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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM    TO
COMMISSION FILE NUMBER: 001-33776
RESOLUTE FOREST PRODUCTS INC.
(Exact name of registrant as specified in its charter)
Delaware 98-0526415
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification number)
111 Robert-Bourassa Boulevard
Suite 5000
Montreal
Quebec
Canada
H3C 2M1
(Address of principal executive offices) (Zip Code)

(514) 875-2160
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of class Trading Symbol Name of exchange on which registered
Common Stock, par value $0.001 per share RFP New York Stock Exchange
Toronto Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
    Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer
Non-accelerated Filer Smaller Reporting Company Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
    Yes ☐    No ☒
As of July 30, 2021, there were 79,108,264 shares of Resolute Forest Products Inc. common stock, $0.001 par value, outstanding.


RESOLUTE FOREST PRODUCTS INC.
TABLE OF CONTENTS
 
  Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
1
2
3
4
6
7
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


PART I.    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions of U.S. dollars, except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Sales $ 1,140  $ 612  $ 2,013  $ 1,301 
Costs and expenses:
Cost of sales, excluding depreciation, amortization and distribution costs
566  464  1,088  988 
Depreciation and amortization 40  40  81  82 
Distribution costs 93  79  177  178 
Selling, general and administrative expenses 36  32  82  66 
Closure costs, impairment and other related charges (1) —  2  (2)
Net gain on disposition of assets
  (9)   (9)
Operating income (loss)
406  583  (2)
Interest expense (5) (9) (11) (18)
Non-operating pension and other postretirement benefit credits
3  5  19 
Other (expense) income, net
(49) 10  (94) 38 
Income before income taxes
355  11  483  37 
Income tax provision
(87) (5) (127) (32)
Net income including noncontrolling interest
268  356 
Net income attributable to noncontrolling interest   —  (1) — 
Net income attributable to Resolute Forest Products Inc.
$ 268  $ $ 355  $
Net income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic $ 3.37  $ 0.07  $ 4.42  $ 0.06 
Diluted $ 3.34  $ 0.07  $ 4.39  $ 0.06 
Weighted-average number of Resolute Forest Products Inc. common shares outstanding:
Basic 79.5  88.1  80.4  88.1 
Diluted 80.3  88.2  81.1  88.2 
See accompanying notes to unaudited interim Consolidated Financial Statements.
1

RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions of U.S. dollars)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
Net income including noncontrolling interest
$ 268  $ $ 356  $
Other comprehensive income:
Unamortized prior service costs or credits
Change in unamortized prior service costs or credits
(2) (1) (3) (16)
Income tax provision
  —    — 
Change in unamortized prior service costs or credits, net of tax
(2) (1) (3) (16)
Unamortized actuarial losses
Change in unamortized actuarial losses
19  15  68  32 
Income tax provision
(4) (4) (16) (7)
Change in unamortized actuarial losses, net of tax
15  11  52  25 
Foreign currency translation   —    (1)
Other comprehensive income, net of tax
13  10  49 
Comprehensive income including noncontrolling interest
281  16  405  13 
Comprehensive income attributable to noncontrolling interest
  —  (1) — 
Comprehensive income attributable to Resolute Forest Products Inc.
$
281  $ 16  $ 404  $ 13 
See accompanying notes to unaudited interim Consolidated Financial Statements.
2

RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions of U.S. dollars, except per share amount)
June 30,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents $ 177  $ 113 
Accounts receivable, net:
Trade 309  230 
Other 35  48 
Inventories, net 492  462 
Other current assets 53  47 
Total current assets 1,066  900 
Fixed assets, less accumulated depreciation of $1,681 and $1,604 as of June 30, 2021 and December 31, 2020, respectively
1,406  1,441 
Amortizable intangible assets, less accumulated amortization of $36 and $33 as of June 30, 2021 and December 31, 2020, respectively
60  63 
Goodwill 31  31 
Deferred income tax assets 796  915 
Operating lease right-of-use assets 54  60 
Other assets 415  320 
Total assets $ 3,828  $ 3,730 
Liabilities and equity
Current liabilities:
Accounts payable and other $ 520  $ 369 
Current portion of long-term debt 3 
Current portion of operating lease liabilities 9 
Total current liabilities 532  380 
Long-term debt, net of current portion 300  559 
Pension and other postretirement benefit obligations 1,482  1,562 
Operating lease liabilities, net of current portion 50  55 
Other liabilities 77  92 
Total liabilities 2,441  2,648 
Commitments and contingencies
Equity:
Resolute Forest Products Inc. shareholders’ equity:
Common stock, $0.001 par value. 121.0 million shares issued and 79.1 million shares outstanding as of June 30, 2021; 120.6 million shares issued and 80.8 million shares outstanding as of December 31, 2020
  — 
Additional paid-in capital 3,805  3,804 
Deficit
(961) (1,235)
Accumulated other comprehensive loss
(1,265) (1,314)
Treasury stock at cost, 41.9 million shares and 39.8 million shares as of June 30, 2021 and December 31, 2020, respectively
(194) (174)
Total Resolute Forest Products Inc. shareholders’ equity 1,385  1,081 
Noncontrolling interest 2 
Total equity 1,387  1,082 
Total liabilities and equity $ 3,828  $ 3,730 
See accompanying notes to unaudited interim Consolidated Financial Statements.
3

RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in millions of U.S. dollars)
Three Months Ended June 30, 2021
  Resolute Forest Products Inc. Shareholders’ Equity    
Common
Stock
Additional
Paid-In
Capital
Deficit Accumulated Other Comprehensive Loss Treasury
Stock
Non-controlling
Interest
Total Equity
Balance as of March 31, 2021 $ —  $ 3,802  $ (1,148) $ (1,278) $ (191) $ $ 1,187 
Share-based compensation, net of withholding taxes —  —  —  —  — 
Net income
—  —  268  —  —  —  268 
Purchases of treasury stock (0.3 million shares) (Note 12)
—  —  —  —  (3) —  (3)
Special dividend —  (81) —  —  —  (79)
Other comprehensive income, net of tax
—  —  —  13  —  —  13 
Balance as of June 30, 2021 $   $ 3,805  $ (961) $ (1,265) $ (194) $ 2  $ 1,387 
Six Months Ended June 30, 2021
Resolute Forest Products Inc. Shareholders’ Equity
Common
Stock
Additional
Paid-In
Capital
Deficit Accumulated Other Comprehensive Loss Treasury
Stock
Non-controlling
Interest
Total Equity
Balance as of December 31, 2020 $ —  $ 3,804  $ (1,235) $ (1,314) $ (174) $ $ 1,082 
Share-based compensation, net of withholding taxes
—  (1) —  —  —  —  (1)
Net income
—  —  355  —  —  356 
Purchases of treasury stock (2.1 million shares) (Note 12)
—  —  —  —  (20) —  (20)
Special dividend —  (81) —  —  —  (79)
Stock unit awards vested (0.4 million shares), net of shares forfeited for employee withholding taxes
—  —  —  —  —  —  — 
Other comprehensive income, net of tax
—  —  —  49  —  —  49 
Balance as of June 30, 2021 $   $ 3,805  $ (961) $ (1,265) $ (194) $ 2  $ 1,387 
4

RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in millions of U.S. dollars)
Three Months Ended June 30, 2020
  Resolute Forest Products Inc. Shareholders’ Equity    
Common
Stock
Additional
Paid-In
Capital
Deficit Accumulated Other Comprehensive Loss Treasury
Stock
Non-
controlling
Interest
Total Equity
Balance as of March 31, 2020 $ —  $ 3,804  $ (1,246) $ (1,181) $ (144) $ $ 1,234 
Share-based compensation, net of withholding taxes
—  —  —  —  — 
Net income
—  —  —  —  — 
Purchases of treasury stock (0.3 million shares) (Note 12)
—  —  —  —  (1) —  (1)
Other comprehensive income, net of tax
—  —  —  10  —  —  10 
Balance as of June 30, 2020 $   $ 3,805  $ (1,240) $ (1,171) $ (145) $ 1  $ 1,250 
Six Months Ended June 30, 2020
Resolute Forest Products Inc. Shareholders’ Equity
Common
Stock
Additional
Paid-In
Capital
Deficit Accumulated Other Comprehensive Loss Treasury
Stock
Non-
controlling
Interest
Total Equity
Balance as of December 31, 2019 $ —  $ 3,802  $ (1,245) $ (1,179) $ (144) 1,235 
Share-based compensation, net of withholding taxes —  —  —  —  — 
Net income
—  —  —  —  — 
Purchases of treasury stock (0.3 million shares) (Note 12)
—  —  —  —  (1) —  (1)
Stock unit awards vested (0.7 million shares), net of shares forfeited for employee withholding taxes
—  —  —  —  —  —  — 
Other comprehensive income, net of tax
—  —  —  —  — 
Balance as of June 30, 2020 $   $ 3,805  $ (1,240) $ (1,171) $ (145) $ 1  $ 1,250 
See accompanying notes to unaudited interim Consolidated Financial Statements.
5

RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions of U.S. dollars)
Six Months Ended
June 30,
2021 2020
Cash flows from operating activities:
Net income including noncontrolling interest
$ 356  $
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
Share-based compensation 3 
Depreciation and amortization 81  82 
Deferred income taxes 127  32 
Net pension contributions and other postretirement benefit payments (47) (48)
Net gain on disposition of assets
  (9)
(Gain) loss on translation of foreign currency denominated deferred income taxes
(24) 39 
Loss (gain) on translation of foreign currency denominated pension and other postretirement benefit obligations
32  (47)
Net planned major maintenance payments
(9) (2)
Changes in working capital:
Accounts receivable (61) 50 
Inventories (30) 25 
Other current assets (2) (7)
Accounts payable and other 36  (49)
Other, net 13 
Net cash provided by operating activities
475  76 
Cash flows from investing activities:
Cash invested in fixed assets (47) (37)
Acquisition of business, net of cash acquired   (172)
Disposition of assets  
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber
(89) (32)
Other investing activities, net 3 
Net cash used in investing activities
(133) (227)
Cash flows from financing activities:
Net repayments under revolving credit facilities
  (2)
Issuance of long-term debt 300  — 
Proceeds from long-term debt   180 
Repayments of debt (557) (1)
Purchases of treasury stock (20) (1)
Payments of financing fees (7) — 
Other financing activities, net 2  — 
Net cash (used in) provided by financing activities
(282) 176 
Effect of exchange rate changes on cash and cash equivalents, and restricted cash   (1)
Net increase in cash and cash equivalents, and restricted cash
$ 60  $ 24 
Cash and cash equivalents, and restricted cash:
Beginning of period $ 159  $ 42 
End of period $ 219  $ 66 
Cash and cash equivalents, and restricted cash at end of period:
Cash and cash equivalents $ 177  $ 27 
Restricted cash (included in “Other assets”) $ 42  $ 39 
See accompanying notes to unaudited interim Consolidated Financial Statements.
6


RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 1. Organization and Basis of Presentation
Nature of operations
Resolute Forest Products Inc. (with its subsidiaries, either individually or collectively, unless otherwise indicated, referred to as “Resolute Forest Products,” “we,” “our,” “us,” “Parent,” or the “Company”) is incorporated in Delaware. We are a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products, and paper, which are marketed in over 50 countries. We own or operate some 40 facilities as well as power generation assets, in the U.S. and Canada.
Financial statements
Our unaudited interim consolidated financial statements and accompanying notes (or, the “Consolidated Financial Statements”) have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (or, the “SEC”) for interim reporting. Under those rules, certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles (or, “GAAP”) may be condensed or omitted. In our opinion, all adjustments (consisting of normal recurring adjustments) necessary for the fair statement of the Consolidated Financial Statements have been made. All amounts are expressed in U.S. dollars, unless otherwise indicated. The results for the interim period ended June 30, 2021, are not necessarily indicative of the results to be expected for the full year. These Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021. Certain prior period amounts in the notes to our Consolidated Financial Statements have been reclassified to conform to the 2021 presentation.
New accounting pronouncement adopted in 2021
ASU 2019-12 “Simplifying the Accounting for Income Taxes”
Effective January 1, 2021, we adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes,” issued by the Financial Accounting Standards Board (or, “FASB”) in 2019, which removes the specific exceptions to the general principles in ASC 740, “Income Taxes,” and clarifies certain aspects of the existing guidance. The adoption of this accounting guidance did not impact our Consolidated Financial Statements and disclosures.
Accounting pronouncement not yet adopted as of June 30, 2021
ASU 2020-04 “Reference Rate Reform”
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” amended in January by ASU 2021-01, “Reference Rate Reform - Scope,” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This update provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform. This update is effective as of March 12, 2020, through December 31, 2022. We are currently evaluating this accounting guidance and have not elected an adoption date. We do not expect this accounting guidance to materially impact our results of operations or financial position.
Note 2. Other (Expense) Income, Net
Other (expense) income, net for the three and six months ended June 30, 2021 and 2020, was comprised of the following:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, in millions) 2021 2020 2021 2020
Foreign exchange (loss) gain
$ (6) $ (9) $ (11) $ 14 
(Loss) gain on commodity contracts (1)
(49) —  (86)
Insurance recovery (2)
  15    15 
Miscellaneous income
6  3 
  $ (49) $ 10  $ (94) $ 38 
(1)    Principally related to lumber futures contracts; none of these contracts were outstanding as of June 30, 2021.
7


RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
(2)    We recorded $15 million as other income for the three and six months ended June 30, 2020, from the settlement of an insurance claim in connection with our acquisition of Atlas Paper Holdings, Inc. (or, “Atlas”) in 2015.
Note 3. Accumulated Other Comprehensive Loss
The change in our accumulated other comprehensive loss by component (net of tax) for the three and six months ended June 30, 2021 and 2020, was as follows:
(Unaudited, in millions) Unamortized Prior Service Costs Unamortized Actuarial Losses Foreign
Currency
Translation
Total
Balance as of March 31, 2021
$ (2) $ (1,270) $ (6) $ (1,278)
Amounts reclassified from accumulated other comprehensive loss
(2) 15  —  13 
Net current period other comprehensive (loss) income (2) 15  —  13 
Balance as of June 30, 2021 $ (4) $ (1,255) $ (6) $ (1,265)
(Unaudited, in millions)
Unamortized Prior Service Costs
Unamortized Actuarial Losses Foreign
Currency
Translation
Total
Balance as of December 31, 2020 $ (1) $ (1,307) $ (6) $ (1,314)
Other comprehensive income before reclassifications (1)
—  22  —  22 
Amounts reclassified from accumulated other comprehensive loss (3) 30  —  27 
Net current period other comprehensive (loss) income (3) 52  —  49 
Balance as of June 30, 2021 $ (4) $ (1,255) $ (6) $ (1,265)
(1)    The indefinite idling of the Amos and Baie-Comeau (Quebec) mills triggered curtailment and remeasurement of the pension and other postretirement benefit (or, “OPEB”) obligations related to their plans as of March 31, 2021, resulting in a curtailment gain of $8 million and an actuarial gain of $22 million, totaling $30 million ($22 million net of tax).
(Unaudited, in millions) Unamortized Prior Service Credits Unamortized Actuarial Losses Foreign
Currency
Translation
Total
Balance as of March 31, 2020 $ $ (1,175) $ (7) $ (1,181)
Amounts reclassified from accumulated other comprehensive loss
(1) 11  —  10 
Net current period other comprehensive (loss) income (1) 11  —  10 
Balance as of June 30, 2020 $   $ (1,164) $ (7) $ (1,171)
(Unaudited, in millions) Unamortized Prior Service Credits Unamortized Actuarial Losses Foreign
Currency
Translation
Total
Balance as of December 31, 2019 $ 16  $ (1,189) $ (6) $ (1,179)
Other comprehensive loss before reclassifications —  —  (1) (1)
Amounts reclassified from accumulated other comprehensive loss (16) 25  — 
Net current period other comprehensive (loss) income (16) 25  (1)
Balance as of June 30, 2020 $   $ (1,164) $ (7) $ (1,171)
8


RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
The reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2021 and 2020, were comprised of the following:
Three Months Ended June 30, Six Months Ended
June 30,
(Unaudited, in millions) 2021 2020 2021 2020 Affected Line in the Consolidated Statements of Operations
Unamortized Prior Service Costs or Credits
Amortization of prior service costs or credits
$ (2) $ (1) $ (2) $ (2)
Non-operating pension and other postretirement benefit credits (1)
Curtailment gain   —  (1) (14)
Non-operating pension and other postretirement benefit credits (1)
  —    — 
Income tax provision
Net of tax (2) (1) (3) (16)
Unamortized Actuarial Losses
Amortization of actuarial losses 19  15  38  29 
Non-operating pension and other postretirement benefit credits (1)
Other items   —   
(4) (4) (8) (7)
Income tax provision
Net of tax 15  11  30  25 
Total Reclassifications $ 13  $ 10  $ 27  $
(1)These items are included in the computation of net periodic benefit cost (credit) related to our pension and OPEB plans summarized in Note 9, “Employee Benefit Plans.”
Note 4. Net Income Per Share
The reconciliation of the basic and diluted net income per share for the three and six months ended June 30, 2021 and 2020, was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, in millions, except per share amounts) 2021 2020 2021 2020
Numerator:
Net income attributable to Resolute Forest Products Inc.
$ 268  $ $ 355  $
Denominator:
Weighted-average number of Resolute Forest Products Inc. common shares outstanding 79.5  88.1  80.4  88.1 
Dilutive impact of nonvested stock unit awards and stock options 0.8  0.1  0.7  0.1 
Diluted weighted-average number of Resolute Forest Products Inc. common shares outstanding 80.3  88.2  81.1  88.2 
Net income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic
$ 3.37  $ 0.07  $ 4.42  $ 0.06 
Diluted $ 3.34  $ 0.07  $ 4.39  $ 0.06 
The weighted-average number of outstanding stock options and nonvested equity-classified restricted stock units, deferred stock units and performance stock units (collectively, “stock unit awards”) that were excluded from the calculation of diluted
9


RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
net income per share, as their impact would have been antidilutive, for the three and six months ended June 30, 2021 and 2020, was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, in millions) 2021 2020 2021 2020
Stock options 0.4  0.9  0.5  0.9 
Stock unit awards   0.9    0.9 
Note 5. Inventories, Net
Inventories, net as of June 30, 2021 and December 31, 2020, were comprised of the following:
(Unaudited, in millions) June 30,
2021
December 31,
2020
Raw materials $ 132  $ 132 
Work in process 55  46 
Finished goods 138  120 
Mill stores and other supplies 167  164 
  $ 492  $ 462 
Note 6. Other Assets
Other assets include countervailing and anti-dumping duty cash deposits on softwood lumber of $278 million and $54 million, respectively, as of June 30, 2021, and of $194 million and $49 million, respectively, as of December 31, 2020. See Note 11, “Commitments and Contingencies” for more information.
Note 7. Accounts Payable and Other
Accounts payable and other as of June 30, 2021 and December 31, 2020, were comprised of the following:
(Unaudited, in millions) June 30,
2021
December 31,
2020
Trade accounts payable $ 300  $ 251 
Accrued compensation 69  76 
Accrued interest 7 
Pension and other postretirement benefit obligations 15  14 
Special dividend payable (1)
79  — 
Accrued provision related to Fibrek Inc. litigation (Note 11)
21  — 
Income and other taxes payable 5 
Other 24  19 
$ 520  $ 369 
(1)    On June 10, 2021, we declared a special dividend of $1.00 per share ($79 million) on our common stock. See Note 12, “Share Capital,” for more information.
10


RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 8. Long-Term Debt
Overview
Long-term debt, including current portion, as of June 30, 2021 and December 31, 2020, was comprised of the following:
(Unaudited, in millions) June 30,
2021
December 31,
2020
4.875% senior unsecured notes due 2026:
Principal amount $ 300  $ — 
Deferred financing costs (6) — 
Total 4.875% senior unsecured notes due 2026
294  — 
5.875% senior unsecured notes due 2023:
Principal amount   375 
Deferred financing costs   (2)
Unamortized discount   (1)
Total 5.875% senior unsecured notes due 2023
  372 
Senior secured credit facility - Term loans due 2030   180 
Finance lease obligations 7 
Other debt 2  — 
Total debt 303  561 
Less: Current portion of finance lease obligations and other debt (3) (2)
Long-term debt, net of current portion $ 300  $ 559 
Senior Unsecured Notes
2026 Notes
On February 2, 2021, we issued $300 million aggregate principal amount of 4.875% senior unsecured notes due 2026 (or, the “2026 Notes”) at an issue price of 100%, pursuant to an indenture as of that date (or, the “Indenture”). Upon their issuance, the 2026 Notes were recorded at their fair value of $300 million. Interest on the 2026 Notes is payable semi-annually on March 1 and September 1 of each year, beginning on September 1, 2021, until their maturity date of March 1, 2026. In connection with the issuance of the 2026 Notes, we incurred financing costs of $6 million, which were deferred and recorded as a reduction of the principal. Deferred financing costs are amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the notes.
The 2026 Notes are guaranteed by current and future wholly-owned U.S. subsidiaries that guarantee the ABL Credit Facility and the Senior Secured Credit Facility (each, as defined and discussed below). The notes are unsecured and effectively junior to indebtedness under each of the ABL Credit Facility, the Senior Secured Credit Facility, the Loan Facility and future secured indebtedness to the extent of the value of the collateral that secures such indebtedness. In addition, the notes are structurally subordinated to all existing and future indebtedness (including the Loan Facility) and other liabilities of our subsidiaries that do not guarantee the notes, including all our non-U.S. subsidiaries.

The terms of the Indenture impose certain restrictions, subject to a number of exceptions and qualifications, including limits on our ability to: incur additional indebtedness or issue certain preferred shares; make dividend payments on or make other distributions in respect of our capital stock or make other restricted payments; make certain investments; sell certain assets; create liens on assets; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with our affiliates.

In the event of specified change of control triggering events, we shall be required to offer to repurchase the 2026 Notes at 101% of the principal amount, plus accrued and unpaid interest.
11


RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
On or after March 1, 2023, we may redeem the notes at our option, in whole at any time or in part from time to time, at redemption prices equal to a percentage of the principal amount plus accrued and unpaid interest, as follows:
Year (beginning March 1) Redemption Price
2023 102.438  %
2024 101.219  %
2025 and thereafter 100.000  %
The fair value of the 2026 Notes (Level 1) was $311 million as of June 30, 2021.
2023 Notes
We issued $600 million in aggregate principal amount of 5.875% senior unsecured notes due 2023 (or, the “2023 Notes”) on May 8, 2013. Upon their issuance, the 2023 Notes were recorded at their fair value of $594 million, which reflected a discount of $6 million that was being amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the 2023 Notes, resulting in an effective interest rate of 6%. Interest on the 2023 Notes was payable semi-annually beginning November 15, 2013. In connection with the issuance of the 2023 Notes, we incurred financing costs of $9 million, which were deferred and recorded as a reduction of the 2023 Notes. Deferred financing costs were amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the 2023 Notes.
On January 3, 2019, we repurchased $225 million in aggregate principal amount of the 2023 Notes, pursuant to a notes purchase agreement entered into on December 21, 2018, with certain noteholders, at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest.
On February 2, 2021, we placed the net proceeds from the issuance of the 2026 Notes together with additional cash, into trust for the benefit of the holders of the 2023 Notes to redeem all of the $375 million aggregate principal amount of the 2023 Notes (or, the “Redemption”) at a price of 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date. The Redemption occurred on February 18, 2021. As a result of the repurchase, we recorded a net loss on extinguishment of debt of $3 million in “Other (expense) income, net” in our Consolidated Statement of Operations for the six months ended June 30, 2021.
The fair value of the 2023 Notes (Level 1) was $375 million as of December 31, 2020.
Senior Secured Credit Facility
On September 7, 2016, we entered into a senior secured credit facility for up to $185 million. This senior secured credit facility provided a term loan of $46 million with a maturity date of September 7, 2025, and a revolving credit facility of up to $139 million with a maturity date of September 7, 2022. On October 28, 2019, we entered into an amended and restated senior secured credit facility for up to $360 million, which provided a term loan facility of up to $180 million and a revolving credit facility of up to $180 million with a maturity date of October 28, 2025 for the latter, and repaid our $46 million term loan under the original senior secured credit facility. In March 2020, we borrowed $180 million in term loans for ten years, maturing in March 2030.
On April 19, 2021 (or, the “Effective Date”), we entered into a first amendment to the amended and restated senior secured credit facility (or, the “Senior Secured Credit Facility”). The amount available under the Senior Secured Credit Facility remains unchanged for up to $360 million and is comprised of a term loan facility of up to $180 million 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 (or, the “Term Loan Facility”); and a six-year revolving credit facility of up to $180 million (or, the “Revolving Credit Facility”). On the Effective Date, we repaid our $180 million term loans under the amended and restated senior secured credit facility with a combination of proceeds of borrowings under the Revolving Credit Facility and cash on hand. The amendment then reinstated the full amount of the Term Loan Facility. There is also an uncommitted option to increase the Senior Secured Credit Facility by up to an additional $360 million, subject to certain terms and conditions.
The obligations under the Senior Secured Credit Facility continue to be guaranteed by certain material U.S. subsidiaries of the Company and remain secured by first priority liens on assets of our Calhoun (Tennessee) facility. Interest rates under the Senior Secured Credit Facility are based, at the Company’s election, on either a floating rate based on the LIBOR, or a base rate, in each case plus a spread over the index. In addition, loans under the Term Loan Facility can bear interest at a fixed rate plus a spread. For loans under the Term Loan Facility, the applicable spread ranges from 0.5% to 1.4% for base rate loans, from 1.5%
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
to 2.4% for LIBOR rate loans, and from 1.7% to 2.1% for fixed rate loans. For the Revolving Credit Facility, the applicable spread ranges from 0.5% to 1.0% for base rate loans, and from 1.5% to 2.0% for LIBOR rate loans. The amended credit agreement contains customary covenants, representations and warranties, and events of default.
As of June 30, 2021, we had $180 million of availability under the Term Loan Facility and $180 million of availability under the Revolving Credit Facility, which were undrawn. The fair values of the term loans (Level 2) approximated their carrying values and were bearing interest at LIBOR plus a spread of 2.13% as of December 31, 2020.
ABL Credit Facility
On May 14, 2019, we entered into an amended senior secured asset-based revolving credit facility (or, the “ABL Credit Facility”) with an aggregate lender commitment of up to $500 million at any time outstanding, subject to borrowing base availability based on specified advance rates, eligibility criteria and customary reserves. The amended credit agreement provides for an extension of the maturity date to May 14, 2024.
Effective January 21, 2021, we reduced the commitment under the Canadian tranche of our senior secured asset-based revolving credit facility by $50 million, to $250 million, resulting in an aggregate commitment of $450 million, subject to borrowing base limitations. The obligations under the ABL Credit Facility are guaranteed by certain of our material subsidiaries.
As of June 30, 2021, we had $336 million of borrowing base availability under the ABL Credit Facility, which was undrawn except for $67 million of ordinary course letters of credit outstanding.
Loan Facility
On November 4, 2020, our Canadian subsidiary, Resolute FP Canada Inc., entered into a secured delayed draw term loan facility (or, the “Loan Facility”) with Investissement Québec as lender for up to C$220 million ($177 million as of June 30, 2021), subject to borrowing base availability based on 75% of the countervailing and anti-dumping duty deposits imposed by the U.S. Department of Commerce and collected by Customs and Border Protection Agency on U.S. imports of applicable softwood lumber products produced at sawmills of the Borrower and its affiliates located in the province of Quebec, Canada from April 28, 2017 to December 31, 2022. The Loan Facility will bear interest at a floating rate equal to 1.45% above the one month Canadian banker’s acceptance rate. The principal shall be repayable in monthly installments over a period of eight years after an interest only period of two years from the date of the first draw. The Loan Facility is subject to prepayment requirements under certain conditions and may be repaid earlier without premium or penalty, but subject to prepayment of accrued and unpaid interest. The Loan Facility provides for a maximum of ten draws and the fulfillment of certain conditions upon each draw. Borrowings are subject to certain restrictions.
As of June 30, 2021, we had C$220 million ($177 million) of borrowing base availability under the Loan Facility, which was undrawn.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 9. Employee Benefit Plans
Pension and other postretirement benefit plans
The components of net periodic benefit costs (credits) relating to our pension and OPEB plans for the three and six months ended June 30, 2021 and 2020, were as follows:
Pension Plans:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, in millions) 2021 2020 2021 2020
Interest cost $ 34  $ 36  $ 67  $ 74 
Expected return on plan assets (55) (55) (109) (111)
Amortization of actuarial losses 20  17  41  32 
Non-operating pension credits
(1) (2) (1) (5)
Service cost 4  8 
Net periodic benefit costs before special events
3  7 
Other (gain) loss   —  (1)
  $ 3  $ $ 6  $
OPEB Plans:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, in millions) 2021 2020 2021 2020
Interest cost $ 1  $ $ 2  $
Amortization of actuarial gains (1) (2) (3) (3)
Amortization of prior service credits (2) (1) (2) (2)
Non-operating other postretirement benefit credits
(2) (2) (3) (3)
Service cost    
Net periodic benefit credits before special events
(2) (1) (3) (2)
Curtailment gain   —    (14)
$ (2) $ (1) $ (3) $ (16)
Defined contribution plans
Our expense for the defined contribution plans totaled $4 million for the three months ended June 30, 2021 and 2020, and $9 million and $8 million for the six months ended June 30, 2021 and 2020, respectively.
U.S. pension funding
The American Rescue Plan Act of 2021 includes provisions that allow for interest rate smoothing of pension funding deficits to minimize the impact of lower interest rates on liabilities. It also extends the amortization period for funding shortfalls from seven years to 15 years under the current rules. We estimate that the impact of the Act on our previously disclosed estimated contributions for 2021 will be a reduction of $13 million.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 10. Income Taxes
The income tax provision attributable to income before income taxes differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21% for the three and six months ended June 30, 2021 and 2020, as a result of the following:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, in millions) 2021 2020 2021 2020
Income before income taxes
$ 355  $ 11  $ 483  $ 37 
Income tax provision:
Expected income tax provision
(74) (3) (101) (8)
Changes resulting from:
Valuation allowance on our U.S. operations 70  (7) 78  (16)
Foreign exchange 1  3  (10)
U.S. tax on non-U.S. earnings (65) —  (83) — 
State income taxes, net of federal income tax benefit   —  2 
Foreign tax rate differences (19) (2) (27) (5)
Other, net (1)
  1 
  $ (87) $ (5) $ (127) $ (32)
(1)    Includes $4 million for the three and six months ended June 30, 2020, related to the settlement of an insurance claim in connection with our acquisition of Atlas.
During the three and six months ended June 30, 2021, we used $70 million and $78 million, respectively, of deferred income tax assets that were fully reserved to offset mainly the tax implications relating to the global intangible low-taxed income inclusion, which is based on the U.S. system of taxation for non-U.S. earnings, whereby foreign earnings less a qualified deduction for foreign assets are included in U.S. taxable income.
Note 11. Commitments and Contingencies
Legal matters
We become involved in various legal proceedings, claims and governmental inquiries, investigations, and other disputes in the normal course of business, including matters related to contracts, commercial and trade disputes, taxes, environmental issues, activist damages, employment and workers’ compensation claims, grievances, human rights complaints, pension and benefit plans and obligations, health and safety, product safety and liability, asbestos exposure, financial reporting and disclosure obligations, corporate governance, Indigenous peoples’ claims, antitrust, governmental regulations, and other matters. Although the final outcome is subject to many variables and cannot be predicted with any degree of certainty, we regularly assess the status of the matters and establish provisions (including legal costs expected to be incurred) when we believe an adverse outcome is probable, and the amount can be reasonably estimated. Any recovery from litigation or settlement of claims that is a gain contingency is recognized if, and when, realized or realizable. Except as described below and for claims that cannot be assessed due to their preliminary nature, we believe that the ultimate disposition of these matters outstanding or pending as of June 30, 2021, will not have a material adverse effect on our Consolidated Financial Statements.
Asbestos-related lawsuits
We are involved in a number of asbestos-related lawsuits filed primarily in U.S. state courts, including certain cases involving multiple defendants. These lawsuits principally allege direct or indirect personal injury or death resulting from exposure to asbestos-containing premises. While we dispute the plaintiffs’ allegations and intend to vigorously defend these claims, the ultimate resolution of these matters cannot be determined at this time. These lawsuits frequently involve claims for unspecified compensatory and punitive damages, and we are unable to reasonably estimate a range of possible losses. However, unfavorable rulings, judgments or settlement terms could materially impact our Consolidated Financial Statements. Hearings for certain of these matters are scheduled to occur in the next twelve months.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Countervailing duty and anti-dumping investigations on softwood lumber
On November 25, 2016, countervailing duty and anti-dumping petitions were filed with the U.S. Department of Commerce (or, “Commerce”) and the U.S. International Trade Commission (or, “ITC”) by certain U.S. softwood lumber products producers and forest landowners, requesting that the U.S. government impose countervailing and anti-dumping duties on Canadian-origin softwood lumber products exported to the U.S. One of our subsidiaries was identified in the petitions as being a Canadian exporting producer of softwood lumber products to the U.S. and was selected as a mandatory respondent to be investigated by Commerce in both the countervailing duty and anti-dumping investigations.
On April 24, 2017, Commerce announced its preliminary determination in the countervailing duty investigation and, as a result, after April 28, 2017, we were required to pay cash deposits to the U.S. Customs and Border Protection agency (or, “U.S. Customs”) at a rate of 12.82% for estimated countervailing duties on the vast majority of our U.S. imports of softwood lumber products produced at our Canadian sawmills. The preliminary rate remained in effect until August 26, 2017. Commerce changed the rate in its final affirmative determination on November 2, 2017, but the new rate did not take effect until December 28, 2017, following the ITC’s final affirmative determination and the publication by Commerce of a countervailing duty order. Until November 30, 2020, we were required to pay cash deposits to U.S. Customs at a rate of 14.70% for the vast majority of our U.S. imports of Canadian-produced softwood lumber products. On December 1, 2020, Commerce issued its final results in the countervailing duties first administrative review and established our new rate at 19.10% for countervailing duties. This rate applies until Commerce sets a new duty rate in subsequent administrative reviews, or a new rate may be set through a remand determination by a binational panel formed pursuant to the North American Free Trade Agreement or United States-Mexico-Canada Agreement, as the case may be (or, “Panel”) on appeal. On May 20, 2021, Commerce issued its preliminary rates in the countervailing duties second administrative review and established our new preliminary rate at 18.17% for countervailing duties. The preliminary rate will not take effect until the publication by Commerce of the final results. During the six months ended June 30, 2021, we made additional cash deposits of $84 million, bringing our total to $278 million.
On June 26, 2017, Commerce announced its preliminary determination in the anti-dumping investigation and, as a result, after June 30, 2017, we were required to pay cash deposits to U.S. Customs at a rate of 4.59% for estimated anti-dumping duties on the vast majority of our U.S. imports of softwood lumber products produced at our Canadian sawmills. On November 2, 2017, Commerce announced its final affirmative determination in the anti-dumping investigation and, as a result, from November 8, 2017 to November 29, 2020, we were required to pay cash deposits to U.S. Customs, at a rate of 3.20% for the vast majority of our U.S. imports of Canadian-produced softwood lumber products. On November 30, 2020, Commerce issued its final results in the anti-dumping first administrative review and established our new rate at 1.15% for anti-dumping duties. This rate applies until Commerce sets a duty rate in subsequent administrative reviews, or a new rate may be set through a remand determination by a Panel on appeal. On May 20, 2021, Commerce issued its preliminary rates in the anti-dumping second administrative review and established the new “all-others” preliminary rate at 12.05% for anti-dumping duties. The preliminary rate will not take effect until the publication by Commerce of the final results. During the six months ended June 30, 2021, we made additional cash deposits of $5 million, bringing our total to $54 million.
On April 1, 2019, Commerce published a notice initiating the administrative reviews of the countervailing duty and anti-dumping orders on softwood lumber products from Canada and we were selected as a mandatory respondent in these administrative reviews. On March 10, 2020, Commerce published a notice initiating the second administrative review of the countervailing duty and anti-dumping orders on softwood lumber products from Canada. We were selected as a mandatory respondent for the second administrative review of the countervailing duty order and we are in the process of responding to Commerce with the information required. On March 4, 2021, Commerce published a notice initiating the third administrative review of the countervailing duty and anti-dumping orders on softwood lumber products from Canada. We were selected as a mandatory respondent for the third administrative review of the countervailing duty order and we are in the process of responding to Commerce with the information required.
In parallel, on September 4, 2019, a Panel issued an interim decision upholding the affirmative final injury determinations of the ITC in both investigations of softwood lumber products from Canada. The Panel remanded the ITC to reconsider several findings and ordered the ITC to submit its redetermination on remand within 90 days from the date of the Panel interim decision. On December 19, 2019, the ITC issued its redetermination on remand that maintained the affirmative final injury determinations, and on May 22, 2020, the Panel issued its final decision and affirmed in its entirety the ITC’s injury determination on remand. On January 6, 2021, and January 19, 2021, we filed our complaints supporting Panel reviews of the final results in the countervailing and anti-dumping first administrative reviews.
In addition, on August 24, 2020, the World Trade Organization’s (or, “WTO”) dispute panel issued a report (or, the “Panel Report”) in the case brought by the government of Canada in “United States — Countervailing Measures on Softwood Lumber
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
from Canada” (DS533), concluding, among other things, that Commerce acted inconsistently with the Agreement on Subsidies and Countervailing Measures on most of the matters. On September 28, 2020, the United States notified the WTO’s dispute settlement body of its decision to appeal the Panel Report.
We are not presently able to determine the ultimate resolution of these matters, but we believe it is not probable that we will ultimately be assessed with significant duties, if any, on our U.S. imports of Canadian-produced softwood lumber products. Accordingly, no contingent loss was recorded in respect of these petitions in our Consolidated Statements of Operations, and our cash deposits are recorded in “Other assets” in our Consolidated Balance Sheets.
Fibrek acquisition
Effective July 31, 2012, we completed the final step of the transaction pursuant to which we acquired the remaining 25.40% of the outstanding Fibrek Inc. shares, following the approval of Fibrek’s shareholders on July 23, 2012, and the issuance of a final order by the Quebec Superior Court in Canada (or, the “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 C$1.99 per share, or C$31 million in aggregate, plus interest and an additional indemnity, for a total then estimated at C$44 million payable in cash. We had previously accrued C$14 million for the payment of the dissenting shareholders’ claims. Following the court decision, we accrued an additional C$30 million ($23 million). Of the total amount of C$44 million, C$19 million ($14 million) was payable immediately and paid on October 2, 2019. The remaining balance of C$27 million as of June 30, 2021 and C$26 million as of December 31, 2020 ($21 million and $20 million as of June 30, 2021 and December 31, 2020, respectively), which includes accrued interest, is recorded in “Accounts payable and other” as of June 30, 2021, and in “Other liabilities” as of December 31, 2020, in our Consolidated Balance Sheets. We are appealing the decision, therefore the payment of any additional consideration and its timing will depend on the outcome of the appeal. On November 13, 2019, a legal hypothec in the amount of C$30 million was registered on our Saint-Félicien (Quebec) immovable and movable property to secure the payment of any additional amounts following the outcome of the appeal. The hearing in this matter is expected to occur in the next 12 months.
Partial wind-ups of pension plans
On June 12, 2012, we filed a motion for directives with the Quebec Superior Court, the court with jurisdiction in the creditor protection proceedings under the Companies’ Creditors Arrangement Act (Canada) (or, the “CCAA Creditor Protection Proceedings”), seeking an order to prevent pension regulators in each of Quebec, New Brunswick, and Newfoundland and Labrador from declaring partial wind-ups of pension plans relating to employees of former operations in New Brunswick, and Newfoundland and Labrador, or a declaration that any claim for accelerated reimbursements of deficits arising from a partial wind-up is a barred claim under the CCAA Creditor Protection Proceedings. We contend, among other things, that any such declaration, if issued, would be inconsistent with the Quebec Superior Court’s sanction order confirming the CCAA debtors’ CCAA Plan of Reorganization and Compromise, as amended, and the terms of our emergence from the CCAA Creditor Protection Proceedings. A partial wind-up would likely shorten the period in which any deficit within those plans, which could reach up to C$150 million ($121 million), would have to be funded if we do not obtain the relief sought. The hearing in this matter has not yet been scheduled but could occur in the next twelve months.
Environmental matters
We are subject to a number of federal or national, state, provincial, and local environmental laws, regulations, and orders in various jurisdictions. We believe our operations are in material compliance with current applicable environmental laws and regulations. Environmental regulations promulgated and orders issued in the future could require substantial additional expenditures for compliance and could have a material impact on us, in particular, and the industry in general.
We have environmental liabilities of $13 million and $15 million recorded as of June 30, 2021 and December 31, 2020, respectively, primarily related to environmental remediation, assessment, monitoring and management related to closed or idled sites. The amount of these liabilities represents management’s estimate of the ultimate settlement based on an assessment of relevant factors and assumptions and could be affected by changes in facts or assumptions not currently known to management for which the outcome cannot be reasonably estimated at this time.
We also have asset retirement obligations of $27 million and $25 million recorded as of June 30, 2021 and December 31, 2020, respectively, primarily consisting of liabilities associated with landfills, sludge basins and the dismantling of retired assets.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
These liabilities are included in “Accounts payable and other” and “Other liabilities” in our Consolidated Balance Sheets.
Note 12. Share Capital
Treasury stock
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up to $100 million. During the three and six months ended June 30, 2021, we repurchased 343,894 shares at an average price of $11.21 for a total of $3 million and 2,092,348 shares at an average price of $9.78 for a total of $20 million, respectively. We repurchased 253,898 shares at an average price of $2.09 for a total of $1 million during the three and six months ended June 30, 2020.
Dividends
We declared a special dividend of $1.00 per share ($79 million) on our common stock during the three and six months ended June 30, 2021, which was recorded in “Accounts payable and other” in our Consolidated Balance Sheet as of June 30, 2021. The dividend was paid to shareholders on July 7, 2021. We did not declare or pay any dividends on our common stock during the three and six months ended June 30, 2020.
Under some of our compensation plans, participants are credited additional units when a dividend is declared. The impact of the special dividend was as follows: for the three and six months ended June 30, 2021, $3 million was recognized as a compensation expense, and $2 million as an increase in deficit and in additional paid-in capital; and $3 million as an increase in liabilities as of June 30, 2021.
Note 13. Segment Information
We manage our business based on the products we manufacture. Accordingly, our reportable segments correspond to our principal product lines: market pulp, tissue, wood products, and paper.
None of the income or loss items following “Operating income (loss)” in our Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management. For the same reason, closure costs, impairment and other related charges, gains and losses on disposition of assets, as well as other discretionary charges or credits are not allocated to our segments. We allocate depreciation and amortization expense to our segments, although the related fixed assets and amortizable intangible assets are not allocated to segment assets. Additionally, all selling, general and administrative expenses are allocated to our segments, with the exception of certain discretionary charges and credits, which we present under “corporate and other.”
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Information about certain segment data for the three and six months ended June 30, 2021 and 2020, was as follows:
(Unaudited, in millions)
Market Pulp (1)
Tissue
Wood Products (2)
Paper Segment
Total
Corporate
and Other
Total
Sales
Second quarter
2021 $ 199  $ 35  $ 664  $ 242  $ 1,140  $   $ 1,140 
2020 $ 161  $ 44  $ 199  $ 208  $ 612  $ —  $ 612 
First six months
2021 $ 375  $ 77  $ 1,094  $ 467  $ 2,013  $   $ 2,013 
2020 $ 338  $ 93  $ 373  $ 497  $ 1,301  $ —  $ 1,301 
Depreciation and amortization
Second quarter
2021 $ 6  $ 4  $ 10  $ 16  $ 36  $ 4  $ 40 
2020 $ $ $ 10  $ 16  $ 37  $ $ 40 
First six months
2021 $ 12  $ 9  $ 21  $ 31  $ 73  $ 8  $ 81 
2020 $ 12  $ $ 21  $ 33  $ 75  $ $ 82 
Operating income (loss)
Second quarter
2021 $ 30  $ (7) $ 405  $ (7) $ 421  $ (15) $ 406 
2020 $ 10  $ (2) $ 15  $ (12) $ 11  $ (5) $
First six months
2021 $ 34  $ (9) $ 626  $ (31) $ 620  $ (37) $ 583 
2020 $ $ —  $ 20  $ (15) $ 12  $ (14) $ (2)
(1)Inter-segment sales were $8 million and $7 million for the three months ended June 30, 2021 and 2020, and $15 million and $14 million for the six months ended June 30, 2021 and 2020, respectively. These inter-segment sales, which were transacted at either the lowest market price of the previous month or cost, were excluded from market pulp sales.
(2)Wood products sales to our joint ventures, which are transacted at arm’s length negotiated prices, were $20 million and $5 million for the three months ended June 30, 2021 and 2020, respectively, and $33 million and $10 million for the six months ended June 30, 2021 and 2020, respectively.
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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis is intended to help the reader understand Resolute Forest Products, our results of operations, cash flows and financial condition. The discussion is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes (or, the “Consolidated Financial Statements”) contained in Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q (or, “Form 10-Q”).
When we refer to “Resolute Forest Products,” “Resolute,” “we,” “our,” “us” or the “Company,” we mean Resolute Forest Products Inc. with its subsidiaries, either individually or collectively, unless otherwise indicated.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND USE OF THIRD-PARTY DATA
Statements in this Form 10-Q that are not reported financial results or other historical information of Resolute Forest Products are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements relating to the impact of the novel coronavirus (or, “COVID-19”) pandemic and resulting economic conditions on our business, results of operations and market price of our securities, and to our: efforts and initiatives to reduce costs, increase revenues, and improve 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; estimated capital expenditures; 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,” “see,” “anticipate,” “continue,” “attempt,” “project,” “progress,” “build,” “pursue,” “plan,” “grow,” “allow,” “look,” “enhance” and other terms with similar meaning indicating possible future events or potential impact on our business or Resolute Forest Products’ 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 Form 10-Q include, but are not limited to, the impact of: the COVID-19 pandemic on our business and resulting economic conditions; developments in non-print media, including changes in consumer habits, 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 wood manufacturing in the U.S., and tissue production and sales, or divestitures or other strategic transactions or projects, including loss of synergies following business divestitures; uncertainty or changes in political or economic conditions in the U.S., Canada or other countries in which we sell our products, including the effects of pandemics; 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, financial and regulatory risks associated with global, regional, and local weather conditions, and climate change; any disruption in operations or increased labor costs due to labor disputes or occupational health and safety issues; difficulties in our employee relations or in employee attraction or retention; disruptions to our supply chain, operations, or the delivery of our products, including due to public health epidemics; disruptions to our information technology systems including cybersecurity and privacy 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; changes relating to the London Interbank Offered Rate (or, the “LIBOR”), which could impact our borrowings under our credit facilities; losses that are not covered by insurance; any shutdown of machines or facilities, restructuring of operations or sale of assets resulting in any additional closure costs and long-lived asset or goodwill 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 the vast majority 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 set
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forth under Part I, Item 1A, “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (or, the “SEC”) on March 1, 2021 (or, the “2020 Annual Report”), which have been heightened by the COVID-19 pandemic, including related governmental responses and economic impacts, market disruptions and resulting changes in consumer habits.
All forward-looking statements in this Form 10-Q are expressly qualified by the cautionary statements contained or referred to in this section and in our other filings with the SEC and the Canadian securities regulatory authorities. We disclaim 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.
Market and industry data
The information on industry and general economic conditions in this Form 10-Q was derived from third-party sources and trade publications we believe to be widely accepted and accurate. We have not independently verified the information and cannot assure you of its accuracy.
OVERVIEW
Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products, and paper, which are marketed in over 50 countries. The Company owns or operates some 40 facilities, as well as power generation assets, in the U.S. and Canada. We produce lumber in the U.S. and Canada, and we are the largest producer of wood products east of the Canadian Rockies, the largest producer of uncoated mechanical papers in North America, and a competitive pulp producer in North America. We are also a leading global producer of newsprint and an emerging tissue producer. Resolute has third-party certified 100% of its managed woodlands to internationally recognized sustainable forest management standards.
We report our activities in four business segments: market pulp, tissue, wood products, and paper. We believe an integrated approach across these segments maximizes value creation for our Company and stakeholders.
We are guided by our vision and values, focusing on safety, sustainability, profitability, accountability, and teamwork. We believe we can be distinguished by the following competitive strengths:
Competitive cost structure combined with diversified and integrated asset base
large-scale and cost-effective operations, including significant internal energy production from cogeneration and hydroelectric facilities, which support our value proposition;
control over fiber transformation chain from standing timber to end-product for the majority of our offering;
nearly 100% of our products sourced from high-quality virgin fiber;
harvesting rights for the majority of fiber needs in Canada; and
sophisticated logistics capabilities to meet demanding customer expectations.
Solid balance sheet
favorable pricing and flexibility under borrowing agreements together with our liquidity levels support our ability to weather challenging market cycles and to execute our transformation strategy;
significant tax assets to defer cash income taxes and provide synergies to execute this strategy; and
customers benefit from a financially stable and reliable business partner in a challenging industry.
Seasoned management team
deep industry expertise, with influential leaders in forestry, operations, environmental risk management and public policy;
culture of accountability, encouraging transparency and straightforwardness; and
core identity tied to renewable resources we harvest in a truly sustainable manner.
21

Our Business
For information relating to our products, strategy and highlights, sustainable development and performance, and power generation assets, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Our Business” in our 2020 Annual Report.
Second Quarter Overview
Impact of the COVID-19 pandemic
We have sustained operations across all of our business segments through the COVID-19 pandemic, but we had to take certain measures in the face of the dramatic reduction in economic activity, particularly for marketing-dependent products like newspapers, inserts, flyers and commercial paper. In March 2021, the Company announced the indefinite idling of its Amos and Baie-Comeau (Quebec) paper mills, which had been temporarily idled since spring 2020, as a result of market conditions and the impacts of the pandemic, reducing the run-rate newsprint capacity by 25% (equivalent to 43,000 metric tons per month).
Dividends
We declared a special dividend of $1.00 per share ($79 million) on our common stock in the current quarter, which was recorded in “Accounts payable and other” in our Consolidated Balance Sheet as of June 30, 2021. The dividend was paid to shareholders on July 7, 2021.
Amendment to Senior Secured Credit Facility
On April 19, 2021, we amended the Senior Secured Credit Facility agreement in order to repay the $180 million of pre-amended term loans, extend the maturity date of the revolving credit facility from 2025 to 2027, reduce the spread on the term loan facility by up to 10 basis points, and reinstate in full the $180 million Term Loan Facility. See below under “Liquidity and Capital Resources – Capital Resources” for more information.
Three months ended June 30, 2021 vs. June 30, 2020
Our operating income was $406 million in the quarter, compared to an operating income of $6 million in the second quarter of 2020. Excluding special items, our operating income was $405 million, compared to an operating loss of $3 million in the year-ago period. Special items are described below.
Our net income in the quarter was $268 million, or $3.34 per diluted share, compared to a net income of $6 million, or $0.07 per diluted share, in the year-ago period. Our net income in the quarter, excluding special items, was $300 million, or $3.74 per diluted share, compared to a net loss of $22 million, or $0.25 per share, in the year-ago period.
Three Months Ended June 30, 2021 Operating Income
Net Income
EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported $ 406  $ 268  $ 3.34 
Adjustments for special items:
Closure costs, impairment and other related charges (1) (1) (0.01)
Non-operating pension and other postretirement benefit credits
—  (3) (0.04)
Other expense, net
—  49  0.61 
Income tax effect of special items —  (13) (0.16)
Adjusted for special items (1)
$ 405  $ 300  $ 3.74 
22

Three Months Ended June 30, 2020 Operating Income (Loss) Net Income (Loss) EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported $ 6  $ 6  $ 0.07 
Adjustments for special items:
Net gain on disposition of assets
(9) (9) (0.10)
Non-operating pension and other postretirement benefit credits
—  (4) (0.05)
Other income, net
—  (10) (0.11)
Income tax effect of special items —  (5) (0.06)
Adjusted for special items (1)
$ (3) $ (22) $ (0.25)
(1)Operating income (loss), net income (loss) and net income (loss) per share (or, “EPS”), in each case as adjusted for special items, are not financial measures recognized under U.S. 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, and gains and losses on disposition of assets 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 non-operating pension and other postretirement benefit (or, “OPEB”) costs and credits, other income and expense, net, and the income tax effect of the special items. EPS, as adjusted for special items, is calculated as net income (loss), as adjusted for special items, per diluted share. 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 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, 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.
Six months ended June 30, 2021 vs. June 30, 2020
Our operating income was $583 million in the first half of the year, compared to operating loss of $2 million in the year-ago period. Excluding special items, our operating income was $585 million, compared to operating loss of $13 million in the year-ago period. Special items are described below.
Our net income in the first half of the year was $355 million, or $4.39 per diluted share, compared to net income of $5 million, or $0.06 per diluted share, in the year-ago period. Our net income in the period, excluding special items, was $419 million, or $5.18 per diluted share, compared to net loss of $51 million, or $0.57 per share, in the year-ago period.
Six Months Ended June 30, 2021
Operating Income
Net Income
EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported $ 583  $ 355  $ 4.39 
Adjustments for special items:
Closure costs, impairment and other related charges 0.02 
Non-operating pension and other postretirement benefit credits —  (5) (0.06)
Other expense, net —  94  1.16 
Income tax effect of special items —  (27) (0.33)
Adjusted for special items (1)
$