1 (888) 203-1112 (North America) or 1 
(647) 436-0148 (International) using access code 5674179 until November 7, 
2013.

About Domtar 
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and 
distributes a wide variety of fiber-based products including communication 
papers, specialty and packaging papers and absorbent hygiene products. The 
foundation of its business is a network of world class wood fiber converting 
assets that produce papergrade, fluff and specialty pulps. The majority of its 
pulp production is consumed internally to manufacture paper and consumer 
products. Domtar is the largest integrated marketer of uncoated freesheet 
paper in North America with recognized brands such as Cougar®, Lynx® Opaque 
Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®. Domtar 
is also a leading marketer and producer of a broad line of incontinence care 
products marketed primarily under the Attends® brand name as well as baby 
diapers. In 2012, Domtar had sales of US$5.5 billion from some 50 countries. 
The Company employs approximately 9,500 people. 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 2012 as 
filed with the SEC and as updated by subsequently filed Form 10-Q's. 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.

________________________________
(1)  Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP 
Financial Measures in the appendix. 
    Domtar Corporation
                                                                      

Highlights                                                            

(In millions of
dollars, unless
otherwise noted)                                                      
                                                                      
                                                           
                   Three months Three months Nine months  Nine months
                      ended        ended        ended        ended
                   September 30 September 30 September 30 September 30
                         2013         2012         2013         2012
                                                 (Unaudited)
                                                           
                              $            $            $            $
                                                                      

Selected Segment
Information                                                           
                                                                      

Sales                                                                 
    Pulp and Paper        1,204        1,280        3,650        3,870
    Personal Care           175          111          394          288

Total for
reportable
segments                  1,379        1,391        4,044        4,158
    Intersegment
    sales - Pulp
    and Paper               (4)          (2)         (12)          (3)

Consolidated sales        1,375        1,389        4,032        4,155

Depreciation and
amortization and
impairment and
write-down of
property, plant
and equipment                                                         
    Pulp and Paper           84           90          260          274
    Personal Care             9            6           21           15

Total for
reportable
segments                     93           96          281          289
    Impairment and
    write-down of
    property,
    plant and
    equipment -
    Pulp and Paper            -            -           15            2

Consolidated
depreciation and
amortization and
impairment and
write-down of
property, plant
and equipment                93           96          296          291
                                                                      

Operating income
(loss)                                                                
    Pulp and Paper           42           98           96          298
    Personal Care            11           12           34           32
    Corporate               (4)          (1)         (62)          (6)

Consolidated
operating income             49          109           68          324

Interest expense,
net                          21           20           67          109

Earnings before
income taxes and
equity loss                  28           89            1          215

Income tax expense
(benefit)                     1           22         (26)           57

Equity loss, net
of taxes                      -            1            1            5

Net earnings                 27           66           26          153
                                                                      

Per common share
(in dollars)                                                          

  Net earnings                                                        
    Basic                  0.83         1.85         0.77         4.21
    Diluted                0.82         1.84         0.77         4.20

Weighted average
number of common
and exchangeable
shares outstanding
(millions)                                                            
    Basic                  32.7         35.7         33.6         36.3
    Diluted                32.8         35.8         33.7         36.4
                                                                      

Cash flows
provided from
operating
activities                  104          206          287          411

Additions to
property, plant
and equipment                62           66          180          171
    Domtar Corporation                                          

Consolidated
Statements of
Earnings                                                    

(In millions of
dollars, unless
otherwise noted)                                            
                                                            
                                                            
                    Three months Three months Nine months  Nine months
                       ended        ended        ended        ended
                    September 30 September 30 September 30 September 30
                          2013         2012         2013         2012
                                                  (Unaudited)
                                                            
                               $            $            $            $
                                                            

Sales                      1,375        1,389        4,032        4,155

Operating expenses                                          
    Cost of sales,                                                3,263
    excluding
    depreciation
    and
    amortization           1,116        1,100        3,280
    Depreciation
    and
    amortization              93           96          281          289
    Selling,
    general and
    administrative            95           80          281          268
    Impairment and
    write-down of
    property,
    plant and
    equipment                  -            -           15            2
    Closure and
    restructuring
    costs                      -            2           18            3
    Other
    operating
    loss, net                 22            2           89            6
                           1,326        1,280        3,964        3,831

Operating income              49          109           68          324

Interest expense,                          20           67          109
net                           21

Earnings before
income taxes and                           89            1          215
equity loss                   28

Income tax expense                         22         (26)           57
(benefit)                      1

Equity loss, net of                         1            1            5
taxes                          -

Net earnings                  27           66           26          153
                                                            

Per common share                                            
(in dollars)                    
                                                            

  Net earnings                                              
    Basic                   0.83         1.85         0.77         4.21
    Diluted                 0.82         1.84         0.77         4.20

Weighted average
number of common
and exchangeable
shares outstanding
(millions)                                                  
    Basic                   32.7         35.7         33.6         36.3
    Diluted                 32.8         35.8         33.7         36.4
    Domtar Corporation                                                  

Consolidated Balance Sheets at                                      

(In millions of dollars)                                            
                                                                    
                                            September 30 December 31
                                                  2013        2012
                                                     (Unaudited)
                                                          
                                                       $           $

Assets                                                              

Current assets                                                      

  Cash and cash equivalents                          191         661

  Receivables, less allowances of $4 and $4          583         562

  Inventories                                        703         675

  Prepaid expenses                                    31          24

  Income and other taxes receivable                   48          48

  Deferred income taxes                               58          45
    Total current assets                           1,614       2,015
                                                                    

  Property, plant and equipment, at cost           8,928       8,793

  Accumulated depreciation                       (5,576)     (5,392)
    Net property, plant and equipment              3,352       3,401

Goodwill                                             367         263

Intangible assets, net of amortization               409         309

Other assets                                         143         135
      Total assets                                 5,885       6,123
                                                          

Liabilities and shareholders' equity                                

Current liabilities                                                 

  Bank indebtedness                                    6          18

  Trade and other payables                           693         646

  Income and other taxes payable                      16          15

  Long-term debt due within one year                   6          79
    Total current liabilities                        721         758
                                                          

Long-term debt                                     1,102       1,128

Deferred income taxes and other                      946         903

Other liabilities and deferred credits               435         457
                                                          

Shareholders' equity                                                

  Exchangeable shares                                 46          48

  Additional paid-in capital                       1,998       2,175

  Retained earnings                                  756         782

  Accumulated other comprehensive loss             (119)       (128)
    Total shareholders' equity                     2,681       2,877
                                                          
      Total liabilities and shareholders'
      equity                                       5,885       6,123
    Domtar Corporation                                                     

Consolidated Statements of Cash
Flows                                                                  

(In millions of dollars)                                               
                                                                       
                                  Nine months ended   Nine months ended
                                    September 30        September 30
                                           2013                2012
                                                     (Unaudited)
                                                                       
                                                  $                   $
                                                                       

Operating activities                                                   

Net earnings                                     26                 153

Adjustments to reconcile net
earnings to cash flows from
operating activities                                                   

  Depreciation and amortization                 281                 289

  Deferred income taxes and tax
  uncertainties                                 (9)                  13

  Impairment and write-down of
  property, plant and equipment                  15                   2

  Net losses on disposals of
  property, plant and equipment
  and sale of business                            9                   -

  Stock-based compensation
  expense                                         4                   3

  Equity loss, net                                1                   5

  Other                                         (4)                (11)

Changes in assets and
liabilities, excluding the
effects of acquisition and sale
of businesses                                                          

  Receivables                                  (46)                 (1)

  Inventories                                  (19)                  20

  Prepaid expenses                              (5)                 (7)

  Trade and other payables                       15                (80)

  Income and other taxes                       (11)                   6

  Difference between employer
  pension and other
  post-retirement contributions

  and pension and other
  post-retirement expense                        23                   7

  Other assets and other
  liabilities                                     7                  12

  Cash flows provided from
  operating activities                          287                 411
                                                                       

Investing activities                                                   

Additions to property, plant and
equipment                                     (180)               (171)

Proceeds from disposals of
property, plant and equipment and
sale of business                                 55                   -

Acquisition of businesses, net of
cash acquired                                 (287)               (293)

Investment in joint venture                     (1)                 (5)

  Cash flows used for investing
  activities                                  (413)               (469)
                                                                       

Financing activities                                                   

Dividend payments                              (50)                (42)

Net change in bank indebtedness                (13)                   8

Issuance of long-term debt                        -                 548

Repayment of long-term debt                    (99)               (190)

Stock repurchase                              (183)               (116)

Other                                             2                 (1)

  Cash flows (used for) provided
  from financing activities                   (343)                 207
                                                                       

Net (decrease) increase in cash
and cash equivalents                          (469)                 149

Impact of foreign exchange on
cash                                            (1)                   -

Cash and cash equivalents at
beginning of period                             661                 444

Cash and cash equivalents at end
of period                                       191                 593
                                                                       

Supplemental cash flow
information                                                            

  Net cash payments for:                                               
    Interest (including $2
    million and $47 million of
    tender offer premiums in 2013
    and 2012, respectively)                      60                  92
    Income taxes (refund) paid                  (8)                  60

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 presented are frequently used by investors and are useful to evaluate our ability to service debt and our overall credit profile. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results. The Company calculates "Earnings before items" and "EBITDA before items" by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our current operations. Management uses these measures, as well as EBITDA and Free cash flow, to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Net earnings provides for a more complete analysis of the results of operations. Net earnings and Cash flow provided from operating activities are the most directly comparable GAAP measures.


                                                                                        
                                              2013                        2012
                                  Q1    Q2    Q3   YTD    Q1    Q2    Q3    Q4   YTD

Reconciliation of           
"Earnings before
items" to Net
earnings (loss)                                                                      
      Net earnings
      (loss)         ($)           45  (46)    27    26    28    59    66    19   172

  (+) Impairment and
      write-down of
      property,
      plant and
      equipment and
      intangible
      assets         ($)            7     3    -     10     1    -     -      8     9

  (+) Closure and
      restructuring
      costs          ($)           -     13    -     13     1    -      1    18    20

  (-) Net (gains)
      losses on
      disposals of
      property,
      plant and
      equipment and
      business       ($)          (6)    -     12     6    -     -     -      1     1

  (+) Impact of
      purchase
      accounting     ($)           -     -      2     2     1    -     -     -      1

  (+) Reversal of
      alternative
      fuel tax
      credits        ($)           18    -     -     18    -     -     -     -     - 

  (-) Cellulosic
      biofuel
      producer
      credits        ($)         (33)    -     -   (33)    -     -     -     -     - 

  (+) Loss on
      repurchase of
      long-term debt ($)            2    -     -      2    30    -     -     -     30

  (+) Weston
      litigation
      settlement     ($)           -     46    -     46    -     -     -     -     - 

  (=) Earnings
      before items   ($)           33    16    41    90    61    59    67    46   233

  (/) Weighted avg.
      number of
      common and
      exchangeable
      shares
      outstanding
      (diluted)      (millions)  34.9  33.4  32.8  33.7  37.0  36.6  35.8  35.2  36.1

  (=) Earnings
      before items
      per diluted
      share          ($)         0.95  0.48  1.25  2.67  1.65  1.61  1.87  1.31  6.45
                                                                                     

Reconciliation of           
"EBITDA" and "EBITDA
before items" to Net
earnings (loss)                                                                      
      Net earnings
      (loss)         ($)           45  (46)    27    26    28    59    66    19   172

  (+) Equity loss,
      net of taxes   ($)            1    -     -      1     2     2     1     1     6

  (+) Income tax
      (benefit)
      expense        ($)         (22)   (5)     1  (26)     8    27    22     1    58

  (+) Interest
      expense, net   ($)           25    21    21    67    71    18    20    22   131

  (=) Operating
      income (loss)  ($)           49  (30)    49    68   109   106   109    43   367

  (+) Depreciation
      and
      amortization   ($)           95    93    93   281    97    96    96    96   385

  (+) Impairment and
      write-down of
      property,
      plant and
      equipment and
      intangible
      assets         ($)           10     5    -     15     2    -     -     12    14

  (-) Net (gains)
      losses on
      disposals of
      property,
      plant and
      equipment and
      business       ($)         (10)    -     19     9    -     -     -      2     2

  (=) EBITDA         ($)          144    68   161   373   208   202   205   153   768

  (/) Sales          ($)        1,345 1,312 1,375 4,032 1,398 1,368 1,389 1,327 5,482

  (=) EBITDA margin  (%)          11%    5%   12%    9%   15%   15%   15%   12%   14%
      EBITDA         ($)          144    68   161   373   208   202   205   153   768

  (+) Reversal of
      alternative
      fuel tax
      credits        ($)           26    -     -     26    -     -     -     -     - 

  (+) Closure and
      restructuring
      costs          ($)           -     18    -     18     1    -      2    27    30

  (+) Impact of
      purchase
      accounting     ($)           -     -      2     2     1    -     -     -      1

  (+) Weston
      litigation
      settlement     ($)           -     49    -     49    -     -     -     -     - 

  (=) EBITDA before
      items          ($)          170   135   163   468   210   202   207   180   799

  (/) Sales          ($)        1,345 1,312 1,375 4,032 1,398 1,368 1,389 1,327 5,482

  (=) EBITDA margin
      before items   (%)          13%   10%   12%   12%   15%   15%   15%   14%   15%
                                                                                     

Reconciliation of           
"Free cash flow" to
Cash flow provided
from operating
activities                                                                           
      Cash flow
      provided from
      operating
      activities     ($)           63   120   104   287    30   175   206   140   551

  (-) Additions to
      property,
      plant and
      equipment      ($)         (56)  (62)  (62) (180)  (29)  (76)  (66)  (65) (236)

  (=) Free cash flow ($)            7    58    42   107     1    99   140    75   315
                                                                                     

"Net debt-to-total          
capitalization"
computation                                                                          
      Bank
      indebtedness   ($)           13     2     6          13    22    15    18      

  (+) Long-term debt
      due within one
      year           ($)            8     7     6           6     6     7    79      

  (+) Long-term debt ($)        1,104 1,102 1,102         952   950 1,196 1,128      

  (=) Debt           ($)        1,125 1,111 1,114         971   978 1,218 1,225      

  (-) Cash and cash
      equivalents    ($)        (513) (432) (191)       (315) (276) (593) (661)      

  (=) Net debt       ($)          612   679   923         656   702   625   564      

  (+) Shareholders'
      equity         ($)        2,842 2,652 2,681       3,009 2,948 3,004 2,877      

  (=) Total
      capitalization ($)        3,454 3,331 3,604       3,665 3,650 3,629 3,441      
      Net debt       ($)          612   679   923         656   702   625   564      

  (/) Total
      capitalization ($)        3,454 3,331 3,604       3,665 3,650 3,629 3,441      

  (=) Net
      debt-to-total
      capitalization (%)          18%   20%   26%         18%   19%   17%   16%      

"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.

Domtar Corporation Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2013 (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 presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results. The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.


                                                                                                                           
                
                              Pulp and Paper ((1))          Personal Care ((2))                 Corporate               
         Total

Q1'13 Q2'13 Q3'13 Q4'13 YTD Q1'13 Q2'13 Q3'13 Q4'13 YTD Q1'13 Q2'13 Q3'13 Q4'13 YTD Q1'13 Q2'13 Q3'13 Q4'13 YTD

Reconciliation of Operating income (loss) to "Operating income (loss) before items"


                    
      Operating

income (loss) ($) 38 16 42 - 96 13 10 11 - 34 (2) (56) (4) - (62) 49 (30) 49 - 68

(+) Impairment


      and
      write-down of
      property,
      plant and

equipment ($) 10 5 - - 15 - - - - - - - - - - 10 5 - - 15

(-) Net (gain)


      loss on
      disposal of
      property,
      plant and
      equipment and

business ($) (10) - 19 - 9 - - - - - - - - - - (10) - 19 - 9

(+) Reversal of


      alternative
      fuel tax

credits ($) 26 - - - 26 - - - - - - - - - - 26 - - - 26

(+) Weston

litigation

settlement ($) - - - - - - - - - - - 49 - - 49 - 49 - - 49

(+) Closure and

restructuring

costs ($) - 10 - - 10 - 2 - - 2 - 6 - - 6 - 18 - - 18

(+) Impact of

purchase

accounting ($) - - - - - - - 2 - 2 - - - - - - - 2 - 2

(=) Operating

income (loss)

before items ($) 64 31 61 - 156 13 12 13 - 38 (2) (1) (4) - (7) 75 42 70 - 187


                    

Reconciliation of     
"Operating income
(loss) before
items" to "EBITDA
before items"                                                                                                           
                    
      Operating
      income (loss)

before items ($) 64 31 61 - 156 13 12 13 - 38 (2) (1) (4) - (7) 75 42 70 - 187

(+) Depreciation

and

amortization ($) 89 87 84 - 260 6 6 9 - 21 - - - - - 95 93 93 - 281

(=) EBITDA before

items ($) 153 118 145 - 416 19 18 22 - 59 (2) (1) (4) - (7) 170 135 163 - 468

(/) Sales ($) 1,238 1,208 1,204 - 3,650 111 108 175 - 394 - - - - - 1,349 1,316 1,379 - 4,044

(=) EBITDA margin

before items (%) 12% 10% 12% - 11% 17% 17% 13% - 15% - - - - - 13% 10% 12% - 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.

((1) )On May 31, 2013, the Company acquired Xerox's paper print and media product's assets in the United States and Canada.

((2) )On July 1, 2013, the Company acquired 100% of the shares of Associated Hygiene Products LLC.

Domtar Corporation Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2012 (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 presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results. The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.


                                                                                                                           
                   
                                   Pulp and Paper           Personal Care ((1))                Corporate                
        Total

Q1'12 Q2'12 Q3'12 Q4'12 YTD Q1'12 Q2'12 Q3'12 Q4'12 YTD Q1'12 Q2'12 Q3'12 Q4'12 YTD Q1'12 Q2'12 Q3'12 Q4'12 YTD

Reconciliation of Operating income (loss) to "Operating income (loss) before items"


                   
      Operating

income (loss) ($) 106 94 98 32 330 8 12 12 13 45 (5) - (1) (2) (8) 109 106 109 43 367

(+) Impairment


      and
      write-down of
      property,
      plant and
      equipment and
      intangible
      assets        ($)     2    -     -     12    14    -     -     -     -    -    -     -     -     -    -     2    -
     -     12    14

  (+) Closure and
      restructuring
      costs         ($)     1    -      1    27    29    -     -      1    -    1    -     -     -     -    -     1    -
      2    27    30

  (-) Net losses on
      disposals of
      property,
      plant and
      equipment     ($)    -     -     -      2     2    -     -     -     -    -    -     -     -     -    -    -     -
     -      2     2

  (+) Impact of
      purchase
      accounting    ($)    -     -     -     -      -     1    -     -     -    1    -     -     -     -    -     1    -
     -     -      1
                                                                                                                        
                   

  (=) Operating
      income (loss)

before items ($) 109 94 99 73 375 9 12 13 13 47 (5) - (1) (2) (8) 113 106 111 84 414


                   

Reconciliation of        
"Operating income
(loss) before
items" to "EBITDA
before items"                                                                                                           
                   
      Operating
      income (loss)

before items ($) 109 94 99 73 375 9 12 13 13 47 (5) - (1) (2) (8) 113 106 111 84 414

(+) Depreciation

and

amortization ($) 94 90 90 91 365 3 6 6 5 20 - - - - - 97 96 96 96 385

(=) EBITDA before

items ($) 203 184 189 164 740 12 18 19 18 67 (5) - (1) (2) (8) 210 202 207 180 799

(/) Sales ($) 1,329 1,261 1,280 1,218 5,088 70 107 111 111 399 - - - - - 1,399 1,368 1,391 1,329 5,487

(=) EBITDA margin

before items (%) 15% 15% 15% 13% 15% 17% 17% 17% 16% 17% - - - - - 15% 15% 15% 14% 15%


                   


"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 March 1, 2012, the Company acquired 100% of
      the shares of Attends Healthcare Limited.
      On May 1, 2012, the Company acquired 100% of the
      shares of EAM Corporation.
    Domtar Corporation

Supplemental Segmented Information

(In millions of dollars, unless otherwise noted)
                                                                                    
                                             2013                        2012
                                 Q1    Q2    Q3   YTD    Q1    Q2    Q3    Q4   YTD

Pulp and Paper                        
Segment                                                                             
    Sales           ($)        1,238 1,208 1,204 3,650 1,329 1,261 1,280 1,218 5,088
    Operating       ($)
    income                        38    16    42    96   106    94    98    32   330
    Depreciation    ($)
    and
    amortization                  89    87    84   260    94    90    90    91   365
    Impairment and  ($)
    write-down of
    propery, plant
    and equipment
    and intangible
    assets                        10     5    -     15     2    -      -    12    14
                                                                                    
    Papers                                                                          
    Papers          ('000 ST)
    Production                   795   837   827 2,459   870   832   788   831 3,321
    Papers          ('000 ST)
    Shipments -
    Manufactured                 828   801   814 2,443   870   819   826   805 3,320
      Communication ('000 ST)
      Papers                     706   676   694 2,076   756   705   709   684 2,854
      Specialty and ('000 ST)
      Packaging                  122   125   120   367   114   114   117   121   466
    Paper Shipments ('000 ST)
    - Sourced from
    3rd parties                   83    85    73   241   100    92    91    78   361
    Paper Shipments ('000 ST)
    - Total                      911   886   887 2,684   970   911   917   883 3,681
    Pulp                                                                            
    Pulp Shipments( ('000
    (a))            ADMT)        372   344   352 1,068   389   368   415   385 1,557
      Hardwood      (%)
      Kraft Pulp                 17%   14%   14%   15%   15%   16%   20%   19%   18%
      Softwood      (%)
      Kraft Pulp                 56%   57%   58%   57%   61%   57%   55%   56%   57%
      Fluff Pulp    (%)          27%   29%   27%   28%   24%   27%   25%   25%   25%
                                                                                    
                                                                                    

Personal Care                         
Segment                                                                             
    Sales           ($)          111   108   175   394    70   107   111   111   399
    Operating       ($)
    income                        13    10    11    34     8    12    12    13    45
    Depreciation    ($)
    and
    amortization                   6     6     9    21     3     6     6     5    20
                                                                                    
                                                                                    

Average Exchange    $US / $CAN
Rates                          1.009 1.023 1.039 1.024 1.001 1.010 0.995 0.991 0.999
                    $CAN / $US 0.991 0.977 0.963 0.977 0.999 0.990 1.006 1.009 1.001
                    €EUR
                    / $US      1.320 1.306 1.325 1.317 1.312 1.283 1.252 1.298 1.286
                                                                                    

(a) Figures are gross of market pulp purchased from other producers on the open
    market for some of our paper making operations. Pulp Shipments represent the
    amount of pulp produced in excess of our internal requirement.
                                                                                    
    Note: the term "ST" refers to a short ton and the term "ADMT" refers to an air
    dry metric ton.

  

 

SOURCE Domtar Corporation

MEDIA AND INVESTOR RELATIONS Pascal Bossé Vice-President Corporate Communications and Investor Relations Tel.: 514-848-5938

Image with caption: "Domtar Personal Care manufacturing facility, Delaware, Ohio (CNW Group/Domtar Corporation)". Image available at: http://photos.newswire.ca/images/download/20131024_C6141_PHOTO_EN_32492.jpg

Image with caption: "John D. Williams, President and CEO, Domtar Corporation (CNW Group/Domtar Corporation)". Image available at: http://photos.newswire.ca/images/download/20131024_C6141_PHOTO_EN_32494.jpg

Image with caption: "Domtar market pulp bales (CNW Group/Domtar Corporation)". Image available at: http://photos.newswire.ca/images/download/20131024_C6141_PHOTO_EN_32496.jpg

To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/October2013/24/c6141.html

CO: Domtar Corporation ST: Quebec NI: PAP ERN CONF

-0- Oct/24/2013 11:30 GMT

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