The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1.
_________________
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of Management, include all adjustments that are necessary for the fair statement of Domtar Corporation’s (“the Company”) financial position, results of operations, and cash flows for the interim periods presented. Results for the first six months of the year may not necessarily be indicative of full year results. It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Domtar Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the Securities and Exchange Commission. The December 31, 2015 Consolidated Balance Sheet, presented for comparative purposes in this interim report, was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
8
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
2
.
_________________
RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING CHANGES IMPLEMENTED
PRESENTATION OF DEBT ISSUANCE COSTS
In April 2015, the FASB issued Accounting Standard Update (“ASU”) 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. In August 2015, the FASB also issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” which allows debt issuance costs associated with line-of-credit arrangements to be presented as an asset.
The Company adopted the new requirements on January 1, 2016 with retrospective application. The effect of this change in accounting policy on our Consolidated Balance Sheet as at December 31, 2015 was as a reduction of $9 million in Other assets and Long-term debt.
CLOUD COMPUTING ARRANGEMENTS
In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in Cloud Computing Arrangements,” which clarifies the circumstances under which a cloud computing customer would account for a cloud computing arrangement as a license of internal-use software under Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). The amendments provide customers with guidance on determining whether or not a cloud computing arrangement includes a software license that should be accounted as internal-use software.
The Company adopted the new requirements prospectively on January 1, 2016 with no material impact on the consolidated financial statements.
FUTURE ACCOUNTING CHANGES
REVENUE FROM CONTRACTS WITH CUSTOMERS
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The core principal of this guideline is that an entity should recognize revenue, to depict the transfer of promised goods or services to customers, in an amount that reflects the consideration for which the entity is entitled to, in exchange for those goods and services. Guidance in this section supersedes the revenue recognition requirements found in topic 605.
ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period. Early adoption is permitted only for annual and interim periods beginning after December 15, 2016.
The Company is currently evaluating these changes to determine how they will impact the consolidated financial statements.
INVENTORY
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” which simplifies the measurement of inventories valued under FIFO – first-in, first-out – and moving average methods. Under this new guidance, inventories valued under these methods would be valued at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling costs less reasonable costs to sell the inventory.
This ASU does not change the measurement principles for inventories valued under the
LIFO – last-in, first-out – method.
The amendments in the update are effective for interim and annual periods beginning after December 15, 2016. The amendments should be applied prospectively and early adoption is permitted.
The Company does not expect this new guidance to have a material impact on the consolidated financial statements.
9
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
FINANCIAL INSTRUMENTS
In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends the guidance on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments.
The amendments in this update are effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. To adopt the amendments, the Company will be required to make a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. Early adoption is permitted.
The Company does not expect this new guidance to have a material impact on the consolidated financial statements.
LEASES
In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires lessees to recognize a right-of-use asset and a lease liability for all of their leases with a lease term greater than 12 months while continuing to recognize expenses in the statement of earnings in a manner similar to current accounting standards. For lessors, the new standard modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted as of the beginning of an interim or annual reporting period.
The Company is currently evaluating the impact of this guidance on the consolidated financial statements.
SHARE-BASED PAYMENTS
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted as of the beginning of an interim or annual reporting period.
The Company does not expect this new guidance to have a material impact on the consolidated financial statements.
DERIVATIVES AND HEDGING
In March 2016, the FASB issued ASU 2016-05, “Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships,” which clarifies that "a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument" or "a change in a critical term of the hedging relationship." As long as all other hedge accounting criteria in ASC 815 are met, a hedging relationship in which the hedging derivative instrument is novated would not be discontinued or require redesignation. This clarification applies to both cash flow and fair value hedging relationships. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted as of the beginning of an interim or annual reporting period.
The Company does not expect this new guidance to have a material impact on the consolidated financial statements.
10
NOTE
3
.
_________________
DERIVATIVES AND HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENT
HEDGING PROGRAMS
The Company is exposed to market risk, such as changes in currency exchange rates, commodity prices, and interest rates. To the extent the Company decides to manage the volatility related to these exposures, the Company may enter into various financial derivatives that are accounted for under the derivatives and hedging guidance. These transactions are governed by the Company's hedging policies which provide direction on acceptable hedging activities, including instrument type and acceptable counterparty exposure.
Upon inception, the Company formally documents the relationship between hedging instruments and hedged items. At inception and quarterly thereafter, the Company formally assesses whether the financial instruments used in hedging transactions are effective at offsetting changes in either the cash flow or the fair value of the underlying exposures. The ineffective portion of the qualifying instrument is immediately recognized to earnings. The amount of ineffectiveness recognized was immaterial for all periods presented. The Company does not hold derivative financial instruments for trading purposes.
CREDIT RISK
The Company is exposed to credit risk on the accounts receivable from its customers. In order to reduce this risk, the Company reviews new customers’ credit history before granting credit and conducts regular reviews of existing customers’ credit performance. As of June 30, 2016, one of Domtar’s Pulp and Paper segment customers located in the United States represented 12% ($76 million) (2015 – 12% ($78 million)) of the Company’s receivables.
The Company is exposed to credit risk in the event of non-performance by counterparties to its financial instruments. The Company attempts to minimize this exposure by entering into contracts with counterparties that are believed to be of high credit quality. Collateral or other security to support financial instruments subject to credit risk is usually not obtained. The credit standing of counterparties is regularly monitored.
INTEREST RATE RISK
The Company is exposed to interest rate risk arising from fluctuations in interest rates on its cash and cash equivalents, bank indebtedness, bank credit facility and long-term debt. The Company’s objective in managing exposure to interest rate changes is to minimize the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. The Company may manage this interest rate exposure through the use of derivative instruments such as interest rate swap contracts, whereby it agrees to exchange the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.
COST RISK
Cash flow hedges:
The Company purchases natural gas at the prevailing market price at the time of delivery. To reduce the impact on cash flow and earnings due to pricing volatility, the Company may utilize derivatives to fix the price of forecasted natural gas purchases. The
11
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 3. DERIVATIVES AND HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENT (CONTINUED)
changes in the fair value on qualifying instruments are included in Accumulated other comprehensive loss to the extent effec
tive, and reclassified into Cost of sales in the period during which the hedged transaction affects earnings. Current contracts are used to hedge a portion of forecasted purchases over the next
60
months
.
The following table presents the volumes under derivative financial instruments for natural gas contracts outstanding as of June 30, 2016 to hedge forecasted purchases:
Commodity
|
|
Notional contractual quantity
under derivative contracts
MMBTU
(2)
|
|
Notional contractual value
under derivative contracts
(in millions of dollars)
|
|
Percentage of forecasted
purchases under
derivative contracts
|
|
Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
(1)
|
|
8,535,000
|
|
|
$
|
27
|
|
|
|
|
80%
|
|
2017
|
|
8,980,000
|
|
|
$
|
28
|
|
|
|
|
34%
|
|
2018
|
|
4,275,000
|
|
|
$
|
13
|
|
|
|
|
16%
|
|
2019
|
|
3,375,000
|
|
|
$
|
10
|
|
|
|
|
13%
|
|
2020
|
|
3,375,000
|
|
|
$
|
11
|
|
|
|
|
13%
|
|
2021
|
|
2,060,000
|
|
|
$
|
7
|
|
|
|
|
15%
|
|
(1)
|
Represents the remaining six months of 2016
|
(2)
|
MMBTU: Millions of British thermal units
|
The natural gas derivative contracts were fully effective as of June 30, 2016. There were no amounts reflected in the Consolidated Statements of Earnings and Comprehensive Income (Loss) for the three and six months ended June 30, 2016 resulting from hedge ineffectiveness (three and six months ended June 30, 2015 – nil).
FOREIGN CURRENCY RISK
Cash flow hedges:
The Company has manufacturing operations in the United States, Canada and Europe. As a result, it is exposed to movements in foreign currency exchange rates in Canada and Europe. Moreover, certain assets and liabilities are denominated in currencies other than the U.S. dollar and are exposed to foreign currency movements. Accordingly, the Company’s earnings are affected by increases or decreases in the value of the Canadian dollar and the European currencies. The Company’s European subsidiaries are also exposed to movements in foreign currency exchange rates on transactions denominated in a currency other than their Euro functional currency. Additionally, there has been, and may continue to be, volatility in currency exchange rates as a result of the United Kingdon’s June 23, 2016 referendum in which voters approved the United Kingdom’s exit from the European Union, commonly referred to as “Brexit.” The Company’s risk management policy allows it to hedge a significant portion of its exposure to fluctuations in foreign currency exchange rates for periods up to three years. The Company may use derivative financial instruments (currency options and foreign exchange forward contracts) to mitigate its exposure to fluctuations in foreign currency exchange rates.
Derivatives are used to hedge forecasted purchases in Canadian dollars by the Company’s Canadian subsidiary over the next 24 months. Derivatives are used to hedge a portion of forecasted sales by its U.S. subsidiaries in Euros and in British pounds over the next 12 months. Derivatives are also used to hedge a portion of forecasted sales in British pounds and Norwegian krone and a portion of forecasted purchases in U.S. dollars and Swedish krona by its European subsidiaries over a period of between 12 to 24 months. Such derivatives are designated as cash flow hedges. The changes in the fair value on qualifying instruments are included in Accumulated other comprehensive loss to the extent effective, and reclassified into Sales or Cost of sales in the period during which the hedged transaction affects earnings.
12
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 3. DERIVATIVES AND HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENT (CONTINUED)
The following table presents the currency values under significant
currency positions
pursuant to currency
derivatives outstanding
as of
June 30, 2016
to hedge forecasted purchases and sales:
Currency exposure hedged
|
|
Business Segment
|
|
Year of maturity
|
|
Notional contractual value
|
|
Percentage of
forecasted net
exposures under
contracts
|
|
|
Average Protection rate
|
|
Average Obligation rate
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
CDN/USD
|
|
Pulp and Paper
|
|
|
|
271 CDN
|
|
|
70%
|
|
|
1 USD = 1.2462
|
|
1 USD = 1.2854
|
USD/Euro
|
|
Personal Care
|
|
|
|
29 USD
|
|
|
81%
|
|
|
1 Euro = 1.1355
|
|
1 Euro = 1.1355
|
Euro/USD
|
|
Pulp and Paper
|
|
|
|
19 EUR
|
|
|
50%
|
|
|
1 Euro = 1.1301
|
|
1 Euro = 1.1301
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
CDN/USD
|
|
Pulp and Paper
|
|
|
|
417 CDN
|
|
|
54%
|
|
|
1 USD = 1.3083
|
|
1 USD = 1.3577
|
USD/Euro
|
|
Personal Care
|
|
|
|
39 USD
|
|
|
54%
|
|
|
1 Euro = 1.1368
|
|
1 Euro = 1.1368
|
Euro/USD
|
|
Pulp and Paper
|
|
|
|
19 EUR
|
|
|
50%
|
|
|
1 Euro = 1.1370
|
|
1 Euro = 1.1370
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
CDN/USD
|
|
Pulp and Paper
|
|
|
|
103 CDN
|
|
|
13%
|
|
|
1 USD = 1.2951
|
|
1 USD = 1.3629
|
USD/Euro
|
|
Personal Care
|
|
|
|
14 USD
|
|
|
19%
|
|
|
1 Euro = 1.1532
|
|
1 Euro = 1.1532
|
The foreign exchange derivative contracts were fully effective as of June 30, 2016. There were no amounts reflected in the Consolidated Statements of Earnings and Comprehensive Income (Loss) for the three and six months ended June 30, 2016 resulting from hedge ineffectiveness (three and six months ended June 30, 2015 - nil).
FAIR VALUE MEASUREMENT
The accounting standards for fair value measurements and disclosures, establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement.
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities.
|
|
Level 2
|
Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
Level 3
|
Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.
|
13
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 3. DERIVATIVES AND HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENT (CONTINUED)
The following tables present information about the Company’s financial assets and financial liabilities measured at fair value on a recurring basis (except Long-term debt, see (c) below) at
June 30, 2016
and
December 31, 2015
, in accordance with the accounting standards for fair value measurements and disclosures and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
Fair Value of financial instruments at:
|
|
June 30, 2016
|
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
|
Significant
observable
inputs
(Level 2)
|
|
|
Significant
unobservable
inputs
(Level 3)
|
|
|
Balance sheet classification
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency derivatives
|
|
|
21
|
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
(a)
|
Prepaid expenses
|
Natural gas swap contracts
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
(a)
|
Prepaid expenses
|
Currency derivatives
|
|
|
12
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
(a)
|
Other assets
|
Natural gas swap contracts
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
(a)
|
Other assets
|
Total Assets
|
|
|
41
|
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency derivatives
|
|
|
15
|
|
|
|
—
|
|
|
|
15
|
|
|
|
—
|
|
(a)
|
Trade and other payables
|
Natural gas swap contracts
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
(a)
|
Trade and other payables
|
Currency derivatives
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
(a)
|
Other
liabilities and deferred credits
|
Natural gas swap contracts
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
(a)
|
Other liabilities and deferred credits
|
Total Liabilities
|
|
|
28
|
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset backed notes ("ABN")
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
(b)
|
Other assets
|
Long-term debt
|
|
|
1,369
|
|
|
|
—
|
|
|
|
1,369
|
|
|
|
—
|
|
(c)
|
Long-term debt
|
The cumulative gain recorded in Other comprehensive income (loss) relating to currency options and forwards hedging forecasted purchases of $13 million at June 30, 2016, will be recognized in Cost of sales or Sales upon maturity of the derivatives over the next 24 months at the then prevailing values, which may be different from those at June 30, 2016.
14
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 3. DERIVATIVES AND HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENT (CONTINUED)
Fair Value of financial instruments at:
|
|
December 31, 2015
|
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
|
Significant
observable
inputs
(Level 2)
|
|
|
Significant
unobservable
inputs
(Level 3)
|
|
|
Balance sheet classification
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency derivatives
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
(a)
|
Prepaid expenses
|
Natural gas swap contracts
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
(a)
|
Prepaid expenses
|
Currency derivatives
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
(a)
|
Other assets
|
Natural gas swap contracts
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
(a)
|
Other assets
|
Total Assets
|
|
|
10
|
|
|
|
—
|
|
|
|
10
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency derivatives
|
|
|
39
|
|
|
|
—
|
|
|
|
39
|
|
|
|
—
|
|
(a)
|
Trade and other payables
|
Natural gas swap contracts
|
|
|
14
|
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
(a)
|
Trade and other payables
|
Currency derivatives
|
|
|
10
|
|
|
|
—
|
|
|
|
10
|
|
|
|
—
|
|
(a)
|
Other liabilities and deferred credits
|
Natural gas swap contracts
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
(a)
|
Other liabilities and deferred credits
|
Total Liabilities
|
|
|
67
|
|
|
|
—
|
|
|
|
67
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset backed notes
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
(b)
|
Other assets
|
Long-term debt
|
|
|
1,261
|
|
|
|
—
|
|
|
|
1,261
|
|
|
|
—
|
|
(c)
|
Long-term debt
|
(a)
|
Fair value of the Company’s derivatives are classified under Level 2 (inputs that are observable; directly or indirectly) as it is measured as follows:
|
|
-
|
For currency derivatives: Fair value is measured using techniques derived from the Black-Scholes pricing model. Interest rates, forward market rates and volatility are used as inputs for such valuation techniques.
|
|
-
|
For natural gas contracts: Fair value is measured using the discounted difference between contractual rates and quoted market future rates.
|
(b)
|
ABN are reported at fair value utilizing Level 3 inputs. Fair value of ABN reported under Level 3 is based on the value of the collateral investments held in the conduit issuer, reduced by the negative value of credit default derivatives, with an additional discount applied for illiquidity. These ABN are held outside of the Company’s pension plans.
|
(c)
|
Fair value of the Company’s long-term debt is measured by comparison to market prices of its debt. The Company’s long-term debt is not carried at fair value on the Consolidated Balance Sheets at June 30, 2016 and December 31, 2015. However, fair value disclosure is required. The carrying value of the Company’s long-term debt is $1,301 million and $1,251 million at June 30, 2016 and December 31, 2015, respectively.
|
Due to their short-term maturity, the carrying amounts of cash and cash equivalents, receivables, bank indebtedness, trade and other payables and income and other taxes approximate their fair values.
15
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
4
.
_________________
EARNINGS PER COMMON SHARE
The following table provides the reconciliation between basic and diluted earnings per common share:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net earnings
|
|
$
|
18
|
|
|
$
|
38
|
|
|
$
|
22
|
|
|
$
|
74
|
|
Weighted average number of common shares
outstanding (millions)
|
|
|
62.6
|
|
|
|
63.6
|
|
|
|
62.7
|
|
|
|
63.7
|
|
Effect of dilutive securities (millions)
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Weighted average number of diluted common shares
outstanding (millions)
|
|
|
62.7
|
|
|
|
63.7
|
|
|
|
62.8
|
|
|
|
63.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per common share (in dollars)
|
|
$
|
0.29
|
|
|
$
|
0.60
|
|
|
$
|
0.35
|
|
|
$
|
1.16
|
|
Diluted
net
earnings
per
common
share
(in
dollars)
|
|
$
|
0.29
|
|
|
$
|
0.60
|
|
|
$
|
0.35
|
|
|
$
|
1.16
|
|
The following table provides the securities that could potentially dilute basic earnings per common share in the future, but were not included in the computation of diluted earnings per common share because to do so would have been anti-dilutive:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Options
|
|
|
314,287
|
|
|
|
220,406
|
|
|
|
412,372
|
|
|
|
137,521
|
|
16
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
5
.
_________________
PENSION PLANS AND OTHER POST-RETIREMENT BENEFIT PLANS
DEFINED CONTRIBUTION PLANS
The Company has several defined contribution plans and multiemployer plans. The pension expense under these plans is equal to the Company’s contribution. For the three and six months ended June 30, 2016, the pension expense was $8 million and $18 million, respectively (2015 – $7 million and $15 million, respectively).
DEFINED BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFIT PLANS
The Company sponsors both contributory and non-contributory U.S. and non-U.S. defined benefit pension plans. Non-unionized employees in Canada joining the Company after January 1, 1998 participate in a defined contribution pension plan. Salaried employees in the U.S. joining the Company after January 1, 2008 participate in a defined contribution pension plan. Unionized and non-union hourly employees in the U.S. who are not grandfathered under the existing defined benefit pension plans, participate in a defined contribution pension plan for future service. The Company also sponsors a number of other post-retirement benefit plans for eligible U.S. and non-U.S. employees; the plans are unfunded and include life insurance programs and medical and dental benefits. The Company also provides supplemental unfunded defined benefit pension plans and supplemental unfunded defined contribution pension plans to certain senior management employees.
Components of net periodic benefit cost for pension plans and other post-retirement benefit plans:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2016
|
|
|
|
Pension plans
|
|
|
Other post-retirement benefit plans
|
|
|
Pension plans
|
|
|
Other post-retirement benefit plans
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Service cost
|
|
|
8
|
|
|
|
1
|
|
|
|
16
|
|
|
|
1
|
|
Interest expense
|
|
|
13
|
|
|
|
1
|
|
|
|
25
|
|
|
|
2
|
|
Expected return on plan assets
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
(39
|
)
|
|
|
—
|
|
Amortization of net actuarial loss
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
Amortization of prior year service costs
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
Net periodic benefit cost
|
|
|
3
|
|
|
|
2
|
|
|
|
6
|
|
|
|
3
|
|
Components of net periodic benefit cost for pension plans and other post-retirement benefit plans:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30, 2015
|
|
|
June 30, 2015
|
|
|
|
Pension plans
|
|
|
Other post-retirement benefit plans
|
|
|
Pension plans
|
|
|
Other post-retirement benefit plans
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Service cost
|
|
|
9
|
|
|
|
1
|
|
|
|
18
|
|
|
|
2
|
|
Interest expense
|
|
|
17
|
|
|
|
1
|
|
|
|
33
|
|
|
|
2
|
|
Expected return on plan assets
|
|
|
(23
|
)
|
|
|
—
|
|
|
|
(47
|
)
|
|
|
—
|
|
Amortization of net actuarial loss
|
|
|
2
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
Amortization of prior year service costs
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
Net periodic benefit cost
|
|
|
5
|
|
|
|
2
|
|
|
|
9
|
|
|
|
4
|
|
For the three and six months ended June 30, 2016, the Company contributed $5 million and $9 million, respectively (2015 – $3 million and $6 million, respectively) to the pension plans and $1 million and $2 million, respectively (2015 – $2 million and $3 million, respectively) to the other post-retirement benefit plans.
17
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
6
.
_________________
OTHER OPERATING LOSS (INCOME), NET
Other operating loss (income), net is an aggregate of both recurring and occasional loss or income items and, as a result, can fluctuate from period to period. The Company’s other operating loss (income), net includes the following:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Gain on sale of property, plant and equipment
(1)
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
—
|
|
|
|
(15
|
)
|
Bad debt expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
Litigation settlement
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
Foreign exchange loss
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
Other
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
2
|
|
Other operating loss (income), net
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
4
|
|
|
|
(8
|
)
|
|
(1)
|
Effective June 23, 2015, Domtar finalized the previously announced sale of its Gatineau properties. Payment of $26 million (CDN $32 million) was received on July 3, 2015. As a result, the Company recorded a gain on sale of property, plant and equipment of $10 million (CDN $12 million).
|
18
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
7
.
_________________
INCOME TAXES
For the second quarter of 2016, the Company’s income tax expense was $6 million, consisting of a current income tax expense of $8 million and a deferred income tax benefit of $2 million. This compares to an income tax benefit of $1 million in the second quarter of 2015, consisting of a current income tax expense of $16 million and a deferred income tax benefit of $17 million. The effective tax rate was 25% compared with an effective tax rate of (3)% in the second quarter of 2015. The effective tax rate for the second quarter of 2015 was impacted by the recognition of previously unrecognized tax benefits due to the expiration of certain statutes of limitations, by enacted law changes in several U.S. states, by the favorable tax treatment of certain gains on property dispositions and by the impairment of property, plant, and equipment charges occurring in a high-tax jurisdiction.
For the first half of 2016, the Company’s income tax expense amounted to $3 million, consisting of a current income tax expense of $8 million and a deferred income tax benefit of $5 million. This compares to an income tax expense of $8 million in the first half of 2015, consisting of a current income tax expense of $40 million and a deferred income tax benefit of $32 million. The effective tax rate was 12% compared to an effective tax rate of 10% in the first half of 2015. The effective tax rate for the first half of 2016 was impacted by the approval of a state tax credit in the U.S. The effective tax rate for the first half of 2015 was impacted by the recognition of previously unrecognized tax benefits due to the expiration of certain statutes of limitations, by enacted law changes in several U.S. states, by the favorable tax treatment of certain gains on property dispositions and by the impairment of property, plant, and equipment charges occurring in a high-tax jurisdiction.
19
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
8
.
_________________
INVENTORIES
The following table presents the components of inventories:
|
|
June 30,
|
|
|
December 31,
|
|
|
2016
|
|
|
2015
|
|
|
$
|
|
|
$
|
Work in process and finished goods
|
|
|
409
|
|
|
432
|
Raw materials
|
|
|
135
|
|
|
130
|
Operating and maintenance supplies
|
|
|
209
|
|
|
204
|
|
|
|
753
|
|
|
766
|
20
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
9
.
_________________
GOODWILL
The carrying value and any changes in the carrying value of goodwill are as follows:
|
|
June 30, 2016
|
|
|
|
$
|
|
Balance at December 31, 2015
|
|
|
539
|
|
Effect of foreign currency exchange rate change
|
|
|
4
|
|
Balance at end of period
|
|
|
543
|
|
|
|
|
|
|
The goodwill at June 30, 2016 is entirely related to the Personal Care segment.
21
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
0
.
_________________
INTANGIBLE ASSETS
The following table presents the components of intangible assets:
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Estimated useful lives
(in years)
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Definite-lived intangible
assets subject
to amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water rights
|
|
40
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
6
|
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
6
|
|
Customer relationships
|
|
10 - 40
|
|
|
357
|
|
|
|
(54
|
)
|
|
|
303
|
|
|
|
354
|
|
|
|
(46
|
)
|
|
|
308
|
|
Technology
|
|
7 - 20
|
|
|
8
|
|
|
|
(3
|
)
|
|
|
5
|
|
|
|
8
|
|
|
|
(2
|
)
|
|
|
6
|
|
Non-Compete
|
|
9
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
License rights
|
|
12
|
|
|
28
|
|
|
|
(7
|
)
|
|
|
21
|
|
|
|
28
|
|
|
|
(6
|
)
|
|
|
22
|
|
|
|
|
|
|
401
|
|
|
|
(65
|
)
|
|
|
336
|
|
|
|
398
|
|
|
|
(55
|
)
|
|
|
343
|
|
Indefinite-lived intangible
assets not subject
to amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
|
|
218
|
|
|
|
—
|
|
|
|
218
|
|
|
|
215
|
|
|
|
—
|
|
|
|
215
|
|
License rights
|
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
Catalog rights
|
|
|
|
|
38
|
|
|
|
—
|
|
|
|
38
|
|
|
|
37
|
|
|
|
—
|
|
|
|
37
|
|
Total
|
|
|
|
|
663
|
|
|
|
(65
|
)
|
|
|
598
|
|
|
|
656
|
|
|
|
(55
|
)
|
|
|
601
|
|
Amortization expense related to intangible assets for the three and six months ended June 30, 2016 was $4 million and $9 million, respectively (2015 – $4 million and $9 million, respectively).
Amortization expense for the next five years related to intangible assets is expected to be as follows:
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Amortization expense related to intangible assets
|
|
|
19
|
|
|
|
19
|
|
|
|
19
|
|
|
|
18
|
|
|
|
18
|
|
22
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
1
.
_________________
CLOSURE AND RESTRUCTURING COSTS AND LIABILITY AND IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
The Company regularly reviews its overall production capacity with the objective of aligning its production capacity with anticipated long-term demand, which in some cases could result in closure or impairment costs being recorded in earnings.
Ashdown, Arkansas mill
On December 10, 2014, the Company announced a project to convert a paper machine at the Ashdown, Arkansas mill to a high quality fluff pulp line used in absorbent applications such as baby diapers, feminine hygiene and adult incontinence products. The conversion work commenced during the second quarter of 2016. The fluff pulp line is scheduled to startup by the third quarter of 2016 and will allow for the production of up to 516,000 metric tons of fluff pulp per year once the machine is in full operation. The project resulted in the permanent reduction of 364,000 short tons of annual uncoated freesheet production capacity on March 31, 2016.
The Company also invested in a pulp bale line that will provide flexibility to manufacture papergrade softwood pulp, contingent on market conditions.
The Company recorded $3 million and $24 million for the three and six months ended June 30, 2016, respectively, of accelerated depreciation under Impairment of property, plant and equipment on the Consolidated Statement of Earnings and Comprehensive Income (Loss). The Company also recorded $21 million of costs related to the fluff pulp conversion outage under Closure and restructuring costs during the second quarter of 2016. During the first quarter of 2016, the Company recorded $1 million of severance and termination costs under Closure and restructuring costs.
The Company recorded $18 million and $37 million for the three and six months ended June 30, 2015, respectively, of accelerated depreciation under Impairment of property, plant and equipment on the Consolidated Statement of Earnings and Comprehensive Income (Loss). The Company also recorded $1 million of severance and termination costs under Closure and restructuring costs during the second quarter of 2015.
Other costs
For the three and six months ended June 30, 2016, other costs related to previous and ongoing closures include nil and $1 million, respectively, of severance and termination costs related to Pulp and Paper.
For the three and six months ended June 30, 2015, other costs related to previous and ongoing closures include nil and $1 million, respectively, of severance and termination costs related to Personal Care.
At June 30, 2016, the Company’s provision for closure and restructuring costs is $3 million. This provision is comprised of severance and termination costs, all related to Pulp and Paper.
23
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
2
.
_________________
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT
The following table presents the changes in Accumulated other comprehensive loss by component
(1)
for the periods ended June 30, 2016 and December 31, 2015:
|
|
Net
derivative
(losses)
gains
on
cash
flow
hedges
|
|
|
Pension items
(2)
|
|
|
Post-retirement
benefit items
(2)
|
|
|
Foreign currency
items
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance at December 31, 2014
|
|
|
(15
|
)
|
|
|
(192
|
)
|
|
|
(13
|
)
|
|
|
(48
|
)
|
|
|
(268
|
)
|
Natural gas swap contracts
|
|
|
(8
|
)
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
(8
|
)
|
Currency options
|
|
|
(40
|
)
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
(40
|
)
|
Forward exchange forward contracts
|
|
|
7
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
7
|
|
Net (gain) loss
|
|
N/A
|
|
|
|
(5
|
)
|
|
|
3
|
|
|
N/A
|
|
|
|
(2
|
)
|
Foreign currency items
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
(223
|
)
|
|
|
(223
|
)
|
Other comprehensive (loss) income before reclassifications
|
|
|
(41
|
)
|
|
|
(5
|
)
|
|
|
3
|
|
|
|
(223
|
)
|
|
|
(266
|
)
|
Amounts reclassified from Accumulated other
comprehensive loss
|
|
|
26
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33
|
|
Net current period other comprehensive (loss) income
|
|
|
(15
|
)
|
|
|
2
|
|
|
|
3
|
|
|
|
(223
|
)
|
|
|
(233
|
)
|
Balance at December 31, 2015
|
|
|
(30
|
)
|
|
|
(190
|
)
|
|
|
(10
|
)
|
|
|
(271
|
)
|
|
|
(501
|
)
|
Natural gas swap contracts
|
|
|
4
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
4
|
|
Net investment hedge
|
|
|
(1
|
)
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
(1
|
)
|
Currency options
|
|
|
13
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
13
|
|
Forward exchange forward contracts
|
|
|
13
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
13
|
|
Foreign currency items
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
55
|
|
|
|
55
|
|
Other comprehensive income before reclassifications
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55
|
|
|
|
84
|
|
Amounts reclassified from Accumulated other
comprehensive loss
|
|
|
13
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16
|
|
Net current period other comprehensive income
|
|
|
42
|
|
|
|
3
|
|
|
|
—
|
|
|
|
55
|
|
|
|
100
|
|
Balance at June 30, 2016
|
|
|
12
|
|
|
|
(187
|
)
|
|
|
(10
|
)
|
|
|
(216
|
)
|
|
|
(401
|
)
|
(1)
|
All amounts are after tax. Amounts in parenthesis indicate losses.
|
(2)
|
The accrued benefit obligation is actuarially determined on an annual basis as of December 31.
|
24
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 12. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT (CONTINUED)
The following table present
s
reclassifications out of Accumulated other comprehensive loss:
Details about Accumulated other
comprehensive loss components
|
|
Amount reclassified from
Accumulated other
comprehensive loss
|
|
|
|
|
For the three months ended
|
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
Net derivative gains on cash flow hedges
|
|
|
|
|
|
|
|
|
|
Natural gas swap contracts
|
|
|
5
|
|
|
|
5
|
|
(1)
|
Currency options and forwards
|
|
|
3
|
|
|
|
5
|
|
(1)
|
Total before tax
|
|
|
8
|
|
|
|
10
|
|
|
Tax expense
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
Net of tax
|
|
|
5
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of defined benefit pension items
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss and prior year
service cost
|
|
|
3
|
|
|
|
2
|
|
(2)
|
Tax expense
|
|
|
(1
|
)
|
|
|
—
|
|
|
Net of tax
|
|
|
2
|
|
|
|
2
|
|
|
Details about Accumulated other
comprehensive loss components
|
|
Amount reclassified from
Accumulated other
comprehensive loss
|
|
|
For the six months ended
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
Net derivative gains on cash flow hedges
|
|
|
|
|
|
|
|
|
|
Natural gas swap contracts
|
|
|
10
|
|
|
|
9
|
|
(1)
|
Currency options and forwards
|
|
|
11
|
|
|
10
|
|
(1)
|
Total before tax
|
|
|
21
|
|
|
19
|
|
|
Tax expense
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
Net of tax
|
|
|
13
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of defined benefit pension items
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss and prior year
service cost
|
|
|
5
|
|
|
5
|
|
(2)
|
Tax expense
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
Net of tax
|
|
|
3
|
|
|
4
|
|
|
(1)
|
These amounts are included in Cost of Sales in the Consolidated Statements of Earnings and Comprehensive Income (Loss).
|
(2)
These amounts are included in the computation of net periodic benefit cost. Refer to Note 5 “Pension plans and other post-retirement benefit plans” for additional details.
25
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
3
.
_________________
SHAREHOLDERS’ EQUITY
On February 22, 2016 and May 3, 2016, the Company’s Board of Directors approved a quarterly dividend of $0.40 and $0.415 per share, respectively, to be paid to holders of the Company’s common stock. Total dividends of approximately $25 million and $26 million, respectively, were paid on April 15, 2016 and July 15, 2016, respectively, to shareholders of record on April 4, 2016 and July 5, 2016, respectively.
On August 2, 2016, the Company’s Board of Directors approved a quarterly dividend of $0.415 per share to be paid to holders of the Company’s common stock. This dividend is to be paid on October 17, 2016, to shareholders of record on October 3, 2016.
STOCK REPURCHASE PROGRAM
The Company’s Board of Directors has authorized a stock repurchase program (the “Program”) of up to $1.3 billion. Under the Program, the Company is authorized to repurchase from time to time shares of its outstanding common stock on the open market or in privately negotiated transactions. The timing and amount of stock repurchases will depend on a variety of factors, including the market conditions as well as corporate and regulatory considerations. The Program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the Program. The Program has no set expiration date. The Company repurchases its common stock, from time to time, in part to reduce the dilutive effects of stock options and awards, and to improve shareholders’ returns.
The Company makes open market purchases of its common stock using general corporate funds. Additionally, the Company may enter into structured stock repurchase agreements with large financial institutions using general corporate funds in order to lower the average cost to acquire shares. The agreements would require the Company to make up-front payments to the counterparty financial institutions, which would result in either the receipt of stock at the beginning of the term of the agreements followed by a share adjustment at the maturity of the agreements, or the receipt of either stock or cash at the maturity of the agreements, depending upon the price of the stock.
During the first half of 2016, the Company repurchased 304,915 shares at an average price of $32.21 for a total cost of $10 million.
During the first half of 2015, the Company repurchased 723,459 shares at an average price of $41.65 for a total cost of $30 million.
Since the inception of the Program, the Company has repurchased 24,853,827 shares at an average price of $39.33 for a total cost of $977 million. All shares repurchased are recorded as Treasury stock on the Consolidated Balance Sheets under the par value method at $0.01 per share.
26
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
4
.
_________________
COMMITMENTS AND CONTINGENCIES
ENVIRONMENT
The Company is subject to environmental laws and regulations enacted by federal, provincial, state and local authorities.
On February 16, 2010, the government of British Columbia issued a Remediation Order to Seaspan International Ltd. (“Seaspan”) and the Company, in order to define and implement an action plan to address soil, sediment and groundwater issues. Working with authorities, Seaspan and the Company selected a remedial plan and obtained permitting approval on May 14, 2015 from the Vancouver Fraser Port Authority. It is anticipated that construction will begin in 2017. The Company has recorded an environmental reserve to address its estimated exposure. The possible loss in excess of the reserve is not considered to be material for this matter.
The following table reflects changes in the reserve for environmental remediation and asset retirement obligations:
|
|
June 30, 2016
|
|
|
|
$
|
|
Balance at beginning of period
|
|
|
52
|
|
Additions
|
|
|
1
|
|
Environmental spending
|
|
|
(2
|
)
|
Effect of foreign currency exchange rate change
|
|
|
2
|
|
Balance at end of period
|
|
|
53
|
|
The U.S. Environmental Protection Agency (“EPA”) and/or various state agencies have notified the Company that it may be a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as “Superfund,” and similar state laws with respect to other hazardous waste sites as to which no proceedings have been instituted against the Company. The Company continues to take remedial action under its Care and Control Program at its former wood preserving sites, and at a number of operating sites, due to possible soil, sediment or groundwater contamination.
Climate change regulation
Various national and local laws and regulations have been established or are emerging in jurisdictions where the Company currently has, or may have in the future, manufacturing facilities or investments. The Company does not expect to be disproportionately affected by these measures compared with other pulp and paper producers located in these jurisdictions.
In the United States, EPA’s Clean Power Plan requires states to develop compliance plans to reduce greenhouse gases (“GHG”) emissions beginning in 2022 from existing electric utilities. The final rule is being litigated, with 45 of 50 states directly involved in the litigation. The Clean Power Plan requirements could result in significant changes to state energy resources and increase the cost of purchased energy in most states. On February 9, 2016, the U.S. Supreme Court stayed the implementation of the Clean Power Plan until the litigation is resolved. Many states have stopped working on their compliance plans, but a few states are continuing. The Company does not expect to be disproportionately affected compared with other pulp and paper producers located in the states where the Company operates.
The EPA is also developing a biogenic carbon accounting framework to account for carbon dioxide emissions from biomass fuels for Clean Air Act permitting and other regulatory purposes. The Company does not expect to be disproportionately affected by any future EPA measures compared with other pulp and paper producers in the United States.
The Government of Canada has committed to developing a sector-by-sector approach to set performance standards to reduce GHG. The pulp and paper sector is currently undergoing review. The Company does not expect its facilities to be disproportionately affected by these future measures compared with other pulp and paper producers in Canada.
27
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The province of Quebec has a GHG cap-and-trade system with reduction targets. British Columbia has a carbon tax that applies to the purchase of fossil fuels within the province. The province of Ontario is also developing a cap-and-trade system, with final rules expected this year and the first compliance period beginning in 2017. The Company does not expect to be disproportionately affected compared to the other large pulp and paper producers located in the province.
CONTINGENCIES
In the normal course of operations, the Company becomes involved in various legal actions mostly related to contract disputes, patent infringements, environmental and product warranty claims, and labor issues. While the final outcome with respect to actions outstanding or pending at June 30, 2016, cannot be predicted with certainty, it is management’s opinion that their resolution will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Spanish Competition Investigation
In September 2014, following preliminary inquiries commenced in January 2014, Spain’s National Commission of Markets and Competition (“CNMC”) initiated a formal investigation of alleged violations of Spanish competition laws in the market for heavy adult incontinence products in Spain.
On October 15, 2015, the Competition Directorate of the CNMC filed a Statement of Objections against a number of industry participants alleging the existence of a series of agreements between manufacturers, distributors and pharmacists to fix prices and to allocate margins for heavy adult incontinence products within the pharmacy channel
in Spain during the period from December 1996 through January 2014. Among the parties named in the Statement of Objections are Indas, which the Company acquired in January 2014, and two of its affiliates.
On January 4, 2016, the Competition Directorate issued a proposed decision confirming the allegations of the Statement of Objections. The proposed decision recommended the imposition of fines on the parties without recommending the amount of any fines. The Company recorded a €0.2 million ($0.2 million) provision in the fourth quarter of 2015 in Other operating loss, net.
On May 26, 2016, the CNMC rendered its final decision, which declared that a number of manufacturers of adult heavy incontinence products, the sector association and certain individuals participated in price fixing during the period from December 1996 through January 2014. Indas and one of its subsidiaries were fined a total of €13.5 million ($14.9 million) for their participation. A provision was recorded in the second quarter of 2016 in the amount of €13.3 million ($14.7 million) in Other operating loss, net.
The sellers of Indas made representations and warranties to the Company in the purchase agreement regarding, among other things, Indas’ and its subsidiary’s compliance with competition laws. The liability retained by the sellers is backed by a retained purchase price of €3 million ($3.3 million) and bank guarantees of €9 million ($9.9 million).
On June 27, 2016, in light of the CNMC decision, the sellers, in terms of their indemnity obligations, have agreed to the appropriation by the Company of the retained purchase price and the release of the bank guarantees. Accordingly, a recovery of €12 million ($13.2 million) was recorded in the quarter and included in Other operating loss, net.
In July 2016, the fines were paid and Indas and two of its affiliates named in the final decision appealed the decision to the Spanish courts.
The Company purchased limited insurance coverage with respect to the purchase agreement, and will seek to recover the remaining €1.5 million ($1.7 million) under the insurance policy. Any recovery from the insurers would be recorded in the period when the proceeds are received.
28
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
INDEMNIFICATIONS
In the normal course of business, the Company offers indemnifications relating to the sale of its businesses and real estate. In general, these indemnifications may relate to claims from past business operations, the failure to abide by covenants and the breach of representations and warranties included in the sales agreements. Typically, such representations and warranties relate to taxation, environmental, product and employee matters. The terms of these indemnification agreements are generally for an unlimited period of time. At June 30, 2016, the Company is unable to estimate the potential maximum liabilities for these types of indemnification guarantees as the amounts are contingent upon the outcome of future events, the nature and likelihood of which cannot be reasonably estimated at this time. Accordingly, no provision has been recorded. These indemnifications have not yielded a significant expense in the past.
Pension Plans
The Company has indemnified and held harmless the trustees of its pension funds, and the respective officers, directors, employees and agents of such trustees, from any and all costs and expenses arising out of the performance of their obligations under the relevant trust agreements, including in respect of their reliance on authorized instructions from the Company or for failing to act in the absence of authorized instructions. These indemnifications survive the termination of such agreements. At June 30, 2016, the Company has not recorded a liability associated with these indemnifications, as it does not expect to make any payments pertaining to these indemnifications.
29
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
5
.
_________________
SEGMENT DISCLOSURES
The Company operates in the two reportable segments described below. Each reportable segment offers different products and services and requires different manufacturing processes, technology and/or marketing strategies. The following summary briefly describes the operations included in each of the Company’s reportable segments:
·
|
Pulp and Paper –
consists of the design, manufacturing, marketing and distribution of communication, specialty and packaging papers, as well as softwood, fluff and hardwood market pulp.
|
·
|
Personal Care –
consists of the design, manufacturing, marketing and distribution of absorbent hygiene products.
|
An analysis and reconciliation of the Company’s business segment information to the respective information in the financial statements is as follows:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
SEGMENT DATA
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp and Paper
|
|
|
1,054
|
|
|
|
1,110
|
|
|
|
2,139
|
|
|
|
2,256
|
|
Personal Care
|
|
|
228
|
|
|
|
216
|
|
|
|
444
|
|
|
|
434
|
|
Total for reportable segments
|
|
|
1,282
|
|
|
|
1,326
|
|
|
|
2,583
|
|
|
|
2,690
|
|
Intersegment sales
|
|
|
(15
|
)
|
|
|
(16
|
)
|
|
|
(29
|
)
|
|
|
(32
|
)
|
Consolidated sales
|
|
|
1,267
|
|
|
|
1,310
|
|
|
|
2,554
|
|
|
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization and impairment
of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp and Paper
|
|
|
72
|
|
|
|
75
|
|
|
|
145
|
|
|
|
149
|
|
Personal Care
|
|
|
15
|
|
|
|
16
|
|
|
|
31
|
|
|
|
32
|
|
Total for reportable segments
|
|
|
87
|
|
|
|
91
|
|
|
|
176
|
|
|
|
181
|
|
Impairment of property, plant and
equipment - Pulp and Paper
|
|
|
3
|
|
|
|
18
|
|
|
|
24
|
|
|
|
37
|
|
Consolidated depreciation and amortization and impairment
of property, plant and equipment
|
|
|
90
|
|
|
|
109
|
|
|
|
200
|
|
|
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp and Paper
|
|
|
35
|
|
|
|
55
|
|
|
|
54
|
|
|
|
130
|
|
Personal Care
|
|
|
15
|
|
|
|
17
|
|
|
|
29
|
|
|
|
27
|
|
Corporate
|
|
|
(11
|
)
|
|
|
(10
|
)
|
|
|
(26
|
)
|
|
|
(24
|
)
|
Consolidated operating income
|
|
|
39
|
|
|
|
62
|
|
|
|
57
|
|
|
|
133
|
|
Interest expense, net
|
|
|
15
|
|
|
|
25
|
|
|
|
32
|
|
|
|
51
|
|
Earnings before income taxes
|
|
|
24
|
|
|
|
37
|
|
|
|
25
|
|
|
|
82
|
|
Income tax expense (benefit)
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
8
|
|
Net earnings
|
|
|
18
|
|
|
|
38
|
|
|
|
22
|
|
|
|
74
|
|
30
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE
1
6
.
_________________
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The following information is presented as required under Rule 3-10 of Regulation S-X, in connection with the Company’s issuance of debt securities that are fully and unconditionally guaranteed by Domtar Paper Company, LLC, a 100% owned subsidiary of the Company, Domtar Industries LLC (and subsidiaries, excluding Domtar Funding LLC), Ariva Distribution Inc., Domtar Delaware Investments Inc., Domtar Delaware Holdings, LLC, Domtar A.W. LLC (and subsidiary), Domtar AI Inc., Attends Healthcare Products Inc., EAM Corporation, Domtar Personal Care Absorbent Hygiene Inc, and Associated Hygienic Products LLC., all 100% owned subsidiaries of the Company (“Guarantor Subsidiaries”), on a joint and several basis. The Guaranteed Debt will not be guaranteed by certain of Domtar’s own 100% owned subsidiaries; including Domtar Delaware Holdings Inc. and its foreign subsidiaries, including Attends Healthcare Limited, Domtar Inc. and Laboratorios Indas. S.A.U., (collectively the “Non-Guarantor Subsidiaries”). The subsidiary’s guarantee may be released in certain customary circumstances, such as if the subsidiary is sold or sells all of its assets, if the subsidiary’s guarantee of the Credit Agreement is terminated or released and if the requirements for legal defeasance to discharge the indenture have been satisfied.
The following supplemental condensed consolidating financial information sets forth, on an unconsolidated basis, the Balance Sheets at June 30, 2016 and December 31, 2015, the Statements of Earnings and Comprehensive Income (Loss) and Cash Flows for the three and six months ended June 30, 2016 and 2015 for Domtar Corporation (the “Parent”), and on a combined basis for the Guarantor Subsidiaries and, on a combined basis, the Non-Guarantor Subsidiaries. The supplemental condensed consolidating financial information reflects the investments of the Parent in the Guarantor Subsidiaries, as well as the investments of the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries, using the equity method.
|
|
For the three months ended
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Consolidating
|
|
|
|
|
|
AND COMPREHENSIVE INCOME (LOSS)
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
—
|
|
|
|
1,040
|
|
|
|
498
|
|
|
|
(271
|
)
|
|
|
1,267
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding depreciation and amortization
|
|
|
—
|
|
|
|
874
|
|
|
|
410
|
|
|
|
(271
|
)
|
|
|
1,013
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
63
|
|
|
|
24
|
|
|
|
—
|
|
|
|
87
|
|
Selling, general and administrative
|
|
|
2
|
|
|
|
25
|
|
|
|
77
|
|
|
|
—
|
|
|
|
104
|
|
Impairment of property, plant and equipment
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
Closure and restructuring costs
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21
|
|
Other operating loss (income), net
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
3
|
|
|
|
985
|
|
|
|
511
|
|
|
|
(271
|
)
|
|
|
1,228
|
|
Operating (loss) income
|
|
|
(3
|
)
|
|
|
55
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
39
|
|
Interest expense (income), net
|
|
|
16
|
|
|
|
7
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
15
|
|
(Loss) earnings before income taxes
|
|
|
(19
|
)
|
|
|
48
|
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
24
|
|
Income tax (benefit) expense
|
|
|
(5
|
)
|
|
|
12
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
6
|
|
Share in earnings of equity accounted investees
|
|
|
32
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(28
|
)
|
|
|
—
|
|
Net earnings (loss)
|
|
|
18
|
|
|
|
32
|
|
|
|
(4
|
)
|
|
|
(28
|
)
|
|
|
18
|
|
Other comprehensive loss
|
|
|
(14
|
)
|
|
|
(25
|
)
|
|
|
(29
|
)
|
|
|
54
|
|
|
|
(14
|
)
|
Comprehensive income (loss)
|
|
|
4
|
|
|
|
7
|
|
|
|
(33
|
)
|
|
|
26
|
|
|
|
4
|
|
31
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS AND
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Consolidating
|
|
|
|
|
|
COMPREHENSIVE INCOME
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
—
|
|
|
|
2,106
|
|
|
|
1,019
|
|
|
|
(571
|
)
|
|
|
2,554
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding depreciation and amortization
|
|
|
—
|
|
|
|
1,846
|
|
|
|
788
|
|
|
|
(571
|
)
|
|
|
2,063
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
128
|
|
|
|
48
|
|
|
|
—
|
|
|
|
176
|
|
Selling, general and administrative
|
|
|
10
|
|
|
|
52
|
|
|
|
145
|
|
|
|
—
|
|
|
|
207
|
|
Impairment of property, plant and equipment
|
|
|
—
|
|
|
|
24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
Closure and restructuring costs
|
|
|
—
|
|
|
|
23
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23
|
|
Other operating loss (income), net
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
|
|
11
|
|
|
|
2,072
|
|
|
|
985
|
|
|
|
(571
|
)
|
|
|
2,497
|
|
Operating (loss) income
|
|
|
(11
|
)
|
|
|
34
|
|
|
|
34
|
|
|
|
—
|
|
|
|
57
|
|
Interest expense (income), net
|
|
|
32
|
|
|
|
16
|
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
32
|
|
(Loss) earnings before income taxes
|
|
|
(43
|
)
|
|
|
18
|
|
|
|
50
|
|
|
|
—
|
|
|
|
25
|
|
Income tax (benefit) expense
|
|
|
(10
|
)
|
|
|
4
|
|
|
|
9
|
|
|
|
—
|
|
|
|
3
|
|
Share in earnings of equity accounted investees
|
|
|
55
|
|
|
|
41
|
|
|
|
—
|
|
|
|
(96
|
)
|
|
|
—
|
|
Net earnings
|
|
|
22
|
|
|
|
55
|
|
|
|
41
|
|
|
|
(96
|
)
|
|
|
22
|
|
Other comprehensive income
|
|
|
100
|
|
|
|
90
|
|
|
|
56
|
|
|
|
(146
|
)
|
|
|
100
|
|
Comprehensive income
|
|
|
122
|
|
|
|
145
|
|
|
|
97
|
|
|
|
(242
|
)
|
|
|
122
|
|
|
|
For the three months ended
|
|
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS AND
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Consolidating
|
|
|
|
|
|
COMPREHENSIVE INCOME
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
—
|
|
|
|
1,079
|
|
|
|
522
|
|
|
|
(291
|
)
|
|
|
1,310
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding depreciation and amortization
|
|
|
—
|
|
|
|
916
|
|
|
|
427
|
|
|
|
(291
|
)
|
|
|
1,052
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
65
|
|
|
|
26
|
|
|
|
—
|
|
|
|
91
|
|
Selling, general and administrative
|
|
|
3
|
|
|
|
39
|
|
|
|
57
|
|
|
|
—
|
|
|
|
99
|
|
Impairment of property, plant and equipment
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
Closure and restructuring costs
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Other operating income, net
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
|
2
|
|
|
|
1,033
|
|
|
|
504
|
|
|
|
(291
|
)
|
|
|
1,248
|
|
Operating (loss) income
|
|
|
(2
|
)
|
|
|
46
|
|
|
|
18
|
|
|
|
—
|
|
|
|
62
|
|
Interest expense (income), net
|
|
|
25
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
25
|
|
(Loss) earnings before income taxes
|
|
|
(27
|
)
|
|
|
39
|
|
|
|
25
|
|
|
|
—
|
|
|
|
37
|
|
Income tax (benefit) expense
|
|
|
(7
|
)
|
|
|
3
|
|
|
|
3
|
|
|
|
—
|
|
|
|
(1
|
)
|
Share in earnings of equity accounted investees
|
|
|
58
|
|
|
|
22
|
|
|
|
—
|
|
|
|
(80
|
)
|
|
|
—
|
|
Net earnings
|
|
|
38
|
|
|
|
58
|
|
|
|
22
|
|
|
|
(80
|
)
|
|
|
38
|
|
Other comprehensive income
|
|
|
53
|
|
|
|
53
|
|
|
|
44
|
|
|
|
(97
|
)
|
|
|
53
|
|
Comprehensive income
|
|
|
91
|
|
|
|
111
|
|
|
|
66
|
|
|
|
(177
|
)
|
|
|
91
|
|
32
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
|
|
For the six months ended
|
|
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS AND
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Consolidating
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
—
|
|
|
|
2,195
|
|
|
|
1,055
|
|
|
|
(592
|
)
|
|
|
2,658
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding depreciation and amortization
|
|
|
—
|
|
|
|
1,892
|
|
|
|
814
|
|
|
|
(592
|
)
|
|
|
2,114
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
129
|
|
|
|
52
|
|
|
|
—
|
|
|
|
181
|
|
Selling, general and administrative
|
|
|
8
|
|
|
|
72
|
|
|
|
119
|
|
|
|
—
|
|
|
|
199
|
|
Impairment of property, plant and equipment
|
|
|
—
|
|
|
|
37
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37
|
|
Closure and restructuring costs
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
Other operating loss (income), net
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
|
9
|
|
|
|
2,130
|
|
|
|
978
|
|
|
|
(592
|
)
|
|
|
2,525
|
|
Operating (loss) income
|
|
|
(9
|
)
|
|
|
65
|
|
|
|
77
|
|
|
|
—
|
|
|
|
133
|
|
Interest expense (income), net
|
|
|
51
|
|
|
|
14
|
|
|
|
(14
|
)
|
|
|
—
|
|
|
|
51
|
|
(Loss) earnings before income taxes
|
|
|
(60
|
)
|
|
|
51
|
|
|
|
91
|
|
|
|
—
|
|
|
|
82
|
|
Income tax (benefit) expense
|
|
|
(16
|
)
|
|
|
4
|
|
|
|
20
|
|
|
|
—
|
|
|
|
8
|
|
Share in earnings of equity accounted investees
|
|
|
118
|
|
|
|
71
|
|
|
|
—
|
|
|
|
(189
|
)
|
|
|
—
|
|
Net earnings
|
|
|
74
|
|
|
|
118
|
|
|
|
71
|
|
|
|
(189
|
)
|
|
|
74
|
|
Other comprehensive loss
|
|
|
(125
|
)
|
|
|
(127
|
)
|
|
|
(122
|
)
|
|
|
249
|
|
|
|
(125
|
)
|
Comprehensive loss
|
|
|
(51
|
)
|
|
|
(9
|
)
|
|
|
(51
|
)
|
|
|
60
|
|
|
|
(51
|
)
|
33
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Consolidating
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Assets
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
18
|
|
|
|
6
|
|
|
|
87
|
|
|
|
—
|
|
|
|
111
|
|
Receivables
|
|
|
—
|
|
|
|
257
|
|
|
|
351
|
|
|
|
—
|
|
|
|
608
|
|
Inventories
|
|
|
—
|
|
|
|
534
|
|
|
|
219
|
|
|
|
—
|
|
|
|
753
|
|
Prepaid expenses
|
|
|
20
|
|
|
|
24
|
|
|
|
11
|
|
|
|
—
|
|
|
|
55
|
|
Income and other taxes receivable
|
|
|
12
|
|
|
|
3
|
|
|
|
16
|
|
|
|
—
|
|
|
|
31
|
|
Intercompany accounts
|
|
|
983
|
|
|
|
5,149
|
|
|
|
289
|
|
|
|
(6,421
|
)
|
|
|
—
|
|
Total current assets
|
|
|
1,033
|
|
|
|
5,973
|
|
|
|
973
|
|
|
|
(6,421
|
)
|
|
|
1,558
|
|
Property, plant and equipment, net
|
|
|
—
|
|
|
|
2,061
|
|
|
|
845
|
|
|
|
—
|
|
|
|
2,906
|
|
Goodwill
|
|
|
—
|
|
|
|
296
|
|
|
|
247
|
|
|
|
—
|
|
|
|
543
|
|
Intangible assets, net
|
|
|
—
|
|
|
|
250
|
|
|
|
348
|
|
|
|
—
|
|
|
|
598
|
|
Investments in affiliates
|
|
|
8,177
|
|
|
|
2,137
|
|
|
|
—
|
|
|
|
(10,314
|
)
|
|
|
—
|
|
Intercompany long-term advances
|
|
|
6
|
|
|
|
93
|
|
|
|
638
|
|
|
|
(737
|
)
|
|
|
—
|
|
Other assets
|
|
|
7
|
|
|
|
25
|
|
|
|
131
|
|
|
|
—
|
|
|
|
163
|
|
Total assets
|
|
|
9,223
|
|
|
|
10,835
|
|
|
|
3,182
|
|
|
|
(17,472
|
)
|
|
|
5,768
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Trade and other payables
|
|
|
53
|
|
|
|
411
|
|
|
|
229
|
|
|
|
—
|
|
|
|
693
|
|
Intercompany accounts
|
|
|
5,011
|
|
|
|
1,014
|
|
|
|
396
|
|
|
|
(6,421
|
)
|
|
|
—
|
|
Income and other taxes payable
|
|
|
—
|
|
|
|
14
|
|
|
|
10
|
|
|
|
—
|
|
|
|
24
|
|
Long-term debt due within one year
|
|
|
62
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
64
|
|
Total current liabilities
|
|
|
5,126
|
|
|
|
1,441
|
|
|
|
636
|
|
|
|
(6,421
|
)
|
|
|
782
|
|
Long-term debt
|
|
|
830
|
|
|
|
298
|
|
|
|
109
|
|
|
|
—
|
|
|
|
1,237
|
|
Intercompany long-term loans
|
|
|
533
|
|
|
|
204
|
|
|
|
—
|
|
|
|
(737
|
)
|
|
|
—
|
|
Deferred income taxes and other
|
|
|
3
|
|
|
|
536
|
|
|
|
142
|
|
|
|
—
|
|
|
|
681
|
|
Other liabilities and deferred credits
|
|
|
15
|
|
|
|
179
|
|
|
|
158
|
|
|
|
—
|
|
|
|
352
|
|
Shareholders' equity
|
|
|
2,716
|
|
|
|
8,177
|
|
|
|
2,137
|
|
|
|
(10,314
|
)
|
|
|
2,716
|
|
Total liabilities and shareholders' equity
|
|
|
9,223
|
|
|
|
10,835
|
|
|
|
3,182
|
|
|
|
(17,472
|
)
|
|
|
5,768
|
|
34
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Consolidating
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
49
|
|
|
|
2
|
|
|
|
75
|
|
|
|
—
|
|
|
|
126
|
|
Receivables
|
|
|
—
|
|
|
|
384
|
|
|
|
243
|
|
|
|
—
|
|
|
|
627
|
|
Inventories
|
|
|
—
|
|
|
|
556
|
|
|
|
210
|
|
|
|
—
|
|
|
|
766
|
|
Prepaid expenses
|
|
|
8
|
|
|
|
7
|
|
|
|
6
|
|
|
|
—
|
|
|
|
21
|
|
Income and other taxes receivable
|
|
|
—
|
|
|
|
13
|
|
|
|
11
|
|
|
|
(10
|
)
|
|
|
14
|
|
Intercompany accounts
|
|
|
764
|
|
|
|
4,776
|
|
|
|
16
|
|
|
|
(5,556
|
)
|
|
|
—
|
|
Total current assets
|
|
|
821
|
|
|
|
5,738
|
|
|
|
561
|
|
|
|
(5,566
|
)
|
|
|
1,554
|
|
Property, plant and equipment, net
|
|
|
—
|
|
|
|
2,018
|
|
|
|
817
|
|
|
|
—
|
|
|
|
2,835
|
|
Goodwill
|
|
|
—
|
|
|
|
296
|
|
|
|
243
|
|
|
|
—
|
|
|
|
539
|
|
Intangible assets, net
|
|
|
—
|
|
|
|
254
|
|
|
|
347
|
|
|
|
—
|
|
|
|
601
|
|
Investments in affiliates
|
|
|
8,005
|
|
|
|
2,050
|
|
|
|
—
|
|
|
|
(10,055
|
)
|
|
|
-
|
|
Intercompany long-term advances
|
|
|
6
|
|
|
|
88
|
|
|
|
621
|
|
|
|
(715
|
)
|
|
|
-
|
|
Other assets
|
|
|
15
|
|
|
|
10
|
|
|
|
115
|
|
|
|
(15
|
)
|
|
|
125
|
|
Total assets
|
|
|
8,847
|
|
|
|
10,454
|
|
|
|
2,704
|
|
|
|
(16,351
|
)
|
|
|
5,654
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
61
|
|
|
|
456
|
|
|
|
203
|
|
|
|
—
|
|
|
|
720
|
|
Intercompany accounts
|
|
|
4,685
|
|
|
|
722
|
|
|
|
149
|
|
|
|
(5,556
|
)
|
|
|
—
|
|
Income and other taxes payable
|
|
|
4
|
|
|
|
24
|
|
|
|
9
|
|
|
|
(10
|
)
|
|
|
27
|
|
Long-term debt due within one year
|
|
|
38
|
|
|
|
1
|
|
|
|
2
|
|
|
|
—
|
|
|
|
41
|
|
Total current liabilities
|
|
|
4,788
|
|
|
|
1,203
|
|
|
|
363
|
|
|
|
(5,566
|
)
|
|
|
788
|
|
Long-term debt
|
|
|
901
|
|
|
|
301
|
|
|
|
8
|
|
|
|
—
|
|
|
|
1,210
|
|
Intercompany long-term loans
|
|
|
490
|
|
|
|
225
|
|
|
|
—
|
|
|
|
(715
|
)
|
|
|
—
|
|
Deferred income taxes and other
|
|
|
—
|
|
|
|
535
|
|
|
|
131
|
|
|
|
(12
|
)
|
|
|
654
|
|
Other liabilities and deferred credits
|
|
|
16
|
|
|
|
185
|
|
|
|
152
|
|
|
|
(3
|
)
|
|
|
350
|
|
Shareholders' equity
|
|
|
2,652
|
|
|
|
8,005
|
|
|
|
2,050
|
|
|
|
(10,055
|
)
|
|
|
2,652
|
|
Total liabilities and shareholders' equity
|
|
|
8,847
|
|
|
|
10,454
|
|
|
|
2,704
|
|
|
|
(16,351
|
)
|
|
|
5,654
|
|
35
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
CONDENSED CONSOLIDATING STATEMENT OF
CASH FLOWS
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Consolidating
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
22
|
|
|
|
55
|
|
|
|
41
|
|
|
|
(96
|
)
|
|
|
22
|
|
Changes in operating and intercompany assets and
liabilities and non-cash items, included in net earnings
|
|
24
|
|
|
|
108
|
|
|
|
(35
|
)
|
|
|
96
|
|
|
|
193
|
|
Cash flows provided from operating activities
|
|
|
46
|
|
|
|
163
|
|
|
|
6
|
|
|
|
—
|
|
|
|
215
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
—
|
|
|
|
(184
|
)
|
|
|
(35
|
)
|
|
|
—
|
|
|
|
(219
|
)
|
Acquisition of business, net of cash acquired
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Cash flows used for investing activities
|
|
|
—
|
|
|
|
(185
|
)
|
|
|
(35
|
)
|
|
|
—
|
|
|
|
(220
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend payments
|
|
|
(50
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50
|
)
|
Stock repurchase
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10
|
)
|
Net change in bank indebtedness
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Change in revolving bank credit facility
|
|
|
—
|
|
|
|
(50
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(50
|
)
|
Proceeds from receivables securitization facility
|
|
|
—
|
|
|
|
—
|
|
|
|
120
|
|
|
|
—
|
|
|
|
120
|
|
Repayments of receivables securitization facility
|
|
|
—
|
|
|
|
—
|
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
(20
|
)
|
Repayments of long-term debt
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Increase in long-term advances to related parties
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
(60
|
)
|
|
|
76
|
|
|
|
—
|
|
Decrease in long-term advances to related parties
|
|
|
—
|
|
|
|
76
|
|
|
|
—
|
|
|
|
(76
|
)
|
|
|
—
|
|
Other
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Cash flows (used for) provided from financing activities
|
|
|
(77
|
)
|
|
|
26
|
|
|
|
40
|
|
|
|
—
|
|
|
|
(11
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(31
|
)
|
|
|
4
|
|
|
|
11
|
|
|
|
—
|
|
|
|
(16
|
)
|
Impact of foreign exchange on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Cash and cash equivalents at beginning of period
|
|
|
49
|
|
|
|
2
|
|
|
|
75
|
|
|
|
—
|
|
|
|
126
|
|
Cash and cash equivalents at end of period
|
|
|
18
|
|
|
|
6
|
|
|
|
87
|
|
|
|
—
|
|
|
|
111
|
|
36
DOMTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016
(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED
)
(UNAUDITED)
NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
|
|
For the six months ended
|
|
|
|
June 30, 2015
|
|
CONDENSED CONSOLIDATING STATEMENT OF
CASH FLOWS
|
|
Parent
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Consolidating
Adjustments
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
74
|
|
|
|
118
|
|
|
|
71
|
|
|
|
(189
|
)
|
|
|
74
|
|
Changes in operating and intercompany assets and
liabilities and non-cash items, included in net earnings
|
|
(63
|
)
|
|
|
36
|
|
|
|
13
|
|
|
|
189
|
|
|
|
175
|
|
Cash flows provided from operating activities
|
|
|
11
|
|
|
|
154
|
|
|
|
84
|
|
|
|
—
|
|
|
|
249
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
—
|
|
|
|
(93
|
)
|
|
|
(43
|
)
|
|
|
—
|
|
|
|
(136
|
)
|
Proceeds from disposals of property, plant and equipment
|
|
|
—
|
|
|
|
6
|
|
|
|
1
|
|
|
|
—
|
|
|
|
7
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
—
|
|
|
|
9
|
|
Cash flows used for investing activities
|
|
|
—
|
|
|
|
(87
|
)
|
|
|
(33
|
)
|
|
|
—
|
|
|
|
(120
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend payments
|
|
|
(50
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50
|
)
|
Stock repurchase
|
|
|
(30
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(30
|
)
|
Net change in bank indebtedness
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
Repayments of long-term debt
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
Increase in long-term advances to related parties
|
|
|
—
|
|
|
|
(23
|
)
|
|
|
—
|
|
|
|
23
|
|
|
|
—
|
|
Decrease in long-term advances to related parties
|
|
|
8
|
|
|
|
—
|
|
|
|
15
|
|
|
|
(23
|
)
|
|
|
—
|
|
Other
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Cash flows (used for) provided from financing
activities
|
|
|
(71
|
)
|
|
|
(33
|
)
|
|
|
14
|
|
|
|
—
|
|
|
|
(90
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(60
|
)
|
|
|
34
|
|
|
|
65
|
|
|
|
—
|
|
|
|
39
|
|
Impact of foreign exchange on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
79
|
|
|
|
18
|
|
|
|
77
|
|
|
|
—
|
|
|
|
174
|
|
Cash and cash equivalents at end of period
|
|
|
19
|
|
|
|
52
|
|
|
|
136
|
|
|
|
—
|
|
|
|
207
|
|
37