US $
- Q3 GAAP net loss of $43
million / $0.47 per
share
- Adjusted EBITDA of $23
million
- Liquidity remains strong at $566
million
- Post-quarter senior secured credit facility refinancing to
further boost liquidity by $175
million
MONTRÉAL, Oct. 31, 2019 /CNW/ -
Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) today reported
a net loss for the quarter ended September
30, 2019, of $43 million, or $0.47 per share, compared to net income of
$117 million, or $1.25 per
diluted share, in the same period in 2018. Sales were $705 million in the quarter, a decrease of
$269 million from the year-ago
period. The third quarter of 2018 included sales from the
Catawba (South Carolina) and Fairmont (West
Virginia) facilities, which were sold in the fourth quarter
of 2018. Excluding special items, the company reported a net loss
of $34 million, or $0.37 per share, compared to net income of
$96 million, or $1.03 per diluted share, in the third quarter of
2018.
"Ongoing weakness in market pulp pricing had a significant
impact on our quarterly results," said Yves
Laflamme, president and chief executive officer. "While
paper has come under pressure this year and lumber markets continue
their slow recovery, we are pleased with the progress in sales
growth and productivity gains in the tissue business, as we
continue to build our position in the segment with positive EBITDA.
In October, we successfully used our strong financial situation to
increase and extend our senior secured credit facility by
$175 million, providing us additional
liquidity at very competitive terms to support our transformation
initiatives. The proactive steps we have taken over the last few
years to strengthen our balance sheet position us well to execute
on our strategy despite the cyclical downturn currently affecting
the industry."
Non-GAAP financial measures, such as adjustments for special
items and adjusted EBITDA, are explained and reconciled below.
Operating Income Variance Against Prior Period
Consolidated
The company reported an operating loss of $18 million in the quarter, compared to operating
income of $40 million in the second
quarter. Lower pricing adversely affected results by $48 million, particularly in market pulp
($34 million), as did an increase in
manufacturing costs ($19 million) due
to more planned maintenance outages this quarter, and an increase
in chemical costs. Lower freight costs and a decrease in
share-based compensation expense partially offset these
unfavorable items. Overall volumes remained unchanged, as the 25%
increase in market pulp shipments outweighed lower paper and lumber
volumes.
Market Pulp
The market pulp segment recorded an operating loss of
$12 million in the third
quarter compared to operating income of $27 million in the second quarter. The drop in
profitability was largely attributable to the 15% lower average
transaction price, to $625 per metric
ton, as global market conditions further weakened. The operating
cost per unit (the "delivered cost") rose by $34 per metric ton, to $664, largely due to additional maintenance
costs, mainly incurred during the scheduled outages at two mills.
Given steps taken to reduce finished goods inventory, shipments
rose by 63,000 metric tons. Despite the volume increase, EBITDA
fell to negative $5 million in the
third quarter. Finished goods inventory dropped to more normal
levels of 74,000 metric tons at quarter-end.
Tissue
The tissue segment incurred an operating loss of $3 million in the quarter, an improvement of
$1 million compared to the second
quarter, and building on the gains of the previous quarter.
Favorable product mix and continued pricing gains for
away-from-home products led to a $46
per short ton increase in average transaction price, to
$1,741, more than offsetting the
$32 per short ton increase in
delivered cost. As a result, EBITDA improved slightly to
$1 million.
Wood Products
The wood products segment reported an operating loss of
$4 million in the quarter compared to
an operating loss of $3 million in
the second quarter. Pricing decreased by $7 per thousand board feet, to $341, mainly due to unfavorable sales mix, while
shipments dropped by 55 million board feet due to soft demand.
Despite lower shipments, finished goods inventory at quarter-end
remained unchanged at a normalized level of 122 million board feet,
as the company took over 70 million board feet of downtime in the
quarter, for nearly 170 million year-to-date. Even with lower
volumes, the delivered cost improved by $4 to $351 per
thousand board feet, but not enough to outweigh the 13% drop in
sales. Accordingly, EBITDA decreased to $4 million for the quarter, compared to
$6 million in the previous
quarter.
Newsprint
At $4 million in the third
quarter, newsprint's operating income decreased by $13 million compared to the previous quarter.
Sales retreated by 14% as the average transaction price decreased
by $24 per metric ton, to
$573, and volume was 36,000 metric
tons lower, at 314,000. The drop was more significant in offshore
markets, which account for approximately 40% of newsprint volumes.
Even with the reduction in shipments, finished goods inventory
remained relatively unchanged at 104,000 metric tons at
quarter-end, as the company continued to take temporary production
downtime. Lower volumes combined with unfavorable chemical usage
led to most of the $13 per metric ton
increase in delivered cost. As a result, EBITDA decreased by
$14 million to $11 million for the quarter, equivalent to
$36 per metric ton. EBITDA margin
decreased to 6%.
Specialty Papers
The specialty papers segment generated operating income of
$4 million in the quarter, down
$11 million from the second
quarter. Pricing decreased by $21 per short ton to $732, while shipments declined slightly to
185,000 short tons. The delivered cost also increased by
$29 per short ton, to $705, mainly as a result of higher maintenance
and lower cogeneration contribution associated with downtime
- mostly planned - at one mill. EBITDA decreased to $15 million, or $85
per short ton. EBITDA margin declined to 11%.
Consolidated Quarterly Operating Income Variance Against
Year-Ago Period
The company's operating results were $153
million lower than the third quarter of 2018. Overall
pricing had a $111 million
unfavorable impact, as the average transaction price decreased
by 25% for wood products, 20% for market pulp, and 9% for
newsprint. The decline in operating results also reflects the
divestiture of the Catawba and
Fairmont facilities, as well as an
increase in manufacturing costs of $49
million, mainly due to higher fiber expense and additional
planned maintenance. These unfavorable items were offset in part
by lower variable compensation expense and lower depreciation
due to divestitures and full amortization of certain assets.
Corporate and Finance
With $25 million of cash provided
by operations, $37 million of capital
expenditures, $13 million of softwood
lumber duty deposits, and $7 million
of share repurchases, the company ended the quarter with
$69 million of cash. Liquidity stood
at $566 million at quarter-end. Net
debt to trailing 12-month adjusted EBITDA remained low, at
1.1x.
By quarter-end, the company had recorded cumulative softwood
lumber duty deposits of $149 million
on the balance sheet.
So far in 2019, the company repurchased 1.8 million shares, at a
cost of $12 million. There remains
$12 million under the existing share
repurchase program.
In October, the company entered into an amended and restated
senior secured credit facility for up to $360 million, replacing the existing $185 million facility entered into in
September 2016. The amended credit
agreement includes a term loan facility of up to $180 million with a delay draw period of up to
three years and maturities of six to ten years at the company's
option, as well as a six-year revolver of up to $180 million.
The company is appealing the decision rendered by the Quebec
Superior Court in Canada related
to the 2012 acquisition of Fibrek. Of the total amount payable
pursuant to the decision of Cdn $44
million, Cdn $19 million was
paid in October. The payment and timing of any additional
consideration will depend on the outcome of the appeal. During the
third quarter, Cdn $30 million
($23 million) was accrued and
recorded in "Other (expense) income, net" for the eventual payment
of any amounts following the outcome of the appeal.
Outlook
"We expect challenging conditions in market pulp to
persist at least through the end of the year, but we see
encouraging signs and stronger industry operating rates for
softwood pulp, which represents about two-thirds of our production
capacity. For tissue, we will build on recent improvements around
sales growth and productivity gains to deliver steady improvements
over the next few quarters. Even as conditions in the lumber market
remain somewhat uncertain, we believe wood products results will
improve as reported industry capacity rationalizations support more
stable market dynamics. Although we expect to see marginal seasonal
improvement in paper shipments in the fourth quarter, we will face
sustained pricing pressures for all paper grades, as operating
rates remain low. Despite difficult markets, we are focused on
maximizing margins and earnings power in our paper business. Our
network of competitive assets and solid financial position provide
us a strategic edge to weather current market headwinds and take
advantage of future transformation opportunities," added Mr.
Laflamme.
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 (877) 223-4471 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, 2019, by dialing (800)
585-8367, conference number 4663289.
Description of Special Items
Special
items
|
Third
quarter
|
(in
millions)
|
|
2019
|
|
2018
|
Foreign currency
translation
gain
|
$
|
(1)
|
$
|
–
|
Net gain on
disposition of assets
|
|
(1)
|
|
–
|
Non-operating pension
and other postretirement benefit credits
|
|
(12)
|
|
(13)
|
Other expense
(income), net
|
|
18
|
|
(14)
|
Income tax effect of
special items
|
|
5
|
|
6
|
Total
|
$
|
9
|
$
|
(21)
|
Cautionary Statements Regarding Forward-Looking
Information
Statements in this press release and the earnings conference
call and webcast referred to above that are not reported financial
results or other historical information of Resolute Forest Products
Inc. (with its subsidiaries, "we," "our," "us" or the "company")
are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. They include, for
example, statements included in the Outlook section of this press
release and statements relating to our: efforts and initiatives to
reduce costs and increase revenues and profitability; business and
operating outlook; future pension obligations; assessment of market
conditions; growth strategies and prospects, and the growth
potential of the company and the industry in which we operate;
liquidity; future cash flows, including as a result of the changes
to our pension funding obligations; 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 our 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 our actual future financial condition, results of
operations, and performance to differ materially from those
expressed or implied in this press release and the earnings
conference call and webcast referred to above include, but are not
limited to, the impact of: developments in non-print media, and the
effectiveness of our responses to these developments; intense
competition in the forest products industry; any inability to offer
products certified to globally recognized forestry management and
chain of custody standards; any inability to successfully implement
our strategies to increase our earnings power; the possible failure
to successfully integrate acquired businesses with ours or to
realize the anticipated benefits of acquisitions, such as our entry
into tissue production and sales, or divestitures or other
strategic transactions or projects; uncertainty or changes in
political or economic conditions in the
United States, Canada or
other countries in which we sell our products; global economic
conditions; the highly cyclical nature of the forest products
industry; any difficulties in obtaining timber or wood fiber at
favorable prices, or at all; changes in the cost of purchased
energy and other raw materials; physical and financial risks
associated with global, regional, and local weather conditions, and
climate change; any disruption in operations or increased labor
costs due to labor disputes; difficulties in our employee relations
or retention; disruptions to our supply chain, operations, or the
delivery of our products; disruptions to our information technology
systems including cybersecurity incidents;
risks related to the operation and transition of legacy system
applications; negative publicity, even if unjustified; currency
fluctuations; any increase in the level of required contributions
to our pension plans, including as a result of any increase in the
amount by which they are underfunded; our ability to maintain
adequate capital resources to provide for all of our substantial
capital requirements; the terms of our outstanding indebtedness,
which could restrict our current and future operations; losses that
are not covered by insurance; any additional closure costs and
long-lived asset impairment or accelerated depreciation charges;
any need to record additional valuation allowances against our
recorded deferred income tax assets; our exports from one country
to another country becoming or remaining subject to duties, cash
deposit requirements, border taxes, quotas, or other trade remedies
or restrictions; countervailing and anti-dumping duties on imports
to the U.S. of substantially all of our softwood lumber products
produced at our Canadian sawmills; any failure to comply with laws
or regulations generally; any additional environmental or health
and safety liabilities; any violation of trade laws, export
controls, or other laws relating to our international sales and
operations; adverse outcomes of legal proceedings, claims and
governmental inquiries, investigations, and other disputes in
which we are involved; the actions of holders of a significant
percentage of our common stock; and the potential risks and
uncertainties described under the heading "Risk Factors" in Part I,
Item 1A of the company's annual report on Form 10-K for the year
ended December 31, 2018.
All forward-looking statements in this press release and in the
conference call and webcast referred to above are expressly
qualified by the cautionary statements contained or referred to
above and in the company's other filings with the U.S. Securities
and Exchange Commission and the Canadian securities regulatory
authorities. The company 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
market pulp, tissue, wood products, newsprint and specialty papers,
which are marketed in close to 70 countries. The company owns or
operates some 40 facilities, as well as power generation assets, in
the United States and Canada. Resolute has third-party certified
100% of its managed woodlands to internationally recognized
sustainable forest management standards. The shares of Resolute
Forest Products trade under the stock symbol RFP on both the New
York Stock Exchange and the Toronto Stock Exchange.
Resolute has received regional, North American and global
recognition for its leadership in corporate social responsibility
and sustainable development, as well as for its business practices.
Visit resolutefp.com for more information.
RESOLUTE FOREST
PRODUCTS INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Unaudited, in
millions of U.S. dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months
ended September
30,
|
|
Nine
months
ended September
30,
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
705
|
$
|
974
|
|
$
|
2,255
|
$
|
2,824
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales,
excluding depreciation, amortization and distribution
costs
|
|
558
|
|
628
|
|
|
1,648
|
|
1,881
|
Depreciation and
amortization
|
|
42
|
|
54
|
|
|
124
|
|
161
|
Distribution
costs
|
|
94
|
|
117
|
|
|
295
|
|
356
|
Selling, general and
administrative expenses
|
|
30
|
|
40
|
|
|
103
|
|
125
|
Closure costs,
impairment and other related charges
|
|
-
|
|
-
|
|
|
-
|
|
1
|
Net gain on
disposition of assets
|
|
(1)
|
|
-
|
|
|
(1)
|
|
(4)
|
Operating (loss)
income
|
|
(18)
|
|
135
|
|
|
86
|
|
304
|
Interest
expense
|
|
(8)
|
|
(12)
|
|
|
(24)
|
|
(36)
|
Non-operating pension
and other postretirement benefit credits
|
|
12
|
|
13
|
|
|
36
|
|
38
|
Other (expense)
income, net (1)
|
|
(17)
|
|
14
|
|
|
(22)
|
|
4
|
(Loss) income
before income taxes
|
|
(31)
|
|
150
|
|
|
76
|
|
310
|
Income tax
provision
|
|
(12)
|
|
(33)
|
|
|
(52)
|
|
(111)
|
Net (loss) income
including noncontrolling interests
|
|
(43)
|
|
117
|
|
|
24
|
|
199
|
Net income
attributable to noncontrolling interests
|
|
-
|
|
-
|
|
|
-
|
|
-
|
Net (loss) income
attributable to Resolute Forest Products Inc.
|
$
|
(43)
|
$
|
117
|
|
$
|
24
|
$
|
199
|
Net (loss) income
per share attributable to Resolute Forest Products
Inc.
common
shareholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.47)
|
$
|
1.28
|
|
$
|
0.26
|
$
|
2.18
|
Diluted
|
|
(0.47)
|
|
1.25
|
|
|
0.26
|
|
2.14
|
Weighted-average
number of Resolute Forest Products Inc. common
shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
90.9
|
|
91.3
|
|
|
91.9
|
|
91.3
|
Diluted
|
|
90.9
|
|
93.4
|
|
|
93.0
|
|
93.2
|
|
|
|
|
|
|
|
|
|
|
See Notes to the
Unaudited Consolidated Financial Statement Information
|
RESOLUTE FOREST
PRODUCTS INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited, in
millions of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
2019
|
|
December
31,
2018
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
69
|
$
|
304
|
Accounts receivable,
net:
|
|
|
|
|
Trade
|
|
314
|
|
347
|
Other
|
|
63
|
|
102
|
Inventories,
net
|
|
522
|
|
508
|
Other current
assets
|
|
40
|
|
43
|
Total current
assets
|
|
1,008
|
|
1,304
|
Fixed assets,
net
|
|
1,477
|
|
1,515
|
Amortizable
intangible assets, net
|
|
49
|
|
50
|
Deferred income tax
assets
|
|
846
|
|
876
|
Operating lease
right-of-use assets
|
|
63
|
|
-
|
Other
assets
|
|
228
|
|
190
|
Total
assets
|
$
|
3,671
|
$
|
3,935
|
|
|
|
|
|
Liabilities and
equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
396
|
$
|
427
|
Current portion of
long-term debt
|
|
1
|
|
223
|
Current portion of
operating lease liabilities
|
|
8
|
|
-
|
Total current
liabilities
|
|
405
|
|
650
|
Long-term debt, net
of current portion (2)
|
|
423
|
|
422
|
Pension and other
postretirement benefit obligations
|
|
1,179
|
|
1,257
|
Operating lease
liabilities, net of current portion
|
|
58
|
|
-
|
Other
liabilities
|
|
54
|
|
71
|
Total
liabilities
|
|
2,119
|
|
2,400
|
Equity:
|
|
|
|
|
Resolute Forest
Products Inc. shareholders' equity:
|
|
|
|
|
Common
stock
|
|
-
|
|
-
|
Additional paid-in
capital
|
|
3,803
|
|
3,802
|
Deficit
|
|
(1,174)
|
|
(1,198)
|
Accumulated other
comprehensive loss
|
|
(946)
|
|
(950)
|
Treasury stock at
cost (3)
|
|
(132)
|
|
(120)
|
Total Resolute
Forest Products Inc. shareholders' equity
|
|
1,551
|
|
1,534
|
Noncontrolling
interests
|
|
1
|
|
1
|
Total
equity
|
|
1,552
|
|
1,535
|
Total liabilities
and equity
|
$
|
3,671
|
$
|
3,935
|
|
|
|
|
|
See Notes to the
Unaudited Consolidated Financial Statement Information
|
RESOLUTE FOREST
PRODUCTS INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited, in
millions of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months
ended September
30,
|
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
Net income including
noncontrolling interests
|
$
|
24
|
$
|
199
|
Adjustments to
reconcile net income including noncontrolling interests to net cash
provided by operating activities:
|
|
|
|
|
Share-based
compensation
|
|
4
|
|
6
|
Depreciation and
amortization
|
|
124
|
|
161
|
Reversal of inventory
write-downs related to closures
|
|
-
|
|
(1)
|
Deferred income
taxes
|
|
52
|
|
106
|
Net pension
contributions and other postretirement benefit payments
|
|
(96)
|
|
(112)
|
Net gain on
disposition of assets
|
|
(1)
|
|
(4)
|
(Gain) loss on
translation of foreign currency denominated deferred income
taxes
|
|
(26)
|
|
28
|
Loss (gain) on
translation of foreign currency denominated pension and
other postretirement
benefit obligations
|
|
27
|
|
(23)
|
Net planned major
maintenance amortization (payments)
|
|
16
|
|
(7)
|
Changes in working
capital:
|
|
|
|
|
Accounts
receivable
|
|
60
|
|
(6)
|
Inventories
|
|
(14)
|
|
(53)
|
Other current
assets
|
|
(11)
|
|
(13)
|
Accounts payable and
accrued liabilities
|
|
(41)
|
|
61
|
Other, net
|
|
2
|
|
9
|
Net cash provided by
operating activities
|
|
120
|
|
351
|
Cash flows from
investing activities:
|
|
|
|
|
Cash invested in
fixed assets
|
|
(82)
|
|
(94)
|
Disposition of
assets
|
|
2
|
|
2
|
Decrease in
countervailing duty cash deposits on supercalendered paper,
net
|
|
1
|
|
13
|
Increase in
countervailing and anti-dumping duty cash deposits on softwood
lumber
|
|
(46)
|
|
(62)
|
Decrease (increase)
in countervailing duty cash deposits on uncoated groundwood
paper
|
|
6
|
|
(6)
|
Net cash used in
investing activities
|
|
(119)
|
|
(147)
|
Cash flows from
financing activities:
|
|
|
|
|
Net repayments under
revolving credit facilities
|
|
-
|
|
(144)
|
Payments of
debt
|
|
(225)
|
|
-
|
Purchases of treasury
stock (3)
|
|
(12)
|
|
-
|
Payments of financing
and credit facility fees
|
|
(2)
|
|
(1)
|
Cash used in
financing activities
|
|
(239)
|
|
(145)
|
Effect of exchange
rate changes on cash and cash equivalents, and restricted
cash
|
|
1
|
|
(1)
|
Net (decrease)
increase in cash and cash equivalents, and restricted
cash
|
|
(237)
|
|
58
|
Cash and cash
equivalents, and restricted cash:
|
|
|
|
|
Beginning of
period
|
|
345
|
|
49
|
End of
period
|
$
|
108
|
$
|
107
|
|
|
|
|
|
Cash and cash
equivalents, and restricted cash at period end:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
69
|
$
|
72
|
Restricted cash
(included in "Other current assets" and "Other assets")
|
|
39
|
|
35
|
|
See Notes to the
Unaudited Consolidated Financial Statement Information
|
RESOLUTE FOREST
PRODUCTS INC.
|
RECONCILIATION 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 1
to the Reconciliations of Non-GAAP Measures regarding our use of
non-GAAP measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2019
|
Operating
income (loss)
|
Net income
(loss)
|
EPS
|
(Unaudited, in
millions of U.S. dollars, except per share
amounts)
|
|
|
|
|
|
|
|
GAAP, as
reported
|
$
|
(18)
|
$
|
(43)
|
$
|
(0.47)
|
|
|
|
|
|
|
|
Adjustments for
special items:
|
|
|
|
|
|
|
Foreign exchange
gain
|
|
-
|
|
(1)
|
|
(0.01)
|
Net gain on
disposition of assets
|
|
(1)
|
|
(1)
|
|
(0.01)
|
Non-operating pension
and other postretirement benefit credits
|
|
-
|
|
(12)
|
|
(0.13)
|
Other expense,
net
|
|
-
|
|
18
|
|
0.20
|
Income tax effect of
special items
|
|
-
|
|
5
|
|
0.05
|
|
|
|
|
|
|
|
Adjusted for
special items
|
$
|
(19)
|
$
|
(34)
|
$
|
(0.37)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2018
|
Operating
income (loss)
|
Net income
(loss)
|
EPS
|
(Unaudited, in
millions of U.S. dollars, except per share
amounts)
|
|
|
|
|
|
|
|
GAAP, as
reported
|
$
|
135
|
$
|
117
|
$
|
1.25
|
|
|
|
|
|
|
|
Adjustments for
special items:
|
|
|
|
|
|
|
Non-operating pension
and other postretirement benefit credits
|
|
-
|
|
(13)
|
|
(0.14)
|
Other income,
net
|
|
-
|
|
(14)
|
|
(0.15)
|
Income tax effect of
special items
|
|
-
|
|
6
|
|
0.07
|
|
|
|
|
|
|
|
Adjusted for
special items
|
$
|
135
|
$
|
96
|
$
|
1.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2019
|
Operating
income (loss)
|
Net income
(loss)
|
EPS
|
(Unaudited, in
millions of U.S. dollars, except per share
amounts)
|
|
|
|
|
|
|
|
GAAP, as
reported
|
$
|
86
|
$
|
24
|
$
|
0.26
|
|
|
|
|
|
|
|
Adjustments for
special items:
|
|
|
|
|
|
|
Foreign exchange
loss
|
|
-
|
|
9
|
|
0.10
|
Net gain on
disposition of assets
|
|
(1)
|
|
(1)
|
|
(0.01)
|
Non-operating pension
and other postretirement benefit credits
|
|
-
|
|
(36)
|
|
(0.39)
|
Other expense,
net
|
|
-
|
|
13
|
|
0.14
|
Income tax effect of
special items
|
|
-
|
|
(2)
|
|
(0.02)
|
|
|
|
|
|
|
|
Adjusted for
special items
|
$
|
85
|
$
|
7
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2018
|
Operating
income (loss)
|
Net income
(loss)
|
EPS
|
(Unaudited, in
millions of U.S. dollars, except per share
amounts)
|
|
|
|
|
|
|
|
GAAP, as
reported
|
$
|
304
|
$
|
199
|
$
|
2.14
|
|
|
|
|
|
|
|
Adjustments for
special items:
|
|
|
|
|
|
|
Foreign exchange
loss
|
|
-
|
|
2
|
|
0.02
|
Closure costs,
impairment and other related charges
|
|
1
|
|
1
|
|
0.01
|
Reversal of inventory
write-downs related to closures
|
|
(1)
|
|
(1)
|
|
(0.01)
|
Start-up
costs
|
|
8
|
|
8
|
|
0.09
|
Net gain on
disposition of assets
|
|
(4)
|
|
(4)
|
|
(0.04)
|
Non-operating pension
and other postretirement benefit credits
|
|
-
|
|
(38)
|
|
(0.41)
|
Other income,
net
|
|
-
|
|
(6)
|
|
(0.07)
|
Income tax effect of
special items
|
|
-
|
|
18
|
|
0.19
|
|
|
|
|
|
|
|
Adjusted for
special items
|
$
|
308
|
$
|
179
|
$
|
1.92
|
RESOLUTE FOREST
PRODUCTS INC.
|
RECONCILIATION 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 1 to the
Reconciliations of Non-GAAP Measures regarding our use of the
non-GAAP measures EBITDA and Adjusted EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2019
(Unaudited, in millions of U.S. dollars)
|
Market
pulp
|
Tissue
(2)
|
Wood
products
|
Newsprint
|
Specialty
papers
|
Corporate
and other
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
including noncontrolling interests
|
$
|
(12)
|
$
|
(3)
|
$
|
(4)
|
$
|
4
|
$
|
4
|
$
|
(32)
|
$
|
(43)
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
8
|
Income tax
provision
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
12
|
Depreciation and
amortization
|
|
7
|
|
4
|
|
8
|
|
7
|
|
11
|
|
5
|
|
42
|
EBITDA
|
$
|
(5)
|
$
|
1
|
$
|
4
|
$
|
11
|
$
|
15
|
$
|
(7)
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
gain
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
(1)
|
Net gain on
disposition of assets
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
(1)
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
(12)
|
Other expense,
net
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
(5)
|
$
|
1
|
$
|
4
|
$
|
11
|
$
|
15
|
$
|
(3)
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2018
(Unaudited, in millions of U.S. dollars)
|
Market
pulp
|
Tissue
(2)
|
Wood
products
|
Newsprint
|
Specialty
papers
|
Corporate
and other
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
$
|
57
|
$
|
(10)
|
$
|
45
|
$
|
32
|
$
|
26
|
$
|
(33)
|
$
|
117
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
12
|
Income tax
provision
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
33
|
Depreciation and
amortization
|
|
7
|
|
5
|
|
8
|
|
16
|
|
12
|
|
6
|
|
54
|
EBITDA
|
$
|
64
|
$
|
(5)
|
$
|
53
|
$
|
48
|
$
|
38
|
$
|
18
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
|
(13)
|
Other income,
net
|
|
|
|
|
|
|
|
|
|
|
|
(14)
|
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
64
|
$
|
(5)
|
$
|
53
|
$
|
48
|
$
|
38
|
$
|
(9)
|
$
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2019
(Unaudited, in millions of U.S. dollars)
|
Market
pulp
|
Tissue
(2)
|
Wood
products
|
Newsprint
|
Specialty
papers
|
Corporate
and other
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
$
|
57
|
$
|
(15)
|
$
|
(1)
|
$
|
49
|
$
|
34
|
$
|
(100)
|
$
|
24
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
24
|
Income tax
provision
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
52
|
Depreciation and
amortization
|
|
17
|
|
13
|
|
25
|
|
22
|
|
32
|
|
15
|
|
124
|
EBITDA
|
$
|
74
|
$
|
(2)
|
$
|
24
|
$
|
71
|
$
|
66
|
$
|
(9)
|
$
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
loss
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
9
|
Net gain on
disposition of assets
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
(1)
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
|
|
|
(36)
|
|
(36)
|
Other expense,
net
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
74
|
$
|
(2)
|
$
|
24
|
$
|
71
|
$
|
66
|
$
|
(24)
|
$
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2018
(Unaudited, in millions of U.S. dollars)
|
Market
pulp
|
Tissue
(2)
|
Wood
products
|
Newsprint
|
Specialty
papers
|
Corporate
and other
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
including noncontrolling interests
|
$
|
131
|
$
|
(21)
|
$
|
177
|
$
|
46
|
$
|
23
|
$
|
(157)
|
$
|
199
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
36
|
Income tax
provision
|
|
|
|
|
|
|
|
|
|
|
|
111
|
|
111
|
Depreciation and
amortization
|
|
22
|
|
11
|
|
23
|
|
49
|
|
36
|
|
20
|
|
161
|
EBITDA
|
$
|
153
|
$
|
(10)
|
$
|
200
|
$
|
95
|
$
|
59
|
$
|
10
|
$
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
loss
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
2
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
1
|
Reversal of inventory
write-downs related to closures
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
(1)
|
Start-up
costs
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
8
|
Net gain on
disposition of assets
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
(4)
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
|
|
|
(38)
|
|
(38)
|
Other income,
net
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
153
|
$
|
(10)
|
$
|
200
|
$
|
95
|
$
|
59
|
$
|
(28)
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the
Reconciliations of Non-GAAP Measures
|
RESOLUTE FOREST PRODUCTS INC.
Notes to the Unaudited Consolidated Financial Statement
Information
1. Effective July 31, 2012, we
completed the final step of the transaction pursuant to which we
acquired the remaining 25.4% of the outstanding Fibrek Inc. (or
"Fibrek") shares, following the approval of Fibrek's shareholders
on July 23, 2012, and the issuance of
a final order of the Quebec Superior Court in Canada (or "Quebec Superior Court") approving
the arrangement on July 27, 2012.
Certain former shareholders of Fibrek exercised rights of dissent
in respect of the transaction, asking for a judicial determination
of the fair value of their claim under the Canada Business
Corporations Act. On September 26,
2019, the Quebec Superior Court rendered a decision fixing
the fair value of the shares of the dissenting shareholders at Cdn
$1.99 per share, or Cdn $31 million in aggregate, plus interest and an
additional indemnity, for a total currently estimated at Cdn
$44 million ($33 million, based on the exchange rate in effect
on September 30, 2019) payable in
cash. Of this amount, Cdn $19 million
($14 million) was payable immediately
and paid on October 2, 2019.
We are appealing the decision, therefore the payment of any
additional consideration and its timing will depend on the outcome
of the appeal. As previously reported, we had accrued Cdn
$14 million ($10 million, based on the exchange rate in effect
on September 30, 2019) for the
payment of the dissenting shareholders' claims. We have accrued an
additional Cdn $30 million
($23 million, based on the exchange
rate in effect on September 30, 2019)
for the estimated eventual payment of any amounts following the
outcome of the appeal, and as a result recorded $23 million in "Other (expense) income, net" in
our Consolidated Statements of Operations for the three and nine
months ended September 30, 2019.
2. On October 28, 2019, we
entered into an amended and restated senior secured credit
agreement for up to $360 million,
replacing our existing $185 million
senior secured credit facility. The amended and restated credit
agreement includes a term loan facility of up to $180 million and a six-year revolving credit
facility of up to $180 million. The
term loan facility is available with a delayed draw period of up to
three years, and the choice of maturities of six to ten years from
the date of drawing. At closing, we repaid our $46 million term loan by borrowing under our new
six-year revolving credit facility.
3. During the three and nine months ended September 30, 2019, we repurchased 1.1 million
and 1.8 million shares, respectively, at a cost of $7 million and $12
million, respectively, under our $150 million share
repurchase program, which was launched in 2012. We did not
repurchase any shares during the three and nine months ended
September 30, 2018. There remains
$12 million under the program.
RESOLUTE FOREST PRODUCTS INC.
Notes to the Reconciliations of Non-GAAP Measures
1. Operating income (loss), net income (loss) and
net income (loss) per share (or "EPS"), in each case as
adjusted for special items, as well as earnings before interest
expense, income taxes, and depreciation and amortization (or
"EBITDA"), and adjusted EBITDA, in each case by reportable
segment (market pulp, tissue, wood products, newsprint and
specialty papers) in accordance with the Financial Accounting
Standards Board Accounting Standards Codification 290, "Segment
Reporting," are not financial measures recognized under generally
accepted accounting principles (or "GAAP").
We calculate operating income (loss), as adjusted for special
items, as operating income (loss) from our Consolidated Statements
of Operations, adjusted for items such as closure costs, impairment
and other related charges, inventory write-downs related to
closures, start-up costs, gains and losses on disposition of
assets, and other charges or credits that are excluded from our
segment's performance from GAAP operating income (loss).
We calculate net income (loss), as adjusted for special items,
as net income (loss) from our Consolidated Statements of
Operations, adjusted for the same special items applied to
operating income (loss), in addition to foreign exchange gains and
losses, non-operating pension and other postretirement benefit
costs and credits, other income and expense, net, and the income
tax effect of special items.
EPS, as adjusted for special items, is calculated as net income
(loss), as adjusted for special items, per diluted share.
EBITDA by reportable segment is calculated as net income (loss)
including noncontrolling interests from the Consolidated Statements
of Operations, allocated to each of our reportable segments,
adjusted for depreciation and amortization. EBITDA for corporate
and other is calculated as net income (loss) including
noncontrolling interests from the Consolidated Statements of
Operations, after the allocation to reportable segments, adjusted
for interest expense, income taxes, and depreciation and
amortization.
Adjusted EBITDA means EBITDA, excluding the same special items
applied to net income (loss).
EBITDA margin is calculated as EBITDA divided by sales.
Net debt is calculated as total debt less cash and cash
equivalents.
Liquidity is calculated as cash and cash equivalents from our
Consolidated Balance Sheets, and availability under our revolving
credit facilities.
We believe that using these non-GAAP measures is useful because
they are consistent with the indicators management uses internally
to measure the Company's performance, and it allows the reader to
more easily compare our operations and financial performance from
period to period. Operating income (loss), net income (loss), and
EPS, in each case as adjusted for special items, as well as EBITDA,
adjusted EBITDA, and EBITDA margin are internal measures, and
therefore may not be comparable to those of other companies. These
non-GAAP measures should not be viewed as substitutes to financial
measures determined under GAAP in our Consolidated Statements of
Operations in our filings with the Securities and Exchange
Commission.
2. The operating results of our Calhoun
(Tennessee) tissue operations, previously recorded under
corporate and other, have been recorded in our tissue segment since
April 1, 2018.
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SOURCE Resolute Forest Products Inc.