Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,501.65 -12.72 -0.08%
S&P 500 1,875.39 -4.16 -0.22%
NASDAQ 4,126.97 -34.49 -0.83%
Ticker Volume Price Price Delta
STOXX 50 3,194.55 18.58 0.59%
FTSE 100 6,700.95 26.21 0.39%
DAX 9,598.13 53.94 0.57%
Ticker Volume Price Price Delta
NIKKEI 14,404.99 -141.28 -0.97%
TOPIX 1,164.90 -8.91 -0.76%
HANG SENG 22,555.00 45.36 0.20%

Resolute Reports Preliminary Third Quarter 2013 Results



           Resolute Reports Preliminary Third Quarter 2013 Results

PR Newswire

MONTREAL, Oct. 31, 2013

US $

  * Q3 net income of $29 million / $0.31 per share, excluding special items
  * Adjusted EBITDA of $104 million
  * Best pulp quarter in two years
  * $619 million non-cash reduction of U.S. deferred tax assets

MONTREAL, Oct. 31, 2013  /PRNewswire/ - Resolute  Forest Products Inc.  (NYSE: 
RFP) (TSX: RFP)  today reported a  net loss  of $588 million  for the  quarter 
ended September 30, 2013, or  $6.22 per share, on  sales of $1.1 billion.  The 
Company's quarterly  results were  significantly affected  by a  $619  million 
non-recurring, non-cash  income tax  charge to  reduce the  value of  deferred 
income tax assets on its balance sheet. 

Excluding total special items of $617  million, net income in the quarter  was 
$29 million, or $0.31 per share. This  compares to net income of $13  million, 
or $0.13 per  diluted share, excluding  $24 million of  special items, in  the 
third quarter ended September  30, 2012. Before  adjusting for special  items, 
net income in that  quarter was $37  million, or $0.38  per diluted share,  on 
sales of  $1.2 billion.  Adjusted  EBITDA was  $104  million in  the  quarter, 
compared to $96 million in the year-ago period.

"Again this  quarter,  our  continued asset  optimization  efforts  helped  to 
maximize our  earnings  power  despite challenging  market  conditions,"  said 
Richard Garneau,  president  and  chief executive  officer.  "Improvements  in 
volume, transaction price and costs led  to the best quarter our pulp  segment 
has seen in two years,  which helped to offset  the effects of weaker  pricing 
for lumber and excess supply in paper grades." 

Non-GAAP financial  measures,  such  as  adjustments  for  special  items  and 
adjusted EBITDA, are reconciled below.

Consolidated Quarterly Operating Income Variance Against Year-Ago Period

Compared to the  year-ago period,  sales in the  quarter declined  2%, or  $23 
million, to  $1.1  billion,  primarily  as a  result  of  lower  pricing  ($33 
million), mainly in newsprint, and currency fluctuations, offset in part by an
increase in volume ($17 million).

The Company  recorded operating  income  of $36  million  this quarter,  a  $5 
million improvement  over the  third  quarter of  2012.  This reflects  a  $26 
million improvement to  pulp and paper  manufacturing costs -  the benefit  of 
asset optimization initiatives and external power sales from new  cogeneration 
facilities -  and  a weaker  Canadian  dollar, offset  in  part by  the  lower 
pricing, largely in newsprint, and higher wood products costs. 

Downtime was 90,000  metric tons  lower in the  pulp and  paper segments  this 
quarter, mainly as a result of the extensive downtime taken in 2012 to improve
the  operational  and   environmental  performance  of   the  newly   acquired 
Saint-Félicien, Québec, pulp mill.

Segment Operating Income Variance Against Prior Quarter

Newsprint
Operating income  in  the newsprint  segment  was  $13 million  in  the  third 
quarter, a $3  million improvement  over the second  quarter. Newsprint  sales 
rose 3%  in the  quarter  as a  result  of a  20,000  metric ton  increase  in 
shipments, with  export  sales  representing 45%  of  total  newsprint  sales, 
consistent with the first half of the year. After falling $40 since the end of
last year, average  transaction price  has now  been stable  for two  straight 
quarters. The  Company maintained  its lower  cost advantage  in the  quarter, 
reporting operating cost per unit (the "delivered cost") down 1%, to $589  per 
metric ton, in line  with the new  low reported in  the previous quarter.  The 
Company generated EBITDA of $50 per metric ton of newsprint shipped,  compared 
to an  average of  $52 in  the  four previous  quarters, despite  the  falling 
prices.

Specialty Papers
Operating income was $17 million in the quarter, compared to breakeven in  the 
previous quarter. Sales rose 2% this quarter  due mainly to a 5,000 short  ton 
increase in shipments.  Average  transaction price was  also up $4.  Delivered 
cost fell  7%  compared  to  the second  quarter,  which  included  costs  and 
inefficiencies  associated  with  the  annual  maintenance  at  our   Calhoun, 
Tennessee, mill. EBITDA was $79 per short ton shipped in the quarter, compared
to an average of $61 in the four previous quarters. 

Market Pulp
The market  pulp segment  generated operating  income of  $21 million  in  the 
quarter, $11 million higher than in the  second quarter. Sales grew by 2%,  to 
$269 million, on a 2% increase in  shipments and a $5 per metric ton  increase 
in average transaction price.  This follows increases of  5% in shipments  and 
$27 per metric ton,  respectively, in the second  quarter. Delivered cost  was 
down 4%, due mainly to  better efficiency at mills  in the U.S. southeast,  in 
part from the  second quarter  annual maintenance  at Calhoun.  EBITDA in  the 
segment was $85 per metric ton shipped in the quarter, compared to an  average 
of $23 in the four previous quarters. 

Wood Products
Operating income  in  the wood  products  segment  fell to  breakeven  in  the 
quarter, down $16  million sequentially.  The 3%  increase in  sales over  the 
second quarter  reflects a  21% increase  in  shipments offset  by a  $62  per 
thousand board feet reduction in lumber prices. Finished goods inventory  fell 
28% due to the Company's  efforts to reduce the  buildup caused by lower  than 
expected demand in  May and June,  which included scheduled  downtime at  most 
sawmills during peak vacation periods. The  drop in pricing reduced EBITDA  to 
$22 per thousand board feet shipped, compared to an average of $63 in the four
previous quarters. 

Coated Papers
The coated paper  segment generated  an operating loss  of $3  million in  the 
quarter, down from operating income of $2 million in the second quarter. Sales
slipped 4% on a 6% reduction in shipments, as seasonal demand improvement  did 
not materialize  to  the degree  expected.   Delivered  cost rose  7%  in  the 
quarter, mostly because of the absorption of fixed costs over lower volume and
seasonally higher power and wood costs,  reducing EBITDA to $51 per short  ton 
shipped, compared to an average of $83 in the four previous quarters. 

Corporate & Finance

Based on  the  application of  accounting  standards, including  a  review  of 
historical earnings, the Company reduced the carrying value of deferred income
tax assets on  the balance  sheet by  $619 million,  representing the  portion 
related to its  U.S. operations.  The reduction is  a non-recurring,  non-cash 
adjustment, recorded as an income tax charge.

"This reduction in no  way affects our underlying  tax attributes nor  hinders 
our ability to  use them," said  Jo-Ann Longworth, senior  vice president  and 
chief financial officer. "We have over $1.6 billion of U.S. net operating loss
carryforwards available to use against future earnings."

The carrying value of the total net deferred income tax asset recorded on  the 
Company's balance  sheet as  of the  end of  the third  quarter was  therefore 
reduced to $1,346 million, from $1,961 million in the previous quarter.

Outlook

Mr. Garneau added: "Building on the encouraging developments this quarter,  we 
see the  pulp  segment  maintaining  its positive  momentum  into  the  fourth 
quarter, but the timing  of worldwide capacity  increases makes 2014  somewhat 
more uncertain.  Wood products should experience better overall pricing in the
fourth quarter, based on the gradual  increase in lumber prices from the  lows 
late in June.   Costs will remain  under pressure, however,  given lower  wood 
allocation and the additional burdens  imposed on producers with the  province 
of  Québec's  newly-implemented  forest  tenure  system.   As  recent  history 
demonstrates, our leaner and efficient operating platform is a key competitive
advantage to face  challenging market conditions.   While the seasonal  demand 
surge for coated and specialty papers  failed to materialize as expected,  and 
while conditions  could change  in  newsprint, we  nonetheless expect  to  see 
sequential volume growth in newsprint  and supercalender grades in the  fourth 
quarter before we  enter seasonal  lows.  But  we see  continued pressure  for 
coated paper as the market struggles to adjust to lower operating rates due to
lower demand, grade switching and higher imports."

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  5722774) 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 November 14 by  dialing 
(800) 408-3053 with the pass code 6229639.

Description of Special Items

Special items, net of tax                        Third quarter   Third quarter
(in millions)                                             2013            2012
Gain on non-cash translation of Canadian dollar
net monetary assets                                      $ (5)          $ (21)
Closure costs, impairment and other related
charges                                                      3               3
Start-up costs of idled mill                                 2               4
Net gain on disposition of assets                            -             (3)
Other income, net                                          (2)             (1)
Non-cash reorganization-related and other tax
adjustments                                                  -             (6)
U.S. deferred income tax asset valuation
allowance                                                  619               -
                       Total                             $ 617          $ (24)

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 regarding selling, general  and administrative expenses;  business 
and operating  outlook; 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 exhibit  99.4 to the  current report  on Form 8-K  filed with  the 
United States Securities and Exchange  Commission and the Canadian  securities 
regulatory authorities on April 24, 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 SEC 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, commercial  printing 
papers, market pulp and  wood products. The Company  owns or operates over  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, including 65% certified to the Forest
Stewardship  Council^®  (FSC^®)  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 also  a member  of the  World Wildlife  Fund's  Climate 
Savers program, in which businesses establish ambitious targets to voluntarily
reduce greenhouse gas emissions and work aggressively toward achieving them.

                        RESOLUTE FOREST PRODUCTS INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
              (Unaudited, in millions except per share amounts)
 
                                                                              
                                                                              
                              Three        Three
                              Months      Months     Nine Months   Nine Months
                              Ended        Ended        Ended         Ended
                            September    September    September     September
                               30,          30,          30,           30,
                               2013        2012         2013          2012
                                                                        
Sales                       $    1,130   $   1,153   $     3,311   $     3,375
Costs and expenses:                                                           
    Cost of sales,
    excluding
    depreciation and
    amortization ^                 857         890         2,572         2,602
    Depreciation and
    amortization                    61          59           182           174
    Distribution costs             134         131           387           385
    Selling, general and
    administrative
    expenses                        38          41           126           114
    Closure costs,
    impairment and other
    related charges  ^(2)            4           5            56            98
    Net gain on
    disposition of assets            -         (4)           (2)          (28)
                                                                        
Operating income (loss)             36          31          (10)            30
                                                                              
Other (expense) income:                                                       
    Interest expense              (12)        (17)          (39)          (51)
    Foreign currency
    translation gain
    (loss) ^(3)                      3          18           (9)            21
    Other, net ^(4)                  2           1          (33)             1
Income (loss) before
income taxes ^                      29          33          (91)             1
                                                                              
Income tax (provision)
benefit ^(5)                     (617)           4         (546)            10
Net (loss) income
including noncontrolling
interests                        (588)          37         (637)            11
Net loss attributable to
noncontrolling interests             -           -             1            35
                                                                              
Net (loss) income
attributable to Resolute
Forest Products Inc.        $    (588)   $      37   $     (636)   $        46
                                                                              
                                                                              
Net (loss) income per
share attributable to
Resolute Forest Products
Inc. common shareholders:
^(6)                                                                          
                                                                              
    Basic                   $   (6.22)   $    0.38   $    (6.72)   $      0.47
    Diluted                     (6.22)        0.38        (6.72)          0.47
                                                                              
Weighted-average number
of Resolute Forest
Products Inc. common
shares outstanding: ^(6)                                                      
                                                                              
    Basic                         94.6        98.1          94.7          98.0
    Diluted                       94.6        98.1          94.7          98.1

                        RESOLUTE FOREST PRODUCTS INC.
                         CONSOLIDATED BALANCE SHEETS
                           (Unaudited, in millions)
                                                                       
                                                  September 30    December 31,
                                                      2013           2012
                                                                       
Assets                                                                        
Current assets:                                                               
  Cash and cash equivalents                       $        271   $         263
  Accounts receivable trade, net                           577             576
  Accounts receivable other                                127             121
  Inventories, net                                         528             545
  Deferred income tax assets                                44              56
  Other current assets                                      81              69
     Total current assets                                1,628           1,630
Fixed assets, net                                        2,330           2,440
Amortizable intangible assets, net                          66              69
Deferred income tax assets ^                             1,340           2,000
Other assets                                               191             194
     Total assets                                 $      5,555   $       6,333
                                                                              
Liabilities and equity                                                        
Current liabilities:                                                          
  Accounts payable and accrued liabilities        $        560   $         581
  Current portion of long-term debt                          7               2
     Total current liabilities                             567             583
Long-term debt, net of current portion                     597             532
Pension and other postretirement benefit
obligations                                              1,742           1,946
Deferred income tax liabilities                             38              75
Other long-term liabilities                                 65              72
     Total liabilities                                   3,009           3,208
                                                                              
Commitments and contingencies                                                 
                                                                              
Equity:                                                                       
  Common stock                                               -               -
  Additional paid-in capital                             3,749           3,730
  (Deficit) retained earnings                            (589)              47
  Accumulated other comprehensive loss                   (565)           (614)
  Treasury stock at cost                                  (61)            (61)
     Total Resolute Forest Products Inc.
     shareholders' equity                                2,534           3,102
  Noncontrolling interests                                  12              23
     Total equity                                        2,546           3,125
     Total liabilities and equity                 $      5,555   $       6,333

                        RESOLUTE FOREST PRODUCTS INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOW
                           (Unaudited, in millions)
                                                                              
                                               Nine Months       Nine Months
                                             Ended September   Ended September
                                                   30,               30,
                                                  2013              2012
Cash flows from operating activities:                                         
Net (loss) income including noncontrolling
interests                                    $         (637)   $            11
Adjustments to reconcile net (loss) income
including noncontrolling interests to                                         
net cash provided by operating activities:                                    
   Share-based compensation                                5                 4
   Depreciation and amortization                         182               174
   Closure costs, impairment and other
   related charges                                        47                89
   Inventory write-downs related to
   closures                                                5                 7
   Deferred income taxes                                 546               (6)
   Net pension contributions                            (65)              (71)
   Net gain on disposition of assets                     (2)              (28)
   Loss (gain) on translation of foreign
   currency denominated deferred income
   taxes                                                  53              (49)
   (Gain) loss on translation of foreign
   currency denominated pension and                                           
   other postretirement benefit
   obligations                                          (52)                39
   Note payable forgiveness gain                        (12)                - 
   Net loss on extinguishment of debt                     59                - 
   Net planned major maintenance                         (6)              (14)
   Dividends received from equity method
   investees in excess of income                           5                 2
   Other, net                                           (12)               (6)
   Changes in working capital:                                                
        Accounts receivable                              (8)                51
        Inventories                                       12               (9)
        Other current assets                             (5)                 9
        Accounts payable and accrued
        liabilities                                      (5)              (11)
              Net change in working
              capital                                    (6)                40
                   Net cash provided by
                   operating activities                  110               192
                                                                              
Cash flows from investing activities:                                         
Cash invested in fixed assets                          (124)             (102)
Disposition of assets                                      4                31
Proceeds from insurance settlements                        4                - 
Acquisition of Fibrek Inc., net of cash
acquired                                                  -               (24)
Decrease in restricted cash                                3                76
Increase in deposit requirements for
letters of credit, net                                    -               (12)
                   Net cash used in
                   investing activities                (113)              (31)
                                                                              
Cash flows from financing activities:                                         
Issuance of long-term debt                               594                - 
Premium paid on extinguishment of debt                  (84)                - 
Purchases of treasury stock                               -               (45)
Dividends to noncontrolling interests                    (1)               (3)
Acquisition of noncontrolling interest                    -               (27)
Payments of debt                                       (497)             (112)
Payments of financing and credit facility
fees                                                     (9)                - 
Contribution of capital from
noncontrolling interest                                    8                - 
                   Net cash provided by
                   (used in) financing
                   activities                             11             (187)
                                                                              
Net increase (decrease) in cash and cash
equivalents                                                8              (26)
Cash and cash equivalents:                                                    
   Beginning of period                                   263               369
   End of period                             $           271   $           343

                        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 7 to the Unaudited Consolidated
Financial Statement Information
regarding our use of non-GAAP measures.
 
Three Months Ended September 30,
2013
(unaudited, in millions except per      Operating       Net income
share amounts)                       income (loss)      (loss)          EPS
                                                                              
GAAP as reported                     $            36    $    (588)    $ (6.22)
                                                                              
Adjustments for special items:                                                
    Foreign currency translation
    gain                                          -            (5)      (0.05)
    Closure costs, impairment and
    other related charges                          4             3        0.04
    Start up costs of idled mill                   3             2        0.02
    Other income, net                             -            (2)      (0.02)
    U.S. deferred income tax asset
    valuation allowance                           -            619        6.54
                                                                              
GAAP as adjusted for special items   $            43    $       29    $   0.31
                                                                              
Three Months Ended September 30,
2012
(unaudited, in millions except per      Operating       Net income
share amounts)                       income (loss)      (loss)         EPS 
                                                                              
GAAP as reported                     $            31    $       37    $   0.38
                                                                              
Adjustments for special items:                                                
    Foreign currency translation
    gain                                          -           (21)      (0.21)
    Closure costs, impairment and
    other related charges                          5             3        0.03
    Start up costs of idled mill                   5             4        0.04
    Net gain on disposition of
    assets                                       (4)           (3)      (0.03)
    Other income, net                             -            (1)      (0.02)
    Reorganization-related and other
    tax adjustments                               -            (6)      (0.06)
                                                                              
GAAP as adjusted for special items   $            37    $       13    $   0.13
                                                                         
Nine Months Ended September 30, 2013
(unaudited, in millions except per      Operating       Net income
share amounts)                        income (loss)     (loss)            EPS 
                                                                              
GAAP as reported                     $          (10)    $    (636)    $ (6.72)
                                                                              
Adjustments for special items:                                                
    Foreign currency translation
    loss                                          -              9        0.10
    Closure costs, impairment and
    other related charges                         56            35        0.37
    Inventory write-downs related to
    closures                                       5             3        0.03
    Start up costs of idled mill                  31            22        0.23
    Net gain on disposition of
    assets                                       (2)           (2)      (0.02)
    Net loss on extinguishment of
    debt                                          -             38        0.40
    Transaction costs                              5             5        0.05
    Other income, net                             -           (18)      (0.19)
    U.S. deferred income tax asset
    valuation allowance                           -            619        6.54
                                                                              
GAAP as adjusted for special items   $            85    $       75    $   0.79
                                                                         
Nine Months Ended September 30, 2012
(unaudited, in millions except per      Operating       Net income
share amounts)                        income (loss)     (loss)             EPS
                                                                              
GAAP as reported                     $            30    $       46    $   0.47
                                                                              
Adjustments for special items:                                                
    Foreign currency translation
    gain                                          -           (26)      (0.27)
    Severance                                      3             2        0.02
    Closure costs, impairment and
    other related charges                         98            52        0.53
    Inventory write-downs related to
    closures                                       7             4        0.04
    Start up costs of idled mill                   5             4        0.04
    Net gain on disposition of
    assets                                      (28)          (16)      (0.16)
    Transaction costs                              7             7        0.07
    Reorganization-related and other
    tax adjustments                               -           (16)      (0.16)
                                                                              
GAAP as adjusted for special items   $           122    $       57    $   0.58

                                  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 7 to the Unaudited Consolidated Financial Statement Information regarding our use of
non-GAAP measures EBITDA and Adjusted EBITDA
                                                                                            
                                                                                            
Three Months
Ended
September 30,
2013                                                                        Corporate
(unaudited, in                Coated   Specialty     Market      Wood          and
millions)       Newsprint    papers      papers      pulp      products       other       Total
                                                                                                
Net income
(loss)
including
noncontrolling
interests         $    13    $   (3)   $       17   $    21    $      -     $    (636)   $ (588)
Interest
expense, net                                                                        12        12
Income tax
provision                                                                          617       617
Depreciation
and
amortization           18          9           10        13            9             2        61
EBITDA                 31          6           27        34            9           (5)       102
                                                                                                
Foreign
currency
translation
gain                                                                               (3)       (3)
Closure costs,
impairment and
other related
charges                                                                              4         4
Start up costs
of idled mill                                                                        3         3
Other income,
net                                                                                (2)       (2)
                                                                                            
Adjusted
EBITDA            $    31    $     6   $       27   $    34    $       9    $      (3)   $   104
                                                                                                
                                                                                            
Three Months
Ended
September 30,
2012                                                                         Corporate
(unaudited, in               Coated     Specialty    Market       Wood         and
millions)       Newsprint    papers      papers     pulp       products       other       Total
                                                                                                
Net income
(loss)
including
noncontrolling
interests         $    26    $     2   $       28   $  (18)    $       6    $      (7)   $    37
Interest
expense, net                                                                        17        17
Income tax
benefit                                                                            (4)       (4)
Depreciation
and
amortization           18          9           11        13            8            -         59
EBITDA                 44         11           39       (5)           14             6       109
                                                                                                
Foreign
currency
translation
gain                                                                              (18)      (18)
Closure costs,
impairment and
other related
charges                                                                              5         5
Start up costs
of idled mill                                                                        5         5
Net gain on
disposition of
assets                                                                             (4)       (4)
Other income,
net                                                                                (1)       (1)
                                                                                                
Adjusted
EBITDA            $    44    $    11   $       39   $   (5)    $      14    $      (7)   $    96
                                                                                                
                                                                                                
Nine Months
Ended
September 30,
2013                                                                        Corporate
(unaudited, in               Coated    Specialty    Market       Wood          and
millions)       Newsprint    papers      papers      pulp      products       other       Total
                                                                                                
Net income
(loss)
including
noncontrolling
interests         $    21    $   (1)   $       25   $    26    $      32    $    (740)   $ (637)
Interest
expense, net                                                                        39        39
Income tax
provision                                                                          546       546
Depreciation
and
amortization           54         27           30        39           27             5       182
EBITDA                 75         26           55        65           59         (150)       130
                                                                                                
Foreign
currency
translation
loss                                                                                 9         9
Closure costs,
impairment and
other related
charges                                                                             56        56
Inventory
write-downs
related to
closures                                                                             5         5
Start up costs
of idled mill                                                                       31        31
Net gain on
disposition of
assets                                                                             (2)       (2)
Net loss on
extinguishment
of debt                                                                             59        59
Transaction
costs                                                                                5         5
Other income,
net                                                                               (26)      (26)
                                                                                                
Adjusted
EBITDA            $    75    $    26   $       55   $    65    $      59    $     (13)   $   267
                                                                                                
                                                                                                
                                                                                            
Nine Months
Ended
September 30,
2012                                                                        Corporate
(unaudited, in               Coated    Specialty    Market       Wood          and
millions)      Newsprint     papers     papers       pulp      products       other       Total
                                                                                                
Net income
(loss)
including
noncontrolling
interests         $    79    $     6   $       70   $  (38)    $      12    $    (118)   $    11
Interest
expense, net                                                                        51        51
Income tax
benefit                                                                           (10)      (10)
Depreciation
and
amortization           54         28           35        31           26            -        174
EBITDA                133         34          105       (7)           38          (77)       226
                                                                                                
Foreign
currency
translation
gain                                                                              (21)      (21)
Severance                                                                            3         3
Closure costs,
impairment and
other related
charges                                                                             98        98
Inventory
write-downs
related to
closures                                                                             7         7
Start up costs
of idled mill                                                                        5         5
Net gain on
disposition of
assets                                                                            (28)      (28)
Transaction
costs                                                                                7         7
Other income,
net                                                                                (1)       (1)
                                                                                                
Adjusted
EBITDA            $   133    $    34   $      105   $   (7)    $      38    $      (7)   $   296
                                                                                        

 

RESOLUTE FOREST PRODUCTS INC.
Notes to the Unaudited Consolidated Financial Statement Information

1. In the second quarter of 2013, we changed our accounting policy for repairs
   and maintenance costs associated with planned major maintenance activities.
   Previously, all repairs and maintenance costs, including those associated
   with planned major maintenance, were expensed as incurred. We elected to
   change our accounting policy for planned major maintenance costs to the
   deferral method, whereby the costs of each planned major maintenance
   activity are amortized on a straight-line basis over the estimated period
   until the next planned major maintenance activity. All other routine
   repairs and maintenance costs continue to be expensed as incurred. We
   believe that the deferral method is preferable as the economic benefit
   associated with planned major maintenance activities are more appropriately
   recognized over the period of future benefit, which is not limited to the
   period the expense is incurred. In addition, the deferral method enhances
   the comparability of our financial results with our peer companies. In
   accordance with Financial Accounting Standards Board Accounting Standards
   Codification 250, "Accounting Changes and Error Corrections," we have
   applied the change in accounting policy retroactively by adjusting our
   comparative consolidated financial statements for the effect of this
   change.
 
   The effect of the change in accounting policy on our Consolidated
   Statements of Operations for the three months ended September 30, 2013 and
   2012 was as follows:

                                                                                     
                 Three Months Ended September 30,    Three Months Ended September 30,
                               2013                                2012
(Unaudited,                                         
in millions,      Before
except per      Accounting                               As        Effect
share             Policy                     As      Previously      of         As
amounts)          Change     Adjustment   Reported    Reported     Change    Adjusted
Cost of
sales,
excluding
depreciation
and
amortization     $     856     $      1   $    857     $    895    $  (5)    $    890
Income tax                                                                 
(provision)
benefit              (621)            4      (617)            3         1           4
Net (loss)                                                                 
income
attributable
to Resolute
Forest
Products Inc.        (591)            3      (588)           31         6          37
Net (loss)                                                                 
income per
share
attributable
to Resolute
Forest
Products Inc.
common
shareholders:                                                                        
Basic               (6.25)         0.03     (6.22)         0.32      0.06        0.38
Diluted             (6.25)         0.03     (6.22)         0.32      0.06        0.38
                                                                                     
The effect of the change in accounting policy on our Consolidated Statements of
Operations for the nine months ended September 30, 2013 and 2012 was as follows:
                                                                                     
                 Nine Months Ended September 30,     Nine Months Ended September 30,
                               2013                                2012
(Unaudited,                                         
in millions,      Before
except per      Accounting                               As        Effect
share             Policy                     As      Previously      of         As
amounts)          Change     Adjustment   Reported    Reported     Change    Adjusted
Cost of
sales,
excluding
depreciation
and
amortization     $   2,578     $    (6)   $  2,572     $  2,616    $ (14)    $  2,602
Income tax                                                                 
(provision)
benefit              (546)            -      (546)           12       (2)          10
Net (loss)                                                                 
income
attributable
to Resolute
Forest
Products Inc.        (642)            6      (636)           34        12          46
Net (loss)                                                                 
income per
share
attributable
to Resolute
Forest
Products Inc.
common
shareholders:                                                                        
Basic               (6.78)         0.06     (6.72)         0.35      0.12        0.47
Diluted             (6.78)         0.06     (6.72)         0.35      0.12        0.47
                                                                                     
The effect of the change in accounting policy on our Consolidated Balance Sheets as of
September 30, 2013 and December 31, 2012 was as follows:
                                                                                     
                        September 30, 2013                  December 31, 2012
                  Before                            
                Accounting                               As        Effect
(Unaudited,       Policy                     As      Previously      of         As
in millions)      Change     Adjustment   Reported    Reported     Change    Adjusted
Other current
assets           $      64     $     17   $     81     $     58    $   11    $     69
Deferred
income tax
assets
(non-current)        1,342          (2)      1,340        2,002       (2)       2,000
(Deficit)
retained
earnings             (604)           15      (589)           38         9          47

There was no impact on net cash provided by operating activities for all
periods as a result of the change in accounting policy.

2. Closure costs, impairment and other related charges for the three and nine
   months ended September 30, 2013 were comprised of the following:

                                                                              
(Unaudited, in millions)                          Pension Plan
                                                  Curtailment
                                                    Loss and   Severance
                                     Accelerated   Settlement  and Other
                                     Depreciation    (Gain)      Costs   Total
Indefinite idlings:                                                           
  Paper machine in Calhoun,                                   
  Tennessee                                                                   
        Third quarter 2013               $      -     $      -    $    - $   -
        First nine months 2013                 44            -         5    49
  Kraft mill and paper machine in                             
  Fort Frances, Ontario                                                       
        Third quarter 2013                      -            -         -     -
        First nine months 2013                  -            -         4     4
Restructuring initiative:                                                     
  Baie-Comeau, Quebec paper mill                                              
        Third quarter 2013                      -            2         2     4
        First nine months 2013                  -            2         2     4
Other                                                                         
        Third quarter 2013                      -            -         -     -
        First nine months 2013                  -          (1)         -   (1)
Total                                                                         
        Third quarter 2013               $      -     $      2    $    2 $   4
        First nine months 2013                 44            1        11    56

Closure costs, impairment and other related charges for the three and nine
months ended September 30, 2012 were comprised of the following:

 
                                                  Pension plan
                                                  Curtailment
                                                      and      Severance
                          Impairment Accelerated   Settlement  and Other
(Unaudited, in millions)  of Assets  Depreciation    Losses      Costs   Total
Indefinite idlings:                                                           
  Bowater Mersey Paper
  Company Limited                                                             
         Third quarter
         2012               $    (7)     $      -     $      -   $     5 $ (2)
         First nine
         months 2012              63            -            9        14    86
  Paper machine in
  Catawba, South Carolina                                                     
         Third quarter
         2012                      1            -            -         -     1
         First nine
         months 2012               1            -            -         -     1
Restructuring
initiatives:                                                                  
  Catawba paper mill                                                          
         Third quarter
         2012                      -            -            -         3     3
         First nine
         months 2012               -            -            -         3     3
  Baie-Comeau, paper mill                                                     
         Third quarter
         2012                      -            -            -         -     -
         First nine
         months 2012               -            -            3         1     4
Other                                                                         
         Third quarter
         2012                      -            1            -         2     3
         First nine
         months 2012               -            1            2         1     4
Total                                                                         
         Third quarter
         2012                $   (6)      $     1      $     -    $   10 $   5
         First nine
         months 2012              64            1           14        19    98

3. During the three months ended September 30, 2013, we recorded a foreign
   currency translation gain of $3 million. This gain is a result of the
   stronger Canadian dollar relative to the U.S. dollar as of September 30,
   2013 and its impact on the translation of Canadian dollar monetary assets
   in our principal Canadian operating subsidiary. During the nine months
   ended September 30, 2013, we recorded a foreign currency translation loss
   of $9 million as a result of the translation of our Canadian dollar balance
   sheet amounts.
    
4. Other, net for the three and nine months ended September 30, 2013 and 2012
   was comprised of the following:

 
                                   Three Months Ended   Nine Months Ended
                                     September 30,        September 30,
(Unaudited, in millions)                2013     2012       2013     2012
Net loss on extinguishment of debt   $     -  $     -    $  (59)  $     -
Note payable forgiveness gain              -        -         12        -
Gain on liquidation settlement             3        -         12        -
Post-emergence costs                       -      (2)        (1)      (7)
Miscellaneous (expense) income           (1)        3          3        8
                                     $     2  $     1    $  (33)  $     1

5. During the three and nine months ended September 30, 2013, we recorded an
   income tax provision of $617 million and $546 million, respectively. We
   recorded for the three months ended September 30, 2013 an increase to the
   income tax provision of $619 million to establish a full valuation
   allowance against our net U.S. deferred income tax assets. An important
   factor we considered when reviewing the likelihood of realization is the
   existence of a three-year cumulative loss in our U.S. operations, as
   determined under applicable accounting standards.  This cumulative loss
   limits our ability to rely on projections of future earnings to support
   continued recognition of our U.S. deferred income tax assets.
    
6. For the calculation of basic and diluted (loss) income per share for the
   three and nine months ended September 30, 2013 and 2012, no adjustments to
   net (loss) income attributable to Resolute Forest Products Inc. were
   necessary.
    
7. 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, 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 net income (loss) per share. 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, severance costs, inventory write-downs, start up costs of
   idled mills, gains and losses on dispositions 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, other income (expense) and reorganization-related
   and other tax adjustments.
    
   Net income (loss) per share (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, coated papers,
   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.

Contact:

Investors    
Rémi G. Lalonde
Vice President, Investor Relations
514 394-2345
ir@resolutefp.com

Media and Others
Seth Kursman
Vice President, Corporate Communications,
Sustainability and Government Affairs
514 394-2398
seth.kursman@resolutefp.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement